A major rally in WAVES price this week that saw it nearly double risks faltering in the coming sessions due to a “death cross” technical pattern.
WAVES price crashed 85% after ‘death cross’ in 2018
A death cross measure appears when an asset’s long-term moving average closes above its short-term moving average.
Notably, on the WAVES’ weekly chart, its 50-week exponential moving average (50-week EMA; the red wave) jumped above its 20-week exponential moving average (20-week EMA; the green wave) in the week ending Feb. 21 — a bearish crossover.
That is WAVES’ first “death cross” occurrence on a weekly chart since June 2018. In both cases, the correction in the WAVES market appeared due to selloff across the broader crypto market following a massive bull run.
As it happened, WAVES fell by up to 85% after the 2018 death cross formation, despite briefly closing above both its 20-week and 50-week EMAs in impressive but fake bullish rebound moves.
Therefore, WAVES’ latest upside retracement, albeit its best weekly performance since April 2018, still treads under long-term bearish risks. As a result, a price drop below the 20-week and 50-week EMA could spell another selling round in the market.
That WAVES selloff level
To recap, WAVES, the native token of a blockchain platform of the same name, rallied by as much as 88% week-to-date to reach over $21 apiece during the weekend.
As Cointelegraph covered earlier, migration to Waves 2.0, partnership with interoperable blockchain service provider Allbridge, and an upcoming $150 million fund to boost Waves’ growth in the U.S. served as tailwinds to WAVES upside boom.
But signs of correction have emerged as WAVES falls nearly 10% from its local top near $21 this Saturday.
Interestingly, the inflection point coincides with the 1.00 Fib line of the Fibonacci retracement graph made from the 21.60-swing high to 0.54-swing low, which served as key resistance during January 2018, April 2021, and November 2021 corrections — as shown in the chart below.
WAVES/USD weekly price chart featuring its ‘critical resistance.’ Source: TradingView
For instance, in April 2021 and November 2021, bulls attempted to flip $21.60 as support but failed. As a result, WAVES has spent most of its time under the said 1.00 Fib level than above it, suggesting an unstable upside sentiment around it.
The Fibonacci fractal suggests that WAVES would undergo a pullback move toward its next line of supports near $17, $13.50, and $11. Conversely, a decisive move above $21.60 could have bulls retest levels above $34.50.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
A recent survey has revealed that a whopping 75% of investors in Asia-Pacific and Latin American emerging markets are looking to increase their exposure to cryptocurrency investments.
Researchers from consumer sentiments firm Toluna surveyed 9,000 people from 17 countries to complete the report released in February which found that more investors in APAC and LATAM emerging markets believe cryptocurrency investments are on a long-term upward trend. This is contrasted with developed markets that tend to believe crypto is in the midst of another hype cycle.
Emerging markets appear to be the most lucrative markets for growth in the cryptocurrency industry as 32% of consumers surveyed have trust in cryptocurrency compared to just 14% in developed markets such as the U.S. and E.U.
The data suggested that two of the major factors contributing to the broad differences in investing strategy are likely to be awareness and understanding of the crypto markets. Despite 61% of respondents reporting that they are aware of crypto, only 23% said they are familiar with the asset class. Toluna proposes that this may be because “it’s a complex concept that’s not easily understood.”
These days, crypto and nonfungible token (NFT) advertising can be found in many places, including professional sports arenas around the world which increases awareness but not necessarily understanding.
The relative difference in trust is reflected by the disparity between those who have invested in crypto in emerging markets (41%) and in developed ones (22%) of those surveyed. The trust difference is further illustrated by the lower sense of risk perceived by investors in emerging markets. Just 25% of investors in emerging markets believe crypto is too risky to dabble in, whereas 42% in developed markets feel that way.
However, overall perceived risk in crypto remains high as the report states, “45% of consumers agree that cryptocurrencies are not guaranteed to succeed.” It continues:
“Whereas 61% of consumers trust fixed, traditional deposits, just 23% say they trust cryptocurrency deposits in today’s market.”
The survey concluded that the generation with the highest proportion of crypto investors was Millennials. Toluna found that an average of 40.5% of Millennials surveyed aged 25-34 in emerging and developed markets invest in crypto. This data matches up with other similar surveys like Morning Consult’s, which found that 48% of Millennial households surveyed owned crypto by December 2021.
Gen Z investors aged 18-24 reported a rate of investment just below that of Millennials at 40% between both markets. However, Baby Boomers aged 57-64 had the lowest rate of investment with just 21% reporting plans to invest in crypto.
