China, gold and bitcoin's decline

Our award-winning crypto writer explains why both bitcoin and gold have tumbling and where the floor is.

Despite a consensus of sorts that central bank moves towards blockchain-based money should be good news for bitcoin, the leading cryptocurrency is not feeling the love at the moment.

As always, though, with so many variables in play, it could be that it is the story beyond Libra and state crypto that is impacting the bitcoin price – namely a return of risk-on sentiment.

With hopes of peace breaking out in the US-China trade war and, as a result, worries about global growth perhaps somewhat less elevated, perceived safe haven assets have been taking a hit.

Gold has seen a week of declines, with bitcoin seemingly mirroring that sell-off.

Bitcoin has declined to $8,597 at the time of writing, with the recent run-up to $10,500 caused by the 'Xi put', when the Chinese president waxed lyrical about blockchain, losing its impetus.

The lodestar of the crypto world is now in its third week of declines, although on a month view it is 5% higher.

Although crypto fans won't want to hear this, far from being a safe haven, it is worth pointing out that bitcoin on a three-month view is the worst performing asset class.  

Nevertheless, year-to-date it is still top of the pile with a return of 130% and, from the standpoint of the macro bulls, that's because none of the underlying problems that led to the financial crisis have been successfully addressed. Instead, unconventional monetary policy – which in this view is loosely described as printing money for the banks – could be said to have stored up more problems as seen in the emergence of negative interest rates.

Bitcoin is still trading above its 50-day simple moving average (green line in chart below), but only just. 

The volume profile (which shows the level of buying and selling interest at any given price point) indicates strong support at $7,977. However, that is probably little comfort to those who interpreted the spike to $10,500 as a near-term bullish reversal. 

As always, it is difficult to predict the price of bitcoin from week to week let alone month to month, but China’s recent pivot towards going all in on blockchain technology should help to build a floor for the price.

(BTC/USD 1-day candles on the Luxembourg-based Bitstamp exchange. Courtesy TradingView)

China state crypto coming "in two or three months", EU serious on crypto

A draft document from the European Union urging the European Central Bank  (ECB) to further explore crypto technology and major coverage by the world's largest news agency, China's Xinhua, stating that bitcoin is "the first successful application of blockchain technology", are just two of the most recent examples of the growing interest among central bankers and governments in state-backed digital currencies. 

Central bankers are considering crypto in order to harness the much-promised increased efficiencies and cost reductions the technology could deliver in the payments realm. 

More details have emerged about the possible timing of the release of China's much-rumoured central bank digital currency (CBDC).

Jack Lee, managing partner at HCM Capital, told US financial news TV outlet CNBC that China's CBDC should see the light of day in "maybe two or three months". HCM Capital is the private equity arm of Taiwanese contract manufacturer Foxconn, with 350,000 employees in mainland China.

For its part the People's Bank of China has scotched the latest rumoured launch dates, describing them as "fraudulent".

Elsewhere, Reuters reported on 6 November that it had seen a European Union draft document on a central bank digital currency drawn up by the Finns who hold the current rotating EU presidency. 

The draft in part said:

"The ECB and other EU central banks could usefully explore the opportunities as well as challenges of issuing central bank digital currencies including by considering concrete steps to this effect."

The change in tack by the EU was said to have been prompted by the wake-up call from Libra.

According to Reuters, the report may be discussed by EU finance minister on 5 December. 

In one of the plans being considered it is envisaged that electronic cash would be created for European consumers that could be directly deposited at the ECB, bypassing entirely the current financial intermediaries, including clearing banks. Any such plan is sure to set alarm bells ringing for the current incumbents and will face substantial opposition from the banks.

Alex Karasulu, chief executive and founder of OptDyn, the company behind the eco-friendly Subutai blockchain router, which among other things increases mining efficiency, thinks national cryptocurrencies is an unstoppable trend.

In comments provided to interactive investor, Karasulu sees the trend as a threat to the dollar with the US in danger of falling far behind. He said: "The epidemic spreading of sovereign cryptocurrencies occurs through bilateral trade vectors. Countries, minus the US, are not only creating their own national cryptocurrencies, but are helping their bilateral trading partners tokenise their sovereign national currencies as well. 

He continued:

"The aim is to bypass SWIFT, avoid the need to use US dollars at all in a swap, and get out before an inevitable financial system collapse hits. Notice that these drivers feed back into themselves to further accelerate the collapse of the US dollar."

Does Facebook Pay put Libra on backburner?

Meanwhile, the Libra crypto project that put the cat among the central bank pigeons, seems to be losing focus at Facebook after the social media giant revealed the upcoming release of Facebook Pay for its US customers. It will allow users of all of its properties to send money directly to each other using the current digital payments infrastructure in a similar fashion to PayPal’s Venmo app or Barclays, Pingit. 

Facebook's shares jumped 2.5% on the news. In a company statement Facebook said the service would "provide people with a convenient, secure and consistent payment experience across Facebook, Messenger, Instagram and WhatsApp."

Although it would be premature to see Facebook Pay as an admission of failure with Libra, it clearly shows the company is not putting all its eggs in the Libra basket.

Indeed, Facebook has always said Libra was an independent entity but, after the massive regulatory pushback the crypto project has attracted, the company has decided not to wait around for it to clear the considerable hurdles that have been placed in its path around the world.

