Far from assaulting the heights on the back of renewed optimism on institutional interest and less fretting about regulations, bitcoin has retreated markedly to currently trade at $8,717. The rot set in late Thursday and has accelerated since. Altcoins have fallen even more heavily, which is not too surprising given outperformance against bitcoin during the recent rally.
Today, bitcoin is down 6.8%, with top alts off by 10-15%, suggesting the failure of bitcoin to break above its 200-day moving average at $10,000 has shattered gathering bullish confidence.
Altcoins have taken a hammering: Cardano is down 17%, IOTA 17.5% lower, Ripple off 15% and Ethereum is down 10%.
South Korea’s UpBit exchange under investigation, Mt.Gox whale dump
News from South Korea may account for the sudden dramatic reversal in the markets over the past 24 hours. The country’s largest exchange UpBit is being investigated by the authorities regarding accusations of fraud, according to media in the country. UpBit’s offices have been raided and computer equipment seized.
Also, Brian Kelly on CNBC’s Fast Money Show claimed that the trustee in charge of the funds of the bankrupt Japanese Mt.Gox exchange may have offloaded as many as 8,000 bitcoin. Kelly is the founder of investment firm BKCM and is the manager of its Digital Asset Fund.
Also, the statements that came out of the annual general meeting of Berkshire Hathaway shareholders didn’t help sentiment. Warren Buffett and Charlie Munger, the president and vice president respectively, doubled down on their previous sceptical pronouncements on crypto. Buffett attacked bitcoin as “probably rat poison squared” and was joined by Munger who described buying bitcoin as “anti-social, stupid, immoral”.
Bill Gates was another well-known naysayer to pour cold water on the nascent asset class this week.
The pullback in the crypto markets reveals something of the fragility of the recent rally led by bitcoin.
According to Datatrek’s Nick Colas, who at the end of last week said the market was getting a bit ahead of itself, low wallet openings and a collapse in Google searches are key reasons for prospective investors to exercise caution. Colas was the first Wall Street analyst to cover bitcoin, and he is generally supportive of the industry. It is worth quoting the meat of what he had to say in his interview on CNBC.
“Is now the right time to buy? No, for two fundamental reasons. The first is we are not seeing a lot of incremental engagement with people buying bitcoin for the first time. And like any new technologies you need new adopters to come in to make it more valuable and in terms of Google searches they are way down compared to the peaks of December and January – 85 to 90%.
“The second issue is we are not seeing a lot of wallet growth – people are not opening up a lot of new bitcoin wallets to purchase the asset. Growth in wallets was only 2% last month [April]; it was 5 to 7% per month all of last year.”
Huawei preinstalling crypto wallet on all its phones
Exciting news for the sector comes from Chinese mobile giant Huawei. It has launched an App Gallery that will be preinstalled on all its phones and includes BTC.com’s cryptocurrency wallet.
Although exchanges and initial coin offerings were banned in China last year, it is not illegal to own and use crypto. Huawei is the largest phone manufacturer in China and also owns the Honor brand.
BTC.com is owned by China’s Bitmain, the dominant crypto mining group globally. According to Bloomberg, Huawei is also seriously considering the manufacturing of a handset that can run blockchain applications. Blockchain projects such as Qtum, which has been expanding in China provides technology that would allow blockchain apps to run on mobile devices.
Jaime Gonzalo, vice president of Huawei Technologies’ mobile services, said of the company’s plans: “From our leadership position in China, the tip of the spear of mobile payments, we expect to see massive growth in global cryptocurrency adoption habits in the near future.”
Facebook sets up blockchain group
On Tuesday, tech news site Recode reported that Facebook had undertaken its most wide-ranging reorganisation ever, splitting the business into three divisions. In the division for “New platforms and infra” a new blockchain group has been created.
The blockchain efforts will be led by David Marcus, who was previously responsible for Messenger and breaking it out from Facebook as a separate app. Marcus is a former president of PayPal so knows a thing or two about payments, and at the end of last year joined the board of US exchange Coinbase.
However, Facebook’s move, although bolstering the credibility of the blockchain technology that underlies bitcoin and other crypto, could also be interpreted as a threat to existing startups in the space.
