On-chain data shows two dramatic declines in the Bitcoin reserves held by a Canadian Bitcoin fund but there's a catch.
A Canada-based Bitcoin fund, operated by 3iQ Corp, has witnessed a dramatic decline in its BTC reserves since June.
Literally named the Bitcoin Fund (QBTC:CN), the closed-end investment product, was holding around 24,000 BTC in its vaults in early June. However, as the monthly session progressed, the reserves first dropped to below 16,000 BTC in a dramatic, straight-line decline.
Later, another massive withdrawal pushed the Bitcoin Fund's BTC reserves to around 13,000 BTC, according to on-chain data from South Korea-based analytics firm CryptoQuant.
However, the withdrawals from the QBTC fund across June coincided with an inflow spike in 3iQ's exchange-traded fund (ETF), called 3iQ CoinShares Bitcoin ETF (BTCQ). In detail, the Canadian ETF attracted inflows of 2,088 BTC in June 2021 against the QBTC outflows of 10,432 BTC in the same month.
ByteTree CIO, Charlie Morris, noted that 3iQ allowed its clients to convert their QBTC units into 3iQ CoinShares Bitcoin ETF. He added that the growth of crypto ETFs across major stock exchanges—which allows redemptions and withdrawals—prompted investors to reduce their exposure in the closed-ended fund.
A lesser Bitcoin exposure, nonetheless
In comparison, 3iQ's top rival, the New York-based Grayscale Bitcoin Trust (GBTC), did not witness declines in its BTC reserves. Grayscale Investments has closed GBTC since February, citing "administrative purposes." The closed-end fund does not allow redemptions and withdrawals.
Additionally, data collected by ByteTree Asset Management shows that the 90-day inflow into the United States and Canada-based Bitcoin funds has dropped to 12,794 BTC compared to 191,846 BTC in January 2021, a 93.3% decline.
The 3iQ CoinShares Bitcoin ETF (BTCQ), despite attracting 2,088 BTC in June 2021, has so far experienced outflows of 354 BTC in July 2021.
Fund reserves reflect rising and declining institutional interest in Bitcoin. That is primarily because these investment products tend to work provide accredited investors ways to gain indirect exposure to crypto markets by issuing shares backed by real Bitcoin sitting in vaults.
Thus, as the Bitcoin reserves on average drop across the funds, it typically suggests a lower demand for cryptocurrencies among institutional investors.
The Fed angle
Institutional investors reducing their exposure in the Bitcoin funds coincide with the Federal Reserve's hawkish signals at the end of June's Federal Open Market Committee's meeting.
In detail, the U.S. central bank said mid-June that it could hike interest rates by the end of 2023 to contain prevailing inflationary pressures. It referred to the US consumer price index (CPI), a gauge to measure inflation, that surged 0.6% in May 2021 to reach a three-decade high of 4.5%; CPI climbed another 0.9% in June to reach 5.4% at its fastest pace in the last 13 years.
Since the Fed's outlook, Bitcoin has dropped below $32,000. However, the flagship cryptocurrency has mostly remained inside the $30,000-34,000 price range, suggesting a mixed outlook among retail and institutional investors about the cryptocurrency's next directional bias.
The bias conflict emerges despite popular narratives that pose Bitcoin as an ultimate edge against rising consumer prices. The record goes like this: Unlike the U.S. dollar or other fiat currencies, Bitcoin comes with a limited supply of 21 million tokens, which makes it scarcer than inflationary currencies, and in turn, more valuable in the long run.
But Bitcoin has reacted negatively to rising inflation in the previous months, prompting critics to question its safe-haven narrative, at least in the short term. For instance, Fortune covered a special section on Bitcoin's erratic response to surging consumer prices, stating that the cryptocurrency is now marching "to its own drummer."
