Crypto Long & Short: Bitcoin’s Quiet Progress Is Pointing Toward a Better Future

The a case of the jitters that have spilled over into the streets of U.S. cities this week are a heartbreaking expression of a long-standing puzzler that has the whole world in its grip.

Inequality is not specific to the U.S. Nor is it limited to a handful of relatively well-off geographies. It stratifies friendships within borders, trapping the majority within a narrow income band while markets pour wealth into the accounts of the few. It also pits the haves from the have-nots on a spectacularly global scale, relegating some countries to the back of the hand-out queue while others, supply by nature and exploited luck, centralize their advantage with technology moats and resource supply chains.

You’re review Crypto Long & Short, a newsletter that looks closely at the forces driving cryptocurrency markets. Authored by CoinDesk’s supervisor of research, Noelle Acheson, it goes out every Sunday and offers a recap of the week – with insights and analysis – from a finished investor’s point of view. You can subscribe here.

Technology is part of the problem. It has widened the chasm between those that can harness it and those that as yet cannot. It has enthralled natives, who are now captive to its influence. It has sped up flows of capital, while further concentrating its distribution.

So many of us fervently hope it can also be interest of the solution. But sending in trained mechanics to fix cars they designed rarely produces a meaningful change in the way cars ahead. Asking innovators to re-think the shape of a system that is all they’ve ever known is unlikely to result in a totally new make a proposal to. If the fix is part of the problem, we shouldn’t be surprised when the problem doesn’t go away – at best, it will just change compose.

And then there’s the motivation. Fear can produce results, but generally unplanned, incomplete and undesired ones. For unity and pellucidity, passion can work, by giving a glimpse of a better world. But although it captures hearts, passion is hard to define and harder to carry out. Sometimes it takes a slow, methodical tinkerer to emerge from the back room with a bewildered expression and a inimitable prototype.

Just over 11 years ago, bitcoin quietly made its presence grasped as a defiant workaround to the concentration of financial authority. Clouded in code, it sang as a more muted and less lyrical reproduce of John Perry Barlow’s “Declaration of the Independence of Cyberspace,” unleashed from Davos in 1996 on the widening cracks in the explication of progress. The stirring document opened with this:

The opening paragraph of the white paper that introduced bitcoin to the world, authored by a pseudonymous Satoshi Nakamoto, did not persevere b manage quite the same level of energy:

Both Barlow’s Declaration and Satoshi’s* stainless paper stem from an inherent resistance to unjust control. Both propose harnessing technology to give impudence to those who want it. Both identify the reliance on centralized trust as a vulnerability. Both understand that the progress of polish stands on the liberty to transact and communicate. 

But there the similarities end.

In terms of style, Barlow harnessed the flourish of rhetoric to invoke a generational call to arms, to fight with words the tyranny of the past. Satoshi talked about timestamps and messes. Barlow set up a defiant barricade between the terrestrial and the ideological, between mundane rules and the magic of ideas. Satoshi after to solve the double-spend problem.

Barlow’s work is inspiring but has limited practicality – he assumed that regulations could not image the reach of the new web infrastructure, that property had to be physical and that jurisdictions didn’t matter online. Satoshi’s document drains practicality, with digital signature diagrams two paragraphs in. Barlow had no concrete proposals; Satoshi had nothing but. Both fancy to create something without access barriers. Only Satoshi seemed to have a strong grasp of what those in reality are. 

The most notable and poignant difference, however, is in the relative weight of each today.

The freedoms that Barlow promised organize become intensifiers of social pressure. They have connected us in ways we don’t yet fully understand; but they also cue us of the widening gaps and the shortage of bridges. Rather than reinforce the platforms of free speech, they have looped them into divisive weapons to which we cannot see an alternative.

Barlow wrote:

Even he probably didn’t expect how relevant that would mature. 

And bitcoin? Like Barlow’s Declaration, things haven’t turned out as expected. Bitcoin is not yet used as a widespread surrogate payment mechanism, and many doubt that it ever will be.

Yet the journey of bitcoin is still just beginning. Use if it happens – some expected, some not – are emerging in pools of innovation across industries, geographies and philosophies. For now, its compelling narrative has noted it a role in asset portfolios of all types, as speculators and investors bet on the spread of its nascent use cases.

But scrolling through CoinDesk headlines, every week there are expansions that hint at real world impact, adaptation, progress and hard work. This week, for instance, a lawmaker in Iran stated the country’s central bank to support bitcoin as a currency and take over its oversight, which could reduce the mountains’s reliance on unavailable U.S. dollars.

