Tag: Volcano Bonds

News: ‘Dead Man’s Switch’ streaming in US, Kazakhstan switches off the internet, volcano bonds, 6-hour rug pull 

Dead Man’s Switch: a crypto mystery, a film about failed Canadian crypto exchange QuadrigaCX, is out in the U.S. You can now stream it on the Discovery Channel. 

I’m in the film, along with fellow bitcoin skeptic David Gerard. You can read the reviews in the New York Times, the New York Post, and the Wall Street Journal. My picture is in the WSJ!  

I wrote a review of Jennifer Robertson’s book “Bitcoin Widow.” She was married to Quadriga CEO Gerald Cotten. Her book comes out Jan. 18, near the three-year anniversary of when she announced Cotten’s death to stunned investors—a month after he died! David Gerard also wrote a scathing review of the book, which you can find here. 

A new year has begun. I wrote up my crypto predictions for 2022. Like several other skeptics, I thought bitcoin would crash months ago. I still think it will crash. All the conditions are ripe for a crash. It’s just taking a little longer than we anticipated. 

Kazakhstan switched off the Internet

Amid anti-government protests, Kazakhstan—the world’s second biggest bitcoin mining hub next to the U.S.—switched off the Internet on Jan. 5. (Netblocks)

A few hours after the blackout, bitcoin saw a 12% drop in its hashrate. The incident shed light on how much bitcoin is being produced using fossil fuels. (Fortune)

Kazakhstan’s energy system has been struggling to keep up with increased crypto mining in the country, driven by the rise in bitcoin’s price and a rush of miners to its borders after China banned bitcoin mining last year. The electricity in Kazakhstan is some of the world’s dirtiest—70% coal-powered.

Countries that once welcomed crypto miners with open arms now want them gone because of the strain they put on their power networks. (Fortune)

After suffering blackouts, Kosovo recently banned crypto mining. Last month, Kosovo’s largest coal-fired plant closed due to technical issues, forcing it to import 40% of its electricity at higher prices. If it’s going to survive this energy crisis, the miners need to go. (BBC) 

Elsewhere, Iran is putting another moratorium on bitcoin mining. Argentina also recently went after bitcoin mining companies following blackouts. (La Politica Online, Spanish)

Volcano bonds

El Salvador, which adopted bitcoin as a national currency last year, is creating roughly 20 bills to serve as a legal framework to issue $1 billion bitcoin bonds, aka “volcano bonds.” 

Alejandro Zelaya, the country’s minister of finance, told El Mundo that the bills will cover regulations about issuing securities as cryptocurrency to ensure the viability of the bonds, which President Nayib Bukele originally proposed in November. (El Mundo, Spanish; Reuters)

Half of the $1 billion raised by the bond issuance will go toward buying BTC and half will be used to fund Bitcoin City, a crypto utopia at the base of a volcano. The idea is that the city will harness the geothermal power generated by the volcano for its electricity—ergo the term “volcano bonds.”  

Blockstream, the company responsible for a huge chunk of bitcoin’s code, along with iFinex—the parent company of stablecoin issuer Tether and crypto exchange Bitfinex—are partnering with El Salvador to create the volcano bonds. The bonds will be issued on Blockstream’s Liquid Network. Bitfinex will be the book runner for the bonds.  

Not only will Bukele destroy what is left of El Salvador’s economy with his insane plan, but he will attract hordes of scammers to the country. Bukele is, at this point, trading public bitcoin on his phone, and bragging about it on Twitter. David Gerard has a full update. (DG’s blog)

Binance up to its old tricks 

We learned a lot about Binance in 2021. Looks like nothing has changed.

Binance does not have a securities registration in Ontario. Yet, incredibly, after promising the Ontario Securities Commissions (OSC) that it would stop allowing Ontario residents to use its platform after Dec. 31, the crypto exchange turned around and told its users not to worry.

