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What is PAX Gold (PAXG) and how does it work?

PAX Gold is a cryptocurrency and gold hybrid that bridges the gap between the two investment options. It offers the security and stability of cryptocurrencies.

In recent years, nonfungible tokens (NFTs), cryptocurrencies and other modern investment options have become trendy. However, physical commodities such as gold are still in high demand. In 2021, the global market capitalization for cryptocurrency surpassed $2 trillion. Now, investors must ask themselves: which option should I choose — crypto or gold?

Gold is a commodity that dates back thousands of years as a store of value and as a means of exchange and is still successful today. Even with the invention of decentralized digital cryptocurrency, gold has remained just as prominent. Although, for most individual investors, owning gold can be difficult and out of reach. There is one crypto company, PAX Gold (PAXG), whose goal is to make gold ownership more democratic and available to everyday investors by allowing them to trade it like any other cryptocurrency.

PAX Gold has discovered a method to combine cryptocurrency with physical gold assets, making it attractive to investors accustomed to conventional alternatives. This article will discuss PAX Gold (PAXG) and analyze how the cryptocurrency works.

What Is PAX Gold?

Paxos Gold is a cryptocurrency that is backed by real gold reserves held by Paxos, a for-profit company in New York. Each PAXG token is linked to a 1:1 ratio to one troy ounce (t oz) of a 400-ounce London Good Delivery gold bar stored at Brinks Security vaults in London. The Paxos-backed cryptocurrency, PAXG, is backed by the London Bullion Market Association (LBMA) certified gold bars and may be redeemed for actual bullion.

Related: What is a gold-backed token and how does it work?

PAX Gold investors are spared the trouble of storing and securing physical gold, as well as transporting it. Also, shares can be bought fractionally, which makes it more accessible for retail investors who otherwise would be hindered by the high cost of gold. PAX Gold boasts a combination of qualities from both physical gold ownership and cryptocurrency that provide solutions to many modern-day challenges in the gold market such as high costs, storage concerns and the lack of liquidity.

Who Is Behind PAX Gold?

The Paxos Trust Company, a financial institution and tech company based in New York City that specializes in blockchain technology, created PAX Gold. Charles Cascarilla and Richard Teo, both former analysts at different firms (Cascarilla at Goldman Sachs and Teo at Cedar Hill Capital Partners), founded Paxos in 2012.

PAX Gold is not the only crypto project that Paxos has undertaken. In addition to PAX Gold, they have also created PAX Dollar (USDP), a digital United States dollar and stablecoin. They have received strong institutional support and have raised over $500 million in total funding from investors like OakHC/FT, Mithril Partners and PayPal Ventures.

How does PAXG work?

The PAX Gold token is built on the Ethereum blockchain, which gives it portability among wallets, exchanges, decentralized finance (DeFi) platforms, and other apps that use Ethereum. PAX Gold allows users to trade, stake or redeem their tokens for high-quality gold bars. These gold bars are accredited by the London Bullion Market Association and stored in secure vaults around the world. Even with these top-notch security measures and high-quality gold, PAX Gold doesn’t charge any custodial or storage fees — only a 0.02% transaction fee.

Is Pax Gold safe? PAX Gold is not only accredited with a gold standard, but it also functions dependably and transparently. Both PAX Gold and its holding company, Paxos Trust, are under the legal jurisdiction of the New York Department of Financial Services (NYDFS). Furthermore, PAX Gold protects the consumer and the company’s assets independently, ensuring that the consumer is secure in the event of bankruptcy.

PAXG undergoes monthly audits from a third-party auditing firm to ensure that its gold reserves match the supply of PAXG tokens. The reports from these attestations are released on Paxos’ official website. In addition, PAXG’s developers run regular smart contract audits to search for any potential bugs or vulnerabilities in the network.

Is Pax Gold real gold?

As mentioned earlier, Pax gold is tokenized gold that operates on a blockchain network. Tokenization is the digital transformation of both physical and intangible assets into cryptocurrency. The PAXG token specifically represents physical gold from the Paxos trust company. Gold is a good store of value because it keeps its value over time. As such, it is often used as a hedge against inflation. When the USD loses value, gold becomes more expensive in USD and vice versa. This makes gold a popular choice for investors looking to protect their wealth from inflation. 

