This month in crypto: March 2021

Before we get started, I should point out this month’s issue is long. We’re talking 4,000+ words. So I’m fairly certain some email clients will cut it short. If yours does, you can read the whole thing on the coin confidential here.

Also, with it being so long, I’m sure I’ve managed to stuff it with typos. So I’m sorry about that.

And if you do make it all the way to the end, I'd love to get your opinion on something.

Now on with the issue…

I think this might have been the biggest month in the history of crypto.

December 2017 was big. But the mainstream attention was more like “what the hell is going on with this magic internet money?”

Today, some of the world’s biggest companies are replacing their cash reserves with Bitcoin.

Still, crypto being crypto, prices have been all over the place. A few days ago, Bitcoin’s market cap topped $1 trillion, for the first time ever.

And as I write, on Saturday 27^th of February, Bitcoin is up 54% in the last 30 days, and Ethereum us up 18%.

Their year to date (YTD) returns are up 60% and 102% respectively. And many alts are up by even more.

Cardano, for instance – which I did a mini review of here in September – is up more than 700% YTD.

(All prices taken from CoinGecko and TradingView.)

Still, you wouldn’t know it, if you’ve spent much time in the cryptosphere recently.

Crypto has been crashing hard over the last few days and holders are putting on a show to prove they’re not spooked by it.

When prices crash, message bords get pretty meta.

First you have the “buy the dip” posts.

Then “this is a healthy correction. Don’t panic.”

Then “stop telling people not to panic. No one is panicking.”

Then “You’re all only posting not to panic as a way of stopping yourselves panicking.”

I find it’s good to steer clear of cryptoland on days when prices are up or down more than 10-15%.

So that’s the backdrop to this month’s newsletter. Now let’s get on with the actual stories.

Tesla and Square replace cash reserves with Bitcoin… who’s going to be next?

On the 8^th of February, Tesla revealed it had traded $1.5 billion of its cash reserves for Bitcoin.

CNBC reports at the end of 2020, it held around $19 billion in cash. So its Bitcoin purchase represents just under 8% of its reserves.

The purchase was made in January. And a few days ago, one analyst calculated Tesla had already made $1 billion (unrealised) profit on that purchase.

“Tesla is on a trajectory to make more from its Bitcoin investments than profits from selling its EV (electric vehicle) cars in all of 2020. While the Bitcoin investment is a side show for Tesla, it’s clearly been a good initial investment and a trend we expect could have a ripple impact for other public companies over the next 12 to 18 months,” Daniel Ives told CNBC.

Of course, that was before the recent crash. So who knows how much Tesla is up or down on its Bitcoin now.

Shortly after Tesla’s announcement, Square revealed it had bought another $170 million worth of Bitcoin.[i]

And it looks like Twitter could be next:

The bigger story here isn’t about Tesla or Square or Twitter… or even MicroStrategy which I reported on last month. It’s about the message their actions send to the world.

And that’s exactly what the hottest asset manager on the planet, Ark Invest, talked about in its 2021 “Big Ideas” report.

The hottest asset manager in the world, Ark Invest, has some big predictions for Bitcoin in its annual report

Ark Invest has been everywhere recently.

If you haven’t heard of it, it’s an asset manager, founded by Cathie Wood in 2014.

To give you an idea of how much hype she’s getting right now, I just looked down at my phone to see this notification:

Ark’s aim is to “deliver long-term capital appreciation with low correlation to traditional investment strategies by identifying and investing in the leaders, enablers and beneficiaries of disruptive innovation.”

In other words, it mostly invests in tech and biotech.

And its flagship fund has been riding high as tech firms have come to control the stockmarket.

It gained 143% over the last 12 months, and 672% over the last five years.[ii]

Even by crypto standards, that’s a good return. But in the stockmarket, it’s otherworldly.

To put that into perspective, the S&P 500 benchmark has returned 23% in the last 12 months and 97% over the last five years.

Ark’s flagship fund has got so big and so popular it now risks “having too much money and not enough stocks,” Bloomberg reports.

So when Ark releases its “Big Ideas” report, people listen.

You can read the 2021 Big Ideas report for yourself here.

There are a lot of interesting ideas in it. But it’s the ones about Bitcoin, Ethereum and DeFi we’re most interested in today.

It notes how DeFi (read my guide to DeFi here if that term is alien to you) has increased adoption of Ethereum and is creating a new world of financial services. Ones that do away with “traditional financial companies”.

It also says “we believe Bitcoin has earned an allocation in well-diversified portfolios” and goes on to make some price projections for different scenarios.

