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Cryptocurrency Market Analysis February 23, 2018

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cryptocurrency price analysis

Regulators – Boogeyman of the Cryptoworld

The cryptocurrency world has been shaken for the past couple of months by the measures, which governments have been taking in order to regulate this market. China has stopped the activity for the local exchanges and prohibited external transfers to foreign exchanges. The SEC has had crypto discussions and the IRS is working with Chainalysis to scan for tax evaders. Many countries have banned ICOs and are strongly against investments in such vehicles. Japan – the one with already existing regulations – is knocking on the doors of exchanges in order to strictly monitor their activity. These examples could easily be listed in a couple more pages.

Although right now everyone looks at regulations as killing crypto businesses and investments, from our point of view this is a misconception. In a decentralised world, some of the power is given back to individuals, yet it does not make the environment safer because there will always be actors trying to benefit in an illicit way from the trust of other people. ICOs serve as an example. In 2017 thousands of ICOs have been launched, with many good ideas backed by experienced teams, which most probably will reach their targets and provide promised services according to their whitepapers. But these are few and far between. Many ICOs have just been launch for startup founders to get their hands on easy money. 

The trend clearly shows ERC20 token to be most commonly used in creating new ICOs. These can be easily built in just several minutes by a medium experienced developer. Such tokens do not bring added value to the crypto space but due to lack of regulations and supervision, they are released and millions of dollars will be lost by their owners, without the possibility of being recovered.

Despite the sentiment that regulating a decentralised economy is seemingly a drawback, it shall bring stability and trust towards the remaining tokens. Most governments, if not all of them, are supporting the innovative technology underlying cryptocurrencies. However, they also have the obligation to fight with money launderers, tax evaders, and scammers in order to protect bona fide investors. Understandably, regulators take a slow and measured approach to cryptocurrencies.

Bulls or Bears?

As per the usual, markets tend to panic when an external factor is expected to have an impact on the environment, though it is not fully understood by the masses, and the price dips. This is what happened to bitcoin and altcoins in late December 2017 and January 2018.

Due to regulatory risks, bans, and smart money selling their coins, a sell-off started on the crypto market. The price of bitcoin plunged from close to $20,000 to $6,000, providing a huge discount for whales to come into the market. As all the headlines were showing “Anonymous investors buys 400 millions USD worth of bitcoin”. Nobody with access to this kind of funds would invest as much in a low probability investment opportunity, or we are wrong?

Nevertheless, many analysts and investors all over the world have expressed their opinion that blockchain technology has the potential to disrupt a big number of classical business models. The crypto asset market is still in its early development stage. A new regulatory environment will pave the way for more smart money to enter this market. A new passion to have better control over finances and less trust in centralised institutions adds up to a strong list of arguments, which reinforce the idea that the crypto market, still dominated by bitcoin, is poised to continue its rally.

Price Analysis

Bitcoin

The price action of bitcoin (BTC) vs USD shows that after hitting the $20,000 Resistance, the price started a corrective move inside a descending channel, which stopped at $6,000, a four-month low. Currently, we can say that the main trend of the price is downward, by looking at LH and LL (Lower Highs and Lower Lows). The rally which has brought back the back towards $12,000 has met a strong resistance area built on a convergence of previous resistance levels and trend line. A drop from here back to retest the local support from $9,000 is more likely than a breakout from this channel. The fundamental uncertainty is still fueling bears and the accumulation area has yet to be developed. A retest of $9,000 or even lower of $7,500 support area could gather enough buying power for bulls to come back and break above $12,000, aiming for new highs above $20,000.

Ethereum

Ethereum (ETH), as well as other altcoins, followed pretty much the same path as BTC, though it has not corrected as much. It hit its all-time high in January and the dip stopped at around $600 per ETH. This is considered a strong support area for the future price action of this pair. A rally brought the price back to the $1,000 resistance area which worked as a charm, since the price was reflected and now is on a downwards move, targeting the $750 local support. We are expecting this pair to act very similar to BTCUSD and build an accumulation area before breaking above the downtrend line.

