5 Tips For New Bitcoin Investors

Authored by Darryn Pollock via CoinTelegraph.com,

Taking the plunge and entering the crypto space can be daunting. There is no centralized authority to hold your hand, and the rumors and stories circulating around digital currencies can be fear-inducing.

image courtesy of CoinTelegraph

However, with a few straightforward tips, negotiating that first Bitcoin transaction or trade can be a lot less stressful.

1. Do your homework

There is plenty of hype, rumor, success stories and tales of horror when it comes to Bitcoin and other digital currencies. Make sure you understand exactly what you’re getting into, and don’t risk more money than you could afford to lose.

Bitcoin is an exciting world to be in, but it is one that is complex and confusing if you only enter it on hype. Many people buy expensive cars, not knowing how the engine works, and that is fine because if it breaks there are mechanics and garages. In the cryptocurrency world, it is you against the world, it is decentralized and there is no one to hold your hand.

Pawel Kuskowski, CEO & co-founder of Coinfirm, gave this advice:

"The more you understand, the better off will be."

Don’t simply speculate about the big money there is to be made, actually go out there and learn how Bitcoin and Blockchain work. Lucas Geiger, founder and CEO of Wireline, says:

"This may seem obvious, but I think the first thing is take time to understand the Blockchain. I say this strongly because few people will do this. If you don"t have a high-level understanding of how a Blockchain stores secure data (such as coins), then you are investing in the equivalent of tulip bulbs.”

A good place to start is the beginning - with Satoshi Nakamoto"s white paper. Crypto fund manager Jacob Eliosoff wrote:

"If you have any technical bent whatsoever, take 10 minutes to leaf through the original 2008 Satoshi white paper. It"s only eight pages, legible and an inspiring work of genius!"

The great thing about the cryptocurrency ecosystem though is that there is a lot of material and information out there. Loads of websites and resources are aiming at trying to make the technology easier to understand.

Even more than that, the investment world is also trying to simplify things by making Bitcoin more available to traditional investors. The introduction of things like futures will help people understand how Bitcoin works.

2. Be cautious

In any investment there will be risk, but that risk is somewhat magnified by Bitcoin’s newness and extreme volatility. Eliosoff emphasized:

"This is still an extremely high-risk space. Don"t invest money you can"t afford to lose!"

It is tempting to be bold and brazen, throwing money at Bitcoin after hearing the success stories, but especially as a first timer, caution is the better part of valor. There is no reason to look to become a millionaire overnight with Bitcoin, and by sinking huge amounts of capital in it from the start, you will be met with more problems than solutions.

Marshall Swatt, a serial entrepreneur, suggested:

"Start small and invest a small portion of your capital."

Additionally, from Tim Enneking, managing director of Crypto Asset Management, advises:

"Don’t chase Bitcoin prices. Decide on a entry point and stick with it. With Bitcoin, you’re almost always right in terms of foreseeable price action – it’s your timing that might be off. So, be patient, and let the Bitcoin price come to you."

There are a number of investing strategies that work really well with Bitcoin, and those that offer the most success are often the most cautious.

Things like ‘Dollar Cost Averaging’ - putting in the same amount of money into an investment at the same time each week or month - is great for Bitcoin as it helps you ride out the lows, as well as the highs.

3. Diversify effectively

Most new digital currency enthusiasts hear first about Bitcoin, but there are thousands of other cryptocurrencies out there, and some have grown much faster than even Bitcoin. Diversification is wise, particularly since many of these “altcoins” perform well when Bitcoin drops. Tech entrepreneur Oliver Isaacs writes:

"Hedge against volatility and don’t put all of your eggs in one basket. Much like investing in the stock market or FX, you should diversify your funds as a risk management technique." 

Famed stock picker Ronnie Moas is a strong believer in diversification. It is easy to become infatuated with one cryptocurrency, especially Bitcoin, but it is important to hedge your bets.

“Do not put all your Crypto money into Bitcoin,” Moas warns. “You must diversify across at least a dozen of the more than 1,000 names. Focus on names in the top 50.”

4. Keep coins off the exchanges

There is still a lot of hacking and thievery that goes on in the crypto space, and it is important to take precautions. It isn’t too hard to make hackers’ lives difficult. Use the exchanges for just that: exchanging. Once you have bought a currency, move the money off the exchange and into a wallet that only you control, such as a hardware wallet.

A lot of people have been burned on exchange hacks - none more so than the major Mt. Gox one - but even recently, things like BTC-e and the charges against their CEO would have caused many people to lose out on huge amounts of money.

