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Bitcoin Core version 0.16.2 is now available from: https://bitcoincore.org/bin/bitcoin-core-0.16.2/ This is a new minor version release, with various bugfixes as well as updated translations. Please report bugs using the issue tracker at GitHub: https://github.com/bitcoin/bitcoin/issues To receive security and update notifications, please subscribe to: https://bitcoincore.org/en/list/announcements/join/ How to Upgrade If you are running an older version, shut it down. Wait until it has completely shut down (which might take a few minutes for older versions), then run the installer (on Windows) or just copy over /Applications/Bitcoin-Qt (on Mac) or bitcoind/bitcoin-qt (on Linux). The first time you run version 0.15.0 or newer, your chainstate database will be converted to a new format, which will take anywhere from a few minutes to half an hour, depending on the speed of your machine. Note that the block database format also changed in version 0.8.0 and there is no automatic upgrade code from before version 0.8 to version 0.15.0 or higher. Upgrading directly from 0.7.x and earlier without re-downloading the blockchain is not supported. However, as usual, old wallet versions are still supported. Downgrading warning Wallets created in 0.16 and later are not compatible with versions prior to 0.16 and will not work if you try to use newly created wallets in older versions. Existing wallets that were created with older versions are not affected by this. Compatibility Bitcoin Core is extensively tested on multiple operating systems using the Linux kernel, macOS 10.8+, and Windows Vista and later. Windows XP is not supported. Bitcoin Core should also work on most other Unix-like systems but is not frequently tested on them. 0.16.2 change log Wallet #13622 c04a4a5 Remove mapRequest tracking that just effects Qt display. (TheBlueMatt) #12905 cfc6f74 [rpcwallet] Clamp walletpassphrase value at 100M seconds (sdaftuar) #13437 ed82e71 wallet: Erase wtxOrderd wtx pointer on removeprunedfunds (MarcoFalke) RPC and other APIs #13451 cbd2f70 rpc: expose CBlockIndex::nTx in getblock(header) (instagibbs) #13507 f7401c8 RPC: Fix parameter count check for importpubkey (kristapsk) #13452 6b9dc8c rpc: have verifytxoutproof check the number of txns in proof structure (instagibbs) #12837 bf1f150 rpc: fix type mistmatch in listreceivedbyaddress (joemphilips) #12743 657dfc5 Fix csBestBlock/cvBlockChange waiting in rpc/mining (sipa) GUI #12432 f78e7f6 [qt] send: Clear All also resets coin control options (Sjors) #12617 21dd512 gui: Show messages as text not html (laanwj) #12793 cf6feb7 qt: Avoid reseting on resetguisettigs=0 (MarcoFalke) Build system #13544 9fd3e00 depends: Update Qt download url (fanquake) #12573 88d1a64 Fix compilation when compiler do not support __builtin_clz* (532479301) Tests and QA #13061 170b309 Make tests pass after 2020 (bmwiedemann) #13192 79c4fff [tests] Fixed intermittent failure in p2p_sendheaders.py (lmanners) #13300 d9c5630 qa: Initialize lockstack to prevent null pointer deref (MarcoFalke) #13545 e15e3a9 tests: Fix test case streams_serializedata_xor Remove Boost dependency. (practicalswift) #13304 cbdabef qa: Fix wallet_listreceivedby race (MarcoFalke) Miscellaneous #12887 2291774 Add newlines to end of log messages (jnewbery) #12859 18b0c69 Bugfix: Include <memory> for std::unique_ptr (luke-jr) #13131 ce8aa54 Add Windows shutdown handler (ken2812221) #13652 20461fc rpc: Fix that CWallet::AbandonTransaction would leave the grandchildren, etc. active (Empact) Credits Thanks to everyone who directly contributed to this release: 532479301 Ben Woosley Bernhard M. Wiedemann Chun Kuan Lee Cory Fields fanquake Gregory Sanders joemphilips John Newbery Kristaps Kaupe lmanners Luke Dashjr MarcoFalke Matt Corallo Pieter Wuille practicalswift Sjors Provoost Suhas Daftuar Wladimir J. van der Laan And to those that reported security issues: Braydon Fuller Himanshu Mehta As well as everyone that helped translating on Transifex. View the full article

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Jul 06, 2018 From the desk of Arthur Hayes Co-founder & CEO, BitMEX From The BitMEX Research Desk A brief history of Stablecoins (Part 1) Abstract: In this piece we look over the history of distributed stablecoins, focusing on two case studies, BitShares (BitUSD) and MakerDAO (Dai). We examine the efficacy of various design choices, such as the inclusion of price oracles and pooled collateral. We conclude that while a successful stablecoin is likely to represent the holy grail of financial technology, none of the systems we have examined so far appear robust enough to scale in a meaningful way. The coins we have looked at seem to rely on “why would it trade at any other price?” type logic, to enforce price stability to some extent, although dependence on this reasoning is decreasing as technology improves. The Volatility Blues The anguish experienced by traders worldwide during the $20,000 to $6,000 slide further proves that recently experienced losses matter more than gains. The financial media and many traders forget that 18 months ago the price was $1,000 and then in the fall of 2015 the price was $200. Jonny-come-lately traders / investors were eviscerated by the recent moves. To make matters worse, the volatility collapsed alongside the price. For crypto, this is deadlier than white wine and painkillers. But what about adoption? One of the major facets of Bitcoin preventing further adoption is its high volatility. In a pure Bitcoin economy, how can people trade Bitcoin against real goods if its value violently fluctuates? The underwater trader laments that the market just doesn’t get the “fundamental” value of this new transaction network. Well, what transaction network's monetary token do you know increased 20x in value in under one year? None. Therefore, the driving force is not about current utility but intense speculation on future utility. Changing the way in which humans use money is an extremely long and difficult process. This process by its nature must be chaotic. Money and the means by which it is handled is personal and sometimes religious. If you tell a society that tomorrow things will be done differently than how they were done over the past 200 years, there will be an intense reticence to change. A violent upheaval is necessary. Therefore, if Bitcoin is to be used in any productive manner, the period leading up to this new epoch must be extremely volatile. Bitcoin is a call option on a new monetary system. The most important option pricing input is the underlying asset's implied volatility. As the above chart illustrates, the realised 30-day annualised volatility crashed alongside the price. When volatility returns, the price will go higher. We Have Been Here Before The nuclear bear market of 2015 started in January when the price broke $300. For the next 10 months, the price traded between $200 and $300. While that is a 50% range, the daily movements were very slight. Without volatility, many traders, investors, and market commentators wrote off Bitcoin. Why should one care about an asset that has crashed over 80% from its recent all-time high, and has barely moved since? Traders returned to the market because the volatility re-emerged. If Bitcoin can gyrate 100% in annualised volatility terms in a 30-day period, then quick gains can be made. The FOMO “investors” who believe they can change their lot in life with little effort and in little time took us from $200 to $20,000. There were not many things that fundamentally changed about the adoption of Bitcoin in real commerce from 2015 to 2017. Return to $20,000 The path to parity will not begin in earnest until volatility rises materially. People need to be excited again. 10% pump & dumps in one day will bring back the good times. The real questions are what catalyst will start the party again, and how long will it take. During the 2017 bull market, the effect of global macro events on Bitcoin was forgotten. For 2H2018, a global macro event will have to prove that Bitcoin is a safe-haven asset. In 2015 Greece almost told Frau Merkel to do one, but chickened out at the crossroads. Bitcoin responded positively when the market believed Greece could actually liberate itself. If a similar type scare happened later this year, would Bitcoin regain its safe haven status? With the Fed, ECB, and BOJ effectively flatlining or outright reducing their balance sheets, cracks in the financial markets will show later this year. Money printing has never led to prosperity in the long run, and when you shut off the tap the ghosts and ghouls of the financial markets will play. The MSM Still Loves Bitcoin Thankfully the mainstream financial press loves talking about crypto. The personalities of the leading figures are larger than life. Even at Bitcoin $6,000 and Ether $400 a whole cadre of individuals are generationally wealthy, and are making interesting life choices the media can’t stop covering. In 2015 no one was watching, in 2018 everyone is. In order to prove their prescience, MSM outlets will fall over themselves attempting to call the bottom in Bitcoin. The foolish many who believe these pundits actually can divine the future will attempt to knife catch. Many will fail, but if enough try, some will succeed. These successful retail punters will be paraded on the airwaves as trading gods. This will further increase the FOMO, volatility, and price appreciation. Nothing goes up or down in a straight line. I still haven’t seen enough pain and anguish to believe we are done bloodletting. In true Bitcoin fashion, the price will go to the level no one thinks is possible and rebound faster than traders can work up the nerve to BTFD. Calling the Curve The BitMEX Bitcoin / USD 28 December 2018 futures contract, XBTZ18, recently began trading. The following trade ideas assume that spot in the short term will continue to fall and bottom in 3Q2018, and then aggressively rebound into 4Q2018. This scenario also assumes that trader sentiment will not fall out and enter a protracted bear market. However, if you have very high conviction in that scenario, the riskiest and potentially most profitable strategy would be to: Go short XBTU18 from now until you believe Bitcoin has bottomed. Cover the short XBTU18, and then go long XBTZ18. The reason to go short the 3m initially is that it should be more responsive to spot movements due to its lower time value. It is also more liquid so panicked speculators and hedgers will use that futures contract. Its annualised basis should trade at a steeper discount than XBTZ18. You go long XBTZ18 on the rebound because it has more time value. If the market does perform as you expect, speculators will bid up the backend of the curve. A lot of things can happen by the end of December. Given that Bitcoin is a call option, the future implied volatility has a greater probability of causing the price to rise rather than fall. The more time value housed in the instrument you are trading, the better change the long convexity can work in your favour. If you believe this a credible sequence of events, but want to reduce risk, a spread trade is advisable. The reduced risk comes at a the cost of reduced profit potential. Go short XBTU18 vs. long XBTZ18 from now until you believe Bitcoin has bottomed. Replace the above short XBTU18 with a short on XBTUSD Because you expect the sell pressure to happen at the short-end of the curve, the term structure will steepen causing the profit made on the short XBTU18 position to offset losses on the long XBTZ18 position. The term structure chart shown above shows the current curvature of the BitMEX Bitcoin / USD futures markets. It is relatively flat, which indicates now is the time to enter into this spread trade. This is a price neutral trade; however, be aware that each position is margined separately. Unrealised profit from the short XBTU18 position cannot be used to offset unrealised losses from the long XBTZ18 position. The second trade is a funding plus long 6m basis trade. As the market rebounds, the swap will be pushed into a premium which means shorts will receive funding. The long end of the curve will also get bid up in annualised basis terms due to the greater time value. You earn money from the swap funding, and futures basis appreciation. Again this trade is price neutral, and you must be cognizant of each positions’ margin. The reason why I prefer the use of spread trades to express directional moves is that if my prediction is wrong, it does not destroy my capital base. The more conviction around the prediction, the more leverage I employ on each leg to juice up my return on equity. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

Bitcoin Core version 0.16.1 is now available from: https://bitcoincore.org/bin/bitcoin-core-0.16.1/ This is a new major version release, including new features, various bugfixes and performance improvements, as well as updated translations. Please report bugs using the issue tracker at GitHub: https://github.com/bitcoin/bitcoin/issues To receive security and update notifications, please subscribe to: https://bitcoincore.org/en/list/announcements/join/ How to Upgrade If you are running an older version, shut it down. Wait until it has completely shut down (which might take a few minutes for older versions), then run the installer (on Windows) or just copy over /Applications/Bitcoin-Qt (on Mac) or bitcoind/bitcoin-qt (on Linux). The first time you run version 0.15.0 or newer, your chainstate database will be converted to a new format, which will take anywhere from a few minutes to half an hour, depending on the speed of your machine. Note that the block database format also changed in version 0.8.0 and there is no automatic upgrade code from before version 0.8 to version 0.15.0 or higher. Upgrading directly from 0.7.x and earlier without re-downloading the blockchain is not supported. However, as usual, old wallet versions are still supported. Downgrading warning Wallets created in 0.16 and later are not compatible with versions prior to 0.16 and will not work if you try to use newly created wallets in older versions. Existing wallets that were created with older versions are not affected by this. Compatibility Bitcoin Core is extensively tested on multiple operating systems using the Linux kernel, macOS 10.8+, and Windows Vista and later. Windows XP is not supported. Bitcoin Core should also work on most other Unix-like systems but is not frequently tested on them. Notable changes Miner block size removed The -blockmaxsize option for miners to limit their blocks’ sizes was deprecated in version 0.15.1, and has now been removed. Miners should use the -blockmaxweight option if they want to limit the weight of their blocks’ weights. 0.16.1 change log Policy #11423 d353dd1 [Policy] Several transaction standardness rules (jl2012) Mining #12756 e802c22 [config] Remove blockmaxsize option (jnewbery) Block and transaction handling #13199 c71e535 Bugfix: ensure consistency of m_failed_blocks after reconsiderblock (sdaftuar) #13023 bb79aaf Fix some concurrency issues in ActivateBestChain() (skeees) P2P protocol and network code #12626 f60e84d Limit the number of IPs addrman learns from each DNS seeder (EthanHeilman) Wallet #13265 5d8de76 Exit SyncMetaData if there are no transactions to sync (laanwj) #13030 5ff571e Fix zapwallettxes/multiwallet interaction. (jnewbery) GUI #12999 1720eb3 Show the Window when double clicking the taskbar icon (ken2812221) #12650 f118a7a Fix issue: “default port not shown correctly in settings dialog” (251Labs) #13251 ea487f9 Rephrase Bech32 checkbox texts, and enable it with legacy address default (fanquake) Build system #12474 b0f692f Allow depends system to support armv7l (hkjn) #12585 72a3290 depends: Switch to downloading expat from GitHub (fanquake) #12648 46ca8f3 test: Update trusted git root (MarcoFalke) #11995 686cb86 depends: Fix Qt build with Xcode 9 (fanquake) #12636 845838c backport: #11995 Fix Qt build with Xcode 9 (fanquake) #12946 e055bc0 depends: Fix Qt build with XCode 9.3 (fanquake) #12998 7847b92 Default to defining endian-conversion DECLs in compat w/o config (TheBlueMatt) Tests and QA #12447 01f931b Add missing signal.h header (laanwj) #12545 1286f3e Use wait_until to ensure ping goes out (Empact) #12804 4bdb0ce Fix intermittent rpc_net.py failure. (jnewbery) #12553 0e98f96 Prefer wait_until over polling with time.sleep (Empact) #12486 cfebd40 Round target fee to 8 decimals in assert_fee_amount (kallewoof) #12843 df38b13 Test starting bitcoind with -h and -version (jnewbery) #12475 41c29f6 Fix python TypeError in script.py (MarcoFalke) #12638 0a76ed2 Cache only chain and wallet for regtest datadir (MarcoFalke) #12902 7460945 Handle potential cookie race when starting node (sdaftuar) #12904 6c26df0 Ensure bitcoind processes are cleaned up when tests end (sdaftuar) #13049 9ea62a3 Backports (MarcoFalke) #13201 b8aacd6 Handle disconnect_node race (sdaftuar) Miscellaneous #12518 a17fecf Bump leveldb subtree (MarcoFalke) #12442 f3b8d85 devtools: Exclude patches from lint-whitespace (MarcoFalke) #12988 acdf433 Hold cs_main while calling UpdatedBlockTip() signal (skeees) #12985 0684cf9 Windows: Avoid launching as admin when NSIS installer ends. (JeremyRand) Documentation #12637 60086dd backport: #12556 fix version typo in getpeerinfo RPC call help (fanquake) #13184 4087dd0 RPC Docs: gettxout*: clarify bestblock and unspent counts (harding) #13246 6de7543 Bump to Ubuntu Bionic 18.04 in build-windows.md (ken2812221) #12556 e730b82 Fix version typo in getpeerinfo RPC call help (tamasblummer) Credits Thanks to everyone who directly contributed to this release: 251 Ben Woosley Chun Kuan Lee David A. Harding e0 fanquake Henrik Jonsson JeremyRand Jesse Cohen John Newbery Johnson Lau Karl-Johan Alm Luke Dashjr MarcoFalke Matt Corallo Pieter Wuille Suhas Daftuar Tamas Blummer Wladimir J. van der Laan As well as everyone that helped translating on Transifex. View the full article

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Jun 01, 2018 From the desk of Arthur Hayes Co-founder & CEO, BitMEX From The BitMEX Research Desk Bitcoin Economics – Deflationary Debt Spiral (Part 3) Abstract: This report is the third in a three part piece on Bitcoin economics. In the first piece, we looked at common misconceptions with respect to how banks make loans and the implications this has on the ability of banks to expand the level of credit in the economy. We analysed the inherent properties of money which ensure that this is the case and evaluate the impact this could have on the business cycle. In part two, we considered why Bitcoin might have some unique combinations of characteristics, compared to traditional forms of money. We explained the implications this could have on the ability of banks to engage in credit expansion. In this piece (part three), we examine the deflationary nature of Bitcoin and consider why this deflation may be necessary due to some of Bitcoin's weaknesses. We also look at how Bitcoin could be more resilient to some of the traditional economic disadvantages of deflation than some of Bitcoin's critics may think. List of 44 Bitcoin fork tokens since Bitcoin Cash Abstract: Although in 2018 Bitcoin may have somewhat moved on beyond this issue, in this sixth piece on consensus forks and chainsplits, we provide a list of 44 tokens which seem to have forked away from Bitcoin since the Bitcoin Cash split. Money Launderers Use Property, not Bitcoin ​For some, crypto-coins have a bad reputation: "it facilitates money laundering" is a common belief. Enlightened Hodlers retort that Bitcoin is a terrible way to launder money: it has a public ledger and relative illiquidity vs. the USD. While USD is the preferred method of account, which USD assets do money launderers favour? Pro-Tip: It ain’t Bitcoin. In these modern times, washing $1 million of crisp cocaine-tainted Benjamins is no easy feat. If you walk up to a teller and attempt to deposit into a bank, they most likely will turn you away or call the police. You could call Saul in New York’s diamond district and attempt to wash it through precious stones; but, fencing those diamonds at close to par will prove difficult. Governments always want more money parked in their jurisdictions. However, sometimes they have to play the coy mistress and profess their desire to stop terrorist financing (except for the Saudis). Below I will show that the property market is the preferred washing machine for the world’s unclean cash. I will take a look at the real estate purchase and holding disclosures in Hong Kong, where China launders its money, and the United States where the world launders its money. I will look at both through the lens of the Common Reporting Standard (CRS). We will step into the shoes of our average USD millionaire Zhou from China. How would he clean his cash, and keep the eye Xi from knowing where his loot is? Chinese people are under no illusion about the rapacious nature of their government. While many have benefited handsomely over the past 30 years, one wrong political misstep could send them back to the countryside penniless. The complete lack of financial freedom means that Beijing, if it wants to, can completely bankrupt you on a whim with no due process. America, the home of the free, decided that it needed to know where all the financial assets of its tax donkeys globally reside. They required any financial institution to report on the assets of any American. China and many other countries also thought this was a great idea. Hence, the Common Reporting Standard was born. The CRS allows member countries to share financial data between themselves. Under the CRS, China can call up Hong Kong and request information on any Chinese national. There were two very interesting developments in the history of the CRS: America failed to ratify the CRS. Which means, for example, that America is not obliged to share financial data on Chinese people with assets in America with China. Things that make you go ‘Hmmmm…’ for $200, Alex - America wants all countries to follow FACTA and inform on Americans, but it won’t return the favour. I wonder where all those assets held by non-Americans will end up? Hong Kong exempted property from the assets deemed reportable. As this SCMP article notes, Chinese people rushed to convert bank deposits into property. Property is one of the best generators of economic activity. Many jobs are created on the back of a property boom. From a policy perspective, anything a government can do to encourage an increase in the property stock will make it look like it knows how to run a successful economy. That’s the date the country falls in line with the Common Reporting Standards, or CRS – a Foreign Account Tax Compliance Act (FATCA)-type regime developed in response to a G20 request, aimed at combating cross-border tax evasion and protecting the integrity of the international tax system. The Chinese government pledged to join in with CRS in 2014. Details on financial assets held by foreign individuals within mainland China will also start being collected. The agreement means information will be exchanged with tax authorities in 100 countries and regions from next year, including Hong Kong. The city has been considered a tax haven for many mainland investors, as there is no capital gains tax levied here. But now they are being forced to convert those financial investments into property, prior to the July deadline to avoid declaring any financial assets held abroad, to the Chinese authorities. When it comes to the US, the National Association of Realtors is hell-bent on property purchases being exempt from KYC / AML regulations. FinCEN recognised that property became a blatant cash washing machine in certain hot markets, and imposed some disclosure requirements in August 2017. Set to expire on February 23, 2017, FinCEN discovered that a significant portion of the reported covered transactions in the latest GTOs were linked to possible criminal activity by the individuals revealed to be the beneficial owners of the shell company purchasers. As a result, FinCEN is extending the current GTOs for an additional 180 days, until August 22, 2017, and may consider permanent data collection requirements later this year for more cities. The GTOs require certain title companies to identify natural persons with a 25 percent or greater ownership interest in a legal entity purchasing residential real property without a bank loan or similar external financing in the following geographic areas meeting specific transaction thresholds: $500k and above – Bexar County, Texas $1m and above – Miami-Dade, Broward, and Palm Beach Counties, Florida $1.5m and above – New York City Boroughs of Brooklyn, Queens, Bronx, and Staten Island $2m and above – San Diego, Los Angeles, San Francisco, San Mateo, and Santa Clara Counties, California $3m and above – New York City Borough of Manhattan This is a step in the right direction to fight those evil money launders at the very high end of the market, but for your average Zhou with a few million big ones to stash, it is still business as usual. America remains the favoured place to stash cash away from Beijing’s prying eyes, or, indeed, those of any other government bent on stemming capital flight. As long as someone stays below those investment limits, he or she can expect to have little difficulty obtaining a clean bank account and making a property purchase with cash. Let’s Try With Bitcoin It is clearly easy to wash and hide a few million USD in the liquid property markets of Hong Kong and America. What about using the favourite monetary boogeyman, Bitcoin? Assume you want to move $1 million in cash into Bitcoin. There are two options: either you can open an account on an exchange, or trade over-the-counter (OTC) with a dealer. Any exchange that can handle this sort of volume has a serious banking relationship. Their bank will require extensive KYC / AML checks on all accounts. If the purpose is to hide the flow of funds, this is suboptimal. Presented with a subpoena, the exchange will be obligated to present the customer details. If you can’t use an exchange, perhaps an OTC dealer would trade with you. Unfortunately the large dealers also must follow KYC / AML regulations. They again have banking relationships to maintain. The major liquidity sources are exchanges and compliant OTC dealers. There are dealers who will onboard a client without KYC checks; however, their spread vs. the market will be extremely aggressive. A 20%+ vig to clean your money, assuming they can handle your size, is to be expected. Washing money through the crypto capital markets is very difficult if you are unwilling to provide KYC information. Property is much easier, and vested interests from the government to the real estate brokers want you involved. They will do all they can to alleviate KYC / AML reporting requirements. Satoshi ain’t the biggest illegal finance enabler: no, it’s Uncle Sam. Waiting for Godot ​ “Nothing happens. Nobody comes, nobody goes. It's awful.” ― Samuel Beckett, Waiting for Godot The crypto community has been waiting for a variety of Godots since its inception. For traders, our Godot is the mythical Institutional Investor. When they get involved in a big way, our bags will transform into Lambos, and we will live happily ever after. When they get involved, liquidity will magically improve and the market will “behave” as it is supposed to. Many crypto commentators including myself, proclaimed 2018 as the year institutional investors get involved in a big way. This flood of new money would help support a Bitcoin price above $10,000; and take us to Valhalla in short order. With northern hemispheric summer approaching, are institutional investors actually flocking to our new space? News of a Goldman and JP Morgan crypto trading desk aside, what is the best proxy for insto interest in crypto? The CME and CBOE Bitcoin futures contracts trading volumes are the best proxy. Both of these contracts are USD margined and settled. Anyone who trades these contracts obtains Bitcoin price exposure without ever touching Bitcoin. At BitMEX, our contracts are margined and settled in Bitcoin. That means to trade, you must own Bitcoin. Most instos love the idea of Bitcoin, but are terrified of actually buying, storing, and transferring it. The Numbers The above graphs show the USD trading volumes of the CME, CBOE, and BitMEX Bitcoin / USD contracts YTD. The first takeaway is that BitMEX dominates. BitMEX’s retail client base, trades multiples of the insto client base of the CME and CBOE. BitMEX retail traders for the most part would find it very difficult to open an account with a broker that offers connectivity to the CME and CBOE. These brokers will require relatively high account minimums. The lower leverage offered and higher contract notionals at the CME and CBOE mean that even if a typical BitMEX client had connectivity, they would not be able to afford to trade even one contract. It is clear from this data that retail traders still dominate the flows. Anecdotally, if you hang out long enough in Telegram, WeChat, Reddit etc. you will hear traders talk about spot movements triggered by quirks of a particular derivatives market. Friday settlement for OKex quarts on many occasions has completely whipsawed the market. Trading behaviour is also affected by an upcoming large funding payment on the BitMEX XBTUSD swap. What there is scant mention of, are market changes in response to the CME or CBOE expiry. Tomorrow Is Another Day The CME and CBOE volumes point to tepid involvement by instos. The Jan to May MoM CAGR is 3.94%. However, that will change. As banks gin up their trading activities over the next 6 to 12 months, they will begin hand-holding their clients in their crypto baptism. If a bank is going to take the reputational risk by publicly announcing the creation of a trading desk, they will do whatever they can to generate business to justify the risk. The easiest product to trade is the one that doesn’t require anyone to actually touch the underlying asset. An easy win for a newly minted trading desk is to provide risk pricing on CME and CBOE listed futures. A client wants to trade a chunky block immediately; the sell-side desk will quote a two-way and clear their risk on-exchange over the trading day. The client gets instant liquidity in excess of the screen, and the bank can take healthy bid-ask margins on meaningful flow. As volumes and open interest grows, the interplay between the USD settled and Bitcoin settled derivatives markets will lead to profitable distortions in the market. Before that happens, interested traders should read the BitMEX vs. CME Futures Guide. The non-linear components of the BitMEX products complicates things, but ultimately means there will be profitable arbitrage and spread trades between the two universes. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Apr 20, 2018 From the desk of Arthur Hayes Co-founder & CEO, BitMEX From The BitMEX Research Desk Diagram of a Bitcoin block: Covert versus overt AsicBoost Abstract: We present a graphical illustration of a Bitcoin block, including the Merkle trees and explain why the additional Merkle tree in the block, associated with the Segregated Witness upgrade, is necessary. We then take a closer look at some of the potential negatives of both overt and covert AsicBoost, following on from our September 2017 piece on the subject. After the recent announcement from the patent owner, we conclude that the new Blockchain Defensive Patent License (BDPL) scheme, if robust, could result in limited downsides to the use of overt AsicBoost on the network. On the other hand, there may still be some issues with the less efficient covert AsicBoost. Tether: New financial data released by Puerto Rico Abstract: Following our earlier research piece on Tether a few weeks ago, further financial information has just been released by Puerto Rico. The new data supports our speculation that Noble Bank could be Tether’s primary reserve bank and that the region may be a major cryptocurrency centre. Update: SegWit transaction capacity increase compared to Bitcoin Cash Abstract: In September 2017, we wrote a piece on the SegWit capacity increase. Here, we provide an update on SegWit adoption with six more months of transaction data. We also compare the transaction throughput to that of Bitcoin Cash, an alternative capacity-increase mechanism. Bitcoin price correlation: Record high against the S&P 500 Abstract: We look at the price correlation between Bitcoin and some traditional financial assets since 2012 and notice that the correlation with stocks in the last few months has reached record high levels, although it remains reasonably low in absolute terms. We conclude that a crypto-coin investment thesis of a “new non-correlated asset class” may, therefore, have some merit, although correlations may increase if the ecosystem expands. Due to the current correlation with stocks, Bitcoin may no longer offer downside protection in the event of a financial crisis, which some people may expect. Complete guide to Proof of Stake – Ethereum’s latest proposal & Vitalik Buterin interview Abstract: In this piece, we examine the proof of stake (PoS) consensus systems. We look at their theoretical advantages and weaknesses. We then analyze the specific details of some of the most prominent and novel PoS systems attempted thus far, where we learned that some pure PoS system becomes increasingly complex to the point which they became unrealistic. We review the latest Ethereum proposal, which we think is a significant improvement compared to previous attempts and that it could provide net security benefits for the Ethereum network. However, the system may still be reliant on proof of work (PoW), which is still used to produce the blocks and it is not entirely clear to us if the PoS element of the process contributes to ensuring nodes converge on one chain. The Crypto Hangover After a December to remember, crypto took a rough ride in the paddy wagon called the markets. The volatility was glorious, but for many, the gyrations negatively impacted their PNL. Bloodied traders, hedge funds, and ICO issuers litter the information highway. The El Dorado of uncorrelated returns still entices many to continue their journey in this new and exciting industry. 2, But No 20 Every day my LinkedIn inbox was filled with at least one new person announcing they were opening a crypto hedge fund. Various media outlets reported that by the end of Q1, a few hundred registered crypto hedge funds existed. The vast majority of these funds are long only. Meaning these fund managers are overpaid beta chasers. Nothing wrong with the beta, but when you fool yourself into thinking you produce alpha, disastrous results ensue. The investors who gladly handed over thousands and sometimes millions of USD, now stare at scarlet numbers that would make Hester Prynne proud. As I check in with some of my hedge fund manager friends, the fundraising process is going slower than expected. The second class of slightly more sophisticated fund managers expected to arbitrage their way into Steven Cohen’s league. These managers proved more successful; however, some learned that your risk management in the crypto markets better be airtight or you will get REKT. All manner of bad luck greeted their lackluster returns. The inability to manage margin requirements on spread trades is one sure way to destroy a spread trade. All in all, many newly minted John Paulson wannabe’s learned that it wasn’t so easy to trade crypto. The markets were volatile, seemingly random, and did not “behave” as they should or had. ICO, A Dream Deferred Every tech team now needs an ICO strategy. If the un-washed public will hand you hundreds of thousands of Ether on nothing more than a slick website and a plausible whitepaper you have to take their un-dilutive money. The flood of ICOs continues unabated, most of the 2017 vintage deals now trade below their ICO price. I firmly believe that the ICO is a revolutionary way to fund technology projects. And the ICO should allow anyone with an internet connection and a few Satoshi or Ether to participate in the success of a project. However, the ICO has morphed into a private-placement orgy. The ICO deals have gotten bigger, which necessitated the creation of the Sale of Future Tokens (SAFT) monstrosity. Teams bypass the small individual investors who used to participate in public ICO issuances for private deals conducted through SAFTs. Telegram has raised over $2 billion via SAFTs issued to professional investors. Good on them, but we should not consider that a real ICO. Traditional VC investors love the SAFT because it closely resembles the traditional Series Alphabet soup. The SAFT achieves the liquidity event very quickly, meaning they can dump their paper on retail investors in the secondary market. However, there is just too much token toilet paper for the market to absorb. The ICO market slumped and took its god Ether with it. Many newly minted token investors will find that without the support of retail, they are just passing a hot potato along Sand Hill Rd. Unfortunately for their bonuses, these hot potatoes are marked to market almost immediately and could end up costing them percentage points of returns. This is not an "ICOs are dead" market call, but rather for ICOs to regain their former glory, they need to go back to basics. The teams that can say no to SAFT, and actually launch a fair and widely distributed public token sale, will revive the market. There are still projects that will do extremely well, but most of these tokens are and always will be dog turd. Trading All Markets The financial media loves crypto; there's pathos and a cast of very interesting characters (I’m loving Brock Pierce’s hats). Readers searching for the next get rich quick investment devour any and all crypto coverage. PSA: if you need to read Bloomberg to figure out what happened in crypto, don’t quit your non-crypto day job. There are any number of reasons why the market plunged from $20k to $6k in Q1. US tax-related selling, regulatory FUD, the ICO slump, weak hands capitulating, are all plausible reasons. These combined with the simple fact that an asset that goes up 20x in one year is certainly due for a meaningful correction. No financial reporter will accept the simple reason that nothing goes up or down in a straight line. There must always be a reason, and they print all manners of gobbledygook if it sounds plausible to their editor. The best crypto traders can trade both bull and bear, and furthermore both trending and choppy markets. However, I have encountered very few of these specimens. Most successful traders learn their style and if the current market structure doesn’t fit, they take a break. The market is in chop mode. After $10,000 thunderously fell, the market traded in a $6k to $10k range. The beauty of Bitcoin is that the range is very large, and moves sudden. For disciplined traders, this chop is a gold mine. For those who thought merely sitting in a Telegram chat room, or reading /r/bitcoinmarkets was sufficient to generate mad gains, SFYL. What keeps traders coming back to the market is that hard work is actually rewarded. This is truly the only real free asset market globally. That should excite any student of the markets, and student one must be if you want to drive a Lambo and order trains of Dom P. P.S. If you don’t know what a train is, order one at the club, and watch your heart skip a beat when presented with the bill. Onward to The Elysian Fields Before one departs for the Hamptons, French Riviera, or Bali, another quarter awaits. Q1 was the carnage, Q2 will be the consolidation. The regulators spooked us, the drops nuked us; but after all of that $5,000 was not breached. Bitcoin is still here, the markets are still volatile, and more people than ever before know what a cryptocurrency, digital token, and or ICO is. That is a net positive. Many exchanges now have more registered users than the stock exchange in their domicile. The demand to trade these markets surpasses the capacity of exchanges. Crypto is not going anywhere, and those who are completely comfortable in the digital arena will continue to prefer crypto investments to equities and fixed income. I don’t know where the price will be in the next three months, but my spidey sense tells me a sentiment shift is occurring. The next test will be $10,000. Can we hold, and for how long? Then the journey back to $20,000 can continue. Funding Mean Reversions 2018 One of the most powerful and simple trading strategies is mean reversion. The XBTUSD swap features a funding rate that is exchanged between longs and shorts every 8 hours. The rate is calculated based the observed premium or discount of the swap over the spot index from the previous 8 hours. The lag between observation, announcement, and payment of funding gives this rate predictive power. The intent of the funding rate is to entice traders to take the counter-trend position. If the market is falling, those trading with the trend will pay funding (shorts). If the market is rising, those trading with the trend will pay funding (longs). The trend is your friend until it ain’t. Anecdotally traders notice that the funding is elevated in absolute terms directly preceding a turn in the market’s direction. Last September I presented a simple mean reversion funding strategy. If funding is high in positive terms, short XBTUSD right before funding is charged. Receive the funding payment, then cover the short position 8 hours later. If the funding is high in negative terms, go long XBTUSD right before funding is charged. Receive the funding payment, then close the long position 8 hours later. Depending on your criteria for when you put on this trade, there is a historically positive profit. Armed with slightly longer than one year’s worth of data (March 2017 to April 2018), I have calculated the historical returns for this strategy. The trading triggers happen at one and two standard deviations away from the mean on the positive and negative side. The below are the results: Sigma - This is the number of standard deviations away from the mean. Count - For negative funding, this is the number of observations where the funding rate is below or above the Sigma for negative and positive funding rates respectively. % Passes - This is the percentage of observations in the Count sample set where if the Sigma is negative, the next log 8-hour return is positive; or if the Sigma is positive, the next log 8-hour return is negative. Cumulative Funding - This is the total amount of funding received from the observations in the Count sample set. If the Sigma is negative you will be going long XBTUSD and receiving funding. Therefore, even though the Cumulative Funding is listed as negative, you will receive this as income. Cumulative XBTUSD Return - This is the sum of the next log 8-hour return of observations in the Count sample set. Cumulative Return - This is how much you will earn from this mean reversion strategy. That is the funding income net of the return from the XBTUSD trades. % of Total Observations - [Count / Total Number of Observations] The most profitable range in this simplistic study is between the one and two Sigma absolute ranges. That fundamentally makes sense. If the funding is at the maximum, the counter-trend trade will very likely blow up in your face as the trend continues. Bitcoin, as readers know, is a very emotional market. The highs go higher and lows lower. As the funding moderates during an extended rally or dump, that is when the tide is most likely to change. And that is when placing a counter-trend trade which receives the funding and direction change is the most profitable. The more sophisticated statisticians amongst us can concoct much more advanced and nuanced mean reversion strategies centred around the XBTUSD funding rate. The data for the analysis I conducted are all freely available via our public API. This study is yet another proof that plenty of juice remains in the Bitcoin market for cool-headed analytical traders. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

