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China Fears Spread Beyond Bitcoin As Crypto Markets Slide

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%name China Fears Spread Beyond Bitcoin As Crypto Markets Slide

The digital currency markets experienced widespread price declines today, as concerns surrounding the latest developments in China motivated many traders to sell off not only bitcoin, but alternative digital assets.

The development follows the PBoC’s announcement today that it warned several domestic exchange operators that they must comply with regulations or risk being shut down. Traders also received startling news from major operations Huobi and OKCoin that, effective immediately, they would suspend bitcoin withdrawals for one month.

Markets reacted strongly to these developments, with bitcoin prices falling to as little as $942 at 14:30 UTC, a more than 10% decline from the opening price, according to the CoinDesk Bitcoin Price Index (BPI).

The digital currency then recovered, rising to $975.21 at the time of report.

Yet, even after this increase, bitcoin prices were still roughly 7.5% lower for the session, BPI figures show.

Impact spreads

Even in alternative digital asset markets, the impact of the development in bitcoin was widely felt.

Ether, which powers the smart contract-based platform ethereum and is the second-largest cryptocurrency by market capitalization, fell to as little as $10.67 on CoinMarketCap, down close to 7% since the start of the day.

The digital token then recovered lost ground, reaching $10.92 at the time of report. Yet, even after making these gains, ether was roughly 4.8% lower for the session at time of writing.

Screen Shot 2017 02 09 at 3.44.17 PM China Fears Spread Beyond Bitcoin As Crypto Markets Slide

Ether classic, which was created roughly six months ago as a result of an ethereum hard fork, provided the most striking example of a price decline, dropping upwards of 20% for the day to $1.20 on CoinMarketCap, after trading at $1.47 at 12:04 UTC.

The digital currency, which helps power the smart contract-based platform ethereum classic, later rose to $1.28 at the time of report.

At this price, ether was roughly 12% lower for the day.
Screen Shot 2017 02 09 at 3.45.11 PM China Fears Spread Beyond Bitcoin As Crypto Markets Slide

Monero, a digital currency that leverages ring signatures to help provide market participants with a high level of privacy, fell to as little as $11.83 during the day, close to 8% below the price of $12.83 at 12:04 UTC, according to CoinMarketCap.

At the time of report, the digital currency had recovered slightly, trading at $11.91, still more than 7% lower for the session.

XMR Chart 2 China Fears Spread Beyond Bitcoin As Crypto Markets Slide

Growing up

The fact that digital currency prices suffered widespread declines today, and then proceeded to recover, is merely part of a broader trend, Jacob Eliosoff told CoinDesk.

He emphasized that in some cases, news that bodes poorly for bitcoin “may actually help (or at least be neutral for) other major coins.” He pointed to a bug in bitcoin’s blockchain or a major disagreement between bitcoin developers as potential examples.

However, news that causes bitcoin prices to push lower usually has the same effect on the price of altcoins, he said.

The high correlation that exists between the price of digital currencies may simply be a sign of the market’s immaturity. Bitcoin was the first cryptocurrency to scale, and has grabbed the lion’s share of the total market capitalization owned by these digital assets. (In most cases, you have to buy bitcoin before purchasing other altcoins).

Watch and wait

However, several altcoins have risen to prominence by offering some compelling value not provided by bitcoin.

Ethereum, whose currency ether had a market capitalization of roughly $970m at the time of report, has drawn interest by offering developers a platform where they can create applications that rely on smart contracts.

Likewise, Monero, the fifth-largest digital currency by market capitalization according to CoinMarketCap, has carved out its own niche by offering a level of privacy far higher than that of bitcoin.

In this way, Eliosoff and others are hoping that the “extreme correlation” that exists between the prices of digital currencies today will diminish over time as more establish singular use cases and establish unique infrastructure.

As evidenced by today’s moves, however, this development remains in the distance.

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Lawyer Arrested in Attempt to Sell Confidential Complaint for Bitcoin

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A lawyer for a major US lobbying firm has been arrested and charged after trying to sell confidential information for bitcoin.

According to court documents filed on 1st February and unsealed yesterday, Jeffrey Wertkin sought to sell a criminal complaint related to a whistleblower case for $310,000, asking that he be paid in bitcoin for the offer.

Wertkin, who was arrested on 31st January, was previously a partner for Akin Gump Strauss Hauer & Feld, a major Washington, DC-based law practice and lobbying firm. According to OpenSecrets.org, the firm’s clients include AT&T, Volkswagen and Mobil Oil, among others.

Wertkin also served six years as a trial lawyer for the US Justice Department, The New York Times reported yesterday.

Court documents show that Wertkin reached out to an unnamed employee of a California cybersecurity firm, ultimately moving to sell that individual sealed information related to a complaint that had been filed against the company.

Using the moniker “Dan”, Wertkin sent a partial copy of the complaint to the company, offering a full copy in exchange for $310,000 in bitcoin.

The filing states:

“…Dan suggested to EMPLOYEE that Dan be paid in bitcoin and explained to EMPLOYEE how bitcoin worked and that the advantage to bitcoin was that it could not be traced.”

Wertkin and the employee, after a series of additional conversations, were scheduled to meet at the Hilton Garden Inn in Cupertino, California. FBI agent William Scanlon, who submitted the affidavit, was waiting nearby in the place of the tech company employee.

Once the copy of the complaint was handed to Scanlon, other FBI agents quickly moved in to arrest Wertkin, who, according to the affidavit, “was wearing a wig which I believed was to conceal his identity”.

