Big US Banks Set Aside Billions in Downturn Warning; Stocks Continue to Tumble

The markets started to see red as investors grew worried about an uptick in coronavirus infections slowing the economic recovery when they kicked higher later in the day yesterday after the banks earning season kicked off.

The Dow Jones Industrial Average raced higher with its biggest percentage advance of the month. S&P 500 also spiked 1.7%, which can be further driven by a good performance by the banks’ stocks.

Bitcoin meanwhile continues to hover around $9,215 as it has been doing for about a month now. The volume remains extremely low while Tether is recording more than double the bitcoin’s ‘real’ trading volume, as per Messari.

The first earnings report showed that Wells Fargo took a $2.4 billion loss, the first quarterly loss since 2008. The earnings declined due to low-interest rates, uncertainty associated with COVID-19, and a worse-than-expected macro environment.

The surprise came in the form of JPMorgan, which topped its revenue estimated at $33 billion, up from 15% from the same quarter last year while profits dropped over 50%. Citigroup also reported revenue of $19.8 billion but a drop of 73% in profits from last year.

This was because of trading revenue driven by massive volatility in the market and the Fed injecting liquidity while purchasing corporate bonds as such, not sustainable.

Banks stocks are currently down with Wells Fargo losing as much as 45% in yearly returns. The shares of Wells Fargo and Citigroup fell 5.4% and 2.8%, respectively, yesterday with little changes in JPMorgan’s.

While both Citibank and JPMorgan Chase beat their estimated earnings, they didn’t put out an optimistic outlook.

JPMorgan CEO Jamie Dimon warned that the bank still “faces much uncertainty regarding the future path of the economy.”

All three of the banks meanwhile continue to stockpile billions; Citibank added $5.6 billion in the Q2 2020 while Wells Fargo and JPMorgan added $8.4 billion and $11 billion respectively to prepare for things to get worse.

Although government aid cushioned the economic fallout from the pandemic so far, bank executives said as the programs begin to expire in the coming months, the banks expect their losses to mount as defaults will rise.

“The banks are pessimistic about the course of the recovery,” said Gabriel Chodorow-Reich, associate professor of economics at Harvard University. “The banks don’t see a rapid recovery over the next six months — they see a protracted recession.”

Amidst this, Lael Brainard, a Federal Reserve governor, warned that “a broad second wave could reignite financial market volatility and market disruptions at a time of greater vulnerability.”

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Author: AnTy

Bitcoin Scammers Have Stolen $24 Million in First Half of 2020: Whale Alert Report

In the first six months of 2020, scammers made off with about $24 million in bitcoin, as per the Twitter bot Whale Alert’s latest report.

These scams involved giveaways, sextortion, fake exchanges, fake ICO’s, bitcoin recovery, video scams, Ponzi schemes, fake tumblers, malware, and so on.

Over the past four years, $38 million worth of Bitcoin has been stolen by scammers (excluding Ponzi schemes), out of which $24 million belongs to the first half of this year alone.

The scam market, which is characterized by high profits, no taxes, minimal effort, and zero risks, will be “grown over twenty-fold since 2017 to annual revenue of at least 50 million US dollars” by the end of 2020, predicts Whale Alert.

Whale Alert noted that the “most successful scams” made more than $130,000 in a single day with just one-page website, a BTC address, and YouTube advertising. One scam managed to rake in over $1.5 million over six months, promoting a fake exchange with an amateurish website riddled with spelling errors.

The “Giveaway” is another successful one that features celebrities like Elon Musk, netting around $300,000.

According to the crypto tracker, it’s only a matter of time that a professional team of scammers will start using systems like deep-fakes. The latter being a technique where a person’s face is superimposed over another person in an image or video, which it says “will surely revolutionize the scam market.”

The origins and destination of these scam proceeds have been traced to some of the top exchanges, payment providers, and gambling sites who willingly or unknowingly participate in these crimes.

