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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Bitcoin Blockchain Crypto News Markets

BTCS Launches ‘Bividend’, the First NASDAQ Company to Pay BTC Dividends

A little-known NASDAQ-listed blockchain company, BTCS, has made history by becoming the first to offer a Bitcoin dividend, dubbed quite appropriately, a “Bividend“.

Bividend Explained

BTCS, which describes itself as as “securing the next-generation blockchain infrastructure and providing data analytics tools for your crypto portfolio”, announced this week that it was proceeding with a so-called “bividend”, the first dividend payable in Bitcoin by a NASDAQ-listed company.

The company intends to pay a once-off dividend in either Bitcoin or cash, equivalent to US$0.05 per share, on March 16, 2022. To qualify, you must be a shareholder of record, meaning that the shares cannot be held by a brokerage firm such as Robinhood, where you are merely the beneficial owner. You also need to specifically opt in if you prefer Bitcoin over cash.

We want to reward our long-time shareholders for their continued support and encourage financial freedom by providing the means to enable direct ownership of Bitcoin and other digital assets.

Charles Allen, CEO of BTCS

Allen added that BTCS had a history of breaking new ground:

In the crypto space BTCS has a long history of firsts, including being the first pure-play US public company focused on cryptocurrencies and blockchains, the first US public company to mine Bitcoin, the first … to implement a digital asset treasury strategy, and the first … to secure next-generation proof-of-stake blockchains.

Charles Allen, CEO of BTCS

BTCS shares soared on the announcement, pushing the price as high as 43 percent on the day, taking its market capitalisation to around US$43 million.

BTCS share price. Source: Tradingview

Publicity Stunt?

While some have seen the news as bullish, others have adopted a more cynical view, suggesting it is merely a publicity stunt.

Matt Levine of Bloomberg describes BTCS as a “somewhat unloved micro-cap company” that pulled off an effective marketing trick, propping the shares up more than 40 percent on the day.

A bividend is a terrible name but an obviously good meme-y crypto stunt to increase attention … BTCS will pay about $500,000 in bividends, which bought it about $15 million of market cap. Just a good trade!

Matt Levine, writer, Bloomberg

Cynicism aside, he may not be wrong. BTCS is still almost 50 percent off its September high when it debuted on the NASDAQ.

Whatever your take, it’s clear that:

  • regardless of whether it was a publicity stunt or not, it worked; and
  • given its success, there are likely to be a host of copycats in the near future leveraging the Bitcoin brand to elevate their own.
Categories
Bitcoin Bitcoin Mining Crypto News Mining

Bitcoin Hashrate Falls 12% Amid Kazakhstan Internet Shutdown

Earlier this week, Bitcoin’s hashrate hit a new all time high, however in a matter of days, it has dropped by 12 percent amid an ongoing political crisis in Kazakhstan where internet blackouts have reduced normalised network connectivity to just 2 percent.

Kazakhstan network connectivity rate. Source: Netblocks

Kazakhstan, the Bitcoin Mining Hub

Over the past decade, the former Soviet Union satellite state has enjoyed a reputation for stability, attracting billions of dollars in foreign investment, including the Bitcoin mining sector.

The country boasts some of the world’s lowest energy prices, which in part, has led to the Central Asian nation accounting for approximately 20 percent of the Bitcoin network’s hashrate. As neighbouring China banned Bitcoin mining in mid-2021, Kazakhstan proved to be one of the beneficiaries, increasing its hashrate even further.

An Ongoing Political Crisis

Initially sparked by anger at recent fuel price hikes, protests soon morphed to encompass a broad anti-government sentiment, leading the country’s presiding cabinet to resign.

Prior to their resignation, in what appears to be an obvious attempt to restrict protestor communications, state-owned Kazakhtelecom shut down the nation’s internet which in turn saw Bitcoin’s hashrate plummet.

Following widespread internet blackouts, some Bitcoin mining pools were hit harder than others:

BTC mining pool hashrate change. Source: Larry Cermak via Twitter

Bitcoin Hits Lowest Level in a Month

Independent of the hashrate drop, Bitcoin fell by over 4 percent to US$43,678, its lowest level since December 4.

