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Bitten by the Bear

Following a few days of strong, persistent price declines, which saw Bitcoin lose ~30% of its value in a span of 7 days, the markets posted mildly positive returns today in what looks like a modest relief rally after a heavy beating. We are clearly not out of the woods yet and the downturn may still continue. When you are investing in a highly experimental technology that scales up at a slower pace than the previous technologies, you must desensitize yourself to the short-term market fluctuations and take a longer-term view. As we have repeatedly mentioned, price movements in cryptocurrencies such as BTC are no indication of underlying technical progress or developer/user adoption, except in the long term.

If it is any (dark) consolation, everyone is bleeding and everything is falling in what can only be described as an across-the-board ‘risk-off’ trade. Close to a trillion dollars in market capitalization have been wiped out from the US equity markets in the last four weeks. Apple is down 25% from its trillion-dollar milestone, Facebook is down 40% since July, Bitcoin is down 80% from its December highs, Ethereum 90%, Amazon another 25% – the list is endless. Sometimes you just need to wait it out and start testing the waters again slowly, but calling a bottom is a fool’s errand; as Keynesians will remind us – the market can stay irrational longer than you can stay solvent.

BTC price movement in 2018 compared to that in 2017 seems to be one that adheres to the old maxim – buy the rumor, sell the news. 2017 was all hype and expectation, and $20k/BTC was definitely a result of the market being overbought. In 2018, we have much more widespread acceptance, institutional toeholds and technological advancements in areas like scaling. This should actually justify a price far higher than the 4-6k that BTC has been trading in the past few months.

From a price transparency standpoint, we have a new price index for Bitcoin’s price that takes into account the prices from three top OTC trading firms in the US (Cumberland, Genesis Trading and Circle Trade) and is managed by MV Index Solutions. As regulators continue to clamour for more transparency into crypto trading and price reporting, the arrival of a new price index that captures the pricing in OTC markets (which is usually very much a zero-transparency black box type arbitrage business) adds more credibility to the price standardization process and is very welcome. OTC market trading volumes in cryptocurrencies are reportedly as big as the exchange trading volumes.

Therefore, having a publicly accessible OTC markets price feed bridges the information gap between exchanges and dark pools, and paints a clearer picture of overall market activity. To learn more about the price index, click here. Remember that a lack of market transparency was cited as one of the biggest reasons behind SEC’s rejection of ETF applications. With the MVIS BTC price index we are clearly seeinf positive strides in the right direction to address the critical issue of issue.

Meanwhile in Crypto Wonderland….

“Binance Invests in Koi” Binance Labs has revealed that its $3 million investment in Koi Trading, an OTC trading operation headquartered in San Francisco. Koi Trading aims to be a compliant global option for private cryptocurrency liquidity. It also offers assistance with data science, quantitative research, and compliance consulting work.

“Paxos Partners with BitPay” Crypto startup Paxos is partnering with payments firm BitPay to allow the latter’s merchants to utilize the Paxos Standard stablecoin in settling transactions. The move will give BitPay clients the ability to conduct transactions using a cryptocurrency while maintaining the “the trust and stability of the USD”. BitPay’s overseas clients, in particular, will be able to benefit from settling transactions via the stablecoin.

“BCash Cash Battles Continue” According to BitMEX Research, going under the assumption that much of the hash rate on both sides of the Bitcoin Cash “hash war” has been leased since the fork, says that BCH miners have collectively lost as much as $6.1 million in gross revenue since last week’s blockchain split — but that one side, Bitcoin SV, can’t “keep this up forever”.

“Italy Crackdown on Unauthorised Crypto Startups” The Italian securities watchdog, Commissione Nazionale per le Società e la Borsa (CONSOB) has ordered three crypto-related companies providing unauthorized investment services to cease and desist. The CONSOB enforcement action comes amid recent calls to tighten crypto regulation in the EU. In September, Brussels-based think tank Bruegel called on EU ministers for more scrutiny on how digital currencies were distributed to investors.

“BCH SV Block Reorg”Bitcoin Cash SV, the hard forked chain of Bitcoin Cash created by a camp composed of CoinGeek, Calvin Ayre, and Craig Steven Wright, suffered a block reorganization. However, as reported by Bitcoin Unlimited chief scientist Peter Rizun, CoinGeek allegedly reorganized its own blocks. Emin Gun Sirer, a professor at Cornell, stated that in a decentralized blockchain protocol, a self block reorganization should not be possible.

Crypto Twitter Pick

What We’re Reading
 / Listening To

The Truth About the Crypto Crisis by Meltem Demiror

Media in Crypto featuring Mike Dudas of The Block

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