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Quadrigacx sees 26,000 BTC go AWOL, perhaps forever

  News

The CEO of the Canadian exchange is reported to have died, taking the private keys to its cold storage with him. Not everyone is convinced.

 

Back in January 2015, the bear market was a little over a year old. It had been a tough year, with existential questions asked of bitcoin and blockchain. Then, when hope was waning and the digital currency was on the ropes, in came the knockout blow. Bitstamp was hacked, with the loss of 19,000 BTC – then worth around $5 million. The exchange went offline, and the price data simply shows a gap for that period. When it came back online, it wasn’t long before traders threw up their hands and capitulated, driving the price down to a low of $155. Bitcoin swiftly met powerful buying pressure, bringing it back above $200, where it ultimately stabilised. Thus the 2014 bear market ended much as it had begun, with the hack of a major exchange (the first, for the uninitiated, being MtGox in February 2014).

 

History doesn’t repeat but it rhymes, and it’s interesting that we have just seen another major exchange shut its doors – probably for good. The story of Quadrigacx has attracted plenty of attention, for various reasons. The loss of the private keys to cold storage – containing the vast majority of the exchange’s funds – as well as the apparent loss of access to its fiat accounts (presumably temporary), has left its traders gnashing their teeth in anguish. $190 million is in the wind. How, in 2019, after all we have learned, could this have happened?

 

There are many twists in the story. Naturally, there is a conspiracy theory that the CEO, Gerald Cotten, did not die in India, as claimed. Presumably it is a trivial thing to purchase a death certificate from corrupt officials with the right connections and tens of millions of dollars in virtual currency. Then there is the report that uses blockchain analysis to evidence the likelihood that Quadrigacx never had the crypto it claimed; it was supposedly running a fractional reserve and paying withdrawals from new deposits. Then Jesse Powell, CEO of Kraken – who has noted how convenient were the timing of the death and the circumstances of the lost funds for a troubled exchange – tweeted that Quadrigacx had apparently been using Kraken to store crypto.

 

We have thousands of wallet addresses known to belong to @QuadrigaCoinEx and are investigating the bizarre and, frankly, unbelievable story of the founder’s death and lost keys. I’m not normally calling for subpoenas but if @rcmpgrcpolice are looking in to this, contact @krakenfx

 

There is now a petition for Kraken to take over the running of what remains of Quadrigacx. Needless to say, the weight of evidence is stacking up and this is looking more and more like an Exit Scam with every passing hour. If so, that crypto is not off the market, locked forever in a forgotten cold storage account.

So one of the wider questions this episode raises is: Is Quadrigacx to 2019 what Bitstamp was to 2015?

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Looking ahead: the Halvening 2020

  News

In the grip of a deepening crypto winter, the Bitcoin Faithful are looking ahead to the next Halvening to inject new life into the market.

 

The Halvening is Bitcoin’s only adjustment in Monetary Policy. Unlike fiat currencies, where inflation targets and monetary supply are typically set by politicians and central banks respectively, bitcoin’s supply is algorithmically determined. Every block – on average 10 minutes – a new tranche of bitcoin’s are created. And every 210,000 blocks, or around 4 years, the size of that tranche is cut in half.

 

Thus decreasing new supply is built into the Bitcoin protocol. The laws of supply and demand suggest that this should have a significant effect on price, since – all things being equal – there are fewer new coins coming onto the market.

 

To date, history appears to have borne out that idea. The first Halvening took place on 28 November, 2012, when Bitcoin’s rewards dropped from 50 BTC per block to 25 BTC. At the time, bitcoin cost just $12. Looking at the log chart, price action was flat at the time but it’s clear that this was the point that the huge run-up to over $1,000 at the end of 2013 began, almost exactly a year later.

 

The second Halvening occurred on 9 July 2016. Once again, the chart suggests this was a key point in the next run-up, from around $620 at the time to almost $20,000, 17 months later.

 

Important though these events are, they’re not nearly enough on their own for making reliable predictions. The ecosystem was very different in 2012, when bitcoin was barely known. By 2016, the growing influx of retail money was making an enormous difference to price – the Halvening helped but did not fundamentally change that dynamic.

