Author: Dale Warburton

Dale is a former attorney turned passionate Bitcoiner with an interest in investments, macro, geopolitics, innovation, tech, nature, wildlife, MMA and Bitcoin (of course).

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Crypto Exchange Crypto News Crypto.com Hackers

Crypto.com Finally Admits Close to $34 Million Lost in Hack

Earlier this week, Crypto.com suspended withdrawals after some users reported suspicious activities on their accounts. Initial losses were estimated at US$15 million but later this ballooned to US$34 million, a figure that has since been confirmed by the world’s fourth-largest exchange.

A Rough Week for Crypto.com

On establishing that some 400 users had experienced unusual activity on their accounts, the company put a hold on withdrawals and reassured users that their funds were safe.

Early reports suggested that US$15 million had been stolen, as reported by blockchain security group PeckShield.

The stolen funds were subsequently laundered through popular coin mixer Tornado. However, one eagle-eyed on-chain analyst claimed that the losses were closer to US$34 million.

The on-chain analyst was initially alerted by an “abnormally large withdrawal” from Crypto.com that was then mixed through a well-known Bitcoin tumbler, as illustrated below:

BTC withdrawal through a tumbler. Source: @ErgoBTC

Crypto.com Finally Confirms Losses

In a statement on its website, Crypto.com confirmed that the hack had impacted 483 users and that unauthorised withdrawals totalled 4,836.26 ETH, 443.93 BTC and approximately US$66,200 in other cryptocurrencies.

The company added:

No customers experienced a loss of funds. In the majority of cases we prevented the unauthorised withdrawal, and in all other cases customers were fully reimbursed.

Crypto.com statement on the hack

The company ascribed the hack to a problem with two-factor authentication (2FA) and said that going forward, it would put in place several mechanisms to create additional layers of security:

Based on replies to the Tweet above, it remains to be seen whether the matter is well and truly over, or if there is still more to come.

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Bitcoin Crypto News Real Estate

US Fintech Company ‘Milo’ Offering Zero Deposit Bitcoin-Backed Real Estate Loans

A Florida-based real estate technology firm, Milo, may just have solved the age-old problem of Bitcoiners who want to buy real estate but don’t want to sell their hard-earned coins. Following an announcement this week, Milo is launching the world’s first Bitcoin mortgage offering, enabling customers to buy real estate in the US by leveraging their stack as collateral.

A Bitcoiner’s Dream

Bitcoiners have always gone back and forth about the merits of real estate ownership:

One thing that can’t be denied, however, is that we all need a roof over our head. To those who prefer ownership over renting, the pain of selling bitcoins to purchase property is twofold – not only do you have less BTC, but you’re also left with a hefty tax bill.

Milo’s offering is therefore a welcome relief to Bitcoiners around the world who wish to buy US real estate. As per the announcement, qualifying clients would enjoy a 30-year bitcoin-backed low rate mortgage:

Clients expect us to come up with innovative solutions to extend credit to millions of great consumers. The existing ways for crypto consumers to access home credit has left them with unintended tax liabilities of selling for a downpayment or worse, the opportunity cost of seeing their crypto increase in value. There are countless stories of people buying property with bitcoin proceeds only to see it increase in value and be worth millions more.

Josip Rupena, CEO and founder, Milo

Aside from the benefit of diversification and capital growth of both assets, one of the best features of this offering is that it requires zero dollars down as a deposit. Milo claims the entire process is seamless and far quicker than conventional mortgage applications due to the “liquidity of digital assets”.

Already, nationals from 63 countries have signed up for the offering, suggesting that international appetite for the product is strong. Recognising that, historically, banks have not been the friendliest towards crypto, Milo’s CEO added:

This is an exciting time for the crypto and mortgage industries. With our new crypto mortgage, we can expand our offerings to consumers that were previously denied by other banking firms just for having crypto. We have an opportunity to make sure that doesn’t happen any more and their bitcoin wealth can now help them buy a property.

