Cryptocurrencies rally this week as Facebook announces plans to launch a stablecoin
Dec 21, 2018
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Developments in Financial Services
- The Wall Street Journal (WSJ) published a report suggesting that all investors sell and then repurchase their Bitcoin (BTC) as a way to save money on taxes. “The only good thing about investing in cryptocurrencies this year was the tax break,” wrote the Wall Street Journal. Investors can benefit from selling and reselling their cryptocurrencies to receive a break on their capital gains tax because cryptos are exempt from the so-called wash sale rule, which, “prohibits capital-loss deductions when investors purchase a security such as a stock within 30 days of selling a loser.”
- Galaxy Digital, a notable crypto investment bank headed by former Goldman Sachs partner Mike Novogratz, has issued a note to clients detailing that short rallies like the one currently occurring in the crypto market are what happens, “before a real rally ensues.” With Bitcoin (BTC) trading above USD$4,00 for the first time since its price dropped, Galaxy Digital believes that cryptocurrency markets could continue to gain momentum. Galaxy Digital wrote to clients that, “Short rallies are exactly what happens before a real rally ensues. This could set up a more sustained ‘Buy the Dip’ market as we look at the upcoming Institutional launches to give this legs.”
- Western Credit Union’s President claimed in an interview with Reuters Plus earlier this week that the company is, “ready to adopt any kind of currency.” President Odilon Almeida discussed in the interview that there is no notable difference between cryptocurrencies and regular digital payments, the latter Wester Credit Union has handled for years. “We already transact with 130 currencies. If one day we feel like it is the right strategy to introduce cryptocurrencies to our platform, technology-wise, it’s just one more currency,” said Almeida, adding, “I think cryptocurrencies may become one more option of currency or assets around the globe to be exchanged between people and businesses. If that happens, we would be ready to launch.”
- Dr. Prash Puspanthan, CEO and Founder of Caleb and Brown, Australia’s largest retail crypto brokerage service, discussed in an interview that Australian financial advisors are beginning to accumulate Bitcoin (BTC) and other cryptocurrencies for their clients’ portfolios. While speaking to local news outlet Micky, Dr. Puspanathan explained, “These are wealth managers, who have their own personal cryptocurrency portfolios. They see value in it... I’ve dealt with five or six of them personally already.” Dr. Puspanathan also added that many advisors are wary, however, because of the uncertain regulatory state of cryptocurrencies.
- After cryptocurrency exchange ratings and analytics service CER accused South-Korea based crypto exchange Bithumb of faking up to 94% of its daily trading volume, Bithumb is publicly denying the allegations. A spokesperson from Bithumb told news outlet Forbes that, “Bithumb is doing nothing to inflate trade volume. Bithumb is not selling mining-based coin. Bithumb is trying to get more customers by providing various promotions just like any company in the world as a normal business.” While Bithumb is ranked as the second-largest cryptocurrency exchange in the world by daily reported trading volume on Coinmarketcap.com, it does not even place in the top 100 for adjusted daily trading volume on Coinmarketcap.com.
- OKEx, the Malta-based cryptocurrency exchange that is the second-largest in the world by daily trading volume, announced the launch of a new Bitcoin (BTC) derivative product that will maintain no expiry date. Called the “perpetual swap”, the product will allow cryptocurrency traders to indefinitely speculate on the future value of OKEx’s BTC to US Dollar index. OKEx’s perpetual swap will allow traders to leverage their investment up to 100x.
- The Australian Securities Exchange (ASX) reaffirmed its plans to roll out its distributed ledger-based settlement system by early 2021 despite the departure of Digital Asset Holdings CEO Blythe Masters. While speaking on the matter, ASX Deputy CEO Peter Hiom said that, “ASX remains absolutely committed to DLT and our partnership with Digital Asset (DA),” adding that, “We are working closely with DA at all levels of development, implementation, and customer readiness for the replacement system, and we look forward to continuing this work with AG Gangadhar and the DA team.”
- The South China Morning Post (SCMP) is reporting that the Hong Kong Stock Exchange (HKEX) is reluctant to accept Bitcoin mining equipment manufacturer Bitmain’s initial public offering (IPO) filings just a day after the stock market regulator called the reports rumors. SCMP cites two sources familiar with the matter in their report, which details that the HKEX thinks it is, “premature for any cryptocurrency trading platform – or business associated with the industry – to raise funds through an IPO in Hong Kong before the proper regulatory framework is in place.”
