Kvě 17

Ripple Soars 445% in 2 Weeks, But XRP Holders Won’t Like This Article

· May 17, 2017 · 9:00 am

The Ripple cryptocurrency XRP has been the center of attentions, rallying to unprecedented heights over the last month but what is truly fueling the rally?

[Note: This is an Op-Ed]


XRP Shoots Up 445%

Ripple has been enjoying a phenomenal month on the price charts, constantly breaking all time highs and dominating daily trading volume.

Although recent times have been filled with exciting rallies, XRP has overshadowed every altcoin out there, growing over 445%% in two weeks, making it the second most valuable cryptocurrency with a marketcap of roughly $14 billion. 

The rally experienced in the XRP price charts can be attributed to recent news on the cryptoshpere like the addition of new customers (banks, and payment service providers) to the Ripple network. This also includes news of the Bank of Tokyo-Mitsubishi UFJ, which recently joined Ripple’s Interbank Group for Global Payments, and the announcement to lock a large portion of the company-owned XRP tokens under escrow.

Some have also pointed to the current cryptocurrency landscape in Japan (where Ripple holds a strong community presence and has made several bank partnerships), and how the new regulatory stance of the country can be supporting a new wave of misinformed investors.

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

Another thing to note about this new trend is that the general lack of understanding or appreciation of the technology by many of new users. This is no surprise and all of us have been there at one point but the new wave of Japanese investors seem to be exhibiting a whole new level of incomprehension and misguided decision making in my opinion.

However, it is becoming evident that the general lack of knowledge regarding what Ripple is and what the recent updates actually mean is global as XRP has been dominating trading volume in the BTC market as well.

Fueled by Misinformation?

Although Ripple been one of the most valuable cryptocurrencies in terms of market cap for quite some time, its recent rally can only be fueled by the recent rumors and news regarding the XRP token. The most relevant of which are the customers and partnerships acquired by Ripple and today’s announcement regarding Ripple’s 55 Billion coins being locked, which has been circulating the web as a rumor for a while now.

Given the scenario, many investors that are now joining the Ripple boat must have no idea what they are buying and how the news actually influences the demand and supply for the token in the long-term, once the “hype” has died down.

For example, many users believe that banks and other types of financial service providers that are joining the Ripple network should create demand for the XRP token, which is needed in order for banks to make use of the technology that Ripple has created, one that rivals VISA itself in terms of transaction throughput.

However, the general public doesn’t seem to realize that these institutions are “encouraged” but not required to use XRP to pay any kind of operation fees. Instead, they can simply make use of the technology provided by Ripple and build their own network using their own in-house tokens.

It is also a known fact that Ripple holds ~62% of the XRP supply, which is capped at 100 billion. This means that Ripple currently has roughly $23 Billion worth of XRP. Standards on how marketcap is measured in the cryptocurrency space vary but if you count all of the XRP that currently exists, Ripple has a ~37 billion dollar market cap, or over 7 billion dollars more than Bitcoin.

computer security

Another general misunderstanding is that the token-lock result in scarcity of XRP tokens. According to the announcement, Ripple will lock 55 billion tokens out of the 62 billion tokens they own as a means to inspire trust (or perhaps to further accelerate the price growth of XRP).

The truth is that this will affect the supply of XRP. The tokens that have been in the possession of XRP will continue to be held by the team. In other words, no XRP will be removed from circulation. The number of XRP available on exchanges and wallets today, will remain unchanged. Unfortunately, some less-informed users believe this will create some sort of artificial scarcity.

One should also note that Ripple’s pledge to lock any amount of tokens is nothing but fireworks, given that the centralized nature of Ripple allows it to change the rules at any time.

A post by Ripple that seeks to compare the characteristics of Bitcoin, Ether, and Ripple makes this clear:

In contrast, the Ripple Consensus Ledger has proven governance with institutional validators run by MIT, Microsoft and leading global banks.

Lastly, user’s should also note that these tokens won’t be locked for long. The official announcement reads:

We’ll use escrow to establish 55 contracts of 1 billion XRP each that will expire on the first day of every month from months 0 to 54. As each contract expires, the XRP will become available for Ripple’s use.

Crypto End-Game

Despite the aforementioned misunderstandings, it should also be noted that Ripple is certainly not vaporware. The Ripple company is building real technology that is being used by real corporations.

But traders should keep in mind that whatever Ripple is building, it is building it for the banks and middlemen, not for the people, per se. This, in my opinion, puts it in a whole other category than Bitcoin and many other decentralized cryptocurrencies, whose goals are to eliminate middlemen, decentralize money, and empower the individual.

Is the XRP token in a bubble? Or is there something else we are missing? Let us know what you think is driving the rally in the comment section.


Images courtesy of CryptoCompare, Ripple, Shutterstock

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Kvě 05

Do A.I. and Cryptocurrency Work Well Together?

· May 5, 2017 · 3:00 pm

Just because Grindelwald and Dumbledore had a deadly brawl during their quest to revolutionize magic doesn’t mean two great powers cannot be used in concert to change the world.

By Marcie Terman, founding director of XBT Corp Sarl


This could be the worst way to start an important conversation about financial technology, but stick with me, it gets more interesting. We are speaking about the world-altering technology of Artificial Intelligence as the first superpower coupled with the financial system disruptive technology of cryptocurrency — a decentralized payment system that circumvents government manipulation of currency and is forcing us to redefine the concept of money. The question is: Can these two technologies be used together to change the way ordinary people like you and me invest our money — without expiring in a shower of blue sparks? “Avada Kedavra!”

