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Story About SpaceX Engineer Who Traded “Insider Tips” for Bitcoin Comes to Sad Ending

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Mysterious “Millionaire Mike” is going to face five years behind bars. Here’s how much he earned from insider trading.

SpaceX employee James Roland Jones, 33, pleads guilty to conspiracy to commit securities fraud. In 2016-2017, he sold “insider tips” for Bitcoin (BTC) on darknet forums. Unfortunately, one of his partners was an FBI undercover agent.

Five years behind bars for “Millionaire Mike”

The Department of Justice released a statement regarding the results of an investigation of SpaceX engineer James Jones. According to the document, he opened numerous accounts on behalf of American citizens, whose IDs and sensitive information were sold on the darknet.

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Then, he was contacted by the undercover FBI officer and bought from him what he expected to be “insider trading information” about an American publicly traded company. In April and May 2017, Mr. Jones initiated numerous transactions from fake accounts to “monetize” the information from the agent.

In Q3, 2017, Mr. Jones contacted the agent himself and revealed to him “insider information” about another publicly traded company. The two conducted another series of securities transactions; for some of them, the hijacked accounts of real people were used.

Now, the mastermind of “insider trading,” who went by “Millionaire Mike” on special forums, faces five years in federal prison.

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Modest gains, severe penalty

Mr. Jones is also being investigated by the U.S. SEC for selling “insider tips” on stock price dynamics. According to the litigation documents, he frequented darknet forums and offered gullible traders his predictions about which stock was going to rise or fall:

Jones would sometimes sell tips for the same stock in both directions. In the event his false tips did not pan out, Jones offered to give the next tip for free if the disappointed purchaser would leave a good review for Jones on the dark web site.

His services were paid for in Bitcoins (BTC). In total, he earned $27,000 for illegal activity in 2016-2017.

The officers of the SEC underscore that this is the first case in U.S. law enforcement history when an “insider” was caught on the dark web. Meanwhile, the documents have not disclosed whether he sold information about SpaceX or any other public company.

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If bitcoin doesn’t need banks, should I buy bitcoin ETFs?

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The launch of the first US Bitcoin ETF, the ProShares Bitcoin Strategy ETF (ticker: BITO) helped propel bitcoin to new all-time highs.

This was a milestone for the asset management industry, further integrating Bitcoin into traditional finance.

A big question raised this week was whether it’s worth buying a bitcoin ETF, especially one that is tied to futures (not spot).

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That’s the issue that some members of the investment community may have been struggling with since the fund’s launch on Tuesday. With the expectation that there are more such products on the horizon, let’s try to better understand the advantages and disadvantages of investing in a bitcoin ETF.

A first advantage, especially for those who do not have enough time or knowledge to minimally actively manage their investments. Actively managed BITO provides exposure to bitcoin without having to worry about “storage”, using so-called private keys and/or digital wallets to do so.

On the other hand, the best and most economical way to own bitcoin or other cryptocurrency is directly, and yet, traditional brokerages offer relatively low fees compared to administration and custody fees charged by ETFs.

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The ProShares ETF proved to be the 2nd most traded fund launch on record, with more than 24 million shares changing hands on the 1st day, and reached $1.2 billion in assets after just 2 trading days.

futures

The head of the SEC (the US CVM), Gary Gensler, has suggested that a futures-linked bitcoin ETF offers better investor protections than an ETF that is backed by spot cryptocurrencies.

A key criticism of a bitcoin futures ETF is that managing futures contracts can be expensive compared to direct ownership.

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Futures are contracts that give the buyer exposure to the price movements of an asset, usually with monthly expiration dates.

A future ETF involves the cost of “rolling over” contracts that expire soon into future months, which would likely be passed on to the end user.

Also, when the prices of a futures contract are higher for futures months contracts, the market is said to be in contango. That is, you will pay more to exit the expiring contract and enter the new one.

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On the other hand, when shorter-term contracts cost more than longer-term contracts, this is called backwardation.

Graphs exemplifying Backwardation x Contango
Backwardation x Contango | Source: Cointimes.

For those who don’t feel confident going to a brokerage or owning their own private keys, the bitcoin ETF can be a good place to start. But, it should be kept in mind that it also has its costs and risks.

“Veterans are not buying” (“Veterans are not buying”)

Despite the hype about the debut of the first Bitcoin-linked ETF, many proven crypto enthusiasts aren’t planning to buy it anytime soon.

This move was a big step for the traditional market. But bitcoin’s central goal is still to bypass Wall Street and democratize the financial sector.

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Some Bitcoin advocates claim that the ETF, in some terms, defeats Bitcoin’s fundamental purpose: autonomy and ownership.

Cathie Wood of Ark Investment Management said she did not buy the BITO fund on its first trading day because she wants to better understand the tax ramifications of ETF futures exposures first.

Despite all this, it is worth reinforcing several positive points in favor of ETFs, such as: you do not need to worry about their custody, the ease of portfolio planning, the simple way to manage investments, the security involved (since the custody is usually done by specialized companies), among other points.