- A new research report published by Diar on Monday finds over-the-counter (OTC) Bitcoin (BTC) trading volume has spiked so far in December, potentially suggesting that institutional investors are accumulating. The report reaches this conclusion by analyzing monthly BTC trading volumes of Greyscale’s OTC-traded Bitcoin Investment Trust (GVTC) and monthly BTC trading volumes of Coinbase during OTC market hours. Diar’s report concludes by saying, “Are institutional investors keeping at bay or have they shifted towards higher liquidity over-the-counter physical Bitcoin markets? The answer is likely a little bit of both.”
- In an interview with Bloomberg published Tuesday afternoon, Galaxy Digital founder and ex-Goldman Sachs partner Mike Novogratz said that he does not expect the price of Bitcoin (BTC) to decline much further and that it will likely trade in between USD$3,000 and USD$6,000 in the foreseeable future. While appearing on Bloomberg Television, Novogratz discussed that, “We are entering a cool era for macro. Crypto is less exciting now versus macro. Macro got quite boring for many years, and crypto was really exciting.” Since Novogratz’s interview, BTC has rallied steadily and is up 9.38% in the last 24 hours to USD$3,849.35.
- Mike Kayamori, CEO of Japan-based cryptocurrency exchange platform Quinone, interviewed on Blomberg TV on Tuesday and predicted that the price of Bitcoin (BTC) will reach an all-time high by the end of 2019. Kayamori went on to cite a lack of catalysts to propel the market forward in discussing the current state of the cryptocurrency market. When asked about where he thought BTC would bottom, Kayamori responded, “I don’t know. No one does. However, when you look at historical patterns and where things are going, I think the bottom is near.”
- GMT, an Israeli-based financial services firm, has joined RippleNet, Ripple’s bank and payment provider network, according to an official company press release. GMT hopes that its move onto RippleNet will help the company remain, “at the forefront,” of the country’s finance industry. In its official press release, GMT said that, “After a long and precise process GMT was chosen to be Ripple’s representative in Israel, by so joining Ripple, and its partners, in creating a global financial system, with high-end technology and values such as transparency and affordable costs.” Upon joining RippleNet, GMT is now in the company of MoneyGram, American Express, Japan’s SBI Group, and other members of the cross-border payments platform.
- JP Morgan Chase & Co. believes that institutional investors are being scared off from investing in digital assets because of the extended bear market. In a research note to clients, a team of analysts from JP Morgan Chase & Co. wrote that, “Participation by financial institutions in Bitcoin trading appears to be fading,” adding that, “Key flow metrics have downshifted dramatically.”
- Overstock.com’s blockchain investment wing, Medici Ventures, announced that it has successfully purchased digital tokens that represent 3.6mm shares of Chainstone Labs. Medici Ventures’ USD$3.6mm investment in Chainstone represents a 29.6% stake in the company. While speaking to CoinDesk, Chainstone CEO Bruce Fenton said that, “We believe that digital securities are a far superior model to old ways of moving securities. Since this is our business focus, it’s a natural fit to have our own equity digitized into a securities token.”
- Spencer Bogart, a Partner at Blockchain Capital, appeared on CNBC and defended his USD$50,000 price target for Bitcoin (BTC). “Bitcoin does not make a kind of price-to-earnings or price-to-value revenue that normally puts an upper bound or a ceiling on a typical kind of early-stage technology company. Bitcoin scan surely reach that high. But how long will it take, we are not sure yet.” Bogart went on to add that 2018 has been a fantastic year for BTC, stressing to forget prices and look at scaling solutions like the Lightning Network.
- Malta, the so-called, “Blockchain Island,” is set to get a bank that serves blockchain and crypto firms. OK Blockchain Capital Limited, the investment arm of OK Group, announced an investment in RnF Finance, a Malta-based firm currently in the application process for a license through the Malta Financial Services Authority. CEO and Founder of RnF, Roderick Psaila, commented on the bank’s prospects, discussing that, “The Bank shall engage into four main business streams: Offer banking services to corporates; Lending; Private Banking; and Wealth Management. We are targeting big corporates and private clients and the mentality would be that no industries are vetoed beforehand but each application will be treated on a case by case basis.
