Category Archives: Bitcoin
Meet the KFC Worker Who Ran a Bitcoin Drug Empire From His Attic – Bitcoinist
A British KFC worker has been sentenced to 8 years in prison for running a million pound drug operation from his house in Leicestershire. Drugs, 1.8 million cash and over 300,000 in Bitcoin were seized by local police.
In 2017 police executed a search warrant on Paul Johnsons home, where they found large quantities of several class A and class B drugs including ecstasy, cocaine, ketamine, and cannabis. Johnson had been selling the drugs nationwide via post, according to the local report.
Between August 2016 and November 2017 UK Border Control intercepted 20.8 kilos of packages addressed to Johnson at three delivery addresses he had rented, of which 40 per cent were class A drugs They amounted to a quarter of a kilo of cocaine, 8.1 kilos of ecstasy tablets and powder, three kilos of the horse tranquiliser, Ketamine, and eight shipments of cannabis, each variously weighing between half a kilo and four-and-a-half kilos.
Johnson, his wife Lia, and their young daughter lived in a quiet neighborhood in the English midlands. They gave no indication of the large-scale narcotics operation taking place in the attic of their home.
According to Johnsons attorney, he entered the drug trade in 2015 after having difficulty finding a suitable job and was not part of a larger criminal gang.
Johnson ran his operation on the dark web, and continued long after authorities began to intercept his packages. Police claim that at the time of his arrest he had amassed GBP 1,868,946 as well as Bitcoin worth 314,358, all of which has been seized.
Lia Johnson has received a two year sentence.
Critics of cryptocurrency have long claimed that blockchain assets, notably Bitcoin, are primarily used by criminals such as Johnson. Bitcoin first gained this reputation in 2014, when U.S. authorities shut down the Silk Road, a large crypto-based online marketplace that featured drugs as well as many other illegal products. Silk Roads operator, Ross Ulbricht, is currently serving a life sentence.
Cryptos association with criminal activity is contentious and complex. Its borderless, anonymous architecture makes it well-suited for illegal transactions. On the other hand, the overwhelming majority of cryptocurrency transactions are legal. Also, criminals have long been able to launder their assets, and there is little to indicate that blockchain technology will change their behavior for the worse.
Aside from drugs, authorities are deeply concerned with the use of blockchain assets to fund terrorist and extremist groups. For example, a man in the United States has recently pled guilty to selling illegal guns to neo-Nazis in exchange for Bitcoin.
Also, Israeli researches have linked several Bitcoin wallets to Palestinian extremists.
Whereas blockchain assets clearly represent a challenge for law enforcement, they are also a remarkable tool that promise to radically improve the lives of millions across the globe.
Do you think Bitcoin plays a key role in fuelling drug crime? Add your thoughts below!
Images via Shutterstock, Leicester Mercury
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Meet the KFC Worker Who Ran a Bitcoin Drug Empire From His Attic - Bitcoinist
Bitfinex Bitcoin whale hints recent BTC rally to $9,850 is manipulated and unsustainable – CryptoSlate
Joe007, a well-known whale who trades with massive size, hinted that the recent Bitcoin rally to $9,800 is manipulated. According to the Bitfinex Leaderboard, Joe007 has traded $68 million in volume in the past week alone. Why is the Bitcoin upsurge manipulated? Ever since the Bitcoin price was at around $8,300, major platforms like BitMEX []
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Bitfinex Bitcoin whale hints recent BTC rally to $9,850 is manipulated and unsustainable - CryptoSlate
Will Genesis upgrade signal the beginning of the Bitcoin financial powerhouse? – ZDNet
The Bitcoin SV network is preparing for a hard fork protocol upgrade on Feb. 4, 2020, which is code-named the Genesis upgrade.
This significant upgrade is planned to include a set of protocol restoration changes that represent an almost complete return to the original Bitcoin protocol documented in the white paper in August 2009
This upgrade will restore the original Bitcoin protocol, keep it stable, and allow it to massively scale by removing the limits that can be set in a block. And its going to completely change the way that Bitcoin is used on the blockchain. The Bitcoin Association believes that Bitcoin SV is Bitcoin.
