CRYPTO CURRENCY | Hotly anticipated bitcoin futures surge on debut

NEW YORK/SYDNEY — Bitcoin futures jumped more than 20 percent in their eagerly anticipated U.S. debut, which backers hope will encourage wider use and legitimacy for the world’s largest cryptocurrency even as critics warn of the risk of a bubble and price collapse.

The launch on Sunday night may have caused an early outage of the Chicago-based CBOE Global Markets’ website. The exchange said that due to heavy traffic on the CBOE Global Markets website, the site “may be temporarily unavailable.”

The one-month bitcoin contract <0#XBT:> opened trade at 6 pm (6.00 p.m. ET) at $15,460, dipped briefly and then rose to a high of $18,700.

As of 0430 GMT, it was up 16 percent from the open at $17,940, with 2,211 contracts traded.

On the Luxembourg-based Bitstamp BTC=BTSP, bitcoin prices surged 7 percent to $15,720. It is up more than 1,400 percent so far in 2017, and its gains in the past month have been rapid.


Experts had worried that the risks associated with the currency’s Wild West-like nature could overshadow the futures debut, but so far the price action has been unlike the wild swings seen in the past few weeks. Bitcoin tumbled 20 percent in 10 hours on Friday.

“Even if there is an institution or institutional-sized trader out there, they are going to want to make sure that the mechanics work first, just for the futures,” said Ophir Gottlieb, chief executive officer of Los Angeles-based Capital Market Laboratories.

“I think the excitement will come when the futures market is established. That can take a few days,” Gottlieb added.

The futures are cash-settled contracts based on the auction price of bitcoin in U.S. dollars on the Gemini Exchange, which is owned and operated by virtual currency entrepreneurs and brothers Cameron and Tyler Winklevoss.

Market participants said the launch of the futures contract wouldn’t necessarily reduce volatility in the cryptocurrency.

“There are no ways to arbitrage between the market and other exchanges, CBOE cannot settle Bitcoin as far as I know,” said Leonhard Weese, president of the Bitcoin Association of Hong Kong.

“Regular bitcoin traders don’t have access to it, and the trading desks that use the futures market don’t have access to bitcoin.”

Cryptic currency

While bitcoin’s price rise mystifies many, its origins have been the subject of much speculation.

It was set up in 2008 by someone or some group calling themselves Satoshi Nakamoto, and was the first digital currency to successfully use cryptography to keep transactions secure and hidden, making traditional financial regulation difficult if not impossible.

Central bankers and critics of the cryptocurrency have been ringing the alarm bells over the surge in the price and other risks such as whether the opaque market can be used for money laundering.

“It looks remarkably like a bubble forming to me,” the Reserve Bank of New Zealand’s Acting Governor Grant Spencer said on a television program run on Sunday.

“We’ve seen them in the past. Over the centuries we’ve seen bubbles and this appears to be a bit of a classic case,” he said.

Many investors have stood on the sidelines watching its price rocket. However, it is possible to buy bitcoin without having to spend the full price of one coin. Bitcoin’s smallest unit is a Satoshi, named after the elusive creator of the cryptocurrency.

Somebody who invested $1,000 in bitcoin at the start of 2013 and had never sold any of it would now be sitting on around $1.2 million.

Heightened excitement ahead of the launch of the futures has given an extra kick to the cryptocurrency’s scorching run this year.

Controversial move

Bitcoin fans appear excited about the prospect of an exchange-listed and regulated product and the ability to bet on its price swings without having to sign up for a digital wallet.

Others, however, caution that risks remain for investors and possibly even the clearing organizations underpinning the trades.

“You are going to open up the market to a whole lot of people who aren’t currently in bitcoin,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

The launch has so far received a mixed reception from big U.S. banks and brokerages, though.

Several online brokerages, including Charles Schwab Corp and TD Ameritrade Holding Corp (AMTD.O), did not allow trading of the new futures immediately.

The Financial Times reported on Friday that JPMorgan Chase & Co, Citigroup Inc would not immediately clear bitcoin trades for clients.

Goldman Sachs Group Inc said on Thursday it was planning to clear such trades for certain clients.

