Day: August 14, 2018

The Chinese Ministry of Industry and Information Technology (MIIT) has listed a blockchain research laboratory in its list of key labs for the year, published by the government department on Monday.

The MIIT is looking to accelerate blockchain adoption by building a strong ecosystem to support a variety of industry sectors and the expansion of the technology across these fields.

This particular lab has been titled the Key Laboratory of Blockchain Technology and Data Security Industry and Information Technology, listed as supervised by National Industrial Information Security Development Research Center.

Several proposals for accelerating blockchain adoption has come from the MIIT recently, as reported by local news outlets. Xinhuanet details that the MIIT’s interest is focused on the expansion of blockchain outside of the financial sector into the Internet of Things, intelligent manufacturing, and supply chain management to name a few.

The ministry plans to expand the reach of blockchain promotion in areas especially regarding strengthening computing power, storage capacity, building a good industrial ecology, and promoting the healthy development of the blockchain industry.

The article also acknowledges that the MIIT is aware of accompanying risks to the infant industry, including the possibility of technical loopholes.

July saw the MIIT’s deputy director call for the country to work collaboratively to foster blockchain’s growth on an industrial scale in a statement posted on the department’s website, where he also praised the technology’s security potential with regard to preventing “information tampering and forgery“.

The post added that it would be particularly beneficial to harness blockchain as a core technology while realizing it “from a strategic perspective”.

Despite China’s harsh stance on cryptocurrency, the country has been an international spearhead for blockchain development research. Even president Xi Jinping has been vocal on the positive potential of blockchain, saying he expects technological breakthroughs to be achieved with the country’s research.

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Monday hailed in one of the worst days the crypto market has ever seen, with Bitcoin posting a loss of 6%, while altcoins fell even further. However, not all investors are worried, as some see that this nosedive is just another part of the tumultuous cryptocurrency cycle.

CoinShares Executive: The Narrative Around Crypto Is Hard To Grasp

Meltem Demirors, a Chief Strategy Officer (CSO) at Coinshares, recently appeared on CNBC’s “Fast Money” segment to comment on the state of the market.

#bitcoin is stranded 78% from its highs, but @Melt_Dem says the #crypto crisis is building toward a major rally. pic.twitter.com/5ovMZJ3AA3

— CNBC's Fast Money (@CNBCFastMoney) August 13, 2018

Firstly, Fast Money host Melissa Lee brought up a heavily contested debate, querying the Coinshares CSO on what is holding Bitcoin back from being known as a store of value worldwide. Demirors responded by drawing attention to cryptocurrency’s so-called “narrative,” stating:

“The narrative around Bitcoin is still really hard to grasp. I think that the crypto community is really struggling with narrative right now. If we look at what institutional investors are looking for — even retail investors — what is the narrative? Really the only metric we have for most cryptocurrencies is the price, and price is such an imperfect metric. (So) what does actual utilization look like?”

This statement alludes to the presence of misunderstandings, and the lack of knowledge of where this industry is heading, which she sees as a problem that should be fixed moving forward. Exploring this pressing topic deeper, the Fast Money host asked: “if we said Bitcoin was a stock, and the narrative is unclear.. why would I want to buy it?” Likening the cryptocurrency market to the internet boom of the late 1990s/early 2000s, Demirors noted that “new technologies that shift the paradigm,” like blockchain and cryptocurrencies, are not understood nor adopted overnight.

While this sounds like a bearish statement on its own, the Coinshares executive noted that last year’s cryptocurrency bubble helped to drive substantial amounts of capital into “building new (blockchain-focused) businesses that serve a real purpose.” While this makes it sound like cryptocurrencies have garnered close to zero traction so far, Demirors added that from the perspective of specific data points and metrics, this nascent industry has begun to see adoption, albeit ever so small.

Although prices are often portrayed to be the be all and end all of the industry, to Demirors, prices can be cast aside, as the CSO brought up the two data points that show cryptocurrencies can see long-term growth. She noted:

“Two startup metrics that are really common might be the total addressable market and the penetration rate of that market. So again, if Bitcoin is a store of value, the total addressable market theoretically is huge. You have M1, M2, gold potentially as an analog, so how much of the market have we captured? If we’re looking at Ethereum, maybe the total addressable market is the market for compute capacity.”

If Bitcoin lives up to be an easy-to-use store of value, the cryptocurrency market, specifically Bitcoin, could capture upwards of tens of trillions of capital as users rush to seek the best store of value. In the case of Ethereum, with computing becoming an integral part of our lives, if the scaling solutions are present, the “global computer” network could easily become another technology adopted by billions all over the world.

