Bitcoin fell Tuesday, following stocks lower after the August consumer price index report came in higher than expected.
The cryptocurrency slid 9.66% on Tuesday, falling to $20,249.8 per coin at 4:00 p.m. ET according to Coin Metrics. It was bitcoin’s worst day since June 18.
The declining price is a reversal of earlier gains. Bitcoin had hit a one-month high of $22,764.49 Tuesday morning before falling, according to Coin Metrics.
The rally, which brought the digital asset back above the key psychological $20,000 level last week, was spurred by softening of the U.S. dollar ahead of Tuesday’s inflation report, which was expected to show that inflation had cooled off. A much-anticipated network update for Ethereum also boosted the digital coin’s price.
But August CPI data showed that inflation rose month over month even as gas prices slipped. The U.S. dollar jumped, and stocks sold off sharply as Wall Street anticipates more aggressive interest rate hikes from the Federal Reserve.
As rates surge, investors sought to shed risky assets like cryptocurrencies.
Ether, the token that runs on Ethereum, also slipped more than 6% on Tuesday ahead of the much-anticipated Merge, expected to take place sometime between Sept. 13-15. During the merge, Ethereum will switch from a proof-of-work model to one that uses proof-of-stake.
The move will help make Ethereum more energy efficient and secure. It should also help draw new investors to the cryptocurrency, which has the second-largest market cap after bitcoin.
Still, it’s not clear when exactly the Merge will happen. It may also take more than the three days investors are currently watching.
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Bitcoin held above $22,000 on Monday as it continues a week-long rally ahead of U.S. inflation data and a highly anticipated Ethereum network upgrade.
The world’s largest cryptocurrency was trading at $22,328.27 at around 9:15 a.m. ET, according to CoinDesk data.
After falling below $19,000 on Wednesday to its lowest level since June, bitcoin has since rallied around 17%.
This also comes off the back of a winning week last week for U.S. stocks. Bitcoin has been closely correlated to equity markets, particularly the Nasdaq, and often moves higher when the tech-heavy index rises.
Crypto investors are looking ahead to the August consumer price index report, scheduled to be released Tuesday, to see the direction inflation is headed which could give hints toward future policy moves by the U.S. Federal Reserve.
Stocks have been under pressure this year as the Fed has hiked interest rates to try to control rampant inflation.
Cryptocurrencies, which are also risk assets, have been battered. Nearly $2 trillion has been wiped off the entire crypto market since its all-time high in November. Bitcoin is down more than 50% this year.
That decline has also been driven by crypto-specific issues including the collapse of key projects and bankruptcies that have spread across the industry.
Meanwhile, the Ethereum network will complete a long-awaited upgrade called the merge. This will transform the Ethereum blockchain from a proof-of-work to proof-of-stake model and significantly reduce the amount of energy required for the network to operate.
Proponents say this could pave the way for a broader use of ether, the token that runs on Ethereum.
“Crypto faces an unusual double whammy this week: U.S. inflation data and [hopefully] the long-awaited and oft-delayed Ethereum Merge. Hold your breath for a rollercoaster ride,” Antoni Trenchev, co-founder of Nexo, said in a note on Monday.
“In a time awash with narratives, there’s none bigger than the Merge in crypto and it’s one which the wider world should take notice of with Ethereum’s carbon footprint set to be slashed by 99%.”
However, analysts cautioned that the merge will not necessarily speed up the Ethereum network, which is known to be slow, nor will it reduce the fees associated with transactions.
Still, excitement has been growing for the merge. Since ether hit its low for the year in mid-June, the price for the world’s second-largest cryptocurrency has far outpaced bitcoin’s. Ether is up more than 90% since June. 19 while bitcoin has risen just over 20%, begging the question of how much the merge has already been priced in.
The Federal Reserve is also widely expected to increase interest rates again next week when its Federal Open Market Committee (FOMC) meets, which is another dark cloud hanging over the crypto market.
“The Merge may trigger a ‘sell the fact’ situation in the crypto market and we still need to be careful for next week’s FOMC meeting. Bitcoin could continue to rally but it could be quite short lived,” Yuya Hasegawa, crypto market analyst at Japanese exchange Bitbank, said in a note Monday.
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Digital asset services provider, Blockchain.com recently announced that the company has signed a Memorandum of Understanding (MoU) with the Virtual Assets Regulatory Authority (VARA) in Dubai.
According to the details shared by Blockchain.com, retail and institutional clients in Dubai will soon be able to access technology-driven financial services.
