Four days ago the crypto markets were crashing hard. Now they’re crashing harder. Bitcoin, which hasn’t fallen past $6,000 for months, has dumped to $4,413.99 as of this morning, and nearly everything else is falling in unison. Ethereum, flying high at $700 a few months ago, is at $140. Coinbase, that bastion of crypto stability, is currently sporting a series of charts that look like Aspen black-diamond ski runs.
What is happening? There are a number of theories, and I’ll lay out a few of them here. Ultimately, sentiment is bleak in the crypto world, with bull runs being seen as a thing of a distant past. As regulators clamp down, pie-in-the-sky ideas crash and shady dealers take their shady dealings elsewhere, the things that made cryptocurrencies so much fun — and so dangerous — are slowly draining away. What’s left is anyone’s guess, but at least it will make things less interesting.
The bag holder theory
November was supposed to be a good month for crypto. Garbage sites like FortuneJack were crowing about bitcoin stability while the old crypto hands were optimistic and pessimistic at the same time. Eric Vorhees, founder of ShapeShift, felt that the inevitable collapse of the global financial system is good for folks with at least a few BTC in their wallets.
Others, like the Binance CEO Changpeng Zhao, are expecting a bull run next year and said his company was particularly profitable.
Ultimately, crypto hype moves the market far more than it has any right to, and this is a huge problem.
So who do you believe, these guys or your own lying eyes? That’s a complex question. First, understand that crypto is a technical product weaponized by cash. Companies like Binance and Coinbase will work mightily to maintain revenue streams, especially considering Coinbase’s current level of outside investment. These are startups that can literally affect their own value over time. We’ll talk about that shortly. Ultimately, crypto hype hasn’t been matching reality of late, a major concern to the skittish investor.
“I think that the downturn is due to things not going up as much as people had wanted. Everyone was expecting November to be a bull month,” said Travin Keith, founder of Altrean. “When things indicated that it wasn’t going that way, those who were on borrowed time, such as those needing some buffer, or those in the crypto business needing some money, needed to sell.”
Tether has long been the prime suspect in the Bitcoin run up and crash. Created by an exchange called Bitfinex, the currency is pegged to the dollar and, according to the exchange itself, each tether — about $2.7 billion worth — is connected to an actual dollar in someone’s bank account. Whether or not this is true has yet to be proven, and the smart money is on “not true.” I’ll let Jon Evans explain:
What are those whiffs of misconduct to which I previously referred? I mean. How much time do you have? One passionate critic, known as Bitfinexed, has been writing about this for quite some time now; it’s a pretty deep rabbit hole. University of Texas researchers have accused Bitfinex/Tether of manipulating the price of Bitcoin (upwards.) The two entities have allegedly been subpoenaed by US regulators. In possibly (but also possibly not — again, a fog of mystery) related news, the US Justice Department has opened a criminal investigation into cryptocurrency price manipulation, which critics say is ongoing. Comparisons are also being drawn with Liberty Reserve, the digital currency service shut down for money laundering five years ago:
So what the hell is going on? Good question. On the one hand, people and even companies are innocent until proven guilty, and the opacity of cryptocurrency companies is at least morally consistent with the industry as a whole. A wildly disproportionate number of crypto people are privacy maximalists and/or really hate and fear governments. (I wish the US government didn’t keep making their “all governments become jackbooted surveillance police states!” attitude seem less unhinged and more plausible.)
But on the other … yes, one reason for privacy maximalism is because you fear rubber-hose decryption of your keys, but another, especially when anti-government sentiment is involved, is because you fear the taxman, or the regulator. A third might be that you fear what the invisible hand would do to cryptocurrency prices, if it had full leeway. And it sure doesn’t look good when at least one of your claims, e.g. that your unaudited reserves are “subject to frequent professional audits,” is awfully hard to interpret as anything other than a baldfaced lie.
Now Bloomberg is reporting that the U.S. Justice Department is looking into Bitfinex for manipulating the price of Bitcoin. The belief is that Bitfinex has allegedly been performing wash trades that propped up the price of Bitcoin all the way to its previous $20,000 heights. “[Researchers] claimed that Tether was used to buy Bitcoin at pivotal periods, and that about half of Bitcoin’s 1,400 percent gain last year was attributable to such transactions,” wrote Bloomberg. “Griffin briefed the CFTC on his findings earlier this year, according to two people with direct knowledge of the matter.”
