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Blockchain Bites: Winklevoss’ Wild Prediction, Bitcoin Miners’ Horde, Ethereum’s ‘Critical Bug’

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Mongolian authorities have put the kibosh on cheap electricity for crypto miners, Venezuela is seeing healthy crypto use outside government-approved exchanges and a “critical bug” has left 13% of Ethereum nodes useless.

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Top shelf

Bakkt’s back?
Growing institutional interest is helping to drive a recent spike in volume on Bakkt, according to its president, Adam White. Trading volumes for physically settled bitcoin futures on Bakkt rose to $134 million on Tuesday from a previous high of $132 million on July 28, Muyao Shen reports. Physically settled means buyers receive tokens at expiration instead of cash. “It’s not a bet on the price of bitcoin,” White said. “It doesn’t rely on an index price created from unregulated spot markets that are self-reporting their data.” Despite the recent surge, Bakkt still lags behind CME Group, a bigger, U.S.-regulated exchange. Data shows the aggregated daily volumes of bitcoin futures on Bakkt and the CME were at $279 million and $1.5 billion, respectively, on Monday.

Mongolian mining moratorium?
Over 20 bitcoin mining farms in China’s Inner Mongolia have been stripped of electricity perks after a clampdown by the local government. A document issued by the Department of Industrial and Information Technology of the Inner Mongolia Autonomous Region on Aug. 24, shows the government agency suspended electricity discounts provided by the state-owned regional energy trading firm, following onsite inspections that found many supposed data centers were actually bitcoin mining facilities. With the policy change, electricity costs could reach 0.38 yuan per kWh ($0.054), up from 0.26–0.28 yuan per kWh ($0.037 to $0.040), CoinDesk’s Wolfie Zhou reports.

Venezuela’s crypto economy
A new Chainalysis report focused on Latin America found Venezuela ranks third in the world for crypto adoption, behind Ukraine and Russia. Venezuela has adopted a crypto-friendly attitude amid crippling sanctions and hyperinflation, though most retail usage is happening through peer-to-peer marketplaces, not government-approved exchanges. State-owned Criptolago, one of only seven exchanges with government approval, saw $380,000 in dollar-adjusted volume over the last year compared to LocalBitcoins’ $242 million over the same period. 

Client centralization
A “critical bug” has left 13% of Ethereum nodes useless, and it could take weeks or months to fix. Parity-Ethereum and OpenEthereum versions 2.7 and later contain a bug that stops nodes from syncing with the $43 billion network’s latest block. Clients are  different programming language implementations of blockchain software, a  way to strengthen the network by having concurrent yet separate systems running. This bug has highlighted the issue of client centralization, as Ethereum Foundation-backed Geth client now supports some 80% of the Ethereum network, CoinDesk’s Will Foxley reports. 

Wild predictions
Tyler and Cameron Winklevoss, early crypto investors and founders of Gemini, believe weakness in the U.S. financial system and other factors mean bitcoin could one day reach $500,000 per coin. In a post on the Winklevoss Capital blog Thursday, the two set out outlined “fundamental problems” with gold, oil, and the U.S. dollar as stores of value. “Even before COVID-19, and despite the longest bull run in U.S. economic history, the government was spending money like a drunken sailor, cutting taxes like Crazy Eddie, and printing money like a banana republic,” the brothers write. They recently met with prominent day-trader Dave Portnoy and told him gold could be devalued if figures like Elon Musk begin gold mining asteroids. 

Quick bites

At stake

Mined hordes
Bitcoin miners are holding more bitcoins than at any point in the past two years.

This could signal increased bullishness about future gains, CoinDesk’s Zack Voell said. 

Miners are holding more than 1.82 million bitcoins, an increase of roughly 2% in the last year, according to data from Glassnode. In fact, this is part of a larger trend, where the percentage of all inactive bitcoin (meaning it hasn’t been traded or cashed in) hit a four-year high last spring.

Thomas Heller, former director at leading mining pool F2Pool, said this was a bullish indicator, as it appears holders may be anticipating a higher price. 

