This month in crypto: the great contradiction

Note: all price data taken from Coin Gecko on the 3^rd of September.

One of the 12 labours of Heracles was to slay the Lernean Hydra.

The Lernean Hydra was a many-headed serpent. If you lopped off one of its heads, two more would grow in its place.

Its original head was immortal, and its blood was so venomous that you could die just by breathing the air around it.

In the end Heracles triumphed over it, with the help of the goddess Athena and a trusty sidekick.

He then dipped his arrows in the hydra’s blood and used them to kill many foes in the years that followed.

Although, in the end, (spoiler alert) the poison on them was used by a crafty centaur to kill him as well.

Crypto is like that immortal hydra.

It’s become many different heads, all attached to the same body, but all acting independently of each other.

We have:

Bitcoin still 23% down from its all-time high (ATH)…

Memecoins like dogecoin and Shuba Inu down 59% and 81% from their ATHs respectively…

Scamcoins like Internet Computer and Safemoon down 90% and 79% from their ATHs respectively…

Meanwhile some major altcoins like Solana and Cardano are smashing their previous price records…

Ethereum is somewhere in the middle… only 9% off its ATH and gaining ground fast.

So depending on which cryptos you follow, you’ll likely have a very different view of the market right now compared to other people.

And that separation has spilled into many different areas of the crypto sphere.

On one side, we have US Senate almost bringing crypto to a halt with the now-infamous infrastructure bill…

And the SEC chief, Gary Gensler saying that crypto is too big not to regulate and also that in a few years it will be irrelevant if it isn’t regulated… which is a contradiction in itself.

“At about $2tn of value worldwide, [the crypto industry] is at the level and the nature that if it’s going to have any relevance five and 10 years from now, it’s going to be within a public policy framework. History just tells you, it doesn’t last long outside. Finance is about trust, ultimately,” he told the (notoriously anti-crypto) Financial Times.

It’s also kind of fun that Gensler says “finance is about trust”.

If you remember why Bitcoin and crypto in general came about (see: Everything you need to know about crypto in one essay) you’ll know it was created precisely because people don’t trust traditional finance…

And more than that, it was literally created to solve the problem of trust in financial transactions.

From the Bitcoin Whitepaper:

What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.

Anyway…

Meanwhile, the US Federal Reserve Governor, Lael Brainard, “can’t wrap her head around” why America doesn’t have a Central Bank Digital Currency (CBDC).

From Reuters:

"The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC (central bank digital currency)offering, and the U.S. doesn't have one, I just, I can't wrap my head around that," Brainard told the Aspen Institute Economic Strategy Group. "That just doesn't sound like a sustainable future to me."

And on the other side of the lagoon, Germany has passed legislation allowing institutional funds to hold up to 20% of their assets in crypto.

This news didn’t really make a splash. I guess because so much of the press is US-focused. But it could be a very big deal.

From Bloomberg:

A law taking effect on Monday [the 2^nd of August] will let so-called Spezialfonds with fixed investment rules put as much as 20% of their holdings in Bitcoin and other crypto assets. The funds, which can only be accessed by institutional investors such as pension companies and insurers, currently manage about €1.8 trillion.

20% of €1.8 trillion is roughly £360 billion, or $500 billion.

And of course, it’s highly unlikely that all of those funds will choose to put 20% of their holdings into crypto.

But there’s a good chance some of them will put some of their money into it. And over time, it’s likely more and more of them will put more and more money into it.

And more than that, it lends crypto a massive amount of credibility in Germany.

So that’s what’s going on in the wider crypto world.

Now let’s look at specifics.

Big tech is too greedy to ignore crypto after Square and PayPal’s success

Okay, so this story isn’t really about a specific crypto. But I’m putting it in this section anyway.

It’s from a newsletter writer called Teeka Tiwari. You might have seen a video or two of his over the last few years selling his crypto newsletters.

(If you ever wondered what I do for my real job. Well, I write those kinds of promotions for various investment services. Although, I’ve never written one for him or for the Palm Beach Group.)

Don’t worry, I’m not writing a plug for that here. This is actually an excerpt from his column on Palm Beach Daily, which I thought made an interesting point about Big Tech getting into crypto.

Weirdly, I don’t subscribe to Palm Beach Daily. So I have no idea how I ended up reading this piece. But I do remember copying it into my notes for this month’s issue.

Anyway, here’s Teeka’s argument:

I’m thoroughly convinced companies like Amazon, Apple, Facebook, and Google will ultimately integrate bitcoin and Ethereum into their platforms.

