Coin News

A mixed crowd of denim jeans and custom-tailored suits, typical for crypto-events, is standing across the vertical aisle of the the main conference area at the Blockchain & Bitcoin Conference in Saint Petersburg, blocking the line of sight for those lucky enough to have snatched themselves a chair in the back. The hall, while spacious — high ceiling, tall arched windows partly covered with ASIC mining billboards — still isn’t quite large enough to fit all interested visitors.

The speaker on stage works for Alfa Bank, one of the biggest banks in Russia. The financial sector in the former Soviet block is taking as much interest in Bitcoin and, of course, blockchain technology as anywhere else is. Having skipped Russia’s second-biggest city for the past two years, Smile-Expo re-introduced its Eastern European conference tour in Saint Petersburg last Thursday.

“The event had over 600 visitors, 25 exhibitors and some 20 speakers. Four of those work for Russia’s largest financial institutions,” event organizer Pavol Likhomanov told Bitcoin Magazine. “Entrepreneurs and finance professionals are increasingly taking this technology seriously. This is evident from the turnup here in Saint Petersburg; and we’ve seen year-over-year growth in interest at our Moscow event as well.”

This interest is not necessarily self-evident. It was only in 2014 — indeed, around the time of the last Saint Petersburg conference — that Russia seemed to emerge as one of the most crypto-hostile nations on the globe. In an attempt to curb criminal activity, the Putin administration introduced draft legislation that would essentially ban any use of cryptocurrencies. Not much later, access to a number of Bitcoin websites, including bitcoin.org, was blocked in the country.

But so far, the proposed law has never actually been implemented.

“Bitcoin and cryptocurrencies still have no legal status in Russia,” Artem Tolkachev told Bitcoin Magazine. The director of Deloitte Russia’s legal services for technology projects was one of the headline speakers at the event, where the legal implications of blockchain technology represented a big chunk of the morning program.

“The central bank considers cryptocurrency like bitcoin a money surrogate, which is a progressive stance. But the Ministry of Finance is more conservative. They don’t like anything they don’t understand and cannot control,” he said. “And Russian policymakers are not always very open-minded. They prefer to have their own internet … their own currency.”

Needless to say, Bitcoin is not a great fit in such a worldview.

The Thaw

But the initial icy stance on digital currencies seems to be getting a bit less frosty these days.

It was only a couple of weeks ago that Russian president Vladimir Putin met Ethereum creator Vitalik Buterin at the International Economic Forum, also held in Saint Petersburg. In the widely reported event, within the crypto-sphere at least, the president was said to have “supported the idea of establishing ties with possible Russian partners” — referring to Buterin’s technology pitch.

The announcement has been interpreted as a sort of preliminary green light for Russian blockchain entrepreneurs and investors. While not quite an official endorsement from the Kremlin, let alone formal regulation, it’s been a hopeful sign nonetheless.

But until it’s official, Russian cryptocurrency users across the halls in the historic Vedensky Hotel, the site of last week’s event, remain reserved.

“The Russian market is volatile,” Timur, a former forex trader, told Bitcoin Magazine. He offers a platform that allows Russian brokers to trade on behalf of their clients, Russian cryptocurrency speculators. Speaking from his exhibit stand in Saint Petersburg, he explained: “We never know for sure if what’s accepted today will be legal tomorrow. Official policy could change at a whim.”

That’s why his company sets customers up with foreign bank accounts in Switzerland, or Lithuania, or maybe offshore. The coins themselves — bitcoin, litecoin, ether — never leave the exchange where they are traded.

And these exchanges are not in Russia either … at least not officially. Incorporating abroad is a typical strategy for Russians and their cryptocurrency startups.

Mining

It’s not just traders and the finance sector that are taking an interest. Bitcoin mining is growing in Russia too.

This is perhaps most evident from the rise of mining pool BitClub Network over the past months. While officially established outside of Russia, the team works from Kazan, a city to the east of Moscow. Already one of the biggest non-Chinese miners on the Bitcoin network, BitClub Network’s founder — he’s casually wearing a T-shirt emblazoned with an image of Putin — assured Bitcoin Magazine his will be a top-five pool by the end of the year. At least, that’s what one of his employees translated into English, his smartphone showing videos of data centers full of humming ASIC miners.

