Analytics

June 24

Cryptocurrency weekly digest (17.06 - 23.06): what will become of bitcoin now

June 24

Our leading analyst’s forecasts, the market review and the week’s events in our weekly column.

Well, this week the cryptocurrency market made another nosedive. On Friday we witnessed another psychological level breakage when the bitcoin price went down lower than $6500. One of the major player’s sell-off could be accountable for this because large lots to sell, up to several hundred bitcoin have been witnessed at different exchanges. As of this article the price is actively testing the $6000 level at times making successful attempts of puncturing it. It is believed in the nearest future we will see its further movement downwards. The reason is simple: there is no positive news to back it up. Even the recent news about Square Inc. (a financial service having 7 million users) getting a virtual currency license for trade in New York failed to support the tumbling markets. It feels like the investors who have overcome the hype do not know what further use the cryptocurrencies could be put to. Yes, there is a cool Ethereum platform that can operate smart-contracts, so what? Their application is rather limited, for further development Ethereum should be adopted by major corporations that will load the network with useful transactions instead of transfering speculators’ money from one wallet to another. The situation with bitcoin has been uncertain for a very long time. Yes, it can help to carry out cross-border payments relatively cheap, but payments aren’t fast enough and sometimes there are withdrawal problems. Ripple, for instance, allows to do the same cheaper and faster.

Also news that add fuel to the fire are rumours about bitcoin price manipulations via Tether (we have written about it in our last issue), tightening of governmental regulation over cryptocurrencies and ICO and also the rocking volatility caused by derivatives (bitcoin futures) that provides major players with motives to manipulate the market while this isn’t legally punished. It seems that the investors don’t know what to do without the hype, and that’s what feeds the bearish sentiments for so long.

Looking at the bitcoin price graphs we can see that it is still moving along the global bearish trend. This is very clear if you look at the daily intervals (the red line). Apart from that it constantly shows signals to sell (such as systematic rebound from the moving average). And for the time being we can’t see the situation change in the nearest future.

Fig 1. BTC/USD (Bitfinex). Daily graph.https://lh3.googleusercontent.com/E_sxEIFPytz9YW-Eqk610QUel2OTETYFxXalJ-JEgSqQGTTP8DVQzJQbmEc_VZ6OFR8btcD9uVYYTuhhCcdLg2F1k5H0RxF2XFX7StpQ8oxbV8zthMxI_gG1IFkaLJCcepqSQGWO

Fig 2. BTC/USD (Bitfinex). Four-hour graph.https://lh5.googleusercontent.com/TBqoH6MOqovohMy8WCZDnn6cxK4ygffQX4bLXa6y0EFAS76ZjyBMQAGplZ7Vjjhfnz9zrtquXXjjz_Wqqi80H6ko_-lIQ2wi4Vd6lakDuqEK-EZ10H5E8M5J_mK9lYKocFYWGjMS

The further fall of the price gives some reason for optimism though. There is an opinion in the market that somewhere around the $5000 level major speculators may start to buy in order to push the price up and then all the loss could be compensated. This is only theory for the time being, but the movement down below the $6000 level and testing the $5500-$5000 levels seem very probable. Another way of changing the situation lies in the rapid development of Lightning network. If the network is capable of supporting large volumes in microtransactions (tens of millions dollars at least) then cryptocurrency will get a new impulse provided by micro, small and medium-sized businesses. Also legislative confirmation of bitcoin as a payment method in a number of leading european economics can be considered ground for growth. But for this the price volatility should be low whereas the events of the week show that it is hardly probable in the nearest future.

And so, on to the news.

Tokens

Eos

Hardly has EOS main net gone live after 21 block producer has been elected by token holder vote, the platform has become subject to a storm of criticism caused by transactions freeze and the block producers’ actions. The worst concerns of the users about the power amount given to a small number of people have been confirmed. Against the network constitution rules the block producers have frozen 7 user accounts on suspicion of keeping stolen tokens. The precedent may have profound consequences for the EOS community as well as the crypto industry because the decentralization principles and the DPoS consensus are being questioned.

However all this fuss didn’t stop EOS from getting leading positions in two cryptocurrency ratings. One by Weiss agency and another by CCID (China Center for Information Industry Development).