And it all has to do with greed. Here’s what I mean…

If you look at two companies that have already adopted bitcoin – Square and PayPal – they’re making a killing.

Since adding the ability to buy bitcoin, Square has seen its crypto service revenue grow to as much as $3.5 billion per quarter.

And while PayPal hasn’t released specific numbers, its crypto-enabled Venmo payment app saw $58 billion in payment volume over the last quarter… a 58% increase.

PayPal is also launching its “super app” over the next few months, enabling even more crypto trading capabilities.

Just as important, Square and PayPal have seen combined user growth of 85 million new customers over the past year

This is creating a competitive advantage for them that Big Tech can’t ignore.

How long can Facebook ignore PayPal’s exploding userbase?

How long can Amazon look at Cash App’s growing crypto payment revenue before it says, “We’ve got to get involved. We’re losing market share… And there’s billions of dollars in earnings we’re not participating in.”

Silicon Valley is just like Wall Street. When it comes to making money, never bet against their greed.

I think what he’s saying here makes a lot of sense. Big Tech is just too greedy to keep fighting against crypto. Sooner or later it’s going to start integrating it.

Although, I’d imagine it will first create its own franken-cryptos to try compete. Then eventually it will integrate proper cryptos… or get superseded by them.

Hacker steals $600m in biggest DeFi hack in history... then gives it all back

This story even made the BBC Radio 4 morning news.

Well, the initial part of it did. The part that makes the industry look incredibly risky and unprofessional. Or as good ol’ Gary Gensler puts it, like “the wild west.”

The most interesting part never actually made it into the mainstream media. The part where the hacker gave back all of the stolen funds voluntarily.

Basically, a DeFi platform called Poly Network was hacked and $600 million worth of crypto was stolen, making it the biggest DeFi hack in history.

(And if you don’t know what DeFi means, don’t worry, just read this.)

But then the hacker returned most of the funds a few days later, describing the episode as, “one of the most wild adventures in our lives.”

Then after a bit more back-and-forth, they eventually returned all the remaining funds.

Apparently the hacker (or hackers) was annoyed that $33 million of the stolen Tether had been locked. So they delayed returning the remaining funds for a few days.

"In my selfish view, the story is tainted by the locked USDT. It would have been a perfect example of building trust between anonymous 'adversaries' by leveraging the power of smart contracts," they said. (Source)

Coinbase launches £150,000 account guarantee for UK customers

This story is kind of a weird one.

I wasn’t sure if it was real because I couldn’t find it anywhere on Coinbase’s site.

But I think that’s because it only just announced it, and it announced it via email first. I expect they’ll do a blog post about it in the coming weeks.

Anyway, I’ve managed to find a link to the online view of their email here.

And now I’ve finally managed to find an official post about it here.

From Coinbase:

We’re introducing a new pilot for UK customers: The Coinbase Account Guarantee. Should someone gain unauthorised access to your Coinbase account and misappropriate funds, you may now be eligible for a reimbursement. Please note the eligibility criteria at the bottom of this email.

As the only cryptocurrency exchange offering UK customers reimbursements of up to £150,000, we're proud to protect your funds.

To put that into context, the UK Financial Services Compensation scheme (the one your bank has) only goes up to £85,000. So Coinbase is really stepping up here.

There’s no regulatory requirement for it to do this, either. It just wants to do it because it will make people more likely to use it and keep their crypto on it.

I know Coinbase get some stick. But I honestly, think it’s probably the safest place you can keep your crypto right now.

That is, unless you trust yourself to never mess up with your hardware wallet. Oh, and also trust that no one will ever steal your 24-word key… and that you’ll never lose it, either.

Let’s hope that the UK regulators don’t decide to try push Coinbase out of the UK, too… like they’ve already done to Celsius and Wirex… and are trying their very best to do to Binance.

Ethereum completes London hard fork – (almost) regains all-time high price

Well, it’s been a long time coming…

I think I’ve written about Ethereum’s latest network upgrade every month of this year.

But eventually went through mostly without a hitch.

Ethereum is now reportedly burning $395,000 ETH per hour.

At time of writing, 184,338 ETH has been burned since the upgrade, which is around $730 million (£526 million).

At this rate, 2.3 million Ethereum per year will be burned – around $9.1 billion (£6.56 billion).

You can track the burn rate on ultrasound.money if you’re interested.

All things being equal, you’d expect the reduced supply to push up Ethereum’s price.

