Crypto Long & Short: A Change Is Gonna Come (Central Bank/SEC Version)

News and views for crypto investors

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August 30, 2020 Sponsored by   By Noelle Acheson Director of Research If you were forwarded this newsletter and would like to receive it, sign up here.  PRICES (08/30/20 @ 12 p.m. UTC):  BTC - $11,620.28 | ETH - $407.27   EDTIOR'S NOTE: Due to a sending error, yesterday's edition of Crypto Long & Short was filtered into many subscribers' spam folders. With apologies to those receiving this twice, here is the Aug. 30 edition in its entirety. Hi everyone, It’s been a sobering week, with hurricanes battering communities already suffering from economic uncertainty and COVID-19 fear, and riots and empty stadiums reminding us that people are desperately seeking new voices in order to be heard.  As if all that weren’t sad enough, we found out this week that the crypto industry has lost one of its pioneers – Matthew D’Souza, CEO and founder of bitcoin mining firm and fund manager Blockware Solutions, passed away from leukemia at the way-too-young age of 29. But with sadness and turmoil comes change, and with change comes hope. In THE BRIEFING this week, I talk about how change is all around us, in new systems and old, and we are all together trying to adapt to a new normal, whatever that is. If ever there was a week to be grateful for what we’ve achieved, and determined to achieve more, it’s this one. With that hopefully uplifting note, read on… (The song this week is The Fugees’ cover version of “A Change Is Gonna Come,” originally written by Sam Cooke in the 1960s, in response to his personal experiences as a black man in America. Many things have changed since then, on all fronts, but almost 60 years later, the struggle still resonates. "It's been a long time coming, but I know a change is gonna come." Let’s hope so.) ETH 2.0: THE LAUNCH OF PHASE 0  Live Webinar: What to Expect When Phase 0 Launches Ethereum, the world's second-largest cryptocurrency by market capitalization, is expected to undergo a radical system-wide upgrade to improve network scalability and efficiency this by early next year. Join CoinDesk Research on Sept. 10 at 1:30 p.m. ET for a live discussion as we examine the potential market impacts of the launch of what’s known as Ethereum 2.0.  Due to its sheer complexity, Ethereum 2.0 will be rolled out in several phases starting with Phase 0. Don’t miss the opportunity to understand the risks, benefits and predictions for the next phase of this technology. THE BRIEFING The constant of change There has been no shortage of epoch-changing twists so far this year. I mean, seriously, take your pick: even aside from the pandemic, we have riots on the streets of American cities, an alarming trade war, negative oil prices and gold briefly above $2000/oz. These are just some of the loud, headline-grabbing changes that were once unthinkable but now form part of our new normal.   A much quieter shift, but equally transformative, started to make its presence more felt on Thursday, when the Chairman of the U.S. Federal Reserve, Jerome Powell, outlined a new focus for the institution: inflation will be allowed to run higher than the original 2% target “for some time” to make up for undershoots. In other words, inflation might rise in the short term, but don’t worry, we won’t raise rates. At first, the announcement seemed totally “meh” – the only surprise was that his remarks were not more remarkable. Given the colossal government debt, no one expected rates to be raised in the near future, no matter what inflation does.  But zooming out, Powell’s comments cement a radical shift in the role of arguably the most powerful central bank in the world. This is likely to influence more than just yield expectations: it could trigger a greater transformation of the Fed’s role.  This will, directly and indirectly, support the work going on in crypto markets. But more on that in a minute.  Origins First, let’s look at a bit of history.  The founding Federal Reserve Act of 1913 did not specify any macroeconomic goals – the institution’s original mandate was to provide liquidity in order to avoid financial panics. The 1946 Employment Act shifted the focus to “maximum employment,” and in 1978 a new Act added a parallel goal of “reasonable price stability.” After a decades-long drift towards focusing on that at the expense of everything else, the financial crisis of 2008 jolted the Federal Reserve into again prioritizing financial stability. That role gave it plenty of leeway as the current crisis started to unfold, and let it move into new areas that highlight its false independence. This could become increasingly significant given what Chairman Powell himself has recognized as a weakening faith in large institutions.  