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Global investors watch out for Italian referendum, Bitcoin to get the push?

Posted on December 4, 2016 | by [email protected]

The European region has always been a major Bitcoin market mover in times of economic or political crisis. This is evident from what happened with Brexit this year. The pre-Brexit tension and the post-Brexit shocks caused turbulent economic times for European residents. The Brexit from EU caused Bitcoin prices to spike up considerably and make it the safe haven against the adverse market reactions. December 4^th can witness a similar push in Bitcoin prices as EU will witness Italian referendum. While market is waiting to for what might happen, let’s look into the dynamics of the referendum:

Italian Referendum:

On December 4^th, the global markets should be prepared for an economic tremor as Italy prepares for a referendum. The Italian citizens would vote on changing resolutions to amend constitutions. This also involves absolving the power given to State, Parliament and Bureaucrats. The sale of Italian government bonds and securities has been on the rise anticipating the crisis. Italy currently has eight troubled banks currently that tank if the referendum doesn’t turn out in favor. Adding to the tension, Prime minister Matteo Renzi declared that he will quit if people vote against the resolution.

Impending market chaos:

The aftermath of the controversial referendum can be disastrous as Italy is one of EU’s biggest debtors. Owing to bad lending practices, the country’s borrowing has led to financial instability as many banks are under heavy pressure now.

Financial Times reporter Rachel Sanderson stated,

“Italy’s banks have €360bn of problem loans versus €225bn of equity on their books after successive regulators and governments failed to tackle a bloated financial system where profitability was weakened by a stagnant economy and exacerbated by fraudulent lending at several institutions.”

How the markets will react to this would surely be of interest for all global investors.

How Bitcoin will react:

If the Italian referendum goes sour, it could mean investors could turn to possible uncorrelated assets such as bitcoin and Gold. Just before the Brexit vote, Bitcoin spiked to $675. As soon as the decision became public, global stock markets began to plunge. However, gold and bitcoin values went up significantly as investors turned to safer hedges. Just one week before the vote took place, the San Francisco-based exchange Coinbase saw a 55% rise in British registrants. After the vote was out, it was noted that a 350% increase in UK sales of Bitcoin. Even during the fears of possible ‘Grexit’- Greece Exit, there was good increase of volumes of Bitcoin. Basing on these historical observations, it is very possible that we might see something similar during the referendum.

The Much-Hated Bitcoin is Becoming the Saving Grace for Banks

Posted on October 26, 2016 | by [email protected]

It is no longer news that traditional financial institutions hate Bitcoin and they’ll do anything to stifle its growth. Bitcoin seeks to decentralize the money supply in the economic landscape and a decentralization of money could make banks obsolete or mostly unnecessary. More so, Bitcoin offers incredibly low transaction costs and the low fees associated with Bitcoin payments makes Bitcoin a better payment alternative to many of the payment solutions that banks offer.

From the foregoing, banks have an ax to grind with Bitcoin and they are fueling the war of fear in order to slow down its adoption. More so, the banks are leveraging their economic and political affiliations to lobby against regulation that would empower Bitcoin as a global currency. Nonetheless, The Guardian reports that banks are now hoarding Bitcoin in order to protect themselves against cyber attacks in the future.

Cyber attacks take a deadly form

On October 21, the U.S. Department of Homeland Security began investigations into a DDoS (distributed denial of service) attack on some popular websites. The DDoS attack was targeted at websites in both the U.S. and Europe and it is one of the strongest DDoS attack in record. The DDoS attack took out popular sites such as Twitter, CNN, Reddit, PayPal, Fox News, Wall Street Journal, and Netflix among others.

The attacks were designed to target Dyn, a firm that provides DNS services to many of the aforementioned websites. Dyn notes that “We began monitoring and mitigating a DDoS [distributed denial-of-service] attack against our Dyn Managed DNS infrastructure shortly after 7:00am ET of Friday”.

Last Friday attacks highlight a worrisome trend in the cybersecurity industry as hackers harvest IoT (Internet of Things) devices to wreak havoc with DDoS attacks. There are about 7 billion to 19 billion IoT devices; hence, DDoS attacks will only become severe going forward.

The more worrisome trend is that the hackers often request for ransom in order to call of the attacks. Interestingly, the hackers prefer getting paid in Bitcoin because of the anonymity that it provides them.

