Their Goal: Make Cryptocurrency Less Scary

If you have a tough time with the idea of putting even a dollar of your net worth into a digital cryptocurrency — Bitcoin, Litecoin, Ethereum, and the like — no sensible person would blame you.

Aside from the price fluctuations, there’s the question of who’s protecting those digital assets. Is it an institution like QuadrigaCX, an exchange for cryptocurrency run from its founder’s laptop, which reportedly lost $140 million in customer funds after the founder died in India in December? Or one like Tokyo-based Coincheck, which had $532 million in cryptocurrency stolen by hackers in January 2018?

“Every time I see one of these exchanges get hacked, or the founder take off with money in some kind of scam, it’s another reminder of how immature this industry is,” says Matthew Walsh, a former Fidelity Investments vice president who helped launch a private fund that invested in cryptocurrency there. “It’s bordering on a joke how immature the infrastructure is — and how dangerous it is.”

But for a growing group of venture capital firms and startup companies in Boston, the dangerous and mostly unregulated realm of cryptocurrency represents an opportunity. They see these digital currencies — which can store value and operate independently of government-controlled monetary systems — eventually becoming as safe for investors as a Bank of America money market fund. That, however, is going to require a lot of new technology. Which they plan to build and sell.

Walsh’s new venture capital firm, Castle Island Ventures, is among them. After he and cofounder Nic Carter left Fidelity, they raised $30 million to invest in what Walsh says is a “whole new category of infrastructure” required to make cryptocurrency safer and more reliable.

Sharon Goldberg and Ethan Heilman cofounded Arwen, a Boston startup trying to make cryptocurrency exchanges more secure.

“The reason we launched the fund is we think a lot of these cryptocurrencies will be investible assets,” Walsh says — even if they don’t feel that way to most mainstream investors today.

Castle Island has already invested in six startup companies, Walsh says, and other local firms like General Catalyst, First Star Ventures, Highland Capital Partners, and Underscore VC have also been writing checks to fledgling cryptocurrency companies.

Highland and Underscore helped incubate a startup called Arwen, founded by a Boston University computer science professor and her doctoral student.

“We’re in the early days,” says Arwen CEO Sharon Goldberg. “But let’s go back to 1999 and using credit cards on the Internet. Nobody wanted to put their credit card number into a website. But you do today, because you trust the encryption. You see that little lock in your browser.”

Goldberg is taking a sabbatical from teaching to build the company, which has eight employees and earlier this month moved out of Underscore’s space into its own office.

She points out that cryptocurrency is designed to be a “decentralized” system — there’s no central bank regulating how much of it there is, just software code running on computers. Yet if you want to exchange one kind of cryptocurrency for another, or turn cryptocurrency into dollars or yen, you need to entrust that transaction to a centralized exchange. “Centralized exchanges are the way to trade this decentralized currency,” Goldberg says. “It’s strange.”

So Arwen is creating a layer of technology that would enable you to convert one currency into another securely, even if the exchange gets hacked or goes offline in the middle of a trade. Arwen’s technology is based on something called an “atomic swap,” which Goldberg explains using the metaphor of a briefcase full of cash. If two people intend to swap briefcases filled with two different kinds of currency, the risk is that you hand your briefcase to the other person and they run off. An atomic swap ensures that each person get the other person’s briefcase, even if the other person tries to split.

Late last month, Arwen launched a “sandbox” environment for demonstrating the technology, and Goldberg says the company is talking with prospective customers. “The majority of our customer calls are outside of the US,” Goldberg says. “In Japan, for instance, there are just a massive number of companies creating ways to buy cryptocurrencies.”

Why is the United States behind? “Regulation is stronger here, and other institutions are more trustworthy,” she says.

Arwen is working on “an important problem” and it could prove “a key missing piece needed to get wider adoption of crypto assets as a real investment asset class,” says Drew Volpe of Boston-based First Star Ventures.

Volpe’s firm last year put money into Everbloom, which is building its own cryptocurrency exchange that tries to solve the issues of trust and reliability “from the ground up.” Everbloom, he explains, is a decentralized exchange that never has to take ownership of the asset itself — similar to Arwen’s approach, the trades happen “trader to trader” using the same atomic swap idea.

Two things could happen to make holding and trading cryptocurrencies more trustworthy, observes Boris Revsin, managing director of Republic Labs, a firm that has made recent investments in the cryptocurrency sector.

One is that trusted financial services brands like Fidelity or Charles Schwab will launch cryptocurrency-related products and services and “offer recourse if something terrible happens” to your money, he says.

But the other is that non-brand name exchanges that today are not trustworthy could start to incorporate technology from Arwen or other companies like it, and begin to build trust with investors.

Either of those scenarios, Revsin says, could encourage more asset managers and investors to move some of their assets into cryptocurrency.

In case you haven’t been tracking it closely, the price of Bitcoin is down almost 60 percent from February 2018. But over two years, the price has risen 240 percent, and more than 800 percent over three years. It’s a risky place to keep your wealth today — but investors and entrepreneurs are betting that just as credit card transactions on the Internet became more trustworthy, that will change.


Source
Author: Scott Kirsner
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51 percent Ethereum Classic hacker returns $100,000 in stolen cryptocurrency

An exchange has mulled over the possibility of the hacker being white-hat, but $1 million is still unaccounted for.

 

The cyberattacker believed to be responsible for a 51 percent on the Ethereum Classic (ETC) blockchain has returned $100,000 in stolen proceeds, while keeping roughly $1 million.

According to Gate.io, the funds were returned last week but it is not known why the cryptocurrency has been returned, or for what purpose — and efforts to contact the hacker have proved fruitless so far.  

“We still don’t know the reason,” the cryptocurrency exchange said. “If the attacker didn’t run it for profit, he might be a white hacker who wanted to remind people the risks in blockchain consensus and hashing power security.”

This is a possibility, but even so, the potential ‘white hat’ has still kept a fortune in cryptocurrency for themselves following the attack.

The ETC blockchain was the victim of what is known as a 51 percent attack starting on 5 January, leading to the theft of $1.1 million in the Ethereum Classic cryptocurrency. 

51 percent attacks force a blockchain to reorganize and permit attackers to seize control over transactional power of a network. In this case, it is believed over 100 blocks were reorganized.

If they manage to wrestle control of over 50 percent of the network, they are given leave to modify and execute transactions, as well as reverse transactions after they have been confirmed. This is known as “double spending.”

Theoretically, 51 percent attacks could take place on any kind of blockchain, but it does take access to a vast amount of computing power to execute these types of attacks.

Coinbase identified a total of 15 attacks, 12 of which included double spending in order to steal 219, 500 ETC. In an analysis of the attack, SlowMist researchers documented transactions involving thousands of coins at a time taking place.

“We believe that due to the recent decline in blockchain funding, the net mining power of the whole network has declined,” the researchers said. “You have really felt the impact of the 51 percent on ETC, and it is foreseeable that the attack will increase rapidly with the cost of attack reduced.”

Some of the funds have been returned but this does not mean that the blockchain is safe from potential attacks by the same hacker in the future, or copycats who also possess the means to conduct 51 percent attacks.

Gate.io says that the hashing power of the ETC network is still not strong enough to fend off these types of attack and that the possibility exists of enough hashing power being rented out to hit the blockchain again.

“Gate.io has raised the ETC confirmation number to 4000 and launched a strict 51 percent detect for enhanced protection,” the platform added. “We also suggest other ETC exchanges take actions to protect the trader from blockchain rollback/reorg.”

SlowMist recommends that exchanges and pool operators increase their block confirmation times as a matter of urgency to mitigate the risk of 51 percent attacks. Both Gate.io and Bitfly have done so; however, if enough computing power is in play to permit over 50 percent of the network to be in an attacker’s control, block confirmation extensions may not be enough.


Source
Author: Charlie Osborne
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Expect ‘Large increase’ in Cryptocurrency Taxes Filed for 2018, Says Bittax CEO

Why did you decide to launch Bittax? Are Bitcoin taxes too cumbersome to calculate for the average person? 

Gidi Bar Zakay: I’ll admit that, like everyone else, I was also prejudiced against bitcoin. But when I was approached by the tax authority while serving in a public position at the Institute of Certified Public Accountants and was asked to comment on a circular that they intended to issue regarding bitcoin, I realized it has potential. That this is what the world needs right now.

Not everyone can calculate crypto taxes from their own home. The regular and familiar calculation method – FIFO (First in First Out) – isn’t so simple to calculate either, but calculating tax in a way that will simultaneously represent the actual activity in coins, prevent double taxation caused by the exchange of altcoins, allow the user to present the whole image, prevent data omission and save tax payments on activity that does not reflect an actual transaction, is a complex task which cannot be performed with Excel or a simple calculator at home.

Is your service aimed at Israeli citizens only or is it global?

The service is currently active in Israel but will soon be exported to the USA and then to Europe.
Our company is currently only listed in Israel, but it is expected to operate internationally.

How does it work – how much is it? Is it simply a self-service calculator or do you have experts that can help clients directly? 

This is how the system works: the user copies their addresses into the system and receives a full overview of their activity.

The users indicate which transactions belong to them, which were forwarded to a third party and which are taking place at the exchange. If the users do not remember certain transactions, the system will make recommendations and attempt to help them remember.

If the users have reached a full overview, the system will warn them of the missing data. The system is unique because of its calculation method. The system does not use the regular and common methods but performs a specific identification of the coins sold and calculates the tax liability accordingly.

This method, patent pending, of which is in the process of being registered, reduces the tax liability by 70-25%, according to the type and scope of activity.

Of course, if the user requires assistance, we are available to guide and assist as much as possible.

What kind of approach does the Israeli government have on cryptocurrency taxes?


The Israeli tax authority treats cryptocurrency as assets and taxes the profits through the capital gains tax. This decision does not come as a surprise – many governments around the world made it, and it is somewhat understandable. Most people don’t use cryptocurrencies at coffee shops and grocery stores, but as instruments for investment and trade.

Once any person would be able to use bitcoin for daily purchases, I believe that most governments will acknowledge it is a tax-free coin.

How many people around the world do you estimate owe cryptocurrency taxes today? In other words, how big is your potential market? 

When examining the activity data from the different exchanges, we are looking at hundreds of millions worldwide.

How many of them currently pay taxes?

Very few. This process will take time, for both the users and the authorities.

Once the coin owners will understand that regulation will result in international adoption of the coins, and the governments will understand how to collect these taxes and how to proactively approach the users, this process will unfold naturally. I expect to see a large increase in the number of reports filed for 2018 in two or three months and an even greater increase in the reports for 2019.

Bitcoin Taxes

A poll in April 2018 revealed most people saying ‘you’ll never catch me’ when it comes to paying taxes on their crypto gains. Is this a problem for the tax agencies? Is it difficult for the gov’t to determine whether an individual owes taxes in this case? 

We’ve heard these statements from the global crypto community, and we can understand them. As a group, we believe in the ideology of a decentralized system and find it difficult to accept that someone else does not view crypto as a coin and demands taxes for it. But today, we can see that the authorities around the world receive the information.

The authorities approach some of the exchanges and demand to receive the data. Many countries grant them the power to do so. Some of the exchanges share the information following the authorities’ request, and once the data is in their hands, it is not difficult to reach the users.

Do you think the bear market of 2018 was partially due to the billions owed in taxes from the previous year resulting in ‘massive selling’ as Tom Lee suggested?

I think that the market’s decline is the positive outcome of people who tried to use crypto in order to make easy money without actual activity backing it, and then left when they realized that the celebration is over. I think that the market is in excellent condition. Those who stayed are the people who truly believe in the future of cryptocurrency and are genuinely interested in developing it.

Considering that 2018 was a downward year for cryptocurrency prices across the board, would filing taxes on crypto losses be particularly recommended this year?

If someone had a profitable activity at the beginning of 2018, through coins or other capital channels, it would be helpful for them to report their losses at the end of 2018. However, it will not be possible to offset losses incurred in 2018 against the huge profits gained in 2017.

What is the best jurisdiction to consider for people who’d like to pay little to no crypto taxes? 

The authority to which crypto-related taxes are paid is determined by the user’s tax residency. The tax residency is determined by, among other things, the number of days spent in the country during the relevant year.

Some countries are friendlier towards cryptocurrency, and I’ve heard of some that even treat crypto as a coin. But will a person leave everything and move to another country simply for tax considerations? Then they must have an abundance of crypto… I would love to meet that person. It’s possible that the entire world has been looking for their identity for the past few years.

What are your predictions for the upcoming year? Do you expect more and more people to start paying cryptocurrency taxes?

I believe that in 2019 we will be looking at a continued effort to closely supervise the crypto market by the authorities, accompanied by an increase in tax payments by the users. What matters now is making sure that the privacy of the tax-paying users will not be affected.

Therefore, we are working on a solution which will maintain the privacy of the users throughout their relationship with the tax authorities, and will only expose the necessary information, addresses and personal data not included.

This solution will be beneficial for both the tax authorities and coin owners around the world because it’ll be worthwhile for the users to report their earnings willingly and not wait for the authorities to locate them.


