The world’s in a pretty uncertain spot right now. Some countries have done well to curb the pandemic but others have much worse to come. This has taken a huge toll on people’s lives and the economy, and almost every asset class is in a sorry state.
Crypto looked to be there too with the price tanking quickly since the virus went global, but the past week or so - and especially the past few days - has shown us that investor confidence is returning. Bitcoin is now over $7,000 and that’s probably the most uplifting news I can offer for the day.
But other things have happened too, and I’ve covered them below.
1. Institutional Money Behind $7K Bitcoin Rally?
Today’s first major story unsurprisingly has to do with Bitcoin’s rally past $7k. It’s been hanging at $6k levels since it recovered from dipping to $4,600-ish in mid-March.
If there’s anything to take away from this, it’s that it will make many people happy. But it might be worthwhile to examine this more closely, in order to discover where this rally might have come from. This is especially true given that the halving will be here soon - and historically that has always influenced Bitcoin’s price.
One theory that’s making the rounds is the fact that a rise in CME futures volumes could be behind this rally i.e. an institution-driven rally. Large transactions were made on the Bitcoin network towards the end of March and the first few days of April - which coincides with the time that CME futures grew in volume, on April 1 and 2.
There’s never a guarantee as to why the market moves as it does - the evidence is not so compelling that we can say with full certainty that institutional demand has sparked this price surge. Still, it’s a good sign when it comes to the larger picture - there is still strong institutional demand in these fragile times that we are in.
That is the really interesting point. Institutional interest has been surging over the past year - there are several reports on this and it needs little retelling - and it is certainly encouraging to see these investors continue to accumulate during what seems to be the end of a bear phase.
2. Will COVID-19 Spark Central Bank Digital Currencies?
Cash use and COVID-19 - search intensity
Central Bank Digital Currencies, CBDCs for short, have been the topic of the year - only out-discussed by DeFi perhaps. It’s been a solution that’s gained increasing traction among governments all across the world, many of whom have already directed its implementation.
The Bank of International Settlements (BIS), which just released a report titled ‘Covid-19, cash and the future of payments’, has come out with another interesting suggestion, stating the COVID-19 pandemic could expedite the growth of the market.
The researchers state that the extraordinary circumstances of a lockdown - people forced to stay indoors and avoid physical contact - has spurred a change in the way we think about cash. This is partially due to the physical exchange of cash, which is avoided now, and the means to make payments for various goods and services via wallets or the web.
In other words, COVID-19 has inadvertently pushed development and growth of digital payments solutions - something which bodes well for CBDCs. The report concludes with the following:
In the context of the current crisis, CBDC would in particular have to be designed allowing for access options for the unbanked and (contact-free) technical interfaces suitable for the whole population. The pandemic may hence put calls for CBDCs into sharper focus, highlighting the value of having access to diverse means of payments, and the need for any means of payments to be resilient against a broad range of threats.
What with the amount of effort that countries are putting into CBDCs, we know they’re happening sooner than later. It seems like that sooner is going to arrive much sooner now.
3. Ex Texas Pastor Defrauds $500K by Running Water-Backed Cryptocurrency
The charges made against the two accused.
The United States Securities and Exchange Commission has charged a former Texan pastor and his wife for their involvement in an “alkaline water-backed cryptocurrency” called TeshuaCoin.
The bizarre scam targeted African Americans, which resulted in the two accused - Larry Donnell and Shuwana Leonard - defrauding the victims of $500k by promoting a cryptocurrency that was purportedly backed by alkaline water, selling “worthless stock certificates” and touting a bitcoin mining operation that did not exist.
The scam began its operation in 2017, with the two accused telling victims that TeshuaCoin was a fully functional cryptocurrency, and affected about 500 investors.
Teshuater, the registered name of the company, cannot issue stock, as it is not a corporation. Donnell sold stock certificates anyway, and told investors that they would see an increase in share price and become part owners.
The official filing also mentions the project’s whitepaper, where Teshuater said that it wished to raise $20 million and explained how it would use investors’ funds.
In any case, that’s another case of fraud done and dusted, with reparations hopefully made soon to all those that were affected.
4. Bitcoin Halving in 38 Days - Why is it Such a Big Deal?
Note Bitcoin's performance following the halvings.
Even the freshest of market entrants would be aware of the halving - even non-crypto media outlets are covering the halving and its implications, as these outlets slowly begin to recognize cryptocurrencies as a legitimate asset class.
The halving itself is inching ever closer, with the projected duration being 38 days. That’s a little over a month, and a month passes quickly in the crypto world.
Historically, the halving has been a monumental occasion for the network. Occuring at roughly every 4 years, and resulting in the miners’ block rewards being halved (and therefore lowering supply), both of the two halvings that have occurred resulted in a rally in Bitcoin’s price in the months that followed.
The upcoming halving is set to reduce the block rewards from 12.5 BTC to 6.25 BTC. Over the course of the past two halvings, we’ve seen Bitcoin’s price steadily head up (Bitcoin’s bottom has improved year on year.) The fact that it will take about roughly $12,000 (as opposed to about $6000 now) to mine 1 BTC also convinces some people that Bitcoin’s price will go up.
Besides the price - which if history is anything to go by will increase - there is one other thing to make note of following the halving: how will it affect miners?
Miners are going to be rewarded less and they’re going to have to keep up with the increasing demands of the network. This will be far more significant (if less spectacular) than the price itself, which will no doubt undergo ups and downs in the months following the rally.
This halving will prove to be the most interesting one yet, as we live in a time where cryptocurrencies are not too far away from being mainstream and the need for digital money being more evident than ever.
5. Binance, Bitmex, KuCoin, Block.one and Others Facing Lawsuits
Early reports termed it a "Red Wedding"
In what is probably the hottest news of the week besides Bitcoin’s price action, 11 major exchanges and cryptocurrency companies, are facing lawsuits related to wholesale securities violations. The cases were filed in New York by Roche Freedman, a firm which is involved in a case against Craig Wright.
These entities include Binance, BitMex, KuCoin and Block.One, and specific projects include Civic, Status, the Tron Foundation and Quantstamp. Some major names in the space were also listed by name, including Binance CEO Changpeng Zhao, EOS co-founder Dan Larimer and Block.One CEO Brendan Blumer.
What’s interesting is that these lawsuits target multiple companies that operate outside the United States, meaning that they will be tried under the Hague Convention.
The claims made in the lawsuit are that these companies were involved in the sale of unlicensed securities, as well as engaging in market manipulation. The specific tokens that the lawsuit referred to as being unlicensed securities include EOS, BNT, SNT, QSP, KNC and OMG, among others.
There are several legal hoops to jump through and things will be slow with COVID-19, but it should be an interesting case to watch, as it may have knock-on effects and influence other cases.