Matthew Unger, founder and CEO of iComply Investor Services Inc. suggested:

"Just like you keep some cash in your wallet, some in your bank account and perhaps the really valuable stuff in a safe, you need to manage digital currencies in the same way."

5. Get ready for a wild ride

Bitcoin is notorious for its volatility, so much so that many traditional investors are terrified of it. A massive drop in Bitcoin’s price does not spell permanent disaster, but it is hard to stay committed when you start heading into the red.

Diversification is a great strategy to help with that, but it takes some thought and effort. Of course, the most famous (and so far, successful) Bitcoin strategy of all is to ‘hodl’ - or hold onto -  your investment no matter the market volatility.

You can also buy and forget, as not keeping an eye on the market can help keep you from worrying about the dips and miss the volatility.

A Look Inside The Secret Swiss Bunker Where The Ultra Rich Hide Their Bitcoins

Somewhere in the mountains near Switzerland’s Lake Lucerne lies a hidden underground vault containing a vast fortune.

It’s no ordinary vault, according to Quartz. Built inside a decommissioned Swiss military bunker dug into a granite mountain, it’s precise location is a closely guarded secret, and access is limited by myriad security precautions.

But instead of gold bars, the bunker contains hard drives on which customers’ bitcoins are being kept in what’s call “cold storage” – i.e. the owners’ private keys are protected by an air-gapped hard drive. The vault is one of many operated by Xapo, an early bitcoin company known for its cold storage wallet products and a debit card that pays for transactions in digital currencies.

The company won’t disclose how much bitcoin is stored in the vault, but one employee who spoke with Quartz said he sometimes takes customers with millions of dollars in bitcoin on tours of the vaults where their fortune is stored. Xapo was founded by Argentinian entrepreneur and current CEO Wences Casares, whom Quartz describes as “patient zero” of bitcoin among Silicon Valley’s elite. Cesares reportedly gave Bill Gates and Reed Hoffman their first bitcoins.

As Quartz explains, the bitcoin vault doesn’t store actual bitcoin units. Instead, what’s being stored are the owners’ private cryptographic keys that allow the owner to access and transfer his or her bitcoins by matching the key with a public key that’s used to identify the coin on the blockchain. Gaining unauthorized access to someone’s private keys is akin to making off with a gold bar.

The inexorable rise in bitcoin’s valuation has been marred by notable hacking incidents like the collapse of Mt. Gox, which ushered in the longest bear market in bitcoin’s history. Security fears appear to have subsided as bitcoin’s price has soared to all-time highs, but incidents like the collapse of the DAO have inspired investors with substantial bitcoin wealth to look into protecting it.

To store the coins, Xapos contracts Deltalis, the company that technically operates the 10,000-square-foot data-center that now inhabits the decommissioned bunker.

Server racks for banks, and any client who needs secure data processing, fill a cavity dug over 320 meters deep in the granite mountain. The Swiss military built the facility in 1947, and it served as the army’s secret headquarters during the Cold War, Agence-France Presse has reported. Inside, walls covered with detailed maps and ancient radio electronics serve as vestiges of its military past.

To enter Xapo’s private vault in the Deltalis data center, visitors must endure an exhausting series of security procedures.

Streiff leads us to a concrete facade jutting out of the mountainside, the bunker’s entrance. We step through about a foot of concrete and enter the lobby. I sign in as I would at any office building, except I also have to present my fingerprints and be photographed. After that I step through a “man-trap”—a phone booth-sized cylinder made of bullet-proof glass that shuts me in until an operator opens the door on the opposite side.

Once through the man-trap, we touch our ID cards and pass through a set of steel revolving doors, then walk down a 100-meter long passageway through the granite. At the end of the passageway are two red steel doors that I’m told can survive a nuclear blast. Streiff invites me to try to close one—my 90 kg (198 pound) frame can’t budge it. “They’re closed every night,” he tells me, showing me how to hang off the handle and use his body’s momentum to gradually swing it shut.

Streiff and Kon are taking me to see Xapo’s “private suite,” an ultra-secure, customized, portion of the data center. We pass through a second man-trap and then end up in front of a nondescript white door. “This is further than anyone outside Xapo has been,” Streiff tells me, as he unlocks it. Inside is a space about the size of a walk-in closet containing a cooling unit, and yet another door. But that’s as far as they’ll let me go, and I’m not allowed to take photographs.

Security is similarly tight inside the vault. Nobody is allowed the enter the “cold room” where the bitcoins are stored on air-gapped hard drives. To protect against an electromagnetic pulse attack, the cold room is equipped with a Faraday cage, a type of barrier meant to block electromagnetic fields.

