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Is the Bitcoin Bubble Finally Over?

Is the Bitcoin Bubble Finally Over?

By John Jagerson | June 14, 2018 — 3:12 AM EDT

In Wednesday’s Daily Market Commentary webinar I was asked a few questions about bitcoin and its continued decline. In 2017, this topic would come up much more frequently as bitcoin’s value rose nearly 2,000% to its peak in December. However, from its absolute high in 2017 to today’s low, bitcoin is down approximately 70%.

Some cryptocurrency enthusiasts will take issue with comparing the rally last year with an asset bubble, but it certainly had all the right characteristics to be defined that way. One of the most important problems that create an asset bubble is called “asymmetric information flow,” which happens when one side of a trade has more information than the other side. New analysis indicates that this is one of the most important factors that drove bitcoin’s rally last year.

For example, the flow of information about Mortgage Backed Securities (MBS) and Credit Default Swaps (CDS) was much more available and more accurate to the banks issuing those exotic instruments than the buyers and investors who bought them.

There is mounting evidence that the market for bitcoin had an extremely asymmetric information flow and was likely manipulated into the rally last year. In a paper released on Wednesday, University of Texas Finance professor John M. Griffin and his co-writer Amin Shams convincingly show that another cryptocurrency called “tether” was used to manipulate bitcoin to higher and higher prices.

Tether, a purportedly dollar-pegged cryptocurrency, was apparently used to obscure bitcoin purchases in ways that would push prices higher when there were no other market catalysts that could explain the cryptocurrency’s rally. Essentially, the lack of transparency allowed bad actors in the market to create information (tether-funded bitcoin purchases) that they had access to, but the broader spectrum of investors did not.

Investors have attempted (and sometimes successfully implemented) the same strategy in regulated financial markets. The “pump and dump” scheme in penny stocks or efforts to “corner” a futures market are similar to what was done to bitcoin through tether. In U.S. and European financial markets, attempts to influence prices like this are considered “market manipulation” and can be criminally prosecuted.

The bottom line is that if Professor Griffin is correct, then the underlying manipulation in bitcoin’s price may have been removed and the asset is going to fall back to its “natural” value. Whatever its real worth, apparently $20,000 wasn’t the right number.

Published at Thu, 14 Jun 2018 07:12:00 +0000

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Cryptocurrencies Continue To Show Subtle Gains

Cryptocurrencies Continue To Show Subtle Gains

Ethereum stays marginally above $600 handle, but the further upside is effectively capped by 100-DMA at $612. Lack of follow-through signals that the recovery attempts are fading away, leaving ETH vulnerable to new losses. The second largest coin is mostly unchanged since the start of the day and up 2.5 percent in recent 24 hours.

Speaking at Bloomberg Invest New York Summit, Mike Novogratz, the founder, and CEO of Galaxy Digital Capital Management, explained that cryptocurrency industry is still in its infancy, which explains many of its faults and “misbehaviors”.

“Ethereum, which is one of the main leaders in the crypto space, is only three years old. If you think of the current market as a three-year-old child, it’s unreasonable to expect it to have the maturity of a PhD student,” he said.

For the last couple of years, the market has been dominated by retail investors, vulnerable to FOMO and FUD phenomena. The market will mature once this pattern is changed. At the same time, Novogratz believes that cryptocurrencies will not replace fiat money as regulators will do their best to prevent that from happening.

Ethereum technical picture

Looking technically, ETH/USD is stuck at $600 as the recovery proved to be short-lived. The coin needs to clear ultimate hurdle created by 23.6 percent Fibo at $652. Once above, the recovery may be extended to $700 with 200-DMA registered at $705. On the downside, an important support is created by $504.

ETH/USD, the daily chart

(Click to enlarge)

IOTA price, just like the other major cryptocurrencies is correcting slightly lower on Wednesday. The digital asset has trimmed gains today by a subtle 1.34 percent, however, it is still trading above the bullish trend line which is supported by the 50 percent Fib retracement level with the previous swing high of $1.99 and a low of $1.34.

IOTA has not managed to shake off the selling pressure in the market after the slide that occurred earlier this week. IOT/USD is trading at $1.74, similarly, it is dancing with the 38.2 percent Fib retracement level. The price is currently supported by the 200 SMA, but a bear trend is forming to show that selling pressure is rising.

