Cryptocurrencies: Bitcoin and 'Spoofy'
* Bitcoin BTCUSD caught fire last weekend, taking out yet another record high and pushing above $50bn market capitalization for the first time ever. This after selling off in the wake of the split last week. This is THE brand-new entrant in digital currency.
* So-called Bitcoin Cash, which erupted out of the original Bitcoin on Tuesday last week, is the result of a small fraction of Bitcoin developers’ demand for a version of the popular crypto currency that allows virtual miners, which support the currency, to more rapidly process transactions in larger units known as blocks. After launch, a single Bitcoin Cash token was worth $626 after soaring 122% in less than 24 hours.
* Its emergence comes as the original Bitcoin is undergoing a separate fork, known as BIP 91 — another widely backed solution to the so-called scaling problem that expands the Bitcoin network without creating a separate version. The existence of parallel versions, has created some confusion in the cyber-unit industry and threatens to rattle Bitcoin participants, if only briefly.
* The nascent Bitcoin Cash — it is SO new that, unlike most digital currencies, it does NOT even have a logo….yet — comes as the industry is confronting growing pains, with a chorus of market participants urging for the adoption of software updates that would facilitate larger, speedier transactions. Bitcoin Cash is an attempt to solve processing issues by allowing blocks to be processed in 8-megabyte units, rather than the one-megabyte block the older version of Bitcoin uses.
* The split played out at 08.20BST on Tuesday 1 August, according to btcforkmonitor.info, which a site developed to monitor this so-called “fork” in the world’s largest digital currency. Because Bitcoin Cash is supported by a minority of developers and industry specialists, its future is uncertain and it will likely be prone to volatility. The cyber currency is presently backed by currency-mining and trading firm ViaBTC and Kraken Exchange, a San Francisco Bitcoin exchange operator.
* Meanwhile, a number of large digital currency exchanges including Coinbase, have said they are NOT supporting Bitcoin Cash transactions — for the moment, at least. Still, that has NOT stopped a rapid ascent for Bitcoin Cash. According to digital-currency data firm coinmarketcap.com, Bitcoin Cash already is the third largest crypto currency in the world at a market value of $10bn, just behind Ethereum’s Ether tokens, with a total value of $21bn and the original Bitcoin at $45bn.
* Bitcoin BTCUSD, meanwhile, was flat Tuesday, the day after the split, at $2,750.32, according to a prominent industry site Coindesk.
* So, what’s triggering the latest surge? Apparently, a VERY deep-pocketed trader (or group of traders), nicknamed “Spoofy,” is rumoured to be manipulating the Bitcoin market by employing his namesake tactic on the Bitfinex crypto currency exchange, according to Cointelegraph. Spoofing is when a trader makes a deceptive bid or offer with the intent of cancelling it before execution, thus giving the illusion that somebody is getting ready to buy or sell and potentially triggering a notable move in price.
* For example, if Spoofy places a large buy order that entices smaller traders to hop aboard, he can turn around and instead use the uptick to execute a sell order. We have seen it before in other markets, like when Navinder Sarao, the British trader accused of contributing to the 2010 stock market “flash crash,” pleaded guilty to using the shady tactic.
* So yes, spoofing is illegal, but since Bitcoin markets are mostly unregulated, it’s quite common, Cointelegraph reports. The difference in Spoofy’s case is that he’s got a massive bankroll that allows him to regularly place orders upward of $60 million. The BitCrypto’ed blog described the impact he’s had on Bitcoin. “Spoofy makes the price go up when he wants it to go up, and Spoofy makes the price go down when he wants it to go down,” the blogger wrote. “And he’s got the coin… both USD, and Bitcoin, of course, to pull it off, and with impunity on Bitfinex.”