Busan as Blockchain Hub? The Korean city travels the wrong way; No bail for Bankman-Fried
Good morning. Here’s what happens:
Prices: Bitcoin and other cryptos enjoyed the sound of inflation easing more than expected in November.
Insight: The South Korean city of Busan wants to be a blockchain hub, but it’s forgetting a few inconvenient truths.
Prices
CoinDesk Market Index (CMI)
885.54
+21.7 ▲ 2.5%
Bitcoin (BTC)
$17,765
+554.0 ▲ 3.2%
Ethereum (ETH)
$1319
+43.8 ▲ 3.4%
S&P 500 daily close
4,019.65
+29.1 ▲ 0.7%
Gold
$1822
+41.2 ▲ 2.3%
Treasury Yield 10 years
3.5%
▼ 0.1
BTC/ETH prices per CoinDesk indices; gold is the COMEX spot price. Prices from approximately 4:00 PM ET
Inflation Declines, Bitcoin Accelerates
By James Rubin
Former FTX CEO and crypto miracle Sam Bankman-Fried went to a Bahamian jail, was denied bail and was verbally assaulted in a congressional hearing by the executive who replaced him as the exchange’s CEO.
Binance saw a flood of withdrawals hours after a report that US prosecutors were considering criminal charges against the exchange. Shares of crypto-friendly bank Silvergate fell to a two-year low.
The digital asset industry had a memorable 24 hours, but not for the reasons it would prefer.
Still, crypto markets only had eyes for encouraging inflation numbers from November.
Bitcoin recently traded at $17,765, up 3.2% over the past 24 hours, as investors embraced the latest Consumer Price Index (CPI) data, which showed prices rising 7.1%, lower than the 7 .3% estimated by economists responding to a FactSet survey. The CPI rose over 9 percent earlier this year.
“It’s pretty clear that the back of inflation has been broken,” Jacob Sansbury, co-founder and CEO of Pluto, a provider of DIY automated investment services for retail investors, wrote to CoinDesk. After all, CPI prints are trailing indicators.”
Sansbury added: “This is a promising sign for bitcoin and crypto, along with other risk assets. I’m not saying a bottom has fully formed yet for the crypto market, but from today’s lower-than-expected CPI print, it’s pretty nice.” clearly a bottom is very, very close.”
Ether recently changed hands at $1,319, also up 3.4% from Monday at the same time. Most other major cryptos had a solid green hue with AVAX, the token of the base layer network Avalanche, and LINK, the token of the software platform, Chainlink, recently rising 5.8% and 3.2% respectively. The CoinDesk Market Index (CDI), an index that measures crypto’s performance, recently climbed nearly 2.4%.
US stock indexes embraced the encouraging CPI numbers more calmly as the tech-heavy Nasdaq and S&P 500 climbed 1% and 0.7% respectively. The Bureau of Labor Statistics on Tuesday also showed core inflation, which excludes more volatile food and fuel costs, rose 6% against expectations of 6.2%, providing further evidence that the US central bank’s monetary hawkism over the past six months has worked.
US Treasury yields, hovering above 4% just a few months ago, fell to 3.5% on Tuesday. On Wednesday, the Fed is likely to raise interest rates by 50 basis points (bps), ending a streak of four straight 75 bps hikes.
Meanwhile, Bankman-Fried was taken into custody and will face an extradition hearing on February 8, 2023. The U.S. Attorney’s Office for the Southern District of New York dismissed the charges earlier Tuesday, announcing that officials charged Bankman-Fried with wiretapping. fraud, conspiracy to commit money laundering and campaign violation charges, among other alleged crimes. FTX collapsed last month after CoinDesk found irregularities in its balance sheet.
In a Tweet on Tuesday, Binance founder and CEO Changpeng “CZ” Zhao wrote that he welcomed a “stress test” of withdrawals on his exchange to meet increasing user redemption requests from the platform.
Of the cryptocurrency’s rally on Tuesday, Bob Ras, co-founder of exchange and digital asset ecosystem Sologenic, cautiously noted in an email to CoinDesk that the rebound was not “as significant as many had hoped.”
“This is not to say that there won’t be more upside for major crypto assets here soon. It is certainly possible, if not likely,” he wrote, adding that the emergence of China from the Covid shutdowns could affect inflation in the months ahead.
“There is simply too much uncertainty for a full-fledged market breakout for cryptoassets and stocks further along the risk curve,” he wrote.
Biggest winners
Biggest losers
Insight
By Sam Reynolds
The South Korean city of Busan seems hell-bent on being a blockchain hub. But will anyone care about blockchain initiatives by government companies and seek to build the first city-run crypto exchange?
Part of Busan’s status as “the center of a global digital information ecosystem,” as government literature describes it, is to integrate blockchain technology into every facet of public service. That means, according to The Korea Herald, blockchain will be the technology that powers the city’s blockchain-based ID service called B-Pass, B-Fresh, its seafood logistics service, B-Tour, a tour platform, to name a few.
