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Singapore-based payments unicorn Nium has rolled out a crypto-as-a-service (CaaS) offering aimed at financial institutions.

• Nium provides turn-key purpose-built API suites for new and traditional finance companies. Its latest offering seeks to provide ready-made tools amid a period of high demand in crypto.
• The company said its new CaaS will provide institutions with “in-demand capabilities” for crypto investment and initially supports up to five cryptos, according to a statement on Monday.
• Through an API connection to its platform, the firm says its clients can embed crypto marketplace services, along with KYC, regulatory monitoring, brokerage, custody, and processing.
• Nium has decided to launch its product throughout the U.S. with a further 15 cryptos expected to be added to be added to the service by next year. Another 25 countries and jurisdictions are expected to be supported by next year, including Australia, Singapore and Hong Kong.
• In July, Nium secured $200 million in fresh funding led by tech investor Riverwood Capital receiving unicorn status with a valuation above $1 billion.
• “Our global clients are seeking more and more ways to differentiate their core offerings,” said Prajit Nanu, co-founder and CEO at Nium. “We offer access to modular fintech elements for payments and card issuing – and now, crypto.”

Read more: Crypto as a Payment System? Here We Go Again

Ant Group and Tencent have changed references of non-fungible tokens (NFTs) to “digital collectibles” on their platforms and sites, Chinese media Jiemian reported.

• So far, NFTs have not been included in the Chinese government’s rules against crypto trading and mining. However, state entities have warned against the use of NFTs for market speculation. Last week, a government-run tech park in the Guangdong province cautioned people against scams that prey on the NFT hype.
• The two firms appear to be distancing themselves from NFTs. Tencent said that the reference change reflects the company’s commitment to compliance, while Ant Group reiterated that it is against the digital collectibles hype and market speculation.
• Ant Group runs a marketplace focused on celebrity NFTs on its Alipay platform, and has issued NFT collections of historical artifacts, as recently as Friday, as well as one for the 2022 Asia Games.
• In August, Alipay said that users must hold their NFTs for 180 days before transferring them to others in order to curb speculation.
• Regulators have recently interviewed big tech platforms about their NFT products, Chinese blogger Colin Wu said, citing anonymous sources. CoinDesk was not able to confirm the report.
• Such interviews often occur when companies have crossed some line with Chinese authorities. Ant Group had such a sit down with regulators, prior to its IPO being cancelled last year.
• Other big companies, such as e-commerce platform JD.com, have also launched NFTs in China.

Read more : How Ant’s Suspended IPO Is Related to China’s Digital Yuan

Saudi Arabia’s central bank is experimenting with emerging technologies like blockchain for the finance sector, but doesn’t intend to phase out cash in favor of digital payments, according to an interview with local newspaper Al Eqtisadiah.

• Central bank digital currencies (CBDCs) are one of the most important financial technologies under development, but the kingdom does not intend to phase out the use of physical cash, according to a central bank representative quoted in the report.
• The central bank was one of the first in the world to experiment with CBDCs back in 2019 when it announced project Aber, a bilateral experiment with the U.A.E. to test the use of digital ledgers on cross-border transactions.
• Saudi Arabia is trying to increase the proportion of electronic payments to 70% of the country’s total by 2030, but the kingdom wants to ensure continuity of cash transactions and the availability and acceptance of paper and metal cash as a means of payment, according to the interview.
• The representative said the target is likely to be achieved five years earlier, in 2025.
• The U.A.E. are now working on another cross-border CBDC project with China, Thailand, and Hong Kong.

Read more: Central Banks of China, UAE Join Blockchain-Based CBDC Payments Project

Frances Haugen, the former Facebook product manager and whistleblower, reportedly practices the strategy of holding cryptocurrency.

In an interview with the New York Times published Saturday, Haugen said she was managing financially “foreseeable future” because she had bought crypto “at the right time.” The article didn’t specify what type of crypto Haugen purchased.