Digital asset services provider, Blockchain.com recently announced that the company has signed a Memorandum of Understanding (MoU) with the Virtual Assets Regulatory Authority (VARA) in Dubai. According to the details shared by Blockchain.com, retail and institutional clients in Dubai will soon be able to access technology-driven financial services.
In the last few years, several blockchain firms have opened their offices in Dubai. In November 2020, Ripple announced the selection of Dubai for its regional headquarters. Blockchain.com highlighted that the company is also in process of opening a local office in Dubai.
“Crypto investors in Dubai and its surrounding regions will soon be able to experience Blockchain.com’s full suite of retail and institutional brokerage tools including custodial services, an exchange, and OTC crypto brokerage services for institutional clients.
“As part of our local commitment, Blockchain.com is in the process of opening a local office and intends to hire in the region. We are also actively pursuing a local Minimum Viable Product license, followed by a full license as soon as it becomes available,” the company noted.
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Bitcoin fell below $19,000 on Wednesday morning, at one point hitting its lowest level since June following a drop in stock markets globally and the continued strength of the U.S. dollar.
The value of the entire cryptocurrency market also fell below $1 trillion as digital coins across the board saw a sell-off.
Bitcoin was last trading slightly higher at around $18,955.34, according to Coin Metrics. Ether, which has far outpaced bitcoin’s gains in recent months, hovered below the flat line, at $1,571.20.
Central banks around the world are battling rampant inflation with tightening monetary policy. The U.S. Federal Reserve has undertaken a series of interest rate hikes totaling 2.25 percentage points. Markets are expecting further interest rate rises.
Policy tightening by the Fed has strengthened the U.S. dollar which has weighed on risk assets. The 10-year U.S. Treasury yield has also surged.
Bitcoin has traded in correlation to stocks and so if they fall, in general, so does the cryptocurrency.
“The macro environment also continues to prove difficult with the dollar continuing to put in highs. This impacts all risk assets as we can see,” Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.
“If we see the dollar start to move back down, then we should be able to get risk assets such as bitcoin move back up again.”
The crypto market has been battered this year with nearly $2 trillion wiped off its value since its peak in November. Bitcoin is about 60% off its record high of $68,990.90 that was hit in November.
The sell-off has been caused by a tough environment for risk assets as well as crypto-specific issues including collapsed projects and bankruptcies that has spread across the industry.
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Rain Financial is laying off hundreds of employees in a fresh round of job cuts, according to people with knowledge of the matter, as the ongoing volatility in digital assets takes its toll on one of the Middle East’s largest crypto exchanges.
The company communicated the decision to staff on Thursday morning, the people said, asking not to be identified because the matter is private. Before this week’s cuts, the firm had about 400 employees, the people said.
Rain also laid off dozens of staff members earlier this year, Bloomberg News has reported. It wasn’t immediately clear exactly how many jobs would be affected in the latest round of cuts.
“The volatility in the industry has been difficult to properly plan for, which has resulted in the unfortunate changes that we have had to make today,” co-founder and Chief Executive Officer Joseph Dallago wrote in a post on LinkedIn.
Takeover Interest
Cryptocurrency prices have plummeted this year from the highs reached during late 2021. Industry insiders say the struggles of crypto exchanges may attract takeover interest from more established financial companies.
Before the slump, Rain had been on a hiring spree, tapping a number of former bankers, lawyers and consultants to join its Dubai-based team, as a broader crypto frenzy swept through the financial center of the United Arab Emirates.
The staff cuts were made to reflect the “operational needs and market conditions,” Rain said in a separate statement, without providing the number of people made redundant.
“As a business we have had to adapt our future plans given these difficult market conditions to ensure we can navigate through this downturn,” it said.
Rain’s backers include Silicon Valley venture capital firm Kleiner Perkins and Coinbase Ventures. It last raised funds at a $500 million valuation, pledging to use the money to expand in the Middle East and Africa and double its workforce to 800 this year.
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District of Columbia Attorney General Karl Racine accused MicroStrategy co-founder and Executive Chairman Michael Saylor of evading $25 million in district taxes in a lawsuit filed Wednesday.
The lawsuit also names MicroStrategy as a defendant. Racine alleges the company conspired to help Saylor evade the taxes. The AG’s office said it’s seeking to recover a total sum of over $100 million in unpaid taxes and penalties.
