Analysis of the Last Week in Blockchain
(October 31, 2016 — November 6, 2016)
Bitcoin, Ether, & Blockchain Asset Price Movement
Last week was extremely volatile in the bitcoin market. After beginning the week at $700, the price ranged $70 mid-week, rising to $745 and quickly falling to $675 before rallying back to $710 to represent an overall weekly gain of 1.56%.
Year to date, bitcoin is now up 63.68%. Against the years low in January, bitcoin is up 98.21%, and against the year’s high in June, bitcoin is now down -7.44%.
Since the start of August just 3 months ago, bitcoin is now up 28.63%.
With about 15.963 million bitcoin mined at this point, the current price represents a total market cap over $11.3 Billion.
Ether traded relatively flat in the USD markets last week, beginning the week at just over $11 and closing just under $11 to represent an overall loss of -1.43%.
Year to date, ether is up 1,046% as compared to the dollar after a massive early rise rise.
Given bitcoin’s volatility last week, the ether price relative to bitcoin similarly jumped around a bit mid-week before closing a bit lower to represent an overall weekly loss of -2.96%.
Year to date, ether’s value relative to bitcoin is up 598%.
Last week, the LBI was similarly volatile, rising about $2.50 from $192.50 to $195, representing an overall weekly gain of 1.22%, after a sharp mid-week move north of $200 that quickly reversed.
Since its inception on January 1, 2015, the LBI is now up 94.88%, & since the start of the year, the LBI is now up 64.73%.
Last week, the LBI re-balanced into 7 Blockchain Assets — BTC, ETH, XRP, LTC, ETC, XMR, & DASH, each with a market cap north of $50 Million on the first of the month.
Last week, we saw mixed performance in the blockchain asset markets.
- STEEM & XRP were the highest weekly performers featured above, up 57.37% & 2.10%, respectively.
- DASH & LTC were the lowest weekly performers featured above, down -5.64% & -3.11%, respectively.
Blockchain News
Last week was full of exciting news across the industry and with numerous individual assets.
An ETF analyst at Bloomberg wrote a piece last week entitled “Five Reasons the Winklevoss Bitcoin ETF Should Be Approved”, following the SEC’s announcement that they are now seeking additional public comments on the fund.
As Eric Balchunas points out, it’s easy to bring up concerns including “the questionable security and stability of bitcoin and its platforms, as well as possible new regulations” (despite having bitcoin’s price increase over 600% since the Winklevoss’ first filing in July 2013, and the massive growth in the surrounding ecosystem), but it’s worthwhile to analyze some potential upsides & related holes in the current market as well.
Some of his supporting reasoning behind the approval of the ETF include: the massive premium on alternative structured products like GBTC, the success of related groundbreaking ETFs in areas like equities, fixed income, gold, and even more niche regional products, extremely risky products like exchange traded notes backed by real bankruptcy potential and funds inherently employing leverage (like popular “3x” directional funds), most people understanding that a bitcoin ETF would track bitcoin which is already known as a risky and volatile asset, and the Winklevoss twins unfettering dedication to the space and industry as a whole.
Following up on Bitcoin Core’s Segregated Witness (“SegWit”) code release (making it possible for miners to signal support for SegWit in just a couple weeks, and potentially going live later this year with SegWit transactions in live blocks), Bitcoin Magazine interviewed several bitcoin hardware wallets (including Ledger & Trezor), for more direct information on the benefits of the proposed changes to their firms, products, and userbases.
One currently concerning characteristic of hardware wallets is the fact that they do not store the entire bitcoin blockchain and rather rely on connecting to external wallets and software to receive new transactions.
“Hardware wallets don’t store the entire blockchain, nor do they have access to the Bitcoin network directly. Instead, to collect the transaction history, they connect to software that does.” — Nicolas Bacca, Ledger CTO
Potential issues occurring from this structure may include “fee attacks” (which may surface when connecting to an insecure or malicious computer) that can alter the structure of a user’s proposed transaction to attribute say the majority of the user’s bitcoin into a mining fee as opposed to the intended result without the user’s knowledge. The way in which the Bitcoin Core developers designed SegWit to change the process of generating signatures and transactions may allow hardware developers to upgrade their product’s codebases and help protect users from these attacks in a much simpler format than the alternatives today.
Ethereum continues to find bugs in the platform and solidity (a native programming language) and move towards additional hard forks to continue to improve its network & protocol and de-bloat its blockchain from previous spam attacks.
