Mati Greenspan, Senior Market Analyst at FX broker eToro, has provided his daily commentary on traditional and crypto markets for January 8, 2019.
Highlights include:
- Stocks Rally Off Lows: Stocks are recovering from a dismal Q4 as the U.S. and China make progress on a trade deal and the Fed signals that they’re less likely to raise rates this year. The US government shutdown continues to drag on, however.
- Scammers Take Advantage of Ethereum Upgrade: The Ethereum blockchain is set to implement an upgrade on or around January 16th. Several projects are taking advantage of the hard fork, including Ethereum Nowa, which appears to be an outright scam.
- Ethereum Classic Hacked: Coinbase discovered that hackers took over more than half of ETC’s mining power in order to either create a double spend or erase previous transactions in order to get coins back and spend them again. This attack doesn’t pose a problem for the wider industry, but should be considered a learning opportunity for other crypto projects.
- Market Forecast Webcast Today at 10 am ET: eToro will host a webcast at 10 am ET today to discuss what will drive markets in 2019. You can register here.
Traditional Markets
Stocks have managed to rally off the lows and are now firmly in green for the year. Here we can see the Dow Jones’ all-time high in early October and the recent low from December.
There does seem to be some progress being made in the US trade war with China. The Fed also seems to be signaling that they’re less likely to be hiking rates this year. In contrast, the US government shutdown only seems to be heating up.
Today marks the 18th day of the partial shutdown and according to rhetoric from the White House, it seems that the President is willing to let it last an entire year if necessary.
President Trump has announced that he will address the nation tonight at 9:00 PM EST. Many expect him to declare a state of emergency in order to circumvent Congress in getting funding for the border wall.
Market volatility has come down a bit from the extreme highs of December but is still quite elevated.
So, there’s been a lot of confusion here and I’m very glad to cut right through this one for you and clarify.
First, some background… We’ve discussed already that the Ethereum blockchain is about to see a major upgrade. The name of this upgrade is Constantinople and it is scheduled for on or around January 16th.
Constantinople will be implemented as a hard fork on Ethereum. If you’re not 100% sure how forks work, please review this short explanation now.
In this upcoming case, the Ethereum upgrade has been widely embraced by the community and until now there have been no major players protesting Constantinople. So most likely it will be a smooth upgrade.
This means that the entire network will probably implement the upgrade together and there will be no action required from the end users.
It’s important that we emphasize this because there are several projects out there piggybacking on the upgrade and taking advantage of people. One of which, called Ethereum Nowa appears to be an outright scam.
Ethereum Classic Hacked!!!
Not to be confused with Ethereum, Ethereum Classic is a legitimate fork of Ethereum. A disagreement among the community back in 2016 led to a chain split. Since then Ethereum Classic (ETC) has not done too well, especially when compared to her sister Ethereum (ETH).
Last night Coinbase put out the following alert on Ethereum Classic:
Explanation: The most common type of attack in crypto is known as a 51% attack. Basically, if a foul player manages to control more than half of the network’s mining power (hashrate), they can basically rewrite history.
Lingo: Rewriting history is also known as a reorganization or “reorg” and the most common reason to do this would be to create a double spend. Or, erase a previous transaction so you can get your coins back and spend them again.
Coinbase’s blog identified no less than 15 reorgs, several of which contained suspicion of double spend activity amounting to an approximated $1.1 million, which has been siphoned from the network.
Again, it’s important to understand that ETC is not the same as ETH. In the initial moments after the blog was released, both coins sold off in the confusion but ETH did manage to regain composure fairly quickly.
The reason is that Ethereum has a hashrate of about 20 times that of Ethereum Classic. So while it might be possible to temporarily get enough hashrate to control 51% of ETC’s network, it would be practically implausible to affect ETH in this way.
Putting things into perspective, if someone is dreaming about trying to 51% attack Bitcoin, they would need about 4,500 times the amount of hash than they do to attack ETC.
So, anyone claiming crypto is in a state of emergency is dead wrong on this one. Simply put, this is yet another great example of how negative news is nothing more than a learning opportunity. All the newcomers that joined crypto in 2017 should be much more comfortable now with how blockchain and crypto works and that is ultimately a good thing.
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