Josip Rupena, CEO and founder, Milo

The downside? Not your keys, not your coins. Clients would be well-advised to do a due diligence on what happens with their bitcoin once handed over. The devil is in the detail, which at this point is distinctly lacking.

We’ve seen bitcoin-backed miner loans, bitcoin-backed mortgage refinance and now this, bitcoin-backed mortgages. It’s hard to envision any circumstances in which this is where it ends.

Notably, no one is offering other crypto loans in this context, suggesting the consensus appears to be that Bitcoin is here to stay and worthy as collateral for a 30-year loan commitment.

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Australia Bitcoin Crypto News Sports

UFC Champ Francis ‘The Predator’ Ngannou to Take Half his Purse in Bitcoin

This weekend at UFC 270 in Anaheim, California, heavyweight champ Francis “The Predator” Ngannou defends his title against former sparring partner and undefeated French interim champ Cyril Gane. Betting underdog Ngannou is the one capturing most of the limelight after announcing he would take half of his purse in bitcoin.

Ngannou Sees Bitcoin as the Future

The African-born knockout artist has a truly inspirational story, having started working at age 10 in a sand quarry, ending up in a Spanish jail and then living on the streets of Paris while trying to pursue a career in boxing.

Francis Ngannou, a tale of rags to riches. Source: Reddit

Despite reaching superstar status in mixed martial arts (MMA) circles, Ngannou first caught the eye of Bitcoiners only last week when he tweeted:

His purse for this weekend’s 25 minutes or less bout is estimated at US$750,000, excluding win or sponsorship bonuses. At a minimum, the bitcoin portion of Ngannou’s earnings would represent US$375,000 (or 8.87 BTC, based on the current price of US$42, 287).

UFC 270 poster. Source: UFC

Given his humble upbringing, it should come as no surprise that the champ appreciates the value of inflation-resistant savings technology, and its capacity to transform the plight of everyday Africans.

Paid in Bitcoin, a Growing Trend?

As infrastructure and tech solutions proliferate, it has become increasingly simple to pay and get paid in bitcoin. In the US, for example, the Strike app (among others) has enabled employees to receive a portion of their salary in bitcoin through automatic dollar-cost-average buys. This has been embraced by people from all walks of life, from ordinary workers to elite athletes:

Closer to home, Australian employees can also get paid in bitcoin through fintech company Living Room of Satoshi, which offers workers the option for any percentage of their wage to be paid directly to their Bitcoin Lightning wallet.

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Bitcoin Crypto News Payments

Bitcoin Payments Decline as Other Cryptos Grow in Payment Usage

A literal interpretation of “cryptocurrency” necessarily implies a willingness on the part of the holder to exchange it for goods and services. However, according to BitPay, a company that provides BTC and BCH payment processing services for merchants, not all holders wish to part with their coins and, of late, Bitcoin spending is on the decline.

Spend of crypto by industry. Source: Bitpay

A Treasury and Marketing Strategy Wrapped in One

Around the globe, consumers and businesses are increasingly embracing crypto payments. While consumers may wish to spend some of their gains, many businesses have jumped on the bandwagon, driven by both financial and publicity reasons. It worked on both fronts for MicroStrategy:

That has increased the power of the brand by a factor of 100. We just had our best software quarter over the last 10 years. The Bitcoin business is driving shareholder returns. I think the employees are happy. The shareholders are happy.

Michael Saylor, chief executive and founder of MicroStrategy

From a company’s perspective, and when it comes to payments, there’s little downside to giving customers additional choices. Provided you aren’t hamstrung by shareholder environmental and social governance (ESG) activism (see Tesla), it makes commercial sense to accept some crypto assets – particularly since they can always be exchanged for fiat if the company doesn’t have a bullish outlook on the digital asset concerned.

From a customer’s perspective, the main downside to using one’s crypto for payment is that in most countries (including Australia), it constitutes a taxable event, meaning you will be obliged to pay capital gains tax.

Bitcoin’s Digital Gold Narrative Reducing Payments?