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In summary, it is not possible to say in a binary way whether the bitcoin ETF is or is not a good investment alternative. It all depends on your investor profile, your intentions and objectives when investing in bitcoin, and your strategy.

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Futu Niuniu and Tiger Securities can’t search for Bitcoin ETF market data

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  • China’s largest stock trading platform, Futu Niuniu, Tiger Securities, can no longer search for Bitcoin ETF market data.
  • The blackout comes at the backbone of their success after BITO’s listing.

Futu Niuniu and Tiger Securities have been unable to search for the market data of two Bitcoin ETFs, including Valkyrie’s BTF or ProShares BITO. The Chinese government seems to enforce its regulations even on companies working abroad. The blackout comes at the backbone of their success after BITO’s listing. BITO was the number one hot stock in the Tiger Securities app. It is not yet clear why the companies cant search for Bitcoin ETF currently.

Tiger and Futu played an integral part in a record number of Chinese IPO deals. These, despite threats from China to block any future American involvement. Last year, the two firms advised on 26 U.S.-based IPOs. Besides, they also helped their clients get listed abroad through offshore listings.

Futu and Tiger facing risks of new personal data privacy law

Futu and Tiger have attracted one million brokerage clients, which has helped provide trading flows in droves. In early September, tech stocks were falling in the entire United States. The two entities helped contribute almost $1 billion to Tesla Inc.’s value.

Yet, Futu and Tiger are both facing risks as China’s new personal data privacy law takes effect on Nov 1.

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The Chinese authority is cracking down on big technology firms focusing on crypto. Yet, these same giants have found success in the US with IPO underwriting.

Investors in China are taking their money to brokers that help them invest overseas. But these firms could run into problems with data privacy rules and compliance risks.

China targets the most extensive stock software

China’s latest round of governing attacks has come in a flurry, targeting cryptocurrency. The People Daily News lists Chinese online agents next on the list for firm oversight and docility. The total crackdown comes as China braces itself arising from trade wars with America.

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Futu, reacting to a piece that discussed how they protect user data, said. “Since our launch, Futus has insisted that the security of information and data is supreme.”

“Futu stands firm on its pledge for strict compliance with relevant laws & regulations,” they said.

China plans to execute a new law to govern cyberspace and enhance national security. The Personal Information Protection Law takes effect on Nov 1. And it will complement China’s Data Security Law. It’s okay for the country’s investors to invest abroad in cross-border Connect schemes. And Qualified Domestic Institutional Investors (QDII). 

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The new rules will regulate the export of personal data. They are posing a challenge and a threat to online brokers. In most cases, these brokers provide cross-border trading services for mainland Chinese citizens.

Futu and Tiger Securities don’t have brokerage licenses on the mainland. But, Chinese citizens can open accounts with them online. Citizens must submit personal data related to ID cards, bank cards, and tax records for this to happen.

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NFTs ‘on Bitcoin’: Yes, That’s a Thing!

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Non-fungible tokens (NFTs) are all the rage right now. From CryptoPunks to Bored Apes, millions in crypto are exchanging hands for pixel art, tokenized memes, and crypto collectibles. 

For the most part, the action takes place on the Ethereum (ETH) blockchain, which has made some hardcore bitcoiners skeptical of this new crypto market segment. However, there is also a market of NFTs secured by the Bitcoin (BTC) blockchain.

Read on to learn about what’s happening with Bitcoin-secured NFTs. 

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NFTs are moving beyond Ethereum

Until recently, Ethereum has been the go-to blockchain for minting and trading NFTs. That is changing quickly, however, as Ethereum high gas fees have pushed out many would-be market participants, making NFTs on other chains more attractive. 

The Bitcoin blockchain has also a role to play here.  

While NFTs “on Bitcoin” don’t exist purely on the Bitcoin blockchain (in a way that ERC721 tokens exist on Ethereum), they are secured by the Bitcoin blockchain. The additional tech stack that powers the ability to issue and secure NFTs with Bitcoin is provided by the likes of CounterpartyStacks, and the Liquid Network

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Let’s dive in and take a look at some of the most prolific NFT projects secured by Bitcoin.

Rare Pepes & crypto art on Scarce City

Scarce City is a Bitcoin-secured art auction platform that enables artists to sell their artwork for BTC. 

The Scarce City team claims that “Bitcoin’s finest goods should be sold according to the network’s properties of pseudonymous, borderless, permissionless, trust minimized, and verifiable authenticity and supply.” 

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On the auction platform, art is sold via Lightning-powered auctions to “keep auction participants accountable by collateralizing their bids through instant, anonymous, low-fee Lightning Network payments,” the team explains on its website.

In addition to giving artists the ability to sell their physical art in exchange for BTC, the marketplace also sells an NFT series based on the Pepe The Frog internet meme, called the Rare Pepe collection. 

Rare Pepe NFTs are powered by Counterparty – an open-source protocol built on top of the Bitcoin network – that uses the Bitcoin blockchain to record data. 

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By securing NFTs on Bitcoin, these digital collectible cards arguably have a chance of lasting longer than NFTs secured by newer chains that may end up disappearing (or forking) in a few years’ time. For NFT holders, that is something to consider. 

