Crescent Talks Crypto

ALL YOU NEED TO GET CAUGHT UP ON THE WORLD OF CRYPTO IN 10 MINUTES OR LESS

 

Weekly Newsletter

04/02/2018 - 04/09/2018

 

Market Recap: Winners & Losers

Crypto assets lost about $6 billion over the last week, bringing the market's total value to ~$258 billion. Among assets with at least $100 million in market cap, Ontology (ONT), Verge (XVG), and IOStoken (ISOT) were the largest gainers, while Veritaseum (VERI), Waltonchain (WTC), and Aeternity (AE) saw the largest declines, according to data complied by Coinmarketcap. Seven of the current 10 largest crypto assets posted losses over the last seven days.
 

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Mt. Gox CEO Doesn’t Want Leftover Bitcoin From Liquidation

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Source:  Bitcoin.com


What happened?

Mt. Gox’s ex-CEO, Mark Karpeles, participated in an “Ask Me Anything” on Reddit last week where he, once again, claimed that he doesn’t want the 160,000 Bitcoin (~$1.1 billion) that will be left after the exchange repays its creditors. Mt. Gox, which was based in Japan, was the largest bitcoin exchange in the world at the beginning of 2014 before they got hacked for over 740,000 bitcoins. This led to a huge decline in Bitcoin’s value as well as over 24,000 customers around the world losing access to their cryptocurrencies. Still to this day, not a single customer has recouped a single cent and are awaiting court proceedings to be able to get a fraction of their assets which are currently being help by Mt. Gox’s bankruptcy trustee. WSJ reports that “Karpeles stands to receive millions expected to be left over after the exchange’s users have been reimbursed due to the fact all creditors would receive the value of their bitcoin holdings in Japanese yen, not bitcoin itself”. Karpeles took to Reddit to explain how he is against this approach and that he would prefer a “civil rehabilitation” plan that would reimburse their creditors in bitcoin instead.
 

Why does this matter?

The fall of Mt. Gox was a huge event which caused 2013’s bear crypto market and there are claims that the market is still feeling effects of the crash today. Earlier this year, Mt. Gox’s bankruptcy trustee disclosed he had sold around $400 million in the past few months. Some people attribute Bitcoin’s fall from ~$20,000 to this sale as well as the trustee stating there are still 160,000 BTC and BCH still left to be sold.  Mark Karpeles’ seems to have the intent of refunding users who lost funds with their crypto, but this will most likely be too difficult to accomplish. While it is unfortunate that there are 160,000 BTC and BCH still left to be sold, it looks like they will be sold OTC and there’s a chance civil rehab may help in not having to liquidate all those assets.

 
What’s the word on the street?
 

The community seems to be split regarding Mark Karpeles. While some have pointed out that Bitcoin started gaining traction during the Mt. Gox era which obviously led to an increase in attack attempts for this new technology, a portion of the community seems to hold Mark and Mt. Gox liable for a lot of what’s gone wrong within the crypto space. That being said, the community seems to be in agreement that it is very important to watch what Mt. Gox’s Trustee will be doing with the remaining Bitcoin and Bitcoin Cash. 

 
Where can I read more?

CoinDesk: Mt. Gox CEO: I Don’t Want Bankrupt Bitcoin Exchange’s Billions
CoinTelegraph: Mt. Gox Ex-CEO Says He Doesn’t Want Leftover $1 Billion Post-Liquidation Funds


Verge Hack Makes for Bumpy Week
 

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Source: Crypto Insider


What happened?

Verge (XVG) experienced a brief hack on Wednesday, lasting approximately three hours according to the company's official Twitter account. The hacker was able to manipulate block mining timestamps, allowing for the false creation of XVG coins. Known as a "51% attack", the hacker was able to obtain a majority of Verge's hashrate, thus controlling the network. Verge's solution: a hard fork that received strong push back from its community. 

Why does this matter?