By removing the limits on a block and enabling scaling up to 2GB per block, Bitcoin SV blockchain will be able to support significantly higher transaction volumes and more transaction fees for miners.
Fees for transactions across the blockchain will change too. For two parties without trust, the fee rate should remain at 1 satoshi/byte until after the Genesis hard fork of the Bitcoin SV network.
After Feb. 4, 2020, blockchain service provider TAAL predicts that there will be a change to the default fee rate to 0.5 satoshis/byte and a change of relay fee to 0.25 satoshis/byte. A satoshi is the smallest divisible unit of a Bitcoin charged per byte of data.
These tiny, insignificant transaction fees are predicted to entice enterprises to utilize the technology. It is far cheaper and more efficient to store data and transactions on the ledger than it is to store it in a data center -- or the cloud.
Due to this upgrade Bitcoin usage is predicted to explode in late February as most network-wide limits are removed from the scripting language and network propagation rules.
There has been a push for several years to remove the limits due to the block subsidy "halving" event that happens in May.
Then, the reward that miners receive will be cut from 12.5 Bitcoin BTC to 6.25. Miners are in this to profit, and without the subsidy, mining BTC is not profitable and could reduce the chances of Bitcoin BTC success.
However, all are not happy with Bitcoin SV Genesis upgrade plans. Miners of other Bitcoin protocols, such as Bitcoin BTC, seem to feel threatened by Craig Wright, who I think is indeed Satoshi Nakamoto, the creator of Bitcoin.
Bitcoin BTC has completely changed, mainly due to the software soft fork Segwit (Segregated Witness), implemented on Bitcoin BTC in August 2017.
Anonymous tweeter and supporter of Bitcoin SV @Street5Wall reckons that these changes have fundamentally changed BTC -- so much that it is no longer considered Bitcoin anymore.
Many other changes were made to the original Bitcoin protocol that essentially made BTC unusable except as a "collectible," which is totally not what its creator Satoshi had in mind.
The Genesis upgrade to Bitcoin BSV completely restores the Bitcoin protocol to its original version on Feb. 4, 2020, and removes all block size caps (currently at 2GB on BSV compared to 1MB on BTC).
BTC is only capable of seven transactions per second compared to 140,000 transactions/sec on BSV. Genesis will increase that number dramatically. BSV can already handle more transactions/sec than credit card company Visa.
Bitcoin BTC transaction fees are already high. In 2017 there was a "bubble" where some transactions were costing upwards of $50. Because of the small block limit -- 1MB -- for transactions, the queue became longer and made transactions significantly longer to confirm.
Bitcoin BTC could probably suffer as a result of the Genesis upgrade -- perhaps as early as May 2020, as the block reward for mining reduces from 12.5 to 6.25 BTC per block.
Being able to scale is really important. The BTC limitation of 1MB blocks was always designed to be a temporary limit.
If the lost revenue can not be recovered with transaction fees, then miners will go away and BTC will suffer. By removing the limits, as Satoshi intended,
Bitcoin can be used freely by businesses and people. More transaction capacity equals more fees, even if those fees are only 1/3 of a cent.
As mentioned in the original white paper, Bitcoin was intended to be scalable from day one without side chains forming such as the 'Lightning Network' and others.
The upcoming Genesis upgrade on Bitcoin SV will remove these limits as originally intended by the designer of the original blockchain protocol and return Bitcoin to its original scalable state.
The problem with the Lightning Network is that it removes the economic incentive for miners to transact across the network as miners feel that revenue will go to the second layer -- not the miners themselves.
The Lightning Network does not seem to work successfully as it is an anonymous network with no public ledger of transaction recording.
The challenge is that people cannot send Bitcoin BTC. It is too expensive to use.
Perhaps large organizations will begin to announce Bitcoin integration into their business models once the Genesis upgrade has proved itself capable of scale.
Some enterprises could have been waiting for a long time to utilize the technology but have possibly been discouraged due to the high transaction fees and ever-changing protocol.
