Author: Mark Hartley

“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”

This decade-old headline has become synonymous with cryptocurrency after the pseudonymous programmer and creator of Bitcoin, Satoshi Nakamoto, hid it within the first ever Bitcoin block mined – the Genesis block. The headline alludes to the United Kingdom’s then-Chancellor Alistair Darling considering a second bailout for banks after the 2008 financial crisis left the economy in tatters.

Ten years later and we find ourselves on the brink of a similar situation. Rather than an economic crash caused by a subprime mortgage housing bubble, markets across the globe are suffering declines due to various issues – the ongoing US-China trade war, falling tech stocks, the Fed raising rates and Iranian oil sanctions.

Now, however, the economic landscape is vastly different. Cryptocurrency has not only provided average citizens with an alternative store of value but more importantly the knowledge that together we can retake control of our own finances. This was Nakamoto’s intention when including The Times headline within the Genesis block – to highlight a financial system that takes from the poor and serves only the rich. The hidden message was a call-to-arms to fight back against corruption and greed within the banking sector.

So have we succeeded in bringing Nakamoto’s revelations to light?

In many ways, the fact that the Bitcoin network still exists at all is a success in itself. I’m sure that Nakamoto, whoever he/she/they is or was, had no idea their little experiment would grow into the melting pot of economic reinvention and revolutionary dissent that it has.

However, many issues remain unresolved. The industry is awash with disagreement, infighting, hacks, thefts, allegations of fraud, questionable decentralization and the ever-looming threat of government regulation or seizure. 2018 saw the cryptocurrency bubble burst for the fifth time, shaving over 85 percent of value off the market over the ensuing 12 months. As before, many claimed it was the final death knell for the industry, but already we are seeing a reversal in the market and the year has only just begun.

Bitcoin, in particular – the crypto cat with 300 lives – has fought through it all and kept its head above water, for the most part. As it moves into its second decade of existence it remains plagued by slow transaction times, lack of scalability and an uncertain future regarding mining profitability. Some believe these issues can be resolved through various forks, patches or upgrades while others see Bitcoin eventually being replaced by a more advanced cryptocurrency.

Whatever the outcome, as we enter 2019 one thing is for sure – cryptocurrencies are here to stay.

Ethereum has gained a huge 11 percent in value today, adding $1 billion to its market cap and surpassing XRP to regain second position on crypto market cap charts. It’s price increased from a low $131 last night to its current level of just over $148 at around midday (UTC) today.

The move means Ethereum has regained 90 percent of the losses it suffered towards the end of last year but will likely face resistance at previous support levels between $170 and $180 if it continues to climb. This month will be host to Ethereum’s much-anticipated Constantinople Fork which plays a significant role in Ethereum’s move from a Proof-of-Work (PoW) to Proof-of-Stake (PoS) protocol, a change designed to improve transaction speed and scalability issues.

While not quite to the extent of Ethereum, XRP has also enjoyed gains today, increasing by 3.4 percent with a market cap of $14.8 billion. The coin is now trading at $0.36, up from $0.34 earlier today. Yesterday, almost three billion XRP tokens worth a whopping $1 billion were moved in a succession of seven transactions between various Ripple Escrow and Ripple OTC distribution wallets. The moves were revealed to be part of Ripple’s Escrow feature, which is designed to release a certain number of coins on a monthly basis.

Other coins that have made impressive gains today include Litecoin (LTC), which is up 6.5 percent at $32 and EOS, up 4.6 percent $2.70. Bitcoin (BTC) is trading at $3,822, up 3 percent, with the overall cryptocurrency market up approximately $7 billion since the year began.

A somewhat bizarre but serious hacker group called “The Dark Overlord” has made some pretty bold claims regarding the September 11th terrorist attacks on the World Trade Centre in New York, USA.

The group claims to have 18,000 “confidential, classified and secret” documents obtained subversively from various U.S. law enforcement agencies, including the FBI and TSA, and are demanding a ransom paid in Bitcoin to keep the data under wraps. Allegedly, the documents contain sensitive details related to insurance data and litigation which could presumably reveal what they believe to be the “true story” about what really happened on that fateful day.

Since the world-famous terrorist attacks occurred over 17 years ago, there has been a never-ending drive by conspiracy groups to reveal what they believe to be a government cover-up of the real events. Some even claim the devastating event was an inside job and go so far as to accuse the U.S. government of perpetrating the attack.

