Bitcoin Futures Market Bakkt Makes Its First Acquisition

Bakkt may not be able to launch its planned bitcoin futures exchange this month as planned, but that isn’t stopping the company from developing its projects. CEO Kelly Loeffler announced Monday that the New York Stock Exchange–backed startup was acquiring “certain assets” belonging to Rosenthal Collins Group (RCG), an independent futures commission merchant. RCG had previously announced it was selling its customer accounts and brokerage business to British firm Marex Spectron. Bakkt previously announced it had raised nearly $183 million in a funding round, with the funds intended to building up the exchange’s infrastructure. The acquisition will help Bakkt improve its risk management and treasury operations, Loeffler wrote, adding that the deal will also help improve Bakkt’s anti-money laundering/know-your-customer operations. The transaction is expected to be finalized next month. Referencing a regulatory delay in launching the company’s anticipated futures exchange, Loeffler added:
“This acquisition underlines the fact we’re not standing still as we await regulatory approval by the CFTC for the launch of regulated trading in our crypto markets. Our mission requires significant investment in technology to establish an innovative platform, as well as financial market expertise to deliver the most trusted fintech ecosystem for digital assets.”
Bakkt previously announced it intention to launch its futures exchange on Jan. 24, 2019. However, the company is still waiting on approval through the Commodity Futures Trading Commission, as it intends to custody bitcoin for clients in its own “warehouse.” The CFTC must first start a 30-day comment period, allowing the general public to weigh in on the proposal, which the regulator has yet to do. This means that Bakkt will not be able to launch on Jan. 24. Loeffler’s latest announcement did not include a revised estimated launch date. Source: www.coindesk.com

The Case for a 2020 Bitcoin Bull Run

Christopher Brookins is the founder of Pugilist Ventures, a quantitative crypto fund founded out of Carnegie Mellon. ————————————————————————————————

Since the end of 2018, price action has been demonstrably negative, which surprised many expecting the end of Q4 historical “pump” in prices.

The price plummet appears largely driven by negative sentiment and swathes of selling pressure after the 2018 support level of $6,000 finally broke (dashed black line). This selling pressure kept prices well into the oversold range (using RSI and SWTO) for several weeks.

Only recently, has price begun to rebound. Even so, RSI and SWTO are still trending downward (black arrows), which may point to further price weakness at the beginning of Q1 2019 while bitcoin searches for a sustainable bottom.

Charts via Tradingview.com

Volatility ≠ Price Growth

As mentioned prior, many market commentators and participants assumed, incorrectly, that Q4 was always a strong period for market price growth, specifically from mid-November to the end of December. However, what many viewed as historically consistent price growth during this period, was in fact historically consistent volatility growth.

The graphic below shows historical daily volatility trends of bitcoin on a yearly basis since 2013. Thus, the supposition that many bulls were wrongly betting on was that higher volatility always equates to higher prices.

*Gdax/Coinbase Pro

As the volatility chart illustrates, the volatility trends of BTC, since 2013, do follow predictable patterns, culminating in higher volatility during Q4. This dynamic unfolded again in 2018 as price volatility compressed from October to mid-November (black lines), which typically precedes a breakout in price action. However, this time, volatility broke out to the downside for bitcoin.

After analyzing the overall trend in 2018 (demonstrably bearish), price volatility compression, historical volatility patterns, and fundamental indicators, it should have been more clear to market participants that the probability of a negative price breakout was far higher than to the upside.

Fundamental Indicators

Fundamental indicators can be quite useful for ascertaining a “narrative” of price movements and patterns, as long as the narrative is rooted in non-subjective data exploration. However, given the small sample size of bitcoin market cycles (n=10), each indicators output and predictive ability should be taken with a “grain of salt”.

Nic Carter from Castle Island Ventures / CoinMetrics and Antoine Le Calvez from Blockchain.info recently pioneered a new concept called realized cap (capitalization). The differentiation between realized cap and market cap being “instead of counting all of the mined coins at equal, current price, the UTXOs are aggregated and assigned a price based on the BTC/USD market price at the time when said UTXOs last moved.”

David Puell and Murad Mahmudov do an excellent job explaining these terms and significance further in their article.

Using data from CoinMetrics, the significance of realized cap compared to market cap can be visualized quite dramatically, albeit via a small sample size. The crossover points between market cap and realized cap can be viewed almost similar to golden crosses, whereby market cap breaching above realized cap is a re-ignition of a bull cycle, while a cross beneath may indicate the final stretch of a bear cycle. Beyond the aforementioned, this comparison offers lessons which may bear out or “repeat” in 2019.

