Category Archives: Bitcoin

Bloomberg

(Bloomberg) -- Stefan Qin was just 19 when he claimed to have the secret to cryptocurrency trading.Buoyed with youthful confidence, Qin, a self-proclaimed math prodigy from Australia, dropped out of college in 2016 to start a hedge fund in New York he called Virgil Capital. He told potential clients he had developed an algorithm called Tenjin to monitor cryptocurrency exchanges around the world to seize on price fluctuations. A little more than a year after it started, he bragged the fund had returned 500%, a claim that produced a flurry of new money from investors.He became so flush with cash, Qin signed a lease in September 2019 for a $23,000-a-month apartment in 50 West, a 64-story luxury condo building in the financial district with expansive views of lower Manhattan as well as a pool, sauna, steam room, hot tub and golf simulator.In reality, federal prosecutors said, the operation was a lie, essentially a Ponzi scheme that stole about $90 million from more than 100 investors to help pay for Qins lavish lifestyle and personal investments in such high-risk bets as initial coin offerings. At one point, facing client demands for their money, he variously blamed poor cash flow management and loan sharks in China for his troubles. Last week, Qin, now 24 and expressing remorse, pleaded guilty in federal court in Manhattan to a single count of securities fraud.I knew that what I was doing was wrong and illegal, he told U.S. District Judge Valerie E. Caproni, who could sentence him to more than 15 years in prison. I deeply regret my actions and will spend the rest of my life atoning for what I did. I am profoundly sorry for the harm my selfish behavior has caused to my investors who trusted in me, my employees and my family.Eager InvestorsThe case echoes similar cryptocurrency frauds, such as that of BitConnect, promising people double-and triple-digit returns and costing investors billions. Ponzi schemes like that show how investors eager to cash in on a hot market can easily be led astray by promises of large returns. Canadian exchange QuadrigaCX collapsed in 2019 as a result of fraud, causing at least $125 million in losses for 76,000 investors.While regulatory oversight of the cryptocurrency industry is tightening, the sector is littered with inexperienced participants. A number of the 800 or so crypto funds worldwide are run by people with no knowledge of Wall Street or finance, including some college students and recent graduates who launched funds a few years ago.Qins path started in college, too. He had been a math whiz who planned on becoming a physicist, he told a website, DigFin, in a profile published in December, just a week before regulators closed in on him. He described himself on his LinkedIn page as a quant with a deep interest and understanding in blockchain technology.In 2016, he won acceptance into a program for high-potential entrepreneurs at the University of New South Wales in Sydney with a proposal to use blockchain technology to speed up foreign exchange transactions. He also attended the Minerva Schools, a mostly online college based in San Francisco, from August 2016 through December 2017, the school confirmed.Crypto BugHe got the crypto bug after an internship with a firm in China, he told DigFin. His task had been to build a platform between two venues, one in China and the other in the U.S., to allow the firm to arbitrage cryptocurrencies.Convinced he had happened upon a business, Qin moved to New York to found Virgil Capital. His strategy, he told investors, would be to exploit the tendency of cryptocurrencies to trade at different prices at various exchanges. He would be market-neutral, meaning that the firms funds wouldnt be exposed to price movements.And unlike other hedge funds, he told DigFin, Virgil wouldnt charge management fees, taking only fees based on the firms performance. We never try to make easy money, Qin said.By his telling, Virgil got off to a fast start, claiming 500% returns in 2017, which brought in more investors eager to participate. A marketing brochure boasted of 10% monthly returns -- or 2,811% over a three-year period ending in August 2019, legal filings show.His assets got an extra jolt after the Wall Street Journal profiled him in a February 2018 story that touted his skill at arbitraging cryptocurrency. Virgil experienced substantial growth as new investors flocked to the fund, prosecutors said.Missing AssetsThe first cracks appeared last summer. Some investors were becoming increasingly upset about missing assets and incomplete transfers, the former head of investor relations, Melissa Fox Murphy, said in a court declaration. (She left the firm in December.) The complaints grew.It is now MID DECEMBER and my MILLION DOLLARS IS NOWHERE TO BE SEEN, wrote one investor, whose name was blacked out in court documents. Its a disgrace the way you guys are treating one of your earliest and largest investors.Around the same time, nine investors with $3.5 million in funds asked for redemptions from the firms flagship Virgil Sigma Fund LP, according to prosecutors. But there was no money to transfer. Qin had drained the Sigma Fund of its assets. The funds balances were fabricated.Instead of trading at 39 exchanges around the world, as he had claimed, Qin spent investor money on personal expenses and to invest in other undisclosed high-risk investments, including initial coin offerings, prosecutors said.So Qin tried to stall. He convinced investors instead to transfer their interests into his VQR Multistrategy Fund, another cryptocurrency fund he started in February 2020 that used a variety of trading strategies -- and still had assets.Loan SharksHe also sought to withdraw $1.7 million from the VQR fund, but that aroused suspicions from the head trader, Antonio Hallak. In a phone call Hallak recorded in December, Qin said he needed the money to repay loan sharks in China that he had borrowed from to start his business, according to court filings in a lawsuit filed by the Securities and Exchange Commission. He said the loan sharks might do anything to collect on the debt and that he had a liquidity issue that prevented him from repaying them.I just had such poor cash flow management to be honest with you, Qin told Hallak. I dont have money right now dude. Its so sad.When the trader balked at the withdrawal, Qin attempted to take over the reins of VQRs accounts. But by now the SEC was involved. It got cryptocurrency exchanges to put a hold on VQRs remaining assets and, a week later, filed suit.Asset RecoveryBy the end, Qin had drained virtually all of the money that was in the Sigma Fund. A court-appointed receiver who is overseeing the fund is looking to recover assets for investors, said Nicholas Biase, a spokesman for Manhattan U.S. Attorney Audrey Strauss. About $24 million in assets in the VQR fund was frozen and should be available to disperse, he said.Stefan He Qin drained almost all of the assets from the $90 million cryptocurrency fund he owned, stealing investors money, spending it on indulgences and speculative personal investments, and lying to investors about the performance of the fund and what he had done with their money, Strauss said in a statement.In South Korea when he learned of the probe, Qin agreed to fly back to the U.S., prosecutors said. He surrendered to authorities on Feb. 4, pleaded guilty the same day before Caproni, and was freed on a $50,000 bond pending his sentencing, scheduled for May 20. While the maximum statutory penalty calls for 20 years in prison, as part of a plea deal, prosecutors agreed that he should get 151 to 188 months behind bars under federal sentencing guidelines and a fine of up to $350,000.That fate is a far cry from the career his parents had envisioned for him -- a physicist, he had told DigFin. They werent too happy when I told them I had quit uni to do this crypto thing. Who knows, maybe someday Ill complete my degree. But what I really want to do is trade crypto.The case is U.S. v Qin, 21-cr-75, U.S. District Court, Southern District of New York (Manhattan)(Updates with comment from prosecutor and case caption)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.2021 Bloomberg L.P.

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The Grayscale Bitcoin Trust: What It Is and How It Works - Yahoo Finance

JERSEY CITY, N.J., Feb. 9, 2021 /PRNewswire/ --BlockFiInc. ("BlockFi"), a financial services company dedicated to building a bridge between cryptocurrencies and traditional financial and wealth management products, today announced the launch of the BlockFi Bitcoin Trust ("the Trust"), an investment vehicle for investors seeking access to Bitcoin ("BTC"), the leading digital asset. The entry of the Trust into the market will provide investors with an alternative, more cost-effective entry point to the crypto market compared with similar existing products.

Investment trusts are among the most popular methods for major institutions to invest in BTC. The Trust will issue shares via private placements, and the investment objective of the Trust is for the value of the shares to reflect the value of BTC held by the Trust less the Trust's expenses and other liabilities. Trust shares will be available to global institutions and other qualified investors in the near-term, and later this eligibility will be expanded to include accredited individual investors in the U.S.