Putting aside US$110 million in leveraged longs that were liquidated in an hour, this latest dip is largely attributable to a broader shift in market sentiment towards risk-off assets following the Federal Reserve’s signal that it intended to shrink its US$8.3 trillion balance sheet.

It’s not all bad news however. Looking at Bitcoin’s relative strength index (RSI), which indicates levels of over-bought/over-sold, it is currently lower than it was at the May-July 2021 correction. We know what happened afterwards.

Bitcoin relative strength index. Source: Buybitcoinworldwide.com

History doesn’t repeat itself, but it often rhymes.

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Bitcoin Crypto News Gold

Goldman Sachs Sees BTC Taking Further Market Share from Gold, $100k Possible This Year

Goldman Sachs Group Inc (GS), a multinational US$136 billion investment bank, has released a note to its investors saying that a US$100,000 price tag for Bitcoin in 2022 is possible if it continues to erode gold’s utility as a store of value.

Goldman Sachs and Bitcoin

Even though GS isn’t bullish on Bitcoin per se, Wall Street bankers inevitably follow the money, as reflected in the investment bank’s recent actions.

In June last year, it began trading Bitcoin futures, even though its investors were unsure whether Bitcoin was an investable asset. Later, an internal survey revealed that 60 percent of its wealth management clients were interested in purchasing Bitcoin.

Despite the natural tension between fiat-loving bankers and Bitcoiners, GS’s recent paper was met with delight by Bitcoiners who felt that, finally, a major investment bank saw Bitcoin for the “digital store of value” that it is. The report went on to add that Bitcoin’s userbase may well increase from 100 million to 4 billion within the next five years.

Comparison of crypto technologies. Source: Goldman Sachs

Goldman Sachs and the ‘Store of Value’ Thesis

In its report, GS commented that Bitcoin would continue to take market share from gold as part of a broader adoption of digital assets. By GS’s own estimates, Bitcoin accounted for 20 percent of the “store of value” market which it said comprised Bitcoin and gold. The value of gold that’s available for investment, in their opinion, is estimated at US$2.6 trillion.

Gold and Bitcoin on “store of value”. Source: Goldman Sachs
Macro and Bitcoin. Source: Goldman Sachs

The note went on to say:

If Bitcoin’s share of the store of value market were ‘hypothetically’ to rise to 50 percent over the next five years, its price would increase to just over US$100,000, for a compound annualised return of 17 or 18 percent.

Zach Pandl, co-head of global FX and EM strategy, Goldman Sachs

While one could debate whether GS’s figures are accurate, as well as its specific understanding of Bitcoin (for example, it doesn’t appear to know about the Lightning Network), it is clear it has become something it is taking seriously.

Whereas most financial products are created at the top and distributed downwards to retail (like mortgage-backed securities), Bitcoin is a retail-inspired monetary revolution that is slowly bringing in institutional capital. Raoul Pal spoke of an impending “wall of institutional money” in 2021. Perhaps 2022 will be the year.

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Bitcoin Bitcoin Mining Crypto News

As Bitcoin Turns 13, Its Hashrate Hits a New All-Time High

January 3 marked the 13th anniversary of Bitcoin’s genesis block. Coincidentally, and within days, Bitcoin’s hashrate reached an all-time high of 228.92 exahashes per second (EH/s) – this despite the fact that Bitcoin’s performance of late has significantly undershot expectations. What gives?

Bitcoin Hashrate: Source: Coinwarz

Hashrate – What is it and Why Does it Matter?

Simply put, “hashrate” refers to the total computational power used to mine and process transactions on Proof-of-Work (POW) blockchains, such as Bitcoin. It is the most widely used metric in evaluating the strength and security of a POW blockchain.

All things being equal, the greater the number of honest miners and associated computational power, the more difficult it becomes for dishonest actors to disrupt or engage in a 51 percent attack.

Accordingly, a drop in hashrate typically makes it easier to perform a 51 percent attack, whereas the opposite is true when the hashrate increases.

Hashrate Recovery Post-China Ban

As Bitcoin developer Jameson Lopp notes, Bitcoin’s hashrate increased by 10 percent in 2021, but that in itself is eclipsed by its recovery following China’s ban on mining:

Weathering and completely recovering from a 50 percent+ drop due to a mining ban by the country with the most hashpower was a major milestone for network resilience.

