Monthly Archive: December 2022

• The U.S. Securities and Exchange Commission (SEC) is increasing its scrutiny of audits of cryptocurrency companies in an effort to protect investors.
• The SEC warns investors and audit firms that any troublesome “fact patterns” could result in a referral to the division of enforcement.
• Binance, the largest crypto exchange by trading volume, was looking for another audit firm after it was dropped by Mazars.

The U.S. Securities and Exchange Commission (SEC) is increasing its oversight of cryptocurrency companies by examining the audits of such businesses in order to protect investors. In the wake of the collapse of FTX, as many as nine exchanges around the world announced that they would publish transparency reports or Merkle tree proof of reserves to reassure investors.

The SEC is warning investors not to place too much confidence in the fact that a company has a proof of reserves from an audit firm. Paul Munter, the SEC’s acting chief accountant, said that such a report “is not enough information for an investor to assess whether the company has sufficient assets to cover its liabilities.” If the SEC finds any troubling “fact patterns”, they will consider referring the case to the division of enforcement.

This scrutiny comes at a time when questions have been swirling around Binance, the largest crypto exchange by trading volume, which released a report of its proof of reserves that was withdrawn two days later when the auditing firm it had hired, Mazars, announced it was no longer working with crypto firms. Binance has since been trying to find a new audit firm to work with, but the Big Four (Deloitte, EY, KPMG and PwC) are reportedly unwilling to conduct a proof of reserves for a private crypto company.

The SEC’s increased scrutiny of cryptocurrency companies is a positive development for investors, as it will help protect them from potential scams or frauds. The SEC’s warnings that investors should not too heavily rely on audit reports could help to ensure that investors have all the necessary information before making an investment. Additionally, the SEC’s enforcement efforts could help to deter any potential fraudulent activity.

1. Bitcoin’s annualized seven-day implied volatility has declined to a two-year low of 38.2%.
2. Analysts are scrambling to explain the perplexing tranquility in the market.
3. Markus Thielen, head of research and strategy at Matrixport, believes the macro outlook is extremely constructive and that the FTX headlines will have less impact on the market.

The bitcoin (BTC) market has been surprisingly calm despite lingering FTX contagion fears and macroeconomic uncertainty. Many analysts are scrambling to explain the perplexing tranquility in the market. The annualized seven-day implied volatility (IV) of bitcoin, or the options market’s forecast of a likely movement in the underlying asset, has declined to a two-year low of 38.2%, according to data source Amberdata.

This metric, often equated with the degree of uncertainty or fear, peaked at 145% on Nov. 9 and has been decreasing since, even as the FTX contagion spread and experts feared a wave of miner bankruptcies.

Markus Thielen, head of research and strategy at Matrixport, believes that the macro outlook is extremely constructive, which is contributing to the lower volatility. He also believes that the FTX headlines will have less impact on the market, due to investigations doing the dirty work in the background and China’s recent decision to relax inflationary COVID-19 restrictions.

Bitcoin’s price has risen 9% to $17,700 since crypto lender BlockFi filed for bankruptcy on Nov. 28 and has managed to eke out 3% gains for the week despite Binance’s clients withdrawing large sums of their coins early this week. This indicates that traders have moved on from the FTX collapse and have bought options to hedge against future market volatility.

The current low volatility of the bitcoin market has been perplexing to many analysts. However, with the macro outlook being extremely constructive, the FTX headlines having less impact on the market, and traders buying options to hedge against future market volatility, it is not surprising that the bitcoin market is relatively calm.

• Bitcoin looked remarkably stable Wednesday, trading around $16,780 as traders wrestled with the uncertain market outlook for next year.
• U.S. equities were a bit more buoyant on Wednesday, with the Nasdaq Composite, Dow Jones Industrial Average, and S&P 500 all up 1.4-1.5%.
• Traders have been navigating the continuing nervousness on the potential market contagion from the FTX collapse over the past month and closely watching the U.S. Federal Reserve’s hawkish stance on possibly continuing to raise interest rates in 2023.

The cryptocurrency market was surprisingly steady on Wednesday, with Bitcoin (BTC) trading around the $16,780 mark. Investors seemed to be wrestling with the uncertain market outlook for the coming year, with many wary of the potential impacts of the recent FTX collapse.

The largest cryptocurrency by market capitalization has been hovering in a range of between $16,700 and $16,900 over the past 24 hours. This stability was not mirrored in the traditional stock markets, however, as the tech-heavy Nasdaq Composite, Dow Jones Industrial Average, and S&P 500 all experienced a boost, trading up 1.4-1.5%.

The Federal Reserve’s hawkish stance on potentially continuing to raise interest rates in 2023 is making traders nervous, and could be a major factor in the coming year’s markets. Thomas Kralow, a crypto trader, commented that the probability of a recession is high, and that people could see the same situation that played out in 2008, when the Fed pivoted too late and the market crashed by 40%. He noted that the market bottomed when the fed funds rate was at zero, worrying that this could mean a drop to $10,000 or lower for Bitcoin in 2023.

