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Bitcoin: The main BTC conference, Network Activity Growth, Falling Volatility, the High Volume of BTC Future on the CME, ETF, BTC ATM Network, LocalBitcoins Stops Cash Trades, Lightning Network, an Increased Google Trends Score

Biweekly update 3rd June — 18th June

Since it is the first update on Bitcoin and our followers are essential for us, there are a lot of points that refer to the previous weeks, including May. First of all, the latest development update was published on May, 2, and it contains several bug fixes and minor improvements. Secondly, we’re hailing the return of Bitcoin’s annual conference, an event to push innovation forward, collaborate with old and new friends and reignite the community of permissionless value. Thirdly, all fundamental indicators show the trend change. In spite of the preceding bear market, Bitcoin network activity displays incredible growth. As we know, the development of any new project is impossible without the development of the ecosystem. So, one of the significant steps to make crypto universal payments is the development of ATM Network and the ecosystem of the most popular cryptocurrency clearly shows the strong demand and supply on the ATM market. Also, Lightning Network’s, the Layer 2 for the BTC, activity indicators and Google Trend Score rise dramatically.

Disclaimer

Trading and investing in digital assets like Bitcoin are highly speculative and comes with many risks. This article and the information below and above are for informational purposes and should not be considered investment advice. They should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.

Development

GitHub metrics
Developer activity (from Coinlib.io)

Since the latest Bitcoin Core 0.18.0 which was published on May 02, 2019, there are no updates, according to the Bitcoin Core.

Social encounters

  • “P2P Bitcoin Exchanges Still Hodl Hodling On” — Podcast

In this episode, Dave and Grahm cover the recent news and developments happening around peer-to-peer (p2p) bitcoin exchanges. They talk with Hodl Hodl’s Max Keidun about LocalBitcoins, regulatory uncertainty, predictions and different kinds of p2p exchanges.

Bitcoin Wednesday is one of the largest community-driven monthly conferences about the Digital Currency Revolution in The Netherlands. The event is always held on the first Wednesday of every month at a location in Amsterdam.

Breaking Bitcoin is an event for the technical community focusing on the security of Bitcoin and everything around it. Presentations aim to be technical, focusing on vulnerabilities, theoretical or practical attacks targeting the users and the Bitcoin protocol. This event is geared toward people with knowledge of the technical aspects of Bitcoin or security in general.

Upcoming events:

  • Bitcoin 2019

After 10 years of evolution, hacks, scams, civil war and breakthroughs, it’s time to think about where Bitcoin will go in the next decade. This will be the return of Bitcoin’s annual conference, an event to push innovation forward, collaborate with old and new friends and reignite the community of permissionless value.

Location: SVN West — San Francisco, CA

Date: June 25–26, 2019

Finance

Before digging deeper into Bitcoin’s finance, we should admit that there are a lot of fundamental metrics which can help us make a decision, but metrics are just metrics and there are risks associated with investing in crypto assets. All metrics can only show general market and user sentiment in past and present, not in the future.

We use quantitative fundamental analysis as one of many aspects in our approach to investing. For instance, we use the following indicators and ratios.

  • Active Addresses (Daily) — indicator
Source: bitinfocharts.com

The graph above shows the average number of active addresses used on the Bitcoin blockchain in the last 30 days. It is obvious that the increase in the number of active addresses reflects the growth of the activity of the entire Bitcoin network. Now we have seen this steady growth since the beginning of 2019 which is accompanied by a market trend change to bullish.

  • Average Transaction Value (Daily MA30) in USD

This graph reflects the average transaction value in the previous 30 days, and, as previous graph, shows the rise in network activity. No one can deny the trend change.

  • Mining profitability in USD

No PoW blockchain can operate steadily without its main infrastructure and security providers — miners. And mining profitability can indicate miners’ interest. This graph shows mining profitability per day and it can tell us: time to return to mining business — profitability doubled in several months.

  • Network Value to Transaction Value
Source: TradingView

It is a time when we can see the all-time high of Net Value to Transaction and it can be interpreted as a signal to sell BTC. To be honest, it is not just technical indicator, it is the fundamental indicator which shows the overbought of Bitcoin on the market because NVT displays that the value exceeds usage.

