October Review – A Quantum of Solace from the East & Top Stories of the Month

Oct 1 Tether trumps Bitcoin for the monthly reported trading volume. Reported volumes compiled by CoinMarketCap showed that the controversial stablecoin, which is being sued by The New York Attorney General's office (NYAG), had the highest trading volume for the month of September, with roughly 18% higher volume than that of Bitcoin. Tether’s volume first surpassed that of Bitcoin in late April and has managed to consistently outstrip Bitcoin's daily volume since early August.

Oct 2 US lawmakers ask the Federal Reserve to develop a digital dollar. Congressmen French Hill and Bill Foster, House Financial Services Committee members, wrote a letter to Federal Reserve Board Chairman Jerome Powell pitching the idea of taking up “the project of developing a US dollar digital currency.” The letter outlined risks to the US dollar as a reserve currency if another country or a private company were to create a widely used cryptocurrency.

Oct 3 Switzerland's principal stock exchange, SIX lists joint Bitcoin and Ethereum exchange-traded product (ETP). Swiss crypto broker Bitcoin Suisse partnered with fintech firm Amun AG to launch the product, which trades under the ticker ABBA and is weighted 90% Bitcoin and 10% Ether. SIX had already listed a Bitcoin ETF in February and six other cryptocurrency ETPs, four of which track individual prices of BTC, ETH, XRP and BCH and two others which track a select basket of five and ten cryptocurrencies.

Oct 5 PayPal withdraws from Facebook's Libra project. In a statement issued by a spokesperson, PayPal noted that despite deciding to forgo further participation in the Libra project, the company remained supportive of Facebook's efforts,

“We remain supportive of Libra’s aspirations and look forward to continued dialogue on ways to work together in the future. Facebook has been a longstanding and valued strategic partner to PayPal, and we will continue to partner with and support Facebook in various capacities.”

Oct 6 UK Financial watchdog, Financial Conduct Authority (FCA) ramps up investigations into cryptocurrency firms. The FCA was reportedly looking into 87 crypto firms either as part of initial scrutiny or full enforcement investigations, a 74% increase from 2018 when 50 firms were subject to investigations. The FCA had issued a warning back in May that there had been a three-fold rise in reports of online cryptocurrency and forex scams, resulting in an estimated £27 million ($33.2 million) in lost funds.

Oct 7 Class-action lawsuit against Bitfinex and Tether claims $1.4 Trillion in damages. Represented by Roche Freedman LLP, the US law firm which recently won a federal case against Craig Wright, the filing alleged that Bitfinex and its affiliated entities engaged in fraud and manipulation on an unprecedented scale,

“The crimes committed by Bitfinex, Tether, and their executives include Bank Fraud, Money Laundering; Monetary Transactions Derived From Specified Unlawful Activities, Operating an Unlicensed Money Transmitting Business, and Wire Fraud.”

Oct 8 United Nations Children’s agency, UNICEF establishes Cryptocurrency Fund. In a blog post on its official website, the UN announced that it would be using cryptocurrencies to fund open source technology benefiting children and young people around the world. The first contribution to the UNICEF Cryptocurrency Fund was received from the Ethereum Foundation, a total of 100 Ether which will benefit three grantees of the UNICEF Innovation Fund, a project to provide internet access to schools across the world.

Oct 9 US Internal Revenue Service (IRS) publishes its first cryptocurrency tax guidance since 2014. The new guidance notice addressed tax liabilities created by cryptocurrency forks, acceptable methods for valuing cryptocurrency received as income and calculating taxable gains when selling cryptocurrencies. Addressing the long-standing issue of forks, the guidance noted that forked currencies should be treated as “an ordinary income equal to the fair market value of the new cryptocurrency when it is received.”

Oct 11 Russia's central bank sees no compelling reason for a national digital currency. Chairwoman of the Bank of Russia, Elvira Nabiullina revealed that the possibility of a central bank digital currency (CBDC) was explored but reasons for the technology were not strong enough to override potential risks, “It is difficult to really estimate what advantages the national digital currency will give, for example, in comparison with existing electronic non-cash payments. There are many risks, and the advantages may not be obvious enough.”

Oct 14 Following PayPal, Visa, MasterCard, eBay, and Stripe quit the Libra Association on the eve of the inaugural Libra meeting. The exodus came after Democratic senators Brian Schatz of Hawaii and Sherrod Brown of Ohio sent letters to the companies warning of increased regulatory scrutiny of their businesses should they persist with the Libra project. Despite the desertions, the remaining members of the Libra association proceeded with the first official meeting in Geneva, where the group drafted a charter and appointed its board of directors.

