CoinsPaid, a payment processor facilitating transactions between conventional finance-oriented companies and crypto-paying customers, recently experienced a breach. The platform reports facilitating about a million transactions monthly, valued at around 7 million EUR, and claims to have managed over 19 billion euros in crypto transactions.

Another Attack

The Estonian platform encountered its second significant security breach in half a year. The initial breach, transpiring on July 22nd, resulted in a $37.3 million loss. Following a post-mortem, investigators identified the Lazarus Group, which hails via North Korea, as responsible for the attack. Lazarus executed the breach by tricking a CoinsPaid employee during a fabricated job interview, leading to the downloading of malicious code facilitating unauthorized withdrawal requests.

Damage Control

Recently, the platform faced another breach, with blockchain cybersecurity firm Cyvers detecting unauthorized transactions involving USDT, USDC, ETH, BNB, and the native CPD token. Approximately $7.5 million was pilfered and directed to an external wallet, then rerouted to crypto exchanges like ChangeNOW, WhiteBit, MEXC, and others.

The modus operandi resembled the July breach, hinting at a potential oversight by CoinsPaid in fully eradicating any and all access by the bad actor. Despite the comparatively smaller scale of this attack, the stolen amount aligns with what CoinsPaid claims is its monthly transaction volume. The platform, however, has not issued an official statement on the recent incident.

The United States Securities and Exchange Commission (SEC) initiated the publication of notifications regarding updates on spot Bitcoin ETFs on January 8th, 2023. By 10:45 P.M. UTC, the national securities exchange page on the SEC website displayed modifications to eight 19b-4 filings outlining proposed rule adjustments. Approximately a dozen applicants are presently seeking approval for a spot Bitcoin ETF, indicating the potential for additional amendments in the future.

Getting Closer

Among the aforementioned revised filings, six pertain to proposed rule modifications for the listing and trading of ETFs by WisdomTree, VanEck, Ark Invest, Franklin Templeton, Fidelity, and Invesco Galaxy on the Cboe BZX exchange. Another amendment involves a proposed rule change for NASDAQ to list and trade the Valkyrie Bitcoin ETF. Yet another addresses a proposed rule change for NYSE Arca to list and trade the Hashdex ETF.

The recent amendments largely address prior concerns, including the size of relevant markets, the inclusion of surveillance-sharing agreements, and the prevention of market manipulation. Each notice indicates that the exchanges submitted the relevant amendment to the SEC on Friday, January 5th. Earlier reports also indicated a similar timeline in anticipation of expected approvals around Wednesday, January 10th.

Amendment Details

On January 8th, several spot Bitcoin ETF applicants also submitted amended registration statements, including various forms such as the 8-A12B. Moreover, the latest S-1 update by BlackRock notably underscores the absence of immediate in-kind creations and redemptions, which could have facilitated certain ETF transactions using Bitcoin instead of cash.

The timing of the In-Kind Regulatory Approval is uncertain, and there is no assurance that NASDAQ will receive approval in the future. If NASDAQ obtains In-Kind Regulatory Approval and the Sponsor opts for in-kind creations and redemptions, the Trust will notify the beneficial interest owners of the Shares.

Additionally, S-1 registration statements by BlackRock and other firms also incorporate new details, including fee and seed funding information. Most firms submitted nearly finalized S-1 amendments on or before the December 29th, 2023 deadline. Consequently, the latest amendments do not substantially alter the structure of each application but primarily provide additional details.

The Tron blockchain encountered a minor dip in Stablecoin Total Value Locked (TVL) during the initial part of the latter half of 2023 but eventually surged to achieve unprecedented highs, reaching approximately $48 billion, as disclosed in a recent Reflexivity report. The report highlighted that roughly 94% of this cumulative value was associated with USDT.

Prioritizing USDT

Reflexivity Research indicated that Tron has upheld its position as the foremost blockchain for USDT, surpassing the Ethereum mainnet by approximately 8% in terms of TVL. Tether, an early fiat-backed stablecoin in the crypto market, first launched on the Bitcoin Omni chain, expanded to Ethereum, and currently predominantly resides on Tron and Ethereum.

