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 Coinbase Crypto News

$10 Trillion ‘BlackRock’ Partners with Coinbase for Clients to Buy BTC

Rumours circulated some six months ago that BlackRock, one of the world’s most influential fund managers, was moving to offer its institutional clients access to crypto trading. Now, it’s become official:

Driven by Client Demand

The news broke on August 4 when Coinbase announced it had partnered with the US$10 trillion financial heavyweight to offer crypto trading to its institutional clients, starting with bitcoin.

Following the alliance, BlackRock’s proprietary wealth management platform, Aladdin, will integrate directly with Coinbase Prime, such that clients will have access to trading, custody, prime brokerage and reporting capabilities. Aladdin is the gold standard of institutional fund manager platforms, suggesting that the partnership is likely to have far-reaching consequences:

In the true spirit of Bitcoin, it’s worth noting that BlackRock’s move to offer bitcoin arose from the bottom-up, rather than top-down:

Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets. This connectivity with Aladdin will allow clients to manage their bitcoin exposures directly in their existing portfolio management and trading workflows for a whole portfolio view of risk across asset classes.

Joseph Chalom, global head of strategic ecosystem partnerships, BlackRock

This represents a dramatic change of tone from years gone by, a fact that didn’t escape Bitcoin Twitter:

Blackrock changes its tune. Source: Bitcoin Archive

Coinbase Soars on the News

Shortly after the partnership announcement, Coinbase stock, which recently suffered a 20 percent drop amid an unregistered securities probe, rose by close to 40 percent.

Unsurprisingly, the company has not been spared from this year’s bear market of “historic proportions“, impacting both digital assets and related firms alike. For the year to date, Coinbase stock remains down over 63 percent, even after this most recent rally:

Coinbase stock YTD. Source: Google Finance

While bitcoin’s price remains supressed against a challenging macro backdrop, it’s telling that financial giants such as BlackRock continue with plans to move forward, proving that this asset class is here to stay.

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Bitcoin Crypto News Lightning Network

Galoy Introduces ‘Stablesats’, Bringing US Dollars to the Lightning Network

Bitcoin’s volatility is the most frequently cited criticism of El Salvador’s adoption of bitcoin as legal tender. To address this legitimate concern, Bitcoin Beach wallet developer Galoy has released a new feature called “Stablesats”, enabling users to send synthetic US dollars over the Lightning Network.

Game-Changer for Developing Nations

Developing nations are often argued to be those that stand to benefit most from bitcoin adoption. The harsh reality, however, is that the asset’s volatility presents a material obstruction to adoption as a medium of exchange, simply because the majority of potential users don’t have the financial legroom to withstand its unpredictable price moves.

In response, Galoy has created “Stablesats” to enable users to save in BTC and spend in USD, all through the Lightning Network:

With Stablesats-enabled Lightning wallets, users are able to send from, receive to and hold money in a USD account in addition to their default BTC account. While the dollar value of their BTC account fluctuates, $1 in their USD account remains $1 regardless of the bitcoin exchange rate.

Nicolas Burtey, chief executive officer, Galoy

Importantly, what makes it different from other stablecoins such as Tether (USDT) is that there is no token; it is simply bitcoin stabilised into a dollar balance:

The company also announced that it had raised US$4 million to develop GaloyMoney, an open-source Bitcoin banking platform, a versatile application programming interface (API) and an enterprise-ready Lightning gateway offering organisations access to Lightning payments.

Mechanics and Risks

Stablesats is able to offer a US dollar balance underpinned by bitcoin through a mechanism know as inverse perpetual swaps. It works by pledging the user’s bitcoin as collateral to an exchange to purchase derivative contracts that are used to hedge the BTC underlying the US dollar value.

Inverse perpetual swaps are denominated in fiat, with any gain or profit priced in bitcoin. Accordingly, the user’s dollar account incurs unrealised BTC gains if the bitcoin price drops, or unrealised BTC losses if the bitcoin price increases. At a high-level, this is what enables Stablesats to retain a stable dollar balance without interfacing with the traditional banking sector.

