Bearish Bitcoin bites, fears of further falls, regulation woes build: Hodler’s Digest, May 23–29

Bearish signals are growing in the crypto markets as tighter regulations and environmental concerns cast a dark shadow over Bitcoin.

Coming every Saturday, Hodler’s 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

Bearish signals grow as Bitcoin price drops to $35,000 and traders ignore the dip

Bitcoin is struggling right now. The cryptocurrency has struggled to keep its head above $40,000 this week as traders react negatively to twin threats of environmental concerns and the growing drumbeat of regulation.

We’ve seen a lot of downside moves across the market over the past two weeks. Although most institutional investors have held firm and vowed to continue holding onto their crypto, there’s been a lack of “we bought the dip” announcements. All of this has left retail traders worrying that BTC could suffer further declines.

The Crypto Fear and Greed Index is currently flashing a score of 18, indicating that Extreme Fear is currently paralyzing the market.

Bitcoin can still drop to $20,000 but holding remains winning strategy, data shows

Yes, there are some rather dire warnings out there, but Bitcoin’s 11-year history does help offer an insight into how the world’s biggest cryptocurrency fares when things turn bearish.

The BTC/USD exchange rate typically rises parabolically. It later trims more than half of those gains down as profitable traders sell the top. But, at the same time, traders who buy Bitcoin around its local top suffer longer periods of losses.

Overall, the historic price trajectory of Bitcoin remains skewed to the upside. The cryptocurrency bottoms out after every bullish-to-bearish cycle and rebounds all over again to seek new all-time highs.

PlanB, the creator of the stock-to-flow model that predicts BTC will hit $288,000 by 2024, recently delivered this powerful fact: Not a single investor who has held Bitcoin for more than four years has ever suffered losses.

Shutting down Bitcoin is impossible, Ark Investment founder says

With China imposing a crypto crackdown, the Biden administration reviewing “gaps” in the regulation of digital assets, Iran banning BTC mining until September to preserve electricity, and Australia warning that traders who don’t report crypto profits will face consequences, regulation is certainly stepping up a gear.

But when it comes to whether Bitcoin itself is in danger of being shut down, Ark Investment founder Cathie Wood believes this would be “impossible.”

At CoinDesk’s Consensus 2021 conference, she predicted global regulators “will be a little more friendly over time” toward cryptocurrencies due to the fear of missing out on opportunities provided by the industry.

With miners now willing to prioritize renewable sources of energy for BTC mining, Wood said: “Half of the solution is understanding the problem.”

Michael Saylor says Bitcoin Mining Council required to combat “hostile” narrative

According to MicroStrategy CEO Michael Saylor, part of this quest to understand the problem involves the creation of the Bitcoin Mining Council.

This organization, announced on May 25, was formed following a successful meeting between Elon Musk and a number of top North American mining firms.

During the Consensus 2021 conference, Saylor said: “It turns out that Bitcoin miners don’t actually have a good forum for communicating how they generate their energy. We don’t have a standard model for Bitcoin energy usage right now, and we don’t have a future forecast model that we commonly use.”

Castle Island Ventures’ Nic Carter certainly is a fan of making things more transparent, but he believes Elon Musk isn’t the right person to lead this debate.

He explained: “Bitcoiners are still intensely skeptical of Musk, and they view him as conflicted, given that his business partially involves the sale of offsets.”

PayPal users will be able to withdraw crypto to external wallets

There were some promising developments on the adoption front this week. PayPal announced that it will allow users to withdraw digital assets to third-party wallets.

Meanwhile, Apple has revealed that it is looking for a new business development manager who specializes in alternative payments, including cryptocurrency — signaling that the iPhone manufacturer is gravitating toward digital assets.

While the job posting is compelling, Apple remains largely on the sidelines of the cryptocurrency industry and has yet to signal definitive plans for expanding into this market. Interestingly, cryptocurrency exchange Coinbase recently overtook TikTok as the most downloaded app on Apple’s App Store.

Winners and Losers

At the end of the week, Bitcoin is at $36,514.09, Ether at $2,515.33 and XRP at $0.90. The total market cap is at $1,589,854,165,444.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Helium, BakeryToken and Polygon. The top three altcoin losers of the week are Waves, Solana and UNUS SED LEO.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

Most Memorable Quotations

“I believe Bitcoin has a long way to fall from here. I think it will slowly grind down the slope of hope with a periodic dead cat bounce. Bitcoin’s technicals are severely damaged, it is better to be the first one to sell into the bubble before the whole ship sinks.”

