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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Banking Crypto News DeFi

Goldman Sachs Plots a Move into ‘DeFi’ with its ETF, Critics Speak Out

Following a July 26 filing with the Securities and Exchange Commission (SEC), Wall Street investment bank Goldman Sachs has taken its tentative first steps into the world of DeFi with the announcement of a DeFi exchange traded fund (ETF).

On closer inspection, however, it isn’t quite as it seems.

Goldman Sachs ‘DeFi ETF’

As per the filing:

The Goldman Sachs Innovate DeFi and Blockchain Equity ETF (the ‘Fund’) seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Solactive Decentralized Finance and Blockchain Index (the ‘Index’).

Goldman Sachs SEC filing

Goldman Sachs considered “DeFi” to mean the “Digitalisation of Finance”, defined as “the digital transformation of traditional financial services, including the support and delivery of payments, transaction services, lending and insurance”.

In terms of the types of investments with the ETF, the filing noted:

The eligible universe of stocks is comprised of common equity securities, including depositary receipts, of companies located across developed and emerging markets worldwide, listed and traded on major exchanges in certain developed markets, including: Australia, Canada, France, Germany, Hong Kong, Japan, South Korea, Switzerland, the Netherlands, the United Kingdom and the United States.

Goldman Sachs SEC filing

According to the filing, the ETF will be tied to the performance of companies that are working on blockchain technology and the digitisation of finance.

The ‘DeFi ETF’ Is Anything But DeFi

While some were quick to praise the move, some sharp-eyed critics highlighted a glaring issue:

On a closer inspection of the index that the ETF would be tracking, it revealed only legacy companies with zero exposure to crypto-native businesses – hardly a ‘DeFi ETF’ as advertised.

Buzzwords Over Substance

Earlier this year, Goldman appeared to be making moves in the right direction. In May it recognised crypto as an investment asset, followed by the introduction of a crypto trading desk despite investors’ uncertainty. Following this latest move, however, the megabank’s reputation will undoubtedly suffer within crypto circles.

What drives such inaccurate labelling of financial products, and is it deliberate? Could it be the blockchain equivalent of environmental greenwashing? Given the track record of investment banks, it seems likely that the appearance of “keeping [up] with the times” (ie, blockchain) is more important than actually doing so.

Experienced members of the crypto community have long been suspicious of Wall Street’s moves into the industry, and perhaps they have a point.

Categories
Bitcoin Crypto News Market Analysis Markets

Bitcoin Up 20% Over Past Week – Is a Supply Squeeze Underway?

Bitcoin bull runs have historically been triggered by supply squeezes. A number of indicators suggest that a bullish move may be in progress.

Indications of a Supply Squeeze

During Q3 2020, long-term holders (LTHs) controlled 80 percent of the supply. Today, that figure is 75 percent and growing, according to on-chain analytics.

Bitcoin’s supply shock is currently equivalent to levels it was at earlier this year, between US$50K – US$60K a coin. The two charts that follow illustrate the shift in coins towards LTHs:

Bitcoin moving from weak hands to strong hands. Source: Will Clemente III
Coin circulation to strong hands over cycles. Source: Will Clemente III

Another bullish indicator to be aware of is the relative strength index (RSI), a momentum tool used to identify overbought and oversold levels. Generally:

  • values of 70 or above indicate that an asset is becoming overbought
  • values of 30 or below indicate that an asset is oversold or undervalued

The RSI has been in a downtrend for seven months but may be turning a corner, as illustrated below:

Relative strength index. Source: Will Clemente III

On-chain analyst Willy Woo also has his eyes on the RSI:

Another interesting metric showing evidence of a potential short squeeze is the the perpetual funding rate. This is the mechanism that pegs the perpetual contract to the index (weighted average price of all major exchanges). When funding is positive, longs are paying shorts to keep their positions open; when negative, vice versa.

Generally, prolonged positive funding is bearish, whereas prolonged negative funding rates is bullish. We’ve seen mostly negative funding rates since late May. The last time we had prolonged negative funding like this was following the March 2020 Covid-19 capitulation, after which the price dramatically rose to an all-time high in December.

Bitcoin futures perpetual funding rate. Source: William Clemente III

Supply Squeeze in Action?

After months of sideways action and a drop below US$30,000 amid market fear, Bitcoin seems to be turning a corner. Last week, Crypto News Australia reported that there was evidence of Bitcoin bears retreating, and perhaps this is coming to fruition.

