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Cryptocurrency Market on High Alert as CFTC Subpoenas Bitfinex, Tether

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The crypto market was under renewed pressure Tuesday after U.S. regulators subpoenaed one of the world’s biggest digital currency exchanges and a startup known for converting cryptocurrencies into fiat money.

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CFTC Issues Subpoenas

Bloomberg and CCN reported Tuesday that the U.S. Commodity Futures Trading Commission (CFTC) issued subpoenas to Bitfinex and Tether last month. Although the nature of the hearings has not yet been confirmed, speculators say it could be related to both companies sharing many of the same executives. Tether has been accused of running a fractional reserve to inflate bitcoin prices and thus cover up the financial issues facing Bitfinex.

Although it is not entirely clear from the official websites of Bitfinex and Tether who runs the firms, an email obtained from Bloomberg indicated that Jan Ludovicus van der Velde is the CEO of both. Van der Velde’s LinkedIn page says he is currently a resident of Taiwan.

Tether Under the Spotlight

Tether has been the center of a media firestorm this week after the company unexpectedly split with its auditor Friedman LLP, fueling critics who have long been suspicious of its backing. The company, which created the USDT cryptocurrency that is allegedly pegged to the U.S. dollar, has not been able to verify conclusively that its accounts are indeed backed by the greenback.

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A document that appears on Tether’s website shows it had $443 million in deposits as of Sept. 15, although the names of the banks and account holders were blacked out.

Regarding its dissolved relationship with Friedman, Tether issued the following statement on Saturday:

“Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame.”

Tether is still recovering from a $31 million cyber heist last November, which exposed underlying financial issues facing the company. According to critics, one of the telltale signs of Tether’s solvency issues has been its persistence in minting USDT tokens. More tokens in circulation gives the company more opportunity to buy bitcoin and drive prices even higher.

The global cryptocurrency market shed tens of billions of dollars on Tuesday, with bitcoin briefly falling below $10,000. The combined value of all coins in circulation bottomed out near $492 billion, according to CoinMarketCap. That represents a decline of more than 12%.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 344 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Bithumb to Launch ICO in Singapore Later This Year

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One of South Korea’s largest cryptocurrency exchange is planning to launch its own initial coin offering (ICO) this year. According to local media, the token sale will be administered in Singapore, one of the most attractive jurisdictions for ICOs.

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Launch of Bithumb Coin

Bithumb is in the early stages of developing a native token that will be used as a trading instrument on the digital currency exchange. According to local and international media reports, two versions of the token, dubbed Bithumb Coin, will be launched.

Reports indicate that the token sale will not be available to the general public but to targeted investors. This is a similar model employed by several large prominent crowdfunding campaigns, such as Telegram, which has now raised at least $850 million out of what’s expected to be a multi-billion-dollar deal.

Several digital currency exchanges offer native tokens, which provide much-needed liquidity boosts and allow traders to carry out easier transactions more seamlessly. Some exchanges, such as Binance, offer lower fees for trading in the native token. The most recent example of an exchange-issued cryptocurrency is Huobi, which announced plans to launch Huobi Token (IT) on Ethereum. HT issuance will be capped at 500 million units.

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At present, Bithumb has not provided a timetable for when the token will launch, although it is generally believed to be commencing later this year.

Bithumb is one of the world’s largest crypto exchanges by total volume. On Saturday, the exchange processed nearly $1.3 billion worth of cryptocurrency trades with the vast majority of transactions quoted in South Korean won.

Circumventing Local Restrictions

While South Korea has become a major center for cryptocurrency trading, companies are barred from raising money via ICOs. The government banned the controversial crowdfunding model back in September before broadening its investigation of the broader cryptocurrency arena.

Singapore, on the other hand, is now considered an emerging hub for ICO transactions thanks to supportive government policies and favorable tax rules. Not only does the Monetary Authority of Singapore not regulate cryptocurrency, it “welcomes them as an innovation that can potentially reduce the cost of financial transactions,” according to guidelines published by the agency back in November.

However, MAS has recently indicated that it will assess additional rules within its existing cryptocurrency framework to safeguard investors. At the present time, MAS only regulates crypto-market intermediaries, like exchanges and remittance companies.

Although South Korea is no longer agnostic toward ICOs like many of its counterparts, local financial authorities are exploring Know Your Customer and Anti-Money Laundering protocols that could be used to better enhance the token sale process.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 344 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Saxo Bank Expects Cryptocurrency Prices to ‘Springboard’ in Second Quarter

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After a dismal first quarter, cryptocurrency prices may be entering a bullish cycle, according to analysts at Denmark’s Saxo Bank. The financial institution recently issued an optimistic outlook on the asset class but warned that downside risks remain.

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The Bullish Case for Cryptocurrency

In Saxo’s quarterly outlook report, analyst Jacob Pouncey argued that cryptocurrencies could be poised for a comeback in the second quarter as bearish pressures continue to fade. Recent acquisitions of crypto exchanges by major financial firms and the consolidation of the blockchain industry make Q2 a possible venue for a large price recovery.

“The steep losses have driven industry consolidation. The rush to market was badly timed and a number of crypto asset hedge funds, exchanges, and ICOs have shut down already,” he said.