Verge's current market value, based on circulating coin supply, is around $1 billion, making it the 20th largest crypto asset. Despite the company's efforts to downplay the size of the attack, the possibility a coin with this much value is vulnerable to such a disruptive hack is a wake up call for holders of all cryptoassets. Although this type of attack would require much more computing power and scale to disrupt a top-tier crypto like Bitcoin, in this market one must remember never to render any outcome impossible.

What’s the word on the street?

Even though the attack happened mid-week, Verge was one of the best performing crypto assets over the last week, returning over 50%. The community's response was mixed at best, with multiple sources questioning the credibility of the development team. 
 

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Source: Crypto Insider

The Verge community also has its fair share of grassroots proponents, one of which went so far as to argue the timing of the attack was more than a coincidence: 

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Source: Bitcoin.com

The reaction and subsequent steps the Verge team took sounded a few alarm bells. The most prudent action would be to address the size of the issue and disclose detailed processes the team is implementing to prevent against such an attack in the future. Risk is always present in this market, but the coming weeks will tell if the community's faith in Verge strengthens or falters.

Where can I read more?

Verge Responds to Claims by Launching Fork
Verge Casts Doubt Over Development Team
Mashable: Verge Hack


Introducing Coinbase Ventures

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Source: Coinbase

What happened?

Coinbase, the largest cryptocurrency exchange in the US, announced on April 5th that it is launching a venture capital arm to invest in seed stage cryptocompanies. Coinbase Ventures will invest off of Coinbase’s balance sheet with $15 million in the first initiation, but it plans to grow this arm as the company grows. The fund itself is not intended to be a significant profitability driver for the company with the focus instead being on helping the space grow. When Coinbase President and Chief Operating Office Asiff Hirji made the announcement live on CNBC on Thursday, he made sure to stress that they were investing in crypto companies and not currencies. The emphasis on investment in the company is to remove even the appearance of a conflict of interest, which he then reiterated by saying “It’s not about investing in the token, it’s not about trying to line up tokens that we would later put on our exchange, it’s really about trying to help the ecosystem mature.” 

Why does this matter?

One of the popular arguments against currently investing in crypto currencies is that the present value of some tokens is not justified by their adoption. Coinbase Ventures aims to provide financing to companies that they believe will move the space forward to the extent that they will even be investing in companies that could be seen as competitors. Continued investment in both companies that aim to improve the infrastructure of the space as well as those that look to serve or improve a particular function will be paramount for widespread adoption. While ICO’s remain an efficient and popular method of raising capital, venture capital funds can also serve in an advisory role, a function that is underemphasized in a space laden with great ideas and a lack of experience.

What’s the word on the street?

The significance of this seems to be generally underappreciated by the speculators in the crypto community, many of whom were looking for a new coin listing. This is likely just a function of the current macro pricing environment, which causes investors to look for an immediate catalyst to reverse the general bearish trend. In reality, real growth will be buoyed by the penetration and utilization of cryptocurrencies. 
 

Where can I read more?

Introducing Coinbase Ventures

 

Polish Authorities Seize €400m from Accounts With Alleged Ties to Bitfinex

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Source: trustnodes

What happened?

On April 6, news began to break that Polish authorities seized €400m from two bank accounts that were supposedly used to launder money for South American drug cartels. Accusations have been made that tie one of these accounts to the prominent cryptocurrency exchange Bitfinex, and alleges that the cartel used this account to convert their fiat into crypto in order to hide its source. 

On April 8, Bitfinex provided the following statement to FinanceMagnates.com denying the allegations. 

“Bitfinex can confirm that it is aware of the current allegations that have been reported by Polish media over the past several hours.

Bitfinex believes that these allegations are untrue and Bitfinex customers and operations are unaffected by false rumors. Bitfinex is proud to be the world’s leading crypto exchange, and in this capacity works tirelessly to remain in strict compliance with authorities and regulators worldwide.”


Why does this matter?

If these allegations have merit, and Bitfinex is proven to be knowingly complicit, this would deal a major blow to one of the world’s largest cryptocurrency exchanges by volume, and lead to severe ramifications that could affect the entire market. Possible outcomes in a worst case scenario include the dissolution of the exchange, criminal charges for those involved, possible loss of funds for exchange users, potential price declines across the market, and increased regulatory scrutiny. 

