COINBASE AND CIRCLE: STABLECOIN: Exchanges Collaborate On Newly Launched ‘USDC’; To Be Supported By Both Exchange Platforms

Coinbase and Circle have collaborated to create a newly approved and fully USD backed stablecoin dubbed USDC. The new stablecoin will be supported by both exchanges as members of the CENTRE Consortium.

Here is the press release directly from Coinbase:

Starting today, Coinbase customers in supported jurisdictions can buy, sell, send and receive the USD Coin stablecoin (USDC) at Coinbase.com and in the Coinbase iOS and Android apps. US customers outside New York state can buy and sell, and customers around the world can send and receive. More geographies will be available in the future.

This is the first time Coinbase has supported a stablecoin, which is fundamentally different from other cryptocurrencies. Unlike bitcoin or ether, a USDC is meant to represent a single US dollar (USD) that does not move up or down relative to its reference currency. One USDC is a 1:1 representation of a US dollar on the Ethereum blockchain.

Each USDC is 100% collateralized by a corresponding USD held in accounts subject to regular public reporting of reserves. The underlying technology behind the USDC was developed collaboratively between Coinbase and Circle, in our capacity as partners and co-founders of the new CENTRE Consortium.

The advantage of a blockchain-based digital dollar like USDC is easier to program with, to send quickly, to use in dApps, and to store locally than traditional bank account-based dollars. That’s why we think of it as an important step towards a more open financial system.

Use cases for USDC today include:

  • Improved send and receive. Two Ethereum wallets can quickly send and receive any amount of USDC at any time of day. Large transfers for business purposes become as easy as small e-commerce payments. Consumers can use the Coinbase app to send USDC to someone, while remaining confident the value is stable.
  • Use in dApps and exchanges. There is a burgeoning ecosystem of crypto dApps, exchanges, and blockchain-based games. A USDC follows the ERC20 standard, which means it can be used with any app that accepts tokens based on that standard. The USDC can thus be used as a stable digital dollar to buy items in the crypto ecosystem, from Cryptokitties to tickets for blockchain-based games.
  • A programmable dollar. For developers and fintech companies, a digital dollar like USDC is easier to program with. For example, given the private keys for USDC, a program can easily send and receive them back and forth using the public Ethereum blockchain.

Today’s launch is made possible by the collaboration between Coinbase and Circle, as co-founders of the new CENTRE Consortium. Both Coinbase and Circle operate with a compliance-first approach and a track record of security. That’s why we believe CENTRE is uniquely positioned to offer USDC to people who want to take advantage of the benefits of stablecoins.

USDC will be coming to Coinbase Pro in the coming weeks, and is already supported on Coinbase Wallet, a user-controlled wallet where people can store ERC20 tokens.

The link to the official release can be found here: Coinbase And Circle Stablecoin USDC

BREAKING: BITCOIN SEC ETF MEETING: CBOE, VanEck, SolidX All Meet With SEC Commissioner Elad Roisman; Approval Confidence ‘High’

On October 9th new SEC Commissioner Elad Roisman met with representatives from Van Eck, SolidX, and the CBOE to discuss the proposed Bitcoin ETF. 

Roisman is the first commissioner to publicly meet with representatives of the three groups. The previous presentation was made to SEC staff, specifically the Office of Market Supervision and Division of Trading and Markets.

**the bulk of this report was provided by @CryptoQF a trusted crypto data and analysis account**

In the meeting with Commissioner Roisman arguments were made that the Bitcoin ETF should be approved as previous issues identified by the SEC are now resolved. Directly from the presentation:

•There now exists a significant regulated derivatives market for bitcoin.

 •Relevant markets – Cboe, bitcoin futures, OTC desks – are regulated.

 •Concerns around price manipulation have been mitigated, consistent with approval of prior commodity-based ETPs.

 •Cboe’s rules are designed to surveil for potential manipulation of Trust shares.

 •Promotes investor protection.

**Attached are the notes for that meeting:

In September, Republican Elad Roisman was confirmed for a seat on the SEC Commission. Prior to his appointment, the commission had only 4 of the possible 5 seats filled. 

Roisman is rumored to be friendly to crypto and free markets, similar to Commissioner Hester Pierce. Given Pierce was the only “yes” vote, approval would still require defectors.

