This month in crypto: January 2021

Well, I couldn’t really have timed it any worse, could I?

In the three months since I stopped writing to you every week, we’ve seen more action, adoption and mainstream interest in crypto than we have in the last three years.

Bitcoin has more than doubled its all-time high, briefly passing $40,000, and now sitting around $34,000.

Ethereum has edged past its all-time high, hitting $1,459 and now sitting at $1,366.

And even Dogecoin – fuelled by the crypto equivalent of WallStreeBets – flew past its all-time hight and more than quadrupled in price in less than 24 hours.

But more than just the prices, we’ve seen a paradigm shift in how the world looks at crypto – and Bitcoin in particular.

BlackRock, the world’s largest asset manager, which has a sickening $7.8 trillion under management, is making moves to invest in Bitcoin futures.

You can read its filing with the SEC here, if you’re interested. But here’s the most important sentence: “Certain Funds may engage in futures contracts based on bitcoin.”

Of course, that doesn’t mean it will start working with Bitcoin, but it certainly lays the groundwork. The filing, which was amended on the 20^th of January 2021 mentions “Bitcoin” 25 times.

JPMorgan – which has up until very recently been extremely anti-Bitcoin – came out and basically said Bitcoin will eat gold’s lunch.

Here’s what its note to clients said:

“The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced. If this medium to longer-term thesis proves right, the price of gold would suffer from a structural headwind over the coming years.” [i]

And other major players did more than just talk.

MicroStrategy’s stock rockets 300% in four months thanks to Bitcoin

Back in September I reported on Nasdaq-listed MicroStrategy swapping its cash reserves for Bitcoin reserves.

It bought $425 million worth.

At the time MicroStrategy’s CEO, Michael Saylor said: “We feel pretty confident that Bitcoin is less risky than holding cash, less risky than holding gold.”

In the months that followed MicroStrategy’s bet paid off big time.

That $425 million worth of Bitcoin bought on the 11^th of August is now worth around $1.2 billion.

But it gets even better. Because late last year MicroStrategy bought another $650 million worth of Bitcoin.

At last count MicroStrategy held some 70,784 Bitcoin, worth a staggering $2.4 billion…

And the company is now looking to add even more Bitcoin to its reserves.

The crazy thing is, when MicroStrategy started buying Bitcoin its entire market cap was around $1.4 billion.

Now its Bitcoin reserves alone are worth $1 billion more than its entire market cap was back in September.

But its market cap has grown even higher. Because it’s a public-listed company, people have been investing in it as a way of getting Bitcoin exposure without investing in Bitcoin.

So since I first reported on this story, its stock has done this:

Source: Tradingview

It’s up over 300% in four months.

And its market cap is now $5.8 billion.

And don’t forget, this is a company you can hold in an ISA.

So I’ve seen people pointing out this could be a way to get tax-free exposure to Bitcoin… which is probably why its price has shot up so much.

Could Coinbase become the Amazon of crypto?

MicroStrategy isn’t the only big player buying up billions of dollars of Bitcoin.

Grayscale – which already sucked up tens of billions of dollars of Bitcoin and Ethereum in 2020 – has been on an absolute buying spree.

It now has a staggering $22.9 billion of Bitcoin and $4 billion of Ethereum in its trusts. [ii]

That means Grayscale owns around 3.5% of all the Bitcoin in existence and around 2.5% of all Ethereum in existence. And it’s still buying.

When Bitcoin dropped from $38,000 to $33,400, Grayscale swooped in and bought another 8,000 Bitcoin… or more than $260 million worth.[iii]

One of the interesting things about Grayscale, apart from the crazy amount of crypto it’s buying, is the fact that Coinbase handles its custody. [iv]

And even more interesting is the fact that Coinbase has filed to float on the stockmarket, with a direct listing rather than an IPO. [v]

It’s almost got me thinking that if Coinbase is good enough to store a multi-billion dollar institution’s crypto then it’s probably good enough for me, too. Or anyone else for that matter.

Especially given that…

Ledger’s customer database was hacked and now customers are receiving death threats

Over the last few months Ledger has had a real fall from grace.

It’s managed to get hacked not once but twice. And, unfortunately, its customers are  paying the price.

Back in October news started emerging about Leger customers being targeted by phasing attacks. [vi]

It turned out that Ledger’s customer database had been hacked and scammers gained access to a whole heap of customer details.

Naturally the scammers have been sending out many phishing attempts to these customers (myself included).