With the buying of corporate debt, the Fed is no longer just limiting itself to the printing of money – it is now deciding where the money goes. This is political. And with initiatives such as the Main Street Lending program, it is opening itself up to an almost inevitable wave of defaults that the taxpayer will have to fund.      And that's even before you consider the pain that a higher inflation rate will unleash on a public reeling from unemployment and foreclosures. The “average” target of 2% may not sound like much, but anyone who has been grocery shopping recently knows that the reported headline increases are meaningless to daily life in a pandemic. The Fed is effectively telling them that the whopping 10% reported annual CPI increase in July for meat, the over 8% increase in the price of eggs and the over 4% increase for vegetables (to choose just some examples) aren’t important. We’re taught that the Fed is independent from the government, which gives it the power to focus on the economy without political interference. But its increasingly embedded relationship with the Treasury is turning the central bank into more of a political arm. Its head is a political appointee. And its powers come from Congress, which responds to voters, who could conceivably convince Congress to make some adjustments.  Let’s not forget that the U.S. Federal Reserve was created just over 100 years ago – the institution is not that old, in the grand arc of history. And its influence is not written in stone. For now, its role is significant and even essential as the global economy recalibrates debt and affiliations. But things change.  In place Where do crypto markets come into this? Crypto markets were born in a storm of change. In 2009, the year of the first bitcoin transaction, the role of the central bank was going through another profound transformation. The roiling markets were handing out unwelcome lessons in the hubris of assuming trends were constant and systemic institutions were immutable.  Just over 10 years later, we’re in a similar situation. What we knew to be true about finance and markets is now riddled with doubt. What we assumed just couldn’t be, now is. And the central banks that we understood to be the gatekeepers to the global economy, are struggling to define their place in a rapidly evolving chaos and rebirth. Those of us working in this industry watch indicators of a new reality pop up almost weekly. Over the past few days, we saw a blockchain-based security token initiate an IPO with SEC approval, a long-standing and well-respected financial institution get involved in the launch of a crypto fund, and a state-owned energy giant partner to reduce flaring from operations through bitcoin mining. These big steps forward take their place in the march towards the profound change that everyone working in crypto has been preparing for. Whatever our role, we are working on what we think comes next in the cogs of progress. Chairman Powell’s remarks this week reminded us that so are central bankers.  Progress is not just the realm of new technologies and business models, and change is not just about replacing traditional institutions with new ones. Everything evolves. If 2020 teaches us one thing, it has to be that assumptions don’t last, and that we all need to be flexible. In a world where everything is undergoing a transformation, barriers come down faster. And, as uncomfortable as it may be, change is always an opportunity, especially when it comes from unexpected areas. In our industry, it’s what we’ve been hoping for.  The SEC is changing, too Central banks aren’t the only venerable institution implementing profound policy changes that will impact crypto markets. Earlier this week the U.S. Securities and Exchange Commission (SEC) approved the plan for the NYSE to allow companies to list newly issued shares directly, rather than via an IPO. Previously, direct listings were allowed for shares already held by insiders. This new ruling will enable companies to raise capital on public markets without the expense of an IPO, while still meeting certain compliance rules.  This is potentially a big deal for crypto markets, since a handful of well-known companies in our industry have been rumored to be contemplating a public listing. Going the direct route will make this a lighter lift for blockchain startups, give investors a regulated exposure to the crypto markets, raise the profile of the industry as a whole and give us analysts insight into the inner workings of previously opaque businesses.   The SEC also broadened its definition of “accredited investor,” for the first time in 40 years, to include those that had passed the Series 7, 65 and 82 exams, regardless of their personal wealth. As a CFA, I am miffed that CFAs aren’t included (what, are we not smart enough?), but I’m taking the glass-half-full approach of focusing on the fact that change is happening, albeit slowly on some fronts.  