The code for Taproot, Bitcoins biggest upgrade in years, is finalized and has been packaged into a forthcoming update. Only, its not ready to be deployed yet because Bitcoin developers have differing opinions on the best route to activation.

Taproot will enhance Bitcoins smart contract capabilities by implementing a new digital signature scheme, Schnorr. Implementing the upgrade requires a soft fork of Bitcoins code, and there are a few competing proposals for how to activate it.

In a bid to expedite implementation discussions, Bitcoin Core contributor A.J. Towns recently surveyed 12 other developers who have been active in the implementation process to glean their thoughts on what activation should look like.

The results of the survey show that, while developers are generally aligned when it comes to the big picture of Taproots activation, they disagree on the details. As they debate the finer points, the developers conservative, careful deliberation may seem like nitpicking to outsiders.

But it shows that so-called soft-fork upgrades like Taproot are not entirely riskless events and that the specter of the controversial Segwit soft fork has haunted discussions.

Taproot activation proposals, explained

The Segwit transaction load increase was Bitcoins last soft fork, or an upgrade that is backwards compatible, meaning software running the old version of the code can still interact with the upgraded version.

Segwits activation was anything but smooth and relied on tweaks along the way after miners failed to adopt the upgrade in its first year. To keep the upgrade from failing, a new implementation proposal was adopted in the middle of the activation process. In an effort to put pressure on miners to upgrade, one proposal even suggested that node operators those Bitcoin users who run Bitcoins software and keep a copy of its ledger reject transactions from the miners who hadnt updated to SegWit to expedite its adoption.

In a perfect world, both node users and miners would upgrade simultaneously to ensure no conflict would split the chain or result in two rival factions supporting two different versions of Bitcoins code.

Even though Taproot is a non-controversial upgrade, the memory of Segwit is making developers cautious when evaluating this latest upgrade.

Two proposals

Two of the leading implementation proposals for Taproot rely on a mix of miner signaling and user activation. BIP 8, introduced in 2017 by Bitcoin developers Luke Dashjr and Shoalinfry, would include a signaling period for miners; if enough miners dont activate to reach consensus on the upgrade, then a flag day for activation would automatically upgrade Bitcoin nodes that have downloaded v0.21 of Bitcoin Core.

These nodes would reject blocks and transactions from miners who do not support Taproot, so in theory, this method would incentivize miners to adopt the new ruleset lest they lose out on profits.

In a second Taproot implementation proposal, Core developer Matt Corallos Modern Softfork Activation, fuses BIP 8 with BIP 9 (the latter being the proposal originally adopted to activate Segwit but which proved inadequate).

Corallos hybrid model first includes a one-year signaling period for miners. Second, if a super-majority of miners does not update during this timeframe, then the upgrade would be subject to a six-month review to make changes (if any) to the proposal.

The third and final step is a BIP 8-style activation period of two years, with a non-mandatory flag-day for node users to activate the update.

What Bitcoin developers think

For the first question in his survey, AJ Towns asks developers what percentage of miners need to signal an upgrade for it to be considered a safe majority. Eight believe that nothing less than 85%-95% would be sufficient. The thinking is that anything less threatens a network split where some miners run the older code and some the newer code, which would create two conflicting transaction histories.

Failing a miner-signalled activation, seven respondents think a flag day for node-enforced activation could come as soon as 12-18 months after activation begins. If too few miners adopt the upgrade, this would mean nodes could enforce the Taproot ruleset and only accept blocks from miners who also signaled for the upgrade.

In a perfect world, both node users and miners would upgrade simultaneously to ensure no conflict would split the chain or result in two rival factions supporting two different versions of Bitcoins code.

Almost all of the developers surveyed want to wait to see if miners and users adopt the upgrade on their own before deciding on a hard date for flag day (if theres enough early support, a flag day may not be necessary at all).

If activation doesnt come to pass through voluntary activation, then a flag day activation is the last option on the table. Most respondents were in favor of a mandatory flag day to automatically signal the update. This would mean updated nodes would reject blocks from miners who havent signaled for the upgrade.

