BitPay Stops Processing Payments Less Than $100, Backpedals Two Days Later

Bitcoin payment service provider BitPay has announced Friday, Dec. 22, that it is updating the minimum payment amount on its platform from $5 to $100, only to retract the change two days later, as reported in a blog post on Sunday.

BitPay has shared an update Dec. 22, notifying its users that the platform will no longer process invoices that are less than $100 equivalent in Bitcoin, a vast increase over the previous limit of $5.

The company cited unprecedented Bitcoin transaction volume and the resulting record-high network congestion and miner fees as the reason for this change.

The blog post states:

“Bitcoin miner fees are now more than $30 per transaction on average … Bitcoin payments under $100 are quickly becoming impractical for users to send and for BitPay to process.”

It was further specified that the change “does not affect person to person payments in the BitPay wallet” and “only [affects] payments to BitPay merchants and Bitcoin-to-dollar loads for the BitPay Card.”

BitPay backpedals

However, just two days later, the payment processor has retracted the change, returning the minimum invoice limit back to its previous value of $5, based on a claim that “Payment Protocol improvements” recently implemented on the platform have allowed it to do so.

We do not have plans for further immediate changes to the minimum BitPay invoice amount,” the announcement continued.

Notably, the company has still not implemented support for the SegWit scaling solution on its platform as of Dec. 25, despite admitting that it would help increase the capacity of the network and allow “an average Bitcoin miner fee reduction of over 40 percent.”

This failure to enable SegWit support four months after it has been activated on the Bitcoin network has resulted in a degree of frustration for the users of BitPay, as almost every single person replying to the company’s latest announcement on Twitter is asking for the urgent addition of the scaling solution:

BitPay Will Not Process Bitcoin Payments Below $100 Due to High Miner Fees

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BitPay, one of the largest bitcoin payment processing platforms for online merchants, will no longer process payments below $100 due to rapidly rising bitcoin transaction fees.

No More $100 Transactions

Over the past few months, the size of the bitcoin mempool has increased to more than 100 million bytes and the number of users, average transaction per day, and user activity increased exponentially. As a result, given the lack of adoption of Segregated Witness (SegWit) and the fixed block size of bitcoin at 1MB, the average bitcoin transaction fee has surpassed $30.

According to Bitcoin Fees, a bitcoin transaction fee prediction platform developed by Earn.com (previously 21 Inc), the fastest transaction fee at the time of reporting is 950 satoshis per byte, or 214,700 satoshis for a median-size transaction, which is equivalent to $28.7.

Consequently, BitPay revealed in an official statement that the company will not be able to process bitcoin payments below $100, as doing so would result in a fee of nearly 30 percent of the actual amount of the transaction. The BitPay team wrote:

“The Bitcoin network has been seeing record transaction volume in the last few weeks. This growth has also led to record network congestion and record-high bitcoin miner fees. Bitcoin miner fees are now more than $30 per transaction on average. To protect purchasers and to continue to offer service for Bitcoin payments, we are now requiring a new invoice minimum payment amount of $100 on all BitPay invoices.”

In the upcoming months, BitPay explained that its development team will actively work on the implementation of SegWit, which will reduce bitcoin transaction fees by around 40 percent. The BitPay development team added, “Segregated Witness reduces the size of bitcoin transactions, allowing for an average bitcoin miner fee reduction of over 40%.”

What Will Happen With Rising Fees?

As demonstrated by Blockchain, the second largest bitcoin wallet platform and market data provider, bitcoin is currently processing nearly 300,000 transactions on a daily basis with block size averaging at 1.06MB. That is, a size larger than the maximum block size of 1MB, made possible through SegWit.

The mempool size of the Bitcoin network, the holding area for unconfirmed transaction, has remained above 120 million bytes for awhile, preventing transactions without significantly high fees from being confirmed and verified by miners.

Luke Jr, a Bitcoin Core developer, stated earlier today that SegWit itself was not designed to reduce transaction size and fees but rather as a platform and base infrastructure for second-layer solutions like Lightning. He noted that Lightning will enable near instant payments with privacy and lower fees, allowing the Bitcoin network to scale.