A notable distinction lies in the composition of stablecoins on Ethereum, showcasing a more even mix of USDT and USDC on-chain. In contrast, the Tron ecosystem is overwhelmingly dominated by USDT. This dominance is particularly evident in Tron contracts, where the USDT Token contract utilizes the majority of on-chain energy, making up roughly 95.6% of all contracts. This implies that Tron is primarily utilized for USDT transactions with limited diversification.

Navigating Challenges

Despite a moderate increase in USDT volume in 2023, a noteworthy trend is the 130% growth in the number of USDT holders during the same period, according to TronScan data. The Tron ecosystem also faced consecutive exploits, with the Poloniex exchange, acquired by Justin Sun, being hacked in November of the previous year, resulting in the theft of nearly $125 million.

Subsequently, crypto exchange HTX and blockchain protocol Heco Chain were also compromised, leading to a cumulative loss of $97 million in various digital assets. Despite these incidents, the decentralized finance sector for Tron managed to remain stable.

In under two years since adopting Bitcoin (BTC) as an accepted legal form of payment, a special economic zone situated in Roatan, Honduras, has officially acknowledged BTC as a unit of account. This designation allows the flagship crypto to be utilized as a measure for determining the market value of goods and services.

The initiative, led by Jorge Colindres, the acting manager and tax commissioner of the regional ZEDE (Zone for Employment and Economic Development) on January 5th, aims to provide increased financial autonomy to individuals and businesses operating within the region.

Still A Ways To Go

Colindres expressed the belief in the right to financial and monetary freedom, emphasizing the freedom for individuals to conduct transactions, manage their accounts, and report taxes in their chosen currency. This development permits BTC to serve as a monetary unit for evaluating the market value of various goods and services within this specific zone.

However, the implementation of the Final BTC Tax Payment Procedure faces various contemporary challenges due to technological limitations in the eGovernance system and external regulatory issues. Presently, tax obligations for entities opting for Bitcoin are determined in BTC for internal accounting but are reported to ZEDE in United States Dollars or the Honduras Lempira.

A Bright Future

Upon resolution of these issues, entities will report and settle tax liabilities to the local ZEDE in BTC. Those wishing to adopt BTC as their unit of account must also submit a notice to the regional tax commission within 30 days of the relevant tax period, referencing an approved cryptocurrency exchange like Coinbase or Kraken.

El Salvador decided to recognize Bitcoin as legal tender nationwide back in September 2021. Colindres highlighted that the aforementioned ZEDE is in fact one of the most competitive special regimes in Latin America, boasting over $100 million in three years and the creation of over 3,000 jobs across the country.

ETH prices could experience an upturn soon following the announcement by crypto lender Celsius, currently undergoing bankruptcy restructuring. Celsius, in the process of transitioning to a Bitcoin mining focus, has declared its intention to withdraw its holdings when it comes to the second largest cryptocurrency.

Unstaking Continues

Celsius, previously committed to incorporating staking into its operations, had been selling staking rewards on the open market to cover expenses related to the reorganization plan. Celsius recently stated that the company will unstake existing ETH holdings, which have generated valuable staking rewards income for the estate, to offset certain costs incurred throughout the entire restructuring process.

The significant unstaking activity expected in the next few days aims to release ETH for prompt distribution to creditors. According to data via the analysis tool Arkham, crypto wallets associated with Celsius have staked over $151 million worth of ETH, likely earning an annualized yield between 4-5%.

ETH Keeps Flowing

Although the staking rewards may not result in substantial ETH sales, they could have contributed to negative sentiment for the token, along with other factors such as interest in alternative blockchains. Concurrently, outflow data reveals that Celsius transferred over 30,000 ETH to custodian Fireblocks in the past week, some of which may have been deposited at the crypto exchange Coinbase, where it is possibly exchanged for stablecoins.

