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Bitcoin Stalls, Ethereum 2.0 Outage, and IRS Crypto Crackdown

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Coming every Sunday, Hodler’s Digest will help you track every single important news story that happened this week.

 

Top Stories This Week

 

Pro traders unfazed by Bitcoin price stalling at $12,400, data shows

Another week, another unsuccessful attempt at meaningfully cracking $12,000. Bitcoin suffered an 8.6% drop to as low as $11,370 after a stubborn rejection at $12,400. Now, technical analysts are cautiously anticipating a consolidation phase in the short-term.

Cointelegraph analyst Michaël van de Poppe says dropping below $11,500 again could lead to a bearish divergence for the world’s biggest cryptocurrency. Here’s the problem: Clouds are beginning to darken over the stock market, and this could affect BTC

The “Buffett Indicator” is hinting that the U.S. stock market is currently at dot-com levels — potentially indicating that equities are highly overvalued. A crash could trigger a major reaction on the BTC markets… but the jury’s out on whether it’ll be good or bad.

Some argue that the correlation between Bitcoin and the S&P 500 has been diminishing recently — potentially boosting the bull case for BTC if stocks decline. Indeed, a new report by Grayscale Investments recently said that Bitcoin’s current market structure “parallels that of early 2016, before it began its historic bull run.”

 

Ethereum 2.0 testnet suffers major outage, lasting several days

There was further bad news for the already delayed Ethereum 2.0 upgrade this week. Medalla, the final multi-client testnet before the long-awaited Phase 0 launch, came to a shuddering halt when a bug took most validators offline.

Medalla is now back up and running again, if not entirely stable. But some, such as the Bitcoin SV blog CoinGeek, have described the disruption as a major disaster that proves Ethereum 2.0 is not ready to launch, with “significant delays likely.”

Not everyone agrees with this dire outlook. Raul Jordan, the editor of Prysmatic Labs, insists that the outage “does not inherently affect” the upgrade’s launch date. Even though he described the bug as “carnage,” he insisted that this is exactly what testnets are for: ironing out problems in an environment where real money isn’t at stake.

With the Ethereum network struggling to cope with demand, a problem exacerbated by the DeFi boom, pushing back the launch date any further would be a major issue. After all, Phase 0 had been meant to launch back in January.

As Eli Afram wrote on Twitter: “ETH 2.0 is going to need all the testing it can get. Maybe a couple of Hail Mary’s too.”

Shock: Ethereum miners against proposal to reduce block rewards by 75%

Now here’s a bit of news that’ll blow your socks off. Miners have reacted furiously to an Ethereum Improvement Proposal that would slash block rewards by 75%.

The change is designed to bring Ether’s inflation rate more in line with Bitcoin’s and to preserve ETH’s purchasing power. But miners are warning that this would have a devastating impact on security and could make a 51% attack more likely.

Some miners are disgruntled about how they’re being treated in the run-up to Ethereum 2.0. This upgrade will make the blockchain proof-of-stake, eventually rendering miners obsolete.

One of them said: “It feels really bad to be treated as a necessary evil to be paid out the minimum possible to incentivize us to keep our lights on just long enough to make the transition to 2.0 work.”

Former Reserve Bank of India head says cryptos have a future, but fears a monopoly

One of India’s top economists has said that private cryptocurrencies like Bitcoin and Facebook’s Libra can have a future — even when central banks launch their own digital assets.

Raghuram Rajan formerly served as the governor of the Reserve Bank of India and as the International Monetary Fund’s chief economist. He warned that it would be “problematic” if a single private cryptocurrency or CBDC ends up gaining a monopoly, as this would mean they have a “tremendous amount of power.”

Speaking on a CNBC podcast, he believed that comparing Bitcoin with Libra and Libra with CBDCs such as the digital yuan is ultimately unhelpful because each will play a different role. Whereas he predicted BTC will continue to serve as a store of value or a speculative asset, he said Facebook’s asset will be used for day-to-day transactions.

In remarks that are rather refreshing from a former central banker — let alone one from crypto-cautious India — Rajan added: “Do you trust the central bank as much with details on every transaction you make? Should the government know? The beauty of the cash in our hands is that it’s anonymous. Even if you’re not doing something illegal you don’t want the government seeing everything you do.