With news of early adopters retiring millionaires, and newbies making a 300% profit or more on their cryptocurrency holdings, investing in digital assets is seen by many as a lucrative opportunity.
That said, cryptocurrency continues to exist as one of the most volatile asset classes, marked with significant price swings branching from the highest highs to the lowest lows. For this reason, it is common for new investors to make attempts to time the market, especially if they have had a few successful trades under their belt.
Unfortunately, this is dangerous thinking since, like traditional asset classes, determining when a surge or dip will occur is impossible. For example, few could have predicted the current market the world is experiencing, which has made for a prime buying opportunity now that top cap tokens are facing a significant markdown from previous all-time highs.
Added complexity comes down to the cryptocurrency market being available 24 hours a day, making it all that more of an intimidating landscape for new investors to navigate. As a result, there is no proper way to time the cryptocurrency market, with the very thought being highly discouraged.
For those looking at long-term methods of building wealth, patience and strategy become increasingly crucial over timing an entry point. Like traditional assets, cryptocurrency follows standard cycles, with prices constantly compounding.
Meaning long-term investors with a particularly strong focus on strategy are far more likely to gain wealth than short-term traders. As the saying goes, timing the market time often loses to time spent in the market.
Therefore, investors are encouraged to move away from luck towards more responsible investment strategies. Consider that despite crypto trades available all day, a careful everyday analysis will result in patterns, and the addition of strategy will minimize risk.
Employing a strategy
Enabling a smart trading strategy comes down to several key principles, including investing only what a trader is willing to lose and avoiding the compelling sway of fear and greed. These efforts are often only easy in theory and require the assistance of a partially or fully automated trading platform to help execute.
For example, users are encouraged to adopt a dollar-cost averaging (DCA) strategy rather than attempting to time a dip in the market, where they can use it to build their cryptocurrency portfolio while limiting stress.
The strategy, favored by Warren Buffet, looks to buy into a holding by spreading out payments over a period of time, varying the price of purchase. Investors will typically set a recurring amount to be paid out, effectively averaging out the cost of the asset over time and limiting the potential impact of paying too much or missing a drop in prices. Many new investment tools aim to simplify this process through automation, enabling users to select a trading frequency (hourly, daily, weekly, etc.) and price limit, which the said automated platform will execute.
Following a similar strategy is the concept of grid trading. Grid trading occurs when orders are placed above and below a set price.
In practice, traders can place buy orders at every $2,000 below the price of Bitcoin (BTC) and sell orders above the market price. As assets fluctuate within that range, an automated program will look to these movements to buy low and sell high. With this strategy, investors will not need to time the market and profit from sideways markets when the price fluctuates within a given range.
Minimizing the impact
To help branch this knowledge gap for new traders, Matrixport has released a series of tools to make cryptocurrency trading smarter. Currently, Matrixport exists as one of Asia’s fastest-growing digital assets financial services platforms, releasing products such as an Auto-Invest tool for users to employ DCA, functionality for enabling a grid strategy and options-based Buy-Below-Market (BBM) and Sell-Above Market (SAM) offerings.
BBM and SAM were released as the first of their kind in the industry, enabling users to buy and sell Bitcoin at discounts or premiums relative to the market price. These offerings were inspired by the traditional wealth management accumulator and decumulator products that were reimagined for cryptocurrency investors. For investors, the benefit is twofold, allowing investors to tame an otherwise volatile market while eliminating the human emotion that elicits panicked reactions to market dips. Although the minimum requirement for the traditional model was $1 million, the BBM/SAM feature has made the feature accessible to the everyday investor with a lower minimum of $100.
The result of each pricing option may have one of three outcomes. In the case of BBM, this may be the asset settling in range and resulting in 50% of the user’s fund being used to purchase the asset, the price settling on the lower bound of the range and used to buy the asset or the price settling above the range with the order being knocked out. And wSAM is the reverse strategy of BBM.
Through the use of tools like BBM and SAM, among others, investors will be equipped to fill in the missing gaps in their smart trading strategies. Although not eliminating all risks, Matrixport boasts the smooth market transition for new investors as a conservative approach that removes any need to time the market.
Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you with all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.
The U.S. Securities and Exchange Commission (SEC), led by crypto-skeptical Chairman Gary Gensler, is reportedly investigating NFT creators and marketplaces for securities violations, according to a report from Bloomberg.
Anonymous sources in the report claim that the SEC is investigating whether: “certain nonfungible tokens… are being utilized to raise money like traditional securities.”