However, the timeline of Lightning integration by leading businesses remains unclear, as even SegWit has not been integrated by Coinbase, Blockchain, and BitPay, three of the largest bitcoin businesses in the industry.

“Segwit does not decrease the size of transactions. That’s a myth. Lightning is the method of reducing block sizes (and also fees) that I had in mind,” said Luke Jr. 

To relieve the congestion of the Bitcoin network, analysts suggest that a block size increase is necessary, at least until SegWit and Lightning are fully adopted by the industry.

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Bitcoin Christmas Special: 2017 Was Wild Ride, Eventful 2018 Seems Likely

The festive season is in full swing and those who celebrate Christmas have enjoyed turkey dinners, presents under the tree and long Christmas specials on TV. But for many of us involved in the world of cryptocurrencies, this has been one Christmas Special we will never forget.

November was an extraordinary month, as Bitcoinsmashed barrier after barrier on its way to the $11,000 mark. Despite multiple corrections, time after time, the virtual currency bounced back from volatile swings in price.

Some called it a bubble, others said is was just the tip of the iceberg, but no one predicted the wild ride Bitcoin would endure in the weeks leading up to Christmas.

Bitcoin futures launch

Last month the price of Bitcoin reacted strongly to the news that the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE) were planning to launch Bitcoin futures – which eventually led to a massive bull run. Both mainstream exchanges successfully launched their new offerings and in both instances the price of Bitcoin reacted favourably, although the CME launch a week after CBOE had far less of an affect on the price of Bitcoin.

The general sentiment ahead of the futures’ launch was that mainstream financial institutions openly trading on the Bitcoin market would cause a greater stream of money to flow into Bitcoin, raising the price. Indeed, that is exactly what happened – for a time. But not long after Bitcoin hit the meteoric $20,000 mark, the market underwent a massive correction, sinking down to just under $11,000 on Friday, December 22.

It wasn’t just Bitcoin that endured a wild ride, as the whole cryptocurrency market saw losses, with the combined market cap dropping $200 bln in a single day.

Coinbase and Litecoin

Another curveball that had some effect on the market was the surprise announcement that Coinbase was launching Bitcoin Cash trading on it’s platform. That saw the price of Bitcoin Cash surge – but the integration was soon marred by scandal.

Coinbase had to suspend buy and sell orders on its GDAX exchange due to significant volatility. A day later, the company confirmed it would also investigate allegations of insider trading by employees, who were prohibited to trade Bitcoin Cash in the lead up to the launch.

Meanwhile Litecoin founder Charlie Lee made two controversial moves. First, he tweeted his belief that a multi-year bear market was coming which could see Litecoin drop as low as $20.

Roughly a week after expressing his views about Litecoin’s future, Lee sold or donated all of his Litecoins, citing a conflict of interest. Lee’s announcement became national news, as the likes of CNBC, Fortune, Forbes and others reported on it. However, The Verge has questioned Lee’s motives, suggesting that for a currency’s founder to sell his entire holdings would seem to indicate a lack of confidence in the currency’s future.

Litecoin also saw a drop in price from it’s recent all-time high at $360 to settle around $280 at press time.

Light at the end of the tunnel?

Watching Bitcoin nosedive from $20,000 was quite a sight – and social media platforms were awash with all sorts of memes amid both positive and negative sentiment. Many were adamant that they would ‘hodl,’ while others panicked and looked for advice.

Well-known Blockchain engineer Jameson Lopp summed up the mood perfectly in this Tweet:

While there is still plenty of market volatility across the board – Bitcoin, Ethereum and other altcoins seem to have steadied after what is sure to dubbed the ‘Great 2017 Correction.’

What we do know is that 2018 has plenty in store for the cryptocurrency market. Back in November, Coinbase CEO Brian Armstrong said that a host of institutional investors have been waiting to invest in Bitcoin and other cryptocurrencies. However, a lack of trust in current exchange service providers led many to believe they couldn’t risk their clients money.

He estimated that at least $10 bln is ready to be invested into the market. Mike Novogratz has been singing the same tune – saying ‘the herd is coming’ in relation to the changing sentiments of mainstream financial institutions towards cryptocurrencies.

However, following recent volatility, Novogratz has now hit the pause button on a $500 mln fund he was preparing to launch.