BiotechValley Insights

“It turns out that Bitcoin miners don’t actually have a good forum for communicating how they generate their energy. We don’t have a standard model for Bitcoin energy usage right now, and we don’t have a future forecast model that we commonly use.”

Michael Saylor, MicroStrategy CEO

“Spoke with North American Bitcoin miners. They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising.”

Elon Musk, Tesla CEO

“No-coiners are taking this opportunity to buy the dip.”

Willy Woo, statistician

Prediction of the Week

Bitcoin price volatility hits 2021 high as one analyst paints $15,000 target

BTC’s 30-day volatility is at a yearly high, suggesting that the flagship cryptocurrency remains at risk of wild price fluctuations in the sessions ahead.

Things are even crazier when it comes to Ether. Data from Skew suggests ETH/USD’s realized volatility on a 30-day timeframe is now near 2017 highs.

One dire prediction this week came from an analyst at BiotechValley Insights, who said: “I believe Bitcoin has a long way to fall from here. I think it will slowly grind down the slope of hope with a periodic dead cat bounce.”

Their current price target? $15,000 to $16,000.

FUD of the Week

SEC charges five for illegally prompting $2 billion Bitconnect Ponzi

Three years and some unforgettable memes later, the United States Securities and Exchange Commission has announced that five individuals will face charges relating to promoting the Bitconnect Ponzi scheme.

The promoters are accused of offering and selling securities without registering with the offering with the SEC and validating themselves as broker-dealers — in violation of the law.

They also allegedly “advertised the merits of investing in BitConnect’s lending program to prospective investors, including by creating ‘testimonial’ style videos and publishing them on YouTube, sometimes multiple times a day.”

The SEC’s Lara Shalov Mehraban said: “We will seek to hold accountable those who illegally profit by capitalizing on the public’s interest in digital assets.”

U.K. regulator bans crypto exchange’s ‘time to buy’ Bitcoin advert

Britain’s advertising regulator has banned an ad campaign that told people “it’s time to buy” Bitcoin.

Luno’s posters had caused quite a splash earlier this year, and were plastered across the London Underground transit network and on buses. One ad said: “If you’re seeing Bitcoin on the Underground, it’s time to buy.”

However, the Advertising Standards Authority concluded that the campaign failed to illustrate the risk of investing in BTC. It said: “We considered that consumers would interpret the statement ‘it’s time to buy’ as a call to action and that the simplicity of the statement gave the impression that Bitcoin investment was straightforward and accessible.”

Future adverts will need to carry a proper risk warning.

China to socially blacklist Bitcoin miners in Inner Mongolia region

New penalties are introduced to try and deter people from mining Bitcoin in Inner Mongolia.

Reports suggest offenders will now be placed on a social credit blacklist — something that would stop them from being able to access loans or even use the local transport network.

The new rules make particular mention of data centers, industrial parks, telecoms companies, internet firms and even cybercafes, noting that any such offenders found operating mining equipment would have their business license revoked, could be removed from the local electricity trading scheme, and could even have their businesses shut down entirely.

China’s determination to rid itself of Bitcoin miners has already had a knock-on effect. Three mining companies — BTC.TOP, Huobi and HashCow — announced they were closing down their operations in the Chinese mainland earlier this week.

Best Cointelegraph Features

Carbon-neutral Bitcoin funds gain traction as investors seek greener crypto

Steps are being taken to ensure green Bitcoin options for investors, but this may only serve as a short-term solution to a long-term problem.

For the long haul? When Bitcoin nosedived, institutions held fast

Institutional investors know crypto assets are volatile: “They’re making a generational bet and are not deterred by a few weeks of volatility.”

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Coinbase Wallet introduces new browser extension

Coinbase Wallet extension is your bridge to instantly accessing crypto apps on Chrome

By Sid Coelho-Prabhu, Coinbase Wallet lead

We’re excited to announce a new downloadable Coinbase Wallet extension to more easily and securely connect to decentralized apps (dapps) and decentralized finance (DeFi) on your desktop.

