What Could Kill the Bitcoin Boom

If you bought a Bitcoin in early 2017, when one cost less than $900, you could have a profit of more than 1,200 percent now. But you almost certainly didn’t do that. Perhaps you dipped in a toe in November or December, as the price hit headline-grabbing records—$10,000, then $15,000, then higher. If you were very unlucky and bought at the peak of about $20,000 on Dec. 17, you’d have lost more than 40 percent of your money as of Jan. 16, when the price was $11,200. More than $2,000 of that decline came in about 24 hours, after South Korean Finance Minister Kim Dong-yeon indicated the country may crack down on cryptocurrency trading to discourage speculation. It’s not every asset that can feel like it’s in a bubble and a crash at the same time.

But based on no other valuation metric than what it cost a year ago, the price of Bitcoin is still dizzyingly high. For the many doubters who can’t believe things have come this far—and for Bitcoin owners who can see how much they might lose—the big question is what it would take to knock the price back further.

In past episodes, “Bitcoin and digital currencies have been incredibly resilient to bad news,” says Meltem Demirors, director of development at Digital Currency Group, which invests in Bitcoin and related technologies. Cryptocurrency exchanges such as Mt. Gox, Bitfinex, and BTC-e have been hacked over the years, with hundreds of millions of dollars’ worth of Bitcoin stolen. China in September moved to shut down exchange trading of the cryptocurrency. None of these permanently stopped Bitcoin’s rise up the price charts, especially after it drew the attention of hedge fund traders and futures markets.

One doomsday scenario would be a successful hack of the blockchain. That’s the underlying technology that records and verifies every transaction, using exact copies of a database spread on computers all over the world. Those host computers, called miners, are rewarded with new Bitcoin for doing the work of verifying transactions. An attacker might be able to alter the blockchain’s history by marshaling more than half the computing power on the network. But that would be monumentally difficult; someone with the technology to do it could instead “opt into the game” and get paid to mine Bitcoin, says Tyler Winklevoss, co-founder of the Gemini digital asset exchange and one of the largest Bitcoin holders.

The likelier risks are far more pedestrian. The first is that while plenty of investors and speculators have piled into Bitcoin, it’s a difficult currency to use in the real world. The network is slow and expensive for small transactions. And who wants to spend $4 in Bitcoin for a coffee if next week that could be worth $8? “My big concern as a company is that digital currency doesn’t find its quote-unquote killer use cases, where people are saying, ‘Wow, we now have tens of millions of daily active users that are using it for payments,’ ” says Adam White, who runs GDAX, the exchange for institutional investors run by Coinbase. “That’s one of the largest existential threats to the company.”

BitPay's Singh Calls Bitcoin Selloff an Overreaction

There’s been a very public civil war among Bitcoin developers: One group favors changes to the network, the other doesn’t. “It’s got to have the developer community come together and figure out how to scale it properly and continuously,” says Sheri Kaiserman, a managing director at Wedbush Securities and an early Wall Street believer in Bitcoin’s potential. Meanwhile, Bitcoin faces competition from other digital currencies, from Bitcoin Cash to Litecoin to Ether, which have also seen big gains and wild swings.

You could spend weeks learning about the nuances of the various cryptocurrencies. But the main risk to Bitcoin is actually the easiest to understand. “The biggest factor in what’s driving the price up is potentially what will drive it down—a reversal of animal spirits,” says Adam Ludwin, chief executive officer of blockchain startup Chain. “There is essentially a belief this will continue to go up. If people believe it will continue to go down, that’s self-reinforcing.”

To explain that psychology, Ludwin invokes John Maynard Keynes. The economist likened investing to a newspaper contest where readers were asked to pick the picture of the person the majority of other people would find most attractive. To win, a reader would have to discard his own judgment and bet purely on a guess of what the average person would find beautiful. Or, maddeningly, even on what the other players would think the average player would like. Cryptocurrency in general is “really one of the most beautiful distillations of the Keynesian beauty contest that’s ever existed,” says Ludwin. All investments have some of this speculative element, but unlike, say, a stock, Bitcoin isn’t a claim on future earnings to which investors can hitch a valuation. To bet on Bitcoin is to believe simply that others will want it.

