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It is more appropriate to characterize bitcoin as a “risk” asset rather than a “safe” asset, according to JPMorgan strategists.

This is because of how bitcoin has behaved over the past year against equity, JPMorgan strategists led by Nikolaos Panigirtzoglou said in a note published Friday. Since March 2020, the correlation between bitcoin and S&P500 has increased, said the strategists.

Gold’s correlation with S&P500 has also been predominantly positive. Therefore, “both bitcoin and gold could be more characterized as ‘risk’ rather than ‘safe’ assets,” said the strategists, who believe investors prefer these assets because they are “alternative” options rather than safe or “hedge” assets.
Source: Coin Metrics, The Block Research

While bitcoin is witnessing institutional and retail demand, its price return to $40,000 looks difficult in the near future, according to the strategists. This is because the pace of flows into the Grayscale Bitcoin Trust (GBTC) “appears to have peaked” based on four-week rolling averages.

“At the moment, the institutional flow impulse behind the Grayscale Bitcoin Trust is not strong enough for bitcoin to break out above $40k as the 4-week pace of the flow into GBTC appears to have peaked,” said the strategists. “Thus the risk is that momentum traders will continue to unwind bitcoin futures positions.”

Earlier this month, the strategists said Bitcoin’s price could reach above $146,000 over the long term, provided that bitcoin’s volatility converges to that of gold. Reiterating that point in Friday’s note, the strategists said that process is likely a multi-year process and depends on bitcoin ownership becoming more institutional and less retail over the coming years.

“In all, while bitcoin is currently trading within our fair value range of between $11k and $35k (at current levels of bitcoin volatility), the apparent peaking of the flow pace into the Grayscale Bitcoin Trust and a mechanically decay of our momentum signal till the end of March, both imply that the near term balance of risks is still skewed to the downside,” they added.

© 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.

Chengdu is said to be the next place to roll out another city-wide test of China’s central bank digital currency.

Chinese payments media Mpaypass cited an internal memo from the Bank of Communications in a report on Monday. Per the bank’s internal note, the Southwestern Chinese city is set to start the test on January 27 with the local government giving away 30 million digital yuan, worth $4.6 million.

On top of that, Chinese e-commerce giant JD.com will give away another 20 million digital yuan, worth $3.1 million, that can be spent on online shopping, the report added.

The free digital yuan will be issued via a lottery, which is the same with what the city of Shenzhen and Suzhou did in previous tests since last October.

Based on the report, the registration for the lottery is expected to start on January 27 while lottery-winners will be able to spend the free digital yuan in local merchants from February 4 to February 26 throughout the Lunar New Year festival.

The local government has not yet published any announcement of the test through its official media channel. It’s not yet clear how many residents will be able to participate in the trial.

Meanwhile, the report said the city of Suzhou, which had its first digital yuan test in December, is set to kick off a second city-wide trial on January 27 with an issuance of 40 million digital yuan, worth $6.1 million.

© 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.

Roughly $144.3 billion passed through decentralized exchanges (DEXs) in 2020, but not all transactions involved legally-obtained crypto.

Blockchain analysis firm Chainalysis estimates that about $34 million of decentralized finance (DeFi) transactions were conducted by criminal actors. 

Source: Chainalysis

The $34 million figure might not sound like a lot — it’s only 0.02% of the estimated DEX volume, after all. But that number remains significant because the frequency of such activity is expected to rise in 2021, wrote Chainalysis chief scientist Jacob Illum in a draft shared with The Block.

One factor in this numerical growth will be purely logistical — blockchain analytics firms like Chainalysis and Elliptic haven’t found all the crime-tied activity that occurred in 2020. As such, they’re likely to uncover additional instances this year, as Chainalysis previously mentioned was the case with the PlusToken Ponzi scheme. The key events date back to 2019, but many of the key players weren’t identified until the following year. 

Illum mentions another reason for the increased DeFi activity rate: because cybercriminals have taken note of DeFi’s smart contracts, which route funds into users wallets depending on the terms stipulated in the code. There’s a lack of human oversight between transactions, and Illum argues that money laundering via DeFi will increase as a result. 

“The question that remains is whether the most popular platforms will be those where administrators retain enough control to prevent criminal transactions, as we saw in the KuCoin hack,” Illum wrote. 

The third is that dark markets, like Televend, are decentralizing. Televend uses encrypted automated chat bots on Telegram to connect more than 150,000 vendors to buyers. Buyers place orders on a vendor’s automated chat and then receive a BTC address generated by the bot. 

“Televend receives commissions on each sale, but never actually touches the funds, so there’s no central entity for law enforcement to track through blockchain analysis — the transactions blend in much more easily,” Illum wrote.  

© 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.

Crypto exchange Bitstamp has confirmed to The Block that it has implemented stricter know-your-customer (KYC) measures for Dutch users.

According to these measures, which came into force on January 15, no Dutch user of Bitstamp is allowed to withdraw crypto to an outside address without meeting KYC rules.

“Before you can withdraw crypto from Bitstamp to an outside address, you have to add that address to your whitelist and provide a photo that proves it really is your address,” Bitstamp recently told Dutch users. 

This means direct withdrawals to third parties are no longer allowed by Bitstamp. Users have to withdraw crypto from Bitstamp to their wallets first if they want to then send those funds to third parties.

“As a regulated cryptocurrency exchange, we have to follow the rules and guidelines of the jurisdictions where we are present,” Bitstamp CTO David Osojnik told The Block, explaining:

“The changes we’ve made to our processes regarding cryptocurrency withdrawals for our customers in the Netherlands are in response to rules stipulated by the DNB [Dutch central bank], which we are obligated to follow if we want to continue doing business in the country.”

De Nederlandsche Bank, the country’s central bank, has supervised crypto service providers in the Netherlands since last year. At the time, the DNB said crypto firms must be registered with it, as well as follow anti-money laundering and sanctions rules.

Per those rules, “institutions must check incoming and outgoing payment transfers, and block and report them to DNB in the event of a hit.”

“We realize this situation is not ideal and may inconvenience our customers. That is why we have implemented a solution that makes verifying cryptocurrency addresses as simple as possible while satisfying our regulatory requirements,” said Osojnik.

Bitstamp has automatically enabled the “whitelisting” feature forDutch users’ accounts, meaning they now have to add each cryptocurrency address to their whitelist before sending crypto to it. Whitelisting has become obligatory for all customers in the Netherlands, said Bitstamp.

While Bitstamp and a few other platforms such as Bitonic have obliged to the stricter rules, crypto derivatives giant Deribit moved out of the Netherlands last year for Panama.

Other crypto firms, on the other hand, closed shop last year, citing customer privacy concerns.

© 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.