Haugen has also since moved to Puerto Rico to manage a health condition and to join “crypto friends,” according to The New York Times’ story.

In May, Haugen left Facebook, taking with her tens of thousands of documents that showed that the company prioritized its growth over its users’ well-being. The documents exposed the social media giant’s awareness that information posted on Instagram could harm teenage mental health.

The documents also showed that Facebook knew that its products were spurring ethnic violence in places such as Ethiopia and that it failed to combat misinformation on its platform relating to the January 6 Washington riots.

Pierre Omidyar, the eBay co-founder whose nonprofit groups started working with Haugen in October, was believed to be supporting the whistleblower financially full time. But Haugen told The Times that the only help she is soliciting came via nonprofits for travel and related expenses, according to the reporting.

Read more: US Lawmakers Push Back on Facebook’s Novi Wallet Launch

Millions of email addresses associated with the crypto market capitalization website CoinMarketCap (CMC) have been compromised.

According to the data security breach website haveibeenpwned, 3.1 million addresses are now trading on “hacking forums.” The addresses are trading via dark web marketplaces, one source told CoinDesk Sunday.

CMC said Saturday it had become aware that batches of data had shown up online “purporting to be a list of user accounts.” It is unclear how the addresses were obtained. The website also said only addresses and not passwords had been exposed though it discovered a correlation and warned users to use separate and unique passwords across multiple sites.

“At this point in our investigation, we’ve come to the conclusion that the leak did not come from CoinMarketCap servers,” CMC said on its blog. “As no passwords are included in the data we have seen, we believe that it is most likely sourced from another platform where users may have reused passwords across multiple sites.”

CMC did not immediately respond to CoinDesk’s request for comment.

Read more: Leaked Slides Show How Chainalysis Flags Crypto Suspects for Cops

The Commodity Futures Exchange Commission is said to be investigating Polymarket, the decentralized prediction market, according to Bloomberg sources.

The news service said that that the derivatives regulator is “investigating whether Polymarket is letting customers improperly trade swaps or binary options and if it should be registered with the agency.”

“Polymarket is firmly committed to complying with applicable laws and regulations and to providing information to regulators that will assist them with any inquiry,” a Polymarket rep told Bloomberg.

Polymarket “hasn’t been accused of wrongdoing,” according to the report. Bloomberg also said that the company has hired former CFTC enforcement chief James McDonald, now a partner at Sullivan & Cromwell, as part of its response to the investigation. 

Polymarket allows users to place speculative bets on certain outcomes, using the stablecoin USDC as a means of transacting. Users can bet on outcomes by purchasing contracts that are cleared on the Ethereum network. 

The market raised $4 million in new funding last fall, a development that came just before the U.S. presidential election. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

With so much social media hype, mainstream attention and celebrity support it’s easy to think that dogecoin is a solid investment. But is the dog-themed cryptocurrency really as innocent as it looks?

Dogecoin has come a long way since its modest beginnings as a parody cryptocurrency based on a viral internet meme of a Shiba Inu “doge.” Back when it was just a pup in December 2013 the price of doge was $0.00055878 per coin, worlds away from its all-time high in May of $0.69 (123,383.30%).

A big part of the Dogecoin project’s success can be attributed to its die-hard community of followers who, in the early days, helped the project take on an entirely new life of its own. This included expanding dogecoin’s utility to a tipping cryptocurrency via third-party applications and using doge to support a range of charitable causes – some of which attracted mainstream media attention.

More recently, however, the reason dogecoin’s popularity has skyrocketed is not because of any new utility or function, but because memes and irony have resonance in internet tribes. That goes double for the world of cryptocurrency, which lends itself to insider language and jokes. This culture has grown significantly and become more influential over the last year (see wallstreetbets). which naturally benefits dogecoin. It has even managed to attract high-profile celebrities who have amplified the spread and effects of this social phenomenon, including Snoop Dogg, Gene Simmons and the person who has arguably has the strongest pull on dogecoin’s leash, Tesla co-founder Elon Musk (aka the “dogefather“).

