Why bitcoin holding above $8,000 may be prelude to new leap forward

The biggest event on the calendar (no, not that wedding) has been and gone and there was no Consensus 2018 conference bounce for bitcoin.

The CoinDesk-sponsored gathering took place in New York this week and attracted more than 8,000 people, a record number, but it didn’t lead to a surge in the bitcoin price.

Quite to the contrary in fact. Bitcoin is trading at $8,127 just below its 50-day moving average, down 2.7% today, and has been stuck in a relatively narrow range by bitcoin standards for the better part of the week of $8,700 to $8,100, briefly dipping to $7,979 late Thursday London time.

Activity on the Hong Kong-based BitMEX exchange, run by chief executive by Arthur Hayes who made his name as an ETF trader, and where bitcoin futures are traded on leverage of up to 100x, may have been responsible for the sub-$8,000 drop.

The liquidation of long positions in bitcoin on Thursday following a suspension on BitMEX may have contributed to briefly pushing bitcoin below the psychologically important $8,000 level.

Hayes in an appearance on CNBC’s Fast Money predicted bitcoin would hit $50,000 by year’s end, but he would say that wouldn’t he.

According to research site cryptocompare, trading volumes on the crypto exchanges it tracks is at the lowest for more than a year, coming in at 30,460 BTC.

The lacklustre performance of bitcoin, even against other altcoins never-mind fiat, continues despite some promising newsflow for the sector.

Bitcoin dominance of the crypto market has fallen to 37.45%, the lowest levels since February, according to coinmarketcap.

Market participants will be hoping the tight trading range and holding of support at $8,000 may be a pause before a renewed push higher.

Circle to launch dollar-pegged crypto

Payment startup Circle, whose backers include Goldman Sachs, announced this week that it would be releasing a cryptocurrency pegged to the value of the US dollar.

Circle also completed a funding round this week, raising $110 million, valuing the company at $3 billion. Bitmain, the Chinese crypto mining giant took part in the funding round.

Circle chief executive Jeremy Allaire plans for its Circle USD Coin project to leverage the use-case of crypto regarding speed of transfers and security compared to current fiat currency processes, as well as solve the volatility problem associated with crypto.

“It’s a version of fiat that can move at the speed of the Internet with global reach, with much less cost, with high levels of security. It’s a huge improvement for how fiat money transmission can work around the world for consumers and for businesses who might want to collect digital payment with tokens,” Allaire explained.

USD Coin will be a regulated alternative to other so-called “stablecoins” such as Tether, which has been surrounded by controversy following the issuance of new coins without verifiable proof of backing by an equal amount of dollars.

Jack Dorsey the Twitter and Square chief executive is doubling- down on his faith in crypto as the “native currency” of the internet, although he is not sure bitcoin will be the one.

Speaking at the Consensus conference he said: “I’m just approaching with the principle that the Internet deserves a native currency. It will have a native currency. I don’t know if it will be bitcoin, I hope it will be bitcoin. I’m a huge fan.”

Dorsey also revealed that not everyone at Square was enamoured with crypto and there have been heated debates about to what extent Square should embrace the nascent asset class.

JPMorgan – from “fraud” to trading desk?

JPMorgan has been the source of much mirth in the crypto community following its decision a few days ago to appoint Oliver Harris to the newly created position of head of crypto-assets strategy.

JPMorgan has been working in the blockchain field for some time and, notably, was involved in helping Zcash to enhance its privacy features and it is thought that Harris will be working on a spin-off from that project as well as looking to make investments to bring blockchain start-ups to market.

Although there is no firm indication that JPMorgan is setting up a trading desk imminently, it shows a softening of attitude in that direction. Some might say where Goldman Sachs leads, others follow – Goldman Sachs recently set up a trading desk for crypto.

As an aside, Zcash rose 40% this week when it was listed on the Gemini exchange owned by the entrepreneurial twins, the Winklevoss brothers.

The news from JPMorgan, the largest US investment bank, follows an interview with co-president Daniel Pinto who claimed that bitcoin will fail, either through being strangled by regulators or because “people stop believing in it”.

Pinto added that he thinks the tokenisation of the economy  “is real” and that although the bank had not traded bitcoin futures is was a in a position to do so. “If we need to clear futures of bitcoin, can we do it? Yes. Have we done it? No,” he remarked in comments to CNBC.