Avada Kedavra

But first, let’s take a step back and look into them as individual concepts, with respect to their relationships to investment and trading.

Artificial Intelligence

Artificial Intelligence (AI) means software that after its initial programming continues to improve its performance based on its experience of the environment it has been set to ‘learn.’ Unlike in movies, where AI is characteristically portrayed as menacing, human-destroying droids, AI software has actually bettered our lives in fields as diverse as healthcare, education, safety, transportation, and entertainment. In the field of financial trading, AI has been clandestinely used for two decades to generate profits for hedge funds, banks, and other large trading companies.

In its early days, AI trading systems relied on human intervention to provide trade execution but since the rise of electronic exchanges, AI trading has probably changed the character of the world’s markets without the general public’s knowledge.

Today, it is the hedge funds, banks and major international corporations like Goldman Sachs that are reaping the benefits from AI-based trading of forex and stock markets. These companies harness “deep learning” — evolving mathematical and statistical models of prediction and probability — to forecast the short-and-long term outcomes of various financial markets. These models, because of their nature, should be able to track the changes in market condition and therefore continue to improve their performance over time.

I Robot

Deep learning models aren’t concerned with the fundamentals of the underlying market. They work through pattern recognition, and like their human quantitative analyst counterparts seek the relationships between chart patterns and expected outcomes to generate a return. However, even the most disciplined human trader can be influenced by the fear of loss or greed which may change their trading behavior.

AI Bots, however, execute trades consistently without emotion at lightning speed directly onto the exchange, placing and closing trades on behalf of their clients. They stick faithfully to limits, never lose discipline or waver from their assigned course based on the idiosyncrasies of emotion.

Cryptocurrency Trading

Cryptocurrency trading, which until recently has been mostly centered on bitcoin, has gained momentum in recent years. Since Feb 2011, when bitcoin stood at parity with the US dollar, bitcoin has risen to where it is trading now some six years later at prices between $1,200 and $1,425. The reasons behind bitcoin’s success are many.

Coupled with its decentralized nature which protects it from all good and bad government policies; bitcoin is beginning to be seen as a viable alternative in certain countries where hyperinflation or lack of confidence in government has rendered the local currency a less attractive alternative. Bitcoin is also becoming easier to manage, simpler to use, safer than carrying paper money and cheap enough to transact and carry, without needing an intermediary.

Despite the last 6 month’s remarkable price increase, bitcoin as an asset class has its share of ills, including periods of extreme market volatility. Bitcoin’s limited supply coupled with the inability of governments to intervene to counteract market forces means that bitcoin reacts quickly to market bias. Take for example, the very recent bitcoin ETF buzz: bitcoin’s price trended northward comfortably ahead of the SEC’s ETF ruling amid growing optimism, hitting a peak of $1,327 a coin. But after the SEC shot down both the Gemini and SolidX bitcoin ETF projects, the price nosedived 20% before rallying within the month back to similar levels.

In addition, shorter-term fluctuations can be seen if one looks at intraday bitcoin charts. On an average BTC/USD chart, bitcoin’s value fluctuates between 10 and 15 USD every 4 hours and sometimes quite a bit higher. For many investors, such fluctuations make bitcoin an uncomfortable investment choice. However, there are day traders who use this volatility to take tidy profits out of the market on a daily basis. These are the traders who are fixed, glued to their computer monitors and mobile screens all day long, tracking the market to enter and exit positions.

intraday bitcoin charts

So we return to the original question: “Can a market as young and volatile as cryptocurrency be successfully partnered with Artificial Intelligence to produce a profitable outcome?”

With market capitalizations in the low millions up to low billions, cryptocurrency markets present too small an opportunity to interest most trading banks and hedge funds. They use the power of their deep pockets coupled with AI to generate massive profits from high-frequency trading where a few millisecond advantage over competitors can generate big returns.

This means that there is room while cryptocurrency markets are still in their infancy for AI developers to create systems that learn to identify profit opportunities in these young, highly volatile markets. And while a Goldman Sachs may snort at a market cap of 20 billion dollars, investors like you or me would be delighted with this kind of profit.

We are starting to see young talent, like the people running the Our AI Bot blog out of the UK. These types of cryptocurrency enthusiasts are coupling their Deep Learning System knowledge with innovation, imagination and an understanding of the inputs that are relevant to predicting digital currency market movement to yield what look like fairly outstanding results.

But many within the cryptocurrency space feel the markets are moving towards mainstream and already there are players like Pantera Capital and banks like Santander and Citibank that are looking at how to generate profits from the cryptocurrency markets. So the window of opportunity for individuals to benefit from what AI can do in digital currency trading is probably limited. The time to look at this opportunity is now – “Expecto Patronum!”

What do you think? Can A.I. and cryptocurrency work well together? Let us know in the comments below.


Images courtesy of Warner Bros Productions, Twentieth Century Fox Film Corporation, CryptoCompare, AdobeStock

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Dub 13

Why National Cryptocurrencies Will Never Beat Bitcoin

· April 13, 2017 · 2:00 pm

National cryptocurrencies will never be able to compete with Bitcoin because no one will trust a system that requires advance permission from and which is controlled by a government to use it. 

