I was going to write about the future of cryptocurrencies in China today. Then I saw this John Oliver cryptocurrency explanation on Last Week Tonight. You’re welcome.
Tag: bitcoin
Bitcoin freefall continues
Bitcoin traded for below $8,000 Friday. It’s the first time bitcoin has traded for below $8,000 since November of last year. (CNBC) Bitcoin has lost more than $72 billion in market cap in 2018 (Business Insider via Yahoo).
Bitcoin isn’t the only cryptocurrency having a bad 2018.
Overall, cryptocurrencies are off 34% year-to-date. The entire cryptocurrency field has lost $207.7 billion in market cap, according to data from CoinMarketCap. (Fortune)
What’s going on? There are a variety of factor’s driving the bitcoin freefall and cryptocurrency selloff. Part of it is a market correction. Part of it is a response to regulatory concerns. India appears ready to ban cryptocurrencies as a payment mechanism. (Reuters). Meanwhile, Facebook is cracking down on coin promotions and the SEC and other regulatory agencies are in the midst of investigations.
Be smart: As the blockchain and cryptocurrency markets mature, there’s going to be more regulatory action and news. This is the nature of an emerging industry. On Tuesday, for example, there’s a Senate hearing on what the oversight role for the SEC and the Commodity Futures Trading Commission should have on “virtual currency.” At some point, the market won’t show the same volatility to regulatory intervention that it does now. But nobody knows when that moment will arrive.
Facebook bans bitcoin, ICO ads
Sorry folks. You can’t advertise your bitcoin promotions or ICOs on Facebook anymore. The popular social network has banned these ads because too many of them are misleading or deceptive. The Facebook ban began earlier this week. And any ad banned from Facebook will also be banned from Facebook’s advertising network. (Recode)
This is why we can’t have nice things:
We want people to continue to discover and learn about new products and services through Facebook ads without fear of scams or deception. That said, there are many companies who are advertising binary options, ICOs and cryptocurrencies that are not currently operating in good faith.
This policy is intentionally broad while we work to better detect deceptive and misleading advertising practices, and enforcement will begin to ramp up across our platforms including Facebook, Audience Network and Instagram. We will revisit this policy and how we enforce it as our signals improve. (Facebook announcement)
But there’s hope: Facebook knows there are legitimate offerings out there. The company has deliberately cast a wide net while it figures out how to refine what it’s looking for in terms of banning ads. So at some point in the future, bitcoin promotions and ICO ads will be welcome again. We just don’t know how long that’s going to take.
Bitcoin, cryptocurrency prices tumble again
A market selloff sent prices for bitcoin, ethereum and other cryptocurrencies tumbling Tuesday. Bitcoin was down 12 perecent and trading below $10,000 Tuesday afternoon, according to CoinDesk. Ethereum was down 9 percent while ripple fell 10 percent, according to CoinMarketCap. (CNBC)
Be smart: No one exactly knows what sparked the massive selloff. One possibility is South Korea implementing strict KYC rules for trading cryptocurrencies. (CNBC) Another is the SEC freezing the assets of AriseBank and halting its massive ($600 million so far) ICO. (CNBC) A third regulatory action saw the U.S. Commodity Futures Trading Commission send subpoenas to cryptocurrency exchanges Bitfinex and Tether. The subpoenas were issued in December, but reported publicly for the first time today. (Bloomberg Technology) It’s also entirely possible that this trifecta of bad news had nothing to do with the selloff. Nobody knows for sure.
What’s next: Volatility is the norm in cryptocurrency markets. So this wild ride will continue. Just remember the regulators are not going away either. The size and volatility of these markets have caught their attention. And there are going to be more regulatory actions in the future.
Weiss gives ethereum higher grade than bitcoin
Independent financial ratings firm Weiss Ratings awarded ethereum a B and bitcoin a C+ in its first cryptocurrency ratings report. No cryptocurrency received an A. EOS was the only other currency to receive a B. (CNBC)
The key facts: Bitcoin was dinged for slow transaction times, high transaction fees and no method to upgrade its underlying technology. Ethereum, by contrast, was faster and had better underlying technology. (CNBC)
Market fears: Weiss Ratings had to overcome distributed denial of service attacks to publish the ratings report. The attacks appear to have originated South Korea. Fears of low ratings for certain cryptocurrencies may have prompted the DDOS attacks. (Palm Beach Post)
The bottom line: Weiss Ratings is considered a tough, but fair rating service. As cryptocurrencies gain mainstream acceptance, more ratings like this will come out. And as more ratings come out, cryptocurrencies will move from a speculative market play to a much more informed one.
South Korea eyeing cryptocurrency trading ban
The quick read
The trading of cryptocurrencies is booming in South Korea. And government officials are not happy about it. Authorities raided local exchanges Wednesday and are pressing forward with tax evasion charges. The government also announced that legislation to ban the trading of cryptocurrencies is in the works. The raids and planned legislation initially sent local coin prices tumbling 21 percent and global bitcoin prices down about 10 percent. (Reuters)
The key facts
South Korea is a major player in cryptocurrency trading.
(Bitcoin) still trades at around a 30 percent premium compared to other countries. (Reuters)
And it’s not just bitcoin. The South Korean market trades heavily throughout the cryptocurrency space. Any disruption in South Korea is a disruption in the global market.
The bottom line
The South Korean legislation is still being written and needs a majority vote in the National Assembly to pass. That’s still months away. But regulators and politicians are concerned. And that’s not a good thing.
Overstock, Coinbase close bitcoin cash flaw
Quick read
For about three weeks, a bitcoin payment glitch left online retailer Overstock and bitcoin wallet Coinbase vulnerable to potential fraud. Customers were being charged in bitcoin, but allowed to pay the numerical equivalent in bitcoin cash. (KrebsOnSecurity)
Mini-explainer
So if an item cost 10 BTC, customers were allowed to pay 10 BCH instead. Additionally, if customers canceled the order, refunds were made in BTC even if the payment was made in BCH. Given the value disparity between BTC and BCH (bitcoin is about 7 times more valuable than bitcoin cash), this was a serious problem.
The key facts
Consider the implications here: A dishonest customer could have used this bug to make ridiculous sums of bitcoin in a very short period of time. Let’s say I purchased one of the more expensive items for sale on Overstock, such as this $100,000, 3-carat platinum diamond ring. I then pay for it in Bitcoin cash, using an amount equivalent to approximately 1 bitcoin ($~15,000).
Then I simply cancel my order, and Overstock/Coinbase sends me almost $100,000 in bitcoin, netting me a tidy $85,000 profit. Rinse, wash, repeat. (KrebsOnSecurity)
The bottom line
Coinbase implemented the bitcoin payment solution, so it stood to lose the most from the glitch. As the cryptocurrency space becomes more crowded, the potential for these types of mistakes will increase. Payment processors need to be extra careful moving forward to avoid situations like this.
Dimon ‘regrets’ bitcoin remarks
The quick read
JPMorgan Chase CEO Jamie Dimon told Fox Business News Tuesday that he shouldn’t have called bitcoin a “fraud” last September. (American Banker) Dimon went on to acknowledge blockchain technology could be useful.
The key details
Dimon still isn’t a big believer in bitcoin however.
The 61-year-old CEO said Tuesday he’s still not very interested in the subject, and thinks that government intervention may eventually hamper bitcoin’s growth and acceptance. (American Banker)
Bottom line
Dimon still isn’t a big fan of bitcoin. But he can’t dismiss blockchain technology, especially with his own company interested in it. So he softened his statement a bit.