GSG Market Update – July 16, 2019 INTERNAL USE ONLY (copy 01)

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GSG Market Update



July 16, 2019
Name Current Price 24h % 30d Vol 90d Vol 21d EMA 50d EMA
Bitcoin  $10,753.23 4.13% 118.63% 90.48% $11,116.033 $10,038.254
Ethereum  $227.12 0.27% 107.64% 94.34% $277.680 $268.673
XRP  $0.315 0.51% 93.43% 96.83% $0.374 $0.389
Litecoin  $89.86 1.47% 94.40% 97.40% $112.579 $113.772
Bitcoin Cash $309.62 6.66% 125.67% 108.80% $382.271 $390.881
EOS  $4.27 -0.15% 106.92% 107.49% $5.506 $5.944
Binance Coin $28.08 -0.22% 80.67% 95.37% $32.000 $31.668
Bitcoin SV $128.810 5.83% 117.10% 187.31% $181.311 $176.993
Stellar  $0.087 1.53% 98.26% 97.71% $0.102 $0.111
TRON  $0.025 0.14% 111.08% 105.88% $0.031 $0.031


  • U.S. Treasury Secretary Steven Mnuchin voiced the Trump administration’s concerns with Facebook’s Libra and cryptocurrencies in a press conference. While Mnuchin did not make any new policy statements, he did reiterate statements made by various government entities in the past, describing the potential for cryptocurrencies to be used by criminals as one main issue.
  • Draft legislation that would allegedly impose a ban on the use of cryptocurrencies in India is being circulated by local blockchain legal experts on social media. An unverified document published by tech lawyer Varun Sethi appears to reveal a draft bill entitled “Banning of Cryptocurrency & Regulation of Official Digital Currencies.” The proposed bill suggests that a “Digital Rupee” issued by the country’s Reserve Bank would be approved by the Central Government as legal tender, while all cryptocurrency would be comprehensively prohibited.
  • Cleveland Cavaliers, along with its associated esports club Cavs Legion GC, have partnered with cryptocurrency firm UnitedCoin. The partnership will reportedly be used to advertise UnitedCoin and provide the Cavs with an inroad to the fintech sector via cryptocurrency.
  • R3 allegedly to be considering going public. The company is speaking with advisers about an initial public offering, although no final decisions have been made.
  • NYDFS has granted virtual currency licenses to two subsidiaries of Seed CX. Seed Digital Commodities Market LLC and Zero Hash LLC, both of which operate under Seed CX, received BitLicenses, while Zero Hash has also been granted a money transmitter license. The crypto exchange launched spot trading services earlier this year, and hopes to receive regulatory approval to offer forwards trading in the coming months. SCXM is now legally able to serve as a matching engine for crypto buyers and sellers, as well as act as a platform for block trades.
  • Vitalik Buterin suggested that Ethereum use blockchain networks that have relatively lower transaction fees as a data layer, with Bitcoin Cash being mentioned as a candidate that “fit the bill perfectly” as it has a relatively high data throughput rate.
  • Samsung-backed consortium involving six other major South Korean firms is developing a blockchain-based mobile identification system. The firms include Woori Bank, KEB Hana Bank, SK Telecom, KT, LG UPlus and Koscom. A self-sovereign identity system, in which consumers are able to protect their own data, is being developed by the participants for faster services. 

Upcoming Events

  • July 16 - U.S. Senate Committee on Banking, Housing, and Urban Affairs hearing on Facebook's Libra
  • Jul 26 - CME Bitcoin Futures Jul 2019 contract (BTCN19) last trade date; settlement July 29
  • Aug 6 - Litecoin Block Reward Halving (Coin reward decreases from 25 to 12.5 coins)
  • Aug 14 - SEC decision on Bitwise ETF
  • Aug 20 - Blockchain Summit Singapore 2019 (forthcoming)
  • Aug 30 - CME Bitcoin Futures Aug 2019 contract (BTCQ19) last trade date; settlement Sept 3
  • Sept 17 - Ethereum Classic Atlantis hard fork
  • Sept 27 - CME Bitcoin Futures Sep 2019 contract (BTCU19) last trade date; settlement Sept 30
  • Jan 3, 2020 - Ethereum 2.0 Launch (Phase Zero)
  • Nov 2020 - ZCash Halvening / Founders’ Reward set to expire


BTC Longs-Shorts

ETH Longs-Shorts

Market Cap Return

Sector Return

Twitter Daily

There have been several fundamental changes to the incentives in Bitcoin since its launch.

