Srp 08

Unregulated Bitcoin ‘Wild West’ Gives Rise to Spoofy

· August 8, 2017 · 5:30 pm

Spoof orders, illegal on financially regulated markets, are on the rise and being exploited on largely unregulated Bitcoin and cryptocurrency markets. Demonstrable instances, perpetrated by a group or individual known as Spoofy, have occurred on Bitfinex and GDAX.


Spoof orders, or placed market trade orders that are not actually intended to be executed, are part of the rampant manipulation of traders on cryptocurrency exchanges. Trading into your own buy or sells is also illegal in the regulated financial markets, and it is suspected that this behavior has become more rampant in order to help Bitcoin price manipulators cut potential loses from their dubious activities. They also serve to sway trader behavior with massive sell and buy walls which are suggested to be the work of an individual or group, perhaps even the exchanges themselves going under the pseudonym of Spoofy.

Spoof Trading Ruled Illegal On Traditional Exchanges

Spoof Trading Ruled Illegal On Traditional Exchanges

With trading bots and API access to exchanges providing all the data needed for a coordinated manipulator, it isn’t a question of “is someone doing it?” so much as “who is doing it?”. Cases have been brought to light and prosecuted in the traditional stock markets, such as when Navinder Sarao pleaded guilty to spoofing offenses.

Using an automated trading program, or bot, Navinder’s actions contributed to the 2010 stock market flash crash. Then there is Michael Coscia who used a flood of small orders before canceling them to manipulate other traders. During Coscia’s trial, assistant US attorney Sunil Harjani said:

Traders contemplating sophisticated scams will think twice if they know that there are more significant consequences than a civil lawsuit or a regulatory action. […] Hedge funds and proprietary trading firms will closely review their trades, and strike down get-rich-quick manipulation trading schemes because the cost is not worth the benefit.

Is Spoofy Real? Evidence Seems to Point to ‘Yes’

BitCrypto’ed provides plenty of evidence on the Hackernoon website on market manipulation (including the video above), alleging that the trade spoofing activity is primarily carried out on the Bitfinex exchange. According to the investigation, Spoofy is either an individual or group, but certainly a coordinated entity with an unrivaled amount of money to influence the market.

Laying out all of the evidence, BitCrypto’ed writes:

Spoofy makes the price go up when he wants it to go up, and Spoofy makes the price go down when he wants it to go down…And he’s got the coin… both USD, and bitcoin, of course, to pull it off, and with impunity on Bitfinex.

Marketwatch’s Shawn Langolois, who appears to agree with BitCrypto’ed, further clarifies:

If Spoofy places a large buy order that entices smaller traders to hop aboard, he can turn around and instead use the uptick to execute a sell order.

Not Everyone Believes

Not Everyone Believes

No matter the evidence, however, there are still plenty of people who have yet to be convinced that a single person or entity could possibly be the sole driving force behind Bitcoin’s price.

Whether or not Spoofy is real, the practice of spoofing is very real and is already common enough to warrant rulings against it in the traditional stock market. Largely unregulated, cryptocurrency markets are still very much the “wild west” frontier of finance, a reputation hard to dismiss as exchanges and owners disappear or get arrested with alarming frequency. The same lack of regulation that makes cryptocurrency so attractive to many is also what allows modern day Butch Cassidys and James Gangs to get away with their misbegotten deeds.

Do you believe in Spoofy? Is he just a ghost story whispered of by grizzled traders? Let us know in the comments below.


Images and video courtesy of AdobeStock, Hackernoon

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Čvc 31

BitcoinCash (BCC) Hardfork: What it Means and How to Secure Your Assets

· July 31, 2017 · 4:00 pm

The Fork Awakens… BitcoinCash is expected to fork off from the main chain on Tuesday taking roughly 30% of the hashpower with it. Antpool, the largest bitcoin mining pool, is expected to mine the alternate chain.


BitcoinCash Hard Fork

August 1st has been a long-awaited day for months on the calendars of Bitcoin enthusiasts worldwide. But with the UASF being deemed a success by many people in the community, a new event is worrying some and it just so happens to be on the same day. BitcoinCash or BCC (some are proposing the ticker abbreviation of BCH as BCC is already taken) is a planned fork of the Bitcoin ledger by means of a User Activated Hard Fork, or UAHF.

