Binance Coin Skyrockets, Starbucks Coffee for Bitcoin | Hodler’s Digest

How much Bitcoin do you buy a week? Well, probably not as much as Twitter CEO
Jack Dorsey, who went on ‘tales of the crypt podcast’
to talk all things Bitcoin. During the course of the interview, he hinted
that he buys up to $10K worth of BTC a week, slowly converting his
over $5 billion into crypto. Brad Garlinghouse was in a more fighting mood
this week, he slammed the JPM Coin following speculation that the major bank’s project
could render Ripple obsolete. Garlinghouse said that the JPM Coin lacks
interoperability, just use the dollar guys! He did however have one conciliatory remark:
the Ripple CEO said that the very fact that a major bank was ‘leaning in’ to blockchain
and crypto is a good sign.

Nouriel Roubini, AKA Dr. Doom, might never
change his mind on crypto, but some previous FUDmeisters have repented. Niall Ferguson, historian and author of the
Ascent of Money, has recently joined a stablecoin project and said that crypto won’t turn
out to be a complete delusion after all. Roubini only saw betrayal. Also this week, the Neutrino scandal continues, college campuses mine crypto, a Bakkt-Starbucks
equity deal, and time to get bullish about Binance Coin. Ladies and gentleman, I’m Molly Jane, and
this is your weekly Hodler’s Digest. Let's take a look at the
markets this week. The Coinbase/Neutrino scandal might be
reaching a conclusion. This week it was announced
that former members of spyware firm Hacking Team
will transition out of Neutrino; However, their departure date
has not been confirmed. Details of the acquisition were leaked on
Wednesday, legal documents reportedly revealing that Coinbase bought the firm for $13.5 million. The cost of the acquisition at this point
goes beyond money; Brian Armstrong and his team are clearly backpedaling furiously after
some severe blowback from the crypto community.

The hashtag #DELETECOINBASE emerged in response
to Coinbase working with former members of Hacking Team, which had reportedly helped
repressive regimes monitor journalists and political activists. Armstrong issued an official statement expressing
regret and a lack of due diligence. However, he maintained that Neutrino was of
critical importance to Coinbase, and yet there are still questions that have been left unanswered. This prompted crypto Twitter person Whalepanda
to post a link with a list of 10. Caught up in the melee was blockchain analytics
firm Elliptic, who provides tech to Coinbase.

A Coinbase executive had defended the Neutrino
acquisition by saying that existing external tech providers were selling Coinbase user’s
data to third parties, a claim which Elliptic denies. Chainalysis, another blockchain analytics
firm, took preemptive measures; they published an official statement assuring their clients
and the public they do not partake in such activities. Worried about student debt? Concerned you will leave college penniless
and destitute? Well, have no fear, the answer is simple:
mine crypto! According to the new studies, students across
the U.S. are doing just that. In fact, college
campuses are the second-largest crypto miners across industry verticals. The research was carried out by Umbrella,
a security product for tech conglomerate Cisco. They monitor their clients’ network connections
to screen malicious activity, which includes potentially nefarious crypto mining.

University campuses
are ranked second, at 22%. The energy and utilities sector
is number one, at 34%. A Cisco threat researcher explained the trend
and why it’s so cost-effective for students: "Mining difficulty for a lot of coins is very
high right now — which means it costs more for electricity and internet than the profit
you can produce from mining those coins. If you don't have to pay for those costs,
then you are in a really good spot for making money on the university's dime." Cyber attack monitoring firm Vectra discovered
a similar trend — intentional crypto mining and cryptojacking were more prevalent on college
campuses than in any other industry.

So far, universities have not really commented
on the trend and there have been no major crackdowns. However, with the need for more and more powerful
hardware to turn a profit, it is hard to imagine many students are making a serious dent in
their student loans, which is $40k on average. The dream of buying coffee with Bitcoin
has never been so close to materialization. According to unconfirmed reports, the previously
announced Bakkt digital assets platform, which includes Starbucks as one of its associated
enterprises, actually completed an equity deal with the coffee giant. The anonymous source further notes that Starbucks
will install Bakkt software in its stores, thus allowing customers to pay with Bitcoin but not really. The crypto will instantly be converted into
fiat, meaning that Starbucks is not truly accepting your Bitcoin for a Frapp. When the partnership with Bakkt was announced
last summer, Starbucks had toned down hodlers’ enthusiasm, clarifying it will not accept
Bitcoin directly, but that they will continue to talk with both customers and regulators
as the crypto space evolves. Set to be launched by the Intercontinental
Exchange at some point this year — pending regulatory approval in a process that has
already been elongated by the lengthy U.S.

