Over the past week, Brazil’s central bank adopted guidelines from the International Monetary Fund (IMF) on cryptocurrencies, and leading cryptocurrency exchange Binance launched a lending service letting users “earn crypto while you sleep.”
Binance announced plans for a Libra-like global stablecoin named Venus, the SEC sent a cease-and-desist letter to Russian-based crowd sale analysis site ICO Rating, an outage at Amazon’s cloud data centres disrupted operations at several crypto exchanges, BitMEX added three further countries to its list of restricted jurisdictions amid regulatory pressure, and Binance compensated victims of its recent KYC hack…with a lifetime VIP access to Binance!
Binance Starts Letting Users Earn Crypto While Sleeping
Binance has launched a lending service allowing its users to earn cryptocurrency without trading, in a passive way. Currently the service is open for only a few tokens – its Binance Coin (BNB), Tether’s USDT stablecoin, and Ethereum Classic (ETC). Annualized interest rates are of 15% for BNB, 10% for USDT, and 7& for ETC.
Brazil’s Central Bank Adopts IMF Guidelines
The central bank of Brazil has adopted guidelines from the International Monetary Fund (IMF) and is now classifying cryptocurrencies as assets. The financial institutions noted the country imports bitcoin, a move that has been “reducing the trade surplus” in its balance shee.t It alos categorized cryptocurrency mining as a “productive process.”
The Stars Align on Binance’s Stablecoin Plans
Binance announced plans to launch an “independent regional version” of Facebook’s Libra token, which it’s calling Venus. The project includes the issuing of a set of stablecoins pegged to fiat currencies in several as-yet-undefined regions. The news follows the issuance of a GBP-backed stablecoin through the exchange’s Jersey-based subsidiary in July of this year.
The SEC Continues Its Campaign Against ICO Bad Actors
The SEC issued a cease-and-desist order against ICO Rating, a site popular during the ICO boom, for its analysis of upcoming offerings. The agency claimed that the company violated Section 17(b) of the Securities Act in receiving around $100k in compensation for its reviews without making proper disclosures. The move is part of a campaign by the regulator to bring to account the unscrupulous actors from the 2017/18 token mania, which has included action against three notable ICOs to date.
Overstock CEO Resigns as tZERO Opens Platform to Non-Accredited Investors
NASDAQ-listed U.S. internet retailer Overstock announced the departure of its CEO Patrick Byrne, following a New York Times’ article in which Byrne made allegations against the U.S. Government.
Byrne became a prominent figure in the blockchain space both for his evangelism of Bitcoin and for integrating crypto into the company’s operations, such as its tZERO securities exchange. Separately, the exchange has announced that its securities tokens (TZROP) are now available to be traded to non-accredited investors, as per Rule 144 of the Securities Act of 1933.
The Long Take
Is There Such a Thing as Impartial Analysis in Crypto?
One of the most popular acronyms in crypto is DYOR; Do Your Own Research. But for someone seeking to analyse the relative merits and red flags for the various projects and tokens that exist in the space, how can they be sure their research won’t be tainted by the biases and financial incentives of others?
This week, the SEC took action against ICO Rating for its once-popular token reviews, for which – the agency alleges – they received around $100k in compensation. Few would have expected the SEC’s next target, following actions against AirToken, Paragon and Kik, would have been a ratings site.
Indeed, ICO Rating were only one of many review sites that rose to prominence during the 2017/18 boom. A cursory glance at any of these websites and you will be greeted with comforting words such as “trusted”, “independent”, and “unpaid”. Look broader and you’ll find a number of independent research firms offering their analysis on current or upcoming projects, often cumulating in enthusiastic buy recommendations.
It’s hardly surprising, therefore, that many of these reports have formed the basis for the modicum of due diligence done by crypto investors before buying tokens from ICO smart contracts or from exchanges.
In an emerging market like crypto, where many of the established institutions and market research firms from the traditional markets are yet to offer their services, it’s less than surprising that ambitious new companies will seize the opportunity to offer their analysis to meet public demands. The question, however, remains: Who reviews the reviewers?
Now, it appears, this responsibility is being undertaken by the SEC. At least in the most egregious of cases. Whether ICO Rating was cherry picked by the regulator to make an example to all actors offer partial investment advice, or whether similar orders will be made against companies offering similar market information-based products remains to be seen.
While there is a clear need to ‘clean up the space’, there is also a question of where the line should be drawn. Crypto VCs and investment funds habitually release reports and theses that put their own investments in a positive light. One may think of Multicoin Capital’s influential BNB investment thesis as just one of many cases in point. The distinction here is clearly the existence of upfront disclosures of holdings (versus furtively receiving payments for its recommendations).
The SEC’s ruling also shouldn’t detract for the fact that there is a great deal of free and – in as much as it can be – impartial research available for crypto investors seeking to analyse a project’s attractiveness. Binance’s research arm is one of the leaders in this respect, though one must again weight the advice against its incentive to attract more users to trade the assets available on its platform.
The truth is that crypto investing is always going to require some level of trust. Unless the investor has the means and skills available to vet a project’s team, code and market proposition, as well as the economics underlying its token, most will require some form of guidance from those better informed in the matter. At least now there’s no excuse forn that party failing to make proper disclosures.
Tweets of the Week
Ikigai’s senior quant Hans Hauge offers a useful thread to explain the concept of ‘Adjusted Binary BDD’ as a Bitcoin valuation measure:
Bitcoin bubble tops are clearly identified with a dark red cluster of Adjusted Binary BDD. Until that happens, we're not at the top. Public opinion is key here because that red cluster is caused by the assumption of the crowd and is self-fulfilling (reflexivity). pic.twitter.com/hZG9WMYcsS
— Hans HODL (@hansthered) August 22, 2019
Arianna Simpson offers a (potentially timely) reminder no to underestimate alts:
1/ The general crypto narrative seems to be drifting back to bitcoin maximalism, so I wanted to share a few thoughts on bitcoin relative to the rest of the crypto market:
— Arianna Simpson (@AriannaSimpson) August 21, 2019
Bitcoin researcher Murad Mahmudov offers a timeless rule of thumb for judging when to buy or sell crypto:
Buy when 65% of CT influencers calling for an e c h o b u b b l e / new bear market / “deep correction” to 6-7k.
Sell when your normie high school friends are asking you about XRP / IOTA.
— Murad Mahmudov 🚀 (@MustStopMurad) August 22, 2019
The Week’s Best Content:
Recommendation 1 – Mapping decentralised finance
Outlier Ventures’ Joel John provides a comprehensive overview of one of the most exciting areas of crypto; the burgeoning “DeFi” ecosystem.
Recommendation 2 – Revisiting the Fat Protocol thesis
Smart Money’s Jonathan Joseph marks the three years since Joel Monegro introduced his popular – and often controversial – Fat Protocol thesis by reassessing its merits.
Recommendation 3 – When alt season?
Developer Eric Elliot risks jinxing the fabled altseason to analyse which projects are best placed to accrue new value.
Bitcoin Lightning Network roundtable discussion
Hosted by Ben Livshits, UCL and The Reserve
Wednesday 28 August, 7-9pm
Professor Ben Livshits, Chief Scientist at Brave Software and research fellow at University College London will this week chair and guide a discussion on the merits of Bitcoin’s “layer 2” scaling solution The Lightning Network. The event is open to anyone interested, although spots are limited.