Mining company Bitmain has stated their intentions to fork and create this separate blockchain with different consensus rules, most notably an immediate blocksize increase to 8MB. It also includes wipeout and replay protection, something the developers added to allow both blockchains to coexist peacefully and without loss of user funds.

How to Secure Your Assets?

As with all cryptocurrency hard forks, users that own Bitcoin on the legacy chain and control their private keys will automatically own coins on the new BCC chain. No further action needed. However, your claim to these new coins could be threatened if you use a third-party wallet provider such as Coinbase or blockchain.com.

Not controlling the private keys of your Bitcoins means you don’t control the private keys of your BitcoinCash either. Some examples of wallets that allow you to control the keys are Electrum, Jaxx, or Mycelium. The fork is scheduled to occur on Tuesday, August 1, 2017, at 12:20:00 pm (UTC time), so make sure to move your coins as soon as possible.

Exchanges That Support BitcoinCash (BCC)

Numerous exchanges have come out stating how they plan to deal with the upcoming hard fork. According to the BitcoinCash website, the following exchanges have announced that they will support, or at least allow users to access, BitcoinCash

Wallets That Support BitcoinCash (BCC)

Along with the exchanges, many reputable wallet providers, such as Ledger and Trezor, have released statements saying they will have their wallets support BCC. A more comprehensive list can be found below.

Full Nodes

Other Wallets

One thing to note is that ElectronCash is NOT made by the Electrum developers, which was cleared up in a statement made by them here.

ViaBTC currently has a futures market for BitcoinCash, and it currently sits at around $311.59, or about 12% of Bitcoin’s current market price. Only time will tell if this coin will gain traction, or be crushed by the thousands of people ready to dump the moment the fork occurs.

What do you think of the looming fork? Will BCC be blown out of the water by the massive offload of coins? Will you be transacting with BCC? Or do you think this is going to be one of hundreds of altcoins? Let us know in the comments below!


Images courtesy of Bitcoincash.org, Coinmarketcap.com

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Čvc 30

Mass Exodus from Coinbase Spawns 12 Hour Bitcoin Withdrawal Delays

· July 30, 2017 · 2:45 pm

Coinbase users are moving their funds to wallets and exchanges where they will be credited for Bitcoin Cash (BCC ) tokens, causing delays in Bitcoin withdrawals from the exchange.


Coinbase, the world’s largest (and often highest-rated) Bitcoin exchange, has made it clear that they will not honor the new Bitcoin Cash (BCC) token created by the Bitcoin blockchain split set to occur on August 1. Coinbase’s policy is to only support one version of a digital currency, as stated in a July 27 blog post:

Our policy is to support only one version of a digital currency. In order to determine which fork to support we look at factors such as size of the network, market value and customer demand. We make this decision carefully because safely supporting a new digital currency requires significant work for many teams.

Many other exchanges and wallets, however, are supporting the new blockchain and its token. Users with BTC funds in exchanges like Kraken, Bitfinex, and ViaBTC will be credited with an equal amount of BCC when the UAHF activates on August 1 at 12:20 PM UTC.

Bitcoin Exchanges supporting BCC

The Great Bitcoin Exodus

The result has been somewhat predictable: Users looking to scoop up “free BCC tokens” are now leaving Coinbase en masse and Bitcoin’s service has become degraded as a result. Coinbase’s status page now indicates that outgoing BTC transactions may be delayed by up to 12+ hours as they process their backlog.

Coinbase is also recommending that users who wish to withdrawal Bitcoins before the hard fork do so before 10 AM on July 31:

If you wish to withdraw bitcoin (BTC) before the hard fork, we recommend you initiate your withdrawal by 10am PT on Monday July 31st due to potential network congestion.

There’s No Such Thing as a Free Lunch

Given the stance many have taken that the BCC coin split will essentially be “free money” for Bitcoin holders, it seems almost common sense to leave Coinbase in anticipation of the hard fork. However, many have warned that there is no such thing as free money – any profits scraped from BCC will have to come from somewhere, in this case from the BTC price itself.

Speculation is also rampant over what will happen to the price of each currency. BTC supporters predict BCC recipients will quickly dump the new coin to buy more BTC, wiping out the new coin and driving the price of BTC back up as buyers scramble to acquire “free” Bitcoins.

