[header date=”23 November 2018″]Tether is under the government’s microscope, a key Coinbase exec moves on, and Bakkt is on hold, again.[/header]
What you need to know—and why
The bitcoin slump isn’t as bad as 2015 (yet). The financial media has been dominated by bitcoin price consternation this week, as the digital gold seems to be turning into fool’s gold. With headlines announcing bitcoin’s “new 13-month low” it’s clear we’re in a funk.
[takeaway]Historical comparisons offer consolation, but unfortunately, they don’t mean much. That’s because today’s percentages gains and losses are much larger in absolute terms. Crypto coverage has always been an emotional rollercoaster and this time is no different. Buckle up. ➡️ [/takeaway]
The US justice department scrutinizes Tether. The DOJ has been examining whether price manipulation played a role in the stunning rise of bitcoin and other cryptocurrencies during 2017. According to Bloomberg, the DOJ is closely studying Tether, a token supposedly pegged to equivalent US dollar reserves that enters the cryptocurrency markets exclusively through Bitfinex, a large exchange which shares a management team with Tether.
[takeaway]Rumors about Tether-linked manipulation have been floating around since at least early 2017. In fact, one particularly aggrieved cryptocurrency enthusiast who goes by “Bitfinex’ed” documents his or her suspicions on Twitter. As the price of bitcoin thuds lower and lower, Bitfinex briefly reclaimed the top spot for bitcoin trading volume on its BTC/USD pair—a development raising eyebrows. ↗️[/takeaway]
Mining manufacturers may delay their Hong Kong IPOs. Bitmain Technologies Holding, which operates mining pools Antpool and BTC.com, as well as Ebang International Holding, another large mining equipment maker, might put off plans to go public, reports Nikkei Asian Review. This follows Canaan—yet another Chinese bitcoin mining manufacturer—allowing its IPO application to expire this past week.
[takeaway]The fortunes of miner manufacturers (and especially mining pool operators) rise and fall with the price of bitcoin, and that makes Hong Kong regulators uneasy. Leonhard Weese, president of Hong Kong’s Bitcoin Association, says wariness among regulators about crypto business models is to blame. “The sentiment is still that this is just a fad, and why allow companies to IPO that they believe will go bankrupt soon?” ➡️[/takeaway]
Coinbase’s chief policy officer leaves for a venture capital firm. Mike Lempres, who previously served as the exchange’s chief legal & risk officer, will join Andreessen Horowitz (a16z), reports Bloomberg. Earlier this year, a16z opened a $300 million dedicated crypto fund.
[takeaway]Lempres’ departure isn’t altogether surprising. Coinbase recently transitioned Lempres into the policy role when it brought on Fannie Mae’s Brian Brooks as general counsel in September. However, at a time when the cryptocurrency markets are going through upheaval (and drawing even more attention from regulators), it would’ve been nice to have the veteran Lempres in the room. It’s not immediately known what his role will be at a16z. ➡️[/takeaway]
The US embraces multilateralism, at least for crypto crimes. The US has been going its own way lately, but deputy attorney general Rod Rosenstein called for a “multinational response” to cryptocurrencies in remarks to the Interpol General Assembly. Rosenstein noted bitcoin’s role in money laundering, scams, and ransomware hacks like the WannaCry attack. While noting that there are some “legitimate uses” for virtual currencies he said “we must work together to make clear that the rule of law can reach the entire blockchain.”
[takeaway]Cryptocurrencies have reached the highest level of discussion—and yes, coordinated oversight—on the international stage. As Rosenstein noted, the US included cryptocurrencies in anti-money laundering regulations. In March, the US Treasury even raised the possibility of adding specific wallet addresses to its list of sanctioned persons and groups. ↗️[/takeaway]
[supplemental headline=”Chart interlude”]
As bitcoin’s price declines, its hash rate is falling, too. Since peaking at 53.6 million tera hashes per second on October 4, bitcoin’s hash rate has steadily declined, indicating that miners are turning away from the cryptocurrency. Some of that mining power might be diverted toward the new forks of bitcoin cash, while other miners may simply have abandoned the industry if the price of bitcoin falls below their cost of mining it.
