BitMEX Adds 100x Leveraged Quarterly Bitcoin / USD Futures

The BitMEX 30 December 2016 Bitcoin / USD 100x Leveraged Futures, XBTZ16

By popular demand, we have brought back the Quarterly Bitcoin / USD Contract, but have given the leverage a bump up to 100x. Note that this is an inverse style contract.

Symbol: XBTZ16
Leverage: 100x
Underlying: XBT/USD
Contract Value: 1 USD
Expiry Date: 30 December 2016 at 12:00 UTC

Need to Hide 200 Million Yuan? Use Bitcoin Instead


Since October 10th, the first trading day in China after Golden Week, the PBOC has weakened the Yuan by over 1.00%. USDCNH is approaching 6.80. CNH is the offshore and freely tradable version of the restricted onshore CNY.

China recently published its 3Q16 GDP. Surprise, GDP grew at 6.70% exactly what analysts expected. If you believe any economic data from any government globally, I have some Paycoin to sell you. The data point of most interest is China’s monthly FX reserves. Goldman Sachs analyst MK Tang estimates that capital outflows in September accelerated to US$78 billion up from US$32 billion in August. He also stated that the official number released by China was bogus.

The PBOC needs to sequester as much capital inside China as possible to mitigate the massive amount of credit being extended by the nation’s banks. As of September the Banking Regulatory Commission reported China’s domestic banking assets totaled CNY217.3 trillion (US$32 trillion), which is up 14.7% YoY. [Zerohedge] They have been closing the gates since August 2015. SCMP reports that SAFE closed 56 illegal underground banks involving more than CNY1 trillion.

To make matters worse, Xi Jinping’s anti-corruption drive has rich comrades running scared. If they look hard enough, almost every wealthy person could be convicted of some sort of graft. What is worse is that the “law” changes to fit the prerogatives of the party. If you do not fall in line with Xi Jinping, you will be made an example of. As a result, government officials and wealthy citizens desperately try to spirit their capital outside of China.

A recent story illustrates the plight of rich Chinese officials. Wei Pengyuan, the former vice chairman of the National Energy Administration’s coal department, was charged with accepting bribes. Police seized CNY200 million (US$29.5 million) worth of cash from his apartment. [Zerohedge]

The conduits through which cash moves abroad are being shuttered. Desperate officials have turned to hiding vast amounts of cash in their primary residence. One problem in China is is the largest denomination bill is worth 100 CNY. This was deliberately done to make it very hard to hold large amounts of wealth outside the government controlled banking system.

Wei’s stash of cash weighed an estimated 1 ton. Wealthy Chinese need a store of wealth that is outside governmental control, and easily portable. Enter Bitcoin. Many people perceive China’s appetite for Bitcoin to be predicated on a desire to get money out of the country. Getting the wealth out of the country is proving to be very tough, therefore the more important concern is hiding in plain sight.

Bitcoin is weightless, and can be accessed using any internet connected device. As of December 2015, China had 620 million users of internet connected mobile devices. Bitcoin can be purchased in as little as 30 minutes from one of the large Chinese Bitcoin exchanges. Bitcoin / CNY is the most liquid pair globally. Put all these factors together, and it is a no brainer for wealthy individuals to store a portion of their wealth in Bitcoin.

Bitcoin purchased need not ever be converted into USD. Bitcoin can be the final destination of wealth for Chinese citizens. When viewed in this light, the China premium for Bitcoin could rise to levels not seen since 2013. In 2013, the China premium reached a high of 40%.

The main stumbling block is education. However, with more and more wealthy comrades meeting a bullet for economic graft related offenses, their life could depend on learning.


October 27, 2016 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Bitcoin (XBT)  + 3.792% 676.75 652.04
Ripple (XRP)  –  3.673% 0.00001353 0.00001272
Augur (REP)  + 2.814% 0.0078682 0.0071224


Zcash (ZEC) News:

Growing Hype and Ecosystem Surrounding Zcash Launch [News.Bitcoin]
Trustless Pyramid schemes happens in Ripple for sale.