Others remain cautious of any price movements, especially in the immediate aftermath of the fork. Kraken has already warned users in a July 27 notice that “margin traders should be very cautious across the fork” and to “plan for the possibility of extreme volatility”:

Margin traders are advised to be very cautious across the fork, by either reducing their position sizes or closing out entirely before the fork. In addition to the special provisions described above, margin traders should plan for the possibility of extreme volatility and unfavorable forced liquidations surrounding the fork.

Do you support the new BCC token? Do you think BTC holders will reap profit from the chain split, or will the volatility only drive down prices?


Images courtesy of BitcoinCash, Coinbase, Flickr

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Čvc 26

Russian National Arrested in Greece with Ties to Money Laundering, BTC-e, Mt. Gox Theft

· July 26, 2017 · 4:30 pm

Alexander Vinnik, 38, has been arrested in Greece on a U.S. warrant. While he is suspected of running one of the largest online money laundering operations, additional reports are emerging naming him as the mastermind behind the Mt. Gox heist that sent Bitcoin spiraling out of control in 2013.


The Man Behind the BTC-e Exchange

For almost seven years, BTC-e has operated as one of the oldest digital currency exchanges in the world. During that entire time, the people behind the company have been completely anonymous.

Until today.

The alleged mastermind behind a multi-billion dollar money laundering scheme and, according to sources close to the exchange, a key person behind BTC-e has been unmasked as Alexander Vinnik, a Russian national who was arrested today in Greece. Vinnik is wanted in the United States on suspicion of money laundering at least $4 billion USD through bitcoin transactions.

Vinnik is currently being held in custody by Greek authorities pending a U.S. extradition request.

Greek police have stated:

An internationally sought ‘mastermind’ of a crime organization has been arrested. Since 2011 the 38-year-old has been running a criminal organization which administers one of the most important websites of electronic crime in the world.

With Vinnik’s extradition, the U.S. investigation will go into full swing. This is the latest in a series of U.S. efforts to curb cybercrime worldwide. Last week, a multi-national coordinated raid involving the U.S. and several other countries resulted in the takedown of the Darknet site known as Alphabay.

BTC-e have long been known for their lax regulations user identity verification and their uncooperative nature when it comes to anti-money laundering organizations. Perhaps coincidentally, the exchange has conspicuously been offline since last Thursday, with the website currently citing “unscheduled maintenance” as the cause of the interruption of service.

A feed of tweets from the BTC-e is on the site as well to keep users informed.

Ties to the Mt. Gox Bitcoin Hack

Vinnik was also found to be in control of a sizable number of Bitcoins that could possibly be traced back to the hack of the Mt. Gox exchange back in 2013. A group of security experts known as WizSec published a blog post earlier today detailing how the hack took place. The group maintains that Vinnik has been their prime suspect in their years-long investigation into the Bitcoin theft and that the same conclusions about his involvement were made independently by other teams working to uncover what really happened.

WizSec explains:

In September 2011, the MtGox hot wallet private keys were stolen, in a case of a simple copied wallet.dat file. This gave the hacker access to a sizable number of bitcoins immediately, but also were able to spend the incoming trickle of bitcoins deposited to any of the addresses contained. […] By mid-2013 when the funds spendable from the compromised keys had slowed to a near halt, the thief had taken out about 630,000 BTC from MtGox.

Mt. Gox Where is Our Money

Not only can the Mt. Gox coins be traced to Vinnik, but other less known heists can be traced to him as well.

According to WizSec:

Coins stolen from Bitcoinica, Bitfloor and several other thefts from back in 2011 and 2012 were all laundered through the same wallets.

Vinnik has denied all accusations against him in a Greek court of law. More information on this story will surely be released in the coming days, so make sure to stay tuned.

Do you think that Vinnik will be extradited to the States? Or will other countries try and lay their claim to prosecute? Let us know in the comments below, and make sure to check back at Bitcoinist.com for more information on this story as it unfolds.


Images courtesy of Japan Times, Reuters/Alexandros Avramidis, Shutterstock

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Čvc 14

Switzerland’s Private Banking Sector Offering Bitcoin as an Asset

· July 14, 2017 · 3:30 pm

Switzerland’s Falcon Private Bank has partnered with a local Bitcoin exchange giving the financial institution the opportunity to offer Bitcoins, as well as altcoins, to its customers through asset portfolios.


