Digital Currency Sandbox in Hawaii, tokenization of toilet paper and more… | Crypto Market News

Thrilling market news with CoinMetro’s CEO, Kevin Murcko in This Week in Crypto!

Crypto Market News Highlights

Crypto lenders demand more than $100 million in margin calls

Considering the fact that the markets tanked, like every other market did, $100 million doesn’t seem like all that much.

With a loan to value ratio of 50–70%, it doesn’t take much volatility to put an issue on the table.

Goes to show that we haven’t created a solution yet. What we thought was a great solution, proved to not be so great.

BitMex Insurance Fund Tags ATH, Binance and Deribit Inject Millions

Again, market tanks and lots of people get stopped out. A lot of people with negative balances and a lot of slippage.

Most of these guys created these ‘insurance funds’ because no insurance funds were offered to them, since they are mostly unregulated. Secondly, there is no real insurance fund structure for crypto derivatives firms, so they created their own.

The real side is that they mainly did this for a marketing ploy. “We have an insurance fund, we put some of our profits there, blabla” — but most of the profits come from b-booking, and 100% of all the trades that flow in on high leverage contracts.

This basically means that they are not matched to anything. When people get stopped out and liquidated, BitMex gets that money. Then they stick a very small part of that money into the insurance fund, and give it back to you when you go into negative balance territory. Isn’t that nice of them?

Institutional Traders Caused the Bitcoin Price Drop, Chainalysis Claims

We use Chainalysis, and Kevin was hoping for some hardcore details in this article, but all it said was that 7/10 transfers during the price drop, were between 10–1000 BTC. So what?

Kevin wouldn’t bet against the fact that a good deal of money that flowed out of the market was from “institutional” traders. Mainly because the reason they had money in Bitcoin was because it was supposed to not correlate with other financial markets. And then it correlated. So they started to sell. It pushed the market lower, fear-based capitulation kicked in for retail guys and everybody started selling.

This little piece of data they provided in the article doesn’t say much, according to Kevin. Unless normally only 1/10 transaction is between 10–1000 BTC. Even then, that would just be one piece of data, and wouldn’t relieve the doubt.

Nouriel Roubini proposes tokenized toilet paper: “more useful than gold”

He probably thought he was being funny, but there is already a whitepaper out there for tokenized toilet paper.

Obviously this is in jest, making fun of stablecoins that are backed — or not backed — by anything, really. Virtual toilet paper is not physical, so if you trade it with someone, you don’t have to fear getting Coronavirus.

Kevin thinks this goes to show again that Nouriel misses the point sometimes. Nouriel sees what is occurring now in the market, and he doesn’t understand what the technology and the use of the technology can do for financial markets in the future. He just focuses on the now. Which is why he’s not an entrepreneur, obviously.

Spanish Securities Watchdog Halts Short Selling Amid Coronavirus Caused Recession

We have seen circuit breakers both this week and last week in the US. Kevin actually did an interview recently about circuit breakers. Circuit breakers stop markets when they are moving in one direction, usually south. Kevin never heard of a circuit breaker when a market is moving up.

Limiting short selling doesn’t mean you can’t short. If you own the asset, you can sell it. You just can’t go short, meaning you can’t take on credit and sell something you don’t own.

You could argue that this limits access to the free market. Considering the crisis, Kevin thinks they probably made the right move. But it’s going to be controversial. If the market had gone up 40%, would they stop people from buying on leverage? No. From the trader’s perspective, it is just as risky. But it’s not risky for the actual economy, which is why they don’t care.

Some rules are in place, and they are not impartial. They don’t want markets to tank too hard, because it has a very direct effect on the underlying economy. And that’s kinda bullshit, if you think about it.

Huobi Adds Crypto ‘Circuit Breaker’ After Last Week’s Mass Liquidations

Kevin is sure that they are going to get a whole ton of shit from this one. And they probably should. They are the first one to do it.

