Bulls are still bullish as bitcoin keeps its head above $8,000, reports award-winning cryptocurrency writer Gary McFarlane who runs through the big crypto news.
Bitcoin is seemingly in a holding pattern around $8,000-8,150 before the next push forward, although has briefly fallen below $8,000 on two occasions in recent days.
The treading water is all the more impressive, given the drop below $8,000 triggered by the latest negative ruling in the Winklevoss brothers' persistent attempts to get the US Securities and Exchange Commission (SEC) to approve its exchange traded fund (ETF) product.
Crypto trading firm BKCM's chief executive Brian Kelly thinks a lot of major sellers have exited:
"There were a lot of big sellers out there. Those big sell-offs included sales ahead of [the US] tax season and the Mt.Gox hack.” Kelly added that he didn’t rate the chances of an ETF being approved this year very highly “but that doesn't stop speculation on that".
Although it is in his interest to talk up bitcoin, Kelly said:
"I can tell you from the calls that I'm getting, people that looked at [bitcoin] in December and didn't like the price are coming back now and saying, "Alright, this thing is not going away. We need to understand what it is. Where does this asset class fit in to our portfolio?""
Other notable thoughts on price come from hedge fund manager Mark Yusko who is sticking with his price targets for bitcoin, at $25,000 for end 2018, $75,000 for 2020, $200,000 in 2022 and $500,000 by year's end 2024.Yusko is the chief executive of Morgan Creek Capital Management with assets under management of $1.5 billion.
Yusko uses the expected growth in the hash power of the network - how many computers are mining - to justify his valuation.
He thinks there are many investors from December last year who are getting ready to jump into the bitcoin market, if not the wider crypto market.
"As soon as the price starts to run, those people that have been waiting on the sidelines to make sure that the bear market is over are ready to jump in, and then once it actually starts moving, then it starts moving fast and that's when you get those parabolic moves."
Bitcoin ETF: hope and realism collide
The rejected Winklevoss Bitcoin Trust may have been confused by some market participants with the VanEck SolidX bitcoin ETF. Investors have become focused on the latter regarding its hoped-for approval by the regulator. The SEC also delayed until September a decision regarding five crypto ETFs proposed by Direxion Investments.
The Winklevoss news last Thursday shifted the market to the defensive, reminding those getting carried away by the prospect of exchange traded products market caps of the continued reticence of the SEC to approve any of the products so far brought before it. A decision on the VanEck product is expected on 16 August.
However, the big news lurking inside the SEC’s decision is the dissent of commissioner Hester M. Peirce (one of four commissioners), and her airing of worries that innovation risks being blunted, with effects beyond crypto. "More generally, the commission’s interpretation and application of the statutory standard sends a strong signal that innovation is unwelcome in our markets, a signal that may have effects far beyond the fate of bitcoin ETPs," Peirce states.
Considerable obstacles remain in the path of bitcoin ETFs. With a US Justice department investigation already ongoing into market manipulation and the SEC on record with its worries, an ETF approval is very far from a foregone conclusion.
Indeed, in an attempt to forestall the SEC’s criticisms, VanEck has sent a letter to Dalia Blass at the SEC’s investment management division. In the letter the New York-based investment firm directly engages with the regulator’s stated concerns regarding valuation, liquidity, custody, arbitrage and potential manipulation. VanEck claims that bitcoin price volatility is similar to that of gold, and that the bitcoin futures market efficiently reflects the price of bitcoin and therefore would keep the ETF’s price in step with its net asset value. The ETF provider also asserts:
"That, due to the diversified ownership and volume of trading, the market does not have major, structural vulnerabilities".
The SEC specifically rejected the claim that the markets were "uniquely resistant market manipulation" as well as the security breaches at exchanges and danger to investor funds.
The crypto industry hopes an ETF would help to attract mainstream funds to the crypto market. ETFs track an underlying asset and trade on the stock exchange in the same way as shares. The asset can be tracked either by physically holding the asset or synthetically replicating it using derivatives. The VanEck Solid X ETF will hold bitcoin futures contracts, which are cash settled and the company said in its letter that it would not hold a physically settled product if one came available.
Commercial loans, Singapore Airlines and Coinbase e-giftcards
The background noise of adoption progress continues with significant announcements from banking, big tech and telecoms companies.
The Agricultural Bank of China, one of the country's big four commercial banks, issued a $300,000 loan using blockchain technology. The loan is backed by land collateral. ABC is working with "node partners" such as local government land and resource offices, its commercial bank peers and the Guizhou province branch of the People's Bank of China.
Elsewhere in China, the city of Nanjing has set aside a $1.5 billion fund to assist in the development of public blockchain solutions as part of its vision of a smart city of connected individuals and Internet of Things devices at street and building level. The UDAP Foundation and TokenX Community are the first beneficiaries of the fund.
In telecoms, one of the two giants of South Korea telecom, KT Corporation, launched its own blockchain. Initially it will be applied to improving service delivery for international data roaming and ID verification.
Staying in Asia, Singapore Airlines has launched the KrisPay wallet as part of its frequent flyer programme, which it is touting as the "world's first blockchain-based airline loyalty digital wallet". Members can use KrisPay miles to pay for goods from one of its 18 partner merchants. The private blockchain was developed in partnership with Microsoft. Transactions per second (tps) run at 10,000 tps on the network with room to grow to 100,000 tps.