Enterprises want a locked, stable protocol and fee structure before they commit time and resources to build applications on top of it, instead of then having to constantly change their development process whenever the base protocol changes.
The Blockchain conference taking place in London on Feb. 20 has two well-known -- outside the crypto world -- speakers, which seems to validate Bitcoin SV's credibility and could encourage mainstream investors to stand up and take notice: This could be the beginning for real large scale enterprise adoption taking Bitcoin BSV into uncharted enterprise territory.
The Genesis upgrade could signal a massive change in the way that people use Bitcoin. There could be very exciting times ahead for both Bitcoin miners and users.
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What would happen if Twitter or Facebook removed your account, deleted your posts, and silenced your communications? New app Twetch, built for the blockchain, aims to solve that issue.
From cryptocurrency to chocolate, where to spend your Bitcoin
So, you have invested wisely and now have lots of BitcoinSV to spend. But where can you spend your hard-earned cash? Here are some of the wide range of outlets that accept your cryptocurrency for real goods.
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James Howells wishes he could turn back time after throwing away a hard drive containing a fortune in Bitcoin
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Will Genesis upgrade signal the beginning of the Bitcoin financial powerhouse? - ZDNet
Warren Buffett Changes His Take on Bitcoin (BTC) Is This Real? – U.Today
During the overhyped meal with the Tron chief executive Justin Sun, which finally took place earlier this year, investment guru Warren Buffett did not say a singlebad word about Bitcoin to the Tron CEO and his guests: eToro CEO Charlie Leeand other top reps from the blockchain sphere.
While talking to Justin Sun and the other top reps of the blockchain and crypto industries, Warren Buffett spoke his mind on several major issues.
The old school investment guru said that Bitcoin still has a long ways to go to fulfillthe value of the blockchain. Therefore, he is certainthat his grandson will inherit his fortune not in Bitcoin but in good-old US dollars.
The DLT technology has great potential, reckons Buffett. A lot of the companies he has invested in, including JP Morgan, the banking giant, are studying blockchain and the opportunities it may offer. As per Justin Sun, the investment guru is curious to see how DLT will change the sphere of payments in the next decade.
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Being of a positive opinion of Elon Musk as an entrepreneur, Buffett thinks that Tesla shares are not the best asset to invest in at the moment Tesla has too many competitors in the market who havea lot of cash and who will not go away, the investor believes.
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Warren Buffett Changes His Take on Bitcoin (BTC) Is This Real? - U.Today
Dutch university pays $220K in Bitcoin to alleged Russian hackers – The Next Web
A Dutch university resorted to paying hackers $220,000 in Bitcoin BTC to release computer systems held for ransom since Christmas Eve, reports Reuters.
University of Maastricht vice president Nick Bos announced at a press conference on Wednesday it had bowed to the cyberattackers demands, as it otherwise wouldve had to rebuild its entire IT network to get back online.
The damage of that to the work of the students, scientists, staff, as well as the continuity of the institution, can scarcely be conceived, said university vice president Nick Bos, as quoted by Reuters.
Bos confirmed the attackers gained entry to the network after compromising an employees email account in November 2019 via phishing.
By December 24 last year, the hackers had encrypted the universitys computer systems, including workstations and email servers, and demanded 30 BTC for a tool to unlock them (worth $216,000 then, $294,000 today).
Cybersecurity firm Fox-IT, hired by the University of Maastricht to recover its systems, found Russian-speaking cybercriminal group TA505, also known as Evil Corp, responsible for the attack.
The US Department of Justice believes TA505 has caused over $100 million worth of losses since its inception, having hit financial institutions and retailers in several countries with its information-stealingDridex malware.
A recent investigation found more than 1,000 potential TA505 victims across the world.
Ransomware incidents like these persist across the world. In the past two years, hackers have taken over the computer networks of governments, businesses, hospitals, and schools,often demanding millions of dollars in cryptocurrency (mostBitcoin) for a decryption tool.
