Monthly Archives: July 2020

Bitcoin, thrust into the international spotlight this week by Twitter hackers trying to defraud people of their bitcoin, is hard to track but by no means impossible.

Bitcoin, cryptocurrency and blockchain analytics companies are able to forensically examine crypto transactions and are often able to pinpoint exactly who made the transaction, where and when.

Now, a top Pentagon investigative unit is looking for information about hiring a crypto analytics service to "quickly detect criminal and suspicious cryptocurrency transactions" around the world.

A top Pentagon investigative unit has put out a request for a bitcoin and cryptocurrency analytics ... [+] service.

The U.S. Army Criminal Investigation Division Command (USACIDC) is looking to licence an application to help them track and trace illicit cryptocurrency transactions, according to a statement of work published on July 10. Unlike a more formal request for proposal, the posting is part of an earlier research phase called a request for information.

"The contractor must provide worldwide web-based access to a reliable cryptocurrency investigation service," the document read, giving a deadline of July 20 for companies to submit the information.

"The web based application must provide the capability to assist law enforcement identify and stop actors who are using cryptocurrencies for illicit activity such as fraud, extortion, and money laundering. Application must enables users to conduct in-depth investigation into the source of cryptocurrency transactions and provides multi-currency analysis from bitcoin to other top cryptocurrencies."

In addition, the application must "help spot suspicious transaction patterns and interactions with other entities," and "a link analysis tool to facilitate the analysis of data."

The request for work comes after the United States Army Contracting Command of New Jersey published a pre-solicitation notice seeking a similar web application to help law enforcement agencies to track and identify people using cryptocurrencies for illegal purposes in July last year.

The U.S. Army Contracting Command put out a so-called "request for information" on bitcoin and ... [+] cryptocurrency analytics services, inviting firms to respond by July 20.

Companies such as New York-based Chainalysis and London-based Elliptic, which recently won a contract with the IRS, have carved out a niche providing blockchain data and analysis to government agencies, bitcoin and crypto exchanges, and financial institutions.

Coinbase, the largest U.S. bitcoin and cryptocurrency exchange, has recently made headlines by licencing its blockchain tracing software to the U.S. government. The move has sparked controversy, with critics claiming the service causes a conflict of interest for the popular exchange.

Coinbase said in an email that it was aware of the USACIDC request for work but had yet to make a decision on whether it will bid.

"We'll always look for ways to work with agencies and law enforcement to fight illegal activity," a Coinbase spokesperson said.

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A Top Pentagon Investigative Unit Wants To Spy On Worldwide Bitcoin And Crypto Transactions - Forbes

As reports hit the United Kingdom in mid-June warning that inflation rates had fallen to a four-year low, high-profile fund managers were conversely worrying that the COVID-19 stimulus from governments and central banks would ultimately drive up prices.

In a recent market outlook note, famed hedge fund investor Paul Tudor Jones warned that:

We are witnessing the great monetary inflation an unprecedented expansion of every form of money unlike anything the developed world has ever seen. High debt accommodated by money printing is difficult to banish. Inflation expectations could one day respond to this reality.

Crispin Odey, the London-based founder of Odey Asset Management, also agrees inflation is ultimately unavoidable given the level of stimulus. In the short term, the money will be made on the inflation bet, Odey wrote in a recent letter. With potential inflation seemingly on the horizon, investors are looking out for the next big hedge in order to protect assets during the nascent economic crisis.

Jones, for one, has decided a way forward is to invest his fund, Tudor Investment Corporation, into Bitcoin (BTC). If I am forced to forecast, my bet is it will be Bitcoin, commented Jones in the same letter to investors. Bitcoin reminds me of gold when I first got into the business in 1976.

After the United States Federal Reserve indicated on June 10 that interest rates will remain near 0% until 2022, Bitcoin saw a short-lived run past $10,000, gaining 1.6% over 24 hours before dropping back.

Institutional investment managers have been increasingly interested in all things crypto over the past couple of years, and their interest keeps rising. A recent Fidelity report shows that in a survey of almost 800 institutional investors across the U.S. and Europe, 45% of firms in Europe say they hold crypto assets. Fidelity goes on to report:

The survey revealed higher penetration with crypto hedge and venture funds, as expected, but also the financial advisor, high net worth individual and family office segments.

Consumers are also showing increased signs of interest, with the U.K.s Financial Conduct Authority reporting that an estimated 2.6 million people have bought crypto assets at some point, nearly double the number reported last year.

