Did ICOs Cause Ethereum to Drop by 44% in 2 Weeks by Dumping on the Market?

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Within a period of two weeks, from August 1 to August 14, the price of Ether, the native cryptocurrency of the Ethereum network, dropped by 44 percent.

In 14 days, the price of Ethereum plummeted from $470 to $260, reaching its lowest point in 2018 by falling below the $300 mark for the first time since early November, 2017.

The entire cryptocurrency market experienced a steep decline in valuation, losing nearly $150 billion of its valuation in a month. But, Ether, which performed particularly well against the US dollar amongst other major cryptocurrencies like Bitcoin and Bitcoin Cash, quickly became one of the worst performing digital assets in August.

What Fueled the Drop of Ether?

Today, on August 14, even after suffering such a large drop in price, Ether dropped 18 percent of its value against the US dollar, declining from $300 to $260 within a 12-hour span.

While other cryptocurrencies did experience major drops in value, Bitcoin for instance, only lost 6 percent of its market cap against the US dollar.

Throughout this week, many analysts including Eric Wall, a lead cryptocurrency researcher at fintech company Cinnober, stated that blockchain projects which raised hundreds of millions of dollars in Ether in the past 12 months dumped the digital asset on the public cryptocurrency exchange market, creating a domino effect across major exchanges.

“The problem when you give millions of ETH to ETH competitors is that they can unload the ETH on the spot market and short ETH on the futures market before that, so they’re not only securing the funding but also manipulating the underlying spot market in favor of their shorts,” Wall said.

It is important to acknowledge that the amount raised by ICOs in their token sales do not necessarily mean new capital coming into the market but rather existing capital stored in major cryptocurrencies like Bitcoin and Ether moving to ICOs.

Hence, if ICO participants allocate millions of dollars in Ether to token sales, and the developers conducting the token sales dump the capital raised in Ether on the cryptocurrency exchange market, it indirectly becomes a massive sell order.

Consequently, the Ethereum exchange market has suffered in the last three months, as ICOs continued to dump large amounts of Ether on the market.

BitMEX Shorts All-Time High

This week, Arthur Hayes, the CEO of cryptocurrency exchange BitMEX, revealed that in merely a week, BitMEX became the largest exchange for ETHUSD trading, as its 50x leveraged ETHUSD swap has evolved into the most liquid Ethereum trading pair in the global market.

Given the overly strong downtrend of Ether and the rest of the market, it is evident that the increase in the activity of ETHUSD trading pair hosted by BitMEX demonstrates a rise in the number of shorts placed by investors that have lost confidence in the short-term trend of Ether.

While it is difficult to conclusively state that ICOs led the price of Ether to crash, it is obvious that the liquidation of the capital raised by token sales played a major role in creating a strong downtrend for Ether.

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Ethereum Co-Founder Joseph Lubin: Crypto Price Collapse Will Not Constrain Further Growth

Ethereum co-founder and ConsenSys Inc. CEO Joseph Lubin said in an interview with Bloomberg Aug. 14, that he does not see the recent cryptocurrency price collapse as a constraint to further growth.

In а recent discussion on the state of the cryptocurrency market with Bloomberg, Lubin said that the value surges of the past year were just another bubble like the previous “six big bubbles, each more epic than the previous one, and each bubble is astonishing when they’re happening.”

He added that on close scrutiny those peaks look like “pimples on a chart.” Lubin said that each bubble, such as the current one, has brought a significant burst of activity. He stated:

“…we build more fundamental infrastructure, we see a correction, and the potential gets even more impressive… I absolutely expect that there is a strong correlation between the rise in price and the growth of fundamental infrastructure in the ecosystem and the growth of development in the ecosystem. We are probably two orders of magnitude bigger as a developer community than we were eight or 10 months ago.”  

Lubin attributed volatility to “trader types,” i.e. speculative investors, saying that it is not necessarily an indicator of underlying infrastructure enhancement. When asked about how the price volatility affects him, Lubin answered:

“So we can look at the price and make growth plans and projections, and we’re still on track, basically. So this is not unexpected.”