To be sure, no one is clairvoyant, but we’re talking about market sentiment. But there is another technical reason miners, in particular, may be holding: mining factories are in a cycle of deploying newer mining machines. 

This phase in the “hardware cycle” means operation expenses have decreased, and therefore, so has the number of bitcoin sold to cover those expenses,  Harry Sudock, vice president of strategy at GRIID, said. Presumably, costs would have spiked months ago, when miners were ordering the machines now being deployed.

As miners deploy new machines, they also enjoyed a 7% monthly revenue increase in July, according to network data analyzed by CoinDesk, thanks to recent price appreciation and increased transaction fees.

Join CoinDesk Research on Sept. 10 at 1:30 p.m. ET for a live discussion.

Live Webinar: What to Expect When Phase 0 Launches
Ethereum, the world’s second-largest cryptocurrency by market capitalization, is expected to undergo a radical system-wide upgrade to improve network scalability and efficiency this by early next year. Join CoinDesk Research on Sept. 10 at 1:30 p.m. ET for a live discussion as we examine the potential market impacts of the launch of what’s known as Ethereum 2.0. 

Due to its sheer complexity, Ethereum 2.0 will be rolled out in several phases starting with Phase 0. Don’t miss the opportunity to understand the risks, benefits and predictions for the next phase of this technology.

Market intel

Hedges grow
Bitcoin and gold are reversing losses seen on Thursday after the Federal Reserve’s announcement of a more relaxed approach to tackling inflation sent a tremor across the markets. Bitcoin rebounded back above $11,450 on Friday, erasing nearly 70% of the decline from $11,594 to $11,141 yesterday. Gold, too, has risen back to $1,960, having dropped to $1,910 after the event. “Powell’s speech suggests that there is no end in sight [for the Fed’s easy money policy],” John Kramer, trader at GSR, said. Put simply, Powell’s speech looks to have strengthened bitcoin’s long-term bullish case, CoinDesk’s Omkar Godbole reports.

Tech pod

WabiSabi lobby
Privacy-focused Bitcoin software wallet Wasabi is working on a new protocol design, dubbed WabiSabi, to improve the user experience and privacy of the wallet’s CoinJoin transactions, CoinDesk tech reporter Colin Harper reports. The major design change would allow users to coinjoin with different values than their peers, a first for the technology, reduce the role of a centralized coordinator and potentially enable CoinJoin sends to other users. This process would operate in the background if it runs the way Wasabi envisions it, opening up the possibility to make “every spend a CoinJoin.” 

Fee-less
USD Coin (USDC) has integrated “meta transactions” to the stablecoin platform to eliminate fees paid to the Ethereum blockchain when sending money around. “This enables people to fund their non-custodial wallets with USDC and start using DeFi/dapps without also having to own ETH,” Coinbase developer Peter Jihoon Kim said. Adopted as part of a protocol update, USDC 2.0, the Centre Consortium also announced a new on-chain signature system, CoinDesk’s Will Foxley reports. Founded by Coinbase and Circle, USDC is the second-largest stablecoin by market cap at $1.4 billion.

Op-ed

Tech over laws
Shiv Malik, co-founder of the Intergenerational Foundation think tank and head of growth at Streamr, thinks policies like Europe’s GDPR or Andrew Yang’s “data dividend” are inadequate for putting users back in control of their data. “[T]here is a way of fighting tech with tech that might also result in changing the underlying economic structures,” he writes, namely through open-source, decentralized protocols. “We shouldn’t demand a tithe, we should take back control of our data.”

Podcast corner

The Breakdown
The Breakdown presents everything you need to know about Jerome Powell’s Jackson Hole address. 

Who won #CryptoTwitter?

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Disclosure

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.





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MicroStrategy Buys Additional 13,005 Bitcoin for $489 Million

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With the current BTC price, MicroStrategy’s total Bitcoin holding is worth more than $3.4 billion.

MicroStrategy Inc (NASDAQ: MSTR) has continued its Bitcoin acquisition spree as it has purchased another $489 million worth of BTC. As of the 21st of June, the Nasdaq-listed business intelligence company holds 105,085 Bitcoins.

