You can’t make this stuff up, but the Dow Jones newswire just did. They later apologized claiming that the article was a “technical error.”
The ordeal did seem a bit more elaborate than a simple glitch.
Several headline alerts were sent…
…and the full article included a fair bit of detail…
It seems like somebody was testing some serious news algos. I’ve heard of fake news but this one takes the cake.
eToro, Senior Market Analyst
Due to local holidays, there will be no market update tomorrow. We’ll pick up where we left off on Friday the 13th.
Please note: All data, figures & graphs are valid as of October 11th. All trading carries risk. Only risk capital you can afford to lose.
Bitcoin “Flash Crash”
The popular Crypto News website CoinDesk displayed a price plunge of about $600 per coin for almost 10 full minutes.
Even though no major exchange was showing the sudden price movement some financial media ran with the story anyway.
This one we can probably chalk up to overzealous financial reporting and click bait. Well…. can’t blame them there 😉
You’ve probably heard by now that bitcoin is currently undergoing some serious scaling issues at the moment.
The main issue is that the network needs to be able to handle a lot more transactions per second if indeed it is to compete with the world’s biggest payment processors.
Visa currently handles about 24,000 transactions per second. Bitcoin would struggle if it were to see a sustained volume of more than 7 transactions per second. We’re well under that level at the moment but as the use of bitcoin continues to grow it’s something that needs to be worked out quickly.
This graph shows the average transactions per second since May 2016…
and this one demonstrates the fast pace of bitcoin adoption by showing the average number of transactions per day since the blockchain began.
The debate on how to improve the network speed is heating up and the proposal currently on the table is to double the size of each block in the blockchain from 1 Megabyte to 2 Megabytes.
The process to do this is called a hard fork and it would essentially create a new bitcoin that people would then need to transfer to. The estimated date for this to happen is on or around November 18th.
The miners are currently signaling in strong favor of this solution with more than 94% of mining power onboard.
However, much of the community is largely opposed. As this is extremely political and extremely democratic each side does their best to try and force their ideas on the rest of the network.
What’s in a name?
The main question here is what will the new bitcoin be called. Ideally, the proponents of the Segwit2x would like it to simply be called bitcoin.
This could of course create a problem, especially if not everybody is on the same page. If we had two different currencies both with the same name it would create mass confusion and chaos as nobody would really be sure what they’re sending where and who accepts what.
The popular exchange site Bitfinex has made the call that they will be calling the old bitcoin BTC and will call the new one B2X.
A Hong Kong based wallet and debit card provider named Xapo has issued the following statement.
Meaning, that they are going to support whichever currency the network as a whole decides.
Therein lies the problem.
So what’s the solution?
The price of bitcoin however doesn’t seem to be phased by all this and is currently testing its all time high of $5000 per coin.
So, either the alternative investment community is not aware of the dangers lurking or they simply don’t care.
After all, we had some very similar issue on August 1st with the argument whether to implement Segwit or not and even though there was a lot of fuss then, the average user was largely unphased and the price has nearly doubled since that time.
My personal hope and best educated guess is that at the critical moment the community will indeed come together to realize the best solution. Despite all the fuss and bother it does seem likely that we can get through it rather painlessly.
As far as other markets are concerned all eyes now on the central banks. Specifically, the FOMC meeting minutes that will be released tonight.
The central banks are the biggest market participants at this time so everything they say or do can have a big impact on the direction of the markets.
Tonight, traders will hyper-focus on if the Fed will raise interest rates in December and how they plan to unload their balance sheet.
Tomorrow, there will be a monetary policy conference in Washington DC that will include speeches from several Fed officials and a guest appearance from Mario Draghi.
Wishing you an amazing day ahead!
This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.
Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.
Technical Analysis: Litecoin Continues Surge as Bitcoin Tests Highs
With the crypto world being focused on the historical futures launch, the major coins all enjoyed buying following a hectic weekend, and a volatile week as a whole. BTC itself got another boost from the widespread publicity and the volatile correction of the recent days ended, with the most valuable coin bouncing back towards its all-time high.
While the long-term picture remains severely overbought, the short-term picture is not stretched and further gains are possible even amid the elevated correction risk. That said, investors should wait for a more favorable entry point to ad dot their holdings, while traders should control position sizes in the light of the long-term setup. Major support levels are now near $13,000, $11,300, and $10,000, with stronger levels still at $8200 and $7700.
