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Bitcoin Volume Surpasses OTC Gold Market

Financial researcher Nic Carter has run the numbers and found that Bitcoin volume has surpassed the over the counter (OTC) gold market so far in 2018. The OTC gold market is on track to settle USD 446 billion of transactions in 2018 while the Bitcoin market is on track to have a volume of USD 1.38 trillion in 2018, using simple extrapolation.

So, not only has Bitcoin’s volume surpassed the global OTC gold market, it has surpassed it by about 200%. This is a good indicator that Bitcoin has become a major asset class.

Conservatively, (adjusted estimates), Bitcoin has settled $848b this year, and is on track to settle $1.38T. Bitcoin, it appears, has quietly surpassed the OTC gold market in settlement volumes.

— nic carter (@nic__carter) August 12, 2018

Carter used gold clearing statistics from the London Bullion Market (LBMA) which includes HSBC, ICBC Standard Bank, JP Morgan, Scotiabank, and UBS to arrive at the USD 446 billion OTC volume projection for 2018. In general, gold OTC volume is less than USD 30 billion per month, and silver OTC volume is less than USD 5 billion per month. According to CoinMarketCap, Bitcoin has a volume of USD 136 billion in the past month, and this does not include derivatives exchanges like BitMEX which actually have nearly as much volume as all the Bitcoin spot markets combined.

There is a caveat to this since total gold volume might be far higher than OTC markets due to paper gold. On markets like COMEX, paper gold is issued, which can be redeemed for the actual precious metal stored in a vault. However, there is only a tiny fraction of actual reserves in the vault backing the paper gold. There are many different estimates for the ratio of paper to metal stored in the vault, ranging from a 100 to 1 ratio all the way up to 1,000 to 1. Regardless of the exact number, the point here is most gold trading is done with derivatives that aren’t truly gold. This has saturated its market price and forced it to be far lower than it should be.

When it comes down to it, OTC gold market volume represents the true volume of physical trading, and Bitcoin has far surpassed it. This means there are more demand and activity associated with Bitcoin than physical gold.

As written in a previous article on Bitcoin News, Bitcoin is better than gold as a currency since it is far more liquid and far more secure. This makes Bitcoin much better for international commerce and finance than gold. It appears the market agrees with this, based on the global data.

 

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Venezuela Central Crypto Bank Next as IMF Predicts Million Percent Hyperinflation

It has been reported that there are new plans afoot for a Venezuelan central bank cryptocurrency along with a “superior court to the Supreme Court of Justice”.

According to Venezuela National Constituent Assembly member Hermann Escarra, the government is preparing to change the constitution to allow for the new crypto bank.

Venezuela’s crisis has steadily worsened as a result of lower oil prices, corruption, and a mismanaged socialist system, experiencing all but a total collapse of the economy, public services, security, and healthcare. In February, Venezuela launched its own Petro cryptocurrency backed by the country’s oil reserves.

Shopping bags made of the national currency the bolivar (VEF) are now being made in order to transport the notes, and a cup of coffee costs around VEF 2.2 million (around USD 0.50 at black market rates). For the same price, you can fill a small SUV with petrol almost 9,000 times.

The government continues to print money at an alarming rate with a current inflation rate of over 25,000%. The IMF predicts hyperinflation in Venezuela will reach a staggering one million per cent by the end of this year at the current rate, although this has been refuted as ludicrous by some economists. Economic meltdown and a recent assassination attempt on President Maduro just this weekend continue to paint a grim future for the South American oil-rich giant.

It is uncertain if a cryptocurrency-based central bank can do anything to help to at least alleviate some of the country’s extreme financial problems, particularly as the Petro has so far made little impact. It looks very much as though Venezuela has reached the “try anything” stage. Nonetheless, Escarra divulged the latest plan on Thursday:

“The National Constituent Assembly of Venezuela… is preparing a reform to the Constitution that would include a central bank for crypto-assets and a superior court to the Supreme Court of Justice… the draft changes to the Constitution will be presented in 35 days to the board of the Constituent Assembly.”

Maduro’s new “Bolivar Soberano” which is linked to the Petro is also ready for release on 20 August.