Throughout the last few months, attorneys from the SEC’s enforcement unit have reportedly sent subpoenas demanding information on specific NFTs and other token offerings.
While crypto lending products have been the subject of great regulatory scrutiny over the past year, this report marks a major move into investigating the NFT sector. The inquiry shows the SEC is taking a particular interest in how fractional NFTs are being used. That’s where a more valuable NFT is tokenized into smaller pieces and onsold.
The warning signs have been clear for a while, with Hester Peirce, also known as Crypto Mom, stating back in Mar. 2021 that selling fractionalized NFTs could be breaking the law.
“You better be careful that you’re not creating something that’s an investment product — that is a security”
This investigation is the latest in a wave of clampdowns that seek to govern the cryptocurrency market more firmly. Most recently, the SEC ordered that New Jersey-based crypto lending company BlockFi pay a record fine of $100m for failing to list “high-yield: lending products as securities.
While Bitcoin and Ethereum have been able to avoid scrutiny owing to the fact that they aren’t considered securities by the SEC (at least, not yet), other digital assets have not enjoyed the same reprieve, most notably Ripple Labs the parent company of XRP, which has been embroiled in a legal case over selling “unregistered securities” since late 2020.
NFT sales have continued to grow, flouting the current market decline — with the top two NFT exchanges LooksRare and OpenSea sharing $10.7 billion in trading volume over the past 30 days.
In his monthly crypto tech column, Israeli serial entrepreneur Ariel Shapira covers emerging technologies within the crypto, decentralized finance and blockchain space, as well as their roles in shaping the economy of the 21st century.
Jack Dorsey, Twitter’s ex-CEO and Bitcoin (BTC) aficionado, is not a big fan of Web3 — or at least of what its grand vision is shaping up to be. Users won’t own the next iteration of the internet, he asserts again and again. Instead, venture capital funds pumping millions into blockchain and Web3 projects will be the ones to hold the reins. But, will they, though?
The reality, as usual, is not as partial as either side would have you believe. In essence, Web3 is the dream of an internet free from the grasp of centralized platforms such as, well, Twitter. Different commentators also include other features such as an end to pervasive surveillance, more decentralization, data that’s understandable to both people and machines and AR/VR functionality. But, at the core, it seems, the Web3 movement is about bringing down the big fish.
In its current shape and form, after all, the internet is indeed quite centralized in a lot of ways. Just four companies run almost 70 percent of the global cloud infrastructure that is home to millions of web pages and applications. All the familiar faces are also encroaching on the crucial infrastructure making up the web’s backbone. And, platforms like Twitter and Facebook have largely centralized the way we consume content, becoming the window into the wider web for many — just look at Facebook’s standoff with Australian news publications.
Jack argues that the whole Web 3.0 brouhaha is ultimately a lot like a coup. A group of upstarts comes together, striking up a plot to overthrow the royalty, but they are only doing that out of self-interest. They have no thoughts to spare for the layman out there. And, should they win, little would change in the kingdom other than the banners flying over the capital.
So, is there anything in Web3 for the laypeople of the centralized kingdom? The reality is, as usual, complicated.
It is undeniably true that Web3 is a hot topic in the VC world. It’s not just a16z bringing forth this vision. There’s also Iconium, a private investment fund focused on digital assets and decentralized projects, investing in networks like Secret and Terra and dozens of other funds large and small. All in all, VCs pumped $33 billion into blockchain startups in 2021 and this figure speaks for itself — but not necessarily with the implication of control.
In the digital world, you reap what you code. Code is the law, blockchain enthusiasts like to say, and even though the crypto community itself didn’t always live by this principle, it is a rallying cry for some of its more purist advocates. The idea behind it is that the code is a more unbiased judge than any centralized entity could ever be, and so, in code we trust.
While the sentiment may be a bit naive, this focus on the code is worthy of further discussion. Things like the pervasive surveillance that users deal with today stem from the code powering the platforms they use. The reason why Facebook and Twitter services pull in your data is that they were coded that way. This design, for its part, stems from a specific business model from the Web2 era: You pay for the free service with your privacy.
By extension, though, an app without hard-coded consumer surveillance is fundamentally incapable of spying on the users. Neither is it capable of exercising any form of control over anything it’s not built to control in the first place. And, as long as it happens to sit on a public blockchain where its code is open for review, users will be able to inspect its limitations themselves. Those who don’t speak Solidity will still be able to hear from those who do, as the open-source community is generally always abuzz with insightful discussions and opinion-sharing.