Source
Author: Allen Scott
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Cryptocurrency Conferences Continue to Thrive Despite Industry Downturn

Over the last year, cryptocurrency prices have dropped significantly and mainstream attention has been waning in recent months. However, according to recent data, the digital currency and blockchain conference circuit did not see a steady decline during the last six months of 2018.

 

Digital Currency and Blockchain Focused Conferences Are Still Trending

Cryptocurrency and blockchain related conferences did not see a decline in popularity last year. The number of crypto-infused events held was a stark contrast to the many other sectors within the digital asset economy, according to recent data collected by the analysis site Tradeblock. In 2018, cryptocurrency conferences really started heating up and event organizers pulled in millions from steady ticket sales and initial coin offering (ICO) exhibition booths. For instance, last year at Consensus Week (May 11-17) in New York the conference scored a whopping $10.5 million with event tickets being sold for $1,500-2,000 for all 7,000 attendees.

In fact, blockchain conference tickets sold for big money all year long and most of the events in 2018 sold out. The two-day Ethereum Ethereal Summit hosted by Consensys sold tickets for $1,300 a pop, even after Vitalik Buterin publicly spoke out against expensive conference tickets and rampant scams. The Women on the Block conference on Mother’s Day sold for $299-599, and Token Summit on May 17 sold out its early bird tickets at $649 and sold the rest of the seats in the house for $979. Last May, the company Eventbrite was selling NYC Blockchain Tech & Invest Summit tickets for $899-$1,299 per person.

In the face of massive layoffs, the declining cryptocurrency market values in 2018, and tickets selling for hundreds and even thousands of dollars — Blockchain conferences have remained unscathed from the faltering crypto economy. The well known provider of institutional trading tools and digital currency data Tradeblock explained this week that 2018 blockchain event organizers continued to host conferences all around the world.

“Despite the crypto bear market during 2018, the number of industry related conferences did not see a steady decline in the latter half of the year,” the analytical data website Tradeblock detailed on Thursday.

Cryptocurrency Conferences Continue to Thrive Despite Industry Downturn

Pricey Crypto Events See Sold Out Exhibit Halls and Thousands of Attendees

Many of the 2018 blockchain events had upwards of hundreds to thousands of attendees, according to the vast list of conferences held last year. The Paris Fintech Forum saw 2,000 guests, Finovate Europe 1,400, Malta Blockchain Summit 9,500, Cryptocurrency World Expo Berlin 1,600, Blockchain Summit Vienna 2,000, Deconomy South Korea 2,000, Blockchain Conference Moscow 2,000, and the Blockchain Expo Global in London saw 6,000 participants. Blockchain conferences saw appearances from numerous cryptocurrency developers and blockchain luminaries as well, such as Tim Draper, Joseph Lubin, Changpeng “CZ” Zhao, Vitalik Buterin, Charlie Lee, Balaji Srinivasan, and many other speakers.

2019 cryptocurrency and blockchain related conferences are still in full swing as there are many scheduled for the next few months already. There are conferences such as Blockchainge DC, Crypto Investor Show Manchester, TNABC Miami, and the Binance Blockchain Week event. Some of these conferences will host up to 4,500 people depending on the blockchain event. Even though online attention and crypto trends may be dwindling, the general public is still very inquisitive toward cryptocurrency and blockchain focused events.

What do you think about the cryptocurrency and blockchain conference circuit still thriving? Did you attend any blockchain conferences last year? Let us know what you think about this subject in the comments section below.


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Author:  Jamie Redman
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Investing Through The Eyes Of A Crypto Trader

The last few years could rightfully be described as a rollercoaster when it comes to cryptocurrencies. Bitcoin became a household name overnight, and just as quickly, its bubble burst. Initial coin offerings (ICOs) enjoyed a boom but now their success is dwindling. Meanwhile, security token offerings (STOs) and other breakthroughs are vying to fill the void.

 

To navigate and understand where the cryptocurrency market is headed, I spoke to Anatoly Radchenko, the CEO of United Traders, which is an advanced investment and financial services company. At the age of 28, Radchenko was named the Best Private Investor twice and started a hedge fund. He has significant experience with financial markets in general, and a unique first-person perspective on trading cryptocurrencies.

Over the past year and a half, the crypto industry has become quite well-known. What happened?

“The period from 2016 to 2017 was the most interesting in the crypto market. ICOs appeared on the scene, and everyone had very high expectations. These prospects are still there today, but are much more grounded. In the beginning, expectations were too high, and were in a very short timeframe. That is why everyone quickly became disillusioned and the bubble burst—and why 2017 was very difficult for all traders. Even with top funds like Novograts and Pantera Capital, investors lost about the same amount as if they personally held bitcoin”.

Radchenko explains that in traditional markets, not all assets are correlated with the market—but with the crypto market, all assets fell alongside it. It was difficult to find a safe haven. So 2017 taught traders, especially new ones, that the markets are quite volatile. Many traders used leverage, which led to large losses and eventually to the elimination of all positions. They came with high expectations for a quick profit—and it did not quite pan out – he added.

Can we expect a rebound in the market?

“I think that the drop is a good thing, because a drop in value will ultimately lead to a decrease in volatility. When a large number of people have at least one bitcoin each, they press the button and the losses snowball. Now, though, most bitcoins will once again belong to large holders. This will reduce the circulation of bitcoins in the market, which in general should stabilize the markets a little bit. Such a strong drop also made investments possible for many serious players who were suddenly able to afford it”.

Radchenko is circumspect on what will happen next since, of course, everyone has different predictions about what will happen with cryptocurrencies—to the point that many experts are sick of being asked what they think at all. Wall Street’s main advisor has said he is tired of forecasting crypto, and recently wrote on Bloomberg that he is refusing to comment on the topic.

“We even decided to make a little joke out of it with a fun, quick quiz where anyone can predict what comes next”, Radchenko adds.

Do you think cryptocurrency prices were manipulated—and if so, by who and how?

“In principle, when the price was at $6,000, everyone understood that, okay, someone buys, someone sells. But with sharp movement from $6,000 to $3,000, many people got knocked off track. And it happened without any significant events. I do think Tether and Bitfinex, which are being probed by the Department of Justice, are at play here. I also think this may be some kind of manipulation by the same bitmix”.

Radchenko explains that a bitmix is an exchange which accepts only bitcoins. It is very easy to register. Most people—let’s call them gamblers—switched to this platform and there was high turnover. If you look at the volume on the bitmix, the total could reach 5 or 6 billion a day relative to the volume on the Binance and Bitfinex exchanges. So it turns out that we find ourselves in a situation widely talked about in classical markets: the volume of derivatives, which in one way or another indirectly affect the underlying asset, or spot price of the asset itself, is much higher. This holds true for gold and oil too. And with crypto, we do not have regulation or a central supplier, so prices differ everywhere. There is a lot of systemic and financial risk.