Government shutdown — Bakkt plans to initially
offer physically-delivered Bitcoin futures. Commenting on the partnership with Bakkt,
vice president of partnerships and payments at Starbucks Maria Smith said that “Starbucks
will play a pivotal role in developing practical, trusted and regulated applications for consumers
to convert their digital assets into U.S. dollars for use at Starbucks.” Binance Coin has been among the best performing
tokens of 2019. While most cryptocurrencies tend to follow
the pattern of Bitcoin, crypto exchange Binance’s native token has developed a pattern of his
own, surging by over 140% since the beginning of the year against the backdrop
of the bear market. The contrast was particularly evident at the
beginning of the week, when Bitcoin and other major cryptocurrencies lost around $5 billion,
while Binance Coin surged by 16%. According to many observers, Binance Coin
has been behaving like a stablecoin, which pumps when the rest of the coins dump. This week, Binance Coin became the seventh-top
cryptocurrency by market capitalization, leaving behind Tron, Stellar and Tether. Many in the industry are congratulating Binance
CEO CZ for the coin’s outstanding performance. CEO of Tron Justin Sun went as far as defining
Binance Coin as “a new Bitcoin” while eToro’s Mati Greenspan said: “Binance
coin has been able to buck the crypto correlations principally because people buy it as a way
of speculating on industry growth.

If the markets are moving it means people are trading,
and Binance has a big share of those volumes.” We reached out to Ivan on Tech, asking him to comment
on Binance Coin’s outstanding performance. So number one, Binance is a corporation and
they are pushing their currency very, very successfully and they are doing everything
they can to increase the value of their Binance Coin. And the latest development is of course their
DEX that they're building and they've been very open with the fact that it's not truly
that decentralized but it's all about the fact that the user has control over the keys. And now we have the Binance Chain and everything
else coming out. They just want to push adoption, to push
user base to grow and make it even bigger. So I think they have made a lot of efforts
and it is harder to do when you have a project such as Bitcoin or Ethereum where the community
is more decentralized and there are many different interests and the decision process is slow
while Binance can really take a decision quickly, they can push their coin with new innovations
new technologies and I think it is one of the biggest reasons why we see Binance Coin
performing so well today.

And everyone is aware in the industry that
Binance Coin is backed by Binance. It depends on Binance and that Binance really needs
to be successful for Binance Coin to be successful. So until now they have been that and until now the
performance of the coin reflects their successes. So when it comes to short and middle term,
who knows. I mean we're in crypto. Volumes are so low compared
to traditional markets. Anything can happen in the short term. It can dump. It can pump. Who cares about short term or middle term. It's all about the long term. Can Binance sustain itself in the long term? And this is the question I think
we need to be asking. Looking at their technology right now I think
they have a very good chance. And as I told in the previous question they're
not that focused on decentralization per se. They just want adoption. They want users. At the same time they see the exchanges getting
more and more popular and getting more and more advanced and developed so therefore they're
creating their own DEX where users control their own key and also launching their own

So I think long term they have all of the
possibilities and all of the chances to be successful and when Binance is successful,
Binance Coin is also successful because they have been really trying to get so many use
cases for Binance Coin as possible and this is different from many other ICOs and many
other projects. Many other ICOs had some kind of token, they
offer something but then you realize they don't even use it themselves. They're not even pushing it themselves. They start accepting other payment methods,
they start doing a lot of other things that basically make the coin they useless while
Binance has really been pushing their coin and I think it is a good thing for the investors.

