Bitcoin’s clash of the titans

Call it bitcoin’s clash of the titans.

One, a little known banker to the crypto world, is Nobuaki Kobayashi, bankruptcy trustee for Mt. Gox,  the digital currency exchange that was hacked and lost billions of dollars for its BTC clients in 2014.

The other mystery titan only goes by the Bitcoin address of 3Cbq7aT1tY8kMxWLbitaG7yT6bPbKChq64 and according to BitInfoCharts has amassed an astronomical amount of bitcoins worth $344,000,000 at a blended cost basis around $8,400 from 02-09-18 through 02-12-18, according to published reports.

The mystery buyer has a total a new total of 96,000 coins worth somewhere around $790M at today’s price of $8,225, according to BitInfoCharts. The buyer is now the third largest holder of bitcoin in the world.

Kobayashi could very well be on the other side of the trade since the trustee has been charged with selling of the remaining cryptos held by Mt. Gox. The Japanese banker has sold roughly 2,300 bitcoin since last September while prices were soaring toward $1,800.

Kobayashi is said to have another $1.9B in assets he is looking to liquidate, which could be one of the reasons bitcoin has fallen below $9,000K recently.

Perhaps these two could arrange a private placement off the exchanges, so that bitcoin can get back to its true price discovery without the dread of other huge sales having the effect of price suppression.


Mt. Gox founder, Mark Karpeles begins fraud trial in Tokyo

After a brief aside yesterday to explain the bizarre circumstances of my hospitalization, we’ll get back to the financial news and thank you for all the kind messages.

The trial of former Mt. Gox chief executive officer Mark Karpeles began Tuesday in Tokyo. He is charged with embezzlement and fraud stemming from the collapse of then the world’s most-active trading platform for buying and selling digital currencies.

Almost  850,000 bitcoins – then worth about $500M — were stolen in a hack disclosed in February 2014, along with $28 million in cash from the exchange’s bank accounts. In today’s falling bitcoin price the same amount would be valued at just under $2B.

Karpeles, a 32-year-old Frenchman, has pleaded not guilty to the charges, but acknowledges the transfers. This is the first time he has addressed the charges publicly after the bankruptcy filing in 2014.

“I swear to God that I am innocent,” he said in Japanese to the three-judge panel hearing his case, according to the pool report.

No word on how long the trial will last, but in its bankruptcy filing Gox reported that about 200,000 bitcoin were recovered after the alleged hack.

$10,000 bitcoin can’t happen with these exchange outages

While bitcoin was dropping like a stone on Monday with sellers clamoring for the exit, thereby crashing the Coinbase exchange, another digital crypto-like token, ethereum, soared to record highs.

Other exchanges like BTC-e, tweeted on Monday that it was hit by a distributed denial-of-service attack, or DDoS. Their website was back online at 4:00pm EST.

This was the second outage for Coinbase in the last three weeks and both outages were when bitcoin was falling.

So what is with the bitcoin exchanges, that they work fine when there are $200-$500 run ups in price, but fail miserably on the downside? And why can’t they get their stories straight?

For any cryptocurrency to gain broader appeal safeguards must be put in place to give each investor equal opportunity to buy and sell. The last thing anyone needs is a government to step in to regulate the market.

Another question is how is it that a digital currency exchange is developed that is not robust enough to handle spikes in traffic? The exchanges are built with the express purpose of having scalability. It’s not like you built a physical market and then people started trading it online and you were caught short.

The exchanges by using the ploy of server outages due to traffic or DDoS attack at a critical junction are setting themselves up for comparison with Mt. Gox and its implosion some years ago.

If you want to see a $10,000 bitcoin price, these exchanges — and there are about 10 of differing sizes on bitcoin — must come together to execute sales for each other if one exchange goes down.

You can’t expect neophytes, new to the cryptocurrency markets, to be able to manage navigating different exchanges to find one to buy or sell on.

The Federal Reserve is schedule to announce Wednesday the result of its two-day meeting on whether to raise rates another quarter point.

I’ve written numerous times that Yellen & Co. will not raise again this year.

So I’ll stand by that and say the Fed will stand pat and wish to monitor the markets and inflation and stand ready to raise at upcoming meetings, but will stand pat today.

While the low rates have created numerous asset bubbles from stocks to bitcoin, the tightening of credit will have a disastrous effect on the overall economy. GDP is looking at below 2% for the quarter after coming off a sub 1% first quarter.

That’s my call we will see at around 2PM EDT whether I am right or not.