Largest South Korean Parties Promise Bitcoin ETFs Before Election

https://bitcoinmagazine.com/markets/largest-south-korean-parties-promise-bitcoin-etfs-before-election

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As South Korea approaches its next legislative election in 2024, both the current ruling party and the main opposition have pledged to make several pro-Bitcoin policies, most especially to approve a Bitcoin ETF.

On April 10, 2024, The Republic of Korea will carry out its legislative election, which takes place every four years. Regardless of outcome, the President will not change, as they serve five-year terms and are thus elected by entirely separate procedures, thanks to a quirk of South Korea’s constitution. In fact, leading into this election, the party which controls the majority of seats does not hold the nation’s highest office, and will not have the opportunity to contest this until 2027. Nevertheless, one fact makes these distinctions less critical from the Bitcoiner’s perspective: both parties have made the unusual step of making similar pledges to support Bitcoin.

Although there are theoretically 6 different parties contesting for 300 seats in this election, 4 of these each hold single-digit numbers. The two real contenders are the conservative People Power Party (PPP), which currently holds the presidency, and the more liberal Democratic Party (DPK) which currently holds 50 more seats. What’s more, polling currently supports a favorable outcome for the DPK, leading to an unenviable possibility where People Power may hold the leading office and virtually zero ability to pass legislation. It’s likely for these reasons that the party chose to embrace radical new incentives, and that’s where Bitcoin comes in.

Rumors of a pro-Bitcoin turn for PPP first materialized on February 19, 2024, when its representatives made comments to a local newspaper that a more comprehensive framework for crypto regulation needed to become a priority. Until this new framework exists, they alleged, it may be the most prudent option to eliminate all capital gains taxes on Bitcoin or other cryptocurrency until relevant legislation could be hammered out and signed. Legislation like this would be a difficult undertaking, however, and PPP spokespeople claimed that it may be necessary to continue such a tax pause for two years. This seems like a particularly clumsy attempt at fishing for votes, especially considering that these taxes are currently in a state of limbo, but it was not the only effort.

The PPP went on to state that same day that the party was considering a broad range of pro-Bitcoin options, particularly by loosening a series of restrictions on institutional investment. Not only did they pledge to create a “Digital Asset Promotion Committee” with special authority over digital asset regulation, the PPP also made several vague statements on several specific policy reforms, particularly the crown jewel: a Bitcoin Spot ETF. It was broadly speculated that these vague promises were a cynical move intended to attract flagging youth support, especially considering that data from the National Tax Agency claims that 80% of crypto users are in the 20-39 age bracket. These moves may have been undertaken with little true affinity for Bitcoin, but the next development overturned the entire situation.

The following day, the opposition stole PPP’s thunder when the DPK made several concrete pledges, most especially to allow individual investors access to Bitcoin ETFs. Their plan specifically declares that these purchases will have to go through an individual savings account, and therefore corporate interests will be unable to use it for serious multibillion dollar trades. The DPK also made several more vague allusions about removing other barriers to institutional legislation, but announced that a comprehensive proposal to “vitalize and institutionalize” the digital asset space will be released on Wednesday, February 21st. These political upsets led the PPP to respond in kind by upgrading their general pro-Bitcoin comments into definite campaign promises.

This presents us with a most unusual situation: regardless of the political establishment’s true feelings on Bitcoin or any other digital asset, the need to win youth support in a particularly contentious election has made either choice the pro-Bitcoin option. But how likely are these politicians to follow through, and what would it look like for South Korea? To answer these questions, it’s important to look at a few fundamentals in their overall economy. By all accounts, it’s doing pretty well: although South Korea has recently experienced inflation, with their monetary supply at the highest level since 1970 during Q4 of last year, this figure has calmed down significantly. Further, its Consumer Price Index (CPI) has also relaxed over the past few months, showing that the cost of goods such as housing, food or electricity have been declining in turn.

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An environment like this does generally rule out one of the most prominent use-cases for Bitcoin adoption worldwide, namely its use as a store-of-value. It seems unlikely that large numbers of South Koreans will seek to maintain significant savings in won, nor are they likely to use it for international remittances. However, South Korea does nevertheless have several distinct advantages as a possible new Bitcoin hub. In 2022, an estimated 4% of South Koreans held various digital assets, although this number was markedly growing. Less than 14% of Americans held any in the same period. In other words, mass adoption has not been a significant barrier to the US status as a worldwide center for Bitcoin, with its vast array of active developers and revolutionary blockchain projects, and it likely won’t present an obstacle for South Korea either. South Korea is a developed economy with a strong tech sector, and its stable inflation will be a necessary requirement for a certified digital asset industry emerging.

There is one crucial point in South Korea’s favor, additionally: as both major parties have pointed out, Bitcoin enjoys enthusiastic popularity among the nation’s youth. Not only has the country with its dense population centers enjoyed a high level of internet connectivity for decades, Millennials have a living memory of a currency crisis in 1997, which led South Korea to turn to bailouts from the IMF. These factors especially have led a growing number of Korean youths to show interest for an alternate economic vision, and Bitcoin has been there to supply that vision. The number of Bitcoiners may be small, but there are several reasons to believe that it could become a fertile ground for future development.

In other words, it’s very possible that the pro-Bitcoin initiatives endorsed by both parties will be able to trigger a real maturation for the young industry. Between the two sets of pledges, it seems at first glance that the DPK’s might prove more useful in this respect: their ETF proposal is not an invitation for the financial establishment to dominate the market, and their upcoming framework is explicitly intended to empower a new domestic industry. Nevertheless, the PPP’s proposal is also encouraging, and its plan to create a regulatory body for crypto can also provide many opportunities.

No matter how you slice it, Bitcoin has been taking the world by storm ever since the US approved the spot ETF, and countries are falling like dominoes to enact similar pro-Bitcoin legislation. South Korea’s close neighbor, Japan, has even considered taking steps to foster their own industry. Regardless of how the nation decides to swing between their two main political options, it’s clear that the decision on Bitcoin has already been made. We can look to a golden new opportunity coming for South Korea, and the knowledge that Bitcoin’s strength may create similar opportunities elsewhere. After all, the way Bitcoin’s been growing, success like this could come anywhere. No matter where you are, it may come to pass that you’re asked to choose between Bitcoin and Bitcoin, and that makes for one sure bet.

Chinese Partnership to Bring Large-Scale Bitcoin Mining to Ethiopia

https://bitcoinmagazine.com/markets/chinese-partnership-to-bring-large-scale-bitcoin-mining-to-ethiopia

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The Ethiopian government is set to enter a partnership with companies from China to establish powerful new Bitcoin mining infrastructure in the country, all centered around a massive hydroelectric dam.


On Thursday, February 14, actors involved with the project announced a partnership between Ethiopian Investment Holdings, a state-owned investment firm, and Data Center Service PLC, subsidiary of West Data Group, based in Hong Kong. Kal Kassa, the CEO for Ethiopia at Hashlabs Mining, initially went to Twitter to claim that “The partnership will be for the purposes of a $250 million data mining project in Ethiopia,” but he would subsequently delete this announcement and replace it with a similar announcement that did not include an exact dollar amount. Regardless of the specific cash commitments involved, the aim of this partnership is clear: the establishment of a data center and other critical infrastructure to supercharge Bitcoin mining in Ethiopia.

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Since Bitcoin mining has largely been prohibited in China, West Data Group has been actively working to begin new operations abroad, in familiar mining hubs like Kazakhstan and the United States alongside multiple other African nations. Chinese investment money has already been flowing into various countries in Africa due to the Belt and Road Initiative, but Ethiopia has a couple of distinct advantages that make it even more attractive: for one, it joined BRICS (Brazil, Russia, India, China, South Africa) in January 2024, making it the newest member of this economic alliance of emerging nations. This added diplomatic relationship will doubtlessly make massive international deals run much more smoothly.

The second biggest advantage in Ethiopia’s favor is the Grand Ethiopian Renaissance Dam (GERD), a massive project to construct a dam on the Nile River to revolutionize Ethiopia’s energy generation. The dam has been in construction for more than a decade; it finally began filling with water in 2020, and has been generating hydroelectric power since 2022. But its current operations are only a fraction of its full potential, assuming the project completes smoothly. For these reasons, Chinese Bitcoin miners have been flocking to Ethiopia in 2024, to the extent that 19 of the 21 bitcoin mining firms that have reached agreements with Ethiopia’s state power company are headquartered in China. Several specifics of the dam have sweetened the deal additionally; not only has a substantial amount of Chinese investment already gone into the dam’s construction, but its altitude and consistent climate create conditions that are fairly ideal for year-round mining operations. This is the situation as it stands today, but this major new infrastructure partnership has only just started. One can only imagine how far it can go from here.

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Nevertheless, there are several concerns with the long-term viability of the site as a global hotspot for Bitcoin mining. First of all, the GERD has been something of a hotly contested issue between Ethiopia and the Egyptian government. The Nile River has two main tributaries, the White and Blue Nile. Although the White Nile is one of the longest rivers in the world, stretching more than 2,000 miles from Lake Victoria to where it meets up with its counterpart in Sudan, the much shorter Blue Nile flowing from the Ethiopian Highlands supplies about 85% of the water once the two tributaries meet. The Egyptian government’s long-held concern is that the dam could cut off most of their country’s water, unless Ethiopia is extremely scrupulous with not filling the dam too quickly. However, until the dam is full, it will only be able to generate a fraction of projected energy goals.