The problem is that this initiative represents yesterday’s thinking on blockchain. Others have tried and failed to integrate permissioned enterprise blockchain into digital infrastructure. A few weeks ago, CoinDesk reported that two major enterprise blockchain projects ended: shipping giant Maersk and IBM abandoned TradeLens, a blockchain solution to optimize supply chains, while the Australian Stock Exchange said it was abandoning a blockchain-powered clearing and settlement system because of a poor cost-benefit ratio.
“It’s a Web2 business model, but with a little bit of Web3 pixie dust sprinkled on. And once the pixie dust clears, the value proposition doesn’t look so hot,” Paul Brody, head of blockchain at global consulting giant Ernst & Young, told CoinDesk in a previous article.
This is in addition to IBM’s blockchain team being effectively discontinued in early 2021, and Microsoft discontinuing its Azure cloud services for blockchain a few months later.
It is not entirely clear how the powers that be in Busan will do anything different that could change the equation on enterprise blockchain. It’s probably that they can’t.
Blockchain is still slow
The reason there hasn’t been a success story in this field is that the technology itself is slow compared to other database platforms.
“The problem was the cost of computing power to implement. Blockchain technology is slow and requires a lot more computing power. Blockchain is the model T for distributed ledger technology. They are wonderful, but now outdated,” explained Burke Files, a consultant, when asked why the U.S. The Food and Drug Administration is not implementing blockchain technology as they once claimed.
Busan’s other blockchain venture is the creation of a state-run crypto exchange. In a recent announcement from the city, officials said the project had some setbacks but remains on track for a launch next year.
Backlash indeed. FTX was an early contractor on the project, but it’s obviously not going to work now that the stock exchange has collapsed and the former CEO has been arrested.
Binance and Huobi are also involved, but there has been little to show for what should be a very simple project.
Even if it is built, will anyone use it? There will certainly be advantages for traders when it comes to Korean won on ramps and accelerated know-your-customer procedures. But will people be comfortable shopping on a government-run platform? It is a fiat exchange and many will no doubt find it antithetical to Satoshi’s vision for crypto.
Busan could also open itself up to some major headaches via debt.
What if the stock exchange is hacked? Or what if a listed token is the victim of a blanket sweep? In the case of offshore exchanges, this can add a level of complexity, but serving the city of Busan with a legal notice will be much easier for a Korean lawyer than tracking down an exchange that is registered in the Seychelles but has no central office.
Of course, it could all be a Potemkin village designed to look like busy work and extract taxpayer dollars. When CoinDesk visited the Busan blockchain center in August, it was just a co-working space with a handful of people. Hardly indicative of what is a global technology hub.
Important events
15:00 HKT/SGT (7:00 UTC) UK Consumer Price Index (YoY/Nov)
03:00 HKT/SGT (19:00 UTC) The US Fed’s interest rate decision
05:45 HKT/SGT (21:45 UTC) New Zealand’s Gross Domestic Product (YY/Q3)
CoinDesk TV
In case you missed it, here’s the latest episode of “First Mover” on CoinDesk TV:
Sam Bankman-Fried Arrested in Bahamas, SEC Accuses Former FTX CEO of Defrauding Investors
As the world watches, major events affecting crypto are simultaneously unfolding. Congressional hearings on the collapse of FTX began just hours after Sam Bankman-Fried was arrested in the Bahamas. New US economic data showed the consumer price index (CPI) rose at a 7.1% annual pace in November, which was down from October, a sign that inflation is easing. The crypto markets have reacted positively. “First Mover” guests included Kennyhertz Perry partner Braden Perry, Defiance ETF co-founder and CEO Sylvia Jablonski and whistleblower and Nym security consultant Chelsea Manning.
Headings
FTX founder Sam Bankman-Fried refused bail in the Bahamas: Bankman-Fried was arrested on Monday.
With founder facing accusations, new CEO says FTX embezzled customer money: Sam Bankman-Fried is now a criminal defendant, and CEO John Ray III told lawmakers that FTX embezzled customer funds “right before their eyes.”
Crypto Markets Near-Apocalypse in 2022 Turns Zombie Tokens into Dead Coins: The number of cryptocurrencies has fallen by around 1,000 since February, the biggest drop ever, according to Statista. Often tokens are removed from pricing sites like CoinGecko because they no longer trade – even though they technically still exist on the blockchain.
Binance’s CZ welcomes ‘stress test’ as exchange resumes USDC withdrawals: The world’s largest crypto exchange by trading volume has undergone a wave of withdrawals due to concerns about reserves. Withdrawals of the stablecoin USDC were paused for several hours, but have now resumed.
Grayscale Bitcoin Trust Discount Hits Record 50%: The shares have not traded at a premium to bitcoin since March last year.
