Last Week Today – Bitcoin and Cryptocurrency Weekly Digest July 9 – 16

  • Donald Trump tweets negatively about Bitcoin. Bitcoiners rejoice!
  • Federal Reserve Chairman says Bitcoin is a SoV alternative to gold
  • Facebook to halt Libra project until regulatory concerns are addressed
  • Hackers steal $32 million from Japanese cryptocurrency exchange

Trump doesn’t believe in Bitcoin. That’s alright. He doesn’t believe in climate change either

From a cypherpunk’s curio to a cause celebre at Capitol Hill, Bitcoin’s improbable 10-year journey could make for the most compelling documentary ever. The US president tweeted about Bitcoin this past Thursday. It was hardly in glowing terms but that matters not.

A currency “based on thin air, can facilitate unlawful behaviour, including drug trade and other illegal activity” sounds a lot more like the US dollar than Bitcoin.

It’s evident that Trump’s understanding of what constitutes sound money is as good as his understanding of climate science. This is far from the first time Trump has neglected rationality. Indeed, his baffling tenure has been little more than an unwavering spell of irrational hissy fits.

Regardless of the nature of the remarks, bitcoiners were overjoyed that a sitting US President had not only clocked on the world’s leading cryptocurrency but thought it necessary to rebuke its merits. In the words of one of the greatest human beings that ever lived, Mahatma Gandhi, “First they ignore you, then they laugh at you, then they fight you, then you win.” For many bitcoiners, Trump’s ridicule of Bitcoin represents an inclination to fight for fear of relinquishing state control of monetary supply.

Trump also launched a broadside on Facebook’s announced virtual currency, Libra, and defended the US dollar, describing it as “both dependable and reliable” and “by far the most dominant currency in the world.”

It’s pretty remarkable how the Libra saga has ironically served to highlight Bitcoin’s redoubtable fundamentals and the impregnable nature of the Bitcoin network.

So the US president doesn’t like Bitcoin or Libra. What’s he going to do about it? He can stop Libra, that’s easy. How is he going to stop Bitcoin? Who can really stop Bitcoin? How do they go about it? The only thing governments can do is shut down centralized exchanges and that’s not going to stop Bitcoin. It would only serve to strengthen the ecosystem further by forcing users to adopt decentralized exchanges.

Unfortunately for governments and lawmakers, picking a fight against Bitcoin would be tantamount to tilting at windmills, for although Bitcoin is everywhere, it is nowhere specific, rendering efforts at taming Bitcoin no more than a fool’s errand.

An ill-conceived intervention on the part of lawmakers is only going to backfire spectacularly, which is exactly why regulatory bodies have been sitting tight on coming up with a framework of rules for Bitcoin but have pounced on Libra immediately after it was announced by Facebook.

Unlike Trump, Fed Chair Jerome Powell exhibits outstanding knowledge of Bitcoin

The same day Trump lashed out against Bitcoin, Federal Reserve Chairman Jerome Powell delivered a testimony before the Senate Banking Committee regarding utility of cryptocurrencies and the implications of Facebook’s Libra.

Powell expressed “serious concerns” over Libra due to Facebook’s well-documented privacy and security shortcomings, but was rather more welcoming of Bitcoin as a digital alternative to gold.

“Almost no one uses bitcoin for payments, they use it more as an alternative to gold. It’s a store of value, a speculative store of value like gold. People have been talking about it since cryptocurrencies emerged but we haven’t seen it. But that’s not to say we won’t see it. If we do see it, then we could see a return to an era in the United States where we had many different currencies in the so-called national banking era.”

A noted critic of the gold standard, Powell’s remarks have been interpreted by some as an espousal of Bitcoin as being better than gold as a store of value and anchor for monetary supply.

In a white house press briefing on Monday, Treasury Secretary Steven Mnuchin also expressed “very serious concerns” about cryptocurrencies, particularly Libra, which he said he was uncomfortable with as it posed a “national security threat.”

Libra gets panned at Senate hearing and will not be launched without US regulatory approval

In a prepared testimony which was released prior to the Senate Banking Committee hearing on Tuesday, Facebook’s David Marcus, head of Calibra, clarified that Facebook had no intention to press ahead with Libra without regulatory approval,

“We know we need to take the time to get this right and I want to be clear that Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.