Given its inbuilt scarcity and trusted monetary policy, Bitcoin was always likely to be the long-term investor’s digital asset of choice. If billionaires like Bill Miller and Peter Thiel recommend HODLing Bitcoin, then it’s probably advice worth thinking about.

As the digital gold narrative became firmly entrenched in mainstream consciousness, together with growing institutional adoption, it’s no surprise that the level of Bitcoin spent is on the decline.

Last year, Bitcoin’s use at merchants that use BitPay dropped to about 65 percent of processed payments, down from 92 percent in 2020.

Crypto spending patterns compared. Source: BitPay
Categories
Bitcoin Crypto News

Mayor of Rio de Janeiro Follows Miami with Plans to Allocate 1% of Treasury to BTC

When Miami’s Mayor Francis Suarez announced plans last November to convert a portion of the city’s treasury reserves into Bitcoin, it seemed inevitable that other cities would soon follow suit. The latest is one of Brazil’s largest cities, Rio de Janeiro, which, according to local newspaper O Globo, is looking to put 1 percent of its treasury into Bitcoin.

Rio de Janeiro Embraces Bitcoin

According to the O Globo report, Mayor Eduardo Paes was quoted as saying at Rio Innovation Week:

We are going to launch Crypto Rio and invest 1 percent of the treasury in Bitcoin.

Eduardo Paes, Mayor of Rio de Janeiro

It was also reported that plans were under way to transform the city into a hub for the broader crypto industry. Finance secretary Pedro Paulo explained that Rio was considering whether to offer residents a 10 percent discount on taxes if paid in Bitcoin.

Rio, known for its beautiful beaches, is looking to become a crypto hub. Source: Canva

We are studying the possibility of paying taxes with an additional discount if you pay with Bitcoin.

Pedro Paulo, secretary for farming and planning, Rio de Janeiro

Of course, even if it were an option, not everyone would be on board with the proposal:

Companies, Countries and Cities Converting Cash to Bitcoin

Since adopting a Bitcoin standard for its treasury in August 2020, MicroStrategy’s Michael Saylor has inspired a wide range of market participants to follow suit, although admittedly to a lesser degree.

After famously labelling his company’s reserves as a “giant melting ice cube”, and with record levels of inflation, a growing number of economic actors have decided to shift a portion of their cash into Bitcoin – best viewed as a long-term inflation-resistant savings technology.

From Tesla and Block (formerly Square) to billionaire Bill Miller and the country of El Salvador, all have implicitly acknowledged the risk of holding a rapidly depreciating asset that is fiat currency. Instead, they have turned to Bitcoin.

Detractors will point to Bitcoin’s short-term volatility and criticise those who wish to divest of depreciating fiat currencies. What most forget is that the smart money thinks in decades and that when you zoom out, it’s difficult to find a better asymmetric bet to protect your purchasing power.

Bitcoin historical price, log chart. Source: @ChartsBTC
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Bitcoin Crypto News Payments

Tonga Intends Following El Salvador Playbook, Making BTC Legal Tender by November

According to former member of parliament Lord Fusitu’a, the small Polynesian island nation of Tonga is likely to emulate El Salvador’s adoption of Bitcoin as legal tender, perhaps as soon as November this year.

No Stranger to Bitcoin

As reported by Crypto News Australia last October, Lord Fusitu’a is a well-known Bitcoin advocate who previously expressed a desire for the country to adopt it as legal tender.

Bitcoin is the first truly global natively open monetary system. Blockchain is the most optimal storage medium for money if your goal is decentralisation and complete, egalitarian democratisation of money.

Lord Fusitu’a

One of the primary motivations for adopting Bitcoin is that Tonga remains highly dependent on remittances, even more so than El Salvador, which as a result of adopting Bitcoin may cost Western Union as much as US$400 million per annum.

Between 38 percent and 41.1 percent of our GDP, depending on which World Bank figures you use, is remittances. To get those remittances to Tonga, Western Union takes a 30 percent bite out of them, on average.