[Note: This is an op-ed, edited by Allen Scott] 


National Cryptocurrencies Will Never Be Global

News is just in that the mint of a very important, historic sovereign nation has just hired a company in a separate nation to help it launch its own “Blockchain not Bitcoin” attempt to ride the Bitcoin wave. This is extraordinary in several ways, and allows a general principle to be explored.

First off, this mint doesn’t understand how Bitcoin works. That is clear. They’ve made the common error of believing what computer illiterates in well regarded newspapers mistakenly repeat verbatim about Bitcoin; that you can have “Blockchain without Bitcoin”. And this is only the first of their many errors in this project.

Even if their technical and economic assumptions were correct, there is no way that their private money system can beat the market. The Russians and the Chinese will never accept domination of a global e-money by a single foreign nation coded by a second party.

They will at a minimum, launch their own central bank altcoin, or more likely, settle on Bitcoin as the civilized global standard. These people have made the fundamental error of thinking that they can beat the market. It is the same error the Americans made thinking that everyone would use CDMA instead of GSM.

This new money will never be international. No one will trust a system that requires advance permission from and which is controlled by a government to use it, that can exclude any actor based on arbitrary rules of a hostile government when Bitcoin is available. There is no logical reason to trust anyone when Bitcoin exists; any system that is tainted by the requirement of trust is inferior to Bitcoin, and will make rational actors choose Bitcoin over those other, broken systems every time.

There are other problems with this new project, some of which will be of concern to the State. With a software simulation of money, the company providing the service is the mint, with absolute control over the money and its operation, not the mint.

In order to be the mint, you must directly control the levers of the machinery, you cannot outsource that control to other men, and certainly never to men from a foreign country; these foreigners de facto control everything if no one in the mint can understand how anything works. They seem to have forgotten what the word “Sovereign” means.

If you’re going to outsource the creation of a new e-money, and cede control over its development to foreigners, why not go all the way and give it to the global experts: Bitcoin Core?

You get all the benefits of the hundreds of developers working on Bitcoin, and access to the global Bitcoin network, its first mover advantage, huge ecosystem and its network effects. You are already willing to give up control, so you may as well give it up for something and not for nothing.

Outsourcing Sovereignty?

This is another example of the global Computer Literacy Crisis, where the ‘aparatchicks’ don’t understand how anything works, and are rendered helpless, delegating all responsibility to software developers who are now one of the top global powers on Earth as a class.

We saw this with government departments around the globe accepting Microsoft Windows as “the standard” for decades, with the late realization that this gives control (and back-door NSA espionage access) to a foreign company. Much better to use Linux that belongs to no one, is transparent and infinitely more secure and controllable. Just like Bitcoin.

For 7 years I’ve been talking about the book “Good Money” by George Selgin:

If you are interested in Bitcoin and why “private Blockchain” is junk, you should read this book. What is fascinating about this news of a sovereign mint hiring a foreign company to create a system for them is that the private money vs State money is turned on its head in the Bitcoin era.

In the 1700s, button makers switched to minting coins for private use, because the Royal Mint couldn’t supply the demand for small change. Now, government mints are turning to bespoke “Blockchain not Bitcoin Tokens” while Bitcoin becomes the sovereign money of the world.

The picture is entirely reversed; the state is minting private money to fill an (imaginary) need while Bitcoin is the money everyone uses but has trouble getting a hold of. Azteco is a service that aims to solve that problem.

Like many projects with no hope of traction because they are fundamentally flawed, this new platform has put its software up on GitHub, hoping to attract developers to work on it for free. This will not happen.

Bitcoin Devs Won’t Waste Time With Other Blockchains

First of all, the number of developers with the skill to hack cryptocurrencies in C is extremely small, and all of them are working on Bitcoin. They’re all doing so mostly without compensation, for the good of society, just like Linux kernel developers do. There is no way you are going to persuade these ethical men to stop working on Bitcoin and to devote that time to a bogus “permissioned ledger” project run by a company on behalf of a nation state.

Bitcoin devs simply aren’t going to split their limited time between projects like Corda or any anti-Bitcoin project. And of course, Corda has conceded defeat and given up on “making blockchains programmable” and other fanciful hand-waving nonsense.

“GitHub Open Source” isn’t a magic wand that will cause men to flock to your repo and software to be written for you for nothing, and no, you can’t hire developers to do this work either; there are none available.

Developers at this skill, experience and knowledge level are an extremely rare breed, and they are all working on Bitcoin, and will never contract to work on unethical software, for any amount of money.

Every year the State wastes time on vanity projects they can’t even understand, Bitcoin grows, spreads and strengthens. The number of new, fundamental features coming to Bitcoin is not matched by any other project, and how these will synergise is anyone’s guess.

(From The Elements Project, new features coming to Bitcoin https://elementsproject.org/elements/ SegWit will activate, on Litecoin first and then Bitcoin. Then everything will change.)

Every software project has a use case. The developers are eager to make their case so they can gain users. When they won’t make the case clearly, something is very wrong. There is no use case for a sovereign nation to launch its own altcoin that is inferior to Bitcoin.

Its like launching a new mobile phone network standard; no manufacturer is going to incorporate another set of protocols, chips, transceiver and antennae into its phone to accommodate you, and yet, this is exactly what these people believe they can do with Bitcoin. All rational nation State actors are now running to embrace and profit from the inevitable domination by Bitcoin and not betting against it.