There are a couple of breakout points on the chart; on the upside, if IOTA price overcomes the resistance at $1.85, it could test the key resistance at $2.0. On the flipside, the zone at the 50 percent Fibonacci level is vital and could lead to downside breakout towards $1.60 – $1.55 demand zone. This is a suitable buy zone, although the major support will be found at $1.35.

IOTA is one of the most active cryptocurrencies in the industry, the team has been working hard on releasing new technology in the market. They have recently provided an update on the most anticipated project in the community, Qubic. In addition to that, they have also launched IOTA Lab. IOTA is described as an open-source project for the community and is developed by AKITA, which is a new startup enterprise that focuses on DLTs.

IOT/USD 1-hour chart

(Click to enlarge)

Tron, now the 10th largest digital asset by market capitalization, is sidelined under $0.060, off Tuesday’s high reached at $0.0613. It has gained over 2 percent since this time yesterday, but the upside momentum has faded away.

Tron has recently launched the MainNet and now moving closer to its “Independence Day” scheduled on June 25. Following the example of EOS, Tron Foundation has offered generous rewards to those who help eliminated the system bugs and vulnerabilities.

“We take the security of our platform very seriously. We are looking for developers who specialize in global network security to help make TRON MainNet one of the most secure public blockchains in the industry and provide a stable infrastructure for future DApps to be deployed on the MainNet,” said Justin Sun, founder of the TRON Foundation.

Tron’s short-term technical picture

As it is shown on the hourly chart, TRX/USD stays above 50-SMA (hourly chart) at $0.0590. Once this local support area is broken, the selling pressure may take the price towards the next pivotal zone at $0.0570, followed by $0.0550. On the upside, the nearest resistance registered at $0.0600 (with 200 and 100-SMA clustered around that area and 50 percent Fibo at $0.0614). If it is cleared, the upside may be extended towards $0.0638 (June 3 high)

TRX/USD, the hourly chart

(Click to enlarge)

By Tanya Abrosimova via FX Street

Published at Wed, 06 Jun 2018 17:00:00 +0000

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Bitcoin is falling back to Earth

Bitcoin is falling back to Earth

Bitcoin is having a terrible 2018.

The digital currency has slumped roughly 50% since the start of the year, dropping below $7,000 on Friday morning in Asia. Less than four months ago, it was trading close to $20,000.

The latest losses follow moves to step up regulation of cryptocurrencies in Europe and Asia.

In Japan, two virtual currency exchanges closed down this week amid increasing scrutiny from the country’s financial services watchdog. The trading platforms, Mr Exchange and Tokyo Gateway, both failed to secure a license from Japan’s Financial Services Agency.

The “regulatory clampdown in Japan is a massive negative,” said Stephen Innes, head of Asia-Pacific trading at currency broker Oanda.

Japan is one of the countries where trading in bitcoin and other digital currencies exploded last year, helping to drive up prices as mom-and-pop investors piled in.

Almost half of recent global trading in bitcoin was carried out in Japanese yen, according to industry website CryptoCompare.

The Japanese government officially recognized bitcoin as a form of currency last year and started licensing exchanges. But regulators have stepped up scrutiny of the industry after about $530 million in digital currency was stolen from an exchange in January.

New rules in Europe that limit the amount of money that investors can borrow to trade cryptocurrencies could also be weighing on bitcoin’s price, said Innes, who is betting it has further to fall.

Other popular virtual currencies such as Ethereum and Ripple have also slumped recently.

Bitcoin has faced a number of other setbacks this year.

Earlier this week, Twitter(TWTR) announced that it would no longer be running ads tied to cryptocurrencies. Both Facebook(FB) and Google(GOOGL) have announced similar bans on ads, including for initial coin offerings, a fundraising method using cryptocurrencies.

The US Securities and Exchange Commission has been trying to rein in cryptocurrency trading in recent months, saying investors should only buy and sell them on registered exchanges.

Bitcoin has bounced back from steep drops in the past. It dropped below $7,000 in early February before rallying above $11,000 later that month.

