The financial group has a new global head of cryptocurrency strategy. Last May, the bank said that Bitcoin is not an asset class or a good investment.

Financial group and investment bank Goldman Sachs could launch its cryptocurrency, as long as the project is commercially viable. The institution is currently exploring the possibility of issuing, managing, and determining potential use cases for a new token.

Mathew McDermott, the new global head of Goldman Sachs’ cryptocurrency or digital assets department, recently revealed this information. The executive admitted that the bank intends to create a token, but this process is at a very early stage as they are still studying potential use cases.

The director believes that the current financial system will be different in the next 5 or 10 years. All traditional assets and liabilities would become part of blockchains. In other words, operations would be fully digital and would use (public or private) distributed ledgers for greater security and transparency. The intention would be to give preference to this type of platform over centralized or partially decentralized databases.

As McDermott sees it, the landscape includes a new system in which all transactions can occur within a blockchain. It would be a transformation for the issuance of debt, loans, mortgages, credits, and the transfer of assets.

However, the executive sees an obstacle that they must overcome to reach that level of adoption. It would be necessary to create a consensus with the rest of the banks, institutional investors, and regulators, which initially seems complicated.

If an advance of this type were to occur, the executive is aware that all the banking, financial, and office work apparatus would change forever. He confirmed that “with any technological advance, there will be an interruption to the existing status quo.”

McDermott has reportedly recruited staff from the JP Morgan Chase Bank involved in the creation of the JPM Coin, the first crypto asset of a relevant bank. Sources close to the bank said that Goldman Sachs hired JPMorgan’s chief digital asset strategy officer, Oli Harris.

Goldman Sachs, Bitcoin, and Contradictory Messages

The fact that Goldman Sachs has a digital asset or cryptocurrency division is a clear sign that the institution does not want to fail to take advantage of its potential. McDermott’s recent appointment as a new strategist and their plans to issue a possible token reinforces this view.

The bank’s recent actions seem to indicate that it is “paddling” in favor of Bitcoin, but the messages that it sends are still contradictory. Last May, Goldman Sachs stated that Bitcoin was not an asset class or a good investment, especially because of its volatility, young infrastructure, and susceptibility to hacking.

Regarding the first cryptocurrency, the bank stated that it did not recommend the use of Bitcoin on a strategic or tactical basis for its customers’ investment portfolios; however, its volatility could lend itself to impulsive traders.

In 2018, Goldman Sachs had postponed its plans to trade cryptocurrencies as there was no clear regulatory framework. At the time, they reported that there was interest in crypto assets, but their priority was to design a cryptocurrency custody service for their institutional investors.

By Alexander Salazar

The latest analysis that Mati Greenspan released could indicate that Bitcoin is no longer correlated with the S&P 500 index.

One of the most important elements to predict the price of Bitcoin is its correlation with traditional financial markets. If this correlation exists, it would be possible to predict the direction of Bitcoin’s price by observing the trends in the stock market.

However, not everyone agrees with this theory. This is the case of Mati Greenspan, who says that Bitcoin is no longer correlated with the S&P 500.

Problem with Bitcoin’s Price

The issue of the correlation between Bitcoin and the S&P 500 has been around the crypto world for several years now. Many cryptocurrency users consider that this is not a minor matter, since one of the foundations for BTC’s success has been its quality as a store-of-value asset. It would automatically lose this capacity if there were a correlation between the index and the cryptocurrency.

The great attractiveness of a store-of-value asset is that there is no relationship between its price and the traditional financial market. In this sense, in the face of an economic or political crisis that causes the markets to collapse, the store-of-value-asset will maintain or even increase its price. Precious metals such as gold have shown that behavior throughout the centuries.

Therefore, if there is a correlation between Bitcoin and the S&P 500 index, a large part of the crypto community would have to reconsider the role of the cryptocurrency within the international economy.

This is a debate for which figures from the crypto world have demanded, such as the case of Vitalik Buterin. He has advised focusing more on the capabilities of BTC as a means of payment, and less on its supposed quality as a haven of value.