Investors across the board can take advantage of these same trends and realize the benefits of hedging against inflation via Bitcoin. But accessing crypto markets can be extremely convoluted at times, with crypto exchanges charging users hefty fees for the privilege. Yet over the past couple of years, there has been somewhat of a maturing of crypto markets. Now, more consumer-friendly, easy-to-use platforms have been set up, providing immediate and safe access to best-price crypto. Users of these platforms can benefit by instantaneously and effortlessly exchanging their money into digital currencies at competitive prices and monitoring their balances in real time.

Through these unprecedented times as economies around the world adjust to dealing with a pandemic, investors across the globe are having to readjust their positions. Using Bitcoin to hedge against potential inflation is not solely in the realm of the Joneses and Odeys of this world, however. New technology platforms are making it much easier for U.K residents to similarly safeguard their assets by combining currencies into one account, helping to make cryptocurrencies more readily available.

The best profit-maximizing strategy is to own the fastest horse, Jones said in his Great Monetary Inflation note. He clearly believes that Bitcoin is the one to back.

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

Mark Hipperson is the founder and CEO of Ziglu, a cryptocurrency trading platform. Previously, he co-founded Starling Bank, where he was responsible for helping to secure the U.K. banking license with regulators and obtaining the initial $70 million funding. He was also responsible for the design, build, implementation and support of the banks IT services platform, apps and infrastructure. Mark started his career at Barclays where he was deputy chief technology officer and head of technology for the Barclays Group.

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Bitcoin Could Be the Next Big Inflation Hedge - Cointelegraph

The response to the Covid-19 pandemic has been ruthless on the global economy and during the last six months, traditional stocks and commodities have felt extreme market volatility. Coinshares published a comprehensive report this week in regard to how bitcoin performed during the coronavirus outbreak. The seven-page study highlights how bitcoins rebound to pre-Covid price levels has unsurprisingly garnered attention amongst the investment community.

Coinshares head of research Chris Bendiksen recently published a report that discusses how bitcoin (BTC) reacted to the coronavirus outbreak and the mid-March market volatility. Despite what critics like Peter Schiff say, BTC has outperformed a great number of global assets including gold since the March 12, 2020 (Black Thursday) market rout.

Golds price per ounce was $1,589, and the price has risen 13.90% to a high of $1,810 on July 17. Bitcoin (BTC) on the other hand slid to a low of $3,870 on Black Thursday sliding -49.39% that day. However, since then the price of BTC has increased 135% where it stands today at just above the $9,100 per coin region.

The report called Understanding Bitcoin During the Covid Crisis written by Bendiksen highlights how resilient bitcoin can be. Coinshares believes that the initial tumble on March 12 was ignited by fear spreading from other markets.

It then became particularly severe due to bitcoins unique market structure, Bendiksens report notes. The overall usage of leverage in bitcoin spot and derivatives markets is generally large, but in the time leading into March 12 & 13, leverage levels were abnormally high, making them extra vulnerable to shocks.

The report continues by adding:

Interestingly, even after sustaining a drop of that magnitude, Bitcoin not only found a natural bottom, it vigorously rebounded over the succeeding weeks and liquidity levels have normalised. Not only does that demonstrate that what we observed was a market dislocation caused by exogenous shocks, not a broad revaluation, but it also shows that Bitcoin markets are highly resilient and self-correcting, even in the complete absence of external intervention.

Despite the swift rebound, the Coinshares researcher explained that due to bitcoins market structure not really changing, theres little reason to doubt the March 12 volatility could happen again. Bendiksen says there were a number of things that happened prior to Black Thursday, which can be examined again for future volatility events.

The report details that traditional financial markets were on shaky ground in early March, and a stampede for cash took place after Europe and North America implemented the initial lockdowns.

But was really noticeable was the leverage levels in bitcoin markets prior to the Black Thursday fallout.

In bitcoin markets, leverage had been building in various forms, the report reveals. USD lending rates on margin platforms were elevated, and Long/Short (L/S) ratios at spot exchanges such as Bitfinex were hovering at abnormally high levels. Having come down from twin peaks of almost 12x in late December and early January, L/S ratios spiked back above 9x in the weeks leading up to March 11. By March 17, the ratio had dropped to less than 2x.

Bendiksen also stressed that the situation on derivatives exchanges did not help and the number of outstanding BTC-collateralized loans spiked to an all-time high before the March 12 event. Despite the -49.39% drop that day, Bendiksen said that BTC eventually found a bottom between $3,500 and $4,000 per coin.

Going forward, the Coinshares report said that monitoring leverage metrics will help gauge future volatility risk. Unlike traditional markets, BTC also didnt get help from external intervention from organizations like the Fed, and [bitcoins] recovery has been stronger and faster than almost all other markets, the research paper highlights.