Russian miners are now setting up data centers such as these in the east of Russia, Alex of mining service provider MyRig told Bitcoin Magazine. “The temperature in Irkoetsk, for example, is ideal for Bitcoin mining: it can be -40 degrees Celsius. Meanwhile, electricity is cheap. There’s a big raw material industry, but with the crisis, some factories are out of use. With energy to spare, miners are starting to fill that void.”

MyRig, a rebranding of Bitmain Warranty (not to be confused with Bitmain), is not the only mining business at the Saint Petersburg conference. The company is vying for attention with several competitors in one of the exhibition rooms. One of them sells entire containers full of equipment, not unlike BitFury’s mobile data centers. Another is re-selling Antminers, the best-selling Bitmain machines.

“But to mine bitcoin in Russia at scale, you do still need to have the right connections,” Alex continues. “If you don’t know your way around local policymakers you risk being shut down.” Though with the increase in profits that the mining sector has seen over the past half year or so, the “big dicks” are entering the space, Alex said. “The guys with lots of money — and lots of connections. I’d expect mining in Russia to continue to grow significantly over the next year.”

And official regulation should be coming too, Deloitte’s Tolkachev said. A draft bill for cryptocurrency should be introduced within a few months, and could be approved by early 2018. This could bring some much-desired regulatory clarity for Russians wanting to open cryptocurrency-related businesses and otherwise openly engage in the industry without needing to work around the existing legal structure.

That is, visitors in the Vedensky Hotel generally seemed to agree, unless Putin changes his mind.

A mixed crowd of denim jeans and custom-tailored suits, typical for crypto-events, is standing across the vertical aisle of the the main conference area at the Blockchain & Bitcoin Conference in Saint Petersburg, blocking the line of sight for those lucky enough to have snatched themselves a chair in the back. The hall, while spacious — high ceiling, tall arched windows partly covered with ASIC mining billboards — still isn’t quite large enough to fit all interested visitors.

The speaker on stage works for Alfa Bank, one of the biggest banks in Russia. The financial sector in the former Soviet block is taking as much interest in Bitcoin and, of course, blockchain technology as anywhere else is. Having skipped Russia’s second-biggest city for the past two years, Smile-Expo re-introduced its Eastern European conference tour in Saint Petersburg last Thursday.

“The event had over 600 visitors, 25 exhibitors and some 20 speakers. Four of those work for Russia’s largest financial institutions,” event organizer Pavol Likhomanov told Bitcoin Magazine. “Entrepreneurs and finance professionals are increasingly taking this technology seriously. This is evident from the turnup here in Saint Petersburg; and we’ve seen year-over-year growth in interest at our Moscow event as well.”

This interest is not necessarily self-evident. It was only in 2014 — indeed, around the time of the last Saint Petersburg conference — that Russia seemed to emerge as one of the most crypto-hostile nations on the globe. In an attempt to curb criminal activity, the Putin administration introduced draft legislation that would essentially ban any use of cryptocurrencies. Not much later, access to a number of Bitcoin websites, including bitcoin.org, was blocked in the country.

But so far, the proposed law has never actually been implemented.

“Bitcoin and cryptocurrencies still have no legal status in Russia,” Artem Tolkachev told Bitcoin Magazine. The director of Deloitte Russia’s legal services for technology projects was one of the headline speakers at the event, where the legal implications of blockchain technology represented a big chunk of the morning program.

“The central bank considers cryptocurrency like bitcoin a money surrogate, which is a progressive stance. But the Ministry of Finance is more conservative. They don’t like anything they don’t understand and cannot control,” he said. “And Russian policymakers are not always very open-minded. They prefer to have their own internet … their own currency.”

Needless to say, Bitcoin is not a great fit in such a worldview.

The Thaw

But the initial icy stance on digital currencies seems to be getting a bit less frosty these days.

It was only a couple of weeks ago that Russian president Vladimir Putin met Ethereum creator Vitalik Buterin at the International Economic Forum, also held in Saint Petersburg. In the widely reported event, within the crypto-sphere at least, the president was said to have “supported the idea of establishing ties with possible Russian partners” — referring to Buterin’s technology pitch.

The announcement has been interpreted as a sort of preliminary green light for Russian blockchain entrepreneurs and investors. While not quite an official endorsement from the Kremlin, let alone formal regulation, it’s been a hopeful sign nonetheless.

But until it’s official, Russian cryptocurrency users across the halls in the historic Vedensky Hotel, the site of last week’s event, remain reserved.