The PAXG tokens have serial numbers that match those of individual gold bars. The serial number, value and other characteristics of a holder’s physical gold may be discovered by inputting an individual’s Ethereum wallet address on the PAXG lookup tool. They also have the option to convert their PAXG into fiat money, another cryptocurrency or allocated and unallocated gold bullion bars at the current market price of gold.

What’s the difference between PAXG and gold ETFs?

The main difference between a gold ETF and Pax Gold is that an ETF purchases a contract that mimics the price of gold, but the user does not own the underlying asset. Each PAXG token is directly linked to a real gold bar kept in a London vault, with each PAXG token being equivalent to one.

Gold exchange-traded funds (ETFs) track the value of the underlying commodity. They just give investors access to the price of gold, but not ownership. An investor who owns a gold ETF is a party in an agreement that gives him or her a specific fraction of the pooled gold. Gold ETFs can’t compare to full ownership of the metal. For example, by the time settlement occurs, the contract value may be lower than what you would get if you simply owned the gold outright.

In contrast, a PAXG is a digital representation of physical gold. Each PAXG token represents one troy ounce of gold in London vaults that can be identified by sequential numbers. Trading PAXG does not take days to settle as physical gold bar trading might do because it is handled on Ethereum as an ERC-20 token.

PAX Gold is the perfect investment for both traditional and modern investors who want to stay on trend without compromising their personal goals. With actual gold assets reflected in crypto tokens, you can invest in both physical and digital resources with a single investment, taking advantage of the best aspects of each.

How does PAX gold make money?

PAX Gold will earn revenue in two ways: a small premium on the gold and a tokenization fee at the time of initial purchase. The percentage for the tokenization fee depends on the amount purchased initially; it is 1% for purchases of one ounce or less but significantly lower for larger purchases. Paxos will not charge custody fees, but it will charge a fee of 0.02% whenever a customer wants to buy or sell a token on a blockchain network.

Related: What is tokenized real estate? A beginner’s guide to digital real estate ownership

Can you stake PAXG? You can earn interest on your PAXG by lending it to a custodian, but rates will differ depending on the lender. Staking your PAXG also allows you to earn interest, but you must lock up your tokens for a specific period of time. How to buy PAXG? The token is available for purchase on several exchanges, including Binance, Kraken, KuCoin and Coinbase. Here are the steps to buy PAXG tokens on the Coinbase crypto exchange: 

Download a self-custody wallet that supports PAXG like the Coinbase wallet.

Securely store your recovery phrase.

Understand and prepare for Ethereum network fees.

Buy and transfer Ether (ETH) to your self-custody wallet.

In the trade section, use the ETH to purchase PAX Gold.

The future of asset-backed tokens

Asset-backed tokens are digital representations of physical assets that can be redeemed for the underlying asset. That asset could be gold, oil, real estate, equity, soybeans or just about any other commodity.

Asset-backed tokens are cracking open markets that were once inaccessible and costly by making transactions that don’t need a central figure. By doing this, we’re ensuring both security and transparency in business relationships. This is changing the way we do business for the future and how we think about ownership and wealth creation.

Asset-backed tokens may also help to address issues caused by inflated or depreciated currencies, as well as the unpredictable stock market. Individuals have a viable new financial choice that combines digital liquidity with real asset values when needed, thanks to asset-backed tokens’ potential. We’ve already seen how asset-backed tokens are being used in numerous applications.

The future of asset tokenization is only as limited as the imagination. With new use cases being discovered every day, it’s exciting to think about all the possibilities for how asset-backed tokens can help people and businesses around the globe.

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Latin America is ready for crypto — just integrate it with their payment systems

Brazil is already leading the globe in cryptocurrency adoption. Integrating crypto with payment providers in the region is a surefire way to see Latin America fully embrace the industry.

Thriving on exploiting users’ data, Web2 monopolies like Facebook and Google have ushered in an era of massive internet centralization in recent years. This concentration of power has enabled huge shares of communication and commerce closed platforms, giving users little control over how their data is collected.

An emerging concept, Web3, will provide a means to pivot from centralization to an open-source internet. A recent report from Andreessen Horowitz (a16z) found that this new digital economy could reach an astounding 1 billion users by 2031. If executed correctly, the decentralized internet will allow users to take control of their data and content.

