Month: May 2024

Susquehanna International Group, LLP (SIG), a global trading, technology, and investment firm, disclosed that it holds over $1.8 billion in Bitcoin exchange-traded funds (ETFs) through a 13F-HR filing submitted to the Securities and Exchange Commission (SEC), providing a detailed breakdown of SIG’s investment portfolio.

The filing reveals the investment firms biggest positions were in Grayscales Bitcoin ETF GBTC, totaling $1,091,029,663.

The documents also revealed that SIG holds positions in ARK 21SHARES BITCOIN ETF, BITWISE BITCOIN ETF TR, BITWISE FUNDS TRUST (BITCOIN AND ETHER), FIDELITY WISE ORIGIN BITCOIN, FRANKLIN TEMPLETON DIGITAL BITCOIN ETF, GLOBAL X BITCOIN TREND, INVESCO GALAXY BITCOIN ETF, ISHARES BITCOIN TR, PROSHARES TR SHORT BITCOIN, PROSHARES TR BITCOIN STRATE, PROSHARES TR BITCOIN & ETHER, VALKYRIE BITCOIN FD, VALKYRIE ETF TRUST II BITCOIN AND ETHE, VALKYRIE ETF TRUST II BITCOIN MINERS, VALKYRIE ETF TRUST II BITCOIN FUTR LEV, VANECK BITCOIN TR, VOLATILITY SHS TR 2X BITCOIN STRAT, and WISDOMTREE BITCOIN FD.

The total combined amount of assets across all these ETFs add up to over $1.8 billion at the time of writing.

Interestingly enough, the investment firm noticeably holds $4,037,637 worth of ProShares short bitcoin ETF, which aims to offers investors the potential to profit on days when BTC drops in price. In addition to this, SIG also holds $1,004,552 worth of Valkyrie Bitcoin Futures Leveraged Strategy ETF and $97,856,513 worth of Volatility Shares 2x Bitcoin ETF, to profit even further on days when the price of BTC is rising.

Bitcoin ETFs offer institutions a regulated and accessible way to gain exposure to Bitcoin’s price movements, but gives up the ability for investors to directly hold the bitcoin themselves.

Click the image to learn more about self custodying your bitcoin.

SIG’s disclosure of holding over $1.8 billion in Bitcoin ETFs reflects the growing trend of institutional adoption and investment in Bitcoin as part of a diversified investment strategy. Market researchers and analysts expect more institutions to file these 13F-HR documents with the SEC in the coming months, revealing specifically who has been purchasing spot Bitcoin ETFs since they went live earlier this year in January.

It is often said that Bitcoin allows anyone to be their own bank. If you know anything about Bitcoin’s ethos and underlying tech, you’ve likely heard of this concept before. But do you know exactly how that works and why Bitcoin is more suitable as a store of value than your bank?

To get the full picture, it’s important to understand how banks work today, and how Bitcoin differs from the traditional financial system.

The Problem With Banks

The first problem with banks is their custodial nature, and with that, the risk of rehypothecation inherent to fractional reserve banking. If banks were simply means of warehousing cash for their clients, using them would only imply counterparty risk. While not ideal, this would not necessarily be a problem if banks simply let customer funds sit there, but that’s not exactly what happens. To explain, banks lend your hard-earned cash, often purchasing government bonds to collect a yield on that cash. Sometimes, a bank might lend out too much and not maintain enough liquidity to honor redemptions, and unfortunately, there’s nothing you can do about it. If the bank goes down, often, your funds go along with it.

Not only that, but the traditional financial world is gatekept. Put simply, traditional financial institutions must adhere to national and local regulations that place restrictions on how individuals can use their hard-earned currency. This problem is exacerbated in countries with strict capital controls. If government regulation can change at the drop of a hat, your funds in a bank can be put at risk. Banks and traditional financial institutions, existing at the grace of their government’s legal and regulatory system, have no choice but to comply.