What are some rules for investing in crypto?

A great rule is to try to invest in large projects, because money tends to go toward money—that is, projects with good marketing. Another good rule is that there is no need to try to guess the bottom. It is better to allocate your assets evenly and in equal parts into different projects, because, once again, the price now does not reflect anything. As we recently saw, iOS just grew 30% in a day. Why did this happen? Nobody knows. And you will never guess whether it will start growing today or tomorrow. It is necessary to be patient and not try to look for the bottom.

With regard to the challenges traders faced in 2017, it’s hard to be happy when people lose money because of their inexperience. But the most important thing a trader must understand is that, even if he has been mistaken when it comes to his predictions and transactions, all is not lost. The market will be there tomorrow and the day after tomorrow and in a year. A trader must always have a margin of safety (or cash) in order to somehow correct a situation that has gone wrong. Do not go all-in and expect instant results. Gamblers get mowed down.

How do scam projects affect the industry and the value of currencies? Do a large number of them affect the cost of other cryptocurrencies?

Scam projects have always existed and will always exist. Most people try to focus on good projects, but there have always been both bad and good projects and novice investors might not be able to tell the difference. But I do not think most projects that failed were necessarily the result of organized criminal groups, for example. They did not intend for the funds to disappear. A lot of guys who raised money for ICOs had no background building businesses, and knew nothing about corporate culture or hiring staff, much less how to conduct B2B and B2C relations. They just had an idea, investors invested a lot of money in the idea, and the idea did not go anywhere. Plus, the crypto market fell. It was kind of a game, and they lost. I do not think most people wanted to throw their investors under the bus.

What trends await us in 2019? Maybe some that will be transferred from 2018 and so on?

The first is the development of various protocols, services, and chains for bitcoins, like Lightning. These are faster, reliable, simplified ways of banking and the user experience will only continue to improve in 2019. The second is the emergence, I hope, of the framework for security tokens. When companies collect money, they can only issue tokens a year later, so this year we will see how Telegram tokens, for example, will behave. Also, as services like Facebook have their own internal currencies (like it’s said to be creating for WhatsApp transfers) it will drive adoption so that people start to understand how, say, the Facebook cryptocurrency differs from Bitcoin, what decentralization is in general, and why it is needed. Finally, we will also see the use of blockchain technology by corporations.

Can you talk about how the ICO boom happened and whether it will happen again?

It can easily happen again, but it will just be called something else and have another mechanism. The rules will change a little bit, the names will change, the marketing will change, and the boom will repeat. I think security tokens will be the next boom.

And what is the importance of security tokens now for the industry?

The fact that your rights are described, and, roughly speaking, the company has some responsibility. These security tokens can have dividend distribution properties, they can have voting properties — that is, they can have properties like a security, but they can be stored and transmitted to each other like tokens.

With security tokens it is always clear how many there are, where they lie, who they lie with, how to find a buyer, seller, etc. It will help to make the market liquid and transparent. That is, it can lower the barriers for medium investors to invest during the earlier stage of a company. As a rule, all the best companies look at how they can attract Google Ventures, Andreessen Horowitz, Sequoia, and so on. But security tokens can also drive the democratization of investments in good companies.

How will current utility tokens, including security tokens, be regulated in the future?

This is actually, probably, one of the most difficult issues, and, in my opinion, no one knows, and everyone is waiting for that answer. I think the Security and Exchange Commission should listen to other regulators from other countries and figure it out. They cannot simply talk about how thing should be.


Source
Author: Gerald Fenech
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10 Crypto Events You Can Expect to See in 2019

If 2018 was the year we all realized unregulated cryptocurrency offerings (ICOs) would have to be replaced by regulated “security token” offerings (STOs), 2019 is shaping up to be the year we see that regulation implemented.

As a result of that change, here are 10 events I predict we’ll see in the crypto space within the next 12 months:

1. A large bank will enter into the crypto custody business

The institutions are coming! It’s hard to get through a day on crypto Twitter without someone associating the current price of Bitcoin with the imminent entrance of so-called “institutional money.” It’s hard to imagine the “suits” won’t soon enter the community. The promises of Bitcoin and Ethereum (and their profit-producing volatility and liquidity) attracted professional traders in droves in late 2017 and 2018, and many of them stayed through the latest downturn. With the SEC declaring BTC and ETH as currencies, the path towards institutional custody and trading isn’t far behind. Expect JP Morgan or Goldman to enter the market, with perhaps BoNY joining them. Confidence level: 100%.

2. Several traditional broker-dealers will open ATSs for STO trading

If you have followed the crypto sector for any amount of time, you are probably familiar with OFN, aka The Open Finance Network, a recently licensed regulated alternative trading system. In the U.S. and Canada, an ATS is a non-exchange trading venue that matches buyers and sellers to find counterparties for transactions. They are usually regulated as broker-dealers instead of as exchanges (note: my company’s General Counsel and cofounder, Gautam Gujral, was an author on the SEC’s first Concept Release on ATS and Exchange regulations). OFN is just the first of these businesses that will be popping up. Recently, Coinbase purchased a broker-dealer, as did token issuance platform Tokensoft. In 2019, we can expect more broker-dealers (perhaps firms such as Entoro Capital, US Capital Global, or SeriesOne) to obtain licenses to trade in alternative investments like security tokens. Confidence level: 100%.

3. 2017 ICOs issued in the U.S. will be the first security tokens traded on exchanges

With year-long restrictions, small-ish raises, and tiny floats, don’t expect many of the 2018 STOs you’ve heard about to trade on exchanges (some have fewer than five holders and asset values in the low single digits). Instead, expect “remediated” ICOs that have registered their shares with the SEC to be the first issuers to trade in volume on compliant exchanges. There really is a Santa Claus for the security token exchanges, and his name is SEC Chairman Jay Clayton. In 2018 he put some presents under the tree in the form of Airfox and Paragon Coin, both ICOs that received “orders” from the SEC forcing them to register. In other words, the first widely traded STOs will have started life as ICOs. Hear me now, believe me later. Confidence level: 99%.

4. Asian investors and funds will pivot to the US to invest in digital assets

Asian investors are still dominant in traditional Bitcoin (mining) and ICO-driven crypto activity, but over the course of the last six months, as prices have dropped and new technologies (like digital asset tokenization) have come to the market, investor groups such as Huobi and Binance, and newer VCs like 8 Decimal, Alpha Omega Capital, Aurablock Capital, and Alpha Square Group are inverting the market and coming to the U.S. for its regulatory clarity. With the Chinese government saying that STOs will be kicked out, Chinese investment teams have been especially active in the U.S.-based STO community, seeking to learn how to structure these offerings. This is exciting; the U.S. may in fact be a bastion of innovation in at least one realm of crypto — the kind that Wall Street and big investors prefer. Confidence level: 95%.

