The Abacus team is back at it again for their ninth weekly crypto recap. Their recurring column will bring you up to speed on the all the major crypto headlines you need to know about.
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.
Adoption And Free Enterprise
Big finance continues to enter the cryptocurrency space with a flurry of ETF funds being proposed to the SEC. The activity follows an incredibly volatile week for cryptocurrency with prices Bitcoin fluctuating wildly, causing at least one prominent investor to halt plans for a proposed crpyto hedge fund and exchanges to rethink their trading policies amidst skyrocketing transaction prices.
- Bitpay Restricts Sub $100 BTC Transactions Then Has A Change of Heart : Bitcoin payment service Bitpay made news last week when it announced that due to extremely high transaction prices of as much as $30/transaction, the minimum amount for a payment on the platform was increasing to $100. Amid a backlash of tweets, two days later, the service announced the minimum was back down to $5. Bitpay cited the busier than ever Bitcoin network is raising transaction prices to unprecedented levels, but claims that new protocols have enabled them to reverse the short lived increase. Notably, Bitpay has not yet enabled the segwit protocol that much of the Bitcoin network has adopted.
- Segwit2x Fork To Take Place December 28th: After dropping their previous mid november plans for hard fork that saw Bitcoin prices tumult and a rush of cash flood into Bitcoin Cash, the Segwit2x team, citing usual concerns of scalability and transaction fees, have announced the hard fork will go forward on December 28th with eight exchanges listed to be supporting the new protocol. In addition to B2X coin, the founders of the project said they’d also reward BTC holders with a “ proportional number of Satoshi Nakamoto’s Bitcoins as a reward for their commitment to progress.” It remains to be seen what kind of effect this will have on market prices or on the continued success of Bitcoin Cash.
- Crypto Markets Sputter While Others Call It A Crash: Bitcoin hit highs of roughly $20,000 before dropping to as low as $11,000 last week over a 3 day period of fallout. Since then the price has risen to over $15,000. While some saw this volatility as a sign of Bitcoin’s dominance being questioned, others felt that the moves had established a new floor at around $10,000.
- AI Related ICO Raises Staggering $36 Million: SingularityNET has reported that it’s ICO raised $36MM in roughly one minute, a staggering result even for a highly anticipated offering. The firm is creating a platform that allows users to outsource work to AI nodes, which in turn can then distribute work to other AI nodes as needed, creating an AI to AI network. The group had over 20,000 registered to participate in the ICO which they then parsed down to roughly 5,000 after a screening process.
- Hedge Fund Guru Delays Crypto Fund: Prolific hedge fund investor Mike Novogratz has announced he’s delaying the launch of his highly anticipated $500MM cryptocurrency fund amidst concerns of extreme volatility. Slated to be the largest fund of its kind, at one point Mr. Novogratz felt confident enough to predict BTC hitting $40,000 in 2018. He has now changed his opinion after the latest round of market pull outs, instead boasting that BTC might hit $8,000 before a major rebound. Mr. Novogratz claims, “We didn’t like market conditions and we wanted to re-evaluate what we’re doing. I look pretty smart pressing the pause button right now.”
- Louisiana Comes In At #1 For Bitcoin Mining: Electrical supply company Crescent Electric has released a study analysing BTC mining costs based on the consumption of the 3 most popular mining machines (Antminer S9, AntMiner S7, and the Avalon 6). The study has found the Louisiana is the cheapest state to mine for BTC with an average price of $3,224 per BTC mined, with Hawaii coming in at the most expensive at $9,483 per coin. As the price of Bitcoin has surged, many would be miners have sought out cheap electricity rates, raising some concern over the power requirements needed to support Bitcoin and other proof of work based cryptocurrencies.
- HitBTC Introduces Deposit Fees: HitBTC, the 10th highest volume Bitcoin exchange with $232.8M in 24Hr volume at the time of writing has announced a new fee for all Bitcoin deposits onto the platform. Priced at 0.003 BTC (about $47) the fee stays the same regardless of deposit amount. This news comes with many reports of Bitcoin transaction pricing making small transactions under $100 untenable. HitBTC cites difficult times in the past few weeks starting of the Bitcoin network that there are, “…significant amount of transactions waiting in the mempool, longer processing time and unprecedented fees.” Reports like these continue to fuel the debate of Bitcoin as a means of transference vs a store of value akin to digital gold.
