CryptoAM: Tether Troubles, Bob Ross, and Securities Law

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Ledger Capital

6 min readJun 29, 2018

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We are now in the largest in longest downtrend in Bitcoin’s history. That’s why I’ve taped this Bob Ross quote above my monitor, “Gotta have opposites, light and dark and dark and light, in painting. It’s like in life. Gotta have a little sadness once in awhile so you know when the good times come. I’m waiting on the good times now.”

3 things you need to know:

One: First SEC regulated security token trading platform launches. Open Finance Network (OFN) is a platform which can be integrated into broker dealers or custodians. OFN is built on the Ethereum blockchain which is where all transactions are recorded, verified, and reconciled. OFN has partnerships with Harbor, Republic, Securitize, and Polymath.

Shakeup: Existing US based centralized exchanges like Bittrex may lose a lot of business if the SEC suddenly decides that they are basically an unregulated securities exchange (which virtually all exchanges are right now). Exchanges like Coinbase, Robinhood, and Poloniex will have a massive advantage because they are all already on track to become regulated.
A note: I was at a dinner with the SEC commissioner yesterday, and he mentioned that no exchange was registered with the SEC and every exchange right now in violation of the law. The SEC doesn’t want to come down hard because of fear of stifling innovation, but they are working towards compliance.
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Two: Chinese firms finds a possible double spend vulnerability in Tether. Slow Mist, a Chinese cybersecurity firm claims to have found a double spend vulnerability in Tether. A founder from the platform which Tether was created on tweeted,“[I]t appears that what happened here is that an exchange wasn’t checking the valid flag on transactions. They accepted a transaction with valid=false (which they should not have), and then the second “double spend” transaction had valid=true, which they also accepted. Unless I am missing something, this is just poor exchange integration.” So it is possible that it is not a true double spend vulnerability in Tether’s protocol at all.

BTW: This is one of two negative Tether articles I could have written about today. I didn’t want to beat the kid up even more!
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Three: Huobi opened it’s first European office yesterday. Huobi, the third largest crypto exchange, has been expanding rapidly in an attempt to grab marketshare from it’s biggest competitor Binance. Huobi has also announced they will be setting up a San Franciso affiliate office through HBUS which they claim is not an arm of Huobi despite HBUS not existing before Huobi announced the strategic partnership.

Why this matters: The exchange wars have just begun. Expect to see international moves from many exchanges in an attempt to stay relevant. Amid declining volumes all over, exchanges will have to innovate to stay relevant.
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Also in the news:

What I’m reading today:

The “Intent of Code” is Law

After weeks of controversy over the freezing of a number of accounts by the EOS block producers, Dan Larimer has shared his remarks on how to fix these issues.

“Block One calls for an end to all arbitration orders other than to render non-binding opinions on the intent of the code. I believe the elected block producers should be the jury, which must render a 2/3+1 decision to freeze a broken contract and/or to replace a broken contract with one that operates according to the original intent (as determined by arbitration).”

Dan Larimer is saying that the block producers should stop making decisions on whether accounts should be frozen, or funds refunded. They should only act in the case that a smart contract bug has made a contract not act in accordance to its design, e.g. the DAO hack or Parity’s frozen funds.

Larimer also suggested that the solution to lost and stolen keys should be preventative rather than reactive. EOS has support for Apple’s Secure Enclave, which allows for iDevices to be used as full-fledged hardware wallets with biometric security. EOS also supports time delays which would allow for transactions to be cancelled before they are finalized and then the account owner can take steps to secure their private funds.

Overall this seems like a positive step forward for EOS. It truly is one massive experiment. It will be interesting to see how things play out from here.

Dan Larimer’s post was followed by a proposal for an EOS Constitution v2.0 by Block.one.

Around the corner:

CME futures expire on June 29th
Ontology is releasing it’s mainnet by June 30th
VeChain mainnet launching by June 30th
Fusion mainnet launching by June 30th
The Augur mainnet is launching on July 9

Tell us what we should add!

Market Outlook:

Quick Take

Well, we found the decisive move and it was a continuation of the downtrend. As we’ve mentioned, the longer there is sideways trading the more likely the general trend is to continue. Keep that in mind, as it looks like we’re primed for some more sideways trading around the 5.8–5.9k line.

Unfortunately, there are only two near term support levels left before we’re talking about the possibility of a sub 5k bitcoin. This means we would have given up almost all of the price appreciation due to the November/December bull run.

It’s looking more and more likely that Bitcoin has chased out many of the Nov/Dec adopters as they’ve seen their portfolios hit hard. A fast reversal will need some news to spur action, otherwise we’re looking at a slow couple of months.

Daily Chart:

4h Chart:

The concerning image chart here is the 4h chart. Notice the last time we fell below 5.9k we had a sharp correction which brought us above 6k. Unfortunately it looks like have found less buy pressure this time around. Buyers are getting weary, and BTC falling to around 5.6k (previous support from November) would not be unlikely.