One read on the psychology of the Bitcoin boom is that it’s part of a broad bull market in all kinds of assets. Despite anxieties about politics, North Korea, and rising equity valuations, investors seem to be in a mood to embrace risk and are fearful of missing out on big gains. Or perhaps Bitcoin is the shadow side of that optimism: Many are drawn to cryptocurrency because they see it as a palliative to the system that came crashing down in 2008, and their belief in Bitcoin has been hard to shake. Market psychology is difficult to pin down—the one thing that’s reliable about it is its volatility.

    BOTTOM LINE – Despite its meteoric rise in the past few years, Bitcoin remains a wildly volatile investment, dropping more than $2,000 in a day when bad news hits.

    Read more: www.bloomberg.com

    How to Make Money Off Bitcoin Without Actually Owning It

    It’s the equity investor’s conundrum: how to get access to the skyrocketing returns of bitcoin and blockchain without actually owning the tokens.

    To Thomas Lee, a major bitcoin bull who heads research for Fundstrat Global Advisors, a dozen stocks should do the trick.

    “We believe investors should have exposure to blockchain, particularly given bitcoin has essentially zero correlation to equities, bonds and commodities —- hence, as a portfolio strategy, bitcoin is a good diversification tool,” Lee wrote in a note to clients Friday. “But this is impractical for many equity managers, given the parameters of their mandate or because of practical issues (custody of tokens, etc.).”

    Investors recently have sought ways to participate in the eye-popping bitcoin rally without having to purchase the cryptocurrency on the unregulated exchanges that have proven susceptible to hacks. Absent from Lee’s list are bitcoin futures, regulated derivative products that will debut on Cboe Global Markets Sunday and CME Group Dec. 18.

    Lee has long been one of Wall Street’s biggest advocates of the cryptocurrency. Two weeks ago he doubled his price target on bitcoin to $11,500 by the middle of 2018. It went for $15,552 as of 10:31 a.m. in New York on Friday, according to Bloomberg composite pricing.

    He suggests equity managers look to these ideas to leverage blockchain in their portfolios:

    • Bitcoin Investment Trust (GBTC)
    • MGT Capital Investments Inc. (MGTI)
    • HIVE Blockchain Technologies Ltd. (HIVE)
    • U.S. Global Investors Inc. (GROW)
    • DigitalX Ltd. (DCC)
    • NVIDIA Corp. (NVDA)
    • Advanced Micro Devices Inc. (AMD)
    • CME Group Inc. (CME)
    • Cboe Global Markets Inc. (CBOE)
    • Overstock.com Inc. (OSTK)
    • Goldman Sachs Group Inc. (GS)
    • Square Inc. (SQ)

    The looming availability of futures weighed on these equity proxies this week, as speculators may be shifting away from stocks of companies that have benefited as bitcoin’s price rose more than 15-fold this year. Both HIVE Blockchain Technologies and U.S. Global Investors are down near 10 percent this week. Nvidia and Advanced Micro Devices have also suffered losses in the five days ending Dec. 8.

    As for the totality of Lee’s picks, an equal weighted basket of these stocks is up 136 percent this year, according to the note. But as impressive as that may seem, he points out that it still lags bitcoin’s 1,685 rise in 2017.

      Read more: www.bloomberg.com

      Crypto-Linked Stocks Sink With Bitcoin on South Korean Warning

      The rout in bitcoin is also taking down stocks with ties to cryptocurrencies.

      Pareteum Corp. dropped 26 percent as of 1:13 p.m. in New York, while Digital Power Corp. and LongFin Corp. each slipped more than 6 percent after South Korea’s government said it wanted to clamp down on speculation, potentially by shutting down some exchanges. The warning sent bitcoin below $14,000, leaving it down 29 percent from last week’s record.

      Overstock.com Inc., On Track Innovations Ltd., and Riot Blockchain Inc. also traded lower Thursday, in relatively light volume during a holiday-shortened week.

      The crypto space has been on a wild ride this month, with the digital token bitcoin soaring to record highs before a dramatic selloff last week. The assets rebounded earlier this week, before resuming their slide lower in a test for investor enthusiasm in the asset class.

      Such volatility isn’t new for bitcoin or its proxies. The digital coin has seen many peaks and valleys over the course of its history. This year, it’s climbed 1,300 percent and once reached more than $19,500. Related assets have largely moved in tandem with the cryptocurrency. Shares of Riot Blockchain and Digital Power, while taking a hit today, are still up 611 percent and 475 percent this year, respectively.