Disagreements on the finer details

So-called forced signaling through the flag day would have the benefit of making Taproot default on any Bitcoin Core node running v.21; in turn, these nodes would only accept block data from miners who have also signaled the update, so in theory this would encourage miners to upgrade lest they lose their business.

But what if the miners have node users who do accept their blocks?

This is one caveat to forced signaling: If too many miners and node users dont accept Taproot and refuse to update their software, then the network could split into two competing chains. If enough economic interest backs the old version of Bitcoin, then the result could be two competing assets.

This outcome is partly why some developers, like Matt Corallo, think that forced signaling is unnecessary.

Since Taproot has been largely uncontroversial, it would be a political risk to force signal the upgrade, he argues. He considers the activation method a relic of Segwits user-activated soft fork, a proposal to activate Segwit through similar means after miners failed to adopt the upgrade. Segwit was very controversial and political. Taproot is not, but Corallo believes enforced signalling threatens to make it that way.

In his post, Towns writes the mandatory signaling would be a way to definitively enforce Taproots network-wide activation after enough consensus has been established through discussion and miner support.

If you want to maximize the number of nodes that will enforce the rules should a flag day occur, but also only choose the flag day after an initial activation attempt is already widely deployed, then you have no choice but to make signaling mandatory when the flag day occurs, Towns writes.

Whats the holdup?

Towns introduces an alternative activation proposal in the survey which features a four-year activation time frame. As ever in Bitcoin development discussion, this, too, received some pushback.

Once the decision to activate has overwhelming support from developers and users, the longer the timeframe for activation (beyond that practically required for miners to safely upgrade) the more things that can go wrong, former Bitcoin Core developer Eric Lombrozo said to Towns on Twitter.

Risks aside, if most developers and Bitcoiners think Taproot is a shoe-in for an upgrade, it shouldnt take four years to activate, especially since it has already been so-long in the making.

After all, if Taproots been in the works since 2018, shouldnt miners and node operators know what to expect?

As Blockstream CEO Adam Back put it on Twitter, Taproot cant be a surprise after several years.

Read more from the original source:
Bitcoin Developers Divided on Specifics of Taproot Activation - Coindesk

As the weekend approaches, Bitcoin (BTC) price appears set to close out the month with a remarkably strong performance which has many bulls calling for a new all-time high above $20,000 in the near future.

Traders attribute these lofty estimates to the fact that BTC appears to have flipped $12,000 to $12,500 to support and barring some unexpected price implosion, Bitcoin is on the path to painting a beautiful monthly candle.

Further bullish evidence comes from todays options and futures expiry which saw $450 million of futures open interest expiring as of Oct.28.

According to Cointelegraph contributor Marcel Pechman:

Currently, BTC is trading above $13.5K, and the 4-hour chart shows the digital asset making higher lows and lower highs as the price pulls into a tighter range.

Even as the price holds above the 20-day moving average, it wouldnt be unexpected to see it range between $13,500 to $12,900 through the weekend and into early next week.

If Bitcoin price is able to push above the pennant trendline at $13,620 and secure a 4-hour close above it, then a renewed push for a new 2020-high above $13,859 is possible.

Currently, as trading volume increases, the moving average convergence divergence indicator shows the MACD has crossed above the signal line (orange) and the histogram shows an increase in momentum. The RSI is also above the midline, just reaching 60, but for the last few days, BTC has met resistance at $13,660.

In the event that BTC loses its current momentum and drops from the pennant below $13,100, there is support at $12,800. Failure to hold at this level opens the door for a retest of the next support at $12,000 and below this $11,500.

From a birds-eye-view, Bitcoins current price action is encouraging and the digital asset is clearly in a strong uptrend with room to run higher.

The same cannot be said for altcoins which have taken an absolute pummeling throughout this week. At the time of writing Ether (ETH) price is down by 5.8% as the top altcoin struggles to reclaim $400 as support. Chainlink (LINK) has dropped 6.74% and Binance Coin (BNB has lost 6.10%.

According to CoinMarketCap, the overall cryptocurrency market cap now stands at $396.6 billion and Bitcoins dominance rate is 63.5%.

