China Unbans Bitcoin

bitcoin-china-price-flag-line-720x415(image credit)


It’s been fun watching rampant speculation and inaccurate, lazy reporting regarding the most recent rise in bitcoin price. Conspiracy theories are running wild, and tin foil hat traders are petrified that they will get burned again when the “ponzi” collapses. Guess what guys? Unlike last time, that shit probably ain’t gonna happen anytime soon.

We have no idea who the fuck started the MMM ponzi meme, but good job. You have the entire community up in arms with some dubious information. For starters, this entire thing was based off of a few tweets from BTC China, starting with:

Days later, the CoinTelegraph article we linked to earlier was published. We are not suggesting that BTCC is lying in anyway, or that their customers have not received dubious investment solicitations involving bitcoin… but how on earth is a “ponzi” (aka MMM) that has been around since April 2012 sending us somewhat parabolic right now? Common sense would say, it isn’t. Besides that, bitcoin isn’t actually part of the “ponzi”. Those who have done their research know that it is just a way to fund your “ponzi” account. You can also link to your bank account, which is much more convenient for most normies.

Traders have been intrigued by the spread between western exchanges and China. There has been unfounded speculation that this could be because Chinese are moving money out of the country and cashing out on western exchanges. While this is most likely true, is this really the main catalyst for the rapid price increase? Doubtful.

Logic tells us that we must investigate this a bit further, to find the real reason the bulls have been on parade.

Let’s see… Could it be that China UNBANNED bitcoin? Fucking finally?

Umm.. YEAH!

From the Cyberspace Administration of China:

Screen Shot 2015-10-19 at 6.58.30 PM

Full text:

US Commodity Futures Trading Commission (CFTC) has for the first time the Bitcoin virtual currency and other commodities defined, announced that it would Bitcoin futures and options trading supervision. Shortly thereafter, on suspicion of money laundering use Bitcoin trading platform, CFTC called on Tel Aviv to a Bitcoin trading platform swaps were punished.

Coincidentally, the United States State bank regulators Joint Committee recently recommended that the third-party electronic money transfer transactions or conduct of the company, included in the scope of duties of state banking regulators. Although still at the proposal stage, but it will promote economic regulation of electronic money or active processes.

Changes in the regulatory level of attitudes, for stormy markets Bitcoin is twofold impact. On the one hand, a variety of use bitcoin be illegal speculation and speculative behavior of money-laundering, will gradually usher in tougher “long supervision.” In fact, compared with around Bitcoin transaction itself, the risk Bitcoin development of various types of derivatives and structured products based on greater, and this is the reason Bitcoin is classified as commodity management lies. On the other hand, in a regulated environment for development, Bitcoin is also possible to gradually get rid of “bad boy” image, the evolution of a stable to choose a modern financial portfolio.

The current has entered the “post Bitcoin era”, away from the ups and downs, Daxitaibei towards rational and norms Bitcoin into the mainstream of development. In fact, more innovative value bitcoin block chain behind reflect its (block chain) technology. This is a series of related data using cryptography block-linking method, each data block contains the information in the last 10 minutes all Bitcoin network transactions, used to verify the validity of the data block and generate its information. Block chain provides a decentralized try, for various industries including financial, including providing a way to re-establish an information verification, credit constructed. Recently more and more attention to the technology of traditional financial sector. For example, according to the European Banking Association (EBA) in the latest report, the block chain technology with lower costs, improve product supply and improve the speed potential.

Although some people think bitcoin block chain and its technology was not stable, but it can not ignore its revolutionary changes brought about pay for. Traced the Internet and new technology development has brought the expansion of distributed payment and settlement mechanism, which may push financial transactions distributed innovation. Even relatively “stable,” the Federal Reserve, in early 2015 also released a report, to create conditions for direct clearing between financial institutions facilitate public IP networks, because this is more likely to reduce costs.

In the “post Bitcoin era”, although many are not virtual currency is closer to real money property, but in the relatively stable development path, through to payment and settlement functions to explore the core of the currency, but it will help to explore the real Innovative electronic money. However, the pace of innovation behind have followed from the regulation. (Tao)

Let’s look at the date and time on this release:

October 13, 2015 09:35:18

Screen Shot 2015-10-19 at 7.01.23 PMAnd when did the China pump start?

Seems like it’s probably not a coincidence.

And to top it off, Harvard Business Review China hosted the 1st Global Blockchain Summit, in Shanghai, on October 15-16, 2015.


About the summit (typos are theirs):

TCP/IP protocols led us to the age of free information transmittion, and the latest blockchain technology will lead us to the age of free information notorization. Blockchain, a critical milestone in information technology, will restructure the conventional ways of production and organization of the human society.

As the first professional blockchain technology institution in China, Wanxiang Blockchain Labs sincerely invites all interested parties to join our first global blockchain summit,. During the summit, we will discuss the applications and opportunities of blockchain technology in areas, such as Online Payment, Internet of Things (IOT), Securities Trading, and Digital Assets Management. We are expecting around 200 guests attending from various backgrounds, including banking, manufacturing, information technology and academia, etc.

More information can be found on 8btc, here.

In summary: Is this small bull run just a blip in this annoying as fuck 200-300 range? Based on the fact that it appears China has just officially unbanned bitcoin, probably not. After two long years, put on your mother fucking moonsuits. We’re about to head much higher!

Obviously we may have no idea what the fuck we’re talking about, and this shouldn’t be considered to be financial advice. We’re long. Are you?

Bitcoin’s Role During The Upcoming Financial Crisis


Almost exactly seven years after the 2008 financial crisis, it appears as if the world’s current financial system is on the brink of outright collapse once again. If you are reading this blog, you probably aren’t oblivious to the recent fx volatility, emerging market bloodbath and constant dewm narrative now being pushed by the msm. With a possible fed rate hike (or maybe even QE4eva) looming in just a few hours from now, general tension and unease can be felt globally as investors struggle to position themselves for the coming weeks and months. A rate hike is likely to trigger a market collapse, while moar QE will pretty much give the fed and its funny money absolutely no credibility.

While most people’s retirement accounts and home value were rekt in 2008, there are some identifiable positives which came out of the crisis. Three we often contemplate are:

  1. Interest in financial education by the general public
  2. Zerohedge
  3. Bitcoin

One of the largest (possibly) unintended consequences of the crisis was the desire of the general public’s attempt to become more “financially savvy”, or at the very least learn why their net worth was more rekt than an OKC margin call cascade. Since the collapse of the dot-com bubble, high speed internet and smartphones have spread like wildfire and large amounts of information is readily available to anyone who seeks it. Sure, most folks nearing retirement age still can’t accurately tell you what QE is; but generally, more of the public and world at large began to educate themselves about the absolute mess that our current financial system has become.

A huge contributor to this education effort is Zerohedge (and other alt-media sites), which has proven itself to be more on point than the msm. Mom and dad probably don’t read ZH, but those who decided to dive down Alice’s rabbit hole are probably regular readers. While some articles are pure fluff, and others may contain inaccuracies, some of the most valuable information is often found in the snarky comments where these issues are debated and sorted out. A little Google-fu (can we change this to DuckDuckGo-fu now?) of your own, and you feel like – “A whole new world!”.

For those of us who are really out there (I guess), we stumbled upon (great app btw) bitcoin, which probably expanded that initial and once so vast rabbit hole into the Kingdom of Narnia. Many sleepless nights later and epiphanies later, it’s likely that your views of the world and finance have been turned upside down.


Why will bitcoin matter in the upcoming financial crisis?

Obviously, each community member has their own views on this topic. How though, can this information be conveyed to Mom and Dad at the most basic level? In essence, each of us hodlers is front running the crash, while newly enlightened and “financially savvy” Joe Public is still fucking around with inverse ETFs and volatility options trying to time the next crash and “retire”. Sorry to “bust your bubble”, but good luck retiring with that stack of worthless fiat if you can even cash out once the fire exits are locked. If you are the type of person who quietly chuckles to yourself at cocktail parties while listening to “savvy” individuals talk about the market while you are compulsively checking ZeroBlock, you probably already know this though.

Americans have long enjoyed the privilege of having the world’s reserve currency as their national currency. Because of this, they have never faced or had to live through a currency crisis, as many nations around the world have in recent decades. Citizens of some other countries whose currencies are pegged to the dollar have thus been transferred this privilege as well, and are subsequently also living in oblivion. On the other hand, some countries such as Panama and Ecuador go as far as using a process known as dollarization, making the USD their official national currency. Most individuals fail to consider that many (but decreasing in number) securities and financial instruments are USD denominated, meaning that traders/investors need to hold USD to buy them and are given USD when they are sold. As the USD faces ever increasing competition from both other fiat currencies and digital currencies (cryptocurrencies included), where are these parked USD going to move? Obviously, things are much more complicated than this and many other factors come into play; but when the shit starts to hit the fan, where will all this money move?

Because of the status of their national currency as the worlds reserve currency, Americans do not fundamentally understand inflation the way most emerging nations do. To most Americans, inflation is only a measure of how much more their beer and hamburger cost y/y July 4th BBQ. They do not understand how the value of their currency will behave vs superior forms of money, especially when fiat currency is overtaken by a superior form of money in a so called “speculative attack”. More on this speculative attack in a bit, but for now, let’s introduce readers to Gresham’s Law:

Gresham’s law is an economic principle that states: “When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.”[1] It is commonly stated as: “Bad money drives out good”.

This law applies specifically when there are two forms of commodity money in circulation which are required by legal-tender laws to be accepted as having similar face values for economic transactions. The artificially overvalued money tends to drive an artificially undervalued money out of circulation[2] and is a consequence of price control.

Gresham’s law states that any circulating currency consisting of both “good” and “bad” money (both forms required to be accepted at equal value under legal tender law) quickly becomes dominated by the “bad” money. (For a formal model see Bernholz and Gersbach 1992). This is because people spending money will hand over the “bad” coins rather than the “good” ones, keeping the “good” ones for themselves. Legal tender laws act as a form of price control. In such a case, the artificially overvalued money is preferred in exchange, because people prefer to save rather than exchange the artificially demoted one (which they actually value higher).

