You’re either going to be very pleased or very disappointed to know that I won’t be covering any of the NFT madness in this month’s issue.
That’s because I’m writing a whole feature on NFTs – or rather, what everyone is missing about the NFT hype – next weekend.
That won’t be a premium issue. So if you’re reading this now, you’ll also be able to read that for free.
And speaking of coin confidential premium. I just wanted to thank everyone who joined. There are way more of you out there than I imagined! If you missed my first issue, where I reviewed Radix, you can read it here.
The theme for next month’s issue was very closely fought. And it switched around a few times along the way. But in the end more of you voted for an issue on “core cryptos for a happy life” than to review an individual crypto.
So in this month’s premium issue, I’ll give a rundown of what I see as the best cryptos to hold for the long term, and why.
The individual crypto leader was IOTA. So I’ll probably be reviewing that in the coming months.
And I will just say now, IOTA was my favourite high-potential crypto back in 2018 when I first ranked it for Crypto Wire, and it’s still my favourite high-potential crypto today. So it will also appear as one of my core cryptos in this month’s premium issue.
Given all the new things I’ve been adding, I thought you might appreciate having a publishing schedule from me.
1st weekend of the month: this month in crypto newsletter (free).
3rd weekend of the month: coin confidential premium newsletter (paid).
Features and essays
On some of the weekends in between the regular newsletters I’ll also be writing in-depth features and essays on interesting or important topics.
And these ones will also be free.
Okay, definitely enough preamble. Now on with this month’s issue…
Wider crypto news and insights
Institutions, institutions, institutions, institutions…
Back in the early 2000s, Microsoft’s Steve Ballmer became a viral sensation by going crazy for “developers, developers, developers!” live on stage at a Microsoft conference.
You can see it below:
That is the definition of passion, right there.
Anyway. Over the last few years crypto has been going equally as crazy for institutions. Or should that be, institutions have been going crazy for crypto?
As you might know from my Everything you need to know about crypto essay, Bitcoin was created as a direct result of institutions screwing over the public.
So the relationship between crypto and institutions is always going to be contentious.
But in the last few months, crypto and institutions are becoming more and more deeply entwined.
JPMorgan revealed it was letting clients gain exposure to cryptos through a Structured Note – or rather, its SEC filing did.
(If you’re not au fait with structured notes – I certainly wasn’t – there’s a good explainer from Investopedia here)
The note will reference 11 stocks that JPMorgan believes are good substitutes for investing in actual cryptos:
MicroStrategy, Square, Riot Blockchain, NVIDIA, PayPal, AMD, Taiwan Semiconductor, ICE (owns Bakkt), CME (does Bitcoin futures), Overstock, Silvergate Capital.
I don’t know why anyone would invest in this over just buying Bitcoin, or even Grayscale’s Bitcoin fund. But there you go.
Morgan Stanley is letting its rich clients invest in two crypto funds.
Only rich people are smart enough to be allowed to invest in crypto. So if clients want in, their Morgan Stanley investment account must be worth over $2 million. Source, CNBC.
Don’t you know that there are no dumb rich people and no smart poor people?
BlackRock – the world’s biggest asset manager – has been trading Bitcoin futures. $6.15 million of them to be exact, which it made $360,458 on at the end of March. Source: Forbes.
And Goldman Sachs – the great vampire squid itself – is getting back in to crypto.
On the 1st of March ol’ squiddy announced it was restarting its cryptocurrency trading desk. And will also be “exploring potential” for a Bitcoin ETF. Source: Reuters.
Speaking of crypto ETFs…
There are now four US Bitcoin ETFs on the horizon
Forbes Crypto Confidential (great name, wonder how they came up with it…) reports there are now four US Bitcoin ETFs in the works, following the success of Canada’s first one.
Fidelity ($4.9 trillion assets under management) submitted a filing to the SEC for a Bitcoin ETF. You can read it here.
WisdomTree submitted its application for a Bitcoin ETF on 11thMarch. You can read its filing here.
