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Last Year’s Crypto Boom Was Fixed: Researchers

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Bitcoin’s plight in 2018 has been a stark reversal from the leading cryptocurrency’s performance in 2017, particularly vs. the end of last year. So what gives? If you were to ask a pair of researchers, one of whom has a penchant for uncovering fraud in the financial markets, the gains have an asterisk next to them, one that leads to popular U.S.-dollar linked cryptocurrency Tether (USDT).  

The University of Texas Finance Professor John Griffin and understudy Amin Shams have published a paper entitled “Is Bitcoin Really Un-Tethered?” It chronicles what the academics ultimately conclude is a shady dynamic between bitcoin and Tether, the No. 12 cryptocurrency by market cap.

Using algorithms and transaction data collected from the public blockchain, the researchers determine that Tether is a coin that is “pushed out into the market” and not driven by supply and demand but instead the whims of the bitcoin price. 

They point to the Bitfinex exchange, which is looking to redomicile from Asia to Switzerland, aka Crypto Valley. After monitoring the activity surrounding Tether coins on Bitfinex, the researchers propose that Tether supply is added to the market by Bitfinex at crucial times in bitcoin’s performance.

Source: “Is Bitcoin Really Untethered?”

What Gives?

That’s what drove the bitcoin price to nearly the $20,000 level in December 2017, according to the report, whose results they say are “consistent with the Tether issuers pushing out Tether to stabilize the price of bitcoin,” the report states. The U.S. CFTC earlier this year issued subpoenas to both Bitfinex and Tether, both of which are led by J.L. van der Velde, to ensure that there were adequate reserves that they claim make the coin stable. No fraud was uncovered.

Tether boasts a market cap of $2.5 billion and it is viewed as a more stable alternative to bitcoin’s erratic price swings, though the details surrounding the mechanics of it all are held close to the vest. From what the researchers say, Tether coins are created in groups of 200 million, after which time the coins are directed to Bitfinex.

Meanwhile, when bitcoin suffers a dramatic decline, researchers found evidence that the Tether coins are then directed by Bitfinex and other leading exchanges toward purchasing more bitcoin, resulting in an inflated price. They studied the period from March 2017 through year-end and found dozens of instances in which the behavior occurs.

Given the regulatory scrutiny that’s on the markets today, it would make sense that if Tether-fueled bitcoin price manipulation were occurring, it would slow down in this environment and thus no rescue for the bitcoin price. But the pressure in the cryptocurrency markets could just be a function of all the uncertainty that’s swirling at the moment.

“I’ve looked at a lot of markets. If there’s fraud or manipulation in a market it can leave tracks in the data. The tracks in the data here are very consistent with the manipulation hypothesis,” Griffin told Bloomberg.

Meanwhile, Bitfinex CEO van der Velde told the publication: “Tether issuance can’t be used to prop up the price of bitcoin nor any other coins/token on Bitfinex.”

Meanwhile, the U.S. Department of Justice is in the midst of a probe to determine whether traders are responsible for previous market gains by manipulating the bitcoin price.

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 16 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.




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Congresspeople Now Required To Disclose Crypto Holdings

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Secret HODLING by politicians is about to have its moment under the microscope.

According to a June 18 memo issued by the House Ethics Committee, U.S. House members were advised this week that they must now publicly reveal any digital token holdings worth more than $1,000.

Lawmakers are also now required to reveal any cryptocurrency sales or purchases that exceed $1,000 within 45 days of the transaction date.

The memo further stipulated that congresspeople should include such investments in their annual financial disclosure reports.

The timing of the memo is intriguing. For decades, congresspeople and their employees have been legally required to disclose assets like real estate and investment proceeds.

The enforcement of these rules got even stricter after the passage of a 2012 law requiring disclosure of stocks, bonds and derivatives trades by members of Congress or their family members.

The rise of cryptocurrencies, alongside questions over how and if they should be regulated, has generated a lot of uncertainty over how existing rules should apply to lawmakers’ purchases of Bitcoin and other crypto tokens.

In theory, it could expose hypocrisy by lawmakers that condemn cryptocurrency as a fraud or national security risk but profit off them in the shadows.

The release of the house memo means that the public will soon learn exactly which lawmakers are invested in crypto assets. This mandated reporting forces lawmakers who take strong stances either way on the regulation of crypto assets to literally put their money where their mouth is.

The memo also addressed whether members of Congress are allowed to make money through side gigs tied to cryptocurrencies.

The memo clarified that House rules going forward prohibit lawmakers from earnings of more than $28,050 a year from jobs unrelated to congressional duties will also apply to cryptocurrency mining.

This should, therefore, eliminate the temptation for lawmakers to use cryptocurrency to skirt the rules.

These rules coming out of the memos are likely a good thing for the blockchain industry as a whole going forward. This is due to to the fact that implementing universal standards for lawmakers will eliminate potential areas of corruption.

Since a huge focus of governments worldwide around crypto assets has been their potential for use in illicit or criminal activities, it would be tremendously embarrassing if politicians themselves were using cryptocurrency for these purposes.

That being said, for savvy lawmakers, it is probably relatively straightforward to hide the assets that they do have/had.

For instance, all one needs to avoid suspicion is a non-verified account on a decentralized exchange with a hardware wallet. In the view of this analyst, the odds of a lawmaker personally owning crypto assets while not being remotely technically inclined is near zero.

As a result, while the new standards are absolutely necessary going forward, I don’t know how much of an impact they will really have.