Alex Tapscott, the managing director of the digital asset group at Ninepoint Partners, compared the current market environment to December 2018, when Bitcoin (BTC) hit a then-all-time low of $3,000. He said the current situation looks to be the same, and that Bitcoin’s performance in the coming year will depend on how the traditional markets perform, as well as the Fed’s response.

As the markets move forward, traders will be keeping a close eye on the potential impacts of the FTX collapse, the actions of the Federal Reserve, and the performance of traditional stock markets. With all of these factors in play, Bitcoin’s price and stability could be drastically affected in the coming year.

• Visa recently proposed a system called “Account Abstraction” that uses smart contracts to enable automated, programmable payments on Ethereum.
• This solution involves the creation of a smart contract that acts as an intermediary between a user account and a contract account, allowing for the creation of a self-custodial wallet that can make automatic recurring payments without requiring the active participation of the user.
• This system would allow for the automation of payments through the use of smart contracts, allowing for the creation of “delegable accounts.”

Visa, a payments processor, recently proposed a system known as “account abstraction” that uses smart contracts to enable automated, programmable payments on Ethereum. Account Abstraction (AA) is a proposal that seeks to combine user accounts and smart contracts into a single type of account on the Ethereum blockchain. This is made possible by allowing for the creation of validity rules for individual transactions.

This system involves the creation of a smart contract that acts as an intermediary between a user account and a contract account, allowing for the creation of a self-custodial wallet that can make automatic recurring payments without requiring the active participation of the user. Currently, there are two types of accounts on the Ethereum network: Externally Owned Accounts (EOA) controlled by a private key, and Contract Accounts (CA), which are essentially smart contracts. EOAs can initiate transactions, but CAs cannot. However, by using Account Abstraction it is possible to create a smart contract that can initiate transactions on behalf of an EOA, enabling the creation of a self-custodial wallet that can make automatic recurring payments.

One use case for AA is the creation of “delegable accounts,” which allow for the automation of payments through the use of smart contracts. With a delegable account, a user can delegate the ability to initiate a payment to a pre-approved smart contract, known as an “auto payment contract.” This auto payment contract would be able to initiate payments automatically when certain conditions are met. For example, a user could set up a contract that pays their rent automatically each month.

To deploy this system on the Ethereum layer 2 network StarkNet, Visa proposed using a custom-built token that operates on a sidechain. This token would be used to facilitate payments between the user and the smart contract. The user would be able to set up their own smart contract, which would be able to make automatic payments without requiring the active participation of the user.

Visa’s proposed Account Abstraction system has the potential to revolutionize the way payments are made on Ethereum. By allowing for the creation of self-custodial wallets that can make automated, programmable payments, users will have more control over their finances and will be able to make payments faster and more securely. Additionally, this system could help to reduce the cost of payments, as automated payments would be cheaper than manual payments.

• Visa (V) recently proposed a system known as “Account Abstraction” which uses smart contracts to enable automated programmable payments on the Ethereum network.
• This system would allow for the creation of a self-custodial wallet that can make automatic recurring payments without requiring active user participation.
• The proposal involves deploying the system on the Ethereum layer 2 network StarkNet.

Visa (V) recently announced a revolutionary new system known as “Account Abstraction” that utilizes smart contracts to enable automated programmable payments on the Ethereum network. This system would allow for the creation of a self-custodial wallet that can make automatic recurring payments without requiring active user participation.

Currently, the Ethereum network consists of two types of accounts: Externally Owned Accounts (EOA) and Contract Accounts (CA). EOAs are controlled by a private key and can initiate transactions, while CAs are smart contracts and cannot. However, Account Abstraction solves this limitation by allowing for the creation of a hybrid account that combines the two. This hybrid account can initiate transactions on behalf of an EOA, enabling the creation of a self-custodial wallet that can make automatic recurring payments.

The Account Abstraction system also allows for the development of “delegable accounts”, which enable the automation of payments with the use of smart contracts. This is done by allowing a user to delegate the ability to initiate a payment to a pre-approved smart contract, known as an “auto payment contract”.

Visa proposed deploying the Account Abstraction system on the Ethereum layer 2 network StarkNet. This would allow for a higher degree of scalability and privacy, while still preserving the security of the underlying Ethereum network.

The Account Abstraction system has the potential to drastically improve the user experience when making payments on the Ethereum network. It could also reduce costs, as users would no longer need to actively manage their accounts. Additionally, the automated nature of the system could make it more attractive to businesses and organizations looking to streamline their payment processes.

