Gold collapsing. Bitcoin UP.

[79b79aa8]

brief update for the lazy:

1. china devalues yuan 0.45% vs. USD, lowest since 2011:
http://www.zerohedge.com/news/2016-05-29/china-sends-yellen-another-warning-fixes-yuan-lowest-over-five-years
http://business.inquirer.net/210705/china-fixes-yuan-at-over-five-year-low-against-dollar

2. fed will likely increase rates 0.25% on next FOMC meeting june 14-15 (which among other things will further strengthen the USD vs all other currencies, except BTC).

3. both moves dilute rich yuan holders, who want dollars but cannot get them openly. BTC opens one crack through which capital can flow. [*]

4. BTC price in china has settled around CNY 3750 = USD $570 (vs. ~ USD $530 in west), but no real way to take advantage of that spread as US banks and markets closed monday for memorial day, and in any case capital controls make it difficult to acquire USD in china and move it out.

5. still spread seems large enough to be taken advantage of via third parties (buy BTC in west, sell it in china, pay chinese trading partner in yuan at 6-7% discount, minus perhaps 3-4% in financial costs).

6. recent movement is but the tiniest drop in the bucket of global trade / currency markets.

7. gold collapsing, bitcoin UP
http://in.reuters.com/article/global-precious-idINKCN0YL067


[*] POBC aware of this. are they behind the chinese mines (cf. KNC statement)? if so, what's their strategy, to control what they cannot stop?

 

[Norway]

@Bagatell @lunar
Yes, I speak swedish. It's very similar to Norwegian.

The translated part is the most interesting part. (Exept maybe the fact that they will be mining until the halvening.)

 

[_mr_e]

I wouldn't say that the Chinese miners are highly leveraged so much. I believe there are a few reasons why mining is so profitable for them.

For one, they are getting paid to swallow up electricity by the plants that were created in areas that ended up becoming ghost towns.

And two, the biggest reason, is that in China there is likely a premium on unregistered fungible value. These miners are able to convert their registered value into anonymous unregistered value through mining and they are likely happy to pay a premium for that (take a loss)

 

[Peter R]

We are beginning to publish our test results with Xthin and the Great Firewall of China (@solex, @sickpig, @theZerg, @Peter Tschipper, @Jihan, @cypherdoc)

Link to article (part 1 of 5):

https://medium.com/@peter_r/towards-massive-on-chain-scaling-presenting-our-block-propagation-results-with-xthin-da54e55dc0e4

Link to /r/btc discussion:

https://www.reddit.com/r/btc/comments/4lpzod/towards_massive_onchain_scaling_presenting_our/

Link to /r/bitcoin discussion:

https://www.reddit.com/r/Bitcoin/comments/4lq2dw/towards_massive_onchain_scaling_presenting_our/

 

[cypherdoc]

We need someone to do an exact translation of that Sam Cole interview. it's very important to understand what he thinks of the situation in mining to interpret what may be happening in China even if it is coming from his biased perspective.

@Dusty yes, those minutes are important. i have a tab open to remind me to comb thru them but they make my head hurt.

@lunar, @_mr_e i'd still think that any premium advantage the Chinese miners have would have already been arbitraged away by the electricity suppliers who are aware of all the money they would be making thru subsidy. i also still think many of them will be leveraged. gambling/leveraging is in their nature and if i were in their position, with a big advantage, i'd fill that advantage gap with leverage in an attempt to squeeze out competition and become an industry leader.

@79b79aa8 yes, Gold collapsing. Bitcoin UP. note how it's violated that little red line:

 

[Norway]

@Peter R, @solex, @sickpig, @theZerg, @Peter Tschipper, @Jihan, @cypherdoc
WOW! Great job, guys!!!
[doublepost=1464622878][/doublepost]@cypherdoc Ok, I'll do a translation now.