On the topic of highly debated and discussed hard fork and large software changes to Ethereum, EthNews wrote an overview piece on two different consensus mechanisms, Proof of Work (“PoW”), as seen in bitcoin & currently in ethereum where miners attempt to solve mathematical problems to generate the next block in the chain, and Proof of Stake (“PoS”), contemplated for a future ethereum release, a structure in which miners “stake” or lock-up their current ETH holdings to verify transactions instead of iterating over values until satisfying an equation.
Consensys wrote a piece on how the Zcash release and underlying technology may effect Ethereum in the future. Zcash employs a cutting edge branch of cryptography and math called zero knowledge proofs (allowing a user to “prove a statement true without revealing anything about it other than that it’s true”) to allow for optional completely private and untraceable transactions on the Zcash blockchain.
What good or legitimate use cases for this type of privacy exist in the world today? Consensys offers up several examples including: a company that wants to protect information regarding its supply chain from competitors, individuals who wish to pay for divorce, bankruptcy, or medical advice discretely, and trading desks and other financial institutions who wish to keep their trades and books unknown from their peers.
Consensys then dives into how the Ethereum developers could leverage the work on zero knowledge proofs championed by the Zcash team by either allowing public transactions on the Zcash blockchain to be verified by smart contracts on Ethereum or, more complexly, directly incorporating the technology as a native feature of Ethereum.
Augur released a blog post on their development of a technique to “sharply reduce the duration of their market resolution period — from two months after a predicted outcome can be determined to as low as three days or less — and in a way that doesn’t sacrifice security”.
Ripple’s Chris Larsen has announced he’ll be stepping down as CEO (and moving to an executive chair role) to be replaced by current COO Brad Garlinghouse at the start of 2017. Garlinghouse was previously CEO of Hightail, a cloud service allowing users to send, receive, digitally sign, and synchronize files, and prior to that was the president of applications and commerce at AOL, and an SVP at Yahoo.
“I am trying to get the right balance between Ripple and spending time with my two young boys. But I couldn’t be happier for Brad, about where we are and how Brad has gotten us here, and what he would be able to do for us going forward.” — Chris Larsen
Fred Ehrsam (Coinbase co-founder) published a piece on GDAX’s blog entitled “How to Raise Money on a Blockchain with a Token”, spreading an extremely bullish viewpoint on the new trend of blockchain projects raising money via public asset crowdfundings, just shortly after Travis Scher (DCG associate) published a piece very much taking the opposite perspective.
Fred dives into areas including when it may be appropriate (“if your project has a network effect”), the structure (when, how much to hold back or vest, etc.), the legality, comparisons to traditional fundraising, and more.
As we rapidly approach the finale of the U.S. presidential elections, many have expressed their viewpoints on how the result may impact the price of and demand for bitcoin. At a similar time, the public has been debating the influence of Chinese trading demand, capital controls, and yuan price movement as it relates to the recent bitcoin rally.
In a Yahoo! Finance article last week, Daniel Roberts & I looked at some of this Chinese trading data driving the bitcoin price as opposed to U.S. election predictions, as well as mentioning the impacts of events like SegWit, selling volume in other blockchain assets, and more.
Nearly 99% of all global bitcoin trading activity happening right now is happening in Chinese yuan. Sunnarborg adds that whenever the bitcoin price spikes significantly, regardless of the reason, it feeds on itself and drives it higher. “People see that demand and feel that FOMO [fear of missing out], which drives a lot of new people in. The market is so thin and new, people are hunting for news, anything you hear has an immediate effect. It goes the opposite way as well — if you read bad news about bitcoin, the market has a tendency to panic.
Lawnmower was featured in an article on the Bitcoinist describing our future plans including additional indices, investment tools, analytics, and informative research on upcoming blockchain asset crowdfundings (be on the lookout for a piece on the upcoming Golem sale this Friday).
-Alex Sunnarborg
Founder & CFO, Lawnmower.io
This post originally appeared as part of the weekly update on the Lawnmower Blog where you can view more stories and analysis on the blockchain space.
Disclaimer: All viewpoints are completely my own. Nothing presented represents the viewpoints, opinions, etc. of any corporation or organization and all data/charts/analyses are for illustrative and discussion purposes only and should not be construed or interpreted as fact, advice, recommendation, or anything of similar nature.
