SEC says bitcoin and ether aren’t securities

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Clarity is good.
Image: ULRICH BAUMGARTEN/GETTY

The world of cryptocurrency just got some much needed good news. 

With the prices of bitcoin and ether on a steady downward trend, the Securities and Exchange Commission today provided hodlers with a flash of hope: Neither of the cryptocurrencies are considered securities. 

So reports CNBC, which notes that the SEC’s head of the Division of Corporate Finance, William Hinman, delivered the news at the San Francisco Yahoo All Markets Summit: Crypto conference. If the SEC had decided differently, then exchanges and markets would likely have faced some serious regulation. 

And, well, no one in cryptoland likes regulation.  

The announcement was celebrated by big names in both the Ethereum and Bitcoin space. 

Oh, also, it had quite the effect on price. Coindesk shows both ether and bitcoin spiking on the news. 

But all this doesn’t mean the SEC is washing its hands of the entire emerging industry. According to Hinman, many ICOs are in fact securities and will be on the receiving end of SEC regulatory action. 

Interestingly, Yahoo News reports Hinman as explaining that simply calling something a coin or a token makes no difference in the eyes of his agency. More important is the extent of decentralization involved in the network in question. 

“Over time,” CNBC quotes him as saying, “there may be other sufficiently decentralized networks and systems where regulating the tokens or coins that function on them as securities may not be required.”

So, you know, better hype up your blockchain project’s decentralized attributes now. It may save you from the SEC’s wrath later. 

Read more: https://mashable.com/2018/06/14/bitcoin-ether-not-security-sec/

Andy Warhol Is a Bitcoin Star for 15 Minutes

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The world of finance isn’t done yet with its effort to turn artistic masterpieces into tradeable securities. A decade ago it was hedge funds and bankers selling small shares in works by Andy Warhol and his ilk as investment opportunities. Today it's the cryptocurrency crowd.

If history’s a guide, the risk and cost of owning a tiny part of an illiquid, hard-to-value asset still outweighs the rewards. And all that without ever getting to hang the picture on your wall.

The new tilt at art trading is as much a throwback to pre-crisis financial engineering as it is about crypto-futurism. A British gallery is promising to sell up to 49 percent of Warhol’s 14 Small Electric Chairs in a blockchain-powered online auction. Buyers can pay in Bitcoin, Ether or other tokens. They’ll take cash too if you’re that way inclined.

How To Sell It

Cryptocurrency prices have been hit by a speculative unraveling and a regulatory crackdown

Source: Bloomberg

These micro-stakes would then be traded on a marketplace. There may be a blockchain verifying transactions, and crypto-currencies changing hands, but we've seen art investment pools and art stock markets before. They don't always end well.

Despite all the airy talk about democratizing art ownership and disrupting the gilded world of auction houses and dealers, this doesn’t really do that. Nobody owning a piece of the Warhol will take it home. It's locked up in a tax-free zone somewhere. What’s being traded is a stake in the special purpose vehicle that holds it.

Bank Canvas

A ranking of the world's most valuable artworks, as of Nov. 17, 2017

Source: World Economic Forum

This may be a wonderful way for the ultimate owner to make money from an artwork without taking it out of storage or ceding control, but it's hardly the Barnes Foundation.

As for the idea that this is a clever bet on the future value of a piece of art, these assets are as risky as any others. The art market is illiquid and can be volatile. Blue-chip artists are no protection against a market crash. Even Warhols were sold at a loss during the financial crisis. Do punters know the difference between this “Electric chairs” canvas, which the gallery says has been valued at 4.2 million pounds ($5.6 million), and others by the same artist?

Artistic Temperament

Global art market sales growth tends to fluctuate

Source: UBS/Art Basel

Imagine what the combined volatility of cryptocurrency markets and the art market might create in times of stress. Liquidity would evaporate. That initial buy-in fee of 2 percent wouldn’t seem so cheap then.

Warhol himself might have enjoyed the idea of trading and owning pieces of art that you've never seen. And there is at least one tangible thing on offer: The people running the auction say buyers can choose to receive a special scanned print of the work in question, which to the naked eye looks just as good as the original. As David Bowie once sang in a song about Warhol: “Can't tell them apart at all.”

