Monday Markets Wrap-up: The Double-Spend That Did Not Happen

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Good morning. Today, we look at a couple of developments from CryptoPH, as well as news from around the world.

Welcome to Monday Markets Wrap-up, part of our new series: BitPinas Daily. We will look back at all the major news and updates that happened this week. Crypto is global, but sometimes news that matters happens while we sleep. So we bring to you what’s happening in our space here and abroad. We highlight three to four important news of the past week and list down the rest. 

Market Price as of January 25, 2021:

Bitcoin$32,068-2.7%
Ethereum$1,392.54+13.11%
Tether$0.99-1%
Polkadot$18.60+8.45%
XRP$0.271428-0.64%
SLP$0.016+14.29%


Bitcoin closed January 24, 2021, at $32,068 per BTC. We’re down 9% in the last 7 days and up 13% since the year began. This is 22% below the previous all-time high of $41,940, which was hit on Jan. 8, 2021.

Bitcoin’s market capitalization stands today at $606,273,788,579 which is 61% of the entire cryptocurrency market. The entire crypto market, by the way, now has a market cap of $991,444,968,832 (+4%).

On the table above, there’s the cryptocurrency SLP. If you wonder what that is, check out this article: Playing Axie Infinity vs Minimum Basic Salary in the Philippines.

MicroStrategy

MicroStrategy buys another $10 million in Bitcoin

MicroStrategy has purchased 314 BTC at an average price of $31,808 including fees and expenses. The business intelligence firm (in case everyone has forgotten what this company’s actual business does) is now holding 70,784 bitcoins at an average price of $16,035. 

MicroStrategy’s BTC buying spree has caused Citigroup to downgrade its recommendation of the company’s shares ($MSTR) from “neutral” to “sell.” In the note, Citigroup said it is concerned that the company is losing its focus with CEO Michael Saylor’s “disproportionate focus on bitcoin vs. running the business.”

In the chart below, I marked the day  Citigroup’s “sell” recommendation made it into the news:

Clearly, MicroStrategy’s investors are unconcerned.

U.S. Government

New administration’s Freeze on FinCEN’s proposed rule on private wallets

One of Joe Biden’s first acts as President is to freeze all new or pending “Trump-era” rules until members of his administration are able to review them. So in the crypto industry, this means the Financial Crimes Enforcement Network or FinCEN’s proposed rule that require “banks and money service businesses” to “submit reports, keep records, and verify  the identity of customers” who engage in transactions with private crypto wallets will not take into effect, for now.

To review, the FinCEN’s proposal are as follows:

  • If a user in a crypto exchange sends an amount worth $10,000 in one day to a private wallet, the crypto exchange must compel the sender to disclose who the owner of that private wallet is.
  • The crypto exchange must store records of such transactions worth $10,000 and submit it to FinCEN.
  • The crypto exchange must maintain records for transactions worth over $3,000.

Regime change: Biden appointees are well-informed about crypto

While it doesn’t guarantee crypto-friendly legislation, it at least means that discourse in the U.S. surrounding crypto regulations will be well-informed.

  • Gary Gensler, who teaches blockchain and cryptocurrency at MIT, will be the next U.S. SEC Chairman
  • Chris Brummer, who runs the annual D.C. Fintech Conference and has a podcast that sometimes talked about crypto may be the next Chairman of the Commodity Futures Trading Commission (CFTC), Reuters reported.
  • Michael S. Barr, who was once a member of Ripple’s board of advisers, may become the next Comptroller of the Currency.
  • Janet Yellen, who appears to not be a fan of Bitcoin, did clarify that she acknowledges the “benefits of cryptocurrencies and other digital assets, and the potential they have to improve the efficiency of the financial system.”

What double spend?

The Bitcoin Double-Spend That Never Happened

The picture below is the timeline of events that led  to the “double-spend” event that did not happen:

What is Double-Spend? This is a potential flaw in digital cash wherein the same money is spent twice. We know that digital files can be copied and reproduced infinitely and in a sense that’s okay (for example, creating a copy of a digital photo you took for backup purposes), But for digital currencies, this simply must not happen because the same money must not be spent twice. If this is widespread, we’ll lose faith in money.

The best real-world analogy is Alice writing a check for Bob, and then Alice withdrawing the money from her bank before Bob can encash the check, which draws money from Alice’s bank account. Another is when Alice pays a $5 dollar bill for a coffee, she gives the $5 dollar bill to the cashier. She can’t get that same $5 bill and spend it elsewhere.

Bitcoin was the first major digital currency to solve this double spending problem. The blockchain retains records of time-stamped transactions going back to its founding in 2009. 

In the simplest sense, the attacker might try to double spend by sending their 1 BTC to two BTC wallet addresses. Like everything else, it will first go to a pool of unconfirmed transactions. The first transaction will be approved and the second will be considered invalid and will not be verified.

