China is already public testing the digital yuan. View in browser

“Cash is a seductive investment because it doesn't have as much volatility, but it taxes you and your buying power about 2% a year. ” ~ Raymond Thomas Dalio, founder of Bridgewater Associates, an American investment management firm

Market State

The cryptocurrency market remained strong above $200 billion over the last two weeks. Top cryptocurrencies enjoyed significant gains. The overall cryptocurrency market dropped by 10% for a short period of time when the price of May’20 WTI Crude Oil dropped to -40 USD on the 20th of April. The price of Bitcoin stabilized around $7000. Ether has recovered since the price crash of Black Thursday which occurred on the 12th of March, 2020. It has been trading as high as $190 for a brief moment last week. Currently Ether is trading around $182. Ethereum has seen a surge in activity. According to blockchain analytics and market research platform Messari, the daily value transfer on Ethereum has reached parity with Bitcoin. Messari’s analysis attributed the increase in daily value to stablecoin transfers. Stablecoins now account for 80% of the daily transfer value on Ethereum as most popular stablecoins such as Tether (USDT), USD Coin (USDC) and True USD (TUSD) are all issued on Ethereum.

Meanwhile the Financial Stability Board (FSB) is asking G20 Finance Ministers and Central Bank Governors to create regulatory frameworks for stablecoins. Randal K. Quarles, Chair of the FSB and Vice Chairman for Supervision of the US Federal Reserve said in a letter addressed to finance ministers and central banks that “Technology is changing the nature of traditional finance, the non-bank sector has grown, and requires deeper understanding and coordination among the supervisory and regulatory community.” Quarles believes that cross-border payment inefficiencies will be a problem for the post-pandemic economic recovery. Stablecoins may fill needs not met by existing cross-border payment systems. FSB is already taking the lead and preparing a roadmap to improve cross-border payment systems and support a swift global recovery.

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Quiz of the week

Which seven blockchains currently support Tether (USDT)?

  1. Algorand, Bitcoin Cash, EOS, Ethereum, Liquid Network, Omni and Tron
  2. Algorand, EOS, Ethereum, Liquid Network, Omni, Ravencoin and Tron
  3. Algorand, EOS, Ethereum, Liquid Network, Omni, Ripple and Tron

Scroll down to see the answer at the end of the newsletter.

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Top stories of the week
Facebook Completely Redesigned Libra Shifting to Multi Stablecoin Model

The Libra Association has released a new whitepaper, unveiling several major changes to its proposed stablecoin Libra. David Marcus, the head of Facebook’s Libra cryptocurrency project, confirmed these changes via his tweets on the 16th of April. Libra will now be backed by stablecoins. The project will develop a host of single-currency stablecoins for specific fiat currencies, such as Libra USD, Libra EUR and Libra GBP in addition to Libra Coin (LBR). According to the whitepaper “Each single-currency stablecoin will be fully backed by the Reserve, which will consist of cash or cash equivalents and very short-term government securities denominated in that currency and will only be minted and burned in response to market demand for that coin.” The Libra Coin will now be backed by these single-currency stablecoins. “A smart contract will combine these specific single-currency stablecoins into LBR based on specified fixed nominal weights” said the Association in its whitepaper. Libra Networks is the entity that is directly responsible for operating the Libra payment system, minting and burning Libra Coins, and administering the Reserve. The Libra Association, parent of Libra Networks has begun the process of applying for a payment systems license from the Swiss Financial Markets Supervisory Authority (FINMA). The Libra network will now also have a comprehensive anti-money laundering and anti-terrorist protocols, to keep up with the latest recommendations issued by the Financial Action Task Force. Libra will be able to enforce sanctions on coins, per requests from law enforcement. David Marcus also tweeted that Facebook is now less involved with the Libra project. Most of the Libra funding comes from its members and less than 10% of its funding comes from Facebook.

China is Already Public Testing the Digital Yuan

China has officially introduced its central bank digital currency (CBDC) referred to as Digital Currency Electronic Payment (DCEP) to state employees. A pilot test has already been carried out in April, 2020 in five cities, Suzhou, Shenzhen, Xiongan, and Chengdu, as well as Beijing. The digital currency wallet has been distributed to state workers who have bank accounts at four state owned banks that are involved in the DCEP project. Government workers will receive transport subsidies in the new digital currency. China’s four major banks – China Construction Bank, Bank of China, the Industrial and Commercial Bank of China, the Agricultural Bank of China – will be responsible for distributing the digital currency. These commercial institutions will pay a 100% reserve to the central bank. Then the People’s Bank of China will issue the digital currency to banks, which will make sure that digital yuan is pegged 1:1 ratio to real yuan and prevent any form of inflation. A representative of the Bank of China stated that “The current closed test of digital Yuan will not affect the commercial operation of listed institutions, nor will it affect the RMB issuance and circulation system, financial market and social economy outside the test environment.” DCEP will also be distributed to large fintech companies such as Tencent and Alibaba to be used in WeChat Pay and AliPay. While users can’t transfer money from WeChat to AliPay and vice versa, DCEP can be transferred to both AliPay and WeChat. The government has mandated that all merchants who accept digital payments (such as Apple Pay, AliPay and WeChat) must accept DCEP, which will make DCEP the most accepted digital payment method in China. DCEP wallets have double offline technology, which allows both sides to send and receive transactions even if they are offline.

Alpha5, an Advanced Bitcoin Derivatives Exchange is Launching in June

Alpha5, a new Bitcoin derivatives exchange, is planning to launch in June, 2020. The exchange offers bitcoin futures and options, as well as exotic or customized derivative products and has a tokenized insurance fund. According to the exchange announcement, it is an all-in-one Bitcoin derivatives platform that not only provides trading tools for users but has strong platform security. Alpha5 is backed by Polychain Capital, one of the largest crypto funds. According to Alpha5 founder Vishal Shah, Alpha5’s cornerstone product will be Futures Swaps that are quite standard products in legacy markets, however, they are absent in the crypto-sphere. A credit-default future is expected to launch in Q4 and a hashrate future should have live implementation by mid-2021 and bitcoin difficulty swaps could follow next. Bitcoin's hashrate keeps fluctuating, which could impact production cost and eventual profits for miners. Hashrate futures are derivative contracts that allow bitcoin miners to hedge the hashrate or the bitcoin network's processing power. Difficulty swaps will help bitcoin miners to mitigate the risk of increased mining difficulty, which could reduce their expected coin production.

Venezuelans Can Now Send and Receive Crypto via SMS

On the 5th of April, a Venezuelan crypto exchange, Criptolago announced the launch of a service that allows users to make crypto payments via SMS text message without an internet connection. The service was launched in response to the country’s president, Nicolas Maduro, who urged Venezualean firms to come up with alternative payment methods parallel to the traditional banking system. President Maduro, emphasized the need to develop offline payment systems that are also compatible with the new currency Petro. Criptolago’s SMS payment system is not only supporting Petro, Venezuelans can now send Bitcoin, Litecoin and Dash via SMS without the need for an Internet connection. At the moment the service is only available for registered users, but it is very easy to register on the exchange. The real problem for Venezuelans is that the price of the Petro is unstable, which makes it difficult to pay with it as a practical method of exchange. Venezuelans assume that the value of the Petro is much lesser than what the government sources report. Venezuelans have been sending cryptocurrencies with text messages since 2018. The most popular payment solution is Dash Text, an offline Dash wallet. Dash Text has processed 6456 offline transactions since January 2019 and 90% of those transactions originated in Venezuela alone (while Dash Text has customers in the United States, Spain, Brazil and Columbia.) Dash Text CTO, Lorenzo Rey told Decrypt, crypto news site that currently four transactions are processed daily on average via Dash Text, which is a sharp decline from more than 30 transactions per day prior to the mid-March market crash. Criptolago has not published usage statistics. However, the new service is expected to become widely used considering how unstable internet connectivity is in Venezuela, as well as the hyper devaluation of its national currency.

Retail Investor Interest in Bitcoin is Increasing Since the Price Crash Caused by the Coronavirus

According to a report (State of the Network, issue: 45) published on the 7th of April, 2020 by a blockchain analytics firm Coin Metrics, the number of addresses holding relatively small amounts of BTC has been increasing since the March 12th crash. More specifically, the number of addresses holding between one billionth and one hundred millionth of the total Bitcoin supply has increased about 6% over the last 90 days while the number of addresses holding between one hundred millionth and one ten millionth of total supply increased about 4%. This increase took place when Bitcoin crashed to a yearly low of $3800. The report suggested that with small purchases increasing and new wallets coming online “this could signal that adoption is growing, as new users start acquiring relatively small amounts of BTC.” (However, each new wallet doesn’t necessarily mean new users as old users could be splitting up their Bitcoin holdings to a new wallet.) Other analyses from the crash suggested that retail investors were buying the dip. For example, crypto asset management company Bitwise published trading volume from leading crypto exchanges the day after the crash that showed $5 billion in fresh inflows to Bitcoin. This trend is the opposite of the institutional investors, who entered Bitcoin after 2017 and are now seeking shelter in the US dollar, while the little guy is buying the dip. In crypto these institutional investors are not fleeing to the dollar, instead they are fleeing to the cryptocurrency equivalent of the dollar, the US dollar pegged stablecoins, of which Tether saw the most increase in demand.

Bitcoin Payments Firm Fold Launches a Debit card in Partnership with Visa

Bitcoin payment app developer Fold has joined Visa's Fintech Fast Track program, to offer a Visa debit card that earns Bitcoin cashback rewards for dollar purchases. According to Fold’s statement, it is the first cryptocurrency firm to be admitted into the Fast Track Program. The program aims to encourage fintech startups' integration with Visa. Bitcoin payment app developer Fold has joined Visa's Fintech Fast Track program, to offer a Visa debit card that earns Bitcoin cashback rewards for dollar purchases. According to Fold’s statement, it is the first cryptocurrency firm to be admitted into the Fast Track Program. The program aims to encourage fintech startups' integration with Visa. By joining the program fintech startups gain access to Visa experts, technology, and resources to scale with efficiency. Prior to Fold, crypto exchanges such as Coinbase, Crypto.com, and Binance have all announced their own debit cards. However, unlike Fold, these debit cards only support users to spend Bitcoin. "Fold is one of the first companies that allow you to spend Bitcoin in the real world... As Bitcoin has evolved and as our relationship with bitcoin has changed, we have morphed to fit what the true value of Bitcoin is. That is, giving you the easiest way to accumulate this new asset but also do it in a way that you don't have to buy it, and you don't have to go through KYC," Fold CEO and cofounder Will Reeves told The Block, crypto news site. According to Reeves, the new debit card will be available in Q3 2020 and those who are interested can register to a waitlist by providing their phone numbers and addresses and confirm ownership of a bank account. Fold currently offers its users to earn up to 20% Bitcoin cashback rewards when they purchase and use gift cards from Starbucks, Uber, and Target.

The Block crypto news site mentioned it as an interesting fact that previously Binance had announced the launch of its own payment card in partnership with Visa. However, Binance has quietly removed references to Visa from its announcement post and scrubbed off a Visa logo from the card. The reason behind Binance’s move is still unclear as both Binance and Visa did not respond to requests for comments.

Tweet of the week

Note: price of May’20 WTI Crude Oil dropped to -40 USD on the 20th of April.

Meme of the week
Quiz answer

Which seven blockchains currently support Tether (USDT)?

The correct answer is “A”.

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