First Mover Asia: Bitcoin Slumps to Below $48K Ahead of $6B Options Expiry

(Edited by James Rubin and Greg Ahlstrand)

Good morning. Here’s what’s happening:

Market moves: Bitcoin slumps below $48,000, as December’s options expiration nears

Technician’s take (Editor’s note): Technician’s Take is taking a hiatus for the holidays. In its place, First Mover Asia is publishing CoinDesk reporter Sanadali Handagama’s interview with European Parliament member Eva Kaili. The discussion covered MiCA, the current regulatory frenzy over stablecoins, Web 3 and of course, Facebook’s Diem.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis.

Prices

Bitcoin (BTC): $47,701 -6.2%

Ether (ETH): $3,813 -5.7%

Markets

S&P 500: $4,786 -0.1%

DJIA: 36,398 +0.2%

Nasdaq: $15,781 -0.5%

Gold: $1,807 -0.2%

Market moves

Bitcoin, the oldest cryptocurrency, dropped by more than 6% to under $48,000 during the U.S. trading day on Tuesday, despite continued muted spot market activities.

While the spot trading volume of bitcoin remained mostly unchanged from a day ago, its price turbulence came as the market headed into monthly options expiration.

A total of 129,800 option contracts worth more than $6 billion are set to expire on Friday, according to data provided by Skew. As CoinDesk reported previously, data shows that bitcoin tends to move toward the “max pain” point in the lead-up to an expiration and sees a solid directional move in days after settlement.

Credit: Skew

This price move trend usually comes from spot market manipulations by option sellers (mostly institutional traders) to push the spot price closer to the strike price at which the highest number of open options contracts expire worthlessly. That creates maximum losses – so-called max pain – for option buyers. The max pain point for Friday’s option expiration is $48,000, according to Cayman Islands-based crypto financial services firm Blofin.

Q&A – Eva Kaili

The View From Brussels: How the EU Plans to Regulate Crypto: European Parliament member Eva Kaili says Facebook’s libra announcement in 2019 catalyzed lawmakers into action on digital assets. (By CoinDesk reporter Sandali Handagama)

The European Union (EU) wants to regulate the digital asset industry; there are a number of bloc-wide initiatives already underway. The most comprehensive is a 168-page “Markets in Crypto-Assets” (MiCA) that would create an EU-level licensing framework for crypto issuers and service providers.

But crypto regulations are only one part of a larger Web 3.0 governance strategy for the political and economic union of 27 nations.

This feature is part of CoinDesk’s “Policy Week,” a forum for discussing how regulators are reckoning with crypto (and vice versa).

According to Eva Kaili, a member of the European Parliament, the new proposals for digital assets, data and artificial intelligence (AI) were all inspired by the General Data Protection Regulation (GDPR) of 2016, which sought to strengthen consumers’ control over how their data is used by companies allowed to operate in the EU.

For digital assets in particular, the catalyst was Facebook’s 2019 plans to build its own stablecoin, libra (now diem), a digital token backed by a basket of currencies and assets, Kaili said. She added that regulatory clarity for digital finance is key to fostering innovation and protecting citizens freedom and sovereignty from being exploited by Big Tech.

Kaili is a Greek politician, a member of the Progressive Alliance of Socialists and Democrats in the European Parliament; she was elected in 2014. Kaili has advocated for innovation-friendly regulations for distributed ledger technology (DLT) applications and decentralized finance (DeFi).

CoinDesk got a chance to speak to Kaili about her views on MiCA, the current regulatory frenzy over stablecoins, Web 3.0 and, of course, Facebook’s Diem.

The following has been lightly edited for brevity and clarity.

CoinDesk: There are a number of regulatory initiatives in progress in the EU that will directly impact the crypto space in the coming years. Which are the most important, in your opinion?

Kaili: The upcoming regulatory initiatives are designed to provide legal certainty and to test these new technologies in collaboration with traditional players and stakeholders. It will hopefully be completed by the end of 2022.

The first framework is “Markets in Crypto-Assets, or MiCA. It’s part of the EU’s digital finance strategy, and it tries to deal in a holistic manner with the crypto ecosystem to establish clear and new licensing requirements that are passport-able. And this means we were trying to pave the way [by] initiating a robust regulatory response, as we did with GDPR.

MiCA will allow firms to operate across the EU, and also set stronger consumer protection standards. It also sets out rules for digital asset issuance and public offerings, and has some specific requirements relating to stablecoins. It lays out additional requirements for the big, systemically important stablecoins, too. MiCA is going through its first readings [in the parliament], so it has some way to go. There have been no consultations between the EU parliament and council yet.

Then you have the pilot regime for market infrastructures based on DLT. I am a rapporteur [the person who gives reports] on that one. I would say it’s not only an ambitious project but also a much anticipated sandbox project. It’s quite unique for the EU because it’s aiming to test new business models deploying DLT in the EU financial infrastructure, and the provisions will translate into a huge testing environment that will operate in a uniform manner across the EU, just like what MiCA is trying to do for crypto assets. It would offer concrete testing outcomes, and then this would feed the future policymaking and regulatory adaptation. So when you are exiting the sandbox, you are participating in creating the regulatory framework to follow. It has gone through the EU Council and parliament first readings, and it seems to go through these negotiations quite smoothly.

CoinDesk: A lot of EU regulators are showing concern over stablecoins, and MiCA is considerably focused on regulating stablecoins in particular. Why is that?

Kaili: Back in 2019, the discussions around Facebook’s stablecoin, libra, now called diem, led us to accelerate legislative initiatives and to explore what could happen if we have global currencies coming from not just central banks but also from private players. Certain stablecoins could work on a global level, and have a global reach. They are what the EU calls significant e-money tokens. They are addressed by MiCA because they could indeed raise concerns regarding the EU monetary policy, stability and sovereignty. But this is not just an EU concern.

Since several countries are now exploring central bank digital currencies including China and Russia, I would say that global stablecoins can have unprecedented effects on all economies because of the connectedness of the financial system. And also consider that for the first time in more than a century, the U.S. dollar supremacy is being challenged. The rise of cryptocurrencies and stablecoins may be forcing us to rethink what a currency is, who regulates it, and what it means if it’s not controlled by the national government.