Beyond that door, I rely on what Carlos Rienzi, Xapo’s head of security, tells me later, when I’m back in London. Rienzi chose the vault for Xapo, and he designed the private suite and its security protocols. His “threat model,” as computer security jargon goes, is to protect against attacks from “well-funded terrorist groups or hackers.”

There are two more portals inside the suite: the first leads to an operators’ room, and the second to a “cold room.” The cold room is encircled with steel slabs to form a Faraday cage: a barrier that protects against a possible electromagnetic pulse (EMP) attack that could wipe out the data—and thus the keys to the bitcoin—stored in the room. For digital assets like bitcoin, thick walls and a secret location are not enough. A shield against invisible modes of attack like an EMP bomb must be provided for.

No one, not even the operator, enters the cold room. Its door is sealed with tape—like a crime scene—to ensure it’s not tampered with. The cold room contains hardware, which is never connected to the internet, used to sign bitcoin transactions. Signing a transaction can be performed offline. The operator accesses that hardware using “special cabling,” sending encrypted data to the hardware for signing. Finally, before a transaction can be approved, two more sign-offs, in two other vaults located on separate continents, must be performed.

I ask Rienzi if he feels pretty confident about the security measures he has in place in Switzerland. “We are under attack 24/7,” he tells me, referring to the terrorists and hackers he designed the vault to guard against. “This is not a race. It is a chess game. You have to think about the opponent’s next movement. You can never relax.”

Of course, all the security measures in the world can’t protect investors from a sudden plunge in the bitcoin price. However, the digital currency’s indomitable - for now - performance has silenced at least one of its most prominent critics. Then said, unlike precious metal specie, one carefully targeted EMP would be all it takes to sever the ownership chain for a long, long time.

Still, with the digital currency recently reaching yet another record high, despite relentless jawboning and rhetoric by everyone from Jamie Dimon to central bankers to China, we can only imagine the business of protecting bitcoin fortunes is set to boom.

"Bitcoin Jesus" Says Another Network Split Is Coming In November

Since its current world-beating bull run began in late 2015, bitcoin has surmounted a series of pitfalls that were supposed to kill the market.  The list is remarkably long. The DAO hack. The PBOC crackdown. The ICO craze. The SEC’s rejection in March of two proposed bitcoin ETFs. And, most recently, the network split that spawned bitcoin cash. All were supposed to burst the roaring valuation bubble, yet in almost every example, a temporary pullback was followed by another leg higher.

Considering that it was the culmination of three years of acrimonious infighting among bitcoin core devs and the miners, the August split – particularly the market reaction – was surprisingly cavalier. Now, the faith of bitcoin investors is being tested once again as key players in the market are warning that another network split could create a third version of bitcoin as soon as November.

According to Bloomberg, bitcoin evangelist Roger Ver, better known as “Bitcoin Jesus,” said that some of the miners who supported the controversial software upgrade that triggered the split in August have withdrawn their support just as bitcoin core developers are preparing to implement the second step of the update. This could create a rift between what Ver calls “legacy bitcoin” and “the SegWit2x version of bitcoin.”

“There’s probably going to be another split between bitcoin legacy and SegWit2X version of bitcoin but that just gives me more coins that I can sell for the Bitcoin Cash version,” Ver said in an interview on Bloomberg Television at a conference organized by Bitkan in Hong Kong.

Ver was an early adopter of bitcoin. Since the split, he’s been a vocal supporter of bitcoin cash. Ver, who was born in the US but renounced his citizenship and is currently a citizen of Saint Kitts and Nevis, has also been denied visas to travel back to the states in the past. Of course, Ver has been badly wrong before. Back in the summer of 2013, he traveled to Tokyo to visit Mt. Gox shortly after customers started having issues withdrawing their funds, which the exchange attributed to unspecified "liquidity problems." Ver attested that Mt Gox CEO Mark Karpeles had shown him bank statements proving that the exchange"s troubles were a result of being temporarily shut out of the traditional banking system, and that customers" assets were safe. Of course, this excuse was merely a ruse for a massive hack that resulted in the theft of tens of thousands of customer bitcoins.

To be sure, Ver isn’t alone in warning about another potential split. Samson Mow, chief strategy officer at blockchain startup Blockstream, also says a rift is likely as more miners and developers reject the pending upgrade to SegWit2X.

“Many developers, users, miners, and businesses have already stated they do not agree with the pointless 2x fork, so we’ll likely end up with three chains,” said Samson Mow, chief strategy officer at Blockstream, which has close associations with Core developers. “Long-term, only the main bitcoin chain which has the support of users and developers can survive.”

