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A new cryptocurrency by fintech startup Circle, a company backed by Wall Street giant Goldman Sachs, is aiming to be a digital version of the US dollar, writes the Independent.
Circle has announced that the new USD Coin will be free from volatility issues due to it being pegged to US dollar, offering it a stable value in order for it to be used as a working currency, rather than just an investment tool, the company says. Circle also claim it will be a faster and more secure version of the US dollar.
The underlying technology behind the proposed USD Coin will not be decentralized peer to peer, as it’s backed by fiat currency and released by a major financial institution, although it will be an electronic cash system, according to the company. People will also not be able to mine the USD Coin in the same way other cryptocurrencies can be generated, as the only way to acquire them is to buy them.
It is the second cryptocurrency-related announcement from Goldman Sachs in the space of a month, following news that the bank had plans to open its own crypto trading desk on behalf of its clients. The startup clearly views the backing of Sachs as a huge driver of the project, commenting on its blog post:
“Existing fiat-backed approaches have lacked financial and operational transparency, have operated in unregulated jurisdictions with unknown banking and audit partners, and have been built as closed-loop ecosystems and closed proprietary technologies.”
Matthew Newton, analyst at crypto retailer eToro, sees the move as inevitable, suggesting that this has been coming:
“This shouldn’t come as a huge surprise to anyone who has been paying attention to cryptocurrencies over the last 18 months. Any forward-looking financial institution needs to understand this technology and accept its enormous potential.”
Newton goes on to argue that big banks have been investing in research and development of blockchain and cryptocurrency for some time. The trading platform will be the first of any major Wall Street institution and is expected to add further legitimacy, particularly following so close after Goldman Sach’s Bitcoin futures announcement last month.
There is a suggestion that the company may announce cryptocurrencies tied to other traditional currencies in the future, such as the pound and the euro.
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A senior analyst at leading social trading network eToro has announced that he sees Bitcoin overtaking its all-time high of $20,000 with “absolute certainty”
Mati Greenspan, who is also a well-known bitcoin expert, told the UK’s Sunday Express that bitcoin’s January retracement was “a temporary swerve” and feels certain the trend will now be upward for the digital currency. Although he describes himself as, “not a fortune teller or anything like that,” Greenspan suggested that “Whenever the price moves and jumps into a new order of magnitude, we need to see some sort of retracement on that.”
According to CNN, this is not the first time that analysts have compared the recent slump to the drop in 2014 when bitcoin dropped by 80% in value and then failed to recover for over a year. The market is now considerably different from its position over three years ago with a daily global trading volume of $30 million.
Greenspan is not alone in his views regarding the figure, providing that bitcoin can continue its trading volume, but some investors and analysts see the 20k target happening sooner. Billionaire investor Mike Novogratz, and Pantera Capital CEO Dan Morehead, along with other investors, see bitcoin surpassing its all-time high by the end of 2018.
The market may have benefited recently from the frequent announcements made by well-known investors about to embrace cryptocurrency trading. Also, banks beginning to express a more favorable interest in the market, such as Goldman Sachs announcement to offer bitcoin futures trading on behalf of its customers, does have an impact as well.
Goldman Sachs has said that it has no plans to initially buy and sell Bitcoin itself, but a team is looking into the possibility, provided it can gain regulatory approval and then work out a plan for eliminating risk.
In the last few days, Bitcoin Foundation founder Charlie Shrem has tweeted that May 2018 will be the “last time” bitcoin costs less than $10,000.
Image source: Pixabay (Geralt, CC0 License)
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In a recent Bloomberg broadcast, Mati Greenspan, eToro senior market analyst, saw positive signs for cryptocurrency, saying that the market was about to receive a new flow of liquidity from Wall Street.
Among many issues faced, volatility may not be one that Wall Street giants are used to but Greenspan says it has been in a consistent state of play since the very beginning.
He said,”The dip we’re talking about is actually nothing new for Bitcoin, as far as percentage terms go. If we look at it historically we’ve seen these type of pullbacks before, and definitely Wall Street is getting involved and they are building the bridges as we speak. Whether they go full on Bull or full on Bear, we don’t know, and they are ready to inject new liquidity into the market.”
Greenspan went on to explain that Wall Street missed the boat when it came to last year’s all-time high, with Chicago exchanges CBOE and CME launching Bitcoin futures right at the precipice in the Bitcoin high.
He reflected that the future of Bitcoin in the financial ecosystem would remain unknown, pointing out that the cryptocurrency operates as an individual entity, not part of the central banking monopoly.
In December and January, the Bitcoin network experienced congestion due to the newfound popularity of the currency, inevitably causing some concern for the future of the coin.
Compared to two years ago when fees were next to nothing, the reporter commented that “it takes forever to get it through the system” during congested periods.
“Since then the price has come down, the interest has come down and right now if you were to send a transaction it would be instant, comparable to many years ago, this is why we need more liquidity in the market,” came the reply.
A new scaling proposal is currently being rolled out for Bitcoin in the shape of the newly-developed Lightning network protocol. It effectively creates a layer on top of the blockchain, enabling fast and cheap transactions which can settle payments off the blockchain.
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