Then, we have this political dimension that we have to take under consideration. Even if we don’t want to admit it, we have to have central bank digital currencies because it’s a matter of geopolitical dominance. It can also become a matter of monetary sovereignty, especially when you don’t have like-minded countries deploying similar platforms and marketplaces.

Read More: DeFi Is Like Nothing Regulators Have Seen Before. How Should They Tackle It? | David Z. Morris

We have to also consider the private players. I think we will very quickly see a digital euro, maybe we’re already late, but I believe if we had stablecoins from Facebook without a central bank digital currency, then the risk would be bigger. But I also think it’s going to be very interesting to consider the flip side. When you have Russia, China, U.S. and Europe launching their own digital currencies, what would that mean for the diem and other private stablecoins?

CoinDesk: Do you feel there’s anything missing in these frameworks, particularly with MiCA?

Kaili: One of the challenges we have is a lack of clear definitions to understand exactly what is not covered by the MiCA.

The problem that we see, and I believe it will have to be addressed by us in the future, is that the decentralized finance, or DeFi, business model does not fit into the MiCA framework as no single entity can be identified in DeFi projects and they do not fall under the definitions used in centralized finance.

There, we have an issue because decentralization has great benefits, but also some significant risks. Crypto adopters cannot turn to the authorities in case of fraud or cyber attacks or if they accidentally lose their funds. If decentralized systems don’t have a clear definition, then we have to definitely address it to give the industry that legal certainty. We also have to support the cryptocurrency exchanges to be able to provide this consumer protection, also for themselves not to face issues that would make it impossible to operate in Europe, and also to help them [learn] what transparency is for us and the governance standards that would protect consumer funds against these attacks and malfunctions within their responsibilities. So these are the main concerns around the MiCA framework.

CoinDesk: How does the EU’s approach to digital asset regulation compare to other jurisdictions around the world?

Kaili: First of all, the nature of the European Union is different. We have 27 different member states with different legal and tax systems that are not harmonized. So we are trying to adopt a unique approach to policy making with MiCA. We are allowing room to test the technology, we are interacting with stakeholders and we are trying to establish concrete proposals to create legal certainty, clarity, at least in this first big step that we are taking. When we talk about technology that is developed in a more, let’s say, free way, in the U.S. or Asia, I would say that a lack of standards or legal certainty has its own challenges. You see what’s happening with El Salvador with the government suddenly legalizing bitcoin. You see what happened with China, for example. China had the highest concentration of bitcoin miners and then suddenly changed [its] approach. Then the U.S. [Securities and Exchange Commission], which is reportedly investigating DeFi platforms and the parties behind them. It’s an unclear investigation.

I think the U.S. might be taking a slightly hostile approach. So we try to see what we don’t want to have in Europe. We are more careful. We don’t speed up too much.

We did have some problems initially. We started by trying to fit new things and innovations in old boxes, so we struggled a little. But now, we are trying to create hybrid boxes so we don’t expect innovation to fit our old boxes. We are creating new boxes and allowing them to keep evolving without feeling that it is a hostile environment. This is how I feel, but it also depends on the specific cases. I’m working a lot in the crypto space. So at least I can speak for the crypto space and say that our approach is innovation friendly, mainly.

CoinDesk: It seems as if the apprehension over Facebook’s libra has revealed some greater concerns about the influence of big tech in the EU. In the EU at least, as you said, regulating digital assets is not just about digital asset disruption in particular but part of a larger digital strategy concerning the internet, data and financial sovereignty. Is this a fair assessment?

Kaili: We understand that whoever owns or holds data now holds a lot of power and that you can generate great value from data, and this applies to the crypto space, too, as it generates transaction data. As part of the digital strategy, and parallel to MiCA, we are also working on the Digital Services Act, the Digital Markets Act and the Artificial Intelligence Act. For the first time, after several decades, we are using the internet to regulate the internet along with the access to data and the parties that are using this data. So I think that a well-regulated, data-driven financial sector also needs a well-regulated data economy. Data is now a commodity but many consumers do not understand exactly how it is a commodity. For example, consumers can consent to sharing their data while they can’t control how that data is being used.

I think there is a risk that the greater sharing of data could lead also to customers with certain characteristics to be excluded from markets or from borrowing money. For example, if businesses have access to more data through open finance, this could lead to more personalized pricing of insurance policies, which is an absolute no-go in Europe. This increased individualizing of risk is likely to affect more vulnerable or low-income consumers. If you have predictive [artificial intelligence], for instance, it could lead to calculating credit scores, or insurance premiums for citizens to exclude them or to include them. This could violate our fundamental principles and rights. So we need to have some objectives when we design our strategy to protect fair pricing practices.

I would say there is a great need to have efficient data legislation and we have to understand the process of how to extract the value of data for the public good and at the same time balance it with innovation. I’d say the data legislation file will arrive in January. This means we will make more data available to European companies, we will make sure that they will have to open up and share some data with startups and researchers, which is not the case at this point. We hope to achieve the portability harmonization of data across the EU, similar to what we’re trying to achieve in the crypto space. It’s the same principles for every sector that we have to also include in the financial sector.

CoinDesk: What you’re saying is it’s important to find a way to make sure that consumer data isn’t siloed by one or two big companies?

Kaili: I don’t believe we should not have big companies. I just believe we should understand their business models and make sure that we set certain rules when we open up to new players. We should have more competition. This will increase and improve the quality of the services. And this would ensure a level playing field for newcomers. But these big players, they’re not really located in the EU, at least, the significant ones that we all understand we’re talking about.

CoinDesk: But wouldn’t this potential carveout of Big Tech go against the EU objective of tech neutrality you mentioned earlier that gives citizens the freedom to decide which tech they want to use to serve them best?

Kaili: I would use the word “reciprocity.” To overcome this problem, you have to set your principles and standards. If a company follows those principles, it should be able to enter your market. If not, they shouldn’t.