Bloomberg summarizes the circumstances that could lead to another split below:

“If another tear occurs in November, it would create a third version of the cryptocurrency and potentially further scatter capital and resources as three offshoots of bitcoin emerge.

SegWit2x refers to a compromise proposal developed to deal with the surge in transactions. In August, miners agreed to implement the first phase of the proposal, or SegWit. They were expected to increase the blocksize to two megabytes around November in a second phase.

Avoiding such a splinter requires miners to reach at least 92-percent consensus on supporting the second phase of SegWit2x, but that’s becoming increasingly unlikely, according to Wang Chun, co-owner and chief administrator of F2Pool, one of the world’s largest mining pools.

Even though SegWit2x garnered more than 93 percent support in July, miners and developers seem to be backing away from the proposal, a compromise that harbors characteristics disliked by extremists on both sides. Wang said he thinks the split will “happen, 100 percent.”

Many Core developers agree. Several have said they’d prefer to focus on writing code in the future for only the SegWit chain: currently the largest version of bitcoin at about $64 billion in market value.”

So, would the creation of a third iteration of bitcoin (and, we presume, the spontaneous generation of billions of dollars’ in “value”) be enough to trigger the great crash that naysayers like J.P. Morgan Chase & CO CEO Jamie Dimon and Bridgewater Associates founder Ray Dalio have warned is coming?

What say you?
 

Bitcoin's Rise To Record Highs In Context

After a two-year long bear market, bitcoin came roaring back in 2016, and has been climbing ever since.

The digital currency reached a new all-time high above $4,650 on Tuesday, an increase of more than 350% year-to-date. The sheer intensity of its gains has inspired some comparisons to the digital currency"s initial run-up, which ended with the collapse of bitcoin exchange Mt. Gox in early 2014, marking the end of the first bitcoin bull market.

Given bitcoin"s torrid advance, analysts from Bespoke Investments attempted to put its gains in context in a chart. The results are striking: Compared with infamous asset bubbles like tech stocks in the 1990s, bitcoin has climbed much further in far less time. According to Bloomberg, “there’s almost no comparison” between bitcoin and the tech-stock bubble.  

“Bespoke Investment Group contrasted the rise in bitcoin with infamous bubbles such as the tech market in the late nineties. There’s almost no comparison. Tech stocks rose just over 1,000 percent over the entire course of their bubble, and bitcoin is already up more than twice that. Take a look.”

According to CoinTelegraph, bitcoin analysts expect the digital currency to finish the year around $5,000.

And some expect the digital currency to go much, much higher. According to the Wall Street Journal, early Snapchat investor Jeremy Liew expects Bitcoin will reach $500,000 by 2030. Security company founder and notable eccentric John McAfee believes it’ll take only three years.

Alistair Milne, a popular bitcoin analyst who has a large Twitter following, calculated earlier this month that bitcoin would already be worth more than $7,000 if the digital currency’s share of the overall crypto market would return to its pre-2017 levels. Bitcoin’s market capitalization now represents less than half of the total for the broader market crypto market, down from about 90% early this year. The drop is largely due to bitcoin rivals like Ethereum and Litecoin, which put bitcoin"s YTD rise to shame.

If Bitcoin returned to market dominance of ~84% (where it was before the Bitcoin Unlimited/forking fears), the price would be ~$7000 today

— Alistair Milne (@alistairmilne) August 15, 2017

Bitcoin has made a habit out of routinely defying its most ardent skeptics. But the shadow of Mt. Gox still looms large over the digital currency market. And the risk of another bull-market-ending catalyst like a 51% attack on the bitcoin network or another major hack at one of the more mainstream exchanges could force out the week hands, sparking another precipitous drop.

Mysterious Trader With "Nearly Unlimited Bankroll" Said To Manipulate, Dominate Price Of Bitcoin

It was over three years ago, back in May 2014, when we wrote "How Bots Manipulated The Price Of Bitcoin Through "Massive Fraudulent Trading Activity" At MtGox" in which we first demonstrated one of the more striking observed "bot-driven" bitcoin manipulation schemes, in this case related to the infamous collapse of the now defunct Mt.Gox bitcoin exchnage.