Shares of MicroStrategy were down more than 6% Wednesday afternoon on the news. Saylor, who oversaw the company’s push into bitcoin, stepped down as CEO earlier this month. Under his leadership, MicroStrategy spent close to $4 billion acquiring bitcoin at an average price of $30,700, and he has said he considers the company’s stock a sort of bitcoin ETF.
Saylor allegedly claimed to reside in Virginia or Florida, which have lower or no personal income tax rates, while actually living in several different homes around D.C., including a penthouse apartment in the Georgetown neighborhood or on his yacht on the Georgetown waterfront or Potomac River when the apartment was undergoing renovations, according to the lawsuit. The suit includes several screenshots of posts that appear to be from Saylor’s Facebook page dating back several years and referencing the view from his “Georgetown balcony” and discussing his “home” while tagging Washington, D.C.
MicroStrategy allegedly “had detailed information confirming that Saylor was in fact a DC resident,” according to a press release, but it chose to withhold that information.
In a statement, MicroStrategy said, “The case is a personal tax matter involving Mr. Saylor. The Company was not responsible for his day-to-day affairs and did not oversee his individual tax responsibilities. Nor did the Company conspire with Mr. Saylor in the discharge of his personal tax responsibilities. The District of Columbia’s claims against the Company are false and we will defend aggressively against this overreach.”
Around 2014, the AG’s office claims in the lawsuit, MicroStrategy’s then-chief financial officer confronted Saylor about his alleged tax evasion being a potential liability for the company. Saylor and MicroStrategy ended up reaching an agreement where Saylor’s salary would be reduced to a nominal $1, the lawsuit claims, in order to reduce the risk authorities would discover the alleged scheme. Still, the AG alleges, Saylor continued to benefit from “fringe benefits” with a “high cash value,” such as use of the company plane.
“A decade ago, I bought an historic house in Miami Beach and moved my home there from Virginia,” Saylor said in a statement. “Although MicroStrategy is based in Virginia, Florida is where I live, vote, and have reported for jury duty, and it is at the center of my personal and family life. I respectfully disagree with the position of the District of Columbia, and look forward to a fair resolution in the courts.”
The suit is the first to be brought under a recently passed law called the False Claims Act, according to Racine’s office. The district law incentivizes whistleblowers to report tax fraud and allows the court to impose penalties up to three times the amount of the evaded taxes, according to the AG’s office.
The district suit follows a separate complaint filed by whistleblowers against Saylor in April 2021, accusing him of failing to pay income taxes from 2014 through 2020. The complaint was filed under seal but made public on Wednesday.
The AG’s office said it independently investigated the whistleblower case and found MicroStrategy had filed inaccurate W-2s with his Florida-based address and had failed to withhold taxes allegedly owed to the district. The new lawsuit alleges Saylor failed to pay income tax he owed to the district starting in 2005.
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Crypto lender Celsius Network will allow withdrawals from some of its customers, potentially returning $210 million to users who were locked out of their accounts this summer.
Celsius paused customer withdrawals in June, claiming it had been slammed by the massive crypto sell-off. It later attempted to resume withdrawals by raising money through a high-yield token, but eventually filed for bankruptcy in July.
But a new court filing said the lender will reopen withdrawals for customers who have custodial and withhold accounts, CoinDesk reported, noting about 58,300 users deposited over $210 million in those accounts.
That came a day after 64 custodial customers filed a petition against the crypto lender demanding their funds be returned to them, adding that Celsius had the ability to do so, but have avoided that for months.
“The Debtors’ continued refusal to honor withdrawals of all Custody Assets has created tremendous hardship on their users as set forth in hundreds of letters filed on the docket and at hearings,” the petition said, referring to letters sent to the Southern District of New York from Celsius customers. Many of them have expressed anger at being locked out of their accounts, and have pleaded to get their deposits back.
Celsius owed $4.7 billion when it filed for bankruptcy. According to court filings, Celsius said the total value of its assets were only worth around $4.3 billion at the time it declared bankruptcy, around $17 billion less than what it reported in March of this year.
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In its first foray into the crypto sector, the House Committee on Oversight and Reform is dialing up the pressure on federal agencies and crypto exchanges to protect Americans from fraudsters.
In a series of letters sent Tuesday morning, the committee asked four agencies, including the Department of the Treasury, the Federal Trade Commission, the Commodity Futures Trading Commission, and the Securities and Exchange Commission, as well as five digital asset exchanges — Coinbase, FTX, Binance.US, Kraken, and KuCoin — for information and documents about what they are doing, if anything, to safeguard consumers against scams and combat cryptocurrency-related fraud.
