Thursday, December 31, 2020


 From Zero Hedge:

Centralized identity systems are fragmented, insecure, and restrictive. The emergence of blockchain technology holds the promise of a more secure, accessible, interoperable, and ultimately self-sovereign future, where everyone gets to own their personal information and control how it is used. At least that’s the dream sold by blockchain evangelists. But how does the reality of blockchain digital identity stack up?

What Is On-Chain Digital Identity?

A digital identity is a record derived from the use of personal information and actions taken online. It can include pseudonymous information, like an IP address, but also real-world data such as name, date of birth, medical history, and search activity. It is the combination of these biographic, biometric, and behavioral data points that make up a digital identity.

Blockchain technology provides a decentralized solution for storing and managing this digital identity, where data is not stored in a single database. Blockchain-based digital identity solutions can encrypt the data and record it in different volumes on-chain, securing the information in a verifiable, interoperable, and accessible format when required while protecting privacy and securing against hacks and unauthorized access.

Users and organizations can then present digitally signed claims related to them (such as a driving license, fingerprint, or qualification), which have been signed by identity issuers. The verification process of the signed claims is automatic and with no intermediary required.

Why Blockchain Digital Identity Is a Big Deal

Managing digital identities on a blockchain could eradicate issues with existing centralized solutions, including insecurity, inaccessibility, and lack of transparency.

Currently, most of our valuable data is stored on centralized government or business databases. They use legacy software and introduce single points of failure. Personally identifiable information stored on these systems is very attractive to hackers, comprising 97% of all breaches at an estimated cost of $654 billion in 2018. Storing and transmitting encrypted information across a tamper-proof decentralized blockchain removes this risk.

Over one billion people have no proof of identity, and nearly three billion are unbanked. Lack of an identity prohibits access to education, work, travel, government services, and the existing financial system. This legacy system involves inconvenient and complex processes and expense, with a lack of knowledge on how to navigate it keeping people locked out. However, as over 60% of these unbanked already own mobile phones, blockchain-based mobile identity solutions can open up access to a new, simpler system that can better suit their needs.

The fragmented and non-standardized way in which digital identities are currently managed is weak, making it easier to create fake identities and increasing the levels of fraud. With sophisticated smartphones and advances in cryptography and blockchain technology, we now have the tools to build decentralized identity management systems that standardize the process and make it much harder to manipulate.

On-Chain Identity in Action

One project developing such a solution is Concordium. Concordium is a privacy-centric, public, and permissionless proof-of-stake blockchain built for business. Digital identity is core to the Concordium network, with identity management built-in at the protocol level and interoperability with other blockchains helping to develop a standardized solution. It also comprises an ID app for iOS and Android, allowing users to import files, move identities and accounts to other devices, and restore backups, opening up accessibility for participants.

Concordium offers a workable solution by providing transactional privacy for users, along with a mechanism that allows for accountability to local regulations. 

Concordium’s self-sovereign identity layer contrasts with other blockchains by using zero-knowledge proof cryptography to allow its users to transact and share information in a completely private and anonymous way. Concordium accounts can therefore be tied to zero-knowledge-proof identities, confirming they are verified. Blockchain observers cannot use that identity to link to a specific entity, as it remains encrypted. This means that transactions are processed without exposing the identity of the sender or receiver, and the sender and receiver will also be the only parties that can see the actual details of a transaction.

On the other hand, where a suspicious transaction or set of transactions have been detected, the real-world identity of the user can be revealed to qualified authorities with the help of anonymity revokers and identity issuers in a decentralized process. This provides a hybrid solution to empower compliance with jurisdictional legislation, regulations, and auditor requirements. 

What Blockchain Means for Digital Business Models

Decentralized, blockchain-based digital identity is maturing fast, with solutions like Concordium’s ID app allowing users to obtain and control verified digital identities from regulated identity issuers.

This will have a big impact on business models in terms of data monetization, data portability, and economic inclusion, as we set out on the road towards the ultimate goal of self-sovereign identity.

As the world begins to realize the benefits of digital identity on a blockchain, attitudes regarding who owns and should profit from user-generated data are likely to change. This has particular ramifications for user content-based services like social media platforms, and behavioral analytics-hungry advertisers, but also any other organization that needs the data. It provides individuals with control over a future data monetization model that is user rather than business-centric.

The enabling of frictionless data portability will also have a profound effect on how services are set up. Regulators are keen to push the right of portability, where technically feasible, so users do not have to re-verify identity across multiple platforms, reducing security risks. However, current solutions either create walled gardens that make this inefficient or rely on a few large tech giants like Facebook and Google to manage it. 

This was a point made by German Chancellor Angel Merkel in talks with businesses including Deutsche Telekom, BMW, and Lufthansa about making digital identity a top priority, alongside EU initiatives like the European Blockchain Services Infrastructure (EBSI) helping to implement self-sovereign identity and trusted data sharing. 

With decentralized identifiers (DIDs), secured by private key cryptography, containing the verifiable claims, it is possible to migrate identities between systems without friction. It simplifies onboarding and access processes for users, providing a standardized means of verifying credentials without manual inefficiencies or relying on centralized points of failure.

Digital identities are expected to contribute considerably to economic growth in the coming decade, benefiting individuals and opening up access to the global market. The value of digital identities is estimated to expand by 22% per annum, with economic benefits of over €300 billion for European organizations alone, and double that for consumers. Decentralized digital identity models will allow users to unlock this value and help grow the global economy.

The Ultimate Goal: Self-Sovereign Identities

The issues surrounding traditional digital identity systems make life harder for both users and organizations. By taking a blockchain-based decentralized approach, thanks to projects like Concordium, we move closer to the ultimate goal of self-sovereign identity.

It represents a major breakthrough, giving users back full control over all their personal information. Companies will have limited access to verifiable claims, and the system does not rely on a central authority to work. The impact of this will extend far beyond our current imagination, encompassing new use cases and industries as digital identity becomes an integral part of the lives of billions.

Wednesday, December 30, 2020

"A Fantastically Unusual Thing Happened": For The First Time Ever, IB Clients Are Net Short The Market

From Zero Hedge:

Yesterday morning, SocGen's Albert Edwards asked when referring to a recent MarketWatch article, if he was “the last bear left in the markets” adding that "surely I am not now all alone, howling to myself on the icy Christmas tundra?!"

Our response to Edwards - that he may well in fact be the last bear standing -  was to show a recent Goldman chart we published at the start of the month, which demonstrated the record drop in S&P short interest "as any remaining bears have been ritualistically slaughtered in the last few months", something we first discussed last month in "Hedge Funds Go "All-In" As Bears Go Extinct: Shorts Drop To Record Lows."

Not that the extinction of bears is in itself bearish: quite the contrary - as JPMorgan explained (see "Crowded Trades And Euphoric Consensus Are The Biggest Threats For Markets"), it is one of the oldest contrarian signals in the "book", although to be fair there has never before been a book when the Fed would step in any time there is even a modest market correction to bail out 12-year-old trading veterans and various straight to CNBC money managers whose only "strategy" is to buy and hold everything, confident the Fed will always bail them out.

So in the context of this unprecedented bullish euphoria which has now surpassed the mania of the dot com bubble, there has been yet another unprecedented response by market professionals whose returns this year have been crushed by teenagers...

... and various other new market entrants to whom Powell and his money firehose now directly caters.

On Tuesday, Interactive Brokers chairman Thomas Peterffy appeared on CNBC to discuss the "explosion" in options trading, largely driven by retail investors...

... who have been snapping up record amount of out of the money calls on names like Tesla, and the FAAMGs, in the process creating a positive gamma feedback loops, and sending the price of stocks higher, leading to even more OTM call purchases and so on.

What Peterffy said was remarkable: "A fantastically unusual thing happened among our customers about a week ago" the Hungarian head of Interactive Brokers said.

"Our customers are traditionally long the market. A week ago it has changed: our customers tend to be on the selling side of options and there is such demand for out of the money options that our customers became sellers so they overwrite their long position in stocks, and it's usually about Tesla, Amazon and Apple - that's where most of the action seems to be."

"So the Robinhood folks are long these options, and IB customers are short these options. It's a very interesting situation, it has never happened in our history that our customers as a whole were net short the market. But as of yesterday. that is the case."

In short, we are now witnessing a historic clash where the relentlessly euphoric Robinhood bullwagon has forced an entire brokerage catering to high net worth individuals and professionals - Interactive Brokers - to turn net short, in revulsion to the idiocy unleashed by the Fed and teenager traders.

Unfortunately, whereas any other time the outcome of this clash of generations and wealth buckets would have been all too obvious, the fact that the Fed now explicitly caters to idiots, CNBC talking heads and clueless BTFDers, means that it is completely unclear who the winner of this clash will be. To be sure, judging by the 14x outperformance of retail traders vs hedge funds, one can argue that the Robinhood juggernaut can continue indefinitely until such time as the Fed realizes the catastrophic consequences of what it has unleashed... which may well be never.