Eric Diton, president and managing director of The Wealth Alliance, noted that Bitcoin had become an overvalued asset after rising from below $4,000 to a record $65,000 in almost a year. However, based on how far the cryptocurrency has come, its prices have to correct before continuing higher.
Nevertheless, a Bank of America survey of fund managers also found "long Bitcoin" among their most crowded trades, alongside long ESG and long commodities.
As Cointelegraph reported, traders are now closely watching the last major unlock dates over the next few days and weeks due to their potential impact on the cryptocurrency market.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The grants program will be distributed to developers over the next 12 months via 1INCH tokens.
1inch Foundation, the non-profit organization of the 1inch decentralized exchange aggregator, has earmarked $3 million to fund new protocol upgrades as part of a grants program targeting developers.
Over the next 12 months, 1inch Foundation will disburse grants for projects in the following categories: network development, community development and research and analytics.
The network development category targets aggregation products, automated market makers, wallets, layer-2 protocols and integrations involving the 1inch API.
For community development, eligible projects include educational materials, local meetups and hackathons.
In the research and analytics category, 1inch Foundation is looking to fund projects around data analytics and research.
Projects that have recently started in decentralized finance, or DeFi, and have no prior funding history are eligible to apply, 1inch Foundation said. After submitting an application, eligible applicants will be invited for an interview to determine grant potential. Winners will receive a formal grant offer and begin the onboarding process.
1inch Foundation also announced that it has awarded its first grant of 100,000 1INCH tokens to DeNet, a decentralized storage and hosting platform.
“DeNet's concept is based on utilizing unused disk space on personal computers for storing and hosting dApps,” the Foundation explained.
The 1inch Network officially launched in April of this year, though the project has been on crypto watchers’ radar for much longer, having burst onto the scene during an ETHGlobal New York hackathon in May 2019. As Cointelegraph reported, 1inch launched its mobile application on Apple iOS in April. More recently, the protocol revealed a new stablecoin pegged to the U.S. dollar.
A failure to retain $31,000 would mean that $29,000 and then $24,000 are on the menu, says Michaël van de Poppe.
Bitcoin (BTC) dropped to its "final support zone" above $31,000 on July 15 as a low grind downward brought fresh predictions of a BTC price crash.
Binance debacle spreads as $32,000 falls
The pair had made little progress overnight, falling further as Italian lawmakers said that major exchange Binance was unauthorized to trade in their jurisdiction.
The latest in a series of setbacks for the exchange, a spokesperson nonetheless told the mainstream media that its operations were unaffected by the announcement.
"We take a collaborative approach in working with regulators and we take our compliance obligations very seriously," the spokesperson commented, quoted by Reuters.
As such, there remained little cause for optimism among spot traders. For popular trader Michaël van de Poppe, $31,000 represented Bitcoin's last hope of avoiding a more series dip.
"Bitcoin didn't hold the $32.4K level as support and dipped lower, through which it's facing the final support zone to hold (the $31-31.5K region)," he summarized earlier on the day.
The price headache is being exacerbated by a conspicuous lack of interest among investors, with low volumes meaning a sustained bullish uptick is unlikely.
As data from on-chain monitoring resource Glassnode revealed, however, it may be a seasonal, rather than an emotional phenomenon.
"Investors aren't selling, they are simply on holiday," co-founders Yann Allemann and Jan Happel argued, pointing to a significant reduction in exchange transaction fees.
As Cointelegraph reported, further data shows that accumulation is underway even by investors who sold when BTC/USD hit $30,000 on the way to current all-time highs.
U.K. financial regulators have announced an 11 million pound digital marketing war chest to warn people about the dangers of crypto investments.
The United Kingdom’s Financial Conduct Authority (FCA) created an 11 million pound ($15.2 million) digital marketing campaign to warn citizens about the risks associated with crypto investments.
Nikhil Rathi, chief executive of the FCA, made this known in a draft speech for the agency’s webinar titled “Our Role and Business Plan” delivered on Thursday.