Initial subscribers to the Trust are expected to include BlockFi and select institutional investors, using BTC to subscribe. Upon the expiration of an initial lockup, shares may become available for secondary investment on a wide range of recognized brokerage platforms.

As sponsor of the Trust, BlockFi Management LLC, a wholly owned subsidiary of BlockFi, will charge a sponsor fee of 1.75%. BTC held in the Trust will be custodied by Fidelity Digital Assets Services, LLC ("Fidelity Digital Assets") through an enterprise-grade custody solution purpose-built for institutional investments. Davis Polk & Wardwell LLP is legal counsel to BlockFi in connection with the Trust, with Coin Metrics Inc. providing index and pricing data and Grant Thornton LLP serving as financial statement auditor.

"Given the level of institutional activity in recent months and demand for new, professional-grade investment vehicles, the timing of BlockFi Bitcoin Trust is ideal," said Zac Prince, Founder & CEO of BlockFi. "As we work to broaden the availability of this vehicle to retail brokerages, we expect this product will facilitate greater investments in digital assets - at the core of BlockFi's mission in bridging crypto with traditional finance."

"We believe a trust structure for this product is beneficial for investors and will play an important role in improving access in this nascent market," added Yevgeniy Feldman, Vice President for Institutional Services at BlockFi. "The BlockFi Bitcoin Trust can more easily meet rapidly growing demands from the public to invest in digital assets, and our decision to custody the Trust's holdings with Fidelity Digital Assets will help give shareholders peace-of-mind in the security of their investments."

"The digital asset ecosystem has grown significantly in recent years, creating an even more robust marketplace for investors and accelerating demand among institutions," said Christine Sandler, Head of Sales and Marketing for Fidelity Digital Assets. "An increasingly wide range of investors seeking access to Bitcoin has emphasized the need for a more diversified set of products offering exposure to the asset. Like BlockFi, we believe pairing innovative products with institutional-grade solutions that provide high caliber security will help enable broader adoption of digital assets."

For additional information, interested investors can visit: https://www.BlockFiTrust.com

Legal Disclaimers:

Investors should carefully consider the investment objectives and risks as well as fees and expenses of the Trust before investing. More information can be found in the Trust's Private Placement Memorandum. Read the Private Placement Memorandum carefully before investing.

Nothing contained in this announcement should be construed as a solicitation of an offer to buy or offer, or recommendation, to acquire or dispose of any security, commodity, investment or to engage in any other transaction.The information provided in this announcement is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. This announcement is not directed to any person in any jurisdiction where the publication or availability of the announcement is prohibited, by reason of that person's nationality, residence or otherwise.

Investments in the Trust involve risk and the value of the Trust's shares could go down.

Neither BlockFi nor any of its affiliates or representatives provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Media Contact for BlockFi:

Ryan DicovitskyDukas Linden Public Relations[emailprotected]

About BlockFi

BlockFi is a new breed of financial services company. Founded in 2017 by Zac Prince and Flori Marquez, BlockFi is building a bridge between cryptocurrencies and traditional financial and wealth management products to advance the overall digital asset ecosystem for individual and institutional investors. BlockFi's platform manages more than $8 billion in assets and has generated tens of millions in interest for clients. The company, headquartered in New Jersey with offices around the globe, continues to expand its presence in the United States and internationally.

About Fidelity Digital Assets

Fidelity Digital Assets offers a full-service enterprise-grade platform for securing, trading and supporting digital assets. A business of Fidelity Investments, one of the world's largest and most diversified financial services providers with more than $9.8 trillion in client assets under administration as of December 31, 2020, Fidelity Digital Assets combines the operational and technical capabilities of the broader Fidelity organization with dedicated blockchain expertise to deliver a completely new offering for institutional investors. Learn more at http://fidelitydigitalassets.com.

Fidelity Digital AssetsSM("Fidelity") is an independent company, unaffiliated with BlockFi. Fidelity is a service provider to BlockFi. There is no form of legal partnership agency affiliation, or similar relationship between the BlockFi and Fidelity, nor is such a relationship created or implied by the information herein.

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BlockFi Launches the BlockFi Bitcoin Trust - PRNewswire - PRNewswire

The wonderful thing about bitcoin is many of its apparent benefits, like the ability to be anonymously owned and securely transferred, are also the things that often create situations like this: police in Germany have seized more than 50 million ($60 million) in bitcoin, but they cant access any of it because, as Reuters reports, the person they took it from wont tell them his password.

The man in question was sentenced and has served his time in jail for covertly installing bitcoin mining software on peoples computers, but throughout the entire process, he never shared a peep about how German authorities should get in. We asked him but he didnt say is the explanation Reuters was offered by a prosecutor. It presents a big, and probably obvious, question: can you really seize something, particularly money, that you cant access or use?

The even more glaring issue is how often passwords, PINs, and their collective absence pop up in stories about bitcoin, illegal or otherwise. There was a recent story in The New York Times about a programmer with his own bitcoin fortune locked away in a secure hard drive that revealed an amazing statistic: around 20 percent of bitcoin in existence today (totaling around $140 billion) are completely lost or locked up in wallets with lost passwords, meaning theyre completely inaccessible.

So maybe this German bitcoin enthusiast is sticking it to the people who had him locked up, or maybe hes simply forgotten his password. Reuters reports that prosecutors have ensured the man cannot access [his] largesse but if they cant access it either, I think its safe to say that pile of lost bitcoin just got a bit larger.

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A German man is keeping $60 million in bitcoin from police by never revealing his password - The Verge

It was a Saturday morning and Adam was feeling bold.

He'd made thousands of dollars on a single trade the night before, and was feeling lucky. But Adam wasn't trading on the Dow, pumping GameStop stocks or investing in a startup. He was about to sink $2,500 into a cryptocurrency called DeTrade.

It seemed safe. Adam had investigated the coin's development team on LinkedIn, and watched a video of its CEO laying out a roadmap for the coin's future. A newswire piece published on Yahoo touted DeTrade's technology as advanced enough to disrupt cryptocurrency.

Thanks to Bitcoin hitting an all-time high valuation of $40,000, almost tripling its value in two months, cryptocurrency is very much back in the zeitgeist. But while for many people Bitcoin is synonymous with cryptocurrency, it's not what crypto traders like Adam are interested in. Beneath Bitcoin and Ethereum, the second-best-known currency, is a strange underworld of different cryptocurrencies.

Called altcoins or, sometimes, "shitcoins," these are essentially penny-stock cryptocurrencies. And they're crazy. Bitcoin tripled its value recently, but many altcoins explode 30, 40 or 50 times over within days. Arguably the most famous is Dogecoin, which recently shot up thanks to a potent combination of Reddit and Elon Musk, but there are thousands of altcoins, forming an Indiana Jones-esque Cave of Crypto Wonders. The spoils can be life-changing, but there are traps around each corner. Fortunes can be made and lost in seconds. Cons and fraudsters are everywhere, with traders vulnerable to scams at each step of the process.

Case in point: Adam's foray into DeTrade. The touted technology behind it wasn't real. Nothing about the project was. DeTrade, for all intents and purposes, didn't exist. The LinkedIn profiles were fake, and the video of its CEO was a deepfake created with AI. It was a scam. Those behind it, operating in the unregulated world of crypto, vanished. Adam lost his $2,500, but he got off easy. In total, those behind the scam took in around $2 million.

Just a regular day playing with altcoins, says Adam.

Adam got into cryptocurrency in September. When we spoke, it felt like he'd crammed years of trading into two months. He put in $4,000 and lost it in days. Then he turned $3,000 into $90,000. After withdrawing a third of that and then losing just over another third, he now had around $20,000 in crypto.

