Category: Bitcoin

Categories
Bitcoin Crypto News Russia

Bitcoin Surges 15% Overnight, Flippening the Russian Ruble

As conflict between Russia and the Ukraine intensified, it wasn’t clear whether bitcoin would act as the “risk-on” asset it has been in the past. However, as Russian citizens scramble to get their money out of ATMs after being cut off from the SWIFT system, geopolitical turmoil has seemingly done the improbable, causing bitcoin to surge by 15 percent overnight.

BTC/USD. Source: Coinbase

Bitcoin Flippens Russia’s Ruble

Since its invasion of Ukraine, Russia’s domestic currency, the ruble, has collapsed in dramatic fashion against the US dollar by some 30 percent.

Russian ruble/USD. Source: Yahoo Finance

As a result of bitcoin’s gains and the ruble’s precipitous downfall, bitcoin soon overtook the Russian ruble by market cap in a so-called “flippening”.

Bitcoin Now Risk-Off?

As markets shifted in a distinctly “risk-off” direction, equity futures were slammed. Curiously, however, bitcoin futures were up, suggesting that perhaps it doesn’t always trade as a high-risk technology stock.

Bitcoin futures amid a sea of red. Source: Simon Hayes

What’s Driving the Price Action?

The first, and most obvious, inference is that Russians are flocking to buy bitcoin in unprecedented volumes as they watch their local currency collapse. No doubt they are seeking refuge in a fixed-supply, decentralised, and unconfiscatable digital asset. This is reflected in BTC/Ruble trading volume figures:

BTC/Ruble trading volumes. Source: Kaiko

This is also supported by Glassnode data which illustrates that we’ve now reached an all-time high of non-zero BTC addresses:

A second argument that podcaster Natalie Brunell makes is that this crisis, together with Canada freezing bank accounts of protesters, serves only to raise the profile of Bitcoin as a permissionless, censorship-resistant, borderless form of money that you can custody yourself.

Bitcoin’s overnight rise, while unexpected to some, is viewed by others as an entirely logical consequence of a debt-backed fiat system beginning to fray at the edges. That said, the situation in Ukraine remains complex is evolving. Time will tell how Bitcoin responds in the coming weeks and months.

Categories
Bitcoin Crypto News Russia

Russia Could Use Crypto to Evade Sanctions After Being Cut Off from SWIFT

Amid Vladimir Putin’s invasion of Ukraine, the US and EU have announced a plan to isolate Russia from the international financial system, including blocking some banks from the Society for Worldwide Interbank Financial Telecommunications (SWIFT), the messaging networking underpinning global finance.

What is SWIFT and Why Does It Matter?

SWIFT is a global cooperative of financial institutions formed in 1973 when 239 banks from 15 countries came together to establish a way to handle cross-border payments. Today, SWIFT connects more than 11,000 financial institutions across more than 200 countries.

Best understood as a simple email system that enables secure messages across its members, SWIFT facilitates an average of 40 million messages a day including orders, payment confirmations, FX exchanges, and trades. Importantly, SWIFT doesn’t actually do any transfers or holding of funds, but it’s a critical part of the communication infrastructure that enables cross-border money flows. Think of it as a vital part of the global financial system’s plumbing.

Consequences of Being Cut Off SWIFT

While SWIFT isn’t a political organisation, it has often been used as a geopolitical tool as part of sanction packages. Cutting Russia out from the SWIFT system would prevent its access to some US$630 billion in central bank reserves and dramatically impact its ability to conduct global trade. This was highlighted by the EU Commission:

Cutting off Russia from SWIFT is, however, a genuine double-edged sword. The Federation remains a key energy producer for much of Europe and further abroad. It is therefore anticipated that sanctions would not apply to its energy sector.

At this point, it isn’t clear how this will play out. However, it is something Russia has no doubt long foreseen, given that it has been building an in-house system since 2014 specifically to handle situations like this.

Crypto to Get Around Swift

While nothing has been confirmed as yet, it’s self-evident that unlike SWIFT, cryptocurrencies are incapable of censorship, making them a perfect vehicle for circumventing sanctions.

The caveat, of course, is that they would need to be genuinely decentralised. For example, if the US discovered ETH was being used to circumvent sanctions, what are the chances of the Ethereum Foundation getting a call asking for Chainalysis-identified addresses to be banned?