      For related news and information:
      XBT Curncy GP for bitcoin
      VCCY for a cryptocurrency monitor

      For more on cryptocurrencies, check out the podcast:

        Read more: www.bloomberg.com

        New Wave of Ransom Threats Seen in Unprecedented Attack

        An unrivaled global cyber-attack is poised to continue claiming victims Monday as people return to work and turn on their desktop computers, even as hospitals and other facilities gained the upper hand against the first wave.

        More than 200,000 computers in at least 150 countries have so far been infected, according to Europol, the European Union’s law enforcement agency. The U.K.’s National Cyber Security Centre said new cases of so-called ransomware are possible “at a significant scale.”

        “We’ve seen the rise of ransomware becoming the principal threat, I think, but this is something we haven’t seen before — the global reach is unprecedented,” Europol Executive Director Rob Wainwright said on ITV’s “Peston on Sunday” broadcast. 

        QuickTake Cybersecurity

        The malware used a technique purportedly stolen from the U.S. National Security Agency. It affected the U.K.’s National Health Service, Russia’s Ministry of Interior, China government agencies, Germany’s Deutsche Bahn rail system, automakers Nissan Motor Co. and Renault SA, PetroChina, logistics giant FedEx Corp., and other company and hospital computer systems in countries from Eastern Europe to the U.S. and Asia.

        The hackers used the tool to encrypt files within affected computers, making them inaccessible, and demanded ransom — typically $300 in bitcoin. Russia and Ukraine had a heavy concentration of infections, according to Dutch security company Avast Software BV.

        Microsoft Corp. President Brad Smith, in a blog post Sunday, said the attack is a “wake-up call” for governments in the U.S. and elsewhere to stop stockpiling tools to exploit digital vulnerabilities. “They need to take a different approach and adhere in cyberspace to the same rules applied to weapons in the physical world,” he said.

        Normal Operations

        About 97 percent of U.K. facilities and doctors disabled by the attack were back to normal operation, Home Secretary Amber Rudd said Saturday after a government meeting. At the height of the attack Friday and early Saturday, 48 organizations in the NHS were affected, and hospitals in London, North West England and Central England urged people with non-emergency conditions to stay away as technicians tried to stop the spread of the malicious software.

        The initial attack was stifled when a security researcher disabled a key mechanism used by the worm to spread, but experts said the hackers were likely to mount a second attack because so many users of personal computers with Microsoft operating systems couldn’t or didn’t download a security patch released in March that Microsoft had labeled “critical.”

        Microsoft said in a blog post Saturday that it was taking the “highly unusual“ step of providing the patch for older versions of Windows it was otherwise no longer supporting, including Windows XP and Windows Server 2003.

        While the scale of the attack shows Microsoft needs to strengthen its own capabilities, “there is simply no way for customers to protect themselves against threats unless they update their system,” Smith said in his blog post. “Otherwise they’re literally fighting the problems of the present with tools from the past.

        “This attack is a powerful reminder that information technology basics like keeping computers current and patched are a high responsibility for everyone, and it’s something every top executive should support."

        Matt Suiche, founder of United Arab Emirates-based cyber security firm Comae Technologies, said he’s seen a variant on the original malware that still contains a kill-switch mechanism — though future versions could find a way to overcome it. “We are lucky that this logic bug is still present,” Suiche said.

        The Good Guys Can Have the Upper Hand on Cybersecurity

        A message informing visitors of a cyber attack is displayed on the NHS website on May 12.

        Photographer: Carl Court/Getty Images

        Victims have paid about $50,000 in ransom so far, with the total expected to rise, said Tom Robinson, chief operating officer and co-founder of Elliptic Enterprises Ltd., a ransomware consultant that works with banks and companies in the U.K., U.S. and Europe. Robinson, in an interview by email, said he calculated the total based on payments tracked to bitcoin addresses specified in the ransom demands.

        Last year an acute-care hospital in Hollywood paid $17,000 in bitcoin to an extortionist who hijacked its computer systems and forced doctors and staff to revert to pen and paper for record-keeping.

        Business Targets

        A spokesman for Spain’s Telefonica SA said the hack affected some employees at its headquarters, but the phone company is attacked frequently and the impact of Friday’s incident wasn’t major. FedEx said it was “experiencing interference,” the Associated Press reported.

        Renault halted production at some factories to stop the virus from spreading, a spokesman said Saturday, while Nissan’s car plant in Sunderland, in northeast England, was affected without causing any major impact on business, an official said.

