Blockchain Bites: DeFi’s Harvest Hit, IRS ‘Crypto Clarification, Buoyant Bitcoin Note by JPMorgan


The IRS has cleared up some questions about cryptocurrency disclosure for the upcoming fiscal season. A popular DeFi application appears to have been attacked. JPMorgan analysts see “considerable” gains for bitcoin.

Upper shelf

Cryptographic Guide
The US Internal Revenue Service has made it clear that mere holding of cryptocurrencies does not need to be disclosed. A series of published draft instructions for this year’s 1040 tax form specify that returnees must disclose any sales of cryptocurrencies, trade in goods or services, or trade in property (including other crypto assets). Respondents also need to disclose whether they have received cryptocurrency for free, including via airdrop or hard fork. “The draft is likely to remain valid unless there are ‘unforeseen issues’ or new regulations that require changes, the IRS said in the document,” reports CoinDesk’s Daniel Palmer.

DeFi exhaust
The $ 1 billion Harvest Finance protocol appears to have been attacked, draining bitcoin and stablecoins worth $ 25 million. The anonymous team behind the popular DeFi app tweeted that it is “actively working on the issue of mitigating the economic attack,” adding that the attacker has manipulated stablecoin prices on Curve Finance, another DeFi protocol. DeFi analyst Chris Blec previously said that Harvest Finance administrators had a “fund-draining administration key” locked into protocol contracts, though it’s unclear whether that level of control is related to the recent exploit. . The platform’s native token, FARM, plunged 65% and the protocol’s TVL dropped to $ 673 million (at 5:00 UTC) in the news.

Tether loses
The US government is pursuing a civil confiscation request on more than 300,000 units of the cryptocurrency tether (USDT) after they were reported stolen in a hack earlier this year, reports Sebastian Sinclair of CoinDesk. The funds, owned by Shixuan Cai and business partner Lin Jian Chen, were frozen by operator Tether after Cai reported the theft to the Los Angeles Police Department (LAPD) in April, court documents show. . “Tether regularly assists law enforcement and tries to promote their legitimate goals,” Tether CTO Paolo Ardoino told CoinDesk. “Tether will always play by the rules, obey the law and try to support the wider digital token community.”

Speech rights
The case against Ethereum developer Virgil Griffith, accused by the US government of violating the law on sanctions and executive orders by allegedly discussing how to bypass economic blockades while speaking at a conference on North Korean cryptocurrency, is without merit, the defence. In a dismissal motion, attorney Brian Klein argues that Griffith only provided information that was already in the public domain and that the President of the United States does not have the authority to ban the transmission of information, among other claims. Griffith’s arrest last November is the first sanctions case in a US court involving cryptocurrency.

Denial of service
According to Mashable, PayPal ditched the controversial domain registrar and hosting service Epik as a customer. The payment giant said it had stopped serving the company over concerns about financial risk, potentially related to Epik’s digital currency, suggested by a source “close to the situation”. The cryptocurrency, Masterbucks, is used to pay for domain services and can be exchanged for US dollars and has allegedly been touted by Epik as a way to avoid certain fees. PayPal previously raised concerns about money transmission and digital currency laundering. For its part, Epik argues that the bloc displays “anti-conservative bias” because the service has become a lifeline for far-right organizations, including Gab and the Proud Boys.

Quick bites

  • Open Interest on Augur Prediction Markets Exceeds $ 1M (The Block)
  • Quantstamp claims Ethereum 2.0 is ready for launch (decrypt)
  • “This is really precious.” Lex Sokolin on the next chapter of DeFi and Frances Coppola on End of Banks (Opinionated, CoinDesk)
  • Why PayPal Rally Is Not What It Seems and Why It’s Okay (Crypto Long & Short, CoinDesk)
  • Carlyle acquires Calastone, one of the largest financial users of the corporate blockchain (Ledger Insights)

At stake

Millennial drivers
The narrative of Bitcoin as a store of value has received some juice this year, as seen by the wave of companies adding BTC to their cash holdings and the support of legacy investors such as Paul Tudor Jones. Although a question remains as to how decentralized money can fit into the broader investor scheme.

Part of the problem here is that the investor universe is a moving target, especially as more millennials enter the fray. Last week, JPMorgan’s Global Quantitative and Derivatives Strategy released a note, obtained by CoinDesk’s Zack Voell, detailing how this changing investor landscape could contribute to “considerable” gains for bitcoin.

Comparing bitcoin to gold, the customer memo stated that bitcoin should be viewed as a “risk” asset rather than a hedge, based on its positive correlation with the Standard & Poor’s 500 index. Analysts have underlined the interest of millennial investors in cryptocurrency and the growing role of the demographic group in the broader financial scheme.

CoinDesk’s Voell notes that bitcoin’s market cap would have to increase by a factor of 10 before it could match the private sector’s total investment in gold. Although “even a modest crowding of gold as a long-term alternative currency would mean doubling or triple the price of bitcoin from here,” the JPMorgan note read.

That said, analysts suggest that bitcoin is “currently overbought in the short term”.

Market information

Parade of the whales
The number of bitcoin “whales” – groups of addresses held by a single network participant holding at least 1,000 BTC – is a four-year high. As of Sunday, there are now 1,939 whales, the highest number since September 2016, a 2.2% increase from last week. CoinDesk’s Omkar Godbole notes that the rise is likely related to prevailing bullish pressures on the bitcoin price, which jumped 13% last week to record its best one-week performance since April.

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