PLUS: JPMorgan to offer bitcoin exposure to customers

This week was pretty busy in the world of Bitcoin. JPMorgan will be offering clients exposure to bitcoin through an actively managed fund as soon as this summer. The publicly traded company Nexon purchased $100 million of BTC for its balance sheet. The SEC decided to further procrastinate on its bitcoin ETF decision by delaying its ruling on the VanEck application another 45 days. Tesla sold 10% of its bitcoin position and Matt Levine gave the skinny on what was really going on. Pete Rizzo and Alex Gladstein wrote absolutely killer pieces on Satoshi and switching to the Bitcoin Standard, respectively. 

In other news, ether hit an all-time high as the investment arm of the EU raised $121 million from bonds using Ethereum. ETH 2.0 hit a bump in the road when a bug stopped validators from earning block rewards. Binance announced it will launch an NFT marketplace on the Binance Smart Chain. Visa, Mastercard, PayPal, and Paxos each produced crypto-positive headlines. (Btw, if you’re interested, I’m moderating a discussion between Charles Cascarilla, CEO of Paxos, and Vlad Tenev, CEO of Robinhood, next Tuesday, May 4. Register here.) The NYT reports that traditional art collectors are wary of the NFT trend. The alleged administrator of Bitcoin Fog, one of the original coin mixers, was caught by authorities. In fun news, a bitcoin ETF is, apparently, a terrible idea, and you can now vacation using only BTC. 

On Unchained, Devin Finzer, co-founder and CEO of OpenSea, talks about all things non-fungible. Click the link below to hear him break down NFTs and how he thinks the industry might evolve while also giving the inside scoop on OpenSea. On Unconfirmed, Dan Finlay of MetaMask describes how its monthly active users quintupled in the last half year.

Listen to the Latest Episode of Unchained

How NFT Platform OpenSea Plans to Maintain Its Competitive Advantage

Devin Finzer, co-founder and CEO of NFT marketplace OpenSea, talks all things non-fungible.

Listen to the Latest Episode of Unconfirmed

Dan Finlay, co-founder of MetaMask, talks about the meteoric growth of monthly active users of the crypto wallet, which has quintupled in the past six months.

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This Week’s Crypto News…

BTC Institutional Adoption Strengthens as Bitcoin ETF Delayed

Sources tell CoinDesk that JPMorgan Chase will be offering an actively managed bitcoin fund to certain clients as soon as this summer, marking an about-face for the company led by CEO Jamie Dimon, who infamously called Bitcoin a “fraud” in 2017. NYDIG, a bitcoin-centric investment firm, will serve as the fund’s custody provider. 

Asian video game publisher Nexon, a publicly-traded company, announced the purchase of roughly $100 million worth of Bitcoin. The allocation represents about 2% of its total cash and cash equivalents as of December 2020. 

The U.S. Securities and Exchange Commission delayed its ruling on VanEck’s bitcoin ETF application, extending the original 45-day decision window to 90 days. The new deadline is set for June 17, though it could be further delayed to encompass 240 days. The extension should not come as a surprise: the securities regulator has delayed other bitcoin ETF proposals, each ending in rejection. 

Tesla Sold 10% of Its Bitcoin Position

A Q1 earnings report showed that Tesla generated $100 million+ in income from the sale of bitcoin, helping boost profits to a quarterly record high to start 2021. The electric vehicle company’s original purchase of $1.5 billion in BTC is currently valued at $2.48 billion — even with the sale. Barstool CEO Dave Portnoy, acting as a stand-in for crypto day traders and people who don’t know what it means to HODL, tweeted at Musk:

Musk responded

Bloomberg columnist Matt Levine noted that Tesla’s chief financial officer Zachary Kirkhorn discussed bitcoin liquidity a lot on the call. As Levine puts it, “Tesla decided to put a chunk of its corporate cash into Bitcoin and I guess needed to make sure that its money wasn’t trapped. A reasonable concern!” He then brought up the accounting rules that can be a negative for companies holding Bitcoin on their balance sheets. 

He says, “When your Bitcoins go up, you don’t book a gain, but when they go down you do book a loss. The only way to book a gain on Bitcoins is to sell them.” The upshot, he says, is that “if you are Elon Musk and you can make Bitcoin go up by tweeting about it — you almost have an obligation to do it? Perhaps a fiduciary obligation to your shareholders, but at least a sort of aesthetic obligation to comedy. If Bitcoin wants Musk to manipulate it, Musk really ought to manipulate it.” 

Speaking of Bitcoin, I recommend two long reads this week:

  1. April 26th was the 10th anniversary of Satoshi’s last-known communication with the Bitcoin community.  In Bitcoin Magazine, Kraken editor-at-large Pete Rizzo analyzes the last days of Satoshi, when there was, Rizzo writes, “a growing belief – stronger perhaps than any confidence in Satoshi himself – that no Bitcoin user could be greater or less than any other, that they were all nodes on the network, authors of code, individuals responsible for the software’s success.”
  2. Alex Gladstein, chief strategy officer at the Human Rights Foundation, wrote about the hidden cost of the waning petrodollar — a U.S. dollar paid to a petroleum exporter in exchange for oil — on U.S. fiscal policy and political power. He believes a transition to a Bitcoin standard from the petrodollar “plays to the strengths of open societies, does not depend on dictators or fossil fuels, and is ultimately run by citizens, not the entrenched elite.” 

Ether Reaches a New All-Time High

After hitting $2,600 for the first time last week, ether soared to a new all-time high over $2,700 on Wednesday afternoon. 