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Talks between the two governments have repeatedly broken down over the past several years, and no agreement to resolve this dispute formally exists. The Ethiopian government has nevertheless claimed that they will proceed with normal construction and operations whether an agreement is reached or not. The United States has brokered several of the talks between these two governments and is generally considered to favor Egypt’s position; considering the rivalry between the US and China, there are no shortage of opportunities for either side to attempt to influence the dam’s progress and operations.

Still, despite these possible setbacks, the GERD in its present state is substantially operational, with many Bitcoin miners already setting up shop. Reuters reported that 90% of Ethiopia’s electricity comes from hydroelectric sources, and that the finished dam will produce about as much electricity as the entire country generates today. Nuo Xu, founder of China Digital Mining Association has claimed that “Ethiopia will become one of the most popular destinations for Chinese miners,” and he is already arranging for representatives from additional mining firms to visit the site.

As far as the actual infrastructure that will be built from this multinational partnership, details have been particularly sparse, especially considering how Kal Kassa revised his claim to downplay the specific amount $250M invested. Bloomberg claims that most government discussion of the project uses various euphemisms like “high-performance computing” and “data mining” to refer to Bitcoin mining, with the project officially designated a data center. “Ethiopia is heavily regulated,” claimed Nemo Semret, CEO of Ethiopian miner QRB Labs, which is involved in pro-Bitcoin lobbying efforts. “Introducing a new sector like this has been a big challenge, and we’ve been working for the last two years to get all the necessary permissions from the government.” In other words, it seems that the government still has some sort of squeamishness over directly endorsing Bitcoin and the industries that support it. Nevertheless, its actions have supported Bitcoin miners a great deal.

Although most of the mining and infrastructure building in Ethiopia has been a thoroughly Chinese business deal, the vast potential in the project has already been recognized worldwide. Marathon Digital, the largest Bitcoin miner in North America, specifically called attention to the site. Charlie Schumacher, Marathon’s vice president of corporate communications, publicly stated that “we are looking at Africa. We believe that bitcoin mining is, among other things, a technology solution for the energy sector, and Africa may be a great place to prove this thesis”. He went on to add that “Bitcoin miners can incentivize the buildout of more power across the continent, by serving as the first customer for new power projects”.

In other words, industry leaders worldwide have identified this project as a powerful first step. Even if the Ethiopian government makes it difficult for Marathon or other US mining companies to buy into this Chinese investment hub, there are countless opportunities to recreate the project. Many Ethiopians today do not have access to electricity, and Bitcoin mining is incentivizing electricity generation there with hundreds of millions of dollars. Is there any shortage of other locations that would similarly benefit from such incentives? Of course not. Bitcoin has the power to be a driver for progress worldwide, pushing electricity generation and job opportunities with it. And as an added benefit, it’s all renewable. Is it any wonder that people worldwide are looking at Bitcoin as a new model to bring economic independence everywhere?

New UK Rules Cause Consternation for Bitcoiners

https://bitcoinmagazine.com/markets/new-uk-rules-cause-consternation-for-bitcoiners

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

New regulations from the British Financial Conduct Authority (FCA) have taken effect over UK businesses that deal with Bitcoin and other cryptoassets, leading to immediate public disapproval.

These new regulations, quietly imposed in mid-February, came as a surprise to many of the users impacted. The FCA has already impacted several payment processors like PayPal and Luno, which have ceased all ability for users to purchase Bitcoin. The main thrust of these new regulations, however, has been in developing what the FCA calls “positive frictions.” Piggybacking on previous decisions in 2023 to combat the rise of “finfluencers,” such as banning refer-a-friend bonuses and other incentives from non-crypto investment sites, the FCA has aimed its new regulations at countering “social and emotional pressures to invest”. In the main, this initiative amounted to one most controversial rule: quizzes and other competency tests on all major exchanges, preventing users from accessing their own funds.

The background for new regulations of this scale are, unsurprisingly, quite complicated. For starters, the FCA is a financial regulator that exists at the behest of the British government, but is not directly controlled by it. Although the Treasury does make appointments to this board, its daily functions are nevertheless independent of direct oversight. For example, the FCA’s predecessor agency, the Financial Services Authority (FSA), was founded in part to curtail the practice of industry self-regulation in the finance sector, which is a legally recognized type of trade association. In fact, CryptoUK, the self-regulating trade association in Britain’s digital asset sphere, directly spoke against these new regulations.

All this is to say, it’s little wonder that the FCA feels empowered to act this unilaterally, especially when it might contradict some of Parliament’s long term economic goals. British Prime Minister Rishi Sunak has made an ambitious policy out of trying to promote growth in the crypto sphere. Sunak wishes to make the country a “crypto hub”, attracting international capital and facilitating industry development through friendly regulation. It’s little wonder that Sunak has identified Bitcoin as an area of major growth: A substantial percentage of Britain’s existing economy is powered by similar longstanding international relationships in the world of banking and finance, and expectations for the economy as it stands have been lagging.

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So, if the same sources of income have been failing to meet expectations, why not look towards a rapidly growing industry that could doubtlessly benefit from these existing ties? Sunak claimed that the first item on his pro-Bitcoin agenda has been to pass clear legislation around a stablecoin, but new FCA regulations have also been very high up his priorities list. There’s just one question, then. Why has an agenda intended to place exchanges under the “same legal framework that covers investment banking and insurance” led to such an overreach?

For starters, the FCA has been marked for a notorious hostility to Bitcoin in the last several months. Although the United States has made worldwide headlines with its approval of a Bitcoin spot ETF, the futures ETF with more indirect ties to bitcoin’s actual valuation has been legal well before that. The FCA, however, established a complete shutdown of Bitcoin-related derivatives in 2021, and has not given any indication that they wish to change this stance. This backwards attitude puts the UK not only behind the US, but also most of its other largest trading partners; both prominent members of the English-speaking world like Canada and Australia as well as the European Union have all begun embracing this multibillion dollar derivatives market. Even Hong Kong, with longstanding economic ties to Britain, has shown far greater receptiveness on this front.

The FCA’s conservative attitude towards such a massive and growing industry has hardly gone unnoticed, needless to say. Lisa Cameron, MP and Chair of the Crypto and Digital Assets All-Party Parliamentary Group (APPG), has made public statements alongside very similar lines as the reports published by APPG, claiming that the world of Bitcoin is of vital economic importance. Although “The APPG has been clear in its recent inquiry report that..we must ensure that the U.K. has robust standards in terms of regulation and consumer protection,” said Cameron. “The APPG is aware that the new financial promotions regime has caused complications for some crypto and digital firms, and of reports that a number of operators have paused crypto purchases while they adapt to the new regime.” She went on to add that “While consumer protection must remain a top priority, government and regulators must also take care to ensure that we do not inadvertently deter responsible and regulated operators from choosing to invest in the U.K.”

So, if nothing else, the concern about these regulations is shared by actual legislators and not only the community. Cameron’s criticism seems particularly noteworthy in that she has only been part of Sunak’s party since October 2023, having previously won 3 elections under an SNP ticket. Additionally, Coinbase has also made headlines with its January hiring of George Osborne, former Chancellor of the Exchequer, in an advisory role. Considering that Coinbase is one of the exchanges most directly impacted by these new rules, a man who was in charge of the Treasury for 6 years is bound to have useful advice.

In other words, there are possible sources for opposition from several different sectors, as both government figures and industry leaders have voiced their objection, alongside the consumers as a whole. As for a timeline on the FCA changing their policies, however, it’s anyone’s guess. Meanwhile, there have been several other prominent interactions between the British legal system and the world of Bitcoin. Craig Wright, the so-called “Fake Satoshi,” is currently involved in a court case over his continued claims that he is the true inventor of Bitcoin. If the court rules against him, it may prove the end for a recurring episode in Bitcoin’s subculture. Similarly, although the United States is known for making the most prominent mass-scale seizures of Bitcoin, British law enforcement did manage to seize more than £1.4 billion in bitcoin in late January.

It’s likely that the FCA’s rules will eventually be loosened one way or another, as the British government has put such a priority on making these new regulations friendly to the industry. If pushback is loud and varied enough, it’ll be clear that a new course is necessary. Bitcoin’s economic star has been going up and up over the past few years, and it’s way too powerful for unelected regulators to put up a high degree of stubbornness. If we can see it in the US’ fight for a Bitcoin ETF, we can see it in the pushback to the FCA: nobody is strong enough to challenge Bitcoin’s crown.

EIA Mining Survey Looms Large Over Bitcoin Mining Industry

https://bitcoinmagazine.com/markets/eia-mining-survey-looms-large-over-bitcoin-mining-industry

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.


