January 18, 2017 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Bitcoin (XBC)    + 9.969% 6322.16 5670.63
Ripple (XRP)    –  8.415% 0.00000830 0.00000713
Litecoin (LTC)    –  6.852% 0.00468 0.00431

Bitcoin (XBC) News:

Bitcoin Nears $900 Days Before Trump’s Swear-In; Monero, Dash, Steem Grow Too [Cointelegraph]

To trade Bitcoin / Yuan on BitMEX, please trade XBCH17

 

Ripple (XRP) News:

SWIFT GPI Part 3: the Empire Strikes Back [Ripple]

To trade Ripple on BitMEX, please trade XRP7D

 

Litecoin (LTC) News:

What is the absolute earliest segwit could be activated?  [Reddit]

To trade Litecoin on BitMEX, please trade LTC7D

January 17, 2017 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Factom (FCT)    + 6.268% 0.003695 0.003400
Zcash (ZEC)    –  4.958% 0.05511 0.05220
Augur (REP)    –  3.357% 0.0050744 0.0047846

Factom (FCT) News:

New Factom Foundation Wallet is out!  [Reddit]

To trade Factom on BitMEX, please trade FCT7D

 

Zcash (ZEC) News:

Hardly Anyone Seems to Be Using Zcash’s Anonymity Features [CoinDesk]

To trade Zcash on BitMEX, please trade ZECH17

 

Augur (REP) News:

Markets Update: Cryptocurrency Prices Begin Rebounding [Nigeria Today]

To trade Augur on BitMEX, please trade REP7D

 

 

January 16, 2017 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Augur (REP)    –  3.792% 0.0052439 0.0049464
Monero (XMR)    –  3.274% 0.0136050 0.0120840
Zcash (ZEC)    + 3.202% 0.0557343 0.0527500

Augur (REP) News:

Augur Development state for the front-end, security audits and launch date [Reddit]

To trade Augur on BitMEX, please trade REP7D

 

Monero (XMR) News:

Monero Successfully Hardforks to Increase Privacy and Anonymity [cryptocoinsnews]

To trade Monero on BitMEX, please trade XMR7D

 

Zcash (ZEC) News:

A Future Friendly Fork [Zcash Blog]

To trade Zcash on BitMEX, please trade ZECH17

2016: The Year of REKT

Significant 2016 Events

  • Bitcoin reached 3-year highs; then lost 20% in minutes.
  • Significant cryptocurrency heists totaling to almost US$160M in assets.
  • Vitalik changed his name to Sir Forks-A-Lot.
  • Sterling traded at 30 year lows.
  • Oil hit a 13-year low, then doubled.
  • China cracked down on capital flight, causing USDCNY to hit fresh local highs.

2016 was the year where cryptocurrency traders were made or destroyed.

Bitcoin started 2016 at a price of $430. It traded sideways for 5 months before pumping to $789.7 in mid June. After the Bitfinex hack, it crashed to $600 where it remained range bound until November. Bitcoin on western exchanges ended the year just shy of $1,000, a 132% annual return.

Contrary to what the media tells you, Bitcoin was not the best performing currency this year. In fact, in Dollar terms, Monero rose 2,745%; the party started after it was adopted by several Darknet markets. The entire altcoin complex posted impressive YoY gains:

  • Ethereum, +770%
  • Factom, +390%
  • Ethereum Classic post fork, +215%
  • Zcash (using the first traded price on BitMEX as a reference), +210%
  • Bicoin’s little brother Litecoin, +29%

“Buy and hodl” appears to have been a good trading strategy, so long as you were not subject to any hacks. Almost US$160 million worth of cryptocurrency at current prices was stolen, the largest being 119,756 Bitcoin (currently worth over $123 million) from Bitfinex on August 2nd. The “hot wallet hack heard around the world” sent shockwaves throughout the community, and caused a 20% collapse in the price of Bitcoin. Further controversy arose over the 36.067% haircut that applied to all accounts, Bitcoin or not, to cover the losses.

Bitfinex was not the only exchange or protocol that was hacked. Gatecoin lost $2 million, and the almighty DAO lost $60 million at the time, which necessitated an Ethereum hard fork to bail-out investors. This hard fork then eroded faith in Ethereum, creating Ethereum Classic. Doh.

