In this edition we recap the crippling, somewhat horrifying events that happened in the world of digital currency over the last week, identify a few crypto assets with bright sides that are outperforming the rest, and discuss developments in the sophistication of crypto-scamming — as well as methods currently being employed to stop it.
Over $100 Million Wiped Off Market Cap Last Week
A second week of market turmoil ended on a down note as the price of bitcoin struggled to remain above $8000. 98 of the top 100 cryptocurrencies by market cap were down, many in the double digits, as of Sunday morning. Big-time investors raced to withdraw money from more experimental blockchain projects in favor of BTC, ETH and cash. Unsurprisingly, bitcoin’s dominance of the total cryptocurrency market cap increased from 33% to 35%, and Ethereum’s from 18% to 20%, even with the steady outflow of the top 2 cryptos for hard cash.
The continued sell-off in the cryptosphere mirrors recent activity in the stock markets, which saw their biggest losses in 2 years on Friday.
Stock market volatility usually signals a shift in investment strategy as money flows out of more experimental investments in favor of more stable investments, which are commonly known as “safe haven” investments.
As worries about inflation begin to set in, institutions are moving their money out of speculative investments into dollar. Though the idea of moving money into a store of value known to be inflationary may seem like an ironic remedy for the problem, the US dollar remains extremely stable compared to the vast majority of other investments. The dollar has acted as the unofficial world currency for several decades, even after being taken off of the gold standard in the early 1970s, accounting for 66% of all currency holdings by international financial institutions.
Ethereum Also Down, Ecosystem Still Popular
Ethereum also sank close to $300 over the course of the last week, after hitting an all-time high in BTC price of 0.12 on Thursday. The price of ETH remained relatively stable during the last 30 days. Even though it has fallen from all-time highs in dollar value amount, it is climbing in terms of bitcoin, making it a relatively stable investment when the rest of cryptos are under siege. Ethereum’s status as the best, most innovative second-generation cryptocurrency helps it remain in favor with institutional-size investors, as well as the fact that a whole economy of Ethereum token-based projects currently utilizes its blockchain and could not survive without it.
DigixDao (DGD), which saw 80%+ gains in a week when nearly every single other digital currency was down, is an example of such a token. DigixDao is an ERC20 compliant token that is used for a wide variety of functions, including providing liquidity to an Ethereum-based decentralized exchange (DEX) and governing the stabilization of the gold-backed DigixGold (DGX) token.
Similar to Tether (USDT, which is currently facing somewhat severe problems), DGX in effect plans to act as a “stable token”; the main difference being it is pegged to the value of one gram of gold as opposed to one dollar. Through association with DGX, DGD is seen as a relatively stable crypto investment, even if DGX tokens have not yet been made available for purchase. The promise of fluid, cheap interchangeability of DGD for other cryptocurrencies also makes it an attractive investment, harnessing liquidity through its interoperability with other coin blockchains. This also lends stability to its price, even though it remains extremely volatile when compared to gold or any physical commodity.
In an honorable mention, the first altcoin, Litecoin (LTC), was 1 of 2 in the top 100 to experience positive gains over the last 48 hours, perhaps also now exhibiting some signs of a “save haven” crypto investment itself. The first coin to employ a scrypt algorithm (as opposed to bitcoin’s SHA-256), Litecoin features relatively cheap energy costs, significant mining profitability and widespread popularity, making it an attractive competitor as a payment transmission vehicle.
Scams on the Rise
Frequently taking the form of viruses, malware, exit scams and bunk projects, cryptocurrency scams can also involve elaborate schemes of impersonation. These include redirecting users to a fraudulent website that looks extremely similar to an actual website, through which user identification information is collected by scammers. They also include using ICO contribution addresses that are very similar to those used by an ICO during an investment phase, hoping that the investor won’t realize they actually contributed to a bogus address controlled by a scammer. More recently, they include fabricated email solicitations claiming to be from an ICO fund, complete with logo and project links. In these scam emails, the team behind an ICO claims to offer exceptional discounts on purchases and guarantees of project success that are too good to be true. They then provide contribution addresses controlled by themselves, not in any way actually affiliated with the ICO, frequently making off with wallet funds, never to be heard from again.
It is estimated that upwards of 10% of all funds contributed to ICOs are stolen or otherwise misappropriated. ICO-related thefts are one of the best rationales that world governments have to push for the regulation and restriction of cryptocurrency within their borders. As hackers and thieves develop ever more sophisticated ploys to separate ICO participants from their coins, third parties are taking the initiative to combat would-be scammers on their platforms. Facebook started the ball rolling earlier in the year by banning advertisements for all cryptocurrency-related products. Members of the Ethereum community are currently working on a browser extension to verify the authenticity of posts and authors in an effort to curb the constant flood of impersonators looking to make a quick buck.
Also in the News
In another “first” case use scenario for bitcoin, a man used the cryptocurrency to purchase two prime seats for this year’s NFL Super Bowl match, in Minneapolis, Minnesota. The seats are located in the first row of the 50-yard line – arguably the best seats in the stadium – and went for one bitcoin a pop (close to $9300 per ticket at the time of purchase). The seats were only sold to the anonymous man after some haggling and agreement for the ticket vendor to accept bitcoin. After an hour long transaction process during a particularly volatile period for BTC, the vending company quickly went back to accepting dollars only in exchange for event tickets.