Recognising the danger of decentralised digital assets, the European Central Bank has started moving at lightning speed to get its crypto regulatory framework in place:

In the end, it’s worth remembering that crypto is apolitical and neutral. Like knives, electricity, the internet or fists, it can be used by good and bad actors alike. Even though Cuba and North Korea have both used crypto to get around sanctions, it’s best to view assets such as Bitcoin as a neutral technology.

How this saga plays out, and whether this marks the beginning of the end for US dollar hegemony, remains to be seen.

Categories
Bitcoin Bitcoin Mining Crypto News Mining Regulation

EU Proposes Bill to Ban Proof-of-Work Mining by 2025

Given previous comments decrying Bitcoin’s energy use, it comes as no surprise that the European Union (EU) has proposed a regulatory package that includes provisions banning the use of proof-of-work (POW) consensus mechanisms across the union’s 27 member states.

Ban Forms Part of a Broader Crypto Regulation Discussion

POW has increasingly been under the microscope, with environmental harm being the most common concern cited. The favourite line of the corporate press is that Bitcoin consumes more energy than (insert country).

In the EU specifically, Swedish regulators began calling for a ban in November 2021, and this appears to have gained support from politicians across Germany, Spain and Norway.

The most radical proposal outlined in the package is one that prohibits “crypto services” that rely on “environmentally unsustainable consensus mechanisms”, starting January 2025. Put differently, the EU wishes to ban bitcoin mining, given Ethereum’s proposed transition to proof-of-stake.

Although environmental concerns have been frequently raised, its inclusion in the package came as a surprise to many, as one commentator noted:

Nobody expected it to become a dealbreaker and to make it into the final report.

Patrick Hansen, head of growth, Unstoppable Finance

EU parliamentarian Stefan Berger hinted that the MiCA (Regulation of Markets in Crypto-assets) package was as much a political debate as one about technology or facts:

The Greens and Socialists, as you can imagine, are criticising the proof-of-work concept and criticising the energy use, saying that bitcoin needs more energy than the Netherlands.

Stefan Berger, EU parliamentarian (Germany)

However, Berger did note that he felt that MiCA was an inappropriate forum for debating and settling “technological or energy-related rules”.

Discussions on finalising MiCA are set to begin at the end of February, and there is hope among some that the amendments relating to POW will be dropped:

Bitcoin Mining Levels ‘Inconsequential’

For ideologues looking to score political points, no amount of data is likely to change their mind. However, for those interested in facts, a recent study shows that Bitcoin consumes less than 0.05 percent of global energy. Moreover, close to 60 percent of its energy consumption is renewable.

And this does not even cover how Bitcoin naturally gravitates towards cheap, stranded energy and how its energy use is not in competition with any other uses. Neither does it touch on the most critical aspect, namely why POW is in fact critical for a global, decentralised store of value.

Lyn Alden said it best: ” … a lot of energy concerns directed at Bitcoin start with the presupposition that it’s useless. A trillion dollars in market cap disagrees. Little concern is given to worldwide washing machine energy usage, for example, because we understand the value.”

Categories
Bitcoin DeFi Ethereum Wrapped Bitcoin

Wrapped BTC Inflows Stall Amid Slowdown in Ethereum-Based DeFi

In further evidence of a cooling crypto market, flows of wrapped Bitcoin (wBTC) into Ethereum have flatlined since December 2021. 

While wBTC circulation has grown rapidly since its launch in late 2018, it has stagnated so far this year due to weakened interest in DeFi.

Wrapped BTC Reflects HODLers’ Demand for DeFi

In essence, wBTC is an ERC-20 token used to represent BTC on the Ethereum network, which allows BTC holders to take advantage of decentralised finance (DeFi) opportunities on Ethereum without having to sell their BTC. Currently, 66 percent of all wBTC supply is held by smart contracts.

Similar to dollar-backed stablecoins like USDC, wBTC is backed 1:1 with actual BTC. The process of minting new wBTC involves real BTC being sent by the purchaser to a merchant, who in turn sends the BTC to a custodian (in this case, BitGo). The BTC is then held in a multi-sig by the custodian and a corresponding amount of wBTC is minted on the Ethereum network.

Calm After the Storm

Since its launch and until late last year, wBTC circulation grew rapidly, more than doubling between January and December 2021, eventually peaking at just over 260,000 tokens – approximately 1.4 percent of the total Bitcoin supply. 

wBTC supply. Source: Coin Metrics

In the months since though, wBTC circulation has stagnated at around the 260,000 mark, reflecting a general weakening trend across the DeFi space. This is reflected in data from DeFiLlama, which shows the total value locked in DeFi protocols has declined to below US$200 billion, having peaked at over US$250 billion in late December.

