Upcoming Bitcoin SegWit Deadline, Ethereum Falls, and Tierion ICO

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Published : July 15th, 2017
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What Is SegWit2x and How will it Change Bitcoin?

The upcoming SegWit activation deadline on August 1st is expected to cause more volatility in the price price action for Bitcoin. However, it remains to be seen in which direction it will trend. But what exactly is SegWit and what does it mean for you?

The start of this scaling debate started years ago. In order to protect from cyber attacks, Bitcoin was designed to cap the amount of information on its network. That puts a ceiling on how many transactions it can process, which is known as the “block size” limit. Now, transaction times and processing fees have soared to record levels this year. This has slowed the adoption of Bitcoin and the ability to process payments.

To address this problem, two schools of thought emerged. On one side are the miners, who use costly computers to verify transactions. They are now proposing a straightforward increase to the block size limit.

While both sides have big incentives to reach a consensus, the lack of a central authority has made compromise difficult to say the least. The crypto community has been following the dispute’s ongoing saga and nobody knows how it will all play out. Many are now bracing for volatility and as we will soon find out which side will be victorious.

According to a recent Bloomberg article, traders are worried about steep price declines and volatility, which would prove to be a buying opportunity. Arthur Hayes was quoted as saying, “It’s a high-stakes game of chicken.”  He’s a former market maker at Citigroup Inc. who now runs BitMEX, a Bitcoin derivatives venue in Hong Kong. He went on to say, “If you’re a trader, there’s a lot of uncertainty as to what happens. Once there’s a definitive signal about what will be done, the price could move very quickly.”

As it stands right now, the protocol stands on the cusp of major changes to its code. To understand this turbulent time, you have to first understand some of the technical details involved and go back into history.

This first started with, “The New York Agreement” which is sometimes referred to as “the (Barry) Silbert Accord” or “SegWit2x,” and is a scaling agreement created within a group of large international Bitcoin companies. It was published just before the Consensus 2017 conference in New York last May. This agreement is a fork of the Bitcoin Core software client is being developed under the name “BTC1.”

According to Coindesk, SegWit2x is not the first proposal for scaling bitcoin’s transaction capacity. SegWit2x, though, differs in some key ways.

“These include: 1. It was not put forward by, nor has it been endorsed by, Bitcoin Core, the network’s main open-source developer team. 2. It doesn’t introduce new ideas so much as combine those previously proposed by various developers in a new way.”

It’s even better explained like this: SegWit, or Segregated Witness is basically an “add-on” that carries signatures and some additional data. It is completely ignored by old nodes on the network, but recognized by new nodes. The data they carry is not hashed along with the other parts of a transaction into the transaction ID. SegWit2x is actually a combination of both SegWit and a 2MB hard-fork (to activate three months after SegWit). So: 1. SegWit requires 95% of the mining hashrate. And 2. SegWit2x requires 80% of the mining hashrate.

But this is exactly where things get tricky. Agreeing to initiate a hard fork without knowing how investors and holders will react to such a change comes with risks. If there is not full support for the hard fork from bitcoin holders, the result could be a split of Bitcoin into two separate cryptocurrency networks, which could cause brand confusion. Essentially there would be 2 versions of Bitcoin.

Even though more than 80 percent of the network hashrate has agreed to run the SegWit2x code, it’s possible that speculators will prefer the non-hard fork chain. This happened with the Ethereum fork last year and we still have an Ethereum Classic token, which was actually the original Ethereum blockchain.

Since Bitcoin works by hash rate, just like Ethereum, “true” or “valid” Bitcoin is based on whoever has 51%+ of the hash power as well as the longest chain of work (which automatically means the one with more hash power since they would be mining blocks faster). Hash power is the only metric that can’t be faked.

Photo Credit: Bitcoin Magazine

Things could get especially problematic for wallets and exchanges. Generally, they’ll want to support both coins if they can. But, doing so could require chain reorg protection (so called “wipeout” protection) and transaction replay protection. Users need to make sure their wallet has “replay protection” in case this were to happen.

A Reddit user posted a countdown online: http://www.segwitcountdown.online/. Whatever happens, either could be a good scenario. If the price does drop, it could be a tremendous buying opportunity. If it doesn’t, then holders will be rewarded for hanging in there and the price could really rally based on the successful protocol change.

