This week on Planet Bitcoin - 24 April 2015

Friday 24 April 2015

After a week of bumping along the $225 line, moving only a few dollars either way, the picture abruptly changed on Tuesday when the market spiked $8 – a sudden and completely unexpected rise that was over within just a few minutes. From there, traders took encouragement and bought up into the high $230s, before moderate profit-taking took over and finally a return to around $235 and below.

Weekly chart

The reason for the spike was, apparently, a single trader’s mistake. The evidence points to one account on OKCoin betting on the market falling to the tune of $3 million – around 31,000 contracts at $100 each. In the event, the market moved against the trader far enough to trigger a margin call. As his position was force-liquidated, coins sold in the hope of a fall in price were effectively bought back, causing a surge in demand. From there, renewed confidence helped push the price higher still. What did not happen this time was an immediate short back down to the $220s, which might have been expected in such apparently pessimistic conditions after an unanticipated move.

Around the Bitverse

Elsewhere in the bitcoin world, it has been an eventful week. Two pieces of news have come out about Mt Gox, which collapsed over a year ago in February 2014 with the loss of 650,000 bitcoins. The first is that a recent report has found that the missing coins were most likely stolen and sold sometime between late 2011 and May 2013 – well before the exchange finally sank. It means that Gox was running a fractional reserve, whether intentionally or (more likely) otherwise, for many months. This also means the coins are unlikely to be dumped on the market, as many have feared.

On a related subject, claims have now opened for those who lost coins in Gox. 200,000 bitcoins were ‘discovered’ in a so-called ‘old format’ wallet after Gox’s collapse, and presumably these will form the main source of funds for former customers. The claims process is detailed in a document published on Mt Gox’s site. In brief, customers will be able to claim in either BTC or USD, and through Kraken (if they want bitcoins) or Mt Gox itself. Kraken is offering up to $1 million in free trades for those who claim via their platform. Although the price of bitcoin has collapsed by two-thirds from its levels on February 7 (around $705), when Gox first suspended withdrawals, returns will be calculated at $483 per coin. However, it has been estimated that customers may receive as little as 20 percent of their money back.

In other news, bitcointalk moderator Theymos has handed over a large number of forum-users’ personal messages and deleted posts (totalling some 5 GB) to the US authorities, who are investigating fraudulent activity by mining company Butterfly Labs. BFL sold pre-orders for ASIC mining rigs but never delivered many of them, whilst others were delivered so late that they were essentially worthless due to the enormous increase in hashrate. More than 20,000 customers missed out thanks to their incompetence – or dishonesty, if you believe the suggestions that they were mining with their customers’ rigs.

Some users who sent PMs mentioning BFL have been informed; others who simply posted about the company have not. Theymos previously gave up information about Ross Ulbricht in response to a subpoena. The case raises questions about what users believe is private and what is public – and whether others can expect information about other questionable activities discussed on bitcointalk to be subpoenaed in the future.

Finally, New York’s BitLicense is growing ever-closer to becoming a reality. Regulator Benjamin Lawsky has said he believes it will be ready before the end of May, though is keeping a keen eye on how other jurisdictions deal with virtual currencies to maintain a degree of overall coherence.

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