Bitcoin miners have not been operating under normal circumstances for the past several months. Bitcoin’s blockchain has seen a particularly intense degree of demand over the past several months, and it looks like BRC-20s, and to a lesser extent, image inscriptions, all made possible by the Ordinals protocol, bear a great deal of responsibility. Essentially, this protocol enables users to inscribe unique data on the most minute denominations of bitcoin, allowing them to create new “tokens” directly on Bitcoin’s blockchain. This means that quantities of bitcoin worth pennies in terms of their fiat value may nevertheless be bought and sold multiple times, with every one of these transactions needing to be processed through the same blockchain, not to mention the high demand seen while initially minting.

This is where the Bitcoin miners come in. The energy-utilizing computations undertaken by specialized mining hardware are not only meant to generate new bitcoin, but they also can be used to verify the blockchain’s transactions and keep the digital economy flowing smoothly. With network usage about as high as it’s ever been, miners have more than enough opportunities to earn revenue just by processing these transactions, and the actual production of newly-issued Bitcoin can take something of a backseat. As of February 2024, these conditions have created a situation where mining difficulty is higher than ever before in Bitcoin’s history, yet the industry is raking in large profits. However, one of the most reliable patterns in the Bitcoin market has been the sheer chaos that sees fees spike and then plummet. So, what will happen to miners after these conditions change?

It’s this ecosystem that became quite disturbed on January 31 when federal regulators declared a new mandate: the EIA, a subsidiary of the US Department of Energy (DOE), was going to begin a survey of electricity use from all miners operating in the United States. Identified miners will be required to share data on their energy usage and other statistics, and EIA administrator Joe DeCarolis claimed that this study will “specifically focus on how the energy demand for cryptocurrency mining is evolving, identify geographic areas of high growth, and quantify the sources of electricity used to meet cryptocurrency mining demand.” These goals seem straightforward enough at first glance, but several factors have given Bitcoiners pause. For one thing, Forbes claimed that this directive came from the White House, which referred to this action as an “emergency collection of data request.” This survey is explicitly created with the goal of examining the potential for “public harm” from the mining industry, and even included an aside that this “emergency” collection might lead to a more routine collection expected from every miner in the near future.

Obviously, language like this has left many in the community extremely uneasy, and several leading miners have already made statements condemning the initiative. The tone coming from regulators seems to be of an overwhelming narrative that these businesses are a potential threat, whether by increasing carbon emissions, taxing electrical infrastructure, or being a public nuisance. Some of the most egregious claims are easily debunked, but it doesn’t change the reality that a few hostile government actions could greatly upset this ecosystem. Furthermore, the world of mining already has a major upset on the horizon, in the form of the impending Bitcoin halving. This regular protocol baked into Bitcoin’s blockchain is set to automatically cut mining rewards in half sometime in April, at block 840,000, and already some pessimists are claiming that this upset will be enough to put nearly the entire industry out of business. What are the actual worst case scenarios here? What are the most likely ones?

First, it’s important to examine some of the factors inherent to Bitcoin that are likely to impact miners, regardless of government pressure. The miners are in a bizarre market situation because transaction fees can generate revenue on the same level as actual mining, but the situation may be stabilizing. New data shows that Ordinals sales plummeted by 61% in January 2024, showing that their impact on blockspace demand is likely to diminish. So, if certain miners are depending on these tokens to maintain profits, that revenue stream is not looking particularly dependable. However, even though network usage from these microtransactions is likely to plummet, regular transactions are actually looking great. The trading volume of bitcoin is higher than it has been since late 2022, and it shows no signs of stopping. Surely, then, there will be plenty of demand for the minting of new bitcoin.


Bitcoin traffic has been increasing for several months as the prospect of a legalized Bitcoin ETF became more and more real, and now that this battle is over, the trading volume has increased at a greater rate. While the halving can present opportunities and challenges for miners, none can claim that it’s an unexpected event. Firms have been preparing for it as a matter of course, with around $1B of this increased trading volume coming from miners themselves. Reserves of bitcoin held by miners are at their lowest point since before the spike in 2021, and miners are using the capital from these sales to upgrade equipment and ready themselves.

In other words, independent of any government action, it seems that the market conditions are likely to shift due to these factors. The bottom may fall out for some of the smaller firms that operate on slim margins, but the overall growth in Bitcoin trading volume means that there will always be opportunities to make revenue. Since it’s the most well-capitalized firms that can make the most extensive preparations for the halving, it may very well come to pass that some of the more inefficient mining companies will not be able to survive. From a regulatory standpoint, perhaps that is a wanted outcome.

The federal government seems mostly concerned with perpetuating the idea that the mining industry is a tax on society as a whole, consuming massive amounts of electricity for an unclear benefit. However, only the most efficient operations will be guaranteed to survive the halving and its economic fallout. As the less efficient ones close their doors, the survivors will be left with a much larger slice of a smaller overall pie. Besides, if the open letters from several leading firms are anything to go by, these companies are fully prepared to make a vocal fight against any attempted crackdown on the industry. Considering that the survey itself is still in its first week of data collection, it’s difficult to say what conclusions it will draw, or how the EIA will be empowered to act afterwards. The most important thing to consider, then, is that these new trends are taking place with or without the EIA’s influence.

The survey is only just beginning, and the halving is only months away. There are plenty of reasons to be concerned about the EIA’s impact on the mining industry, but it’s not like this is the only factor. From where we’re sitting, it seems like the whole ecosystem may be substantially changed by the time regulators are ready for any action, even if the action is harsh. The people left to face them will be hardened themselves, survivors and innovators from a chaotic market. Bitcoin’s great strength has been its ability to change rapidly, allowing new enthusiasts the chance to take advantage of one set of rules, and then rise or fall as the rules change. It’s this spirit that propelled Bitcoin to its global heights over more than a decade of growth. Compared to that, what chance do its opponents have?

Presidential Election Puts El Salvador’s Bitcoin Future At A Crossroads

https://bitcoinmagazine.com/el-salvador-bitcoin-news/presidential-election-puts-el-salvadors-bitcoin-future-at-a-crossroads

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.


On Sunday, February 4, El Salvador’s presidential election will determine whether Nayib Bukele and his revolutionary experiment with Bitcoin will have a continued presence in the nation’s future.

Since Nayib Bukele became President of El Salvador in 2019, he has enjoyed a fairly broad base of support; he was the first man since 1984 to win independently of the nation’s two major political parties. The topic that has taken his administration to a subject of worldwide discussion, however, has been his support of Bitcoin. Bukele made world history in September 2021 when he raised it to the status of legal currency, and El Salvador’s radical experiment with Bitcoin has captivated interest worldwide ever since.

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Naturally, a large deal of this interest has been negative, especially from the financial and media establishment worldwide. The Bitcoin law went into effect mere weeks before bitcoin fell from its all-time highs, and this led to no small amount of speculation that the government would lose huge sums as a result. More pressingly, financial institutions like the IMF also repeatedly urged El Salvador to give up on its project, raising the possibility that the country might lose access to loans. However, as of 2024, not only have the government’s investments into bitcoin stockpiles gone firmly into the black, but major financial institutions have also grudgingly accepted the strength of the Salvadoran economy. The nation’s critics have been disproven from this angle, but there’s one more immediate test on the horizon: the matter of Bukele’s re-election.

In an interview on January 31, Bukele’s running mate Felix Ulloa went to great lengths to stress that a re-election will mean a firm re-commitment to Bitcoin. Although Ulloa revealed that the IMF has quietly been repeating its requests to de-list bitcoin in El Salvador, he was insistent that these pleas are falling on deaf ears. A particular source of strength, he claimed to Reuters, was the takeoff of the ETF in the United States. A major victory like this means for him that Bitcoin “enjoys the greatest credibility in the entire world.” Not only did Ulloa claim that the existing laws in support of Bitcoin “will be maintained”, but he also added that the proposed “Bitcoin City” infrastructure project continues to enjoy the government’s full support.

As far as the polls are concerned, a wide variety of international press agencies all agree that Bukele’s victory is practically guaranteed. The centerpiece of his popularity, it seems, actually has nothing to do with Bitcoin, as large numbers of citizens remain unconvinced. Instead, it seems his sweeping crackdowns on gang activity are the main reason, causing El Salvador’s murder rate to plummet from a shocking 105 murders per 100k residents in 2015 to 7.8 per 100k, the lowest in the region. In other words, his voters love him extensively, but as of yet they remain ambivalent on the Bitcoin initiative. Fickle support like this could indeed be dangerous, as future economic difficulties could turn this indifference into outright rejection. However, as far as all polling suggests, Bukele will have another term to convince his people.

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Luckily, there are extensive plans in place to attempt to deepen these connections in multiple spheres of life. The usage of an international currency like bitcoin has attracted the flow of international spending, with tourism to the nation spiking in recent years. In addition to these more casual inflows of cash, the government has also encouraged more permanent immigration by allowing foreign nationals to directly purchase citizenship with bitcoin investment. These attempts to raise foreign dollars can definitely impact the nation’s citizens, but there are also efforts underway to directly create jobs in this burgeoning industry.

Since October, El Salvador has partnered with several firms to create mining infrastructure powered by geothermal energy. Bitcoin mining is a growing market worldwide, and the use of green energy easily sidesteps the most common refrain against it. These goals of creating domestic jobs and attracting foreign investment both fall under the umbrella of the aforementioned “Bitcoin City” project, a plan with the long-term goal of fostering all the multifarious jobs in software development and blockchain engineering associated with the digital asset space.

