As we predicted in our last report, the price of the world’s top cryptocurrency has run into heavy resistance above $10,000.
Bitcoin is holding above that level, but has spectacularly failed to maintain progress much past $11,000 in erratic trading over the past few days. Indeed, every time the price pushes above the $11,000 level, it soon enough recoils lower, suggesting those who bought as bitcoin smashed through $10,000 late last year are taking the opportunity to exit as they hit break even or make some profit.
So, although bitcoin has overcome the naysayers who interpreted the recent correction as the end of the line for crypto, its price recovery is still struggling to firmly consolidate. The cryptocurrency is currently trading at $10,190 on Coinbase, having fallen 7% over the past 24 hours, according to research site cryptocompare.com.
On Tuesday bitcoin hit a near-term high of $11,714.
Notably, bitcoin’s value as a share of the overall crypto market has risen to 39%, while other coins underperform in comparison.
Ethereum is 7% lower over the past 24 hours at $823, with Bitcoin Cash down 10% and Litecoin off 6% to trade at $203.
Litecoin, which recently traded as high as $250, has given up some of the gains, made partly as a result of the buying that took place before the controversial Litecoin Cash fork, which happened on 18 February.
Korean cryptocurrency official dies
Bitcoin briefly dropped below $10,000 on Tuesday night in response to shock news of the sudden death of South Korea’s head of cryptocurrency regulation.
Jung Ki-joon, the head of economic policy at the Office for Government Policy Co-ordination, was pulling together the government’s legislative regulatory framework for cryptocurrency. The 52-year-old official was found dead at his home. The circumstances surrounding his death are not thought to be suspicious, with the cause said to be a heart attack, according to a report by South Korean news agency Yonhap.
Commentators are speculating that the stress of dealing with the crypto sector may have contributed to triggering the heart attack.
Certainly, the issue of regulatory oversight has been a pressing one in South Korea. In December last year the Youbit exchange was hacked and forced into bankruptcy and there was also the news in January this year of insider dealing by individuals working at the country’s main financial regulator, the Financial Supervisory Service.
At one stage it was thought the government intended to ban the crypto asset class altogether, but it has now signalled that it will instead be confining its activities to clamping down on illegal activity and rampant speculation by strengthening rules around money laundering and know-your-customer processes. With those objectives in mind, the authorities recently forced the ending of the practice of using anonymous accounts on crypto exchanges.
South Korea is estimated to have as many as one million active crypto traders, with the Korean Won currently accounting for 6.4% of trading volume, according to cryptocompare.com.
News from Bangladesh that police in the country “were on the hunt for bitcoin users”, according to the Dhaka Tribune newspaper, may also have contributed to a chilling of sentiment, although the country is not exactly a stronghold of crypto trading. The government has warned consumers not to make transactions with bitcoin.
Bitcoin SegWit move means cheaper transactions
The bitcoin developer team has upgraded the Bitcoin Core Wallet to support the so-called SegWit (segregated witness) code that was released in August last year. The SegWit update shifts some transaction digital signing functionality outside of blocks, thereby freeing up space for more transactions.
The wallet upgrade should make it easier for other entities in the ecosystem to adopt the SegWit changes and transaction fees on the bitcoin network may be cut by as much as 20%.
Coinbase, in an announcement made on Twitter Tuesday, said it would be rolling out full support for SegWit over the coming days.
The US exchange previously stated in a blog post in December last year that the adoption of SegWit will reduce its transaction fees: “This upgrade helps reduce the size of transactions, which improves the overall transaction capacity of the Bitcoin network. This upgrade should also help reduce the fees customers pay on bitcoin transactions.”
All eyes on the Petro
On Tuesday the Venezuelan government began the presale of the Petro (PTR) cryptocurrency token, which is backed by the country’s large crude oil reserves. Developments around the Petro token are being watched closely because it is the first attempt by a government to create a cryptocurrency.
In a tweet on Wednesday president Nicolas Maduro claimed that the Petro had raised $735 million in its first day on sale.
The government has published a Buyer’s Manual to explain how to buy the Petro and use the associated wallet. Exchanges trading PTR will be licensed by the government. A technical whitepaper and other documents have finally been published but contain apparently contradictory information regarding the blockchain the token will use – both Ethereum and NEM are mentioned.
Venezuela’s legislative body has ruled that the petro is illegal.