Bitcoin’s manic run-up this year has boosted volatility far in excess of other asset classes. The futures trading may help dampen some of the sharp moves, analysts said.

“Hypothetically, volatility over the long run should drop after institutions get involved,” Gottlieb said. “But there may not be an immediate impact, say in the first month.”

source: interaksyon.com

CRYPTOCURRENCY | Bitcoin splits, but clone off to slow start

NEW YORK — Bitcoin’s underlying software code was split on Tuesday, generating a new clone called “Bitcoin Cash,” but the new virtual currency got off to a slow start due to lackluster support for its network.

The initiative was headed by a small group of mostly China-based bitcoin miners – programmers who essentially operate the bitcoin network – who were not happy with scheduled improvements to the currency’s technology meant to increase its capacity to process transactions.

These miners, who get paid in the currency for contributing computing power to the bitcoin network, initiated what is known as a “fork” on Tuesday, where the underlying blockchain splits into two potential paths, creating a new digital currency.

The blockchain is a shared online ledger of all bitcoin transactions and has spawned a range of financial and business applications.

Bitcoin’s split has created a new competitor to the original digital currency, which remains the oldest and most valuable in circulation.

Yet only a small fraction of bitcoin miners have been contributing their computing power to the new blockchain, and it took nearly six hours for the first batch of Bitcoin Cash coins to be mined this afternoon, according to Blockdozer Explorer, a firm providing data on digital currencies.

“It’s been a slow start for Bitcoin Cash,” said Iqbal Gandham, managing director at trading platform eToro. “The delay … could be a result of a lack of miner support for the new cryptocurrency.”

Bitcoin Cash on Tuesday traded on certain exchanges at a median price of $146.37, according to bitinfocharts.com, while bitcoin was at $2,729 on the BitStamp platform, down 4.6 percent from Monday.

After the split, Bitcoin Cash has all the history from bitcoin’s blockchain, creating the same number of tokens, plus the new currency created. People who held bitcoins before the split now have access to an equal amount of Bitcoin Cash for free, which they will then be able to trade for fiat currencies – legal tender such as euros and dollars – or other digital tokens.

The creation of new tokens may speed up as less computing power will be required to mine new blocks, said Jeff Garzik, co-founder of blockchain startup, in an email.

Ryan Taylor, chief executive of Dash Core, a firm that manages the development of the Dash digital currency, said Bitcoin Cash may yet be short-lived.

“Bitcoin Cash has not solved scaling,” Dash said. “It has merely kicked the can down the road with slightly larger blocks, but still lacks a credible technology to scale to massively larger numbers of users.”

source: interaksyon.com

‘Miners’ back new bitcoin software upgrade, averts split

NEW YORK — Digital currency bitcoin on Friday averted a split into two currencies after its network supported an upgrade to its software that would enhance its ability to process an increasing number of transactions.

Bitcoin’s miners have signaled their support for the so-called Bitcoin Improvement Proposal (BIP) 91, avoiding a split of bitcoin into two blockchains. The miners represent a network of computer operators who secure the blockchain or a public ledger of all bitcoin transactions

BIP 91 is the first step toward a larger effort to upgrade bitcoin through a software called SegWit2x. On Friday, the support for BIP 91 reached nearly 100 percent, exceeding the required threshold of 80 percent, according to analysts and market participants.

Some investors have warmed to bitcoin, wooed by its explosive performance and potential to compete with gold and government-issued money as a means to store value. Demand for bitcoin has grown in eight years to a market capitalization of more than $40 billion.

But fears about the bitcoin split dampened demand for bitcoin in recent weeks. After hitting record high near $3,000, bitcoin dropped as low $1,830 BTC=BTSP on the Bitstamp platform. On Friday, it traded at $2,647.

The software upgrade attempts to address the bitcoin network’s limitations in processing millions of daily transactions. Bitcoin’s network has not kept pace with its growth and is unable to process all the transactions fast enough.

“BIP 91 unleashes the next wave of innovation because it has been a little bit stagnant of late for bitcoin,” said Rob Viglione, co-founder of ZenCash, a digital coin focused on privacy and security.