 

Still, basic economics points to the next Halvening as a major event for Bitcoin. Right now, it’s expected to happen in May 2020, and block rewards will drop from 12.5 BTC to 6.25 BTC. You can keep track of it at http://www.thehalvening.com. One factor noted elsewhere is that this Halvening will see Bitcoin’s inflation rate drop below that of the target rate for central banks: 900 BTC per day will put inflation at just 1.8% and falling.

 

We have to repeat that we don’t have enough data to know what will happen, as so much depends on the state of the market. So far, the price run-up in the year before each Halvening might just be a coincidence – though intuitively, it makes sense. The event is known in advance and expected, so traders factor it in. Nothing really happens for a while. But then the fundamental fact of reduced supply gradually takes effect, causing incremental changes and helping drive the market higher. In the context of increasing global demand, that’s powerful. Of course, the market gets overheated, the bubble pops and the cycle starts again.

 

We also have to look at the timeframe. The bubble tops do not coincide with the Halvenings, they take place between them, and the offset has been different – around 12 months and 17 months afterwards in each case. Looking at it a different way, the bull market seems to begin around a year before each Halvening. That would put the start of the new uptrend in May this year, which allows very little time for consolidation but could potentially fit with the bottoming of the market.

 

One last point, from the other side of the coin. The Bank of International Settlements recently published a report that falling block rewards would ultimately kill Bitcoin, as there would not be enough money to pay miners, impacting speed and security. ‘Whenever block rewards decrease, the security of payments decreases and transaction fees become more important to guarantee the finality of payments. However the economic design of the transaction market fails to generate high enough fees. A simple model suggests that ultimately, it could take nearly a year, or 50,000 blocks, before a payment could be considered “final”.’

 

So for various reasons, we await the 2020 Halvening with interest.

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Friday Inferno market update

  Analysis

TL;DR all eyes are on $3,200.

 

We’ve said it before, and we’ll say it again: the 200 weekly moving average is where traders have drawn their line in the sand. Right now we’re just a couple of hundred dollars above it, if that. We expect strong support in the $3,000–$3,200 zone, which has a cluster of factors in its favour. What happens after we hit that – and while there are few certainties here, this is one of them: we will revisit it – we won’t know until we get there and see the market’s reaction.

 

Right now the charts are very bearish, and sentiment is absolutely horrible. That points to a downward move, but remember: when it’s as bearish as it can possibly get, that’s when the trend changes. Be prepared for that moment when it happens, as it must. We just don’t see it happening quite yet.

 

As the bear market grinds on, we have a few hopeful predictions and a slew of pessimistic ones. Entrepreneur Alex Melen suggested that ‘Last time the 50 and 200 average crossed on the 4 day chart was at the bottom of last bear market.’ The same has just happened. In fact, the crossover slightly lagged the bottom in 2015, and so this fits quite well with the picture this time, with the crossover lagging the fall to $3,100. However, it’s not all that convincing given the broader picture of low volumes and wider bearish indicators.

 

Another prominent trader and bitcoin analyst, Murad Mahmudov, believes steady support will ultimately be found at the 300 WMA, around $2,300, with a wick to the 400 WMA around $1,800. His Twitter thread contains a wealth of insight about the evolving market and progression in the MAs that have acted as support over time. It’s worth reading, but realistically, there’s too little data to be sure of anything. Then we have Vinny Lingham, Civic CEO, who has recently tweeted: ‘If we break below $3,000 for bitcoin, crypto winter will become crypto nuclear winter.’

 

In more positive news, Fidelity have announced the potential launch of their custody services in March. A lack of suitable solutions for storing crypto securely has been one of the factors preventing institutional investors getting into the bitcoin space. Fidelity works with over 13,000 financial institutions and has over $2 trillion under management. A lot can happen in two months, so there’s no telling what the state of the crypto markets will be, but we will see whether institutions have the confidence in digital assets to start scaling in. The CBOE has also just re-submitted the SolidX-VanEck bitcoin ETF proposal that was so recently pulled due to the government shutdown. But it doesn’t simply pick up where the old one left off. A new 240 day period will now start, meaning it could be almost the end of the year before a decision is finally made.

 

At the other end of the spectrum, bear markets are the time when the next generation of projects build the foundations for the next cycle. We have featured a number of small projects on Crypto Inferno that we think have strong fundamentals. One of these, Soniq, has been busy building on the demand for decentralised music applications. Soniq’s app will run music competitions, and anyone can participate as either musician or judge. Judges vote with small amounts of Soniq tokens, and the more votes a musician receives, the more likely they are to win. Judges are also rewarded for their activity and picking the winner.

