Bitcoin’s Plunge in Volume Stirs Questions About Its Usage

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Earlier this year, when Bitcoin’s price fell by more than 60 percent from its record close, a less-noticed Bitcoin figure also plunged: the number of daily transactions.

There are many explanations for the fall-off in trading, from software- to news-related. What’s less understood is why the level hasn’t recovered as Bitcoin’s price made a 50 percent comeback since Feb. 5. That’s left some investors wondering whether the cryptocurrency is waning in popularity.

The average number of trades recorded daily has roughly dropped in half from the December highs and touched its lowest in two years last month, even as Bitcoin became a household name and roared back to near $11,000.

The transaction data may be bad news for Bitcoin bulls, according to Charles Morris, chief investment officer of Newscape Capital Group in London, who invests in cryptocurrencies. Trading and purchases on the Bitcoin network, which can be measured by metrics like transaction volume, is indicative of price direction, he said.

Average transaction confirmation times have tumbled — though that may be in part because the technology that underlies Bitcoin has already been adapted to address some of these delays. For example, a software enhancement known as the SegWit protocol, changing the way data is stored on the blockchain, was activated last week by Coinbase Inc., the largest U.S. cryptocurrency exchange.

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Not everyone agrees that lower volumes signal trouble for Bitcoin. It may be a healthy return to normality and signs that the market is maturing.

Should prices start rallying again, traders may well be coaxed back, according to David Drake, whose New York-based family office has more than $10 million in cryptocurrency and blockchain investments. He sees the currency soaring to $35,000 by the end of the year.

“We have a legacy of transactions being too slow and expensive, and it will take some time for people to forget,” Drake said by phone. “But they’ll come back.”

The decline in prices may itself be to blame for lower trading volumes in Bitcoin. And websites that once only allowed payment in Bitcoin now accept a much wider range of digital currencies, according to Kyle Samani, managing partner at crypto hedge fund Multicoin Capital. That makes alternative currencies more appealing than the first-mover in the space. A year ago, bitcoin’s market capitalization was about 85 percent of the total sector. It’s now around 40 percent, according to website

“Merchants, payment processors and online gambling are moving off of Bitcoin,” Samani, who has $50 million allocated to the space, said in an email. “Our Bitcoin position as a fund is small — I believe Bitcoin is in the process of failing.”

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    Bitcoin Snaps Slide as Crypto Markets Dodge Push for Regulation

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    Bitcoin rose for the first time in six days, snapping a losing streak that had helped push overall losses in digital currencies to about $500 billion, as the top U.S. market cops said they possessed all the authority needed to regulate and risk appetite returned to financial markets.

    Prices steadied as Securities and Exchange Commission Chairman Jay Clayton reiterated in a Congressional hearing that he believes every initial coin offering he’s seen is a securities sale and the agency already possesses the regulatory oversight needed for enforcement.

    “It was great for the space,” said John O’Rourke, chief executive officer of Riot Blockchain Inc., which invests in cryptocurrency and blockchain startups. “They don’t want to do anything to hamper the development of this technology.”

    Lawmakers may still need to to pass legislation that gives agencies jurisdiction over Bitcoin’s spot market and the online platforms that digital coins trade on, Clayton and Commodity Futures Trading Commission Chairman J. Christopher Giancarlo said during the hearing.

    The selloff had knocked about half a trillion dollars from digital coins since early January. That’s shaken a nascent market whose core attraction — anonymity and decentralization — is being challenged as never before by regulators.

    Tuesday’s U.S. hearings follow comments from Bank for International Settlements General Manager Agustin Carstens that there’s a “strong case” for authorities to rein in digital currencies and that central banks — along with finance ministries, tax offices and financial market regulators — should police the “digital frontier.”

    “Novel technology is not the same as better technology or better economics,” Carstens said in a speech in Frankfurt. He said Bitcoin may have been intended as an alternative payment system with no government involvement, yet it has become “a combination of a bubble, a Ponzi scheme and an environmental disaster,” in reference to its electricity use.

    Cryptocurrencies tracked by have lost more than $500 billion of market value since early January as governments clamped down, credit-card issuers halted purchases and investors grew increasingly concerned that last year’s meteoric rise in digital assets was unjustified. The selloff had coincided with a rout in global equities.

