Steve Massocca’s Crypto Currency Report 12/11/17

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News stories on Bitcoin and Block Chain, both good and bad. These are somewhat lengthy articles, FYI.

We start with the good…

 

Blockchain Scores Major Win as Aussie Exchange Plans Shift

By Matthew Burgess and Vivek Shankar (Bloomberg) — Australia’s main stock exchange just announced one of the finance industry’s biggest bets yet on blockchain.

ASX Ltd. will start using blockchain — the ledger software that makes bitcoin and other cryptocurrencies possible — to
process equity transactions, according to a filing Thursday. Digital Asset Holdings LLC, the startup run by former JPMorgan Chase & Co. banker Blythe Masters, will supply the technology. “We’re the first exchange to consider taking this step,” said Peter Hiom, ASX deputy chief executive officer said on a media conference call.

Blockchain is massively hyped and banks have conducted myriad tests of the ledger technology, with few live deployments. Proponents tout it as a more efficient and less expensive way to track trades.

Embrace Technology

“It surprises me that ASX is doing it ahead of other big exchanges,” said Nader Naeimi, Sydney-based head of dynamic
markets at AMP Capital Investors, which manages about $135 billion according to its website. “When the technology becomes available, you have to embrace it.”

No date for the shift has been announced for replacing ASX’s Clearing House Electronic Subregister System, known as Chess. The new technology will let customers lower costs and introduce new services from the real-time post-trade data, Hiom said.

“The Chess system’s been around since the ’90s,” said Gareth James, an analyst at Morningstar Inc. “Imagine if you’re
using any software on your PC from the ’90s.”

Marginal Cost

Chess was scheduled to be upgraded even before the exchange had considered blockchain, ASX chief executive office Dominic Stevens said. ASX therefore views the switch as a “marginal cost” that will be part of the company’s capital expenditure program, he said.

“The costs in rolling out this system I don’t think are too dissimilar to us having rolled out a traditional system,” Stevens said on the call.

The exchange also invested more in Digital Asset Holdings, bringing the total raised by the startup from investors including JPMorgan and CME Group Inc. to more than $115 million, according to a statement from the firm.

ASX shares rose as much as 1.5 percent in early trading, and were 1.4 percent higher at A$57.76 as at 12:27 p.m. in
Sydney, the highest since January 2008.

 

Bitcoin Frenzy Like No Other Has Koreans Paying 23% Premium

 

By Kyungji Cho, Yuji Nakamura and Narae Kim (Bloomberg) — Like thousands of South Koreans, Moonsung Bae is infatuated by bitcoin. The 35-year-old financial analyst got his first taste a year ago, before the cryptocurrency exploded into one of the wildest investment stories of our time, and by the end of last month his personal holdings had swelled to half his liquid assets.

“I had this fear when I first bought,” Bae said. “But then I realized, oh, it actually works.” It’s certainly worked, at least so far, for those who got in early and rode the speculative wave that pushed the cryptocurrency above $14,000 on Thursday. But where bitcoin and its ilk go from here is the subject of fierce debate, nowhere more so than in Korea, which has emerged as a sort of ground zero for the global crypto-mania.

So many Koreans have embraced bitcoin that the prime minister recently warned that cryptocurrencies might corrupt the nation’s youth. The craze has spread so far that, in Korea, bitcoin is trading at a premium of about 23 percent over prevailing international rates. While neighboring Japan hosts more transactions by some measures, Korea punches far above its weight: In the 24-hour period through Wednesday evening in Seoul, about 21 percent of the world’s bitcoin trades on fee-charging venues involved the Korean won, according to Coinmarketcap.com. The country accounts for about 1.9 percent of the global economy.

As Korean policy makers grow increasingly worried that the mania has gone too far, the nation could become a focus for bitcoin traders around the world. Korea’s top financial watchdog, which briefly roiled cryptocurrency markets with its ban on initial coin offerings in September, said this week that it has “grave concerns” about overheated speculation and has formed a task force with other government bodies to increase supervision.

“Given the size of the market, there’s a greater need for them to come up with something soon,” said Thomas Glucksmann, Hong Kong-based head of marketing at cryptocurrency exchange Gatecoin Ltd.

There’s no definitive explanation for why bitcoin has grown so popular in Korea, but local analysts point to a mix of geopolitical and cultural factors. Bitcoin’s stateless status appeals to some Koreans who’ve grown wary of keeping their savings in a country that shares a border with Kim Jong Un’s increasingly belligerent regime in North Korea, according to Kwak Keumjoo, professor of psychology at Seoul National University.