Despite the fact that this sounds all and good, the Coinshares CSO noted that the technology is still immature and that widespread adoption will likely be years away. Prices may have recently reached new year-to-date lows, but the silver lining is that crypto and blockchain technology have an addressable market that ranges in the billions.

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The Jamaica Stock Exchange will be adding cryptocurrency trading for its clients later this year.

Kim Dotcom, the German-Finnish entrepreneur and the creator of Mega, has publicly stated that gold and crypto are better long-term investments than the US dollar.

In a recent statement, Dotcom said:

“Trust me. Buy crypto and gold. Your USD will become worthless. With US economic collapse all old money currencies will crash. Times will get tough. But you’ll be fine if you hedge some of your assets in preparation for the crash. The big crash is coming 100%.”

Value of the US Dollar

The value of cash and any other form of money depends on their ability to operate as a medium of exchange. If the US dollar, for instance, can be used to purchase properties and services, it has monetary value.

As former Goldman Sachs CEO Lloyd Blankfein stated, fiat money like the US dollar is valuable because under the control of central authorities, people are forced to use cash as the main method of payment. In a way, the value of fiat money is directly attributable to the control a state has over its financial system, and a decline in authority could lead the value of the currency to drop substantially.

Most recently, the lira, the national currency of Turkey, experienced a 50 percent drop in its price against the US dollar triggered by the imposition of tariffs on the Turkish economy by the US government.

To prevent the devaluation of the lira, financial authorities of Turkey immediately implemented strict capital controls to prevent its currency leaving the region and being liquidated for other foreign reserve currencies.

For a major economy like the US, such a drastic situation may never occur. However, Dotcom emphasized that the increasing debt of the US economy, which currently hovers at around $845,000 per family, could lead to a massive devaluation of the US dollar in the long-term.

“The average total debt per family in the US is now at 845000 USD. The average unfunded liability in the US is now at 938000 USD per taxpayer. Anyone who thinks US debt can be solved with economic growth, new debt or printing more dollars is an idiot. US Empire will default,” Dotcom said, citing the statement of Russia’s Finance Minister.

Earlier this year, Anton Germanovich Siluanov, the Minister of Finance of Russia, said that the government significantly reduced its investment in US assets, as it has become a risky tool for payments.

Crypto Versus Gold

Since its creation in 2009, Bitcoin, the most dominant cryptocurrency in the global market, has been described as gold 2.0, or a better version of the traditional asset.

For decades, due to the physical characteris of gold and the ability of central authorities to confiscate the holdings of people stored in the precious metal, experts have criticized the fungibility and transportability of the asset.

In contrast, cryptocurrencies like Bitcoin and Ether, the native cryptocurrency of Ethereum, are liquid, easily interchangeable, and transportable, and possess all of the characters that allow it to function as a better store of value and a medium of exchange than gold.

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In today’s crypto market drop-off, a majority of cryptocurrencies posted horrendous losses, including Ethereum, which fell further than many of its altcoin brethren. This came to the surprise of many, as Ethereum is normally a force to be reckoned with in ‘normal’ market conditions.

Ethereum Moves Under $300 For The First Time In 9 Months

Over its relatively short history, Ethereum has grown to become the 2nd most valuable cryptocurrency, becoming the platform of choice for cryptocurrency projects, and dApp developers.  Despite the fact that Ethereum has cemented itself as a leader in this flowering market, this has not made it vulnerable to devastating price crashes, such as the one seen on Monday.

As users turned on their computers on Monday morning, it quickly became apparent that something was amok, with the market reestablishing year-to-date lows. While Bitcoin already had it worse enough, it clearly became apparent that some cryptocurrencies were under-performing others. As the day continued, market conditions only worsened, with altcoins extending losses even further. Through all this, a common theme remained — Ethereum posted the highest percentage losses out of all of the cryptos in the top 10.

At the time of writing, Ethereum sits at a dismal $267, down 17% from today’s high of $320.  This is the first time ETH has ventured under $300 since November 2017, which was when the Bitcoin boom was just ramping up, and altcoins were starting to show some strength.

Chart Courtesy of TradingView

Over the past week, Ethereum has fallen by over 35%, while Bitcoin has ‘only’ posted a loss of 14%. This devastating move lower has rightfully led some to ask, “Why is the price of ETH performing so poorly?”