Before BIP 91’s endorsement, some bitcoin investors feared it could split into two independent currencies because core developers of the network and the miners each wanted different ways to increase bitcoin’s scale.

A compromise between the two groups has been reached through SegWit2x.

“Bitcoin now has a clear run to add features that allow for faster transactions with lower costs,” said Charles Hayter, chief executive officer of digital currency analytics firm Cryptocompare.

The upgrade to bitcoin’s network will not occur until autumn, said Viglione, because several things need to happen before the new software is activated.

Market participants have complained about the delay in transactions. Analysts say a single bitcoin transaction costs on average 83 U.S. cents to execute, which means micropayments are not feasible on the network.

The network is also limited to roughly seven transactions per second. In comparison, Visa on average handles 2,000 transactions per second.

source: interaksyon.com

Bitcoin hits all-time high

NEW YORK — Digital currency bitcoin hit a record high on Friday on optimism about the approval of the first U.S. bitcoin exchange-traded fund by the Securities and Exchange Commission.

“There’s one catalyst at the moment and that is the expectation that the Winklevoss Trust will be approved on the 11th of March. That’s the only game in town,” said Daniel Masters, portfolio manager of Jersey-based Global Advisors Bitcoin Investment Program.

Investors Cameron and Tyler Winklevoss have a pending application with the SEC for a bitcoin ETF, which was filed nearly four years ago. On March 11, the twins are expected to receive a final decision from the U.S. Securities and Exchange Commission on whether they can list their ETF.

If approved by the SEC, this would be the first bitcoin ETF issued by a U.S. entity.

On Friday, bitcoin climbed to a record $1,298 on the BitStamp platform. Bitcoin last traded at $1,263.01, up nearly 5 percent on the day. So far this year, bitcoin has surged more than 30 percent.

Bitcoin is a virtual currency that can be used to move money around the world quickly and anonymously without the need for a central authority.

Darin Stanchfield, founder and chief executive officer of bitcoin wallet KeepKey, said the approval of the Winklevoss ETF would be a big boost to the market. “It should add a fair amount of liquidity to the bitcoin market,” added.

To date, there are two other bitcoin ETF applications with the SEC. Grayscale’s Bitcoin Investment Trust, backed by early bitcoin advocate Barry Silbert and his Digital Currency Group, filed its application with the SEC in March last year.

SolidX Partners Inc, a U.S. technology company that provides blockchain services, also filed its ETF application in July of last year.

Bitcoin relies on so-called “mining” computers that validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes. In return, the first to solve the puzzle and clear the transaction is rewarded with new bitcoins.

Analysts said the groundwork for bitcoin gains was laid in July last year in a process called “halving,” where rewards offered to bitcoin miners shrink. That has constrained the supply of the digital currency.

Dan Morehead, chief executive officer at hedge fund Pantera Capital, said in his recent letter to investors that the bitcoin price moves in line with the currency’s use in transactions and both have risen sharply.

He sees the bitcoin price possibly rising to $2,288 by the end of the year,

source: interaksyon.com

Chip designers see dollar signs in Bitcoin miners

SUNNYVALE — Tucked away in an air conditioned data center in Silicon Valley is a hodgepodge of black boxes, circuit boards and cooling fans owned by 27-year-old Aaron Jackson-Wilde, a modern-day prospector looking for Bitcoins.

Since discovering the digital currency a few months ago, Jackson-Wilde has paid about $2,000 for his “rigs,” which are powered by specialized computer chips. They are designed to help operate and maintain the Bitcoin network – and, in return, generate a small reward in a process known as “Bitcoin mining.”

A form of electronic money independent of traditional banking, Bitcoins started circulating in 2009 and have since become the most prominent of several fledgling digital currencies.

While they quickly gained a reputation for facilitating drug deals and money laundering, Bitcoins have of late garnered attention from investors, such as venture capital firm Andreessen Horowitz. The volume of transactions using Bitcoins today remains miniscule, but enthusiasts believe the peer-to-peer currency will play a major role in e-commerce and could eventually become as ubiquitous as email.

Bitcoin mining is based on a unique feature of the digital currency. Unlike traditional currencies, where a central bank decides how much money to print based on goals like controlling inflation, no central authority governs the supply of Bitcoins.