“The Russian market is volatile,” Timur, a former forex trader, told Bitcoin Magazine. He offers a platform that allows Russian brokers to trade on behalf of their clients, Russian cryptocurrency speculators. Speaking from his exhibit stand in Saint Petersburg, he explained: “We never know for sure if what’s accepted today will be legal tomorrow. Official policy could change at a whim.”

That’s why his company sets customers up with foreign bank accounts in Switzerland, or Lithuania, or maybe offshore. The coins themselves — bitcoin, litecoin, ether — never leave the exchange where they are traded.

And these exchanges are not in Russia either … at least not officially. Incorporating abroad is a typical strategy for Russians and their cryptocurrency startups.

Mining

It’s not just traders and the finance sector that are taking an interest. Bitcoin mining is growing in Russia too.

This is perhaps most evident from the rise of mining pool BitClub Network over the past months. While officially established outside of Russia, the team works from Kazan, a city to the east of Moscow. Already one of the biggest non-Chinese miners on the Bitcoin network, BitClub Network’s founder — he’s casually wearing a T-shirt emblazoned with an image of Putin — assured Bitcoin Magazine his will be a top-five pool by the end of the year. At least, that’s what one of his employees translated into English, his smartphone showing videos of data centers full of humming ASIC miners.

Russian miners are now setting up data centers such as these in the east of Russia, Alex of mining service provider MyRig told Bitcoin Magazine. “The temperature in Irkoetsk, for example, is ideal for Bitcoin mining: it can be -40 degrees Celsius. Meanwhile, electricity is cheap. There’s a big raw material industry, but with the crisis, some factories are out of use. With energy to spare, miners are starting to fill that void.”

MyRig, a rebranding of Bitmain Warranty (not to be confused with Bitmain), is not the only mining business at the Saint Petersburg conference. The company is vying for attention with several competitors in one of the exhibition rooms. One of them sells entire containers full of equipment, not unlike BitFury’s mobile data centers. Another is re-selling Antminers, the best-selling Bitmain machines.

“But to mine bitcoin in Russia at scale, you do still need to have the right connections,” Alex continues. “If you don’t know your way around local policymakers you risk being shut down.” Though with the increase in profits that the mining sector has seen over the past half year or so, the “big dicks” are entering the space, Alex said. “The guys with lots of money — and lots of connections. I’d expect mining in Russia to continue to grow significantly over the next year.”

And official regulation should be coming too, Deloitte’s Tolkachev said. A draft bill for cryptocurrency should be introduced within a few months, and could be approved by early 2018. This could bring some much-desired regulatory clarity for Russians wanting to open cryptocurrency-related businesses and otherwise openly engage in the industry without needing to work around the existing legal structure.

That is, visitors in the Vedensky Hotel generally seemed to agree, unless Putin changes his mind.

On June 22, the Federal Bureau of Investigation presented its annual Internet Crime Report for the year of 2016. The FBI analyzed the victim reports at the Internet Crime Complaint Center (IC3) and used the information from their database to publish the annual study. It is important to mention that, according to the Department of Justice’s research, only an estimated 15 percent of the U.S. fraud victims reported their crimes to law enforcement.

The FBI highlighted multiple “hot topics” regarding internet crimes for the year of 2016. This included Business Email Compromise (BEC), which resulted in the loss of $360 million from victims, currently standing in first place in the category of most damage caused. BEC is a sophisticated scam targeting companies working with international or foreign businesses or suppliers who conduct wire transfer payments at regular intervals.

Ransomware, an emerging “business form” among cyber criminals, was specially mentioned in the report. When launching such attacks, the hackers target electronic devices — mostly computers and laptops — with malware that locks up the data of the machines. After the criminals successfully breach the systems of the victims, they demand ransom from them. According to the FBI, in most cases, the ransom is paid in digital currencies, such as bitcoin. In 2016, the IC3 identified 2,673 complaints connected to ransomware attacks, with an estimated loss of over $2.4 million.

Another featured sort of internet crime was tech support fraud demanding approximately $7.8 million from the victims. The scam occurs when the criminals impersonate technical support agents from a computer software, security, cable or internet company. After the hackers get in contact with the victims, they convince them to provide remote access to their devices. Once the criminals have control over their systems, additional criminal activity occurs. Multiple companies, including Microsoft and Mozilla, alerted their customers on their websites regarding such fraudulent activities.