That was bad enough.

But then it got much, much worse.

A few weeks ago, some Ledger customers started getting emails from criminals who threatened to torture them if they didn’t pay them a crypto ransom.

These emails were a bit more scary than the usual phishing ones because the criminals posted the recipient’s home address in them.

It turned out that Leger had been hacked AGAIN. And this time 272,000 customers’ names, addresses, emails and phone numbers were leaked.

It even has an Investopedia page dedicated to it.

It’s become so bad that Ledger is now facing a class-action lawsuit.

And there’s a 2,900 member subreddit dedicated to it, with countless stories of people getting sim swapped, phished and generally harassed.

If this were another type of company, it could almost be forgiven. But Ledger’s entire ethos is security.

If a security company can’t keep its own systems secure, then how can you possibly trust it to secure yours?

Now, I should say, if you use a Ledger wallet, you are not actually at risk.

Your crypto is safe. No one hacked the wallet itself, just Ledger’s customer file.

So, as long as you don’t fall for any phishing emails, phone calls, letters or threats of violence then you should be fine.

But given all of the above, I can no longer advocate using Ledger’s products. Which is a shame, because the products themselves are some of the best on the market.

And I’m planning to put a link pointing to this article in my guide to The cheapest, easiest and safest way to buy Bitcoin in the UK, because it currently has an affiliate link to Ledger on it.

So if you’ve just come from there, that’s why I don’t recommend using Ledger’s wallets if you can help it.

Ripple executives finally get their comeuppance – SEC sues them for $1.3 billion “Unregistered Securities Offering”

Ripple has always been a controversial crypto. Mainly because its founders decided to keep a huge amount of its supply for themselves.

This means it can never really be decentralised and so is no better than an inefficient database.

At least, that’s what its detractors would say.

As I wrote way back in 2018:

“Ripple was created in one go, but it was not distributed very far. The founders decided to keep 61% of the total supply for themselves.

What you see on the exchanges is only a small portion of the total supply. If the founders wanted to dump their share and tank the price, they could. I don’t know why they would, but it’s a possibility.”

Well, it seems the SEC has also decided Ripple isn’t a real cryptocurrency.

In fact, they state that it’s a security. Which means that it should have been subject to all the usual securities rules and regulations when it launched.

Since it wasn’t, they are suing the life out of it. You can read their filing here.

When the lawsuit was first announced Ripple dropped by 37% in 24 hours. And most of the major exchanges – Bitstamp, Binance, Bittrex, Coinbase… you name it – delisted it. [vii]

Of course, this being crypto, Ripple’s price is now higher today than it was before the lawsuit was announced.

And that ain’t the half of it…

A former Ripple board member is expected to be appointed Biden’s Comptroller of the Currency

From the Wall Street Journal:

“President Biden is expected to nominate Michael Barr, a former Treasury Department official, to a top post overseeing national banks such as JPMorgan Chase & Co. and Wells Fargo & Co., according to people familiar with the decision.”

As many publications pointed out Barr was a former board member at Ripple.

And now he’s expected to oversee America’s national banks.  

I guess that’s one of the reasons Ripple has been rallying lately.

New York AG’s lawsuit against Tether heats up

Another lawsuit that’s been drawing a lot of attention lately is the New York Attorney General’s investigation into Tether.

I feel like this one has been going on forever. But over January it really heated up.

Someone posted a Medium article about how Tether is suspected of being a huge fraud (which anyone remotely interested in crypto has known for years) and all hell broke loose.

I think because there are so many new people coming into crypto now, all the old revelations are new again.

I had people sending me all kinds of messages about how Tether might be a fraud and how Tether printing lines up with Bitcoin pumps and how it’s all going to come crashing down.

None of this is new information. I, and many others, have been writing about it for years.

In fact, way back in 2019 when the New York AG first filed its lawsuit against tether, I wrote this article: Will the Tether fraud bring down Bitcoin?

But the tether fraud allegations have been around crypto for as long as I can remember.

Anyway, the FT reports that the Tether investigation has now been delayed again, until mid-February.

So I guess we’ll have to wait a little longer to see how that plays out.

Worst case: Tether gets shut down, crypto crashes hard for a few weeks or months and then rallies again.

It could end up being the best buying opportunity since last March.

So I guess that worst case could actually be a best case… so long as you’re in it for the long run and follow the #1 rule of crypto.