Uber exec allegedly concealed 2016 hack with $100,000 BTC “bug bounty” pay-off

Uber’s former chief security officer has been accused of trying to cover up an extensive hack by funneling a hush-money payment of $100,000 in Bitcoin through a bug bounty program.

The U.S. Department of Justice has charged Joseph Sullivan with obstruction of justice and misprision of felony in connection with the 2016 attack. During the incident, hackers obtained the license numbers of 600,000 Uber drivers — and private information belonging to 57 million users.

According to prosecutors, Sullivan took “deliberate steps to conceal, deflect, and mislead” the Federal Trade Commission regarding the breach and the subsequent payment.

U.S. Attorney David Anderson said: “We will not tolerate illegal hush-money payments. Silicon Valley is not the Wild West.”

In a statement, a spokesperson representing Sullivan claimed “there is no merit” to the allegations — adding that, without his actions, “it’s likely that the individuals responsible for this incident never would have been identified at all.” Two of the hackers pleaded guilty to charges of computer fraud conspiracy in October and are now awaiting sentencing.

Winners and Losers

 

 

At the end of the week, Bitcoin is at $11,610.43, Ether at $390.87 and XRP at $0.28. The total market cap is at $361,817,688,182.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are OMG Network, yearn.finance and Golem. The top three altcoin losers of the week are JUST, Swipe and Kava.io.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

 

Most Memorable Quotations

 

“Fed & Treasury to take over banking system? Fed and Treasury ‘helicopter fake money’ direct to people to avoid mass rioting? Not a time to ‘Think about it.’ How much gold, silver, Bitcoin do you have?”

Robert Kiyosaki, Rich Dad Poor Dad author

 

“It appears that users in many regions use stablecoins to access U.S. dollars for cross-border payroll, remittance, and capital flight from local currencies.”

Chainalysis report

 

“ETH 2.0 is going to need all the testing it can get. Maybe a couple of Hail Mary’s too.”

Eli Afram, Twitter user

 

“It would have been really terrifying if the Medalla public testnet ran uninterrupted, with perfect performance right before mainnet, and then this bug occurred with real money at stake once ETH 2.0 launched.”

Raul Jordan, Prysmatic Labs editor

 

“Bitcoin continues to command global investor attention, there is scant supply to meet growing demand, and the infrastructure is now in place to satisfy that demand.”

Grayscale report

 

“Every time Bitcoin breaks a prior all-time high, especially when it takes years to break that all-time high, it tends to usually more than double. So I think $45,000 to $50,000 is a reasonable target.”

Tone Vays, crypto trader

 

“Bitcoin is a bit like gold.”

Raghuram Rajan, former Reserve Bank of India governor

 

Prediction of the Week

 

$50K Bitcoin is “reasonable” if Bitcoin hits new highs, says Tone Vays

Well-known Bitcoin derivatives trader Tone Vays believes Bitcoin will stay above $10,000 for the rest of 2020.

Although he was previously skeptical that the cryptocurrency had any chance of breaking $20,000 in 2021, he now thinks it’s possible for BTC to overtake its all-time high.

Vays said that, should Bitcoin surpass this record, history shows that the cryptocurrency has a good chance of doubling in value. Based on historical price cycles, he predicted that $45,000–$50,000 would be a reasonable target.

Various price models predict the price of Bitcoin to reach anywhere between $30,000 to $250,000 in the long-term. Historically, Bitcoin has seen a major breakout past its previous record high, reach a new peak, then correct. 

A rapid upsurge to unsustainable price levels could leave BTC vulnerable to sharp drops. Vays added: “Do we think we go as high as $100,000? I’m not willing to make that statement. For me, I would be happy if the next top was around $45,000, and that can happen quickly.”

FUD of the Week

 

IRS plans to ask every American worker if they used crypto in 2020

The Internal Revenue Service released drafts of its income tax forms for 2020 this week. Every American filling out this paperwork will be asked whether or not they used crypto.