The central bank of the United States, the Federal Reserve, has put out “educational material” on Bitcoin for teachers and students (including a quiz!). The Bitcoin parts are odd enough, but this and a subsequent blog post will focus on the following statement: “traditionally, currency is produced by a nation's government.“ Is that a fair representation of monetary traditions? At the very least it is quite incomplete. This two-part series will proceed back in time, showing some of the many examples non-governmental money, in order to fill in some of the gaps. Privately issued IOUs and privately minted coins are covered here in part (i) of the series. These IOUs can more specifically be described as bearer promissory notes, and even more specifically, when issued by banks, bank notes. The Bitcoin public blockchain implements a global settlement layer ("layer 1" in bitcoin parlance). The closest historical analog to the Bitcoin settlement layer is not to the bank notes, nor even to the coins (despite its name), it is to the monetary metal that for most of monetary history from ancient civilization to the 20th century ultimately underlay the IOUs. This "metal layer" of historical money systems will be covered in part (ii) of this series, as will some even more ancient forms of non-governmental money. Bank notes Higher layers of the bitcoin ecosystem, which can include exchanges (centralized or decentralized) as well as more trust-minimized systems such as Lightning, correspond most closely in our rough historical analogies to checking accounts (which, although often counted by economists as part of the money supply, and not created or managed by governments, will be so familiar to most readers that they will not be covered in this series) and to private bank notes. In these higher layer monetary systems, a more computationally (or for bank notes physically) efficient medium is substituted for a less efficient medium (for bank notes, often the underlying metal), usually (as is the case with checking accounts, bank notes, and centralized bitcoin exchanges alike) at the cost of increasing trust and thus vulnerability and risk in the system. Bank note (bearer promissory instrument) issued by the North of Scotland Bank, 1945. Many banks besides central banks have issued bank notes that circulated as currency. George Selgin and Lawrence White among others have done extensive work in this area. Knowledge of the long history of non-governmental money was one of the inspirations of the original invention of trust-minimized cryptocurrency. This practice continues to this day in Hong Kong and Scotland. Stockholms Enskilda Bank note, Sweden, 1876. Critics have said that decentralized note issue, following the same principles of fractional reserve and maturity mismatch as central banks, were just as or more prone to runs on the bank. Defenders have argued that competition between note-issuing banks formed a peer-to-peer system where banks could redeem competitors' notes, making it more reliable and robust form of fractional reserve banking than a central bank run or managed fractional reserve. Hong Kong & Shanghai Banking Corporation (HSBC) bank note, 2009. Ipswich Bank, a "country" (non-London) bank in England, 1820s (this instance unissued). Traditionally country banks, like the Bank of England, redeemed for specie, i.e. the official coin, which contained a standard weight of monetary metal (usually in this era silver). After 1833, Bank of England notes became legal tender which holders of country bank notes had to accept in lieu of specie. Bank of Prince Edward Island note, Canada, 1871 Mechanic’s Bank note of 1856, Augusta, Georgia. Before our Civil War, most paper money in the United States was privately issued. Boone County Bank note, Lebanon, Indiana 1858. "During this era the U.S. had no central bank and paper money was issued by a variety of private banks. Some was even issued by manufacturing and retail companies. This money was backed by gold, silver, real estate, stocks, bonds, and a wide variety of other assets. You can no longer cash them in, but they are now worth often substantial sums as collectibles...the note designs were more varied and creative than modern money, and were remarkably free of politicians' faces." Source Bank of De Soto note, De Soto, Nebraska, 1863. Critics have called this era of U.S. private bank note issue the "wildcat banking" era. Collectors sometimes call surviving private bank notes "broken bank notes", because notes from banks that were quickly or never redeemed are much more likely to have survived in reasonable to excellent condition. Hagerstown Bank note, Hagerstown, Missouri, 1850s (this instance unissued). Some other scholars within the Federal Reserve remembered the private note-issuing era in the United States; their central bankers' view of it can be found here. Jiaozi, a bearer promissory note from the Song Dynasty. The earliest jiaozi were issued in Sichuan province by merchants to relieve their fellow merchants of the high costs of transporting the heavy government-issued iron coins. Gordon Tullock wrote of bearer promissory notes in an earlier time and different part of China, Coins A brass half-penny issued by grocer Edward Nightingale, probably dating from the early 1670s. [Source] While in most times and places, coinage was a royal or otherwise political monopoly, there were a number of important exceptions where coins were minted privately and successfully circulated as currency. Per monetary historian Glyn Davies, during the English Commonwealth, Protectorate, and early Restoration occurred “a vast issue by merchants, manufacturers, and municipalities, between 1644 and 1672, of copper tokens, mostly of farthings and halfpence.” [Davies p243] Anglesey & Mines druid half-penny, England, 1788. "From 1787 to 1797, private merchants and industrialists issued 600 tons of custom-made 'commercial' copper coin, which was more copper coin than the Royal Mint had supplied during the previous half century." [Source]. Ironbridge coin, minted by Coalbrookdale Works, Shropshire, England, 1782. In the industrial revolution, factories had to attract workers with frequent pay that could be spent at bargain shops. The Royal Mint was not producing low-denomination coins, so factories minted their own or used the coins minted by another firm. A good review by Jeffrey Hummel of George Selgin's excellent analysis of this era here. Privately minted coins from Sichuan province, China, 1912. While the minting of private coins, especially imitations of official coins, was often banned in order to secure a royal or other political monopoly, the industrial revolution was not the only time or place where private entities minted. Private coinage was by no means even limited to the Anglosphere. Nevertheless, the vast majority of coins in the numismatic record were minted by or under the license of kings, emperors, elected officials, and other kinds of political leaders, and these are also the kinds of coins prized by political historians as the most durable records of a leaders' reign. In part (ii) of this series we will explain and give a few examples of the monetary metals themselves, usually mined and processed by private entities. For most of monetary history, from ancient civilization until recent times, the monetary metals were the ultimate "O" in the IOUs -- the substances that bearer promissory notes were most often redeemed for -- and constituted the most common contents of the coins themselves. The various forms into which monetary metals could be shaped, including coins, were sampled and assayed for their metal content when used outside of the locale where they were issued or covered by legal tender laws. Part (ii) will also explain why these metals, not any of their particular forms, are the closest analog we have to Bitcoin in monetary history. Finally, we will cover some the many other forms besides coins that these metals could take, the monetary and quasi-monetary functions of these forms, and get some glimpses of even more ancient forms that were the common ancestors of modern money and modern jewelry. Part 2 can only scratch the surface of this vast topic and will refer the reader to more in-depth works including those of this author.View the full article

The central bank of the United States, the Federal Reserve, has put out “educational material” on Bitcoin for teachers and students (including a quiz!). The Bitcoin parts are odd enough, but this and a subsequent blog post will focus on the following statement: “traditionally, currency is produced by a nation's government.“ Is that a fair representation of monetary traditions? At the very least it is quite incomplete. This two-part series will proceed back in time, showing some of the many examples non-governmental money, in order to fill in some of the gaps. Privately issued IOUs and privately minted coins are covered here in part (i) of the series. These IOUs can more specifically be described as bearer promissory notes, and even more specifically, when issued by banks, bank notes. The Bitcoin public blockchain implements a global settlement layer ("layer 1" in bitcoin parlance). The closest historical analog to the Bitcoin settlement layer is not to the bank notes, nor even to the coins (despite its name), it is to the monetary metal that for most of monetary history from ancient civilization to the 20th century ultimately underlay the IOUs. This "metal layer" of historical money systems will be covered in part (ii) of this series, as will some even more ancient forms of non-governmental money. Bank notes Higher layers of the bitcoin ecosystem, which can include exchanges (centralized or decentralized) as well as more trust-minimized systems such as Lightning, correspond most closely in our rough historical analogies to checking accounts (which, although often counted by economists as part of the money supply, and not created or managed by governments, will be so familiar to most readers that they will not be covered in this series) and to private bank notes. In these higher layer monetary systems, a more computationally (or for bank notes physically) efficient medium is substituted for a less efficient medium (for bank notes, often the underlying metal), usually (as is the case with checking accounts, bank notes, and centralized bitcoin exchanges alike) at the cost of increasing trust and thus vulnerability and risk in the system. Bank note (bearer promissory instrument) issued by the North of Scotland Bank, 1945. Many banks besides central banks have issued bank notes that circulated as currency. George Selgin and Lawrence White among others have done extensive work in this area. Knowledge of the long history of non-governmental money was one of the inspirations of the original invention of trust-minimized cryptocurrency. This practice continues to this day in Hong Kong and Scotland. Stockholms Enskilda Bank note, Sweden, 1876. Critics have said that decentralized note issue, following the same principles of fractional reserve and maturity mismatch as central banks, were just as or more prone to runs on the bank. Defenders have argued that competition between note-issuing banks formed a peer-to-peer system where banks could redeem competitors' notes, making it more reliable and robust form of fractional reserve banking than a central bank run or managed fractional reserve. Hong Kong & Shanghai Banking Corporation (HSBC) bank note, 2009. Ipswich Bank, a "country" (non-London) bank in England, 1820s (this instance unissued). Traditionally country banks, like the Bank of England, redeemed for specie, i.e. the official coin, which contained a standard weight of monetary metal (usually in this era silver). After 1833, Bank of England notes became legal tender which holders of country bank notes had to accept in lieu of specie. Bank of Prince Edward Island note, Canada, 1871 Mechanic’s Bank note of 1856, Augusta, Georgia. Before our Civil War, most paper money in the United States was privately issued. Boone County Bank note, Lebanon, Indiana 1858. "During this era the U.S. had no central bank and paper money was issued by a variety of private banks. Some was even issued by manufacturing and retail companies. This money was backed by gold, silver, real estate, stocks, bonds, and a wide variety of other assets. You can no longer cash them in, but they are now worth often substantial sums as collectibles...the note designs were more varied and creative than modern money, and were remarkably free of politicians' faces." Source Bank of De Soto note, De Soto, Nebraska, 1863. Critics have called this era of U.S. private bank note issue the "wildcat banking" era. Collectors sometimes call surviving private bank notes "broken bank notes", because notes from banks that were quickly or never redeemed are much more likely to have survived in reasonable to excellent condition. Hagerstown Bank note, Hagerstown, Missouri, 1850s (this instance unissued). Some other scholars within the Federal Reserve remembered the private note-issuing era in the United States; their central bankers' view of it can be found here. Jiaozi, a bearer promissory note from the Song Dynasty. The earliest jiaozi were issued in Sichuan province by merchants to relieve their fellow merchants of the high costs of transporting the heavy government-issued iron coins. Gordon Tullock wrote of bearer promissory notes in an earlier time and different part of China, Coins A brass half-penny issued by grocer Edward Nightingale, probably dating from the early 1670s. [Source] While in most times and places, coinage was a royal or otherwise political monopoly, there were a number of important exceptions where coins were minted privately and successfully circulated as currency. Per monetary historian Glyn Davies, during the English Commonwealth, Protectorate, and early Restoration occurred “a vast issue by merchants, manufacturers, and municipalities, between 1644 and 1672, of copper tokens, mostly of farthings and halfpence.” [Davies p243] Anglesey & Mines druid half-penny, England, 1788. "From 1787 to 1797, private merchants and industrialists issued 600 tons of custom-made 'commercial' copper coin, which was more copper coin than the Royal Mint had supplied during the previous half century." [Source]. Ironbridge coin, minted by Coalbrookdale Works, Shropshire, England, 1782. In the industrial revolution, factories had to attract workers with frequent pay that could be spent at bargain shops. The Royal Mint was not producing low-denomination coins, so factories minted their own or used the coins minted by another firm. A good review by Jeffrey Hummel of George Selgin's excellent analysis of this era here. Privately minted coins from Sichuan province, China, 1912. While the minting of private coins, especially imitations of official coins, was often banned in order to secure a royal or other political monopoly, the industrial revolution was not the only time or place where private entities minted. Private coinage was by no means even limited to the Anglosphere. Nevertheless, the vast majority of coins in the numismatic record were minted by or under the license of kings, emperors, elected officials, and other kinds of political leaders, and these are also the kinds of coins prized by political historians as the most durable records of a leaders' reign. In part (ii) of this series we will explain and give a few examples of the monetary metals themselves, usually mined and processed by private entities. For most of monetary history, from ancient civilization until recent times, the monetary metals were the ultimate "O" in the IOUs -- the substances that bearer promissory notes were most often redeemed for -- and constituted the most common contents of the coins themselves. The various forms into which monetary metals could be shaped, including coins, were sampled and assayed for their metal content when used outside of the locale where they were issued or covered by legal tender laws. Part (ii) will also explain why these metals, not any of their particular forms, are the closest analog we have to Bitcoin in monetary history. Finally, we will cover some the many other forms besides coins that these metals could take, the monetary and quasi-monetary functions of these forms, and get some glimpses of even more ancient forms that were the common ancestors of modern money and modern jewelry. Part 2 can only scratch the surface of this vast topic and will refer the reader to more in-depth works including those of this author.View the full article

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Feb 28, 2018 From the desk of Arthur Hayes Co-founder & CEO, BitMEX Bitcoin March/June calendar spread The above chart shows the Bitcoin price and the annualised premium of the March (XBTH18) and June (XBTM18) Bitcoin/USD contract spread. The calendar spread is calculated by the following function: Annualised Premium = [(XBTM18 Price - XBTH18 Price) / Bitcoin Spot] / 0.2493 0.2493 represents the annualized time value between the March and June expiry dates. The calendar spread is a useful gauge of how bullish or bearish traders are in a forward starting-time period. In early February, Bitcoin lost close to 70% of its value measured against its December 2017 all-time high. The spread reached a low of 0.42% annualised during the same period. Catching knives is deadly for most mortal traders. Some are able to bottom-tick the market, but they are few and far between. After rebounding close to 100% from the recent low of $6,000, the market has entered choppy waters. Trading the chop is a skill in and of itself. The chop will take a healthy stack and make it look sickly before the next breakout happens. Therefore, using derivative spread trades with a view on the direction of the spot market is a better risk-adjusted way to express a view. For those who believe we are in the midst of a full retrace back to $20,000, going long on the XBTM18/XBTH18 calendar spread is prudent. To go long, you must go long XBTM18 and simultaneously go short on XBTH18. If the market indeed continues to push higher, XBTM18’s price will increase faster than that of XBTH18’s. That is because XBTM18 possess more time value, so the interest-rate component will make up a significant percentage of its value relative to XBTH18. This trade comes relatively cheap. Currently, the spread is trading at positive 3.15% annualised. Because the spread is positive, the trade has negative theta or time value. XBTH18 expires at the end of March. By the end of March, if XBTM18 doesn’t outperform, you will lose an outright 0.78%, making your daily theta 0.026%. Historically, the quarterly contracts trade at a 30% to 40% annualised premium. If we assume the curve’s annualised premium stays constant, the calendar spread should trade at a similar premium. Therefore, in the upside scenario, we expect a 10-fold increase in the annualised calendar-spread premium. The reason why you put this trade on rather than going naked long is that the market-to-market losses on this trade are capped at 0.78% unlevered. Imagine you bought Bitcoin at $10,000, then it crashed to $6,000. As a weak hand, you panic-sold the bottom. But the price quickly recovered back to $10,000, and even though your trade broke even over less than one month, you lost 40% because you could not mentally handle the mark to market. With a calendar spread, you know from the outset your unlevered maximum loss. If you are uncomfortable with that loss a priori, you can refrain from putting on the trade. For those who want to juice up the returns, add more leverage to both legs. However, be cognisant that BitMEX does not use portfolio margin - that is, gains in one contract will not offset your liquidation price on the other. You must monitor the liquidation price of the contract with an unrealised loss and continue to top up your account to avoid liquidation. The Volocaust and method actors BTFD was the rallying cry of crypto traders throughout 2017. The beginning of 2018 will test even the most stalwart HODLers. When is the right time to back up the truck? It surely wasn’t at $15,000, $10,000, or $8,000. One of my best friends, once a top-ranked bond salesman, describes himself as a first-rate method actor. When he showed up to work, he had the perfect coif, wrist watch, and tailored suit. Seeing him after he left all that behind, you would think he was a wannabe K-Pop star. When the play was over, he became himself again. The actors in the financial-services theatre don their costumes to drape themselves in an air of respectability. The right accent, pedigree, and clothing allow them to convince the unwashed heathens that the financial products and advice they peddle is not snake oil. I wore my costume too, although my performance was not as convincing. Every Friday at Deutsche Bank, we were allowed wear casual clothing. One Friday, while I was a first-year analyst, I decided to wear a pink polo shirt, acid washed jeans, and yellow sneakers. Later that afternoon, the head of Equities walked past my desk and saw me. He asked my boss, “Who the fuck is that?”, referring to me and my baller outfit. The next week, I learned that casual Fridays were cancelled for the whole office. Thank you, Arthur Hayes! The firms employing these troops of actors still have an aversion to Bitcoin. They are hypocrites, and the latest volatility gyrations that REKT thousands of retail punters invested in products they sold is case in point. A primer on leveraged and inverse ETFs A traditional ETF is a product used to go long on a particular basket of assets. An example is SPY, the SPDR S&P 500 ETF. It gives holders exposure to the S&P 500 index by holding a basket of stocks. One of the biggest reasons why ETFs are so successful in the US: investors can purchase them in their retirement accounts. Retirement accounts have various restrictions on the type of assets that may be purchased. Usually, these accounts do not allow investors to hold futures contracts or trade on margin. Investors crave leverage and the ability to go short. Futures contracts are the most cost-effective way to gain this type of exposure. However, the minimum size of many contracts prohibits small investors from using them. Also, small investors cannot use them in their retirement portfolios. To satiate this demand, ETF issuers began launching leveraged and inverse ETFs. Let’s assume we launch an inverse ETF on the S&P 500 index (SPX). The purchaser of this ETF will profit if the index declines. Daily ETF Performance = -1 * Daily Return SPX Say that on day 1: SPX Close0 = $1,000 SPX Close1 = $500 Return = -50% ETF Performance = -1 * -50% = +50% And on day 2: SPX Close1 = $500 SPX Close2 = $1,000 Return = 100% ETF Performance = -1 * +100% = -100% (Bankrupt!) This simple example illustrates that inverse ETFs are path dependent. In other words, holders take on convexity while holding this ETF. Unfortunately, they are short, not long. Leveraged and inverse ETFs are ticking time bombs. If held long enough during a period of suitable volatility, there is a significant likelihood that holders will severely underperform their intended strategy. In addition, the fund manager must constantly rehedge his portfolio at the end of each trading day. The more a manager trades, the more fees must be paid to investment banks and the exchange. These fees are passed on to the client. The client is short gamma, underperforms the benchmark, and pays more in fees. Can you spot the sucker? The Volocaust Selling volatility has been the sure bet to riches for retail and institutional investors alike since 2009. The CBOE VIX futures market took off after the crisis, and enterprising ETF issuers began listing products to allow retail punters to participate in this esoteric corner of the financial markets. Retail punters took to VIX ETFs like a Donald Trump to Propecia. As volatility continued to collapse, exchange-traded notes (ETNs) and exchange-traded products (ETPs) that allowed retail investors to short VIX futures proliferated. Retail punters got a double whammy of goodness. The first whammy: VIX futures contango. Because investors feared another 2008 market crash, they bid up call and put prices. This led to enhanced implied volatility, which meant VIX futures traded at a premium to spot. Because volatility continued to realise lower and lower, VIX futures sellers picked up that premium. The second whammy: central banks, crushing all market volatility. At any hint of crisis, the printing press went spastic and punished shorts. One of the most popular products was the VelocityShares Daily Inverse VIX Short-Term ETN (XIV, get it?) that Credit Suisse issued. XIV invests in the VIX short-term futures contracts, not the index itself. This is awesome when the market doesn’t move and the futures basis tends to zero, but if the term structure shifts dramatically higher, it will exacerbate the losses. Things were going swell until the market dropped last week, and the VIX and its associated futures spiked. It went up so much that the net asset value (NAV) of the ETN declined by over 80% in one day. Remember, the ETN decreases in price if the VIX rises. There is a clause in the prospectus that allows the issuer to redeem the ETNs if the NAV drops by more than 80% in one trading session. Investors at that point get back what they can get back. Given that the short-term VIX futures basis spiked as well, these investors are pretty much guaranteed to receive a bagel. Entire fortunes and accounts were destroyed overnight. Traders who saw steady profits as volatility ground lower were wiped out. Bitcoin ain’t so volatile anymore After witnessing a retail product that went from hero to zero in one trading session, how can any banker say with a straight face that crypto coins are too risky for retail investors? These same investment banks gladly structured toxic ETFs, ETNs, and ETPs that gutted the portfolios of those investors they claimed to care so much about. Going long on Bitcoin could result in an investment worth nothing in the near or long-term future. But at least that is an investment with positive convexity. The maximum you can lose is what you put in, but the upside is infinity. Contrast that to any number of inverse ETFs. The maximum unlevered return is 100% and the maximum loss is also 100%. However, as I have shown, the path dependency of these products assures that you will underperform your benchmark in the long run. If the banks that issue these carpet bombs also pooh-pooh Bitcoin, ignore them. The only reason why they don’t like crypto coins is that they have no way to profit from them. They don’t own the exchanges nor can they facilitate agency trading of these assets. A dollar invested into Bitcoin is a dollar not invested in the casino that they operate. That negative attitude is changing fast. The "vampire squid" Goldman Sachs invested money in Circle, who just acquired Poloniex. It seems that crypto money isn't that bad after all. As compliance departments are browbeaten into allowing banks to trade crypto coins, the banks’ tone will shift. Suddenly, an allocation of crypto coins will be investment canon. Jamie Dimon and his ilk will flip-flop into crypto enthusiasts. But don’t hate on Jamie for dogging Bitcoin — he is just playing his part in the financial-markets theatre. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Feb 28, 2018 From the desk of Arthur Hayes Co-founder & CEO, BitMEX Bitcoin March/June calendar spread The above chart shows the Bitcoin price and the annualised premium of the March (XBTH18) and June (XBTM18) Bitcoin/USD contract spread. The calendar spread is calculated by the following function: Annualised Premium = [(XBTM18 Price - XBTH18 Price) / Bitcoin Spot] / 0.2493 0.2493 represents the annualized time value between the March and June expiry dates. The calendar spread is a useful gauge of how bullish or bearish traders are in a forward starting-time period. In early February, Bitcoin lost close to 70% of its value measured against its December 2017 all-time high. The spread reached a low of 0.42% annualised during the same period. Catching knives is deadly for most mortal traders. Some are able to bottom-tick the market, but they are few and far between. After rebounding close to 100% from the recent low of $6,000, the market has entered choppy waters. Trading the chop is a skill in and of itself. The chop will take a healthy stack and make it look sickly before the next breakout happens. Therefore, using derivative spread trades with a view on the direction of the spot market is a better risk-adjusted way to express a view. For those who believe we are in the midst of a full retrace back to $20,000, going long on the XBTM18/XBTH18 calendar spread is prudent. To go long, you must go long XBTM18 and simultaneously go short on XBTH18. If the market indeed continues to push higher, XBTM18’s price will increase faster than that of XBTH18’s. That is because XBTM18 possess more time value, so the interest-rate component will make up a significant percentage of its value relative to XBTH18. This trade comes relatively cheap. Currently, the spread is trading at positive 3.15% annualised. Because the spread is positive, the trade has negative theta or time value. XBTH18 expires at the end of March. By the end of March, if XBTM18 doesn’t outperform, you will lose an outright 0.78%, making your daily theta 0.026%. Historically, the quarterly contracts trade at a 30% to 40% annualised premium. If we assume the curve’s annualised premium stays constant, the calendar spread should trade at a similar premium. Therefore, in the upside scenario, we expect a 10-fold increase in the annualised calendar-spread premium. The reason why you put this trade on rather than going naked long is that the market-to-market losses on this trade are capped at 0.78% unlevered. Imagine you bought Bitcoin at $10,000, then it crashed to $6,000. As a weak hand, you panic-sold the bottom. But the price quickly recovered back to $10,000, and even though your trade broke even over less than one month, you lost 40% because you could not mentally handle the mark to market. With a calendar spread, you know from the outset your unlevered maximum loss. If you are uncomfortable with that loss a priori, you can refrain from putting on the trade. For those who want to juice up the returns, add more leverage to both legs. However, be cognisant that BitMEX does not use portfolio margin - that is, gains in one contract will not offset your liquidation price on the other. You must monitor the liquidation price of the contract with an unrealised loss and continue to top up your account to avoid liquidation. The Volocaust and method actors BTFD was the rallying cry of crypto traders throughout 2017. The beginning of 2018 will test even the most stalwart HODLers. When is the right time to back up the truck? It surely wasn’t at $15,000, $10,000, or $8,000. One of my best friends, once a top-ranked bond salesman, describes himself as a first-rate method actor. When he showed up to work, he had the perfect coif, wrist watch, and tailored suit. Seeing him after he left all that behind, you would think he was a wannabe K-Pop star. When the play was over, he became himself again. The actors in the financial-services theatre don their costumes to drape themselves in an air of respectability. The right accent, pedigree, and clothing allow them to convince the unwashed heathens that the financial products and advice they peddle is not snake oil. I wore my costume too, although my performance was not as convincing. Every Friday at Deutsche Bank, we were allowed wear casual clothing. One Friday, while I was a first-year analyst, I decided to wear a pink polo shirt, acid washed jeans, and yellow sneakers. Later that afternoon, the head of Equities walked past my desk and saw me. He asked my boss, “Who the fuck is that?”, referring to me and my baller outfit. The next week, I learned that casual Fridays were cancelled for the whole office. Thank you, Arthur Hayes! The firms employing these troops of actors still have an aversion to Bitcoin. They are hypocrites, and the latest volatility gyrations that REKT thousands of retail punters invested in products they sold is case in point. A primer on leveraged and inverse ETFs A traditional ETF is a product used to go long on a particular basket of assets. An example is SPY, the SPDR S&P 500 ETF. It gives holders exposure to the S&P 500 index by holding a basket of stocks. One of the biggest reasons why ETFs are so successful in the US: investors can purchase them in their retirement accounts. Retirement accounts have various restrictions on the type of assets that may be purchased. Usually, these accounts do not allow investors to hold futures contracts or trade on margin. Investors crave leverage and the ability to go short. Futures contracts are the most cost-effective way to gain this type of exposure. However, the minimum size of many contracts prohibits small investors from using them. Also, small investors cannot use them in their retirement portfolios. To satiate this demand, ETF issuers began launching leveraged and inverse ETFs. Let’s assume we launch an inverse ETF on the S&P 500 index (SPX). The purchaser of this ETF will profit if the index declines. Daily ETF Performance = -1 * Daily Return SPX Say that on day 1: SPX Close0 = $1,000 SPX Close1 = $500 Return = -50% ETF Performance = -1 * -50% = +50% And on day 2: SPX Close1 = $500 SPX Close2 = $1,000 Return = 100% ETF Performance = -1 * +100% = -100% (Bankrupt!) This simple example illustrates that inverse ETFs are path dependent. In other words, holders take on convexity while holding this ETF. Unfortunately, they are short, not long. Leveraged and inverse ETFs are ticking time bombs. If held long enough during a period of suitable volatility, there is a significant likelihood that holders will severely underperform their intended strategy. In addition, the fund manager must constantly rehedge his portfolio at the end of each trading day. The more a manager trades, the more fees must be paid to investment banks and the exchange. These fees are passed on to the client. The client is short gamma, underperforms the benchmark, and pays more in fees. Can you spot the sucker? The Volocaust Selling volatility has been the sure bet to riches for retail and institutional investors alike since 2009. The CBOE VIX futures market took off after the crisis, and enterprising ETF issuers began listing products to allow retail punters to participate in this esoteric corner of the financial markets. Retail punters took to VIX ETFs like a Donald Trump to Propecia. As volatility continued to collapse, exchange-traded notes (ETNs) and exchange-traded products (ETPs) that allowed retail investors to short VIX futures proliferated. Retail punters got a double whammy of goodness. The first whammy: VIX futures contango. Because investors feared another 2008 market crash, they bid up call and put prices. This led to enhanced implied volatility, which meant VIX futures traded at a premium to spot. Because volatility continued to realise lower and lower, VIX futures sellers picked up that premium. The second whammy: central banks, crushing all market volatility. At any hint of crisis, the printing press went spastic and punished shorts. One of the most popular products was the VelocityShares Daily Inverse VIX Short-Term ETN (XIV, get it?) that Credit Suisse issued. XIV invests in the VIX short-term futures contracts, not the index itself. This is awesome when the market doesn’t move and the futures basis tends to zero, but if the term structure shifts dramatically higher, it will exacerbate the losses. Things were going swell until the market dropped last week, and the VIX and its associated futures spiked. It went up so much that the net asset value (NAV) of the ETN declined by over 80% in one day. Remember, the ETN decreases in price if the VIX rises. There is a clause in the prospectus that allows the issuer to redeem the ETNs if the NAV drops by more than 80% in one trading session. Investors at that point get back what they can get back. Given that the short-term VIX futures basis spiked as well, these investors are pretty much guaranteed to receive a bagel. Entire fortunes and accounts were destroyed overnight. Traders who saw steady profits as volatility ground lower were wiped out. Bitcoin ain’t so volatile anymore After witnessing a retail product that went from hero to zero in one trading session, how can any banker say with a straight face that crypto coins are too risky for retail investors? These same investment banks gladly structured toxic ETFs, ETNs, and ETPs that gutted the portfolios of those investors they claimed to care so much about. Going long on Bitcoin could result in an investment worth nothing in the near or long-term future. But at least that is an investment with positive convexity. The maximum you can lose is what you put in, but the upside is infinity. Contrast that to any number of inverse ETFs. The maximum unlevered return is 100% and the maximum loss is also 100%. However, as I have shown, the path dependency of these products assures that you will underperform your benchmark in the long run. If the banks that issue these carpet bombs also pooh-pooh Bitcoin, ignore them. The only reason why they don’t like crypto coins is that they have no way to profit from them. They don’t own the exchanges nor can they facilitate agency trading of these assets. A dollar invested into Bitcoin is a dollar not invested in the casino that they operate. That negative attitude is changing fast. The "vampire squid" Goldman Sachs invested money in Circle, who just acquired Poloniex. It seems that crypto money isn't that bad after all. As compliance departments are browbeaten into allowing banks to trade crypto coins, the banks’ tone will shift. Suddenly, an allocation of crypto coins will be investment canon. Jamie Dimon and his ilk will flip-flop into crypto enthusiasts. But don’t hate on Jamie for dogging Bitcoin — he is just playing his part in the financial-markets theatre. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