To put it mildly, things have been slow on the retail front in crypto. However, Coinbase introducing e-gift cards to its customers is doing its bit to help oil the wheels of commerce. The Coinbase crypto e-gift card is available now in the UK, Spain, France, Italy, Netherlands and Australia. In keeping with Coinbase's ease-of-use mantra, the gift cards can be bought directly in one step.
In a blog post Coinbase said it is "the first trading platform to offer direct withdrawals into e-gift cards". There are no transaction fees "on select e-gifts" for withdrawing from crypto straight into the giftcard, be it "bitcoin into Uber credits or ether into a Nike shopping spree" .
IBM's bank-facing store for blockchain apps, Litecoin and HTC hook-up
Last week we had a stablecoin announcement from IBM and this week it is making a stir again with news that it is building an app store of blockchain products aimed at financial services companies. The IBM platform, LedgerConnect, has received early support from Barclays and Citigroup, with the proof of concept pilot at quite an advanced stage of development, according to reports.
LedgerConnect has been developed with technology from HyperLedger, a consortium competing in the same fintech space as the R3 consortium and its Corda framework. Most banks and other financial institutions are in one of other of the consortiums attempting to develop apps to reduce costs in areas such as post-trade settlement.
Phone maker HTC’s blockchain phone project - known as Exodus - received a credibility boost when Litecoin inventor Charlie Lee said on Twitter that he has thrown his considerable credibility behind the South Korean manufacturer’s efforts:
"Met the HTC Exodus team last week and was really excited to hear the phone will support LTC and Lightning Network on Litecoin natively! I will be an advisor as I see having a secure crypto phone that makes LN simple is needed for mass adoption."
Lightning Network is a so-called sidechain solution that would speed up transactions by creating payment channels that don’t have to directly interact with the blockchain as often. Litecoin is a fork from Bitcoin and is therefore able to use the same technology.
Previous attempts to drive adoption on Litecoin as a means of exchange failed with the abortion of the LitePay initiative to roll out software to merchants wanting to add Litecoin.
Venezuela and Iran at the frontier of crypto adoption?
Venezuela and Iran are both being forced by circumstances to edge closer to a form of national cryptocurrency as their economies are buffeted by violent financial storms. In Venezuela inflation has reached 1,000,000%, rendering the bolivar national currency worthless.
Iran is looking forward to a tougher sanctions regime and the Rial currency has plummeted in value accordingly.
President Nicolas Maduro of Venezuela announced last week that in addition to the Petro crypto pegged to the value of the country's oil reserves and already in circulation, the government would introduce a national cryptocurrency – the Sovereign Bolivar. The national crypto will be linked to the value of the Petro and is slated to enter circulation on 20 August. The Petro launched in February (token presale) at $60 but has since fallen to about $16, not great but a better place than where the fiat currency is right now.
In Iran, Alireza Daliri, the deputy for management and investment affairs at Iran's directorate for scientific and technological affairs of the presidential office, has said that together with the Central Bank of Iran it is creating a "state cryptocurrency".
"We are trying to prepare the grounds to use a domestic digital currency in the country. This currency would facilitate the transfer of money [to and from] anywhere in the world. Besides, it can help us at the time of sanctions."
The Rial currency continues to slide and as a result those with liquid assets are converting to them bitcoin just as quickly as they can. The bitcoin price is trading at a premium on over-the-counter deals of as much as $12,000 over the price on international markets. Iran banned bitcoin in April. Since US president Trump announcement in May that US sanctions would be reintroduced, reports in local media indicate that at least $2.5 billion has been moved out of the country as capital takes flight.
Alongside those developments, blockchain is being looked at more widely for application in the plumbing of the Iranian financial system. The Post Bank of Iran had already built a working version of a national crypto according to reports earlier this year and Daliri's statement presumably refers to a continuation of those efforts.
Only 2% of US investors own crypto, more commission-free crypto trading
A survey of US investors commissioned of 1,921 by Wells Fargo/Gallup found that only 2% are invested in cryptocurrency with 72% having "no interest in ever buying bitcoin" with 26% "intrigued by bitcoin but won’t be buying it anytime soon". The research was conducted on 7-14 May 2018. On the risk scale, 75% consider bitcoin to be "very risky". Men and younger investors are more likely "know something" about bitcoin. The survey concludes that most investors are on the sidelines, knowing little or nothing about bitcoin.
The Wells Fargo/Gallup Investor and Retirement Optimism Index survey authors see, unsurprisingly, new investors being attracted among a younger crowd:
"Looking to the future, however, many younger investors who currently say they are intrigued may be converted to investors once the currency goes more mainstream."
Voyager, a new player has arrived in the commission-free trading space aims to challenge the position of both Coinbase and Robinhood in it's the US crypto trading marketplace. Global investment platform eToro recently introduced commission-free trading in the UK.
Unlike Robinhood, Voyager is planning to offer markets in the top 25 coins, giving investors much better choice. Voyager also plans to be a price discovery service, providing its users with the best price from a number of exchanges in real-time.
Although Robinhood and Voyager are eschewing the typical way in which crypto exchanges make money by charging a fee on every transaction, advertising their services as "free", these companies claw back revenue by including it in the spread between the bid and offer price, which eToro does make explicit in its advertising.
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