        In Germany, Deutsche Bahn faced “technical disruptions” on electronic displays at train stations, but travel was unaffected, the company said in a statement on its website. Newspaper reports showed images of a ransomware message on display screens blocking train information.

        Russia’s Interior Ministry, with oversight of the police forces, said about “1,000 computers were infected,” which it described as less than 1 percent of the total, according to its website.

        In China, the malware affected computers at “several” unspecified government departments, the country’s Cyberspace Administration said on its WeChat blog Monday. Since that initial attack, agencies and companies from the police to banks and communications firms have put preventive measures in place, while Qihoo 360 Technology Co., Tencent Holdings Ltd. and other cybersecurity firms have begun making protection tools available, the internet overseer said.

        China National Petroleum Corp., which owns PetroChina, reported that some of its 21,000 gas stations had seen their digital payment systems disabled by the attack and resorted to accepting cash. More than 80 percent of the stations had been reconnected to the network as of noon on May 14, the company said. Several Chinese universities had also been hit by the attacks, according to local media reports.

        In Japan, Hitachi Ltd. said that some of its computers had been affected. In South Korea, CJ CGV Co., the country’s largest cinema chain, said advertising servers and displays at film theaters were hit by ransomware. Movie servers weren’t affected and are running as normal, it said in a text message Monday. Indonesia’s government reported two hospitals in Jakarta were affected.

        While any size company could be vulnerable, many large organizations with robust security departments would have prioritized the update that Microsoft released in March and wouldn’t be vulnerable to Friday’s attack.

        Users Tricked

        Ransomware is a particularly stubborn problem because victims are often tricked into allowing the malicious software to run on their computers, and the encryption happens too fast for security software to catch it. Some security experts calculate that ransomware may bring in as much as $1 billion a year in revenue for the attackers.

        The attack was apparently halted in the afternoon in the U.K. when a researcher took control of an Internet domain that acted as a kill switch for the worm’s propagation, according to Ars Technica.

        “I will confess that I was unaware registering the domain would stop the malware until after I registered it, so initially it was accidental,” wrote the researcher, who uses the Twitter name @MalwareTechBlog. “So long as the domain isn’t revoked, this particular strain will no longer cause harm, but patch your systems ASAP as they will try again.”

        There is a high probability that Russian-language cybercriminals were behind the attack, said Aleks Gostev, chief cybersecurity expert for Kaspersky Labs.

        “Ransomware is traditionally their topic,” he said. “The geography of attacks that hit post-Soviet Union most also suggests that.”

        Read more: www.bloomberg.com

        Diary of an African Cryptocurrency Miner

        Eugene Mutai’s Nairobi apartment is filled with the sound of money: That would be the hum of a phalanx of fans cooling the computers he’s programmed to mine cryptocurrencies around the clock.

        The 28-year-old has given up a chunk of his living quarters to the enterprise. What’s more, he invests every spare cent in initial-coin offerings: fundraising tools some startups are using to crowdsource capital. He’s a proud citizen of a strange and controversial new world — and a rather rare breed, with just a high-school education and no formal training as a coder. That’s one thing he holds up as proof that cryptofinance isn’t the scam that a diversity of critics, from Jamie Dimon of JPMorgan Chase & Co. to Saudi Arabian Prince Alwaleed bin Talal, have suggested it is.

        “The entire ecosystem could be the biggest wealth-distribution system ever,” Mutai said as his 2-year old daughter, Xena, named after the warrior princess, played with a tablet, swiping from app to app. In the world of internet-based currencies traded without interference from banks or regulators, “big players can’t deny anyone from participating in the financial system.”

        Cables and electronics components that make up one of Mutai’s mining machines.
        Photographer: Luis Tato/Bloomberg

        For Mutai, the appeal is simple: It levels the playing field in global markets that don’t give people like him many breaks.

        An opposing view is that what this young man is doing is wrong or stupid, sucking up massive amounts of electricity to create a software-fabricated asset that’s traded anonymously in a lottery criminals find irresistible.

        So Mutai is either in the middle of a fraud, or a revolution. Whichever, the market has exploded — growing to $190 billion from just $17 billion at the start of the year. Hundreds of new digital tokens have sprung up as entrepreneurs started projects based on blockchain, the public bookkeeping technology that supports digital currencies, raising millions and even hundreds of millions of dollars in minutes. The value of bitcoin, the biggest of them all, has increased six-fold. And it’s about to go mainstream, with CME Group Inc. in Chicago planning to introduce bitcoin-futures trading contracts by the end of the year.

