CME Group’s Leo Melamed: We’ll ‘Tame’ Bitcoin
One of the senior figures at derivatives giant CME Group believes that bitcoin is on course to become its own tradable asset class.
In an interview with Reuters on Tuesday, the company’s chairman emeritus Leo Melamed said bitcoin will likely come to trade in a similar way to how gold and stocks are exchanged today.
Notably, CME Group last week announced plans to launch a bitcoin futures contract, aiming to have the product available by the end of the year. The product is still contingent on approval from the U.S. Securities and Exchange Commission, the firm indicated at the time.
Melamed told Reuters that he expects institutional investors to take part in the futures contracts, rather than just speculators, and called the move a “very important step for bitcoin’s history.” The product will enable investors to bet on bitcoin, as well as short-sell the cryptocurrency.
He went on to say:
“We will regulate, make bitcoin not wild, nor wilder. We’ll tame it into a regular type instrument of trade with rules.”
In the interview, Melamed explained he initially did not believe in bitcoin, but that his interest later grew.
“I’m still that same guy who believes in, at least examining change,” he explained.
Disclosure: CME Group is an investor in Digital Currency Group, CoinDesk’s parent company.
Leo Melamed image via Waseda University/YouTube
Goldman Sachs: Bitcoin Will Consolidate at $8,000 Before Rising Even More
GOLDMAN SACHS IMAGINES NEW HEIGHTS FOR BITCOIN
Earlier this month, Bitcoin continued its upward trend by reaching a new record high, breaking the $7,000 barrier. Unprecedented it may be; but now Goldman Sachs has issued a prediction that the cryptocurrency will consolidate somewhere around a value of $8,000.
Sheba Jafari, the vice president of the Goldman Sachs FICC market strategies team, made the forecast over the weekend. “The market has shown evidence of an impulsive rally since breaking above 6,044,” she wrote, according to a report from Coin Telegraph. “Next in focus $7,941. Might consolidate there before continuing higher.”
However, we should note that Jafari made very different predictions for the future of Bitcoin only a few months ago. In August she suggested that the currency could hit a high of $4,800 – but that it would subsequently dip down to somewhere in the region of $2,200.
Jafari no longer believes that a major downturn is on the cards for Bitcoin. After a brief period consolidating around $8,000, she projects that it will increase in value even further – and given the increases we’ve seen over the course of this year, it’s perhaps unsurprising that he’s reticent to set an upper bound.
There are still dissenting opinions in the room regarding Bitcoin. In September, JPMorgan Chase CEO James Dimon stated his opinion that the cryptocurrency is a “fraud,” and called any trader working for his company that was trading in the coin “stupid” – even though the group is itself investigating blockchain technology.
One short month ago, as Bitcoin was enjoying a period of enormous growth, Harvard’s Kenneth Rogoff stated that its price couldn’t continue to increase indefinitely. He cited the potential for governmental restrictions impeding its utility as the biggest threat to cryptocurrencies’ continued good health.
That said, there are many holding to optimism. One respected Bitcoin trader theorized that it could hit a value of $15,000 before the end of the year, which now seems admittedly ambitious. Other experts have made more reserved predictions that it might reach $20,000 over the next three years.
There are more aspects of Bitcoin beyond investment opportunities seeing great praise. Apple co-founder Steve Wozniak recently said that Bitcoin is better than gold, because its capacity to resist arbitrary supply changes translates into reliable stability.
Obviously, there are still numerous unanswered questions about the future of Bitcoin. However, Jafari’s comments from this weekend suggest that even those who’ve harbored doubts about the cryptocurrency’s longevity are beginning to change their tune.
Written by CoinDesk
Malaysia’s Securities Watchdog Plans Cryptocurrency Regulations
Malaysia’s securities regulator has revealed it is planning a regulatory framework for cryptocurrencies.