Looking at the graphic, market cap went beneath realized cap on December 28, 2014, and stayed beneath realized cap until October 28, 2015, which coincides with the data-validated, high volatility period for bitcoin.

In this case, volatility coincided with price growth for bitcoin and kicked off the start of an amazing two-year bull run for bitcoin. This time around, market cap fell beneath realized cap on November 20, 2018. So, if history repeats itself (which is a tepid assertion), an investor might expect further price declines in 2019 followed by sideways trading, until a reignition of a new bull cycle at the end of Q4 2019 (November to December 2019).

Correlation to Δprice of 0.19

Additionally, using realized cap, an additional ratio or oscillator can be created that further explains bitcoin’s market cycles, market cap to realized cap (MVRM). The MVRM provides a useful indicator that visualizes the above dynamic via one ratio.

For example, historically, a value beneath 1.0 is undervalued while a value above 3.0 is overvalued; and above 4.0 is a negative inflection for prices. Currently, MVRM is 0.82 and the all-time low is 0.56. So, despite bitcoin being in undervalued territory, MVRM still possibly has further room to fall, which is consistent with the end of Q4 2019 narrative.

Further support of the significance of MVRM for price movements can be seen by the correlation between price and MVRM of 0.19, and correlation between price and MVRM of 0.98, which is extraordinarily high.

*coinmetrics.io

Network transaction volume to active addresses ratio (TAAR)

This ratio acts as an “equilibrium” gauge of bitcoin’s price to fundamentals valuation, where transaction volume and active addresses both represent “quantity and quality” growth of the bitcoin network; validated by 0.15 and 0.07 correlation between price, respectively.

For example, when TAAR and price are closely distributed, price (valuation) and fundamentals are aligned in equilibrium; and when either TAAR or price deviate substantially from each other, price is out of equilibrium which has historically resulted in price devaluation (albeit small sample size). The market’s recent selloff has helped reduce the gap between price and TAAR, which has persisted since Q4 2017.

Correlation to Δprice of 0.13

The 30 day moving average of TAAR is ~$2500 while TAAR daily is ~$2000, thus an “equilibrium” range for price appears between $2,000 and $3,000. *Note: prices seldom mean revert directly to their equilibrium level, they typically over-correct, which makes further price depreciation beyond the stated levels possible. Additionally, as can be seen on the logarithmic chart, price has bounced off TAAR’s 30-day MA twice in 2018 (black boxes), and has most recently rebounded momentarily.

The final price flush before finding a stable bottom will likely coincide with price falling beneath the TAAR 30 day MA, price recovering that level, and then TAAR beginning to trend upward once more.

*coinmetrics.io

Similar to MVRM, the TAAR to price ratio is an oscillator that visualizes the same dynamic via one ratio. Historically, a ratio of 1.5 and above is undervalued, 1.0 to 2.0 is “safe”, and beneath 1.0 (“equilibrium”) is overvalued. Currently, the oscillator is ~0.70 which still indicates overvaluation, but the overall trend back towards 1.0 is positive.

*coinmetrics.io

Conclusion

While the recent price action for bitcoin has been harshly negative, these market clearing events have begun the normalization process for bitcoin’s price valuation, which can be seen in several indicators. Per the MVRM analysis above, if history repeats itself, price will likely fall further, then trade sideways until the end of Q4, then reignite a new bull market.

An additional verification of this narrative will be if the TAAR to price oscillator enters undervalued territory above 1.50 in 2019, especially, prior to Q4.

*Disclaimer: this article is for educational purposes only and should not be considered investment or trading advice.   Source: www.coindesk.com