1. We now know that selfish mining is a possibility against PoW coins. 51% honesty isn't sufficient -- depending on the coin, 66% to 100% need to be honest. Luckily, most miners have been honest so far, but the threat is ever present, esp for low hashrate coins.

2. Satoshi did not explicitly mention pools. That changes the game theory substantially, especially if the miners within a pool are not checking the work of the pool operator. A single bad actor can rope in honest-but-not-tech-savvy actors into a byzantine attack.

3. Satoshi only considered a world where there's a single coin. When multiple coins share the same hash function, the dynamics are different. Hashwars, difficulty raising attacks, and death spirals are example attacks from this domain.

4. Hash rental markets make temporary attacks possible. These did exist in 2009, became unfeasible with the shift to ASICs, and are once again a possibility. We saw hash rental markets used, in conjunction with some of the other points above, to attack BTG.

5. Satoshi's famous "6 block" confirmation calculation assumes a relatively small percentage of attacker hashpower. As the amount of available rental hash and attacker budget changes, it needs to be recalculated. If a pow attacker has 49%, # of confirms required is infinity.

6. Finally, people are layering applications on top of the chain, eg Omni and LN. If miners are in bed with attackers on these systems, the dynamics change. E.g. LN can be attacked via censorship. If Omni holds more value than block rewards, the mining dynamics are different.

7. Satoshi did foresee, but was wrong on, what happens when transaction fees exceed block rewards. He indicated that the system would operate as normal. This is incorrect, as miners have an incentive to snipe each other's transactions instead of collaboratively building a chain.

Some of these attacks may not arise in practice. Some are fixable. But the original question asked how the incentives are different from what SN foresaw in 2009. This is my quick summary of how the world has evolved.

Oh, let's not forget: 8. SN seemed not to foresee just how much energy would be spent on mining, and how much value would leak out of the system to the power companies. That changes the dynamic.

Ok 9. SN did not seem to consider the inherent centralization of industrial scale mining. Mining rig manufacture, access to rigs, and access to cheap electricity are inherently limited. This leads towards a small set of industrial miners.

Overall, the world is a different place than it was in 2009. It's a testament to SN that his tech is still around. The original question asked about changes to miner game theory and SN's assumptions. I chronicled the ways in which the original ideas have had to be modified.

Mnuchin issued a warning to those not complying with US AML laws. No talk of a ban. Said specifically that bitcoin speculation is OK. Based on the weekend's sell-off, seems key players knew in advance about this press conference, and sold into it. Seeing short covering now.

Key quotes from the Mnuchin press conference

My takeaways
▷ Bullish for US regulated exchanges
▷ Bearish for international unregulated exchanges
▷ Bearish for DeFi
▷ Bullish for blockchain analytics companies focusing on monitoring, AML, etc.
▷ Bearish for privacy coins

In regards to $BTC, bullish short term due to short covering, slightly bearish otherwise IMO. - "Bitcoin is highly volatile and based on thin air" - "We are concerned about the speculative nature of bitcoin" Quite unfriendly comments.

On the positive side, a bitcoin ban seems out of the question. However, a US ban was unthinkable 5 days ago, before the Trump tweet. On the negative side, Libra (which is positive for $BTC) seems toast, while institutional interest in the asset class may diminish.

1/ The Senate Banking Comm staff reached out last week regarding @facebook @libra pursuant to my @ForbesCrypto article. During a conf call they indicated interest in receiving formal testimony from me. Here it is + summary follows :… @DoWithCare

2/ Big takeaway--politicians that weaponize the US banking system (blocking access to disfavored industries/countries) are modern-day Herbert Hoovers bc these barriers block both unlawful & LAWFUL commerce, & these barriers caused the invention of #stablecoins in the first place.

3/ (OK, I didn't actually call them modern-day Herbert Hoovers the testimony, but I digress...) If Congress isn't happy about @facebook @libra, it can immediately make #stablecoins irrelevant by letting #banks bank the #crypto industry (& I give v specific recommendations here:

4/ a) remove reputation risk as factor in bank examinations (wld alleviate #derisking & #OperationChokePoint), b) ensure USABILITY of dollar to keep reserve currency status (stop threatening to block access, which causes users to search for insurance policy & like it or not...

5/ ...#digitalcurrencies are real alternatives) & c) roll back #BankSecrecyAct & related #compliance obligations on banks--w/ such paltry 0.002% conviction rate for money laundering etc, why on earth is Congress imposing such massive compliance costs + blocking lawful commerce??