BTC/USD, 4-Hour Chart Analysis
The major altcoins are all up today, but only Monero and Litecoin are still within short-term uptrends, and the segment as a whole is still dangerously overextended, and a deeper correction is very likely in the coming weeks. LTC continued its recent break-out, getting close to the $200 level, and joining the extremely overbought group regarding the long-term momentum, and triggering a long-term sell signal in our trend model. Key support levels are found $100 at $75 and $64, with a weaker primary level at $125.
LTC/USD, 4-Hour Chart Analysis
Power Consumption for Bitcoin Mining Is Now Ranked 61st in the World
Bitcoin prices have been towering in the past couple of weeks. This is cause for celebration for users who have heavily invested in the cryptocurrency; but, it appears the value of bitcoin is not the only thing that has hit the roof in 2017. Bitcoin mining energy consumption has also reached new heights.
A research study conducted by PowerCompare—a U.K.-based company for energy comparison tariff—found that the average power used to mine bitcoins this year has already gone beyond the annual energy consumption for some 159 countries. In particular, the global average power spent on bitcoin mining has far outstripped the energy consumption in Ireland and a couple of African countries.
This new study was based on data from Digiconomist, whose current estimation of power used to mine bitcoin hovers around 30.14 TWh annually. This figure is way above Ireland power consumption that currently stands at 25 TWh yearly. In fact, recent research from Dutch Bank ING found out that one bitcoin transaction consumes sufficient electricity to power an average household for a whole month.
At this rate, if bitcoin miners were a single country, it would be positioned 61st in the world based on power consumption, comparable to Slovakia and Morocco. PowerCompare has already predicted that if the trend continues, bitcoin mining will expend the entire world’s electricity by February of 2020!
Why bitcoin mining is increasing power consumption levels
What makes bitcoin mining an energy black hole?
Apparently, it is the computational requirements that process the complex cryptographic problems that miners must solve to be rewarded with the cryptocurrency. Just like other notable cryptos such as Ethereum and Litecoin, Bitcoin depends on miners to validate transactions performed in their respective blockchains.
To verify transactions, miners are required to solve complex mathematical problems, which on becomes increasingly difficult as more and more miners join the mining bandwagon. The more byzantine the cryptographic problems, the more the processing power that is needed to solve them.
In the case of bitcoin—the most popular cryptocurrency—a multitude of miners now make it absolutely necessary to use ASICs (Application-Specific Integrated Circuits) which consume considerable amounts of electricity. At present, ASICs have been designed to provide far more efficient computations, both in terms of the hash rate and power consumption when compared to CPU or GPU mining.
But the ASICs haven’t really resolved the hurdles of power consumption.
Ideally, the use of ASICs meant that the total time required to validate new blocks drastically reduces too. This hasn’t happened because of the way the bitcoin protocol was conceived. Apparently, the mining difficulty in bitcoin ensures that the total time taken for generation of new blocks must be kept constant.
As a matter of fact, the Bitcoin network automatically alters the difficulty level for bitcoin mining to ensure the discovery of new blocks every 10 minutes by miners based on two factors. First, there is the global block difficulty that forces valid blocks to have a hash value that is below the target to ensure the difficulty level is maintained.
Second, the number of miners that are actively participating in the mining process has been soaring, meaning the difficulty level has remained constant for a while now. Also, the mining difficulty automatically adjusts after every 2016 blocks on the Bitcoin network. Depending on how many users were actively mining – together with their combined hashpower—and the time it takes to find the 2016 blocks, the difficulty can either go up or down.
As the mining difficulty increases, miners should acquire more powerful hardware to accommodate for the adjustment which again increases the computational electricity. It is also worth noting that there is no maximum mining difficulty that has been set for the Bitcoin network. There is a possibility that the mining difficulty will continue to rise until all the Bitcoins are mined have been mined by the year 2140.
This means that power consumption in Bitcoin is not likely to decrease in the near future.
Challenges of mining Bitcoins
Here are some challenges of Bitcoin mining:
#1: Environmental hazards
The massive growth of cryptos has set up an exponential demand for processing power. The inordinate amounts of power required to mine bitcoins make it an environmental hazard since much of the earth’s electricity is still generated from greenhouse-gas-generating fossil fuels. This implies that bitcoin mining could be contributing to the climate changes and global warming.
