This must happen if bitcoin is to hit $10,000 again

Award-winning cryptocurrency writer Gary McFarlane brings us all the latest news on cryptos, including the latest crypto ban in China.  

Bitcoin has snapped back from a 14-month low to stage yet another recovery, but will the downtrend in play this year be decisively broken?

Trading at $6,400 last week, bitcoin has taken out overhead resistance to breach $7,000, currently priced at $7,103, according to coinmarketcap. Bitcoin is up almost 10% on a week view and 5% in the past 24 hours. 

Encouragingly for the bulls the herd is getting bigger too. Volumes in US dollar trading is currently at $4.5 billion, and earlier this week rose above $6 billion. The US dollar comprises 21% of global trading, according to research site cryptocompare. 

Today's steep $300 movement in bitcoin’s price is thought to be explained by the forced liquidation of short positions.

IOTA get Fujitsu uplift

Altcoins are making a patchy comeback and, in keeping with recent form, continue to lag bitcoin, which has a 52.5% dominance of the total crypto market. 

IOTA is up 8% at $0.78%, building on gains since the IoT blockchain protocol project revealed a tie-up with Japanese giant Fujitsu.

The Japanese IT equipment manufacturer will deploy IOTA technology in its audit trail process, data security and ID verification management systems. Regarding ID, IOTA's Tangle technology is to be integrated with Fujitsu's PalmSecure Palm Vein Pattern Recognition Technology.

Fifth-placed crypto EOS (more below) is 16% higher today at $6.35, Dash 6% improved and Bitcoin Cash selling for $566, 2.5% higher.

Overall cryptocurrencies market capitalisation has risen to $233 billion from $202 billion a week ago.

The bears have been trapped again. However, as seen previously and despite the noted improvement of the past few days, volumes remain relatively subdued. 

Nevertheless, with that proviso in mind, and others such as regulatory developments and bitcoin exchange traded fund news flow, a view that bitcoin has built – or is in the process of so doing – a bottom seems reasonable. 

Pompliano: bitcoin to $3,000… then $10,000

One analyst sees another fake in the latest price fight back, with a price target of $3,000. Anthony Pompliano, aka "Pomp", the founder of Morgan Creek Digital, believes bitcoin will drop to $3,000 before seeing $10,000 later this year. 

Writing in his Off The Chain newsletter about the findings of his modelling, Pompliano said:

"The final data outputs left me with a few uncomfortable conclusions. The most notable one is that we are likely to see Bitcoin near $3,000 before we see Bitcoin at $10,000 again."

Pompliano continued:

"If this is true, that means we still have 50% price decrease to go. Things may get really, really ugly if this happens."

Also, in the "not out of the woods camp but should be soon" is Erik Voorhees. The ShapeShift crypto exchange chief executive suspects the worst is over. "I don’t expect it (bear market) to end soon, although I do think that the rate of collapse has slowed considerably. Generally, in these bubbles, after you go through several months of a downtrend you hang out in a range for a while… But I think we are done with a majority of the collapse."

Wolf of Wall Street calls time on bitcoin

Jordan Belfort who found fame as the subject of the film Wolf of Wallet Street, thinks bitcoin is the biggest scam of all. Belfort peddled worthless penny stocks to investors in his past fraudulent activities and sees something similar happening in crypto.

"I was a scammer. I had it down to science, and it's exactly what's happening with bitcoin. The whole thing is so stupid, these kids have gotten themselves so brainwashed," says Belfort, holding forth in a CNBC documentary Bitcoin: Boom or Bust.

But in what way is bitcoin a scam? Belfort clarified in a later interview. "It's not that bitcoin's a scam but its nature allows scams to occur," he explained.

He thinks the bubble will pop before the end of the year.

Bitcoin Cash forking woes

Bitcoin Cash (BCH) is feeling unloved after news emerged that miners were abandoning ship as a schism widens in the development community. 

With merchant and wider commercial take up waning, a number of proposed software updates to the protocol have been proposed and there are deep divisions in play. 

Without getting too technical, one set of changes – from Bitcoin ABC, which initiated the original fork from Bitcoin, and is associated with support from Bitmain founder Jihan Wu – wants to enable BCH to run smart contracts.