According to a post on X, in preparation of any asset distributions, Celsius has already begun the process of recalling and rebalancing assets to ensure ample liquidity for the foreseeable future.

Anticipation is rising on social media regarding the SEC potentially approving a Bitcoin exchange-traded fund (ETF), with speculation reaching new heights. The buzz intensified after the Grayscale Legal Chief Officer mentioned casually working on paperwork, and a reporter hinted at possible ETF approvals on X. While some analysts suggest approvals could happen as early as the next day, others anticipate a wait until the following week.

Could Go Either Way

A notable tweet by Grayscale has gained considerable attention lately, as not only is a possible approval trending on social media, discussions about Bitcoin ETFs are also rampant. The price of Bitcoin has similarly seen a 3.4% increase within a 24 hours period after a sharp drop on January 3rd, 2024.

However, not everyone is convinced of an immediate approval. Trader Scott Melkor acknowledges the active rumor mill but remains cautious. Bloomberg ETF analyst James Seyffart dismisses much of the January 5th approval speculation as noise, expecting approval between January 8th and 10th. Attorney Joe Carlasare points out that the public comment period for several ETF applications extends until midnight on January 5th, making approval before the next week seem very unlikely in his view.

Going All In

Senior Bloomberg ETF analyst Eric Balchunas notes that the SEC is presently providing final comments, and issuers are expected to file their final 19b-4 and S-1 forms soon. Approval hinges on these forms, especially the 19b-4 form, for any kind of potential approval. Scott Johnsson, general partner at VB Capital, remains skeptical about ETF approval before the next week unless all 19b-4 applications are cleared, and the SEC is open to simultaneous approvals.

Currently, 14 issuers, including BlackRock, Valkyrie, Bitwise, and Fidelity, are all vying for a Bitcoin ETF approval. Investors and enthusiasts are eagerly awaiting what the SEC will decide, recognizing its potential significant impact on the broader cryptocurrency market.

Cryptocurrency markets experienced significant losses this week, particularly Bitcoin (BTC), which saw a rollercoaster ride that included a surge to $46,000 to a nearly $5,000 dump. Altcoins also suffered, leading to a $150 billion decline in the total crypto market cap. The speculation around the potential rejection of spot BTC ETF applications by the SEC contributed to this sharp drop.

A Sudden Drop

Ethereum dropped over 6%, hovering just above $2,200, while BNB went down to $300 within hours. Other major cryptocurrencies like Ripple, Solana, Cardano, Avalanche, Dogecoin, Polkadot, Polygon, and Chainlink faced losses of up to 12%, with MATIC being particularly affected.

As a result, the total crypto market cap, which was at a near 2-year high of $1.750 trillion, plummeted by $160 billion, standing at $1.650 trillion on CoinMarketCap as of the time of this writing. Furthermore, the market dominance of Bitcoin rose to 51.2%, indicating a larger impact on altcoins.

Other Markets

Meanwhile, in traditional markets, European equity futures declined, Asian stocks were mixed, and investors awaited crucial US jobs data to gauge the interest rate decisions taken by the Federal Reserve. Oil prices rose due to tensions in the Middle East and North Africa, despite signs of weakening US demand, with Brent crude near $78 a barrel.

Lastly, around the time that the various IT services giants within India begin their respective reporting sessions next week, earnings are expected to be the lowest in years, making it difficult for them to justify their valuations.

The United States Securities and Exchange Commission (SEC) is alleged on the verge of granting approval to several spot Bitcoin exchange-traded funds (ETFs). In crucial meetings with major stock exchanges such as the New York Stock Exchange (NYSE), Nasdaq, and Chicago Board Options Exchange (CBOE), the SEC is reportedly in the final stages of reviewing applications for eagerly awaited spot Bitcoin ETFs.

Final Discussions Underway

The discussions primarily revolve around the revision and finalization of 19b-4 filings. These filings, submitted by exchanges on behalf of ETF issuers, necessitate SEC clearance before the public sale of ETFs. Moreover, these discussions signify a positive signal, suggesting that the SEC may give the green light to some, if not all, of the dozen applications by significant money managers and crypto firms seeking spot Bitcoin ETF approval.