A much more significant move is the launch of the first SEC-approved security token listing. INX, a Gibraltar-based company building a crypto exchange, is issuing 130 million tokens that allow holders to receive a share in the company’s net cash flow, as well as trading discounts. The offering price is $0.90, which could net the company $117 million, making it the largest IPO in the industry to date.      That in itself is pretty cool, but let’s not forget that it’s a security token. It runs on the Ethereum blockchain. And it’s been approved for public trading – even for retail investors – by the SEC. Whether the business fundamentals hold up to scrutiny or not, the issue is a phenomenal innovation, and not just because the token itself will blur traditional understanding of tradable assets. As it stands, it’s similar to equity in that holders can share in the business’ success, but without ownership rights. And it could confer operational privileges such as discounts, and possibly other features down the road, because it’s a programmable asset. What’s more, it can only be held by investors that have passed through the KYC process. It’s also a big step forward for a regulator traditionally wary of blockchain-based offerings, one better known for its punitive decisions and high access barriers than its support for new assets and business models.  Anyone know what's going on yet? Although bond yields edged up in response to the Fed’s new inflation stance, the dollar hardly reacted, and even bitcoin’s and gold’s wobbles left them pretty much where they were before Powell’s remarks.  The S&P 500 hit a record high this week, having bounced back over 50% from its 2020 low in March. While gold has not managed to break its all-time high of $2,061 from earlier this month, it is still over 30% up from its March lows. For comparison, bitcoin’s price is nowhere near its all-time high, but it is almost 3x its intraday low on March 12.  The correlation between gold and bitcoin continues to increase, as both are yet again acting as hedges against the dollar. Speaking of which, the correlation between bitcoin and the dollar continues to head downwards. Just through pure math, a declining dollar will boost the bitcoin price denominated in dollars. But what about bitcoin in other currencies? Understandably, the performance is not as high, but it is still strong.   (Note: Nothing in this newsletter is investment advice. The author owns small amounts of bitcoin and ether.) SPONSORED BY CRYPTO.COM The Crypto.com Exchange is a rapidly growing trading venue with a strong retail flow. Top institutions receive a credit line and highly competitive maker/taker fees. Our platform is robust, secure and compliant. Trade profitably on the Crypto.com Exchange – to get in touch with our institutional sales team visit bit.ly/cryptocomcoindesk now. Learn More CHAIN LINKS A filing with the SEC this week revealed that Peter Jubber, head of strategy and planning for Fidelity Investments, is the president of FD Funds GP, which is the general partner of Wise Origin Bitcoin Index Fund I, LP. TAKEAWAY: While Fidelity has not confirmed this, signs point to the fund being a Fidelity initiative, which would mean that one of the largest asset managers in the world, with almost 75 years of history, is launching a crypto fund. Let that sink in.  Blockchain investment firm Digital Currency Group (parent of CoinDesk) has expanded into the bitcoin mining industry with a subsidiary called Foundry which provides cryptocurrency miners and equipment makers with financing and market intelligence. TAKEAWAY: This is yet another sign that the cryptocurrency mining industry is rapidly maturing, which should bring new investment, greater geographical diversification and innovative market products that should add liquidity and resilience to an integral part of the ecosystem. And speaking of a changing crypto mining industry, listed multinational petroleum giant Equinor (formerly Statoil, 67% owned by the Norwegian government) is moving to significantly reduce natural gas flaring by mining cryptocurrency, according to screenshots from Equinor’s intranet received by Arcane Research Friday. TAKEAWAY: The firm will apparently do this via a partnership with Colorado-based Crusoe Energy Systems, which uses digital flare mitigation technology to convert waste natural gas that would be otherwise released into the atmosphere into electricity at the well site that can mine cryptocurrency at low cost. Nasdaq-listed cryptocurrency mining company Marathon Patent Group has signed a letter of intent to acquire the mining-as-a-service company Fastblock Mining in an all-stock deal. After deploying Fastblock’s 3,304 ASIC miners, Marathon’s mining power will increase by 208 petahash per second, and its overall cost to mine bitcoin will drop from $7,400 per BTC to $3,600 per BTC due to Fastblock’s low electricity cost. TAKEAWAY: Lower mining costs not only give the operation a good cushion should the bitcoin price fall, but they also afford it considerable upside if the bitcoin price rallies. While listed companies generally have company risk on top of market risk, they can provide an alternative way to gain exposure to crypto prices for investors that don’t want to bother with crypto exchanges and custody.  