Another fork, in response to the former and this time with efforts led by Australian Craig Wright who once claimed to be bitcoin inventor Satoshi Nakamoto, will increase block size from 32MB to 128MB and, critically, remove the changes proposed by the smart contract fork. 

Finally, a third group, Cobra Bitcoin, wants to basically leave the code alone but build in "replay protection" so that there is no duplication of spending in the event of there being several different BCH chains.  The Cobra group claim to have substantial miner support, with 25% of hashing power (computing power).

None of this is a good advert for crypto and by association crypto in general. Again, it throws a light on the problem of governance – how to get changes in software protocol agreed.

Even the supposedly most modern of blockchain networks have not solved this fundamental problem.

EOS, which ended a year-long ICO by raising $3.6 billion, is still struggling with voting systems. In the latest from the project, it has emerged that funds set aside for development cannot be allocated, and released because there is no administration mechanism in place for token holders or the 21 block producers who do the verification.

There is currently $35 million in the fund which is growing in size and will be worth $200 million by the twelfth month of the EOS network going live. 

However, the network does now have a referendum system implemented as a decision-making tool, although the lofty “constitution” written by Dan Larimer, the chief technical officer of Block.one, the developers of the EOS protocol, is still designated “interim” with controversy still raging about another body, the arbitration committee, and its alleged lack of transparency.

Daniel Keyes, co-founder of decentralised app developer EOS Nation, told CoinDesk: "We've got this worker proposal fund collecting a million dollars a day that we can't do anything with, we've got an interim constitution that people are eager to make changes to, so we want to get something to market as soon as possible."

BCH booster Roger Ver aka "Bitcoin Jesus" and owner of bitcoin.com, who is fond of referring to bitcoin as bitcoin core, told CNBC's Fast Money: "Bitcoin is no longer…usable for commerce at all. The fees became high, the transactions became slow and unreliable, and people like myself and everybody else who was actually trying to use it for commerce stopped and switched to something else, and that something else looks most likely to be Bitcoin Cash for the most number of people." 

BCH is the future "from an investment standpoint" says Ver, controversially. Diversification, however, is still in vogue with Bitcoin Jesus, who holds a varied portfolio of crypto, despite the lock-step correlation at the moment between bitcoin and alts, big and small:

"I hold more Bitcoin Cash then anything else, but I have some Ether, some ZCash, some ZCoin, Dash, Monero and I still hold BTC as well. So a little bit of everything is a good idea, including a bit of Ripple (XRP) and Stellar (XLM). Diversify, diversify, diversify is the name of the game."

Major Japanese crypto miner GMO is no longer a Bitcoin Cash believer – it has stopped mining the cryptocurrency.

Tencent, Alibaba and now Baidu ban crypto – is this China's way of making crypto safe for investors and business? 

China's tightening of the crypto noose continues. 

Baidu Inc ADR, the Chinese search giant, is the latest company to clampdown on cryptocurrency, this time on its discussion forum platform Baidu Tieba with 300 million users. 

Tencent and Alibaba Group Holding Ltd ADR have also moved to ban crypto apps, events, trading and discussion on their platforms and other properties as the Chinese government makes good on its pledge to protect investors and consumers. Critics fear the prohibition campaign could stifle innovation.

A Baidu company spokesperson told the China Times:

"Currently, the company has toughened its scrutiny over digital currency and will not allow sub-forums under this theme, based on relevant rules and regulations."

Tencent and Alibaba both referenced the desire to stop over-the-counter trading of crypto and will continue to monitor activities on their properties. Tencent owns WeChat, the largest messaging app in China and as such a popular venue for setting up trading deals between individuals and entities.

It is now illegal in China to offer goods or services for payment in crypto and ICOs and exchanges remain banned. 124 crypto-related sites are earmarked for blocking although. tech savvy crypto investors have become adept at using VPN services to by-pass state internet controls.

China has taken a twin-track approach to crypto, seeing blockchain as a key part of future economic plans while seeking to drive out bad actors and then later presumably regulate and monitor market operations and business processes of state licensed companies.

With its centralised control of the economy the Chinese government has the advantage of being able to knock heads together to force through new standards and regulations on a nationwide basis.

Before last year's exchange closures, China was the powerhouse of global bitcoin trading, accounting for up to 80% of the total at its peak, but today languishes at a lowly 5%.