Lord Fusitu’a

As a member of the Tongan royal family, Lord Fusitu’a enjoys significant influence within the small island nation and took to Twitter to outline his vision for adopting Bitcoin.

The playbook, which entailed tabling a bill before parliament, was, according to him, “almost identical to the El Salvador bill”:

November Seen as Realistic Date of Adoption

Shortly after his series of tweets, Twitter was abuzz with speculation as to when Bitcoin could be legal tender in Tonga, to which Lord Fusitu’a enthusiastically replied.

If successful, the move could onboard more than 100,000 Tongans onto the Bitcoin network. For many, this comes as no surprise. In 2021, Tonga was one of the shortlisted countries to adopt Bitcoin next, following an appearance on the What Bitcoin Did podcast last year.

Lord Fusitu’a. Source: RNZ

Lord Fusitu’a has been singing the praises of Bitcoin for some time, asserting that it can make the nation “competitive and wealthy” if embraced. Aside from the focus on remittances, the other benefit to Tongans is an inflation-proof vehicle for long-term savings.

Nation state adoption of Bitcoin has commenced and the game theory is under way.

BTC nation state adoption game theory. @DylanLeClair

Tellingly, it’s not just Bitcoiners who are forecasting other nation states joining the Bitcoin network. Fidelity Asset Management, a US$4.2 trillion fund manager, has similar thoughts:

Fidelity Asset Management report. Source: Alex Gladstein
Categories
Bitcoin Crypto News Economics

Bitcoin Finds Support at $42,000 Amid Highest US Inflation in 40 Years

Since abandoning the narrative that inflation was transitory, the US Federal Reserve has tacitly admitted that inflation is here to stay. This was confirmed by the latest consumer price inflation (CPI) print for the 12 months ending December 2021, a 40-year high of 7 percent:

CPI, An Accurate Measure?

The US’ highest CPI print since 1982 proved to be in line with market expectations and, according to the report, was primarily due to supply chain challenges, labour shortages and the ongoing pandemic.

The highest contributors to the CPI basket included energy commodities (48.9%), used vehicles (37.3%), and meat, poultry, fish and eggs (12.5%).

CPI chart
US CPI to December 2021. Source: Bureau of Labor Statistics

Remarkably, the official increase for shelter was 4.1 percent, a figure many question since it is based not on actual house prices, but rather “owners’ equivalent rent of residences”. As reflected in the graph below, the real growth of the median US house price between December 2020 and December 2021 was, in fact, 20 percent.

US median house price 2020-2021. Source: St Louis Fed

It’s no surprise that not everyone agrees on the official inflation figures, particularly since its definition has changed over the years, most notably to exclude the real cost of house price growth.

Shadowstats purports to track real inflation figures and it suggests that inflation, based on the historical and more accurate definition of inflation, has risen by over 10 percent.

Alternative CPI data. Source: Shadowstats

Bitcoin Rises Above $44,000 on the News

January 12’s release of CPI data proved to be in line with market expectations, resulting in the broader crypto market lifting on the news. Bitcoin’s rally, in particular, offered welcome relief to HODLers, who have endured weeks of prolonged losses. On news of the CPI print, crypto’s premier asset rose above the key level of US$44,000.

BTC price. Source: Coinbase

Bitcoin has no doubt benefited from the Federal Reserve’s loose monetary policy since March 2020 and, given recent pronouncements of impending rate hikes, crypto investors can expect higher levels of volatility in the short to medium term.

Irrespective, for those with a long-term horizon, Bitcoin remains – on a risk-adjusted basis – the best hedge against inflation. One way to look at it is that if it’s good enough for the fund manager who outperformed the S&P 500 for a record 15 years straight, than it ought to be good enough for the average investor.

Categories
Crypto News DeFi

Report: ‘Centralisation Issues’ Are Biggest Culprits of DeFi Attacks

A recent report by blockchain security firm CertiK has revealed that in its analysis of 1,737 decentralised finance (DeFi) projects, centralisation was the primary reason behind the vast majority of hacks, exploits and scams.

