Tuesday, January 14, 2020

WOW The Skip Happened ! Now For The Flip

When I wrote this article yesterday ( The Coming BSV Skip and Flip ) BSV was sitting at $170. Woke up this morning and it is $336 and has already surpass BCH at $331. No, I do not have a crystal ball or any inside information. I just noticed the volatility of BCH hashrate and suspected that something must be up with the Unknown Miners.

If BCH supporters are really desperately trying to keep their hashrate up by renting mining rigs then the game is really up. It is only a matter of time, as this will be a futile exercise. They will not have enough money to keep up with the rising price of BSV. It is a vicious feedback loop. Now it has happened. There will of course be resistance with market support but the outcome is inevitable. The fundamental value proposition for BCH is flawed.

For my observance this was my reward.

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This is the first time that I have ever been banned and I have not posted there in 2 years. Guess the truth must hurt. Can't be that bad really because BCH price is actually up by about $70 since my post.

So the The Skip is over. Now the mainstream crypto presses will be pushing hard on the Tulip Trust narrative. Come on be serious. Anybody with common sense can see that it is all about the technology. Why is it that hard to fathom?

Unconfirmed if and buts about the tulip trust even if true, cannot account for the huge run up in price. It means that there is real demand especially when you realise that BSV price have been going up steadily since mid December and in reality since the delisting. 

Will The Flip happen now? Of course. More people are starting to believe or hedging their bets just in case.

Pump and Dump

Will there be a huge dump coming up? Unlikely. Those holding BSV are believers. Being a very divisive 3 way tug of war between the 3 coins those who wants to dump have done so already. The BSV community is even smaller than BCH, and those who are invested for the long term will hold on to their coins, which creates scarcity and more upward price pressure.

There will of course be attempts to push the price lower by traders but the variation will be no more than 30% at most and will be good opportunity to buy the dips. 

Watch the hashrate

I have explained what I believe will be the mechanics of The Flip so I will not repeat it here. As hashrate moves over to BSV, BTC's blocktime will rise and the mempool will bloat as well. This will be the start of the dreaded Chain Death Spiral for BTC. 

The average time between blocks for BTC is rising fast and is already at 17 minutes almost taking twice as long for blocks to confirm. 

Now that everybody have seen what happened BTC supporters will surely put up a valiant effort to prevent the Flipping. There will be lies, misinformation, market support, etc and again the outcome is inevitable. The value proposition that BTC is digital gold is also flawed. The great hope for BTC in the lightning network is also in trouble with security ans scalability issues.

As more people who have substantial financial stake in BTC realise, or start to feel uncomfortable about this, they will start to hedge by at least equalising the number of each coin held. This will of course drive up the price of already tightly held BSV. In a rising market miners will also withhold coins, selling only if they have to further restricting supply. Those selling in the hope of buying back on the dip if are unable to do so will quickly re-buyback at a higher price which will again add to upward price pressure.

Why should BSV succeed.

It has a useful value proposition anchored on a stable protocol with massive scaling.

Other ancillary reasons

1) The Bitcoin founder is behind the chain and supports the development of the chain. I have believed that Craig was Satoshi when he first turned up at this discussion back in June 2017. As more people accept this fact the negative connotation of Craig's effect on BSV price in the past will reverse. I also wrote another piece on why it matters.

2) The developer tools available to support building on BSV. The emphasis is on building useful apps, not on currency and price. The only way to get mass adoption is to get the masses using Bitcoin without them knowing that they are. 

3) The nChain team and Bitcoin Association are always announcing new apps, tools and developments. There is a sense of growth and vitality.

4) The BSV development team always deliver on their promises usually ahead of deadline scheduled.

5) The community is alot more friendly.

That said, all that is left to do is to sit back and watch events roll out as predicted. It is a great time to be alive and watch this drama play out.

Monday, January 13, 2020

The Coming BSV Skip and Flip

For the moment all eyes are on the huge price increase of BSV from around 98 USD to 170 USD over the last week. An increase of over 70% and would most probably exceed $200 soon. So what is happening?

