The Hong Kong Monetary Authority presented its completed Aurum retail central bank digital currency (CBDC) prototype on Oct. 21. The system, developed in conjunction with the Bank for International Settlements (BIS) Innovation Hub, has a unique structure that reflects the intricacies of the existing system for issuing money in Hong Kong.
Aurum consists of a wholesale interbank system and retail e-wallet. The e-wallet is created at a local bank and has a smartphone interface. A validator system prevents bank over-issuance and user double redemption.
The intermediated retail CBDC is used in the e-wallets, and CBDC-backed stablecoins are used in the interbank system. The unusual CBDC-backed stablecoins digitally mirror Hong Kong’s existing currency system, in which bank notes are issued by three financial institutions and backed by the central bank. The CBDC is a direct liability of the central bank, while the stablecoins are liabilities of the issuing bank, with backing assets held by the central bank. The authors stated:
“Bringing CBDC-backed stablecoins to life has never been done before and we therefore felt that doing so may supplement the growing body of research on private sector stablecoins. Indeed, what distinguishes Aurum from private sector stablecoins is that Aurum’s stablecoin balances are reconciled, versus real time gross settlement (RTGS) balances of the issuing bank with the central bank.”
The high level of decoupling between the wholesale and retail ledgers gives the system a high level of cyber-resilience, the designer said.
— Bank for International Settlements (@BIS_org) October 21, 2022
Retail transactions are performed with aliases. Only the intermediary that performs Know Your Customer functions can see the identity of users. Unspent transaction output records are used to track digital currency ownership anonymously through multiple transactions as a safety measure in case of commercial bank bankruptcy.
Hong Kong launched its CBDC research in June 2021 as part of its comprehensive Fintech 2025 Strategy. The monetary authority is pursuing retail and wholesale CBDC implementation separately. It noted earlier that the retail CBDC has no “imminent role” to play in the payments market, but use cases may emerge quickly. Aurum is the first project completed by the BIS Innovation Hub.
New York-based multi-asset trading services Oanda has launched a new cryptocurrency trading service in the United States. This latest addition developed in partnership with regulated blockchain infrastructure provider Paxos Trust Company is designed to give investors easy access to crypto alongside their existing forex portfolios in a secure environment.
The collaboration will enable U.S.-based investors to spot-trade cryptocurrencies on Paxos’s itBit exchange through Oanda’s mobile platform, the broker said. Investors will be able open and fund trading accounts, as well as access major cryptocurrencies such as Bitcoin (BTC) and Ether (ETH). According to Oanda, users will benefit from the company’s long track record in the forex and derivatives markets.
Oanda’s partner Paxos is a regulated blockchain infrastructure provider that uses technology to tokenize, trade and settle assets. Paxos builds enterprise blockchain solutions for companies like PayPal, Interactive Brokers, Meta, Mastercard, MercadoLibre, Nubank, Bank of America, Credit Suisse and Societe Generale.
Gavin Bambury, chief executive officer of Oanda,said the partnership with Paxos gives his firm a regulated partner in which to grow its crypto offerings.
Oanda executive Jessica Bestead said the decision to offer crypto trading services was “in response to the needs of active traders,” a sign that more market participants were looking to gain exposure to digital assets.
Founded in 1996, Oanda claims to be first company to share exchange rate data free of charge on the Internet, launching a forex trading platform that helped pioneer the development of web-based currency trading five years later.
In recent years, platforms offering foreign exchange trading and other traditional assets have broadened their services to include crypto. As reported by Cointelegraph, major U.S. trading platform Interactive Brokers entered the crypto market in mid-2021 to capitalize on the growing demand. Former forex brokers from Jeffries Financial Group also launched a new crypto exchange for institutional investors.
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD abruptly dropping before the Wall Street open, hitting lows of $18,660 on Bitstamp.
A recovery took the pair higher, and it was attempting reclaim $19,000 as support at the time of writing.
The action came as commentators claimed the Fed was softening its policy on rate hikes ahead of the Nov. 1–2 Federal Open Market Committee (FOMC) meeting.
Citing mainstream media quotations from Fed officials, they suggested that the November hike could be the last 75-basis-point adjustment, with smaller ones following.
