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Cybersecurity researchers working for a subsidiary of Japan’s largest bank believe that they have found the hackers who stole $60 million from Japanese crypto exchange Zaif in an attack earlier this year.

MUFG Investigates Zaif Hack

According to a press release published on Monday, Japan Digital Design Co. (JDD) — a subsidiary of banking giant MUFG — partnered with local cybersecurity researchers to monitor the stolen funds as the attackers attempted to move them and, presumably, launder them into fiat currency.

As CCN reported, the Zaif hack occurred in September and saw the thieves abscond with about $40 million in customer funds, along with $20 million that belonged to the exchange. The funds were denominated in bitcoin (BTC), bitcoin cash (BCH), and monacoin (MONA).

The announcement was slim on details, but it stated that it was the latter cryptocurrency — the lesser-known monacoin, whose market cap is just $73 million — that enabled the researchers to accumulate data on the attackers. Apparently, JDD used an array of cloud-hosted MONA nodes to analyze transactions involving the stolen funds and identify clues regarding the identity of the attackers, such as the source IP address.

“Since the Monacoin began moving from October 20, we estimated the source of 5 transactions in question and provided information to the authorities concerning the characteristics of the transaction originator,” JDD said.

“In the investigation of the leaked virtual currency, remittance route has been analyzed through static analysis of the block chain, but with this effort, by deploying the virtual currency node on a large scale after the outflow of the virtual currency, We verified whether we can obtain clues such as source IP address etc. We also got useful data to grasp the accuracy of the information and the cost of tracking,” the release, which was roughly translated from Japanese, said.

Zaif Customers Await Compensation amid Sale of Crypto Exchange

Unlike Coincheck, the Japanese cryptocurrency exchange which lost a record $530 million in a January hack, Zaif was licensed by the country’s Financial Services Agency (FSA), giving the regulatory agency a black eye. Following the hack, the FSA slapped Zaif with a business improvement order and said that it regretted having allowed the exchange to continue operating even after it had received multiple warnings in the past.

Several weeks later, Tech Bureau — the owner of Zaif — announced that it would sell its entire stake in the exchange to Fisco Digital Asset Group, a publicly-listed Japanese company. The terms of the deal, which is scheduled to be completed on Nov. 22, state that Fisco will be responsible for compensating customers who lost funds in the theft.

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A Reddit user has complained that a virtually unknown token is consuming a large amount of Ethereum’s gas supply.

Gas is a measurement of the computational work required to do a given transaction on the Ethereum network. Different smart contracts have different requirements. It is not exactly the same as a transaction fee but it can be viewed as such in terms of economics – when more gas is required, a transaction is, therefore, more expensive. When many transactions are being executed at once, the resources of the network are therefore scarcer, and gas becomes more costly.

A website dedicated to tracking the biggest gas hogs in Ethereum confirms that this contract is using the most gas on the network at present time.

The trouble is, Omniscience Dedication Financial is essentially an unknown quantity. A Mumbai company called Omniscience Capital is found when you search the term, but they have no mention of blockchain products on their site.

What Is Going On Here?

Nothing of value is returned on either Bing or Google. Whoever they are, they’re busy, having conducted more than 72000 transactions within the contract at time of writing. ODF tokens are moving, but it’s unclear what they do, who they are for, or why they exist. The creator of the contract, also unknown, has transacted primarily in two tokens: ODF and CKC, neither of which is assigned a value on venerable site Etherscan. CKC has just 15 holders total.

The ODF token is not currently trading on EtherDelta, which will typically list any token at all. If there were any demand for the token, it’d be trading there, certainly.

All of which begs the question: what is this all about? What is going on here? Are we soon to be surprised by a new “financial” token with some important use case hitting the market and having thousands of holders? Is this the work of a fund or firm working strictly for its clients?

The nature of the public Ethereum blockchain is that anyone can create and launch a token if they please, provided they’re willing to pay for the computing used. In the case of ODF, they appear to have no issue paying for gas, to the detriment of some everyday users. CCN will monitor the situation and report as more details eventually become available on the situation.

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The Swiss Financial Market Supervisory Authority (FINMA) has instructed banks dealing in cryptoassets to apply a risk weighting of eight times their market value  when calculating loss-absorbing capital buffers.

In a confidential letter seen by swissinfo.ch, the regulator also imposed a 4 percent cap on crypto positions as a percentage of total capital held by banks, requiring them to report when they reach the limit.

FINMA’s Skeptical Stance on Cryptocurrencies

While the regulator has so far refrained from taking an official stance on cryptocurrency regulation in Switzerland, the October 15 letter, which was addressed to EXPERTsuisse reveals that pending such a time as the Basel Committee on Banking Supervision makes global recommendations, FINMA wants financial institutions to treat cryptocurrency as a high risk asset class, with a risk weighting touching the upper end of the scale indicating high volatility.

The letter reads in part:

“[Cryptoassets should be] assigned a flat risk weight of 800% to cover market and credit risks, regardless of whether the positions are held in the banking or trading book”.

While bitcoin and other cryptoassets appear to have lost a large part of their notorious volatility over the past few months with bitcoin remaining at or around $6,000 for  most of 2H 2018, the regulator still believes that cryptoassets are a massive volatility risk.

Under the new regulatory provisions, while bitcoin currently trades at around $6,400, a bank must value it at eight times that amount, or over $50,000 when calculating the risk-weighted worth of its assets. As a result, banks must reserve a larger amount of capital to cover trading losses for cryptoassets compared to other asset classes.

In addition, FINMA has also capped the total amount of crypto trading that a bank can carry out including both long and short positions at 4 percent of its total capital, with a requirement to report when the limit is reached. Even more significantly, the regulator has also stipulated that for the purpose of calculating a bank’s liquidity ratios, cryptocurrencies cannot be classified as highly liquid assets.

