Weekly Crypto Recap [12/10/18–18/10/18]
Week in Brief
Tether (USDT), destabilises causing widespread panic on centralised exchanges as traders convert their USDT for Bitcoin.
The International Monetary Fund (IMF) proposes concerns regarding the rapid adoption of cryptocurrencies and how hacking events of centralised exchanges could threaten the international financial system.
Tim Berners Lee, the father of the World Wide Web, introduces his new venture inrupt which aims to decentralise the web, allowing users to possess control of their data as initially intended.
Total crypto market cap is up 7.25% w/w, with 80% of the top 100 coins by market cap trading up w/w. 30% of the top 100 are trading up in the last 24 hours, whilst BTC is down 0.1% and ETH is down 1.4%. BTC, ETH and XRP lead the market cap respectively.
A collapse in confidence of Tether leads Bitcoin prices to surge more than 20% in a matter of hours
On Monday morning GMT, Bitcoin soared in price from $6200 to $7500, before settling around the $6900 mark. Although this has allowed Bitcoin to break through the major declining price resistance formed over the past few months, whether this move is sustainable remains to be seen. The move comes after considerable controversy regarding Tether (USDT), a stable coin utilised by the majority of traders on centralised trading platforms. Despite its name, USDT has failed to remain tethered to USD, with considerable premiums being seen on notable exchanges who offer the cryptocurrency as their prominent tethered pair, such as Bitfinex, Binance, Kraken and OKEx. For example, USDT dropped up to 10% in value on some exchanges, trading at $0.9 on Kraken. Consequently, the sudden increase in the price of Bitcoin can almost certainly be attributed to traders moving funds from their devaluing ‘stable’ currency into Bitcoin itself. The irony of this move is unprecedented, with individuals usually relying on the stability of USDT in Bitcoin downturns. It appears for the time being, Bitcoin has become a better store of value than USDT itself.
So what caused USDT to crash? The debate over USDT’s solvency is not new, many sceptics have questioned the reliability of the centralised stable coin, which is merely backed by the US dollar in a traditional bank account for some time. If the bank refuses withdrawals, a centralised exchange simply cannot allow their users to withdraw tethered funds themselves. As predicted, the solvency debate has now come to a head, with Bitfinex suspending withdrawals of USDT as a result of losing their banking partner Noble Bank, who supposedly backed USDT, alongside HSBC refusing to back USDT moving forward. Moreover, this has lead other centralised exchanges such as OKEx to suspend withdrawals causing further panic for market participants.
Bitfinex is now desperately trying to secure USD fiat pairs to reconcile themselves, but with such significant setbacks, it is hard to say whether USDT will ever be able to regain the credibility necessary to function as a tethered currency in the future. A push towards a decentralised stable coin, not backed by funds in a US bank account, such as MakerDAO’s DAI, could become a necessary scapegoat for those looking to find a stable hedge in market downturns in the future.
IMF issues warning regarding the rapid growth of cryptocurrencies and their impact on the global financial system
The latest International Monetary Fund (IMF) report, “Challenges to Steady Growth”, proposes that the rapid growth of the cryptocurrency marketplace over the past 2 years could pose a substantial threat to the international financial system as world banks struggle to keep pace. The report places a strong emphasis on how the increased adoption of cryptocurrencies could allow for large-scale hacking attacks on centralised platforms, which do not have high enough security measures to prevent sophisticated hackers from infiltrating their wallets.
“Cybersecurity breaches and cyber attacks on critical financial infrastructure represent an additional source of risk because they could undermine cross-border payment systems and disrupt the flow of goods and services. The continued rapid growth of crypto assets could create new vulnerabilities in the international financial system” a comment from the recent IMF report
Thus, the IMF claims that the continuing adoption of cryptocurrencies by both retail investors and institutions could create significant vulnerabilities in the traditional financial system, as both parties begin to perceive cryptocurrencies as alternative means of value and start utilising them for speculative or business purposes. Ultimately, the IMF suggests that if large institutions are to adopt cryptocurrencies, for instance, Ripple (XRP) for industries such as remittances, then the security of storage must be industry grade and backed by insurance mechanisms to ensure the safety of funds. Failing this, both industry players and individuals could suffer large-scale loses causing financial chaos.
Despite this, some bullish cryptocurrency advocates such as Emin Gun Sirer, a well-regarded professor at Cornell University, stated that any recognition from the IMF that cryptocurrencies are becoming a notable asset class is optimistic for the industry as a whole. Moreover, decentralised exchanges are now allowing decentralised custodial services to their clients, which are finally allowing individuals to utilise the power of the underlying blockchain technology to keep their funds secure outside of centralised wallets.
Tim Berners-Lee aims to decentralise the Web with new cryptocurrency venture
“I’ve always believed the web is for everyone,” Wrote Tim Berners-Lee, the iconic British engineer and professor of computer science who notoriously gave away the World Wide Web for free some 30 years ago. “The web has evolved into an engine of inequity and division; swayed by powerful forces who use it for their own agendas,” Berners-Lee added in a recent blog post.
We are at a critical tipping point for the internet, where privacy scandals are awash in the worldwide media and at the forefront of consumers minds. Individuals are rapidly losing trust in centralised authorities in our digital age — and they are demanding solutions. This was sparked by the infamous Cambridge Analytica scandal, followed by the recent Facebook confession that they were using metadata to target specific voters for Trump’s political campaign. As such, individuals are no longer in the dark concerning how their personal information is being exploited for commercial or political gains.
As a result, in late September the father of the internet announced a new project coined inrupt, a project with a mission to decentralise the Web. Backed by Glasswing Ventures, inrupt ultimately aims to restore power to individuals rather than the commercial bad actors who actively seek to capitalise on user data. Thus, inrupt’s true goal is complete decentralisation of the web placing privacy at the forefront, allowing the user, and only the user, to own the rights to their personal information. Now the race to secure user privacy has officially begun, inrupt’s visionary leader may just place them at the forefront of this process.
Coinbase adds 0x (ZRX), the first ERC-20 token to be added to their product offering for customers worldwide (Bitcoin Magazine).
A user of the Bitcoin distributed network confirmed to have transferred $194 million USD valued in Bitcoin for a transaction fee of 10 cents, a feat unimaginable in traditional markets (CCN).
Former Vice President of Coinbase has transitioned to a position at Bakkt, the notorious NYSE backed firm who will allow institutional investors access to the cryptocurrency world by legal means starting November (CryptoGlobe)
Despite the clear institutional interest in the cryptocurrency market, Barclays shuts down their trading division just months after its inception (CryptoSlate)
Choi Jong-Koo of Korea’s Financial Services Commission has reestablished his belief that ICO’s should not be able to operate within the country, whilst still undeniably showing support for Blockchain for business sake (Cointelegraph)
What We’re Reading
What We’re Listening To
For more In-depth cryptocurrency research articles and fundamental picks visit the BBOD Blog.