MARKETS DAILY: Another Chainalysis Bombshell, Plus a Long Squeeze?
After a brief overnight recovery, bitcoin is getting battered along with the rest of the sector, but how much lower can we go? It's CoinDesk's Markets Daily.
After a brief overnight recovery, bitcoin is getting battered along with the rest of the sector, but how much lower can we go? Then, we go deep on the recent Chainalysis report, and two major companies throwing their weight behind 'Blockchain Gaming'.
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- News roundup, Chainalysis report blamed for Monday selloff, and market analysis
- "SORRY, WE HAVE RUN" A look at the Chainalysis report on PlusToken
Adam B. Levine: On Today’s episode, we’re talking State Street’s Winklevoss Moment , Blockchain Gaming, and the Ponzi Scheme Allegedly Pushing Down Bitcoin
Adam: It’s December 17, 2019, and you’re listening to Markets Daily, I’m Adam B. Levine, editor of Podcasts here At Coindesk, along with our senior markets reporter, Brad Keoun, to give you a concise daily briefing on crypto markets and some of the most important news developments in the sector over the past 24 hours.
Adam: And now, we turn to the daily bitcoin market briefing and the important news affecting the crypto industry
Brad Keoun: Bitcoin up just a touch this morning, around $6900, after tumbling about 3% yesterday to the lowest level in three weeks
The news behind yesterday’s drop was apparently a Chainalysis report suggesting that the lingering fallout from the $3 billion PlusToken scam, which was busted earlier this year, may be putting downward pressure on the bitcoin market, since some of the purported perpetrators who remain at large are slowly liquidating their ill-gotten gains
CoinDesk’s Omkar Godbole reports that the number of traders with bullish futures positions on the Bitfinex exchange has climbed to record highs, and that could lead to a long squeeze if prices fall another $400 to $6500
One interesting market observation today comes from Clem Chambers, CEO of the financial data website ADVFN, who says that bitcoin prices might be affected by news of President Donald Trump’s trade war with China
Of course traditional financial markets have been trading on this news, especially recently as the world’s two largest economies agreed to a phase one deal that removed the specter of new import tariffs
But Chambers argues that the recent progress toward a deal might be bad for bitcoin demand, since ostensibly fewer Chinese nationals will be looking for assets outside the reach of the trade conflict and immune from a potential devaluation of the Chinese currency, the yuan
Adam: Turning to the news, State Street, the Boston-based bank that serves as a key service provider to big money-management firms, said it has formed a partnership for a new trial with Gemini Trust, the crypto exchange and custodian founded by the Winklevoss twins
CoinDesk broke the news earlier this month that State Street had shifted its blockchain strategy and cut 40 to 100 developer jobs in the process, but it also recently released a survey suggesting that some 38 percent of its clients planned to increase digital-asset holdings next year
The new trial ultimately aims to allow investors to consolidate reporting of digital assets stored at Gemini with traditional assets serviced by State Street
Brad: Accenture, the giant consulting firm, has invested in the Marco Polo trade-finance blockchain consortium, which includes big companies like Bank of America, Mastercard, Daimler and Bank of New York Mellon
Accenture plans to work with a startup TradeIX to find new use cases for the network beyond buyers and sellers within trade finance
And speaking of big financial companies, it turns out that, despite a lot of anti-crypto rhetoric from the U.S. banking industry, the top 10 U.S. retail banks have worked with unregistered crypto money-services businesses, according to the blockchain forensics company CipherTrace
CoinDesk’s Nathan DiCamillio reports that this is the case even though some of the banks’ official position is that they don’t want any crypto-related transfers passing through their payment networks
John Jefferies, CipherTrace’s chief financial analyst says, QUOTE Whether they want to acknowledge it or not, they’re all doing crypto END OF QUOTE
And finally, the Russian state news agency TASS reported Monday that two Russian nationals have been charged with getting access to government computers and using them to mine cryptocurrencies
The report gives few details but quotes a Russian official as saying the attackers "infected" web pages and mined crypto currency at the moment pages were viewed in a browser
The official, Nikolay Murashov, said that companies should be on the lookout for suspicious activity on their networks, since some 80 percent of a computer’s free power can be used to generate virtual coins, and a legitimate user may not even know about it
And for today’s featured story, we’re highlighting two reports by Decrypt.co on serious players getting into blockchain gaming. So what is Blockchain gaming? It’s basically any game which uses a blockchain to store information, anything from your wins and losses to the actual code the game is running on. Sometimes these games us Tokens to represent in-game characters, or items you might use yourself or trade to someone else.