Detailing the FCA’s decision to create the campaign fund, Rathi stated that the U.K. regulator is concerned about the increasing adoption of crypto investment among the younger demographic.
According to Rathi, “more people are seeing investment as entertainment” and that such irrational behavior may lead to significant losses on their part:
“This is a category of consumer that we are not used to engaging with: 18 to 30-year-olds more likely to be drawn in by social media. That’s why we are creating an £11m digital marketing campaign to warn them of the risks.”
According to Rathi, the risks involved in crypto investments are “stark,” with the FCA boss restating the agency’s popular refrain that people should be “prepared to lose all their money” if they invest in cryptocurrencies.
The FCA’s digital marketing campaign is coming on the heels of actions taken by the U.K.’s Advertising Standards Authority against crypto ads that are deemed “misleading and socially irresponsible.”
As previously reported by Cointelegraph, the U.K. ad watchdog agency ordered crypto exchange platform Luno to halt its “time to buy” Bitcoin (BTC) advert. Earlier in July, the advertising regulator announced a crackdown on cryptocurrency-related ads, which the body described as a “red alert” priority.
Apart from the crypto warning campaign, the FCA boss also stated that the agency will continue to focus on robust examinations of “financials and business models” for operators in complex markets like cryptocurrencies, especially in the area of Anti-Money Laundering (AML) compliance.
The Chinese government’s ongoing crusade against cryptocurrencies might have dramatic consequences for both domestic and global crypto traders.
Since the start of the summer, a series of measures from Chinese authorities to curb cryptocurrency trading and mining have dominated the crypto news cycle.
From urging financial service providers to throttle cryptocurrency-related transactions to ordering a crypto trading software provider shut down, the initiatives coming out of Beijing and their repercussions are widely believed to have contributed considerably to the recent market downturn.
What motivates this new round of hostile actions, and how will they affect the cryptocurrency space of the nation that had once accounted for some two-thirds of the global digital asset supply? Furthermore, it seems that whatever happens in China is having a great effect on other parts of the world, which doesn’t seem to be negative.
Propping up the digital yuan
It is not hard to notice how the intensifying clampdown on trading and mining of decentralized cryptocurrencies comes hand-in-hand with the ramping up of China’s central bank digital currency (CBDC) project. As part of the Digital Currency Electronic Payment system testing, stacks of the government-issued electronic money have already landed in the wallet apps of some 200,000 Chinese citizens selected via a lottery. It looks as if larger-scale trials and wide implementation can be expected within months.
When it comes to the distribution of political or economic power, Chinese leadership is not in the habit of promoting pluralism and competition. Up to a certain point, the nation’s sprawling cryptocurrency sector could eschew scrutiny, as it didn’t come into direct conflict with the government’s strategic plans, but this does not seem to be the case anymore.
Yu Xiong, professor of business analytics and director of the Center for Innovation and Commercialization at the University of Surrey, told Cointelegraph that China will not allow any currency to affect the renminbi, and for that reason, it can’t allow Bitcoin (BTC) to grow too big. Xiong added:
“China, like most of the other governments, would like Bitcoin value to grow at a manageable pace. If Bitcoin is allowed to be used as currency, China, [as many other countries], would face financial disaster. China now has its own CBDC, which can be controlled by the central bank, so there is no need for the government to encourage a decentralized cryptocurrency.”
With major Chinese banks such as the Agricultural Bank of China falling in line and squishing consumer and business operations related to crypto, the concerted effort looks more like a chokehold than a lack of encouragement. On the receiving end of the government’s anti-Bitcoin push, crypto businesses and everyday users are dealing with the dire consequences of the stiffening policies.
Bearing the brunt
The authorities’ all-around crusade against China’s cryptocurrency sector encompasses all major groups of stakeholders: As financial service providers are waking up to their bank accounts suspended, miners in several key provinces are receiving eviction notices. The exit of the company that operated the nation’s oldest Bitcoin exchange vividly illustrates the depth of the crisis.