So on January 18, a user which we will call Bob tried to do a transaction with very low fees (1st attempt). Of course the miners will favor other transactions with more profit if there are available. Bob could wait until his transaction gets confirmed (this will happen if at some point throughout the day, the fees drop to match the fees he paid). Alternatively, he can increase the fees through a “Replace by Fee (RBF)” transaction, which means he is putting an explicit instruction to the miners to favor his new transaction instead. This is what he did (2nd attempt).

Bob’s transaction still did not go through so he decided to increase his fees again (3rd attempt). This time, the user has finally paid enough fees and he did so with three transactions.

But by the time Bob did the third attempt, the blockchain had split into two versions (a normal occurrence in Bitcoin). Whenever this happens, the miners have to decide and converge on a single version of events. Some miners picked up Bob’s first transaction, while others picked up the third transaction. At some point, the blockchain split again and the miners who picked up the first transaction ended up winning (their version of the blockchain is recognized as the true version of all events), so Bob’s other attempts did not become “true”.

If the double-spend topic still feels complicated to you, tune in tomorrow at Bloomcast where they will most likely explain this topic.

The World’s Largest Asset Manager

Two of BlackRock’s funds have been granted the ability to invest in cash-settled bitcoin futures. 

So they are not actually holding BTC. It also does not mean that they will bet that “number will go up.” It’s possible that they bet on the downside too. 

But for the largest asset manager to dive into bitcoin is telling. It’s CEO Larry Fink previously said bitcoin could one day be a global market asset. It is definitely encouraging to see them engaging in the space. The question now is who’s next.

Ethereum

Fundstrat is bullish on ETH

Fundstrat Global Advisors said it is bullish on ETH, calling it the “best risk/reward investment play in crypto” because of the following reasons:

  • Bullish pressure stemming from ETH’s growing role in decentralized finance
  • Gas fees: 2020 gas fees totaled $600  million. Between Jan 1 to 17, 2021, it’s already at $180 million. “Ethereum fees could total $3.9 billion this year.”

FundStrat did say that risks included a potential bear market or setbacks to Ethereum 2.0.

Ethereum closed Sunday at $1,459, a new all -time high.

#CryptoPH

How PH crypto exchanges are handling the XRP fall out

There appears to be different responses among local cryptocurrency exchanges in the Philippines in relation to the current legal issue that Ripple, the company with the majority of XRP token holdings, is facing in the United States. The responses fall in either of the three categories – full suspension of XRP trading, partial suspension, or no change in current policy.

  • PDAX suspended BTC/XRP citing lack of liquidity but also said they are monitoring Ripple’s legal case vs U.S. SEC
  • Bexpress Pro suspended all XRP trading pairs immediately. Its lawyer Atty. Rafael Padilla said the risks are clear. “Philippine securities law is adopted from the U.S. federal securities legal framework. If the U.S. SEC strongly believes—to the point of taking enforcement action against Ripple—that XRP is a security, it is plausible that the Philippine SEC might take the same view. If the Philippine SEC would also regard XRP as a security, this could then expose Philippine-based exchanges listing XRP from the risk of facilitating the sale, purchase or trading of unregistered security in violation of the Securities Regulation Code.” 

Read more on how the exchanges responded here.

Yield Guild Games

“Yield Guild Games gathers players around the world to form a guild that invests in NFT’s of different blockchain games and earns yield for its players, turning them from gamers into investors.”

Check out Yield Guild Games on Discord and Gabby Dizon’s 2020 Year in Review on BitPinas. 

Binance Announces Filipino Chat Support

Colin Goltra, Director of Binance SEA, said he considers it a moral imperative to ensure that every Filipino has cryptocurrency. Filipino language customer support has been a requested feature that would surely help ease up the language barrier whenever there are concerns on the platform. Miko Ilas of Binance Philippines also said that due to the bull run, there is a large volume of users needing customer support so responses may take longer than the usual instant support in the past. Nevertheless, Filipino language customer support will be available from 9 am to 5 pm.

What else is happening

  • Institutions keep buying during the #dip
  • Singapore-based Temasek announces joint digital asset venture focused on capital markets
  • Synthetix introduces Layer 2 Staking on Optimism
  • Banque de France tests ‘whole lifecycle of CBDC’ in landmark transaction
  • Former Canadian Prime Minister lists bitcoin as possible future reserve currency
  • Bitcoin developers weigh the costs of defying whitepaper copyright claim
  • Aave hits record $288 high as demand for flash loans and staking increases

This article is published on BitPinas: Monday Markets Wrap-up: The Double-Spend That Did Not Happen

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Michael Mislos

A business ad graduate from the Pamantasan ng Lungsod ng Maynila, Mike is the website manager of Bitpinas.com. He is responsible for almost every content you see on the site, from topic/news selection to editing of articles. Mike believes correct information about blockchain and cryptocurrency can empower people to make accurate decisions about the industry, which, in turn, should deter bad actors from taking advantage of crypto & blockchain. [Telegram @mikemislos]

Michael Mislos
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