Greenspan Sees No Correlation with S&P 500

In any case, the correlation between Bitcoin and the S&P 500 continues to be a matter of debate among crypto world analysts. Mati Greenspan recently stated that the levels of correlation between the cryptocurrency and the index have fallen significantly. That has happened since the crash in the markets at the beginning of the coronavirus pandemic.

On August 5^th, Greenspan said that cryptocurrencies are “once again able to demand their independence from traditional markets.” To support his position, he showed a graph that reflects the correlation between BTC and the S&P 500 index. In it, it is possible to observe that it reached its highest point at the beginning of the year, to fall sharply since then.

Mati Greenspan explained that “earlier this year, the correlation rose to 0.6 due to the sale of multiple assets at the start of the pandemic.”  However, he said that they are now “below 0.2 again, which means that there is no longer any correlation on a day-to-day basis.”

Not everyone agrees with the position that Bitcoin is no longer correlated with the traditional financial market. However, if Greenspan’s analysis were correct, this would mean that those who say that BTC is indeed a store-of-value asset would have new arguments to defend their position.

By Willmen Blanco

Sbercoin would be tied to the ruble and aimed at corporate customers. If the project is finalized, it would be operational by 2021.

One week after Russian President Vladimir Putin signed the Law on Digital Financial Assets (DFA), the country’s largest state bank is already preparing its stablecoin. Sberbank is getting ready for the issuance of Sbercoin, which would be aimed at the corporate customers of the institution.

The new crypto-asset would be tied to the local fiat currency, the ruble, and Sberbank could issue it at some point next year, according to representatives of the financial institution. One of them, Sergei Popov, stressed that the new legislation opens the doors for the design and launch of a stablecoin for the liquidation of financial assets.

Popov, Director of the transaction business division at Sberbank, said that they can probably issue a token tied to the ruble or a tool for the agreements of some other digital financial assets, based on the law adopted.

Local media noted that the largest Russian state bank continually explores the novelties that arise within the financial sector; of which stablecoins is an example. According to Antonina Levashenko, director of the Russian Center for Competition and Standards Analysis, Sberbank is starting to build its ecosystem and is looking beyond traditional financial services.

The official considers that the fact that the largest state bank shows interest in issuing a private stablecoin is evidence of the desire to “accelerate transactions and reduce costs.” Some elements that could consolidate the project are the infrastructure of the bank and the liquidity that it manages.

Central Banks, Stablecoins and Adoption

The adoption that the bank would assume is in line with the worldwide flow of central banks or state financial institutions that are evaluating or developing stablecoins. For the first case, central bank digital currencies (CDBC) are a subject that remains on the agenda for at least 17 governments around the world. Some bet on establishing systems with distributed ledger technology, while others would not include them.

On the technical side, Sberbank’s project would be within the framework of Hyperledger Fabric, a corporate blockchain project that the Linux Foundation promotes, and would use the network of nodes that the latter hosts in the cloud. Besides, the system would be open for any company to join.

Although Russia legalized Bitcoin with the DFA Law, it prohibited its use as a payment method for the acquisition of goods or services. The law views cryptocurrencies as a set of electronic data that can be adaptable to investments.

Sberbank has a long history of approaching cryptocurrencies and so-called distributed ledger technology (DLT). In 2017, the bank conducted its first blockchain transaction within the Russian banking industry.

The institution also reported in January 2018 that it intended to trade cryptocurrencies in Switzerland, due to restrictions from the Russian government. At that time, the plan was to use the subsidiary Sberbank Switzerland AG to conduct the operations.

By Alexander Salazar

The COVID-19 crisis had a direct impact on the price of Bitcoin and the distribution of ASIC equipment. F2pool believes that Bitcoin miners were unprepared for the halving.

A seemingly endless pandemic, tragedies everywhere, and much political-social instability have made 2020 a tough year. These elements have plagued the global economy at levels hard to estimate. This situation has involved industries that global events have not traditionally touched, such as Bitcoin mining.

