In this week’s edition, we examine the discord between Wall Street analysts and the price movement of BTC, take a look at Coinbase’s continued rise to the top, explain why cryptocurrency is so popular among nations being sanctioned by western governments, and review a few of the non-currency applications that the blockchain in which the blockchain is currently being utilized, potentially to the benefit of the whole of society.

Despite Downtrend, Bitcoin Still a Buy, Say Analysts

The price of BTC slid nearly 15% over the last week, clinging to support at the $7200 level as of the writing of this article. Last week’s slide added significantly to a losing streak that plagued the mother of all cryptocurrencies throughout the month of May. Unsurprisingly, the clear majority of all coins followed suit, with just two exceptions in the top 50 by market cap: Bitcoin Private (BTCP) and newcomer WaykiChain (WICC). Price movement in the crypto markets has been anything but fun for the vast majority of “late bloomer” investors in 2018. An overpriced bitcoin, a wave of international regulatory efforts and a general disappointment in the slow pace of online merchant adoption – despite big money pouring in from Wall Street all through 2017 – are the main culprits behind crypto’s failure to continue its exponential trajectory upward.

This week it was the countries of Israel, Malta and Thailand whose governments announced they would be regulating cryptocurrencies, following a tide of other countries that began the clampdown on crypto this year. Despite the continued downward pressure, crypto-oriented fund managers remain optimistic about the future of their investments, with some continuing to claim that “bad days are good” for incoming bitcoin buyers, even though the downtrend that has characterized 2018 remains intact. New York’s blockchain venture capitalists remain under the opinion that bitcoin retains a “buy” rating and that last week’s bloodshed makes it even more of a bargain as a medium- to long-term investment.

Perceived as unwelcome news to some and welcome news to others, the U.S. Department of Justice launched a probe into cryptocurrency price manipulation in an attempt to weed out “bad actors” from its markets. Bad actors can not only take the form of individuals or groups who manipulate the price of coins for their own gain, but exchanges as well, who have the power to inflate trading activity by placing fake “buy” and “sell” orders to make certain coins appear to be more in demand than they actually are.

Though bitcoin’s slide last week began two days earlier, it was probably triggered by those who knew the announcement was coming in what was likely a form of “insider trading” that will not be subject to investigative efforts. Federal prosecutors are working in conjunction with the Commodity Futures Trading Commission (CFTC), an agency that monitors registered funds and securities on Wall Street that trade bitcoin, cryptocurrencies or derivatives tied to anything cryptocurrency-related. The criminal probe has yet to net any suspects, officially.

The Astounding Rise of Coinbase

One entity which has remained steadfastly undeterred by the ever-increasing regulatory grip of world governments over cryptocurrency is Coinbase, one of the world’s first – and now largest – cryptocurrency exchanges. Coinbase, founded in the technology hotbed of San Francisco, California in 2012, offers the direct exchange of 4 different cryptocurrencies (BTC, ETH, LTC, BCH) for fiat currencies in 32 countries, providing bitcoin transaction and storage services in a staggering 190 countries (almost the entire planet). The company has transformed from small startup to corporate giant over the last 5 years, now on a mission to attract Wall Street’s coveted hedge funds as customers.

Though Coinbase has yet to officially announce a stock offering (IPO) or coin offering (ICO), the company handled over $1 billion in revenue in 2017 and its valuation is currently estimated to be close to $2 billion, making it bigger than most companies listed on the NASDAQ stock exchange. Its latest acquisition, of the crypto exchange Paradex which was launched on the Ethereum-based district0x (ZRX) platform, helps cement its status as a “cryptocurrency empire” that is bent on dominating Wall Street’s access to the crypto space.

Indeed, execs at Coinbase are aiming to have their company soon recognized as “the Google of crypto,” inferring they would prefer their name to be synonymous with blockchain-driven technology. With the blessing of the governments of 32 different countries, along with Wall Street and U.S. federal regulators alike, this seems like a near inevitability for the startup-turned-worldwide financial force.