#2: Stumbling block for mass adoption
The bitcoin cryptocurrency was conceived as a decentralized, peer-to-peer and trustless currency free from regulations of government agencies and financial institutions such as banks. Unfortunately, the adoption rate is discouraging. This can partly be attributed to the high energy consumption costs.
A recent study conducted by researchers from the HINUI (Hamilton Institute at the National University of Ireland) found that the cost of Bitcoin mining on the commodity hardware at present far exceeds the price of the rewards. In fact, Bitcoin mining has now been left to the big players who have the money to buy expensive ASICs with some of them leasing their hardware to small players in the so-called cloud mining.
#3: Rise of illegal piracy
The rise of bitcoin values is a cause for celebration in the crypto universe. It means that the entire global community is beginning to appreciate the value of cryptocurrencies in the world economy. However, mining energy consumption is soaring at an alarming rate. The quicker we find mechanisms to make bitcoin and other cryptocurrency mining electricity use “greener,” the better it would be for the Blockchain technology that is often heralded as the next internet.
Featured image courtesy of Shutterstock.
Bitcoin Futures Officially Launch on CBOE
The long-awaited bitcoin futures contract officially debuted on CBOE Global Markets Sunday, sending BTC/USD sharply higher. Trade volumes were reportedly thin as CBOE’s website crashed immediately after the contract went live.
XBT Goes Live
CBOE’s futures contract, which trade under the symbol XBT, went live at 6:00 p.m. ET. Within minutes, bitcoin prices surged over $1,000, a sign that institutional money was pouring into the market. The BTC/USD exchange rate reached a session high of $15,811 before giving up gains later in the session. XBT traded at $16,000 soon after the contract went live, giving it a premium over the spot price.
At press time, BTC/USD was trading at $15,248, where it was little changed compared with the previous close.
Bitcoin’s total market capitalization is $260 billion. Trade volumes over the past 24 hours have exceeded $13.5 billion, according to CoinMarketCap. South Korean trading desks drove much of the daily turnover, with Bithumb accounting for roughly 16.5% of transactions. That’s equivalent to roughly $2.2 billion.
The Bitfinex exchange turned over 12% of total bitcoin transactions, which is equivalent to $1.6 billion, data showed. Coinbase’s GDAX exchange saw 6% of the volumes, or roughly $823 million. GDAX experienced technical difficulty last week as bitcoin prices crossed $19,000.
Although trade volume on the exchanges was robust, liquidity in the futures market was relatively thin.
Highly Speculative Instrument
It has been argued that bitcoin futures represent one of the highest forms of speculation in recent memory, given that they are cash settled and have no delivery requirement. This point was raised by Randy Mitterling in Twitter of all places in response to Nassim Nicholas Taleb, the world renown essayist, scholar and former trader. Mitterling, who serves as a Chief Investment Adviser, said:
“Bitcoin futures are cash settled. No delivery requirement. It’s just a sentiment indicator that could be completely wrong compared to the actual price. Truly the most highest form of speculation ever created.”
Taleb, himself a brilliant writer and probability theorist, had provided a series of insightful tweets about bitcoin in general and the new futures contract in particular. In a Sunday post, Taleb said the following:
“Note that Bitcoin has a limited number of natural sellers. The entire concept is very concave supply (it costs more and more to extract). The number of producers shrinks with time.”
In an earlier tweet, Taleb also said:
“No, there is NO way to properly short the bitcoin “bubble”. Any strategy that doesn’t entail options is nonergodic (subjected to blowup). Just as one couldn’t rule out 5K, then 10K, one can’t rule out 100K.”
The arrival of bitcoin futures probably ups the ante on other forms of institutional investments involving cryptocurrency. Some analysts speculate that bitcoin exchange-traded funds (ETFs) are the next logical step for a market growing more comfortable with the idea of cryptocurrency.
CBOE chief Edward Tilly recently told CoinDesk that the case for a bitcoin-linked ETF is stronger now that futures trading is under way. As such, CBOE may be prepared to submit a new proposal to the Securities and Exchange Commission (SEC) to allow bitcoin ETFs and exchange-traded notes (ETNs) to be traded.
Tyler and Cameron Winklevoss failed to launch their bitcoin ETF earlier this year after the SEC rejected their proposal on grounds that the Bats exchange would be unable to enter necessary surveillance-sharing agreements.
A bitcoin ETF would allow investors to buy and sell the asset class much like a stock transaction. For many, it is seen as a precursor to greater mainstream adoption of the world’s no. 1 digital currency.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.
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