While Web3 promises to radically change the internet and its ability to provide value to users worldwide, key hurdles must be overcome before it can be adopted en masse.

Related: Brazilian proposal would make crypto payments legal and protect private keys

One major obstacle to mass adoption is the lack of local payments integration that many Web3 projects have. For example, a global Web3 project based in Germany likely doesn’t understand or offer the preferred payment options of people living in Brazil. While it seems tedious, accepting local payment options familiar to customers in their respective regions is a strategic decision that can make an enormous impact in winning market share.

Let’s look at how Web3 projects can scale in Latin America and globally by expanding local payment options.

Understanding local payment preferences

Local payment methods are regionally preferred payment types. These methods include digital wallets, cash vouchers, local debit networks, bank transfers, open invoicing and other tactics used globally to transact in-store and online. Without local payment fluency, Web3 businesses aren’t able to access different markets across the globe.

However, serving an international clientele by accepting local payments is no easy feat as each region subscribes to significantly different preferred payment options and regulatory requirements. Web3 projects often don’t have the proper infrastructure to reach global audiences at scale.

One of the hottest Latin American markets for Web3 projects is Brazil, as its citizens are adopting digital transactions faster than in any other country. Brazil has seen a massive uptake of its national instant payment solution, PIX, implemented by the Brazilian Central Bank in 2020. For Web3 companies to reach this audience, they must forge a way to connect with local banks and stay in line with local regulations.

Related: Top Latin America delivery app to accept crypto

COVID-19 accelerated digital transformation in nearly every corner of the world. In Mexico, the adoption of SPEI, a real-time gross settlements payment system created by the Bank of Mexico, is rising. Companies can capitalize on systems like SPEI by finding a way to partner with central banks or employing a third party to link to banks for them.

Additionally, the pandemic and the rise of contactless payments highlighted the importance of flexible payment options. Online payment methods are gaining significant traction in Latin America. For example, Mexican convenience store OXXO recently launched a voucher-based banking app that allows users to pay for their utility bills and online purchases that now boasts more than 1.6 million users. Keeping up-to-date with new developments in the payments landscape is vital to serving customers and keeping pace with the competition.

Establishing trust and loyalty

In many countries in Latin America, individuals are eager to embrace crypto in the hope of a better financial future. A recent study found that Latin Americans are the most bullish on crypto compared to any other region worldwide. There is a huge opportunity for the Web3 movement to establish deep trust with Latin Americans as the centralized system has failed them.

Local payments are a gateway to customer acquisition and loyalty. To effectively enter new markets, it is vital to establish quick integration with all relevant currencies. This results in new end-user conversions and higher success rates, which builds loyalty and trust with local audiences.

Enhancing user experience

It is a widely held belief that much work is needed to streamline the user experience in Web3. Regarding Web3 payments, users are looking for fast, reliable transactions in the payment method of their choice. Web3 projects can improve user experience by meeting customers where they are and speaking their language.

Related: Bitcoin ATM installed in Mexico’s Senate Building

Ways to enhance payment user experience include simplifying the onboarding process and providing exceptional customer support. Notifying users every step of the way so that they are confident their payment is being processed will ensure there is no confusion or apprehension.

Web3 is still in its infancy and has some growing pains in its current state. But accomplishing the due diligence required to deepen infrastructure integrations worldwide will open up endless possibilities and, ultimately, transform the ways individuals socialize, transact and consume data.

Holger Arians is the CEO of Banxa, a payment and compliance infrastructure provider to the global crypto industry.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Terra back from the dead? LUNA price rises 300% in September

The incredible LUNA rally took place amid a flurry of positive and negative events while technicals suggest a correction is coming.

Terra has become a controversial blockchain project after the collapse of its native token LUNA and stablecoin TerraUSD (UST) in May. But its recent gains are hard to ignore for cryptocurrency traders. 

LUNA rising from the dead?

After crashing to nearly zero in May, LUNA is now trading for around $6, a whopping 17,559,000% price rally in less than four months when measured from its lowest level. 

Meanwhile, LUNA’s performance in September is particularly interesting, given it has rallied by more than 300% month-to-date after a long period of sideways consolidation.

