Dispatch #141: Hong Kong Announces New Crypto Rules

In this patch of your weekly Dispatch:

• Hong Kong’s new crypto rules 🚥
• Ron Desantis pledges to protect Bitcoin 🙈
• Heavy HODL mode 💎

The Big Idea

Hong Kong's U-Turn to Crypto

Well, here’s a twist.

At the top of the last bull run, China turned its back on crypto, banning mining and then trading. That prohibition extended across China’s sphere of influence, and as late as last fall, Hong Kong looked like it was headed towards a significantly restrictive crypto policy.

This year, there has been an about-face. Chinese state-owned banks are reportedly soliciting crypto companies to open accounts in Hong Kong. On Tuesday, Hong Kong’s Securities and Futures Commission announced its plans to allow retail trading of cryptocurrencies as early as this year, adding that it will accept applications from exchanges to offer such services from June 1.

The rules aren’t totally freewheeling. To be considered for sale to retail, for example, tokens must be listed in at least two major indices. Moreover, the SFC believes that stablecoins shouldn’t be offered until new stablecoin-specific regulations can be implemented.

The news is quite a development from the expectation of a complete ban on retail crypto trading just last year.

The Latest In…

70% Drop in Crypto Hacks

Blockchain surveillance firm TRM Labs has released a new report saying that crypto hacks were down 70% in Q12023 from a year earlier. The average size per hack is also down – from $30M to $10.5M. The firm suggests two events might have impacted this. The first was the arrest of Avraham Eisenberg who attacked Mango Markets, and the second was the sanctioning of Tornado Cash by the US Treasury.

The Latest In…

Bitcoin Is US Presidential Politics Now

It is pretty refreshing to see Bitcoin enter the mainstream US political discourse in this way. This week:

• Darkhorse Democrat candidate Robert F. Kennedy Jr gave a rousing speech about the importance of a non-sovereign store of value.
• Florida Governor Ron DeSantis formally launched his beat-Trump…err presidential campaign. During a Twitter Spaces event with Elon Musk, he said “I think the current regime, clearly, they have it out for Bitcoin, and if it continues for another four years, they’ll probably end up killing it.”
• Presidential candidate Vivek Ramaswamy became the second candidate in the US elections to accept donations through Bitcoin.

The Week’s Most Interesting Data Story

A Silent HODLing Wave

In early April, the net position change indicator for long-term BTC holders turned positive and has been growing for the past month. This rapid accumulation suggests investors see Bitcoin's recent slump as a typical “bull market breather” and are adding more BTC to their stashes. Glassnode’s Liveliness metric, which evaluates the equilibrium between holding and spending habits, also aligns with this observation. At present, network Liveliness is plummeting to the lowest point since the surge above $20K in December 2020. This decrease underscores that the dominant market trend for most of the supply is HODLing (and borrowing), rather than spending. Nobody is moving; does that mean big moves are coming?

Hot Topics

What the Community Is Discussing

Is Vitalik really worried?

True.

It’s getting weird out there.

What to Watch for Next Week:

• Can trading get its momentum back?
• Will the SEC be forced into more rulemaking by the courts?
• Will the US raise the debt ceiling?