Falcon Private Bank

On Wednesday, Falcon Private Bank took major steps in a number of avenues within digital currency when it announced that it would be storing and trading Bitcoin within its asset infrastructure. Wealthy customers of the bank will now be able to branch out into digital currencies, allowing them to hold, buy and sell Bitcoin directly through the bank.

It is a move that many have expected to see for some time as slow moving financial institutions like banks and asset management finally come around to the idea of digital currency and the markets that they are building.

A Pioneering Nation

A Pioneering Nation

Switzerland has pioneered the way for digital currencies of late with its light touch in terms of regulations. Bitcoin-based businesses have been categorized under the same lenient laws that also control financial technologies, separate from the usual banking licensing and red tape.

Falcon bank received the green light from the regulators in the country, setting a new precedent for private banks. It is an important and ground breaking move as the hopes are that it will be successful enough to prompt other institutions across the globe to follow suit. The crypto asset-management market is a huge, untapped entity that could provide banks with a fresh and technologically advanced market.

Bitcoin Trading added to Falcon Private Bank

Moving with the Times

The partnership between Falcon and Bitcoin Suisse, the local digital currency exchange, is seen as a positive step for the bank’s customers as well as the institution itself as it works to resurrect its stuffy and traditional brand.

Arthur Vayloyan, Falcon’s global head of products and services, said in a statement:

We are proud to be the first-mover in the Swiss private banking area to provide blockchain asset management for our clients. Falcon is convinced that the time is right to enter this nascent market and it is our firm belief that this new product will fulfill our clients’ future needs.

Although Bitcoin and other digital currencies have seen a sharp downward turn since the highs of the $3000 Bitcoin, there is a belief held by these institutions and agencies that are entering the digital currency market that the rise will continue in the near future.

Would you be willing to make your trades with Bitcoin through a bank? Is it possible to have a bank involved in Bitcoin, or does that defeat the object? Let us know in the comments below.


Images courtesy of AdobeStock, Falcon Private Bank, MaxPixels

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Čvn 15

Major Bitcoin Exchanges Crippled by DDOS Attacks Amid Record Price Rally

· June 15, 2017 · 12:45 pm

Denial-of-service attacks brought several major Bitcoin exchanges to their knees this week, leaving traders locked out of the system, as hackers reap the market rewards.


Ongoing Cyber Attacks

DDoS attack

The DDoS attacks, timed to occur during intense periods of trading, gain the hackers a market advantage during price swings. Allowing them to game the price difference on compromised exchanges. Users are left locked out of the system during what could be crucial time periods of market activity.

Bitfinex, the largest U.S dollar-based bitcoin exchange has admitted that their platform was under DDoS attack. However, despite what they refer to as ongoing attacks, they do say that “Most users will be able to use the platform normally.” and released the following tweet;

BTC-e is also believed to have been affected, as their site went down temporarily. They also posted a tweet acknowledging the issue though it has since been deleted.

Market Fears and Due Caution

While no coins were directly stolen from users during the attacks, the ensuing instability caused significant chaos nonetheless. Those who remember, or were victims of, the disappearance of the Mt.Gox and Cryptsy exchanges, know that Bitcoins should not be left on these platforms in case of more catastrophic attacks.

Users engaged in Margin trading on these sites are particularly at risk as they are unable to close their positions and stand to lose a lot of money if no stop-loss measure has been put in place.

In an interview with CNBC, Benjamin Roberts, co-founder and CEO of digital currency trading start-up Citizen Hex offered this warning to cryptocurrency investors:

Investors with assets on centralized cryptocurrency exchanges should be careful. The track records of these organizations are not good, and as the assets on the exchanges grow, so does the bounty for attacking or hacking them.

Unprecedented New Interest In Bitcoin

Bitcoin exchanges are also under the pressure of a surge of new users who are noticing Bitcoins price gains.  The price of Bitcoin climbed to $3000 this week before plunging down to $2400, a move which does nothing to allay fears about the famously volatile coin.

Bitcoin exchange Coinbase has struggled to keep up with the massive influx of new customer registrations. CEO Brian Armstrong recently tweeted:

The CoinBase site has been down this week too, something they put down to the high traffic they were experiencing.

Should the exchanges be doing more to protect their users? Are they improving? Have you had an experience with the exchanges you’d you like to let Bitcoinist know about? Let us know in the comments below.


