Weekly Roundup: Markets Slide, Coinbase Records Given to IRS, Nakamoto Re-Examined
In this week’s edition, we touch on the latest developments in the movement of coin prices, review a few of the culprits that are slowing down big money’s return to the cryptocurrency scene, discuss why the IRS court victory over Coinbase is a blow to bitcoin’s libertarian ideals, and revisit the shrouded, ever-evolving mystery of bitcoin’s elusive creator, Satoshi Nakamoto.
BTC, ETH, Top Alts End Week on Down Note
The price of bitcoin slid about 8% lower over the course of last week, briefly surpassing the $12,000 mark on Tuesday before dropping back down to $9,350 by the following Monday. Ethereum and most of the other top alts fared slightly to significantly worse as Wall Street’s enthusiasm in crypto has seemingly reached a plateau thus far in 2018. Furthering skepticism was a report published on bitcoin.com which found that over half of all ICO projects started in 2017 had already failed. The information was republished by the widely-read financial news website Fortune on Sunday and is likely to put a damper on continued investor appetite for ICOs.
Despite the jaw-dropping volatility experienced by BTC this year, it remains up a whopping 120% over the last 6 months and over 900% in the last year, which renders it a far more impressive medium- to long-term investment than the vast majority of stocks or other publicly traded assets. With such tremendous gains significantly outpacing the rest of the financial markets, cryptocurrencies may not find themselves out of “bubble burst” territory just yet, as a huge chunk of Wall Street money remains entrenched in the cryptosphere.
IRS Wins Access to Coinbase Records in Court
In a blow to cryptocurrency’s freedom and independence from government forces, the world’s premiere bitcoin exchange, Coinbase, notified around 13,000 of its customers on Friday that their account data would soon turned over to the IRS per court instruction. The decision stems from a December 2016 request from the IRS that Coinbase turn over account information for nearly all of its users, or close to 500,000 individuals, which Coinbase disagreed with on legal grounds. After a few months in court, a compromise was finalized in November 2017 in a ruling which knocked the total number down to 13,000 customers.
Coinbase’s notification is being blamed as a reason for BTC’s continued slide to sub-$10,000 levels late in the week. The federal scrutiny of Coinbase transactions is bound to make cryptocurrency less appealing to a sizeable contingency of users, perhaps the first strong indication that the unregulated, “Wild West” era of bitcoin is finally coming to an end. On its site, Coinbase reminds its users that they are responsible for self-reporting trading activity on bitcoin to the IRS, which considers cryptocurrency to be property, and therefore taxable under applicable guidelines.
Nine Years Later, Satoshi Nakamoto Remains an Enigma
Earlier this month, the first public announcement of bitcoin turned nine years old, and although the mysterious Satoshi Nakamoto’s untouched fortune in bitcoin renders him one of the richest men in the world, his actual identity remains unknown. What is known about Satoshi is that he (or they) had previous knowledge of the SHA-256 hashing algorithm that secures the bitcoin blockchain, which was originally developed by the NSA. Among the people publicly speculated to be Satoshi Nakamoto are billionaire inventor Elon Musk, inventor of bitcoin precursor “bit gold” Nick Szabo, and pre-bitcoin cryptographic pioneer Hal Finney, who was not only the recipient of the first bitcoin transaction ever recorded to the blockchain but also lived (coincidentally) only a few blocks from Dorian Nakamoto, who was also suspected of being Satoshi in 2014.
Finney, who mined bitcoin alongside Satoshi in 2009 (back when the mining difficulty was still “1”; today it is 3 quadrillion) passed away in 2014, had this to say about his impressions of bitcoin’s creator:
“…At the time, I thought I was dealing with a young man of Japanese ancestry who was very smart and sincere. I’ve had the good fortune to know many brilliant people over the course of my life, so I recognize the signs.”
The idea of using cryptography to secure the transmission of digital currency had been around since the mid-90s, but none of bitcoin’s early predecessors managed to function with the technical precision and reliability of bitcoin. This had led to rampant speculation that “Satoshi Nakamoto” was not necessarily a name but an anagram used a team of cryptography experts and programmers working for U.S. government. In January of this year, Natalya Kaspersky of security software company Kaspersky Labs stated in a presentation that she thought bitcoin was not only created by the NSA but used by the CIA as a means to covertly launder funds or otherwise move money around the world without being detected.
More recently, the Japanese translation of the two words were broken down into contexts applicable to bitcoin; the most popular of which were “Clever Gentlemen” and “The Origins of What is Upcoming (or Next).” These translations lend heavy credence to the idea that the words “Satoshi Nakamoto” are a pseudonym for either a single person or a team of people working together. Regardless of who Nakamoto is, conspiracies of an NSA backdoor into bitcoin remain, as it is frequently cited that technology developed by the NSA is usually outdated by the time it is made available to the public.
Also in the News
- Those dealing with the economic consequences of the Brexit transition may benefit from use of the blockchain, says UK academic.
- A real-world, use case scenario for bitcoin just became a whole lot more practical as strippers employed by strip clubs are wearing temporary tattoos of bitcoin address QR codes in order to let customers pay them in a more discrete fashion.
- Just like with many other forms of gifting, bitcoin gifts are now considered tax deductible by the IRS, perhaps serving as a way to lessen the blow of capital gains taxes being paid by the (likely) slim margin of traders who will choose to report cryptocurrency trading on their IRS forms this year.