Digital Yuan Taking Over – China Expands Trials to Beijing and Other Provinces
China’s Commerce Ministry made an announcement that it will expand the trials of China’s central bank digital currency to include Beijing, as well as Hebei and Tianjin provinces.
According to the Wall Street Journal report on Aug 14, the time when this expanded pilot program will begin. However, the nation’s Ministry of Commerce said that the policy framework should be done by the end of 2020.
The expanded pilot testing will also include the Hong Kong Greater Bay area, which consists of nine cities, including Shenzhen and Guangzhou, as well as Hong Kong and Macau.
A representative from the Chinese Ministry of Commerce announced that the trials will cover much of China’s most wealthy regions. Poorer regions such as central and western China will also join the testing, though the reasoning behind this is not explained. The People’s Bank of China, which is China’s central bank, will lead the pilot.
China’s CBDC is also known as a digital currency electronic payment (DCEP for short) and is by many influential people around the world expected to be the first operational national digital currency. The People’s Bank of China tested this DCEP in mid-April as part of a transport subsidies scheme for government and enterprise workers in Suzhou, a major city in Jiangsu Province.
Earlier this month, state-run banks in China were also reported to be performing testing a digital wallet that was specifically designed for DCEP usage on a large scale.
Thank you for viewing this Forex academy educational video. In this session, we will be looking at the U.S. dollar index and how it has been affected by the global pandemic.
The Dollar Index is also known by the following acronyms, the DXY, or DX, and USDX. The United States dollar is the single largest currency traded in the forex market. The U.S. dollar index is a weighted measurement of the value of the United States dollar against six other currencies, including the euro, the Japanese yen, Australian dollar, the British pound, the Canadian dollar, the Swedish krona, and the Swiss franc. The values of the dollar index or updated every few seconds during normal market trading activity.
If you like to trade any of these pairs, it is advisable that you keep an eye on the U.S. dollar index at all times.
This is a historical 6-month view of the dollar index, and although the pandemic was already starting to escalate in February, the disease was mostly effecting Europe and Asia, and after a move lower, the index climbed to a high of 103.00 just one month later due to its safe-haven status. However, this healthy level for the United States dollar has fallen off since that high to a low of 92.54 at the beginning of August.
This dollar fall has largely been due to the fact that Europe is seen to be recovering from the coronavirus and where governments such as the European Union and the British have been seen to be implementing monetary policies that will be good for the recovery for their respective economies. Also, Australia has handled the pandemic very well and where the infection rates have been quite low in that country.
On the flip side, we have the United States, which is systemically failing in coming to grips with the Corona outbreak, which has been escalated in many of the U.S. states.
While the federal reserve has been wildly applauded for their implementation of quantitative easing and handling of interest rates in reaction to the escalating economic fallout, President Donald Trump has been criticized for not taking the disease seriously enough, and many would say he has had his head in the buried in the sand hoping that it will go away and that much of his rhetoric surrounding that disease is tilted towards the upcoming presidential elections. This had caused the markets to wonder if America will actually get a grip on this horrendous disease, and this had caused market sentiment to shift away from the United States dollar in favor of the other major currencies, which have all pulled back from their lows when Europe was very badly hit back in March.
However, on Friday the 7th of August, the non-farm payroll reports took a little bit of heat of the DXY when it posted jobs growth of 1.76M in the United States for July, which went on to erase some of the concerns about the state of the United States labor market and this gave the dollar index a lift. In fact, it was up 0.6% at 93.40, a 3-day high. But this was still only bouncing off the loads of 7 weeks and straight declines.
While the boot has been firmly put into the U.S. Dollar in the last few months, it is important to remember that one month’s good U.S. jobs figures may not be enough to raise the U.S. dollar index back to its highs in March. The next biggest test will be whether or not the U.S. government can agree on a new pandemic relief package. So far, the democrats and republicans have been at each other’s throats and not being able to come to a successful conclusion on this matter with regard to how much relief is necessary. Watch this space. The outcome will affect the Dollar index.
A Backspread is a combination of option positions. A Call Backspread involves selling an at-the-money or in-the-money call and buying a higher number of out of the money calls. The ratio of options sold to options bought usually are 1:2, 2:3, 5:3, or any combination. The main idea is to buy more options than sold. The ideal situation happens when it is entered at a credit, meaning you earn more from the sold option than you pay for the purchase of options, which is ideal, as it offers total protection in the case you’re wrong with the direction of the trade.
Call Backspreads is a better alternative to buying naked calls because it offers better protection when wrong about the direction of the market.
A Put Backspread is identical to a call, but, as we may guess, it is the right choice if we think the market will move downwards.
Main Factors
We are expecting a market movement, but we would like to be covered if we are wrong.
Implied volatility is low, and we hope it will rise after our entry.
A total transaction entered at a credit is ideal.
A Falling Knife
The use of Backspreads is ideal for catching market bottoms and tops, as it limits, or, even, avoids the risk of being wrong. One situation is to capture a falling-knife market. In this scenario, the market experienced a sharp and significant drop, but we think it has to reverse. Buying naked calls in this scenario can be too risky, as the timing of an upward move is far from accurate, and we may end up with a losing position if the market keeps falling. The use of a Backspread is excellent because we can still profit if wrong in the case of a credit Backspread.
Overextensions
Another ideal situation occurs if the market makes an overextended rally, but you suspect it is a bull trap. That often happens when trading Bitcoin, for instance, with the Bart Simpson pattern. The Bart Simpson pattern shows a sharp upward movement followed by a similar downward action after several hours of sideways action.
Under this scenario, a Put Backspread position is ideal because, if wrong, we could still be protected but still having unlimited profit potential.
Uncertain timing
A third situation arises when we expect a substantial upward rally but are not sure about the timing. A properly constructed call Backspread can give unlimited profit for a minimal dollar risk.
Time to expiration
In all situations, it is better to use longer to expire options when constructing the Backspread, as this offers a broader timeframe for the play to develop. What’s more, Longer-dated options are more sensitive to changes in volatility, so that if we enter a Backspread on reduced volatility, the profits multiply when volatility increases due to the market move.
The risk
The main downside of this strategy happens when the underlying asset remains near the strike price of the sold call/put at expiration, or the implied volatility declines further, which usually occurs when the asset does not move much. This is why it is best not to hold Backspreads until expiration, as they can generate its largest loss with the lack of movement of the underlying security.
To summarize
A Backspread strategy can give the trader
The stamina to trade tops or bottoms on strongly trending assets
Time to allow the timing to work out with a limited risk
Buying naked options means the purchase of just calls or puts of the same strike and expiration date, with no ownership of the underlying asset, nor other simultaneous purchases of a different call ( or put).
Buying a naked option is a market-timing strategy. The options trader considers that, at the current price, the asset is overvalued or undervalued, and, also, there are signs of a market reversal.
The main factors to consider are:
There are technical reasons to believe in a large movement soon! Actual low implied volatility! Good Delta and time remaining to expiration so time decay will be minimal.
The main errors novice options traders do when buying naked options are:
Only consider market timing to make a trade.
Buying out of the money options because they are cheap. Buying options with no regard to the current implied volatility. And if they are expensive, switching to an even more out of the money strike. Buying options with short expiries because they are cheaper.
The threats
Poor timing is the main threat. Buying a call followed by a drop in price will swiftly devalue the option. Therefore, to buy options, it is imperative to have a fairly precise timing signal.
Also, time decay will hurt the value of the option if the underlying security fails to make the expected movement, which will cause a drop in volatility and a decrease in the premium. This effect increases if the time to expiration is short.
The following rules will maximize the odds in our favor:
Buy naked options only if your timing method has proven accurate
Buy calls with Delta over 50 or puts with Delta below -50 to improve the chances.
Buy calls near support, buy puts near resistance, especially on non-trend or mean-reverting markets. Lower volatility is a plus, although not too critical if the action is short-term
At least 30 days to expiration to minimize time decay.
The key elements to make a profit are two:
A reliable indicator or pattern that consistently predicts a large movement
Avoiding being hurt by time decay and drops in volatility.
A possible use of this strategy is to catch tops and bottoms. Options will limit the risk at the premium paid by the option. With enough time to expiration, the timing required to succeed does not need to be as accurate as with the underlying instrument. The risk is limited without the need for stop-loss orders, which on many occasions, get taken, and then the market reverses.
The risk/reward profile of a Call
The risk-reward profile of a naked call has already been shown, and it shows the characteristic stick profile with limited risk and unlimited reward. The intrinsic value line shows the values at expiration, but, since the before expiry, the option has a time value. The real market value at a set date before expiration draws a curve similar to the red line shown in the image. The shorter the time to expiry, the closer this line will be to its intrinsic value, since time value decay, as we already know.
Similarly, the risk/reward profile of a Put shows a stick-like pattern; only this time, the rewards come from prices under the strike price. As it happens in Calls, the red line in the image shows a likely value line of a Put before expiry, that would get closer and closer to the intrinsic line as the time approaches the expiry date.
Forex Options VIII – Market Overview of Option Strategies
In the previous videos, we have discovered the basics of options and the main topics that need to be mastered to trade them, such as Deltas, Volatility, Time to expiration, risk profiles, and market timing.
In this video, we will sketch the main strategies using options, with one goal in mind: to simplify the decision process.
Elements to success
There are two elements to consider when trading options: Volatility and price direction. A trader should consider if he wants to seek a directional strategy or a neutral one. After deciding that whether bullish, bearish, or neutral, the trader must look at the current and future implied volatility to decide which is best: to buy or write options.
The strategy matrix
These strategies will be covered in the following video presentations, and our critical variables of volatility and market direction will play the primary role in the decision-making process. The process will always be the same: you should decide first if you’re bullish, neutral, or bearish, and then assess the volatility.
To help in the decision making, it could be handy to have:
A chart with the price action of the underlying instrument, to help us visualize the situation of the market action
An implied volatility graph of the option in question, to assess whether it is at a low or high point
Source: cmegroup
The options chain with prices of the asset, to help us see the proximity to the spot price and also the expirations.
Source: traderji.com
A risk profile graph. That kind of graph is available in the majority of the option-trading tools. A risk profile helps not only assess the potential profits but also visualize the worst-case scenario.
Source: gfmi.com
Position Management:
To option traders, the most challenging decision is to exit. Thus, besides knowing when to use the strategy and the right moment to enter a trade, it is essential to understand when to exit for a profit and cut losses.
The strategies we will cover in the coming videos are
Users of the loyalty platform StormX will now be able to earn cashback in cryptocurrencies from shopping at Walmart.
According to an announcement made on Aug 14, StormX users are now able to earn up to 4% cashback in crypto for all purchases made at Walmart. Users that achieve the “Diamond” rank can even earn up to 14%. CEO of StormX Simon Yu said that he believes that this Walmart partnership will bring new users to StormX as well as to crypto:
“As the only cryptocurrency cashback program for Walmart worldwide, StormX is confident that users will take advantage of this reward program to earn their favorite crypto while shopping at their favorite retailer.”
As the announcement said, Walmart is the latest addition to StormX’s pool of partners, which now counts over 650 companies. Among these companies are market giants such as Microsoft, eBay, Adidas, Nike, Target, Samsung, and Dell. StormX says it has already distributed over $2 million to its users.
In June, Walmart’s Chinese subsidiary reached a partnership deal with VeChain, a blockchain-based supply chain management platform, in order to create a system for tracing food products. At the beginning of March, Walmart joined the Hyperledger blockchain initiative. All this indicates that the retail giant is well aware of what crypto and blockchain could bring to the company, both in terms of convenience and marketing, and that they are taking full advantage of it.
Senate Banking and Financial Institutions committee of California has passed a bill with the goal of defining digital assets as well as measure its impact on the state.
Assembly Bill 2150, which has the power to potentially influence how federal regulators approach crypto and digital assets, unanimously passed the Senate’s committee. The bill will be discussed in the Committee on Appropriations from August 17. The bill had also passed the California Assembly before moving through to the Senate.
The bill was first proposed by California Assembly Majority Leader Ian Calderon, who initially wanted to classify digital assets as non-securities. However, amendments to the bill that were made by the Senate refrained from further defining crypto assets. It now focuses on directing the California’s Department of Business Oversight to create and conduct a study to see if the state can enact policies similar to the SEC Proposed Securities Act Rule 195.
The study ultimately wants to see how treating digital assets as securities for a brief amount of time can impact consumer protections and benefits to the state.
The Department of Business Oversight also has to provide suggestions for regulatory frameworks as well as define key terms.
As we have seen in our previous videos, many elements play essential roles in the success ( or failure) of options trading. Another important factor in deciding which options strategy to choose is the market action. Thus, market timing plays a crucial role in the success of the options trader. Timing the market when directly investing in an asset, especially in intraday trading, is essential. That is true also for option strategies that rely on the movement of the underlying security.
When trading options, the usual market situations to analyze are
The underlying asset is expected to move in a particular direction within an assumed period.
The asset is likely to go in a determined direction but without a specified period.
The security is expected to experience a large movement but without a known path.
The security is likely to move in a range.
Under the preceding scenarios, an options trader can be profitable if:
He is right about the scenario
He uses the precise strategy for the market and current volatility.
Usually, the first factor (being right) makes you money, whereas the second one determines the amount won, and the maximum loss when wrong.