Bendiksens report concludes by saying:

The continued and common usage of leverage in bitcoin markets means that the bitcoin price remains vulnerable to volatility spikes. If outside events of similar magnitude were to recur, it is not unlikely that bitcoin prices would behave in a similar way. Keeping an eye on these metrics should help in gauging ongoing volatility risk.

What do you think about Coinshares recent report concerning bitcoin and Covid-19? Let us know in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons, Coinshares, Datamish.com, Genesis Capital,

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Report Shows Bitcoin's Covid-19 Recovery Stronger Than Other Markets With Zero Intervention - Bitcoin News

Since Bitcoin (BTC) price rallied above $19,000 in 2017, crypto analysts have issued an amazingly wide range of price predictions on the date and value of the next all-time high or low.

Sometimes these predictions are rooted in deep fundamental and technical analysis, whereas other times they are simply nothing more than off-the-cuff estimates issued at whim.

Options markets provide useful insights into traders' expectations, including mathematical probabilities for an asset's future prices. Using Black & Scholes model allows one to better assess the likelihood of analysts' estimates.

The Black & Scholes valuation algorithm has been the basis for the pricing of options on traditional assets since the early 1970s, and remains widely used.

Although the Black & Scholes option pricing model tends to underestimate the odds of substantial movements, it does provide precise and conservative estimates.

Similar to weather forecasting, adding more than a couple of days to an estimate reduces its precision by a logarithmic proportion. One must also consider that the model has to predict a binary outcome because a $9,500 option will be deemed worthless if the expiry price is $9,499.

Many analysts tend to exaggerate their estimates to make a bold statement and attract media attention, or their predictions are based on various types of bias.

No one expects gold bugs like Peter Schiff to draw a bullish Bitcoin estimate, and the same can be said for expecting a bearish prediction from Stock-to-Flow model author PlanB.

The question investors should be asking is exactly how far off were those estimates compared to Bitcoin options pricing? Furthermore, should one even consider these analysts and pundits opinions?

Although the Black & Scholes options pricing model can be complicated, it's usage is pretty straight forward. By informing the current BTC price, strike level, days until expiry, and annual volatility, the model will instantly provide the odds above and below a specific price.

Skipping the complex calculations, one can refer to Skew Analytics to find current probabilities for each expiry based on options pricing.

Bitcoin probability at options maturity. Source: Deribit

Most active option strikes expire on the last Friday of every month. As previously explained, those figures will seem conservative. Both August and September strikes signify a mere 50% probability that Bitcoin price will remain above $9,000.

A 50% odd should is effectively neutral, as the mathematical model states that odds above and below such target are pretty much the same.

By contrast, the probability for a $8,500 on the July expiry (just two weeks from now) sits at 76%. The model becomes more confident as we approach maturity, so one should not expect options to price 90% plus odds for contracts with more than two weeks left.

To assert whether analysts and pundits' predictions fare better than options markets pricing, one needs to stack those odds against the Black & Scholes options model, which requires four basic inputs: current price, strike (prediction), days until expiry, and implied volatility.

Bitcoin price and pundits predictions. Source: TradingView

The above chart depicts six predictions over a 100 day period, which will be individually tested against the options markets model.

Despite having said numerous times that he isn't an active trader, Binance founder Changpeng Zhao often likes to publicize his predictions. In early November, CZ declared that BTC would hit $16K 'soonish,' so one should assume four months.

CZ missed the mark by 35% as Bitcoin failed to break $10,500 level within four months. This was not a lousy call, but rather way too optimistic as indicated by the Black & Scholes model.

Analyst Willy Woo reflected on the previous year cycle low of $3,100 and estimated that Bitcoin could drop 71% from its $12,800 high, reaching $4,500 before the next halving. It seemed rather unlikely at the time, but a six-month timeframe in cryptocurrency is a very long time.

Hats off to Willy Woo on this call as the March 13 infamous crash caused a brief test of the $4,000 level. Despite being correct, buying protection for such a long time frame costs substantial money. A $6K put option would have cost Woo $540 back then.

Notorious Bitcoin basher Peter Schiff spotted a head and shoulders pattern and issued a $1,000 prediction. Although no timeframe was set, based on such a pattern, a three-month time frame seems reasonable.

One doesn't need to be a statistician to deem such predictions as unreasonable. According to the options model, a $5,000 target back would still have shown a limited 10.7% probability.

Peter could have remained bearish using a more reasonable goal, according to options markets at that time.

The 40-year market stalwart said that BTC had already hit its floor; hence investors waiting for a price dip to $6,000 have "missed" their opportunity. No timeline was mentioned, although a 3-month prediction would have pleased most investors.

