This week on Planet Bitcoin - 5 June 2015

Friday 05 June 2015

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

After months of a tedious pattern of flatlining pockmarked with sudden jumps up and down, we might finally be seeing something a bit different. After bumbling along around the $235 mark for several days, in line with its recent behaviour, the market started to drop – a gradual slide that accelerated with a higher-volume fall towards the end, landing a little above the $220 point, as the chart shows. From there, volumes returned to normal and the price recovered a little to the low $220s. As far as bitcoin is concerned, this 5% movement is nothing but, as we remarked last week, it’s notable now for the fact that such rises and falls are comparatively rare these days.

Weekly chart

This movement seemed a little more natural than the previous clear attempts at market manipulation – an organic move by traders who lost confidence rather than a single whale throwing around money, whether intentionally or inadvertently (both have happened in recent weeks). Still, the overall market situation is reminiscent of Groundhog Day. We were last here in mid-April after a fall from just under $300. The time before that was early February, again after the fall from just over $300 – that one from Coinbase’s ‘Regulated Exchange’ news. And just before that $220 was the point at which the market rested after the crunch down to $155. It seems that the $220s are an important point for traders. The swings are getting less and less wild, both the optimism and pessimism trailing off. What happens next? A recovery upwards will be welcomed, but since $220 has proved a sticking point in the past anything below that is likely to be treated with horror – at least in the short term. If that happens, we can expect more serious volatility. That’s not necessarily a bad thing, since one way or another the last months’ malaise have to play out and reach some kind of a denouement before the picture decisively changes for the better.

Around the Bitworld

The big news of the week was Wednesday’s announcement that the BitLicense regulations had finally been released. The long-awaited and controversial development applies only to New York, though given the care and attention that have gone into crafting the rules, it is highly likely that other states will take their cues from Ben Lawsky’s document. Companies will require a $5,000 license to do business in bitcoin in the state, and they will be required to jump through various other hoops (such as hiring a compliance officer) to ensure they stay on the right side of the law. The new rules have had a mixed reception, with fears they will hamstring smaller companies – though they could have been far more restrictive without extensive feedback and advocacy from the bitcoin community.

Meanwhile, Chinese exchange OKCoin has provided an exemplar for why bitcoin businesses attract the attention of regulators. Former CTO Changpeng Zhao warned the bitcoin community of various dubious practices they were involved in, including problems in his contract, the exchange’s use of bots to inflate volume artificially, and their manipulation of a proof-of-reserves audit (none of which will come as any surprise to anyone who has spent any length of time in the bitcoin world). He also claims that their cold wallet was poorly protected, with the CEO alone holding the private keys. It return, OKCoin maintain that Changpeng was incompetent, did not understand the technology he was hired to manage and lied repeatedly for his own reasons.


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