Read more from the original source:
Impending pennant breakout sets Bitcoin price back on the path to $14,000 - Cointelegraph

Almost one-quarter of Ethers (ETH) circulating supply is held on cryptocurrency exchanges, according to analytics platform ViewBase.

The website shows that 26,768,260 ETH is on exchanges, equating to 23.6% with a value of $10.3 billion. Almost 26 million of these tokens are held by 10 centralized exchanges, with Coinbase alone sitting on 8,521,807 ETH 7.5% of the supply.

Ether is miles ahead of Bitcoin (BTC) in terms of the percentage of tokens held on exchanges. Bitcoinhas 8.1% of its circulating supply held on exchanges.

Earlier this month, Cryptocurrency statistician Willy Woo said he believes that when the number of coins held on exchanges drop, its a sign that new buyers are coming in to scoop the coins off the markets and moving them into cold storage. As such, the relatively low share of BTC held on exchanges is macro bullish according to Woo.

According to crypto data aggregator Glassnode, the number of Bitcoin held on exchanges has been reducing significantly for almost the entire year, falling from the all-time high of 2.97 million BTC in February to below 2.6 million yesterday.

Glassnode also shows bullish signals for Bitcoin with the daily number of new addresses for Bitcoin approximately 480,000 six times that of Ether, which has less than 80,000 new addresses created each day.

Also worth noting is that the seven-day moving average of exchange net flow volume for both Bitcoin and Ether have been negative since early August. The net flow volume is the number of coins sent to exchanges minus the amount removed. This suggests that while Ether has a high percentage of coins held on exchanges compared to other coins, the overall sentiment is moving toward a bullish trend in the last few months.

Glassnode does not reflect the same percentage of coins held on exchanges as ViewBase. According to Glassnode, there are less than 16.6 million ETH (14.7%) and almost 2.6 million BTC (14%) on exchanges.

Read the rest here:
Nearly 24% of Ether held on exchanges Three times the percentage of Bitcoin - Cointelegraph

How investors might learn to stop worrying and love crypto

Oct 29th 2020

EVERY TUESDAY for most of 1979-80, the Blitz wine bar in Covent Garden was host to an influential club-night. London was then a run-down city. The Blitz was a seedy spot. What made it remarkable were the Blitz Kids, the extravagantly dressed Tuesday-night regulars. A teenage Boy George worked in the cloakroom. The door policy was strict. To get in, said Steve Strange, who ran the club-night, you had to look like a walking piece of art. Mick Jagger was once refused entry.

This all seemed shallow and transient. The make-up, the get-ups and the evident disdain for people who were not walking pieces of art were marks of unseriousness. Yet the Blitz Kids, a mix of art students and urchins, would go on to shape popular culture, according to Sweet Dreams: The Story of the New Romantics, a new book by Dylan Jones. This brings us to another hangout for oddballs, fantasists and drop-outs: bitcoin. To most people it seems at best a fad, at worst a con-job. But it refuses to disappear. And its price in dollars is up by around 150% since March.

It is hard to have a sensible conversation about bitcoin. To show interest is to invite contempt from sceptics and an inbox stuffed with get-rich-quick proposals from boosters. But a nagging thought will not go away. What if these crypto-kids are on to something just as the much-derided Blitz Kids were? After all, as well as notoriety, bitcoin has ingenuity and scarcity on its side.

Start with the ingenuity. Even people who are hostile to bitcoin will concede that its technology is fiendishly clever. It is essentially a way of accounting for who has spent what. Instead of a central exchange to keep score, and to verify payments and receipts, it uses an electronic ledger that is distributed across the entire system of bitcoin users. The systems dispersed nature means that tampering with the accounts would require gaining control over a majority of the networks computers. That is an important source of trust in bitcoin.

A big part of its appeal to users is that no one official entityno government, bank or tech firmis in charge. (This is also what a lot of people dislike about it.) The system is self-regulating. It is also self-limiting. Bitcoins are mined when a computer solves a very time-consuming maths problem. It must identify a large number encrypted in the systems code. Over time the remaining numbers become harder to find. Eventually the mine will be exhausted. Bitcoins supply protocol is as restrictive as the Blitzs door policy. Only 21m bitcoins will ever be produced.