More than a million Coinbase Wallet customers regularly use dapps like Uniswap and Compound. However, accessing these applications on desktop is currently a tedious process that requires users to scan a QR code using their mobile phone each time they want to connect to a dapp.

Starting today, we’re making it much simpler to access and use these dapps on desktop with the Coinbase Wallet extension. The new extension allows for instant access to dapps on desktop — after linking your Wallet account to the extension once, you are free to browse all dapps with one click. This includes accessing thousands of cryptocurrencies, trading on decentralized exchanges (DEXes), earning interest and collecting NFTs. You can also link your Coinbase account to Wallet and buy or transfer crypto to use in DeFi, without leaving Wallet. All activity conducted on desktop via the Wallet extension will stay in sync with the Coinbase Wallet mobile app.

Get started
Ensure that you are running the latest version of the Android or iOS Coinbase Wallet mobile app before downloading the extension. Simply scan the QR code on the Wallet extension once and visit a dapp — see the quick links below for some recommendations. The extension will automatically save your account details, and you’ll be able to revisit a dapp at any time.

Simple, secure transactions
Transactions can be initiated directly via desktop but do require user confirmation on the Wallet mobile app.

Because Coinbase Wallet is non-custodial — or user-controlled — we require that customers manage any transactions with their Wallet mobile app to ensure high levels of security.

With the new extension, Wallet’s private keys are encrypted using the secure enclave or keystore of your mobile device, where they are protected with biometric authentication or a PIN.

Looking forward
We want to empower millions of more customers to engage in the exciting world of dapps and the larger crypto ecosystem. To do this, we’ll continue to take steps to provide greater ease of use and accessibility with new developments and offerings like the Coinbase Wallet extension.

Quick links
The new Wallet extension works with every Ethereum dapp. Here are some dapps you can try today:

We’re always listening to our users and welcome feedback and troubleshooting questions via our help center.

Coinbase Wallet introduces new browser extension was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

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How Coinbase is rethinking its approach to compensation

By L.J. Brock, Chief People Officer

Coinbase is always evolving. In the last year, we’ve grown our headcount by 100%, hired in 6 new countries; committed to being a remote-first company; established Coinbase as a mission focused company; and recently completed our direct listing and became a publicly-traded company. Still, it is incredibly early for crypto as a new technology, and we’re in it for the long-haul. That’s why we take extraordinary measures to attract top talent to come build with us.

It’s actually one of our most important values as a company: top talent in every seat. Upholding it requires us to constantly revisit our compensation practices to ensure we’re competitive in the marketplace, an attractive employer for candidates, and that our compensation practices reinforce the culture we want to build. Evolving compensation is not just about appealing to candidates, though; it’s also about taking a hard look at industry norms and innovating to relieve pain points, ensure more equity across the workforce, and improve transparency. So what are we doing?

Step 1: Increasing our compensation targets

Ensuring top talent in every seat requires an investment. In 2019, we made the decision to benchmark ourselves across a highly competitive set of peers and some of the largest tech companies in the world. This was an aggressive move for us at the time, as a small, private start-up. This year we’ve continued our commitment to top talent by further increasing our cash and equity compensation — from the 50th percentile amongst our peers to the 75th — across the entire company.

Step 2: Eliminating negotiations from the hiring process

Because our standard offers are world-class, we are officially eliminating negotiations on salary and equity from our recruiting process.

Anyone who wants to work in crypto belongs and is valued at Coinbase. It doesn’t matter what your background is, where you went to school (or bootcamp), where you’ve worked before, or even what you’ve been paid before. If you pass our bar and are hired to do the same work, you get the same offer as the next candidate for a role.

Traditionally people expect they need to negotiate for the best package after being hired in a new job. Those that do this well tend to be rewarded, and those that don’t lose out. These negotiations can disproportionately leave women and underrepresented minorities behind, and a disparity created early in someone’s career can follow them for decades. We want to do everything we can to ensure that’s not the experience at Coinbase. All employees in the same position, in the same location, receive the same salary and equity offer. No exceptions.

Eliminating negotiations doesn’t mean all employees are paid the same after they begin working. In fact, we want compensation differentiation, but it should be solely driven by demonstrated performance and outsized impact on our company and for our customers. We will continue to apply multipliers to our equity and cash rewards for high performers identified through our rigorous performance management process. This way, our high performers receive compensation commensurate with their impact, in addition to accelerated career development and a front row seat to building the cryptoeconomy.