If El Salvador’s voters do decide to re-elect Bukele on February 4, he’ll have his work cut out for him to ensure that Bitcoin is an enduring presence. As of yet, many of his citizens are either earning extra revenue from international travelers interested in Bitcoin, or involved in building the new pools to mine it. Although the economy is growing, this has not been sufficient to win his people over to the full possibilities of a radical new economic future. Nevertheless, he has won their love anyway, as his government has continually enjoyed fierce public support. In other words, re-election is very likely, and the experiment will continue for the five years of his second term. The major challenge of these five years, however, will be to ensure that Bitcoin will become a fact of life for his people. Still, as daunting of a task as this may seem, he has already been working on normalizing Bitcoin in a wide variety of ways.

Just as one example of this, last year the country partnered with one of its largest distributors, enabling huge numbers of businesses to begin accepting bitcoin for the most mundane transactions. Furthermore, these normalization efforts have extended beyond El Salvador’s borders. El Salvador needs the support of its citizens, but it also wishes to encourage broader support from other nations. The Central African Republic (CAR) was directly inspired by El Salvador when it briefly became the second nation to adopt bitcoin as a legal currency. However, this effort was simply impossible to sustain in a country where around 90% of citizens do not have internet access, and it was shuttered in 2023. CAR was not the only country to be influenced by Bukele’s government, as he actually sent a team of “Bitcoin Ambassadors” to Argentina upon the election of its newest President last November. Outreach efforts like this will go a long way to ensure that El Salvador is the first country to accept bitcoin as legal tender, but won’t be the last.

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Some of these initiatives highlight the way that El Salvador’s Bitcoin project has radically different aims from the ETF battle in the United States, even though Salvadorans like Vice President Ulloa are naturally heartened by its victory. The ETF is a financial instrument that allows ordinary Americans some extra opportunities to indirectly profit from Bitcoin’s success, while Bitcoin has a radical vision for anyone in the world to take control of their economic fortunes. Nayib Bukele has shown a real interest in fostering Bitcoin as a part of everyday life, as shown by the variety of ways he’s encouraged economic development and his attempts at international outreach. Our community needs fighters like those who pursued the ETF battle, but it’s important to remember that Bitcoin means so much more than a way to earn fiat currency. If Bukele has the chance to really embed Bitcoin in El Salvador’s society, it’ll show the world what kind of success Bitcoin can offer us all.

Bitcoin Fluctuates Amidst Increasing Institutional Acceptance

https://bitcoinmagazine.com/markets/bitcoin-fluctuates-amidst-increasing-institutional-acceptance

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.


Bitcoin has seen a slight reversal in its ongoing rally over the last months of 2023. This price fluctuation may nevertheless suggest an upcoming bull market as the asset finds new backers.

Throughout its entire history, Bitcoin has been a wildly fluctuating asset. In the almost 15 years since the Genesis Block was mined, its greatest valuations have always come as a result of dramatic spikes, and the comedown from these highs has always been about as steep. Nevertheless, it has always shown an uncanny tendency to end up in a better situation after the dust settles. This volatile nature has even been taken as a positive in many aspects, as it reinforces a central truth for Bitcoin: It is ultimately a currency, with a new vision for how economic relationships should operate in society. Bitcoin has gained a great deal from those who wish to treat it as a pure investment asset, but these people cannot form the heart of the community.

All this is to say, Bitcoin prices fell on December 11 after an extended bull market that lasted several months. Generally spurred on by the positive buzz around a Bitcoin ETF winning federal regulatory approval, the price continued to rise despite setbacks like the change of CEO at Binance, the industry’s largest exchange. Despite the appearance that this new rally could withstand shocks that would have been significant even a year prior, its invincibility could not last as the price dropped nearly 6% from midnight Sunday to the time of this writing. As the price hovers around the $41,000 range, a noteworthy development is the apparent lack of fear from all corners of the Bitcoin world.

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Although it may seem fairly standard for the most die-hard Bitcoiners to view all price declines as a “healthy correction” or a cooldown for an “overheated” market, even more traditional financial media outlets like Barron’s have claimed that “the tea leaves in crypto derivatives still point to bullish animal spirits.” Speaking primarily about a series of potential catalysts, the esteemed weekly circulation seemed to point only to reasons that this setback is minor. In particular, it quoted FxPro analyst Alex Kuptsikevich in stating: “A wave of profit-taking hit the cryptocurrency market on Monday morning…we saw a massive exit from long positions in low liquidity… Strong demand for risk assets in traditional markets suggests that the market will try to get back on its previous growth track.”

These long positions in particular are at the crux of the recent downturn. After months of success, indirect investors showed a particular interest in risky bets where Bitcoin was concerned: These investors had a greater stomach for starting futures contracts at heavily leveraged positions. Although bets like this would be easier to set up and earn money without higher startup capital, they’d be liquidated automatically if bitcoin were to fall suddenly. A sudden drop in price was quickly able to erase some $330 million in these bets, a figure that ballooned to $500 million the next day. These leveraged positions seem as of yet to be the biggest casualties from the price drop.

In other words, as analysts have been quick to point out, the market was just too hot. A series of figures add weight to the claim that Bitcoin’s success has encouraged these risky bets: Not only was the bull market entering historically unstable rates for the first time since before the bull market, but other factors like mining difficulty serve as canary in the coal mine. With the next halving becoming increasingly imminent, miners are in no position to expect a continued scenario where mining rewards increase faster than mining difficulty. But that’s exactly the scenario that’s been playing out.

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So, although some experts have claimed that this cooling period may continue to persist as long as one month or longer, the overwhelming consensus is that the price of bitcoin will come back as hard as ever in the very near future. But why is this? Sure, a tiny setback for bitcoin doesn’t seem to hurt anybody but the overleveraged futures traders, but what can justify the real belief that, as CNBC put it, “there’s plenty of momentum left in the current bitcoin uptrend?” The answer comes from the same thing that created this momentum: a real belief in the Spot Bitcoin ETF.

Last week’s rumors that the leading ETF applicants were nearing a breakthrough in their negotiations with the SEC have turned into new negotiations: BlackRock in particular has extended a new invitation for the largest banks on Wall Street to get in on the action. BlackRock requested a change in the ETF protocol from their proposals, allowing certain authorized participants to use cash instead of bitcoin to invest. Considering that some large banks are prohibited from directly holding Bitcoin or other digital assets, this change directly opens the door for some of the largest players in the industry. An offer like this seems to further suggest that BlackRock’s talks with the SEC have stabilized to a new degree.

Additionally, Google has also updated its advertisement policies, quietly making changes to a platform that has historically had a great skepticism towards Bitcoin-related products. With certain caveats, Google will now permit the advertisement of “Cryptocurrency Coin Trusts” to users in the United States, specifically claiming that financial assets representing actual digital currency are fair game. On top of this, Google has even loosened its enforcement strategy for violations of this type, turning immediate suspension into a 7-day warning. Changes like this surely seem to suggest that the search engine giant is also expecting a forthcoming approval.

This setback, in other words, is just a natural part in the life cycle of Bitcoin, and bitcoiners appreciate that. Sometimes, the currency’s runaway success attracts newcomers that don’t fully understand that bitcoin’s volatility cuts both ways. Traders saw overleveraged positions as a cheap way to potentially win large sums of cash from bitcon’s price rally, and now a temporary setback has caused hundreds of millions to evaporate. But this is nothing new. Downturn phases like this keep the market from growing too unsustainably for too long, and ensure that anyone who’s interested in Bitcoin for very long will appreciate more than a quick chance for profit. Bitcoin’s capacity for meteoric rise is what brings people into the fold, and meteoric declines are what temper their expectations. Through all of these moves, Bitcoin only grows in strength.

As ETF Hype Builds, Bitcoin Rallies Past $40k

https://bitcoinmagazine.com/markets/as-etf-hype-builds-bitcoin-rallies-past-40k

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

Despite a few apparent setbacks, like the change of leadership at Binance, Bitcoin’s ongoing upward trend is turning into a runaway success as the price has crossed the $40,000 mark.

Things have been going well for Bitcoin as of late. Not only has the general trend in its valuation been a steady increase throughout the entirety of 2023, but September has also seen this steady growth kick up a notch. Although there are sometimes claims that this growth will taper off or reverse, the beginning of December has shown that quite the opposite is true: It’s looking like a real bull market out there. At the beginning of September, it was valued at $25,000 and it crossed the $40,000 mark shortly into December.

One of the most obvious signals that the hype train would slow down has been the events at Binance. Although it was the world’s largest digital asset exchange in November, the company has pled guilty to financial crimes in the US, prompting the CEO’s exit and billion-dollar fees on top of this exchange losing its crown. As competitors have moved in to take bites out of Coinbase’s market share, one question has stood out to skeptics: Why isn’t Bitcoin hurting more? When the world’s number one exchange has failed in the industry, like with Mt. Gox or FTX, it has often taken a severe bite out of bitcoin. “Crypto” seems to be hurting badly right now, but bitcoin’s looking shinier than it has in a year and a half. Where did this sturdiness come from, in such an otherwise volatile asset?