We can be sure of this. No “permissioned,” “BlockChain,” alt-coin reality denying project launched by a Nation State that has outsourced development of its software to a private company in a foreign land can ever hope to outperform Bitcoin on any level.

Incredibly, the lessons of the doomed and fundamentally flawed Canadian “Mint Chip” have not been learned yet. This is a good thing, believe it or not. The longer Bitcoin’s enemies think they can reinvent the wheel and beat Bitcoin, the better it is for Bitcoin. By the time they figure all of this out, it will be too late. In fact, it already is too late.

KYC/AML is Dying

There has been some very good news on the Bitcoin perception front. Another judge, this time in of all jurisdictions, New York, has ruled that Bitcoin is not Money.

[…] a federal judge in New York has recommended that money-laundering charges be dropped in a local case, based on his determination that Bitcoin doesn’t qualify as money. Instead, U.S. Magistrate Judge Hugh B. Scott has opined that Bitcoin more closely resembles a commodity. While he noted that Bitcoin might one day become so acceptable that it could be considered as money, Scott suggested that it currently has more in common with collectibles – like trading cards and other novelty items.

I wrote about this several times previously.

Any business in Bitcoin, if it is run by competent men, should now destroy their “compliance” data and stop all KYC/AML work immediately. They can rely on these two judgements as pretext, and if any prosecutor or three letter agency wants to take them to court, they should accept the challenge, because they will win.

Coinbase, for example, has been asked for a database dump of all their customers who transferred Bitcoin from 2013 to 2015. They are going to fight this in court, and it may cost them millions to defend this outrageous attack.

Instead of going to court to defend handing over customer data, Coinbase should permanently destroy the data, and fight in court to prove Bitcoin is not money, and not subject to any law any more than Linden Labs “Linden Dollars” are.

Doing this, they will forever be unable to hand over data they don’t have, and will not be asked for it again. They will streamline their service, and increase their profitability. Or burn rate. Either way, the way out of their current problems is to embrace these two judgements and amplify them so that the entire industry is both protected and relieved of onerous administrative burdens simultaneously.

Stopping KYC/AML will increase on ramp speeds, increase profits, increase Bitcoin throughput and midwife “The Transformation”. You are already in a fight with the State, who are using your own data against you; data that you did not have to collect in the first place, that you volunteered to collect, expecting a pat on the head.

Doing this will also turn you from an unethical company into an ethical one. Its a no brainer.

For the Lulz

Finally, for some lulz. People love predicting the collapse of things. Its like a perverted spectator sport, where you’re betting on which gladiator is going to die first. Y2K hysteria Twitter and even the internet have been predicted to “collapse” and these predictions failed.

We all remember Clifford Stoll. No surprise then, when people pop up to predict that Bitcoin will have a “complete and total collapse” for no given reason whatsoever.

What we can see emerging is the fact that the vast majority of men have reached their intellectual limit in 2017. Most of the things are incomprehensible to them. Bitcoin is one of those most things. As time goes on, this problem is going to get much worse. Its like the familiar tale of Artificial Intelligence making new versions of itself that man has no capacity to understand.

The problem isn’t that people don’t understand new technology. This has always been true since man started forging steel, and of course, everyone is entitled to their own opinion. The problem is that these ignorant people insist on forcing other people who do understand the new tools, to conform to their mistaken ideas of how they should work with them and present it to the market.

Bitcoin has been suffering this for a few years now, but with the recent court decisions, Japanese “Legitimization” (remember when everyone kept saying “legitimacy” is what Bitcoin needs? Now its “adoption” and “scale”) and increase market penetration through great services like Local Bitcoins, it is now clear that Bitcoin will win. No matter what you want.

Lastly…

Finally, some good news. Samson Mow, notorious milliner, Bitcoin thinker, expert analyst, conference organizer, East West bridger, Ubisoft expander, organizer of the “Scaling Bitcoin” event and meme manipulator extraordinary, has just been hired by Blockstream.

Normally hirings of this sort would not be worth comment, but this one is given what is under discussion in this piece. Some were calling for this very useful man to be fired over his very amusing tweets and totally accurate analysis. This is not good thinking.

Because people conflated Bitcoin with money, there is an underlying assumption that the men involved in Bitcoin must emulate the behavior of stuffy, stiff, humorless bankers. Nothing could be further from the truth.

We know that Bitcoin is not money and in properly designed businesses, no one needs to be trusted; Bitcoin itself is the infallible guarantor. All the social signals that men used to use to assess trust (ties, logos, and all the trappings of banking) have been replaced with software. This leaves people behind the levers to “let it all hang out” and be totally honest, because the software is what you trust, not the men who wrote it. This is another benefit of Bitcoin, that is slowly starting to emerge.

The people stuck in the 20th Century are the same ones who never encrypted their email and think that Bitcoin is for buying Starbucks on chain. They’re the ones doing the speech policing, and calling internet culture “toxic.”

Samson Mow being hired is an explicit rejection of these wrong ideas; he is being hired because he merits the job, and nothing else. Bitcoin is not about illusions, it is about MATHEMATICAL FACTS.

[Full disclosure: The author of this piece is the founder of Azteco]

Do you agree with this assessment of Bitcoin? Share your thoughts below! 


