NKB Group’s Blockchain Market Update – NKB Group

7 January 2019 / #42

SUMMARY

The total Crypto Market grew by almost 33% and overall volume has spiked by 80% since the 17th December 2018. [BTC] is up by 7.6%, Ethereum is up by 14.9%, XRP is up by 4.9%, and EOS is up by 10%. The best performers among top-40 crypto were Litecoin (26%), Tron (20%) and Cardano (18.7%).
2018 SEC Recap
New York Forms Crypto Task Force
Facebook Works on Stablecoin
Chinese Miners in Delay with IPO
GMO Quits Manufacturing of Miners
Italy Forms Blockchain Group
Tether has Sufficient Accounts According to Bloomberg
DX.Exchange to Digitize US Stocks Market
Tokenized Securities on EOS Blockchain
Tokensoft Partners with Coinbase for Security Token Custody

MARKET MOMENTUM

Since our latest edition (17th Dec), digital assets have bounced from the yearly lows of $104 billion back up to $146 billion on 24th Dec, representing a 40% spike in the total crypto market cap. From the beginning of 2019, digital assets were ranging around the $130 billion mark, until yesterday’s break out from an ascending triangle which resulted in a 5% gain, pushing the total crypto market price towards $138 billion. Volume has been bouncing in the $10 to $24 billion range, with almost $18 billion recorded this morning. Bitcoin dominance has fallen by 3.5% to 51.5%, with the price tag back above the $4,000 level, a 25% increase since the level seen 3 weeks ago. Ether is back as the second largest asset with an 80% gain since our last update, and is currently sitting at $156. XRP, the third largest asset is up 27.5% at $0.37.

Figure 1. The performance and market capitalisation of top-30 cryptocurrencies (by MktCap)

Source: coinmarketcap.com, as of 7th January 2019, 09:00 AM GMT

Figure 2. Worst performing digital assets* with Market Cap (7 days)

Source: coinmarketcap.com, *) MktCap>=$50m

Figure 3. Best performing digital assets with Makret Cap (7 days)

Source: coinmarketcap.com, Mkt Cap >=$50m

Figure 4. Top-30 digital assets

Source: Coinmarketcap.com, NKB Research *as of 7th January 2019, 10:30 GMT

REGULATORY NEWS

Two Congressmen Want to Exclude Crypto from Securities Law

The Token Taxonomy Act, proposed by congressmen Darren Soto and Warren Davidson, would look to exclude cryptocurrencies from securities laws.

SEC Brought 90 Crypto Cases over The Past 2 Years

According to a report from the WSJ, the SEC and state regulators brought more than 90 crypto-related cases over the past 2 years, which resulted in the recovery of $36 million of investor money.

FCA Opened 67 Inquiries into Cryptocurrency Projects

As of 12th November, the UK’s Financial Conduct Authority has opened inquiries into 67 crypto firms of which 49 have been closed, leaving 18 businesses under investigation.

New York Forms Crypto Task Force

New York State is creating a task force to study cryptocurrencies and blockchain technology in order to provide proposals on how the state may best regulate, define and utilize cryptocurrencies as well as providing general overviews of the space.

2018 SEC Recap

Law firm Perkins Coie have created a comprehensive recap of the busy year at the SEC.

CRYPTO MARKET NEWS

NKB 2018 Recap

A quick rundown of the key events we saw in 2018 as well as our expectations and outlook for 2019, by Ben Sebley and Jamie Farquhar from the NKB team.

Facebook Works on Stablecoin for WhatsApp Transfers

Facebook is developing a stablecoin which will let users transfer money on its WhatsApp messaging app, initially focusing on the remittance market in India, according to Bloomberg.

Chinese Miners in Delay with IPO

Due to the general market conditions in 2018, the Hong Kong Stock Exchange is reluctant to approve the IPO applications of Chinese mining equipment manufacturers.

Tether has Sufficient Accounts According to Bloomberg

According to a report conducted by Bloomberg, controversial stable coin Tether is most likely backed by equivalent USD deposits.