It calculates that if other S&P 500 companies were to follow in Tesla’s footsteps and convert 10% of their cash to Bitcoin, Bitcoin’s price could go as high as $400,000.

Or about eight-times higher than it is today.

“Bitcoin could play a pivotal role as corporate cash” it says.

And speaking of corporate cash…

BNY Mellon – America’s oldest bank – is getting into Bitcoin

Remember that issue I wrote on “crypto’s tipping point” a few months ago?

It was about how US National banks are now allowed to hold crypto for their clients… And how this will be the “tipping point” that brings crypto truly mainstream.

Well, it’s happening.

From The Wall Street Journal on the 11^th of February:

Bank of New York MellonCorp. , the nation’s oldest bank, is making the leap into the market for bitcoin, a sign of broader acceptance of the once-fringe digital currency.

The custody bank said Thursday it will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients.

Over the next few months I expect we’ll see many more national banks getting into crypto and offering custody solutions to customers.

Check out my article all about that to see how it might affect the crypto world going forward.

On that note… there’s something Nietzsche-esque going on with that whole situation right now.

(Is Nietzsche-esque a word? Probably not.)

Crypto’s most legit exchange, Coinbase, is listing on the Nasdaq any day now

In “Beyond Good and Evil”, everyone’s favourite love him or hate him philosopher, Friedrich Nietzsche says:

He who fights with monsters should be careful lest he thereby become a monster. And if thou gaze long into an abyss, the abyss will also gaze into thee.

Well, I think that’s an apt quote for this next story.

Late last year America’s biggest crypto exchange, Coinbase, announced it was going to list on the stockmarket.

Since then crypto prices have exploded and the Coinbase listing is one of the hottest stories in IPO history.

(Although it’s doing a direct listing not an IPO. But for the retail investors who buy it that doesn’t really make any difference. It just means insiders can sell their shares sooner.)

On current insider “private market” trading prices, it’s projected to hit a market cap of around $100 billion. Which would make it the biggest IPO since Facebook. [iii]

If you’re interested you can read Coinbase’s full SEC filing here.

This is a big moment for crypto. It’s hard to overstate just how big.

This listing will lend any crypto Coinbase trades a lot of legitimacy, and it could set the stage for other big crypto exchanges going public.

But here’s the interesting part.

With Banks now offering crypto custody services and crypto exchanges like Kraken getting banking charters, the waters between traditional finance and crypto are extremely muddy.

Adding to that, we now have exchanges like Binance offering fiat savings accounts that offer up to 5% interest. And Coinbase planning to move into lending, too.

So someday soon we’ll have publicly-listed crypto exchanges with real banking charters that offer 4,900% better returns on your savings than traditional banks.[iv]

How is that going to play out for the banks?

And speaking of corrupt financial institutions…

Tether fined $18.5 million by New York Attorney General. Nothing changes.

If you read last month’s issue, you’ll know Tether had its day in court coming up.

Well, it turns out – to the surprise of absolutely no one – Tether isn’t exactly legit.

It reached a settlement with the New York Attorney General in which is admitted to no wrongdoing, but agreed to pay an $18.5 million fine.[v]

Although, reading the New York Attorney General’s press release, it would appear it was perpetrating a lot of wrongdoing:

Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines.

Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie. These companies obscured the true risk investors faced and were operated by unlicensed and unregulated individuals and entities dealing in the darkest corners of the financial system.

The only real thing that’s changed as a result of this case is that Tether and Bitfinex can no longer operate in New York. And they also have to submit quarterly reports of Tether’s reserves.

Hopefully, this will eventually lead to people using more reputable stablecoins than Tether. But the process so far has been slow going.

Mastercard greenlights crypto payments

And in our last piece of general crypto market news this month, we have this…

Payments giant Mastercard is “planning to give merchants the option to receive payments in cryptocurrency later this year,” according to CoinDesk and about a million other sources.

From CoinDesk:

Previously, Mastercard supported limited cryptocurrency transactions through its cryptocard partners Wirex and Uphold. But those programs only cover payment, not settlement; the coins are converted to fiat currency well before reaching the merchant.

The new initiative promises to upend that dynamic among the store owners and businesses who opt in. They will be able to conduct their business beyond the bounds of the fiat ecosystem.

This could prove to be very big news for crypto stablecoins and upcoming Central Bank Digital Currencies.

Right. That’s enough general market commentary. It’s time to get into specific crypto news.

