The Bitcoin Bull Run: How It Started, How It’s Going 0 80

Wherever you stand on Bitcoin, there is no question about its impact on the role of blockchain and cryptocurrency within society.  Whether we look back to Pizza Day or to its heights in 2018, the volatile nature of the cryptocurrency has garnered much speculation and media coverage. 

While many looked at the past few years as a “Crypto Winter,” others saw an opportunity for Bitcoin.  Between COVID lockdowns, political, and fiat currency concerns, Bitcoin has been on a dream run – for a moment going over the $55,000 barrier.

Why Did Bitcoin Suddenly Explode (Again)?

Elon Musk and other influencers played a role in the recent rise in Bitcoin’s price. Tesla’s recent investment in an infrastructure to accept Bitcoin payments, and Apple Pay’s introduction of BitPay, a prepaid bitcoin MasterCard, are also major markers of market adoption. But two other events occurred that set the stage for the Bitcoin bull run: a pandemic and Bitcoin Halving.

Every four years, Bitcoin miners have their processing transactions cut in half. This reduction in supply then drives up prices based on scarcity. This occured in May 2020, when the economy was already at a standstill due to the pandemic. Since the supply of crypto coins is finite many think that there is lower inflation risk with using them – this means that it may be used as a hedge against U.S. inflation. In 2020, more than 20% of all dollars currently in circulation were printed, making crypto even more alluring. 

Crypto isn’t going anywhere. This year, experts project increased use of crypto cards, emergence of new cases, and increased investing from traditional finance leaders.

Take a look at this visual deep dive on the rise of Bitcoin for more information:

Bitcoin: Once A Diamond In The Rough, Now A Treasure

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Tina Mulqueen is the CEO of Kindred PR. She consults with reputable ICOs on marketing and public relations strategy, helping clients to secure more than $10M in funding. She was named one of the top young communications professionals by INC Magazine, and her campaigns have been featured in Adweek, Entrepreneur, INC and Forbes, in addition to multiple other niche and television outlets. She's an advocate for women in technology, and often speaks about the intersection of technology and retail marketing. She writes regularly for Forbes, and has written for Huffington Post, Today, Thrive Global, Elite Daily, New York Lifestyles Magazine, and more.

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Chinese Crypto Leader Li Xiaolai Suddenly Retires 8 1429

One of China’s most prominent Bitcoin investors has announced his retirement from the crypto world. Billionaire Li Xiaolai is the founder of BitFund, a crypto venture capital firm that has fostered a slew of Bitcoin-related startups.

Li’s announcement of his decision to withdraw from cryptospace—and investing otherwise—came unexpectedly via his page on Chinese social media site Weibo.

“From this day on,” his post reads, according to TechNode’s translation, “I, Li Xiaolai, will personally not invest in any projects (whether it is blockchain or early stage). So, if you see ‘Li Xiaolai’ associated with any project (I have been associated with countless projects without my knowledge, 99% is not an exaggeration), just ignore it.”

Li is a former school teacher, and claims to be the first person in China to openly trade Bitcoins, rather than hiding behind its famous anonymity. Now, retired from both teaching and investing, he says he’s not sure where to go next. “I plan to spend several years to contemplate on my career change. As for what I’m doing next, I’m not sure just yet.”

Li closed his post by expressing that he still maintains a long term optimism about the blockchain.

Li’s Ventures Grew Crypto Capital, Controversey

Through BitFund, Li has incubated a number of blockchain related startups, including an off-chain wallet called Bitfoo, the crypto exchange YUNBI, and HashRatio, a miner manufacturing company. Li organized 2014’s Global Bitcoin Summit in Beijing, back when you could get a BTC for as little as $440, and years before China instated its full ban on cryptocurrencies.

Earlier this year, Li also acted as managing partner of Hangzhou Xiong’An Blockchain Fund, a billion dollar fund backed by the Hangzhou government. Li stepped down after fellow venture capitalist Chen Weizing introduced a series of accusations against him.

Included in the eleven accusations, which Chen broke on social media and messaging platform WeChat, were a supposed debt of 30,000 BTC that Chen says Li failed to pay on time. Li published a point-by-point response to Chen’s accusations, addressing the 30,000 BTC debt by saying “it’s not true… Chen is just muddying the water.”

Though Li called them “defamations,” and Chen did not offer supporting evidence for his allegations, Li said Chen’s antics “brought material and negative impacts on the reputation of Xiong’An Blockchain Fund” and that his resignation would “let the Hangzhou government continue its push for blockchain development.”

Li was the subject of controversy on another occasion when, in a candid conversation he did not know was being recorded, he outed several influential organizations as scams and said that the best way to succeed in blockchain, even if your project is worthless, is to get famous and build consensus.