The underlying asset is expected to move in a particular direction within an assumed period
Market timing is essential when planning to buy puts or calls because if we buy a call and the market drops, we will lose money. When developing a short-term strategy, the best test for the entry rules is to measure the profit after a certain number of days. such as in
Profit = Price [x] – Price[0],
being x the number of days after entry and testing it for different values of x. The advantage of using a time window is that it allows the trader to focus on a strategy with determined expectations.
If the trader’s time frame is one month or more, he should care about volatility. If it is exceptionally high, he will pay more time premium, which will decline over time, but if he intends to sell it in five days, he will not need to be concerned about it, as decay will be minimal. The disadvantage of trading in a reduced time frame is that the asset must move within the period, or the strategy will lose money.
The asset is likely to go in a determined direction but without a specified period
Often, traders expect an asset to rise or fall but don’t have clues about when that will happen. Options can be used under this scenario, although, in this case, volatility should be monitored and considered. When there is no specified time frame, the trader must usually keep the option near to its expiration; thus, time decay or volatility decline will eat part or all the expected profits.
The security is expected to experience a large movement but without a known path
Profiting from this scenario is unique to options trading, as options allow the possibility to profit indistinctly from rises or falls in the price of the underlying asset. The most usual strategy is buying straddles, the combination of a call and a put. Since this strategy is relatively expensive, it is best for low volatility periods ( the market is in a range) where you expect a sudden movement. If right, the combination of implied volatility increment, and price movement will pay the initial cost. Indicators that may help with this strategy are ADX, RSI, historical volatility, ATR, and Percent R.
The security is likely to move in a range
This is another scenario only profitable using options. In the case of the asset moving in ranges, which happens two-thirds of the time, the options trader may profit in several ways. Indicators such as Percent R or support/resistance assessment can determine overbought and oversold levels and use these timing techniques to options. For example, sell out of the money calls in overbought markets to profit from the premium at expiration. Other option strategies that profit from ranges are buying calendar spreads, vertical spread selling, selling puts at support levels, and advanced combinations, such as Butterfly spreads.
Recommended reading:
THE OPTION TRADER’S GUIDE TO PROBABILITY, VOLATILITY, AND TIMING , by Jay Kaeppel
If you’ve been following our Options video series, you’ve understood that options trading is a game of chance. Thus, if you hope to succeed at trading options, you must strive to consistently place the odds in your favor as much as you can on every trade you intend to make.
Options traders must realize that options are not the same as trading the underlying asset. Options have a time premium that vanishes with time, and that makes their probability of profit to be less than 50%.
Pros and Cons
Although forex traders are used to having an opinion on whether a pair is going to move up or down, the options’ trader should not theorize about it, but comparing the risk and reward characteristics of several possible trades to decide which is the most desirable. Dreaming about unlimited profits while buying low-probability options or selling far out of the money options with high-probability of profits without minimizing the risk is a recipe for disaster.
The Delta as a proxy of probability
An option’s Delta can be determined for each option, using an option-pricing model, which usually is made available by the broker to its customers. Sites such as Investing.com display the Delta of the most usual FX options.
Delta values range from 0 to 100 on Calls and from -100 to 0 on Puts. Delta can be viewed as
1.- An estimate of the odds that the option will be in the money at its expiry. For instance, if the EURUSD 1.1650 Sept Call has a delta of 0.33, it has about a 33% probability of expiring in the money.
2.- A delta of 0.33 implies that the option moves 0.33 pips for every pip of movement on the underlying. A delta of 100 means the option position is equivalent to buying the underlying asset; thus, a delta of -50 is equal to being short the underlying with half of the original position size.
Please note, though, that the Delta of an option changes with time and price movements.
Delta Neutral
Delta neutral is a way to place the overall trade position so that the Delta nears to zero. This can be achieved by having a combination of options with positive and negative deltas so that their summation is near zero. Delta neutral traders don’t bother with market movements, because they don’t not affect them. Their task is to keep their position neutral, rebalancing it when the position moves away from neutral by opening new positions and/or closing open ones. According to advocates of this methodology, Delta Neutral strategies naturally make a trader buy low and sell high, creating a consistently profitable game.
Probability and risk Analysis
Options traders usually have several ways to fill an options trade for a determined strategy. Thus, evaluating the probability and the risk of the possible trade combinations will determine which is the most profitable and best candidate.
For example, a trader may be decided to buy a put and a call on the EURUSD pair before a potential disrupting event. That way, he will profit from the volatility raise without caring about direction. But he may be in doubt about whether to buy them at the same strike price (Straddle) or a different price (Strangle).
The trader must consider the following for every candidate combination:
Upside and downside break-even points
Probability of being outside of BE at Expiration
Profit at expiration for the upward and downward targets
The maximum loss of the option combination
Likelihood of experiencing the maximum loss.
A table made with these parameters will show the best alternative, which in this case, is the Straddle, as it shows the best settings and also the highest rewards for its risk.
Keys to Success in Option Trading
The essential trading guidelines to succeed in options trading are:
Identifying the strategies available
Understanding when to use a given plan to maximize the benefit
Accurately evaluating the level of the current volatility
Identifying whether it is time is to buy premium or sell premium
Buying undervalued options and selling overvalued options
Recognizing when there are disparities in the implied volatilities of different options and take advantage of the fact
Properly take a profit and cut a loss
Stay tuned for more on Option Strategies!
Recommended reading:
THE OPTION TRADER’S GUIDE TO PROBABILITY, VOLATILITY, AND TIMING , by Jay Kaeppel
Forex Options III- Risk Profiles of the Basic PUT/CALL Strategies
A Risk profile is the most important tool for analyzing the gain-loss potential of an Options strategy. Thus we need to dedicate a chapter to understand how to make risk profiles. That is because understanding and managing risk is a critical task for the options trader.
Risk profile
A risk profile is the graphical representation of the profit-loss of an options trade in relation to the changes in the price of the underlying asset. The horizontal axis shows the possible stock prices of the underlying asset. The vertical axis from bottom to top show potential losses and profits. The graph lines indicted the theoretical profit and loss of a position at expiration. The zero-line is the trader’s break-even point.
To create a risk profile of a Call option, the horizontal line below the zero-line would represent the cost of the option at day zero. Since below the strike price, the option has no intrinsic value. The horizontal line shows its time value. This line is extended until the strike price point. From there, profits begin to add up, so the path heads to the upside with a slope that reflects the profit and price change.
EURUSD 1.1850 Sept. Call
An easy way to construct it is by using Excel’s graphs after creating a table with relevant profit-loss points. As an example, we present a long position on EURUSD 1-1.850 sept-2020 Call.
In a long Call position, we buy the right, but not the obligation to purchase the asset at the strike price. Thus, if the asset drops in price, let’s say to 1.0000, we are not obliged to buy at the 1.1850 strike price. This sets the maximum loss to the price paid for the call option, which is $144.
Therefore, we set the cost value (-$144) with a minus sign from 1.0000 to its 1.1850 strike price. That will draw a horizontal line. Then we compute the break-even price (1.1944) and set its profit to zero. We calculate the distance from strike to BE ( 0.00940) and add points every that distance, which should also show $144 profit differences. After creating the table, we can create a graph and display it on the sheet.
Similarly, the same EURUSD 1.185 Short Call option will look like:
In the case of an option seller, he expects the price not to go above the strike price at expiration, but our maximum profit is the option premium ($144). If the price moves above the strike price, his premium will fade and start becoming an increasing loss. That is reflected in the profile.
As for Puts, the EURUSD 1.1850 Long Put profile is shown below:
When we purchase a Put, we buy the right to sell at the strike price. Thus, we expect the price of the asset to drop. But we don’t have an obligation to do it, So, if the asset’s price moves up, our loss will only be the cost of the Put option, $133 in this case. That creates the profit-loss profile shown above.
The short version of the EURSD September Put – when you sell the option instead of purchasing it– is:
In this case, the maximum profits occur when the price at expiration is above the strike price. Prices below expiration will covert that profit into increasing losses.
These kinds of graphs will give you the basic profile in case you don’t have more sophisticated options analytical software but is enough to create the strategies’ profile curves.
Historical volatility is the calculated or statistical volatility of an asset. It merely measures the price fluctuations of a security over a specific time. For example, we can calculate the standard deviation of the EURUSD pair over the last 20 days to get the 20-day historical volatility. Options traders, then, use this value to compute the fair price of a given option. If historical volatility is 25%, it means that the asset’s likely movement within the next 12 months will be in a range of about 25% from the current price ( plus or minus).
Figure 1 – EURUSD daily chart with its 20-day historical volatility curve.
Implied Volatility
Implied volatility represents the volatility of an asset expected by the market over the life of an option. The main difference with historical volatility is that the later is based on past price changes. In contrast, Implied Volatility is the volatility implied by the current price action of a given option. Historical volatility looks at the past, whereas implied volatility reflects the market’s expectations for future volatility.
Figure 2 Implied volatility shift with time and strike price
source: Semantic Scholar
When the expected volatility decreases, the option’s premium drops, and when it moves up, the option’s price goes up. Thus, assets with lower levels of implied volatility will hold cheaper option prices.
Implied volatility changes, as the view of the market participants shift. Options’ sensitivity to the changes in implied volatility varies with the time to expiration and strike to spot Price distance. An option near expiration will be less sensitive to implied volatility changes than a similar option with a longer time to expiration. Also, options with strike prices at the money have the highest sensitivity. In contrast, options deep in the money or out of the money are less sensitive to implied volatility shifts.
How to effectively use Implied Volatility
We can follow the asset’s implied volatility and take note when it peaks and when it troughs historically, to determine when it is relatively high and low.
Following this procedure, we can determine when option prices are cheap, and when they are expensive. Also, since volatility tends to be mean-reverting and cyclic, traders could forecast a potential move towards its average value.
Volatility forecasting by itself is not a stand-alone strategy but can help traders decide their optimal option selection. For instance, if the options are expensive, and a trader expects this to revert to lower values soon, he may choose to sell instead of buying overpriced options. Strategies following this idea can be covered calls, naked puts, or credit spreads. Also, during low implied volatility, the purchase of options is the best choice. In that case, long calls, or even, a long straddle ( long put + long call) can be profitable.
Recommended reading:
THE OPTION TRADER’S GUIDE TO PROBABILITY, VOLATILITY, AND TIMING , by Jay Kaeppel
The price of a given option is determined in the real market by supply and demand. That means a buyer and a seller must agree on a determined price to complete a transaction. A buyer willing to buy at market price must pay the ask price. A seller wanting to sell at market price should accept the bid price. Options spreads are usually larger than spot spreads. For instance, the typical spread of a EURUSD spread is 3-4 pips, but its lower risk at a reduced cost makes them attractive to knowledgeable option traders.
A probability game
Options trading is a probability game. The long-term profitability of an options strategy is linked to the traders trying to buy undervalued options and sell overvalued options. Therefore, the trader should have a clear understanding of theoretical versus market valuations, and, in the case of FX Options, knowing the underlying market fundamentals.
The majority of options traders use an option as if it was the underlying, buying calls when they think the asset will go up and buying puts when considering it will go downward. The issue is that options are wasting assets, thus in most cases, that approach is unprofitable.
Structured approach
Most authors consider that to trade options successfully, a structured approach is necessary. A trading plan is needed, and, in addition, developing the discipline to follow it.
The benefits of a structured approach are:
Emotions are eliminated in the decision-making process
There is no psychological need to be right
The best thinking effort is made before the battle, avoiding subjective decisions
The Theoretical Pricing Model
Options are complex investment products as it involves estimating the odds the price of an underlying asset to surpass the strike price within a given time lapse. The most used model is The Black-Scholes equation that uses the price, volatility, time, and interest rates to compute an option’s fair price. The basic idea of the Black-Scholes model is that the right to delay a decision ( to buy an asset at a specific price) has a value, which can be computed.
A general trait of these models is the assumption that the distribution of prices in the market is Gaussian or something close to it, on a logarithmic scale. Although the Gaussian distribution is an approximation to the way prices move, it is essential to understanding the pricing model’s statistical nature.
Under this model, the price movements of the underlying assets move also following the Normal Distribution. If you’ve followed us in our Stats for traders” video series, you’d understand by now that 68,2% of the values following the bell-shaped curve lie within one standard deviation (SD) from the mean and 95.4% of them lie within two SDs.
That means only 31.8% lie away more than one SD, and just 4.6% go farther than two SDs. In the case of an option, we are interested in only one side of the bell curve. In this context, only 15.9% of the data points lie beyond 1 SD, and 2.3% beyond two SDs.
The Black-Scholes-Merton Formula
C(S0,t) = S0N(d1) -Ke-r(T-t) N(d2)
S0N(d1): The Intrinsic value
-Ke-r(T-t)N(d2): The time value of the option
d1 and d2 are calculations of the area of a point in the curve, which will show the price’s odds to reach that point.
As said, the Black-Scholes-Merton equation assumes that price movements follow the Gaussian Distribution. That, combined with an expiring date and the knowledge of the volatility (sigma) of the asset, are the key ingredients to assess the fair price of the option.
If we were to buy at the absolutely fair price, the model would predict zero gains and zero losses in the long term. But the volatility in the market is not constant but changing. Therefore, the ability to evaluate which options are cheap or expensive, under our forecasted scenario showing a higher (or lower) future volatility is one of the elements for success.
