“Fear” in The Crypto Market And Bitcoin’s Correlation With S&P 500 Climbs to Highest Level of 2021

Crypto assets are not really having a good time, with Bitcoin stuck around $56,500 and Ether below $4,300.

But crypto assets are not alone in that as speculative stocks aren’t any different as losses picked up in very-high-priced technology names as the bond market started to price in higher odds of rate hikes next year following President Joe Biden picking Jerome Powell for a second term as the Federal Reserve chairman.

“The big-cap tech names have become synonymous with the risk-on/risk-off trade. When the big-cap tech names move in a significant way, other risk assets move in tandem,” said Matt Maley, chief market strategist for Miller Tabak + Co.

This has the 100-day correlation coefficient of Bitcoin and the S&P 500 climbing to 0.33, which is among the highest readings of the year.

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A coefficient of 1 shows a strong correlation, while minus-1 would show they’re moving in opposite directions. The current figure means when stocks move up, Bitcoin is likely to do the same, and vice versa.

“The recent drawdown in Bitcoin and the rest of the cryptocurrency ecosystem has been tied to the selloff in the more risky growth names,” Art Hogan, chief market strategist at National Securities. “So you’re seeing cryptocurrencies come off, and you’re seeing the high-flying growth names come down.”

The lack of bullishness in the crypto market, except for particular crypto-assets, has the market sentiments turning to “fear,” as per Crypto Fear & Greed Index.

While some may feel this might be the end of the crypto market, others believe this could be a sign of an extended cycle.

“It’s very possible “extended cycle” could partially play out. Bitcoin could top early January or whatever. ETH a bit later on. Alts in April and maybe DeFi even separately from other alts. Not everything must converge on one top point in time,” said popular crypto investor @bitcoinpanda69.

Currently, there are a few potential factors that are playing a part in the market weakness, including a shifting macro outlook and crypto market conditions.

Within crypto, as price drops, open interest for BTC and ETH, which is a proxy for leverage, has “started to decrease as pressure is placed on existing long positions,” as per Coin Metrics.

As for Bitcoin miners, who are natural BTC sellers, their selling pressure has been minimal and is trending lower. Moreover, they use OTC desks to minimize their impact on the price. Recently, miners have started to HODL their BTC mining rewards.

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On a macro front, with the US bond yields, especially with shorter-duration maturities, on a sharp rise over the last few weeks, capital might be reshuffling from riskier crypto assets to a “risk-free” rate of return.

Amidst all this, JPMorgan Chase CEO Jamie Dimon couldn’t help but poke at cryptocurrencies. “It is not really a currency,” Dimon said at the Boston College series of CEO interviews.

These “crypto tokens” have no intrinsic value and have rallied on speculation fueled by government stimulus payments, he said, adding, “It is hysteria.”

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Author: AnTy

$3.5 Billion In Crypto Accounted for 93% of All Assets Seized by IRS in 2021: Report

$3.5 Billion In Crypto Accounted for 93% of All Assets Seized by IRS in 2021: Report

The agency expects to seize billions of dollars worth of crypto in the coming year after getting more ability to surveil crypto transactions in the infrastructure package, to counter which a comprehensive bipartisan bill has been introduced in the House.

The Internal Revenue Service (IRS) seized $3.5 billion worth of cryptocurrencies during the 2021 fiscal year, according to an IRS criminal investigation annual report published this week.

This figure accounted for 93% of all the assets seized by tax enforcement using this period.

Now, the IRS is expecting to seize crypto valued at billions of dollars linked to tax fraud and other crimes in the coming year as well, as per the agency’s head of criminal investigations.

“I expect a trend of crypto seizures to continue as we move forward into fiscal year ‘22,” IRS Criminal Investigation Chief Jim Lee said on a call with reporters. “We’re seeing crypto involved in a number of our crimes as we move forward.”