5. The SEC will approve several Reg A+ deals related to tokens

The JOBS Act Reg A+ exemption, for those who don’t remember, allows unaccredited investors to fund startups. Ignored in the heyday of the ICO, Reg A+ is now considered a holy grail by those in crypto who oppose the idea of accredited investor requirements but still believe in playing by the SEC’s rulebook. Reg A+ lets a company raise up to $50 million annually via non-restrictive crowd fundraising, enabling a form of ICO that’s legal in the U.S.

When Circle acquired SeedInvest in Q4 2019, it laid the groundwork for some successful 2019 Reg A’s. Expect the SEC to approve several Reg A+ issuances this year with an underlying token, from firms like Issuance.com and SeedInvest. Confidence level: 90%.

6. ‘Legacy’ financial institutions will become digital asset infrastructure buyers

Once crypto tokens cross the chasm and the so-called early-majority starts to form (in mid-to-late 2019), expect to see some significant M&A activity within the ecosystem. Coinbase’s hiring of former LinkedIn M&A boss Emilie Choi, is a good indicator. While it’s tempting to expect large and early crypto infrastructure ventures like Coinbase (and Circle, Huobi, Binance, Cumberland-DRW, etc.) to be the primary drivers of this activity, some believe we will see the Nasdaq, NYSE, EuroNext, JPX, or even more likely DTCC or Cede and Co., come in as acquirers. What could prevent this from happening? Not enough data/signal to create institutional FOMO, where fear of insurgent innovation drives M&A. Confidence level: 90%.

7. Ethereum will lose ground as the predominant platform for the next generation of coin offerings

Ethereum’s ERC-20 smart contract standard is the undisputed coin of the ICO realm, with more than 1,000 unique ERC-20 crypto tokens issued since Ethereum debuted in 2015. Despite its overwhelming popularity with ICOs, widespread exchange compatibility, and developers’ familiarity with Solidity (the programming language for Ethereum-based smart contracts), Ethereum’s time as the predominant platform may be coming to an end. Faster and cheaper smart contract platforms like NEO, Stellar, IBM’s Hyperledger Fabric, and Hedera Hashgraph are coming along to steal the limelight just as the world starts paying attention to SEC-compliant token offerings. Also not helping Ethereum is the Constantinople hard fork coming up later this month, which could damage the community supporting the chain. While there are many reasons to move from Ethereum, the concentration of developer expertise and the standardization efforts of security token issuance projects like Polymath, Harbor, and Securrency will keep Ethereum in the lead for 2019. Confidence level: 70%.

8. Regional authorities will increasingly match U.S. crypto policies and may surpass the U.S. in STO activity

As more ICO projects launched outside of the U.S. fail (shut down, etc.) and more issuers wrap their offerings in safe-seeming nomenclature (i.e. calling any offering an STO, regardless of how it is structured), expect foreign regulators to adopt frameworks similar to what the SEC has established in the U.S. Exhibit A: Malta. While Malta has been attracting projects seeking to raise capital, it suffers from a poor reputation among banking regulators. In order for Malta to attain its goal of becoming “Blockchain Island,” it will need to pass and maintain stricter KYC & AML rules so depositors in its banks (i.e. crypto projects) can be confident they can use the funds to pay developers and vendors who are not on the island. Malta is not alone in its attempts to normalize and provide investor protections. Singapore recently stepped up efforts and may be the real pioneer in trading tokens on regulated exchanges. Confidence level: 60%.

9. Tokens will be traded on ‘major’ exchanges in addition to new broker-dealer operated Automated Trading Systems

This might be the easiest prediction, because an insider made news of it at December’s Consensus: Invest. According to Gabor Gurbacs of Nasdaq partner Van Eck, the Nasdaq plans on launching Bitcoin futures trading in Q1 2019. But before you say this is a safe prediction, remember what Bakkt said about ICE-Bakkt in August. There is no such thing as a “gimme putt” in crypto, and yes, tokens will also trade on tZero and Open Finance. Confidence level: 50%.

10. Rules related to accredited investor requirements will be relaxed

Accredited investor rules are what separate ICOs from STOs. They dampen excitement and enthusiasm among fans of so-called “open finance.” With these rules in place, only the wealthy are able to participate in current STOs. Spice VC, which recently began trading on OpenFinance, is an example of an offering that might be interesting to more investors, but is only available to those with a $200k annual income or more than $1 million in assets. The market will struggle to foment revolution in capital formation and liquidity as long as most of the potential investor pool is excluded from investing. However, in the harsh light of the ICO hangover, changes to accreditation rules have little chance of a quick modification. Confidence level: 1%.


Source
Author: Dave Hendricks
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Crypto Giant Coinbase Made Strides In Q4 2018, Even As Bitcoin (BTC) Plunged 40%

Although Coinbase has recently become a controversial company, especially as it began to add crypto assets left and right, the company has long had an unrelenting drive for innovation. Since setting up shop in 2012, the San Francisco-headquartered startup, headed by a former Airbnb employee with visions of grandeur, has quickly set the industry standard in a number of subsectors.

The firm may have started as a consumer-centric exchange, which sported a simple (near-)one-click interface, but Coinbase has evolved far beyond its original premise now. And interestingly, even as digital assets like Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) — Coinbase’s lifeblood — continue to lose value, the firm has only doubled-down on its expansion and development efforts.

Coinbase Outperformed The Bitcoin Sell-Off

Recent Giving Pledge signee Brian Armstrong, the fervent, sometimes controversial chief of Coinbase, recently issued a note to his underlings — a swelling group of talent — accentuating the fact that the company has not only survived but thrived in the recent bearish downturn.

The American firm, which now has offices around the globe, started Q4 of 2018 with a bang, securing $300 million in funding from Tiger Global, Y Combinator, A16Z, Polychain Cap, and a number of other crypto-friendly venture groups. This round valued Coinbase at a jaw-dropping $8 billion, making the firm arguably the most valuable company in the entirety of Bitcoin ecosystem.

And since that $300 million cash boost, which was explained to be allocated towards global expansion efforts, institutional services, and applications for crypto, Coinbase has arguably been on the up-and-up. As explained in Armstrong’s letter, released to the public in an evident attempt at transparency, Coinbase launched a number of pertinent products, including support for Circle-backed USD Coin, a revamped version of Earn, PayPal withdrawals, and crypto-to-crypto trading, to only name a few products.