Since 2014’s first tokenized card games, we’ve seen what have to be dozens of projects attempting to connect gaming and blockchains, with limited success. But in general these projects have been plagued by technical inaccessibility, higher costs since on-chain transactions are required, and often have focused more on creating interesting token systems than crafting fun, sustainable games. It’s not to say it hasn’t been tried, just that it’s proven very difficult to attract attention from anyone beyond technology enthusiasts, or people who are playing at least a little because they think it’s a good financial decision. It’s always been a strange combination.
So with that as background, our first story focuses on a “Evolutionary RPG” published by one of game publisher Ubisoft’s venture subsidiaries. Quoting from Decrypt:
Adam: End quote
Nine Chronicles is available now in a free alpha test, if you’d like to check it out you’ll find the link in todays shownotes.
While we can’t tell if Nine Chronicles is the game that’ll help the broader concepts go mainstream, it’s instructive to note that the companies backing these plays are growing in profile.
Outside of any specific game, Decrypt is also reporting that computer chip manufacturer AMD recently joined the Blockchain Gaming Alliance, and has plans to bundle blockchain games with the sale of new graphics cards.
Adam: END QUOTE
While blockchain gaming may not be there yet, these moves are significant, and this is certainly a story we’ll be following as events continue to unfold.
For AMD this isn’t just about gaming, it’s about making sure that as this sector develops, they’re a major player in it. The inclusion of blockchain games with new graphic card sales seems to be the price they’ll pay to ensure that the underlying protocols need their hardware, and for AMD that’s a bet that might pay off.
Adam: And now, for our daily market spotlight, we’re looking at a report yesterday from the startup Chainalysis suggesting that the $3 billion PlusToken scam, busted earlier this year, might be pushing down prices for bitcoin.
Brad: That’s right Adam, today we’re looking at what might be a major factor in the bitcoin market - the fallout from the PlusToken scam busted earlier this year
Now PlusToken was a South Korean exchange and high-yield investment program, started in 2018, offering a wallet service and promising 8% to 16% on stored funds, and it may have attracted as many as 3 million users, largely in South Korea and China
The operation allegedly had some of the telltale signs of a ponzi scheme, with members encouraged to recruit new members, and in doing so could obtain honorable distinctions like “Big Boy” and “Great God”
But in June, withdrawals from the app were frozen, and six allegedly high-ranking members of the operations were arrested on the Pacific island nation of Vanuatu, and they were ultimately extradited to China to face charges
One of the transactions from their wallets contained a note saying QUOTE Sorry, we have run” END-QUOTE according to CryptoBriefing
According to Chanalysis, a blockchain forensics and compliance firm, some $2 billion of cryptocurrency may have been taken from victims
And due to the transparency of transactions on the blockchain, it’s been possible to watch as these cryptocurrencies moved around the various networks, with the looters apparently trying to cash out
And the theory now is that some of their bitcoin sales might be putting downward pressure on prices
Traders in the bitcoin market became aware of this dynamic in November, but the story is getting fresh attention now after Chainalysis published its report yesterday
Chainanalysis has built up a credible reputation for using its blockchain skills to help fight crime
This is the same firm that in October announced that it had assisted the U.S. Department of Justice in the world's largest reported shutdown of a child pornography ring
According to Chainanalysis, the funds from the PlusToken scam appear to have been moved around various blockchain networks and crypto exchanges using sophisticated techniques designed to hide the origin of the transactions and also blending funds with other funds that were not involved in the PlusToken scheme
Some transactions went through over-the-counter brokers with light know-your-customer requirements, which make it easier for traders to conceal their identities from exchanges and authorities
Chainalysis claims $185 million in stolen bitcoin have already been liquidated by individuals related to PlusToken, and the theory is that these transactions have contributed to bitcoin’s price decline to about $6900 now from as high as $13000 in June
While Chainalysis wouldn’t say for certain that liquidations from PlusToken-related accounts sunk bitcoin’s price, the blockchain forensics firm was willing to claim “that those cashouts cause increased volatility in Bitcoin’s price, and that they correlate significantly with Bitcoin price drops.”
According to Chainanalysis, the dynamic continues to haunt the bitcoin market, since some $150 million of allegedly illicit proceeds from the scam has yet to be cashed out
The other big takeaway, according to Chainalysis, is that this is just another episode that paints the crypto industry in a negative light, which could scare off big institutional investors who might otherwise want to allocate some money to bitcoin
Adam: Join us again on Wednesday, for the next Markets Daily from Coindesk. To make sure you never miss an episode, you can subscribe to Markets daily on Apple Podcasts, Spotify, Google Podcasts, and just about any other place you’d like to listen. If you’re enjoying the show, we really appreciate you leaving a review. And if you have any thoughts or comments, email email@example.com
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