Banks are now hoarding Bitcoin to mitigate cyber attacks

The Guardian reports that banks have started buying up hoards of Bitcoin, which they plan to use to for ransom payments if they happen to become a victim of DDoS attacks. In reality, paying off the hackers in Bitcoin (or any other currency) makes economic sense for banks because law enforcement agencies are currently incapable of preventing or stopping those kinds of attacks.

Dr Simon Moores, a former technology ambassador for the UK government and chair of the annual international e-Crime Congress observes that, “The police will concede that they don’t have the resources available to deal with this because of the significant growth in the number of attacks.”

Moores also notes that it makes sense for banks to pay off hackers than to risk a DDoS attack. In his words, “Big companies are now starting to worry that an attack is no longer an information security issue, it’s a board and shareholder and customer confidence issue.”

Strangely enough, the same Bitcoin than banks have vilified so much is now turning out to be their saving grace in the face of security challenges. Moore notes that, “From a purely pragmatic perspective, financial institutions are now exploring the need to maintain stocks of bitcoin in the unfortunate event that they themselves become the target of a high-intensity attack, when law enforcement perhaps might not be able to assist them at the speed with which they need to put themselves back in business.”

Major Banks make a move on Blockchain: Prices to go higher?

Posted on September 7, 2016 | by [email protected]

At the start of September the Bitcoin markets have been on a tear and prices continue to feed off positive sentiment in the market. A few of the stories catching the attention of bitcoin investors have to do with major commercial banks and their various plans to implement blockchain technology. As adoption affects the market sentiment, this news has the potential to catapult prices much higher. Let’s take a closer at how these banks plan to integrate blockchain technology.

BNY Mellon is backing up transactions using Blockchain

BNY Mellon has come up with a test system that relies on blockchain technology to create backups of transactions. While the existing system records only brokerage transactions, work is under progress on further applications. The new system operates alongside BNY’s existing transaction records system. It aims to provide an operational buffer in the event that the first layer of transaction records becomes unavailable. Developed as part of the bank’s broader blockchain efforts, the resiliency solution is dubbed as ‘BDS 360’. Their internal projects collaborated with financial institutions as part of the R3 distributed ledger consortium, announcing the “settlement coin” project. BNY CIO Suresh Kumar framed the effort as a way for the bank to test “the strengths and weaknesses” of the technology. He said

“Assume your primary system is down. Do you have the information that you need so that you are able to conduct business, have an account for transactions that you know of, so that you can settle transactions? So that’s what we tried to do.”

BNP Paribas opens Blockchain Lab

BNP Paribas has opened a new FinTech laboratory at its New York headquarters. This lab would primarily focus on building blockchain solutions to employee problems. This was announced at a blockchain hackathon held by the French multi-national bank. Eventually, the lab will house the work of six task forces, which will also work on AI and big data. BNP’s chief operating officer of commercial investment banking, Bruno d-Illiers, stated that the lab is open to all company employees and not just cryptographers and leadership. Needless to say, the employees in France were happy about this

Barclays completes finance transaction through Blockchain

Barclays reported that two partners, Ornua and Seychelles Trading, were able to successfully transfer trade documentation via blockchain platform. This platform was created by Barclay’s accelerator program graduate, ‘Wave’. The Israel-based startup was using custom technology on top of a blockchain to facilitate the transfer of trade documents.

In statements, Barclays head of trade Baihas Baghdadi said that this is a crucial step for trade settlements. The project confirms that adding multiple parties to a distributed ledger system can remove one of the biggest “headaches” associated with global trade, the movement of the paper documents that track and authenticate the transactions.

Hong Kong’s Central Bank to Test Blockchain:

Hong Kong’s de-facto central bank intends to launch an innovation hub that will test blockchain and distributed ledger solutions.The Hong Kong Monetary Authority (HKMA) revealed yesterday it has begun work on the initiative with the Hong Kong Applied Science and Technology Research Institute (ASTRI). This is an initiative founded by the government to enhance its competitiveness in technology. Additional activities that are expected to take place at the innovation hub include the testing of solutions; discussions between regulators, incumbents and startups; and the testing of solutions that could be adopted by the HKMA.