The crypto market has halted four days of reversal, with the top coins table starting to flash green from Thursday, with only 15 of the top 100 coins in the red. Bitcoin was up 5%, Ethereum nearly 10%, with fifth-placed EOS up 13% and Cardano advancing 10%.
Although the bleeding has been staunched for now, this week the crypto bears have reminded market participants that they never really went away, with bitcoin falling to prices last seen four months ago. Trading at one point as low as $6,334, according to cryptocompare, bitcoin has lost 13% on a week view and is down 24% over the past month. At 18:17 UTC on 14 June, bitcoin was priced at $6,665 on Coinbase.
Second-largest coin by market capitalisation, Ethereum is off 14% on the week and 26% in the past month and is currently priced at $520.
The next stop for bitcoin could be under $6,000 if Ran Neu-Ner of CNBC Africa is right:
"We keep going down, and we’re testing new lows. Sixty-two-fifty is the next point. If it goes under that, we’re going to test $5,900."
However, he remains bullish, or foolish depending on your view, seeing the lower lows of recent days as a buying opportunity. “It [bitcoin] could go to 20, 30, 40, $50,000. Then no one cares whether you bought it at 5 or 6.”
Foreign exchange analyst Boris Schlossberg of BK Asset Management is not so sure about that expected bounce. "The $5,000 area is going to be the line between the diehards and the fair-weather fans in bitcoin. If the currency basically drops below that level I think you're going to see forced liquidation from all ends," he told CNBC on Wednesday.
Elsewhere, EOS token holders are smiling after a slow start to voting for the 21 block producers (BPs) who will verify transactions. The vote had to have at least 15% of token supply taking part for it to be valid, and the slow going prompted fears the process was stalling. Those fears have now proved unfounded, with the threshold reached after large token holders joined the party. Just over 169 million tokens voted, accounting for 17% of the total supply of 1 billion. The mainnet (network) will now be fully activated.
The EOS token sale lasted a whole year and raised $4 billion, the largest ICO to date. Several decentralised applications have already been built for the platform, such as Everipedia, a blockchain-based online encyclopedia backed by Wikipedia co-founder Larry Sanger, and Iryo, a decentralised medical records storage solution.
Rohan Abraham from London-based block producer EOSAuthority, which has been elected as one of the 21 block producers, told interactive investor:
"We didn't have an official wallet, the voters had to rely on community tools and contact Block Producers to help with activation. Turned out to be a good exercise. The people are all generally very happy and things are looking good for now.
"Upon activation EOS Authority was #2 on the list of block producers selected by voters worldwide and we were #1 on the number of accounts that voted for us. So the team here at EOS Authority is pretty happy with the response from the community," said Abraham.
The latest bout of selling in crypto markets has been triggered by the hacking of a small South Korean exchange called Coinrail, which lost $40 million of client funds in the security breach.
Although Coinrail is not a major player, the hack is an unwelcome reminder to investors of the risks that continue to be prevalent on crypto exchanges. Japanese exchange Coincheck suffered an even more serious security breach in January which led to the loss of NEM tokens which at the time were valued at $500 million.
Despite the well-aired security vulnerabilities that investors and traders expose themselves to by keeping holdings on exchanges, customers value the convenience of having someone else look after their assets. However, the safest way to store funds is in an offline hardware wallet such as those available from Trezor and Nano Ledger. These wallets have become much easier to use, but still require a level of technical ability that many clearly find off-putting.
Puzzlement greets news Ethereum Classic to list on Coinbase
One exception to the downturn in prices this week was Ethereum Classic (ETC). Up until yesterday it had seen a 25% price appreciation on the back of an announcement by leading US exchange Coinbase on 12 June that it will be listing ETC. Coinbase only provides markets in four coins at present (bitcoin, Ethereum, Litecoin and Bitcoin Cash) and so ETC will be joining a rarefied group. Coinbase says the decision to list ETC has been made in a way that is “consistent with our process for adding new assets”, but the choice has puzzled crypto watchers.
Back in March, Coinbase clarified its process for listing new coins following controversy surrounding alleged insider trading by staff at the exchange prior to the listing of Bitcoin Cash markets on the exchange in December.
Ethereum Classic is currently the 18th-ranked coin by market cap, so there are many other contenders with much larger trading volumes that observers would have placed ahead of ETC for consideration. Because of Coinbase's reach and influence, rumours of listings on the exchange have often led to sharp movements in the prices of coins, a phenomenon seen most notably when Ripple's XRP was thought to be in the frame for a listing, helping to push the price of the token to highs of $3.52, although it is today trading at $0.55.
One theory widely aired on Twitter is that Coinbase holds a large number of ETC tokens on behalf of clients, from when the fork in the chain happened following the debacle around a project called The DAO, which lost customer funds. Transactions had to be reversed by creating a new chain (Ethereum Classic stayed on the old chain).
Another theory points to the lack of transparency in the industry as a whole. According to this view, links are seen between the Barry Silbert, founder of the Digital Currency Group (DCG) and a fan of Ethereum Classic and Coinbase, in which the Digital Currency Group is a major investor.
Last year Silbert posted about Ethereum Classic in glowing terms, which some construed as market manipulation. For example, in November he published a tip on Twitter urging readers to “close out his short position before an Ethereum Classic Summit”. Silbert told Reuters at the time that he did not make trading recommendations and, referring to DCG, said:
"DCG, its subsidiaries and employees take pride in our strict compliance policies and adherence to all applicable regulations, including company-wide rules and restrictions concerning the trading of digital assets."
Highlighting possible manipulation problems, a 66-page research paper by University of Texas academics John M. Griffin and Amin Shams, shows that purchases of Tether, the dollar-pegged cryptocurrency, increased following market downturns, which in itself would be unusual because if the market is rising then those traders holding crypto could be expected to be selling to buy bitcoin and other coins.
The researchers found that the purchases of Tether, used by traders to park funds during periods of high volatility because of its peg to the dollar, tended to lead to a rise in the price of bitcoin, when the reverse should be the case if traders are selling bitcoin to buy Tether.
"We find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies," the paper’s abstract reads.
US regulators have launched an inquiry into market manipulation in crypto. Crypto exchanges are not held to the same standard as other financial markets due to the lack of regulation and the immature nature of the markets, which means that large holdings of cryptoassets are held by a relatively small number of individuals and entities.
In other news in the regulation realm, William Hinman, the director of the US Securities and Exchange Commission's (SEC's) division of corporate finance, has stated that ether, the native token of the Ethereum network used by many projects to run their initial coin offering (ICO) fundraising efforts on, is not a security "as currently structured".
"When we think about how ether today is operating, at least, we see a highly decentralised network, not the type of centralised actor that characterizes securities offerings."
Hinman said, clarifying previous statements by SEC chairman Jay Clayton who has characterised bitcoin as a currency while considering most ICO tokens to be securities, but left open the question of where that left Ethereum.
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