To trade Zcash on BitMEX, please trade ZECZ16


Bitcoin (XBT) News: 

USDCNY 7.00 Equals Bitcoin $1,000 [BitMEX Blog]

To trade Bitcoin on BitMEX, please trade XBTUSD


Augur (REP) News:

The highest volume of bet in Agur: Which political party’s candidate will win the 2016 U.S. Presidential Election? [Augur official website]

To trade Augur on BitMEX, please trade REP7D


October 26, 2016 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Augur (REP)  –  6.849% 0.0078983 0.0068334
Monero (XMR)  –  5.463% 0.0098272 0.0086201
Factom (FCT)  –  5.123% 0.0042600 0.0039388

Augur (REP) News: 

Augur’s REP Garners Solid Community Support Ahead of Platform Launch [Bitcoin Magazine]

To trade Augur on BitMEX, please trade REP7D


Monero (XMR) News:

Altcoin Report: Monero Shutting Down Until January []

To trade Monero on BitMEX, please trade XMR7D


Factom (FCT) News:

Factom at Money 2020 in Las Vegas  [Reddit]

To trade Factom on BitMEX, please trade FCTXBT



How to Market Make Bitcoin Derivatives Lesson 1

high frequency trading

Providers of liquidity, or market makers, provide an essential service to any tradable market. They ensure that there is always a buy (bid) price and sell (ask or offer) price. This allows traders to enter and exit a market at any time.

If Bitcoin and the digital currency trading industry are to grow, exchanges will need more and more market makers to provide additional liquidity. There are many traders who have graduated from purely directional trading, to providing liquidity on various spot markets. This series of lessons is meant to give traders a basic understanding of how to market make digital currency derivatives.

Lesson 1 will focus on how to quote a two-way price, a simple dynamic hedging strategy, and settlement. In order to keep the math simple, we will use an 7-day expiring Ethereum Classic / Bitcoin futures contract, ETC7D.

Contract Details:

Contract Value: 1 ETC

Underlying: Poloniex ETC/XBT exchange rate

Settlement: 30-minute Time Weighted Average Price (TWAP) Friday 12:00 UTC

How to Calculate Bid / Ask Quotes

A futures contract derives its value from the underlying asset. For ETC7D, the underlying asset is the Poloniex ETC/XBT exchange rate.

Your trading program needs a live feed of the bid, ask, and last price of ETC/XBT on Poloniex. For starters, I advise you to calculate the mid price (average of bid and ask). As a market maker, you will hold futures contracts until settlement. Because a futures contract will equal spot at settlement, we can value ETC7D by the following formula:

ETC7D Quote Mid = ETC/XBT Mid Price (Spot) + Basis or Skew

After calculating your ETC7D Quote Mid, you will apply your spread. We will discuss how to calculate a Basis or Skew in Lesson 2.

As a market maker your spread compensates you for hedging costs (trading commissions, and bid / ask spread) on the underlying exchange, and the volatility of the underlying asset.

I will ignore the volatility component for now.

Spread = Spot Trading Fees + Spot Bid / Ask Spread + Market Maker Profit

The Market Maker Profit is how much you would like to earn on every trade.


Spot = 0.02 XBT

Basis or Skew = 0 XBT

Spot Trading Fees = 0%

Spot Bid / Ask Spread = 0%

Spread = 1.00%

ETC7D Quote Mid = 0.02 XBT

ETC7D Quote Bid = 0.02 XBT * 0.995 = 0.0199 XBT

ETC7D Quote Ask = 0.02 XBT * 1.005 = 0.0201 XBT

These quotes will be calculated then sent to BitMEX.

Simple Dynamic Hedging

Your goal as a market maker is to be market neutral. As other traders hit your bids and lift your asks, you must hedge yourself in the spot market.

Since each ETC7D contract represents 1 ETC, if you sell 1 ETC7D contract, you must buy 1 ETC. If you buy 1 ETC7D contract you must long sell or short 1 ETC.