The firm also added a dozen crypto assets to its platform, an evident sign of changing times, with notable additions including ZCash (ZEC), Basic Attention Token (BAT), Maker (MKR), and 0x (ZRX). In a podcast, vice-president Dan Romero explained that firm’s clientele has begun to clamor for crypto asset support, presumably catalyzing the recent listings.

Along with adding the aforementioned tokens and products, Coinbase forayed into six new regions, opening the ground-breaking potential of crypto to millions more. The Coinbase chief also explained that his firm made a number of investments, into organizations such as Alchemy, Securitize, Starkware, Nomics, and Abacus.

Closing the retrospective post, Armstrong made his excitement and gratitude more than apparent when he wrote:

“I continue to be so impressed by the ability of this team to execute on aggressive timelines, all while solving problems that have never been solved before. This was a year of scaling Coinbase up to meet the demand of the market and efficiently executing to serve our customers.”

Great Year Ahead For The Crypto Juggernaut

Interestingly, the firm already seems to have prospects for a great 2019. As reported by NewsBTC earlier today, an apparent survey from Coinbase has polled users on the appeal of a subscription model, which would reduce “maker” and “taker” fees for Pro traders, while offering perks for premium members. If implemented, this program would be the first of its kind in the cryptosphere, and would likely propel the company’s trading platforms to new heights.

Asiff Hirji, president of the fledgling company, recently hinted that 2019 will be a great year for institutional participation in cryptocurrencies. In an interview with CNBC, Hirji explained that Coinbase’s custodial service “has blown by internal goals,” as “hundred of institutions” have boarded onto the platform in recent memory. Seeing that Coinbase has been playing a role in that facet of this industry, it can be assumed that this influx of Wall Street hotshots will trickle down to the company’s growing roster of institutional products.

Zeeshan Feroz, the chief at Coinbase’s U.K. branch, also expressed a similar positive outlook, but from a broader perspective. He said:

“I think you can expect a more aggressive approach to us adding more countries in the coming months. Much of what we’re doing here is driven by customer needs and what we’re seeing in the market… I think if you look at last year, a lot of the focus was on people who bought crypto from an investment point of view and a lot of projects raised a ludicrous amount of money as a result of that.”


Source
Author: Nick Chong
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Cryptocurrency Markets Take A Downturn Days After Christmas

Christmas came late for the bears, but Santa didn’t fail to deliver. Nearly all of the top cryptocurrencies stumbled by multiple percentage points, everything from Bitcoin down to Zcash. Unsurprising, demand for stablecoins rose and they were trading at a slight premium.

Bitcoin Loses Over 4% Over 24 Hours

When the Bitcoin price is as high as it is, a single percentage point is worth more than $30, so even a shift of 2% is notable. At time of writing, Bitcoin was trading under $3600. Earlier in the week, it was thought that the godfather cryptocurrency might make it back over the $4,000 line, but things broke the opposite direction.

Earlier in the week, it was thought that the godfather cryptocurrency might make it back over the $4,000 line, but things broke the opposite direction. Chart from TradingView.

There is speculation afoot that tomorrow’s expiration of more than 25,000 worth of Bitcoin futures on Deribit is fueling the downturn.

As the above tweet points out, this will cut open future interest in half. People may be selling on the news in the belief that demand for Bitcoin might drop when these options mature, while sell pressure might also increase.

The rest of the cryptos trade against BTC in virtually every single market where they are traded, so a lowered value of BTC normally lowers their value unless or until something corrects the trend. The changes are not mathematically exact, however, and often positive trading in altcoin markets can lead to lessened losses.

Ripple Forfeits Over 6%

Ripple’s price has lost about a nickel over the past 24 hours. Confidence in the bank-friendly blockchain platform remains high across the board, with Ripple CEO Brad Garlinghouse recently making statements to the effect that Ripple is overwhelmingly a decentralized platform.

Confidence in the bank-friendly blockchain platform remains high across the board, with Ripple CEO Brad Garlinghouse recently making statements to the effect that Ripple is overwhelmingly a decentralized platform. Chart from TradingView.

Ripple enjoys a strong community and as time goes on its price has divorced increasingly from its BTC peg, with more markets adding it as a base pair and trading it against fiat currencies. This could in the future result in more price stability for Ripple.

Ethereum Drops 10%

In the case of Ethereum, the charting was almost precisely parallel Bitcoin, however:

The charting was almost precisely parallel Bitcoin. Chart from TradingView.

Ethereum saw a drop from a 24-hour high of over $130. It had recently overtaken Bitcoin Cash in terms of price, but Bitcoin Cash bulls in more recent days have caught up with Ethereum and surpassed it yet again. The overall loss to Ethereum’s price is around 10% over the past 24 hours.

It still maintains a higher market capitalization than Bitcoin Cash, standing at time of writing at nearly $2.6 billion.

Chart from CoinMarketCap.

Bitcoin Cash Down More Than 12%

The 24-hour period started with Bitcoin Cash trading above $180, but by the end of it sellers would be lucky to get just over $150.

BCH has lost $30 over the past 24 hours. Chart from TradingView.

It’s unclear what drove the resurgent demand in Bitcoin Cash. One thing that is certainly clear is that the Bitcoin fork has yet to recover from the essential split in value it suffered when Bitcoin SV forked off and created a new blockchain.

Stellar Markets Chaotic, Losses Of At Least 5%

Stellar has been back and forth at the end of the 24-hour period, seeing a brief climb back to nearly 11.5 cents and then trending back downward.

Ripple had a market cap of twice Stellar’s at time of writing, around 40 billion to Stellar’s 19 billion. Chart from TradingView.

The Ripple fork has never yet overcome its predecessor and always seems to trade around 1/3rd of its value. Significant improvements to its business relationships would be required to increase the value. Both tokens suffer the curse of massive supplies in the billions, meaning that small changes in their per-token valuations multiply into wider changes in the market capitalization overall.

Ripple had a market cap of twice Stellar’s at time of writing, around 40 billion to Stellar’s 19 billion. Neither is anything to scoff at, of course, being that they could fit several of the tokens just a little lower on the rankings several times over.


Source
Author: P. H. Madore
Image Credit: Charts from TradingView

5 Types of Cryptocurrency Entrepreneurs Should Know About

Cryptocurrencies are both investment opportunities and new financial instruments of increasing importance to investors and business owners.

 

You can classify every digital currency in existence as one of these five types of cryptocurrency. These distinctions are of the utmost importance for cryptocurrency investors because they determine what exactly you’re investing in, and who can invest in the first place. From coins to tokens, stablecoins to utility and security tokens, here are the main types of cryptocurrency you need to know about.

