There was a lot of positive news in the crypto world this week, particularly for Bitcoin.
First, it's trading near $59,000 as of press time, double what it was three months ago. Second, there's a lot of speculation that approval for a Bitcoin futures ETF is imminent. (That is part of the reason for the price jump.) Finally, the geographic distribution of the Bitcoin hash rate is now less concentrated than it ever has been, and as of July, none remains in China.
That removes one of the biggest existential threats to crypto -- that the Chinese government could have influenced mining, and therefore the security of the Bitcoin network. As recently as a year ago, Chinese miners made up around two-thirds of all hash power on the network.
In the panel, four investors -- Rik Willard, founder of Agentic Group, Thomas France, co-founder of Cygni Capital, Dylan Hixon, president of Arden Road Investments, and Nick Grossman, general partner at Union Square Ventures -- discuss numerous questions investors in the decentralized web are facing now, including what role VCs play, how to invest to further goals of financial inclusion, and more.
And now for the top crypto news stories this week:
According to the University of Cambridge, the United States now accounts for more of Bitcoin’s hash rate than any other country in the world. As of August 2021, more than one-third (35.4%) of Bitcoin’s hash rate -- a measure of the computing power securing the network -- was located in the United States. The figure marks a drastic shift in mining power. Last summer, the US only accounted for 4.2% of the hash rate and for 21.8% in May 2021.
Following behind the US in terms of hash rate was Kazakhstan at 18.1%, Russia at 11.2%, and Canada at 9.6%. No other country currently houses more than 5% of Bitcoin’s hash rate. Just like the US, Kazakhstan, Russia, and Canada have each seen their share of the global hash rate increase over the past year.
This upward trend in global hash rate for these countries coincides with an equally severe decrease in hash rate for China, which began cracking down on cryptocurrency mining in earnest earlier this year. Data from Cambridge recorded precisely 0% of Bitcoin’s hash rate coming from China in July of 2021 -- marking an abrupt about-face for a country that used to be a mining powerhouse. For context, in August 2020, China miners made up 67.1% of Bitcoin’s hash rate. As recently as May 2021, China still accounted for 34.3%.
Michel Rauchs, digital assets lead at the Cambridge Centre for Alternative Finance, believes that the shift in power away from China is a positive development for the health of Bitcoin’s network. “The effect of the Chinese crackdown is an increased geographic distribution of hashrate across the world, which can be considered a positive development for network security and the decentralised principles of Bitcoin,” Rauch wrote.
Stripe s beginning to assemble a team of crypto engineers to navigate the payment company’s journey into Web3. Guillaume Poncin, the former head of engineering for banking and financial products at Stripe, will be heading the team.
The engineers will be joining a “brand new” team at Stripe and “will design and build the core components that we need to support crypto use cases,” as the job description states. Poncin says he is looking for “engineers and designers to build the future of Web3 payments.”
The job posts do not specify which cryptocurrencies Stripe will be working on or what aspects of blockchain technology Stripe will be attempting to leverage. A CoinDesk report says that the company “wants to remain tech-neutral” while building in crypto. In perhaps a hint at where Stripe’s focus will be, Stripe’s CEO John Collison described crypto as a “very exciting” tool in solving the issue of cross-border transactions earlier this year.
Notably, this is not the payment company’s first time down the crypto rabbit hole. Stripe was an early supporter of Bitcoin and one of the first major companies to accept the cryptocurrency back in 2014. That being said, Stripe ended its BTC program in 2018, saying that consumer demand was not there for Bitcoin-based payment rails.
Two of the most popular cryptocurrency exchanges in the US are moving into NFTs. On Monday, FTX.US, the American subsidiary of Sam Bankman-Fried’s FTX, launched a Solana-based NFT marketplace. Dubbed FTX NFTs, the marketplace plans to add support for Ethereum NFTs in the next few weeks. Unlike decentralized markets, like OpenSea or Solanart, FTX NFT will allow users to purchase NFTs with US dollars via credit card or ACH payments. However, with the ability to pay in cash comes the cost of KYC, as all users must undergo know-your-customer identity checks to be eligible to trade on the platform.