- Tagomi Holdings Inc., an electronic broker startup backed by PayPal co-founder Peter Thiel’s venture capital firm, has officially launched, as per a company release on Monday. Tagomi Holdings offers electronic brokerage services to clients for digital assets and aims to ease operational challenges institutions face when trading digital assets. Tagomi Holdings raised USD$16mm in capital, led by Thiel’s venture capital firm, investment fund SV Angel, and private equity and venture capital firm Collaborative Fund
- The Hong Kong Stock Exchange (HKEX) is denying reports that it is hesitant to approve the initial public offering (IPO) filings of Chinese cryptocurrency mining giant Bitmain. When asked about the reports, an HKEX spokesperson responded that, “HKEX does not comment on rumors.” The original reports highlighted that HKEX’s hesitation stemmed from the volatility surrounding cryptocurrency markets and its effect on the crypto mining industry.
- BitMEX Co-Founder and CEO Arthur Hayes believes that 24/7 trading seen in cryptocurrencies will start to become the norm in most markets. While appearing on Laura Shin’s “Unchained” podcast, Hayes discussed, “What really struck me about Bitcoin and the world of crypto assets was that for the first time, you basically have access for people who otherwise wouldn’t interact with financial markets. I think 24/7 trading of all different types of assets is something that’s going to be the future, and that will bleed into other markets we’re all familiar with, you know, FX, fixed income, and equities.” Hayes also discussed that, so far in 2018, BitMEX has done nearly USD$1tn in trading volume.
- A new report published by data researchers from the Blockchain Transparency Institute finds that a majority of the top 25 Bitcoin (BTC) trading pairs listed on CoinMarketCap.com (CMC) are based up trading volumes that are, “grossly,” inflated. According to the Blockchain Transparency Institute’s, “Exchange Volumes Report,” published last Thursday, “Most of these pairs’ actual volume is under 1% of their reported volume on CMC. We noted only 2 out of the top 25 pairs not to be grossly washing trading their volume, Binance and Bitfinex.”
- KfW, a state-owned German bank, and Burkina Faso’s Ministry of Finance are planning to test a blockchain application geared towards public finance management, according to an official announcement on Monday. KfQ, which is Germany’s third-largest bank by total assets, will test TruBudget, an open source application it developed in the country of Burkina Faso within the next six months. KfQ hopes that TruBudget will effectively shorten lengthy manual processes while ensuring that funds are properly allocated.
- Overstock.com’s subsidiary tZero is being hired by private equity firm GSR Capital to develop a cobalt-backed digital token, according to an official announcement. Overstock said on Monday that up to USD$200mm of cobalt could be tokenized in 2019. As a result of the deal, an agreement for GSR to invest up to USD$404mm in Overstock and tZero will be delayed. The agreement was set to close on December 15th, but just one day prior, ‘GSR contacted us and asked for an extension to allow a key partner in the cobalt initiative from outside of China to participate in the deal,” said Patrick Byrne, CEO of Overstock.
- Coinbase.com retailer users can begin trading cryptocurrencies directly against other cryptocurrencies, according to an announcement by the exchange on Monday. Crypto-to-crypto trading is a feature that has been long available to users of Coinbase.com’s professional cryptocurrency trading service. Crypto-to-crypto trading services will allow Coinbase.com users to avoid 2x trading fees if they wish to convert from one cryptocurrency to another -- in the past, users were forced to convert a crypto to fiat before converting the fiat to another crypto.
- Coinbase, a major US-based cryptocurrency exchange, is partnering with PayPal to offer users fee-free cash withdrawals to the popular online payment system, as per an official announcement. As of Friday, US users of Coinbase will be able to withdraw cash balances to PayPal free of charge while the same service will be launched for other countries later in 2019. After initially integrating PayPal with its service in 2016, Coinbase was forced to terminate the integration due to technical difficulties in March 2018.
- A new survey conducted and published by the United States Depository Trust and Clearing Corporation (DTCC) finds that fintech is believed to be a, “systemic risk,” to the broader global economy. 20% of those surveyed believe fintech to be among the systemic risks to the global economy, up 15% from 2017’s numbers. Stephen Scharf, Managing Director and Chief Security Officer of the DTCC, discussed the survey results, saying that the growing concerns over fintech, “demonstrates a growing awareness of the potential risk and highlights the need to evaluate both risks and rewards associated with fintech initiatives.”