The flattening of DeFi markets partially reflects the state of the broader market, with the total crypto market cap down some 40 percent since it peaked at nearly US$3 trillion in November 2021. It may also reflect a flight to safety after a series of high profile DeFi hacks and rugpulls, such as the US$326 million Wormhole hack and the ‘polite’ rugpull on the Avalanche network.

Categories
Bitcoin Bitcoin Mining Crypto News Onchain

Bullish: 60% of BTC Hasn’t Moved in a Year, Mining Difficulty Hits All-Time High

For investors fixated on NGU (number go up) technology, the past year hasn’t been pretty, with bitcoin down 33 percent over the past 12 months. However, for long-term investors, there are several bullish indicators worth paying attention to.

BTC price over past 12 months. Source: Coinbase

Long-Term HODLers Have Conviction

When it comes to on-chain market intelligence, Glassnode’s “HODL Waves” chart provides invaluable insight as to bitcoin UTXO (unspent transaction output) age distribution. Put differently, it provides an illustration of when bitcoins were last spent, and how spending patterns change over time.

HODL waves. Source: Glassnode

According to the latest available data, 60 percent of bitcoins have not moved over the past 12 months, suggesting there is a cohort of long-term HODLers that have tremendous conviction, even when the price has collapsed 33 percent over the same period.

Mining Difficulty Hits All-Time High

In January, Bitcoin’s hashrate reached an all-time high, and as of last Friday, Bitcoin’s mining difficulty reached an all-time high of 27.97 trillion hashes.

This is the second time in three weeks that Bitcoin has reached a new all-time high, suggesting that mining is becoming increasingly competitive. To illustrate, Bitcoin’s difficulty was 13.67 in mid-July 2021, shortly after the China mining ban, and is now up 105 percent from its lows.

Bitcoin mining difficulty over past 12 months. Source: CoinWarz

In addition, Bitcoin’s hashrate continues to trend upwards:

These factors cumulatively speak to a network becoming increasingly secure and resilient – qualities integral to the success of a decentralised, unconfiscatable store of value.

Where To From Here?

On the price front, ongoing volatility should be expected, given the US Federal Reserve’s hawkish pronouncements and institutional perspective that Bitcoin is a “risk on” asset:

However, as Mark Yusko likes to remind us, “price is a liar”, and for those with a long-term horizon there are plenty of reasons to be optimistic.

If anything, current price levels are attractive and an excellent entry-point for dollar-cost averaging into the asset. If you’re ready to start stacking Sats, head over to HardBlock where you can set up your account once and then send bitcoin to your hardware wallet without lifting a finger.

Categories
Bitcoin Crypto News Cryptocurrency Law

US Congressman Introduces ‘Keep Your Coins Bill’ to Prevent Government Confiscation

In the wake of mounting concerns relating to private companies and the Canadian federal government denying financial services to members of the Freedom Convoy, US Congressman Warren Davidson took to Twitter to advise followers that a “Keep Your Coins Act” (KYC) bill would soon be tabled before legislators:

Implications of the Bill

At its core, the KYC bill purports to protect investors’ ability to have self-custody of their own assets, as well as engage in peer-to-peer transactions.

If the bill were passed in its current form, it would block state and federal agencies from prohibiting or otherwise restricting “the ability of a covered user to use virtual currency or its equivalent for such user’s own purposes, such as to purchase real or virtual goods and services for the user’s own use; or conduct transactions through a self-hosted wallet”.

Protest Should Be ‘Even-Handed’

In a discussion with Bitcoin Magazine, Congressman Davidson commented that self-custody had been on his mind for some time and that whatever your views were of the Freedom Convoy:

If this [protest] happened in America [the US], some would be cheering, some would be upset. My point is that it should be even-handed. We shouldn’t use money as a way of controlling people. Of course, if there’s criminal activity you should go after that. But imagine if the same thing were done to a crowdfunded BLM movement. That wouldn’t be okay. It’s not okay with the Freedom Convoy, either.

Republican Senator Warren Davidson

Davidson’s financial services counsel, Tim Hite, echoed these sentiments:

Seemingly on a roll, he didn’t stop there, daring Twitter to ban him for posting an image of two contradictory tweets by Canadian Prime Minister Justin Trudeau:

The tweet in question. Source: Senator Davidson

There’s a whiff of freedom in the air and it appears to be gaining momentum, at least in the US. It remains to be seen how things will turn out in Canada.