VanEck’s Bitcoin ETF application is live, and the SEC has 45 days to approve or deny it. You can see it hereunder the 15th of March date.
And SkyBridge Capital submitted its Bitcoin ETF application to the SEC on 19thMarch. You can read it here.
The reason a Bitcoin ETF would be such a big deal is because it would mean regular investors could then invest in Bitcoin in a tax efficient way.
Personally, I’d love to be able to throw a Bitcoin ETF into my ISA and never have to worry about how much tax it would cost me down the line.
I also imagine that eventually ETFs for Proof of Stake cryptos – ones that basically pay you dividends for holding them and keeping their network secure – will emerge and pay massive dividends.
And it would be great to invest in those through an ISA and collect big tax-free dividends. One day…
So, will any of these Bitcoin ETFs be approved? Given the long history of the SEC denying Bitcoin ETFs, the odds are probably against them.
But now we have so many institutions clamouring for crypto exposure, maybe the SEC will be more amenable.
Especially because Biden’s nominee for the SEC chairman is a man called Gary Gensler, a professor at MIT who lectures on cryptocurrency.
Although, as The National Law Review points out, although Gensler is very knowledgeable about crypto, he also loves regulation:
Those in the crypto community who are optimistic that Gensler will significantly reimagine the SEC’s approach to regulating digital assets are likely to be disappointed. In particular, we believe there is a low probability that he will revisit the SEC’s fundamental approach to treating most digital assets as securities under the Howey test. Gensler’s resume as a regulator shows he tends to favor more regulation, not less, and he will likely feel political pressure to continue this approach at the SEC.
PayPal will let you pay in crypto – but watch out for that capital gains tax
On the 30th of March, PayPal announced it would let customers use their crypto holdings to make purchases. At least, if you live in the US. But I’m sure it’ll roll it out worldwide soon enough.
As with the Visa announcement we’ll look at in a minute, this isn’t really anything new. You’ve been able to get a Coinbase card that lets you pay with crypto for years. And Wirex has a whole company based around a crypto payment card.
However, it’s yet another major company endorsing crypto and proving that it’s here to stay.
I don’t know why you would use this – or any other – crypto payment service for the foreseeable future though.
Unless tax treatment changes on crypto then it’s foolish to use it as an actual currency.
You need to keep a record of every purchase you make and then work out what your capital gain was on it and then file it all with HMRC at the end of the year and pay extra tax on it.
It’s a logistical and administrative nightmare.
Following that thought, on the 30th of March, HRMC issued new tax guidance on crypto for the first time since December 2019.
Many were hoping it would clarify its positions on staking rewards, DeFi, lending, crypto derivatives and other booming parts of crypto. It didn’t.
In fact, it didn’t really say anything new at all.
For example, here’s what it says about staking rewards:
Some types of mining require ‘staking’ of exchange tokens which weights the entitlement to newly forged tokens, as is explained at CRYPTO10300.
Whether such activity amounts to a taxable trade (with the tokens as trade receipts) depends on a range of factors such as:
- degree of activity
If the mining activity does not amount to a trade, the pound sterling value (at the time of receipt) of any tokens awarded will be taxable as income (miscellaneous income) with any appropriate expenses reducing the amount chargeable.
For more information on miscellaneous income, see BIM100000.
If the individual keeps the awarded assets, they may have to pay Capital Gains Tax when they later dispose of them.
You can read the new manual here.
But basically it looks like every crypto transaction counts as disposal of an asset and so is liable for capital gains.
And every staking reward you get needs to be logged and counted as income. And then you must also pay capital gains on the rewards if you later trade them.
I’m sure it’s going to be fun for big investors logging staking rewards form myriad different currencies every day.
I’ve actually seen a number of people say they avoid investing in any crypto that issues rewards for this reason.
It’s frustrating, to be sure. But you can automate it all with something like Koinly.
Disclaimer: this is not tax advice. I am not an accountant.
