The longest shutdown in history is over.
Alas no big beautiful wall, but there was a cave.
Outside of the White House, the 2020 election is already heating up, Democrats are entering
the race as well as some independents.
So while it might not be possible to buy Starbucks with Bitcoin, it might be possible to use
Starbucks to buy the presidency.
Howard Schultz, former CEO of Starbucks, this week flirted with running for POTUS, but might
reconsider after this exchange.
Don't help elect Trump!
You egotistical billionaire a**hole!
Go back to getting ratioed on Twitter!
A considerably more popular proposition was BitTorrent this week, which sold-out of all
of their tokens in under 15 minutes, raising over $7 million.
Also this week, a $1 billion hack Chainalysis report, Iran avoids sanctions with crypto,
Hamas accepts crypto and gold vs Bitcoin.
Ladies and gentlemen, I'm Molly Jane and this is your weekly Hodler's Digest,
Let's take a look at the latest market updates.
Two sophisticated criminal organizations are responsible for stealing over one billion
dollars in cryptocurrency hacks, says a report published by crypto analytics firm Chainalysis.
This amount accounts for the majority of funds stolen in such hacks in the last few years.
The two groups, dubbed Alpha and Beta, are still active and appear to have very recognizable
patterns of behavior.
The Chainalysis report provides a description of the techniques used by the two groups to
hide their tracks, by transferring stolen funds thousands of times before cashing out
from multiple exchanges.
A method to stop the hackers, the study says, could be through a tighter collaboration among
crypto exchanges.
We talked to Philip Gradwell, chief economist at Chainalysis, to give us more details about
the report.
So we identified these two organizations by looking at the patterns by how they cash the
money out once they've committed a hack.
So we didn't know that there would be only two.
Instead, we have these investigators who follow the money from the scene of the crime to the
point where the hackers change that for fiat or for other cryptocurrencies.
And what we did is we then took a systematic approach where we were able to analyze those
flows of money over time.
And when we did that across a number of hacks we saw that there were two very clear patterns
which suggest to us that there's two groups behind this.
And given the scale of the number of hacks that they had done and the complexity by which
they moved the money around, it suggests that both of these are large professional organizations.
When Alpha hacks an exchange they then move that crypto around thousands and thousands
of times in a very short period of time and they cash out to lots of different places.
And that means that they're actually paying quite a lot in fees.
They risk losing some of their crypto.
They might cost them more to try and cash out at least different areas.
They've kind of got almost higher cost of business through the way that they cash out.
So they're not as efficient as group Beta, which doesn't move its funds around as much
and then cashes out all at once, often through one single exchange.
It really looks like group Alpha is trying to create confusion.
It looks like on purpose they're making this really complex web that's harder to follow
through.
The hackers are always trying to cash out at the place where they can swap their crypto
into fiat.
That's in other exchanges.
So the cooperation really comes from one exchange saying: "OK, we had a hack.
Can everyone else be on the lookout for funds that come from us?
And if you get those funds deposited at your exchange can you perhaps freeze them?".
So we can investigate, asking questions and hopefully get some of those funds returned.
Stepping up the challenge for hackers, New York-based crypto exchange Gemini completed
a SOC 2 Type 1 examination, giving proof of its high-level security standards.
Gemini is reportedly the first crypto exchange to receive such certification, released by
audit firm Deloitte and designed to meet the trust services requirements of the American
Institute of Certified Public Accountants.
Such requirements include security, availability, processing integrity, confidentiality and
privacy.
We talked to Gemini Head of Risk, Yusuf Hussain, and asked him to explain how this represents
a significant milestone for the company and for the crypto industry as a whole.
Major American investment firm Fidelity will launch its own custody service for digital
assets in March, as sources close to the matter told Bloomberg this week.
The company's new services will be targeted at institutional investors, such as hedge
funds, family offices and market intermediaries, but for now they will not be available for
retail investors.
Bitcoin will be the first crypto to be stored by Fidelity, but Ethereum storage is expected
to follow soon.
Fidelity reported in a statement: "We are currently serving a select set of eligible
clients as we continue to build our initial solutions.
Over the next several months, we will thoughtfully engage with and prioritize prospective clients
based on needs, jurisdiction and other factors."
Fidelity manages trillions of dollars in client assets and it has been in the business for
over 70 years.
The launch of its crypto custody service responds to an increasing demand for security in the
crypto sphere and is likely to attract more and more institutional investors into the space.
Iran has lifted the nationwide ban on Bitcoin, albeit with some restrictions; Iranians can
trade the leading crypto, but are prohibited from having holdings above 10,000 euros or
just over $11,000.
In addition to this, Iranians are not allowed to accept payments in crypto within Iran.
Despite the restrictions, the crypto community, which transacts up to $10 million in BTC a
day, cautiously welcomed the reversal of the ban.
The restrictions are part of draft regulations, so could be subject to change.
The reversal was announced by the central bank just before the electronic banking and
payments systems conference earlier this week.
The theme of the conference was "blockchain revolution," likely the only revolution
the country will see for some time to come.
Another announcement that was expected at the conference was the launch date of the
state-backed Crypto-Rial, but so far, radio silence from the central bank on that particular
topic.
All of these crypto-related projects both at the state level and amongst ordinary Iranians
are ostensibly efforts to circumvent crippling sanctions.
The U.S. Treasury has sought to "aggressively pursue Iran and other rogue regimes attempting
to exploit digital currencies."
However, ordinary Iranians are using crypto to accept foreign payments and conduct business
in Bitcoin to get around restrictions imposed by U.S. banks.
Of course, not everything is aboveboard.