Gresham’s Law was developed during a time when physical coinage was most prevalent. With the advent of digital currencies though, what if this law was extrapolated to include the digital space? Could sound money such as bitcoin be viewed as “good money”, while freely printed fiat paper promises start to become recognized as “bad money”? Believe it or not, for many of us, this has already happened.

The first part of understanding how bitcoin will fit into this mess is understanding why the upcoming financial crisis is going to be different than the rest. Sure, we have the 630+ trillion derivatives bubble, frothy stocks and real estate, COMEX registered gold at a record low and many other hazards to navigate, but what many normies fail to consider is the stability of the actual currencies that everything in the world that they know is priced in. With headlines like Fed Enters Rate Hike Meeting With First Headline Deflation Since January being pumped by the usual msm culprits, we can completely understand how Mom and Dad are left scratching their heads, not understanding what the fuck is going on. A few weeks ago we’re worried about inflation, now we’re worried about deflation? After enough of this, the only inflating you want to know about is that of your stomach, with alcohol. Maybe that’s the point actually. To confuse the shit out of Joe Public so that he would rather not pay attention because it makes no sense.

Regardless of inflation or deflation, we believe one important statistic to look at is the increase in money supply over time is through the M1 and M2 Money Stock Measures, presented by the St. Louis Fed.

First we will take a look at M1

What is M1 a measure of? From Investopedia:

A measure of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts and Negotiable Order of Withdrawal (NOW) accounts. M1 measures the most liquid components of the money supply, as it contains cash and assets that can quickly be converted to currency. It does not contain “near money” or “near, near money” as M2 and M3 do.

Screen Shot 2015-09-17 at 1.20.29 AMAs is clearly illustrated, M1 is currently 3,041.4 Billion USD. Shaded areas represent US recessions. See that hockey stick looking thing on the right hand side? The M1 measure has nearly doubled since the 2008 financial crisis. Doubled, in 7 years.

For a more detailed look into money supply, let’s take a look at M2.

What is M2? From Investopedia:

A measure of money supply that includes cash and checking deposits (M1) as well as near money. “Near money” in M2 includes savings deposits, money market mutual funds and other time deposits, which are less liquid and not as suitable as exchange mediums but can be quickly converted into cash or checking deposits.

Screen Shot 2015-09-17 at 1.20.46 AMM2 hasn’t hockey sticked quite like M1 has, but the pace has clearly picked up in recent years. The take away from looking at M2 is noticing that this figure includes savings deposits and money market mutual funds. That’s over 9,000 Billion USD, of “near money” that may need to seek shelter somewhere, at some point soon.

The argument can be made that an increase in money supply does not equal inflation in the price of goods and services. While this can be true in the short term, this is not the point that we are attempting to illustrate. As we will discuss later, rapid inflation is likely to come only when fiat currencies undergo a speculative attack by a superior form of money, at a later date. All that readers should take away from the figures above is the dramatic increase in M1 over the last seven years, and the large amount of near money that comprises M2. Specifically, keep in mind that this near money includes savings and money market accounts.

During times of financial crises, money tends to seek shelter in safe haven investments. The history of crises will show us that these safe havens often include precious metals, fiat denominated bonds, physical cash (fiat), “cash” money market accounts, put options priced in fiat and a variety of other “vanilla” investments. Joe “Savvy” (after 2008) is likely to take a more aggressive stance, positioning himself short, going long the VIX and using insane leverage against central banks virtually unlimited supply of fiat. The common thread tying most safe haven investments together is that unless they are something physical, most are worthless fiat paper promises or a bunch of fiat 1s and 0s inside a computer. Most people fail to realize that in an ever evolving world, their fiat will one day be worthless, and that day is probably sooner than they think.

The past shows us that “cash” is often considered by most to be a safe haven during economic downturns. Years of investing experience have shown the normies that if they time the cycles right and BTFD, fiat riches are to be made. Again, this is an extreme over simplification of markets, but the goal is to get Mom and Dad to understand why this time actually is different. The easiest route for most normal investors or traders to take is to buy low, sell high. Rinse, repeat. This same behavior can be exhibited in retirement accounts, as folks attempt to prepare for possible economic downturn. Have you ever looked at what “cash” in your trading or retirement account actually is though? Chances are, you are actually investing that “cash” into a money market account with your broker. Again, we will get into this in more detail later.

After every boom, comes a bust, and it’s only a matter of time until the US stock markets are in full meltdown mode again. We aren’t in the business of making predictions of when this will happen, but at some point everyone will rush for the exits at once. Given the msm’s recent coverage, we’re sure it will be blamed on HFT, hacking or something else of the sort.

What makes this time different is the fact that society has been given an alternate safe haven in which to safely store their wealth and transact. With many advantages over both fiat currency and precious metals, the performance of cryptocurrencies (bitcoin is the largest) has not yet been tested in the face of financial collapse or economic downturn. Bitcoin was conveniently released during the depths of the last crisis, quietly suggesting “problems solved”. For the first time since it’s invention, fiat has a formidable opponent.

From the Chicago University Law School paper that we refer to later in this post:

Screen Shot 2015-09-17 at 11.26.33 AMFor a bit more detail, view the video below:


If bitcoin hasn’t proven it’s performance in the face of a financial crisis, what do we think it’s role will be?

As events in Cyprus and Greece have shown us, capital controls are no joke and often appear simultaneously as a crisis occurs. In the real world, life and business must go on, and forward thinking individuals are likely to use bitcoin as a means of conducting exchange in an environment that may not permit so otherwise. Our friends at BitMEX recently outlined the role that bitcoin could play for the Chinese, as the government actually begins enforcing capital controls.

As we saw in Greece, domestic transfers were not impacted by capital controls, and luckily Circle and Coinbase offer a great ACH service to US based customers if they should experience such an event. Similar exchanges exist in most countries globally. The prevalence of trusted exchanges in most economies provides a quick and easy on/off ramp for those wishing to convert bitcoin into their national fiat trash cash. If international capital controls are implemented in the current financial system, individuals could simply purchase bitcoin on their local exchange to send abroad, hassle free. The receiver could convert that bitcoin into their local currency if they wish, or leave it in their digital wallet for later use.

At the very least, should the speculative attack against fiat currencies be mitigated, bitcoin will provide a seamless method of exchange for international business to be conducted in the face of capital controls. Who wants to mail precious metals or cash to buy something from a vendor when they can scan a qr code from their smartphone?

The role of bitcoin during a financial crisis is not limited to just circumventing capital controls though. This is just one example which can be illustrated by recent news events that Joe Public can relate to. In our view, the biggest advantage of bitcoin over fiat which can be realized by the ordinary person is going to be it’s use as sound money/a store of value over the longer term. In turn, leading to the behavior recognized by Gresham’s Law.


What is this speculative attack that we keep speaking of?

The scenario of a speculative attack against fiat currencies, and the potential relevance of this phenomenon to the IMF is outlined in this University of Chicago Law School paper:

Screen Shot 2015-09-17 at 11.16.46 AMScreen Shot 2015-09-17 at 11.22.21 AM

Now it might be easier for Mom, Dad and Joe Public to put the pieces together – Gresham’s Law, Bitcoin and a speculative attack against fiat currencies? Although anything can spark inflation, the most likely scenario is that a sudden distrust in fiat money will send a sudden wave of investors seeking shelter in safer assets. In such a scenario, we would expect the “bad money” to begin to hit the streets, as the “good money” (including bitcoin) is hoarded. This sudden increase in the supply of “bad money” is the most likely driver which will cause inflation, as the masses realize they have a choice. As we have seen time and time again, individuals without access to or knowledge of precious metals and bitcoin directly, will likely seek physical assets, in hopes that they will retain more value than their fiat or can be traded for sound money/currency at a later time.

Although covered in the video above, let’s revisit the three functions of currency, and how they relate to bitcoin.

From the same Chicago Law paper:


Screen Shot 2015-09-17 at 11.47.24 AMScreen Shot 2015-09-17 at 11.49.48 AMScreen Shot 2015-09-17 at 11.50.01 AMScreen Shot 2015-09-17 at 11.50.22 AMBringing this back to the M1 figure illustrated above, we ask the question. When faith is lost in fiat currency, where is all of that money going to go? We see bitcoin as being a prime candidate.

As for M2 and the money market accounts. Many “savvy” individuals failed to take notice when the SEC implemented new money market rules a few months ago. MarketWatch outlines some of the changes:

The SEC regulations aim to prevent an investor exodus from money-market funds like the one that happened during the 2008 financial crisis, when the federal government had to step in with financial backing for the industry.

One requirement under the new rules is that the shares of money-market funds that cater to institutional investors and invest in corporate or municipal debt must float in value, like the shares of most other mutual funds. That’s a change from the stable $1-a-share value traditionally maintained by all money-market funds. The idea is that investors will be aware of changes in asset values as they occur and be able to adjust their holdings accordingly, rather than stampeding out of funds when they suddenly become aware that their shares aren’t worth $1.

For a bit more on the subject, feel free to read this paper by the NY Fed. With investors trapped in money market funds which are declining in value, where can we see some of that money going? Our belief is that some of it will move into bitcoin by gaining exposure via any proxy available to investors at the time: GBTC, BTCS, ARKW, etc. Savings are also included in the M2 figure. It is likely that some of those savings will move into bitcoin as well, via the current ACH (or similar domestic) system and Coinbase/Circle (or other competitors globally).

In summary: Financial crises are often triggered by “black swan” events, that few see coming. As much as everyone wants to time the crash, this is not a smart or sustainable investment strategy. Taking a deeper look into post-2008 events, and virtually unlimited money printing by global central banks, it appears as if this time really is different. What makes it different though, is the fact that investors and the general public have a new safe haven asset class where they can retreat (bitcoin). This asset class may be unconventional to some, but to others it is the next logical step in the journey of money through time. The world is about to witness the greatest wealth transfer in history, which side will you be on?


Whether or not Janet decides to raise rates today is left to be seen. If she does though, we are left wondering. Could the real reason be to stave off a speculative attack?

From the Chicago Law paper:

Screen Shot 2015-09-17 at 11.54.58 AM Screen Shot 2015-09-17 at 11.55.31 AM Screen Shot 2015-09-17 at 11.55.49 AM

Is ChangeTip Changing Anything Anymore?