Meanwhile, India bans crypto again
Earlier in March news broke that India was planning to ban crypto trading, mining and holding.
The bill, one of the world’s strictest policies against cryptocurrencies, would criminalise possession, issuance, mining, trading and transferring crypto-assets.
The measure is in line with a January government agenda that called for banning private virtual currencies such as bitcoin while building a framework for an official digital currency.
If the ban becomes law, India would be the first major economy to make holding cryptocurrency illegal. Even China, which has banned mining and trading, does not penalise possession.
And this comes off the back of an Indian government panel recommending up to 10 years in jail for anyone who uses crypto back in 2019.
This story has been pretty big news within crypto. But it’s not really news at all. India already banned crypto back in 2018. Here’s a link to a BBC article about it at the time.
And as that Reuters piece points out, that 2018 ban was only repealed in March 2020. So crypto being banned in India is the norm, not the exception.
At this point, no serious crypto company should consider launching operations in India.
It’s a shame India is likely to get left behind in an industry that promises to have as much impact on our lives as the internet has. (But then, of course, I would think that, wouldn’t I?)
Imagine if America would have tried to ban the public using and building on internet back in the 90s.
You could argue that its financial dominance is a direct result of its embrace of internet technology.
As I argued in my everything you need to know about crypto essay. Crypto IS the next internet. And any country or corporation that fails to see that will get left behind.
Of course, India knows that. The clue to why it’s banning crypto again is in that quote above: “a January government agenda that called for banning private virtual currencies such as bitcoin while building a framework for an official digital currency.”
It wants to build its own Central Bank Digital Currency (CBDC) that it can control, and outlaw everything else.
But as you know, and as anyone who has spent any time researching crypto whatsoever knows, crypto is about way more than just currency.
It has the potential to improve just about every industry on the planet, and allow new ways of doing business and new entire industries to emerge… just like the internet did.
Again, see my everything you need to know about crypto essay for more on that.
It’s a real shame that many of those in power around the world see crypto as more of a threat than an opportunity.
It will be interesting to see how it all plays out in the coming years.
Specific crypto news and insights
Ethereum Futures are live
I wanted to add this story in last week, but I ran out of time. However, it’s another real landmark for Ethereum.
In February, the Chicago Mercantile Exchange (CME) launched Ethereum futures trading.
As CoinDesk pointed out last month:
[Ethereum] has more than tripled in value since the CME announced plans to list futures contracts on Dec. 16, mimicking bitcoin’s surge from $6,000 to $19,783 seen in the weeks leading up to Dec. 17, 2017, when the exchange began trading bitcoin futures.
But it’s also worth noting that as it gets towards futures expiry dates, prices can fall off a cliff.
For example, a record number of expiring futures contracts were blamed for the big drop in Bitcoin we saw towards the end of March. Source: forexcrunch.
And I remember back when Bitcoin futures were first introduced in December 2017, they were blamed for some huge drops around their monthly expiry dates.
So futures can be a double edged sword for any asset class. Just ask gold investors how they feel about them. Actually, probably don’t do that.
Visa to settle payments on Ethereum – how is this not bigger news?
In mid-March Visa’s CEO announced he was working to bring crypto payments to any merchant that accepts VISA cards… so basically everywhere on the planet. Source: Bitcoin.com.
Now, the interesting thing here didn’t emerge for a few more days. That is, Visa is going to use the USDC stablecoin to settle transactions on its network.
From Reuters on the 29th of March:
Visa Inc said on Monday it will allow the use of the cryptocurrency USD Coin to settle transactions on its payment network, the latest sign of growing acceptance of digital currencies by the mainstream financial industry.
USDC is one of the most trusted stablecoins out there. It was created by Circle, with backing from Coinbase and others.
There are currently just under 11 billion USDC in circulation and it’s fully audited and backed 1:1 with real USD.
USDC runs on Ethereum, Algorand and Stellar. But the version Visa is using is the Ethereum one.