In a similar move, Coinbase, the larger exchange by far in this story, announced a waitlist for Coinbase NFT. Though support for other chains is expected, the new platform will initially only allow users to mint, purchase, and showcase Ethereum-based NFTs. Interestingly, Coinbase will be using self-custody wallets, so users will not need to go through KYC check to utilize the NFT platform.
Coinbase seems bullish on NFTs as an economic force. “Our ambition with Coinbase NFT is to allow everyone to benefit from their creative spark; to contribute to a future where the 'creator economy' isn’t a small subset of the 'real' economy, but a central driver,” Coinbase said.
According to Decrypt, over 1,400,000 users have already signed up for the waitlist -- a number that ended up briefly shutting down the site due to heavy traffic.
In related news, Sotheby’s, a 277-year-old auction house, is launching a new platform called Sotheby’s Metaverse to auction NFTs for fiat, ETH, BTC, and stablecoins.
Two commissioners at the Securities and Exchange Commission disagree on crypto regulation.
Commissioner Hester Peirce is widely known for a more favorable stance toward crypto, and has even proposed that token issuers have a three-year safe harbor period to develop their coins. Commissioner Caroline Crenshaw made waves by saying Peirce’s “safe harbor” proposal could potentially be harmful to the crypto community. She said, “Had a safe harbor been in place during the Initial Coin Offering or ICO boom of 2017 and 2018, I think the results would have been even worse for investors and the markets. ICOs and other digital asset offerings raised billions from investors, but most never delivered on their promises.”
Commissioner Peirce, aka Crypto Mom, for her part, continues to take the SEC to task, as she did in this speech at the Texas Blockchain Summit on October 8th:
Regarding the prevailing attitude inside the SEC that digital assets already have legal clarity, Peirce said: “The idea that there is clarity as to when crypto assets are securities must come as a surprise to the lawyers advising crypto projects that have struggled with this issue for years.”
On the recent trend of Americans being geoblocked from airdrops due to regulatory uncertainty, Peirce added: “Widespread geoblocking of Americans should concern American regulators even if it does lighten their regulatory load... Take a look at Twitter after one of these airdrops— the SEC is not being thanked.”
After lamenting over the jurisdictional jockeying between regulators, Peirce turned to stablecoins, saying: “I believe that we must take strong account of the potential benefits of stablecoins, including the possibility that a U.S. dollar stablecoin might support the role of the dollar in the global economy.”
To wrap up her thoughts, Peirce took to Twitter, writing:
In related news...
Bloomberg reports that the Biden administration is weighing an executive order on cryptocurrency. The order would task federal agencies to study the crypto industry and offer recommendations regarding financial regulation, innovation, and national security. The executive order is still under consideration, but the administration will soon announce its strategy for cryptocurrencies, according to Bloomberg’s sources, who are described as being familiar with the matter.
Speaking of crypto oversight, three separate crypto entities unveiled proposals for regulation. Coinbase published a piece titled “Digital Asset Policy Proposal: Safeguarding America’s Financial Leadership,” a16z unveiled an “Agenda for the Future of the Internet,” and FTX announced its own set of “policy goals for crypto market regulation.” Clearly, the topic is on many people’s minds.
Bitcoin is trading above $50,000 and has a market capitalization of over $1 trillion.
However, according to JPMorgan CEO Jamie Dimon, the emperor of cryptocurrency has no value.
“I personally think that Bitcoin is worthless,” said Dimon during an Institute of International Finance event on Monday. Dimon’s words were on brand. The billionaire CEO has spoken out against Bitcoin numerous times, dating back to 2015, when Bitcoin was priced at $400.
Dimon went on to clarify that his negative stance on Bitcoin does not affect JPMorgan. “Our clients are adults. They disagree. That’s what makes markets. So, if they want to have access to buy yourself bitcoin, we can’t custody it, but we can give them legitimate, as clean as possible, access,” concluded Dimon.
Funnily enough, just at publishing time, Morgan Stanley CEO James Gorman said on the bank’s third-quarter earnings call that “I don’t think crypto’s a fad, I don’t think it’s going away.”
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