If people do manage to make money from this, then finance truly will have reached its post-modern apotheosis.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Lionel Laurent at [email protected]

    To contact the editor responsible for this story:
    James Boxell at [email protected]

    Read more: https://www.bloomberg.com/view/articles/2018-06-08/andy-warhol-bitcoins-are-famous-for-15-minutes

    Hot damn, this Bitcoin cat just might convince me to HODL

    Yesssssssss.
    Image:  iridi/getty

    Bitcoin true believers have long promised a blockchain-based revolution, but the only true thing of value to come out of Satoshi’s white paper is this chill-ass cryptocat.  

    Sure, the scams and ransomware and general buffoonery in the blockchain space have all been pretty great, but none of that comes close to this Bitcoin maximalist tabby. 

    I mean, just check the dude out. 

    He’s an absolute unit, with bad-boy appeal. 

    Get it.

    Image: iridi/getty

    And! He’s knows how to accessorize. 

    Oh *hell* yeah.

    Image: iridi/getty

    Let’s not overlook the fact that he believes in saving for retirement. 

    Investing in a feline future.

    Image: iridi/getty

    But he’s not stingy, either. Check this party vibe. 

    Crypto rich!

    Image: iridi/getty

    Also, hell yeah to these shades. My man’s got style. 

    Fresh.

    Image: iridi/getty

    Not only that, he makes a coherent argument about the relative value of cryptocurrency versus fiat. (The tie means he’s legit.)

    Farewell to fiat.

    Image: iridi/getty

    So while the market may be volatile, and the entire blockchain industry is basically a solution in search of a problem, at least it gave us this cat. 🙌 

    Read more: https://mashable.com/2018/06/01/bitcoin-cat/

    Consensus 2018: Dispatches from the ‘Coachella of Bitcoin’

    Nightmare fuel has moved to the blockchain.
    Image: jack morse/mashable

    It’s 8:15 a.m. at the Hilton hotel in Midtown Manhattan, and the escalator has a bouncer. 

    An estimated 8,500 blockchain experts and cryptocurrency evangelists have come from around the globe to be here at the 2018 Consensus conference, and the line to pick up attendee badges shows no sign of moving. A security guard in a suit, talking into his sleeve, eventually gives a small group the go-ahead to ride up to the second floor where another line awaits. 

    It feels like we’re trying, and failing, to get into New York’s hottest nightclub.

    “This is like the Coachella of Bitcoin,” a passerby whispers to her companion as they breeze by. 

    You can taste the excitement.

    Image: jack morse/mashable

    And indeed, while it lacks Beyonce and the questionable wardrobe choices of the Southern California music festival, the Coindesk organized Consensus more than makes up for it in its sheer opulence and buffoonery — a fact made obvious before you even walk through the conference doors.

    Parked outside the hotel were three Lamborghinis — an inside joke within the cryptocurrency community — and, opposite them, a man claiming that the developers of NEM screwed him out of over $1.5 million USD worth of cryptocurrency. 

    Across the street was an entirely different type of show: specifically, a fake protest. Chanting “hey hey, ho ho, Bitcoin has got to go,” the group of self-described bankers and CEOs (one man told me he got his suit out of a dumpster) carried signs reading “paper checks use less electricity” and “we thought this was a bubble.”

    According to a rambling statement on the group’s website, the Genesis Mining-backed demonstrators were actually protesting aspects of the financial industry, but either way, they generated enough of a scene to draw a crowd and put conference attendees in what can only be described as an appropriately absurdist frame of mind. 

    Because as soon as those who came to hear the blockchain gospel made it past the aforementioned escalator bouncer and the formidable registration line, they were met with what can only be described as a hodler’s paradise. 

    Want 18-karat gold crypto-jewelry to commemorate your ride-or-die status as a Bitcoin maximalist? Consensus 2018 is the place for you. 

    But can you verify ownership on the blockchain?

    Image: Jack Morse/mashable

    I’ll take two, please.

    Image: Jack Morse/mashable

    And sure, you may know about beer, but have you heard of cryptobeer?