Millennial techies are at home with all this. The older technophobic crowd tends to be hostile. So be it. That most people still hate bitcoin isnt a bad thing, writes Dylan Grice of Calderwood Capital, an alternative-investment boutique, in a recent letter to clients. This is to say that it is difficult to make a lot of money buying an asset that everybody likes. And as with the Blitz, the infamy and outrage is part of the allure. Older visitors might grumble that the music played there was unremarkable or that the venue was a dump. It didnt matter. The club acted as a focal point for like-minded people. That is an underrated virtue. Thomas Schelling, a Nobel prize-winning economist and game theorist, contended that people gravitate towards focal points without formally agreeing to do so. His insight extends to asset markets. Gold barsor bitcoinshave value if enough people tacitly agree that they do.

What precisely might that value be? An honest answer is: Who knows? Bitcoin has no intrinsic worth. As with gold, there is no stream of future dividends to build a valuation around. Yet people have become comfortable with gold as an asset because it has been around for so long. Bitcoin is a newcomer, but its use is growing. So if you believe it has a future, you may want to own some, says Mr Grice. Indeed if you like gold as a hedge against a revival in inflation or some other calamity, you might consider transferring some of your gold allocation to bitcoin. It has advantages over the precious metal: it can be more easily stored and transferred, for instance. In some places, you can actually use it.

Bitcoin is a pretty tiny club. Beside it, gold looks as capacious as Wembley Stadium. The market value of all bitcoin is just 1-2% of the value of all the gold above ground. Scarcity is a trait of many things that are perceived to have value. Steve Strange, who sadly died in 2015, understood this fully. The best move I ever made was turning Mick Jagger away at the door, he said.

This article appeared in the Finance & economics section of the print edition under the headline "Blitz-coin"

Originally posted here:
Getting down with the cool kids on bitcoin - The Economist

Nine celebrities with profiles on the sponsored video-sharing platform Cameo have published messages wishing Bitcoin (BTC) a happy birthday ahead of the twelfth anniversary of the publication of its whitepaper on Oct. 31.

The videos were paid for by crypto security firm Halborn, and feature Hollywood notables, musicians, and comedians including David Hasselhoff, Charlie Sheen, Carole Baskin, Charlamagne Tha God, Gilbert Gottfried, Doug Benson, Hassan Johnson, Soulja Boy, and RZA.

Most of the celebrities were reading off talking points and showcased varying levels of crypto-literacy. Charlamagne Tha God questioned whether the pictures that he found upon Googling Satoshi Nakamoto actually depicted Satoshi.

Charlie Sheen offered praise to Satoshi Nakamoto and expressed excitement at the chance to invest in BTC once he finds a job of course. He admitted he has little knowledge of cryptocurrency.

The Hoff made the bold pool-side claim that he invented Bitcoin:

Tiger King star Carole Baskin emphasized the virtues of contact-less payments amid the coronavirus pandemic, predicting the virtual currency will be the future.

RZA wondered if maybe soon there will be a Wu-Tang Bitcoin.

While Oct. 31 commemorates the publication of the Bitcoin whitepaper, the networks genesis block was not mined until Jan. 3, 2009.

See the article here:
The Hoff claims to have invented Bitcoin in 12th anniversary video - Cointelegraph

Ahead of the 12th anniversary of the Bitcoin white paper, a large group of celebrities published cameo videos saying happy birthday to the worlds first cryptocurrency. A number of popular stars appear in the videos including Charlie Sheen, David Hasselhoff, Carole Baskin, Gilbert Gottfried, and more.

What do you think about the nine celebrities that wish Bitcoin a happy birthday ahead of the 12th anniversary? Let us know what you think about this subject in the comments below.

