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Binance & KYC Hack, South Korea Regulates Crypto, Bitcoin Hedge
August 12  |  13 min read

Crypto Week #32 Overview

The COIN360 Editorial Team

Last week held mixed results for cryptocurrencies, as only two out of the five top cryptocurrencies ended the week with gains. Bitcoin’s price had some ups and downs, and eventually closed the week with small gains, while Bitcoin Cash barely managed to finish better than the previous week. Other important developments include an announcement of a real-time payment system from the U.S. Federal Reserve, reports of Bitcoin as a hedge against worldwide financial instability, a new tax bill for cryptocurrencies in the U.S., and regulatory news from multiple countries, including South Korea and the UK.

Here’s what you need to know about last week’s happenings in crypto.

1. Cryptocurrency Market Analysis

Bitcoin (BTC) started the week at $10,960.74, the lowest price of the week, and by Tuesday it had grown almost 12% to peak for the week at $12,273.82. During the next few days, BTC remained stable and on Sunday the first cryptocurrency by market capitalization closed at $11,523.58, growing 5.1% during the week. Bitcoin’s market capitalization shrank 2.3% throughout the week, closing at $205.9B on Sunday.

Bitcoin price in USD, market capitalization, charts, volume

Bitcoin 7-day price and market cap chart. Source: COIN360

Ethereum (ETH) opened at $222.65 on Monday, and on Tuesday the highest price of the week took place at $239.12. The price of ETH decreased during the week until it bottomed out at $203.79 on Saturday, 14.8% lower than Tuesday’s high. On Sunday, ETH closed at $216.09, losing almost 3% of its value throughout the week. The market capitalization for ETH shrank 7.7%, closing at $23.2B on Sunday.

Ethereum price in USD, market capitalization, charts, volume

Ethereum 7-day price and market cap chart. Source: COIN360

Ripple (XRP) opened on Monday at $0.319723 and later that day the highest price of the week occurred at $0.331414. The lowest price of the week didn’t come until Friday, when XRP hit $0.293271, 11.5% lower than Monday’s highest price. On Sunday, XRP closed at $0.301915, losing 5.6% of its value throughout the week. Ripple’s market capitalization shrank 6.7% during the week, closing at $12.9B on Sunday.

Ripple price in USD, market capitalization, charts, volume

Ripple 7-day price and market cap chart. Source: COIN360

Bitcoin Cash (BCH) started at $333.69 on Monday and, like BTC and ETH, the highest price of the week took place on Tuesday, at $352.30. Towards the weekend, the price of BCH decreased until it had reached its lowest price of the week at $307.34, 12.8% lower than Tuesday’s high. By Sunday, however, BCH’s price had started to recover, closing at $336.20, with a 0.8% gain for the week. The market capitalization for BCH closed at $6B on Sunday, losing 3% of its value during the week.

Bitcoin Cash price in USD, market capitalization, charts, volume

Bitcoin Cash 7-day price and market cap chart. Source: COIN360

Litecoin (LTC) started the week at $93.09 and grew 13.4% throughout Monday to introduce the highest price of the week, at $105.59. Litecoin’s lowest price of the week happened on Saturday at $83.14, losing more than a fifth of its value since Monday’s high. Sunday closed with LTC at $89.75, losing 3.6% of its value throughout the week. Litecoin’s market capitalization also experienced losses, shrinking 7.3% during the week and closing at $5.7B on Sunday.

Litecoin price in USD, market capitalization, charts, volume

Litecoin 7-day price and market cap chart. Source: COIN360

2. U.S. Federal Reserve to Release Real-Time Payment System in 2023/2024

As per an Aug. 5 press release from the Federal Reserve Board, the new system will be called FedNow, and will work as a round-the-clock, real-time interbank payment and settlement service that will support near-instantaneous payments and transfers of funds in the country. The service will be available to businesses and the general public, and will work on both weekdays and weekends. The governor of the board, Lael Brainard, stated that FedNow will “permit banks of every size in every community across the country to provide real-time payments to their customers.”

In relation to the announcement, crypto entrepreneur Anthony Pompliano simply replied: “Bitcoin is already available.”