This year, miners of this cryptocurrency have faced challenges like never before. They have not only had to experience firsthand the consequences of the coronavirus, but they also had to prepare for a difficult year within this market. The Bitcoin third halving accompanied the pandemic and there has been an increasingly competitive ASIC manufacturing ecosystem. There, new and old companies struggle to assert the dominance of their mining equipment.

Mining pool F2pool recently published a report that demonstrates the negative effects of the current year on the mining industry on more than one occasion. However, the landscape by the end of the third quarter of 2020 is not as worrisome as it initially seemed. Companies and private miners have managed to overcome, to a greater or lesser extent, the most shocking events. However, a new wave of infections could change the picture.

Pandemic Has Complicated Bitcoin Mining

From mid-February, the world stopped until it entered a strict quarantine. Without the freedom to move and with coronavirus cases doubling every day, the economy stalled. The day when the WHO declared that a pandemic was hitting the world, markets collapsed and the fateful Black Thursday occurred.

Everyone will remember that night when the price of Bitcoin fell by 50%, reaching a low of USD 3,800. The market for this cryptocurrency had already had several lows in 2020, due to market speculation. However, this drop was unprecedented regarding the previous ones, since it was full of panic and uncertainty.

The markets of gold, crude oil, and the S&P 500 index also experienced effects similar to those of Bitcoin. The report by F2pool states that this unusual situation in global markets demonstrated that “the demand for means of survival for the society is more significant than having a safe-haven asset.” People hurried to convert into cash their savings to solve their needs while they could, in a scenario that the media portrayed as apocalyptic.

There was a price correction soon after, but miners felt the hard knocks of the fall anyway. Twenty-three percent of Bitcoin’s hashrate fell immediately with this market crash, that is, a large proportion of miners decided to disconnect their equipment or migrate to other networks until further notice. With a price of USD 3,800 per BTC, the ASIC equipment that was working to cover operating costs at that time was not profitable enough.

In addition to the bearish trend in the market, the quarantine that the WHO imposed to stop the spread of the coronavirus further complicated the picture. The Bitcoin mining ecosystem had been preparing since last year for the third halving of this cryptocurrency, buying more powerful devices and conditioning the old ones. However, due to mobility restrictions, Bitmain S19 and MicroBT M30 equipment arrived late.

The delay further limited Bitcoin miners, who were already with their hands tied regarding the upcoming halving. With the decrease in the price of Bitcoin and a block reward of just 6.5 BTC, many miners had to stop working until the difficulty underwent readjustment or the profitability conditions improved.

In the report, F2pool suggests that the ecosystem was unprepared for the new era of Bitcoin. When the halving occurred in early May, the second post-halving block took 40 minutes to mine (which normally takes 10 minutes) and in the first 24 hours, there was a removal of only 137 blocks (which is usually 144 on average).

Although people expected a decrease in Bitcoin’s hashrate after the event, the behavior of the network indicated that there was even less. This may be because the most powerful ASIC devices on the market have not yet been incorporated due to logistics problems that the pandemic has caused.

By Alexander Salazar

JP Morgan attributes the correlation between Bitcoin and the S&P 500 to millennials. The financial company notes that young people do not see Bitcoin as just another investment, but as an alternative to the US dollar.

Long gone are the days when the senior executives of the financial company JP Morgan considered Bitcoin (BTC) a fraud. Now, this institution welcomes cryptocurrencies, praises them, and even develops them.

In this context, the financial group recognizes that investors are currently interested in assets as an alternative to national fiat currencies. However, the investment that the latter choose varies according to their age, since the younger buy Bitcoin and the older prefer gold.

Concerning the stock market, JP Morgan, under the leadership of Nikolaos Panigirtzoglou, states that millennials are buying shares in technology companies. Instead, older people are disposing of their shares to move to less volatile instruments like bond funds.

The company attributes the increase in the correlation between Bitcoin and the S&P 500 since March precisely to millennials and their investments. Furthermore, they note that the younger do not see Bitcoin as a mere investment but as a currency alternative to the US dollar.

After hearing the JP Morgan group’s remarks, Michael Sonneshein, director of fund management company Grayscale, approved of the millennials’ decision. To do this, he used an analogy typical of ice hockey: “You have to skate where the puck is going, not where it has been.”

