Bitcoin to $50,000 and a UK bitcoin billionaire

Bitcoin has crashed since last December but one analyst predicts a new peak reports award winning cryptocurrency writer Gary McFarlane.

Bitcoin is up 11% to $6,526 over the past week as it rallies from lows at $5,900, according to research site cryptocompare. Nevertheless, the rally has paused for now with resistance at $6,700 proving to be a bridge too far. From a technical standpoint the price will need to consolidate and push towards $7,000 over the next few days if the momentum of the uplift is to carry through.

The bitcoin price action has been marked by two distinct bullish spurts, the first of which was last Friday when the price jumped 500 dollars in short order on a surge in volumes. Something similar happened on Monday with the price jumping from a session low of $6,275  to $6,681.

Factors behind the stalled rally

A number of factors may have contributed to the stalling of the rally. US payments start-up Square, which recently acquired a New York bitlicence so that users of its Cash app in the US can trade cryptocurrencies, has withdrawn its application for a licence as an industrial loan company. However, it turns out that the withdrawal is only temporary as Square seeks to strengthen its application with the Federal Deposit Insurance Corp.

Tom Lee, the bullish Fundstrat Global Advisors founder who has held to his $25,000 price target all year despite the bear market, seemed to be walking back on that in comments made to CNBC. 

In a discussion about mining costs, a subject we referenced last week as the bitcoin price threatened to fall below breakeven, he said:

"Bitcoin has historically traded at 2.5 times its mining costs. It's not out of the question that it could be over $20,000 by the end of the year at fair value.” 

That seemed to imply he had trimmed $5,000 off his target, but clarified on Thursday that he was sticking with his original end of year price prediction.

“What I was trying to illustrate was that given where mining costs will be and applying the historical average of 2.5 times mining costs, that would imply fair value over $20,000, roughly $22,000.”

He continued: "We still think bitcoin can reach $25,000 by the end of the year or something like that."

Matthew Newton, an analyst at investment platform eToro, saw developments in the regulatory space behind the cooling off in bitcoin’s 10% advance.

Newton told Interactive Investor: "Despite making modest gains earlier this week, prices have stumbled again, most likely influenced by the Reserve Bank of India's decision to ban cryptocurrencies. These outright bans are not good for the industry, stifling development before the technology has had time to mature.  

“However, we are seeing promising signs from many other governments around the world, who are investing time to understand the technology before making an informed decision about regulation.”

Another dampener for the crypto sector came from a site called Dead Coins that tracks initial coin offerings. It claimed that 800 ICOs are dead, because they are trading at less than 1 cent or are just outright scams or have closed their businesses. A caveat to that is that there are many tokens that trade at less than 1 cent and their valuation depends on how many tokens make up total supply.

Altcoins making a noise

In sympathy with bitcoin, which accounts for 42.6% of the total crypto market capitalisation of $268 billion, alt coins have been making gains too.

Although most coins are in the red at the time of writing, there are some standout winners for the week.

Among top altcoins seeing substantial gains is NEO, dubbed the "Chinese Ethereum", up 35%, after strategic partner Ontology’s (ONT) mainnet went live and also helped by the news that it was opening up to allow more nodes on its network, often criticised for being too centralised. The NEO priced leapt 9% to $33 on the Ontology announcement as crypto watchers took it as a sign that it would help NEO to gain traction.  

The developers of both projects have worked together on NEO smart contract technology. Ontology is based in Shanghai. The token’s price has has slipped 2% this week to trade at $4.7 despite the mainnet news.

Cardano and Google do the tango

Cardano (ADA), another decentralised application platform, in this case not actually with a working product but with wide support because of its peer-reviewed approach and innovative technology, has also seen it value rise. 

The eighth-placed coin by market cap is led by Brit Charles Hoskinson of the IOHK Foundation which is based in Hong Kong.  Cardano has seen its price mushroom 22% in the past seven days. 

Hoskinson gave a presentation to Google employees at the tech giant’s London HQ, where he explained how the Ouroboros protocol the network will run on works. He pitched it as an interoperability play in which any number of tokens to be interchangeable. 

Hoskinson put it like this: “And because all the payment systems are now programmable, thanks to you guys and many others, the merchant gets paid whatever the hell the merchant wants to get paid, now. So I can walk over to Starbucks, and I can have my house tokenized, and I can sell it. There’s a market maker that lives in between that, and I sell one-millionth of my home and I can buy that cup of coffee, somebody bought that from me and the merchant gets paid in dollars or pounds.”

The Cardano founder's appearance at Google was enough to ignite rumours of a partnership in the works, with the price charging ahead as a result. 

Hoskinson is a co-founder of Ethereum and he touted Cardano’s advantages over that platform, not just in terms of its third-generation interoperability features, scalability and security but crucially in its footprint among developers. 

"So how many Java, C++ or Go developers are writing code on Ethereum? You can’t, Ethereum doesn’t support any of these languages," he commented somewhat disparagingly. 

"Our goal is to release the next major version of Cardano some time this year, called Shelly."