Images courtesy of Twitter, Shutterstock

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Kvě 29

China’s Biggest Exchanges to Add Ethereum, Other Altcoins as Demand Surges

· May 29, 2017 · 7:00 am

As altcoins continue to gain popularity throughout the world, Bitcoin exchanges in China are also getting in on the action and listing alternative cryptocurrencies.


Huobi to Support Altcoins

As the moratorium on cryptocurrency withdrawals is expected to soon end in China, exchanges in the country seem to be turning their attention to alternative cryptocurrencies. Two days ago, one of the big three exchanges in China, Huobi, announced it will launch Ethereum trading on May 31.

The announcement reads:

We are excited to announce the CNY/ETH will be listed on our exchanges. Trading will start at 12:00 May 31st (GMT +8). ETH deposit and withdrawal is available from now on.

Today, Huobi released a list of altcoins that are to be added in the future according to the rank of the coin in said list. According to Huboi’s underlying model, Ethereum, Litecoin and Ripple are the highest ranking coins following Bitcoin, followed by Dash, Zcash and Dogecoin.

Online news service cnLedger tweeted:

The list was ranked using a model created by Huobi which factors in the coin’s strategy, marketing, activity, risk and technology to calculate the relevance of the coin.

The list and underlying model can be seen in Huobi’s official announcement.

BTCC to Get In On the Action as Well

Huobi isn’t the only Bitcoin exchange in China that is to list alternative cryptocurrencies.

After a two-week poll, in which over 190k votes by the cryptocurrency community were counted, Ethereum Classic will be listed in the BTCC exchange. Bobby Lee, CEO of BTCC tweeted:

Although the exchanges employed a completely different method in which Huobi used a model to rank cryptocurrencies and BTCC used a community poll, both exchanges are interested in opening the doors for the Chinese community to invest in  alternative cryptocurrencies.

Huobi and BTCC, however, are not the first exchanges in the country to list alternative cryptocurrencies. The China-based Yunbi exchange allows users to buy and sell cryptocurrencies like Etherem, Ethereum Classic, Zcash, QTUM, Bitshares, and others. BTC38 also offers a multitude of cryptocurrencies to be bought and sold for CNY. Lastly, CHBTC also lists Ethereum, Ethereum Classic, and Litecoin.

Crypto in Asia

Although less-known exchanges in the country offer altcoin trading, most Chinese users are only familiar with Bitcoin and Litecoin, given that most cryptocurrency investors use one of the big three exchanges in the country, BTCC, OKCoin and Huobi.

China plays a big part in the Bitcoin world, ranking in the top 3 countries by daily trading volume but other countries in the continent are becoming increasingly interested in cryptocurrencies and it’s not just Bitcoin and Litecoin.

Take Japan, for example, where the recent Bitcoin law has created an accentuated demand for cryptocurrencies, making the JPY the biggest Bitcoin pair in the world by trading volume and that’s not all. Other cryptocurrencies are also gaining traction in the country.

Co-Founder of IndieSquare and Community Director at the Counterparty Foundation, stated in a recent blog post:

First, one of the unique characteristics of the Japanese crypto space is that altcoins are very popular as a means of investment and some of them have very strong and dedicated communities; some even more active than the Bitcoin community itself in a way. Among them, two of the most popular altcoins in Japan are XRP(Ripple) and XEM(NEM).

In South Korea, Ethereum and Ethereum Classic are also extremely popular, even more so than Bitcoin whose daily trading volume is smaller than that of ETH or ETC.

With China adhering to the altcoin craze, could Asia become the capital for alternative cryptocurrencies?


Images courtesy of Shutterstock.com, Twitter 

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Kvě 21

Japan Bitcoin Prices Hit 300,000 Yen, Trade Volume Doubles

· May 21, 2017 · 11:58 am

Bitcoin spot rates on Japanese exchanges hit 300,000 yen ($2690) Saturday as the largest trading market continues to buoy prices.


Japan Exchange Frenzy: Coincheck Sees 97% Increase

As Bitcoin breached the $2000 barrier worldwide Friday, Japan’s exchange spreads had begun widening, with asking prices exceeding $500 above the average amount quoted on resources such as Coinmarketcap.com.

Compared to an average press time rate of $2080, major exchange Coincheck currently quotes a spot rate of 260823 yen ($2344).