Jameson Lopp via Twitter

As Bitcoin miners fled China to more friendly regulatory regimes, the US has become the biggest beneficiary in what commentators have described as one of China’s most significant geopolitical blunders. For context, in this year alone an estimated US$900 million in mining equipment is expected to be shipped to the US from China.

What of Price Action?

Historically, the correlation between Bitcoin’s price and the hashrate is shaky, although drawing on historical data, some inferences can be made.

For example, Bitcoin OG Max Keiser suggests that “hashrate precedes price. New ATH hash means new ATH price incoming. $220k in 2022 [is] in play.” While he might have missed the mark in 2021, the chart below reflecting both hashrate and price does appear to indicate Bitcoin is trending lower than one would expect at the current hashrate.

Bitcoin Mean Hashrate. Source: Glassnode

Others in the Bitcoin community are more circumspect:

While some Bitcoiners bemoan recent price action, if you’re in it for the long haul, the fact that the Bitcoin network is stronger and more robust than ever ought to be sufficient cause for celebration.

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Bitcoin Crypto News DeFi Metaverse NFTs

Jack Dorsey Causes Twitter Storm, Calls Web 3.0 a Centralised Venture Capital Playground

Following his recent departure from Twitter, many suspected Jack Dorsey would be spending his time on Bitcoin after saying earlier this year, “I don’t think there is anything more important in my lifetime to work on”. While his plans remain under wraps, Dorsey ignited a Twitter storm after criticising Web 3.0 as being centralised and for the benefit of venture capitalists.

The Promise of Web 3.0

Web 3.0 envisions a future state of the internet based on decentralised public blockchains where users own and govern sections of the internet, rather than requiring access through centralised entities such as Google or Facebook.

Unlike Web 2.0 where users are the product and unable to own a piece of the internet, Web 3.0 is “owned by the community” and “trustless” in the sense that an intermediary isn’t required for transactions.

Among other things, Web 3.0 includes decentralised finance (DeFi), a favourite among venture capital firms at the moment and a sector into which enormous sums of money have been ploughed.

Web 3.0 Decentralised?

Web 3.0 promises a decentralised version of the virtual world featuring public blockchains, metaverse technology, non-fungible tokens and DeFi free from the grasp of centralised power sources. But how much of this is true?

One place to start is with the data. Earlier this year, Messari published a report illustrating the initial token allocations for some of the most popular blockchains. Evidently, insiders such as venture capital firms, founders and foundations represent the bulk of initial allocations in most cases, suggesting that they may not offer the promise of decentralised governance purported.

Initial token allocation for public blockchains. Source: Messari

The crux of Dorsey’s criticism is simple. Venture capitalist firms (VCs) frequently fund Web 3.0 projects in direct competition with genuinely decentralised alternatives such as 100 percent initial coin offerings. By owning a controlling stake, they are able to pressure blockchain co-founders and influence the direction of the project. In addition, as insiders, VCs are well-placed to pump their bags and time their exit at the expense of retail investors.

Naturally, Twitter’s favourite billionaire troll couldn’t resist commenting too:

Taking a step back from the Twitter storm, it’s clear in the end that Dorsey feels as if Web 3.0 is decentralised in name only. While he quite obviously is not opposed to centralisation or venture capital – see Twitter and Square – he simply wants people to know what they are getting into.

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Australia Crypto Exchange Crypto News

MyCryptoWallet Liquidation Commences, Amount of Crypto Held Remains Unknown

Liquidators for MyCryptoWallet are in the process of establishing the amount of cryptocurrency held, if any, by the now-defunct Australian crypto exchange. In the interim, out-of-pocket investors are left with little choice but to hope for the best.

Liquidation Under Way

According to documents lodged with the corporate regulator, MyCryptoWallet’s former chief executive, Jaryd Koenigsmann, first contacted the insolvency practice, SV Partners, on November 22. This drove the company into liquidation proceedings on December 3.

Soon after, the appointed liquidators commenced their campaign to sell various parts of the business, the most valuable component being its intellectual property and technology stack.