3. Grayscale: Bitcoin as a Hedge Against Financial Instability

On Aug. 8, Grayscale Investments published a case study for hedging against the current trade war between the U.S. and China with Bitcoin. According to the data, twenty different asset classes and currencies had an average drawdown of -0.5% since Donald Trump announced the new trade tariffs in May, while Bitcoin had a cumulative return of 104.8%. The study argues that Bitcoin’s store of value and spending characteristics could prove positive during a liquidity crisis, while its potential for growth is positive for economic cycles. In addition to this, Bitcoin is also recommended for long-term investment portfolios: the report describes it as a “transparent, immutable, and global form of liquidity that can provide both wealth preservation and growth opportunities.”

4. A No-Deal Brexit Could Lead Bitcoin to Record Highs

A case for Bitcoin as a hedge during market instability has also been made for situations that go beyond the trade war. Nicholas Gregory, CEO of blockchain firm CommerceBlock, was quoted as saying that a no-deal departure of the UK from the EU could signify a “massive and unprecedented breakout” for Bitcoin due to market instability and turmoil. As Gregory states, an “increasingly populist and politically unstable world” is expected to cement Bitcoin’s safe haven status by 2020, which could eventually lead to a new all-time high price for the cryptocurrency.

5. Bitcoin and Gold Correlation Have Doubled in the Last Three Months

According to Bloomberg Opinion’s Tim Culpan, the perception of Bitcoin as a safe haven in times of market turmoil can already be seen in the recent increase in correlation with physical gold, traditionally considered a safe haven asset. This correlation over the course of 2018 was at 0.496, and in the past three months, it has grown to 0.827. However, the column emphasizes that correlation doesn’t imply causation, and that other things (namely the stablecoin Tether) also play a big role in the price of Bitcoin and the liquidity of crypto markets.

6. 80% of Tether Supply is Currently Held by 318 Addresses

On a related note, an Aug. 7 Coin Metrics report revealed that 318 wallet addresses hold at least $1M worth of Tether (USDT) each, which makes up for 80% of the global Tether supply. Among the addresses are whales and major crypto exchanges like Binance. According to John Griffin, a finance professor at the University of Texas at Austin, given that USDT is in the control of only a few players, they can swing BTC’s price on their own, and he has linked USDT to market manipulation as well as to Bitcoin’s all-time high back in 2017.

Unlike Tether, around 20% of Bitcoin’s total supply is currently held by whales and more than 20,000 addresses hold at least $1M worth of BTC.

7. Ripple Reportedly Working on Multiple Investment Deals

After a $30M investment deal with money transfer provider MoneyGram, the CEO of Ripple, Brad Garlinghouse, stated on Aug. 9 that he was working on additional potential investment and acquisition deals. No major details about them have been disclosed, though Garlinghouse did mention growth acceleration and serving customer needs as areas that Ripple was interested in. “We’re in a very strong position, our business is growing strongly, we have a strong balance sheet, and I intend to press our advantage,'' added Garlinghouse.

8. Binance Investigates Supposed KYC Data Leak

In an Aug. 6 official statement, Binance declared that an anonymous attacker reportedly had 10,000 photos that resembled KYC data of Binance users and was demanding 300 BTC in exchange for the information. According to the statement, the images released by the hacker on Telegram lack Binance’s proprietary digital watermark, and seem to date back to February of 2018, a month where a third-party processor handled Binance’s transactions. Changpeng Zhao, CEO of Binance, sent out a tweet on Aug. 7 addressing the situation, asking traders not to believe the KYC leak and not fall for FUD (fear, uncertainty, and doubt). Binance is offering a reward of up to 25 BTC for people who help in the process of identifying the attacker and as they plan to pursue legal action.

Later reports indicate that the Telegram groups that the hacker had set up to spread pictures of the leak were closed, and that the price of the BNB coin was 12% up a day after reports of the alleged hack surfaced.

9. Report: ICOs Raised Twice as Much as Venture Capital Investments in H1 2019

According to a report from analytics firm TeqAtlas, ICOs (or TGEs; token generation events) raised $2.095B in the first half of 2019, almost doubling the $1.248B raised through venture capital investments in the same period. The report states that VC investment has been on the rise over the past four and a half years, reaching a total valuation of $9.2B since 2014. However, it still pales in comparison to the amount raised by ICOs, which reached $15.2B in 2018 alone. Despite the dominance of ICOs, the report also notes that funding through ICOs has seen a monthly and quarterly downtrend, which is a sign of investor caution due to the current regulatory landscape.