For those who believe in the underlying technology of BSV the reason is clear and inevitable. BSV is the original protocol as described in the Bitcoin whitepaper and despite the timeline BTC and BCH are the forks off the true protocol. A "Back To The Future" scenario!

The main theme of this post is a prediction that BSV will soon surpass the price of BCH (The Skip) and thereafter go on to surpass the price of BTC ( The Flip ). Contrary to our intuitive nature of believing in the slow rate of change in the crypto sphere, these events will happen quite quickly, because theses events are very much determined by the mining hashrate.

For most of 2019 the hashrate for BCH was about 2% and BSV around 1% of the total hashrate. This week the hashrate in both these coins have doubled to 4% and 2% respectively. This means that miners are finding it more profitable to mine these two coins or the supporters of these coins are renting hashes to support their chain.

Notice the amount of "unknown" miners on the BCH and BSV blockchain and none on BTC. The hashrate on BCH have been fluctuating between 1.5 to 4.3% recently. For BCH, it is dangerous for its' hashrate to fall below that of BSV as it would very quickly be reflected in the price of these two coins.

Unknown Miners

Unknown miners have always been a part of Bitcoin mining, but the significant part that it is now playing on BCH and BSV is unprecedented. Seeing that is is more than 3%, the increase must be a switch from BTC mining either as a result of mining rentals or BTC miners dedicating some of their hashrates towards BCH and BSV without reveling themselves as doing so.

The increase in blocktime on BTC is starting to show. Keep an eye on this developing situation.

There is still much debate going on about which is the true Bitcoin and which will survive. Miners are business people and they will only be motivated by profit. It does not matter to them which coin wins as they will always mine the most profitable coin.

Prior to November 2018 the price of BCH which included BSV fluctuated a great deal but after that date BCH price have mainly trended downwards.

BSV price on the other hand trended downwards because it was delisted on many leading exchanges but has since trended upwards against BTC as oppose to BCH. The price drop as a result of delisting must be looked upon as a manipulated event and accounted for when studying the chart above.

Against BCH the price of BSV is also clearly trending upwards.

All these events must be looked at as part of the continuing struggle between BTC, BCH and BSV as to which is the real Bitcoin. When 3 coins are competing on the same mining algorithm only one will win. This is a winner takes all scenario.

The Skip
It is dangerous for BCH if its' hashrate falls below that of BSV as this will soon be reflected in the price. Because the price of BSV have been on the uptrend we can expect that some miners are dedicating a little of their hashrate to mining BSV as a defensive move. These will mainly be the source of the Unknown miners we see on the BSV blockchain.

The dilemma for BCH supporters is that if they do not do something about the mining hashrate their coin will be in danger. As price is not a real factor in the volume of Unknown miners on the BCH blockchain we can only surmise that it is the result of hashrate rentals by BCH supporters.

This situation is unsustainable as the more BSV price increase against the more hash rate they must rent from the available rental pool and also carry the losses on the BCH mined as BCH price trends against that of BSV.

This will all come to a head when BSV price exceeds that of BCH. This is the Skip event, after which the price of BCH will move down sharply. BCH goal of becoming digital cash will be over. It is not possible to be used as a digital currency if your market cap is less than 2 Billion USD.

The Flip
During the BTC and BCH war, BCH overtaking and replacing BTC was known in the crypto community as the flippening. This did not happen and BTC successfully retain the overwhelming majority of the Bitcoin hashrate.

BCH survived the Chain Death Spiral because it had the Emergency Difficulty Adjustment programmed in. It was able to retain a percentage of mining hashrate commensurate with its' price for profitable mining. This also applied to BSV after it forked from BCH.

We have already seen today at least 3% of hashrate moving away from BTC. As the battle between BSV and BCH intensify we will see more hashrate moving away.  The BTC blockchain is acutely vulnerable to loss in hashrate and the Chain Death Spiral. We may start seeing a slowdown in BTC blocktime in the next few days.

