“The largest bank offering services to cryptocurrency exchanges means a lot of credibility for the space” ~ an anonymous banker commented on JPMorgan’s service extension to cryptocurrency exchanges

One of the most important events in the cryptocurrency space was Bitcoin’s third block reward halving which happened on the 11th of May, 2020 at block number 630 000 of the Bitcoin blockchain. The final block with a reward of 12.5 BTC was mined by F2Pool and included a special message in the block header which reads "NYTimes 09/Apr/2020 With $2.3T Injection, Fed's Plan Far Exceeds 2008 Rescue". The message referenced Bitcoin’s genesis block message encoded by Satoshi Nakomoto on the 3rd of January, 2009 “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

Bitcoin plunged from $9630 to $8400 the day before halving which caused the cryptocurrency market to drop from over $260 billion to $230 billion. Since then the overall cryptocurrency market recovered back to its current $263 billion level. Bitcoin bounced back and currently trading in the $9000 range. Interest in Bitcoin has grown due to the halving hype and Bitcoin has been transacted more which led the Bitcoin blockchain to experience transaction overload. Bitcoin transaction fee hit an 11-month high of $5.16 on the 14th of May. Transaction fees depending on the transaction size. Miners first select to execute the transactions with higher fees to earn more revenue. However, if there aren’t that many transactions in the mempool (Bitcoin transactions that are waiting to be confirmed), miners will have to process transactions with low fees. If the average transaction fee for Bitcoin stays expensive, some cryptocurrency users will likely opt for altcoins which offer cheaper and faster transactions.

What was the first product ever bought with Bitcoins on the 22th of May, 2010?

1. Book
2. Computer
3. Pizza

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

JPMorgan Chase, the United States’ largest bank, has reportedly started providing banking services to cryptocurrency exchanges, according to the Wall Street Journal (WSJ). Its first cryptocurrency exchange clients are Coinbase and Gemini. Though this isn’t the first time JPMorgan has served clients from the crypto industry. TokenSoft, a regulated transfer agent and software vendor for blockchain based security tokens has had an account at the bank since 2017. The two crypto exchanges’ accounts were approved in April and transactions have already started to be processed, reported the WSJ. JPMorgan Chase is not processing cryptocurrency transactions on behalf of the exchanges but is providing cash-management services and handling dollar transactions, including dollar deposits and withdrawals for their U.S.-based customers through the Automated Clearing House (ACH) network.

Historically, it has been difficult for cryptocurrency exchanges to secure reliable banking relationships due to the regulatory uncertainty, the volatile nature of the market, fear of fraud and money laundering. Coinbase and Gemini had to go through a rigorous vetting process to get JPMorgan Chase’s approval. Both exchanges are licensed as money transmitters in multiple states and hold a BitLicense from the New York State Department of Financial Services (DFS).

The move by JPMorgan is significant, not just because its CEO Jamie Dimon has been a long-time critic of Bitcoin but because the move shows the traditional finance industry is becoming more open to the cryptocurrency market. JPMorgan CEO, Jamie Dimon, used to call Bitcoin “a fraud” but later regretted it. JPMorgan also built its own blockchain settlement service and launched its own US dollar backed stablecoin called JPM Coin. An anonymous banker told The Block, cryptocurrency media website that “the largest bank offering services to crypto exchanges means a lot of credibility for the space.” He also added “There is little business in fees associated with processing wire and ACH payments, I would expect that there are other associated benefits to JPM from any associated banking services, additional collaboration with both of those firms, potential for winning any future IPO (Initial Public Offering) or another angle such as JPM coin being offered on either of those platforms.”

German online bank Bitwala has announced a new product that offers its customers an annual interest of up to 4% on their Bitcoin deposits. Bitwala is partnering with crypto lending platform Celsius Network, which has more than $300 million assets under its management with over 40,000 users. Celsius lends out Bitcoin held by Bitwala customers to institutional investors allowing Bitwala users to earn interest just by holding Bitcoin.

Bitwala’s Bitcoin Interest Account makes it the first traditional fiat currency bank to offer interest for holding Bitcoin in an account. Many decentralized finance (DeFi) platforms offer similar interest-earning accounts with much higher interest rates of up to 8.6% per year. However, Bitwala is more regulated compared to DeFi platforms. It has over 80000 customers from across 32 countries in Europe and operates under license from SolarisBank, one of the largest banks in Germany. 

Bitwala is allowing its customers to buy Bitcoin for as little as €30 and hold it free of charge and earn weekly interest which is paid out on every Monday. “Interest rates are calculated by Celsius on a weekly basis, based on the demand for Bitcoin by their institutional borrowers. If borrowing demand is high, Celsius is able to pay a higher rate” detailed Bitwala. There are no lock-up periods and customers own the private keys of the Bitcoins that are in the Bitwala wallet, which means account holders can withdraw their Bitcoin or convert to euros at any time. “The customer exchanges the ownership of their Bitcoin into owning a claim on the repayment of the loan” clarified Bitwala.

Reddit, home to thousands of communities’ endless conversation is testing two Ethereum-based tokens to reward engagement in two of its communities, which together have more than 2 million members. The tokens are called “Moons” ($MOONS) and “Bricks” ($BRICKS). Moons is launched for /r/Cryptocurrency community which has 1 million members and Bricks token is issued for the 1.3 million members of /r/ForniteBR community. Both tokens are Ethereum-based ERC20 tokens and can be claimed, viewed, and spent from the Vault right inside the Reddit app which is an in-app Ethereum wallet that has a private key and recovery phrase and available on both iOS and Android.