Japan Bitcoin Prices Hit 300,000 Yen

Fellow exchange BitFlyer registered a 97% increase in trade volumes in the 24 hours to press time Sunday. By contrast, Kraken saw USD/BTC up 21%, Bitfinex 51% and GDAX 45%.

Dotcom, Saxobank: ‘I Told You So’

Momentum in Japan has steadily increased as Bitcoin gains more of a public profile in business and media circles. Most recently, a drive focussed on mainstream availability – and hence adoption – of Bitcoin payments will see hundreds of thousands more outlets able to accept the virtual currency.

These outlets include those of major payment apps and by extension Alipay.

The Japanese exchange climate is also of interest to traders abroad as prices accelerate and opportunities for profit-taking via arbitrage become an increasingly hot topic of conversation on social media.

Taking kudos already meanwhile are those who predicted current prices when Bitcoin was worth much less.

Among those were Saxobank and Kim Dotcom, both of whom forecast a $2000 Bitcoin in 2017.

The banking world has also seemingly reacted to the new personality of Bitcoin, with Norwegian Skandiabanken offering cryptocurrency-denominated accounts.

Mempool Woes Continue To Haunt Users

At the same time, however, all is not well. On a technical usability level, the Bitcoin network’s backlog of unprocessed transactions means that many investors are unable to benefit from arbitrage or other trading-based options afforded by the diverse exchange market.

The mempool is hovering around all-time high levels, vastly inflated compared to even two months ago, with even significant fee rises unable to impact on waiting times.

Having briefly dropped Friday, queues are now lengthening once more, with tools such as transaction accelerators either maxed out or charging comparatively high fees to increase the probability of a speedy confirmation.

A test transaction from Bitcoinist with a fee of 120 satoshi per byte, unconfirmed for 24 hours, would currently cost $4.66 to accelerate with BTC.com.

What do you think about the differences in exchange prices for Bitcoin? Let us know in the comments below!


Images courtesy of CoinCheck, BTC.com, AdobeStock

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Bře 23

The China Syndrome: Are California’s Bitcoin Exchanges Doomed?

· March 23, 2017 · 4:30 am

Increasing regulatory pressures have eviscerated trading volumes across Bitcoin exchanges in China. Bitcoin’s shifting volumes and price are signaling that further disintermediation is inevitable, which could also spell trouble for Western exchanges like Coinbase and Kraken.


China Regulates Bitcoin Exchanges

Increasing regulation of the Bitcoin market in China by the People’s Bank (PBoC) has characterized the first Quarter of 2017.

First they banned margin-trading. Then they halted withdrawals of Bitcoin from Chinese exchanges in February. The latest news is that withdrawals are expected to resume soon provided a strict set of KYC/AML conditions are met.

The nature of the ban on withdrawals has been widely misunderstood.

Note that bitcoins were not trapped. Trading continued the whole time on Chinese exchanges – purchases and sales were allowed. The PBoC never disallowed the withdrawal of cash from Chinese exchanges. So Chinese who wanted to exit could simply sell their Bitcoins and withdraw their renminbi.

The China Syndrome

That said, there were several consequences of the Chinese regulation in the global Bitcoin market. I call this set of results or symptoms that occur in tandem ‘the China Syndrome’.

China Bitcoin Core attack

We can expect more and more financial regulators to intervene ever more intrusively into Bitcoin markets globally, and we can expect to see a similar syndrome of effects every time.

So, as the IRS demands that Coinbase reveal all its customer records, we can expect the same China Syndrome set of consequences.

What were the results of increased regulation of exchanges in China?

  1. The share of global trading volumes of Chinese exchanges collapsed.
  2. There was terrific disintermediation. Over The Counter (OTC) trading volumes in China exploded. This is trading that is done P2P, off-exchange. The two most popular OTC platforms in China are LocalBitcoins and Bitkan.
  3. Bitcoins started to trade on Chinese exchanges at a significant discount to global prices. Previously Bitcoin had nearly always traded at a small premium on China exchanges to the global price. (Zerohedge claimed ad nauseam this was evidence of demand for Bitcoin as a vehicle for capital flight, though that’s refuted by BTCC CEO Bobby Lee.)
  4. Bitcoin traded OTC in China has achieved a premium over both the price on Chinese exchanges and indeed over global prices. It is the most expensive Bitcoin in the world!
  5. Bitcoin has recently started to trade on LocalBitcoins at a premium to exchanges worldwide where previously there was a discount.
  6. The logical endgame of disintermediation is a black market. For example, what naturally happens in an economy such as Venezuela or Nigeria where banks (the middleman) fail to provide the market-clearing price for dollars as a result of capital controls? People will disintermediate their asses and sell on the black market of course!

