Early Bitcoin investor and industry proponent Chamath Palihapitiya has signaled a potential run for the position of California governor.
The CEO of venture capital firm Social Capital, Chamath Palihapitiya, appeared to announce his intentions in a Tweet on January 26. The post linked to his new website with a number of promises for the U.S. state including massive tax cuts, an increase for teacher’s salaries, the end of student loans, and a handout for new births.
Palihapitiya appears to be gearing up for the 2022 Gubernatorial race or potentially for a special election, though no specifics were provided beyond his intentions to get involved politically.
The billionaire businessman has also joined efforts to force a recall vote for the current California governor Gavin Newsom which would lead to a special election later in 2021 according to reports.
A growing number of Californians have been displeased with Newsom’s performance in the position, especially when it comes to inconsistent shutdowns and a slow-moving Covid-19 vaccine rollout.
According to an April 2020 Forbes article, Palihapitiya bought Bitcoin back in 2013 when the price was around $80 per coin, and he claims that at one point he owned around 5% of the entire Bitcoin supply.
There have been a number of pro-crypto moves in U.S. politics since President Biden took office on January 20 which include the nomination of former member of Ripple’s board of advisors directors, Michael Barr, as the next Comptroller of the Currency. Additionally, the Biden administration has also picked crypto-knowledgeable Gary Gensler to head the Securities and Exchange Commission.
The United States Treasury Department’s now-infamous proposal to require information on crypto transfers from exchanges to self-hosted wallets is back in motion.
Per a Tuesday announcement from the Financial Crimes Enforcement Network, or FinCEN, stakeholders will have another 60 days to respond to the proposal. While a marked improvement from the 15-day comment period of the original proposal, unfortunately for the crypto industry, it doesn’t look like the actual terms of the proposal have changed along with the administration.
The news follows Janet Yellen’s confirmation as secretary of the Treasury last night. Shortly after his inauguration, President Joe Biden ordered a freeze on all midnight rulemaking from agencies run by appointees — the Treasury included.
FinCEN had originally announced the proposal right before Christmas with a wildly truncated comment period so that the final rule could come out before Donald Trump left office. It was rumored to be an initiative directly from Trump’s treasury secretary, Steven Mnuchin, himself.
The crypto community reacted with outrage, submitting enough commentary and leveraging enough political pressure to get Mnuchin’s Treasury to extend the comment period, effectively passing the proposal off to his successor. Some hoped that Yellen, who Biden named as his treasury secretary nominee back in November 2020, would be less antagonistic toward crypto.
It remains to be seen what happens after the Treasury gets another round of comments, but the return to this rule on Yellen’s first formal day at work is not cause for optimism. Interested parties can send comments to FinCEN here.
To determine whether the recent pump reflects a potential local top, we’ll take a closer look at on-chain flows and derivatives data.
Exchange withdrawals point to whale accumulation
Increasing withdrawals from exchanges can be caused by multiple factors, including staking, yield farming, and buyers sending coins to cold storage. Usually, a steady flow of net deposits indicate a willingness to sell in the short-term. On the other hand, net withdrawals are generally related to periods of whale accumulation.
As the above chart shows, on Jan. 23, centralized exchanges recently reached their lowest Ether reserve levels since November 2018.
Although there is some discussion whether part of this Ether exodus is an internal transfer between Bitfinex cold wallets, there has been a clear net withdrawal trend over the past month. Despite these ‘rumors’, the data points towards accumulation.
This data also coincides with the DeFi’s total value locked (TVL) reaching a $26 billion all-time high and signals investors chose to take advantage of the lucrative yield opportunities that exist outside of centralized exchanges.
Futures were overbought
By measuring the expense gap between futures and the regular spot market, a trader can gauge the level of bullishness in the market.
The 3-month futures should usually trade with a 6% to 20% annualized premium (basis) versus regular spot exchanges. Whenever this indicator fades or turns negative, this is an alarming red flag. This situation is known as backwardation and indicates that the market is turning bearish.
On the other hand, a sustainable basis above 20% signals excessive leverage from buyers, creating the potential for massive liquidations and eventual market crashes.
The above chart shows that the premium peaked at 6.5% on Jan. 19, equal to a 38% annualized rate. This level is considered extremely overbought, as traders need an even higher price increase ahead of expiration to profit from it.
Overbought derivatives levels should be considered a yellow flag, although maintaining them for short periods is normal. Traders might momentarily exceed their regular leverage during the rally and later purchase the underlying asset (Ether) to adjust the risk.
One way or another, the market adjusted itself during the Ether price crash, and the futures premium currently stands at a healthy 4.5% level, or 28% annualized.