It is high time that we act as a community, or “the reputation of blockchain might not be able to recover in the long run,” said Whale Alert.

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Author: AnTy

Bitcoin is in a ‘Consolidation Zone,’ We’ll Move to $14k Once BTC Gets Above $10k: Novogratz

Bitcoin is about system change, said Mike Novogratz, CEO of Galaxy Digital, in his latest interview with Barron’s Carleton English.

While talking about the catalysts that could propel the price of Bitcoin higher, he shared how a revolution is going on between black lives matter and people looking for economic injustice, and COVID-19 pandemic has exposed it. So, in this macro backdrop, “that gives us a tailwind.”

Price-wise, bitcoin is doing fine, said Novogratz. After the March sell-off that saw everything crashing, BTC recovered more than 160% in the next two months. But since then, Bitcoin has been ranging sideways — “we are in a consolidation zone.”

The $10,000, however, remains a critical psychological level, and “once we get above it, we move to $14,000,” he said.

Bitcoin is Hard to Buy

Novogratz shared that it is hard to buy bitcoin.

He explained how, when billionaire investor Paul Tudor Jones bought it, there was much excitement. But the next hedge funds can’t just buy it the next day. They have to go through the same process of operation due diligence, checking their docs, and talking to their investors.

It is a slow process to get people on board, into institutionalizing this, he said although he believes in the next “two to five years every major bank is gonna have a crypto desk because they’re gonna need to.” According to him, the bitcoin market is still dominated by retail investors.

“Bitcoin is still hard to buy. If it was easier to buy, it would be a lot higher. And there are more and more people making it easier to buy: funds being set up, custodies being done, at one point we’ll get an ETF,” Novogratz echoes these thoughts in an interview with CNBC’s Fast Money that was published earlier this week.

During the interview, Novogratz also told the public to hold more gold than bitcoin even though he believes “bitcoin way outperforms gold.” This is just because of the volatility of the digital asset.

Bitcoin volatility has taken a dive recently because of the weak price movement, falling to the level of the S&P 500.

Gold also has been on a tear lately, in the past month, while bitcoin was stuck in a rut, the precious metal rallied. Recently, it broke above $1,800 to a nine-year high.

Stock Market Bubble

While bitcoin has been boring, stocks are rallying hard, which reminds Novogratz of bitcoin in 2017 when the leading digital currency climbed to a new ATH.

“We’re at really dangerous valuations on the growth side, on the tech side,” he said. “If it’s Zoom or Tesla or Beyond Meat, whatever stock has a story, everyone’s rushing in. That gets me worried.”

The stock market, according to him, is “unhinged from reality,” and he advised small investors to get out before it crashes.

“We are in irrational exuberance — this is a bubble,” he said in an interview with Bloomberg. “The economy is grinding, slowing down, we’re lurching in and out of COVID-19, yet the tech market makes new highs every day. That’s a classic speculative bubble.”

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Author: AnTy

Stablecoins Yet Again Under Regulatory Scrutiny In Revised FATF Report

In a Tuesday report, the Financial Action Task Force, with members from about 200 countries, said stablecoins need to comply with standards to guard against money laundering and terrorism financing.

FATF is an inter-government body that sets international standards to prevent illegal activities related to money laundering and terrorist financing watchdog. It was after a 12-month review completion that the report was prepared for the G-20 finance minister and central bank governors.

Lately, regulators are taking a strong stance against fiat-begged stablecoins like Tether (USDT). With the latest step by the FATF, the exchanges and other entities supporting stablecoins will likely have to verify the identities and comply with different policies.

“My assumption would be that FATF will update guidance in relations to stablecoins in the near future,” said Jesse Spiro, global head of policy and regulatory affairs for compliance technology provider Chainalysis.

Potential to be mass-adopted on a global scale

The total supply of stablecoins has doubled this year and is now quickly approaching the 12 billion mark.

Interestingly, USDT issued on Ethereum accounts for more than half of the total stablecoins supply. Also, the market cap of Tether has surpassed $10 billion.

