Blockchain Bites: Bitcoin All-Time High Puts It on Pace for Highest Monthly Close

Blockchain Bites is back – we hope you enjoyed the holiday pause. Now for the news: Another major hedge fund may allocate to bitcoin. Kaspersky sees cybercrime on the rise for 2021. And anonymous developers have forked a seemingly dead project to launch DeFi’s latest stablecoin.

And, perhaps most notably, bitcoin has set a new all-time high. “After nearly three years of waiting, bitcoin investors can celebrate a new all-time high Monday after the leading cryptocurrency traded as above $19,900 Monday morning, breaking the previous record set in December 2017, according to CoinDesk Bitcoin Price Index (BPI) data,” CoinDesk reporter Zack Voell writes.

Top shelf

Basic Cash basics
A team of anonymous developers is resurrecting a version of Basecoin, a project that received $133 million in funding though never launched. The quasi-fork, called Basis Cash, is a dollar-pegged stablecoin project designed for DeFi and commercial applications, a Basis developer said. Beginning with just 50,000 BAC (the token’s ticker) at first, Basis is in a minority of stablecoins that are not backed by anything of value. Instead, price stability will be maintained by the algorithmic printing of Basis Bonds and currency debasing. (The original Basecoin was foiled by U.S. securities regulators, and the team returned the raised funds in 2018.)

Hedge fun…
Guggenheim Funds Trust filed an amendment with the U.S. Securities and Exchange Commission to allow its flagship $5 billion Macro Opportunities Fund gain exposure to bitcoin by investing up to 10% of the fund’s net asset value in the Grayscale Bitcoin Trust (GBTC). Guggenheim is a hedge fund giant with more than $233 billion in total assets. If it follows through on its investment, Guggenheim will join hedge fund managers Stanley Druckenmiller’s and Paul Tudor Jones’s recent excursion into crypto, who both noted bitcoin’s strength as an inflation hedge.

Security upgrade
Ethereum Classic hard forked to its Thanos upgrade, meant to increase miner participation and increase security. The upgrade allows less powerful mining rigs to join the network, while also doubling the duration of ETC’s mining period, thereby “increasing network security and promoting a more distributed and healthy mining ecosystem,” Terry Culver, CEO at ETCLab, said. More than 90% of existing miners have migrated over to the Thanos fork, according to Culver. Further, as new miners have come online, the network’s hashrate has also seen a notable rise. Over the past year Ethereum Classic has suffered a number of 51% attacks.

Crypto crime
Cybersecurity specialist Kaspersky foresees a rise in bitcoin scams in 2021, according to a new report on coming financial threats. Weakening fiat systems and rising poverty caused by the coronavirus pandemic will drive many to cybercrime. Specifically, researchers say, bitcoin fraud and theft is likely to increase, as it is “the most widespread cryptocurrency.” The report extrapolates on available data from this year. Further, targeted ransomware attacks are also expected to rise, having seen “successful operations and extensive media coverage this year,” though Kaspersky thinks ransomers will begin demanding more payouts in privacy-preserving cryptos like monero.

Selling stock
Blockchain payments firm Ripple is selling roughly one-third of its stake in MoneyGram, in its first such sale of company stock since the startup invested in the remittance giant in 2019. According to U.S. securities filing on Friday, Ripple owns as much as 17% of outstanding MoneyGram shares, and now intends to sell up to 4 million shares. Ripple acquired Moneygram stock in 2019 at $4.10 apiece. The stock has now surged 260% above $7 this year, signaling a significant profit on investment. “This is purely a judicious financial decision to realize some gains on Ripple’s MGI [MoneyGram International] investment and is in no way a reflection of the current state of our partnership,” a Ripple spokesperson told CoinDesk.

Quick bites

• Leigh Cuen dives into “Bitcoin’s carnivore cult,” finding it both stupid and correct. (CoinDesk) 
• Satoshi Nakamoto’s recently uncovered emails to cryptography legend Hal Finney present a new puzzle. (CoinDesk)
• Hedge fund legend Raoul Pal has invested about 75% of his liquid assets in bitcoin. (Decrypt)
• Ethereum's mining difficulty and hashrate have both reached new all-time highs. (The Block)

Market intel

Boot and rally
Despite the sharp pullback last week, bitcoin looks on track to post its highest-ever monthly price close. Last Wednesday bitcoin quickly shed $3,000 from local highs, but has since recovered more than 50% to approximately $18,600. That’s significantly higher from the peak month-end price of around $13,880 observed on Dec. 31, 2017, CoinDesk markets reporter Omkar Godbole writes. “Every time bitcoin has closed above the previous monthly all-time high, a 700% to 1,000% uptrend has followed,” crypto analyst Josh Rager said.

At stake

CBDC pilots
Yesterday I reported that the central banks of Saudi Arabia and the United Arab Emirates (UAE) published a report based on a year-long joint digital currency pilot. In the report the regional powerhouses found that distributed ledgers, including classic blockchains, could improve cross-border and domestic settlements, without sacrificing privacy.

But the “Aber” project, named for the Arabic word for “crossing boundaries,” was significant for more than just a successful central bank digital currency (CBDC) dry run. According to the researchers, it was likely the first blockchain-based CBDC experiment that tested the feasibility of a dual-issued currency.

In this sense, even though a Saudi/UAE bilateral currency is nowhere near ready for deployment, if ever, Aber did add to the existing body of knowledge. The program – which also involved the cooperation of six commercial banks that risked their own deposits in the trial – specifically referenced previous CBDC pilots in Singapore, Japan, South Africa and Canada.

It’s worth going over what those earlier experiments were seeking:

• Project Stella: A project began in 2016 and led by the Bank of Japan (BoJ) and European central bank (ECB) studied the use of DLT for financial market infrastructure.
• Project Ubin: In late 2016, the Monetary Authority of Singapore (MAS) commenced a collaborative project with financial institutions and technology providers to explore the use of distributed ledgers for clearing and settlement of payments and securities.
• Jasper-Ubin: the Bank of Canada (BoC) and Monetary Authority of Singapore (MAS) collaborated on Jasper-Ubin Project to test the use of distributed ledger technology for cross-border high value payments.
• Project Khokha: In late 2017, the South African Reserve Bank collaborated with seven banks to study interbank settlement in the country.

“While other central banks have also explored cross-border payments, the major difference was in Aber’s dually issued single digital currency approach and use of real money,” Aber’s researchers write.

Accordingly, while most blockchain-based CBDC pilots found varying levels of success in distributed systems to structure a nation’s financial architecture, the research isn’t complete.

Aber, for one, saw early issues in coordinating nodes across jurisdictions as well as lingering questions around transaction privacy, particularly in cross-border transfers. Then there are the issues that any blockchain system will run into including scalability, transaction finality and throughput limit. Those are mostly technical concerns.

Economically speaking, as a joint currency backed equally by the Saudi Riyal and the UAE Dirham initiative, fluctuating foreign currency exchange rates became an issue. As did the possibility of different cities and jurisdictions applying different taxes or charging different interest rates.

While many nations are surging ahead with CBDC adoption – with China and the Bahamas leading the pack – there’s still reason to take a slow-going approach. After all, Aber, modest as it was, was among the first to put real money at stake.

Food for thought