LUNA/USDT daily price chart. Source: TradingView

Terra ecosystem in September

It is vital to note that LUNA also trades with the ticker LUNA2 across multiple exchanges.

In detail, Terraform Labs, the firm behind the Terra project, divided the old chain into Terra Classic (LUNC) and Terra LUNA 2.0 (LUNA/LUNA2).

Related: Do Kwon reportedly hires lawyers in S. Korea to prepare for Terra investigation

Terra Classic is the original version of the Terra blockchain, while Terra LUNA 2.0 was created as a part of a regeneration strategy by Terraform Labs founder Do Kwon. In doing so, Kwon and his team periodically airdrop the LUNA2 tokens to users affected by Terra’s collapse.

LUNA/LUNA2 started pumping on Sep. 9, the day on which many things happened inside the Terra ecosystem.

First, Terra Classic (LUNC) passed governance proposals to add a 1.2% tax on all its on-chain transactions on the day. In other words, the proposals will permanently remove 1.2% of the LUNC supply from each on-chain transaction, as Cointelegraph covered here.

Terra Luna Classic (#LUNC) skyrockets >37,000% since its bottom after the Terra collapse

This comes after a proposal to implement a 1.2% token burn tax on all transactions that will enable $LUNC to become a deflationary cryptocurrency.#LUNC#HaileyLUNC$LUNCpic.twitter.com/oIxI7tqVkW

— Hailey LUNC ✳️ (@TheMoonHailey) September 7, 2022

Second, a self-proclaimed Terra whistleblower, FatMan, reported a suspicious transaction worth 435,000 LUNA2 tokens to Binance, alleging that the sender is TerraForm Labs.

“Was eating lunch [and] saw LUNA2 pump. Checked the TFL Dawn wallet. Sure enough, after months of farming rewards with the airdrop they claim they never received, they sent all 435K available LUNA 2 to Binance just days ago. That’s just one address.”

.@clayop tallied up the numbers – TFL sent a total of $3.9 billion USD (in UST) to exchanges including Binance and KuCoin.

Let the enormity of that figure sink in, and consider how many people’s savings that is added up. Crypto’s biggest fraud.

No explanation from @stablekwon https://t.co/qc2kCFPMHW

— FatMan (@FatManTerra) September 9, 2022

However, Do Kwon dismissed the allegations.

The Sep. 9 pump also occurred a week after Terra passed the proposal to conduct its second airdrop of over 19 million LUNA tokens until Oct. 4.

LUNA price technicals lean bearish

From a technical perspective, LUNA’s price risks undergoing a massive correction in the coming days.

Firstly, on the four-hour chart, the token’s relative strength index (RSI) has jumped above 70, which is considered overbought territory where a correction becomes more likely. Secondly, the price has been forming a rising wedge, a bearish reversal pattern, since Sep. 9.

LUNA/USDT daily price chart featuring rising wedge breakdown setup. Source: TradingView

Notably, a rising wedge forms when the price trends higher inside an ascending range whose upper and lower trendlines converge toward one another. It resolves after the price breaks below the lower trendline together with a rise in trading volume.

As of Sep. 11, LUNA was testing its wedge’s lower trendline for a potential breakdown move. In this case, the price will risk falling by as much as the wedge’s maximum height.

In other words, LUNA could drop to $4.5, down 30% from today’s price.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Bitcoin short squeeze ‘not over’ as BTC price eyes 17% weekly gains

Analysts are still confident that BTC price action can break $23,000 going into the Ethereum Merge and U.S. CPI data.

Bitcoin (BTC) stayed higher into the Sep. 10 weekly close as optimistic forecasts favored $23,000 next.

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

$23,000 targets remain in place

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD hitting $21,730 on Bitstamp overnight — the most since Aug. 26.

The pair managed to conserve its prior gains despite low-volume weekend trading conditions being apt to amplify any weakness.

Among analysts, excitement was palpable going into the new week, one which should prove pivotal for short-term crypto price action.

The Ethereum (ETH) Merge and fresh United States inflation data were the top catalysts expected to influence the market.

“Expect volatility to pick up around next week’s economic data,” on-chain monitoring resource Material Indicators wrote in part of a tweet over the weekend.

“In the meantime, remember…THIS is a rally. If you don’t take profit along the way, you risk giving it all back.”