 

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Price Poor Metric to Judge Bitcoin, Says CoinShares

Digital asset management company CoinShare’s chief strategist Meltem Demirors featured on CNBC’s Fast Money on Monday, where she discussed the problematic nature of judging Bitcoin on price alone.

Demirors offered that actual utilization may be a better alternative metric for institutional and retail investors to consider, which she put down as the real struggle right now. Although she said that it is not yet clear when or how Bitcoin may regain its value, the best way to predict this is by determining solid metrics that best fit Bitcoin.

The strategist noted that ”real traction” is imminent but a lot is relying on analysis to find the key metrics that will drive growth.

She compared cryptocurrency with similar innovative enterprises such as Intel, Amazon, and Microsoft in the early days of internet stocks, noting that it took Amazon nine years to recover from its initial price high during the dotcom bubble, Intel 15 years, and Microsoft 17 years.

Such as these early internet stocks, Demirors said that the real traction for Bitcoin will come with time. The late 2017 price run can be put down to “fear of mission out” (FOMO), which caused a similar type of speculative bubble, she said. With that bubble burst, real businesses with real-life use applications are being developed in the space.

As she put it: “New technologies that shift the paradigm take a long time to really understand.”

This goes to what she described as a key issue right now in the lack of a coherent narrative from the cryptocurrency community. With institutional interest in the space growing, Demirors said that this could well be an opportune time for Bitcoin, but it is not being considered a store of value because of the poorly-relayed narrative.

Bitcoin (BTC) currently sits at USD 6,038.18 after struggling this year to make significant gains compared with last years highs of nearly USD 20,000.

 

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Could Wall Street Banks Become Crypto Custody Specialists?

Wall Street banks are slowly beginning to consider crypto custody as another mainstream service.

This, despite the occasional dig at crypto from the big players on Wall Street such as Goldman Sachs recent “cryptocurrency mania” comment last week citing it as one of the top risks for the market, even though the very same bank is dipping into Bitcoin derivatives on behalf of its fund manager clients.

The above service offered by Goldman Sachs may well be client-driven but behind the usual anti-crypto spin, a different picture can be detected after a bit of surface scratching. The Financial Times suggests that “trendy young crypto-types” are the new kids on the Wall Street financial block, although what crypto-related products will come from these young brains is still to be revealed. However, the trend is very much toward research and crypto is the name on the tip of everyone’s tongues.

Analysts are suggesting that the new frontier on Wall Street could well be cryptocurrency assets custody; looking after customer’s cryptocurrency funds. At the back of this are fees, another way the bank can make money out of cryptocurrency without dabbling themselves. In this way, billions of dollars held in custody by the banks can be another payday for the big names on Wall Street.

Recent Bitcoin News reports have illustrated some of the problems of safe storage of cryptocurrency assets, which vary in degrees of complexity from multiple vaults with random back up keys to Swiss Bunkers carved into the sides of mountains. Thus, there is clearly scope for bank intervention on behalf of clients.

Reportedly, forerunners in this new race are New York City-based ItBit, Gemini and more lately Goldman Sachs and JPMorgan now lining up to offer their services. Others are Japanese broker Nomara and notably the Swiss Stock Exchange part-owned by the 130-bank SIX group conglomerate.

Sam Mcingvale, San Francisco-based head of Coinbase Custody suggest that his company is joining the custody fray with plans to cold-store USD 5 billion of institutional crypto assets by the end 2018. Customers need these services, he argues:

“People were saying: “Hey, we’re already holding Bitcoin with you, we trust you, but we need more; we need a regulatory component, we need monthly statements, we need a different type of insurance.”

 

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Bitcoin’s Dominance Percentage Over 50% for the First Time Since December 2017

Bitcoin’s dominance percentage is at 50.9% as of this writing on 12 August 2018 according to data from CoinMarketCap. The numbers are up 15% from May 2018 when the uptrend began. This is the first time since December 2017 that Bitcoin’s dominance percentage has risen above 50%, meaning most of the money invested in cryptocurrency is invested in Bitcoin.

