Blockchain and Cryptocurrency News Roundup

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  • January 18, 2021
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18 January 2021.

Dive into a short summary of some of the biggest headlines in Crypto this week. Goldman Sachs to enter crypto market ‘soon’ with a custody play, XRP token is classified as a non-security by the UK treasury, Exchanges are running out of ETH with reserves plunging 27% in 48 hours & Guggenheim’s CIO still stands by $400,000 Bitcoin projection.

Goldman Sachs to enter crypto market ‘soon’ with a custody play

U.S. banking powerhouse Goldman Sachs has issued a request for information (RFI) to explore digital asset custody, according to a source inside the bank. When asked about timing, the Goldman source said the bank’s custody plans would be “evident soon.” Goldman’s digital asset custody RFI was circulated to at least one well-known crypto custody player toward the end of 2020. “Like JPMorgan, we have issued an RFI looking at digital custody. We are broadly exploring digital custody and deciding what the next step is,” said the Goldman source, who asked not to be named. (An RFI on crypto custody was issued by JPMorgan in October 2020, as reported by The Block.) The Goldman insider said the bank’s digital assets initiative was “part of a broad digital strategy,” citing stablecoins in relation to recent missives from the U.S. Office of the Comptroller of the Currency (OCC). A tectonic shift took place in the world of crypto custody this week, as San Francisco-based Anchorage attained conditional approval from the OCC to become a national digital bank and “unequivocally” meet the definition of “qualified custodian” in the process. Anchorage President Diogo Mónica said in an interview this regulatory approval will invite many large and risk-averse institutional players into crypto. When asked about JPMorgan, Goldman and Citi – the three big U.S. banks most are watching in relation to crypto custody – Mónica said: “We are talking to all these guys.” There has been chatter about Goldman perhaps offering something akin to prime brokerage services involving crypto. However, the Goldman insider said the bank is looking at custody but not prime brokerage. “Anchorage, BitGo and Coinbase have quite grand plans in crypto prime brokerage and we would not be looking to duplicate those,” said the Goldman source.


XRP token is classified as a non-security by the UK treasury

The UK has released a report on crypto-assets and stablecoins to deliver a more comprehensive overview of its financial system. According to the official guidelines, the UK Treasury (Her Majesty’s Treasury) does not classify XRP as a security. Rather, XRP is looped in with Bitcoin (BTC) and Ethereum (ETH) and categorized as unregulated tokens, which contrasts with the United States’ definition. In the UK, however, XRP is viewed as a non-security. More specifically, XRP, BTC, and ETH are viewed as crypto assets that are used primarily as a means of exchange. The report refers to them as “exchange tokens,” a sub-category under unregulated tokens. The UK Treasury’s released report follows the standard of The Financial Conduct Authority (FCA). It acknowledges that cryptocurrencies are dynamic. The report read: “The FCA’s guidance also makes clear that many tokens can take a hybrid form and fall into different categories at different points in time – for example, they may initially be used to raise capital, then later be used primarily as a means of exchange.” The UK Treasury classified cryptocurrencies in three broad categories: e-money tokens, security tokens, and unregulated tokens. This definition surrounding XRP contrasts with how the token is viewed in the United States. Currently, XRP’s status in the US remains unclear. While Bitcoin and Ethereum are viewed as commodities, the Securities and Exchange Commission (SEC) alleges that XRP is a security. Previously, Ripple CEO had praised the UK for its regulatory guidance for cryptocurrencies, saying that “the UK had a clear taxonomy” surrounding it. Brad Garlinghouse applauded the UK’s Financial Conduct Authority for its leadership in characterizing how one should think about different sorts of assets and how they can be used. Ripple and the Bank of England (BoE) had long been known to be partners, as the UK Central Bank had leveraged Ripple’s technology for its Real-Time Gross Settlement System (RTGS). RTGS is the funds transfer system that enables real-time transfer of fiat and securities. Ripple has been actively working with central banks and looking to help financial institutions deploy central bank digital currencies (CBDC). Ripple has time and again vouched for its On-Demand Liquidity (ODL) services and XRP Ledger, which uses XRP to bridge currencies between different fiats and provide efficient, real-time cross-border transactions. In addition, XRP is compatible with stablecoins, whose utility has been recognized by the Bank of England’s governor Andrew Bailey for its transacting advantages and its ability to reduce friction in payments. Due to the US’ clampdown on XRP, Ripple had previously also considered moving its operations overseas. The UK has been among the list of countries that the fintech firm had considered. Executive chairman of Ripple Larsen had criticized the cryptocurrency framework provided by the US Securities and Exchange Commission and said that it was light years behind the UK, China, and other countries in terms of providing a regulatory framework for cryptocurrencies.