IOTA is becoming a monster

If you’ve been reading my writing for a while, you’ll know I’ve been saying IOTA will eventually be a top 3 coin for a good few years now… so long as it fulfils its promises, that is.

And let’s be fair. It has big promises to fulfil.

Within the next year or so, it plans to become fully decentralised, launch smart contracts, enable reusable addresses, and generally upgrade everything about its network.

It’s been working on doing that since it first launched back in 2016. But now in the last year, it’s started hitting all its targets, and it’s in the very final stages of testing out its new, upgraded network.

As it wrote in a recent blog post:

“Realizing the Machine Economy requires feeless micropayments, immutable and verifiable data, decentralized and self-sovereign identities, smart contracts for complete autonomy of processes, and the tokenization of physical and digital assets. IOTA is building all of these components right now.”

Every couple of days the IOTA foundation announces more and more milestones towards making that happen.

Which explains why it’s actually doing pretty well vs the overall crypto market for once. Its YTD gain is sitting at 319%.

In fact, its development has got far enough along now that Curv will soon offer custody solutions for IOTA.[vi]

(Curv, if you haven’t heard of it before, bills itself as “the world’s most trusted digital asset security platform” and is used by eToro, BNP Paribas, SwissBorg and a host of other institutions.)

However, that isn’t even the biggest IOTA news this month.

On the 11^th of February Dell, Intel and IOTA demonstrated a “data trustworthiness” solution called project Alvarium.

Basically this can be used to ensure data is trustworthy. Which may sound kind of boring. But it’s a very useful technology to have.

“For real-world scenarios, we need look no further than the global pandemic. It could massively reduce friction if there were a way to measure the trustworthiness of the data involved in the vaccine rollout. Everything from the provenance of which vaccines are coming from which manufacturer, to how many people in which regions are getting the vaccines, could be managed much more effectively if there were a trust certification measurement for all involved actors,” writes IOTA.

And let’s not forget that IOTA is already being used to verify vaccines:

But even that wasn’t IOTA’s biggest news this month. (This next one is, I promise.)

With the launch of its next network upgrade called chrysalis, IOTA will be able to tokenize real-world assets.

For a rundown on how big this is, you can read my feature: How Security Token Offerings (STOs) will forever change global finance.

As IOTA writes:

The ramifications of this technological breakthrough cannot be overstated: tokenization will transform the concept and the exchange of value as we know it. Tokenization breaks down barriers, allowing for a greater democratization of finance and investment while simultaneously providing a more secure, more transparent, and more easily manageable environment for assets.

The thing about doing this on IOTA is that IOTA is feeless.

If you’ve been following DeFi developments, you’ll know that Ethereum’s gas fees have been a huge problem. So on IOTA, the main barrier to DeFi going mainstream is instantly removed.

Or as IOTA – famously, never one to understate – puts it:

A feeless and scalable protocol like the Tangle will completely transform the concept of tokenization itself. Whether it’s a person making a micro-investment in real estate, an artist securing intellectual property, a restaurant manager issuing gift certificates, a car company issuing shares in its mobility fleet, or an IoT device selling access to its data stream, IOTA’s Digital Assets framework will provide the architecture for anyone to tokenize and utilize assets securely and cheaply.

This gives IOTA the power to wrap any other crypto and make it feeless and massively scalable

To take that concept to the extreme, one day you could even see the entire Bitcoin network wrapped within IOTA.

Of course there are a million reasons that would never actually happen, but technically it would be possible.

As IOTA writes:

With IOTA Digital Assets, we lay the groundwork for cross-network asset swapping with IOTA acting as a feeless bridge currency. As the framework matures and the tooling around smart contracts is created by our community, it will be possible for the IOTA token to represent other assets such as Ethereum, Cardano or Bitcoin, bridging these assets to one another in a seamless way.

Rather than creating a bridge between each currency, IOTA Digital Assets allow for only one pool and one bridge to be built. This means that a single integration into the IOTA Digital Asset framework opens up the possibility to swap between all assets on the network.

If you’ve made it this far, I think that quote is worth rereading. The possibilities this development brings are incredible.

And unlike a lot of IOTA hype in the past, this is already live on its decentralised testnet. As IOTA writes:

Already today, the tokenization is live on the Coordicide Testnet (GoShimmer). With the changes being introduced in Chrysalis (in particular UTXO) we will be able to support digital assets on the IOTA Mainnet.

Cardano is launching tokens (and smart contracts) in March

Over the last few months it feels like Polkadot and Cardano have been neck and neck as cryptoland’s top altcoin of choice.