 

Soniq’s app is in development but they are currently testing the idea with a contest on Instagram. The team reached out to 1,000 musicians last year. 300 responded and wanted to participate to win Soniq tokens. With no promotion the project now gets hundreds of thousands of views and impressions. A new contest has now been launched on Instagram with higher rewards, with the aim of introducing cryptocurrency investors to the concept and to promote participation. Check out Soniq’s website for more details. We firmly believe that the projects that bootstrap with little or no funding in the fire of the bear market will be very strongly positioned for the turnaround, when it happens.

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‘Ex-chainers’: the personal price of the crypto crisis

  News

While bitcoin lost 85% of its value over 2018, the real tragedy of the bear market has been the human cost. In this series of guest posts, Inferno publishes interviews with former members of the blockchain scene who left the crypto sector for the real world. Names have been changed to protect privacy.

 

I meet Karen at a diner on her way home from work. I’m already sat at one of the booths, watching the entrance, and it’s clear exactly who she is when she walks in. Late 20s, smartly but informally dressed. Pretty, but with a distance in her eyes that is obvious straight away. The sign says to wait until she is seated but she spots me and walks over – displaying evidence of independent thought not shared by 90% of the population. Crypto will do that to you, if you let it.

 

Over dessert, Karen tells me her story. She got into crypto three years ago during a temporary spell of unemployment. It turned into a two-and-a-half year career break as she carved out a niche for herself and worked hard to establish a reputation as a community moderator for a number of large ICOs. ‘I was one of the beneficiaries of that exponential rise in 2017,’ she explains. The ICOs were successful, she was successful – she picked up over $50,000 on each of them, she tells me, selling most of her tokens near the top.

 

‘I guess I learned to read people, to read markets, during the course of my work,’ she says. ‘Prices were rising in 2016, when I got started. Then they started to accelerate. And then the acceleration accelerated. The communities I was helping manage, they were full of people making incredible price predictions. Understanding some basic psychology, the nature of herd mentality, put me ahead of most of the competition – even if I didn’t have a financial background like I assume a lot of those traders did. They were all making money, all euphoric, but there was this little voice in the back of my head…’

 

Karen made a fortune out of selling her tokens, and then watched as the whole thing came crashing down. ‘It didn’t give me any pleasure to know I’d been right,’ she continues. ‘I’d have been happy to be proved wrong. After all, they were the experts. I was just there to help manage the community.’ But that task, it turned out, was about to get a lot harder.

 

As bitcoin topped out at $20k and the ICO scene imploded under the weight of the bear market and new regulation, her communities turned nasty. ‘These were smart, articulate people but they never saw it coming,’ she explains, shaking her head. ‘It hit them like the back of a bus.’

 

Not long after, Karen simply switched off her computer and left crypto for good. She hadn’t used a real identity online, there was nothing that could be used to track her. ‘I cashed out the remainder of my crypto, deleted whatever email and social accounts I could and shredded my hard drive. I was out of there like a ghost. That life never existed.’

 

Today, Karen works as a childcare specialist, returning to her previous career. After life as a community manager in crypto, she finds interacting with highly intelligent, rational adults too painful. ‘It’s easier to work with children. Sure, they have tantrums. Sure, they have totally unreasonable expectations. Sure, they don’t speak very good English and some of them have poor personal hygiene. Sure they can be really nasty to you sometimes, when things aren’t going their way. But you know what? For some reason, I don’t find that hard any more.’

 

The author is an experienced financial journalist whose opinions and interviews have been featured in The Guardian, Forbes and the Financial Times. He writes here under the pseudonym Marcus Aurelius.

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Inferno picks: MimbleWimble

  News

This powerful tech underpins Grin and Beam – two of the most exciting crypto projects of the moment.

 

Bitcoin is incredible tech, but it has its limitations. It’s slow, and it’s a resource hog. This is due to the way the protocol works. When you send coins, you are not updating your balance or the recipient’s balance. Instead, you are cryptographically proving that you own coins in the sending address, and then registering the ‘output’ to the new owner using the recipient’s address.

