This week on Planet Bitcoin - 10 July 2015

Friday 10 July 2015

Weekly market report and news from Dynacoins, first community-supervised mutual bitcoin fund.

Last week’s Greece-inspired push saw the market lift to the mid-$260s – the level of the April 2013 bubble, back when Cyprus’s own bank closures gave its people a reason to circumvent capital controls and speculators a reason to pile into bitcoin. After sinking to the low $250s over the weekend, the next rise – fuelled by dismay at the prospect of total failure of the banking system and Grexit – brought it to the high $270s, before the price dropped back again. After a pause in the mid-$260s again, it moved back up and levelled off in the low $270s.

Chart

The pattern, then, is fairly similar to the one we’ve seen repeatedly before over the past few months, of higher lows and higher highs. On the one-month chart this is clearly visible. However, the next couple of days will be absolutely critical. Thursday was the deadline for Greece submitting new plans to the EU; these will be discussed on Saturday before a final decision is made about Greece’s place in the Eurozone on Sunday. Should the answer be a Grexit then we can expect significantly increased interest in bitcoin, because Greece’s banks will by then be entirely illiquid and very likely on the point of complete failure.

To be clear, bitcoin’s rise is not simply due to Greeks buying bitcoin. Although there has been substantial interest from Greece, the volumes are just not high enough to be producing these effects. They are the result of speculators taking their cues from what they think other speculators will do as a result of the Greek situation.

Update: shortly after this post was first published, LTC traders - probably acting in a co-ordinated move to manipulate the market - chose to lock in their profits in a space of just a few minutes, wiping out recent LTC gains and pushing BTC sharply higher into the $290s. The markets remain extremely volatile and further sudden movements are likely.

Elsewhere in Cryptoland

Let’s not forget China, whose stock market has been hugely volatile in recent days. After another sharp fall, cutting 30 percent off its value since its high a few weeks back, the Chinese government implemented measures to increase confidence. The most significant of these was to prevent large shareholders (anyone with 5 percent or more of a stock) selling for six months. This led to an immediate surge in the markets, but recent history suggests this may be short-lived. Either way, Chinese speculators are continuing to throw their money at alts – particularly Litecoin, which has seen huge volumes of trade. Prices have quadrupled since three months ago. (A new Chinese ponzi scheme accepting LTC as deposits partially explains this.) Peercoin, too, has seen exceptional growth, tripling in price in a month. Another crash in the stock market will probably see the stream of money into the alts turn into a flood.

Back onto the Greek crisis, an interesting test case for a blockchain currency is being carried out on the island of Agistri. Along with the crypto consultancy Coinstructors, Brian Kelly will be implementing a solution using Nautiluscoin, which he says will be backed with gold. Quite what the deal is here remains unclear; Nautiluscoin was launched a year ago and was mired with controversy for various reasons, including a large pre-mine and poor distribution. Arcane comments from Coinstructors suggest that there is more going on here, with other blockchains involved in some way, but they are keeping their cards close to their chests for now.

Bitcoin itself has been suffering over the last week or so as a vast number of small transactions have been used to clog the network. Ordinary transactions have been delayed by hours and even days, and tens of thousands of unconfirmed transactions have been stacking up. Whether this is another ‘stress test’ or a deliberate attack is unclear, and given the impact there is little difference between the two anyway. The problems have been used on both sides of the blocksize debate. On the one hand, there is a case for leaving blocksize at 1MB and the market setting tx fees, since the highest fees will win against low-cost spam transactions. If such an attack was to take place with 8 or 20 MB blocks, filling them all, the blockchain would swiftly grow to an unmanageable size. On the other hand (and more convincingly), larger blocks would be more expensive to attack and the backlog would clear faster once the attack was over.



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