This week on Planet Bitcoin - 11 March 2016

Friday 11 March 2016

TL;DR some good, some bad, but crypto is going strong

This week bitcoin came off a two-month high of around $440 and briefly flirted with a plunge below $400 - a worrying development that came to nothing. The price promptly recovered and stabilised between $410 and $415 for several days, and has since risen back to $420. Volumes are nothing spectacular, and it seems that it’s just another one of the holding patterns we’ve got used to over the last year or more. There will no doubt be another bigger move in time, once the consolidation has run its course.

Chart

One of the reasons for the sudden loss of confidence might have been the spam attack that has been slowing bitcoin transactions down to a snail’s pace. At first, it seemed that this was just the natural consequence of bitcoin being used as it was intended - transaction volumes had finally become too big for the protocol’s 1 MB blocks. In the event, though, it looks like a rogue wallet had accidentally started sending bitcoins to itself in unending loops, saturating the network with transactions. The blockchain is still on borrowed time, but it’s not as bad as we thought. In response, Bitcoin Classic nodes have increased to more than 25% of the network, though blocks mined have topped out at 4%. It’s down to the big guys to solve this.

Elsewhere in cryptoland

Meanwhile, Ethereum corrected, hitting a high of 0.03 BTC before dropping around 30% and then recovering to what looks like a double top - an indication that the bubble is truly, at last, about to burst. But Ethereum never fails to surprise, so there are no guarantees here (or rather, no guaranteed timeframes). This move coincides with a report suggesting that Ethereum, wonderful though it is, suffers from serious flaws - not least in terms of scalability. 

The alt markets have also enjoyed something of a resurgence in recent weeks, which continues - perhaps as a result of money coming out of ETH and looking for a new home. Overall, the mood has very much changed in recent weeks and the malaise that had been a feature for many months has lifted.

In fiatland, there is trouble afoot. The European Central Bank cut interest rates once again on Thursday in a desperate attempt to revive inflation, which is stubbornly sub-zero. Main interest rates are now 0% and the bank deposit rate is -0.4%. Additionally, QE has been increased from €60 to €80 billion per month, and has been extended to include corporate as well as government bonds. It’s a ‘big bazooka’, as one critic called it, but the reality is there’s not a lot of ammunition left if the Eurozone slides back into recession. Meanwhile there is growing interest in the idea of helicopter money as a solution for the woes of major economies, particularly the Eurozone, sometimes dressed up in language of ‘QE for the people’. This should be worrying enough, but many of the mainstream news outlets which are openly discussing it - as well as the policymakers - overlook the fact that it would require treaty change for the ECB to do it, and Brexit for the Bank of England. Which is another thing upsetting the markets.


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