Over 4,800 Pump & Dump Schemes Identified

Researchers from the University of New Mexico have identified over 4,800 pump and dump schemes from Telegram and Discord channels over a six month period in 2018.

Bitfinex Launches Margin Trading for Tether

Cryptocurrency exchange Bitfinex has launched margin trading for the USDT/USD pair, which will enable its users to hedge the exposure taken on stablecoins.

Additional 2 Million Tokens were Found in BTCP

Crypto analytics platform CoinMetrics, has revealed an additional 2 million tokens ($3.9 million) were secretly minted to claim a total supply of 20.4 million. The Bitcoin Private team has confirmed this and is currently investigating whether additional coins were transferred to an exchange or used elsewhere.

GMO Quits Manufacturing of Miners

Japanese internet company GMO will no longer develop, manufacture and sell cryptocurrency mining machines after extraordinary losses of $218 million in Q4 2018.

Ledger and Trezor Weak Spots Exploited

Researchers from wallet.fail demonstrated a series of attacks against hardware wallets Trezor and Ledger, showing that even hardware can be compromised.

Italy Forms Blockchain Group

The Italian Ministry of Economic Development has brought together 30 experts to develop the nation’s blockchain strategy.

WSJ Reports ICO Plagiarism

The Wall Street Journal has analyzed 3,300 ICOs and found that 16% of them showed signs of plagiarism.

Past Weeks in Funding

Lightning payments platform OpenNode raised $1.25m from Draper Associates; DCG and Peter Thiel are backing Layer1 crypto fund with $2.1m; STO issuance operator Abacus raises $2m from YC and Coinbase; Nomics, crypto trading data firm, raised $3m from DCG, Coinbase and others in Series A round; $182.5m raise for Bakkt; and Waves raised $120m to roll-out a private version of its blockchain.

SECURITY TOKEN NEWS

Tokensoft Partners with Coinbase to Offer Security Token Custody

Security Token Offering platform Tokensoft announced a partnership with Coinbase to provide a custodial solution for its clients.

Tokeny Launches T-REX Standart

Tokenization platform Tokeny officially released open source security token standard T-Rex, a token for regulated exchanges designed to allow issuance and trading in a compliant manner.

Medici Ventures Buys 29% Stake Using Blockchain for Transfer

A subsidiary of overstock.com, Medici Ventures, has acquired a 29% stake in Chainstone Labs via a $3.6 million security token transfer on Ravencoin blockchain. Chainstone Labs is focusing on custodial and management services in the security token space.

Issuance and Primetrust Partnership

Another security token issuer, Issuance, has announced a new partnership with crypto custodial firm Prime Trust.

STO Global-X Releases STGX

Singapore-based STO Global-X is launching an end-to-end security token platform, STGX, designed for the issuance, management and trading of security tokens.

Tokenized Securities on EOS Blockchain

The first tokenized securities protocol called Financial Securities Protocol is coming to the EOS blockchain in order to “realize high throughput scalable financial applications”.

DX.Exchange to Digitize US Stocks Market

Estonian-based crypto startup DX.Exchange, is launching a trading platform allowing its clients to purchase 1:1 backed real world stocks, entitling them to the dividends that the stocks are worth. The EU regulated platform is initially offering tokenized shares of Google, Apple, Amazon, Facebook, Microsoft, Tesla and other tech companies.

Published at Mon, 07 Jan 2019 20:14:20 +0000

July 12, 2017

Study: Late 2013 Bitcoin Bubble Fueled by Suspicious Trading Activity on Mt. Gox

According to a recent study by researchers from the University of Tulsa and Tel Aviv University, the massive increase in the bitcoin price in late 2013 was caused by suspicious trading activity on the now-defunct Mt. Gox bitcoin exchange. The study, which is titled “Price Manipulation in the bitcoin Ecosystem,” indicates that 600,000 bitcoins were acquired by agents who did not pay for them, and the bitcoin price rose by an average of $20 on days when the suspicious trading activity took place.