NVT (Network Value to Transaction Value) = Network Value (Market Cap.) / Daily Transaction Volume

  • Average fee in USD

As we know, every transaction includes fee, which is paid to the miners for writing this to the ledger, but because of low Bitcoin TPS (Transactions per second), there is a lot of unconfirmed transaction and if any user wants to make his/her transactions confirmed faster he/she is able to pay higher transaction fees. It is obvious that the growth of commission is due to increased activity. And today this fact can be seen on the chart above.

Monetary properties:

  • Volatility — 16.67%

Volatility is a statistical measure of the dispersion of returns for a given security or market index over a given period of time. Generally, this measure is calculated by determining the average deviation from the average price of a financial instrument in the given time period. We use standard deviation whose using is the most common, but not the only, way to calculate historical volatility. The higher the historical volatility value, the riskier the asset (in our case, Bitcoin). However, that is not necessarily a bad result as risk works both ways — bullish and bearish. But there is an important point for long-term crypto-investors — Bitcoin volatility is decreasing, however S&P 500 volatility is increasing. In our view, one of the reasons is Trade War — investors might prefer to invest in digital assets, not in Equity, which depends on the policy. Nevertheless, everybody, interested in crypto currencies, must remember that investing in digital assets like bitcoin is highly speculative and comes with many risks, but according to Hawley, professor and economist, the higher the risk in business, the greater the potential financial reward is for the business owner.

  • Bitcoin Inflation — 3.77%

When we talk about Bitcoin Inflation Rate, we do not mean the purchasing power of money, we mean the average mined bitcoins. There is a fixed amount of 21 million Bitcoin that can be minted, which means that no coins can be minted once this amount is reached. Approximately 80 percent of the total amount of Bitcoin has already been minted. Bitcoin’s algorithmic inflation rate since 2010 is displayed in the figure below and is explained in the original white paper written by Satoshi Nakamoto.

Inflation rate

Today, 18th June, the inflation rate of Bitcoin is 3.77 percent. The difficulty re-adjustment makes it impossible to simply mine more Bitcoin by allocating more computer resources to the network. As more people try to mine Bitcoin, the software automatically increases the difficulty of successfully mining a Bitcoin and vice-a-versa.

Once the inflation rate reaches zero, miners will no longer be able to earn money from minting newly created bitcoins. Instead, transaction fees will have to increase or the number of transactions will have to increase.

To conclude, we must admit that Bitcoin Block Reward Halving Date approaches — 21 May 2020. According to the historical prices and previous halving, Bitcoin’s price is influenced by this long-awaited date, as the inflation rate will drop by half.

Financial updates

  • Bitcoin Future on the Chicago Mercantile Exchange
Source: CME Group

CME was created in 1898 as a commodities exchange for butter and eggs. It is now one of the biggest financial exchanges in the world, specializing in futures and options across industries, from agriculture to metals to real estate.CME launched Bitcoin futures trading in December 2017, and volume on the exchange has been rising since then.

On May 13, 2019, Chicago Mercantile Exchange (CME) reported a daily volume of over $1.3 billion in notional value for Bitcoin futures contracts traded. CME is a regulated exchange based in the United States, but unregulated exchanges outside of the U.S. Report even higher volumes for futures trading. On the same day, BitMEX reported $13 billion in notional value traded. However, on May 28,2019, the volume raised 21 thousand futures. Today, 18th June 2019, it is only 8 thousand futures.

Last month, May, anticipated SEC responded around the two Bitcoin ETF proposals — the Bitwise proposal and the VanEck proposal — could potentially impact the market, as ETF news had done in the past. This didn’t end up being the case: when the SEC postponed its decision on the Bitwise ETF proposal with a five-week public comment period, the volume-weighted average price of BTC only moved 0.7%, from $8010 to $8069; when the SEC postponed the VanEck/SolidX ETF proposal and requested additional comments on the proposal, the volume-weighted average price of BTC only move 0.3%, from $7910 to $7936. This may suggest that, despite the substantial “hype” around Bitcoin ETF approval, the market doesn’t care about a Bitcoin ETF as much as it cares, for instance, about BTC’s utility as a hedge against global markets. Alternatively — or additionally — the probability of ETF approval may have already been “baked into” market prices.

Source: CoinMarketCap

Ecosystem

Bitcoin ATM Network

First, there is the robust growth in Crypto ATM Installations. Now there are 4 962 installations and it seems went fine.