My preliminary investigations reveal that the company’s online platform and its technological infrastructure is commercial to realise … Accordingly, I have engaged lawyers and valuers to assist me with the process of securing the online platform and the sale of the company’s website and intellectual property.

Terry van der Velde, liquidator, SV Partners

Last week, SV Partners released a report to creditors where it indicated that, as of yet, it had failed to identify whether the failed business had any of its own crypto reserves.

My investigations are ongoing with respect to the coins and wallets … Creditors will be updated in further reports.

Terry van der Velde, liquidator, SV Partners

Low Prospect of Recovery?

When asked about whether individual customers could access their funds, SV Partners outlined the liquidation process:

All assets of the company vest in me as liquidator of the company for the benefit of creditors … Customers [who] invested money and had their coins stored through the company’s website, and can verify their deposits, may be entitled to receive a dividend. However, at this stage the quantum and timing of any such dividend is unknown.

Terry van der Velde, liquidator, SV Partners

While the assets of MyCryptoWallet remain unknown, liquidators confirmed that its bank accounts were empty and that it had an outstanding debt of A$250,000, owed to a related party.

As per the report, MyCryptoWallet had around 19,500 registered customers. Given the average retail investor’s proclivity to leave their crypto on exchanges, the number of creditors is expected to run into the thousands. Naturally, this would be very concerning to investors, some of whom may have lost as much as A$40,000.

A subsequent statutory report to creditors is scheduled to be released on or before March 3.

What are the chances that creditors will recover their funds in full? Undoubtedly, that ship has sailed. At best, aggrieved investors can hope to recover a portion of their investment, together with a brutal, albeit elementary, lesson – not your keys, not your coins.

As Rick tells Morty, “not your keys, not your coins”. Source: @AUnderwar
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Banking Bitcoin Crypto News

Billionaire Hedge Fund Manager: Bitcoin Has Merit as ‘Younger Generation’s Gold’

Ray Dalio runs the largest hedge fund on Earth, with US$105 billion under management. After previously dismissing it, earlier this year he disclosed that he “had some Bitcoin“, and in a recent interview with MarketWatch, suggested it was a “younger generation’s alternative to gold”.

Using the Past as a Guide for the Future

Speaking to MarketWatch, Dalio suggested that most people are interested in the news of the day but not in history and lessons of the past.

My approach has always been like [that of] a doctor, that if I haven’t seen many cases of it before I want to go back and study all the cases in history so I can make decisions today.

Ray Dalio

Zooming out, Dalio identified three main themes that required study, largely driven by fiscal and monetary policies over the past two decades:

  1. Zero interest rate, high levels of debt and money printing to finance that debt.
  2. Growing conflict and division between different socio-economic and political groups.
  3. The rise of China challenging the American world order that has been in place since 1945.

Recognising that money printing has historically led to currency debasement and inflation, as reflected in the recent 39-year US CPI inflation numbers, he suggests that conditions may indeed worsen if stimulus cheques don’t come in at the same rate.

Dalio’s Investment Advice

Dalio noted that at present, “money is essentially free” so it doesn’t cost anything to borrow. He added: ” … with the cost of money negative and below the nominal growth rate, it’s very profitable to borrow and invest in anything that can grow at the inflation rate or more”.

The Federal Reserve was therefore “between a rock and a hard place” because it needs to restrain inflation, but if it raises rates, asset prices will collapse. In a country that is already divided, and with mid-term elections next year, it wouldn’t be politically palatable to raise rates. Dalio’s base case is therefore continued economic stimulus and currency devaluation.

While it may be tempting, he cautioned investors against cash:

People think the safest investment is cash, but they don’t look at the inflation-adjusted return. Don’t hold cash. It’s better to hold a liquid, diversified portfolio of assets – if it’s balanced. An “all-weather” portfolio has currency diversification, asset-class diversification, country diversification and industry diversification.

Ray Dalio

Dalio On Bitcoin

When asked, Dalio praised Bitcoin and saw merit in a small portfolio allocation:

It has been an amazing accomplishment for bitcoin to have achieved what it has done, from writing that program, not being hacked, having it work and having it adopted the way it has been. I believe in the blockchain technology; there’s going to be that revolution, so it [Bitcoin] has earned credibility.

