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Bitcoin’s [BTC] Lightning Network is semi-custodial banking, says Bitcoin Unlimited’s Peter Rizun

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Bitcoin’s Lightning Network has become one of the most popular topics in the cryptocurrency space. Lightning Network is a second-layer mechanism used for transmitting off-chain payments by utilizing the security of the Bitcoin blockchain. The channel enables two participants to create a channel for the purpose of transferring Bitcoin, without the need for recording it on a blockchain.

The hype for the Lightning Network gained momentum after the Lightning Torch campaign on Twitter. Influencers such as Jack Dorsey, Charlie Lee, Samson Mow, WhalePanda, CZ, and Riccardo Spagni, have all participated in passing the torch around the Twitterverse.

However, the second-layer network has been questioned by many despite its rising popularity. Peter R. Rizun, Chief Scientist at Bitcoin Unlimited, is one of the critics who remarked that the Lightning Network “is a semi-custodial banking.”

He further stated that “the degree of custodianship is proportional to the fee required to escape from a non-cooperative channel.” Rizun added that if the fee required to escape from a non-cooperative channel was in the “same order of magnitude” as a user’s channel balance, then the Lightning Network is “effectively full-custodial banking.”

Rizun views were backed by Emin Gun Sirer, a Cornell Professor, known to give his views on cryptocurrencies and the financial system on a regular basis. He said,

“Peter nails it. If channel creation is expensive, LN turns into a re-creation of the banking system.”

Rizun further explained his pointers on a Reddit thread. He said,

“Imagine that fees averaged $100 per transactions. You’ve been using a channel for a while and now your remaining channel balance is near $100. When I say “your remaining channel balance,” I mean the amount you actually have available in that channel, already net of the $100 fee to close the channel to the blockchain.”

Source: Reddit
He further added,“$100 fees are a low estimate in a future where most transactions are done on LN. But $100 is a lot of money to most people in the world. This means that for most people, LN will not bring them financial freedom and the ability to be their own bank and send payments to anyone they choose. For most people, LN will look like banking looks today.”

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Crypto Money Managers Unleash Social Media Algos to Predict Bitcoin Volatility

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Money managers are hungry for yield. Crypto continues to outperform just about any other asset class making this nascent market a hot-bed for alternative prediction solutions. And social media algos are front and centre of that speculation.

Cryptocurrency prices, like foreign exchange, are largely decentralized providing plenty of opportunities for smart programmers to profit from the difference. But can those same programmers hone their craft to take advantage of a new form of opportunity, social media sentiment analysis? Some seem to think so.

Reddit Gossip. Social media algos.
A high-level overview of cryptocurrency gossip via Reddit. Source: CoinGossip

Funds Head-Hunting Algo Programmers At Alarming Rates

Sentiment analysis is not particularly new, but crypto is. And retail investors don’t hang out in private meeting rooms and exclusive restaurants. They hang out on Twitter and a whole host of other digital mediums. Good-quality programmers who can tap this diamond mine are in high demand.

One report revealed that the number of blockchain job postings has soared to 4,086%since 2019. The large majority of those likely data-driven roles. According to PricewaterhouseCoopers, quantitative crypto funds significantly outperform their peers’ thanks to the analysis of online crypto chatter.

Coders with machine learning skills are particularly highly sought after. One Taiwan-based expert even used crowdsourcing to build an analysis algorithm. Mark Howard explains:

“It’s pretty hot right now, any fund that’s worth their salt, they are devoting some of their resources and allocation for sentiment analysis.”

Fake News and Paid Views

If you were thinking about jumping on the bandwagon, realize that sentiment analysis is not the holy grail of all crypto predictive analysis. At least not yet. Platforms like Twitter, Facebook, and Reddit are still plagued with bag-holders and marketers looking for every chance to punt their own coins.

BitSpread, a blockchain asset management advisory in London has built its own social media algo but warns of the dangers. In an interview with Reuters, CEO Cedric Jeanson explained:

“The sentiment itself, what we see on Twitter, can be really geared toward fake news. We are always very cautious about what we’re reading in the news because, most of the time, we’ve seen that there’s a bias.”

Scraping the most relevant data is no easy task. Indeed, getting an accurate picture of what people are trading compared to what they are saying is tricky. Part of Bitspread’s algorithm focuses on cryptocurrency exchange posts that highlight trading positions. Similar to this:

Bitmex rekt. Social media algos
Well-established exchange Bitmex reveals regular trading liquidations. Source: Twitter

Retail Interest Not Catching up in This Crypto Bull Run

The jury is still out on how successful this approach will be. Despite Facebook’s Libra recently surpassing Bitcoin on crypto Twitter, the latest Google Trends data is not very encouraging.

Bitcoin interest over time. Social media algos.
Retail interest has not regained its 2017 highs. Source: Google Trends.

While Google search interest for Bitcoin was at its highest 2019 level in June, it’s still well off the 2017 highs. Meanwhile, the price has rallied to $14 000, not far from its all-time highs. The data suggests that retail investors may not be driving this bull run as in previous years.

That could ultimately put a spanner in the works for crypto social media algos considering that institutional investors are highly unlikely to post their trades via social media. Either way, it’s early days and the volatility afforded by Bitcoin still offers potential lucrative gains.

