Wednesday, July 31 — crypto markets are seeing widespread green, with Bitcoin (BTC) breaking back above $9,700 and many large market cap altcoins seeing solid gains of between 3 and 9% on the day.
Despite trading in a lower price range since dropping back to a four-figure price point in a recent corrections, BTC is today up a solid 2.4%, bringing it to $9,717 by press time.
This mild uptick nonetheless stops short of bringing the coin back into the green on its 7-day chart, where Bitcoin is still reporting a fractional 0.7% loss. On the month, losses are starker, topping 8%.
Yesterday, Peter Tchir — a former Executive Director at German multinational investment bank Deutsche Bank — argued that Bitcoin is an indicator of hidden geopolitical tensions, pointing to the coin’s momentous performance this May at a time of fraught trade talks between the United States and China.
Also this week, erstwhile Bitcoin bear and CNBC host Joe Kernen predicted that the top coin could hit $55,000 — a 500%+ price surge — by the time of its next halving in May 2020.
Top altcoin Ether (ETH) — which celebrated its fourth birthday yesterday — has posted a 1.9% to trade around $212 by press time. In corrections earlier this week, the coin had circled perilously close to the round $200 mark, but has since recovered ground and is just slightly in the red, at 2.2%, on its 7-day chart. On the month, however, Ether is down over 18%.
XRP is reporting a 2.7% gain on the day, while among the remaining top ten coins several alts are seeing stronger upward momentum: Bitcoin Cash (BCH) is posting a 7.5% gain on the day, Litecoin (LTC) is up 3.6% and Binance Coin (BNB) is up 4.1%.
In the context of top twenty coins, Tezos (XTZ) is outstripping all other assets, seeing a 24% gain on the day following news of the token’s listing on major United States crypto exchange Coinbase. At press time, XTZ is trading at $1.24
Still among the top twenty, strong gains are being reported by Chainlink (LINK) — up over 9% — as well as by NEO (NEO), IOTA (MIOTA) and Cosmos (ATOM), all of which are up by 4-5%.
Total market capitalization for all cryptocurrencies is at $261,434,827,781 at press time, according to Coin360 data.
Dominating the crypto headlines this week is the hearing devoted to examining regulatory frameworks for cryptocurrencies and blockchain held at the United States Senate Banking Committee. Cointelegraph reported live on the most important developments during the hearing as it unfolded.
Yesterday’s Committee hearing notably follows upon earlier hearings in mid-July that had examined the regulatory hurdles surrounding Facebook’s Libra.
Despite the lack of decisiveness in the bitcoin market following the dominant crypto asset’s abrupt drop from $14,000 to $9,500, many analysts – even bearish ones – generally remain confident that the bitcoin price is heading towards a new record high in 2020.
On CNBC’s Squawk Box, as CCN reported, prominent news anchor Joe Kernen emphasized the imminence of the next halving of the Bitcoin blockchain protocol, suggesting that it could act as a major catalyst for the asset over the medium to long term.
Bitcoin price should surge as one crucial event disrupts supply & demand ratio
In recent years, the bitcoin price has been primarily driven by supply and demand from the market. As the market capitalization of the asset grew, the impact of news and events have started to lessen.
The block reward halving of bitcoin, which occurs approximately every four years, is expected to have a fundamental effect on the circulating supply of bitcoin, altering the rate at which new BTC are mined.
On the Bitcoin blockchain protocol, users mine BTC to secure transactions and process payments using mining equipment and electricity. In return for the consumption of resources, miners are rewarded with BTC, which then is sold, primarily through over-the-counter (OTC) markets.
During or around May 2020, the amount of BTC miners receive for processing transactions on the Bitcoin blockchain protocol will decline by half, leading to a decline in the inflow of BTC into the global market from miners.
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“With what we produce of gold every year, it would take 62 years to produce that much gold. If you do the same kind of analysis using bitcoin or silver or anything, you can come up with some of these flow metrics that are highly correlated. Silver I think is 22 years and gold is… and in the next halving, bitcoin, all of the sudden, gets close up to where gold is…. we will see anyway.”
Due to the block reward halving and other technical indicators, technical analysts who remain bearish on the short-term trend of bitcoin have stated that in the long-term, the trajectory of the dominant cryptocurrency is likely to be positive.
OB1, the developers behind the online decentralized marketplace and currency trading platform OpenBazaar announced a mobile counterpart called Haven.
Haven allows users to buy and sell goods and services directly with each other, using cryptocurrencies, without relying on middlemen who take a cut of merchants’ transactions or gather shoppers’ data.
The app is organized into four sections: shopping, social, chat, and a non-custodial multi-wallet. For all features of the peer-to-peer network, user information is stored locally and protected with end-to-end encryption, meaning only the parties involved in the sale or conversation are able to see the details.
Since OB1 launched its 2.0 of OpenBazaar, 250,000 nodes joined the permissionless network. Jenn Cloud, OB1 communications lead, said “there is a core user base of several thousand who frequently use the software and many more are casual users.” A substantial proportion of the “long-lasting nodes” are merchants.
