Cryptocurrencies

CertiK shares security tips following third BAYC security compromise in six months

According to CertiK, investors should be highly skeptical of free NFT giveaways, as well as small peculiarities in sites they interact with.

On June 4, the popular nonfungible token, or NFT, project Bored Ape Yacht Club (BAYC) suffered its third security compromise this year. Nearly 142 Ether (ETH) ($250,000) worth of NFTs was stolen after hackers gained access to the Discord account of a BAYC community manager and posted a message with a link to a fake website.

The link advertised a limited-time free-NFT giveaway to users who connected their wallets, which were then drained of NFTs. During two prior occasions in April, hackers breached BAYC’s Discord and Instagram pages and managed to siphon 91 NFTs, worth over $1.3 million at the time of the second attempt, via a phishing link.

As told by blockchain security firm CertiK, hackers quickly moved stolen funds to obfuscation platform Tornado Cash, making it impossible to trace any further flow of funds on the blockchain. In a statement to Cointelegraph, sources at CertiK explained that however legitimate the project may seem, “NFT holders should also be highly suspicious of anyone claiming to offer free assets, as these can often be phishing attacks.” In addition, CertiK wrote:

“In the case of the June 4th attack, the malicious carbon-copy site had some small differences. Firstly, there were no links to social media sites on the phishing site. There was also an added tab titled “claim free land” and specifically targeted popular NFT projects.”

As a precautionary measure, Certik recommended crypto enthusiasts look for subtle peculiarities on such sites, as they are frequently an indicator of malicious activity. “At the very least, users engaging with such giveaways should always make an effort to confirm the legitimacy of the site by comparing it with a known and confirmed site and looking for any discrepancies,” they concluded.

Hong Kong’s Securities and Futures Commission warn of nonfungible token risks

The regulatory agency’s main concern was the rise of unregulated collective investment schemes in NFTs.

On Monday, Hong Kong’s Securities and Futures Commission (SFC) released a statement warning investors about the risks of nonfungible tokens, or NFTs, which have soared in popularity in recent years. The regulatory body wrote:

“As with other virtual assets, NFTs are exposed to heightened risks, including illiquid secondary markets, volatility, opaque pricing, hacking and fraud. Investors should be mindful of these risks, and if they cannot fully understand them and bear the potential losses, they should not invest in NFTs.”

However, it appears that the SFC’s specific concern lies in the securitization of NFTs. “The majority of NFTs observed by the SFC are intended to represent a unique copy of an underlying asset such as a digital image, artwork, music or video,” which do not require regulation by the SFC.

But assets that push the boundary between collectibles and financial assets, such as fractionalized or fungible NFTs structured as securities or collective investment schemes (CIS) in NFTs, do fall under the SFC’s mandate. The solicitation of Hong Kong residents by companies engaged in these activities require the issuer to obtain a license from the SFC unless an exemption applies.

CIS has recently gained traction as they present a plausible solution for individual investors to obtain fractional ownership of real-life collectibles that would be otherwise too cost-prohibitive for any single party. Yet, questions persist as to whether such investment structures constitute securitization.

One recent effort launched by the Royal Museum of Fine Arts Antwerp (KMSKA) to tokenize a million-euro classic painting on the blockchain was conducted via debt securitization. The venture met regulatory requirements via the aid of blockchain entities Rubey and Tokeny.

Bitcoin ATM installations record low in May, biggest drop since 2019

Since January, Bitcoin ATM installations have seen a gradual slowdown, eventually falling 89.75% from December 2021’s 1,971 new installations.

Bitcoin (BTC) ATM installations across the globe have seen a steep decline throughout the year 2022, with May recording just 202 new BTC ATMs, a range last seen three years ago in 2019.

Since January, Bitcoin ATM installations saw a gradual slowdown, eventually falling down 89.75% from December 2021’s 1,971 new installations. However, data from Coin ATM Radar reveals an evident comeback in the installation numbers, as the world saw 817 Bitcoin ATMs installed in June — in just the first five days.

*Net change of cryptocurrency machines number installed and removed monthly. Source: Coin ATM Radar*

Some of the key factors contributing to the slowdown of crypto ATM installations include geopolitical tensions across the world, unclear or anti-crypto regulations, market saturation and business impact due to the ongoing coronavirus pandemic.

Coin ATM Radar’s data confirms that the United States is home to 87.9% of the total 37,826 crypto ATMs worldwide. Europe houses a network of 1,419 ATMs, representing 3.8% of the global ATM installations.

