Blockchain Bites: Hashrates Drop, Bitcoiners Hodl and an Open Letter to Bankers

Floods are dampening bitcoin mining hashrates, Ethereum Classic may be thrown off its most popular exchange and bitcoin is moving off exchanges.

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Flooded network
Major Chinese bitcoin mining pools are each seeing daily hashrate drops of between 10% and 20% following continuous rainstorms in Sichuan. China’s southwestern Sichuan province, estimated to have over 50% of the Bitcoin network’s total computing power, has been hit by heavy rainstorms since last week. Data from BTC.com shows the world’s top four bitcoin mining pools – PoolIn, F2Pool, BTC.com and Antpool, all based in China – have each seen their hashrates drop between 10% and 20% over the last 24 hours. 

Exchanging patterns
Bitcoin exchange reserves have fallen to a 21-month low. Data shows the number of bitcoins held in exchange addresses fell by 0.83% to 2,610,278 BTC on Monday – the lowest level since Nov. 24, 2018. Some view this an indicator investors feel is bullish about the market. Investors tend to move digital assets from their wallets onto exchanges when they lose confidence in the current price movement, as happened during the Black Thursday sell-off, when bitcoin crashed by 40% and exchange balances surged by 2%. Bitcoin is now riding a 13-month high.

Is ETC OK?
OKEx, the exchange with the highest trading volume of ethereum classic (ETC), is considering delisting the cryptocurrency after two recent 51% attacks drained $5.6 million from its coiffures. “Given ETC’s popularity and standing, we are not rushing into delisting… We also do not want to foot the bill for ETC’s security vulnerabilities that have made it particularly susceptible to attack(s),” said Jay Hao, chief executive of the exchange. It’s assumed the hacker used OKEx during the attacks because of its ETC liquidity. The exchange has since increased confirmation times for ETC trades.

Chipping away
Investors suing chipmaker giant Nvidia for allegedly misreporting the size of its crypto mining-related revenue have complained the company is now trying to block key evidence from a former employee. The lawsuit, begun in 2018, alleges Nvidia downplayed the quantity of graphics cards sold to crypto miners. Shareholders have now told the court Nvidia’s lawyers had gotten the former marketing executive to “disavow” several key statements. Plaintiffs allege the former employee has retracted the testimony out of fear of retaliation.  

Crypto trusts
Grayscale Investments’ Bitcoin Cash Trust (BCHG) and Litecoin Trust (LTCN) crypto products are set to begin trading publicly on over-the-counter markets after receiving DTC eligibility Monday. The twin funds provide institutional and retail investors exposure to their namesake cryptocurrencies: bitcoin cash ($5.8 billion market cap) and litecoin ($4.3 billion market cap). The crypto trusts serve as a gateway for investors who lack the technical know-how or risk tolerance to hold coins themselves. (Grayscale is a subsidiary of Digital Currency Group, CryptoX’s parent firm.)

Last week, the Financial Times reported the coronavirus is driving bond trading digital. 

According to JPMorgan Chase’s Treasury trading desk, only 50% of pre-pandemic U.S. Treasury trades were carried out electronically. The figure has since increased to 70% in April and 77% in June. The trend is likely to continue, says JPMorgan. 

In times past, trades would be executed by “picking up the phone to negotiate with a human trader” or standing on the trading floor, the FT reports. This is no longer feasible due to hygienic concerns. 

Apart from cultural impediments, the bond market is resistant to digitization due to its sheer size. “In fact, there are only 43,000 stocks in the world, but there are millions of bonds, each with [its] own legal and financial idiosyncrasies,” the FT reported in 2018. 

But is a human touch necessary to make sense of trading debts? 

One of blockchain’s aims is to provide a sound foundation for the digital economy. To create unique and persistent digital representations of any asset or debt.

While still in its infancy, the blockchain bond industry has seen early success. Governments, nonprofits and corporations have all had successful trials or issuances using a blockchain. Most recently, Thailand’s Ministry of Finance announced plans to issue $6 million in debt.

Peaked?
Bitcoin (BTC) was flat after jumping on Monday to a new 2020 high above $12,400. Analysts are speculating whether the largest cryptocurrency can hold the higher ground. The latest move up came on high volume, and it was a “convincing break,” Denis Vinokourov, head of research for the crypto prime broker BeQuant, told CryptoX. Monday’s high was just 11% off the 2019 peak of $13,880. This insight came from First Mover. You can subscribe here. 

Second sleuth
Elliptic has added Binance Chain and its native payments token BNB to its monitoring platform, becoming only the second blockchain analysis company to do so. Starting Tuesday, Elliptic’s automated compliance, wallet monitoring and transaction tracing tools can all tap into Binance Chain activity. Binance executives said compliance is key to BNB adoption.  The SEC inked a deal with competing firm CipherTrace in July, specifically for its BNB tracing ability.

Dear banker
Ouriel Ohayon, CEO and co-founder of ZenGo, penned an open letter to all bankers urging them to experiment with crypto, professionally and personally. Crypto won’t supplant banks, but banks cannot survive the path they are on. “No one is asking you to change everything overnight. Just start somewhere, learn continuously, explore the rabbit hole, do some pilots. Start with more familiar territories like custodial exchanges and U.S. dollar-backed stablecoins, which are in high demand everywhere,” he writes.

Inflated narratives?
Nathaniel Whittemore takes a look at the macroeconomic environment to discuss the countervailing forces affecting inflation in the latest edition of The Breakdown.