2019 May 13 - Volume.3 Issue.14

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2019 May 13 - Volume.3 Issue.14

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Bitcoin Widens Gap as Cryptocurrencies Experience Bull Market Jolt

Cryptocurrency markets sidelined reasoning on the weekend as Bitcoin's price surged to an 8-month high despite facing multiple overwhelmingly negative events in recent weeks. But token fatigue may have kicked into full gear as the 'King of Coins' widens the gap against other cryptocurrencies that are now trading at a fraction of what they did in 2017/18 when Bitcoin was at current prices.


Markets have shrugged off Tether systemic risk concerns despite the largest traded stablecoin still not having fully recovered from its de-pegging twenty days since solvency questions arose when it was revealed that the company had loaned $850Mn to its officially unofficial creator Bitfinex (Diar, 30 April).

Meanwhile, hackers swept away with over $40Mn in Bitcoin last week from Binance, the world's largest cryptocurrency exchange, joining the ranks of the many other compromised trading venues (Diar, 18 December 2017). This, however, was not enough to dull markets down who have now become accustomed to thefts notorious on exchanges that have well surpassed the $1.1Bn mark (Diar, 18 February 2018, 11 June 2018).

Markets remained tamed as the exchange locked up withdrawals and pledged to cover the loss from its own "Secure Asset Fund for Users" (SAFU) that was accumulated from a portion of the trading fees that Binance earns.

Community sentiment did sour though on the back of a suggestion by Binance's CEO Changpeng Zhao who ventured into examining the possibility of a deep reorganization (reorg) of the blockchain that would have seen miners earn the stolen funds instead.

|| MUCH LIKE GOLD, PINNED TO PERCEPTIONS

The 'plan' was abandoned. Should numbers have added up, a chain split would have been possible with such an endeavor.

Consequences would have likely spiraled unfavorable for everyone sending Proof-of-Work blockchains back to the drawing board, although, the system itself would have been operating as designed with a split community claiming true to one chain or another.

While the reorg chain would unlikely survive community upheaval, the damage of intervention by influential actors would have been mined in history abandoning any notion of decentralization.

|| A DIFFERENT TYPE OF STEER?

With almost goldfish-like memory span cryptocurrency markets surged to its highest point since September 2018.

But as Bitcoin tugs other cryptocurrencies into glory along with it, markets haven't reacted in uniform to past valuations. When markets began to tumble in 2018, Ether was trading at an amazing 72% higher than it is trading today when Bitcoin was in the current price range of $7000.

And Ether isn't the only visible victim. Privacy coin ZCash has dropped 80% in comparison. In fact, all top major cryptocurrencies have fallen to a fraction of what they were once being traded when Bitcoin was at current price levels (see table).

Most of the major coins even trail behind their own valuations during the 2017 run up to the peak. And despite thousands of more coins being added to the watery metric of "market capitalization," Bitcoin now dominate a near 60% of the total cryptocurrency value, a two-year high not seen since May 2017.

Bull Market Blues? Cryptocurrencies vs Bitcoin at $7k Range

wdt_ID Date BTC ETH LTC BCH XRP ZEC XMR
1 Feb-18 7105 710 130 892 0.69 325 187
2 Jun-18 7104 554 111 1001 0.61 213 144
3 Sep-18 7123 290 65 584 0.34 155 119
4 May-19 7159 191 86 360 0.32 63 78
5 -
6 % Diff. - -73 -34 -60 -54 -81 -58


ETH/BTC Gap Widens Near All-Time-High (1=Largest Gap Between Pair)


...As Does XRP (1=Largest Gap Between BTC and XRP)


With Bitcoin Cash Gap Widening Trend Starting Against Bitcoin


Small Pools Gain on Bitcoin Mining Hash Power Distribution

As Bitcoin's Hash Power continues in steady growth nearing highs, major pools whose tussle for solving blocks looks all but plateaued month in, month out. Smaller mining pools have made significant gains in the past few months as unknown miners either drop off or join a tribe.


Unknown Bitcoin miners had set a new trend at the start of the year having gone from solving only 6% of the blocks at the start of 2018, to a whopping 22% by the end of the year (Diar, 14 January).

The trend has been bucked however as smaller pools are now making the gains solving 23-24% in the previous two months, double the average of last year (see chart).

While the distribution of hash power is certainly better geared against coordinated attacks, the number of pools continue to dwindle. To date, versus the start of 2018, 40% of the pools have now shut down.

% of Bitcoin Blocks Mined by Pool


Source: Diar, Blockchair. NB: Bitmain includes ViaBTC


Bitfinex Billion
In a short 10 day span since one of the older cryptocurrency exchanges sought investment following a cash shortfall, Bitfinex, has been able to raise a whopping $1Bn to cover "stuck funds", said its CTO Paolo Ardoino on Twitter (Diar, 30 April). The exchange has not gone public for its token, LEO, and is said to have been able to secure investments tranches of $100Mn from several investors. Still, words selected carefully in Mr Ardoino's message stating that it was Tether that was raised further convoluting the investment relationship between the two entities.
Bakkt Alley Found
One of the most anticipated institutional Bitcoin products that was set to launch at the start of this year has now opted to get to market through a different route. Rather than waiting for approval for their physically-settled Bitcoin futures to be approved by the  U.S. Commodity Futures Trading Commission (CFTC), the ICE-backed company is said to self-certify, a method opted previously by both the CME and the CBOE who listed futures at the end of 2017 without objections. Launch dates remain unclear, but the company said that it will begin testing in July.
FinCEN's Not So-New Guidance
A 30-page guidance circular by the US Department of Treasury's Financial Crimes and Enforcement Network (FinCEN) caused a surge of analysis from the community despite the agency stating that the "guidance does not establish any new regulatory expectations or requirements." Still, the regulator is at attention having now added a considerable amount of crypto-lingo in its vocabulary in its effort to highlight those who may or may not be required to adhere to Money Services Business (MSB) laws, decentralized or otherwise.
Microsoft Adds ID Heft
Tech giant Microsoft has open-sourced part of their decentralized identity solution project dubbed Ion that sits atop of Bitcoin's testnet. A mainnet launch is also said to be in the works, sources said speaking to Coindesk. The infrastructure would allow users to ultimately own their user data and logins across the web. Data breaches have riddled the internet that many have looked to solve the problem using blockchain technology, permission or otherwise, and put data ownership in the hands of the users rather than entities (Diar, 30 April 2018).

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