Coins vs Tokens

The biggest distinction in cryptocurrency is between coins vs tokens. Every cryptocurrency has to be one or the other. Here’s what differentiates coins from tokens: Coins have their own blockchain. Tokens do not.

Most of the big name cryptocurrencies — Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) — are coins. The most important thing to remember about coins is that they have their own blockchain, meaning a decentralized, peer-to-peer network that records transactions on a digital ledger.

By contrast, a token does not have its own blockchain. The Ethereum blockchain is the most popular platform for token creation, though you can theoretically create a token on any blockchain. 0x (ZRX), Maker (MKR) and Basic Attention Token (BAT) are examples of ERC-20 tokens, meaning a specific type of Ethereum-based token. In other words, their protocol exists ‘on top of’ the Ethereum blockchain.

Coins function as currency. Tokens represent access to a product or ‘stock.’

Since coins have their own blockchains, it makes sense that they serve as currency, a means of exchange, within that network. This is why Bitcoin is called digital gold and Ripple is lauded for its fast transactions: Bitcoin is a store of value, like gold, and Ripple facilitates cross-border bank transactions. Furthermore, it’s easier to convert USD to a coin, rather than a token. Investing in a token usually requires exchanging USD for a coin first.

The value of a token is a little more complicated. Tokens are typically released in ICO, which stands for Initial Coin Offering. ICOs are like IPOs for cryptocurrency, meaning that they give the investor access to tokenized services or products, or represent a stake in a cryptocurrency company. This is where tokens get a little confusing: Tokens fall under different SEC regulations depending on what they represent. You can separate tokens into two types of cryptocurrency that represent either a utility or a security.

Utility Tokens vs Security Tokens

Understanding the distinction between these two types of cryptocurrency is paramount to investors, cryptocurrency companies and the government. In other words, the SEC has much stricter regulations for security tokens than it does for utility tokens because, as their name suggests, they’re considered to be digital securities.

Most Tokens Are Utility Tokens.

If you can buy or trade a token on a cryptocurrency exchange without being an accredited investor, then it’s a utility token. In broad terms, a utility token gives an investor access to a service or product. This can mean that a token can represent exclusive access, a discounted rate, or early access. When you hear about smart contracts and DApps, you should assume that a utility token is involved.

Basic Attention Token (BAT) is a utility token that has received a lot of press. It’s a means of exchange for digital advertising attention, hence the name. Integrated with the browser Brave, BAT works in three ways:

  1. Users receive BAT for consenting to view ads.
  2. Content creators receive BAT when users view ads on their site.
  3. Advertisers buy ad space with BAT.

BAT represents attention, not stock or currency, making it a utility token. This means that anyone can trade utility tokens on a cryptocurrency exchange.

Security tokens are securities that exist on the blockchain.

Security Tokens are different. Like securities, security tokens represent part-ownership in a tradeable, real-world asset external to the blockchain. And because security tokens are regulated by the SEC like securities, you have to be an accredited investor to participate in STOs, meaning Security Token Offerings.

The SEC decides whether something is a security token using the Howey Test. In simple terms, the Howey Test determines whether a cryptocurrency investment is ‘speculative’, meaning that the investor makes money based on the labor of a third party.

Investing in security tokens is slightly more difficult. Investors must use a security token issuance platform, like Polymath or Swarm, to buy and trade tokenized securities. Unlike Coinbase or Binance, which are cryptocurrency exchanges that allow anyone to create an account, security token issuance platforms require their users to meet specific requirements. This typically means having your accredited investor status confirmed by a KYC provider. The platform will then create a customized profile that specifies how and how much each investor can trade.

Converging Types of Cryptocurrency

Distinctions between types of cryptocurrency can be obscure. Since companies have access to a much smaller investment pool with security tokens, some try to pass off their security tokens for utility tokens. There is also debate over whether tokens can represent currency, like coins, rather than access to a service. To make matters less clear, stablecoins are often technically ‘stabletokens’.

What is a Stablecoin?

Stablecoins are an increasingly popular type of cryptocurrency, especially in a Bitcoin bear market. This is because stablecoins are “pegged” to traditional assets like fiat (meaning government-backed currency like the US Dollar or Euro) or gold.

For example, the theoretical exchange rate between a stablecoin pegged to the USD and the US Dollar itself is 1 to 1. In theory, the company behind a stablecoin has the same exact amount in assets, stored in bank accounts, as they do tokens.

The advantage of stablecoins is that in a bear market, crypto investors can move their money from volatile cryptocurrency to stablecoins, a more ‘stable’ asset class in theory. This is instead of converting it back to USD, which can be a two-step process that incurs transaction fees. When a bull market returns, investors can convert their stablecoin back into other more volatile currencies at little to no cost.

Historically, however, stablecoins have ‘broken their peg’ in both directions. For example, controversial stablecoin Tether (USDT) has been worth less than a dollar, and Gemini Coin (GUSD) has exceeded the value of a dollar. This highlights another feature of stablecoins: Most have “USD” in their name. But keep in mind that not all do. For example, Maker (MKR), another stablecoin, does not.

Stablecoins Are Generally Tokens.

Despite being called stablecoins, stablecoins are usually tokens, meaning that they don’t have their own blockchain. Maker (MKR) exists on the Ethereum blockchain. Tether (USDT) was built on the Bitcoin blockchain. Similarly, both these “tokens” function as “currency,” which is a characteristic of coins, not tokens. As we develop new applications for digital currencies, distinctions between types of cryptocurrency become increasingly blurred, which makes SEC regulation even more uncertain.

Distinctions between types of cryptocurrency matter.

Why should you care whether something is a coin or a token, a utility token or a security token? Though the world of digital currency appears new and unclear, every prospective investor should know the value of the crypto they’re considering and, above all, how current and future SEC regulation will affect it.

Furthermore, the distinction between coins and tokens represents two potential forks in the evolution of cryptocurrency: cryptocurrency as tokenized securities and cryptocurrency as a payment method. Will crypto replace the stock market, the US Dollar or both? As it stands, both revolutionary applications of cryptocurrency are making headway.


Source
Author: Scott McGovern
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Report: Top Crypto Exchange Bithumb Faking Up To 94% Of Trading Volume; Bithumb Denies Allegations

Cryptocurrency exchange rating service CER has accused Korea-based Bithumb, the world’s second-largest crypto exchange by volume, of faking much of its trading volume since late summer 2018.