Categories
Bitcoin Crypto News

Canada Invokes Emergency Act, Cuts Off Crowdfunding and Crypto for Freedom Convoy

In an attempt to cut off funding to the Canadian “Freedom Convoy”, Prime Minister Justin Trudeau has taken unprecedented steps by invoking a 1988 Emergencies Act, enabling the government to freeze bank accounts without going through the courts. As one commentator put it, a “Super Bowl ad for Bitcoin”, if ever there was one:

Canada Wades into Unchartered Territory

Despite subzero temperatures, Canada has in recent weeks experienced ongoing protests in Ontario by a loose affiliation of truckers and citizens, dubbed “Freedom Convoy”.

While initially established to protest vaccine mandates for truckers going between the US/Canada border, the group’s fundamental purpose is to force the federal government to abandon all mandates. Thus far, it seems to have worked, as numerous provinces have since dropped the more onerous restrictions.

A week ago, the government classified the protest as an “unlawful occupation”, resulting in GoFundMe withholding over US$8 million in donations to the Freedom Convoy. Now the government has gone one step further in an attempt to place a tighter squeeze on protests.

Yesterday, Canada invoked the Emergencies Act for the first time, with Deputy Prime Minister Chrystia Freeland saying: “We are broadening the scope of Canada’s anti-money laundering and anti-terrorist financial rules so they cover crowdfunding platforms and the payment providers they use.” Freeland went on to say that these actions would also cover cryptocurrencies.

Bitcoin Fixes This

Few would have predicted that Canada, a self-described Western liberal democracy with fundamental freedoms enshrined in its Canadian Charter of Rights and Freedoms, would invoke emergency powers to run roughshod over the fundamental rights of its citizens, much less confiscate the assets of those with whom it disagrees.

Arguably, there has not been a more compelling and clear use case for Bitcoin in a modern Western democracy:

Even politicians took notice, such as this US Senator, who tweeted:

Nothing makes the case for crypto more than a government freezing bank accounts to suppress free speech …

US Republican Senator Tom Emmer

El Salvador President Nayib Bukele, who is often painted by Western governments as “authoritarian”, took to Twitter himself:

Whether driven by the emergency declaration or not, Bitcoin rose around four percent overnight to trade at US$44,200 at the time of going to press.

Canadian Prime Minister Justin Trudeau. Source: Invest Answers

Watershed Moment?

As exciting as it is to have companies like Tesla buy bitcoin, or when El Salvador declares it legal tender, one could argue that it is moments like these that will be remembered in the long arc of Bitcoin’s history.

There are decades where nothing happens; and there are weeks where decades happen.

Vladimir Ilyich Lenin

Is this a point in time when decades happen within weeks? That remains to be seen, but it looks more likely now as ever.

Categories
Bitcoin Bitfinex Crime Crypto News

Bitfinex Hack and Bitcoin Laundering Scheme Coming to Netflix

Remember the Bitfinex hack of 2016? Well, this real-life story is now coming to Netflix as a documentary series about the married couple who allegedly laundered part of the proceeds of the hack – an aspiring rapper called Heather Morgan and her husband, Ilya “Dutch” Lichtenstein, both arrested in New York last week.

Streaming giant Netflix will produce the series centred on the Bitfinex hack, which amounted to 120,000 BTC or around US$4.5 billion. It will be directed by American filmmaker and producer Chris Smith.

Morgan and Lichtenstein were arrested on charges of laundering over US$3.6 billion worth of Bitcoin, almost three-quarters of the hack’s total proceeds. Investigators tracked movement of the assets on the blockchain as the couple tried to liquidate them by buying and selling NFTs (non-fungible tokens), physical gold, using fake identities and online accounts.

Whale Alert Spots 10,000 BTC From Bitfinex Hack

Earlier this month, Whale Alert reported that almost US$400 million in proceeds from the Bitfinex hack had been transferred to an unknown wallet.

As an interesting side note, the LEO token, which is a basic exchange utility token used on Bitfinex to lower trading, blew up 60 percent in value following the seizure of the 120,000 BTC.

Categories
Bitcoin Crypto News Regulation

Crypto Twitter Slams SEC Amid $100 Million BlockFi Lending Settlement

BlockFi, a crypto services provider offering credit facilities to both institutions and retail investors, has for the past year been under persistent investigation by the US Securities and Exchange Commission (SEC) for its high-yield lending product.