The halvening of the BTC, BCH and BSV will have a large impact on the price and hashrate distribution between these coins. If prices do not double to maintain profitability, it must be met with increasing value collected through transaction fees. Only BSV have the capacity to gain more from transaction fees per block than block subsidy.

Note the steady increasing trend in transaction fees over block reward for BSV.

Soon after The Slip, our attention will be turn to The Flippening round two BSV against BTC. This time there will be a real difference in ideology between the two chains.

A coin can only be relevant if it is useful. It will not be useful to the masses unless it can scale. Here BSV clearly trumps BTC as it can already achieve thousands of transaction comfortably while BTC is still stuck at a maximum of 7 transactions a second. Large blocks means lower cost per transaction leading to new applications built around micro transactions. Usefulness brings mass adoption. BTC is clearly not geared towards mass adoption but towards being used by a minority as digital gold. This will not succeed as it requires Governments to adopt BTC in their currency reserve in order to push the price of BTC towards a million dollars a coin perhaps. This is unlikely because participants in the world monetary system will not want to see huge chuck of wealth in BTC they do not control.

BSV on the other hand will achieve this by default. In striving for scaling and mass adoption and it will become embedded into all our lives at a global level. National currencies will be tokenised on the BSV blockchain and this will be the "Killer App" that will cement BSV as the real Bitcoin.

With scaling comes mass adoption leading to The Flippening.

Last Note For The Skeptics.
If you are still skeptical about the above then this chart may change your thinking. Using BCH as a base every crypto coin including BTC is negative except for BSV.

The Flippening




Friday, January 10, 2020

BSV hit $150 today. It is NOT a pump!

BSV hit a high of 156 USD today before falling to 149. Over the last seven days it had increased market cap by over 60%. Over 30% in the last 24 hours. This has sent jubilation and panic into the supporters and detractors of BSV.

If you read the recent post, the reason for the rise was developments in Craig Wright legal case.




Well, nothing has been revealed and nothing has changed! So why should BSV supporters suddenly pump the price by buying big? At this point most of the early adopters have invested into their favorite coins and over the last 2 years since BTC peaked at 20,000 no new money have come into the industry. Movements in values have mostly been the result of speculation and hodlers moving between coins on pure speculation.

Something has changed with BSV since mid December it has started tracking higher against BTC, going against the trend. Something has changed.

Since its' inception a year ago it has been under attack from almost every quarter of the crypto community mainly because of the mercurial personality of Craig Wright, and it has been largely successful till now.

Why now? It is because Crypto is all about technology. Like Google and Facebook, the best technology in the space wins and dominates completely. So why has BTC not done so? Why BSV? The answer is because BSV is the real McCoy. BCH and BTC are the Forks! After Febuary 4 2020 BSV will have unlimited block size and unlimited scaling potential.

Remember that we had 2 years of blocksize debate before BCH branched off to 2 megabytes blocks. It is all about being able to scale because only then enterprise level applications can become viable. The other necessity for enterprise adoption is a stable protocol. You can't write huge software applications only to rewrite them again when the protocol changes. After February 4 BSV protocol will be set in stone meaning that all applications written will always be backward compatible. There will be improvements to the BSV protocol but the base layer will be stable.

This is the reason for BSV price rise. Hedge fund money is coming into the space.


The first of these hedge funds Unbounded Capital has moved into the space. Make no mistake. Others are taking notice. Crypto use to follow BTC but BSV is begining to decouple. Small increments from December 18 but the swings will widen.

There will only be one winner.

This is the nature of Crypto. It will mimic the development of the internet. Before the dominance of the internet, intranet was all the craze. Every company wanted their own permission and private intranet. The problem with any closed system is that development stagnates. No matter how large a company, it can never match the power of open source permission less development.

The first condition of a permission less platform in Crypto is a stable platform. This means that no group of developers will have the ability to change the protocol. This is what BSV will become. With a stable platform and unlimited scaling, it will be the only crypto left standing when the dust settles. All the rest will just become curiosity coins.