Spot volume remains strong and traders bought the dip
In addition to monitoring futures contracts, profitable traders also track volume in the spot market. Typically, low volumes indicate a lack of confidence. Therefore significant price increases should be accompanied by robust trading activity.
Over the past week, Ether has averaged $6.1 billion in daily volume, and while this figure is far from the $12.3 billion all-time high seen on Jan. 11, it is still 240% higher than December’s. Therefore, the activity supporting the recent $1,477 all-time high is a positive indicator.
Exchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can obtain a clearer view of whether professional traders are leaning bullish or bearish.
With this said, there are occasional discrepancies in the methodologies between different exchanges so viewers should monitor changes instead of absolute figures.
The top traders index at Binance and Huobi have held roughly the same Ether position over the past couple of days. Huobi’s average over the past 30 days has averaged a 0.83 long-to-short ratio while at Binance traders held a 0.94 average. The current reading at 0.85 indicates a slight negative sentiment.
OKEx stands out as the top traders long-to-short ratio peaked at 2.0, strongly favoring longs in the early hours of Jan. 22, but it decreased until Jan. 24 and finally bottomed at 1.05. The strong net selling trend was reverted today as traders bought the dip and the indicator flipped to 1.17 in favor of longs.
One should keep in mind that arbitrage desks and market makers encompass a vast portion of the exchanges’ top traders metric. The unusually high futures premium would incentivize those clients to create short positions in futures contracts while simultaneously buying Ether spot positions.
Considering Ether’s on-chain data indicating whales hoarding, along with the healthy futures contracts premium, the market structure seems reliable.
The fact that top traders at OKEx also bought today’s dip is further indication that the rally should see continuation.
The views and opinions expressed here are solely those of theauthorand do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Ripple Labs spent $690,000 on lobbying in the United States in 2020, which still didn’t save the firm from the Securities and Exchange Commission.
Per legally mandated disclosures for 2020, Ripple’s lobbying program dwarfed those of other firms in the crypto industry. Coinbase, which looks to become the first American crypto exchange to issue public shares, spent $230,000 over the same year, while other exchanges like Binance.US, Gemini and Kraken did not report any spending on lobbying.
Ripple’s spending on lobbying is, however, relatively paltry compared with the giants of Big Tech. Facebook, for example, spent well over $5 million in just the fourth quarter of 2020.
The Diem Association, formerly known as the Libra Association, reported no lobbying activity over 2020, despite the prospective stablecoin issuer’s major struggles with regulators. In the past, it had contracted with the Washington, D.C. offices of law firm Skadden. While the Diem Association has consistently downplayed its relationship with Facebook, Facebook maintained a $200,000 contract with lobbyists at FS Vector over 2020 to focus on blockchain issues.
Ripple was, incidentally, also an FS Vector client. The first half of 2020 also saw Ripple terminate its in-house lobbying team. It now relies solely on contracts with professional firms.
Lobbying activities that Ripple funded were aimed primarily at legislation before Congress like the Token Taxonomy Act and the Digital Commodity Exchange Act. These pieces of legislation set new rules for which digital assets are or are not securities.
Questions of securities law and crypto are obviously critical to Ripple’s business model. The firm had long faced questions as to whether XRP was in fact a security. These questions culminated in the SEC, the securities regulator in the U.S., filing a suit against Ripple Labs near the end of December 2020. In its complaint, the SEC alleges that “the overwhelming majority of Ripple’s revenue came from its sales of XRP, and Ripple relied on those sales to fund its operations.”
Neither Ripple nor FS Vector responded to Cointelegraph’s request for comment. Representatives for Diem declined to comment.
Aave (AAVE) price has been on an absolute tear for weeks and today the DeFi-token rallied to a new all-time high at $288.90.
The decentralized finance protocol is one of the most popular in the market and the recent rally in the DeFi sector is one of the driving forces behind AAVE’s rally.
At the start of 2021, AAVE price was trading at $83 and the recent rally appears to have bolstered the protocol’s surging total value locked, increasing buy volume on spot and derivatives exchanges and the continued development of Aave’s lending platform and flash loan issuance.
TVL soars to a new high
Data from DeFi Pulse shows that Aave’s TVL rose from $2.03 billion on Jan. 1 and as (BTC) and Ether (ETH) price went parabolic Aave’s TVL also surged.
Currently, Aave’s TVL sits at a new all-time high of $3.75 billion, making the platform the second-largest DeFi platform by TVL behind Maker (MKR).
The steady addition of new tokens to the lending and borrowing protocol increases the likelihood that its TVL will continue to rise and help AAVE retain its standing as one of the top DeFi projects in the cryptocurrency space.
