Speculators rather Than Long-Term Investors Influence Bitcoin’s Prices

Willmen Blanco
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Speculators rather Than Long-Term Investors Influence Bitcoin’s Prices

Unlike speculators, holders resist the volatility and fall in the prices of Bitcoin. Effective Bitcoin capitalization has fallen below market capitalization.

Some metrics seem to indicate that short-term investors in Bitcoin, as well those new holders of the cryptocurrency, are responsible for the price decline in the markets.

According to Coin Metrics, the holders of 281,000 BTC, which they had not moved for 30 days, put them back into circulation between March 11th and 12th. At the same time, holders of only 4,131 BTC, who had not moved them for at least a year, also put them into circulation on the network.

The company has been dedicated to monitoring the time that Bitcoin holders spend to mobilize their funds. It explains that, according to some of its metrics, those price movements stem from transactions made by Bitcoin holders with little seniority within the ecosystem.

Regarding the 281,000 BTC, which corresponds to funds that holders have not touched in/for 30 days, this has been the fourth largest in 8 years. Therefore, it seems that the recent changes in the price of BTC in the market did not affect long-term holders.

Besides, Coin Metrics warns that investors are selling at a loss, according to data collected under the Spent Output Profit Ratio (SOPR) index.  This reflects the price at which holders bought Bitcoin (according to the input was created) and at which they sold it (according to the date when the output was created). This index reached its lowest point since 2012 on March 12th, indicating an all-time volume of sales at a loss.

Another metric suggests that long-term holders place much more value on Bitcoin than short-term investors, or “speculators”, as Coin Metrics define them. The Market Value to Realized Value (MVRV) index is a relationship between the appreciation that long-term investors give to Bitcoin and current market capitalization. This metric, which is called effective capitalization, is based on the price of Bitcoin when the holders last moved that group of coins or, in case they had never spent them when they mined them.

In conclusion, Coin Metrics states that Bitcoin is at an attractive time to buy, due to the current price and the positive indicators of its value. However, it is not yet clear what lies behind the recent market volatility, so it remains to monitor financial events in the cryptocurrency market over the next few weeks.

However, it is clear that the coronavirus alarm, along with the consequent collapse of the financial markets, is the main reason for this drop in prices. Bitcoin holders, as well as new investors, had never expected this disease to reach such critical levels that it would even affect the global economy.

This is not the first time that the Bitcoin prices have dramatically dropped and been able to recover its all-time highs. Of course, it is only a matter of time to see Bitcoin rising back to the levels that it had before last Black Monday on March 9th.

By Willmen Blanco

Security Failure in Federal Blockchain ​​of Argentina Validated a False Document

Maria Rodríguez
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Security Failure in Federal Blockchain ​​of Argentina Validated a False Document

Authorities assure that the mistake is due to a hack of the system. This would have happened through a web platform of the public body.

A security failure that occurred in Argentina’s Federal Blockchain system allowed hackers to validate a false resolution. The country’s government classified as false the document that the system validated last Saturday, March 14th. This event shows weaknesses in this blockchain platform.

Data provided by the authorities shows that the document called “Official Gazette of the Nation”, number 34,329, included actions related to the current Covid-19 disease that the World Health Organization (WHO) declared as a pandemic last March 11th, 2020. Shortly after the WHO declaration, Argentine authorities corrected the document, certifying it again on the network.

According to local media, the authorities found the failure after determining that computer criminals violated the Official Gazette website. Local media consulted citizens regarding this issue. According to their answers, this act highlights flaws in the system when it comes to certifying documents, especially in the different channels for publication.

The authorities did not express further details about the issue, so it is unknown if the Official Gazette website conducted automatically this certification process in the blockchain network or if the help of a user was necessary to introduce the false publication.

Although the authorities corrected the resolution, the event affected the positive opinion of users and aroused strong opinions on social networks. A user explained the process for entering data into a decentralized network and commented that there must be a person responsible for the action.

Besides, the same user, whose name on social networks is @nubis_bruno, questioned the security of the network’s management and expressed that if the network was hacked there should be an investigation that would bring justice.

“Putting the Official Gazette on the blockchain platform allows people to take over what they say. If something bad was posted because they hacked the platform, then there was a cybercrime. We must stop, report, and investigate”, the Argentine authorities explained to local media.

Another user named @jmtruffa, or Juan M. Truffa, gave his opinion. He thinks the same that the previous user. “The pdf is signed and the signature validates when the document is perfect. So here hackers either stole the keys or they lie”.

This network uses Blockchain-based Distributed Ledger Technology (DLT) for the exclusive use of authorized entities such as some private organizations and public bodies.

In the past, it was possible to certify other documents of the Official Gazette, through the Federal Blockchain of Argentina and using other platforms such as OpenTimestamps, which uses the Bitcoin network. But the validation task is now determined with Argentina’s Federal Blockchain after an update conducted during 2018.

Distributed Ledger Technology is a digital system that allows transactions or operations to exchange data, information, inter alia. In this way, only authorized parties have access to introduce new certification movements. The data is unchangeable; only the parties involved can share and view it on the network.

However, this network works as a “semi-public” system, so some invited members may also have access. This is the point that Argentine authorities should evaluate and even change to avoid future mistakes.

By María Rodríguez

Stablecoin USDC to Provide Additional Support to MakerDAO’s Collateral Operations

Willmen Blanco
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Stablecoin USDC to Provide Additional Support to MakerDAO’s Collateral Operations

The decision stemmed from a voting process that the Maker Governance Forum conducted. The community is questioning the use of a centralized stablecoin in a decentralized ecosystem.

The cryptocurrency community learned that MakerDAO will include the anchored cryptocurrency or stablecoin USD Coin (USDC). They said that this centralized asset will help to support the Maker protocol.

MakerDAO will add the US dollar-backed currency to the platform, allowing its storage in the Maker Vault.  It should be noted that this is the vault for collateral assets for the generation of credits in Dai, the platform’s native token. This is the third collateral that MakerDAO has approved, after adding Ether (ETH) and Basic Attention Token (BAT) for the same purpose and functionality.

The Maker Governance Forum held a meeting that was open to the entire community and available to the general public. There they conducted a voting process that gave rise to the aforementioned decision.

In this sense, they ensure that any cryptocurrency or asset that they choose to use as collateral must meet the correct risk parameters to be in the platform. In the case of USDC, they specify some values ​​such as their annual commission (20%), rate of collateralization (125%), and debt ceiling (20 million USDC), among others.

However, some users and community members did not welcome the recent announcement by MakerDAO. One of the comments regarding this decision indicates that the centralization of USDC does not align with Maker’s values ​​as a decentralized organization and protocol.

According to one of the participants in the forum, Dai is so special as it is the first decentralized stablecoin backed by both a decentralized bank and decentralized collateral assets. He thinks that, with the inclusion of USDC, it will now be nothing better than the US dollar.

A Spanish-speaking Twitter user asked if there was anyone who could clarify the situation to her in her mother tongue. She said that she found the use of a centralized stablecoin to create a decentralized stablecoin too confusing.

However, other users consider that the integration of USDC will bring more liquidity to the Maker ecosystem. Even so, they believe that this would occur at the cost of losing resistance to censorship.

Users indicate that, if the authorities took control of USDC, the Dai funds backed by this asset would be at considerable risk. Also, the company that issues USDC may freeze funds at its discretion when it deems it necessary, as one of the sections of the USDC Circle User Agreement establishes.

Of course, this feature is in clear conflict with Bitcoin’s ideals of decentralization and resistance to censorship. Therefore, it would also negatively affect cryptocurrency projects like Maker.

The setbacks that decentralized finance (DeFi) platforms have recently undergone might have led MakerDAO to take this measure. Among such hindrances are the security and operational problems that have raised serious concerns in the community.

Besides, liquidity is one of the most valued qualities in this decentralized organization scheme. Users should remember that the fall in Ethereum (ETH) prices caused the liquidation of some securities at 0% in recent days.

By Willmen Blanco

Regulatory Bodies in Belarus Seek to Seizure Cryptocurrencies Linked to Crimes

Maria Rodríguez
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Regulatory Bodies in Belarus Seek to Seizure Cryptocurrencies Linked to Crimes

The Investigation Committee expects the country’s legislators to take into account the suggestion it proposes. The idea is to modify the law and make it able to confiscate cryptocurrencies

Some regulatory entities in Belarus hope to be able to modify judicial laws in the country to allow the confiscation of cryptocurrencies linked to crimes. In this way, they would be following some examples of countries that offer to the international market the sale of crypto assets seized to criminals.

Most of the police procedures in Belarus report that the most wide cryptocurrency criminals used is Bitcoin (BTC). Belarus currently does not have a legal tool that allows seizing cryptocurrencies. The petition to lawmakers is now a reality due to the initiative of state authorities.

The Research Committee of the Republic of Belarus, a group that makes up several state authorities in the country, hopes to support the initiative as a step towards new technologies and as a further step in building a system that strengthens local legislation.

Through an interview conducted by local media last March 9th, Iván Noskevich, Head of the Investigation Committee, talked about his interest in taking the initiative to the real level. According to the executive, the country is not prepared to properly face these crimes executed with cryptocurrencies. For this reason, modifying the statutes so that the authorities can confiscate these assets can be an important action.

Noskevich said that, amid criminal proceedings against some criminals, judicial entities faced problems trying to seize cryptocurrencies. Since the national laws do not contemplate this type of procedure, the Investigation Committee proposes to make a reform to the law. The intention is to carry out these tasks. Besides, the official hopes to give the authority the necessary power to confiscate these assets in all kinds of crimes.

However, Noskevich expressed concern that his initiative does not have the full support of lawmakers. “We have found such as cases before, but there was no legal regulation of the mechanism to confiscate cryptocurrencies. I hope legislators to listen to the opinion of the Investigation Committee and that these amendments be introduced in the legal procedure legislation”, he said.

Belarus has not been a very active country with the use of cryptocurrencies although, in 2017, the country’s president, Alexander Lukashenko, legalized the use of these digital assets in the territory. Only in 2019, there was little movement regarding cryptocurrencies in this nation.

In the middle of 2019, the attorney general of Belarus was concerned about the use of these assets in tax evasion. Some months before, the major local bank, Belarusbank, announced its intention to create an exchange platform that would help use cryptocurrencies on its banking platform and avoid tax evasion. However, criminals found a way to use cryptocurrencies in their crimes.

The Investigation Committee hopes the authorities to take into account its recommendations to confiscate cryptocurrencies that were used in crimes, as other countries are doing since some years ago. Belgium, for example, will auction BTCs at the end of March for an approximate value of USD 125,000. The federal government held these cryptocurrencies during a public auction.

However, auctioning cryptocurrencies seized during crimes can cause these assets to go back into the hands of criminals. As a press release expressed, some authorities in Finland fear that these digital currencies will once again serve as a “channel” for illegal acts. For these reasons, Belarus authorities want to study and create new laws to regulate the use of cryptocurrencies and avoid crimes such as money laundering.

By María Rodríguez

Developing Blockchain Projects in Panama Is Challenging Due to Labor Shortage

Alexander Salazar
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Developing Blockchain Projects in Panama Is Challenging Due to Labor Shortage

The government seeks to cover this deficit through partnerships that will allow training to young people. Despite the shortage of developers, some projects are struggling to emerge.

Some initiatives have shown the potential of Panama for developing business plans and financial ideas. However, there is a shortage of developers and qualified labor in the area of blockchain technology, which highlights the need for education.

Regarding education about cryptocurrencies in Panama, it is impossible not to mention the current Secretary-General of the Chamber of Digital Commerce and Blockchain, Rodrigo Icaza. This young man’s interest in crypto assets led him to study at the University of Nicosia and to write the book Learning to Use Bitcoin.

Icaza explains that the lack of local labor in this area has led the government to work on initiatives through alliances with Latin American organizations. The objective is to prepare young people, especially university students so that they will train the first community of blockchain developers.

The Panamanian official adds that, despite the shortage of developers, some projects are struggling to emerge. For example, the government is interested in promoting a blockchain-based project to conduct procedures. He says that manufacturing and agribusiness companies should use it to register in the National Industry Registry (RIN).

Tasks to Be Developed

Even though Panama is recognized as a financial, banking and logistical reference, it has not yet been able to establish itself as a cryptocurrency business center. According to Icaza, the fact that Panama does not have a Central Bank forces it to depend exclusively on the USA and its correspondent banks.

The official explains that the scenario in Panama is different from that of the region since it has a financial and banking orientation. According to the current model, cryptocurrencies are not an option to operate. Besides, the correspondent bank will close an account unilaterally if it discovers that someone is operating a business with cryptocurrencies.