The most commonly-cited reason for all this success has been the continued sense of impending victory on a Bitcoin spot ETF. The ETF, or exchange-traded fund, is a new financial instrument whose valuation is tied directly to bitcoin, and would have a very wide reach into American markets. Although anyone can purchase bitcoin, the ETF would mark a whole new level of prestige and acceptance: Anyone could buy them without understanding or even being fully aware of the concept of self-custody, such as if a pension or mutual fund bought in. Although the SEC has continued to drag their feet on a firm acceptance, it is generally believed that the fight is nearing the end. Bloomberg, for example, openly cites the ETF as a reason to predict a $500,000 bitcoin price by the end of the upcoming cycle.

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There’s more to this belief than a mere collective fantasy, however. Although it is difficult for an unelected board like the SEC to be directly swayed by popular opinion, there is real power coming to bear on the side of the Bitcoin ETF. For example, the world’s largest asset manager, BlackRock has had a sustained prominent role in the ETF fight, filing one of the first petitions to the SEC and throwing its weight into the legal battle. On December 5, it was made public that it had received a shot in the arm: On October 27, a single unknown investor gave the company $100,000 to add to its war chest.

Cases like this have shown the real staying power of Bitcoin, as these larger institutions have contributed to an overall sense of optimism that can be measured in many distinct ways. For example, the desire to “hodl” bitcoin, and refuse to sell them for years at a time, has been treated as gospel by many Bitcoiners. This has evidently been quietly growing over the past few months: In August, when the rally hadn’t even started, it was revealed that bitcoin holdings on major exchanges had fallen to the lowest level in five years. In the intervening months of success, however, the trend has exploded.

Coinglass

An increase in self-custody like this could point to a few different trends. First of all, especially in light of the events at Binance, it could simply mean that growing numbers of Bitcoiners wish to take advantage of the blockchain’s radical options for self-custody. Why keep your money on an exchange if you don’t need to? The important thing to notice is that the trend is to pull bitcoin out of exchanges for self-custody, not to simply sell it off for fiat. In other words, people expect its value to continue increasing, and they expect it so thoroughly that it’s becoming harder and harder to find anyone selling. And as it seems from these price moves, it’s a smart move to make.

In this space, some positive moves have a way of feeding into each other. Although Bitcoin’s technology obviously has revolutionary implications on the monetary system worldwide, it doesn’t hurt when the speculative value is doing well, too. Take, for example, the case of El Salvador, a Central American nation that shocked the world when it made bitcoin legal tender. There have been many benefits such as tourism dollars rolling in and new jobs coming with a nascent digital asset industry. However, the nation has also invested directly into bitcoin, and it’s been a topic of mockery for much of the establishment press. With bitcoin “failing” and “bombing,” there has been “little to show” from the nation’s investment in terms of dollars and cents.

Now, however, Salvadoran President Bukele is proud to claim that “El Salvador’s Bitcoin investments are in the black!” Despite “literally thousands of articles and hit pieces that ridiculed our supposed losses,” he said, “if we were to sell our bitcoin, we would not only recover 100% of our investment, but also make a profit of $3,620,277.13 USD (as of this moment).” He added, of course, that the government has no plans to sell off any of it. El Salvador has been purchasing bitcoin at a steady rate, and it’s a true mark of success that the nation can call even this decision vindicated. The new jobs and tourists will come either way, but surely it’s best to prove the haters wrong, after all.

In short, it’s an extremely positive sign that bitcoin is doing this well in this environment, enjoying some of the best news that it’s had in years. Some of the biggest rallies, like in 2017 and 2021, came on quickly with few signs of this success. We have some undeniable signs right now. Bitcoin has had a few months where the “crypto industry” has seen real rattles, and the world’s leading digital asset has barely noticed. It is important to remember that some of the biggest collapses have happened without warning too, and many have been directly caused by the exact same type of troubles that Bitcoin can skate past now. Who knows where we’ll be when the ETF is approved? Who knows what kind of benefits will come to the entire world? In any event, a more resilient Bitcoin is prepared to move into the future, and it’s looking very bright indeed.

Binance CEO Changpeng Zhao Pleads Guilty, Steps Down

https://bitcoinmagazine.com/legal/binance-ceo-changpeng-zhao-pleads-guilty-steps-down

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.


In a shocking development to the international Bitcoin community, Binance founder and CEO Changpeng Zhao is stepping down from his role as part of a guilty plea on criminal and civil charges in the US.

Binance, the largest digital asset exchange in the world by volume, has seen its very future come into question as the result of a legal battle with the US Department of Justice (DoJ). Founder and CEO Changpeng Zhao, also known as CZ, pled guilty on September 21 to money laundering violations, and agreed to both resign from his post and pay a $50M fine, which may be reduced. Binance will also pay a whopping $4.3 billion fine, and this penalty seems fairly set in stone. This agreement comes at the end of a monthslong legal battle in which the DoJ charged him of several serious violations: Not only facilitating transactions with sanctioned groups such as Russian mercenaries fighting in Ukraine, but even encouraging users to cover their tracks on potential violating money-laundering statutes.

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Since its founding in 2017, Binance has steadily grown over the years to become the world’s most popular Bitcoin exchange. The firm was initially founded in China, but has moved locations several times over the years, even to different continents, and currently does not have an official headquarters. It has grown in notoriety despite requiring a different platform, Binance.US, to offer services of any sort inside the United States, but its biggest windfalls came as it absorbed FTX customers in the wake of that exchange’s apocalyptic collapse. CZ had long been one of the industry’s biggest players, but especially since FTX fell, Binance has indisputably been the largest in the space. And now, CZ’s deal seems like a last-ditch move to keep the company operational.

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In his resignation letter, published one day after he pled guilty in Seattle, CZ claimed that “Binance will be fine. I will have to deal with some pain, but we will survive. We will get through, although with some changes in structure. It might not be a bad thing when we look back in a few years’ time,” adding that he “needed a break anyway.” Publicly, he tried to present an optimistic face, expressing confidence in his employees and encouraging a smooth transition for the new head, Richard Teng. Despite this confident facade, there are still new difficulties brewing for CZ and his company.

For one, since Binance needed to spin off a subsidiary to operate inside the United States, Binance.US is not strictly covered by the initial plea agreement with the Department of Justice. Indeed, as of November 27, the Securities and Exchange Commission (SEC) is actively investigating the US branch for misuse of consumer funds and a possible backdoor that CZ could use to continue accessing Binance.US assets. Binance lawyer Matthew Laroche claimed that the company “has withered under the stress and cost of the SEC lawsuit. The average monthly value of Binance.US assets is down almost 90% and Binance.US has lost almost half of its monthly users since the SEC filed its case.”

In addition to this continued attempt to limit CZ’s potential resources, his movements are also being curtailed. Changpeng Zhao has established ties in several nations: Having been born in China, his family immigrated to Canada during his childhood and he has citizenship there. Additionally, he is a citizen of the United Arab Emirates, and resides there with his wife and children. Considering that the latter nation has no extradition treaty with the US, and that CZ has massive resources to draw on, Seattle District Court Judge Richard Jones labeled him a flight risk. As part of his bail agreement, CZ is temporarily forbidden from leaving the United States, as the government claims that a multi-billionaire with foreign citizenship, a guilty plea and a possible prison sentence would be detained “in the vast majority of cases.” In other words, the fact that he’s free from jail in the US is itself a stretch, let alone leaving the country.

Clearly, the presumption that the company’s founder and head would engage in this sort of behavior does not portend well for the business. Already one of its main competitors is seeing a major boost in the same way that Binance benefitted from FTX’s collapse: Since CZ announced his resignation, the exchange Coinbase has seen a stock price growth of around 20% in five days. This boost for Coinbase comes on top of a very profitable year, as the company’s stock valuation overall has jumped nearly 90% in the last six months. Coinbase is itself even engaged in a legal battle with the federal government, but evidently it has been faring better in this respect.

Still, despite all these setbacks, the company is looking forward. New CEO Richard Teng told the press that he has a “robust timeline” for moving forward with company compliance. Stressing that “Binance is a six year old company—it’s a relatively young company by any measure,” he claimed that he intends to direct a change from the “disruptor” attitude of many tech startups and situate the firm into the world of traditional finance. A former banking regulator, Teng hopes to bring this moderating experience into the future for Binance. Additionally, even though other firms may stand to benefit from their competitors’ failure, a sense of solidarity does exist: Former BitMEX CEO Arthur Hayes called the treatment of CZ “absurd” compared to other money-laundering violators like former Goldman Sachs CEO Lloyd Blankfein, and questioned what these developments could mean for all digital asset exchanges.

Stepping away from Coinbase itself, one must take into account how Bitcoin as a whole has been taking these developments. Which is to say, it’s been fine: The price rally that began in October has continued unabated. Comparing this to the five-alarm fire that took place when FTX collapsed, it’s easy to see how the industry has matured: Commentators have taken notice of the general confidence that Bitcoin is here to stay. Several of the biggest crashes in Bitcoin’s history have coincided with the downfall of major exchanges, but headlines are full of general optimism and Bitcoin’s rally hasn’t even faltered. The state of things in 2023 seems clear: Although individual businesses may rise and fall, Bitcoin has achieved enough adoption and notoriety that it’ll take more than one business to seriously harm it. Binance may very well bounce back from setbacks like this, and if it does, there will be a bustling industry waiting for it.

