Bitcoin Weekly Digest; Top Cryptocurrencies Stories From September 3-10

  • Key metrics point to burgeoning Bitcoin network security
  • Twitter has no interest in creating its own cryptocurrency
  • SEC Chair outlines hurdles to approval of Bitcoin ETF
  • Testnet for Ethereum’s Istanbul upgrade postponed

Bitcoin network growing ever stronger. Will price follow?

The most widely disseminated news regarding Bitcoin this week was the movement of 94,505 BTC in a single transaction, valued at roughly $1 Billion, for which a fee of .065 BTC was paid. Blockchain data research firm, TokenAnalyst linked the input addresses to Singapore-based exchange, Huobi.

Many noted that a far lesser fee would have sufficed, but it’s not far-fetched to assume that the fee paid may have been meant as a token of gratitude to the miners for supporting the network.

Indeed, we all have good reason to thank the miners as they have been making the network more secure than it has even been. The Bitcoin network’s hash rate has been setting and breaking new ATH records on a daily basis recently.

At 97 quintillion hashes per second, it is on the brink of reaching 100 quintillion for the first time in history. To contextualize this number, the network’s hash rate was a mere 10 quintillion hashes per second in December 2017 when Bitcoin set its ATH price record.

Another recent research from TokenAnalyst found that centralized exchange inflows, which are transactions sent to exchanges, have declined significantly in the last 20 months – from nearly 250k daily transactions in January 2018 to less than 25k transactions in July 2019, showing that holders are taking control of their coins.

This corresponds with data from Coin Metrics, which revealed that the number of Bitcoin addresses holding at least 10 bitcoins is at an ATH of 150k+ addresses. Granted, many of these addresses may be the same individual holding their coins in multiple addresses but exchanges tend to hold most of their coins in a single offline address. Therefore, this is indicative of diminishing concentration of distribution.

While higher hash rate secures the network and the blockchain from various common attack vectors, less concentrated distribution of coins secures the price from being manipulated by a few players with greatly consequential market leverage.

Jack Dorsey is not a fan of corporate blockchains

Since Facebook announced its plans for Libra, many bandwagon-hopping corporate entities have predictably started dallying with or have begun working on their own private digital currencies.

Given the backlash Facebook has had to contend with in the last couple of months, you have to wonder why? It may be that, in their infinite wisdom, they are labouring under the notion that the opprobrium was directed only towards Facebook, and not private blockchains altogether.

Every man and his dog is straining to find ways to tokenize their business or brand now. Only in this past week, we learned that Micronesian island nation, the Marshall Islands is issuing its own sovereign digital currency after using the US dollar as its de facto national currency since becoming independent in 1979. Former boxing champion from Philippines and current senator, Manny Pacquiao launched his own vanity digital currency, known as ‘Pac’ tokens, at a concert in Manila.

With altcoins now on the wane, the next cryptocurrency bubble could unleash upon us a plethora sovereign, corporate or vanity tokens. Twitter founder, Jack Dorsey, who has been a long-time Bitcoin proponent, wants no part of it.

Speaking in Melbourne at an event for Square Terminal, a point-of-sale device for small businesses independent from banks, Dorsey opined that “open internet standards serve every person better than ones controlled or started by companies” and he would therefore support “existing, open standards” such as Bitcoin, rather than create a corporate currency.

Square, which sells Bitcoin through its cash app and enabled BTC deposits in June, generated $125 million in revenue from Bitcoin trading by its customers, netting a $2 million profit for the company.

Dorsey once again reiterated that Bitcoin remains the best bet to become the currency of the Internet, “I think Bitcoin is the best bet because it’s been the most resilient, it’s around for 10 years, it has a great brand and it’s been tested a bunch. As I look at all cryptocurrencies that could fill that role of being the native currency for the internet, Bitcoin is a pretty high probability.”

SEC clarifies reasoning for holding off Bitcoin ETF approval

Since the late 2017 bull market, numerous applicants have been jostling to get a Bitcoin ETF (exchange-traded fund) approved. From Winklevoss to Proshares to Bitwise to VanEck and SolidX, SEC has either outright rejected applications with short shrift or simply kicked them into long grass.

On Monday, SEC Chairman Jay Clayton tackled the subject, stating that although progress was being made in cryptocurrency markets, there was still “work left to be done” before a Bitcoin ETF becomes a reality.

Just as he had remarked in the past, Clayton highlighted concerns over price manipulation was a major sticking point for the commission, “Given that they trade on largely unregulated exchanges, how can we be sure that those prices aren’t subject to significant manipulation? People needed to answer these hard questions for us to be comfortable that this was the appropriate kind of product.”