Adam had seen some tempestuous trading in recent weeks. One person managed to flip $2,000 into over $40,000 on two different occasions, but lost it all to scams both times. Another put $150 in a coin and doubled his money in 15 minutes. Decent result, but his $150 would've turned into $28,000 if he'd waited only one more day.

But despite the community's enthusiasm, there's a small problem. Right now cryptocurrencies don't really do anything.

Bitcoin nearly tripled in price, from $15,000 to over $40,000, in two months. If you invested $1,000 in early November, you could have taken out $2,600 two months later.

Investing in a stock means ascertaining its value -- based on factors like competition, risks and, above all, profit generation -- and then putting money into ones that are undervalued. Once the market realizes the value of that stock, you see gains.

Speculation is naturally part of this: The Dot-com Bubble was all about pouring money into "pre-profit" companies in the hopes they'd make money someday. Cryptocurrency, however, takes speculation into the stratosphere. For the most part, cryptocurrency is pure speculation. People are investing in technology that produces nothing, and has no practical application. As I write this, a coin called Meme is selling for $517. That's a little over four times the price of an Apple share. Doge, a coin marketed after the internet slang for "dog,"doubled in value earlier this month after a pornstar tweeted about it. After the price settled, it then rocketed once more when Reddit wanted to make it the GameStop of cryptocurrency.

This disconnect between value and purpose has made many experts understandably skeptical.

David Gerard is one such skeptic. He became interested in Bitcoin in 2013, when it first hit $1,000, and has since written two books on cryptocurrency. His most recent focuses on Libra, Facebook's ill-fated attempt at digital currency.

"The driving force of Bitcoin and cryptocurrency is nothing to do with technology," he told me during a Skype call. "It's all about the chance that people might get rich for free. All of this is about the psychology of get-rich-quick schemes."

In his years working as an IT systems administrator, Gerard's job has been to examine new technology and discern what's useful and what's not. Cryptocurrency, he told me, is not.

"Bitcoin burns a whole country's worth of electricity for the most inefficient payment network in human history," he said.

After launching at around $8 in August, the obscure Meme coin briefly reached a valuation of over $1,750 in September. If, with fantastic luck, you invested $1,000 at $8 and sold at $1,750, you'd be up $217,000. This is the allure of "shitcoins."

That's no exaggeration. Cryptocurrencies are mined using powerful computers, and many enterprising types put together farms of computers used solely for the purpose of mining Bitcoin. As a result, Bitcoin is responsible for more energy consumption than Switzerland.

Gerard says the only thing you can do with Bitcoin is buy it and sell it. He's even harsher on altcoins.

"They're absolutely useless objects. Even by the standards of Bitcoin, altcoins are useless," he said.

This is precisely what makes them so fascinating. Seemingly, all they can do is get internet punters to bet on their success. But this enables average people to become rich. That Meme coin I mentioned before? It was listed at $2.72 and a month later hit an all-time-high price of over $2,000.

Imagine becoming a millionaire from a joke internet coin.

Crypto Spider has made millions with altcoins. Crypto Spider isn't his real name. Like most people in the cryptocurrency community, he goes by a pseudonym.

He's gained renown in some Telegram groups over the past few months thanks to a "2K to 1M" challenge, where he endeavored to see how quickly, and with how few trades, he could turn the first number into the second. In cryptocurrency, you can follow someone's portfolio if you have their wallet number, so the community was able to watch this challenge play out in real time.

Within two months, that $2,000 was over $2 million. Much of that money was made off one trade: He chucked $50,000 into a project which, in the space of around a week, magnified 35 times in value, netting him $1.75 million.

"You won't ever see that type of explosive growth if you don't trade in altcoins," he told me, though he also said "95% of these coins are going to be nonexistent in the future."

Like Adam, Crypto Spider has no background in finance or trading. He lists college courses in game theory, basic algorithmics and some economics as useful to his crypto exploits -- but in essence he's a self-taught amateur. He declined to tell me his specific age, only that he was "20ish" when he first got into cryptocurrency in 2017.

He admits he was attracted by the "pretty numbers," by seeing coins magnify in value 30, 40 and 50 times within a short period. He was enthusiastic enough to start a university club around cryptocurrencies, and how they'd be used in the future.

Crypto Spider says cryptocurrency will play a "major part in the future of finance," and speaks with the passion of a believer. He breathlessly transitions from how cryptocurrency is a part of the internet's evolution to the possible use cases of blockchain, the technology behind Bitcoin, in the next 10 years. But despite his enthusiasm, I couldn't help but notice how chunks of what he said echoed Gerard.

Cryptocurrencies are mined using powerful computers. More emissions are produced by global Bitcoin miners than by the entire country of Switzerland.

For one thing, he looks back at all the projects he was excited about in 2017 and realizes most were almost entirely vaporware, technology that's advertised but never delivered.

Gerard calls the cryptocurrency community a pool of scammers. Spider notes that people often invest in altcoins they know don't have a function, because there's enough hype around the project to make money. "It's a bubble," he said, "we're literally swapping money from each other. I somehow was able to game all the other people."

Spider says his performance is 60% luck. He first approached cryptocurrnecy trading with the mentality of, "I'm young, I'm dumb, I can lose all my money and it'll be OK."

Again, it reminded me of something Gerard said: "If you're rich enough that your money is your own problem, fine. If you know zero is a number your investment could go to, fine."

"But a lot of people are being ripped off, and that's really bad."

People really are getting ripped off. Difficult to regulate and subsisting largely on hype, cryptocurrencies are particularly prone to scams.

Take OneCoin, a company that, through a presale for a cryptocurrency that didn't exist, stole $4 billion from people around the world before its founder disappeared. Then there's BitConnect, a coin that reached a $2.6 billion valuation by promising a 1% return on investment every day. It was eventually designated a Ponzi scheme by various authorities around the globe, causing it to lose 96% of its value before getting shut down months later.

Those are two of the biggest instances of crypto-fraud. But millions of dollars are scammed from cryptocurrency markets every day in less dramatic ways. Coins are suddenly discontinued, with owners taking all the money with them in what the community calls "rug pulls." Some have investment contracts, ignored like terms-of-service agreements, that prohibit you from taking your money out of a project. Other times, entire cryptocurrency exchanges -- which sell coins like a stock exchange sells stocks -- vanish.

"I think I've been scammed over 100 times," Crypto Spider said, adding that he lost $250,000 through fraud in December. "Who knows who creates these projects. A lot of people are taking on pseudonyms, because they're almost all money grabs."

But the deepfake used to scam $2 million adds a new vector. Coming into wider use in recent years, deepfakes are mostly used for pornographic purposes, but as the DeTrade scam shows, deepfakes can also be used in financial scams.

OneCoin founder Ruja Ignatova at an event for the "revolutionary" cryptocurrency. Ignatova disappeared around the time OneCoin was discovered to be a fraud: The cryptocurrency the company sold didn't actually exist. It's reported to have scammed over $4 billion from people around the world. Ignatova has yet to be found.

Gerard says he's never seen a deepfake used as part of a scam before. Crypto Spider says he's seen it just once.

"We didn't have that problem in 2017, where people would use deepfakes and rug pull like this," he said. "The internet is evolving, but the scammers are also evolving."

Deepfake technology "is being democratized, and that may not be a good thing," said Julie Inman-Grant. Now commissioner of the Australian government's eSafety Commission, Inman-Grant formerly led public policy teams at Microsoft, Adobe and Twitter.

"This kind of takes the art out of social engineering," she explained, referring to the techniques usually used by scammers to get you to click a fraudulent link or hand over credit card details. "If they're delivering a video of someone you respect and you really have no way of telling by the naked eye or ear if it's fake or not, the potential for misuse could be devastating."

