[header date=”11 September 2018″]The bottom falls out of ether markets, Facebook hires blockchain talent, and India’s supreme court hears a crucial case on crypto trading.[/header]
The market’s message
One ether is still worth one ether, so there’s that. It’s cold comfort to some investors, as the price of ether recently dropped below $200 for the first time in more than a year. But users can still transact on the Ethereum network, deploy smart contracts, and interact with decentralized applications. Ether can trade for more than $1 million or less than a penny, and how it functions will remain the same.
Ether was trading for $400 just last month, so what’s behind the steep decline in price? For most market watchers, it’s something to do with the negative feedback loop of ICO liquidations and general panic selling. Hefty short positions suggest that the downward pressure may persist.
[img src=”https://cms.qz.com/wp-content/uploads/2018/09/ETH-BTC-USD-Sept-2018.png”]
Even if blockchain developers say they ignore prices, it lurks in the background, a looming threat to drain the funds they raised to finance future programs for Ethereum’s “world computer.” As ether drops, developers are forced to confront whether investors are actually in for the long term—the arduous innovation and uncertain prospects of blockchain-based networks—or just looking to make a quick buck. Breathless coverage of token prices suggests that the latter is common approach to crypto investing.
For those preoccupied with ether’s price, rather than its alleged utility, it’s worth noting that not even Ethereum’s creator, Vitalik Buterin, is all-in on the network as a financial investment. In April 2016, when ether traded for around $10, Buterin wrote that he had sold about a quarter of his ether holdings. “I am not going to apologize for sound financial planning,” he said.
Later, when ether was trading at around $900 this February, he was equally principled: “If you’re trying to figure out where to store your life savings, traditional assets are still your safest bet.”
Still, Buterin was the one who helped launch a network with tokens that he acknowledges are intrinsically worthless, at least for now. Why didn’t he wait to devise a platform with an equitable distribution model and a proven use case, aside from speculation?
We’re almost a year removed from Buterin stressing the “need to differentiate between getting hundreds of billions of dollars of digital paper wealth sloshing around and actually achieving something meaningful for society.” It’s hard to see how his invention has made any difference beyond inflating the crypto bubble. Non-state virtual currency is interesting, but wasn’t Ethereum supposed to be something even greater? —Matthew De Silva
[supplemental headline=”Meanwhile, in Menlo Park…”]
What’s up with Facebook’s blockchain plans? The social media giant’s careers page now features six job openings for its blockchain team, which the company describes as “a startup within Facebook.” There are five marketing and policy openings in the Bay Area but only one technical role—for an Israel-based software engineering manager—on offer. Facebook already has a handful of staffers on its blockchain team led by former Messenger lead David Marcus, including Christina Smedley (head of brand and marketing) and Evan Cheng (director of engineering).
[takeaway]It’s now nine months after founder Mark Zuckerberg mentioned decentralization as part of his annual personal challenge, and we’re none the wiser about how the company might benefit from blockchain tech. ➡️[/takeaway]
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View from India
After an unsettling wait lasting nearly two months, a crucial legal battle between Indian government watchdogs and the crypto-trading industry is finally coming to a close.
The supreme court will start its final hearing tomorrow (delayed by a day), which will examine cases filed by the digital-asset exchanges against the Reserve Bank of India (RBI). In April, the banking regulator dealt a body blow to booming cryptocurrency platforms in India by forbidding them from maintaining accounts or business relationships with banks.
As a result, rupee-denominated deposits and withdrawals have been unavailable for virtual-currency trading since July, causing a dramatic decline in the amount of buying and selling. On average, volumes have fallen to one-tenth of their peak levels, according to industry experts.
Exchanges have adapted by focusing on peer-to-peer transactions and crypto-to-crypto trade to circumvent the ban. Some are trying to escape the RBI’s crackdown by shifting their headquarters to more crypto-friendly nations such as Malta and Switzerland.
The industry also fought back by dragging the RBI, Indian government, the income-tax department, and the markets regulator to court in April. Now, following a few preliminary hearings, the final proceedings are about to begin, with a verdict expected soon thereafter. In earlier discussions, the cryptocurrency industry told the RBI that it is open to more scrutiny in exchange for more business-friendly rules.
So far, the central bank has been adamant about not relaxing its policies. It believes investing in bitcoin and its ilk is fraught with risks like extreme volatility and scams. It has also argued that digital coins have no intrinsic value. Moreover, the anonymous transactions can circumvent banks and help facilitate money laundering and other illicit finance.
As the final hearing begins, the cryptocurrency industry in India isn’t too hopeful. At best, the court may ask the RBI to reconsider the ban; at worst, the situation will remain unchanged, according to people who work at crypto exchanges.
Trading will likely continue even if the worst-case scenario unfolds. But the amount of buying and selling will probably remain contained and grow only slowly. —Nupur Anand in Mumbai
[supplemental headline=”De-jargonizer: Bag holder”]
Have you ever held on to an investment until it became worthless? Watching your hard-earned money dwindle down to zero is a painful—but invaluable—experience. It teaches you to do your homework, to question your premises, and reconsider whose advice you take seriously.
The cryptocurrency world has adopted the term bag holder from traditional financial markets, but with a slightly more pejorative meaning. It’s often used to question a person’s motives, not just their acumen. A bag holder can be a person who naively sinks their paycheck into a trendy-but-doomed ICO or who shills a thinly traded altcoin, ostensibly to dump their holdings onto somebody else.
[mailto filter=”Jargon” subject=”De-jargonize this”]What other terms should we de-jargonize?[/mailto]
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Crypto calendar
🗣 Sept. 19-20: Consensus Singapore. The CoinDesk-led event will feature conversations on gaming, mining, and blockchain forensics. Quartz reporter John Detrixhe will interview Don Wilson, founder of trading powerhouse DRW, on stage. If you’re there, say hello!
🤝 Sept. 25: Capitol Hill Round Table. Warren Davidson, a Republican Congressman, will meet with blockchain and crypto industry figures, such as VC Andreessen Horowitz, crypto advocacy group Coin Center, and exchange operator Kraken. The discussion will focus on fostering “light-touch” ICO regulation.
🗣 Oct. 1-2: Ripple’s Swell Conference. Bill Clinton is a keynote speaker at the San Francisco event this year. At last year’s gathering, ex-Fed chairman Ben Bernanke told attendees, “Bitcoin is an attempt to replace fiat currency and evade regulation and government intervention. I don’t think that’s going to be a success.”
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