We are OK if we lose some candidates due to this decision — the best candidates for Coinbase are those who are looking for a highly competitive package and are ready to let their contributions speak for themselves.

Step 3: Adopting annual equity grants that drive predictable, real time compensation

Another goal of our new compensation program is to manage volatility and provide as much predictability for our employees as possible. Crypto has historically been volatile, and it’s a reasonable assumption that our stock price may be, too. As we grow, we anticipate more candidates will value predictability in their annual compensation. Instead of a four-year new hire grant (standard at many tech companies), employees will receive annual grants, sized at one-year targets that vest in their entirety each year. An employee’s multi-year equity compensation will no longer be dictated by our company valuation at a single point in time.

Some may say eliminating 4-year new hire grants could hurt retention; we disagree. We don’t want employees to feel locked in at Coinbase based on grants awarded 3 or 4 years prior. We want to earn our employees’ commitment every year and, likewise, expect them to earn their seat at Coinbase.

We are also eliminating the one-year cliff from our new hire grants. We expect new hires to add value on their first day, so it only makes sense for them to start vesting rewards for their contributions.

We also plan to make these annual grants for all employees together at one time, using one share price. This is designed to minimize disparate outcomes that can persist for years after one’s start date. This is another way we are ensuring pay differences are due only to demonstrated performance. Everyone will have the same incentive to add value and grow our company together, which is important for our culture.

These are significant changes, but ones we believe will help us achieve our ambitious goals in this next phase of growth. We are still early in rolling out this program and, like so many things at Coinbase, we’ll assess, understand and iterate on it over time. But we believe it aligns our compensation philosophy with the culture we want to build, and we can’t wait to see what it enables.

If this excites you, please apply to join the team here.

How Coinbase is rethinking its approach to compensation was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

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Incident Post Mortem: January 29, 2021

By Jordan Sitkin

Between 4:25am and 9:31am PST on Friday, January 29, had an outage. During this time, many users experienced errors while attempting to use the Coinbase app and crypto buying, selling and trading features were intermittently available. Access to trading on was unaffected. This post will detail the outage, explain what caused it, and describe the changes we’ve made to prevent similar failures going forward.

The Outage

A group of oncall engineers convened after being paged for high error rates across many endpoints. It was quickly diagnosed as an issue with a Redis cluster used to store spot rates for currency conversions. These spot rates are used for estimated conversions between currencies, which puts it in the critical path for a range of functionality such as displaying the value of your portfolio in your local currency. The CPU load on this Redis cluster suddenly hit 100% and was causing several API endpoints and background jobs to fail. We immediately moved to reduce load on this cluster so that it could recover. Our monitoring indicated that the majority of the load on this cluster was coming from background jobs, so we began disabling them, expecting to see query throughput drop.

After several cycles of disabling jobs, load on the cluster was still high, so a cluster failover was attempted to see if the failure was due to a hardware issue. This, too, had no effect. We were also unable to deploy a code change intended to mitigate the issue because the unhealthy Redis cluster was preventing new application servers from booting. An attempt to vertically scale the cluster in place also failed to reduce CPU pressure.

We finally opted to provision a new, much larger Redis cluster to replace the overloaded one. Once it booted, we pointed a fresh application deployment at it, and finally restored service to our customers. However, several questions remain unanswered at this point, prompting us to dig in and uncover the actual root cause.

Root Cause Analysis

In the days since the outage, we have reconstructed a clear picture of what happened during the first minute.

  1. 00:00s — A Memcached node reboots. This Memcached deployment provides a read-through cache in front of the keys that store exchange rates in the Redis cluster that failed. The reboot corresponded with a brief spike in cache misses while the clients shifted their queries to another Memcached cluster member. This is not an unprecedented occurrence, and in this case the Memcached clients recovered quickly as expected.
Memcached client errors

2. 00:02s — Concurrent Redis queries spike and connection pools fill up. The simultaneous cache misses due to the Memcached node restart caused a stampede of queries for the underlying data stored in the Redis cluster. The increased volume of concurrent queries required a 50x increase in the number of Redis connections to serve them.