An accompanying chart showed the Binance BTC/USD order book providing solid resistance near $21,500, a zone which bulls subsequently appeared to overcome.

BTC/USD order book data (Binance). Source: Material Indicators/ Twitter

For popular account Il Capo of Crypto, meanwhile, there was room for additional upside.

Short squeeze is not over. 22500-23000 should be next.

— il Capo Of Crypto (@CryptoCapo_) September 11, 2022

He added, however, that there was a “90% chance” that BTC price action would return back under $20,000 in future.

$23,200 was also a target for trader CJ, who eyed various short-term levels for clues as to long and short entry positions.

#BTC

– Sweep equal highs at 21.9k and close back below July mid and I’ll be looking for a short targeting the monthly open.

– Reclaim the mid or hold as support and we likely see a fast move into 23.2k pic.twitter.com/xv9oarffsA

— CJ (@IrnCrypt) September 10, 2022

“Septembears” take a beating

The weekly close thus looked set to be a three-week high, Bitcoin already trading above closing prices from the second half of August.

Related: Bitcoin analyst who called 2018 bottom warns ‘bad winter’ may see $10K BTC

BTC/USD 1-week candle chart (Bitstamp). Source: TradingView

On macro, hopes that a sustained risk asset rally would ensue became more vocal, with analyst Hernik Zeberg particularly confident.

“Every time Inflation tops — Stock market rallies! EVERY TIME! And RSI (momentum) — is in turning area,” he argued on the day.

“US CPI coming out on Tuesday. This time will not be different!”U.S. inflation vs. S&P 500 annotated chart. Source: Henrik Zeberg/ Twitter

July CPI data showed that the U.S. may have already seen peak inflation.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Florida govt warns against auto warranty scammers asking crypto payments

Regardless of the methods used by scammers to contact potential victims, the FDACS newsletter highlighted five red flags that can help citizens identify and evade possible scams.

The Florida Department of Agriculture and Consumer Services (FDACS) issued a warning sharing insights into identifying robocall scam marketing auto warranties, which includes being asked to pay for the services via gift cards and cryptocurrencies. 

Consumer complaints against increasing robocall scams — wherein scammers use prerecorded calls to market and sell fraudulent services — led the Enforcement Bureau to order phone companies to avoid carrying robocall traffic.

Regardless of the methods used by scammers to contact potential victims, the FDACS newsletter highlighted five red flags that indicate scams.

Five red flags for identifying scams. Source: fdacs.gov

Stressing on some of the go-to payment methods often being recommended by the scammers, the announcement read:

“Payment Type: If you are asked to pay with a gift card or cryptocurrency, it’s a scam.”

In addition to asking Florida residents to refrain from making crypto payments, the FDACS reiterated that no government officials would ask for personal information, such as their Social Security or credit card numbers, adding that “Only scammers will require one of those kinds of payment, and once you send the money, you probably won’t get it back.”

Although the newsletter mentioned the impossibility of tracking down crypto funds from hackers, numerous corporations, including Velodrome and Curve Finance, have successfully recovered stolen funds — thanks to the immutable nature of blockchain technology.

Related: US lawmakers call on Mark Zuckerberg to address ‘breeding ground’ for crypto scams: Report

On Sept. 5, United States congressman Brad Sherman — a well-known crypto skeptic — acknowledged the rapid growth of the crypto ecosystem, claiming that banning cryptocurrencies was no longer an option.

Sherman stated that political donations and crypto lobbying make blanket banning cryptocurrencies impossible, adding that:

“We didn’t ban it at the beginning because we didn’t realize it was important, and we didn’t ban it now because there’s too much money and power behind it.”

Most lawmakers, including Sherman, favor implementing strict regulatory policies on crypto.

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New Data Shows Some South American Mummies Were Brutally Murdered

The reasoning behind any good mummy’s curse – real or fiction – is that it protects the remains and buried belongings of the deceased by condemning anyone who disturbs them to bad luck, illness or death. That definition has held up throughout the history of major mummy discoveries – the deaths attributed to the opening of the tomb of King Tut – and all of the classic mummy movies and novels. However, that belief generally focuses on the mummies and tombs of pharaohs, royalty and other important people and their relatives. What if the mummy is the remains of an ordinary citizen? That is generally the case of the mummies found in various South American countries. A recent discovery about many of those mummies may open the mummy’s curse to a second possible cause … revenge. A new scan of mummies found in two South American countries revealed a gruesome cause of death – murder. Would you blame those mummies for cursing the living? Did anything happen to the researchers who discovered this?