Yifan He, CEO of Hong Kong-based blockchain firm Red Date Technology, opined to Cointelegraph that “the entire crypto industry in China is officially gone.” He thinks that while trading has always been in the area and mining was largely supported by some local governments, the current prohibitive turn in governmental policy will deal both types of activity a blow, from which they are unlikely to recover anytime soon:
“Once banks and payment service companies ban crypto trading completely, it will be very hard for regular people to use RMB to buy crypto. There is already a significant drop in crypto trading activities in China because all mining is gone. Regular users can no longer inject new money into trading, and almost all major exchanges have banned leverage and margin services for Chinese citizens.”
In He’s opinion, a fraction of crypto trading can still persist, yet it will have to migrate underground. This will essentially put an end to China’s BTC mining dominance, as miners will either have to shut down completely or relocate and be regulated in other jurisdictions.
The global fallout
What’s being witnessed right now appears to be nothing short of the dismantling of the entire cryptocurrency industry in the country that, until recently, was a major mining and trading powerhouse.
Most everyday Chinese traders will likely find the new rules prohibitive and cease trading activity. Mining businesses will face a choice between vanishing and opening up shop in a different jurisdiction. Those who appreciated the ease of transacting in digital assets will soon have a centralized alternative in the government-backed CBDC.
Squashing the crypto sector on such a vast scale is inevitably echoing on the global scale as well. With much of the Chinese mining capacity gone, the hash power map of the world will have to undergo a dramatic rearrangement, with new centers of mining power emerging elsewhere to fill the void. With that, not just the firms but also the regular users will be affected in the long run, as some parts of the world will start witnessing an inflow of crypto-related business, to which regulators will start responding.
It is also possible that the loss of Chinese trading activity will become a factor weighing on the global crypto market for quite some time. Building and sustaining a new bull run comparable to that of the early 2021 — a process that requires a continuous inflow of new market participants — might become more challenging, given that China is no longer able to supply the user base growth it had contributed previously. The rest of the world is going to have to try really hard to compensate for China’s departure.
A new legal initiative in Australia wants to allow DAO project governors to contract with other legal entities through DeFi tools.
Specialists and lawyers focused on decentralized finance (DeFi) are launching an initiative to create a new type of legal entity in Australia representing decentralized autonomous organizations (DAOs).
The country's Digital Law Association and global law firm Herbert Smith Freehills are lobbying an Australian Senate committee to formally recognize new decentralized models for corporate governance. These new DAO models would replace the board of directors with an internet community, the Australian Financial Review reported Thursday.
The initiative specifically intends to allow “DAO Limited” project governors to contract with other legal entities through DeFi tools, implementing blockchain technology to remove traditional intermediaries like banks and exchanges. Limited liability status will also prevent Australian members of a DAO from being liable for losses incurred by decisions made by a member of the community.
According to the lawyers, legalizing DAOs in Australia could make the country more attractive for global digital asset businesses, as groups of local DeFi entrepreneurs reportedly shift offshore to jurisdictions like Singapore and Germany.
A DAO is a decentralized organization with certain sets of rules that are encoded as a computer program and are usually based on blockchain technology. The first most important attempt to create a DAO was “The DAO,” a machine-operating venture organization launched in 2016.
The news comes as some cryptocurrency exchanges are shifting to a decentralized structure. Yesterday, ShapeShift crypto exchange announced plans to open-source its platform and dissolve its entire corporate structure in a move to underscore its commitment to DeFi. “Inspired by the broader DeFi community, we’ll now help pioneer a new model of economic coordination for the 21st century. No corporate entity, no banks and no borders. The tools are ready,” ShapeShift founder and CEO Erik Voorhees said.
One electoral commission aspirant in Kenya said that the country should consider adopting blockchain-based voting.