Instead, Bitcoin transactions are tracked by a network of computers that solve complex mathematical problems to validate transactions and prevent counterfeit. The system automatically generates new Bitcoins as the math problems are solved and rewards them to the computer operators.

In a key twist that keeps inflation in check, the difficulty of the cryptographic math that leads to newly minted coins grows as more computers join the network.

That has led some technology professionals to target a new market in souped-up computers and specialized chips aimed at the growing ranks of Bitcoin “miners.”

Consider Ravi Iyengar, who first heard of Bitcoins about six months ago. Since then he has quit his job as a senior chip architect at Samsung Electronics and raised $1.5 million to launch CoinTerra. He says he has already pre-sold more than $5 million worth of the hardware he has designed for Bitcoin mining.

“I’ve been in arms races throughout my career – AMD, ARM, Intel,” said Iyengar, referring to prominent semiconductor companies, “but none of them match the intensity of Bitcoin mining. Each month in Bitcoin mining is like a year.”

Perishable silicon

Little is known about exactly who started Bitcoin, but the concept was introduced in a 2008 paper written under the pseudonym Satoshi Nakamoto. Since then, Satoshi Nakamoto has become sort of a patron saint among advocates pushing for Bitcoins as an alternative to national currencies.

Bitcoin is not backed by physical assets, is not run by any person or group, and its value depends on people’s confidence in the currency. The dollar price of Bitcoins has spiked over the past year as more people became aware of the currency and speculators jumped into the market, which remains highly volatile. Bitcoin recently broke $200, compared to $12 a year ago.

The goal of Bitcoin miners is to pull in more than what they spend on their rigs – some cost over $20,000 – and the electricity they need to keep the machines running 24 hours a day.

That is no easy feat. In the past three months, miners added so much gear with drastically improved chips that processing power on the network jumped from 289 terahashes per second to more than 4,000 terahashes per second, according to The Genesis Block, a blog that collects Bitcoin data.

In reaction, the network drove up the difficulty of verifying each cryptographic block of transaction data, making it even harder to break even on investments in costly mining gear.

“Bitcoin makes silicon perishable,” said Andreas Antonopoulos, a digital currency entrepreneur in San Francisco. “Your mining rig rots away in front of your eyes every day you have it.”

It has become so hard to make a profit that comparisons to the 19th century California gold rush, when money was often made selling shovels to naive prospectors, have become a running joke among Bitcoin miners.

“It’s the guys who sell the equipment who are making the money, not the Bitcoin miners,” said Jackson-Wilde, a manager at a company that makes motorcycle batteries.

CoinTerra believes spending on new Bitcoin mining chips could easily hit $100 million a year for the next three years, assuming no change in prices. While that is peanuts for large semiconductor companies like Intel Corp and Qualcomm Inc, it is a lucrative market for a handful of small developers.

About 11.9 million Bitcoins, worth $2.4 billion at recent prices, have been minted since the currency began circulating. Based on recent activity, the network is on track to create around 1.4 million new Bitcoins annually over the next three years, the equivalent of more than $280 million a year at recent exchange rates.

Reflecting growing competition, Jackson-Wilde says his gear – which features model names like Erupter, Jalapeno and Spartan – now pulls in a tiny fraction of the Bitcoins it used to, but he expects another $10,000 worth of next-generation equipment to put him in the black.

Despite the expenditures, he considers himself a hobbyist committed to supporting the Bitcoin network rather than a serious digital-currency investor.

“Buying and selling Bitcoins is enticing, but it’s not as enticing as being part of it and actually having hardware,” he said.

Hobby state

Mining with a simple laptop PC was easy back in 2009, when the fledgling Bitcoin network was a fraction of its current size. But within a year, hobbyists found that graphics chips, often referred to as GPUs and widely used by PC gamers, could provide a major boost in mining output.

Miners cobbled together dozens of graphics chips in their garages and basements, surrounded by fans to keep the electronics from overheating.

