Our award-winning crypto writer explains all the must-know news in cryptoland right now.
Bitcoin has had an explosive start to the year and it probably has the US Department of Defence to thank. The killing of Iranian general Qasam Soleimani in a US drone strike ignited fears of a major conflagration in the Middle East that sent investors, briefly, running for the hills.
Risk-off assets came into their own as gold and government bonds rose in value, and with bitcoin joining the safe haven assets rally.
Entering the new year priced at around $7,150, the leading cryptocurrency has risen 24% to date, currently priced at $8,937, its highest level since early November last year.
The Iran tensions abated in short order. That led to gold falling back in sympathy but not bitcoin. It is as if bitcoin benefited from a booster rocket burn in deep space, with no gravity or friction to slow down the initial acceleration. Far from giving up its gains, the price has strongly consolidated above $8,500.
With bitcoin (BTC) block rewards for miners set to halve from 12.5 to 6.25 BTC in May, the oft predicted rally it was expected to induce has helped to set expectations for buyers encouraged to increase exposure when the missiles started flying in the Middle East.
Bitcoin bulls will now be targeting a challenge to resistance at $9,500 (see chart below).
(BTC/USD on Coinbase exchange. Courtesy TradingView)
Altcoins outperforming bitcoin
And the price action hasn’t all been about bitcoin. Many top altcoins (all crypto other than bitcoin) have been substantially outperforming bitcoin of late.
Stronger sentiment among altcoins is a positive development for the market as a whole, which up until this point had seen bitcoin doing all the heavy lifting. Bitcoin is still very much in the vanguard but altcoins’ catch-up outperformance indicates that crypto investors are again turning to the value differential present in other coins.
While bitcoin is 13.4% higher over the past seven days, second-placed cryptoasset Ethereum is 23% the better at $170, Litecoin has improved 31% to $59, decentralised application platform EOS is up 42% at $3.94, while so-called privacy coin Dash has more than doubled in value with a jump of 136% to $124.
And in a phenomena often seen in the wake of a bitcoin rally, the main clones of the original get pulled along in the slipstream.
Lesser bitcoin forks such as Bitcoin Gold and Bitcoin Diamond have benefited probably for no other reason than the halo effect of the brand recognition that comes from having ‘bitcoin’ in their name, up 123% and 99% respectively.
Bitcoin SV rockets nearly 300%, rumours fly about 1.1 million bitcoin at centre of Wright v Kleiman court case
But it is the more serious bitcoin-fork coins Bitcoin Cash (BCH) and Bitcoin SV (BSV) that have been seeing price action which has market participants seeing shades of the 2017 bull market.
Keeping in mind the caveat of relatively thin volumes and a lack of market depth compared to the mature markets of traditional financial asset classes, the price appreciation of BCH, and even more so BSV, is striking.
Bitcoin Cash, which differs from bitcoin in that it has a block size of 32 MB as opposed to bitcoin’s 1 MB, has leapt 41% in the past seven days.
However, it is the fork from Bitcoin Cash known as Bitcoin SV that has caught everyone’s attention.
Between the 10 January to 14 January the price went on a parabolic trajectory with a near 300% increase in price, touching $459 (see chart below). It has since pulled back from that extraordinary high to currently trade at $314, but that is still an increase over the past seven days of 147%. During this time it has, on a number of occasions, jumped above BCH in the market capitalisation rankings.
(BSV/USD on Bitfinex exchange. Courtesy TradingView)
The two noisiest cheerleaders for BSV, Dr Craig Wright and billionaire Calvin Ayre, who see it as the true fulfilment of Satoshi Nakamoto’s original bitcoin “vision”, hence the SV acronym, are largely responsible for igniting the rally.
Bitcoin SV has a block size of 128 MB and a roadmap to increase it still further, with its supporters insisting that the larger block sizes are necessary if the coin is ever going to be able to scale up transaction throughput to make crypto viable as a means of payment.
But it is the fallout from a Florida court case, in which Craig Wright is the defendant, that has set a fire under the BSV price.
We don’t have space to rehearse the full story here, suffice to say Wright mined 1.1 million bitcoin in the early days of the network with business partner David Kleiman. Kleiman died in 2013 and Wright took control of all the coins, according to Dave Kleiman’s brother Ira who is suing Wright.
Wright for his part had claimed not to have direct access to the bitcoin fortune, worth $9.8 billion at current prices, because it was entrusted by a blind trust named the Tulip Trust.
Wright had been ordered by the Florida judge, Bruce Rheinhart, to provide to the court and the plaintiffs the addresses of the bitcoin holdings, all related transactions and access to the fortune as part of the court discovery process. Wright’s failure to comply with the order saw him found in contempt of court by Judge Rheinhart.