- Telegram Messages ICO Plans: Telegram, a favorite encrypted messaging services of the cryptocurrency community, has announced plans to launch an ICO dubbed “TON”, said to mean either “The Open Network” or “Telegram Open Network.” Intended to aid those under oppressive governments, the platform is said to use a light wallet to support a native currency called “Gram.” With 180MM users, the messaging platform already has a captive audience for an ICO, with messaging platform Kik demonstrating the success of deploying an ICO in the space.
- Goldman Sachs Ready To Dive Into Crypto: Following a recent announcement, it appears the infamous financial powerhouse Goldman Sachs will be opening up a cryptocurrency trading desk by the end of June, making Goldman the first large investment bank to do so. CEO Lloyd Blankfein has publicly commented on Bitcoin in the past, often taking a conservative but open minded stance, remarking “[Bitcoin] is not for me. But there is a lot of things that there weren’t for me in the past that have worked out very well. If it was 20 years forward and it worked out, I could tell you why it worked out. But based on everything that I know, I am not guessing that it will work out.” Following the recent start of futures contracts trading, Goldman Sachs joining the cryptocurrency fray adds yet another layer of legitimacy to the space, with other investment banks expected to follow suit.
- Insider Trading Rumors Swirl Following Coinbase Bitcoin Cash Launch: Following much anticipation, the launch of Bitcoin Cash on Coinbase was met with a flurry of tweets as rumors circulated regarding insider trading and market manipulation. The exchange halted trading just hours after the launch citing extreme volatility, with prices of BCH going for almost $9,000–nearly triple the average market price outside of the exchange. Coinbase released a statement saying they’re looking into the possibility of any employees partaking in the price run up. Order books were reopened on December 20th in a limited capacity.
- Bitcoin ETFs Coming To An Exchange Near You: The New York Stock Exchange has announced a proposal to create a Bitcoin exchange traded fund that would track Bitcoin futures contracts, allowing regular and shorting positions. While these funds are designed to closely monitor movement on the CME and CBOE BTC futures exchanges, they do not actually own Bitcoins. The NYSE clarifies, “By being long Bitcoin Futures Contracts, the Fund seeks to benefit from daily increases in the price of the Bitcoin Futures Contracts. The Fund will not be benchmarked to the current price of Bitcoin and will not invest directly in Bitcoin. When the price of Bitcoin Futures Contracts held by the Fund declines, the Fund will lose value.” Prior attempts at Bitcoin ETF’s have been rejected by the SEC, however many feel approval is more likely given the cryptocurrency’s increasing crossover into the world of traditional finance. The NYSE proposal comes after the CBOE filed 6 other proposals for ETF funds just 11 days after their futures contracts went live.
- Litecoin Founder Sells It All: Litecoin founder Charlie Lee has announced that he is selling all of his Litecoin holdings, writing on Reddit, “For the first time in 6+ years, I no longer own a single LTC that’s not stored in a physical Litecoin. (I do have a few of those as collectibles.)” Lee feels that by selling he can be more organically involved in the project, able to comment on pricing without having to worry about a conflict of interest. The founder still plans to devote himself full time to Litecoin, noting that, “…When Litecoin succeeds, I will still be rewarded in lots of different ways, just not directly via ownership of coins. I now believe this is the best way for me to continue to oversee Litecoin’s growth.” Some may find the timing of the announcement to be rather convenient given the major surge in Litecoin pricing as of late.
