Category Archives: Cryptocurrency

FBG: 10X within 1 Year

Source: Forbes, Aug 2018

To the crowd assembled, FBG’s fame stems from turning $20 million into $200 million in a year.

FBG’s approach has three pillars: Invest like a venture capitalist in initial coin offerings (ICOs), trade on news and events by moving in and out of tokens rapidly and, critically, exploit insider relationships and marketing hype to ensure profitability. The firm’s rise speaks volumes about the anything-goes world of cryptocurrencies, where the stated ideals of democratization are a joke and being an insider is the surest path to riches.

Like other big investors in crypto, FBG is offered “presale” discounts on ICOs to the tune of 30%.

According to Zhou, trading makes up more than half FBG’s revenue, but as the crypto trading environment has become more transparent and efficient, the firm has moved from arbitraging crypto exchange- price discrepancies to event-driven trading, in which FBG bets on how topics like regulatory news will affect crypto prices. For example, when the CME Group announced it would launch bitcoin futures contracts last December, Zhou went long on the bitcoin uptick. When news broke that the Japanese exchange Coincheck had been hacked earlier this year, he quickly went short. In 2017, FBG says it quadrupled its money in trading.

Not all of FBG tactics seem completely aboveboard. One little-publicized investing dynamic that FBG’s executives gloss over is its relationships with cryptocurrency exchanges, the crypto equivalent of the NYSE or Nasdaq. Typically, when a new token announces its listing on a top exchange, the price jumps because the new liquidity is perceived as an endorsement. Zhou has cozy relationships with the three most active crypto exchanges: OKEx, Binance and Huobi, each processing $500 million to $1 billion or more in crypto trades a day. Using these connections, FBG has helped ICOs it has invested in, like Zilliqa, obtain listings on the exchanges.

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ETH Pre-Sale’s Unusual Sale Pattern

Source: Medium, Apr 2018

The chart looks very smooth, almost too perfect for an uncoordinated effort of several thousand contributions over two weeks, especially compared to charts from other fundraisers like KickstarterSwarm or Tezos ICO.

Tezos’s Chart

Bitcoin & Ethereum Comparison

Source: CryptoGround, Jul 2018
<see source for details>

  1. Bitcoin vs Ethereum: Understanding the Concept
    1. Understanding Bitcoin
    2. Understanding Ethereum
  2. Bitcoin vs Ethereum: Coin Limit
  3. Bitcoin vs Ethereum: Price and Market Cap Comparison
    1. Price Analysis
    2. Market Capitalization
  4. Bitcoin vs Ethereum: Understanding the Mining Mechanism
  5. Bitcoin vs Ethereum: Dealing With Scalability Issues
  6. Can Ethereum Overtake Bitcoin?
  7. Conclusion

Bitcoin Crashes

Source: Quora, Jul 2018

BIS: Cryptocurrencies

Source: Bank of International Settlements, Jun 2018
<GREAT READ!>

The money flower distinguishes four key properties of moneys:

  1. the issuer,
  2. the form,
  3. the degree of accessibility and
  4. the payment transfer mechanism.

The issuer can be a central bank, a bank or nobody, as was the case when money took the form of a commodity.

Its form can be physical, eg a metal coin or paper banknote, or digital.

It can be widely accessible, like commercial bank deposits, or narrowly so, like central bank reserves.

A last property regards the transfer mechanism, which can be either peer-to-peer, or through a central intermediary, as for deposits. Money is typically based on one of two basic technologies: so called “tokens” or accounts. Token-based money, for example banknotes or physical coins, can be exchanged in peer-to-peer settings, but such exchange relies critically on the payee’s ability to verify the validity of the payment object – with cash, the worry is counterfeiting. By contrast, systems based on account money depend fundamentally on the ability to verify the identity of the account holder.

Cryptocurrencies: Looking Beyond the Hype

  • Cryptocurrency technology comes with poor efficiency and vast energy use.
  • Cryptocurrencies cannot scale with transaction demand, are prone to congestion and greatly fluctuate in value.
  • Overall, the decentralised technology of cryptocurrencies, however sophisticated, is a poor substitute for the solid institutional backing of money.

 

Tether Drives (up to 50%) of BTC’s Rise

Source: UT Austin, Jun 2018

This paper investigates whether Tether, a digital currency pegged to U.S. dollars, influences Bitcoin and other cryptocurrency prices during the recent boom.

Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.

The flow clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests incomplete Tether backing before month-ends. These patterns cannot be explained by investor demand proxies but are most consistent with the supply-based hypothesis where Tether is used to provide price support and manipulate cryptocurrency prices.

Related Reading: TrustNodes, Jun 2018

“From March 1, 2017 to March 31, 2018, the actual Bitcoin price rises from around $1190 to $7000 for a 488% return. In contrast, the price series without the 87 Tether-related hours ends at around $4100, a 245% rise.

Hence, the hours with the strongest lagged Tether flow, which account for less than 1% of the time-series, seem associated with 50% of the Bitcoin buy-and-hold return over the period,” they say.

The study finds significant correlations between tether printing and bitcoin’s price rise, with the authors arguing it applies more widely to other cryptos:

“The percentage of the buy-and-hold return that are attributable to the Tether-related hours range from 42% for Dash to 82% for Zcash.

Ethereum, for example, experienced near 2400% return during this period, while it would alternatively experience around 900% return if the Tether-related hours were excluded. Across the six other crypto currencies, returns are 64% smaller on average when removing the 87 Tether-related flow hours.”

There has been suspicion for some time that Tether was propping up bitcoin’s price with CFTC opening an investigation in January.  In March, however, they printed out 300 million USDT and in May printed out another 250 million.

Bloomberg, Jun 2018

Griffin’s paper describes several patterns uncovered in a yearlong period. First it found that flows weren’t symmetric. When Bitcoin’s price fell, purchases with Tether tended to increase, helping to reverse the decline. But during times when Bitcoin rose, Griffin said he didn’t see the reverse occur. That’s “suggestive of Tether being used to protect Bitcoin prices during downturns,” he wrote.

Price Thresholds
He zeroed in on 87 of the largest purchases of Bitcoin with Tether from March 2017 to March 2018. In the cases examined, new Tether had been issued within the prior three days, and Bitcoin’s price had fallen in the prior hour. What followed were increases in Bitcoin’s price — and those gains added up.

Even though the 87 examples account for less than 1 percent of the time period examined, they amounted to about 50 percent of Bitcoin’s compounded return over that year. In comparison, 10,000 simulations Griffin and Shams ran demonstrated “that this behavior never occurs randomly,” they wrote.

Griffin said one of the most notable trends he saw in the data was when Bitcoin traded near certain price thresholds, denominated in $500 increments.

Bitcoin purchases with Tether “strongly increase just below multiples of 500. This pattern is only present in periods following printing of Tether and not observed by other exchanges,” he wrote in the paper. To other investors, it gives the impression of a “price floor,” providing a signal for them to buy as well.

 

‘Bitcoin whales’ control third of market with $37.5bn holdings

Source: FT, Jun 2018

A mysterious cluster of 1,600 investors known colloquially as “bitcoin whales” collectively hold $37.5bn of the cryptocurrency, or close to a third of the available total, revealing the extent to which wealth is concentrated in the nascent market.

Data from Chainalysis, a blockchain research company, seen by the Financial Times showed that in April this year, there were some 1,600 bitcoin “wallets” — the digital stores held by individual users — containing at least 1,000 bitcoin each.

Just under 100 wallets contained between 10,000 and 100,000 bitcoin, roughly worth between $75m and $750m at today’s prices.

That the bitcoin market is so tightly held stands at odds with bitcoin’s mission to democratise finance by setting up an alternative monetary systemfree of central bank control and open to all. It also brings risks for smaller speculators.

“This concentration of wealth means that bitcoin is at risk of volatility, as the moves of a small number of people will have a large effect (on the price),” said Philip Gradwell, Chainalysis’ chief economist.

Last November, the amount of bitcoin owned by those who held the asset for more than a year was roughly three times that held by short-term investors who traded more recently.

However, by April 2018, the data showed the amount held by long-term investors, at about 6m bitcoin, was much closer to matching the amount held by short-term speculators, with 5.1m bitcoin.

Chainalysis estimated that many longer-term holders sold at least $30bn worth of bitcoin to new speculators over the December to April period, with half of this movement taking place in December alone.

Experts also warn there are opportunities particularly for larger players to engage in market manipulation owing to the lack of regulation and the existence of informal over-the-counter markets.

“A number of these larger holders do communicate with each other, they know [each other], they take stock of market activity,” said Dr Garrick Hileman, head of research at Blockchain and co-founder of Mosaic.io, a platform for market intelligence on crypto.

Hannah Murphy FT FT2 hours ago

@Dr Phil Hi Dr Phil, this data does not include the wallets that are run by crypto exchanges. Chainalysis estimates groups such as exchanges or merchant services held about 2.2m bitcoin in April.