Investors Buy Bitcoin’s Dip as Fraudulent Revenues Drop
Bitcoin (BTC) began the week by recovering from $6,700 to $6,900 before taking a hit, dropping to a $6,570 low before, moving back up once again to trade at $7,150 at press time. Ether (ETH), the second-largest cryptocurrency by market capitalization, rose throughout the week from $155 to $182.
Last week saw cryptoasset manager Grayscale Investments reveal that it had raised a total of $503.7 million in the first quarter of the year, nearly doubling its previous record high of $354.8 million in Q3 2019. Grayscale offers investors digital asset investment products, giving them exposure to the cryptocurrency space without having to manage private keys.
These products include its Bitcoin Trust (GBTC) and Ether Trust (ETHE), and are managed for a fee. Grayscale’s record quarter this year saw it raise nearly as much as in the entirety of 2019, where it raised $600 million. In total, it now has over $2.2 billion worth of assets under management.
Notably, institutional investors reportedly made up 88% of the total investments in the first quarter of this year, – a majority of whom were hedge funds. Over the last 12 months, grayscale saw inflows of over $1 billion, with 79% of the funds coming from institutions.
Silicon Valley investment powerhouse Andreessen Horwitz (a16z) is also doubling down on the cryptocurrency space, as according to the Financial Times it’s looking to raise $450 million for a second cryptocurrency-focused fund.
Andreessen Horowitz is one of the most established venture capital firms in Silicon Valley, having invested in Facebook, Pinterest, Airbnb, BuzzFeed, Slack, Lyft, and others. In the cryptocurrency space, a16z invested in popular cryptocurrency exchange Coinbase as early as 2013, and was recently a founding member of Facebook’s Libra Association.
The Libra Association itself revealed this week that it is pivoting to support cryptocurrencies tied to fiat currencies, and has decided to drop its plans for a single cryptocurrency backed by a basket of currencies and short-term U.S. Treasury bonds. The cryptocurrencies it will support will be digital versions of fiat currencies.
Large investors aren’t the only group betting on cryptocurrencies. Data shared by Coinbase CEO Brian Armstrong on social media revealed a large influx of deposits and buys of exactly $1,200 – the size of the stimulus check U.S. citizens are receiving as part of the $2 trillion CARES Act to provide relief.
The funds have been distributed directly to citizens, with some being able to receive them on Square’s Cash app – which also lets users buy and sell BTC. On social media, several users revealed they would be using at least part of the stimulus check to buy bitcoin.
Cybercriminals’ Revenues Drop
A report published by blockchain analysis firm Chainalysis revealed that criminals using cryptocurrencies have seen their revenue plummet by one-third because of the coronavirus-induced market crash seen last month, which saw the price of BTC drop from $7,1000 to under $4,000 in a two-day period.
It revealed that on a seven-day moving average, the revenue earned by crypto scams dropped from $800,000 in the middle of January to less than $300,000 in April. Nearly all of the revenue losses, it adds, are concentrated on investment scams and Ponzi schemes, as other fraudulent actors have formed new narratives to take advantage of the COVID-19 outbreak.
These include blackmail and phishing scams where criminals pose as health organizations asking for donations or try to blackmail victims by threatening to infect them with the novel coronavirus.
The FBI has pointed out that many have also tried to pose as the victims’ employers, asking them to accept “donations” into their bank accounts and convert them into crypto to launder the funds.
In this vein, to help curb money laundering using cryptoassets, popular Ethereum blockchain explorer Etherscan has launched a tool to help users identify tainted addresses. The tool, ETHProtect, analyzes data to find addresses that received funds associated with fraudulent activities, phishing schemes, hacks, scams, or exploits.