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Word on the Street: Goldman cries ‘fake news’ and Facebook ‘blockchain’

11 Sep 2018

In an interesting parallel it has been a bad week for crypto and Wall Street and both were running red by the end of it. After regaining the higher ground at over $7,000 BTC gave up around ~14% from its weekly high and found support around $6400. On Wall Street, technology stocks and the broader indices were down as Facebook and Twitter took a hammering this week as their respective COO and CEO were grilled by Congress - and amid its share slide, Facebook replayed the 'blockchain' card.

Goldman ‘puts brakes on crypto trading desk’ (high impact)

The greatest shadow cast over the market this week was from the hulk of investment banking, Goldman Sachs, which had announced months ago that it would be opening a trading desk for bitcoin futures – even appointing a head trader – only to put it on the backburner, according to reports this Wednesday.

Since the crypto market entered a bear phase at the start of the year, crypto investors/traders have had an almost monomania with institutional investment in the space believing the prospect of it and an ETF will be an unequivocally positive development for prices. However, this will do nothing for the real world-utility that drives most assets.

However, on Thursday, at the TechCrunch Disrupt conference, Goldman chief financial officer Martin Chavez moved to quell the reports that the bank had given up on its crypto endeavors, calling it fake news and saying that the bank was still working on a non-deliverable forward derivative of BTC because “clients want it”.

“I never thought I would hear myself use this term but I really have to describe that news as fake news” – Goldman Sachs CFO, Martin Chavez

Both bitcoin and Facebook shares have been on a parallel path over the past five days as they were affected by bad news and although the prices weren’t correlated they followed a similar trend in sell-offs which may signal a crossover of buyers/sellers in both markets.

*Chart of BTC in blue and Facebook (FB) in red; both sold off this week in a similar fashion on bad news. *

Facebook cries ‘blockchain’ to halt share slide (low impact)

Price action wasn’t the only parallel between BTC and FB, as word emerged on Thursday that Facebook’s blockchain team is advertising for new positions, one of which is for a head of business development with extensive experience in ‘dealmaking’. Facebook’s blockchain division is led by David Marcus who formerly sat on the board of Coinbase.

It is unsurprising that Facebook has played the blockchain card this week when its business and ethics model was scrutinised and vilified by media and Congress and it is likely an attempt to halt the slide of its shares which are down around 8 percent this week.

A very clever PR stunt to remind the public of its ‘efforts to decentralize’ its power or a hint that it’s interested in acquiring decentralized apps and companies?

Buterin caveats “inevitable collapse” of ETH (med impact)

Vitalik Buterin was forced to defend an assertion made in a TechCrunch article written by Jeremy Rubin, an advisor to Stellar, that the collapse of ETH as a currency is inevitable and its value would plummet to zero.

Rubin made the points that gas fees the only use case for the currency and at that gas fees don’t necessarily have to be paid in ETH itself, but can be done in any currency through ‘economic abstraction’ and that it is still possible for the network to succeed while the native currency implodes.

In a reddit thread Buterin agreed that with the network in its current state the value of ETH could possibly go to zero, but that’s assuming the network stays on PoW. He said the move to PoS and a proposal to burn ETH paid in gas fees would prevent this from happening.

"In Ethereum as it currently exists this is absolutely true [value of ETH go to zero] and, in fact, if Ethereum were not to change all parts of the author’s argument (except the part about proof of stake, which would not even apply to Ethereum as it is today) would be correct." – Vitalik Buterin

Ethereum has had a torrid time in recent months with its price hitting lows not seen since this time last year. Despite its promise, user growth of its thousand-plus Dapps has been very poor, aside for a tech-savvy niche audience, with no value-proposition for mainstream adoption apparent. Both the scaling issues and price action this week suggest that others are also losing faith and patience in the Ethereum project.

Shapeshift exchange looks for KYC (low impact)

Libertarian exchange Shapeshift that was famed for its anonymous customer accounts also moved this week to implement KYC for its customers under duress to “de-risk”. It is a symbolic move for the exchange, founded by blockchain evangelist Eric Voorhees, against the core tenets it was established on.

Ripple used in payment corridor between Europe and India (low impact)

TransferGo, an international payment provider, has announced it will use Ripple’s products for real-time remittances between Europe and India, which is a multi-billion dollar channel. Ripple also announced a similar partnership with Brazilian currency exchange company, Beetech, to facilitate payments out of Brazil.

The usual weekly pronouncements from Ripple executives about its partnerships also continued, as Ripple co-founder and chairman Chris Larsen unveiled at a tech conference the names of the 100 banks that had signed up to participate with its products. From Ripple’s perspective, this means more than just a partnership but that the companies have committed to integrating one or more of its products.

Separately, Platio a London-based “smart bank” platform built on the EOS blockchain announced it will use Ripple’s xVia alongside Sepa and SWIFT for remittances, one of the few projects to use all three side-by-side.

People’s Bank of China opens digital currency research centre (low impact)

The Digital Currency Research Lab of the People’s Bank of China (PBoC) is expanding its research centres outside of Beijing to trial blockchain and crypto-like currencies in real world applications.

According to local publication Securities Times the government will open a fintech center in Nanjing, the capital city of the eastern Jiangsu province. The Digital Currency Research Lab in Nanjing will be a collaboration between a Jiangsu bank and the University of Nanjing. The PBoC is working on a prototype digital currency while it has also been buying vast amounts of gold in recent years, boosting its reserves from 400 tonnes in 2000 to around 2000 tonnes today.

Perhaps a Chinese digital RMB backed by gold will be a future reserve currency?

Follow @AndrewBNC


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