Part three of our four-part review of crypto in 2019 looks back at July-September, which saw Bitcoin get a namecheck by the US president, China edge closer towards its own cryptocurrency, Craig Wright losing a $10 billion lawsuit. As if you’d forgotten that.
You can check out part two of our 2019 review here, and look out for part four later in the week.
Alts Enjoy Some Breathing Space After Bitcoin’s Bull Run
Bitcoin supporters started July with a sense of suspicious optimism. The price had hit $13,900 and had pulled back to $11,000 at the start of the month, suggesting that the short term top was in, but the fact that it had recovered so well was a good sign. The question was where it would now pull back to, as that would drive sentiment for the second half of the year.
Alts made hay while the big orange sun shone, with big players such as Ethereum doubling in price, although interestingly this happened in tandem with Bitcoin’s rise rather than happening after Bitcoin had hit its peak, which was the typical alt season pattern. Binance listed Dogecoin in the first week of June, which led to many social media influencers claiming that a fully fledged alt season was imminent. They were, however, to be disappointed.
Trump Gives Bitcoin a Public Thumbs Down
Bitcoin hit the headlines in July when US President Donald Trump said he was “not a fan” of Bitcoin and other cryptocurrencies, which for many represented a kind of crowning glory in its attempt to gain worldwide notoriety. At the same time, Federal Reserve head Jerome Powell called Bitcoin “digital gold”, which lit further fire in the bellies of Bitcoin fans, who considered everything was right with the world as Bitcoin remained around the $10,000 mark.
— Crypto₿ull (@CryptoBull) July 12, 2019
In mid-July, a much anticipated debate between BitMEX CEO Arthur Hayes and crypto-skeptic Nouriel Roubini, dubbed the Tangle in Taipei, failed to live up to its billing. Hayes failed to deliver a telling blow against Roubini’s fervent anti-crypto stance, although Roubini undid any salient points he may have had by screeching like a hysterical teenage girl and repeating the same points time and time again. All in all, everyone lost.
July also saw an escalation in the case between Bitfinex and the New York Attorney General, which related to an $850 million USDT Bitfinex leant itself to cover a gap in its accounts. Bitfinex argued that the NYAG didn’t have jurisdiction over their case, but the core accusation wasn’t helped by growing evidence of a link between Tether minting and Bitcoin’s 2017 price explosion, initially made in a University of Texas paper in 2018.
Justin Sun’s Abandoned Buffett Buffet
The crypto world offered something of a wry smile when spin-master Justin Sun won an auction to have lunch with billionaire investor Warren Buffett, soon adding a plethora of crypto fans to the dinner table as his allowed guests. The entire plan unravelled just days before the meal however when Sun called it off citing kidney stones on the same day that there was huge speculation that he had been banned from travelling to the event by Chinese authorities, causing many to express their opinion that Buffett had got off lightly.
In late July the Inland Revenue Service (IRS) began a mass mailing to those who they suspected of not correctly filling in their tax returns, offering them a chance to come clean about their crypto holdings. Another round of letters in early August went even further, using exchange data to suggest actual figures that certain individuals owed in tax, giving recipients a deadline to prove otherwise. As our interview with tax expert Sean Ryan revealed, this was grossly unfair for a number of reasons.
August also saw LedgerX seemingly beat Bakkt to the punch by offering the first physically-backed Bitcoin futures, only for the company to be forced into an embarrassing climbdown just days later when it was revealed a misunderstanding of U.S. Commodity Futures Trading Commission (CFTC) rules meant they didn’t have the license they assumed they had been awarded. Bakkt itself finally launched in late September, over a year after it was first suggested, but the initially poor uptake damped a lot of enthusiasm around it.
3 total bitcoin have been traded on Bakkt so far ?
This violatility and price explosion is unbelievable ?
— moon (@MoonOverlord) September 23, 2019
China’s Digital Yuan Gets Closer
China was back in the headlines in mid-August with huge news that it was planning to launch its own cryptocurrency, which it had apparently been working on for the past five years. 2019 had already intensified the fractious relationship between the country and Bitcoin, with suggestions that it might finally outlaw Bitcoin mining, but attention turned to its own internal uses of blockchain, particularly in the wake of Facebook’s announcement of Libra. The possibility of a digital yuan was something that had been mooted for some time, primarily as a way for the state to better monitor the spending habits of its population, and it seemed that the potential emergence of Libra was about to force the nation’s hand.
China also had a stake in a story that would develop into late 2019 – PlusToken. PlusToken wasn’t a name that many in the crypto community were familiar with until this point in the year, when it was discovered that the ponzi scheme, which had collected an incredible ₿200,000, was selling off their ill gotten gains on the open market on the request of Chinese authorities.
Many attributed this to Bitcoin’s inability to hold its value after its $13,900 peak, with some suggesting that Bitcoin’s price couldn’t rise until the selling was done, as any small term increase would be met with more selling, which could take many months.
Correction – 200,000 $BTC in total held by PlusToken, not 100k
Wallet links provided in screenshot below
Some shitshow is about to go down pic.twitter.com/5lnlykgRtU
— ๑ PANDA ๑ (@PandaofBinance) August 14, 2019
Wright Gets it Wrong in Kleiman Case
The biggest headline maker during this entire period was undoubtedly Satoshi Nakamoto-wannabe Craig Wright. Wright, who had in July made a habit of suing anyone who denied he was Bitcoin’s pseudonymous creator Satoshi Nakamoto, lost a libel case against Roger Ver at the very start of August and received some home truths from the judge for his troubles, who accused him of not being able to back up claims of his so-called reputation, adding that evidence of any harm caused to his reputation was “weak” and “almost entirely speculative”.
The real headlines came in the middle of August however when Wright’s defense against the estate of former business partner Dave Kleiman was thrown out by a judge, leaving Wright owing a mammoth ₿200,000. His reputation was yet again torn to shreds by a second judge in the space of a month, who accused him of being “belligerent and evasive”, of engaging in a “pattern of obstructive behaviour”, and submitting fraudulent documents.
Many in the crypto community rejoiced over the result and engaged in more than a touch of schadenfreude, but Wright’s cronies rallied round to defend the disgraced charlatan. Nevertheless, it was clear that the defeat had taken its toll on Wright, who was legally bound to hand over Bitcoin that was, at the time, worth a staggering $2 billion, Bitcoin he said he didn’t have access to.
Wright Case Overshadows Bitcoin Pullback
The Wright case ended what had been a hectic three months in the crypto world and diverted attention away from the fact that Bitcoin was still sliding down the other side of its $13,900 move with no sign of where it would stop. The complete absence of an alt season following the move also fostered a sense of concern within the community that the new money they had assumed was driving the price in fact wasn’t, and rather than being the platform for all time highs it was instead a manipulated move from recycled money.
However unpalatable this theory might have been to the community, the following three months would prove that it was much closer to the truth than they realized.