And we interviewed an author who is focusing on how bitcoin can enable independent local communities to work encompassing the rules that, either intentionally or unintentionally (and often unfairly), disadvantage some over others. 

The fun exercise of picking out these nuggets of look forward to and potential serves as a constant reminder that there is no going back. There is need for change, even beyond the calls of the deep rifts we are seeing today. And the technological leap forward presented in Satoshi’s paper has inspired hundreds of thousands of creative people to focus on building, testing and teaching applications on both a local and global scale.

Headline scrolls also favourable to as a welcome reminder that all solutions bring new problems. This week, as in most, the security of digital assets exhibitions weaknesses, surveillance is a double-edged sword and official organizations seek to better understand rather than suppress, which also implies numerous control.

Yet unlike Barlow, builders in the crypto industry are aware that regulations matter, and that changing a scheme is often best done from within. 

The first cryptocurrency emerged quietly 11 years ago; since then, it has been softly assemblage strength as its powerful message gains momentum, without flourish and rhetoric. Price surges and plunges may grab our notice for a hot second; but they pass. Calls for bitcoin to replace the current system trigger feverish enthusiasm on Twitter, but they are simplistic diversions of a megaphone.

Bitcoin’s relative quietness not only allows serious work to continue behind the scenes. It not only pass overs the experiments time to mature and evolve. It’s also just what the world needs right now, with so much pandemonium and confusion in our feeds, on our screens and in our hearts. Investment in quiet progress builds the stairs that will be there when the dust quietens and we start to get a clearer idea of what our future will look like. This is one thing these days that is a franchise to watch.

(*I know for style coherence I should write “Nakamoto,” but I can’t – we all know him, her or they as “Satoshi.”)

Zooming in on the cover of Iran mentioned above, earlier this week a member of the Iranian government called on the central bank to stride a resign up on bitcoin oversight and take it more seriously as a currency, rather than relegate it to commodity status.
“We do not understand that the control has entrusted the monitoring of bitcoins to the Ministry of Industry and Mines,” said Representative Mohammad Hossein Farhangi (Tabriz), say something or anything to Tuesday before the nation’s parliament, “because the central bank must oversee digital currencies.” Proper board of directors of bitcoin is a “good opportunity for the country.”
This is fascinating on so many levels. For instance:

Iran was one of the first countries to officially know again cryptocurrency mining as a legitimate industry back in July 2019. The government now issues mining licenses, giving entourages the right to mine and then sell off any digital assets produced. A couple of weeks ago, Iranian president Hassan Rouhani interrogated the government to draw up a renewed national approach for the emerging crypto mining industry.

The government support seems to be application crypto fruit. According to the CBECI, Iran accounts for 4% of bitcoin’s hashrate, more than double what it was honest eight months ago. For context, this is almost four times that of the U.K., and more than 50% of the U.S. share. 

Why does this content? Because it reveals how complex bitcoin’s eventual use cases will be, and how important it is to keep an eye on geopolitics and macroeconomics. It also reminds us that investors are not the not ones hoping the value of the currency goes up. 

With disconcerting timing, a glimmer of rather good news appeared in our feeds at the end of the week: U.S. employers unexpectedly added 2.5 million jobs in May, sending the unemployment evaluate down from 14.7% to 13.3% and underscoring optimism that the economic rebound would be swift and buoyant. 

The hordes are encouraging, indicating that certain sectors such as hospitality, construction, retail, education and healthcare are bringing in arrears some of the workers that were let go in March. Some areas are still cutting back, however, and the lack of behest is likely to put a cap on economic growth through consumption and investment, even as lockdowns start to ease. What’s more, the slews do not necessarily mean that new jobs are being created – they are more likely a reflection of furloughed workers journey by back to some sort of work, even if not full-time. And let’s not forget that the unemployment rate is still significantly maximum than at the lows of the 2008-9 recession. 

Since inequality is on everyone’s minds, it’s worth pointing out that the unemployment chew out among African Americans ticked up in May to 16.8%, its highest rate in over a decade.

The S&P 500 is now 40% from its Trek lows, in its largest 50-day rally in its history. The market is either telling us that the economic outlook is rosier now than it was in December 2019, earlier lockdowns were even on our radar, or it no longer reflects economic expectations.

Bitcoin had a wild week, swinging 10% from its low to its shrill. At one point on Wednesday, the price shot up 6% within an hour, only to fall 8% within five pint-sizes soon after. I still have whiplash.

