Cryptomarkets Week in Review: November 7th, 2014

Another cryptomarkets week in the books, and a week that appears – at face value – to have meant nothing for the prices of various assets could actually have been a fairly important time. The price of Bitcoin sits around $340, exactly where it was a week ago, but it is sometimes the journey and not the destination that is important. Litecoin fell around 7%, as did DOGE. But what has happened this week?

The first headline is a non-story: the SEC investigation did not continue making waves. Obviously it’s still a story – just, for the moment, a hidden one. The question remains open, but perhaps forgotten by many, as to whether the investigations are going to more charitable or less charitable towards good faith actions by Bitcoin companies and their founders, or if they will be actively looking for reasons to prosecute. Bitcoin is a new technology that does not perfectly fit the framework of the old laws, and so while many of the new Bitcoin companies that have sprung up and are now under investigation may violate the letter of the law, they may not violate the spirit of it. A good example of this is Bitcoin gambling sites, such as Moneypot.com, a craze that struck the Twitter cryptotrading community recently, or SatoshiDICE.com, which has been around for quite some time.

Why is online gambling illegal in the United States, but casinos are open in many states? Three reasons. First, and most importantly, the casinos lobbied for it – sorry, but welcome to politics. This isn’t the stated justification for banning online gambling, but it is a reason why it happened. Second, tax evasion. Gambling has always been a home for black marketeers wishing to launder money, and the businesses themselves tend to work with enough cash for them to do the same. Online gambling sites made this even worse from the governments perspective, being an ideal method for tax evasion and money laundering. Third, and perhaps most importantly for this discussion, cheating. Fraudulent online casinos were a big thing in the early days of the internet, because there was little players could do to check what they were doing and make sure it was provably fair.

Provably fair, of course, is a term you may have seen thrown around in Bitcoin, and it’s real. Moneypot and SatoshiDICE are both provably fair games. Using cryptographic algorithms, the sites reveal – prior to the game – the outcome of the game, using a hashed message. After the game, you can input the results, and it will always return the hashed message you were presented with at the beginning, thus proving that the game was fair. This eliminates the third issue. Bitcoin itself and the blockchain eliminate the second. So the only one remaining is the first – lobbied barriers to competition for casinos. Not much of a justification, if you ask me.

But again – letter of the law, spirit of the law. The spirit of the law is to prevent bad players from defrauding people; the letter of the law bans online gambling.

The second headline is quite a story – the story of Changetip, which has been all anyone has been talking about this week on Reddit. Spurred on by the immense success earned by Dogecoiners for their overwhelming and consistent generosity, the /r/Bitcoin community started to use Changetip much, much more frequently, and to talk about it more everywhere. And so a phenomenon started. Changetip is all over the place now, and it has gone viral.

Many held the view that Bitcoin needed a catalyst to spark the next bubble. Changetip is the sort of thing that will get people talking. But there was another event this week that reminded people of how easy it is to spark up the bubble.

Silk Road 2.0 was shut down, and its alleged operator, a man named Blake Benthall, who used the username Defcon. Dread Pirate Roberts 2.0 is still at large and unknown. Could the Silk Road 2.0 shutdown be the catalyst we were looking for? Could Changetip? Possibly.

For now, the price has an important hurdle to cross. It has failed to remain above the $350 price point twice recently, once today and once on Halloween. In order to get real momentum going, the price will need to break through back over $400 with a real push. Until we get a $50 or more rise in a single 24-hour period, the bubble is still waiting in the wings. The reckless optimism that causes the virtuous cycle that causes the bubbles for which Bitcoin is so famous needs a jolt to kick it off – so keep waiting until it happens.

Beyond Bitcoin, some other assets to keep a watch on this week are Litecoin and DOGE, mentioned earlier, as well as DRK and NXT. Interested parties should also consider following the Blocknet story as it develops, as it appears to have reached the necessary funding for launch. These assets – along with the remainder of the top 10 altcoins – are where the action will be in altcoins for the time being. The community is tired of endless pump-and-dump schemes, and after such a long altcoin-depression, people invested in the altcoin and Bitcoin markets are seeking safe refuge – as safe a refuge as can be found in the world of cryptocurrency, that is.

One final note of things to watch in the coming weeks: the Rouble. Not a cryptocurrency, but Russia has been a fairly major antagonist to Bitcoin, and its currency is now failing, with markets estimating their 5-year default at 18% and the Rouble down 11% against the dollar in the past week. Russia’s wealthiest citizens may be looking for a path to currency flight, and Russia’s fairly tight capital controls may make Bitcoin an attractive option – whether as a store of value or as an intermediary between the Rouble and other national currencies is unknown. Keep watch as this develops further, and if you want to pretend the price of Bitcoin went up this week, I’ll leave you with a chart to cheer you up: https://bitcoinwisdom.com/markets/btce/btcrur

Until next week!

DISCLAIMER: The content of this article is not intended to constitute professional investment advice, or a recommendation to buy, sell, or otherwise interact with any security or investment product. The author may have a material relationship with assets mentioned in this article, and while he attempts to remain objective, appropriate caution should be taken by readers when considering making any investment in assets mentioned or discussed above. Cryptocurrencies are an extremely volatile marketplace in which even experienced investors should take great caution.