“As a result of ongoing and positive cooperation with Canadian regulators, there is no need for Ontario users to close their accounts by December 31, 2021,” Binance said in a letter to its users. It turned out Binance hadn’t spoken to any OSC staff at all. (Bloomberg)

Understandably, the OSC was pissed off. “This is unacceptable,” the regulator said in a statement. “Crypto asset platforms that have or will be applying for registration with securities regulators should be aware that misrepresenting their registration status raises concerns about the fitness of the firm and its principals for registration.” (OSC statement)

Binance blamed its actions on a “miscommunication.”  

In India, Binance-owned crypto exchange WazirX was busted for tax evasion. The goods and services tax authority in Mumbai says the exchange dodged paying Rs 40.5 crore ($5.4 million) in GTS.

WazirX lets you trade bitcoin in two ways: using Indian rupees or WRX, its native crypto. If a trader sells bitcoin for WRX instead of rupees, they pay lower fees. 

Binance figured it only had to pay GST on commission earned in rupees but could skip out on paying taxes on commission earned in WRX. A GST of 18% was applicable on these coins. At the end of the day, WazirX ended up handing over Rs 49.2 crore ($6.6 million), including penalties and interest. 

Zanmai Labs Pvt., which manages WazirX, told the media it was a mistake. The tax code was ambiguous. (India’s press information bureau, The Economic Times)

Samsung’s ‘groundbreaking’ new TV feature: NFT support  

You can now display your Bored Ape NFT on your 65” TV. Your guests will be so impressed. 

Samsung is offering extensive support for NFTs as part of its 2022 TV lineup—“the world’s first TV screen-based NFT explorer and marketplace aggregator, a groundbreaking platform that lets you browse, purchase, and display your favorite art—all in one place.” Basically it’s offering support for JPGs. What will technology think of next? (Press release, ArsTechnica)

The electronics maker has also opened up a metaverse store in Decentraland, an Ethereum-based virtual world, based on its flagship store in New York. (Press release, Decrypt)

The comments in the ArsTechnica coverage are gold. In response to the NFT TVs, one reader said:  

“Thank Christ. It’s really a colossal pain in the ass to display my NFTs now.

First I have to fire up Twitter and spend like 20 minutes laughing at the last guy who got scammed into transferring his token to some Nigerian prince.

Then I have to wade through the hundreds of good samaritans who are thoughtfully pasting my man’s lost ape into replies.

I have to find just the right one to save to my camera roll.

Then I have to wait like hours for my Canadian lingerie model friends to come over so we can talk about investment opportunities and that guy in Starbucks who made such a biting observation about student loan forgiveness that the whole place clapped.

Then I have to freaking cast my camera roll to the TV so that everyone there can really see and understand the rare variations in my apes. Which, really, is all I need a TV for in the first place.”

Six-hour rug pull

On Dec. 31, a new token called $YEAR was airdropped. It was set up as a “year in review” of your Ethereum transaction history. It quickly morphed into a painful lesson for investors. 

$YEAR came from a Twitter account called EtherWrapped. Users could connect their wallets and view a history of ETH and ETH NFT transactions over 2021. Then, EtherWrapped would hand out a token reward based on the user’s history. Several folks on Twitter warned that it was a honeypot.

The creator wasted no time. Six hours later, he pulled the rug on the project, draining 30 ETH from the $YEAR liquidity pool, and sending the token’s value to zero. Ladies and gentlemen, the future of finance!

Twitter user @meows.eth posted a thread explaining how the rug pull took place. (NFT Evening, Twitter)

Matt Damon is making everyone ill

Actor Matt Damon has hit peak cringe. The actor appeared in a Jan. 2 NFL Super Bowl ad—tagline “fortune favors the brave”—for Crypto.com, a crypto exchange and NFT marketplace. (Youtube)

In the ad, he struts about equating some of the greatest human accomplishments with buying shitcoins and NFTs of bored apes. His performance has sparked a backlash online. 