NFT skins for Bitcoin gamers

Bitcoin-secured NFTs are not only limited to artworks and dank memes. They also have applications in the gaming world. For instance, Lightnite, a play-to-earn online game powered by Lightning payments, utilizes Blockstream’s Liquid Network to enable players to purchase and earn in-game items in the form of NFTs. 

The Liquid Network is a Bitcoin sidechain that can facilitate the trading of these and other Bitcoin NFTs. While it was created by Blockstream, it’s currently governed by a federation of parties and operated on an open-source blockchain platform called Elements. 

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In a blog post, Blockstream explains that Lightnite players receive a unique Liquid token in their account every time they purchase or earn a skin. These tokens can then be withdrawn to a personal Blockstream wallet for safekeeping or to trade with other Lightnite players. Should a Lightnite player receive a skin outside of the game, they can deposit the Liquid token in their Lightnite account to receive the skin and deploy it in the game. 

Lightnite skins are not the only NFTs floating around on the Liquid Network. Another notable NFT project on Liquid is Raretoshi. 

Raretoshi is an NFT marketplace that enables artists to sell rare digital art for L-BTC (pegged bitcoin on Liquid), benefiting from lower transaction costs and the ability to get paid in bitcoin. 

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NFTs on Stacks: Web 3.0, built on Bitcoin

Stacks says it is a decentralized, open-source network built on Bitcoin that aims to unleash Bitcoin’s potential as a programmable base layer to build “a better Internet.” That means that developers can mint NFTs and build NFT marketplaces that are secured by the power of the Bitcoin network. 

The Stacks team says that “Bitcoin has all the properties that decentralized apps and smart contracts need: the security, the settlement assurances, the capital, and the network effects.” 

In light of Stacks’ Bitcoin-powered technology stack and the rising popularity of NFTs, it comes as little surprise that the first NFT ventures have already started to emerge on Stacks. 

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StacksArtSTXNFT, and Boom are examples of up-and-coming NFT platforms operating on the Stacks chain. 

Interestingly, Satoshibles – an NFT collection by bitcoiners for bitcoiners that launched on Ethereum – announced that it plans to move to Stacks via an NFT bridge between Ethereum and the Stacks blockchain. 

“Using Satoshi as our mascot, we have always felt that we are the NFT for Bitcoin enthusiasts, however, it’s a pretty hard sell when your project is on Ethereum,” the Satoshibles team admitted. 

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To bring its series of 5,000 algorithmically generated, Satoshi-themed NFTs close to the Bitcoin community, Satoshibles holders will be able to port their NFTs to Bitcoin via Stacks.

As the NFT market continues to grow and more NFTs “powered by Bitcoin” emerge, we could see even more money flowing into non-fungible tokens, especially when collectors can trust that their NFTs are secured by Bitcoin. 

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In a blog post, Blockstream explains that Lightnite players receive a unique Liquid token in their account every time they purchase or earn a skin. These tokens can then be withdrawn to a personal Blockstream wallet for safekeeping or to trade with other Lightnite players. Should a Lightnite player receive a skin outside of the game, they can deposit the Liquid token in their Lightnite account to receive the skin and deploy it in the game. 

Lightnite skins are not the only NFTs floating around on the Liquid Network. Another notable NFT project on Liquid is Raretoshi. 

Raretoshi is an NFT marketplace that enables artists to sell rare digital art for L-BTC (pegged bitcoin on Liquid), benefiting from lower transaction costs and the ability to get paid in bitcoin. 

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NFTs on Stacks: Web 3.0, built on Bitcoin

Stacks says it is a decentralized, open-source network built on Bitcoin that aims to unleash Bitcoin’s potential as a programmable base layer to build “a better Internet.” That means that developers can mint NFTs and build NFT marketplaces that are secured by the power of the Bitcoin network. 

The Stacks team says that “Bitcoin has all the properties that decentralized apps and smart contracts need: the security, the settlement assurances, the capital, and the network effects.” 

In light of Stacks’ Bitcoin-powered technology stack and the rising popularity of NFTs, it comes as little surprise that the first NFT ventures have already started to emerge on Stacks. 

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StacksArtSTXNFT, and Boom are examples of up-and-coming NFT platforms operating on the Stacks chain. 

Interestingly, Satoshibles – an NFT collection by bitcoiners for bitcoiners that launched on Ethereum – announced that it plans to move to Stacks via an NFT bridge between Ethereum and the Stacks blockchain. 

“Using Satoshi as our mascot, we have always felt that we are the NFT for Bitcoin enthusiasts, however, it’s a pretty hard sell when your project is on Ethereum,” the Satoshibles team admitted. 

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To bring its series of 5,000 algorithmically generated, Satoshi-themed NFTs close to the Bitcoin community, Satoshibles holders will be able to port their NFTs to Bitcoin via Stacks.

As the NFT market continues to grow and more NFTs “powered by Bitcoin” emerge, we could see even more money flowing into non-fungible tokens, especially when collectors can trust that their NFTs are secured by Bitcoin. 

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