Weekly Roundup: BTC Fails To Hold $4000, SEC Chair Opens Up About Bitcoin ETF
In this week’s edition, we bring you some details of the latest movement in the never-ending roller coaster ride that is bitcoin, cover what two chief members of the Securities and Exchange Commission have to say about the future of a Bitcoin ETF, explain why it’s a bad idea for celebrities to be endorsing ICOs, and ponder over the ramifications of what a federal blacklisting of a bitcoin address could possibly entail.
Bears Back in Control as Bitcoin Slides Below $4,000, Again
As of Monday morning, things took a turn for the worse as the price of BTC plummeted back below the $4,000 level, dashing hopes of a soon-to-be bull run, even though it was still up roughly 2% over the last 7 days. As of the writing of this article, bitcoin had just suffered a heart-dropping 4% decline over the period of the last hour. Regardless, prices were still up about $350 from the yearly low set on November 27th of $3474. Things appeared to be grim going into the first week of December, even though the Dow Jones Industrial Average was beginning to show a rally and up over 1.3% for the day thus far.
The continued bear market hasn’t slowed down the Bitcoin Network’s transaction volume in the slightest, however, with an average daily transaction volume higher in November than at any point since February of this year. This heightened level of activity potentially suggests that even when the value of the coin is falling, its adoption is still rising. While the average number of transactions per day is still only slightly more than half of that during the mania that gripped markets in December 2017, it signifies interest in bitcoin is being pulled out of the doldrums it experienced during the spring and summer of this year.
The revived interest in bitcoin can also be confirmed with Google Trends, which shows the number of searches for the term “bitcoin” picking up considerable steam since the beginning of November. Searches for the term peaked in December 2017 and reached a 2018 low in late October, but the “trend of trends” seems to have reversed course going into last month, even if the trend of the price of BTC hasn’t. Interestingly, an analysis of searches for the term “cryptocurrency” shows a gradual decline of interest still in tact, whereas searches for the term “blockchain” has been extremely stable over the same period of time.
A few factors helping to bring more attention to bitcoin include NASDAQ’s plans to launch a new Bitcoin Futures market on schedule in spite of the bear market, the launch of a new Bitcoin Futures trading product from Bakkt (coming early next year), strides made in adoption of the Lightning Network that are helping to keep transaction fees down, and of course, ongoing speculation of whether or not the SEC will eventually approve the addition of a Bitcoin ETF (or multiple Bitcoin ETFs) to the U.S. stock markets. All of these factors serve as potential catalysts for the beginnings of a new bull run.
Silbert: BCH Fork a “Distraction”, ICO Market “Dead”
In CNBC’s Squawk Box segment last week, crypto venture capital fund manager Barry Silbert gave his opinion on last month’s Bitcoin Cash hard fork, dismissing it as a “distraction” that would only serve to assure bitcoin’s (BTC’s) dominance in the market space in its aftermath. Silbert, Founder and CEO of Digital Currency Group, is also the owner of crypto news outlet CoinDesk and has never been shy about giving his opinions on current topics in the industry.
“The fork is a distraction… The industry did itself a real disservice… but let me give you the other side of that: if bitcoin emerges as the winner, it will have been battle-tested, as it has been challenged by competitive cryptocurrencies and internal development strife. Whether its called Bitcoin Cash, or Ethereum, or Zcash, whatever the winners are down the road, they will have earned that spot.” – Barry Silbert
During the interview, Silbert also referenced the ICO market as being “dead,” pointing to this phenomenon as one of the main reasons why the price of Ethereum had tanked so hard relative to bitcoin over the course of 2018. Earlier this year, in July, Silbert had proclaimed that the price of BTC had reached its bottom and could not go any lower – perhaps the reason why he decided to lay off predictions of a price bottom when pressed on it this time around.
“My advice to all ICOs would be to get ahead of the game and close up shop, delist the token, get everyone their money back and pursue a normal business model that doesn’t require a token.” – @nic__carter https://t.co/5KLVo1Uim7
— Barry Silbert (@barrysilbert) November 16, 2018
SEC Chair Provides Conditions for BTC ETF Approval
Last week the chair of the SEC laid out some conditions bitcoin must meet if it were to be approved for the basis of an ETF – an item of news which has long been the subject of speculation. In short, chairman Jay Clayton expressed his desire to see safeguards put in place to prevent the manipulation of bitcoin prices, adding that as of now no particular mechanisms existed that would keep the price of a tradeable security free from such manipulation. With the Justice Department’s recent investigations into accusations that Tether (USDT) was being used at mega-exchange Bitfinex to manipulate the price of BTC during its meteoric rise of late last year comes an air of uncertainty that bitcoin was free of such manipulation, and that the invention of cryptocurrency had not been around long enough to establish federally-enforced preventative measures to deter price manipulation.