Stellar chosen to help build Ukraine’s national digital currency

Stellar is like Ripple’s cooler younger sibling.

It was basically created as a not-for-profit decentralised version of Ripple. There’s some good information on it on stellar.org, if you want to read up.

Back in early January Stellar hit the headlines because it was chosen by the Ukraine government to help build its Central Bank Digital Currency (CBDC).

(If you don’t know what a CBDC is, I wrote a feature on them here.)

From CoinDesk:

“The National Bank of Ukraine has been researching the possibility of CBDC implementation since 2017, and the Stellar partnership will now be the basis of its virtual currency development, according to Digital Transformation and IT Deputy Minister Oleksandr Bornyakov.”

That’s a pretty big deal.

But it gets even bigger when you dig into it. Because Ukraine’s CBDC would be built on Stellar’s public network.

From the National Bank of Ukraine:

“The private version of the Stellar blockchain protocol, which has been tested under the Pilot Project, was functioning in the regular mode and may be used in local (bank-level) electronic money systems after some finalization. We cannot use that version to build the national-scale system, as it is practically impossible to update it following the development of the basic Stellar blockchain protocol. Instead, the national-scale system can be designed on the basis of one of the public versions of modern powerful blockchain protocols.”

So if this project were to come to fruition it would be huge for Stellar. Which is why it more than doubled in price in the days following the announcement.

More big news from IOTA, VeChain, Ethereum and DeFi

This article is now well over 2,000 words.

But I still have big news about IOTA, VeChain, Ethereum and DeFi to cover.

Realistically, I don’t have time to do it. And it’s a Sunday evening, and I really need to get away from the computer.

So I’ll just link you to other coverage of these stories instead.

IOTA

IOTA Founder David Sønstebø out of Iota Foundation after ‘unanimous’ board decision.

Frankfurt Airport is using IOTA to verify COVID-19 test results.

VeChain

Puff Bar vape devices will be using Vechain technology to fight counterfeits.

Ethereum

Binance Launches ETH 2.0 Staking Service.

DeFi

Mark Cuban: DeFi, Not Robinhood, Gives Money Back to Users.

What about the whole Gamestop WallStreetBets Robinhood saga?

Since the Gamestop stuff all kicked off I’ve been inundated with messages to write an article about it.

(There’s a decent Bloomberg article on it here if somehow you’ve missed the biggest non-crypto investment story of the decade)

And I do plan to, because it ties directly into why crypto was created and what it can do to give ordinary people power over the “establishment”.

But for now I’ll just say that it’s already pushing millions more people to look into crypto, which is amazing.

Not to mention the whole story itself is making people question the entire corrupt financial system… which is also great.

It’s like if Occupy Wall Street had actually done something rather than just sit around for a few months and then get bored and go home.

The reason I haven’t dug into it today is I think it deserves its own piece.

And it deserves some real thought going into it.

I don’t really want to just write another reactionary piece about it that will merely add to the tens of thousands that have already been hastily typed up.

But I will say this, I think it still has a ways to go before it’s over. And there’s a good chance it could spawn a whole new movement towards decentralisation.

What’s happening with coin confidential going forward?

I tried to stay away and it just didn’t work.

So thank you to those of you who’ve written in with kind words over the last few months. It’s great to see that people find my writing helpful.

My new plan going forward is to turn this into a monthly newsletter, which I’ll publish at the end of every month.

I’m pretty sure I can stick to that schedule, no matter what’s going on in my life.

And if I learn to organise my time a bit better, I plan to eventually publish an issue every other week.

Now, at this point of the article I used to ask for a donation.

But what would actually help the site out more is if you shared this with someone you think would find it useful and encouraged them to subscribe.

The more subscribers I have, the more hard work I will feel compelled to put into each issue… and hopefully the more you’ll get out of it.

Okay, that’s all for this month.

Thanks for reading.

Harry

PS If you want to know how much mainstream opinion has changed on Bitcoin, just look at the Guardian. It posted a positive piece on Bitcoin in December. I’m fairly sure it’s never ever done that before. It didn’t even mention scams or terrorism once… although it still couldn’t resist a reference to tulips.

If you’ve been a long-time reader you’ll know how the Guardian usually reports on anything crypto related. And if not, you can read my article “Why must the Guardian lie?” from back in 2018. 

PPS Here’s a link if you missed the reference in the meme I made for the opening of this piece.

Ethereum trust numbers: https://grayscale.co/ethereum-trust/