In conclusion, Visa’s Account Abstraction system is an exciting and innovative proposal that could revolutionize the way payments are made on the Ethereum network. It has the potential to drastically improve the user experience, reduce costs, and streamline payment processes for businesses and organizations. It remains to be seen how the proposal will be received and adopted, but it is certainly an exciting development for the world of blockchain and cryptocurrency.

• FTX has filed for bankruptcy and is in a battle over ownership of $450 million worth of stock in Robinhood Markets (HOOD).
• The dispute involves 56 million shares owned by Emergent Fidelity Technologies Ltd., a corporate entity 90% controlled by former FTX CEO Sam Bankman-Fried.
• FTX has requested that the judge overseeing the bankruptcy case force the shares to remain frozen while FTX tries to figure out how to repay all its creditors.

FTX, a crypto exchange, has had to seek the help of a U.S. bankruptcy court amid a battle over ownership of about $450 million worth of stock in Robinhood Markets (HOOD). At the heart of the dispute are 56 million shares of the brokerage owned by Emergent Fidelity Technologies Ltd., a corporate entity organized in Antigua and Barbuda and 90% controlled by former FTX CEO Sam Bankman-Fried.

The filing states that three parties have tried to get possession of these shares: BlockFi (a lender that FTX had helped prop up earlier this year), Yonathan Ben Shimon (an FTX creditor appointed as a receiver in Antigua and granted permission to sell the shares under supervision of a court there) and Bankman-Fried himself (who has legal bills). To prevent further complications, FTX’s bankruptcy estate asked ED&F Man Capital Markets, the brokerage where the shares are parked, to freeze the stock around the time the Chapter 11 case began on Nov. 11.

FTX has determined that Emergent only “nominally” owns the shares and that they truly belong to FTX. It is believed that Emergent is a special-purpose holding company that appears to have no other business. FTX has requested that the judge overseeing the bankruptcy case force the shares to remain frozen while FTX tries to figure out how to repay all its creditors.

FTX argued in the filing that the fact that multiple prepetition creditors of different Debtors and Mr. Bankman-Fried are all seeking to obtain possession of the Robinhood Shares demonstrates that the asset should be frozen until this Court can resolve the issues in a manner that is fair to all creditors of the Debtors. It is hoped that the judge will agree to this request and the shares will remain frozen while FTX figures out how to repay all its creditors.

• Cryptocurrency payments to ransomware hackers have decreased from nearly $74 million USD in 2021 to $16 million USD in 2022, according to blockchain intelligence firm Crystal Blockchain.
• This may be due to the emergence of new ransomware gangs and Conti ransomware gang’s closure.
• Analysis of on-chain activity shows that crypto services with a high money laundering risk score are seeing a drop in popularity and exchanges and services that manage to keep “dirty” crypto out are tightening their anti-money laundering policies.

The prevalence of cryptocurrency payments to ransomware hackers has seen a significant decrease in the past year, according to a report from blockchain intelligence firm Crystal Blockchain. The report found that payments to ransomware hackers totaled a mere $16 million USD in 2022, compared to nearly $74 million USD in 2021.

This decline in payments may be linked to the closure of the notorious Conti ransomware gang, known for terrorizing U.S. hospitals during the COVID-19 pandemic. Since their closure, new ransomware gangs have emerged, but are yet to reach the level of notoriety of Conti. Despite this, the decrease in payments may also be attributed to the increased regulation, registration and client expectations of virtual asset service providers.

The report also found that crypto funds are increasingly exchanged between lower-risk virtual asset service providers, likely due to the aforementioned reasons. Additionally, the volume of funds sent to lower risk exchanges from scams fell by 24% in 2022 compared to 2021. This could be seen as a sign that exchanges and services that manage to keep “dirty” crypto out are further tightening their AML policies, discouraging criminal actors from using their services.

The data presented by Crystal Blockchain suggests that the decrease in cryptocurrency payments to ransomware hackers is likely due to a combination of factors. On one hand, the emergence of new ransomware gangs may be making it more difficult for hackers to collect funds. On the other hand, increased regulation, registration and client expectations of virtual asset service providers, as well as exchanges and services that manage to keep “dirty” crypto out further tightening their AML policies, may be scaring away criminal actors.

Overall, the decrease in payments to ransomware hackers is a sign that the use of cryptocurrency for criminal activities may be decreasing. It remains to be seen whether this trend will continue in the future, but if it does, it may be thanks to the combined efforts of law enforcement agencies, exchanges and service providers, and the public at large.

• CoinDesk, in partnership with data company Atlas Corp., has determined the active population of Decentraland to be 810 on an average day.
• At the recent Metaverse Music Festival, 3,668 active users with a non-fungible token (NFT) in their wallet were recorded.
• Determining the population of Decentraland is difficult because the metaverse is filled with bots and inactive users.