Speaking yesterday at the SCxSC Digital Finance Conference in Kuala Lumpur, the chairman of Securities Commission Malaysia (SC), Tan Sri Ranjit Ajit Singh, explained that SC is working on “relevant regulations and guidelines” for functional use cases of digital assets. These include “secondary market trading of established cryptocurrency and digital assets” in the capital market, he said.
According to a report by Edge Markets, Ranjit indicated that SC is working closely with the country’s central bank, Bank Negara Malaysia (BNM), to sketch out a framework on cryptocurrencies that it expects to finalize in the coming months.
He reportedly said:
“Together with BNM, we will look at the area carefully and as SC is in charge of the secondary market, we would craft regulations to ensure that the trading values have the right conditions in place for market integrity and investor projection purposes”.
According to the report, Ranjit further said that various cryptocurrency exchanges have approached the regulator and that, once the framework is outlined, the SC would then see which exchanges are registered.
The SC chairman also revealed that his agency is working on a pilot project to explore distributed ledger technology (DLT) for unlisted and OTC markets.
Planned to boost digital innovation in Malaysia’s capital markets, Ranjit said the findings from the pilot would be published as an “industry blueprint.”
The news may mark a softening of the country’s previous stance on the trading of cryptocurrencies. Just a month ago, the central bank indicated it make a decision on whether to ban the trading of cryptocurrencies “before the end of the year.”
Kuala Lumpur image via Shutterstock
Written by CoinDesk
Bitcoin’s Bogeyman Cometh: Why Segwit2x Is a 51% Attack
Edan Yago is CEO and founder of Epiphyte, a startup performing FX funds settlement on the bitcoin blockchain for financial institutions.
In this opinion piece, Yago discusses one of the biggest theoretical attacks against bitcoin, and why he believes an upcoming software change fits its definition. Follow Edan Yago on Twitter.
In bitcoin’s Necronomicon of possible attacks and weaknesses, one reigns supreme – the 51% attack.
If there is a fear that has played on people’s minds as the end-of-days scenario for bitcoin, it is this. Attackers who hold more than 50% of hashing power could stop transactions from confirming and even reverse some transactions. They could undermine the whole project.
Bitcoin’s design and its system of economic incentives has been set up specifically to combat the destructive potential of a 51% attack. And it has worked. The 51% attack has remained a hypothetical bogeyman. Until now.
By all indication, a coordinated 51% attack will begin on, or around, Nov. 16. That’s when a consortium of miners representing substantially more than 50% of the network’s hashing power and an allied group of blockchain startups will seek to increase the block size.
This will require a hard fork, which while controversial, is a legitimate desire. In itself, this is not an attack.
Where it goes wrong
However, the consortium’s effort has evolved beyond a simple fork. It is now being developed not simply as an effort to fork the chain, but to do so in such a way as to deliberately prevent the continued existence of the status quo chain.
Specifically, the developers involved have declined to introduce replay protection.
The 2x fork will create a situation where transactions performed on one fork, can be “replayed” on the second fork. In effect, users will have funds on both blockchains, but any transaction they perform on one blockchain could lead to a loss of funds on the other blockchain.
Replay protection is a fairly easy-to-implement method to protect users from this risk. Network attacks are those actions taken with the intention of disrupting the protocol’s normal functioning. The 2x change, bereft of replay protection, causes massive disruption. This is by design.
Without replay protection in place, a minority chain becomes less likely to survive.
Question of motives
The preferred outcome for the consortium is that the status quo chain ceases to exist, that its transactions fail to confirm.
This is the literal definition of a 51% attack. If it sounds a bit bizarre to call the consortium’s effort an attack, that’s because it is. The consortium comprises many real supporters of bitcoin, acting in what they believe is good faith. They don’t mean to be attacking bitcoin.
However, without replay protection their efforts are like an autoimmune disease, having become overzealous and perverted.
So, bitcoin is finally coming to come face-to-face with the mother of all attacks. This is a watershed moment. The very worst outcomes are bad indeed.