In the next video of this series, we will develop the volatility concept applied to options.
Recommended reading:
THE OPTION TRADER’S GUIDE TO PROBABILITY, VOLATILITY, AND TIMING , by Jay Kaeppel
As we have seen in our previous video, Options have value, called the premium. The premium is the cost of buying the option and varies depending on its strike price distance to the spot price.
As we can see on the graph 1, depending on whether the spot price is above, equal or below the strike price, it is said s call option is “in-the-money,” “at-the-money,” or “out-of-the- money” (Conversely, “out-of-the-money,” at-the-money” and “in-the-money” for a put option.)
The value of the option (premium) in a determined moment is composed of its intrinsic value and time value.
Premium = Intrinsic Value + Time Value
Intrinsic value
The intrinsic value of an option is the amount by which it is in-the-money. The intrinsic value part of the premium is not reduced or lost by the passage of time. On a Call option, it is the difference between the spot price and the strike price of the underlying asset. On a Put option, the intrinsic value is equal to the subtraction of the strike price and the asset’s spot price. If the option is at the money or out of the money, its intrinsic value is zero.
We can see that the intrinsic value is not dependent on how much time is left until its expiration. It only tells how much of the value of the asset is included in the price. If the intrinsic value is zero, then the premium has only time value, which decreases over time.
Time Value
The time value (Theta) can be thought of as the amount by which the premium exceeds its intrinsic value. Also called Extrinsic value, the time value has a direct relation to time, but also to changes in volatility. The time value of an option expiring in three weeks has less time value than a similar option expiring in six weeks. That is logical, as the buyer can profit more time from the movement of the option.
Since American options can be exercised any time before expiration, an option premium cannot go below its intrinsic value. This means that the cheaper the option, the less real value is included in the price. The price of out of the money options are lower as the strike price moves further out of the money. That is because the odds of being profitable at expiration decrease with distance from strike to spot price.
The time value has a kind of snowball behavior. It decreases slowly when far away from expiration, but it accelerates and depreciates faster and faster. On the expiration date, the option’s value is only its intrinsic value, which means the option has to be in the money.
As the option is deeper in the money, it has less time value and more intrinsic value. This also means the option behaves more and more as its underlying asset. This is related to the Delta getting closer to 100 ( or -100 in the case of puts). The higher the Delta, the option captures a higher percentage of the movement of its underlying asset.
That’s all for today. In the next videos will explain the basic strategies using options.
Recommended reading:
THE OPTION TRADER’S GUIDE TO PROBABILITY, VOLATILITY, AND TIMING , by Jay Kaeppel
Pompliano on Goldman Sachs’ Interest In Blockchain
With Mathew McDermott assuming the role of global head of digital assets for Goldman Sachs, the market can expect this banking giant to be quite involved in cryptocurrencies very soon.
“In the next five to ten years, we could see a financial system where all assets and liabilities will be native to a blockchain, and all transactions natively happening on-chain,” McDermott in a CNBC article on Aug 6.
Tweeting out this quote on Aug 6, Anthony Pompliano, Morgan Creek Digital co-founder, responded:
“Wall Street companies are about to learn why technologists often say innovate or die.”
McDermott’s plans include expansion
Taking over for Justin Schmidt, which was Goldman’s previous head of digital assets, McDermott plans to hire new Asia-based as well as Europe-based team members, with the goal of ultimately growing his lineup by 100%.
Additionally, the new Goldman executive mentioned a potential future native asset that they might develop. “We are exploring the viability of creating Golman’s own fiat digital token,” said McDermott for CNBC.
The era of digital money
Among many advantages of a blockchain-based digital system, McDermott specifically mentioned efficiency, describing how the new ecosystem could essentially have the same activities, except they would all be digital instead of physical.
“That includes debt issuances, loan origination, securitization; essentially, you’ll have a digital market ecosystem, and the options are pretty vast,” he explained.
Oli Harris, former head of digital assets strategy for JPMorgan Chase, who assisted with the outline of the JPM Coin, also took a position at Goldman thanks to McDermott.
McDermott, in his interview, also noted increased institutional attention, which is something the crypto industry has been wishing for over the past several years. “We’ve definitely seen an increase in interest across some of our institutional clients as they are exploring how they can participate in the crypto space,” he explained.
After suffering two major 51% attacks over the past week, Ethereum Classic has seen its hash rate go down considerably – all due to people being scared of another such attack.
As a consequence of Ethereum Classic’s miner capitulation, the estimated cost of performing a 51% attack targeting Ethereum Classic using hash power simply rented from NiceHash went down from $12,000 per hour to less than $4,000 per hour.
Despite this, the market price has been unaffected by the fragility of the network, with ETC actually gaining more than 2% since news of the second 51% attack broke. ETC is currently trading for $6.95.
Exchange volume report
With the 24-hour trade volume being up roughly 10% from the level posted a few days before the first 51% attack, orders are continuing to execute across most of the top exchanges, including Coinbase Pro, Binance, Bitfinex, as well as KuCoin.
The increase in trade activity is occurring despite the suspension of withdrawals, deposits, and margin funding services among a number of leading cryptocurrency exchanges.
ETC and its market signals
The strength of ETC’s markets is quite high despite exchange’s having disabled wallet activity. This raises a question regarding whether algorithmic bots may be driving the trading activity at the moment.
A 2019 report published by Blockchain Transparency Institute made an estimate that Ethereum Classic was one of the three assets traded the most by the bots, with more than 80% of the volume being flagged as suspicious.
Ethereum Classic miners capitulation
After hovering between five and six terahashes per second through July, ETC’s hash power dropped to somewhere around four terahashes per second over the past seven days.
The second attack saw hash power spike up to 9 terahashes per second, just before plummeting to less than 2.5 terahashes per second afterward.
Monero’s Hashrate Skyrocketing – Biggest Daily Gain Ever Recorded
Monero has experienced the biggest daily increase in its hashrate since the network’s creation in 2014 on Aug 6.
The Monero hashrate managed to increase from 1.67 Gigahashes per second on Aug 5 to 2.2 Gigahashes per second on Aug 6. The 0.52 Gigahashes per second single-day gain represents the highest increase in the project’s history. Prior to this, the most significant daily percentage gains came in Monero’s early days.
Banks should embrace privacy coins
On Aug 3, Coin Center submitted various comments to the Office of the Comptroller of the Currency on Federal Savings Association and National Bank Digital Activities. The submitted comments suggested that banks should be embracing privacy coins rather than fighting them.
“We argue that Banks shouldn’t only be able to use trustless mixing technology or privacy-enhanced crypto such as Z-cash or Monero, but that they may be obligated to do so so they could protect the privacy of their customers.” – was written in one part of the submission.
Monero is a unique value proposition
It is unclear what made Monero’s hashing power explode in such a way. In a world where many people feel that they are becoming watched and tracked by the governments more and more, Monero may simply present a unique value proposition.
Various reports have indicated that Monero is currently the best major privacy-preserving cryptocurrency. While other privacy coins like Dash and Zcash can be traced with relative ease, Monero proves to be quite a challenge. The sheer fact that it is hard to track has led to several centralized exchanges delisting it.
Monero trails only Bitcoin in its adoption rate amongst Dark Web users and dealers, for whom the privacy-preserving features of cryptocurrencies are sometimes quite literally a matter of life and death.
All the capital invested in Bitcoin at the moment totals to a few billion dollars less than Bank of America’s market valuation.
Bitcoin’s current market cap currently sits just over $217 billion, while Yahoo Finance’s data shows Bank of America’s market cap at just over $226 billion.
Bitcoin’s market cap is still climbing
Although it has endured a lot of dramatic price fluctuations, Bitcoin’s price managed to grow substantially in 2020, rising past several wealth comparisons along the way.
The United States Central Bank injected $168 billion into the economy back in March, just before COVID-19 measures. At that point in time, Bitcoin’s market cap was nearing $145 billion.
If we take a look at April, Jeff Bezos’ net worth came out at approximately $140 billion, while Bitcoin’s market cap neared $130 billion.
Since then, Bezos’ net worth managed to reach a staggering $193 billion, while Bitcoin’s valuation went even higher, to the point it is at currently, at $217 billion.
Bitcoin could reach astronomical heights
Morgan Creek Digital co-founder Anthony Pompliano forecasted a future Bitcoin market cap of over $80 or $90 trillion at some point. This forecast happened during an Aug 4 crossover podcast episode featuring Peter McCormack.
Pompliano, however, expressed his uncertainty on whether Bitcoin would reach such a market cap within his lifetime.
As a long-time Bitcoin advocate, Pompliano has stated his position on Bitcoin as well as crypto, in general, many times.
While not exactly in biblical proportions, the covid-19 pandemic has had a dramatic effect on people who have been cooped up in lockdown and more worryingly seen the terrible effect of how the virus spreads like wildfire in compacted and highly densely populated areas, such as inner cities.
It is easy to understand how city dwellers who have been restricted to one place for an extended period of time could not wait to rush to the rural areas in the United Kingdom and US for example, where a dramatic increase in people was noted in the numbers wanting to be closer to nature and away from the threat of catching the virus in the city’s.
Buxton lagoon
Many of these were offered a curt, go home, message from local people in villages and areas such as Snowdonia national park and other villages in Wales, where people erected signs telling visitors to return home. Famously, Derbyshire police dyed the Buxton blue lagoon, the colour black to try and deter tourists from visiting.
One of the most concerning aspects of the pandemic was that people were worried there would have be food shortages, however, global supply chains held up remarkably well, and after bouts of panic buying store shelves were quickly replenished, even in rural areas, thus people relaxed about this and went back to their normal level of buying. But the fact that rural areas were not badly affected has given city people more confidence in moving out to the suburbs. After all the virus would appear to be with us for some time, and it is much easier to socially distance in a more rural location than it is living cheek-by-jowl in a city.
Another aspect all over the globe is that people who have been locked up in their apartments and houses have had a chance to think about what is important to them in life, and there is nothing more like being surrounded by sickness and death to make one realise what is important.
And while the technology to enable people to work remotely has been around for many years, employers have been unwilling to implement this style or running their businesses, perhaps because they prefer the face to face working experience, and also so they can keep an eye on their employee’s productivity.
Canary Wharfe
However, the feature of allowing people to work remotely has been largely successful, and where are large institutions such as HSBC in Canary wharf have suggested that there will be a greater move away from insisting that people work in their offices there. Productivity has been up for some firms whose staff have been working remotely, and there are the huge savings that can be made in owning and maintaining commercial properties, or simply selling them or giving up rentals, and no business rates. And although this might have the effect of causing a collapse in the value of commercial properties, there is always the opportunity to convert such buildings into much needed residential homes for those people who do want to remain living in cities.
But this type of thing has been going on for hundreds of years where cities change because of disease: It was the cholera outbreak in the 19th century which claimed the lives of 10,000 people, which brought about the need for a modern sewage system. This may never have been identified without the outbreak.
From the Athens plague in 430 BC and the black death in the middle ages, even through to the more recent Ebola epidemic across sub-Saharan Africa and of course, the currents Covid outbreak, all have brought about changes in the way that people live their lives, they change government policies, transportation, medical research and treatment, the way our children are educated, supply chains, and where many countries, including the USA and UK, are now looking to bring home from overseas productions and third party suppliers, in order to be more self-reliant and all of which has come about due to the Covid virus pandemic.
US HOUSING STARTS
The improvements in housing starts for June in the United States has been put down two people looking to buy and build homes in rural areas. This is seen as the growth aspect to the housing market in the United States right now.
And the same is true in the United Kingdom where estate agents are reporting a surge in the number of would be homebuyers who are looking to move out of city areas into rural or smaller towns. Again, this is pretty much down to the success of home working, which is seen as one of the only positive things to come out of the pandemic, and a need for a better quality of life with less chance of contracting diseases such as Covid.
Here at forex academy, we are also predicting an even greater rise in people looking to trade currencies and crypto coins from home. The timing has never been better. The technology exists, the market has been remarkably unaffected, and has been one of the real winning business to have flourished during this horrendous pandemic.
Pantera Capital is the oldest crypto investment company in the United States. When Dan Morehead, the company’s founder, was asked to make a Bitcoin price prediction during his recent interview, he mentioned an investment letter published by Pantera Capital. This letter contained, based on the stock-to-flow model, a bold prediction that Bitcoin will reach $115,000 by August 2021. Morehead expects Bitcoin to grow
Morehead thinks that the prediction is still possible, despite the fact that in just one year, Bitcoin’s price would have to increase around ten times its current value. Still, his personal prediction is a bit more modest, though not modest at all in an absolute sense. He said:
“My common response is that it’s been growing at a rate of 209% for nine years and that I think it’s going to grow at least 209% for the next couple of years. That puts you at around $100 000, probably in the next two years, and I do think that will happen.”
If Bitcoin grows 209% annually as it did up until now, it will reach the $100,000 mark in 1.92 years. However, if it were to reach $115,000 in just one year, than Bitcoin would need a 900% annual growth rate.
Morehead noted that he is tired of skeptics that constantly pose questions such as “What is Bitcoin’s killer app?”. In his personal opinion, Bitcoin itself is the killer app with the primary use case as a store of value. Bitcoin does it better than gold, which now has a market capitalization of $9 trillion, said Morehead.
