Bitcoin strengthens as buyers look past probe threat

Bitcoin has firmed above $10,500 but has, as yet, failed to scale $11,000 in a relatively calm week that saw some good news flow for the leading cryptocurrency.

However, there was a minor pullback in the bitcoin price overnight following the Wall Street Journal’s publication of a report that said the US Securities and Exchange Commission (SEC) has issued “scores” of subpoenas to blockchain start-ups running initial coin offerings (ICOs), and to their advisers, in what could be the beginning of a major probe into the new fundraising scene.

Chariman of the SEC Jay Clayton has insisted that most ICOs are selling securities and in January said “if people don’t change their ways” more action would be taken to force compliance with securities laws. The SEC closed down an ICO by AriseBank, which said it was launching a decentralised bank and had reportedly raised $600 million from retail investors.

Circle buys Poloniex exchange, Japan’s Rakuten to launch crypto

A sharp move higher for bitcoin on Monday, after languishing in the $9,000s over the weekend, was helped by the news that payments start-up Circle had acquired altcoin exchange Poloniex.

Poloniex has struggled with infrastructure and support issues over the past few months, as have many other exchanges in the wake of the increased popularity of the crypto sector.

Circle is backed by US investment bank Goldman Sachs and Chinese internet giant Baidu (BIDU). The start-up has a global footprint, with its platform enabling users to transfer fiat and bitcoin, although it no longer provides the option to buy bitcoin.

Poloniex is a top 10 exchange for bitcoin and Ethereum trading volumes and number two for the XRP/BTC pair, according to

A post on the Circle website by founder Sean Neville and chief executive Jeremy Allaire explained the acquisition as part of the company’s mission to “make it possible for everyone, everywhere to create and share value”.

The pair say the immediate concern will be to fix the exchanges support and other systems issues. “You can expect Circle to address customer support and scale risk, compliance, and technical operations to bolster the existing product and platform,” they outlined in the announcement and said Circle will be looking to provide fiat “connectivity” for the exchange.

In future they envision a “robust multi-sided distributed marketplace that can host tokens which represent everything of value: physical goods, fundraising and equity, real estate, creative productions such as works of art, music and literature, service leases and time-based rentals, credit, futures, and more”.

Other positives for the cryptocurrency sector came from Japanese e-commerce company Rakuten, seen by some as an Amazon rival, which announced at the Mobile World Congress in Barcelona that it plans to launch a cryptocurrency to power its current loyalty programme.

Rakuten chief executive Hiroshi Mikitani said the coin would act as a “borderless” currency inside its ecosystem that could help to increase transactions internationally, helped by the allure of crypto to make the loyalty programme more attractive.

Although nowhere near the size of Amazon (AMZN), Rakuten reported revenues of $8.8 billion in 2017 and customers using its rewards programme have received tokens worth $9.1 billion since its inception 15 years ago.

Mikitani says Rakuten is “very different from Amazon” because its core business is to bring together merchants and retailers in a single platform.

Miners open for business in the US, Bitmain made up to $4 billion last year

Bcause, a new mining, trading and clearing platform that styles itself a “full-stack mining ecosystem”, has built out a mining and data centre in Virginia Beach, in the US state of Virginia and is offering mining contracts to individuals, professionals and institutions.

Those signing the contract for individuals are in effect securing ownership of a state-of-the-art AntMiner S9 mining rig delivering hashing power of 13.5 TH/s (13.5 trillion hashes per second), and which will be run and maintained by Bcause. AntMiners are ASIC (application specific integrated circuits) units specifically designed to mine bitcoin and are manufactured by Chinese mining giant Bitmain.

The full details of the contracts are yet to be released but the fact that major mining operations are setting up in the US as opposed to cheap electricity locales such as Chinese Mongolia (where the government has put the squeeze on) or Iceland, is indicative of the sizeable profits that can be made.

Miners are also building operations in the US state of Washington where there are cheap sources of renewable electricity in the form of hydroelectricity.