- WikiLeaks Embraces Cryptocurrency Donations And Crypto Kitties: Wikileaks founder Julian Assange has encouraged donors to contribute to the publication by using cryptocurrencies in order to circumvent government blockades. Wikileaks has also jumped on the cryptokitties bandwagon, boasting, “Cryptography is not only transforming the global financial system, it is generating creative innovation in a vast array of human interaction. WikiLeaks likes cats and wants to help bring cryptocurrencies and smart contracts into the mainstream. Donors and crypto-kitty enthusiasts can empower WikiLeaks by bidding for one of our cute purebred cryptographic kittens. Newcomers will learn about the blockchain, acquire their very first cryptocurrency, and potentially even make a profit.” The WikiLeaks team has said they’ll donate two cats to Donald Trump and Hillary Clinton in something of adorably wrapped political statement. The first generation cats are worth several thousand dollars. The themed WikiLeaks kitties will be bred at a rate of one kitten per week, with 8 put up for sale.
- Major Japanese Company To Pay Employees In Cryptocurrency: Japanese firm GMO Internet has announced they’ll be offering employees some of their salary in Bitcoin starting in February 2018, with the option to receive up to $890 monthly in the digital currency. The company hopes to gain a better understanding of cryptocurrency through this process noting, “Employees can receive salaries by Bitcoin if they want to. We hope to improve our own literacy of virtual currency by actually using it.” The company launched an exchange earlier this year.
Regulation And Government
The divide between crypto-friendly nations and those that see digital currencies as a threat continues as more laws hit the books, with nations like the U.S. coming down more aggressively on nefarious actors in the space. Russia continues with a regulatory framework while the EU and South Korea take a more hands off approach for the time being. North Korea raises the question of of rogue nations using cryptocurrency to get around economic sanctions.
- Israel May Launch Digital Currency: Israel has already made headlines for embracing Bitcoin and the notion of digital currencies and is now taking that ethos one step farther with the announcement that they’re pondering creating a digital Shekel. The currency would correspond in value to physical Shekels. Sources close to the country’s finance ministry remark that Israel see’s a native digital currency as being a good tool to combat the country’s black market which constitutes roughly 22% of the country’s GDP. The government is also considering legislation that would significantly reduce the amount of physical cash in circulation. For now, the country is in the preliminary stages, considering an “Economic Arrangements Bill” that would create a panel to investigate the matter.
- Eurozone Not Considering CrypoEuro For Now: Prominent major European bank Bundesbank board member Carl-Ludwig Thiele has said that the eurozone is not currently considering a digital currency, remarking a governmental embrace of the technology is “…currently not in sight.” Thiele went on to offer cautionary advice to investors, highlighting the volatility of digital currencies.
- New Tax Laws Coming For Crypto: A revision to US tax law has seen Congress pass an amendment that will obviate cryptocurrency from the “like kind” tax law, which allowed exchanges to not pay tax on earnings from one cryptocurrency to another as long as a fiat currency wasn’t involved. Russian authorities have also began cracking down on taxable earnings, requiring cryptocurrency traders to declare profits.
- North Korea Continues Its Exchange Hacks: North Korea is believed to be behind the attack on South Korean exchange Youbit, forcing the company to declare bankruptcy after 17% of their assets were lost in the hack. Account holders were informed they could receive 75% of their funds held on the exchange with the additional 25% likely not coming until well after the bankruptcy proceedings. This latest hack comes after other South Korean exchanges like Bithumb had funds disappear, suggesting the North Korean Regime is stockpiling cryptocurrencies. Given the recent sanctions placed on North Korea, cryptocurrency is an ideal tool for a nation that needs to have anonymous purchasing power. Governments around the world may start using security as a justification for further regulation in light of North Korea’s activities.
- Japan Begins To Question Ultimate Value of Cryptocurrency: Japan’s Finance Minister Taro Aso has come out with a highly critical statement in regards to the efficacy of cryptocurrency, standing in stark contrast to the country’s generally open stance towards digital currency. Claiming that Bitcoin has yet to prove itself as a “credible currency”, the Finance Minister went on to add that cryptocurrency is not largely used in the country. Aso added, “There’s no fixed definition on whether it’s a currency or not. This issue is a difficult one. It has not yet been proven to be credible enough to become a currency, so I need to watch for a little while more.”