Amidst this surge of stablecoins, the new rules would impose anti-money laundering (AML) and know-your-customer (KYC) requirements on stablecoins like Tether and also the new endeavors like Facebook’s upcoming Libra.

Stablecoin providers and exchanges that support coins would have to set up processes for monitoring transactions, investigations, and regulatory filings, Spiro said. Also, they would have to make sure that OTC trading desks are compliant. Tether uses Chainalysis for a part of its compliance process; Spiro told Bloomberg.

“OTC desks, there’s been a lot of illicit activity that we’ve been able to follow through,” said Spiro. “It’s something that regulators are going to be taking a long hard look at.”

The fiat-pegged digital currencies were an attempt to mitigate the extreme volatility in the cryptocurrency market. Tether, a popular stablecoin is especially used in China for fiat on- and off-ramp, since the country banned direct fiat channels in 2017. It is also used by export-import businesses in Asia.

According to FATF, “stablecoins appear better placed to achieve mass-adoption than many virtual assets.” For instance, Facebook wants its Libra to be used by 1.7 billion of the world’s unbanked.

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Author: AnTy

Yet Another Balancer Attack for ‘Unclaimed’ COMP; DeFi Liquidity Provider to Reimburse Hack Victims

It hasn’t been 24 hours since the news about a $500,000 hack on Balancer came that a new attack has claimed $2,300 worth of the hot Compound tokens (COMP).

Hao, a hacker and engineer at DeBank, a DeFi wallet took to Twitter to share how this time as well, someone used Andreessen-funded dYdX to flash loan and drained, yes again, unclaimed COMP stored in several pools of Balancer, an automatic market maker.

The hacker explained that the contract flash loaned some tokens from dYdX to mint cToken from these funds. Then they Uniswap v2 to flash loaned some COMP.

The contract joined COMP/cBAT/cUSDT pool to trigger Compound to send unclaimed COMP to this balancer pool. After syncing COMP balance, the contract withdrew from the balancer at an advantage and continued to do the same for other pools.

After getting all the extra COMP, it repaid Uniswap and dydx and made an exit and swapped COMP for ETH in a normal Uniswap V2 trade.

However, @FollowTheChain said the “unclaimed COMP” is just a tiny fraction of COMP that has accumulated since the last movement of each cToken that happened a few minutes before.

According to Balancer Labs, this attack wasn’t like the one from yesterday either.

Amidst this came the good news, that Balancer Labs will be reimbursing all the liquidity providers who lost funds in yesterday’s attack.

It will also pay out the “highest bug bounty available” to Hex capital, who alerted about this vulnerability to balancer Labs in May.

“This is a major issue in crypto today – creating bug bounty programs and then ignoring the results + refusing to pay out. We need to do better,” said Hex Capital.

Market Unaffected

Yesterday’s attack involved two pools of the Balancer that contained deflationary tokens STA and STONK, tokens with transfer fees, worth more than $500,000 getting drained by a hacker.

The attack happened in two separate transactions which were 30 minutes apart. And only the pools with a token with transfer fees were affected by the exploit.

DeFi aggregator 1inch in its official report said the attacker was a “very sophisticated smart contract engineer with extensive knowledge and understanding of the leading DeFi protocols.”

Not only was he organized and prepared in advance but also used Tornado Cash, a privacy-focused Ethereum mixer, to get initial funds that hid his source of Ether.

It reported that the attack on one of the Balancer Pools was caused by a complex transaction that the hacker sent to the Ethereum mainnet. Then, with another transaction, the hacker drained another Balancer Pool.

The address with the stolen funds currently has about 601 ETH worth about $133,823.

In its official report on the incident, Balancer Labs reported that it wasn’t aware that “his specific type of attack was possible” which now came to be untrue.

However, they have been warning about the unintended effects of ERC20s with transfer fees in the protocol. As such, STA wasn’t included in the recently put together mining whitelist of BAL.