[img src=”https://cms.qz.com/wp-content/uploads/2018/11/Bitcoins-hash-rate-during-the-last-two-months.png”]
Note: 1 tera hash is 1 trillion hashes.
[mailto filter=”Chart” subject=”Here’s a chart idea…”]Got a killer chart idea? Let us know[/mailto]
[/supplemental]
Crypto meets finance
When the Intercontinental Exchange—the owner of the New York Stock Exchange, among other bourses—announced it was backing a cryptocurrency exchange called Bakkt in August, it was yet another sign that the digital assets were moving out of the shadows and into the mainstream of finance. But like a lot of assumptions made about crypto earlier this year, that might have been premature.
Bakkt (like “backed” – get it?) was originally scheduled to begin operations this month, but is now on hold until at least January 24, according to a post on Medium by Bakkt CEO Kelly Loeffler. This is the second time the exchange has postponed its launch date, after previously aiming for Dec. 12.
[takeaway] Bakkt seems to be the trading platform to coax any still-wary investors into the market. With blue-chip partners like Microsoft and Starbucks and the promise of insurance for crypto in storage, Bakkt projects reliability and security, with the small problem that it does not yet exist. Delays and unexpected obstacles happen, but its postponement during bitcoin’s tumble is worrying. Its investors are no doubt hoping it launches while there is still bitcoin to trade. ↘️ [/takeaway]
[supplemental headline=”Reasonable Doubt”]
Are blockchains good for anything? Long-time Uber executive Sam Gellman (one of the company’s first 50 employees) doesn’t seem to think so. This week, he decried on Twitter that the $30 billion wave of investment in blockchain-related ventures has generated virtually no apps with “a real user base for anything other than speculating on crypto.”
When respondents pointed out that the problems blockchain is trying to solve are gargantuan (e.g., restoring data ownership to end users), Gellman was unpersuaded. “Blockchain hasn’t even shown progress or hope outside of store of value. At that point you have to say $30bn is crazy and we should re-evaluate. I’m not asking for Mars I’m asking for 10,000 daily users.”
“My main question is when does enough time pass and enough money get burned and enough smart people fail to create something interesting that the religion of crypto starts to become past tense. I think my son will use blockchain about as often as I do 😆” he concluded.
[/supplemental]
Regulatory Watch
India’s draft regulations for cryptocurrency could be ready next month. That’s per a counter-affidavit filed on Nov. 19 by the Narendra Modi government (and reviewed by Quartz) in the Indian supreme court. India’s top court is hearing a case filed by a clutch of cryptocurrency exchanges who accuse the government and the central bank of choking the ecosystem. The court document reveals that the government is preparing a draft bill “on virtual currencies, use of distributed ledger technology in (the) financial system and framework for digital currency in India.”
[takeaway]Cryptocurrency exchanges have steadily been driven out of India. Even if new regulations give crypto some breathing room, it might be too little, too late. ↘️[/takeaway]
[supplemental headline=”Hacks, scams, and capers”]
From victim to villain. Nicholas Truglia seems to have a nose for crypto trouble. In October, the Manhattan resident claims a group of young men he met in a club got him drunk, and tortured him into revealing his crypto pass codes—linked to $1.2 million in bitcoin—then stole his laptop and mobile phones. While it’s unclear if any cryptocurrency was actually stolen, the police investigated and four men were arrested and released, with a March court date, according to the New York Post.
Now Truglia is on the opposite side of the law. He’s accused of bilking a Silicon Valley executive of $1 million in bitcoin by hacking his phone and emptying his Coinbase and Gemini accounts, also per the Post. Police allege Truglia persuaded a mobile phone company to give him access to the phone of San Francisco’s Robert Ross, a scam called “sim switching.” Police say Truglia targeted other executives, including Saswata Basu, CEO of blockchain storage company 0chain, but only stole crypto from Ross. Truglia was arrested, and $300,000 of bitcoin was recovered.
[/supplemental]
Calendar
🗣 Nov. 27 Consensus: Invest. Hosted by CoinDesk, the one-day event in New York “will forecast the evolution of digital assets through 2019, and will focus on how digital securities, commodities, and utility tokens will drive the boom behind the alternative financial system.” SEC chairman Jay Clayton will be present for a fireside chat. Be sure to ask him when the commission will approve a bitcoin ETF.
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