UPDATE – Binance Confirms: Crypto Debit Cards Now Shipping to Europe Binance has confirmed that the shipping of its crypto debit cards to European countries following a tweet from Changpeng Zhao, the CEO Binance. Zhao, also known as CZ, posted a tweet announcing that Binance has begun with shipping a limited quantity of Binance crypto cards […]
UPDATE – Binance Confirms: Crypto Debit Cards Now Shipping to Europe Binance has confirmed that the shipping of its crypto debit cards to European countries following a tweet from Changpeng Zhao, the CEO Binance. Zhao, also known as CZ, posted a tweet announcing that Binance has begun with shipping a limited quantity of Binance crypto cards […]
UPDATE – Binance Confirms: Crypto Debit Cards Now Shipping to Europe
Binance has confirmed that the shipping of its crypto debit cards to European countries following a tweet from Changpeng Zhao, the CEO Binance. Zhao, also known as CZ, posted a tweet announcing that Binance has begun with shipping a limited quantity of Binance crypto cards on July 24. He added that the cards are, for the time being, only being shipped to users in the European Economic Area.
CZ’s social media post regarding the card shipments.
While most companies would issue a press release boasting about the card shipments, CZ did this in quite an unorthodox way: by tweeting the news out unofficially on July 25.
“They started shipping in limited quantities as of yesterday. That’s what I heard,” the Binance exchange CEO said, referring to the Binance Card.
Binance made an announcement regarding the issuance of the card in April 2020, right after the company’s acquisition of Swipe, a company specializing in digital asset debit cards.
Binance future crypto card plans
The crypto exchange platform giant noted that the card would soon expand its reach out of just Europe. A Binance representative confirmed that the Binance Card would be available to order in the UK shortly.
The representative did not give any specific details on the card’s geographic expansion, but he did confirm that compatibility for additional countries will come as time passes.
While most businesses struggled during the worldwide economic uncertainty, Binance continues its growth in 2020, with its crypto debit card holding as one area of expansion.
An Introduction To Forex Options Part 2- Step Up Your Game!
The price of the option, at least theoretically, is determined by a complex computation using the Black-Scholes model. The Black-Scholes equation aims to compute the fair value of the contract, based on the asset’s volatility, the time in days to the expiration, and the distance of the strike price to the spot price of the underlying.
But, the market may and do set a different price. Since strike price and expiring date are fixed, the difference of the market price with the theoretical price, computed using historical volatility, is attributed to a different perception of the asset’s volatility, which is called “implied volatility.”
The greeks
The running price of an option depends on several factors, as we can see: The volatility, the distance of the strike to the current price, and the time to the expiration. The greeks are four factors that define the risk of the option: Delta, Gamma, Vega, and Theta.
Delta
Delta measures the change in the price of an option that results from a change in the underlying’s price. The value of delta ranges from – 100 to zero on puts and from 0 to 100 on calls. For example, the delta of a call at the money ( when the strike and spot prices are equal) is 50, which means the option’s value changes 50% of the change on the underlying’s price. Delta is also a measure of the probability of being profitable at expiration.
We have to pay attention to the following:
– Deltas increase as the expiration date gets closer
– Delta’s rate of change is measured by Gamma
– Implied volatility changes can also change the Delta.
Gamma
Gamma measures the rate at which Delta changes. Gamma is small for out of the money options and gets higher as the option moves at the money. Gamma is positive ( 0-100) for calls and negative ( -100-0) for puts.
A low gamma suggests that even a large movement on the underlying will have a small effect on the Delta and, therefore, on the option’s price.
Vega
Vega is the measure of the volatility of the underlying asset. As the Vega increases, so do the odds of the price moving larger ranges. Hence, an increase in Vega it rises the price of the option, while a shrinking vega will lower it. Thus, option sellers benefit from the shrinkage of Vega. Vega reflects the price action of the market. An increasing Vega shows a trend, while a decreasing vega may show a trading range. Also, since Vega reflects the implied volatility, it can increase or decrease without any price changes on the underlying asset. Of course, a quick change in the price increases it. Also, Vega drops as the option gets closer to its expiration.
Theta
Theta shows the time decay of the option and is related to its distance to the expiration date. As time passes, Theta drops. Theta is always negative since time moves in the same way for calls and puts. Consequently, Theta decay is good for sellers and bad for buyers. Theta is highest for the at-the-money option, and its value drops to its negative limit with an increasing rate near expiration.
Recommended reading:
THE OPTION TRADER’S GUIDE TO PROBABILITY, VOLATILITY, AND TIMING , by Jay Kaeppel
Ethereum’s Adoption Rate Exceeds Bitcoin’s Rate After 5 Years One key metric suggests that Ethereum has enjoyed a much faster adoption rate as well as the growth rate in the first five years of its existence than Bitcoin. When comparing the total number of addresses created in the first five years on both Ethereum […]
Ethereum’s Adoption Rate Exceeds Bitcoin’s Rate After 5 Years One key metric suggests that Ethereum has enjoyed a much faster adoption rate as well as the growth rate in the first five years of its existence than Bitcoin. When comparing the total number of addresses created in the first five years on both Ethereum […]
Ethereum’s Adoption Rate Exceeds Bitcoin’s Rate After 5 Years
One key metric suggests that Ethereum has enjoyed a much faster adoption rate as well as the growth rate in the first five years of its existence than Bitcoin.
When comparing the total number of addresses created in the first five years on both Ethereum and Bitcoin, it’s easy to see that the second-largest cryptocurrency by market capitalization takes the win.
However, while the number of addresses could be considered a good gauge of the adoption rate, it may not be as perfect as it sounds. One reason for that is that the accounting systems are different.
Key differences
The growth rate for both BTC and ETH networks is quite similar in the first 600 days. However, by mid-2017, Ethereum’s curve became much steeper as a result of the ICO boom and the creation of thousands of ERC20 tokens on the Ethereum protocol.
Another advantage that Ethereum had over Bitcoin from the beginning is that, while Bitcoin was the tech that introduced crypto to the world, Ethereum walked an already walked path. Bitcoin’s adoption was rather slow and gradual at first as almost no one even know what crypto could bring. The slope of its curve never had an uplift similar to Ethereum’s curve during the ICO boom.
This article begins a series that will explain the basic concepts of options. We will focus on the basic or vanilla options because we think they are the most used in all markets, and base of all variants, including the infamous binary options.
Options as Insurance
An option was thought of as insurance, where the buyer acquires the right to be compensated if something happens to his main assets. That way, fund managers could hedge the risks of their portfolios. Thus, an option is a derivative from the main asset, which gives the buyer the right, but not the obligation, to buy or sell at a determined price at the expiration date.
Therefore, contrary to the underlying asset, an option purchase offers unlimited gains for a limited loss. In a sense is like a position with built-in stop loss, only that the stop loss does not get executed until the expiration date of that option. This, and its relatively low cost compared with the cost of the underlying asset, has made options a game extremely popular.
The contract
Options are structured contracts between two parties, a buyer and a seller in which the seller takes the obligation to sell a specified asset at a determined price, called Strike Price, at a future expiration date. The buyer also acquires the right, but not the obligation to buy the asset at the strike price.
Option basic classes
There are two basic option classes: Calls and Puts.
Fig 1 – The valuation curve of a Call
Fig 2 – The valuation curve of a Put
A Call offers the buyer the right to buy the underlying asset at the strike price, and a put provides the buyer the right to sell it at the specified strike price, both at a set expiration date. There are two options styles, European and American options. Both are similar. The only difference is that American options allow the buyer to exercise the option at any time before expiration, while the European style may be exercised only on the Expiration date. The difference is subtle but unimportant, as any trader can sell the purchased option instead of exercising it and use the money to purchase the asset.
Option contract detail terminology
The terminology of an option stipulates the asset, expiration date, type, and strike price of the contract. Example:
“EUR-USD December 01 1.20 Call”
This contract states that the underlying asset is the EUR/USD pair, that the expiration date is December 01, the strike price is 1.20, and is a Call.
Expiration dates are usually the third Saturday of the month for monthly options, but there are also weekly options that may expire at a determined day and time.
We can see that for a predetermined asset there can be a lot of different contracts involving different expiries, strike prices, and class (put or call). These contracts are called option chains.
Recommended reading:
THE OPTION TRADER’S GUIDE TO PROBABILITY, VOLATILITY, AND TIMING , by Jay Kaeppel
The US Printed More Money in June Than in Two Centuries
Dan Morehead, CEO of Pantera Capital, expressed his opinion on the US, printing a shocking amount of money to support the economy during the COVID-19 pandemic.
His letter to investors states that “The United States printed more money in June alone than in the first two centuries after its creation.” Morehead continued saying that “In June, the US budget deficit, which counted $864 billion, was larger than the total debt that was incurred from 1776 through the end of 1979, which is shocking.”
Bitcoin is the way out
Morehead made it extremely clear that Pantera Capital sees Bitcoin and cryptocurrencies as a whole as the solution for the current crisis. He also highlighted the contrast of the effects of money printing in recent months, to the effects it had over the centuries:
“With that first trillion USD printed, the US defeated British imperialists, bought Alaska and made the Louisiana Purchase, defeated fascism, built the Interstate Highway System, ended the Great Depression, and went to the Moon.”
Morehead showed his distrust towards how the US handles its finance, citing the resulting inflation as the main reason any person should “get out of fiat money and get into Bitcoin.”
BTC Going to zero
Not everyone is, however, as bullish when it comes to Bitcoin as Morehead is. Goldbug Peter Schiff is also extremely concerned about the effects of money printing the US has done. He predicts that “The US is about to experience one of the greatest inflationary periods in the history of the world.”
However, he isn’t fond of Bitcoin and says that an asset with no intrinsic value will eventually go to $0. He suggests that people move their funds into gold and other precious metals.
Inflated prices
Despite widespread fears over USD inflation, many experts actually predict that consumer prices will go into a period of deflation.
However, many believe the inflation is, at the moment, actually hidden in asset prices rather than consumer prices.
Pantera Capital revealed a simple investment strategy it has when it comes to non-fiat assets:
“Stay long on crypto until schools and daycares open. Until then, the economy won’t function properly and money will be continuously printed.”
Retail forex traders take for granted, or do not know, or simply forget, that the retail sector of this market is derived from and only operates on the back of the institutional foreign exchange market place, where currencies are physically sold and bought, and need to be electronically delivered, on behalf of their institutional accounts and where these trades are growing again after a short period of decline to over $6.6 trillion in value per day in spot FX and the forward FX market.
If not for the continual success of the institutional forex market, there would be no retail market, where retail traders trade on the difference in price, contracts for difference or spread betting, and do not take physical delivery of the currencies they trade in.
In 2002, under the direction of the Federal Reserve, a company called CLS group which stands for continuous linked settlement was formed to act as the middleman in a large and ever-growing portion of institutional forex trades and where it was their role to authenticate and match trades to ensure that correct currencies or payments are placed into correct accounts.
CLS has prepared a report which was recently published by the global FX committee, or GFXC, which was set up in 2017 as a forum for bringing together central Banks and private sector participants with the aim to promote a bus fare liquid open and appropriately transparent foreign exchange.
CLS is set up to deal in 18 currencies, most of which are from major economies. In the report, the chief executive, Marc Bayle de Jesse, mentioned a worrying statement, and I quote, ‘’ given the way in which FX trading has evolved, we have to think of additional ways to solve the problems of systemic risk’’.
He added that the market had previously seen payment failure in 1974 when Herstatt Bank in Germany, which was a privately owned bank in the city of Cologne, failed in the delivery of German Deutsche marks and US Dollars in a forex transaction because of time zone differences between Germany and the USA. This, coupled with the fact that they had made losses in betting against the dollar, caused the bank to be put into administration. The knock-on effect was significant, where the counterparty banks did not receive their US dollar payments.
Other entities, such as the bank for international settlements and GFXC themselves, have also expressed potentially very significant risks due to the amounts involved.
And while the payment cost of some clearinghouses is deemed to be expensive, some banks and institutions prefer to settle FX trades directly with their trading counterparts based on trust.
With the forex market growing and where emerging economies will be relying more and more on foreign exchange transactions, it is worrying to see that major clearinghouses are worried that there could be a breakdown in settlements If this were to happen on large transactions it could cause utter panic in the foreign exchange markets, with a possibility of a halt in market makers offering liquidity to the market, this could cause a spill over into the retail market with disruption to pricing, liquidity and even temporary suspension in trading. As if retail traders didn’t have enough to worry about! Let’s hope those clever people in clearing can develop extra fail-safe mechanisms to protect international settlements.
Thank you for joining the forex academy educational video. In this video presentation, we will be looking at how public holidays affect the forex market.
Public holidays have various effects on the financial markets, including forex trading. For example, in institutional forex trading where banks, hedge funds, and institutions physically buy and sell currencies, which have to be delivered into bank accounts, in some situations, public holidays may require that settlement dates are postponed for one business day.
But in the world of retail currency trading, where traders trade contracts for difference or spread betting, this, of course, does not apply.
