Grayscale is Not Buying Record Bitcoin, It’s Just Ripping Off Retail investors

Ever since the coronavirus pandemic began, bitcoin has been on a rollercoaster ride. While the BTC price has been trying to push higher, in May, miner rewards were cut into half to 6.25 BTC.

After miner inflow was reduced by 50%, there have been reports of Grayscale’s GBTC Bitcoin Trust buying the digital currency at record pace.

Currently, GBTC shares are trading at a premium of 20% to Bitcoin with each share cost $10.76 where each share represents 0.00096070 BTC which means one BTC is worth $11,200 here while Bitcoin is trading on spot exchanges just under $9,400.

Grayscale’s Ethereum product ETHE is trading even at a higher premium of 750%, 46% above ETH’s ATH.

A FINRA-approved investment vehicle, Grayscale held more than 300,000 BTC prior to the March 12 crash. Recently, it was revealed, the crypto hedge fund Three Arrows Capital has become the qualified investor to hold more than 6% of Grayscale Bitcoin Trust (GBTC) shares.

The fund has amassed more than 21 million GBTC shares, worth nearly $259 million or just over 20,230 BTC.

Retail Investors getting Ripped Off

Since halving, Grayscale has been gobbling up 50% more BTC than has been created. The news excited the crypto market given that bitcoin supply in the market has already cut down and with Grayscale consuming all the Bitcoin that is being created in the market and more, this should drive the prices up.

But that’s not really the case!

According to Ryan Watkins of Messari Crypto, Grayscale actually bought way less, just 31% of all new bitcoin mined since the halving.

This is because of the in-kind purchases. “~80% of the money it reportedly pulls in do not make up for any buy pressure,” because they were ‘in-kind’ purchases. Basically, these institutional investors can hand out their own BTC in order to ‘buy’ the GBTC shares.

GBTC shares are available to accredited investors and are created using cash or cryptocurrency with a year lock-up period, to be reduced to 6-month, which means initial investors can sell their shares to the public on secondary markets after the period is over. Watkins explained,

“When there are a lot of buyers and few sellers, investors in the secondary market can push the price of the shares well above the value of the underlying cryptocurrencies.”

“Since no new shares are being created, no new cryptocurrency is actually going into the trust, creating a premium to the underlying. This can create a significant arbitrage opportunity for accredited investors who can create new shares in the primary market.”

21shares, previously known as Amun, also shared in its report that buying bitcoin at these premiums makes sense if one is an institutional investor and creates shares at NAV but retail investors are simply getting “ripped off.”

Given these high premiums on products, it is unlikely that savvy or institutional investors are buying them. It’s the retail investors that are buying GBTC shares to get exposure to Bitcoin through their brokerage accounts or 401Ks.

It’s the “institutional and accredited investors that create GBTC are able to resell at large markups” and of course, Grayscale is benefitting from retail overpaying, said Lanre Ige of 21shares.

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Author: AnTy

Can RippleNet Cloud be a Game Changer for Post-COVID Banks and Financial Institutions?

The COVID-19 pandemic has undoubtedly increased the adoption of emerging technologies. Since the world was challenged by this virus, innovations by the FinTech community ranging from blockchain tech to cloud infrastructure have been accelerated. A company like Ripple, prominent for its blockchain built cross-border payment solutions, is now touting its cloud services as well, RippleNet Cloud.

As tech evolved, it became evident that existing on-premises infrastructure is in fact a huge cost in today’s business world. This is because of the underlying operations in staffing, maintenance, and migration to new systems. Therefore, cloud solutions are slowly taking over starting with tech giants like Microsoft and IBM who are among the largest service providers in this niche. However, financial institutions led by banks are still skeptical of moving their systems to cloud platforms given the sensitivity of clients’ data.

RippleNet Cloud

While cloud services may seem a concept of the future, their value proposition beats existing on-premises that are outdated, expensive to maintain, and inflexible. According to recent a publication on Ripple Insights, cloud services are now considered essential for the going concern of businesses post-COVID.

“Now, cloud-based technologies are considered essential to any business wishing to survive the pandemic—and keep up with rapidly changing consumer demands.”