Initial documents released

So far the hacker group has already released three files as a way to prove its claims are not frivolous and made the 10GB encrypted file available to download ahead of releasing the encryption key. Documents are said to have been obtained not only from government agencies but also various insurance companies including Lloyds of London, Hiscox and Silverstein Properties – the company that owned the World Trade Centre complex.

The group aren’t asking for payment from any specific, individual party but rather “anybody” the documents may interest – including terrorist groups, enemies of the U.S. and anyone who may be named in the documents. It is believed that some of the data could have been obtained earlier this year when Hiscox confirmed a hack that involved the theft of documents that could potentially expose its commercial policyholders in the U.S.

In one demand letter, the group threatened:

“Pay the fuck up, or we’re going to bury you with this. If you continue to fail us, we’ll escalate these releases by releasing the keys.”

While government agencies may wish to keep the information contained for security reasons, it’s unlikely to change the minds of those who believe the official 9/11 narrative. As history has shown, facts and evidence are often the least important aspects that humans consider when forming opinions about emotional events.

Bitcoin continues to be used by hackers and criminals despite numerous cases revealing how it lacks true anonymity and is relatively easy to track when compared with other, more private cryptocurrencies.

A report by the Sunday Telegraph reveals that the United Kingdom’s financial overseer, the Financial Conduct Authority (FCA), has been investigating 67 cryptocurrency companies in the country since early November.

The data, which was gathered through a freedom of information request, indicates a growing concern within the FCA regarding the use of cryptocurrencies in the UK. It is believed that the regulator considers cryptocurrencies to carry increased investment risks and pose potential threats to financial markets. Of the 67 firms being investigated, 49 inquiries have already been closed – although several have been issued with consumer alerts. The FCA has not released the names of the remaining 18 companies still under scrutiny.

Regulatory Concerns

The cryptocurrency industry in the UK remains only partially regulated and the government has voiced its intentions to improve upon this. The FCA’s executive director of strategy and competition, Christopher Woolard, noted that, along with the Bank of England, the agency is in support of cryptocurrencies and intends to help it grow. However, its main concern at present is the perceived risks posed by financial instruments such as derivatives. Earlier this year the FCA announced plans to ban the sale of cryptocurrency contracts-for-difference (CFD’s), a specific type of derivative considered especially risky to retail investors.

The UK trade association, CryptoUK, said it supports the introduction of proportionate regulation.

“We will be working closely with policymakers, including in the FCA, to develop new regulation that strikes the balance between ending bad practice and enabling this exciting industry to flourish.”

As 2018 comes to a close, the cryptocurrency industry continues to struggle through a year-long bear market. From an all-time high of over $800 billion in January this year, the market is now worth only $125 billion, a 78 percent decline. However, despite the decline, interest amongst both retail and institutional investors continues to grow and many believe the technology has a bright future. 

Yesterday, somebody transferred 90,000,000 of Ripple’s XRP tokens between two unknown wallet addresses, prompting crypto sleuths to question the purpose of the move. Usually transfers of this size involve the wallet of an easily identifiable cryptocurrency exchange, but in this case, both transaction identities are unknown – making the move that much more suspicious. It was announced today that wildly-popular trading platform eToro has added support for XRP on its eToro wallet, a traditional trading system that now supports both fiat and cryptocurrency. 

However, the more impressive aspect of the equation is the incredibly low cost of the transaction – only 0.005 XRP. The total number of XRP tokens transferred equates to more than $33 million in value but incurred a fee of almost a third of a cent. A similar transfer of fiat currency between traditional banks could easily incur a fee upward of $1 million. In reality, converting the 90,000,000 XRP into usable fiat currency would undoubtedly attract additional fees, but the transaction exhibits the potential that digital assets pose for the future of international remittance.

Disadvantages of XRP

Of course, XRP is not a proof-or-work (PoW) blockchain and as such, doesn’t require any mining, which is why it attracts almost zero fees. This means that while it doesn’t suffer from the high costs involved with mining, some believe it lacks some of the benefits offered by PoW networks. There is some debate as to whether it’s consensus method is superior to that of Bitcoin but since the two technologies are so vastly different, a direct comparison is impractical.

This year has seen Ripple aggressively work towards forming partnerships with banks in order to improve international payments, at one point appearing to challenge the decades-old SWIFT standard used by most financial institutions. With the ability to handle 10,000 transactions per second, it certainly seems more appealing than the slow Bitcoin network. However, as long as the Ripple corporation allegedly controls the majority supply of XRP, it will continue to receive criticism from skeptics regarding its decentralization – one of the key aspects of cryptocurrency.