But while all the meme-fueled hype and extravagant price activity are exciting, it’s important to know that there are a number of underlying risks associated with owning dogecoin that every new investor should know before diving into this digital asset.

1. Dogecoin has an unlimited supply …

In February 2014, Dogecoin co-founder Jackson Palmer decided to completely remove the cryptocurrency’s supply cap, which previously stood at 100 billion coins, in a bid to encourage the use of the coin for tipping and dissuade people from holding it.

This means dogecoin has an inflationary supply and new coins are continuously pouring into the market. By contrast, bitcoin (BTC), the original and most valuable cryptocurrency, has a hard cap of 21 million units.

Why is dogecoin’s infinite supply an issue? Supply and demand are the two fundamental drivers for determining the fair market value of goods, services and assets. It’s generally accepted that assets in high demand and scarce supply are likely to rise in price, whereas assets in poor demand and high supply are likely to fall in value.

Dogecoin, however, is a bit of an anomaly. The demand for the coin is currently higher than the number of coins entering the market so the price is rising. Even with an infinite supply, if buyers continue to purchase coins at an equal to or higher rate than they’re entering the market, the price will continue to rise or reach an equilibrium level.

Big If. In order to sustain price levels, dogecoin buyers will need to continually purchase all coins being created because there is no scarcity to support the price.

Think of it as shoveling snow off your driveway in a never-ending blizzard. Yes, you could argue, if everyone on the street helped out you could keep it clear but it’s likely the snow will eventually win.

2. … and it gets bigger every day

At the current mining rate, 10,000 new dogecoins are released in block rewards every minute. That works out to roughly 14.4 million new dogecoins entering circulation every single day, or 5.2 billion per year.

These block rewards are fixed, meaning no more or no less than 10,000 dogecoins will be awarded to miners every minute. The only thing that will change over time is mining difficulty, which for dogecoin adjusts after every block. Difficulty rises and falls depending on how many miners are competing to discover new blocks at any given time.

Right now, dogecoin mining difficulty is climbing toward a two-year high as a result of increasing prices, which, in turn, is pushing DOGE mining profitability to record highs and attracting more miners to the network.

3. Dogecoin also lacks technical development

In 2015, Palmer walked away from Dogecoin, frustrated by the “toxic” crypto industry at the time, which he felt was becoming increasingly “like a bunch of white libertarian bros sitting around hoping to get rich and coming up with half-baked, buzzword-filled business ideas which often fail in an effort to try and do so.”

The meme-based cryptocurrency was left in the hands of a few community developers to continue where Palmer left off. However, little has been done with the code over the last six years. Prior to the recent Dogecoin Core 1.14.3 release on Feb. 28, the last major development was posted on Nov. 8, 2019. There was also a notable gap between Nov. 10, 2015, and Feb. 4, 2018, where no updates were published at all. For perspective, the Bitcoin network’s code is updated almost every day.

Dogecoin developers argue there’s little reason to post regular releases. “It has been running stable, and the rules of the network have not changed since in a way that would put it at risk,” said Maximilian Keller, one of the community developers. “The Dogecoin network does not necessarily have the same challenges as Bitcoin, so it’s less of a pressing issue for us” to update regularly.

Nevertheless, one might expect a project that now has a market cap exceeding $50 billion (bigger than Ford’s) and a community fund that currently holds 23,532,879 coins ($9.1 million at current prices) to begin issuing more frequent code updates, even if it is still a joke cryptocurrency.

4. 10 wallets hold 44% of all dogecoin

According to data, almost half of all dogecoins in circulation are held in a handful of crypto wallet addresses, with the largest wallet accounting for 28% of the supply. Why is this a problem? Well, it means that at any given time one of these whales could exit out the market and send doge prices tanking. Not to mention, they could easily use their huge positions to manipulate the market via stop-loss hunting, creating buy and sell walls or employing other trading strategies to artificially raise or lower the price. This leaves every other dogecoin investor at the mercy of their trading activities.