Ray Dalio

He recognised that Bitcoin was the younger generation’s answer for gold and added “Bitcoin is like gold, though gold is the well-established blue-chip alternative to fiat money”.

Despite being positive about Bitcoin, Dalio did however stress that should it continue to represent a threat to government, it would likely be outlawed. Governments have banned alcohol, drugs, weapons and even gold, but none has served to undermine its value in the long run.

While Dalio is no doubt the expert on all things macro, he is perhaps overlooking the fact that if properly self-custodied, Bitcoin is unconfiscatable. Despite being banned in various countries around the world, Bitcoin has continued its path towards global adoption.

As Parker Lewis has said, “… if a government attempts to ban Bitcoin it is an endorsement that Bitcoin works and threatens their monopoly on money”.

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Crypto News NFTs

Nexo Pioneers NFT-Backed Lending Services

Market-leading crypto lending specialist Nexo has teamed up with Singaporean hedge fund Three Arrows Capital to launch its new NFT-backed lending services. Clients will now be able to borrow digital assets and use NFTs as collateral.

Nexo Accepting Bored Apes and CryptoPunks, For Now

Initially, only those who hold Bored Ape Yacht Club and CryptoPunks NFTs will have access to the service, however the company plans to add more down the line.

For a company wanting to provide liquidity to NFT holders, this decision makes sense as prudence would suggest that if you’re going to allow clients to borrow against their NFTs, best you make sure that those NFTs have a reasonable prospect of sustaining value into the future.

Nexo recognises that even so-called “blue chip” NFTs are potentially overheated, and this is reflected in its conservative offering:

  • minimum value of NFT must be US$500,000;
  • interest-only loan with rates between 12-15 percent; and
  • loan to value ratios between 10-20 percent.

Nexo co-founder Antoni Trenchev recognised that NFT use cases would continue to proliferate and, in due course, so would their services:

An NFT can be anything and can provide so many functions … in the future, we’ll be providing loans and financing people’s purchase against anything from digital real estate, to gaming items, or even limited-edition Nike sneakers.

Antoni Trenchev, Nexo co-founder

Year of the NFT

This has undoubtedly been the year of the NFT – it fact it was 2021’s word of the year. In a relatively short space of time, we’ve seen the space mature as investment into NFT infrastructure and gaming continues to soar. By way of example, the world’s first NFT-related ETF was launched earlier this month.

But not everyone is excited about NFTs. Many regard them as useless JPEGs, tacky displays of wealth, or a bubble reminiscent of the dot com era. Doubters can now put their money where their mouth is and short NFTs. Arguably, that requires more bravery than buying one.

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Banking Bitcoin Crypto News Cryptocurrencies

Bank of England Says BTC ‘May Be Worthless’, But Pound Down 98% Against BTC in 5 Years

The Bank of England (BOE) is well-known for its hawkish stance towards Bitcoin, so it should come as no surprise that its deputy governor, Sir Jon Cunliffe, has now claimed that Bitcoin “could theoretically or practically drop to zero”.

The facts however, suggest otherwise.

Pound Sterling priced in BTC. Source: TradingView

Danger to the Established Financial System

Cunliffe told the BBC that Bitcoin poses a threat to the stability of the financial system. With 2.3 million digital asset owners in the UK and with cryptocurrencies representing just over 0.1 percent of total household net asset value, he recognised that the risk at present was not terribly significant. He remains, however, concerned due to its volatility.

Their price can vary quite considerably and they could theoretically or practically drop to zero … the point, I think, at which one worries is when it becomes integrated into the financial system, when a big price correction could really affect other markets and affect established financial market players.

Sir Jon Cunliffe, deputy governor, Bank of England

The deputy governor also felt that at present the standards and regulations relating to crypto were “not there yet”:

We really need to roll our sleeves up and get on with it, so that by the time this becomes a much bigger issue, we’ve actually got the regulatory framework to contain the risks.

Sir Jon Cunliffe, deputy governor, Bank of England

Inflation More Dangerous?