Cryptocurrency and Sanction Evasion

Since the early days of Wikileaks, bitcoin has been used by organizations to skirt government-imposed bans on money flow to different organizations, which have since crept up in size to include entire nations. Of the list of countries sanctioned by the EU or American governments in at least one way or another, roughly a dozen of them are actively pursuing creation of their own, state-backed cryptocurrency or have enacted laws legalizing cryptocurrency use to degrees greater than those of Europe or the U.S. Some of them include:

Venezuelan president Nicolas Maduro, who recently won his bid for re-election, had this to say about why cryptocurrency is so important to the economy of his country:

We have decided to respond to the inhuman commercial blockade that the governments of the United States and Europe are subjecting us to, and which has hurt our people so much, with the creation of the world’s first ever cryptocurrency backed by reserves, the petro, whose benefits are already and immediately being invested in the people, as we have always done.

Whether or not Maduro’s petro will be able to maintain bound in value to the price of Venezuelan oil remains to be seen, but the socialist nation is already using it to help secure oil deals with foreign nations in the meanwhile.

Ways Which the Blockchain Can Transform Society

It is all-too-easy to forget that the blockchain has other uses outside of acting as the record-keeping system for a cryptocurrency. Following a story about a tuna fish whose transportation logistics had been registered on the Ethereum blockchain, Wired published a comprehensive list of “187 things the blockchain is supposed to fix” on Friday, well-aware that progress on a blockchain solution for at least a few of these items was already underway. Some of the more overarching items include transforming insurance, health record storage, pension funds, authentication standards, the global supply chain, as well as disease prevention programs. Just about every conceivable problem that arises from a lack of public trust, proper security, or storage mechanisms, can theoretically be solved with the application of a decentralized, encrypted public ledger.

The blockchain’s unique ability to simultaneously provide privacy and transparency in an open-source manner is already being put to practice in several industries. For example, a startup called SpringRole is already employing the blockchain to help keep track of the validity and ownership of résumés, while also being able to “weed out” fake résumés. Walmart and IBM are working together to test a pilot program that uses the blockchain to help monitor the quality of foods and their delivery, to prevent food-borne illnesses that spread through contaminated foods. In Indonesia, the blockchain is being put to use to record real estate transactions and property rights, which are frequently contested in the 8th largest country in Asia.

If time proves that any of these test case scenarios provide a more effective manner of conducting business than traditional models, it will help cement the blockchain as permanently-engrained in society – as well as a revolutionary technology – regardless of how well bitcoin or any other of the 1600+ cryptocurrencies based on it fare in the future.

Also in the News

  • London police seized over $600,000 worth of bitcoin from a British national hacker late last week, in the first-of-its-kind case involving cybertheft of that degree. The hacker used “phishing” software to obtain confidential material and financial data from over 100 companies and 78 million users, which he would then sell on the dark markets in exchange for bitcoin.
  • In what may prove to be one of the biggest bitcoin scams of all-time, a South African trader disappeared with close to $80 million in user funds last week, effecting more than 28,000 investors spread out across the globe. The trader offered investors one of the hallmark signs of any Ponzi scheme that has ever been hatched, in cryptocurrency or otherwise (as explained in our Spotting a Scamcoin Part III article last week): a consistent return, of 2% a day, 14% a week or 50% a month. As what happens with every Ponzi scheme eventually, new investor money stopped coming in to pay the old, and the brazen scammer is currently still at large.
  • Also out of South Africa comes a story involving a boy kidnapped for a bitcoin ransom, who was found 4 days after being abducted from an eastern province of the country. It was unclear if the 15 BTC ransom was indeed paid or not and the case is the first of its kind for the violence-torn country.
  • On a curious note, a blockchain-based charity auction in New York City raised eyebrows and an underestimated amount of funds as crypto-millionaires (and even some billionaires) poured money into crypto-related pieces of art. The biggest-selling items proved to be of the Crypto Kitty variety: digital, “breedable” cats that were infamous for congesting the Ethereum network in December of 2017. Some of the blockchain-based “kitties” brought in tens out thousands of dollars, creating as much confusion as laughter for onlookers in the crowd. Currently, the most popular comment for Vice’s YouTube video (as linked above) reads as follows:

This is kind of embarrassing. I fear for our future. – CaptainTruth

We can’t help but kind of agree.