Before today’s post, a rare top-of-bill offer and opportunity for you, dear readers. The Sibos conference (a major financial industry powwow) will be taking place in Boston the week of Sept 29. Circle and the Bitcoin Investment Trust will be co-sponsoring a screening of “The Rise & Rise of Bitcoin” documentary for conference attendees, as well as a VIP Party that evening atEmpire for around 500 people. Circle has reserved a few spots for TBI readers, so please ping me ASAP if you think you can make it, and I’ll send them a short list of those who should make the cut this weekend.
I’m into nepotism and will pick favorites to join me for a night of open bar, DJ entertainment, and good chow with some of the movers and shakers from the real financial industry. No guarantees, so email me soon.
Bitcoin Pricing and Advocates
A lot of people asked me this week why I think the bitcoin price has been tanking. It’s easy for people to think that someone could be manipulating the market or that there is some big inside information that is driving insiders to sell, but I believe the reasons for this recent drop are (probably) innocuous. Aside from the fact that there simply isn’t a great deal of buying interest and continuous sell-side pressure from merchant conversions, there are a few things that stand-out…
First, there is probably some tax selling. We’re only a few weeks away from the extended October 15th personal income tax deadline in the US, and it’s likely (given bitcoin’s complicated tax status) that a disproportionate percentage of bitcoiners will be filing their returns late. With no near-term price stimulus on the next month horizon, this week was as good as any to sell. For those with lots of bitcoin exposure, the 10% price drop could have scared them into liquidating a few weeks early. Selling at a loss is better than tax evasion.
Second, unless you are living under a rock, you know that Chinese e-commerce and payments giant Alibaba priced its IPO today. This is one of the easiest trades you could possibly make if you were able to get in at the IPO price. Dump some BTC to buy BABA, and then sell it after it pops. I don’t think this is a crazy assumption. Aside from the barrage of sales from mining pools and merchants, the only other real action on the bitcoin exchanges from a day to day basis comes from active traders who eat up volatility. And there should be a significant overlap between the US and Chinese traders who know BABA and the US and Chinese traders who know BTC. If this is in fact a short-term trade for a few, then maybe we’ll see a bounce back to $500 next week. Remember, BABA’s float is ~$30BN and market cap is about $230BN, which is about 300x and 40x the size of BTC’s, respectively. It wouldn’t take many traders to make this move for it to make sense.
Finally, with mining difficulty at all time highs and the bitcoin price drifting lower, there is a vicious cycle that kicks in for any miner who is selling BTC to cover overhead. If you have a giant bitcoin mining operation, you were making 80-90% margins earlier this year, and could hypothetically sit on 80-90% of your coinbase rewards. Today, even the biggest miners must be temporarily running at or close to break-even, so if you need to convert your mining rewards to fiat to cover costs, the percentage of freshly mined coins sold on exchange is now nearing 100%. That means that miners who made 25 BTC at $500 per BTC with $10,000 in expenses still have the $10,000 in expenses at $400 per BTC, even though their margin has gone to near-zero. And while that nominal sell-side pressure hasn’t changed, it becomes larger as a percentage of volume (other things equal).
Honestly, most of you know I don’t like talking about short-term price movements because I’m not a trader. I’m a long-term dude. But I don’t know where all of the really good block chain / price analytics blogs have gone. Maybe they are all heads down on product, and only share research that makes their clients rich.
Damn it! When will I learn…
The CoinCenter launch yesterday was a huge deal.
The new DC-based public policy and advocacy group is the most legitimate looking political organization formed in Bitcoin to date, and in that niche appearances matter. Executive Director Jerry Brito (formerly with the Mercatus Center) is complemented by a rock star board of directors with Marc Andreessen (big VC), Balaji Srivinasan (big miner via 21e6), Susan Athey (leading academic via Stanford), Jeff Garzik (Bitcoin core developer & BitPay engineer), and Alex Morcos (big hedge fund / angel investor and primary sponsor of the MIT bitcoin drop) — not to mention over $1 million in seed funding from a16z, Barry Silbert, Union Square Ventures, RRE Ventures, and most of the industry’s top funded startups.