Justus Abonyo, former chair of Kenya’s Social Democratic Party and current candidate for commissioner of the country’s Independent Electoral and Boundaries Commission (IEBC), has called for the adoption of blockchain voting.
According to a report by Kenyan news outlet, The Star, Abonyo spoke of this while appearing before the selection committee overseeing the appointment of IEBC commissioners at the Kenyatta International Convention Centre on Thursday.
Detailing his support for blockchain voting adoption, Abonyo said such a move would have significant, cost savings benefits of up to 300%, stating:
“The cost of a ballot in Kenya ranges between $7 to $25 (700 shillings to 2,500 shillings). If we use blockchain technology, this cost will go down to ~$0.5 (50 shillings). This is an area I would explore as a commissioner.”
The IEBC commissioner aspirant also argued that adopting blockchain voting will also help to improve the transparency and security of Kenya’s elections. Abonyo’s call for adopting the novel tech also comes as the country prepares for another general election in 2022.
Kenya’s previous presidential polls back in 2017 were reportedly marred by accusations of IEBC’s electronic voting system being compromised. These claims were further given credence by the murder of the IEBC’s IT manager days before the polls.
The jury is still out on the effectiveness of blockchain voting, with MIT cybersecurity experts stating back in November 2020 that voting systems based on the novel tech carried “severe risks” to democracy.
Indeed, some recent deployments of blockchain-based voting protocols have come under performance scrutiny. In July 2020, reports emerged that the system utilized in Russia’s constitutional amendment vote back in 2020 allowed constituents and even third-party entities to decipher the ballots cast.
Meanwhile, Abonyo is not the first to offer blockchain as a panacea for ensuring security and transparency in the country. As previously reported by Cointelegraph, David Robinson, the regional anti-corruption advisor at the United Nations Office on Drugs and Crime, stated back in November 2020 that Kenyan authorities could use blockchain as a tool to fight corruption.
Cambridge research shows that China’s Bitcoin mining power fell by 40% before the crackdown, while the United States’ hash power quadrupled.
China’s crackdown on Bitcoin (BTC) mining due to energy consumption concerns is widely regarded as the trigger for the miners’ exodus from Asia to Western countries. But new research by the Cambridge Centre for Alternative Finance suggests that the shift in mining power started before China’s renewed scrutiny.
Reuters reported that China’s total computing power connected to the Bitcoin network, or hash rate, fell from 75.5% in September 2019 to 46% in April 2021, before the Asian country even officially announced the mining crackdown.
During the same 18-month period, the United States quadrupled its share of the global Bitcoin hash rate from 4% to 16.8% to become the second-largest producer of Bitcoin. Another country often named a potential destination for miners’ relocation, Kazakhstan, increased its share to 8% and became a primary Bitcoin producer.
After experiencing massive power outages in the mining hub of Xinjiang in April, Chinese authorities started investigating the energy consumption involved in Bitcoin mining. Officials announced strict supervision of mining activities due to carbon concerns, triggering the relocation of several industrial miners out of China.
Calling China’s mining ban a temporary inconvenience, iMining CEO Khurram Shroff said that the diversified location of mining facilities is great news for the rest of the world. “The Toronto Stock Exchange recently listed the world’s first Bitcoin ETF,” he exemplified, “[Canada] is already ahead of the curve in terms of mainstreaming cryptocurrencies.”
Some experts see China’s crackdown on Bitcoin mining as an easy decision. Bitmain’s EMEA partner recently told Cointelegraph that the country is required to reduce its carbon footprint to get funding from the International Monetary Fund or the World Bank, and Bitcoin mining was a convenient target to minimize energy consumption.
What seems to be a full reversal on a previously hostile Bitcoin stance is tempered by Mnuchin, who added that he still wouldn’t buy BTC himself.
Bitcoin (BTC) may be a “scam” for former United States President Donald Trump, but the former Treasury Secretary appears to have made a U-turn on the world’s first and best-known cryptocurrency.