    For more on cryptocurrencies:
    Bitcoin Crash Sees Miners Fried in This Game of Chicken: Gadfly
    Bitcoin Trading Signal That Returned 1,152% Is Flashing Sell
    Cryptocurrency Rules From Congress Sought by U.S. Market Cops
    Bitcoin Selloff Among Biggest in Digital Coin’s History: Chart
    Why Bitcoin Goes Down as Well as Up (Plus What It Is): QuickTake
    Power-Hungry Crypto Mines Clean Up as Cost of Electricity Grows

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      A Classic Scam Finds New Life Stealing Bitcoin on Twitter

      A new version of a classic online scam is percolating on Twitter. And while anyone even halfway paying attention likely wouldn't fall for it, the trick has already raked in thousands of dollars of ethereum and bitcoin in less than a week.

      The scheme itself is pretty straightforward: Attackers make Twitter handles that closely mimic the verified accounts of well-known figures like Elon Musk, John McAfee, or Ethereum cofounder Vitalik Buterin. Then they respond to one of those genuine tweets, giving the appearance of having started a thread, in which they claim that they'll send a significant quantity of cryptocurrency (like 2 bitcoin) to anyone who sends a smaller amount of currency (like 0.02 bitcoin) to a particular wallet. Yup, that's it. As of publication, you can see new attempts popping up on Twitter every few minutes.

      "It's like a social media impersonation mixed with a classic Nigerian prince scam," says Crane Hassold, a threat intelligence manager at the security firm PhishLabs, who previously worked as a digital behavior analyst for the FBI. "Twitter will likely start blocking the accounts making the posts, but the level of effort needed for this scam is so low that it'll probably be a cat and mouse game, and the return on investment at the beginning will be pretty good for the actor."

      The scheme also closely resembles a popular trick in the game Eve Online, in which scammers post "send a little, get a lot" promises to collect Eve's in-game currency (known as ISK) in its Jita solar system, which acts as the commerce center. Like cryptocurrency, ISK is stored in electronic wallets for digital transactions.

      'The level of effort needed for this scam is so low that it'll probably be a cat and mouse game'

      Crane Hassold, PhishLabs

      The Twitter version, which started cropping up on February 1, doesn't appear to be a total blockbuster, since most people know to avoid "send a little, get a lot" setups. (Not to mention that Elon Musk probably wouldn't randomly give out a ton of bitcoin for no reason through Twitter. We think.) Still, many of the bitcoin and ethereum wallets the attackers set up do have a low key stream of payments coming in. For example, one wallet posted in a fake John McAfee tweet, which promised 20 bitcoin for every 0.02 received, racked up 0.184 bitcoin within hours. At current prices that's about $1,500. Not a gold rush, but also not bad for a scam that takes so little effort.

      "It’s all a statistics game. They aren’t targeting folks who need to be convinced, they’re targeting folks who will knee-jerk react," says Tinker, a researcher from the Dallas Hackers Association who was early to spot the scam. "By lessening the length of the message, it makes the scam more consumable. Combine that with impersonating famous people sending out popular tweets and the fall of bitcoin—folks are desperate to get a gain on their loss."

      As the price of cryptocurrencies has soared—and then crashed back down—scammers have capitalized on the booms and preyed on victims of the busts. The hustles are diverse, including all different types of phishing, spamming, and the notorious development of bogus initial coin offerings, but social media impersonation has a role in many of them, perhaps because so much discussion, speculation, and misinformation about cryptocurrency takes place there.

      One attempt to identify bogus accounts impersonating prominent cryptocurrency community members is the new Chrome Extension "EtherSecurityLookup." Created by web developer Harry Denley, who also makes the anti-phishing tool "EtherAddressLookup," the new extension checks Twitter accounts against a whitelist of legitimate cryptocurrency community members, and flags handles that are too similar as potentially problematic.

      Impersonation on social media is an ongoing problem, but these rackets violate the user agreements of pretty much every service, and platforms like Twitter can discourage them by playing whack-a-mole with the malicious accounts. And scams that are easy for fraudsters to run never totally go away, because it doesn't take much investment to do them as quick one-offs. "It's like any of the old school schemes," PhishLabs' Hassold says. "They're somehow still around, because there are always people who are going to fall for it."

      The Cryptocurrency Racket

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      The CFTC just went after a cryptocurrency, and the price of Bitcoin is plummeting

      Not looking good.
      Image: traviswolfe/getty

      The price of Bitcoin plummeted below $10,000 Tuesday morning as news broke that The U.S. Commodity Futures Trading Commission had subpoenaed Tether and Bitfinex, a so-called stablecoin cryptocurrency and one of the world’s largest cryptocurrency exchanges, respectively. 

      First reported by Bloomberg, news of the December 6 subpoenas follows allegations from critics of Tether that the digital currency may not in fact be backed on a one-to-one basis with U.S. dollars as its founders claim. 

      “We routinely receive legal process from law enforcement agents and regulators conducting investigations,” Bitfinex and Tether said in a statement published by Bloomberg. “It is our policy not to comment on any such requests.”