Oct 15 The Oxford English Dictionary (OED) announces the addition of the word “satoshi” as the smallest monetary unit in Bitcoin. Revealed in a blog update on the official website of the principal dictionary of the English language, the entry defined satoshi as “The smallest monetary unit in the Bitcoin digital payment system, equal to one hundred millionth of a bitcoin.” The earliest citation of the word is dated to be from 2012 in a Usenet newsgroup message regarding the implementation of colored coins.

Oct 16 United States Commodity Futures Trading Commission (CFTC) files a lawsuit against Circle Society. A civil enforcement action was brought against the Nevada-based HYIP scheme and its owner David Gilbert Saffron for fraudulent solicitation, misappropriation, and registration violations relating to an $11 million binary options scheme. Saffron was alleged to have guaranteed up to 300% returns and retained investor funds in his personal wallet, using them to pay new participants in the manner of a Ponzi scheme.

Oct 17 Bitcoin helps law enforcement track down child porn offenders. Using data from blockchain research firm Chainalysis, law enforcement officials from the US, UK and Korea were able to uncover and indict 23-year-old Jong-Woo Son of South Korea for operating a child sexual abuse site called Welcome To Video. Son had already been arrested and convicted in South Korea on separate charges related to child sex abuse. 337 of the site's users from the US and eleven other countries were also arrested and charged.

Oct 19 HTC unveils an entry-level successor to Exodus 1 blockchain phone. Taiwanese electronics giant HTC released Exodus 1s blockchain phone which, besides housing, a hardware wallet similar to its predecessor, is also capable of functioning as a Bitcoin full node. The ability to run a full bitcoin node will allow for additional privacy and control over funds. HTC decentralized chief officer Phil Chen said the encouraging response to Exodus 1 inspired the launch of a more affordable successor.

Oct 22 Opera web browser adds Bitcoin payments to its Android app. The new functionality allows Opera for android users to make payments in bitcoins directly from a built-in digital wallet. Charles Hamel, Head of Crypto at Opera, said the company wanted to bring cryptocurrency visibility to the 300 million users of its browser app,

“Most people have heard of bitcoin and thus we saw it as important to support it and make this feature more familiar to a larger group of people.”

Oct 23 Google claims Researcher: Google’s Quantum Breakthrough Could Improve How Proof of Stake (PoS) Worksquantum supremacy, IBM refutes the claim. Google announced in the journal Nature that its Sycamore quantum computer had performed a computational task beyond the capabilities of even the most powerful supercomputer. In a blog post written in response to the claim, IBM researchers lauded the effort but argued that the world's fastest Oak Ridge supercomputer could solve the problem in less than 2.5 days, debunking Google's claim of quantum supremacy which requires the solving of a problem beyond the prowess of a classical computer.

Oct 25 President of China, Xi Jinping urges the country to seize blockchain opportunity. Speaking at the 18th collective study of the Political Bureau of the Central Committee, Xi emphasized the use of blockchain as an important breakthrough for independent innovation of core technologies and called for an acceleration of efforts to develop blockchain ideas for industrial innovation, economic and social integration. He said it was necessary to implement the rule of law into the management of blockchain and promote the safe and orderly development of blockchain.

Oct 28 Bakkt announces consumer app for bitcoin payments. The futures platform revealed in a blog post that their next mission following the successful launch of Bakkt futures and the Bakkt warehouse was to unlock the value of digital assets through consumer payments. The payments app will support a superset of digital assets besides bitcoin and testing is set to begin in 2020 with coffee chain Starbucks. Bakkt's Chief Product Officer Mike Blandina said that consumer payments could drive broader acceptance of digital assets.

Oct 31 US regulators charge XBT Corp for unregistered futures offerings to US customers. The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) alleged that XBT, a Switzerland-based security dealer also known as First Global Credit, sold security-based swaps for bitcoin without registering on a national exchange. The filing details that XBT illegally accepted futures orders from 24 US investors between 2016 and 2018 when it wasn't a registered futures commission merchant (FCM).

Author's Take

On the eve of Halloween, the Bitcoin whitepaper turned 11 years old. Quite how a once flippantly ridiculed cypherpunk's curio journeyed to spook the establishment into embarking on a digital reformation of the monetary system is beyond bewildering.