 

[cypherdoc]

spread slowly being arb'd away but with final result above $500, imo, and an eventual continuation of the rally:

[doublepost=1464624834,1464623855][/doublepost]Deconstructing the Bitcoin Market Cap

 I believe estimating that 2.5m is a healthy estimate for coins we will never see again, including Satoshi’s coins (risk percentage adjusted).

https://vinnylingham.com/deconstructing-the-bitcoin-market-cap-ce52b0d87035#.wacgy0aq2
[doublepost=1464625652][/doublepost]@Inca

if you read Vinny's article, you'll see that he and BitcoinBullBear are saying that $697 is their estimate for a major breakout level. at the same time, it also represents a major level of resistance or ceiling like you were asking me the other day. what's interesting is that the estimate of resistance i gave you correlates very closely to what they're saying; 4100-4200 yuan. all 3 of our estimates revolve around the June 2014 price peak.

 

[Norway]

@cypherdoc Here you are, sir:


KNC Miner Founder: “China has advantages we don’t know about”


By Viktor Strøm,

Monday may the 30th, 2016 14:10


Tougher competition than the company expected made KNC Miner apply for bancruptsy. “It was the responsible thing to do”, says Sam Cole, CEO and founder of KNC Miner.


KNC Miner applied last friday for bankruptsy at a swedish court. After just two years when the company got their first investments from VC’s like Creandum and Accel.


The reason for the bankruptsy is according to the parties involved that the number of bitcoin produced in total is halved in july.


“We have allways known about this halving, and that it will double our costs to mine bitcoin. What we didn’t know, was from what level this would be done. What it looks like now, is that it will be unprofitable with a small margin after the halving” says Sam Cole.


According to Sam Cole, KNC still have good profit margin on producing bitcoin. Especially after the rise in price the last days. But as the halved income is not enough to carry the costs after july, the board took the proactive descission to file for bankruptsy.


“We try to be responsible. We were convinced that we would not be profitable after july, so it’s better to file for bancruptsy now than being forced to this later”, he says.


Other reasons for the bancruptsy is a delay in the work on the latest generation computerchip “Solar”. Also the increased the competition from miners in China.


“The competition has increased more than we could know. When we do the math, it’s about hundreds of millions of USD invested in mining the last six months. Even with free electricity, we can’t understand how that can be profitable”, says Sam Cole.


Why do you think there is so much investments when it’s not profitable?


“I can only speculate. They might not know know what they do, but that would be unlikely, gien the large investments. They might have som kind of advantage in China that we don’t have or know about here.”, says Sam Cole.


In 2014, KNC had a turnover of 640 million SEK and lost 36 million SEK. Numbers from 2015 is yet to be public, but according to Sam Cole the turnover was lower because they stopped selling hardware to consumers.


“We will have a loss in 2015, because we invested in a new data center in december”, says Sam Cole.


KNC Miner have three computer centers in Boden, and was about to finish a fourth. The computer halls are part of what the bankruptcy manager now will try to sell.


KNC also has a few million SEK in cash and around 7 million SEK in bitcoin.


“There are many things we have developed that could be valuable, both harware and software for blockchain. We also have investments in subsidiary companies. We’ll just have to see what people are willing to pay for it”, says Sam Cole.


The hardware in Boden can only be used to mine bitcoin or similar cryptocurrencies. Mining Ether is not an option.


To Sam Cole, the bankruptcy means he must help taking down what he has been builing up.


“I have worked with this company for three years. At the same time, I got two kids, so it has been very hectic. I’m glad I did it, but it’s sad to see it stop here. Now, I look forward to do something just as exiting again”, he says.

 

[cypherdoc]

@Norway

thank you so much. great work.

let me think about this some more. several interesting tidbits in there.
[doublepost=1464626999,1464626279][/doublepost]everybody starting to talk/tweet about Gold collapsing Bitcoin UP again:

 

[_mr_e]

@cypherdoc Did you understand what I meant when I say there is a premium on unregistered value within China? This has nothing to do with electricity costs and has everything to do with being able to convert their registered $'s into an unregistered anonymous form. This comes with a premium of which the miners are willing to pay, and hence they likely are mining at a loss.

Mining bitcoin, like gold, is likely geographical and will move to wherever the most value can be extracted. (value not necessarily meaning bitcoins)

 

[theZerg]

why are only newly minted btc unregistered? A few txns after an exchange and normal BTC is pretty anonymous

EDIT: What's your opinion and why: Was the China rise held back by the price disparity between east and western exchanges?