The average daily volume of physically settled bitcoin derivatives on Bakkt, a U.S.-based crypto derivatives exchange backed by the parent of the NYSE, has reached record levels this month, signaling growing institutional interest in spot bitcoin transactions. TAKEAWAY: Bakkt’s futures with physical delivery allow investors to take ownership of bitcoin via a regulated exchange. Spot exchanges may be licensed, but they are not regulated since spot crypto does not yet have a regulator. Derivatives do. And many institutions are limited to transacting on regulated venues.  (Source: skew.com) Nic Carter looks at the protocol architecture of Bitcoin and Ethereum, and the role of fees in each. TAKEAWAY: This is especially relevant given the soaring fees on Ethereum, which throws into question its goal to be a widespread, high-throughput application platform (although the upcoming shift to Eth 2.0 aims to support this). Bitcoin’s relatively high fees also have a role in shaping its narrative (more store-of-value than decentralized payment system) and technological development (sidechains and lighter data structures).  Antigua and Barbuda-based crypto exchange FTX has launched a futures index for the top 100 liquidity pools on Uniswap, the largest decentralized exchange by traded volume. And Binance, the world’s largest crypto exchange by volume, plans to offer fully synthetic derivatives based on a decentralized finance index. TAKEAWAY: You’ve heard me say this before: the innovation in terms of new types of assets in crypto markets is phenomenal. Here you have products that allows traders to use centralized crypto exchanges to access the performance of markets native to decentralized platforms, with leverage.  Ribbit Capital, an investor with a $2.6 billion portfolio of fintech startups including cryptocurrency and blockchain ventures (and a founding member of the Libra Association), filed a prospectus with the SEC for a $350 million IPO for a special-purpose acquisition company (SPAC) called Ribbit LEAP. TAKEAWAY: Ribbit LEAP does not yet have a business, but it intends to find one with which to merge, and could end up being an efficient public listing route for a crypto business looking to raise capital. As Nathaniel Whittemore explains in this great podcast episode, SPACs are not cheaper than IPOs, but they are more agile, which could become important if indeed we are heading into a bull market. In other words, with a SPAC, crypto businesses can raise funds faster, taking advantage of rising hype.     Podcast episodes worth listening to: How Much Should We Fear Post-Crisis Debt or Inflation? Feat. Adam Tooze – Nathaniel Whittemore, The Breakdown Everything You Need to Know About Jerome Powell’s Jackson Hole Speech – Nathaniel Whittemore, The Breakdown Dick Bove (Odeon Capital) on the banking sector and the future of dollar dominance – Matt Walsh, On The Brink Jason Furman on Productivity, Competition, and Growth – Tyler Cowen, Conversations with Tyler Zachary Kelman (Kelman Law) on the FATF, Bitcoin, and the International Order – Nick Carter, On The Brink RESEARCH HUB: NEW + NOTEWORTHY Grayscale: Valuing Bitcoin    Blockware: Generating Alpha in Bitcoin – Mine & Accumulate vs. Buy & Hold Blockware: Vulnerabilities in the Price of Bitcoin Driven by Miners Castle Island Ventures: Cryptodollars       Delphi Digital: The State of Ethereum        SEE ALL OF THE RESEARCH HUB'S REPORTS HERE   Introducing: CoinDesk Research Hub CoinDesk's Research Hub aims to bring under one domain a wide range of insights, contributed by the industry’s leading research teams, to offer a broad selection of topics and approaches to investors looking for deeper understanding. As well as CoinDesk’s research reports, it includes work from Delphi Digital, Kaiko, Glassnode, Grayscale, Bitwise, TokenInsights, Arcane Research, Fidelity, CoinShares and many more, with new contributions added regularly. Explore the Research Hub's growing library. ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like  coindesk.com . If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is. Crypto Long & Short A newsletter from CoinDesk See previous editions Copyright © 2020 CoinDesk, All rights reserved.  Our mailing address is:  250 Park Avenue South New York, NY, 10003, US  Want to change how you receive these emails? You can update your preferences here.