Then in 2010, entrepreneurs caught wind. Jeff Ownby and a handful of colleagues had just formed Butterfly Labs with the goal of using off-the-shelf programmable chips, known as FPGAs, to help banks run complex financial risk simulations.

“As we were starting down the road planning this, we read about Bitcoin and said ‘Wow, this is exactly what we’re trying to do here,’” Ownby said. “It was pretty much in a hobby state, so we thought this might be something.”

Butterfly Labs and other startups optimized FPGAs, which are more typically used in factories and telecommunications gear, to work efficiently on the Bitcoin network.

In 2012, the Bitcoin arms race escalated again when Butterfly Labs and rivals, all with little or no semiconductor engineering experience, started designing chips from the ground up. Custom chips, known as application specific integrated circuits (ASICs), are normally made by companies focused on high-volume products like televisions – not startups making small batches of digital mining devices.

“They’re the Wild West,” said John Cheng, head of California based-Custom Silicon Solutions, which helped Butterfly Labs design and manufacture its ASIC. “There’s a certain rhythm you’re used to in the chip business. It’s usually two or three years before your ramp, but these guys wanted to ramp in six months.”

Butterfly Labs said on Thursday it recently took a downpayment for new mining gear in Bitcoins equivalent to $1 million, the largest-ever transaction in the digital currency. It identified the customer as HashTrade, a company selling contracts for cloud-based Bitcoin mining run in data centers.

David Johnston, executive director of BitAngels, an investment group, says consolidation in Bitcoin mining is well underway.

“Mining has been going through these different generations and going up a learning curve, from amateurs running CPUs and GPUs to new professionally funded companies with experienced chip designers taking it to the state of the art,” Johnston said.

Still, there remain plenty of oddities in the Bitcoin mining business. Johnston cited ASICMiner, which both sells mining rigs and runs its own mining operations, as one of the largest and most respected operators. The company has even sold stock to online investors who paid in Bitcoins.

ASICMiner recently had a market value equivalent to $50 million, according to data on the BitFunder online exchange.

But few know where the company is located, or even who is in charge. The chief executive communicates through web forums under the pseudonym “Friedcat.”

source: interaksyon.com

Bitcoin group, US regulators discuss digital currency

WASHINGTON — U.S. regulators and law enforcement agencies met on Monday with an advocacy group for Bitcoin, a digital currency that has been under fire for its purported role in facilitating anonymous money transfers.

Jennifer Shasky-Calvery, director of the Financial Crimes Enforcement Network (FinCEN), said her unit hosted a presentation by members of the Bitcoin Foundation, an advocacy group of Bitcoin-related businesses.

“This is part of our ongoing dialogue aimed at enhancing communication with our regulated financial industries,” Shasky-Calvery said in a statement.

She also noted that virtual currency exchanges must register with regulators and face requirements similar to those imposed on other financial firms. FinCEN is the Treasury Department’s anti-money laundering unit.

Bitcoins, which have been around since 2008, are a form of electronic money that can be exchanged without using traditional banking or money transfer systems.

Bitcoins are the most prominent of these new currencies, which have come under scrutiny from regulators and law enforcement officials.

Representatives of the Bitcoin Foundation did not immediately respond to requests for comment. The group’s website says it aims to make the currency more respected and to improve and protect its integrity.

The currency first came under scrutiny by law enforcement officials in mid-2011 after media reports surfaced linking the digital currency to the Silk Road online marketplace where marijuana, heroin, LSD and other illicit drugs are sold.

In recent months, the U.S. government has taken steps to rein in the currency and more regulatory action is expected.

Tokyo-based Mt. Gox, the world’s largest exchanger of U.S. dollars with Bitcoins, had two accounts held by its U.S. subsidiary seized this year by agents from the Department of Homeland Security on the grounds that it was operating a money transmitting business without a license.

The Federal Bureau of Investigation reported last year that Bitcoin was used by criminals to move money around the world, and the U.S. Treasury said in March that digital currency firms are money transmitters and must comply with rules that combat money laundering.

The Senate Committee on Homeland Security and Government Affairs launched an inquiry into Bitcoin and other virtual currencies earlier this month, asking a range of regulators to list what safeguards are in place to prevent criminal activity.

source: interaksyon.com