Speaking to CNBC on Wednesday, Steven Mnuchin confirmed that his perspective on Bitcoin had “evolved.”
Mnuchin: Bitcoin stance has “evolved a little”
The Trump administration was known for its dismissive tone on Bitcoin in public, and those hoping for endorsement from Trump were ultimately left disappointed.
Mnuchin himself was less than inclined to offer support during his Treasury tenure, but his most recent comments reveal a clear softening of his stance.
“I think my view has evolved a little bit, but it is pretty consistent,” he told the network.
“The first part of it is I think the underlying technology of blockchain is really incredible and has lots of different things, particularly in fintech and finance. I think as it relates to Bitcoin — if people want to buy Bitcoin as a subsititute, no different from buying gold or some other asset — it’s fine.”
Mnuchin added that he “would not want to have” Bitcoin in is his portfolio but stressed that he was not against others adopting it.
Continuing, he expressed a desire for Bitcoin to have “complete BSA and regulatory compliance.”
“As a matter of fact, under the OCC last year, we approved that banks could custodian it, and the reason we did that is because we wanted to make sure that this was becoming in the regulated world.”
His words garnered praise from Bitcoin circles, with Saifedean Ammous, author of The Bitcoin Standard, calling the changes “nice to see.”
Bitcoin still has few political allies
Mnuchin’s perspective now sounds increasingly at odds with that of Trump’s, who last month flatly called Bitcoin a “scam” in an episode that ultimately failed to impact market sentiment.
The picture under current President Joe Biden, meanwhile, has yet to offer much to Bitcoin proponents. Treasury Secretary Janet Yellen has voiced concerns about cryptocurrency more widely, and senior politicians are at odds over how to address it.
It is not just a U.S. predicament — El Salvador passing a Bitcoin legal tender law in June drew adverse reactions from global financial bodies including the World Bank and the International Monetary Fund.
The law, which enters into effect in September, is so far without comparison anywhere in the world. Paraguay, which presented a regulatory bill on Bitcoin this week, has not revealed plans to adopt a “Bitcoin standard.”
Bitcoin’s node count has achieved another all-time high milestone with almost half of the nodes running on Tor.
The number of reachable Bitcoin network nodes has crossed the 13,000 mark for the first time. As previously reported by Cointelegraph, the previous all-time high was 11,613 achieved back in January.
According to data from Bitcoin network statistics dashboard Bitnodes.io, this milestone was reached back on July 5 when the number of reachable nodes clocked in at 13,374. At the time of writing, Bitnodes’ data puts the current network node count at about 12,835,
Coin.Dance, another tracking website, also has Bitcoin’s node count at a new all-time high of 12,825. Nodes running the Bitcoin Core software make up 98.77% of the number, with the remaining scattered across less popular implementations like Bitcore and Bitcoin Knots.
Bitcoin Core 0.21.1 was released back in May with a Taproot activation code, and at almost 5,000 nodes (according to Coin.Dance), it is currently the most utilized version of the software among entities running reachable nodes. Figures from Bitnodes put the number at 5,125, or 40% of the total network node count.
Bitnodes’ data also shows at almost half of the network node count is running on Tor. Back in January, only about a quarter of all reachable nodes were running on the hidden network Tor. Running a client like Bitcoin Core using Tor provides an additional privacy layer since the IP addresses of connecting nodes are obfuscated.
According to Bitnodes’ data, the network node count has increased by 2,739 nodes in the last year, reinforcing Bitcoin’s decentralization ethos.
The growth in the network node count is also akin to the expansion currently taking place in the Lightning Network ecosystem where capacity has gone up over 70% in less than six months.
Earlier in July, public Lightning Network capacity crossed 1,800 Bitcoin (BTC) after adding 100 BTC in less than a week. Data from Lightning Network statistics tracker Bitcoin Visuals puts the number of LN nodes at above 12,800, which is also an all-time high value.