Recent House Financial Services Hearing Bashes Bitcoin, Illogical Arguments

Whenever the topic of Bitcoin regulation comes up, things often deteriorate rather quickly. That situation is no different where House Financial Services subcommittee meetings are concerned. Their most recent get-together raised a lot of questions and showed there is a massive bias toward cryptocurrencies.

The Subcommittee Hearing’s Purpose

On paper, the recent meeting of the House Financial Services subcommittee had positive intentions. The goal is to get an overview of the cryptocurrency landscape. based on that information, regulatory measures may be introduced in the future. Unfortunately, the members of this subcommittee are rather divided on cryptocurrencies altogether. It seems there is a very strong bias toward this form of money, which is not entirely surprising.

Representative Brad Sherman of California is convinced cryptocurrencies are a “crock”. He is not a fan of how people can make a lot of money from buying, selling, and trading cryptocurrencies. At the same time, most stock market traders make good money by sitting at home in their pajamas as well. It seems the bias against cryptocurrencies is mainly because it is cryptocurrency. An unregulated form of money that makes people millions is a thorn in the side of Sherman.

Airing these concerns during a subcommittee hearing is always positive, though. Everyone’s opinion matters when these groups get together. However, Sherman is not a big fan of the ICO business model either. In his opinion, ICOs are a “lie to the public” and a way to disguise unregulated IPOs. Again, this shows there is some need for regulation of sort sorts, albeit that is much easier said than done.

Regulation is Coming Eventually

Even though the bashing of Bitcoin is clearly visible, the regulatory discussions are far from over. Instead, we will see further subcommittee meetings to discuss the regulatory aspect of the “crypto craze”. Protecting investors is one of the main objects of this subcommittee. Things will move along rather slowly, though .The lack of understanding cryptocurrencies is a problem which is difficult to solve.

It seems a study on the ICO market will be published rather soon. Whether or not that study will be as biased as this subcommittee’s meeting, remains unknown. It is evident a ruleset needs to be put in place for both ICOs and the cryptocurrency at some point. What those rules will entail exactly, has yet to be determined. Once the report is published,  the subcommittee will “move in” to establish some new guidelines.

Luckily, not everyone is as biased to cryptocurrencies. Representative Tom Emmer of Minnesota is in favor of a hands-off approach, for the time being. Finding the balance between regulation and innovation is not all that easy. A mixed bag of responses from this House Financial Services subcommittee, with conflicting interests as well. All of this seems to indicate a unified regulation of cryptocurrency and ICOs is still far away.

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The markets reacted very badly to Google’s announcement that it was going to ban all cryptocurrency advertising. Over $60 billion was shed in less than 24 hours and most altcoins lost over 20% of their value. Panic selling still gripped a large number of inexperienced traders and the markets suffered as a result.  The internet giant’s decision may not be all that bad though, at least for the top cryptocurrencies.

It is pretty obvious why central banks and governments want to control and regulate cryptocurrencies. But when advertising driven internet monopolies decide to crack down on them one has to question their motives. Google’s announcement comes a couple of months after Facebook decided to axe all ICO advertising. A bizarre move as the social network still allows rogue accounts to disseminate crypto spam, scams and clickbait among countless crypto groups which are full of this dross.

Top Cryptos Will Benefit

According to Forbes the top cryptos such as Bitcoin, Ethereum, Ripple and Litecoin are so well known that they don’t need advertising. Craig Cole from CryptoMaps told the news outlet;

“While this isn’t the best news, it could be a good thing for cryptocurrency. The ban will help solidify the market and weed out scam coins and illegitimate actors looking to get rich quick, providing stability. This ban doesn’t mean that cryptocurrency is going away. I believe it will ultimately strengthen it.”

With all of the scams and ‘shitcoins’ being weeded out, the overall supply of genuine good tokens will be limited which should have a positive effect on their prices. According to Coinmarketcap there are currently over 1560 cryptocurrencies, and these are just the ones that the website lists.

Crypto Media Booming

The surge in interest in cryptocurrencies has spawned a new online media sector with crypto news websites sprouting up quicker than new coins are. The more professional of these players are likely to be the ones to benefit from the web monopolies banning ads. That revenue will be channeled into smaller outfits and startups more deserving of it than likes of all consuming portals such as Facebook and Google. This will create a more diverse online ecosystem of crypto news and information for investors and traders.

Crypto warlord John McAfee remained positive about long term investments when replying to a message of concern, but was not too confident for those investing or trading in the short term.

Google’s ban is not set to start for another four months, and that is a long time in crypto land. Cryptocurrencies still need time to gain acceptance from users, and build defenses from cyber criminals, mainstream media FUD, internet monopolies, repressive governments, and billionaire bankers.

When crypto markets plunge towards another monthly low some assets will fare better than others. As usual big daddy Bitcoin has led the way and when it shed 14% over night the outlook for all others appeared grimmer. Ethereum has fared badly this time falling harder and faster than usual.

Ethereum, which usually fares well during major downturns, has taken a particularly painful slide over the past couple of days. This could well be a result of the ICO and crypto advertising bans by internet monopolies Facebook and Google. ETH has also become the second cryptocurrency of choice for trading altcoins after Bitcoin so when panic selling on altcoins overwhelms the markets, Ethereum will suffer.

Ethereum ICO Boost Slows

Ethereum has been the platform of choice for the majority of ICOs over the past year. When they are heavily regulated Ethereum takes a beating, likewise if avenues of advertising are closed off to startups looking for exposure for their blockchain projects. ICOs have come under heavy scrutiny from regulators across the globe, principally due to their methods of raising capital.

In order to protect citizens from scams and fraudulent practices governments have put the kibosh on unfettered ICO promotion and marketing. Social media and web giants have followed suit though their motives remain questionable.

Google for instance, up until very recently, still permitted rogue ads linking to mining malware and phishing websites to run on its platform yet wants to ban all crypto advertising later this year. Facebook still allows deceitful member accounts to disseminate clickbait and scams yet banned ICO advertising a couple of months ago. It has also been speculated that Twitter, another social platform allowing fake accounts, could be the next to ban crypto advertising.

ETH Heading for Three Month Low

ETH has reached its lowest point since early December when a huge rally sent it from around $475 to $700 in a matter of days. Currently trading at just under $585 Ethereum has hemorrhaged 16% in the past 24 hours, over the week ETH has lost over 20%, and over a month it is down 37%.

Ethereum has broken several major support levels and continues to slide at the time of writing. If the rout continues it could well head back to late November levels around $450. Looking at the brighter side, in March 2017 Ethereum was less than $40, however if it gets anywhere near that again a lot of investors will have lost a lot of money over the past 12 months.

According to Google’s annual “trust and safety” ads report, the company will crack down on cryptocurrency-related advertising in the coming months. This move comes after Facebook announced its decision to ban cryptocurrency-related ads in January of this year. In a blog post, the internet giant said that many companies advertising binary options, cryptocurrencies, and ICOs were “not currently operating in good faith.” 

A section on Google’s website related to advertising policies and financial services specified that the search giant’s ban would cover ads for “Cryptocurrencies and related content (including but not limited to initial coin offerings, cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice).” Other industries up for scrutiny include rolling spot forex and financial spread betting.

Google’s decision means that even companies with legitimate cryptocurrency offerings won’t be allowed to serve ads through any of the company’s ad products, which place advertising on its own sites as well as third-party websites. Google said it took down more than 3.2 billion ads in 2017 that violated its policies, which is nearly double the 1.7 billion it removed the year before.

Convincing advertisers that the company’s ecosystem is safe and effective is critically important — Google parent company Alphabet makes roughly 84% of its total revenue from advertising. This update will go into effect in June 2018, according to a company post.

“We don’t have a crystal ball to know where the future is going to go with cryptocurrencies, but we’ve seen enough consumer harm or potential for consumer harm that it’s an area that we want to approach with extreme caution,” Google’s director of sustainable ads, Scott Spencer, told CNBC.

Jack Dorsey

These moves by Google and Facebook to ban ads for cryptocurrencies and related tech may put Twitter Chief Executive Officer Jack Dorsey in the hot seat. The founder of the social network is likely to find himself under pressure to follow the two companies and crack down on misleading ads for potentially risky products and services found on his platform

That said, there’s a bit of a problem: Dorsey has reason to resist because he is not only the CEO of Twitter, but also the CEO of Square Inc., which recently began to offer Bitcoin trading — permitting more users to utilize the cryptocurrency. Square is also (like many in the financial services industry) looking at other crypto and blockchain related investments and patents. In a research post Wednesday, Nomura-Instinet analyst Dan Dolev said that 60% of Square merchants surveyed by the firm said they were willing to accept Bitcoin as a payment. 

For Dorsey, his “Twitter hat” may push him to attempt to pacify regulators and reduce crypto-hype; but Dorsey’s “Square hat” may push him more into cryptocurrency territory, because that’s where the fintech money is. It’s worth having a look: even Dorsey’s own tweets reflect a sort of double-duty, sometimes promoting Square’s Bitcoin products, and sometimes reiterating Twitter’s commitment to civility.

It’s worth noting that Facebook and Google’s ad bans have yet to be fully watertight — they can be circumvented by misspelling words, for example. But at the very least they’re a sign the companies are in some way putting their users before ad profits. Time will tell if Dorsey and Twitter follow-suit. 

The ZeroEdge gambling platform is about to complete its presale. This is the last chance for contributors to receive a massive 58% bonus for their participation.

Online Gambling With a Big Difference

ZeroEdge are hoping to create the world’s first gambling platform with 0% house edge. If you thought the house always wins? Well, they don’t anymore…

The team behind ZeroEdge will provide the tools and infrastructure for players  to build and operate their own games on the platform. The aim is to form the planet’s largest gambling network of games with literally no house edge whatsoever. This will in turn drive the adoption of their token, Zerocoin.

The problem ZeroEdge identify with current online gambling models is the obscene house edges at casinos. They estimate that players lose $40 billion every year to online gambling sites.

This house edge guarantees that the casino will win over time. Sure, they might lose today to a single player. However, over the course of thousands of bets, they are mathematically assured of a long-term win.

Take blackjack for example. In a game of blackjack, it doesn’t matter how well a player plays. The house will always have an edge. This is built into the rules of the game. The player can play a perfect strategy against the casino and over time, the casino will still win.

The house edge when playing perfect strategy blackjack is around 1%. If you make stupid mistakes (splitting tens, doubling versus an Ace, and so on), you can dramatically increase this. Based on this model of edges, the house always wins a little and sometimes it wins a lot.

ZeroEdge are hoping to change this though. They think their zero percent house edge games will draw people to the platform. The games on the network will exclusively use their token, the Zerocoin. The company hope that the holders of Zerocoin will profit from the value of the token increasing rather than how current gambling providers’ shareholders profit when the casino beats a punter.

They want to create a network of many different gambling websites. These will use ZeroCoin and there will be no house edge whatsoever.

The idea is that players will favour ZeroEdge games because they are more likely to win at them. This will increase demand for the Zerocoin itself and the value of it will increase too.

The platform are hoping to offer sports betting, live betting, casino games, and poker. It will also offer players a range of other advantages too. These include almost free and instant transactions, transparent gaming, checkable random number generators, and verifiable game outcomes.

ICO Details

The pre-ICO funding will end in around 17 hours (15/03/18). In terms of contributions, it’s 80% complete at present.

This pre-ICO phase is offering a huge 58% bonus to the earliest contributors. During this round of funding, 1 ETH token will buy 60,040 ZERO tokens.

After the pre-sale, the price will be 24,000 ZERO for every 1 Ether.

There will be additional discounts of 15% for week one and two contributions, 10% for week three and four contributions, and 5% for week five and six contributions.

All other contributions will be at a rate of 1 ETH = 24,000 ZERO until the ICO close on August 1. There will also be a soft cap of 3,000 ETH and a hard cap of 30,000 ETH affecting the sale.

If you like the idea of zero percent house edge at an online casino, head over to the ZeroEdge website to contribute. There are full instructions on taking part in the pre-ICO listed there.

Today, under Chairman Rep. Bill Huizenga of Michigan, the Subcommittee on Capital Markets, Securities, & Investment held a hearing (watch it here on Youtube) entitled “Examining the Cryptocurrencies and ICO Markets.” The primary focus of the hearing was to further facilitate dialogue between crypto-industry insiders and lawmakers.

Hearing: Subcommittee on Capital Markets, Securities, & Investment

After an introduction by Chairman Huizenga, the four panellists — academic and industry insiders — read their opening remarks. The rest of the hearing saw these panellists yield questions from the subcommittee members. Members of the panel were as follows: Mike Lempres, Chief Legal and Risk Officer at Coinbase, Dr. Chris Brummer, Professor of Law at Georgetown University Law Center, Robert Rosenblum of Wilson, Sonsini, Goodrich, & Rosati, and Peter Van Valkenburgh, Director of Research at Coin Center.

The main question at hand regarding regulation in the U.S. is who’s going to do it — the SEC or CFTC — and which laws apply. Despite speaking for over two hours, the answer to this question is still not completely clear. But that said, this was the first hearing of its kind and there are to more come: Chairman Huizenga closed the day by declaring optimistically that it was more of “a hello than a goodbye.” 

The majority of the topics discussed revolved around the regulatory parameters in place in the U.S. today, and what those need to look like moving forward to accommodate the crypto space. In discussing this issue more broadly, topics such as how to deal with ICOs, the problems surrounding state and federal agency overlap, and wallet and asset security were touched on too.

Differing Viewpoints

Despite a wide array of perspectives  — with one subcommittee member going as far as calling cryptocurrencies a “crock” and inferring that crypto-enthusiasts were just unemployed men in their pajamas sitting on couches — when the dust settled, many members seemed to have similar ideas in mind: striking a balance between oversight and the accommodation of technological innovation.

Rep. Maloney, a ranking Democrat on the subcommittee from New York, announced that she is working on a cryptocurrency oversight bill that would cover exchanges that offer trading services for digital assets. And Chairman Huizenga also announced his intention to pursue some kind of legislative action, saying: “This panel, this Congress is not going to sit by idly with a lack of protection for investors.”

The issue of exactly how to balance regulation was contended. One particular standout was Minnesota’s Rep. Tom Emmer, who said, “I find myself maybe not with my colleagues on some of this.” He went on to say: “I hear elected officials who don’t have any concept of what we’re doing here … talking about ‘we have to go in and regulate.’”

“I realize there has to be some regulation, but it’s the balance,” Emmer remarked. “And I’ve heard from the panel we have regulation in place but we just need clarity.”

Emmer’s views were closely aligned with a lot of what the panellists were expressing — arguing that more clarity is needed around the regulations in place today versus the imposition of new rules on the industry. His sentiments were mirrored by Rep. Ted Budd of North Carolina, who argued that oversight in this area is something that the U.S. “has to get right.”

“Regulation in this space is something that the U.S. has to get right. Because poor or rushed policy in cryptocurrencies really threatens our reputation in finance and technology.”

Your Identity Is Now Safe: The Decentralized All-In-One Safeguarding Solution

Threats to the sanctity of users’ privacy with regards to digital data are more prevalent now than they have ever been.

It’s a logical conclusion that can be deduced from certain facts, such as increased adoption of technology by all age-ranges and the continued growth of industries which require the sharing of sensitive information.

Although large corporations may use arguments such as anonymity of the individual to justify metadata, these organizations own cross-platform data monopolies. These can be cross-referenced to achieve an, arguably invasive, level of user identification and trends prediction.

It’s bad enough to think of this data being shared without our permission to a deluge of interested advertisers – but when these databases become prime targets to malicious actors such as hackers, the potential results seem quite devastating.

Not to mention Apple’s recent decision to move to China [1] – a communist country where the state has control over the data as well as economy.

It’s a problem for small businesses too

Additionally, having to enter your personal information, as well as payment details, into every store that you visit is something of a laborious process and one which benefits neither the customer nor the individual merchant. The rise of protection seals stands testament to the effect that privacy and data protection concerns have had on consumer confidence.

Another result of this is a sense of customer ‘immobility’. This is to say that customers are less likely to spread their purchasing habits amongst multiple online stores or other such platforms (forums, comment boards on blogs, etc) because of effort and risk.

It’s a phenomenon that has further contributed to the dominance of innovation-stifling giants like Amazon, which now reportedly accounts for over 75% of all online spending in the USA [2].

When it comes to implementing effective measures to safeguard customers’ private information, there is an enormous financial barrier facing smaller online business owners.

The situation is also not helped by the fact the information individual retailers hold on each customer is perceived by many to be more extensive than is needed.