Although a final decision is pending, insiders indicate that the agency might commence notifying issuers of their approval as early as this weekend. If this occurs, spot Bitcoin ETF trading could commence next week. ETF analysts and issuers maintain optimism, anticipating a favorable SEC decision on or before January 10th, 2024.

A Matter Of Time

This potential approval comes amidst varying confidence levels in the crypto market. The approval of spot Bitcoin ETFs by the SEC would also represent a significant milestone for the cryptocurrency industry, providing retail investors with increased access to the world's largest digital asset at a lower cost compared to currently approved futures ETFs.

Additionally, the introduction of ETFs through trusted and highly regulated money management firms like BlackRock or Fidelity could broaden the investor pool, attracting more individuals to include cryptocurrency in their investment portfolios. An SEC spokesperson mentioned that any decisions related to the registration statement or 19b-4 orders would be reflected on EDGAR and published on the SEC website and the Federal Register.

Senior ETF analyst Eric Balchunas has indicated that a minimum of three out of the five SEC commissioners support the endorsement of Bitcoin spot ETFs. Balchunas explained that the SEC staff, guided by Chairman Gensler, has collaborated with issuers for months, even during holidays. His remarks were in response to Markus Thielen of Matrixport, who published two opinion pieces simultaneously, one predicting approval and the other forecasting rejection.

Mixed Signals

Thielen asserted that he altered his stance to bearish, not for the sake of making accurate predictions, but due to well prepared arguments. Despite Thielen lacking concrete information on the matter, his rejection opinion piece gained attention when published by Coindesk with a seemingly factual title.

Insiders, such as Balchunas, assert that approval is still imminent, with the SEC potentially announcing the decision following a meeting with various exchanges. The exact meeting time is unclear, but this marks the first instance where a reporter claims three commissioners are in favor. Given that two of these are Republicans, expected to support, and Gensler, appointed by Joe Biden, has indicated a court mandated approval, a decision favoring the ETFs seems imminent if three commissioners are indeed in favor.

More Complications

Matrixport attributes potential rejection to the cautious stance on crypto compliance adopted by Gensler, emphasizing his focus on regulatory standards and non-compliance within the crypto industry. Matrixport contends that Gensler choosing to focus on stringent compliance signals a probable disapproval, impacting widespread cryptocurrency investment potential.

Additionally, Matrixport notes that most voting commissioners associated with the Democratic party, generally skeptical of cryptocurrencies, further complicate ETF approval. Furthermore, regulatory authorities lack compelling political reasons to endorse a spot ETF, casting doubt on swift approval. As a result of these recent developments, BTC experienced a sudden drop in price which also adversely affected all of the altcoins.

Popular decentralized exchange dYdX has released a post mortem report regarding a targeted assault on its v3 platform which occurred this past November that also resulted in a $9 million loss from its insurance fund, constituting approximately 40% of the total fund.

The post revealed that the attacker, whose identity has since been uncovered, engaged in extensive 5x leveraged long positions in USD across over 100 wallets. The native token for DeFi protocol Yearn Finance, YFI, experienced a 215% surge in price as the attacker, utilizing various addresses, acquired spot YFI tokens.

What Happened

The assailant leveraged their unrealized profits to establish additional YFI-USD positions, peaking at approximately $50 million. On November 17th, 2023, dYdX responded by reducing the base and incremental position sizes to constrain the attacker. The subsequent day witnessed a nearly 30% plunge in the price of YFI within an hour, yet the attacker failed to close their positions. As their holdings turned negative, the insurance fund automatically offset their losses.

Notably, a week before the YFI incident, the attacker executed a similar strategy targeting USD, withdrawing about $5 million in profits. However, this did not impact the v3 insurance fund, as dYdX had raised the initial margin requirement to 100%, preventing further earnings for the attacker.