- South Korea Wonders If Cryptocurrency Are In Fact Currencies: After releasing several new regulations regarding taxation and residency/age restrictions for cryptocurrency trading last week, the South Korean Financial Supervisory Service (FSS) has announced that it has no more plans to regulate cryptocurrency for the time being. The agency based this decision on their notion that digital currencies are not real currencies and not a substitute for money. FSS Governor Choe Heung-Sik remarked during a press conference that, “All we can do is to warn people as we don’t see virtual currencies as actual types of currency, meaning that we cannot step up regulation for now.”
- SEC Freezes Trading On Crypto Related Stock: The SEC has issued a stop trade for The Crypto Company, a firm based in Malibu, California that provides currency consulting and investment services. In it’s statement, the SEC cited concerns “…regarding the accuracy and adequacy of information in the marketplace about, among other things, the compensation paid for promotion of the company, and statements in Commission filings about the plans of the company’s insiders to sell their shares of The Crypto Company’s common stock. Questions have also arisen concerning potentially manipulative transactions in the company’s stock in November 2017.” The company’s stock price has surged on the back of cryptocurrency markets exploding with an infusion of capital. This is the latest in a slew of SEC action regarding cryptocurrency related entities, with a freeze of PlexCorps earlier in the month relating to accusations of anti-fraud violations.
- Info CEO Suggests Central Banks Will Purchase Cryptoassets: Blockchain.info CEO Peter Smith shared his thoughts that banks will begin holding cryptocurrency alongside their traditional reserves during an interview with CNBC. Smith went on to say that he felt banks would likely begin to issue their own branded digital assets, something we’ve seen many governments considering as of late. The CEO also shared his thoughts on security vulnerabilities, decreeing that he felt the market is due for another big hack given all of the activity as of late.
- Belarus Becomes Cryptocurrency Heaven: New statutes passed in Belarus see the legal recognition of the use of blockchain technology while offering significant tax incentives to attract business in the cryptocurrency sector. The country is creating a “High-Tech Park” that it sees as a hub for new technologies. One new law even states, “Turnovers, profits (income, proceeds) from various operations with tokens are not recognized as taxable items until January 2023.” Central bank Chief Pavel Kallaur went on to note “As for cryptocurrencies, the Digital Economy Development Ordinance allows resident companies of the Hi-Tech Park to use cryptocurrencies for international deals. We are okay with that.”
- Russia To Introduce Regulatory Framework: New laws are expected to be proposed to the Russian national legislature on December 28th. According to Anatoly Aksakov, chair to the State Duma’s financial markets committee, “I expect that the adoption of the draft law on [cryptocurrencies] will be in March… The problem is that we already have a lot of people who acquire [cryptocurrencies] and they are deceived, we need to give people the opportunity to work legally with it, to protect them as much as possible.” The original legislation was posed to hit before the end of the year but was met with much dissent, causing delays. Aksakov remarked that Putin himself had put the agency on a tight deadline to garner new regulations, which will supplement previously enacted regulations around cryptocurrencies and ICOs.
- Texas Comes Down Hard On Potentially Fraudulent Mining Company: Texas lawmakers have been obtained a cease and desist order against USI-Tech limited, a Dubai based firm that allegedly had been selling investment contracts related to mining cryptocurrency in Texas. According to the allegations, the company claimed to offer steady high yield returns also offering investors who buy in an incentive for referring new clients. According to the document, “In addition to violating registration requirements, USI-Tech and the sales agents are violating State Securities Board rules by failing to disclose information investors would need to make an informed decision about whether to invest.”
As a growing number of players enter the cryptocurrency space, once theoretical notions of whether Bitcoin is intended to be a transactional implement or a digital store of value are coming to a front as record high transaction prices demonstrate the limitations of the Bitcoin protocol.
National security is a new issue coming to light that could see countries more aggressively calling for regulation under the guise of national security. With the legitimacy that big finance is adding to the world of cryptocurrency, it seems ever more likely that the space will evolve into the next well regulated and fully integrated financial/technology/investing industry.
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