Blockchain and Cryptocurrency News Roundup

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  • November 23, 2020
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23 November 2020.

Dive into a short summary of some of the biggest headlines in Crypto this week. Bitcoin is less volatile than many S&P 500 stocks, KuCoin exchange restores all token deposit and withdrawal services following massive hack, Tokenization will bring desirable stability to emerging markets & Bitcoin shortage? Pantera thinks market rally driven by PayPal buys.

Bitcoin is less volatile than many S&P 500 stocks

Bitcoin is less volatile than many stocks, according to investment management firm VanEck. The firm compared the cryptocurrency to the companies on the S&P 500 and found Bitcoin was less volatile than 112 of them in a 90 day period. In the past year, Bitcoin was a better bet than 145 stocks in the index. Bitcoin has been blasted by some in the world of traditional finance because of its volatility. But VanEck said that the story is not quite as simple as previously believed. “While bitcoin continues to be a volatile asset, it may surprise researchers and investors as to what other major assets have been more volatile than bitcoin,” the firm said in a Friday blog post. “Much of the volatility over the past few years can be attributed to sensitivity to small total market size, regulatory hurdles and generally limited penetration in mainstream stock and capital markets.” The firm added that a US Bitcoin exchange-traded fund (an investment vehicle that tracks the value of the currency) doesn’t yet exist but when it does, it “may show similar volatility characteristics as many stocks in well-known indices and ETFs.” VanEck withdrew its own application for a Bitcoin ETF. This isn’t the first time Bitcoin has proved to be a better investment than traditional stocks. An investor put $1,000 in the top 10 cryptocurrencies in January 2019 as an experiment, and the digital assets—including Bitcoin, Ethereum and Bitcoin Cash—came out winning. 


KuCoin exchange restores all token deposit and withdrawal services following massive hack

KuCoin announced yesterday that the withdrawal and deposit services for all tokens will finally be resumed on the crypto exchange.The Singapore-based digital asset platform suffered what was considered one of the biggest hacks in cryptocurrency history back in September, losing more than $150 million worth of Bitcoin, ERC-20 tokens, and Ether stored in hot wallets. The huge security breach was a result of a stolen private key. Following the attack, many other cryptocurrency exchanges froze large amounts of Tether to prevent the hackers from liquidating and swapping their funds. KuCoin also took matters into its own hands by dumping old hot wallet addresses. It then secured the remaining funds by transferring assets into new hot wallets. KuCoin also froze deposits and withdrawals on the exchange. Nevertheless, the hack was a huge blow for KuCoin. Currently, it is undergoing judicial proceedings for some tokens. For the affected cryptocurrencies, daily withdrawal limits will be implemented. To make up for this, the trading fees will be waived for the tokens in question. The “zero fee rule” will last until the withdrawal limit is lifted. KuCoin crypto exchange seems to be undergoing a lot of revamping, as its official Twitter account is also “temporarily restricted” at the time of writing, indicating that there has been “unusual activity” on the account, according to Twitter. For the lost funds, KuCoin CEO Johnny Lyu had previously assured all customers that it was going to be taken care of. He said that the company’s insurance fund will cover the hacked funds.

Is financial theft easier to trace with crypto?

Although the crypto firm has managed to recover 84% of the digital assets affected by the KuCoin hack, scammers have still been known to be on the move lately in an attempt to convert their stolen funds. Over 2 million worth of stolen crypto was reported by to have been transferred to an unknown wallet on November 5. However, since the stolen crypto assets run on the Ethereum blockchain, the hackers’ digital transactions could be traced by on-chain analytics. With the rise of crypto adoption overtaking the financial world, an advantage of digital assets running on blockchain technologies may be that compared to traditional fiat, financial crypto theft may be easier to trace. The advantages of crypto transactions are that they have a digital footprint, for the most part, are permanently stored on nodes, and can be retraced by law enforcement in that manner. Financial theft that can otherwise take years to track can therefore be pursued and resolved by law enforcement in a matter of weeks or months, as evidenced by the infamous Twitter hack for Bitcoins that happened this year. It only took three months for authorities to clamp down on the culprits.