And by Friday afternoon in Asia, it had recovered some of its earlier losses to claw its way back above $7,000.

— CNN’s Emiko Jozuka contributed to this report.

Published at Fri, 30 Mar 2018 11:32:51 +0000

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Cboe urges U.S. regulators to move forward with bitcoin ETFs

 

Cboe urges U.S. regulators to move forward with bitcoin ETFs

NEW YORK (Reuters) – U.S. securities regulators should not stand in the way of exchange-traded funds that hold cryptocurrencies like bitcoin from coming to the market as they are essentially the same as other ETFs that hold commodities, said exchange operator Cboe Global Markets.

The U.S. Securities and Exchange Commission said in January that “significant investor protection issues” needed to be examined before bitcoin-based ETFs could be offered and it also had concerns around how the products would be priced, stored and safeguarded.

Cboe’s letter said the exchange believes “that the vast majority of these concerns can be addressed within the existing framework for commodity-related funds related to valuation, liquidity, custody, arbitrage, and manipulation.” The March 23 letter was signed by Cboe President Chris Concannon.

Bitcoin can be moved around the world quickly and with relative anonymity, without a central authority such as a bank or government. The a virtual currency’s 1,500 percent surge last year stoked investor demand.

Cboe believes ETFs would give investors a more transparent and accessible way to get exposure to cryptocurrencies than the spot market.

Yet bitcoin has been volatile, swinging from a 2018 high of $17,234.99 on Jan. 6 to a low of $5,920.72 on Feb. 6, and trading on Monday at about $8,092. Many investors remain leery, and the SEC has been cautious due to several massive cybersecurity breaches that have hit bitcoin owners and exchanges and a lack of consistent treatment of the assets by governments.

The regulator has denied or tabled more than a dozen proposals for funds that would own bitcoin or futures based on them, including four separate proposals submitted by Cboe, such as the Winklevoss Bitcoin Trust.

Cboe and rival CME Group Inc have successfully launched cash-settled bitcoin futures contracts, however, which the exchange operators self-certified in December and are regulated by the Commodity Futures Trading Commission.

Cboe asked the SEC to evaluate each cryptocurrency fund and underlying cryptocurrency-related holdings on a case-by-case basis.

More than $70 billion in notional value of bitcoin transactions traded hands in the spot market in December, when the price reached more than $19,000, Cboe said. Such liquidity would easily support bitcoin ETFs or other exchange-traded products (ETPs), the exchange said.

“As the volumes continue to grow, especially on regulated U.S. markets, the overall spot bitcoin market looks more and more like a traditional commodity market and Cboe continues to believe that the spot market is sufficiently liquid to support a bitcoin ETP.”

Reporting by John McCrank; Editing by David Gregorio

Published at Mon, 26 Mar 2018 15:29:22 +0000

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How bitcoin IRA investments bypass U.S. fiduciary protections

How bitcoin IRA investments bypass U.S. fiduciary protections

(The opinions expressed here are those of the author, a columnist for Reuters.)

By Mark Miller

CHICAGO (Reuters) – Bitcoin in an IRA? You might think holding a volatile, unregulated investment like cryptocurrency in a retirement account would violate the U.S. Department of Labor’s fiduciary rule, which took effect last summer.

But despite the risks, the “bitcoin accepted here” shingle is hanging proudly in the Wild West of retirement investing – self-directed Individual Retirement Accounts.

Cryptocurrency is a digital – or virtual – currency that uses cryptography for security. Market-leader bitcoin racked up astonishing gains of more than 1,300 percent in 2017, but lost over half its value earlier this year. (reut.rs/2Fyp5jg). This week, it is trading around $9,000 – a stomach-churning drop from its 52-week high just short of $20,000 in December.

“As we’ve seen recently, it can drop like a stone, instantly,” said Ed Slott, who educates financial advisers on IRAs and publishes the Slott Report.

Traditional IRA accounts hold mutual funds, equities and bonds; the custodial firms that hold these accounts will not touch cryptocurrencies like bitcoin or other alternative investments, such as precious metals or real estate.

   But in a self-directed IRA, you can invest in just about anything. Under the Internal Revenue Service Code, the only prohibited investments are life insurance, collectibles (such as coins or precious gems), or commingling personal assets (such as a home you own). A marketplace of small custodial firms specializes in these accounts.

IRA investments are the main focus of the fiduciary rule, because most of the assets in them are rolled over from 401(k) plans, which enjoy the protection of the Employee Retirement Income Security Act of 1974. One of the main aims of the rule is to protect investors from high-cost, risky investments when they move assets to IRAs.

Self-directed IRAs are covered under the rule, although their proponents argued that they should have been exempted during the debate about its creation. “They tried to argue that if people wanted to gamble with their own money, we should let them,” said Phyllis Borzi, who led the fiduciary initiative as assistant secretary for Employee Benefits Security in the U.S. Department of Labor during the Obama administration.

“I wasn’t convinced by that argument, because self-directed IRAs are the least-regulated segment of the retirement account market.”

Self-directed IRA custodians are not acting as fiduciaries as long as they refrain from giving specific advice about investments. They can charge fees to facilitate fairly complex account setups; they also may provide education about the rules and regulations through books, pamphlets or videos.

A NON-FIDUCIARY ROLE

   Consider Adam Bergman, author of “How to Use Retirement Funds to Purchase Cryptocurrencies in a Nutshell.” Bergman heads Miami-based IRA Financial Group, which acts as a custodian for self-directed IRAs. His company’s services are not limited to cryptocurrencies – most of the self-directed IRAs held at his firm are invested in real estate, he said.

   Bergman, an attorney, is well aware of the rules against providing specific advice. “We are non-fiduciary custodians,” he said. “We don’t sell financial products – we take great pains to make sure we are not fiduciaries. We just facilitate. There’s no way on God’s green earth I’m going to give people investment advice.”

Fair enough. Yet on Bergman’s website, you can watch a video where he discusses clients who have had “huge gains” investing in cryptocurrency in the past few years – and paid no tax because they used Roth IRAs as the investment vehicle. “They may otherwise have three or four hundred grand in taxes they would have to come up with.”

But the worries do not end with taxes. Aside from their volatility, cryptocurrencies trade on unregulated online exchanges. Many have been plagued by technical problems and hacks, and the Commodity Futures Trading Commission warned investors to be wary of fraudulent “pump and dump” schemes (reut.rs/2FyYxOP). The Wall Street Journal reported recently that the U.S. Securities and Exchange Commission has issued dozens of subpoenas as part of a broad investigation of the cryptocurrency industry (reut.rs/2Ip2kft).

Self-directed IRAs are a small niche market, holding about $50 billion in assets, according to a report last year by the U.S. Government Accountability Office (GAO). By comparison, the overall IRA market represented $8.5 trillion at the end of the third quarter last year, according to the Investment Company Institute.

In its report, GAO focused on the additional responsibilities shouldered by investors in alternative assets, and recommended that the IRS improve the guidance offered to account owners on how to monitor their tax liability and determine fair market value of unconventional assets. The IRS agreed with the recommendations, but to date has only partially implemented the reforms, according to the GAO (bit.ly/2pbO150).

   The appeal of using an IRA to invest in alternatives is simple. “For most people, it’s where their assets are concentrated,” said Tim Steffen, director of advanced planning at Robert W. Baird & Co.

But Slott thinks retirement investors should consider the broader merits of alternative investments, and cryptocurrency in particular. “If a client asked me about this, I’d say – ‘Do you understand it? If you don’t know what you’re investing in, then why would you do it?’”

Sometimes that understanding is lacking. Said Steffen: “We even had one client who wanted to hold the physical coin itself.”

Editing by Matthew Lewis

Published at Thu, 15 Mar 2018 11:12:17 +0000

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How I learned to stop hating and love the Crypto

How I learned to stop hating and love the Crypto

by SCOTT

Ask… and ye shall receive.

Let’s talk about Cryptos. I know for a fact most of you hate these bastard offspring. And I used to as well… until I learned to stop hating and love crypto.

I was biased against them because I was sick of hearing about idiots making millions who don’t actually know how to trade.

But I’m sure you couldn’t possibly understand 😉

Systems for crypto’s have some unique challenges.

In no particular order

  • The exchanges all have different data
  • There isn’t enough data for a statistically significant backtest
  • Some of the exchanges are crooked as a 3 dollar bill
  • The “stable” coin Tether is an obvious multi-billion dollar ponzi scheme
  • For things with half a trillion dollar market cap, the markets are THIN. Read this https://medium.com/@bitfinexed/understanding-bogus-usd-crypto-currency-volume-why-you-should-disregard-fakeusd-prices-and-c0933c72e3e5
  • You have to decide whether to do your charting against BTC/ETH or USD
  • The crypto-idiots have fetishised “HODL”ing (an intentional misspelling of holding). Apparently ignoring stop losses and holding through 90% retracements is smart now.
  • Correlations are insane. Most days 90% of coins are up OR 90% of coins are down. This makes developing systems difficult.
  • Because you can’t trust the exchanges, you can’t usually use stops (eek)

Now despite those inherent problems it’s highly likely that you and I will never see a bull market as strong as this one.  I’ve been crushing it (even with the recent 75% across the board drop) and I’ve figured out a whole lot of stuff along the way.

So, let’s put our System Building caps on and start figuring out workarounds for these problems.

For the next few days I’ll be fleshing out the mechanics of the System Building Process as it applies to crypto.

Firstly. If the crypto bubble is popped/over… then every last one of these shitcoins is going to zero. And bitcoin will be back under $1000.

The implications of this are obvious. You can’t put more than 5 or 10% of net wealth in these things, since they are all the same basic trade. No way around it.

You must bank regular profits. Trailing stops give too much profit back on markets this volatile.

Secondly. The all on/all off nature of crypto means that you want to run for cover at the first sign of rain.

Thirdly. Because we haven’t got enough data to really make a backtest mean anything, discretionary systems are probably an obvious choice here.

Anyway… discuss amongst yourselves and I’ll flesh all this out over the coming days.

Right now, we have NQ breaking out while ES is still lagging. That sets us up for the LAST CHANCE for the bears when ES tests the old highs.

Make no mistake… if the ES and YM break to the upside, there are a lot of shorts who will have to cover.

The EURUSD really has my spidey sense tingling. Bucky has been catching a beatdown and we are at the kind of extreme which indicates the tide might turn here.

Anyway… that’s all for today. Catch you again tomorrow.

Scott Phillips

Published at Mon, 12 Mar 2018 05:13:10 +0000

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Is The South Korean Crypto-Drama Finally Over?

Is The South Korean Crypto-Drama Finally Over?

By: Michael Kern | Wed, Feb 21, 2018


The regulation rumor mill has been churning particularly hard in recent months, with South Korea and China taking center stages. But recent headlines are suggesting that the South Korean government, at least, may finally be coming around.

As one of the busiest markets for cryptocurrency trade, regulation rumors sent prices of cryptos across the board tumbling. But now, a key regulator, Choe Heung-sik, chief of South Korea’s Finance Supervisory Service, has reassured his citizens that an outright ban is off the table.

Not only is the much-feared ban of cryptos off the table, Choe hopes the country will normalize cryptocurrency business in a self-regulatory environment.

“The whole world is now framing the outline (for cryptocurrency) and therefore (the government) should rather work more on normalization than increasing regulation,” Choe told reporters.

This news inspires hope in many crypto-enthusiasts looking for reassurance in the marketplace. This is certainly a far cry from the Justice Minister’s January warnings of a potential shutdown of cryptocurrency exchanges in the country.

While anonymous accounts in South Korean banks are forbidden to purchase cryptocurrencies to prevent crimes such as money laundering, several banks are adopting policies allowing customers to not only buy cryptos, but even preparing plans to integrate spending options in the near future.

Choe also mentioned that the government will ‘encourage’ banks to do business with cryptocurrency exchanges, noting that Shinhan Bank, Industrial Bank of Korea, and NH Bank are already offering accounts to a number of local exchanges.

The wave of positivity coming from regulatory officials has clearly had an impact on crypto prices in the past few days, with bitcoin finally showing signs of recovery.

The government’s apparent change of heart also paves the way for corporations, such as Samsung which is launching its own brand of crypto-mining hardware, to do business with the blessing of regulators.

By Michael Kern

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Published at Wed, 21 Feb 2018 11:14:31 +0000

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