Galoy provides a basic video to outline the mechanics behind its synthetic USD:

From a risk perspective, the main concern is naturally a counterparty risk, since the derivatives trade necessarily takes place with a centralised exchange, which also retains custody of the bitcoin. In recent times, it’s become all too familiar to see exchanges hacked, or otherwise freeze user withdrawals.

Assuming the risks can be properly contained, this exciting innovation by Galoy has the possibility to facilitate widespread bitcoin adoption. Simple, user-friendly consumer applications drove the adoption of mobile applications, and there’s no reason to believe it will be different in the case of bitcoin.

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Bitcoin Crypto News

Michael Saylor Steps Down as CEO of MicroStrategy to Focus on Bitcoin

Bitcoin permabull Michael Saylor has stepped down from his role as chief executive at MicroStrategy, a business intelligence firm he founded 23 years ago, to focus on his work in Bitcoin.

He joins Jack Dorsey, another tech billionaire who, since leaving Twitter, has shifted focus almost exclusively to Bitcoin:

All In on Bitcoin

In MicroStrategy’s Q2 results presentation, the company announced that Saylor would step down from his role as CEO but would assume a new role as executive chairman. The presentation made reference to the company’s bold treasury strategy, and identified the key role that Saylor would play going forward:

MicroStrategy became the first publicly traded company to adopt bitcoin, a revolutionary financial technology, as its primary treasury reserve asset. As Executive Chairman, Mr Saylor will focus primarily on innovation and long-term corporate strategy, while continuing to provide oversight of the company’s bitcoin acquisition strategy as head of the Board’s Investments Committee.

MicroStrategy presentation

Saylor commented that splitting the roles of chairman and CEO would enable the company to better pursue its two corporate strategies, namely acquiring and holding bitcoin, and growing its enterprise analytics software business:

As Executive Chairman I will be able to focus more on our bitcoin acquisition strategy and related bitcoin advocacy initiatives, while [current president] Phong [Le] will be empowered as CEO to manage overall corporate operations.

Michael Saylor, MicroStrategy, executive chairman

Company Continues to Make Positive Strides

Given that 2022 has been a bear market of “historic proportions”, it was inevitable that much of the focus would be on MicroStrategy’s macro strategy – to buy and hold bitcoin.

It’s little surprise then that one of the more notable elements of the Q2 results was a US$917.8 digital asset impairment charge, up significantly since US$170.1 million in Q1.

Since first purchasing bitcoin in August 2020, the company has acquired a total of 129,699 BTC at an average price of US$30,664 per coin, and has continued at an unrelenting pace, recently buying up another 421 BTC at just over US$20,000 apiece.

Naturally, mainstream financial media have been quick to criticise the strategy, particularly in relation to its leveraged position. Chief financial officer Andrew Kang, however, confirmed that 85,000 BTC were unpledged or unencumbered. “We have more than sufficient collateral for any price volatility,” he said.

Despite the company’s position being underwater, Saylor remains undeterred in his commitment, saying: “MicroStrategy is in a category of one; we are the largest corporate holder of bitcoin in the world. Our strategy is buy and hold for the long term, and that’s it.”

For those paying attention, this shouldn’t be a surprise. He made it clear in his interview with Laura Shin last year:

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Bitcoin Bitcoin BSV Crypto News

Self-Proclaimed ‘Satoshi’ Claims Victory Against Bitcoin Podcaster, Awarded Damages of £1

Dr Craig Wright, the self-proclaimed inventor of Bitcoin, has claimed victory in a defamation lawsuit against popular British Bitcoin podcaster Peter McCormack. “Faketoshi”, as he is known in Bitcoin circles, was awarded £1 for advancing “deliberately false evidence”:

Evidence Found to be False

The host of the What Bitcoin Did podcast was sued for his comments in which he described Wright as a “fraud” and “liar” in relation to persistent claims that he was indeed the founder of Bitcoin.