Redis connection count

3. 00:07s — We see a high rate of Redis client timeout errors. The sudden influx of connections created a slow-down in the Redis engine. CPU utilization jumped to 100% and it stopped being able to respond to queries within a 1 second timeout. At this point, the error rate on our price data API endpoints was around 90%. These timeouts prevented memcached from replenishing its cache, so load on this Redis cluster remained high from this point on.

Redis client timeout errors

4. 00:13s — The 5 second cache TTL at the CDN for all public price data expired. Normally, load on the application for these endpoints is stable, thanks to the CDN cache. During this time, it spiked to 5x normal volume because the CDN began forwarding requests to the app to replenish its cache for all asset price data. Due to the 90% error rate on these endpoints, it was unable to successfully refresh the cache for the vast majority of keys. The application code fell through to Redis to load this data because of the Memcached misses, which further increased load on the already overloaded cluster.

CDN response codes

At this point, the Redis cluster was receiving a throughput of queries many times its normal load, and the layers of cache above it (Memcached and the CDN) were unable to replenish because of Redis client timeouts and connection failures. Any requests which relied on exchange rate data were failing, and users were therefore unable to access critical functionality on our site. The cycle of cache misses and client timeouts kept this Redis cluster overloaded for the duration of the outage despite several attempts to reduce load.

Looking Ahead

With the clarity of hindsight, we’ve identified some blind spots in our monitoring that prevented us from quickly understanding the failure.

  • Our client-side Redis monitoring did not include timed out queries. This made it impossible for us to see that the application was overloading Redis, since we were only looking at successful calls, which decreased during the outage.
  • Our server-side Redis monitoring did not include failed calls. This made for a confusing dashboard that showed a sharp increase in network activity, but no apparent query activity. Our metrics are derived from the Redis INFO commandstats output, and did not include failed_calls or rejected_calls.
  • The Memcached node restart was only discovered after the incident because this information was not surfaced on any of our dashboards.

In addition, our application was configured in a way that allowed an initial small failure to cascade into a full-blown outage.

  • Client connection pools grew to 50x size almost instantly, overwhelming Redis with new connections. To counter this, we’ve tuned connection pool sizes to have more generous minimums and sane maximums.
  • The Redis cluster was underprovisioned. We’ve replaced it with an appropriately sized cluster and have audited our remaining clusters to ensure they are correctly scaled.
  • We were not making use of read-only replicas on this cluster. We are exploring wider use of Redis secondary reads to better scale this and similar use cases.

Another important observation is that an outage in one area of our API was able to interrupt service across all of it. We are currently working to decompose our monolithic application server into separate services in order to prevent these types of outages going forward. Pulling this part of the API into a separately scalable unit will let us isolate it from issues elsewhere, and prevent it from disrupting other features.

We take the uptime and performance of our infrastructure very seriously, and we’re working hard to support the millions of customers that choose Coinbase to manage their cryptocurrency. If you’re interested in solving scaling challenges like those presented here, come work with us.

Incident Post Mortem: January 29, 2021 was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

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Brief Incident Post Mortem: January 6–7, 2021

This is a short placeholder blog and will be replaced with a full post-mortem and disclosure of what happened yesterday.

From 15:15 to 15:45 UTC on Tuesday, January 6th 2021, and again from 15:32 to 20:36 UTC yesterday, January 7th, 2021, the API that powers and our mobile applications experienced instability for our customers globally. This instability ranged from periods of full outage to elevated error rates for customers across both our web and mobile applications. At 20:36 UTC, full service was restored and all systems began operating normally.

This issue only affected customers’ ability to access Coinbase and Coinbase Pro UIs, and did not impact trading via our exchange APIs or the health of the underlying markets.

API error rate (%) during this period (all times in PST)

We have identified the problem and have successfully implemented a mitigation which allowed us to restore full service. In parallel with the publication of this post, our internal teams are running a full post-mortem in order to understand how this occurred, and how we can prevent it from happening again. We will be publishing a full post-mortem with details on our learnings and next steps.

We deeply apologize for the inconvenience that this unavailability caused and remain committed to making Coinbase the easiest and most trusted place to buy, sell, and manage your cryptocurrency.

If you’re interested in working on challenging availability problems and building the future of the cryptoeconomy, come join us.

Brief Incident Post Mortem: January 6–7, 2021 was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

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