“Based on rigorous analysis with extensive robustness checks, we conclude that the suspicious trading activity caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months,” the study states.

At the center of the study is the infamous Willy bot that was first publicized on a Wordpress blog back in May of 2014.

The paper details the data used for the study, identifies the suspicious trading activity and notes that these sorts of manipulative practices may still be possible today, especially in the altcoin markets.

The Data Used for the Study

This study regarding price manipulation in the bitcoin markets is based on a data leak of CSV files that included the trading activity on Mt. Gox from April 2011 to November 2013. The researchers behind the study then supplemented that data with more information from bitcoincharts.com.

“We performed additional sanity checks of the data utilizing publicly available historical Mt. Gox trading data from bitcoincharts.[com],” reads the report. “We are confident that the data are high-quality.”

Suspicious Trading Activity

In the leaked data, the report notes that there are suspicious accounts in which the country and state fields are filled in as “??” Many red flags are then found upon further inspection of these accounts.

In the case of one account dubbed “Markus,” the report states that no trading fees are paid and the prices on trades are seemingly random.

“In the end, we have concluded that Markus did not actually pay for the bitcoins he acquired; rather, his account was fraudulently credited with claimed bitcoins that almost certainly were not backed by real coins,” states the report. “Furthermore, because transactions were duplicated, no legitimate Mt. Gox customer received the fiat currency Markus supposedly paid to acquire the coins.”

According to the study, Markus acquired a total of 335,898 bitcoins in the 225 days the account was active.

Another entity noted by the study is known as “Willy”; however, Willy controlled many different accounts. According to the study, Willy appeared roughly seven hours after Markus became inactive.

The data cited by the report indicates that Willy would purchase 10–19 bitcoins at a time until an amount equal to $2.5 million worth of bitcoins had been purchased. Willy would then make a new account and repeat the process.

The study notes that there are indications that the owner of the Willy accounts was a Mt. Gox insider. For example, Willy was able to trade while the Mt. Gox API was offline, and the user ID numbers used by Willy were high for the time period they existed.

The study on price manipulation in the bitcoin ecosystem indicates that Willy acquired 268,132 bitcoins in exchange for $112 million. Much like Markus, Willy did not actually pay for his bitcoins.

“Hence, together, these unauthorized traders ‘acquired’ around 600,000 bitcoins by November 2013,” says the study. “Perhaps unsurprisingly, this is very close to the number of bitcoins (650,000) that Mt. Gox claimed to have lost when it folded in early 2014.”

According to the study, Markus accounts for 12 percent and Willy accounts for 6 percent of the total trade volume on the four major bitcoin exchanges on the days they were active.

In addition to the possibility of an inside job, the study also notes that an early bitcoin adopter could have artificially driven up the bitcoin price via a security vulnerability on the exchange in an effort to increase the value of his or her own holdings.

“We do not know for sure which, if either, of these scenarios reflect what actually happened,” says the report. “But that is largely beside the point. Our goal is to demonstrate that these fraudulent trades did in fact significantly impact the price of bitcoin.”

According to the New York Times, former Mt. Gox CEO Mark Karpeles admitted to operating the Willy bot in a Japanese court on Tuesday.

Altcoins Open to Manipulation

The researchers behind the study indicate that the importance of price manipulation in digital asset markets will increase as this technology continues to go mainstream. The study indicates that many altcoins are open to this same kind of price manipulation right now.

“Similar to the bitcoin market in 2013 (the period we examine), markets for these other crytocurrencies are very thin,” says the report. “Our analysis suggests that manipulation is quite feasible in such settings.”

Civic CEO Vinny Lingham shared a similar sentiment during a recent talk where he compared altcoins to pump-and-dump penny stocks. “With altcoins, [pump-and-dump schemes] are super easy,” said Lingham.

“Regulators may want to begin taking an active oversight role as the bitcoin ecosystem becomes more integrated into international finance and payment systems,” concludes the study.

The post Study: Late 2013 Bitcoin Bubble Fueled by Suspicious Trading Activity on Mt. Gox appeared first on Bitcoin Magazine.