Just as the bears began snuggling down in anticipation of another crypto winter, a jolt from the East roused the bulls into action. China's eternal president rallied the nation to embrace blockchain ideas, but pointedly omitted any mention of Bitcoin.

Few days later, the ruling communist party's PR wing advised the nation not to confuse glorious blockchain with bête noire Bitcoin, a purely speculative asset devoid of real value, making it clear that this wasn't so much adoption as co-option and others will likely join this race to co-opt blockchain to perpetuate the debt-financed fiat economy we've been riddled with for nearly five decades.

Lawmakers in the US have been pushing the Federal Reserve to digitize the dollar, even more so now. The ECB has dallied with the idea as an alternative to Libra. The world's fastest-growing economy, India is also mulling over a sovereign digital currency to ward off the threat of cryptocurrencies. A recent UN report speculated that at least 40 member nations were considering state-backed digital currencies.

These large economies, scrambling to preserve their control oversupply and distribution of money in the face of an inevitable digital currency revolution, will resort to peddling centralized SMART (Surveillance Marketed As Revolutionary Technology) blockchains as better iterations of Bitcoin.

Bitcoin currently best serves the interests of lesser nations, the likes of Venezuela, Cuba, Hong Kong, North Korea, Turkey, and Iran, who're not as pre-occupied with retaining control of monetary supply and surveillance of their citizens as escaping the sharp power of US and China.

Market reaction to the news from China reaffirmed a couple of things. In public perception, the concepts of blockchain and Bitcoin are indistinguishable. Secondly, that an authoritarian central figure with no authority over Bitcoin was able to influence the market shows that Bitcoin's maturation is far from actualization.

The arrival of fiat blockchains will usher in a new era in digital currencies featuring third-generation altcoins. The scale of their threat to Bitcoin can be summed up with two simple words, “OK, Boomer”.

Undeterred by high-profile defections, Facebook continues to pursue regulatory approval for Libra. Calibra CEO David Marcus talked up the project's popularity claiming that more than 1,500 entities have expressed interest in joining the Libra Association.

Despite drafting the Libra charter, as yet there is no concrete launch date for Libra in the US, EU or anywhere else. With the emergence of fiat blockchains, it's likely that Libra will be consigned to seeking refuge in the lesser economies at best.

Google's quantum claims have been widely publicized but it turns out China may be ahead of both Google and IBM in the quantum race. Scientists at the University of Science and Technology of China have significantly improved a quantum computing technique called boson sampling using photons.

CEO of Google, Sundar Pichai likened Google's own quantum experiment to the first man-made vehicle in space, Soviet Union's Sputnik 1 in 1957. If we're sticking to that analogy, then true quantum supremacy can be likened to space travel at the speed of light, which is as far away from being achieved as it was in 1957.

Concerns that a sufficiently powerful quantum computer could break commonly used asymmetric cryptography, including those used in cryptocurrencies, are not dissimilar to Y2K hysteria of the late '90s. There already exist quantum-resistant algorithms and hash functions used by cryptocurrencies are considered fairly secure from the quantum threat.

Trading Insights

In the face of a significant headwind for most of the month, bulls staged an epic onslaught towards the end to close out October strongly at 9150, 10% higher than the September close.

Spurred by what was widely perceived to be glad tidings from China, the last Friday of the month witnessed the largest daily price gain since 2011 of 42%.

Looking at the weekly chart, it’s clear that despite the strong move, BTC/USD failed to register a close above .236 Fibonacci retracement at 9569. An Ichimoku leading span crossover and Stoch RSI double bottom indicate that bulls retain slight control for now. However, if a breakout above 9569 should fail to materialize, we may be set for a bearish move in the short-term.

In the monthly chart, October’s close formed a bullish piercing line pattern, which can only be confirmed by another close in green this month. Monthly RSI bounced from a previous resistance level of 57, but only a return above 60 would confirm the resumption of the uptrend. Likewise, although Stoch evinces bullish convergence, a crossover needs to occur for confirmation.

Bitcoin Cash (BCH/BTC) was the best performing altcoin in October, gaining 18% in the last week of the month. This was most likely in anticipation of a scheduled protocol upgrade set for November 15.

Although other altcoins traded with marginal gains earlier in the month, Bitcoin’s monster rally towards the end of the month left them trailing in the wake, which meant that Bitcoin managed to reassert a nearly identical market dominance from September of 67%.

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