The government has made the PTR legal tender. On the website announcing the pre-sale it states: “The Bolivarian Republic of Venezuela guarantees that it will accept Petro as a form of payment of taxes, fees, contributions and national public services, taking as a reference the price of the barrel of the Venezuelan basket of the previous day with a discount. In this way it will be guaranteed that the buyer always has a recovery value adjusted to that of his investment.”
The government has lofty aims for its cryptocurrency. “Petro will be an instrument for the creation of a freer, balanced and fair international financial system,” the website proclaims, although its primary purpose is to circumvent sanctions imposed by western states and to arrest the precipitous economic decline of the country that has seen oil production, the country’s main export, collapse by 80%.
A total of 100 million PTR will be issued, although only 82.4 million is being offered in the pre-sale. Venezuela’s crypto regulator, Carlos Vargas says strong interest is expected from Turkey, Qatar, Europe and the US. Buyers can use either crypto of fiat to purchase the token. The degree of centralised control that could be exercised by the government may make some in the crypto community wary of the petro.
Blockchain money transfer gets traction, Carney says bitcoin a failure
Veem, a Silicon Valley money transfer startup, has seen an increase in the amount of business it conducts on blockchain, according to chief executive and founder Marwan Forzley.
The company uses both legacy systems and blockchain to transfer money, depending on which is the cheapest and most efficient at any given point in time.
In its fourth quarter results, Veem’s blockchain business doubled on the previous year, and now accounts for 62% of transaction volume. However, that figure only represents 10% of total transaction value because it is invariably cheaper for the company to send larger sums over legacy payment rails, such as SWIFT. GV, formerly Google Ventures, is among the venture capital firms backing Veem.
Back with the naysayers, Bank of England governor Mark Carney told an audience at a London university on Monday that central banks were concerned about the illicit activities that crypto in general, and bitcoin in particular, facilitate in addition to worries about the extreme volatility of the asset class.
Carney considers bitcoin to be a failed experiment as an alternative form of money: “It has pretty much failed thus far on … the traditional aspects of money. It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange.”
UK parliamentary committee launches crypto inquiry
In the UK, the Treasury Select Committee, a parliamentary body and not a branch of HM Treasury as confusing reported on leading crypto news site CoinDesk and elsewhere, today launched an inquiry into “digital currencies and distributed ledger technology”, according to a statement on the committee website.
Nicky Morgan MP, chair of the committee, said the inquiry would look at the risks and benefits of the new technology. “Striking the right balance between regulating digital currencies to provide adequate protection for consumers and businesses, whilst not stifling innovation, is crucial. As part of the inquiry, we will explore how this can be achieved.”
The committee intends to look at the “regulatory response” to date – or lack of it – from the government, the Financial Conduct Authority and the Bank of England. “People are becoming increasingly aware of cryptocurrencies such as Bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors,” Morgan observed.
Cash disappearing fast in Sweden
However, in Sweden cash is becoming a rare thing at a rate that is starting to alarm both parliament and central bank. A parliamentary review of central bank legislation is currently scheduled to produce an interim report as early as this summer on how to deal with the challenges of a cashless society.
“If this development with cash disappearing happens too fast, it can be difficult to maintain the infrastructure for handling cash,” said Mats Dillen, who is leading the parliamentary review.
Sweden’s Riksbank has been mulling over whether a central bank cryptocurrency – dubbed the e-krona – should be introduced.
Governor Stefan Ingves said this week of the cash problem: “Overall, I think we are facing structural changes in areas that have previously been stable. This is a development which will affect all the Riksbank’s departments and we will need to make strategic decisions regarding the way forward.”
A final decision on the e-krona is expected at the end of this year.
Pretend bitcoin is a goat?!
American comedian Ellen DeGeneres introduced her three million viewers to bitcoin this week. In a comical takedown she likened holding bitcoin to owning a goat.
“Pretend like bitcoin is a goat. Now it’s adorable … and you want to pick it up and you want to pet it. But you can’t because it’s not there. It doesn’t exist except for on that internet right there, just like bitcoin is digital currency.
“Say you own one bitcoin, and you bought it when it was worth $10,000 – and then for some reason bitcoin becomes worth $20,000 – you just doubled your money. Personally I’d rather own a baby goat.”
Funny or not, the skit will probably encourage puzzled and/or inquisitive mainstream onlookers to want to find out more, especially given the recent price recovery. Less than 1% of the population in the US and other mature economies are thought to be invested in crypto.
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