Good News for Some

In a surprising twist, the news has come as a boost for a growing number of crypto-focused banks setting up in Switzerland. One of these new banks is SEBA Crypto AG, which recently raised over $103 million to create a seamless framework to merge crypto banking and fiat banking services. Speaking to swissinfo.ch, SEBA CEO Guido Bühler stated that while FINMA’s new guidelines may be relevant to certain institutions and processes involved in cryptoasset handling, they have a “limited impact” on SEBA’s business model.

While FINMA’s instruction to banks indicates a level of regulatory caution, it should be noted that Switzerland is noted for being one of Europe’s friendliest jurisdictions for crypto finance innovation. CCN reported recently that FINMA gave the green light to Zug-based Crypto Finance AG subsidiary Crypto Fund AG to offer a wide range of blockchain-based assets to institutional investors in the country.

In August, CCN also reported that Swiss private bank Maerki Baumman became the second bank in the country after Falcon Private Bank to offer banking services to cryptocurrency firms.

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On Monday, bitcoin underwent a bearish correction after establishing a new weekly high at 6440-fiat, falling close to 0.8 percent.

Bitcoin Hits Weekly High

The BTC/USD pair is trading in a bull trend above the 200-period simple moving average on hourly charts. The big move yesterday seems to have appeared more because of Tether, whose USDT token lost its dollar-peg once again, and its holders started jumping towards other coins. Prior to that, the BTC/USD pair was already pursuing a stable uptrend on near-term charts, albeit with low volume.

The correction taking place at this moment also signifies the formation of yet another bull flag. In a traditional scenario, such a pattern could lead to a breakout action towards the north. That said, the current pullback action could put BTC/USD towards the lower trendline of the parallel channel formation, seeking a strong bounce back above the 50 percent Fibonacci retracement level at 6421-fiat.

The RSI momentum indicator, meanwhile, is also hinting a dip into the strong selling area, mirroring the extended bearish correction prediction towards the lower dotted trendline. The Stochastic Oscillator is already inside the bearish region and is hinting a bounce back anytime soon.

On a 4H timeframe, the uptrend is still capped by a blue descending trendline — adjusted according to recent higher highs. The BTC/USD pair is trading in a bear trend below the 200-period simple moving average. A break above the blue trendline coupled with an increasing volume index rate could form a medium-term bullish sentiment, but an actual long-term upside bias will have to wait until the BTC/USD pair reclaims 7000-fiat.

BTC/USD Intraday Analysis: Bull Flag Expected?

According to our intraday strategy, we are pretty much watching the same range we defined in our previous analysis. That said, 6421-fiat is still serving as our interim resistance while the interim support is at 6329-fiat. The range is pretty wide to apply our intrarange strategy, so we are first waiting for the price to break below the lower red dotted trendline, and clear our short position towards 6329-fiat. As we enter this position, a stop loss order just 4-pips above the entry point will define our risk management perspective.

If we are indeed watching a bull flag formation, then a bounce back from the lower red dotted trendline should have us put a long position towards 6421-fiat, while sighting 6500-fiat as our breakout position target. In both the positions, maintaining a stop loss order just 4-pips below the entry point will minimize our losses in case there comes a bias reversal scenario.

Trade safely!

Featured Image from Shutterstock. Charts from TradingView.

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Bitcoin has been unusually stable in recent weeks, and the decrease in volatility has now reached historic levels in the futures markets.

Bitcoin Volatility Hits Record Level in Futures Markets

That’s according to Kevin Davitt, senior instructor for The Options Institute at CBOE Global Markets, who said that Chicago-based derivatives exchange saws record low volatility in its bitcoin futures market during the month of October.

Speaking on the subject during CBOE’s latest weekly bitcoin futures roundup, he said:

“Last week, which ended on October 26, saw the least volatility yet with a 3 percent weekly high-to-low range,” he said, “if we look at the weekly range over the course of October, it’s a mere 6.6 percent, which is far and away the lowest monthly average.”

CBOE’s XBT futures product had seen an average weekly volatility of 15.65 percent since their launch in Dec. 2017, more than double what the market saw in October. Remarkably, even bitcoin’s most volatile week during October saw a lead-month range of just 8 percent.

“The high settle was 6630, and the low settle was 6105. That move occurred in the second week of the month of October, between the 8th highs and the lows on October 11,” he said. “That works out to a lead-month range for the calendar month of less than 8 percent.”

Previously, Davitt had noted in his regular futures analysis that bitcoin’s 20-day historical volatility (HV) had become comparable to some of Wall Street’s most liquid stocks. At the time, bitcoin’s 20-day HV was below those of Amazon, Netflix, and Nvidia, and it was quickly approaching the HV of Apple, the world’s most valuable company.

Reflecting on this phenomenon, Davitt said, “Anyway you carve it, bitcoin volatility is relatively low and has been declining.”

Crypto Prices are Stable, But is That a Good Thing?

However, analysts disagree about whether the crypto market’s newfound stability is a positive sign. Tom Lee, one of Wall Street’s earliest and most well-known crypto advocates, said that he has been “pleasantly surprised” by how stable bitcoin has proven to be relative to the choppy equities markets.

BitMEX CEO Arthur Hayes, on the other hand, argued in recent market commentary that bitcoin would never see mainstream adoption unless volatility ramps back up.

“Contrary to popular belief, Bitcoin requires volatility if it is ever to gain mainstream adoption. The price of Bitcoin is the best and most transparent way to communicate the health of the ecosystem,” he wrote. “It advertises to the world that something is happening–whether that is positive or negative is irrelevant.”

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