The history books will tell us that CBOE and CME were the first mainstream exchanges to actively invest money into the cryptocurrency market. Nasdaq isn’t far behind, given their plans to launch futures next year.

And amid the carnage of a cryptocurrency market freefall, banking giant Goldman Sachs is planning to launch a cryptocurrency trading platform by mid 2018. They would be the first major Wall Street investment bank to actively trading virtual currencies.

Buckle up

Considering that Bitcoin grew in excess of 1,000% in 2017, anything could be possible in the next 365 days. It’s clear that many financial institutions have taken stock of the emergence and establishment of cryptocurrencies and are looking to step into the market. Failing to do so risks getting left behind.

Financial analysts, Blockchain specialists and cryptocurrency experts will be gearing up for an exciting year ahead. With so much already planned, one thing is for certain: digital currency is here to stay.

What NASA, Uber, and Blockchain Startups Have in Common

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In November 2017, it was announced that Uber and NASA have partnered to begin developing a pilot project for air taxis. Coined Uber “Elevate”, the service is expected to have a similar base fare as Uber “X”, creating a new ecosystem for passenger commuting and travel.

On first thought, the idea of flying cars and commuter drones seems out of sight. The reality is that the first manned drone flight has already been successfully completed. In May 2017, California-based Passenger Drone initiated testing on a vertical take-off and landing (VTOL) craft that could be powered both by human pilots and remotely. In August 2017, the first manned flights took place.

The US Government is also realizing the impact that drones and flying vehicles will have. News just broke that President Trump signed a law that will force all drones to be registered with the FAA. European lawmakers passed a similar rule a few weeks back targeting drone registration. Total drone registrations in the US topped 800,000 earlier in 2017 with an estimated growth of over 7 million drones in use by 2020.

With this massive growth comes the concerns of air safety and how to best regulate the future highways of the sky, both for commercial and consumer use. Innovative blockchain companies are jumping at the chance to address this need with everything from safety protocol to marketplaces for future flights.

For example, Blockchain Taxi, a partner of Passenger Drone, is taking the lead on using all of Passenger Drone’s flight data to build out a blockchain-backed protocol. By combining years of historical flight data, Blockchain Taxi wants to create the smart contract ecosystem that can be used by regulators and enterprises to facilitate safe passenger drone and air taxi operations.

Another company in the space, McFly, has modeled out the projected cost of flying a passenger drone versus taking a private jet or Uber. Those figures, come out to roughly $8 per minute of flight time for an Uber Elevate vs. $50 for a typical helicopter ride.

Earlier this year The United States Patent and Trademark Office (USPTO) published a patent titled “Unmanned aerial delivery to secure location,” describing how Wal-Mart could use blockchain technology to automate the logistics of delivery drones. In this example, blockchain technology could be used to authenticate identities, track packages in real-time, and log all critical information on a secured ledger.

Not all news from related blockchains startups has been positive. First mover AERO Token, received a tough critique from ICO rating agency Smith & Crown for having an “incomplete appeal for investor support”. The challenges involved include the economics involved with building out this drone infrastructure as well as legal red flags due to different interpretations of laws.

Despite the challenges, it is safe to assume that manned drone flights and air taxis will eventually be a part of our mainstream transportation culture. Whether used for emergency evacuations or logistics, there are many inner-city hurdles that could be solved using both commercial and passenger drones.

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Bitcoin-Only Charity Fund Donates $1 Mln To Internet Archive

Pineapple Fund has donated $1 mln in Bitcoins to the Internet Archive this Saturday. Pineapple is a Bitcoin-only charity established in early December 2017, whose ultimate goal is to give $86 mln worth of Bitcoin to various nonprofit organizations.

For early adopters, Bitcoin’s massive rise in value has been a remarkable ride from rags to riches, and some are now deciding to give back. The Pineapple Fund has been launched by an anonymous person who goes by the username /u/PineappleFund on Reddit.

The donor has created a website to issue reports as to which organizations have been given Bitcoin donations so far. It also includes a form for those nonprofits who would like to apply for future donations.

To date, the charity has given 657 BTC – approximately $8.5 mln – to 13 organizations, which focus on specific areas, such as providing clean water to sub-Saharan Africa, building technology for universal healthcare and improving the treatment of age-related diseases.