This is addressed in the Artificial Intelligence Act that is under the EU parliament microscope. It lays out standards for bigger players, the more risky applications, even if they’re not based in the EU. It means that if you want to access this market, you have to respect the outcome of these principles Europe wants to protect. So if we consider that something they do is harmful, it could be completely banned. This usually applies to businesses that use facial recognition, health-care tech or weaponized AI. Whoever wants to enter the EU market, they have to follow the same rules, even if they come from other countries.

When we created GDPR, everybody thought it would fail. Now it seems like it was not just welcome, but it actually led the way for like-minded countries to improve the quality of services and make sure users feel protected and safe online, and ensuring people’s rights online. So I think we’re going to follow the same path. And we have a lot of work to do to strike a good balance to protect the well being of citizens, and avoid becoming protectionist.

Important events

9:30 p.m. HGT/SGT (1:30 p.m. UTC): U.S. trade in goods, advance report (Nov.)

11 p.m. HGT/SGT (1 p.m. UTC): Pending home sales index (Nov.)

CoinDesk TV

In case you missed it, here are the most recent episodes of “First Mover” on CoinDesk TV:

Crypto Markets Analysis, Global Adoption, Crypto Regulation in Review

What’s going on in the crypto markets? “First Mover” discussed the near and long-term bitcoin and altcoin outlook with guest Andriy Velykyy of Allbridge. Also, what does the new year hold for global crypto adoption, and does Ukraine have a future as a major crypto hub? Plus, First Mover covered the year in crypto policy and regulation: much discussed and much more to do in 2022.

Latest headlines

India’s Central Bank Recommends Basic Version of CBDC: The bank calls the currency a “convenient alternative” to cash.

Iran Banning Crypto Mining Until March 6 to Save Power: Report: It’s the second time this year Iran has taken such measures to reduce the strain on the country’s power grid.

OpenDAO’s SOS Token Hits $250M Market Cap Despite Unclear Goals, Security Risks: Airdrops can kickstart a community, but that doesn’t mean they have staying power.

Solana Wallet Phantom Nixes Auction for iOS Beta Invites After Community Erupts: Solanaland’s top crypto wallet abandoned its NFT auction hours before the pricey proceedings were set to begin.

Longer reads

Crypto Learns to Play the DC Influence Game: The infrastructure bill was the first shot in a long battle on Capitol Hill. But do lobbyists in Washington really understand crypto?

Today’s crypto explainer: How to Use Ethereum

Other voices: Crypto lobbying is going ballistic (The Economist)

Said and heard

“The crypto industry is late to the game. With the exception of a few well-established trade groups, and some firms that saw the importance of having a seat at the federal table before it became painfully obvious, crypto companies have largely avoided engagement with Washington.” (Rob Garver for CoinDesk’s Policy Week series)…”In the tech industry, 2021 was a year of profits and pivots. Thanks in part to the pandemic and the digitization of our lives, all of the big tech companies got bigger. Facebook changed its name to Meta, Jeff Bezos went to space, Jack Dorsey left Twitter and Silicon Valley fell harder for crypto.” (Kevin Roose writing in The New York Times)

Source: Coin Desk

Market Wrap Year-End Review: Altcoins, NFTs Filled Void When Bitcoin Got Boring

Hi Market Wrap readers! During the final two weeks of 2021, we’re using this space to recap this year’s most dramatic moments in cryptocurrency markets – and highlight the key lessons from this fast-evolving corner of global finance. Over a series of eight posts that started on Dec. 20 and will run through Thursday, we’ll recap what shook crypto markets this year. (Scroll down for today’s latest crypto-market prices and top gainers/losers.)

On Monday, we showed how some large investors began to cash out of their bitcoin trades in April and May, as prices retreated from the then-all-time-high price of around $65,000. Concerns about rampant speculation and a decline in global money supply growth were some reasons why investors began to jump ship. Then investors became concerned about bitcoin’s environmental footprint, which also caused Tesla to reconsider its involvement in the cryptocurrency. The selling pressure accelerated in May after China banned cryptocurrencies.

It was a wild first half of the year for bitcoin, but by June, the market began to settle down. BTC stabilized at around $30,000 after dropping nearly 50% over the span of a couple months. During that time, traders flocked to alternative cryptocurrencies (altcoins) and non-fungible tokens (NFTs) in hopes of greater profits.

Altcoin season in full effect

Around the start of the year, multiple altcoins began to outperform bitcoin (BTC), reflecting a strong appetite for risk among investors. The payments token XRP rallied nearly eightfold between January and April, and the prices of many decentralized finance (DeFi) tokens such as Aave’s AAVE token and Uniswap’s UNI also soared.

Even during the broad crypto market sell-off, altcoins began to account for a greater share of the total crypto universe – shrinking bitcoin’s “dominance” in the industry jargon. Many “Ethereum killers,” or competitors in the field of smart contracts blockchains, began to grab the attention of traders – such as Solana, with its SOL token. So-called layer 2 tokens such as MATIC from Polygon, which aims to increase the efficiency of transactions on the Ethereum blockchain, rose nearly twofold in July.

The chart below shows bitcoin’s market capitalization relative to the total crypto market capitalization, known as the bitcoin dominance ratio. BTC’s relative market cap loss began to accelerate between March and May before stabilizing at around 40% in the following months.

Bitcoin dominance ratio (CoinDesk, TradingView)

The NFT craze

As bitcoin’s price stabilized at around $30,000 in July and August, some traders became bored, literally.

It had been clear since March just how far this year’s crypto craze extended beyond bitcoin, when a piece of digital artwork sold for $69.3 million at a Christie’s auction by crypto artist Beeple. In the wake of breathless headlines in traditional media outlets like the New York Times, the potential riches from selling non-fungible tokens, or NFTs, attracted scores of artists, celebrities and traders seeking additional investments in the crypto market.

The Bored Apes Yacht Club became the second-most popular NFT collection by total trade volume behind CryptoPunks, CoinDesk’s Eli Tan wrote in August. At that time, the “floor price” for Bored Ape Yacht Club NFTs – the cheapest available on the open market – was 48.8 ETH, or $165,578. (By the end of the year, it would rise even further, to about $240,500.)