In its annual report, the IRS said cybercrimes affecting the US financial systems are seeing “exponential growth” and added that it is now prioritizing training on criminal schemes related to crypto.

Recently, Congress granted the IRS more ability to surveil crypto transactions in the infrastructure package President Joe Biden signed into law on Monday. The law contains the overreaching definition of crypto ‘broker’ to have them track and porter transactions to the IRS.

This week, a comprehensive bipartisan bill has been introduced in the House to clarify the definition of a broker and for other purposes.

This bill will “fix EVERYTHING wrong with the infrastructure bill’s crypto tax provision–including the unconstitutional §6050I individual reporting mandate,” said Jerry Brito, executive director of CoinCenter.

He noted that it would replace the overly broad definition of “broker” with one that is reasonably limited to exchanges that buy and sell crypto for customers, will only cover reporting information voluntarily provided by customers and held for legitimate business purposes, and will strike the expanded reporting requirement for digital assets.

“Blockchains, cryptocurrencies, & decentralized finance may still be new & evolving, but Congress must recognize these technologies are some of the most important innovations to come along in a generation,” said Congressman Tim Ryan, along with Patric McHenry, who introduced this legislation.

Congressman Ryan said a balance between consumer protections and reasonable oversight needs to strike while simultaneously providing these technologies with the space to grow, which is essential to taking advantage of this opportunity.

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Author: AnTy

Michael Novogratz’s Galaxy Adds More than $3B in Assets This Year as Ether Picks Up Steam

Michael Novogratz’s Galaxy Adds More than $3 Billion in Assets This Year as Ether Picks Up Steam

Ether is going mainstream, much like Bitcoin did a year-and-a-half ago. Also, crypto is now becoming an asset class.

Crypto billionaire Michael Novogratz’s Galaxy Digital Holdings (GLXY) recorded its biggest ever cash influx as Bitcoin and Ether rallied to their all-time highs.

Currently trading just under $62,000, Bitcoin made its ATH at $67,000 on Oct. 20. Ether meanwhile hit a new peak on Wednesday at $4,675 and is currently consolidating around $4,500, up over 520% this year so far.

While Ether is inching closer to $5k, Goldman Sachs has estimated that the digital asset’s price is set to reach $8,000 by year-end because “it has tracked inflation markets particularly closely.” The lastest spike in inflation breakevens suggests more upside for the second-largest cryptocurrency.

Crypto Becoming An Asset Class

At the end of October, Galaxy had $3.2 billion in assets, an increase of 45% from the prior month, according to global asset management head Steve Kurz. At the beginning of the year, the asset manager had less than $1 billion under its management.

One of the main drivers of its growth is Ether-focused Canadian ETF. The CI Galaxy Ethereum ETF (ETHX) has amassed more than $1 billion since launching in April.

According to Kurz, this flood of cash will continue to build as Ether gains mainstream adoption.

“Crypto’s becoming an asset class, not just an asset.” “From a market infrastructure and development of the asset class perspective, Ether is picking up steam, probably the way Bitcoin did a year-and-a-half ago.”

GLXY shares have also jumped 13% in the first three days of November, following the 50% uptrend last month.

Bitcoin Facing Competition From Ethereum

The US has yet to see an Ether ETF though the first Bitcoin ETF started trading last month, but it was linked to futures contracts trading on the CME, and a spot crypto ETF is nowhere near being approved. Analysts expect Ether futures ETF to get the green light soon as well, even before the physically-backed Bitcoin fund gets approved.

Besides the potential to have its future ETF launching, CME has also announced that it is launching Micro Ethereum Futures early next month.

“It has become clear in the last six months that bitcoin faces competition as Ethereum and other Layer 1 assets become more innovative, with DeFi and NFT use cases, while bitcoin’s primary use case continues to be as a scarce, fungible digital asset,” said Chainalysis chief economist Philip Gradwell.