There is the pie chart above which reflects the distribution by the manufacturer. The biggest players are General Bytes and Genesis Coin. Must admit, the average transaction fee continues to be pretty high — about 8%.

Moreover, most of them are located in North America. It means that there remains much to do in order to make Crypto ATM as usual as our ordinary ATMs.

Coinsource and Expanding the Bitcoin ATM Network

Summary:

  • “We are well poised to fulfill our mission of delivering an array of financial services to the underserved, unbanked and underbanked populations as we expand our reach and our services,” Clark said. “All of us at Coinsource look forward to being an integral component in the continued ‘Bitcoinization’ of the world.”
  • Among the biggest movers for that month was bitcoin ATM network Coinsource, which, according to CoinATMRadar, added 14 machines for a total of 224, joining General Bytes, Genesis Coin, BitAccess andLightningXchange in May’s top five in net growth. Coinsource was also granted a highly coveted BitLicenseby the New York State Department of Financial Services (NYSDFS) last November, the first one awarded to a bitcoin ATM operator.
  • In Clark’s view, the key attributes that drive a bitcoin ATM network’s growth are reputation, user experience, reliability and customer support. Striving to maximize these qualities in their own network, as well as choosing each location carefully, are keys to Coinsource’s ongoing expansion. An increasing number of Coinsource ATMs are of the two-way variety, meaning users can sell bitcoin in addition to buying it. Coinsource’s two-way kiosks are presently transacting in Nevada, New York, Pennsylvania, New Hampshire, California, Tennessee, Texas, Florida and Washington, D.C., and Coinsource has plans to convert its entire network to this functionality.
  • “Operating any type of a self-serving kiosk business on a national level has its challenges, regardless of the products or services being sold on them, especially when cash management and logistics are added to the mix,” Clark acknowledged. “The kiosks are machines that are a combination of hardware and software, and problems do occur. The most important consideration for us was the ability to build into our systems the ability to receive quick, autonomous notification whenever a kiosk has a problem so we can quickly take the necessary steps to eradicate the problem and bring the kiosk back into the network.”

LocalBitcoins Stops Cash Trades, Personal Offers on Platform

  • Multiple users have reported that crypto trading platform LocalBitcoins has stopped allowing customers to make in-person trades of crypto assets for cash in an anonymous fashion.
  • Reddit user u/GrayLifes first posted about this development on June 1, 2019, claiming that cash ads were removed from the platform without warning. A wide range of other users concurred, stating that all “local ads are hidden or deleted from the entire site,” without any option to search for possible traders nearby. “All my local trade ads are missing,” user u/scottemick claimed. “How can it even be called local bitcoins anymore?”
  • One of the largest peer-to-peer crypto exchanges in the world, LocalBitcoins has encountered a wide array of legal difficulties in the past several months. Based in Finland, the company began mandating that customers fill out KYC information in late March, breaking with the site’s long-running tradition of allowing anonymity. This rule change was made only after new legislation was passed by the Finnish Parliament.
  • As an international company, however, LocalBitcoins has found itself beholden to more regulatory forces than those of its home country alone. On May 24, the company announced that it was making a complete withdrawal of all services from Iran, banning Iranian users from the platform. Considering the new wave of sanctions that the United States has imposed on the country, LocalBitcoins likely pulled out largely to avoid running afoul of legal troubles with the U.S. Government.
  • LocalBitcoins has attracted regulatory scrutiny from the U.S. Regardless, however, and this may help to explain this major shift in the exchange’s business model. In April 2019, the U.S. Department of Justice (DOJ) sentenced a man to fines and prison time for running an unlicensed exchange, and then did the same to a second man in late May. In both cases, the DOJ specifically noted that these men advertised their businesses to area traders on LocalBitcoins.com, and considering that these businesses are now formally considered illegal, it seems obvious that the exchange would want to avoid running into trouble itself.Following the apparent change at LocalBitcoins, Reddit users began looking for alternative services. Although it is unclear how well the company will adapt to the existing ecosystem of conventional crypto exchanges, the company’s original model has been thoroughly dismantled by this point.

Lightning Network

Source: explorer.acinq.