The fund’s homepage claims:

“Our main themes are supporting medical research, gender equality and taking innovative approaches to do good in this world.”

The motive for the donation is explicit on the site as well:

“Donating $86 mln of Bitcoins to charity. Because once you have enough money, money doesn’t matter.”

Many early adopters of Bitcoin have been in the news recently. For example, the Winklevoss brothers purchased approximately one percent of the outstanding supply of BTC in 2013 – an investment which has resulted in them becoming the first Bitcoin billionaires.

Security Tips for Wannabe Investors: How to Identify ICO Scams

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The author, David Balaban, is a computer security researcher with over 15 years of experience in malware analysis and antivirus software evaluation. 

In the current cryptocurrency climate heated up by the skyrocketing value of Bitcoin, people with financial resources on their hands treat startups in this domain as a promising opportunity to get the bang for their buck. ICO (Initial Coin Offering) is what bridges the gap between enthusiasts who plan to launch a new cryptocurrency venture, on the one hand, and potential sponsors of such projects, on the other.

In a nutshell, the gist of an ICO is as follows: a certain percentage of the would-be cryptocurrency also referred to as virtual tokens, is sold to early investors for fiat money or another existing type of digital cash. If the project turns out successful, the value of these purchased coins grows over time, and the backers get a substantial return on investment. In case the startup doesn’t raise a sufficient amount of funds to go live, the investors may get their money back.

Notorious ICO scams

Any new initiatives, where money circulates back and forth, are a classic lure for scammers, Initial Coin Offering being no exception. Retrospectively, con artists have announced ICO campaigns for rogue projects, got money raised and vanished. This is why it’s imperative for early backers to be on the lookout for red flags when considering an investment option of that sort. Some of the most defiant incidents described below might give you an idea of what the typical ICO scam looks like.

The fraudulent Opair ICO took root in 2016. The ne’er-do-wells behind it were able to raise $1 million for their fake startup, promising backers decentralized debit cards in return for their donations. Unfortunately, the fact that the Opair crew acted quite suspiciously from the beginning didn’t discourage interested parties.

Specifically, the rogue players had set up LinkedIn profiles that were clearly sockpuppets crammed up with phony personal details and photos. Furthermore, the purported startup reps were allegedly so concerned about their privacy that they rejected all offers to attend cryptocurrency-related events or even have video calls with potential backers.

In the upshot, shortly after the Opair coins made it to exchanges, the crooks dumped them and their website was knocked offline. The fundraisers, obviously, lost it all.

This ICO was a bit more controversial than the outrageous Opair scam. It’s still unclear whether it was a fraud from the start or an unsuccessful attempt to create something the proprietors failed to cope with. One way or another, people lost a great deal of money over it.

BitCad was purportedly intended to be a replacement for numerous areas of business activity, trading and even government functioning. In particular, it was supposed to accommodate biometric verification, a decentralized trade engine, and a smart contract constructor, to name a few. Meanwhile, the mechanism of implementing these sophisticated features was a mystery for the most part. Nevertheless, the Initial Coin Offering raised $5 million.

Things started to smell fishy when some members of the large BitCad crew abandoned the project shortly after launch. At about the same time, the team stopped posting new announcements. Despite the apparent signs that something went terribly wrong, some early backers are still anticipating good news from BitCad architects in the near future.

  • Authorship

Authorship was marketed as an ERC20 (Ethereum token standard) project. Its alleged goal was to become a decentralized means for authors, publishers, reporters, and translators to get rewarded for their intellectual work via ATS tokens. This ICO raised some $1 million.

Some discrepancy between Authorship proprietors’ story and real life should have become an early wakeup call for wannabe investors, but it didn’t. The light-fingered individuals claimed to be motivated by their experience running a bookstore. However, visiting the store’s website unearths its primitive nature from the get-go as it offers nothing but pencils, paper memo pads, and vinyl computer decals. To add insult to injury, Authorship makers indicated a fictitious address of their headquarters.

At the end of the day, a lot of backers never got their ATS tokens. Some did, but their price turned out much lower than promised. Therefore, even the ‘lucky’ investors lost up to 80% of their money over Authorship.