Yesterday, Ethereum (ETH) dropped to a 9-month price low, and was trading at $288. The last time the altcoin fell below the $300 price point was in early November, 2017. This morning losses expanded to 16 percent on the day and almost 35 percent over the last week.

Currently, ETH is trading around $263, down 7 percent on the day, with a market capitalization over $26 billion.

Ethereum’s 24-hour price chart. Source: Cointelegraph Ethereum Price Index

Ethereum’s 24-hour price chart. Source: Cointelegraph Ethereum Price Index

Playboy Sues Cryptocurrency Company for Breach of Contract

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Playboy Enterprises, the parent company of Playboy Magazine, is suing cryptocurrency company Global Blockchain Technologies (GBT) on allegations of fraud and breach of contract, according to a report from L.A. Times.

The company had announced a partnership with GBT earlier in March, upon revealing that it was developing an online payment wallet with cryptocurrency support across its chain of businesses.

The idea was to trial the adoption of a new cryptocurrency called Vice Industry Token (VIT) with a new wallet on Playboy.TV before expanding to other entertainment media channels and platforms owned by the company. The lifestyle brand had also suggested that customers will be able to earn and pay Vice tokens to view content, as well as to comment and vote for content.

According to the report in L.A Times, Playboy Enterprises had filed a lawsuit in the Los Angeles County Superior Court, where it claimed to have entered an agreement with Canada-based GBT to implement the blockchain technology into Playboy magazine’s online channels. The report says that GBT was expected to integrate third-party cryptocurrency VIT tokens on the network of sites owned by the media company.

The Beverly Hills-based Playboy is now seeking “unspecified compensatory and punitive damages,” as it claims GBT hasn’t made good on the deal which includes a $4 million payment, which the blockchain company promised to pay.

In its defense, GBT believes it has a “strong defense to the action” filed by Playboy Enterprises and the company says it will be “vigorously defending same” in court.

Due to the privacy concerns that cryptocurrency resolves, a number of adult entertainment brands have been exploring the industry with the aim of circumventing traditional payment options like wire transfers and credit cards and their hefty processing fees.

Pornhub and Brazzers are two of the major adult sites that currently accept cryptocurrency payments, while porn star Stormy Daniels — now best known as U.S. President Donald Trump’s former mistress — also accepts Vice tokens on her personal website.

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Venezuela to Use Petro as Unit of Account for Salaries, Goods and Services

Venezuelan President Nicolás Maduro has announced that the national oil-backed cryptocurrency, the Petro, will be used as a unit of account within the country, news outlet ABC International reported August 14.

Nicolás Maduro reportedly announced in a television address, that the state oil company PDVSA will use the Petro as a unit of account. Additionally, the government will introduce a new salary system and a pricing system for goods and services that are anchored to the Petro. ABC quotes Maduro:

“As of next Monday, Venezuela will have a second accounting unit based on the price, the value of the Petro. It will be a second accounting unit of the Republic and will begin operations as a mandatory accounting unit of our PDVSA oil industry.”

According Maduro, the implementation of a new Petro-based salary and pricing system “will mean a substantial improvement in the income of the workers” and will help “the maximum retail price to reappear.”

Starting August 20, Venezuela will have two government currencies, the Petro and sovereign bolivar, the latter of which will be indexed to the former. The sovereign bolivar will take five zeros away from the current national currency, the bolivar fuerte, in an eventual monetary reconversion.

The Central Bank (BCV) will reportedly “begin to publish the official figures of the value of the sovereign bolivar according to the Petro and the value of the petro according to international currencies.” Maduro also said that the BCV and private banks in the country have already received the new banknotes.

The Venezuelan government launched the pre-sale of the Petro in February, with 82.4 million of the world’s first national oil-backed cryptocurrency available at that time. The country introduced the currency in an attempt to attract foreign investors and skirt U.S. and E.U. sanctions, as well as overcome catastrophic hyperinflation which is projected to hit 1,000,000 percent in 2018.

According to the Petro whitepaper, the cryptocurrency fully complies with Venezuelan legislation, though the opposition in the National Assembly publicly claimed that issuing Petro was illegal.