This alone could point to the primary reason Bitcoin and crypto are currently in free fall: without artificial controls, the real price of the commodity becomes clear. A Twitter user called Bitfinex’d has been calling for the death of Tether for years. He’s not very bullish on the currency in 2019.
“I don’t know the when,” Bitfinex’d said. “But I know Tether dies along with Bitfinex.”
Le shitcoin est mort
As we learned last week, the SEC is sick of fake utility tokens. While the going was great for ICOs over the past few years with multiple companies raising millions if not billions in a few minutes, these salad days are probably over. Arguably, a seed-stage startup with millions of dollars in cash is more like a small VC than a product company, but ultimately the good times couldn’t last.
What the SEC ruling means is that folks with a lot of crypto can’t slide it into “investments” anymore. However, this also means that those same companies can be more serious about products and production rather than simply fundraising.
SEC intervention dampens hype, and in a market that thrives on hype, this is a bad thing. That said, it does mean that things will become a lot clearer for smaller players in the space, folks who haven’t been able to raise seed and are instead praying that token sales are the way forward. In truth they are, buttoning up the token sale for future users and, by creating regulation around it, they will begin to prevent the Wild West activity we’ve seen so far. Ultimately, it’s a messy process, but a necessary one.
“It all contributes to greater BTC antifragility, doesn’t it?,” said crypto speculator Carl Bullen. “We need the worst actors imaginable. And we got ’em.”
One other interesting data point involves Bitmain. Bitmain makes cryptocurrency mining gear and most recently planned a massive IPO that was supposed to be the biggest in history. Instead, the company put these plans on hold.
Interestingly, Bitmain currently folds the cryptocurrency it mines back into the company, creating a false scarcity. The plan, however, was for Bitmain to begin releasing the Bitcoin it mined into the general population, thereby changing the price drastically. According to an investor I spoke with this summer, the Bitmain IPO would have been a massive driver of Bitcoin success. Now it is on ice.
While this tale was apocryphal, it’s clear that these chicken and egg problems are only going to get worse. As successful startups face down a bear market, they’re less likely to take risks. And, as we all know, crypto is all about risk.
Abandon all hope? Ehhhhh….
Ultimately, crypto and the attendant technologies have created an industry. That this industry is connected directly to stores of value, either real or imagined, has enervated it to a degree unprecedented in tech. After all, to use a common comparison between Linux and blockchain, Linus Torvalds didn’t make millions of dollars overnight for writing a device driver in 1993. He — and the entire open-source industry — made billions of dollars over the past 27 years. The same should be true of crypto, but the cash is clouding the issue.
Ultimately, say many thinkers in the space, the question isn’t whether the price goes up or down. Instead, of primary concern is whether the technology is progressing.
“Crypto capitulation is once again upon us, but before the markets can rise again we must pass through the darkest depths of despair,” said crypto guru Jameson Lopp. “Investors will continue to speculate while developers continue to build.”
Galaxy S21 FE, Galaxy Z Fold 3, Galaxy Z Flip 3 might launch in August
It seems that Samsung is really trying to step up its schedule this year, but perhaps not too early as expected. Initial reports claimed that Samsung’s next Unpacked event would take place in July, considerably earlier than it had ever done in the past years. A new report now says that the event will instead be in August again but, more importantly, Samsung will reportedly have three phones to launch, all of which are meant to fill in the gap that the Galaxy Note will leave this year.
Samsung already made it more or less official that there will be no Galaxy Note this year. That decision was partly blamed on the global semiconductor shortage, and probably indirectly because of the Galaxy S21 Ultra that already has S Pen support. Ironically, that shortage won’t change the fact that Samsung will launch three phones in its place instead.
The Galaxy Z Fold 3 and Galaxy Z Flip 3 are already expected, of course, and they might still be launching earlier than they did last year despite this August schedule. The Galaxy Z Flip 5G did launch in August while the Galaxy Z Fold 2 and Galaxy F20 FE followed later. That Samsung will just be announcing everything in August and make the devices available in the following months is also a possibility.