Owners of the high-priced NFT collection include National Basketball Association superstar Steph Curry, YouTube creator Logan Paul and musician Jermaine Dupri.

Dune Analytics: Average Bored Ape Sales Price

Speculation moves in cycles. Crypto traders began the year in full buying mode and then price declines encouraged some profit-taking as regulatory risks unfolded. The speculative wave had its ups and downs, but traders were able to find opportunities in the alternative crypto market as bitcoin began to lose its relative dominance.

In the next episode, we’ll show how bitcoin’s price broke out of a two month-long sideways range as El Salvador came to the rescue.

Relevant News

Latest prices

  • Bitcoin (BTC): $47,735, -6.8%
  • Ether (ETH): $3,823, -6.6%
  • S&P 500: -0.1%
  • Gold: $1,807, -0.1%
  • 10-year Treasury yield closed at 1.482%, up 0.003 percentage point.

CoinDesk 20

Here are the biggest gainers and losers among the CoinDesk 20 digital assets, over the past 24 hours.

Biggest gainers:

There are no gainers in CoinDesk 20 today.

Biggest losers:

Asset Ticker Returns Sector
Internet Computer ICP −14.5% Computing
Cosmos ATOM −13.5% Smart Contract Platform
Chainlink LINK −12.6% Computing

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

Source: Coin Desk

Tenedores a largo plazo de bitcoin mantienen posiciones pese a una fuerte caída desde noviembre

Los tenedores a largo plazo de bitcoin recortaron marginalmente sus posiciones en las últimas semanas a pesar de la fuerte caída de los precios, según datos de la empresa de análisis Glassnode.

La principal criptomoneda por capitalización bursátil no logró superar el nivel de $52.000 el lunes y cayó hasta $47.740 el martes, al cierre de esta edición.

Los precios de bitcoin han caído casi $20.000 desde los máximos de noviembre de 2021, cuando tocó los $69.000. Sin embargo, los análisis muestran que la oferta en poder de los inversores sólo se ha reducido a 13,3 millones de BTC desde 13.4 millones de BTC. Un cambio marginal, si se tiene en cuenta la enorme caída del precio.

Las tenencias de bitcoin a largo plazo vieron pocos cambios incluso después de una caída de precios en noviembre de 2021. (Glassnode)

La absorción de bitcoin por parte de vendedores podría ser alcista.

“Este comportamiento en la cadena se observa más típicamente durante los mercados bajistas de bitcoin, que en retrospectiva son efectivamente largos períodos de redistribución de monedas de manos más débiles a aquellas con una convicción más fuerte y largoplacista”, explicó Glassnode en un boletín informativo del lunes.

Glassnode clasifica a los titulares de larga duración como direcciones que poseen bitcoins durante más de 155 días, un plazo después del cual es estadísticamente menos probable que los titulares gasten sus bitcoins.

Los datos muestran que los titulares a largo plazo han añadido 1.8 millones de bitcoins a sus cuentas desde enero, mientras que la oferta a corto plazo se redujo en 1.4 millones de bitcoins en el mismo periodo.

Algunos tenedores a largo plazo no han tocado sus bitcoins en más de cinco años, ya que el 23% de los 21 millones de bitcoins permanecieron intactos en ese periodo, según otras métricas rastreadas por Glassnode.

Mientras tanto, el Índice de Fuerza Relativa (RSI, por sus siglas en inglés) para bitcoin se deslizó a niveles favorables en las horas de trading europeas el martes, después de alcanzar condiciones de sobrecompra el viernes pasado. Esta herramienta calcula el impulso del mercado para los activos, y un nivel de sobrecompra implica que los precios están sobrevalorados y pueden estar preparados para un cambio de tendencia o un retroceso correctivo de los precios.

Las lecturas del RSI para bitcoin volvieron a niveles favorables después de la caída del precio del martes. (TradingView)

Las lecturas del RSI para bitcoin rondaron los 40 el martes después de alcanzar un nivel de sobrecompra de más de 72 el viernes, cuando los precios tocaron los $51.000.

Source: Coin Desk

Creating the On-Ramp for Web 3

Arguably the biggest challenge for the ongoing development of crypto, blockchain technology and Web 3 is finding ways to widen their appeal and facilitate their applications. As the end of a tumultuous year for crypto markets comes to an end, there is now a unique, once-in-a-lifetime global opportunity to shape the future by democratizing access to the tools that people need to create decentralized services for everyday life.

One ecosystem is dedicated to making this happen: the Near blockchain, a permissionless, proof-of-stake, carbon-neutral blockchain designed to be superfast, incredibly secure and infinitely scalable. Unlike other networks, Near gives software developers easy access to build new crypto applications, from non-fungible tokens (NFTs) to decentralized finance (DeFi) products, encouraging people to launch new business models and consumer products.

Near is also much faster than Ethereum, the world’s most used blockchain. It’s capable of hundreds of thousands of transactions per second versus ETH’s 45, and charges 1,000 times lower transaction fees for a much lower barrier to entry. But instead of being a direct competitor, Near runs in concert with Ethereum and other blockchains, allowing for the free flow of assets and communication between networks for the betterment of all.

Since its launch in 2020, Near’s ecosystem has seen a surge of activity. To date, it has processed more than 50 million transactions across more than 1.7 million accounts and helped incubate and foster over 200 projects and 300 DAOs.

In October 2021, Near announced $800 million in global ecosystem funding initiatives targeted at accelerating growth. The announcement, which includes the $350 million in funding announced by Proximity Labs, is designed to build on the momentum in the Near ecosystem over the last 12 months. In addition, Near recently finalized partnerships with Opera and the Wharton Business School, started working with crypto payment provider MoonPay to make Near accessible in 150 countries worldwide and continued collaborating with Near Inc. to launch Simple Nightshade, the first step towards a fully sharded blockchain.

At the end of 2021, Near held a town hall meeting for its wider community during which a number of other key developments were highlighted. These include the Near Education’s 1,000 Teacher Initiative that will educate the next million developers, designers and product people in the ecosystem. The second iteration of the MetaBUILD is currently underway, the first having launched in August with $1 million in prizes up for grabs.