Less than two months after that tweet, the sudden Bitcoin collapse on March 13 proved Peter Brandt's prediction wrong.

In an interview with Yahoo! Finance, Fundstrat senior analyst Tom Lee suggested that Bitcoin's technical achievements paved the way for 200% gains within six months, with halving acting as a catalyst.

With less than 20 days to fulfill such a prediction, it seems very unlikely to occur. At least buying a $23K call option would have cost $65, a bargain considering a $4,000 upside to Lee's target.

The creator of the stock-to-flow model revealed his belief that Bitcoin would not return below $8,200. PlanB also mentioned that he was expecting levels above $10,000 near Bitcoin halving in May.

Less than a month later, PlanB's $8,200 support level was broken, although his $10,000 prediction for halving was pretty close as it was off by only 3% to 5%.

One might say PlanB got it 50% right, although the bold $10,000 prediction could have earned him good money using a butterfly spread strategy.

Black & Scholes can be a useful tool to understand how far a prediction might be from options pricing. Whats clear is that pundits seem to exaggerate their takes, which leads to huge misses and misinformation in the form of bad analysis being spread through major media outlets.

In some cases, the wild guesses do hit the mark. For example, Willy Woo and PlanB could certainly have profited by defying options model pricing, but generally it's better to do your own research instead of following calls from leading analysts.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Bitcoin Price Predictions by Top Analysts Are Usually Wrong Heres Why - Cointelegraph

A snap-shot investigation to follow the funds connected with yesterdays Twitter Hack of Jeff Bezos, ... [+] Elon Musk, and several celebrities to review where the fraudsters have transferred the funds into.

Performing an initial investigation to follow the funds related to the Twitter TWTR hack that happened on July 15 to Elon Musk, Jeff Bezos, Barack Obama, Joe Biden, Kanye West, Bill Gates and numerous other celebrities and executives of large technology companies, it is evident the many of those funds already hit reputable exchanges that might freeze the funds.

During the Twitter hack, the fraudsters, posing as celebrities, falsely informed users that they have decided to partner up with a mysterious organization called "CryptoForHealth" in order to 'give back to their community.' The scam has been covered extensively by several news outlets including Forbes contributors like Jasse Damiani, that reviewed the initial steps just after the hack.

As different celebrities were sharing and resharing those posts that turned out to be fraudulent, some of their followers decided to open up their own wallets and pay as well. More than $130,000 later, most of the posts had been removed, the website of CryptoForHealth shut down. Twitter stepped in to forbid some users to tweet, but it is high time to recover the funds to the victims or at least specify to which exchanges they have been sent.

Despite a common misperception as Bitcoin represents a pseudo-anonymous network, transactions performed on it are both visible to the general public and traceable. Addresses can be directly connected to particular exchanges.

As scammers are still moving funds between cryptocurrency wallets, investigators from all over the world have stepped in with the goal to identify types of exchanges and freeze the funds on different accounts.

From the initial review, it is evident that much of the funds have been transferred to Binance. In a recent statement to TechCrunch, Binance Security Team informed that they have been aware of the situation and launched an investigation, which is visible to the crypto community as their team marked several cryptocurrency wallets as fraudulent.

Earlier today, an article released by Cointelegraph revealed that addresses used by the hackers had previously been linked to Coinbase and BitPay, common names in the cryptocurrency exchange and merchant sphere.

According to our initial analysis the funds have reached many exchanges, but the core of the funds originated from the main Binance address. It is now clear that scammers were sending funds back and forth between different cryptocurrency addresses in an attempt to confuse law enforcement agents, wash them. Once completed fraudsters have sent a large parts of the funds to an address belonging to Binance yet again, which has been rather quickly discovered and flagged by the exchange.

Secondary besides Binance, it seems though that multiple exchanges like Bittrex, as well as MercadoBitcoin in Brazil have received funds from this scam already, said Sven Martinsson, the Founder & CEO of VALEGA Chain Analytics - a Blockchain Investigations and analytics firm working out of Finland.

Even though the investigation remains novel, due to the transparency of the open blockchain of Bitcoin, it is possible to follow different transactions to a different account at cryptocurrency exchange platforms. Being personally engaged in one such crypto exchange platform, competent and motivated compliance team members have a portfolio of tools and processes to stop such transactions in case they are being spotted. The fraudsters seem to know that so that there is a race for the fraudsters to try to exchange the funds to fiat currencies as soon as possible and Blockchain investigators to mark as many wallets as quickly as possible to freeze those funds.