How to invest in an ICO safely

Just like any investment undertaking, Initial Coin Offering implies risk. This is why the rule of thumb is to treat these cryptocurrency startups with a reasonable degree of paranoia and weigh up the pros and cons before ever considering participation. Whereas there is no universal criterion for vetting the validity of an ICO, it makes sense to scrutinize a few things.

  • Peruse the whitepaper

An ICO’s whitepaper gives insights into the project team, goals, development roadmap, token implementation, the timeframe for listing the tokens on cryptocurrency exchanges, and similar technicalities that might be of interest to a potential backer.

So, take your time, read it (including the fine print), and make sure you can explain the gist of the startup in detail to somebody else. Keep in mind, though, that a fraudulent ICO may include a whitepaper, so this hallmark alone isn’t ultimately informative regarding its legitimacy.

  • Examine the website and social accounts

This tip is a no-brainer, but it speaks volumes about likely red flags. While the website of an ICO doesn’t have to be top-notch to the bone, it should use a valid SSL certificate (the URL starts with HTTPS). Furthermore, a trustworthy startup should have a social media manager who spreads the word about the ICO and interacts with the online community. Get in touch with that person, ask a few questions and see how responsive and professional they appear.

  • Look for endorsements

If someone reputable in the blockchain domain supports an ICO, such feedback is definitely on the plus side of the project. It doesn’t mean, though, that all startups that cannot boast well-known aficionados are scams.

  • Verify code auditing

Ascertain whether the code of the project has been thoroughly audited for bugs, malware, security loopholes, and other weaknesses. Make sure code auditing was done by renowned security researchers. Such an insight may give you important clues on how serious the ICO authors are about their startup.

Long story short, exercise prudence, do some reconnaissance on your own and follow your intuition before making up your mind regarding the investment. Refrain from purchasing an ICO’s virtual tokens unless you get all the questions on your checklist answered and you’re okay with those answers. And again, some extra paranoia will play into your hands when it comes to joining a new cryptocurrency venture.

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I Try to Make Everything Simple For the Community, Founder of Orioncoin

Cointelegraph continues publishing interviews with prominent guests of BlockShow Asia 2017, that took place in Singapore in November 2017.

Woanjen Tang is an experienced asset manager. After completing a Bachelor of Civil Engineering with Ryerson University, Woanjen returned to Malaysia to hone his multinational business management experience. Projects under his leadership flourished at a commercial and residential real estate brokerage. Upon his exit from real estate, he went to Canada, where he founded Orioncoin Computing Corporation.

Cointelegraph talked to Woanjen Tang, founder and CEO of Orioncoin about new startups, traveling and simplicity as the highest level of complication.

Cointelegraph: Thank you very much for coming! My first question is about your perception of the venue. What did you feel today coming here? What is your first impression of the Singaporean crypto community?

Woanjen Tang: Oh, I think Cointelegraph has a great BlockShow today. A lot of networking, a lot of media and investors here, and new startups that can bring more ideas to the space about the future of Blockchain technology.

CT: Do your prefer networking with startups or with those who have already experienced projects and not venturing into new ideas?

WT: I think both, also with the already established Blockchain firms. They are established and we know their ideas, while a lot of startups have new ideas that impressed even me.

CT: Do you travel a lot?

T: Oh, yes, I travel a lot.

CT: What about different perceptions of your project for example in different countries?

T: Orioncoin, basically… we make loyalty points on our own Blockchain- on Orioncoin’s Blockchain. So it can quickly help on the travel side of the business and the hotel business, leisure business. And it’s going to expand it – the more people travel, the more they will use Orioncoin. Because in the past people used to travel less than they should because the technology was not so advanced. Today we can travel by planes; you can go anywhere fast. The more we travel, the more Orioncoin expands.

CT: Orioncoin was your idea. What did inspire you?

T: It is a long story. I try to make everything simple for the community- basically, make loyalty points.

CT: Do you think that simplicity is the highest level of complication?

T: Yes, because people aren’t usually interested in a conventional or in loyalty point systems. So we basically just simply provide a Blockchain technology to the loyalty point system, which can increase the value, and then more and more people get excited to come into the space. Through loyalty points, which they can have for free and use the coin access to the cryptocurrency market – we move the development forward.