        Eugene Mutai and his daughter Xena.
        Photographer: Luis Tato/Bloomberg

        Cryptocurrencies are especially attractive in economies where there are restrictions on taking cash abroad, or people don’t have bank accounts, or the local currency is being trampled by inflation. That’s the case in Zimbabwe, for example, which is facing a liquidity crisis as inflation spirals: Bitcoin in the local Golix exchange has soared to more than $10,000, a 75 percent premium on global prices, as locals rush to it to protect savings.

        In six of the largest African nations for which there is trading data in the online exchange Local Bitcoins, the average premium to the Bloomberg bitcoin index is 7 percent; the gap in major bitcoin trading hubs such as China, South Korea, Germany and the U.K. doesn’t surpass 3 percent. Mutai said he sees cryptocurrencies as safe because “local political issues don’t affect them” — something of note in Kenya, where after two elections within three months there’s still a stalemate over who is the rightful leader.

        A bitcoin web trading screen.
        Photographer: Luis Tato/Bloomberg

        Just last year, Mutai hadn’t heard of bitcoin, which hardly makes him unusual. Neither does the fact that a decade ago he didn’t have access to a computer. He was interested in technology, though, and borrowed a friend’s Nokia Symbian S40, one of the first non-smartphones that could download apps. In between odd jobs in farming, herding sheep and ferrying people on his motorcycle, he taught himself the basics of HTML and CSS coding languages.

        He was living at the time in his mother’s home village — they moved there from the city for his last year of high school, after his twin brother died and his mom lost her job — and was barely earning enough to survive. So he decided to move in with his uncle in Nairobi, who happened to have a desktop computer and a WiFi connection. “It was do or die,” he said.

        Mutai spent four months glued to the computer, worrying his uncle, who at one point took the machine away. After mastering the mysteries of code, he landed a job as a programmer. He also became a consultant for the technology incubator iHub and for the Nairobi County government. By 2016, he was named Kenya’s top-ranked software developer by Git Awards, which bases its rankings on data from GitHub, a site where coders store and share their work.

        Mutai arranges a rack of cryptocurrency mining machines at his home in Nairobi, Kenya.
        Photographer: Luis Tato/Bloomberg

        Now Mutai works for Andela, which trains developers and engineers throughout Africa and connects them with companies including Microsoft Corp. His current contract is with Restaurant Brands International Inc., building an ordering app for Tim Hortons. He’s in the Kenyan middle class, a feat for a guy without a college degree.

        But his opportunity for real wealth, Mutai figures, is in cryptocurrencies, which he can exchange for dollars or hold as an investment. His mining rig runs six 1080 Ti graphics cards. Maintenance is pretty low, as he wrote on his Facebook page: “It sits in my living room doing its thing all day every day with little or no supervision.”

        At the moment, the rig churns out mainly digital coins called Zcash and LBRY Credits. Mutai said he’d like to increase production by plugging in two more graphics cards, but that will have to wait until he can upgrade the power supply to his apartment. As it is, his monthly electric bill is about $200, steep for a residence in Nairobi.

        His initial-coin offerings investing takes more personal energy. “I do a lot of research,” Mutai said. “I feel like a small VC.”

        Is he treading dangerous waters? Possibly, but he’s up for the gamble. “They say no-risk, no-return, and I’m willing to take the risk.”

          Read more: www.bloomberg.com

          Early Bitcoin Investor Has Some Advice On How Much Money to Hold in Bitcoin

          As bitcoin approaches yet another record, Union Square Ventures LLC’s Fred Wilson says investors should be careful how much of their portfolios are allocated to digital currencies.

          Wilson, who first invested in the sector in 2013, wants to set the record straight on exactly what percentage of someone’s investments should be tied to things like bitcoin.

          “I have about five percent of our net worth in crypto assets, across a number of vehicles; direct holdings, Union Square funds, token funds, etc.,” Wilson said in a blog post. “I think that’s likely at the high end of what the average person should have, but I also think its not a ridiculous number for the average person to have.”

          If someone had invested in bitcoin the same day that Wilson announced his venture capital firm’s investment in Coinbase Inc., a trading platform for cryptocurrencies, they would have seen their investment rise a whopping 5,000 percent.