Unfortunately, the report from the Yonhap News Agency didn’t come with details about the Galaxy S21 FE or Fan Edition. If it will repeat the same formula from last year’s Galaxy S20 FE, it will simply be a watered-down and more affordable version of the base Galaxy S21 model. The report does estimate a 700,000 KRW price tag, roughly $624 versus that base model’s starting $799.
The Galaxy S21 FE might be overshadowed by the more expensive foldables, though, at least as far as attention is concerned. The Galaxy Z Fold 3, in particular, is expected to have Samsung’s first under-display camera and its first foldable to have S Pen support. The Galaxy Z Flip 3, which skips a generation to match its foldable sibling, is believed to have a bigger cover screen.
Facebook really wants you to read articles before sharing them
It’s a common Internet habit: reading an article’s headline and then sharing the work without reading it. There are multiple reasons someone may do this, not the least of which is making assumptions about what the article presents based on its titles. Facebook is taking steps to address this habit, which can be problematic at times, by rolling out a new prompt.
The problem with sharing articles based on nothing more than the title is the risk of spreading misinformation, coming to conclusions that aren’t supported by the article, and lacking key details needed to discuss the matter. Actually reading the article provides context that may give the person sharing it a more informed perspective about the topic.
Facebook has announced that in order to encourage users to read articles before sharing them, it will now show them a prompt if they attempt to share a news article link they haven’t opened. The prompt includes the option to open the article first or to continue with sharing it.
Facebook notes in its prompt, “Sharing articles without reading them may mean missing key facts.” The prompt is described as a test at this time; it’s unclear how widely it is available. As with any test, it is possible it may change in the future or, perhaps, be removed.
This isn’t the first time we’ve seen this kind of feature appear on a social media platform. Last summer, Twitter introduced a similar prompt that encouraged its readers to read an article before sharing it. The feature first arrived on Android before rolling out in October 2020 on iOS.
Amazon fake reviews scam revealed in data breach with massive potential
By now, most of us probably suspect that fake reviews on internet shopping sites are a real thing. Whether being offering so-called “free product trials” after buying something or encountering a review that makes the product a little too good to be true, it’s easy to assume that fake reviews are a thing that happens. Today, however, a new security breach is giving us a better idea of just how widespread this might be.
Earlier this year, the folks over at SafetyDetectives discovered an open ElasticSearch database that contained what they call a “treasure trove” of messages between Amazon vendors and Amazon customers regarding fake reviews. The vendors in question typically offered free products in exchange for positive reviews, and in all, SafetyDetectives says that as many as 200,000 people are implicated by the data breach.
More than 13 million records comprising 7GB of data was revealed by this ElasticSearch server, which was closed and secured several days after SafetyDetectives discovered it in early March. SafetyDetectives says that it was unable to identify the owner of that server, making it impossible to alert them that the server was sitting wide open. It’s clear, however, that the server contained communications between several different vendors and customers – not just a single vendor.
Information that was leaked includes email addresses along with WhatsApp and Telegram phone numbers belonging to vendors. Customer data that was leaked includes 75,000 Amazon profile and account links of those who were selling reviews, PayPal email addresses, email addresses, and “Fan names” that could include the first names and surnames of users.
Instead of communicating through Amazon, vendors and the people selling reviews would often communicate through other messaging apps. Review sellers, it seems, were often instructed to purchase the product from Amazon and wait a few days before publishing a positive review of it, often with instructions from the vendor regarding what to say and how to make the review seem credible. After that, they were promised a refund on the purchase price of item – which was often carried out through PayPal to avoid using Amazon’s systems – and were allowed to keep the item in exchange for their positive review.
Obviously, this has some pretty big implications for vendors and Amazon users who were participating in fake reviews, as accounts for both could be terminated and fines could be levied depending on where in the world these vendors and reviewers are based. If you have a moment, be sure to read through SafetyDetectives’ full report on this data breach, because there’s a lot of good information there – including tips on how to spot fake reviews on Amazon.
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