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Arbitrage bot’s spam attack on the Polygon network generated $6,800 per day

An arbitrage bot managed to turn 14 ETH to 218.5 ETH simply by spamming the Polygon network for 120 days.

The growth of layer-two protocols has been one of the major stories of 2021 as the rising popularity of decentralized finance (DeFi) and nonfungible tokens (NFT) have driven transaction costs higher on the Ethereum (ETH) network effectively pricing out many participants. 

Earlier this year the Polygon network, formerly known as MATIC, emerged as one of the top contenders in the race for an effective Ethereum layer-2 scaling solution, and the project's QuickSwap DeFi platform was also one of the more successful Uniswap clones.

The platform was quite popular initially but as other platforms like Arbitrum and Optimism popped up, discussions about Polygon fell to the wayside and some traders even refer to the platform as "slow". Data from Flipside Crypto shows that the low-cost capabilities of the Polygon network came under attack after a cleverly devised arbitrage bot managed turn 14 Ether in 218.5 Ether in less than four months.

The bot filled each block with “meaningless transactions”

According to data from Flipside Crypto, the attack began in early May and at one point in June, pushed transactions on the Polygon network went as high as 8 million per day. In the same timeframe, the maximum number of transactions on the Ethereum network was at 1.2 million.

Number of transactions on Ethereum vs. Polygon. Source: Flipside Crypto

Data found on a Polygon forum indicates that the attacker has been inflating transaction volumes by as much as 90% by stuffing each block full of “meaningless transactions” while only having to pay around 0.02 MATIC to spam the entire block and roughly $1,000 for an entire day.

A deeper dive into the transactions and addresses interacting on the network revealed that around 30% of the network’s transaction count was coming from two contracts which have been determined to be arbitrage bots that conduct thousands of daily transactions to various decentralized exchanges (DEX).

The exact reason why the spammer chose to fill each block when the bots were only conducting 2,000 - 4,000 trades per day is uncertain, but one theory is that it was done in an effort to prevent anyone else from front running the trade.

Related: Polygon can hit $3.50 in Q4 as MATIC’s 20% weekly rally triggers bull flag setup

The bot netted $6,800 in average daily profit

Over a period of 120 days, the bot was able to grow an initial amount of 14 Ether to 218.5 Ether, which is currently worth $813,694.

That works out to an average daily of profit roughly $6,800 before including the cost to spam the network.

In response to the spammer, the team behind Polygon ultimately decided to increase the minimum cost of a transaction from 1 gwei to 30 gwei as a way to fight spam and improve network health.

The move appears to have achieved its intended goal as data provided by Delphi Digital shows that the spike in average transaction costs coincided with a marked decline in the number of daily transactions because it now costs $30,000 to spam the network for an entire day.

Polygon average gas cost vs. daily transaction count. Source: Delphi Digital

Network data shows that the spam transactions have dropped from 2 million to 500,000 transactions per day, a decrease of 75%, but they still account for 16.7% of daily transactions. This means that the bots are spending roughly $5,000 of their daily $6,800 profit on gas to keep the scheme running.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Grayscale Confirms Plan to Convert GBTC Into Bitcoin ETF

Here’s why analysts are saying ‘No FOMO’ ahead of Bitcoin’s ETF launch

The upcoming launch of a BTC ETF has bulls proclaiming that a $100,000 Bitcoin price is imminent, but several analysts warn that a sharp short-term pullback could also occur.

The day the crypto traders have long-awaited is almost here. At the opening bell on Oct. 19, a ProShares futures-based BTC ETF is scheduled to launch and analysts are predicting that additional ETFs will rollout over the coming week. 

Data from Cointelegraph Markets Pro and TradingView shows that an early morning attempt by bears to drop the price back below $60,000 was well defended by traders and at the time of writing their is a tug-o-war at the $61,000 to $62,000 zone. 

BTC/USDT 1-day chart. Source: TradingView

While many have predicted that the ETF launch is the fuel needed to push BTC to the $100,000 mark, not all analysts agree and some warn that the event could be another “buy the rumor, sell the news” event.

A higher low would be "normal" price action

One trader who is not completely enamored with the idea of a BTC futures ETF is pseudonymous Twitter user ‘Cry me a $COIN’, who posted the following tweet suggesting that the recent BTC price action is merely part of a normal price cycle.

According to the price path outlined in the chart above, there’s a chance that Bitcoin tops out below $68,000 in the next few months before heading lower to establish a higher low near $46,000.

A similar sentiment was expressed by 'Ryan Cantering Clark’, who suggested that up to now, “the trade has been "long ETF approval" and we are here, so what else in the short term takes us much higher?”

Clark said:

“Everyone knows where this is going, so in the short term I think we get a deeper pullback.”

FOMO buyers beware

A deeper analysis of what could possibly come next was provided by David Lifchitz, managing partner and chief investment officer at ExoAlpha. Lifchitz suggested that a small pullback might be in order, “especially after the torrid run from $40,000 just two weeks ago,” which translated into a BTC increase of 50%.

While Lifchitz suggested that “the medium-term looks definitely higher,” the analyst offered a word of caution for potential buyers by saying, “these Bitcoin ETFs based on CME futures to track BTC price will underperform Bitcoin spot price due to ongoing futures roll costs.”

According to Lifchitz, professional traders are likely to continue using Bitcoin CME futures or crypto derivative exchanges for their trading needs while “long-time crypto investors are all well equipped to directly trade and store Bitcoin spot.”

Lifchitz said:

“So these ETFs will likely be an easy Bitcoin access to unsophisticated retail investors with their broker accounts, who will not get the full return of BTC after all fees are accounted for. These ETFs will also bring arbitrage opportunities for smart traders. Wall Street at its best.”

Related: Bitcoin RSI strength suggests BTC price is still far from its cycle top

$90K BTC price if the classic cup and handle formation plays out

A final scenario to be on the lookout for was offered by pseudonymous Twitter user ‘Nunya Bizniz’, who posted the following tweet outlining a bullish scenario for Bitcoin’s price action.

As seen in the chart provided, the analyst suggested that BTC price has the potential to drop back to the $53,000 support in the near term before resuming its uptrend. 

The trader believes that after the price pulls back to touch underlying support, BTC could then squeeze up to $98,000

BTC/USD 1-day chart. Source: Twitter

The overall cryptocurrency market cap now stands at $2.463 trillion and Bitcoin’s dominance rate is 47.3%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Grayscale Confirms Plan to Convert GBTC Into Bitcoin ETF

US Treasury says it must ‘modernize and adapt’ to digital currencies

"Digital assets and payments systems could harm the efficacy of our sanctions” if left unchecked, the Treasury said.

The United States Department of the Treasury has issued a review on sanctions and suggested the government do more to develop its infrastructure and policies in regards to digital assets.

In an Oct. 18 report, the Treasury Department said the growing use of digital assets was hampering the implementation of sanctions while balancing funds from legitimate humanitarian organizations. The department suggested that better communication between itself and the crypto industry, financial institutions, and others in addition to “deepening its institutional knowledge and capabilities” could help improve current policy.

“Sanctions are a fundamentally important tool to advance our national security interests,” said Deputy Treasury Secretary Wally Adeyemo. “Treasury’s sanctions review has shown that this powerful instrument continues to deliver results but also faces new challenges. We’re committed to working with partners and allies to modernize and strengthen this critical tool.”

The report added:

“If left unchecked, these digital assets and payments systems could harm the efficacy of our sanctions.”

According to the report, the Treasury Department suggested the government adopt a structured policy framework, coordinate with allies and partners when possible, ensure sanctions are understood, enforceable, and adaptable, and implement them “to mitigate unintended economic, political, and humanitarian impact.” The department added it should modernize to include the “right expertise, technology, and staff” to handle the challenges of digital assets.

Related: Rogue states dodge economic sanctions, but is crypto in the wrong?

The U.S. Treasury Department has been employing sanctions as part of the government’s efforts to fight ransomware attacks threatening the country’s infrastructure — for example, when Russia-based DarkSide hackers attacked the Colonial Pipeline system in May. Last month, the department announced it would impose sanctions on the Czech Republic as well as Russia-based business Suex OTC for allegedly allowing hackers to access cryptocurrency sent as payment for ransomware attacks.

Grayscale Confirms Plan to Convert GBTC Into Bitcoin ETF

Bitfury CEO confirms IPO considerations are part of expansion plans

In 2018, Bitfury raised $80 million from investors like Michael Novogratz’s Galaxy Digital at a $1 billion valuation.

Bitfury, one of the world’s largest companies in the blockchain industry, is mulling a potential initial public offering, or IPO, as part of the company’s global growth plans, the company’s CEO confirmed to Cointelegraph.

“As Bitfury and its portfolio of companies continue their global expansion in the digital assets space, Bitfury will be considering an IPO as part of its broader expansion and growth plans,” Bitfury co-founder and CEO Valery Vavilov said.

According to the executive, Bitfury has not yet determined when and on what exchange the company is willing to proceed with an IPO. The company’s last funding round took place in 2018, with Bitfury raising $80 million at a $1 billion valuation.

Bitfury’s investors include European venture capital fund Korelya Capital, South Korean internet giant Naver Group, Asian institutions Macquarie Capital and Dentsu Japan as well as Michael Novogratz’s crypto investment company Galaxy Digital.

British news agency The Telegraph originally reported on Bitfury’s potential IPO plans on Oct. 10, citing anonymous sources claiming that Bitfury tapped Big Four accounting firm Deloitte to review its readiness for going public. The publication noted that Bitfury operates its main headquarters in the Netherlands but it is legally based in the United Kingdom. Bitfury did not immediately comment on its legal headquarters to Cointelegraph.

Founded back in 2011, Bitfury is a major company in the industry, operating a wide number of services like crypto mining hardware design, software, semiconductor chips’ manufacturing as well as running mobile data centers. The company’s United States-based Bitcoin mining subsidiary, Cipher Mining, was valued at over $2 billion as of March 2021.

Related: Bitcoin miner Stronghold will list almost 6M shares in its $100M IPO

Apart from focusing on cryptocurrency mining, Bitfury has been actively working on cryptocurrency security, blockchain research and compliance, running platforms like Crystal Blockchain, LiquidStack and the most recent spin-off Axelera AI. The firm is also a software provider for some global applications through its Exonum private blockchain framework, which was trialed for Russia’s blockchain-based voting system in 2020

Grayscale Confirms Plan to Convert GBTC Into Bitcoin ETF

Interactive Brokers launches crypto trading in US for four tokens

U.S.-based financial advisers with Interactive Brokers are now able to recommend cryptocurrency investments to their clients.

Brokerage firm Interactive Brokers Group is allowing investment advisers registered with the company to trade four cryptocurrencies.

In an Oct. 18 announcement, Interactive Brokers said its Registered Investment Advisers would be able to trade and custody Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin (LTC) for clients using Paxos Trust Company. The firm reported this service was currently only available for its advisers in the United States, but planned to launch crypto trading for global clients in the future.

“Allocating a small percentage of assets to cryptocurrency as part of a well-diversified portfolio has steadily become more commonplace, and advisors may wish to recommend cryptocurrency to their clients,” said Interactive Brokers executive vice president of marketing and product development Steve Sanders.

Related: Powers On... Broker disintermediation and unregulated crypto exchanges cause major concerns

With headquarters in the United States, Interactive Brokers falls under the purview of regulators including the Securities and Exchange Commission and the Financial Industry Regulatory Authority. As of Oct. 1, the firm reported 1.54 million client accounts with $353.8 billion in equity.

Grayscale Confirms Plan to Convert GBTC Into Bitcoin ETF

Ankr Network, Stacks and Kadena rally while most altcoins cool off

ANK, STX and KDA took a different path than most altcoins by posting double-digit gains over the past 24-hours.

Even with Bitcoin price on the verge of a new all-time high, the cryptocurrency market projects an aura of anxious optimism on Oct. 18 as investors await the official launch of the first Bitcoin (BTC) exchange-traded fund (ETF) which is set to begin trading on Oct. 19

While the market waits for the historic ETF launch, BTC bulls are battling to hold the $62,000 level as support. Meanwhile, a handful of altcoins posted double-digit rallies on Monday as traders possibly look to capitalize on the gains they provide when Bitcoin price consolidates.

Top 7 coins with the highest 24-hour price change. Source: Cointelegraph Markets Pro

Data from Cointelegraph Markets Pro and TradingView shows that the biggest gainers over the past 24-hours were Ankr Network (ANKR), Stacks (STX) and Kadena (KDA).

Ankr Network partners with the Sacramento Kings

Ankr Network's blockchain solution is designed to use idle computing power from devices and data centers from around the world to help power the crypto ecosystem.

VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for ANKR on Oct. 17, prior to the recent price rise.

The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historical and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.

VORTECS™ Score (green) vs. ANKR price. Source: Cointelegraph Markets Pro

As seen in the chart above, the VORTECS™ Score for ANKR began to pick up on Oct. 17 and climbed to a high of 70 around four hours before the price spiked 46% over the next day.

The jump in price for ANKR comes following the project’s multi-year sponsorship deal with the National Basketball Association’s (NBA) Sacramento Kings.

Stacks advances toward launching smart contracts on Bitcoin

Stacks is a layer-one blockchain solution focused on bringing smart contracts and decentralized applications to the Bitcoin network.

VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for STX on Oct. 11, prior to the recent price rise.

VORTECS™ Score (green) vs. STX price. Source: Cointelegraph Markets Pro

As seen in the chart above, the VORTECS™ Score for STX began to pick up on Oct.11 and reached a high of 88, around five hours before the price began to increase by 55% over the next week.

The rise in prominence for STX comes as the possible launch of multiple BTC ETFs has excited the wider investment community about the possibility of smart contract capabilities on the Bitcoin network.

Related: Grayscale confirms Bitcoin ETF plans and adds exposure to Zcash, Stellar Lumens and Horizen to its trusts

Kadena adds NFT capabilities

Kadena price also took a bullish turn over the last 24 hours.

Data from Cointelegraph Markets Pro and TradingView shows that after hitting a low of $2.14 on Oct. 16, the price of KDA has rallied 30% to a daily high at $2.79 on Oct. 18 as its 24-hour trading volume spiked 313% to $9.4 million.

KDA/USDT 4-hour chart. Source: TradingView

The increase in momentum for KDA comes following the protocol's partnership with Immutable Records which will bring a fully-built NFT marketplace to the Kadena ecosystem.

The overall cryptocurrency market cap now stands at $2.462 trillion and Bitcoin’s dominance rate is 47.2%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Grayscale Confirms Plan to Convert GBTC Into Bitcoin ETF

NYAG directs 2 crypto firms to shut down, investigates 3 others

The regulator "will not hesitate to take whatever actions are necessary against any company that thinks they are above the law," said Letitia James.

The New York Attorney General’s office has alleged two unnamed crypto lending platforms operating in the state have engaged in unlawful activities and ordered three others to provide information on their businesses.

In a Monday announcement, the New York Attorney General’s office said it has ordered two crypto lending platforms — at the time of publication, the names were still redacted — to “cease any and all such activity” relating to selling or offering securities and commodities within ten days. Attorney General Letitia James also requested that three crypto businesses operating in New York — names redacted — provide details on their lending products, policies, procedures, clients in the state and other relevant information.

“My office is responsible for ensuring industry players do not take advantage of unsuspecting investors,” said James. “We’ve already taken action against a number of crypto platforms and coins that engaged in fraud or that illegally operated in New York. Today’s actions build on that work and send a message that we will not hesitate to take whatever actions are necessary against any company that thinks they are above the law.”

The request for information from the three companies was not legally binding, but the NYAG's office left the door open to serving a subpoena in the letter. The order to shut down operations is backed by the state’s Martin Act, which grants the AG the enforcement power to bring civil or criminal charges against unregistered securities offerings.

James’ messages to the five crypto lending platforms come following the agreement of Bitfinex and Tether to pay $18.5 million in damages as part of a settlement with the NYAG office. The Attorney General later issued a warning to firms operating in the crypto industry: “Play by the rules or we will shut you down.”

Under current New York state law, all crypto brokers, dealers, salespersons and investment advisers must register with the NYAG’s Investor Protection Bureau if they are doing business in the state. Those without an exemption who fail to do so will be subject to civil and criminal penalties.

Related: ​​NY attorney general warns investors and crypto firms of 'extreme risks'

In September, the New York Attorney General’s office ordered crypto investment platform Coinseed to close its doors after allegedly defrauding investors out of more than $1 million and selling an unlisted token. Coinseed has been told to permanently halt its operations and pay $3 million in fines.

Grayscale Confirms Plan to Convert GBTC Into Bitcoin ETF

Institutional managers hold a record $72.3B of crypto — CoinShares

Bitcoin and the broader cryptocurrency market are bullish again; institutional investors have increased their allocation accordingly.

Institutional inflows into cryptocurrency products rose last week, as investment managers increased their exposure to Bitcoin (BTC) and leading altcoins, according to the latest CoinShares report. 

Total assets held by institutional managers reached $72.3 billion for the week ending Oct. 17, the highest level on record. By comparison, institutional crypto holdings were worth $57 billion in March and reached $71.6 billion in May.

For the latest week, digital asset investment products saw inflows totaling $80 million. Bitcoin products attracted the largest investments at $70 million, marking the fifth consecutive week of inflows. Institutional investors also increased their holdings of Polkadot (DOT) and Cardano (ADA) products by $3.6 million and $2.7 million, respectively. Meanwhile, Ether (ETH) products saw minor outflows totaling $1 million.

In terms of provider, ETC Group and 21Shares saw the largest weekly inflows at $63.6 million and $19.3 million, respectively. Inflows into Grayscale products, which represent the largest crypto-focused funds, flat-lined.

Bitcoin is coming off its highest weekly close on record, as the spot price came within striking distance of $63,000 on Friday. The largest cryptocurrency by market capitalization is rising in anticipation of two futures-based ETFs hitting the market in the near future. The ProShares Bitcoin Strategy ETF is scheduled to begin trading on the New York Stock Exchange on Tuesday.

Related: Grayscale hints at plans to convert Bitcoin trust into BTC-settled ETF

A Bitcoin ETF listing in the United States could attract new investors to the cryptocurrency market by giving them a familiar and highly regulated vehicle in which to park their assets. ProShares CEO Michael Sapir said Monday that investors have been “eagerly awaiting the launch” of a Bitcoin-focused ETF. 

Pent-up demand among traditional investors was reflected in the recently launched Canadian Bitcoin ETFs, which attracted billions of inflows shortly after launching. The Purpose Bitcoin ETF, which launched in February, now has $1.7 billion in assets under management, according to Bybt data.

Grayscale Confirms Plan to Convert GBTC Into Bitcoin ETF

Law Decoded: Best regulation is self-regulation, Oct. 11–18

As the crypto space gets all worked up by the impending launch of Bitcoin exchange-traded funds, the captains of the industry take it upon themselves to offer sketch the designs of future regulatory regimes.

Between fever-pitch anticipation over the impending approval of a Bitcoin exchange-traded fund, the CFTC’s $42-million-plus settlement with Tether and Bitfinex, and Vladimir Putin brooding over cryptocurrency’s capacity to transfer value, this past week has been saturated with major policy news. While all the above are the instances of the state figures and institutions’ top-down actions and statements on digital assets, an arguably even more interesting tide has emerged on the side of the crypto industry itself.

Two major players of the digital space, Coinbase and a16z (Andreessen Horowitz), came forward with proposed visions for regulating internet-native economic activity

Below is the concise version of this newsletter. For the full breakdown of policy developments over the last week, register for the full newsletter below.