- The Hong Kong Stock Exchange (HKEX) is allegedly hesitant to approve the initial public offering (IPO) applications of Bitmain, a Chinese bitcoin (BTC) mining equipment manufacturing giant. According to an anonymous person who is closely involved in talks, “The exchange is very hesitant to approve these bitcoin mining companies because the industry is so volatile. There’s a real risk that they could just not exist anymore in a year or two.” The anonymous individual added that, “The HKEX doesn’t want to be the first exchange in the world to approve this and have one die on them.
- South Korea’s Financial Services Commission (FSC) has formally charged three employees from Upbit, the country’s largest cryptocurrency exchange, for manipulating volume data, according to a report by The Korea Times. Upbit as a whole is accused of falsely inflating volume figures on three separate occasions between October 2017 and October 2018 – Upbit has denied these allegations. The report published by The Korea Times quotes an unnamed FSC official who said, “I’m worried about investors who may lose money in this market because of exchanges like Upbit. We need a way to make the market and the industry fair and transparent.”
- Two members of the US House of Representative, Representative Warren Davidson and Representative Darren Soto, have introduced a bill that would effectively exempt cryptocurrencies and other specific digital assets from federal securities laws. The, “Token Taxonomy Act,” would amend both the Securities Act of 1933 and the Securities Exchange Act of 1934 in order to exclude digital tokens from the regulation. The bill specifies that a digital token is not a representation of a financial interest in a company, including an ownership or debt interest or revenue share.”
- Templum, a US-based regulated token trader, has sought out the US Securities and Exchange Commission (SEC) in an effort to better understand how digital assets tracked or tokenized on a blockchain network fall within US securities regulations. Additionally, the company filed a rulemaking petition through the US SEC that outlines how cryptocurrency assets and blockchain technology may fit into certain types of securities transactions. The petition reads, “We encourage the SEC to provide more guidance related to post-trade activities in the digital asset space.”
- The Thai Securities and Exchange Commission (SEC) is planning a public hearing to loosen the rules that initially formed a barrier to Initial Coin Offerings (ICOs), according to local news outlet Bangkok Post. This past May, the government of Thailand issued a royal decree in order to regulate its domestic cryptocurrency market. In its report, the Bangkok Post quoted General Secretary of the Thai Securities and Exchange Commission, Tipsuda Thavarmara, who said, “The proposed guideline is an attempt to find greater equilibrium in the regulatory process and reduce regulatory impediments, while taking risk management and investor protection into account.”
- French Parliament have rejected four amendments to the country’s 2019 finance bill that would have effectively eased cryptocurrency taxation,according to French business magazine Capital. One of the proposals rejected by French Parliament would have differentiated between regular crypto transaction and occasional crypto transaction in an effort to relax guidelines for the latter. French Parliament also rejected a proposal that would have caused cryptocurrency taxation guidelines to follow current guidelines for securities when first introducing crypto tax guidelines.
- Coincheck, the Japanese cryptocurrency exchange the was hacked for USD$532mm of NEM tokens last January, has been granted a cryptocurrency exchange operating license by Japan’s Financial Services Agency (FSA), according to news outlet Nikkei. While neither party has confirmed the license, Nikkei is reporting that an official announcement is set for the end of the year. Coincheck has responded to the report, saying, “It is not the exchange’s official announcement and we haven’t confirmed the fact yet.”
- United Kingdom tax collection service HM Revenue & Customs (HMRC) has published a policy paper titled, “Cryptoassets for Individuals,” that aims to provide tax advice for cryptocurrency investors. The policy paper highlights that investors can pay either Capital Gains Tax (CGT) or Income Tax (IT) for crypto investments depending on the type of transaction conducted. To introduce the policy paper, HMRC wrote, “The tax treatment of cryptoassets continues to develop due to the evolving nature of the underlying technology and the areas in which cryptoassets are used.”
