Bitcoin’s Plunge in Volume Stirs Questions About Its Usage

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Earlier this year, when Bitcoin’s price fell by more than 60 percent from its record close, a less-noticed Bitcoin figure also plunged: the number of daily transactions.

There are many explanations for the fall-off in trading, from software- to news-related. What’s less understood is why the level hasn’t recovered as Bitcoin’s price made a 50 percent comeback since Feb. 5. That’s left some investors wondering whether the cryptocurrency is waning in popularity.

The average number of trades recorded daily has roughly dropped in half from the December highs and touched its lowest in two years last month, even as Bitcoin became a household name and roared back to near $11,000.

The transaction data may be bad news for Bitcoin bulls, according to Charles Morris, chief investment officer of Newscape Capital Group in London, who invests in cryptocurrencies. Trading and purchases on the Bitcoin network, which can be measured by metrics like transaction volume, is indicative of price direction, he said.

Average transaction confirmation times have tumbled — though that may be in part because the technology that underlies Bitcoin has already been adapted to address some of these delays. For example, a software enhancement known as the SegWit protocol, changing the way data is stored on the blockchain, was activated last week by Coinbase Inc., the largest U.S. cryptocurrency exchange.

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Not everyone agrees that lower volumes signal trouble for Bitcoin. It may be a healthy return to normality and signs that the market is maturing.

Should prices start rallying again, traders may well be coaxed back, according to David Drake, whose New York-based family office has more than $10 million in cryptocurrency and blockchain investments. He sees the currency soaring to $35,000 by the end of the year.

“We have a legacy of transactions being too slow and expensive, and it will take some time for people to forget,” Drake said by phone. “But they’ll come back.”

The decline in prices may itself be to blame for lower trading volumes in Bitcoin. And websites that once only allowed payment in Bitcoin now accept a much wider range of digital currencies, according to Kyle Samani, managing partner at crypto hedge fund Multicoin Capital. That makes alternative currencies more appealing than the first-mover in the space. A year ago, bitcoin’s market capitalization was about 85 percent of the total sector. It’s now around 40 percent, according to website

“Merchants, payment processors and online gambling are moving off of Bitcoin,” Samani, who has $50 million allocated to the space, said in an email. “Our Bitcoin position as a fund is small — I believe Bitcoin is in the process of failing.”

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    Bitcoin Snaps Slide as Crypto Markets Dodge Push for Regulation

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    Bitcoin rose for the first time in six days, snapping a losing streak that had helped push overall losses in digital currencies to about $500 billion, as the top U.S. market cops said they possessed all the authority needed to regulate and risk appetite returned to financial markets.

    Prices steadied as Securities and Exchange Commission Chairman Jay Clayton reiterated in a Congressional hearing that he believes every initial coin offering he’s seen is a securities sale and the agency already possesses the regulatory oversight needed for enforcement.

    “It was great for the space,” said John O’Rourke, chief executive officer of Riot Blockchain Inc., which invests in cryptocurrency and blockchain startups. “They don’t want to do anything to hamper the development of this technology.”

    Lawmakers may still need to to pass legislation that gives agencies jurisdiction over Bitcoin’s spot market and the online platforms that digital coins trade on, Clayton and Commodity Futures Trading Commission Chairman J. Christopher Giancarlo said during the hearing.

    The selloff had knocked about half a trillion dollars from digital coins since early January. That’s shaken a nascent market whose core attraction — anonymity and decentralization — is being challenged as never before by regulators.

    Tuesday’s U.S. hearings follow comments from Bank for International Settlements General Manager Agustin Carstens that there’s a “strong case” for authorities to rein in digital currencies and that central banks — along with finance ministries, tax offices and financial market regulators — should police the “digital frontier.”

    “Novel technology is not the same as better technology or better economics,” Carstens said in a speech in Frankfurt. He said Bitcoin may have been intended as an alternative payment system with no government involvement, yet it has become “a combination of a bubble, a Ponzi scheme and an environmental disaster,” in reference to its electricity use.