The Florida court had previously established that Wright and Kleiman were in a partnership and as such the bitcoin and intellectual property should be shared.
Mystery courier shows up to unlock $9.8 billion bitcoin stash – or maybe not
Since then, Wright has changed tune, telling the court that a “bonded courier” would be delivering the encryption key to him on 1 January.
However, in the latest twist revealed in the submission by Judge Beth Bloom from a higher Federal court Wright was given until 3 February for the bonded courier “to appear from the shadows”.
This week, a twitter post of a screenshot from a Slack channel purported to show Wright in a discussion thread revealing that the bonded courier had arrived with the encryption keys. That rumour, together with tweets from Ayre telling the BSV community to expect big news in the coming days, is thought to have led to the frenzied buying.
The rumours had initially appeared to have been partially verified. According to court papers dated 14 January the mystery courier had handed over the encryption keys and private keys.
Since then though, Ira Kleiman has stated in court filings that Wright has in fact only provided a list of 16,404 public addresses for the bitcoin but no keys to unlock the Tulip Trust and none of the private keys that would be necessary to access the bitcoin.
Further complicating the saga, the latest filings submitted by Wright in the ongoing case may throw further doubt on the true amount of the bitcoin mined by Wright and Kleiman and the ownership rights. Referred to in the latest documents is a ‘Tulip Trust III’. Wright has asked for the documents relating to it to remain sealed, but has been ordered by Judge Bloom to bring forward an edited version within 10 days.
Wright, in the face of much derision, has claimed in recent years to be the pseudonymous inventor of bitcoin, Satoshi Nakamoto.
The court case was going to be settled last year but Wright changed his mind and decided to contest the Kleiman estate’s law suit.
Buyers of BSV are presumably assuming the price will rise when the fortune is unlocked and Wright uses a portion of his holding to buy BSV. Wright has made no indication he plans to do that although in a statement he has said he would not “dump my family’s BTC as some people suspect or want”.
Less generous followers of the court case and BSV have claimed without evidence that the dramatic price appreciation is market manipulation and part of an elaborate ‘exit scam’ by BSV insiders.
The plot thickens.
FCA lays down the law to crypto firms
The Financial Conduct Authority (FCA) announced on 10 January that it is now the anti-money laundering and counter terrorist financing supervisor for cryptoasset businesses.
The FCA provided a list of some of the main compliance requirements for cryptoasset firms:
- identify and assess the risks of money laundering and terrorist financing which their business is subject to;
- have policies, systems and controls to mitigate the risk of the business being used for the purposes of money laundering or terrorist financing;
- where appropriate to the size and nature of its business, appoint an individual who is a member of the board or senior management to be responsible for compliance with the MLRs;
- undertake customer due diligence when entering into a business relationship or occasional transactions;
- apply more intrusive due diligence, known as enhanced due diligence, when dealing with customers who may present a higher money laundering / terrorist finance risk. This includes customers who meet the definition of a politically exposed person;
- undertake ongoing monitoring of all customers to ensure that transactions are consistent with the business’s knowledge of the customer and the customer’s business and risk profile.
New cryptoasset firms doing business in the scope of the money laundering regulations must register with the FCA “before conducting businesses”.
Existing businesses can continue to operate as before but must “ensure their compliance”. All existing businesses must be registered by January 2021 and to that end submit a completed registration form by June this year.
More detailed information for cryptoasset firms is available here.
Ex Commodity Futures Trading Commission chief in push for US central bank digital currency
J Christopher Giancarlo, the one-time chairman of US financial regulator the Commodity Futures Trading Commission, is behind a project to digitise the US dollar.
Giancarlo is part of a team that has partnered with consultancy giant Accenture to set up the Digital Dollar Foundation. The aim is to be ‘stablecoin’ cheerleaders to push the US Federal Reserve towards creating a central bank digital currency (CBDC).
The People’s Bank of China has completed testing of its own CBDC and pilots are expected to be rolled in the first quarter of this year, with leading Chinese tech firms such as Alibaba and Tencent lined up to test the ‘digital yuan’.
Virtual world on a blockchain nears public launch
In other crypto news, Decentraland, the blockchain-based game where players can own parcels of land and build on it in a virtual world, finally goes public on 20 February.
The world has taken two years to build and test and in that time 100,000 parcels of LAND have been transacted using the MANA token and more than 25,000 avatars created.
To celebrate the coming launch the project will be conducting a treasure hunt in Decentraland’s first metropolis called Genesis City. The project runs on the Ethereum network.
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