Ironically, it's blockchain, the behind-the-scenes technology, that could be the solution to the burgeoning deepfake problem. In cryptocurrency, the blockchain is an unalterable ledger that tracks every transaction. Once it's on the ledger, it can't be altered. That same technology can be used to track anything -- like the creation and distribution of a video, from studio to iPhone screen. There are already startups working toward this, like Truepic.

When I asked about blockchain's ability to neutralize deepfakes, Inman-Grant wasn't entirely optimistic.

"It's definitely an arms race, but it's not an arms race we're winning right now."

When Bitcoin hit $40,000 in December, it was confirmation to enthusiasts that cryptocurrency is the future. For skeptics, a higher peak just means a more precipitous fall.

"I think they'll become increasingly regulated and less and less interesting," Gerard said of cryptocurrency. That means less of the "pretty numbers" Crypto Spider was attracted to, but hopefully fewer scams.

For Adam, DeTrade actually had a happy ending. One aggrieved victim of the scam analyzed the metadata of the deepfake, which he used to track down the perpetrators. After some naming and shaming across Telegram, the money was returned.

That unexpected $2,500 return was a big deal, equivalent to a few weeks pay. Good timing too: By the time Adam got it, a bad trade saw his crypto portfolio diminish from $10,000 to $2,000.

Just another day trading altcoins, Adam told me.

Correction, 1:30 p.m. PT:Removed incorrect statement that Netflix had yet to turn a profit.

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Forget Bitcoin: Inside the insane world of altcoin cryptocurrency trading - CNET

Ethereum pauses at record high, bitcoin's rally stalls, DOGE Moons

Ether (ETH) prices were lower after surging 10% on Wednesday to a new record, climbing past $1,600 for the first time.

The recent gains appeared driven by signs of growth on the cryptocurrencys underlying Ethereum blockchain network, as well as interest from institutional investors starting to venture beyond bitcoin, the oldest and largest cryptocurrency.

Ethereum is in such high demand because the asset is undergoing changes to make it even more decentralized and even more secure, said Simon Peters, an analyst for the trading platform eToro. This is attracting buyers from both the institutional and retail world.

Bitcoin (BTC) appeared to lose momentum after its steady rise over the past week from $30,000 to about $38,000.

The price level of $38,190 proved tough to pierce, according to Matt Blom, head of sales and trading for the cryptocurrency exchange firm EQUOS.

Once it hit that level, prices seem to struggle and actually just retraced lower, overtaken by massive sell orders on both spot and derivatives exchanges, Blom wrote. Stagnation in the $34K-$38K range probably cant be avoided, and eager bulls might be cooled down by relentless sellers before BTC progresses higher again.

And dogecoin (DOGE)? The digital token launched in 2013 as little more than a joke is up about 50% in just the past two days, for a market value of more than $6 billion. Elon Musk, the electric-vehicle and private-spaceflight entrepreneur whos also reportedly the worlds richest man, tweeted about it early Thursday. There was also heavy chatter about the token on social media forums, and probably a lot of speculation about the chatter.

In traditional markets, the Reddit-fueled whiplash in shares of meme stocks like GameStop (GME) appeared to subside, but the regulatory fallout might just be getting going: U.S. Congresswoman Maxine Waters, who heads the House of Representatives Financial Services Committee, said Wednesday she wants Reddit user Keith DeepF***ingValue Gill to testify at a Feb. 18 hearing along with executives from the retail trading platform Robinhood and the hedge funds Melvin Capital and Citadel.

Stocks were pointing higher whilegold weakened 1.1% to $1,814 an ounce.

Visa's plans push crypto industry closer to point of no return

With 3.3 billion payment cards in use, Visa (V) is a household name. Its also one of the biggest players in the global financial infrastructure, processing some 188.1 billion transactions a year.

Thats why it was such big news for the cryptocurrency industry on Wednesday when Visa announced it is piloting a new program that will allow banks to offer bitcoin services. Previously, Visa had been focused on helping crypto companies issue bank cards and has partnered with 35 crypto firms to date, but this is the first time the company has offered crypto services to banks.

The market impact? Edward Moya, senior market analyst for the brokerage Oanda, wrote Wednesday the news may have helped to push up bitcoins price. Bitcoins acceptance continues to improve, Moya wrote.

Another takeaway might be that Visas splashy move could make it harder for U.S. lawmakers or regulators to thwart bitcoins growth. Ray Dalio, of the giant hedge fund Bridgewater, and former Goldman Sachs CEO Lloyd Blankfein have suggested that authorities might look to crack down on the fast-emerging cryptocurrency if it really starts to take off.

Think of the operational, technological and marketing expenses involved in Visas new project. The chances are low that a big, heavily regulated financial company would push forward without some assurances that theres no turning back from crypto. Or that Visa would make this move before heavy consultations with key corporate customers, including big credit-card lenders such as JPMorgan Chase, Citigroup and Bank of America.

The more investments established companies make in the business, the less likely authorities are to force write-offs.

Ether rally spreads beyond ether. Dogecoin has nothing to do with it.

The average fee for sending a transaction on the Ethereum blockchain has climbed above $20 for the first time, in a sign of just how popular the network is becoming.

Its not just ether rallying to a new all-time high this week: Also rising were major digital tokens from the realm of decentralized finance, or DeFi, where entrepreneurs are building software-automated versions of banks and trading platforms atop decentralized, Internet-based networks, mainly the Ethereum blockchain, CoinDesks Muyao Shen reported Wednesday.

DeFi tokens including price-feed-provider Chainlinks LINK, the decentralized exchange SushiSwaps SUSHI and the DeFi lender Aaves AAVE have logged new historic highs.

Prices for SUSHI, whose launch last year met with immediate controversy, have quadrupled already in 2021 amid bullish speculation over the future of DeFi. Based on data from the analysis firm Messari, thats the second-highest gain among digital assets with a market capitalization of at least $1 billion after dogecoin (DOGE), which offers little more than meme-y yuks to its adoring fans. (Dogecoin has nearly sextupled this year, for those keeping track.)

Also getting a lift were prices for cryptocurrencies associated with blockchains that are competing with Ethereum to become dominant platforms for decentralized computer applications. Sometimes referred to colloquially as Ethereum killers, they include Polkadots DOT token and Solanas SOL.

Ether made a significant push, and that is causing projects linked to the DeFi space to rise, said Hunain Naseer, senior content editor at crypto exchange OKEXs research unit, OKEx Insights.

One downside from the flurry of activity on the Ethereum blockchain might be elevated fees for sending transactions over the network, since the rate paid rises with increasing congestion. As reported by CoinDesks Will Foxley, the average transaction fee early Thursday climbed above $20 for the first time, reflecting growing demand for tokens launched atop the Ethereum blockchain. Those include the dollar-linked digital tokens known as stablecoins as well as DeFi-related tokens.

A catalyst for further price action might come from the Chicago-based CMEs launch of a new futures contract on ether next week. The listing should give more institutional investors a way to bet on the second-largest cryptocurrency after they took positions in bitcoinlast year.

The institutions are buying ether, Ryan Sean Adams, founder of newsletter Bankless,wrote in a tweet.And theyre just getting started.

Bond traders are increasing their expectations for inflation

So-called breakeven inflation rates, or the pace of price increases implied by U.S. government bond markets, have reached an eight-year high and are climbing fast.

The Federal Reserves mantra over the past year as the coronavirus wreaked a devastating toll on the economy is that theres no need to worry about inflation; in fact, as Chair Jerome Powell was quick to point out, recessions often lead to deflation because flagging consumer demand can prompt businesses to cut prices while elevated unemployment mutes upward pressures on wages.