At the time of writing, Bitcoin has been making sharp bullish moves suggesting that a supply squeeze may in fact be underway. Consider Bitcoin’s recent performance:

  • 1 Month: +24.67%
  • 1 Week: +20.67%
  • 24-Hours: 12.96%

Evidently, things tend to move fast in crypto. At the time of publication, Bitcoin was trading at US$38,228.

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Crypto News Hackers

1,000 Pro-Trump Magacoin Holders’ Personal Details Leaked by ‘Hactivist’

Magacoin is a pro-Trump crypto created to support “MAGA” candidates, but things haven’t quite gone according to plan for supporters. The website connected with the crypto has been hacked, leading to supporters’ personal information being leaked.

Magacoin

Hackivist Attacks Magacoin’s Website

Evidently, the website hosting the crypto and users’ personal information was not as secure as the creators would have hoped. A ‘hacktivist’ was able to successfully attack the website and obtain a host of personal information. Subsequently, the information – including names, addresses, passwords and IP addresses – was leaked to The Guardian.

Former US president Donald Trump with his infamous red MAGA hat. Source: BBC

Leak Shows Magacoin’s Biggest Holders and Lacklustre Sales

The information leaked also highlighted the fact that the vast majority of Magacoins went to the crypto’s founders – Marc Zelinka, a Trump-loving consultant, and a Super PAC associated with him. In response, Zelinka has claimed that he no longer controls Magacoin and that he handed it off to another pro-Trump political activist.

Self-enrichment is often the motive behind creators of new cryptos and this one appears to be no different.

Despite Magacoin’s best marketing efforts with “100 free Magacoins” aimed at radio hosts, media personalities, bloggers and grassroots groups who agree to promote the cryptocurrency, it never really took off in any meaningful sense. On average, holders only had 100 coins compared to the millions held by the founders and bigger bag holders.

It isn’t only amateur operations such as Magacoin that get hacked. Last year, Ledger experienced a massive databreach resulting in thousands of clients’ personal information being leaked. And it isn’t limited to companies, as non-profits such as Anglicare Sydney have similarly experienced it.

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Crypto News DeFi Markets

$27 Billion Grayscale Launches DeFi Index for Institutional Investors

Grayscale Investments, the world’s largest digital currency asset manager, has announced the launch of its newest diversified investment product, the Grayscale Decentralised Finance Fund.

Grayscale Moves into DeFi

Grayscale is perhaps best known for its flagship product, the Grayscale Bitcoin Trust (GBTC) – the biggest buyer of bitcoin in 2020 and for years the only only viable way institutional investors could gain exposure to the asset without physical custody.

The GBTC grew incredibly quickly during Bitcoin’s run-up to its all-time high in April, and now is in the process of converting the trust into an exchange traded fund.

However, following strong institutional interest, Grayscale has partnered with CoinDesk to create the Grayscale DeFi Fund (Fund) which aims to provides investors with exposure to a selection of industry-leading DeFi protocols through a market-capitalisation weighted portfolio designed to track the CoinDesk DeFi Index (Index).

With increasing attention on the innovations within decentralised finance, it’s critical for the investment community to have tools that deliver calculated exposure to this exciting area of innovation. This collaboration offers investors the data and tools they need to gain exposure to decentralised finance into their portfolios.

Jodie Gunzberg, managing director, CoinDesk Indexes

The Fund is Grayscale’s 15th investment product, and its second diversified fund offering. 

This latest move into DeFi is evidence of growing institutional demand in the space.

Constituents of the Index

As of July 1, 2021, the Index consisted of the following assets and weightings:

  • Uniswap (UNI), 49.95%
  • Aave (AAVE), 10.25%
  • Compound (COMP), 8.38%
  • Curve (CRV), 7.44%
  • MakerDAO (MKR), 6.49%
  • SushiSwap (SUSHI), 4.83%
  • Synthetix (SNX), 4.43%
  • Yearn Finance (YFI), 3.31%
  • UMA Protocol (UMA), 2.93%
  • Bancor Network Token (BNT), 2.00
Categories
Bitcoin Crypto News Market Analysis Markets Trading

Bitcoin Slides Below $30,000 Amid Market Fear

Bitcoin dropped below $30,000 on July 20, breaking below a trading range that had held for the previous four weeks. Analysts fear that a deeper price decline may be on the cards.

Bitcoin had appeared somewhat rangebound between US$30,000 and US$40,000 since mid-May. Analysts noted that this mimicked a pattern last witnessed in 2018 when Bitcoin went sideways between US$5,900 and US$7,400.