Images courtesy of elementsproject.org, Twitter, Shutterstock 

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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 11

6 Reasons Why The ETF Defeat is a Major Win For Bitcoin

· March 11, 2017 · 1:00 pm

2,697 views

Many within the Bitcoin community are pretty upset about the Winklevoss ETF being turned away by the SEC. If you are among them, buck up, little camper! I’m going to reveal several reasons why Bitcoin is better off without the passage of the COIN ETF.

[This is an op-ed article. Viewer discretion is advised.]


Bitcoin Must Be Regulated…to Be Regulated

First things first, let’s review yesterday’s ruling by the Securities Exchange Commission. Here is the text from their 38-page statement:

As discussed further below, the Commission is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.

The Commission believes that, in order to meet this standard, an exchange that lists and trades shares of commodity-trust exchange-traded products (“ETPs”) must, in addition to other applicable requirements, satisfy two requirements that are dispositive in this matter. First, the exchange must have surveillance sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated.

The way this is phrased, with their approval based “surveillance,” it doesn’t sound a Bitcoin ETF is going to be approved, by the Winklevoss Twins or anyone else, anytime soon. This leads to my first issue with the ETF and the first reason this defeat is a win for Bitcoin.

An ETF will require copious amounts of banking and/or government “surveillance,” according to the SEC statement. Is that what you, a lifer within the Bitcoin community, want? 

Twins

Bitcoin transactions are already more transparent and open-source than any global economic system on the planet. They are so public that many developers are writing scripts and apps to make the system more private. Many mainstream investors and institutions avoid using Bitcoin because of its lack of privacy. Others use altcoins like Dash and Monero instead, but this tentacle of government wants, even more, oversight and “surveillance?”

Now, I’m sure the Winklevoss Twins are decent gentlemen, but who wants them having so much control over Bitcoin?

They own the Gemini exchange in New York and it is estimated that they have over 100,000 BTC themselves. Now they get full access to a Wall Street fund full of Bitcoins as well? Is that level of Bitcoin hoarding and centralization serving them or the greater Bitcoin good? Do you, or I, need the rich getting richer? I don’t. 

OTHER ETF’s PROBABLY A NO-GO TOO

I spoke with Charles Hayter, CEO & Founder of Crypto Compare in the aftermath of this decision and shared his views on the situation. We agreed that Bitcoin was better off without the ETF, with him saying,

Whether other jurisdictions will allow a Bitcoin ETF remains to be seen – but for the time being all is not well – and it seems as if the other ETF’s in the pipeline for the SEC are facing the same stone wall.

Another reason is why throw out the baby with the bathwater? Why make Bitcoin change, for the worse, so that mainstream investors get a free ride into Bitcoin’s economic system?

Why can’t they earn it like I and many of you have? Why can’t they go to an exchange and buy BTC, and move it into a hardware wallet? Why does Bitcoin’s greatness have to be compromised for the bourgeoisie? Where I come from, those who are late do not fruit cup!

DID I LOSE ANY REAL VALUE?

Next, let’s look at Bitcoin price, one of the main reasons for the despair of so many, as their precious digital investment will not “go to the moon” as quickly now. Look at the price this morning. What did you really lose?

Many were rightfully predicting that the price would nosedive to around $1,000 USD, but it is trading at almost $1,200, not much different than it was just 24 hours ago, before “the decision.”

Here is the chart over the last 24 hours, provided by Bitcoin Average:

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Do you know what I did? I bought in on Ethereum last month, before the Enterprise Ethereum Alliance caused a huge bump in value. I thought it might double the value, but it ended up adding 50% in a couple of weeks. Very happy with my gains, I cleaned out my ETH for BTC when it dipped to $1080. That’s what good investors do. They buy undervalued assets low and go long with them. I’ve already made 10% on my money because a good investor makes money when they buy, not when they sell. Go and do likewise, gents. The chart above says that many of you have, as well.

So the ETF fail just kicked out all the speculators, all the bandwagon babies, all the Johnny-come-lately’s, and what have you lost? Fifteen bucks? Big deal! In effect, the Bitcoin community has gone down to the river, beaten out digital currency with a rock, cleaned out all the dirt, and you have a legitimate Bitcoin market price, sans the inflation from day-trading pump-and-dumpers.

So what if it lost $230 in ten minutes? You know damn well you can’t kill Bitcoin, baby! It’s like “The Walking Dead!”

The free market in Bitcoin, which definitely does not exist in Gold, Silver, or FOREX, has shown you the actual market value of Bitcoin. That’s pretty damn sweet, and it’s a lot higher than much released. Bitcoin took the mainstream’s best shot and is still kicking like Bruce Lee, or Bruce Leroy (Barry Gordy’s “The Last Dragon”, circa 1985, highly recommended)!

WHO SAYS BITCOIN CAN HANDLE THE MIGRATION?

The rally in Bitcoin prices over the past several months has shown in a significant increase in the number of transactions. This increase is testing the limits of the network and resulting in much slower than normal transaction times.

For crying out loud, it takes 45 minutes for me to get an on-chain transaction done! Many people have complained to me on Twitter, and on Reddit, that their transactions aren’t going through in 3 hours, 6 hours, 12 hours? What would an ETF flood of mainstreamers do to those lead times? Is Bitcoin’s infrastructure ready for that influx? Not seeing that.

