Bitcoin will become superior to gold after its halvening says Coinbase. View in browser

“Imagine for a moment that there was a base metal as scarce as gold with one special property: It can be transported over a communications channel.” ~ Satoshi Nakamoto, creator of Bitcoin

Market State

Over the last week the cryptocurrency market has seen large gains currently peaking at around $298 billion. The price of Bitcoin broke the $10000 mark, for the first time since September, 2019. Currently Bitcoin is standing around $10270. Altcoins have also seen strong gains during the last week. Ether pushed over $250 which is the price level not seen since September, 2019. Bitcoin Cash reached a new yearly high of $470.

Several major cryptocurrency milestones have been reached last week. The Bitcoin network has processed its 500 millionth transaction on the 5th of February. The number of transactions doubled itself just within 3 years, from 250 million in 2017 to 500 million transactions in 2020. The total value of the cryptocurrency locked in decentralized finance (DeFi) applications has surpassed the $1 billion mark. The Ethereum-based lending protocol Maker dominates the DeFi space. Maker accounts for nearly 60% of the total value locked in decentralized applications.

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Quiz of the week

How often does Bitcoin block reward halving occur?

  1. Every 200,000 blocks or approximately every four years
  2. Every 100,000 blocks or approximately every two years
  3. Every 100,000 blocks or approximately every four years

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

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Top stories of the week
More Than 40 German Banks Have Applied To Offer Crypto Custody Services

On the 29 of November, 2019 the German federal parliament, the Bundestag passed a bill that will allow German banks to sell and store cryptocurrencies. The bill came into effect on the 1st of January, 2020. According to Handelsblatt, a leading German business newspaper, BaFin, the country’s financial regulator, has already received more than 40 applications from banks who are interested in offering cryptocurrency custody service. If these 40 banks successfully obtain a custody license they will store Bitcoin and other cryptos on behalf of their customers. The government is satisfied with the number of expressions of interest and stated that the goal is to make Germany a popular location for crypto-based businesses. Frank Schäffler, a member of the German parliament said, “The high demand for crypto custody licenses shows that companies are increasingly adopting blockchain technology, but is also the result of the new legislation.” Apart from Solarisbank, the report doesn’t mention the names of the banks. Michael Offermann, head of crypto banking at Solarisbank said “We have been dealing intensively with the topic of crypto custody for one and a half years. The regulations in the new Money Laundering Act allows a practical time to start addressing the topic of crypto custody. As soon as it becomes easier to buy and store cryptocurrencies we expect strong growth.”

Bitcoin Will Become Superior To Gold After Its Halvening Says Coinbase

In a new Medium blog post, a cryptocurrency exchange Coinbase explained that Bitcoin has a number of advantages to gold. The post titled “Digital Scarcity, and Bitcoin Halvings” covered key reasons that make Bitcoin a safe haven asset like gold. The author of the post, Mike Co wrote that “gold’s predictable supply, elemental scarcity, and the global market has allowed it to become a stable store of value against fiat currency.” He claimed that “anything gold can do, Bitcoin can do better.” Bitcoin’s scarce nature that is very similar to gold secures its place in the world. It requires a great deal of work to create new Bitcoin, through a process called mining or “Proof of Work”. After Bitcoin’s third halving which will occur in May this year, new Bitcoin issuance will drop from current 12.5 to 6.25 new Bitcoins mined every ten minutes. In addition to its scarcity, Bitcoin has a number of other qualities over gold. Verifying the purity of a gold ring is “expensive and difficult”, while Bitcoin nodes can independently verify any Bitcoins received, as well as the entire historical ledger. Sending Bitcoin around the world is cheaper than gold. It is highly portable even in large quantities. Unlike gold, which needs to be melted down, you can own or send a fraction of a Bitcoin. The post concluded that “Bitcoin is a store of value to rival gold in the digital age.”

