Blockchain Bites: Bitcoin's Rich List, Coinbase's Latest Acquisition

Ripple tried to settle with the SEC before the watchdog’s XRP-related lawsuit. The “bitcoin rich list” has more names than ever. Grayscale reports an uptick in interest from pension funds and Coinbase makes an acquisition to beef up its institutional bitcoin offerings. It has been a huge news day, so buckle up.

Top shelf

Frontrunning action
Ripple tried to settle charges of conducting $1.3 billion worth of unregistered securities transactions when selling XRP to exchanges and the public, before the U.S. Securities and Exchange Commission (SEC) sued in December, CEO Brad Garlinghouse said Wednesday. In a Twitter thread, Garlinghouse addressed what he described as five “key questions” about the SEC’s argument, though he warned that he was limited in what he could say because the case is ongoing. Several exchanges have moved to delist or stop XRP trading.

Pensions or bust
Grayscale is reporting increased “participation” in its flagship bitcoin and crypto investment products from institutions, pensions and endowments, not just hedge funds. Newly named CEO Michael Sonnenshein told Bloomberg, “The sizes of allocations they are making are growing rapidly as well,” with some $27.5 billion in total assets under management. (Grayscale, like CoinDesk, is owned by Digital Currency Group.)

Rich list grows
The number of addresses holding over 1,000 bitcoin stands at a record high of 2,334, indicating that large bitcoin holders have been accumulating bitcoin during the market run-up. This comes after a brief depression in the total number of bitcoin “whales” in December. “The dip and renewed increase at the end of December shows relatively little interest in profit-taking on the part of these large holders, even though almost all holdings are currently in profit,” according to CoinDesk Research’s quarterly review report.

First acquisition of the year
Coinbase has acquired trade execution startup Routefire to bolster the exchange’s suite of institutional products ahead of a planned IPO. The terms of the deal were not disclosed, though Routefire was a small, seven-employee firm based in San Francisco. Coinbase has experienced intermittent outages during the run-up in bitcoin’s price above $40,000.

Going public?
Cryptocurrency exchange Bakkt, which is majority-owned by Intercontinental Exchange, is in advanced talks to go public via a merger with a special purpose acquisition company (SPAC), Bloomberg reported, citing people with knowledge of the matter. The deal, if it’s concluded, would value the combined company at more than $2 billion, the report said. A deal could be announced as soon as next week.

Quick bites

  • 1,981 BTC: Finland will auction bitcoin from 2016 enforcement actions. (CoinDesk)
  • > 65,000: FinCEN logged well over 65,000 submissions related to its proposed “unhosted” wallet rule during its abnormally short, and potentially illegal, public comment period. (CoinDesk)
  • AMENDED COMPLAINT: A senior district judge in Utah has acknowledged he made a “mistake” when granting Overstock’s motion to dismiss a lawsuit over its digital dividend issued in 2019. (CoinDesk)
  • WHITE-KNUCKLE RALLY: Did bitcoin just experience its best week since 2017? (Bloomberg)
  • DOWN TURN: Economy sees job loss in December for the first time in eight months as surging coronavirus takes toll. (CNBC)
  • BTC’S BIGGEST FANS are hedge fund baby boomers (Bloomberg Opinion)
  • MICRO STRATEGY? Read the company’s 2020 Shareholder letter. (Blog)

Market intel

What Joe Biden’s $3 trillion stimulus package means for bitcoin
President-elect Joe Biden is reportedly considering a two-pronged stimulus effort in the form of $2,000 checks for Americans and a tax and infrastructure spending package worth $3 trillion, the first sign of what many market analysts predict will be a tide of fiscal stimulus under a new U.S. presidential administration. With increased spending, comes increased inflation projections – which many crypto insiders see as a boon for bitcoin’s programmatic, deflationary attributes.

If the 2020 Q1 was the quarter of market turmoil, Q2 the bitcoin halving and Q3 the explosion of stablecoins and decentralized finance applications, Q4 was the quarter of institutional FOMO for bitcoin and of Ethereum launching the first phase of its ambitious migration to a proof-of-stake (PoS) blockchain. The latest CoinDesk Quarterly Review looks at the performance of bitcoin and ether compared to macro assets and other crypto assets, and at their progress, milestones and value drivers over the past three months. Download the free report.

At stake

Yesterday, Facebook made the unprecedented decision to ban a sitting president, Donald Trump, from its services for his role in inciting the revolt that damaged the U.S. Capitol. Facebook and other social media firms have had four years to discuss how to balance publishing information in the public interest (because President Trump said it) when much of it is not factual.

Streaming service Twitch, e-commerce platform Shopify and others also banned the president, at least until he leaves office on Jan. 20. The president’s Twitter feed, meanwhile, was suspended for 12 hours, Jan. 6-7.

Many opponents have long called for Trump to be booted from his online bully pulpits, where he often commands a large audience (88.7 million people follow @realDonaldTrump, his personal Twitter account). Explaining the decision, Facebook CEO Mark Zuckerberg said the “current context is now fundamentally different, involving use of our platform to incite violent insurrection against a democratically elected government.”

Some in the crypto world see it differently.

“I think what is happening right now is absolutely ridiculous. One big circus show setting us up for the last act – total control of our thoughts and actions. Twitter and Facebook are mass scams. No matter what your political view, the amount of heavy-handed censorship is, let’s say, suspicious,” Josh Petty, founder and CEO of the alternative social media site Twetch, told Blockchain Bites over email.

It’s old hat to call crypto a libertarian insurrectionary movement, though there are some key areas where the two ideologies align – primarily in championing individualism and all the “classically liberal” rights associated with that. This means freedom of ownership, freedom of speech and freedom to “exit” from the crowd.

Instead of erecting laws to protect these freedoms, blockchains create cryptographic proofs to ensure certain conditions are always met. These are monetary assurances – like Bitcoin’s hard-capped supply, Ethereum’s infinite programmability or Solana’s blitzkrieg settlement speed – as well as cultural, like the idea that finance and speech should be uncensorable.

“People really value censorship resistance, both for themselves and others, to the degree where it can seem irrational to bystanders,” pseudonymous crypto researcher Hasu wrote in November, in a blog post titled, “Exploring Bitcoin’s core values and why we defend them.”

Blockchains, by connecting people directly, can assure certain freedoms that are often occluded when intermediaries get involved. If you believe that everyone has the right to a platform online, then you’d probably disagree with Facebook’s decision to ban Trump – regardless of the circumstances.

“Social media companies have no direct role in a democracy,” Petty said. “Social media companies, despite using the word ‘social’ to describe them, are private enterprises serving customers and their self-interests.”

Indeed, these bans could be seen as fatuous branding exercises. Trump has less than two weeks in office before a new president is sworn in, and many prominent figures in Congress and elsewhere are calling for his immediate removal.

While the hardline, anti-censorship approach has neat answers for complicated questions, in practice it often runs into just as many sticky situations.

Today, following news reports and a Southern Poverty Law Center (SPLC) investigation that found “white supremacists and neo-fascists” are using the streaming platform DLive, owned by Justin Sun’s Tron, the blockchain-based platform will take steps to suspend and ban streamers found in violation of its community rules.

“The DLive team actively are taking actions regarding streamers who are found to be part of or participants in the incident at the Capitol Building in Washington, D.C., on [Jan. 6] including but not limited to account suspension, removal of past broadcasts, freezing their earnings and abilities to cash out. The donation and paid subscriptions will be refunded to the accounts from which they originated,” a DLive press release reads.

Then again, DLive’s primary selling point was not censorship resistance but its rewards program.

Who won #CryptoTwitter?

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