“We’ve heard many stories from merchants about finding OpenBazaar a refugee from the high fees, restrictive terms and conditions, and poor treatment of merchants on eBay and Amazon.”
The app has many of the same features as OpenBazaar, but does not support P2P cryptocurrency trading. Additionally, dispute moderation is only supported by the desktop client.
The social feature is new and enables users to easily communicate with each other. Importantly, it is “not connected to transactions or any other activities on the network and will never post anything automatically,” said Cloud.
Like OpenBazaar, Haven will support BTC, BCH, ZEC and LTC. The representative said plans for a previously reported native token, OBC, are currently on hold.
Looking forward, however the team plans to add Ethereum support. Also, though “no firm plans have been made by the OB1 team… several in the OpenBazaar community have begun work to see if it’s possible to support Monero,” said Cloud.
Haven is available in the Apple App Store and Google Play. This week, the company is offering special deals, such as fifty percent off select electronics and Haven store gift cards, posted in the app “at undisclosed times.”
OB1 has raised $9.25 million to date from investors including Union Square Ventures, Andreessen Horowitz, OMERS Ventures, BlueYard, Bitmain, Digital Currency Group, and venture capitalist William Mougayar.
Rival manufacturers of blockchain smartphones, Samsung and Pundi X, appear to see the benefits of working together on crypto adoption.
Announced by Pundi X in a blog post on Monday, the firms have entered a symbiotic relationship regarding their wallet tech, with Pundi X integrating with Samsung’s Blockchain Wallet and making its XWallet available to the Galaxy S10 phone’s blockchain app options.
“This presents a unique opportunity to push blockchain technology and blockchain-based digital assets into the mainstream, reaching the millions of Samsung smartphone users around the world,” firm says in the post.
Pundi X claims the news makes it the first fintech app in the S10’s blockchain ecosystem.
S10 users adding XWallet to the Samsung Blockchain Wallet will be able to move cryptocurrencies between the two apps. Pundi X suggests that users can use Samsung’s wallet to store cryptos securely, “like a savings account,” and moving them to the XWallet “checking account” for use in payments.
Pundi X added that, with XWallet recently becoming available via XPOS – the firm’s blockchain point-of-sale device – more payment options will be on offer for S10 users as a result. XWallet is also connected with XPASS, Pundi X’s NFC-enabled crypto payment card product.
The firm said:
“The XWallet’s integration with the Samsung Blockchain Wallet thus makes Pundi X payment ecosystem available to a much wider audience, allowing the Samsung Galaxy smartphone users to not only store their ETH securely but also transfer to XWallet and spend it in a variety of shops, opening their doors to the new generation and their preferred cryptocurrencies.”
Samsung launched its S10 flagship phone back in March, revealing a bold blockchain play that saw it offer the crypto wallet alongside decentralized apps (dapps), merchant payments and other features such as blockchain signing.
Details of Pundi X’s device were aired at the Mobile World Congress conference in Barcelona in February and a launch is expected later this year. The prototype XPhone is said to be able to make callsover a blockchain.
The cash-counting machines were softly buzzing in an office with floor-to-ceiling windows overlooking Moscow’s landmarks.
“Hear that sound?” asked the head of an over-the-counter (OTC) cryptocurrency trading desk — let’s call him ‘Oleg’ — who requested his real name and company be withheld. “You can hear it 24/7 in here.”
Business is brisk thanks to a constant flow of Chinese merchants who come in daily with heavy bags of cash. Oleg said his OTC desk sells about $3 million worth of crypto every day. Most of it usually goes to China. But what’s perhaps most surprising is which crypto.
Only 20 percent of Oleg’s sales are in bitcoin, the oldest cryptocurrency with the largest market capitalization. The other 80 percent is in the dollar-pegged token known as tether, or USDT.
Tether’s best-known application is allowing crypto traders to move money between exchanges quickly to take advantage of arbitrage opportunities. But according to several Moscow OTC traders, it has at least one real-world use case – as the go-to remittance service for local Chinese importers.
The total volume of USDT purchased by Chinese businesses can reach $10 million to $30 million daily, these traders said.
“They accumulate a lot of cash in Moscow and need tether to transfer it to China,” said Maya Shakhnazarova, head of OTC trading at Huobi Russia, the Moscow office serving high-roller clients of Singapore-based exchange Huobi Global.
It’s a simple process.
“A client comes with cash, we register the price at exchanges, when we agree on a price, we make a deal,” Shakhnazarova told CoinDesk. “The client hands over cash and a wallet address, the seller sends USDT to the wallet.”
Why tether? It has the usual advantages of crypto – no limits on how much money can be sent or where – without the volatility that makes most coins infeasible for moving millions across the border daily.
Despite longstanding questions about USDT’s purported dollar backing, exacerbated by the New York State Attorney General (NYAG) court case against the issuing company Tether, the stablecoin usually trades around $1.