*Number of cryptocurrency machines installed by manufacturer over time. Source: Coin ATM Radar*

Crypto ATM manufacturer Genesis Coin maintains its position as the leader in terms of the market share, representing 41% of the total operational crypto ATMs across the globe. Other manufacturers with prominent market share include General Bytes (21.6%), Bitaccess (16%), Coinsource (5.4%) and Bitstop (4.7%).

While real-world challenges may have a momentary impact on Bitcoin’s physical expansion via ATMs, at its core, the Bitcoin network continues to outperform its previous records in securing, decentralizing and speeding up the impenetrable peer-to-peer network.

*Cumulative Bitcoin capacity across all channels. Source: BitcoinVisuals node*

As Cointelegraph reported based on data from Bitcoin Visuals, the Bitcoin Lightning Network (LN) capacity attained an all-time high of 3,915.776 BTC — further improving BTC transaction speeds and reducing fees over the layer-2 protocol. The Bitcoin LN was first implemented into the Bitcoin mainnet in 2018 to address Bitcoin’s infamous scalability issues.

CBDCs can “kill” private crypto: India’s RBI deputy governor to IMF

“One of the reasons it is so successful is because it’s simple,” he added while comparing the Unified Payments Interface’s (UPI) growth with blockchain technology.

In discussion with the International Monetary Fund (IMF), T Rabi Sankar, the deputy governor of the Reserve Bank of India (RBI), reflected an anti-crypto stance as he spoke about India’s potential to disrupt the crypto and blockchain ecosystem.

Rabi Sankar started the conversation by highlighting the success of the Unified Payments Interface (UPI), India’s in-house fiat-based peer-to-peer payments system — which has seen an average adoption and transaction growth of 160% per anum over the last five years.

“One of the reasons it is so successful is because it’s simple,” he added while comparing UPI’s growth with blockchain technology. According to Rabi Sankar:

“Blockchain, which was introduced six-eight years before UPI started, even today is being referred to as a potentially revolutionary technology. [Blockchain] use cases haven’t really been established that much at the speed it initially was hoped for.”

However, the RBI official confirmed that a large population in India still lacks access to UPI-based banking due to the unavailability of smartphones. To counter this, the Indian government is working on offline payment platforms, some of which have started rolling out to the masses.

June 2 at 7:00am ET // At the Frontier: India’s Digital Payment System and Beyond will explore the latest developments in digital payments with a focus on lessons from India as well as future with a significant role for Central Bank Digital Currencies. https://t.co/ZSj7i15fBG pic.twitter.com/X6cVyHewEs

— IMF (@IMFNews) May 31, 2022

Rabi Sankar also stated that banks will remain crucial for providing liquidity services to the general public in India, warning that technology is merely a tool and cannot be used to create currencies:

“A currency needs an issuer or it needs intrinsic value. Many cryptocurrencies which are neither are still being accepted at face value. Not just by gullible investors but also the experts, policymakers or academicians.”

He further stated that RBI does not believe that stablecoins, like Tether (USDT), should be accepted blindly as 1-to-1 fiat pegged currencies. Speaking about the advantages of a digital rupee, Rabi Sankar said:

“We believe that central bank digital currencies (CBDCs) could actually be able to kill whatever little case that could be for private cryptocurrencies.”

On May 28, India’s central bank, RBI, proposed a three-step graded approach for rolling out CBDC “with little or no disruption” to the traditional financial system.

As Cointelegraph reported, finance minister Nirmala Sitharaman first revealed the plan to launch a CBDC in 2022-23 with an aim to provide a “big boost” to the digital economy. RBI’s report revealed that the central bank is currently experimenting to develop a CBDC that addresses a wide range of issues within the traditional system.

CBDCs can “kill” private crypto: India’s RBI deputy governor to IMF

“One of the reasons it is so successful is because it’s simple,” he added while comparing the Unified Payments Interface’s (UPI) growth with blockchain technology.

Rabi Sankar started the conversation by highlighting the success of the Unified Payments Interface (UPI), India’s in-house fiat-based peer-to-peer payments system, which has seen an average adoption and transaction growth of 160% per anum over the last five years.

“One of the reasons it is so successful is because it’s simple,” he added while comparing UPI’s growth with blockchain technology. According to Rabi Sankar:

“Blockchain, which was introduced six-eight years before UPI started, even today is being referred to as a potentially revolutionary technology. [Blockchain] use cases haven’t really been established that much at the speed it initially was hoped for.”