‘Safein’, or the forthcoming blockchain / ICO solution

Safein is a brand-new innovator, and Ethereum based decentralized blockchain effort, by a team from Lithuania who hope to disrupt both e-commerce and identity verification industries in one fell swoop.

Their ambitious roadmap includes becoming the first payments provider to support both fiat and cryptocurrency payments, and they have applied to become the first combined fiat/crypto payments provider to obtain an Electronic Money Institution in the EU.

To combat the problem of data-sharing across countless different websites and remembering each respective username/password, Safein aims to become an all-in-one, one-click verification service.

Their token-based platform will additionally reward both customer and merchant token holders, with the former enjoying a lucrative referral scheme and the latter receiving free transactions, which should encourage subscriptions from both parties.

SafeIn’s ICO begins on April 25th. Their soft cap is 4,000 ETH and hard cap is 37,500 ETH. Furthermore, pre-ICO is planned for 1 April 2018. Pre-ICO amount: 2,000 ETH.

You can test out their functioning MVP (Minimum Viable Product) now, which includes a demo of the customer benefits provided in terms of privacy and ease-of-use. You can get the latest news at their website, or on their social media platforms (Facebook / Twitter / Medium).

The South Korean government is examining an end to the country’s ban on ICO’s as it explores ways to boost its crypto economy.

S.Korea Explores ways to Boost Blockchain

The country which banned initial coin offerings (ICO’s), a popular way for fintech companies to raise capital, in September 2017 is now having another look at allowing the method to take place as it worries about falling behind in developing blockchain based fields.

According to Business Korea, during a briefing on IT and Fintech the country’s Financial Supervisory Service (FSS) announced plans to revitalize blockchain technology.

Methods talked about including attending international conferences, promoting the use of the technology for companies within the country, and by dedicating financial resources to its promotion and use. The ministry of science will contribute 4.2 billion won ($3.94 million) of its budget to support blockchain technology projects.

Private Sector Urges a Lift on ICO Ban

Market watchers in the country though are calling for a lift of the ICO ban in order to finance the development of blockchain projects in a meaningful way.

Park Sung-joon, head of the Blockchain Research Center at Seoul’s Dongguk University, said the government needs to lift the ban on ICO’s;

“An ICO is banned only in South Korea and China. The government said it will make a 14 billion won (US$13.15 million) investment to promote the technology but it is a ridiculously small amount of money considering the fact that other countries are seeking to research and develop the technology by raising hundreds of millions of won through an ICO.”

Government critics of the controversial funding method argue that it is still to early to lift the ban. Legislation examiner at the National Assembly Won Jong-hyun said, “Currently, cryptocurrency trading market is not stable. We need more time because an IPO and other confounding fund raising (sic) methods will not be able to control risks of price fluctuations.”

Despite the ban, many South Korean companies have been involved in raising money through ICO’s overseas. The Korean regulatory bodies have no permission to look into companies records for overseas funding.

South Korea is reaching out to it’s neighboring countries Japan and China to explore regulatory cooperation that could bring about a smaller ecosystem of trade within the Asian market.

While the ban on ICO’s may be lifted due to private sector pressure the ban on foreigners trading cryptocurrency within the country will remain in place as a precaution against money laundering and other cross-border crimes as reported in Business Korea.

Thailand’s cabinet is set to vote on implementation of a new 10% capital gains tax on profits from cryptocurrency investment. Royal Decree will empower the SEC to regulate digital currencies.

New Tax Part of Royal Decree

The Thai Revenue Department has asked the cabinet to vote on an amendment to the new revenue code which would include a proposed 10% capital gains tax on profits from trading in cryptocurrency according to a source inside the ministry of finance.

The Bangkok Post reported this morning that the tax will be part of a Royal Decree proposed to allow the SEC to comprehensively regulate all aspects of the crypto market including ICO’s.

The new decree will classify cryptocurrency as digital assets, not currency, meaning that the SEC will be charged with regulating all aspects of virtual coins. Rapee Sucharitakul the secretary -general of the SEC said the regulations should set standards for information disclosure of cryptocurrency trading while also overseeing the launching and proceeds generated by ICO’s.

He was further quoted by the Post speaking about investor protection included in the new regulations as saying;

“The regulatory framework will cover cryptocurrencies in several areas, including investor protections and how cryptocurrencies have sometimes been used as a medium for money-laundering, tax avoidance and Ponzi schemes”

This ruling will come after what has been a twice extended period of consultation to review the regulatory framework of cryptocurrency in the Kingdom.

Regulations a Long Time Coming

Chairman of The Thai Fintech Association, a startup accelerator Korn Chatikavanij, who previously served as the country’s finance minister between the end of 2008 and mid-2011 said in an interview last week that his organization supports the new plan.

“I agree with the Finance Ministry’s [view] of letting the SEC be the only organization governing digital assets, because it already oversees securities and has a profound understanding of digital assets,”

Said Korn, according to a Friday report by the Bangkok Post.

Others in the government have cited similar laws that have now passed in the U.S. as a positive step since they help to regulate trade in cryptocurrency while tapping into a previously untaxed source to generate income for the nation.

Traders may seek to invest outside of Thailand in order to avoid paying the tax but could face punishment once they bring the funds back in, including possible liability under Thailand’s very strict money laundering act. Either way there is likely to be an exodus from exchanges in the once crypto-friendly nation.

The Royal Decree will be forwarded to the cabinet for consideration today and is expected to be accepted and put into enforcement by the end of the month.

According to unnamed sources in the industry, cryptocurrency exchanges are charging between $50,000 to $1 million to list initial coin offerings (ICOs) on their platforms — as reported by Business Insider. As one might expect, many of those who spoke to BI were unable to name the specific exchanges they have dealt with.

Exchanges wield a lot of power in the crypto markets and access to more prominent ones can mean the difference between success and failure for new projects. In the eyes of many, these seemingly high rates reflect a large power imbalance between exchanges and crypto projects. Michael Jackson, a partner at venture capital firm Mangrove Partners said;

“Basically there are a lot of people who want their coins listed. The exchanges are where the liquidity is — it’s where the money is — so that’s where the power is just at the moment.”

ICO Potential

For startups, ICOs offer a quicker and potentially more lucrative alternative to traditional growth methods like venture investment or going public. For investors, these tokens provide exposure to red-hot sectors and provide the ability to quickly and easily trade their stake in a project — something not traditionally possible with early-stage investments.

The problem is that in order to access this liquidity, companies issuing tokens have to get listed on at least one of the many cryptocurrency exchanges. Like stock markets, these online exchanges — based across the globe — offer a venue for people to trade tokens.

Take Oliver Bussmann. Bussmann has advised a number of high-profile cryptocurrency projects — like Ripple and IOTA — and is the president of Switzerland’s Crypto Valley Association, a public-private partnership promoting the region of Zug as a hub for cryptocurrency businesses. The former CIO of UBS, who now runs his own Swiss fintech advisory firm, told BI:

“If you prepare for an ICO, you have to prepare for a listing. It’s important to get access to liquidity. That means the bigger the exchange is, the more effort and also more cost to get listed.”

When asked how much fees to list on exchanges are, he said, “At the lower end it’s $50,000, up to $1 million — I’ve heard that. It’s depending on the size of the exchange.”

Other industry sources have confirmed this price range, like Jackson: “I was doing a project, I won’t tell you specifically what one — one token on a number of exchanges — and that was the ballpark we were in.”

There are others, too: the CEO of one company planning an ICO told BI that they had been asked for $1 million by a top-tier exchange to list their coins. The company, as expected, declined to be named or to name the exchange or speak publicly about the issue, as the whole process is currently under a nondisclosure agreement.

Not All Exchanges Are Equal

Not all exchanges are equal, which is why the range of fees varies greatly. The 24-hour trading volume of Binance — which is currently the second biggest exchange in the world — sits at $1.7 billion as of today (according to Bitstamp, the tenth biggest exchange globally, had a volume of $334 million — around a sixth of Binance.

This is important, as access to the “best” exchanges carries a premium: the bigger the liquidity pool, the higher the potential market value of a coin, and the higher the chance of success for a project.

“Good exchange means a high probability of good market fit, because you have access to liquidity and investors,” Bussmann said. “If you don’t get access to certain exchanges, then it’s tier two exchanges, which means access to investors is limited.”

All said, there are counter-arguments: the exchanges aren’t doing too badly themselves. Bloomberg estimated earlier this month that the top ten exchanges are making as much as $3 million a day in fees, this based on calculations from publicly available volume data and trading fees.