26. 01/07/2019 10:03
Bridging the Gap Between Bitcoin and Global Regulators

Shin’ichirio Matsuo is a research professor and the director of B-TED research center at Georgetown University. He is also a co-founder of the BSafe.network, a global blockchain research test network used by 31 universities.


Since 2015, when bitcoin became an issue for regulators like the state of New York, the regulation of cryptocurrency (the G20 now calls it as a crypto asset) has been discussed in many places, mainly at bodies like the Financial Stability Board (FSB) and the Financial Action Task Force (FATF).

However, Facebook’s Libra cryptocurrency has changed the landscape, ensuring a massive number of debates on regulation are likely ahead. To be sure, these debates will be about the size of companies specializing in internet technologies more than they are about technology architecture.

Yet, throughout the history of crypto asset and blockchain, regulators have been considered an enemy, even as most governments have sought new financial innovations based on the blockchain.

The main issue is, we still don’t have proper communication channels among stakeholders in this ecosystem. Regulators don’t have a functional language to talk with open-source engineers. Open-source engineers sometimes do not want to speak with regulators.

Business entities wish to use new and immature technologies by avoiding frictions with regulation. Citizens need transparency to business entities, but there are no standard criteria to ensure transparency of business. Generally (and I hope) regulators don’t want to discourage innovation, and open-source engineers don’t want to facilitate crimes. The goals of both are almost the same.

But, to make the situation more productive, we need to solve this communication problem. That is now beginning to happen.

Historical discussion at the G20

On June 8 and 9 of this year, the G20’s financial ministers and central bank governors met in Fukuoka, Japan, bringing together a group of 20 governments that discuss issues related to economics.

The FSB, FATF and the International Organization of Securities Commissions (IOSCO) are the organizations which form regulations under G20 leadership. Before the G20 financial track, the FSB published an insightful report titled “Decentralized financial technologies: Report on financial stability, regulatory and governance implications.”

This report emphasized the importance of multi-stakeholder discussions, and that regulations and laws are not an 100 percent perfect tool for forming a healthy ecosystem. It concluded contributions from all stakeholders, including open-source engineers, are essential.

On June 8, the G20 held “G20 High-level Seminar on Financial Innovation Our Future in the Digital Age” to discuss the issue of multi-stakeholder governance.

This was indeed the genesis block of discussions by different stakeholders, including Klas Knott, the vice-chair of FSB, Brad Karr, managing director of IIF (a world group of established banks), Adam Back, the famous cryptographer, Shinichiro Matsuo (myself) who represents neutral academia views, and Jun Murai (moderator), the famous “Internet Samurai” who developed the first-ever inter-university internet communications network in Japan.

All Panelists: Jun Murai, Adam Back, Brad Karr, Klas Knott, and Shin’ichiro Matsuo (from the left)

Knott firstly explained the FSB report and the views of his fellow regulators, including their regulatory goals. Karr went on to discuss many potential applications of decentralized finance, including financial inclusion. Back explained how blockchain technology is an excellent tool to achieve regulatory goals.

I discussed how multi-stakeholder discussion would facilitate healthy permissionless innovations in decentralized finance. We further agreed that the multi-stakeholder discussion is essential for decentralized finance to be made real.

As a result of this seminar and G20 discussion, the following historical sentence was written in the official communique.

“We welcome the FSB report on decentralized financial technologies, and the possible implications for financial stability, regulation and governance, and how regulators can enhance the dialogue with a wider group of stakeholders.”

What multi-stakeholder governance means

In general, governments tend to keep their right to control everything. The internet, which creates a global space of communication, was the first challenge to this order. Here, “global” is different from “international,” because it is independent from the nation.

The internet is also one of the most successful cases of multi-stakeholder governance.

Even in the case of the internet, the government tried to be the only entity of governance, but the effort failed; governments are one of the stakeholders of Internet Governance Forum (IGF) and Internet Corporation for Assigned Names and Numbers (ICANN).

This structure is an excellent foundation that facilitates a huge amount of permissionless innovation, but is also compliant with regulations. A similar situation will happen in finance, and this is the reason why the FSB and G20 are working toward the communique, through the involvement of multi-stakeholders might imply reducing their power of governance.