The tether-for-rubles purchases often take place in offices like Huobi’s in the steel-and-glass skyscraper district of Moscow City.
“There are a lot of OTCs here in Moscow City, a bunch of offices in every building, and the volumes for them all can reach several dozens of millions of dollars a day. It’s all paid for in cash,” Shakhnazarova said.
Tether’s killer app
Chinese grey-market importers used to rely on bitcoin before the 2018 bear market, another OTC dealer, Roman Dobrynin, told CoinDesk. As the price was ever-growing, merchants and the intermediaries helping them buy crypto could make some extra money along the way.
But since the beginning of 2018, hoping that your bitcoin will still be worth the same or more at the end of the transfer became too risky.
“As the price was going down, tether became much more convenient to use,” said Dobrynin. “China is totally reliant on USDT, they trust in it a lot, plus it’s very liquid.” His own clients are mostly Chinese, and they usually find him by word of mouth, connecting via Telegram.
To buy or sell USDT for dollars from Tether itself, a trader must be verified through the company’s know-your-customer (KYC) process. However, since the token runs on top of public blockchain networks (bitcoin, ethereum and tron), anyone can receive or send it, and secondary trades are unrestricted.
Tether did not respond to requests for comment by press time.
Back in China, the merchants can exchange USDT for fiat easily, even though the People’s Bank of China banned fiat-to-crypto spot trading in September 2017, forcing the exchanges to move out of the country and limiting trading to crypto-to-crypto pairs.
Chinese traders who need to liquidate crypto assets into Chinese yuan can still go to an OTC market maker, such as those registered on exchanges like Huobi and OKEx, to get matched with buyers and send them crypto after receiving a wire transfer via a bank, AliPay or WeChat Pay.
Critics of Tether have long questioned whether the stablecoin was fully backed 1:1 with dollars, as the company long insisted. The NYAG case revealed that Tether had loaned a big chunk of its capital reserves to Bitfinex, an exchange with overlapping management and owners, leaving the coin only 74 percent collateralized by cash and equivalents.
None of this seems to faze the Moscow traders or their Chinese clients.
“Nobody actually cares if tether is backed or not,” says Konstantin Plavnik, chief operating officer of Moscow-based crypto derivatives exchange Xena. Confidence in Tether’s solvency relies on long-time habit and convenience: this market needs tether, so tether is trusted.
OTC traders also point out that USDT’s daily volume exceeds its supply in circulation several times over, which indicates that people turn the token around multiple times during the day. For example, according to CoinMarketCap, on July 29, the 24-hour volume of USDT was recorded at $17.5 billion, while the total supply was just around $4 billion.
The turnaround of tether is fast, so for the merchants using the token for remittances, whether it’s worth something or not matters only within one day. Large batches of USDT get transferred to China overnight and then exchanged for yuan, crypto entrepreneurs in Moscow told CoinDesk.
“USDT will stay propped by the power of habit and trust of its users,” said Vladislav Bulochnikov, the head of product at crypto wallet app provider Chatex. “Even if it loses half of its backing — it’ll still be out there.”
Skirting capital controls
Stepping back, the Chinese government maintains strict capital controls, limiting the amount of foreign currency anyone can buy or sell to $50,000 a year. People can apply for an additional quota, but still the amount of currency they can buy and sell will be limited. In this situation, some Chinese have opted to use crypto to move money across the border, Bloomberg reported in 2017.
The fact that Chinese merchants bringing cheap goods to Moscow’s shopping malls use crypto to move money around was all but officially recognized by the Russian authorities last year.
Several large malls in the city account for around $9.5 billion of unregulated cash flow monthly, and most of the merchants are from China, said Yuri Polupanov, the Bank of Russia’s head of financial monitoring and currency control, during an event hosted by Thomson Reuters in Moscow in April 2018.
These malls, located inside huge warehouses on the outskirts of Moscow, host multiple retail stands, selling mostly clothing, usually for cheap and for cash. They are shopping Meccas for people who can’t afford to spend much on their wardrobes and avoid even mass-market chain stores.
“We see most of the revenue turned into cryptocurrency, which is not reported in any way at the moment,” Polupanov said at the Thomson Reuters event, according to the RBK news agency. “We see simultaneous transfers of that cryptocurrency via email to the homeland of those merchants and producers, and the following exchange of it for the local currency there.”
According to a March 2019 report in the Russian newspaper Novaya Gazeta, cash would be received at places like a hotel called “Druzhba” (“Friendship” in Russian), located next to the shopping mall named “Moscow.” Then this cash would be swapped for crypto and sent to Hong Kong.
The wholesale trade offices at Druzhba could be turning around $10 million to $12 million daily, Novaya Gazeta’s sources estimated.
The operations were ceased for a short time after police raided the hotel, along with the malls mentioned by the Bank of Russia, in March of this year.
Small crypto desks are still functioning at those malls, OTC trader Dobrynin believes, though they likely don’t provide the volumes merchants need.
Outside traders are often afraid to go to those areas to make deals as things can get dangerous there, he said, explaining: