Beijing Municipal Government Unveils Web3 White Paper

NVT Ratio Signals Overvalued BTCThe network value to transaction (NVT) ratio of Bitcoin, which has been staying at a high level since the beginning of the year, has signaled its overvaluation, according to Yonhap Infomax.However, some argue that this will not necessarily lead to a crypto winter, considering that the nature of Bitcoin as an asset has changed and there is no sign of overheating in other indicators.©Pexels/PixabayPrice and NVT ratio correlationYonhap Infomax found out that the correlation between the NVT ratio and the price of Bitcoin over the past six years is -0.35. A value of 1 represents a completely positive correlation, while a value of -1 represents a completely negative correlation.Extending this period to 2010 makes the correlation close to 0, but during the early years, NVT ratios showed high volatility, shooting up to four digits. Such a high volatility doesn’t suggest much correlation. Until 2021, there was a high correlation of up to -0.44.The NVT ratio is calculated by dividing the market cap by the transacted volume. Conceptually, it is similar to the price-to-earnings ratio for the stock market.In 2017, when the crypto market was bullish, the average Bitcoin NVT ratio was 7.3. This number became 8.7 in 2021 when the market experienced a similar pattern. In retrospect, single-digit NVT ratios usually hint at bullish markets.This year so far, Bitcoin has been relatively overvalued, given that the average NVT ratio is 23.6.BTC price recoveryWhen the crypto market sentiment lost its confidence due to the FTX bankruptcy last year, the price of Bitcoin went down to $15,000. It later recovered to the near $30,000 level. The Bitcoin price once had reached an all-time high in 2021, surpassing $65,000.The years that manifested similar patterns as this year were 2018 and 2019. In those years, the Bitcoin NVT ratio plateaued around 20.Uncertain outlookThe NVT ratio itself could point to a possible crypto winter, but researchers say it’s hard to say.Jang Kyung-pil, a research analyst at crypto data platform Xangle, said that people now consider Bitcoin as a store of value rather than a means of transactions, pointing out that BTC’s market value to realized value (MVRV) ratio has hit the bottom at 0.84 and now reached 1.4. According to Jang, MVRV values under 1 indicate undervaluation and those above 3 indicate overvaluation.Jung Seok-moon, head of the research center at crypto exchange Korbit, said that the current NVT ratio signals BTC overvaluation. He added that the Fed is likely to turn dovish in its monetary policy, which would prompt a strong BTC uptrend.

The Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) are charting new regulatory territory with the release of a comprehensive consultation paper outlining their proposal to accept and regulate fiat-referenced stablecoins (FRS) within the Chinese autonomous territory.Photo by Ben Cheung on PexelsConsultation processThe proposal has been published to the FSTB website in the form of a consultation paper titled “Legislative Proposal to Implement the Regulatory Regime for Stablecoin Issuers in Hong Kong.” Separately, the HKMA has published a press release on the topic. This development seeks to establish a regulatory framework for stablecoin issuers and address associated risks. The consultation period is scheduled to conclude on Feb. 29 of next year. At the heart of this legislative proposal is the requirement for companies actively marketing the issuance of FRS to the public of Hong Kong to obtain a specific local license from the HKMA. The proposed criteria for obtaining this license are robust and include key elements such as maintaining reserves “at least equal to the par value” of all circulating stablecoins. This measure ensures that stablecoins remain fully backed, contributing to their stability and reliability. The legislation also places a strong emphasis on the segregation and secure safekeeping of reserve assets, enhancing the protection of users’ funds and preventing misuse. Furthermore, issuers will be mandated to provide transparent disclosure and regular reporting, fostering accountability and transparency within the stablecoin ecosystem. It is noteworthy that the proposed regulations explicitly exclude algorithmic stablecoins from obtaining an HKMA license, underlining a preference for stablecoins with solid reserve backing. No doubt the spectacular collapse of the UST algorithmic stablecoin in 2022 has informed the Hong Kong regulator’s decision to exclude consideration of algorithmic stablecoins in this instance. Need to establish Hong Kong presenceTo underscore their commitment to regulatory compliance, stablecoin issuers seeking an HKMA license will also be required to establish a registered office in Hong Kong. This office must have a chief executive, senior management team and key personnel in place, aligning with Hong Kong’s efforts to ensure that all activities related to stablecoin issuance are conducted responsibly. The proposed licensing regime for FRS aligns with Hong Kong’s broader strategy to foster the growth of the Web3 ecosystem within the region. Christopher Hui, Secretary for Financial Services and the Treasury, highlighted the significance of this move, stating: “With the implementation of the licensing regime for VA trading platforms from June this year, the legislative proposal to regulate FRS is another important measure facilitating Web3 ecosystem development in Hong Kong.” Market competitionBack in February, the HKMA signaled its intent to regulate stablecoins when it issued a discussion paper considering various regulatory approaches. Competition is on an upward trajectory relative to stablecoin issuance and use. In June, Hong Kong-based qualified custodian First Digital Trust announced that it was gearing up to launch "First Digital USD," a U.S. dollar-backed stablecoin regulated in Asia rather than the United States. Leading stablecoin issuer Circle has been active in furthering its product offering in Asia during 2023. It successfully attained licensing approval in Singapore while in Japan, it joined forces with SBI Holdings in an effort to propel further growth of its USDC stablecoin within the Japanese market.

Energy Theft Results in Crypto Mining Operation Shutdown in BorneoAuthorities in Miri, a city on the island of Borneo in Malaysia, swiftly responded to a tip-off from the public, leading to the successful shutdown of an illegal cryptocurrency mining operation.According to local news source, The Borneo Post, during a well-executed raid, 34 mining servers were confiscated, all of which were illicitly drawing power through cable tapping.Photo by Muhammad Faiz Zulkeflee on UnsplashEnergy thieves turn to miningWhile Borneo offers some of the lowest energy prices in Malaysia, it continues to struggle with the problem of energy theft. That issue has been highlighted via a recent utility announcement. Sarawak Energy, the local energy provider, estimated that the criminal operation caused losses of approximately 6,000 Malaysian ringgits ($1,300) worth of stolen electricity each month.The rise of the Bitcoin mining industry in 2023 has brought about record-high network hash rates and network difficulty. While the growth of miners generally signifies the robustness of the Bitcoin network, smaller operators without the economies of scale enjoyed by larger corporations face challenges.One such challenge is energy generation to power their mining servers. In pursuit of higher profit potential with lower electricity rates, illegal mining operators are drawn to stealing electricity from the grid. By eliminating energy expenses, these illicit miners can accumulate profits and offset equipment costs.Fourth recent instanceThe recent incident marks the fourth major operation in Senadin, where Miri is located, where authorities have cracked down on power theft cases related to cryptocurrency mining in 2023. So far, over 137 Bitcoin mining servers have been seized during these operations.On the other side of the spectrum, legitimate crypto mining companies are actively securing funding to support their mining projects. Riot Platforms, for instance, invested a substantial $162.9 million to acquire 33,280 state-of-the-art equipment from MicroBT, a leading producer of mining machinery.In another example, Coinbase extended a $50 million credit line to Canadian cryptocurrency firm Hut 8 Mining, facilitating its operations. Furthermore, Volcano Energy, a public-private partnership in El Salvador, secured an initial funding of $250 million for its ambitious Bitcoin mining venture.Appropriate mining activityThe spate of recent instances of illegal mining in Borneo acts as a reminder of the importance of regulatory compliance and adherence to the law within the cryptocurrency industry. While the allure of lucrative profits may tempt some to engage in illegal activities, the consequences can be severe. Mining can be a positive societal force when applied within appropriate circumstances.A move by the President of Kyrgyzstan last week to harness crypto mining in order to utilize energy that is otherwise being wasted at the central Asian country’s Kambar-Ata-2 hydropower plant serves as a recent example of a positive use case for the activity.In Texas in the United States, crypto miners are collaborating with those that manage the local energy grid, turning off miners at times when the state is on the brink of suffering blackouts.As the crypto mining landscape continues to evolve, it is essential for both authorities and legitimate operators to work together in finding sustainable solutions that ensure the industry’s growth while maintaining the integrity of the energy infrastructure.