Staking drives demand for AAVE token
AAVE’s trading volume also surged at the beginning of 2021, increasing from $200 million on Jan. 3 to a high of $928 million on Jan. 16.
As AAVE price reached a new high, it’s 24-hour trading volume notched a record $1.06 billion. This volume surge is partially driven by investors acquiring more tokens for staking, with 26.8% of the total supply of AAVE currently staked on the platform earning an APY of 6.1%
Flash loans attract investors
Another reason for AAVE’s recent surge is the growth of its flash loans.
Flash loans allow cryptocurrency holders to collatoralize their portfolio to fund other purchases or new crypto purchases. The loans also help investors utilize the value in their tokens without the need to sell see them and create a taxable event.
Since launching flash loans less than 12 months ago, more than $1.7 billion have been issued and it’s expected that this figure will increse as the crypto bull market progresses.
As can be seen in the chart above, the most dominant token requested for flash loans is the DAI stablecoin, followed by USDC and ETH. Data from Messari shows that Aave issued $25 million in loans in the first half of 2020, $500 million in Q3, and nearly $1 billion in Q4, including $450 million in December.
The expansion of the flash loan concept will likely attract more users to Aave, especially since they can be used for arbitrage opportunities between DEXs, collateral swaps, self-liquidations and a variety of other applications within the DeFi sector.
There are two major indicators that have been useful in spotting trend reversals in the ongoing bull cycle.
First, whenever the Coinbase premium appeared, which means BTC is trading higher on Coinbase than on Binance, for example, BTC saw bullish momentum. Second, the momentum of Bitcoin strengthened when it saw large outflows from Coinbase.
In the past several days, however, neither of these two indicators have shown any staying power as the metric dipped into negative territory on Jan. 24.
When will Bitcoin market sentiment improve again?
Bitcoin will most likely find a renewed bullish rally if the premium on Coinbase consistently appears with large outflows.
The combination of these two indicators would suggest that high-net-worth individuals are accumulating Bitcoin once again. Ki explained:
“I’ll keep my bearish bias until there are significant Coinbase premium and Coinbase outflow. $BTC needs USD spot inflows from institutional investors to start the next bull run.”
The popular narrative around the recent Bitcoin rally is that high-net-worth individuals and institutional investors are scooping up BTC on every dip.
Besides the two Coinbase-related indicators, stablecoin inflows is another important metric that could spot a new rally brewing.
Ki noted that stablecoin inflows into exchanges are often a powerful on-chain signal for a rally because it shows the entry of sidelined capital into the cryptocurrency exchange market.
“This indicator is one of the powerful on-chain signals with a pretty good hit rate. You can predict an instant rise in the short term, regardless of the overall market trend. It’s the number of stablecoins deposits on all exchanges, meaning investors try to send stablecoins to exchanges to buy crypto. For example, if this value hit 80, we can assume that 80 people are trying to deposit on exchange at a single block, in 15 seconds.”
How low would BTC go?
In the foreseeable future, if Bitcoin continues to trade sideways, some traders foresee BTC dropping to as low as $27,000.
A pseudonymous trader known as “CJ” shared a potential scenario where BTC could bottom at around $26,000 to $27,000.
However, even in the worst-case scenario, analysts generally do not see the price of Bitcoin declining to the low-$20,000 area. The trader wrote:
“This channel could be the very thing that prevents a 20k re-test. Based on this chart, the sweet spot for a dip is between 23-27k.”
Although short-term on-chain indicators signal a slightly bearish outlook, they do not hint at the likelihood of a deep correction.
Bitcoin dropping back down to around $20,000, the previous all-time high, would mean a 35% drop from current levels. Such an event is unlikely, but traders should be aware of a possible black swan event such as a regulatory clampdown or a high-profile lawsuit against a major industry player.
Amid a wild market-wide bullrun for non-fungible tokens (NFTs), an ultra-rare “alien” CryptoPunk has sold today for 605 Ether, worth over $750,000 at today’s prices.
CryptoPunks are widely considered to be the original NFT project, released even before Cryptokitties, the blockchain-based collectibles project that propelled NFTs to mainstream consciousness. CryptoPunks developers Larva Labs report that Punks have accounted for $26 million in lifetime sales on their native marketplace, and the average sale price for Punks over the past year has been $6,199.
Each Punk has unique attributes, such as background color, accessories, and even some ultra-rare features, such as an “alien” or “zombie” appearance. The Punk that sold today, #2890, is one of nine alien Punks in existence.