Exchanges are running out of ETH with reserves plunging 27% in 48 hours

Analysts predict Ether may soon hit a new all-time high after ETH reserves on centralized exchanges fell by 27% in two days.

The amount of Ether held on exchanges has plunged over the past two days, with CryptoQuant data indicating that just 8.1 million ETH is currently sitting in the reserves of centralized exchanges.

The acceleration of ETH being taken off exchanges was highlighted by Nuggets News’ Alex Saunders, who noted a 10% drop in Ether reserves on centralized platforms on Jan.14 — from 11 million to 10 million over 24 hours. “Exchanges will run out of ETH in 10 days at current rate,” he predicted.

Earlier today, Saunders noted the decline in Ether reserves had escalated by a further 20% leading him to suggest that centralized platforms may run out of ETH in the next 48 hours.

Other data providers also show that exchange balances have fallen by 42.5% since tagging an all-time high of 14.1 million in mid-May 2020. Data from Glassnode indicates that Ether reserves on centralized exchanges have not been this low since July 2018. As of this writing, only 7% of Ether’s circulating supply is held on exchanges. Saunders interprets the data as suggesting an explosive bull-run into new all-time highs is imminent for Ether, stating: “We all know what happened when demand outstripped supply of $BTC. It quadrupled in 90 days.” CryptoQuant data shows that exchanges’ BTC reserves have fallen by 21% since posting an all-time high of nearly three million during March 2020. However, the recent acceleration in Ether being taken off exchanges far outpaces that of BTC. Exchanges’ BTC reserves only fell by 4.5% since Oct. 21 while Bitcoin’s price increased 230%, from roughly $12,000 to $40,000. However, 600,000 of the recently moved Ether has been attributed to an internal transfer between Bitfinex cold wallets — one of which is believed not to be recognized by Cryptoquant. A further 2 million Ether that has left exchanges was identified as being moved to decentralized finance platform Gnosis. According to crypto market data aggregator Into The Block, Ether is currently exhibiting numerous bullish signals, including a bid-to-ask volume imbalance of almost 9%.


Guggenheim’s CIO still stands by $400,000 Bitcoin projection

In a video uploaded by Bloomberg Markets and Finance, Guggenheim’s Chief Investment Officer Scott Minerd stood by his projection before Christmas that Bitcoin could rise to a price of $400,000. “I think one thing that we’re seeing is the sudden interest in retail” he said, echoing a popular interpretation of Bitcoin’s current state of market play. He added: “we’re moving into a speculative frenzy… Perhaps it’s time to take some money off the table here” echoing a tweet written four days earlier. Scott Minerd is a founding and managing partner at Guggenheim Partners. He guides the firm’s investment strategies and oversees client accounts investing in various different securities. Guggenheim Partners currently holds more than $295 billion dollars in assets under management. Despite counselling prudence with Bitcoin, Minerd believes the post-pandemic market will be flourishing. He compares the pandemic to the Spanish flu of 1918, noting “we could be in a golden age.” However, as many studies have concluded, the Spanish flu had a 6% negative effect on GDP and consumption in countries with high mortality rates. What the Spanish flu did not have an impact on were gold prices, nor has any pandemic for that matter, a point which Minerd factored into his reasonings: “The $400,00 price I talked about was based off the supply of gold in the world, and crypto in a lot of ways is more attractive than gold.” Bitcoin has recently been falling, but high-profile supporters like MicroStrategy CEO Michael Saylor and SkyBridge founder Anthony Scaramucci still tweet their fidelity to their initial projections, while channeling nine and ten digit sums into the currency through their companies. With Morgan Stanley taking a major stake in MicroStrategy and Skybridge’s Bitcoin Fund launch call getting inundated, clearly both retail and institutional interest in Bitcoin is growing. On the topic of whether Guggenheim has invested in Bitcoin, Minerd disclosed that “some of our private funds have already purchased it… If you believe what I said that it’ll go to $400,000 eventually, 2% of your portfolio will be 20% before this is all over.” So Minerd’s mind is clear: Though it could be “time to take some money off the table,” he plans to keep a lot on the table, and perhaps add even more, just in case Bitcoin reaches $400,000. 


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