Recently the U.S. Justice Department indicted two Iranian men on charges related to SAMSAM
ransomware, which compromised American hospitals and government agencies in Atlanta.
On the state level, Iran is reportedly in talks with eight countries including Switzerland,
South Africa, France and the United Kingdom to discuss the possibility to conducting financial
transactions in crypto.
At this point, it is unclear whether the negotiations concern crypto in general or are about the
Crypto-Rial.
Iran is not alone in its attempt to circumvent sanctions using a state-backed crypto, Russia
is currently engaged in similar efforts, and yet both countries should perhaps use Maduro's
Petro as a cautionary tale, or take Max Keiser's advice:
Text from Tweet: "It's great states (Iran, Venezuela, China, Russia) are trying state-crypto
currencies.
It's an important step.
All theirs will fail and they'll realize only #Bitcoin gives them what they seek: Escape
from $USD."
We spoke to Gevorg Avetikyan, an academic scholar of Iranian studies from the Yerevan
State University, currently at the European University in St. Petersburg, about how sanctions
are affecting Iran.
On February 11 it will be exactly 40 years that they have done a revolution ever since
there have been various kinds of sanctions imposed on Iran.
I mean the most distraught indeed the most effective was that we now know of that are
tied to the nuclear policy in Iran that have started in mid-2000s.
Nevertheless in November 2018 the sanctions resumed their direction and soon after that
Ian Central Bank and most of its banks most of its banking institutions were switched
off from the SWIFT network which means that Iran was really left with no real realistic
legal option of Internet or some money transactions which means that they cannot pay for the inputs
and they cannot also get the money for their exports
The price of Rial does not really affect that much the local population.
But there's very important things.
And the first one that comes to my mind is medicine.
Iran does have its own industry of pharmaceutical etc.
But they still depend on many medication which is imported to the country and the population
at this moment is just unable to pay for it.
Last year during the new year there were large protests all over the country which started
from a spark.
Chicken eggs the price of eggs had arisen for several percents.
And that was the first sparkle to bring some people into the streets to protest against
the growing prices etc.
Hamas is crowdfunding, but due to the fact that, amongst others, the U.S. and the E.U.
consider them a terrorist organization, they likely fall foul of the Gofundme and Kickstarter
terms of service.
Thus, the de facto ruling party of the Gaza strip has turned to Bitcoin in order to raise
funds.
The request for BTC was sent out on Abu Obeida's Telegram channel, a spokesman for Hamas.
The funds would go to their militant faction, which is widely considered a terrorist organization
with the exception of Russia, Turkey and China, who do not take this position.
The Telegram message reads: "all lovers of the resistance and the supporters of our
righteous cause to support the resistance financially using 'Bitcoin' currency."
The message goes on to accuse the so-called "Zionist enemy," Israel, of trying to
cut all means of financial support.
The Gaza strip is currently under a land, air and sea blockade imposed by Egypt and
Israel; furthermore, Benjamin Netanyahu recently froze several million dollars in Qatari aid,
$15 million of which was intended to pay the salaries of Hamas civil servants.
Spokesman Abu Obeida did not detail how exactly supporters could donate Bitcoin to the militant
wing of Hamas, which is telling because actually receiving funds in BTC is most of the battle.
Last year, U.S. Congress concluded that "cash was still king'"when it came to terrorist
financing and crypto was a "poor form of money" in this regard.
They reached this conclusion after studying Al-Qaida's efforts to raise illicit funds.
In September of last year, the U.S. House of Representatives passed the "Financial
Technology Protection Act" in order to set up a task force to combat terrorist financing
Early in January, Gemini founders Cameron and Tyler Winklevoss confirmed their bullish
view on Bitcoin, encouraging hopes that the main cryptocurrency will eventually replace
gold as the most trusted store of value.
"I think investors who have gold in their portfolio of other precious metals are now
starting to look at Bitcoin as a better store of value, it has better money characteristics
than gold itself, so it is actually better at being gold than gold."
"Bitcoin is better at being gold than gold itself," said Tyler.
It is clear, however, that we are not there yet.
After briefly turning to Bitcoin as their preferred store of value during the 2017 bull
run, many investors are now returning to gold.
At least that's what Jan Van Eck, CEO of investment management firm Van Eck Associates,
pointed out in a recent interview.
He said:
"I do think that Bitcoin pulled a little bit of demand away from gold last year, in
2017.
Interestingly, we just polled 4,000 bitcoin investors and their number one investment
for 2019 is actually gold.
So gold lost to bitcoin and now it's going the other way."
Van Eck's analysis was supported by a recent report by market development organization
World Gold Council, which points out that, while Bitcoin has behaved as a risky asset
amidst the stock market crisis of 2018, losing much of its value, gold's price rallied
and confirmed itself as the safest store of value in troubled times.
According to the same study, Bitcoin's strong correlation to Nasdaq proved its close relation
with technology stocks, thus not suitable for replacing gold as a safe haven.
However, it doesn't need to be a throw the baby out with the bathwater situation.
Several stablecoins backed by the precious metal are already available on the market.
For instance, the Digix Gold token, launched in September 2018, is based on the Ethereum
blockchain and backed by physical gold.
Shaun Djie, CEO of Digix, said the gold-pegged token is likely to gain popularity in a crypto
winter, the end of which is still out of sight.
We talked to Shaun Djie, asking him to comment on the advantages of a gold-backed cryptocurrency.
With Iran circumventing sanctions and Russia de-dollarizing, do think more countries will,
in Max Keiser's words, "escape the USD"?
Or does that have as much chance as a 43-7 Rams Super Bowl victory?
Let us know in the comments.
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