The company announced its latest Bitcoin acquisition earlier today. According to the company, the newly acquired BTC totaled 13,005 at an average price of about $37,617, fees and expenses included. The purchase came after MicroStrategy generated $500 million in cash from the sale of debt to fund the purchase of BTC.

Before MicroStrategy purchased the most recent Bitcoin, the company had unveiled plans to buy Bitcoin in a filing with the US Securities and Exchange Commission (SEC). In the filing, MicroStrategy said it would be selling up to 1 billion of its class A common stock through an “Open Market Sale Agreement” with Jefferies LLC. The company added that proceeds from the stock sales would be used to buy more Bitcoin. MicroStrategy explained:

We intend to use the net proceeds from the sale of any Class A common stock offered under the prospectus for general corporate purposes, including the acquisition of bitcoin, unless otherwise indicated in the applicable prospectus supplement.

MicroStrategy Focuses on Bitcoin Acquisition

In addition, MicroStrategy has made Bitcoin acquisition a focus for the company. The company said that it mainly pursues two corporate strategies. Apart from growing its enterprise analytics software business, a major strategy for the company is to acquire and hold BTC.

In the SEC filing, the Nasdaq-listed company added that it is currently seeking opportunities to implement Bitcoin-related technologies like blockchain analytics into its software offerings. Also, the company intends to hold its Bitcoin holdings long-term and not engage in regular trading.

MicroStrategy became the first publicly-traded company to buy Bitcoin in August 2020. At the time, the company bought 21,454 BTC worth $250 million, making BTC its primary treasury reserve asset. When MicroStrategy made its initial Bitcoin purchase, BTC was trading at $11,653 per coin. This means that the price of Bitcoin has surged about 5 times since the first purchase.

After debuting into the crypto space in August last year, MicroStrategy had purchased more and held more than 90,000 BTCs before its latest acquisition, announced on the 21st of June.

At the time of writing, Bitcoin is hovering around $33,000. With the current BTC price, MicroStrategy’s total Bitcoin holding is worth more than $3.4 billion. According to MicroStrategy, its new subsidiary – MacroStrategy, manages about 92,079 BTC of its coins.

MSTR stock is currently at $595.79, a 7.64% decline over its previous close of $646.46. The company has grown nearly 403% in the last twelve months and 53.57% in its year-to-date record. In addition, MicroStrategy stock has gained more than 26% over the past month. However, MSTR has shed 17.65% over the past three months and has dropped 0.30% in the last five days.

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Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.



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Wise Fintech to Go Public via Direct Listing on London Stock Exchange

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In the future, Wise plans to roll out OwnWise, a client shareholder program that will allow its users to own a stake in the company.

British fintech Wise, formerly TransferWise, announced Thursday its plans to go public via a direct listing on the London Stock Exchange (LSE). The money transfer company said it had sufficient funding and therefore, did not require underwriters or issuing of new shares.

Wise will pioneer direct listing in London, a deal which will be finalized on July 5. Sources speculate the listing could value Wise at anywhere between $6-7 billion, up from its latest $5 billion valuations. This would also make it one of the biggest floats this year.

Founded in 2010, Wise has managed to accumulate 10 million customers who use its services to send £5 billion ($7 billion) every month. Its rivals include Western Union and MoneyGram in addition to startups like WorldRemit and Revolut.

Since 2017, Wise’s track record shows consistent profitability with a 54% annual growth rate. The latest 2021 fiscal year report shows it made £30.9 million in profits out of the £421 million ($589 million) sales revenue. This year, the company’s payments app registered £54.4 billion of international transfers for 6 million clients.

Wise Listing on LSE

Listing the giant company is a great accomplishment for London as it competes with “The Big Board”, New York Stock Exchange Group (NYSE), to attract more high growth and Blue-chip firms. As of 2020, the NYSE had 2800 company stocks and its market cap as of June, 2021 was $24.68 trillion. LSE, on the other hand, has listed over 1300 companies and its market cap is at 40.08 from today’s MarketWatch data.