In a move that seems to echo the way in which traditional banks reward customers with interest by putting their money into markets, OKEx has now begun offering a similar system.

OK Piggybank is the name the Hong Kong-based exchange has given to its margin loaning rewards scheme. The way it works is that the cryptocurrency exchange will lend out user assets to margin traders and then pay back a percentage of interest to the customer. OKEx will keep 15 percent of all profits that it claims will go towards funding insurance for “societal losses” and the remaining 85% will be distributed among OK Piggybank users.

OKEx has been beta-testing the system for over a month now and officially launched the full version to all its users today, December 26th, at 09:00 (UTC +1). Only coins that are available for margin trading on OKEx are supported and include Bitcoin (BTC), Ripple (XRP), Ethereum (ETH), Tether (USDT), EOS, Litecoin (LTC) and Ethereum Classic (ETC).

Deposits and withdrawals are instant and there is no minimum deposit required. 

In a medium post announcing the launch, OKEx lauded the new scheme as a way for crypto “HODL’ers” to profit on their investment even in times of a market downturn.

Echoes of Old Banking

While the scheme sounds like a good idea on paper, it shows an increasing trend by cryptocurrency exchanges to use old-school marketing ploys usually associated with traditional financial institutions. There are already a number of blockchain-based financial platforms offering loans in cryptocurrency and anyone who was around in 2008 should remember the effects that uncontrolled debt can have on the global economy.

Going forward, it will be interesting to see how such a system holds up against leveraged losses in the event of a heavy market crash and whether or not crypto exchanges will continue to adopt the same risky financial practices that led to the creation of Bitcoin in the first place.

On December 1st, Bitcoin was trading at approximately $4,250, but as the month continued, prices plummeted, with the asset eventually reaching a low just under $3,200.

And then, on December 18th, magic happened. The oversold cryptocurrency market, which had dipped below $100 billion in total value and was expected by many to fall even further, recovered in spectacular fashion. Over the course of the past seven days, over $40 billion has been added to the total market capitalization, with the price of Bitcoin alone gaining over 30 percent in value.

Today, Bitcoin stands at almost $4,200, mere inches from recovering all of it’s December losses. Looking across the wider altcoin market, things are even better – Bitcoin SV (BSV), the recent hard fork of Bitcoin Cash (BCH), is up a staggering 98 percent over the past 30 days, with Tron (TRX) up 70 percent and Ethereum (ETH) up 20 percent. The only digital assets in the top 10 that remain down over the past month are EOS and Stellar (XLM), with 15 percent and 22 percent losses respectively.

Making WAVES

Moving outside of the top 10, the trading platform WAVES has undoubtedly been one of the best-performing coins this month. The decentralized exchange platform is up an incredible 253 percent since December 18th, making WAVES the 20th largest cryptocurrency in the world, with a market cap of $385 million. It’s price briefly topped $4.40 last weekend, the highest level in over six months, and the WAVES/BTC trading pair accounted for almost half of all transactions on Binance.

The impressive gains can be largely attributed to the successful funding of the $120 million Vostok ICO, conducted within the WAVES ecosystem. Vostok aims to develop a universal solution marketed towards governments that assists the development of scalable IT infrastructure on a private blockchain. The project plans to conduct an airdrop of 3 percent of all Vostok System Tokens (VST) to members of the WAVES community.

This weeks epic recovery that saw the cryptocurrency market add $30 billion to its overall value and Bitcoin break $4,000, appears to have finally begun leveling out.

Bitcoin has consolidated above $4,000 and seems to be holding support there, while Ripple (XRP) and Ethereum are holding above $0.35 and $110 respectively. Bitcoin Cash (BCH) was one of the biggest surprise winners of the week, tripling its price from around $75 on December 16th to a high of $228 only five days later. However, the asset has since failed to hold support above $200 and is now trading at around $196.

Tron (TRX), on the otherhand, appears to have joined the party a bit late and is only rallying now. The asset is up 22 percent today while most other assets flounder between 2 to 4 percent gains.

So Why the Late Run?

Since it’s successful migration off of its Ethereum ERC-20 standard token to its own mainnet three month ago, TRX has been benefiting from increased network activity due to a throng of gambling and gaming DApps developed on its blockchain. With a recent injection of $100 million of funding into the upcoming TRON Arcade platform that aims to revolutionize the gaming industry, TRX supporters will certainly have reasons to celebrate this Christmas.