Tim Draper Invests $1.25 Million in Bitcoin Payments Processor OpenNode

U.S.-based venture capitalist Tim Draper has invested $1.25 million in OpenNode, a bitcoin-only payments processing startup. Announcing the seed round on Tuesday, OpenNode told CoinDesk that the raised funds will be used to expand its team and beef up its legal and compliance efforts. The firm claims to process “instant” and “risk-free” bitcoin payments for businesses, generating revenue by charging a 1 percent for transactions. OpenNode taps the lightning network – effectively a transacting layer on top of bitcoin – which is being developed in an effort to enable faster and cheaper transactions that can net-settle to the bitcoin blockchain. OpenNode said in a statement that since the start of its platform, the capacity of the lightning network has grown over 15,000 percent to 456 bitcoin or BTC. “We’ll continue to tackle new emerging markets where the lightning network can cut costs, promote creative payment models, and refine the current user experience with payments,” an OpenNode spokesperson told CoinDesk. Draper, the founding partner of Draper Associates and Draper Fisher Jurvetson (DFJ) Venture Capital, is an early blockchain investor and has backed several startups in the space. Back in 2016, he led a $4.2 million series A funding round in Texas-based company Factom, aimed at building a number of new products for its blockchain data network. Draper also participated in a total $760,000 investment round of bitcoin payroll startup Bitwage in 2015, and a smart contract trading platform called Mirror’s $8.8 million Series A financing in the same year. Source: www.coindesk.com

Blockstream Boosts Bitcoin Satellite Service With Lightning Payments

Bitcoin users’ ability to send transactions through outer space has just been given a boost. Blockchain technology firm Blockstream announced Monday that it has expanded its satellite service to the Asia-Pacific region. It’s also added support for lightning network transactions, allowing users to pay for its service using the “layer 2” scaling solution. The company first launched Blockstream Satellite in August 2017, which lets bitcoin users transfer bitcoin through leased satellites. Initially, users in Africa, Europe and the Americas were able to utilize the system. At the time, CEO Adam Back said the service was aimed at individuals with limited internet access or who otherwise face issues accessing bitcoin. In the months since launch, response to the service has been positive, he told CoinDesk Monday. “There are third-party developers that have taken an interest to build local infrastructure using the satellite service, for example connecting it with mesh networks to make bitcoin more accessible in emerging markets,” Back said, regarding applications using the service. The addition of an API integrating the lightning network apparently came after users expressed interest in sending bitcoin-related data. Back said:
“Lightning adds privacy due to its use of onion routing, and off-chain netting; and lightning better supports micropayments that are lower transaction cost, faster and more scalable. These are advantages for retail and web API use-cases generally, and help make the satellite data API service efficient and connect in with other bitcoin-related infrastructure.”
Back was unable to share any user statistics, due to the fact that Blockstream Satellite uses passive receiver technology. To use the service, users need a small satellite dish – TV satellite receivers work fine – that’s connected by USB to a personal computer or a piece of dedicated computer hardware such as a Raspberry Pi. Free, open-source software, such as GNU Radio, can be used for managing the connection. “Recipients can receive bitcoin data without their [internet service provider] being able to see the transactions,” Back explained. The service itself has demonstrated “excellent” up-time, and the network includes redundancies to ensure reliability. “The system is designed to auto-recover from a 24-hour outage in user equipment, by continuous retransmission of recent data as well as live data,” he said. Fonte: www.coindesk.com

A Year Ago Today Bitcoin’s Price Hit a Record $20k

Bitcoin (BTC) is still struggling to find the bottom of a bear market on the anniversary of its $20,000 all-time record price high. At press time, the world’s largest cryptocurrency by market capitalization was trading at $3,230 on Bitstamp – down 83.5 percent from the record high of $20,000 reached on Dec. 17, 2017. BTC is also down 76 percent on a year-to-date basis (from its opening price of $13,880 on Jan. 1) and is on track to end its three-year winning streak. The picture, however, was remarkably different in the fourth quarter of the last year. The cryptocurrency picked up a strong bid on Nov. 1, 2017, on speculation that the imminent listing of bitcoin futures products on major US exchanges would open the floodgates for institutional money. Back then, BTC was trading above $6,000. Notably, the “fear of missing out” (FOMO) established a self-feeding cycle of more investors joining the party, leading to an even bigger rise in price. By Dec. 17, BTC was trading at $20,000 and was seen rising to dizzy heights this year. Such was the frenzy that Ari Paul, current CIO of Blocktower Capital, purchased 12-month call options with a strike price of $50,000 for $1 million. Call options give holders the right to buy the underlying cryptocurrency at an agreed price on or before a particular date. Paul was essentially betting that BTC would rise to $50,000 by Dec. 28, 2018. The bubble, however, burst in the first quarter of this year and prices have been generally falling ever since. As a result, that now-worthless call option is set to expire next Friday.

A tough year

BTC’s slide from $20,000 to $3,200 could be categorized in the following phases: Sell the fact: BTC closed last year at $13,880 – down 44 percent from the $20,000 high seen on Dec. 17 – possibly due to profit taking on long positions initiated in the run-up to the futures listings. Most experts called it a “sell the fact” scenario and dismissed it as nothing more than a healthy correction. Bubble shrinks: The effects of regulatory clampdowns in China and South Korea weighed heavily over bitcoin’s price early in Q1. Both nations were the biggest sources of demand for cryptocurrencies before the restrictions. Prices subsequently fell to $6,000 on Feb. 6 and closed near $7,000 on Mar. 31. Bear breather: BTC spent a better part of the second quarter and the entire third quarter defending the psychological level of $6,000. Notably, the key support level held ground in the third quarter, despite the decision by the US Securities and Exchange Commission’s (SEC) to reject BTC exchange-traded funds (ETFs). As a result, experts, including the likes of billionaire investor Novogratz, were convinced that BTC had bottomed out around $6,000. Losses resume: BTC’s inability to produce a notable price bounce despite the repeated defense of $6,000 proved costly. Prices nosedived below the critical 21-month exponential moving average (EMA) support on Nov. 14, signaling a resumption of the sell-off from the record high of $20,000.

What lies ahead?

BTC hit a 15-month low of $3,122 over the weekend and is showing little signs of life below the 21-month EMA. The short-duration, technical charts, however, are signaling scope for a minor price bounce.

Monthly chart

The above chart shows BTC’s journey from the record highs a year ago to recent 15-month lows near $3,100. The outlook as per the monthly chart would turn bullish, if and when BTC crosses the former support-turned-resistance of the 21-month EMA, currently at $5,719.

Daily chart and BTC/USD Longs on Bitfinex

BTC’s daily chart shows a “sideways” breach of the falling wedge resistance, meaning the breakout is not convincing. As a result, a more credible evidence of a bullish reversal is needed, possibly in the form a high-volume break above $3,633 (high of the 3-day inverted hammer candle). That could yield a stronger corrective rally to levels above $4,000. BTC/USD long positions on Bitfinex rose to 35,773 BTC earlier today – a level last seen on July 23. More importantly, the longs have risen by 33 percent in the last six days. That could be an indication that bargain hunters are paying heed to extreme oversold conditions reported by the 14-week relative strength index (RSI). BTC, therefore, could witness a corrective bounce ahead of the year’s end.

View

  • A drop to the psychological level of $3,000 remains on cards as long as BTC is trading below the crucial resistance at $3,633.
  • A break above $3,633 would validate the falling wedge breakout seen in the daily chart and allow a rally to $4,000. A violation there would expose next resistance lined up at $4,410 (Nov. 29 high).
Disclosure: The author holds no cryptocurrency assets at the time of writing. Fonte: www.coindesk.com

US Government Issues Advice Over Bitcoin Bomb Threat Emails

The U.S. government has confirmed the existence of bomb threat emails that demand bitcoin from organizations and suggested steps to take. The National Cybersecurity and Communications Integration Center (NCCIC), part of the Cybersecurity and Infrastructure Agency, announced Thursday that it is aware of such an email campaign worldwide. “The emails claim that a device will detonate unless a ransom in bitcoin is paid,” the NCCIC said. There have been several media reports stating that scammers are demanding hefty bitcoin ransom with the subject line, “I advise you not to call the police.” The email reportedly read:
“My man carried a bomb (Hexogen) into the building where your company is located. … I can withdraw my mercenary if you pay. You pay me 20.000 $ in Bitcoin and the bomb will not explode, but don’t try to cheat – I warrant you that I will withdraw my mercenary only after 3 confirmations in blockchain network.”
Some Twitter users also posted screengrabs of threatening emails, including some individuals. The NCCIC advised citizens that, if they receive one of the bomb threat emails, they should not try to contact the sender or pay the ransom. The agency also asked people to report emails to the FBI’s Internet Crime Complaint Center or to a local FBI field office. The mayor of Washington, DC, Muriel Bowser has also released an official statement confirming that she has been briefed by the Metropolitan Police Department (MPD) on the ongoing investigation into the several bomb threats nationwide, including DC. “Each of the threats was received via email, requesting bitcoin ransom, but we have no knowledge that anyone has complied with the transaction demands,” she said. Bowser added:
“MPD is investigating these threats with our federal law enforcement partners. This is an issue being reported in other cities nationwide and is not considered credible at this time. If you receive a threat or observe suspicious activity, please call 911.”
Australian and New Zealand government agencies are also reportedly investigating bitcoin bomb threat emails received by some residents, as confirmed by cybersecurity officials to Reuters. Fonte: https://www.coindesk.com/us-government-issues-advice-over-bitcoin-bomb-threat-emails