DeFi in 2021: Losses vs Market Cap

According to the report, 2021 witnessed US$1.3 billion in crypto lost to 44 hacks, exploits or scams. This was approximately US$500 million more than 2020, however it is worth noting that 2021’s losses represent 0.05 percent of crypto’s total market capitalisation, compared to 2020 which was 17 percent.

While the percentage of total market capitalisation lost to hacks and exploits decreased in 2021, the rise in value locked meant the dollar value lost was greater than in 2020. This is a definite step forward, but it shows that the ecosystem still has progress to make before DeFi feels like a safe place in which to deploy capital.

CertiK Report
Total value lost to DeFi Hacks. Source: CertiK

CertiK noted that the majority of DeFi platforms exploited in 2021 were unaudited, a fact it found “disappointing” and which “highlights the amount of work to be done before DeFi is seen as a secure place to invest and innovate in”.

Nonetheless, DeFi’s incredible growth, in excess of 1,000 percent, “reflected the persistent demand for security solutions in a rapidly expanding industry”.

Different DeFi stacks. Source: @Funkmeister380 via Medium

DeFi by Name Only?

DeFi’s raison d’etre is to make financial products more readily accessible to a broader audience through distributed ledger technology. This suggests that it exists to specifically disintermediate middlemen such as brokerages, exchanges, or banks. However, as noted in the report, centralisation issues lay at the heart of most DeFi exploits:

By far the most common vulnerability found was centralisation risk. Single points of failure can be exploited by dedicated hackers and malicious insiders alike.

CertiK Report

To illustrate, as reported by Crypto News Australia, DeFi protocol bZx was exploited for more than U$55 million in November as the result of private key mismanagement. This was an example of privileged ownership (found in 76 out of 1,737 audits) that allowed the attacker to gain complete control of all contracts the key controlled.

As CertiK quite correctly notes:

Centralisation is antithetical to the ethos of DeFi and poses major security risks.

CertiK Report

Despite its promise and total value in DeFi increasing tenfold in 2021, the innumerable instances of DeFi hacks, leaks, exploits and breaches, as well as clear evidence of centralisation, suggests that DeFi in its current form remains some way out from achieving its intended goal of finance for everyone.

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Bitcoin Crypto News Gold Investing

Billionaire Bill Miller Admits 50% of His Net Worth is in Bitcoin

Against a macro backdrop of structurally low interest rates and rising inflation, it seems that every few weeks a billionaire comes out to declare a Bitcoin position.

The latest is Bill Miller, a fund manager with more than 40 years’ experience in financial markets. Unlike his peers, Miller isn’t diversified – over 50 percent of his net worth is in Bitcoin.

Former Value Investor Turned Bitcoin Bull

In traditional financial markets, Miller enjoys legendary status after his record-beating 15 consecutive years of outperforming the S&P 500 index.

In a video interview with Wealth Track published last week, Miller revealed that 50 percent of his personal assets were in Bitcoin and related investments – a far cry from the “1-2 percent” recommended by fellow investment heavyweight Ray Dalio.

Despite previously disclosing a Bitcoin position, Miller had, until now, shunned the “Bitcoin bull” label, preferring instead to call himself “a Bitcoin observer” – one who is watching the trajectory of Bitcoin as a new technology relative to other game-changing technologies like the printing press, steam engine, automobile or electricity. In his view, Bitcoin is following a well-understood path for the adoption of new technologies.

When asked about why he went so big on Bitcoin, he noted:

It goes against many of the tenets of financial discipline. On the other hand, the people that actually are the richest people in the country all are massively concentrated. You know, Buffet in Berkshire, Bezos, Mark Zuckerberg … they’re not widely diversified, they are highly concentrated and I think that’s because they have a high degree of confidence in the value of those investments.