 

In order to prove you own coins, your Bitcoin wallet has to plough through the entire blockchain, checking each output to see if you are the legitimate current owner – tracing that ownership right from when the coins were first mined into existence, through every previous owner to the present day and your address. That requires that full nodes hold the whole blockchain, and have the computational resources to trawl through it. It also means that every address and every amount transacted are stored on the blockchain, which is totally transparent. While bitcoin can be relatively private if used carefully, in practice information is almost always leaked and the public nature of the blockchain means anyone can get their hands on that data.

 

Mimblewimble was proposed back in 2016 as a new kind of blockchain solution that addressed these problems. It’s named after a tongue-tying spell in the Harry Potter books, because the blockchain doesn’t give up information about its users. Like Bitcoin, Mimblewimble was proposed by an anonymous developer – this one calling himself Tom Elvis Jedusor (the French version of Tom Marvolo Riddle, Lord Voldemort’s schoolboy name). It won’t surprise you to learn that they’re not the only Harry Potter references in the Mimblewimble (MW) world. You can find the MW white paper here – though it’s really just a text file, hardly as comprehensive and well-articulated as Satoshi’s Bitcoin paper. But it does the job, and it has caught a lot of interest, because the ideas within it are exceptional.

 

MW is a collection of technologies, much like Bitcoin itself built on existing ideas like Adam Back’s HashCash and public key cryptography but combined them in new ways. The white paper is dense, technical and frankly a little disorganised, so it’s not for the uninitiated. Some of the major features are as follows.

 

No addresses. Using MW, you prove ownership of outputs using a private key. However, those outputs are not registered to an address, like in Bitcoin, and when publicly verifying you own them, you do not have to leave sensitive information (like addresses) on the blockchain.

 

No amounts. MW takes a ‘zero sum’ approach, whereby you only have to prove that no new coins have been created (and that the transaction is therefore legitimate), not how much was sent. So long as outputs minus inputs equals zero, that’s all that matters. So neither addresses nor amounts of coins are stored on the blockchain at all.

 

Scalability. MW uses a neat feature called transaction cut-through, which essentially condenses all the transactions in the blockchain into one single, large transaction. This is a little like a central bank carrying out settlement for commercial banks at the end of the day. Money might move backwards and forwards many times between thousands of different recipients, but all that really matters is the net difference. If Alice sends Bob some coins, and Bob sends all of those coins on to Charles, Bob doesn’t need to be in the blockchain at all. This means there’s far less information stored on the blockchain than there is for Bitcoin, which improves privacy and reduces the storage space required.

 

Dandelion. This is an upgraded network protocol that also improves privacy. Instead of a node simply broadcasting a transaction to the network, that data first takes several steps from one randomly-selected node to another, until the last one in the ‘stem’ of the dandelion, at which point it’s dispersed more widely. The result is it’s very hard to know where that transaction has come from.

 

In short, Mimblewimble appears to offer the best of both worlds, combining both scalability and privacy – something that other privacy protocols have so far dismally failed at. There are drawbacks, or ‘features’, perhaps. Because there is a need for both parties to agree and sign a transaction (to confirm the ‘blinding factor’ that helps obscure the amount transferred), both wallets need to be online for the transaction to be finalised. You can’t just send coins to an address, like bitcoin – which also has implications for cold storage. And Bitcoin’s scripting language had to be removed, so different implementations will need to find workarounds for features like multi-sig and the Lightning Network – which will be needed if it is to be used as cash, because its throughput isn’t that much better than Bitcoin’s.

 

Overall, though, this is some incredibly exciting tech. We’ll be looking at two specific implementations, Grin and Beam, in the coming weeks, and it wouldn’t surprise us if Mimblewimble became a very popular approach for many more new blockchain platforms.

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Tuesday Inferno market update

  Analysis

We have hit a yearly low, but have not yet revisited the low for this market cycle. Yet.

 

Bitcoin has been trending down all year, but it seems like we might finally be approaching the endgame for this cycle. We’re not at capitulation yet, but after a period of consolidation, it’s grinding closer.

 

For the last week or so BTC has traded sideways around the $3,500 level. What we have seen repeatedly is rapid jumps up or down and then back to the mean. These are not normal market movements. They start and finish within just minutes, leaving long candle wicks of 2-3%.

 

This is consolidation within a range, with market-makers taking potshots here and there at traders who are over-leveraged without proper risk control. Big players (most likely using bots) are simply margin-hunting in an environment of low liquidity. The expectation was always that this would end like the other consolidation ranges did: with a big move.