Ripple’s cloud-based solution has since been hailed as a game-changer for banking ecosystems. Basically, the firm provides a platform for businesses to interact seamlessly on RippleNet via a common Ripple Payment Object (RPO). Compared to on-premises, clients on RippleNet can go live five weeks faster while cutting the costs attributed to staffing and hardware requisition.

In addition, RippleNet Cloud provides financial institutions the option to leverage on-demand liquidity for their settlements. Notably, clients also don’t have to stress with upgrades as they are handled with Ripple’s team. Given these underlying factors, RippleNet has attracted a number of prominent financial service providers including MoneyGram and India-based, Federal Bank.

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Author: Edwin Munyui

Secret Service Warns Unemployment Checks Will be Targeted by Scammers; Would DLT Help?

The coronavirus pandemic has not just caused a global health scare, but it has also impacted the livelihoods of billions around the globe due to mandatory shutdowns to contain the spread of the virus.

Many governments have decided to help the citizens in these troubled times by offering stimulus checks and cash relief including countries in and of Europe, Canada and the United States.

The United States has been the worst hit given the number of cases have reached over 1.5 million and thousands have perished to the disease. The outbreak of pandemic also saw one of the worst unemployment crisis in U.S. history as millions registered as unemployed in hopes of getting a stimulus check, and the unemployment rate peaked at 14.7%.

While the federal government has decided to help the unemployed in the ongoing pandemic, the unemployment checks meant to help the needy are now being targeted by scammers.

The U.S. Secret Service has alleged that they have evidence of sophisticated scamming machinery targeting these welfare checks which can steal hundreds of millions of dollars.

A New York Times report suggested that these scammers were filing false benefit claims disguised as people who were not unemployed and they might be using personal information gathered from earlier cyber attacks. The memo read,

“It is assumed the fraud ring behind this possesses a substantial P.I.I. Database to submit the volume of applications observed thus far.”

Nigerian Scammers Could be Behind the Sophisticated Attacks

A secret service memo suggested that the way these attacks are being carried out and the sophistication of these scams are quite similar to the organized scams carried out by Nigerian scammer groups.

These scammers held detailed information about U.S. citizens, including their social security numbers. Agencies since tasked with aiding unemployment checks realized the grave problem quickly.

Washington state has emerged as the primary target, while there have been reported cases of such scams in Florida, Massachusetts, North Carolina, Oklahoma, Rhode Island and Wyoming as well.

Back in April, the cybersecurity officials have warned about the increase in cybercrimes amid lockdown and how these cybercriminals have changed the tactics and sophistication level to pray on the insecurities of people looking for jobs.

Amid growing cyber crimes and misuse of data, many have suggested the use of blockchain to tackle the authenticity of the data since the technology is immutable and not controlled through a centralized system.

With the correct implementation of blockchain, government agencies can track the relief funds and ensure that these funds reach the right people.

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Author: James W

University of Waterloo Prof: Ripple’s XRP is More Environment-Friendly Than PoW Based Bitcoin

The recent coronavirus pandemic has brought back attention towards maintaining a cordial relationship with our environment. In the wake of the COVID-19 outbreak, the whole world has come to a standstill as roads become empty and factories shut down.

While the pandemic for sure has created a sense of uncertainty, it has also given a pause to mother nature from constant carbon emission and pollution which in turn has resulted in clearer skies and improved conditions for our ozone layer.

While the world will not be the same once we get past these troubled times, its time for some introspection and how we take our environment for granted.

Blockchain and Cryptocurrencies are going to play a pivotal role in the financial future, and thus sustainability should be a top priority for the decentralized space as well. Ripple, one of the key players in the decentralized space, is at the forefront of this initiative where its University Blockchain Research Initiative (UBRI), in association with the University of Waterloo is looking into ways that cryptocurrency can be made more sustainable.

Professor Hasan and Research Associate Crystal Roma along with their team recently published a research paper on the cost of running an XRP Validator node.

The research found that running one for a year would cost around $63, which was a great contrast to the fact that mining a single Bitcoin cost anywhere between $531 to $26,170. Professor Hasan noted that:

“Energy consumption is a big issue for blockchain, and it’s important that we identify better alternatives that can replace Proof-of-work algorithms.”

