NBA player Spencer Dinwiddie launched world's first professional athlete security token View in browser

“The internet is going to be one of the major forces for reducing the role of government. The one thing that’s missing ... is a reliable e-cash: a method whereby on the internet, you can transfer funds from A to B without A knowing B or B knowing A." Milton Friedman ~ American Nobel Prize winning economist (1999)

Market State

The cryptocurrency market has gained more than $20 billion since last week. Cryptocurrencies are soaring. Over the last few days Bitcoin has risen from the weekly low of $7750 to over $8600. It is now eyeing $9000 or maybe even break above the 5 digit price. Altcoins have followed the rally, some of them even outperformed Bitcoin. Bitcoin fork coins such as Bitcoin Cash, and Bitcoin SV have jumped a surprising 18% and 70% respectively within the last few days. With its latest price jump Bitcoin Cash is now once again the 4th biggest cryptocurrency by market capitalization. Ether is trading at around $162 which is a 13% increase compared to last week. Ripple is up by 10% to $0.225 since last week.

In less than 4 months the Bitcoin block reward halving is coming. The current 12.5 Bitcoin block reward will be cut in half to 6.25 Bitcoin. Half as much Bitcoin will enter into circulation over the next four years, making Bitcoin even more scarce. Observers have also pointed out that safe haven assets such as gold, oil and Bitcoin saw large gains when the military tensions between the United States and Iran escalated. Gold is considered as a safe investment in times of macroeconomic uncertainty due to finite supply. Bitcoin is the digital counterpart of gold and also has limited supply.

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Quiz of the week

What are Bitcoin Options?

  1. The obligation to buy or sell a certain amount of Bitcoin at a certain price on a specific future date
  2. The right to buy or sell a certain amount of Bitcoin at a certain price on a specific future date
  3. The right to buy or sell a certain amount of Bitcoin at a certain price on any future date

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

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Top stories of the week
The EU’s 5th Anti-Money Laundering Directive Came Into Force

The European Union’s 5th Anti-Money Laundering Directive (5AMLD) has been adopted and entered into force on the 30th of May, 2018. Member states have to implement these new rules into their national legislation by the 10th of January, 2020. The new regulation amends the 4th AMLD and requires 28 member states to regulate cryptocurrency exchanges and custodial wallet providers with the same regulatory requirements as banks and other financial institutions, such as mandating them to register with the competent authorities in their domestic locations. For example in the UK Financial Conduct Authority (FCA) announced on the 10th of January that it has become the AML and CTF supervisor of UK cryptoasset activities. In Austria the Financial Market Authority (Finanzmarktaufsicht, FMA) is now the regulator of cryptocurrency service providers, which has already announced that unregistered crypto businesses will face a fine of up to €200,000. In Germany the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) will regulate crypto businesses. In Hungary the new legislation entered into force on the 10th of January, concerned crypto service providers are subject to the supervision of the Hungarian Office of Anti-Money Laundering and Counterterrorism as of the same date. The European Commission clarified that “Cryptocurrency service providers will have to identify their customers and report any suspicious activity to the National Financial Intelligence Units.”

The Chicago Mercantile Exchange Has Launched Options on Bitcoin Futures

Chicago-based derivatives exchange CME has launched options contracts on top of its existing Bitcoin futures product on the 13th of January, 2020. The CME Bitcoin futures contract launched on 18th of December, 2017. Option provides the right but not obligation to buy or sell the underlying asset, Bitcoin futures at a certain price at a specific date in the future. The option contracts expire into one Bitcoin futures contract, which represent 5 Bitcoins and cash settles to the CME Bitcoin Reference Rate (BRR). (Cash settled derivatives doesn’t deliver the actual underlying asset instead settlement is achieved by a cash payment.) Tim McCourt, CME Group's Global Head of Equity Index and Alternative Investment Products, said back in November 2019 “Since the launch of our Bitcoin futures nearly two years ago, clients have expressed a growing interest in options as another way to hedge and trade in these markets. We believe Bitcoin options will now offer our customers greater precision and flexibility to manage their risk.” According to McCourt the major customers of Bitcoin futures are Bitcoin companies such as miners and traders based in Europe and Asia. He expects Bitcoin options may see similar user demographic. Since most of Bitcoin miners are located in Asia CME expects high demand from Asia. In May 2020, block reward granted to Bitcoin miners will go down from 12.5 BTC to 6.25 BTC. Usually Bitcoin halvings are followed by greater price volatility, which can be a hindrance for miners and traders. Bitcoin miners can now hedge against price volatility in a more precise and affordable manner.

