A report released today from S&P Global rating details the possibilities for the future of cryptocurrency, claiming that retail investors will be most affected if a crash takes place.
S&P Global Ratings released a report Monday, Feb. 19, entitled the “The Future Of Banking: Cryptocurrencies Will Need Some Rules To Change The Game,” that details the possible outcomes for the global financial markets in relation to the actions of the crypto markets.
Even though an early February crash of both the traditional markets and the crypto markets appeared to show synchronicity, Mohamed Damak, S&P Global Ratings financial services senior director, doesn’t see this correlation as meaningful, CNBC reports:
"For now, a meaningful drop in cryptocurrencies' market value would be just a ripple across the financial services industry, still too small to disturb stability or affect the creditworthiness of banks we rate.”
According to S&P’s report, retail investors, as opposed to banks, would be hit the hardest in the event of a crypto crash:
"We expect rated banks to be largely insulated, given that their direct or indirect exposure to cryptocurrencies appears to remain limited."
Damak also stressed the importance of regulation in the crypto sphere moving forward:
"We believe that the future success of cryptocurrencies will largely depend on the coordinated approach of global regulators and policymakers to regulate and enhance market participants' confidence in these instruments.”
The report noted that Blockchain technology could lead to a “positive” disruption of the global financial markets.
Large companies across the globe are already beginning to experiment with Blockchain — Chinese PC company Lenovo recently filed a patent for a Blockchain-based document verification system, and the first major agricultural trade using Blockchain technology was completed in January by sending a shipment of soybeans from America to China.
South Korean cryptocurrency exchanges will hand over tax on almost $650 mln in revenues by the end of April.
The Upbit exchange generated more than half of South Korea’s $648 mln cryptocurrency exchange revenues in 2017, new government figures claim.
According to data released by lawmaker Park Kwang-on and reported by local news media outlet Yonhap News Sunday, total revenues for Korea’s burgeoning exchange sector ballooned 8025% compared to 2016, when it amounted to just $7.5 mln.
Exchanges enjoyed a lively and competitive market for most of last year, before the South Korean government began threatening restrictions and even an outright ban on cryptocurrency trading beginning in December.
As the environment begins to settle and regulations become enacted, the aftermath of new tax obligations for exchanges for 2017’s bumper year continues.
In January, lawmakers demanded exchanges pay both corporate tax and a local income tax amounting to just over 24% of revenues earned during the period in question.
Upbit appears in line to take the biggest hit with its 52.9% market share in 2017, with Bithumb, Coinone and Korbit following in second, third and fourth places respectively.
Bithumb, which hit the headlines last year due to security lapses and this month for its prestigious partnership with online shopping mall WeMakePrice, accrued 317.7 bln won ($297 mln) in commissions.
According to government directives, all due payments must occur by the end of March for the corporate tax and the end of April for the local income tax.
A Chinese multinational PC company, Lenovo, filed a patent application with the US for a Blockchain-based validation system for proving the integrity of physical documents.
Chinese multinational PC company Lenovo has filed a patent with the U.S. Patent and Trademark Office (USPTO) for a system to “verify integrity of physical documents,” using a "security Blockchain.”
The patent application was submitted in August 2016, but was published late last week on Feb. 15.
The use of digital signatures encoded into documents, as opposed to physical signatures printed with physical ink, provides assurance that the document was not modified after the signing.
The patent’s “Brief Summary” explains that a processor will identify an “integrity symbol” within the document, convert it into an “integrity map,” and then compare the map to the physical document to ensure the document’s integrity.
The security Blockchain, Lenovo writes, would allow one to ensure “that they have the current authentic physical document even if multiple paper copies exist and multiple people have made entries in the chain of modification.” If multiple, fake copies of a physical document came into existence, they would “show up as orphaned blocks in the chain.”
In December 2017, Swiss banking giant UBS filed a similar patent with USPTO for a Blockchain-based system for client IP and user validation.
Although Chinese firm Lenovo’s patent application wasn’t submitted recently, its online release comes as China is in the midst of a general crackdown on all things crypto within the country. China banned all foreign cryptocurrency exchanges in early February, following a September 2017 ban of Initial Coin Offerings (ICO).