For years, there has been non-stop talk in the community about what “bitcoin’s killer app” will be, but what most fail to realize is that the bitcoin protocol itself is the “killer app”. Transacting online has been cumbersome and risky with legacy payment methods (cc fraud, hackings, etc), and the internet was clearly designed with a payment layer in mind. What is that whole 402 payment required thing for? In essence, the “killer app” is already here. What is lacking though, are many practical uses for bitcoin which are easily within reach for those of us who aren’t hoarders/traders. Yes, anyone can easily download Mycelium and send their friend half of the dinner bill, but those p2p (practical uses) are between current bitcoiners, which offer no new exposure for the technology.

So how do we, as a community, show the world that bitcoin isn’t just for drug dealers, money launderers, the t word and now Wall Street? How do we show the every day person that using bitcoin is not just fun, safe and easy, but also can add value to their everyday lives? As a community, it’s our job to take up this challenge, and creatively bring bitcoin to the masses.

Enter – ChangeTip

When they first entered the bitcoin space as ChangeCoin we were convinced that their innovative service was going to help fill this void. Not only had they developed a genius way to seamlessly transmit micropayments via social media, but the community support behind their effort was incredible. From Tipping Tuesday (within our community) to the semi mainstream acceptance of bitcoins superiority over PayPal via Millionaire Makers, ChangeTip was on fire. In December 2014, with an investment of $3.5 million from Pantera Capital, it seemed like the ChangeTip train was unstoppable.

Fast forward a few months later, and it seems as if the train has slowed considerably, and is in much need of some upgrades. While they are the current market leader, lack of innovation could easily void ChangeTips first mover advantage, as others rush to fill the unmet needs of the world at large.

But how did we get here? Part of the problem may be two situations which can be singled out as having received much negative media attention:

  1. ChangeTip’s solubility was questioned, to which they promptly responded. We commend the community for doing their due diligence, but as usual, this FUD just created lots of Reddit entertainment.
  2. Privacy issues were raised about connecting social media accounts with bitcoin addresses. The linked article provides additional insight into some criticisms of ChangeTip. Additional information can be found in this Bitcoin Magazine article.

Some quotes from the above articles:

The first one is the linkage between our social network identities and our Bitcoin addresses. Bitcoin is anonymous but traceable, and it would be invaluable to annotate different wallet addresses with twitter/reddit/facebook/google account names. Well, with your tipping help, they can. And that’s worth something. Before you claim that you’ll create new addresses and tumble your coins or whatever, we all know how lazy people are from the way they install flappy bird apps on their phone with enough privileges to launch nukes. Real people will be readily identifiable.

Tips contain fingerprints, and someone is actively collecting them.

Second, they have the linkage between multiple social networks. Unless you exercise an enormous amount of online hygiene and maintain a separate changetip account per social channel, ChangeTip can connect your identities across services. For instance, they would know that your gag account on reddit, the one whose username includes a garden vegetable and an anatomical reference, is linked to your Google account. Or the Discus account you use to harass academics who found flaws in Bitcoin is connected to your real identity as, say, a failed academic at, say, the National University of Singapore.

Of course, even assuming that ChangeTip can remain solvent, and stick to its current business plan, and maintain the safety of its accounts, and provide its privacy guarantees as promised, there’s still the possibility that it will get hacked and have its business data leaked. They have taken measures to protect their holdings by partitioning out a cold wallet, but they need to keep all of their valuable business data online for their own operation. This data stores precious information on which accounts are associated with each other, and it needs to be online, where it’s vulnerable.

[from Bitcoin Magazine]

Some users have raised concerns about the amount of personal and social data that ChangeTip is collecting. For example, ChangeTip collects information about every social network where its users send tips. This means that ChangeTip could potentially be able to link a private Facebook profile to a Reddit account or a withdrawal bitcoin address for a user.


In regards to ChangeTip being insolvent. This turned out to clearly just be FUD. In our opinion, ChangeTip gave a better response to this accusation than the “worlds leading bitcoin exchange” (oah wait, they haven’t yet). The privacy concerns though, while they have been transparent (here and here), are real. Anyone who has an understanding of social media, big data, etc, knows that not much information is needed in order for privacy to be compromised. Are we accusing ChangeTip of any such nefarious behavior? No, not at all. The truth is, customers using any service should assume that they have no privacy whatsoever, especially over the internet.

So, why do we think that the ChangeTip train has stalled? Clearly two small FUD event’s couldn’t have done that much damage. Our opinion – lack of new features which will engage the community, and (especially) those outside of the community.

The introduction of ChangeTip itself was a tremendous success, and clearly showed that their concept worked and was viral. Adding a few new platforms which people can tip on with a small personalized message though? Not the type of innovation the community needs in order for this to go mainstream. Ok, we’ll credit them with some of their other ideas, like paper airplanes too. But outside of being fun, how exactly is this going to help ChangeTip spread as virally as when they first launched?  Especially after the shitstorm of FUD ChangeTip has endured, the community as a whole needs to see a revitalization of that energy that appeared in the second half of 2014. Truth be told, their April Fools joke is probably the most creative and innovative thing we have seen since their launch. (video below)

Why are we writing this piece? What can be done?

Within a day or two of the news breaking that ChangeTip was receiving VC money, we e-mailed them inquiring about possible opportunities. To us, the power of the platform was obvious and immense. ChangeTip has the possibility to change how society as a whole uses, and interacts with the internet. To our pleasure, we received a response rather quickly, and begun a series of e-mails (and even had an hour long Skype call) where we shared some of our ideas.

Months later, we have seen a few small advances, but mostly just ChangeTip dying.

Take for instance their integration with Twitch.

ChangeTip made it extremely easy to start accepting BTC tips from Twitch by making it literally as easy as clicking a button. Once logged into ChangeTip—by using any social media that the platform supports, including Twitch—it’s as easy as hitting “ACCEPT” on a page that asks if you want to give ChangeTip permission to access your stream.

The ChangeTip platform then sends a ChangeTip tip bot to watch the chat and viola: integration complete.

From then on any watcher can use a modified ChangeTip tipping format of “!ChangeTip give $1 to @Kyt” in the chat and it will automatically fill the ChangeTip address of the recipient. On Twitch the bang (or “!”) is used often to begin a command to a bot.

This seems remarkably similar to their integration with other platforms. With the amount of Facebook viruses people have had to deal with when they thought they were getting free headphones, does anyone outside of our community really want to deal with this shit? This is not being innovative, and is not helping to bring ChangeTip and bitcoin to the masses. With the negative media spin put on bitcoin, most normies probably scroll past mewn screaming idiots tipping on Twitter (usually to popular media influencers) thinking – “there’s that bitcoin scam thing again”.

We won’t argue that some of this tipping exposure outside of our community is positive, but for someone who isn’t a bitcoiner, we doubt it means much.

Some of our thoughts/ideas that were outlined to ChangeTip (summarized for brevity and privacy):

In order for “tipping” to go mainstream, users need to be able to realize the value of their tip by immediately receiving something tangible that is of value to them. Sure, there will always be people sending bits for funny comments, but Joe Public doesn’t care about a “coffee” that he received when all he actually can do is stare at some numbers on a website. Your average Twitter user is the type of person who brings their monitor into the computer repair shop when it doesn’t work. They certainly aren’t going to take the time to learn about bitcoin/ChangeTip, unless they receive some sort of immediate gratification or “tangible reward” in their eyes. Fortunately, ChangeTip is in the prime position to capitalize on these opportunities.

Obvious integration ideas (to us at least):

  • News Site Paywalls – How many times does someone post a link on Reddit that is paywalled? Yeah, someone copies and pastes the content generally, or you can Google the title in most cases, but this isn’t the case for every article, that might appear in every subreddit. Wouldn’t it be great to be able to say – “/u/changetip next 10 views are on me”. Or to send an article view to an individual via a ChangeTip queue, and have a personal link messaged to them?
  • Video Site Paywalls – Same concept as above, but this could be integrated into both premium sites and free streaming sites. On free sites, users can use their ChangeTip balance to skip all ads, or on Premium sites, users could use their balance to pay in order to view the content. Taking this a step further, wouldn’t it be great for a video creator (or anyone) to post their work to Reddit and say something along the lines of “/u/changetip the first 10 minutes are free for the first 500 views”.
  • Streamium Integration – Streamium is already bitcoin only! Any combination of the above ideas into Streamium could easily launch ChangeTip into the stratosphere, and bring back that 2014 rush. Although this is likely to attract current bitcoiners only at first, Streamium is easy enough to use (and everyone loves streaming video) that the sheep will flock to it with enough great content.
  • Integration With Coinstar – ChangeTip is trying to promote purchasing bitcoin through their site, but why? There are already enough credible players in the space (Circle, Coinbase, etc), and isn’t ChangeTip (from Wikipedia) – “a micropayment platform built by ChangeCoin, Inc., an American corporation based in San Francisco, California, which specializes in online micropayments using the digital currency bitcoin.”  Let’s say ChangeTip really wants their users to have the ability to purchase bitcoin through them. Why not integrate with Coinstar? There is no competition in this space at all, and it would be a great marketing gimmick, where users can “change their change”.
  • Integration with paid music providers – Same ideas as above, but for music.


Any of the first three ideas above would allow ChangeTip users the ability to immediately recognize the value of their tip. This value can be easily recognized by anyone who is semi-computer proficient, which will spur their interest in the technology. Because payment would be sent from ChangeTip directly to the paywall provider, users who aren’t current ChangeTip customers won’t even have to sign up for the service in a “/u/changetip the next 10 views are on me for free”. Yet, they will immediately be able to recognize the value of the service that they just used. Some cute wording from the ChangeTip bot would obviously advertise what is happening, and this would likely spur additional interest from non-bitcoiners. Who doesn’t like free shit? Payments could be sent in bulk from ChangeTip to each paywall on a set interval, which could be tracked through the blockchain and verified by all parties. ChangeTip could secure a solid revenue stream, something many startups badly need, through taking a fraction of each micropayment as the middle man (not possible in today’s world).


ChangeTip’s recent integration with Gyft was the motivating factor to finally finish this blog post. Maybe they tried to implement some of our ideas, maybe this was something they had on the table for a year. Who knows, but either way it’s an epic fail. Seriously? From the Coindesk article:

Until now, ChangeTip users could top up their accounts via Coinbase, bitcoin or credit/debit card, however they could only cash out in bitcoin. Following the firm’s announcement yesterday evening, they now have the option to redeem gift cards from Starbucks, iTunes, Xbox and Amazon. They range from $1 all the way up to $2,000.