While some parts of the document lack fine details and others are not backed by any sufficient arguments, there are some clear economic use cases. Paying taxes and other settlements with state bodies would be at least 10 percent cheaper with the Petro, which is planned to be expanded into other payment markets in the future.

The whitepaper says that the Petro can be be easily converted into U.S. dollars and other currencies, which will help Venezuela in export trade. Still, there’s a possibility that it could be purchased with funds that were received illegally at crypto exchanges or privately, and then exchanged to oil that can be ‘laundered’ and documented to eventually be sold through above-board business practices in various jurisdictions.

SEC Smacks ICO Fraudster with $30,000 Fine, Lifetime Trading Ban

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The U.S. Securities and Exchange Commission (SEC) has issued an officer and director bar, a penny stock bar, and a penalty of $30,000 to a fraudulent ICO founder today.

According to the official press release, David T. Laurance was previously found guilty for taking part in deceitful security offerings.

Laurance’s LinkedIn profile shows that he is the president and CEO of oil drilling company Tomahawk Exploration LLC. He has worked at the company for over eight years. Laurence created “Tomahawkcoins” in June 2017 with a plan to raise $5 million in an initial coin offering (ICO). The project would then, he advertised, use the capital to drill ten wells in California.

However, the SEC claims that the ICO provided false information in their promotional statements. They “used inflated projections of oil production” and claimed that Tomahawk had already obtained leases for drilling on the sites. The firm also tried to portray Laurance as a principled individual by claiming that he had a “flawless background”.

The ICO wasn’t successful in raising enough money; however, the company set up a bounty program to trade Tomahawkcoins with online promotional services.

Robert A. Cohen, chief of the SEC’s Cyber Unit, said, “Investors should be alert to the risk of old-school frauds, like oil and gas schemes, masquerading as innovative blockchain-based ICOs.”

Both Laurance and Tomahawk were given cease and desist orders — they chose to avoid denying or accepting the claims. Furthermore, Laurance was permanently banned from working as an officer and a director under the officer and director bar, and from trading or owning stocks under the penny stock bar.

According to a recent study published by digital asset newsletter Diar, exit ICO scams have cost investors over $100 million. The highest position is held by Shenzhen Puyin Blockchain Group, a Chinese company, which was able to acquire $60 million from three different ICOs.

Following the recent developments, SEC published a warning for crypto investors today. The agency admonished investors to research the background of any individual who is selling cryptocurrencies.

The SEC also added that scammers often lure people into their projects by offering high returns on their investment. In order to combat this issue, the agency has created a search tool at Investor.gov which contains the details of various investment professionals. Another tool, SEC Action Lookup – Individuals (SALI), helps investors identify individuals who have been convicted by the SEC.

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Jamaica Stock Exchange to Introduce Crypto and Tokens Trading via Canadian Fintech Firm

The Jamaica Stock Exchange (JSE) has selected Canadian fintech company Blockstation to facilitate the trading of digital currencies and tokens on the JSE, according to an August 14 press release.

Upon implementation of the project, JSE will provide trading, quotes, execution, and settlement services for cryptocurrencies and tokens.

Kirk Brown, Head Trader for a broker member of the JSE, underlined the importance for investors “to be able to invest in digital assets through their traditional financial institutions.” Marlene Street Forrest, Managing Director of the JSE said:

“We are very comfortable moving forward based on the training and support provided by Blockstation, and because their trading platform incorporates familiar compliance rules to ensure a fair marketplace.”

Prior to the deal, five broker members participated in a live workshop with representatives from local regulators, while Blockstation completed beta testing in Jamaica with the participating institutions.

The JSE also signed a Memorandum of Understanding (MOU) with Blockstation, agreeing that the two organizations would collaborate in the future.

Incorporated in 1968, the JSE Main Market capitalization rose to over $1.19 trillion following the successful Initial Public Offering (IPO) of Mayberry Jamaican Equities at the end of July this year. The total number of companies listed on the exchange reached 74 this year, while the total number of securities is 107.