With BitStream, Bitcoin Use In Data Markets Is On The Rise

https://bitcoinmagazine.com/markets/with-bitstream-bitcoin-use-in-data-markets-is-on-the-rise

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.


Robert Linus, ZeroSync developer and creator of the BitVM protocol, has created a new protocol for incorporating data sales and downloads into the trustless security of Bitcoin’s blockchain, and it may open a new realm of uses for Bitcoin.

Linus has had a busy career as of late revolutionizing Bitcoin’s potential. Although much of the buzz about Bitcoin in the mainstream is related to its monetization and use as a financial instrument as it increasingly becomes entangled with the existing world of finance, Linus has undertaken several important projects to maximally harness the blockchain in surprising new areas. In addition to his work at ZeroSync to create zero-knowledge proofs, in October, Linus made headlines with his new BitVM protocol: A method to create logic gates and complex computations entirely within Bitcoin’s blockchain. Such functionality, at scale, would enable Bitcoin to carry out smart contracts to the same degree as other tokens like Ethereum, only without sacrificing any of Bitcoin’s decentralized characteristics.

On November 11, Linus announced the proof-of-concept for a new protocol: BitStream. Essentially, the plan is to utilize Bitcoin’s blockchain to make atomic purchases of various data packages; in other words, purchases that require no intermediary and can be accepted or disputed by the buyer and seller purely using the functions of their contract. Linus’ whitepaper goes into greater detail: He specifically draws attention to Nostr, a decentralized protocol designed to create censorship-resistant communications.

Although its trustless nature and general aims are very adjacent to Bitcoin’s ethos, Nostr does not directly use Bitcoin, and Linus claims that “paid servers for platforms like Nostr often underestimate their operating costs when charging a monthly payment for storing a user’s data. Users can split their payment into daily or weekly increments if they don’t trust the servers, but this strategy doesn’t resolve the economic challenges servers face. Users are paying to upload their data, so servers are not paid per download.” He went on to state that one of the main focuses behind BitStream is the requirement that servers are incentivized and compensated, using a pay-for-download basis.

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Although Linus was quick to state some of the very easy ways that BitStream’s encryption protocol would be further complicated, to make the service overall more secure, he made an explanation of the basic fundamentals using a much more simplified model. Essentially, as is extremely common in file encryption, the initial file is broken into chunks to form a Merkle tree, and it then hashes each chunk of data. The new File ID is the root of this tree, the piece of information that contains all the hashes and none of the original data. A one-time pad is then used to encrypt each of the original chunks, using a different formula than the hashes in the unencrypted tree. The hashed chunks and the new encryptions of the same chunks are then paired together, into a new tree with a new root that is shared with the server.

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With the Encrypted ID available, an automated process can exist where payment by the seller is automatically met with the other pieces of data needed to decrypt the actual file: All encrypted chunks, the hashes of all unencrypted chunks and the original file ID. If there is any discrepancy between the encrypted chunks and the unencrypted chunks, it will be immediately evident, and the buyer can use it as a proof to the blockchain that the transaction is somehow bogus and should be refunded. In this way, a secure method for transferring files is transformed into a trustless contract that financially incentivizes the data server, all using the power of Bitcoin’s blockchain.

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This protocol is enabled with a wide variety of Bitcoin’s payment channels, obviously including the Lightning Network but also sidechains like Liquid and several more obscure solutions. It is also constructed in a similar way to BitVM, not necessarily clogging up Bitcoin’s blockchain by making every step require on-chain transactions, but verification and disputes can easily do this to carry out disputes. When Linus was told that BitStream does for storage space what BitVM does for execution time, and asked if they could be combined, he replied in the affirmative and claimed that he came up with BitStream first, and needed to figure out how to generalize it into BitVM.

Although this protocol has had both its supporters and detractors, Linus was succinct when he was asked on Twitter what makes this protocol better than other storage solutions? His answer: “It’s bitcoin.” Once again, Linus has figured out a way to carry out some of the functions some altcoins have centered their business model around, all using the number one decentralized currency, and not even having negative side effects. It’s in this spirit, then, that we should consider Durabit: a similar protocol for using Bitcoin to incentivize and guarantee the security of data transfers, albeit with an anonymous creator.

Durabit is a protocol built on top of one of the Internet’s most notorious protocols, BitTorrent, the file hosting service. Although it has gained an immense reputation over its 22 years of functionality, it requires users to actively seed the data for further downloads. If a file is downloaded by users more often than it is re-seeded, it disappears. Durabit does not propose a completely trustless method to solve this, although it is reasonably low-trust: A mint runs the protocol, and accepts funds from users that wish to see a file seeded. The mint then makes micro-payouts to seeders at timed intervals, so that the mint cannot directly abscond with the funds and the initial investor can revoke the remaining funds if they feel the mint is acting in a dishonest manner.

This protocol is far more niche, and for that matter less trustless than BitStream, but it nevertheless opens up a truly novel use-case in the history of Bitcoin. Although the cry of “seed your torrents!” has been an essential refrain for good Internet etiquette for decades now, the disappearance of files from the platform and the difficulties of running a program like Nostr show that goodwill isn’t always enough. With Bitcoin, there can be an actual incentive to continue best practices and encourage the free flow of information, all without tying these incentives to an outside authority.

Even the most well-intentioned overseer can still be pressured by external forces to stop the flow of data, but protocols like these show how information can flow with either a tiny arbitrator or none at all. Bitcoin has a powerful ability to transform the entire world of data markets, and it’s all contained within the most fundamental laws of Bitcoin’s ethos. If BitStream sees widespread use, if further anonymous Bitcoiners create protocols like Durabit, who knows what the possibilities are? After the community begins to innovate on a new concept for Bitcoin, the sky’s the limit. 

CBOE to Launch Margined Bitcoin Futures Trading in 2024

https://bitcoinmagazine.com/markets/cboe-to-launch-margined-bitcoin-futures-trading-in-2024

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.


The Chicago Board Options Exchange (CBOE), the largest US options exchange, has announced a move to open a new model of Bitcoin futures trading in 2024: A cryptocurrency-native exchange and clearinghouse that offers margin trading and leveraged derivatives among many planned products.

CBOE Digital announced these plans on November 13, sending ripples through the entire Bitcoin community with a radical list of planned features and trading options. The exchange is offering a wide array of products and services, so that users are not only able to directly invest in these futures contracts, but also to engage in multiple higher-risk methods of increasing their purchasing power. Margin trading involves using the assets in an account as collateral for a much larger loan from the exchange, to be invested in these futures trades, while leveraged trading allows a user to receive essentially a line of credit to magnify their position, taking gains and losses at several times the amount of their initial investment. CBOE plans to offer both of these functions.

These are only a few of the options outlined in their initial press release, as the exchange claimed to present “an intermediary-inclusive model” that “ensures separation of duties to avoid conflicts of interest,” and that CBOE’s capacity to serve as both exchange and clearinghouse “will allow it to potentially bring more unique and groundbreaking offerings in 2024.” The announcement also adds that their roadmap includes several physically delivered products, pending regulatory approval. By acting in this manner, ordinary investors will have a lower physical barrier to entry if they wish to gain exposure to Bitcoin, with the caveat that these margin and leverage options also come with an added risk.

Although CBOE’s plan to add these high-reward options to the world of Bitcoin futures trading is certainly a new experiment, the exchange’s history with this type of trading goes back quite far into Bitcoin’s history. CBOE was in fact the first options exchange in the world to offer Bitcoin futures trading back in December 2017 when it beat their Chicago-based rival CME to this milestone by 8 days. Although this particular period in crypto was heady with excitement, showing an unprecedented spike in Bitcoin’s price that wouldn’t be matched for several years, this rally wouldn’t last. Ed Tilly, then-CEO, claimed that “given the unprecedented interest in bitcoin, it’s vital we provide clients the trading tools to help them express their views and hedge their exposure,” but nevertheless this initial project was shuttered in 2019 during the bear market.

Still, although CBOE’s worldwide-first in Bitcoin futures trading couldn’t stay the distance, this actual type of Bitcoin exposure has proven very popular with the test of time. The Chicago Mercantile Exchange (CME) for example, which launched the second-ever futures trading program, has seen years of lagging interest turn into dramatic success. The CME has recently been enjoying a higher rate of Bitcoin futures trading than Binance, the world’s largest cryptocurrency exchange, in a development that commentators have called “a proxy for institutional activity.” It’s easy to see why there’s so much buzz around the subject: The impending Bitcoin ETF is frequently credited for Bitcoin’s success in late 2023, and the main point of interest is that a financial instrument like this would be an easy stepping-stone for a layperson to become financially entangled with the world’s premier digital asset. But, if rates of futures trading conducted in cash versus crypto are anything to go by, Bitcoin futures trading has also been doing this.

