Superforecasting cryptocurrencies: Week 4 Day 1: Living contradictions

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18 September 2017

Living contradictions

Once again we see the contradiction between the midnight results and the 14:00 prices compared to previous days.

We can also contrast the assessed probability that prices will reach 150% of the 26 August levels by 1 December (several over 70%) and their current distance from this goal (many over 40% off).

We can flip the results to see the reason. Though cryptocoins may be 20% below the 26 August levels, these can also be said to represent the volatility of crypto over a month.

If confidence or speculative investment returns, another 40% climb over the next two months is perfectly feasible, and the 14:00 prices indicate that a 10% rise is within a day's ordinary movement.

Meanwhile, we see more and more developments indicating wider acceptance of cryptocurrencies and recognition of their uses. But the crypto world, unlike the stock market, is still vulnerable to large trades by single players. This should change as the ecosystem expands, but until that point, the highs and lows are to be expected.

Crypto developments

BIS says central banks may need to go crypto

The Bank for International Settlements (the bank of central banks) says all governments "may eventually have to decide whether issuing retail or wholesale [cryptocurrencies] makes sense in their own context".

The question poses itself most urgently for countries like Sweden, "where cash usage is rapidly declining", the BIS said in its quarterly review. "Many stores do not accept cash and some bank branches no longer disburse or collect cash."

"While it seems unlikely that bitcoin or its sisters will displace sovereign currencies, they have demonstrated the viability of the underlying blockchain or distributed ledger technology," it adds.

One option might be a currency available to the public, with only the central bank able to issue units that would be directly convertible with cash and reserves, it says. There might be a greater risk of bank runs, however, and commercial lenders might face a shortage of deposits.

For a quick summary, see Bloomberg. Much of the story is in the BIS conclusion.

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Why did the China ban on crypto exchanges cause the price dip?

At hacked.com, Joseph Young reports "Prominent Bitcoin Researchers Perceive Chinese Exchange Ban Positively."

He notes that guru investor Tuur Demeester says a full ban will mean the hashrate for minting coins will decline and cause slower transactions. This is most likely to cause problems for BitcoinCash because Chinese mining pool operators do most of its mining.

"But, Demeester also explained that China’s censorship of bitcoin will also lead to rapid emergence of decentralized exchanges (peer to peer trading platforms), bitcoin mixing tools, tor and satellite nodes, which will drastically improve privacy and security measures for bitcoin users," Young notes.

He also reports Jon Creasy's prediction that crypto exchanges will be reinstated after President Xi is re-elected on 18 October.

Overnight, Japan has become the largest bitcoin exchange market in the world, overtaking the US, he adds.

Most interesting, Young observes that China accounted for only 10-13% percent of global bitcoin trades prior to the ban. Yet the sell-off was much more, nearly 30% from $4100, and rebounded by 32% to $3850 when the ban was finally announced. Speculators in the US, Japan and South Korea panic on the rumors, and whales moved in again to buy when prices were low.

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Japan now biggest in bitcoin exchange

Sam Quinn at ethereumworldnews.com says Japan now has 50.75% of the bitcoin exchange market. Bitcoin trading by China has dropped from 15% to 6.4%. In China, the Huobi and OKCoin exchanges have been given until the end of October to stop services (instead of end September), as they were not involved or operated any fundraising for the inital coin offerings ICO, he observes.

Chinese traders have moved to Japanese Bitcoin exchange markets, giving it 20% more than the US market share.

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Coincheck first licensed exchange in Japan

Coincheck announced it is now the first licensed exchange in Japan after being approved by the country’s Finance Bureau Director.

Bitcoin was legalized as a form of payment on April 1, 2017, but all domestic exchanges must be authorized by the treasury department and Financial Services Agency (FSA).

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First Ethereum blockchain–based lottery?

KIBO Lotto, based in Singapore, is to be the first Ethereum blockchain–based lottery, btcmanager reports.

bitcasino.io is credited as one of the first gambling platforms using the blockchain technology. Kibo lotto prizes are paid automatically by smart contract immediately after the drawing. This means lottery participants can receive any amount of the jackpot at once from any part of the world with no additional fees or charges, it says.

"Kibo lotto also introduces advantages like transparent draws, prize payments based on smart contract technology and bigger bet control. This is built to allow the company to eliminate any fraud attempt from the drawing results," btcmanager reports.

However, it still has to go into operation.

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Eye on ICOs

Business Insider UK reports: "More than $1.8 billion has been raised in 'initial coin offerings' this year, much of it by companies you have never heard of." Why?

Jim Edwards suggests after talking to two investors:

A large portion of ICOs are funded by people who got rich buying Bitcoin.
They need to diversify their exposure to the volatile cryptocurrency.
But they don't want to pay tax.
On that basis, ICOs look like a good deal.

"When you're a Bitcoin millionaire and the Chinese government can wipe away 25% of your assets in an afternoon, you need to act," he observes.

"Bitcoin generally becomes taxable at the moment you convert it into cash, " he points out. "Most ICO currencies are tradeable with Bitcoin. So a good way to diversify out of Bitcoin without alerting the IRS and HMRC is to trade into an ICO."

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