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Facebook’s GlobalCoin is going to be BIG

Even if it fails as badly as Facebook’s first online currency, plugging a network of 2 billion users into crypto is going to have a huge impact.

 

Facebook is getting into the blockchain space in a big way. The move has been rumoured for months, but now, finally, the first reliable details are emerging.

 

The project, earlier nicknamed ‘Libra’, is being referred to within the company as GlobalCoin. Not much is known about the tech that will underpin it – for example, whether Facebook will develop its own blockchain or use an off-the-peg solution or fork; whether it would be PoW or PoS; how centralised it will be and whether users will have the option of managing their own private keys, and so on. But we do now know a few things about how it is going about this landmark development for crypto:

 

  1. It’s set to launch to around a dozen countries in the first quarter of next year.
  2. Facebook has sought guidance for the project from Bank of England governor Mark Carney, as well as regulatory help from the US Treasury.
  3. It’s in talks with Western Union and other money transmission services.
  4. Discussions are apparently also being held with online merchants, with the aim of reducing payment processing fees.
  5. The US Senate and Banking Committee has expressed concerns about consumer protections and how user data will be secured.
  6. The coin is rumoured to be backed by several real-world currencies to prevent the volatility for which cryptocurrency is notorious.

 

Facebook tried launching Facebook Credits around ten years ago, but the currency never really caught on – it didn’t offer enough to the social network’s users to make it worth switching from regular payment options. But this time, it could be different.

 

For a start, Facebook is bigger than it was a decade ago. A lot bigger. The platform has over 2 billion monthly users. It spans the globe, meaning there’s an instant use-case for money remittance and efficient cross-border payments. And crypto has been seeing a lot of buzz recently.

 

Add to that the reality than regular crypto like Bitcoin has a few tens of millions of users, at most, and you’re looking at a lot of exposure for the sector. Which means that even if GlobalCoin fails, it’s going to be a great thing for crypto overall.

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Bestmixer.io shut down by cops

It’s the ‘first law enforcement action of its kind against such a cryptocurrency mixer service’, according to Europol.

 

Dutch financial authorities, working with Europol, have seized control of six servers in the Netherlands – shutting down one of the largest cryptocurrency mixing services in the world.

 

Bestmixer.io had been running for a year, and has mixed around $200 million in BTC, BCH and LTC since May 2018. The operation against it has run almost as long, starting in June last year.

 

Mixers are services that pool funds from many different users, moving them between multiple different addresses before paying out funds to fresh addresses held by the customer. The result is that it is difficult or impossible to determine where the funds originated. Thus a mixer or ‘tumbler’ service can be used to anonymise funds gained or used illegally – for example, in the course of drugs purchases, or for money laundering. Bestmixer.io was one of the world’s three largest mixer services. Analysis shows that many of the funds that entered the mixer came from criminal activities, and that funds paid out by the mixer were similarly used for criminal purposes – chiefly money laundering.

 

This is believed to be the first action of its kind against a cryptocurrency mixing service – although other illegal bitcoin-powered operations (such as darkweb markets) have previously been shut down by the authorities, as early as 2013, when US agents took action against the Silk Road.

 

Users of Bestmixer.io may have cause for concern beyond the loss of their favourite service. The Dutch Fiscal Information and Investigation Service (FIOD) has collected information about users and their interactions on Bestmixer over the past year – including IP addresses, transactions, Bitcoin addresses and chat messages. This will now be analysed by the FIOD and Europol, and the information will be shared with intelligence agencies from other countries.

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CNBC provides contrarian signal

Worried that bitcoin was due a pullback? No need to stress. Our best contrarian indicator, CNBC, is flashing bullish.

 

After any parabolic increase like bitcoin has seen over the past couple of weeks, you’d expect a pullback. Right? I mean, the market is crazy overbought, RSI is bumping against the ceiling, and there’s no way that any trader could think buying at this point was smart. Surely?

 

Well, just hold on. Because one of our favourite indicators says otherwise.

 

There’s smart money and there’s dumb money, and CNBC definitely caters to the latter. All through the bull market, this channel figured it would get in on the action, with regular updates about the price of bitcoin and other major cryptos. Quantity mattered. Quality did not.

 

CNBC has featured plenty of analysts on over the last couple of years, and they have proven decidedly mediocre. In fact, it’s been worse than that. CNBC has developed into a kind of in-joke in the crypto world, because they get it wrong so much of the time. They’re the TV equivalent of a noob who just got into crypto and suffers from the wild swings of emotion than result from the price moving up or down a few hundred dollars.

 

The long and the short of it is that CNBC offers really, really poor trading advice. If you’d done the opposite of what CNBC suggested, you’d be a winning trader. Now, CNBC have warned of a move back to $7,000.