My key to success is to read more Cointelegraph

CT: What is your personal background?

T: I was doing a civil engineering background in Toronto, Canada.

CT: Do you think that it is important to have a particular background, knowledge in order to be successful in Blockchain and crypto projects?

T: Yes, background really helps. If you have the right background, it certainly helps, but it depends on certain cases.

CT: And what is your personal key to success?

T: My key to success is to read more Cointelegraph. It’s part of how I learned about Blockchain and the Blockchain people. Try to look at YouTube for more knowledge about Blockchain and listen more, read more and communicate more in the space, join the space for local meetups and everything. Then you will have the sense of what is Blockchain.

CT: I have the last and logical question out of what you said just. I am collecting lists of inspirational reading from our speakers and guests. So would you recommend something that impacted you recently? It does not have to be related to Blockchain.

T: Actually, the guy named Andreas, I forgot his last name impacted me most. He is Greek. You can search on YouTube. He is passionate about Bitcoins and Blockchain technology, and what it can bring to change the world and eliminate the trust between people and the government. Basically, corrupt this whole system by stealing your wealth, you know? What he suggests is stealing your wealth in a stealth mode. So you have one thousand today, you have one thousand tomorrow – so actually your wealth is still the same. But, for one thousand today you cannot buy the one thousand tomorrow’s goods because of inflation. Because they are printing money, they are stealing wealth in stealth mode. You cannot see it, cannot complain because you have one thousand now, you have one thousand tomorrow – doesn’t change. Why do you say I steal your money? So, basically, people don’t see it but this guy, he saw the problem and explained it quite well. That is what inspires me. We should go and explore more about Blockchain and bring the services and products to the market.

CT: Thank you very much! It was a pleasure to talk with you!

Thank you!

Cryptocurrencies Decline on Christmas Eve: Bitcoin, Ethereum, Ripple Down 10%

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On Christmas Eve, December 24, the price of leading cryptocurrencies fell by large margins. Bitcoin, Ethereum, Bitcoin Cash, Ripple, Litecoin, along with every other cryptocurrency in the market with the exception of a few have declined substantially in value.

Out of the 10 most valuable cryptocurrencies in the market, Bitcoin Cash and Ripple have recorded the largest losses, falling by 18 percent and 17 percent respectively. The two cryptocurrencies have also surged in value earlier this week, resulting in a bigger correction than other cryptocurrencies in the market.

Bitcoin, Ethereum, and Litecoin recorded a price correction of over 10 percent, as the price of bitcoin fell below $14,000.

Why Did a Correction Occur?

Historically, the market valuation of cryptocurrencies had surged during holiday seasons, especially throughout Christmas and new year’s. Analysts have attributed to the tendency of cryptocurrencies like bitcoin rising during holiday seasons to the introduction of new family members and friends to the cryptocurrency market.

As bitcoin and cryptocurrencies become hot topics, more individual and casual investors engage in bitcoin and cryptocurrency trading.

On December 23, prior to Christmas Eve, the cryptocurrency market recovered from a major correction, which led to the price decline of every single cryptocurrency in the market. Bitcoin fell by around 25 percent, while others fell by nearly 50 percent.

After a speedy recovery, on December 24, the cryptocurrency market recorded another correction, which was unforeseen by most analysts and experts. Highly regarded and respected investors including billionaire hedge fund legend Mike Novogratz stated that with the recent recovery, the price of bitcoin will likely initiate a new rally and surge in price in the short-term. However, the cryptocurrency market recorded another major correction prior to Christmas.

For newcomers, the latest cryptocurrency correction could be a crucial opportunity to understand the nature of the cryptocurrency market and risks involved in trading. Every market is affected by a bear cycle after a bull run, as Litecoin creator and former Coinbase executive Charlie Lee had explained.

This year, the cryptocurrency market has surpassed the expectation of even some of the most optimistic, enthusiastic, and long-time entrepreneurs, analysts, and investors. In April 2017, ShapeShift CEO Erik Voorhees predicted the market valuation of cryptocurrencies to surpass $300 billion in 4 years.

By December, bitcoin alone had already achieved a $300 billion market cap and the combined market valuation of cryptocurrencies surpassed $600 billion.