Early into its very first page, the latest 1040 form asks: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”

Chandan Lodha, the founder of the crypto tax software firm CoinTracker, told Cointelegraph that this “pretty clearly shows that the IRS is taking cryptocurrency taxes even more seriously.”

 

John McAfee has left his own privacy asset project

Tech pioneer and crypto advocate John McAfee sensationally announced this week that he was departing his own privacy asset project, Ghost.

In a tweet on Aug. 19, he wrote: “Management is incapable of making a success of the project. It will, without a doubt fail.”

McAfee apologized for leading anyone astray, but added: “I tried to explain the fundamental principles of management, but they fell on deaf ears.”

The 74-year-old has bashed Bitcoin for its lack of privacy, but Ghost has had some problems of its own. It has been claimed that the project plagiarized content from the white paper of PIVX, another anonymity-focused crypto asset.

Following his abrupt departure, a Ghost representative wrote on Telegram: “John McAfee is a tech pioneer, a really cool guy, and a loose cannon […] John can help market GHOST to his network or doesn’t have to, but that does not affect the GHOST blockchain whatsoever.”

Fake tokens continue to plague Uniswap

Fake coins continue to plague decentralized exchange Uniswap, with prominent crypto projects associated with upcoming token sales reporting impersonators trading on the platform.

Earlier this week, the upcoming DeFi lending protocol Teller Finance tweeted that a fake token in its name, as well as a Uniswap pool, had been created.

The project added: “Teller Labs has not made any official announcements on any potential, planned, or upcoming token launches.”

The highly anticipated NEAR Protocol token sale also attracted impersonation scams in the lead-up to its commencement last week — with Cointelegraph identifying two tokens impersonating NEAR on Uniswap in recent weeks.

Unlike centralized platforms, Uniswap does not maintain any rules or criteria for listing, meaning that anybody can list an ERC-20 token on the exchange.

 

 

Best Cointelegraph Features

 

Crypto crimes… rated

The high-profile Twitter hack — which saw malicious actors take over 130 verified accounts including Bill Gates and Elon Musk — managed to be both technically brilliant and incomprehensibly stupid at the same time. Writing for Cointelegraph Magazine, Andrew Fenton takes a look at some of the biggest scams over the years.

 

Journeys in blockchain: Ray Youssef of Paxful

Youssef speaks to Darren Kleine about his journey in the world of business — starting all the way back as a newspaper delivery boy in the 80s.

 

Key timing for adoption? Crypto goes mainstream with TV, newspaper ads

Recent advertising campaigns by cryptocurrency fund management firms are well-timed as investors look for safe havens from inflation. Gareth Jenkinson has the story.





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Who takes gold in the crypto and blockchain Olympics? – Cointelegraph Magazine

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Every four years (usually), the world comes together in a celebration of sport and competition at the Olympic Games. In the spirit of Tokyo 2020, let’s look at countries that are deserving of gold medals across different spheres of the cryptocurrency and blockchain space.

The variety of sports featured at the Olympics have changed over the years, and the current summer Olympics in Japan features a total of 33 different sports. Exciting competitions like skateboarding and surfing were added for Japan as the global showpiece continues to evolve and adopt different sports.

The cryptocurrency and blockchain space is similar in this regard. Many different working parts make for a colorful community both united and divided by their preferences of cryptocurrencies and blockchain platforms.

Let’s take a look at which countries and institutions take home gold medals in their respective crypto and blockchain codes.

Gold for Bitcoin adoption goes to… El Salvador

Sports often have fans cheering for the underdog and El Salvador has emerged as one of those lesser-known players that have burst onto the global stage in 2021. The Central American country grabbed headlines this year as it officially became the first in the world to recognize Bitcoin as legal tender

Without delving too deep into the specifics, El Salvador’s congress voted to pass President Nayib Bukele’s Bitcoin Law which recognizes Bitcoin (BTC) as legal tender alongside the United States dollar, with 62 of a total 84 votes in agreement with the new legislation.

 

 

The law allows citizens to pay for goods and services in Bitcoin, and Bukele also stated that the Salvadoran government will guarantee the convertibility of BTC into USD at the time of any given transaction. The government plans to airdrop $30 worth of BTC to every citizen later this year.