Bank holidays mean that the banks in the country where the holiday is taking place will be very unlikely to be trading in the forex market. And because banks are the biggest single participants in the forex markets, if they are on holiday, then the volume of transactions is typically reduced. When volume is reduced, this can have the effect of making the market static in the given currency pair are involved. But this thinning can also cause voids and gaps, which can also have the effect of creating spikes in price action.
As an example, when the Japanese have a public holiday, it is not unusual to see the USD JPY pair have periods of extra and volatility. While, if for example, the Euro area and the US shared a public holiday, such as the Christmas period, you would typically find thin market conditions and little volatility, especially when those two currencies are paired.
Another thing to consider, which most retail traders do not, is that there can often be extra volatility in price action in the 24 or 48 hours before a public holiday, and also so a day or two after a public holiday. This is known as the public holiday effect and is well-known, particularly in the stock market, where investors see extra volatility and usually extra buying during the run-up to public holidays.
Sometimes this is not quite so evident within the forex market; however, things to be considered are that large institutions do not like large exposed trading positions over weekends and public holidays. Often you will find that banks, institutions, and traders like to adjust positions by closing them out or switching between assets, for example, out of a currency and into a more stable asset such as gold, which is very bullish in the current market. This is known as hedging. Certainly, the longer the public holiday, the more likely you will see thinning in markets and where Christmas is the best example.
This type of situation can lead to extra price volatility in the run-up to public holidays, and you should bear this in mind before you place trades before, during, and after a public holiday.
And so, bank holidays can cause the forex market, on occasion, to act erratically and where fundamental and technical analysis sometimes has little or no bearing on price action. In other words, trade during public holidays at your peril. If you insist on trading during these periods, you should expect the unexpected and always maintain tight stop losses. And take note, the bigger the country, the less the volume going through, for example, the most widely traded currency in the United States dollar and if they are on holiday volume crashes, similarly with Europe with regard to the Euro currency.
Ensure that you have a good public holiday calendar which you can refer to in order to trade around public holidays
Here are the public holidays for August, September, and October 2020.
A detailed look at Cable price action 14th to 24th July 2020
What is going on with the GBPUSD pair, AKA Cable?
Thank you for joining the forex academy educational video. In this session, we will be looking at what has been happening with the Great British pound US Dollar pair, also known as Cable between the 14th to the 24th of July 2020.
The idea behind this video is to show you what professional traders look for in their technical analysis in order to try and determine the future movement of price action.
This is a 1-hour chart of Cable for the period of the 14th to the 24th of July 2020.
One of the biggest mistakes that new traders make is that they do not look at historical price action before putting on a trade. Technical analysis is a trader’s best friend and should be looked at holistically before for taking on a trade. Technical charts should be looked at from left to right because they tell a story.
We can see that the price action of this pair was bid up to position A, which was a new recent high and, importantly, above the key figure of 1.2600, a multi-month high for the pair. Traders will have taken some profits after this push, and we see price action fall back to the support line, before a second push higher to position B, and where position B is lower than position A. This tells us that the strong bull move was running out of steam. Buyers were worried about a possible double top rejection of position A, and this left the door open for sellers to come in because the price could not be sustained above the key 1.26 level.
We then have a period of sideways consolidation between the support and resistance line and more importantly between the two key levels of 1.25 and 1.26, however, there is a breakout of this consolidation period at position D, where the bulls gain control and where the resistance line becomes support and we see an aggressive move higher from here position E. support lines often become resistance lines and vice versa. The other critical component of this bull move was the fact that the EU Brexit negotiator Mr. Barnier was holding talks with a British government regarding the future trading arrangements, post-Brexit, and a potential new trade deal. The market was expecting that a possible deal could be reached, and this was seen as positive for the British pound.
Meanwhile, profit-taking was taking place at position E and where subsequent price action began to fall back to position F and where technical analysis traders saw a bear formation and pushed pair down to position G, which is an important round number of 1.2650.
Looking for an opportunity to enter the market, bears again took control and pushed the pair higher. However the fading arch formation was reflective of uncertainty, and where the market was braced for an EU press conference, where Michael Barnier, the lead negotiator for a new EU/UK trade deal, said that a deal was unlikely with the British government due to substantial differences and so-called red lines around fishing rights and possible divergences in standards, which would likely prevent a deal being reached. This was seen by the markets as bad for the British pound and activated an initial sell-off in the pair, which was only stopped in its tracks when the United States released worse than expected initial jobless claims data for June, which reversed the pair at position H, coupled with the fact that Mr. Barnier said that there was still an opportunity to secure a deal with a British government and that talks would resume again in August. This gave a more positive sentiment to the pound, and the pair lifted to the second period of support and resistance, importantly, this was above the key 1.27 level.
In thin trading on Friday evening, BST, after the European and London sessions had finished, and with China and US tensions rising because of a breakdown in relations and a lack of trust growing on either side, the US dollar was generally sold off across the board and Cable lifted to a new multi-month high of 1.2800.
A large part of the bid tone in this pair is because of a bad sentiment for the United States economy due to the growing number of Covid cases which is seen as being almost out of control, and where are Great Britain has largely surpassed the worst of the disease and whereby the economy is opening up, and things are returning to some kind of normal.
The scope is for further upside in this pair due to the ever-increasing bad sentiment for the United States dollar and slightly better sentiment for the British pound, where there is still hope that an EU UK trade deal can be completed by December.
Welcome to this forex academy educational video. In this session, we will be looking at the uptrend in gold prices with regard to the possibility of a continuation in this bull trend.
Gold, buy the dips.
In this historical chart going back to 1998 where prices were just 200.00, we can see an almost exponential rise in the value of gold to its current levels.
Gold, which is the oldest currency on earth, is traded primarily by people looking to invest by taking ownership of the physical product however it is used in the markets four trading on speculation for hedging against swings peaks and troughs in the general financial markets which is pretty much what we are seeing today. The most recent rise in the value of go gold is attributed to the uncertainties in the global financial markets pertaining to the onset of the covid virus.
The recent rise in the value of gold should be attributed to a risk-off event in the financial markets where people are bailing out of certain riskier assets and moving into gold. This includes general speculators who are enjoying the recent bull trend to these historic highs.
In this 5-day chart, we can see peaks, troughs, and spikes in prices, plus pullbacks and price flattening followed by a slight sell-off, and then continuations to the current highs. Price has generally been able to stay above 1900.00
Analysts at Goldman Sachs have increased their 12-month price outlook for gold to $2,300 a troy ounce. And while stock markets around the world are looking exposed to the continuation in the covid virus with potential falls on the horizon, and where yields are considered to be low in the bond market, it is no surprise that investors are looking for ways to offset their exposure to these assets and recently, for many, gold stands out. The bull trend speaks for itself.
Morning show institutions wrestle with the incredible amounts of stimulus being unleashed into the market by the federal reserve, and well they worry about the potential knock-on effect with regard to rising inflation; as a result, markets tend to reflect on previous similar situations such as the market crash in 2008 and other virus outbreaks in order to predict future price movement. While the big guns worry about the intricacies of the continuing financial crisis, shrewd investors will be following the money. With that in mind, gold is looking like a safe investment, in which case some major analysts are suggesting should continue looking for entries into this gold trend as it nudges up towards 2000.
This is a 5-day chart of the Great British pound US Dollar pair, where we can see a rise of price from 1.2790 to a high of 1.3170 before the pair fell back at the end of trading on the 31ST July. Much of the move higher has been due to an overall decrease in the performance of the United States dollar and where extreme volatility crept into the market on Wednesday 29th August, when the federal reserve held are interest rates on hold but where the FOMC comments at the press conference were extremely rubbish regarding the outlook for the American economy as the continuation of the covered virus escalates within the United States.
The volatility continued on Thursday, when unemployment data in the form of continuing jobless claims in the United States showed an increase, and more importantly, the annualised second-quarter gross domestic product figure was released for the US at – 32.9%, the biggest such drop in history. The US dollar was heavily battered as a result, giving an uplift to the pound, Euro, AUD, NZD, and others.
Incredibly, this is a Dow Jones industrial average daily chart, which shows that while the Dow took a dip down to just above 26,000 on the last day of trading for July, it subsequently rallied to 26,482 at the close. Naturally, analysts, market commentators’ and traders alike are bewildered by the fact that the United States posted its biggest loss in gross domestic product in such a short time frame in history, and yet the Dow Jones remained unscathed.
So, what can we expect in the ensuing weeks? With regard to the Dow Jones, it’s pretty much being driven by technical analysis and where the big numbers such as 26,000 seem to be holding as support and where the recent attempt to breach 27,000 failed and can therefore for the assumed to be a resistance level. Larger sized institutions are looking at the long term rather than the short term. They believe that a v-shaped recovery is possible and that when suitable medical solutions are found to minimise the impact of Covid on individuals to perhaps where it can be managed to almost like cold virus, or flu symptoms levels, the American economy can return to normal very quickly. However, pessimism is more and more creeping into the markets as top analysts scratch their heads and talk up the possibility of another crash in US equities. However with regard to the United States dollar, we should expect a toing and froing effect, with more volatility, and where bad news will affect the US dollar performance during certain times of the days and weeks and whereby bad news regarding the UK and Europe, such as what we are seeing at the moment regarding further lockdown measures being implemented by the British government as cases of Covid escalate, and whereby further outbreaks in covid are being seen across Europe can be considered to be bad for both the UK and the Eurozone economies, in which case you might expect a reversal in the euro and the British pound such as we saw on the last day of trading for July when these major currency pairs reversed from sharp rallies.
Sentiment is playing a large role in the majors, with USDJPY bouncing off of multi-month lows, as seen on this monthly chart, as investors buy yen as a safe haven currency.
Similarly, for the USDCHF pair, which has been sold heavily to a low at the end of July, as seen on this monthly chart, to 0.9100, again a multi-month low as investors buy the Swiss franc for its safe-haven status.
Thank you for joining this forex academy educational video. In this session, we will be looking at the GBPUSD pair, also known as cable.
The idea is to show you recent price action on a 1-hour chart so that you can apply the related methodology to your own trading style.
Always read your chart from left to right because it tells a story of historical price action key levels and what potentially is driving a particular currency pair.
Here we can see that price action remained bullish from the 27th of July, and moved up to a significant key level at 1.300. It Immediately found some sellers at the position, and where 1.300 was then seen as an area of resistance. After such a bullish move, traders will typically take some profit and wait for the next significant move in price action before they re-join. Here on our chart, we can see that at position B, here was a retest of the 1.300 and where this level subsequently became an area of support. Again, we see a nice bull rally before price action falls back to the key level at 1.30 at position C and D, where subsequently, the bulls finally start buying the pair ad where 1.300 is then seen as a significant area of support.
Price action goes on to breach the 1.3100 key level, and then at position E Andrew Bailey, Governor of the Bank of England left its interest rates on hold for the August meeting and left its policy unchanged. Importantly all nine members of the monetary policy committee voted to leave interest rates and changed.
Because there was market speculation that the Bank of England might introduce negative interest rates to try and mitigate against the negative economic effects of the covid pandemic, this was largely discounted by the governor of the Bank of England who said after the announcement that negative interest rates would be useful and remain in the toolbox, but they have no plan to introduce them at the moment.
Again, this provided a lift for cable, which was driven up on the good news to 1.3183. 1.3200 will be on traders’ minds as the next significant test.
Things to consider are that growth forecasts have been upgraded with positive data releases in recent weeks for Great Britain. And Mr. Bailey said that “The British economy is still set to contract in 2020 – COVID-19 is taking its toll. Nevertheless, this decline has now been trimmed to single digits – 9.5% against 14% beforehand. That is a substantial upgrade. While the BoE also trimmed growth forecasts for the next two years – a slower recovery – it is hard to foresee too far into the future given the high uncertainty surrounding the virus.” However, the Bank of England remains wary of further outbreaks of the virus, hampering the economic recovery for the United Kingdom.
Cable will need to push up and find a support area above 1.3170 in order for a sustained push up to the 1.3200 level. We would imagine an initial rejection of this key exchange rate, however, if the market goes on to attack it on a number of occasions, it could be breached and leave the door open for a push-up to 1.3250. Failure will see a push down to the low 1.30’s
Where next for the day jones industrial average?
Thank you for joining the forex academy educational video. In today’s session, we will be looking at the dow jones industrial average, which is closely watched and considered to be the main united states benchmark indices.
It is price-weighted and tracks the performance of 30 of America’s largest companies, which are mostly listed on the New York stock exchange.
The Dow Jones index reached a record high of over 29,000 in February, before tanking to just above 18,000 in march during the worst of the Covid pandemic in the United States. And then rallied back up to 27,500 in June while the United States was still severely impacted by the outbreak of the virus. The amazing recovery was largely driven. I hope that the pandemic would soon be over and that a recovery would quickly happen within the United States with regard to the economy getting back to normal. The Fed was calling this a V-shaped recovery. Straight down and then straight up. However, this has not exactly transpired, and although the federal reserve has implemented monetary policies to prop up their ailing economy and help those individuals who have been impacted, including support for companies, all of this is just adding to America’s debt burden. The typical analysis of the stock market being driven up by growth is, therefore, flying in the face of the fundamentals.