Bitcoin Core version 0.16.0 is now available from: https://bitcoincore.org/bin/bitcoin-core-0.16.0/ This is a new major version release, including new features, various bugfixes and performance improvements, as well as updated translations. Please report bugs using the issue tracker at GitHub: https://github.com/bitcoin/bitcoin/issues To receive security and update notifications, please subscribe to: https://bitcoincore.org/en/list/announcements/join/ How to Upgrade If you are running an older version, shut it down. Wait until it has completely shut down (which might take a few minutes for older versions), then run the installer (on Windows) or just copy over /Applications/Bitcoin-Qt (on Mac) or bitcoind/bitcoin-qt (on Linux). The first time you run version 0.15.0 or newer, your chainstate database will be converted to a new format, which will take anywhere from a few minutes to half an hour, depending on the speed of your machine. Note that the block database format also changed in version 0.8.0 and there is no automatic upgrade code from before version 0.8 to version 0.15.0 or higher. Upgrading directly from 0.7.x and earlier without re-downloading the blockchain is not supported. However, as usual, old wallet versions are still supported. Downgrading warning Wallets created in 0.16 and later are not compatible with versions prior to 0.16 and will not work if you try to use newly created wallets in older versions. Existing wallets that were created with older versions are not affected by this. Compatibility Bitcoin Core is extensively tested on multiple operating systems using the Linux kernel, macOS 10.8+, and Windows Vista and later. Windows XP is not supported. Bitcoin Core should also work on most other Unix-like systems but is not frequently tested on them. Notable changes Wallet changes Segwit Wallet Bitcoin Core 0.16.0 introduces full support for segwit in the wallet and user interfaces. A new -addresstype argument has been added, which supports legacy, p2sh-segwit (default), and bech32 addresses. It controls what kind of addresses are produced by getnewaddress, getaccountaddress, and createmultisigaddress. A -changetype argument has also been added, with the same options, and by default equal to -addresstype, to control which kind of change is used. A new address_type parameter has been added to the getnewaddress and addmultisigaddress RPCs to specify which type of address to generate. A change_type argument has been added to the fundrawtransaction RPC to override the -changetype argument for specific transactions. All segwit addresses created through getnewaddress or *multisig RPCs explicitly get their redeemscripts added to the wallet file. This means that downgrading after creating a segwit address will work, as long as the wallet file is up to date. All segwit keys in the wallet get an implicit redeemscript added, without it being written to the file. This means recovery of an old backup will work, as long as you use new software. All keypool keys that are seen used in transactions explicitly get their redeemscripts added to the wallet files. This means that downgrading after recovering from a backup that includes a segwit address will work Note that some RPCs do not yet support segwit addresses. Notably, signmessage/verifymessage doesn’t support segwit addresses, nor does importmulti at this time. Support for segwit in those RPCs will continue to be added in future versions. P2WPKH change outputs are now used by default if any destination in the transaction is a P2WPKH or P2WSH output. This is done to ensure the change output is as indistinguishable from the other outputs as possible in either case. BIP173 (Bech32) Address support (“bc1…” addresses) Full support for native segwit addresses (BIP173 / Bech32) has now been added. This includes the ability to send to BIP173 addresses (including non-v0 ones), and generating these addresses (including as default new addresses, see above). A checkbox has been added to the GUI to select whether a Bech32 address or P2SH-wrapped address should be generated when using segwit addresses. When launched with -addresstype=bech32 it is checked by default. When launched with -addresstype=legacy it is unchecked and disabled. HD-wallets by default Due to a backward-incompatible change in the wallet database, wallets created with version 0.16.0 will be rejected by previous versions. Also, version 0.16.0 will only create hierarchical deterministic (HD) wallets. Note that this only applies to new wallets; wallets made with previous versions will not be upgraded to be HD. Replace-By-Fee by default in GUI The send screen now uses BIP125 RBF by default, regardless of -walletrbf. There is a checkbox to mark the transaction as final. The RPC default remains unchanged: to use RBF, launch with -walletrbf=1 or use the replaceable argument for individual transactions. Wallets directory configuration (-walletdir) Bitcoin Core now has more flexibility in where the wallets directory can be located. Previously wallet database files were stored at the top level of the bitcoin data directory. The behavior is now: For new installations (where the data directory doesn’t already exist), wallets will now be stored in a new wallets/ subdirectory inside the data directory by default. For existing nodes (where the data directory already exists), wallets will be stored in the data directory root by default. If a wallets/ subdirectory already exists in the data directory root, then wallets will be stored in the wallets/ subdirectory by default. The location of the wallets directory can be overridden by specifying a -walletdir=<path> option where <path> can be an absolute path to a directory or directory symlink. Care should be taken when choosing the wallets directory location, as if it becomes unavailable during operation, funds may be lost. Build: Minimum GCC bumped to 4.8.x The minimum version of the GCC compiler required to compile Bitcoin Core is now 4.8. No effort will be made to support older versions of GCC. See discussion in issue #11732 for more information. The minimum version for the Clang compiler is still 3.3. Other minimum dependency versions can be found in doc/dependencies.md in the repository. Support for signalling pruned nodes (BIP159) Pruned nodes can now signal BIP159’s NODE_NETWORK_LIMITED using service bits, in preparation for full BIP159 support in later versions. This would allow pruned nodes to serve the most recent blocks. However, the current change does not yet include support for connecting to these pruned peers. Performance: SHA256 assembly enabled by default The SHA256 hashing optimizations for architectures supporting SSE4, which lead to ~50% speedups in SHA256 on supported hardware (~5% faster synchronization and block validation), have now been enabled by default. In previous versions they were enabled using the --enable-experimental-asm flag when building, but are now the default and no longer deemed experimental. GUI changes Uses of “µBTC” in the GUI now also show the more colloquial term “bits”, specified in BIP176. The option to reuse a previous address has now been removed. This was justified by the need to “resend” an invoice, but now that we have the request history, that need should be gone. Support for searching by TXID has been added, rather than just address and label. A “Use available balance” option has been added to the send coins dialog, to add the remaining available wallet balance to a transaction output. A toggle for unblinding the password fields on the password dialog has been added. RPC changes New rescanblockchain RPC A new RPC rescanblockchain has been added to manually invoke a blockchain rescan. The RPC supports start and end-height arguments for the rescan, and can be used in a multiwallet environment to rescan the blockchain at runtime. New savemempool RPC A new savemempool RPC has been added which allows the current mempool to be saved to disk at any time to avoid it being lost due to crashes / power loss. Safe mode disabled by default Safe mode is now disabled by default and must be manually enabled (with -disablesafemode=0) if you wish to use it. Safe mode is a feature that disables a subset of RPC calls - mostly related to the wallet and sending - automatically in case certain problem conditions with the network are detected. However, developers have come to regard these checks as not reliable enough to act on automatically. Even with safe mode disabled, they will still cause warnings in the warnings field of the getneworkinfo RPC and launch the -alertnotify command. Renamed script for creating JSON-RPC credentials The share/rpcuser/rpcuser.py script was renamed to share/rpcauth/rpcauth.py. This script can be used to create rpcauth credentials for a JSON-RPC user. Validateaddress improvements The validateaddress RPC output has been extended with a few new fields, and support for segwit addresses (both P2SH and Bech32). Specifically: * A new field iswitness is True for P2WPKH and P2WSH addresses (“bc1…” addresses), but not for P2SH-wrapped segwit addresses (see below). * The existing field isscript will now also report True for P2WSH addresses. * A new field embedded is present for all script addresses where the script is known and matches something that can be interpreted as a known address. This is particularly true for P2SH-P2WPKH and P2SH-P2WSH addresses. The value for embedded includes much of the information validateaddress would report if invoked directly on the embedded address. * For multisig scripts a new pubkeys field was added that reports the full public keys involved in the script (if known). This is a replacement for the existing addresses field (which reports the same information but encoded as P2PKH addresses), represented in a more useful and less confusing way. The addresses field remains present for non-segwit addresses for backward compatibility. * For all single-key addresses with known key (even when wrapped in P2SH or P2WSH), the pubkey field will be present. In particular, this means that invoking validateaddress on the output of getnewaddress will always report the pubkey, even when the address type is P2SH-P2WPKH. Low-level changes The deprecated RPC getinfo was removed. It is recommended that the more specific RPCs are used: getblockchaininfo getnetworkinfo getwalletinfo getmininginfo The wallet RPC getreceivedbyaddress will return an error if called with an address not in the wallet. The wallet RPC addwitnessaddress was deprecated and will be removed in version 0.17, set the address_type argument of getnewaddress, or option -addresstype=[bech32|p2sh-segwit] instead. dumpwallet now includes hex-encoded scripts from the wallet in the dumpfile, and importwallet now imports these scripts, but corresponding addresses may not be added correctly or a manual rescan may be required to find relevant transactions. The RPC getblockchaininfo now includes an errors field. A new blockhash parameter has been added to the getrawtransaction RPC which allows for a raw transaction to be fetched from a specific block if known, even without -txindex enabled. The decoderawtransaction and fundrawtransaction RPCs now have optional iswitness parameters to override the heuristic witness checks if necessary. The walletpassphrase timeout is now clamped to 2^30 seconds. Using addresses with the createmultisig RPC is now deprecated, and will be removed in a later version. Public keys should be used instead. Blockchain rescans now no longer lock the wallet for the entire rescan process, so other RPCs can now be used at the same time (although results of balances / transactions may be incorrect or incomplete until the rescan is complete). The logging RPC has now been made public rather than hidden. An initialblockdownload boolean has been added to the getblockchaininfo RPC to indicate whether the node is currently in IBD or not. minrelaytxfee is now included in the output of getmempoolinfo Other changed command-line options -debuglogfile=<file> can be used to specify an alternative debug logging file. bitcoin-cli now has an -stdinrpcpass option to allow the RPC password to be read from standard input. The -usehd option has been removed. bitcoin-cli now supports a new -getinfo flag which returns an output like that of the now-removed getinfo RPC. Testing changes The default regtest JSON-RPC port has been changed to 18443 to avoid conflict with testnet’s default of 18332. Segwit is now always active in regtest mode by default. Thus, if you upgrade a regtest node you will need to either -reindex or use the old rules by adding vbparams=segwit:0:999999999999 to your regtest bitcoin.conf. Failure to do this will result in a CheckBlockIndex() assertion failure that will look like: Assertion `(pindexFirstNeverProcessed != nullptr) == (pindex->nChainTx == 0)’ failed. 0.16.0 change log Block and transaction handling #10953 aeed345 Combine scriptPubKey and amount as CTxOut in CScriptCheck (jl2012) #11309 93d20a7 Minor cleanups for AcceptToMemoryPool (morcos) #11418 38c201f Add error string for CLEANSTACK script violation (maaku) #11411 339da9c Change SignatureHash input index check to an assert (jimpo) #11406 e12522d Add state message print to AcceptBlock failure message (TheBlueMatt) #11062 26fee4f Mark mempool import fails that were found in mempool as ‘already there’ (kallewoof) #11269 61fb806 CTxMemPoolEntry::UpdateAncestorState: modifySiagOps param type (donaloconnor) #11747 e970396 Fix: Open files read only if requested (Elbandi) #11737 46d1ebf Document partial validation in ConnectBlock() (sdaftuar) #10699 c090262 Make all script validation flags backward compatible (sipa) #10279 214046f Add a CChainState class to validation.cpp to take another step towards clarifying internal interfaces (TheBlueMatt) #11824 d9fdac1 Block ActivateBestChain to empty validationinterface queue (TheBlueMatt) #12127 9501dc2 Remove unused mempool index (sdaftuar) #12118 44080a9 Sort mempool by min(feerate, ancestor_feerate) (sdaftuar) #8498 0e3a411 Minimize the number of times it is checked that no money… (jtimon) #12368 3f5012b Hold mempool.cs for the duration of ATMP (TheBlueMatt) #12401 d44cd7e Reset pblocktree before deleting LevelDB file (Sjors) #12415 f893824 Interrupt loading thread after shutdown request (promag) P2P protocol and network code #10596 6866b49 Add vConnect to CConnman::Options (benma) #10663 9d31ed2 Split resolve out of connect (theuni) #11113 fef65c4 Ignore getheaders requests for very old side blocks (jimpo) #11585 5aeaa9c addrman: Add missing lock in Clear() (CAddrMan) (practicalswift) #11524 5ef3b69 De-duplicate connection eviction logic (tjps) #11580 1f4375f Do not send (potentially) invalid headers in response to getheaders (TheBlueMatt) #11655 aca77a4 Assert state.m_chain_sync.m_work_header in ConsiderEviction (practicalswift) #11744 3ff6ff5 Add missing locks in net.{cpp,h} (practicalswift) #11740 59d3dc8 Implement BIP159 NODE_NETWORK_LIMITED (pruned peers) signaling only (jonasschnelli) #11583 37ffa16 Do not make it trivial for inbound peers to generate log entries (TheBlueMatt) #11363 ba2f195 Split socket create/connect (theuni) #11917 bc66765 Add testnet DNS seed: seed.testnet.bitcoin.sprovoost.nl (Sjors) #11512 6e89de5 Use GetDesireableServiceFlags in seeds, dnsseeds, fixing static seed adding (TheBlueMatt) #12262 16bac24 Hardcoded seed update (laanwj) #12270 9cf6393 Update chainTxData for 0.16 (laanwj) #12392 0f61651 Fix ignoring tx data requests when fPauseSend is set on a peer (TheBlueMatt) Wallet #11039 fc51565 Avoid second mapWallet lookup (promag) #10952 2621673 Remove vchDefaultKey and have better first run detection (achow101) #11007 fc5c237 Fix potential memory leak when loading a corrupted wallet file (practicalswift) #10976 07c92b9 Move some static functions out of wallet.h/cpp (ryanofsky) #11117 961901f Prepare for non-Base58 addresses (sipa) #10916 e6ab88a add missing lock to crypter GetKeys() (benma) #10767 791a0e6 Clarify wallet initialization / destruction interface (jnewbery) #11250 c22a53c Bump wallet version to 159900 and remove the usehd option (achow101) #11307 4f7e37e Display non-HD error on first run (MarcoFalke) #11408 69c7ece Fix parameter name typo in ErasePurpose walletdb method (PierreRochard) #11167 aa624b6 Full BIP173 (Bech32) support (sipa) #11594 0ecc630 Improve -disablewallet parameter interaction (promag) #10368 77ba4bf Remove helper conversion operator from wallet (kallewoof) #11074 99ec126 Assert that CWallet::SyncMetaData finds oldest transaction (BitonicEelis) #11272 e6e3fc3 CKeystore/CCrypter: move relevant implementation out of the header (jonasschnelli) #10286 927a1d7 Call wallet notify callbacks in scheduler thread (without cs_main) (TheBlueMatt) #10600 4ed8180 Make feebumper class stateless (ryanofsky) #11466 d080a7d Specify custom wallet directory with -walletdir param (MeshCollider) #11839 8ab6c0b Don’t attempt mempool entry for wallet transactions on startup (instagibbs) #11854 2214954 Split up key and script metadata for better type safety (ryanofsky) #11870 ef8ba7d Remove unnecessary mempool lock in ReacceptWalletTransactions (promag) #11864 2ae58d5 Make CWallet::FundTransaction atomic (promag) #11886 df71819 Clarify getbalance meaning a tiny bit in response to questions (TheBlueMatt) #11923 81c89e9 Remove unused fNoncriticalErrors variable from CWalletDB::FindWalletTx (PierreRochard) #11726 604e08c Cleanups + nit fixes for walletdir PR (MeshCollider) #11403 d889c03 Segwit wallet support (sipa) #11970 b7450cd Add test coverage for bitcoin-cli multiwallet calls (ryanofsky) #11904 66e3af7 Add a lock to the wallet directory (MeshCollider) #12101 c7978be Clamp walletpassphrase timeout to 2^30 seconds and check its bounds (achow101) #12210 17180fa Deprecate addwitnessaddress (laanwj) #12220 f4c942e Error if relative -walletdir is specified (ryanofsky) #11281 8470e64 Avoid permanent cs_main/cs_wallet lock during RescanFromTime (jonasschnelli) #12119 9594139 Use P2WPKH change output if any destination is P2WPKH or P2WSH (Sjors) #12213 eadb2da Add address type option to addmultisigaddress (promag) #12276 7936446 Remove duplicate mapWallet lookups (promag) RPC and other APIs #11008 3841aaf Enable disablesafemode by default (gmaxwell) #11050 7ed57d3 Avoid treating null RPC arguments different from missing arguments (ryanofsky) #10997 affe927 Add option -stdinrpcpass to bitcoin-cli to allow RPC password to be read from standard input (jharvell) #11179 e0e3cbb Push down safe mode checks (laanwj) #11203 d745b4c add wtxid to mempool entry output (sdaftuar) #11099 bc561b4 Add savemempool RPC (greenaddress) #10838 66a5b41 (finally) remove getinfo (TheBlueMatt) #10753 7fcd61b test: Check RPC argument mapping (laanwj) #11288 0f8e095 More user-friendly error message when partially signing (MeshCollider) #11031 ef8340d deprecate estimatefee (jnewbery) #10858 9a8e916 Add “errors” field to getblockchaininfo and unify “errors” field in get*info RPCs (achow101) #11021 90926db Fix getchaintxstats() (AkioNak) #11367 3a93270 getblockchaininfo: Add disk_size, prune_target_size (esotericnonsense) #11006 a1d78b5 Improve shutdown process (promag) #11529 ff92fbf Avoid slow transaction search with txindex enabled (promag) #11618 87d90ef Lock cs_main in blockToJSON/blockheaderToJSON (practicalswift) #11626 998c304 Make logging RPC public (laanwj) #11258 033c786 Add initialblockdownload to getblockchaininfo (jnewbery) #11087 99bc0b4 Diagnose unsuitable outputs in lockunspent() (BitonicEelis) #11710 9388639 cli: Reject arguments to -getinfo (laanwj) #11738 d4267a3 Fix sendrawtransaction hang when sending a tx already in mempool (TheBlueMatt) #11753 32c9b57 clarify abortrescan rpc use (instagibbs) #11191 ef14f2e Improve help text and behavior of RPC-logging (AkioNak) #10874 9e38d35 getblockchaininfo: Loop through the bip9 soft fork deployments instead of hard coding (achow101) #10275 497d0e0 Allow fetching tx directly from specified block in getrawtransaction (kallewoof) #11178 fee0370 Add iswitness parameter to decode- and fundrawtransaction RPCs (MeshCollider) #11667 711d16c Add scripts to dumpwallet RPC (MeshCollider) #11475 9bad8d6 mempoolinfo should take ::minRelayTxFee into account (mess110) #12001 a9a49e6 Adding ::minRelayTxFee amount to getmempoolinfo and updating help (jeffrade) #12198 adce1de Add deprecation error for getinfo (laanwj) #11415 69ec021 Disallow using addresses in createmultisig (achow101) #12278 288deac Add special error for genesis coinbase to getrawtransaction (MeshCollider) #11362 c6223b3 Remove nBlockMaxSize from miner opt struct as it is no longer used (gmaxwell) #10825 28485c7 Set regtest JSON-RPC port to 18443 to avoid conflict with testnet 18332 (fametrano) #11303 e542728 Fix estimatesmartfee rounding display issue (TheBlueMatt) #7061 8c2de82 Add RPC call rescanblockchain <startheight> <stopheight> (jonasschnelli) #11055 95e14dc RPC getreceivedbyaddress should return error if called with address not owned by the wallet (jnewbery) #12366 93de37a http: Join worker threads before deleting work queue (laanwj) #12315 758a41e Bech32 addresses in dumpwallet (fivepiece) #12427 3762ac1 Make signrawtransaction accept P2SH-P2WSH redeemscripts (sipa) GUI #10964 64e66bb Pass SendCoinsRecipient (208 bytes) by reference (practicalswift) #11169 5b8af7b Make tabs toolbar no longer have a context menu (achow101) #10911 9c8f365 Fix typo and access key in optionsdialog.ui (keystrike) #10770 ea729d5 Drop upgrade-cancel callback registration for a generic “cancelable” (TheBlueMatt) #11156 a3624dd Fix memory leaks in qt/guiutil.cpp (danra) #11268 31e72b2 [macOS] remove Growl support, remove unused code (jonasschnelli) #11193 c5c77bd Terminate string *pszExePath after readlink and without using memset (practicalswift) #11508 ffa5159 Fix crash via division by zero assertion (jonasschnelli) #11499 6157e8c Add upload and download info to the peerlist (debug menu) (aarongolliver) #11480 ffc0b11 Add toggle for unblinding password fields (tjps) #11316 22cdf93 Add use available balance in send coins dialog (CryptAxe, promag) #3716 13e352d Receive: Remove option to reuse a previous address (luke-jr) #11690 f0c1f8a Fix the StartupWMClass for bitoin-qt, so gnome-shell can recognize it (eklitzke) #10920 f6f8d54 Fix potential memory leak in newPossibleKey(ChangeCWallet *wallet) (practicalswift) #11698 7293d06 RPC-Console nested commands documentation (lmlsna) #11395 38d31f9 Enable searching by transaction id (luke-jr) #11556 91eeaa0 Improved copy for RBF checkbox and tooltip (Sjors) #11809 80f9dad Fix proxy setting options dialog crash (laanwj) #11616 8585bb8 Update ban-state in case of dirty-state during periodic sweep (jonasschnelli) #11605 f19ca12 Enable RBF by default in QT (Sjors) #12074 a1136f0 Optimizes boolean expression model && model->haveWatchOnly() (251Labs) #12035 eeb6d52 Change µBTC to bits (jb55) #12092 fd4ca17 Replaces numbered place marker %2 with %1 (251Labs) #12173 bbc91b7 Use flexible font size for QRCode image address (jonasschnelli) #12211 10d10d7 Avoid potential null dereference in ReceiveCoinsDialog constructor (ryanofsky) #12261 f359afc Bump BLOCK_CHAIN_SIZE to 200GB (laanwj) #11991 062c8b6 Receive: checkbox for bech32 address (Sjors) #11644 045a809 Fix qt build broken by 5a5e4e9 (TheBlueMatt) #11448 d473e6d reset addrProxy/addrSeparateProxyTor if colon char missing (mess110) #12377 604f289 qt: Poll ShutdownTimer after init is done (MarcoFalke) #12374 daaae36 qt: Make sure splash screen is freed on AppInitMain fail (laanwj) #12349 ad10b90 shutdown: fix crash on shutdown with reindex-chainstate (theuni) Build system #10923 2c9f5ec travis: Build with –enable-werror under OS X (practicalswift) #11176 df8c722 build: Rename –enable-experimental-asm to –enable-asm and enable by default (laanwj) #11286 11dacc6 [depends] Don’t build libevent sample code (fanquake) #7142 801dd40 Travis: Test build against system libs (& Qt4) (luke-jr) #11380 390771b Remove outdated share/certs/ directory (MeshCollider) #11391 7632310 Remove lxcbr0 lines from gitian-build.sh (MeshCollider) #11435 167cef8 build: Make “make clean” remove all files created when running “make check” (practicalswift) #11460 e022463 [depends] mac_alias 2.0.6, ds_store 1.1.2 (fanquake) #11541 bb9ab0f Build: Fix Automake warnings when running autogen.sh (fanquake) #11611 0e70791 [build] Don’t fail when passed –disable-lcov and lcov isn’t available (fanquake) #11651 3c098a8 refactor: Make all #includes relative to project root (laanwj, MeshCollider, ryanofsky) #11621 1f7695b [build] Add temp_bitcoin_locale_qrc to CLEAN_QT to fix make distcheck (fanquake) #11755 84fa645 [Docs] Bump minimum required version of GCC to 4.8 (fanquake) #9254 6d3dc52 [depends] ZeroMQ 4.2.2 (fanquake) #11842 3c8f0a3 [build] Add missing stuff to clean-local (kallewoof) #11936 483bb67 [build] Warn that only libconsensus can be built without Boost (fanquake) #11945 7a11ba7 Improve BSD compatibility of contrib/install_db4.sh (laanwj) #11981 180a255 Fix gitian build after libzmq bump (theuni) #11903 8f68fd2 [trivial] Add required package dependencies for depends cross compilation (jonasschnelli) #12168 45cf8a0 #include sys/fcntl.h to just fcntl.h (without sys/) (jsarenik) #12095 3fa1ab4 Use BDB_LIBS/CFLAGS and pass –disable-replication (fanquake) #11711 6378e5c bitcoin_qt.m4: Minor fixes and clean-ups (fanquake) #11989 90d4104 .gitignore: add QT Creator artifacts (Sjors) #11577 c0ae864 Fix warnings (-Wsign-compare) when building with DEBUG_ADDRMAN (practicalswift) Tests and QA #11024 3e55f13 Remove OldSetKeyFromPassphrase/OldEncrypt/OldDecrypt (practicalswift) #10679 31b2612 Document the non-DER-conformance of one test in tx_valid.json (schildbach) #11160 ede386c Improve versionbits_computeblockversion test code consistency (danra) #10303 f088a1b Include ms/blk stats in Connect* benchmarks (kallewoof) #10777 d81dccf Avoid redundant assignments. Remove unused variables (practicalswift) #11260 52f8877 travis: Assert default datadir isn’t created, Run scripted diff only once (MarcoFalke) #11271 638e6c5 travis: filter out pyenv (theuni) #11285 3255d63 Add -usehd to excluded args in check-doc.py (MeshCollider) #11297 16e4184 Make sure ~/.bitcoin doesn’t exist before build (MeshCollider) #11311 cce94c5 travis: Revert default datadir check (MarcoFalke) #11300 f4ed44a Add a lint check for trailing whitespace (MeshCollider) #11323 4ce2f3d mininode: add an optimistic write and disable nagle (theuni) #11370 2d85899 Add getblockchaininfo functional test (promag) #11365 f199b8a Add Qt GUI tests to Overview and ReceiveCoin Page (anditto) #11293 dbc4ae0 Deduplicate CMerkleBlock construction code, add test coverage (jamesob) #10440 9e8ef9d Add libFuzzer support (practicalswift) #10941 364da2c Add blocknotify and walletnotify functional tests (promag) #11420 8928093 Bump univalue subtree and fix json formatting in tests (MarcoFalke) #10099 424be03 Slightly Improve Unit Tests for Checkqueue (JeremyRubin) #11513 14b860b A few Python3 tidy ups (jnewbery) #11486 2ca518d Add uacomment tests (mess110) #11452 02ac8c8 Improve ZMQ functional test (promag) #10409 b5545d8 Add fuzz testing for BlockTransactions and BlockTransactionsRequest (practicalswift) #11389 dd56166 Support having segwit always active in regtest (sipa, ajtowns, jnewbery) #11562 5776582 bench: use std::chrono rather than gettimeofday (theuni) #11182 f7388e9 Add P2P interface to TestNode (jnewbery) #11552 b5f9f02 Improve wallet-accounts test (ryanofsky) #11638 5e3f5e4 Dead mininode code (jnewbery) #11646 fe503e1 Require a steady clock for bench with at least micro precision (TheBlueMatt) #11468 76b3349 Make comp test framework more debuggable (jnewbery) #11623 ee92243 Add missing locks to tests (practicalswift) #11035 927e528 [contrib] Add Valgrind suppressions file (practicalswift) #11641 7adeea3 Only allow disconnecting all NodeConns (MarcoFalke) #11677 3bdf242 Remove unused NodeConn members (MarcoFalke) #11699 66d46c7 [travis-ci] Only run linters on Pull Requests (jnewbery) #11654 084f52f Initialize recently introduced non-static class member lastCycles to zero in constructor (practicalswift) #11648 ccc70a2 Add messages.py (jnewbery) #11713 49667a7 Fix for mismatched extern definition in wallet tests (sipsorcery) #11707 0d89fa0 Fix sendheaders (jnewbery) #11718 9cdd2bc Move pwalletMain to wallet test fixture (laanwj) #11714 901ba3e Test that mempool rejects coinbase transactions (jamesob) #11743 3d6ad40 Add multiwallet prefix test (MarcoFalke) #11683 a892218 Remove unused mininode functions {ser,deser}_int_vector(…). Remove unused imports (practicalswift) #11712 9f2c2db Split NodeConn from NodeConnCB (jnewbery) #11791 13e31dd Rename NodeConn and NodeConnCB (jnewbery) #11835 f60b4ad Add Travis check for unused Python imports (practicalswift) #11849 ad1820c Assert that only one NetworkThread exists (jnewbery) #11877 d4991c0 Improve createrawtransaction functional tests (promag) #11220 2971fd0 Check specific validation error in miner tests (Sjors) #11947 797441e Fix rawtransactions test (laanwj) #11946 8049241 Remove unused variable (firstAddrnServices) (practicalswift) #11867 18a1bba Improve node network test (jnewbery) #11883 cfd99dd Add configuration file/argument testing (MeshCollider) #11879 d4e404a Remove redundant univalue_tests.cpp (jnewbery) #11748 20166f8 Adding unit tests for GetDifficulty in blockchain.cpp (merehap) #11517 5180a86 Improve benchmark precision (martinus) #11291 a332a7d Fix string concatenation to os.path.join and add exception case (dongsam) #11965 d38d1a3 Note on test order in test_runner (MarcoFalke) #11997 ddff344 util_tests.cpp: actually check ignored args (ajtowns) #12079 45173fa Improve prioritisetransaction test coverage (promag) #12150 92a810d Fix ListCoins test failure due to unset g_address_type, g_change_type (ryanofsky) #12133 1d2eaba Fix rare failure in p2p-segwit.py (sdaftuar) #12082 0910cbe Adding test case for SINGLE ANYONECANPAY hash type in tx_valid.json (Christewart) #11796 4db16ec Functional test naming convention (ajtowns) #12227 b987ca4 test_runner: Readable output if create_cache.py fails (ryanofsky) #12089 126000b Make TestNodeCLI command optional in send_cli (MarcoFalke) #11774 6970b30 Rename functional tests (ajtowns) #12264 598a9c4 Fix versionbits warning test (jnewbery) #12217 1213be6 Add missing syncwithvalidationinterfacequeue to tests (MarcoFalke) #12292 eebe458 Fix names of excluded extended tests for travis (ajtowns) #11789 60d739e [travis-ci] Combine logs on failure (jnewbery) #11838 3e50024 Add getrawtransaction in_active_chain=False test (MarcoFalke) #12206 898f560 Sync with validationinterface queue in sync_mempools (MarcoFalke) #12424 ff44101 Fix rescan test failure due to unset g_address_type, g_change_type (ryanofsky) #12388 e2431d1 travis: Full clone for git subtree check (MarcoFalke) Documentation #10680 6366941 Fix inconsistencies and grammar in various files (MeshCollider) #11011 7db65c3 Add a comment on the use of prevector in script (gmaxwell) #10878 c58128f Fix Markdown formatting issues in init.md (dongcarl) #11066 9e00a62 Document the preference of nullptr over NULL or (void*)0 (practicalswift) #11094 271e40a Hash in ZMQ hash is raw bytes, not hex (runn1ng) #11026 ea3ac59 Bugfix: Use testnet RequireStandard for -acceptnonstdtxn default (luke-jr) #11058 4b65fa5 Comments: More comments on functions/globals in standard.h (jimpo) #11112 3f726c9 [developer-notes] By default, declare single-argument constructors “explicit” (practicalswift) #11155 a084767 Trivial: Documentation fixes for CVectorWriter ctors (danra) #11136 108222b Docs: Add python3 to list of dependencies on some platforms (danra) #11216 81f8c03 Update hmac_sha256.h (utsavgupta) #11236 ba05971 Add note on translations to CONTRIBUTING.md (MeshCollider) #11173 4eb1f39 RPC: Fix currency unit string in the help text (AkioNak) #11135 21e2f2f Update developer notes with RPC response guidelines (promag) #11219 bcc8a62 explain how to recompile a modified unit test (Sjors) #10779 f656147 Create dependencies.md (flack) #10682 2a56baf Move the AreInputsStandard documentation next to its implementation (esneider) #11276 ee50c9e Update CONTRIBUTING.md to reduce unnecessary review workload (jonasschnelli) #11264 b148803 Fix broken Markdown table in dependencies.md (practicalswift) #10691 ce82985 Properly comment about shutdown process in init.cpp file (wraith7) #11330 ae233c4 Fix comments for DEFAULT_WHITELIST[FORCE]RELAY (danra) #11340 d6d2c85 Fix validation comments (danra) #11305 2847480 Update release notes and manpages for 0.16 (MarcoFalke) #11132 551d7bf Document assumptions that are being made to avoid NULL pointer dereferences (practicalswift) #11390 12ed800 Document scripted-diff (jnewbery) #11392 a3b4c59 Fix stale link in gitian-building.md (shooterman) #11401 4202273 Move gitian building to external repo (MarcoFalke) #11414 bbc901d Remove partial gitian build instructions from descriptors dir (fanquake) #11571 c95832d Fixed a couple small grammatical errors (BitsInMyBlood) #11624 f9b74ef Change formatting for sequence of steps (vivganes) #11597 6f01dcf Fix error messages in CFeeBumper (kallewoof) #11438 7fbf3c6 Updated Windows build doc for WSL/Xenial workaround (sipsorcery) #11663 41aa9c4 Add getreceivedbyaddress release notes (MarcoFalke) #11533 cbb54e7 Update WSL installation notes for Fall Creators update (Thoragh) #11680 4db82b7 Add instructions for lcov report generation (jamesob) #11686 54aedc0 Make ISSUE_TEMPLATE a bit shorter, mention hardware tests (TheBlueMatt) #11704 ea68190 Windows build doc update (sipsorcery) #11706 5197100 Make default issue text all comments to make issues more readable (TheBlueMatt) #11140 1429132 Improve #endif comments (danra) #11729 7a43fbb links to code style guides (Sjors) #11793 8879d50 Bump OS X version to 10.13 (Varunram) #11783 16fff80 Fix shutdown in case of errors during initialization (laanwj) #11804 00d25e9 Fixed outdated link with archive.is (TimothyShimmin) #11960 4307062 Fix link to installation script (laudaa) #12027 63a4dc1 Remove boost –c++ flag from osx build instructions (fernandezpablo85) #12062 5961b23 Increment MIT Licence copyright header year on files modified in 2017 (akx20000a) #12063 36a5a44 Update license year range to 2018 (akx20000a) #12093 5691028 Fix incorrect Markdown link (practicalswift) #12143 b0d626d Fix link for BIP159 pull request (azuchi) #12112 3c62868 Remove the ending slashes from RPC URI format (jackycjh) #12166 e839d65 Clarify -walletdir usage (jnewbery) #12241 b030133 Fix incorrect link in /test/ README.md (fanquake) #12187 b5e4b9b Updating benchmarkmarking.md with an updated sample output (jeffrade) #12294 7cf1aea Create NetBSD build instructions and fix compilation (fanquake) #12251 cc5870a initwallet: Do not translate highly technical addresstype help (MarcoFalke) #11984 efae366 Update OpenBSD build instructions for 6.2 (cont’d) (laanwj) #12293 9d9c418 Mention that HD is enabled if hdmasterkeyid is present in getwalletinfo RPC help (fanquake) #12077 c04cb48 Correct sendmany curl example (251Labs) #10677 b3ecb7b Document that addmultisigaddress is intended for non-watchonly addresses (instagibbs) #12177 cad504b Fix address_type help text of getnewaddress and getrawchangeaddress (mruddy) Refactoring #9964 b6a4891 Add const to methods that do not modify the object for which it is called (practicalswift) #10965 655970d Replace deprecated throw() with noexcept specifier (C++11) (practicalswift) #10645 c484ec6 Use nullptr (C++11) instead of zero (0) as the null pointer constant (practicalswift) #10901 22e301a Fix constness of ArgsManager methods (promag) #10969 4afb5aa Declare single-argument (non-converting) constructors “explicit” (practicalswift) #11071 dbf6bd6 Use static_assert(…, …) (C++11) instead of assert(…) where appropriate (practicalswift) #10809 c559884 optim: mark a few classes final (theuni) #10843 2ab7c63 Add attribute [[noreturn]] (C++11) to functions that will not return (practicalswift) #11151 7fd49d0 Fix header guards using reserved identifiers (danra) #11138 2982511 Compat: Simplify bswap_16 implementation (danra) #11161 745bbdc Remove redundant explicitly defined copy ctors (danra) #11144 cee4fe1 Move local include to before system includes (danra) #10781 60dd9cc Python cleanups (practicalswift) #10701 50fae68 Remove the virtual specifier for functions with the override specifier (practicalswift) #11164 38a54a5 Fix boost headers included as user instead of system headers (danra) #11143 3aa60b7 Fix include path for bitcoin-config.h (danra) #8330 59e1789 Structure Packing Optimizations in C{,Mutable}Transaction (JeremyRubin) #10845 39ae413 Remove unreachable code (practicalswift) #11238 6acdb1f Add assertions before potential null deferences (MeshCollider) #11259 089b742 Remove duplicate destination decoding (promag) #11232 2f0d3e6 Ensure that data types are consistent (jjz) #10793 efb4383 Changing &var[0] to var.data() (MeshCollider) #11196 e278f86 Switch memory_cleanse implementation to BoringSSL’s to ensure memory clearing even with -lto (maaku) #10888 9821274 range-based loops and const qualifications in net.cpp (benma) #11351 6c4fecf Refactor: Modernize disallowed copy constructors/assignment (danra) #11385 94c9015 Remove some unused functions and methods (sipa) #11301 8776787 add m_added_nodes to connman options (benma) #11432 058c0f9 Remove unused fTry from push_lock (promag) #11107 e93fff1 Fix races in AppInitMain and others with lock and atomic bools (MeshCollider) #9572 17f2ace Skip witness sighash cache for non-segwit transactions (jl2012) #10961 da0478e Improve readability of DecodeBase58Check(…) (practicalswift) #11133 a865b38 Document assumptions that are being made to avoid division by zero (practicalswift) #11073 3bb77eb Remove dead store in ecdsa_signature_parse_der_lax (BitonicEelis) #10898 470c730 Fix invalid checks (NULL checks after dereference, redundant checks, etc.) (practicalswift) #11495 50d72b3 [trivial] Make namespace explicit for is_regular_file (jnewbery) #11511 db2f83e [Init] Remove redundant exit(EXIT_FAILURE) instances and replace with return false (donaloconnor) #10866 ef8a634 Fix -Wthread-safety-analysis warnings. Compile with -Wthread-safety-analysis if available (practicalswift) #11221 0dec4cc Refactor: simpler read (gnuser) #10696 ef3758d Remove redundant nullptr checks before deallocation (practicalswift) #11043 5e9be16 Use std::unique_ptr (C++11) where possible (practicalswift) #11353 05a7619 Small refactor of CCoinsViewCache::BatchWrite() (danra) #10749 2adbddb Use compile-time constants instead of unnamed enumerations (remove “enum hack”) (practicalswift) #11603 a933cb1 Move RPC registration out of AppInitParameterInteraction (ryanofsky) #11722 26efc22 Switched sync.{cpp,h} to std threading primitives (tjps) #10493 fbce66a Use range-based for loops (C++11) when looping over map elements (practicalswift) #11337 0d7e0a3 Fix code constness in CBlockIndex::GetAncestor() overloads (danra) #11516 0e722e8 crypto: Add test cases covering the relevant HMAC-SHA{256,512} key length boundaries (practicalswift) #10574 5d132e8 Remove includes in .cpp files for things the corresponding .h file already included (practicalswift) #11884 66479c0 Remove unused include in hash.cpp (kallewoof) #10839 c66adb2 Don’t use pass by reference to const for cheaply-copied types (bool, char, etc.) (practicalswift) #10657 79399c8 Utils: Improvements to ECDSA key-handling code (str4d) #12250 e37ca2b Make CKey::Load references const (ryanofsky) #12108 9220426 Remove unused fQuit var from checkqueue.h (donaloconnor) #12159 f3c7062 Use the character based overload for std::string::find (kekimusmaximus) #12266 3448907 Move scheduler/threadGroup into common-init instead of per-app (TheBlueMatt) Miscellaneous #11246 777519b github-merge: Coalesce git fetches (laanwj) #10871 c9a4aa8 Handle getinfo in bitcoin-cli w/ -getinfo (revival of #8843) (achow101) #11419 093074b Utils: Fix launchctl not being able to stop bitcoind (OmeGak) #11394 6e4e98e Perform a weaker subtree check in Travis (sipa) #11702 4122112 [build] Add a script for installing db4 (jamesob) #11794 dd49862 Prefix leveldb debug logging (laanwj) #11781 24df9af Add -debuglogfile option (laanwj) #10773 c17f11f Shell script cleanups (practicalswift) #11829 7630a1f Test datadir specified in conf file exists (MeshCollider) #11836 d44535d Rename rpcuser.py to rpcauth.py (hkjn) #11831 d48ab83 Always return true if AppInitMain got to the end (TheBlueMatt) #11943 1808660 contrib: fix typo in install_db4.sh help message (laanwj) #12075 c991b30 [scripts] Add missing univalue file to copyright_header.py (fanquake) #12197 000ac4f Log debug build status and warn when running benchmarks (laanwj) #10672 6ab0e4c Avoid division by zero in the case of a corrupt estimates file (practicalswift) #11273 cdd6bbf Ignore old format estimation file (Xekyo) #11951 1fb34e0 Remove dead feeest-file read code for old versions (TheBlueMatt) #11421 9ccafb1 Merge current secp256k1 subtree (MarcoFalke) #11573 2631d55 [Util] Update tinyformat.h (fanquake) #10529 331352f Improve bitcoind systemd service file (Flowdalic) #11620 70fec9e [build] .gitignore: add background.tiff (Sjors) #11558 68e021e Minimal code changes to allow msvc compilation (sipsorcery) #11284 10bee0d Fix invalid memory access in CScript::operator+= (guidovranken, ajtowns) #10939 a1f7f18 [init] Check non-emptiness of -blocknotify command prior to executing (practicalswift) #11467 937613d Fix typos. Use nullptr instead of NULL (practicalswift) #11834 5bea05b [verify-commits] Fix gpg.sh’s echoing for commits with ‘\n’ (TheBlueMatt) #11830 a13e443 rpcuser.py: Use ‘python’ not ‘python2’ (hkjn) #12194 7abb0f0 Add change type option to fundrawtransaction (promag) #12269 2ae7cf8 Update defaultAssumeValid to block 506067 (gmaxwell) #11952 9ab9963 univalue: Bump subtree (MarcoFalke) #12367 09fc859 Fix two fast-shutdown bugs (TheBlueMatt) #12422 4d54e7a util: Make LockDirectory thread-safe, consistent, and fix OpenBSD 6.2 build (laanwj) Credits Thanks to everyone who directly contributed to this release: 251 Aaron Clauson Aaron Golliver aaron-hanson Adam Langley Akio Nakamura Akira Takizawa Alejandro Avilés Alex Morcos Alin Rus Anditto Heristyo Andras Elso Andreas Schildbach Andrew Chow Anthony Towns azuchi Carl Dong Chris Moore Chris Stewart Christian Gentry Cory Fields Cristian Mircea Messel CryptAxe Dan Raviv Daniel Edgecumbe danra david60 Donal O’Connor dongsamb Dusty Williams Eelis esneider Evan Klitzke fanquake Ferdinando M. Ametrano fivepiece flack Florian Schmaus gnuser Gregory Maxwell Gregory Sanders Henrik Jonsson Jack Grigg Jacky C James Evans James O’Beirne Jan Sarenik Jeff Rade Jeremiah Buddenhagen Jeremy Rubin Jim Posen jjz Joe Harvell Johannes Kanig John Newbery Johnson Lau Jonas Nick Jonas Schnelli João Barbosa Jorge Timón Karel Bílek Karl-Johan Alm klemens Kyuntae Ethan Kim laudaa Lawrence Nahum Lucas Betschart Luke Dashjr Luke Mlsna MarcoFalke Mark Friedenbach Marko Bencun Martin Ankerl Matt Corallo mruddy Murch NicolasDorier Pablo Fernandez Paul Berg Pedro Branco Pierre Rochard Pieter Wuille practicalswift Randolf Richardson Russell Yanofsky Samuel Dobson Sean Erle Johnson Shooter Sjors Provoost Suhas Daftuar Thomas Snider Thoragh Tim Shimmin Tomas van der Wansem Utsav Gupta Varunram Ganesh Vivek Ganesan Werner Lemberg William Casarin Willy Ko Wladimir J. van der Laan As well as everyone that helped translating on Transifex. View the full article

