Monthly Archives: August 2017

Bitcoin is getting closer to looking like a traditional financial product.

Japanese financial information firm Fisco announced Monday it is experimenting with the country's first bitcoin-backed bond. The news follows other announcements in the last several weeks for bitcoin options, futures and an exchange-traded fund tracking bitcoin derivatives in the U.S.

"I think it's a very healthy and natural progression of the space," said Adam White, Coinbase vice president and general manager of its GDAX exchange, told CNBC in a phone interview.

Derivatives products will allow for greater liquidity, better price discovery and lower volatility, White said. "I think products like derivatives or an ETF effectively allow traders to do two things: speculate and hedge risk on the price speculation."

Bitcoin price 12-month performance

Source: CoinDesk

Bitcoin has more than quadrupled in price this year, hitting a record above $4,500 Thursday and notching a market value of $74 billion amid growing institutional investor interest in the digital currency. Many governments and financial institutions see enormous potential for improving transaction security and efficiency using the blockchain technology that supports bitcoin.

But the surge in investor demand has also revealed access issues with third-party storage systems and trading platforms that fall short of the more established Wall Street markets.

Bitcoin's price is also prone to massive swings of several hundred dollars within a day. With bitcoin futures in the works, investors will be able to protect themselves from potential sharp drops in prices through hedging.

The ability to hedge bitcoin investments paves the way for other products, such as bonds.

Fisco's three-year bitcoin bond was issued by its digital currency exchange unit for an internal trial on Aug. 10, according to a Google translate of the press release.

The bond has a three percent annual interest rate and returns bitcoins when it matures, the release said. The total worth of the bond was 200 bitcoin, or $900,000 at Thursday's prices.

The bitcoin bond "brings digital currencies into the world of high finance," said Dan Doney, chief executive officer of Securrency, which plans to launch a platform at the end of the year to allow investors to buy stocks using bitcoin. Doney was chief innovation officer at the U.S. Defense Intelligence Agency before co-founding Securrency in 2015.

The biggest challenge is "it is very difficult to predict the price of bitcoin tomorrow, let alone a year from now," Doney said.

A bitcoin-backed bond would allow large institutions to store value using the digital currency and potentially be more open to accepting bitcoin as payment, analysts said.

"It is interesting financial firms are trying to get their arms around the currency and what it can be," said Brian Patrick Eha, author of "How Money got Free: Bitcoin and the Fight for the Future of Finance."

In early August, the Chicago Board Options Exchange said it planned to launch bitcoin futures as soon as the fourth quarter of this year. That paved the way for VanEck, which sells gold ETFs and other investment products, to file last Friday with the U.S. Securities and Exchange Commission for a "VanEck Vectors Bitcoin Strategy ETF" that proposes to initially invest in bitcoin futures.

The U.S. Commodity and Futures Commission in late July also approved a digital currency trading platform called LedgerX to clear derivatives.

Historically cryptocurrencies "were very much a domain for crypto anarchists and tech-savvy people, and that has changed in the last couple years," said Niklas Nikolajsen, CEO of Swiss-based digital currency broker Bitcoin Suisse. "This means a whole new ballgame of people are going to get access to the market."

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Bitcoin bond launch brings digital currency step closer to 'world of high finance' - CNBC

Following moves by China and Japan to regulate digital currencies, Australia is attempting to crackdown on money laundering and terrorism financing with plans to regulate bitcoin exchanges.

"The threat of serious financial crime is constantly evolving, as new technologies emerge and criminals seek to nefariously exploit them. These measures ensure there is nowhere for criminals to hide," said Australia's Minister for Justice Michael Keenan in a press release.

The Australian government proposed a set of reforms on Thursday which will close a gap in regulation and bring digital currency exchange providers under the remit of the Australian Transactions and Reporting Analysis Centre (AUSTRAC).

These exchanges serve as marketplaces where traders can buy and sell digital currencies, such as bitcoin, using fiat currencies, such as the dollar.

Bitcoin has grown massively this year. The market cap has increased to $73.93 billion and the price recently hit fresh record highs. It currently trades at $4,476 and the price has risen 348 percent year to date.

The reform bill is intended to strengthen the Anti-Money Laundering and Counter-Terrorism Financing Act and increase the powers of AUSTRAC.

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Another major country joins China and Japan in cracking down on bitcoin exchanges - CNBC

Defying naysayers, Bitcoin's price surged above $4,500 for the first time early Thursday to reach a market value of $73.6 billion.

While the cryptocurrency has since pared some of its gains, falling to $4,453 by midday Thursday, it's risen by about $1,000 in the past nine days. The currency's total market value jumped $17 billion in the same period, thanks in part to the optimism traders have around plans to help Bitcoin eventually go mainstream . This includes speedier transactions, starting with its software updatedubbed Segwit2xearlier this month.

We can also speculate that it is related to the increased interest from Korean and Japanese exchanges where volumes are also increasing, William Mougayar, the founder of Startup Management, told Fortune . Another part of it is driven by the psychology of markets, as $USD 5,000 seems to be within reach, now that the $4,000 level has been easily broken.

That said, Bitcoin's sudden rise is cause for concern for some.

Goldman Sachs analyst Sheba Jafari wrote in a Sunday note that she expected Bitcoin to potentially hit and peak at $4,827.

"The market should in theory enter a corrective phase. This can last at least one third of the time it took to complete the preceding advance and retrace at least 38.2% of the entire move," she wrote. "From current levels, that would measure out to around $2,221."