A trader buys 300 ETC7D contracts at 0.0201 XBT from you. You are now short 300 ETC. Your trading program will automatically buy 300 ETC/XBT on Poloniex for 0.02 XBT.

Symbol Position Trade Price XBT Value
ETC7D -300 0.0201 XBT -6.0300 XBT
ETC/XBT +300 0.0200 XBT +6.0000 XBT
Unrealised Profit +0.03 XBT

You now have 0 ETC exposure. Because you have sold ETC7D at a greater price than where you bought ETC spot, you have an unrealised profit of 0.03 XBT.

You are still quoting a two-way market of 0.0199 XBT / 0.0201 XBT for 300 contracts each side. A new trader decides to sell 300 contracts at your Bid price of 0.0199 XBT. Your ETC7D position is flat (you sold 300 ETC7D previously, and now you just bought 300 ETC7D), and you are long 300 ETC/XBT; your net exposure is long 300 ETC. Your trading program long sells 300 ETC/XBT at 0.02 XBT.

Symbol Position Trade Price XBT Value
ETC7D -300 0.0201 XBT -6.0300 XBT
ETC/XBT +300 0.0200 XBT +6.0000 XBT
ETC7D +300 0.0199 XBT +5.9700 XBT
ETC/XBT -300 0.0200 XBT -6.0000 XBT
Realised Profit +0.06 XBT

Your portfolio is flat. You have realised a profit of 0.06 XBT or 1% of the value of your quotes. That 1% equates to the spread you built into your Bid and Ask quotes.

This is the simplest form of market making. You take the underlying spot price, apply a spread, and dynamically hedge 1:1 whenever anyone trades on your quotes.


If you hold a futures contract over settlement, it will expire and leave you with no exposure.

Your Portfolio:

Symbol Position Trade Price XBT Value
ETC7D -300 0.0201 XBT -6.0300 XBT
ETC/XBT +300 0.0200 XBT +6.0000 XBT
Unrealised Profit +0.03 XBT

If you do nothing, on Friday 12:00 UTC your ETC7D position will go to 0, and you will be left long 300 ETC/XBT. Your goal is to be market neutral, so during the settlement calculation period you need to reduce your spot hedge to 0.

ETC7D expires based on a 30-minute TWAP. BitMEX will take the spot prices on Poloniex each minute and compute an average, which then becomes the settlement price. To capture the unrealised profit of 0.03 XBT, you to sell ETC/XBT at the ETC7D settlement price.

Your trading program will split your spot hedge into 30 slices, or 10 ETC. Each minute you will sell 10 ETC at market to match the price used in the settlement calculation. Because the settlement calculation uses the last price each minute, you theoretically will match the settlement price.

Any difference between your sell trade executions and the prices used in the settlement calculation is called Slippage. In this example, if your Slippage is more than 0.50%, you will lose money. If you have 0% of Slippage you will earn the full unrealised profit.

In Lesson 2, I will explain how to calculate a Basis and Skew. These two variables tie in closely with inventory management.

If you wish to begin market making on BitMEX, please take a look at our sample market making bot on Github.

October 25, 2016 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Lisk (LSK)  + 6.197% 0.0002739 0.0002581
Factom (FCT)  + 2.317% 0.0042090 0.0040300
Augur (REP)  –  1.904% 0.0081573 0.0078500


LISK (LSK) News: 

cumulative list of all changes made to the Lisk core [Lisk Forum]

To trade LISK on BitMEX, please trade LSKXBT


Factom (FCT) News:

InsurTech Disruptors: Redefining an Industry [Money2020Europe]

To trade Factom on BitMEX, please trade FCTXBT

Augur (REP) News:

How Augur could recreate futures market [Cftc]

To trade Augur on BitMEX, please trade REP7D


The Guide to Zcash, The Digital Currency That Aims to Dethrone Bitcoin


Zcash is the most anticipated new digital currency of 2016. Zcash aims to create a form of electronic money that is truly a bearer instrument.