Coinciding with the all-time high, the European Investment Bank, the EU’s lending arm,  announced it used Ethereum to issue $121 million in digital notes. Here’s how it works:

  1. The EIB issues a series of bond tokens on Ethereum
  2. Investors purchase + pay for the bond tokens in fiat
  3. The money used to purchase the bonds is minted as a CBDC on Ethereum 
  4. The principal is paid in fiat at maturity to CBDC holders
Ethereum 2.0 Updates:
  • Last Friday, Ethereum creator Vitalik Buterin outlined the development roadmap for ETH 2.0. His plan would see Ethereum evolve into a proof-of-stake blockchain, implement sharding strategies to improve throughput, and tweak security measures for the better. 
  • On Saturday, Ethereum 2.0 had its first major incident when a bug was discovered that prevented a large set of validators from producing blocks. Validators are users staking 32 ETH+ on Ethereum 2.0 to power the proof-of-stake blockchain. The bug was patched after 403 blocks and caused little disruption outside of certain validators losing out on block rewards.  

Binance Smart Chain NFT Announcement Marred By $50 Million Hack and Potential Violation

Cryptocurrency exchange Binance plans to launch an NFT marketplace that will run on its Ethereum competitor, the Binance Smart Chain. 

That announcement was overshadowed by a Binance Smart Chain dapp, Uranium Finance, losing $50 million in a potential rug pull. Several tokens, including bitcoin and ether, were drained from the protocol early Wednesday due to a bug that allowed the exploiter to use a swap function to steal the funds. 

Furthermore, Binance’s recent release of stock tokens that track Tesla, Coinbase, and MicroStrategy stock caught the ire of Germany’s Financial Supervisory Authority BaFin as being “suspicious.” The exchange could incur up to $6 million in fines — 3% of Binance’s annual revenue. Regulators in the U.K. and law firms in Hong Kong have already questioned the legitimacy of the stock tokens. 

In related news, Brian Brooks, the soon-to-be CEO at Binance.US, has grand plans to build the exchange as a Coinbase competitor and out of the shadow of its parent company, Binance. He is determined to expand the exchange’s reach across the U.S. Brooks told The Block that his “priority is doing what is necessary to get what needs to be done on licenses” for states where Binance.US is currently unavailable, like Texas and New York, amongst others. He said he believes that if the firm “just added those states and nothing else, the business would probably double.”

Payment Platforms Continue to Embrace Crypto

  • In an earnings call earlier this week, Visa CEO Alfred Kelly described the firm as “extremely well-positioned” to achieve its crypto goals related to a multi-pronged strategy including bitcoin services, stablecoins, and CBDCs. 
  • Mastercard was revealed as the partner for Gemini’s upcoming credit card, which will offer rewards in crypto for cardholders. Gemini is the crypto exchange founded by the Winklevoss twins.
  • In a recent profile by Time Magazine, PayPal CEO Dan Schulman said that “Demand on the crypto side has been multiple-fold to what we initially expected. There’s a lot of excitement.” 
  • Paxos, the blockchain infrastructure company powering PayPal’s and Venmo’s crypto offerings, raised $300 million. CEO Charles Cascarilla is optimistic about Paxos’ growth, telling The Block, “We thought we could add one customer the size of PayPal this year. I think we can add three to five.”

NFTs Field Criticism From Art Collectors

The New York Times reports old school art collectors are reluctant to join the blockchain art craze over concerns about the quality, ownership, and authenticity of NFTs. Critics of NFTs wonder about the exclusivity of an NFT, which anyone can see online, along with, as one put it, the “enormous unsolved copyright issues.” 

However, the NYT cites artists excited to produce digital content on the blockchain and art galleries adding NFTs to exhibits. Positives aside, Tina Rivers Ryan of the Albright Knox Art Gallery said it best: “the $69 million question is whether this is going to become another hype cycle like virtual reality was in 2016 or like Net art was before the dot-com bubble burst in 2001.”

The Alleged Administrator of Bitcoin Fog Caught

Bitcoin Fog was one of the first Bitcoin washing machines — a service designed to help anonymize cryptocurrency transactions by mixing user’s funds. 

On Tuesday, U.S. officials arrested Roman Sterlingov, the alleged administrator of Bitcoin Fog, on money laundering related charges. The IRS used an “analysis of bitcoin transactions” along with other investigative information to identify Sterlingov. 

More than 1.2 million BTC was sent through Bitcoin Fog, worth $336 million at the time. According to Wired, at least $78 million passed through the mixer to illegal marketplaces, such as Silk Road. 

This Article Was a Terrible Idea

The Financial Times published an article titled “A bitcoin ETF is a terrible idea,” saying that for ETFs, “the assets need to be liquid too. That could be a problem with bitcoin, the supply of which is capped at 21m coins. In a market plunge, investors could find themselves locked into the shares.” All I have to say to this is that maybe before publishing something in an international newspaper, it’s a good idea to do some research on it. 

Vacationing Using Bitcoin?

Paradise is on its way: The One Bequia development, where 39 luxury villas are set to be built in the Caribbean, intends to become the world’s first fully Bitcoin-enabled community. People will be able to pay for property in Bitcoin while also using BTC for everyday essentials like groceries, restaurants, and movie theaters. 

The property owner, Storm Gonsalves, says the adoption of BTC is more necessity than gimmick, citing banking challenges arising from small island nations sending and receiving money internationally as a struggle because of derisking by large international banks.