The changing tides of investing
Don’t be mistaken: VCs are not charities, they are very much interested in returns on their investment. The question is, though, where do these returns come from? In this respect, things are different from project to project, but in most general economic terms, blockchain projects are all about tokens. Sometimes, it’s not positive, as victims of any of the recent rug pulls may testify, but for VCs, that’s essentially how they cash out. They invest by buying tokens from the project and profit from selling it when it takes off. More often than not, it’s that simple.
A VC investing in an invasive app taking a jab at the established giants fits into Dorsey’s argument. And, yes, a decentralized application (DApp) can hypothetically be as invasive as a centralized one. A VC investing in a privacy-first open-source project in hopes of cashing out on its token does not. Neither can accrue any kind of outsized power in the hypothetical decentralized internet of tomorrow unless projects they invest into explicitly hand them this power — which is something the community can keep tabs on.
Furthermore, the face of investing is changing. The push for decentralization has given rise to decentralized autonomous organizations, or DAOs, which often come together around a specific vision or an investment. In a somewhat similar vein, projects like dHEDGE, a social asset management protocol, give retail investors a chance to pool their assets together under the guidance of a skilled manager or algorithm and put them to work. Both approaches will ultimately lead to more democratized and more conscious investing, which also runs against what Dorsey is charging.
All in all, the tale of Web3, as it often happens with big ambitions and big words, is now marketing buzz and speculation as much as it is genuine technological ingenuity and a push for a better web for all. Something like this inevitably takes a bit of cynicism to process without falling into any of its many caveats, but it is just as important to look out for the diamonds in the rough. That is exactly what investors are doing. There may never be a single tectonic shift in the Web3 foundations, but as more and more decentralized projects take off that offer users genuine value beyond purely financial terms, the Big Tech grasp on the Internet may indeed give way to a new paradigm, one that won’t ultimately give us more of the same.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Ariel Shapira is a father, entrepreneur, speaker, cyclist and serves as founder and CEO of Social-Wisdom, a consulting agency working with Israeli startups and helping them to establish connections with international markets.
Bullish optimism returned to the cryptocurrency market on March 1after a majority of tokens turned green and Bitcoin bulls telegraphed their intention to hold the $40,000 level as support going forward.
Data from Cointelegraph Markets Pro and TradingView shows that the price of Bitcoin (BTC) has surged 20% from a low of $37,409 on Feb. 28 to an intraday high at $44,951 on Tuesday.
BTC/USDT 4-hour chart. Source: TradingView
Here’s what several analysts are saying about the sudden bullish reversal in Bitcoin price and what crypto traders can expect moving forward during this time of increased global tensions.
A revisit to $34,000 is “not out of the question”
Prior to Tuesday’s price surge, BTC sellers were firmly in control of the market according to a report from Delphi Digital, which posted the following chart and noted that “in the wake of recent events that have unfolded, being cautious over the last two weeks has indeed proved to be the correct course of action.”
BTC/USD 6-hour chart. Source: Delphi Digital
According to Delphi Digital, the major lower support level to keep an eye on is $34,000 based on the amount of support seen there back in January when a hawkish Fed caused markets to tumble “before staging an impressive rally.”
Delphi Digital said,
“Since then, price has failed to sustain momentum and returned to this $34,000 region as Russia announced its invasion of Ukraine. Price has since bounced to $38,000 at the time of writing, but a revisit of the $34,000 support level is certainly not out of the question just yet.”
Hodlers are hopeful
A more bullish projection was offered by on-chain analysis firm Glassnode, which noted that “despite a 50%+ correction” since the highs in November, a majority of the buyers that had entered the market throughout the August to November rally “have not liquidated their positions.”
Bitcoin URPD on Feb. 27. Source: Glassnode
According to Glassnode’s analysis of the URPD metric, which shows the distribution of coin supply at the price it last moved on-chain, “the primary redistribution appears to be coming from investors who bought the $60,000+ range” and have recently been selling in the $35,000 to $38,000 price range.
Glassnode said,
“This spending behavior describes a market dominated by price insensitive HODLers, who appear unwilling to liquidate their coins, even if held at a loss. Meanwhile, top buyers have been significantly fleshed out, and represent a far smaller proportion of the investor cohort when compared to May-July 2021.”
A final bit of insight with a bullish bent was offered by options trader and pseudonymous Twitter user John Wick, who posted the following chart noting that “you can see we have a clear double bottom with a nice sign of strength.”