Tokenization will bring desirable stability to emerging markets

One of the biggest challenges emerging markets face is volatility. Fueled by political and economic instability, dependency on a limited number of industries, and constraints on market accessibility, these matters are exacerbated by a bad or nonexistent regulatory framework. While it doesn’t appear that many of these elements will change anytime soon, there are financial and technological implementations that can be introduced to provide stability. Tokenization — a relatively novel, blockchain-based, cryptographic ratification of assets — can be the vehicle that empowers this vision to be realized. Essential to a successful, mature market is more movement of assets. In other words, markets need liquidity, which is partly derived from participation. If not enough people are participating, the odds are low that a security will be liquid. As a result, the market remains more stagnant, investors see higher risk, and economies then become dependent on a few strong industries to compensate, while both foreign and domestic actors are unable to generate wealth from within by other market means. In the end, more participation would lead to higher liquidity, but political-economic systems can impede progress. Many emerging markets, although not all, also operate under political regimes that hinder financial participation, with swaths of the population unable to access a bank or an investing account remotely, limiting social mobility and liquidity as well as increasing the wealth gap. In some oligarchies, which comprise a sizable portion of emerging markets, the lack of accessibility to finance can be purposeful, with the intent to limit political advancement and maintain political oppression. In other cases, socioeconomic mobility is not technically restrained, but domestic issues limit opportunities for the more impoverished in one way or another. Blockchain technology has spurred the potential for a real financial revolution, though, with more potential participation and opportunity. The underlying concept for blockchain’s development stems from a familiar system and feeling that people in emerging markets face: centralized power and not much to do about it. The idea was to take the centralized power out of the hands of the wealthy Wall Street few, whose own whims had global market implications. Rather than route the markets through legacy financial institutions, blockchain would route them through the people, thereby cutting out the intermediary and empowering individual people. Ultimately, empowering the people with blockchain-based finance should, theoretically, lead to more accessibility and, subsequently, participation, especially for the unbanked or financially strained. Although the underlying blockchain technology has the power to decentralize finance, it is the digital capsules that run on it called “tokens” that are the real culprit in boosting market participation. Practically speaking, tokens can represent any sort of tradable asset, whether digital or tangible. In a 2018 report, Deloitte strongly voiced its confidence in the true potential of tokenization: “The act of tokenizing assets threatens to disrupt many industries, in particular the financial industry, and those who are not prepared risk being left behind. […] We foresee that tokenization could make the financial industry more accessible, cheaper, faster and easier, thereby possibly unlocking trillions of euros in currently illiquid assets, and vastly increasing the volumes of trades.” These ideas have manifested into a variety of different applications, from securities to assets as unique as art pieces, that have benefitted from the unique capacities of tokenization.


Bitcoin shortage? Pantera thinks market rally driven by PayPal buys

In an investor letter published Nov. 20, the venture firm compared the ongoing bull market to the last time BTC (BTC, +1.40%) rose above $18,000, three years ago. “Previously the friction to buy bitcoin was pretty onerous,” the letter notes, contrasting that difficulty with how e-commerce giant PayPal has now made it easy for millions of users to become potential bitcoin, ether, bitcoin cash (BCH, +1.06%) and litecoin (LTC, +5.01%) buyers. Indeed, all eligible PayPal account holders in the U.S. can now buy, hold and sell those cryptocurrencies – sooner than the payments firm anticipated, due to steep customer interest. Additionally, the firm recently upped its weekly crypto purchase limits to $20,000 from an initial $10,000. “BOOM! The results are already apparent,” Dan Morehead, chief executive and founder of Pantera, wrote in the November letter. “When PayPal went live, volume started exploding.” Pantera claims that PayPal is already buying almost 70% of the new supply of bitcoins. Together with Square’s Cash App routine bitcoin buying, more than 100% of all newly minted bitcoins is accounted for, Pantera alleges. The Bitcoin network issues new BTC on a fixed and predetermined schedule. Only 6.25 new BTCs are mined every 10 minutes, following this year’s “halving,” an amount that will continue to decrease every four years until all 21 million BTC enter circulation. Pantera’s thesis centers around a supply-side understanding of the bitcoin market. The idea is that as the supply of BTC decreases, due to lower mining rewards, the demand naturally increases – leading to an appreciation in price. “When other, larger financial institutions follow [PayPal’s] lead, the supply scarcity will become even more imbalanced. The only way supply and demand equilibrates is at a higher price,” Pantera wrote.


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