PoolTogether, Ethereum Based No-Loss Lottery Raised $1 Million

The team of PoolTogether, an Ethereum based decentralized finance (DeFi) application, has announced that they have successfully raised $1 million from IDEO CoLab Ventures, ConsenSys Labs and DTC Capital, based on a simple agreement for future equity (SAFE) to boost security, increase prize pools and maintain fee free. PoolTogether was launched in September, 2019 as a lottery game. The idea is based on a concept called “prize linked savings account.” Participants deposit DAI or USDC in exchange for a ticket to win a prize. (Dai and USDC are the stablecoins, which equals to one US dollar.) If a participant doesn’t win, they get all their money back. This is possible because the prize is funded by the interest accumulated on all the funds deposited by the players. Payments deposited will immediately start earning yield through Compound’s Dai money market, which is a smart contract protocol that enables collateralized, peer-to-peer loans. One lottery ticket can be purchased with 1 DAI or 1 USDC. Users can buy tickets through integrated wallets such as MetaMask. However participants are not eligible to win a prize unless they have been in the pool for the whole duration of the time. This prevents people from buying tickets right before a prize is awarded. Tickets are eligible for the next and all future prizes, but not the current prize. Users can take their money out any time, there is no lock time. Once the winner is selected the rest of the funds are returned to the participants. PoolTogether runs on smart contract, which is open source and audited by Quantstamp and OpenZeppelin, security audit firms for distributed systems. Currently the lottery game has two versions. A weekly pool that uses DAI and a daily pool which uses USDC stablecoin. The weekly DAI pool has 1 million dollars in it, deposited by 2500 unique players. The pool generates a prize of around $1600 each week. The winner of the largest PoolTogether prize ever was announced last Friday, who deposited 10 DAI and won 1648 DAI.

A New Swiss Regulation Limits Unidentified Crypto Purchases To 1000 CHF

On the 7th of February, 2020, the Swiss Financial Market Supervisory Authority (FINMA) passed an anti-money laundering provision. According to the new rule the limit for unidentified crypto transactions is now lowered to from CHF 5000 (~$5100) to one-fifth of the amount or 1000CHF (~$1,000). Swiss regulators will also hold a consultation on additional regulation until the 9th of April this year. Swiss crypto exchanges will have to collect data on users whose transaction amount is beyond 1000 CHF and must submit the data to the authorities for reviews on a regular basis. The Financial Action Task Force (FATF), an intergovernmental organization devoted to combating money laundering and terrorism financing recommended last year that crypto exchanges must collect identification for purchases over $1000 USD. Last month the European Union’s 5th Anti-Money Laundering Directive (5AMLD) came into effect, which also proposed a similar regulation, requiring crypto exchanges to comply with traditional banking grade KYC and AML procedures. Due to the new regulations several European crypto startups have decided to relocate or shut down their businesses. 

The US Central Bank Is Looking Into Fedcoin Digital Currency

On the 5th of February, Federal Reserve Governor Lael Brainard delivered a speech at a conference on payments at the Stanford Graduate School of Business. In her speech she shared how the big technology firms (Facebook) and networks (Bitcoin) are driving the digital transformation of payments and bringing new business models. She said “digitalization has the potential to deliver greater value and convenience at a lower cost, but there are risks as the new players are outside the financial system's regulatory guardrails.” She also highlighted stablecoins which were designed to overcome the volatility of first-generation cryptocurrencies by tying the digital currency to an asset or basket of assets. Brainard said “Facebook has an active user network of one-third of the global population, the company's Libra stablecoin project has imparted urgency to the debate over what form money can take, who or what can issue it, and how payments can be recorded and settled.” Given the dollar's important role, she claimed that it is essential for the Fed to remain on the frontier of research and policy development regarding central bank digital currency. The Fed is now conducting research and experimentation on distributed ledger technologies and their potential use case for digital currencies.

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Quiz answer

How often does Bitcoin block reward halving occur?

The correct answer is “A”.

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