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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As Crypto Markets Grind Lower, Institutional Adoption Continues to Grow

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Two of Russia’s largest banks have launched portfolios dedicated to trading bitcoin and other cryptocurrencies, the local Kommersant newspaper reported Friday. The pilot projects are the latest examples of widening institutional acceptance of digital currencies in spite of the market’s recent correction.

Russian Banks to Offer Crypto Portfolios

Russians with bank accounts at Sberbank and Alfa Bank will soon be able to trade cryptocurrencies in a designated fund that will track price movements on some of the world’s largest exchanges. The portfolio, which is being overseen by the Bank of Russia, will include bitcoin, Ethereum and Litecoin.

Although the full list of assets has not been provided, the portfolio will be revised four times a year, with a trading algorithm balancing the holdings.

Sberbank is Russia’s largest financial institution, with the central bank owning 50% of its authorized capital. Alfa Bank is one of the country’s largest private banking institutions.

Although cryptocurrencies are largely unregulated in Russia, Justice Minister Alexander Konovalov recently confirmed that the asset class falls under the definition of “other property.” Two draft bills on cryptocurrency are still pending in the State Duma.

The Russian government had initially said it would ban cryptocurrencies as they could be use for money laundering and terrorist financing. As digital assets grew in popularity, government agencies took a decisive u-turn, with President Vladimir Putin even considering the launch of a state-backed cryptocurrency.

Institutions Preparing for Cryptocurrency Trade

Financial institutions from New York to London are planning to launch cryptocurrency trading operations in the not-too-distant future. An April survey by Thomson Reuters showed that one-in-five major banks are considering cryptocurrency trading in 2018, a sign that the niche industry is gaining mainstream acceptance.

Goldman Sachs has been gradually scaling its crypto operations in pursuit of a bitcoin trading operation that is expected to launch later this year. While Goldman won’t be trading bitcoin outright, it will serve in the capacity of market maker for bitcoin futures.

It has been argued that the first wave of institutional adoption of cryptocurrency was poorly timed given the market’s steep losses over the last two quarters. This has led to greater industry consolidation as major firms swept in to acquire cryptocurrency exchanges. Earlier this year, Monex Group announced it would acquire and rehabilitate Coincheck, a Japanese exchange that was hacked for $530 million. Goldman-backed Circle has also bought out Poloniex, one of the world’s largest digital exchanges.

In the realm of blockchain adoption, banks are pouring billions into new commercialization initiatives. According to a recent study by Greenwich Associates, blockchain budgets for major banks in 2017 swelled by 67% to $1.7 billion.

San Francisco startup Ripple has already brought on board hundreds of clients to test drive its blockchain-based payments and liquidity platforms. This includes big-name clients such as UBS, Standard Chartered and Santander.

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 461 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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Crypto Expert Maintains $60,000 Price Target for Bitcoin

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Back in January, cryptocurrency expert Phillip Nunn made two bold predictions: bitcoin will reach a low of $6,000 this year before rebounding to a high of $60,000. With his first prediction proving true, Nunn remains steadfast that the latter price point will also come to fruition in spite of recent market turmoil.

The Bulls Will Prevail

In a recent interview with BusinessCloud U.K., Nunn said market volatility will ultimately work in favor of bitcoin, leading to an historic rally before year’s end.

Referring to his January forecast, Nunn said “the prediction was based on, first of all, market volatility which we’re experiencing at the moment.”

Nunn, who heads The Blackmore Group and Wealth Chain Group, said his $60,000 price forecast is “absolutely” possible given bitcoin’s long-term trajectory and role in disrupting traditional sectors. However, at present, bitcoin and other digital currencies are at the mercy of market sentiment and price manipulation, given the relatively small size of the industry. Case in point: cryptocurrency trade volumes plummeted to around $9.5 billion this weekend, the lowest in over two months. Such low turnover makes crypto assets prone to extremely wild swings not unlike the price forecasts Nunn put forward in January.

“All the money that exists in crypto at the moment is from the public, so it’s all about market sentiment,” he said. “A flood of bad news can wobble the market, stuff like regulation. The industry is so small that there’s market manipulation.”

Ultimately, Nunn says bitcoin is helping to create an “internet of value” that will disrupt everything from money to record-keeping.

His view differs markedly from an institution like the Bank for International Settlements (BIS), which on Sunday released a report arguing for bitcoin’s ultimate demise. Although BIS didn’t frame the outcome exactly in those terms, the Swiss institution said the digital currency is ultimately too costly and too prone to manipulation to become a mainstay in traditional finance.

Bitcoin Prices

Bitcoin was little changed on Sunday, as prices consolidated around $6,500. With daily turnover of $3 billion, bitcoin’s trade volumes accounted for more than a third of the crypto market total.

The world’s largest cryptocurrency by market cap is down nearly 5% over the past week. That pales in comparison with some of the leading altcoins, which have fallen double digits over the same period.

Bitcoin has experienced multiple selloffs this year, with some analysts attributing the decline to the launch of bitcoin futures in December. Fundstrat Global Advosrs’ Tom Lee recently argued that bitcoin prices tend to fall into the expiration of the monthly futures contracts. This is likely caused by traders longing actual bitcoin and shorting the futures market.

Like Nunn, Lee maintains a strongly bullish outlook on bitcoin and has called for prices to rebound to $25,000 this year despite recent market dynamics.

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 461 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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