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| Exploring the transformation of value in the digital age By Michael J. Casey, Chief Content Officer Mar. 4, 2022 Was this newsletter forwarded to you? Sign up here. Supported by
Despite almost nine years of covering this space, I was not prepared for the developments of this past week, as cryptocurrencies and the debate over the value to society became part of the story around the biggest military conflict in Europe since World War II. Today’s column addresses what’s at stake for crypto and for the ideal of financial freedom.
We were lucky enough to have an ideal guest for this moment on the “Money Reimagined” podcast. My co-host Sheila Warren and I spoke with Jonathan Levin, chief strategy officer and co-founder of Chainalysis, the blockchain forensics company. Chainalysis is uniquely positioned to survey the flows of money into Ukraine and Russia. Given his company’s role in helping government’s track illicit funds, Levin also has an interesting perspective on the questions of privacy versus security that arise in these situations and how we might arrive at a better balance between the two.
Have a listen after reading the newsletter.
Cryptocurrency comes to the tax-advantaged 401(k) Now, for the first time, ForUsAll’s new Alt401(k) adds cryptocurrencies, including Bitcoin and up to 40 others, to the list of 401(k) investment options – and the tax savings for you and your employees can be jaw-dropping. This is all thanks to the 401(k)'s tax-advantaged status and our self-directed cryptocurrency window, powered by Coinbase Institutional. Now, by using after-tax (Roth) contributions, it's possible to eliminate capital gains taxes on your cryptocurrency gains forever.*
Learn more about crypto in a 401(k)
*To be fully tax exempt and subject to withdrawal without penalty, you must meet the 5-year rule for the initial Roth deferral and be at least 59 1/2 years old. Consult your retirement plan provider or your accountant for details. Of course, ForUsAll does not provide tax advice and the tax laws could change in the future. Cryptocurrency feature available Q1 2022.
If Ever There Were a Time for Financial Freedom, It’s Now Max Kukurudziak/Unsplash, modified by CoinDesk In years hence, when we look back on how cryptocurrencies became integrated into the global economy, this week may be viewed as a turning point.
For one, there was the unprecedented phenomenon of a besieged European government crowdfunding armament procurement with donations from around the world, demonstrating not only crypto’s global capacity for peer-to-peer fund transfers but also the power of decentralized action as decentralized autonomous organizations (DAO) and other crypto communities swiftly mobilized. At the same time, the West’s swift move to cut off Russian banks from the SWIFT messaging system gave people a crash lesson in the gatekeeping plumbing of the incumbent international financial system to which cryptocurrencies offer an alternative.
More importantly, people have been forced to reckon with cryptocurrency’s value proposition and what it means to embrace it.
Crypto is about financial freedom. It has always been about freedom. But at least now we have a stark set of scenarios to help people get their heads around it. I hope that will help them not only see crypto’s potential to change entrenched paradigms but also to consider with more open minds the challenges it poses to our existing priorities and assumptions.
These issues were thrust into the spotlight by decisions from crypto exchanges such as Kraken and Binance to deny a Ukrainian request that they disable transfers to all Russian accounts, indiscriminately. Former U.S. Secretary of State Hillary Clinton told Rachel Maddow that she was “disappointed” that some “so-called crypto exchanges” were “refusing to end transactions with Russia for some philosophy of libertarianism or whatever.”
Off the Charts Correlation Correction Last week, we looked at a one-year chart showing how bitcoin became more positively correlated with U.S. stocks over recent months while gold became negatively correlated. What a difference a week makes.
As the below chart from CoinDesk’s Sage D. Young shows, things flipped as the Ukraine conflict unfolded this week. Even as stocks fell on the news, bitcoin – which throughout the first two months of winter had tended to sell off in sympathy with a more bearish equities market – suddenly went the other direction.
