Kiffmeister’s #Fintech Daily Digest (12/27/2020)

Bitcoin price crashes by 6.5% in minutes after hitting $28.4K sell wall

Bitcoin (BTC) hit an all-time high of about $28,400 before running into heavy selling pressure and crashing to $26,500. Since then it’s been fluctuating around the $27,000 level.

Stablecoin Market Capitalization Continues to Increase

Stablecoin market capitalizations continue to increase (up 13% since December 1 at $28.0 billion). Almost all are USD-pegged, and Tether remains the dominant stablecoin ($20.8 billion), followed by USD Coin ($3.6 billion), DAI ($1.1 billion) and Binance USD ($0.9 billion). Number six is Empty SetDollar (ESD) one of the first algorithmic stablecoins to come to market. An algorithmic stablecoin adjusts its supply deterministically to maintain the peg to its price target (U.S. dollar in the case of ESD). ESD was launched in September 2020 and its market capitalization is currently $0.5 billion (up $0.4 billion since December 1).

Dynamic Set Dollar USD Stablecoin Has Fallen Off the Rails

The Dynamic Set Dollar (DSD), launched in November, is a fully decentralized stablecoin that unlike centralized coins, e.g. USDT, has no 1:1 backing through a centralized USD treasury. To be highly capital efficient it does not use any collateral, like the main competitors DAI or sUSD. The voluntary elastic supply mechanic is different from Ampleforth (AMPL) and Based (BASED). It is inspired by Empty Set Dollar (ESD), but is supposed to respond faster to market demand through more frequent epochs, extended supply caps, and a modified supply extension/contraction formula. However, it’s been having trouble sticking the peg as it recently traded down to 41 cents.

Forbes Cryptocurrency Awards 2020: The $3 Trillion Bitcoin Marketing Campaign

For the first time ever, Forbes published its Crypto Awards. Fed chairman Jerome Powell takes the honors as the crypto person of the year: In a pandemic year when the Fed printed so much stimulus money that the central bank saw its balance sheet nearly double in size, Forbes Awards judge Anthony Pompliano of Morgan Creek Digital credits Powell with running a “$3 trillion marketing campaign for bitcoin.” 

China Tells Ant to Return to Its Roots, Imposes Curbs

The People’s Bank of China ordered Ant Group to return to its roots as a provider of payments services, threatening to throttle growth in its most lucrative businesses of consumer loans and wealth management. The central bank summoned Ant executives over the weekend and told them to “rectify” the company’s lending, insurance and wealth management services. They also blasted Ant for sub-par corporate governance, disdain toward regulatory requirements, and engaging in regulatory arbitrage. The central bank said Ant used its dominance to exclude rivals, hurting the interests of its hundreds of millions of consumers. 

Why Exactly Does the World Need a Smart Banknote?

A smart banknote is a traditional banknote on a paper or polymer substrate that has the added ability to communicate with an electronic network. Like current banknotes, a smart banknote can work completely offline, without a network or electricity. It is denominated and has all the physical properties of a traditional banknote in size, feel, appearance, etc.  But, this hybrid banknote also bears a chip and electronic ink. These attributes allow the smart banknote to interface with an electronic network and record the value of the note (the result of the electronic transaction) on its surface, making this information visible offline.

A smart banknote could bridge the gap between a traditional banknote and a purely electronic currency. In some sense a smart banknote is like a digital currency cold wallet that would show the value it contains when offline. A smart banknote provides all the advantages of cash and all the advantages of digital currency in one device. The still many people who do not have the bank accounts and depend on cash for their daily transactions could periodically use a smart banknote’s electronic capabilities perhaps at a retailer or public kiosk. There are places and times when there is no internet access, or even electricity, rendering electronic money and payment methods useless. A smart banknote might fill the gap.

For more on smart banknotes, including a detailed white paper, check out Franklin Noll’s Smart Banknote Research Hub.