The new owners are a group of investors that include FlamingoDAO, a “NFT collective that supports and collects premium NFTS,” according to a Flamingo spokesperson. The official FlamingoDAO Twitter handle confirmed the purchase with a meme:
“It’s simple: Cryptopunks is a groundbreaking project; it pre-dated the ERC 721 standard and crypto kitties,” said the spokesperson on the investment thesis. “Aliens are the rarest form of Cryptopunk and we believe that the acquired Alien will be prized by collectors over time and mature into an iconic digital art piece.”
Crypto art collector @gmoneyNFT, who himself dropped 140 ETH on a Punk earlier in the month, thinks that the alien is a fine investment despite the sky-high valuation.
“I think it was a great purchase. As the world moves more digital, the digital “flex” will be more and more important. It’s how humans operate in the physical world. It won’t change in the digital realm,” he said.
Some critics have called into the question the sky-high prices rare NFTs have been fetching, however, arguing that simple digital scarcity is a shaky foundation on which to justify a $750,000 sale. @gmoneyNFT dismisses these criticisms, saying that there are plenty of real-world analogues that make just as much — or as little — sense.
“Why would someone pay millions of dollars for an original Andy Warhol screen print when you can buy the same one online for $20? Why would someone buy a pair of yeezy’s for $300 when you can buy a fake from the same factory, made with the same materials for much less? Humans like to feel special. The provenance has value.”
In a move that may give seasoned investors flashbacks to 2018, Valkyrie Digital Assets is the latest asset management firm to file a registration with the SEC to form a Bitcoin ETF — a bid that joins a crowded field of prospective fund managers looking to capitalize on renewed retail interest in cryptocurrencies.
Filed on Friday, the Texas-based family investment fund proposed listing the Valkyrie Bitcoin Trust on the New York Stock Exchange. The application did not include a possible trading ticker.
If history is any indication, however, the filing’s chances of leading to a tradable fund are slim. During the last Bitcoin bull run, multiple firms attempted to throw their hat into the ring as at least nine entities filed proposals for a Bitcoin ETF with the SEC, including ETF giants VanEck and Direxion, as well as Gemini, the crypto services firm formed by Cameron and Tyler Winklevoss.
In a previous interview with Cointelegraph, Kryptoin CEO Donnie Kim, whose firm filed for an ETF in October of 2019, says that the SEC has long been hesitant to move forward with proposals.
“At this moment in time the commission is listening and learning about this new asset class and they are in a holding pattern, partly to understand the consequences of the existing products on the market and partly to look for further guidance under the current political landscape,” said Kim.
On Thursday, Jan. 21 gold ETF giant VanEck — which was the first company to ever file for a Bitcoin fund — filed to form a Digital Assets ETF, which would track the performance of the Global Digital Assets Equity Index made up of crypto service companies.
Janet Yellen, the former Chair of the Federal Reserve, is one step closer to earning the nomination of Treasury Secretary.
The Senate Committee on Finance voted unanimously to approve Yellen’s nomination Friday morning, setting the stage for a full Senate vote. Republican Senator Chuck Grassley said he hoped the GOP’s backing would signal “bipartisan” support under the new Democratic administration.
Fellow Republicans said they backed Yellen despite disagreeing on several of her policy stances. The general consensus was that she was exceptionally qualified for the job.
Committee members hoped for a full Senate vote to confirm Yellen’s appointment on Friday but as of publication time, that has yet to materialize.
If confirmed as Treasury Secretary, Yellen would become a key member of President Biden’s Cabinet and will act as a principal adviser on economic issues and fiscal policy. She would also be the first woman to occupy the post.
At her Senate confirmation hearing Tuesday, Yellen called for “big action” on the Covid-19 crisis. She said:
“Economists don’t always agree, but I think there is a consensus now: Without further action, we risk a longer, more painful recession now — and long-term scarring of the economy later.”
Yellen headed the Federal Reserve between 2014 and 2018, becoming the first woman to do so. Under her leadership, the central bank made its first attempt at normalizing monetary policy — an initiative that was later curtailed under Jerome Powell.
The cryptocurrency industry has been following Yellen’s nomination process closely. The former Fed chief has given mixed signals on digital assets. On one hand, she has touted Bitcoin (BTC) and other digital assets as an important innovation in optimizing global transactions. On the other, she has raised concerns over crypto’s role in money laundering and illicit financing.
In his first day in office, President Biden placed a general freeze on all federal-agency rulemaking, effectively blocking several Trump-era policies from advancing. The proposed crypto wallet regulation was among them.
At the same time, MicroStrategy, well known for its ever-increasing Bitcoin treasury, confirmed that it had purchased 314 BTC to bring its total hoard to 70,784 BTC.