JP Morgan-Bitcoin Relationship: Complex Beginning and Happy Ending

Unlike gold, a metal that John P. Morgan considered to be the only true money, the JP Morgan company did not always look favorably on Bitcoin and cryptocurrencies. However, this perspective has been changing over the years.

In September 2017, the CEO of this banking institution, Jamie Dimon, attacked Bitcoin calling it fraud. Besides, he said on that occasion that he would fire any employee of his who was trading with Bitcoin as he considered it “stupid”.

A month later, he called Bitcoin a fraud again, stating that investors who trusted the cryptocurrency would “pay the price” for investing in “something so stupid.”

In those same days, Dimon spoke about Bitcoin and, with a less aggressive attitude, said that he saw something good in it: blockchain. The banker argued that this technology “could be used for digital dollars.” Also, JP Morgan had already been experimenting with blockchain for a year.

Soon after that, the company was charged in Swedish courts with market manipulation. A few days after Dimon’s statements, and after Bitcoin’s price fell, JP Morgan was one of the most prominent buyers of the crypto asset.

Since then, they began a stage of progressive public acceptance and, in certain cases, incorporation of cryptocurrencies.

As an illustration of the saying “if you can’t beat them, join them”, JP Morgan announced in February 2019 the development of its cryptocurrency: JPM Coin, a stablecoin that maintains parity with the US dollar.

Regarding Bitcoin, the company has stressed during the COVID-19 crisis that it can “overcome adversity better than other traditional markets.” This is one of the features that make Bitcoin the best option for investors in the market.

By Alexander Salazar

The trading traffic of decentralized exchanges exceeded USD 4,320 million last July. The Uniswap, Curve, and Balancer protocols handled the bulk of the activity with 76%.

Last July, there were records for decentralized exchanges (DEX) on Ethereum, whose monthly trading volume reached USD 4.32 billion, setting a new record high, the second in a row.

The trading traffic on Ethereum DEX last month represents a 184% increase from the USD 1.52 billion that they traded in June. At the time, they reached a new record high.

Data from Dune Analytics show that the decentralized exchanges Uniswap (41%), Curve (25%), and Balancer (10%) led the trading volume in July. In the last few days, these three platforms have had a market share of about 43%, 16%, and 6%, respectively.

The trading volume on decentralized exchanges has not stopped growing in the last six months. In July, it experienced traffic 12 times higher than the one that they had traded in the same period last year when they processed USD 350 million. In March of this year, the DEX sector registered a trading volume of USD 1.03 billion, which also represented a new record at the time.

Yield Farming: DeFi Boom that Spreads like Fire on DEX

The growing increase in the use of decentralized exchanges occurs on a par with the boom in Decentralized Finance (DeFi). At the same time, the popularity of yield farming, which seeks to take advantage of the high rates of return of these decentralized protocols, has driven this sector.

At the end of June, Ethereum exceeded one million daily transactions. The increase in operations would be directly related to the practice of yield farming.

The following month, the transaction volume of DeFi dApps exceeded USD 12 billion. DappRadar noted in a report that this average of transactions represented a new all-time high. In the document, the specialized website also attributes the boom in the sector to so-called yield farming.

With the increase in the trading volume that pours into the DeFi space, it is not surprising that the monthly trading traffic on decentralized exchanges is also increasing.

Besides, DappRadar sees the DEX sector as the second-largest driver of transaction volume in the DeFi ecosystem. However, it notes that this only moves 4% of the total volume of the activity in DeFi.

SEC Is Now Going After DeFi

The US Securities and Exchange Commission (SEC) plans to contract a blockchain analysis service to investigate decentralized finance (DeFi) on the Ethereum network. The regulatory entity argues that it seeks to know the logic and operation of this type of programmable transaction.

On July 30^th, the regulatory agency published a request inviting software companies to submit their proposals. In the request, the SEC would seek to identify the types of tokens used, the purpose of the contracts and restrictions on buying and selling, as well as potential modifications.

By Alexander Salazar