Theyre indeed so prevalent that the FBI issued a warning in October urging ransomware victims not to pay their hackers, lest they be encouraged to carry out more attacks.
As for the University of Maastricht, its computer systems are reportedly back online and now fully operational.
Published February 7, 2020 11:27 UTC
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Dutch university pays $220K in Bitcoin to alleged Russian hackers - The Next Web
Lightning Labs Raises $10M Series A to Be the ‘Visa’ of Bitcoin – CoinDesk
Lightning Labs has raised $10 million in Series A financing as it gears up to launch its first paid service for merchants looking to accept bitcoin payments.
Craft Ventures led the round, with Managing Director Brian Murray joining Lightning Labs board of directors. Other investors include Slow Ventures, former Goldman Sachs co-head of securities David Heller, Avichal Garg of Electric Capital and Ribbit Capital.
The funding round suggests some investors see the San Francisco-based startup as one of the few protocol-oriented firms with a prospective business model.
If bitcoin is going to reach its potential as a viable global currency, its going to need to scale beyond the base layer, Murray said. Similar to how Visa relieves banks from handling all fiat currency traffic, Lightning relieves the base bitcoin chain from handing all transactions, thus bring more speed and fee efficiency to the network.
Stepping back, Lightning Labs released a beta version of the scaling solution LND in 2018 and previously raised $2.5 million in a seed round from investors including Twitter CEO Jack Dorsey, Square executive Jacqueline Reses, litecoin creator Charlie Lee and former PayPal COO David Sacks. Lightning Labs also launched a mobile wallet app in June 2019, and as of today the company is offering a paid service called Lightning Loop.
Loop aims to help merchants manage their payment channels more effectively. Lightning payment channels need to have bitcoin in them in order to stay open, which is a problem for those who actually use these channels without a perfectly balanced in-and-out flow.
Loop in helps people put funds into their existing channel kind of like a prepaid debit card for a lightning account, Lightning Labs CEO Elizabeth Stark said. Loop out is currently the most popular product because it allows people to continue receiving funds on lightning.
This service, which will charge a small percentage of each full loop, helps merchants and exchanges maintain liquidity in the channels.
With nearly a dozen lightning startups sprouting up over the past two years, Stark said her startup will distinguish itself by becoming an infrastructure provider to other startups.
The first Lightning Conference in Berlin attracted 500 participants in 2019, so there may initially be a small pool of developers and service providers willing to pay for back-end support. The way I see it, there will be an aggregate of financial services, of which Loop is one, and you can batch all of those, Stark said. The blockchain becomes an anchor layer for other Layer 2 services on lightning.
One example might include the shopping app Fold, which processed roughly 1,600 lightning payments during the 2019 holiday shopping season.
"Were growing fast and Lightning Labs loop service makes it simple to manage our lightning nodes liquidity, letting our team focus on building out great user experiences that bring lightning to the world," Fold's Will Reeves told CoinDesk.
Infrastructure spending
Beyond Loop, Stark said her startup will focus on options for larger payment channels in 2020, both opt-in channels that can individually hold more than $1,500 and Atomic Multi-Path Payments, which break payments into smaller parts and are able to return the whole amount if all the small parts dont promptly arrive at the same recipient.
River Financial CEO Alexander Leishman said his exchange startup, which uses LND to offer users lightning liquidity and trading functions, said Lightning Labs and ACINQ are the only two startups in the space focused on the nitty gritty of protocol development.
If it allows us to support larger amounts [of bitcoin] off-chain, it improves the experience for our users. Weve already had users that are frustrated with the [Lightning Networks] limits, Leishman said. Services that would make [lightning transactions] easy for us are definitely of interest.
Stark, who is an adviser to Leishmans exchange, said her goal for Lightning Labs is to enable automated services so the network will just work without clients needing to tamper with channel allocation and flows. The peer-to-peer messaging app Sphinx also uses LND, which Murray said is only possible because of what Lightning Labs is building.
Lightning Labs is building the channels for bitcoin to fulfill its promise as a medium of exchange, a means of micropayment, as remittance infrastructure, and much more," investor Jill Carlson of Slow Ventures said in a press release.
