30 December

Although the world’s largest cryptocurrency by market value, bitcoin (BTC), saw a roughly 64% decline in value year-to-date, CoinDesk research shows that bitcoin and ether returns in 2022 per unit of risk were about the same as equities and significantly better than bonds.

Look at some of the darlings that people were really excited about 18 months ago in stocks, they’ve lost 80-90% of their value as well.

Bitcoin and ether appeared to be affected by the same forces that made stock investing a challenge over the past year, including high inflation and the looming threat of recession.”

“Pro-Bitcoin politician Sitiveni Rabuka recently took office as the new Prime Minister of the Pacific Islands of Fiji. Now, it seems the new PM is actively considering the adoption of bitcoin as legal tender there.

Let’s go 2 for 2 – BTC Legal Tender Bills for the Pacific in 2023,’ the tweet reads, hinting at Tonga’s own Bitcoin legal tender legislation that could reportedly go live as early as Q2 2023. [Tonga’s] Lord Fusitu’a told Cointelegraph that Fiji’s new Prime Minister ‘asked to meet with me which we did via zooms since last year to walk him through step by step, how he could adopt bitcoin legal tender. The new PM is definitely pro-Bitcoin.’

Both countries could benefit tremendously from bitcoin adoption in two specific areas; remittances and mining. Remittances sent to Fiji accounted for 11.3% of the country’s gross domestic product (GDP) in 2021, per World Bank data. Tonga’s situation is even more dramatic –– remittances were a whopping 45.5% of the nation’s GDP in 2021. When it comes to mining, both countries can take advantage of their geology.”

Together with the U.S., the two countries represent a 52% market share in terms of global blockchain enterprises. The CAICT also disclosed that around 48 post-secondary institutions across China have introduced “blockchain engineering” related degrees and certifications.

Major Chinese tech giants such as Tencent, Ant Financial, Huawei, and Alibaba, have all created “blockchain alliances” in the past years for their respective operations.

In the report, the institution detailed four types of blockchain technologies with high application potential. First, “settlement chains” would allow transparent publication of telecom fees for firms such as China Mobile and China Unicom. Second, the Zhejiang Cold Chains would enable consumers to verify the source of their food by scanning the products’ QR codes. Third, the Trusple cross-border payments platform can help buyers and sellers obtain due diligence info on their counterparties. Finally, blockchain monitoring platforms can help financial regulators spot order irregularities between different exchanges.

China currently allows ownership of cryptocurrencies and nonfungible tokens, or NFTs, with their legality protected in courts of law. However, the country has banned the issuance of initial coin offerings along with digital exchanges and cryptocurrency mining. Despite setbacks, the Government of China has included blockchain developments on its official national agenda.”

See Also: Chinese Communist Party official pleads guilty to helping Bitcoin miners

Stablecoins shouldn’t be the instruments that the public sells in a panic. They’re supposed to be the opposite; the life vest that people grab on to. Tether has become that stablecoin that everyone sells when panic hits. But this doesn’t have to be the case. Here are four things that Tether can do to ensure that the next time the crypto economy undergoes a shock, tether stays steady.

1. Tether needs to get rid of its corporate bonds, funds and “other investments.”

A stablecoin’s number one job is to be steady, and that demands holding safe assets like cash and Treasury bills. But some of the line items on Tether’s balance sheet – including commercial paper, corporate bonds and funds, secured loans and “other investments” – suggest that Tether operates more like a hedge fund or venture capital firm than a stablecoin.

To put an end to this pattern, Tether needs to sell all of its risky assets and move to a 100% safe-asset allocation.

2. Tether needs to cancel its 0.1% redemption/withdrawal fee.

The price at which any stablecoin trades on exchanges like Binance and Kraken is set by arbitrage. Competition among arbitrageurs to execute these trades at a profit is what locks the price of stablecoins on key exchanges at a price close to $1. Tether’s 0.1% fee adds to an arbitrageur’s costs of carrying out this trade.

Factoring in this cost, it only really becomes profitable to buy tether tokens when they’ve fallen to $0.999, and sell them when they’ve risen to $1.001. Tether’s price randomly floats within this relatively wide band. This lack of rigidity attracts bad press, rumors, innuendo and speculation.

3. Tether needs to open redemptions up to more people by removing its $100,000 floor.

This floor creates perverse trading patterns on exchanges like Binance and Kraken, which further exacerbate fears about Tether. In short, Tether’s $100,000 minimum pushes the majority of USDT users who want to sell en-masse on exchanges.

But it is precisely during broad crypto panics that this arbitrage mechanism breaks down: arbitrageurs back off out of fear of losing their capital, exchanges halt withdrawals as activity overwhelms them, and blockchains get congested. And so panicked on-exchange sales of tether overwhelm the mechanisms that are supposed to anchor tether, and its price falls below the lower end of its $0.999 band.

If Tether removed its $100,000 minimum and allowed everyone to redeem at source, then tether users wouldn’t have to flock en masse to exchanges in order to offload their tether. They could simply send their 100 tether directly to the company and get $100. This would relieve price pressure on exchanges and bring an end to Tether’s crazy on-exchange price movements.

4. Tether needs to be more transparent.

Tether falls short of the current standard for stablecoin transparency. This lack of transparency helps create a trust gap that leads to Tether selloffs during market panics. Its auditor is only testing the company’s investments four times per year. That’s not good enough.

By bringing its disclosure practices up to industry standard, Tether will grow trust and users will be less likely to dump Tether tokens come the next crypto panic.”

Stacks acts as a Bitcoin sidechain, powered by both sBTC and STX – Stacks’ native token. In the proposed sBTC peg system, users send regular bitcoin to a wallet controlled by stackers (a process referred to as “pegging in”). This action mints an equivalent number of sBTC that can be used in smart contracts on Stacks.

Bitcoin sidechains aren’t new. Blockstream, a Bitcoin infrastructure firm, published a whitepaper on sidechains as early as 2014, and currently has a fully functional sidechain federation called Liquid. Earlier this month, Layer 2 Labs raised a $3 million seed round from angel investors to develop “drivechains,” another flavor of Bitcoin sidechains.

So what new innovation does sBTC bring to the sidechains conversation? Ali claims the sBTC model is unique in that anyone can be a miner or stacker. He sees the use of STX to incentivize stackers to sign peg out requests as a distinct advantage, although alternative projects tend to avoid the use of altcoins such as STX like the plague.

The concept is still in the implementation phase and will be formalized under Stacks Improvement Proposal (SIP) 21. ‘My best guess is maybe eight to nine months from now.'”

‘Tether Cartel’ Next to Fall