Other alt coins showing their spurs were  IOTA, the Internet-of-Things-focused blockchain, 17% higher, Stellar and EOS up 15% and Ethereum Classic, Steem and NEM more than 20% the better. Ethos, which released its "universal" wallet that it touts as secure storage for a wide array of tokens, was nearly 50% higher at one point but is now 25% up on the week as the shine of the announcement wears off, with the token off 17% today.  

Bitcoin to $50,000 and a UK bitcoin billionaire

The $50,000 price target from BitMEX co-founder Arthur Hayes may have helped inject some bullishness into the market, although his target was predicated on a bitcoin exchange traded fund (ETF) being approved, and there is no sign of that yet, although ETF provider VanEck has resubmitted a re-engineered offering that is currently being considered by the US Securities and Exchange Commission.

As the leader of one of the top exchanges, market participants could hardly expect Hayes to say he expects the bitcoin price to fall to zero, although he did point out in the interview on CNBC that his exchange makes money whether the price is going up or down by taking its cut on orders.

In related news, Hayes’s founding partner at BitMEX Ben Delo was also in the news. 

The 34-year-old Briton who holds a first in mathematics and computer science from Worcester College, Oxford, revealed to the Daily Mail that he is the youngest self-made billionaire in the UK. 

By his own admission it took a lot of work to make BitMEX what it is today, with daily trading volumes of $2 billion: "I have had my nose down in a start-up for the past four years. I was doing 18-hour days at one point." Hayes and Delo started BitMEX in 2014.

Europe's biggest ETF trader is into crypto

Although there is no visibility on when ETFs might come to market in the US, there has been some interesting news in Europe. 

Dutch firm Flow Traders, one of the largest traders of ETFs in Europe, revealed that it has been active in the market for the exchange traded notes issued by XBT Provider.  The Bitcoin Tracker and Ethereum Tracker products from XBT hold the underlying asset and as such provide a regulated way for institutions to gain direct exposure to crypto.

Flow Traders chief executive Dennis Dijkstra in an interview with Bloomberg said:

"People underestimate crypto. It's big, and it is to be regulated very soon. The market participants are much more professional than people think. Institutional investors are interested - we know they are because we get requests.”

According to Bloomberg, the Dutch firm is the first financial institution to say that it is taking positions in crypto. It is doing so despite the warning of a spokesperson from the financial market regulator in the Netherlands who said:

“We discourage activities in cryptos both by consumers and professional license holders.”

Dijkstra let it be known that  Flow Traders has "dramatically increased" its trading of XBT Provider products. XBT ETNs are denominated in Swedish Krona and euro and can be bought by retail investors. 

Food Standards to improve with blockchain?

The UK's Food Standards Agency has successfully completed trials of a blockchain-based supply chain solution for cattle slaughtering.

Sian Thomas, head of information management, said: "This is a really exciting development. We thought that blockchain technology might add real value to a part of the food industry, such as a slaughterhouse, whose work requires a lot of inspection and collation of results. 

“Our approach has been to develop data standards with industry that will make theory reality and I'm delighted that we've been able to show that blockchain does indeed work in this part of the food industry. I think there are great opportunities now for industry and government to work together to expand and develop this approach.”

Supply chain management is seen as a key area for blockchain implementation because of the paperwork-intensive nature of the processes that are often involved. However, critics highlight the inability of blockchain to stop human beings making fraudulent record entries on the distributed ledger unless biometrics and other surveillance methods are brought into play, and that might offset any cost savings.

Kraken and Bloomberg go to war

Following an investigation by Bloomberg reporters has uncovered what they say are abnormal movements in the Tether price on the Kraken exchange, something of a flame war has broken out. Tether is pegged to the dollar and says it holds dollars that equal the value of the Tether cryptocurrency. US exchange Kraken has defended its markets and responded by making accusations of its own, claiming that the Bloomberg story appeared just before the end of trading on the bitcoin futures contract on 29 June.

The Bloomberg reports published charts of bitcoin and Tether price movements. In the case of bitcoin, price changes are reflected in the volumes, while no such correlation exists with Tether on Kraken’s markets it claimed. The trading patterns on Kraken’s Tether market shows a concentration of unusually large trades in contrast to bitcoin’s more even distribution.

The Bloomberg reporters say they found no evidence that Kraken was manipulating the markets: "No evidence that Kraken itself is involved in any manipulation has emerged". However, it did also highlight the Kraken chief executive Jesse Powell’s dismissal of the need for regulatory oversight. In a blog on the exchange's Medium site, author "Krakenfx" rebuts Bloomberg, with accusations of its own.

"It’s scary to think that our lawmakers are reading this stuff. The title sure was sensational, and it undoubtedly grabbed eyeballs but what of the readers who are not following the outrage on Reddit and Twitter? What of those who rely on the journalistic integrity and expertise of their news sources?

"If we are to take up our pitchforks against market manipulation, guide your torches toward this illumination: the Bloomberg News piece was published on June 29th, the last business day of trading for Q2, and expiration date of numerous futures contracts."