“We launched MetaBUILD in August with the idea that this metaverse concept is bringing together work and play, the digital and the real, and it’s really merging Near’s identity of founding DAOs and communities, and the blockchain is at its core,” said Near co-founder Illia Polosukhin.  “[Overall] we’ve had a lot of [developer] growth since May as we got all of the pieces and building blocks in. Over the last three or four months we’ve had 30% to 40% growth.”

Further validation of Near’s potential came with the announcement that Marieke Flament will be the new CEO of the Near Foundation starting Jan. 1, 2022.  Flament joins from NatWest’s digital SME bank Mettle, and before that as head of European operations at Circle, making her a unique combination of both a crypto native and an experienced fintech CEO, who has scaled businesses in both.

“With its permissionless, proof-of-stake blockchain, Near has the capability to help us unlock many of the long-promised uses of the technology and to create products and services that promote greater inclusivity and reflect the needs of the people they’re designed to serve,” said Flament. “As the CEO, I am excited to play a role in achieving the foundation’s aim and to ensure that through collaboration and openness, the blockchain can be used as a true force for good.”

In Q4 this year, another major new project launched on Near Mainnet: Flux, an oracle from the future. Completely decentralized, Flux is bringing secured data feeds to any and all high-throughput data apps on the Near blockchain, such as trading platforms that need access to lots of reliable data. Flux’s unique feature set will bring to Near a next-generation oracle capable of powering mainstream use cases like derivatives, lending, stablecoins, dynamic NFTs, yield farming, reserve currencies, insurance, asset bridging, off-chain computation and more.

A number of other developers will launch their projects on Near in 2022, bringing many more DeFi, NFT, gaming, metaverse and other exciting projects to the Near ecosystem. The $800 million funding initiative, along with Guilds and other blockchain expertise and resources, will be crucial in helping DAOs succeed and, just as importantly, bringing the masses to the Open Web.

Source: Coin Desk

OpenDAO’s SOS Token Hits $250M Market Cap Despite Unclear Goals, Security Risks

In a remarkable display of the power of airdrops in community formation, a new token reached a peak market capitalization of over a quarter-billion dollars in just four days.

Unclear goals, looming security risks and a fickle market could lead to prices drifting lower as interest and attention begin to wane, however. Its market cap now sits at $207 million.

On Christmas, NFT traders awoke to an airdrop of SOS tokens – the governance token for the newly formed OpenDAO.

Airdrops are a token distribution method that allows crypto users who have performed certain actions to claim tokens. In this case, the airdrop applied to any Ethereum address that purchased a non-fungible token (NFT) on the popular OpenSea marketplace – a potential pool of more than 850,000 addresses. To be clear, OpenDAO has no relationship with OpenSea aside from targeting its user base with an airdrop.

According to a Dune Analytics dashboard, so far nearly 275,000 addresses have claimed the airdrop, with the median claim worth $125 at current prices. Many prolific collectors reported claims in the four- and five-figure range, and the exact math used to calculate claim amounts hasn’t been disclosed.

Despite the blazing-hot start for the project, however, multiple experts have cautioned that, due to exploit vulnerabilities and a hazy road map, SOS may already be on the downswing.

Security risks

Shortly after the airdrop, multiple Ethereum developers raised red flags on social media concerning potential attack vectors in the project’s code – namely, the risk of a “rug” from the founding contributors.

Fifty percent of the token supply is in the hands of three addresses controlled by the core team. These tokens are reserved for staking rewards, liquidity mining incentives and a DAO treasury, but have no on-chain security guarantees – such as a time lock, vesting schedule or a multisignature wallet, or multisig – protecting them.

Hypothetically the team has the ability, at any time, to take these tokens and dump them on centralized and decentralized exchanges, making millions and driving the value of the token to zero – one of the types of scams often referred to as “rug pulls.”

In an interview with CoinDesk, OpenDAO core contributors said that there is a nomination process underway in the project’s Discord channel to elect seven multisig signers, which would mean transactions require a four-of-seven majority to move forward.

Additionally, in an interview with CoinDesk, Quadrata Network co-founder Fabrice Cheng said the airdrop distribution architecture could enable the core team to “over time silently and slowly [claim] tokens that are normally reserved for the [OpenDAO] community.”

Due to the distribution calculations not being disclosed, verifying if the claims function has been exploited is difficult, but there’s no clear evidence that it has. The core team is largely anonymous or pseudonymous.

The DAO will also be closing the redemption period for the airdrop in June, and any unclaimed tokens will be transferred to the DAO treasury.

Limited utility

As the core team looks to put basic security measures in place, the community is now working to decide what the SOS token will actually be used for.

While some on social media have speculated that OpenDAO might use its sudden influx of funds to attempt to build a decentralized alternative to OpenSea, the team’s stated ambitions are more modest.

In early promotional materials, the core team advertised using the treasury to compensate victims of common NFT scams and hacks, “preserve NFT art” and “support NFT artists.”

Additionally, the core contributors are evaluating use case suggestions from the community.

“There have been many wonderful and brilliant ideas, but we are giving a cooling period before the elections of our multisignature wallet signers,” said one contributor in an interview.

The DAO has held two votes for token holders, including one to initiate a staking program that will generate rewards over a one-year period and one for a liquidity mining program that will reward liquidity providers over a two-year period.

Read more: Andre Cronje’s New NFT Marketplace Is a Vampire Attack Suicide Pact

These are both popular decentralized finance (DeFi) tools used to generate demand for a token but usually exist as components in a larger token-economic framework.

Despite the token’s limited utility, core contributors have been successful on the business development front. In the project’s Discord channel, contributors have announced a steady stream of partnerships with a number of wallets and marketplaces.

Community formation

Multiple observers have marveled at how the project has managed to grow so quickly despite both its security risks and a lack of a product or vision.

Targeted airdrops, a token distribution method that unites users who might not know each other but who have performed similar on-chain actions, is part of the recipe for success, according to some experts.

“SOS is a good example of how tokens can be a great way to coordinate a community, even if there isn’t a product,” said prolific NFT collector and Ex Populus co-founder Soban “Soby” Saqib. “Bootstrapping communities is difficult in the traditional world, but tokens and NFTs allow us to accelerate this in Web 3.”