It’s an exclusive club of donors and a decidedly undemocratic, but top-tier board, supporting what could be a fully baked public policy team. Ideologues might hate them, but this group couldn’t have launched at a better time.
Even the Bitcoin Foundation itself has to be happy with this news, as they can continue to expand internationally and focus on maintaining the Bitcoin core, while being relieved of some lobbying duties. There will always need to be some public policy initiatives run through the TBF, but hopefully that will be deemphasized once CoinCenter scales. The Foundation’s public image is too damaged to do truly effective policy work. The fresh blood in DC will help all.
Money 20/20 (November 2-5 in Las Vegas)
Money20/20 is the world’s largest event enabling payments and financial services innovation for ‘anywhere, anytime’ connected commerce at the intersection of mobile, retail, marketing services, data and technology. With 6,500+ attendees, including more than 500 CEOs, from over 2,250 companies and 50 countries, Money20/20 is critical to realizing the vision of disruptive ways in which consumers and businesses manage, spend and borrow money. The next Money20/20 will be held on Nov. 2-5, 2014 in Las Vegas, and will be preceded by the Money20/20 Hackathon, which runs Nov. 1-2. Register here!
Inside Bitcoins Conference (September 15-16 in London and October 5-7 in Las Vegas)
The CCN has partnered with Inside Bitcoins to offer 50% discounts on conference passes to students! Just use the code COLLEGECRYPTOSTUDENTS. (You will need to provide info that you are a full-time student, so send an email to firstname.lastname@example.org with copy of your student pass after registering.) Inside Bitcoins London and Las Vegas are the latest Media Bistro conferences on the calendar following shows this year in Berlin, Hong Kong, and New York. For more information on the London show, visit here. For more information on Vegas, you can sign up here.
Jobs, Jobs, Jobs
Check out HoneyBadgr, which introduces top talent to early stage and venture-backed Bitcoin startups. They are a team of ex-Googlers residing at Boost VC in Silicon Valley, with a mission to help grow the Bitcoin ecosystem on a global scale.
Today’s Tid Bits
Bitcoin Think Tank Coin Center Launches
Coin Center, a new public policy organization dedicated to digital currency advocacy and research launched in Washington DC this week. The organization will have an initial budget of $1m, which it received from a variety of investors including Andreessen Horowtiz, BitGo, BitPay, Coinbase, itBit’s Charles Cascarilla, Hudson River Trading, Liberty City Ventures’ Emil Woods, RRE Ventures, Union Square Ventures, and Xapo. One of Coin Center’s main goals will be to positively shape global regulatory debate around digital currency.
Compliance Company Strevus Comments on BitLicense Proposal
Strevus, a regulatory compliance platform commented on the BitLicense proposal by originally commending NYDFS for taking the lead in Bitcoin regulation. But they did have some criticism; they believe that the Bitcoin Regulations should “be no more burdensome than New York’s Money Transmitter law nor the Federal AML laws.” Strevus believes the BitLicense is too stringent on Currency Transaction Reporting (CTR), Suspicious Activity Reporting (SAR), and the Enhanced Due Diligence reporting for bitcoin businesses.
Bitcoin Topic of Discussion at Recent Fed Meeting With Bankers
In a meeting in early May between the Federal Reserve Board and members of the banking industry, bitcoin was discussed. The meeting groups came to the conclusion that “Bitcoin does not present a near term threat to the banking system by way of disintermediation.” Though they did admit “various security concerns will continue to hinder adoption.” It was also mentioned that if adoption of bitcoin continues, bankers could begin to participate in “Bitcoin fund flows.”
Apple Pay won’t bite into Bitcoin: Cameron Winklevoss
While on CNBC’s Squawk Alley yesterday, promoting his investment in Authy, a two-factor authentication app, Cameron Winklevoss told CNBC that Apple Pay wouldn’t waver use of bitcoin. Cameron explained that “Apple Pay is a closed system…bitcoin is inherently open sourced, decentralized.” Cameron and Tyler Winklevoss are still awaiting SEC approval for their bitcoin ETF, ‘COIN.’