Lightning Network is a “Layer 2” payment protocol that operates on top of a blockchain-based cryptocurrency (like Bitcoin). It enables fast transactions between participating nodes and has been touted as a solution to the Bitcoin scalability problem. It features a peer-to-peer system for making micropayments of cryptocurrency through a network of bidirectional payment channels without delegating custody of funds. Lightning Network implementation also simplifies atomic swaps.

Regular use of Lightning Network consists of opening a payment channel by committing a funding transaction to the relevant base blockchain (Layer 1), followed by making any number of Lightning transactions that update the tentative distribution of the channel’s funds without broadcasting to the blockchain, optionally followed by closing the payment channel by broadcasting the final version of the transaction to distribute the channel’s funds.

  • NodesNumber of nodes with and without channels.
Source: BitcoinVisuals node (lnd)

This chart shows the number of nodes with and without channels. Lightning nodes open payment channels with each other that are funded with bitcoin. When transactions are made across those channels, the channel balance is reflected without having to broadcast a transaction on the chain. This creates a second layer on top of the bitcoin network that expands its capabilities.

  • Channels
Source: BitcoinVisuals node (lnd)

Unique = channels connecting nodes directly for the first time. Duplicate = channels between nodes that are already connected. Blue — Unique, Red — Duplicate.

  • Network Capacity
Source: BitcoinVisuals node (lnd)

This chart shows cumulative Bitcoin capacity across all channels. Lightning nodes open payment channels with each other that are funded with bitcoin. When transactions are made across those channels, the channel balance is reflected without having to broadcast a transaction on the chain. This creates a second layer on top of the bitcoin network that expands its capabilities.

  • Network Capacity per Channel
Source: BitcoinVisuals node (lnd)

Daily median capacity per channel statistics. Blue — average, Red — 90th percentile, Green — 50th percentile, Yellow — 10th percentile.

  • Conclusion

Certainly, there is a growth in Lightning Network Activity and the main reason is a noticeable increase in Bitcoin popularity.

Rumors

The SFOX Crypto Market Volatility Report: May 2019

Source: SFOX

The SFOX writes: “In May, BTC had a nearly perfect negative correlation with the S&P 500, highlighting public interest in BTC as a hedge against global markets.”

In their opinion, these correlation data corroborate the view that some investors may be using BTC as a hedge against global markets. BTC’s typically low correlation with other markets may make it appealing to some as such a hedge, and the fact that altcoins followed BTC during this time suggests that those investors using crypto as a serious hedge may still be defaulting to BTC, despite the continued maturation of the crypto sector beyond BTC. This highlights the potential for BTC to function as a unique hybrid of gold’s status as a store of value and the S&P 500’s status as a risk asset.

Crypto Lender Sees High Demand for Stablecoin Loans in Chinese Market

The main points:

  1. Asia-based crypto lender BabelBank has announced a record-high number of crypto-collateralized loans issued amid new rebranding efforts — the crypto lender claims to have issued over $100 million in loans since it launched in July 2018. Furthermore, it says that it has issued $18 million to new customers within a 24-hour period. BabelFinance carries an outstanding loan balance of just $88 million.
  2. Stablecoin loans might be one of the most sought-after products at BabelFinance, but the company offers more than just crypto-backed loans in its portfolio.
  3. “We see a better crypto finance world. It is our corporate responsibility to support innovation with better financial tools and solutions,” Yang concluded.

Social media metrics

Social media activity:

Since this is the first biweekly overview, there is only one period and there are no FaceBook and Reddit dynamics.

  • Google Trends
Source: Google Trends

In our view, another one symptom of a bullish trend can be an increasing Google Trends Score (0–100).

Numbers represent search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular. A score of 0 means that there was not enough data for this term.

  • Tweets
Source: Twitter

The graph above reflects the number of tweets with hashtag #bitcoin. We consider that this index shows the popularity of Bitcoin and the rise, observed nowadays, could predict the larger demand for Bitcoin and other cryptocurrencies.

The graph above shows the dynamics of changes in the number of BTC Reddit subscribers and Facebook likes. The information is taken from Coingecko.com.

This is not financial advice.

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Paradigm is an ecosystem that incorporates a venture fund, a research agency and an accelerator focused on crypto, DLT, neuroscience, space technologies, robotics, and biometrics — technologies that combined together will alter how we perceive reality.

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