Interestingly, a current “no” vote in Commissioner Kara Stein will disappear in December as her term expiration requires her to leave the Commission. 

Democrat Allison Lee is rumored to be her replacement, but the gap between Stein’s departure and Lee’s appointment could be a potential opening for the ETF approval.

This leads us to our previous conversations with sources at the CBOE and their continued confidence in an eventual approval:

“The VanEck ETF is perfectly approvable if you have been reading the tea leaves in the rejection language at the SEC connected to previous submissions. It checks every box, as I’ve said before, and I’d be shocked, SHOCKED, if it didn’t win approval. Now that approval will probably come with a bunch of dissenting language amongst the respective approving members – but it will still get approved. Not backing down in any way, in fact, I’d double down on it at the moment.”

“…the SEC is first and foremost interested in investor protection with these types of new asset class submissions. VanEck has that issue covered in spades with zero leverage and accredited investor protections built into the product. That will win the day, eventually. Expect the rhetoric to ramp up and ‘warring factions’ to become more visible leading up to any decision early next year, but I remain imminently confident in an approval.”

Our sources at the CBOE have been consistent and resolute in believing that the Van Eck product has been and is the most likely candidate to make it to the finish line. Every step along the way the only question that they’ve grappled with is timing; never with the likelihood of approval.

A Bitcoin ETF should closely follow the Bakkt launch, the continued maturity of Bitcoin futures markets, Fidelity’s crypto initiative and Nasdaq’s push into the crypto ecosystem. Given all of that activity, a Bitcoin ETF approval in late Q1 of 2019 seems reasonable, even inevitable.

Sourced: https://www.sec.gov/comments/sr-cboebzx-2018-040/srcboebzx2018040-4507040-175984.pdf

 

BAKKT BEGINS: DECEMBER 12: Bakkt Will Begin Trading Bitcoin Daily Futures Contracts Dec. 12

Bakkt has announced the date it will turn on the lights and begin utilizing the ICE exchange family of networks to trade Bitcoin futures contracts. The date is set as December 12, 2018.

Bakkt is considered by many (including its well-heeled investors: Fortress Investment Group, Eagle Seven, Galaxy Digital, Horizons Ventures, Alan Howard, Pantera Capital, Protocol Ventures, and Susquehanna International Group, LLP) as the flagship institutional organization pressing into the digital asset space.

Tier 1 global investment banks are either in current discussions with Bakkt to use their familiar exchange architecture or are watching the launch very, very closely.

A short reminder of what Bakkt is on the cusp of executing:

Bakkt is designed to enable consumers and institutions to seamlessly buy, sell, store and spend digital assets. Formed with the purpose of bringing trust, efficiency, and commerce to digital assets, Bakkt seeks to develop open technology to connect existing market and merchant infrastructure to the blockchain.

As an initial component of the Bakkt offering, Intercontinental Exchange’s U.S.-based futures exchange and clearinghouse plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing on December 12, 2018, after receiving CFTC review and approval. These regulated venues will establish new protocols for managing the specific security and settlement requirements of digital currencies. In addition, the clearing house plans to create a separate guarantee fund that will be funded by Bakkt.

It all begins on December 12, 2018. And as the firm and exchange quickly spool up their partners will become more and more visible. For example, Bakkt has partnered with Starbucks to process payments via Bitcoin on the coffee company’s mobile app. You may be interested in this fact: Starbucks occupies the largest mobile app payments ecosystem in the United States. Bigger than Apple Pay, Google Pay, and Samsung Pay – with 23.4 million users.

And a quick *reminder* quote regarding the scale and aspirations of the Bakkt organization:

“In bringing regulated, connected infrastructure together with institutional and consumer applications for digital assets, we aim to build confidence in the asset class on a global scale, consistent with our track record of bringing transparency and trust to previously unregulated markets,” said Jeffrey C. Sprecher, Founder, Chairman and CEO of Intercontinental Exchange.

Bakkt begins less than two months from now. The digital asset space is about to change again.

Bitcoin Breakout! 3 Reasons Why Bitcoin Technicals Are Foreshadowing A Bullish Move

Bitcoin barely makes a move as low volatility throughout overnight trading (US CST) has a range of fewer than 100 points. 