Futures, Options

Political turmoil at home may also be adding to the cryptocurrency’s appeal, she said. President Park Geun-hye was ousted in March after an influence-peddling scandal that involved the nation’s biggest companies. “People want to take comfort in something outside and beyond the country,” Kwak said. Korea’s individual investors have long had an affinity for supercharged financial wagers, notes Tai-ki Lee, senior research fellow at the Korea Institute of Finance.
Equity derivatives are wildly popular in the country, in part because they allow investors to make leveraged bets. Korea’s market for stock-index options was the most active worldwide by number of contracts until the government began cracking down on speculation in 2011, according to the Futures Industry Association. Kim Do-young, a 34-year-old audio producer in Seoul, said he was drawn to bitcoin because opening an account was easy and it looked like a chance to make a fast buck. “You can cash out super quickly,” he said.

Kim adds to his holdings of bitcoin and about 20 other cryptocurrencies every week, taking profit when he needs money to pay rent. While it’s unclear what measures will emerge from Korea’s cryptocurrency task force, the government seems intent on acting. The tax authority is considering a levy on cryptocurrency trading gains, Yonhap News reported on Tuesday, while Prime Minister Lee Nak-yon warned last month that cryptocurrencies could become gateways to pyramid schemes and other illicit activity if left unchecked.

“If we let things continue, I feel some serious pathological phenomena could occur,” Lee said. Bae, who bought his first bitcoin in November 2016 to pay a ransom to hackers who had hijacked his computer, sees room for the market to take a breather as regulators clamp down and arbitragers target the local price premium. He sold most of his holdings on Nov. 29.
But he’s prepared to jump back in once prices fall. After devouring books and articles about bitcoin and its underlying
blockchain technology, Bae is convinced cryptocurrencies will come to be viewed as a store of value by more and more people around the world.

As for the regulatory risk, he takes comfort from the fact that bitcoin shrugged off China’s crackdown on ICOs and
cryptocurrency exchanges earlier this year.  “Now I only have one bitcoin,” said Bae, who checks the market price about 10 times a day. “But I’ll be buying again for sure.”

 

Blockchain Seen Revolutionizing Food Chain, Cutting Costs

 

By Luzi Ann Javier
(Bloomberg) — The technology that tracks bitcoin transactions is set to revolutionize the food chain. Blockchain, the distributed ledger technology, will lower transaction costs for food companies, improve efficiency and create new business opportunities, said Harry Smit, a senior analyst at Rabobank International. Firms should explore options to adapt to the new technology or risk losing their competitive edge as innovation takes hold, he said in a report released Thursday.

Wal-Mart Stores Inc. and International Business Machines Corp. have already jumped on the bandwagon and more are joining in, including Nestle SA and Dole Food Co. Companies are seeking to improve transparency in industry targeted by food-fraud that’s been estimated by Michigan State University to cost as much as $40 billion a year.

“In order for goods to be traceable from farm to fork, all parties that handle the goods should be linked to the blockchain,” Smit said. “Once the hurdle of broad participation is taken and the benefits of a more transparent supply chain manifest themselves, laggards will be forced to join fast, or otherwise remain at a competitive disadvantage.”

 

And now the bad…

Bitcoin Mining Service NiceHash Says Hackers Emptied Its Wallet

 

By Olga Kharif
(Bloomberg) — NiceHash, the marketplace for cloud-based mining of cryptocurrencies, said hackers breached its systems and stole an unknown amount of bitcoin from its virtual wallet. “We are working to verify the precise number of BTC taken,” the company said Wednesday in a statement on its Facebook page. It’s halting operations for 24 hours, it said. The venture’s main webpage showed a “maintenance” error message, linking to its social media accounts.

NiceHash helps match people who can spare computing capacity with miners looking to solve complex math problems to obtain a variety of new coins. It later facilitates periodic payments to the service providers with bitcoin.

A wallet address circulated by NiceHash users shows that more than $60 million of bitcoins might be affected, according to CoinDesk, the cryptocurrency research and news website. NiceHash Chief Executive Officer Marko Kobal didn’t immediately respond to a LinkedIn message seeking comment.

Steve Massocca |
Wedbush Securities | 2 Embarcadero Center, 6th Floor | San Francisco | CA | 94111
Steve.Massocca@wedbush.com | www.wedbush.com | Member: NYSE / FINRA / SIPC

Wedbush

Futures trading involves the substantial risk of loss and is not suitable for all investors. Each investor must consider whether this is a suitable investment since you may lose all of or more than your initial investment.  Bitcoin futures require much higher margins than other futures contracts, and Wedbush may require higher minimum account balances for those clients who trade these contracts.