I am proud that Facebook has initiated this effort here in the United States. I believe that if America does not lead innovation in the digital currency and payments area, others will. If we fail to act, we could soon see a digital currency controlled by others whose values are dramatically different.”

On the first day of hearing, Facebook trying to position itself at the forefront of innovation and a champion of values certainly did not go down well in the Senate, still aggrieved at the company’s pervasive influence, its user privacy policies and data security failings.

Startlingly, some of the revelations from the hearing went contrary to what Facebook had outlined in the white paper only a few short weeks ago.

In response to a question on data sharing policies, Marcus revealed that submitting an ID and signing up for a Calibra wallet account might include agreements to share one’s transactions with Facebook.

On the point of Facebook’s revenue model concerning Libra, Marcus said it was based on more online commerce through easy access to Libra leading businesses to spend more on Facebook ads.

When quizzed on Facebook’s motivation for its pursuit of a global cryptocurrency, Marcus opined that blockchain is an inevitable innovation and if the US failed to lead the world in adopting and regulating it, the technology could come from places “out of reach of our national security apparatus,” hinting at China taking over the mantle.

Ohio Senator Sherrod Brown perhaps said it best, after branding Facebook dangerous and delusional, “Like a toddler who has gotten his hands on a book of matches, Facebook has burned down the house over and over, and called every arson a learning experience.”

Marcus is scheduled to testify before the House Financial Services Committee on day 2 of the hearing on June 17, which we’ll cover in next week’s digest.

Another week, another exchange hack. $32 million siphoned off Japanese exchange Bitpoint

Tokyo-based cryptocurrency exchange, Bitpoint suspended its services on Friday after it lost ¥3.5 billion ($32 million) worth of cryptocurrencies, largely involving Ripple.

The exchange, which is operated by electrical services company, Remixpoint Inc., said in a statement that roughly 70% of funds stolen belonged to customers, while the rest was owned by Bitpoint.

All of the funds were stolen from a hot wallet, raising grave concerns about the exchange’s security practices for leaving such a large amount of money vulnerable. The exchange was among those ordered by Japan’s Financial Services Agency to improve internal security controls following the 2018 hack of Coincheck.

There is no greater hindrance to cryptocurrency adoption as poorly secured, jury-rigged custodial exchanges being allowed to operate in laxity with impunity. But it’s hard to blame exchanges when the culture of trusting third parties with cryptocurrency assets has been normalized.

Trading Insights

After trading briefly above $13000 for the second time in as many weeks, Bitcoin closed a bearish week just above the psychological support at $10190, before continuing to tumble further down to trade at July’s lowest price of $9235.

We talked about the double top formation taking shape on the daily chart last week. At the time of writing, the pattern is nearly complete.

A high-volume close below $9036 would definitively confirm the pattern and further losses could then be afoot. A potential support level to look out for from a breakdown here would be the 100EMA at $8598.

Daily MACD is showing sharp bearish divergence, so the short-term prospects for Bitcoin does look rather bleak. Weekly MACD, although still bullish, is now shaping up to converge bearishly.

Daily RSI is teetering at the critical level of 40, not seen since February, which is usually considered the low-point of a bull cycle.

Despite the short-term bearish outlook, a potential long-term positive trend for Bitcoin continues to emerge as altcoins are unable to stem their slide against Bitcoin. Bitcoin’s dominance went up a further 2% this week, up to 67%.

There are also fairly strong fundamental criteria around the corner for long-term bullishness – Fidelity’s institutional custodial services, Bakkt futures which is set to begin testing later this week and mining reward halving which is less than 10 months away.

Ethereum was trading as low as 0.0205 BTC on Monday, a new 28-month low and is showing few signs of a recovery. EOS and TRON, the most hyped mainnet launches of 2018, set new 19-month lows of 0.00035 BTC and 215 sats respectively.

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Lamps Toujours
Lamps is a British economist and Bitcoin evangelist with an elusive ken for all things blockchain. A writer by avocation, Lamps' suasive opinions and analyses evince a quenchless passion to promote the integration of blockchain as the new economic and commercial infrastructure on a global scale.

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