Bitcoin Price Action

Many have weighed in on Bitcoin’s price recently and there are now two camps. The price was holding study above $2,300 this week until today, when it broke down to near $2,225 as investors got even more worried about the short-term future. Some believe Bitcoin will rally after August 1st with a successful change to the protocol. Others aren’t so optimistic. Either way, many say, Bitcoin is about to break out in what commentators expect to be a large move.

Bitcoin has been trading on average between $2,400 and $2,800 since June 16th, which is a considerably less volatile period to that which preceded it, according to data from Coinmarketcap. More recently, Bitcoin has taken a back-seat as short-term investors have been focused on alt-coins such as Litecoin in recent weeks. Even Ethereum has dropped and remained near $200 after a strong volatility at the end of June.

Ethereum’s Ether Token Falls Below $200

Over the past year, the price of Ethereum’s Ether increased from $10 to $242, increasing by a staggering rate of 2,320%.

But just this past week, the price of Ether, the native cryptocurrency powering the Ethereum blockchain, fell below $200 for the first time since 30th May.

During the day’s session, the price of one ether token hit an inter-day low of $192.22 across major exchanges, its lowest value in over 40 days of trading, according to data from cryptocurrency price information provider Coinmarketcap.

Even with the declines, the price of ether is still up substantially over the course of 2017, having risen over 2,000% from roughly $8 on 1st January according to Coindesk. Even though there have been many talking about Ethereum’s market cap surpassing Bitcoin, it has not happened. But there is still broad optimism about the asset among traders, who believe it to be a rare cryptocurrency that has established a viable value proposition by enabling token issuance.


Photo Credit: Coin Telegraph

Part of the reason Ethereum has taken off is due to the emergence of the Enterprise Ethereum Alliance (EEA) and the initial coin offering (ICO) market. Recently, Cointelegraph reported that the ICO market crossed the $1 bln mark, officially becoming a billion dollar market on its own. Furthermore, many organizations are experimenting with the Ethereum network and its smart contract technology. These include large companies with deep pockets within the EEA including BHP Billiton, JPMorgan Chase and Microsoft. Large companies hope that smart contracts will automate certain processes and operations, resulting in Billions of dollars in operational savings.

ICOs are continuing to attract more investors from both the cryptocurrency community and institutional investors. Among the top 10 cryptocurrencies, most saw steep declines, with ripple, ethereum classic, dash, IOTA and NEM falling over 16%.

BlackRock Manager says Cryptocurrency Market Charts Look ‘Pretty Scary’

According to Reuters article, Richard Turnill, a Global Chief Investment Strategist for BlackRock made comments on the state of the cryptocurrency market. He remarked: “I look at the charts, and to me that looks pretty scary.”

For some crypto fans though, it comes as no surprise that an exec at a large asset manager would make bearish remarks on cryptocurrency in general. After a quick review of Mr. Turnhill’s resume on the Blackrock website, it reveals he Mr. Turnill worked in the international division of the Bank of England as an economic advisor–the very type of establishment Bitcoin disrupts.

In remarks, Turnill also said that, he believes the market wouldn’t pose any risks to the broader financial market in the event of a steeper sell-off.

“There’s no evidence that if that price went to zero tomorrow that there’d be any broader financial implication over time, but to me it is example of where you’re getting some big price movements in the market,” he said.

Top Banking Exec from White-Show Firm Brown Brothers Harriman & Co. Backs Ethereum Over Bitcoin

Furthermore, it should come as no surprise that top executives at in the banking world are taking notice of cryptocurrencies. Despite the fact that most of them want to harness the power of Blockchain-based, tonkenless financial models, many of them still comment on the price of Bitcoin and other cryptocurrencies.

One executive, Mike McGovern, is the new head of Investor Services Fintech Offerings at Brown Brothers Harriman & Co., which is one of America’s oldest private banks. McGovern said, “When looking at Bitcoin Blockchain versus Ethereum, there’s no doubt Ethereum is superior. It doesn’t cost as much to mine Ether tokens because it requires less electricity than Bitcoin. Ethereum is not only cheaper than Bitcoin, it is also more robust and has more applications outside of simply financial transactions such as represent virtual shares, assets, proof of membership, and more..”