Another factor is likely the recent announcement from crypto exchange giant Binance that it will be adding trading pair support for TRX and stablecoin TrueUSD (TUSD). Along with Cardano (ADA) and NEO, Binance began supporting TRX/TUSD trading pairs from December 19th.

The TRON network has grown exponentially in the past few months, with data from TronScan indicating it will soon have over 1,000,000 active accounts. The network recently benefited from a record-breaking 2.64 million transactions in a single day.

While it may just be a late rally, the unique market movement shows a strong indication of decoupling of TRX from BTC and other crypto assets.

End of Year Volatility

While the cryptocurrency market is certainly exhibiting signs of a reversal from its recent year-long bear market, analysts have warned investors to remain cautious. The recent rally could simply be the result of Christmas hype and a lack of significant volume in the market means a downturn in the new year is likely.

On January 22 this year, 71-year old veteran trader Peter Brandt called an 80 percent retrace to sub $4,000 for Bitcoin, based on a general rule of technical analysis.

In an interview with Yahoo! Finance, he spoke of how he had seen other markets that experienced parabolic advances affected in similar ways and it always ends the same – “Prices always fall 80% to 90%,” he said.

Despite the recent rebound that saw Bitcoin rally from $3,200 to almost break back above $4,000, he thinks a test of 2013’s high of $1,200 is still a very real possibility. He cited the tendency for bear markets to retest previous highs before a full reversal begins.

“Crypto won’t have any friends at that point,” he said.

Brandt makes it clear that he is simply pointing out typical movements in financial markets and is no way a critic of Bitcoin or cryptocurrency, stating that a return to the December 2017 high of $19,000 for BTC is still a possibility. Speaking on the current rally, he believes it’s most likely a “dead cat bounce” and will reach $4,600 at best before retracing to sub-$3,000 in the first quarter of 2019.

BTC is currently trading at $3,700, up 10 percent in the past week. Analysis by FXStreet sees the Relative Strength Index (RSI) for BTC/USD reversing to the upside, indicating a possible recovery to $3,800 or above. However, if bears manage to push it below $3,500 then it may only find support around $3,380.

Former International Monetary Fund (IMF) economist Mark Dow, who opened a BTC short at the peak of last year’s rally, has finally closed his position – sending a strong signal that the market could have finally hit bottom.

“I’m done. I don’t want to try to ride this thing to zero. I don’t want to try to squeeze more out of the lemon,” he said in an interview with Bloomberg.

He went on to suggest that he has noticed certain aspects of people’s perception to cryptocurrency changing – in a similar way to how the hype last year told him to short.

“People buy into these assets because they believe the narrative, and you look at the asset prices to see if the narrative is weakening or changing,” he continued, although he did not specifically say that he is now bullish or that he has opened a long position.

Christmas Fever?

The recent bullish rally that has seen $20 billion added to the cryptocurrency market over the past three days has certainly given investors reason to rejoice, but is it just Christmas fever prompted by memories of last years epic bull run?

Ethereum (ETH) has broken back above $100, a significant psychological support level and while some reversal is beginning to show, many assets are up by almost 20 percent this week.

EOS is leading the charge with huge 38 percent gains over the past seven days (30 percent in just the past 24 hours), taking it to 4th position by market cap. Litecoin (LTC) is close behind with 25 percent gains in the week and XRP is up 20 percent, along with the recently consolidated ABC fork of Bitcoin Cash (BCH).

Lagging behind are Stellar (XLM) and Bitcoin (BTC) with only 3 percent and 6 percent gains respectively. Currently, the only digital asset in the red is the other Bitcoin Cash hard fork, Bitcoin SV, with a 3 percent decrease in value.

Manage Expectations

There are still a number of factors that could sway the market in either direction, most notably manipulation and “pump ‘n dump” schemes. Bitcoin miner and investment banker Nic Puckrin recently wrote an article for CCN explaining ways in which institutional investors can, in fact, be bad for the market in the long-term and how we can work to reduce the harm.

In another article from The Star, the publication highlights research into the prevalence of pump ‘n dump schemes in the cryptocurrency market from January to June this year – although this will hardly be news to those deeply entrenched in the community. It points out how lack of regulation allows perpetrators of P’nD schemes to operate transparently and without fear of reprisal.