BTC/USD 1-week chart. Source: Twitter
John Wick said,
“We also have a confirmed reversal. Stops should always be set under the signals wick. I would be surprised if this setup takes us over $60,000.”
The overall cryptocurrency market cap now stands at $1.93 trillion and Bitcoin’s dominance rate is 43.2%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Global trade and financing suffer from inefficiencies because of traditional infrastructures. However, according to Martha Reyes, the head of research at Bequant, crypto can fix this issue.
In an interview with Cointelegraph, Reyes shared her thoughts on the state of global trade and financing and how crypto makes this more efficient. According to Reyes, despite the growth and magnitude of global trade, areas like remittance payments still suffer from the number of intermediaries that transactions have to go through. This leads to lengthy transaction times. Reyes notes that legacy systems for cross-border payments make global trade a “prime candidate” for blockchain technology adoption.
“Digital ledger technology can make complex trade transactions more efficient and secure. Smart contracts allow parties to specify the terms of an agreement and ensure that those are immutable and transparent.”
Reyes adds that the traceability of ownership for documents and agreements stored within smart contracts makes security tighter. Apart from this, the researcher notes that transaction settlement within blockchains is a lot faster and reduces friction.
Apart from global trade, Reyes thinks that tokenization helps in the aspect of financing as well. This may add benefits for small and medium enterprises (SMEs) in the form of access to capital.
“Tokenizing trade finance assets can facilitate access to capital for SMEs looking to trade as well as investors searching for yield, matching supply and demand more efficiently.”
Reyes also cited XDC Network as an example. “The smart contract transactions feature a digital coin, XDC, which represents the value of off-chain, bank originated assets that have yield generating capabilities,” says Reyes.
The research head believes that this is a way to “break through barriers” and give SMEs access to financing that’s outside of the sphere of the traditional financing system. Reyes notes that this “can also increase competition among lenders.”
Adding to the topic, the Bequant head of research also discussed the rise of hybrid protocols and what sets them apart.
“As more institutions take an interest in DLT, and they are often required to keep the information in their transactions private, this can present a dilemma in using a public blockchain. Some institutions are even creating their own private centralized blockchains. This is where a hybrid model becomes useful.”
Reyes notes that within hybrid networks, transaction details can be private while limiting data that’s given to the public network for the confirmation of the transaction. According to Reyes, “The technology combines the speed of private blockchains with the security of public ones, drawing on the strengths of both while minimizing any disadvantages.”
A set of 30 crypto wallets from 12 exchange accounts that have been linked to the terrorist group Hamas based in the Gaza Strip were seized on Monday by Israeli authorities.
Crypto exchange al-Mutahadun held the wallets where 12 accounts were allegedly being used by Hamas leaders to fund terrorist efforts against Israel. The Times of Israel reported that Israel’s Defense Ministry said on Feb. 28 that al-Mutahadun has helped Hamas’s military wing “by transferring funds amounting to tens of millions of dollars a year.”
The exact value of the seizures and specifically what crypto assets seized is not yet clear, however, Israeli officials believe Hamas uses “tens of millions of dollars” in crypto funds to fund its military. Israeli Defense Minister Benny Gantz said in a Feb. 28 statement
“We continue to expand our tools to cope with terrorism and the companies supplying it with the economic oxygen pipeline.”
Law enforcement agencies and banks around the world such as BNY Mellon have been increasingly tracking crypto transactions to pinpoint and drop the hammer on financial criminals. Blockchain transaction tracking firm Chainalysis has determined that only a small portion of crypto funds are used in criminal activity, however.
Hamas has been accepting crypto donations since 2019 when economic sanctions began severely constricting its ability to fight against Israel.
The seizure of wallets was conducted with help from Israel’s National Bureau for Counter Terror Financing (NBCTF). The NBCTF conducted a similar seizure of Hamas crypto funds last July when it confiscated wallets containing Tether (USDT), Ether (ETH), Dogecoin (DOGE), XRP, Binance Coin (BNB), Zcash (ZEC), Litecoin (LTC), and other assets.
Crypto tracking firm Cyphertrace confirmed that the funds seized in July were used by al Qassam Brigades, a part of Hamas’s military.
Crypto-based philanthropy is by no means limited to funding terrorism. In the first two months of 2022, supporters of the Freedom Convoy in Canada and Ukraine’s resistance force against Russia have raised millions in crypto donations.
Last month, crypto exchange Binance suspended services and marketing to Israelis upon request from the Capital Market, Insurance, and Savings Authority. The suspension is likely to be in effect as long as the Authority reviews the status of Binance’s license to do business in the country.