Sunday, December 29, 2019

Repo Market Madness - Liquidity to be increased to 500 billion

What is happening in the Repo market must worry us. The Repo market is meant to be just a clearing house for banks and financial institutions without the Federal Reserve actively intervening.

If there was only one bank in the system and it must maintain a 10% reserve ratio, then it must keep 10% reserve of its' total loan value with the reserve bank. Of course there are more than 1 bank in the economy and during the course of a days trading some may lend out more than the 10% reserve ratio mandated and some will lend less. At the end of the day the banks that lend more will borrow from those that lend less in the Repo market at the market interest rate overnight so that the total reserve ratio of all banks together is 10% or less. This is how the Federal reserve controls the amount of money and therefore debt creation in the system. ( see hidden secrets of money )

If the Federal Reserve have to intervene, then the system is broken. On September 16 2019 the Federal Reserve had to intervene pumping 21 billion into the Repo Market. Had it stop there, that would have been OK, it would have just been a hiccup in the system. But the intervention continued and increased unabated. ( see George Gammon explanation )

The system is broken, something is definitely wrong, but what? There have been no official explanation and much speculation. One plausible reason is rehypothecation. ( what is happening in the repo markets ) It is most likely a combination of several factors including funding the budget deficit which is expected to exceed 1 Trillion dollars. Roughly 100 billion a month or 25 billion weekly. Interestingly the current funding into the repo market since September 16 is just over 400 billion or roughly 25 billion a week.

The amount of support by the federal reserve into the repo market can be tracked by looking at the Federal Reserve balance sheet. Since September 16 it has increased from 3.769 to 4.165 Trillion. How high can it go. More important is when and how the Fed exits the Repo market.

Implications of QE

QE is basically printing money and pumping liquidity into the system. In 2008 it was used to bail out the banks by buying their non performing mortgages and pumping fresh capital into the banks. There is no evidence of mortgage default this time so what is it that the Federal reserve is covering up?

Funding old debts is not inflationary as the money has already been spent. However, if the Fed is financing this new liquidity crisis with new money, the result could be inflationary which will mean higher interest rates.

It is hard to fathom higher interest rate being an allowable scenario as the government debt is already at 24 Trillion with much of that debt being rolled over every six months. Not to mention the adverse effect it will have on the economy pushing it into a recession and possibly depression. How then will this circular cause and effect situation ends is anybody's guess.

Fact is that we are already in a growth period for 12 continuous years without a recession which means an ever higher asset bubble that has never been allowed to correct. The situation must correct eventually as the effects of QE become less effective until it is gone.

The effects of the crash when it comes will be worst for the poor and those that can least weather the storm.

Protecting oneself

All the analysis above is depressing if we don't have a way to protect ourselves against this calamity. The stock market is not a refuge. It is already in a bubble as all the money printing is finding its' way there.

For the rich there is of course gold and other precious metals. If you are financially tight then a small investment in BSV ( Bitcoin SV ) would be the best bet. I have chosen BSV because I believe that it is the real bitcoin. It will eventually replace BTC and perhaps exceeds the current price of BTC. 1 BSV could be worth more than $10,000 within 2 years all because it can scale and be used in many applications that requires micro transactions.

This is of course just my opinion.

Hidden secrets of money episode 4

Repo market - George Gammon

What is happening in the repo markets

This article has been permanently written and timestamped to the BSV blockchain

Thursday, December 12, 2019

What is happening at the Repo markets.

What is happening at the Repo market?

Rehypothecation - The process by which someone pledges an asset for a loan but it has already been pledge for another prior loan. Strange but it seems that this practice is allowed and common among hedge funds, banks and financial institutions. It is also possibly the source of the problem manifesting in the Repo market.

The Repo Market - There are 3 players in the Repo market. The main banks, qualified financial institutions and the Federal Reserve. Banks and financial institutions have to maintain a minimum deposit held at the reserve bank in proportion to their loan portfolio. At the end of the day banks and financial institution lend to each other to keep the system in balance. This system works well and has been working perfectly without the participation of the Federal Reserve since the financial crisis of 2008, that is until September 16 this year, when the Repo rate hit 10%. The Reserve Bank stepped in to provide liquidity and calmed the markets. Since then they have provided 300 billion in short term liquidity.