One impediment to Bitcoin’s use as electronic cash is that all transactions are viewable on the public blockchain. Bitcoin’s fungibility has become an issue as a result. Some people and businesses (mainly exchanges) will not accept Bitcoin if certain addresses touched or will touch those coins in the past or future. Transaction censorship goes against the core of values of Bitcoin.

Zcash is the latest coin that attempts to create a digital currency where no knowledge of the inputs or outputs of the cryptographic signature are require for verification. This is called a Zero-Knowledge Proof. DASH and Monero are two other digital currencies that attempt to solve the same problem using different cryptographic methods.

The hype surrounding Zcash is deafening. The Zcash development team is held in high regard. They have secured investment from notable Bitcoin venture capital firms such as Pantera, Fenbushi, and The Digital Currency Group. Bitcoin luminaries such as Roger Ver, Erik Voorhees, Barry Silbert, and Li Xiaolai have invested their personal capital. Conformational bias is important in evaluating why investors choose one project over another. If the leading figures of the Bitcoin industry are investing, it must be good, right?

Unfortunately Zcash is not holding an Initial Coin Offering (ICO) to distribute ZEC amongst investors. ZEC is the three character currency code for Zcash. ZEC will be distributed through mining rewards just like Bitcoin. Unlike Bitcoin that was an unknown and unproven concept when it launched, the genesis block of ZEC is highly anticipated. The short supply of ZEC paired against ravenous demand, has and will lead to a price spike.

Zcash Mining

A ZEC block is produced every 2.5 minutes and 12.5 ZEC are awarded to the miner who creates that block. Bitcoin currently produces blocks every 10 minutes, and the block reward is 12.5 BTC. The Zcash team opted for a “slow start” to the mining process. For the first 20,000 blocks (approximately 34 days), only 125,000 ZEC will be created vs. an expected 250,000 ZEC. That leads to an average 6.25 ZEC created per block.

On December 1, 2016, the block reward will revert to 12.5 ZEC per block. By January 1, 2017, the total supply will stand at approximately 348,200 ZEC.

The Zcash team took a total of $3 million worth of outside investment. In order to reward initial investors and pay for operational expenses, during the first 4 years 20% of all ZEC produced will go to the Zcash team and initial investors. The effective supply by January 1, 2017 will be 278,560 ZEC. I will use this as the total supply for the price predictions I will make.

Zcash Trading

BitMEX Zcash Futures ZECZ16
BitMEX ZECZ16 Orderbook, Chart, and Recent Trades

In order to provide price discovery on the future value of ZEC, BitMEX launched the first and only trading product on the ZEC/BTC exchange rate. The ZECZ16 futures contract expires on December 30, 2016 12:00 UTC based on that day’s exchange rate for immediate delivery.

ZECZ16 allows traders to go long or short ZEC with up to 2x leverage. The contract’s listing price on September 15, 2016 was 0.024790 BTC, and now trades at 0.195 BTC, a gain of almost 700%. During that period, 8,590 ZEC (1,675 BTC, $1.08 million) were traded.

The unique feature of ZECZ16 is that traders do not need to own ZEC to trade this futures contract. Using only Bitcoin, any trader can buy and sell ZEC using leverage. This is very important because it will be very difficult to buy, and and almost impossible to short physical ZEC due to the restricted supply. Many miners will not immediately sell the ZEC they produce in hopes of rapid price appreciation. That reduces the amount of ZEC publically available for sale.

The BitMEX ZECZ16 futures contract represents one of the easiest and most liquid ways for any investor to gain exposure to ZEC.

Zcash Future Price

If ZEC is a superior coin to DASH and Monero, then a portion of the funds invested in those two coins will shift to ZEC. The market capitalisation of DASH plus Monero is $154 million. Bitcoin’s market capitalisation is $10.31 billion. DASH + Monero’s market capitalisation is 1.50% of Bitcoin’s. The below table describes what the ZEC/USD price could be on January 1, 2017 depending on what percentage of DASH + XMR funds move into ZEC.


% of DASH + Monero ZEC/USD ZECZ16 % Difference from Current Price
10% $55 $126 -56.08%
25% $137 $126 +8.60%
75% $277 $126 +119.62%
100% $554 $126 +339.24%


Even a relatively small amount of money that chases the small supply of ZEC will lead to a price bubble. It is not inconceivable that ZEC touches price parity with Bitcoin in the near term. These economics are not lost on traders, and that is why the ZECZ16 contract is up over 700% since it’s launch in mid-September.

On Friday October 28, 2016, the genesis block will launch. Expect a frenzied scramble for any and all ZEC that becomes publically available for sale.

October 24, 2016 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
LISK (LSK)  – 3.826% 0.0003006 0.000252
Factom (FCT) + 2.618% 0.0042278 0.0038627
Ripple (XRP) + 2.618% 0.00001425 0.00001314

LISK (LSK) News: 

Community Meeting — October 28th, 2016 [ blog]

To trade LISK on BitMEX, please trade LSKXBT


Factom (FCT) News:

Factom Chairman on Bitcoin: “The Sooner We Fork The Better” [Cryptoncoins news]

To trade Factom on BitMEX, please trade FCTXBT


Ripple (XRP) News:

Global Banks Test Ripple’s Digital Currency in New Blockchain Trial [CoinDesk]

To trade Ripple on BitMEX, please trade XRP7D


October 21, 2016 BitMEX Report

Currency 24 Hour Return Day High Day Low
Lisk (LSK)  + 7.200% 0.0003079 0.0002824
Ripple (XRP)  + 5.119% 0.00001489 0.00001375
Monero (XMR)  + 4.803% 0.0114849 0.0090520

LISK (LSK) News: 

Lawsuit Against Lisk [Reddit]

To trade LISK on BitMEX, please trade LSKXBT


Ripple (XRP) News:

R3 Trials Interbank Cross-Border Payments With Ripples Digital Asset XRP [NEWSON6]

To trade Ripple on BitMEX, please trade XRP7D

Monero (XMR) News:

Darknet Marketplace Monero Market Goes Offline Until January 2017 [CryptoCoinsNews]

To trade Monero on BitMEX, please trade XMR7D


Can You Survive An Interest Rate Hike?

This week I attended a Bitcoin meet-up in Hong Kong where a serial Bitcoin / Blockchain angel investor gave a talk. His investment framework consisted of investing in companies that had low margins but could scale easily.

One audience member asked what he would do in a situation where margins went to zero or even negative. Many blockchain application businesses fall into this category. Part of his response was that due to quantitative easing (aka money printing) money was free, so investing in businesses with zero or negative gross margins can be done. If rates are more negative than the cash flow burn of the company, in our bizarro world that actually is outperforming.

I then followed up with a question on how his thesis would be impacted if interest rates rose. He responded that in the near future that wouldn’t happen, and even if it did policy makers would realise their errors and quickly revert back to printing gobs of money.

Whenever someone completely dismisses the possibility that a central tenet of their investment thesis cannot be invalidated, alarm bells ring. During the 2003 to 2007 US subprime housing bubble, the common refrain was that housing prices NEVER went down. By 2008, that central tenet of faith was proven grossly erroneous.

Central banks over the past 25 years have conditioned investors to expect lower interest rates every time there is a financial hiccup. In 1990 the US 10-Year Treasury Bond yielded 7.94%, today it yields 1.75%. The effect of falling interest rates has pushed investors further out on the risk curve to generate stable income.

Bitcoin / Blockchain startups primarily fund themselves by selling equity to investors, by issuing tokens through Initial Coin Offerings (ICO), or through retained earnings (assuming the company is profitable). Most startups in the early stages sell equity.

A Thought Experiment

Assume you are an angel investor and you share the worldview of the speaker I spoke about earlier. Essentially you invest in scalable Bitcoin / Blockchain businesses with the hope that a greater fool will emerge, allowing you to exit your investment. Remember it’s the 4th Industrial Revolution; you don’t want to miss out. You have a pool of capital that you will spread amongst various startups. Here are some assumptions about your investing strategy:

Initial post-money valuation: $5 million
Years to exit: 7

Your portfolio’s performance is benchmarked against owning high-yield US corporate bonds. While many think that money is “free”, it definitely is not unless you are an AAA-rated developed market corporation. Everyone else must pay to play.

I chose the BofA Merrill Lynch US High Yield Effective Yield as a proxy for what an investor can earn buying riskier corporate bonds. Investing in startups is infinitely riskier than buying high-yield corporate bonds, as these companies produce actual cash flow.

The Federal Reserve Bank of St. Louis publishes the historical effective annualised yield. The below table lists current and historical annualised yields for the index.

Annualised Yield 7-Year Compounded Return
Current 6.14% 51.76%
Minimum 5.16% 42.22%
Maximum 23.26% 332.27%
Average 9.28% 86.12%

The majority of the startups that you invest in will die within 7 years, and you will lose 100% of the money invested. A small percent will exit at a valuation that is multiples higher. Your performance depends on your ability to pick winners.

Break-even Success Rate = (1 + Opportunity Cost) / (1 + Exit Return)

Break-even Success Rate: The success rate at which you are indifferent to investing in startups vs. buying high-yield US corporate bonds

Success Rate: Defined as the % of startups in your portfolio that complete a successful exit

Opportunity Cost: The 7-year compounded return of the high-yield index

Exit Return: The return generated after the startup has completed an exit

Exit Return = (Initial Valuation / Final Valuation) – 1

The below table lists the Break-even Success Rate under different scenarios

Current Minimum Maximum Average
Avg Exit Valuation vs. High-Yield Returns 6.14% 5.16% 23.26% 9.28%
$50mm 15% 14% 43% 19%
$100mm 8% 7% 22% 9%
$250mm 3% 3% 9% 4%
$500mm 2% 1% 4% 2%
$1bn 1% 1% 2% 1%

It is hard to pin down the global average exit valuation for startups. From various articles I have read, startups on average exit with valuations between $50mm to $100mm. If we assume bond yields normalise near 10% per annum, 9% to 19% of your startup portfolio must successfully exit. Even in the current “low” interest rate rate environment, you still must be a very skilled investor to break-even (8% to 15% success rate).

Achieving a $50mm+ exit valuation is no easy task. Most likely after your angel / seed investment, the company will subsequently attempt to raise a Series A and then B to grow into a juicy acquisition target. Most likely after each round, your equity stake will be diluted.

The below table reproduces the Break-even Success Rate assuming each successful startup does two subsequent financing rounds and existing investors are diluted 20% in each round.

Current Minimum Maximum Average
Avg Exit Valuation vs. High-Yield Returns 6.14% 5.16% 23.26% 9.28%
$50mm 24% 22% 68% 29%
$100mm 12% 11% 34% 15%
$250mm 5% 4% 14% 6%
$500mm 2% 2% 7% 3%
$1bn 1% 1% 3% 1%

Instead of achieving a 9% to 19% success rate, you now must achieve a 15% to 29% success rate if interest rates normalise. Remember, you are only breaking-even. For all the hard work of identifying promising startups and mentoring them, you have not generated outsized returns. Wouldn’t it be much easier to log onto Interactive Brokers and buy a high-yield bond ETF?

Because you invest in companies with low to zero gross margins, your only hope is to pass the hot potato onto investors who are more risk seeking than yourself. You have no expectation of dividend income. As interest rates rise, the universe of assets that yield high returns with less risk grows. The pool of fools will decline, and your portfolio will struggle to break-even vs. investing in a basket of high-yield corporate bonds.

There are many Bitcoin / Blockchain businesses and business models that generate real revenue, and are defensible. One only has to look at Bitfinex to see how profitable a “properly” run Bitcoin exchange can be. For the full year 2015, Bitfinex generated US$7.03 million of Net Income on US$9.35 million of revenue.

Do The Twist

The BOJ was the first central bank to explicitly target a steeper yield curve. In a recent speech, Federal Reserve Governor Eric Rosengren stated that the Fed should engineer a steeper yield curve. Many financial analysts are calling this new form of yield curve targeting a “Reverse Operation Twist”. The original “Operation Twist” involved the Fed buying long-dated bonds and sellings short-dated ones in order to lower long-term interest rates.

Banks need a steep yield curve to make money. After printing money to stave off insolvency of commercial banks, central banks must now steepen the yield curve so that their stakeholders can return to profitability. The effects of a steeper yield curve are already working. JP Morgan, Bank of America Merrill Lynch, and Goldman Sachs have all reported impressive 3Q16 earnings.

As yields on the long-end rise, it will be easier to find positive yielding investments that are not as risky as punting startups that have no plan to ever generate a profit.

Fork Me Baby One More Time

The Ethereum Foundation successfully completed another hard fork of Ethereum (ETH) at block 2,463,000, which occurred Tuesday October 18, 2016. A second (well technically third) fork is due later this month. The original and “immutable” Ethereum Classic (ETC) chain is also due for a hard fork on October 25th.

What The Fork Is Going On?

Since September 18th, the Ethereum network has been constantly under attack by a person or group attempting denial of service (DoS) attacks on the Ethereum blockchain. This resulted in the network becoming “bloated” and filling up with a large number of pending transactions, increasing network confirmation times. They were able to achieve this by introducing an operation code (opcode). EXTCODESIDE opcode is the most well known, which caused miners and nodes to spend more energy processing the blocks than the reward they received.

Every operation that an Ethereum contract performs on the network pays a fee (called the gas fee). The attacker called the computationally expensive opcode, while paying low gas fees. Take a look at some of the transactionshere.

The introduction of Geth by the Ethereum Foundation is being hindered by the network bloat. That is why a hard fork was deemed necessary. This fork is known as the Ethereum Improvement Project 150 or EIP150. The next fork will attempt to remove empty accounts the attacker used to flood the network.

Since Ethereum Classic has the same code as Ethereum, the same attacks are happening. ETC devs have also introduced a fix, raising questions about the immutability of the chain and where the line in the sand is drawn for hard forks. Under what circumstances is a hard fork deemed necessary for a chain that markets itself as immutable?

What’s the point of the attacks? Is someone sending thousands and thousands of empty transactions, paying gas fees, just so they can get the Ethereum Foundation to enhance the network? Unless they intend to destroy the network (and fail to think the devs will fix it), then I think the below chart illustrates the main reason.

Both ETH and ETC have dropped more than 20% since the attacks started. Any shorts during this time have become extremely profitable, perhaps more so than the gas fees the attacker has been paying.

This presents an interesting opportunity. Let’s assume the attacks caused the price drop, and the subsequent forks fixed the underlying issues. This sets up ETH and ETC for a sharp move upwards.

Trade Idea: Go long ETH by buying ETHXBT; go short ETC by selling ETC7D. Hold the spread trade until the ETC hard fork on October 25th.

October 20, 2016 BitMEX Morning Report

Currency 24 Hour Return Day High Day Low
Ripple (XRP)  + 5.315% 0.00001398 0.00001293
Ethereum (ETH)   – 3.195% 0.01982 0.01885
LISK (LSK)  + 3.136% 0.000295 0.00027

Ripple (XRP) News:

Ripple CEO Suggests Next U.S. President Appoint a Fintech Advisor [Cryptocoins news]

To trade Ripple on BitMEX, please trade XRP7D

Ethereum (ETH) News:

Ethereum Forks But Blockchain Attacks Keep On Coming [CoinDesk]

To trade Ethereum on BitMEX, please trade ETHXBT

LISK (LSK) News: 

Lisk Propels Forward: Feature Interview with Co-Founder and CEO Max Kordek [BTCMANAGER]

To trade LISK on BitMEX, please trade LSKXBT