Additionally, the lack of a road map for the project may paradoxically be serving as a tailwind for the token. As one eGirl Capital member put it, the proximity to OpenSea paired with a lack of details about the token’s eventual use ultimately led to a surge in interest:

Future prospects

A number of notable traders, personalities and founders are included in SOS’ list of top holders, including Aave co-founder Stani Kulechov and pseudonymous NFT mega-investor Pranksy.

The Sushi SOS-ETH decentralized exchange pool remains a “hot contract,” according to wallet profiler Nansen, and Nansen co-founder Alex Svanevik told CoinDesk on Saturday that the token was one of the most popular among the “smart money” segment over the past three days.

However, the hype train is showing signs of slowing. According to CoinGecko, trading volume has been declining on a steady basis since Sunday, and prices have drifted lower, as well.

In a recent blog post, popular crypto trader and podcast host Jordan “Cobie” Fish wrote that for buzzy assets like SOS with no product, the level of attention a project can sustain and its prices are often directly correlated, and keeping attention is difficult work.

“Once an asset has entered the consciousness of many players, it is easier to get all players to think about this asset again, but achieving sustained attention without a product and without users is much harder,” he wrote.

As on-chain governance – a process at times notably slow and inefficient – grinds on and security risks remain a threat, it’s unclear how long SOS can hold the interest of the notably fickle crypto community, and prices may soon reflect that.

Source: Coin Desk

Growth of Dollar Digital Currency Creates New Investment Opportunities for Businesses

In November 2021, the total value of dollar digital currencies surpassed $127 billion, according to a U.S. Treasury Department report. It has kept going up. A month later, it’s more like $158 billion by CoinMarketCap’s count, up staggeringly from $28 billion in January. Of that total, $42 billion can be ascribed to USD coin (USDC), a project from Circle that for months has been among the 10 largest market capitalizations of any cryptocurrency regardless of category.

Now that we’re in the season of dollar digital currencies, Circle is working to make this innovation more accessible for B2B use around the world.

Circle Yield*

Since its 2018 launch, USDC has functioned as a medium of exchange in blockchain-based and other digital use cases in which fiat dollars are unavailable. The dollar digital currency offers low-cost and nearly instant value transfer; building on that utility, USDC can now also serve as the principle for crypto lending via Circle Yield.

Circle Yield offers an alternative to other fixed-income strategies. Investments in Circle Yield are made and paid in USDC, thus avoiding the complexity often found in typical crypto-based investments, but still offer interest returns well above those found in many low-risk corporate bonds or money market accounts. USDC, in turn, is fully backed by cash and equivalents and short-duration U.S. Treasuries, and attestation reports are published monthly by the Grant Thornton accounting firm regarding the reserve balances.

Circle Yield, then, is designed to offer time-limited investments in the crypto ecosystem, which are secured with bitcoin collateral. Such investments wouldn’t require exposure to volatile assets but can still outperform many traditional financial instruments.

How businesses use Circle Yield today

USDC is known to be well suited to typical crypto enthusiasts who want to make dollar-denominated deals. But what about venture capital firms? Family offices? Corporate treasuries? Portfolio managers employed by institutional investors might want to do the same as blockchain technology proliferates and new investment opportunities arise.

That’s where Circle Yield comes into play. It essentially securitizes USDC into an instrument that can only be marketed and sold to accredited investors, or those who meet Securities and Exchange Commission standards for wealth, liquidity and market sophistication.

“Corporate treasurers can maximize reserves while minimizing risks,” said Hannah Post, the Yield product specialist at Circle. “Yield offers returns much higher than what is currently available from most traditional financial institutions’ interest-bearing products and minimizes the complexity of accessing this new asset class by being able to fund the product directly from your Circle Account.”

Circle, the principal operator of USDC, offers Yield to corporate institutional investors. Yield, which is built on USDC and regulated by the Bermuda Monetary Authority, is fully secured with bitcoin collateral stored with a regulated, third-party financial institution.

With this infrastructure in place, Circle intends to expand the geographic reach of Yield from its initial launch in the U.S. and Switzerland to a broader set of jurisdictions.

As capital markets for dollar digital currencies like USDC prove their value to investors, more participants from financial institutions and other corporate players with idle treasury reserves are likely to join the growing wave of stablecoin users. It looks like dollar digital currencies still have a lot more growing to do in the years ahead.

*Offering subject to business approval, geographical availability and regulatory authorization, and there is no guarantee that the product will become available in a specific timeframe or to a specific customer or geography. Not currently available in the following U.S. states: Alaska, Minnesota, New York and Hawaii. Circle Yield product offered through Circle International Bermuda Limited (“Circle Bermuda”). Circle Bermuda has entered into lending arrangements with one or more institutional borrowers, including Genesis Global Capital, LLC. These lenders pledge and transfer Bitcoin into custody with a third party custodian as collateral for their USDC borrowings and Circle Yield investors benefit from a security interest in Circle Bermuda’s security interest in the pledged Bitcoin.

Circle Account and money transmission services are provided by Circle Internet Financial, LLC. Circle Internet Financial, LLC, NMLS # 1201441, is a licensed provider of money transmission services. A full list of Circle’s licenses can be found at https://www.circle.com/en/legal/us-licenses.

Circle is not a bank; your Circle Account is not a bank account, and any funds are not insured by the Federal Deposit Insurance Corporation, the Securities Investor Protection Corporation or by any U.S. or foreign government agency, insurance fund, person or entity. For investors in the United States, investments described in this communication are offered by Circle Bermuda to “accredited investors” only in accordance with Regulation D, Rule 506(c) of the Securities Action of 1933, as amended. While Circle Bermuda is regulated by the Bermuda Monetary Authority for digital asset business, Circle Bermuda is not engaged in banking and deposit taking activities and is not regulated for these purposes. You should carefully conduct your own investigations and analyses in connection with any participation in this product, including its objectives, risk factors, fees and expenses and the information set forth in these materials. All prospective participants in the products described herein are advised to consult with their legal, accounting and tax advisers regarding any potential participation. Please read the offering documents carefully before you invest. Additional information is available upon request.