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Feb 16, 2018 From the desk of Arthur Hayes Co-founder & CEO, BitMEX When I dip, you dip, we dip BTFD was the rallying cry of crypto traders throughout 2017. The beginning of 2018 will test even the most stalwart HODLers. When is the right time to back up the truck? It surely wasn’t at $15,000, $10,000, or $8,000. Trading both ways is intellectually challenging. The gains one made by faithfully adhering to one very profitable strategy can evaporate in days. Things change, and so should your trading strategy and mindset if you are actively punting crypto. Because the financial media always needs a reason why crypto gyrates the way it does, they descend upon their trusted sources and hound them for any explanation at all. I will go through some of the reasons routinely put forward. The CME and CBOE effects The day the CME Bitcoin futures contract launched marked the top of this bull run. The BitMEX Bitcoin Index (.BXBT) flirted with $20,000 on that fateful morning. The following two months proved that it was an amazing top at which to short Bitcoin. Now that large financial institutions could short Bitcoin by only posting USD, the thinking was/is that they will use their financial might to short Bitcoin into the ground. The first thing most financial reporters fail to understand is that on a futures exchange, there is a long for every short. By definition, a futures exchange has no net impact. If the shorters at the margin are willing to accept lower prices than buyers at the margin, the contract will trade at a discount. At that point, market makers will be net buyers, and then sell or short-sell Bitcoin on the spot markets. If the open interest is sufficient large, then this backwardation can negatively affect the price. The above is a graph of the open interest in XBTUSD since January 2018. It is relatively small. The maximum open interest over the period is $164 million. Assume that all market makers are net long, which means they must short-sell Bitcoin spot to remain price neutral. That means that $164 million of Bitcoin must be sold. That is not a per-day flow but a stock of short Bitcoin positions. The spot market on exchange trades exceeds $1 billion per day. The OTC volume is unknown, but it is not insignificant. The short pressure at its logical maximum emanating from the CME and CBOE contract holders is meaningless. Therefore, the effect on the broader market in actual flows is negligible. The contracts mainly bolster traders’ bullish sentiment. In terms of trading volume, BitMEX continues to blow both of these contracts out of the water. In the year to date, the BitMEX XBTUSD, XBTH18, and XBTM18 products traded a combined $53.14 billion versus CME and CBOE combined Bitcoin futures volume of $4.48 billion. BitMEX is 12x more liquid. Wall Street is shorting Bitcoin spot The evil bankers can’t stand a coterie of misfits becoming millionaires and billionaires, so they crashed the party by aggressively shorting Bitcoin in the spot markets. The large financial institutions do not own Bitcoin in large quantities, if at all. They are hamstrung by KYC/AML concerns surrounding Bitcoin. That means that if they wanted to sell Bitcoin, they would need to borrow it from a credible counterparty. Hey, Cumberland Mining, can we borrow $100 million of Bitcoin? Assuming banks borrowed Bitcoin with the intention of shorting it, they would need to sell it on an exchange. Given the skittishness that inhibits counterparties globally from placing large amounts of capital on an exchange, I highly doubt any compliance department at a bulge-bracket bank would approve opening an account. Let’s suspend reality and assume they allowed trading desks to open accounts on the largest Bitcoin spot exchanges. The maximum the desk could make is 100% if Bitcoin went to zero. But, if the market instead face-ripped them by 50% on a $100-million position, that loss would reach the global head of trading and of the investment bank. If you were the line executive that green-lit that trade, you would lose your job. You shorted Bitcoin, and lost a huge sum of money. That would make it into the financial press; you and your bank would be ridiculed. The career and operational risk of trading Bitcoin and then shorting it would dissuade any bank from acting. Korea trading ban After the Chinese passed the crypto trading baton to South Korea, all policy actions emanating from South Korean territory were closely watched. When a South Korean Department of Justice official proclaimed that they would attempt to ban crypto trading in Korea, the market crashed. However, unlike China, there is legal due process in South Korea. Also unlike China, South Korea’s economy is open. When the dust settled, the legislators clarified that they merely wished to have more visibility into who was trading what. Korean punters must now use real-name accounts; minors and foreigners are prohibited from trading. This is hardly draconian or a ban on trading. The South Korean government is captured by crypto. The country’s National Pension Fund even holds equity investments in many of the largest trading venues. Korea’s most successful technology startup, Kakao, owns the largest exchange by trading volume, Upbit. Is the government really going to torpedo an industry that millions of voters love, and an industry that is creating high-paying jobs? No. Your average Kim will keep the faith, and continue to trade crypto. The exchanges were halted from accepting new accounts. That measure will be lifted sometime in February. With more new blood in the market, expect the negative sentiment to wane. China bans crypto again I don’t know why markets continue to react to negative policy announcements from China. The regulators instructed all financial institutions to do a self-assessment and ban any payments connected with crypto trading. This was in response to the rampant OTC trading occurring after they shut down public trading of crypto on the large exchanges. While the on-ramp into crypto is more cluttered, Chinese punters will find ways to obtain any financial exposure they wish. If people can find a way to build illegal power plants in China, they can surely figure out how to buy and sell crypto against Beijing’s wishes. Tether big-bang theory Like many religions, the prelate deems us laypeople unworthy of speaking the their language of the gods. As such, the majority of the crypto world, myself included, has no idea how Tether works. The CFTC subpoena relating to Bitfinex and Tether spooked the markets. However, I don’t believe this is a net negative event. If Tether were in serious trouble, FinCEN and the US Treasury would be the agencies inquiring into its inner workings. If they wanted to shut it down, the first action would be a cease-and-desist order. Given that it was the CFTC that issued the subpoena and that Tethers continue to be created, what the agency is after most likely is not fatal to the currency. Even if a cease-and-desist order were issued, that would cause a market spike in the value of most large-cap cryptos instead of a plunge. Traders who wished to receive any real value at all would sell Tether and buy any crypto they could. The price of Bitcoin/Tether would spike, and this would drag the Bitcoin/USD value higher as well. This is similar to what happened when the banking issues on Bitfinex drove people to sell USD IOUs on Bitfinex and purchase Bitcoin, and then withdraw it. Bitfinex led the market higher, and the rest of the exchanges followed. If you believe there is actually trouble in the Tether Hotel California, then go long on Bitcoin. But the market action suggests that the latest legal issues are benign. What has fundamentally changed? The prices of the entire crypto complex crumpled. However, on a year-over-year basis, Bitcoin is up multiple hundreds of percent. Maybe your favourite shitcoin isn’t, but that’s just the game. Don’t let CNBC fool you into buying tops and selling bottoms. If the publicity surrounding this asset class diminishes, that could elongate the bear market. However, the financial presstitutes, as Nassim Nicholas Taleb calls them, are hooked on crypto. There is real pathos in this industry. The most-read financial stories will continue to be about this space and people therefore will continue to wonder what all the fuss is about. That will continue to drive new money into the system. For short-term traders, the amount of new fiat entering the system is the most pressing concern. If you believe the correction results in no new blood entering, then as weak hands cash out they will drive prices lower on the margin. However crypto traders are volatility junkies. Once you trade crypto, even when the equity market “crashes” 5%, you merely brush it off your shoulders. For long-term “investors”, nothing has changed about the technological merits of Bitcoin or your favourite shitcoin. Either the coin or token will be useful or it won’t. The market gyrations are irrelevant. The only certainty is that price volatility will rise as the crypto complex is chopped into bits. For us crypto traders, this is going to be an amazing first quarter. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Feb 16, 2018 From the desk of Arthur Hayes Co-founder & CEO, BitMEX When I dip, you dip, we dip BTFD was the rallying cry of crypto traders throughout 2017. The beginning of 2018 will test even the most stalwart HODLers. When is the right time to back up the truck? It surely wasn’t at $15,000, $10,000, or $8,000. Trading both ways is intellectually challenging. The gains one made by faithfully adhering to one very profitable strategy can evaporate in days. Things change, and so should your trading strategy and mindset if you are actively punting crypto. Because the financial media always needs a reason why crypto gyrates the way it does, they descend upon their trusted sources and hound them for any explanation at all. I will go through some of the reasons routinely put forward. The CME and CBOE effects The day the CME Bitcoin futures contract launched marked the top of this bull run. The BitMEX Bitcoin Index (.BXBT) flirted with $20,000 on that fateful morning. The following two months proved that it was an amazing top at which to short Bitcoin. Now that large financial institutions could short Bitcoin by only posting USD, the thinking was/is that they will use their financial might to short Bitcoin into the ground. The first thing most financial reporters fail to understand is that on a futures exchange, there is a long for every short. By definition, a futures exchange has no net impact. If the shorters at the margin are willing to accept lower prices than buyers at the margin, the contract will trade at a discount. At that point, market makers will be net buyers, and then sell or short-sell Bitcoin on the spot markets. If the open interest is sufficient large, then this backwardation can negatively affect the price. The above is a graph of the open interest in XBTUSD since January 2018. It is relatively small. The maximum open interest over the period is $164 million. Assume that all market makers are net long, which means they must short-sell Bitcoin spot to remain price neutral. That means that $164 million of Bitcoin must be sold. That is not a per-day flow but a stock of short Bitcoin positions. The spot market on exchange trades exceeds $1 billion per day. The OTC volume is unknown, but it is not insignificant. The short pressure at its logical maximum emanating from the CME and CBOE contract holders is meaningless. Therefore, the effect on the broader market in actual flows is negligible. The contracts mainly bolster traders’ bullish sentiment. In terms of trading volume, BitMEX continues to blow both of these contracts out of the water. In the year to date, the BitMEX XBTUSD, XBTH18, and XBTM18 products traded a combined $53.14 billion versus CME and CBOE combined Bitcoin futures volume of $4.48 billion. BitMEX is 12x more liquid. Wall Street is shorting Bitcoin spot The evil bankers can’t stand a coterie of misfits becoming millionaires and billionaires, so they crashed the party by aggressively shorting Bitcoin in the spot markets. The large financial institutions do not own Bitcoin in large quantities, if at all. They are hamstrung by KYC/AML concerns surrounding Bitcoin. That means that if they wanted to sell Bitcoin, they would need to borrow it from a credible counterparty. Hey, Cumberland Mining, can we borrow $100 million of Bitcoin? Assuming banks borrowed Bitcoin with the intention of shorting it, they would need to sell it on an exchange. Given the skittishness that inhibits counterparties globally from placing large amounts of capital on an exchange, I highly doubt any compliance department at a bulge-bracket bank would approve opening an account. Let’s suspend reality and assume they allowed trading desks to open accounts on the largest Bitcoin spot exchanges. The maximum the desk could make is 100% if Bitcoin went to zero. But, if the market instead face-ripped them by 50% on a $100-million position, that loss would reach the global head of trading and of the investment bank. If you were the line executive that green-lit that trade, you would lose your job. You shorted Bitcoin, and lost a huge sum of money. That would make it into the financial press; you and your bank would be ridiculed. The career and operational risk of trading Bitcoin and then shorting it would dissuade any bank from acting. Korea trading ban After the Chinese passed the crypto trading baton to South Korea, all policy actions emanating from South Korean territory were closely watched. When a South Korean Department of Justice official proclaimed that they would attempt to ban crypto trading in Korea, the market crashed. However, unlike China, there is legal due process in South Korea. Also unlike China, South Korea’s economy is open. When the dust settled, the legislators clarified that they merely wished to have more visibility into who was trading what. Korean punters must now use real-name accounts; minors and foreigners are prohibited from trading. This is hardly draconian or a ban on trading. The South Korean government is captured by crypto. The country’s National Pension Fund even holds equity investments in many of the largest trading venues. Korea’s most successful technology startup, Kakao, owns the largest exchange by trading volume, Upbit. Is the government really going to torpedo an industry that millions of voters love, and an industry that is creating high-paying jobs? No. Your average Kim will keep the faith, and continue to trade crypto. The exchanges were halted from accepting new accounts. That measure will be lifted sometime in February. With more new blood in the market, expect the negative sentiment to wane. China bans crypto again I don’t know why markets continue to react to negative policy announcements from China. The regulators instructed all financial institutions to do a self-assessment and ban any payments connected with crypto trading. This was in response to the rampant OTC trading occurring after they shut down public trading of crypto on the large exchanges. While the on-ramp into crypto is more cluttered, Chinese punters will find ways to obtain any financial exposure they wish. If people can find a way to build illegal power plants in China, they can surely figure out how to buy and sell crypto against Beijing’s wishes. Tether big-bang theory Like many religions, the prelate deems us laypeople unworthy of speaking the their language of the gods. As such, the majority of the crypto world, myself included, has no idea how Tether works. The CFTC subpoena relating to Bitfinex and Tether spooked the markets. However, I don’t believe this is a net negative event. If Tether were in serious trouble, FinCEN and the US Treasury would be the agencies inquiring into its inner workings. If they wanted to shut it down, the first action would be a cease-and-desist order. Given that it was the CFTC that issued the subpoena and that Tethers continue to be created, what the agency is after most likely is not fatal to the currency. Even if a cease-and-desist order were issued, that would cause a market spike in the value of most large-cap cryptos instead of a plunge. Traders who wished to receive any real value at all would sell Tether and buy any crypto they could. The price of Bitcoin/Tether would spike, and this would drag the Bitcoin/USD value higher as well. This is similar to what happened when the banking issues on Bitfinex drove people to sell USD IOUs on Bitfinex and purchase Bitcoin, and then withdraw it. Bitfinex led the market higher, and the rest of the exchanges followed. If you believe there is actually trouble in the Tether Hotel California, then go long on Bitcoin. But the market action suggests that the latest legal issues are benign. What has fundamentally changed? The prices of the entire crypto complex crumpled. However, on a year-over-year basis, Bitcoin is up multiple hundreds of percent. Maybe your favourite shitcoin isn’t, but that’s just the game. Don’t let CNBC fool you into buying tops and selling bottoms. If the publicity surrounding this asset class diminishes, that could elongate the bear market. However, the financial presstitutes, as Nassim Nicholas Taleb calls them, are hooked on crypto. There is real pathos in this industry. The most-read financial stories will continue to be about this space and people therefore will continue to wonder what all the fuss is about. That will continue to drive new money into the system. For short-term traders, the amount of new fiat entering the system is the most pressing concern. If you believe the correction results in no new blood entering, then as weak hands cash out they will drive prices lower on the margin. However crypto traders are volatility junkies. Once you trade crypto, even when the equity market “crashes” 5%, you merely brush it off your shoulders. For long-term “investors”, nothing has changed about the technological merits of Bitcoin or your favourite shitcoin. Either the coin or token will be useful or it won’t. The market gyrations are irrelevant. The only certainty is that price volatility will rise as the crypto complex is chopped into bits. For us crypto traders, this is going to be an amazing first quarter. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Jan 17, 2018 From the desk of Arthur Hayes Co-founder & CEO, BitMEX From The BitMEX Research Desk Mining Incentives – Part 3 – Short Term vs. Long Term Abstract: In this third piece on crypto-mining incentives, we look at the different time periods miners may choose for maximizing profits; short term or long term. We draw analogies with related concepts in "traditional" mining, such as "high-grading". In corporate finance circles there are rumours of potential IPOs for crypto-miners, which could mean management focus shifts to the short term, as they may need to justify quarterly earnings to investment analysts. We then look at the implications of this on potential network issues, such as "replace by fee" (RBF), AsicBoost and the blocksize limit. Whether one likes it or not, we think full RBF is coming. A Complete History of Bitcoin’s Consensus Forks Abstract: In this piece we list 19 Bitcoin consensus rule changes (or 18, as an accidental one “failed”), which represent what we believe to be almost every significant such event in Bitcoin’s history. At least three of these incidents resulted in an identifiable chainsplit, lasting approximately 51, 24 and 6 blocks, in 2010, 2013 and 2015, respectively. Bitcoin Gold (BTG) – Investment Flow Data Abstract: A few weeks ago, we published a piece on Bitcoin Cash and how one can analyse transaction data on the two blockchains involved in the split, to try to draw conclusions about the potential investment flows between the two chains. In this piece we provide a similar analysis, with respect to Bitcoin Gold (BTG). BitMEX Stellar $100K Giveaway BitMEX is offering a $100K lottery giveaway for Stellar (XLMF18) contracts. To win one of the 15 lottery prizes, trade at least 5000 Stellar (XLMF18) contracts on BitMEX to get one ticket. The more you trade, the more chances you have to win up to $25K. For more details, read the contest rules. Ode to Speculators As a good friend of mine says, “Everyone hates bankers until it’s time to pay the bill.” The same can be said for crypto speculators. The common rejoinder amongst those who wish they were crypto rich, but who are too scared or lazy to jump in, is that crypto won’t last because the only use case is speculation. It is true that the number one use case for crypto is speculation. However, without these unwashed speculators, would anyone outside of a few technologists really care a fig about this industry? Infrastructure Building What makes coin valuable? At a fundamental level, most coins need some sort of usage. A coin with a dedicated community is able to attract users and talented developers to improve the protocol. The technology, ideally, will be useful, but that depends on the quality of work produced. But if you are a developer, how do you decide which project to devote your time to? If you are a user, how do you first hear about a new coin or project? Forums, IRC, Twitter, and eventually traditional technology-focused media outlets are the first to pick up on new trends. It is difficult to find a worthy project while wading through the Internet sewer of questionable content. The eureka moment occurs not when just one person discovers something new and useful, but when a group of journeymen are moving in the same direction on the path to enlightenment. That is the slow approach. The faster and more popular approach is to use some objective measure to determine whether a group of people believe in a new coin or project a priori. The best objective measure is a market-determined price. One of the best facets of this industry is that most projects possess a tradeable asset. The price, traded volume, and market cap reflect the market’s judgement on the value of a project. When a price goes up and to the right, that validates those already working on the project. It also creates a desire for others to join the revolution for fear of missing out. This positive feedback loop lays a solid foundation for a project to scale and possibly realise its vision. Fake News Think back to how you first heard about Bitcoin. For me, it was a Zero Hedge article about how the price had shot up, to a then all time high of $250 in April 2013. The sharp price rise intrigued me, and prompted further investigation. Only then did I read Satoshi’s white paper, and become a believer. I imagine that most readers have a similar story. The mainstream media's most popular stories usually deal with someone making a lot of money in a short period of time. In our hyper-competitive and fast-paced world, everyone is trying to spot the next thing. They too want to discover the next Netscape, Google, Amazon, and Facebook. You too can sell books, give TED talks, go to Burning Man, and wear a puffy vest that shows off your mega biceps in your 50’s. Most people learned about Bitcoin through the media. Back in 2013, any major news outlet writing a story about Bitcoin could send the price up or down, depending on the content. Developers and punters use media outlets to determine what new skills to learn, and which new assets to HODL. The media needs a constant stream of volatility for them to continue to write about an asset class. That is why you rarely see articles about the intricacies of the bond markets. It is boring because the volatility is low. Equities however are sexy. They have stories, and their prices at times move violently on new developments. The media now loves crypto because the coins move. There is a constant flow of news. There are outrageous personalities who lead projects and own large stashes of coins. The crypto industry appeals to the emotions and greed of the public, and a new euphoria is palpable — a euphoria that central banks and regulators destroyed in the traditional asset markets. Ode to Speculators Developers, users, and investors all depend on a horde of uncouth speculators to create a liquid market for crypto coins. I say uncouth, because many financial outlets regard retail investors as stupid. Retail investors don’t work at white-shoe investment banks, wear formal business costume, or read The Economist for pleasure on the weekend. Yet, the craze is lead by these hooligans. A new class of millionaires and billionaires were created from a stock of undesirables. The memes, language, and behaviour of many of the leading figures have no place at large banks and technology firms. But these people speculated that crypto could change the world. Of course, the financial media and vaunted figures such as Jamie Dimon would pooh-pooh crypto as a cesspool filled with retail speculators. It would be unimaginable for them to endorse a market they don't understand. However, for those who are famous within the industry, there is a disturbing trend of disdain toward said speculators. That very same fame grew because they contributed to an asset class that has grown by hundreds of billions of dollars in one year. Rather than complaining about the wild gyrations of the crypto markets, a more appropriate response is to express gratitude that crypto isn’t as boring as the S&P 500. But What Are They Used For? Bitcoin is the most mature crypto-coin, and it is less than a decade old. Many of the coins that people love to hate are less than one year old. In another decade, it might be appropriate to ask “Where’s the beef?” Right now as a trader or HODL’er. you want as much volatility as possible. That drives more smart engineers into the industry, more users interacting with the technology, more crypto media articles, and liquidity from new retail punters. XBT/USD Curve Structure Due to the increased liquidity on BitMEX’s Bitcoin / USD contracts, a six-month fixed date contract can finally be listed! This new contract is XBTM18, and it expires June 29, 2018. Now we have the beginnings of a Bitcoin / USD contract-interest rate term structure. Valuable insights can be gleaned into the market’s perception of the future value of Bitcoin from the premium or discount of these contracts. The above chart illustrates the annualised percentage premium of XBTH18 (March 2018) and XBTM18 (June 2018) on January 4, 2018 and January 16, 2018. Looking at the January 4 observations, I am immediately struck by how flat the curve is. Given the explosive Bitcoin price volatility in December, I would expect XBTM18 to trade significantly lower or higher than XBTH18 in annualised percentage terms. If we time travel back to January 4, I would advise one of two strategies: Bullish: Sell XBTH18 vs. Buy XBTM18 If you believe that the price of Bitcoin will rise, this is a price neutral way to express that view. Why not just go naked long? If your prognosis is incorrect, your absolute losses will be much less using a 3m vs. 6m basis trade. If the spot price were to continue upwards over the next few weeks, XBTM18 would outperform XBTH18. That is due to traders purchasing the long end of the curve in anticipation of much higher prices come June. This outperformance manifests itself by the XBTM18 annualised premium rising much higher than XBTH18’s. Bearish: Buy XBTH18 vs. Sell XBTM18 If you believe the price of Bitcoin will fall, this is a price-neutral way to express that view. Again, in case you are wrong, you want to limit the absolute losses via a basis trade. If the spot price were to continue downwards over the next few weeks, XBTM18 would underperform XBTH18. That is due to traders selling the long end of the curve in anticipation of much lower prices come June. What Actually Happened Spot prices fell, and the curve parallel shifted lower. In addition, XBTM18 underperformed XBTH18 over the 12-day time period. In annualised percentage terms on January 4 and January 16, XBTM18 was 0.59% and 1.92% cheaper than XBTH18 respectively. The change in average spot price between both days was down 8.19%. The XBTM18 basis held up quite well all things considered. That indicates that there is a strong bid under XBTM18. The market does not expect the Bitcoin spot armageddon to continue into the summer. Or, said another way, hope springs eternal. And hope plus 100x leverage is a strong cocktail. Trade Idea: Sell XBTH18 vs. Buy XBTM18 This bout of weaker prices allows an excellent entry point into this trade. If you believe the price will soon test $10,000 and maybe $8,000, wait for the dip. During the despair, traders will short the bottom and push the whole curve close to flat premium. If the market is super bearish, XBTM18 might even trade at a discount. Then you back up the truck, and go all in. Otherwise, the current curve structure still affords an excellent entry point. My base case is that the curve will parallel-shift upwards to an annualised 40%, and XBTM18 will move to flat vs. XBTH18. In the bullish case, XBTM18’s premium will continue to outperform and hit 50% to 60% annualised. Daily Theta Theta is the daily income earned or lost due to the passage of time. Theta = (outright % premium) / (days until expiry) For the trade described above, you earn Theta by being short XBTH18 and pay Theta by being long XBTM18. This is because both contracts trade at a premium. Currently the net Theta is +0.0053% per day. A positive Theta means the trade pays for itself. Said another way, the trade has positive carry. One caveat: your positive XBTH18 Theta position evaporates in 73 days once it expires. The clock is ticking. The trade must move into your favour before XBTH18 expires. If you roll into another 3m vs. 6m calendar spread in late March, the levels may not be attractive and/or you may lock in a loss. Bitcoin Ain't a Stock The most common criticism of Bitcoin is that it has no intrinsic value. That is entirely true, but neither does the US dollar or a bar of gold. These same critics then begin to buttress their argument by comparing Bitcoin’s market cap against the equity value of some large blue-chip companies. Surely Bitcoin is in a bubble if it is worth $250 billion and company X is worth slightly less. A share of stock in a company is the net present value of all future dividends, which implies that stocks have intrinsic value. It is intellectually lazy to compare Bitcoin, which possesses no income stream, against a stock that does. This leads me to believe that most financial journalists do not fundamentally understand any of the financial assets they write about daily. The mischaracterisation of Bitcoin and its value proposition further illustrates their ignorance. The second facet of Bitcoin in the market that pains me is that many people don’t understand exchange rates. If Bitcoin has no intrinsic value, its value comes from the market’s perception of its moneyness — which means that Bitcoin has a price only vs. another asset, crypto-coin, or fiat currency. Therefore, either Bitcoin can be in a bubble now, or the asset it is valued against was previously. Take the above weekly log graph of the Bitstamp USD/Bitcoin price since 2012. Viewing this chart would lead you to believe that the dollar was in a bubble, which then burst. Hard-money folks have been labelled modern-day Cassandras because the hyperinflationary fiat doomsday collapse has yet to manifest itself. The inflation, which government statistics expertly conceal - rears its ugly head through crypto-coin pumps and Hong Kong cage homes worth millions of USD. My pet peeves do not prove that Bitcoin deserves its current market-clearing price against fiat currencies. Rather, if one wants to dismiss Bitcoin as a fad for the young'uns and financially stupid, the arguments used must make financial sense. BTFD! January, historically, has been a great month to pick up cheap Bitcoin. Over the past five years Bitcoin has turned bearish during this month and has, eventually, recovered from its drop (although it took a little longer in 2014 and 2015). Creative traders who believe that Bitcoin will indeed again recover from this current market slump can look at ways to increase their alpha while holding Bitcoin using BitMEX products. At the time of writing, XBTH18 and XBTM18 are trading at $100 and $800 premiums over a spot price of $10,950, which translate to 4.6% and 16.5% annualised premiums, respectively. Historically, the basis on the fixed-date products trade on average around 25%-30% annualised basis levels and thus these trades could be an extremely cheap way to pick up cheap Bitcoin. For example, consider if the basis reverts back to its historical average immediately at the current price levels: we should see a premium on XBTH18 and XBTM18 of $640 and $1,450 respectively. Hence, a trader looking to BTFD on Bitcoin, who believes that the basis should revert to its historical average, could then see additional gains of $540 - $650 on the fixed-date products. Happy trading! Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Jan 17, 2018 From the desk of Arthur Hayes Co-founder & CEO, BitMEX From The BitMEX Research Desk Mining Incentives – Part 3 – Short Term vs. Long Term Abstract: In this third piece on crypto-mining incentives, we look at the different time periods miners may choose for maximizing profits; short term or long term. We draw analogies with related concepts in "traditional" mining, such as "high-grading". In corporate finance circles there are rumours of potential IPOs for crypto-miners, which could mean management focus shifts to the short term, as they may need to justify quarterly earnings to investment analysts. We then look at the implications of this on potential network issues, such as "replace by fee" (RBF), AsicBoost and the blocksize limit. Whether one likes it or not, we think full RBF is coming. A Complete History of Bitcoin’s Consensus Forks Abstract: In this piece we list 19 Bitcoin consensus rule changes (or 18, as an accidental one “failed”), which represent what we believe to be almost every significant such event in Bitcoin’s history. At least three of these incidents resulted in an identifiable chainsplit, lasting approximately 51, 24 and 6 blocks, in 2010, 2013 and 2015, respectively. Bitcoin Gold (BTG) – Investment Flow Data Abstract: A few weeks ago, we published a piece on Bitcoin Cash and how one can analyse transaction data on the two blockchains involved in the split, to try to draw conclusions about the potential investment flows between the two chains. In this piece we provide a similar analysis, with respect to Bitcoin Gold (BTG). BitMEX Stellar $100K Giveaway BitMEX is offering a $100K lottery giveaway for Stellar (XLMF18) contracts. To win one of the 15 lottery prizes, trade at least 5000 Stellar (XLMF18) contracts on BitMEX to get one ticket. The more you trade, the more chances you have to win up to $25K. For more details, read the contest rules. Ode to Speculators As a good friend of mine says, “Everyone hates bankers until it’s time to pay the bill.” The same can be said for crypto speculators. The common rejoinder amongst those who wish they were crypto rich, but who are too scared or lazy to jump in, is that crypto won’t last because the only use case is speculation. It is true that the number one use case for crypto is speculation. However, without these unwashed speculators, would anyone outside of a few technologists really care a fig about this industry? Infrastructure Building What makes coin valuable? At a fundamental level, most coins need some sort of usage. A coin with a dedicated community is able to attract users and talented developers to improve the protocol. The technology, ideally, will be useful, but that depends on the quality of work produced. But if you are a developer, how do you decide which project to devote your time to? If you are a user, how do you first hear about a new coin or project? Forums, IRC, Twitter, and eventually traditional technology-focused media outlets are the first to pick up on new trends. It is difficult to find a worthy project while wading through the Internet sewer of questionable content. The eureka moment occurs not when just one person discovers something new and useful, but when a group of journeymen are moving in the same direction on the path to enlightenment. That is the slow approach. The faster and more popular approach is to use some objective measure to determine whether a group of people believe in a new coin or project a priori. The best objective measure is a market-determined price. One of the best facets of this industry is that most projects possess a tradeable asset. The price, traded volume, and market cap reflect the market’s judgement on the value of a project. When a price goes up and to the right, that validates those already working on the project. It also creates a desire for others to join the revolution for fear of missing out. This positive feedback loop lays a solid foundation for a project to scale and possibly realise its vision. Fake News Think back to how you first heard about Bitcoin. For me, it was a Zero Hedge article about how the price had shot up, to a then all time high of $250 in April 2013. The sharp price rise intrigued me, and prompted further investigation. Only then did I read Satoshi’s white paper, and become a believer. I imagine that most readers have a similar story. The mainstream media's most popular stories usually deal with someone making a lot of money in a short period of time. In our hyper-competitive and fast-paced world, everyone is trying to spot the next thing. They too want to discover the next Netscape, Google, Amazon, and Facebook. You too can sell books, give TED talks, go to Burning Man, and wear a puffy vest that shows off your mega biceps in your 50’s. Most people learned about Bitcoin through the media. Back in 2013, any major news outlet writing a story about Bitcoin could send the price up or down, depending on the content. Developers and punters use media outlets to determine what new skills to learn, and which new assets to HODL. The media needs a constant stream of volatility for them to continue to write about an asset class. That is why you rarely see articles about the intricacies of the bond markets. It is boring because the volatility is low. Equities however are sexy. They have stories, and their prices at times move violently on new developments. The media now loves crypto because the coins move. There is a constant flow of news. There are outrageous personalities who lead projects and own large stashes of coins. The crypto industry appeals to the emotions and greed of the public, and a new euphoria is palpable — a euphoria that central banks and regulators destroyed in the traditional asset markets. Ode to Speculators Developers, users, and investors all depend on a horde of uncouth speculators to create a liquid market for crypto coins. I say uncouth, because many financial outlets regard retail investors as stupid. Retail investors don’t work at white-shoe investment banks, wear formal business costume, or read The Economist for pleasure on the weekend. Yet, the craze is lead by these hooligans. A new class of millionaires and billionaires were created from a stock of undesirables. The memes, language, and behaviour of many of the leading figures have no place at large banks and technology firms. But these people speculated that crypto could change the world. Of course, the financial media and vaunted figures such as Jamie Dimon would pooh-pooh crypto as a cesspool filled with retail speculators. It would be unimaginable for them to endorse a market they don't understand. However, for those who are famous within the industry, there is a disturbing trend of disdain toward said speculators. That very same fame grew because they contributed to an asset class that has grown by hundreds of billions of dollars in one year. Rather than complaining about the wild gyrations of the crypto markets, a more appropriate response is to express gratitude that crypto isn’t as boring as the S&P 500. But What Are They Used For? Bitcoin is the most mature crypto-coin, and it is less than a decade old. Many of the coins that people love to hate are less than one year old. In another decade, it might be appropriate to ask “Where’s the beef?” Right now as a trader or HODL’er. you want as much volatility as possible. That drives more smart engineers into the industry, more users interacting with the technology, more crypto media articles, and liquidity from new retail punters. XBT/USD Curve Structure Due to the increased liquidity on BitMEX’s Bitcoin / USD contracts, a six-month fixed date contract can finally be listed! This new contract is XBTM18, and it expires June 29, 2018. Now we have the beginnings of a Bitcoin / USD contract-interest rate term structure. Valuable insights can be gleaned into the market’s perception of the future value of Bitcoin from the premium or discount of these contracts. The above chart illustrates the annualised percentage premium of XBTH18 (March 2018) and XBTM18 (June 2018) on January 4, 2018 and January 16, 2018. Looking at the January 4 observations, I am immediately struck by how flat the curve is. Given the explosive Bitcoin price volatility in December, I would expect XBTM18 to trade significantly lower or higher than XBTH18 in annualised percentage terms. If we time travel back to January 4, I would advise one of two strategies: Bullish: Sell XBTH18 vs. Buy XBTM18 If you believe that the price of Bitcoin will rise, this is a price neutral way to express that view. Why not just go naked long? If your prognosis is incorrect, your absolute losses will be much less using a 3m vs. 6m basis trade. If the spot price were to continue upwards over the next few weeks, XBTM18 would outperform XBTH18. That is due to traders purchasing the long end of the curve in anticipation of much higher prices come June. This outperformance manifests itself by the XBTM18 annualised premium rising much higher than XBTH18’s. Bearish: Buy XBTH18 vs. Sell XBTM18 If you believe the price of Bitcoin will fall, this is a price-neutral way to express that view. Again, in case you are wrong, you want to limit the absolute losses via a basis trade. If the spot price were to continue downwards over the next few weeks, XBTM18 would underperform XBTH18. That is due to traders selling the long end of the curve in anticipation of much lower prices come June. What Actually Happened Spot prices fell, and the curve parallel shifted lower. In addition, XBTM18 underperformed XBTH18 over the 12-day time period. In annualised percentage terms on January 4 and January 16, XBTM18 was 0.59% and 1.92% cheaper than XBTH18 respectively. The change in average spot price between both days was down 8.19%. The XBTM18 basis held up quite well all things considered. That indicates that there is a strong bid under XBTM18. The market does not expect the Bitcoin spot armageddon to continue into the summer. Or, said another way, hope springs eternal. And hope plus 100x leverage is a strong cocktail. Trade Idea: Sell XBTH18 vs. Buy XBTM18 This bout of weaker prices allows an excellent entry point into this trade. If you believe the price will soon test $10,000 and maybe $8,000, wait for the dip. During the despair, traders will short the bottom and push the whole curve close to flat premium. If the market is super bearish, XBTM18 might even trade at a discount. Then you back up the truck, and go all in. Otherwise, the current curve structure still affords an excellent entry point. My base case is that the curve will parallel-shift upwards to an annualised 40%, and XBTM18 will move to flat vs. XBTH18. In the bullish case, XBTM18’s premium will continue to outperform and hit 50% to 60% annualised. Daily Theta Theta is the daily income earned or lost due to the passage of time. Theta = (outright % premium) / (days until expiry) For the trade described above, you earn Theta by being short XBTH18 and pay Theta by being long XBTM18. This is because both contracts trade at a premium. Currently the net Theta is +0.0053% per day. A positive Theta means the trade pays for itself. Said another way, the trade has positive carry. One caveat: your positive XBTH18 Theta position evaporates in 73 days once it expires. The clock is ticking. The trade must move into your favour before XBTH18 expires. If you roll into another 3m vs. 6m calendar spread in late March, the levels may not be attractive and/or you may lock in a loss. Bitcoin Ain't a Stock The most common criticism of Bitcoin is that it has no intrinsic value. That is entirely true, but neither does the US dollar or a bar of gold. These same critics then begin to buttress their argument by comparing Bitcoin’s market cap against the equity value of some large blue-chip companies. Surely Bitcoin is in a bubble if it is worth $250 billion and company X is worth slightly less. A share of stock in a company is the net present value of all future dividends, which implies that stocks have intrinsic value. It is intellectually lazy to compare Bitcoin, which possesses no income stream, against a stock that does. This leads me to believe that most financial journalists do not fundamentally understand any of the financial assets they write about daily. The mischaracterisation of Bitcoin and its value proposition further illustrates their ignorance. The second facet of Bitcoin in the market that pains me is that many people don’t understand exchange rates. If Bitcoin has no intrinsic value, its value comes from the market’s perception of its moneyness — which means that Bitcoin has a price only vs. another asset, crypto-coin, or fiat currency. Therefore, either Bitcoin can be in a bubble now, or the asset it is valued against was previously. Take the above weekly log graph of the Bitstamp USD/Bitcoin price since 2012. Viewing this chart would lead you to believe that the dollar was in a bubble, which then burst. Hard-money folks have been labelled modern-day Cassandras because the hyperinflationary fiat doomsday collapse has yet to manifest itself. The inflation, which government statistics expertly conceal - rears its ugly head through crypto-coin pumps and Hong Kong cage homes worth millions of USD. My pet peeves do not prove that Bitcoin deserves its current market-clearing price against fiat currencies. Rather, if one wants to dismiss Bitcoin as a fad for the young'uns and financially stupid, the arguments used must make financial sense. BTFD! January, historically, has been a great month to pick up cheap Bitcoin. Over the past five years Bitcoin has turned bearish during this month and has, eventually, recovered from its drop (although it took a little longer in 2014 and 2015). Creative traders who believe that Bitcoin will indeed again recover from this current market slump can look at ways to increase their alpha while holding Bitcoin using BitMEX products. At the time of writing, XBTH18 and XBTM18 are trading at $100 and $800 premiums over a spot price of $10,950, which translate to 4.6% and 16.5% annualised premiums, respectively. Historically, the basis on the fixed-date products trade on average around 25%-30% annualised basis levels and thus these trades could be an extremely cheap way to pick up cheap Bitcoin. For example, consider if the basis reverts back to its historical average immediately at the current price levels: we should see a premium on XBTH18 and XBTM18 of $640 and $1,450 respectively. Hence, a trader looking to BTFD on Bitcoin, who believes that the basis should revert to its historical average, could then see additional gains of $540 - $650 on the fixed-date products. Happy trading! Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Dec 15, 2017 From the Desk of Arthur Hayes Co-Founder & CEO, BitMEX From The BitMEX Research Desk Public Companies With Exposure To The Crypto Space Abstract: The price of crypto related assets like Bitcoin have skyrocketed in recent months and many speculative investors understandably appear to want upside exposure to the space, however the risk of a downwards correction is high, in our view. In this piece we look at a potentially lower risk method of obtaining some upside, by presenting a selection of listed equities which have some exposure, but also businesses in other areas. Bitcoin Cash (BCH): Investment flow data (update) Abstract: In early September 2017, we published a piece on Bitcoin Cash (also known as BCash) and how one can analyse transaction data on the two blockchains involved in the split, to try to draw conclusions about the potential investment flows between the two chains. In this piece we update the analysis, with another three months worth of data. itcoin’s Unique Value Proposition Abstract: In this piece we examine the question of “What is Bitcoin for?” We conclude that neither low cost payments, censorship resistance nor digital payments, are particularly compelling on their own. However, when combining both censorship resistant money, with the ability to use money electronically, we have a potentially interesting and somewhat unique set of characteristics. CBOE Bitcoin Shorts Got Ashdrake'd There once was a trader who went by the handle Lord Ashdrake. He was a Romanian programmer, and was a prolific force during the nuclear Bitcoin winter in 2014 and 2015. His skill was shorting Bitcoin, and that strategy worked like a charm until it didn’t. When Bitcoin finally broke and held $300, Ashdrake performed his usual action of shorting Bitcoin. Unfortunately this time, the price continued through $300 to $500, and almost touched $600 in under 2 months. He completely blew up his account to the point where he could no longer trade Bitcoin. His folly was being unable to shift into a bull market mindset. The trader community coined the term “to be Ashdrake’d.” It meant to completely blow up your trading account by shorting Bitcoin. Leading up to Monday’s CBOE Bitcoin futures launch, the financial media constantly droned on that institutional investors would line up to short Bitcoin into the ground. However within twelve hours after the launch, the CBOE Jan Bitcoin future hit the circuit breaker three times, and was up over 20%. Interactive Brokers was so afraid of being Ashdrake’d they did not allow clients to go net short the futures contract. They have since reversed that stance, but shorts must post a whopping 400% margin. Contango, Anyone? As I write this the CBOE future continues to trade at a premium to spot. There is a very simple reason why this future should usually trade at a premium. Consider the plight of the average traditional active asset manager. Global central banks crushed volatility in all asset classes in their relentless drive to create inflation. Bonds, equities, ETFs, asset-backed securities are all prominently featured on central bank balance sheets. Retail investors noticed. They realised en masse it is better to own a passive market-tracking ETF, than entrust an expensive human to generate “alpha”. Even the so-called smart money became glorified beta-chasers. However, Bitcoin and other digital currencies continued to be volatile, have a negative correlation to risky assets, and go up in value. If I am an average active fund manager, I am surely underperforming a passive equity investment in the S&P 500, for example. If I do nothing, I will certainly lose assets to passive ETFs with lower fees and better performance. However, I could swing the bat and import a call option with a negative correlation to my portfolio as a whole. If it goes to 0, who cares? I was going to underperform the index anyway. If it rises 50% to 100% in a month, I have added a few crucial basis points to my performance. That could be the difference between receiving a doughnut as a bonus or getting PAID. That call option is going long Bitcoin futures. I don’t have to believe in Bitcoin, only its price, volatility, correlation, and liquidity. I don’t have to hold Bitcoin. I only need to use the USD already deposited with the CBOE or CME to trade the futures contract. The specs will be net long Bitcoin futures contracts. The market makers who are delta neutral will sell futures and purchase Bitcoin. As I have said previously, market makers must receive a very high basis to compensate them for the USD margin they must post. Unfortunately for these market makers, unrealised USD gains from being long Bitcoin cannot be used to offset the unrealised USD losses on their short futures position. Therefore the basis must be attractive enough to compensate for the large balance sheet usage. The basis on the CBOE opened close to +10%, and now trades in the +3% to +5% range. CME Game Time All the traders I speak to unanimously prefer the CME’s contract structure to the CBOE’s. The main point of contention is that the CBOE uses only Gemini as a reference exchange. The liquidity of Gemini pales in comparison to the sum of Bitstamp, GDAX, itbit, and Kraken. The CBOE launch on Monday whetted the appetite of speculators globally. Never before in my markets career have I seen such attention paid to a new futures contract. The game has just begun, and the CME is going to rain 3’s like Steve Kerr all over the CBOE. Out of the gate I expect the CME near month contract to hit the 7%, then 13% circuit breakers. By mid-morning Asia time, I expect the contract to be limit up at 20%. Tame Bitcoin … Yeah, Right Bitcoin is a wild bucking bronco, and the CBOE and CME lack the skills to ride 8 seconds. We crypto traders should thank our lucky stars that these venerable exchanges decided to list futures contracts this year. The volatility and attention they have brought exceed anything I could have imagined. Central banks saved commercial banks from certain death via aggressive money printing. However 9 years after the GFC, banks and investors are desperate for volatility. Bitcoin, altcoins, ICOs and all manner of digital tokens provide the long lost market gyrations that made generations of traders wealthy. As Jesse Livermore said:“I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend.” Moral of the story: don’t get Ashdrake’d. BTFD, ya hearrd? XBTH18, The Main Event The launch of the new Bitcoin quarterly contract is always an exciting time. The basis or lack thereof points to trader excitement or apathy. As Bitcoin nears $20,000 and with the CBOE and CME now on board, the basis gyrations of the BitMEX Bitcoin / USD 30 March 2018 futures will fascinate traders. The leading factor in the basis movements will be the CBOE and more so the CME Bitcoin futures contracts. The CME contract launches Monday morning Asia time. As a betting man, I predict the basis will move up and to the right in an aggressive fashion. This will carry XBTH18 basis higher as well. Therefore for those who cannot trade the CME contract, using XBTH18 is a great way to play the most anticipated launch of a crypto related product to date. Strategy 1: Bullish on price and basis For those who believe the price and basis will rise together, go long XBTH18. This the highest risk strategy I will propose, but also has the largest profit potential. Strategy 2: Bullish on price and basis, but delta neutral For those who do not want to run naked Bitcoin delta, go long XBTH18 vs. short XBTUSD. You make money on basis expansion via the long XBTH18 position. If the price and futures basis are rising, the XBTUSD swap will also trade at a premium. That means that as a short, you will receive funding. This strategy is predicated on your view that the price will rise. The FOMO will invite buyers to pay a premium for the 100x leverage. This is what drives the futures basis and swap funding higher. Strategy 3: Bullish on basis, and delta neutral This strategy is for those who believe that buyers will exert extreme pressure on the CME futures basis, but are not exactly sure whether the price will go up or down. Traders should go long XBTH18 and short spot Bitcoin. This trade only makes money if the XBTH18 basis increases. Timing Bitcoin moves are exaggerated over weekends when flat cash ceases to travel between exchanges. The FOMO before the CME launch will be legendary, thus it behooves traders to put these trades on as early as possible. You don't want to wake up Saturday morning, after a Volar session, to the XBTH18 basis trading a few percentage points higher. The time to buy is now. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

