Welcome to Chain Letter! Great to have you. Here’s what’s new in the world of blockchains and cryptocurrencies. | | Bitcoin’s “liquidity event.” The price of Bitcoin took a beating over the weekend, and some media outlets seemed to attribute the big selloff to yet another exchange hack—this time, intruders stole nearly $40 million worth of digital coins from the Korean trading platform Coinrail. Whatever the proximate cause, it’s only part of a larger decline: Bitcoin is off more than 30 percent since it hit $9,800 on May 5, and more than 60 percent percent since it’s mid-December high of over $19,000. Philip Gradwell, chief economist for the blockchain analytics firm Chainalysis, thinks he knows one reason for the downturn: Bitcoin’s “liquidity event.” According to Chainalysis, long-term Bitcoin holders sold at least $30 billion worth to speculators between December and April. Gradwell told the Financial Times that the 60 percent increase in the number of bitcoins available for trading during that period has been a “fundamental driver” of the drop in price. | | A whale of a market manipulation opportunity. Also according to Chainalysis, around 1,600 wallets hold roughly a third of all available bitcoins. That means trades from just a few people (like a handful of colluding “whales,” or individuals with large holdings) can heavily influence the price. Now the Wall Street Journal reports that government investigators have demanded that four cryptocurrency exchanges—Bitsamp, Coinbase, itBit, and Kraken—turn over “comprehensive trading data” to assist a probe into whether manipulation is distorting recently-launched Bitcoin futures markets, which rely on an index derived from the prices at the four exchanges. Whenever the government comes knocking in crypto world, you can bet someone’s going to put up a fight. This time it was Kraken’s CEO, Jesse Powell, who piped up first, telling the WSJ that the feds’ demands have exchanges like his “questioning the value and cost of their index participation.” | | Why the Fed might mint disappearing coins: The US Federal Reserve ought to consider issuing its own digital currency. That’s according to a new op-ed by Sheila Blair, former chair of the Federal Deposit Insurance Corporation. Such a currency, she says, could be as stable as fiat money and reduce the risk of financial crises. “Imagine we all held an interest-bearing FedCoin,” she writes. To combat inflation, the Fed could pay more interest to incentivize saving. During a recession, it could reduce the rates to spur people to spend their FedCoins. And if that didn’t fix things, the Fed could “issue special digital coins that would disappear, within a (certain time), if not spent on consumption,” writes Blair. That would be more effective than the tax and Social Security refunds given out during the Great Recession, she argues, since most people either saved that money or used it to pay debts. | | Loose Change Fill your pockets with these newsy tidbits. | | | Bitmain, the dominant maker of specialized Bitcoin mining chips, is considering an IPO. (Bloomberg) | | | | Ethereum Classic spiked 25 percent on the news that it will be listed on Coinbase. (CoinDesk) | | | | Vladimir Putin says Russia “cannot have its own cryptocurrency.” (ETHNews) | | | | Wells Fargo will prohibit customers from using credit cards to buy cryptocurrency. (Bloomberg) | | | | Bitcoin trading in Venezuela is skyrocketing in response to crippling inflation. (Quartz) | | | | The transcript of a tense conference call involving 200 EOS developers reflects a chaotic scene as the network, which raised $4 billion via an ICO, struggles to launch. ( WSJ $) | | | The Money Quote “It's a whales' election.” —Steve Floyd of EOS Tribe, a candidate to be an EOS “block producer,” the equivalent of a miner. The new blockchain won’t go live until the network elects 21 block producers via a complicated voting process, and Floyd and others think one reason the election is taking longer than anticipated is that some of most influential token holders are waiting to see how others vote before deciding. (CoinDesk) | | | |