In either of these situations, you’d lose out through no fault of your own. Your funds rely entirely on the bank’s integrity. This is a big risk. Banks have failed before and they will fail again. Unfortunately, centralized financial institutions just come with these types of risks.

Why is Bitcoin the Solution

To avoid this uncertainty, you want to store capital outside the jurisdiction of centralized entities. The only answer is to use a purely decentralized store of value, i.e. Bitcoin. Bitcoin circumvents these risks with a few features that centralized financial institutions cannot offer.

Borderless

Unlike banks, Bitcoin is borderless. You can access and use your funds in any country, and you can send BTC to anyone around the world. The beauty of borderlessness is that it doesn’t cost you anything more to send BTC to your next-door neighbor than it would to send it to someone on the other side of the world. Plus, unlike banks, currency exchange fees aren’t necessary. In addition, users can transact across political jurisdictions seamlessly due to the permissionlss nature of Bitcoin.

Peer-to-peer transfer of value

A key difference between the traditional financial system and Bitcoin is the former’s requirement of trusted third parties that facilitate transactions. This implies that a third party can approve or deny a given transaction, stymying an individual’s expression of financial agency. In contrast, Bitcoin’s permissionless peer-to-peer network sidesteps intermediaries, allowing individuals to unilaterally dictate transactions between each other.

Ownership

An additional benefit of Bitcoin is the ability for individuals to control their funds through the power of cryptography. In essence, if someone has access to a given Bitcoin private key, they can control the flow of funds from public addresses associated with that private key.

As long as no one has access to your private keys, only you can control your Bitcoin. While there are challenges when it comes to privately and safely storing your private key (generated from a seed phrase), you can securely use this private key to sign messages and interact with the Bitcoin network. While storing funds in a bank account allows the bank to lend out or use your funds, that’s not possible with a non-custodial Bitcoin wallet. That’s what true ownership is all about.

To Be Truly Bankless, How You Manage Your Bitcoin Matters

If you want to go truly bankless, it’s important to understand the cross-over of traditional financial institutions and centralized bitcoin custodians.

Centralized exchanges are businesses registered in specific countries. As such, they must comply with local laws and regulations, just like banks. Plus, they don’t allow you to manage your own private keys. The company can access your bitcoin at any time, just like a bank can with your fiat currency.

Any of these centralized institutions rely on the integrity of the banks they use. They all involve counterparty risk. If you use a crypto platform that relies on a bank, and the bank goes down, your funds go along with it. So, if you’re dead set on going bankless, make sure you take these aspects into account.

Challenges On The Road To Banklessness

To go bankless with Bitcoin, you know you need to embrace self-custody, but custody isn’t the only challenge. Of course, Bitcoin works a little differently from fiat currencies, so truly going Bankless with Bitcoin also has its challenges.

Everyday Payments

Bitcoin’s suitability as a store of value is unmatched, but it can offer a challenge for everyday payments. Bitcoin’s average block time is 10 minutes – meaning that a simple payment for an item like a cup of coffee is heavily constrained by Bitcoin’s design.

That said, there are solutions to scale both Bitcoin’s transaction speed and total throughput. For example, the Lightning network, a Bitcoin Layer 2 solution, provides near-instant and global final settlement of transactions while minimizing the use of the Bitcoin base layer. While Lightning is constrained by certain aspects of its design, like needing to settle on Bitcoin itself to close and open payment channels, Layer 2s like Lightning network open up the possibility of greatly scaling Bitcoin’s use as a medium of exchange.

One proposal to overcome the Lightning Network’s design constraints, as mentioned above, is the use of Chaumian ecash, where federated mints can issue redeemable certificates to users in the way that cash was at one point, a certificate of deposit redeemable for gold.

In an ecash implementation, a network of federated mints would use Lightning to settle between each other, and retail payments would take place using ecash itself. This implies that Lightning may become more of a commercial solution for scaling Bitcoin financial services, and that retail payments would take place on solutions built on top of Lightning.