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In this piece we look at a potentially lower risk method of obtaining some upside, by presenting a selection of listed equities which have some exposure, but also businesses in other areas.Bitcoin Cash (BCH): Investment flow data (update) Abstract: In early September 2017, we published a piece on Bitcoin Cash (also known as BCash) and how one can analyse transaction data on the two blockchains involved in the split, to try to draw conclusions about the potential investment flows between the two chains. In this piece we update the analysis, with another three months worth of data.itcoin’s Unique Value Proposition Abstract: In this piece we examine the question of “What is Bitcoin for?” We conclude that neither low cost payments, censorship resistance nor digital payments, are particularly compelling on their own. However, when combining both censorship resistant money, with the ability to use money electronically, we have a potentially interesting and somewhat unique set of characteristics. CBOE Bitcoin Shorts Got Ashdrake'd There once was a trader who went by the handle Lord Ashdrake. He was a Romanian programmer, and was a prolific force during the nuclear Bitcoin winter in 2014 and 2015. His skill was shorting Bitcoin, and that strategy worked like a charm until it didn’t.When Bitcoin finally broke and held $300, Ashdrake performed his usual action of shorting Bitcoin. Unfortunately this time, the price continued through $300 to $500, and almost touched $600 in under 2 months.He completely blew up his account to the point where he could no longer trade Bitcoin. His folly was being unable to shift into a bull market mindset. The trader community coined the term “to be Ashdrake’d.” It meant to completely blow up your trading account by shorting Bitcoin.Leading up to Monday’s CBOE Bitcoin futures launch, the financial media constantly droned on that institutional investors would line up to short Bitcoin into the ground. However within twelve hours after the launch, the CBOE Jan Bitcoin future hit the circuit breaker three times, and was up over 20%.Interactive Brokers was so afraid of being Ashdrake’d they did not allow clients to go net short the futures contract. They have since reversed that stance, but shorts must post a whopping 400% margin.Contango, Anyone?As I write this the CBOE future continues to trade at a premium to spot. There is a very simple reason why this future should usually trade at a premium.Consider the plight of the average traditional active asset manager. Global central banks crushed volatility in all asset classes in their relentless drive to create inflation. Bonds, equities, ETFs, asset-backed securities are all prominently featured on central bank balance sheets.Retail investors noticed. They realised en masse it is better to own a passive market-tracking ETF, than entrust an expensive human to generate “alpha”. Even the so-called smart money became glorified beta-chasers.However, Bitcoin and other digital currencies continued to be volatile, have a negative correlation to risky assets, and go up in value. If I am an average active fund manager, I am surely underperforming a passive equity investment in the S&P 500, for example.If I do nothing, I will certainly lose assets to passive ETFs with lower fees and better performance. However, I could swing the bat and import a call option with a negative correlation to my portfolio as a whole. If it goes to 0, who cares? I was going to underperform the index anyway. If it rises 50% to 100% in a month, I have added a few crucial basis points to my performance. That could be the difference between receiving a doughnut as a bonus or getting PAID.That call option is going long Bitcoin futures. I don’t have to believe in Bitcoin, only its price, volatility, correlation, and liquidity. I don’t have to hold Bitcoin. I only need to use the USD already deposited with the CBOE or CME to trade the futures contract.The specs will be net long Bitcoin futures contracts. The market makers who are delta neutral will sell futures and purchase Bitcoin. As I have said previously, market makers must receive a very high basis to compensate them for the USD margin they must post.Unfortunately for these market makers, unrealised USD gains from being long Bitcoin cannot be used to offset the unrealised USD losses on their short futures position. Therefore the basis must be attractive enough to compensate for the large balance sheet usage.The basis on the CBOE opened close to +10%, and now trades in the +3% to +5% range.CME Game TimeAll the traders I speak to unanimously prefer the CME’s contract structure to the CBOE’s. The main point of contention is that the CBOE uses only Gemini as a reference exchange. The liquidity of Gemini pales in comparison to the sum of Bitstamp, GDAX, itbit, and Kraken.The CBOE launch on Monday whetted the appetite of speculators globally. Never before in my markets career have I seen such attention paid to a new futures contract.The game has just begun, and the CME is going to rain 3’s like Steve Kerr all over the CBOE.Out of the gate I expect the CME near month contract to hit the 7%, then 13% circuit breakers. By mid-morning Asia time, I expect the contract to be limit up at 20%.Tame Bitcoin … Yeah, RightBitcoin is a wild bucking bronco, and the CBOE and CME lack the skills to ride 8 seconds.We crypto traders should thank our lucky stars that these venerable exchanges decided to list futures contracts this year. The volatility and attention they have brought exceed anything I could have imagined.Central banks saved commercial banks from certain death via aggressive money printing. However 9 years after the GFC, banks and investors are desperate for volatility. Bitcoin, altcoins, ICOs and all manner of digital tokens provide the long lost market gyrations that made generations of traders wealthy.As Jesse Livermore said:“I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend.”Moral of the story: don’t get Ashdrake’d. BTFD, ya hearrd? XBTH18, The Main Event The launch of the new Bitcoin quarterly contract is always an exciting time. The basis or lack thereof points to trader excitement or apathy. As Bitcoin nears $20,000 and with the CBOE and CME now on board, the basis gyrations of the BitMEX Bitcoin / USD 30 March 2018 futures will fascinate traders.The leading factor in the basis movements will be the CBOE and more so the CME Bitcoin futures contracts.The CME contract launches Monday morning Asia time. As a betting man, I predict the basis will move up and to the right in an aggressive fashion. This will carry XBTH18 basis higher as well. Therefore for those who cannot trade the CME contract, using XBTH18 is a great way to play the most anticipated launch of a crypto related product to date.Strategy 1: Bullish on price and basisFor those who believe the price and basis will rise together, go long XBTH18. This the highest risk strategy I will propose, but also has the largest profit potential.Strategy 2: Bullish on price and basis, but delta neutralFor those who do not want to run naked Bitcoin delta, go long XBTH18 vs. short XBTUSD. You make money on basis expansion via the long XBTH18 position. If the price and futures basis are rising, the XBTUSD swap will also trade at a premium. That means that as a short, you will receive funding.This strategy is predicated on your view that the price will rise. The FOMO will invite buyers to pay a premium for the 100x leverage. This is what drives the futures basis and swap funding higher.Strategy 3: Bullish on basis, and delta neutralThis strategy is for those who believe that buyers will exert extreme pressure on the CME futures basis, but are not exactly sure whether the price will go up or down.Traders should go long XBTH18 and short spot Bitcoin. This trade only makes money if the XBTH18 basis increases.TimingBitcoin moves are exaggerated over weekends when flat cash ceases to travel between exchanges. The FOMO before the CME launch will be legendary, thus it behooves traders to put these trades on as early as possible.You don't want to wake up Saturday morning, after a Volar session, to the XBTH18 basis trading a few percentage points higher. The time to buy is now. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe View the full article

