Blockchain and Cryptocurrency News Roundup

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  • October 12, 2020
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12 October 2020.

Dive into a short summary of some of the biggest headlines in Crypto this week. China to award DCEP worth $1.5 million to Shenzhen residents to test digital Yuan, Cardano’s 12% price surge leaves top cryptocurrencies in the dust, crypto long & short: a UK ban on crypto derivatives will hurt, not protect investors & more investors HODL Bitcoin in anticipation of a 2021 BTC bull market.

China to award DCEP worth $1.5 million to Shenzhen residents to test digital Yuan

As a way to enhance the adoption and continue to test its digital currency dubbed the Digital Currency Electronic Payment (DCEP), China’s central bank, the People’s Bank of China (PBOC), has teamed up with Shenzhen city to distribute coins worth 10 million yuan, approximately $1.5 million to residents.The city’s local government disclosed that the giveaway would adopt a lottery system with around 50,000 beneficiaries. They will have the liberty to spend the digital currency across more than 3,300 shops located in Shenzhen’s Luohu district. As per the announcement: “Residents need to apply in advance for an online lucky draw in order to be in the running for the digital money. The money, seen as virtual ‘red packets,’ will be deposited to the individual’s digital currency wallet from 6 pm on October 12.” The promotion is expected to run from October 12 to October 18. Reportedly: “A total of 50,000 such ‘red packets’ will be distributed, each containing 200 yuan. Winners of the red packets need to download and register for a digital currency app to claim the money.” The initial development phases of China’s CBDC date back to 2014. The Shenzhen program is aimed at furthering the use cases and research of the digital currency. For instance, in August, employees at state-run commercial banks in China started internally testing its CBDC digital wallet application for transferring money and payment transactions.The CBDC is also expected to be tested in distinctive scenarios like the upcoming 2022 Winter Olympic Games to be held in Beijing and Zhangjiakou. Different governments view the launch of CBDCs as a race against time because they will give them a competitive edge in global markets. For instance, Japan recently disclosed that it could kick start a proof-of-concept phase on the issuance of its CBDC in 2021.

Cardano’s 12% price surge leaves top cryptocurrencies in the dust

Place your financially informed trades ahead of the weekly price update for the top ten cryptocurrencies by market capitalization. There’s all to win and all to lose—time to pony up and stake the house as collateral. Ready, set…BANG!—and they’re off! Chainlink is the first out the gate in a flash, up 13.83% in the past seven days, per metrics site CoinMarketCap. Trailing behind but giving it everything it’s got is Bitcoin Cash, up 9.41%. Biting Bitcoin Cash’s tail is XRP, up $8.96% in the past week. XRP’s trying to get away from Litecoin, up 8.42%. Neck and neck are Bitcoin and Ethereum, up 7.47% and 7.29% respectively. And what’s that? It’s difficult to make out, but…wait, be quiet now—the dust is settling. Ah, it’s just Polkadot, spluttering as it copes with the fumes of its jockey, who spent most of last night throwing up most of the previous night. It’s up 4.85%. And of course, there’s Binance Coin, spinning up circles, up just 3.5%. But hang on, THWING…Cardano shoots past. Everyone thought it too young to race—it’s not safe, they said—the recent network upgrade, Shelley, only launched in July. But, tongue slack and legs about to buckle, it rises 12.2% in the past 24 hours, and 15.7% in the past week. With Cardano way out in front the race looks futile. What we considered fast was in fact slow—what rubes we were. The rest of the horses cross the line but nobody’s paying attention; all eyes are on Cardano today. 


Crypto Long & Short: A UK ban on crypto derivatives will hurt, not protect investors

This week the U.K.’s Financial Conduct Authority (FCA), which regulates the country’s financial services, issued a ban on the sale of crypto derivatives and ETNs to retail investors. While this may not seem particularly material to crypto asset markets overall – U.K. retail investors weren’t that much into crypto derivatives anyway, and the market hardly reacted at all – it is worth paying attention to for the alarming message contained within. This message loudly says: “We don’t like crypto assets.” In case you think I’m exaggerating, the policy statement opens with the sentence: “There is growing evidence that crypto assets are causing harm to consumers and markets.” (Actually, there isn’t, and to see a financial regulator make such a bold claim with no supporting evidence is jarring.) The message itself is fine; not everyone likes crypto assets. But this is a financial regulator whose job includes protecting investors, not passing judgement on new asset groups. The documents accompanying the ban read like a reflection of the personal opinions of some senior members, and represent a gross overstep of the regulator’s mission and remit. A secondary message, also alarming, says the FCA thinks retail investors are incapable of understanding new topics. The reasoning is couched in a “for your own good” tone – the FCA assures investors it is preventing losses of between £19 million and £101 million a year. This in itself insults retail investors’ intelligence, as whatever method they used to calculate this figure produced too wide a band to be even remotely credible. I wonder how much the same retail consumers lose on the National Lottery every year.