“However, several events could serve as springboards for a cryptocurrency bull market in Q2, whether it is through fundamental drivers, or it is just a self-fulfilling prophecy.”

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Advocates of cryptocurrencies have a lot more to be optimistic about. The digital asset class has gained about a third in the last week, with combined prices reaching their highest level since mid-March. The rally has been associated with a steep recovery in the value of altcoins, which now account for nearly 61% of the total market.

Amid the latest downturn, altcoins saw their share of the total market drop to around 54%.

Uncorrelated Assets

The Saxo analyst made another interesting observation: blue-chip cryptocurrencies have historically shown unique price independence in the face of financial-market shocks. As money continues to flow from the equity markets, so-called “uncorrelated assets” such as bitcoin could be poised to benefit.

Research has shown that bitcoin exhibits low correlation of returns, which means it behaves independently of other asset classes. We saw a breakdown of this quality earlier this year as cryptos seemingly traded in the same direction as stocks (likely due to the influx of new traders to the market).

When it comes to investing, low correlation essentially refers to price independence. This means blue-chip cryptocurrencies like bitcoin are influenced by distinct market forces that do not always apply to other asset classes. Likewise, traditional politico-economic drivers do not influence digital assets to the same degree.

The Saxo report was released on Tuesday, so there’s a good chance that the cryptocurrency forecast was influenced by the recent uptrend in prices. However, Pouncey also indicated that the future presents more opportunity for stability as “weak hands” are purged from the market after the recent bearish cycle. This outlook is shared by many, who expect crypto assets to extend their recovery in the short-to-medium term.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 344 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Coinbase Alert: Amazon Is Coming

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Amazon is to the 21st century what Walmart was to the 20th century.  Slowly, Amazon is putting its imprint onto more and more areas of business.  Already AMZN is one of the world most valuable companies worth more than $725 billion.  Their sheer size allows them to go wherever they want. Last year’s jumbo acquisition of Whole Foods is a good example.

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From these moves, it is clear that Amazon intends to avoid becoming the “one trick pony” that its rival Apple has succeeded in becoming.  That means that Amazon must forever be searching for giant technology centric markets. Cryptocurrency may be on the horizon.

Just yesterday the U.S. Patent Office issued # 9,947,033 to Amazon for software titled Streaming Data Marketplace.  CNBC first reported the headlines.  Here are some direct excerpts from the patent application:

Streaming analytics technologies hold the promise of making vast volumes of data available in a low latency fashion. However, while prior technologies may be able to provide data in a low latency fashion, the raw data may have low value (or have less valuable than the data could have) until the raw data is enhanced by correlating the raw data with additional data, such as by matching records using common values.

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One example is a data stream that publishes or includes global bitcoin transactions (or any cryptocurrency transaction). These transactions are completely visible to each participant in the network. The raw transaction data may have little meaning to a customer unless the customer has a way to correlate various elements of the stream with other useful data.

For example, a group of electronic or internet retailers who accept bitcoin transactions may have a shipping address that may correlate with the bitcoin address. The electronic retailers may combine the shipping address with the bitcoin transaction data to create correlated data and republish the combined data as a combined data stream.

A group of telecommunications providers may subscribe downstream to the combined data stream and be able to correlate the IP (Internet Protocol) addresses of the transactions to countries of origin. Government agencies may be able to subscribe downstream and correlate tax transaction data to help identify transaction participants.

Translating Into English

Amazon filed this patent back in 2014 so it is obvious that cryptocurrencies were not the only application they had in mind for their Streaming Data Marketplace.  That doesn’t change the fact that crypto has evolved in value to over $300 billion and adoption of bitcoin by Amazon would be a major legitimizing force in the whole crypto movement.

The one big thing standing in the way of acceptance of a large number of relatively small value transactions is liquidity (speed) and Amazon vendors profits could be enhanced or completely wiped out by crypto volatility.  Before getting all excited, the Streaming Data Marketplace would need to address this issue.

Without trying to get into the techno garbodigook, one way to address the problem would be for Amazon to create their own massive crypto exchange that not only provided low latency transactions but serve as yet another Amazon service.  Just using the Amazon name would bring enormous credibility.

The Value Of the Data

After reading through the patent, it is obvious there are many applications to be developed. Helping regulators may be one of those. Here is what the patent application states.

For example, a law enforcement agency may be a customer and may desire to receive global bitcoin transactions, correlated by country, with ISP data to determine source IP addresses and shipping addresses that correlate to bitcoin addresses.  The agency may not want additional available enhancements such as local bank data records.

Good Or Bad For Bitcoin (And Others

Is having all of the additional data available to law enforcement and other regulators a good or bad thing?  After all, doesn’t this take away all the anonymity that attracted so many to cryptocurrencies in the first place?

There are arguments on both sides of this issue but I think the benefits are worth some consideration.  The biggest is that if Amazon and all of its vendors have a mechanism in place to accept payment in bitcoin, this is a huge plus.  The day this happens eBay and virtually every other online merchant will get with the game. And let’s remember we are talking about far more than just bitcoin.  The downside is that if you have obtained your crypto from some questionable activities or wish to maintain your anonymity, stay away from online shopping.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 61 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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