In the beginning of August, Germany’s second largest stock exchange, the Stuttgart Börse, revealed plans to develop a new platform for Initial Coin Offerings (ICOs) as well as a multilateral crypto trading venue. Alexander Höptner, CEO at Börse Stuttgart, said the exchange developed the platform in response to “demand from both retail and institutional investors for a regulated and reliable environment for trading with cryptocurrencies.”

Last month, the Malta Stock Exchange (MSE) announced its collaboration with digital asset exchange OKEx to build a new institutional grade security-tokens trading platform. The joint project is entitled OKMSX and aims to become a platform for digital asset exchanges with security expertise and client due diligence.

Trouble on the Horizon? What Last Weekend’s Ruckus Means for Bitmain’s IPO

Over the weekend, information surfaced that could suggest that mining giant Bitmain may be facing an uphill battle as it looks to launch an IPO on the Hong Kong stock exchange.

Newly leaked public information reveals that, in its pre-IPO presentation to investors, Bitmain provided insight into its cryptocurrency holdings, which shows that Bitmain unloaded most of its bitcoin (BTC) to accumulate bitcoin cash (BCH) in its stead. In a snapshot of a slide from the original presentation, the leftmost column titled “Digital quantity of money” shows Bitmain’s bitcoin supply decreased from 71,560 BTC to 22,082 from December 2016 to Q1 2018. Over the same period, its BCH holding increased to over 1 million coins.

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Samson Mow, CSO of Blockstream, pointed out that Bitmain has incurred half a billion dollars in losses through its BCH holdings over the last three months alone. Scrutinizing the company further, Mow pointed out that Bitmain chose not to disclose financial data for its Q2 inventory in 2018. The tweet by Mow brings to light that Bitmain reported $1.24 billion in inventory for Q1 2018, while it has not mentioned any numbers for Q2 despite already being well into Q3, raising speculation that Q2 was omitted because the company may have realized a loss between $600-700 million.

In a recent Medium blog post, a pseudonymous blogger by the name of Crypto Herpes Cat points out that these losses, and the lack of transparency surrounding its reporting, could have an impact on Bitmain’s forthcoming IPO.

Why This Matters

All this could spell concern for Bitmain’s current and potential investors, although some investors have still expressed continued support for the company despite the recent debacle.

A recent twitter thread by Vijay Boyapati, a software engineer at Peach Inc. and a prominent crypto blogger, argues that “Bitmain entered one of the worst trades of 2017” when it chose to support bitcoin cash over bitcoin, going on to state that the mining giant is sitting on a such a large supply of the cryptocurrency that “they have no ability to exit its billion dollar position in BCash without a complete collapse in its price.”

As the evidence from the pre-IPO presentation suggests, Bitmain could be holding 5 percent of the total supply of bitcoin cash at a time when the altcoin is falling below its all-time lows. With market conditions like these, price stability is fragile, making it difficult for a large holder of any cryptocurrency to offload a large number of coins without severely affecting the price. Given its stash of bitcoin cash, Bitmain could risk tanking the price even further, something that would obviously be against its own interests.

Another part of Bitmain’s business is also struggling thanks to increased competition from competitors like GMO, Avalon and Ebang, who have started producing more efficient chips than the 16nm ones that Bitmain’s S9 miner uses, according to Crypto Herpes Cat.

Market saturation and an overall decrease in demand for miners during the prolonged bear market has caused Bitmain, the largest Bitcoin mining hardware company, to incur what may be a substantial loss on its balance sheet. For instance, the antminer s9, Bitmain’s latest and most sophisticated ASIC, once sold for $3,500; now, it’s selling for $700 — a decline of over 80 percent.

The majority of Bitmain’s value, however, is derived from its treasure trove of crypto assets like bitcoin cash, as well as future cash flows from selling mining equipment. During the bull market that saw bitcoin rise to almost $20,000, the same speculative demand that drove prices and mining interest fueled the majority of Bitmain’s business. But since bitcoin’s price has retreated some 70 percent from its all-time highs, the demand for ASIC miners has decreased as well.

Through multiple funding rounds in 2017 and 2018, Bitmain witnessed its valuation balloon to $12 billion, and its IPO valuation has it figured upward of $40 billion.