Now, transfer fee tokens will be added to the blacklist and will continue to audit, the third planned audit is starting soon, and review the protocol.

However, the market seems unaffected for now, as the total value locked in Balancer is $115 million, down from the all-time high of $117 million just a day before, as per DeFi Pulse.

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Author: AnTy

Bitcoin Doesn’t Need Mass Institutional Adoption, Just 1% Would Do the Trick

Institutions are increasingly getting interested in bitcoin, about a third of big asset managers currently own bitcoin, revealed a recent survey by Fidelity. Also, just last month, billionaire Paul Tudor Jones divulged that he has about 2% of his portfolio in bitcoin.

These are growing times where people recognize the world’s digital currency as the hedge against inflation, fiat debasement, and unprecedented money printing.

The white whales of cryptocurrency, institutional investors, have “long been considered the most significant barrier between Bitcoin and a multi-trillion dollar market capitalization,” said Messari analyst Ryan Watkins.

In anticipation of their hopeful arrival, firms are investing billions of dollars in building infrastructure to serve them, and partnerships are picking up “as the perfect storm appears to be brewing for investment in Bitcoin.”

According to him, a horde of large institutional investors isn’t necessary to take bitcoin to the moon, just one percent is enough to pump its market capitalization to over $1 trillion and price to $50,000.

Currently, institutions have invested only a small percentage of their assets in bitcoin primarily due to regulatory uncertainty along with hacking, fraud, and unpreparedness of the infrastructure. In his latest analysis, Watkin tested a hypothetical scenario,

“What would inflows from a 1% institutional allocation to bitcoin look like?”

This allocation involved billions of dollars in double and triple digits from endowments & foundations, family offices, sovereign wealth funds, pension funds, and mutual funds.

This much inflow could see an impact of 2x to 25x increase in the price of bitcoin and take the flagship cryptocurrency to a new all-time high of $50,000 and into the trillion market cap category.

But as we saw over the past decade, in which bitcoin has been the best performing asset, there were no institutional investors, and bitcoin has made new highs thrice purely on retail interest.

So, bitcoin may not even need institutions to succeed in the future, and retail is already increasingly jumping in amidst the economic and currency crisis. This coronavirus pandemic, political risks, and fiscal policies will also drive the institutions to it.

Moreover, retail will come rushing back and start FOMOing once the market begins seeing typical BTC moves.

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Author: AnTy

After Raking in $200M, Kazakhstan Now Plans to Attract $740M Investment from Crypto Mining

Kazakhstan is planning to attract 300 billion tenge (about US$740 million) of investments from cryptocurrency mining in the next three years, said the Minister of Digital Development, Innovation, and Aerospace Industry Askar Zhumagaliyev.

Last week, while addressing the Senate, the minister shared his plan, as per the local media reports.

A draft bill regarding the regulation of digital currencies was also discussed on the floor which bans the issue and circulation of digital currencies “except as otherwise provided by law.” It doesn’t ban crypto mining though.

While addressing the bill, Zhumagaliyev pointed out the growth of the cryptocurrency sector in the United States, Sweden, and South Korea. He also noted the 14 digital farms in Kazakhstan, mostly located in the country’s northern regions and in Pavlodar, East Kazakhstan Regions, and Uralsk.

These farms are built near energy sources and have already brought in 82 billion tenge (just over US$200 million) of investment in the country. Zhumagaliyev said,

“According to the report that we have prepared with international experts, we expect another 300 billion tenge (US$738.4 million) in the next three years as digital investments and in general, the further development of digital mining.”

Back in December 2019, there have been reports that Kazakhstan lawmakers won’t be taxing income generated from crypto mining.

This was because the country considers crypto mining as technological progress and tax liabilities are applied to the income made in “real money.” But at the same time, it noted that mining farms using mining hardware to offer crypto mining services will be susceptible for taxation just like data centers.

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Author: AnTy

60% of Bitcoin Supply Not Moved in a Year, What Does it Say About the Next Bull Run?