TRON

Last week TRON has launched the process of migrating TRX tokens to its main net that will be followed by 1 billion token burn. 39 cryptocurrency exchanges have supported the migration process and confirmed participation in the token swap. Nevertheless the process is not finalized yet. The token holders should elect the oversight staff and only then the main net will go live. This event is scheduled for June 26. The price for this token has recently been lowering but the burn of the largest in the network history volume of tokens could make it rise rapidly.

ICON

At the same time migration of another major altcoin, ICON is likewise taking place. On Friday the developers told that no issues have come up in the process.

Tether

Independent audit carried out by Freeh Sporkin & Sullivan, LLP (FSS) resulted in confirming that Tether is in the possession of enough money to back its tokens. Nevertheless it added new issues with Tether, one being the reason for engaging a law firm instead of an accountant one for this report. The other point is that the data was taken in some point of time and doesn’t mean collateration before the date or after.

Regulation

No significant developments can be seen in the attitude of regulators towards the crypto-industry. All the authorities do is aimed at tightening controls over crypto exchanges and ICO. Nevertheless there were some interesting news this week.

Bank of International Settlements has published its quarterly among other drawing attention towards cryptocurrencies and their deficiencies. The report addressed to the central banks notes that vulnerabilities of the consensus algorithm and the dependency upon miners could destroy cryptocurrencies all in all. This report is not a policy document nor is it a decree but could be considered by regulators when making decisions on the industry.

Also the speech of Nasdaq exchange CEO did not remain unnoticed. She sharply criticized ICO-projects stating that they pose serious risks for individual investors and expressing concern about lack of transparency, oversight and accountability of companies that a raising assets through ICO. She insists on counting tokens as securities but there is no general consensus on the point. For instance as we have already mentioned last week William Hinman, Director of Division of Corporation Finance for SEC stated officially that cryptocurrencies like Bitcoin and Ethereum are not to be viewed as securities and will not be regulated by the corresponding law, but this should not apply to tokens in general for one should admit that some of them are similar to securities.

Meanwhile banks in Ireland  are withdrawing financial services to cryptocurrency companies and close their accounts. The banks themselves are denying singling out exchanges, consulting and broker firms as well as crypto startups appealing to anti money laundering measures as is often done in such cases.

But there are also good news. Jack Dorsey’s startup Square Inc. obtaining of the New York Bitlicense cheered up the market a bit. Now the electronic payment platform having 7 million users a month will be constantly controlled by the local financial regulator on one hand and on the other it will provide its users with digital payment methods and become the major rival of Coinbase in the state.

Mt.Gox exchange that was hacked in the end of 2013 is starting the process of civil rehabilitation after the bankruptcy when the exchange had to sell-off bitcoin in order to repay the debts to the customers. This means the market won’t be threatened by large sell-offs that had endlessly lowered the BTC price in the recent past.

Crypto exchanges

The Korean exchange Bithumb and the heist it has been subject to that was followed by a total crypto market drop was in the center of attention last week. Rumours are that the hack was a setup whereas the representatives of the exchange deny this and assure that all their customers who suffered loss as the result of the attack will be compensated.

Bitfinex, one of the largest crypto exchanges announced its chief strategy officer was leaving the company. Phil Potter decided to leave the same post in Tether that is affiliated to Bitfinex.

The third largest crypto exchange Huobi Pro has revealed that Bloomberg has added HB10 index making it available to Bloomberg Terminal users. And now they are provided with data on Bitcoin, Ethereum, Litecoin, Bitcoin Cash, Ethereum Classic, Ripple, Dash, EOS and Zcash. Meanwhile Huobi has added Waves to its trade lists.

Whereas bitFlyer exchange has suspended new customers registration due to the Japanese regulator’s order. The Japanese Financial Service Agency (JFSA) demands client verification must be carried out. Five other Japanese exchange have become subject to the order and the focus to the community as well.

Misc

John McAfee the famous cryptocurrency enthusiast has presented the first truly secure wallet. It seems that McAfee could use some security for himself, because it became known that a couple of days later the investor and developer had been attacked personally. Carry on, John! What would we do without your twitter predictions? However recently he officially gave up on promoting ICO in his blog. SEC scrutiny is not good for a future president candidate after all.

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