On the same day as Cunliffe’s comments, in a blogpost published by the BOE the bank offered an unusual criticism of Bitcoin’s scarcity saying “its scarcity may even, ultimately, render Bitcoin worthless”. The mechanics of how that would play out remain somewhat of a mystery.

It went on to say: “Now, so far, Bitcoin has not performed [as] well as money. Quick recap: money issued by central banks, fiat money, acts as a ‘store of value’ – it preserves the spending power of income and wealth, so that you can be confident that a pound, say, will buy about as much in a year’s time as it would today.”

Ironically, the timing of these comments could not have been less opportune as the UK has just recorded its highest inflation in 10 years.

Worse still is the fact that, relative to Bitcoin, the Pound Sterling is down 60.89 percent over the past year and 98.31 percent over the past five years.

Fiat currency performance in BTC. Source: Priceinbitcoin

Despite being largely antagonistic towards crypto, the BOE is in the process of investigating a digital pound, dubbed “Britcoin”.

Fiat Currencies Inherently Inflationary

While potentially offering some benefits, the “Britcoin” is unlikely to overcome the fundamental problem with fiat currencies – that they are inflationary by nature, with unpredictable monetary policy and controlled by central authorities with a proclivity to increasing its supply, which naturally and ultimately leads to debasement.

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Blockchain CBDCs Crypto News Stellar

Ukraine Bank Launches CBDC Pilot Built on Stellar Lumens Blockchain

A recent announcement by the Stellar Development Foundation (SDF) has revealed that the Stellar blockchain will be used to pilot an electronic version of the hryvnia, Ukraine’s national currency. In addition to September’s news of the country legalising cryptocurrencies, Ukraine appears to be gradually embracing the entire digital asset ecosystem.

Stellar Partners with Fintech Firm and Ukraine Bank

‍The CBDC pilot will be carried out by global fintech firm Bitt and one of Ukraine’s oldest banks, TASCOMBANK. The project will be overseen by the country’s central bank, with additional oversight from the Ministry of Digital Transformation.

As part of the project, an electronic hryvnia will be issued on the Stellar blockchain. One of the main tests will be use cases for “programmable payroll for public employees at Diia, an IT solutions enterprise, as well as for peer-to-peer payments and merchant payments”.

Oleksandr Bornyakov, deputy minister of Digital Transformation of Ukraine, noted:

This pilot project will serve as a technological basis for the issuance of electronic money, and is the next key step to advance innovation of payment and financial infrastructure in Ukraine.

Oleksandr Bornyakov, deputy minister of Digital Transformation of Ukraine

Build It, Test It, and It Will Come

The stated objective of the project is to “pilot the issuance of electronic money on an open blockchain with asset-control capabilities for issuers”.

TASCOMBANK will build and test the regulated electronic hryvnia on Stellar, which will be deployed on Bitt’s digital currency management system. Part of Stellar’s appeal, according to Bitt CEO Brian Popelka, is its “many benefits, including greater flexibility that aligns with the electronic hryvnia’s specific needs”. Volodymyr Dubey, TASCOMBANK’s chairman of the board, was similarly optimistic about the project’s prospects, saying:

With the rapidly growing impact of virtual assets on our everyday life and economic landscape, it is essential to utilise the advantages of blockchain technology and new related products as a part of the bank’s long-term market strategy. Electronic currency paves the way to more sophisticated products in the virtual assets field that we are excited to explore.

Volodymyr Dubey, chairman of the board, TASCOMBANK

Stellar Making Strides

Earlier this year, the Stellar Foundation announced a partnership with Moneygram and USDC as part of its move into the global remittances space. Now, its ambitions have expanded into central bank digital currencies (CBDCs) with its CEO and executive director expressing great confidence that its blockchain is up to the task.

Stellar is an open network that was designed with asset issuance in mind, and is uniquely suited to assets like the electronic hryvnia. It offers issuers, like TASCOMBANK, a suite of controls that they can configure for their asset control needs while maintaining the interoperability and flexibility of an open ledger.

Denelle Dixon, CEO and executive director, Stellar Development Foundation

This regulated electronic hryvnia will be built under the current e-money legislation of Ukraine, and the payment services law governing the circulation of electronic money and future issuance of a digital currency is anticipated to take effect in 2022.