 

Analysis of BTC trade volume on Bithumb shows a significant rise on August 25 and drop on November 12.CER

In September, CER says, Bithumb ranked at the bottom of the top ten global exchanges as measured by CoinMarketCap, at around $350 million in daily trade volume. But by November 11, Bithumb peaked at $4.4 billion, more than 12 times as much. Today, Bithumb ranks second on CMC’s list of crypto exchanges as measured by reported volume at $1.4 billion. (Bithumb does not appear on CMC’s “adjusted volume” ranking.

The reason, according to CER?

Wash trading, or simultaneously selling and buying at the same time to create misleading and artificial activity.

“Judging from our multifaceted investigation on Bithumb charts we see the signs of trade volumes manipulations, specifically, wash trading,” CER marketing lead Gleb Myrko told me via Facebook Messenger. “Having calculated Price-Volume Correlation we came to conclusion that the trade volume performance is not linked to price fluctuation on the exchange.”

One example of odd trading patterns includes a 10X jump in BTC daily trade volume in September, which does not appear to be accompanied by fundamental causal factors.

Other examples include strange activity spikes in the first few minutes of the 11AM hour daily that delivered 95% of the daily total volume, and irregular trade volumes that didn’t align with price moves, CER says.

Trade activity spikes during the first few minutes of an hour delivered 90-95% of daily total volume, says CER.CER

In addition, average transaction size ballooned from .21 BTC in the beginning of the summer to a very significant 5.88 BTC, or $37,600 USD, from October 15 to November 11.

Transaction size grew significantly from earlier in the year.CER

The trades followed an odd pattern, as well. For example, BTC transactions on September 9 totaled an astounding 7,500 in just five minutes. That’s 39% of the day’s total trades, and 94% of the whole day’s volume.

According to CER, other coins showed similar patterns, including LTC, ETC, XMR, ZEC, OMG, and BTG.

One coin, WTC, showed the most intense artificial activity, CER says.

“WTC stands out from all the coins we observed, as it was only listed on the exchange on the last day of August and had the shortest pump period which started on October 28th and lasted till November 11th,” CER states in a document shared with me. “For that reason its pump was one of the most intensive. The inflated daily volume of Waltonchain jumped by 350 times from 348k WTC (on average prior to the pump) to 122.5mln WTC (on average during the pump) only to then drop by by 1,450 times in one day from 206.7mln WTC to 141.8k WTC on November 12th.”

I asked Bithumb about the allegations, and the company dismissed them out of hand.

“Bithumb is doing nothing to inflate trading volume,” an unnamed company representative told me via email. “Bithumb is not selling mining-based coin. Bithumb is trying to get more customers by providing various promotions just like any other company in the world as a normal business.”

CER is a service by Hacken Ecosystem, and Hacken offers a “white hat” community token. Concerned that these allegations might be motivated by business concerns, I asked Hacken if the company had ever tried to list on Bithumb.

The answer?

“No, never.”

Cryptocurrency experts I spoke to did not find this kind of behavior difficult to believe, though they stressed that to evaluate this specific accusation they would need to review the evidence carefully.

That said, there seems to be little trust in the crypto world … perhaps appropriate for currency which is supposed to function in a trustless environment. Or, perhaps not.

“They all inflate numbers,” says Aryeh Altshul, CRO at Hexa Labs, a blockchain consultancy. “It’s the normal practice in crypto.”

All of the non-U.S. exchanges are inflating transactions, agrees Brandon Wirtz, CEO of AI company Recognant, adding that many in the U.S. are doing the same … and using buffers between legitimate buy and sell bids to buy and re-sell coins between the kosher trades.

“It causes volatility and velocity which can be good for 50 percent-plus more traffic,” he said.

Crystal Clare Stranger, founder and CEO of PeaCounts, a blockchain-based payroll payments company, says that this is quite possible and even common.

“In the crypto space it is common to follow the adage of ‘fake it ’til you make it’ and many people grossly exaggerate how successful they are. Many companies have used market manipulators to pump the value of their tokens to look successful, and other exchanges have done this to break into the top ten.”

“It is very easy for a centralized exchange to trade dummy accounts off-chain using bots to pop volume,” Stranger added. “And as the exchange themselves bear little cost for these transactions, essentially just the computing cost, [it becomes] very tempting, especially with so many exchanges opening in the last couple years. It is a very competitive market.”

Another expert suggested that this could be connected to Bithumb’s well-publicized hacks in 2017 and 2018.

“Originally the breach on June 19 was thought to have resulted in the stolen crypto being sent to unknown hacker wallets,” says Morgan Steckler, CEO at iTrustCapital, a digital currency retirement planning company. “However, if this recent fraudulent transaction data proves to be true, and if Bithumb was able to evade detection through multiple recent audits of their security and transaction protocols, it is also entirely possible that the 39 addresses thought to belong to the hackers actually belonged to the exchange itself.”

Several experts did not want to be named.

“Basically, take all the illegal stock trading activites that have been banned over the years and move them into crypto. Why? Because it’s the Wild Wild West,” said one, who manages companies on both the fiat and cryptocurrency sides of finance.

“Ghost orders are huge … it’s where you open a buy and sell at the same time across multiple accounts, then close off one side of all the transactions (example buy) side and then run with your short position (sell side).”

Another expert suggests that Bithumb may have inadvertently contributed to Bitcoin’s continuing price collapse.

“According to data reported by CCN, there is certainly evidence to suggest a strong correlation between the timing of Bithumb’s promotion expiration and the sudden, and for many, shocking plummet that continues to play out across the industry,” says Travis Barker, CTO of Dash Marketing and early adopter and proponent of cryptocurrencies. “So far, I haven’t seen evidence to suggest malicious intent. In other words, I don’t know if Bithumb was intentionally or incorrectly inflating volume numbers, or simply running highly successful promotions to that effect.”

CER representatives seem fairly certain that there was intentional malfeasance.

“Bithumb has mastered a multi-factored approach to conceal its foul play,” says CER’s Myrko. “As far as we are able to judge the manipulations were fulfilled via matching opposite orders with the same price or by simply drawing transactions out of thin air, so-called ‘painting the tape.'”

The goal, CER suggests, may have been to establish Bithumb as a leading global crypto exchange. The result, however, could be extremely negative.

It “undermine[s] the entire image of the blockchain sphere as an environment of trust and transparency,” says Myrko. “Such irresponsible activity makes crypto field less than unwelcoming for the investors and industries who saw blockchain as a new opportunity.”

All that said, it’s important to reiterate that Bithumb denies the accusations.

CER is planning to publish all of its data — over 20 pages of charts, images, and documentation of what it considers to be fraudulent behavior.

At that point Bithumb will be able to respond directly to the accusations and, perhaps, offer an explanation.


Source
Author: John Koetsier
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