    Cryptocurrencies tracked by have lost more than $500 billion of market value since early January as governments clamped down, credit-card issuers halted purchases and investors grew increasingly concerned that last year’s meteoric rise in digital assets was unjustified. The selloff had coincided with a rout in global equities.

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    Cryptocurrency Rules From Congress Sought by U.S. Market Cops
    Bitcoin Selloff Among Biggest in Digital Coin’s History: Chart
    Why Bitcoin Goes Down as Well as Up (Plus What It Is): QuickTake
    Power-Hungry Crypto Mines Clean Up as Cost of Electricity Grows

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      The iced tea company that changed its name to include blockchain retracts on bitcoin mining operation

      Remember the iced tea company that changed its name to Long Blockchain and immediately shot up by 500 percent on the stock market? Well, it turns out it may not be getting into the blockchain after all.

      The company has decided to back off from its pledge to buy 1,000 bitcoin mining machines — just six weeks after it said it would be doing so.

      Of course, six weeks ago bitcoin was worth a whole lot more than it is now — it’s currently trading at $10,000 less than it was at the beginning of the year. That’s not to say it won’t go up again, but investors are rightfully skittish at this point.

      That slump has affected Long Blockchain’s shares, which have plunged 50 percent since it reached its dizzying height, causing the company’s market cap to sink below the $35 million minimum value required to list on Nasdaq’s exchange.

      “While we continue to believe in the value of mining equipment to the blockchain ecosystem, the purchase of these machines — which was negotiated as a no-risk option to the Company — was just one of the multiple strategic avenues we have been considering,” Shamyl Malik, head of the Company’s Blockchain Strategy Committee, said in a statement.

      Instead, Long Blockchain says it will “continue to evaluate the purchase of mining equipment for Bitcoin and other digital currencies as part of our larger blockchain initiative” as it moves ahead on completing a merger with British firm Stater Blockchain, which works on “developing and deploying globally scalable blockchain technology solutions in the financial market,” according to its website.

      Note, however, Long Blockchain was already in a pickle before adding blockchain to the name. Shares dipped by 24 percent over the last 12 months, and the company received a warning letter from Nasdaq in October, prompting the zany strategy to change its name to a zeitgeisty buzzword.

      As it turns out, glomming on to the trend of the moment to boost your value can only hold you for so long. There’s no word on when the merger will be complete, but one thing is clear — Long Blockchain is not likely to see the type of gains it once did simply by changing its name.

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      Bitcoin Ban Expands Across Credit Cards as Big U.S. Banks Recoil

      A growing number of big U.S. credit-card issuers are deciding they don’t want to finance a falling knife.

      JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. said they’re halting purchases of Bitcoin and other cryptocurrencies on their credit cards. JPMorgan, enacting the ban Saturday, doesn’t want the credit risk associated with the transactions, company spokeswoman Mary Jane Rogers said.

      Bank of America started declining credit card transactions with known crypto exchanges on Friday. The policy applies to all personal and business credit cards, according to a memo. It doesn’t affect debit cards, said company spokeswoman Betty Riess.

      And late Friday, Citigroup said it too will halt purchases of cryptocurrencies on its credit cards. “We will continue to review our policy as this market evolves,” company spokeswoman Jennifer Bombardier said.

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      Allowing purchases of cryptocurrencies can create big headaches for lenders, which can be left on the hook if a borrower bets wrong and can’t repay. There’s also the risk that thieves will abuse cards that were purloined or based on stolen identities, turning them into crypto hoards. Banks also are required by regulators to monitor customer transactions for signs of money laundering — which isn’t as easy once dollars are converted into digital coins.

      Bitcoin has lost more than half its value since Dec. 18, falling below $8,000 on Friday for the first time since November. The drop occurred amid escalating regulatory threats around the world, fear of price manipulation and Facebook Inc.’s ban on ads for cryptocurrencies and initial coin offerings.

      Now, cutting off card purchases could exacerbate those pressures by making it more difficult for enthusiasts to buy into the market. Capital One Financial Corp. and Discover Financial Services previously said they aren’t supporting the transactions.

      Mastercard Inc. said this week that cross-border volumes on its network — a measure of customer spending abroad — have risen 22 percent this year, fueled partly by clients using their cards to buy digital currencies. The firm warned that the trend already was beginning to slow as cryptocurrency prices fell.

      Discover Chief Executive Officer David Nelms was dismissive of financing cryptocurrency transactions during an interview last month, noting that could change depending on customer demand. For now, “it’s crooks that are trying to get money out of China or wherever,” he said of those trying to use the currencies.

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        A collective insanity has sprouted around the new field of cryptocurrencies, causing an irrational gold rush. I know youre tempted, but dont be a fool

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        Bitcoin Fall Extends to 25% as Fears of Crypto Crackdown Linger

        January’s cryptocurrency selloff got fresh impetus on Tuesday when Bitcoin slumped as much as 25 percent, as the prospect of regulatory crackdowns appeared to spread.

        While the largest digital coin was down 25 percent at $10,338 as of 4:37 p.m. in New York, it was still at the lowest level since early December, according to composite pricing on Bloomberg. As Bitcoin halted its two-day rally, rival cryptocurrencies also tumbled. Ripple sank as much as 40 percent and Ethereum dropped 26 percent.

        Speculators across the globe are struggling to determine when or how market watchdogs may rein in an industry that’s decentralized and derives much of its value from anonymous ownership. Many assertions that digital coins represent a bubble have triggered double-digit selloffs over the past year, only to be followed by rebounds.

        In South Korea, shutting down cryptocurrency exchanges is still an option, Finance Minister Kim Dong-yeon said in an interview with TBS radio. But measures first need “serious” discussion among ministries, Kim added, holding out hope for traders that a crackdown won’t go that far. Kim said there’s irrational speculation and that rational regulation was

        “The finance minister made it clear they’re definitely considering banning crypto trading — and it’s probably the third-largest market,” said Neil Wilson, senior market analyst in London for online trading platform ETX Capital. “The news is hitting prices and broader sentiment, and it follows China’s move to shutter mines.”

        China, which first began targeting the industry last year, is escalating its clampdown on cryptocurrency trading, particularly online platforms and mobile apps that offer exchange-like services, according to people familiar with the matter.

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        “We’ve heard reports that South Korea, China and Japan have considered a shared approach, a path, to regulation,” ETX’s Wilson said, also citing a challenge to digital coins from a bill in the U.S Senate. “It looks like the light touch that has allowed the crypto-boom to explode may be coming to an end,” he wrote in a note to investors.

        Lower-than-normal trading in Korea and Japan may have exaggerated the moves in Asia hours on Tuesday, said Mati Greenspan, senior market analyst for the eToro currency platform.

        Bitcoin trading using the Korean won was about 3.3 percent of the total among major currencies, compared with more than 10 percent reached on several days over the past two weeks, according to data.

        Steven Maijoor, chairman of the European Securities and Markets Authority, said investors “should be prepared to lose all their money” in Bitcoin, in a Bloomberg TV interview in Hong Kong. “It has an extremely volatile value, which undermines its use as a currency,” he said. “It’s also not broadly accepted.”

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        The ESMA warned retail investors against initial coin offerings in November and is monitoring developments in cryptocurrencies, Maijoor said.

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          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.

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            Bitcoin falls $1,000 after South Korea promises crackdown on trading

            Move comes less than two weeks after high-profile digital currency exchange in Seoul was hacked and went bankrupt

            Bitcoin plunged by more than $1,000 (740) on Thursday after South Korea said it was planning a crackdown on trading in the digital currency in the latest of a string of warnings for investors.

            It dropped to about $13,500 after trading at about $15,400 on Wednesday. The dip was seen as a further illustration of bitcoins volatility.

            The cryptocurrency has surged in value this year by more than 900%, becoming one of the biggest stories in finance amid a slew of warnings of a pending market crash.

            Bitcoin recovered ground later on Thursday and was trading at about $14,000 at 5.30pm UK time.

            South Korea, which is one of the biggest markets in the world for bitcoin, said it was preparing a ban on opening anonymous cryptocurrency accounts and new legislation to enable regulators to close coin exchanges if they felt there was a need to do so.


            What is bitcoin and is it a bad investment?

            Bitcoin is the first, and the biggest, “cryptocurrency” a decentralised tradable digital asset. Whether it is a bad investment is the big question. Bitcoin can only be used as a medium of exchange and in practice has been far more important for the dark economy than it has for most legitimate uses. The lack of any central authority makes bitcoin remarkably resilient to censorship, corruption or regulation. That means it has attracted a range of backers, from libertarian monetarists who enjoy the idea of a currency with no inflation and no central bank, to drug dealers who like the fact that it is hard (but not impossible) to trace a bitcoin transaction back to a physical person.

            According to Reuters, the South Korean government issued a statement saying it had warned several times that virtual coins cannot play a role as actual currency and could result in high losses due to excessive volatility.

            The move came less than two weeks after the high-profile insolvency of one of the countrys digital currency exchanges, after the Seoul-based platform was hit by hackers for a second time.

            The exchange, called Youbit, shut down after losing 17% of its assets in a cyber-attack which was later blamed on North Korean hackers. The incident followed several other attacks against cryptocurrency platforms, such as a hack earlier in the month against the cryptomining marketplace NiceHash, which lost about 4,700 bitcoins in the attack.

            The crackdown in South Korea comes amid repeat warnings from leading figures in finance and some of the worlds top economists, who have said the currency is a vehicle for fraudsters and drug dealers. There are also fears that its rapid increase in value this year could quickly unwind, causing severe losses for investors.

            Sir Howard Davies, who chairs RBS, has likened investing in bitcoin to Dantes Inferno Abandon hope all ye who enter here while Jamie Dimon, the head of JP Morgan, has said bitcoin could potentially be worse than the tulip mania of the 17th century, when bulb prices rose vertiginously before crashing.

            However, several leading academics have said bitcoin poses no threat to the stability of the financial system, as its total value stands at about $240bn, paling in comparison with the total value of global shares at almost $80tn.

            Companies are also exploring ways to exploit blockchain which is the technology underpinning bitcoin and works by securely encrypting information to speed up everything in business from making payments to transferring data and contracts.

            Bitcoin rose to nearly $20,000 a week before Christmas, following the introduction of derivatives trading for major investment firms on the Chicago Mercantile Exchange, which enabled hedge funds to place bets on future prices. However, it then lost 25% of its value on 22 December, before recovering earlier this week and then slumping again on Thursday.

            While some have said more investors in the market could help support higher valuations, the currency is on a jittery run.

            Craig Erlam, senior market analyst at trading firm Oanda, said the recent fall in value could have made speculators more wary of the potentially negative news from Korea for its market price.

            We saw plenty of this in reverse on the way up, with positive news triggering significant rises and negative news being brushed aside. It wouldnt surprise me if we see prices heading back below $10,000 before they find their feet again, he said.

            Digital currencies have grabbed the attention of global regulators this year as a consequence of bitcoins rapid price growth, gaining in value from about $1,000 at the beginning of 2017. Other cryptocurrencies such as Ethereum, Ripple and Litecoin have also gained in value this year.

            Closer control of digital currencies by financial watchdogs could result in further volatility for bitcoin, as part of its attraction among supporters has been the lack of government and central bank oversight.

            The UKs Financial Conduct Authority has issued a warning about investing in initial coin offerings, which use digital tokens to raise funds for startup businesses and projects.

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