Ripple

Ripple (XRP), on the other hand, had a much more volatile and aggressive behaviour than our previously analyzed tokens. The price shot through the roof in a strong buy period, fueled by the Asian buyers, especial investors coming from South Korea, reaching a new high at $3.32 per XRP. The sell-off corrected 88.6 (Fibonacci retracement) of the latest rally, and the token is currently traded below $1 per token. A support area has been built around 75 cents per token, while the resistance level sits at $1.21 per token. Similar to the BTC and ETH, we consider an accumulation area is developing as we speak, providing time for bulls to regroup and push the market above the current resistance levels.

Buroka TechThis cryptocurrency market analysis is being presented by Buroka Tech. Buroka Tech is cryptocurrency-focused technology provider for financial institutions. 

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Alleged Con Man Taken to Court in Kenya Over Fake Bitcoin Deal

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Fake Bitcoin Deal

A man is reportedly facing charges in a Nairobi court after allegedly swindling an accountant out of 375,000 Kenyan shillings (KES) in a fake bitcoin deal. The accused, Patrick Kamau, allegedly committed the fraud on several dates between December 2018 and May 2019.

Bitcoin Investment Deal Goes Sour

Kamau reportedly promised to open a forex trading account for the complainant and invest in forex bitcoin through BNB Forex. Benjamin Mugoya entered into the deal with the hope of making crypto trading profits after a friend introduced him to Kamau. The accused posed as a sales representative for BNB Forex in Kenya.

BitcoinGet

To open the forex trading account, Kamau asked Mugoya to wire KES400,000 to his bank account. However, after receiving a total payment of KES375,000 on May 22, Kamau switched off his phone.

In addition to this payment, Mugoya had sent Kamau KES50,000 in two installments in December 2018 and January 2019.

This is not the first bitcoin-related case that has been heard in a Nairobi court. In 2017, three bitcoin traders were charged with allegedly stealing KES10.2 million from I&M bank and Mpesa. The case involved a purchase of bitcoin from the traders using stolen money.

The case against Kamau has been scheduled for 22 February 2020. The accused was released on a cash bail of KES150,000 or a bond of KES200,000.

Unregulated Crypto Space

Mugoya could be one of many victims that have fallen prey to fake bitcoin investments despite the Central Bank of Kenya’s warning against investing in bitcoin.

The Bank’s Governor, Patrick Njoroge, has been vocal about the risks associated with cryptocurrencies such as fraud.  In 2018, the Governor ordered Kenyan banks to refrain from making crypto transactions or engaging with entities transacting in virtual currencies.

The unregulated crypto space in Kenya means that victims of crypto fraud are unprotected, thereby, preventing them from recovering their funds. However, with sufficient evidence, Mugoya could obtain justice from the Kenyan court system.

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DRC, Tunisia to Invest in Tech-Focused Impact Fund BLOC Smart Africa

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BLOC Smart Africa

The Tunisian and DRC governments have signed a declaration with Bamboo Capital Partners and Smart Africa to invest in the tech-focused impact fund, BLOC Smart Africa.

The agreement was made in Tunis at the Afric’Up Summit, an event that aims to promote innovation, entrepreneurship, and tech startups in Africa. The 2019 theme was “smart cities and open innovation in Africa,” featuring conferences and workshops with more than 150 speakers and investors.

BLOC Smart Africa

Smart AfricaBLOC Smart Africa is an impact fund that uses blended finance to invest in African startups with social and environmental impact-driven projects that leverage new technologies. For the first fund, the company has a target size of €100 million. The government of Togo committed €5 million in March for the first tranche.

Djibouti and Chad have also expressed their support for the Smart Africa project and they intend to formalise their commitment to the BLOC Smart Africa fund soon. Additionally, Burkina Faso has created an ad-hoc commission that will consider whether the country should become a founding member of the BLOC Smart Africa fund.