According to Reddit, the tokens are currently in beta testing and the testing mode will continue through summer 2020. Reddit said that "the smart contracts and mobile apps have been reviewed and audited by Trail of Bits, an independent security firm with blockchain expertise." Reddit members will be able to use these tokens to tip other users, buy badges and awards, take part in polls, or buy a special membership. Users have control of their private keys, which means no one else can access the coins except the users themselves and not even Reddit can take them away. Because both are on a public blockchain, user balances and transactions are public and tied to their Reddit username. Tokens can be transferred to any Ethereum wallet just like any other Ethereum token.

The total number tokens has a hard cap of 250 million tokens in each Reddit community. For example, there will never be more than 250 million $MOON tokens. Initially, 50 million tokens will be distributed based on karma (Reddit’s score system) earned in the subreddit to date. The amount of tokens issued diminishes over time, and can only be earned by contributing content (by posting or commenting for example). Whenever tokens are used to buy badges or memberships, they are burned, which means destroyed and reintroduced into the next month’s distribution.

While Facebook’s Libra and Telegram’s Ton cryptocurrency projects have either been delayed or cancelled Reddit is introducing cryptocurrency to its 400 million users. This means millions of people will soon own wallets for storing ERC-20 tokens.

One of the most well-known and respected hedge fund managers and billionaire investor Paul Tudor Jones revealed that he is buying Bitcoin futures as he believes Bitcoin is a hedge against upcoming inflation.  According to Forbes, Jones was the 7th most successful investor in 2019 with his net profit of $500 million dollar.  In his latest investor letter titled “The Great Monetary Inflation” published on the 7th of May, 2020 he announced that his fund Tudor BVI may hold as much as a single-digit percentage of Bitcoin futures, but he didn’t reveal exactly how much. This was one of the biggest endorsements for Bitcoin from institutional investors. The fund has $21.5 billion in assets under management and a low single digit investment could bring hundreds of millions into the Bitcoin futures market. 

His interest in Bitcoin comes amid the unprecedented central bank money printing. By his calculation, $3.9 trillion of money, the equivalent of 6.6% of global economic output, has been printed since February, 2020. Jones wrote “We are witnessing the Great Monetary Inflation -- an unprecedented expansion of every form of money unlike anything the developed world has ever seen.” As per him the real questions among investors right now is “which store of value will be the winner in the next ten years?” According to him Bitcoin can compete with other stores of value such as Gold, fiat currencies, financial assets. They He evaluated graded stores of value based on four characteristics: purchasing power, trustworthiness, liquidity and portability. 

Jones said that Bitcoin reminds him of the crucial role that gold played in the economic crisis of the 1970s and added “at the end of the day, the best profit-maximizing strategy is to own the fastest horse.  If I am forced to forecast, my bet is it will be Bitcoin.”  He also made a compelling case for owning Bitcoin. He noted “ Bitcoin is literally the only large tradeable asset in the world that has a known fixed maximum supply. By its design, the total quantity of Bitcoins (including those not yet mined) cannot exceed 21 million. The quintessence of scarcity  making it increasingly near and dear, a concept alien to the current thinking of central banks and governments.”

On the 7th of May, 2020, Hanfa, the Croation financial regulator approved a Bitcoin investment fund called Passive Digital Asset fund making it the first regulated cryptocurrency fund in the country. The regulator also appointed Croatian state-owned bank HPB to serve as the Bitcoin fund’s depository. The fund has been set up by Griffon Asset Management and invests only in Bitcoin. The initial investment period closes once the fund collects a minimum asset value of 1,000,000 HRK (approximately 132 000 EUR) or 15 days after the announcement of Hanfa's decision, whichever comes first.

According to the official ruling Griffon Asset Management will use three separate blockchain explorers to calculate daily asset value. The ruling added “access to and disposal of crypto assets requires multiple key signatures that are physically stored in separate secure locations, and the transfer of assets cannot take place without the approval of both the Company and the Depository with their keys.” Investors can make their initial investment in cash or Bitcoin. 

The fund charges no performance fee from its investors as it is a passive fund. However, there will be a management fee of 2.5%. Investors who exit the fund within a year will be charged with 3.5%. Similarly the fund charges 2.5% exit fee from investors who exit within two years from their investment date. The fund drops the exit charges after two years.

Tech giant IBM has partnered with three European electricity grid operators to make electric mobility more convenient, cost-effective and climate-friendly. The newly created platform Equigy, is backed by TenneT, a grid provider in Netherlands and part of Germany; Terna covering Italy; and Swissgrid covering Switzerland. One of the challenges with renewable energy sources is that the power production is not predictable as with fossil fuels, which can generate electricity at will. According to IBM the weather-dependent renewable electricity production can be controlled by Electric Vehicles (EV).

EV owners now have the opportunity to contribute to power grid balancing through bi-directional charging technology. Bi-directional charging enables electric vehicles to not only absorb electrical energy, but also to feed it back into the power supply in the opposite direction. This way EV batteries can become energy storage devices that can also supply electricity if needed. Integrating as many electric vehicles as possible into the power grid calls for a wide range of innovations.

The Equigy platform is leveraging IBM’s blockchain technology as an accounting system that will enable EV owners to share data between other consumers, aggregators and transmission system operators (TSOs). Leo Dijkstra, Blockchain Services lead at IBM Energy, Environment & Utilities unit said “we saw the blockchain as a means to make the system trusted and democratized, so that domestic appliances can participate and be trusted by the TSOs. Electric-car makers are especially interested. By participating in such schemes EV owners could see substantial cost cuts.”

Harry Potter author, J.K. Rowling recently asked for an explanation of Bitcoin and Tesla CEO Elon Musk was among those who tried to help explain Bitcoin to her.

What was the first product ever bought with Bitcoins on the 22th of May, 2010?

The correct answer is “C”.

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