Blockchain Bites: Dollar’s Decline, Ether’s Moneymakers and Coinbase’s Considerations

The Securities and Exchange Commission appears to be interested in Binance’s eponymous blockchain, 132% of ether wallets are in profit and the Bank of Japan is getting serious about CBDC R&D.

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Binance Sleuths 
The SEC appears to be gearing up for a closer look at Binance coin (BNB) and other tokens on cryptocurrency exchange giant Binance’s eponymous blockchain. The U.S. securities regulator disclosed in a Wednesday memo its intention to award Menlo Park, Calif.-based CipherTrace a single-source contract (because it’s the only blockchain analysis firm capable of tracing Binance Chain transactions). CipherTrace previously partnered with Binance to bring anti-money laundering tracing tools to Binance Chain.

Coinbase Considering
Coinbase is considering listing ampleforth, hedera hashgraph, blockstack and 16 other digital assets in the cryptocurrency exchange’s latest exploratory review. On Friday, The San Francisco-based exchange announced it will evaluate 19 additional cryptocurrencies against its “Digital Asset Framework” for potential inclusion on its popular trading platform. The announcement did not state a timeline and gave no guarantees on “whether or when” any of the contenders would actually be listed.

Splinternet
The Blockchain-based Service Network (BSN), a state-backed digital infrastructure project in China, aims to be the dominant internet services provider for decentralized applications (dapps). BSN’s global expansion is built using U.S. technologies, another possible vector in the tense U.S.-China trade war. Amazon Web Services (AWS), Microsoft and Google are among the major cloud service providers for BSN’s overseas data centers. “The world is clearly becoming a ‘splinternet’ with national boundaries and domestic regulations overturning the previous ‘techno globalism’ motif,” said James Mulnevon, director of intelligence integration at SOS International. 

Music Makers
Audius, a streaming service that connects music fans directly with artists, has raised $3.1 million in a strategic round co-led by Multicoin Capital and Blockchange Ventures, with participation from Pantera Capital and Coinbase Ventures. Audius has now raised a total of $8.6 million as the platform prepares for prime time, having grown in less than a year to more than 250,000 monthly users and 40,000 artists. EDM artists seem to be the site’s burgeoning specialty with notables including RAC, deadmau5, Lido, 3LAU, Zeds Dead, Mr. Carmack and REZZ all signed on. The blockchain use case for music is a familiar one: the inequity and tardiness of the revenue model of streaming services like Apple Music and Spotify.

In Profit
Profitable ether addresses have grown by a hefty 132% since last July. In the last week, ether has established a foothold above $300 for the first time in 12 months. While the second-largest cryptocurrency is trading with only a relatively small price increase year-on-year, the number of profit-making or “in the money” ether addresses has more than doubled to 31.37 million from 13.5 million over that time, according to blockchain analytics firm IntoTheBlock. The numbers indicate many took advantage of the opportunity to buy ether under $300, resulting in almost 18 million more in-profit addresses.

It seems like every day or so the Bank of Japan, the nation’s central bank, is pushing forward with plans for a central bank digital currency (CBDC). 

Friday, it was reported the BoJ’s most senior economist will lead the department responsible for CBDC research and development. This department has been involved in a digital currency working group alongside five other central banks since the start of the year, and runs a task force to study CBDC implications.

This bit of news comes on the heels of another senior official who said digital currency research was a “top priority” for the central bank. 

Analysts, and members of the BoJ itself, have noted the context. China has taken the lead in CBDC development – with major retailers and ecommerce giants involved in plans to test what’s officially known as the DC/EP.

While Japan is testing a digital yen and involved in European Central Bank research to study DLT’s use in global financial infrastructure, it has no definitive plans to use it. 

Yet, a digital yen could be a welcome change for a nation whose economy draws constant comparisons to the living dead. In 2009, the Wall Street Journal said Tokyo’s efforts to bring “Japan’s dead economy” back to life created a Frankenstein monster. The concept of “zombie companies,” those that bring in only enough revenue to finance their debts, was dreamt up to describe Japanese firms. 

The BoJ has always been willing to experiment. But these attempts at resurrecting a deflationary economy have met with mixed results. Negative interest rates and the central bank’s policy of buying corporate exchange-traded funds (a novel strategy the U.S. Federal Reserve is considering) haven’t spurred growth or brought the nation out of its three decade long “lost decade.”

While a CBDC could give more granular control over monetary policy and maybe leading to further economic experiments, it likely isn’t a solution in itself. 

July Jubilee 
Bitcoin may have its best July in eight years and confirm a major bullish breakout in the process. Bitcoin is trading near $11,190 at press time, up nearly 22% this month, according to data from CryptoX’s Bitcoin Price index. The cryptocurrency now needs to hold above $11,145 till Friday’s close (in UTC time) to confirm the biggest July gain (at 22%) since 2012, when prices rallied by 40%. If bitcoin closes below $11,050, the resulting monthly gain would be less than the 21% rise seen in July 2018.

Summer Bummer?
Meanwhile, the dollar has dropped to its lowest level since May 2018 as the Federal Reserve said it plans to keep interest rates close to zero. The dollar’s trade-weighted index – a measure of its value relative to a basket of other dominant currencies – dropped to $93.04 Thursday afternoon. The last time the index traded this low was on May 15, 2018, according to TradingView.

Aave’s Wave
Aave’s lend token has rallied by 23% in the past 24 hours and is trading at $0.3440 at press time, according to data source Messari. It’s the day’s top performer among cryptocurrencies with at least $100 million market capitalization. On Wednesday, the protocol announced the Aavenomics Proposal, a plan to transition to decentralized governance by token holders, featuring a liquidity-mining rewards system similar to the one that helped drive growth recently in Compound, a rival decentralized lender.

Too Big to Fail
Jenny Leung, a blockchain and fintech attorney at Blakemore Fallon PLLC dba Ketsal, thinks social media firms have become too big to fail. During the COVID-19 crisis, the recent civil rights protests and Twitter hack, social media institutions showed that “their failure would pose a significant threat to society due to their outsized influence, size, reach, society’s co-dependence on them and ‘their power to shape the interpretation of public events,’” she writes. If Wall Street giants are systemically important financial institutions (SIFI), then firms like Twitter and Facebook have become systemically important social media institutions (SISMI).

Bonding Moment
A veteran bond strategist, George Goncalves, gives his take on why the bond market has a better read than equities on short-term and long-term macro trends.