To further this development, the British government is considering increasing leniency in firm enlisting guidelines to encourage issuing of dual-class shares. However, European stock markets have been hit with a lot of volatility this year, with at least two IPO cancellations in recent weeks.

The dual share structure is what Wise is opting for as it allows them to retain voting control while accommodating investors and customers into their shareholder base. At present, however, it locks them out of the lucrative Financial Times Stock Exchange (FTSE) indices.

Nevertheless, the company intends to issue both class A and class B shares with the latter holding the privilege of 9 votes per share. The expiry for Class B shares is in the fifth year following Wise’s IPO. It is likely for concerns to arise over this structure as it may give executives excessive influence on shareholder votes.

In the future, Wise plans to roll out OwnWise, a client shareholder program that will allow its users to own a stake in the company. Financial endeavors for the company are advised by Goldman Sachs, Morgan Stanley, Barclays and Citigroup.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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JPMorgan Acquires Nutmeg Robo-Advisor, Furthering UK Retail Banking

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Before the deal, JPMorgan and Nutmeg had partnered late last year to offer clients an assortment of globally diversified exchange-traded funds (ETFs).

JPMorgan Chase & Co (NYSE: JPM) said Thursday it has closed a deal to purchase Nutmeg, an online investment management service, for an unnamed price. US biggest bank hopes the agreement, which awaits regulatory approval, will complement its launch of a standalone digital bank brand in the UK during the year.

Using the latest technology from Nutmeg will help boost JPMorgan’s retail and institutional push since the company aims at establishing as many branches as it can outside the US.

With over £3.5 billion (4.9 billion) worth of assets under management, the decade-old Nutmeg is one of the UK leading and award-winning robo-advisors. The company offers various investment accounts including Individual Savings Accounts (ISAs), general investment, and pensions accounts.

Additionally, its competitors include Wealthsimple, Moneybox, and Moneyfarm. Before the take-over, Nutmeg had raised over $150 million in investments from Goldman Sachs and the British venture capital firm – Balderton Capital.

JPMorgan CEO Jamie Dimon stated last year that the banking giant would be “much more aggressive” in adding assets by conducting more acquisitions. The bank may also be stepping up to competition from adversary Morgan Stanley (NYSE: MS) which, in recent years, has spent $20 billion in merger agreements with E-trade and Eaton Vance.

Dimon also mentioned leveling up against blue-chip tech firm Alphabet Inc (NASDAQ: GOOGL) and other fintech firms such as PayPal Holdings Inc (NASDAQ: PYPL).

JPMorgan Stock Market and Nutmeg Acquisition

Before the deal, JPMorgan and Nutmeg had partnered late last year to offer clients an assortment of globally diversified exchange-traded funds (ETFs). This is not the first time the bank has partnered with a company then acquired it later. In October 2020, JPMorgan partnered with 55ip, a tax-smart fintech start-up, then bought it a couple of months down the line.

Differing regulatory guidelines in Europe and the UK made it necessary for JPMorgan to purchase the robo-advisor, rather than use investment technology available in the US. However, its US-based investment service You Invest is currently doing well, with assets valued at about $50 billion, as Dimon states.

JPMorgan’s tech initiative marks one among many happening in Britain’s retail banking sector. Banks such as Revolut, Starling, and Monzo manage digital-only checking accounts which have attracted a host of clients. Going by data from Innovate Finance, FinTechs in the UK probably make up the world’s largest markets, having pulled in $4.1 billion investment from venture capitalists as of last year.

JPMorgan Securities served as financial advisor in the JPMorgan-Nutmeg transaction, while Freshfields Bruckhaus Deringer acted as legal counsel. Arma Partners was Nutmeg’s financial advisor and Taylor Wessing was legal counsel.

As of June 17, 2021, at 7:59 p.m. EDT, JPMorgan stock closed at $151.76, down 2.89%. In the after-hours session, it was trading at $151.48, down 0.18% in 24-hours.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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