Rates are purely indicative and are subject to change pending availability, approval and market conditions.

Source: Coin Desk

Iran Banning Crypto Mining Until March 6 to Save Power: Report

Iran is banning authorized crypto mining in the country until March 6 in an attempt to save power and avoid blackouts this winter, according to a Bloomberg report.

  • The move will free up 209 megawatts of power for use by the country’s households, according to Mostafa Rajabi Mashhadi, the director of state-run Iran Grid Management Co., who was interviewed by state TV.
  • The government is also cracking down on illegal crypto mining by both individuals and larger operators, Mashhadi said, nothing that those groups consume more than 600 megawatts of electricity.
  • Iran banned all crypto mining this past summer to reduce the burden on the national power grid. An unusually dry spring has left Iran struggling with hydropower shortages.
  • The move may crimp Iran’s finances, because the country has been using locally mined cryptocurrency to bolster its revenue amid tough international sanctions.

Read more: Iranian President Wants to Regulate Crypto ‘as Soon as Possible’

Source: Coin Desk

India’s Central Bank Recommends Basic Version of CBDC

As India grapples with uncertainty around cryptocurrency regulation, the Reserve Bank of India (RBI), the country’s central bank, said it is inclined to offer a basic central bank digital currency (CBDC) initially before implementing a more sophisticated version.

A report titled “Trend and Progress of Banking in India 2020-21″ released on Tuesday elaborates on the thinking of the RBI on a CBDC.

In a major step away from the RBI’s stance in the past toward anything cryptocurrency-related, the report says, “In its basic form, a central bank digital currency (CBDC), provides a safe, robust and convenient alternative to physical cash. In comparison with existing forms of money, it can offer benefits to users in terms of liquidity, scalability, acceptance, ease of transactions with anonymity and faster settlement.”

The RBI is charting ways to implement a CBDC in phases and its initial recommendation is to ”adopt basic models initially, and test comprehensively so that they have minimal impact on monetary policy and the banking system.”

Read more: Indian Ruling Party-Aligned Group Takes Stance on Crypto Regulation

While the bank said it is concerned about the “dynamic impact” of a CBDC “on macroeconomic policy making,” the report points to “India’s progress in payment systems” and how that “will provide a useful backbone to make a state-of-the art CBDC available to its citizens and financial institutions.”

The report raises questions about several aspects of CBDCs including “design elements” that “need to be navigated before” a CBDC is introduced. The design elements include exploring the rollout and navigating “whether the CBDC would be general purpose and available for retail use (CBDC-R), or would it be for wholesale use (CBDC-W)?”

T Rabi Shankar, the RBI’s deputy governor, has stated that “two types of CBDC are in the works,” wholesale and retail, and that “a lot of work has been done” on the wholesale CBDC but that “the retail-based CBDC approval is more complicated and it will take some more time.” He also said that “the moment it is ready, whichever is ready first, we will release it for pilot testing.”

In the past, the RBI has sought a total ban on cryptocurrencies, arguing that a partial ban wouldn’t work. In April 2018, the RBI notified banks not to support or engage in crypto transactions, effectively banning crypto trade in India, until the Supreme Court overturned the ban two years later.

The Indian government’s current bill to regulate cryptocurrencies, a draft of which has not been made public, has also reportedly evolved from prohibiting “all private cryptocurrencies” while allowing “for certain exceptions to promote the underlying technology,” to enabling cryptocurrency to be used as an asset, but banning its use as currency or payment.

CoinDesk has reported that India’s draft cryptocurrency bill probably won’t become law until after next year’s Budget Session ends in April, adding to uncertainty about the state of crypto regulation in the nation.

Source: Coin Desk

Solana Wallet Phantom Nixes Auction for iOS Beta Invites After Community Erupts

UPDATE (Dec. 28, 17:11 UTC): This article has been updated to reflect Phantom’s restructuring of the beta access rollout.

Solana’s Phantom wallet nixed its plans to sell pricey NFT invites for its iOS beta Tuesday after taking heavy community criticism that it was effectively pricing people out with $1,600 access passes.

“We never meant to alienate anyone and never intended on profiting from the auction in any way,” Phantom, the crypto wallet company, said in a Twitter post. It said it had planned to donate the now-canceled mint proceeds to charity; it pledged to donate $200,000 to the organization Girls Who Code.

Phantom replaced its NFT sale with a “free” beta invite for 1,000 people, a sharp decline from the 7,000 planned non-fungible tokens. It was unclear if Phantom’s new plan would affect the app’s debut timeline, although the sign-up spots filled up within minutes.

The botched launch amounted to an embarrassing misstep by Phantom, a closed-source crypto wallet as prominent in Solanaland as MetaMask is for the Etherverse. An NFT project meant to be “fun” instead devolved into hours of drubbing on Twitter as users balked at paying as much as eight SOL to test out the app.

Signs of the storm were brewing Tuesday morning. A representative for Magic Eden, the NFT marketplace originally slated to conduct the access sale, told CoinDesk “We may be changing our approach to this drop” prior to this article’s original publication.

That the proceeds were earmarked for charity had little impact on the Solana community’s response. Some called for a boycott of the sale; others pledged to move their assets elsewhere. But paying eight SOL to access an unfinished product was clearly a nonstarter.

Phantom goes mobile

Demand for a Phantom mobile app has been simmering for months as the price of SOL, Solana’s native asset, surged.

Phantom boasted 1 million active users in November as the most popular crypto wallet for Solana-based decentralized finance (DeFi). It became an ecosystem kingpin despite lacking a mobile app and held its throne even as competing apps such as Solflare launched theirs. The demand has been so heated that some overeager Phantom users have reported losing their wallet balances to opportunistic scammers who filled the void with phony apps.

Read more: Solana Wallets Phantom, Solflare Eye Mobile for Growth

Both companies (and leadership at the blockchain’s keystone stakeholder, Solana Labs) have called mobile wallet apps critical to the superfast network’s long-term growth. Mobile wallets let users trade, send, swap and stake cryptocurrencies and NFTs from their phones.