However, even with the crypto bans in place, Chinese companies have not stopped looking into the crypto sphere. On Feb. 7, Chinese-based payment service provider LianLian partnered with RippleNet to facilitate faster and less expensive cross-border payments in Europe, the US, and China.
“Scams” in the cryptocurrency industry have angered Ethereum co-founder Vitalik Buterin as Australia’s watchdog receives over 1200 complaints.
Cryptocurrency “scams” generated over 1200 complaints to Australia’s consumer watchdog in 2017, according to new figures it released this month.
Local news media outlet ABC reports data it obtained from the Australian Competition & Consumer Commission (ACCC) reveals 1289 complaints, some of which appear to relate to token offerings.
Australia has remained quiet against the recent backdrop of pledges by international regulators to keep a close eye on cryptocurrency token sales and related activities.
As Cointelegraph reported on various occasions since the World Economic Forum 2018 late January, the US Securities and Exchange Commission (SEC) has led plans for continued scrutiny on financial products subsequently repeated by entities including the European Union.
While ABC does not state which specific operators the complaints refer to, one investor relates losses he suffered through use of controversial Australian exchange Igot, responsibility for which has since been transferred to Bitlio since an insolvency scam in 2016.
“These are quite speculative products and they can be quite high-risk,” John Price, commissioner for financial regulator the Australian Securities and Investments Commission (ASIC) meanwhile told the publication in broader comments.
“It's been quite well documented that some of these products are scams, so please don't invest unless you're prepared to lose some or all of your money.”
Scams even affect cryptocurrency’s best-known names, with Ethereum co-founder Vitalik Buterin warning investors about a Twitter impersonator purporting to offer free money on his behalf.
The fake giveaway even made the headlines in cryptocurrency news media, which erroneously reported it as legitimate.
Cryptocurrency media is now, even if out of ignorance/stupidity, complicit in making twitter scams look more legit.
Also, the ECF is *not* an EF initiative; it's an independent community organization with some EF participants as advisors.
Shame, https://t.co/JE9wIWmITL. pic.twitter.com/aM4YpjJIP7
— Vitalik Buterin (@VitalikButerin) February 18, 2018
A sense of positivity greets Bitcoin traders Monday as $11,000 comes and goes twice and analysts forecast upside.
Monday, Feb. 19: the Bitcoin price has surpassed $11,000 twice since Sunday as bullish sentiment returns to markets and new support begins to form.
Data from Cointelegraph’s price index shows a BTC/USD journey to a high of $11,190.10 Feb. 18, followed by a smaller peak above the significant barrier Monday at $11,001.45.
Optimism is flowing after Bitcoin broke through resistance surrounding $10,000 Feb. 16, the threshold subsequently forming a support floor with prices staying above it as of press time.
The move upwards broadly reflects predictions by well-known cryptocurrency price analyst Tone Vays, who in various recent forecasts warned of volatility around $10,000 and a repositioning of support floors.
Now, “clear” support and resistance will make future price action “more predictable” going forward, he says, noting the “bullish” trend in both daily and weekly charts as the week begins.
#Bitcoin hit resistance for a swift $800 drop from $11,250 to $10,400… Now that it's pulling back up what should be expect? $BTCUSD should become more predictable once clear Support & Resistance are established. Let's have a Live Look:https://t.co/nZIwHpNqlJ
— Tone Vays [#Bitcoin] (@ToneVays) February 18, 2018
Bitcoin has outperformed the majority of the top 50 altcoin assets tracked by Coinmarketcap in USD terms over the past 24 hours.
Ethereum Classic (ETC) has been a notable exception, gaining 11% on BTC since Sunday amid a trading uptick following a social media plug by major proponent Barry Silbert Feb. 12.
Silbert had attributed Bitcoin’s latest rise to the effect of its appearance on US talk show Ellen late last week, in which host Ellen DeGeneres briefly explained what Bitcoin is to millions of viewers.
Ethereum (ETH), Ripple (XRP), Bitcoin Cash (BCH) and Litecoin (LTC) meanwhile lost around 2% against BTC during the same period.
A Japanese Blockchain-based company eliminates intermediaries and allows social media users to publish a single live stream on different platforms.
PATRON, a Japanese Blockchain-based platform, intends to transform the social influencer market by eliminating intermediaries taking a large share of profits. The company has partnered with Orlando’s Switchboard Live, allowing users to publish a single live stream on different platforms and grow the audience.
Broadcast all at once
The company is developing a sharing economy system which could work similar to Airbnb, with ‘hosts’ purchasing influential posts, Cointelegraph previously reported. Additionally, PATRON’s smartphone application allows social media influencers to stream live videos simultaneously to more than ten different platforms including the leading social media such as Facebook Live, Periscope, YouTube. This system could give PATRON users a way to increase views and grow their audience.
According to PATRON, the company is celebrating the fact they are now going to be listed on HitBTC, one of the leading cryptocurrency exchanges. This means they will have increased publicity and also will be able to charge a liquidity premium for their token. A liquidity premium is the price markup that results from a security being more easily traded. Illiquid goods like real estate and physical assets are valued as less because of the increased risk that comes from their liquidity.
HitBTC is a European-based cryptocurrency exchange that has been in operation since 2014. They boast a significant amount of currency pairs and are now delving more into dealing with alt-coins. The listing of Pat coin on their service could help PATRON’s reach spread and increase the amount of money they raise in their Pre-ICO and ICO.
On Feb. 14, 2018, PATRON will begin their Pre-ICO, and on March 1, 2018, they will open up their public sale. This part of the fundraising stage is all about raising the money necessary to achieve their long-term goals.
With the rise of companies like Instagram, Snapchat and Youtube, personalities can reach more people than ever. And with reach comes an ability to sell things. The whole influencer market is based on these personalities helping companies advertise their products in exchange for compensation.
According to PATRON, the market is currently quite opaque- it is not easy for influencers to find clients. This created the business of being an agent and connecting these two parties, but with this comes fees that can add up.
PATRON aims to become the company that disintermediates agents and provides a new means for the influencer market. The company intends to use the money from their ICO to hire the developers necessary to build the application and protocols that will be used on their platform. Additionally, they want to build a San Francisco presence so they can benefit from the network effects that occur there.
Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.
Weekly analysis of the equity and cryptocurrency markets over the week.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The market data is provided by the HitBTC exchange.
Both equities and cryptocurrency markets rallied together last week, as each recovered prior losses. Investors will continue to watch for signs of inflation and the trend of rising rates. The 10-year US Treasury yield has been leading global rates higher, hitting a four-year high last week of 2.93. Yet, for now, it looks like initial concerns have dissipated. The dollar is falling against most assets, which seems to be helping equities. All of the major equity markets followed were positive, with India’s BSE Sensex the weakest performer, up only 0.015%.
Much of Asia was closed last Friday due to the Chinese New Year, yet the Hang Seng was able to complete its four-day trading week with a 5.4% advance to end at 31,115.40, while the Shanghai Composite was up 2.2% to close at 3,199.16. In Japan, Bank of Japan (BOJ) Governor Kuroda announced he would stay for another term which was viewed as supporting a continuation of loose monetary policies. This was viewed positively by the market with the Nikkei 225 advancing 1.6% for the week to end at 21,720.25.
The S&P 500 advanced for each of the past six days (due for a stall or pullback). That by itself should give investor’s pause as the odds now favor a pullback or at least a rest in the near-term. Heading into the new week US financial markets are closed on Monday for a government and bank holiday. This may affect liquidity in global markets heading into the week.
German DAX Index
The DAX found support at 13,003.4 two weeks ago, where it completed an 88.6% Fibonacci retracement of the prior upswing and was 11.7% off its 13,596.90 record peak from a month ago. That low support was also around a prior swing low from August of last year at 11,868.80, with the 14-day Relative Strength Index (RSI) in clear oversold territory. The RSI was the most oversold since August 2015. This means that the uptrend structure, of high swing highs and higher swing lows, has been maintained, at least so far. Therefore, a decent recovery could follow soon. It also means that the August low is critical support and a break below it puts the larger bull trend at risk of a deeper corrective phase.
