Crypto Credibility

Last Monday, there was a striking headline in the Daily Telegraph: “Russia looks to bitcoin to soften effects of US Sanctions”. The immediate impact on bitcoin’s price was minimal, though it did rise 4.2% later in the day after Zerohedge picked up the story.[i]

The Telegraph’s source seemed credible. Vladislav Ginko is an economist at the Russian Presidential Academy of National Economy and Public Administration, which is the training ground for Russia’s political and administrative elite, a Russian equivalent of France’s École Nationale d’Adminstration. Professor Ginko appears to be a firm believer in bitcoin and its technology, and he seems well-connected. But it is not a brand-new story. Earlier this month he tweeted the following: 

Tweet 1

However, Professor Ginko perhaps should not be taken too seriously, being either a conspiracy theorist or perhaps a joker, as the following more recent tweet reveals:

tweet 2

Putting this bizarre allegation to one side, he has reminded us that President Putin has expressed an interest in cryptocurrencies and blockchain technology. The point missed in Professor Ginko’s tweets is that one way to destabilize the dollar would be to encourage a new bull market in cryptocurrencies, which could be the strategic logic behind a Russian move. It is not, as implied by Professor Ginko, that bitcoin is about to take its place alongside Western currencies in Russia’s currency reserves. Furthermore, the idea that Russia is seriously considering adding $10bn of bitcoin to reserves does not ring true, given it would be more likely to quietly accumulate them first instead of boasting about an intention and paying higher prices.

It may be just coincidence, but bitcoin’s vicious bear market broadly coincided with the US dollar’s recovery, which commenced only a month after bitcoin’s peak in December 2017. Recently, the dollar has shown signs of entering a new bear phase, in which case a negative correlation suggests bitcoin might begin to recover, and with other credible cryptocurrencies become to be seen as an alternative to the king of fiat.

Cryptocurrencies have disappeared from most people’s radar screens. While public attention has drifted elsewhere, it is clear that professionals are still working on solutions to identify and control risks at a time of market quietness. These are the generic market conditions usually identified with the prospect of a renewed bull phase.

Crypto criminal cleansing continues

For the moment, it might too early to expect cryptocurrencies to be ready for a lasting revival. The 2017 bull market blow-off exposed excessive greed, signaling the start of a probable multi-year bear market, or even the end of the entire phenomenon. Over a thousand cryptocurrencies were in existence by early 2018, issued mostly by wannabe Satoshis. Today it is estimated there are over 1,600. 

In recent years exchanges and other service providers have been closed amid accusations of fraud and money-laundering. Freedom from national boundaries and the laws that go with them have undoubtedly contributed to criminal activity both real and imagined. On Monday this week, SlowMist, a Chinese-based blockchain security firm, reported suspected money-laundering in ethereum classic (ETC), in its newsfeed  reproduced below:

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Disclaimer: The views and opinions expressed in this article are those of the author(s) and do not reflect those of Goldmoney, unless expressly stated. The article is for general information ...

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