Source: Tradingview

What Could Be Driving the Fear?

From an investment perspective, crypto doesn’t exist in a vacuum. Data, trends and sentiment experienced in traditional markets will necessarily impact what happens in crypto. Therefore, one argument has been that the digital asset space is currently facing strong macro and regulatory headwinds.

At present, investors in traditional markets are pulling away from risky assets (such as Bitcoin) on the back of weaker monetary and fiscal stimulus, in addition to rising Covid-19 cases, including those caused by the Delta variant. As US government stimulus declines, Wall Street is “seeing too much froth” and “selling the best performing assets such as Bitcoin” according to Edward Moya, a senior market analyst at Oanda.

On the regulatory side, central banks have keyed in on crypto and, more specifically, stablecoins. The US Federal Reserve is currently putting stablecoins under regulatory scrutiny and just days ago, the People’s Bank of China called cryptocurrencies “mostly speculative instruments” that “pose potential risks to financial security and social stability”.

Other Factors Feeding the FUD

These concerns are in addition to ongoing environmental, regulatory and “crypto is for criminals” FUD, not to mention the persistent cries from mainstream investors that Bitcoin will never be a store of value and will eventually be worth zero.

For the moment, institutional and retail interest has cooled off, at least according to “Bitcoin” Google searches.

Google Trends data vs. the price of bitcoin – Coin Metrics’ State of the Network report, issue 112.

While most investors have a strong sense of where Bitcoin is going over the next five to 10 years, the near term is far less certain. In April, Bitcoin easily supported prices over US$50,000 but at present appears to be struggling at US$30,000.

For now at least, it isn’t clear whether a breakout is more likely than a breakdown. Only time will tell.

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Crime Crypto News Interviews

Biographer Claims McAfee Went from $100 Million to Broke

In an upcoming book, No Domain: The John McAfee Tapes, biographer Mark Eglinton details how controversial late tech pioneer John McAfee managed to blow his US$100 million fortune.

Cover of No Domain: The John McAfee Tapes. Source: Amazon

McAfee’s life was as controversial as its ultimate ending. Earlier this year, he was charged with fraud and just last month, he was found dead in his Spanish cell in an apparent suicide. True to form, McAfee preemptively tweeted:

Latest Revelations

Eglinton’s revelations come shortly after McAfee’s untimely death. The biographer alleges that McAfee blew millions of dollars on “bizarre” mansions and compounds around the world. Eglinton apparently interviewed McAfee over Skype starting in August 2019, when McAfee was on the run, fearing a pending US indictment on charges of tax evasion, which was unsealed upon his arrest last October.

Eglinton suggests that McAfee got hammered by the real estate crisis in 2008. Many of his properties were sold at a great loss, such as his Woodland Park, Colorado compound which he bought for US$25 million and later sold for US$5.2 million.

McAfee was allegedly so broke that he was unable to pay advance money to cover costs prior to sealing a book deal, remarking that he couldn’t do it, telling Eglinton “my financial situation is worse than yours”.

I don’t doubt that if he could have helped he would have.

Mark Eglinton

In one his last tweets, McAfee claimed that he had “nothing”:

Janice Dyson, McAfee’s widow, maintains that her husband did not commit suicide and as yet has not commented on the status of McAfee’s estate.

Categories
Crime Crypto News Hackers Monero Ransomware Zcash

US Government Offers $10 Million Bounty for Cyberattacks, Enticing with Crypto Payments

Following the infamous Colonial Pipeline attack earlier this year and a slew of copycat ransomware attacks, the US government has gone on the offensive by announcing a bounty program to counteract the ongoing risk of cybercrime.

Reward for Attacks on “Critical Infrastructure”

In a statement, the US Department of State’s Rewards for Justice (RFJ) program noted it was offering a reward of up to “US$10 million for information leading to the identification or location of any person who, while acting at the direction or under the control of a foreign government, participates in malicious cyber activities against US critical infrastructure”.

Cars queue to refuel following the “Colonial Pipeline” cyberattack which crippled the US’ biggest fuel pipeline based in Washington, DC, May 15, 2021. Source: Daily Sabah

The RFJ statement went further, saying:

Commensurate with the seriousness with which we view these cyber threats, the Rewards for Justice program has set up a Dark Web (Tor-based) tips-reporting channel to protect the safety and security of potential sources.

Office of the Spokesperson Source: US Department of State

Bounty May be Paid in Crypto – Bitcoin or Privacy Coins?