May is coming to an end and bitcoin is looking to stay above $9,500, ending the month with about 8% returns.

The market sentiments are reacting and approaching “greed” once again. But this is the third time the sentiment is pushing to a greedy state and out of the fearful area. The good thing is we have stayed out of the “Extreme Fear” area for over a month now.

crypto-fear-greed
Source: Crypto Fear & Greed Index

However, there have been no significant changes in volatility over the past week but that can change quickly.

For the past two months, the last days of the month have recorded some of the large daily moves.

According to Income Shark, Bitcoin can yet again drop to $9,200 level with some “weird weekend action.” But it’s possible we will make our back to $9,600 level and if we break it, we could have a ride to $10,000 and if rejected, it might be the time to short.

Interestingly, there aren’t many bitcoins to be bought, especially given that Grayscale is absorbing more BTC than what’s been minted since halving. Already, its Bitcoin Trust holds about 2% of all BTC supply.

Meanwhile, the effects of halving have already started to dissipate with the hash rate increasing. The imminent Chinese monsoon would further balance things out as it would make electricity cheaper and “lead to a temporary increase in the rate of block generation and hence bitcoin production and sell pressure.”

Bitcoin velocity has also been dropping sharply since halving. The transaction activity might be seeing a temporary slow down but the “longer-term trend remains positive and is trending upwards,” noted Arcane Research.

An Exodus of BTC from Exchanges

We might not be in a bullish territory yet but the market is seeing bullish indicators. 60% of bitcoin supply hasn’t moved in more than a year, a level last seen before the bull run of 2017 started.

BTC-Supply
Source: Glassnode BTC-Supply

This increased level of hodling behavior can also be seen in the BTC balance on exchanges which have reached their lowest level in over a year, as per Glassnode.

One explanation of this exodus is the optimistic long-term sentiment that has investors withdrawing their funds from exchanges in favor of hodling in anticipation of a bull run. The growing number of bitcoin whales support this just as the continued holder accumulation over the past two months.

But this isn’t the whole story, this withdrawal trend is different for different exchanges.

Glassnode - BTC Balance on Exchanges
Source: Glassnode – BTC Balance on Exchanges

The steepest decline is recorded by Bitfinex of 66.6% that is 133,000 BTC since Black Thursday. After Bitfinex, the largest outflows are seen by BitMEX at 35.6% (105k BTC) and 24.6% (97k BTC) by Huobi.

In contrast to this, Binance and Bitstamp saw a slight increase in their BTC balance. Coinbase, however, remains the most popular exchange for holding BTC which has a balance of 968,000 BTC, decreasing only 0.2% during this time.

So it’s not just investors choosing to hold, or using cold storage for hodling, there could be many reasons at play.

Lack of trust could be one such reason in the case of BitMEX which experienced two DDoS attacks on Black Thursday. But this still doesn’t justify the continued decline of BTC balance on the exchange and why these funds haven’t moved onto other exchanges.

Moreover, even before the crash, the BTC balance of Huobi and Bitfinex has been on decline which only accelerated after Black Thursday. When the massive sell-off occurred, Bitfinex’s BTC balance had already dropped over 47% from its highest point in Dec. 2018.

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Author: AnTy

Another Demand Source for BTC In a World of Central Banks’ “Whatever it Takes” Stance

Bitcoin is up about 21% against USD YTD but a whopping 74% against Brazilian Real, 60% in South African Rand, 52% in Mexican Peso, 45% against Turkish Lira, and more than 44% in both Russian Ruble and Colombian Peso.

This is the result of the unprecedented size and speed of monetary and fiscal responses to COVID-19. This relief has already surpassed $10 trillion globally.

The US Federal Reserve added over $2.5 trillion to this in the last two months. The demand for dollar and dollar-based assets gives them far more breathing room than any other central bank in its size of intervention.

Interest rates globally have also been slashed in a desperate attempt to slow the rapid tightening of financial situations.