This is awesome, now I can take my magic internet money and go buy a gift card that I can send to my phone and then use that to buy something in a store (or from an online vendor)? How many 100 bit tips do you have to collect in order to buy a coffee at Starbucks? And how is bitcoin acceptance doing at Gyft? It used to make up 90% of their sales, but now makes up 10%. Seriously though, you probably couldn’t buy a Whole Foods gift card even if you were present for every Tipping Tuesday. Sure, ChangeTip gives out larger tips to promote their company, but how many people get (or accept) those?

Gift cards through Gyft do not give users immediate gratification. They add complicated steps for new bitcoiners, and anyone who is already using bitcoin to buy cards from Gyft is going to use their current method, not ChangeTip.


Where does this leave us?

It is evident that ChangeTip is focusing on attempting to draw developers to their API. It is also evident, that no one is building anything worthwhile or else it would have hit the community already with the impact of the original ChangeCoin. ChangeTip has already proven that their concept works, but there have been no attempts to integrate the technology in a way that individuals outside of the bitcoin community can use to recognize value. If bitcoin is going to be recognized as useful and perceived as valuable by the everyday person, they need to be able to interact with it in a way that actually solves a problem in their life (other than being a highly volatile speculative instrument). ChangeTip has been poised to fill this void, but it seems like they just want to put the “tip” in.

Ps, along that line of thinking: Did anyone actually approve this image for publishing or was it just sent out? Anyone else see something dirty?


The Bitcoin XT Trojan


With the block size debate raging for weeks now, bitcoin has proven (again) that it is has grown up and is now subject to the unfortunate realities of the world, and politics. While we have been following the debate closely, we felt that it was not worthy of reporting on because of the childish behavior, remarks and slander which are completely unproductive when you are trying (as a community) to build the next global financial system. The sock puppets, censorship and social engineering fuckery have gotten way out of hand, and the community is starting to stray from the cohesion which it has maintained for so many years. While we don’t expect this to be the end of bitcoin, by any means, it it isn’t going anywhere fast until the current issues are sorted out and consensus on the block size is reached.

It is clear that there are certain agendas at play, and our goal is to help readers see through the bull shit to gain a clearer picture of what is actually going on. As we have stated multiple times, we are bitcoin believers, and our goal is to educate the community. The traditional bitcoin news sources are highly censored, controlled opposition or worse, and we strive to provide an oasis away from that garbage, for the intellectually inclined.

Our belief has long been that bitcoin’s only potential Achilles Heel (but not fatal flaw) lies with the politics of the developers. While it is an open source project, and anyone can view or modify the code, the developers are the “controllers” of bitcoin in a sense, and therefore are often viewed similar to political figures. Just like the conversations you unfortunately have to hear when walking down the street about Hillary or Jeb, Reddit is littered with posts of love, hate, passion and disdain for all of the core devs. It’s literally a minefield on some days (well, until censorship). In the “real world”, it has been shown time and time again that by influencing those in control, certain agendas can be carried out, often with little or no push back. Fortunately for bitcoin though, the open source nature of the project allows anyone with a computer and internet to audit the code. In the end, the “controllers” are only perceived to be in control, while the actual control lies with each and every one of us, the community.

A series of abnormal events have occurred in the last few months, which we will lay out below. While it may be clear to some what is going on, most of the community is still in the dark (as usual, what else is new).

1) The regulatory landscape surrounding bitcoin has been changing dramatically. The NY BitLicense has been implemented, many companies and exchanges are refusing to comply, and we can expect more regulation to be introduced in other parts of the globe sometime soon. Anyone reading this blog has read everything associated with these events, so we don’t feel the need the outline them further here.

As we know, bitcoin itself can not be regulated (unless it is hard coded, more on this below), so these current regulations are a patchwork of misdirected attempts to apply traditional regulatory logic to a vastly contrasting system. The at the “core” of the issue, is the bitcoin core itself, and the fact that without actually modifying this code, it is impossible to regulate bitcoin in any effective fashion.


2) The stress test in early July was a blatant attempt to draw the communities attention to the ongoing block size drama. After a series of less stressful stress tests, someone with a very thorough understanding of the bitcoin protocol performed a tx spam attack which slowed transaction time for many considerably. QnP4v32

More in:

Bitcoin Magazine

and some excellent coverage on Medium

The common thread that seemed to tie all media coverage together, especially “mainstream”, was that something needed to be done with the block size. Reddit was ablaze with people saying dumb shit (and some insightful things), and, as usual, no one saw through the fact that this all was just a big game of social manipulation. Sucks, huh?


3) entered the scene a few months back, and immediately questions began to surface. Their about us page is shady, at best, and the business address which they list (78 York Street, London), is a virtual office. Reddit posts outlining this can be found here and here, with more details. Supposedly, their phone number doesn’t even work, their executives are all anonymous and it doesn’t seem as if they have are any satisfied customers (or customers at all).

After the first stress test, Coinwallet claimed responsibility, and more information became available. Finance Magnates does a great job covering that here. They also bring the anonymous aspect of the company to light for those who don’t compulsively check Reddit:

Others pointed to the fact that Coinwallet.EU, previously unheard of in the industry, is using the test to make its name known. Skeptics alleged that the company seems to have come into existence solely to conduct the test. Its website lists no physical address, and does not disclose the identities of its principals.


4) The introduction of Bitcoin XT has introduced about as much volatility into the community as the price has recently experienced. One of the most hotly debated aspects surrounding XT though (until now), has not been the software itself, but the blatant censorship and social engineering/manipulation which has occurred in every corner of the community. This clearly concentrated effort has just pissed off most people, but if you have a half a brain, you would think more into the situation. Why might this be going on? Why is there this HUGE push by some to stop XT in it’s tracks, while others are so eagerly pushing it along? What could each of their agenda’s be? What else could be at stake? Like everything else in the world, is this huge debate just cover for a much larger issue?

Before the spam attacks, the block size issue was raised by Gavin as being “urgent”. Until then, it was known to the community that modifications would needed in the future, but there was no sudden sense of urgency.

Is it a coincidence that the first attack began shortly after Gavin started pushing the block size debate? Seems a little too well timed for us to think so. To be clear, we are NOT implying that Gavin has anything to do with the stress test. There are many other players to consider though.


5) The next spam attack by, which is now being pushed by the msm. Some quotes from that article:

UK-based mining service CoinWallet is gearing up to conduct a stress test of the Bitcoin network in early September, which it said will likely render most standard wallet software “worthless” and create “nearly a 30-day backlog”.

A CoinWallet representative told IBTimes in an email exchange: “I don’t have a set date, but it will be early September. I’m too busy this month to fully devote a large amount of time to executing the ‘test’.

“As part of this test, I will be reconsolidating more than 150 Bitcoin that currently sits in these wallets.”

CoinWallet conducted a transaction to demonstrate what this will look like.

“As you can see from the transaction, there are 20 tiny inputs, with half going to miner fees, and half going to one of my CoinWallet addresses. This transaction is approximately 3kb, or 1/323rd of a block. In other words, for every ~323 of these I send, I fill up a block.

“These 20 servers push approximately 1 transaction per second. The plan is to fill them up to 50-100 Bitcoin in total. In theory, if all things go as planned, we will create a nearly 30-day backlog.”

“Of course, this won’t cripple Bitcoin entirely. Those who are smart enough to increase their fees will still manage to push transactions through. However, it will make it prohibitively expensive, and will likely render most standard wallet software, ranging from Multibit, to Mycellium, and others completely worthless.

A debate has been raging for months over whether or not to increase the maximum size of a transaction block of data beyond 1 megabyte.

Bitcoin core developers Gavin Andresen and Mike Hearn are spearheading the drive to increase the block size, and have developed Bitcoin XT client to allow miners to opt out of the current 1MB limit. The majority of miners must adopt the protocol upgrade or else no change will come into effect.

“The fact that the XT fork hasn’t occurred yet is ridiculous,” CoinWallet said.


So “a Coinwallet representative”, but throughout the entire article he is quoted as referring to themself as “I”. Sounds like a one man show to us. The “representative” is very careful to outline the fact that their “test” attack will render most wallet software useless. Fear mongering, anyone? Their plan is to create a 30 day backlog in transactions, which they believe will shift perception towards the need for larger blocks, now. The end quote is just the icing on the cake, and clears up any conspiracy theories that community members may have had about Coinwallet’s intentions. They are pushing for an XT update, and flexing their digital biceps in order to push their agenda. How much more fucking political can you get with this? The kicker, they plan to start this “test” attack in early September, so like in a week and a half.


So, why does this all matter?

It appeared as if Gavin and Mike were doing the right thing by pressing forward with a solution when no one else would. They put a solution out there, and gave the community the right to decide how to move forward. Until a consensus is reached, the network will not be an XT alt, and we are safe. But piecing all of this together, there seems to be some sense of urgency to force users to switch to XT. Anyone who regularly sends coin, knows that the network works as promised at all times other than when these malicious events are taking place. Since the last stress test ended, the mempool has been pretty much empty, with the exception of what looked like a pre-test to this upcoming attack about a week ago. If there wasn’t going to be another stress test attack, people wouldn’t have any problem completing their transactions until bitcoin organically grew, and the user base started consistently filling 1mb blocks. The point being, other than this FUD and their stress tests, there is no need for larger blocks right now, and there is no reason for anyone to rush and update to XT. So what is the ulterior motive?


As it turns out, some conspiracy theorists believe bitcoin has been hijacked. They feel as if a player has identified and attempted to exploit the one weakness which might actually harm the honey badger. Crashing price? No. Hackings, Goxxings, Ponzis and scams? No. Hijacking the code itself, creating FUD/a media shit storm surrounding the issue and then “creating a 30 day backlog of transactions” because the “fact that the XT fork hasn’t occurred yet is ridiculous”,  sounds like some Stuxnet style shit to us. An urgent (and artificial) timeline is being pushed on the community, to update their software in a rush, to a package which has much controversy surrounding it.

But has the code itself been hijacked? Is this just a conspiracy theory, or conspiracy fact.