Investors Try To Reason Why ETH Is Capitulating So Heavily 

According to Bloomberg, a primary catalyst for this drastic decline is the high levels of selling pressure placed upon Ethereum by ICOs, as projects seek to liquidate their crypto war chests for fiat. According to Biswa Das, a founding partner at crypto hedge fund Bloomwater Capital, projects are cashing out to cover operational expenses and in fear that the market will continue lower. Das stated:

“These startups are raising a lot of funds but they don’t have treasury management or enough cash management experience, so they’re selling too early and causing a lot of pressure in the market. It was fine last year but right now the market is so fragile that it causes a lot of pressure.”

Das’ suspicions were seemingly corroborated by crypto analytics firm Santiment, who suggests that startups have spent upwards of 110,000 ETH over the past 30 days.

CNBC’s coverage of Ethereum’s tumble seems to confirm much of the same, with Meltem Demirors of Coinshares discussing this occurrence with Fast Money panelists. Demirors noted:

“Ethereum starting this narrative of being a decentralized computer, it shifted over to smart contracts as enterprises when getting more interested in this technology and then it became a substrate for ICOs to raise money with… So they held a lot of ether in their treasury… I think this is really what our ecosystem is struggling with — how do we allocate out of ETH into our assets that preserve value long term, and what should those be.”

While many investors believe that the worse has already arrived, Spencer Bogart of Blockchain Capital says “the pain” may be far from over, as there are still hundreds of thousands, if not millions of ETH that are ready to be sold en-masse on spot market exchanges.

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With US government scrutiny focusing in on cryptocurrencies, hedge funds face tense uncertainty due to the unclear tax regulations regarding digital currency assets.

Trying to play by the rules

With billions of dollars on the line, cryptocurrency hedge fund managers face a challenge when trying to fully comply with tax laws just as individual investors do. Their jobs required them to maximize profits while minimizing liabilities, but with few guidelines regulating their holdings, there is a lack of direction for this to take place in a fully legal manner.

The US Internal Revenue Service (IRS) is attempting to keep up with the pace of innovation with regulations, last month announcing that the large business and international division would focus on cryptocurrency audits in the coming year. Bigger tax bills and penalties have been threatened by the government department when the rules come in.

Clay Littlefield, a tax attorney for Alston & Bird in Charlotte, North Carolina, told Forbes that there is indeed a lot of uncertainty considering how the IRS will treat cryptocurrencies in the near future. Littlefield acknowledged that while there is plenty of analogies that can be placed on circumstances, there is not a lot of solid legal framework for investors to reference.

Why the lack of clarity?

There are several key factors that have contributed to this uncertain climate. Most crucially, regulatory bodies such as the IRS have been slow in laying out their full positions on digital currency.

Karl Walli, senior counsel at the Treasury Department’s office of tax policy earlier this year told tax professionals there is a ”long list” of issues the IRS needs to address, adding that planned new tax laws would increase the efficiency of comprehending all these problems. Walli said: “There’s no way in this environment that we’re going to be able to put out guidance on the majority of those issues.”

In 2014, the IRS settled on considering crypto as property, not currency, meaning that investors, miners and those earning wages in Bitcoin would be required to report profits and losses as is required with property. The market was dominated at this time by small investors; hedge funds trading in cryptocurrency has created problematic issues for the concept of crypto as property which has yet to be addressed.

Ultimately, funds may well end up owing more in taxes than their current estimations, dependent on the IRS’s decision.  David Shakow, professor emeritus at the University of Pennsylvania Law School assumes that the lack of guidance right now may well provide a solid defense for hedge funds, regardless of future implementations.

For now, however, offshore tax havens such as the Cayman Islands have begun to attract big investors looking to avoid the necessity of following the unclear US tax regulation, although operations investing in cryptocurrencies for a foreign investor have not yet been legitimized by the IRS as non-taxable by the US.

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FOMO Moments

This biggest one day dump this year, Ethereum, XRP, Bitcoin Cash, EOS and Cardano dropping double digits

The crypto winter is getting colder as markets tanked yet again over night to a new 2018 low. Total market capitalization plunged below $200 billion and kept going to reach its lowest level since the end of October 2017.

Bitcoin briefly dipped below $6k once again and is holding the level just above it. With a loss of 6.5% on the day BTC is down to $6,050 and poised for further declines. Trade volume has dropped from $6.6 billion to just over $5 billion at the time of writing.