And although all things are never equal, Ethereum’s price has been steadily rising this month. It’s up around 57% in the last 30 days.

Ethereum bug spurs “Eth killer” price rises

Now, about that “mostly” part of without a hitch.

Well, it turns out that last week a bug in Ethereum’s code left some of its network vulnerable to hacks and so it had to do another hard fork to fix it.

(I should probably point out that this bug was unrelated to the London hard fork. It just turned up around the same time.)

This bug and fork didn’t get covered very much in the crypto press. But Bloomberg did pick it up.

And as Bloomberg reported:

Ether rose to back above $3,200 in Asia on Monday [30^thof August] and was trading at around $3,165 at 2:10 pm Hong Kong time. It slid while the bug fix was taking place, dropping from around $3,341 on Aug. 23 to as low as $3,056 on Aug. 26.

It was off the back of this that a number of Ethereum’s major competitors – Solana, Cardano, Tezos, Polkadot and others – gained against Ethereum.

But over the last few days Ethereum has shot back up. Although its 30-day price increase is still currently below all of those mentioned above.

Over the last 30 days:

Ethereum has gained 57%

Tezos has gained 76%

Polkadot has gained 89% (read my Polkadot review here)

Cardano has gained 118%

Solana has gained a ridiculous 313% – and has roughly doubled in price since I reviewed it in last month’s premium issue.

Honestly, all of those gains would be out of this world in any other asset class. But for crypto – as you know – it’s just par for the course.

At least, it is in a bull run.

And out of those five only Cardano and Solana are currently above their May highs.

IOTA “short squeeze” sees price rocket 44% in 24 hours

Over the last few months IOTA has been going from strength to strength…

It completed its chrysalis upgrade and finally integrated Ledger wallets into its new firefly wallet.

It appears close to being chosen by Object Management Group (OMG) as a data standard.

It’s just joined Gaia-X – which is a pretty big deal, if you read that post.

It’s progressing with its digital identity program – this month it produced a proof-of-concept with de Volksbank.

It’s getting ready to release smart contracts (which will be fully compatible with Ethereum smart contracts)

And its fully-decentralised IOTA 2.0 network is running on its DevNet.

Needless to say, even though its price hasn’t gone up much, behind the scenes there is a lot going on. And it remains the crypto I believe has the most potential out there.

Anyway. Because it hasn’t caught much attention in this run, investors have been getting bored of it.

It also doesn’t help that the chrysalis upgrade didn’t initially support Ledger wallets.

And it took weeks – or in Binance’s case, months – to be integrated with most major exchanges.

So following the chrysalis upgrade, people who had IOTA on exchanges were pretty much stuck with it there.

On the IOTA and IOTA markets subreddits, there have been a lot of post about people “giving up” on IOTA to chase the latest hot cryptos.

And I think that feeling is echoed with a lot of IOTA holders, and a lot of crypto investors in general.

Then on top of that you have the Dan Simmerman fiasco.

Dan Simmerman is the IOTA Foundation’s Head of Financial Relations. And unfortunately for him, he made a very bad call around four months ago.

On IOTA’s discord, he announced:

“Seriously what we will share is better than Coinbase. Probably more impactful honestly. IF IT HAPPENS”

He went on to say:

“Pretty much my entire life is riding on this. If it doesn’t work I’m screwed. Probably can never show my space in re crypto world again… In all seriousness though, I’ve been working on two very exciting things that hopefully we can share about un the next few weeks.” [sic].

(you can read up on the original reddit post that highlighted this here.)

Unfortunately for Simmerman, nothing happened. And “bigger than Coinbase” has now become a meme.

To put “bigger than Coinbase” into perspective, there’s currently a change.org petition with more than 1,600 signatures to get IOTA listed on Coinbase – I kid you not.

People really want that Coinbase listing.

So for Simmerman to say he’s working on something “probably more impactful” than Coinbase and then not deliver… well, he isn’t exactly loved in the comments right now.

Maybe he’ll come good. Maybe people are being too impatient and four months isn’t a long enough timeframe for him to pull off whatever he was talking about.

Or maybe he won’t deliver, and the clamour of posts like the below will end up in him leaving/getting fired:

I guess that’s a good life lesson in never over promising and under delivering right there. When online communities turn on you, it can be brutal. Poor guy.

So although IOTA has been making huge strides with all those things I linked to, and more, it’s also been doing badly on the community and price front.

If you were following IOTA closely, you’d see just how well it’s actually doing. But if you just check in from time to time, you’d probably only see the negative stuff.