Image Credits: Shutterstock, Pixabay, Wiki Commons, Halborn,

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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'David Hasselhoff Invented Bitcoin' - 9 Celebrities Wish Bitcoin a Happy Birthday | Featured - Bitcoin News

Medelln, Colombia, Oct. 30, 2020 (GLOBE NEWSWIRE) -- The agricultural and cannabis industry will have an alternative payment system to private banking. Blockcannan, a technology company in the field of agriculture, has partnered with VISA, MasterCard, and Latoken Exchange to allow people from all over the world to participate in the profits of the cannabis industry legally through smart contracts on the Blockchain. The profits generated could only be shared in fiat currencies until now, but now they can also be shared in cryptocurrencies (namely Bitcoin, Ethereum and CBD).

About Blockcannan

Blockcannan is an agriculture and technology company established in Colombia that aims to transform the management of agricultural resources through Ethereum smart contracts. It is developing a digital platform that will allow investors, allied companies, authorities and others interested in leasing land, to obtain profits on their cell phone from the commercialization of cannabis extract and agricultural products in countries of Europe and North America. In this way, it will open the doors to the efficient use of agricultural resources with the help of technologies such as Blockchain and big data.

The CBD seed token developed by its work team allows faster and cheaper transactions of goods and services than the traditional system, in addition, the possibility that anyone with little investment knowledge, can obtain benefits from agricultural farms and from cannabis legally. This smart contract will help in the tokenization of agricultural resources, including land. Blockcannan builds a Marketplace for the commercialization of agricultural products based on blockchain. The market will facilitate the safe trade of agricultural products and legal cannabis extract. Previously, this exchange could have been done only in CBD tokens, but now, after the association with the exchange of VISA, MasterCard and Latoken, it can be done in fiat currencies or Bitcoin / Ethereum.

Proper inventory management and issuance of documents to authorities is also critical to a legal cannabis market. The Colombian State has filed Law 1787 of 2016, which regulates safe and informed access to the medical and scientific use of cannabis and its derivatives, allowing import and export. That is why Blockcannan has also developed an inventory management system for the comprehensive management of crops throughout their life in the supply chain. Thanks to blockchain technology, the system is so traceable that government authorities can also use it to track the journey of items passing through it (which is why it can work for the legalized sale of cannabis).

How will it work?

As explained above, the platform that Blockcannan is developing will work with the help of Ethereum smart contracts. As for technicalities, anyone can participate in the commercialization of agricultural products through this platform by depositing money or CBD tokens on the platform. Once they have deposited it, they can start receiving profit in the proportion of their participation in their smartphones for up to 29.9% of the value of their investment. The minimum investment amount is $ 6 and the maximum is set at $ 2 Million.

There is also a limitation on who can use the platform and who cannot. To prevent money laundering risks, only those people who have the legal capacity to enter into a contract according to the authorities of their region can use it.

Allied farms already developed by Blockcannan

Some of the allied farms have already been developed by Blockcannan to show how it will work. They have established a network of these farms in the Andean region, and a pilot project in La finca el Vrtice located in the village of Ro Fro in the municipality of Tmesis, Colombia. That particular farm has an area of 15.18 hectares and is close to the municipal seat with easy access to roads. Approximately 1.79 hectares of this land has been used for agriculture, while Blockcannans team is using 0.69 hectares to build the greenhouse, cellar, nursery and drying chamber for the production and extraction of Cannabis.

According to economic projections, Blockcannan in its first year of operation will have a return of $ 3,488,000 and by its fifth year it is estimated to reach $ 55,808,000.

Media Contact Details:Company Name: BlockcannanCompany E-mail: Contact@blockcannan.comCompany website: https://blockcannan.com/

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Blockcannan Partners With The Giants VISA, MASTERCARD And BITCOIN - GlobeNewswire

We shared two swing trades over the previous 3 week period and both reached all three profit targets. Our targets were strategically placed between 11,600 and 13,250 because of the historical resistance. Now that 11,600 to 12,300 has been cleared, we can anticipate a high probability of support.

Old resistance becomes new support and vice versa. I am not going to get into the psychological aspects of this phenomenon, but in this case it meets the first criteria that we look for when it comes to a trade idea and that is: attractive location.