More than $1 billion in crypto has been lost to fraud since the start of 2021, according to research from the FTC.
“As stories of skyrocketing prices and overnight riches have attracted both professional and amateur investors to cryptocurrencies, scammers have cashed in,” wrote Rep. Raja Krishnamoorthi, D.-Ill., Chair of the Subcommittee on Economic and Consumer Policy. “The lack of a central authority to flag suspicious transactions in many situations, the irreversibility of transactions, and the limited understanding many consumers and investors have of the underlying technology make cryptocurrency a preferred transaction method for scammers.”
The letters ask that the federal agencies and crypto exchanges respond by Sept. 12 with information about what they are doing to protect consumers. The committee says that these responses could be used to craft legislative solutions.
In particular, the letters ask that the exchanges produce documents dating back through Jan. 1, 2009, which display efforts to combat crypto scams and fraud, as well as show attempts made to “identify, investigate, and remove or flag potentially fraudulent digital assets or accounts,” as well as highlight discussions around “whether to adopt more stringent policies.”
In one letter, addressed to Sam Bankman-Fried, the CEO and founder of FTX, the committee notes that “while some exchanges review cryptocurrencies before listing them, others allow digital assets to be listed with little or no vetting.”
Blockchain analytics firm Chainalysis found that 37% of crypto scam revenue last year went to “rug pulls,” a type of scheme that involves developers listing a token on an exchange, pumping it up, and then vanishing with the funds.
Binance.US, which also received an inquiry from the committee on Tuesday, has been accused in a class action lawsuit of misleading consumers about the safety of investing in the U.S. dollar-pegged stablecoin known as terraUSD (or UST, for short) and its sister token, luna. At their height, luna and UST had a combined market value of almost $60 billion. Now, they’re essentially worthless.
Concern over the safety of crypto funds parked on centralized platforms has also been gaining traction following the recent collapse of Voyager Digital and Celsius, both popular apps among retail traders because of the double-digit annual percentage yield once offered by the two companies. The subsequent bankruptcies of these two platforms have highlighted the question of who owns cryptocurrency assets when a custodial business goes belly up. In the bankruptcy proceedings of both Voyager and Celsius, customers are considered unsecured creditors, rather than federally-insured bank depositors, meaning there is no guarantee they will get any of their money back.
As for the relationship between investor and crypto exchange, the terms and conditions vary. In a financial filing released in May, Coinbase said its users would be treated as “general unsecured creditors” in the event of bankruptcy.
Krishnamoorthi also noted that the agencies often seem to be acting at cross-purposes and giving inconsistent guidance to private-sector players. “Without clear definitions and guidance, agencies will continue their infighting and will be unable effectively to implement consumer and investor protections related to cryptocurrencies and the exchanges on which they are traded.”
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Singapore is planning to roll out new regulations that will make it more difficult for retail investors to trade cryptocurrencies at a time when they seem to be “irrationally oblivious” about the risks, its central bank chief said.
Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said at an event on Monday that despite warnings and measures, surveys show that consumers are increasingly trading in cryptocurrencies globally, not just in Singapore, attracted by the prospect of sharp price increases.
“They seem to be irrationally oblivious about the risks of cryptocurrency trading,” he said.
“Adding frictions” on retail access to cryptocurrencies was an area the MAS was contemplating, he said.
“These may include customer suitability tests and restricting the use of leverage and credit facilities for cryptocurrency trading,” he added at a seminar titled “Yes to digital asset innovation, No to cryptocurrency speculation.”
Singapore’s welcoming approach has helped the financial hub attract digital asset services-related firms from China, India and elsewhere in the last few years, making it a major center in Asia.
But recent defaults of some global cryptocurrency-related firms based in Singapore, many of which are not subject to the financial regulator’s guidelines on consumer protection or market conduct, has triggered worries about tighter regulation.
The MAS will seek public feedback on its proposals by October, Menon said, adding that reviews are ongoing by regulators globally.
In January, the MAS issued guidelines to limit cryptocurrency trading service providers from promoting their services to the public. Read full story
Cryptocurrencies have plunged this year, as U.S. interest rate increases and runaway inflation prompt investors to ditch riskier assets.
“MAS’ facilitative posture on digital asset activities and restrictive stance on cryptocurrency speculation are not contradictory,” Menon said.
U.S. crypto exchange Gemini and Huobi, a crypto exchange initially focused on China, are among those with a major presence in Singapore.