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Flying Monsters That Aren’t Mothman: We’re Talking About Its Rivals

That’s right: Mothman is not the only winged beast that falls into the category of Cryptozoology. As you’ll see right now. I’ll begin with a woman named Norka and her story of a winged thing she saw back in 1976. There comes a time in the life of every investigator of the paranormal when a case just gels. From the credibility of the witness to the importance of the story, everything combines together and in the best fashion possible. I have experienced such a deep sense of satisfaction and connection on a number of occasions. But, there is, perhaps, no greater example than the amazing affair of a woman named Norka, which came my way on the fourth day of my trek across Puerto Rico in 2004 – and with good friend, cryptozoologist, Jon Downes. Norka was a fascinating lady, who lived in a spacious and atmospheric house high in the El Yunque rain forest. Norka’s story was one that took our quest for the truth about the chupacabra to a whole new – and largely unanticipated – level. After we devoured our breakfasts fit for a king – in the open courtyard of the Wind Chimes Inn – our convoy of jeep, cars, and trucks once again hit the road. There were people to interview, creatures to be sought, and absolutely no time to waste. Around ninety minutes after we left bustling San Juan behind us, we arrived at Norka’s lavish home. It was dominated by a pair of huge, wrought-iron gates and a driveway that was so steep it actually required me to put the jeep in the lowest possible gear to successfully climb it. I quipped to Jon that the fortified home had probably been built to keep the chupacabra out. Who knows? After digesting what Norka said, I seriously had to wonder if my joke just may have been on target, after all.

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SEC to address growing crypto issuer filings with specialized offices

The upcoming Office of Crypto Assets will review crypto filings, allowing DRP to refocus on filing review issues related to crypto assets.

In light of the influx of filings from cryptocurrency issuers in the United States, the Securities and Exchange Commission (SEC) decided to set up two new offices this fall to provide specialized support to the seven offices currently responsible for reviewing issuer filings. 

Under the Division of Corporation Finance’s Disclosure Review Program (DRP), the SEC announced plans to add two offices — an Office of Crypto Assets and an Office of Industrial Applications and Services — purely focused on dealing with crypto assets and industrial applications and services, respectively.

Sharing insights into the move, Renee Jones, director of the Division of Corporation Finance, stated:

“The creation of these new offices will enable the DRP to enhance its focus in the areas of crypto assets, financial institutions, life sciences, and industrial applications and services and facilitate our ability to meet our mission.”

According to the announcement, the Office of Crypto Assets will take over DRP’s effort to review crypto filings, allowing the department to refocus its resources “to address the unique and evolving filing review issues related to crypto assets.”

The Office of Industrial Applications and Services, on the other hand, will be set up to take over non-pharma, non-biotech, and non-medicinal products from the Office of Life Sciences.

Related: Brazilian SEC seeks to change its role in cryptocurrency regulation

A recent SEC filing revealed MicroStrategy’s intent to sell class A stocks worth $500,000,000 and reinvest the capital “for general corporate purposes, including the acquisition of Bitcoin (BTC).”

Snippet from MicroStrategy’s SEC filing. Source: SEC.gov

MicroStrategy holds approximately 129,699 BTC, which was amassed over several years at an aggregate purchase price of $3.977 billion. With crypto prices failing to recover, the company’s BTC reserves stand as a loss of over $1 billion, as shown by Bitcoin Treasuries data.

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Binance removes 3 stablecoins, Russia eyes cross-border crypto payments and UK exudes crypto positivity: Hodler’s Digest, Sept. 4-10

Coming every Saturday, Hodlers Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more a week on Cointelegraph in one link.

Top Stories This Week

 

US Fed vice chair Michael Barr favors hard line on crypto, OCC acting head no friendlier

Global crypto regulation remains a prevalent topic looming over the sector. Recent comments from United States Federal Reserve Board Vice Chair for Supervision Michael Barr and Acting Comptroller of the Currency Michael Hsu favored a lean toward more government overwatch. Barr expressed a desire for stablecoin regulation as well as crypto-related banking regulations. Hsus comments included looking at the industry cautiously.