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Blockchain Bites: Ethereum Classic Attacked Again

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August 31, 2020 By Daniel Kuhn If you were forwarded this newsletter and would like to receive it, sign up here.  Top shelf Signature Bank gave out dozens more PPP loans to crypto firms than previously known, Ethereum Classic has suffered another 51% attack and a digital yuan wallet went live and disappeared this weekend. Third attack The Ethereum Classic blockchain suffered its third, and worst, 51% attack in a month Saturday evening. Spotted by mining company Bitfly, the attack reorganized over 7,000 blocks, or two days' worth of mining, compared to 3,693 and 4,000 blocks in the first two attacks, CoinDesk Zack Voell reports. ETC Cooperative, a foundation supporting the network's development, said it was “aware” of the attack and “working with others to test and evaluate proposed solutions as quickly as possible." FTX will reconsider its ETC perpetual futures contracts, CEO Sam Bankman-Fried told CoinDesk, following actions earlier this month by OKex and Coinbase to consider delisting ETC and extending confirmation times for the cryptocurrency, respectively. ETC Labs, recently announced it would implement additional security features. Crypto loans Signature Bank extended about $20 million to roughly 40 firms in the digital asset space under the federal Paycheck Protection Program (PPP), dozens more than was previously reported. CEO Joseph DePaolo would not name nor confirm the number of firms receiving PPP loans, though he said the bank’s crypto PPP loan volume was due to other banks serving crypto not having the resources to offer the same kind of program. Previously, CoinDesk reported that at least $30 million had been extended to crypto companies by several banks including JPMorgan Chase, Silicon Valley Bank, Cross River Bank and others. Signature loaned a total $1.9 billion, roughly .55% of the entire $350 billion that was disbursed, through the emergency relief program. Backdoor hack An Electrum wallet user claims to have lost 1,400 bitcoin (~$16.2 million) after installing an older version of the software from a malicious source, CoinDesk’s Sebastian Sinclair reports. In a Sunday Github post, pseudonymous user "1400BitcoinStolen" said they downloaded a version of the wallet and installed a security update pop-up that triggered a transfer of the user's entire BTC balance to an address in the possession of a hacker. Electrum allows anyone to "run their own servers or use servers that they trust,” according to another Github user seemling associated with Electrum. If users download a version from a different source than Electrum and don't check signatures, they may "install a backdoored.” Yuan wallet? A public version of a digital yuan wallet quickly went live and was disabled this weekend, CoinDesk’s Wolfie Zhou reports. Around noon on Saturday local time, users of China Construction Bank (CCB), one of the big-four state-owned commercial banks, had access to a DCEP (digital currency, electronic payment) wallet feature via the bank’s mobile app. The wallet was registered with a phone number associated with their bank accounts and could be linked with their bank funds. It is unclear when CCB opened up the service, but news of the feature quickly spread Saturday among the Chinese cryptocurrency community and media, before being disabled. In app searches for “digital currency” now display: “This function is not yet officially available to the public. Please wait patiently.” Micro taxes? Crypto microtransactions worth less than $1 are taxable events, according to a U.S. Internal Revenue Service (IRS) memo. Responding to a request for clarification from the tax agent's own Small Business/Self Employed Division, the IRS senior technician Ronald Goldstein said cryptocurrency "acts as a substitute for real currency" and considered property for federal income tax purposes. One might imagine it’s like reporting cash tips. Examples of microtransactions include crypto rewards earned from downloading an app and leaving a positive review; downloading games and reaching particular milestones; completing online quizzes; or registering accounts with various online services. Quick bites DeFi Is a ‘Complete Scam,’ Says Controversial Entrepreneur Craig Wright (Sebastian Sinclair/CoinDesk) Rep. Davidson: DeFi 'gets at the heart' of debate on financial regulation (Michael McSweeney/The Block) Maria Bustillos on Tokenizing Journalism, the Death of Civil and Rise of Brick House (Daniel Kuhn/CoinDesk) Money Reimagined: From COVID Generation to Crypto Generation (Michael Casey/CoinDesk) Chainlink Acquires Blockchain Oracle Solution From Cornell University (Will Foxley/CoinDesk) At stake Warring exchanges OKEx and Huobi are caught in a battle for supremacy in the crypto derivatives market, as well as a Chinese market said not to exist, CoinDesk’s Muyao Shen reports. The battle began in 2018, when then-OKEx CEO Chris Lee defected to Huobi to become vice president of global business development.  “There’s a natural friction between OKEx and Huobi,” Matthew Graham, chief executive officer of Beijing-based crypto consultancy Sino Global Capital, said. “While they have both pushed to enlarge their international footprints, they still prioritize their Chinese user base.”  A regional turf war takes place in the context of crypto’s illegality. Officially, Huobi doesn’t acknowledge the Chinese cryptocurrency market exists: “There is not a market in China. That is not legal,” a representative said, though Huobi appears to be getting nearly a third of its website traffic from Chinese visitors, versus 14% for OKEx, according to a website tracker.   However, other competitive fields are easier to quantify. OKEx is the world’s biggest crypto derivatives exchange, with outstanding contracts valued at $1.26 billion. Huobi trails with $1.25 billion in outstanding contracts.  The close competition has led to novel derivative products from both exchanges – though some see the real prize as winning a favored position with the Chinese government. Last year, President Xi announced China would “seize the opportunity” of blockchain, spurring increased testing of a digital yuan, the establishment of  an open blockchain-based services network and other digital infrastructure development. On that count, Huobi might be one move ahead of OKEx: The Chinese branch of Huobi has joined the Blockchain-Based Service Network (BSN) Development Alliance, which aims to be one of the most influential infrastructure services providers in the country. Market intel August's end Bitcoin is eyeing an August gain for the first time in three years, but is lagging behind U.S. stocks for the month. The cryptocurrency is trading near $11,610 at press time, representing a 2.27% gain on a month-to-date basis, according to CoinDesk's Bitcoin Price Index, while the S&P 500 is on track for a 7.25% gain this August. Bitcoin faced rejection at highs above 12,400 on Aug. 17 and has been restricted largely to a range of $11,100 to $11,800 ever since, CoinDesk’s markets reporter Omkar Godbole said.  First Mover First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. They follow the money so you don’t have to. You can subscribe here. Tech pod Web3 wallet? Private key management specialist Torus unveiled a one-click Chrome and Brave browser extension to provide Web3 experiences. Called tKey, the product is a custom version of two-factor authentication (2FA), that enables single login for their wallet and could be used to secure other devices – like a mobile phone. At a high level, Torus splits and distributes sensitive data needed to construct a user’s private key between the user and nodes on the Torus network, which includes Binance, Ethereum Name Service (ENS), Etherscan, Matic Network, Ontology, Skale, Tendermint Core and Zilliqa, CoinDesk’s Ian Allison reports.   Op-ed Profound shift Last week, Chairman of the U.S. Federal Reserve Jerome Powell announced the central bank will allow inflation to run higher than its longstanding 2% target, without raising interest rates. CoinDesk’s Head of Research Noelle Acheson sees this as a profound shift in the role of the central bank, which might have repercussions for the crypto industry. “If 2020 teaches us one thing, it has to be that assumptions don’t last, and that we all need to be flexible. In a world where everything is undergoing a transformation, barriers come down faster. And, as uncomfortable as it may be, change is always an opportunity, especially when it comes from unexpected areas. In our industry, it’s what we’ve been hoping for,” she writes.  Inflation solution Frances Coppola, a CoinDesk columnist and author of “The Case for People’s Quantitative Easing,” thinks one way to increase inflation, which has consistently fallen below a targeted 2%, is to just give people money. “From beyond the grave, [John Maynard] Keynes sends a powerful message to today’s leaders. If you want inflation to rise, Mr. Powell, you need to get people spending. Announcing that you will permit prices to rise more quickly won’t achieve this. And neither will increasing the money supply, unless that money goes to people who are likely to spend it,” she writes. Who won #CryptoTwitter? ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is. Blockchain Bites A newsletter from CoinDesk See previous editions Copyright © 2020 CoinDesk, All rights reserved.  Our mailing address is:  250 Park Avenue South New York, NY, 10003, US  Want to change how you receive these emails? You can update your preferences here.