On Feb. 17, United States Deputy Attorney General Lisa Monaco announced at the Munich Cyber Security Conference the formation of the new task force “dedicated to cryptocurrency” within the Federal Bureau of Investigation (FBI). Coming four months after the launch of the Justice Department’s National Cryptocurrency Enforcement Team (NCET), this marks another major step in the U.S. government’s crusade against criminal abuse of cryptocurrencies.
What the task force will look like
The name of the new task force that Monaco revealed is the Virtual Asset Exploitation Unit (VAXU). It will bring together the personnel from the various units of the FBI with crypto expertise to conduct investigations that use blockchain analysis and can result in virtual assets’ seizure. There are still not a lot of details available on the details of the VAXU’s operation but in her speech, Monaco clearly emphasized the fight against cyber ransomware as the main priority:
“Ransomware and digital extortion, like many other crimes fueled by cryptocurrency, only work if the bad guys get paid, which means we have to bust their business model […] The currency might be virtual, but the message to companies is concrete: if you report to us, we can follow the money and not only help you but hopefully prevent the next victim.”
The VAXU also plans to work jointly with foreign task forces to track down multinational criminal networks operating in crypto.
Relation to the NCET
Despite its primary affiliation with the FBI, VAXU will in fact be part of the National Cryptocurrency Enforcement Team (NCET), launched in Oct. 2021, to target money launderers and cyber criminals. As per the official release, the NCET’s mission is to “tackle complex investigations and prosecutions of criminal misuses of cryptocurrency, particularly crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors.”
The NCET’s mission includes investigation and prosecution of cryptocurrency cases, identifying areas for increased investigative and prosecutorial focus, building relationships with crypto-adjacent units and officers across the law enforcement system and collaborating with the industry players.
Essentially, the NCET has a mandate to participate in almost any relevant case, no matter who is investigating it. The addition of the FBI-backed VAXU will further extend the unit’s capacities and entrench its status as one of the most important forces in the crypto law enforcement game.
NCET’s new look
On Feb. 17, Eun Young Choi, ex-senior counsel to the Deputy Attorney General, was appointed to lead the NCET. Choi spent over nine years as the cybercrime coordinator at the U.S. attorney’s office for the Southern District of New York where she dealt with cryptocurrency while investigating money laundering schemes and online fraud.
To name one, Choi served as lead prosecutor in the case of illegal crypto exchange Coin.mx, an unlicensed virtual currency exchange whose operator, Anthony Murgio, was sentenced to 66 months in prison. She also successfully argued the appeal in the case against Ross Ulbricht, the founder of the Silk Road, who’s been serving his back-to-back life sentences since 2015.
Speaking to Cointelegraph, Sujit Raman, partner in the privacy and cybersecurity practice at Sidley Austin law firm, underlined the consistency of the current U.S. law enforcement approach. As early as 2018, the Department of Justice publicly declared that “cybercriminals increasingly use virtual currencies to advance their activities and to conceal their assets,” and announced its intention to “continue evaluating the emerging threats posed by rapidly developing cryptocurrencies that malicious actors often use.”
Detailed internal evaluation and analysis within DOJ led to the publication of a comprehensive crypto enforcement strategy by the Trump Administration in October 2020. Raman noted:
“The launching of the NCET and of the FBI’s Virtual Asset Exploitation Unit are, therefore, significant and important expansions upon lines of thinking that senior officials have been pursuing for some time, across administrations.”
Executive synergies
Michael Bahar, chair of global law firm Eversheds Sutherland’s Cybersecurity practice said to Cointelegraph that there will be a synergetic effect to the prospective cooperation between the DOJ and other regulatory bodies. Bahar commented:
“The growing experience and expertise within the Department of Justice will also spread to regulators like the Securities and Exchange Commission and financial regulators. Indeed, we should now expect the Department of Justice to further enhance its engagement with state and local law enforcement and regulatory bodies in the United States and globally.”
As Raman explains, these relationships between the DOJ and bodies such as the SEC, Commodity Futures Trading Commission (CFTC), Financial Crimes Enforcement Network (FinCEN) and Internal Revenue Service (IRS) already exist and, while there are limits on how much criminal enforcers can collaborate with civil regulators, “those partnerships will only continue to deepen.” But, in Raman’s opinion, the DOJ and its task forces will not drive the actual rulemaking around digital assets:
“DOJ is a law enforcement agency. It is not likely to play a very significant role in crafting a legislative framework to govern the crypto industry writ large.”