 

Yesterday saw a sharp fall, but a clean bounce off the fib line. We have just now seen a further drop below that, with a low (at the time of writing) of $3,322 (Bitstamp). But we do not expect that to hold for long.

 

The pattern continues: lower high, lower low, trending down towards that 200 weekly moving average and the $3k zone. That is where we expect the fireworks to happen in earnest as traders panic that the last line of defence – as they imagine it – becomes threatened. And since that is such an important area, we do not expect capitulation to happen and for the next cycle to start until that area is attacked with greater volumes than before.

 

Let’s be clear here. We are expecting a crash of epic proportions below $3k. It may well last only hours, but when a market like bitcoin panics, it can be spectacular. If you trade, set a skunk order down low, because anything can happen – including flash crashes right down to zero if a big trader panics or fat-fingers. What happens after $3k is breached will depend on the market’s reaction. A strong bounce would be positive; a weak bounce would imply the bear market will continue for some time longer.

 

In other news…

 

Steve ‘Woz’ Wozniak, Apple co-founder and bitcoin fan, has said that he sold all his bitcoins at the top. ‘When it shot up high, I said I don’t want to be one of those people who watches and watches it and cares about the number. Part of my happiness is not to have worries, so I sold it all and just got rid of it.’

 

Minor exchange Liqui has shut down, after its users did not agree in sufficient numbers to the changes to its terms.

And according to Jan Van Eck of VanEck bitcoin ETF fame, former BTC investors are turning to gold in the bear market.

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Looking for the bottom: who’s right?

  News

Just like on the way up, we have some crazy, messy predictions on the way down. We’re logging a few here because a lot of ‘experts’ are going to look dumb after the fact.

 

Back at the end of 2017 and start of 2018, we saw some insane predictions for where bitcoin might end up in the near future. Fundstrat’s Tom Lee stuck by his $25,000 prediction for the end of 2018 for a long time, before adjusting it down to $15,000. This so-called expert was actually at the lower end of the spectrum of forecasts, with others calling for $50,000, $80,000, $100,000 and higher.

 

And so it is on the way down. Bitcoin will bottom at $1,000, we hear. At $500. It will go to zero.

 

These are the same ‘experts’ who predicted $25-100,000.

 

The reality: No one knows. We think BTC will bottom below $3k, probably with a swift capitulation spike to the low $2,000s. But we don’t know either. We’re clear about that. No one knows for sure.

 

Bitcoin has just put in a new local low, dropping below $3,400 for the first time this year. And so, to give a sense of how these ‘experts’ are collectively doing little more than putting a finger in the wind, and to give a sense of the range of lows they are expecting, here are a few recorded for posterity.

 

Crypto Twitter influencer Armin van Bitcoin believes the market has already bottomed. Noting that the price of BTC is $3,550 (ok, that didn’t age well…) he says he’s bullish and names several experts who are not.

 

Murad Mahmudov thinks we’ll see $1,700–$2,200. Not so far off our own estimate.

 

Tone Vays says it could be $1,300 or even lower.

 

Anthony Pompliano (Morgan Creek Digital) thinks a little under $3,000 is likely: we’re almost there, but will probably trade sideways through this year.

 

Lucid Investment Strategies says sub–$1,000 (ouch), before ultimately heading to $10 million.

 

Plenty of pro-bitcoin commodities and trading experts are looking at $1,xxx, while the overall consensus seems to be that the bottom will be found by the end of Q2 2019.

 

But here’s the thing. The market evolves. New information comes to light. Price discovery occurs and impacts the next phase. All of which means that the best traders don’t try to predict the bottom. They update their expectations with new information and adapt as they go.

 

Right now, we’re looking at that 200 weekly moving average, and the psychological support of $3,000. If we close below that, we have useful information about the next step. If we bounce off it hard, then it’s more positive.

 

Just don’t go trusting ‘experts’ too much when they try to predict the future months in advance.

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What does reversal look like?

  News

When bitcoin changes trend, it’s usually pretty clear. But will it be the same this time?

 

Every crypto trader wants to know whether we’re finally near the bottom after a 13-month-long bear market. What would that look like in practice and how will we know when it happens?