This makes for a situation that readies for a breakout with the overall bear market being challenged, a major pivot area being tested, and a recent volume spike that saw a massive leg up. 

Let’s examine these.

The overall bear market continues to be challenged as the breakout above the long-term upper trend line (shown in orange) gives bullish cause to the momentum of Bitcoin. However, this line must be maintained, which it has done so far, but without any continuation on the upside. BTC sees sort of a “hangout” time with price barely exceeding the 6600 mark – bringing us to the next point of interest.

The 6600 level, although not a true support or resistance level, has maintained as a solid pivot point for BTC throughout trading history. This level was tested three times recently with two major tests and one soft test(wicked). 

BTC now struggles to maintain 6600 but has bounced through it several times over the last few days, making this an interesting point to watch. The failure to break through will result in 6400 support being sought out once again. 

A break below support will ultimately test the 6250 level again which has stood as the major higher low for BTC to attain a possible trend change overall.

Finally, we see the massive upside price action now being tested. After a quick run up to 7800 last week, BTC now remains in retracement. The current retrace move is quite slow, however, has still held to a 1/2 retrace of the previous leg up. Additionally, it has held above support and the long-term bearish upper trend line.

Stochastic levels are almost bottomed mid-scale, and if prices hold, the turnaround to seek overbought (>80) levels should see more upside action.

BTC is currently a hold with downside protection under 6540. If no entry has been made – possible entry point lower as stochastic mid-scale bottoms.

Futures Traders – Trade the Trend. The short-term trend is short – however, prepare for longs in the next three hours (15m scale).

Bitcoin Volatility And Volumes Slow; Technicals Point To Continued Range-Bound Chop

Bitcoin overnight trading (US CST) produces very little volatility, however, still maintains course with some upside price action. Low volatility and the fact that BTC has been testing the 6600 pivot area –  not to be confused as a support or resistance area – has provided a stable ground for the price to now seek higher levels. 

Support stands firm at 6400 while resistance remains at 6800. As BTC seeks out resistance at the moment, entries at 6610 should be held firm unless a second breakdown of the 6600 mark occurs.

As the next support level down is 6400, it should also be noted that long-term bearish upper trend line now stands at about 6280 and decreases with every hour. 

This level is now reaching the 6250 major pivot area – a little bit of a concern with BTC now retracing. If the 6600 area does not hold and BTC seeks out 6400 once again, expect the 6250 level to be tested once again. This has held as a long-term pivot area, producing two higher lows* in the last few months alone while BTC has remained in an overall bear trend for the entire year.

With all this noise, the main focus at the moment is for the price action to hold the 6400 support area (which it is currently doing well) and to seek out the next resistance point up at 6800. 

The current retrace has officially held 1/2 of the previous leg up, giving hint at the continuation of upside movement. 

Additionally, the price is now set to meet the MA line as shown on the mid scale. This will give a boost to BTC to break out of the zone it has been trading in since the major breakout, roughly 6500-6700.

Stochastic mid-term seeks the overbought (>80) level.

MACD momentum is bullish and looks to cross to the upside at this time.

BTC is currently a hold with downside protection under 6600.

Trading Crypto: “An ultra-long bearish wick showing added downward pressure…”

Bitcoin overnight (US CST) brings almost no change as the price stays in the 6500 region with little change. After a battle with the 6600 area (shown yesterday), there has been no further attempt to break this line to the upside. 

Again, this is not true resistance but has provided a pivotal area for BTC in the overall bear market. The next resistance point lies at 6800. This level has also rejected BTC a couple of times now and will remain a hard point for BTC to pass.

As shown, BTC has had two equal highs – not a good sign for the bulls as the second one comes with the ultra-long bearish wick showing much added downward pressure. This one single candle also gave an immediate rejection of the 6800 area – a point that is crucial in seeing the long-term trend change for BTC. 

Otherwise, the next most crucial area down happens to come in two forms: the 6400 support area which is currently still maintained and the long-term bearish upper trend line. This line now stands at about 6300 as it is a sloping line.

Stochastic daily is still in the lower region, but the mid-term and shorter-term scales are looking for higher levels. This gives an indication of uncertainty in the market as the rejection of 6600 gives caution. Watch for this level to be broken again before re-entry short or long term.

MACD remains negative daily with the hourly scale looking to cross to the downside.