About 180 crypto companies applied for a crypto payments license to the MAS in 2020 under a new regime but Singapore has handed out only about two dozen licenses so far after an elaborate due diligence process that is still going on.
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As crypto exchange Coinbase faces industry challenges and economic headwinds, the company is taking a close look at where it can cut costs, CEO Brian Armstrong told CNBC’s Kate Rooney.
Coinbase shares have lost more than 70% of their value this year as the company has grappled with a “crypto winter” tied to the plummeting of bitcoin and ethereum. Armstrong said the downturn is not unusual, as Coinbase has been through four down cycles in the 10 years since he started the company.
Coinbase is facing inflationary pressures and a potential recession, but Armstrong said the macro environment is reminiscent of what the company has dealt with in the past.
“We have this saying internally, I like to repeat a lot, which is you know, it’s never as good as it seems, it’s never as bad as it seems,” he said. “I think one of the reasons Coinbase has been so successful in the last 10 years is we just we try not to get focused on short-term ups and downs.”
Coinbase cut 18% of its workforce in June, and Armstrong previously attributed the layoffs to a possible recession and a need to manage the company’s burn rate and increase efficiency.
Armstrong said the layoffs were meant to be a one-time event, but that “anything could happen.”
“I can’t tell you what the world’s going to be like a year from now,” he said. Armstrong said Coinbase is looking closely at reducing costs related to marketing, external vendors and Amazon Web Services.
He added that the company is looking to convert as many fixed costs into variable costs as possible. That could mean Coinbase Super Bowl ads are a thing of the past, though Armstrong said there will still be a “variety of Coinbase ads out there.”
The bear case for Coinbase has been around potential pressure on trading fees, which accounted for more than 80% of revenue in the second quarter. Noted short seller Jim Chanos is among those betting against Coinbase, claiming that it over earns on fees and as “competition increases amongst the exchanges, you’re going to see fee compression.”
Armstrong said fees will eventually erode as they have in the stock brokerage industry. But Coinbase is not yet seeing price sensitivity.
“I do think there’s going to be margin compression, eventually it has to happen at some point because everything that we’re building, you know, others, eventually you’re going to build it and it’ll become a little bit more commoditized,” Armstrong said. “I’d like to get to a place where more than 50% of our revenue is subscription and services.”
That part of the business, subscription and services, has grown to roughly 18% of revenue from 4% a year earlier. It includes interest income, Coinbase’s premium membership, blockchain rewards and fees for storing crypto on the platform on behalf of customers.
Coinbase and the SEC
Coinbase has also dealt with SEC scrutiny in recent months. The agency charged an ex-Coinbase product manager with fraud and launched a probe into whether the platform is illegitimately allowing users to trade digital assets that haven’t been registered as securities.
Determining how to classify cryptocurrency tokens is controversial, and Armstrong said he expects the company will receive some regulatory clarity after the midterm elections. If cryptocurrencies are considered commodities like other kinds of currency, they would be governed by the Commodity Futures Trading Commission. But many crypto projects are funded by the sale of speculative tokens.
SEC Chair Gary Gensler has said that “many of these underlying tokens have the attributes of securities” and need to be regulated as such to protect investors.
Armstrong said he’s happy to be working with the SEC.
“You know, we’ve been in actually engaging with regulators and I actually think it’s a good thing,” Armstrong said. “And our overall goal is really to help drive regulatory clarity on a global scale.”
Company culture and remote work
Though Coinbase was started in San Francisco, it has no official headquarters and none of its employees are required to work in an office.
Armstrong said he thinks the remote-first structure has been positive for the company’s recruiting but that it has eroded some of the learning and development, creativity and trust. As a result, he said the company is trying to get employees together with some of their teammates in person at least once a quarter.
Coinbase’s mission statement says the company strives to be a “refuge from division” and does not “engage in social or political activism.” Armstrong gained a lot of attention from CEOs in Silicon Valley and beyond for a blog post he wrote in 2020, declaring that political debates about candidates are off limits.
Armstrong said he was “shocked” by the types of leaders who were reaching out to talk to him about it, but that he thinks the company has become almost too well known for its mission statement.
“I kind of want to just turn the page on it,” Armstrong said. “I’d rather be better known for our products and all the cool innovation that we’re doing, but, you know, in a way it was good that other companies found something interesting in it.”
“I think it’s net positive,” he said. “It’s given us access to a wealth of talent in small towns in various countries.”
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