But the declining value of fiat currencies during this period points out how this “do whatever it takes” mantra — with aggressive rate cuts and massive asset purchases — can only go so far.

Interestingly, Bitcoin cycles tend to peak when the growth of assets of major central banks began to decelerate.

Source: Delphi Digital – The State of Bitcoin 2020

Demand for non-sovereign “safe haven” assets & non-correlated alternatives

Some developing countries have the room to cut rates in case the economic condition worsens. These countries can benefit from mild currency depreciation but at the same time risk driving away foreign investors.

Just last week, Brazil cut down its benchmark interest rates to a record low of 3% and its Congress has given the green light to new asset purchases. Brazilian Real has already lost 30% of its value against the US dollar since the start of this year. As such, BTC is up 74% against it.

Although, the capital flowing out of emerging markets won’t flow right into bitcoin, “the sheer size of this potential move could serve as another demand source for BTC, especially if tighter capital controls become more commonplace,” stated Delphi Digital in its latest report.

In this environment, Delphi Digital expects the demand for non-sovereign “safe haven” assets to rise considerably amidst the increasing risk of broad-based currency debasement, “most notably bitcoin and gold.”

Moreover, a rise in demand for non-correlated alternatives is foreseen by the independent crypto research company as “investors become more aware of the secular headwinds facing growth assets.”

Amidst this macro backdrop, bitcoin had its third halving yesterday. This supply shock has the inflation rate of the world’s leading digital asset declining to 1.80%, less than the global inflation rate of 3.6% while being the best performing asset of the past decade and of 2020 so far. All of this is what makes this digital asset an attractive investment option.

Macro investor Paul Tudor Jones also revealed this week that he has almost 2% of his assets in Bitcoin which he considers a hedge against inflation.

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Author: AnTy

Galaxy Digital’s Mike Novogratz: This Is The Year For BTC Or I Might ‘Hang Up My Spurs’

Bitcoin proponent, Mike Novogratz is still “most excited” about the world’s leading cryptocurrency but “if it doesn’t go all out by the end of the year I think I might just hang my spurs,” he said.

“We should have doubled within six months, we really should, this is the time, maybe within the end of the year, no retesting the old highs again,” said Novogratz.

The founder and CEO of Galaxy Digital shared this on CNBC’s “Closing Bell” where he said with central banks printing money, it feels like money is growing on trees. And this is the perfect setting for bitcoin, the hard asset.

Novogratz said “one story that is so crystal clear right now is bitcoin,” while central banks around the world monetize their debt.

“We’re going to have four or five six trillion dollars of fiscal debt monetized by this and literally it is a printing press. It’s exactly why bitcoin was created.”

After ending the quarter first of 2020 with a negative, 10% loss, bitcoin was off to a good start in April. Yesterday, the digital asset jumped above $7,000.

The leading crypto asset is currently up over 80% from the $3,850 low it put in mid-March. The violent sell-off in the crypto market that was in line with the stock market, however, saw increased interest from retailers. As we reported, from Coinbase, Kraken, to BitBank, Luno, and others, everyone saw record trading volume and signups.

But institutions might also be in for stacking some stats by buying the dip.

“I am seeing investors I never saw before, hedge fund investors, high net worth investors getting into Bitcoin for the first time.”

But, as we have been seeing the liquidity crunch that resulted in everything from the stock market, to gold being sold -off, the dollar rose as everyone scrambled for USD. However, according to Novogratz, that’s always the first reaction.

“What’s the first reaction is to get to safety. All of a sudden though people are going to say, wait a minute what are you doing in the dollar.

So, that’s when we come up with the next fiscal package which they’ll come up with, I’m sure within the next four months another two or three trillion dollars because the first one wasn’t enough.”

And this will be when more and more people will be getting into bitcoin, he said just like he’s “seeing it as we speak. I’m getting calls from real big investors who had never thought about it before are saying ‘tell me about this bitcoin.’”

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Author: AnTy