And while every single good news regarding vaccines has tended to keep the Dow Jones index propped up, almost artificially, another aspect which has been holding it up to levels above 26,000 points and more recently a pop above 27,000 points has been the expectation that tech stocks would perform very well during this time. This has been backed up by strong performances from companies such as Microsoft and apple Intel NVIDIA and Amazon, which are listed on the alternative index, the National Association of Securities Dealers Automated Quotations, or Nasdaq, of which there are two variant indices; the 100 and the composite.
Worryingly Wall Street closed in the red, which was largely triggered by buy tech stocks falling potentially bursting the bubble that the American economy will be driven higher by such stocks leading to a v-shaped recovery.
Even more alarming is the continuing spat between China and the United States, which could lead to tariffs being implemented on either side and potential sanctions. Any breakdown in trade between the two nations, especially China buying from the United States at the moment, would also impact on the so-called v-shaped recovery. And, of course, America just does not seem to be getting a handle on the number of cases of Covey, which are escalating in some States.
The pullback from 27,000 points on the Dow to the current level of 26,470, at the time of writing, and a simultaneous drop on the s&p 500 of 20 points and a shed of 98 points on the NASDAQ on Friday the 24th July, has set alarm bells ringing with investors and traders who have been concerned that stock markets in the United States are overvalued and about to crash for a second time since March.
Americans Trading Depreciating Dollars For Booming Bitcoin
A Bloomberg article that came out recently claims that Americans are foregoing the largest fiat currency, the US dollar, for more speculative assets such as stocks, gold, as well as Bitcoin.
High saving rates, low yields
As the COVID-19 lockdown continues in the US, the personal savings rate of Americans is at a historic high. On the other hand, the yield offered to them by financial institutions on savings accounts is close to zero. Meanwhile, assets like Bitcoin, equities, and gold, all made double-digit gains since March.
The article talks about a 28-year-old Californian who said that he is soon going to take out his $15,000 savings that were held in a high-yield savings account at Ally Bank and convert them into Bitcoin.
USD July performance
If we look at USD from an objective standpoint, the reality is even worse than what Bloomberg article suggests. The dollar is rapidly depreciating against almost every single leading fiat currencies. As a matter of fact, according to the Financial Times, July is by far the worst month USD had in a decade.
With yet another round of stimulus checks just around the corner, as well as most of the US still affected by COVID-19 restrictions, it is quite possible that this problem will most likely only get worse. Americans may have more depreciating USD on their hands in the short term, which they could seek to convert into higher-yielding assets, such as crypto. However, as they say, there is no such thing as a free lunch, as higher rewards always bring higher risks.
Grayscale Can Now Publicly Trade BCH and LTC – Approved by FINRA
Crypto fund manager giant Grayscale Investments will now make Bitcoin Cash and Litecoin available for public trading. This will be done through shares of the firm’s cryptocurrency trusts.
A July 20 announcement stated that Grayscale got verified by the Financial Industry Regulatory Authority (FINRA for short) to transact shares of the firm’s Bitcoin Cash Trust as well as Litecoin Trust. The two stocks will be available for public trading very soon. They will go under the tickers BCHG and LTCN.
Grayscale reported that it has 2,725,300 shares in its BCH Trust for $5.8 million assets under management, as well as 509,400 shares of the LTC Trust totaling $2 million as of June 30.
Publicly traded tokens
Grayscale’s trust will provide a means of investing in crypto without actually having to hold the tokens. According to the investment firm, this investing strategy avoids “the challenges of buying and storing digital Bitcoin Cash or Litecoin directly.”
Shares of BCH and LTC are the fourth and fifth public offerings that came from Grayscale. The firm previously received approval to list shares of Bitcoin, Ethereum, and Ethereum Classic. Horizen, Stellar Lumens, XRP, and Z-cash, are available for trading through Grayscale’s trust directly.
At the time of writing, Bitcoin Cash and Litecoin are valued at $251.11 and $48.37, respectively. According to CoinMarketCap, BCH is rated as the fifth largest token by market cap, while LTC is the eight.
Capriole digital asset manager Charles Edwards made a statement that, in his opinion, Bitcoin will pass $20,000 if US banks invest even 1% of their assets in crypto. On top of that, he added that this was not impossible as the unfolding trend is “not hard to see.”
“If US banks put even just 1% of their assets into Bitcoin as an investment, insurance or hedge… the Bitcoin price will more than double” he wrote on Twitter, further adding:
“Just Grayscale already owns 2% of circulating Bitcoin supply today. It is not hard to see which direction this is going in.”
Edwards uploaded a chart of US banks’ asset balances as further proof of the potential impact they could have if they leaned even slightly towards BTC.
Institutions quietly buying BTC
While this is the opinion of only one analyst, the current market development is showing that this is not just an opinion. US lenders received a green light from regulators to engage in cryptocurrency custody activities last week, which opened up a lot of possibilities.
Whether an influx of buyers from the banking sector would ultimately benefit Bitcoin remains a contentious topic, but the overall opinion of the community leans towards this being beneficial, if not mandatory, for Bitcoin’s price development.
As time passes, we will see more and more institutions reaching towards crypto, therefore increasing the demand. “It’s not a matter of it being good or bad,” Edward said.
Where Did They Go? 10,000 Antminers ‘Missing’ From a Facility in Mongolia
The power struggle at crypto mining giant Bitmain is continuing. Not only have the accusations of certain “illegal power seizures” made headlines, but the physical theft of mining hardware as well.
Bitmain-owned Antminer’s Wechat channel made a post alleging that former Bitmain staff has “illegally moved” around 10,000 Antiminer Bitcoin mining rigs from a Mongolia-based company-owned facility.
The machines included models from the S17 and T17 series, as well as the flagship S9 miners, and they were reportedly removed in mid-July. This reportedly caused serious economic losses to Bitmain and its customers. The fact that the incident has been reported to the police as well as public security authorities acts as further proof that this allegation is not just another story.
At stake is not only Bitmain’s personal hardware but also hardware belonging to its clients, as there are many who choose to have their mining hardware hosted at the manufacturer’s mining rigs.
Bitmain’s co-founder, Micree Ketuan Zhan, accused his other co-founder Jihan Wu of being the one responsible for the “illegal transfer” of the mining hardware.
Bitmain’s power brawl
Wu Jihan, the co-founder of Bitmain Technologies Ltd., poses for a photograph in Hong Kong, China, on Friday, May 18, 2018. The Coingeek Conference runs through today. Photographer: Anthony Kwan/Bloomberg via Getty Images
This conflict seems to have drawn two co-founders further apart, as they are now furiously fighting over who has the position of the legal representative at Bitmain.
This public battle started in October 2019 when Jihan Wu reportedly considered Zhan responsible for the illegal power seizure.
This battle is apparently growing out of the business field, as Bitmain’s CFO was arrested in May after supposedly participating in a purported “mob attack” on the co-founder Micree Ketuan Zhan. In June, reports showed that Zhan had hired guards to forcibly seize control of the Bitmain’s Beijing office.
At present, Jihan Wu retains formal authority over Bitmain’s operations based in Hong Kong.
Binance Sending Out Its Debit Cards – Crypto Cards Taking Over After months of planning and testing, the crypto giant Binance has begun delivering its crypto debit cards to customers. Binance CEO Changpeng Zhao, better known as CZ, posted a tweet on July 25 as a response to a community member that has expressed interest […]
Binance Sending Out Its Debit Cards – Crypto Cards Taking Over After months of planning and testing, the crypto giant Binance has begun delivering its crypto debit cards to customers. Binance CEO Changpeng Zhao, better known as CZ, posted a tweet on July 25 as a response to a community member that has expressed interest […]
Binance Sending Out Its Debit Cards – Crypto Cards Taking Over
After months of planning and testing, the crypto giant Binance has begun delivering its crypto debit cards to customers.
Binance CEO Changpeng Zhao, better known as CZ, posted a tweet on July 25 as a response to a community member that has expressed interest in the product. CZ said that they started shipping debit cards in limited quantities.
As the previous reporting shows that the plan was to do an August launch for the card in the European region, it can be inferred that CZ meant that Binance started shipping to European customers at the time being.
Binance debit card timeline
One of the largest platforms in the crypto industry, Binance, unveiled its plans for a crypto debit card in April 2020, which would go by the name Binance Card. The company then proceeded to acquire crypto debit card company Swipe, using the acquisition to further its plans for the Binance Card project.
CZ and Binance tested out the payment option in July, which the CEO revealed in a July 10 Twitter post. This was done as a part of the product’s initial testing.
Four days later, Binance announced its plans for an August card launch in certain regions of Europe, guaranteeing cards’ compatibility with four digital assets. Bitcoin and Binance’s BNB cryptocurrency were among the four assets listed.
CZ’s recent tweet shows that the development for Binance’s card is going along quite well, as well as that the company is respecting the timeline that it has given. Binance itself has also posted a number of headlines in 2020 amid all the setbacks that happened due to the COVID-19 situation.
Don’t Get Your Hopes Up – New Ruling That Classifies BTC as ‘Money’ Isn’t Anything Special
A recent court case in Washington D.C. saw a man being prosecuted on multiple counts for operating a so-called Bitcoin tumbler — a popular method of hiding Bitcoin transactions.
The Washington court charged the defendant on three counts in December 2019, with those counts including operating an unlicensed money transmitting business, as revealed in a July 24 court document.
The document noted that “After examination of the relevant statutes, case law, as well as other sources, the Court concludes that BTC is money under the MTA and that Helix, as the indictment described, was an ‘unlicensed money transmitting business’ under the applicable federal law.”
Even though this particular instance appears to be a ruling in favor of Bitcoin as it classifies it as money, the current law requires a money transmission when dealing with Bitcoin, even though the cryptocurrency is not technically under any monetary classification.
The defendant operating a Bitcoin mixing service
Larry Dean Harmon, acting as the defendant in the case, allegedly ran a Bitcoin mixer business named Helix. The project was run on the dark web. Mixers such as Helix muddy the data around Bitcoin transactions, therefore making transaction traceability difficult.
Harmon saw roughly 354,468 BTC flow through his business from the year 2014 to 2017, the court document stated.
Washington D.C. court accused Harmon of three separate illegal acts: 1. Conspiracy to launder monetary instruments
2. Operating unlicensed money transmitting business, and
3. Engaging in money transmission business without a proper license.
BTC is “Money”? Not a big deal!
As mentioned previously, the ruling appears in favor of Bitcoin as it classifies it as money. However, the court’s “move” was done in order to lay out the need for cryptocurrency exchanges to operate with money transmitter licenses. Therefore, while the first thought on Bitcoin being considered as money is great, the underlying move the court made can actually be considered a net negative thing for Bitcoin and its centralized exchanges.
How To Make Money Following Our FX Options Section – Update
Thank you for joining the Forex Academy educational video. In this video, we will be looking at our FX options service, which is completely free and which we first brought you on the 23rd of April this year. We will be taking a look at how the service is going since its inception and what’s changed and how it can be applied to your daily trading to enhance your overall success rate.
First, you will need to head to our website at Forex (dot) Academy, select market update, and from the drop-down menu, click on FX options.
Every day, on this page, our analyst, Kevin O’Sullivan, brings you the combined volume FX option expiries, which close at 10 a.m. New York time, each day. The combined amounts will never be less than 100 million of the local currency pertaining to the maturity. And where these large volume FX option maturities have a magnetic effect on the price action of the particular currency typically major pairs that are involved.
This is what you might expect to see when you click on the FX options page every day when the majority are available. Here we can see that there are three options maturities due to roll off at the 10 a.m. New York cut. The first option is for 982 million euros at the 1.1300 exchange rate, the second option is for 584 million euros at 1.1400, and the third option is 4 for 512 million euros at 1.1500.
These FX option maturities are lean plotted on to a 1-hour chart and colour coded red, orange, or blue. If you see an FX option in red, there is a high probability that’s the price action gravitates towards this by 10 a.m. New York. If the maturity is colour coded in orange, there is a slightly less possible chance of price reaching this level by the cut. And if the maturities are highlighted in blue, there is an unlikely chance that price action reaches these levels by 10 a.m.
Kevin will also so provide chart analysis, which is a fairly new feature when he publishes this data at around 8:30 a.m. BST each day. Here he says that the pair is consolidating but that the 1.1400 option expiry is within range and with a caveat that eurozone data and policymaker speeches may play a role in trend direction. He has provided support and resistance levels, and the two options at 1.13 and 1.15 are discounted by coding them in blue, Kevin, and where he believes the price will move to the upside to target the 1.400 maturity which he has coded in red.
Let’s take a look at the price action later on during the European and United States session in this pair. We can see that Kevin was correct price action punched through the resistance line and headed up to the 1.1400 option maturity. At no time did price action go near the one 1.13 00 or 1.1500 levels, as predicted, and where these were highlighted in blue as being unlikely. And at the time of the New York cut, the exchange rate was 1.1430, just 30 pips away from the favoured red option at 1.1400.
It is suggested by Kevin that traders place the option expiry levels onto their own charts in order to feed this into their own trading methodology. Even if you had taken on the trade based on Kevin’s recommendation early in the European session, you could have made nearly 50 pips as the price rose.
What is more, is that this service is extremely reliable and wear on a regular basis the technical analysis as provided by Kevin is throwing up accurate predictions often with pinpoint accuracy and regularly buy a handful of pips. Which just goes to show how much the market pushes price action to these key fx expiries and where are often larger the combined amount of the maturity, the more likely of price action hitting the FX option maturity at the time of the 10 a.m. New York cut.