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This BCC token represents the Bitcoin Core side of the Bitcoin Unlimited futures contract.The Litecoin vs Dogecoin hashrate wars of 2014 & the implications for Bitcoin vs Bitcoin Cash Abstract: In this piece we look at the hashrate oscillations between Litecoin (LTC) and Dogecoin (DOGE) in 2014. We compare it to the current Bitcoin (BTC) & Bitcoin Cash (BCH) hashrate oscillations and consider whether we can learn any lessons from “history”.The implications for Bitcoin of the new Bitcoin Cash difficulty adjustment mechanism Abstract: In this piece we examine the potential impact of Bitcoin Cash’s new rolling 24 hour difficulty adjustment algorithm on the Bitcoin network. We look at the possible implications of price movements of Bitcoin Cash, with respect to hashrate oscillations between the two coins.Revisiting The DAO Abstract: In this piece we revisit The DAO and the events following its failure. We analyse what happened to the various buckets of funds inside The DAO, on both sides of the chainsplit which it caused. We identify US$140 million of unclaimed funds still inside what is left of The DAO. BitMEX vs. CME Futures Guide Bitcoin is at a watershed moment. The Chicago Mercantile Exchange (CME), the largest exchange globally by notional traded, deemed Bitcoin worthy of a futures contract. The contract will allow investors to speculate on the Bitcoin / USD price without owning Bitcoin. Prior to this contract, derivatives traders were required to own Bitcoin in order to post margin on futures trading platforms such as BitMEX.Due to the different client bases that BitMEX (retail), and the CME (professional investors) serve, the price discrepancies between two futures contracts with the same underlying will present enormous opportunities to generate arbitrage profits. This guide will walk traders through how to execute such trades.Contract SpecsEach CME contract is worth 5 Bitcoin (XBT), and quoted in USD. Margin and profit and loss (PNL) are denominated in USD. This is what I refer to as a linear contract structure.CME XBT Value = 5 XBT * ContractsCME USD Value = 5 XBT * Price * ContractsEach BitMEX contract is worth 1 USD of Bitcoin, and quoted in USD. Margin and PNL are denominated in XBT. This is what I refer to as an inverse contract structure.BitMEX XBT Value = 1/Price * 1 USD * ContractsBitMEX USD Value = 1 USD * ContractsThe above chart shows the XBT value of each contract. The CME contract has a fixed value in Bitcoin no matter the spot price. The BitMEX contract’s Bitcoin value follows a 1/x function. Technically speaking the BitMEX multiplier is negative, even though in the graph uses a positive multiplier for a better visualisation.Assume you are long 10,000 contracts at a price of $1,000.XBT Value = 1/$1,000 * -1 USD * 10,000 = -10 XBTNow the price falls to $500.XBT Value = 1/$500 * -1 USD * 10,000 = -20 XBTAt a lower price, the XBT value is a larger negative number.XBT PNL = -20 XBT - (-10 XBT) = -10 XBTThis means that the value in Bitcoin declines faster as the price falls, and increases slower as the price rises. That is negative gamma, or negative convexity.The above chart shows the USD value of each contract. The CME contract’s USD value changes in a linear fashion with respect to the spot price. The BitMEX contract’s USD value is fixed at $1 per contract.CME Contract SpecsContract SizeThe CME contract is much larger in notional terms than BitMEX’s. If the price of Bitcoin is $8,000, one CME contract is worth $40,000. To achieve a similar notional on BitMEX requires 40,000 contracts.When I touch on spread trades later, the much larger CME notional means that only traders with large amounts of capital can put on these trades. This limiting factor, along with the lower leverage offered by the CME, means most retail traders will be unable to trade the CME product.SettlementThe first major difference between the two contracts is the underlying index. The CME settles on the CME CF Bitcoin Reference Rate. This index includes prices from Bitstamp, Gdax, itBit, and Kraken. BitMEX settles on the BitMEX Index that includes Bitstamp and Gdax.Traders who hold either contract to expiry will need to familiarise themselves with each index, and at a minimum be able to trade on all four exchanges.Both BitMEX and the CME expire on the last Friday of the contract month. However, BitMEX expires at 12:00 UTC, while the CME expires at 16:00 London Time which is either 16:00 UTC or 15:00 UTC depending on daylight savings. Given that the expiry time differs by only 3 to 4 hours, there is little benefit to adjust the time value when computing relative basis.MarginBitcoin is a call option. The more volatile it is, the more valuable the option. Due to an infinite upside, and a capped downside at 0, the trading pressure on the margin comes from longs. That means that market makers who are price neutral will usually be short derivatives. Their propensity to quote an offer depends on how easily it is to purchase spot Bitcoin, and how their short derivative is margined.As I previously mentioned the BitMEX contract is margined in XBT. That means that shorts can purchase spot Bitcoin and use this as collateral against their BitMEX short. If you buy $1,000 of Bitcoin, deposit the full XBT notional with BitMEX, then short 1,000 BitMEX contracts, you cannot be liquidated if the price rises.BitMEX shorts, due to the inverse contract structure, are long gamma in XBT terms. That means as the price rises, their unrealised losses increase less quickly. Therefore, BitMEX shorts can use more leverage than they otherwise would if the contract used a linear contract structure.Contrast that with the CME, which margins the contract in USD. For a market maker who is short, their spot Bitcoin hedge cannot be used as margin at the CME. As the price rises, their Bitcoin is worth more; however those unrealised USD gains cannot be deposited as margin. The CME will demand more USD collateral as the unrealised losses mount.This makes shorting the CME contract very capital intensive. A priori, I expect the CME contract to trade more expensive than BitMEX. CME shorts need to be compensated via a higher basis for their implicit short volatility position.The CME intends to list a futures curve out to one year. The backend of the curve, due to a larger time value, will be illiquid when compared to the front months, and will trade at a very high basis.I will now present two spread trades. Assume that you are a USD based investor.Spread Trade: Long BitMEX vs. Short CMEAssume the following:Leverage: 5x / Initial Margin of 20%Spot = $8,000BitMEX = $8,000Contracts = Long 200,000CME = $10,000Contracts = Short 6Spread = $2,000First compute the XBT and USD exposures.On BitMEX:XBT Exposure: 200,000 Long Contracts / $8,000 = +25 XBTUSD Exposure: 200,000 Long Contracts * 1 USD = -$200,000Margin Requirement: 20% * 25 XBT = 5 XBTCollateral Currency Exposure vs. USD: +5 XBT / -$40,000 (Valued at the spot price)On CME:XBT Exposure: 6 Short Contracts * 5 XBT = -30 XBTUSD Exposure: 6 Short Contracts * 5 XBT * $10,000 = +$300,000Margin Requirement: 20% * $300,000 = $60,000Collateral Currency Exposure vs. USD = 0Because you are a USD based investor, you must ensure that you do not have XBT/USD risk at any time. Due to the XBT BitMEX margin requirement, you must short an additional 1 CME contact to hedge the 5 XBT margin required on BitMEX.Margin XBT/USD Price Risk:BitMEX: +5 XBT / -$40,000CME: -5 XBT / +$50,000 (Short 1 Contract)Net: 0 XBT / +$10,000Due to the CME’s higher basis, we earn carry on the BitMEX XBT collateral.Spread XBT/USD Price Risk:BitMEX: +25 XBT / -$200,000 (Long 200,000 Contracts)CME: -25 XBT / +$250,000 (Short 5 Contracts)Net: 0 XBT / +$50,000As predicted, we earn $50,000 PNL from this spread trade. The below table stresses the portfolio on a large up and down move. Price BMEX XBT PNL BMEX USD PNL CME USD PNL Total $4,000 -25.00 XBT -$100,000 $150,000 $50,000 $8,000 0.00 XBT $0 $50,000 $50,000 $16,000 12.50 XBT $200,000 -$150,000 $50,000 The trade continues to return $50,000 regardless of the price movement. However, this is a leveraged trade, we must post additional margin on either BitMEX or the CME depending on the price move.The below table summarises what actions must be taken to ensure we meet margin requirements. Margin Action Currency Needed Price Falls Buy then deposit XBT on BMEX, sell CME contracts XBT & USD Price Rises Deposit USD to CME USD Because we are short gamma on our long BitMEX position, we must post XBT and sell CME contracts to hedge the XBT collateral. Both of these derivatives require additional margin. On the upside, we only need to post additional USD with the CME. Depending on your cost of capital, a prolonged down move without any recovery could become very expensive.Another issue is the sizing of this trade. Each CME contract is worth 5 XBT. If you wish to remain price neutral on your XBT collateral, a 5 XBT loss needs to be a small % with respect to your trade notional. Otherwise you will always be over and under hedged. The below table illustrates this point.Entry Price: $8,000Multiplier: -1 USD (for inverse contracts the multiplier is actually negative) Contracts XBT Value Down % Move Up % Move 50,000 -6.25 XBT $4,444.44 -44.44% $40,000.00 400.00% 250,000 -31.25 XBT $6,896.55 -13.79% $9,523.81 19.05% 500,000 -62.50 XBT $7,407.41 -7.41% $8,695.65 8.70% 1,000,000 -125.00 XBT $7,692.31 -3.85% $8,333.33 4.17% 2,500,000 -312.50 XBT $7,874.02 -1.57% $8,130.08 1.63% 5,000,000 -625.00 XBT $7,936.51 -0.79% $8,064.52 0.81% The % Move is a measure of how far the price needs to move up or down to generate a contract value change of 5 XBT. As you can see, go big or go home.Spread Trade: Short BitMEX vs. Long CMEAssume the following:Leverage: 5x / Initial Margin of 20%Spot = $8,000BitMEX = $10,000Contracts = Short 250,000CME = $8,000Contracts = Long 5Spread = $2,000First compute the XBT and USD exposures.On BitMEX:XBT Exposure: 250,000 Short Contracts / $10,000 = -25 XBTUSD Exposure: 250,000 Short Contracts * 1 USD = +$250,000Margin Requirement: 20% * 25 XBT = 5 XBTCollateral Currency Exposure vs. USD: +5 XBT / -$40,000In order to hedge the 5 XBT of margin required, sell an additional 50,000 BitMEX contracts.XBT Exposure: 50,000 Short Contracts / $10,000 = -5 XBTUSD Exposure: 50,000 Short Contracts * 1 USD = +$50,000Net: 0 XBT / $10,000On CME:XBT Exposure: 5 Long Contracts * 5 XBT = +25 XBTUSD Exposure: 5 Long Contracts * 5 XBT * $8,000 = -$200,000Margin Requirement: 20% * $200,000 = $40,000Collateral Currency Exposure vs. USD = 0Spread XBT/USD Price Risk:BitMEX: -25 XBT / +$250,000 (Short 250,000 Contracts)CME: +25 XBT / -$200,000 (Long 5 Contracts)Net: 0 XBT / +$50,000As predicted, we earn $50,000 PNL from this spread trade. The below table stresses the portfolio on a large up and down move. Price BMEX XBT PNL BMEX USD PNL CME USD PNL Total $4,000 37.50 XBT $150,000 -$100,000 $50,000 $8,000 6.25 XBT $50,000 $0 $50,000 $16,000 -9.38 XBT -$150,000 $200,000 $50,000 The trade continues to return $50,000 regardless of the price movement. However, this is a leveraged trade, we must post additional margin on either BitMEX or the CME depending on the price move.The below table summarises what actions must be taken to ensure we meet margin requirements. Margin Action Currency Needed Price Falls Deposit USD to CME USD Price Rises Buy then deposit XBT on BMEX, sell BMEX contracts XBT Because you have positive gamma on the short BitMEX position, you will not face a doubling of margin requirements when the price falls. This spread trade is more capital efficient; however, I doubt whether BitMEX will frequently trade more expensive than the CME for reasons described above.Gap RiskThe CME does not trade over the weekend. Longs or shorts depending on the price action over the weekend, could be insta-rekt when the exchange reopens Sunday night US time.Interactive Brokers, one of the CME’s clearing members, expressed severe reservations about this product due to the high volatility. They are scared shitless about how to deal with underwater shorts. It is not impossible for Bitcoin to gap up 100% in a matter of hours on positive news. Imagine what will happen when an ETF finally is approved.BitMEX deals with gap risk via Auto-Deleveraging. The CME at the present moment cannot employ a socialised loss feature. Instead, clearing members must pony up the cash. That is why they are being such scaredy cats.Depending on your broker, margin requirements for short positions could be extremely unforgiving. This will push CME basis up even further, and make putting on the spread trade described above, even more expensive.Are You Yellow?Arbitraging BitMEX vs. the CME requires a high level of trading sophistication and attention to detail. The different margin currencies and policies present many opportunities to transform what is a sure profit into a massive loss.However, owing its the difficulty, these spread trades will be juicy. For students of markets, this is an arbitrage opportunity of a lifetime. Those who put in the time to perfect these strategies, will profit handsomely. I'll Take That Building wealth is the easy part, securing and storing it for use by subsequent generations is very difficult.Half a millennium ago, a wealthy family needed a private army to secure its land and wealth. If you couldn’t project violence in the defence of your assets, they would be forcibly taken by an opportunistic person.As civilisations evolved and we entered the age of the nation state, society agreed that a centralised government should have a legal license to kill in order to secure the interests of property owners. Regardless of the economic “ism” a government claims to practice, the goal is the same. Protect a small group of asset holders against the hoard of commoners who might like to improve their lot at the expense of the elites.Today the richest humans don’t command standing armies, and their holdings include financial and real assets. Stock and bond ownership relies on a central depository to affirm that you indeed are the owner. Government deed offices proclaim a piece of land or real estate is yours.You are rich as long as the government allows you to be. The trappings of wealth can be taken at a whim. Should your actions upset a powerful state actor, your bank accounts will be frozen, and assets confiscated through the courts.The recent Saudi corruption drive is case and point. Mohammad bin Salman (MBS), the crown prince of Saudi Arabia, is on a mission to wean the country off of oil. This is harder said than done, especially since the general population only complies because of generous government handouts. To beef up the government coffers, MBS did what all governments do, go after certain rich people.MBS certainly wouldn’t subject himself to austerity. Last year he purchased a yacht worth over $500 million while at the same time slashing government spending.Overnight some of the country's richest members were herded to the Ritz Carlton, and placed under arrest owing to “corruption” charges. The most famous billionaire ensnared was Prince Alwaleed bin Talal. This Price is a world famous investor and has large stakes in some of the biggest tech darlings globally.After a few days cooped up in the Ritz, MBS presented his chattel with a choice. Liquidate your assets and give the Saudi government up to 70%, or stay locked up. Even if a large percentage of your wealth is held offshore, due to information sharing between governments, MBS likely knows where the biggest nuggets are held. If he doesn’t think you have been forthcoming enough with the true state of your offshore wealth, well the Yemeni front line is awful fun these days.Bitcoin presents a different way to secure wealth. Instead of trusting a government staffed with capricious humans, holders of Bitcoin trust cryptography and a decentralised network of profit motivated miners.Bitcoin is less than a decade old, and is still very much an experiment. But if you possess a sum of wealth, it is prudent to diversify the networks used to secure it. Many people believe if they follow the “law”, they will be alright. However, laws change to serve the growth and power of the government writing them.The government failures in Venezuela and Zimbabwe illustrate that in times of crisis Bitcoin can be used to grease the wheels of commerce. Unfortunately for most, it takes a time of crisis to elucidate the fatal flaws of a particular economic system. Only then will people take concrete actions, which only moments ago, were diametrically opposed to their belief system. At that point it’s too late. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe View the full article