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So, although CBOE ended their groundbreaking effort to pioneer Bitcoin futures trading, they’ve seen the action growing over the years, and have decided to dust off the project with some new and expanded functionality. They gained regulatory approval from the Commodities and Futures Trading Commission (CFTC) in June to carry out these revolutionary product offerings, and they’ve been off to the races ever since. CBOE Digital’s President John Palmer claimed at the time that margin trading is a “big driver” of derivatives trading worldwide, and added that “we’re always taking a very prudent approach to products that we list in the spot and derivatives markets.”

To facilitate a smooth launch for these new services, CBOE has entered into partnerships with several different leaders in the intersection of digital assets and finance, including B2C2, BlockFills, CQG, Cumberland DRW, Jump Trading Group, Marex, StoneX Financial, Talos, tastytrade, Trading Technologies and Wedbush. Palmer told the press that “our upcoming launch of margin futures represents a significant milestone for CBOE Digital, and we are grateful to have the support of such a remarkable group of industry partners who share our commitment to building trusted and transparent crypto markets. We couldn’t be more excited,” he added, “to extend access to [futures] further into the digital assets markets and offer margin trading for our customers.”

The new regime of futures trading at CBOE is currently scheduled to open on January 11, 2024. Depending on its success and possible breakthroughs in regulatory approval, new features may be added in the following months. However, although CBOE has also announced that Ether futures will also be available alongside Bitcoin ones, Palmer firmly stated that there are “no plans in sight” that any altcoins will be added any time soon.

The Bitcoin community is waiting with bated breath to see how well these futures trades perform come January. Although margin and leverage trading does include the potential for increased losses and is not for the faint of heart, it doesn’t change the fact that the vastly decreased amounts of cash up front required to invest are a major draw. If the Bitcoin ETF is set to turn total novices into Bitcoiners, with things as mundane as pension funds suddenly tied up with Bitcoin, then this margin futures trading is set to have the smallest private traders to jump in headfirst.

As it stands today, the existing Bitcoin futures trading is already a substantial industry, and CBOE is betting that these riskier options will leave all sorts of traders looking for the action. Although Bitcoin’s main goal is to turn existing financial models on their head, it can’t be denied that the marriage of Bitcoin and finance has paid out massive dividends in increasing Bitcoin’s popularity and value. If CBOE can set a trend in the industry for the second time on Bitcoin futures trading, a whole world of opportunities will open up. 

As El Salvador’s Bukele Approaches Re-Election, Bitcoin Entrenchment Deepens

https://bitcoinmagazine.com/el-salvador-bitcoin-news/el-salvador-bukele-election-bitcoin-deepens

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.


With President Nayib Bukele’s re-election date less than three months away, Bitcoin is seeing continued increases in institutional support within El Salvador, suggesting a strong foundation for the country’s experiment with Bitcoin as legal tender.

Election season is entering full swing in the Republic of El Salvador, with the actual vote for President scheduled to take place on February 4, 2024. Polling for a possible election has shown him to have an overwhelming lead over any competitors for months now, although there has been a persistent question of his eligibility to seek re-election. As of early November 2023, the courts have officially declared his candidacy to be valid, and from where things look now, he seems on track to win a second term. Bukele has been famous for a few different policy decisions; although a large degree of his domestic popularity is due to his anti-gang crackdowns, his presidency has been particularly renowned internationally for his campaign to make Bitcoin legal tender.

El Salvador officially adopted Bitcoin as a valid currency in September 2021 after several months of effort, and since then the country has been home to an experiment of historic proportions. Many of the world’s financial institutions have shown considerable and persistent opposition to this experiment from the very beginning, and for fairly straightforward reasons: Before Bukele added bitcoin, the only legal currency in El Salvador was the US dollar. This situation put El Salvador in an unenviable situation where another country held a direct and powerful leverage in all economic matters. Removing this leverage was an important motivator, but there are many other benefits to a borderless currency in an economy like El Salvador’s: For example, international remittances are a major sources of income for many Salvadorans, and bitcoin offers a way to cut out traditional financial middlemen like Western Union.

Source

Although these two years have been marked by growing pains, many clear signs now exist that El Salvador’s new economic model is gaining acceptance in the broader world economy. For instance, the S&P upgraded the nation’s credit rating in November, citing consistent efforts to manage its debt obligations and overall economic stability. A major boost to this growing stability has been Bitcoin and its new opportunities, as tourism has massively increased with visitors from the US alone doubling since Bukele first took office. Bukele’s administration credits Bitcoin with this success, with Vice President Ulloa calling it the “driving force” of the “rebirth of the country.” The data seems to bear this out, as El Salvador has become popular with foreign full-time residents in addition to tourists, due to the ease of using bitcoin in daily life.

So, with all these factors pointing to Bitcoin serving a major role in the economic development of the country, it seems natural that this policy will become a well-established feature of the nation for years to come, right? There’s just been one hiccup with this plan, and it’s that the population has still shown some reluctance to adopt Bitcoin on a mass scale. Although it certainly has no small number of adherents, the country is far from a status of hyperbitcoinization, where most people use the currency on a regular basis or exclusively. Since the largest part of Bukele’s domestic popularity has come from his reputation as a crimefighter, it’s not inconceivable that even a successful re-election could see Bitcoin gradually de-emphasized.

However, it seems as if increasing institutional support will prevent this backslide from happening. The government has consciously undertaken actions to facilitate a powerful domestic Bitcoin community in the country, like its ongoing contributions to the Lava Pool project, which seeks to encourage local companies to sprout up in the business of Bitcoin mining, all using renewable energy. Although projects like this have been useful for creating a new ecosystem, the government cannot do this alone. Luckily, it won’t have to, as major investments are taking place without the direct encouragement of the state. Distribuidora Morazán, the second-largest distributor of goods in El Salvador, announced that it would be accepting and encouraging Bitcoin through a partnership with the wallet and API platform Blink. The firm does not directly supply goods to consumers themselves, but acts as a middleman: Selling its wares to some 40,000 merchants across the country.

In other words, Distribuidora Morazán is hoping to increase Bitcoinization with business-to-business (B2B) transactions, and it is actively encouraging these businesses to accept and promote Bitcoin, too. Company CEO Jacir Garcia-Prieto claimed that “our distribution operation, until today, has been predominantly managed in cash and this presents a series of logistical, time, and operational difficulties that slow our day-to-day ability to visit more points of sale. Bitcoin solves that.” He added that “The vast majority of our customers do not have access to banking services and this is the perfect way to introduce them to their first financial tool.” Within days of its launch, the plan was rolled out to dozens of merchants, and they hope to reach 1,000 in the next year.

This is not the only major business initiative to take place at this time, as Bitcoin ATM providers Athena and Genesis Coin have also begun a plan on November 8 to add Lightning Network functionality to Bitcoin ATMs across the country. Although there have been some stalled attempts to introduce this vitally important second-layer solution to El Salvador, the persistent drive to try again shows a real confidence that it will be a profitable investment. The Lightning Network allows for Bitcoin wallets to carry out much smaller transactions without delay or high fees, and it is frequently considered more or less essential in using bitcoin for small purchases. For Salvadorans deciding to try out bitcoin, this new upgrade will make the experience that much easier.

Everything seems set for El Salvador’s Bitcoin experiment to turn into a full-fledged economic institution. President Bukele has managed to carry out a remarkable transformation in his first term, and it’s anyone’s guess as to how far he could continue the project with a few more years at the helm. Although the majority of the population remains skeptical of Bitcoin itself, they still love his administration overall, and now many of the hardest growing pains are in the rear-view mirror.

Bridges are being rebuilt with financial institutions worldwide and Bitcoin is bringing in huge dollars in tourism; more to the point, confidence is growing. Bukele’s government has taken an active hand on several occasions with trying to grow the domestic Bitcoin industry, but other private firms have decided to invest independently. Even if the need to win re-election and maintain normal administration takes up a lot of Bukele’s focus, companies like Distribuidora Morazán are more than capable of progressing the vision. With a few more years of growth like this, El Salvador’s Bitcoin adoption could truly become an economic model to inspire innovation worldwide. 

Lightning Network Sees Record Adoption Amidst New Applications

https://bitcoinmagazine.com/markets/lightning-network-sees-record-adoption-amidst-new-applications

The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

The Lightning Network, a node-based payment protocol designed to solve Bitcoin’s solvability problem, has shattered all expectations of success with its rise of over 1200% in the last two years.

The Lightning Network is a “layer 2” decentralized network based upon Bitcoin’s blockchain, designed to solve the scalability problem in bitcoin transactions. Essentially, Bitcoin can function as a trustless and decentralized global currency because of its proof-of-work system that can verify all operations on the blockchain, one block at a time. However, as Bitcoin has exploded in popularity and value over the years of its existence, the number of transactions that need verification has risen logarithmically, into the tens of millions per month. And every one of these transactions requires computing power to be verified.

Source: Wikipedia

The tremendous growth of Bitcoin usage and adoption has come with a double-edged sword, that there are increasing millions of people who want to try out Bitcoin to purchase their coffee, a cab service, or any of the other million everyday transactions that make up normal life. But the transaction fees necessary to validate these tiny purchases have only increased, to the extent that the cost of spending the money would outweigh the actual expenditure dozens of times over. This problem has been anticipated since the early days, and since 2015-2016, new innovation has been creating the Lightning Network.