Despite these clear downsides, dogecoin may well continue to ride high for a time on social media hype, celebrity endorsement and rapidly breeding meme culture. (Bloomberg’s Joe Weisenthal gleefully noted recently that, if you factor in the recent rally, doge has outperformed BTC over seven years.) What remains to be seen is how long those things alone can sustain price increases.

ProShares, the sponsor of the first-ever exchange-traded fund (ETF) backed by bitcoin futures, has applied for a waiver to limits the amount of bitcoin futures a buyer can purchase in the new fund, Barron’s reported.

• Starting with the November front-month contract, the Chicago Mercantile Exchange (CME) will limit the amount of futures that a buyer can buy in the new ETF to 4,000, dropping to 2,000 three days before expiration. As each contract represents five bitcoin, total ownership is limited to 20,000 bitcoin.
• To get around this limit, ProShares has already split its futures portfolio with half in October and half in November.
• CEO Michael Sapir told Barron’s that if the CME doesn’t grant the waiver, ProShares could shift assets into later-dated contracts, structured notes or swaps. Barron’s also noted that ProShares’ prospectus for the ETF says the fund could also invest in equities with crypto exposure.

Speaking of Bitcoin on the CoinDesk Podcast Network is brought to you by CrystalBlockchain.com.

Join hosts Adam B. Levine, Jonathan Mohan and Andreas M. Antonopoulos as they dissect the October global financial stability report from the International Monetary Fund (IMF) subtitled “COVID-19, Crypto and Climate: Navigating Challenging Transitions.” An entire chapter of the report is dedicated to destabilization factors crypto poses, at least as identified by the IMF. It even coined a new term, “cryptoization,” to refer to the introduction and/or substitution of crypto in emerging markets.

Although worries of supply shocks, supply chain inflation and stagflation fill headlines, the IMF placed crypto in the top three stability concerns. Is the organization gearing up to poise crypto as the scapegoat in case of an oncoming financial crisis?

Credits

Today’s show featured Andreas M. Antonopoulos, Jonathan Mohan and Adam B. Levine, with music by Gurtybeats.com. Our episode art is a photograph by Giorgio Trovato/Unsplash recreated by Speaking of Bitcoin

Any questions or comments? Send us an email at adam@speakingofbitcoin.show

Last week’s launch of the ProShares Bitcoin Strategy ETF (BITO) was a smash hit by any measure. Yet it may be that at least part of its success could in part be the result of how the instrument is structured rather than pure demand from buyers hoping for bitcoin exposure.

In just a few hours, the exchange-traded fund (ETF) amassed $570 million in assets under management (AUM), making it one of the most successful debuts of an ETF in history. Within a few more hours, that number just about doubled.

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BITO’s assets are mostly invested on the Chicago Mercantile Exchange (CME), which saw an expected increase in both open interest and volume for bitcoin futures. One question is whether some of that volume could be the result of traders positioning for profit from the way this particular ETF is structured.

Currently, for every dollar it takes in, ProShares allocates 40.2% to buying CME bitcoin futures contracts that settle in October and 31.2% for futures that settle in November. The remaining 28% or so is put in U.S. Treasury bills. Reminder: On the CME, bitcoin futures are settled in cash, meaning no actual bitcoin changes hands. It’s basically a side bet on the price of the asset.

So if by Wednesday there were $1.108 billion in AUM, $791 million of it was bitcoin futures on the CME. That’s the equivalent of 13.8% of the CME’s bitcoin open interest of $5.745 billion.

From Monday to Wednesday, open interest soared to $5.745 billion from $4 billion, an increase that was more than double the ProShares ETF’s holdings.

Meanwhile, volume was up, too, to levels never seen before on bitcoin futures: Tuesday saw $5.9 billion in futures change hands on the CME, and Wednesday’s figure was north of $7.5 billion. In the 19 trading days prior, the average was $2.5 billion per day.