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Nov 22, 2017 From the Desk of Arthur Hayes Co-Founder & CEO, BitMEX From The BitMEX Research Desk Trading Tip: Attempt to obtain free Bitcoin Cash on Bitfinex Abstract: In this piece we explain a reasonably risky way to obtain free Bitcoin Cash (BCH) on the Bitfinex platform, by purchasing the BCC token. This BCC token represents the Bitcoin Core side of the Bitcoin Unlimited futures contract. The Litecoin vs Dogecoin hashrate wars of 2014 & the implications for Bitcoin vs Bitcoin Cash Abstract: In this piece we look at the hashrate oscillations between Litecoin (LTC) and Dogecoin (DOGE) in 2014. We compare it to the current Bitcoin (BTC) & Bitcoin Cash (BCH) hashrate oscillations and consider whether we can learn any lessons from “history”. The implications for Bitcoin of the new Bitcoin Cash difficulty adjustment mechanism Abstract: In this piece we examine the potential impact of Bitcoin Cash’s new rolling 24 hour difficulty adjustment algorithm on the Bitcoin network. We look at the possible implications of price movements of Bitcoin Cash, with respect to hashrate oscillations between the two coins. Revisiting The DAO Abstract: In this piece we revisit The DAO and the events following its failure. We analyse what happened to the various buckets of funds inside The DAO, on both sides of the chainsplit which it caused. We identify US$140 million of unclaimed funds still inside what is left of The DAO. BitMEX vs. CME Futures Guide Bitcoin is at a watershed moment. The Chicago Mercantile Exchange (CME), the largest exchange globally by notional traded, deemed Bitcoin worthy of a futures contract. The contract will allow investors to speculate on the Bitcoin / USD price without owning Bitcoin. Prior to this contract, derivatives traders were required to own Bitcoin in order to post margin on futures trading platforms such as BitMEX. Due to the different client bases that BitMEX (retail), and the CME (professional investors) serve, the price discrepancies between two futures contracts with the same underlying will present enormous opportunities to generate arbitrage profits. This guide will walk traders through how to execute such trades. Contract Specs Each CME contract is worth 5 Bitcoin (XBT), and quoted in USD. Margin and profit and loss (PNL) are denominated in USD. This is what I refer to as a linear contract structure.CME XBT Value = 5 XBT * ContractsCME USD Value = 5 XBT * Price * Contracts Each BitMEX contract is worth 1 USD of Bitcoin, and quoted in USD. Margin and PNL are denominated in XBT. This is what I refer to as an inverse contract structure.BitMEX XBT Value = 1/Price * 1 USD * ContractsBitMEX USD Value = 1 USD * Contracts The above chart shows the XBT value of each contract. The CME contract has a fixed value in Bitcoin no matter the spot price. The BitMEX contract’s Bitcoin value follows a 1/x function. Technically speaking the BitMEX multiplier is negative, even though in the graph uses a positive multiplier for a better visualisation. Assume you are long 10,000 contracts at a price of $1,000.XBT Value = 1/$1,000 * -1 USD * 10,000 = -10 XBT Now the price falls to $500.XBT Value = 1/$500 * -1 USD * 10,000 = -20 XBT At a lower price, the XBT value is a larger negative number.XBT PNL = -20 XBT - (-10 XBT) = -10 XBT This means that the value in Bitcoin declines faster as the price falls, and increases slower as the price rises. That is negative gamma, or negative convexity. The above chart shows the USD value of each contract. The CME contract’s USD value changes in a linear fashion with respect to the spot price. The BitMEX contract’s USD value is fixed at $1 per contract.CME Contract Specs Contract Size The CME contract is much larger in notional terms than BitMEX’s. If the price of Bitcoin is $8,000, one CME contract is worth $40,000. To achieve a similar notional on BitMEX requires 40,000 contracts. When I touch on spread trades later, the much larger CME notional means that only traders with large amounts of capital can put on these trades. This limiting factor, along with the lower leverage offered by the CME, means most retail traders will be unable to trade the CME product. Settlement The first major difference between the two contracts is the underlying index. The CME settles on the CME CF Bitcoin Reference Rate. This index includes prices from Bitstamp, Gdax, itBit, and Kraken. BitMEX settles on the BitMEX Index that includes Bitstamp and Gdax. Traders who hold either contract to expiry will need to familiarise themselves with each index, and at a minimum be able to trade on all four exchanges. Both BitMEX and the CME expire on the last Friday of the contract month. However, BitMEX expires at 12:00 UTC, while the CME expires at 16:00 London Time which is either 16:00 UTC or 15:00 UTC depending on daylight savings. Given that the expiry time differs by only 3 to 4 hours, there is little benefit to adjust the time value when computing relative basis. Margin Bitcoin is a call option. The more volatile it is, the more valuable the option. Due to an infinite upside, and a capped downside at 0, the trading pressure on the margin comes from longs. That means that market makers who are price neutral will usually be short derivatives. Their propensity to quote an offer depends on how easily it is to purchase spot Bitcoin, and how their short derivative is margined. As I previously mentioned the BitMEX contract is margined in XBT. That means that shorts can purchase spot Bitcoin and use this as collateral against their BitMEX short. If you buy $1,000 of Bitcoin, deposit the full XBT notional with BitMEX, then short 1,000 BitMEX contracts, you cannot be liquidated if the price rises. BitMEX shorts, due to the inverse contract structure, are long gamma in XBT terms. That means as the price rises, their unrealised losses increase less quickly. Therefore, BitMEX shorts can use more leverage than they otherwise would if the contract used a linear contract structure. Contrast that with the CME, which margins the contract in USD. For a market maker who is short, their spot Bitcoin hedge cannot be used as margin at the CME. As the price rises, their Bitcoin is worth more; however those unrealised USD gains cannot be deposited as margin. The CME will demand more USD collateral as the unrealised losses mount. This makes shorting the CME contract very capital intensive. A priori, I expect the CME contract to trade more expensive than BitMEX. CME shorts need to be compensated via a higher basis for their implicit short volatility position. The CME intends to list a futures curve out to one year. The backend of the curve, due to a larger time value, will be illiquid when compared to the front months, and will trade at a very high basis. I will now present two spread trades. Assume that you are a USD based investor. Spread Trade: Long BitMEX vs. Short CME Assume the following:Leverage: 5x / Initial Margin of 20% Spot = $8,000 BitMEX = $8,000 Contracts = Long 200,000 CME = $10,000 Contracts = Short 6 Spread = $2,000 First compute the XBT and USD exposures.On BitMEX:XBT Exposure: 200,000 Long Contracts / $8,000 = +25 XBT USD Exposure: 200,000 Long Contracts * 1 USD = -$200,000 Margin Requirement: 20% * 25 XBT = 5 XBT Collateral Currency Exposure vs. USD: +5 XBT / -$40,000 (Valued at the spot price)On CME:XBT Exposure: 6 Short Contracts * 5 XBT = -30 XBT USD Exposure: 6 Short Contracts * 5 XBT * $10,000 = +$300,000 Margin Requirement: 20% * $300,000 = $60,000 Collateral Currency Exposure vs. USD = 0 Because you are a USD based investor, you must ensure that you do not have XBT/USD risk at any time. Due to the XBT BitMEX margin requirement, you must short an additional 1 CME contact to hedge the 5 XBT margin required on BitMEX.Margin XBT/USD Price Risk:BitMEX: +5 XBT / -$40,000 CME: -5 XBT / +$50,000 (Short 1 Contract) Net: 0 XBT / +$10,000 Due to the CME’s higher basis, we earn carry on the BitMEX XBT collateral.Spread XBT/USD Price Risk:BitMEX: +25 XBT / -$200,000 (Long 200,000 Contracts) CME: -25 XBT / +$250,000 (Short 5 Contracts) Net: 0 XBT / +$50,000 As predicted, we earn $50,000 PNL from this spread trade. The below table stresses the portfolio on a large up and down move. Price BMEX XBT PNL BMEX USD PNL CME USD PNL Total $4,000 -25.00 XBT -$100,000 $150,000 $50,000 $8,000 0.00 XBT $0 $50,000 $50,000 $16,000 12.50 XBT $200,000 -$150,000 $50,000 The trade continues to return $50,000 regardless of the price movement. However, this is a leveraged trade, we must post additional margin on either BitMEX or the CME depending on the price move. The below table summarises what actions must be taken to ensure we meet margin requirements. Margin Action Currency Needed Price Falls Buy then deposit XBT on BMEX, sell CME contracts XBT & USD Price Rises Deposit USD to CME USD Because we are short gamma on our long BitMEX position, we must post XBT and sell CME contracts to hedge the XBT collateral. Both of these derivatives require additional margin. On the upside, we only need to post additional USD with the CME. Depending on your cost of capital, a prolonged down move without any recovery could become very expensive. Another issue is the sizing of this trade. Each CME contract is worth 5 XBT. If you wish to remain price neutral on your XBT collateral, a 5 XBT loss needs to be a small % with respect to your trade notional. Otherwise you will always be over and under hedged. The below table illustrates this point.Entry Price: $8,000 Multiplier: -1 USD (for inverse contracts the multiplier is actually negative) Contracts XBT Value Down % Move Up % Move 50,000 -6.25 XBT $4,444.44 -44.44% $40,000.00 400.00% 250,000 -31.25 XBT $6,896.55 -13.79% $9,523.81 19.05% 500,000 -62.50 XBT $7,407.41 -7.41% $8,695.65 8.70% 1,000,000 -125.00 XBT $7,692.31 -3.85% $8,333.33 4.17% 2,500,000 -312.50 XBT $7,874.02 -1.57% $8,130.08 1.63% 5,000,000 -625.00 XBT $7,936.51 -0.79% $8,064.52 0.81% The % Move is a measure of how far the price needs to move up or down to generate a contract value change of 5 XBT. As you can see, go big or go home. Spread Trade: Short BitMEX vs. Long CME Assume the following:Leverage: 5x / Initial Margin of 20% Spot = $8,000 BitMEX = $10,000 Contracts = Short 250,000 CME = $8,000 Contracts = Long 5 Spread = $2,000 First compute the XBT and USD exposures.On BitMEX:XBT Exposure: 250,000 Short Contracts / $10,000 = -25 XBT USD Exposure: 250,000 Short Contracts * 1 USD = +$250,000 Margin Requirement: 20% * 25 XBT = 5 XBT Collateral Currency Exposure vs. USD: +5 XBT / -$40,000 In order to hedge the 5 XBT of margin required, sell an additional 50,000 BitMEX contracts.XBT Exposure: 50,000 Short Contracts / $10,000 = -5 XBT USD Exposure: 50,000 Short Contracts * 1 USD = +$50,000 Net: 0 XBT / $10,000On CME:XBT Exposure: 5 Long Contracts * 5 XBT = +25 XBT USD Exposure: 5 Long Contracts * 5 XBT * $8,000 = -$200,000 Margin Requirement: 20% * $200,000 = $40,000 Collateral Currency Exposure vs. USD = 0Spread XBT/USD Price Risk:BitMEX: -25 XBT / +$250,000 (Short 250,000 Contracts) CME: +25 XBT / -$200,000 (Long 5 Contracts) Net: 0 XBT / +$50,000 As predicted, we earn $50,000 PNL from this spread trade. The below table stresses the portfolio on a large up and down move. Price BMEX XBT PNL BMEX USD PNL CME USD PNL Total $4,000 37.50 XBT $150,000 -$100,000 $50,000 $8,000 6.25 XBT $50,000 $0 $50,000 $16,000 -9.38 XBT -$150,000 $200,000 $50,000 The trade continues to return $50,000 regardless of the price movement. However, this is a leveraged trade, we must post additional margin on either BitMEX or the CME depending on the price move. The below table summarises what actions must be taken to ensure we meet margin requirements. Margin Action Currency Needed Price Falls Deposit USD to CME USD Price Rises Buy then deposit XBT on BMEX, sell BMEX contracts XBT Because you have positive gamma on the short BitMEX position, you will not face a doubling of margin requirements when the price falls. This spread trade is more capital efficient; however, I doubt whether BitMEX will frequently trade more expensive than the CME for reasons described above. Gap Risk The CME does not trade over the weekend. Longs or shorts depending on the price action over the weekend, could be insta-rekt when the exchange reopens Sunday night US time. Interactive Brokers, one of the CME’s clearing members, expressed severe reservations about this product due to the high volatility. They are scared shitless about how to deal with underwater shorts. It is not impossible for Bitcoin to gap up 100% in a matter of hours on positive news. Imagine what will happen when an ETF finally is approved. BitMEX deals with gap risk via Auto-Deleveraging. The CME at the present moment cannot employ a socialised loss feature. Instead, clearing members must pony up the cash. That is why they are being such scaredy cats. Depending on your broker, margin requirements for short positions could be extremely unforgiving. This will push CME basis up even further, and make putting on the spread trade described above, even more expensive. Are You Yellow? Arbitraging BitMEX vs. the CME requires a high level of trading sophistication and attention to detail. The different margin currencies and policies present many opportunities to transform what is a sure profit into a massive loss. However, owing its the difficulty, these spread trades will be juicy. For students of markets, this is an arbitrage opportunity of a lifetime. Those who put in the time to perfect these strategies, will profit handsomely. I'll Take That Building wealth is the easy part, securing and storing it for use by subsequent generations is very difficult. Half a millennium ago, a wealthy family needed a private army to secure its land and wealth. If you couldn’t project violence in the defence of your assets, they would be forcibly taken by an opportunistic person. As civilisations evolved and we entered the age of the nation state, society agreed that a centralised government should have a legal license to kill in order to secure the interests of property owners. Regardless of the economic “ism” a government claims to practice, the goal is the same. Protect a small group of asset holders against the hoard of commoners who might like to improve their lot at the expense of the elites. Today the richest humans don’t command standing armies, and their holdings include financial and real assets. Stock and bond ownership relies on a central depository to affirm that you indeed are the owner. Government deed offices proclaim a piece of land or real estate is yours. You are rich as long as the government allows you to be. The trappings of wealth can be taken at a whim. Should your actions upset a powerful state actor, your bank accounts will be frozen, and assets confiscated through the courts. The recent Saudi corruption drive is case and point. Mohammad bin Salman (MBS), the crown prince of Saudi Arabia, is on a mission to wean the country off of oil. This is harder said than done, especially since the general population only complies because of generous government handouts. To beef up the government coffers, MBS did what all governments do, go after certain rich people. MBS certainly wouldn’t subject himself to austerity. Last year he purchased a yacht worth over $500 million while at the same time slashing government spending. Overnight some of the country's richest members were herded to the Ritz Carlton, and placed under arrest owing to “corruption” charges. The most famous billionaire ensnared was Prince Alwaleed bin Talal. This Price is a world famous investor and has large stakes in some of the biggest tech darlings globally. After a few days cooped up in the Ritz, MBS presented his chattel with a choice. Liquidate your assets and give the Saudi government up to 70%, or stay locked up. Even if a large percentage of your wealth is held offshore, due to information sharing between governments, MBS likely knows where the biggest nuggets are held. If he doesn’t think you have been forthcoming enough with the true state of your offshore wealth, well the Yemeni front line is awful fun these days. Bitcoin presents a different way to secure wealth. Instead of trusting a government staffed with capricious humans, holders of Bitcoin trust cryptography and a decentralised network of profit motivated miners. Bitcoin is less than a decade old, and is still very much an experiment. But if you possess a sum of wealth, it is prudent to diversify the networks used to secure it. Many people believe if they follow the “law”, they will be alright. However, laws change to serve the growth and power of the government writing them. The government failures in Venezuela and Zimbabwe illustrate that in times of crisis Bitcoin can be used to grease the wheels of commerce. Unfortunately for most, it takes a time of crisis to elucidate the fatal flaws of a particular economic system. Only then will people take concrete actions, which only moments ago, were diametrically opposed to their belief system. At that point it’s too late. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

Какво знаем за текущата атака срещу биткойн. The post Атаката срещу биткойн чрез Биткойн Кеш appeared first on Hash.bg. View the full article

Какво знаем за текущата атака срещу биткойн. The post Атаката срещу биткойн чрез Биткойн Кеш appeared first on Hash.bg. View the full article

Bitcoin Core version 0.15.1 is now available from: https://bitcoincore.org/bin/bitcoin-core-0.15.1/ or https://bitcoin.org/bin/bitcoin-core-0.15.1/ This is a new minor version release, including various bugfixes andperformance improvements, as well as updated translations. Please report bugs using the issue tracker at GitHub: https://github.com/bitcoin/bitcoin/issues To receive security and update notifications, please subscribe to: https://bitcoincore.org/en/list/announcements/join/ How to Upgrade If you are running an older version, shut it down. Wait until it has completelyshut down (which might take a few minutes for older versions), then run the installer (on Windows) or just copy over /Applications/Bitcoin-Qt (on Mac)or bitcoind/bitcoin-qt (on Linux). The first time you run version 0.15.0 or higher, your chainstate database willbe converted to a new format, which will take anywhere from a few minutes tohalf an hour, depending on the speed of your machine. The file format of fee_estimates.dat changed in version 0.15.0. Hence, adowngrade from version 0.15 or upgrade to version 0.15 will cause all feeestimates to be discarded. Note that the block database format also changed in version 0.8.0 and there is noautomatic upgrade code from before version 0.8 to version 0.15.0. Upgradingdirectly from 0.7.x and earlier without redownloading the blockchain is not supported.However, as usual, old wallet versions are still supported. Downgrading warning The chainstate database for this release is not compatible with previousreleases, so if you run 0.15 and then decide to switch back to anyolder version, you will need to run the old release with the -reindex-chainstateoption to rebuild the chainstate data structures in the old format. If your node has pruning enabled, this will entail re-downloading andprocessing the entire blockchain. Compatibility Bitcoin Core is extensively tested on multiple operating systems usingthe Linux kernel, macOS 10.8+, and Windows Vista and later. Windows XP is not supported. Bitcoin Core should also work on most other Unix-like systems but is notfrequently tested on them. Notable changes Network fork safety enhancements A number of changes to the way Bitcoin Core deals with peer connections and invalid blockshave been made, as a safety precaution against blockchain forks and misbehaving peers. Unrequested blocks with less work than the minimum-chain-work are now no longer processed evenif they have more work than the tip (a potential issue during IBD where the tip may have low-work).This prevents peers wasting the resources of a node. Peers which provide a chain with less work than the minimum-chain-work during IBD will now be disconnected. For a given outbound peer, we now check whether their best known block has at least as much work as our tip. If itdoesn’t, and if we still haven’t heard about a block with sufficient work after a 20 minute timeout, then we senda single getheaders message, and wait 2 more minutes. If after two minutes their best known block has insufficientwork, we disconnect that peer. We protect 4 of our outbound peers from being disconnected by this logic to preventexcessive network topology changes as a result of this algorithm, while still ensuring that we have a reasonablenumber of nodes not known to be on bogus chains. Outbound (non-manual) peers that serve us block headers that are already known to be invalid (other than compactblock announcements, because BIP 152 explicitly permits nodes to relay compact blocks before fully validating them)will now be disconnected. If the chain tip has not been advanced for over 30 minutes, we now assume the tip may be stale and will try to connectto an additional outbound peer. A periodic check ensures that if this extra peer connection is in use, we will disconnectthe peer that least recently announced a new block. The set of all known invalid-themselves blocks (i.e. blocks which we attempted to connect but which were found to beinvalid) are now tracked and used to check if new headers build on an invalid chain. This ensures that everything thatdescends from an invalid block is marked as such. Miner block size limiting deprecated Though blockmaxweight has been preferred for limiting the size of blocks returned bygetblocktemplate since 0.13.0, blockmaxsize remained as an option for those who wishedto limit their block size directly. Using this option resulted in a few UI issues aswell as non-optimal fee selection and ever-so-slightly worse performance, and has thusnow been deprecated. Further, the blockmaxsize option is now used only to calculate animplied blockmaxweight, instead of limiting block size directly. Any miners who wishto limit their blocks by size, instead of by weight, will have to do so manually byremoving transactions from their block template directly. GUI settings backed up on reset The GUI settings will now be written to guisettings.ini.bak in the data directory before wiping them whenthe -resetguisettings argument is used. This can be used to retroactively troubleshoot issues due to theGUI settings. Duplicate wallets disallowed Previously, it was possible to open the same wallet twice by manually copying the wallet file, causingissues when both were opened simultaneously. It is no longer possible to open copies of the same wallet. Debug -minimumchainwork argument added A hidden debug argument -minimumchainwork has been added to allow a custom minimum work value to be usedwhen validating a chain. Low-level RPC changes The “currentblocksize” value in getmininginfo has been removed. dumpwallet no longer allows overwriting files. This is a security measureas well as prevents dangerous user mistakes. backupwallet will now fail when attempting to backup to source file, rather thandestroying the wallet. listsinceblock will now throw an error if an unknown blockhash argumentvalue is passed, instead of returning a list of all wallet transactions sincethe genesis block. The behaviour is unchanged when an empty string is provided. 0.15.1 Change log Mining #11100 7871a7d Fix confusing blockmax{size,weight} options, dont default to throwing away money (TheBlueMatt) RPC and other APIs #10859 2a5d099 gettxout: Slightly improve doc and tests (jtimon) #11267 b1a6c94 update cli for estimate*fee argument rename (laanwj) #11483 20cdc2b Fix importmulti bug when importing an already imported key (pedrobranco) #9937 a43be5b Prevent dumpwallet from overwriting files (laanwj) #11465 405e069 Update named args documentation for importprivkey (dusty-wil) #11131 b278a43 Write authcookie atomically (laanwj) #11565 7d4546f Make listsinceblock refuse unknown block hash (ryanofsky) #11593 8195cb0 Work-around an upstream libevent bug (theuni) P2P protocol and network code #11397 27e861a Improve and document SOCKS code (laanwj) #11252 0fe2a9a When clearing addrman clear mapInfo and mapAddr (instagibbs) #11527 a2bd86a Remove my testnet DNS seed (schildbach) #10756 0a5477c net processing: swap out signals for an interface class (theuni) #11531 55b7abf Check that new headers are not a descendant of an invalid block (more effeciently) (TheBlueMatt) #11560 49bf090 Connect to a new outbound peer if our tip is stale (sdaftuar) #11568 fc966bb Disconnect outbound peers on invalid chains (sdaftuar) #11578 ec8dedf Add missing lock in ProcessHeadersMessage(…) (practicalswift) #11456 6f27965 Replace relevant services logic with a function suite (TheBlueMatt) #11490 bf191a7 Disconnect from outbound peers with bad headers chains (sdaftuar) Validation #10357 da4908c Allow setting nMinimumChainWork on command line (sdaftuar) #11458 2df65ee Don’t process unrequested, low-work blocks (sdaftuar) Build system #11440 b6c0209 Fix validationinterface build on super old boost/clang (TheBlueMatt) #11530 265bb21 Add share/rpcuser to dist. source code archive (MarcoFalke) GUI #11334 19d63e8 Remove custom fee radio group and remove nCustomFeeRadio setting (achow101) #11198 7310f1f Fix display of package name on ‘open config file’ tooltip (esotericnonsense) #11015 6642558 Add delay before filtering transactions (lclc) #11338 6a62c74 Backup former GUI settings on -resetguisettings (laanwj) #11335 8d13b42 Replace save restoreWindowGeometry with Qt functions (MeshCollider) #11237 2e31b1d Fixing division by zero in time remaining (MeshCollider) #11247 47c02a8 Use IsMine to validate custom change address (MarcoFalke) Wallet #11017 9e8aae3 Close DB on error (kallewoof) #11225 6b4d9f2 Update stored witness in AddToWallet (sdaftuar) #11126 2cb720a Acquire cs_main lock before cs_wallet during wallet initialization (ryanofsky) #11476 9c8006d Avoid opening copied wallet databases simultaneously (ryanofsky) #11492 de7053f Fix leak in CDB constructor (promag) #11376 fd79ed6 Ensure backupwallet fails when attempting to backup to source file (tomasvdw) #11326 d570aa4 Fix crash on shutdown with invalid wallet (MeshCollider) Tests and QA #11399 a825d4a Fix bip68-sequence rpc test (jl2012) #11150 847c75e Add getmininginfo test (mess110) #11407 806c78f add functional test for mempoolreplacement command line arg (instagibbs) #11433 e169349 Restore bitcoin-util-test py2 compatibility (MarcoFalke) #11308 2e1ac70 zapwallettxes: Wait up to 3s for mempool reload (MarcoFalke) #10798 716066d test bitcoin-cli (jnewbery) #11443 019c492 Allow “make cov” out-of-tree; Fix rpc mapping check (MarcoFalke) #11445 51bad91 0.15.1 Backports (MarcoFalke) #11319 2f0b30a Fix error introduced into p2p-segwit.py, and prevent future similar errors (sdaftuar) #10552 e4605d9 Tests for zmqpubrawtx and zmqpubrawblock (achow101) #11067 eeb24a3 TestNode: Add wait_until_stopped helper method (MarcoFalke) #11068 5398f20 Move wait_until to util (MarcoFalke) #11125 812c870 Add bitcoin-cli -stdin and -stdinrpcpass functional tests (promag) #11077 1d80d1e fix timeout issues from TestNode (jnewbery) #11078 f1ced0d Make p2p-leaktests.py more robust (jnewbery) #11210 f3f7891 Stop test_bitcoin-qt touching ~/.bitcoin (MeshCollider) #11234 f0b6795 Remove redundant testutil.cpp h files (MeshCollider) #11215 cef0319 fixups from set_test_params() (jnewbery) #11345 f9cf7b5 Check connectivity before sending in assumevalid.py (jnewbery) #11091 c276c1e Increase initial RPC timeout to 60 seconds (laanwj) #10711 fc2aa09 Introduce TestNode (jnewbery) #11230 d8dd8e7 Fixup dbcrash interaction with add_nodes() (jnewbery) #11241 4424176 Improve signmessages functional test (mess110) #11116 2c4ff35 Unit tests for script/standard and IsMine functions (jimpo) #11422 a36f332 Verify DBWrapper iterators are taking snapshots (TheBlueMatt) #11121 bb5e7cb TestNode tidyups (jnewbery) #11521 ca0f3f7 travis: move back to the minimal image (theuni) #11538 adbc9d1 Fix race condition failures in replace-by-fee.py, sendheaders.py (sdaftuar) #11472 4108879 Make tmpdir option an absolute path, misc cleanup (MarcoFalke) #10853 5b728c8 Fix RPC failure testing (again) (jnewbery) #11310 b6468d3 Test listwallets RPC (mess110) Miscellaneous #11377 75997c3 Disallow uncompressed pubkeys in bitcoin-tx [multisig] output adds (TheBlueMatt) #11437 dea3b87 [Docs] Update Windows build instructions for using WSL and Ubuntu 17.04 (fanquake) #11318 8b61aee Put back inadvertently removed copyright notices (gmaxwell) #11442 cf18f42 [Docs] Update OpenBSD Build Instructions for OpenBSD 6.2 (fanquake) #10957 50bd3f6 Avoid returning a BIP9Stats object with uninitialized values (practicalswift) #11539 01223a0 [verify-commits] Allow revoked keys to expire (TheBlueMatt) Credits Thanks to everyone who directly contributed to this release: Andreas Schildbach Andrew Chow Chris Moore Cory Fields Cristian Mircea Messel Daniel Edgecumbe Donal OConnor Dusty Williams fanquake Gregory Sanders Jim Posen John Newbery Johnson Lau João Barbosa Jorge Timón Karl-Johan Alm Lucas Betschart MarcoFalke Matt Corallo Paul Berg Pedro Branco Pieter Wuille practicalswift Russell Yanofsky Samuel Dobson Suhas Daftuar Tomas van der Wansem Wladimir J. van der Laan As well as everyone that helped translating on Transifex. 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This year has been one of the more controversial years for Bitcoin thus far. We have already seen a number of important forks happen - SegWit, Bitcoin Cash and Bitcoin Gold, and we're scheduled to witness some other forks soon - Bitcoin Cash doing a hard fork, SegWit2x looming ever closer, and we might even see some emergency PoW change hardfork in response to SegWit2x. Amidst all of that, many people are asking themselves, debating and fighting over an important question - "What is Bitcoin?" ( ). The power of the name Earlier this year, there was a small debacle as to what Bitcoin Cash should be called. It seems that some of its opponents wanted to dismiss the fork by calling it "Bcash" to further distance it from the Bitcoin project. It seems the "Bitcoin" name by itself holds value like any other brand, otherwise we wouldn't have so many projects using it: How many Bitcoins do we have? (source) In response to Bitcoin Cash being called Bcash, some supporters of that project started calling Bitcoin Cash by just "Bitcoin", and referring to the SegWit side of the fork as " ". While at the start it might not seem like much, a definition of what "Bitcoin" is and which side of a fork gets to call itself that is really important. Bitcoin is a currency with over 125B USD market cap, a liquid market on numerous exchanges, and countless of projects using it, many of whom would barely be able to follow what's going on in this debate. A fork of Bitcoin, on the other hand, has to start out with nothing and build up that market almost from scratch. This is why contentious forks are so problematic and why such a simple thing as replay protection is controversial - whoever wins in the fork and gets to call itself "Bitcoin" will be the project that matters, while the loser won't matter anymore. A fork with a hard replay protection is easy to dismiss as an altcoin, while one without is much easier to pass on as an upgrade to the protocol, as Bitcoin has historically never done replay protection (while it seems Ethereum might be getting that as a standard in the future). So what is Bitcoin, really? With all of those forks past and future, many people have to ask themselves - "What is Bitcoin, really?". Gavin Andresen's definition has been a good guide so far: It might, however, be worthwhile to start drilling down the definition and listing all of the important semantics that have or might be important in the future. So Bitcoin could be defined as: A blockchain Beginning with the genesis block hash 000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f Containing only validly signed transactions Containing only not-previously-spent transactions Containing no more than ~21M coins Following the ~130 year coin distribution Continuously, publicly mined Double-SHA hashed With a difficulty adjustment every 2016 blocks Mined using a PoW algorithm Following the chain with the most cumulative work With a block limit of 1MB ... There are many such nitty-gritty details to list and rank. An important exercise for a lot of people is to rank these various features, and in case of a contentious fork - figure out which of those features might be changed. So for example, if Bitcoin Gold is creating a fork that changes the PoW algorithm and doing private mining for awhile, versus Bitcoin Cash changing the block limit and changing the difficulty adjustment algorithm, we have forks that change the features 10 and 7, vs 12 and 9. Following this ordered list, Bitcoin Cash would be less contentious (which is not to say - not contentious at all) as it alters features lower down the list. So would Bitcoin be Bitcoin under Script being changed to Simplicity? SegWit2x changing the block size? A fork that changes the PoW? Which part of the fork would be "more Bitcoin" than the other? Of course, there is more to a fork than just such rules - there is a lot of politics involved, and sometimes a more controversial fork still remains dominant. Ethereum's DAO fork for example meant the "main" chain violated a very important rule - containing only valid transactions, but that side of the chain is still a lot more widely used than the "purer" alternative - Ethereum Classic. Conclusions Battling over which side of the fork is "the real Bitcoin" is more than just fighting over a name. It is the battle for market dominance, wide acceptance and legitimacy in the eyes of the laymen. The winner will be the world's best know cryptocurrency, while the loser will be hardly talked about outside of the crypto circles. Seeing which side of the debate will endure the upcoming forks will definitely be a seminal point in the story of Bitcoin. View the full article

