This week on Planet Bitcoin - 7 August 2015

Friday 07 August 2015

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

The exciting volatility of recent weeks has abated, and from its high above $300 bitcoin has declined around 10% over the last month. Both prices and volumes have fallen since last weekend, and the market is now trading back in the high $270s/low$280s, roughly where it established a plateau after its latest decline a fortnight ago. There have been no sharp movements in either direction, and gentle and steady selling has been the order of the day.

 Weekly chart

There is nothing particularly surprising about this, as at the moment there are no reasons for heavy activity. If there was one month in the year when low volumes might be expected, it’s August, and a look at the longer-term chart confirms that volumes are indeed at a year low; the last time there was so little trading was August last year. Moreover, any interest in bitcoin prompted by Greece has receded into the background.

In the alt markets, most coins are showing declines over the course of the week – perhaps crypto’s summer variation of the ‘sell in May and go away’ principle that used to be adopted by stock traders. No doubt interest will pick up again when people return from their holidays.

Around the bitworld

The other factor that is likely to be making some difference to the market is Ethereum, which launched on 30 July with its Frontier version. Trading is to commence shortly, after the network has a chance to ‘thaw’. A project of such magnitude and publicity inevitably attracts speculation, and although Ether has not been available to buy on exchanges, proxies such as Ethercoin have been changing hands ahead of the exchange release. At the time of writing, these are trading at 20 times the original price. (At the pre-sale, 2,000 Ethers could be bought for one bitcoin. Ethercoin is currently trading around 0.01 BTC or 100 per bitcoin.)

Even taking into account the fall in bitcoin value in terms of USD since the sale (22 July to 2 September 2014), this still represents a tenfold increase in speculative value. Ether is also a highly inflationary currency, at least in its early phase. In all likelihood, this will lead to a flood of supply when Ethers are officially traded, and enormous volatility until the market settles.

The other major news of the week was that Mark Karpeles, one-time CEO of MtGox, has been arrested by Japanese police. Rumours of Karpeles’ own theft of the 650,000 bitcoins that he claims were stolen by hackers have, of course, circulated ever since the exchange collapsed. However, the arrest was not for theft but for manipulating financial records. It seems that Karpeles altered the database to make it look like Gox was in a better position than it was in reality.

The arrest was quickly followed by an AMA (Ask Me Anything) on Reddit by Ashley Barr, Gox’s first employee. Barr, who was known as Adam Turner during his time at the exchange for reasons of safety and anonymity, discusses some frankly appalling but sadly unsurprising details of Karpeles’ leadership of MtGox. The picture he paints is one of consistent incompetence and criminal negligence, rather than outright and malicious criminal activity. Karpeles made live updates to the exchange, hopelessly and catastrophically overspent, mixed customer and exchange funds, didn’t maintain cold wallets and didn’t share critical information with other employees, amongst other issues. Barr expressed his hope and expectation that Karpeles would be convicted based on the evidence he had supplied to the police.

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