Now, there is some speculation as to the motives behind Bitmain’s IPO, including suggestions that they may be providing a way for Bitmain to right the ship by offloading onto retail investors. Since Bitmain’s value was derived from its speculative business strategies, its IPO may be a way to sell part of its company at the high valuation they earned during the bull market, Crypto Herpes Cat suggests.

How Did Bitmain Get Here?

Bitmain’s support for Bitcoin Cash has lined up with its narrative since the original hard fork in August 2017. Jihan Wu, CEO and co-founder of Bitmain, has sat alongside proponents like Roger Ver in defending it as the future of Bitcoin and money.

More than this, as an unofficial continuation of Bitmain’s “BIP148 contingency plan,” Bitcoin Cash was effectively initiated by Bitmain, while Bitmain-affiliated mining pool ViaBTC realized the coin by mining its first blocks. Between ViaBTC and its other proxy mining pools, Bitmain supported and mined bitcoin cash from its inception, accumulating a large number on top of what it had already received during the fork.

Through its mining pools, Bitmain supported and mined bitcoin cash, accumulating a large amount on top of what it had already received as a result of the fork. Bitmain has also made substantial investments into projects supporting bitcoin cash, investing $3 million into a bitcoin cash-powered, digital advertising platform.

Bitmain has not responded to Bitcoin Magazine’s request for comment at this time.

Goldman Sachs, Wall Street Banks Sink $32 Million into Enterprise Blockchain Startup

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We may, as Lightning Labs CEO Elizabeth Stark said earlier this year, be entering a “bitcoin not blockchain” world, but the global banking cabal isn’t ready to capitulate on its support for enterprise blockchain products just yet.

Indeed, Axoni, an enterprise blockchain startup founded in 2013, has just concluded a $32 million Series B funding round headlined by a group of Wall Street’s largest financial institutions.

Announced on Tuesday, the funding round was led by Goldman Sachs and Nyca Partners and featured investments from major financial industry firms such as Wells Fargo, JPMorgan, Citigroup, and Franklin Templeton. The funding round also included more conventional blockchain investors, including Digital Currency Group, Andreessen Horowitz, and Y Combinator.

“Our strategic partners have been critical to our success so far; we are delighted to strengthen and expand those relationships with this financing as we continue to deploy Axoni’s technology,” said Greg Schvey, CEO of Axoni.

Axoni plans to use its new capital to power the development of its AxCore platform, which is intended to underpin the next generation of platforms that operate in the $11 trillion credit derivatives market. Toward this end, the firm plans to place a particular emphasis on building out AxLang, an Ethereum-compatible smart contracts scripting language designed to facilitate formal verification.

“The adoption of distributed ledger protocols in capital markets resembles the early days of adopting TCP/IP for distributed enterprise applications,” said C. Thomas Richardson, head of Market Structure and Electronic Trading Services at Wells Fargo Securities. “We continue to be impressed with Axoni’s ability to facilitate such adoption by identifying use cases that could benefit from blockchain technology.”

The firm has already signed a major partnership with the Depository Trust and Clearing Corporation (DTCC), which offers post-trade clearing and settlement services and processes $1.6 quadrillion worth of transactions annually. Forbes reports that the New Jersey-based DTCC has tasked Axoni with building it a blockchain-based distributed ledger to which it can migrate its Trade Information Warehouse.

In 2016, CCN reported that DTCC CEO Michael Bodson said that the advent of blockchain technology presented the firm with a “once-in-a-generation opportunity to modernize the post-trade environment.”

Previously, Axoni raised $18 million in a Series A funding round led by Wells Fargo and NEX Group, and the company has now raised a total of $55 million.

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Playboy Sues Canadian Blockchain Firm for Fraud and Breach of Contract

Beverly Hills-based Playboy Enterprises is suing Canadian firm Global Blockchain Technologies (GBT), claiming that it failed to integrate blockchain technology into Playboy’s online media channels, the Los Angeles Times reported August 14.

Playboy Enterprises reportedly filed a lawsuit in Los Angeles County Superior Court, accusing the Canadian company of fraud and breaching a contract, which the two companies drew in March.