The initial success of the DAO crystalized fears about Bitcoin’s future survival. The DAO was the most successful crowdfunding campaign – ever. Over $150 million worth of funds were raised during its 28-day Initial Coin Offering (ICO) which ended in May 2016. The DAO’s light shined bright, and the Ethereum Foundation couldn’t resist trumpeting its success. They may have even bought a significant amount of the tokens during the ICO.

Unfortunately like many aspects of this industry, the hype was unwarranted. Only three weeks after launch a “recursive call” attack vector was exposed and the attacker made off with over 3.6 million ETH. This represented close to one-third of assets held in the DAO.

The Ethereum Foundation advocated a hasty hard fork of Ethereum to bail out DAO investors. Self preservation is a powerful force. The foundation faced possible legal actions (it is possible that illegal “securities” were sold to retail investors). A bigger motivator was the huge sum of money they possibly stood to lose via their thought to be DAO investment if there was no hard fork.

To their chagrin, the hard fork spawned the brother that never died. China decided that if they can’t have any say in pumping and dumping a currency, then they would back the original chain, now coined Ethereum Classic (ETC). ETC is now the currency of choice behind Bitcoin in China. ETC is now gaining more popularity, with Western exchanges (e.g. Coinbase) accepting their mistake and thinking about listing it. To their credit, Poloniex grasped the opportunity and listed ETC shortly after the hard fork. BitMEX followed a few hours later with a futures contract.

Zcash (ZEC) is 2016’s most spectacular pump and dump. Zcash rose from its original listing price on BitMEX of 0.025 XBT ($15 at the time), to a high of 3,299.999 XBT ($2.276 million) on Poloniex directly after the genesis block. It’s true, someone bought Zcash at a price of $2.276 million per ZEC. Granted, it wasn’t a whole coin.

In the end, Newtonian physics prevailed. Zcash became Zcrash. ZEC closed the year out at 0.048 XBT ($48), creating a whole new generation of bag holders.

Not all movements in this crypto bull market were organic. Brexit played a major role in pumping Bitcoin up 15% on Black Thursday / Friday. “There is no way the Brits will leave the EU” they said, and then the Pound crashed over 13% in a single session. It has since hit a low of 1.1145 and now trades at 1.2232.

The biggest global macro upset was the U.S. Presidential election. The number of celebrities vowing to give up their precious penthouse apartments in NYC and their luxurious beach-front mansions in Malibu upon a Trump victory have since gone into hiding. They now resort to ordering their Beluga caviar at home facing the harsh reality that no one cares what they think. Tough life.

The Trump Effect not only touched Bitcoin in that special place, but also economies globally. Federal Reserve chair, Grandma Yellen, continued normalising interest rates with a 0.25% hike of the Fed Funds rate. Since the election, the S&P500 rallied over 10%, the Dollar continued strengthening (although not as much as Bitcoin), and market sentiment is the highest it has been in a long while.

Life is full of ironies. The “populist” candidate might be the saviour of American banker bonuses. Donald Trump is no Andrew Jackson.

China has played its part by cutting off a number of capital flight options over the last year in a frantic effort to cut the steady decline of the country’s reserves.

2017, The Year of the Chicken

The world is waking up to Bitcoin. Whether it is being used by only 100 merchants or 100,000, the general public is realising it holds value. Bitcoin has become the crypto reserve currency. This is why it remains on the Iron Throne. Whether you believe ETH and the smart contract war will outshine Bitcoin, you need to remember that most traded volume on ETH is done against Bitcoin. Traders buy Bitcoin to trade altcoins. 2016 started the ICO revolution. 2017 will no doubt have its own DAOsaster, and its own Zcrash.

The premium in China will stay strong as the Yuan weakens towards 8.00, pushing Bitcoin towards new ATHs. In an attempt to curb this, China will try to control Bitcoin, and fail.

This year will Japan will eliminate the 8% consumption tax on Bitcoin sales. This will boost its adoption as traders search for the next Pachinko hit.

The SEC might allow a US listed Bitcoin ETF. Although the Winklevoss ETF, COIN, has been delayed by over 3.5 years, the chorus calling for an outright decision grows. A hard rejection will not crush Bitcoin. In the slim chance the ETF is approved, the price should spike as Bitcoin traders front-run retail and institutional investors that will now be able to buy the cryptocurrency.

This all points to a exciting year for Bitcoin.