Maybe that’s why some unknown trader, or traders, decided to short IOTA in a big way this week.

You see that red line on the chart below, that’s the number of shorts on IOTA.

As you can see, the shorts went from basically nothing, to more than 13 million.

Then something unforeseen happened.

The crypto version of WallStreetBets (SatoshiStreetBets) picked up on this and all hell broke loose. Here’s a link to the original thread.

That subreddit has a ridiculous 483,000 members, and they love nothing more than a short squeeze.

Over the next 24 hours IOTA’s price jumped 44%. And two days later, the short squeeze is still going.

As you can see on the chart, there are still more than 8 million shorts on IOTA, and that subreddit is still hyping it up.

(There’s actually a fairly good high level overview of how this IOTA short squeeze works from that sub here.)

The sudden interest has flooded IOTA communities with new people and new questions, and a lot of long-time IOTA proponents have been lending support in the threads.

It’s kind of strange to see a project that’s been mostly forgotten suddenly being front and centre again.

Who knows how it will all play out, but it’s certainly exciting to watch for now.

Oh, and if you are thinking of taking a look at SatoshiStreetBets, I should probably warn you, there are an awful lot of scams and generally awful projects hyped up in that place.

I usually just brose it to see what scam and meme coins are doing the rounds. But it does occasionally stumble onto some good stuff, too. As evidenced by this week’s IOTA short squeeze.

Radix is set to unlock its full token supply on the 15^th of September – who knows what will happen to its price…

If you read my Radix review, this next story should definitely interest you.

This month Radix held a community vote on whether to write off its price-based token  unlock and just unlock everything at once.

It turns out the “unlock it all at once” side won the vote.

You can read Radix’s blog about it here.

It’s not set in stone yet, there’s still one more vote. But Radix seems reasonably certain that vote will go the same way as the first one.

Why are they doing it? Here’s their explanation:

When price unlocking was originally introduced, we believed that having aligned incentives across token holders, the team, and the community would maximize awareness and distribution of (e)XRD tokens to increase the decentralization and security of the Radix Public Network before its inception with the Olympia Mainnet. With the eXRD token launch, we initially saw this working well with eXRD achieving high degrees of liquidity, a steady increase in token holders, and the total value of the network increasing steadily.

However, throughout Q2 and Q3 of the year, these important metrics were starting to slow. It seemed that the price unlocking mechanism was a key factor in preventing further adoption, awareness, and distribution of (e)XRD.  Clearly, the unlocking mechanism wasn’t working as we had hoped.

Basically, it seems like people aren’t buying into the project because there’s too much uncertainty over the unlocking, supply increase and token price.

So the community has voted to get the full unlock out of the way in one go and create an even playing field.

Many expect that the sudden increase in supply will crash the token price – hence why Radix’s price is down about 25% over the last two weeks.

But other people will see it as a great opportunity to snap up cheap Radix, which will increase the price.

And there’s no saying if the early backers who will receive their tokens early will actually dump them or just hold onto them.

So right now – and for the next few weeks – it’s impossible to say what will happen to Radix’s price.

But once the supply unlocks, if its price remains near what it is now, it should propel the project into the top 100 list. And that will bring a lot more attention.

It’s also probably worth noting that when Solana (which I reviewed last month here) had a huge token unlock, it barely affected the price at all.

In the short term, I have no idea what this will do to Radix’s price. But over the medium-to-long term it should be a positive.

Although, let’s be honest, no one knows what will happen to any given crypto’s price at any given time.

I mean, who would have predicted an IOTA short squeeze this week?

Never a dull moment.

Okay, that’s all for this wee—

Actually, I almost forgot. For next month’s premium issue I’m going to review Constellation (DAG).

It’s an intriguing microcap crypto that’s been going from strength to strength this year.

If you want to read that review when I publish it in a couple of weeks, you can join coin confidential premium here. If you do, you’ll also get instant access to my Radix, Solana, Polkadot and Algorand reviews, too.

Thanks for reading,

Harry

PS Next month’s free issue will be a week later than normal (so the second weekend of the month) because I’ll – hopefully – be somewhere around the Mediterranean sea when I’d usually be writing it. And as much as I like crypto, I like holidays infinitely more.

To quote Bertrand Russell:

One of the symptoms of approaching nervous breakdown is the belief that one’s work is terribly important, and that to take a holiday would bring all kinds of disaster.

If I were a medical man, I should prescribe a holiday to any patient who considered his work important.