BTC is currently a No Play until upside break of pivot area at 6600, or lower support(6400) confirmation.

DECONSTRUCTING TETHER: Industry Expert: “I think the reality could be a lot darker…”

It has been fascinating to watch Tether over the years. Let’s start with the obvious, Tether is a bad product. 

Claiming that the token is backed by something (dollars in Tether’s case) without any mechanism of demonstrating this link, without transparency in the token’s supply, and without an open token creation and redemption process is a big problem. It would never work for any sophisticated or institutional investor.

**This article was written by Dan Rayhkman, CEO of Fungible Network, and a well-known crypto and blockchain expert. His opinions here are based on years of real-world experience in digital assets; among them; building crypto exchange networks, crypto API’s, token liquidity mechanisms, etc.**

But with all its problems Tether’s utility is obvious. Take a look at coinmarketcap.com where BTC and ETH on average trade about 3% of their market cap a day, and USDT routinely trades above 100% of its market cap. 

The utility of this coin is not it’s “stability” but it’s presumed equality to a dollar. It is a dollar surrogate. Many exchanges avoid dealing with the US dollar directly, instead, they use USDT as a substitute.

Over the last few days, Tether’s peg to the dollar has been challenged. Here’s an article on Cointelegraph that explains nicely what could have caused this diversion: https://cointelegraph.com/news/untethered-the-history-of-stablecoin-tether-and-how-it-has-lost-its-1-peg

Anybody who has an account on one of the exchanges that are using Tether should be concerned. If your money sitting in USDT and this “stable coin” is down 4% what should you do? Take a look at the image below, this is our aggregated BTC book with prices from all of the exchanges where we trade.

RFO Capital Aggregated BTCUSD Book

 

The first thing that people will notice is the 4.1% price inversion. We can buy BTC on Coinbase (GDAX) for 6428.06 and sell it on HitBTC for 6715.52. This inversion has been there for a last couple of days. 

What’s the cause of this inversion? Tether! You can clearly see a group of exchanges where Bitcoin prices are in 6700 range and another group of exchanges where prices are in 6400 range, the difference is the base currency in these pairs. 

Exchanges that show prices around 6700 trade BTC against USDT and exchanges where Bitcoin trades against the real dollar are showing prices around 6400. So this discrepancy is not really an arbitrage opportunity, it is the cost of USDT in USD.

Here’s the really difficult question, what would happen if USDT fails? What is the probability of that; and if Tether collapses, and what would happen with Bitcoin and the rest of the coins? 

What would happen to the exchanges that use USDT? What would happen if there is a run on this token similar to a run on the currency?

Let’s go through a hypothetical: if crypto traders lose confidence in USDT and start abandoning it, it will drive it’s price further and further down, as a self-fulfilling prophecy. Similar to how people sell risky assets and buy the US dollar when there is financial or political turmoil. People will sell USDT looking for safe haven. 

There are really only two suitable options: Bitcoin or the US Dollar.

If USDT collapses, an optimistic scenario would be for trades to sell out of USDT and buy Bitcoin as the most liquid coin. Then exchanges could find a replacement for Tether (another “stable coin” linked to US dollar) and, happy days, business would continue as usual.

I think the reality could be a lot darker. I think it would be a problem many times bigger than the hacking of MtGox. MtGox was a small problem as very few people knew anything about Bitcoin at the time, and even fewer people had accounts there. The problem was confined to that circle of crypto geeks. Now the problems would be a lot bigger with many Main Street investors trading cryptocurrencies.

I think if Tether collapses, it would bring a nuclear winter into the already depressed crypto market. I am not even sure the market would recover, not any time soon. 

Traders will lose confidence in the existing trading models, investors will lose money. And I think the prices of all coins, including Bitcoin will collapse.

But here’s the good news. I don’t think exchanges will allow this scenario to happen. Binance and other exchanges are making too much money to allow Tether to collapse and to threaten their businesses. Even if the entire 2.1 billion USD is missing, top exchanges can work together to create an emergency fund to support it. 

Tether’s value is based on the confidence that market participants put into it. Exchanges could provide the support needed to maintain the 1-to-1 peg for the USDT and restore the confidence in this product. 

Already, Tether’s price, after falling to 86 cents recovered to 98 cents. So this confidence restoration project may be already underway.