January 13, 2017 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Factom (FCT)    + 9.056% 0.0036673 0.0031800
Augur (REP)    + 5.928% 0.0051790 0.0046501
Bitcoin (XBC)    + 4.044% 5568.57 4936.74

Factom (FCT) News:

US DHS tests blockchain to track cross-border activities [Econotimes]

To trade Factom on BitMEX, please trade FCT7D

 

Augur (REP) News:

Augur Development Update – Jan 11th [Augur]

To trade Augur on BitMEX, please trade REP7D

 

Bitcoin (XBC) News:

Why pbocs inspection of exchanges [8btc] (Chinese version only)

To trade Bitcoin / Yuan on BitMEX, please trade XBCH17

January 12, 2017 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Bitcoin (XBC)    – 17.770% 6444.71 4936.74
Ripple (XRP)    + 10.533% 0.0000091 0.0000071
Ethereum (ETH)    + 6.385% 0.01262 0.01153

Bitcoin (XBC) News:

Bitcoin falls 10% as China plans to investigate exchanges [CNBC]

To trade Bitcoin / Yuan on BitMEX, please trade XBCH17

 

Ripple (XRP) News:

India’s Axis Bank to Launch Ripple Payments [CoinDesk]

To trade Ripple on BitMEX, please trade XRP7D

 

Ethereum (ETH) News:

Blockchain technology could revolutionize edtech and the education system – Alum Gate [Alumgate]

To trade Ethereum on BitMEX, please trade ETH7D

January 11, 2017 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Ripple (XRP)    + 9.489% 0.00000774 0.00000680
Litecoin (LTC)    + 4.948% 0.00517 0.00460
Augur (REP)    –  2.636% 0.0048000 0.0045694

Ripple (XRP) News:

Does anyone here think that XRP rate will one day reach 1$? [Reddit]

To trade Ripple on BitMEX, please trade XRP7D

 

Litecoin (LTC) News:

My Vision For SegWit And Lightning Networks On Litecoin And Bitcoin [Medium]

To trade Litecoin on BitMEX, please trade LTC7D

 

Augur (REP) News:

How is REP worth it? [Reddit]

To trade Augur on BitMEX, please trade REP7D

January 10, 2017 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Litecoin (LTC)    + 10.227% 0.00500 0.00435
Augur (REP)    –  6.243% 0.0052778 0.0045001
Bitcoin (XBC)    –  1.331% 6367.11 6049.14

Litecoin (LTC) News:

Litecoin Core 0.13.2 [GitHub]

To trade Litecoin on BitMEX, please trade LTC7D

 

Augur (REP) News:

Is there any Guesstimation or dev update on when augur intends to launch? Is it like weeks or months? Thanks [Reddit]

To trade Augur on BitMEX, please trade REP7D

 

Bitcoin (XBC) News:

India’s Bitcoin Google Searches Hit All Time High [cryptocoinsnews]

To trade Bitcoin / Yuan on BitMEX, please trade XBCH17

The Invisible Bull

Monero (XMR) was the best performing digital currency in 2016, rising over 2,745%. Even if you didn’t enter at the beginning of the year, if held over the last month you would have doubled your money. In the last week, it is up over 30% in USD terms. The market capitalisation of Monero rose over 40x this past year. Monero recently bested Ripple and Litecoin to earn the 3rd spot behind the King and Kitten of Crypto (ETH).

Hold on – check out Big Daddy Vitalik’s kitten bag.

Okay, back to reality. Why is Monero so hot right now? A few months ago a few Darknet markets, AlphaBay and Oasis Market, began using Monero. This highlighted the need for a digital currency more anonymous than Bitcoin. The adoption by a real userbase gave Monero a distinct advantage over other anonymous currencies such as Dash and Zcash.

Kraken added Monero trading noting “Monero is built on the core principles of privacy, decentralization, open development, scalability and fungibility”. Coinbase received many requests to add Monero. However given the regulatory straitjacket Coinbase is under, color me surprised if they support trading of a fully anonymous crypto.

Monero transactions achieve anonymity by using ring signatures. The process is similar to a Bitcoin mixer, but is included in the protocol of the coin and is used by default. The effect of this is to make blockchain analysis much more difficult.

Zcash uses a different approached, called a zk-SNARK, which allows transactions to be completely anonymous. If this feature is not enabled, transaction processing and verification is the same as the Bitcoin protocol. Please read our article “The Battle For Online Privacy” for a further discussion of these two privacy protocols.

The Zcash mining reward is a point of contention. 20% of the reward goes to the founders which is what sparked the fork for Zcash Classic. Zcash Classic eliminates the founders’ reward and slow mining start.