Despite the assurances, big investors and corporations have piled into bitcoin over the past year, betting the cryptocurrency, whose supply is limited under the blockchain networks underlying programming, could serve as a hedge against loose monetary policy, aka near-zero interest rates and trillions of dollars of money printing.

But now there are signs another key market segment might be getting more concerned about inflation: bond traders.

The five-year breakeven inflation rate, which can be derived by examining the yields on various U.S. government bonds, is now signaling a 2.2% average rate over the next five years. Thats the highest in eight years, and its also above the Feds long-term target of 2%. Whats more, the figure appears to be rising fast: As recently as September, the breakeven inflation rate was below 1.5%.

As noted this week by First Mover, economists are already starting to sketch out how fast the economy might heat up as more people get vaccines and consumers start to get their confidence back. Bank of America estimates theres some $1.6 trillion of excess savings on consumer balance sheets, which could quickly translate to pent-up spending demand. And the economy has yet to feel the impact of the stimulus package now being debated in U.S. Congress, likely to total at least $1 trillion.

The national employment situation will become clearer on Friday when the U.S. Labor Departments Bureau of Labor Statistics releases its jobs report for the month of January. On Wednesday, Pantheon, a macroeconomic forecasting firm, revised its projection to an increase of 200,000; previously the firm was expecting a decline of 100,000 in the nonfarm payrolls. The average expectation of Wall Street economists is for an increase of 100,000, according to Bloomberg. (U.S. jobless claims were lower than expected last week, at 779,000, according to a report early Thursday.)

The reflationary trends we are seeing in markets are likely to continue throughout 2021, according to a report Wednesday from the Wells Fargo Investment Institute.

Bitcoin Watch: Increasing signs of demand from institutional investors

Although bitcoin has failed to sustainably push past the psychologically important $40,000 price level, signs continue to mount of growing interest in the cryptocurrency from big institutional buyers.

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Ethereum, DOGE on Own Journeys as Inflation Bets Fuel Bitcoin - CoinDesk - CoinDesk

BitMEX incorporated in the Seychelles, a move that allowed the start-up to move fast and minimize its tax exposure while Western governments struggled to even understandmuch less create a way to governthe newfangled financial instruments and market that BitMEX was building. In a 2015 investor presentation, Hayes made the point that Bitcoin derivatives are completely unregulated worldwide. Regulators are still trying to tackle the exchanging of fiat and Bitcoin.

That might have been magical thinking. There were no rules in the beginning, and [governments] werent interested in articulating the rules, Chu remembered. You would go to [them] and ask for guidance and get nothing. Is this illegal? No answer. It was only after the fact, he said, that cryptic strictures emerged to police cryptousually in response to some infraction that had not been previously articulated by regulators. But where Chu saw chaos, Hayes saw opportunity.

For nearly a year after its launch, BitMEXs business was flat. Some days we had no trades, Hayes remembered. No one bought or sold. The fees from trading on the platform barely covered the server bill, which Reed paid with his credit card. While Hayes and Delo stayed in Hong Kong, Reed got married and moved back to the States, settling in Milwaukee, where he operated out of coworking space. The time zone difference, however, worked in their favor: Reed and Delo, in signature start-up fashion, took turns being on call, addressing customer support issues 24/7.

The companys fortunes changed when, in late 2015, it started offering customers 100xfive times as much leverage as its closest competitor. Political volatility the following year, with Brexit and the election of Donald Trump, increased cryptos trading volume. Come 2017, BitMEX had to bring on 30 employees to cope with the explosion in trading. The firm moved into new office space, which it would soon outgrow.

By 2018, BitMEX had become a high-stakes bazaar, moving billions every day. During one of our meetings, Hayes commented, We are the biggest trading platform in the world, by volume. Thats anyone who trades a crypto product. BitMEX, he said, was one of the most liquid exchange[s] in the world, regardless of asset class. By that measure it was in the same league as the NASDAQ as well as the New York, London, and Tokyo stock exchanges. Within four short years Hayess scrappy casino had become, in gambling terms, the house. (Since the indictment was unsealed in October, BitMEX has taken a huge hit; its market share and trading volume have dropped precipitously.)

In May 2018, on the opening day of Consensusthe crypto worlds equivalent of the Consumer Electronics ShowHayes pulled up to the Hilton in midtown Manhattan in an orange Lamborghini and tweeted: Did you see my ride today at #Consensus2018 ?

A close friend insisted he was simply lampooning the thousands of attendees gathered inside the hotelinvestors who talked a big game about cashing in on crypto, but who had really only succeeded in burning through millions in venture capital on harebrained schemes and ICOs (initial coin offerings). Still, looking back, the Lambo gambit might well have been the moment, more than any other, when Hayes painted a bulls-eye on his back.

True, the firms partners had differing approaches to their images and their booming business. Hayes, who didnt mind ruffling feathers, reveled in the role of financial renegade. Sam Reed kept an extremely low profile, a secret billionaire (on paper) walking the streets of Milwaukee. Ben Delo, however, seemed to hunger for mainstream acceptance. When BitMEX was declared the worlds largest cryptocurrency exchange in 2018, a string of British newspapers dubbed him the U.K.s youngest self-made billionaire. That October he donated 5 million to Oxfords Worcester College and a few months later signed the Giving Pledge, designed by Bill and Melinda Gates and Warren Buffett as an open invitation for billionaires...to publicly commit to giving the majority of their wealth to philanthropy. In a letter explaining his decision, he wrote, As a schoolboy in Britain aged 16, I was asked to list my ambitions for the future. I answered concisely: Computer programmer. Internet entrepreneur. Millionaire. I have been incredibly fortunate to exceed those goals, and Im grateful to be in a position to sign this pledge.

Two years ago BitMEX leased the 45th floor of Cheung Kong Center, the most expensive real estate in Hong Kong and home to Goldman Sachs, Barclays, Bloomberg, and Bank of America. Hayes, Delo, and Reed were literally moving in on the establishment. But ever eager to make a statement, BitMEX kitted out its office with an accessory none of those stodgy legacy companies had: a large aquarium inhabited, appropriately enough, by live sharks.

By the summer of 2019, the amount of money moving through BitMEX was staggering. On June 27, the company announced it had set a new daily record, trading $16 billion. Two days later Hayes tweeted: One Trillion Dollars traded in a year; the stats dont lie. BitMEX aint nothing to fucking [sic] with. @Nouriel Ill see you on Wednesday.

The man he was tweeting at was Nouriel Roubini, a respected NYU economics professorand BitMEXs fiercest critic. Dubbed Dr. Doom, Roubini sat on President Clintons Council of Economic Advisers and served at the Treasury Department, the International Monetary Fund, and the World Bank. In other words, he was about as establishment as Hayes was contrarian. On July 3, the pair faced off onstage at the Asia Blockchain Summit in what was publicized as the Tangle in Taipei, taking their seats as the theme from Rocky blared overhead.

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The Rise and Fall of Bitcoin Billionaire Arthur Hayes - Vanity Fair

ZUG, Switzerland, Feb. 4, 2021 /PRNewswire/ -- Bitcoin Association, the Switzerland-based global industry organisation that works to advance business with the Bitcoin SV blockchain, today announces that it has made a pair of strategic additions to its global team, as it works to improve enterprise awareness and adoption of Bitcoin SV.

Bitcoin Association has hired Lizette Louw as a content marketing specialist and Connor Murray has joined the Bitcoin SV Academy team as a content creator. The announcement concludes a busy week for Bitcoin Association, which on Monday appointed Aaron Zhou as its first China-based technical outreach specialist.

Lizette Louw will be a familiar face for many in the Bitcoin SV ecosystem, having spent the past three years working as a digital marketing and content strategist at Bitstocks, which operates the BSV-based Gravity banking ecosystem app. An experienced content professional, Louw has amassed an extensive portfolio of published work, spanning business, finance and technology publications. Based in Johannesburg, South Africa, in her new role with Bitcoin Association, Louw will develop and implement a range of new inbound marketing initiatives, focused on informing enterprises and mainstream audiences about the benefits of building with the Bitcoin SV blockchain.