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First Mover: Huobi Takes on OKEx in Futures, Opening New Front in 'Chinese' Rivalry

ALSO: Bitcoin gained in August for the first time since 2017, though it trailed the S&P 500

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August 31, 2020 Sponsored by By the CoinDesk Markets Team Edited by Bradley Keoun If you were forwarded this newsletter and would like to receive it, sign up here.  TODAY: Prices (since 00:00 UTC) : Bitcoin $11,656 (-0.5%) | Ether $433 (+1.1%)  Bitcoin prices were down slightly early Monday but headed for a 2.3% gain on the month, the first time the cryptocurrency has gained in August since 2017.   Huobi is taking on OKEx in the business of bitcoin futures trading, opening a new front in the ongoing rivalry between the two Chinese-led exchanges. Bitcoin trailed the Standard & Poor's 500 Index in August as prices got stuck in a range between $11,100 and $11,800.   What's Hot: SushiSwap, YearnFinance, Chainlink, Ethereum Classic.  PRICE POINT Bitcoin was lower in early trading Monday after gaining over the weekend, as Japanese stocks rose and U.S. stock futures gained on bets that central banks will adhere to loose monetary policy for years to come.   As August draws to a close, bitcoin is up 2.3% on the month, decelerating after July's 24% gain. For the past two weeks, the largest cryptocurrency has been stuck in a range between roughly $11,100 and $11,800.    MARKET MOVES Cryptocurrency exchange Huobi is taking aim at competitor OKEx in the business of trading bitcoin futures and other derivatives contracts, opening up a new front in a longstanding rivalry between the Chinese-led exchanges.  OKEx, which is led by Chinese executives and based in Malta, is the world’s biggest crypto derivatives exchange, with outstanding contracts valued at $1.26 billion, according to the data site CoinGecko. Huobi, also led by Chinese brass but based in Singapore, is close behind, tied for second place with another exchange, BitMEX, at $1.25 billion.  In a report this month, Huobi said it has “managed to push new boundaries against other well-established exchanges when it comes to futures trading volume.” Huobi is already beating OKEx in a few market segments, according to the report, including “ coin-margined futures” – where traders can post their initial down payment, known as margin, using cryptocurrencies. Huobi claims to also regularly beat OKEx in weekly and quarterly bitcoin futures contracts. “Before Huobi launched its futures contract in December 2018, OKEx had the largest market share of the world,” Ciara Sun, vice president of Huobi Global Markets, told CoinDesk in a Telegram message. “Huobi Futures always looks up to the best of the market.”  Exchange BTC Futures Open Interest, billions of dollars. (Skew)   The battle for supremacy in cryptocurrency futures – and China – adds to the tension between the two exchanges, which have been at loggerheads at least since 2018, when then-OKEx CEO Chris Lee defected to Huobi to become vice president of global business development. OKEx CEO Jay Hao, in a company update in March, called Huobi “our doppelgänger,” insisted “imitation was the sincerest form of flattery” and said he “would like to think that Huobi was able to withstand this market volatility by following our footsteps.” Experts on China’s often-murky cryptocurrency markets say the rivalry between the two exchanges likely stems from the fight for customers in the world’s second-largest economy.  “There’s a natural friction between OKEx and Huobi,” Matthew Graham, chief executive officer of Beijing-based crypto consultancy Sino Global Capital, told CoinDesk in an email. “While they have both pushed to enlarge their international footprints, they still prioritize their Chinese user base.”  Trading volumes and open interest for Huobi versus OKEx. (CoinGecko/CoinDesk)  Read more: Huobi and OKEx Battle for Supremacy in China - Muyao Shen SPONSORED BY BITSTAMP Enjoy zero fee trading on all XLM, PAX and GBP pairs through September 1st! Now is the best time to join over four million traders and financial institutions that trust Bitstamp’s powerful platform, intuitive mobile app and industry-leading APIs. Bitstamp gives you all the trading tools to effectively execute your strategy: Unmatched order execution, powered by Nasdaq: Cutting-edge Nasdaq matching engine delivers optimal trading speed and efficiency in all market conditions. Tradeview interface: Our powerful trading interface offers advanced order types, live charting and an array of analytical tools. Available on web and mobile. Robust API connectivity: Our FIX, HTTP and WebSocket APIs are consistently rated as the fastest and most stable in crypto. Advanced custody solutions: Institutional-grade custody from BitGo with 98% of customer assets in cold storage and protected by BitGo’s insurance coverage. Download the Bitstamp app or visit Bitstamp.net/Pro to get started today! Learn More BITCOIN WATCH Chart showing the S&P 500 outpacing bitcoin in August. (TradingView)  While bitcoin is eyeing an August gain for the first time in three years, the cryptocurrency is lagging U.S. stocks over the month.  Bitcoin is trading near $11,610 at press time, up 2.3% on the month, according to CoinDesk's Bitcoin Price Index. It was the first time the cryptocurrency gained in August since 2017, when prices rallied by 66%.  