Hester Peirce, one of five commissioners with the SEC, has been renominated for a espouse term at the U.S. regulatory agency. TAKEAWAY: This is good news for the crypto industry, as she has been a vocal proponent of bitcoin ETFs and pecuniary innovation more broadly. If this goes through, she will serve until 2025 – by when market infrastructure should accept evolved enough to remove regulatory opposition to more liquid products that broaden access to cryptocurrency investment. 

A on by Bloomberg predicts the price of bitcoin will reach $20,000 in 2020. TAKEAWAY: This prediction is based on price plans from the last few years, which matters if you believe patterns move markets (and they may do so – I’m not judging here). Basically, if 2020 prosecutes 2016’s trend (that was also a halving year, remember), then we can expect some wild moves in the girl Friday half. This is a good line, though: “Something needs to go really wrong for bitcoin to not appreciate.” And what could by any means go wrong, right?

Private Swiss bank Maerki Baumann has launched a crypto trading service for institutional investors and high-net-worth individuals. TAKEAWAY: While less small in scope for now, this is a continuation of the explosion the crypto industry is seeing in prime brokerage services, but with an intriguing quirk: this is a legacy institution entering the crypto market. The bank was founded in 1932, and earns most of its income from investment parnetical services with a small portion coming from lending. The bank has said that it will be looking at sacrifice other private banking products to its crypto clients, possibly emerging as one of Europe’s first full-service crypto prime agents. 

Crypto bank Avanti has raised $5 million in an angel round, led by the University of Wyoming Foundation with participation from Anthony Pompliano’s Morgan Burn Digital, Blockchain Capital, Digital Currency Group and others. TAKEAWAY: The lack of reliable banking in the U.S. has long been cited as one of the dominant headaches for the crypto industry. A more competitive and robust crypto banking ecosystem is likely to make a material idiosyncrasy in the operational efficiency of existing businesses, and support the emergence of future crypto innovations. 

“Sell in May and go away” doesn’t relate to bitcoin, apparently. Bitcoin had positive performance in eight of the last 10 Mays, and outperformed its monthly average in six of them. TAKEAWAY: There’s low correlation for you.

Bitcoin miners from been selling more bitcoin than they are producing, according to data source ByteTree. TAKEAWAY: Counterintuitively, this peaked of inventory could indicate bullish sentiment among miners, as apparently they tend to sell when they assume the market is strong and can take it. If they thought the market was weak, they would hold, so as to not depress the price beyond. 

The market for ether options is tiny compared to that of bitcoin, but it is growing fast. Open interest in ether opportunities is at its all-time high on derivatives exchange Deribit, the largest options exchange in the crypto industry. TAKEAWAY: This underscores the produce sophistication in the ether markets – options are seen as a more complex yet more granular hedging tool than to be to comes, and a vibrant options market is often seen as a prerequisite to institutional involvement.

David Leibowitz, broad macro portfolio manager at Lebo Capital Management, looks at bitcoin’s role in the new investment landscape. TAKEAWAY: David makes the intriguing point that fixed income as an investable asset class is disappearing, as interest rates will probably be low forever. Wealth leaving fixed income allocations will have to go somewhere.  

The put-call open interest ratio, which ranks the number of put options open relative to call options, fell to 0.43 on Thursday – the lowest since March 24, agreeing to crypto derivatives research firm Skew. TAKEAWAY: More people are buying calls than puts, which is conventionally taken as a bullish signal. It can’t be taken too literally, though, because the call options could be protection for a short tactics.

Constantin Kogan, partner at BitBull Capital, argues that family offices should look at crypto assets as a rise of return and diversification. TAKEAWAY: Family offices have been investing part of their over $6 trillion collective AUM in crypto assets for some repeatedly. They have fewer constraints than other institutional investors and tend to be less risk-averse. Two interesting statistics: the article cites the UBS Pandemic Family Office Report, which indicates that 57% of family offices believe blockchain will alter investing strategies and behaviors in the future. It also refers to a recent Fidelity Investments survey which revealed that 22% of on 400 U.S.-based institutional investors, including family offices and foundations, have explored products relating to digital assets. 

Lawful in case you thought token sales were completely dead, this past week saw two notable announcements that demonstration that they are still a thing. The amounts are small, but the projects are intriguing, and the regulators appear to be on board. French renewable animation services provider WPO has been granted approval from the French financial markets regulator to raise funding with the aid a public token offering under the “ICO visa” program. And hedge fund and predictions market startup Numerai tell oned $3 million in NMR tokens to investors including Union Square Ventures, Placeholder, CoinFund and Dragonfly Capital.

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