There have been critics of the law change both locally and abroad, but the overall sentiment seems positive for the adoption of Bitcoin and a change of perception toward the preeminent cryptocurrency. 

Nevertheless, there are a few final hurdles that lie ahead for the country. Firstly, the International Monetary Fund has issued its own warning about the potential downsides of countries adopting Bitcoin that currently have unstable inflation rates. 

Secondly, some citizens of El Salvador have also expressed their skepticism of the move. A survey undertaken at the beginning of July involving 1,233 citizens revealed that nearly half of the respondents knew nothing about Bitcoin. Of the poll takers, 20% agreed with the move, highlighting the need for an educational campaign to complement the progressive move to make BTC a legal tender in the country.

Change is often met with uncertainty and resistance, but in terms of progression and adoption, El Salvador takes the gold medal in this first category.

Switzerland takes silver in the category, thanks to its crypto-friendly laws that have boosted the use of cryptocurrencies and companies working in the space. The USA clinches the bronze medal thanks to the efforts of Miami’s Bitcoin-friendly mayor Francis Suarez, who’s been driving various initiatives to promote the use of BTC.

China leads the CBDC race, but anti-crypto policies lead to disqualification

China has been a powerhouse at the Olympics over the past two decades with its sporting program producing a fine pedigree of Olympic weightlifters, gymnasts, divers, shooters and martial artists. In the world of cryptocurrencies, the story is quite different.

China has taken a stern stance toward cryptocurrencies and has continued this policy in 2021, with its outright ban of mining completely rebalancing the Bitcoin mining ecosystem as a result. 

Interestingly enough, the nation is far ahead of the world when it comes to the race to develop a fully-fledged central bank digital currency, or CBDC. Over the past 18 months, China has piloted and rolled out significant testing of its Digital Currency Electronic Payment, or DCEP. 

 

 

Colloquially known as the digital yuan, citizens began testing the facility through lotteries that award a small number of participants in various cities with digital yuan, which they could use through a mobile app to pay for goods and services at thousands of participating vendors.

There is no denying that China has blazed the trail for the development, testing and roll-out of its CBDC. In the same breath, the DCEP is a government-controlled program, and the specifics of the technology and systems powering the digital yuan are shrouded in mystery.

However, China’s recent ban on mining in different regions and its zero tolerance of cryptocurrency exchanges means that despite its well-developed CBDC program, it falls out of the reckoning for a medal. Luckily, a number of other countries have also made significant strides in developing their own CBDCs. 

In the world of sports, fans often get behind the underdog, and this is certainly the case with the Bahamas and its Sand Dollar CBDC. The country has made significant strides with the development and testing of its very own CBDC and became the first country to go live in October 2020.

The Sand Dollar ecosystem continues to onboard more local banks and financial institutions, paving the way for widespread adoption of the CBDC and a fully digital payment environment. The Bahamas is the deserving recipient of the gold medal in this category.

Sweden has begun its first trial of pilot testing the e-krona CBDC with a couple of local banks and external participants. As it continues testing its system with local financial institutions, Sweden earns the silver medal in this category.

Cambodia and Ukraine have been credited for their own CBDC development programs by a recent report from PricewaterhouseCoopers, sharing the bronze medal in this category.

North America in the race for gold in Bitcoin mining

China was undoubtedly the gold medal incumbent of Bitcoin mining but this is quickly changing in 2021. Recent estimates saw China account for more than 70% of the global hash rate before various mining operations were forced to shutter in June.

Those firms that were able to quickly look for greener pastures would welcome their mining equipment. While various countries in Asia would be the closest locale to relocate to, North America is quickly becoming the new hub of cryptocurrency mining.

Research from the Cambridge Centre for Alternative Finance shows that the hash rate of American-based miners has steadily been on the rise over the past year and the latest regulatory move in China has only accelerated that point.

The Cambridge Bitcoin Electricity Consumption Index world map has yet to fully reflect the data from China’s regional mining bans in June, in order to get a better understanding of how the Bitcoin mining hash rate’s geo-distribution has changed. The latest map shows the distribution as of March 2021.