Now, long term I think it's looking bright
right now. I think when you look at the cryptocurrency
market as a whole there is a clear pattern to the entire market. I mean we are in the bear market. And so most crypto currencies go down including
Bitcoin if you look at the longer term. But then of course some coins have short term
gains such as Binance right now but in the long term I think Bitcoin and Binance are
just so different. So while they will probably share the sentiment
of the market as a whole — that's when everyone is negative on crypto, everyone is leaving
the crypto space as we saw this year and the last year when we have a bear market — probably
they will both lose value.

But at the same time I also see that they're
so different. You cannot compare Bitcoin and Binance Coin. Binance is all about Binance as a company
and so maybe we should value Binance Coin more as a share in Binance company. It is not a security, it's not classified
as security but the value in my view depends so much on Binance. And so for me it is rational that in the future
they will not be as similar as they are today when it comes to markets moving because they
are so different and the value of Binance Coin really depends on the Binance company
and they have been doing very well up until now.

And we're going to follow it into the future. Crypto lending startup BlockFi is launching
a deposit account for Bitcoin and Ethereum. The BlockFi Interest Account will offer customers
an 6% annual interest rate issued monthly, which will be compounded, thus resulting in
a 6.2% annual yield. This is a much higher percentage than what
the majority of traditional banks offer to their clients. The interest paid to crypto holders come from
the interest the company receives by offering loans to institutions. Director of marketing at BlockFi Brad Michelson
reportedly said the new product “will help crypto investors grow their wealth with one of the most powerful
tools in finance – compound interest”. According to the announcement, account holding
will be custodied at Gemini Trust Company, which is regulated by the New York State Department
of Financial Services. Last year, BlockFi attracted investments from
big crypto players like Mike Novogratz’s Galaxy Digital
and Anthony Pompliano’s Morgan Creek Capital. Pompliano did not hold back in his enthusiasm
in praising the new deposit fund. However, BlockFi’s announcement sparked
a fair amount of criticism on social media, with many concerned of possible risks hiding
behind lending money to BlockFi.

Some pointed out the lucrative interest rates
offered by BlockFi are directly correlated with the risk of entrusting funds to the company. Also, as the account will be issuing interest
in crypto, investors’ money will still be affected by the market’s high volatility. Reacting to the wave of criticism, Pompliano
invited investors not to trust him and rather to do their own research about BlockFi. The concern is absolutely valid. Basically, BlockFi is to do an effective job
of managing that risk. And the first thing that you need to understand
when you think about managing that risk is who the counterparties are. We're under pretty strict non-disclosure
agreements in terms of saying specifically who we work with but if you look at our last
round of investment it's firms like those: Fidelity, Susquehanna, Akuna Capital, CNT
Digital, Galaxy Digital, Morgan Creek etc. As a general rule our
margin call level is 110%. So if the Bitcoin price goes up by around
15%, then we hit the margin call price.

Our system sends an instant notification to
our borrowers and they have a certain period of time, usually hours, actually usually just
one hour to respond to that. If they don't respond to that we will take
some of the dollars that they provided as collateral and use them to buy bitcoin. One of the things that we're constantly monitoring
and modelling is level of volatility over time. And if you're looking at those models Bitcoin
volatility has come down dramatically and it's trended downwards for a while now. So these days is very rare to see a North
of 15% move up in Bitcoin in a gap. 3%, 5%, 8% maybe,
but 15 hasn't happened in a while. We will never use funds that are in the interest
account like equity capital. So one of two things is going to happen
is either BlockFi goes bankrupt and returns everybody's money.

Or we're very successful and this thing keeps
working and it keeps scaling. Gemini is basically the security platform
for private keys. They also provide liquidity in terms of their
exchange when we need it for that risk management function I was talking about Clients send their funds, BlockFi never touches
the private keys, Gemini manages the security and then when we lend them to one of those
counter parties, we move the crypto off of Gemini and send it via the blockchain to the
counterparty who is posting the collateral back to BlockFi. This episode is sponsored by Trade Santa. Trade Santa is a cloud-based trading bot. Set it up in less than 2 minutes, trade multiple
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The link is in the description below! What’s the most Bitcoin you bought in a
week, anywhere near Jack Dorsey? Let us know in the comments. And, as always, remember to like, subscribe,
and hodl..

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