Thank you for viewing this forex academy educational video.
In this session, we are going to be looking at what has been going on with the euro US dollar pair in terms of what has been driving it to its current levels and where we might expect price action to go from here.
Firstly, we always read our charts from left to right because they tell a story. On this one-hour chart of the euro US dollar, we can see a strong area of support where the price was not able to breach below the 1.1375 level, having already flirted with levels above the 1.1400 key level.
The next significant part in this bull move is at position A which was when the EU leaders agreed the €1.8 trillion budget and recovery package for the eurozone member states, which included debt and grants.
Initially, this was seen as a buy the rumour sell the fact scenario, where price action reached a high hi of 1.1470 on the news that the 27 members had finally reached an agreement.
Price action fell back to the key 1.1400 level before finally moving up to position C before the pair pushed above the key resistance line there. Note how the Bollinger bands opened up to facilitate this push, which was a very aggressive move, taking the pair air up through the key 1.1500 handle without any initial pullback or resistance here, before finding some resistance at position D at around 1.1550. Profit-taking leads to a pullback to position E, which was just above that key 115 handle.
Again, the bull’s push the pair higher in a very aggressive drive up to the next key level 1.1600, before profit-taking pulled the pair lower into a neck formation, and before the secondary spike higher, which could not quite reach 1.1600 level, which was seen as a potential double top. And when the EU Brexit negotiator Mr. Barnier made comments that the potential of a no-deal Brexit was very high, the pair pulled back to position G only to be reversed aggressively at position H due to poorer than expected Initial Jobless claims unemployment numbers from the United States on Thursday the 23rd.
Price action subsequently moved up in another aggressive bid and punched up to the 1.1625 handle before fluctuating at its current levels around the key 116 handle.
The next important phase will be whether price action can find a firm footing above 1.1600. The Euro has certainly got the market sentiment in its favour currently, with Covid still aggressively running rife in the USA and where the EU seems to be coming up with successful stimulus packages for the Eurozone area. A failure at this critical level could see a retest of 1.1550 and lower as the market considers if the pair has simply run out of steam at these multi-month highs.
The only caveat being that all of this stimulus is mostly made up of debt, and this could be an anvil around Europe’s neck if the economy does not recover as expected during 2021.
Over $1.4 Billion of Laundered Money Came to Crypto Exchanges
Money laundering concept. Yellow clothes peg hold Bitcoin and one hundred dollar banknotes.
The latest report by Peckshield, a company specializing in blockchain security, shows that over $1.4 billion of laundered money found its path to crypto exchanges in 2020.
Peckshield has been collecting data from both online and offline sources for more than one year, and then, verified and analyzed it. In this process, they were able to identify more than 100 million transaction addresses.
The company found that around 147,000 Bitcoin, currently worth more than $1.4 billion, has moved onto top exchanges this year.
These assets were associated with hacks, the dark web economy, illegal gambling, etc.
“We ranked the exchanges by the amount of stolen money on them, and found that the top ten exchanges for illegal funds were: Huobi, Binance, Okex, then ZB Gate.io, Bitmex, Luno, HaoBTC, Bithum, and lastly Coinbase.” – Peckshield stated in its report.
The company also said that some of the monitored addresses moved their funds to crypto mixers, which made it difficult to continue tracing them.
“As of June 30, we have monitored the high-risk address, out of which $1.62 billion flowed into the blacklisted address, while $15.9 billion went into the mixed currency service provider. It should be emphasized that the majority of the funds that went through the mixed currency service have been successfully laundered, and were untraceable after that.”
Wallets associated with the PlusToken scam have been followed by suspected massive open-market sales on crypto exchanges. In turn, this created fake spikes in Bitcoin, Ethereum, and altcoin prices.
The Bitcoin market has been quite slow lately. Some would say a little too quiet. As of July 14, Bitcoin’s volatility levels dropped to levels unseen after 2017. In recent weeks, Bitcoin was left behind as investors piled into altcoins such as Chainlink and Cardano.
One possible explanation for why Bitcoin is consolidating for so long may be an increase in the presence of high-frequency trading (or HFT for short) firms in recent months. Paolo Ardoino, CTO of Bitfinex, believes that HFT is a major reason behind Bitcoin’s volatility.
“Crypto is back to the old days of HFT before everything became the zero-sum game that it became today. HFT crypto firms can make a lot of money by deploying relatively straightforward strategies, such as cross-exchange arbitrage or exploiting the spread between one exchange and another” – Ardoino said.
HFT and cryptocurrency
High-frequency trading is a trading method that uses trading algorithms to transact an enormous number of orders in fractions of a second. While it has existed in the crypto space for a long time, the scope of its existence was rather small. However, just as billionaire Paul Tudor Jones revealed his BTC holdings recently, other institutional investors are showing interest and joining the market. This may explain the greater influence of HFT on the market.
Bitfinex, which claims it is “huge for HFT in crypto,” just recently revealed that between 80% and 90% of its platforms’ volume was now generated by HFT companies. Bitfinex partnered with a company called Market Synergy and started offering “institutional standard crypto connectivity.”
This crypto exchange platform concludes the growing use of HFT represents an increase in “maturity in the crypto space.”
However, why would Bitcoin volatility go down instead of up, with the increased use of HFT? Ardoino explained that, while the volatility is reduced, the liquidity of the market has drastically increased, which is exactly how HFT operates.
“As Bitcoin becomes an established asset class, the high levels of volatility associated with crypto will recede,” he explained. “There is an inverse correlation between liquidity and volatility, especially when HFT is involved.”
Bitcoin is famous for moving aggressively to the upside and downside for a short period of time. If we take a look at the previous year, Tom Lee of Fundstrat reminded everyone that the majority of Bitcoin gains came in the ten best trading days of the year. However, the evergrowing presence of HFT may as well be changing the “rule of 10 best days” as well.
Thank you for joining our educational webinar, where today we will be looking at a New Kid on The Block regarding digital currency.
So just what is the Axia coin?
Marketed as a non-mineable token, Axia is a digital currency with its particular ecosystem, including its own secure wallet. From the Greek word açai, meaning value and worth, the coin was specifically designed with blockchain technology security, and is asset-backed, which will no doubt give this particular currency some added weight in a marketplace has become something of the Wild West and has a reputation for extreme market volatility, manipulation, depreciation, and fraud.
At the moment, we are not quite sure how the token is backed, whether it is cash, pledges, stocks, gold, or other securities, most of which are subject to price movements and up and down valuations in the real world. However, the company says it has addressed the above negative attributes for other digital currencies and that its ecosystem makes it less vulnerable to these negative traits. One of the unique features of the access platform is that it is designed to combat declines in value.
And while the company’s website markets the coin as the new reserve currency for the world, which is something of an overstatement, clearly, they have a place in the market and have considered how the features and applications could give them a Leading Edge as the marketplace for digital currencies develops.
The company markets Its ecosystem as stable, scalable, with low fees, full transparency, safe and secure, responsible, community-based, and is custom-built for global adoption.
The Axia Coin ecosystem is supported by its own wallet and features the AX exchange, debit card, gift card, mobile app, top-up facility, marketplace, video call, Axia chat feature with contacts.
They also have built-in cross-platform consistency and user rewards with merchant benefits, although, at the time of writing, we were not able to ascertain exactly what those benefits are.
They have their own branded debit card feature, which can be used wherever major credit cards are accepted, and transactions can be made online and in-store, and their USP here is that they say it will save customers on foreign exchange transactions adding value to the entire community.
The downloadable app can also be used to send messages, images, and files and is available on IOS and Android. It also boasts encrypted end-to-end communication with no data tracking and can facilitate a web conferencing with a cloud-based virtual meeting room.
Axia also offers a SIM card that offers rewards simply for making calls surfacing the web and sending text messages, which boasts of reduced or eliminated roaming charges and no contractual obligation.
Clearly, a great deal of thought, let alone investment, has been given to the AXIA Ecosystem. Also, we do not see it taking over the world as the new reserve currency anytime soon it will clearly have a respectable following and take up, and if all its promises, especially around security, hold fire, we would expect continued growth for this innovative New Digital currency. Certainly, as the world of commerce modernises and changes in the economic paradigm shifts towards the digital realm, the digital currency revolution will remain unstoppable. Organisations such as Axia who take A more holistic approach, and especially have asset-backed coins will fare better than most.
Questions remain to be answered, such as exactly the nature of the asset backing for the digital token, and we hope to learn more about these aspects in due course.
US FDA Considers Using Blockchain for Food Security
The US Food and Drug Administration recently released a blueprint as well as a pilot study for food safety, which highlighted blockchain as a viable option for many of the identified challenges.
The blueprint, which was released earlier this week, breaks down some of the challenges that the food distribution throughout the country faces, as well as looks at how smart technologies such as blockchain could solve them:
“Our world is evolving and improving at a breakneck pace. With the evolution comes new technologies, from new digital tools to even new sources of food ingredients. This advancement provides new tools and approaches for tackling food safety issues, but also presents new issues to consider when trying to regulate food safety.”
The technologies mentioned in the blueprint include artificial intelligence, the IoT, sensor technologies as well as blockchain. They are looked at in terms of tech-enabled traceability, retail modernization, prevention, and outbreak response and food safety culture.
The FDA didn’t just realize that blockchain has potential recently. In fact, it has been talking about it for the last two years. Stephen Hahn, the FDA’s Food and Drugs Commissioner, as well as Frank Yiannas, the Food Policy and Response Deputy Commissioner, noted the devastating impact of COVID-19 on the food supply chain sector. They both stated that blockchain is one of the technologies that will make it easier to track products through the supply chain and certainly improve how the industry operates.
IBM has laid the groundwork
IBM is the one that brought blockchain to the agriculture and shipping industry by implementing its FoodTrust program that launched in conjunction with Walmart. This program is servicing many of the major retail giants in America, while the blockchain records food product information as well as certification, therefore reducing pain points such as certification storage and product recalls.
Has the West got it right regarding the China & Hong Kong National Security Law? Part 2 of 2
Societies are complex and ever-evolving organisms, and if China is to successfully govern Hong Kong then surely it has a right to implement changes to laws if when it feels the need to do so, after all, other countries do this all the time, and mostly without criticism and especially from China, who is fairly agnostic with regards to the governance of other countries.
While 27 countries in the West have openly criticized China’s new Hong Kong law, 53 other countries have come out in support of the new legislation. This is largely gone unreported.
What’s more, 2.9 million people in Hong Kong signed a petition supporting the new law, some 38% of the population in which case you can comfortably assume some people did not bother, in which case it could be as even as a 50/50 split of the population agreed.
Certainly, investors were happy as the Hong Kong stock market surged 1.7% as the bill was introduced.
One question which came out was that several accusations from media outlets – including Ming Pao, RTHK, ATV, TVB, Now TV, Oriental Daily News, and Apple Daily – that organizers had hired protestors, and that many had been paid between HK$200 ($26, £15) to HK$800 for turning up and protesting.
And while in the United States black lives matter’s protesters were called terrorists by Donald Trump, the protesters who were causing disruption, mayhem, wanton criminal damage and almost financial ruin for some businesses in Hong Kong, were called heroes by the West.
And so the question is, has the West got this wrong, and do they have the right to tell China how to handle its affairs and make threats of sanctions and tariffs without any real foundation that the new security law in Hong Kong is such a bad thing, especially as a high proportion of residents actually support it. Wouldn’t it be more advisable to sit back and watch how the new law is implemented and look at it from the point of view that action should only be taken should there be proven breaches of human rights and miscarriages of justice amounting from the new law? After all, how could anybody, with any common sense, expect that China will change the law, now that it’s actually been implemented? Is it worth risking an economic fallout with China, especially as we are still in the midst of a global pandemic that is crippling economies around the world?
Perhaps we need to further analyze some more lessons from history and further statistics before we start trying to push China around: –
China’s percentage of the world’s gross domestic product in 1980 was 1%, which is quite staggering when we realize that it had grown to 15% in 2015, and currently in 2020, pre-pandemic, the figure was 18.5%.
If growth rates return as expected, by the end of 2021, the post-pandemic picture for China’s growth path could see it with 30% of world’s GDP between 2030 to 2035 according to economic modeling by Tsinghua University, Beijing. That is twice as much as the United States and almost identical to the United States and Europe combined. And, incidentally, that is the same as the percentage of global GDP China enjoyed in 1820.
Some Might argue that China expanded so incredibly because of reverse engineering and copying other countries’ products and stealing intellectual property rights. However, China has moved on, and the West has certainly enjoyed buying cheaper products as manufactured in China. But, China has now become a powerhouse of innovation and is clearly able to hold it so on that front, from cars, white goods, phones, computer systems, software, medicine, communications technology, as produced by Huawei and other Chinese tech firms. They are also leading designers of infrastructure projects, with the best rail system in the world. They own huge banking corporations and leading companies such as Alibaba, JD.com, NetEase; the danger is that China is about to leave the West in its shadow. And all this happened since the Chinese communist party abandoned a large part of its ideology in order to embrace capitalism.