 

 

 

Nevertheless, from August 2019 to March 2021, the U.S. saw an increase in its contribution to the global hash rate from 4% to 16%, making it second to only China in terms of hash rate. This is largely due to a concerted effort from major mining operators in America steadily increasing their hash rate by acquiring new equipment during this period.

Kazakhstan has also opened its doors to relocate Bitcoin miners from China and has seen its share of the Bitcoin hash rate climb to around 8% of the global rate, according to Cambridge’s recent report.

China’s share of the global hash rate has dropped below 50%, while the United States’ has climbed. This picture, however, has still not factored in the major relocation of mining operations out of China.

It might be too early to give the U.S. the gold medal for Bitcoin mining, but the country seems to be on track to take over in the leaderboards if it continues at the same pace. China’s mining clampdown results in a disqualification, so the U.S. becomes the new gold medallist in this category.

Kazakhstan swoops in to take silver with its 8% contribution to the global hash rate, while Iran grabs the bronze medal with its 4.6% share. Canada and Malaysia just miss out on the podium in the category.

The regulatory race goes down to a photo finish

When it comes to progressive regulation that is driving cryptocurrency adoption and use, there are a number of countries that are vying for a crypto gold medal and can boast to have developed regulatory parameters that are helping the industry thrive in their locales. 

Malta has positioned itself as the blockchain island for a few years now and has attracted a number of the world’s biggest cryptocurrency exchanges and other crypto service providers. The country’s regulatory package is attractive, as crypto holders do not have to pay capital gains, wealth, or inheritance tax on their holdings, but trading is subject to income tax. 

Singapore is another country that has established comprehensive laws that have made it clear what cryptocurrency firms and service providers need to do in order to operate in the country. Singapore is also among a handful of countries that has zero capital gains tax on cryptocurrency income. 

South Korea has long been a country with an avid cryptocurrency user base and often sees Bitcoin trading at prices far higher than the rest of the world. The country has since developed strict regulatory frameworks but has also driven a number of initiatives to foster various services powered by blockchain technology.

 

 

 

 

Switzerland is another strong contender in this category, given its progressive attitude toward the cryptocurrency and blockchain space. Earlier in 2021, the Canton of Zug finally rolled out its facility for residents to pay taxes in BTC and Ethereum (ETH).

Canada is featured prominently in this race, having become the first country to approve a Bitcoin exchange-traded fund (ETF). The launch of the first Bitcoin ETF in February 2021 was a huge success, with the Toronto Stock Exchange’s Purpose Bitcoin ETF seeing nearly $100 million in trade volume on its first day. 

All in all, Canada has been hailed for its progressive regulatory environment for cryptocurrency use. Cryptocurrencies are classed as commodities, and their usage for goods or services is treated as barter transactions. 

These five countries, therefore, end the crypto and blockchain regulatory race in a photo finish that’s hard to call. As we bring up the slow-motion replay, we can confirm that Canada can take the gold in this category for its broad range of crypto-friendly regulations, from ETFs to clear tax laws and favorable mining tariffs.

Malta takes silver, as its status as the “Blockchain Island” has waned somewhat due to a change in governmental leadership that had initially championed this cause. Singapore and South Korea share bronze in this category.

The U.S. takes gold for institutional adoption

The modern-day United States optimizes a capitalist society, and the disruptive nature of cryptocurrency has led some forward-thinking individuals, companies and institutions to move quickly to leverage the potential of cryptocurrencies and blockchain technology.

Enter MicroStrategy, a global leader in business intelligence services, which in 2020, pioneered a move to convert its fiat-based treasury holdings to Bitcoin. The company’s CEO, Michael Saylor, is a fierce Bitcoin proponent and has relentlessly acquired BTC since the firm’s decision to bank on the preeminent cryptocurrency in August last year.

MicroStrategy’s move is widely credited for influencing electric vehicle manufacturer Tesla and its founder Elon Musk to decide to begin investing in Bitcoin and, even at one point, accepting the cryptocurrency as a means of payment for its vehicles. 