10. South Korea Is Planning to Directly Regulate Crypto Exchanges

The Financial Intelligence Unit (FIU) of South Korea’s Financial Services Commission is planning to regulate cryptocurrency exchanges directly, instead of its current practice of regulating them indirectly through domestic banks. Reportedly, the government will introduce a licensing system for crypto exchanges following the FATF recommendations from June. Lee Tae-hoon, head of administration and planning at the FIU stated that if the amendment to the Act on Reporting and Use of Certain Financial Transaction Information is passed, money laundering in the crypto sector would be prevented and the sector would be more easily overseen, as the amendments include banks issuing real-name accounts to crypto exchanges and KYC and AML regulations held to the same standards as traditional financial institutions.

11. The City of Seoul Will Release Its Own Cryptocurrency in November

The capital of South Korea is planning to launch its own city-wide cryptocurrency by November 2019, in its plan to develop into a smart city. The cryptocurrency, S-coin, which will be regulated by the government (where it will be allowed to be used and what it will be able to purchase, among other things), will be released with the objective of encouraging citizens to participate in governance and facilitating cooperation between citizens. S-coins will be handed to citizens when they fulfill their citizenship obligations like paying taxes, as well as for the use of public services. Moon Jae-In, South Korea’s President, referred to regulatory innovation of blockchain technology as a matter of survival, as “we are experiencing the fourth industrial revolution”, as well as stating that creating real use cases for the blockchain to protect personal information will create a greater international presence for South Korea in addition to contributing to the country’s economy.

12. FATF Senior Policy Analyst Debunks Rumor of Countries Developing a Crypto Surveillance System

Rumors of a surveillance system, which was going to be co-developed by 15 countries and managed by the Financial Action Task Force, surfaced during the week. According to the reports, the system was designed to collect and share personal data on individuals who conduct cryptocurrency transactions in order to prevent funds from being laundered and ending up apart of terrorist organizations, among other potential risks.

Later reports would indicate that the story was false, with senior analyst Tom Neylan clearing up the rumors of a new system being developed.

13. A New Tax Bill for Cryptocurrencies Is Introduced by the U.S. House of Representatives

A tax bill, dubbed the “Virtual Value Tax Fix Act of 2019” and introduced on July 25 by Representative Ted Budd (NC-R), has been introduced in the United States House of Representatives. The bill, which seeks to allow the exclusion of gain or loss on like-kind exchanges of cryptocurrencies, attempts to introduce amendments to the Internal Revenue Code of 1986 so that “the exchange of virtual currency for virtual currency of like kind” is treated as “the exchange of real property for real property of like kind”, meaning that, if the bill becomes a law, cryptocurrencies will be excluded from double taxation under the Internal Revenue Code.

14. The Tax Authority in the U.K. Requests Users and Transactions Data From Crypto Exchanges

In order to identify cases of tax evasion, the U.K.’s tax, payment, and customs authority, Her Majesty’s Revenue & Customs (HMRC), has reportedly requested customers’ information (names and transactions) from cryptocurrency exchanges. Allegedly, the authority has requested three exchanges in the U.K. (Coinbase, eToro, and provide users’ information and transaction data, going back two or three years. HMRC stated that these exchanges have information regarding the transactions their clients have made, which could potentially lead to tax charges.

15. The SEC Took Quotes Out of Context and Twisted Facts Due to a Lack of Evidence, Kik Lawyers Claim

Lawyers of the messaging app Kik stated in an Aug. 6 court filing that the SEC had resorted to taking quotes out of context and twisting facts due to the lack of evidence that supports the regulator’s claims that Kik had violated the securities laws in its 2017 ICO. “These tactics”, the document reads, “may have gotten the Commission a decent news cycle, but they will not withstand meaningful scrutiny at summary judgment or trial.” The document goes on to state that the SEC is rejecting its governmental duty to justice by twisting facts and providing a “highly selective and misleading depiction” of the events that led to the accusation.

Final Thoughts

The looming possibility of a recession due to the trade war between China and the U.S. and a no-deal Brexit have led to worldwide turmoil in the economy. In the event of any of those two things happening, Bitcoin and other cryptocurrencies could come out as massive beneficiaries, as many traders would turn to a nationless and decentralized store of value. Specialists say that these events could eventually trigger an identity crisis for the global financial system because it exposes the weaknesses and vulnerabilities of fiat currencies, which would lead to more people turning to cryptocurrencies. The seeds of massive adoption have been planted multiple times in 2019 thanks to increased coverage of crypto in mainstream media, and it seems like germination might be just around the corner.

We wish you a great week,

The COIN360 Editorial Team