As we wrote at the time, a number of traders began noticing suspicious behavior on Mt. Gox. Basically, a random number between 10 and 20 bitcoin would be bought every 5-10 minutes, non-stop, for at least a month on end until the end of January, by what appeared to be two algos, named later as "Willy" and "Markis." Each time, (1) an account was created, (2) the account spent some very exact amount of USD to market-buy coins ($2.5mm was most common), (3) a new account was created very shortly after. Repeat. In total, a staggering ~$112 million was spent to buy close to 270,000 BTC – the bulk of which was bought in November.

"So if you were wondering how Bitcoin suddenly appreciated in value by a factor of 10 within the span of one month, well, this is why. Not Chinese investors, not the Silkroad bust – these events may have contributed, but they certainly were not the main reason. But who did it? and why?"

Of course, in the end this alleged manipulation did not help Mt.Gox which eventually collapsed in what has been the biggest case of cryptocoin fraud in history.

We bring up this particular blast from the past, because in the latest case of bitcoin market abuse - with Bitcoin trading at all time highs above $3,000 - Cointelegraph reports of rumors swirling about a trader "with nearly unlimited funds who is manipulating the Bitcoin markets." This trader, nicknamed "Spoofy," received his "nom de guerre" because of his efforts to “spoof” the market, primarily on Bitfinex.

Of course, spoofing is what Navinder Sarao pled guilty of last year, when regulators inexplicably changed their story, and instead of blaming a Waddell and Reed sell order for the May 2010 flash crash, decided to scapegoat the young trader who allegedly crashed the market due to his relentless spoofing of E-mini futures (and also making $40 million in the process of spoofing stock futures for over five years).

It now appears that a spoofer has once again emerged, only this time in Bitcoin.

For those unfamiliar, spoofing is simple: it is the illegal practice of placing a large buy order just below other buy orders, or a large sell order just above other sell orders, then cancelling if it appears that the order is about to be hit or lifted. The idea is to make traders think that somebody with deep pockets is getting ready to buy or sell, in hopes of moving the market. If traders see a sell order of 2000 Bitcoin they may rush to panic sell before the whale crashes the price. And vice versa on the bid-side.

As an example of Spoofy"s trading pattern, here is a breakdown of a typical "trade" by the mysterious entity as noted by BitCrypto"ed who first spotted the irregular activity: Spoofy is a regular trader (or a group of traders) who engages in the following practices:

• Places large bids ($2 million and up) for Bitcoin, usually just under a smaller bid order, only to remove them once someone starts to sell. These orders usually have a lifetime of minutes, or sometimes as short as 5–10 seconds to manipulate the price up (more common)


• Places large asks ($2 million and up), for Bitcoin when he wants the price to go down, or stop going up (less common)


• Occasionally ‘Spoofy’ will allow orders deep in the orderbooks to remain for a few hours, usually $50–$100 below the current price. For example, during the recovery above $2,000, he had roughly 4,000 BTC of false orders in the $1,900 range that were unlikely to execute, and ultimately were never executed.

As noted above, spoofing is actually illegal - as ultimately the trader has no intention of ever executing the publicized trade - but as Bitcoin markets are largely unregulated, it’s a very common practice.

What is unusual in this case is the nearly unlimited bankroll that Spoofy has at his disposal: He regularly places orders approaching $60 million.

Even more unusual is that, as cointelegraph reports, most of Spoofy’s activity occurs on a single exchange: Bitfinex. This exchange came under fire earlier this spring when Wells Fargo cut off their banking ties. As a result, it’s virtually impossible to deposit fiat on Bitfinex without going through intermediaries.

Yet unlike most Bitfinex traders, Spoofy appears to have special privileges, and has massive sums of both fiat and Bitcoin at his disposal on that exchange, likely one of the only traders who does.

* * *

In addition to spoofing, "Spoofy" also engages in wash trading, or effectively trading with himself. As BitCrypto’ed points out in a recent blog post:

“Spoofy makes the price go up when he wants it to go up, and Spoofy makes the price go down when he wants it to go down, and he’s got the coin… both USD, and Bitcoin, of course, to pull it off, and with impunity on Bitfinex.”

The BitCrypto’ed blog also describes Spoofy’s wash trades, when he trades with himself by either selling into his own buy orders or vice versa. Wash trading at high volumes can induce a frenzy of buying or selling, as other traders respond to the high trading volume. Spoofy can execute wash trades at very low cost, about $1,000 per million dollars of volume.

A single entity (entity could be a trader, or a group of traders), single handedly wash traded 24,000 Bitcoins in shorts. In order to do this, you would need to have at least 24,000 BTC on Bitfinex and the USD to buy them with.