Both experts agree that these developments don’t pose any threat to the legitimate crypto industry. On the contrary, capable law enforcement can help move it forward toward becoming a more transparent and safe zone for investments.
The signal the DOJ activity sends is quite clear: It’s time to comply. “If you engage with cryptocurrency, you will need to demonstrate that you can do so in a compliant manner, calibrating your compliance programs to the unique risks that cryptocurrencies and the underlying blockchain technology present,” Bahar explained.
The continuing centralization and coordination of federal law enforcement’s investigative and prosecutorial efforts in the virtual currency space makes it clear: While the fast-growing crypto industry is here to stay, law enforcement is adjusting its strategies in response.
In 1996, when the Nintendo 64 was first launched in the United States, it sold 1.6 million units (worth $200 each) in its first quarter. Its closest competitor for the holiday season was a $30 Tickle Me Elmo doll, which sold around a million units in the same window. More than 20 years later, when Nintendo’s $300 Switch sold 1.5 million units in its first week, there was a lot more competition, and not just for the holiday season.
The business of gaming has changed dramatically since its early days. From basic monetization through the sale of physical and digital copies of games to in-game monetization through microtransactions, the widespread adoption of the internet has caused a pronounced shift in the gaming landscape. While the previous millennium’s video game studios depended on revenue from selling games and gaming hardware, today’s goliaths don’t expect you to buy their games at all.
The business of gaming
Nintendo is a relatively rare example of a large gaming studio that hasn’t delved too deep into the microtransaction waters. Fortnite rakes in around $5 billion per year for Epic Games, and with numbers like that, you can bet most gaming companies are at least investigating the free-to-play model. However, this shift in consumer mindset from deep loathing to moderate acceptance for microtransactions has been a long, arduous process.
Fortnite was far from the first game to introduce microtransactions, but it was one of the first mainstream examples of a live-service game that relied purely on in-game purchases. This came at a time when the concept of microtransactions invoked images of toxic loot-box economies and luck-based purchases that had games morphing into “pay-to-win” ecosystems and as consumers were growing increasingly frustrated with game publishers.
Fortnite flipped the script, pushing microtransactions as a way to distinguish yourself in-game while supporting the developers on the side. They did not affect gameplay, preventing deeper pockets from dominating the games, and served as an excellent way for those with money and appreciation to show it — a sort of vanity-fuelled charity. Sound familiar?
Treasure Chest from Fortnite. Source: Fortnite Wiki
Will it blend?
Nonfungible tokens (NFTs) were bound to find their way into gaming ecosystems. From early implementations like CryptoKitties to today’s Axie Infinity, digitally owned tokens are seemingly destined to be coupled with games.
Some of the biggest names in the video game industry are embracing NFTs, and it’s no real surprise. Gaming has never been more accessible than it is today, evolving from a niche consumer base to establishing global pop-culture trends. For decades, gaming collectibles have sold for obscene prices — why should their digital cousins be any different?
From Ubisoft to Square Enix, what’s really intriguing the industry is figuring out the best approach. Some have simply started selling digital items as NFTs, enabling buyers to resell them to other, more eager enthusiasts. Others are attempting to adopt the play-to-earn (P2E) model used by Axie Infinity.
Earlier this year, American video game retailer GameStop announced plans to partner with an Australian crypto firm to develop a $100 million fund for NFT creators, content and technology. In his New Year’s letter, Square Enix president Yosuke Matsuda indicated that the company would like to incorporate blockchain/NFTs into its future releases, but he did not mention any specifics.
Recently, Ubisoft attempted to release a limited-edition collection of NFTs alongside its Ghost Recon Breakpoint game. In a perfect world, this would have been a celebratory moment — one of the world’s largest, most valued gaming mammoths had proclaimed the adoption of blockchain technology. As you might already know, this announcement didn’t quite go according to plan.
Introducing Ubisoft Quartz We’re bringing the first energy efficient NFTs playable in a AAA game to Ghost Recon: Breakpoint!
According to a report from DappRadar, gaming-related NFTs generated revenue worth nearly $5 billion last year and represented around one-fifth of all NFT sales in 2021. Ubisoft unveiled an NFT project on Dec. 7 — a move that was met with a 96% dislike ratio on its announcement video on YouTube — and two weeks later, it had reportedly only sold 15 NFTs, collectively worth less than $1,800.