Currently the Bitcoin market cap is USD 109 billion while the overall cryptocurrency market cap is USD 215 billion, which yields the 50.9% Bitcoin dominance rate. Ethereum’s dominance percentage has declined to 15.3%, since the Ethereum market cap is USD 33 billion. In June 2017 Ethereum’s dominance percentage rose to as high as 31.8% at the same time Bitcoin’s dominance percentage decreased to 39.2%, which is the closest Ethereum got to overtaking Bitcoin as the cryptocurrency with the most investment. Since then Ethereum has declined relative to Bitcoin, long term.

The rise of Ethereum’s popularity in 2017, alongside a wave of initial coin offerings (ICOs), most of which are based off the Ethereum blockchain, is the reason Bitcoin’s dominance percentage declined from the 80-90% range. ICOs have taken a big hit as regulators crack down on ICO activity across the world, and Ethereum is simultaneously losing value relative to Bitcoin, resulting in the dominance percentage upswing since May 2018.

It might be healthy for the cryptocurrency market, for Bitcoin’s dominance percentage to continue rising. Bitcoin is the most secure, most widely used, and perhaps the purest cryptocurrency. It truly is the gold standard of the cryptocurrency world. It would make things far less confusing for new investors if other cryptocurrencies continue to decline since it makes it more obvious that Bitcoin is the best investment choice. In general, if funds are diverted from other cryptocurrencies back to Bitcoin, that could fuel a strong Bitcoin price increase long-term which is beneficial for the entire crypto space. Especially since most crypto businesses prefer to transact with Bitcoin.

Since Bitcoin’s dominance percentage fell from the 80-90% range in early 2017, there have been 3 rallies in the dominance percentage. This includes the time when Bitcoin rallied to USD 20,000, and a smaller bump in the dominance percentage during March 2018 before the Bitcoin rally to USD 10,000. The current rally in dominance percentage is much larger than the bump during March and could be a positive sign that Bitcoin is entering a favorable setup for a rally. However, the past data for this sort of phenomena is so scant that using Bitcoin’s dominance percentage to predict price can’t be done with much confidence.

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SEC Stalls VanEck SolidX Bitcoin ETF till at Least 30th September 2018

The highly-anticipated decision on the VanEck SolidX Bitcoin exchange-traded fund (ETF) has been stalled until at least 30 September 2018, according to an announcement from the Securities and Exchange Commission (SEC) on 7 August. The Bitcoin market dropped from USD 7,150 to less than USD 6,600 as of this writing and it continues to drop, as the Bitcoin community can now clearly see that a Bitcoin ETF will not be approved by the SEC anytime soon.

This particular Bitcoin ETF was the main reason behind the speculative rally in July that pushed Bitcoin’s price up to USD 8,500 from lows of less than USD 6,000. Now, it appears the market is on track to erase all of those gains. The rally initially halted when the SEC issued a 92-page rejection letter for the Winklevoss Bitcoin Trust ETF, which is much like the VanEck SolidX Bitcoin ETF in that it uses actual Bitcoins in its reserves instead of cash. In the lengthy rejection letter, the SEC detailed how the Bitcoin market was too volatile and unregulated to be the basis of an approved financial instrument.

The ultimate message is that no matter how well put together these Bitcoin ETFs are, they stand no chance of being approved under the current administration. Over 1,300 comments were submitted to the SEC regarding the VanEck SolidX Bitcoin ETF, mostly favorable, but they had no impact on the SEC’s decision to delay the ETF decision today. The SEC has the power to delay the decision all the way until March 2019 under their laws,  and the expert who made that calculation expects the SEC to extend the decision deadline to the maximum. All things being equal, in March 2019, the SEC would likely simply reject this ETF.

One of the SEC commissioners says the SEC decision to reject the Winklevoss Bitcoin Trust ETF was a major disservice to investors since it would force investors to trade outside of SEC-regulated markets.

Fortunately, the Commodities Futures Trading Commission (CFTC) is much more favorable towards Bitcoin, and has already allowed the launch of Bitcoin futures on CME and CBOE in late 2017. Also, the Bakkt exchange, backed by the Intercontinental Exchange (ICE), is proposing physical Bitcoin futures. These physical Bitcoin futures, projected to launch in November 2018, will be just as good for facilitating institutional investment as a Bitcoin ETF, if not better and more likely to be approved.

