A Noteworthy Week for Bitcoin.

Podcast: http://bit.ly/XcUoVn.

Hi Everyone,

This week bitcoin traded between $460/BTC and $490/BTC.  Volatility remains low for the third week in a row.

  • Satoshi's gmx.com email account got hacked: http://bit.ly/1AuKmw4.
    • Some initially thought the email expired and the hacker just reregistered using that email but that doesn't seem to be the case.  It looks like Satoshi's email was actually hacked with all of his previous correspondences inside: http://bit.ly/XpVZHR.
    • Everything else in the article isn't conclusive.  The BTCe account could be photoshopped, the receipt for the miners could be a red herring, the hacker's other claims could just be lies or trolling.
    • The hacker supposedly has Satoshi's identity and wants 25 BTC to release the info.  It seems to me that Satoshi is the sort of character who would write all his emails with the thought in mind that it could one day be public information.  I don't see him being careless enough to leave personally identifiable information lying around but who knows.
    • This event has led a number of trolls to pretend they are the hacker and extort the community for money to reveal Satoshi's identity.  Very opportunistic and very funny; trolls beget trolls.
  • IBM partners with Samsung to develop blockchain-like technology to debut at CES in January: http://bit.ly/1y8cWHzhttp://bit.ly/ZjjgfZ.
    • Rumors of it being a copy of Ethereum.
    • Will use Telehash for secure communication.
  • Braintree partners with Coinbase to bring bitcoin to its merchants: http://bit.ly/1wegQdr.
    • Braintree's merchants include Uber and Airbnb.
  • Coinbase is also expanding to 13 European countries: http://bit.ly/1m8Ta9y.
    • It's possible that this move was due to merchant growth slowing in the US.
    • Coinbase number of merchants over time according to bitcoinpulse: 
    • Another explanation for the chart is that Coinbase has just been going after the larger merchants who are less in number but do a large amount of volume.
    • The European market would open a new avenue avenue of growth for Coinbase and it looks like they are ready to challenge Bitpay and other bitcoin merchant services companies in Europe.
  • Dogecoin begins merged mining with litecoin: http://bit.ly/1uKtXlu.
    • Merged mining allows litecoin miners to confirm dogecoin transactions given their PoW meets the appropriate difficulty level.
    • In other words, the dogecoin network can now benefit from the hashing power (and thus security) of the more powerful litecoin network.
    • Since moving to merged mining, dogecoin price has gone up about 75%: 
  • OKPay was ordered by courts to hand over $6.1m to mtgox: http://bit.ly/1s3M9cQ.
    • Originally, OKPay had intended to return the money to depositors and now this is no longer possible.
    • Given that most of these funds came in immediately preceding the fall of gox, this move by courts is effectively a transfer of wealth from gox's new creditors to gox's old creditors if the courts should decide to paid out all creditors in proration.
  • Bank of England publishes its second paper on bitcoin: http://bit.ly/1tCvqJD.  First paper from Q1: http://bit.ly/1gph2wA.
  • Federal Reserve Bank of Boston publishes paper on bitcoin: http://bit.ly/1uxSrPA.
    • Observed that merchants give on average .86% discount on items bought with bitcoin.
    • Their sentiment is bearish on bitcoin as a payment system but bullish on the innovation spurred by bitcoin in the payments space.
  • I'm sure you have all heard the announcements for Apple Pay.  I see this as an indirect boon to bitcoin app developers as I'm sure many of them will leverage the TouchID (fingerprint identity verification) and NFC technology Apple is putting into place.
    • TouchID should decrease real fraud and subsequently friendly fraud as well.
    • This would benefit both traditional payments systems and bitcoin as well.
    • Apple will be earning .15% on each transaction.
    • 83% of US card issuers are on board.
    • 220,000 stores will support it at launch in October.  Compare this to 9 million stores where credit/debit cards work.
    • Best Buy and Walmart will not be using Apple Pay.
  • CFTC in approves first fully-regulated bitcoin swap: http://on.wsj.com/1qBrzPB;http://on.barrons.com/1m6voeM.
    • All contracts would be written, quoted, and settled in dollars based on a bitcoin price index developed by TeraExchange by aggregating prices from 6 different bitcoin exchanges.
Some quick thoughts on the altcoin space.  As more scrypt ASICS come out, we will likely see a mass exodus of GPU miners from litecoin and other scrypt coins to some other coin(s) in the same way that the GPUs migrated from bitcoin to litecoin.  This will likely cause both litecoin and the new GPU-heavy coins to increase in value as price has historically been correlated with difficulty for young, nascent cryptocoins.

But why is that the case?  The fact that a commodity all of a sudden becomes more difficult or more costly to produce should not mean that it becomes more valuable per unit since consumer demand for it has not changed and especially since the supply of it goes up in the process of it becoming more costly.  The labor theory of value explanation seems wrong.

Many argue that this is due to the increased security of the network (a higher hashing power implies a more costly 51% attack).  Perhaps demand for a bitcoin-like commodity is directly related to the costliness of a 51% attack on its network.

Possibly.  In the case of dogecoin, difficulty has gone up about 10x from the merged mining while price has gone up about 75%.

What's interesting to note is that, historically, as countries transitioned from older bills to newer bills, the value of that currency did not appreciate even though "security" against forgery improved through the addition of security features in the newer bills (waterprint, security strip, etc.).  Of course we can chalk this up to other factors having a dominating effect on currency value like general demand for the currency and central bank policy.

In any case, I would keep an eye on the Scrypt N-Factor coins and the X11/X13/X15 coins as GPUs migrate from Scrypt coins.

Kevin & Team Buttercoin
Bitcoin Trading Made Easy | Buttercoin.com 

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