Tierion Announces it’s ICO: The Tierion Network Token (TNT)

Tierion, a blockchain proof-of-existence or digital notary company, announced the Tierion Network Token (TNT), a publicly tradable digital asset that will be built on the Ethereum blockchain. The news has been described in their new white paper that Tierion’s token will help to support the network effect that supports its Chainpoint protocol. This is a technology the startup developed in 2015 and it enables users to create time-stamped proofs using public blockchains.

The Tierion Token Sale will open to the public on July 27, 2017, at 6:00 AM PT, with pre-sale starting on July 17th.

According to an email sent via the company, they gave more insight on the ICO to potential investors: “We’ll be sharing important information with you between now and then, so stay tuned! In the meantime, feel free to check out the website for frequent updates and join us on Telegram for a lively discussion of the Token Sale and the Tierion platform, as well as updates from the team in real time.

If you have indicated that you are interested in purchasing over $50,000 in TNT tokens with assured allocation, you can join our pre-sale. A member of our team will contact you via email shortly with details. We’ll be processing pre-sale / pre-funding requests starting on July 17th through to July 27th, depending on availability, and may choose to limit or suspend depending on demand.”

Switzerland Approves Bitcoin Asset Management Business

According to Reuters, private bank Falcon announced this past week it would immediately begin storing and trading bitcoins on behalf of its wealthy customers via the bank’s cash holdings. This is a powerful signal and a move that starts the positive traction of virtual currency in slow-changing asset management space.

The fact is that the Greyscale Bitcoin Investment Trust still trading at a ridiculous premium. Plus, a Bitcoin ETF is unlikely to be approved by the SEC. So, it does make sense that private wealth managers will try to cater to wealthy customers interested in bitcoin.

Falcon received approval from Swiss regulators, marking the first time they’ve authorized a Swiss private bank to work with bitcoin, according to CNBC.

Arthur Vayloyan, global head of products and services for Falcon, said in a statement: “We are proud to be the first-mover in the Swiss private banking area to provide blockchain token asset management for our clients. Falcon is convinced that the time is right to enter this nascent market and it is our firm belief that this new product will fulfill our clients’ future needs.”

Charlie Lee Tries to Keep Litecoin Going After Leaving Coinbase

The Litcoin community celebrated recently when Charlie Lee, who created the litecoin project while working at Google in 2011, finally left his full-time position at Coinbase. He had served as director of engineering since 2013.

Back in May, he left after Litecoin successfully upgraded to Segregated Witness (SegWit), something Bitcoin hasn’t done yet, but it’s in the works.

That’s when the Litcoin made a comeback after years of decline and inactivity.
As it started to look likely that the cryptocurrency would activate the change, the public blockchain saw a burst in developer activity, a hike in price and renewed attention in the press and on social media. Some developers saw Litecoin as a possible testing ground for ideas that might one day be adopted on Bitcoin–which has proven true with SegWit.

After the initial wave of buzz has now mostly slowed down, developers are still optimistic about the future. The Litecoin Foundation was recently formed with the mission of advancing the cryptocurrency, and the price seems to be attractive on a relative value basis to Bitcoin before the big August 1st deadline.

Audience Member Holds ‘Buy Bitcoin’ Sign During Yellen Testimony and Nets Over $15,000 After it Goes Viral

The bitcoin community went crazy this week when, during an appearance before a Congressional committee by Federal Reserve chair Janet Yellen, an attendee held aloft a “buy bitcoin” sign. The image, written in black ink on a yellow legal pad, quickly went viral.

According to Reddit, soon after his appearance, it emerged that the individual is a friend of a cryptocurrency trader who tweets under the handle “CryptoEthan”. He posted a picture of the person which was soon known as the “Bitcoin Sign Guy” who shared a bitcoin address as well. The address has garnered over 6 BTC, an amount worth around $15,000 at the then current prices.

Let us do all of the research for you! If you want our top cryptocurrency picks, ICO’s we believe will be successful, fundamental and technical research, trade alerts and our monthly letter, The GSB Contrarian Report, simply sign up here.

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Jason Hamlin is the founder of Gold Stock Bull, a site providing investment strategies for profiting on the bull markets in Gold, Silver and Alternative Energy. Jason has a background in market research with ACNielsen, and has developed an expertise at analyzing data, charts and market trends for several Fortune 500 companies around the world. Jason has an in-depth knowledge of investing, has passed the Series 65 Uniform Investment Adviser Law Examination and has been tracking the secular bull market in precious metals since its inception.
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