 

GameStop doubles down on crypto amid a new partnership with FTX US

GameStop is teaming up with crypto exchange FTX US in a promotional partnership. So far, 2022 has seen GameStop pursuing increasing involvement in the crypto space, evident in its NFT marketplace launch and its new gaming division devoted to Web3. GameStop has a long-term vision for crypto involvement, according to CEO Matt Furlong during a Q2 fiscal year earnings call.

 

 

Binance: No plans to auto-convert Tether, though that may change

This week, Binance revealed plans to phase out three stablecoins on its trading platform: USD Coin (USDC), TrueUSD (TUSD) and USDP Stablecoin (USDP). The three assets, as well as associated spot trading pairs, will no longer be tradable on the exchange. In addition, Binance plans to terminate other services related to USDC on its platform, such as staking.

The transition is essentially an effort to centralize liquidity into the exchanges own stablecoin, Binance USD (BUSD), based on an explanation tweeted by CEO Changpeng Zhao. The exchange will convert users remaining holdings of USDC, TUSD and USDP into BUSD over a span of 24 hours, commencing on Sept. 29. A conversion of Tether (USDT) to BUSD, however, was not included in Binances plans, though that could change, according to a Binance spokesperson.

 

Bank of Russia agrees to legalize crypto for cross-border payments: Report

Russias central bank is expected to allow cross-border crypto payments to and from the country, but digital asset payments inside its borders will remain banned. The country banned crypto as a payment vehicle via previous legislation. According to Russian Deputy Finance Minister Alexey Moiseev, the governments new approach to crypto is a response to changing circumstances globally following Russias invasion of Ukraine earlier this year.

A statement to media outlet RIA Novosti from the Bank of Russia explained: It is important to emphasize that we are not talking about the legalization of cryptocurrency as a means of payment on the territory of our country. A day later, news came in regarding Russia reportedly looking to cooperate with so-called friendly countries to set up a stablecoin platform for cross-border payments.

 

UK economic secretary commits to make country a crypto hub under new PM

Developments in the United Kingdom this week appeared positive for crypto adoption in the country. Among several comments about crypto, Economic Secretary to the Treasury Richard Fuller said: We want to become the country of choice for those looking to create, innovate and build in the crypto space. The U.K. now has a new prime minister in Liz Truss, who expressed in 2018 that cryptos potential should not be stifled in the country.

 

 

 

Winners and Losers

 

At the end of the week, Bitcoin (BTC) is at $21,293, Ether (ETH) at $1,715 and XRP at $0.34. The total market cap is at $1.04 trillion, according to CoinMarketCap.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Terra (LUNA) at 218.74%, Terra Classic (LUNC) at 76.92% and Ravencoin (RVN) at 65.43%.

The top three altcoin losers of the week are Nexo (NEXO) at -11.74%, 1inch Network (1INCH) at -8.75% and UNUS SED LEO (LEO) at -6.35%.

For more info on crypto prices, make sure to read Cointelegraphs market analysis.

 

 

 

 

Most Memorable Quotations

 

Biggest reason Im bullish on Bitcoin is because the world is not in good shape right now and Bitcoin is going to fix that.

Prince Philip Karageorgevitch, hereditary prince of Serbia and Yugoslavia

 

Until they actually fix the supply side of certain things, like energy especially, but commodities broadly and logistics infrastructure, until that is improved, it’s hard to have a more persistent fix to the inflationary problem.

Lyn Alden, independent macro analyst

 

You cant walk into a Starbucks in America and pay with Swiss francs or pounds. Yet, both of these are real money. Context matters.

Rockwell Shah, co-founder of Invisible College

 

There will always be GPUs mining some GPU optimized chains, but I doubt we will return to the levels of revenue seen in ETH proof-of-work at its peak ever again.

Andy Long, CEO of White Rock

 

Ethers price could decouple from other cryptocurrencies following The Merge, as its staking rewards will make it similar to an instrument like a bond or commodity with a carry premium.

Chainalysis report

 

I want to send a clear, strong message to everyone in the crypto world anyone offering to hand you free money is lying. It simply doesnt exist.

