Blockchain Bites: Bitcoin at $15K, $1B Silk Road Bust

Bitcoin’s price keeps climbing amid election uncertainty. A Russia power provider looks to crypto mining. Coinbase eyes Japan.

AccessTimeIconNov 5, 2020 at 5:55 p.m. UTC
Updated Sep 14, 2021 at 10:27 a.m. UTC
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Bitcoin’s price keeps climbing amid election uncertainty. Wasabi Wallet will offer automatic, privacy-preserving CoinJoins in its coming upgrade. A major Russian power provider is entering into a bitcoin mining joint venture.

Top shelf

$1B BTC forfeiture
The U.S. government is suing for the forfeiture of thousands of bitcoins, totaling more than $1 billion, that it seized on Tuesday. These bitcoins are said by the U.S. Department of Justice to be connected with the Silk Road marketplace. The address holding the bitcoins has been dormant since 2015, when the coins were transferred to now defunct crypto exchange BTC-e. According to Bloomberg, authorities seized the funds from an unknown hacker who had gained access to the address. The BTC are now likely to be auctioned, reintroducing them to the market supply. Near equivalent amounts of bitcoin gold, bitcoin sv and bitcoin cash were also recovered from the address.

Reddit user "ProudBitcoiner" accidentally paid 23.5172 ETH (approximately $9,400) fee on a $120 transaction, the person disclosed in a post. The costly mistake occurred while manually entering a “Gas Price” while executing a swap on the DeFi liquidity protocol Uniswap rather than a “Gas Limit.” Mining pool Ethermine processed the transaction and collected the windfall fee, which was way higher than the current average of 0.0022 ETH ($1.07), though ProudBitcoiner has contacted the miner for assistance in potentially recovering the fee.

Mining co-venture
One of the largest aluminum and power producers in the world will begin crypto mining through a joint venture with BitRiver, which already owns the largest mining venue in Russia and is looking to expand. En+, whose largest shareholder is Russian billionaire oligarch Oleg Deripaska, owns four major hydropower plants in Siberia that produce about 7% of the country’s electricity. The joint venture (an 80/20 split between En+ and BitRiver) will offer 10 megawatts of power for miners to host ASICs, with the potential to expand to 40 megawatts. En+ was sanctioned by the U.S. in 2018, though these prohibitions have since been lifted.

Exchange expansion
Coinbase is hiring in Japan, with renewed plans to launch. While the U.S.-based exchange has not received a mandatory operating license from Japan’s Financial Services Agency (FSA), in March it became a second-class member of the Japan Virtual Currency Exchange Association, a self-regulatory organization approved by the regulator. IT, data, finance and accounting, legal, marketing and communications, customer experience, and international expansion roles are currently open. CoinDesk’s Sebastian Sinclair reports Coinbase has had plans to expand into Japan since 2016.

Privacy preservation
Wasabi Wallet is looking to overhaul its privacy-focused bitcoin software wallet with user-centric design and privacy improvements including automatic, default CoinJoins. (A CoinJoin is a method of mixing BTC transactions from multiple users to better conceal identities). Separately, Blockstream engineers will roll out improvements to bitcoin multi-signature transactions, with privacy benefits. The “MuSig2” design builds on previous multi-signature schemes – a way to authorize transactions using more than one private key – while reducing the technical complexity and amount of communication between parties to operate.

Quick bites

  • FTX is considering a derivatives market for beacon chain ether as Ethereum 2.0’s deposit contract gains its footing. (CoinDesk)
  • Jim Epstein, executive editor of ReasonTV podcasts, joins NLW to discuss the history of the cypherpunks. (The Breakdown/CoinDesk)
  • Binance Uganda is shutting down, following the fate of its Jersey operation. (Decrypt)
  • Lightning operators are bracing for a bitcoin bull run. (CoinDesk)
  • Porsche turns to Circularise’s blockchain to track plastics used in its vehicles. (Modern Consensus)

Market intel

Bitcoin’s stimulus
Bitcoin crossed $15,000, the first time since January 2018. The cryptocurrency is now up 7.8% over the past 24 hours and over 108% on a year-to-date basis, with little sign of slowing. CoinDesk’s Omkar Godbole notes this recent rally is represents a ~40% climb in the last four weeks alone. Buoyed by an imminent sense of monetary stimulus, indeterminate of who wins the U.S. presidential election, analysts predict this rise to continue. "We may not know what a post-election [fiscal] stimulus may look like, but investors continue to believe that the [Federal Reserve] will keep printing money at a pace that favors bitcoins finite supply," John Kramer, a trader at crypto liquidity provider GSR, told CoinDesk.

At stake

Anyone's bet
Prediction markets are still buzzing with activity amid the uncertainty of the current U.S. presidential election process. Yesterday, decentralized predictions platform Polymarket became the fourth-highest fee-generating blockchain project, according to Cryptofees, only behind Bitcoin, Ethereum and DeFi protocol Uniswap.

Currently, perhaps obviously, the largest pool on Polymarket is “Will Trump win the 2020 U.S. presidential election?,” with nearly $8.8 million in trading volume. While predictions flipped in President Donald Trump’s favor on the first night of ballot counting, most bettors now see former Vice President Joseph Biden as favored to win.

“I think us being top 4 of fee-generating blockchain apps, literally anything blockchain-related, is insanity,” Shayne Coplan, Polymarket CEO, told CoinDesk’s Sebastian Sinclair. “Just in this election cycle alone, we have seen our volume surpass $10 million which is a lot higher than we expected in such a short time frame.”

Of course, prediction markets are not the only way for people to take bets out on election results. It’s likely most markets are, in some way, processing the current moment of anxiety and uncertainty.

For instance, trading in Chicago Mercantile Exchange (CME) bitcoin futures during the U.S. election has spiked 75% above the 2020 average. The CME is routinely one of the largest, and most institutionally-driven crypto options exchanges. Average daily open positions, which allow traders the option to buy bitcoin between a specified period, was up 20% in just the first two days in November compared to October.

Making sense of bitcoin’s current three-year high, Bill Noble, chief technical analyst at Token Metrics, said that no matter the electoral outcome, monetary stimulus is to be expected. This strengthens one of bitcoin’s core narratives (the things people believe about the oldest cryptocurrency) as a hedge against inflation.

“If there is social disorder because of a Trump win, the Fed prints. If the election result is a blue wave and taxes rise, the dollar falls because the Fed prints more, and more and more," Noble said.

Going back to predictions markets: Anthony Sassano wrote, “I’ve long thought that one of the major reasons prediction markets hadn’t taken off yet was due to little to no interesting markets being available to bet on.”

That’s not to say predictions markets are any better or worse than traditional ways of measuring risk. Cami Russo’s The Defiant publication said Ethereum prediction markets are the “best or worst answer” to uncertainty, while Decrypt found FTX’s platform largely mirrors FiveThirtyEight's model.

With election headlines currently dominating the discourse, the stakes are high and the bets are on.

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