The Facebook blockchain group is only involved in exploratory work at this time, but when Marcus was running Messenger he did say he was not averse to one day bringing crypto payments to the messaging platform. Other use cases for blockchain might include, data protection and ID verification although the immutable features of blockchain might make such deployment problematic without further development.
Gary Cohn sees global cryptocurrency ahead
Other positive newsflow came from Gary Cohn, in a roundabout way. The former chief economic adviser to President Trump and a former president of investment bank Goldman Sachs, said he thinks there will eventually be a global cryptocurrency, but it won’t be bitcoin. “I’m not a big believer in bitcoin, I am a believer in blockchain technology. It will be a more easily understood cryptocurrency. It will probably have some blockchain technology behind it, but it will be much more easily understood how it’s created, how it moves and how people can use it.”
Staying in the US, Robinhood, the crypto trading app that has taken the US by storm, now boasting four million accounts and gaining a strong following among a younger crypto savvy crowd, completed a Series D funding round this week.
The trading startup raised $363 million (£268 million) in its latest fundraising drive, valuing the company at $5.6 billion. Robinhood has markets in bitcoin and Ethereum and provides data on 14 other coins and sees Coinbase with its 20 million customers as its main rival in the crypto exchange arena.
Chief executive Baiju Bhatt said: “We expect by the end of the year to be either the largest or one of the largest crypto platforms out there. But we also really feel we’ll have the absolute best experience for investing in crypto as well—from having a large variety of coins available to a more favourable cost structure – mainly no commissions – to just quality of product.”
Robinhood has four million accounts compared to Coinbase’s customer base of 20 million, making the top US crypto exchange. Robinhood only has markets in bitcoin and Ethereum while Coinbase offers bitcoin, Ethereum, Bitcoin Cash and Litecoin. Both exchanges accept fiat deposits.
Robinhood opened its crypto trading service in February and is available in 10 US states. Taking part in the latest funding round were venture capital firms such as Sequoia Capital, Kleiner Perkins and Alphabet’s venture arm Capital G.
More bullish price targets and Israeli crypto comes to town
Other news saw a price target of $64,000 slapped on bitcoin by a FundStrat analyst extrapolating from hash power (computing power) on the network. “We believe the current path of hash power growth supports a BTC price of about $36,000 by 2019 year end, with a $20,000-$64,000 range,” said head of data science research Sam Doctor in a report from the US research company.
In other price forecast news, Roger Ver, aka “Bitcoin Jesus” because of his early evangelism for bitcoin, thinks that Ethereum could be worth more than bitcoin by the end of the year. Ver is also a vocal backer of Bitcoin Cash (BCH) which he hopes will replace bitcoin as the “real bitcoin”.
“Ethereum could overtake bitcoin by the end of the year and bitcoin cash could do the same before 2020,” he claimed, which his critics might say was more an attempt to undermine bitcoin and boost BCH than anything else.
He followed up those comments with a strong pump for BCH: “Bitcoin Cash has more than doubled in value in the last month and big investors coming in soon could see it double again by next week. People love to chase a rising star.”
The 19th UK Israel Technology Event takes place on 15 May in London, and provides interested parties with the chance to get a ground-floor view of the tech and, in particular, the crypto scene in Israel, where Tel Aviv has emerged as one of the world’s major development centres and home for blockchain startups.
Presale Ventures is one of the companies that will be exhibiting. It is a seed venture fund for crypto projects, looking to invest in blockchain project even before they’ve got to the presale initial coin offering (ICO) stage.
David Hava, Presales Ventures chief business development officer, in exclusive comments to Interactive Investor, said: “We have a unique new model, which provides exclusive early-bird investment opportunities into blockchain startups before their ICO events, maximally reducing investment risks and increasing ROI. Our team is well-known leaders in the Israeli technology sector and has accumulatively over 30 years of experience.”
ICOs are high-risk investments and are not regulated by the Financial Conduct Authority.
Speaking of ICOs, blockchain project EOS’s year-long ICO comes to an end on 1 June. The token, which has been trading on exchanges during this period, is currently down 15% at $15.4, but there is great interest in the launch of its Mainnet, scheduled to happen shortly after the end of the ICO.
Social trading platform eToro released a research paper on the EOS platform today and it is available here.
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