Determining the population of Decentraland on a regular day or at an event is no easy task. The metaverse itself is filled with bots, inactive users, and those who simply come for a quick look and then leave. CoinDesk, in partnership with data company Atlas Corp., set out to create a number that reflects an accurate count of active players in this metaverse.

The first challenge CoinDesk faced was to differentiate bots from real people. To tackle this, they filtered users by those with non-fungible tokens (NFTs). NFTs denote ownership of real estate in Decentraland (LAND) or wearable items that unlock some of the more popular experiences like ICE Poker. These users are the most active and valuable to the metaverse’s success.

CoinDesk’s research revealed that on an average day, the active population of Decentraland is 810. This number is based on their data analysis and the fact that Decentraland and MANA token holders have an interest in having a large population.

At the recent Metaverse Music Festival, 3,668 active users with an NFT in their wallet were recorded. This is a large increase from the average day and is likely due to the event’s popularity.

Overall, it is challenging to do a census of the metaverse with any accuracy. CoinDesk and Atlas Corp. have worked to create a number that reflects an accurate count of active players in Decentraland. As the metaverse continues to expand and evolve, it is important to keep track of the population, and CoinDesk’s research has provided a valuable starting point.

• Sam Bankman-Fried, former CEO of FTX, appeared in U.S. federal court in New York on Thursday facing charges of fraud, money laundering and campaign-finance violations.
• The judge set bail at $250 million, which was secured with a bond.
• Bankman-Fried must adhere to a long list of requirements, including not making financial transactions for more than $1,000, not opening new lines of credit, only leaving the house to exercise, and undergoing substance-abuse and mental-health treatment.

On Thursday, Sam Bankman-Fried, the former CEO of the crypto empire FTX, appeared in U.S. federal court in New York to face charges of fraud, money laundering and campaign-finance violations. After hearing the case, the judge set bail at $250 million and it was secured with a bond.

The lengthy list of requirements for Bankman-Fried’s release were outlined in the agreement. These included not making financial transactions for more than $1,000, not opening new lines of credit, only leaving the house to exercise, and undergoing substance-abuse and mental-health treatment. Bankman-Fried’s release was secured by equity in his parents’ Palo Alto, California, home.

The investigation into Bankman-Fried’s activities surrounding FTX began in July of 2020. The FBI, who were responsible for extraditing Bankman-Fried from the Bahamas to the U.S., had been closing in on the disgraced crypto frontman. In addition, plea deals had been inked inside the FTX inner circle, most notably with Caroline Ellison, the former CEO of FTX’s sister company Alameda Research.

When Bankman-Fried arrived at the courthouse, he was wearing a crumpled suit jacket and his restraints were audible in the silent courtroom. He was asked if he agreed to the conditions of release and he nodded before saying, “Yes, I do.”

The future of Bankman-Fried’s case is yet to be seen, but one thing is certain: the former CEO of FTX is facing serious charges that could have serious consequences. It remains to be seen how he will fare in court and whether or not he will be able to remain free on bail.

• Bitcoin is run by a tight ship of just a few dozen active developers.
• New York Digital Investment Group (NYDIG) published a report chronicling Bitcoin’s 14-year evolution from a software development perspective.
• It is mind-boggling how the world’s most dominant cryptocurrency, currently worth about $320 billion, has been chugging along with no major hiccups for almost 14 years, under the care of a passionate – but small – group scattered across the globe.

Bitcoin is a decentralized digital currency that has been gaining in popularity for the past 14 years. It was created in 2008 by an anonymous individual or group of individuals known as Satoshi Nakamoto, who published a white paper outlining the concept of a digital currency that could be used for peer-to-peer transactions. Since then, Bitcoin has grown to become a global phenomenon, with billions of dollars in circulation.

The development of Bitcoin has been overseen by a relatively small group of dedicated software developers. According to a report published by New York Digital Investment Group (NYDIG), there are currently around 40 to 60 active developers working on the Bitcoin protocol. This is astonishing when you consider that Bitcoin is now worth an estimated $320 billion.

However, the small size of the developer team has not been a hindrance to Bitcoin’s success. In fact, it is likely that the limited number of developers has helped maintain the stability of the Bitcoin network and its underlying protocol. This is thanks to the extensive experience and knowledge that each team member brings to the table, as well as their commitment to the project.

The developers have been responsible for a number of major updates to the Bitcoin protocol, including the Segregated Witness (SegWit) upgrade, which improved the scalability of the network, as well as the Lightning Network, which enables users to send Bitcoin transactions almost instantaneously. They are also responsible for maintaining the security of the Bitcoin network, which is paramount to its success.

It is clear that the small team of developers working on Bitcoin have had a huge impact on its evolution. They have dedicated their time and effort to ensure the stability and security of the network, while continuously working on improvements to the protocol. Without their hard work, it is highly unlikely that Bitcoin would have achieved the success it has today.