Connor Murray joins Bitcoin Association as part of the team working on Bitcoin SV Academy the recently launched, dedicated online education platform for Bitcoin SV. Murray will work as a content creator, sharing his expertise developing applications for and building businesses with Bitcoin SV. In addition to his contributor role with Bitcoin SV Academy, Murray is the co-founder and CEO of britevue a Bitcoin SV-based online consumer reviews platform, which he will continue to lead. Last year, Murray's company received venture funding from noted technology entrepreneur and leading Bitcoin SV supporter, Calvin Ayre.

Bitcoin Association supports Bitcoin SV as the only blockchain protocol which adheres to creator Satoshi Nakamoto's original design and vision for Bitcoin. With the ability to scale unbounded and support huge volumes of transactions, in addition to its micropayment, smart contract, tokenization and data functionalities, Bitcoin SV isquickly becoming the enterprise network of choice for both businesses and developers.

Speaking on today's appointments, Bitcoin Association Founding President Jimmy Nguyen, said:

"As the Bitcoin SV ecosystem continues to grow, so too does the need to bring more experienced professionals into our Association who can help us teach the world that Bitcoin is meant to be a widely used electronic cash system and data network, not a 'digital gold' reserve asset. We're delighted to welcome Lizette, Connor and Aaron to our team each of whom, in addition to their specialist professional skillset, brings with them specific experience working with Bitcoin SV an invaluable combination as we work to educate enterprises about the world's most powerful distributed data ledger for enterprise and online payments system, Bitcoin SV."

Commenting on her appointment, Lizette Louw, said:

"Working in the blockchain and digital asset space for a number of years now, I've found myself increasingly drawn to the potential evident with Bitcoin SV to have a positive impact on both business and individuals. Bitcoin SV offers enterprises a data infrastructure that is far superior to incumbent systems a true value-add, rather than just an expense. I'm excited to work with Bitcoin Association in my new role to help bridge the gap between business and Bitcoin SV technology."

Also commenting, Connor Murray, said:

"Bitcoin is a complex system spanning several different disciplines, that is capable of so much more than most people understand. That's what makes Bitcoin SV Academy such an important initiative, as it helps to introduce new developers, entrepreneurs and investors to the true power of Bitcoin. I've still got a lot to learn myself, but hope to get a little bit closer to mastering Bitcoin each day by sharing my experience and teaching others."

About Bitcoin Association

Bitcoin Associationis theSwitzerland-basedglobal industry organization that works to advance business on the Bitcoin SV blockchain. It brings together essential components of the Bitcoin SV ecosystem enterprises, start-up ventures, developers, merchants, exchanges, service providers, blockchain transaction processors (miners), and others working alongside them, as well as in a representative capacity, to drive further use of the Bitcoin SV blockchain and uptake of the BSV digital currency.

The Association works to build a regulation-friendly ecosystem that fosters lawful conduct while facilitating innovation using all aspects of Bitcoin technology. More than a digital currency and blockchain, Bitcoin is also a network protocol; just like Internet protocol, it is the foundational rule set for an entire data network. The Association supports use of the original Bitcoin protocol to operate the world's single blockchain on Bitcoin SV.

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SOURCE Bitcoin Association

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Bitcoin Association grows global team with new strategic hires to improve enterprise awareness and adoption of Bitcoin SV - PRNewswire

2020 was the year of the digital and online brokers, as retail investors flocked to investing and trading apps.

But this popularity has its challenges. Last week, users from the Reddit forum Wall Street Bets pushed up the price of GameStop and other small-cap stocks that had been heavily shorted by hedge funds. This created extreme volatility in the stocks challenged the capital requirements of many brokers, such as Robinhood.

The cryptocurrency broker Voyager experienced growth in trading grow five times larger in January after witnessing a 371% increase in membership last year, and the expansion isn't stopping, CEO Stephen Ehrlich said.

One of the main drivers has been Bitcoin. As the price surged in December, there was a renewed interest in the asset, which can be bought and sold on the platform.

Read more: 4 heavyweight investing firms answer the 5 most burning bitcoin questions facing investors as the cryptocurrency sees unprecedented volatility

Then late last week, when Robinhood and several other brokers halted trading on specific stocks, retail investors looked to other platforms.

"We saw an amazing influx of customers come to our platform over a 72-hour period," Ehrlich said.

Voyager's goal is to simplify cryptocurrency trading. Retail investors can sign up in three minutes or less. But because of the current influx, there is a waiting list that is moving quickly, Ehrlich said. Investors can then start building out a portfolio from over 50 digital assets.

The platform has a deep pool of liquidity, which makes it easy for investors to trade in and out of cryptocurrencies.

The platform also gained interest as it offered trading in Dogecoin. The Reddit forum Satoshi Street Bets encouraged investors to buy into the asset after Robinhood halted trading.

Read more: Dogecoin soars another 600% as Reddit frenzy pushes the token into the top 10 cryptocurrencies by market cap

Dogecoin is a cryptocurrency that was created as a joke and based on the popular "Doge" meme. Mike Novogratz, a billionaire investor and the founder of a crypto merchant bank, recently predicted the asset would fall to zero in the long run. But it also has some benefits, such as a fast blockchain and no cap on supply.

It's not up to Voyager to decide what investors trade, Ehrlich said, the platform is an agency broker.

"I'll leave the regulators to what the requirements are to do that," Ehrlich said. "I do believe in free and fair markets for all and let them trade whatever the investing public and trading public wants to."

Regulators had to step in with the XRP token created by the firm Ripple Labs. A Securities and Exchange Commission complaint accused Ripple of running a $1.3 billion unregistered offering with its sales of XRP, which the regulator deemed a security and not a cryptocurrency. Ripple has repeatedly denied this is the case.

Read more: Bank of America warns of 3 looming catalysts that could send the bull market crashing in 2021 and shares how to position for the 'big change' as the Wall Street Bets crowd fights against the system

"I think like every other US broker, we all made the safe assessment to follow the SEC guidance at that point in time," Ehrlich said.

There won't be restrictions in trading on the platform, Ehrlich said. And he isn't too worried about tighter restrictions on digital brokerages in the future.

Platforms like Robinhood have played an important role in bringing consumers back to the retail market, Ehrlich said, which had gone "dry" since the financial crisis until between 2014 and 2015.

A fringe event, such as the GameStop trading frenzy, might garner more attention from regulators. But it might also just be a case of applying existing regulation better, without unduly stifling trade, Ehrlich said.

Perhaps Ehrlich is not afraid of regulation because the platform is already publicly traded. It files financial statements every quarter and goes through an audit every year.

It's a lot of hard work, Ehrlich said, but the transparency and process have been a real "value add."

"You can go to a lot of crypto companies today, and you can't see the financials. You don't know if they actually have the assets or not," Ehrlich said. "In our case, it's right there on our balance sheet."

The prospect of other companies, such as Coinbase, going public this year could be a positive for the industry.

Read more: Wall Street's resident IPO expert breaks down the strategy behind her ETF that returned 107% last year, 3 risks to the current IPO boom and 5 offerings to watch this year

"It's not a dark business. It's very much in the light," Ehrlich said.

The firm also aims to be transparent on payments. Many platforms have come under scrutiny for using a payment for order flow to enable zero-commission trading.

"We don't play that game," Ehrlich said. "We make our spread. We're open about it. We're transparent, and that's our model for the foreseeable future."

Voyager earns revenue through a spread. But if the firm beats the price on the trade, it will pass that price improvement back to the customer and take a small part of the savings.