When Bitfinex announced its plan to distribute Bitcoin Cash, it initially planned to distribute Bitcoin Cash to holders of short positions. Immediately following that announcement, a single trader short sold tens of thousands of Bitcoin all at once. It’s likely this trader was Spoofy himself, hoping to acquire as much Bitcoin Cash as possible.

The large number of shorts on Bitfinex also led many to believe that an epic short squeeze was coming, and many Bitcoin traders purchase coins in expectation of this. Suddenly, he “claimed” all of his own shorts, closing them using his own Bitcoin. The number of shorts dropped drastically, yet without affecting the price at all.

Bifinex itself admitted the manipulation on August 2, one day after the fork:

“After the methodology announcement on July 27th, several accounts began large-scale manipulation tactics in an attempt to obtain BCH tokens at the expense of exchange longs and lenders on the platform, causing the distribution coefficient to artificially plummet.

We have determined that this kind of manipulation?—?including wash trading and self-funding shorts?—?is in violation of Bitfinex’s terms of service. Those who intended to take unfair advantage of the circumstances surrounding the BCH distribution at the expense of other users have been sanctioned accordingly.”

Interestingly, BitCrypto"ed claims that Spoofy isn’t limited to just Bitcoin, and that shortly after this ‘trader’ was ‘sanctioned’ by Bitfinex, another interesting thing happened: ETCBTC shorts immediately disappeared on August 1.

Here we can see how the ETCBTC shorts simply vanished, from 60,000 ETC short, to a low of 93 ETC. But let’s not just look at ETCBTC, what about ETCUSD?

 

A giant middle finger. Notice the dramatic increase and decrease in longs with no effect on price.

I"m not sure what to make of these, but it calls into question the legitimacy of this data. The point I’m trying to make by showing the ETCBTC/ETCUSD margin pairs also engaging in very funny business at the same exact time, how are we supposed to know that the BTCUSD longs on Bitfinex are not also subject to this manipulation?

ETCBTC Shorts = Clear evidence of manipulation
ETCUSD Longs =Clear evidence of manipulation
BTCUSD Shorts = Clear evidence of manipulation (and admitted by Bitfinex)
BTCUSD Longs = BTCUSD Longs in terms of USD, has never been higher in Bitfinex’s history. See the green line.

It"s not just Bitfinex: Spoofy’s activity also drives crypto prices on other exchanges, as arbitrage takes place. Because BItcoin is so thinly traded, a single large “whale” can potentially move the entire market.

Just like in US stock markets where HFTs find instant price arbitrage opportunities, with the help of extensive spoofing, the same takes place in bitcoin exchange.

People underestimate how much exchanges follow each other. Manipulation on one exchange will affect prices on other exchanges. You have traders that watch all of the exchanges and if one exchange starts to pull ahead, they too buy on cheaper exchanges.

You don’t just have people, but you also have bots that will do the same thing, so price reactions can be immediate.

Just like equities. And while Spoofy is certainly exercising outsized control over the Bitcoin price, it is uncertain how much of an affect this is having across all the markets. The price is currently rising, having finally surmounted the $3,000 barrier. The only problem? Nobody knows how much of this increase is organic and sustainable, and how much is due to the market manipulation of Spoofy and others.

Finally, nobody knows who he is:  The identity of Spoofy remains a mystery. He may be i) a single trader, ii) a large OTC trading firm or group of colluding traders, iii) or even the Bitfinex management themselves. He sometimes seeks to drop Bitcoin price, and sometimes acts to increase it. One thing is certain: one single trader seems to have a "central bank"-like impact on the entire crypto market.

BTC-E Says It Will Return Customers' Bitcoins After Being Shut Down By DOJ

In what would be a surprising achievement, after the US government seized the site"s domain, BTC-e announced that it has somehow retained access to customer wallets and deposits nearly two weeks after the site was taken down by a collaboration between US and European authorities.

The announcement was published on a bitcoin forum account long associated with the shadowy exchange, so there’s no guarantee that it represents an official statement from the company, or whatever’s left of it.

Authorities arrested the BTC-e’s alleged founder, Russian-born Alexander Vinnik, in Greece late last month after unveiling a 21-count indictment against Vinnik and BTC-e, which included a $110 million fine for the mysterious digital-currency exchange, as we reported.

The full statement is below, translated from the original Russian by Google.

Vinnik was accused of using the exchange to operate a $4 billion money laundering scheme using cryptocurrency. According to the indictment, Vinnik helped the hackers who stole tens of thousands of customer bitcoins from Mt. Gox in the largest, and probably most infamous, cybertheft in digital-currency history. The Fed’s described BTC-e as the “exchange of choice to convert digital currencies like bitcoin to fiat money for the criminal world, especially by those who committed their crimes online.”