This is a major milestone for the whole crypto industry. But particularly for Ethereum. It’s kind of crazy that this news didn’t send Ethereum’s price soaring.
But it seems like major milestones like this are just a given for Ethereum, so they don’t seem to get investors excited.
If this happened on, say, Cardano or Polkadot I wouldn’t be surprised if they doubled or tripled overnight.
Whereas Ethereum is only up around 18% in the four days following that news.
I know it’s an overused metaphor, but it really does feel like Ethereum is a coiled spring right now. And when it eventually releases, people will wonder why they didn’t see it all coming.
It’s always so obvious in hindsight, isn’t it?
And just as a somewhat related aside, I’ve also been following Algorand’s progress closely.
Its tokenomics are problematic. And its scaling solution doesn’t seem as futureproof as Radix’s. But I think it’s definitely one to watch, and I intend to review it in coin confidential premium in the coming months.
Amazon puts the middleman back in Ethereum
A huge part of crypto is about cutting out the middleman aka central authorities.
So it’s kind of ironic that you can now run an Ethereum node on top of Amazon Web Services (AWS) (Amazon announcement here).
There was a pretty funny Reddit thread about it when it was announced:
IOTA launches smart contracts (alpha) – co-founder predicts market cap in the trillions of dollars
On top of all the development that happened on IOTA last month, on the 4th of March it announced an alpha release of its smart contracts protocol.
As IOTA writes:
The IOTA Foundation’s approach to smart contracts is a shift from existing architectures, addressing their inefficiencies like e.g. the inability for parallel and scalable execution, the inability to run “foreign” smart contracts on different virtual machines and being hindered by volatile and sometimes prohibitive fees, to name just a few.
So it looks like IOTA’s smart contracts should remain atomically composable. And if you’ve read my Radix review, you’ll know just how important that is.
While we’re on the subject of IOTA, in a recent “IOTA talks” co-founder Dominik Schiener made some very interesting comments.
Now, some background before I quote him here.
These comments were made when he was having a chat with someone called ThomasQv, who’s a bit of a local hero on the speculation channel of the IOTA discord.
You can also find Dom on that discord channel fairly regularly. He was on it straight after this talk.
He said that that with the upcoming chrysalis release (more on that later) and smart contracts, “we’re going to see more established companies announcing they’re building on IOTA.”
But his answer to “how likely do you think IOTA is to become a $1 trillion project” was even more telling.
If it was less than 50% [of IOTA going to $1 trillion] then I don’t think it would be worth working on it full time. I have most of my assets in IOTA.
And I truly fundamentally believe that what we’re building is not just another crypto token, but is really this entire new ecosystem for the future. And this ecosystem will be worth trillions of dollars. I’m very confident in that and that’s exactly what we’re building for.
So not just one trillion, but “trillions”.
You can watch that part of the talk below.
And just to put that into perspective, a $1 trillion market cap would put IOTA’s price at around $359… about 224 times higher than it is today.
Maybe one day.
Cardano comes to Coinbase
Well, it was inevitable this would happen.
In mid-March Coinbase announced it would launch Cardano trading on Coinbase Pro on the 18thof March.
This comes as Cardano has been duelling Binance Coin for the coveted title of 3rd biggest crypto my market cap.
As I write this, Binance Coin is currently ahead and Cardano is down to 5th place behind Tether. But those places can change in an instant.
Now, if you follow Cardano, you’ll know it’s kind of become a victim of its own success. As I wrote in my Cardano mini review, Cardano has a reputation for missing deadlines.
That wasn’t such a big deal when it wasn’t super popular. But right now it probably has the biggest following in all of crypto.
So when its “birds” – what Cardano head honcho, Charles Hoskinson calls big developments – were late, there was a backlash.
Although, the Coinbase Pro listing came shortly after that, which may or may not have been one of those “birds”.
Still, I feel that right now Cardano is ridiculously over valued for what it currently offers.