Polkadot was launched in May 2020 and is basically the same idea as Cosmos (launched March 2019) and Ark (Launched March 2017) and Lisk (launched way back in May 2016).

They all want to create something resembling an internet of blockchains. Or a Google of blockchains.

I remember back in 2017, Ark was one of my favourite cryptos. I liked the idea of a “google” of blockchain and on top of that it was Proof of Stake and paid out about a 10% yield.

Things have moved on in the crypto space since then. And we now have a new wave of alts trying to deliver exactly what Ark did more than four years ago.

So although Polkadot may be top of the hypecoins right now. It’s really not doing anything revolutionary. At least, on a conceptual level.

I’m yet to do a proper deep-dive into either Polkadot or Cosmos. But from what I’ve seen they do have good tech… and a lot of hype. Especially in Polkadot’s case.

So I’m sure they will continue to do well.

And to be fair, Apple, one of the richest and most successful companies of all time, got there by doing what Polkadot is doing. Taking an idea that’s already out there and doing it better than anyone else.

So far, YTD:

· Polkadot is up 320%.
· Cosmos is up 242%.
· And Cardano is up 723%.

And for fun, let’s throw Algorand and Tezos into there to round off the top 5 “eth killers”:

· Algorand is up 159%.
· And Tezos is up 81%.

Ethereum itself, if you remember, is up 102%.

As you can see, Cardano is the real outlier there… which kind of makes sense because it’s actually the least far along in its development.

So people can just imagine how amazing it’s going to be when it’s finally ready, without having to deal with reality.

It’s also got even more hype than Polkadot, and it’s on the cusp of launching a major new development: native tokens.

This will be Cardano’s way of enabling tokenisation (see the IOTA section above for why that’s a big deal).

Cardano’s tokens will differ from Ethereum’s because they will be “native”.

Here’s Cardano’s explanation of what that means and why it’s important:

Ethereum, custom (user-defined) tokens are implemented using smart contracts to simulate the transfer of custom assets. Our approach with Cardano does not require smart contracts, because the ledger itself supports the accounting of non-ada native assets.

Another difference is that Cardano’s multi-asset ledger supports both fungible and unique, non-fungible tokens without specialized contracts (similar to those required by ERC-20 and ERC-721 tokens). It can store a mix of both fungible and non-fungible tokens in a single output.[vii]

(As a side note, of all the official crypto blogs, I find Cardano’s the hardest to read. There’s something about their sentence structure that loses you along the way. I don’t think the concepts are especially complex, but the way they write about them is. So if you find their blog hard to follow, trust me, you’re not the only one.)

Tokenisation is now live on Cardano’s testnet and is set to launch on the mainnet next month (March 2021) when it upgrades to “Goguen”.

And Goguen is also finally bringing smart contracts to Cardano. So the next few months will be make-or-break for the biggest hypecoin of the moment.

Given that it’s currently worth more than 50% of Ethereum’s market cap, if all goes well, we might even see some talk of it taking the coveted #2 spot behind Bitcoin.

It will be interesting to see where it stands when I write next month’s issue.

Although, Ethereum has an ace up its sleeve…

Ethereum will finally fix its fees and scaling issues in March: “like going from dial-up to broadband”

Before we get too carried away, this isn’t Ethereum 2.0.

It’s a “layer 2” scaling solution known as a rollup that sort of plugs into the Ethereum network.

As CoinDesk writes:

“A rollup allows a blockchain to settle more transactions across the whole network by sending transactions off-chain, validating them and then settling the lump value on the main Ethereum blockchain. Most dapps have a rollup solution on the agenda.

“In conjunction with other technical solutions, the expectation is Ethereum will be able to execute and settle about 100,000 transactions per second (TPS) with rollups.”

Layer 2 scaling solutions have been around for a while now. But this one, called Optimistic Rollups, promises to be much more useful.

Its main feature – aside from massively increasing Ethereum’s scalability to around 2,000 transactions per second and slashing fees – is that smart contracts can very easily start using it.

So DeFi platforms will be able to take advantage of it as soon as it launches, which is happening in March.[viii]

The world’s biggest DeFi platform, Uniswap, already has a demo running on optimistic rollups. You can read their FAQ here.

There’s a good reddit thread on what this means for Ethereum going forward here.

But essentially, it can be summed up in this comment:

“It’s like going from dial-up to broadband.”

And it should mean that the huge fees and network congestion that have plagued Ethereum over the past year will melt away.

Given the main selling point of many “eth killers” is lower fees and better scalability, it’s going to be interesting to see what happens to the market over the coming months.