As of Friday, the S&P 500, Wall Street's benchmark stocks index, was eyeing a 7.25% gain for August, as per data provided by TradingView. Bitcoin faced rejection at highs above 12,400 on Aug. 17 and has been restricted largely to a range of $11,100 to $11,800 ever since. The rally from July lows below $9,000 has stalled with the weakening of demand from institutions and macro traders, as indicated by the recent 30% decline in open positions in futures listed on the Chicago Mercantile Exchange. Macro Assets Performance (Skew.com) On Friday, CME-listed open interest was $653 million, down from the record high of $948 million reached on Aug. 17, according to data source Skew. Bitcoin's rally from $9,000 to $12,400 observed in the four weeks to Aug. 17 was accompanied by a 150% surge in open interest. It's possible investors have been rotating money out of bitcoin and into cryptocurrencies linked to the white-hot decentralized finance (DeFi) space.  The Lend token from decentralized lending platform Aave has gained 150% this month.  Other DeFi names like oracle provider Chainlink's LINK token and lending project Compound's COMP token have added 108% and 55%, respectively.  Ethereum's ether cryptocurrency is also outshining bitcoin on a monthly basis with over 20% gains.  Looking ahead, however, negative-yielding government bonds are expected to continue powering gains in both bitcoin and stocks.  And bitcoin, a perceived store of value, may draw stronger buying interest than stocks, with expectations for U.S. inflation beginning to accelerate in response to the Federal Reserve's recent decision to signal tolerance for higher prices.  Bitcoin is still down 40% from its record high of $20,000 and looks relatively undervalued compared to U.S. stocks, which are trading at record highs even amid the ongoing coronavirus epidemic.  A potential correction in stocks still poses downside risks to bitcoin, according to Joel Kruger, a currency strategist at LMAX Digital.  "Bitcoin is still an emerging asset and therefore still somewhat exposed in periods of risk-off," Kruger told CoinDesk in a Telegram chat. – Omkar Godbole   TOKEN WATCH SushiSwap (SUSHI): Alternative to Uniswap is poised to become next DeFi meme with new liquidity incentive. YearnFinance (YFI): Delta Exchange launches perpetual swaps for YFI tokens, with 20x leverage and margined and settled in bitcoin, as Forbes calls YFI " the altcoin star." Chainlink (LINK): DeFI oracle provider buys Cornell University's privacy oracle solution DECO for undisclosed sum, as Oasis Network announces integration.  Ethereum Classic (ETC): Frequently-attacked blockchain gets hit by third 51% attack in a month.  Live Webinar: What to Expect When Phase 0 Launches Ethereum, the world's second-largest cryptocurrency by market capitalization, is expected to undergo a radical system-wide upgrade to improve network scalability and efficiency this by early next year. Join CoinDesk Research on Sept. 10 at 1:30 p.m. ET for a live discussion as we examine the potential market impacts of the launch of what’s known as Ethereum 2.0.  Due to its sheer complexity, Ethereum 2.0 will be rolled out in several phases starting with Phase 0. Don’t miss the opportunity to understand the risks, benefits and predictions for the next phase of this technology. WHAT'S HOT Japan's SBI Holdings launches short-term crypto derivatives (CoinDesk) Inflation will outstrip both bond yields and corporate earnings for the foreseeable future (CoinDesk) Bitcoin locked in DeFi rises to record 55,000 as HODLers hit with FOMO (CoinDesk) Chinese bank disables digital yuan wallet after soft launch drawing widespread attention (CoinDesk) Mr. Powell, if you want higher inflation, give people money (CoinDesk) ANALOGS The latest on the economy and traditional finance Tens of thousands of furloughed U.S. jobs at risk of becoming permanent (WSJ) Worries persist over whether ratings firms are accurately assessing the risks in CLOs (WSJ) American households and businesses are too indebted to cope with sustained deflation (CoinDesk) Wall Street's fear gauge is rising again, even as stocks keep pushing higher (Reuters) Australia's reserve bank says home prices could fall as much as 40% (News.com.au) Inflation needs to average 3.2% over next five years to average 2% over decade through 2025 (WSJ)  The Fed is basically “green lighting” consumer prices, and inflation expectations are rising in the bond market (Bank of the West) Five-year breakeven U.S. inflation rates, a proxy for the bond market's inflation expectations. (Federal Reserve Bank of St. Louis)  TWEET OF THE DAY For a concise, daily summary of CoinDesk's comprehensive coverage of cryptocurrencies and the digital-asset industry, please subscribe to Blockchain Bites here: https://www.coindesk.com/newsletters Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments. ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is. First Mover A newsletter from CoinDesk See previous editions Copyright © 2020 CoinDesk, All rights reserved.  Our mailing address is:  250 Park Avenue South New York, NY, 10003, US  Want to change how you receive these emails? You can update your preferences here.

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