He pointed out how an additional 4 million ETH have flooded into DeFi in the last six months, bringing the total to 17.6 million Ethereum — 15% of Ether’s total supply.

“These are all very positive developments for crypto, and I think its potential is now clearer than ever,” said Gradwell.

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Author: AnTy

Grayscale Kickstarts SEC Review of its Spot Bitcoin ETF (‘BTC’) Application

Grayscale Bitcoin Trust (GBTC) has more than $40 billion assets under management and is currently trading at a steep 16.56% discount.

The day the first Bitcoin ETF launched in the US, the largest digital asset manager Grayscale Investments announced that it had filed to convert the world’s biggest Bitcoin fund into a spot ETF.

The Grayscale Bitcoin Trust will trade under the ticker symbol ‘BTC.’

Unlike the ProShares Bitcoin Strategy ETF (BITO), whose debut was the second most traded ETF with more than $1 billion worth changing hands, Grayscale’s ETF will be backed by actual units of the leading cryptocurrency.

The filing by Grayscale along with the NYSE Arca has kickstarted a window for the Securities and Exchange Commission (SEC) to reject or delay the GBTC conversion application. The SEC has 75 days to review the application.

While the SEC has allowed the derivatives-based product to launch, Chair Gary Gensler has emphasized that it offered more investor protection. Physically-backed Bitcoin ETF was first filed by Winklevoss twins in 2013, and in the past eight years, the agency has rejected every single one of them.

Launched in 2013, Grayscale Bitcoin Trust has $41.7 billion assets under management and is currently trading at a steep 16.56% discount. GBTC holds roughly 3.44% of all Bitcoin in circulation. Michael Sonnenshein, chief executive officer, said,

“As we file to convert GBTC into an ETF, the natural next step in the product’s evolution, we recognize this as an important moment for our investors, our industry partners, and all those who realize the potential of digital currencies to transform our future.”

Sonnenshein shared on Twitter that GBTC is owned by investors in all 50 states, representing over 700K retail and institutional accounts. GBTC shares are locked up for six months; this means the holders are unable to trade in reaction to market movements.

Grayscale is committed to converting not only GBTC but also other 14 investment products into ETFs, he added.

Dave LaValle, Global Head of ETFs at Grayscale Investments, said,

“At Grayscale, we believe that if regulators are comfortable with ETFs that hold futures of a given asset, they should also be comfortable with ETFs that offer exposure to the spot price of that same asset.”

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Author: AnTy

“This Isn’t Just BTC Anymore,” It’s Digital Assets Creating an Ecosystem of New Opportunities: BofA

“This Isn’t Just Bitcoin Anymore,” It’s Digital Assets Creating an Ecosystem of New Opportunities, says Head of BofA Global Research

Bank of America has finally launched coverage of cryptocurrencies due to “growing institutional interest” and the massive appetite among retail clients.

Candace Browning, head of global research at BofA Securities, shared in an interview with Bloomberg that the number of corporates mentioning crypto on their earnings calls has increased to about 147 in the most recent quarter, from merely 17 in the last year.

“This isn’t just Bitcoin anymore, this is digital assets and it’s creating a whole ecosystem of new companies, new opportunities, and new applications.”

The bank has published its first research coverage focused on crypto titled “Digital Assets: Only the first inning” while noting that the industry has grown to over $2 trillion with more than $200 million users. The “digital asset universe is too large to ignore” now.

BofA’s cryptocurrency research coverage for which the team was appointed in July is headed by former tech analyst Alkesh Shah, the bank said.

“This is growing, this is mainstream, and it’s not just Bitcoin.”

In other news, Inuit Inc., the maker of QuickBooks and TurboTax software which recently acquired privately held email marketing firm Mailchimp for $12 billion, has launched a new venture arm to invest in emerging financial technology, including crypto.

Talking about crypto’s role in Intuit’s future and just how excited the company is about the nascent asset class, Sasan Goodarzi, CEO of Intuit, told Bloomberg that “It’s important to intentionally place your bets on the future.”