FT’s Jemima Kelly says “there is something grotesque about seeing a man whose net worth was recently valued at $170m shilling for a platform that is already making so much money that it can afford to spend $700m rebranding Los Angeles’ Staples Center as the Crypto.com Arena.” (FT)

Tim Draper still supports Elizabeth Holmes

A jury convicted Elizabeth Holmes of fraud on Jan. 4. As Bloomberg’s Matt Levine puts it: “Theranos raised a lot of money from investors who did not do too much due diligence, because the world was awash in money and investors got careless; that is much, much, much, much more true now, and Theranos looks a little quaint.” (NYT, Bloomberg)

Tim Draper—aka ”Bitcoin tie guy”—proves once again he is completely delusional. He is still supporting Holmes, even after she was convicted. He told Fortune: “This verdict makes me concerned that the spirit of entrepreneurship in America is in jeopardy.” (Fortune)

Unsurprisingly, Draper also supports President Bukele’s bitcoin efforts in El Salvador. “This is a great video from President @nayibbukele of El Salvador. He is a fresh face of visionary global politics speaking plainly and clearly about #bitcoin and #health at a time when most governments are flailing,” he tweeted, pointing to Bukele’s latest ad campaign. (Twitter)

Also in the news

Bitcoin is decentralized. Just 0.01% of bitcoin holders control 27% of the currency in circulation (WSJ)

Coinbase CEO Brian Armstrong spent $133 million on a Bel-Air eyesore. This is what happens when you have wads of money and no taste (WSJ)

In a last ditch effort to save “The One,” a Los Angeles real estate monstrosity he has spent over a decade creating, Nile Niami wants to launch “The One Coin.” I’m sure it is totally not a security. (LA Times)

Mozilla, the nonprofit behind the Firefox web browser, has paused accepting crypto donations following a backlash, triggered in part by a Mozilla founder Jamie Zawinski. (The Verge)

“Hi, I’m sure that whoever runs this account has no idea who I am, but I founded @mozilla and I’m here to say fuck you and fuck this. Everyone involved in the project should be witheringly ashamed of this decision to partner with planet-incinerating Ponzi grifters,” Zawinski tweeted.

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Posted on by Amy Castor 0

Crypto predictions for 2022: A bitcoin crash is coming—eventually. Regulators will kill stablecoins, soon NFTs

I wrote a prediction piece last year, wherein I spoke to several nocoiner luminaries to get their predictions for 2021. I also gave my own predictions. Were we right? Did any of our predictions hold true?

Well, yes, we were spot on. All our predictions were 100% correct!

We predicted 2021 would be a year of comedy gold. It was! Where to begin? El Salvador adopted bitcoin as a national currency. You can’t get any dumber than that—or maybe you can. How about Bitcoin Volcano bonds? Or Elon Musk sending the bitcoin price falling when he tweeted a broken heart emoji?

Several of us also predicted bitcoin would collapse in value. Bitcoin has not suffered a stupendous crash yet, but the conditions are ripe for a crash—loose regulatory oversight and a lack of real dollars in the system. It’s just taking a little longer than we thought. 

Bitcoin started 2021 at $32,000. It went on to set a new record high of $69,000 in November 2021. It’s now below $50,000—already a 30% drop in price. The higher it goes, the farther it has to fall. The question is not if crypto will plunge, but when.  

Nicholas Weaver, a researcher at the International Computer Science Institute in Berkeley, who has been following Bitcoin since 2012, told me he expected the crypto markets to collapse six months ago. 

“I’m surprised the [bitcoin] mining hasn’t collapsed yet, but I think it’s being propped up by mining companies HODLing and going into debt on power bills.” Bitcoin miners mint 900 new bitcoins per day and they have to sell those for cash to pay their monstrous electricity bills.

Weaver added: “I think the huge hype with Crypto.com, Robinhood, and the others IS drawing in some retail suckers, just not enough.”

Robinhood, the popular stock trading app, starting shifting into crypto in 2020. In an attempt to become a household name, Singapore crypto exchange Crypto.com plastered its name on L.A.’s Staples Center. The media attention helps lure more real dollars into the crypto ecosystem.

Carol Alexander, professor of finance at Sussex University, told CNBC that she expects bitcoin to collapse to as low as $10,000 in 2022. As far as she’s concerned, bitcoin “has no fundamental value.” It’s not a real investment, just a “toy.”