“We are delighted to see our partnership with Bamboo Capital Partners evolve today, with the signature of a declaration of intention from the Governments of the Democratic Republic of the Congo and Tunisia, and with the support of the Governments of Burkina Faso, Chad, and Djibouti. BLOC Smart Africa aims to identify and develop the next generation of pan-African technology champions in close co-operation with our members, partners and local technology ecosystems in the public and private sectors. We look forward to seeing our partnership bear fruit by giving young talent across the continent the opportunity to give free rein to their creativity and entrepreneurial spirit,” said Smart Africa CEO, Lucina Koné.

Smart Africa is an initiative comprising of Heads of States and governments from seven African countries that seek to boost sustainable socio-economic development through ICT. The member states include Rwanda, Burkina Faso, South Sudan, Gabon, Mali, Uganda, and Kenya.

In May 2019, Bamboo Capital Partners signed a partnership agreement with Smart Africa to support the BLOC Smart Africa fund. Through the collaboration, Bamboo will offer access to regional and local ecosystems such as incubators and source deal flow.

Jean-Philippe de Schrevel, founder and managing partner of Bamboo Capital Partners, said: “For over a decade, Bamboo has been at the forefront of impact investing, backing companies with innovative solutions to improve the lives of communities in emerging markets. With the support of these countries, we look forward to investing in companies using the latest technology to tackle major social or environmental challenges.”

Bamboo is a commercial private equity company launched in 2007. The firm has offices in Luxembourg, Bogota, Nairobi, Geneva, and Singapore.

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Nigeria’s Capital Markets Regulator to Create Framework for Cryptocurrency Regulation

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Framework for Cryptocurrency Regulation

Nigeria’s blockchain community and cryptocurrency exchanges could get a clear stance on the classification of cryptocurrencies from the country’s Securities and Exchange Commission (SEC) before the end of the year.

A Framework for Cryptocurrency Regulation Is Coming

According to a report by Pulse, the regulatory institution is set to implement the roadmap for the fintech industry as it pertains to its capital markets. According to the roadmap, between the last quarter of this year and the first quarter of 2020, the SEC is expected to:

  • Decide on its preferred classification of cryptocurrencies (either as commodities, securities or currency).
  • Develop a framework for the regulation of Virtual Financial Assets (VFAs) and VFA Exchanges.
  • Issue guidelines and standards for whitepapers and ICOs.
  • Develop a framework for KYC and due diligence for cryptocurrencies, Virtual Financial Assets, tokens, and ICOs.
  • Define clear classification for tokens based on their unique properties. They could be payment tokens, asset tokens, utility tokens or others.  

The Acting Director-General of the SEC, Mary Uduk, revealed at a Capital Markets Committee briefing last month that the Working Group to drive the implementation of the roadmap would be chaired by Adeolu Bajomo, the Vice-President of the Fintech Association of Nigeria. 

Cryptocurrencies as Commodities or Securities But Not as Currency

traderOne of the recommendations that stands out in the roadmap, which was prepared by a committee comprised of officials from the regulatory agencies, the private sector, and a member of the blockchain community, is for the SEC to recognise cryptocurrencies as commodities or securities, and not as a currency. This classification is expected to have tax implications for investors.

This recommendation is in line with the central bank’s directive last year, which stated that “virtual currencies” were not a legal tender.

Cryptocurrencies have lacked a single, definite identity. For example, Germany is treating them as money and means of payment while the US uses the Howey test to decide whether a cryptocurrency is a security or not.

Crypto Adoption in Nigeria

Citigroup, a US investment firm, reported in January 2018 that Nigerians were the third-largest holders of bitcoin as a percentage of gross domestic product (GDP). The use has ranged from ­trading to making fast, low-cost cross-border transactions, saving on the high fees taken by commercial banks and traditional money-transfer services.

Nigeria has a fast-growing young population with a significant chunk below the age of 35. But there is still a small number of people with access to the financial system. Less than 50 million people with bank accounts in a population of over 180 million. Blockchain applications could be a great way to onboard millions of underserved people into the financial system.

With the SEC expected to take responsibility for the regulation of cryptocurrencies in the country soon, we can foresee more scrutiny of Nigeria’s biggest crypto companies, which could lead to a more secure crypto trading ecosystem down the road. 

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