Per the terms of the agreement, GBT would integrate the Vice Industry Token (VIT) on Playboy’s media sites. Playboy said that the blockchain firm not only failed to fulfill the requirements, but also omitted a payment of $4 million it promised in the agreement.

Now, Playboy is seeking compensation, the amount of which has not been disclosed. GBT dismissed the lawsuit as a “normal dispute” between two businesses, saying that the charge of fraud is “frivolous.” The company told the Los Angeles Times:

“Global believes it has a strong defense to the action and will be vigorously defending same.”

In March, Playboy first announced its plans to develop an online wallet that would enable customers to use crypto to pay for the company’s online media and support the Vice Industry Token. Later in May, GBT announced it was working on the Playboy wallet, including an interface to various platforms.

VIT raised $22 million in Ethereum in the first 24 hours of its Initial Coin Offering (ICO). The blockchain-powered platform for the adult industry rewards viewers on sites with VIT for watching content.

The adult entertainment industry has been gradually adopting digital currencies. In April, streaming site Pornhub partnered with cryptocurrency Verge (XVG) to accept the coin as a payment option for Pornhub purchases. Pornhub Vice President Corey Price said in a press release:

“History has proven that the adult entertainment industry plays a critical role in adoption for innovative technology. We saw that with VHS, Beta Max, credit card payment icons and, most recently, VR goggles. We expect to see widespread adoption of crypto and blockchain in short order.”

Wyre Adds MakerDAO Stablecoin Pairing for Global Money Transfers

Blockchain money transfer company Wyre has announced a partnership with MakerDAO, creator of the Dai stablecoin, to offer Dai as part of a fiat-crypto trading pair in more than 30 countries across the world including the U.S.

Under the new framework, Wyre’s regulated money transfer infrastructure will be used to facilitate the instantaneous movement of “fiat currency directly into and out of Dai,” thereby removing the unpredictability of “speculative cryptocurrencies like Ethereum and Bitcoin” and benefiting from the speed and security of the blockchain, a press release for the announcement states. The arrangement is designed to give customers a quick and secure money transfer protocol that offers full regulatory compliance.

“Pairing Dai to Wyre’s trading engine and global fiat on-ramps and off-ramps will enable nearly-instant movement of funds across borders. By decreasing the amount of time it takes to clear payments, businesses can increase the number of payment cycles, therefore increasing revenue. Remittance platforms or crypto services can also settle instantly in Dai rather than using international wires which can take up to 48 hours,” the release continues.

Through the partnership, Wyre now offers prospective users an Access Point Interface (API) to connect their bank accounts to the blockchain through Dai, while taking care of KYC/AML compliance and onboarding concerns. Using the API, users can now trade Dai against many of the world’s major fiat currencies and cryptocurrencies including USD, GBP, EUR and more.

Speaking with Bitcoin Magazine, Rune Christensen, CEO of MakerDAO, said the alliance would be beneficial to API developers who can leverage Wyre’s experience as a regulated money service business and focus on creating access from local currency to Dai to fulfill global transactions.

“Through this partnership, we are now helping API developers leverage Wyre’s experience in banking and compliance so they can take advantage of the stability of Dai stablecoin to build and engage their communities, cutting through the red tape, and leaving the off-chain complications to a regulated money services business,” he stated.

“As it relates to the supply chain, organizations that may have been hesitant to engage in crypto transactions can now go directly from fiat currency into Dai stablecoin without having to take the middle step of converting fiat to ETH and then to Dai.”

For his part, Wyre CEO Michael Dunworth indicated that the partnership offers users around the world a cost-effective means of breaking through bureaucratic red-tape in a compliant manner. In his own interview with Bitcoin Magazine, he said, “We’re committed to developing partnerships with leaders like MakerDAO to enable the blockchain ecosystem to evolve at a faster pace.”

Since its launch in 2017, Dai has maintained its advertised USD valuation, which has earned it the respect and esteem of the crypto community. Unlike other popular stablecoins like Tether and TrueUSD, which are backed by fiat, Dai is crypto-collateralized, backed by coins like ether and bitcoin.