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Cryptocurrency, Terrorists and the Best Coins for Criminals

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Expecting criminal operators not to make use of cryptocurrency is like expecting a burglar not to make use of a ski-mask.

Cryptocurrency offers a decentralized, accessible path to illegal fund generation, money laundering and liquidity pools, to be used by anyone in any corner of the world, without the oversight of a centralized authority, such as a bank manager.

If the tools are there, then criminals will ultimately make the most of them. This has proved to be the case ever since bitcoin’s inception, where it could mainly be used on the dark web, long before established, reputable real-world vendors ever decided to take notice.

The trend hasn’t slowed – in fact it has flourished, and now a whole host of new coins join bitcoin on the list of coins that dark web vendors will accept for their illicit goods.

At the same time, the rise of cryptocurrency has coincided with the rise of decentralized terrorist networks, and the two look to be inextricably linked from here on out.

Adoption by ISIS

According to a 2016 research paper by Angela S.M Irwin and George Milad, titled ‘The use of crypto-currencies in funding violent jihad’, it has already been shown that terrorists, specifically ISIS, are relying on cryptocurrency to fund their operations, although finding the data isn’t easy. The paper states:

“Although it is difficult to find concrete evidence of large-scale use of Bitcoins and other crypto-currencies by terrorist groups and their supporters, there is strong evidence to suggest that they have been linked to a number of terror attacks in Europe and Indonesia.”

Given the extreme scrutiny which typical financial accounts come under, especially during criminal investigations, it’s no surprise that terrorists are turning to cryptocurrency as a way to outmanoeuvre authorities. The paper continued:

“Supporters of Islamic State of Iraq and Syria (ISIS), jihadists and terrorist organisations are actively looking to and promoting the use of new and emerging technologies, such as Bitcoin, to mitigate some of the risks associated with traditional fund transfer methods.”

It’s not hard to understand the attraction, and using cryptocurrency appears to be a growing trend in terrorist hotspots. The paper summarizes the situation as so:

“Some websites associated with terrorist organisations have started to collect donations in Bitcoins. Many Bitcoin ATMs and Bitcoin exchanges are located in countries that have seen significant numbers of foreign fighters join ISIS in the Middle East and are also positioned in countries that have seen increased risk of terror attack. These present a significant risk because they allow for the seamless, anonymous transfer of funds to and from terrorist groups and their supporters.”

The paper focuses specifically on bitcoin, presumably since it makes up the greater bulk of overall market transactions; however there are other coins which are actually favoured by those engaging in illicit activities to a much higher degree than bitcoin.

Privacy Coins and the Dark Web

Internet research group, Recorded Future, recently published this report on the most common cryptocurrencies used for illicit or unregulated activity on the dark web.

One of the report’s findings was that while bitcoin was still the most common accepted payment method among vendors, it is not the cryptocurrency that dark web users actually favour the most.

The report polled members of a prominent dark web hacking forum, and found that the currency most favoured was, unsurprisingly, Monero.

Monero has gained a reputation as the most private of the privacy coins since its launch in 2014, and has proved the most resistant to the prying fingers of legal authorities.

Following closely in second place is Dash – a crypto payment platform which undoubtedly gains popularity for its ease of use and low fees.

Besides the privacy concerns of individuals buying illegal goods on the dark web, the biggest reason for bitcoin’s decline in popularity is its transaction-to-fee ratio which makes it completely unsuited for smaller, micro-payments.

However, as you can see from the following image, there is a gap between the currencies favoured by criminals and the currencies actually accepted by vendors. As the image illustrates, 100% of vendors on the dark web accept bitcoin.

Following closely in second place is Litecoin, which appears on 30% of vendors’ accepted currency list. Dash comes in at a close third with 20%, while the criminal’s favourite, Monero, only finds use on around 6% of dark web services.

Interestingly, a split appears between Eastern-European and English-speaking regions, with Litecoin and Monero being favoured by those two groups respectively.