 

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Brian Kelly Proclaims That Bakkt Is Biggest Crypto News of the Year

Hedge fund manager Brian Kelly, while appearing on CNBC’s Fast Money, has called Intercontinental Exchange’s announcement about its new Bakkt platform as the “biggest news of the year.”

Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE), recently announced that with the help of technology partner Microsoft, it was planning to launch a new digital asset platform called Bakkt.

ICE also owns 23 exchanges worldwide apart from the NYSE along with many futures exchanges and clearing houses.  Starbucks and Microsoft will be major partners of Bakkt and will begin accepting Bitcoin and other cryptocurrencies. Bakkt is also planning on launching physically-settled Bitcoin futures by November 2018, which would be a mechanism for institutional investors worldwide to easily buy Bitcoin.

Kelly explained his “biggest news of the year” statement after rejecting that ETF would be approved by the SEC this year, suggesting that he’s not actually optimistic on them being approved in 2018, but the speculation surrounding them will maintain investor interest in Bitcoin regardless of the outcome.

He thinks that ICE’s move is better than Bitcoin futures due to its limitations, given that there are “a limited set of people that can trade it… And a lot of people use it for hedging.”

He recently stated that the last Bitcoin price boost following the CNBC announcement was here to stay, only to see the market drop again a week later. When asked if the ICE announcement might have more effect on prices and whether it would meet with success, he responded:

“Oh, yeah! Absolutely! I mean, they are talking about launching in November… They have been working on this in stealth mode for the last 14 months, they have already talked to regulators, they are ready to go.”

He put the lack of market response to “the biggest news of the year” down to time difference and that he expected there would be a response. Bitcoin at the time of writing is $7,473.89 (CMC). He suggested:

“Back in January, Bitcoin would have gone up 20% on this news. So, I think the bear market has just broken people’s spirit, frankly, and so people aren’t really looking for this… A lot of people I talked to today hadn’t seen the news–came out at 08:30 [UTC -04:00]–people hadn’t seen it till 2, 3 in the afternoon. So, the market is still digesting this, and remember most of Bitcoin trading happens in Asia; so, it was released at 08:30 this morning, that’s 09:30, 10:00 at night on a Friday night in Asia. [When] Asia wakes up, you might see this thing pop.”

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Bitcoin Googled More Than Taylor Swift, Stock Market, Donald Trump

Whether Bitcoin is celebrated by everybody or not, one thing is for sure: people can not stop talking about it. Between August 2017 and today, the number of times Bitcoin was Googled surpassed both pop icon Taylor Swift, and even the stock market.

In December 2017, when the value of Bitcoin reached nearly USD 20,000, it was searched for up to 25% more times than US President Donald Trump. Not to forget this was the month that Trump announced Jerusalem as the official capital of Israel, the Senate passed his significant tax reform legislation, and he sent out a series of Tweets condemning his own Federal Bureau of Investigation.

Tickets for Swift’s 2018 stadium tour went on sale on 13 December, but Bitcoin was pulling in around 70% more Google traffic than the pop star.

Interestingly, when the stock market experiences a slump, the number of times it is Googled increases, whereas Bitcoin sees an increase when there is a bull market. This perhaps indicates it is the younger generation losing interest in crypto when there does not appear to be big gains to be had, whereas the older generation that is more heavily invested in stocks for the long-term keeps a closer eye on their investments when they appear to be depreciating.

As well as this, for the majority of people consuming just mainstream media, the extremities of the market are only covered; while it may not be so intriguing to investigate what is being portrayed as a failing market on the verge of collapse, a 10% investment increase in 24 hours is far more interesting.

What can we take from this data?

While Bitcoin simply being Googled more times doesn’t provide any steadfast data regarding its popularity or give us any indication of a change in market price, there is no denying that the concept has entered and intrigued the general population. And that counts for a lot.

What the trends indicate is that there is still a ways to go in turning around the conversation to keep people confident in the market despite the inevitable downward trends.

Just keep in mind, last year Bitcoin was googled more than the US president for around a month. That is progress right there.