Bitcoinist_Bitcoin Donations

Like a Muslim migration flood into Sweden, I’ve seen this movie before, and it doesn’t end well. Bitcoin could become a “no-go zone” very quickly. Bitcoin is not ready for such mainstream movement into the system.

If Wall Street hit Bitcoin right now, man, you’d be sorry. I would personally recommend that Bitcoin is not ready for any such thing until this block size/SegWit/Lightning Network upgrade is full resolved and ceded in the protocol, and that’s not happening anytime soon.

YOUR INVESTMENT NOT REQUIRED FOR SUCCESS

Finally, Bitcoin has been the world’s best-performing currency over three of the last four years, without any ETF or even the incentive to gain one.

Last year, Bitcoin rose 126.2% in value without Wall Street’s help. I view the ETF as just some nitrous oxide being added to a McLaren P1. Bitcoin is going to be worth a minimum of $1,500 USD by year’s end, with or without an ETF, and 2k is still on the table.

In my opinion, Wall Street needs a Bitcoin ETF far more than Bitcoin needs Wall Street.

Wall Street

So, in closing, you’ve found a true market value, you’ve gotten rid of the financial jock sniffers, the government and banks left you because they can’t hardwire in more surveillance, and you only lost $15 in the cleansing?

Like The Rock in the 2004 flick, Bitcoin is walking tall this morning. The SEC has actually done Bitcoin a favor and cleaned up this town. Bitcoin has a lot more pressing issues to worry about. Let us begin addressing them and forget about shine from Wall Street. If that’s what you are after, you are surely missing the point of Bitcoin’s ethos.

It’s not about Wall Street. It’s about us. Grow Bitcoin by word-of-mouth, the world’s most effective marketing campaign. On the side of the Bitcoin box, it should clearly state “Wall Street not included.”

What do you think? Has the SEC done the Bitcoin community a favor or did it just take a major hit? Tell us your thoughts in the comments below.


Images courtesy of Shutterstock, Bitcoinaverage

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Úno 25

When Bitcoin Price Passes Gold, Which One Will Really Be Worth More?

· February 25, 2017 · 10:00 am

Bitcoin’s legendary February ‘bull run’ has created an uncomfortable, but inevitable fact. There will be a day in the very near future when Bitcoin price will exceed an ounce of Gold. At that point, which will truly be worth more? Bitcoin or Gold?


Bitcoin vs. Gold

The answer may depend on which side of the tracks you are from. The two commodities share a lot more in common than one may think. Bitcoin is called “digital gold” because it is so similar in concept to the precious metal. Gold is known for its scarcity, but Bitcoin is considerably more scarce. Both are used as a hedge against inflation and both represent the pinnacle of their asset class.

Gold is currently on a “bull run’ of its own, passing $1,250, after starting the year at around $1,150, but Bitcoin price started the year at around $970, so it is only a matter of time before the more volatile digital currency reaches its next benchmark.

It is not a matter of if, but when. And when this does take place, the mainstream may initiate another run at Bitcoin, fueling more demand and growth. Bitcoin may then be considered a worthy alternative to Gold.

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Bitcoin is not designed to replace the dollar anytime soon, but it may end up replacing Gold as the most valuable commodity of the future. Its value has been said to be headed for  $1 million (said Business Insider) in the future if it does gain traction in the global e-commerce market as a preferred mode of payment. 

Gold hasn’t shown any such potential for such growth versus the global reserve currency in all of its thousands of years because it is definitely not as finite in supply as BTC is. There are far more than 21 million ounces of gold on this planet, and gold is still being mined to this day. Gold supply may never run out.

The Romans used to add copper to gold coins to dilute its value, and basically scam the populace.  Could you tell pure Gold from not? 8k from 14k from 24k? 

Bitcoin’s Downside Risk Not For All

Bitcoin does have some downsides when compared to gold or the USD, like its volatility. Bitcoin generally shows ‘upward volatility,’ but it is volatile all the same. In January alone, it rose from $968 to over $1,100 and fell down to less than $780, all within one week. This never happens with Gold or fiat currencies, which makes Bitcoin a less than desirable replacement for money.

Bitcoinist_Gold Price Declining

“Bitcoin’s downside deviation is still several orders of magnitude higher than that of gold or currency,” says Tyler Durden of ZeroHedge. “Over the past two years, Bitcoin experienced a downside deviation of >45%. Since the beginning of data in 2010, it was >100%. The volatility – or to be precise, the downside risk – makes it difficult for Bitcoin to be more widely adopted as money. What speaks for Bitcoin is that it has shown stellar performance over its short lifespan, but this stellar performance comes with considerable downside risk.”

This Gold Has Plenty of Flaws

So Gold is definitely more stable, but Bitcoin is definitely more useful. Ask the people of Venezuela right now how useful Bitcoin is when their national Bolivar is virtually worthless. Many in Venezuela are using Bitcoin to shop on Amazon (you can buy Amazon gift cards at Gyft and other online retailers) and have food into the country.

Bitcoin is literally saving lives. Gold not so much, as there is little food to be had in the country, and even if there was, you couldn’t use gold effectively to get it. Plus, have you ever tried to move gold across national borders? This is child’s play for purely digital Bitcoin, but the drones at your crossing are trained to dissuade you from moving your personal wealth in metal so easily.