Ethereum has crashed, taking an epic nosedive of 17.5% to trade at $265. This puts it back to mid-2017 price ranges when sentiment was largely bullish. Over the past week ETH has shed 35% as its market cap dumped nearly $15 billion. From a July high of just over $500 Ethereum has crashed almost 50% marking its biggest decline since early January. Ethereum has not been this low since September 15 last year when it briefly dipped to $200. Many have blamed ICO projects for dumping ETH onto the market as all cryptos get pummeled. The dust may settle at around $200 which has been a strong support point for Ethereum in the past.

All altcoins are dumping once again with Cardano taking the biggest hit in the top ten of 19.4% on the day. Bitcoin Cash, XRP and EOS are not far behind with losses of 14-16%. The market cap chart has certainly been shaken up by the August rout which has continued unabated. In the top twenty there are four altcoins getting absolutely smashed with over 20% declines on the day. These include Tron, Iota, Neo and Binance Coin, the latter taking the biggest dump of 23%.

Not a single coin in the top one hundred is green at the moment, not even the stablecoins such as Tether, Dai and TrueUSD. The biggest loss has been suffered by Ark which is down almost 30% in 24 hours. There are nine other altcoins with an over 25% decline at the moment including Kucoin Shares, Bitcoin Private, Zilliqa, Icon, Augur, and 0x.

Total crypto market capitalization hit a new 2018 low of $189.6 billion a few hours ago marking a loss of $30 billion in just 15 hours. On the day they are down almost 12% which is one of the biggest one day dumps of the year. Currently market cap is at $193 billion with a daily trade volume of $15 billion. Things are still looking very precarious in crypto land.

FOMO Moments is a section that takes a daily look at the top 25 altcoins during the current trading session and analyses the best performing ones, looking for trends and possible fundamentals.

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Residents in all 50 U.S. states can now use Square’s Cash App to buy and sell bitcoin, the company has announced.

Listen to the 13 August 2018 Bitcoin News Radio Show below.

On this edition of the show, we start with a Bitcoin market update. Learn about how Bitcoin’s dominance percentage is rapidly rising as Ethereum and other cryptos decline relative to Bitcoin. Hear about how inflation of the lira is causing Turkish citizens to buy lots of Bitcoin and how Saudi Arabia has banned Bitcoin. We then discuss the demo of Binance’s decentralized exchange, which might be a better way to create cryptocurrencies than Ethereum’s ERC-20 protocol.

Follow the Bitcoin News Radio Show on Anchor, Spotify, Google Podcasts, Stitcher, Radio Public, Pocket Casts, and Breaker. We broadcast a new episode every day, covering the most important topics in the crypto, Bitcoin, and blockchain world!

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Key Points

• Bitcoin price failed to stay above the $6,300 and $6,280 support levels against the US Dollar.
• Yesterday’s highlighted key contracting triangle was breached with support at $6,350 on the hourly chart of the BTC/USD pair (data feed from Kraken).
• The pair even traded to a new monthly low below $6,000 and moved into a bearish zone.

Bitcoin price broke key supports near $6,280 against the US Dollar. BTC/USD may correct higher, but broken supports at $6,050 and $6,280 are likely to cap gains.

Bitcoin Price Analysis

Yesterday, we discussed that bitcoin price could gain momentum if it breaks the $6,570 resistance against the US Dollar. The BTC/USD pair failed to break the $6,570 and $6,600 resistance levels, and declined. It dropped sharply and broke many supports like $6,450, $6,300 and $6,280. It even settled below the $6,100 level and the 100 hourly simple moving average.

During the decline, yesterday’s highlighted key contracting triangle was breached with support at $6,350 on the hourly chart of the BTC/USD pair. It cleared the path for more losses and the price declined below the $6,000 support. A new monthly low was formed at $5,894 and the price is currently consolidating losses. An initial resistance is near the 23.6% Fib retracement level of the last drop from the $6,547 high to $5,894 low. Above $6,050 and $6,100, the next major resistance is near the $6,200-6,280 zone. Moreover, the 50% Fib retracement level of the last drop from the $6,547 high to $5,894 low is around the $6,220. Therefore, if the price corrects higher, it could face sellers near the $6,200 resistance area.

Looking at the chart, bitcoin is under a lot of pressure below $6,300. Should buyers fail to push the price back above $6,200 and $6,300, there may well be more losses towards the $5,700 and $5,500 levels.

Looking at the technical indicators:

Hourly MACD – The MACD for BTC/USD is placed heavily the bullish zone.

Hourly RSI (Relative Strength Index) – The RSI is currently below the 30 level.

Major Support Level – $5,880

Major Resistance Level – $6,220

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