UK High Court Judge Martin Chamberlain ruled against McCormack, finding that the podcaster had caused “serious harm” to Wright’s reputation since he was apparently disinvited to speak at various events and conferences.

The judge, however, determined that since Wright had “advanced a deliberately false case and put forward deliberately false evidence until days before trial, he [would] recover only nominal damages”. On that basis, the court found that there would be “no injustice” in awarding the paltry sum of sum of £1:

Summary of judgement. Source: WuCoin

Not the End for Wright

In a statement distributed by his lawyers, Wright said: “I intend to appeal the adverse findings of the judgment in which my evidence was clearly misunderstood.”

Australian-born Wright remains a constant source of derision and controversy within the Bitcoin community. Last year, he won a copyright lawsuit over the Bitcoin whitepaper and later sued a former partner over claims he was entitled to Satoshi’s 1.1 million bitcoins.

McCormack took to Twitter to celebrate the result, saying:

As some of you will now have seen, the judgment in my trial v Dr Craig Wright has now been handed down. I want to thank my lawyers for their diligent work on the case. I also want to thank Justice Chamberlain for this result. We are very pleased with his findings. Please do note that the process is not complete and therefore I will not be commenting further on this. Once the entire process is complete, there will be others I will be thanking.

Peter McCormack, host, What Bitcoin Did podcast

The Bitcoin community celebrated the favourable result, pointing to Wright’s history of plagiarism, forgery and false evidence:

This comes at a time where his hard forked token BSV has less than 2 percent of bitcoin’s market capitalisation and has been delisted from most exchanges due to a lack of security:

With several other cases on the go and an appeal imminent, litigious Wright will likely remain in the headlines for the foreseeable future.

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Bitcoin Crypto News Ethereum Filecoin Investing

Australian Asset Manager ‘Holon’ Launches Multiple Low-Cost Crypto Funds

Following recently approved Australian crypto exchange-traded funds (ETFs), Sydney-based Holon Global Investments (Holon) has just launched three crypto funds of its own, partnering with Gemini as its custodian:

Low-Cost Alternative for Retail Investors

Holon, an asset manager which identifies itself as a Web3 investor, has launched three unlisted funds that provide access to bitcoin, ethereum and filecoin respectively.

According to the investment firm, the funds are currently the only managed investment schemes for digital assets available to retail investors that are registered with the Australian Securities and Investments Commission (ASIC).

We are huge believers in the potential for blockchain and cryptocurrency to revolutionise key areas of the global and Australian economy, including finance and data storage. But Australian investors, financial investors, and financial advisers have struggled to find regulated ways to invest.

Heath Behncke, managing director, Holon

The funds have a A$5,000 minimum investment, or A$2,000 with a A$200 per month savings plan. Furthermore, Holon has suggested that all three funds hold long positions only, as there is no gearing or trading.

Notably, the funds will incur a management fee of 0.4 percent, significantly less than the 1.25 percent fee charges by the initial group of approved Australian crypto ETFs.

Holon’s head of asset management highlighted the thought process behind this decision in a recent interview with the Australian Financial Review:

We don’t think we’re adding an enormous amount of value here, and so we shouldn’t be charging an enormous fee.

Rory Scott, head of asset management, Holon

Holon Strengthens Ties with Gemini

According to a statement by Gemini, it will act as custodian for all three funds, given its credentials and experience in operating within challenging regulatory environments. But this isn’t the first time Holon has teamed up with Gemini. Last year, it partnered with the Winklevoss-led outfit after launching its Filecoin wholesale fund.

Holon’s managing director Heath Behncke was excited about the launch, commenting:

The Holon funds have been carefully structured to include Gemini’s institutional grade custody to provide investors and financial advisors with attractive exposure to some of the most credible and exciting cryptocurrencies – Bitcoin, Ethereum and Filecoin.

Heath Behncke, managing director, Holon

It’s interesting to note that when Commonwealth Bank of Australia announced its foray into crypto, which has since been postponed, it too leaned on Gemini for custodial services. At present, it isn’t clear whether there is simply a lack of credible local institutional-grade custodians, or whether other factors, such as regulations, are at play.