Correction is Necessary

Major price corrections prevent short-term bubbles from occuring. The price trend of bitcoin and other cryptocurrencies in the market is optimistic because it always has managed to recover from major corrections, supported by rising demand from investors and large volumes.

On December 11, Lee wrote:

“Every crypto bull run I’ve seen has been followed by a bear cycle. The market needs time to consolidate. That’s just my experience from 7 years of watching this space. How low and how long it will be is TBD. People need to be aware of this possibility and invest responsibly.”

Currently, the cryptocurrency market is seeing a correction of the three-month bull run bitcoin and the cryptocurrency market have demonstrated.

By December, bitcoin alone had already achieved a $300 billion market cap and the combined market valuation of cryptocurrencies surpassed $600 billion.

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Crypto Markets Are Broken

Cryptocurrencies have captured international attention this year. Although trading currency is nothing new, it certainly feels like an ancient concept being renewed by novel technology. The rapid price increase of almost all digital tokens, which is most noticeable in Bitcoin’s 1,600 percent improvement this year, and their surprising integration into mainstream investment markets through futures contracts, has made crypto trading an appealing pursuit for many investors. In fact, with a total market cap of more than $400 bln, crypto trading is becoming one of the hottest investment opportunities available.

Unfortunately, many traders are finding that the technological advances or even basic trading needs found on traditional investment exchanges are utterly lacking on crypto exchanges. This could be a big problem.

While cryptocurrencies have never been more popular or more in-demand, the exchanges that are intended to facilitate the buying and selling of cryptocurrencies are subpar and inefficient. In their current state, they are the tangible manifestation of people’s worst fears about cryptocurrencies. In general, they lack equity between exchanges, they utilize embarrassingly outdated technology, and they are infused with bad actors.

It’s clear that cryptocurrencies are going to be a significant part of the financial landscape going forward, but these problems need a solution. Perhaps by better understanding how crypto markets are broken, we can begin to find answers for their shortcomings, so that they can thrive.

Lack of liquidity

Some of the very principles that make cryptocurrencies so appealing – mainly their decentralized and autonomous nature – also make them a liability when trading. When trading cryptocurrencies investors can choose from well over 100 exchanges, and prices fluctuate within those exchanges. The World Economic Forum examined price differentials across just three crypto exchanges, and they found “large differences between the prices of Bitcoin.” They list several factors for these price disparities, including time and value gaps resulting from exchanging Bitcoin to USD and back to Bitcoin, but ultimately, the pricing differences can be attributed to lack of oversight and regulation.

In traditional financial markets, the SEC mandated the Regulation National Market System, which ensures that traders are awarded an asset’s best price regardless of exchange. It’s sort of like a price match guarantee for investments, but it ensures that everyone is participating on an even playing field. Moreover, because all exchanges must offer the same prices, they are forced to compete with other exchanges by offering lower costs and better technology.

Since crypto exchanges don’t embrace this principle, the price of digital currencies varies wildly, and exchanges have less incentive to innovate their platforms. While cryptocurrencies continue to soar in value and become integrated into the mainstream financial system, they continue to operate in the financial wild west.  

Outdated technology

New investors are swarming crypto exchanges. These newcomers are immediately met with outdated trading systems that have the functionality of a simple website. As a result, a simple task like changing an order price or size can be prohibitively difficult. Cryptocurrencies are predicated on speed and technological innovation, so these restrictions hinder their ability to operate effectively.

Unfortunately, the outdated technology isn’t just related to investor experience. Algorithmic triggers that stop trading when dramatic price swings distort the market are insufficient or nonexistent on crypto exchanges.

CNBC reported that unlike regulated US stock exchanges, cryptocurrency exchanges aren’t required to have circuit breakers in place to halt trading during wild price swings. Even during this year of tremendous growth, Bitcoin has had four different instances of its price dropping by 50 percent or more. This is relatively common in crypto markets, so the lack of these mechanisms is particularly problematic.

Bad actors

The absence of regulatory oversight and the abundance technological limitations make crypto exchanges ready targets for bad actors.