“Some officials are more eager to calibrate their rate setting to reduce the risk of overtightening,” Nick Timiraos, chief economics correspondent at the Wall Street Journal, summarized.
“But they won’t want to dramatically loosen financial conditions if and when they hike by 50 bps (instead of 75). This meeting could allow officials to get aligned on next steps.”
Timiraos came in for skepticism following his words, with some accusing him of “leaking” data that would be sensitive for markets.
“How silly that there’s a designated Fed leaker that can drop a timely tweet thread and instantly impact global markets,” popular commentator Stack Hodler wrote.
“Imagine the havoc if someone hacked this guys account and leaked a 100bps raise. Yields rocket and we get UK pension crisis 2.0 — what a janky monetary system.”
According to CME Group’s FedWatch Tool, the odds of a 75-basis-point hike next month remained almost guaranteed, with a mere 6.2% chance of 50 basis points.
Target rate probabilities chart. Souce: CME Group
Dollar retreats after yen seals more lows
U.S. equities saw a confident start to trading on the day, while the U.S. dollar swiftly lost ground after earlier causing fresh pain for trading partner currencies.
The U.S. dollar index (DXY) was below 113 at the time of writing, having spiked to near 114 hours prior.
U.S. dollar index (DXY) 1-hour candle chart. Source: TradingView
“It’s all about DXY and the consolidation between recent highs and D1 uptrend,” popular crypto trader and analyst Pierre explained, citing the earlier analysis.
In a sign of how problematic the dollar’s rise was becoming, the Japanese yen weakened past the psychologically significant 150 mark — a 32-year low.
“Unless the BOJ gives in in its bond yield suppression, the yen will continue to power lower. JPY 150 breeched,” Alasdair Macleod, the head of research for Goldmoney, forecast.
USD/JPY 1-month candle chart. Source: TradingView
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The popular messaging app Telegram has developed a new marketplace that doesn’t involve nonfungible tokens (NFTs). The social messaging platform said that it is all set to launch its marketplace for auctioning unique usernames for social platforms, an idea first floated in August.
In an official announcement on its Telegram channel, the firm said that the development phase of the marketplace is near its end. The marketplace is based on its native blockchain called The Open Network (TON).
Durov said at the time that a new marketplace, where username holders could transfer them to interested parties in protected deals — with ownership secured on the blockchain via NFT-like smart contracts, could become a sought-after service in Web3. He added that other elements of the Telegram ecosystem, including channels, stickers, or emojis, could later also become part of this marketplace.
Telegram didn’t respond to Cointelegraph’s requests for comments at the time of publishing.
Telegram started its Web3 and crypto endeavor with hopes of launching a digital payments platform for Telegram. However, like many other platforms from the initial coin offering (ICO) era, Telegram also ran into trouble with the United States regulators for the unregistered sale of its Gram token.
After losing a court battle against the US Securities and Exchange Commission in 2020, Durov stepped away from the project to focus on Telegram. Since then, open-source developers have revived the project under the banner of The Open Network.
Hong Kong is taking action to regain its status as a global cryptocurrency hub by launching several legal initiatives related to the crypto industry.
A city and special administrative region of China, Hong Kong is willing to distinguish its crypto regulation approach from the blanket crypto ban in mainland China.
The government of Hong Kong is considering introducing its own bill to regulate crypto in its own China-free way, according to Elizabeth Wong, head of the fintech unit at the Securities and Futures Commission (SFC).
One of the SFC’s initiatives is allowing retail investors to “directly invest into virtual assets,” Wong said during a panel held by InvestHK, the South China Morning Post reported on Oct. 17.
Such an initiative would mark a significant shift from the SFC’s stance over the past four years, which restricts crypto trading on centralized exchanges to professional investors, Wong noted. Eligible investors include individuals with a portfolio worth at least $1 million, or about 7% of the city’s population, as of September 2021.
Wong emphasized that the crypto industry has become more compliant over the past four years, suggesting that it’s time to change the city’s stance on crypto, stating:
“We think that this may be actually a good time to really think carefully about whether we will continue with this professional investor-only requirement.”
The SFC official also mentioned a few other legal initiatives targeting the development of the crypto ecosystem in Hong Kong, including a policy introduced in January to allow service providers to sell certain crypto-related derivatives. The regulator has also been reviewing whether to allow retail investors to invest in crypto-related exchange-traded funds, Wong noted.