Transactions could grind to a halt, faith in the system could be lost, bitcoin and by extension, the entire blockchain world could prove to be far more vulnerable to attack than we hoped.
We shall overcome
However, there is also another possible, even more likely, outcome.
Bitcoin could prove resilient to the consortium’s attack and emerge battered but unbroken. In so doing, bitcoin will have proven itself resilient to even its greatest foe.
It is hard to overstate how important this will be to bitcoin’s perceived reliability. Bitcoin has always been haunted by the risk that its rules might come to be dictated by special interest groups or hostile, state-sponsored parties.
This risk is never going completely away, but instead of the risk being a hypothetical bogeyman, it will become a much more prosaic thing: a successfully managed risk.
The 51% attack is bitcoin’s boss level. I don’t think it’s an exaggeration to say that we are now at the end of the beginning. If we successfully overcome this coming challenge, bitcoin will no longer be just an experiment, it will be a fact.
But don’t expect less drama — we are now entering bitcoin’s adolescence.
HODL on tight, things will get hairy.
Written by CoinDesk
Bitcoin Price Rebounds to $7,400 as SegWit2x Support Declines
Earlier today, on November 8, the bitcoin price recovered to over $7,400 after dipping briefly below $7,000, as the market continued to show support for the original bitcoin blockchain over SegWit2x.
Decline in Support For SegWit2x
Charlie Lee, the creator of Litecoin and former Coinbase executive, revealed that Nick Szabo, blockchain, bitcoin, and smart contracts pioneer whom the bitcoin community considers as a figure closest to bitcoin creator Satoshi Nakamoto, has publicly expressed his opposition against SegWit2x.
Scaling is a sensitive but important topic to bitcoin developers, community, and the industry. But, the community has been adamant that developments within the bitcoin protocol and other cryptocurrencies should be executed and conducted in a decentralized manner, like any other open-source project.
Over the past few months, the conflict between SegWit2x supporting businesses and the bitcoin community has been portrayed as a battle between small block supporters and the so-called “big blockers,” and that has certainly not been the case. The community has rejected SegWit2x because of various technical reasons, beginning with closed-source development, opaque agreement made between a restricted group of businesses, developers, and miners, and the SegWit2x development team’s refusal to implement strong replay protection.
As such, the demand for SegWit2x and support for the software has declined in the past few weeks, even from the mining community. Bitcoin journalist Kyle Torpey noted that hashrate support for SegWit2x has substantially decreased in the past week as well. More to that, an increasing number of mining pools in the industry have started to terminate their support for SegWit2x.
Evidently, scaling is necessary for bitcoin and there exists no reason as to why bitcoin cannot evolve as both a digital currency and a robust store of value. But, scaling needs to be done in the right way and more importantly, in an open-source, decentralized, and distributed manner.
How Will SegWit2x Affect Bitcoin Price?
Several analysts have stated this week that the surge in the price of bitcoin should be attributed to the allocation of funds from bitcoins to bitcoin, from investors hoping to obtain B2X upon the SegWit2x hard fork. However, it is far fetched to claim that the upward momentum of bitcoin in the past month was triggered by the SegWit2x movement, given that the majority of investors in the market are not technical enough to understand the implications of SegWit2x.
Such claims imply that investors and traders within the bitcoin and cryptocurrency market have underlying knowledge in hard forks and technical developments in regards to bitcoin development, which is not the case. Bitcoin has appealed to the mainstream since early 2016 and billions of dollars worth of funds are likely held by institutional and large-scale retail investors that consider bitcoin as a safe haven asset and a store of value.
Similar to the impact Bitcoin Cash had, the price of bitcoin will likely endure a major correction upon the SegWit2x hard fork. But, it seems unlikely that the price of bitcoin would decrease by more than 10 percent, as the Bitcoin Cash hard fork also had minimal impact on the price of bitcoin.