      While the exact motivation behind the subpoena is unclear at this time, Tether skeptics have straight up called the digital token a “scam,” and have predicted that its unraveling could bring the price of Bitcoin down by as much as 80 percent. 

      We have reached out to Tether for comment, and will update this post when and if we hear back. In the meantime, however, the price of Bitcoin continues to fall. At the time of this writing it sits at $9,890.  

      This story has been updated to note the date the subpoenas were sent.

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      PSA: No India hasnt banned Bitcoin but its still talking tough on crypto

      Reports of the death of Bitcoin in India have been greatly exaggerated.

      On Thursday a budget speech by finance minister Arun Jaitley generated a tsunami of ‘the Bitcoin party is over in India’ headlines, adding to downward pressures on the cryptocurrency.

      Safe to say, the truth of the matter is a lot more gray. Yes, Jaitley talked tough on crypto currencies. But no, there was no outright ban — not yet, anyway. The Indian government’s plans for crypto regulation remain unformulated (or at least unstated). It did set up a committee to look into crypto back in April. Which reported in Jaitley in August. But no regulations have been confirmed, leaving rumors to swirl.

      Here’s the relevant chunk of Jaitley’s budget speech (via The India Express):

      Distributed ledger system or the block chain technology allows organization of any chain of records or transactions without the need of intermediaries. The Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system. The Government will explore use of block chain technology proactively for ushering in digital economy.

      One clear takeaway from that is the minister is sounding much more positive about blockchain technology. And his tonal contrast between blockchain and cryptocurrencies is obviously intentional — and therefore interesting.

      So yes Jaitley wants to sound like he’s pouring cold water on crypto. But whether that means you should hodl or not depends on your own personal threshold for risk.

      The point about the Indian government not recognizing crypto as legal tender was already made by Jaitley, back in December. And a crackdown on crypto financing illegitimate activities is what any government will say it wants to do. What’s more interesting is the second clause in his sentence — where he tacks on “or as part of the payment system”, which is certainly suggestive of a ban. But nothing is explicitly stated.

      And, as CNN reported earlier, Jaitley was explicitly asked if the government is moving to ban cryptocurrencies by Indian state-owned broadcaster Doordarshan, which interviewed him after the budget speech.

      Here’s CNN’s translation of the exchange (emphasis mine):

      TV Host: We’ve seen a lot of excitement over bitcoins. Why aren’t you banning it instead of stating it isn’t legal tender?

      Jaitley: We are discouraging people from using it now. There is a government committee that’s looking into it right now and they will announce their decisions and next steps after they are done.

      So really the minister’s intention looks to have been to try and inject a little more sanity into the crypto space by splashing a little cold water around. And no one should argue with the sense of that.

      But how exactly will Bitcoin and crypto be regulated in India? Well, that remains to be seen.

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      50 Cent admits he has never owned, and does not now own any bitcoin

      Reports last month that rapper 50 Cent had forgotten about $7 million or so in bitcoin he owned have been given the lie by the man himself, who declares in court documents that he “has never owned, and does not now own, a bitcoin account or any bitcoin,” nor did any of his companies.

      The court documents were first obtained by The Blast, but I tracked them down as well. Curtis James Jackson III (50 Cent’s legal name) filed the “Declaration on bitcoins” last week, well after the reports had circulated that he had rediscovered the trove of cryptocurrency. He said at the time: “I’m a keep it real I forgot I did that shit. Lol.”

      Turns out, however, he never touched bitcoin himself. As he states in the declaration:

      All online transactions involving my brand were handled by an independently owned and operated third part, Central Nervous LLC.. the limited bitcoin transactions that occurred online were processed and converted to U.S. Dollars contemporaneously, based upon the then-existing exchange rate…

      He provided a few screenshots of his BitPay account showing a couple hundred transactions, most of which were for $5.50 or $8.90. It doesn’t look like bitcoin purchases contributed much to the 200,000 copies of Animal Ambition that eventually sold.

      It isn’t anywhere near the 700 bitcoins reports suggested he’d raked in; considering a bitcoin was worth $657 at the time, the total haul is by my rough estimation probably closer to 6 or 7 of them, a few thousand dollars’ worth.

      Why, then, did he not deny the reports at the time, if he knew they were not true? Later in the same document he explains a well-understood rule of show business:

      As a general matter, so long as a press story is not irreparably damaging to my image or brand, I usually do not feel the need to publicly deny the reporting. This is particularly true when I feel the press report in question is favorable to my image or brand, even if the report is based on a misunderstanding of the facts or contains outright falsehoods.