Peterffy's full interview is below.

All Major Western Media Outlets Take "Private Dinners", "Sponsored Trips" From Chinese Communist Propaganda Front

 By Natalie Winters of The National Pulse

A host of corporate media outlets including CNN, The New York Times, The Washington Post, and MSNBC have participated in private dinners and sponsored trips with the China-United States Exchange Foundation, a Chinese Communist Party-funded group seeking to garner “favorable coverage” and “disseminate positive messages” regarding China, The National Pulse can reveal.

Other outlets involved in the propaganda operation include Forbes, the Financial Times, Newsweek, Bloomberg, Reuters, ABC News, the Economist, the Wall Street Journal, AFP, TIME magazine, LA Times, The Hill, BBC, and The Atlantic.

The relationship is revealed in the Department of Justice’s Foreign Agent Registration Act (FARA) filings, which reveal a relationship spanning over a decade between establishment media outlets and the China–United States Exchange Foundation (CUSEF).

‘Neutralize Opposition.’

CUSEF is a Chinese Communist Party-funded initiative founded by Tung Chee Hwa. The group also targets American universities with offers to fund policy research, high-level dialogues, and exchange programs.

Tung also serves as Vice-Chairman of the Chinese People’s Political Consultative Conference (CPPCC), identified by the U.S.-China Security and Economic Review Commission as a key component of the Chinese Communist Party’s United Work Front.

The effort, according to the U.S. government report, aims to “to co-opt and neutralize sources of potential opposition to the policies and authority of its ruling Chinese Communist Party.”

“The United Front strategy uses a range of methods to influence overseas Chinese communities, foreign governments, and other actors to take actions or adopt positions supportive of Beijing’s preferred policies,” it continues.

This strategy appears to have been deployed in conjunction with outlets such as CNN, New York Times, and the Washington Post.

Targeting Reporters, Journalism Students.

A 2011 FARA filing highlighted by Axios detailed CUSEF’s agreement with American lobbying firm BLJ. It outlines how CUSEF set out to “effectively disseminate positive messages to the media, key influencers and opinion leaders, and the general public” regarding China.

To do so, CUSEF targeted working journalists and journalist students:

In order to develop favorable coverage in key national media, BLJ will continue to organize and staff “familiarization trips” to China. This includes recruiting top journalists to travel to China, selected for effectiveness and opportunities for favorable coverage.

In 2009 alone, CUSEF generated 28 media placements as a result of its four journalist visits and BLJ secured “the publication of 26 opinion articles and quotes within 103 separate articles” on behalf of CUSEF.

Outlets included Newsweek, the National Journal, the Nation, Congressional Quarterly, U.S. News, World Report, The Chicago Tribune, and the Washington Note.

“BLJ directly contributed to or influenced” an average of three articles “per week.”


While universities, including the University of Texas at Austin, have divested from CUSEF in light of its Chinese Communist Party ties, the same cannot be said for dozens of Western media outlets.

FARA filings from CUSEF’s American lobbying firm BLJ reveal American media organization participating in “private dinners at BLJ’s CEO’s home on behalf of CUSEF,” trips to China, and meetings with CUSEF officials.

A filing dated January 1st, 2012, show outlets including The New York Times, The Wall Street Journal, Reuters, CNN, and more participating in “private dinners” at the home of CUSEF’s American lobbying firm’s CEO.

The same filing reveals that outlets including National Public Radio (NPR), The Atlantic, MSNBC, and Reuters had journalists visit China to meet with CUSEF officials.

Since then, filings continue to reveal a host of Western outlets attending private dinners and visiting China. Most outlets are included more than once.

In 2013, The Washington Post joined a China-bound journalism delegation, in 2014 Harvard Business Review also joined a delegation, and in 2015, the Los Angeles Times and The Huffington Post also visited the communist country.

A 2014 filing reveals that lobbying firm BLJ “arranged private dinners in New York and Washington DC on behalf of CUSEF” with over 20 attendees including The New York Times, The Washington Post, Reuters, Associated Press, BBC, and more:

Images in CUSEF brochures shed light on the entities visited by journalists.

Between 2011 and 2013 images reveal journalist touring Huawei – a telecommunications firm labeled a “national security threat” and military collaborator by the U.S. government – along with Chinese military bases:


Following the ongoing pressure campaigns, CUSEF has escaped significant criticism in the corporate press. There have only been a few mentions in broader pieces concerning Chinese Communist Party influence operations on American college campuses.

Such behavior from news outlets implies a conflict of interest, or worse: that the ostensible news outlets have been bought off.

Even when CUSEF is criticized, such as in The Washington Post article “China’s reach into U.S. campuses,” CUSEF’s Executive Director Alan Wong was offered a rebuttal: something that even Americans on the political right fail to obtain from outlets such as the Post.

Vox, another outlet participating in CUSEF’s journalism trips, prefaced an article on President Trump and North Korea by noting author Yochi Dreazen “wrote it while on a trip to China sponsored by the China-United States Exchange Foundation (CUSEF)”:

The author of this article wrote it while on a trip to China sponsored by the China-United States Exchange Foundation (CUSEF), a privately funded nonprofit organization based in Hong Kong that is dedicated to “facilitating open and constructive exchange among policy-makers, business leaders, academics, think-tanks, cultural figures, and educators from the United States and China.”’s reporting, as always, is independent.

The article, which featured quotes from Chinese Communist Party officials, appeared to regurgitate the party line, noting “Beijing won big.”

As Foreign Policy magazine noted, to its credit, CUSEF is scarcely a privately funded non profit but rather is “a registered foreign agent bankrolled by a high-ranking Chinese government official with close ties to a sprawling Chinese Communist Party apparatus that handles influence operations abroad.”

Thursday, December 24, 2020

Peak Hype: Timing Cryptocurrency Tops with Social Media Data


Over the past few years, a growing number of Wall Street and cryptocurrency analysts have started to rely on a relatively underutilized source of information to try and beat their respective markets with: social media.

For obvious reasons, social media is seen as a potential treasure trove of market sentiment information, and the macro analysis of forum messages, twitter comments and other social data to gain an edge has quickly been embraced by veteran quants. However, the ability of this data to actually and accurately predict price trends and develop new market alpha is still hotly contested by many crypto traders.

Hopefully, our latest study might finally put an end to this debate.

Trading Crypto with Social Media Data

At Santiment, we gather a massive amount of information from social media to try and determine its impact on the crypto market. As you read this, our system is collecting all incoming messages from over 1000 crypto-specific social media channels, including hundreds of Telegram groups, crypto subreddits, vetted twitter accounts, professional trader chats not indexed by Google and more.

We’ve already developed various market indicators using this dataset, like our ‘Social Volume’ metric which shows the amount of coin-specific mentions on crypto social media over time:

The amount of ‘Bitcoin’-related mentions on crypto social media over the past year (Source: Sanbase)

Though the initial results looked promising, in the early days of building our social dataset we too weren’t really sure whether this tool will end up producing any actionable insights about the crypto market, or mostly prove to be trivial intelligence or useless noise.

We quickly found out it was going to be the former.

Timing Price Tops by ‘Peak Hype’

The first real clues about the usefulness of social media data came when we created Emerging Trends, a handy list of the top 10 words with the highest growth ih crypto-related social mentions, which automatically updates every hour.

Every hour, our Emerging Trends list calculates the top 10 words gaining the most steam on crypto social media

The initial goal of this tool was to build an easy way to discover fresh and quickly developing topics in the crypto community before they hit the ‘mainstream’, and many of our customers still primarily use it in this way.

However, we quickly discovered that this tool also had a nifty side effect. Whenever a particular coin’s name would appear in the top 3 positions on the list, it usually meant two things:

  1. 1. The coin is experiencing a strong price rally. This, of course, made sense - even in 2020, outside of Bitcoin and Ethereum most cryptocurrencies only ever attract serious attention from the general crypto community during a pump.

  2. 2. A price correction was imminent. Think of this as ‘peak hype’ - the bigger the spike in a coin’s social mentions, the more likely everyone interested in the project has ‘bought in’ already, leaving mostly sell pressure.

This second point was a big deal. If we could prove this to be true beyond anecdotal evidence, it would turn our Emerging Trends tool from a nifty ‘market overview’ tool to an entirely new leading price indicator for cryptocurrencies.

So after more than a year of data gathering - and some nicely executed trades based on this information by the Santiment team and community members - we recently put this theory to a proper test.

The Social Backtest

To stress-test the theory that a high placement on our Emerging Trends list indicated a looming correction, we used a so-called ‘event study’ which analyzes the coin price a set amount of days before and after a certain signal fires, and then averages this price information for all observed signals.

Our signal ‘trigger’ was simple - any time that a coin’s name appears in the top 3 words on our Emerging Trends list.

Recently, the price of TFUEL dropped by -35.87% in the 6 days after showing up on our Emerging Trends list

(One important caveat - the top 5 cryptocurrencies were excluded from this study. Unlike with mid and low-cap coins, the spikes in the mentions of Bitcoin or Ethereum aren’t always purely pump related. They also happen around major project announcements and often near local bottoms as well. The impact of social data on top cryptocurrencies will be the subject of a future study.)

So far, there have been 198 instances that satisfied our selected criteria - a coin’s name appearing in the top 3 positions on our Emerging Trends. So we analyzed the average coin price for these 198 signals - from the 2 weeks before to the 2 weeks after these coins claimed a top 3 position on our Emerging Trends list:

As you can see, there is a sharp increase in the price of these coins before the signal triggers. This further gives legs to our theory that price pumps are in fact the biggest reason why all of these coins suddenly get talked about a whole lot more than usual.

The 0 point on the X axis marks the average price of the analyzed coins on the day that the signal triggers. The most important part of the backtest is what happens afterwards:

Within the next 12 days after a coin claims a top 3 position on our list of Emerging Trends, its price drops by an average of 8.2 percent!

Again - this is on a sample size of almost 200 observed signals.

Now, an experienced analyst would also ask about the behavior of the market itself. Afterall, the market might have been going down anyway, which would’ve contributed to a decline in the prices of these coins.

For this reason, an event study also looks at the market itself and tries to nullify its impact by removing a calculated beta.

What does that mean? The below graph shows the results of our backtest alongside the average price behavior of Bitcoin, used here as a proxy for the crypto market:

With this information, we can now go back and calculate a ‘beta’, or a measure of how much each of our analyzed assets typically reacted to the market. Then, we can use this to remove the market’s impact on their price performance.

With the beta calculated, here are the results of our backtest after we removed the impact of the market from the analysis (in orange):

Even though the downtrend has reduced slightly after the signal triggers, the general behavior remained very much the same. With the overall market impact removed, the analyzed coins lost an average of 6% in the 12 days after appearing on our list of Emerging Trends.

Automated vs Human Signals

The initial results of our event study demonstrate the massive potential of social media information as a leading sell indicator in cryptocurrencies. That said, placing aggregated data in proper market context is key to profitable trading in the long-term. And this is something that no amount of automation can achieve.

This is also why we at Santiment don’t only provide hard data about the crypto market, but also focus on producing daily insights and analysis to contextualize this market behavior in a way that only a human analyst can. You can read our latest market reports and analysis over on

Of course, many of our insights in the past have been inspired by different coins showing up on our list of Emerging Trends. ‘Coin go moon’ is often an interesting starting point to try and explain the fundamental factors that have enabled the rally, and to determine where the coin might go from here.

In a small portion of these insights - or whenever we identify clear trends in both the coin’s social and its on-chain data - we also give explicit SELL calls.

We recently started doing this more often, but for the purpose of this analysis, we looked at 18 insights where we explicitly called a ‘top’ based on the fact that a coin’s name appeared on our list of Emerging Trends.

Here is the price performance of the coins featured in those 18 insights, 2 weeks before and 2 weeks after we wrote about them:

Minus some ebbs and flows, the general pattern is again the same - the coins pump prior to our article(s), and begin to decline shortly afterward. This time, however, the actual size of an average downtrend is much stronger compared to automated signals: in the 12 days after we published our ‘top’ calls, the price of these coins decreased by an average of 18.1%!

The same pattern holds when we calculate the ‘beta’ to remove the impact of the market on the price of these coins:

While the sample size is considerably smaller, this further validates our belief that - in order to truly be effective - market data needs to be interpreted by experienced analysts. Information is power but only in the right hands, which is why the Santiment team and vetted community members publish unique analysis about the crypto market each and every day. Again, you can find all of our market reports and daily insights on


As laid out above, the results of our event study clearly showcase the potential of social media data as a leading sell indicator in cryptocurrencies. The second backtest also suggests that an enrichment of data through human interpretation typically yields the best results.

When used to predict downtrends, the appearance of a coin in the top 3 words on our Emerging Trends list suggests an average downtrend of 8.2% for automated signals and 18.1% for human-created signals.

In the future, we will attempt to extend this study to include the largest cryptocurrencies as well, and analyze the predictive power of other social metrics, like our ‘crowd sentiment’ indicators that we have recently introduced to Sanbase Pro.

In the meantime, you can check out Emerging Trends live on Sanbase and try its predictive power for yourself. The tool is still 100% free - for now *wink wink*