Monero and Zcash have almost the same hashing power (60 MH/s). In the long-run however, given the tail-end emission of Monero (which negates the need to increase transaction fees or discuss block size debates), Monero will be the preferred coin to mine over Zcash which follows the Bitcoin protocol for mining rewards. In addition, those users requesting anonymity in their transactions would need to pay the miners more on Zcash than for a non-anonymous transaction, given the z-addresses are larger.

Image 1: Ratio of XMR / ZEC Price

As the above image suggest, Monero is currently starting to gain more momentum than Zcash, however the war will continue throughout 2017. The real battle begins when the supply of ZEC increases to a level where it can actually be widely used. Traders must ponder the switching costs between Zcash and Monero for Darknet market operators.

To add some tinder to the fire, effective Friday 6 January 2017 12:00 UTC, the leverage for XMR7D will be increased from 20x to 25x.

Happy Trading.

Big Door In, Small Door Out

China, once a cuddly panda, is now a violent dragon. The tide has turned, and financial transactions that were previously tolerated are now banned.

2017 has barely begun, and yet China has enacted a flurry of financial regulations to stem the outflow of CNY, and in its wake, arrest a whole-scale financial meltdown. USDCNY flirts with 7.00. Once that level falls, the light of financial truth will shine on China’s cockroach-infested capital account.

In a previous newsletter, I estimated that on January 1st, another $800 billion could legally leave China due to the $50,000 FX limit quota per adult. The State Administration of Foreign Exchange (SAFE) chose to begin enforcing current regulations which prohibit the use of the FX quota for investment purposes.

Comrades must now declare to their bank how their quota will be used. Overseas tuition payments, family visits, and medical treatment are permitted. Buying Hong Kong issued insurance policies, fancy flats in Vancouver and Sydney, however are forbidden. Should a comrade violate the will of Beijing and be caught, they forfeit their quota for up to 3 years. [Bloomberg]

Governments globally love to create endless pages of laws and regulations so they may cherry pick enforcement. Harvey Silvergate estimates that Americans commit three felonies per day. [WSJ] Committing a felony in America disenfranchises you for life. China is no different. The “law” is what the Party says it is, and it is almost impossible to predict what the “law” will be on any given day.

The Hong Kong Dollar Peg Will Fall

China’s woes don’t end with citizens converting CNY into USD legally. The CNH (offshore Yuan) plunge protection team is in full force. To deter evil speculators from shorting CNH, the PBOC has driven up the cost of borrowing CNH in Hong Kong to nosebleed levels. The CNH funding crunch will affect USD and HKD interbank lending rates for Hong Kong and Mainland banks.

The first tremors are being felt in the Hong Kong Interbank Offered Rate (HIBOR). HIBOR is at levels not seen since the 2008 GFC. [Analystz.HK] For year, wealthy Chinese have plowed into the Hong Kong property market. With Fed Funds at 0% to 0.25% for almost a decade, it was almost free to own Hong Kong property. The HKD is pegged to the USD, therefore Hong Kong imports American monetary policy.

Chinese investors purchased a USD asset, with leverage, with a very low interest expense. All they had to do was take a bus, ferry, car, or plane across the border to Hong Kong. No questions would be asked about the provenance of the cash used for the down payment.

If Hong Kong property prices begin to fall due to investors’ inability to fund their investment, it will be a stampede for the exit. But who will be left to buy? Beijing on multiple occasions has asserted its de facto control over Hong Kong. Booksellers have been apprehended, duly elected members of the legislative body denied entry, and the hope of universal suffrage in 2017 annihilated.

The city is gearing up for the 2017 Chief Executive (CE) election. Those who stand for CE must be approved by Beijing, and they are elected by LEGCO representatives. LEGCO is made up of unelected representatives from various business constituencies, and a smattering of popularly elected representatives.

The 2014 Umbrella Revolution in Hong Kong began when Beijing effectively said No to allowing the 2017 CE to be elected via universal suffrage. This violated their agreement with Britain during the 1997 Handover. Students took to the streets in protest. The protest eventually ended, but everyone knew the real battle would be this year during the CE “election”.

Beijing will unequivocally demonstrate that China owns Hong Kong. The implications for capital are severe. If Beijing controls Hong Kong, then the capital of those who believed they escaped the purview of Chinese financial regulators is fair game. Legally, there is no way to have squirreled enough money out of China to purchase a Hong Kong property. My childhood bedroom would be a multi-million dollar apartment were it situated in Hong Kong.

He who sells first, sells best. The Chinese will dump Hong Kong assets (i.e. property). The question is what to do with the HKD they have received. The first step is to convert HKD into USD. It is believed that the HKD is backed 1:1 with USD at the Hong Kong Monetary Authority (HKMA). We will find out the truth in that. If the HKMA has been cheating, the peg could fall under intense selling of HKD for USD.

The HKMA decreed the HKD can trade between 7.75 to 7.85 vs. the USD. My outrageous prediction for 2017 is that the HKD peg falls, and it trades materially weaker. A rush for the exits by Chinese asset holders will precipitate the fall of the peg. Then Beijing will make the political decision to weaken HKD aggressively to match where CNY is trading.

Beware of Chinese New Year

Last year, I falsely predicted that the PBOC would aggressively devalue CNY over the lunar new year. At the beginning of 2016, China’s “official” FX reserves stood near $4 trillion. This year, they stand at $3 trillion. The pace of outflows accelerated in 2016, and the pace of new financial regulations aimed at closing gaping capital account loopholes also intensified.

China must act swiftly before too much Yuan escapes. Another year of loophole whack-a-mole cannot happen. It is do or die time for Beijing if they want to avert a financial meltdown. Trapping CNY in the country to help fund a roll-over of the vast amount of corporate and local government debt is essential.

Over the next twelve months, savers will find holes in the enforcement of the FX quota regulations. Most likely they will bribe national banks’ local office managers to allow them to skirt the rules. China is huge, and Beijing’s control nationally is always touch and go.

Banks are closed from January 27th to February 2nd. A large one-off devaluation to USDCNY 9.00 would solve the problem. During the 1990s China faced a similar problem. Credit was overextended and 40% of Chinese banks’ loan books were non-performing (NPL). [The Diplomat] Analysts believe similar NPL ratios for Chinese banks exist today. A 30% devaluation would provide suitable breathing room for the PBOC to print enough CNY to paper over the problem.

The best case for China is to become the 21st century Japan. Japan avoided an outright financial collapse for almost 30 years by financially repressing savers with low interest rates. For China, this road starts with an aggressive devaluation.

Bitcoin, The Small Door

During times of financial panic, many alternative assets gain value. Bitcoin’s market cap is only $16 billion. Only a small portion of CNY will be able to find a home in Bitcoin. Even if the price grew 10x from current levels, Bitcoin would still not be able to absorb the sheer volume of CNY looking for a safe haven.

As Bitcoin nears all-time-high’s in CNY terms, desperate savers will investigate just what Bitcoin is. Many 2013 bubble bag holders will rekindle their love of Bitcoin and other digital assets.

Chinese savers aren’t stupid. The events around the globe have proven that central bankers will lie and lie, until the moment of truth arrives. Overnight Chinese households will see their wealth greatly diminished. The race is on to find a door out of China.

Those who previously found refuge in Hong Kong will need a new place to store their USD. It will flow into gold, shares of western blue-chip companies, and alternative assets like Bitcoin.

January 09, 2017 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Ethereum (ETH)    + 4.529% 0.01156 0.01059
Factom (FCT)    + 3.950% 0.003300 0.003075
Zcash (ZEC)    –  3.133% 0.0528850 0.0494105

Ethereum (ETH) News:

ETH up as BTC down. How soon until Chinese bubble shifts to Ethereum [Twitter]

To trade Ethereum on BitMEX, please trade ETH7D

 

Factom (FCT) News:

How much will be the total supply ? How to store Factoids ? [Reddit]

To trade Factom on BitMEX, please trade FCT7D

 

Zcash (ZEC) News:

2016: The Year Zcash Entered Blockchain’s History Books [CoinDesk]

To trade Zcash on BitMEX, please trade ZECH17

January 06, 2017 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Augur (REP)   + 17.317% 0.0052100 0.0041554
Bitcoin (XBC)    – 17.255% 8890.27 6148.55
Ripple (XRP)   +  8.581% 0.00000655 0.00000504

Augur (REP) News:

Augur Front End Update – Jan 4th [Augur]

To trade Augur on BitMEX, please trade REP7D

 

Bitcoin (XBC) News:

Bitcoin lost $3 billion in market value in 40 minutes [Quartz]

To trade Bitcoin / Yuan on BitMEX, please trade XBCH17

 

Ripple (XRP) News:

XRP and the current boom in digital currency prices [Reddit]

To trade Ripple on BitMEX, please trade XRP7D