6/ There's an easy way to block all money laundering, tax evasion, terrorist financing & criminal use of money--just block all commerce! (modern-day Herbert Hoovers...) But seriously, every barrier to unlawful commerce also blocks some lawful commerce, & there needs to be balance

8/ Next, a reality check: #cryptocurrencies can't be uninvented. Despite attempts to kill them, they haven't died. @facebook @libra setting up shop in #Switzerland instead of the US is a shot across the bow to the US--bad regulation sends innovators offshore rather than kills it.

9/ Congress shld, tho, hold @Libra_ to its promise to keep 100% reserves permanently. Next,a regulatory-compliant framework for #digitalcurrencies is possible & #Wyoming shows how it can be done. There appears to be a push in Washington to require @facebook to get a bank license.

10/ Seriously, requiring @facebook #calibra to get a bank license, if true, might've killed the project in the US (bc no federal bank regulator has yet approved banks to get involved with #crypto), but #Wyoming's new #SPDI bank charter can bridge the gap--satisfying demands by...

11/ ...Congress for a regulatory-compliant solution (incl #AML compliance) while giving @facebook what it needs bc it fits #stablecoins v well. I'm almost positive @facebook #calibra would be as welcomed in #Wyoming as it appears to be unwelcomed in DC. Next, tho, there are...

12/ ...serious policy concerns w/ the project: privacy & interest payments. On privacy, the left fears big business, the right fears big govt, but freedom-loving people should fear when big biz & big govt collude (h/t @tkibbe). I propose Congress prohibit admission of #calibra...

13/ as evidence in US criminal cases UNLESS govt first obtained a valid warrant before @facebook gave it the data (+ similar for non-US govts). That would remove a big #SurveillanceState concern--just make the data inadmissible as evidence unless obtained under a warrant.

14/ Other big concern is interest pymts. @Libra_ Assoc members are keeping the float & not paying interest to Libra holders. In UK, Bank of England just opened its interest-bearing deposit accts to tech cos (incl Libra), in addition to banks. Will the #Fed do the same in the US?

15/ This is a major policy question--shld @Libra_'s Assoc benefit from central bank largesse in this way (directly or indirectly), at the cost of diluting every holder of the dollar, sterling etc? Why do banks benefit in this way too? As that practice becomes better understood...

16/ voters, calls of both "where's my #bailout?" on the one hand, & "end the ?#Fed" on the other, will inevitably become louder. The US must tread carefully tho, as other countries wld prob love to court @facebook if US regulation is too heavy-handed. US should recognize...

17/ ...there's huge demand for much more efficient pymt system relative to status quo + there are huge economic benefits to freeing up trapped "comfort deposits" on company balance sheets by speeding up payment latency. The #Fed should stop coddling the slumbering incumbent...

18/ ...payment system. Congress is already playing catch-up--our bad regulations already caused invention of #stablecoins in the first place & @facebook already went outside the US for the @Libra_ Association (which shld embarrass the US). Rather than fight the first real...

19 ...innovation in payment systems in nearly 50 yrs, the US should embrace it. #Wyoming's suite of innovative laws shows that such an embrace can be done largely w/in existing regulatory regime, in manner that provides legal certainty, protects consumers & promotes innovation

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This update is provided for information purposes only and does not bind GSG Asset Management or any of its affiliates in any way. It is not, and is not intended to be, a/an: (1) “research report”, “investment research” or “independent research” as may be defined in applicable laws and regulations worldwide; (2) offer to sell, a solicitation of an offer to buy, or a recommendation for any digital asset by GSG Asset Management or any third party; or (3) official confirmation or official valuation of any transaction or asset mentioned herein. To the extent that any of the content published in this update may be deemed to be investment advice or recommendation in connection with a particular digital asset, such information is impersonal and not tailored to the investment needs of any specific person. Any pricing information is indicative only, and does not reflect a level where GSG Asset Management is prepared to execute a trade. You understand that an investment in any digital asset is subject to a number of risks, and that discussions of any digital assets in this update will not contain an exhaustive list or description of the relevant risk factors. GSG Asset Management is not an advisor, and nothing in this update should be construed as investment, tax, legal, accounting, regulatory or other advice, or as creating a fiduciary relationship. You alone are solely responsible for determining whether any investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal and financial situation. You should consult an attorney or tax professional regarding your specific legal or tax situation. All market prices, data, and other information (including that which may be derived from third party sources believed to be reliable) are not warranted as to completeness or accuracy, and are subject to change without notice. All content in the update is presented only as of the date published or indicated, and may be superseded by subsequent market events or for other reasons. GSG Asset Management disclaims any responsibility or liability to the fullest extent permitted by applicable law, whether in contract, tort (without limitation, negligence), equity, or otherwise, for any loss or damage arising from any reliance on or use of this update in any way.

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