Widespread Adoption

Of course, it’s impossible to truly go bankless with Bitcoin if it is not accepted as a medium of exchange. For now, businesses that accept bitcoin are still in the minority in most places around the world. At first, you might be searching for in-person and online shops willing to take cryptocurrencies.

However, bitcoin adoption is changing significantly. While Bitcoin is still a teenager, countless big brands accept Bitcoin today. Disney, Playstation, Microsoft, Starbucks, KFC, Burger King: the list of Bitcoin-friendly businesses is only increasing.

Your Road To Banklessness

In conclusion, going bankless with Bitcoin involves due diligence. For starters, you need a non-custodial wallet such as a Ledger device. But going truly bankless doesn’t end there. You must assess the platforms you use and how you use them. And finally, you must put measures in place to make your everyday transactions more feasible.

But, with those pieces in place, you’re well on your way to fina

Botanix Labs, a Bitcoin development startup based in New York and founded at Harvard, has announced a significant funding of $11.5 million in a press release sent to Bitcoin Magazine.

This funding round, led by prominent investors including UTXO Management, Polychain Capital, Placeholder Capital, Valor Equity Partners, ABCDE, Andrew Kang, Dan Held, Dovey Wan, Eric Wall and others, will fuel the creation of the Spiderchain. Spiderchain claims to be the first Bitcoin-native Layer 2 primitive with full EVM equivalence, envisioned to support a global financial system built on Bitcoin. This funding follows a previous seed series round of $8.5 million in April.

“Our team at Botanix Labs is driven by the mission of building the infrastructure that supports aglobal financial system running on Bitcoin for the next 100 years,” Willem Schroé, inventorof the Spiderchain and Co-founder of Botanix Labs stated. “The Spiderchain can scale the Bitcoinecosystem to eight billion users and unlock trillions in capital that has sat idle for years. We’re proud to have the support of so many industry veterans who share our vision for reshaping howthe world thinks about building on Bitcoin.”

Our team is also proud to be supported by a diverse group of prestigious angel investors who share our vision for the future of Bitcoin. pic.twitter.com/xqoaPcz6Bs

— Botanix Labs 🕷 (@BotanixLabs) May 7, 2024

Since its inception in 2022, Botanix Labs says it has been dedicated to developing technologies that fortify a decentralized, Bitcoin-native financial infrastructure. The Spiderchain project, introduced through an early-stage testnet in November 2023, has already garnered significant traction with over 200,000 active addresses and more than 10,000 experimental token launches, according to the release.

The Spiderchain’s architecture is designed to seamlessly transition applications and smart contracts from Ethereum to Bitcoin, offering users the ability to interact with Bitcoin’s network without relying on wrapped assets. This protocol aims to enhance scalability and also opens avenues for efficient and secure financial interactions within the Bitcoin ecosystem.

“Bitcoin has proven itself to be the most secure monetary network in history,” said Armin Sabouri, CTO and Co-Founder atBotanix Labs. “Now it’s time to put Bitcoin to work by transforming it from only being a store of value into a global monetary network that empowers the sovereignty of individuals.”

For more information on Botanix Labs and Spiderchain, interested parties can visit their website here.

Bitcoin Magazine is wholly owned by BTC Inc., which operates UTXO Management, a regulated capital allocator focused on the digital assets industry. UTXO invests in a variety of Bitcoin businesses, and maintains significant holdings in digital assets. 

Metaplanet, a decades-old Japanese Public company providing hospitality and technology-related services, recently announced a major strategic pivot – embracing Bitcoin as a core corporate treasury asset.

Last month, Metaplanet revealed it acquired over $6 million worth of Bitcoin, marking the company’s foray into digital assets. This mirrors MicroStrategy’s pioneering move to allocate part of its reserves to Bitcoin starting in 2020.