Clayton had also previously stated that custody was another point of concern, “We’re engaging on this, but there are a couple of things about it that we need to feel comfortable with. Custody is a long-standing requirement in our markets, and if you say you have something you really have it.”

We may see a softening of stance from SEC with the launch of Bakkt, which will see the Bakkt Trust set to take custody of bitcoins. However, price manipulation in cryptocurrency markets is not something that is going away anytime soon.

Taking an alternate route to establish trust in their product, VanEck Securities and SolidX Management announced on Tuesday that they would take advantage of an SEC exemption, which allows shares in their VanEck SolidX Bitcoin Trust to be offered exclusively to institutional investors, without exposure to retail investors.

It’s important to note that an ETF approval for any asset has never been easy to come by without rigorous due process. The first gold ETF wasn’t approved until 2003, 60 years after gold ceased to be used as money and asserted its worth exclusively as a store of value.

New October date set for Ethereum’s Istanbul testnet upgrade

Ethereum has a long history of deferred and abortive protocol upgrades. In January 2018, Ethereum co-founder Vitalik Buterin promised that 2018 would be the “year of action” for the embattled smart contract platform.

It was to be the year “where all of the ideas around scalability, Plasma, proof-of-stake, and privacy that we have painstakingly worked on and refined over the last four years are finally going to turn into reality.”

Later in November 2018, at the Ethereum developer conference, Devcon, the developers pored over five years of failed ideas and research in what came across as a tedious threnody. In February this year, Ethereum finally completed Constantinople and St. Petersburg network upgrades, reducing the cost of executing operations on the chain.

The first half of the latest upgrade in the works, dubbed Istanbul, was originally scheduled for testnet this month. It has now been postponed by a month, set for early October, with mainnet activation tentatively scheduled for November.

Of the 30 proposed Ethereum Improvement Proposals (EIPs) for Istanbul, only six have been approved by developers. Large volume of proposals has been cited as the reason for the postponement of testnet. Istanbul upgrade will improve Ethereum blockchain’s interoperability with privacy coin Zcash and better secure the network from replay attacks.

The second part of the upgrade, dubbed Berlin, is expected to take place in the first quarter of 2020 and includes a mining algorithm change to Progressive Proof-of-Work (ProgPoW), which would make Ethereum resistant to ASIC miners. The proposed mining algorithm is currently undergoing a security audit by security consulting firm Least Authority.

With the Ethereum network, there are no guarantees until the upgrades go live. Ethereum Foundation has been subject to waves of broadside from both developers and network users for its management of projects and centralized decision-making.

Anthony Donofrio, a founding member of Ethereum recently criticized the organizational structure at the Ethereum Foundation as “hot garbage” and the foundation has been reportedly forcing teams of coders to leave if they cannot find some other source of funding to support the projects.

Trading Insights

In a week which saw gold record its worst daily session in over two years and Bitcoin bullishly diverge from yuan to hit record high inverse correlation, BTC/USD closed the weekly session last week on Sunday at 10400, a 7% gain from the previous week’s close, forming a bullish engulfing pattern.

Whether the pattern will complete and lead to yet another retest of 10800 with a further close in green this week remains to be seen.

The daily chart shows narrowing bands of standard deviation, with the 50-day SMA proving to be of strong resistance. Despite a bearish DI crossover, there’s no indication as yet of any bearish momentum with ADX sliding further below 20.

A sequence of lower lows and receding momentum portray an ominous inevitability of trend reversal. However, for a reversal to be confirmed, the price would have to decisively break down below the 9300 support level.

Ethereum price forecasts have been terribly bleak for many months but a reversal could be in the offing at long last.

The ETH/BTC daily chart has been forming a falling wedge pattern over the past four months and seems to have broken out of it this week, which, combined with attendant bullish RSI divergence from the price curve, could lead to an uptrend if the retest of resistance for support holds. For those looking to take long positions, a stop-loss at 0.017 is recommended.

Among other major altcoins, Bitcoin SV, BNB and TRON recorded significant losses against Bitcoin, as the leading cryptocurrency retained a 70% market dominance.

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Lamps Toujours
Lamps is a British economist and Bitcoin evangelist with an elusive ken for all things blockchain. A writer by avocation, Lamps' suasive opinions and analyses evince a quenchless passion to promote the integration of blockchain as the new economic and commercial infrastructure on a global scale.

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