Monday, December 28th, 2020
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Your Weekly Update On All Things Crypto |
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CryptoWeekly 2020: Year In Review |
After a crazy 2020, the crypto market looks poised for the ride of a lifetime in 2021, but before we get there, we wanted to take a step back and reminisce on some of the biggest stories in crypto and macro-economics in 2020.
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The COVID Crash: If you were invested in crypto in March of this year, you probably still have a visceral reaction to the words "Black Thursday." It was March 12th and it was the largest single-day sell-off in Bitcoin's history. We all sat and watched as the price of Bitcoin fell over 40% in one day. However, over the course of less than two months, the price surged back higher and left all the doubters in the dust.
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Defi Mania: Decentralized Finance was the biggest story in crypto for more than half the year. It came with a rate of innovation faster than anything we had seen in crypto. Defi mania showed us that it is possible to build decentralized financial instruments around our crypto assets and have our money work for us. We saw the amount of value locked in Defi smart contacts explode from $500M in March to over $14B by December. A staggering 28x in less than a year. While much of the craze has migrated to Bitcoin for now, we're sure Defi applications will see a resurgence in 2021.
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Money Printer Go Brrrrrr: One of the major underlying reasons for the Q4 Bitcoin bull run is the response of world governments to the COVID pandemic. With interest rates at or near zero globally, we are now seeing almost every major nation around the world printing money at a break-neck pace. We've gotten to a point where markets have become addicted to stimulus as new lifeblood to stay afloat. With the debasement of every fiat money system around the world, savvy investors are turning to safe havens like Bitcoin as a way to store their wealth.
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Bitcoin Goes Institutional: We have long prophesized the day that major corporations and institutions would start buying Bitcoin. Well, 2020 saw a flood of institutional investment that blew any of our predictions out of the water. Beginning with Microstrategy's investment of over $450M in Bitcoin as a treasury reserve and followed by Square's investment of $50M (1% of their cash reserves). We saw domino after domino of $100M+ purchases by large institutions. And our best guess is that the tidal wave will turn into a tsunami in 2021.
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Overreaching Regulation: As institutional investment grew, so did the interest of the regulatory watchdogs. From talks of overreaching regulation around KYC for self-hosted addresses, to the blockbuster Ripple lawsuit (see next story), the US Government has made it clear that they expect their voice to be heard in this emerging space. It is yet to be seen how this regulatory overreach may affect US innovation and their standing in the global ranks of cryptocurrency adoption.
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Central Bank Digital Currencies: In October, the Managing Director of the IMF announced the need for a "New Bretton Woods moment." It has become clear that this statement made reference to the adoption of Central Bank Digital Currencies around the world. At present, most major countries around the world are either piloting or developing a CBDC strategy. CBDC's will give the government unparalleled control over the supply and distribution of currency in their country. They will also most likely serve as a great on-ramp for many to get into the cryptocurrency space as these CBDC's will be built on some form of programmable blockchain technology.
Overall, 2020 was a year of big change. There were definitely ups and downs, but all in all, it was one hell of a ride. Thank you so much for your support throughout the year, and we look forward to continuing to provide you exceptional content on the world of crypto in 2021.
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Ripple Ruled by SEC as a Security |
In an almost "Grinch-worth" manner, the SEC dropped an absolute bomb on the cryptocurrency industry by filing a lawsuit against Ripple Labs, creators of the third-largest cryptocurrency XRP. The lawsuit names Ripple CEO Brad Garlinghouse and Co-Founder Chris Larsen as defendants and claims that the company and executives sold $1.3 billion worth of unregistered Securities.
This action follows years of debate between the company and the SEC regarding whether XRP, the digital currency associated with Ripple, is indeed a Security or not. The term "Security" refers to a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation (stock); a creditor relationship with a government or corporate entity (bond); or rights to ownership (option). Under US law, all securities must be registered with the SEC. Ripple Labs is prepared to litigate and maintains the position that their XRP token is a currency, not a security, which therefore would fall outside the jurisdiction of the SEC.
This lawsuit sent shockwaves across the crypto industry and caused much of the alt-coin market to tank in its wake. Fear set in that the other alt-coins might suffer the same ruling. Charles Hoskinson, founder of Cardano called this the biggest lawsuit in the history of the cryptocurrency industry. But this move was puzzling for more reasons than one:
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Timing: It goes without saying that a lawsuit this polarizing might be better off left until after the holidays. This was a calculated move by the SEC to create news and fear amongst investors in the crypto industry, giving the news time to marinate over the Christmas Break. Brad Garlinghouse blasted the SEC saying, “It’s not just Grinch-worthy, it’s shocking... It’s an attack on the entire crypto industry and American innovation.”
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Transfer of Power: It is widely assumed that a Biden administration would look at the cryptocurrency industry in a more favorable light, and this feels like an outright assault by the outgoing administration as one final stand to sabotage this burgeoning industry. A move like this would be akin to a CEO announcing a major merger or acquisition days before they step down. Leaving all the administrative burden and aftermath to fall on the incoming administration.