          Here’s a look at how much a few different types of investor should have tied to cryptocurrencies, according to Wilson:

          • Young, aggressive risk takers should have the highest allocation at 10 percent of net worth
          • Someone who’s a sophisticated investor, but maybe not as much of a risk taker should have 5 percent
          • The everyday investor who’s more conservative, but still willing to take on some risk should devote 3 percent
          • Someone at the retirement age and simply trying to preserve their portfolio shouldn’t have anything in crypto

            Read more: www.bloomberg.com

            Bitcoin Finds Floor After Worst Selloff Since 2015

            Bitcoin rebounded on Saturday along with most of the major cryptocurrencies, halting a four-day tumble that drew worldwide attention to the unregulated $500 billion market that’s frequently called a bubble.

            The double-digit bounceback was strongest with second-tier digital coins. Bitcoin cash soared 21 percent and litecoin gained 12 percent as cryptocurrency traders regained optimism. They weren’t put off by comments published Saturday from a central banker in Germany that “the risk of rapid losses” is obscured in cryptocurrencies.

            “The enthusiasm hasn’t been destroyed,” Marc Ostwald, global strategist at London-based ADM Investor Services International, said by phone from Warsaw. “It’s a volatile market, and investors are hungry for that. They say everything else is boring.”

            The broad recovery on Saturday coincided with a pause in bearish news that had snowballed since Monday and shaved 24 percent off bitcoin’s value, its biggest four-day selloff since 2015. Comments by central bankers, a decision by litecoin’s founder to sell all his holdings and investors’ wishes to cut stakes before the holiday season fueled the plunge.

            “With holidays approaching, some people want to step away from the table, and take their chips with them,” Ostwald said about the selloff. “Still, I wouldn’t want to put it down too much to rationality, because this is not a rational market.”

            While bitcoin wasn’t the most volatile crypocurrency in the past week, it’s the largest, and it shook the world of digital-coin trading on Friday when its interday plunge reached 30 percent. That was the steepest dive since Jan. 14, 2015, back when its market value was just $2.4 billion. On Saturday it was about $260 billion.

            Bitcoin advanced 10 percent to $15,530 at 4:21 p.m. New York time on Saturday, compared with 24 hours earlier, according to data on coinmarketcap.com.

            In a late-week comment that undercut confidence, Michael Novogratz, the former Goldman Sachs Group Inc. and Fortress Investment Group LLC macro trader, said he’s shelving plans to start a cryptocurrency hedge fund. He predicted that bitcoin may extend its plunge to $8,000. Earlier this month he predicted it could reach $40,000 within a few months.

            For a look at whether Goldman is building a cryptocurrency trading desk, click here.

            Growing pains in the digital-coin world and warnings emerged all week, adding to volatility.

            Coinbase, one of the larger trading platforms, on Friday said all buys and sells were temporarily unavailable before they were re-enabled, according to its website. There were no incidents reported Saturday.

            In South Korea, Yapian, the owner of bitcoin exchange Youbit, said Tuesday it would close and enter bankruptcy proceedings after a cyberattack that claimed 17 percent of its total assets.

            ‘Bitter Losers’

            There’s been a string of warnings by regulators for investors in digital coins.

            “We are seeing a rapid rise in value, which hides the risk of rapid losses,” Bundesbank board member Carl-Ludwig Thiele said in a Euro am Sonntag report. He said there is a wide debate going on about the use of digital central-bank money in a closed system, but that he doesn’t currently expect it’s introduction.

            Felix Hufeld, president of German banking supervisor BaFin, advised consumers that trading in bitcoin would produce “bitter losers” and could result in a “total loss,” in an interview with German newspaper Bild.

            EU Warning

            That echoed comments three days ago by the European Union’s financial-services chief, Commissioner Valdis Dombrovskis, who asked the heads of the EU’s three financial supervisors to update their warnings to consumers “as a matter of urgency” in light of recent market developments, according to a letter seen by Bloomberg.

            In past years, central banks and the commercial lenders they oversee have made strides to curb money-laundering through greater transparency rules, only to see anonymous transactions explode in the nascent cryptocurrency industry — under names like Verge and Zcash. Their admonishments this month haven’t stopped double-digit rebounds.