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Australia Crypto News Economics

Australian Inflation Hits 21-Year High as Crypto Market Eclipses $1 Trillion

The Australian consumer price index (CPI) has risen to 6.1 percent for the 12 months ending June 30, the country’s highest inflation level since June 2001:

Just over a year ago, some raised alarm bells as the CPI increased to 3.8 percent. At the time, academics provided a host of reasons not to worry, and this view was supported by the Reserve Bank of Australia (RBA), which expected inflation to reduce to 1.5 percent in 2022. As it turns out, the projections were all wrong.

According to the latest report by the Australian Bureau of Statistics (ABS), the CPI has risen by 1.8 percent over the past quarter and 6.1 percent over the past year.

CPI fluctuations over the past decade. Source: ABS

Of course, the CPI metric is in itself not uncontroversial, since virtually everyone has a different rate of inflation depending on levels of income, consumption habits, location and the like.

Furthermore, when the method of calculating inflation changes, as it frequently does, it almost never results in an increase in CPI, only a decrease. Cynics would call that political expediency.

Transport, Housing Largest Contributors to CPI

Notwithstanding, a weighted average across Australia’s capital cities provides insight as to the largest overall contributors to the official CPI figure, most notably transport (13.1 percent) and housing (9 percent):

Weighted average of eight capital cities. Source: ABS

Australian Treasurer Jim Chalmers described the latest inflation figures as “confronting”, adding that things would likely get worse before improving:

These numbers are obviously for the June quarter, and there is price pressure to follow the period that we are learning more about today.

Jim Chalmers, Australian Treasurer

Given the current inflationary pressures, the RBA is expected to once again hike interest rates next week, with analysts pointing to 0.5 percent and 0.75 percent as being the most likely increases.

Crypto Market Rises

Across the pond, shortly after the US Federal Reserve increased the federal funds rate, the overall crypto market lifted from around US$970 million to just shy of US$1.05 trillion at the time of writing.

BTC and ETH both posted strong overnight gains of 9 and 12 percent respectively, amid growing signs that the broader crypto market contagion may be somewhat contained.

Nonetheless, the broader macro environment remains uncertain and highly volatile. In the short to medium-term, however, it remains to be seen whether this latest relief rally is an indicator of a market sentiment shift or merely a temporary respite from the biting crypto winter.

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Coinbase Crypto News Cryptocurrency Law Regulation

Coinbase Stock Tumbles 20% Amid Regulatory Probe into ‘Unregistered Securities’

Shortly after announcing the first crypto insider trading case, where it identified nine tokens as securities, the US Securities and Exchange Commission (SEC) has now launched an investigation into Coinbase, the publicly listed exchange that listed them:

According to a report by Bloomberg, the SEC is looking into whether Coinbase improperly let Americans trade digital assets that should have been registered as securities. On release of the news, Coinbase stock dropped by 20 percent but recovered shortly thereafter.

Coinbase share price. Source: Google Finance

What Are Unregistered Securities Anyway?

The term “securities” refers to tradeable financial assets, and under US securities law a company may not offer or sell securities to the public unless the offering has been registered with the SEC. Registered offerings are subject to a plethora of laws and regulations that purport to protect investors.

Full disclosure is one of the core elements required within a public listing, designed to help investors make informed choices, and this is typical not just in the US but across virtually all capital markets.

Some of the required information to be disclosed includes the history of the company and its founders, shareholding structure, financial statements, executive compensation, risk factors (both current and future), management’s explanation of operations, and any other material facts relevant to the offering.

If 90 percent of cryptocurrencies are securities, as has been alleged by SEC chairman Gary Gensler, the question then becomes whether relevant disclosures have been made and if not, who should be prosecuted – the project founders or the listing exchange?

Coinbase Denies It Lists Securities

For its part, Coinbase has previously stated that it does not list securities, arguing that:

Coinbase has a rigorous process to analyse and review each digital asset before making it available on our exchange – a process that the SEC itself has reviewed. This process includes an analysis of whether the asset could be considered to be a security, and also considers regulatory compliance and information security aspects of the asset.