In this linuxfoundation e-mail from yesterday, it is noted:

Bitcoin XT contains an unmentioned addition which periodically downloads
lists of Tor IP addresses for blacklisting, this has considerable privacy
implications for hapless users which are being prompted to use the
software. The feature is not clearly described, is enabled by default,
and has a switch name which intentionally downplays what it is doing
(disableipprio). Furthermore these claimed anti-DoS measures are
trivially bypassed and so offer absolutely no protection whatsoever.

Connections are made over clearnet even when using a proxy or
onlynet=tor, which leaks connections on the P2P network with the real
location of the node. Knowledge of this traffic along with uptime metrics
from can allow observers to easily correlate the location and
identity of persons running Bitcoin nodes. Denial of service can also be
used to crash and force a restart of an interesting node, which will
cause them to make a new request to the blacklist endpoint via the
clearnet on relaunch at the same time their P2P connections are made
through a proxy. Requests to the blacklisting URL also use a custom
Bitcoin XT user agent which makes users distinct from other internet
traffic if you have access to the endpoints logs.

There is a great bitcointalk thread about the issue, which highlights the topic.

Some quotes from that thread:

Mike Hearn says it’s to ban people who use DoS attacks from the network, but obviously it can be used to blacklist anyone.

I’m combing through the code and it’s not looking good.

Basically they will disconnect you if your address has ‘low priority’, which might hurt new addresses. If you have a negative priority score that means you’re an attacker according to them, and you are disconnected.

Also mapping the tor network, lots of code aside from this to break through the anonymity of TOR.

These changes are massive and BitcoinXT has not mentioned them at all, clearly the block size debate is a distraction.
We should start referring to XT as ‘PanoptiCoin.

This is disgusting, pages of code for the blacklist.

They’ve been mapping tor for months to get ready for this…. over 1000 IPs listed


And some of the more colorful posts from that thread:

Screen Shot 2015-08-19 at 3.43.33 PM Screen Shot 2015-08-19 at 3.44.44 PM Screen Shot 2015-08-19 at 3.42.45 PM Screen Shot 2015-08-19 at 3.43.19 PM Screen Shot 2015-08-19 at 3.52.45 PM Screen Shot 2015-08-19 at 3.53.10 PM

There are also some arguments against the supposed findings, we outline the most important and conclusive later in this article.

So after all of that conjecture and possible FUD, let’s break down the situation into it’s simplest form:

1) Gavin initiates and pushes urgency of block size issue

2) Regulations are put into place (BitLicense)

3) First spam attack takes place

4) Much community discussion takes place regarding block size

5) Larger spam attack takes place, takes responsibility

6) Bitcoin XT is pushed out by developers and released in a hurry

7) The MSM pushes the XT/block size issue, after mostly negatively portraying bitoin in the past (but blockchain positively)

8) threatens another spam attack, which will back up the network for 30 days. They also support and promote upgrading to XT immediately opently.

8) Questions arise about the purpose of some of the code in XT, or how it can be modified in the future for other/nefarious purposes. Is this an attempt to “regulate” the bitcoin core?


In all fairness to Mike and Gavin, we have to present the most compelling piece of evidence for their inclusion of the new features into the XT code.

Check out this link for the full thread.

The most important response from Mike:

This patch fixes the issue. It adds code that only runs when the node is full. As nodes are not supposed to get full unless there’s an attack, this code should ideally not run, or hardly ever run. If a node reaches its -maxconnections limit instead of rejecting all new connections, it calculates a priority score for each connection and if there are any lower than the new inbound connection, that lower scoring peer is disconnected to make room. And it adds a starting rule that gives Tor connections a lower score than clearnet connections. Hopefully there will be many other heuristics added over time.
The result is:   if and only if your node has run out of resources, and it has connections via Tor, then it will kick out the Tor connections one at a time to make room for non-Tor users.
This reflects the reality that Tor is much more attractive to attackers than real users:  nobody is going to DoS bitcoin from their home internet connection but people use Bitcoin from such connections all the time.
My patch is a tiny first step towards fixing a long standing problem with the design of Bitcoin’s DoS protection system:  it works by attempting to ban IPs that engage in “misbehaviour”. This has two problems:
  1. It’s possible to DoS a node without triggering the misbehaviour rules
  2. It assumes 1 IP = 1 person
The latter assumption isn’t valid for lots of users, like users on mobile phones, at hotels, at conferences, at some universities ……. and users behind Tor!
One of the misleading things I’ve seen a Blockstream employee say is that the Tor prioritisation patch “risks network partition”, which is a fancy way of saying users behind Tor might get disconnected entirely from the main network.
I have a problem with this argument for a couple of reasons.
The first is that anyone can already trigger such a partition. All you have to do is connect to each Bitcoin node from every Tor exit, and then “misbehave”. The exit will then get banned for 24 hours. New connections are then no longer possible. Existing nodes will keep their connections intact, but eventually people will have to restart their nodes, and then they’ll end up banned too. This results in a kind of slow motion network partition. The best fix for this is to replace the notion of banning IPs with something else …. like a more advanced form of priority.
The second is that it suggests Bitcoin should just not care about the attack I outlined above. The guy who has been saying this also believes that non-Bitcoin-Core P2P wallets are a bad idea, which is consistent with Blockstream’s vision of Bitcoin as a kind of clearing network between quasi-institutional entities. So, no surprise that he doesn’t care about attacks that affect mobile P2P users.
However, the Bitcoin XT project does care about them.
The third reason is that to force Tor users to be disconnected and make a partition unique to this patch, you would have to flood the network from non-Tor IPs. As you are probably breaking the law by doing that, you need to find some other shield. The framework is general so if someone does this via some other proxy network, we can give those networks even lower priority than Tor. Problem fixed.
Then you’d have to use botnets and the like, but I know from my time fighting hackers at Google that this is much harder to pull off than using something like Tor. Attacks getting harder, riskier and more expensive? That’s progress.
The new framework is very basic. There are many other heuristics we can add to make it work better, and eventually remove the Tor specific logic entirely.
One idea is to raise the priority of nodes that are doing useful stuff, like relaying us data.
Another idea is to extend the P2P protocol so clients that don’t have long lived connections and can’t provide services to the network (i.e. phones) can gain priority by proving they own bitcoins. It makes sense that a user who has 500 BTC in a 12 month old saving wallet should take priority (if need be) over a user who has no bitcoins at all.
Another quick heuristic is to do dialback on connect. One issue with connection prioritisation is that we have to decide fairly quickly and with low resources whether to service a new connection or not. A quick check if the connecting IP is accepting port 8333 would identify not only Tor but all proxy and botnet services    (running custom software on botnets is much harder/riskier than using their predefined services). Of course it’d also identify mobile/NATd users. So we’d want to combine it with the new protocol above and get wallets to implement it first.
Obviously, in a mostly anonymous system like Bitcoin, any heuristic can be gamed by an attacker who is willing to spend enough resources to simulate real users. All we can do is raise the costs.
So with those ideas combined we’d have a pretty nice general framework that doesn’t need any hints about specific IP ranges anymore. But it’d take a lot more work.
Outside of the fact that we now see a public disagreement between Mike and a Blockstream employee, he outlines an excellent reason for the inclusion of the new changes. It does seem to make sense on the surface, but we definitely see how this can be a very slippery slope which the community should be aware of. The inclusion of prioritizing by IP addresses, and future plans of possibly prioritizing by days destroyed (number of coins * days held in wallet) does open up very real privacy issues. Mike does say that this is just a framework, and that further changes will be made moving forward. What are those changes? Could a simple DDOS protection (which is clearly an IP white/black list scheme) evolve into something more elaborate and targeted? For the time being, we aren’t really concerned about these issues, as everything seems to be in the clear. This situation does bring up interesting questions though, and lots of thoughts for what the future of bitcoin might hold. As of now, there are lots of conspiracy theories, but with the unusual media coverage and coincidence of these events, will we some day find out that there is some conspiracy fact behind what is going on?
In the end, it is a bit shady that what seems to be a front company is threatening to create a 30 day backlog of transactions, essentially if people don’t update to XT. What else might researchers find in the XT code as they dig deeper? We hope nothing, but combined with the other events in recent months, we are left questioning the agenda’s being pushed. We hope that the community works together to maintain the original vision that Satoshi had for the project.
The following was aired on Bloomberg today (click image to bring you to video page):
Screen Shot 2015-08-19 at 6.13.47 PM

Symbiont Updates, XCP Rocket Ignited

rocket-clipart-nicubunu_Toy_rocketWhile it’s no secret that the world has been starting to see the light with “blockchain”, it has been pretty obvious from the multiple attempts by the msm to cover bitcoin already that this is going to take a while. Everyone else has their training wheels on, but for those of us who scoured bitcointalk years ago, got burned buy not selling AM shares near the ath and even those who have been around as recently as the Gox implosion, we don’t need to hear any more about miners solving complex math problems. We get it, and get where this is going. There is no blockchain without bitcoin, and once the sheep finally catch on to that, they still need to learn about alt coins, side chains, etc.

The point being, it’s going to be a while before the mainstream hears about, or cares to hear about something like XCP (Counterparty) (that’s cool though, we won’t mind selling to them). So, if this is the case, why has such as obscure corner of the digital cryptocurrency playpen been receiving massive attention from high profile Wall Street players and a significant amount of investment capital? Duh, it’s the future. Among many other initiatives in the space, SWIFT has a call for proposals out which is looking for information on blockchain securities settlement.

Just to cover this again. In plain English. Counterparty, and decentralized asset settlement in general, will become a backbone of the new financial system currently being built/deployed.

For a refresher, let’s visit Bloomberg:

Some Financial Heavyweights Just Invested in a Trading Platform Linked to Bitcoin

Symbiont, which plans to use bitcoin’s underlying technology to make it quicker and cheaper to transfer assets between buyers and sellers, has won the backing of several financial industry heavyweights.

The company, according to a statement Tuesday, has raised $1.25 million from a group including former New York Stock Exchange chief Duncan Niederauer, former Citadel LLC executive Matt Andresen, and two co-founders of high-frequency trading firm Getco LLC, Dan Tierney and Stephen Schuler.