 

Bitcoin loves big, overblown movements, and if the past is anything to go by we can expect a high volume spike downwards and back up at the end of the cycle: Capitulation. It happened early in 2015 and we’re waiting for it now. But is that always the case for markets? Is there a chance it will be different this time?

 

Sushi Roll reversal

Investopedia discusses reversal patterns described by Mark Fisher, author of The Logical Trader.

‘One technique that Fisher calls the “sushi roll” has nothing to do with food, except that it was conceived over lunch where a number of traders were discussing market setups. He defines it as a period of 10 bars where the first five (inside bars) are confined within a narrow range of highs and lows and the second five (outside bars) engulf the first five with both a higher high and lower low. The pattern is similar to a bearish or bullish engulfing pattern except that instead of a pattern of two single bars, it is composed of multiple bars.’

 

This pattern has appeared on the daily chart for bitcoin, but we’re not convinced (and it doesn’t take in the lowest price to date this year, $3,122 on Bitstamp).

 

High volume?

Price is only one factor. Volume is another. Volume is an indication of how confident a market movement is. That’s why those huge bitcoin volumes are so welcome: they show that a lot of traders are putting their money where their mouth is.

 

Take a look at the S&P500. Capitulation in March 2009 did see volumes peak. The previous bottom, though, in 2002, did not see unremarkable volumes for the lowest point. A few weeks earlier price had slumped with higher volume, though not to the ultimate low. Roughly the same picture is true for the Dow Jones.

 

Or look at the FTSE100 for its reversal in 2009. Again, volumes are high, but do not peak in March, when the market finally turns around. Higher volumes were evident late in 2008, with the dramatic fall of 1,600 points over 4 months. We actually saw something similar with bitcoin at the end of last year.

 

So while bitcoin previously has put in high-volume capitulations, and we still think we need to see a high-volume crunch before things change, that’s not a done deal – peak volumes are often but not always a feature of trend reversals.

 

A few other hints as to whether a movement is a true reversal, or merely a retracement (i.e. a temporary pause before the trend resumes):

  • Retracements often (but not always) respect fibonacci lines.
  • In a reversal, we’d look for a higher high and a higher low. We haven’t yet seen that in bitcoin – so even if the bottom is in, that confirmation signal is yet to come.
  • Reversals break trend lines, showing that the macro picture has changed. For bitcoin, the line of the downtrend slopes right from around $12,000 back in February to roughly $3,800 now. If it isn’t broken, it will hit zero sometime in Q3…

 

Lastly, we’d expect to see exhaustion in terms of sentiment. The bears are all burned out and have nothing left to sell. This is why the announcement that the ETF has been pulled was so interesting. It had no impact on the market. And that might just be an early indication that we’re almost there.

 

Almost.

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Friday Inferno market update

  Analysis

TL;DR It’s always bearish – until it’s not.

 

We had some big news this week: on Wednesday CBoE withdrew its proposed rule change to the SEC, which would have allowed it to list shares in the SolidX-VanEck bitcoin ETF.

 

The long-anticipated ETF has been one of the big hopes for the bitcoin bulls, the belief being that such a retail-friendly on-ramp for money would open the floodgates and power BTC back into an uptrend, and likely to new highs.

 

A final decision on the ETF was due by 27 February, and there have been suggestions that the ongoing government shutdown meant the understaffed SEC was set to refuse it rather than take the risk of letting it through by default when the deadline passed. A statement from VanEck claims that this is a temporary issue, and that the application will be re-submitted when the government and SEC start up again. Either way, this is a significant development and means, at the very least, another long delay.

 

What is interesting about this is the market’s response: essentially nothing. Bitcoin made no move around that news that could be considered anything more than background noise.

 

On Tuesday morning, the day before, BTC did abruptly plummet, dropping from around $3,530 down to $3,401 (Bitstamp): a dramatic fall that looked set to put in a lower low and send bitcoin back down towards the 200 WMA, which we have been saying it is likely to retest. But it was a flash-crash: a single five-minute candle down, which was erased with the next five-minute candle back up. It may have been completely unrelated to the SEC announcement, or it could have been insiders dumping their coins before the news was released (if you like conspiracy theories). Overall, though, the markets shrugged off news that the ETF is on ice.

 

Does this suggest a bottom is in? Unfortunately not: the big picture is still overwhelmingly bearish. Bitcoin keeps putting in lower highs, is trading below the 50 and 200-day moving averages, is experiencing lacklustre volume and has multiple resistance levels to clear before we can say the downtrend is over.