“My life is over,” Wertkin reportedly said as he was arrested.

A full copy of the FBI affidavit can be found below:

FBI Affidavit by CoinDesk on Scribd

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Winklevoss Bitcoin ETF Offering Expands to $100 Million

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New documents filed for the bitcoin exchange traded fund (ETF) sought by investors Cameron and Tyler Winklevoss reveal that the size of the offering has grown to $100m.

The years-long effort – delayed more than once by the US Securities and Exchange Commission (SEC) – is aimed at providing a means for investors to gain exposure to bitcoin without actually having to buy the digital currency.

The SEC is expected to make a decision on the Winklevoss Bitcoin ETF later this year, with its self-imposed deadline of 11th March inching closer. Speculation around the approval is such that at least one exchange has moved to offer a prediction market, letting traders bet on the possible outcome.

Documents submitted to the SEC on 8th February show that the planned offering has changed somewhat in scope.

For example, the size of the offering has increased, from $65m to $100m, as well as a boost in the number of shares being offered, from 1m shares to 10m shares. The filing goes on to indicate that the maximum offering price per share has been lowered, from $65 down to just $10.

Notably, the filing also features new language about the prospect of a network split following a software hard fork, or a backwards-incompatible change to bitcoin’s underlying code.

In that circumstance, the filing states, the ETF’s custodian will support the blockchain that has “the greatest cumulative computational difficulty for the forty-eight (48) hour period following a given hard fork”. During that 48-hour period, the creation or redemption of new ETF baskets will be suspended.

The filing goes on to state:

“If the Custodian, in consultation with the Sponsor, is unable to make a conclusive determination about which Bitcoin Network has the greatest cumulative computational difficulty after forty-eight (48) hours, or determines in good faith that this is not a reasonable criterion upon which to make a determination, the Custodian will support the Bitcoin Network which it deems in good faith is most likely to be supported by a greater number of users and miners.”

The new filing also includes other minor updates such as the companies that will act as authorized participants. These firms are Convergex Execution Solutions LLC, KCG Americas LLC and Virtu Financial BD LLC.

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China’s Bitcoin Exchanges Impose Fees Following Central Bank Meeting

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The era of no-fee trading in China appears to be over.

Following in the footsteps of China’s ‘Big Three’ exchanges, smaller competitors BTC Trade, BTC100CHBTC, DahonghuoYuanbao and BitBays all moved to impose or increase trading fees yesterday in the wake of a meeting with the People’s Bank of China, China’s central bank.

Both BTC Trade and CHBTC said that the fees would come into force on 13th February, whereas the other exchanges did not identify a starting date. Further, with the exception of BTC 100 and BitBays, the exchanges all moved to add 0.2% maker and taker fees.

BitBays is now charging 0.1% maker fees and 0.15% taker fees, while BTC 100 announced that it would begin collecting trading fees, without adding details. Yunbi, in turn, announced a reduction in trading fees two days ago, dropping its trading fees from 0.2% to 0.05%.

It was not immediately clear at press time whether Jubi – another of the exchanges to meet with the PBoC – had made a similar move.

The developments come on the heels of a new warning from the PBoC to domestic bitcoin exchanges about the need for tighter anti-money laundering and foreign exchange controls. Two of China’s “Big Three” exchanges – Huobi and OKCoin – went on to freeze bitcoin and litecoin withdrawals, stating that the new policy would last for one month.

Fee policy changes at Huobi, OKCoin and BTCC had previously driven volume to no-fee exchanges – a trend that is now unlikely given the updates across the sector.

Notably, Yuanbao and BitBays explicitly referenced regulatory concerns in their messages. By contrast, BTC Trade said it had moved to add fees “in order to curb speculation [and] to prevent price speculation”, a message echoed in CHBTC’s post.

Bitcoin prices have fallen sharply since today’s news out of China first broke, averaging $957 at press time.

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Bitcoin Price Sinks Below $1,000 as Exchanges Cut Services

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Bitcoin’s price has fallen sharply, dropping below $1,000 amid news from China that major exchanges had temporarily cut services.

At press time, prices were down more than 7% after word emerged this morning that two of China’s biggest bitcoin exchanges – Beijing-based OKCoin and Huobi – are freezing bitcoin and litecoin withdrawals for a month following pressure from the People’s Bank of China.

Yuan deposits and withdrawals are not affected, the exchanges said.

Markets had been hovering around $1,063 when the news broke, though this has now changed as the market seeks to price in the news.

According to the CoinDesk USD Bitcoin Price Index (BPI), prices fell as much as $80, hitting a low of $958.56. BPI data shows that prices had previously hit a high of $1,077.76 earlier today.

At press time, bitcoin prices are at an average of $988.

CNY-denominated markets were down more than 13% from their peak on the news at one point, according to the BPI, falling from a high of ¥7,598.92 to an average of ¥6,755.52.

However, the price was up 5% on the day at press time, indicating traders were perhaps viewing the news as a buying opportunity.

Real-time response

So far, market observers appear to be reacting with a mixture of surprise and concern when reached for comment.

OTC trader Zhao Dong indicated that he expected further price weakening stoked by traders “since you can only deposit coins and sell” in light of the exchange policy changes.

Kong Gao, overseas marketing director at OTC trading firm Richfund, remarked more simply, stating:

“This is big news.”

CoinDesk will continue monitoring this developing story.

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