    If that’s not your thing, don’t fret, just make you way over to the cyptopuppy (yes, this dog was described to me as a “cryptopuppy”) named after Margaret Thatcher chilling on the fourth floor. 

    Still recovering from the Mt. Gox hack.

    Image: jack morse/mashable

    But just like the SEC trying to shit all over the decentralized parade, the real world did poke its annoying head into the immutable bubble of joy. That’s right, someone ticketed the Lambos. 

    Sad times.

    Image: jack morse/mashable

    What’s more, in what definitely isn’t a metaphor for the entire industry, it turned out that the fancy cars weren’t even the fruit of early Bitcoin adoption. They were just a promotional stunt

    But push that all to the back on your head, fellow believer. Because if there’s one thing “the Coachella of Bitcoin” makes clear, it’s that these are serious people with serious ideas — even if, as one major player in the cryptocurrency space told me on background, 80 percent of people in the scene are likely scammers. 

    Because scammer or no, at the 2018 Consensus conference we’re all heading to the moon.

    Read more: https://mashable.com/2018/05/14/consensus-blockchain-cryptocurrency-conference/

    A Bitcoin mining company just organized a fake protest

    It's the dirty bankers, man.
    Image: jack morse/mashable

    It’s difficult to stand out in the often bonkers world of cryptocurrency.

    With all the scams, hacks, and animated dancing coins, it can be really hard to break through the noise and into the public’s consciousness with your surely revolutionary tech. That’s where the fake protest comes in. 

    As the 2018 Consensus blockchain conference kicked off today in Midtown Manhattan, one bitcoin mining company apparently decided that the best way to make a splash was with a few shouts. As the event was getting started, a group of people could be found marching in front of the hotel hosting the 8,500-person-strong gathering. They chanted slogans like “hey hey, ho ho, Bitcoin has got to go,” and held signs informing anyone who passed by that “paper checks use less electricity!”

    And, as things often go in the world of Bitcoin, everything was not as it seemed. 

    The “protest” was ostensibly organized by a group calling itself Bankers Against Bitcoin, which, as you have probably guessed, is not a 100-percent real protest group. It does have real backing, though. Specifically, that of Bitcoin mining company Genesis Mining

    Importantly, it’s not like Genesis Mining is trying to hide it. As the organizer’s website explains, the company wants everyone to get on the cryptocurrency rocket ship before it’s too late. 

    “This protest is representative of what will happen to those industries and companies that fail to understand times have changed,” explained Genesis Mining CEO Marco Streng on the Bankers Against Bitcoin website. “The consumer abuse that’s been possible due to a lack of competition is over. The biggest competitor big banks have ever faced has arrived and it’s not a company or organization, it’s a decentralized technology.”

    And Genesis Mining is here to help you avoid the soon-to-be grisly fate of the big banks with a “small,” “medium,” or “large” mining package for the low cost of $1,520, $4,440, or $12,960, respectively. 

    Act now! Before it’s too late!

    Image: genesis mining

    We reached out to Genesis Mining with the hope of getting a little more background info on what appears to be, in effect, a well executed publicity stunt. Were the protesters, for example, paid? Unfortunately we don’t know, as we didn’t hear back as of press time. 

    But that shouldn’t surprise anyone. After all, when it comes to making it in the world of cryptocurrency, simply grabbing headlines is often good enough. 

    Read more: https://mashable.com/2018/05/14/consensus-2018-bankers-against-bitcoin/

    As Bitcoin Plunged, These Crypto Hedge Funds Kept Making Money

    • Amber AI’s PTD2 fund surged 30% in first three months of 2018
    • Hedge fund advised by BitSpread made 5.7% in quarter

    Bitcoin’s terrible start to 2018 is highlighting the appeal of cryptocurrency hedge funds that make money in both bull and bear markets.

    Funds specializing in virtual currency market making and arbitrage strategies delivered first-quarter gains even as their mostly bullish peers lost 40 percent on average. That’s a big reversal from last year, when digital assets soared and market-making funds lagged far behind their long-biased counterparts.