This isn’t the first statement purportedly released by BTC-e since Vinnik’s arrest. A day after the site was seized, the same account published a note assuring customers that they would get their money back.

Of course, that didn’t stop some on twitter from making uncomfortable Mt. Gox comparisons.

Too soon? #BTCe pic.twitter.com/g0XeycGyZT

— SirMeow UASF BIP148 (@OneSirMeow) July 27, 2017

Bitcoin's "Day Of Reckoning" Has Arrived: Traders Welcome "Bitcoin Cash" As Network Splits

After a brief delay, the first bitcoin cash blocks have been mined and trading in the new cryptocurrency has begun - albiet at a sizable discount to bitcoin.

#BitcoinCash trading on OKEx at 0.065 BCC / BTC. Trade here https://t.co/7G6sNMENIx $BCC $BTC pic.twitter.com/wpMIIl2RBM

— OKEx (@OKEx_) August 1, 2017

BCC token are trading at 0.097 bitcoin, about $261, on Chinese exchange OKCoin.

#BitcoinCash trading at 0.097 BCC / BTC on 11K+ volume already!!!. Trade here https://t.co/7G6sNMENIx … $BCC $BTC pic.twitter.com/vGG2P4cx9L

— OKEx (@OKEx_) August 1, 2017

By comparison, bitcoin is trading at $2,700, and ethereum at $219, according to CoinMarketCap.

* * *

After more than two years of internecine struggles over how to expand bitcoin’s ability to quickly process transactions, the long-feared bitcoin "day of reckoning" has arrived. The bitcoin network has split into two separate blockchains, causing the creation of a new cryptocurrency twin to the original bitcoin.

In the meantime, the collapse that some bitcoin doomsayers envisioned has so far yet to materialize; the original cryptocurrency was off 3% in recent trade, while most of its peers were higher on the day.

After announcing Saturday that they would go ahead with the fork, bitcoin miners running the alternative bitcoin software will soon begin producing the new coin, known as bitcoin cash. Bitcoin cash raises the limit of how much data can be stored in a single “block” on the bitcoin blockchain, which proponents say will help increase transaction speeds while tamping down rising transaction costs.
Though no blocks of bitcoin cash have yet been mined, Kraken, one of the most popular US exchanges, has added it to its interface.

Bitcoin cash trading live on Kraken, though none yet exists. So fascinating to watch.

— Josh Forman (@joshuajforman) August 1, 2017

Other exchanges are still figuring out how they will handle cash, according to CNBC.

"Coinbase said it will not support the new bitcoin cash. The firm operates the GDAX exchange, which said in an email alert it has temporarily disabled bitcoin withdrawals and deposits Tuesday "in preparation for the upcoming fork."

Bitfinex, which has nearly a third of U.S.-dollar bitcoin trade volume, tweeted Tuesday morning that "We will stop processing $BTC deposits at noon UTC until the situation has settled. Deposits after that time will not be eligible for $BCH."

As of press time, bitcoin cash miners were still waiting for the first new coin to be processed, according to CoinDesk.

According to Btcforkmonitor.info, the bitcoin blockchain has produced 478562 blocks, compared to 478,558 for the alternative Bitcoin Cash blockchain.

At press time, miners dedicating computing power to that blockchain were still looking for their first block, an event that would mark the formal creation of its cryptocurrency.

Bitcoin cash is supported by a minority of miners and developers who objected to a feature of the more popular Segwit2x update that would’ve improved the digital currency’s scalability by routing more transaction data over peripheral networks, thereby taking pressure off the main blockchain. Segwit2x will also increase the bitcoin blockchain’s block size to 2 megabytes. According to Shapeshift CEO Erik Vorhees, the only major mining pools that support cash are ViaBTC and Bitcoin.com.

#bitcoinCash has not forked but behind other nodes #bitcoin pic.twitter.com/p5CC0mk86B

— Crypto Trading (@TradingCrypto) August 1, 2017

Segwit2x has the support of most of the community’s miners. Data from blockchain.info show that 90% of the network’s mining power is signaling support for Segwit2x, higher than the 80% threshold needed to make the software update official.

If recent moves are any indication, Tuesday will be a wild day in cryptocurrency markets as investors wait to see how the market will react to bitcoin cash. Ethereum endured a similar network split last summer that created Ethereum Classic, a separate token that’s seen its price plunge as investors favored the original Ethereum token over its newly created peer. Now investors are wondering: Will a similar dynamic play out with bitcoin and bitcoin cash?
 