Bitcoin Charts by Professor Steve H. Hanke
Steve H. Hanke, Professor of Applies Economics at The Johns Hopkins University along with his assistant, Mazin Al-Rayes have put together a series of charts about bitcoin. The charts include bitcoins in circulation, miner’s revenue, hash rate difficulty, market capitalization, USD trade volume, bitcoin price and volatility, bitcoin risk versus reward, price moving averages, and short and long term positions on bitcoin.
Instabill Extends Banking Lifeline to Isle of Man Bitcoin Startups
Following yesterday’s news that Capital Treasury Services will no longer provide banking support for Isle of Man’s bitcoin companies, Instabill came to the plate. Instabill, a company that offers merchant account services to high-risk companies, announced that it would offer merchant and banking accounts to companies working in the digital currency industry on the Isle of Man. Instabill will allow merchants to accept major credit cards and its payments gateway supports 160 currencies.
Coinbase Launches a Free Bitcoin API for Developers, Toshi
Yesterday, Coinbase announced the launch of Toshi, an open source bitcoin node designed for developers. The software, which will make it easier for developers to build web applications, is compatible with Bitcoin Core and written in Ruby using the PostgreSQL database. Toshi will allow users to gather blockchain information, store bitcoin securely, exchange bitcoin, and even accept it.
Koinify Raises $1 Million for Smart Corporation Crowdfunding Platform
Koinify, a California-based company that seeks to provide the financial backbone for decentralized platforms or crypto 2.0 companies, has raised $1 million in fuding. The new funding will go to further developing its decentralized application crowdfunding platform, which will enable the creation of smart corporations and decentralized applications. The round of funding included IDG Capital Partners, Brock Pierce’s AngelList syndicate and zPark Ventures. Koinify has raised $1.4m in funding to date.
Huobi Launches USD Exchange
Huobi, a Chinese based bitcoin exchange, has launched BitYes.com, a USD-based platform for trading bitcoin and litecoin. BitYes will feature a 24/7 English customer support, will charge a 0.2% standard trading fee, 1% fiat currency deposit fee and a 0.1% bank withdrawal fee. BitYes has also collaborated with the law firm, Perkins Cole to ensure regulatory compliance in various jurisdictions.
Mark Karpeles: My Life Is at Risk
Mark Karpeles, the CEO of the now defunct Mt. Gox exchange sat down with The Daily Beast for an interview. Karpeles portrayed himself as a regular “computer geek,” who now finds his life in danger. In the interview, Karpeles discussed his background, his beliefs on bitcoin, and predicted that more bitcoin exchanges would continue to collapse in the future. When asked about the Japanese police conducting the investigation for Mt. Gox, he described them as “efficient.” Karpeles ended the interview on in dismal tone; wishing people would begin to view him as a human being, not just “Mr. Mt. Gox.”
The Rock Trading Bitcoin Exchange Partners with Green Address
The Rock Trading, a European cryptocurrency exchange has announced a partnership with GreenAddress, a security centered Bitocin wallet provider. The partnership will allow the Rock Trading to implement multisignature and instant transaction confirmation. The Rock Trading was founded in 2007 in Malta, and serves as a trading platform for bitcoin, litecoin, namecoin, and ripple.
Following a Possible Yes Vote, What Will Scotland’s New Currency Be?
With the Scottish independence campaign coming to a vote today, many people have begun to speculate on what type of currency Scotland will use. The Bank of England will only allow Scotland to use the pound sterling for an 18-month period following a yes vote. Quartz writer Daniel A. Medina argues that adopting a cryptocurrency like bitcoin could be a possibility. However, this idea is very far-fetched, but utilizing bitcoin’s underlying technology to create a Scottish flexible digital currency may be more feasible. Interesting, but unlikely.
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