China’s growth is simply disproportionate and while it’s most important relationship is with the USA, it is also highly focused on its relationships with the developing world, where it sees itself as having an affinity and especially with African nations which have enjoyed growth and wealth having sold natural resources to China and been able to benefit from infrastructure projects as designed and provided by China. Some 65% of Africans have a favorable attitude to China and where some African countries are growing solely on the basis of their relationship with China.
Perhaps another lesson for the West is that in 1970 two thirds of global GDP was with the western world, where 15% of the world’s population lives, and only one third in the developing world where 85% of the population lived.
In 2015, 59% of the world’s GDP was accounted for by the developing world, and only 39% by the developed world. And of course, China has its tentacles in all the far-reaching corners of the developing world.
The West cannot stop China, and if it forces China into a situation where tensions become so bad and trust so failing between both sides, the result could be an economic fallout of unprecedented magnitude.
And while China is leaning towards becoming the biggest economic powerhouse on the planet, we should be working with them and not against them if we want to continue to reap the rewards of economic prosperity.
Further alienation by the West to China by forcing them into a corner over the issue of the Hong Kong security law could cause extremely harmful repercussions, which could see pandemonium in the financial markets should sanctions and tariffs be implemented and all while the world is still reeling from the Covid pandemic. The timing of all this could not be worse. Long-term prosperity can only be met by stopping the rhetoric and working together under an umbrella of economic and political harmony.
Finally, what will the future hold for Hong Kong as a trading hub? Certainly, there is no imminent risk that the West will abandon the trading opportunities with regard to its important finance center, tourism, and import and exports should there be a full-scale trading crisis with China. The people of Hong Kong are largely seen as victims in the dispute over the new law.
Has the west got it right regarding the China & Hong Kong National Security Law? Part 1 of 2
Tensions are building between the west and the Chinese government over the recent introduction of China’s National Security Law, but is the west right or wrong on this issue? Threats of tariffs and sanctions are firing in both directions, and some are being implemented while strongly worded threats are being bandied by both sides. To get a clearer picture, perhaps we need to go back in time a little to try and better understand this complex issue, which threatens to further destabilize global trade, where both sides will suffer economically.
Great Britain acquired Hong Kong Island from China in 1842, at the end of the 3-year Opium war, when the so-called Treaty of Nanking was signed. Hong Kong returned to Chinese rule at midnight on July 1, 1997. The ceremony was attended by the then British Prime Minister Tony Blair, Prince Charles of Wales, Chinese President Jiang Zemin, and U.S. Secretary of State Madeleine Albright. The only caveat in the arrangement was that there would be one country and two systems, whereby Hong Kong would retain its own economic and administrative systems.
However cracks began to emerge when the Chinese government attempted to introduce a fugitive offenders amendment bill that would have seen the introduction of an extradition treaty between Hong Kong and the mainland and where offenders from Hong Kong, or those on the run from China, could then be sent to mainland China for processing and prosecution, and if found guilty, there were the implications of jail time being spent on mainland China, thus eroding a fundamental section of the one country two systems arrangement.
There was an outcry by some members of the community in Hong Kong, and immediate objections and protests began there when the proposal for the new bill was presented in 2019 because this was seen as opening up the possibility of Hongkongers to perceived unfair trials and violent treatment in China. The protestors said the new bill would give China a bigger stronghold in the judicial system in Hong Kong, and it could be used to target activists and journalists.
The bill was withdrawn after violent protests in Hong Kong and after an 18-year old was shot in the chest with a live bullet as protesters fought police officers with bricks, petrol bombs, sticks, poles, and anything they could get their hands on. Buildings were torched and vandalized, residents were terrorized as the violence escalated out of control, people were stabbed, and protestors tried to remain incognito by wearing black masks. The activists set up roadblocks, barricades and had standoffs with the police. Hong Kong had never seen violence on this scale in its modern history. The local economy and stock market suffered losses as a result.
The protesters had demanded an end to the bill, and that the stigma and possible risk of criminalization having been characterized as rioters be withdrawn, they also demanded an amnesty for arrested protesters and an independent inquiry into alleged police brutality, plus the implementation of complete universal suffrage, or the right to vote in political elections. They also demanded the resignation of Carrie Lam as Chief Executive.
Although the bill was withdrawn, China did not relent entirely and has now introduced a new Hong Kong national security law, which came into effect on June 30, 2020, and where the law’s key provisions include that: Crimes of secession, subversion, terrorism, and collusion with foreign forces are punishable by a maximum sentence of life in prison. Beijing will establish a new security office in Hong Kong, with its own law enforcement personnel – neither of which would come under the local authority’s jurisdiction and where some cases could be sent back to mainland China to be tried.
This has largely been met with consternation and criticism by the west where 27 countries have protested against the new bill and where Australia has immediately canceled its extradition treaty with Hong Kong by way of protest and offered what equates to a sanctuary to people who wish to flee Hong Kong and where the British government has said that it will offer U.K. residency to 3 1/2 million Hong Kong nationals with overseas British passports, should they wish to leave Hong Kong. The United States government has come out very strongly against the new law and says there will be consequences for China.
The European Union has also issued a strongly worded complaint to the Chinese government. And whereby President Xi Jinping has counter issued strongly worded advice to all of those speaking out against the new security law to stay out of its affairs, while suggesting there will be consequences for those countries taking action such as Australia and where these actions are likely to be financial in nature, perhaps such as extra tariffs, sanctions or even a reduction in trade.
The market has begun to sit up and take note of the extraordinary exchanges and threats coming from both sides. The Australian dollar has come under pressure, and President Trump has said that he has no interest in currently pursuing Phase 2 of the China / U.S. trade deal. The rhetoric has caused spikes and troughs in the U.S. equities market and the U.S. dollar, with implications to counter traded currencies as the fallout between China and its trading counterparts worsens.
For several months, Grayscale Investments was buying more Bitcoin than miners were able to produce. However, this trend came to a halt a few weeks ago.
Grayscale Bitcoin Trust Fund would file a Form 8-K with the SEC on a weekly basis, declaring its most recent Bitcoin acquisitions. However, the last report was filed on June 25, when the company disclosed that it purchased almost 20,000 BTC. The lack of reports after June 25 indicates that Grayscale completely stopped buying Bitcoin. According to its Q2 report, GBTC invested an average of $57.8 million per week.
A Grayscale spokesperson said that the halt in BTC purchases is only temporary, and is caused by a quiet administrative period.
Grayscale indicates institutional interest in Bitcoin
One thing to note is that GBTC is not a hedge fund, which means that it doesn’t buy assets and expects a return on them. Rather, the trust buys assets only when investors buy shares of the trust. As 84% of Grayscale’s investments came from institutional investors, mostly hedge funds, Grayscale buying Bitcoin is a great indication of institutional interest in crypto.
July tends to be a somewhat slow month for investment activity due to many asset managers taking vacations, which may have caused Grayscale to stop buying Bitcoin. Another reason might be that institutions lost some short-term interest due to Bitcoin not moving much recently. Bitcoin has been stuck price-wise ever since early May.
Twitter Promises Additional Security Measures After Major Hack
Twitter vows to add more security training as well as measures in order to protect its platform from breaches such as July 15 wide-scale hack.
Twitter made a statement saying that it is continuing its investigation into the hack while also looking to provide more security training against social engineering tactics. These measures will be in addition to cybersecurity coaching that they get during onboarding as well as ongoing phishing exercises.
Around 130 accounts were compromised on July 15 when hackers took over these prominent Twitter accounts in a Bitcoin giveaway hoax. Elon Musk, Bill Gates, Kanye West, current presidential candidate Joe Biden, as well as many crypto firms like Binance, Coinbase, Gemini, and BitFinex were among the hacked accounts.
“We’re aware of our responsibilities to the people who are using our service and to society more generally. We are embarrassed, we are disappointed, and more than anything, we are sorry,” Twitter said.
Twitter said that the hack did not only allow hackers to access the accounts, but also to view personal information such as email addresses and phone numbers.
How did this happen?
The attackers targeted employees, as Twitter said, using schemes that intentionally manipulated them to perform specific actions in a certain way, therefore revealing information. Hackers got their hands on and used Twitter employees’ credentials and accessed internal systems, which explains how accounts with two-factor authentication were compromised.
This large-scale hack has been deemed a wake-up call for all centralized platforms and possibly paved the way for decentralized platforms to emerge.
100% ASIC Mining Could Increase Bitcoin’s Security 2,000 Times
New research has found that the wholesale embrace of ASIC (read as a-sick) mining for Bitcoin could increase the cost of a 51% attack up to 2,000 times.
Rod Garratt University presented the research that it co-authored with Maarten van Oordt from the Bank of Canada, regarding varying costs of a 51% attack on the Bitcoin network. The research shows that by switching the network to 100% ASIC miners, the security of the network will be increased by up to 2,000 times.
The main reason for this is because ASIC miners have very little use, as well as value, outside of Bitcoin mining. For this reason, an attacker would not be able to obtain that much of a return from the sale of equipment previously used in an attack. In order to perform a profitable attack, however, they would then need to double-spend a much greater amount of coins, which is far more costly and difficult to do.
The researchers’ estimate of a profitable attack occurring after the next halving shows that it would require between 157,000 and 530,000 Bitcoin if 100% ASIC mining were in place.
What is a 51% attack?
A 51% attack is a network attack that seeks to manipulate a blockchain network by being in control of 51% of the mining power. The attacker would then create an alternate blockchain next to the ‘real’ chain, and transition the rest of the network to accept his new, manipulated chain as the correct one.
The most common thing attackers do after a 51% attack is to spend the same coins twice, commonly referred to as a double spend.
Bitcoin’s security concerns
Some people in the Bitcoin community are very much against ASIC miners, which even caused a hard fork in 2017 that resulted in an ASIC-resistant cryptocurrency called Bitcoin Gold. This adversity to ASIC equipment was, according to many, the reason why Bitcoin Gold had a number of successful 51% attacks that resulted in the double-spend of $18 million in coins. On the other hand, Bitcoin is yet to receive its first successful attack.
Dogecoin has been in the public eye as TikTok social media enthusiasts created a challenge that was trying to bring this popular cryptocurrency to $1. However, the hype around it, as well as the price has fallen notably in the past couple of days.
OKCoin CMO Haider Rafique said that “The Dogecoin TikTok effect is really down to the vitality of the TikTok platform, rather than the crypto industry because it thrives off of creating viral challenges. This is exactly the category in which this Dogecoin challenge fits”.
He added: “TikTok challenges come and go in very short cycles, and just by looking at the 20% drop in Dogecoin’s price in the last 24 hours, the trend has likely run its course already.”
TikTokers creating Dogecoin awareness
A viral movement on TikTok saw people buying Dogecoin, as well as urging their viewers to do the same. The ultimate goal of the effort was to send Dogecoin’s price to 1$. However, while the move did bring an increase to Dogecoin’s price, Doge’s price did not break above a penny during the challenge. During the TikTok movement, however, Dogecoin managed to double in price before going back down.
Dogecoin internet traction falls
Other than Dogecoin’s recent price plummet, other metrics are also hinting at Haider Rafique’s conclusion. Google Trends shows that searches for Dogecoin came back to a more normal level.
“We in the crypto market should be very careful of these viral moments as they detract from our long-term goal of creating a global and equitable financial system,” Rafique added.
Fundamental Analysis for Novices Wholesale Inventories, USA
Thank you for joining the fundamental analysis for novices’ educational video. Today we will be looking at the United States wholesale Inventories.
If this is the first time you have joined our fundamental analysis for novices’ educational videos, we highly recommend that every day you use an economic indicator in order to plan your trading activity around the releases of economic data that is released by all the government’s around the world. These statistical data releases can have a dramatic effect on volatility within the market, and that is why it is essential that it becomes second nature that you use one on a regular daily basis.
Most brokers offer an Economic Calendar facility, and they typically look something like this.
The key components to an Economic Calendar are obviously the day and the date and the actual time of the event, and please bear in mind that the time may differ from your own location. The event itself, where typically you will see the nature of the event, such as trade balance, GDP, housing starts, initial jobless claims, bond auctions, interest rate decisions, etc., and the country the release pertains to.
You will also be able to see the impact barometer, which is typically low, medium, and high, where high would be the more likely to see extra volatility after the data release. They will also be a section for the actual data upon its release, and you will typically find a previous value, whether that is weekly, monthly, quarterly, or annually, and a consensus section that will have been put together by leading economists and analysts.
Here we have highlighted the United States wholesale Inventories for May 2020, and according to the time it was due in 58 minutes at the time of writing and where the previous release for April was 1.2% with a consensus of 1.2% and where the market impact value is set to low. Therefore, upon its release, it is unlikely to cause significant market volatility due to the fact that it lags by two months.
Us wholesale Inventories are released each month by the Census Bureau, and it tracks the changes in wholesale sales and inventory levels. The wholesale inventory component is more important because if producers have high inventory levels, this can be seen by the markets as showing slow demand by consumers, and this would have a knock-on effect of causing decreased manufacturing production; this, in turn, will affect jobs and gross domestic product. The sales component does not reflect personal consumption and is therefore not seen as such an important aspect of the data release.
A high inventory number suggests the economy is slowing in the United States and this is negative or bearish for the dollar, where as a low reading is seen as positive or bullish for the US dollar
One key metric suggests that Ethereum has enjoyed a much faster adoption rate as well as the growth rate in the first five years of its existence than Bitcoin.