The State of Crypto in the People’s Republic

All crypto and blockchain related websites are blocked by the Chinese government, and citizens are forbidden from engaging in crypto transactions. The People’s Bank of China released a statement on August 24th warning against ICOs, which they consider to be “illegal fundraising, pyramid schemes, and fraud.”

But the rules have been difficult to enforce, and crypto still enjoys an active user base in China. Beijing Sci-Tech Report, China’s oldest technology publication, is now the first Chinese publication to accept BTC as payment from its subscribers. Chinese crypto channel cnLedger announced in a tweet on September 25th that Ethereum Hotel, China’s first hotel to accept ETH as payment, is open for business in Sichuan Province.

A Crypto Landscape Without a Leader

The sudden exit of Li Xiaolai from the Chinese crypto scene could have caveats, or greater implications. Weibo users expressed their support and gratitude following his announcement, but some also speculated that his choice of words leaves room for Li to continue investing in crypto indirectly, perhaps through funds or corporate entities. Whether that will be the case or not, for many, his resignation marks the loss of a public blockchain leader.

The First SEC Strikes Against Unregistered Crypto Firms Are Here 4 1260

And so it begins.

For the first time ever, the Securities and Exchange Commission has issued a violation to a hedge fund manager for its investments in digital assets. They found Crypto Asset Management, or CAM, a California based crypto portfolio manager, operating as an unregistered investment company while claiming to be SEC regulated. Further, the SEC says CAM was falsely marketing itself as the “first regulated crypto asset fund in the United States.”

Over a four month public offering last year, CAM’s Managing Director Timothy Enneking raised upwards of $3.6 million based on this claim, and invested 40 percent of the fund’s assets into cryptocurrencies, thus operating the fund as an unregistered investment company. CAM received a cease and desist order, with which they complied, and the SEC fined them $200,000. CAM agreed to pay the fine without admitting to or denying the SEC’s findings, and offered buy backs to investors.

The Fall of TokenLot, the SEC’s Second Target

Tuesday the SEC also charged Michigan LLC TokenLot, which closed down at the end of July, with operating as unregistered broker-dealers. TokenLot called themselves an “ICO Superstore,” which co-founders Lenny Kugel and Eli L. Lewitt promoted as a space to buy into ICOs and trade tokens on a secondary market. Through their platform, over 6 thousand retail investors traded more than 200 different tokens which, by the SEC’s standards, qualified as securities and therefore fell under SEC regulations.

It’s the first time the SEC has enforced last year’s DAO Report, which warned traders that digital assets like DAO tokens would be considered securities, and subject to regulations as such. After the SEC’s charges, TokenLot started refunding payments to investors for unfilled orders and began the process of closing down, also without admitting to or denying charges.

Lightened penalties include $471,000 for the company, plus interest, and $45,000 each in personal fines to Kugel and Lewitt.

“The penalties in this case reflect the prompt cooperation and remedial actions by TokenLot, Kugel, and Lewitt,” says SEC Co-Director of Enforcement Division Steven Peikin.  “TokenLot, Kugel, and Lewitt provided valuable information to Commission staff, stopped the conduct, and refunded money to investors.”

Making Examples, or Starting a Crackdown?

The SEC could be making examples of TokenLot and CAM, but there could be more of a crackdown coming.

The charges emerge after the SEC subpoenaed 80 cryptocurrency firms earlier this year, including the $100 million cryptofund of Michael Arrington, founder of TechCrunch. While not indicators of misdoings, the subpoenas were tells that the SEC was working out its terms for coming indictments.

Securities Investigations Extend Beyond US Borders

Also earlier this year, the North American Securities Administrators Association (NASAA), an international investor protection agency, initiated ‘Operation Cryptosweep’ to target fraudulent ICOs and crypto investment products across the US and Canada.

“While not every ICO or cryptocurrency-related investment is a fraud, it is important for individuals and firms selling these products to be mindful that they are not doing so in a vacuum,” says Joseph P. Borg, President of NASAA and Director of Alabama Securities Commission. “State and provincial laws or regulations may apply, especially securities laws. Sponsors of these products should seek the advice of knowledgeable legal counsel to ensure they do not run afoul of the law. Furthermore, a strong culture of compliance should be in place before, not after, these products are marketed to investors.”

The NASAA operation has already resulted in over 200 investigations and 45 enforcements, as of last month, to the applause of the SEC.

The SEC’s own first strikes arrive amidst a crypto slump, as several leading coins, including Bitcoin, Ethereum, and Ripple, are exploring new lows.

“U.S. securities laws protect investors by subjecting broker-dealers and other gatekeepers to SEC oversight, including those offering ICOs and secondary trading in digital tokens,” Stephanie Avakian, Co-Director of the SEC’s Enforcement Division says. She encourages developers of businesses in digital asset trading to contact the SEC “for assistance in analyzing registration and other securities law requirements.”

Any of the many crypto firms still operating unregistered would be wise, at this point, to square up.

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