The paper quotes a prominent Russian hacker on one of the forums they surveyed as describing how it was the black market which propelled Bitcoin to prominence in the first place, and that the trend will continue with some of the newer coins. He said (translated):

“Do not reinvent the wheel – just look where Bitcoin came from. It came from the darknet, and now U.S members are gradually migrating to Dash, while those in Europe have moved to Monero.”

This sentiment was echoed by another forum user, whose comments bring to mind the oft-quoted rule about how the porn industry is the ultimate arbiter of successful video formats:

“As a rule, whatever [currency] is used by the drug dealers will become a mainstream currency, and they have been actively switching to Dash. There are not so many carders are there are junkies.”

Conclusion

The question at this point isn’t whether such activity is taking place, but what the crypto community plans to do to resolve it.

That’s assuming they decide that it needs to be resolved. We’ve already seen instances of crypto platforms in the past refuse to meddle with their code in any way, even in the event of a major hack.

Such dedication to the ideals of cryptocurrency is one of the strengths of the community, but is also the very things which open up the playing field for criminal utilization.

Regulators may move in eventually, but by that time there will likely be another dozen privacy coins which can step in to carry on the process.

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 57 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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Cryptocurrencies

2018: Year of the Crypto Fund

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A protracted bear market in cryptocurrencies has not deterred hedge funds and other institutional players from entering the digital currency space. According to new research, 2018 is shaping up to be a record year for crypto funds, with the number of new ventures growing steadily.

Crypto Funds on the Rise

A total of 96 cryptocurrency funds have launched this year, according to Crypto Fund Research, putting the market on track to outperform last year’s pace of 156. The Rohnert Park, California-based research firm expects there will be a total of 165 crypto hedge funds launched this year.

“We expected a large number of new crypto funds to launch in 2018 to satisfy growing investor demand.” said Josh Gnaizda, founder of Crypto Fund Research. “However, the pace of new fund launches is a bit surprising given the dual headwinds of depressed prices and less than favorable regulatory conditions in many regions.”

If 2017 was “the year of bitcoin,” 2018 is shaping up to be the year of the crypto fund, Gnaizda says. There are now 466 cryptocurrency funds around the world, with more than half coming into existence over the past 18 months.

Pantera Capital, one of the earliest and most well known funds, boasts a lifetime return of 10,000% investing in digital assets.

Crypto funds are also proving popular among Chinese investors, who are barred from investing in digital assets in their home country. As Hacked reported in June, Chinese nationals have made Singapore their destination of choice for launching token investment funds.

The researchers claim that crypto hedge funds are the fastest growing segment of the market, accounting for more than half of the total. A total of 252 funds are located in the United States, followed by 34 in Hong Kong and 29 in the United Kingdom.

Protracted Bear Market

Although the rise of crypto hedge funds is evidence that more investors are taking interest in digital currencies, failure rates are likely to rise if bear-market conditions persist.

“While volatility in the crypto markets can attract some investors to sophisticated crypto funds. It remains unclear if the industry can support such a large number of funds, with limited track record, if we experience an extended bear market,” Gnaizda added.

The cryptocurrency market is once again becoming synonymous with bitcoin as traders cut ties to more speculative altcoins and tokens. At the time of writing, bitcoin’s dominance rate, or the share of the total market capitalization held in BTC, was 51.9%.

After a minor recovery, coin values were down again on Monday. According to CoinMarketCap, the total value of all coins in circulation is $210.5 billion. Last week, the market bottomed near $207 billion, the lowest in a year.

A look at the technical charts reveals little evidence that a bullish reversal is imminent. However, fundamental developments have been positive with banks and stock exchange operators announcing big plans to enter the market.

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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4.6 stars on average, based on 601 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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Altcoins

Predicting Bitcoin Returns with Momentum Effect and Investor Attention Effect

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Yale economists have proposed a new model for predicting bitcoin’s future valuation based on historical price data and Google search queries. According to the researchers, momentum and investor attention are the two key factors that can enable market participants to accurately predict future returns.

Predicting Bitcoin

In a newly published study called “Risks and Returns of Cryptocurrency,” economists Aleh Tsyvinski and Yukun Liu claim the Momentum Effect and Investor Attention Effect can accurately predict the future valuation of leading cryptocurrencies like bitcoin, Ethereum and Ripple XRP.