To give you an idea of just how much it’s gained. It’s up over 1,255% since my mini review in late September 2020… and it still doesn’t have smart contracts.
Which brings me on to…
Groupe Casino launches Euro stablecoin on Tezos… could the Banque de France be next?
If you’ve ever been to France, you’ve probably been to a Casino supermarket. They’re basically like France’s Tesco.
And in mid-March Casino announced it was going to use Tezos to launch its Euro stablecoin. Source: Coin Telegraph.
This could prove to be a much bigger story than it first seems.
That’s because, the Banque de France – France’s central bank – is also likely running tests to use Tezos for its CBDC.
Here’s what Decrypt wrote about that back in January:
The Banque de France completed its first successful test for a CBDC in May of last year. The Banque de France then selected Societe Generale to help it develop a CBDC. In September 2020, SocGen selected Tezos for an experiment and in October tapped ConsenSys (which funds an editorially-independent Decrypt). This week’s experiment is the bank’s first with SETL.
If you’re a regular reader, you’ll know Tezos was one of my favorite cryptos over the last couple of years.
It did surprisingly well over the crypto winter and is doing surprisingly badly in the current bull run.
But, it has had a working product – with smart contracts, delegated proof of stake and an upgradable self-amending ledger with on-chain voting – since 2018.
When you look at what Tezos has compared to Cardano, the respective valuations are, frankly, insane.
And I should be clear. I don’t dislike Cardano. If you’ve read my mini review of it, you’ll know I’m a fan. And I think Charles Hoskinson is a great advocate for the whole crypto community.
But… isn’t there always a but?
I do think that right now Tezos has a lot more going for it… and yet Cardano’s market cap is almost 10 times the size of Tezos’.
If France chooses Tezos to build its CBDC on… and that is one huge “if”… I expect that to change in a flash.
Things to watch out for in the coming months
IOTA is launching chrysalis on the 21st of April
As if we haven’t had enough IOTA news recently… I do try to keep my coverage balanced, but IOTA has been making major announcement after major announcement. I So sorry for being so IOTA heavy.
Anyway, IOTA is launching its chrysalis network upgrade on the 21st of April. You can read about what it will bring here in the official announcement.
Chrysalis is the last big step before IOTA launches coordicide and becomes fully decentralised.
With this latest release IOTA will finally be “production ready”. And we may see some major IOTA-related news in the days and weeks following the upgrade.
Coinbase to IPO on the 14th of April
In perhaps the biggest sign of mainstream adoption in crypto history, Coinbase has set the date of its IPO for the 14th of April.
Well, it’s not actually an IPO, it’s a direct listing. But for the people who’ll be investing in it, that doesn’t make any difference.
It will be the biggest listing since Facebook, and with crypto prices flying, Coinbase is currently valued at around $90 billion in private trading.
What will happen to its stock price on listing day is anyone’s guess. But it’s definitely one to keep an eye on. And it could be the first in a long line of crypto exchanges going public. Kraken, for example, is eyeing a listing next year.
I would hope that in the future more crypto companies would create their own STOs instead of “selling out” and going the traditional IPO route. It really seems like a missed opportunity.
(See my explainer on STOs, and why they are the future of financial markets here.)
Ethereum is undergoing a major upgrade in July that could see its price fly
In July Ethereum is scheduled to undergo a big network upgrade that will make it deflationary like Bitcoin, rather than inflationary like it is right now.
I’ll be covering what this means in more detail in future issues, but for now there’s a great explainer about it here on Hackernoon.
As that article says:
If EIP-1559 [the network upgrade] was live yesterday, it would have burned roughly 17,000 ETH. Annually that equates to over 6.2 million ETH! It will have more effect than halving has on Bitcoin.
So, basically, all else being equal (which it never is in crypto, to be fair) we could see a big price rise in Ethereum as it becomes more and more scarce.
I think that’s it for this month.
I’ll try keep next month’s issue to a more manageable length.
Thanks for reading.
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