Icaza believes that all the stakeholders and those involved in the development of the cryptocurrency sector should work on establishing a collective approach. He says that there will be concrete achievements in the short term as Panama is still a virgin territory for the crypto asset industry.

Strengthening through Education

Four years ago, a small group of Bitcoin connoisseurs undertook an educational process around the pioneering cryptocurrency. According to Icaza, Bitcoin was the victim of news on pyramid schemes involving the use of crypto assets, since several of these fraudulent businesses were promoted in Panama.

The national scandal over the Ponzi scheme OneCoin, as well as his interest in the subject, led Icaza to conduct his research. This led him to take the online course on Digital Currencies offered by the University of Nicosia. After that, he became part of the first community that shared diverse perspectives on the use of cryptocurrencies.

To promote Panama’s technological development, the government created the Chamber of Digital Commerce and Blockchain. This non-profit organization, which is headed by Rodrigo Icaza, is aimed at identifying and promoting local talent to ensure development.

Icaza considers the collaborative and joint working agreement that the Chamber of Commerce signed with the National Authority for Government Innovation (AIG) to be an achievement. Through this, the government has included training programs with local actors, among whom are even public officials.

By Alexander Salazar

Liquidations of over USD 700 Million in BitMEX Are Due to Bitcoin’s Fall

Alexander Salazar
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Liquidations of over USD 700 Million in BitMEX Are Due to Bitcoin’s Fall

Last March 12th, Bitcoin fell from USD 7,200 to its lowest point in the last 10 months. The drop in the price of Ether (ETH) also caused liquidations around USD 32 million.

The sudden drop in Bitcoin’s price last March 12th caused the largest number of bullish and bearish position liquidations at the derivatives exchange, BitMEX, in 16 months.

The major cryptocurrency by market capitalization fell from USD 7,200 to its lowest point in the last 10 months, going to USD 5,678 in just 15 minutes and then reaching less than USD 4,700. This took many traders by surprise and forced settlements of USD 702 million on BitMEX. This has been the largest liquidation amount since November 14th, 2018, according to research company Skew.

The drop in price led BitMEX to make sell liquidations of USD 698 million and buy liquidations of USD 4 million. The exchange, located in Seychelles, had recorded total liquidations of USD 750.8 million in November 2018, when the price of Bitcoin dropped dramatically from USD 6,000 to levels below USD 5,000.

Sell liquidation on BitMEX occurs when the market moves adversely against a long position (a bullish bet) and breaks the liquidation price, which is a predetermined limit. When this occurs, the liquidation system automatically closes the long position. Sell liquidations represent the forced liquidation of long positions, while buy liquidations represent the forced liquidation of short positions.

Long Squeeze Liquidation

Whilst long and short positions have been liquidated, over 90% of the liquidations have been for long positions. This indicates that the leverage was mostly contributed to the bullish side. A sudden drop in the price almost always results in long squeeze liquidations, which consequently adds more bearish pressure around the cryptocurrency, driving it downwards.

The drop in Bitcoin’s price to a 10-month low was followed by a temporary recovery, which saw price rebound to USD 6,700. At the time of writing this article, Bitcoin is moving just below USD 6,000, representing a 24% drop on a 24-hour basis.

Joel Kruger, Forex strategist with the LMAX group, said that they believe that there is very strong support in this area. He added that those involved, beyond the late-2017 rally, would be happy to increase their exposure right now. In this way, they would anticipate Bitcoin’s achievement of its goal of being a secure asset and a valuable safeguard.

However, Bitcoin has not yet found a foothold as an anti-risk asset. The decrease in Bitcoin’s price from USD 10,500 to USD 5,700 has accompanied the deterioration of global perspectives and the massive sales in global stock markets.

Volatility Increases

With the big price movement, the implied volatility of Bitcoin on three-month options has increased to 3.9% per day (74.5% per year), the highest level since January 9th. Implied volatility is a measure of how risky or volatile an asset is expected to be in the future. The greater the uncertainty (volatility), the greater the demand for coverage of purchasing and selling options.

The rise in volatility over the past three months essentially means that traders now expect Bitcoin’s price volatility to remain high for the next 12 weeks.

By Alexander Salazar

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