            “Huge rises and sudden, spectacular setbacks wouldn’t surprise me going forward,” ADM’s Ostwald said. “The worry is going to be, at some point, the pips are going to start squeaking. Retail investors losing money will ask, ‘Why aren’t you intervening to help me? And the answer is going to be, ‘Well, this is a casino. On your head, be it.’ ”

            For related news and information:
            XBT Curncy GP <GO>
            VCCY <GO> for a cryptocurrency monitor

              Read more: www.bloomberg.com

              Bitcoin Looks Remarkably Like A Bubble, New Zealand’s Central Banker Warns

              Bitcoin’s spectacular gains look like a speculative bubble and the cryptocurrency is too unstable to be useful in the future, New Zealand’s central banker said.

              “It looks remarkably like a bubble forming to me,” Reserve Bank of New Zealand Acting Governor Grant Spencer said in interview with TVNZ broadcast on Sunday. “Over the centuries we’ve seen bubbles, and this appears to be a bit of a classic case. With a bubble, you never know how far it’s going to go before it comes down.”

              Bitcoin has soared more than 1,500 percent this year, and about 85 percent in just the past two weeks, as people rush to buy the digital currency in the hope it will become a legitimate alternative to gold or traditional money. Trading in bitcoin futures opens later Sunday, with the first major U.S. exchange offering a product pegged to the wildly fluctuating unit of payment that has no backing from a government or a central bank.

              Bitcoin, “mined” by computers performing complex calculations, surged to over $16,000 last week, and all bitcoins in circulation are now worth more than New Zealand’s entire $185 billion economy. Early investors include the Winklevoss twins, who played an early role in Facebook Inc.’s formation. Cameron Winklevoss told Bloomberg Friday he think bitcoin’s gains have only just begun as it will come to be seen as an upgrade to gold. 

              ‘Very Volatile’

              “Bitcoin is to me very much like gold,” Spencer said. “It’s mined, it has a fixed quality and the price is very volatile.”

              The RBNZ is doing research on demand for New Zealand’s dollar, known as the kiwi, and whether it would be feasible to at some stage replace it with a digital alternative, but Spencer said bitcoin isn’t a template for the future.

              “I think digital currencies, cryptocurrencies, are a real and serious proposition for the future. I think they are part of the future, but not the sort that we see in bitcoin,” he said. “I think a cryptocurrency that has a more stable value will be the sort of cryptocurrency that’s more useful for the future.”

                Read more: www.bloomberg.com

                Asia Stocks Mixed in Subdued Trading; Yen Declines: Markets Wrap

                Stocks in Asia were mixed in subdued trading as investors deferred placing bets following the recent run-up to record highs and ahead of a Federal Reserve meeting this week. The yen fell to its lowest in a month.

                Equity benchmarks fluctuated in Tokyo and were little changed in Sydney and Hong Kong. Volumes were at least 20 percent below their 30-day average on the Nikkei 225 Stock Average and the Kospi index. Data showed hiring increased by more than forecast in November and the unemployment rate held at a 17-year low, paving the way for another U.S. interest-rate increase this week. The S&P 500 Index and Dow Jones Industrial Average closed at all-time highs on Friday in light volume.

                The dollar held on to last week’s gains as President Donald Trump prepares to give a closing argument for the proposed tax reform on Wednesday. Bitcoin futures began trading in Chicago, while the spot price gyrated.

                Investor optimism was already bouncing back after the U.S. government averted a shutdown and tax reform negotiations made progress. With global equities trading near record highs, many money managers earlier this month were booking profits prior to the end of the year amid an equity rotation and waning risk sentiment. While traders see an interest-rate increase by the Federal Reserve as pretty much a done deal this week, there remains a furious debate about the pace of hikes next year.

                China’s inflation pressures moderated slightly in November, giving policy makers another reason to stick to tougher financial regulations to tackle debt and less cause to boost borrowing costs. A rise in producer prices matched estimates, but slowed from October, while consumer-price gains eased as food costs dropped. Money supply and new-loan data are due this week.

                Trading in bitcoin futures started on the Cboe Global Markets, the first major U.S. exchange to offer a product pegged to the cryptocurrency. Bitcoin surged more than 1,500 percent this year. As of 7:36 p.m. New York time, contracts expiring in January were priced at $15,800, or about 3 percent higher than bitcoin itself, according to data compiled by Bloomberg

                Terminal customers can read more in our Markets Live blog.

                Here are some of the key events scheduled for this week:

                • Fed policy makers are projected to raise the target range for their benchmark interest rate against a backdrop of continuing robust U.S. economic conditions, a vibrant labor market and forecasts for inflation to pick up.
                • The European Central Bank, the Bank of England and the Swiss National Bank also set monetary policy.
                • Among top U.S. economic reports next week are consumer inflation and retail sales for December.
                • European lawmakers continue to debate Brexit and weigh moves on the next step, while North America Free Trade Agreement (NAFTA) negotiators meet again.