“Microstrategy just bought 314 more #Bitcoin for $10M. @michael_saylor bought the dip,” Twitter-based information resource Documenting Bitcoin summarized, referring to the company’s CEO, Michael Saylor.
The latest buy-in came at an average cost of $31,808 per Bitcoin and joins asset manager Grayscale’s ongoing purchases that defy overall selling action in the past few weeks.
All eyes on whales at $29,000
Among other major BTC investors, meanwhile, interest remained focused on the area at just below $30,000.
According to monitoring resource Whalemap, that area is crucial to hold in order to avert a further price dip on BTC/USD, one that could take the pair closer to $20,000.
“Falling below $28,727 and consolidating there will give us another big drop to at least $23,818,” part of a series of tweets explained, along with an accompanying graphic.
“Not many supports below $28,727 right now, so if we start consolidating there, it will probably bring BTC all the way to at least $23,818,” co-founder Artem Lazarev told Cointelegraph.
“$23,818 is not super strong but nevertheless should provide time for BTC to reassess the situation. Otherwise, $19,322 is super strong and a level for which big guys are setting their stoplosses probably.”
On the same day, a Basic Attention Token (BAT) Trust, Decentraland (MANA) Trust, Livepeer (LPT) Trust, and a Tezos (XTZ) Trust were also initiated.
Before these communities get too excited, Grayscale Investments is yet to officially confirm it is behind the filings. Some reports have cast doubt on their legitimacy as the registered agent for the Trusts is listed as ‘Delaware Trust Company’ and not Grayscale.
However the Delaware Trust Company is listed on the Grayscale website as one of its official Service Providers and the same details were used for the Grayscale Bitcoin Trust filing in 2013.
Even so, new Trusts are far from certain to launch. Two months earlier in October, a Filecoin (FIL) Trust was created, and this is yet to be made public.
Adding to the uncertainty, a few weeks after the inception of these Trusts, Grayscale CEO and founder Barry Silbert stepped down, replaced by Michael Sonnenshein. It is unclear if Sonnenshein will continue Silbert’s strategy or if he will take the firm in a new direction.
Grayscale last made a filing with the Stellar Lumens (XLM) Trust in October 2018 — more than two years ago.
The Stellar Trust was made public almost six weeks after inception. The majority of Grayscale’s digital-asset trusts are normally made public within days of the legal forming date stated on Delaware’s Corporate Filing website.
The vocal Chainlink army have taken to Twitter to show their support for the filing, speculating what effect this might have on the token’s price.
Twitter user “Bitcoin Collector” stated, “We all know how much purchasing power Grayscale has,” however, he added that the news hasn’t been confirmed.
Chainlink recently passed Bitcoin Cash (BCH) to become the eighth-biggest cryptocurrency with a market cap of more than $9 billion and an all-time high price of $23.30. It has since dropped back to ninth place, losing $2.3 billion in value over a four-day period to trade at $17.8.
New York’s financial regulator is asking for new tools to gather real-time financial data.
On Thursday, the New York Department of Financial Services announced new details of its coming “techsprint” competition:
“The objective of the techsprint is to achieve creative and collaborative prototyping as a step toward smarter regulatory reporting in virtual currency.”
Namely, the DFS is using the two-week competition to get better access to data from crypto companies in real time. It’s first question reads:
“How can DFS achieve real-time or more frequent access to company financial data from virtual currency licensees and receive early warning signs of financial risks to the companies or their customers?”
The DFS is particularly interested in the analytical potential of “natural language processing, machine learning, and artificial intelligence,” which have become top priority technological capabilities for regulators around the world seeking to cope with overwhelming inputs of high-volume industry data.
It’s taken centuries for regulators to get a grip on data inflows in traditional markets, and periodically someone finds new and exciting ways to falsify data. For crypto exchanges looking to fight market manipulation, it’s been an accelerated process — its own techsprint.
The DFS, presiding as it does over Wall Street, is often at the front line of the world’s sub-national financial regulators. For crypto, specifically, the DFS issues and administers the coveted “Bitlicense,” which has put it in particularly close touch with a roster of the biggest players in crypto.
The competition will take place in the first two weeks of March. The winners will receive no monetary prizes, though it seems likely that the competition is a good spot to show off potential tech tools and pick up government contracts. Registration is due by Jan. 26.
Competitions like this techsprint are a popular means for government organizations to check out new technologies from the private sector. In the fall, the Commodity Futures Trading Commission held its first science competition, “Project Streetlamp,” which focused on new analytical tools for identifying unregistered offerings in the U.S. The winner was crypto analytics firm Inca Digital’s “Nakamoto Terminal” platform.
DFS did not immediately respond to Cointelegraph’s request for comment.
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