What’s the word on the street?

While no hard evidence is publicly available as of yet, the community remains skeptical. This isn’t the first question raised about Bitfinex’s business practices. The exchange suffered a major hack in 2016 when 120,000 BTC were stolen, has been subpoenaed by US regulators as recently as December, and has ties to Tether which has been accused of creating tokens not actually backed by USD like they claim to be (speaking of Tether when are we getting those audits?). Does Bitfinex deserve that we give them the benefit of the doubt on these allegations? After examining their recent history it’s very difficult to do so. What can be done? Consider using a different exchange with a cleaner reputation, and move your crypto into a hard wallet, which is good advice regardless of the exchange you use.

Where can I read more?

Bitfinex Mixed Up with Colombian Cocaine 
$400 Million Seized
Bitfinex Reveals New Polish Bank Account Under a Panama Registered Company
 

Regulatory Update

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Global Regulatory Landscape

Bloomberg released their Crypto Regulatory Map and the key takeaway remains that digital currencies are not regulated much outside of China. Expect this map to change shades over the course of 2018 as regulators continue to structure a framework around the blockchain economy.

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The Bans Continue

Japan’s regulator has suspended two exchanges for two months each due to insufficient KYC (know-your-customer) protocols. KYC is required by most financial institutions and asset managers around the world in order to prevent illicit financing and money laundering. Eternal Link and FSHO were ordered to halt operations on April 6th until their processes were scrutinized further.
 
The State Bank of Pakistan announced that financial companies in the country were barred from working with cryptocurrency firms. Shortly after the moratorium was announced Urdubit, the first bitcoin exchange in the country, announced that they would shut their doors. Pakistan’s actions come on the heels of India’s central bank taking similar action barring any institution from working with virtual currency dealers. While these action comes off as draconian it is not surprising given that bitcoin is perceived as an affront to central banks everywhere.
 
Jay Clayton Speaks
 
SEC Chairman Jay Clayton spoke at Princeton University last week on cryptocurrencies. Similar to previous university discussions he expounded on his views for what constitutes a security. Additionally he stated that ‘not all ICOs are fraudulent’ which is consistent with his previous comments and somewhat reassuring to those who fear an outright ban in the United States. 
 
This is not to say that the SEC was not active this week in issuing subpoenas and suits related to fraud in the crpytocurrency market. Celebrity-backed cryptopayments platform Centra halted operations and its founders were arrested following an SEC complaint. Centra’s ICO raised $32m in the summer of 2017 and had the public backing of Floyd Mayweather and DJ Khaled. It turns out that partnerships announced with Visa and Mastercard along with several executives listed on the website were all fraudulent. Good riddance.
 

Anything Else?

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Source: People

One of the most infamous figures in the space, John McAfee, disclosed that he charges $105,000 per tweet to promote certain cryptocurrency projects and products. Additionally, he tweeted that his “McAfee Crypto Team” (which is a marketing agency for ICOs) has a guide breaking down how his promotional tweets work on their website.
 
As you can say, his website basically divides his asking price of $105,000 by his 810,000 Twitter followers and states that the “cost per investor reached” is only $0.13. McAfee then goes on to state “ this is orders of magnitude less than any other approach”. The crypto community seemed to be in agreement that any crypto project which paid $105,000 to get John McAfee to tweet about them…is probably not a project you want to invest in.
 

What we're watching this week:

What: 2nd Global Fintech & Blockchain China Summit 2018
When: April 12, 2018
Source: Event website

What: Chain Reaction Blockchain Supply Chain Summit
When: April 10, 2018
Source: Chain Reaction Summit

Things we're reading this week:

Four Things Erupt from Monero's Hard Fork

Crypto and Taxes 2018 - What You Need to Know: Coindesk

United Against a Common Enemy: Hating on Craig Wright

Kucoin Delists CFD


Favorite Tweets:
 

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Anil Lulla