Bitcoin’s Taproot Upgrade, SEC Rejects BTC ETF & Looking At Stablecoins

The Taproot upgrade for Bitcoin went live as of yesterday (Sunday 14 November, 2021). The upgrade was approved in June, when 90% of miners chose to signal their support. The wait period between approval and activation gave users time to upgrade to the latest version of Bitcoin Core, 21.1.

The code for taproot was originally proposed by Greg Maxwell in 2018, and has been contributed to by three Bitcoin Improvement Proposals (BIPs) since.

The new upgrades improve the privacy, security, and scale for Bitcoin transactions.

BTC/USD is currently trading at 68,519 and is slightly up since the upgrade release.

BTC/USD 1D Chart, 15 November 2021

SEC Rejects VanEck’s Spot BTC ETF

The SEC has rejected VanEck’s proposal for a spot Bitcoin ETF. The agency had delayed its final decision on the proposal in September, and the decision does not come as a surprise, as Gary Gensler holds preference for a BTC futures ETF.

The SEC wrote “[the fund] has not met its burden … to demonstrate that its proposal is consistent with… the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts”.

After the decision Bitcoin prices temporarily dropped < 1%, however quickly recovered.

Two BTC Future’s ETF’s started trading in America last month; Proshares Bitcoin Strategy (BITO) and the Valkyrie Bitcoin Strategy ETF (BTF).

Will Crypto Become Money?

Inflation in the United States of America hit 31-year record highs last Wednesday. Meanwhile, Bitcoin soared over 4% to record highs before retreating again.

The large volatility of cryptocurrencies makes it difficult for them to serve traditional functions of money which are:

  • Store of value
  • Unit of account
  • Medium of exchange

What If Money Is Re-Imagined?

Rather than money being the ends to the means, as it is viewed globally, money is theoretically a means to an ends of exchange. Money originates from Bank letters, which were used to verify that a trader had sufficient stores of wealth (Gold or otherwise) to purchase a good or service.

When seen in this tense cryptocurrencies clearly can be used as money.

Bitcoin has long been used as a currency for ease of transaction across borders or by non legitimate businesses. Ethereum is currently used as a currency to facilitate the purchase or sale of NFT’s.

Despite this, the implication of the cryptocurrencies value against the USD lingers.

Keen cryptocurrency advocates state that “One Bitcoin is worth one Bitcoin regardless of its price against the dollar”.

This is the same way that one USD is worth one USD. A dollar is only one element of money – a tool used to transfer property and clear debts.

Stablecoins – Are They Everything That They Seem?

USDT (Tether) is a “stablecoin” where each token is supposedly pinned to 1 US Dollar. Tether Limited (the centralised authority of USDT) has the ability to print tether,Tether is not regulated in any way other than in the British Virgin Islands (BVI). As of today (15 November 2021) USDT has a market cap of $73.91B.

In 2019 the Bitfinex exchange was sued by the New York Attorney General for using Tether’s funds to cover up over $850M in funds missing. In the court case New York’s Attorney General stated that Tether’s claims about USDT’s 100% USD backing was a lie.

Regulators have revealed that the stable coin is mostly NOT BACKED by the US dollar. Despite these revelations USDT still trades at around 1 USD. Why?

Market Accepted Value

The value of USDT is perceived to be $1 USD, despite the lack of physical dollars to back this value. You may be wondering why price hasn’t crashed or soared against the USD.

The answer? Market Accepted Value.

It is in the USDT user interests to maintain the price of USDT against fiat currencies. Stablecoins are used as payments solutions across international borders. Transferring stablecoins offers lower fees than remittance and payments solution providers typically do, making it a great way to send and receive money!

Published by Tom Stewart

Head of data analytics at TradeProofer. Analyst at Opes Trading Group. FX enthusiast.

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