This philosophy keeps us out of a lot of fake-outs, false signals, and other noise that many get confused by, especially when watching smaller time frames. This is why we only had 2 trades over a 3 week period and the next trade may take a week or so to develop. Waiting is the skill that most traders and investors struggle with.

Read this article:
It's Still Too Early To Buy Bitcoin? - FX Empire

NEW YORK, Oct. 28, 2020 /PRNewswire/ --Bit Digital, Inc. (Nasdaq: BTBT), the Nasdaq listed Bitcoin mining company headquartered in New York, released the first half 2020 financial results report at 9:00 EST on October 19, 2020. The report showed the Company has earned 949.51 bitcoins since its principal business shifted to bitcoin mining in February 2020.

Highlights from the first half 2020 financial results include as follows:

1) Bit Digital (NASDAQ: BTBT) has reached 1250 PH/s of bitcoin hash rate capacity and ranked one of the largest Nasdaq listed bitcoin mining company in terms of the computer power.

2) Bit Digital launched its bitcoin mining operation in February 2020. As of the date of the report, 22,869 miners have generated an aggregate of 949.51 bitcoins, approximately $10.08 million.

3) Bit Digital's bitcoin mining business rapidly expanded. As of June 30, 2020, the bitcoin mining business has generated over $690,000 in revenue.

4) Bit Digital disposed of its peer-to-peer lending business and car rental operations in PRC.

The full first half 2020 financial results report is available on https://bit-digital.com/financial-informationand showed that after the shift of the main business of Bit Digital's (NASDAQ: BTBT) to bitcoin mining, the Company swiftly accumulated computing power while rapidly expanded operations and miners. Erke Huang, the Chief Financial Officer of the Company, said, "The bitcoin mining industry is becoming a sought for alternative asset allocation, and we're looking forward to making bitcoin mining business more accessible to the public and investors."

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of Bit Digital, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website at http://www.sec.gov. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

For more information, please contact:

Erke Huang, CFOEmail: [emailprotected]Phone: +1 347-328-3680

SOURCE Bit Digital, Inc.

Homepage

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Bit Digital Bitcoin Mining Company Releases the First Half 2020 Financial Results Announcing Over $10 Million Worth of Bitcoins Earned - PRNewswire

The price of Bitcoin (BTC) has increased by 36% in the last 35 days, showing a strong rally. The market sentiment has been optimistic due to rising institutional demand and the perception of BTC as an inflation hedge.

But after a large uptrend, the belief that BTC may pull back has begun to increase. While a minor correction could occur, like the 4% downward trip to just under $13,000 on Oct. 28, a sizable downtrend is becoming increasingly unlikely. Bitcoin was at $13,860 at the days peak, which marked the top of the July 2019 rally. After hitting such a resistance area, a minor pullback is expected. Following a drop to below $13,000, BTC has quickly recovered to $13,150, demonstrating resilience.

Throughout the past 11 years, Bitcoin price has moved in cycles. One of the most prominent narratives, among many others, is the block reward halving, where roughly every four years, the Bitcoin blockchain cuts in half the amount of BTC mined. The halving slows down the pace at which new BTC is created, causing its overall circulating supply to decrease over time. The year following every halving, BTC has rallied strongly, as seen in December 2017 when BTC hit $20,000, subsequent to the July 2016 halving.

If a similar pattern follows, the price of Bitcoin will likely hit $20,000 in March 2021, an analyst known as Ceteris Paribus said. For $BTC to match last cycles time to regain all time high, it would need to hit $20k on March 11, 2021. Would be kind of poetic for it to happen a year after (arguably) the most infamous day in bitcoins history.

As such, analysts anticipate the road to $20,000 in the medium term to be met with obstacles and minor corrections. But three reasons could prevent Bitcoin from seeing a big pullback in the near term.

During a bull cycle, the biggest threat to an uptrend is a potential sell-off from long-time hodlers and whales. Before the sell-off happens, some on-chain indicators could show an intent to sell. The most widely used indicator to gauge seller activity is exchange inflows.

When whales prepare to sell Bitcoin, they typically transfer their BTC holdings to exchanges. On some occasions, if a high-net-worth individual is dealing with extremely large BTC holdings, then they might engage in peer-to-peer trades on over-the-counter markets. But in most cases, whales use exchanges like Coinbase, Gemini and Binance. As such, when inflows to major exchanges increase, it often suggests the selling pressure on BTC might intensify.

In the past month, as Bitcoin has rallied, exchange inflows have not increased substantially. Ki Young Ju, CEO of analytics firm CryptoQuant, reaffirmed on Oct. 27 that Bitcoin exchange inflows are declining. On Oct. 22, whale inflows temporarily spiked, causing concerns of heightened selling pressure. Ju noted, Still safe from short-term $BTC dumping as well.

With no large selling pressure coming from whales on exchanges, derivatives traders have explained that the ongoing rally is spot-led, not futures-driven. This differentiation is critical because when a rally is primarily fueled by the futures market, it could raise the probability of a rapid pullback. The reason behind this tendency is the possibility of cascading liquidations.

On a Bitcoin futures exchange, cryptocurrency traders place short or long positions with leverage. But that also indicates that if BTC drops 10%, the position would get liquidated and the trader would lose the base capital of $10,000. When the futures market drives the rally and a small drop rattles traders, it could cause a cascade of long futures contracts, causing the market to drop.

The recent rally, however, has seen significant demand from spot and institutional markets. Light, a pseudonymous Bitcoin derivatives trader, said, Market structure is distributed with no exchange monopolizing price discovery. spot is leading derivatives. make of that what you will. The continuous increase in the trading volume of LMAX Digital, Coinbase, Bakkt and Binance demonstrates the dominance of the spot market in the recent uptrend.

Lastly, the staircase rally of Bitcoin supports the argument that a large price drop has become less likely. In December 2017, Bitcoin crashed after reaching $20,000 because the uptrend occurred in a short period, so there was not enough time to establish support and resistance levels. This time, BTC is climbing a staircase, consolidating after each rally. Such a technical pattern strengthens the uptrend and uplifts the overall momentum.

Still, there are two key reasons why traders anticipate a short-term Bitcoin downtrend. First, the U.S. dollar index (DXY) has been rebounding. Since alternative stores of value, including gold and Bitcoin, are priced against the dollar, the recovery of the DXY could negatively affect BTC. Second, Bitcoin market sentiment is demonstrating FOMO-level excitement the fear of missing out which raises concerns of an overheated rally.

Bitcoin traders Michael van de Poppe and Nick Cote both emphasized that the rising DXY could be a problem for BTC in the near term. Van de Poppe, a full-time trader at the Amsterdam Stock Exchange and a Cointelegraph contributor, said that $12,700 remains a potential target if the DXY continues to climb:

Researchers at Santiment also emphasized that the social mood of the Bitcoin market has been increasing quickly. Marking a positive factor in the long term, in the foreseeable future it raises the chances of an overheated rally. If so, the derivatives market could begin to get overcrowded and whales could ponder taking profit on their positions: Overall social volume is also rising, indicating higher than normal FOMO levels.

In the last three days, the hash rate of the Bitcoin blockchain network has dropped substantially. According to data from ByteTree, miners have been selling large amounts of BTC in the past week. Analysts attribute this trend to the end of the rainy season in China, which affects the cost of electricity of Bitcoin miners. During the rainy season, miners can gain access to cheaper electricity, which allows them to mine more BTC with lower costs.

There is a possibility that, as miners slow down their operations, they will sell BTC to take profit. As Cote, an on-chain analyst, said, the hashing power outflows out of China have been fast and could further accelerate in 2021. While this is a positive development for the decentralization of the hash rate, in the short term, it could affect the markets:

Atop the mass exodus of miners in China, the uncertainty around how the United States presidential election will affect the global equities market is causing both American and European stocks to slump. The Dow Jones Industrial Average has decreased by 5.10% in the past five days, rattling all risk-on and risk-off markets. The DXY aside, gold, Bitcoin and stocks have all fallen in tandem in the last 24 hours, demonstrating a high level of uncertainty in the market.

The rest is here:
Bitcoin price sees pullback, but bulls still marching toward $20K - Cointelegraph