Regulatory push from the bottom up

The broad proposal put forth by a16z presents a vision of Web 3.0 as an array of technologies to organize human activities that are fundamentally decentralized. Its policy agenda emphasizes the need for regulators to ensure an environment where the digital infrastructure supporting Web 3.0 could flourish and where risks are addressed in a targeted fashion. 

Coinbase’s framework is more narrowly focused on the realm of digital finance. Consonant with a16z’s vision, it argues in favor of designating a separate agency (presumably, not the SEC) to oversee the activities of what the framers call marketplaces for digital assets, or MDAs.

ETF excitement

A huge part of the crypto crowd seemed on the verge of breaking into tears of joy over multiple signals suggesting that the SEC would not get in the way of a Bitcoin ETF. SEC Chair Gary Gensler has previously spoken favorably of the level of investor protection granted by those Bitcoin ETFs that are based on BTC futures rather than the “physical” asset.

Gensler’s sentiment provided a background against which subtle cues like Nasdaq’s certification of Valkyrie’s Bitcoin Strategy ETF and a suspiciously well-timed SEC Investor Ed tweet made the approval look all but a done 

CBDCs never sleep

Another week, another crop of reports of central bank digital currency advancement from nearly every time zone. In the United Kingdom, an independent nonprofit called the Digital Pound Foundation will support the nation’s CBDC effort with expert insight. Over in Japan, a central bank official emphasized the need for the simplicity of the prospective digital yen’s design that would ensure interoperability with commercial payment systems. Finally, the financial brass of the G7 discussed foundational policies around digital national currencies, suggesting that there is enough cross-border coordination to make the major sovereign CBDCs of the future fully interoperable.

Grayscale Confirms Plan to Convert GBTC Into Bitcoin ETF

Grayscale confirms Bitcoin ETF plans and adds exposure to Zcash, Stellar Lumens and Horizen to its trusts

Grayscale said it would proceed "once there’s official and verifiable evidence of the SEC’s comfort with the underlying Bitcoin market."

Institutional asset manager Grayscale has announced it will be converting its GBTC Trust into an exchange-traded fund (ETF) once the United States Securities and Exchange Commission (SEC) has “comfort” with recently-approved Bitcoin futures ETFs.

In a Monday Twitter thread, Grayscale communications director Jennifer Rosenthal said the asset manager would proceed with offering an ETF when “the SEC has formally expressed their requisite comfort with the underlying Bitcoin market.” The offering would convert the asset manager’s Grayscale Bitcoin Trust (GBTC), first listed in 2013, into an ETF.

“Once there’s official and verifiable evidence of the SEC’s comfort with the underlying Bitcoin market — likely in the form of a Bitcoin Futures ETF being deemed effective — the NYSE Arca will file a document called the 19b-4 to convert $GBTC into an ETF,” said Rosenthal.

The announcement follows ProShares announcement that its Bitcoin (BTC) futures-linked ETF will begin trading on the New York Stock Exchange under the ticker BITO starting Oct. 19. Filings with the SEC show the regulator has also accepted the registration request for shares of Valkyrie’s Bitcoin Strategy ETF to be listed on the Nasdaq and may accept others in the near future — the SEC currently has several crypto ETF applications under review.

Related: Grayscale adds SOL and UNI to Digital Large Cap Fund portfolio

Grayscale also added three cryptocurrencies available for trading through its suite of crypto investment trust products. The firm said its Grayscale Zcash Trust, Grayscale Stellar Lumens Trust and Grayscale Horizen Trust were now listed on the OTCQX Best Market under the ticker symbols ZCSH, GXLM and HZEN, respectively.

According to Grayscale, the three trusts are not subject to registration and disclosure requirements from the SEC. The vehicles provide a way for investors to gain exposure to the tokens without directly investing in them. Grayscale offers six other crypto investment products with exposure to Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), Ethereum Classic (ETC) and Litecoin (LTC), in addition to a basket of cryptocurrencies through its Digital Large Cap Fund.

Grayscale Confirms Plan to Convert GBTC Into Bitcoin ETF