 

Has Bitcoin come too far, too fast? @AnthonyGriz says it could be time for a move back to $7,000

 

Now, if it was anyone else, we’d agree: this scenario does look likely. A significant drop back towards major support – $6,800, say, or even lower – is totally reasonable after the massive price appreciation we’ve seen in the last fortnight.

 

But here we have a dilemma. Because an irresistible force is meeting an immovable object. Either:

  1. CNBC is right – for the first time, they’re actually talking sense
  2. Bitcoin is going to shrug off the bearish technicals and smash through resistance to $9,000+

 

Either could be correct. It’s possible that CNBC is finally not wrong about bitcoin. But do we really think so?

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Bitcoin winning US-China trade war

The US and China aren’t doing so well out of it though.

 

So what happens when the world’s two largest economies pull out their financial weapons out of their trousers and start waving them around at each other?

 

Well, we’re finding out. It turns out that a tit-for-tat trade war with a major economic powerhouse is going to end in casualties on both sides, no matter who wins. The US might be drawing blood, but the process hasn’t exactly been painless. The stock markets are jittery, GDP growth is slowing, the dollar is having second thoughts and there are serious implications in the fact that it’s putting political pressure on the Fed to do something about it – not great for an organisation that’s supposed to be independent of government, for the very good reason that when there’s a conflict of interests between the ones who print the money and the ones who spend it, the result can be something like Zimbabwe.

 

China, meanwhile, is also feeling the pain. They’re devaluing their currency, the yuan, to make their exports more competitive. But here’s the thing. That means it’s worth less for all those millions upon millions upon millions of Chinese who earn it, save it and spend it on a day-to-day basis. So what do you do if you’re currency is dropping in value?

 

Yup. Sell it for something that’s not. And what if capital controls prevent you from shifting piles of cash offshore?

 

Yup, that’s right. You find a currency that’s immune to capital controls. Something decentralised, borderless and, not to put too fine a point on it, bitcoin-y.

 

With the yuan down 2% against the dollar in the last fortnight, that appears to be what’s happening. It’s hard to be sure because the People’s Bank of China banned bitcoin exchanges back in 2017 (and a few other times, as it suited them). But lots of OTC trading goes on over WeChat. The government tried to ban that, too, recently – but it’s easier said than done.

 

TL;DR China and the US have got into a competition that neither can win without hurting themselves, and bitcoin says ‘thank you’.

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Bitcoin buzz moves from past to future

Focusing on what crypto might bring, rather than its past, has sent prices soaring, suggests new research.

 

People are talking about bitcoin. They have been talking about bitcoin for a long time, of course, but the way they are talking about bitcoin has changed. A study by data provider Indexica shows how the conversation has shifted – explaining the stellar price rise in April and May.

 

Indexica’s analysis of thousands of documents showed ‘three main drivers: a more complex conversation surrounding Bitcoin, fewer concerns about fraud and a shift in the tense of how Bitcoin is talked about from the past to the future.’

 

That contributed to a major impact on bitcoin’s price, which has doubled over the course of this year and is currently consolidating in the $8,000 range. Simply, people are focusing less on bitcoin’s past, and particularly all the scams and hacks that have plagued the digital currency in recent years. Instead, they are looking to the future, and what the role – and value – of bitcoin might be in the years to come. Needless to say, that has had a huge effect, similar to the one seen the stock markets when so-called ‘futurity’ comes into play.

 

‘Think about it,’ says Zak Selbert, Indexica’s CEO. ‘Executives will speak of good things they expect to happen on conference calls before they happen. They only mention mistakes afterwards.’

 

Bitcoin’s uptrend is now into its fifth month – though the breakout was only confirmed six weeks ago. Last time around, the bear market took a year to play out, and was followed by a three-year bull market. The past won’t repeat itself exactly, but it’s reasonable to assume we might be heading into a multi-month uptrend, and potentially a two-to-three year bull cycle – powered by the halving in a year’s time.

 

Sentiment has changed, and crypto is coming back into fashion.

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What are Forks?

A fork is when a blockchain network changes its rules – but there are hard forks and soft forks, and which one happens makes a big difference.

 

Bitcoin runs on consensus. The decentralised network of miners agrees on the contents of the ledger – the blockchain – and makes sure that no one tampers with it. This alone is an amazing feat, and it enables peer-to-peer money. Previously, electronic cash always needed a trusted third party to keep accounts.

 

The network relies on the fact that everyone knows and enforces the same rules. But what if those rules need to change? Maybe there’s a security hole that needs patching. Or maybe the platform is getting a major upgrade with new functionality. That’s when you need a fork.