The Momentum Effect

The Momentum Effect essentially states that cryptocurrency prices are more likely to continue rising following a significant breakout. For example, a large rally in bitcoin one week is likely to generate continued growth the following week. In this vein, momentum applies to cryptocurrencies in the same way it does to stocks, bonds and currencies, though the size of the rallies are usually much larger tha conventional assets

“Momentum is actually something simple,” Tsyvinski said in an interview with CNBC. “If things go up, they continue to go up on average, and if things go down, they continue to go down.”

The researchers believe that the best strategy for making money in crypto is to buy an asset after its price has already spiked and sell it just seven days after purchase. Using this strategy, a trader can still make an average of 11% on bitcoin even if they bought it following a 20% increase.

Tsyvinski explained that the Momentum Effect was stronger for bitcoin than for Ethereum or XPR, although still statistically significant for the latter two.

The Investor Attention Effect

The level of interest and hype around cryptocurrencies also plays a significant role in predicting price movements, the researchers claim. The Investor Attention Effect measures Google and social media search trends for terms like “bitcoin” “Ethereum,” and “cryptocurrency.” The higher the search results, the greater the chances of rising prices.

“For weekly returns, the Google search proxy statistically significantly predicts 1-week and 2-week ahead returns,” the report says.

This is not unlike what Hacked has reported several times before: Google search trends for crypto keywords are positively correlated with rising values. In June, we reported that Google searches for “bitcoin” had fallen to nine-month lows, a sign that first-time buyers were no longer flooding the market.

Google search trends gave “bitcoin” a perfect score of 100 back in December, around the time that BTC was trading at all time highs. Our view at the time was the following:

“Bitcoin’s bull market was largely predicated on the arrival of new traders buying cryptocurrency for the first time… Without new first-time buyers entering the market, bitcoin could face a prolonged lull period characterized by sideways movement and false breakout patterns.”

That outlook has largely panned out in the midst of multiple peaks and troughs.

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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4.6 stars on average, based on 601 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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Research

Over Half Of All ICOs Failed In Q2 2018 Market

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Icorating.com, a high-quality source for independent research into the ICO market, has published their quarterly analysis of ICOs.

There are several important findings in the report, but perhaps none more notable then the fact that 50% of ICOs failed in Q2. Icorating.com attributes this mainly to the fact that half of the projects couldn’t raise more than $100k.

Another important finding was the fact that only 7% of all announced ICO tokens were able to be listed on exchanges. They also found that there was an average 6-day listing time increase compared to last year for tokens on exchanges.

The general view of this report seems to be an increasing bifurcation of success and failure. The projects that hold successful fundraises raise enormous sums, (with EOS being the most obvious example). The ones that don’t, tend to flame out.

This is reinforced by data in the report that the top projects raised an average of $50,000,000 during the ICO. While this is an eye-popping sum, it’s worth noting that the report mentioned that average ICO duration increased by 10%. This is presumably indicative of an ICO market that is becoming less of a Wild West.

Interestingly, the actual number of projects who had an already-operating business represented only 15% of the total ICOs.

Although there does seem to be a common view in the crypto landscape that the days of just holding an ICO with a white paper and idea alone are over, the data in the report showed that whether or not an ICO was held by an existing business in Q2 had zero impact on whether or not the fundraiser was successful.

Whether this is a reflection of a still-new market that has not yet adopted accepted funding norms remains to be seen. But it does give hope to promising projects without sufficient capital, (which in theory was the entire purpose of ICOs in the first place.)

That said, projects in the idea stage did tend to aim for (and raise) less money then those with existing businesses. Specifically, these idea stage projects raised an average of $4.5 million USD/raise.

The vast majority of funding for projects came from North America, 64.67% to be exact. Asia-based projects meanwhile showed an increase in funds raised, but also showed fewer projects seeking capital overall.

This could suggest an approach of “quality not quantity” in the region, although the truth of this remains to be seen as the projects rollout.

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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