Circle research

Weekly Crypto Recap 11/2-11/8

Know & go

  • Highlight of the week: The SEC took action against EtherDelta founder Zachary Coburn. The SEC also said it will soon publish “plain English” ICO guidance.
  • Three things to know: (1) Bitcoin Cash will hard fork on Nov. 15, (2) Midterm elections sparked activity on Augur, (3) In a similar move as Shapeshift, IDEX will implement KYC/AML processes.
  • This week, total crypto market cap peaked at $221 billion on Nov. 7, and is up 3% w/w. BTC is trading at $6,388, up 0.5% w/w, ETH is at $210, up 5.1% w/w, and BCH is at $568, up 26.2% w/w.

Weekly market snapshot

Top Stories

The SEC, ICOs, and decentralized exchanges (DEXs)

William Hinman, Director of Corporate Finance at the SEC, said the agency will soon publish clear ("plain English") ICO guidance. One of the guidelines could be that the SEC will generally see something as a securities offering if there's an expectation of return. Source. The SEC also said they are launching multiple initiatives with partner agencies to reduce fraud in the crypto industry. This year, they've brought 20 cases against ICOs accused of misconduct. Source.

On 11/8, the SEC charged Zachary Coburn, founder of EtherDelta, for trading tokens that are considered to be securities and thus operating an unregistered exchange. This is the first action the SEC has taken against a crypto exchange. Peter Valkenburgh of Coin Center points out that the SEC specifically noted that EtherDelta was maintaining an order book centrally on its servers, off of the Ethereum blockchain, that was essential to facilitating trades in tokens considered securities. Coburn settled with the SEC, paying $300,000 in disgorgement, a $75,000 penalty and $13,000 in prejudgement interest. Source.

It seems that decentralized exchanges are taking more precautions, even prior to the SEC's action against Coburn. In a similar move as Shapeshift, IDEX (a top decentralized exchange) will block NY IP addresses and implement KYC/AML processes to comply with sanctions and money laundering laws. The CEO said that unless a system is completely devoid of centralized pieces, it could be at risk of being regulated. Source. Matteo Leibowitz provides his thoughts on this move and DEXs in general. Source.

In other DEX news, Bancor users can now convert between Ethereum and EOS based tokens. To go from Ethereum to EOS, the Ethereum token is converted to BNT, which is sent to the BancorX smart contract on Ethereum and is removed from circulation on the Ethereum blockchain (so that the supply is unchanged). An oracle reports the BNT amount and destination wallet address to the BancorX contract on EOS. This contract issues BNT on EOS, which can then be converted to EOS tokens. Source.

Bitcoin Cash hard fork

Bitcoin Cash (up over 25% w/w but down over 5% in the last 24 hours) will hard fork on Nov. 15. Bitcoin Cash undergoes scheduled hardforks twice a year to implement network upgrades. This time, the fork is a contentious fork, as the two proposals are incompatible. Bitcoin ABC proposes changing the network's consensus protocols and Bitcoin SV proposes replacing Bitcoin ABC's scripts and increasing the block size to 128MB. Source. Poloniex is allowing pre-fork trading of Bitcoin Cash fork tokens ahead of the fork. The price of the BCHABC token is currently $505 and the price of the BCHSV token is $59.50. Mining pools backing Bitcoin ABC include Antpool (operated by Bitmain), BTC.com, Btc.top, ViaBTC, and Bitcoin.com. Mining pools backing Bitcoin SV include CoinGeek, BMG, and SBI. Bitmain has deployed 90,000 Antminer S9 machines ahead of the fork.* Source.

In other news

  • As reported by Autonomous Next a few weeks prior, different ICO trackers show vastly different monthly totals. Data on funds raised by ICOs is inconsistent with one source citing $22 billion raised in 2018 and another citing that funds raised are actually half of that. Source.
  • In light of the midterm elections on Nov. 6, The Block ran an experiment comparing PredictIt, a centralized prediction market platform, Augur, a decentralized prediction market, and FiveThirtyEight, a poll analytics site. Bets placed on the House prediction market surpassed $1.5 million by 360 participants. Bets placed on the Senate prediction market totaled $24K by 5 participants. Source.
  • Stellar is airdropping $125 million to users of the Blockchain wallet, which represents 2.6% of XLM (Lumens) in circulation and 0.47% of the total supply. Source.
  • Bitmex is launching it's own venture capital arm called Bitmex Ventures. Source.
  • Bitmex Research sponsors a fork monitoring website (ForkMonitor.info) for tracking network upgrades (soft and hard forks) of Bitcoin and Bitcoin Cash. Source.
  • Whiteblock shared high level results from its independent benchmark testing of EOS software. Their conclusion was that EOS is “built on a flawed system and is not truly decentralized.” Source.
  • Coinbase adds BAT to Coinbase Pro and the Coinbase app. Source.
  • China's central bank to restrict airdrops, or “disguised” initial coin offerings. Source.

What we’re reading

  • CryptoCompare October 2018 Exchange Review. Some interesting findings from CryptoCompare's exchange report include that (1) daily average spot volumes around about $6.7 billion (2) CME and CBOE constitute less than 1% of total volumes, (3) daily average volume on trans-fee mining associated exchanges equal $550 million (or 10% of total exchange volume), (4) daily average volume on the top give decentralized exchanges equals $2.4 million (or 0.4% of total exchange volume).
  • The problem bitcoin solves. Saifedean Ammous, author of The Bitcoin Standard, responds to Paul Krugman's question "what does bitcoin solve?". He articulates, hyperinflation and devaluation. He further goes on to explain what he believes is the true use case and true competition of Bitcoin - an international settlement network that competes with central bank settlement systems.
  • Tony Sheng published two great pieces this week, Blockchain archipelagos and an interview with Katherine Wu of Messari, both with mic-drop worthy quotes.
  • In light of the midterm elections this week, Alex Tapscott published an article on online voting facilitated by blockchain tech to address voter suppression. Preston Byrne shares a tweet thread highlighting why he thinks this wouldn't make sense.
  • Jake Chervinsky wrote an insightful tweet thread on Bakkt launching physically settled Bitcoin futures in December and the merits and concerns surrounding the move, and another on the SEC’s action against EtherDelta co-founder.

What we’re listening to

Circle in the news

Where we’ll be in November

  • The World Blockchain Forum, New York, NY, 11/8-11/9
  • Singapore FinTech Festival 2018, Singapore, 11/12-11/16
  • MIT Enterprise Forum, New York, NY, 11/13
  • COSIMO Verbatim Summit, Boston, MA, 11/13
  • Finance Magnates London Summit, Boston, MA, 11/13-11/14
  • Benzinga FinTech Summit, San Francisco, CA, 11/14
  • BV Ventures, SG Innovate & Swiss Chamber of Commerce, Singapore, 11/15
  • Profit & Loss Hong Kong 2018, Hong Kong, 11/15
  • MIT CFO Summit, Newton, MA, 11/15
  • Dots Ventures, London, UK, 11/15
  • TechCrunch Shenzhen 2018, Shenzhen, CN, 11/19-11/20
  • Consensus Invest, New York, NY, 11/27
  • American Banker Block-FS 2018, New York, NY, 11/29 - 11/30
  • MJAC Crypto Compare Blockchain Summit, London, UK, 11/30

If you have any thoughts or questions, please reach out at [email protected].

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*Note: Bitmain is an investor in Circle Internet Financial, Inc.