June 2 at 7:00am ET // At the Frontier: India's Digital Payment System and Beyond will explore the latest developments in digital payments with a focus on lessons from India as well as future with a significant role for Central Bank Digital Currencies. https://t.co/ZSj7i15fBG pic.twitter.com/X6cVyHewEs

— IMF (@IMFNews) May 31, 2022

“A currency needs an issuer or it needs intrinsic value. Many cryptocurrencies which are neither are still being accepted at face value. Not just by gullible investors but also the experts, policymakers or academicians.”

“We believe that central bank digital currencies (CBDCs) could actually be able to kill whatever little case that could be for private cryptocurrencies.”

On May 28, India’s central bank, RBI, proposed a three-step graded approach for rolling out CBDC “with little or no disruption” to the traditional financial system.

Fed governor explains who needs crypto regulation and why demand for it is growing

Experienced investors know how to survive, Christopher Waller reasons, but there can be wide repercussions when small investors are hit with losses.

Regulation is needed to open the crypto ecosystem to a larger public, United States Federal Reserve Board Governor Christopher Waller told an audience at the SNB-CIF Conference on Cryptoassets and Financial Innovation in Zurich, Switzerland. Financial intermediaries can help manage risk for new crypto users, but cannot eliminate it, Waller said, and new and fast-growing financial products need public confidence to survive.

The banking official used historical examples to show the relationship between technical innovation, regulation and the amassing of fortunes. “New technology — and a lack of clear rules — meant some new fortunes were made, even as others were lost,” Waller said.

Experienced investors know how to operate in unregulated marketplaces and may not need or want regulation, Waller continued. He pointed to a recent Fed survey that showed that even with the explosive crypto-assets in recent years, only 12% of American adults own crypto, and 99% of them hold it for investment purposes.

Intermediaries in the financial market may want regulation because new users who have negative experiences with crypto could enter into disputes with them. Waller explained: “When everyday investors start losing their life savings, for no reason except wanting to participate in a hot market, demands for collective action can mount quickly.”

Those demands can grow into the socialization of individual losses, such as calls to reimburse small investors who have suffered losses in the collapse of the Terra (LUNC; formerly, LUNA) ecosystem, the central banker reasoned. That, in turn, leads to increased demand for regulation to prevent the situation from reoccurring.

To allow broad access to the crypto ecosystem, Waller concluded:

“[…] the question isn’t about what experienced users of that ecosystem want — it’s about what the rest of the public needs to have confidence in the ecosystem’s safety, and for better or worse, you can’t program confidence.”

5 metrics to monitor before investing in crypto during a bear market

Everyone is a genius during a bull market, but how does one invest during lengthy downtrends? Here are five things to consider before buying into a crypto project.

Cryptocurrency bear markets destroy portfolio value and they have a dangerous tendency to drag on for longer than anyone expects. Fortunately, one of the silver linings of market-wide pullbacks is that it gives investors time to re-focus and spend time researching projects that could thrive when the trend turns bullish again.

Here’s five areas to focus on when deciding whether to invest in a crypto project during a bear market.

Is there a use case?

The cryptocurrency sector has no shortage of flashy promises and gimmicky protocols, but when it comes down to it there are only a handful of projects that have delivered a product that has demand and utility.

When it comes down to determining if a token should continue to be held, one of the main questions to ask is “Why does this project exist?”

If there is not a simple answer to that question or the solutions offered by the protocol don’t really solve a pressing problem, there is a good chance it won’t gain the adoption it needs long term to survive.

Identify a competitive advantage

In the cases where a viable use case is present, it’s important to consider how the protocol compares against other projects that offer solutions to the same problem.

Does it offer a better or simpler solution than its competitors, or is it more of a redundant protocol that doesn’t really bring anything new to the table?

A good example of unnecessary redundancy is the oracle sector of the market, which has seen a handful of protocols launched over the past three years. Despite the growing number of options, the oldest and most widely integrated oracle solution is Chainlink (LINK) and it remains the strongest competitor in the field.

Does the protocol generate revenue, and how?

“If you build it, they will come,” is a cliche expression tossed around in tech circles, but it doesn’t always translate into real-world adoption in the cryptocurrency sector.

Operating a blockchain protocol takes time and money, meaning that only protocols with revenue or sufficient funding will be able to survive a bear market.

Identifying whether a project is profitable and where the revenue comes from can help guide investors who are interested in buying decentralized finance (DeFi) tokens.