[Data verifying these statements about prices is at my website, Blocklink.info. Select the ‘Black Market FX’ tab.]

Disintermediation is Inevitable

Definition from Investopedia:

Disintermediation, in finance, is the withdrawal of funds from intermediary financial institutions, such as banks and savings and loan associations, to invest them directly. Generally, disintermediation is the process of removing the middleman or intermediary from future transactions.

There remains a powerful need among Chinese to trade Bitcoin that the PBoC cannot stifle. PBoC tries to block one avenue and wily Chinese users disintermediate their way through. It is like the funfair game of whack-a-mole.

As the middleman  – the Chinese exchanges – was failing to meet the need to freely trade Bitcoin, Chinese users cut out the middleman. Here are two charts to illustrate the extent of the disintermediation. Chinese exchanges have become the sick men of global exchanges, and LocalBitcoins China is experiencing explosive growth..

12

coin-dance-localbitcoins-cny-volume

Note that this second chart greatly understates OTC trading in China for several reasons.

One, it’s possible that the Bitkan platform is even more popular than LocalBitcoins in China. Bitkan reported a twelvefold increase in trading volumes in Q1 2017 in this interview with Bitcoinist.

Two, once buyer and and seller establish a relationship through LocalBitcoins or Bitkan, those two parties might choose to transact thereafter privately, without using the platform, so saving on escrow and platform fees.

Three, you also tend to get P2P Bitcoin deals being negotiated on popular financial and exchange forums, like the Chinese equivalents of Craigslist.

Effects of Disintermediation on Prices

This effect has received less attention than the effect on volumes. In Q1 2017 Bitcoins have traded on Chinese exchanges at a significant discount to global prices. Previously Chinese Bitcoin had always traded at a small premium to the global price.

Premium before Q1 201713

Discount after the actions of the PBOC:

My research shows that a) Bitcoin traded OTC in China has achieved a premium over both the price on Chinese exchanges and over global prices and b) Bitcoin has started to trade on LocalBitcoins as a premium to exchange prices worldwide where previously there had been a discount.

china2

There is not the space here to go into the details, which can be viewed at my site Blocklink.info. In summary, at a snapshot on March 22, 2017 07:00 GMT, these prices prevailed when the Global Bitcoin price was $1,064 USD:

China

  • Chinese exchanges: $1,038 (discount to Global price)
  • Chinese LocalBitcoins: $1,114 ($76 premium to CN Exchanges’ price, or 7.3%)

America

  • US Exchanges: $1,064 (same as Global price)
  • US Local Bitcoins: $1103 ($38 premium to global price, or 3.6%)

Previously analysts argued that there was naturally a discount on OTC markets as a result of the greater convenience that the exchanges offered their clients, and of the greater counterparty risk intrinsic in an OTC trade. But it now seems to be the case that the force is with OTC trading, and that users are prepared to pay a premium OTC to achieve greater privacy and control over their Bitcoins.

Decentralized Exchange is the Future

Exchanges in the San Francisco, Japan and Europe have been doing terrific business in 2017 and the money is rolling into their coffers in the form of trading fees and the income they derive from their Bid-Offer spread.

Oh, they are living the life of Riley in San Francisco’s Financial District! Knocking back the $20 libations at Rickhouse Bar on Kearny Street and at Comstock Saloon. They think nothing of buying $75 steaks. The toilets are dusty with cocaine powder. But threats similar to those that have hit the solvency of OKCoin, BTCC etc. await Coinbase, Kraken, Bitfinex and the other big hitters. There will be blood.

coin-dance-bitsquare-all-volume

The future looks rosier for the more decentralized avenues like Bitsquare, whose global volumes have been rising steadily, and for wallets with greater privacy like Samourai.

Further disintermediation in Bitcoin trading is inevitable. That is what the shifting volumes and the price mechanism in the Bitcoin market are signaling.

And note this: the ultimate disintermediation is black market/criminal activity. For example, drug users disintermediate the failure of pharmacies to provide Grade A meth and crack by buying from the street corner or on Dark Markets. That is where we might buy our Bitcoin 3-5 years from now, possibly from wild-eyed, shaggy-haired ex-employees of Kraken.