Higher volumes? Higher interest? Why, of course that’s bullish, right? Perhaps, but maybe not 100%.

Here’s where it gets interesting.

Creation and redemption

BITO isn’t structured like a typical stock ETF. Rather, some of its features are more likely to be found in ETFs that own bonds and other types of financial instruments.

With a lot of stock ETFs, “authorized participants” (APs for short) accumulate and deliver a basket of shares to the ETF provider in exchange for shares in the ETF in a rather Biblical-sounding process called “creation.” APs aren’t average Joes, however. They are institutions and the like that can do this sort of thing in bulk and have the sort of relationships that allow such a trade to take place.

The APs do this kind of a trade if the value of the ETFs they get in return (which they then can sell in the market) is significantly higher than the stocks they deliver. And by “significantly higher,” we’re talking just 1%. That may not sound like a lot for a retail trader hoping to win big on something she saw on Reddit, but for institutions that do trades in the millions, this starts to add up to real money.

If this sort of trade is done enough times, the price of the underlying basket of stocks will rise as they get bought up and the price of the ETF shares will fall as they get sold until the prices of the two converge.

The also-Biblical-sounding “redemption” process is the reverse of the creation process, where APs get a basket of shares in exchange for redeeming their ETF shares to the provider. (ETF.com has a nice little primer on all of this, if you’re so inclined.)

BITO, though, does something similar to bond ETFs called “cash creation,” meaning the AP delivers cash rather than the underlying asset to the ETF provider in exchange for shares.

That could make for some quirky movements in the market, as noted in a Twitter thread by Dave Nadig, chief investment officer and director of research for news and data sites ETF Trends and ETF Database.

Pump up the volume

If BITO were to trade well above fair value during a hot trading day – say, the day of a long-anticipated premiere for an SEC-regulated bitcoin ETF – an AP could sell shares of the ETF “naked,” effectively short without borrowing (the minimum size the AP can create is 10,000 shares or about $4 million-worth as of Thursday). Simultaneously, the AP could offset much of that risk by buying futures on the CME or even some other bitcoin-related asset (bitcoin itself or shares of MicroStrategy or whatever).

At the end of the trading day, the AP would give cash to the ETF provider (in this case, ProShares) in exchange for shares of BITO. ProShares then would take the money and buy futures contracts on the CME because that’s what it’s supposed to do when an AP gives it cash. At the same time, the AP would most probably (though it’s not a given) unwind that hedge taken in other bitcoin assets when it initiated the short earlier in the day.

Again, should this trade get done by more than a few APs, prices of BITO and bitcoin futures would theoretically start to converge, though up to a point. The maximum amount of October bitcoin contracts an entity can hold is 2,000 and up to 5,000 total for all expiries; each contract holds five bitcoin. (BITO is now just about at those limits and the CME is set to increase those limits.)

All this could do a funny thing to volume, though. “AP activity will show up in underlying [CME contracts] twice,” tweeted Nadig. “One quick hedging round trip, followed by one long position until roll/redemption.”

As it turns out, the ratio of volume to open interest in CME bitcoin futures averaged 1.3x Tuesday and Wednesday compared to a 1.0x over the previous 19 days. Thus, open interest those two days averaged $5.3 billion but volume averaged $6.7 billion.

That’s not saying $2.8 billion in above-average volume was necessarily the result of APs seeking out arbitrage opportunities. Indeed, Nadig, speaking to CoinDesk, made it clear that he didn’t know if it happened at all.

Nonetheless, the outsized spike in volume relative to open interest indicates that traders were doing at least some amount of flipping.

Thus when looking at data price and volume data, it helps to remember that sometimes how an instrument is structured can explain some of it.

In the end, if one wants to own bitcoin, the purest play is buying bitcoin itself. Everything else comes with its own idiosyncrasies.