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Market manipulation was key factor in Bitcoin’s bull run, researchers say

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According to a new paper by University of Texas finance professor John Griffin, and graduate student Amin Shams, Bitcoin’s price may have been artificially inflated in its run-up last December to nearly $20,000 per coin.

It was just seven months ago that some of the internet’s most insufferable assholes told anyone that would listen about the newest force in the global currency market. It was a coin, made of digital 1’s and 0’s, that would disrupt the very idea of currency, a project so revolutionary that we’d all be rich, if only we had the resolve to “HODL.”

And some did. During Bitcoin’s most recent boom, millionaires were made — a handful of billionaires too.

Others bought at the peak of the hype cycle, mortgaging homes and other assets to get in early and ride the rocket to its next station, which was the “moon,” according to cryptocurrency types.

Instead, they saw the asset falter. First losing half of its value in January, before a brief rally breathed new hope into the market, only to painfully extract it in the following weeks.

Now, Bitcoin’s value sits at just $6,500, a nearly 70 percent decrease in value over that span. If this were a stock, this is the point at which shareholders might begin to consider liquidating assets.

But in cryptocurrency, nothing is what it seems.

According to Professor Griffin — who has a history of spotting fraud in financial markets — we were all victims in what could be a massive price manipulation scam.

Griffin looked at the flow of digital tokens entering and leaving one of the largest cryptocurrency exchanges, Bitfinex, and identified several patterns that would suggest someone, or a group of people, had successfully propped up prices when they’d flattened at other exchanges.

To push up the price when it sagged elsewhere, someone or some people, at Bitfinex purchased Bitcoin using a secondary currency known as Tether. Tether was created, and sold, by the owners of Bitfinex. Tether’s creators claim the currency is backed by the US dollar, providing a hedge against volatility in cryptocurrency markets. Simply put, it allowed investors to offload Bitcoin (or other cryptocurrencies) into Tether during wild price swings as a means to avoid substantial losses.

Professor Griffin and Mr. Shams examined the flow of Tether and determined that roughly half of Bitcoin’s price in 2017 could be traced to the hours immediately following its movement into other exchanges — typically during periods where cryptocurrencies were in decline. Coin prices at marketplaces that used Tether exceeded those of exchanges that did not, according to the researchers. The pattern ended earlier this year when Bitfinex stopped issuing new Tether.

Bitfinex executives have denied the exchange was involved in any manipulation. The company, told the New York Times today that it never engaged in “any sort” of market or price manipulation and that “Tether issuances cannot be used to prop up the price of Bitcoin or any other coin/token on Bitfinex.”

Regulators don’t seem to be as sure. Late last year, the US Commodity Futures Trading Commission subpoenaed Bitfinex, and Tether — both of which share a CEO — for a closer look.

Things got worse for the company from there, as it cut ties with a third-party auditor, Friedman LLP., over its failures in auditing the supply of Tether in a “reasonable timeframe.”

Friedman, however, was never hired to look at the reliability of Tether’s records, just to prove that the stated amount existed — the equivalent of writing random numbers in an accounting ledger, and then hiring a firm to prove that there are numbers in an accounting ledger. The scope of Friedman’s audit was limited, and remains unfinished.

According to the New York Times, two others have come forward to back Griffin’s research. University College London professor Sarah Meiklejohn said the analysis “seems sound” and chief economist at blockchain data analysis company Chainalysis, Phillip Gradwell, said the study “seems credible.”

What this means for Bitfinex, Tether, or cryptocurrency markets as a whole remains to be seen.

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Australians Can Pay Utility Bills With Bitcoin (BTC)

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Bitcoin (BTC)–In terms of adoption for cryptocurrency, being able to pay for real world goods and services with the digital currency has long been viewed as the gold standard. The bear market of 2018 has led to a shift in focus away from the fundamentals of crypto and the usability of blockchain transactions in favor of wild price speculation. However, an Australian-based partnership is attempting to provide a solution for customers looking to pay their utility bills with cryptocurrency.

Cryptocurrency exchange Cointree announced a joint-venture with billing platform Gobbill to give Australian customers the opportunity to pay their utility bills with cryptocurrency. The goal of the union is to provide a solution for automated billing via crypto, with Gobbill functioning as the intermediary in the exchange, taking user funds in crypto and making the payment in fiat.

Using the Cointree wallet, users of the cryptocurrency exchange will be able to convert stored coins automatically into utility bill payments, giving customers the opportunity to pay in BTC, XRP, and nearly 40 other currencies. While Australian utility companies will not be accepting crypto directly for payment (the exchange involves a conversion to fiat), it does represent a way for Australian crypto users to get around having to cash out of their denomination on exchanges to free up funds for utility payment. The service is being aimed at small businesses and average investors, with the co-founder and CEO of Gobbill, Shendon Ewans, expounding upon the planned form of payment,

“We anticipate a surge in the number of customers who would like to pay their bills in crypto in the coming years. Our partnership with Cointree will cater to this market and ensure Gobbill continues to remain ahead of the curve when it comes to allowing our users to pay their bills automatically, while knowing they’re protected from fraud and scams.”