Coinbase statement

It also argues that “the majority of assets that we review are not ultimately listed on Coinbase”. The company’s statement went on to criticise the SEC’s approach of “regulation by enforcement”, and stressed the need for a “concrete digital asset securities regulatory framework”.

Clearly, regulators are cranking up the regulatory pressure and, given that some 20,000 tokens exist across the world, the most viable mechanism for regulation appears to be with exchanges. Centralised exchanges should no doubt be expecting increased scrutiny over the coming months.

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Bitcoin Crypto News

Man Who Lost 8000 BTC Unveils Robot Dog Masterplan to Recover Fortune

It’s been nine long years for James Howells, an IT engineer from the Welsh city of Newport, since he accidentally threw away a hard drive containing close to 8000 BTC.

Now, the 36-year-old has a new technology-centric plan to recover his fortune:

A Costly Mistake

According to the latest update of this saga from Business Insider, Howells had two identical hard drives stored in a drawer in 2013. One was blank and the other contained some 8000 BTC, worth US$552 million at one stage.

He intended to throw the blank one away, but mistakenly disposed of the one containing bitcoin, which ended up at the local municipal dump. Despite his best efforts, he has repeatedly been denied access, with local authorities arguing it would be too expensive and detrimental to the environment.

A man stands looking at the camera in front of a road and a metal fence.
James Howells. Source: Business Insider 

A ‘Needle in a Haystack’

After various failed attempts, Howells has now devised a new approach, backed by US$11 million in venture capital, which he hopes to present to the council in the coming weeks.

In short, he intends to sift through 110,000 tons of garbage through a combination of human sorters, robot dogs, and an artificial intelligence-powered machine trained to look for hard drives on a conveyor belt.

There are apparently two versions of his plan, depending on what council approves. The more costly version would take three years and cost US$11 million, whereas a scaled-down version would cost US$6 million over 18 months.

Howells has assembled a team of specialists across a number of key fields, including AI-powered sorting, landfill excavation, waste management, and data extraction.

A yellow quadrapedal robot with a mechanical arm attached to its back stands on a stage in front of a purple backdriop that says "collision."
Example of a robot dog to be used by Boston Dynamics. Source: Business Insider  

The unfortunate Bitcoiner has committed to ensuring the environment is protected, saying he did not want to damage it in any way, adding: “If anything, we want to leave everything in a better condition.”

Council Stonewalls Proposals

In rather typical bureaucratic fashion, a representative of the council told Business Insider: “There is nothing that Mr Howells could present to us that would make the council agree”, adding: “His proposals pose significant ecological risk, which we cannot accept and indeed are prevented from considering by the terms of our permit.”

If successful, the recovery team will enjoy 30 percent of the proceeds, with Howell and the investors retaining 30 percent apiece. The balance would then be shared among each of Newport’s 150,000 residents.

In the absence of council approval and as a last resort, Howell is prepared to go to court to gain access to the dump, saying: “I’ve been reluctant to go down that route in the past because I’ve not wanted to cause problems”, stressing that he instead “wanted to work with Newport City Council”.

Richard Hammond of Top Gear fame has interviewed Howells in a fascinating short documentary. It is well worth watching to uncover the lengths a person will go to when faced with the prospect of losing life-altering wealth:

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Coinbase Crypto News Cryptocurrency Law Regulation

US Regulator Lists 9 Tokens as Unregistered Securities

In a groundbreaking insider trading case against a former Coinbase employee, US regulator the Securities and Exchange Commission (SEC) has identified nine tokens in its complaint to be unlicensed securities:

More Bad Press for Coinbase

The case was announced as insider charges were brought against a former Coinbase product manager, his brother, and his friend for allegedly trading numerous crypto assets on multiple occasions, prior to making them available for public trading.