US broker Bernstein reckons that Bitmain made an operating profit of $3 to 4 billion last year, which is similar to that of chipmaker Nvidia (NVDA) whose graphical processing units are used to mine crypto. Prices of Nvidia GPUs favoured in the mining process have doubled in price on re-sale markets as the mining craze leads to supply shortages.

$10 billion bitcoin law suit

In other news, Craig Wright, who in 2016 claimed he was Satoshi Nakamoto, the inventor of bitcoin, is being sued by the family of one-time business partner Dave Kleiman. Although Wright is probably not the cryptocurrency’s inventor, he and Kleiman were certainly in on the groundfloor of bitcoin’s development. It is not known whether Nakamoto is an individual or a group of people but Wright was unable to provide the evidence that he had mined bitcoin’s genesis block (the first block) when challenged by experts.

Kleiman’s family claim in the lawsuit that Wright swindled Dave Kleiman out of as many as 1,100,111 bitcoins.

The legal action was filed in Florida at the beginning of February. In the suit, Kleiman’s family alleges that Wright fraudulently signed contracts in Kleiman’s name, transferring Kleiman’s assets to companies under Wright’s control. The signature, it is alleged, was computer-generated using a font called Otto.

The suit, in part, reads: “At the time of his death, no one in [Kleiman’s] family was aware of the extent of his involvement in creating Bitcoin. Nor were they aware that he had accumulated, with Craig, an incredible sum of bitcoins. Recognizing that Dave’s family and friends weren’t aware of this, Craig perpetrated a scheme against Dave’s estate to seize Dave’s bitcoins and his rights to certain intellectual property associated with the Bitcoin technology.”

Bitcoin is a killer says Bill Gates

Bill Gates, philanthropists and founder of Microsoft (MSFT), said in a Reddit AMA (ask me anything) this week that bitcoin “kills people in a fairly direct way”, concluding that the main feature of the cryptocurrency is anonymity.

“Right now cryptocurrencies are used for buying fentanyl and other drugs so it is a rare technology that has caused deaths in a fairly direct way. I think the speculative wave around ICOs and cryptocurrencies is super risky for those who go long,” Gates claimed, much to the consternation of the crypto community, which collectively fired back furiously on Reddit and other social media.

Gates said anonymity was “not a good thing”. He added: “The Governments [sic] ability to find money laundering and tax evasion and terrorist funding is a good thing”.

Coincheck customers fightback, cryptojacking takes off and another national cryptocurrency

In Asian news, customers of Coincheck, the Japanese exchange that had $530 million in XEM tokens stolen from it in January, have launched a class action lawsuit against the company.

The 132 customers taking the action are demanding compensation totalling 220 million yen($2 million). Coincheck has previously stated that it would be refunding customers who suffered loses but has failed to come forward with any details on when that will happen. Observers suspect that the company does not have sufficient financial resources to cover the losses. Another class action was taken against Coincheck on 15 February, involving seven customers.

Hot on the heels of the Petro cryptocurrency launched by Venezuela, the tiny Marshall Islands, with only 70,000 inhabitants, plans to launch its own national cryptocurrency. The coin will be called the Sovereign with a portion of the proceeds from the offering being allocated to the healthcare needs of local people, said David Paul, minister-in-assistance to the president, in an interview with Bloomberg.

Elsewhere, cyber security firm Avast in a demonstration at the Mobile World Congress, showed how hackers could take control of Internet-of-Things (IoT) devices such as internet-connected cameras to mine the monero cryptocurrency. Avast says only 15,000 IoT devices would need to be hijacked to mine $1,000 in the space of just four days.

In related news, cyber security firm Symantec (SYMC) said it had seen 1,200% growth in cryptohijacking in the UK, where PCs are taken over by malware to surreptitiously mine cryptocurrencies. The scale of the problem is underlined by the fact that the UK only accounts for 4% of total cryptojacking, with the top three countries being the US, Japan and France.

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