“What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation … It’s an issue that needs to be addressed before I would be comfortable.” – SEC chairman Jay Clayton
In a somewhat opposing viewpoint, SEC commissioner Hester Peirce – who made news earlier in the year for her famous dissention over a vote to turn down approval of the most recent Bitcoin ETF application (the one submitted by the Winklevoss twins) – suggested that a Bitcoin ETF was “definitely possible” during an interview in an episode of the bitcoin podcast “What Bitcoin Did.” Peirce quickly became popular among the cryptocurrency community for her contrarian view of the SEC majority opinion regarding Bitcoin ETFs, stating her belief that the committee was overstepping the bounds of its duties by restricting technological innovations. Peirce also said during the recent podcast interview that while crypto did “not get a free pass” and the ability for cryptocurrency to promote scams remained high, the government should have a hand in helping to create a nurturing environment for beneficial new technologies such as the blockchain, rather than stifling its potential mainstream adoption.
Floyd Mayweather, DJ Khaled Fined Over Fraud ICO Endorsement
As a signal of caution to other celebrities who be considering aiding in the promotion of ICOs in the near future, the SEC handed down hefty fines to Floyd Mayweather and DJ Khaled last week for the roles in promoting the fraudulent Centra Tech ICO in 2017. The company raised $32 million worth of different cryptocurrencies under the pretense of a main selling point that they had a partnership with Visa to issue crypto-funded debit cards. The claim was denied by Visa after a New York Times exposé questioned the legitimacy of the venture. As is all-too-common in ICO scams, the CEO of the firm, “Michael Edwards”, turned out to be entirely fictitious, his picture discovered to be that of an entirely different individual found on the internet.
— Floyd Mayweather (@FloydMayweather) September 18, 2017
On April 1st, 2018, two of the company’s founders were arrested on federal charges which included securities fraud, conspiracy to commit securities fraud, wire fraud, and conspiracy to commit wire fraud. The next day, the SEC filed a civil suit against the founders, charging them with securities fraud and seeking to close the company. The SEC had issued a public warning about celebrity-backed ICOs last November, listing reasons why such ICOs were undeserving of trust and why they should be avoided by investors. Mayweather was fined $600,000 and Khaled $200,000 for their role in helping to promote the fraud.
U.S. Feds Begin Bitcoin Address Blacklisting Policy
Interestingly the U.S. Treasury Department has blacklisted two bitcoin addresses in a first-of-its kind ruling. As a result, the federal government will be scrutinizing any funds coming in or out of the two addresses, established to be owned by two Iranians responsible for carrying out a series of devastating malware attacks over the course of the last year. The attacks are estimated to have brought in roughly $6 million worth of bitcoin. While conducting business with Iran is already considered to be illegal because of a recently-imposed, expanded set of sanctions on the country, the two named individuals are now placed on a specially-designated list which makes it illegal for any US citizen to do business with them anywhere, even if the business is not conducted in Iran.
Also interestingly, in the 4 days since this story was published, there have been 3 transactions sent from one of the addresses to the Bitcoin Genesis address, which now contains a whopping (and un-spendable) 66.90094937 BTC. The reason behind the move is unknown but it could signify the hacker’s acknowledgement that they had been targeted by the government and subsequently the media. Regardless of whatever blacklisting the Treasury Department decides to perform, it is still regarded that there is little-to-no way to actually enforce such a blacklisting, as the decentralized nature of bitcoin makes such enforcement impossible.
Almost immediately after the news broke, critics took to social media to list all the potential ways in which targets of the blacklist could be undermined, demonstrating how easy it was to circulate their coins to other addresses which could not be held liable for receipt of their bitcoin.
“What they could do is use the BTC at the blacklisted address to pay transaction fees. That completely taints the block reward (and is significant reason why so much of the BTC supply is tainted with i.e. coins linked to Silk Road). If the owners of the blacklisted coins also know a miner they can do a deal with, then the blacklist can be very thoroughly neutralised.” – Bitcointalk user Carlton Banks
However the case may actually play out, it is strongly advised that bitcoin users do not send BTC to the two addresses, which are 149w62rY42aZBox8fGcmqNsXUzSStKeq8C and 1AjZPMsnmpdK2Rv9KQNfMurTXinscVro9V, as all funds being sent to and from the addresses will assuredly be under a tremendous amount of scrutiny for some time to come.
In a related story, the U.S. federal government indicted two Iranian hackers living in America for their involvement in ransomware attacks on U.S. hospitals and schools who are thought to have some connection with their Iran-based counterparts.