This is the key ingredient, Ehrlich said, about 70% of the time it provides price improvement.

Customers also earn interest on over 20 coins at a time when interest on cash remains stagnant and near zero.

Bitcoin provides interest of 5.5%, while USDC, a stable coin backed to the US dollar that has no fluctuation and no volatility, provides 8.5% interest.

With over 50 assets on the platform, it can be hard to know what to look for as a new investor.

Ehrlich said he didn't tend to pick coins but highlighted four that he liked:

Ehrlich is a big believer in Bitcoin and bullish on the price outlook.

"We are definitely over $100,000 by the end of the year, could be $200,000," Ehrlich said. "But we still see an upward trend. Does that mean it's going to be a straight line up? Absolutely not. There'll be ups and pullbacks and, and we have a lot of customers that like to buy on those dips."

"I think the smart contracts are something that will change a lot of how a lot of businesses move going forward," Ehrlich said.

Ehrlich thinks it's interesting to watch how the asset is more of a trading coin, he said. But some companies are starting to accept Dogecoin for payments, and it does work quicker than Bitcoin, he added.

"If I could put my money in an account and earn 8.5% interest that I know I can convert to $1 whenever I want," Ehrlich said. "That's a pretty compelling story."

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How to trade Dogecoin, Bitcoin: Stephen Ehrlich predictions and crypto strategy - Business Insider

Bitcoins Taproot upgrade is (basically) a shoe-in as Bitcoin stakeholders figure out the best way to bring it online.

Digital signatures are created from the private keys that control bitcoin wallets and are required to approve transactions. Taproot addresses will use Schnorr signatures, rather than Bitcoins current signature algorithm, the elliptic curve digital signature algorithm, or ECDSA for short.

In terms of data and processing, Schnorr signatures are smaller and faster than ECDSA signatures and also have the added benefit of being linear, which means Schnorr-based smart contracts can be optimized for functions that ECDSA signatures cannot.

These differences have made Taproot a highly anticipated upgrade because it will give Bitcoin a boost to transaction privacy and allow for more lightweight and complex smart contracts (an encoded contract with self-executing rules).

The tooling and coding improvements Taproot brings will be largely under the hood and will be a boon to developers. Regular Bitcoin users, however, will also benefit from usability, performance, and privacy improvements to multisignature (multisig) technology, privacy software and even scaling tech like the Lightning Network.

Without Taproot, applying the following upgrades to these softwares would either not be possible or not be as viable.

MuSig2: Boosting privacy and efficiency of multisig transactions

Bitcoin development hub Blockstream is developing a new multisig software, MuSig2, which will make multisig transactions more efficient, cheaper and more private.

Unlike usual Bitcoin wallets, which only require a single signature from a private key, multisig wallets require at least two or more signatures from different private keys to approve a transaction. The idea is to distribute the risk of a wallet among multiple keys and, if needed, multiple parties.

Under the current design with ECDSA contracts, multisig transactions record the signature of each multisig participant individually. Schnorr signatures would allow each signature to be recorded as one signature on the blockchain, making the transactions more lightweight in data, and thus cheaper.

[Taproot] benefits multisig wallets such as Blockstream Green because using MuSig2 is cheaper and more private than current multisig setups, Blockstream researcher and applied cryptographer Jonas Nick told CoinDesk.

The Bitcoin upgrade will also raise the limit on signers a multisig wallet allows from 15 to a much higher number, said Bitcoin developer Chris Belcher.

Schnorr-signature based transactions are more private because, thanks to so-called scriptless scripts, all Taproot transactions have the same digital footprint. That means a single signature transaction and a multisig transaction look the same on the blockchain under Taproots rules.

This privacy improvement spills over into other areas of Bitcoins development, too.

MuSig2 also improves efficiency of multi-party contracts such as Lightning Channels, CoinSwaps or discrete log contracts, and improves the privacy of routing in the Lightning Network by enabling scriptless scripts. This also means that the anonymity set of regular transactions would become larger because, for a blockchain observer, it could just as well be part of a multi-party contract or multisig wallet, Nick said.

CoinSwap: Disguising mixed coin transactions

All of the softwares Nick referenced rely on multisig wallets to bind market participants in cryptographically reinforced rules of engagement called smart contracts.

One of these, the privacy protocol CoinSwap, is widely considered to be the best successor to CoinJoin, currently the most popular software for mixing bitcoins to obscure their transaction history.

One shortcoming of CoinSwaps precursors including CoinJoin is such transactions show up as distinctly different from normal ones. This makes it easier for blockchain analysis to pinpoint CoinJoins on-chain, thwarting any privacy benefits.

According to Belcher, Bitcoins Taproot upgrade will fix this problem.

A good benefit of Taproot is also that it allows scriptless scripts. As you may know, protocols like Lightning Network and CoinSwap depend on so-called hash time locked contracts. Currently these contracts are visible on the blockchain. The thing that scriptless scripts allows is for those contracts to also look exactly the same as a Taproot single-sig transaction.

Point Time Lock Contracts: Making Lightning More Private

As Belcher points out, Bitcoins Lightning Network uses hash time locked contracts (HTLCs) to facilitate transactions. But Schnorr Signatures would pave the way for point time lock contracts (PTLCs), an improvement on HTLCs that allow for more private and efficient smart contracts for Lightning.

The privacy gain comes from a modification to how Lightning Network nodes route transactions. Lightning transactions must be sent directly and peer-to-peer on what are called payment channels. Otherwise, lacking this direct connection, payments must be routed through peers to which both the sender and receiver are connected.

Lightning Network nodes route transactions by passing on a hash of the payment to each node on that payments path. PTLCs alter this hash by adding random info at each hop to make the payment less traceable to any party conducting blockchain surveillance.

Additionally, PTLCs will enable more complex smart contract logic to facilitate unprecedented blockchain escrow conditions and to improve oracles. (Since a blockchain cant process data outside of its network, an oracle feeds this data to it.)

Technically, [PTLCs] could be done today with ECDSA but it doesnt have the same proven security, and if it was implemented it would have to be redone once we get Taproot, Ben Carman, a developer at Suredbits, told CoinDesk.

Other Taproot improvements

Carman and his colleagues at Suredbits have been working on discrete log contracts (DLCs), a fairly new smart contract logic for Bitcoin that, while working today, will be more flexible and easier to use when Bitcoins Taproot upgrade kicks in.

Belcher told CoinDesk that Schnorr signatures will also enable batched validation wherein a Bitcoin full node could validate 1,000 Taproot signatures in nearly the same time it takes to validate one [ECDSA] signature. This scaling solution would significantly speed the time it takes a node to verify all signatures in a block.

Additionally, Taproot could use ring signatures to give users the ability to prove they own certain coins without having to reveal the public key associated with those coins.

That means someone could prove that they own a certain coin without revealing which exact coin. For example, it would be possible to prove you own at least 1 BTC (or any amount) by doing a ring signature over all the Taproot [unspent transactions] worth more than 1 BTC, and yet it doesnt actually reveal which is yours, Belcher said.

This has implications particularly for Lightning Network node operators who want to prove payment channel ownership without sacrificing privacy.

Excerpt from:
How Bitcoins Taproot Upgrade Will Improve Its Software Stack - CoinDesk - Coindesk

Crypto enthusiasts often talk about bitcoin as a hedge against inflation. Why?

The argument is that central bank money printing will lead to inflation or the decrease in the value of money over time. Bitcoin, by contrast, has a fixed limit of 21 million coins that can ever be created. This limited supply allows bitcoin to resist inflation.

The COVID-19 pandemic presented the ideal conditions to test this theory once countries across the world began injecting trillions of dollars into their economies. Many countries, including the U.S., printed money to meet stimulus requirements for its citizens.