Damage Control

The exchange has assured that customer funds remained unaffected and suggested the attacker did not profit from manipulating the YFI market. In response to potential future attacks using similar tactics, dYdX announced enhancements to the v3 trading platform, emphasizing improved open-interest monitoring and alerting capabilities.

Moreover, the forthcoming v4 chain is designed to mitigate risks like those witnessed in this incident. The upgrade incorporates a new software feature automatically adjusting the initial margin fraction in the event of abnormal price movements. As of now, the company has not responded to any requests for additional comments.

Binance, the biggest cryptocurrency exchange in the world, has expanded its Margin offerings by introducing NFPrompt (NFP) and Enzyme (MLN) as newly available assets for borrowing on both Cross and Isolated Margin.

Margin trading in crypto, like in traditional financial markets, involves borrowing funds to increase the size of a trading position. While it can offer potential advantages, it also comes with increased risks.

Multiple Pairs Added

The trading pairs on Cross and Isolated Margin have been broadened, presenting users with increased opportunities for diversified trading. Moreover, users on Binance Margin can now utilize NFPrompt and Enzyme as loanable assets, enhancing flexibility and choices for margin trading.

The newly listed trading pairs on Cross Margin include BNB/USDC, NFP/USDT, and SOL/ETH, while Isolated Margin features pairs like BNB/USDC, MLN/USDT, NFP/USDT, and SEI/TUSD. The proactive development approach of Binance Margin, evident in its continual addition of assets and trading pairs, underscores its dedication to enhancing the user experience and staying ahead in the dynamic cryptocurrency market.

Benefits Of Margin Trading

One of the main advantages of margin trading is the ability to leverage investments. By borrowing funds, traders can control a larger position size with a relatively smaller amount of capital. With leverage, potential profits can be magnified. If the market moves in a desirable direction, the return on initial investments can be higher as opposed to trading without leverage.

Margin trading also allows traders to go short, meaning they can profit via a decline in the price of an asset. This is particularly useful in bear markets or when a trader expects a specific cryptocurrency to decrease in value. Margin trading additionally, provides opportunities to implement more sophisticated trading strategies, such as hedging and arbitrage, which may not be as easily executed with traditional spot trading.

Finally, traders can make use of their capital more efficiently by borrowing funds and increasing their exposure to the market. This can potentially lead to higher returns compared to trading with just the available capital.

CBOE Digital President John Palmer expresses confidence that the approval of spot Bitcoin exchange traded funds (ETFs) will attract a fresh influx of institutional investors. The Chicago Board Options Exchange, which is the largest options exchange in the United States, believes that the green light for these ETFs will open doors for new institutional and, eventually, retail interest in Bitcoin derivatives.

Significant Expansion

According to Palmer, the approval is set to facilitate pension funds and RIA based funds to invest in assets within a spot Bitcoin ETF, providing a direct exposure that is currently unavailable to many funds. An RIA, registered with federal or state regulatory agencies, offers investment advice.

With the SEC facing a January 10th deadline for deciding on the ARK Invest 21 Shares Bitcoin ETF application, Palmer anticipates a significant expansion in Bitcoin derivatives products if the spot ETF gains approval. He foresees institutional players increasingly relying on derivatives to hedge risks. While the breakdown of investor interest remains uncertain, Palmer notes that institutions are likely to lead in accessing hedging tools, with retail investors following suit.

More Exposure Anticipated

In related news, CBOE Digital, the crypto division of the exchange offering crypto futures and options trading, is scheduled to launch margined Bitcoin and Ethereum derivatives trading on January 11th, allowing investors to trade contracts without providing full collateral. Simultaneously, mutual funds are contemplating strategies to gain more exposure to spot Bitcoin ETFs once approved.

On January 2nd, Advisors Preferred Trust, a mutual fund manager, adjusted its prospectus to potentially invest up to 15% of its total assets indirectly in Bitcoin, utilizing shares of Grayscale Bitcoin Trust, ProShares Bitcoin Strategy ETF, and Bitcoin futures contracts.