The latest news comes amid Hong Kong on Oct. 19 launching a $3.8 billion fund to attract foreign businesses back to the city after a massive talent exodus prompted by strict lockdowns and tense political climate.
According to an official statement by the government of the Hong Kong special administrative region, the local government has introduced a bill to propose establishing a regulatory regime for virtual asset service providers. The city authorities also plan to embrace emerging technologies like nonfungible tokens and metaverse and develop Hong Kong into an “international virtual assets center.”
According to some reports, Hong Kong has already been succeeding in terms of crypto adoption so far. Considering a number of factors like crypto ATM installations, pro-crypto regulations and startup culture, Hong Kong was ranked the best-prepared country for widespread crypto adoption in a study by Forex Suggest published in July 2022.
United States-based cryptocurrency exchange Coinbase says the adoption of USD Coin (USDC) has been “more conservative” outside of the U.S., which it believes is a result of international currency conversion fees.
In an Oct. 20 statement, the exchange said there is currently three times more USDC bought with U.S. dollars as compared to other currencies.
“Currently, 3x more USDC is bought with USD versus non-USD currencies. In part this is because, outside of the US, users usually have to pay fees in the process of converting their local currency into USDC, and this is a barrier to broader international adoption.”
The U.S. dollar-pegged cryptocurrency is currently the second-largest stablecoin by market capitalization under Tether (USDT).
Coinbase said it sees the utility of stablecoins such as USDC benefitting residents in countries requiring a coin that doesn’t fluctuate in value, is highly accessible and gives access to decentralized finance (DeFi).
The exchange said it is aiming to “build more on-ramps for users to access USDC,” and will be waiving fees for all customers who buy or sell USDC using any fiat currency.
In 2018, Coinbase along with payments technology company Circle partnered to create the Centre Consortium to develop USDC, which currently is the second-largest stablecoin behind Tether and the fourth-largest cryptocurrency in terms of market capitalization.
Stablecoins such as USDC are seen as a cheaper and faster alternative compared to traditional remittance systems for sending value between parties. A recent report by Chainalysis shows the use of stablecoins for remittances as a key factor driving crypto adoption in Latin America.
The move by Coinbase is the latest in efforts to increase the adoption of USDC, in September, Circle announced it would roll out the stablecoin across five additional blockchains including Polkadot, Optimism, Near, Arbitrum and Cosmos.
San Francisco-based fintech firm Ripple has inched closer to victory in its ongoing battle with the United States Securities and Exchange Commission (SEC).
On Oct. 21, Ripple general counsel Stuart Alderoty confirmed on Twitter that they finally have the elusive documents after “18 months and 6 court orders,” though noted they remain confidential at the SEC’s insistence.
“It was well worth the fight to get them,” he exclaimed, adding:
“I’ve always felt good about our legal arguments, and I feel even better now. I always felt bad about the SEC’s tactics, and I feel even worse about them now.”
The fought-over documents relate to a 2018 speech by former SEC division director William Hinman regarding the status of Ether (ETH), with the financial regulator seemingly pulling out all the stops to keep the documents under wraps.
At the time, he stated that ETH was not a security and Ripple considers this a key argument in its case against the regulator, which has accused it of conducting an unregistered securities sale of its native token XRP (XRP).
Over 18 months and 6 court orders later, we finally have the Hinman docs (internal SEC emails and drafts of his infamous 2018 speech). While they remain confidential for now (at the SEC’s insistence), I can say that it was well worth the fight to get them.
Partner at Hogan & Hogan Jeremy Hogan commented that these are the briefs “where we’ll really see how strong each position is,” while posturing how the SEC will respond. He added that the briefs will be made public on Oct. 24.
Ripple CEO Brad Garlinghouse vented on Twitter, claiming that the SEC’s behavior was shameful and shocking:
“The SEC wants you to think that it cares about disclosure, transparency and clarity. Don’t believe them. When the truth eventually comes out, the shamefulness of their behavior here will shock you.”
XRP prices don’t appear to have reacted to the latest development. Over the past 24 hours, the token has lost 3.2% in a fall to $0.446 at the time of writing, according to CoinGecko.