Murray agreed, adding he strongly believes the infrastructure behind popular mobile apps will take a different shape over the next decade because it will enable direct payments between peers instead of reliance on a third-party provider that monetizes user data.
In the meantime, Stark is optimistically curious about the ability to send small amounts of data and have payments attached to them.
Speaking more broadly of the batched services Lightning Labs will offer by this time in 2021, she concluded: These are lightning-native financial services that help improve the network.
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
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Lightning Labs Raises $10M Series A to Be the 'Visa' of Bitcoin - CoinDesk
Bitcoin Starts Convincing Rally To $10K After Short Term Correction: Here Are Key Hurdles – newsBTC
Bitcoin price remained well bid above $9,000 and rallied to a new 2020 high against the US Dollar. BTC is now trading nicely above $9,500 and signaling a strong increase to $10,000.
Recently, there was a downside correction in bitcoin from the $9,600 area against the US Dollar. BTC traded below the $9,400 and $9,300 levels, before the bulls took a stand above $9,000.
A swing low was formed near $9,079 and the price started a fresh increase above the $9,200 resistance area. The bulls gained pace and pushed the price above the 100 hourly simple moving average and the $9,500 resistance area.
Finally, there was a break above the $9,600 resistance area and the price traded to a new 2020 high at $9,764. Bitcoin is currently correcting lower below the $9,700 level.
It traded below the 23.6% Fib retracement level of the recent rally from the $9,076 low to $9,764 high. However, the previous resistance near the $9,500 and $9,520 levels is acting as a strong support area.
More importantly, there is a major bullish trend line forming with support near $9,460 on the hourly chart of the BTC/USD pair. On the upside, there are short term hurdles near the $9,700 and $9,750 levels.
Bitcoin Price
A successful break above the $9,750 level is likely to set the pace for a larger upward move. The main target could be $10,000, followed by $10,200.
On the downside, there are many key supports for bitcoin bulls near the $9,500 area. The next key support is seen near the $9,420 level. It coincides with the 50% Fib retracement level of the recent rally from the $9,076 low to $9,764 high.
Any further losses may perhaps lead the price towards the $9,340 level and the 100 hourly SMA, where the bulls are likely to take a stand.
Technical indicators:
Hourly MACD The MACD is about to move back into the bullish zone.
Hourly RSI (Relative Strength Index) The RSI for BTC/USD is currently rising and it is well above the 55 level.
Major Support Levels $9,500 followed by $9,420.
Major Resistance Levels $9,700, $9,750 and $10,000.
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Bitcoin Starts Convincing Rally To $10K After Short Term Correction: Here Are Key Hurdles - newsBTC
US Marshals Will Auction $40M in Bitcoin This Month – Coindesk
The U.S. Marshals Service is auctioning nearly $40 million in bitcoin, the first such auction since the end of 2018.
The Marshals will auction "approximately" 4,040 bitcoin, worth $37.7 million at press time, according to CoinDesk's Bitcoin Price Index, to registered bidders on Feb. 18, the press release said. Potential bidders must register by Feb. 12.
"The auction will take place during a six-hour period Feb. 18. Bids will be accepted by email from pre-registered bidders only," the release said.
Bidders will also be required to make a $200,000 deposit before being able to bid. Participants who do not win their bids will receive these back.
The bitcoin will be sold in four lots, with 2,500, 1,000, 500 and 40.54069820 bitcoin each. The first three lots are further split into blocks, each with their own set number of bitcoin.
The bitcoin for this month's auction come from more than 50 administrative forfeitures and legal cases, according to the Marshals' website.
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
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US Marshals Will Auction $40M in Bitcoin This Month - Coindesk
Bitcoin Rallies to Near $9150 as Stocks Drop Over Coronavirus Fears – Coindesk
Bitcoin is maintaining its upward trajectory as coronavirus-led risk aversion hits the traditional markets.