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Past SEC Rulings: In recent years, the SEC has ruled that the two most valuable cryptocurrencies—Bitcoin and Ethereum—are not securities. This was partly on the grounds that they are decentralized with no person or company in control of them. Ripple is however much different than these decentralized systems. Instead of being minted gradually by miners, the entire 100 Billion token supply was minted all at once by the founders. With that said, XRP has become increasingly decentralized as banks and other merchants use it as a bridge currency in cross-border transactions. According to Garlinghouse, "the SEC regarding XRP as security controlled by Ripple is akin to viewing oil as a Security controlled by Exxon."
While the outcome of the lawsuit is still undecided, one thing we know for sure is that this legal battle is far from over. In a statement last week to Fortune, Garlinghouse said, “I think we have to stand up for all of crypto—and not let the SEC bully the entire industry... We’re going to be on the right side of history.”
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SEBA Announces 20M Swiss Franc Series B Investment |
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SEBA, a Switzerland-headquartered, licensed, and supervised bank, announced the completion of it's 20M Swiss Franc Series B this past week. The precise details have yet to be disclosed.
Founded in 2018, SEBA Bank provides a seamless, secure and easy-to-use bridge between digital and traditional assets. Their clients can secure, trade, and manage cryptocurrencies, digital assets, and conventional securities all in one place. The bank started offering its financial services in November of 2019 after it received regulatory clearance from Switzerland's FINMA.
In its debut funding round, SEBA raised over $103 million in investments. Although the precise details have yet to be disclosed, the bank has shared that all existing key shareholders and new investors from Switzerland, Europe, and Asia participated in the Series B. Guido Bühler, CEO of SEBA Bank, stated "I am delighted that the strengths of SEBA Bank and its track record in 2020 were recognised by our existing key shareholders and new investors leading them to participate in a second capital raise."
The Series B capital raise will help fuel SEBA's growth strategy, its domestic and international position and expansion. "This support will allow us to accelerate the strong growth SEBA Bank is delivering as we also plan to expand into new markets in Middle East and Asia and support US institutional clients" explains Guido Bühler.
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Bitcoin Passes $28,000: Shows No Signs Of Slowing Down |
Bitcoin's price continued its tear last week and reached levels that many weren't expecting until Q1-Q2 of next year. We have seen an absolute flood of interest, both from institutions and now from retail investors. Its resulted in a new all-time high of $28,377 USD at the time of writing.
So why is this happening so quickly?
To explain this massive price move, we need not look any further than supply & demand economics. At the current rate of production, there are roughly 900 new Bitcoin minted every day. Last week Grayscale made a purchase of over 12,320 Bitcoin. That is nearly 13x the daily supply, and that's only one company.... With this flood of institutional wealth pouring into Bitcoin, there is simply not enough supply to match the demand, and therefore we are seeing the price go parabolic. There is simply not enough Bitcoin to go around, and we would be willing to bet that we will see an incredible Bitcoin Shortage next year that will push prices to truly extraordinary levels.
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Alt-Coins May Have Found a Bottom |
The last two months have been a struggle for those of us holding alt-coins. No matter what Bitcoin did, it seemed that alt-coin values were bleeding against it. We saw one of the biggest drops in alt-coin dominance last week, as it broke below two major levels of support. However, alts may have found their bottom, as Ethereum bounced off its critical line of support and rallied back over 13% vs Bitcoin Saturday night. Ethereum vs Bitcoin price is a key indicator of the alt-coin market. If Ethereum continues to gain steam, we may have a January rally to look forward to in the alt-coin market.
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Ethereum is an easy pick for this week. The second-largest cryptocurrency has taken a 44% beating vs. Bitcoin over the last 4 months and maybe showing signs that it's had enough. After a 13% rally vs Bitcoin on Saturday night, Ethereum looks poised to kick off the next alt-coin season if it continues. With ETH 2.0 development on track and an increasing percentage of the ETH supply being staked in the ETH 2.0 proof of stake contract, the circulating supply is depleting. Aside from Bitcoin, Ethereum is also one of the more attractive crypto investments for institutions. At only 50% of its all-time high, Etheruem still has a long way to go before it hits its peak this cycle.
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Compound Finance is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications. Users stake their currency in smart contacts and can earn interest on their funds. The Compound protocol is currently the second-largest lending solution in the De-Fi space, with over $1.8 Billion in assets locked into the protocol earning interest. Although having more assets locked than the AAVE protocol, Compound's market cap is still only 60% the size of AAVE. After an 85% slide vs Bitcoin, and with interest starting to move into the alt-coin space, we see Compound as an undervalued protocol, given its importance to the Defi ecosystem. See the trading-view here.
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Not the first appearance for Coinbase. And the reason? Because it's one of, if not the leading, compliant cryptocurrency platform. Do you value clear Communication, positive energy, efficient execution, and continuous learning? If so, we highly suggest you check out not just the Senior Manager position but any of Coinbase's current openings.
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Consumer Senior
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Supporting 30+ protocols, 70 out-of-the-box node types, and monitoring plug-ins for cloud and on-premises services, Blockdaemon is used by exchanges, custodians, enterprises, financial institutions and 10k+ developers to connect commercial stakeholders to blockchains. They are rapidly growing their fully remote, decentralized team made up of dedicated and passionate individuals who want to make an impact in this dynamic and emerging industry.
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Ethereum Blockchain
Engineer
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None of the content or opinions expressed in this newsletter should be consider financial advice. We highly recommend that you do your own research before investing in any project within or outside the cryptocurrency space. |
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