However, Ripple’s momentum has been strong over the past month or so as the case inches toward closure, but XRP is still down 87% from its January 2018 all-time high of $3.40.
The current crypto bear market has induced panic, fear and uncertainty in investors. The dire situation started when the global market capitalization of crypto dropped below the $2 trillion mark in January 2022. Since then, the price of Bitcoin (BTC) has decreased by over 70% from its all-time high of $69,044.77, reached on Nov. 10, 2021. Similarly, the values of other major cryptocurrencies such as Ether (ETH), Solana (SOL), Avalanche (AVAX) and Dogecoin (DOGE) have decreased by around 90%.
So, does history tell us anything about when the bear market will end? Let’s start by examining the causes of the 2022 bear market.
Catalysts of the 2022 bear market
There are several factors that caused the current bear run.
A global increase in inflation and rising interest rates instilled fear and uncertainty in the market, resulting in lower crypto investment than expected. Although there is much publicity pertaining to the United States’ inflation and interest rates, other countries such as India have experienced similar challenges.
Notably, earlier this year, the Federal Reserve announced that it was taking stringent measures to “accelerate tapering of monthly bond purchases.” In other words, the United States planned to introduce measures that slow down its economy to control the ever-rising inflation in the country. The following graph shows the inflation trend from 2016 to 2022.
FRED consumer price index. Source: St. Louis Fed
In effect, to reduce the rate of inflation, the Federal Reserve increased the federal funds rate two times during the year. This reduced the disposable income of U.S. residents, thereby dampening investment efforts in risk assets like cryptocurrencies.
United States interest rate. Source: St. Louis Fed
Crypto analysts believe that leverage was another primary cause of the current bear market. Leverage entails pledging a small amount of money as collateral to borrow a large amount for investing. In this case, investors borrow from exchanges to finance their investments in the market.
The downside of leverage is that once the price of an asset begins to fall, the trading positions liquidate, resulting in a cascading crash of cryptocurrency prices. This lowers investor confidence and tends to inject fear and uncertainty into the market.
While traditional markets have circuit breakers and protections, this is not the case for the crypto market. Take, for example, the recent collapse of Terra, its LUNA token — now known as Terra Classic (LUNC) — and its TerraUSD (UST) stablecoin. Within the same period, several other crypto firms such as Celsius, Three Arrows Capital and Voyager Capital filed for bankruptcy.
Signs that the bear market is nearing an end
Analysts study market cycles to predict when a bear market will come to an end. Generally, market cycles include four phases: accumulation, markup, distribution and a mark-down. For Bitcoin, the market cycle occurs over four years, or 1,275 days. The last phase usually relates to the bear market.
Bitcoin market cycles. Source: Grayscale
According to Grayscale, the crypto bear market commences when the realized price of Bitcoin surpasses its market price. Grayscale defines realized price as:
“The sum of all assets at their purchase price or realized market capitalization, divided by the market capitalization of the asset which provides a measure of how many positions are in or out of profit.”
The realized price of BTC surpassed the market price on June 13, 2022. The table below shows the prices of Bitcoin when its market price was greater than the realized one.
BTC’s realized price vs. market price. Source: Grayscale
It is interesting to note that by July 12, the cycle had completed 1,198 days. Since the entire cycle takes 1,725 days, by that date there were four months until the realized price would cross above the BTC market price.
However, at the end of the four months, Bitcoin would need another 222 days to reach its previous all-time high. This means that from July, it would take a total of five to six months for the bear market to end. The graph summarizes the expected trajectory of the current crypto cycle.
The 2020 bear and bull market cycle. Source: Grayscale
If the current market cycle takes a similar structure as the 2012 and 2016 cycles, and if Grayscale’s findings are accurate, then the bear market could end between November 2022 and December 2022.
How long Bitcoin traders expect the bear market to last
Bitcoin maximalists tend to look toward the Bitcoin halving as an indicator to predict the next bull run. Examining history, BTC has formed a peak within 18 months of each Bitcoin block reward halving.
History of Bitcoin halving. Source: Swyftx
In the past, Bitcoin’s halving has preceded crypto bull runs, as indicated in the above graph. So, BTC maxis who contend the halving schedule directly impacts the bullish or bearish nature of Bitcoin might be correct.