 

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Traders Bear BTC 1,200 Losses in OKEx Insurance Fund Clawback

A liquidation of a long position on the OKEx Bitcoin futures market has caused severe losses to the OKEx insurance fund, resulting in some BTC 1,200 of losses being paid for by traders in short positions.

The move, known as a “clawback”, happened when a trader entered into a USD 417 million long position, roughly BTC 52,000, on the OKEx Bitcoin futures market on 31 July 2018. A long position is when a trader bets that the Bitcoin market will rise, and they can use leverage to multiply their bet. However, if Bitcoin’s price drops, a long position can rapidly lose money and if it loses too much money, it is liquidated to prevent further losses.

The USD 417 million long position was liquidated, causing so much losses that the OKEx insurance fund could not handle it even with a BTC 2,500 Bitcoin injection. This triggered the clawback.

The unusually large size of the long position raised eyebrows at the OKEx risk management team and they requested multiple times that the trader close some of their position to lessen the risk. The trader did not listen and perhaps indicated they would increase the long position, so OKEx froze the account. Right after OKEx froze this account, Bitcoin price dropped so much that the account was forced into liquidation. The liquidation of this single large long position on OKEx is believed to have dropped the global Bitcoin market from USD 8,000 to USD 7,300.

OKEx used BTC 2,500 of their own money to increase the insurance fund for this incident, but the entire insurance fund has been wiped out, and a clawback for 1,200 Bitcoins has been initiated. Traders who profited from short positions are the ones who will have to make up for this loss, which comes out to 50% of their profits.

OKEx has reserved the right to check for price manipulation during the settlement of these contracts, and to adjust the price of Bitcoin to its liking if it is found that manipulation has occurred. OKEx says this price adjustment will reduce the clawback. In reality, if it adjusts the price upwards on the settlement to lessen the clawback, it will decrease profits from short positions. Essentially, traders who have had to pay for the loss will lose the same amount.

New rules are being implemented on OKEx on 4 August 2018 to prevent such large positions in the future, to reduce the possibility of catastrophic losses and clawbacks.

This incident is a good example of how Bitcoin derivatives contracts don’t necessarily have any money backing them, making derivatives trading quite risky for the exchange and individuals. Additionally, this incident shows how derivatives trading can be damaging to global Bitcoin price.

 

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ICE to Launch Exchange, Physically-Settled Bitcoin Futures

The Intercontinental Exchange (ICE), owner of 23 exchanges worldwide including the biggest stock exchange in the world, the New York Stock Exchange (NYSE), and many futures exchanges and clearing houses, is creating a cryptocurrency exchange called Bakkt. Starbucks and Microsoft will be major partners of Bakkt and will begin accepting Bitcoin and cryptocurrency. Even though this is all huge news, the biggest news might be that Bakkt is planning on launching physically-settled Bitcoin futures by November 2018, which would be a mechanism for institutional investors worldwide to easily buy Bitcoin.

Currently, there are Bitcoin futures contracts on CME and CBOE in Chicago, but these futures contracts are settled for cash, and therefore not a good way to buy actual Bitcoins, although there has been at least one exchange for physical (EFP) with the cash-settled futures contracts.

The Commodities Futures Trading Commission (CFTC) will have to approve Bakkt’s proposal but, if approved, it will be the first physically-settled Bitcoin futures in history. The futures contracts will expire every day and be settled for real Bitcoins, making this an excellent way for institutional traders around the world to buy Bitcoin. This could be just as good, or even better, than a Bitcoin exchange traded fund (ETF), which many experts have said would cause a major Bitcoin rally to levels far beyond USD 20,000.

Bakkt will have a built-in clearing house and cryptocurrency custodian, and will have all the regulatory compliance of any ICE exchange, so it seems the physically-settled Bitcoin contracts have a high chance for approval. These futures are projected to launch in November 2018.

Another major part of this story is that Starbucks will begin accepting Bitcoin and cryptocurrency via Bakkt. Vice President for Partnerships and Payments at Starbucks, Maria Smith, says, “As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted, and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks.”

If all goes according to plan, Bakkt could become the biggest cryptocurrency exchange in the world. This is perhaps the news all crypto enthusiasts have been waiting for, and the Bitcoin market has begun to crawl steadily upwards after this story broke the morning of 3 August 2018.

 

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