 

[Mengerian]

*Not sure about prior to 2012, since /u/azop hasn't included the data

Here's the stability chart going back to Jan 2011

Source: http://bitcoinstability.github.io/bitcoinstability/#/stability

 

[_mr_e]

Buying on exchange requires crazy identity anal probes and tracking of how much you bought and sold. Purchasing and running mining hardware does not come with such regulations.

And who says the rally has been held back? This was never going to be a straight line.

 

[79b79aa8]

@cypherdoc Did you understand what I meant when I say there is a premium on unregistered value within China? This has nothing to do with electricity costs and has everything to do with being able to convert their registered $'s into an unregistered anonymous form. This comes with a premium of which the miners are willing to pay, and hence they likely are mining at a loss.

yes but on this theory, to the chinese tax authorities it looks like miners are simply burning money away. literally turning hundreds of millions of dollars (as per KnC estimate) into heat and nothing else -- can that fly, and for how long? unless [TINFOIL] the authorities are in on it [/TINFOIL], which reading between the lines is what sam cole seems to be implying.

What's your opinion and why: Was the China rise held back by the price disparity between east and western exchanges?

i'd say, yes. yuan holders trying to convert to USD via BTC moved the price >10% in two days and created a >7% spread with western exchanges . . . there is only so much influx the system can absorb before the distortions are untenable, and the move as a whole not worthwhile anymore. remember, the yuan devaluation was less than 1/2 a percentage point to begin with.

EDIT: the rise in BTC price wouldn't matter much to them if they immediately are selling for USD in the west (buying higher but also selling higher), but the spread among exchanges does imply a loss.

 

[Peter R]

This is funny, the deleted comment used to say something fairly innocuous like 'you can use it now but not if you're running Core."

 

[cypherdoc]

And hence the spread needs time to come in a bit before the rally can continue.

yes but on this theory, to the chinese tax authorities it looks like miners are simply burning money away. literally turning hundreds of millions of dollars (as per KnC estimate) into heat and nothing else -- can that fly, and for how long? unless [TINFOIL] the authorities are in on it [/TINFOIL], which reading between the lines is what sam cole seems to be implying.




i'd say, yes. yuan holders trying to convert to USD via BTC moved the price >10% in two days and created a >7% spread with western exchanges . . . there is only so much influx the system can absorb before the distortions are untenable, and the move as a whole not worthwhile anymore. remember, the yuan devaluation was less than 1/2 a percentage point to begin with.

EDIT: the rise in BTC price wouldn't matter much to them if they immediately are selling for USD in the west (buying higher but also selling higher), but the spread among exchanges does imply a loss.

 

[Peter R]

Now they deleted the top comment in the Xthin thread (which simply asked "when can I start using this on my node?"):

 

[Inca]

Rampant poisonous censorship continues.

Simply post a thread containing those pictures as a thread on /r/btc @Peter R to highlight the stupidity. #not_invented_here

--

If this really is the start of a major bull move in bitcoin then the old saying 'a rising tide lifts all boats' should hold true for alternate cryptocurrency chains. I would predict a similar move to 2013 with a rapid rise in bitcoin and then some value moving to other chains which seem cheap all of a sudden, sparking rallies in those, too.

Let's get a rally lit properly in bitcoin first! Hopefully the MSM will start resurrecting bitcoin from the dead next week and spark some new money into the space.

Furthermore, I have been wondering if the timing for this sudden rally is actually not simply a pre-Halving phenomenon, but the exact timing may have been from very large (Chinese) holders seeing coinbase pivoting away from bitcoin and wanting to prevent a capital slide out towards that chain. I don't buy a 0.5% yuan depreciation being responsible for capital outflows into bitcoin as a realistic meme, contributory yes, but nothing more than that.

 

[Peter R]

 

[Zangelbert Bingledack]

Someone commented something like, "I thought Greg had debunked this. Why's it being upvoted?"

Future??:

<mods converse>

<someone turns on Ride of the Valkyries>

<modding intensifies>

<people start asking about the modding>

<thread turns into a total mess>

"Commence default sorting by controversial!"

<people point this out, unreddit.com shows a river of red>

"Fuck it, let's just delete the thread. It's about an altcoin anyway."