      When I first became aware of the press reports on this matter, I made social media posts stating that “I forgot I did that” because I had in fact forgotten I was one of the first recording artists to accept bitcoin for online transactions. I did not publicly deny the reports that I held bitcoins because the press coverage was favorable and suggested that I had made millions of dollars as a result of my good business decision to accept bitcoin payments.

      All quite true. It’s hard to say it was not a good decision (being as it was good publicity at the time as well), although in retrospect it might have been wiser to hold onto the coins instead of cashing them in. But with bankruptcy looming, the promise of later riches (which he might simply have to surrender) likely held little temptation for the rapper.

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      Bitcoin is down to $9,300, but news from India might not be as bad as it seems

      Image: slavkoSereda/gettyimages

      After several short-lived drops under $10,000, it looks like the price of Bitcoin finally yielded under pressure. The largest cryptocurrency by market cap is currently trading at $8,947, down 11 percent in the last 24 hours according to CoinMarketCap

      The trigger for the price drop is likely the news from India, where finance minister Arun Jaitley expressed a largely negative view towards cryptocurrencies in his 2018 budget speech. 

      “The Government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system,” Jaitley said according to Fortune

      The price of Bitcoin fell significantly from its December heights of around $20,000.

      Image: coinmarketcap

      Several outlets, including Fortune and Quartz, interpreted this as a country-wide ban on Bitcoin and other cryptocurrencies. However, that’s impossible to deduct from this single quote, which merely states that the government is against two things: crypto-assets financing illegal activities, and crypto assets being used as part of the payment system. 

      In other words, Bitcoin won’t soon become legal tender in India, but there’s nothing here about an outright ban. 

      In fact, according to several outlets, Jaitley actually uttered a couple of positive words about cryptocurrencies in that same speech. According to Hindustan Times, he said the government “will explore the use of blockchain,” and Unocoin, a crypto exchange based in India, has an expanded version of that quote, in which Jaitley says the government will look into blockchain tech “proactively for ushering in digital economy.” 

      The South Korean government recently introduced more stringent cryptocurrency trading rules, but stopped short of any sort of cryptocurrency ban. Like most governments, the Indian government does not appear to be happy with illegal use of cryptocurrencies, but we’ll have to wait for an official policy to draw any finial conclusions.  

      Nevertheless, the markets reacted strongly. Top ten cryptocurrencies by market cap have all dropped double digits in the last 24 hours, with one notable exception: Ethereum. The cryptocurrency that’s also a platform for decentralized apps is currently trading at $1,133 and is actually up by 1.78 percent in the last 24 hours. 

      Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC and ETH. 

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      Bitcoin Ban Expands Across Credit Cards as Big U.S. Banks Recoil

      A growing number of big U.S. credit-card issuers are deciding they don’t want to finance a falling knife.

      JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. said they’re halting purchases of Bitcoin and other cryptocurrencies on their credit cards. JPMorgan, enacting the ban Saturday, doesn’t want the credit risk associated with the transactions, company spokeswoman Mary Jane Rogers said.

      Bank of America started declining credit card transactions with known crypto exchanges on Friday. The policy applies to all personal and business credit cards, according to a memo. It doesn’t affect debit cards, said company spokeswoman Betty Riess.

      And late Friday, Citigroup said it too will halt purchases of cryptocurrencies on its credit cards. “We will continue to review our policy as this market evolves,” company spokeswoman Jennifer Bombardier said.

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      Allowing purchases of cryptocurrencies can create big headaches for lenders, which can be left on the hook if a borrower bets wrong and can’t repay. There’s also the risk that thieves will abuse cards that were purloined or based on stolen identities, turning them into crypto hoards. Banks also are required by regulators to monitor customer transactions for signs of money laundering — which isn’t as easy once dollars are converted into digital coins.

      Bitcoin has lost more than half its value since Dec. 18, falling below $8,000 on Friday for the first time since November. The drop occurred amid escalating regulatory threats around the world, fear of price manipulation and Facebook Inc.’s ban on ads for cryptocurrencies and initial coin offerings.

      Now, cutting off card purchases could exacerbate those pressures by making it more difficult for enthusiasts to buy into the market. Capital One Financial Corp. and Discover Financial Services previously said they aren’t supporting the transactions.

      Mastercard Inc. said this week that cross-border volumes on its network — a measure of customer spending abroad — have risen 22 percent this year, fueled partly by clients using their cards to buy digital currencies. The firm warned that the trend already was beginning to slow as cryptocurrency prices fell.

      Discover Chief Executive Officer David Nelms was dismissive of financing cryptocurrency transactions during an interview last month, noting that could change depending on customer demand. For now, “it’s crooks that are trying to get money out of China or wherever,” he said of those trying to use the currencies.

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