Even though the identity of the scammers remains yet unknown, there are tools in place which allow for visualizing transactions between different accounts and exchanges that use the publicly available data and connect wallets to crypto exchanges.

Here are a couple of examples of how the fraudsters anticipated to hide their tracks. Everything starts on the left side in the middle of the graph, which represents the first address to which the scammers asked users to pay. Each additional connected line of dots represents their effort to hide their tracks and mix funds between different wallets and exchanges.

A more comprehensive description has been placed below each picture which represents a print screen out of a Blockchain Analytics Software.

Even though if this initial graph might not be the easiest to read, it represents the initial ... [+] address cryptocurrency address listed on the hacked addresses (red dot at the lower part of the picture on the left side). Once the scammers received the funds they started to distribute the funds to multiple different wallets. (the second line, looking from the left to the right). While receiving those funds scammers have been trying to transfer funds to more and new addresses to try to wash them to possibly exchange them back to FIAT currency. Green dots represent the addresses that already have been flagged as fraud, green represents addresses that have not YET been flagged in the system as of 6:30 PM CET. When expanding a few of those as an example, it is possible to see that a few were sent to an address that had not yet been associated with fraud or suspicious activities.

Zooming in closer to different dots allows us to directly view the cryptocurrency wallet address which has been used. It is connected to a particular wallet provider or a platform (with strong but not utmost certainty). In order to review where funds were directed and how much was sent.

Expanding further, one of the addresses gives an immediate hit on another Binance address (This ... [+] addresses has already been flagged by the exchange as of 6:30 PM CET)

It is visible that scammers used some of the addresses multiple times (the split the funds to ... [+] different addresses and send them to a new address) and not yet all of the wallets have been flagged as fraud.

Investigations performed by compliance teams take time as they are most likely performed by individuals who are working for different exchange platforms or geographies, so sometimes the funds are able to be transferred to an account before they are being flagged as fraudulent. Red accounts have been already marked as fraudulent.

By the time Binance, when this chart has been recorded most certainly the team behind Binance has ... [+] taken the appropriate countermeasures and flagged a Cryptocurrency wallet as Darknet wallet. Before this cryptocurrency wallet has been flagged, unfortunate significant amount of funds have passed across it to other addresses.

The fraudsters didnt stop at one platform there. Within hours, one of the cryptocurrency wallets in ... [+] which funds have not been moved, has finally initialled a transfer. (It is the red-dot at the bottom, which starts with Cpf)

Following each transaction and the connected spiderweb of transfers between cryptocurrency addresses helps to spot a time period in which fraudsters will try to wash funds with a legitimate exchange. As stated below, fraudsters launched a transfer to MercadoBitcoin in Brazil as well as Bittrex.com already.

The more paths have been explored the more exchange have been listed to which funds have been ... [+] transferred. This time funds were sent to a suspicious cluster (in yellow) of entities (mainly with tumblers and gambling companies, an easy way to launder money) Using the weakness of mostly national law enforcement agencies., fraudsters have approach many exchanges around the globe like MercadoBitcoin (an exchange in Brazil). Furthermore a Binance address to the left now considered a darknet entity.

This review is just a snapshot of the current stage of transfers performed by the fraudsters as of the afternoon of July 17th. It does not display traces in full to avoid obstructing justice or investigations. Even though it has been a Twitter hack and not a Bitcoin hack, the pseudo-anonymity of bitcoin and visibility of each transaction with tools like the wallet explorer does prove that the Crypto community is not helpless and knows more and more with each transaction the fraudsters perform. It is important to underline that it was not Bitcoin that got hacked, it was Twitter. Bitcoin was just the chosen means of payment.

Sven will release a collected investigation free of charge to anyone who can identify themself as an investigator in the process.

Disclaimer:

The transaction investigation remains ongoing. For security reasons and not to interfere with investigations, this is just a teaser to provide insights into different tactics of criminal networks. Exchanges in question have the appropriate means to stay compliant and do their reporting accordingly. This is NOT an attempt to defame or point any fingers and the statements are assumptions, not yet evidence. It remains a visualization of investigation that affected many users and the account holders on Twitter.

For transparency purposes - The contributor of this post is a Head of Compliance in one of the leading Cryptocurrency Exchanges in the Nordics called Safello.

He serves as a board advisor to Valega Chain whose team has launched an investigation to follow the stolen funds on his request. Statements about how Blockchain Analytics Tools work have been performed on the example of Valega Chain Analytics and should not be generalized to other Blockchain Analytics Tools as all of them have their own criteria, tools, and internal processes.

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Uncovering The Money Laundering Attempts Of Bitcoin Fraudsters Behind The Recent Twitter Scam - Forbes