Thetop cryptocurrency by market value crossed the 200-day moving average at $9,000during Tuesday's Asian trading hours and rose to a high of $9,150, pushing thecumulative month-to-date gains to over 25 percent.
At press time, bitcoin is changing hands at $9,061. Despite the minor pullback from the morning's high, the cryptocurrency is still reporting a 4.8 percent gain on a 24-hour basis, and is up roughly $700 from lows near $8,250 observed over the weekend, according to CoinDesk's Bitcoin Price Index.
While bitcoin has kicked off the week on a positive note, stock markets across the globe are facing selling pressure.
Notably, the Dow Jones Industrial Average fell by more than 450 points on Monday with travel-related shares suffering sharp losses on fears the coronavirus outbreak in China could spread globally, hurting worldwide economic growth.
The virus, which first appeared in the Chinese city of Wuhan, is spreading fast. It has so far claimed more than 100 lives in China and the number of confirmed cases increased to 4,515 on Tuesday from 2,835 on Monday, according to the National Health Commission.
With bitcoin outperforming stocks amid the coronavirus scare, a few experts are convinced the cryptocurrency is drawing haven bids more so, as classic safe-haven asset gold has risen by just 0.65 percent so far this week.
The safe-haven argument, however, is not strong, according to prominent analysts like Alex Kruger. "Keep in mind that until Friday the narrative was 'Coronavirus pushing bitcoin lower'. It now is 'Coronavirus pushing bitcoin higher.' Some people try very hard to create narratives," he tweeted Tuesday.
Moreover, bitcoin picked up a strong bid below $7,000 at least two weeks before Chinese authorities placed Wuhan under quarantine on Jan. 23, sending equity markets into a tailspin, and has extended the rally over the last two days.
In fact, the virus outbreak could ultimately have a negative impact on crypto markets, Jason Wu, CEO and founder of non-custodial crypto lender DeFiner, told CoinDesk earlier this week.
Many Chinese crypto retailers tend to cash in on cryptocurrencies right before the Chinese New Year holiday and reinvest in the market in the next year, Wu said. With the virus outbreak, that money may not return to crypto markets, possibly leading to a price drop.
From a technical perspective, bitcoin is looking heavy and could suffer a minor pullback in the next 24 hours.
Hourly chart
The relative strength index charted a bearish divergence (lower highs) earlier on Tuesday, signaling bullish exhaustion, and dived out of an ascending trendline to indicate an end to the rally from lows near $8,250.
The MACD histogram is printing deeper bars below the zero line, indicating a strengthening of downside momentum.
4-hour chart
The current four-hour candle is flashing red, validating the buyer exhaustion signaled by the preceding inside bar candle, which occurs when the specific period's price action falls within the preceding period's trading range.
The RSI has also rolled over from the overbought (above-70) region, signaling scope for correction.
Both the hourly and four-hour charts are indicating the cryptocurrency could revisit the former resistance-turned-support at $8,793-$8,750 (horizontal lines on the four-hour chart).
A violation there would expose the next support at $8,530. If that level holds, bulls might breathe a sigh of relief and another attempt higher could be initiated targeting resistance at $9,000.
The odds of a pullback to $8,750 would weaken if the cryptocurrency finds acceptance above $9,150 during the U.S. trading hours. In that case, the recent high of $9,188 will likely be scaled.
It's worth noting that longer duration charts are aligned in favor of the bulls. So, pullbacks, if any, could be short-lived.
Disclosure:The author holds no digital assetsat the time of writing.
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
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Bitcoin Rallies to Near $9150 as Stocks Drop Over Coronavirus Fears - Coindesk
Buy the Pump, Sell the Dump Does Momentum Investing Work in Bitcoin? – Cointelegraph
Since the start of the year, Bitcoin (BTC) price has been as high as $9,200 a 2-month high while going as low as $6,900 on Jan. 3. Bitcoins volatility is one of the most frequently discussed issues that arise when investors evaluate Bitcoin as an asset class. However, its volatile behavior is what provides an opportunity for investors to take advantage of the price movements and make a profit.