 

But is it interesting? Absolutely. Think back to 2017 and the market’s crazy reaction when the first ETF was denied – a massive crash, followed by rapid recovery and then an onward march to the all-time high. That was at a time of huge optimism. In this instance, the news didn’t make so much as a dent in the market. One way or another, the failure of that ETF was already priced in. That must surely be an indication that we’re reaching the despair phase of the market cycle. And when the last weak hands have sold in despair, there’s only one way for the market to go.

 

So while things look bearish, we know that it won’t last forever. And unless you’re really good at catching knives, you won’t know it’s over until the moment has passed.

 

Tomorrow we’ll look a little further at what a market reversal looks like.

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‘Ex-chainers’: the personal tragedies behind the crypto news

  News

While bitcoin lost 85% of its value over 2018, the real tragedy of the bear market has been the human cost. In this series of guest posts, Inferno publishes interviews with members of the blockchain scene whose lives have been ruined by the technology and its downturn. Names have been changed to protect privacy.

 

Ken looks at websites. He knows he’s not supposed to and he’s tried to stop many times, but he can’t. There’s a magnetic attraction, he tells me, and it’s destroying him – his work, his relationships, his finances.

 

He’s talking to me over drinks in a pub on Amhurst Road in London. Ken is a forty-something estate agent, with a wife and two kids, at least for now. His habits, he says, are starting to put a strain on his marriage, and he wonders how long it will be before things come to a head.

 

‘It all started a couple of years ago,’ he tells me, the words coming out in a rush as he decides to trust me with the story he has kept hidden from everyone for so long. It’s a story I’ve heard before, many times, but I don’t tell Ken this. He needs to feel in control at this point and I won’t cheapen this moment of unburdening for him.

 

‘Work was busy. It was really stressful, the boss was breathing down my neck 24/7. There were targets none of us were meeting, there was talk of people being laid off. It was tough.’ One day, Ken was clearing out the Spam folder of his email and was tempted to click on one of the messages. ‘That was it, really,’ he says. ‘The start of an addiction. Compulsion. Habit, I don’t even know what to call it.’

 

Ken followed the links and pretty soon he was immersed in an online world to which he’d previously had zero exposure. ‘It was intoxicating, at first,’ he continues. ‘What I was seeing on those sites, it was…’ He exhales, slowly. ‘Well. I’d never seen anything like it before. It gripped me, immediately, and I needed more. Then you get used to it, and you need to find something more extreme to get the same buzz.’

 

Pretty soon, says Ken, he was spending hours a day on those sites. He looks up at me, with his sallow, lined face – evidence of chronic sleep deprivation, of long nights spent on websites in secret from anyone else. ‘I’d say I was working late, but I’d be checking this stuff out instead, looking at different sites, chatting to strangers on the web, watching videos. Most nights it was way after midnight when I finally stopped and went to bed. Sometimes the sun was coming up.’

 

That was bad enough, but then Ken made the mistake of downloading an app onto his smartphone. ‘Updates. Every minute, every hour of the day. Always something new, always new models, new things to see and new ways to spend money. I couldn’t stop. It was too late by then, I was up to my neck.’

 

Ken found himself checking his phone dozens, sometimes hundreds of times a day. He’d take long breaks in the bathroom, browsing away from the prying eyes of his colleagues. After a while his boss started to notice, and he had to curtail his habit or risk losing his job. ‘Sometimes I left my phone at home to give myself a break,’ he says, ‘but usually I wasn’t strong enough.’ He now faces disciplinary action, and unless he can end his addiction, he knows he’ll be out of a job within weeks.

 

Ken has been living with his secret for nearly two years now. There was a time, he says, when his wife nearly found out. One night she walked in on him as he was sat on the sofa with his laptop. It was 2am. ‘All of those hours, all those nights online, all those live feeds and conversations with strangers. Time I could have spent with her, and the kids.’ He shakes his head in shame.

 

‘And she really wouldn’t have understood?’ I ask him. He laughs.

 

‘Not a chance. Magical internet money? The best investment of your life? Retiring at 50? No. I just told her I was looking at porn.’

 

The author is an experienced financial journalist whose opinions and interviews have been featured in The Guardian, Forbes and the Financial Times. He writes here under the pseudonym Marcus Aurelius.

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