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This follows on from our piece last week looking at empty blocks.Empty Block Data by Mining Pool Abstract: In this piece we present data displaying the proportion of empty blocks (blocks containing only the coinbase transaction) produced by the different mining pools, over time. We look at the mining methodologies pools could choose and how these policies could impact the proportion of empty blocks.The Bitfinex Chain Split Tokens Abstract: In this piece we look at the ten different chain split tokens that could exist on the Bitfinex platform in 2017 and some of the complexities and challenges involved. There are circumstances in which the policies Bitfinex has chosen are unfair and place a burden on customers, however perhaps this could not be avoided. The Miner Short Squeeze Positioning has begun in earnest. In the last newsletter, I highlighted BitMEX futures trading strategies centered around the SegWit2x hardfork. Three weeks hence, the futures basis indicates aggressive positioning by traders heading into the hard fork. In this post, I will examine advanced trading considerations and unwind strategies. XBTZ17 In ContextBitcoin is up over 7x since January this year. Given this aggressive bull market, futures should trade in contango. Longs must pay a substantial amount of interest to entice shorts to position themselves against the trend. The below charts list the annualised % premium for the XBTM17 (June), XBTU17 (September), and XBTZ17 (December) Bitcoin / USD futures contracts. Each quarterly contract existed during a price rally. However, the Bitcoin Cash and upcoming SegWit2x fork dampened the premium for XBTU17 and XBTZ17 respectively. Max % Premium PA Max % Outright Discount XBTM17 122.30% -2.28% XBTU17 32.38% -5.62% XBTZ17 42.47% -7.17% The above chart illustrates that XBTM17, which experienced no hard fork during its existence, had the highest premium and discount. XBTU17 experienced its max discount during the Bitcoin Cash hard fork. XBTZ17 is already pricing in the SegWit2x hard fork. If the max discount has already exceeded XBTU17’s, then we can expect a substantially larger discount directly preceding the SegWit2x hard fork. The discount is a combination reflecting traders’ fears of a disorderly hard fork, and traders selling XBTZ17 vs. buying spot to create SegWit2x coins with no Bitcoin price risk. Due to the heightened risk and publicity surrounding the SegWit2x hard fork, the discount could reach up to 15% pre-fork. The UnwindThis time around most savvy traders are short XBTZ17 basis. Basis = Future Price - Spot Price. Any time the basis trades flat to positive, they increase their short position. However, once the fork is over large percentage of the XBTZ17 open interest must close their positions. Many traders might close their XBTZ17 short at a mega discount pre-fork, then switch to long basis to play the relief rally. But if everyone is the same way, many will give up profits during the unwind. Additionally, bullish speculators will jump in pre-fork to take naked longs anticipating a sharp rally after the fork occurs. SHORT SQUEEEZZEDuring my time at Deutsche Bank there was a certain French options trader that emitted a high pitched squeaky yell of “Short Squeeze” any time the market gapped higher into the close. The XBTZ17 market is primed for a short squeeze, and I believe profit maximising miners could initiate an even sharper rally higher. The miners signed the New York Agreement (NYA) in an effort to save face and acquiesce to activating SegWit, while at the same time securing larger blocks in the future. The NYA headed off a chain split due to UASF, but Bitcoin Cash was launched as a direct result. Bitcoin Cash has an 8MB block size without SegWit. As it stands now, there is no need for SegWit2x Bitcoin. However, the majority of miners continue to signal for the NYA. Signaling for the NYA costs them nothing, and it does not mean they actually will support the hard fork with hash power. What would happen to the market if at the last minute all the large miners stopped signalling for NYA and the hard fork didn’t happen? You know the answer, Pump City. The other consequence is a violent resetting of XBTZ17 basis. All those who went short basis to collect the B2X dividend would rush to unwind their trades at the same time. BitMEX will not credit B2X coins. Therefore, XBTZ17 shorts will remove margin from BitMEX the day before the fork and deposit on an exchange that will credit B2X. That means the leveraged used by shorts will increase further putting their positions at risk of liquidation during a short squeeze. If I were a profit maximising miner here is what I would do: Buy Bitcoin Spot Buy XBTZ17 futures at a large discount. Shortly before the hard fork deadline, stop signalling for NYA. Bask in the glory of the annihilation of shorts on margin and futures. If you believe this thought experiment might become reality here is what you should do: If you are short basis (short XBTZ17 vs. long spot), unwind that trade at a profit. Go long basis while it is negative (long XBTZ17 vs. short spot). If your risk appetite is large, go naked long XBTZ17 at a negative basis. SegWit2x Bitcoin Is Not a DividendB2X is different than BCH in that B2X supporters do not want their coin to be an altcoin. It will either become Bitcoin or nothing.That is why they refuse to implement replay protection which allows exchanges to safely support B2X. In the event exchanges delay the listing of the B2X by even a day, by the time you theoretically could sell B2X, it might be worthless because it failed at supplanting legacy Bitcoin. If you went short XBTZ17 basis at a flat to positive level, you are in the money. Closing the trade early and earning the expected dividend is prudent due to the fundamental differences between B2X and BCH. All Hail The CME Due to overbearing and counterproductive financial regulations, innovation is often rewarded with heavy fines and loss of licenses. An institution with billions of dollars of revenue at stake cannot take the regulatory and reputational risk dealing with Bitcoin unless someone else does it first. Enter, LedgerX. For over four years, the firm pestered the CFTC to allow them to clear Bitcoin settled futures and options. The hard work paid off this fall when their markets launched. Less than two weeks later, the CME announced they too would join the club. The CBOE technically was the first legacy exchange to announce the impending launch of a USD settled Bitcoin futures contract; however, the CBOE will go live 2Q2018 and the CME plans to launch theirs by year end. The only reason why some large financial institutions (FI) participate in the digital currency ecosystem is they cannot ignore an asset class that went from $0 to almost $200 billion in value in under a decade. Large FIs are severely constrained in their ability to deploy large amounts of capital due to counterparty risk on exchanges not compliant with their specific jurisdictional overseers. An exchange who they can already trade with, the CME, that offers Bitcoin trading products is exactly what they need to seriously get involved. Custody RiskA USD-settled Bitcoin futures contract is perfect for large traders who cannot or will not custody Bitcoin. This futures contract gives them exactly what they desire, a product that pays them fiat currency to speculate on a crypto currency. From the CME’s perspective, they also absolve themselves of the risk of losing customer Bitcoin. This product requires almost zero technical innovation on their part. LiquidityThe BitMEX XBTUSD swap is the most liquid Bitcoin / USD trading product globally. XBTUSD trades 5x - 10x more volume than the underlying index constituents, GDAX and Bitstamp, combined. XBTUSD’s daily trading turnover routinely exceeds $1 billion, and approaches $2 billion. The CME index will include itbit and Kraken as well. For market makers who must hedge flow on the underlying exchanges, two seriously liquid derivative contracts will increase the volatility in the spot markets. It will also place immense strain on the spot exchanges’ infrastructure. Can these four exchanges stand up to the likes of Citadel submitting, amending, and cancelling thousands of orders per minute? Time will tell, but the CME is about to get a crash course in Bitcoin. These issues probably influenced the way in which their index was constructed. The index methodology is overly complex in an attempt to deal with the forecasted liquidity and technological issues the leading spot exchanges face. BitMEX takes a more laissez-faire attitude about the Bitcoin markets than the CME can afford. Every financial reporter will be watching for any misstep, and the headlines will come hard and fast highlighting any issues. Market FragmentationThe Bitcoin markets are highly fragmented due to different regulatory regimes and cultural differences between traders from different domiciles. The type of trader who can trade with the CME cannot trade with many of the exchanges where the reference pricing occurs. This presents a trading opportunity of a lifetime for arbitrage funds who can straddle the regulated and unregulated exchanges, and who can trade across multiple jurisdictions. The divergences will become more acute as large positions are placed on CME and CBOE products. Will the regulated derivatives follow or lead vs. the cowboy trading occurring in North Asia? From a market microstructure perspective, this will be a very interesting experiment. ETF Anyone?In the disapproval of the Winklevoss ETF COIN, the SEC stated that the absence of a liquid regulated derivatives market concerned them. If the CME doesn’t face plant, this will pave the way for the ETF. The SEC dances to the beat of large FIs. If the CME is reaping immense profits from a derivative, asset managers will want in on the racket via a listed ETF. Much like LedgerX, the Winklevii might be bested by a large ETF manager like Blackrock or Vanguard, who now has the regulatory cover to apply for their own Bitcoin ETF. Blackrock vs. the Winklevii; who has more capacity to provide push jobs for ex-SEC staffers? While futures will allow wealthy individual traders and large FIs to comfortably trade Bitcoin, an ETF that appeals to retail investors globally will completely change the paradigm. Starting next year, expect more noise about an ETF approval emanating from the SEC. Slow then FastI did not expect institutional take-up of Bitcoin to grow this quickly. There is too much money being made by startups in the space for large FIs not to get involved. As more and more of the regulatory and repetitional risk is removed, institutions will continue to increase their involvement and exposure. The Deutsche Bank Connection Bankers are flocking to the cryptocurrency industry as both principals and employees of related companies, fund managers, and as individual traders. Amid the rush towards this decade’s green financial pastures, one office of one bank stands out, Deutsche Bank Hong Kong. Deutsche Bank’s foray into investment banking began with its acquisition of Bankers Trust. The firm then proceeded to ditch its conservative German roots, and import the biggest swingers in the industry. A clique of Merrill Lynch bankers were brought in. Their ring leader was Anshu Jain. The culture was cowboy. My Hong Kong summer internship interviews in 2007 illustrates this point. The first round of interviews was in Philadelphia. In my second 2-on-1 interview I met the man who’s team I would intern on that summer. I had just returned from my semester abroad in Hong Kong. He asked me why I loved Hong Kong, and I said I loved clubbing. I then rattled of a list of my favourite establishments. He would later tell me, that’s what sealed the deal for me in his mind. That night I took the whole Deutsche contingent to my favorite dingy Philly late night EDM club. It got messy. In 2007, financiers thought they were gods. Hong Kong has never regained the energy I felt that summer. I interned on the Equity Derivatives sales desk. HR nicknamed this desk the Snake Pit, because of the aggressive personalities that worked there. The 2008 graduate training program in London featured similar aggressiveness. Deutsche offered an all expense paid trip to London for three months for all incoming graduates. The Japanese grads were the most intense. One grad got so drunk, and vomited so hard, he was hospitalised with a broken rib. That is a taste of how the youngins were trained at Deutsche. The firm fostered an aggressive culture focused on partying hard, and making money. Unlike more demure banks, no one at Deutsche was shy as to why they were in the game. Making money was the goal, and no one was censured for being too flashy. As the financial services industry entered a secular decline after the 2008 GFC, Deutsche people scattered to the wind. Deutsche lied to the German regulators about the value of its assets in an effort to avoid becoming recapitalised by the taxpayers. In hind side, that was the dumbest move ever. Their competing American banks gladly took TARP funds, paid huge bonus, and repaired their balance sheets. Deutsche limped along, and is one of the worst performing banks since the crisis. The Deutsche Hong Kong reunion was ignited by Bitcoin. For some reason, this particular office is very well represented in the Bitcoin industry. The individuals I will list all went through the graduate training program, and our Deutsche stints all overlapped. Arthur Hayes, CEO of BitMEX, member of the 2008 graduate class. I worked in Absolute Strategies Group, and then Global Prime Finance as a delta one ETF, futures, and swaps trader. Greg Dwyer, Head of Business Development at BitMEX, member of the 2009 graduate class. He worked on the commodity structuring desk in Singapore, and then worked with me on the delta one ETF market making desk. Nick Andrianov, Risk Management at BitMEX, member of the 2007 graduate class. He worked on the Flow and Exotic Index Volatility trading desk. Andrew Rizkalla, Trading Lead at Paycase, member of the 2008 graduate class. He worked on the Program Trading and Facilitation desks. Kayvon Pirestani, Director of Institutional Sales at Coinbase, member of the 2005 graduate class. He worked on the Equity Derivatives Sales desk. Gavin Yeung, CEO of Cryptomover, member of the 2010 graduate class. He worked on the Program Trading and Facilitation desk. Neelabh Dixit, co-founder of Cryptomover, member of the 2013 graduate class. He worked on the Portfolio Trading desk. Donald Day, CTO Bletchy Park Asset Management, member of the 2009 graduate class. He worked as a quant strategist for the Absolute Strategy Group. The are two other Deutsche Bank HK former employees who did not wish to be mentioned. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe View the full article

style="margin: 0;color: black;"> View this email in a browser BitMEX Crypto Trader Digest Nov 02, 2017 From the Desk of Arthur Hayes Co-Founder & CEO, BitMEX From The BitMEX Research Desk Non Empty Smaller Block Data By Mining Pool Abstract: In this piece we present data displaying the proportion of smaller blocks produced by the different mining pools, over time. This follows on from our piece last week looking at empty blocks. Empty Block Data by Mining Pool Abstract: In this piece we present data displaying the proportion of empty blocks (blocks containing only the coinbase transaction) produced by the different mining pools, over time. We look at the mining methodologies pools could choose and how these policies could impact the proportion of empty blocks. The Bitfinex Chain Split Tokens Abstract: In this piece we look at the ten different chain split tokens that could exist on the Bitfinex platform in 2017 and some of the complexities and challenges involved. There are circumstances in which the policies Bitfinex has chosen are unfair and place a burden on customers, however perhaps this could not be avoided. The Miner Short Squeeze Positioning has begun in earnest. In the last newsletter, I highlighted BitMEX futures trading strategies centered around the SegWit2x hardfork. Three weeks hence, the futures basis indicates aggressive positioning by traders heading into the hard fork. In this post, I will examine advanced trading considerations and unwind strategies. XBTZ17 In Context Bitcoin is up over 7x since January this year. Given this aggressive bull market, futures should trade in contango. Longs must pay a substantial amount of interest to entice shorts to position themselves against the trend. The below charts list the annualised % premium for the XBTM17 (June), XBTU17 (September), and XBTZ17 (December) Bitcoin / USD futures contracts. Each quarterly contract existed during a price rally. However, the Bitcoin Cash and upcoming SegWit2x fork dampened the premium for XBTU17 and XBTZ17 respectively. Max % Premium PA Max % Outright Discount XBTM17 122.30% -2.28% XBTU17 32.38% -5.62% XBTZ17 42.47% -7.17% The above chart illustrates that XBTM17, which experienced no hard fork during its existence, had the highest premium and discount. XBTU17 experienced its max discount during the Bitcoin Cash hard fork. XBTZ17 is already pricing in the SegWit2x hard fork. If the max discount has already exceeded XBTU17’s, then we can expect a substantially larger discount directly preceding the SegWit2x hard fork. The discount is a combination reflecting traders’ fears of a disorderly hard fork, and traders selling XBTZ17 vs. buying spot to create SegWit2x coins with no Bitcoin price risk. Due to the heightened risk and publicity surrounding the SegWit2x hard fork, the discount could reach up to 15% pre-fork. The Unwind This time around most savvy traders are short XBTZ17 basis. Basis = Future Price - Spot Price. Any time the basis trades flat to positive, they increase their short position. However, once the fork is over large percentage of the XBTZ17 open interest must close their positions. Many traders might close their XBTZ17 short at a mega discount pre-fork, then switch to long basis to play the relief rally. But if everyone is the same way, many will give up profits during the unwind. Additionally, bullish speculators will jump in pre-fork to take naked longs anticipating a sharp rally after the fork occurs. SHORT SQUEEEZZE During my time at Deutsche Bank there was a certain French options trader that emitted a high pitched squeaky yell of “Short Squeeze” any time the market gapped higher into the close. The XBTZ17 market is primed for a short squeeze, and I believe profit maximising miners could initiate an even sharper rally higher. The miners signed the New York Agreement (NYA) in an effort to save face and acquiesce to activating SegWit, while at the same time securing larger blocks in the future. The NYA headed off a chain split due to UASF, but Bitcoin Cash was launched as a direct result. Bitcoin Cash has an 8MB block size without SegWit. As it stands now, there is no need for SegWit2x Bitcoin. However, the majority of miners continue to signal for the NYA. Signaling for the NYA costs them nothing, and it does not mean they actually will support the hard fork with hash power. What would happen to the market if at the last minute all the large miners stopped signalling for NYA and the hard fork didn’t happen? You know the answer, Pump City. The other consequence is a violent resetting of XBTZ17 basis. All those who went short basis to collect the B2X dividend would rush to unwind their trades at the same time. BitMEX will not credit B2X coins. Therefore, XBTZ17 shorts will remove margin from BitMEX the day before the fork and deposit on an exchange that will credit B2X. That means the leveraged used by shorts will increase further putting their positions at risk of liquidation during a short squeeze. If I were a profit maximising miner here is what I would do: Buy Bitcoin Spot Buy XBTZ17 futures at a large discount. Shortly before the hard fork deadline, stop signalling for NYA. Bask in the glory of the annihilation of shorts on margin and futures. If you believe this thought experiment might become reality here is what you should do: If you are short basis (short XBTZ17 vs. long spot), unwind that trade at a profit. Go long basis while it is negative (long XBTZ17 vs. short spot). If your risk appetite is large, go naked long XBTZ17 at a negative basis. SegWit2x Bitcoin Is Not a Dividend B2X is different than BCH in that B2X supporters do not want their coin to be an altcoin. It will either become Bitcoin or nothing.That is why they refuse to implement replay protection which allows exchanges to safely support B2X. In the event exchanges delay the listing of the B2X by even a day, by the time you theoretically could sell B2X, it might be worthless because it failed at supplanting legacy Bitcoin. If you went short XBTZ17 basis at a flat to positive level, you are in the money. Closing the trade early and earning the expected dividend is prudent due to the fundamental differences between B2X and BCH. All Hail The CME Due to overbearing and counterproductive financial regulations, innovation is often rewarded with heavy fines and loss of licenses. An institution with billions of dollars of revenue at stake cannot take the regulatory and reputational risk dealing with Bitcoin unless someone else does it first. Enter, LedgerX. For over four years, the firm pestered the CFTC to allow them to clear Bitcoin settled futures and options. The hard work paid off this fall when their markets launched. Less than two weeks later, the CME announced they too would join the club. The CBOE technically was the first legacy exchange to announce the impending launch of a USD settled Bitcoin futures contract; however, the CBOE will go live 2Q2018 and the CME plans to launch theirs by year end. The only reason why some large financial institutions (FI) participate in the digital currency ecosystem is they cannot ignore an asset class that went from $0 to almost $200 billion in value in under a decade. Large FIs are severely constrained in their ability to deploy large amounts of capital due to counterparty risk on exchanges not compliant with their specific jurisdictional overseers. An exchange who they can already trade with, the CME, that offers Bitcoin trading products is exactly what they need to seriously get involved. Custody Risk A USD-settled Bitcoin futures contract is perfect for large traders who cannot or will not custody Bitcoin. This futures contract gives them exactly what they desire, a product that pays them fiat currency to speculate on a crypto currency. From the CME’s perspective, they also absolve themselves of the risk of losing customer Bitcoin. This product requires almost zero technical innovation on their part. Liquidity The BitMEX XBTUSD swap is the most liquid Bitcoin / USD trading product globally. XBTUSD trades 5x - 10x more volume than the underlying index constituents, GDAX and Bitstamp, combined. XBTUSD’s daily trading turnover routinely exceeds $1 billion, and approaches $2 billion. The CME index will include itbit and Kraken as well. For market makers who must hedge flow on the underlying exchanges, two seriously liquid derivative contracts will increase the volatility in the spot markets. It will also place immense strain on the spot exchanges’ infrastructure. Can these four exchanges stand up to the likes of Citadel submitting, amending, and cancelling thousands of orders per minute? Time will tell, but the CME is about to get a crash course in Bitcoin. These issues probably influenced the way in which their index was constructed. The index methodology is overly complex in an attempt to deal with the forecasted liquidity and technological issues the leading spot exchanges face. BitMEX takes a more laissez-faire attitude about the Bitcoin markets than the CME can afford. Every financial reporter will be watching for any misstep, and the headlines will come hard and fast highlighting any issues. Market Fragmentation The Bitcoin markets are highly fragmented due to different regulatory regimes and cultural differences between traders from different domiciles. The type of trader who can trade with the CME cannot trade with many of the exchanges where the reference pricing occurs. This presents a trading opportunity of a lifetime for arbitrage funds who can straddle the regulated and unregulated exchanges, and who can trade across multiple jurisdictions. The divergences will become more acute as large positions are placed on CME and CBOE products. Will the regulated derivatives follow or lead vs. the cowboy trading occurring in North Asia? From a market microstructure perspective, this will be a very interesting experiment. ETF Anyone? In the disapproval of the Winklevoss ETF COIN, the SEC stated that the absence of a liquid regulated derivatives market concerned them. If the CME doesn’t face plant, this will pave the way for the ETF. The SEC dances to the beat of large FIs. If the CME is reaping immense profits from a derivative, asset managers will want in on the racket via a listed ETF. Much like LedgerX, the Winklevii might be bested by a large ETF manager like Blackrock or Vanguard, who now has the regulatory cover to apply for their own Bitcoin ETF. Blackrock vs. the Winklevii; who has more capacity to provide push jobs for ex-SEC staffers? While futures will allow wealthy individual traders and large FIs to comfortably trade Bitcoin, an ETF that appeals to retail investors globally will completely change the paradigm. Starting next year, expect more noise about an ETF approval emanating from the SEC. Slow then Fast I did not expect institutional take-up of Bitcoin to grow this quickly. There is too much money being made by startups in the space for large FIs not to get involved. As more and more of the regulatory and repetitional risk is removed, institutions will continue to increase their involvement and exposure. The Deutsche Bank Connection Bankers are flocking to the cryptocurrency industry as both principals and employees of related companies, fund managers, and as individual traders. Amid the rush towards this decade’s green financial pastures, one office of one bank stands out, Deutsche Bank Hong Kong. Deutsche Bank’s foray into investment banking began with its acquisition of Bankers Trust. The firm then proceeded to ditch its conservative German roots, and import the biggest swingers in the industry. A clique of Merrill Lynch bankers were brought in. Their ring leader was Anshu Jain. The culture was cowboy. My Hong Kong summer internship interviews in 2007 illustrates this point. The first round of interviews was in Philadelphia. In my second 2-on-1 interview I met the man who’s team I would intern on that summer. I had just returned from my semester abroad in Hong Kong. He asked me why I loved Hong Kong, and I said I loved clubbing. I then rattled of a list of my favourite establishments. He would later tell me, that’s what sealed the deal for me in his mind. That night I took the whole Deutsche contingent to my favorite dingy Philly late night EDM club. It got messy. In 2007, financiers thought they were gods. Hong Kong has never regained the energy I felt that summer. I interned on the Equity Derivatives sales desk. HR nicknamed this desk the Snake Pit, because of the aggressive personalities that worked there. The 2008 graduate training program in London featured similar aggressiveness. Deutsche offered an all expense paid trip to London for three months for all incoming graduates. The Japanese grads were the most intense. One grad got so drunk, and vomited so hard, he was hospitalised with a broken rib. That is a taste of how the youngins were trained at Deutsche. The firm fostered an aggressive culture focused on partying hard, and making money. Unlike more demure banks, no one at Deutsche was shy as to why they were in the game. Making money was the goal, and no one was censured for being too flashy. As the financial services industry entered a secular decline after the 2008 GFC, Deutsche people scattered to the wind. Deutsche lied to the German regulators about the value of its assets in an effort to avoid becoming recapitalised by the taxpayers. In hind side, that was the dumbest move ever. Their competing American banks gladly took TARP funds, paid huge bonus, and repaired their balance sheets. Deutsche limped along, and is one of the worst performing banks since the crisis. The Deutsche Hong Kong reunion was ignited by Bitcoin. For some reason, this particular office is very well represented in the Bitcoin industry. The individuals I will list all went through the graduate training program, and our Deutsche stints all overlapped. Arthur Hayes, CEO of BitMEX, member of the 2008 graduate class. I worked in Absolute Strategies Group, and then Global Prime Finance as a delta one ETF, futures, and swaps trader. Greg Dwyer, Head of Business Development at BitMEX, member of the 2009 graduate class. He worked on the commodity structuring desk in Singapore, and then worked with me on the delta one ETF market making desk. Nick Andrianov, Risk Management at BitMEX, member of the 2007 graduate class. He worked on the Flow and Exotic Index Volatility trading desk. Andrew Rizkalla, Trading Lead at Paycase, member of the 2008 graduate class. He worked on the Program Trading and Facilitation desks. Kayvon Pirestani, Director of Institutional Sales at Coinbase, member of the 2005 graduate class. He worked on the Equity Derivatives Sales desk. Gavin Yeung, CEO of Cryptomover, member of the 2010 graduate class. He worked on the Program Trading and Facilitation desk. Neelabh Dixit, co-founder of Cryptomover, member of the 2013 graduate class. He worked on the Portfolio Trading desk. Donald Day, CTO Bletchy Park Asset Management, member of the 2009 graduate class. He worked as a quant strategist for the Absolute Strategy Group. The are two other Deutsche Bank HK former employees who did not wish to be mentioned. Risk Disclaimer BitMEX is not a licensed financial advisor. The information presented in this newsletter is an opinion, and is not purported to be fact. Bitcoin is a volatile instrument and can move quickly in any direction. BitMEX is not responsible for any trading loss incurred by following this advice. Contact Us | Subscribe | Unsubscribe

The past few months in the Bitcoin community have been filled with discussion of an upcoming hardfork - SegWit2x. There have been a lot of people voicing their opinion on the matter of whether that fork should be allowed to pass or not, but today I would like to look at who I believe to be two key players in this debate - Blockstream (opposing SegWit2x) and the miners, the core signatories of the New York Agreement. More specifically, I will be focusing on the incentives both of those parties have when it comes to dealing with SegWit2x. What is SegWit2x? SegWit2x was first proposed as a compromise between the various factions in Bitcoin that were trying to solve the problem of blocks being full. It aimed to both enable the activation of SegWit to enable off-chain transactions, and to increase the block size to 2MB to increase the number of transactions that can be processed on-chain. It was to be deployed in two stages - first by activating SegWit in the summer (which already took place), and then by increasing the block size in winter (which is still pending). Basic incentives for everyone When examining why people would be for or against a certain change, it is often useful to look at the incentives they have for being on either side of the fence. An incentive shared by every Bitcoin user and company is to see Bitcoin succeed, be used by more and more people and to gain in value. You can occasionally see someone stating the opposite (along the lines of "it's good the price is going down, it will slow the adoption rate so the project will be developed further before mainstream starts to use it", or people wanting to buy the dip in price), but most people that are invested in Bitcoin want to see it grow, that's pretty much a given. Beyond that, things tend to get murky. You can see some ideologies come into play and so on. But if you focus on SegWit2x, the basic incentive for both sides appears to come down to the good old money... Incentives of Blockstream and the miners Blockstream is a for-profit company. As such, it is expected it will increase in value and, at least eventually, start generating revenue. While it had some projects that seem to be a money sink, the core business plan seems to still focus on sidechains - "sell[ing] side chains to enterprises, charging a fixed monthly fee, taking transaction fees and even selling hardware" (which the Blockstream CEO even explicitly confirmed). The original SegWit proposal was introduced by Blockstream's co-founder. So with this, we have a clear picture - Blockstream's revenue stream will come from off-chain transactions. Now, let's look at the other side of the debate. Miners are paid directly in BTC by the blocks they mine. They mint new coins with each block, and they also collect fees for any transactions they include in that block. At the moment the block reward is 12.5BTC, and the fees add up to about 0.5 to 2 BTC on average. Pretty straightforward and as described in the original whitepaper. So the miners are incentivised to include as many transactions in their blocks as they can, giving priority to those that pay more fees than the others per unit of size. Clash of incentives Both sides of this debate get their money from the same source - transaction fees. Blockstream wants more transactions to flow through their proprietary service to collect more fees from institutions and individuals. The miners on the other hand benefit from more transactions taking place on the blockchain - they earn transaction fees only for the transactions that are included in the block and get nothing from off-chain transactions until they come back onto the chain. With finite amount of money flowing through the network, this is a classic zero-sum game - the more transactions flow through your preferred channel, the more money you have and the less money your opponent has. In an ideal scenario, we would let both of those options onto the free market and let the consumer choose what they want to use. Some would choose off-chain transactions for their speed, others would prefer on-chain transactions for the immutable records, etc. In a truly free market, the best product will win and the market will reach equilibrium. However, one side is currently at a disadvantage. The size of the blocks is currently fixed at 1MB and SegWit has been activated on the network. This means that the miners have a finite amount of space to work with, while Blockstream and similar service providers don't have to do much to promote themselves - when the consumer will see on-chain transactions being too expensive for them and the blocks being full, they will by necessity make their way onto their platform to be able to transact. Moreover, SegWit transactions have a smaller "weight" to them, meaning you can put more of them in a block and even go over the 1MB block limit with them. So we have a company that benefits from the traditional blocks being filled, while also giving preferential treatment to on board onto and off board from its proprietary services, while blocking others from increasing the overall throughput, all for "the benefit of the consumer". This is basically the Net Neutrality battle all over... Internet access or block throughput, it's all the same in the end... Dynamics of power Looking at this only from the lens of money is of course a bit of a simplistic view of things. There is probably a lot more politics, ideology and power in play - SegWit2x is a hard fork to the Bitcoin network being pushed by the miners rather than the traditional core developers. If it is allowed to pass, it will show that they don't have full control over the project and thus remove them from , while giving the miners more power on top of the computing power they already hold. Conclusions If you look at things from pure monetary perspective, the fight over SegWit2x is a fight about where the transaction fees will flow - whether they will be on or off the chain. Increasing the block size will mean more money will be going to the miners, while keeping it low will force more money to flow through SegWit-enabled services, and to a degree, through Blockstream. SegWit2x is also a struggle for power in the space - who will be able to make changes to the protocol and how things will be handled in the future. The struggle might be framed in many ways - allowing an average user to run Bitcoin on RaspberryPi, the centralisation of power in the hands of the miners or core developers, an attack on the Bitcoin network, etc. How much of that is genuine concern and how much of it is propaganda from either side it will be hard to discern. But in the end, it's probably about money and power... View the full article