NBA Player Spencer Dinwiddie Launched World's First Professional Athlete Security Token

National Basketball Association player Spencer Dinwiddie is tokenizing his $34 million contract and selling it as a bond on an Ethereum based platform starting from the 13th of January till the 10th of February, 2020. The bond will be issued with the help of security token platform Securitize. The partnership has been announced on Twitter by Carlos Domingo, CEO of Securitize. Dinwiddie’s tokenized bond, SD8 token, will allow him to instantly collect an upfront payment of $13.5 million by tokenizing his guaranteed $34 million 3 year contract instead of waiting the entire three years. The SD8 token holders will receive 4.95% annual base interest on a monthly basis in the next three years. Dinwiddie first announced his plan in September, 2019. However, he ran into some legal disagreements with the NBA. NBA claimed that the terms of his agreement with the league would be violated through the tokenization of his contract. But Dinwiddie said the latest draft of his plan doesn’t violate any agreement terms and that he is not doing anything wrong or anything illegal. He also stated that the tokenization is actually beneficial for the NBA as it will lead to higher levels of fan engagement in a new and direct way and give players direct control over their finances.

Crypto Friendly Generations To Inherit $68.4 Trillion From Baby Boomers in the US

Digital asset management company CoinShares revealed in its November 2019 report, that millenials in the US are anticipated to inherit $68.4 trillion from their Baby Boomer parents by 2045. Millenials are defined as the population born between 1981 and 1996, who are currently in their 20s and 30s. This will be one of the greatest wealth transfers in the modern times, making millenials to be the wealthiest generation in history. Different generations have different investment tendencies. Baby boomers are more likely to invest in stocks and bonds. While Millennials have watched financial mismanagement by governments and central banks and grew up with the internet, video games, smart phones, social media and the concept of internet money. They are a generation that is heavily influenced by technology. Millennials trust cryptocurrency as an asset and have demonstrated a strong trend of embracing cryptoassets: according to Coin Dance data almost 50% of Bitcoin holders are the 25 to 34 year old demographic. When it comes to this “Great Wealth Transfer” of Baby Boomers to Millennials cryptocurrencies are positioned as a new way of investing and much of the inheritance could go into cryptoassets.

Brazilian Crypto Exchanges About To Lose Banking Support

Banco Bradesco, the third-largest commercial banks in Brazil, is refusing to abide by any agreements that would prevent the closure of accounts opened by local cryptocurrency exchanges. Brazil’s Administrative Council of Economic Defense (Conselho Administrativo de Defesa Econômica, CADE) ruled in late December 2019, that it was not illegal for banks to withdraw services from crypto exchanges. The Brazilian Association of Cryptocurrencies and Blockchain (Associação Brasileira de Criptoativos e Blockchain, ABCB) protested the decision and requested to have the account closures stopped. However Banco Bradesco’s management believes that cryptocurrency transactions may involve illicit activities such as money laundering. In 2019, the ABCB sued six banks for denying banking services to crypto exchanges. CADE launched an open investigation into the issue and concluded that the six banks were within their rights to deny the exchanges their services. These banks included Santander Brasil, the Bank of Brazil, Bradesco and Brazil’s largest bank, Itau Unibanco. Other commercial banks are also moving forward with the refusal of banking services to local cryptocurrency exchanges.

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Quiz answer

What are Bitcoin Options?

The correct answer is “B”.

Thank you for reading :) 

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