Let’s take a look at the five main reasons for the ban, according to the FCA bulletin. 

1) First up is the “inherent nature of the underlying assets, which means they have no reliable basis for valuation.” Seriously, show me something that does in these markets. OK, that might be a slight exaggeration, but the idea that market prices respond to fair valuations went out the window months ago. 

Plus, crypto assets are a new type of asset. They don’t respond to traditional valuation methods, but this does not mean they don’t have any value drivers. Plenty of work is being done to deepen and spread understanding of what these are.

2) Second, we have the “prevalence of market abuse and financial crime in the secondary market (eg cyber theft).” You may recall that, at the end of September, leaked documents known as the FinCEN Files showed that the U.S. Treasury has labelled the U.K. a “higher risk jurisdiction,” because of the relatively high incidence of financial crime that has nothing to do with crypto derivatives.

3) The cited “extreme volatility in crypto asset price movements” is also an unjustified excuse. Crypto assets are volatile, but bitcoin’s volatility has been heading down over the years, and is not as volatile as some equities on which investors can buy derivatives. Yet you don’t see U.K. retail investors being banned from buying or selling Tesla derivatives.

4) Throughout the statement, the FCA refers often to the “inadequate understanding of crypto assets by retail consumers.” This is just plain condescending. How do they know the understanding is inadequate? This assumption is tantamount to assuming retail investors are incapable of doing their own research and understanding the material. I’m certain there are many retail investors who understand crypto assets better than the FCA does. 

What’s more, FCA consumer survey results released in July of this year found that “the majority of crypto asset owners are generally knowledgeable about the product, are aware of the lack of regulatory protection afforded and understand the risk of price volatility.” The FCA’s own research shows that retail crypto investors have done their homework. Deciding that homework is “inadequate” seems an inappropriate step for a financial regulator to make, especially when no justification is offered.

5) And finally, perhaps my favorite one, we have the “lack of legitimate investment need for retail consumers to invest in these products.” Is it the FCA’s job to determine what the market needs? Does the market really need more equity ETFs? Many well-known investors, with long track records of respectability and rigor, have argued that crypto assets do fulfill a need for a hedge against inflation and financial turmoil.   


More investors HODL Bitcoin in anticipation of a 2021 BTC bull market

On-chain data shows a rise in HODLing among retail Bitcoin investors who expect BTC to rally in Q1 2021. New data shows Bitcoin’s (BTC) current price action is showing higher levels of ‘HODLing’ activity than previous bull cycles.

According to on-chain analyst Willy Woo, an indicator called “reflexivity” has been increasing in recent months. Woo explained that the indicator measures Bitcoin investors’ tendency to hold onto their BTC as its price rises. It’s essentially an alternative way to gauge the HODLing activity of retail investors. There are several reasons why retail investors might be holding onto their BTC even more so than in previous bull cycles. If Bitcoin rallies in 2021, most investors would see it as a post-halving bull rally. Historically, BTC has rallied 12 to 15 months after each halving, recording a new all-time high each time. Based on the tendency of BTC to rally after a halving, retail investors might be holding as a strategy to avoid being priced out if a strong sustained rally begins. Bitcoin has also shown a surprising level of resilience throughout multiple potential black swan events. After its initial recovery from the pandemic-induced crash in March, it has stayed above $10,000 despite numerous negative events. Most recently, the price of Bitcoin slumped after the U.S. Commodities and Futures Trading Commission (CFTC) charged BitMEX with violating the Bank Secrecy Act. After the CFTC announcement BTC price fell below $10,500 but it quickly recovered to the $10,700 support level. According to Woo, this is possibly due to the confluence of the two key factors. Woo explained: “This [reflexivity] is the tendency of HODLers to hold onto their coins harder as price increases. I had expected reflexivity to increase during the mania phase of BULL markets, but it looks quite constant from the last two cycles… This cycle is interesting; reflexivity is increasing rather than static compared to last cycles. While we now need more capital invested to get similar % gains in price, the effect of HODLers holding onto coins tighter is magnifying ‘number go up’ per dollar invested.” Heading into the fourth quarter, industry executives believe the U.S. presidential election could benefit Bitcoin and the positive HODLing data could further buoy BTC price. Industry executives and prominent investors in the cryptocurrency industry foresee the upcoming presidential election in November benefiting Bitcoin. Su Zhu, the CEO of Three Arrows Capital, said a Democratic sweep would catalyze Bitcoin due to various macro factors.He also suggested that a second term for Trump could also benefit Bitcoin. He wrote: “Biden is extremely bullish for BTC because the democrat blue wave could usher in unprecedented installation of MMT agenda w/ corresponding dollar weakness and deficits. With that said Trump is also bullish.” As Cointelegraph reported earlier this week, traders including Peter Brandt believe higher time frame charts point to a strong uptrend for Bitcoin. The combination of favorable technicals, strengthening fundamentals, and rising HODLing activity could buoy a BTC bull run in 2021.


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