Here, stakeholders include open-source developers, regulators, business entities, consumers and academia, who are all seeking to solve the current chaos in terms of regulation and innovation in finance. I think it is good to start with have common understandings of regulatory goals; they are financial stability, consumer protection and preventing crimes.

Multi-stakeholder discussion on these goals will create healthier governance than regulation.

Academia facilitates the dialogue

Unfortunately, communications among stakeholders are not sufficient at this moment. However, we need more calm dialogue based on shared understandings and based on academically reviewed pieces of evidence.

One piece of good news is there are several existing initiatives which facilitate discussions among stakeholders. The Scaling Bitcoin workshop was established in 2015 to create a forum for technology discussions led by academics. Likewise, regulators today discuss their work with academics and economists.

Picture of G20 meets G-20 workshop in Vancouver

This in mind, I believe academia can serve as a good trust anchor and neutral foundation to connect all stakeholder in one place.

A group of universities (currently 31 universities from 14 countries) called BSafe.network has started a new initiative to facilitate multi-stakeholder discussions based on its global neutrality. Right after the G20 financial track meeting, BSafe.network held a multi-stakeholder workshop “G20 meets G-20” with the University of British Columbia.  It was the first event of a preliminary series of multi-stakeholder discussions.

A similar workshop, “Decentralized Financial Architecture Workshop,” will be co-located with Scaling Bitcoin 2019 Tel-Aviv, and we hope to see real engagement between regulators and bitcoin engineers.

Observing the current debates on Facebook’s Libra, I conclude we need more moderated and academia-backed discussions to make innovations healthier. The fact is, the Libra Association does not explain how their architecture achieves regulatory goals. Common understandings on regulatory goals and architecture among all stakeholders are essential to start a regulation discussion.

This is a good test case to apply the multi-stakeholder governance.

It may be more difficult than the case of internet governance to establish a formal body for multi-stakeholder discussion on finance. It might take more than a year. However, I believe the historical message triggered by the G20 and a series of workshops will open the door to a new era of a healthy blockchain ecosystem.

27. 30/06/2019 00:21
Bitcoin Heading for Fifth Month of Gains Despite Price Correction

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  • Bitcoin is still on track to close with gains for the fifth straight month, despite having witnessed a double-digit technical correction in the last 36 hours.
  • The hourly chart shows the pullback has ended and prices could revisit recent highs over the weekend.
  • With a reward halving due in May 2020 and increased institutional participation, prices could rise further in the second half of this year.
  • A break below the May 30 high of $9,097 would invalidate the bullish outlook as per the daily chart.

While bitcoin’s price has witnessed a double-digit correction in the last 36 hours, the cryptocurrency is still on track to end in the green for the fifth consecutive month.

The price of a single bitcoin fell to $10,300 on Bitstamp yesterday, retracing 55 percent of the rally from the June 4 low of $7,432 to the June 26 high of $13,880.

As of writing, BTC is changing hands at $11,800, down 15 percent from recent highs. However, despite the correction, the top cryptocurrency is still up 38 percent from its June 1 opening price of $8,546.

With the monthly close just two days away and technical studies reporting bullish conditions, BTC is likely to end June on a positive note.

The resulting five-month winning run will be the longest since August 2017, as seen in the chart below.

Monthly chart

  • Bitcoin is flashing green for the fifth month straight, having rallied by 11, 8, 28, and 62 percent in February, March, April and May, respectively.
  • A similar winning streak was observed in five months to August 2017.
  • The cryptocurrency appears on track to log double-digit price gains for the third consecutive month – the first such run since the final quarter of 2017.
  • What’s more, bitcoin is set to post a record second-quarter gain of over 180 percent, as discussed earlier this week.

The stellar run could be extended in the second half of this year, as the cryptocurrency is set to undergo a mining reward halving sometime in May 2020.

Further, some observers including Anthony Popliano, co-founder and partner of Morgan Creek Digital, believe the rally seen in the first half was backed by institutional money and the inflows may rise further in the future, thus keeping BTC better bid.