Bitcoin and S&P 500 correlation chart on Oct. 20, 2022. Source: TradingView
The 2022 bear market is unique due to several reasons. First, key macroeconomic variables such as high interest rates and soaring inflation increased its impact. As well, the Terra-LUNA crash and high leverage throughout the entire crypto ecosystem contributed to the onset of the bear run.
Remarkably, this is the first bear market in which there is a correlation between the stock market and Bitcoin, with a correlation rate of over 0.6 in July 2022, according to Coin Metrics data. It is also the first time that the value of BTC has fallen below the previous cycle peak, with the value of BTC falling below $17,600.
BTC and S&P 500 correlation rate. Source: Coin Metrics
The contrasting situations between the 2021 crypto bull run and the 2022 bear market have baffled crypto investors. Analysts believe that the current bear market will end between November 2022 and December 2022, with a possible bull run starting between the end of 2024 an early 2025.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Sam Bankman-Fried (SBF) has written a set of suggested standards for the crypto industry “while waiting for full federal regulatory regimes,” which were posted on the FTX Policy blog on Oct. 19. The post covers many of the questions facing regulators and operators, with specific reference to the United States at points. In particular, SBF outlined a plan for treating assets in the U.S. in regard to their status as securities or commodities. FTX will implement his plan, SBF wrote.
In the United States, SBF wrote, the FTX legal team will analyze assets using the Howey Test, case law and guidance to determine whether an asset is a security or commodity. Non-security assets will be classed as commodities by default. Moreover:
“If we do find an asset to potentially be a security, we will not list it in the US unless/until there is a process for properly registering it.”
In addition, SBF supported the tokenization of equities in the traditional finance market on practical grounds. He also devoted considerable space to the need for customer protection and argued for knowledge-based investor qualification, as opposed to the income/asset-based qualifying system now in place.
Excluding assets that the exchange judges to be securities is no guarantee of peace with the U.S. Securities and Exchange Commission (SEC), however, as Coinbase discovered. When that exchange came under the scrutiny of law enforcement due to alleged insider trading, the SEC added securities trading violations to the charges against the accused. Coinbase chief legal officer Paul Grewal denied the exchange-listed securities, saying “Coinbase has a rigorous process to analyze and review each digital asset before making it available on our exchange — a process that the SEC itself has reviewed.”
While his entire blogpost is a reaction to the lack of regulation in the crypto industry, SBF remained upbeat about future developments. “I’m optimistic, for instance, that the Stabenow-Boozman bill would protect customers while also protecting economic freedom; and that federal regulators are making progress towards thoughtful frameworks,” he wrote in the tweet devoted to the document.
Rarible, the Ethereum-based nonfungible token (NFT) marketplace, announced its platform upgrade to Rarible 2 on Oct. 20.
The NFT marketplace says it is introducing new aggregation tools in order to showcase NFTs from across the Web3 space. This means users can browse and purchase Ethereum-based digital assets from Rarible, OpenSea, LooksRare, X2Y2 and Sudoswap.
Alex Salnikov, chief strategy officer and co-founder of Rarible, told Cointelegraph that the NFT platforms we have today are “siloed,” and aggregation is the way to change that.
“It creates an open environment where users can access the best prices for NFTs all through one interface.”
This development from Rarible comes after a report from DappRadar, which hinted at impending NFT “marketplace wars.” DappRadar’s report highlighted other major platforms in the Web3 space such as Uniswap and OpenSea, both of which acquired NFT aggregator platforms this past year.
While OpenSea and Uniswap both acquired outside aggregators, Rarible simply transformed its services to an aggregation-based model. The report says that such acquisitions could stir up direct competition between platforms.
Rarible also introduced a mechanism in which users can lock up their $RARI, the native token of the marketplace, to earn rewards and incentives for ecosystem participation. Salnikov says this is a step towards further decentralization of the platform.
“Users get to make decisions on where the ecosystem goes next. They have a say in Rarible’s future and that’s something you can’t get with just funds or an NFT.”
Decentralization of NFT marketplaces is a relevant discussion within the Web3 community. Many on Twitter have been calling out market dominators like OpenSea for being too centralized.
A vulnerability in the marketplace was identified by researchers at cyber security software company Check Point, which could’ve cost nearly two million active monthly users their NFTs in a single transaction.
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