There’s a new coin in town called Radix, and it might just blow the world of crypto wide open

This has already been a very, very long issue. We’re well over 3,500 words now. So I can’t spend too long talking about Radix.

But I will say this. I’ve been following Radix fairly closely ever since I saw a demo of its ridiculous scalability at London Blockchain week back in early 2018.

A year after that, it managed to run at a world-record 1.4 million transactions per second.

Since then, it’s been through a lot of changes. And it’s now finally (almost) ready for its mainnet launch, scheduled for Q2 this year.

I’ve spent a fair amount of time looking into Radix over the last few months and lurking in its Telegram groups.

Those groups are pretty interesting places. I’ve seen in-depth takedowns of just about every other hypecoin of the moment in them.

Every time, the biggest names in crypto are shown to have limitations that will come round to bite them in the future. And every time it’s shown how Radix has already thought about and solved the problems in question.

From Avalanche to Elrond, Polkadot to Cardano, Algorand to Solana… I’ve seen them all picked apart.

But then I guess talk is cheap when you don’t yet have a working mainnet. Still, if Radix fulfils its promises it will be by far the most futureproof crypto out there, except for maybe IOTA.

If you’re interested in learning more about it, here’s a welcome pack page.

That page links to everything you need to do your own research into Radix, from the Discord and Telegram groups to its introduction videos and whitepapers.

But be warned, you’re going to hear the phrase “atomic composability” a lot.

Would you be interested in a premium version of coin confidential with monthly in-depth crypto reviews?

If you go onto coin confidential, you’ll see it’s got a new look.

I moved it over from WordPress to Ghost… which will mean nothing to you unless you’re an online publisher yourself.

But basically it makes everything run a lot faster and it makes it easier to schedule and send out these newsletters.

It also means I can make certain articles only available to subscribers or paying subscribers.

Currently I don’t have any paid articles, everything is free.

I’ve set one or two articles to free subscribers-only. But if you’re reading this email, you’re already a free subscriber. So if you click login, you’ll be able to read them.

My Cardano mini-review, for example is set to free subscribers only.

Now, I’ve been thinking about launching a premium version of coin confidential that would cost £10 per month.

This would be a monthly newsletter, in addition to the current free one. And in each issue I would either do an in-depth review of a crypto or write a guide or explainer.

Basically like I used to do with Crypto Wire, if you remember that from when I worked at Southbank.

I’d plan to send paid subscribers a list of the cryptos I’m thinking of reviewing and let them vote on which one I review next… or suggest one not on the list.

However, I know this would be a lot of work, and I’d only want to do it if there was a strong demand from you for it.

So, here’s what I propose. I’m going to let you decide…

If you want me to launch coin confidential premium, and start reviewing and rating specific cryptos again, click here.

That link will take you to a google form where you can show your interest and vote on which crypto you’d like me to review first.

If at least 50 of you want it to go ahead and would subscribe, I’ll do it.

If not, I’ll just stick with the free version and keep writing my “this month in crypto” newsletter once a month.

Also please note: if this were to go ahead, it would be in addition to, not instead of, the free newsletter you’re reading now. Don’t worry, I’m not planning to start pay-walling everything.

Okay, that’s all for this month.

Wow, that was a long issue.

Thanks for reading.

Harry

PS If you're wondering what happened to "This month in crypto: February 2021", well I decided to do what magazines do and start naming these issues for the upcoming month instead of the one that's just gone.

[i] https://www.theverge.com/2021/2/23/22297935/square-bitcoin-purchase-170-million-investment-cryptocurrency

[ii] https://www.tradingview.com/symbols/AMEX-ARKK/

[iii] https://www.axios.com/coinbase-valued-100-billion-direct-listing-9b43e316-7ff7-4f6a-a1db-4dc2481a93ee.html

[iv] Current Bank of England interest rate – and thus most traditional bank savings  accounts rates – is 0.1%: https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate

Current Binance flexible savings rate is 5%: https://www.binance.com/en/lending#lending-demandDeposits

[v] https://www.coindesk.com/ny-ags-850m-probe-of-bitfinex-tether-ends-in-an-18-5m-settlement

[vi] https://blog.iota.org/iota-foundation-partners-with-curv-custody-to-expand-the-iota-token-ecosystem/

[vii] https://iohk.io/en/blog/posts/2020/12/09/native-tokens-on-cardano-core-principles-and-points-of-difference/

[viii] https://medium.com/ethereum-optimism/dope-hires-moar-mainnet-in-march-174fa8966361