Bitcoin and the Environmental Woes Associated With PoW Based Mining

Bitcoin is certainly the king of cryptocurrencies, be it in terms of monetary value, its market cap or market dominance.

However, being such a prominent name also bring a lot of criticism along with it and while there have been many controversies associated with the king coin including its scalability and price volatility issue, the most prominent one is the label of being not so environment-friendly primarily because of its mining consensus Proof-of-Work.

The debate around high electricity consumption for mining Bitcoin, and its respective carbon footprint, arose during the last quarter of 2018. It’s estimated that the amount of electricity consumed in the bitcoin mining process is equivalent to the energy footprint equivalent to the size of a country like Austria.

Experts have since debunked the allegations of having a massive carbon footprint, claiming a majority of the power utilized to mine Bitcoins come from clean source energy, however, there is no denying the fact that Bitcoin mining does consume a significantly high portion of electricity without any direct output of that consumption.

While in many cold countries, miners have modified their mining rigs to use it as a modified thermostat, yet the concerns loom large.

Proof-of-Work mining consensus is considered the most secure consensus at present as it requires multiple miners to input their hashpower to mine the next block, making it difficult for hackers to gain control over the network.

On the other hand, Proof-of-Stake the second-most popular mining consensus select a miner on the network based on their on-chain activity and thus instead of hundreds of miners putting in their hashpower, which in turn leads to a lot of wastage of electrical energy, only the selected one mines the block.

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Author: Rebecca Asseh

Will COVID-19 Accelerate the Demise of Cash? It Puts CBDC’s into Sharper Focus: BIS Head

The outbreak of coronavirus pandemic has brought the whole world to a standstill and it has added to the misery of the financial institutions as well as governments to manage their deficits in these troubled times. While governments are on a money printing spree to get through. The ongoing crisis has also led to a rise in global discussion around Central Bank Issued CBDC’s and brought a sharper focus towards the concept.

During a webinar hosted by Accenture last week at the Reinventing Bretton Woods Committee – Chamber of Digital Commerce, the head of the Bank for International Settlements Innovation Hub, Benoît Cœuré primarily talked on two key areas resilience and technology. Cœuré believed these two key areas would be of great importance in the post-COVID-19 era for central banks and payment gateways

He further elaborated that the ongoing pandemic exposes the loopholes in the financial system and brought out the importance of technological advancements with time. He also believed the focus of central banks and governments should be to look for technologies that can work at arm’s length and overcome present issues of social distancing. In short, he believed that in the post-pandemic era there will be drastic changes in human behavior and consumption patterns which would have a lasting impact on how economies functioned in the pre-COVID era. He explained that there would be significant changes to the payment technology and elaborated,

“The payment industry immediately comes to mind. Payments have been at the forefront of technological change recently. A rapid shift towards digital payments can improve cost, transparency and convenience for billions of consumers. International cooperation is needed to support technological capacity in developing economies, ensure interoperability between national systems, enhance cross-border payments and remittances, and support financial inclusion – in short, to avoid spatial and social fragmentation.”

Physical Cash May Start to See a Decline in Demand

The ongoing pandemic is also going to change how people used physical cash. The head of BIS believed that it is an open question whether the present situation would lead to the demise of use of cash. But, it would surely accelerate the adoption of digital payments. He also believed that the global discussion around CBDCs would see a sharper focus and explained,

“The current discussion on central bank digital currency also comes into sharper focus. Whether COVID-19 will accelerate the demise of cash is an open question. But already, it highlights the value of having access to diverse means of payments and the need for any means of payments to be resilient against a broad range of threats.”

There has been a lot of debate about whether central banks should launch their own digital currencies and that debate has been fueled further by China who is already testing their national digital currencies in several cities.

Interestingly, China is among the most advanced nations when it comes to payment modes where almost 90% of the population is using a digital form of payment which are integrated into their daily use applications. This makes it even easier for the country to implement and issue CBDCs since they won’t have to make significant changes to their payment infrastructure. The ongoing crisis has only proved the need for such innovations and a majority of the nations are believed to spring in action once the pandemic situation is under control.