                And these are the main moves in markets:

                Stocks

                • The Topix index and the Nikkei 225 Stock Average were little changed as of 10:32 a.m. in Tokyo.
                • Australia’s S&P/ASX 200 Index fluctuated as did South Korea’s Kospi index.
                • Hong Kong’s Hang Seng Index rose 0.3 percent and the Shanghai Composite Index was little changed.
                • Futures on the S&P 500 were flat. The underlying gauge gained 0.6 percent on Friday.
                • The MSCI Asia Pacific Index added less than 0.1 percent.

                Currencies

                • The Bloomberg Dollar Spot Index was steady. It ended last week up 1.1 percent.
                • The yen was down 0.2 percent to 113.64 per dollar.
                • The euro traded at $1.1775.
                • The pound was flat at $1.3396.

                Bonds

                • The yield on 10-year Treasuries was steady at 2.38 percent.
                • Australia’s 10-year yield rose almost three basis points to 2.56 percent.

                Commodities

                • West Texas Intermediate crude fell 0.3 percent to $57.19 a barrel.
                • Gold lost 0.1 percent to $1,247.67 an ounce.

                  Read more: www.bloomberg.com

                  China Is Said to Ban Bitcoin Exchanges While Allowing OTC

                  China plans to ban trading of bitcoin and other virtual currencies on domestic exchanges, dealing another blow to the $150 billion cryptocurrency market after the country outlawed initial coin offerings last week.

                  The ban will only apply to trading of cryptocurrencies on exchanges, according to people familiar with the matter, who asked not to be named because the information is private. Authorities don’t have plans to stop over-the-counter transactions, the people said. China’s central bank said it couldn’t immediately comment.

                  Bitcoin slumped on Friday after Caixin magazine reported China’s plans, capping the virtual currency’s biggest weekly retreat in nearly two months. The country accounts for about 23 percent of bitcoin trades and is also home to many of the world’s biggest bitcoin miners, who use vast amounts of computing power to confirm transactions in the digital currency.

                  “Trading volume would definitely shrink,” said Zhou Shuoji, Beijing-based founding partner at FBG Capital, which invests in cryptocurrencies. “Old users will definitely still trade, but the entry threshold for new users is now very high. This will definitely slow the development of cryptocurrencies in China.”

                  While Beijing’s motivation for the exchange ban is unclear, it comes amid a broad clampdown on financial risk in the run-up to a key Communist Party leadership reshuffle next month. Bitcoin has jumped about 600 percent in dollar terms over the past year, fueling concerns of a bubble. The People’s Bank of China has done trial runs of its own prototype cryptocurrency, taking it a step closer to being the first major central bank to issue digital money.

                  “There has been a general tightening of the screw on regulating financial and monetary conditions,” said Mark McFarland, chief economist at Union Bancaire Privee SA HK in Hong Kong. “All of these things suggest a longer term process of tightening scrutiny of activities that aren’t in the normal sort of monetary realm.”

                  OKCoin, BTC China and Huobi, the country’s three biggest bitcoin exchanges, said on Monday that they hadn’t received any regulatory notices concerning bans on cryptocurrency trading. All three venues reported transactions on Monday, with bitcoin rising 7.6 percent on OKCoin as of 5:09 p.m. local time.

                  Read more about last week’s ban on initial coin offerings here.

                  While bitcoin users will still be able to trade cryptocurrencies in China without exchanges, the process is likely to be slower and come with increased credit risk, analysts said.

                  The exchange ban is unlikely to have a major impact on the prices of cryptocurrencies globally because venues outside China will continue trading, according to FBG Capital’s Zhou. The country’s role in the bitcoin market had already started shrinking in recent months as authorities tightened regulation. At one point, exchanges in China accounted for more than 90 percent of the world’s bitcoin transactions.

                  The bigger risk for global traders may be the massive rally in bitcoin prices, according to McFarland.

                  “Whenever you start to hear about Hong Kong taxi drivers becoming millionaires from buying bitcoin, you start to think this is not necessarily driven by fundamentals,” he said. “So you will get quite substantial pullbacks at some point.”

                  Watch more

                    Read more: www.bloomberg.com