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Bitcoin Correction to $9,500 Could Be Followed by 20% Drop: Analyst

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Bitcoin (BTC) has been absolutely slammed over the past week. Since passing above $13,000 for the second time this year last Wednesday, the crypto has been on a clearly downward-sloping trend.

In fact, as of the time of writing this article, Bitcoin has lost 25% in the past week, falling to as low as $9,300.

Despite the fact that optimists are expecting for bulls to experience some form of short-term reprieve, historical trends and other key indicators predict a further unwinding of the cryptocurrency bull market.

Bitcoin Poised to Hit $7,500

Conceptualized by Trace Mayer, an early Bitcoin investor and funder of Kraken, the Mayer Multiple is a way of determining if BTC is either overbought, fairly valued, or oversold. It is calculated by putting the asset’s current price over its 200-day moving average.

Per an analysis of this indicator (currently sits at 1.6) by CryptoKea, a little-known analyst that accurately called the recent drop to at least $9,700 earlier this month, if you consider the Multiple, the ongoing correction looks much like the first “major correction” of 2017’s bull run.

He notes that if history repeats itself and Bitcoin reverses out of its current short-term bearish trend like it did in 2012 and 2017, it could find support anywhere from $7,148 to $8,700. This corresponds to 1.20 times to 1.46 times of the 200-day moving average, which currently sits at $5,957.

Most likely, however, Kea notes that the “most probable target” as per the use of the Mayer Multiple will be $7,505 — another 20% drop from the current Bitcoin price of $9,600.

This somewhat lines up with the target of $8,000 that other analysts hold. Per previous reports from NewsBTC, Timothy Peterson, a prominent American crypto fund manager, notes that Bitcoin’s current active account figure suggests that BTC is overvalued.

According to Peterson’s model, which takes a 30-day median (as of July 13th) of the number of active accounts on the Bitcoin blockchain, BTC currently has a fair valuation of just above $8,000.

In a tweet issued on Saturday, Josh Rager, a prominent technical analyst and cryptocurrency commentator, looked to this same level. View image on Twitter

Rager notes that a “confluence” of chart data and on-chain data suggests that a pullback “would likely bottom out at $8,000”. As he explained in the chart above, $8,000 acted as a key horizontal support and resistance level in the recent rally and 2018’s crash.

What’s more, there is also a CME Bitcoin futures gap around $8,500, which is one of the last gaps waiting to be filled.

And as Alfonso Esparza, senior market analyst at Oanda Corp, recently told Bloomberg: “[Bitcoin] continues to trade lower as comments from President Trump put downward pressure on the cryptocurrency. It could fall further to $8,000, giving back all the gains made in June.”

Drop Might be Over?

Despite this, one analyst believes that the drop is most likely over. In fact, he drew attention to almost five signs why this may very well be the case, even if it sounds crazy.

Firstly, the one-day Relative Strength Index (RSI) and the Stochastic iteration of this indicator are at their lowest levels since at least February, entering the “oversold” range. The one-day Moving Average Convergence Divergence (MACD) has tapped the zero level, despite the fact that Bitcoin is in a raging bull market according to most analysis.

Also, the Elder’s Forse Index, an indicator meant to exhibit the strength of moves, is at its lowest since November 2018; and historical volatility is almost at 100%, implying a move to the upside to return volatility to levels deemed normal.

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Bitcoin Network Is Moving $3 Billion Daily, Up 210% Since April

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Bitcoin’s average transaction volume is topping $3 billion per day, data from crypto analytics site Coinmetrics.io reveals as of July 16.

Bitcoin’s Uptrend in Daily Transaction Value Eclipsing Altcoins’

The data — which has been adjusted to remove noise and certain artifacts, per Coinmetrics — shows an impressive uptrend in the USD value for the volume of the coin’s transactions and transfers over the past 90 days.

On April 17, the average daily value was at $1.04 billion as compared with $3.22 billion on July 16, an almost 210% increase.

The top coin has seen a significantly higher spike in volume as compared with ether (ETH), which saw a 77% increase over the same time period — from a daily average of $370 million to $657 million. XRP has seen a still milder uptrend, at 61% — with the value of daily transactions climbing from $152.5 million in mid-April to $245.6 in mid-July.

Chart

3-month chart for BTC  transactions, transfers, value, adjusted, in USD. Source: Coinmetrics.io

(Non-) Correlations

Bitcoin broke the $3 billion daily average mark on July 11, Coinmetrics’ data shows, when the coin was circling the $11,500 price point. Despite trading roughly $2,000 lower as of today — having taken a steep 11.4% hit on the day and over 24% on the week — average daily transaction value has continued to climb.

Commentators have today argued that the coin’s short-term downtrend was triggered by an antagonistic response from the United States government to Facebook’s Libra coin, which has extended to the cryptocurrency space more broadly.

Veteran trader Peter Brandt anticipates that total market cap could now correct by as much as 80% — yet argues that most of the damage will be shouldered by altcoins, not Bitcoin.

On July 7, Cointelegraph reported that Bitcoin’s hash rate had hit a new all-time high of 65.87 EH/s. Nevertheless, despite the week’s price fluctuations, this figure has continued to soar north, reaching almost 73 EH/s to press time.

source:.fxstreet.

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