Traders with deep pockets can manipulate crypto markets and make an outsized impression on the value of cryptocurrencies. One practice, known as “spoofing,” allows a trader to place buy or sell orders above or below the market value in hopes of manipulating a currency’s price in either direction. This maneuver is illegal, but without regulatory oversight, it’s difficult to enforce that standard.

In addition, when Mt. Gox made headlines because it was the victim of a hacking operation that stole $450 mln worth of Bitcoin, it was one of the first in a long list of egregious hacks that have cost investors hundreds of millions of dollars.

At this point, crypto exchanges are making promises to combat these issues; however, if they remain just promises, it may limit their potential to successfully meet investor demands.

What can be done?

Simply put, cryptocurrency markets need to evolve and the most efficient way to do that is to look towards it’s much older cousin: Wall Street. The technology and regulatory infrastructure that runs Wall Street are decades old but vastly superior to the fractured cryptocurrency marketplaces we have today. Emulating Wall Street would also provide crypto markets with structure and stability that would bring big institutional investors and trading houses to the table to help guide these markets as they mature in the coming years.

Alexander Kravets, Guest Author

Alexander Kravets co-founder of XTRADE.IO, a technology company looking to bring mature Wall Street technologies to the world of cryptocurrency. Before he served as Managing Director of a self-clearing broker/dealer that handled four percent of the daily trading volume on NASDAQ and successfully launched Sogotrade, a retail investing platform with over 100,000 clients.

What Is “Strategic Scarcity” and Why It’s a Game Changer

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Last year has brought terms like bitcoin and cryptocurrency to the vocabulary of more than half the world’s population. Estimates indicate that as many as 1 in 20 people own some form of this new asset class. However, the recent rush has brought many to mistake cryptocurrencies for “corporate stocks”, and not as utility tokens, currencies and/or commodities. One start-up is showing the advantages of tokenization, as compared to the corporate stock structure, in a completely unique way. Optitoken (ERC20) is the first algorithmically traded crypto fund, which will allow token holders exposure to a carefully selected basket of tokens that will be traded automatically with the intent of creating a profit. The project introduces the idea of “Strategic Scarcity” and coin supply control, amongst other interesting strategies put in place solely to benefit the value of token holders and community. 

What is “Strategic scarcity?” One could liken it to some of the techniques used by central banks in regards to controlling the circulation of currency available in order to affect inflation/deflation. In this case, the tool will only be implemented to positively affect price through the means of deflation. How do they do it? That brings into subject some of the other techniques the team is implementing such as algorithmic trading amongst a basket of carefully selected tokens with the intent of creating the most optimal amount of profit possible. The tokens in the basket are backed by the funds raised in the token sale event which is scheduled for early 2018. When a profit is created, the profits are used to buy, in equal amounts, OptiToken directly on each exchange that Opti is available for trading. This first step induces upward price pressure and adds volume to the Opti market(s). To protect from those tokens re-entering the market as potential sell-pressure, the bulk of the tokens are purposefully sent to an “un-spendable address.” Meaning the tokens will be lost forever but still viewable on any ethereum block explorer as to maintain transparency. The remaining small amount, only a few percentage points of each cycle, is sent proportionally to token holders supporting the OptiToken technical infrastructure. 

Each cycle which can only occur, based upon creating profits from the fund. That’s going to be watched over and managed by 3 professional traders, who between them, have years of experience in the cryptocurrency space trading and the profits and wallet balances to prove it. The portfolio to date has outpaced Bitcoin by nearly 100% since the funds test-net inception. You can track its progress on the company’s website at https://OptiToken.io

The founder, Sean Donato, says, “With so many newcomers buying at all-time highs than selling in panic, such as was witnessed in the sharp crash today (December 22nd), the need for something like this is greater than ever. A truly unique token that has the ability and potential to actually be almost as profitable in bear-markets, as it is in bull-markets. This project makes it possible for someone who’s barely beginning to grasp blockchain technology, to potentially profit at equal or higher rates than self-proclaimed seasoned vets.”

In the future, the team seeks to incorporate machine learning and smart-contract automation to further enhance the projects capabilities. You can whitelist for the private pre-sale and ICO now and learn more about the project at https://OptiToken.io or follow them on Twitter @OptiToken. The project will be available for Non-US and Non-Chinese citizens to start but may open up to those geographies in the future if regulation eventually allows. 

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