A few weeks ago, we discussed the possibility to Front Run The XCP Pump. Here we are, a few weeks later, in the midst of what we at believe to be the first leg of a major XCP pump (to continue on announcement of Series A funding). In our last XCP piece, we outlined that there would be a Series A round of funding coming in Q3 this year. Fast forward until last week, and Symbiont just received another round of funding from two more VC firms.

From PR Newswire:

Atlantic Merchant Capital Investors, LLC announced today that it has made an investment in conjunction with Celeridem Capital Management, LLC into, Inc.

“The team at Symbiont is enthusiastic about our new capital partnership with Celeridem and Atlantic,” said Mark Smith.  “The capital they and other investors have provided will allow us to deliver production technology and clear the way to a Series A round later this year.  We are also excited about the opportunity to work with Shiv Govindan and Jeff Hunt [principal at Atlantic].  They bring more than capital to the table.”

Symbiont expects to issue the securities associated with this funding via its proprietary blockchain technology.

Most people only read headlines, and few will actually read an entire article or press release because, ADD. That part in bold up above is something that all investors should be paying close attention to. This latest round of fundraising (for an unspecified amount) is just leading up to their Series A.

Another interesting piece of information from Tampa Bay Business Journal:

Symbiont’s board now includes SenaHill Partners founder and former Goldman Sachs (NYSE: GS) global head of REDI product development Neil DeSena as well as Duncan Niederauer, former CEO of the New York Stock Exchange.

Can you get any more bullish than this? These guys literally live and breathe for money, and not only are they investing in, but are now on the board of Symbiont. Remember guys, the people who founded Symbiont are the same team that created Counterparty (XCP). While they have openly stated they are going to be working with many different solutions, we think that they are probably going to have the best results with the one they are most familiar with, the one they built.

Chart of the price action around both of the last investments can be found below.

Screen Shot 2015-08-02 at 2.15.25 PMWith their Series A coming up, what else have the Symbiont/Counterparty guys been up to?

Everyone was focusing on Blythe Master’s linguistic performances at the American Banker Conference, but few took the time to realize that the Symbiont team was heavily represented as well.

Bitcoin addresses with XCP have been on a steady rise since inception, and show no signs of slowing down.

Screen Shot 2015-08-02 at 3.13.31 PMDeloitte is exploring Counterparty:

Professional services firm Deloitte has revealed it is seeking to use blockchain technology to automate client auditing and crowdsource its consulting efforts, among other applications.

Piscini indicated that these clients are currently exploring different protocols built on top of bitcoin, including Blockstream, Counterparty and Factom. A key question that persists for many is whether to partner with these firms or build a private blockchain.

As for its own projects, Piscini said Deloitte hasn’t determined one specific working thesis for the technology, suggesting the firm is willing to select the blockchain best for its specific use cases.

“Our point of view, is ‘Let’s find use cases, where you can generate more revenue, generate a different customer experience or cut your costs.’ Then we can find the technology stack to address them,” he said.

So far, Deloitte has launched Rubix, a software platform that allows its clients to build applications on top of blockchain infrastructure.

The official website for the service lists four areas of interest, including reconsolidation between trading partners, real-time auditing, land registry and loyalty points. Internally, the company is focused on automating some of its auditing processing via a solution currently in stealth.

“On the consulting side, I think we’ll see the ecosystem adapt and change and move toward blockchain-based solutions,” he continued. “The potential for us is around the ability to source consulting services through a P2P crowdsourcing platform. Instead of saying, ‘Deloitte help us with that strategy’, you can request that service on the blockchain and the blockchain would match you with the right individuals to do that.”

Over time, Piscini said he sees the blockchain becoming a foundational layer for asset transfer, smart contracts and voting, but that different blockchains may be created that specialize in each of these use cases. He also suggested that he sees cryptocurrencies such as bitcoin will likely continue to play a role in the management of blockchains.

Although they are working with multiple possible solutions, we all know that Counterparty was the first working protocol. We also know that this gibberish about private blockchains is just them trying to borrow the bitcoin source code because it’s open source, pissed off they didn’t invent it themselves. Save yourselves some time and money guys, its not worth it.

There was a Counterparty update on July 24th, further cementing the point that Symbiont would be using XCP:

Over the last year and a half, Counterparty has evolved into the most advanced platform for creating financial instruments on top of Bitcoin, used by an increasing number of innovative projects. During the last couple of months, our goal was to wrap up the large scale improvements to the Counterparty software suite, complete comprehensive security audits, and once the protocol reaches a mature state start focusing on and building tools and services around it. Symbiont is a step in that direction, developing products that will be utilizing this technology, and we’re very excited to see it be put into use in systems that power modern finance.


Some interesting projects on bitcointalk/GitHub.

An interesting Reddit post, in which this comment stands out the most:

HFT is often about taking advantage of arbitrage opportunities and moving enough stocks to get fee discounts, so that money can be made even on small changes in price. The stock market is a network of connected stock exchanges etc. Nowadays this is all existing in the realm of highly regulated, centralized operations. In the future I’m confident that stocks will be tokenized either ontop of existing blockading such as counterparty on Bitcoin or on separate blockchains using technologies such as Peershares (/r/peershares) because its just so much more powerful. the question: “why would a company that is making money on inefficient stock markets invest in the next gen stock market? ” my guess would be that they are fully aware of what is about to happen. What is the difference between a stock IPO, VC investing in a startup and say Kickstarta? Save for the juridical differences there is a lot of differences, but that’s about to change as social communities and Bitcoin tech is about to merge. There are already several examples: Nubits, Etherium, Counterparty that is giving a glimpse of what is about to happen. This Bitcoin stuff doesn’t ask for permission and the killer app is the many ways in which it will creep into every aspect of our lives.

Last, but not least, this SEC filing which shows Symbiont sold 1.235 million in debt starting on June 30, 2015.

Screen Shot 2015-08-02 at 3.44.40 PM

For those of you unfamiliar with Form D:

Form D is a form to be used to file a notice of an exempt offering of securities with the Securities and Exchange Commission. Commission rules require the notice to be filed by companies and funds that have sold securities without registration under the Securities Act of 1933 in an offering based on a claim of exemption under Rule 504, 505 or 506 of Regulation D or Section 4(5) of that statute. Commission rules further require the notice to be filed within 15 days after the first sale of securities in the offering. For this purpose, the date of first sale is the date on which the first investor is irrevocably contractually committed to invest. If the due date falls on a Saturday, Sunday or holiday, it is moved to the next business day. The SEC does not charge any filing fee for a Form D notice or amendment.


All of you that are reading this blog can see the impact that “blockchain” is going to have on the traditional world of finance. If we didn’t, we clearly wouldn’t be involved in this absolutely insane world of bitcoin day in and day out. Each of these new protocols (except Etherium) relies on the bitcoin blockchain and a small token of btc to carry out each transaction. Naturally, this will slowly create a demand for btc and create more upward pressure on the price. At this point, it is safe to say that all major banks who have stated they are exploring blockchain technology are holding bitcoin (they couldn’t run their tests without it), which itself is a major milestone for the technology.

As we saw with the msm coverage of the NYSE outage a few weeks ago, the sheep are still being herded and misdirected. Nanex compiled this excellent report which is a must read. The ex-CEO of the NYSE investing into Symbiont during times like these is just too perfectly timed for us to believe it’s purely coincidence.

Interesting times we live in.

As earlier stated, we have been long XCP from the bottom and plan on selling some once the rocket takes off. Obviously we are also holding some as a long term investment.

The Wuestenrote (Wusitanluo) LTC Ponzi Was Crushed

With yesterday’s LTC pump, many traders have been talking about the possibility of another moonshot. In our experience, group think generally should be approached with caution, and traders should sort out the facts on their own before making any moves. With the possibility of making or losing a significant amount of money in the game of ltc hot potato, we decided to dig a bit deeper into the “Chinese Ponzi” that we outlined in this post.

Unfortunately, for traders, it looks like the fun might be over for the time being. It appears as if the suspected ponzi actually was a ponzi, and the people who were running it incurred massive losses and are now on the run. With over 400,000 ltc still in this address, we wonder what their next move will be. Without the upwards pressure of the ponzi on LTC, will the market collapse, or will other pumpers come in to take advantage of the hype around the block halving.

The first piece of information to focus on, this post from the group themselves which was made on July 22nd. We understand that it is a bit hard to read, but that’s Google Translate’s fault. You can easily get the idea of what is going/went on, and it isn’t good.

Wusitanluo Network Announcement:
Dear coins circle and investors you are good:
Since litecoin great investment value, recently sought after by the market, trading activity, rising rapidly. Frequent exchange transactions across multiple platforms, leading after the rapid rise, some investors eager to cash in quickly after frequent cause is thrown down.
The company has been the case of the parties conducted a survey research, set up an investigation team for the entire event carried out a detailed investigation. The occurrence of such a huge market fluctuations things, on behalf of the company for failing to deal promptly remind investors of risk and get the best revenue opportunities, deeply apologize! The company will serve as a reminder that in the future the investment process, to better improve service, increase opportunities and investor communications, increase litecoin trading knowledge training. However miss this opportunity, as well as heavy losses to investors caused by currency circle, we must acknowledge the error, it is wrong leadership of the company, things have happened, companies know that no amount of explanation is useless, only adjusted for market development at the same time in favor of the interests of investors all litecoin program. So please rest assured that the majority of investors! The existence of the event management problems, the company to extend my most sincere apologies to the members.
About uproar MLM event Wusitanluo litecoin recent online fund transfer, the company made the following explanation:
1. litecoin – digital currency in silver, five national ministries issued a document has acknowledged the same nature of virtual currency and stamp investment products;
The company did was to maximize the benefits to our own members, members to participate in the store come in the company to do buy low sell credits for the company and members of the benefit, but after the incident that we deeply appreciate the company’s promotion and incentives does have loopholes, the company is now working on improvements, will be promptly corrected, and safeguard the interests of members and coins circle stable and sustainable development. Increase the propaganda and investor training instructions explain litecoin development environment, the company operating conditions, so that investors from different sectors of society, we have a full understanding, differentiate the company is definitely not an illegal pyramid scheme organizations and other institutions. If the company deliberately fraud, no company disclosed the truth, so please credits circle of investors and members of my friends believe that: The company will gradually improve the business long-term orderly and healthy development continues!
The problem for business, we reflect on the comprehensive, currency experts gathered in the circle, the company’s practitioners admire your moral and technical level, you who are veterans, we circle the deficiencies currency, please timely corrected, we would like to fully cooperate for the greatest degree of meeting customer requirements, to achieve a win-win, and let us improve faster. We are willing and credits between companies in the same industry circles to establish a good cooperative relationship; analysis of everyone’s long-term sustainable development of a steady stream of money to bring new impetus to the development circle, currency prices rose only virtual currency using the procedure we have developed a necessary process, we increase investment late, modify extension model allows the company to achieve a virtuous cycle, please rest assured!
Since the 7.10 incident currency Circle in short Zapan cause our losses, we make the following summary: We have never experienced such an event, there is no ability to timely response and to corporate clients who bring serious losses, our market environment is too optimism did not adjust the tempo. About Wright currency fluctuations, we realized: favorable currency price rises for everyone; short only on a small part of speculators to bring short-term profit, most investors can not share the real benefits brought by the development of virtual currency. Many people even do not know the risks of leverage, resulting in greater losses! So our next step will be an effective and mutually beneficial and win-win to stay in business, please credits circle of colleagues and jointly create a harmonious market environment, maintaining good litecoin healthy development is our responsibility!