*Projects with the highest protocol revenue. Source: Token Terminal*

If a project shows limited activity and revenue, it may be a good time to start evaluating whether it’s undervalued or a investment that should be avoided.

Are there cash reserves?

Every startup is meant to have a war chest, treasury or runway as prior to investing, it’s important to identify whether or not the project has sufficient funds to survive downtrends, especially if providing yield on locked assets is the primary incentive for attracting liquidity.

As mentioned earlier, running a blockchain protocol isn’t cheap, and the majority of the protocols out there might not be liquid enough to survive a lengthy bear market.

Every successful NFT project should bring in a crypto financial manager/treasurer to properly diversify/hedge their war chest, not just keep everything in ETH.

A project needs to know how to take profit too.

— $trawberry Sith (@StrawberrySith) May 10, 2022

Ideally, a DeFi-style project should have a large treasury containing a variety of assets like Bitcoin (BTC), Ether (ETH) and more reliable stablecoins like USD Coin (USDC) and Tether (USDT).

Having a well-funded and diversified treasury that can be pulled from during tough times is crucial and as $trawberry Sith suggests, projects need to learn when to take profit, and not leave a majority of the protocol treasury in Ether or the platform’s native token.

Are roadmap deadlines kept and met?

While past performance is not necessarily an indicator of future results, a project’s history of following its roadmap and meeting important deadlines can offer valuable insight into whether it is prepared to endure tough times.

In addition to keeping track of roadmap milestones, sites like CryptoMiso and GitHub can help investors peer behind the curtain to see the frequency of development and developer activity for a protocol.

If a team is displaying little to no signs of activity as roadmap deadlines come and go, it might be time to consider the possibility that a slow rug pull is occurring and that it may be time to get out before further losses are realized.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Japan passes bill to limit stablecoin issuance to banks and trust companies

The Japanese government is rushing to enforce new stablecoin laws in the aftermath of the Terra collapse.

Japan is moving forward with legislation regarding the issuance of stablecoins, i.e., digital assets with their value pegged to fiat currencies or stabilized by an algorithm.

On Friday, Japan’s parliament passed a bill to ban stablecoin issuance by non-banking institutions, local news agency Nikkei reported.

The bill reportedly stipulates that the issuance of stablecoins is limited to licensed banks, registered money transfer agents and trust companies in Japan.

The new legislation also introduces a registration system for financial institutions to issue such digital assets and provides measures against money laundering.

According to the report, the bill aims to protect investors and the financial system from risks associated with the rapid adoption of stablecoins, which saw its market surging up to 20 trillion yen, or more than $150 billion.

The new legal framework will reportedly take effect in 2023, with Japan’s Financial Services Agency planning to introduce regulations for stablecoin issuers in the coming months.

Japan’s stablecoin bill comes in the aftermath of a massive decline on cryptocurrency markets fueled by the Terra tokens collapse, with the algorithmic stablecoin Terra USD (UST) losing its 1:1 value to the U.S. dollar in early May.

The stablecoin market turmoil has not been exclusive to the Terra blockchain as other algorithmic stablecoins like DEI also subsequently lost its dollar peg, plummeting to as low as $0.4 in late May.

401(k) provider ForUsAll sues US Labor Dept over anti-crypto compliance release

The retirement plan fiduciary says warning about investigation of 401(k) plans that include cryptocurrency constitutes encroachment on private rights.

ForUsAll, a 401(k) retirement provider, filed suit against the United States Department of Labor (DOL) and Martin Walsh as Labor secretary in U.S. District Court in Washington, D.C. on Thursday. The company is seeking the withdrawal of a DOL compliance assistance release issued in March, citing the Administrative Procedure Act, which safeguards against arbitrary official encroachment on private rights.

The DOL release warned that the department’s Employee Benefits Security Administration is expected to “conduct an investigative program” aimed at 401(k) plans that contain cryptocurrency. ForUsAll CEO Jeff Schulte told Cointelegraph:

“The government is suddenly trying to restrict the type of investments Americans can choose to make because they’ve decided today that they don’t like a certain asset class. […] They’re clearly trying to effect a ban and they don’t have the legal authority to do so.”

The DOL release has elicited a sharp response from several quarters. A group of 11 financial industry trade associations sent a letter to Acting Assistant Secretary Ali Khawar in April objecting to the “rulemaking nature” of the release without stating a position on the presence of cryptocurrency in retirement plans.

