Monday, November 12, 2018

CZ's Confidence 😎

November 12, 2018

Binance CEO Makes Reassuring Remarks About State of Cryptocurrency Market

Cryptocurrency market is healthy

Binance CEO Changpeng Zhao (CZ) recently spoke in a CNBC interview with Ran Neuner to talk about the state of the cryptocurrency market. Even as the entire market is down about 70% from its all-time high, CZ had nothing but positive remarks about the cryptocurrency market.

Binance has reportedly taken a massive hit from this bear market. CZ shared that Binance volumes are down significantly:

"Compared to January [of 2018], we are probably down 90 percent. So we only have one-tenth of the trading volume compared to what we had in January. But, compared to like a year or two years ago, we're still trading at huge volumes. Business is still okay, we are still profitable, and we are still a very healthy business."

While volumes are down substantially, Binance is doing well according to other business metrics:

"Right now we are still signing up a steady amount of new users every day so from what we are seeing, it's very healthy actually. The number of new users and the amount of crypto we hold are increasing very steadily. So if you look our cold wallets, the amount of BTC we hold, we have just seen an increase in people depositing Bitcoin to our exchange."

Volumes are actually twice what is reported

CZ also mentioned that the volume numbers reported on sites like CoinMarketCap don't tell the whole story. The CEO estimates that the real volumes are actually about twice as much.

The discrepancy between what is reported and the actual volume is due to over-the-counter (OTC) trading. This is when cryptocurrencies are traded outside of exchanges like Binance. OTC trading is commonly performed by institutional investors.

CZ commented on this, telling CNBC:

"What I've heard is the OTC market is at least as large as the live recorded volumes [on exchanges]. So that is at least 50 percent of volumes that is not being reported on CoinMarketCap. But we're not heading to that business, so we don't know the real volumes."

TAX

Traders are Skipping Taxes with a Lending Loophole

Skirting taxes

Currently, the U.S. government holds that every crypto-to-crypto trade counts as a taxable event. That means a lot of tracking for traders frequently moving between currencies.

However, according to VentureBeat, some traders are taking advantage of a loophole that circles around blockchain-based lending platforms.

To illustrate the loophole, VentureBeat used an example:

"Say you own $30,000 worth of Bitcoin, purchased eight months ago and you're aching to move into Stellar. Normally, you'd need to sell some Bitcoin to buy Stellar, but that would trigger short-term capital gains (it's been less than a year since you bought your Bitcoin). With the lending loophole, you avoid taxes by taking out a loan against your Bitcoin to buy Stellar."

Don't try this at home

Though this works in theory since the interest on the loan is less than the tax penalty you would have incurred, it may not work out so favorable if things turn sour.

For example, if both Bitcoin and Stellar dump significantly during the duration of your loan, you would actually owe the lending platform money since there could be a "margin call price" - a feature that asks for more money than the original Bitcoin you gave if the price falls too low.

Is this popular?

According to popular blockchain-based lending platform BlockFi, it is. However, the lending platform is also widely used for many other purposes such as general living expenses, travel expenses, business expenses, debt payments, and real estate purchases.

Still, regardless of what the tax book says, we don't recommend traders take on more risk with a loan to chase the moon.

MINING

Massive Mining Operation Goes Live in Canada

Mining north of the border

Bitcoin mining firm DMG Blockchain Solution has opened up a mining facility in British Columbia, Canada. The plan for this facility was originally announced in July.

The plant was supposed to be opened in September but was delayed a couple of months.

The facility is 27,000 square feet and will run at a maximum capacity of 85 megawatts. It is powered purely from a hydroelectric generator. This is notable as a lot of mining facilities disrupt the local power grid causing issues with the local government. Apparently, DMG's facility will run completely independent from the local grid.

Canada the new mining frontier?

China is home to a majority of Bitcoin miners, but that seems to be changing. Due to regulatory issues in China and opportunities arising elsewhere, miners are leaving the country at the same time new non-Chinese operations are popping up.

Canada has become one of the most preferred locations for cryptocurrency mining facilities due to cheap hydroelectric power. Also, the colder temperatures of the climate help to limit cooling costs.

The country's government has become a little wary of too many miners opening shop in their country with fears that they will take power from its citizens. To combat this potential issue, some areas of Canada have increased the price of electricity for miners and established the right to shut off their power if the city grid is at maximum capacity.

KNOW THE NUMBERS

Bitcoin ATMs Worldwide Set to Pass 4,000

According to Coin ATM Radar, a Bitcoin ATM tracker tool, the number of Bitcoin ATMs worldwide is set to pass 4,000 this week.

Despite the bear market, Bitcoin ATMs are actually being installed at an all-time high rate of 6.58 Bitcoin ATMs/day.

While 4,000 is still a measly number compared to the estimated 3,000,000 fiat ATMs around the world, Bitcoin ATMs have reached over 75 different countries and have attracted over 40 different producers in their short lifespan.

BITS

But wait, there's more...

The CFTC fined a Bitcoin trader $1.1 million after he defrauded investors to repay stolen cryptocurrencies to his former employee.
Japan's GMO Internet reported a 'historical Q3 performance' for its crypto-related businesses.
A new patent application from IBM reveals the computing giant is looking to tackle issues in scientific research with blockchain.

MEME