This week on Planet Bitcoin - 12 August 2016

Friday 12 August 2016

TL;DR - flirting with $600 again but confidence is still shaken

This week we’ve seen bitcoin prices steadily after the crash that took place at the end of 2 August. The Bitfinex hack saw the theft of almost 120,000 BTC and a plunge from above $600 down to below $500, with flash-crash lows of around $470. This is hardly surprising since there is very little chance of the stolen coins being recovered, and 120,000 BTC - a sum of over $70 million at current prices - is a lot of overhang on the market.

Chart

Notwithstanding, sanity gradually reestablished itself over the last week and prices have recovered to almost $600. Before the hack, prices had stabilised around $650, though in the three days leading up to the breach traders had sold off down to just above the $600 mark. Confidence has now largely returned, but prices have not yet risen sustainably over that earlier level. Bitfinex, meanwhile, is reopening for trading and has ‘compensated’ traders for the loss of their bitcoins with a native token, with one issued for every $1 lost (these are currently trading at a heavy discount, since there is no guarantee customers will ever receive their funds back).

In other news, unconfirmed transactions stacked up again on Thursday, likely prompting a new phase in the block size debate that refuses to die. Ethereum and Ethereum Classic continue to spar, with a large amount of Classic trading on Poloniex despite its relative size compared to its parent. You can keep track of how Ethereum and its Classic fork compare in terms of market cap and hashrate on the website http://www.etc-eth.com/.

On the broader markets, the UK undertook another round of QE this week after lowering interest rates to 0.25%. It was unable to purchase all the bonds it wanted, despite bidding over the odds. At this stage, it’s unclear whether that’s just thin August volumes, or whether it heralds something more serious and we are reaching the limits of what monetary policy can achieve - this is the point at which, in the words of John Maynard Keynes, we are pushing on a string. Meanwhile gold demand is picking up, fuelled by continuing lack of clarity around the impact of Brexit, contagion around the world and the situation of Italy’s banks. Prices have risen to around $1,350. It’s highly likely that bitcoin is and will continue to absorb some of the demand for alternative assets at times of economic uncertainty.


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