Do you agree that centralized exchanges will become obsolete and unable to compete with decentralized avenues? Share your thoughts below!


Images courtesy Coin.dance, Twitter, Shutterstock, Blocklink.info

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Bře 18

Could This Be The End For Bitcoin Unlimited?

· March 17, 2017 · 11:30 pm

1,550 views

20 Bitcoin Exchanges have agreed to list Bitcoin Unlimited (BTU/XBU) as an altcoin, if a hard fork should occur.


BTC & BTU

In the midst of a heated discussion on the scalability and future of Bitcoin, a group of 20 Bitcoin exchanges, including major eastern and western ones, have announced that should a hard fork occur, they will list BTC (Bitcoin Core) and BTU (Bitcoin Unlimited) as two separate currencies.

This decision, backed by BitFinex, BitStamp, Kraken, BTCC, BTCChina, ShapeShift, BitSquare, QuadrigaCX, and other exchanges, was announced in a joint statement.

This announcement reads:

Since it appears likely we may see a hardfork initiated by the Bitcoin Unlimited project, we have decided to designate the Bitcoin Unlimited fork as BTU (or XBU). The Bitcoin Core implementation will continue to trade as BTC (or XBT) and all exchanges will process deposits and withdrawals in BTC even if the BTU chain has more hashing power.

These exchanges have pledged to only add Bitcoin Unlimited (BTU) as an altcoin only if both chains can be run without any conflicts, something that currently is a concern due to the risk of transaction replays.

bitcoin-unlimited

A few hours after this announcement, Poloniex and BitMEX joined in as well, both supporting the plan released by the other exchanges. BitMEX in particular stated:

BU will not be listed or used as a deposit/withdrawal currency until replay protection is implemented and BU is not at risk of a blockchain reorganization if the Core chain becomes longer.

Transaction Replays & Hard Forks

This isn’t the first time a major cryptocurrency has come under danger of hard forking; in fact, Ethereum experienced a similar situation last year. However, this wasn’t without mishaps; Ethereum experienced a number of replay attacks after the fork.

A replay attack is where a transaction carried out on one chain is broadcasted on the other chain. For example, Bob may want to send BTU to Alice. However, this transaction could be rebroadcast on the BTC chain, meaning that Bob would lose both his BTU and BTC.

The announcement states that the exchanges will only list Bitcoin Unlimited if the replay attack vector is eliminated, such as by changing address formats or moving coins to new addresses.

“[N]one of the undersigned can list BTU unless we can run both [blockchains] independently without incident. Consequently, we insist that the Bitcoin Unlimited community (or any other consensus breaking implementation) build in strong two-way replay protection,” the group said. “Failure to do so will impede our ability to preserve BTU for customers and will either delay or outright preclude the listing of BTU.”

The End of the Road for Bitcoin Unlimited?

This new decision could be a devastating blow to Bitcoin Unlimited’s (BU) approach in what has been a tough week for BU. Earlier this week, a critical bug was discovered and later patched, but not before taking half the network’s nodes offline and leading many in the community, including Andreas Antonopoulos, to question BU’s code QA (quality assurance) process.

Additionally, according to coin.dance, a large majority of the companies and services in the Bitcoin Space prefer SegWit over Bitcoin Unlimited by a wide margin.

SegWit Bitcoin Unlimited Support

Furthermore, a majority of miners also support Bitcoin Core. However, if Bitcoin were to fork off into Bitcoin and Bitcoin Unlimited, the loss of a large amount of hashpower could still be detrimental to Bitcoin.

Bitcoin Core Bitcoin Unlimited Pie Chart

Many users and prominent community members have also voiced out against Bitcoin Unlimited, believing that it is a rash and unprofessional attempt to scale bitcoin or even an “attempted robbery.” Some have even gone as far as to suggest a User Activated Soft Fork (UASF), a type of fork where nodes actively reject blocks that don’t signal for SegWit activation.

However, this might not even be necessary, seeing that many exchanges will now only see Bitcoin Unlimited’s approach as an attempt to create an altcoin.

Do you think that Bitcoin Unlimited will try to hard fork the network? If so, do you think that their chain will survive? Let us know your thoughts in the comments below!


Images courtesy of Coin Dance, AdobeStock, Shutterstock

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