FatManTerra, pseudonymous Twitter crypto influencer

 

Prediction of the Week

 

Bitcoin analyst who called 2018 bottom warns ‘bad winter’ may see $10K BTC

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3 major mistakes to avoid when trading cryptocurrency futures markets

Crypto traders love to “ape” and make “degen” investments using high leverage in futures markets, but most traders fall victim to these three key mistakes.

Many traders frequently express some relatively large misconceptions about trading cryptocurrency futures, especially on derivatives exchanges outside the realm of traditional finance. The most common mistakes involve futures markets’ price decoupling, fees and the impact of liquidations on the derivatives instrument.

Let’s explore three simple mistakes and misconceptions that traders should avoid when trading crypto futures.

Derivatives contracts differ from spot trading in pricing and trading

Currently, the aggregate futures open interest in the crypto market surpasses $25 billion and retail traders and experienced fund managers use these instruments to leverage their crypto positons.

Futures contracts and other derivatives are often used to reduce risk or increase exposure and are not really meant to be used for degenerate gambling, despite this common interpretation.

Some differences in pricing and trading are usually missed in crypto derivatives contracts. For this reason, traders should at least consider these differences when venturing into futures markets. Even well-versed derivatives investors from traditional assets are prone to making mistakes, so it’s important to understand the existing peculiarities before using leverage.

Most crypto trading services do not use U.S. dollars, even if they display USD quotes. This is a big untold secret and one of the pitfalls that derivatives traders face that causes additional risks and distortions when trading and analyzing futures markets.

The pressing issue is the lack of transparency, so clients don’t really know if the contracts are priced in stablecoin. However, this should not be a major concern, considering there is always the intermediary risk when using centralized exchanges.

Discounted futures sometimes come with surprises

On Sept. 9, Ether (ETH) futures that mature on Dec. 30 are trading for $22 or 1.3% below the current price at spot exchanges like Coinbase and Kraken. The difference emerges from the expectation of merge fork coins that could arise during the Ethereum merge. Buyers of the derivatives contract will not be awarded any of the potentially free coins that Ether holders may receive.

Airdrops can also cause discounted futures prices since the holders of a derivatives contract will not receive the award, but that’s not the only case behind a decoupling since each exchange has its own pricing mechanism and risks. For example, Polkadot quarterly futures on Binance and OKX have been trading at a discount versus DOT price on spot exchanges.

Binance Polkadot (DOT) quarterly futures premium. Source: TradingView

Notice how the futures contract traded at a 1.5% to 4% discount between May and August. This backwardation demonstrates a lack of demand from leverage buyers. However, considering the long-lasting trend and the fact that Polkadot rallied 40% from July 26 to Aug. 12, external factors are likely in play.

The futures contract price has decoupled from spot exchanges, so traders must adjust their targets and entry levels whenever using quarterly markets.

Higher fees and price decoupling should be considered

The core benefit of futures contracts is leverage, or the ability to trade amounts that are larger than the initial deposit (collateral or margin).

Let’s consider a scenario where an investor deposited $100 and buys (long) $2,000 USD worth of Bitcoin (BTC) futures using 20x leverage.

Even though the trading fees on derivatives contracts are usually smaller than spot markers, a hypothetical 0.05% fee applies to the $2,000 trade. Therefore, entering and exiting the position a single time will cost $4, which is equivalent to 4% of the initial deposit. That might not sound much, but such a toll weighs as the turnover increases.

Even if traders understand the additional costs and benefits of using a futures instrument, an unknown element tends to present itself only in volatile market conditions. A decoupling between the derivatives contract and the regular spot exchanges is usually caused by liquidations.

When a trader’s collateral becomes insufficient to cover the risk, the derivatives exchange has a built-in mechanism that closes the position. This liquidation mechanism might cause drastic price action and consequent decoupling from the index price.

Although these distortions will not trigger further liquidations, uninformed investors might react to price fluctuations that only happened in the derivatives contract. To be clear, the derivatives exchanges rely on external pricing sources, usually from regular spot markets, to calculate the reference index price.

There is nothing wrong with these unique processes, but all traders should consider their impact before using leverage. Price decoupling, higher fees and liquidation impact should be analyzed when trading in futures markets.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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