    Pivot Digital Trading-2, managed by Hong Kong-based Amber AI Group, generated some of the biggest gains among cryptocurrency funds that avoid directional bets. It rose 4.3 percent in March to bring its first-quarter return to 30 percent, according to the firm. Market Neutral Liquidity SP-Institutional, domiciled in the Cayman Islands, earned 5.6 percent in the first quarter, said Cedric Jeanson of BitSpread Group, investment adviser to the portfolio.

    The results suggest some managers are finding ways to profit from wild swings in cryptocurrencies without having to predict whether the coins will rise or fall. Such tactics may appeal to investors who want exposure to digital assets without their extreme volatility.

    As a group, cryptocurrency hedge funds are still highly correlated to the market. A Eurekahedge index for the category posted its biggest three-month slump on record last quarter as Bitcoin sank more than 50 percent. The index soared 1,709 percent in 2017, when Bitcoin jumped about 1,400 percent.

    Among funds that lost money was Silver 8 Partners. It dropped 25 percent in March and 32 percent in the first quarter, according to a commentary sent to investors. Silver 8 invests in digital assets, along with fintech, blockchain and machine learning companies.

    "High levels of uncertainty and low market liquidity make investments in blockchain-related assets volatile," the firm said in a newsletter. "They tend to overreact to cycles of euphoria and pessimism, where the market price itself acts as a catalyst for further momentum."

    The fund has made more than 1,000 percent for investors since its inception in 2016, including a more than 750 percent gain in 2017.

    While funds from Amber AI and BitSpread tend to not post such high returns during boom times, they provide investors with some protection when prices of digital assets fall.

    Weathering Turmoil

    Market-neutral crypto hedge funds fared better in 2018

    Sources: Companies and investors

    2018 returns for the first quarter

    Read more on crypto hedge funds that made a killing last year

    PDT2, as the Amber AI fund is otherwise known, trades the 25 largest digital currencies on exchanges including Huobi, OKEX, Bitfinex, Binance, Kraken and BitStamp, said Tiantian Kullander, one of the four former Morgan Stanley traders who started the firm with a one-time programmer at Bloomberg LP, the parent of Bloomberg News.

    The fund began trading early this year and oversees about $25 million, said Kullander. Its quantitative trading strategies include market-making, short-term trend following and exploiting pricing discrepancies between different currency pairs and exchanges.

    Market Neutral Liquidity SP-Institutional, with more than $100 million of assets under management, makes markets for currencies such as Bitcoin, Ethereum and Ripple, BitSpread’s Jeanson said.

    Read more: http://www.bloomberg.com/news/articles/2018-04-19/as-bitcoin-plunged-these-crypto-hedge-funds-kept-making-money

    Is Facebook seriously launching its own Bitcoin rival?

    Read more: https://www.dailydot.com/debug/facebook-cryptocurrency/

    The @Bitcoin Twitter Account Is at the Heart of Bitcoin’s Big Schism

    Bitcoin and Bitcoin Cash’s most fervent supporters are at it again and Twitter has become a bitter battlefield.

    The latest victim? The @Bitcoin Twitter account was suspended.

    @Bitcoin carries the name of the largest cryptocurrency but, just like Bitcoin.com, frequently issued statements supporting Bitcoin Cash, which split from Bitcoin last year over a disagreement on how the technology should scale. These posts don’t sit well with supporters of the original Bitcoin blockchain, including a group of developers called Bitcoin Core.

    The fight between the two groups prompted prominent blockchain developer Jeff Garzik and others, to attribute the suspension to the endless complaints about @Bitcoin that Twitter was likely getting from Bitcoin Core supporters. Twitter didn’t state reasons for the suspension.

    Roger Ver, an early Bitcoin evangelist whose work earned him the nick-name of Bitcoin Jesus, has now become a vocal supporter of Bitcoin Cash. Ver, who owns the Bitcoin.com website, tweeted:

    The latest skirmish in the war which started with the so-called Bitcoin Cash fork in August, highlights the downside of decentralized organizations and technologies. The lack of a management team means contributors globally can work on improving the technology, which will be implemented only if a majority agrees, but it’s also cause for disagreements and splits.

    “The cryptocurrency development is open source, which means disagreements get aired publicly with the additional angle of the forking of a blockchain, where you have to take the entire network with you, and that creates much more tension," said Neeraj Agrawal, a spokesman at blockchain research advocacy Coin Center. “I don’t expect that to change anytime soon.”

    Litecoin creator Charlie Lee, a well-known Bitcoin Core supporter, was likely one of the first to alert to the suspension with this tweet on Sunday:

    The account now seems to be under new control. The bio now reads "My name is Andrei from Moscow Russia." The private account, which means Tweets aren’t visible to those @Bitcoin doesn’t give permission to follow, has less than 2,000 followers and a background picture that reads "I love you."

    Read more: http://www.bloomberg.com/news/articles/2018-04-09/bitcoin-schism-escalates-after-twitter-suspends-bitcoin-account

    The Lightning Network Could Make Bitcoin Fasterand Cheaper

    In 2014, Joseph Poon and Thaddeus Dryja were bitcoin-obsessed engineers hanging out at pizza-fueled meetups in San Francisco. Their conversation often turned to the central problem of bitcoin: How to make it more useful? The bitcoin network’s design effectively limits it to handling three to seven transactions per second, compared with tens of thousands per second for Visa. Poon and Dryja recognized that for bitcoin to reach its full potential, it needed a major fix.

    The pair had an idea, one whose elements were already in the air at the time. On the weekends they met in unofficial coworking spaces to hammer out a paper describing their vision. Six months later, they revealed their work at a San Francisco bitcoin meetup. They called it the Lightning Network, a system that can be grafted onto a cryptocurrency’s blockchain. With this extra layer of code in place, they believed, bitcoin could support far more transactions and make them almost-instant, reliable and cheap, while remaining free of banks and other institutions. In other words, it promised to fulfill the cryptocurrency dream originally set out by Satoshi Nakamoto in 2008.

    As word of their paper spread, blockchain enthusiasts started hashing out its technical details in blogs and on social media. Around the world, engineers began trying to turn the ideas in Poon and Dryja’s paper into working code. “It was the second most exciting paper I had read in the blockchain era,” says Rusty Russell, a developer at Blockstream, a blockchain technology company. “The first was Satoshi’s.”

    Now, almost three years after Poon and Dryja shared their idea, the Lightning Network is coming to life. Last month the isolated groups developing the network, including Russell, banded together and released a “1.0” version. It has hosted its first successful payments, with developers spending bitcoin to purchase articles on Y'alls, a micropayment blogging site built for demonstration purposes by programmer Alex Bosworth. In a live but isolated test last month, Bosworth separately used the network to pay a phone bill with his own bitcoin. As he tweeted in late December, “Speed: Instant. Fee: Zero. Future: Almost Here.” And this week Blockstream launched an ecommerce site selling t-shirts and stickers that only accepts Lightning payments.

    “When you first heard about bitcoin, you probably heard about ‘instant payments around the world for free,’” says Russell. “But if you dug into it, it wasn’t really that cheap, and it was never instant. Lightning actually does those things.”

    The Crypto Conundrum

    Fixing bitcoin has become an obsession among the developers, miners and investors who wish to see the cryptocurrency become the future of finance. The problem lies at the heart of its design. When a person buys or sells something using bitcoin, that transaction is broadcast to the entire bitcoin network. No matter how small or big, every payment is stored on the approximately 200,000 computers participating in the network. With bitcoin’s popularity soaring, that arrangement leaves the system straining to handle the load.

    The blockchain is composed of literal blocks: collections of transactions organized into sequential chunks. For a transaction to become official, other actors on the network, called miners, must perform computationally intensive procedures to place it in a new block, a process that takes on average 10 minutes. About 2,000 transactions can fit into a block, so backlogs of unconfirmed transactions are common. That’s problem #1: the process is inherently slow.

    Because space in a block is limited, spenders attach a fee to incentivize miners to include their transaction before others. As the backlog of payments grows, spenders offer increasingly lofty fees to attract miners to their transactions. On Thursday, for example, the fee to process an average payment in the next block (with confirmation in roughly 10 minutes) was $14. Those fees are the same for a payment of $5 or $50,000. That’s problem #2: the fees make small transactions impractical.

    Developers have proposed and debated various ways of fixing bitcoin, but few solutions have the momentum of the Lightning Network. Its core idea is that most payments need not be recorded in bitcoin’s ledger. Instead, they can take place in private channels between users. The Lightning Network’s builders seek to move the bulk of everyday payments to private channels and use the blockchain as a secure fallback, to ensure honest commerce.

    In this system, two parties open a channel and commit funds to it. The opening of a channel gets broadcast to the blockchain and incurs the normal bitcoin transaction fee. The channel can stay open for however long—say, a month—during which time the two users can exchange as many payments as they like for free. When the time expires, the channel closes and broadcasts the final state of the pair’s transactions to the blockchain, incurring another transaction fee. If one party believes at some point that he or she was cheated, the aggrieved individual can broadcast the contested transaction to the blockchain, where other users can verify it and miners can update the ledger, forcing the offender to forfeit funds.

    This arrangement works well for parties that frequently do business together, such as a patron who buys coffee at the same diner everyday or a company paying its employees’ salaries. As long as a channel stays open, payments within it are free. Because they don’t rely on the blockchain, they can be completed at internet speeds. But the real innovation occurs when those channels stay open indefinitely, potentially even for decades, and when they connect into vast networks. The system’s design includes extra cryptographic features that allow a user to safely send payments not only through their direct connections but across their extended networks.

    This aspect is vital, because it means a user only needs to open, and pay the transaction fees for, a small number of private channels in order to do commerce across the whole network. The code underlying the Lightning Network can find a path between a user’s immediate connections to more distant parties in the network, in a design akin to internet routing. For example, to make a first-time payment for an article posted on the blogging site Y’alls, you wouldn’t necessarily open a channel directly to the site or its writers. You’d instruct the network to route your money through your existing connections. Doing so would incur a small fee proportionate to the size of the payment—perhaps a fraction of a cent for a payment of a few dollars.

    If the system proves successful, over time the flavor of bitcoin could change dramatically. Miners would only confirm transactions when a bitcoin user signaled the need. Most payments would occur in private. And microtransactions would finally become possible—you could, if you really wanted to, use bitcoin to buy a decently priced cup of coffee.

    “When I first looked into bitcoin in 2011, I thought it made no sense and can’t possibly scale to all the payments one would want to make, so I walked away,” recalls John Newbery, now an engineer at the bitcoin research outfit Chaincode. “But in 2015, when I learned about payment channels and Lightning, my outlook changed. I thought, now this is a system that can scale.”

    Launching Lightning

    But first, someone had to build it. In Australia, Blockstream’s Russell was the first to try implementing it in the summer of 2015. Also around that time, a French bitcoin startup called Acinq began shifting from building a hardware wallet to devoting itself to Lightning. That fall Poon and Dryja partnered with a fellow enthusiast, Elizabeth Stark, to launch Lightning Labs. A quarrel splintered the founding team and Poon and Dryja went their separate ways, but Lightning Labs is now leading the overall network development effort with a rebuilt engineering team.

    In December, interest in the project surged after the three teams announced that their separate implementations worked together as one larger network. Acinq CEO Pierre-Marie Padiou reports that downloads of his startup’s Lightning mobile wallet (the software that stores the private keys needed to spend one’s bitcoin) shot over 4,000. Lightning Labs, meanwhile, has attracted more than 1,000 participants to its public Slack room, where they ask questions of the developers, contribute code or flag bugs.

    There are indeed bugs. Dryja highlights one alarming glitch: If you make a backup of your bitcoin wallet—on another computer or a USB drive, say—and decide to restore from the backup, you can accidentally claim money you’ve already spent. When that happens, the Lightning Network protocol allows your counterparty to take over all the funds in your channel. Dryja says the problem highlights the work to be done before the Lightning Network is ready for wide adoption.

    Some entrepreneurs are willing to gamble on Lightning today. Last week a VPN provider called TorGuard may have become the first company to announce it will accept payments made through the Lightning Network. But it cautioned in a tweet that the network “is not production ready” and that the company would cover any lost payments. For now, Lightning’s users are hardcore bitcoin enthusiasts willing to risk some satoshi to bask in the glory of being first.

    “There’s a great deal of hope pinned to Lightning,” says Chaincode’s Newbery. But as with any network, it success depends both on the quality of its engineering and its ability to kick off network effects. People have to use it, like it, and entice more users to join. That won’t happen in a flash.

    Decoding the Crypto Craze

    Read more: https://www.wired.com/story/the-lightning-network-could-make-bitcoin-faster-and-cheaper/

    Bitcoin Lost Almost 20% of Its Value This Week

    Bitcoin faced one of its biggest tests this week, losing almost 20 percent of its value after the world’s largest cryptocurrency reached a record high Monday.

    The digital currency plunged as much as 30 percent on Friday, before paring losses, as this week’s selloff extended to a fourth day. The weekly decline is the biggest in almost three years. Other cryptocurrencies also tumbled: ethereum dropped as much as 36 percent and litecoin slumped as much as 43 percent, according to composite prices on Bloomberg.

    Michael Novogratz, the former Goldman Sachs Group Inc. and Fortress Investment Group LLC macro trader, said he’s shelving plans to start a cryptocurrency hedge fund and predicted that bitcoin may extend its plunge to $8,000.

    “We didn’t like market conditions and we wanted to re-evaluate what we’re doing," Novogratz said in a phone interview. He predicted last week that bitcoin could reach $40,000 within a few months.

    Bitcoin dropped to as low as $10,776, before recovering to $14,303 at 4:04 p.m. in New York. It last traded below $10,000 on Dec. 1, when the U.S. Commodity Futures Trading Commission agreed to allow trading in bitcoin futures. The price of the digital coin had more than doubled in the prior three weeks.

    The losses represent a major test for the cryptocurrency industry and the blockchain technology that underpins it, which have rapidly entered the mainstream in recent weeks. Bears cast doubt on the value of the virtual assets, with UBS Group AG this week calling bitcoin the “biggest speculative bubble in history.” Bulls argue the technology is a game changer for the world of investment and finance. Both will be closely watching the outcome of the current selloff.

    “The sharks are beginning to circle here, and the futures markets may give them a venue to strike,” said Ross Norman, chief executive officer of London-based bullion dealer Sharps Pixley Ltd., which offers gold in exchange for bitcoin. “Bitcoin’s been heavily driven by retail investors, but there’ll be some aggressive funds looking for the right opportunity to hammer this thing lower.”

    Traders who bought the currency on futures exchanges using collateral may start facing margin calls following the price decline. Two venues launched products in recent weeks that required hefty security, with Cboe needing 44 percent to clear contracts, and the CME 47 percent. Brokers set safety nets even higher.

    Coinbase, one of the world’s largest cryptocurrency exchanges, said all buying and selling was temporarily disabled during today’s rout, after having delays in processing wire transfers and verifying new customers for the past week due to higher traffic. Bitcoin transaction volume jumped more than 30 percent on Coinbase’s GDAX exchange, while fees to approve and record the transactions on the blockchain surged to a record $55, according to Bit Info Charts.

    Many of the recent news stories and market moves connected to cryptocurrencies appear to carry hallmarks of the mania phase of a bubble. Long Island Iced Tea Corp. shares rose as much as 289 percent on Thursday after the unprofitable Hicksville, New York-based company rebranded itself Long Blockchain Corp. Bank of Japan Governor Haruhiko Kuroda said on Thursday bitcoin isn’t functioning like a normal means of payment and is being used for speculation.

    Still, cryptocurrencies are attracting established players. Goldman Sachs Group Inc. is setting up a trading desk to make markets in digital currencies such as bitcoin, according to people with knowledge of the strategy. The bank aims to get the business running by the end of June, if not earlier, two of the people said.

    For related news and information:
    XBT Curncy GP for bitcoin
    VCCY for a cryptocurrency monitor

      Read more: http://www.bloomberg.com/news/articles/2017-12-22/bitcoin-plummets-toward-13-000-down-more-than-30-from-record