As China Slaps Fees On Bitcoin Trades, Japan Monthly Volumes Soar by 8,900%

There is one reason why bitcoin quickly became the darling of HFT and various high speed algo traders operating out of China and the rest of the world: domestic transactions were "frictionless", as there were no fees on buys or sells. Until last night, that is, because as China"s three largest bitcoin exchanges, BTCC, Huobi and OkCoin, all said in separate statements on their websites late on Sunday, starting Tuesday they will charge traders a flat fee of 0.2% per transaction. This is only the latest fallout from the recent crackdown on Chinese bitcoin exchanges whose activities have drawn increased scrutiny from the central bank.

Each of the statements said assessing fees will "further curb market manipulation and extreme volatility".

One of the reasons why China has dominated bitcoin trading volumes in recent years, in addition to the US of the digital currency to bypass capital controls, has been the absence of trading fees which encouraged volumes and boosted demand at Chinese bitcoin exchanges. However, when the price of bitcoin soared to near-record highs - as this website predicted would happen in the summer of 2015 - driven by a stampede of Chinese momentum chasers, it attracted attention from Chinese regulators. Helping the surge, was the collapse in the yuan which weakened 6.6% against the dollar, its worst performance since 1994 as local savers sought the relative "safety" of bitcoin relative to the renminbi.

The standoff between local bitcoin traders and exchanges on one hand, and regulators on other culminated on Jan. 11, when the People"s Bank of China launched spot checks on BTCC, Huobi and OkCoin to look into a range of possible rule violations, amid increasing government efforts to stem capital outflows and relieve pressure on the yuan. According to Reuters, citing "a person familiar with the matter", the exchanges had not received direct instructions from the PBOC, but decided to introduce trading fees to align with its wishes to see the bitcoin market cool down.

So far, the impact of the new fees has been negligible, with the price of Bitcoin on the BTCChina exchange largely unchanged overnight.

And as one bitcoin bubble fizzles, a new one appears to be born. Japan.

As Cryptocoinsnews reported over the weekend, a major factor that has sent the trading volume of Bitcoin in Japan soaring, is the new virtual currency law which will be enforced by this spring, says the Business Development Lead of CoinCheck, the country’s top exchange. According to Kagayaki (Kaga) Kawabata, the introduction of the proposed law made Bitcoin a darling of top media organisations in the country. He explains:

“After this announcement, various large media that once negated Bitcoin started to feature Bitcoin again this time as an innovative technology (After the Mt. Gox incident, the media broadcasted Bitcoin as a tool for money laundering). Japanese national TV shows and newspapers such as NHK and NIKKEI featured about cryptocurrency expanding awareness of the general public and bringing in various users with diverse backgrounds from college students to elderlies.”

Kawabata, whose CoinCheck’s parent company, ResuPress, also provides Bitcoin payment processing for merchants similar to the service BitPay offers, the announcement could have contributed to a key new trend in Japan which is the changing view that Bitcoin is not just an investment vehicle. He says:

“Many still think of Bitcoin as an investment vehicle. However, the situation is changing where Bitcoin is also starting to be used as a payment method in the past few years. Currently, there’s around 5,270 merchants and website that accept Bitcoin as payment in Japan (99% of them use Coincheck payment). Regarding payment volume, compared to last year January, the monthly volume increased by 8900%. This number could accelerate in the next few years.”

He added that the enforcement of the new law may have positive side effects on Bitcoin as it was once considered a toy for geeks but is now changing dramatically now to be seen as a legit currency. Ironically, Japan was also the epicenter of the first mass bitcoin casualty, when Mt.Gox went under, wiping out hundreds of millions in the process. Then again, human memory tends to be quite shallow when potential profits are involved.

Such a change in perception, he says, has the potential to migrate serious traders to trade in Bitcoin and other cryptocurrencies which will inadvertently surge cryptocurrency trading volume remarkably. Which is why he is very optimistic about the future:

“We believe the hype in Bitcoin price is not just a fluke,” Kawabata says on the general outlook of cryptocurrencies. “Many factors exist that accelerate the trading volume. We believe cryptocurrencies market will grow dramatically in the next few years. Many large corporations and banks in Japan have started to show interest in cryptocurrency and started to experiment with the Blockchain technology. I think remittance will be the first practical usage of cryptocurrency where many corporations/banks will adopt cryptocurrencies.”

Of course, if and when the second coming of the Japanese bitcoin bubble fizzles, we are confident some other country in the world will open it with open arms, as the rolling digital currency bubble continues its fascinating drift around the globe.