According to Ewans, Gobbill views this partnership with Cointree as getting ahead of the curve, a refrain we have heard several times from tangential businesses attempting to capitalize on cryptocurrency. By offering a service that automatically takes payments in cryptocurrency, Gobbill is exposing itself to the growing, and vocal, userbase of cryptocurrency, in addition to paving a future for their company that involves a takeoff in the digital currencies.

Cointree also sees partnerships for bill payments and automatic drafting as a way to increase their customer base, with efforts already enacted for several years on the front of crypto-to-bill payment. Jess Rendon, operations manager of Cointree, reported that the company has processed $100 million in bills paid in 2017,

“Last year alone we had about AU$100 million of bills paid and saw ten times growth in this payment feature.

CCN reports that paying bills with cryptocurrency has seen an explosion in Australia over the last several years, having grown by 3300% in a three-year period. While the system devised by Gobbill is still a step removed from utility companies accepting Bitcoin and altcoins directly, it does provide another avenue for investors looking to use their coins outside of exchange speculation.

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Bakkt CEO: ‘With Our Solution, the Buying and Selling of Bitcoin Is Fully Collateralized or Pre-Funded’

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On Monday (20 August 2018), Bakkt, the new company announced by Intercontinental Exchange (ICE) on 3 August 2018, declared that with its solution, “the buying and selling of bitcoin is fully collateralized or pre-funded.”

ICE’s press release mentioned that Bakkt would be offering a one-day phsyically-delivered Bitcoin futures product:

“As an initial component of the Bakkt offering, Intercontinental Exchange’s U.S.-based futures exchange and clearing house plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing in November 2018, subject to CFTC review and approval. These regulated venues will establish new protocols for managing the specific security and settlement requirements of digital currencies.”

This is how Bakkt announced today’s news on Twitter:

Kelly Loeffler, the CEO of Bakkt, provided more details in a post on Bakkt’s Medium blog.

Loeffler started by saying that to achieve a “trusted infrastructure for trading, storing and spending digital currencies”, Bakkt would need to provide:

  • “a consistent regulatory construct”;
  • “transparent, efficient price discovery”; and
  • “an institutional quality pre- and post-trade infrastructure”

She then moved to the “meat” of Bakkt’s announcement:

“A critical element to price discovery is physical delivery. Specifically, with our solution, the buying and selling of Bitcoin is fully collateralized or pre-funded. As such, our new daily Bitcoin contract will not be traded on margin, use leverage, or serve to create a paper claim on a real asset.”

She noted that this provided support for market integrity and differentiated them from other exchanges which “allow for margin, leverage and cash settlement.” She went on to say that once you take into account the fact that Bakkt also provides “a secure, regulated warehouse solution”, it was easy to see how this infrastructure could “help more institutions and consumers participate in the asset class.”

For many crypto traders/investors and analysts, what Bakkt announced today sounded great. However, not everyone was equally excited.

Caitlin Long, 22-year Wall Street veteran (including over eight years at U.S. investment bank Morgan Stanley) who has been active in Bitcoin since 2012, expressed her concern about “financialization” (i.e. when an asset class becomes investable by large institutional investors) of cryptocurrencies, and especially her worries about “leverage-based financialization” (which arises “either from the issuance of more assets out of thin air to dilute existing holders, or from the creation of more claims to the asset than there are assets”) in an article for Forbes published on 31 July 2018.

Upon hearing Bakkt’s announcement earlier today, she sent out the following tweets to explain that although the confirmation that Bakkt’s daily Bitcoin contract would not be traded on margin, use leverage, or serve to create a paper claim on a real asset” was a good thing, she still had a few reservations:

 

 

 

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Biometric Cryptocurrency Card Protects Bitcoin with Fingerprints

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Unikeys has officially announced its UKey cryptocurrency card.

In form, it’s shaped like any other regular payment card. But it’s designed to host multiple popular cryptocurrencies including Bitcoin, Bitcoin Cash, Ether, and Litecoin. What’s more, it features an embedded fingerprint sensor. Once a user’s fingerprint data has been registered and stored in the card’s Secure Element, the card is then able to biometrically authenticate the user for each transaction, ensuring a high level of security.

The biometric component is the product of a collaboration between Unikeys and Hong Kong-based MeReal Biometrics, which obtained its fingerprint sensor technology from Sweden’s Fingerprint Cards. Fingerprint Cards has been very busy in recent months seeking to secure a leading position in the biometric cards market as major financial services brands like Visa and Mastercard prepare for mass commercialization of this kind of technology; Unikeys, for its part, is ahead of the curve.

Of course, a key to success for the latter company will be establishing merchant support for its card’s cryptocurrency payments, and as RFID Journal reports, Unikeys is currently in talks with “several companies” concerning this issue. Unikeys’ CEO says the company is also planning to launch a pilot for its solution in Hong Kong, though details about the project are forthcoming.

Biometric Cryptocurrency Card Protects Bitcoin with Fingerprints

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