Later that month, 10 investor, consumer, worker and retiree organizations sent a letter to Khawar in support of the release, saying it is consistent with the Employee Retirement Income Security Act of 1974 that created the 401(k) program and imposed strict duties on plan fiduciaries.

Schulte said ForUsAll has about 150 companies that have signed up for 401(k) plans that include crypto, and ForUsAll intended to begin rolling out 401(k) plans that include crypto this summer.

“We have met with the Department of Labor last year,” Schulte said. “We have taken great pains to make sure that our program complies with all existing regulations and rules, and we are confident in the design of our program.”

Ethereum’s Merge FOMO isn’t priced in, making a spike to $2.6K a possibility

Ethereum’s price action hangs around major swing lows despite the all-important Merge network upgrade. Analysis suggests ETH is discounted below $2,000.

In a May 30 tweet, Ethereum (ETH) core developer Tim Beiko confirmed that the much-anticipated Ropsten testnet trial of the Merge from proof-of-work to proof-of-stake can be expected “around June 8 or so.”

Interestingly, Ether’s price action is relatively unchanged despite the unexpected bullish announcement. There was a +10% spike on May 30, but those gains were given back between May 31 and June 2. It is very likely that the Merge — currently anticipated in August — has yet to be priced in, giving traders and investors a possible early entrant advantage.

It’s essential to monitor on-chain data

From an investing and trading viewpoint, cryptocurrency markets have a distinct disadvantage in comparison with regulated markets and transparency. The stock market is chock full of legally required disclosures. In the stock market, the retail trader can identify how many shares of a stock are short, what institution bought (or sold) a large disclosed amount, what insiders bought or sold and a myriad of other forms of information.

The cryptocurrency markets do not have those kinds of legal requirements. In fact, the public doesn’t know if the Bitcoin (BTC) or Ethereum being bought and sold on an exchange is the real cryptocurrency or a type of internal derivative used to facilitate liquidity. But crypto markets have something better than the stock market and that is on-chain data.

On-chain data allows investors and traders to monitor a blockchain’s network activity. It can answer questions: How many Ether are being sent to an exchange? Are there any large transactions? Are any “whale” wallets bigger or smaller? On-chain data can help determine whether a trader or investor should be bullish or bearish.

On-chain data that measure inflows and outflows are often used to determine a bias of whether a cryptocurrency is bullish or bearish. Inflow measurements are cryptocurrencies entering an exchange from outside wallets and are often perceived as a sign of incoming selling pressure. Outflow measurements are cryptocurrencies exiting an exchange to external wallets and are often perceived as a sign of holding or accumulation.

The number of inflow transactions has stayed relatively flat over the past three months, with a noticeable drop since the middle of May.

Inflow 24h change: -13.50%
Inflow 7-day change: -5.87%
Inflow 30-day change: -8.08%

*Aggregated exchange inflow transaction count. Source: IntoTheBlock*

However, the number of outflow transactions has declined since March. In addition, there was a major outflow spike on May 12, the date of the most recent Ether flash crash, followed by a resumption of a decline in outflows.

Outflow 24h-change: +3.62%
Outflow 7-day change: +8.87%
Outflow 30-day change: -1.56%

*Aggregated exchange outflow transaction count. Source: IntoTheBlock*

It is important to note that since May 29, outflows have increased and inflows have decreased. This could be a bullish signal that big money is accumulating.

Ether price remains at major swing lows and oscillators are at historical lows

The upcoming Merge event is one of the most significant in Ethereum’s history. It is rare to see the world’s second most valuable cryptocurrency remaining at 200-day lows and down more than 60% from its all-time high.

Perhaps the most important and relevant details for Ether are the position of the relative strength index and the composite index.

The weekly relative strength index remains in bull market conditions, but is just above the final oversold level of 40. The current value of 42.15 is the lowest since the week of March 18, 2019.

The composite index, likewise, is at near a historical low. The composite index, developed by Connie Brown, is essentially the RSI with a momentum indicator. It is an unbounded oscillator and can catch divergences that the RSI cannot. The weekly composite index value is the third lowest in Ethereum’s history and the lowest since the week of March 26, 2018.

*ETH/USD weekly chart. Source: TradingView*

The extreme oversold readings on the Ether weekly chart, rise in outflows and reduction of inflows can give Ethereum investors and traders a good reason to be bullish in the near term. However, any potential bullish reaction will likely be swift and abrupt, but limited to the 2022 volume point of control at $2,600.

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.