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Author: Lorraine Mburu

FBI Issues Warning to Crypto Holders About Increasing Coronavirus (COVID-19) Scams

The COVID-19 pandemic outbreak has brought the whole world to a standstill, with the majority of countries worldwide placed under strict lockdown measures to contain the spread.

The crypto community remains enthusiastic, despite the ongoing crisis, with the upcoming Bitcoin Halving just a month away. However, this enthusiasm has also made them vulnerable to scams.

The Federal Bureau of Investigation (FBI) has released a warning on Monday specifically for crypto holders, suggesting they be prepared for a surge of coronavirus-centred crypto scams in the coming weeks.

Cryptocurrencies have turned out to be a lucrative investment in the past couple of years, which has drawn the interest and investments from people of all kinds, be it institutional investors, small-time traders, young or old. This rapid rise in interest has also given way for scammers to lure many into Ponzi schemes, promising high returns in a short period of time.

However, the risk of scammers has risen significantly in these troubled times where a majority of the population are uncertain of their financial future, as most of the financial markets hit record lows and scarce investment opportunities.

The FBI believes scammers are praying on these insecurities to steal people’s hard-earned money, and launder it through the complex ecosystem of decentralized coin exchanges. While entities like Huobi have taken steps to prevent these activities, buyers beware.

FBI Believe Scammers May use Humanitarian Aid as Cover for Scams

The FBI warning noted that the scammers might use a number of methods and curtail their pitches on emotion quotient in the ongoing situation, where they might pretend to be from organizations looking for donations to help the needy.

The FBI also believes blackmail could also be a scamming avenue for making money. Where the scammers may threaten to infect the victim’s family with the Coronavirus.

The FBI has also urged people to be cautious and, use common sense and not let their emotions get better of them.

The agency has also stated that people should refrain from donating to anyone before verifying the credibility of the source, and report any suspicious website/s or person/s asking for donations.

While there is no clarity on why the agency suddenly issued such a specific warning, it seems there have been many COVID-19-themed scams in the past couple of weeks, prompting the authorities to issue the warning.

In one instance, scammers managed to collect $2 million from PPE seekers in Asia. A few scammers in the UK and USA were found sending malicious texts which drew attention from financial regulators.

A Chainalysis report has revealed that the ongoing pandemic has brought down funding of these scams by one third. This, however, hasn’t discouraged scammers from trying to phish people as their number of attempts have remained constant.

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Author: James W

Google Trends Reveals A Spike In Interest for Bitcoin Halving, Will A Bull Run Start Soon?

Bitcoin Halving is just around 35 days away and despite the ongoing coronavirus pandemic, it seems the interest towards halving hasn’t dipped. In fact, as per the recent Google metrics, the interest in Bitcoin halving is on the rise. While most of the traditional financial market has come to a standstill and governments around the globe are on a money printing spree due to the outbreak of coronavirus, despite these factors Bitcoin seems to stand its ground as a decentralized form of currency.

Bitcoin halving is considered as a highly bullish event given the supply-demand factor. After each halving the rate of new Bitcoin coming into the market get reduced by half. When Bitcoin was launched back in 2009, the block reward was 50 BTC per Block, and approximately after 4 years, this supply has been reduced from 50 to 25, then 25 to 12.5 and the next halving would bring it down to 6.25.

In the past Bitcoin has shown jumps in upwards of 1000% prior to the halving, but that was mainly because Bitcoin was highly volatile being a new asset class, however, the volatility has been significantly reduced in the following years and the next halving might not see that big of a jump. Irrespective of that, Bitcoin proponents are quite confident that the scarcity factor would kick in and BTC price might reach as high as $100,000 within 2 years of halving.

Google Trends Show Significant Rise In Interest Towards Bitcoin Halving

The next Bitcoin Halving is going to be the third event of its kind and probably the first with attention from people of all walks of life. The recent Google Metrics Data is the witness of the same as the trends suggest a significant peak in the searches of ‘Bitcoin Halving’ and ‘Halving’ in the past couple of months.