Cryptocurrencies have been touted as a disruptive force in the payments industry, and American firm PayPal looked to gain first-mover advantage by announcing that it would roll out cryptocurrency custody and payment services on its widely used platform.

 

 

American investment firms have also led the way in allowing a wider audience various ways to gain exposure to cryptocurrencies. None more so than Grayscale Investments, which has a number of cryptocurrency trusts that are valued at over $33 billion to date. Its flagship Bitcoin Trust is currently valued at over $24 billion alone.

These factors are more than enough to hand America another gold medal in the Crypto Olympics in the race for institutional adoption.

Canada takes silver in this category due to its crypto-friendly regulation and its progressive ETF laws that have seen it overtake its North American neighbor in that regard. Thailand walks away with a bronze medal here, as its oldest banking institution, Siam Commercial Bank, has committed $110 million to invest into the decentralized finance sector through its venture capital arm SCB 10X.

DNFs

A number of countries fall into the disqualification category for their varying stances on cryptocurrency and blockchain technology.

In February 2021, Nigerians were caught off guard as the country’s central bank effectively barred local banks from servicing cryptocurrency exchanges. For a country that still ranks as number one for Google’s search of Bitcoin, the move was criticized both locally and abroad. Nigeria’s Securities and Exchange Commission had been developing crypto regulatory plans which were suspended as a result.

India is another country that has a checkered past when it comes to its attitude toward the cryptocurrency space. The country’s government has long been threatening an outright ban on the use of Bitcoin, but this is slowly changing with talk of asset classification providing proper regulatory frameworks and oversight for the burgeoning industry. 

India’s banking sector is still at odds with the cryptocurrency movement, with some of the largest institutions reportedly cautioning customers about acquiring and using cryptocurrencies. It’s clear that mixed messages from India’s government and central bank in recent years have created a swathe of uncertainty that can only be addressed by proper education about the sector.

China’s recent ban on cryptocurrency mining in different regions of the country also sees it feature in this disqualification category, as the move caused major disruptions in the mining ecosystem, forcing operators to close up shop and look for greener pastures abroad.

The Chinese government also issued directives to local banks not to service businesses involved in the cryptocurrency industry, which is cause for greater concern. Cutting off integration with the traditional finance sector means that citizens in the country are robbed of the ability to access and use cryptocurrencies to their full potential.

 

 

 



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Newly found Monero bug may impact transaction privacy, developers warn

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Developers of privacy-oriented cryptocurrency Monero (XMR) have identified a bug that could potentially impact users’ transaction privacy.

On Monday, the official Monero Twitter account warned users of a “rather significant bug” that has been spotted in Monero’s decoy selection algorithm, a system designed to hide real output transactions among 10 decoys in a ring.

First identified by software developer Justin Berman, the bug causes a sufficient probability that users’ output transactions can be identified as the true spend among decoys if users spend funds immediately following lock time in the first two blocks, or 20 minutes after receiving funds.

The developers emphasized that the bug does not pose a risk to any information about addresses or transaction amount but rather only allows to trace the occurrence of an XMR transaction. “Funds are never at risk of being stolen. This bug persists in the official wallet code today,” Monero developers noted.

According to an XMR contributor on Reddit, the newly discovered bug impacts transactions that are from the past. To mitigate the potential privacy risks, Monero developers recommended waiting one hour or longer before spending newly received XMR until the community rolls out a fix in a future wallet software update to mitigate the potential privacy risks. A full network upgrade, or a hard fork, is not required to address this issue, the developers noted.

Related: Privacy coin Monero pumps 31% amid US taxation plans

Launched in 2014, XMR is a major privacy-focused cryptocurrency designed to support secure, private and untraceable transactions, using a special type of cryptography to ensure that all its transactions remain 100% untrackable and unlinkable. Monero is the 29th largest cryptocurrency by market capitalization and is the biggest privacy-centric digital currency by value. At the time of writing, XMR is trading at $222, down 3.8% over the past 24 hours, according to data from CoinGecko.

As previously reported by Cointelegraph, multiple global financial regulators have attempted to crack Monero’s privacy. Last year, the United States Internal Revenue Service offered a bounty of up to $625,000 to anyone who can trace Monero transactions.