You will be limited in how much wealth you can take with you on your trip, and you will end up on somebody’s list for attempting this level of financial freedom. Bitcoin owners never have that problem, at least in transit.

Gold is a shiny construct of value, most sent in ETFs or other digital forms representing its quantity and value. They should both prove to have a greater shelf life than any fiat currency since there has never been a fiat currency that hasn’t eventually reached its true intrinsic value, which is zero.

Bitcoinist_Convert Fiat To Bitcoin

In closing, I have never actually held a piece of 24k gold in my hand, and many of you reading this have not either, and never will. So again, the gold shares more with Bitcoin than you may realize. Even if you were one of the 1% that did physically hold some gold, what could you really do with it?

So in these uncertain economic times, all I can say is pick a side and start investing. If you can, buy both. Governments have tried to curtail Bitcoin use and the digital market adapts and grows like a virus, actually getting stronger and more diverse with each attempt at control.

Neither Bitcoin nor Gold, are going anywhere, so get it while it’s somewhat affordable. This may be considered a ‘Golden Age’ in wealth investing. What’s in your (digital) wallet?

Do you prefer gold, Bitcoin or both as a store of value? Let us know in the comments below!


Image courtesy of ZeroHedge, Shutterstock

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Úno 22

Bank of Canada Paper Concludes Bitcoin Can Be Counterfeited

· February 22, 2017 · 8:00 am

The world is still coming to grips with an inevitable future of purely digitized society. The future of the world’s monetary system is pretty important to gain control of, hence a “staff working paper” was commissioned by the Bank of Canada, the nation’s official central bank.


Bank of Canada Gives ‘Lessons’

Titled Canadian Bank Notes and Dominion Notes: Lessons for Digital Currencies, the paper outlines some very original conclusions were made regarding Bitcoin, which seems to have been the target of the study.

We will provide the cliff notes version for you to digest, as long as you aren’t eating while reading this entry. Viewer discretion is advised.

The Bank of Canada marker is pictured in Ottawa on September 6, 2011. The Bank of Canada will release its latest monetary policy report this morning -- a document expected to explore the economic damage inflicted by falling oil prices. THE CANADIAN PRESS/Sean Kilpatrick

The paper was penned by Ben Fung, Scott Hendry and Warren E. Weber who each claim sole responsibility for these findings in the disclaimer as they seek to not have Bank of Canada besmirched for their conclusions in the paper.

It would be impossible for us to know if they were commissioned to come up with these conclusions at the behest of the bank itself, however. You and I must certainly trust a central bank’s employees in regards to the merit and regulation of a decentralized digital currency. Of course.

‘Private Digital Currencies Will Not Be Safe’

Now onto the fun. The authors surmised, based on the history of the Canadian “private bank notes,” which would be equivalent to Bitcoin in the present day, and the Dominion notes, or government issued notes, that Bitcoin’s cryptocurrency today would exhibit the following properties and require the following modifications by their centralized authority:

The paper draws several lessons for digital currencies based on the evidence from Canada and the United States with bank notes and government issued notes: Digital currencies likely will be counterfeited, Digital currencies likely will not be inflationary; Private digital currencies will not be safe and will not be a uniform currency without government intervention; A central bank can always get its digital currency into circulation, but its digital currency will not necessarily drive out existing private digital currencies.

The “evidence” they reference from the U.S. is the book “Beyond Bitcoin,” published in New York, last year. All the other sources in the appendix were Canadian-based, as they recount the history of these ancient forms of currency. By ancient I mean over one hundred years old in human history, predating any living person.

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They complimented cryptocurrency Bitcoin or “digital currencies,” by likening it to these notes that offered relatively safety from counterfeiting at the time, a high degree of safety as a store of value, or being redeemable in the future, scarcity, uniformity, ease of transferring, and other indicators of being a good “medium of exchange.”

I Didn’t Know You Could Counterfeit Bitcoins

Here’s where it gets dicey. After a lengthy history lesson on the ancient forms of Canadian currency, they come back to digital currencies. They arbitrarily decide that “National bank notes and Federal Reserve notes were also counterfeited.”

“Given this history, it is likely that digital currencies would be subject to criminal attempts to counterfeit them,” they conclude. I guess that settles that!

So they deemed Bitcoins counterfeit-able just because other forms of currency have been counterfeited, so Bitcoin must follow suit. I didn’t know you could counterfeit Bitcoins. Countless computer hackers and experts the world over, far wiser than these authors, have tried and failed to do so, but as long as they say so.  

In any case, the authors manage to extrapolate this counterfeiting of Bitcoin narrative into the following:

It is also the case that counterfeiting for a digital currency would be much more catastrophic than for paper currency. One counterfeit paper bill does not mean the next is also counterfeit. Historically, counterfeiters tend to focus on one or two particular denominations. But one counterfeit digital currency ‘coin’ would almost certainly quickly undermine the confidence in the whole system because it would be much more likely that the other ‘coins’ can be counterfeited too.

Uh…so Canadian, American, and virtually every other currency note in the century-plus history of central banking haven’t been redesigned to prevent counterfeiting? 

So you can do that to paper currency, every ten years or so, without “undermining the confidence of the system.” But a cryptocurrency couldn’t improve security with a core update (Bitcoin Improvement Proposal), or more secure application factored in?