A data compiled by LongHash suggest that the interest levels for Bitcoin Halving have grown from 19 in April to 78 in the present time, and even reached 100 for a short period in the month of March.

Google measures the search volume for particular terms on the scale of 0-100. So, looking at the chart it’s quite clear that the interest in Bitcoin halving was at its highest in Mid-March which has dropped by almost 22% at the start of April. While the decline is significant it can be attributed to the growing tension due to COVID-19 which has infected over 1.5 million people across the globe and has killed over 10k people worldwide.

A majority of the search volume started to spike with the start of the new year which also saw Bitcoin gain some lost grounds and reach around $10,500 mark by mid-February. The traditional markets were already in the turmoil and COVID-19 outbreak led to a series of market crashes which also made many Crypto Institutional investors to panic sell, resulting in Bitcoin crashing to as low as $3,800 in March.

Other metrics suggested Americans being highly interested in Bitcoin Halving, as granular data for the U.S. suggests American citizens will be searching Bitcoin Halving Twice of what they did last week.

Price Predictions and Recent Halvings of Altcoins Haven’t Resulted in Bullish Run

Price predictions in the crypto space is an outright bad idea, as man self-proclaimed pundits have not just got it wrong but way off the mark. The primary example is 2018 bear market, where many of the likes of Charlie Lee and Tim Draper predicted 6-figure price rise after the massive bull run towards the end of December 2017 which saw Bitcoin attain its all-time-high price of near $20k. However, since that prie rise, Bitcoin has not able to go anywhere near that price even when many believed that 2018’s bear market will be followed by another bull run and effects of halving would kick-in by mid-2019 or early 2020.

PlanB, who has attained fame with his stock-to-flow charts predicting Bitcoin to reach over $100K by December 2022 believe the scarcity would be the biggest factor behind Bitcoin’s rise. However, looking at the current scenario and the price predictions in the past, that seems to be quite far-fetched.

Many altcoins such as Litecoin, and most recently Bitcoin Cash and Bitcoin SV has undergone halving, and none of them showed any signs of bullish price movement either prior to halving or in the aftermath, so it would be interesting to see if Bitcoin behaves the same or indeed sees the long-awaited Bull run.

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Author: James W

Govt’s May Accelerate Digital Payment And CBDC Research Due to COVID-19: BIS

Bank of International Statements (BIS) recently released a research report on the effect of the COVID-19 pandemic to the overall payment system. According to the research, the virus is causing fear and uncertainty as physical cash sees a dip in usage in favor of digital payments. Additionally, the report from BIS states there may be an acceleration in the development of government-backed digital currencies such as central banks CBDCs.

Public fears cash over COVID-19 pandemic

In the third bulletin of BIS titled, “COVID-19, Cash, and the Future of Payments” the bank highlighted the growing fear of the use of physical cash, despite scientific evidence of low chances of contracting Coronavirus through cash. This growing fear may set in a rush across governments in the quest to develop CBDCs and other digital forms of payments, the report further states.

“Looking ahead, developments could speed up the shift toward digital payments. […]The pandemic may amplify calls to defend the role of cash – but also calls for central bank digital currencies.”

However, with half of the world lacking these digital payments, a sudden shift to such payment systems may set a divide especially in these times of the pandemic. The researchers said,

“If cash is not generally accepted as a means of payment, this could open a ‘payments divide’ between those with access to digital payments and those without.

This could open a divide in access to payments instruments, which could negatively impact unbanked and older consumers.”

A broader look into digital payments

Governments across the world including Asia, Africa, the Americas, and Europe have started embracing digital payments on mobile phones and digital currencies. The U.S government stimulus bill proposed a digital ecosystem to disburse the funds to millions of Americans.

Argentinian governor, Jorge Capitanich of Chaco province, urged the use of digital payment systems across his state to phase out the use of physical fiat money during an internet call with the President, Alberto Fernández

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Author: Lujan Odera

Modern Monetary Theory (MMT) vs BTC to be the Main Event of 2020

The biggest global emergency of the century, COVID-19 pandemic has the Treasury officials trying to decide on how much they can spend to fight the novel coronavirus.