Here, also deeply grateful to all of concerned friends! In fact, the company was informed that after the incident, in addition to feel very ashamed and apologetic outside, but also gain a more moving and trust, thank the majority of investors have high hopes for the company! The future development of the company, and we closely co-prosperity loss, we already are familiar with the family, so I can better understand that you do not want us to make mistakes in their mood. You were criticized, is the driving force of the company can do better! We will gradually consolidate the business, scientific management company’s business development, allowing companies to develop more robust! & Nbsp; & nbsp; Our company is totally worth everyone has the strength to believe, as the new company litecoin industry, the company has a very strong economic and technical support. Business is like a child, growing up, will inevitably wrestling, make mistakes, then the parents will help one, carefully educate him. The company today, you need to like the parents who help a help, what help us to grow up healthy and strong! & Wusitanluo network announcement!

Source: 8btc

Secondary Source: BTCMan

Further on in the thread, information about the supposed leaders is posted, along with their pictures.

Screen Shot 2015-07-25 at 4.31.23 PMScreen Shot 2015-07-25 at 4.32.10 PMThe Chinese BTC media had been covering the story since earlier in July, more information below:

July 10, 2015, Wright currency prices from a month ago, hovering at 11 yuan, skyrocketing to 54 yuan, or nearly 400%. Investigate its soaring reason, most likely related to a strong sales organization suspected of pulling the disc. After the litecoin surge stirred the entire digital currency industry, in July 2015 at 10pm, litecoin suddenly began to fall from 54 yuan, as of press time, litecoin prices hovering at 27 yuan from top to bottom.

The previous day’s surge, probably only because a video.

Reporter join MLM organizations suspected of QQ group: Wusitanluo – litecoin

Just one day time, group number rose to 435 from 100 people up and down, and still keep up the trend. A large group of files named “Wusitanluo litecoin Fund Projects” “litecoin registration process” file.

Suspected MLM organizations to promote PPT

Wusitanluo litecoin Fund Project Description:

1, sentence description of the project The project requires investors to the market on their own (fire credits net) at market price to buy 500 litecoin, then 500 litecoin Wusitanluo to finance and investment companies, the company returned to 3 per day to 5 litecoin to your virtual currency wallet (fast purse), now return 5, after deducting 10% of the fee actual return 4.5, can be returned litecoin fire credits net trading cash to be held currency to be up.
Note: The contract with the company for 1 year
500 litecoin to the company of the night (the next morning) the return of the company will be able to receive 4.5 credits litecoin is the world’s second largest virtual currency, in China there are 12 exchanges of fire most traded currency net .
Fast is the most secure virtual wallet purse money, safe, convenient and compatible bitcoin
2, to help companies to promote Award
A, all of their recommended straight people can get 50% per person per day
B, straight recommended 10 people became broker (also available in their 5500 litecoin buy directly into the broker)
C, will become a broker, obtain the following rewards:
1–5 dezh dividend of 10%
5% dividend 6–10 dezh
11–15 dezh dividend of 2%
Note: Direct Push 1 get 2nd generation, direct push two people have two generations, direct push three people have three generations, so get up to 15 generations, every day, every day the dividend, too.
Your income = ROI + Promotion Rewards
3, Wusitanluo is a German company, is a diversified financial conglomerate, located at 1156 Forbes Global 2014 companies list, ranked 37 in Germany.
4. What is Wusitanluo litecoin fund?
International litecoin profitable global trading platform to buy low and sell high
5, this model is MLM it?
Your investment in a first, the company received on time if you return the money, proved to be true in the future, who would you most like to pass? You most certainly would like to vote on several accounts under his first order to obtain greater benefits. Their investments much more income than pull people to join.
6, there is no risk of such an investment?
Any investment has risk, but in this era of fast money, to get the maximum benefit is to grasp the opportunity in the short term.
7, was asked: I do not know you, money is how do you cheated?
A: You are mistaken, your money and coins not through my hand, you buy 500 litecoin litecoin directly with your wallet (fast purse) to call the company, I just recommend you to join it, you register Corporate Member When I will use my membership number.

Being thought of these, to be fleshed out later! Other issues your own Baidu, Baidu Post Bar has Wusitanluo it.
This is the latest investment projects, domestic just beginning, very few people do this, have not formed a team like Vicat currency, seize the opportunity to put their achievements as Vicat currency render such a successful teacher.
I am determined to do Wusitanluo first person in China, of course, you can also set up their own team, beyond their own!

OKCoin has been aware of the situation since at least July 11th, but has only made a full statement (that we could find) to their Chinese customers. I.e.: Something that said more than “don’t put yourself in traps”.

They also mention that this is just the latest of their investment projects, and the beginning of domestic projects. What does this mean? We suspect that they may have lost a substantial amount of funds due to their failed pump, and aren’t too convinced that there will be subsequent pumps yet. If anything, we would expect the market to deflate a bit while the ponzi tries to get things back in line, but do they have the buying power to pull themselves out from underwater.

These ponzi masters have gone so far as to imitate a German company, register the .com version of their domain name and put up a fake website in order to cover their tracks.

The companies correct website is:

The fraud site was:

Again, from 8btc:

Germany seems to really have the online search Wusitanluo this company, also great. However, and this litecoin MLM is certainly nothing to do. This is the MLM websites .
In million net Search Domain Information:

Oh, April 10, 2015 was registered.
However, some people may say is to not promote litecoin MLM ah, ah just registered! !
I continue to dig.
The bigger sites do actually quite bluffing. For example, the login screen can select the language. Very fast hardware thing, after all, is large international companies!
But I chose English actually let me choose it, people look down on the Asia-Pacific do not know English? ? ! !

Then I see the website source.
Develop people to effortlessly Reprogramming a German and English pages, when you want to change the English and German pop up directly not to change!

Yes, it is a direct pop, will not determine the country where ip oh ~

A Baidu thread with the ponzi “founders”, shows they have a very creative way of looking at what they are doing.

Screen Shot 2015-07-25 at 5.59.13 PM Screen Shot 2015-07-25 at 5.58.36 PM Screen Shot 2015-07-25 at 5.57.59 PMWe then turned to bitcointalk for information, and found plenty. Here is the most interesting and informative thread:

You can view a video of the schemers promoting here –

And for those of you wishing to see the ponzi schemer’s presentation (source):

123456789101112131415161718192021222325So what do we expect from here? Probably a ltc dump as this news propagates through the west, and traders realize that might be bag hodling for a while. If the ponzi group or another pump team step back into the market place though, we could be in for a wild ride.

The bottom line is that the ponzi pump team didn’t execute their pump as expected, and it appears as if they are now on the run after incurring massive losses. Whether this is true, or FUD to get the ltc price back to a level where they can buy back in and pump is to be seen. With the upcoming block halving, and OKC double witching in September, we have some dates on our calendar to watch.


BFX Bot Gone Wild

It appears as if trading is slowed or suspended on BFX, after a rogue bot seemingly took over ltc/btc trading for a period of 35 minutes. The intense volume and consistent range of the trades suggests that this was not human error (unless they were wasted).

Screen Shot 2015-07-17 at 12.07.57 PM

The impact could be seen on the ltc/usd market, as correctly functioning arb bots (which were obviously also trading the ltc/btc pair vs the rogue bot) took advantage of the situation. Quick traders using their old fashion fingers certainly took advantage of the opportunity as well.


Screen Shot 2015-07-17 at 12.08.33 PMThere was some funny activity in the drk/btc market as well, but nothing conclusive. Could have been a bot, could have been a fomo trader.

Now back to your regularly scheduled programming of watching OKC lead the LTC market.


The LTC Pump, Dump and ? A Post-Mortem For Both Bulls And Bears


In our last post, we outlined some of the shenanigans that were occurring in the LTC marketplace (specifically on BFX). A week and a half later, both bulls and bears are in tears, after some of the most extreme volatility the LTC market has seen in years. We don’t expect this volatility to die down any time soon (a gift for traders), but we feel that the community at large should have a more thorough understanding of the underlying fundamentals of the price action that we have been seeing.

We have been performing a thorough analysis of the different market forces acting on the LTC (and to a lesser extent BTC) markets over the last few weeks, and are attempting to assemble the pieces so that traders can make an educated decision on what their next trades should be. There is a worrisome element to all of this (outlined in 1, below), and the last thing that the crypto community needs at a time when it is finally going mainstream is more traders/investors to get burned and have disdain for the crypto community because of a malicious actor.

1. The Chinese LTC ponzi (surprising, eh?)

2. Pump Team 6

3. Return of old players

4. New interest in Crypto/media coverage/Greece = new money

5. Irrational exuberance and margin trading


Of what we outlined above, we only consider point 1, the ponzi scheme, to be a malicious actor. The others are viewed as forces in the free market.

More details on each below:

1. The Chinese LTC Ponzi – Our friends over at BitMEX published an excellent blog post two days ago outlining the ongoing LTC ponzi scheme in China. This is the address which is being used for the scheme, it has now received over 8.5 million LTC. Bitcoin Magazine goes a bit more in depth on the scheme, and the statements different exchanges have made in response.

An analysis of the wallet address shows that the deposits and withdraws are still increasing dramatically, so the scheme is still ongoing.