What happened on 16 September 2019?

Even though some banks had ample reserve deposited at the Reserve Bank, they were unwilling to lend to other institutions as per usual, because they did not trust the "existence" of the assets (treasury bills) that were offered as collateral. They suspected that something was not right.

In overnight lending at the Repo market, the securities are only promised and not actually transferred. So in theory the banks trusted one another to deliver if needed. This trust evaporated on September 16, and borrowers had to offer ever higher interest rates or better securities. Borrowers had to have this money or they will be in breached of their lending ratio. ( Similar to exceeding your bank overdraft limit and the bank request that you deposit money to bring the overdraft under the limit immediately. You have to comply at whatever the cost or your cheques will bounce and your facility terminated. )

The banks knew something and they were unwilling to lend to one or some institutions at the standard Repo rate or perhaps at any interest rate! The only option left for those institutions is the Federal Reserve. Attempts were made to discover the identity of the institutions concerned but the Federal Reserve have block these requests. It seems that they do not have to disclose this information for 2 years.

So now, only the Federal Reserve is able and willing to lend on the promissory notes of the financial institutions affected and to this effect they have printed and loaned out 300 billion on a "temporary short term" basis. This problem is only growing is not going away anytime soon. The Federal Reserve will have to stop pretending that this is short term and actually "bring" those assets into their balance sheet permanently. But there is a problem. These assets don't exist and they do not know how large the problem is. It is at least 300 billion and growing.

In 2008 under QE1 they actually bought the toxic mortgages (Mortgage Back Securities) from the banks and financial institutions giving them fresh liquidity. ( This is similar to a company in trouble transferring or selling the bad debts or dead inventory in their books to another party. ) They actually cannot do the same with treasury bills this time, because the treasury bills don't exist! The banking system has no way of tracking how many institutions have claims to the same securities. Speculations are abound that it is as high as 3 dollars promised for every dollar of treasuries issued! Surely not! But the fact remains that there are no assets for the Federal Reserve to buy. The only option is permanent Repo market operations until they figure this out how large this problem is.

When the tide goes out we will know who is swimming naked.

Under normal circumstances, if a bank borrows on the Repo market from another bank, it will repay the other party with excess money from it's daily operations such as interest received, loan maturities and daily deposits, and take back their promissory note.

However if other banks sense that a particular institution is in trouble then they would require a higher interest, better securities or just refuse to lend. That institution will then have to go to the Federal Reserve window for funding and everyone will then know that, that institution is in trouble and no other banks will be willing to lend on their promise to pay, backed only by securities of doubtful value, as in the case of Lehman Brothers in September 2008.

If circumstances were normal then the failure of a single institution will be just that. However circumstances are not normal. The problem has only grown larger. The Federal Reserve have expanded overnight lending and also refuse to name the institutions involved. The likely scenario is that it is a systemic problem. All the banks and financial institutions are involved no one knows the extent of the rehypothecation. It is at least a 300 billion problem and growing!

How does this end ?

The Reserve Bank cannot keep renewing and extending the lending in the Repo market. This situation must be made permanent sometime and soon. If the treasuries are non existent, then the problem is even worse than 2008. The Federal Reserve can't even pretend to hold these assets in heir balance sheet as they do not exist. It has to be written off. The financial institutions involve declared insolvent and made bankrupt.

But alas the problem is again too big and involve institutions too big to fail. WE HAVE A HUGE PROBLEM. The solution will affect the value of the US dollar and by implication the world economy as the US dollar is the world's reserve currency.

How do we protect ourselves ?

The only way is to hold on to cash, precious metals, collectibles, blue chip companies and perhaps even cryptos. Any asset that does not carry a counter-party risk. Blockchain is a very young industry and we do not even know which crypto will ultimately prevail. My bet is on Bitcoin SV but that is only a personal opinion.  Good Luck. Hold on to your seats there is turbulence ahead!


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