"Facebook Pay is built on existing financial infrastructure and partnerships, and is separate from the Calibra wallet which will run on the Libra network," the company explained in its press release.

Alibaba in bitcoin rewards tie-up

Staying with China, e-commerce giant Alibaba, which is considering a secondary listing of its shares in Hong Kong, had a record Singles Day in China, coming in at $38 billion. This year those sales came with the option of getting bitcoin rewards following its tie-up with crypto rewards app Lolli.

Alibaba's customers can earn 5% of purchase value in bitcoin denominated rewards, although the service is for now not available inside China, and limited to its US customers.

The move represents a partial U-turn by Alibaba, which in a very public dispute with the Binance crypto exchange, denied that its AliPay service could be used to fund accounts at the venue. Binance is reported to be planning to open an office in Beijing, according to crypto news site CoinDesk. In a statement posted to Twitter on 10 October Alibaba said:

"If any transactions are identified as being related to bitcoin or other virtual currencies, @Alipay immediately stops the relevant payment services."

AliPay, along with Tencent's WeChat, dominate online  and contactless payments in China and are thought to be among the platforms being lined up as official issuers of the yuan-backed central bank digital currency, whenever it appears.  

Bakkt custody comes online, CME reveals bitcoin options plan

The Bakkt platform set up by Intercontinental Exchange, owner of the New York Stock Exchange, has begun accepted customer deposits for its bitcoin custody service, called Bakkt Warehouse. It follows the granting of regulatory approval by the New York Department of Financial Services. The Bakkt service comes with a $125 million insurance policy, although the firm underwriting it has not been disclosed. 

Also, a few days ago trading in its physically settled bitcoin futures product hit a record, with 1,741 contracts (worth approximately $15.5 million at the time) traded on 9 November, double the amount seen the previous day.

The Chicago Mercantile Exchange, which was the second firm to launch regulated bitcoin futures, albeit cash-settled, has announced a new bitcoin futures options product, subject to approval by the regulatory authorities. The firm hopes to launch it in the first quarter of 2020.

In a press release CME Group said:

"Based on actively traded Bitcoin futures, our new options will provide another way for traders to efficiently establish their views on bitcoin performance and diversify their trading strategy."

Abra app lists more crypto

Crypto wallet and exchange app Abra has expanded its range of available crypto assets by 60 to list a total of 96 coins, initially only for the US market. 

In addition, it intends to list 200 crypto assets for its global customer base, starting in December.

A number of coins have been excluded from the app because they are considered securities by the US regulator the Securities and Exchange Commission and include QTUM and EOS.

Included in the revamp is the forthcoming addition of top stablecoin Tether in December along with DAI, while TrueUSD and Paxos stablecoins were made available from 12 November.

San Francisco-based Abra include American Express Ventures and Foxconn Technology Group among its early backers. The app is available in 150 countries.

Niall Ferguson's Ample (AMPL) listed on Kucoin exchange

The AMPL token of the Ampleforth project has listed on Kucoin, a fast-growing Singapore-based crypto exchange.

Ampleforth says that its protocol is designed in such a way that the token “will inflate when the price exchange rate is over one and deflate when the price exchange rate is under one”. It is this supply elasticity that leads the project to define the AMPL token as 'smart commodity money'. 

The Ampleforth protocol enforces a price equilibrium in order to maintain “a stable long-run price”, although the company claims the token is not a stablecoin.

With a raft of heavyweight backers and scholarly support from the likes of British historian Niall Ferguson, author of The Ascent of Money, AMPL has attracted a lot of interest. 

Electroneum (ETN) homes in on Africa opportunities

Electroneum's expansion continues with the addition of Uganda, Nigeria and Tanzania to its mobile phone top-up service. The news follows the viral success seen in Brazil, Turkey and South Africa.

"Partnering with third-party airtime and data providers, Electroneum (ETN) users can now top up 15 major mobile operators across Uganda, Nigeria and Tanzania, providing nearly 100% coverage of subscribers in the African regions," reads a company press statement. 

It also has also added a new non-governmental organisation (NGO) to its roster of node operators – the crypto network's trusted validators – in the shape of Project Child, an Indonesia-based education charity. The two other NGO validators are Ubuntu Pathways and WONDER Foundation.

Listen to the interview with Electroneum chief executive and founder Richard Ells on the interactive investor crypto podcast available here.

OneCoin "scam" puts BBC podcast on the map

The OneCoin saga that has seen investors lose as much as $5 billion in the alleged scam, is a timely reminder that crypto still has its Wild West territories. 

A BBC's podcast delving into the disappearance of OneCoin promoter Dr Ruja Ignatova, dubbed the Crypto Queen, has had remarkable success as the alleged nefarious activities of the coin's supporters continue to intrigue.

The trial of lawyer Mark Scott, who stands accused by the FBI of being OneCoin's money launderer, began in New York on 5 November. The FBI says he laundered funds worth £310 million with some of the money allegedly turning up in accounts at the Bank of Ireland.

Her brother Konstantin was arrested in March at Los Angeles International airport and co-founder Sebastian Greenwood was apprehended in Thailand last year. 

Ruja Ignatova's whereabouts are still a mystery after she disappeared from public view in October 2017.

OneCoin Ltd continues to operate from its base in Bulgaria and in a statement to The Missing CryptoQueen podcast denied it is a Ponzi scheme.