Markets tumble and regulatory pressure increases

Leo Zhang

By Leo Zhang

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Global Picture

As the market begins to comprehend the Coincheck exchange hack in Japan, regulators are beginning to assert dominance. This week, Binance officially closed its operation in mainland China.
A series of negative news wiped out $157 billion from cryptocurrency market's all-time-high. Coincidentally, the U.S. stock market had one of its worst day since 2016, as the surge in bond yield increased the expectation that Fed might accelerate its rate-hike schedule.

Editor's Note

Despite recent turbulance, both the S&P 500 and cryptocurrency market capitalization are still up 20 percent and 22x respectively, compared to a year ago. Bitcoin and other tokens have never experienced a global recession, making it difficult to predict how the asset class would perform in a persistently depressed environment--but it suffices to say that infrastructure may not be adequate enough to sustain this pace of growth. Economists think Bitcoin is still too small to be a systemic risk, but leverage (in several forms) is building up quickly in this immature market.

This Week's News Recap

Monday: Tether breaks up with auditor, inviting another "Mt. Gox moment"
Tuesday: Tightening up post-election, Facebook bans some ads... starting with those promoting ICOs
Wednesday: Italian central bank considers issuing cryptocurrency to (somehow) avoid bubbles
Thursday: Up to 20 percent of bitcoin buying might be on credit
Friday: As stocks dip, crypto market cap loses a cool $157 billion

Further Reading This Week

Quantifying the effect of Tether
(The Tether Report)

"The highly correlated growth between Tether issuance and Bitcoin price raises several interesting questions - Is Bitcoin growth driving Tether? Is Tether issuance driving Bitcoin?"

Winning the cold currency war
(Pimco, by Joachim Fels)

"The dollar’s 10% decline against other major currencies in 2017 and the comment on 24 January by U.S. Treasury Secretary Steven Mnuchin at the World Economic Forum in Davos that a weak dollar is good for the U.S. in the short term all but confirm that the U.S. administration is engaged in what we have called a 'cold currency war'."

Insurers gingerly test Bitcoin business with heist policies
(Reuters, by Suzanne Barlyn)

"The risks are clear: digital currency investors have already lost billions from dozens of cryptocurrency hacks, technical errors and fraud. Many hacked exchanges later shuttered."

Data and Defense: the case of Strava
(DFRLab)

"Sensitive information about the location and staffing of military bases and outposts was inadvertently revealed by Strava, a fitness tracking company."

What the Coincheck hack means for the future of blockchain security
(MIT Technology Review, by Mike Orcutt)

"It’s an expensive reminder that like many things in the cryptocurrency world, security technologies—and the norms, best practices, and rules for using them—are still emerging."

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*Image Credit: Pixabay