- Belgium’s Financial Services and Markets Authority (FSMA) announced that it updated its cryptocurrency-related fraud blacklist to include 113 different websites. The 113 crypto-related websites highlighted in the blacklist are all run by, “fraudsters who are using cryptocurrencies to swindle customers.” The FSMA explained the blacklist further in its announcement, saying, “The principle remains the same: they offer you an investment they claim is secure, easy, and very lucrative. They claim to have specialists who will manage investments for you. You are told that your funds can be withdrawn at any time. In the end, the result is always the same: the victims find themselves unable to recover their money!”
- After rumors circled the cryptocurrency industry in October and November that stablecoin Tether (USDT) is not backed 1:1 by fiat dollar reserves, Bloomberg is reporting that, according to the stablecoin’s balance at Puerto Rico’s Noble Bank on January 31st, 2018, it was backed 1:1 by fiat dollars. This news comes as Tether is under investigation concerning whether it played a part in fueling the Bitcoin (BTC) price rally last year. Discussing the allegations, Stuart Hoegner, general counsel for Tether, said, “As a company that takes its legal and compliance obligations very seriously, we are not in a position to comment on the discussions we have nor to acknowledge the existence of subpoenas or similar legal requests.”
- The Italian Companies and Exchange Commission, Italy’s securities regulators, has officially issued 90-day suspensions to two projects that allegedly conducted fraudulent investment schemes. According to an announcement on the regulator’s website, Bitsurge Token and Green Energy Certificates are banned from offering investments from 90 days -- both of these projects are reportedly scam project from Avalon Life, a firm based outside of the European Union.
- The Central Bank of Egypt (CBE) is considering introducing a digital version of its Egyptian pound in order to reduce costs, according to a report by local news outlet Amwal Al Ghad. While speaking at an Abu Dhabi conference on Sunday, Ayman Hussein, sub-governor of the CBE, discussed that, “feasibility studies,” are currently ongoing. Ghad detailed further that, “A number of international institutions,” are involved in the studies.
- The Hong Kong Securities and Futures Commission (SFC) is reportedly set to tighten cryptocurrency and Initial Coin Offering (ICO) regulation, according to a report by Nikkei. According to the report, the Hong Kong SFC will establish a voluntary regulatory scheme where exchanges test their digital assets in a, “temporary regulatory sandbox,” before the regulator decides if they should seek a license. This regulation will apply to investment funds with more than 10% of holdings in digital assets.
- Facebook is reportedly in the process of developing a cryptocurrency for users of its WhatsApp messaging service, according to a Bloomberg report Thursday night. The prospective cryptocurrency will be pegged to the US dollar, making it a stablecoin. According to the Bloomberg report, Facebook’s coin will initially focus on the remittances market in India, which accounted for USD$69bn in foreign remittances in 2017, or 2.8% of the country’s GDP.
- ConsenSys, a notable blockchain software development company, is preparing to make significant staffing cuts, according to a report by news outlet the Verge. While citing a source familiar with the matter, ConsenSys may face staffing cuts of anywhere between 50% and 60% of its total 1,200-person staff with Consensys Labs, the company’s internal incubator, expected to be the hardest hit. In a letter to its staff cited by the Verge report, ConsenSys explained that the blockchain space is becoming increasingly, “competitive.”
- Coinbase President Asiff Hirji appeared on CNBC’s “Fast Money” and predicted that 2019 will be a great year for crypto institutional investment while explaining that he is not surprised about the recent rally in cryptocurrency prices. Hirji additionally discussed the current state of the crypto industry, saying that, “there has never been as much innovation as there is today.”
- Coinbase, a major US-based cryptocurrency exchange, has announced the launch of its, “Coinbase Earn,” program aimed to educate users while awarding them cryptocurrencies. Coinbase Earn will begin as an invite-only program, initially focusing on one digital asset, 0x (ZRX), the ERC-20. According to an officially company blog post, Coinbase Earn aims to help users, “understand more about an asset’s utility and its underlying technology, while getting a bit of the asset to try out.”
- A new research report published by Chainalysis finds that only 37% of total Bitcoin (BTC) address are, “economically relevant.” Among the total 460mm addresses on the BTC network, 172mm addresses actually hold BTC. Additionally, out of those 172mm addresses that hold BTC, 86%, or 147mm addresses, are owned by a named service rather than individuals.
- Civil, a prospective blockchain media startup whose token sale flopped earlier this year, is set to launch in February. Civil set out a goal earlier in 2018 to generate USD$8.00mm of capital through its token sale, but only raised USD$1.43mm from 1,012 investors. Despite this, Civil will launch in February with a plan to sell its SVL tokens again, this time without time limits, soft caps, or hard caps.
- Changpeng Zhao, CEO and Co-Founder of Binance, called 2018 a, “correction year,” for cryptocurrencies and expressed optimism for the industry’s future in a Bloomberg interview published Wednesday. In the interview, Zhao discussed that he believes the industry will continue to grow from developers who make applications with, “real use cases,” that will drive cryptocurrency adoption. Zhao added that the bear market is not affecting the plans of Binance, saying that they plan to launch two or three exchanges, “in the next month or so,” and adding, “None of our plans changed, we are still pushing forward very aggressively.”
- More than 90% of Monero (XMR) that will ever be in circulation has already been mined, per data on MoneroBlocks.info. A total of 18.4mm XMR tokens are set to be in circulation by Mary 31st, 2022, while 16.6mm XMR tokens currently trade on the secondary market. As the Monero network nears May 31st, 2022, the project will begin implementing a tail emission system where miners receive a consistent mining reward of 0.6 XMR.
- Qtum (QTUM), an open source blockchain project and the 28th largest coin by total market capitalization, has awarded a USD$400,000 grant to Columbia University for the development of a new programming language for Ethereum (ETH)-style smart contracts. Specifically, the grant will go towards a team of two PhD and postdoctoral students to focus on the design and implementation of a new language called DeepSEA.
- Waves Platform, a blockchain network that hosts its native token Waves (WAVES), raised USD$130mm in a funding round, allowing it to develop Vostok, a private blockchain platform and system integrator aimed to serve public institutions and large enterprises. WAVES has appreciated nearly 50% on the news this week and now maintains a market capitalization of more than USD$400mm. Two months ago, the Waves Platform conducted a stress test where it processed more than 6.1mm transactions without delays or disruptions.
- Willy Woo, a notable cryptocurrency analyst and coder, has laid out an algebraic equation for valuing the real value cryptocurrency assets. In an extended Twitter thread, Woo laid out the equation: M=PQ/Vu+I/Vi where M = fundamental value, P = price of the asset, Q = quantity of the asset, Vu = circulation of the utility, I = the value being moved in the network for store of value purposes, and Vi = circulation of investment (store of value).
- South Korea’s Ministry of Science, ICT and Future Planning (MSIT) is partnering with the country’s Ministry of Oceans and Fisheries to launch a blockchain pilot for port logistics innovation, according to an official press release today. The partnership aims to use blockchain technology in order to increase transparency for all parties in the logistics industry while making administrative processes in import and export operations more efficient. The two South Korean ministries initially announced they were partnering on a project this past June.
- Blockstream, a blockchain technology firm, announced on Monday that it has expanded its Blockstream Satellite service to the Asia-Pacific region while also highlighting that it has added support for Lightning Network transactions. First launched in August 2017, Blockstream Satellite enables users with limited internet access to conduct cryptocurrency transactions through leased satellites. CEO Adam Back discussed that Blockstream added Lightning Network support for its Blockstream Satellite Service after users expressed demand for the product, adding that, “There are third-party developers that have taken an interest to build local infrastructure using the satellite service, for example connecting it with mesh networks to make bitcoin more accessible in emerging markets.”
- The number of total unique Ethereum (ETH) wallet addresses reached a milestone on Saturday, surpassing 50 million, according to data from Etherscan, an ETH block explorer. Despite the growing number of ETH wallets, the number of active ETH addresses has decreased steadily through 2018 -- since reaching a high of more than 1 million active addresses in January 2018, total active wallets have fallen roughly 70% to just 328,400. As comparison, the total number of Bitcoin (BTC) active wallets currently sits at around 461,000.
- A report by Russian-based cybersecurity firm Kaspersky Labs finds that total reported cryptojacking cases have increased by 400% so far in 2018.More than 13mm cryptojacking cases have occurred in 2018, up from last year’s total of just 3.5mm. The report details that cryptojacking attacks spiked in the Middle East and Africa this year while highlighting Monero (XMR) as the most frequently targeted cryptocurrency.
*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio