The Abacus returns with their fourth weekly crypto recap. Missed the details of the aftermath of the SegWit2x cancellation? They have all the recent headlines you need to know.
The Abacus Crypto Recap is a weekly update focused on two polar yet symbiotic elements of cryptocurrency markets—adoption and regulation. Here’s all the major happenings for this past week in crypto.
The Segwit2x fork call-off shocked the world and to the surprise of many resulted in the surge of Bitcoin Cash. Once thought of as a side act, there are talks that Bitcoin Cash could represent the future of the world’s most valuable cryptocurrency. Beyond that, the CME group has stated Bitcoin futures will be available in early December and a recent study showed Millennials are becoming increasingly likely to invest in Bitcoin over traditional stocks or bonds.
- Bitcoin Fork Cancelled And Bitcoin Cash Surges: Following tumultuous news that saw the upcoming implementation of the Segwit2X team’s B2X cancelled, Bitcoin Cash prices surged as investors flocked to the coin following a barrage of pro-Bitcoin Cash reports all over social media and crypto news outlets. Bitcoin Cash prices flew from $660 on Friday to a high of $2,446 on Sunday, a peak of roughly 400%. For the first time, the Bitcoin Cash market cap briefly eclipsed that of Ethereum, thrusting it into the second position behind Bitcoin with a market cap of over $40B, which has since settled to roughly $22B at the time of writing. Bitcoin prices during this period went from high’s around $7700 to as low as low as $5500, quickly rebounding to the $6000+ range. The fervency and velocity of capital reallocation during this period shows that even as the total cryptocurrency market cap reaches unprecedented levels, free from any market controls, volatility has the ability to drastically affect even the highest market cap coins.
- Bitcoin Classic (A different Fork) Shuts Down: In the wake of Bitcoin Cash’s influx of capital, the team behind Bitcoin Classic has announced they’re shutting down as they believe Bitcoin Cash will become the default and true Bitcoin by May of this year. Launched in February of 2016, Bitcoin Classic aimed to increase the block size of Bitcoin to ensure future scalability of transactions. Tom Zander from Bitcoin Classic stated that the success of Bitcoin Cash meant that Bitcoin Classic had “fulfilled its promise.” He went on to say, “It is now up to you which chain will gain the most traction … In at most six months I’m sure we’ll just drop the ‘cash’ and call it Bitcoin.”
- Bitcoin Futures For Christmas: CME group has officially announced that their Bitcoin futures contracts will be available “sometime in the second week” of December. While this could lead to an influx of institutional investment, it also provides traders a roundabout way of shorting Bitcoin which could ultimately depress prices. It’s still an open question as to how Bitcoins foray into mainstream financial markets will perform.
- Mastercard Issues Instant Payments Patent: Mastercard has announced a new patent for an instantaneous payment system built atop blockchain technology. The aim of the system is instant remittance to merchants, rather than the current payment period that can take multiple days, enabled by the possibility for instant verification on a blockchain. This latest patent joins a growing number of recently issued by the credit card company.
- Hong Kong Launches Blockchain Financing System: As China embarks on its Belt and Road initiative (a $5 trillion dollar project to connect and provide economic investment in 69 countries) the quasi-independent government of Hong Kong plans to create a blockchain based financing system to add efficiency to the project. The Hong Kong Secretary of Financial Services stated, “This technology could cut the huge input of human resources and time that trade financing traditionally requires, reduce chances of fraud and lower companies’ investment costs through more efficient settlements. Trade along the Belt and Road is mostly conducted by small and medium-sized enterprises, so Blockchain’s distributed ledger technology could help by cutting out the need for a central organization and middlemen.”
- Waves Platform Gets A Speed Boost: Waves has begun a public stress test for its new Waves-NG technology, continuing its quest to become the world’s fastest blockchain. The new technology will raise the speed of block creation, increase transaction speeds, and allow the platform to handle more activity including token distribution during crowd sales.
- Dash Rises Amidst Bitcoin Civil War: While the cryptocurrency world focused on the Bitcoin debacle, some investors placed their bets on another top 10 cryptocurrency that already allows instant payments and incorporates 2MB blocks. Dash clearly caught the eye of some skittish BTC investors and has surged over 50% since the Segwit2x cancellation.
- Virtual Reality Meets Cryptocurrency: The confluence of VR and blockchain was bound to arrive at some point. In early December the first ever virtual land auction will take place and users will be able to purchase land in the newly founded Genesis City. At the upcoming December event “Genesis City land parcels will be sold to the highest bidders.”