Recognising that potential whistleblowers may wish to be paid in crypto, the statement noted that:

The Reward For Justice program also is working with interagency partners to enable the rapid processing of information as well as the possible relocation of, and payment of, rewards to sources. Reward payments may include payments in cryptocurrency.

Office of the Spokesperson Source: US Department of State

The official statement did not specifically disclose which cryptos would be accepted as a means of bounty payment.

However, given the nature of cybercrime and the fact that the RFJ has set up a Tor-based reporting channel, it is likely that potential whistleblowers will elect to remain anonymous. Accordingly, they are likely to prefer privacy coins such as Monero or Zcash over open-source networks such as Bitcoin.

Cyberattacks have not been limited to the US. Last year, Australian television networks were impacted by various cyber attacks and, most recently, this month thousands of retailers were affected by a supply-chain ransomware attack.

Categories
Australia Blockchain DeFi

Aussie Lawyers Propose New Legal Entity for Decentralised Companies (DAOs)

Decentralised Autonomous Organisations (DAOs) in Australia are currently construed as partnerships or unincorporated associations. The Digital Law Association (DLA) and international law firm Herbert Smith Freehills want to change that.

DAO Operations. Source: Pngkey

DAOs as Recognised Legal Entities

Despite DAOs gaining traction in Australia, they are not yet formally recognised as they have been elsewhere. Venture capital firms in the US, however, remain eager to access the Australian DeFi market as they recognise its role as an international leader.

They are conscious this is a key innovation centre now for DeFi and want to back Aussie entrepreneurs.

Richard Galvin, CEO, Digital Asset Capital Management

Despite the enthusiasm of investors, the current Australian legal framework is somewhat grey and creates three main challenges:

  • The status of contracts entered into between DAOs and other entities in the real economy is murky.
  • Currently, all members of a DAO risk legal liability and potential losses for decisions made by a single member of the community.
  • Innovation is stifled as members of DAOs remain concerned that even if they try to do the right thing, the Australian Securities and Investments Commission (ASIC) might take action for something in the future.

DLA therefore suggests that Australia creates a new legal entity, say DAO Limited, which would enable it to contract with other entities in the real economy as well as offer limited liability for its members against potential claims. Rather than a board of directors making decisions, it would be an internet community.

DLA has put forward a number of suggestions including:

  • Establishing a new “authorisation class” that could operate within the current Australian Financial Services Licence (AFSL) regime.
  • Conducting a review of the impact of tax laws on DAOs to ensure technological neutrality happens in practice.
  • Require directors and senior executives of digital asset businesses to undertake annual training programs in “organisational cyber resilience”.
  • Updating ASIC’s Regulatory Guide 172 to give guidance on the licensing regime and obligations for DAO-run financial markets such as Uniswap.

DAOs Still In Their Infancy

DAOs are undoubtedly one of the most exciting developments within the blockchain industry. This week alone, leading exchange ShapeShift coverted its corporate structure into a DAO. However, given that it is a nascent space, there are numerous challenges that will inevitably need to be addressed if DAOs are to become widely integrated within existing regulatory frameworks. Issues such as know-your-client (KYC) and anti-money laundering (AML) provisions, tax, corporate governance, forks, scalability and security are likely to be of primary concern to the regulators.

As with all disruptive technology, one hopes that ultimately an appropriate balance is struck between regulation and innovation.

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Bitcoin Crypto News Markets

Is Bitcoin a Hedge Against the US’ Highest CPI in 13 Years?

US inflation is running hot at 5.4 percent for the year ending June 30, a level last seen in 2008. Bitcoin is often touted as the solution, but is that necessarily the case?

Source: NY Post

Inflation is controversial since not everyone agrees about its constituents. Many consider CPI little more than a tool used to steer policy since it often excludes food, energy, housing and investment assets – all things the average person would typically want.

There is also a raging debate in the US about whether the current inflation levels are “transitory” as reflected in this recent tweet:

Bitcoiners and Inflation

Transitory or not, Bitcoin advocates argue that Bitcoin is a hedge against inflation. In making their argument, they lean on principles of Austrian economics and sound money. In short the argument is:

  • There are two forms of money – hard/sound money and soft/unsound money.
  • Hard/sound money is money that tends to retain its purchasing power over time and whose supply is difficult to increase.
  • By contrast, easy/soft money is money that tends to depreciate over time and whose supply is generally easy to increase.
  • Historically, human beings tend to flourish during times of sound money, whereas the opposite is true of unsound money which tends to result in inequality, civil unrest and socioeconomic turmoil – hyperinflation in Venezuela would be an extreme example.
  • Hard money tends to be deflationary whereas soft money tends to be inflationary (ie, you can buy less goods/services with it over time).
  • Fiat currency is unsound money and leads to long-term currency devaluation.
  • Bitcoin by contrast is the opposite – it is the soundest money we’ve seen since it has a fixed supply with a predictable and immutable deflationary monetary policy.