Coinbase CEO Brian Armstrong took to Twitter saying that the company had received information earlier in the year about possible frontrunning and “immediately launched an investigation”:

As a result of our investigation we identified three suspects and provided this information to law enforcement. One person was a Coinbase employee who we terminated. Today, the DOJ has criminally charged this former employee and the two other individuals for this abusive conduct.

Brian Armstrong, CEO, Coinbase

Unregistered Securities Claim, Again

Earlier this year, Coinbase became the subject of a class-action lawsuit for selling 79 crypto assets alleged to be unregistered securities, and unfortunately for them, another claim appears likely.

This case, emanating from the SEC, alleges that those accused were frontrunning the public listing of as many as 25 digital assets, with nine being described as unlicensed securities. Consequently, they profited to the tune of some US$1.1 million.

Specifically, the claim referred to Powerledger (POWR), Kromatika (KROM), DFX Finance (DFX), Amp (AMP), Rally (RLY), Rari Governance Token (RGT), DerivaDAO (DDX), LCX, and XYO.

Gurbir Grewal, director of the SEC’s Division of Enforcement, commented that they were less concerned with labels “but rather the economic realities of an offering”.

He added: “In this case, those realities affirm that a number of the crypto assets at issue were securities, and, as alleged, the defendants engaged in typical insider trading ahead of their listing on Coinbase. Rest assured, we’ll continue to ensure a level playing field for investors, regardless of the label placed on the securities involved.”

Caroline Pham, a commissioner at the US Commodity Futures Trading Commission (CFTC), said that the SEC’s actions constituted “regulation by enforcement” rather than addressing the question of whether or not certain crypto assets are securities “through a transparent process that engages the public to develop appropriate policy with expert input”.

It’s become increasingly self-evident that regulatory clarity is required on the question of whether crypto assets are unregistered securities, as is often alleged. Securities require adequate disclosure, and arguably that remains conspicuously absent in the vast majority of crypto projects.

However, on the bright side, one benefit of crypto – as highlighted in this case – is that it’s very difficult to conceal your trail if shenanigans are underfoot:

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Bitcoin Crypto News

Tesla Offloads $936 Million Worth of Bitcoin Due to Negative Second Quarter

Last February, Tesla bought US$1.5 billion worth of bitcoin for its balance sheet. After selling 10 percent two months later to “test liquidity”, the inimitable car manufacturer has now sold US$926 billion following a poor second quarter.

According to Tesla’s financial statements, “As of the end of Q2, we have converted approximately 75% of our Bitcoin purchases into fiat currency”, adding, “Conversions [bitcoin] in Q2 added $936 million of cash to our balance sheet.”

The quarterly report noted that Tesla’s Bitcoin holdings remained largely stable for three consecutive quarters, however by the end of March, its digital assets were worth just U$1.261 billion. Following the most recent sale, Tesla is now said to have just 25 percent of the bitcoin it originally acquired, valued at around US$218 million.

On the earnings call, Tesla CEO Elon Musk, who recently became embroiled in a legal tussle with Twitter, explained the reason for selling three-quarters of its bitcoin holdings:

The reason we sold a bunch of our Bitcoin holdings was that we were uncertain when the COVID lockdowns in China would alleviate, so it was important for us to maximize our cash position, given the uncertainty of COVID lockdowns in China.

Elon Musk, Tesla Inc, CEO

“Neither Here Nor There On Crypto”

Despite the sale, Musk make it clear that the company remain opened to increasing its holdings in the future:

This should not be taken as some verdict on Bitcoin.

Elon Musk, Tesla Inc, CEO

He then responded to a subsequent question, where he called crypto “a sideshow to the sideshow” and not the something the business spends any real time on, “We’re neither here nor there on cryptocurrency,” he said.

While some were quick to criticise Musk for having “paper hands”, others said that he could come back anytime knowing that “everyone gets the price they deserve”.

However from a pragmatic perspective, it seems as if Tesla had little choice if they wished to avoid a horrific quarterly result. As one commentator noted, in the absence of the bitcoin sale, Tesla’s cashflow would have been negative: