Bitcoin Finance News Roundup - 9th March 2015

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Price news

Bulls are in control at the moment leading to a slow but steady increase in price over the last week.

We saw a spike of around ~$15 on 5th March which looks largely attributable to the misleading headline on BTCChina’s Twitter feed that, “#Bitcoin and like #crypto currencies have been officially recognized as lawful virtual commodities”. Whether the jump in price was due to traders acting on the “news” or just traders taking advantage of any news to pump the price is a good question. Upon closer inspection, the statement was merely the opinion of the cryptocurrency lawyer Roland Sun. An interesting interview, but very far from an “official” announcement.

Seven-day average price: $274.59 End of week market cap: $3.8 billion

(Prices quoted according to Coindesk Bitcoin Price Index)

Bit Investment Trust Get’s Go Ahead from FINRA

Probably the biggest news from the week was SecondMarket‘s Bit Investment Trust (BIT) achieving long-awaited approval from FINRA to be listed publicly on OTC Markets Group Inc’s platform.

BIT is an investment vehicle for professional investors looking for exposure to bitcoin without having to worry about the technical aspects of storage and security. Since it’s launch as a private fund in September 2013, BIT has raised $60m in investment from accredited investors. This is tiny by Wall Street standards, but its pending public listing has been considered by many in the community to be the potential catalyst for bitcoin’s next rally. Once BIT is launched on OTC Markets, the majority of Wall Street’s more traditional players – brokers, financial advisors, hedge funds, family offices, 401k plans, pensions, IRAs – will finally be able to add bitcoin to their portfolios.

I think there’s more than a passing interest in bitcoin’s speculative potential which may lead to some price fireworks around the launch date. But after the dust has settled there could be a realisation that perhaps expectations had been a little overoptimistic – it’s going to take time to make Bitcoin work. For the long-term, however, it’s a good development and the more ways for people to get involved with the innovation of bitcoin the better.

Third US Government Bitcoin Auction

SecondMarket were in the news for a second time this week with an announcement that they did not win any of the 50,000 bitcoins offered in the latest US government bitcoin auction.

This marked the completion of the third bitcoin auction by the US government since the FBI seizure of the Silk Road bitcoins last year. There is no obligation for the organiser or the winner to announce the results, so we may never find out who won or the final bid price.

The US Marshall Service state that they still hold 44,341 bitcoins, and the expectation is that the next auction will be the last (previous auctions were also for around this amount). It will be interesting to see what happens to the bitcoin price once the spectre of a huge bitcoin dump onto the market is lifted.

On a side note, I love the idea that the US government is selling bitcoin, even going so far as to stagger the auctions to avoid adversely affecting the market. If this doesn’t give legitimacy to the idea of bitcoin as an asset with value I don’t know what does.

European Central Bank Digital Currency Report

Hot on the heels of last week’s Bank of England report, the European Central Bank (ECB) has released its own report on “virtual currency schemes”.

As per usual with these kinds of reports, bitcoin is described as “inherently unstable”, ignoring both bitcoin’s early-stage development and the instability that can emerge from a centrally-controlled currency. I don’t think many people would consider the Russian ruble or Swiss franc stable right now.

However, it’s view that bitcoin could be used to revolutionise cross-border payments, and the warning of the risks of “scamcoins” (read: altcoins) are points well made.

Bitcoin Exchange Update

There were a number of developments in the international bitcoin exchange space this week:

  • Advent of bitcoin market and trade surveillance. Market surveillance and analytics firm Ancoa are to provide services to bitcoin options trading platform LedgerX. [“…LedgerX will be able to instantaneously identify and investigate manipulative behaviors and suspicious trading practices on its own exchange, across other derivatives exchanges and across the multitude of bitcoin spot markets.” Ledger X is yet to receive approval for launch, but I’d be very interested to see what they uncover in this wild and largely unregulated industry!
  • New Brazilian bitcoin exchange. FlowBTC was launched this week by an ex-Deutsche Bank employee. The exchange is based on white label exchange platform Alphapoint, and taps into other Alphapoint exchange liquidity around the world such as Canada’s Cointrader and Mexico’s meXBT. For now, this seems likely to become a common solution to combat the low bitcoin liquidity in most jurisdictions outside of the USD and CNY bitcoin pairs.
  • New Columbian bitcoin exchange. Criptobanco is another new South American bitcoin exchange to launch this week. Similarly they have chosen to use a white label exchange platform from Mimetic Markets. However they don’t seem to have any liquidity sharing agreement with other exchanges and at time of writing have zero trade activity.
  • New Japanese bitcoin exchange. Zaif, have launched a new bitcoin exchange in Japan. They’ve received a large investment and it’s good that Japanese users now have somewhere to trade bitcoin again, but considering the already low confidence towards bitcoin in Japan (thanks to the collapse of Mt Gox), I would be concerned with the addition of an exchange with a strong affiliation to a largely unproven altcoin such as Monacoin.
  • OKCoin reduces fees Beijing-based OKCoin reduced the fees on its international USD exchange this week. Coinbase’s temporary zero-fee promotion aside, this move makes OKCoin the lowest cost USD exchange at the moment, and continues a trend of falling trade fees in the space.
  • BitVC phases out “socialised losses”. Bitcoin futures trading platform BitVC has released a creative solution to replace the controversial “socialised losses” system currently used by most Chinese bitcoin futures markets. However this new risk management system is relatively untested and only time will tell whether it can result in fairer distribution of system losses across users on the platform.
  • QuadrigaCX to be the first publicly traded bitcoin exchange. QuadrigaCX, a Canadian bitcoin exchange, have announced that they are going to be traded on the Canadian Securities Exchange (CSE/CNSX) by early April. The Canadian bitcoin exchanges have generally been quite troubled, with the two main Canadian exchanges Vault of Satoshi and Cavirtex having closed early in 2015. While QuadrigaCX looks poised to take over the mantle, liquidity is low in Canada (QuadrigaCX 24hr volume: 126BTC) and I would be wary about diving head-first into this investment. Do your research.
  • Kraken update website. The leading BTCEUR exchange Kraken has redesigned their website. It was not well received. If we’re going to improve the industry’s credibility, we need to start investing in better design pronto.

 

Full disclosure: Neil Woodfine is an employee of bitcoin exchange OKCoin and is invested in bitcoin. The views expressed above are purely the author’s own and do not represent any organisation. None of the above should be considered as investment advice.

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