The IC3 recorded 17,146 cases of extortion with losses over $15 million, which occurred using the internet. By the FBI’s description, in extortion cases, cyber criminals “demand something of a value from a victim by threatening physical or financial harm or the release of sensitive data.” The agency identified various forms of the crime, including denial of service attacks, hitman schemes, “sextortion,” government impersonation schemes, loan schemes and high-profile data breaches. According to the FBI, cyber criminals often demand the payments in cryptocurrencies from the victims, which provides the perpetrators an additional layer of security since they are easy to send but harder to trace.

Compared to the previous year, the number of reported internet crime cases increased by 3.7 percent in 2016, with the damage caused to the victims rising by $380 million. Excluding the United States, the top five countries affected by internet crime are ranked in the following order: Canada (3,722 cases), India (2,188 cases), the United Kingdom (1,509 cases), Australia (936 cases) and France (568 cases). Among the states of the U.S., California had the most victims (39,547) followed by Texas (21,441) and Florida (21,068).

The FBI also compared the age groups affected by internet crime. Victims aged above 60 had the most damage ($339 million) and the most cases (55,043). People between the ages of 30 and 39 had the second most cases (54,670); however, they lost only 56 percent ($190 million) to the criminals compared to those over 60. Young persons under the age of 20 had both the least amount of cases (10,004) and damage ($6.7 million).

Over the weekend, BTC-USD market cap dropped from $45 billion to a current (and still falling) market cap of $39 billion. BTC-USD brought the entire crypto market to a screeching halt as traders continued to see devaluations in nearly every tradable coin on the market. So, let’s take a look at what has happened and see just how bad this dive will be for BTC-USD and the other cryptocurrencies.

On a macro scale, BTC-USD has been in the process of making a massive Head-and-Shoulders (H&S) pattern on the 6-hour candles:

Figure 1: BTC-USD, 6HR Candles, GDAX

Head and Shoulders are common, highly predictable market reversal patterns. They have well-defined criteria for price movement and price projections once the pattern breaks to the bottom. A H&S pattern is characterized by the following, illustrated above:

1. There is typically an ascending trend line;

2. A left shoulder that is smaller than a central peak (head) and a right shoulder that is smaller than the central peak;

3. The two shoulders are connected by the “Neck Line” of the Head and Shoulders.

4. There is first a test of the ascending trendline. A test and rejection of the ascending trend line’s support will bring us to the test of the neck line.

5. A test of the neck line is usually the ultimate deciding condition for whether or not the pattern will continue downward.

At the time of this article, BTC-USD has broken the ascending trend line and is in the process of testing the Neck Line of the H&S pattern. If condition #5 is broken, the price projections are calculated in the figure below:

Figure 2: BTC-USD, 6HR Candles, GDAX, Price Target for Head and Shoulders

Price targets are not guarantees of price movement. Rather, a price target should be used as more of a target “zone” rather than a discrete point in the price-space. In our case, BTC-USD happens to have a price target with a very reliable, major support line in the $1800s. Whether BTC-USD drops that far down remains to be seen. However, it is important to note the following in the figure below:

Figure 3: BTC-USD, 6HR Candles, GDAX, Steady Downward Momentum

1. The momentum indicators, RSI and MACD, are showing no sign of downward momentum loss;

2. The steady downward momentum is coupled with very little relative buy-back volume.

During previous bearish periods, there was a significant increase in buy volume. However, something we are not seeing in this current bear run is a volume increase. The market could reverse at any point (after all this is crypto!), but on all major long-term scales, the momentum indicators show no sign of slowing down.

If we break the Neck Line of the Head and Shoulders, below are the major support lines you can expect BTC-USD to rest on during its downward spiral:

Figure 4: BTC-USD, 6HR Candles, GDAX, Fibonacci Retracement Levels

At the time of this article, the market is testing the 38% Fibonacci Retracement Level, but the market doesn’t appear to be interested in buying at these values. If the BTC markets don’t see an increase in volume, BTC-USD will continue to hemorrhage in value — as will the entire crypto-market.

Summary:

1. BTC-USD completed a Head and Shoulders pattern that brought the entire crypto-market into a Bear Market.

2. Current price projection based on Fibonacci Levels and Head and Shoulders price target has BTC-USD on a course for the $1800s.