Following the news, Metaplanet has recently hired leading industry analyst Dylan LeClair as Director of Bitcoin Strategy to accelerate its new Bitcoin focus. LeClair is head of market research for Bitcoin Magazine and UTXO Management, and is respected for his expertise in on-chain analytics and macroeconomics.

At Metaplanet, LeClair will craft the corporate Bitcoin strategy, using public markets tools to accumulate BTC for the balance sheet. This aligns with Metaplanet’s vision for advancing Bitcoin’s role in its balance sheet.

LeClair commented: “I’m extremely excited to be joining Metaplenat to implement a corporate Bitcoin standard. By leveraging various corporate financial strategies, we aim to further establish a blueprint for corporate Bitcoin adoption in Japan and beyond.”

He added, “Metaplanet seeks to highlight the strategic benefits of adopting Bitcoin, particularly in regions where political currencies face heightened structural weaknesses.”

Metaplanet is positioning itself as a “MicroStrategy of Asia,” mimicking the software firm’s approach to strengthening its balance sheet with Bitcoin.

MicroStrategy holds over $10 billion in BTC reserves, a strategy that increased its enterprise value considerably.

Click the image to learn more.

Sora Ventures’ Jason Fang called Metaplanet “Asia’s first MicroStrategy.” The move also enables Japanese investors to gain Bitcoin exposure without paying capital gains taxes, which can reach 55% in the country.

Metaplanet offers a path for public market investors and institutions to invest in Bitcoin. This is a major development as corporate Bitcoin adoption goes mainstream.

If Metaplanet follows MicroStrategy’s playbook, significantly increasing BTC reserves over time, it could provide meaningful upside for investors and validation for Bitcoin.

Originally published on Unchained.com.

Unchained is the official US Collaborative Custody partner of Bitcoin Magazine and an integral sponsor of related content published through Bitcoin Magazine. For more information on services offered, custody products, and the relationship between Unchained and Bitcoin Magazine, please visit our website. 

Visit unchained.bitcoinmagazine.com for resources and special offers to upgrade your bitcoin security.

Once someone decides that they want to hold bitcoin in self-custody, they will soon discover that hardware wallets are the most secure tools for managing bitcoin keys. The next question becomes whether to use a singlesig wallet or a multisig wallet.

If you choose to use multisig to secure your long-term savings, you will also need to decide whether you want to set it up all by yourself, or in collaboration with others. Both of these approaches have their own set of trade-offs, and in this article we will compare and contrast them.

Do-it-yourself (DIY) multisig

An attractive characteristic of bitcoin is that it allows people to become more self-sovereign with their wealth. If you’re someone who emphasizes the importance of this feature, your initial reaction to collaborative custody multisig may be one of skepticism. You might instead be considering setting up multisig by yourself, without involving anyone else in your arrangement.

The most common DIY multisig setup involves using multiple keys from hardware wallets you control

A multisig wallet can be set up by using one of several free and open source wallet softwares, such as Caravan, Sparrow Wallet, or Electrum. They allow you to combine extended public keys (xpubs) to build the multisig quorum you want. This approach has a couple of advantages—it gives you the opportunity to customize the structure to suit your needs and potentially retain more privacy than collaborative multisig.

Collaborative custody multisig

Although “collaborative custody” may seem like an alternative to self-custody, these labels are not mutually exclusive. In a thoughtfully designed multisig structure, both terms can accurately describe the same situation.

Bitcoin self-custody is typically defined by who possesses the power to spend the bitcoin. If you hold bitcoin in self-custody, then you’re the only one with unilateral power to spend your bitcoin. Collaborative custody means you’re collaborating with another party to help you manage or spend the bitcoin. In a 2-of-3 multisig where you hold two keys and a collaborative partner holds one key, both features are available! You can still move your bitcoin without relying on the collaborative partner, but you can also receive assistance from them when needed. Additionally, your collaborative partner cannot move your bitcoin without your consent.

The most common collaborative multisig setup involves using a keys from hardware wallets you control and a partner who controls a minority of keys.