The former head of blockchain development at JPMorgan, Amber Baldet, revealed the creation of a startup called Clovyr, along with co-founder Patrick Nielsen, also formerly of JPMorgan. Baldet aims to position Clovyr as a kind of app store for decentralised applications.

Bitmain diversifying, bitcoin mining costs to mushroom

Bitmain, aside from making moves in Silicon Valley with its Circle investment, is also moving into artificial intelligence (AI), according to chief executive Jihan Wu in a rare interview.

Bitmain dominates the manufacture of ASIC chips, which are specialised processors optimised for mining bitcoin.

Given the persistent rumours of China’s government looking to curtail mining activities in the country, Bitmain is planning to diversify and AI is the perfect fit. “Artificial intelligence requires lots of computations,” he told Bloomberg.

Concerning mining and criticism of the amount power it consumes, a peer-reviewed paper from economist Alex de Vries estimates that the bitcoin network will use 0.5% of the world’s electricity supply by the end of 2018.

Computers compete on the bitcoin network to solve a mathematical problem and are rewarded with 12.5 bitcoins if they win, equivalent to about $100,000. Blocks are confirmed approximately once every 10 minutes.

“The Bitcoin network can be estimated to consume at least 2.55 gigawatts of electricity currently, and potentially 7.67 gigawatts in the future, making it comparable with countries such as Ireland (3.1 gigawatts) and Austria (8.2 gigawatts),” de Vries concludes.

Instead of looking at hashrate, which is a measure of the computational resources of the network, to estimate electricity consumption, he extrapolates from the marginal cost of mining (average price x number of minted coins) while allowing for the fixed costs of equipment.

Vries assumes that miners, acting as rational economic agents, will tend to exit and enter mining activity in response to fluctuations in marginal costs.

Blockchain ETF launch and China ranks Ethereum No. 1

Bitcoin believer Brain Kelly, founder and chief executive of BKCM a crypto-centric investment company, launched an exchange traded fund (ETF) this week. The actively managed fund is blockchain-focused and is a partnership with REX Shares. The REX BKCM ETF trades on the NYSE Acra exchange and has a 0.88% total expense ratio.

Kelly said of the Wednesday launch: “I get asked all the time on how to invest in blockchain technology without dealing with storage, the fears of hacking, hedge funds, etc. My hope is the BKC ETF can provide this desired equity allocation to institutions and individuals alike.”

China’s ministry of information technology has created a crypto index listing 28 coins, and released its rating for each constituent a couple of days ago.

Top of the heap is Ethereum, in second place is the social media network Steem, followed by Lisk, the German blockchain for which developers can code in the popular Javascript language, NEO the Chinese-based blockcain dapp platform with a high degree of centralisation, and in fifth place Komodo, which is a fork from Zcash and uses “zero knowledge proofs” to make transactions either totally private or transparent, depending on user requirements.

Bitcoin was rated at 13th in the index, which has produced similar criticisms to when the US ratings agency Weiss gave it a B- rating, with supporters saying not enough credit is given for the longevity (and hence security) of the bitcoin chain and superior adoption rate.

HTC blockchain phone, eToro to launch full-blown crypto exchange

HTC is the latest Chinese phone maker to announce plans for a blockchain phone, following news that Huawei was already in the throes of making one.

Other industry news sees the global social trading platform eToro announce plans to enter the US market and to build a crypto exchange with accompanying crypto wallet.

Up until now eToro exposure to crypto has been provided chiefly through contracts for difference products, but new rules in the European Union are making CFD dealing more expensive to provide and there has also been a clampdown on the level of margin that clients can use when trading the products.

In another indication that the crypto marketplace is slowly maturing and institutional interest increasing, Thomson Reuters launched real-time price feeds for six crypto and the CME futures exchange has released a reference rate and real-time prices for Ether, the native token of the Ethereum network.

The CME started trading bitcoin futures in December last year and the ether developments may signal an intention to launch an ether futures product.

There has been speculation since the launch of bitcoin futures on both the CME and CBOE, that they may have played a role in making it easier to short bitcoin and hence dampen the price, although the trading volumes are relatively low which throws some doubt on that line of argument.

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