The full iOS rollout will come in about a month, according to Phantom.

Source: Coin Desk

How Crypto’s Regulatory Scene Might Evolve in 2022

The story of crypto is one of a global asset and technology class, and it’s one we intend to cover as comprehensively as possible. Here’s what CoinDesk’s new regulatory team is watching for next year.

You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.

Meet the team

The narrative

Hey folks. Happy holidays and congratulations on getting through 2020-lite! Next year promises to be fairly significant in terms of how the regulatory environment around digital assets will develop. To that end, CoinDesk’s brand new regulatory team is up and running and looking forward. I asked the team to share what they’re expecting.

Why it matters

CoinDesk is ramping up its efforts to cover the regulatory world’s intersection with the digital asset sector. To that end, we now have a global team composed of existing and new reporters dedicated to this very specific industry. Here’s what we’ll be watching for next year.

Breaking it down

Nikhilesh De (U.S.): The big issues I’m looking at in the U.S. are stablecoin regulation and the infrastructure bill. The stablecoin issue is most interesting to me – administration officials have said on multiple occasions that they want Congress to act on the President’s Working Group report. While the report suggests that the Financial Stability Oversight Council could draft regulations, even this interagency group is asking Congress to set the rules for stablecoin oversight in the U.S. The questions are whether Congress will act and if it does, what it rules will look like.

The infrastructure bill’s impact is likewise going to draw my attention, less for the tax provision itself and more as a symbol for when the industry started really getting politically engaged. We’ve had lobbyists and policy groups for years now, but this past August’s fight over a provision defining a “broker” really felt like a shift in terms of how the industry views Washington. We’re already seeing a greater number of congressional candidates who have ties to the crypto industry. I imagine we’ll soon start hearing more about political action committees (PACs) or other efforts to lobby candidates and bolster pro-crypto politicians.

What I’m very curious about is where things land up on the actual regulatory side. Will the Securities and Exchange Commission or Commodity Futures Trading Commission take oversight of crypto spot markets? Will one of these agencies issue guidance for startups trying to launch in the U.S.? Or will 2022 be a repeat of 2021 and 2020 and 2019 and so on where we hear speeches and see enforcement actions but not much more.

On a personal note, thanks for sticking through the first year of this newsletter. More to come!

Sandali Handagama (EU): In 2022, we’re going to hear a lot more about the European Union’s (EU) proposed framework for regulating crypto assets as the European Council and Parliament start negotiating the rules. The Markets in Crypto Assets (MiCA) framework is broadly aimed at regulating virtual asset service providers and issuers. But there is an undeniable focus on policing the stablecoin sector, particularly stablecoins that resemble Facebook’s (now Meta)’s proposed stablecoin libra (now diem).

EU regulators also proposed a regulatory sandbox for projects based on distributed ledger technology (DLT) in 2020 that’s now awaiting parliamentary approval.

Meanwhile, the European Central Bank (ECB) is examining a digital euro for retail use. A number of European countries including Switzerland and France have also been part of experiments involving a wholesale digital euro as the Bank of International Settlements (BIS) continues to expand its work on central bank digital currencies around the world.

Cheyenne Ligon (U.S.): Virgil Griffith – the Ethereum developer who was charged with violating U.S. sanctions law after giving a talk on cryptocurrencies in North Korea – will be sentenced by a New York judge on Feb. 2. Griffith’s plea deal could see him serving between five and six and a half years in federal prison.

Griffith’s case is just one of many such court cases I expect to see play out next year. While the majority of them won’t be as high profile as Griffith’s, the explosive growth in the crypto industry means lawmakers and enforcement agencies are paying more attention to crypto crime.

In 2022, I expect to see an uptick in the number of criminal probes of crypto companies, charges brought against individual crypto scammers and enforcement actions and civil penalties from the SEC and CFTC as those agencies regulate crypto through enforcement.

Lavender Au (APAC): With South Korea’s presidential election in March, we are unlikely to see much regulatory action soon. But a new administration taking power could mean that the industry may finally see a promotion bill and investors may see the controversial crypto tax bill amended.

Japan launched a decentralized finance (DeFi) study group this year and we may see its findings next year. The country will also introduce legislation on stablecoins and wallet providers that engage in stablecoin transactions.

In China, the overall attitude toward cryptocurrency is now set, and it’s not friendly. Some entrepreneurs will leave the country and those who choose to remain will keep a low profile. Next year, we’ll see more enforcement, as local governments draw up more detailed regulation on crypto in their jurisdictions.

In Hong Kong, we may see the Securities and Futures Commission release specific legislation aimed at cryptocurrency late next year, insiders say.

Amitoj Singh (India): In the new year, CoinDesk will be closely watching the uncertain state of India’s cryptoverse, especially a crypto bill that hasn’t been introduced yet in parliament. CoinDesk will be monitoring how the bill evolves as lawmakers in India try to make it align with a global regulatory framework.

CoinDesk India will look at what risks the government sees in crypto and how it will try to mitigate those risks. Another issue is how crypto regulations will fit in with regulations of existing capital markets.

Other issues to look at next year include how crypto transactions will be taxed and how advertising in the crypto industry will be regulated.

Biden’s rule

Changing of the guard

Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated)

No more votes this year, happy holidays!

Elsewhere:

Outside CoinDesk:

  • (The Washington Post) The Post looks at Wyoming and how the state has become a tax haven for oligarchs and other individuals.
  • (The New York Times) Executives and developers are leaving major technology companies like Google and Apple to join crypto startups.
  • (U.S. DOJ) The U.S. Department of Justice announced last week that it seized 3,879 bitcoins that a defendant allegedly seems to have used in an effort to hide funds embezzled from his company. What’s interesting to me is that the DOJ seems to be saying that law enforcement officials were able to recover bitcoin stored in a cold wallet. The actual complaint and supporting documents aren’t in the federal PACER system yet, so I haven’t been able to read through them, but I would love to know more about this case – specifically, did the defendant just hand over the private key? Or is there more to this?

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.

See ya’ll next week!

Source: Coin Desk