Before the financial crisis in 2008, people relied on commercial banks to create money, which was in the form of loans. But during the crisis, central banks like Bank of England started creating money via quantitative easing (QE). Now, the banks are back to practicing it, with promises of doing everything they can, everything on the table, and “nothing out of question.”

This crisis is every MMTer’s wet dream

While the BOE is preparing to expand its QE program of $435 billion in outstanding loans by $200 billion, which is just under 10% of the UK’s national income, Malaysia’s stimulus package is worth 17% of its GDP. Fed’s stimulus meanwhile is expected to come at $6 trillion.

Last week, the Fed also bought $183 billion of mortgage-backed securities, to drive down rates. The rates and volatility dropped while the mortgage-related shares rose on Friday. However, this has led some lenders to face margin calls and eroded their working capital.

Because of the Fed’s actions that are meant to help the market, the Mortgage Bankers Associations warned that the housing market could face a “large-scale disruption.”

The Fed’s lending to the US government has already ballooned to $5.2 trillion or 23% of the GDP, but according to Fed Chairman, Jerome Powell, the central bank can go further.

Fed’s coronavirus stimulus also resulted in banking going from “fractional reserve to 0 reserve!” In fractional reserve, banks are required to keep a certain amount of cash on hand, mostly 10% of the deposit. While it can help banks to earn interest on loans, it could result in bank runs as many US banks were and as a result, forced to shut down during the Great Depression.

BTC: The hardest money is challenger

Such measures and stimulus can eat up central banks’ funds but still, the government wouldn’t need to borrow from the market because as the officials themselves have said, they can print.

More QE is their answer. Basically, a form of MMT, this theory which is now in practice says the central bank can print money as long as it likes.

According to Willem Buiter, who was the founding member of the BOE’s monetary policy committee before becoming Citigroup’s chief economist said,

“it would be criminally negligent to allow a design flaw in existing treaties to inhibit the appropriate use of helicopter money at a time of existential crisis.”

On the other hand, the critique of MMT argues it can overheat an economy. Also, taxes would be needed to be increased at one point.

And the alternative to MMT, is Bitcoin. Angel investor Balaji S. Srinivasan, who has been expecting MMT vs BTC to be the main event of the 2020s now thinks it might happen this year as central banks start their money printers.

Source: @balajis

As we have been already starting to see for the past few weeks, Bitcoin price has been reacting to Fed’s unlimited QE announcement with a flurry of trading.

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Author: AnTy

Italian Bank Launches ‘Hype’ Bitcoin Trading Service in Wake of the Coronavirus Outbreak

The Coronavirus (COVID-19) pandemic has inevitably sparked innovation and caused an increase in adoption of some markets sooner than we expected. An Italian bank, Banco Sella, recently launched a BTC trading service in a bid to deal with the tough financial times.

This move is not unprecedented, given the country has been hit the most by COVID-19 in Europe. Banco Sella will now allow over 1.2 million users who registered with their platform dubbed ‘Hype’ to buy and sell Bitcoin. In addition, they will be able to use this digital asset for payments of goods and services. The bank is optimistic that capitalizing on the growing BTC interest while the country is on lockdown will yield a positive ROI in the future.

Hype’s General Manager emphasized on the significance of tapping into this market;

“The cryptocurrency and Bitcoin market in particular continues to arouse interest, especially among the public that constitutes our customer base — by definition young and smart and who, increasingly, expect to be able to access this world through the tool that they use to manage money on a daily basis.”

Will Digital Currencies Help in Curbing Coronavirus (COVID-19)?

The world is at an uncertain point as COVID-19 cases increase by the day. This has forced some countries to take radical measures like lockdowns while others are on the frontline of research and development to fight the virus.

Given the situation, a country like Kenya has moved to incentivize its citizens to use M-Pesa services. The leading mobile provider, Safaricom, announced that sending amounts below $10 will be free while it increased transaction limits to $1500 from $700 per transaction. This initiative has seen Kenya’s average use of mobile money rise from $1.5 to $3.5 within the last five days.

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Author: Edwin Munyui