Bill Miller

Speaking to the question of intrinsic value and whether Bitcoin had any, Miller suggested it was best viewed as digital gold:

It comes down to, at the very basic level, to supply and demand. Bitcoin is the only economic entity where the supply is unaffected by demand. So even with gold, which is $1,800 today, if gold goes to $18,000, there’ll be a lot more gold mined because mines that are unprofitable will become profitable.

Bill Miller

Miller said he personally started buying Bitcoin at around US$200 in 2014 after hearing a talk by Wences Casares, and then continued to buy more over time.

After stopping for number of years, he then decided to get back in when Bitcoin dipped to US$30,000, saying “there’s a lot more money going into it in the venture capital world, and there are a lot of people who are sceptics who are now at least trying it out”.

Despite being heavily concentrated, Miller’s recommendation to average investors is to put 1 percent of their net wealth into Bitcoin because “even if it goes to zero, which I think is highly improbable, but of course possible, you can always afford to lose 1 percent”.

I think the average investor should ask himself or herself, what do you have in your portfolio that has that kind of track record – number one, is very, very under-penetrated; can provide a service of insurance against financial catastrophe that no one else can provide, and can go up 10 times or 50 times? The answer is: nothing.

Bill Miller

At 72 years of age, it’s impressive that Miller has been involved in Bitcoin since 2014. Staying ahead of the technology curve is difficult, but what makes his investment ever more impressive is that he seemingly beat countless tech entrepreneurs to the punch, including Peter Thiel.

Categories
Bitcoin Crypto News Ethereum Tokens

Mozilla Does U-Turn on Decision to Accept Crypto Donations after Climate Backlash

Last week, Mozilla Foundation, the non-profit organisation behind open-source web browser Firefox, announced it would be accepting crypto donations to “keep the Web open and free”. Days later, it reversed the decision “due to cryptocurrency’s environmental impact”.

A Tidal Wave of Backlashes

What did it take for Mozilla to do an about-turn on its crypto donation policy? Approximately 20 disgruntled social media users, based on replies to the initial December 28 tweet:

Shortly after, Mozilla put a temporary hold on users’ ability to make crypto donations:

Unfortunately for Mozilla, it turns out that appeasing 20 noisy commenters has in turn created a new backlash to the initial backlash – a backlash squared, if you will.

Mozilla Greenwashing?

As environmental and social governance (ESG) issues have become increasingly important in modern public relations, it’s no surprise that crypto’s energy consumption has become a perennial hot topic of conversation.

Given the plethora of blockchains, consensus algorithms and the relative utility of each, a single retort is neither possible nor desirable. As a proof-of-work blockchain, Bitcoin tends to be targeted the most as no one credible denies that its energy use is significant.

While this isn’t the forum to provide a detailed rebuttal of the so-called energy argument, venture capitalist and Bitcoiner Nic Carter has done some exceptional work, the latest of which you can read about here.

In short, the energy debate comes down to two questions:

  1. Is the cryptocurrency valuable? If the detractor believes not, then no use of energy is worthwhile, however “green” it may be.
  2. Who gets to decide what is or isn’t an appropriate use of energy?

Is streaming The Kardashians on Netflix or ordering single-serve meal kits an acceptable use of energy? What about Christmas lights, air-conditioning, or the mining of cobalt for your mobile phone? Given that gold mining uses more energy than Bitcoin, should we be pushing for “eco-friendly” wedding rings?

In the context of Mozilla, this line of argument is epitomised in the tweet below:

Being Seen to Be Green

Today, it’s evident that there are societal and financial benefits to claims of being “environmentally friendly” – whether you actually are appears to be of secondary concern. This is essentially what “greenwashing” amounts to, a practice where “green” issues are used to elevate a company’s public perception, rather than actually doing anything useful in an environmental sense. It ultimately comes down to buzzwords over substance.

Mozilla’s decision to pause donations appears to be misguided at best. It has seemingly managed to overlook the value of crypto in funding international non-profits, as well as misunderstand its relationship to energy.

But perhaps there is an even bigger lesson to be learnt – bowing to the mob is often not the smartest strategy, particularly when the facts are not on your side.