He believes betting on emerging, and unproven trends is important because some will work and some won’t. Also, it gives an opportunity to pick great talent, he added.

“We believe crypto and blockchain will play an important role,” said Goodarzi, noting they are all about making sure that everything that they do is about making customers manage their cash flow, only to add, “but they (crypto) are going to play an important role.”

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Author: AnTy

Fintech Savings App, Acorns, Plans to Introduce Crypto Assets to Its 4 Million Subscribers

Fintech Savings App, Acorns, Plans to Introduce Crypto Assets to Its 4 Million Subscribers

In an interview with CNBC, Noah Kerner, CEO of fintech firm, Acorns said the startup plans to introduce cryptocurrencies and other digital assets on its platform. This will give users the ability to invest and learn more about cryptocurrencies. The move represents a switch from the conservative nature Acorns has adopted in previous years.

Additionally, the savings app has appointed former Amazon employee David Hijirida as president to lead the company’s day-to-day operations. Hijirida started his journey in traditional finance companies before spending 12 years in management roles at Amazon, including its global payments division. He also held the CEO position at digital bank, Simple Finance from 2018 before unexpectedly shutting down operations in May this year.

According to Kerner, introducing Bitcoin and other digital currencies will be launched on the app in the coming weeks. This will allow users to diversify their portfolios and learn how to manage their crypto assets, he added during the interview.

“We are going to let people customize their portfolios and add individual equities and crypto into a slice of their diversified portfolios, much the way a money manager would advise you to behave.”

The fintech startup is preparing for its expected public listing later in the year by appointing seasoned managers such as David, Kerner explained. Following a merger with Pioneer Merger Corp., a special purpose acquisition company (SPAC), Arcons was valued at $2.2 billion, preparing for its public sale launch in May. David is the second high-ranking manager appointed in the last two months after it named Twitter executive Rich Sullivan its new chief financial officer.

“David obviously has a great depth and breadth of financial services and technology experience.”

“He has a great combination of fintech, payments, operations, and also product development experience.”

The growth of Arcons is nothing short of impressive, having reached over 4 million paying subscribers with a plan to reach over 10 million subscribers in the next four years.

Unlike fintech startups such as Robinhood, which went public last year, Arcons offers savings and long-term investment options rather than a short-term trading service that offers gamified stock and crypto trading.

“Everything Acorns does about long-term saving and investing for the everyday consumer.”

“It’s why our subscription model is so important because it decouples the business from behaviors that aren’t necessarily customer-aligned, like driving trading or driving spending or driving borrowing.”

The platform is yet to release a launch date for its planned crypto assets inclusion, Kerner concluded.

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Author: Lujan Odera

ECB President Says, Cryptocurrencies Are Highly Speculative Assets That Claim Their Fame As Currency

ECB President Says, Cryptocurrencies Are Highly Speculative Assets That Claim Their Fame As Currency

Christine Lagarde says, “we have to stand ready” for CBDC, which will be available side by side with paper currencies while calling for stablecoins to be regulated.

“Cryptos are not currencies. Full stop,” said Christine Lagarde, President of the European Central Bank (ECB).

In an interview with Bloomberg this week, when asked if she thinks cryptocurrencies are a plus for the global economy or if it’s too early to tell, Lagarde blasted cryptos, saying while they possibly can be, cryptocurrencies are not currencies.

“Cryptos are highly speculative assets that claim their fame as currency.”

She then talked about the need to distinguish between cryptos that are highly speculative, even suspicious occasionally, and have high intensity in terms of energy consumption.

Lagarde also talked about stablecoins during the interview, which she said are “beginning to proliferate.” The total market cap of stablecoins has now surpassed $124 billion, with USDT, USDC, and BUSD leading the market with their respective market share at 58.5%, 23.65%, and 10.27%. Stablecoins, she said,

“need to be regulated where there has to be an oversight that corresponds to the business that they are actually conducting irrespective of how they name themselves.”