I think Tether will survive, for now. Long term it is still a problem and there are many projects in the works looking to replace it. 

Top market participants see the problem and risk that Tether represents, and the process of getting rid of USDT may have started already, Tether market cap is down from 2.7 to 2.1 billion. The biggest drop in its short history.

My long-term prediction is that Tether will be replaced by a safe and transparent alternative. An alternative where the underlying asset can be audited, where the token creation and redemption process is transparent, where the peg is naturally maintained and doesn’t need any resources to be protected. 

The design of such a token is not difficult to imagine. There are many projects that have such dollar-backed tokens, Fungible Network also has a dollar-backed token design. We can issue it if we find the right partners. But for now I am watching the show called Tether, it has intrigue, suspense, and a little tragedy, I hope it ends well.

 

Full disclosure: I am holding a very small balance of USDT. My firm RFO Capital is offering algorithmic selling services, for more information click here: http://consignment.rfocapital.com

TRADING CRYPTO: Traders Should Pounce, Investors Should Wait And Catch The Bitcoin Bottom

Bitcoin continues to test the bounds of the 6600 level as downside momentum maintains course in overnight (US CST) trading. After the rejection of the 6800 resistance level, price action has retraced about 1/2 of the previous leg up so far. 

This is shown by the current test of 6600, which is not true support but has provided a consistent pivot area for BTC throughout the bear market. The next true support level down is at 6400.

The long-term bearish upper trend line currently stands at 6630 – a good sign for bulls as that line keeps getting further away. The challenge has been for BTC to break that line and hold it, and at the moment, BTC is still a ways away for 6400 alone. 

Therefore, there is a higher statistical probability for the uptrend to continue. However, keep in mind that extreme stochastic levels have historically brought the biggest price moves. Unfortunately, stochastic levels are in the oversold (<20) region and MACD remains negative on the mid-scale.

The good news is that the hourly chart has also been oversold for some time now and looks to seek higher levels – giving small entry opportunities.

MED risk entry is available for short-term plays on BTC at this time, while longer-term investors should wait for confirmation of bottoming and continuation of the uptrend.

Futures Traders – trade the trend. The short-term trend (15 min scale only) is currently short.

Bitcoin Meandering Frustrates Traders; Epic Levels Of Chop To Endure Right Now

Bitcoin afternoon trading US CST) sees a break of the mid-scale pennant which is displayed on the hourly chart. This pennant slightly broke to the upside before breaking down to its current level at roughly 6690. 

This still maintains higher price levels, however, slides away even more from the 6800 resistance point as well as gives more pressure for BTC to seek shorter term lows. Although the 6680 area has given some price support, it is ultimately the 6660 level that would be concerning as this was the last hard low pivot.

For this reason, BTC downside protection should be moved higher to the 6660 level from the previous 6580 level. If price were to seek this range again, there is statistical likelihood of price moving lower beyond that point.

At this time, price technically continues to trend sideways with no concrete highs or lows to confirm the trend while staying in the mid range of the previous move up which saw highs at 7800. One thing to consider for the bull case is that BTC still holds well above 6400 support and more importantly the long term bearish upper trend line that provides a case for BTC to continue in an uptrend that sees a longer term trend change over time.

Stochastic hourly is in the lower region seeking oversold(<20) levels.

MACD is negative on short and mid-term scales.

BTC is currently a still a hold with downside protection at 6660.

Futures Traders – trade the trend. The short term trend is sideways – no trade scenario until confirmation of trade via pattern(high/low break with pattern consistency).

SOURCES: BANK OF AMERICA: “Our Merrill Lynch brand should lead token product push once regulators show their hand…”

Bank of America is not the organization that many would tab as a prime candidate to ‘lean in’ to digital assets and attempt to beat competitors to the party. But in conversations that we’ve found illuminating and eye-opening, there is a real appetite for the wealth management divisions of one of the worlds largest financial institutions to lead a charge that gives HNW and UHNW clients access to approved tokenized products.

**A little background with respect to the actual wealth management divisions at Bank of America. Merrill Lynch, US Trust, Merrill PBIG (private banking and investment group), and Merrill Edge. These wealth management assets cut a large swath across the ‘affluent’ in the United States. It should be noted that Bank of America has largely eschewed pushing these brands deep into international waters; largely pulling out of international operations over the past four years.