687cbd1b-db5c-4645-9074-78eb93461120h/t: @Legion for the data, you can view it for yourself here

As stated in the Bitcoin Magazine article, some of the more customer oriented exchanges have taken steps to mitigate any damage from the ponzi, and have reached out to traders/investors to warn them of the unusual trading activity. Huobi posted the attached.

While we believe that the LTC ponzi group has contributed partially to the dramatic LTC price and volatility explosion, we believe that the other market forces acting in parallel have amplified both the upward and downward moves of LTC, creating a potentially hazardous trading environment for those who are ill-informed.

It is our belief that the LTC ponzi masters are the least sophisticated of the actors involved in the market gyrations.


2. Pump Team 6 – Starting on May 22, 2015, it started to become clear that LTC was beginning to undergo a somewhat sophisticated crypto pump. The coin had been beaten down during the bear market, and was primed for some upward movement. Subsequent pumps in PPC and NMC seem to exhibit similar characteristics, which may be a coincidence or may be totally unrelated.

The pump team seems to be extremely sophisticated and precise with their actions, utilizing a variety of strategies across multiple exchanges in order to achieve their goals. It is our belief that the primary goal of the pump team is to accumulate BTC, with USD gains coming secondary.

Between May 22 and July 9, 2015, we saw the btc price (on bfx) rise from $240, to ~$296. This is a roughly 23% increase.

Screen Shot 2015-07-13 at 2.41.00 PMDuring the same time period, LTC saw a substantially more dramatic rise from $1.50 to ~$8.90, a roughly 493% rise.

Screen Shot 2015-07-13 at 2.40.38 PMTraders have been talking about the “decoupling” of ltc and btc over the last few weeks, but is it coincidence? Our take is, no. Watching the market action over the last few weeks during the ltc pump, it became clear that an actor was cashing out cheap ltc that they had purchased for btc, with 1k – 5k ask walls on ltc/btc strategically placed the entire way up. Similar size ask walls were chewed through on ltc/usd, providing some small breathers in the bull market. At the same time, iceberg btc asks were being thrown on okc and hidden btc asks on bfx during periods of significant upward ltc price movement.

What would the purpose of this be? If the pump team was able to successfully hold down the bitcoin market while pumping ltc, their btc earnings from the pump (via the ltc/btc pair) would be significantly greater than if btc were to pump at a somewhat steady rate during the same time period. One advantage of using leverage and/or futures to suppress the bitcoin market is that a player can have a significant impact with a small number of coins (this is why market manipulation in most markets ie: precious metals, is through futures). As long as the number of coins the pump team was accumulating through their ltc pump and subsequent ltc/btc sells was significantly more than what they were throwing at the market, it would be worth their while to perform this tactic even if their “shorts” were to be margin called later.

Around the time of OKC futures settlement last week, the speed of the ltc pump began to die down, and traders started to wonder when it would end. News of the Chinese ponzi was leaking out, and mysteriously, exchanges began to be DDOSed. It was clear that the pump team had made their exit, and margin traders high on hopeium started to sober up to reality, and realize that they were going to be fucked when they couldn’t close their FOMO long in time to escape.

As we believe that it was the ultimate goal of Pump Team 6 to acquire as many btc as possible, this is where we believe the second part of their plan came into play. Like we saw with their earlier ltc actions (reserving all swaps then pumping), these guys are experts. It is our belief, that at this time, they begun closing all of their btc “shorts”, while simultaneously pumping btc with the usd that they had earned during the ltc pump. You can see a large number of shorts which were closed at the time.

Screen Shot 2015-07-14 at 1.00.38 AMThis generated a large amount of btc buy volume across all exchanges, which coincided with DDOS attacks and the situation we are all too familiar with regarding OKC’s margin calls.

Our question is, did someone else realize what the pump team was up to, understand that they may be in a position to incur massive losses, and orchestrate some events in an attempt to mitigate getting rekt? New money is clearing coming into bfx, which has been leading the market as shady Chinese exchanges fade into obscurity. As victims (oops, we mean “traders”) migrate to other platforms, what lengths might actors in the bitcoin eco-system go to in order to attempt to save themselves?

These questions may go unanswered for the time being, but as more information leaks in, it is beginning to seem as if some of the tin foil theories might not be too far off.


3. Return of old players – There has been a recent return of old players to the crypto community. Fontas is a regular on tv, and his return alone has hyped traders up enough to jump on the ltc bandwagon. While we feel that this impact may be minimum, it is important to note because there definitely has been a buzz around buying when he is present. Maybe this is just the newbs that weren’t around for his first rodeo, but either way this element can’t be ignored.

4. New interest in crypto/media coverage – This one should be obvious. Check out /r/bitcoin any day and you will see coverage by every major news media outlet. The situation in Greece, possible bail-ins and the msm pushing bitcoin have definitely had an impact on the market place. How much new money is actually flowing in? This is difficult to tell, but we suspect it isn’t a large sum at this time. As the bull market continues, we expect to see more new money flow in, and geo-political/financial events can always have a sudden positive impact in the amount of money flowing into crypto.

5. Irrational exuberance and margin trading – As with any mania, tears are shed by those left holding bags when we get a 404 buyers not found error. Combine the ease of margin trading in the crypto space with inexperienced traders and you have a recipe for disaster. Many got rekt buying the top, and hopefully will not be turned off to crypto forever from the experience.


So, where do we go from here? What should we expect?

The Chinese LTC ponzi doesn’t seem to have slowed down, but we question what their end game is. All ponzi’s must collapse some time, but what is their proposed exit strategy? Were they screwed when everything collapsed? Did they realize that LTC was being pumped at the same time by other actors? The continuation of transactions to their wallet suggests the scheme is ongoing, but the price action in the market place (specifically on exchanges which made statements regarding the ponzi) seems to show that they are struggling with their own scare walls, and less dynamic forces acting on the market.

We saw the ltc price continue to dip after the initial shock, suggesting that many traders cut their losses, but how many?

Screen Shot 2015-07-14 at 1.23.48 AMWe expect there to be some pretty massive overhead pressure on ltc for the time being, but don’t discount the possibility of a move up as btc continues to gain traction. Our suggestion to new traders is to play the ltc/btc pair, unleveraged for the time being, in order to take advantage of price movement in the market place. For more experienced traders, play the markets as you normally would, but be cautions of the potential forces you may be dealing with. Although we all love making money off of that guy who buys our asks on the ponzi spike, the overall health of the crypto community is more important than making a few dollars. Every trader that is turned off to the space after being absolutely obliterated, is one less player in our daily game of stealing each others money. While we don’t suspect that the pump team planned on this collapsing as hard as it did, we wonder exactly who else knew what was going on? These questions should be answered in the coming days, as more information comes in regarding the “Mouse Group” and how OKC is going to end up settling with their customers. So far, as is clear on Reddit, everyone is getting shafted.


Underlying FOMO + Creative Thinking = LTC Pump


After weeks of almost completely flat trading, and and months of the $220-$240 range, it looks like at least some crypto volatility is back. Although Greek people are not buying bitcoin en masse, the psychological implications of a Greek bank holiday have triggered buying from other parts of the globe. We outlined what you can expect in the US/UK here, in our last post. There is an underlying FOMO in the crypto markets.

With traders back on exchanges, bitcoin was up to it’s usual pumps, dumps and general fuckery. While the MSM has been covering bitcoin, the real action has been in Litecoin (and some of the other alt-coin markets – which we don’t trade).

On Monday, there was a massive upward move in Litecoin (specifically on BFX), which ended up closing (possibly via margin call) a large number of the actual shorts which were open on the exchange. We are going to dig a bit deeper into this move, the previous tests which had been run on the exchange to see if it would be possible and how to identify such behavior in the future.

First, let’s take a look at the overall move (5m chart shown):

Screen Shot 2015-07-01 at 7.51.21 PMThe nearly 20% move mostly occurred during a short 20 minute time span (hey 1%/minute isn’t bad), congrats to those who were able to catch it.

So, why did this happen? What else was occurring? Bitcoin was feeling generally bullish, the (incorrect) msm stories of Greece buying bitcoin were flowing in, and everyone was screaming moon. With some underlying momentum, and general LTC bullishness after large recent gains, this was the perfect time for someone to execute their “plan”.

We first were clued into this person’s activities on June 14th, when we saw some unusual activity in LTC swaps on BFX.

Screen Shot 2015-07-01 at 7.45.52 PMAt this time, we saw a LTC pump (more below), accompanied with a large, rapid rise in LTC swaps, and then a subsequent rapid decrease in swaps. It immediately seemed clear what was going on, and it is absolutely genius. Anyone who trades on BFX knows that if you try to place an order on margin and there aren’t enough swaps left, you order vaporizes. If a person who is “bullish” (aka pumping) reserves all of the LTC swaps, then any asks in the order book will vaporize when they are reached, resulting in a far less stacked order book than appears on the surface. Couple that with underlying FOMO, stop loss triggers and margin calls, you are setting the market up for a nice move upward.

We then saw the same thing 2 days later.

Screen Shot 2015-07-01 at 7.45.59 PMAnd then the most recent (and hopefully not final) pump:

Screen Shot 2015-07-01 at 7.42.41 PMLined up with price, we can see the impact of this trader’s actions:

Screen Shot 2015-07-01 at 8.01.34 PMSo what actually went on here, simplified:

1) Trader borrows all of the LTC swaps available on BFX.

2) Trader runs panicbuyltc.exe (starts panic buying) LTC on BFX.

3) Any asks which aren’t actual LTC, but were to be placed on margin, disappear as the order book and stop losses are eaten through.

4) Profit


It appears as if the goal of this actor was to force margin calls/stop losses. If so, they succeeded massively. With LTC more than doubling in price, in less than a month, this actor has created themselves a nice Scrooge McDuck pile of cash to dive into. Thank you random trader, for you have helped bring back some excitement and volatility to the marketplace. If you were short, our condolences, but come on. There were over 200k LTC shorts on BFX a few weeks ago, and the price was maybe ~$2? You can only short something until 0, so what the fuck are you doing short a coin that actually has a community behind it, and has been battered down from ~$50 highs? Sorry bears, but you have had your fun, and definitely will again, but that number of leveraged shorts at this price is beyond silly.