Lagarde also noted that some big techs are also trying to promote stablecoins and push along the way, which she said are “a different animal.”

Tech giant Facebook first announced its stablecoin Diem in 2019 with a plan to be backed by a wide mix of fiat currencies and government debt and instantly ran into regulatory scrutiny. Last month, David Marcus said they seek necessary regulatory clearances and have already secured approvals for its digital wallet Novi in nearly every state in the US.

Central banks are also “prompted” by the demand of customers to produce digital fiat money, “something that will make the central bank and central bank currencies fit for the century we’re in,” she said.

This is why every central bank, including the ECB and the Federal Reserve, is looking into central bank digital currency (CBDC) so that instead of having banknotes and cash, “we can have exactly the same thing. But in a digital form.”

“So all of us are working on this and certainly always keen to push the CBDC issue on our agenda because I believe that we have to stand ready for that.”

When launched, they will be available side by side with paper currencies,

“because we want customers to have their preference. If they still want to hold those banknotes and cash, fine. And it should continue to be available in the long run.”

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Author: AnTy

Fidelity Digital Assets Exploring the Possibility to Offer Yield Funds, Stablecoins, and DeFi Tokens

Fidelity Digital Assets Exploring the Possibility to Offer Yield Funds, Stablecoins, and DeFi Tokens

Fidelity Digital Assets also plans to increase its employee headcount by up to 70% by the end of the year. Meanwhile, its survey reveals over 60% of US investors are neutral to positive about a Bitcoin ETF.

Fidelity Investments is growing its digital assets team to expand its cryptocurrency-related products in response to the increasing interest from financial advisors, family offices, and other institutional investors.

Tom Jessop, president of Fidelity Digital Assets, said in an interview that the company is planning to increase its employee headcount by up to 70% by the end of the year.

Fidelity’s digital asset arm that provides institutional services including trade execution and custody is also exploring the possibility of offering yield funds and other products that may involve stablecoins or DeFi tokens, said the managing director, Peter Jubber.

“All of these are candidates for us as we begin this exploration.”

“Could they result in actual products? Early days.”

Fidelity also published a survey this week that showed that in the US, 79% of family offices have a neutral, positive view of digital assets. The survey of 1,100 professionals was conducted between early December and early April.

It further showed that factors such as fear of inflation due to financial stimulus was a catalyst for many investors to enter the crypto market.

“A catalyst for a lot of industries was the start of the pandemic.”

“Our clients said the factor to get them off the fence were the macro economic issues in the pandemic.”

For the first time, Fidelity surveyed Asian investors and found them to be the most accepting of digital assets, with more than 70% of those surveyed currently invested in them.

Investors are particularly looking for institutional investment products to hold digital assets. More than 60% of U.S. investors express a neutral to positive view about a potential Bitcoin exchange-traded fund (ETF). Fidelity itself has filed an application with the SEC for a Bitcoin ETF.

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Author: AnTy

House Democrats Planning to Hike Tax on Crypto Assets in Infrastructure Bill

House Democrats Planning to Hike Tax on Crypto Assets in Infrastructure Bill

The trillion-dollar infrastructure bill has moved to the House to pass, and after fighting and losing in the Senate, another big fight is at the crypto industry’s door.

Citing sources with the knowledge of the plans, Politico reported that Richard Neal, chairman of the House Ways and Means Committee, is the one preparing to add these measures.

On Monday, House Democrats released a package of proposed tax increases to help pay for the White House’s $3.5 trillion spending package. Part of the $2 trillion tax hike is a proposal to add currencies, commodities, and crypto assets to the wash-sale rule, which is estimated to raise about $16 billion over a decade. The Ways and Means explainer document notes,

“This section includes commodities, currencies, and digital assets in the wash sale rule, an antiabuse rule previously applicable to stock and other securities. The wash sale rule in section 1091 prevents taxpayers from claiming tax losses while retaining an interest in the loss asset. The amendments made by this section apply to taxable years beginning after December 31, 2021.”