S&P 500 Index (SPX)
The S&P 500 Index hit a high of 2,872.87 four weeks ago. That high was followed by a waterfall decline into support of 2,532.69 reached two weeks ago. Support was seen right at the 200-day moving average (purple line) and the 61.8% Fibonacci retracement level. It’s not surprising that price was rejected with conviction from the 200 line as that is a significant moving average, and the first time it’s approached in a while, it will frequently reverse or at least hold a decline. November 2016 was the last time the 200-day moving average was approached as support. Subsequently, the index rallied as much as 8.7% as of last week’s high of 2,754.42.
The SPX has been up six days in a row and is now due for a pullback. RSI hit oversold at the low and has since turned up, which is bullish. Watch the character of the pullback off last week’s 2,754.42 high along with the accompanying volatility for signs of what’s to come next. The key support from two weeks ago is known. A drop below there is bearish. Otherwise, the chance for a continuation of the long-term uptrend remains.
Cryptocurrencies: Strong performance across the board
Large capitalization cryptocurrencies continued to advance off their lows from two weeks ago. A positive for the sector as a whole was the launch of Coinbase Commerce last week, which will make it easier to pay merchants in cryptocurrency, including Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
Litecoin led the way for the cryptos rising $64.14 or 39.1% to end at $228.24. A couple of developments seem to be driving the advance, including a planned fork of Litecoin Cash and the announcement that LitePay, a merchant payment processing application for cryptocurrency will launch on February 26.
XRP, the cryptocurrency from Ripple was the second-best performer last week, rising $0.20 or 21.5% to end at $1.12. There were positive reports from the Middle East and elsewhere with Western Union confirming they are testing Ripple technology along with the Saudi Arabian Monetary Authority.
Next in line was Bitcoin Cash and Bitcoin, rising 17.9% and 17.3%, respectively. Bitcoin Cash advanced $232.90 to end the week at $1,532.90, while Bitcoin ended at $10,196, up $1,502.02.
The weaker performers included Ethereum, up only $59.37 or 6.8% to close at $937.38, and IOTA, rising $0.16 or 8.5% to end at $2.10.
Ripple (XRP/USD): Breakout of bullish descending wedge
Ripple broke out of a bullish descending wedge pattern seven days ago. The initial breakthrough rally took the crypto up to $1.23 before resistance took hold. At that point, it was up over 118% from the $0.562 low reached two weeks ago. That low just about completed an 88.6% Fibonacci retracement of the previous rally, and put the XRP/USD pair 82.6% below its record high of $3.35 hit in early-January. Following the initial spike high to $1.23 Ripple pulled back to test support of the downtrend line before moving back up. The pullback can better be seen in the intraday charts rather than the daily. This is a classic bullish progression of price, where a breakout occurs, followed by an advance and then a pullback to test prior resistance as support before the advance continues.
All of the above items provide a good basis to conclude that the low has likely been reached for Ripple and that the dominant bias going forward in the coming weeks or months is to the upside. Given that, weakness is best watched for opportunities to enter at lower prices either for investment or trading purposes. Watch the downtrend line for signs of support during pullbacks, at a maximum.
IOTA (IOT/USD): Another bullish wedge breakout, but a little less distinct
There is also a bullish descending wedge breakout that has occurred in IOTA, as of five days ago. This wedge is not quite as clear and distinct as the wedge in Ripple as it’s contained within a larger declining trend, but it is there nonetheless. The IOTA/USD pair found a bottom at $1.20 two weeks ago and has risen over 84% as of Saturday’s $2.212 high. It next has to contend with potential resistance around its downtrend line, which falls from the December record high of $5.80. At the low two weeks ago the coin had fallen as much as 79% off the high.
Given the degree of the recent retracement, along with the reaction off the low, it looks like a low has been determined for IOTA. Further, the 14-day RSI is rising after touching the oversold border.
The market data is provided by the HitBTC exchange; the charts for the analysis are provided by TradingView.
Swiss financial authority outlines a regulatory approach to ICO
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Switzerland has long been a global center for the wealth management industry, housing around $2 trillion, or 27 percent, of global offshore wealth. Since 1934, Swiss bankers and regulators have resisted the efforts of foreign tax regulators, including the Internal Revenue Service (IRS) in the US, to obtain information about secret Swiss bank accounts. They claimed compliance with Swiss law and the need to protect the privacy of their customers, as Swiss private bankers smuggled US taxpayer wealth from the US to Switzerland in all sorts of creative ways. From bundles of cash hidden inside rolls of newspaper to setting up shell companies, to jamming diamonds into toothpaste tubes, Swiss bankers aided tens of thousands of wealthy American clients to evade US taxes through secret offshore bank accounts.
After giving up on their famous banking secrecy laws with a little nudging from the US Department of Justice (DOJ) and the IRS Criminal Investigations Division (IRS-CI) which shut down the oldest private bank and slapped the largest and most prominent Swiss banks with billions in fines for aiding in US tax evasion, Switzerland was on the verge of losing its competitive edge over rival financial markets.
But don’t count Switzerland out just yet. By establishing a global hub for virtual currencies known as the “Crypto Valley” in Zug, and the implementation of forward-looking regulation by the Swiss Financial Market Supervisory Authority (FINMA), Switzerland is emerging as one of “the world’s leading ecosystems for crypto, Blockchain, and distributed ledger technologies” according to Oliver Bussmann, the founder of the Crypto Valley Association. Johann Schneider-Ammann, the head of the Swiss Department of Economic Affairs, points out that the country is becoming a “crypto nation” for the digital revolution with a flourishing initial coin offerings (ICO) market.
ICO is a new way of raising capital funds enabled by digital currencies and Blockchain technology where participants invest fiat currencies and receive ‘tokens’ or digital assets in return. A person, project or company in need of capital creates a new kind of digital coin and sells a tranche of them for fiat currencies on a digital trading platform or exchange.
During 2017, Swiss-based ICOs raised about $550 million in funding, which was about 14 percent of the global ICO market, worth around $4 billion. The Zug-based Tezos ICO alone raised $232 million in July 2017. The Tezos foundation is facing at least half a dozen class-action lawsuits in the US from those who say they were misled and defrauded. “Many Swiss ICO’s are structured as foundations that applied for non-profit tax status and the money raised in these ICOs are treated as a donation that may not be returned to ICO investors” explained Dr, Luka Muller, legal partner of Swiss law firm MME, which helped set up the Tezos foundation as well as some other big ICOs.
FINMA outlines a regulatory approach to ICOs
In response to the sharp increase in the number of Swiss ICOs, on February 16 2018 FINMA published guidelines on ICOs under the Swiss anti-money-laundering and securities laws. Under regulatory guidelines issued, many ICOs will be treated as securities in Switzerland.
There are some exceptions, for example tokens used to access a platform that is already up and running, or for cryptocurrencies that function only as a means of payment. Neither will be considered securities, FINMA said, while the latter would be subject to anti money laundering regulation.
“Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system," FINMA CEO Mark Branson commented.
Switzerland is “unofficially” a cryptocurrency tax haven
Undoubtedly Switzerland is an attractive place for ICOs both for investors and issuers due to the favorable Swiss tax laws.
Cryptocurrencies are neither money nor a foreign currency, nor a financial supply for goods and services tax (GST) purposes.
Transacting in tokens that qualify as securities may give rise to securities transfer tax duties for domestic instruments at a rate of 0.15 percent (or 0.30 percent for non-domestic instruments) in cases where a Swiss securities dealer was involved in the transaction.
Cryptocurrencies are an asset for capital gains tax (CGT) purposes, which only applies to someone who qualifies as a professional trader. Holders or investors of cryptocurrencies are subject to a wealth tax at the rate determined by the tax authorities on December 31 of the fiscal year.
An equity token, issued by an ICO, may be subject to a one-time capital duty of 1 percent, unlike a debt token. Any distribution of profits on equity tokens or payments on debt tokens is subject to Swiss withholding tax at a rate of 35 percent.
US Swiss ICO investors beware of the IRS-CI
The US Swiss ICO token investors not involved in class actions lawsuits should be aware that fresh off its success in uncovering US assets hidden in Swiss banks, the IRS-CI has assigned a special team of agents to investigate whether cryptocurrencies are being used to cheat the tax authority. “It’s possible to use cryptocurrencies in the same fashion as Swiss bank accounts to facilitate tax evasion,” Don Fort, chief of the IRS-CI, explained to Bloomberg News.
The views and interpretations in this article are those of the author and do not necessarily represent the views of Cointelegraph.