Tamás Blummer, pioneering Bitcoin developer passed away. View in browser

“It’s really hard to find assets not correlated with stocks and bonds that have the potential for higher returns that anyone can access.” ~ Matt Hougan, Bitwise managing director and global head of research

Market State

The cryptocurrency market was quite volatile last week. The overall market reached as high as $250 billion last week before going down to $239 billion. Bitcoin is currently trading at around $8660. However, during the weekend the price of Bitcoin surpassed $9000 and dramatically dropped from its weekly high of $9200 to $8500 within a few minutes. Netherlands-based crypto derivatives exchange Deribit has revealed market manipulation could have been responsible for last weekend’s sharp decline. Someone has sold a whopping $101million in Bitcoin on their platform, which may have caused the prices to drop heavily. Despite the sudden price drop, altcoins have seen significant gains, as more people were buying altcoins. As a result Bitcoin dominance dropped from 68% to 65%.

Lunar New Year is around the corner. It will be celebrated this week between the 25th and 27th of January across Asia. It is commonly believed that there is some sort of relationship between the prices of crypto and Lunar New Year. Around this time of year, many Asian investors cash out their crypto holdings as many of them travel long distances to celebrate and give gifts to friends and family members. People also take time off and pause trading which could have a little impact on the market. Analysts have examined the Lunar New Year effect on the Bitcoin market. However the data showed a completely different picture. Economist and trader Alex Kruge shared Bitcoin returns preceding the Chinese New Year from previous years and noted that “Data indicates BTC does not underperform preceding the Chinese NY.” According to the data prior to Lunar New Year Bitcoin returns have been positive.

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Quiz of the week

What is Zero Knowledge Proof in cryptography?

  1. A technique to verify information without revealing underlying data
  2. A way of sending transaction with zero confirmation
  3. A way of lowering transaction size

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

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Top stories of the week
More Financial Advisors Are Adding Crypto to Client Portfolios

A growing number of financial advisors are planning to allocate to cryptoassets in client portfolios in 2020. That’s according to a new survey from Bitwise, a San Francisco asset management and research firm. Bitwise’s annual survey was conducted in December 2019 and collected responses from 415 financial advisors about their thoughts on the cryptocurrency market. 76% of advisors said clients have asked about cryptocurrency in the last 12 months. 72% suspect that their clients may be investing in crypto on their own. The research also found that currently 6% of financial advisors have an allocation to cryptoasset in client portfolios and an additional 7% who are not currently allocating to crypto said they will either “Definitely” (1%) or “Probably” (6%) allocate in 2020. Of advisors already allocating, almost half (42%) expect to increase their allocation. None plan to reduce it. The top reasons for adding cryptoassets to client portfolios were uncorrelated returns with other assets, high returns, demand from clients and crypto’s ability to act as an inflation hedging tool. 56% of advisors said "regulatory concerns" are preventing them from making allocations to cryptoassets. Those who are worried that crypto is a scam or a bubble decreased substantially. 64% of respondents expect the price of Bitcoin to rise over the next 5 years.

Ernst & Young Released Third-Generation Zero-Knowledge Proof (ZKP) Blockchain Technology

Ernst & Young (EY), the audit and consulting giant has announced the release of the third-generation zero-knowledge proof (ZKP) blockchain technology to the public domain on the 19th of December, 2019. ZKP blockchain technology enables private transactions on public blockchains. The new iteration of ZKP blockchain reduced transaction cost more than 90% by combining up to 20 transactions together and reducing the size of private transactions. Paul Brody, EY global blockchain leader said that the new technology is the “most important EY blockchain milestone in making public blockchains scalable for the enterprise.” The initial transaction cost has been reduced 400 fold to around $0.05. A recent research conducted by Ernst & Young in collaboration with Forrester Research found that enterprises choose not to use public blockchains for security and private concerns. However the research also showed that enterprises find private blockchains to be insufficient in terms of interoperability with other blockchains and networks. EY’s ZKP blockchain aims to bridge this gap by providing a sufficient level of transaction privacy while interoperability to other blockchain. EY has also made its smart contract and token review service available for public testing.

US Bill To Exempt Cryptocurrency Gains Less Than $200

A bill, entitled "The Virtual Currency Tax Fairness Act of 2020" has been introduced in the U.S. Congress by Congresswoman Suzan Delbene and Congressman David Schweikert on the 15th of January, 2020. The bill is an amendment to the U.S. Internal Revenue Service (IRS) tax code of 1986 and proposes to exempt cryptocurrency gains under $200 from being taxed. Currently any profits earned from cryptocurrency must be reported to the IRS no matter how small. This is based on a 2014 IRS guidance which treats Bitcoin and other cryptocurrencies as property and transactions using cryptocurrency are subject to income tax. According to Congressmen this system makes use of cryptocurrency incredibly cumbersome as taxpayers would have to file an extensive amount of information to do their taxes. The bill could simplify the tax burdens of crypto users. Taxpayers would not be required to report when they use their cryptocurrencies whose dollar values have changed on everyday small purchases. If the bill is approved, it would apply to any transactions made after the 31th of December, 2019.

Digital Dollar Foundation Launched to Explore Central Bank Digital Currency

Chris Giancarlo, former chairman of the Commodity Futures Trading Commission (CFTC) along with Daniel Gorfine, former chief innovation officer of CFTC and Charles Giancarlo, CEO of Pure Storage, a data storage firm have formed a nonprofit organization, called “Digital Dollar Foundation.” The Foundation have partnered with Accenture, a global services and consulting firm to create the Digital Dollar Project. The purpose of the initiative is to encourage ongoing research and discussions on central bank digital currency (CBDC) and develop a framework for testing and learning about digital dollar. Accenture has a record of collaborations with central banks, including the Bank of Canada, the Monetary Authority of Singapore, European Central Bank. Most recently they have signed an agreement with Sweden’s Riksbank, the world’s first central bank, to develop an e-krona CBDC in a test environment. “The proposed digital dollar would be a tokenized form of the US currency that would coexist with other Federal Reserve liabilities and serve as a settlement medium to meet the demands of the new digital world and a cheaper, faster and more inclusive global financial system” said Chris Giancarlo. 

Remembering Tamás Blummer, Pioneering Bitcoin Developer

Tamás Blummer, an internationally recognized independent Bitcoin developer since 2012 has passed away after a long and severe illness on the 12th of January, 2020. He contributed to number of Bitcoin focused projects including, Rust Bitcoin, which is a Bitcoin development library built in Rust language, CoinTerra an early Bitcoin mining software and hardware manufacturer, Bits of Proof, a Bitcoin technology company which was acquired by Digital Assets Holdings, a blockchain technology company where Tamás served as the chief ledger architect. Tamás started his financial career at Deutsche Bank AG from 1996 until 2012. Later he joined Morgan Stanley as an executive director in Budapest. He first became involved with Bitcoin through CoinTerra. Later, he became a member of the board of the Hungarian Bitcoin Association. Up until his passing, Blummer remained active in the Bitcoin world. Just about a month ago he published an article titled “How central banking breaks down” on Medium. Just two weeks before his death had been on Github. In his final tweet he said “Happy birthday bitcoin. It has been exciting and enriching working for you for many years.” The Bitcoin community deeply saddened by the loss and many have expressed their condolences. May he rest in peace!

Tweet of the week
Meme of the week
Quiz answer

What is Zero Knowledge Proof in cryptography?

The correct answer is “A”.

Thank you for reading :) 

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