Meeting Expectations

This is just a taste of the wisdom and entertainment inside. Desperate governments will do this. Build a “straw man,” or create a facsimile of the target with the same name, but misrepresent everything about that to the masses in a design of deception.

I haven’t read “Beyond Bitcoin,” but this paper does not speak very highly of any Bitcoin knowledge therein. Either it is a bad actor in the space, or these gentlemen didn’t understand it, or just threw it in there to show some form of fintech street cred.

All I can say is consider the source when you are getting information about Bitcoin and where it should go from here.  This came across as a directive to make a case for centralizing control of Bitcoin, and the case was made pretty poorly because there really is no case.

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The people paying their salaries wanted an outcome, and who cares if it makes sense or not?  It’s not like the masses are going to read the fine print.

I didn’t get anything I didn’t already expect from a group of centralized banking employees. What else were they going to say about Bitcoin? That it is clearly better than any money Canada ever had?

If the Bank of Canada actually just copies Bitcoin’s blockchain and infrastructure in pursuit of their own digital currency, they’d probably be much better off than they are today. Make a CanadaCoin, copy the world’s greatest blockchain-based system, and enter the 21st century.

Just don’t try and justify manipulation of Bitcoin. You made a sand castle of an argument, and a tsunami of digital demand is rolling your way.

Do you agree with the authors of this paper? Share your thoughts below!


Image provided by Macleans.ca, Shutterstock

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Úno 15

Make Ethereum Great Again: How ETH Could Go Mainstream in 2017

· February 15, 2017 · 9:00 am

In July of 2015, the world was introduced to Ethereum, and the altcoin market hasn’t been the same since. So what’s has the world’s second most popular cryptocurrency been up to lately? 


Ethereum’s Quick Rise to Fame

There was a time, let’s call that time, “2015,” when the Bitcoin ecosystem wondered aloud “When is there going to be an altcoin worth a damn?” Funny that we asked that because, in July of 2013, and officially launched in July of 2015, the world was introduced to Ethereum by wunderkind Vitalik Buterin, and the altcoin market has never been the same since. Time for an Ethereum progress report.

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In Ethereum’s brief history, ever since its initial, successful and innovative crowd-funding campaign, Ethereum has been a hotbed of activity, never short on drama. Its Ether (ETH) digital currency, partially thanks to the broader acceptance of Bitcoin’s digital currency, reached $1 USD in value far faster than Bitcoin ever did, reaching the milestone in about six months (Bitcoin took the better part of three years.)

DAO But Not Out

By the start of the summer, last year, Ethereum had easily passed $1 billion in market capitalization and its currency was valued at around $20 USD, at its peak. Last summer, things were going so well for young Ethereum, the brain trust launched their most ambitious project to date, the ill-fated DAO (Decentralized Autonomous Organization).

This venture brought in so many investors, but failed so miserably in its execution and security that the altcoin hard-forked, broke into two parts, seemingly permanently, and has gone through more forks to cope with the aftermath. The greater Bitcoin community had left young Ethereum for dead.

Ethereum Classic

So the second half of 2016 was a substantial slice of humble pie for young Ethereum, as its value dropped to a still impressive $7.99 by year’s end. Even after being literally broken into two (Ethereum Classic still exists, trading for about $1.25, according to Coinmarketcap,) that is over 700% in appreciation in its first full year, far exceeding the 126.2% return Bitcoin brought back during the same period.

The Next Big Move?

They also had one hold card that had yet to be played in Q1 2017. Microsoft had helped Ethereum get noticed by the mainstream, back in December of 2015, through the integration with their Azure platform for blockchain technology, which was based primarily on Ethereum’s version of blockchain technology.

Many see this as a keystone to Ethereum having such a meteoric rise in early 2016. It looks like Microsoft is ready to make deja vu all over again in the weeks to come.

Bloomberg reports that Microsoft and Ethereum have another agreement, and a major announcement of a new platform application that will again feature Ethereum’s version of blockchain technology is forthcoming. Microsoft, powerful tech companies, and major banking interests are forming what is being called the Enterprise Ethereum Alliance, and this could be a true moonshot for Ethereum’s mainstream adoption and market value.

Bitcoinist_Microsoft Logo

The details and sources are hush-hush, which indicates how big this could be, and is expected to be announced before the end of the month. It’s “smart contract” foundation in creating faster, more secure transactions than is currently used is seen as the main impetus for its ability to create a mainstream corporate alliance.

Apparently, some people know what’s about to happen, as Ethereum values have soared over 60% just since the first of the year, as ETH has gone from under $8 to approaching $13, as of this writing. Something tells me that’s just the beginning of an even greater winning streak for Ethereum.

I’m Not a Financial Advisor, But…..

I did stay at a Holiday Inn Express last night! Therefore, maybe throwing some BTC in on ETH in the short term should be looked into? Sometime around……hmmm…..I don’t know……right now?

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Kudos to all who developed Ethereum and stayed the course. In what is turning out to be an epic comeback story, those who kept the faith late last year in Ethereum seem poised to be handsomely rewarded with their ROI on shares of the world’s greatest altcoin, Etheruem. The altcoin ante has just been upped.

Gonna be difficult to beat a mainstream business and technological alliance with Microsoft as its bedrock, don’t you think?

Will Ethereum make a comeback this year? Share your predictions below! 


Images courtesy of Shutterstock, Miscrosoft, Coinmarketcap, Ethereum.or, Fortune

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