Collaborative custody multisig can be set up with two or more people. If you have someone in your life that is technical and trustworthy, you could work with that person to set up collaborative custody. However, the most popular approach is to form a partnership with a business that specializes in collaborative multisig. Choosing an established company with a great reputation will grant you access to a team of experts you can trust for help, without giving up control over your bitcoin.

If you work with one or more collaborative key agents, you will simplify your setup by reducing the number of items you need to keep track of yourself. The partnership can also provide you with a resource to help you think through wallet maintenance, such as retaining the wallet configuration information, re-securing your bitcoin if a key becomes lost or compromised, navigating technical difficulties, and managing UTXOs. An institutional collaborative partner can provide the added benefit of actively monitoring for any suspicious activity in connection with your bitcoin wallet, as well.

Trade-offs

Privacy

As mentioned previously, collaborative custody will typically involve sharing some information with your collaborative partner about your bitcoin. This is necessary to get the most value and support out of the relationship.

In most cases, your collaborative partner will be able to see your bitcoin balance, and observe the bitcoin addresses that you interact with while sending and receiving bitcoin. This is why you should only ever consider collaborative partnerships with people or businesses you can trust to respect your privacy.

At Unchained, we are transparent about this reality. The privacy of our clients is taken seriously, and you can view the details of our privacy policy here.

Ease of setup and operation

The biggest downside to attempting multisig on your own is the lack of reliable technical support available for you and your beneficiaries. Multisig is more involved than singlesig, and has several components that must be properly managed. Otherwise, you might find yourself in a difficult situation when trying to access your bitcoin in the future.

Visit Unchained.com for $100 off any Unchained financial services product with code “BTCMAG100”

For example, you will need to know a little about xpubs and BIP 32 derivation paths to understand the specifics about how your multisig wallet is configured. This information can be found in a wallet descriptor or wallet configuration file, which is an important item you will be responsible for keeping in your possession. If this file is lost, then you are at risk of losing access to the bitcoin in your multisig wallet, even if you still have a controlling number of keys within the multisig quorum.

A partner like Unchained can help you recover your bitcoin as long as you have access to at least one of your keys.

Additionally, with an abundance of bitcoin software and hardware designed by various parties, you may run into occasional interoperability issues that can be confusing and frustrating to navigate. These bumps in the road are not uncommon while using bitcoin, and multisig can add another layer of complexity. If you aren’t very technical, or confident about the mechanics of bitcoin and multisig, you may need to rely on outside assistance in these situations. Without an established collaborative partnership, you may be vulnerable to receiving incorrect (or even malicious) advice.

Spending convenience

If you want to get the most out of multisig, then you’ll want to geographically separate the keys. Keeping the keys together in the same location would resemble a more cumbersome version of singlesig. Separating the keys is what adds security and removes single points of failure, but it will also mean that it’s less convenient to make a withdrawal.

If you operate a multisig wallet on your own and separate the keys, then you will have to travel to different locations in order to take any bitcoin out of your wallet. This might not seem like a big deal, if you are holding your bitcoin savings for the long term, and have no plans for regular withdrawals. However, you could still be put into a difficult position if a situation occurred where you needed to access your bitcoin, but your movement was restricted due to unforeseen circumstances, such as a local crisis.

If you use a collaborative custody setup, such as a 2-of-3 quorum where you keep one key at home, one key away from home, and a key agent partner holds the third key, then you have an avenue to accessing your bitcoin that doesn’t require travel. You can sign a withdrawal using your key at home and call upon your collaborative partner to use their key, so that your bitcoin can be spent more conveniently.

Inheritance

Even if you are personally confident with the technology behind bitcoin and multisig wallets, a concern might be inheritance. If you want your beneficiaries to have access to your bitcoin in the event of your death or incapacitation, and they are not as familiar with bitcoin as you are, it can be challenging to find a good solution.

In a DIY multisig setup, creating functional instructions for your loved ones on how to find your multiple, separate keys and recover your bitcoin is not always as simple as it sounds, especially if you want to leave no room for error. Your loved one will need to know how to access and use your wallet configuration file, find your multiple seed phrases and load them into one or more hardware wallets, and use those devices to perform signatures for the withdrawal.

Unchained trust or personal vaults combined with the inheritance protocol ensure that your heirs can recover your bitcoin without learning technical skills today.

Collaborative custody can make for a much smoother experience. Since your collaborative partner will typically have the wallet configuration file, one of the keys in a standard 2-of-3 quorum, and the technical expertise required for recovery, your executor or trustee will barely need to do any work at all. As long as they can access just one of your seed phrases, and they also understand they are supposed to reach out to your collaborative partner in the event of your demise, they wouldn’t need to know any additional details about how bitcoin works! Your collaborative partner could simply instruct your executor or trustee on how to load the seed phrase into a signing device and sign a transaction to move your bitcoin to the wallets of your beneficiaries.

For example, in the case of Unchained, our Inheritance Protocol guides the user through everything they need to know for setting up simple and secure recovery. Our model makes it easy to safely transfer possession of your bitcoin to beneficiaries designated by a will or trust.

Access to financial services

One unique advantage of collaborative custody institutions is that they can grant you easy access to other bitcoin financial services. Besides inheritance, this could include retirement, trading, loans, or other business needs. If you don’t have a collaborative custody partner, you may be able to find companies that offer some of these services in the context of bitcoin. However, there is an important difference.

Collaborative custody institutions have a vested interest in a long-term relationship, because you can use your keys to permissionlessly withdraw your funds and exit the partnership at any time. Your collaborative partner can do nothing to stop this, other than provide high quality services to maintain your desire for the partnership to continue.

Other business models will not necessarily have your best interests in mind. As witnessed in recent years, many large bitcoin exchanges and lending services have demonstrated a shortsighted approach, treating client funds with gross negligence, even to the point of losing peoples’ bitcoin with little opportunity for recourse. The principles of self-custody and low time-preference relationships are what can help protect you from these kinds of breaches of trust.

Visit Unchained.com for $100 off any Unchained financial services product with code “BTCMAG100”

Comparison chart

Bringing back the chart from our article comparing singlesig wallets to multisig wallets and highlighting the sections that focus on DIY multisig and collaborative multisig, we can observe the main differences in these models.

Although you may give up some privacy, collaborative custody can simplify the process of setting up your wallet, operating it securely, and building a functional inheritance plan. Either method you choose will provide the strong security advantages that multisig offers beyond singlesig.

*This depends on whether or not you have wiped your hardware wallet in addition to splitting up your physical seed phrase with SSS or Seed XOR.
**Weak passphrases have a chance of being guessed, but strong passphrases are easier to forget yourself.
***Decoy wallets are technically possible with nonstandard derivation paths or other methods, but are not recommended because it can introduce new risks.
****With increased Taproot adoption, multisig will have the same fee structure as singlesig.

Should I use collaborative multisig or set it up on my own?

The best self-custody setup for each bitcoin holder depends on their goals and preferences. If you are technically proficient with multisig and want to prioritize privacy above the benefits that are unlocked by collaborative custody, then a DIY multisig might be the best choice for you. However, collaborative custody multisig is often recommended as the best solution for the typical individual to help ensure that catastrophic mistakes are avoided.

If you pursue a collaborative custody partnership with Unchained, you can sign up for a Concierge Onboarding to get your multisig vault set up properly and help you understand bitcoin security best practices. You will also have the option of setting up our streamlined Inheritance Protocol, and be enabled to call upon our experts for ongoing education and assistance.

Originally published on Unchained.com.

Unchained is the official US Collaborative Custody partner of Bitcoin Magazine and an integral sponsor of related content published through Bitcoin Magazine. For more information on services offered, custody products, and the relationship between Unchained and Bitcoin Magazine, please visit our website.