Following predictions as optimistic as the $100,000 forecast based on the stock-to-flow model, investors may foresee another period of high price speculation, opening the door for a wider set of investment strategies.
On the other side, if investors end up experiencing a bearish scenario like the majority of 2018 and a portion of 2019, bolder strategies based on wide price movements may serve as a good alternative for market makers.
Cryptocurrency market weekly overview. Source: Coin360
Strategies based on large price movements have been exploited for decades in traditional markets, especially in stocks. One of those strategies is momentum investing. An investor evaluates the daily returns for a sample of stocks and identifies which one was the biggest loser and winner in the price for that day.
In traditional markets, it was found to be lucrative to buy the winner stock that day and hold it for a certain period (up to investor discretion) and sell (short) the loser stock. Usually, investors develop this strategy based on portfolios of best and worst-performing stocks instead of only choosing the best and worst performer from the chosen sample.
However, its not uncommon for the individual momentum strategy to also be applied among investors despite raising questions about investment diversification. Nevertheless, if diversification is found to be ineffective in the crypto space, as reported by Cointelegraph, an investor might expect better results from an individual momentum strategy instead of focusing on portfolios.
Firstly, we identify the top-20 cryptocurrencies in the market today and get the daily returns for each currency during 2019. Throughout a portion of last year, we have seen a bearish scenario in the market. However, Bitcoin picked up and ended the year with a cumulative return of 65%.
By analyzing this strategy for a period with such characteristics, we can present a bolder strategy for investors to take advantage of bigger swings in smaller currencies since the biggest coins showed modest gains.
Secondly, we identify which was the currency that had the highest (winners) and the lowest (losers) return from the top-20 currencies for each day in 2019.
After identifying the daily winners and losers, we assume that an investor buys its closing price that day and sells it the following day, also at the closing price. The closing price (latest data in the range at UTC time given by Coin360) is assumed for simplicity purposes as it is open for investors to decide the desired time to buy and sell during those days. Another variation of the strategy can consist of holding the coin for more than one day.
By employing this strategy every day in 2019, we find that an investor who buys the winners gets the best cumulative return of 140%. Whereas, an investor that buys the losers and sells them the following day retrieves a negative return for this period (-105%). In traditional markets, the strategy works in the same way with the investor buying the winners and sells the losers.
Such volatile behavior leads us to also look at a risk-adjusted performance measure since an investor must be compensated by the exposure to higher risk investment. When exploring this strategy buying the winners a Sharpe ratio (the measure of risk-adjusted return of a financial portfolio) of 1.11 is achieved, excluding transaction costs, which is an acceptable performance for the strategy.
January 2019-December 2019 momentum strategies (Buying Winners & Buying Losers) cumulative returns
As we would expect, lower market-capped coins appear more often as the best or worst performing currency in the market: Chainlink (LINK), Tezos (XTZ) and Cosmos (ATOM).
The same currencies appear in both scenarios much more often than with other currencies. As we would expect, the higher market capped coins appear less frequently as the highest/worst performers (e.g. BTC, ETH, LTC, XRP).
Currencies with most appearances as best and worst-performing currency during the sample period
Looking forward, an investor delving into these types of strategies should be aware of certain factors. The first is that we looked at the top-20 currencies in the market today and examined their returns for the last year.
Hence, some of the coins analyzed may not have been in the top-20 during some periods of 2019 as some may have just been recently launched or their volatility dislodged them from the sample. At the same time, currencies with volatile price swings may be included in some periods, raising the risk of the strategy but also the possible gains.
Another factor is the liquidity risk of employing such a strategy. When a lower market-capped coin sees a significant gain in price, it may be harder to buy it during a 24-hour period as most holders might expect the coin to go even higher or set very high sell limits for new investors to take advantage of this opportunity.
Finally, a strategy that is based on daily trading will incur high transaction costs. In this example, we exclude these expenses from the cumulative returns and Sharpe ratio calculations, which will cause a decrease in performance after computing the impact of operational costs.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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Buy the Pump, Sell the Dump Does Momentum Investing Work in Bitcoin? - Cointelegraph