As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
BITCOIN FALLS BELOW $5,000: On Monday, Bitcoin dropped below the $5,000 mark for the first time since October 2017. There has been speculation that elevated regulatory scrutiny will cause issuers of initial coin offerings to liquidate holdings, Bloomberg reported. The decline comes after the Securities and Exchange Commission announced its first civil penalties against two cryptocurrency firms that did not register their ICOs as securities. The agency fined Airfox and Paragon Coin $250,000 each to compensate investors and the companies will also have to register their virtual currencies as securities. The sell-off has also coincided with a “hard fork” of Bitcoin Cash. Bitcoin dropped further toward $4,000 on Friday and the market value of all cryptocurrencies sank to $138B, down from about $835B at the market peak in January, according to CoinMarketCap.com.
DOJ PROBES TETHER OVER BITCOIN TIES: The U.S. Justice Department is investigating whether last year’s bitcoin rally was fueled in part by price manipulation using Tether, Bloomberg reported Tuesday. Federal prosecutors, who have been probing cryptocurrencies for several months, recently focused in on suspicions that bitcoin, Tether and crypto exchange Bitfinex might have been used to illegally move prices. Bitfinex and Tether have the same management team and some traders have alleged that Tethers, which are supposed to be tethered to the U.S. dollar, are used to purchase bitcoin at key moments when the value of the digital token drops. Chief executive officer JL van der Velde has previously denied such allegations.
BITCOIN’S USE IN PAYMENTS COLLAPSES: The use of bitcoin for commercial payments has slumped significantly this year with the value of bitcoins handled by major payment processors falling roughly 80% in the year to September, Reuters reported Tuesday. The value of bitcoin payments collapsed to $96M in September from a December high of $427M, according to data from Chainalysis, which surveyed 17 bitcoin payments processors, i1ncluding Atlanta-based BitPay. The drop signals that the digital currency is struggling to mature from speculative asset to a serious alternative to fiat currency.
TOM LEE REMAINS BULLISH ON BITCOIN: Fundstrat Global Advisors co-founder Tom Lee said he remains bullish on bitcoin and sees a recovery despite the fall in prices to their lowest levels in over a year, CNBC reported Tuesday. Lee, who cut his year-end target to $15,000 from $25,000 last week, said he stood by that forecast and that additional institutional involvement and oversight from regulators could support prices into the end of 2018. Lee also put a “fair value” of bitcoin at $7,000. “I think digital assets are going to be relevant in a world where growth is increasingly digital,” he said. “To me, bitcoin is a real bet on a project where we have 50M wallets, there’s 5B Visa (V) cards, so I think the runway is really adoption in the future by millennials.”
OVERSTOCK CEO SEES DEAL TO SELL RETAIL BUSINESS: Overstock (OSTK) CEO Patrick Byrne is staking his company's future on Medici Ventures, the unit that controls blockchain-based trading system tZero and more than a dozen other blockchain startups, The Wall Street Journal reported Friday. Byrne plans to sell Overstock's retail business, telling The Journal that he expects to wrap up such a sale deal by February, though he declined to name potential suitors. tZero plans to initially trade security tokens though getting the needed regulatory approvals has taken time and tZero "has blown past several expected launch dates," said The Journal, which added that the company says it will go live in the first quarter.
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Overstock, DPW Holdings (DPW), Kodak (KODK), Ideanomics (SSC), Riot Blockchain (RIOT), Pareteum (TEUM) and Social Reality (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin was down about 23.2% this week to $4,255 in U.S. dollars, according to CoinDesk.