To keep the game going a little bit longer, coiners will need to come up with a new way to lure dumb money into the crypto markets. How will they do this in 2022?

In 2017, initial coin offerings were the answer. In 2021, NFTs lured in the dumb money. David Gerard, author of “Attack of the 50-foot Blockchain,” predicts “there will be some attempt to invent a new form of crypto magic bean that’s more blitheringly stupid than NFTs, but I’m at a loss as to what it could be.”

Changing tides

Jorge Stolfi, a computer science professor at the State University of Campinas in Brazil, is reluctant to make bitcoin price predictions but he thinks change is definitely in the air. “If 2022 doesn’t see a massive crash plus regulations, enforcement, etc then I will be really shocked,” he said in a private chat. 

Stolfi pointed out that critics are less restrained now. In the past, they would tell you to “be careful.” Now they are outright calling bitcoin a Ponzi. Headlines tell the story. A recent opinion piece in the FT carried the headline: “Why bitcoin is worse than a Madoff-style Ponzi scheme.” On CNBC: “‘Black Swan’ author calls bitcoin a ‘gimmick’ and a ‘game,’ says it resembles a Ponzi scheme.” And a June 2021 headline in Vice read: “President of the Minneapolis Federal Reserve Called DOGE a Ponzi Scheme.”

Stablecoins

Stablecoins spun completely out of control in 2021. The supply grew 388%, driven by decentralized finance (DeFi) and derivative trading, according to research by The Block. 

In early 2021, there were 21 billion tethers sloshing around in the crypto markets. Twelve months later, that number quadrupled to 78 billion. Tether is now shamelessly moving tethers in 1 billion and 2 billion batches. And where are Tether’s two remaining principles—CEO Jean-Louis van der Velde and CFO Giancarlo Devasini? Nowhere to be seen is where. They disappeared from the public eye long ago. I suspect we won’t see them again until the U.S. DOJ catches up to them. 

Growth in the second most popular stablecoin was even more staggering in 2021. Circle’s USDC went from 4 billion to 42 billion. In July 2021, Circle shocked everyone when it announced plans to go public via a SPAC, thereby sidestepping the financial scrutiny of an IPO.

We haven’t heard any news on that SPAC since, even though the merger was supposed to close in Q4 2021. My guess is the heat is excessive.

Both Tether and Circle claim that their stablecoins are fully backed by reserves, but the big question is — how carefully are these reserves audited? Some of those reserve assets, like commercial paper, are riskier to convert to cash. Regulators are worried that stablecoins could fuel digital-era “bank runs” if a large number of investors rush to redeem them.

The Biden administration said in 2021 that it wants to regulate stablecoin issuers the same way as banks. SEC Commission Chairman Gary Gensler likened stablecoins to “poker chips at the casino.”

I predict stablecoin companies will continue to feel the pressure from regulators in 2022, and eventually, it will become impossible for them to stay in business. They are becoming too big of a risk.

NFTs — another regulatory loophole to be closed

In 2021, NFTs became dinner table talk after a Beeple piece sold for $69.3 million in crypto at a Christie’s auction. It turned out, the person behind the sale was the former operator of a shady cryptocurrency exchange in Canada, who partnered with Beeple on plans to fractionalize the NFT with a B20 token. He actually gave Beeple 2% of the B20 supply and kept 60% for himself.

Out of seemingly nowhere, NFTs have now become a $40 billion market.  

The initial coin offering market was huge in 2017, until regulators gave fair warning that most ICO tokens were unregistered securities. I predict the regulatory noose will tighten on the NFT market as well. Regulators are already warning that fractionalized NFTs resemble illegal securities. 

If NFT marketplaces are deemed art dealers, they could fall under the bank secrecy act, which means platforms will have to ID their customers and submit suspicious activity reports to the government. 

In short, 2022 will be a year that regulations put a stranglehold on crypto. Until then, expect more comedy gold and corruption in El Salvador, where President Nayib Bukele is now trading bitcoin on his phone and tweeting about it.

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Posted on by Amy Castor 0