A system of Lightning nodes operating on top of Bitcoin can handle huge numbers of microtransactions in a decentralized fashion without directly updating the blockchain, and these trades are resolved en masse in a minimal number of on-chain transactions. Usage is near-instantaneous, and the efficiency improvement is a game changer. Since Lightning made its first public debut in 2019, it has only grown in popularity over the past few years. What has been unexpected, however, has been the extreme growth potential in this protocol even years after its launch.

New data from River, a firm specializing in financial services and Bitcoin technology, has shown that Lightning Network transactions have risen by a mind-boggling figure, more than 1,200%, in the last two years alone. River’s report, published on October 12, set out to disprove myths about the Lightning Network. Far from stagnating or plateauing, the active usage of the protocol has shot up tremendously starting in 2021. River estimated that there are anywhere between 279k and 1.1 million users per month, a wide figure made complicated by the difficulty at measuring private transactions and those between two participants.

Source: River

Furthermore, even as their data has suggested that the number of active nodes has plateaued since mid-2022, the Network’s actual capacity to process bitcoins has been steadily increasing all the same. River draws attention to several subtler factors of Lightning Network success in their study: for example, the fact that Bitcoin’s highest prices ever took place in 2021. During the period observed, they claim that “Google search volume for Bitcoin decreased by 45%, and the price decreased by 44%”, and yet still the Lightning Network has grown out of all proportion in the same time period! This suggests that more experienced users, those who remain invested in Bitcoin’s revolutionary economic model despite its setbacks, have been a key force in adopting this protocol.

Additionally, the report analyzed the types of transactions that 27% of their measured transactions were conducted in some unexpected “growth areas”, such as tipping on social media and streamers and also the gaming industry in general. Indeed, on the same day as this report’s release, gaming firm THNDR began a limited rollout of its new API, Clinch. It uses the Lightning Network to enable gamers worldwide a novel new access to the gambling industry: a series of games with Lightning-based wagers that can be played anywhere, instantaneously, for no fees with bets as low as one satoshi. Considering that increasing numbers of Lightning users have taken to such games in recent years, a success here could break into a multibillion dollar industry.

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This is not even the only new application for the Lightning Network launched in mid-October 2023. Blockstream, a Bitcoin infrastructure company, also announced Greenlight, a solution to offer secure self-custody options for Lightning transactions. Project lead Christian Decker claimed that Greenlight is “designed to let developers integrate Lightning in their apps seamlessly while granting users full exclusive control over their funds,” ensuring that the convenience of Lightning microtransactions is preserved even as a host of new security measures are used. As Blockstream is attempting to attract both private and institutional customers with this “Lightning-as-a-Service” model, it has even offered developers free access to on-demand nodes to develop applications on this protocol.

In other words, the growth of the Lightning Network in nearly all metrics is clearly visible all around. Despite a bear market for Bitcoin and the plateauing of new Lightning Network nodes, this revolutionary protocol has grown tremendously. Counting more users and a substantial portion of all bitcoin transactions, the Lightning Network and its community are pushing forward at high speeds. Most importantly, as evidenced by the new applications that are released at a constant rate, Lightning enjoys an active and dynamic ecosystem of new developers to constantly expand on the project. It is this metric, more than any other, that can guarantee success. Bitcoin has built up its incredible reputation and staying power, the ability to bounce back from market downturns and government crackdowns, through the innovation of its worldwide community. And, as the numbers will plainly tell you, that community loves the Lightning Network.

Amidst Legal Battle, Binance to Exit Russia

https://bitcoinmagazine.com/business/amidst-legal-battle-binance-to-exit-russia

The below is a piece from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

Binance, one of the world’s largest cryptocurrency exchanges, has seen several difficult months of various legal challenges, and recently sold all assets of their Russian branch to a company only founded days earlier.

The trouble began for this major exchange in June, when the Securities and Exchange Commission (SEC) sued Binance for alleged violation of securities law. Citing the “unregistered offers and sales of securities” and lying to potential investors “regarding surveillance and controls over manipulative trading,” the SEC put this company in the crosshairs of a major investigation. The Commission later chastised Binance in September about their lack of cooperation with federal regulators, and further action to unseal Binance’s record was carried out soon after.

Although Binance and its defenders have continued to assert that this lawsuit is an unfair attack in part of a federal “crypto crackdown,” new difficulties have been appearing in its fight since the legal battle escalated. A shockwave went through the Bitcoin community as Brian Shroder, CEO of Binance’s US branch, resigned on September 12 alongside a series of layoffs that eliminated approximately one third of the branch’s staff. American customers already are required to go through the Binance.us site to comply with regulators, and US dollars are no longer accepted by the platform. With these existing difficulties, the added trouble of layoffs and new management have put the future of Binance’s access to the entire American market at risk.

However, although the American operation of Binance has seen difficulties, it is still at least somewhat functional and nominally open for crypto transactions. These setbacks, in other words, truly pale in comparison to the announcement on September 27 that Binance was selling off all exchange services and business operations in the Russian Federation, denying any plans to have ongoing revenue sharing or stock buybacks. And the kicker? CommEX, the buyer of all these assets, is a company that first came into existence one day before the sale.

A move this dramatic certainly came with a large deal of speculation from the international Bitcoin community, with analyst Adam Cochrane identifying not only some telltale Binance fingerprints on CommEX’s online presence and a possible usage of the platform by Russian mercenaries in Nigeria and Ukraine. Although Binance’s press release claims that this move is prompted in part by a Department of Justice investigation into sanctions violations, CEO Changpeng “CZ” Zhao has denied that he is the owner of CommEX. Many former Binance employees will continue their functions at CommEX, however, and he assured that “all assets of existing Russian users are safe and securely protected.”

For a major international company already involved in a months-long legal battle with the federal government, these developments are exceptionally shady. Russia has long been one of the international crypto scene’s leading nations, with high levels of interest in purchasing Bitcoin and active development in crypto and blockchain technology. So, for Binance to abruptly and completely withdraw from this major market implies a serious disruption with their normal activities and a desperate state of operations. And what if the Justice Department continues this probe, suspecting that CommEX merely is a shell company created to avoid charges? Could a lawsuit for violating sanctions join the accusations of financial impropriety?

Binance has seen some good news in the days following this announcement, but also further setbacks. On September 30, two influential players in the cryptocurrency industry, stablecoin issuer Circle Internet Financial Ltd. and crypto investment fund Paradigm Operations filed amicus briefs in support of Binance’s attempt to dismiss the lawsuit against them. Although it is surely heartening to see support from companies with no financial stake in Binance — Circle is even partially owned by Binance’s competitor Coinbase — it is unclear whether the actions of these other firms will deter the SEC’s offensive.

Worse, it is no longer only the federal government targeting Binance through the SEC and Department of Justice. On October 3, Nir Lahav filed a class-action civil suit against Binance and several subsidiaries, specifically mentioning CEO Changpeng Zhao by name. Although this suit alleges that Binance has indeed violated SEC regulations, the goal of this lawsuit is for private entities to win compensation for damage to their businesses. In essence, Lahav and the plaintiffs have accused Binance of triggering the collapse of FTX, allowing Binance to secure more of the market.

These charges seem somewhat flimsy, especially considering that they allege foul play against a firm whose CEO is currently on trial for fraud and money laundering charges. Still, even if this lawsuit is dismissed in short order, it still is a very telling snapshot of the general attitude towards Binance: there is blood in the water. Perhaps these plaintiffs are primarily aiming to force Binance to settle with them, or perhaps they plan to pursue this fight as long as possible. Regardless, actions like this are rarely taken against multibillion dollar businesses with a stable footing.

Even if this lawsuit flops without much impact to Binance’s underlying business, there are other warning signs that seem even more dire. There has been a dramatic fall from grace for Binance’s stablecoin, BUSD, as the firm announced on October 3rd that they would cease all borrowing and lending in BUSD before the end of the month. In August, Binance announced a gradual closure of the BUSD asset, albeit with a vague timeline of some time in 2024. To have such a major aspect of the token shuttered in such short order is typical of much smaller stablecoin operations. BUSD, however, had a peak market capitalization of $23 billion in November 2022, and has cratered dramatically in less than a year to barely over $2 billion. Evidently, something has gone deeply wrong with this previously-successful product, now that it is being abandoned entirely.

Source: UTXO Management

It’s anyone’s guess as to what happens to Binance from here, whether it ends up completely ceasing to exist a year from now or flourishing beyond its former prominence. In any event, the value of Bitcoin itself seems untangled from these proceedings. Although the entire crypto industry took a massive and sustained hit when FTX collapsed suddenly, the compounding difficulties for another giant crypto exchange have coincided with a solid performance by the biggest cryptocurrency. Perhaps Bitcoin has learned some lessons from previous setbacks, and will be more resilient to future setbacks. After all, if there’s one thing that these developments can demonstrate, it’s that the world of Bitcoin is a global business with multifarious connections. It’s far bigger than even the largest crypto exchange.