As the Russian invasion intensified, a strong rally took it to a three-week high of $45,304 on Wednesday, a 30% gain from the week-earlier low it had hit as pre-war tensions were building on the Russia-Ukraine border. Gold, on the other hand, fell in line with stocks. That’s why the former moved to an almost zero correlation with the S&P 500 index on a 14-day trailing basis while gold has broken out from its negative correlation to stocks gain a slight positive correlation with the S&P. Why the reversal? It’s hard to say with any certainty. But the move supports a thesis I’ve supported for some time: that the bitcoin market is defined by a competition between two very different, almost diametrically opposed profiles of investors: institutional speculators and diehard believer “whales.”
The former group treats bitcoin as a “risk asset,” which led them to dump the cryptocurrency in tandem with stocks as the latter fell in response to inflation and interest rate concerns through February. But now that many of these big speculators have capitulated, deep-pocketed diehards who’ve accumulated a great deal of capital over the years are choosing to “buy the dip.” That the massive crypto fund movement into Ukraine and Russia is validating their belief in the fundamental value of bitcoin serves only to reinforce their conviction.
The Conversation Infura’s Venezuela Fail Just as exchanges were grappling with the moral dilemma of whether to block Russian crypto accounts, a similar matter of censorship arose in a different part of the world Thursday, when Venezuelan users of popular Ethereum wallet MetaMask found their access had been denied. Word got around that Infura, which provides tools for developers to build Ethereum blockchain services, had geoblocked the South American country in compliance with U.S. sanctions.
Infura later apologized for having “mistakenly configured the settings more broadly than they needed to be” in response to new sanctions directives from the U.S. Even so, the situation made Crypto Twitter irate.
Larry Cermak, an analyst at The Block, first warned that “it's only a matter of time” until Metamask and Infura “are forced by regulators to censor individual people's IP addresses.” Later, when Infura offered its explanation and apology, Cermak retweeted it, adding, “point still stands, at some point it will.”
Someone with the handle @Route2FI said the incident raised important questions, citing two: “Are we as decentralized as we believe we are by using MM? Do we really own our money unless it's stored in a cold wallet?”
Someone with the Twitter handle @j3s7m4n, presumably a Bitcoin maximalist, tweeted “@MetaMask is a minor 🦊 sideshow, but .@infura_io illustrates yet again what a steaming pile of centralized, very easily censorable 💩 that $ETH, the 'World Computer'. really is”
Camila Russo, founder of The Defiant, lamented that crypto advocates’ claims of its superiority for being accessible to everyone are undermined by the fact that MetaMask could block Venezuelans while NFT platform OpenSea had blocked Iranians, “those who need crypto the most.”
Salty Shrimps launch on March 13th. The 1.696 pixelated NFTs will be ready-to-mint on thecryptosea.com for 0.99 SOL. Each Salty Shrimp plants one mangrove tree, can win a Thailand trip and get free airdrops.
As the 2nd of 8 collections from The CryptoSea - first underwater metaverse on Solana - there are further unique utilities like members-only beach house or royalties payout.
Holders of Shuffle Sharks NFTs receive free shrimps airdropped on Monday, March 7th.
Relevant Reads An Unprecedented Moment It’s a sad truth that some of the most important formative moments in the development of money systems over the centuries were spurred because some or other sovereign needed to fund a war. A historic twist on that will now be the significance of the Russian-Ukraine conflict spurring a government to pay for its armaments via cryptocurrency donations from around the world: around $30 million raised in a week when this newsletter went to print. CoinDesk’s coverage was wide-ranging. Once the official crypto accounts were opened, money started pouring in – and out – of those addresses. As early as Tuesday, Kiev-based crypto exchange Kuna founder Michael Chobanian was on CoinDesk TV noting that of the $26 million raised by then, $14 million had already been disbursed. Fran Valesquez reported on that interview. Moscow-based investigative reporter Anna Baydakova, operating in difficult conditions, chimed in with a deep dive into the story of how a few driven people pulled together to set up the unique fund-raising channel. The fundraising effort then went into overdrive as the official Ukrainian Twitter account announced plans for an airdrop of fungible tokens to thank the donors. But then, as Sandali Handagama reported, it was abruptly canceled. The reasons for the cancellation of the airdrop were not clear, but it may have had something to do with evidence that a rogue account was spoofing it, as Tracy Wang and Shaurya Malwa reported.
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