- Millennials Trending Towards BTC: A recent survey by Blockchain Capital emphasizes Millennials growing fondness for digital currencies over traditional investments like stocks and bonds. The survey found that about 30% of those between 18 and 34 would rather own $1,000 worth of Bitcoin than the equivalent in traditional assets. As Bitcoin grows in relevance amongst a generation with increasing economic clout, banks and governments will have to adapt.
- UN To Fight Child Trafficking With Blockchain: In partnership with the World Identify Network (WIN), the United Nations has launched plans to pilot a blockchain program to combat child trafficking. As stated by the CEO of WIN, “’invisible’ children under the age of five who do not possess a birth certificate are at ‘risk’ and can fall into the hands of child traffickers. These children are often missed by social programs offered by governments or development agencies.” By using blockchain technology to create digital identities, this partnership could effectively curb child trafficking.
- Bitcoin Cash Has Its Own Fork: The original Bitcoin isn’t the only Bitcoin forking around. Bitcoin Cash has safely implemented a hard fork of its protocol which adjusts mining difficulty and makes it easier for miners to create new blocks every 600 seconds. By offering a consistent difficulty rate, Bitcoin Cash seeks to avoid the reduced hash rate that sometimes causes Bitcoin Cash miners to switch over to the original Bitcoin in search of temporarily more efficient mining rewards.
- Crypto Mining Sales Cool Down: After reporting 150 million dollars in cryptocurrency-related sales in Q2, Nvidia, a provider of graphics cards essential to some cryptocurrency mining operations, reported more than a 50% drop in such sales down to 70 million. Nvidia believes the ebbs and flows of the cryptocurrency market make it difficult to project future revenue, but still maintains there is a long-term opportunity in the market despite the sharp decrease.
The SEC and U.S. Treasury Department continue to monitor the ever expanding cryptocurrency market. In addition, both Germany and the EU’s larger European Securities and Markets Authority issued warnings relating to ICOs. As the cryptocurrency market keeps heating, governments across the world are beginning to patch together regulatory frameworks.
- EU Issues More ICO Warnings: The European Securities and Markets Authority followed others in declaring that ICOs may not be compliant with current regulation. The ESMA also voiced concerns as to whether investors were aware of the high risks associated with ICO investments. As the ICO market begins to cool off there is much debate as to how regulators will officially treat the novel fundraising mechanism.
- S. Treasury Gives Bitcoin The Look: Head of of the U.S. Treasury Steven Mnuchin announced his department will investigate illegal use of the world’s most valuable cryptocurrency. Mnuchin seems to have specific concerns over Bitcoin’s use on the dark web. He said in early 2017, “we want to make sure that you don’t have the dark web funded in Bitcoins. And that’s something that is a concern of ours today.” Mnuchin also mentioned he is coordinating with international counterparts to “make sure that this [Bitcoin] is not used for illicit transfers of funds.”
- Gox CEO Get Last Laugh: The CEO of infamous MtGox scandal that saw users of the now defunct exchange lose one million Bitcoins now may stand to make a fortune, as the terms of the settlement are seeing users paid out in Japanese Yen pegged to the pricing at the time of the attack, when one BTC was worth around $480. As it stands now, when all the creditors are paid following the bankruptcy settlement, CEO Mark Karpeles may be left with over $569M in profit after losing his users roughly $7B in funds, thanks to today’s much higher valuation of Bitcoin.
- ECB Monitoring Crypto: While countries all over the world have released statements and regulations regarding cryptocurrency, Europe has been a region of relative silence so far as actionable statements or policy is concerned. While the European Central Bank has in the past made statements alluding to their limited ability to actually regulate cryptocurrencies, executive member of the ECB Benoît Cœuré in a recent interview claimed the bank was closely following the developments of cryptocurrency, sharing some insights. The ECB at the moment does not consider crypto a threat to fiat currency, with Cœuré boasting, “[cryptocurrencies] don’t pose any monetary risk because the amounts involved are marginal.” He spoke of their speculative nature, and further went on to say, “the central banks are following their development very closely because they can spread very rapidly, especially in countries which are moving away from banknotes and coins.”
- SEC Head Announces ICOs Are Easily Manipulated: SEC chair member Jay Clayton recently discussed ICOs at a securities regulation seminar in New York City. He cautioned that ICOs are opaque and often intentionally deceiving and open to extreme price manipulation, stating, “Investors often do not appreciate that ICO insiders and management have access to immediate liquidity, as do larger investors, who may purchase tokens at favorable prices […].” Clayton went on to highlight the need for ICOs to be registered or be approved for exemptions from the SEC. He noted that the SEC is continuing to work on ICO policy and ways to combat fraud and misconduct.
- Germany Issues ICO Warning: Germany is the latest in a raft of countries to issue an official ICO warning. The country’s Federal Financial Supervisory Authority has cautioned investors to be weary of ICOs, warning investors that the burgeoning fundraising mechanism has a particular allure to those of nefarious intent. In a statement, the agency claims, “Due to the lack of legal requirements and transparency rules, the consumer is left on their own when it comes to verifying the identity, reputability and credit standing of the token […].” The agency also announced that a more thorough guide relating to ICOs is coming by November 15th.
- Citi CEO Believes State Sponsored Crypto Will Rise: In an interview with Bloomberg, Citigroup CEO Michael Corbat opnioned that state sponsored cryptocurrencies are on the horizon as governments begin to understand the current threat, claiming, “It’s likely that we’re going to see governments introduce, not cryptocurrencies – I think cryptocurrency is a bad moniker for that – but a digital currency.” Corbat went on to say that Citigroup has been developing its own digital currency, “Citicoin”, intended to aid with cross border remittance. Corbat joins an increasing number of public facing CEOs taking a position of skepticism towards crypto while actively embracing blockchain related products.
- French Banking CEO Levies Argument Against Crypto: CEO of major French Bank Societe Generale Frederic Oudea has claimed that digital currency faces an uncertain future due to their anonymity, further clarifying that governments all over the world are going to regulate them. In a recent interview with CNBC, he claimed, “I can’t see a future of this when I see the attention played by all governments and regulators on anti-money laundering, on anti-tax evasion, on anti-terrorism financing […].” As with many other banking CEOs, he went on to praise the potential of blockchain technology, stating, “I’m more a believer of a distributed ledger technology where you have a defined set of players (that are) well-identified. We choose this mix of crypto technology to secure transactions.”
- Singapore On ICO Alert: The Monetary Authority of Singapore has again come out with a cautionary statement regarding ICOs, saying recent developments in the ICO landscape shows global regulators that they “have the fiduciary duty to be alert on the potential outcome,” according to executive director of the MAS Yao Loong Ng. He went on to say that ICOs should take a commensurate amount of time to reach the market as IPOs, claiming, “If the process of writing a white paper for [an] ICO and subsequently listing on an exchange could take a matter of days, then clearly it is something that we can learn from.”
- Coinbase Tax Probe On The Horizon: The ongoing controversial case between Coinbase and the IRS has reached a new height as a U.S. Magistrate Judge has sided with the IRS, decreeing, “It’s legitimate for them to investigate whether people are making money on their bitcoin purchases and paying taxes on any gains.” it was reported earlier this year that out of 500,000 Coinbase customers, during a period from 2013-2015, less than 900 reported Bitcoin earnings on their taxes. Meanwhile, the lead attorney on the case for Coinbase has stated, “We’re in this tussle with them where they are improperly searching for private information of our customers with no evidence of wrongdoing.”
The happenings of the past week have shown us that even a market cap of nearly $130B isn’t enough to insulate Bitcoin or any other cryptocurrency from the impulsive whims of deeply heretical speculation.
After the team behind Segwit2X announced they would ultimately not go through with the fork, Bitcoin briefly rallied. In the coming hours the price began to drop and crypto media became flooded with headlines decreeing the end of Bitcoin, heralding all who would listen that Bitcoin Cash, with it’s improved and scalable protocol, was the real future iteration of Bitcoin.
— Charlie Shrem (@CharlieShrem) November 8, 2017
In weeks past, as prices soared, some some Bitcoin supporters argued that as an impenetrable store of value (akin to digital gold), it didn’t matter that transaction time and costs have steadily increased, as Bitcoin wasn’t intended to be transactional.
The direct contradiction of this notion was cited by many as the impetus behind the frenzy to sell BTC for BCH, as BCH supporters, following a massive influx of capital into the coin, ardently professed that Bitcoin’s inability to scale with increasing transactions sealed its journey towards irrelevance.
Ultimately, this week serves as a cautionary tale – free from any regulation, deep pocketed players are able to collude and move markets to the tune of billions whether or not their actions are predicated around fact.
The intense volatility of cryptocurrency means that massive swings like these are a matter of inevitability, with the only question being when, not if, the next one is coming. Though things can change quickly with new legislation and ever more adoption into mainstream markets, for the moment, free from any regulation or protectionary measures, cryptocurrency is still a highly unstable market that can change on a whim.
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