Meanwhile, plans to scale up Bitcoin haven't exactly gone smoothly. Miners still appear split about how to implement SegWit2x. The first part of that plan was activated earlier this month, but the second part, an upgrade to Bitcoin's software by increasing block size to two megabytes in November, has been a point of contention. That upgrade, which was made official this week, will result in a " hard fork ."

Miners already dissatisfied with Segwit2x decided not to make that upgrade earlier this year, forming a new cryptocurrency offshoot dubbed Bitcoin Cash . If more miners shun the November upgrade, it would in theory result in yet another Bitcoin currency.

Bitcoin Cash is trading at about $373.80, 47% off its all-time high earlier this month. Ethereum, on the other hand, is trading at about $289, 26% off its all-time high earlier this year.

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Bitcoin Surged to a New High Adding $17 Billion in Just Over a Week - Fortune

Bitcoin Cash's price rose above the $400 mark today, breaking the rangebound market trend of thepast several days.

The cryptocurrency climbed as high as $406 today, according to data fromCoinMarketCap. The move followed days of steadymarketfluctuations, with the price of Bitcoin Cash trading no more than a few dollars above or below the $300 level.

The largest Bitcoin Cash market by-volume is Bithumb, which accounts for roughly 30 percent of the global trade through its Korean won-Bitcoin Cash trading pair, CoinMarketCap figures show. The exchange reports more than $145 million in volume over the past 24 hours.

At press time, Bitcoin Cash is trading at about $391 onBithumb.

As previously reported by CoinDesk, Bitcoin Cash split off from the main bitcoin blockchain earlier this month when a group of miners and developers moved to adopt software, with new network rules, that was incompatible with the rest of the network. The result: bitcoin "forked" into two distinctblockchains with their own freely-traded digital assets.

Today's upward price action comes just hours after bitcoin reached a new all-time high above$4,500.

Rollercoaster image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at [emailprotected].

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Bitcoin Cash Breaks Price Doldrums to Push Past $400 - CoinDesk

One of the worlds largest bitcoin mines is located in the SanShangLiang industrial park on the outskirts of the city of Ordos, in Inner Mongolia, an autonomous region thats part of China. Its 400 miles from Chinas capital, Beijing, and 35 miles from the the city of Baotou. The mine is just off the highway, near the intersection of Latitutde 3rd Road and Longitude 3rd Road. It sits amidst abandoned, half-built factoriesvictims of an earlier coal mining boom that fizzled out, leaving Ordos and its outlying areas littered with the shells of unfinished buildings.

The mine belongs to Bitmain, a Beijing-based company that also makes mining machines that perform billions of calculations per second to try and crack the cryptographic puzzle that yields new bitcoins. Fifty Bitmain staff, many of them local to Ordos, watch over eight buildings crammed with 25,000 machines that are cranking through calculations 24 hours a day. One of the buildings is devoted to mining litecoin, an ascendant cryptocurrency. The staff live on-site in a building with a dormitory, offices, a canteen, and a repair center. For recreation, they play basketball on an unfinished cement court.

Bitcoin mining consumes enormous amounts of electricity, which is why miners seek out locations that offer cheap energy. The Ordos mine was set up in 2014, making it Chinas oldest large-scale bitcoin mining facility. Bitmain acquired it in 2015. Its powered by electricity from coal-fired power plants. Its daily electricity bill amounts to $39,000. Bitmain also operates other mines in Chinas remote areas, like the mountainous Yunnan province in the south and the autonomous region of Xinjiang in the east.

Despite the costs, bitcoin mining remains a lucrative industry. At the current bitcoin price of about $4,000 per bitcoin, miners compete for over $7 million in new bitcoins a day. The more processing power a mining operation controls, the higher its chances of winning a chunk of those millions. The Ordos mine accounts for over 4% of the processing power on the bitcoin networka huge amount for a single facility.

Quartz visited the mine in Ordos on Aug. 11.

Read next: The lives of bitcoin miners digging for digital gold in Inner Mongolia

Read next: Take a 360 walk around one of the worlds biggest bitcoin mines

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Photos: Inside one of the world's largest bitcoin mines - Quartz

This isnt a game of bingo, the company called Blockchain is maintaining the worlds most popular bitcoin wallet. And starting today, Blockchain users will also be able to create Ethereum wallets and hold ethers.

Blockchain isnt a centralized exchange like Coinbase or Kraken. It is simply a wallet so that you can safely story all your cryptocurrencies. Compared to many services out there, Blockchain is more secure and more difficult to hack.

When you create a Blockchain wallet on the web or using the mobile app, the company cant see your balance or your transactions. You can back up your wallet to Blockchains servers, but you keep the keys to your wallet.

And this approach has been quite popular as there are now 14 million Blockchain wallets. The startup also recently raised a $40 million round.

If you want to buy bitcoins or ethers, Blockchain has partnered with exchanges to build seamless integrations. This way, you can send USD, EUR or whatever and receive bitcoins in exchange on your Blockchain wallet.

And the new Ethereum wallets look and work just like bitcoin wallets. The company has partnered with ShapeShift Blockchain users can exchange bitcoins for ethers and vice versa.

While Blockchain has remained dedicated to bitcoin wallets for a while, adopting Ethereum is an interesting move. It proves that there wont be just one universal cryptocurrency.

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Bitcoin wallet 'Blockchain' adds Ethereum support - TechCrunch