 

Soft and hard

In the crypto world, a fork is a change in the rules of consensus. But there are two kinds of fork: hard forks and soft forks. Soft forks are back-compatible. That means the network continues running as it was, no matter who has upgraded to the new software. Old and new versions continue to work seamlessly together. But with a hard fork, clients running new and old software are not compatible. They won’t ‘talk’ to each other. This is when you get a blockchain fork – two separate networks, with miners running different software.

 

Andreas Antonopoulos has described the difference between a hard and soft fork like this: If a vegetarian restaurant decides to add meat to their menu, that’s a hard fork: a change in the rules that is incompatible with their previous approach. But if they add vegan dishes, that’s a soft fork. Vegetarians could still eat there and enjoy the new vegan food, without having to change their existing habits.

 

A soft fork is far less disruptive to the network, because miners don’t have to upgrade to continue mining (even if it’s desirable for one reason or another). But sometimes a hard fork is necessary, especially if a security vulnerability needs fixing. And, of course, there are times when developers want to split the network with a hard fork. This is what Bitcoin Cash did when it changed the rules of consensus and split from the Bitcoin Core network. It’s also what Bitcoin Cash SV did when it split from Bitcoin Cash.

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Tone Vays: Bitcoin Dominance up, was that actually the bottom?

Bitcoin’s market share is rising, giving another signal that the bull might be back in force.

 

Well-known trader Tone Vays has been one of the more tenacious bears of 2019. While many bearish analysts have now flipped bullish, Vays has not yet been convinced. A 100% rise in price from the bottom is not enough, he says (and, given bitcoin’s history, he might be right). But one of the indicators he says is needed to know the bottom is in, is now showing signs of reaching more positive levels: Bitcoin Dominance.

 

Put simply, this is just the percentage of overall crypto market cap occupied by Bitcoin. Alts have been punished recently as bitcoin surges, with traders selling them to hold funds in BTC. Vays has always said that the $#!7coins need to suffer more before he will go on record saying the bottom is in. He has previously argued for lows of $1,800 to come, even as BTC trades at more than three times that level. But now, finally, it seems he may be coming around.

 

Bitcoin dominance is up to 58%, its highest since the December 2017 peak of the bubble, when it briefly topped 60%. Ignoring that short-lived double top in Dominance, it’s been exactly two years since bitcoin occupied such a large market share. Vays thesis is that more altcoins have to die and concentrate money and attention into BTC to know the bottom is in. So just maybe, he says, this is a sign that it’s the end of the bear market after all. Maybe.

 

He’s still not 100% convinced, but it’s a start. We still need to see a pullback, he says – again, with good reason. When we see how far and hard bitcoin dips after this rally, then we’ll know a lot more. We haven’t yet seen that pullback at all, so we’re missing a crucial piece of information.

 

But hesitantly, one by one, the last few bears are starting to turn bullish. Better late than never.

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CZ discusses Bitcoin rollback

In the wake of the Binance hack, the Binance CEO seems to have seriously considered trying to get miners to reverse the illegal transaction.

 

Losing $40 million will make you say, think and do strange things, and we have to hope this is the reason for Changpeng Zhao’s bizarre idea to roll back the Bitcoin blockchain to recover the 7,000 BTC that hackers stole from Binance earlier this week.

 

In an AMA held shortly after the hack ,CZ commented, ‘To be honest, we can actually do this probably within the next few days. But there are concerns that if we do a rollback on the bitcoin network at that scale, it may have some negative consequences, in terms of destroying the credibility for bitcoin.’

 

CZ was roundly criticised by many in the crypto community, who hold the integrity of the Bitcoin blockchain as sacrosanct. Mike Novogratz commented, ‘I am shocked that @cz_binance even went there.  Talk of forking or reorganizing the blockchain is close to heresy.  When the ethereum community did it the project was like 5 months old. A baby.  Bitcoin now has $100bn market cap and is a legitimate store of wealth.’

 

The discussion moved fast, with different proposals of what the fork or special transaction might look like rising to the surface – doubtless in response to the community’s own anger. CZ later appeared to recant on the rollback idea, with this tweet:

To clarify, the proposal by @JeremyRubin & @_prestwich is to construct a TX that would keep all other tx, and just distribute the hacker coins to miners (about 300 BTC/block prod).

It’s not: rollback of any tx, nor is it reverting funds back to Binance.

 

He ultimately stated that it would not work, and that Bitcoin was too secure and immutable. However, this does not appear to be what was first meant, and it seems likely that the narrative has been massaged to make it appear less serious.