“The traditional gaming industry is not going to adopt NFTs in their current state,” Wade Rosen, the CEO of legendary video game corporation Atari, told Cointelegraph. According to Rosen, though blockchain gaming will continue to evolve, there currently isn’t enough tangible utility for players to consider adoption yet.
“NFTs — how they are produced, what value they provide to individual players, and communities of players that form around individual titles — will need to evolve pretty significantly before you can expect to see any widespread adoption within the [traditional gaming] industry. We do see a lot of potential for NFTs and blockchain technology within video games, but not until the definition of an NFT evolves significantly beyond where it stands now.”
It’s not that gamers don’t like the idea of buying NFTs — it’s that they have been marketed as blatant cash grabs. To drive NFT sales, Ubisoft made it absurdly difficult to earn any in-game items for free. Still, some of the most prominent players from Zynga to EA Sports are keeping a close eye on blockchain and how it could impact the business of gaming — an industry worth around $80 billion.
“The reaction to the topic within the industry is binary and visceral, and unfortunately, that just isn’t a good environment for exploration,” Rosen added. “We expect most of the related innovation over the next 12 to 18 months to happen within the more narrow blockchain gaming space.”
American gamers, with an average age of 35, have seen the medium shift from text-based to 2D to 3D to virtual reality multiplayer, all in around two decades.
During this time, the gaming industry has primarily profited from selling entertainment products that offer nothing more than a game. But as soon as you let money flow in and out of a game, you effectively turn its economy into a stock market.
This has led many gamers to feel that — with NFTs and blockchain — studios and game publishers are more focused on creating markets than on engaging, unique and, most importantly, fun gaming experiences.
Make games fun again
There is a middle ground for gaming NFTs, one where publishers don’t run blatant cash grabs and the tokens themselves have no impact on the financial incentives of the game. There are countless factors to consider when investigating why adoption rates have been slow, but many are convinced that cracking the case is only a matter of time.
Elliot Hill, director of communications at Verasity — a blockchain-based advertising technology firm — told Cointelegraph that while NFTs are clearly innovative and useful, they lack adequate infrastructure.
“With these hurdles in the rear-view mirror, it’s my view that widespread adoption of NFT technology is now much more likely by major game companies,” he said.
On the surface, video game studios are like software companies: They both hire developers, designers, managers and executives, along with sales and marketing teams, to build and sell a product. However, they serve an entirely different clientele.
The video game industry works some of the longest hours among software-based companies, filling a strange space between the extravagance of Hollywood and the structure of Big Tech. However, with NFTs practically tacking on optional financial services sidequests to video games, the line between work and play begins to blur.
Gaming NFTs exist at an intersection between some of the most fast-paced, high-skill, high-value environments in the world: technology, finance and entertainment. Each of these sectors accommodates all kinds of market conditions and consumer behaviors, and it will take time for them to understand the intricacies of the others.
Sarah Austin, co-founder of NFT and metaverse gaming launchpad QGlobe, told Cointelegraph that NFT games are in their early stages and haven’t evolved much beyond simple GameFi and P2E models.
“Going from AAA games to NFT games can feel disappointing. However, if the player’s motivation is to earn rewards, then they are less concerned with the quality of gameplay.”
According to research from Nielsen, consumers spent over $90 billion on microtransactions in 2021. The gaming consumer market is happy to spend money in-game, but not at the cost of the game itself. The more utility and impact an NFT has in-game, the less important the actual game becomes.
“The GameFi/P2E arena is where the industry is starting — not the end state,” said Atari’s Rosen. “Personally, I am intrigued by the potential for NFTs to allow for more collaboration and interaction between games and among virtual worlds. Eventually, NFTs may become building blocks that allow players and developers to create new, shared experiences.”
However, there are also cultural elements at play. While pay-to-win microtransaction economies are shunned in the West, gamers in the East seem to have adopted them wholeheartedly. Chinese game developer miHoYo’s worldwide smash hit Genshin Impact essentially runs on a luck-based loot-box economy but managed to gross over $2 billion in its first year.
Genshin Impact title image. Source: GameRant.
As Square Enix president Yosuke Matsuda previously stated, not everyone plays games just to have fun. Some want to contribute to the games they’re playing, and so far, traditional gaming has no incentive models that cater to these consumers.
There’s certainly a large enough market to warrant the effort, but it seems gaming NFTs, in their current form, are more geared toward attracting casino gamblers than average gamers. NFTs are most certainly coming to mainstream gaming — it’s just a matter of who can figure out the right balance between the finance of gaming and the gamification of finance.