In a dramatic turn, BlockFi has now agreed to settle the matter for US$100 million, and crypto Twitter is having none of it:

No Stranger to Controversy

Founded in 2017, New York-based BlockFi has often been in the news, albeit for the wrong reasons. Last year, it suddenly went down and then later it credited 700 BTC to the wrong customers’ accounts.

Much of the recent controversy has surrounded its lending product, as various states issued orders preventing it from registering new customers.

For much of its history, BlockFi was a significant beneficiary of the Grayscale Bitcoin Trust (GBTC) premium – an arbitrage trade that seemingly was able to fund its business. In short, it was able to offer clients attractive yields by taking their Bitcoin deposits, putting them into GBTC for the six-month lock-up period, and then selling them on the secondary market with a premium attached.

On the back of growing competitive products tracking the spot price of BTC, the GBTC premium has since flipped negative, resulting in BlockFi dramatically reducing yields from above 6 percent to as low as 0.1 percent in some cases:

BTC yields on BlockFi as of February 1. Source: BlockFi

Understandably, few are interested in risking their stack for such paltry returns:

SEC Targets Lending Product

During 2021, BlockFi was ordered by the states of New Jersey, Texas, Kentucky, Vermont and Alabama to immediately suspend onboarding residents to its lending products.

Drawing on the weight of these orders, the SEC’s position aligns with the views espoused by the states in question, namely that BlockFi’s lending product constitutes an unregistered security.

Although the company has yet to admit as much and come out with a formal statement, insiders say that of the US$100 million settlement, half is going to the SEC, while the balance will be shared by the state regulators.

Contents of the settlement remain unclear, but it is expected that the deal included provision that no additional clients would be onboarded, and that existing account holders would be grandfathered in.

The irony of restricting users from actually generating a yield on their assets was somehow lost on the SEC, which ostensibly exists to provide protection to investors:

Commentators were quick to point out that if the SEC genuinely cared about investor wellbeing, it would instead focus its energy on leveraged products, which are widespread and offered by a majority of major exchanges:

It’s difficult to argue with that sentiment, as few things can wipe out a retail investor’s wealth better than leverage.

This, together with its refusal to approve a spot Bitcoin ETF in the US, suggests that when it comes to the SEC, there are likely other factors at play beyond “investor protection”.

Categories
Bitcoin Crypto News Ethereum NFTs Polygon

Uber and WWF Show That ‘Environmental Concerns’ Hamper Crypto Adoption

Recent statements by the ride-sharing and delivery app Uber and wildlife conservation organisation World Wildlife Fund (WWF) have further highlighted the environmental hurdles crypto faces to achieve widespread mainstream adoption.

Speaking to Bloomberg last week, Uber CEO Dara Khosrowshahi was clear the company would  accept Bitcoin and other cryptos as payment at some stage, but that now was not the time:

Is Uber going to accept crypto in the future? Absolutely, at some point.

Dara Khosrowshahi, Uber CEO

Khosrowshahi said that as it currently stands, Bitcoin is too expensive to use and too energy-intensive to justify Uber adopting it for payments. “As the exchange mechanism becomes less expensive, becomes more environmentally friendly, I think you will see us lean into crypto a little bit more,” he explained.

WWF NFTs Stymied by Backlash

WWF has also shown it’s enthusiastic about using crypto, but is being held back by environmental concerns. 

WWF recently started selling NFTs minted on the proof-of-stake Polygon network. The organisation claimed to have chosen to use the Polygon network due to its low carbon emissions compared to proof-of-work blockchains such as Ethereum, tweeting that each of its NFTs would generate the same carbon emissions as a glass of tap water. Sounds great so far. 

However, WWF has since stopped sales of its NFTs due to widespread backlash after it was pointed out by Alex de Vries of Digiconomist that because Polygon relies on several Ethereum-based smart contracts to function, its actual energy use is significantly higher than WWF initially stated – roughly 2,100 times higher.

Crypto’s Low Energy Future 

Is it all bad news as far as crypto and the environment go? When heavyweight crypto influencers like Elon Musk and Michael Saylor can’t agree on this question, you could be forgiven for thinking there’s genuine cause for concern. 

However, given statements such as those from Uber and the work being done by both Bitcoin and Ethereum to bring about a lower energy future – not to mention the existence of extremely efficient, carbon-negative alternative layer 1s such as Hedera Hashgraph and Algorand – it looks like the industry as a whole may well overcome the issue of energy use.