This line of thinking is broadly shared throughout the Bitcoin community, including US Senators.

Value of US$1 measured in Satoshis. Source: Documenting Bitcoin

Detractors are often quick to point out that Bitcoin isn’t a good hedge against inflation, particularly in light of its recent price movements.

While that may be true, the same argument could also be made against gold, which is traditionally considered an inflation hedge. In the past 12 months, it is down 0.26 percent.

With that being said, if you are going to be comparing the relative strength of inflation hedges, a longer timeframe is critical. Short-term volatility in the market is to be expected and can’t viably be used as an argument against Bitcoin, gold, real estate or any other traditional inflation hedge.

When faced with strongly held beliefs on both sides of the debate, it is often best to consult balanced analysts such as Lyn Alden. For a comprehensive overview of how Bitcoin could play a role as an inflation hedge within a portfolio, this fascinating video is well worth a watch.

Bitcoin Could Be an Inflation Hedge … in the Long Run

Since Bitcoin’s inception, it has proven to be a long-term store of value whose purchasing power has increased dramatically, notwithstanding its volatility in the short term.

By contrast, the US dollar has lost purchasing power, accelerated even more over the past 18 months. Note the sudden increase in money supply since March 2020 described by some as the greatest monetary expansion in history.

US money supply increase since 2020. Source: US Fed

Compared to the US dollar, Bitcoin is deflationary and its supply is entirely predictable and slowing down over time due to the inbuilt four-year halvings as seen below:

Bitcoin inflation and supply curve. Source: Inbitcoinwetrust.net

Based on historical patterns and Bitcoin’s intrinsic scarcity, it looks like it has a good chance of being an effective inflation hedge in the long run. If, however, your goal is to protect against short-term currency devaluation, less volatile assets may be more suitable. One thing is for sure – we’ve never seen this much liquidity injected into the market within such a short space of time. How this plays out over the long term remains to be seen.

Categories
Australia Crypto News Investing Markets

Australian Broker SelfWealth to Offer Crypto Trading to its 85,000 Users

Melbourne-based SelfWealth, a non-bank low-cost online share trading platform listed on the Australian Securities Exchange (ASX), has announced plans to open crypto trading for its customers.

SelfWealth Responds to Customer Demands

The company has enjoyed strong growth over the past 12 months on the back of its compelling value proposition – namely low-cost, simplified trading of both Australian and international stocks on one platform.

The ability to trade US stocks, which was only launched in December last year, has proven to be particularly popular. Currently, the value of total securities held on the platform is around A$5.9 billion.

Earlier this year, SelfWealth conducted a survey of its customers and established that more than half were already crypto investors. Furthermore, two-thirds of respondents expressed an interest in the sector.

Australians have decided that cryptocurrency is here to stay and are looking for trusted platforms to facilitate their investment decisions … we want to make investing for our customers as seamless as possible.

SelfWealth chief executive Cath Whitaker

Whitaker touted the new functionality, offering customers a single platform to invest in both local and US shares as well as crypto assets, an “Australian first”.

Basic Details of the Move

The company plans to add up to 10 cryptos by the end of the year, which will include both Bitcoin and Ethereum. Details of which other cryptos will be included are not clear.

Much like conventional share trading, SelfWealth will look to charge a flat percentage fee for all crypto trades and the current plan appears to be that the crypto will be held in an integrated third-party wallet.

SelfWealth has not yet elaborated on specific details relating to which exchange it would be working with and whether users would be given the choice of custodying their own crypto assets. However, the company had this to say in its official press release:

We will be partnering with an established and secure cryptocurrency exchange to provide access to cryptocurrencies … we will factor in popularity, liquidity and security.

Jarrod Purchase, marketing manager, SelfWealth

It’s clear that crypto is slowly gaining mainstream approval as traditional financial institutions increasingly look to offer their clients crypto exposure. Unlike most financial products, it appears that customers are the driving force behind the change, not the institutions themselves.

The highly anticipated Aussie crypto ETF is undoubtedly going to accelerate the process of greater crypto adoption, although the timing of an ASX approval remains unclear at this juncture.