Bank of America Merrill Lynch has taken notice of the constant conversation being had in hallowed halls at Goldman Sachs, Morgan Stanley, Citigroup, etc and are pushing to play catch up across the digital assets spectrum. As each of those competitor organizations has announced intentions to either partner with Bitcoin initiatives at exchanges like the CME, CBOE, the Bakkt initiative, or even Gemini as it grows its footprint in partnerships with Nasdaq, et al.

Over the weekend we had numerous conversations with sources at Merrill Lynch who have a good faith belief that BofA and Merrill are approaching digital assets in two ways of interest:

  1. Merrill executives have had serious and ongoing conversations with Bakkt and how to benefit from the exchange network, custody services, and warehouse facility concepts that are set to come to market.
  2. Those same Merrill executives are planning futures, NDF, and longer-tail (i.e. 2020 availability) ETF products that can be marketed to accredited investor clients first, and then more ‘mass affluent’ clients next.

The specifics of these products and the efforts that are going into planning were mapped out for us via three sources who are either directly involved in the planning process or aware of the decision making and chatter coming from the working groups involved.

Here are their comments, via text and email, unedited:

The first source focused on our reporting connected to Bakkt and what Merrill staff has been working on to capitalize on what they see as an easy on-ramp for passing the regulatory sniff test:

“Bakkt provides a roadmap that is easy to follow and challenges the firm’s legal and compliance teams to find holes that really aren’t there; based on the existing exchange constructs and custody/warehouse facility products that already exist. We’ve got relationships that have worked with Kelly and Jeff and are very comfortable with what they’ve built. I can envision a product lineup that closely mirrors what Bakkt does with additional products connected to the futures contracts at the other exchanges. And that, in and of itself, adds even more credibility to what Bakkt is doing, as their entire pitch is exchange related. Think of it this way, our UHNW clients are probably holding, on average 1% of their assets in Bitcoin and maybe Ethereum on some unregulated exchange in some geography that carries geopolitical risk as well as legal and tax risk. Partnering with Bakkt will bring those assets into compliance for those clients and into our ecosystem.”

Our second source believes that BofA simply sees a new revenue stream and assets that should be in their hands, not (as an example) Binance:

“The conversation amongst us (this source is a member of one of the working groups handling the digital assets strategy inside Merrill Lynch) is that the custody question is the only question. Once that issue is solved in a reasonable way and passes the initial regulatory hurdles then we are in and marketing several products to clients that can find comfort in traditional structures that offer peace of mind as to the safety of any asset they own. And based on internal surveys in our UHNW brands, PBIG and US Trust, we believe that most of those clients have a little more than 1% of their assets in principally Bitcoin with a tiny percentage in alternative crypto brands. A US-based custody solution will consolidate those assets, we believe, into Bitcoin and into more traditional exchanges and investment banks.”

Our final conversation, via text, was what alerted us to Merrill’s ongoing work in the space:

“Yes, we are working on a suite of products that are set to roll out in a timely manner once regulations and custody solutions avail themselves. Bitcoin will lead as Bakkt solves the custody issue and we believe that Ethereum follows with identical futures, NDF, ETF type products. We believe that Bakkt will work hard to add Ethereum to its exchange architecture relatively quickly. Plans are in place for that likely development. Notice my references to Bakkt. We are comfortable with their leadership, regulatory clarity and connections, and exchange architecture. Follow them closely because we are right now.”

As the planning velocity cranks up at a place like Bank of America, and specifically Merril Lynch and its affiliated brands, the skeletal structure has Bakkt branding all over it. And the same could be said for how quickly Citigroup, Morgan Stanley, Goldman Sachs, and others are ramping up.

Providing the custody solution that Wall Street has been looking for along with a global exchange network that removes concerns connected to price manipulation that has plagued the digital asset narrative is the reason why firms that formerly referred to Bitcoin as ‘rat poison’ or a ‘Ponzi scheme’ are finding themselves fanboys of Bakkt. Bakkt is set to dominate the institutional dollars that have an appetite to trade Bitcoin.

The massive move away from exchanges like Binance, BitMex, etc could be bigger than anticipated. Much, much bigger than anticipated. In fact, Bakkt and Bank of America/Merrill Lynch are counting on it.