Yesterday, the chairman of the U.S. Federal Reserve, Jerome Powell said the central bank welcomes higher inflation in 2021 as a sign that the economy is picking up again after the pandemic-slump.

Governments hoped an expansionary monetary policy, whereby central banks increased the amount of money available to people, would keep economies moving amid prolonged shutdowns of certain sections of the economy. By June 2020, stimulus action taken by countries had surpassed $10 trillion, according to a McKinsey Global report. U.S. government-spending alone amounted to $6.5 trillion in 2020, up 48% from the previous year.

Theres a crazy amount of money being printed right now, so the value of money is going down. Assets with limited supply, like bitcoin, real estate or shares/stocks, those price tags are going up, Oki Matsumoto, CEO of Monex Group told CoinDesk.

Its true that despite dramatic drops in global economic output and unemployment, market jitters drove asset prices up: the stock market ended the year with record gains. Even bitcoin, considered a fringe asset, had a historic price run, gaining more than 250% by the end of 2020.

These gains were partly influenced by traditional investors who saw bitcoins potential to work as a hedge against inflation.

And yet, the kind of inflation investors were expecting isnt here, at least not yet. In fact, U.S. inflation remained stable through 2020. Some economists dont believe that inflation in America will be running rampant any time soon. Others think a little post-pandemic inflation might even be a good thing.

What is inflation, anyway?

It depends on whom you ask.

The U.S. Federal Reserve defines inflation as the increase in the price of goods and services over time, but many associate it with a change in the money supply, or the total amount of money in circulation.

In the bitcoin world, they dont use the term inflation quite the way that economists do, as a general increase in consumer price. Instead, they tend to use it to mean an increase in the money supply, said economist and CoinDesk columnist Frances Coppola.

The crypto argument that printing more money leads to inflation does sound compelling, Michael Ashton, inflation consultant and JPMorgan alum, told CoinDesk. When there is a change in the relative quantity of two goods, the one that is increasing in quantity tends to get cheaper, he said, adding that this happens with foreign exchange all the time.

The reason why the Mexican peso has been cheap relative to the U.S. dollar for a long time is because the supply of Mexican Pesos has consistently outpaced the supply of U.S. dollars, Ashton said. Because here are a lot more pesos than dollars out there, he explained, the value of the peso in exchange markets goes down.

Thats part of the crypto argument. They say, Were gonna limit how fast cryptocurrency supply can grow and since we are printing all these dollars, then that means that the dollar has to depreciate a lot relative to crypto. Therefore, the price of crypto should rise over time, Ashton said.

Calvo said the view that you can control the price levels of goods and services through money supply is not limited to the crypto world but shared by investors in general, and for good reason. When you look at many countries over a long period of time, you can see some association between the increase in money supply and inflation, Calvo added.

But Calvo, Coppola and Ashton all agree that increasing the amount of money in the economy with a stimulus package, for example does not guarantee a rise in price levels.

If you increase your money supply, you may or may not get an increase in the consumer price level depending on what else is going on in the economy at the time. So there are a number of other factors to consider, Coppola said.

Money is printing, is inflation soaring?

Not really, at least in the U.S.

The U.S. Federal Reserve has an inflation target of 2% measured using the consumer price index (CPI). In 2020, despite inflationary fears due to pandemic-related spending, the U.S. inflation rate hovered around 1.5%, well below target.

One explanation for the relative stability of U.S. inflation is money velocity, which quantifies how fast money changes hands in an economy. If the money supply is increased, but people dont spend a lot of money quickly, inflation can remain in balance.

After the pandemic hit, consumer spending suffered around the world, with countries including the U.S., India, Japan and Germany reporting large drops in household spending. As multiple states in the U.S. went under lockdown, people stayed home instead of dining out, celebrations and gatherings stopped, and travel came to a screeching halt.

People spending less meant the demand for goods and services in general had dropped. Global energy demand declined 6% in the first few months of 2020, its biggest drop since World War II, according to the international energy agency (IEA).

Weaker demand and significantly lower oil prices are holding down consumer price inflation, the Federal Reserve wrote in its June 2020 monetary policy report.

The World Bank, in fact, projected a fall in global commodity prices.

It is under these prevailing conditions that the U.S. government was distributing stimulus funds.

So people are accumulating money, but it is not reflected in the price level, Calvo said.

Ashton explained this may be because money velocity is very low. People are not getting rid of U.S. dollars fast enough, so the price levels dont increase dramatically.

When you drop a ton of money into peoples bank accounts, they cant spend it instantly. So, mathematically, you have to have a declining money velocity. Thats what happened, Ashton said.

What about outside the U.S.?

American inflationary fears may be in part due to whats happening in other parts of the world. Some investors may be looking at countries like Argentina and Venezuela where printing money has led to very high inflation.

What investors are doing, in general, is looking ahead and saying, were seeing a lot of money going into the economy. Therefore, there is a risk that it could happen in the United States; therefore, we need to invest in things that will protect us from that inflation, if it happens. Thats the conventional inflation is coming, we need to protect against it argument, Coppola said.

But in the countries they are looking at, things work differently, Coppola added.

Venezuela and Argentina are hyperinflationary economies where price levels grow rapidly and excessively triggered by an increase in the money supply or a shortage in supply relative to demand.

In Venezuela, for instance, printing money led to jaw dropping increases in food prices last year. The international monetary fund (IMF) reported that the inflation rate in Venezuela was a whopping 6500% in 2020.

In hyperinflationary countries, years of political and economic instability have exhausted the option of printing money without leading to uncontrollable inflation, Calvo said. Coppola added that countries struggling with hyperinflation have other contributing issues like high foreign exchange debt, war, occupation or something political.

Argentina, for example, has had a long and complicated economic crisis riddled with astronomical debt obligations and political instability that often has citizens scrambling to convert their Argentine pesos into sturdier assets or currencies.

In Argentina, the minute [the government] starts increasing the money supply, very quickly, you see the consequences in the price level, Calvo said, adding, Some countries have the privilege of printing money if necessary. Nothing happens. Argentina doesnt have that privilege.

Interestingly, the pandemic has not particularly spurred inflation in Argentina either. By mid-2020, inflation in Argentina had reached a two-year-low, according to a Focus Economics report.

Because Argentines were also under lockdown during the pandemic, the slowed economy and low demand combined with increases in government spending hasnt caused a major rise in price levels, Calvo said.

If inflation isnt soaring, why are people hedging against it?

People may be buying bitcoin as a hedge against future inflation, and theyre not crazy to do so.

According to a statement made to the media by Federal Reserve Vice Chair Richard Carida, the Federal Reserve will continue to maintain near zero interest rates until inflation rises enough to meet its 2% target.

U.S. policy makers know exactly what theyre doing, said Phillip Gillespie, chief executive officer of crypto liquidity provider B2C2 Japan.

They are basically going to suppress the interest rates and let inflation run higher, Gillespie told CoinDesk.

But economists are saying that as the country reopens and spending picks up, reining in price levels to maintain the inflation target will be one of the biggest challenges in the Federal Reserves 108-year history.

So naturally, investors are reacting to all the inflation doom and gloom by betting against it, turning an alternative asset like bitcoin into the 2020 breakout star of inflation hedging in the process.

Bitcoin inherited a lot of the same selling points that made gold a preferred inflation hedge like scarcity and portability, according to J.P. Koning, Canadian financial writer and founder of the popular blog Moneyness.

But when it comes to serving as a hedge against inflation, bitcoin is hardly alone.

If you look around your house, everything is an inflation hedge, Koning said. Your house itself is an inflation hedge, your table, your personal capital, your education are all inflation hedges because all of those things will rise in value as the purchasing power of the currency falls.

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Bitcoin and Inflation: Everything You Need to Know - CoinDesk - CoinDesk