Under US rules, a taxpayer can’t deduct the losses from wash sales which is defined as when a security is sold and within 30 days, “substantially identical” security is then purchased. Cryptocurrencies aren’t currently subject to these rules.

The document further talks about applying constructive sales rules to digital assets, “anti-abuse rules previously applicable to other financial assets.” This rule treats “the adoption of certain offsetting positions to previously owned positions as sales of the previously owned position,” preventing taxpayers from “locking in investment gains without realizing taxable gain.”

House Democrats are also targeting wealthy Americans by proposing raising the tax rate on capital gains and qualified dividends to 28.8%, applied to stock and other asset sales that occur after Sept. 13, 2021.

According to this, starting next year, taxpayers would incur a top federal rate if their taxable income exceeds $400,000 (single), $425,000 (head of household), and $450,000 (married joint), in line with the Biden administration pledging to not raise taxes for households making less than $400,000.

The bill is expected to be revealed before the end of the month.

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Author: AnTy

Ukraine Passes the Law to Regulate Virtual Assets With Nearly Unanimous Vote

Ukraine Passes the Law to Regulate Virtual Assets With Nearly Unanimous Vote

This is a step in the direction of Ukraine’s plan to open a cryptocurrency market to businesses and investors by 2022.

The Ukrainian Parliament passed a law this week that legalizes and regulates virtual assets in the country.

The bill was drafted in 2020 and was passed on Sept. 8 with support from 276 lawmakers, while only six were against the legalization of bitcoin and cryptocurrencies.

For the first time, the bill also provides clarity on digital wallets and private keys in Ukraine.

With this bill, the country aims to provide clarification on this asset class and protect those who own them. While crypto-assets were previously illegal in the country and citizens could buy and sell them, the law enforcement agencies treated the virtual assets as a scam. They conducted raids, often confiscating expensive equipment.

Just last month, the Security Service of Ukraine (SBU) blocked a network of what it called “clandestine cryptocurrency exchanges” running in Kyiv and claimed that these exchanges were facilitating money laundering and providing transaction anonymity.

But the law will allow crypto businesses to work officially in the country. To register a crypto business, a company is needed to prove that it is transparent and has an excellent reputation.

‘It will reduce stereotypical attitudes towards cryptocurrencies and will help them to become normal financial instruments,” said Oleg Kurchenko, CEO of virtual asset exchange platform Binaryx.

While Ukraine’s Ministry of Digital Transformation, the National Bank, and the National Securities Commission are the main regulator of the virtual asset market, as per the law, the government wants to have another regulator to issue permits to crypto companies.

If signed by President Volodymyr Zelensky, where it is now headed, the law will protect the crypto owners and exchange platforms from fraud and determine how it will regulate the cryptocurrency market in the future, according to the local publication.

The country further plans to open a crypto market for investors and businesses by next year, a spokesperson of the Ministry of Digital Transformation told the Kyiv Post. Mykhailo Fedorov, Ukraine’s Minister of Digital Transformation, himself has said previously that the country was modernizing its payment market so that its central bank would be able to issue digital currency.

On an official state visit to the U.S. in August, President Zelensky also spoke of Ukraine’s budding “legal innovative market for virtual assets” as a selling point for investment.

But this would first require the parliament to pass the laws and amend the Tax Code and the Civil Code. Jeremy Rubin, CEO of bitcoin R&D lab Judica said,

“Ukraine’s improved legal status for bitcoin is a laudable symbolic measure that we progress towards a world that respects individual rights universally.”

“But it is only symbolic — bitcoin seeks neither permission nor forgiveness in its mission to protect persecuted communities from unjust governments.”

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Author: AnTy