 

An attempt to alter confirmed blocks or ‘edit’ previous transactions would be an attack on the blockchain, raising a precedent that other, more malicious actors could seek to replicate. CZ has done much for the crypto space and has our gratitude. So we have to give him the benefit of the doubt here: 7,000 BTC is a good reason to consider unconventional solutions. But he cannot be under any illusions that it would risk fatally damaging Bitcoin’s credibility.

Ultimately, this isn’t about CZ or the hackers, it’s about Bitcoin’s security. If one person can gain consensus to reverse a transaction on Bitcoin’s blockchain, it’s very bad news. Bitcoin has to be immutable to be useful. In some ways, it would have been good if CZ actually tried, so we could establish that principle once and for all.

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Customer funds SAFU as Binance hacked for 7,000 BTC

The exchange will cover the losses from its hot wallet via a special fund put aside for the purpose.

 

Binance, the world’s largest altcoin exchange, has become the latest victim of cryptocurrency hackers. An update on the exchange’s support pages read:

 

We have discovered a large scale security breach today, May 7, 2019 at 17:15:24 (UTC). Hackers were able to obtain a large number of user API keys, 2FA codes, and potentially other info. The hackers used a variety of techniques, including phishing, viruses and other attacks. We are still concluding all possible methods used. There may also be additional affected accounts that have not been identified yet.

The hackers were able to withdraw 7000 BTC in this one transaction: https://www.blockchain.com/btc/tx/e8b406091959700dbffcff30a60b190133721e5c39e89bb5fe23c5a554ab05ea

 

So far, this is the only transaction the hackers were able to make – though it is a significant amount of bitcoins, totalling around $40 million. This appears to be around 2% of Binance’s holdings (meaning they have at least 350,000 BTC under management).

 

Changpeng ‘CZ’ Zhao, Binance’s CEO, said that the losses would not affect customers and would be covered from the ‘Safu’ fund – a reserve established after a previous loss for exactly this eventuality.

 

Alarms were triggered only after the large withdrawal was made. Binance will now conduct a thorough security audit, disabling deposits and withdrawals for around a week. Trading will continue. However, Binance have warned that the hackers may still control certain accounts, and may use these to manipulate the markets – large holdings can be used to push the price around, for example, playing whale games with smaller investors to increase their profits from this hack.

 

Surprisingly, however, the hack has not made much of a dent in the price of bitcoin. It is down $160 from its high of $5,970, but that was only to be expected anyway after such a sharp rise. It’s another signal that the bull is back: bad news is shrugged off.

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Bitcoin hits year’s high, altcoins struggle to keep up

It was a great day for bitcoin yesterday, pushing into the resistance zone just beneath $6,000. It’s feeling very bullish!

 

Two caveats. One is that when it feels maximum bullish, it’s often about to look very bearish. As contrarians will tell you, doing the opposite to everyone else can be smart (buy when there’s blood in the streets – not bubbles in the air…). The second is that when bitcoin does this, the alts often get hammered – or, at the very least, don’t keep up. That’s sad if you’re an altcoin hodler, but the good news is, it probably won’t last forever.

 

BTC vs alts

When bitcoin goes on a tear like it has this week, alts often drop in BTC terms, even if they still stay level in USD. That’s because traders sell alts in order to hold BTC, which is rising in value.

 

When BTC stops rising, there’s a good chance that value will come back into the alts – traders will pick up coins they feel are undervalued. BUT that only happens if the market is expecting BTC to plateau for a while, and traders are looking for value elsewhere. If they think it’s just a short pause before bitcoin rises again, then the chances are the alts will stay down.

 

A situation to watch is when alts rise in BTC terms and BTC rises against the US dollar. That gives you leveraged gains on the alts, and it means that money is flooding into the crypto space as a whole – not just bitcoin. That’s a very positive sign overall. It means that alts are being bought with bitcoin, but even more bitcoin is being bought from new demand. (Some coins are more likely to do this; LTC, for example, often moves in step with BTC, without a lag.)

 

You can generally gain a sense of what’s going on by comparing coins on https://coinmarketcap.com/. Just look at which coins are in the green and have gained more than BTC.

 

Watch profit-takers

One word of warning. When BTC rises, traders buy BTC – with fiat or by selling alts. But not all alts are the same. Smaller alts get hit worse, while high-quality ones tend to drop less. Traders keep these, knowing that money will come back into them sooner rather than later. However, there are certain times when a coin will take a worse hit than others its size. Take a look at BAT, for example. On Friday, it was one of the only tokens in the top 50 to be in the red. The reason? Probably simply that it had enjoyed a huge rise in the preceding months, and was a good target for profit-taking.

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Ethereum 2.0 Planned For Launch on the 3rd of January 2020
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