Meanwhile, Marc Bhargava of tagomi.com, the first electronic prime brokerage in cryptocurrency markets, believes this year’s rally is the product of both retail and institutional money.

While talking to CoinDeskLIVE, Bhargava said the 2017 rally was almost entirely driven by retail money, while the one seen this year has been more balanced, with an approximately 80:20 ratio of retail to institutional money.

Bhargava, however, cited low trading volumes as a cause for concern and stressed the need for increased adoption by large asset managers for further price gains.

That said, there seems to be a consensus in the market that Facebook’s Libra cryptocurrency will end up boosting bitcoin’s appeal as an anti-establishment asset and thus its adoption rate.

All-in-all, the macros seem aligned in favor of the continuation of the price rise in the second half of this year. The long-term technical charts are also flashing bullish signals.

Meanwhile, the intraday charts indicate the pullback has ended and recent highs could come into play over the weekend.

Hourly and daily charts

The hourly chart (above left) shows that the relative strength index (RSI) has breached the descending trendline, invalidating the bearish divergence (lower-highs pattern) established earlier this week.

Further, the chart is reporting a bearish channel breakout. As a result, BTC could rise back to levels above $13,000 over the weekend.

Supporting the bullish case is that the cryptocurrency repeatedly bounced from the bullish (ascending) 10-day moving average on the daily chart (above right).

The outlook on that time frame will remain bullish as long as the price is held above the May 30 high of $9,097.

Weekly and monthly charts

Prices may come under pressure next month as the weekly RSI (above left) is reporting extreme overbought conditions, with the highest reading since January 2018.

Any price dip, however, will likely be short-lived, as a channel breakout and a bullish crossover of the 5- and 10-month MAs on the monthly chart (above right) may to have opened the doors for a rally to record highs above $20,000.

28. 28/06/2019 00:19
Bitcoin Drops Below $12K After Biggest Daily Price Move Since January 2018

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  • Bitcoin’s price volatility, as represented by the daily trading range, jumped to a 17-month high on Wednesday.
  • The cryptocurrency has dropped from $13,880 to $11,200 in the last 15 hours and could slide further to $10,000, according to the bearish setup on the hourly chart.
  • A possible falling channel breakout on the hourly chart would open the doors to a retest of Wednesday’s high of $13,880.
  • The outlook on the long duration charts remains bullish.

Bitcoin is witnessing a technical correction a day after printing the biggest one-day trading range since January 2018.

The leading cryptocurrency by market value is currently trading at $11,780, representing a 15 percent drop from the 17-month high of $13,880 hit on Wednesday.

The double-digit pullback has come after a near 90-degree price rise from $7,500 to $13,800 in the 17 days to June 26 and looks like nothing more than a technical correction.

After all, indicators were flashing extremely overbought conditions 24-hours ago. For instance, the widely tracked 14-week relative strength index was hovering at levels last seen in January 2018, as discussed yesterday.

However, despite the pullback, BTC is still up 183 percent on a quarter-to-date basis, its best three-month performance since the final quarter of 2017.

What’s even more notable is that the magnitude of the daily price moves is reminiscent of the cryptocurrency market frenzy of January 2018.

The spread between the daily price high and low was $2,041 on Wednesday – the highest since Jan. 17, 2018. Back then, BTC witnessed a trading range of $2,275 with prices printing a high and low of $11,678 and $9,402, respectively, according to data source CoinMarketCap.

 

  • The daily trading range has jumped above $2,000 for the first time in over 17 months.
  • The $4,110 spread seen on Dec. 22, 2017, is the highest to date.
  • The average daily trading range of $358 seen so far this quarter marks a 311-percent rise on the average daily range of $87 seen in Q1.

Volatility, as represented by daily price range, has surged in the second quarter and may remain high in coming months, with experts predicting a parabolic rise to fresh record highs over $20,000.

Bitcoin, however, may witness a deeper short-term correction in the next day or two, according to the intraday charts.

Hourly chart

The cryptocurrency has established a bearish lower-highs and lower-lows pattern (falling channel) in the last 24 hours on the back of growing sell volumes (red bars).

Further, the relative strength index (RSI) is now reporting bearish conditions with a below-50 print.

Supporting the case for a deeper correction is the violation of the 50-hour moving average support. Throughout the recent rally from $7,500 to $13,800, dips to or below the 50-hour MA ended up reversing the pullback with a move to fresh multi-month highs.

BTC, therefore, could penetrate the support at $11,247 (horizontal line) and slide toward $10,300–$10,000.

A drop below $11,247, however, may remain elusive if the price breaks higher from the falling channel, in which case a retest of $13,800 could be seen.

It is worth noting that a deeper pullback to $10,000, if any, will likely be transient, as the long duration charts are still biased bullish.

Daily and monthly charts

The bullish higher-lows and higher-highs structure is intact on both the daily and weekly charts.

The 5- and 10-day MAs continue to trend north, indicating a bullish setup, and could restrict losses. The averages are currently located at $11,666 and $10,713.

Both the falling channel breakout and the bullish crossover of the 5- and 10-month MAs also indicate the path of least resistance is to the higher side.

29. 27/06/2019 10:55
Bitcoin’s Price Is Up 43% in 7 Days as Bull Frenzy Grips Market
  • With bitcoin’s rise to 17-month highs, the Mayer multiple (a ratio of price to the 200-day moving average) is teasing a break above 2.40 – a level that has marked the beginning of speculative bubbles in the past.
  • BTC may see a short-lived spike to resistances at $17,230 (January 2018 high) and possibly to $20,000 (record high) if the Mayer multiple finds acceptance above 2.40.
  • The hourly chart is flashing signs of buyer exhaustion, however, so a correction to $11,000 cannot be ruled out.
  • A UTC close below the May 31 high of $9,097 would abort the bullish view.

Bitcoin’s (BTC) surging price over the last week is reminiscent of the bull market frenzy observed a year and a half ago.

The leading cryptocurrency by market value rose to a 17-month high of $12,936 on Bitstamp earlier today. At that price, the cryptocurrency was up $3,900 from the level of $9,036 seen a week ago.

Notably, with the near 90-degree rally to 17-month highs, the ratio of bitcoin’s price to the 200-day price average – known as Mayer multiple – printed a high of 2.42, a level which was last seen in early January 2018.

The Mayer multiple essentially quantifies the spread between the price and the 200-day MA. An above-1.0 ratio indicates BTC is in bull market territory above the 200-day MA, while a reading below one implies the cryptocurrency is in a bear market below the 200-day MA.

That said, over the years it has been observed that a reading above 2.4 signifies the beginning of a temporary speculative bubble – a self-feeding cycle of higher prices attracting more bids, leading to further rally.

Daily chart

The Mayer multiple rose above 2.4 on Mar. 4, 2013, when the price was trading at $36.00, representing 176 percent gains over lows near $13 seen in December 2012. More importantly, the cryptocurrency rallied more than 600 percent to $259 in the following four weeks before falling all the way back to $45 on April 12.

Further, prices rose from $11,000 to $20,000 in 16 days following the ratio’s rise above 2.4 percent on Dec. 1, 2018. Again, the bubble was short-lived, with prices falling to $12,000 on Dec. 22.

On similar lines, BTC had gone ballistic, rallying by more than 300 percent to $1,163 in three weeks following the Mayer multiple’s move above 2.40 on Nov. 7, 2013. By Dec. 18, however, the price was trading at lows near $350.

So, if history is a guide, then the fear of missing out may kick in once the Mayer multiple finds acceptance above 2.40, leading to further price rise toward the record high of $20,000.

As of writing, bitcoin is trading at $12,521, representing 10 percent gains on a 24-hour basis. Meanwhile, the Mayer multiple is seen at 2.40.

The cryptocurrency has pulled back from 17-month highs hit earlier today, leaving signs of bullish exhaustion on the short duration chart.

Hourly chart

Bitcoin created a doji candle with a long upper shadow earlier today. The doji candle – a sign of bull indecision or exhaustion – is backed by highest sell volume (marked by arrow) since June 6.

Such candles often mark a local top, according to Alex Kruger, a prominent fundamental and technical analyst.

As a result, a deeper pullback, possibly to the psychological support of $11,000 cannot be ruled out – more so, as a widely followed long-term indicator is reporting extreme overbought conditions.

Weekly RSI

The 14-week relative strength index (RSI) is currently hovering above 81.00, the highest level since mid-December 2017.

While the case for a minor pullback is looking strong, the overall outlook will remain bullish as long as the price is held above the May 31 high of $9,097 and the cryptocurrency could chart another meteoric rise toward $20,000 if the Mayer multiple rises above 2.40.

30. 26/06/2019 09:17
Wait for October: New Bitcoin Miner Demand Is Again Outstripping Supply

Bitcoin’s ongoing bull run has juiced demand for new mining equipment, putting pressure on manufacturers to produce enough machines to satiate buyers.

The world’s largest cryptocurrency by market cap is currently trading at above $11,000 after it surpassed the $10,000 level over the weekend – a nearly 200 percent jump since February. 

“The surge in bitcoin resulted in increased demand and supplies were already short,” said Steven Mosher, head of global sales and marketing at Canaan Creative, maker of the Avalon miner.

While he declined to disclose the firm’s order volume, Mosher said in an email that “the current state of the industry is that inventories are down and demand is high.” 

He told CoinDesk:

“It looks like a return to the 2017 Q3, Q4 conditions, where demand was three times the supply.”

Back then, bitcoin’s price had doubled from July to September in 2017 and further jumped by four times in the last quarter, reaching almost $20,000. 

The price increase over the past several months also led to a significant drop of the time it takes for new mining equipment to pay for itself, according to data provided by TokenInsight, a crypto startup that focuses on mining and trading research.

The firm estimates the average payback period for most mining equipment in the second quarter has dropped to 60 to 150 days, a notable decrease from the previous range of 120 to 280 days.

New models

To capture the new opportunities, Canaan launched a new mining model last month, the AvalonMiner 1041, which it claims can compute as much as 37 terahashes per second (TH/s) with electricity consumption at 2,361 watts per hour. 

By comparison, an older model, the Avalon 851, performs its calculations at a speed of around 14.5Th/s, consuming 1450 watts an hour.

Mosher added that pre-orders for such models are already queued up to as late as October delivery, due to the bulk of buying interest coming from larger customers. 

Similarly, crypto mining giant Bitmain rolled out for sale improved versions of its AntMiner S9 model, dubbed AntMiner S9 SE and S9k just last week. Shipment of the first batch won’t be scheduled until August, according to the firm’s website.

Even more expensive and powerful products, such as the WhatsMiner M20, launched by ex-Bitmain chip design director Zuoxing Yang, are seeing an increasing level of buying interest.

Yang told CoinDesk that the next batch of M20s, which are scheduled for shipment as late as October, is “almost sold out” at the moment. 

But Yang added another important reason why the industry’s supply is having difficulty catching up with the demand is production capacity due to the limited supply of chips from various vendors to begin with.

“Bitcoin’s hash rate increase just can’t keep up with the pace of the price jump,” Yang said. “Production capacity is the bottleneck.”

Hash rate boost

Indeed, the resurgence of mining interest is also reflected in the overall amount of computing power devoted to securing the bitcoin network, which recently hit an all-time high.

Based on data from mining pool BTC.com, the latest one day and seven-day average hash rates are at 65 million TH/s and 58 million TH/s, respectively. 

This aggregated computing power has jumped by about 80 percent since late last year when the 14-day average bitcoin mining hash rate dropped to as low as 36 million TH/s amid bitcoin’s price decline.

Assuming all such additional computing power has come from more widely used mining models like the AntMiner S9 or Avalon 851 with an average hashing power of about 14 TH/s, that would translate to roughly 2 million mining units having been switched on over the past few months.

As a result, BTC.com estimates that bitcoin mining difficulty – a measure of how hard it is to solve the math problems that earn new coins – will further increase by six percent at the beginning of the next adjustment cycle to an all-time-high level above 7.8 trillion.