There are two ways to go with this market. Either we stay as an unregulated, fully open “nobody cares, do what you want”-type of market, or we move into the more mature, trillion dollar market that institutional money really wants to get into.

To move into the more mature marketplace, a lot of the rules applying to the traditional markets would need to apply to the crypto market. Which means circuit breakers are probably going to be on every regulated marketplace at some point. Or we might get rid of them entirely, even from the traditional markets.

The question is, which one works? We instituted those things for a reason, and they seem to work. If we get rid of them again, what will happen? We saw this in crypto, where prices could go close to zero on some platforms, because there is no liquidity. So that also leads to another question, do we get rid of this “OTC” pricing model, or are we going to have a centralized exchange for pricing? We probably should if we are going to have a more global market.

Well, Kevin thinks Huobi got some balls. Or maybe they have no balls. From a business angle, it’s both. “We don’t want to get so many liquidations that it leads into negative balances”, but from a PR perspective, they will get a lot of backlash from the crypto community.

Peter Brandt Touts ‘Zero’ as Bitcoin’s Potential Bottom

And he’s correct. If anybody thinks it’s not possible that Bitcoin could hit zero, then they are delusional. Is it probable? Kevin would say that it’s not probable, at least not under current market conditions, but it is definitely possible. Of course it’s possible.

Congress Proposal to Give Everyone $2000/mo ‘Strengthens Case for Bitcoin’

Printing more money is going to devalue the currency, which means pricing will go up, and more money circulating in the economy — in the short term. Pricing will go up because the currency deflates, and eventually, the money stops. When the money stops, they have to make a decision — do they continue to print more money and devalue the currency until it’s literally worthless, like we have seen in Zimbabwe and other places in the world in modern times — or do they stop printing, and wait for the markets to reset and find true value, which causes a lot of pain and pisses off a lot of voters? No country ever chose the second one…

Now we are in a situation where the entire world, to a certain extent, is seeing the type of issues that these micro-economies have seen, where they had to devalue the shit out of their currency.

So obviously, spreading the wealth in an election year, might sound great to some. But it will probably end up causing more heartache than it does problem-solving, at the end of the day.

But how do you explain that to people? Most people don’t understand how economies work. “Just give me the money, I could use the money”.

To be honest, why don’t they just liquidate everybodys’ debt? Instead of adding trillions to the deficit, just put all our debts to zero. Let’s all start from a zero slate. Like Fight Club…

Hawaii Launches Digital Currency Sandbox to Attract Crypto Firms

Kevin actually sent them an email today. You guys know what we are doing in Montenegro — sandbox, capital market infrastructure, everything from primary market to settlement to secondary market. All in DLT (Distributed Ledger Technology). That’s in Montenegro, and we would love to do that in the US. We are in talks right now back and forth with the SEC, using a legal firm in the US, to see how we can possibly get “no action relief” from the SEC so we can do the same thing in the US.

This may be a way to do it, albeit maybe only on a statewide level. In the US, state law prevails over federal law in many instances, at least inside the specific state. When it comes to the currency exchange business, every US state has something called MSB licenses — Money Service Business licenses. And then there is Fincen, where one has to register on a federal level as a Money Service Business.

As a crypto exchange, we would be considered a Money Service Business. However, if you are exempted from the Hawaii regulator, that doesn’t exempt you from every other state, but you may be able to do crypto exchange if you don’t have physical presence in any of the other states (except maybe New York). However, what about trading of securities?

Kevin sent them an email, and asked if they would allow us to test the ecosystem in Hawaii, and if we could actually test it to the full capabilities, based on the fact that the SEC is really the regulator that covers these types of regulations.

Just to explain the terminology: a sandbox is a place that has a specific type of regulatory rules, in a box, you can’t go outside the box, and you are usually limited to what you can do, and the timeframes are 6–12 months for the most part. In the US, they do something called “No Action Relief”, which is a letter from the regulator that says that you can do “this particular business for up to two years, and you still have to adhere to these regulations like AML/KYC, but you’re given specific relief from a specific set of regulations”.

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