Hedge Fund Manager Brian Kelly Explains November 14th’s ‘Crypto Market Meltdown’

Siamak Masnavi

On Wednesday (14 November 2018), Brian Kelly, the founder and CEO of digital asset investment firm BKCM LLC, explained yesterday's "Crypto Market Meltdown", which led to double-digit percentage losses for most of the major cryptocurrencies including Bitcoin, which sank to $5,569, its lowest price in over a year.

Yesterday, Kelly, on CNBC's "Fast Money" show, was asked by host Melissa Lee to explain the reasons for the crypto markets going into "meltdown mode."

Kelly started by pointing out that Bitcoin Cash (BCH) was about to a "hard fork", i.e. an update to the protocol software "such that the software validating according to the old rules will see the blocks produced according to the new rules as invalid," which means that "all nodes meant to work in accordance with the new rules need to upgrade their software." And if "one group of nodes continues to use the old software while the other nodes use the new software, a split can occur."

"Now, when you do a software upgrade, everybody usually agrees, but in this particular case, everybody is not agreeing about what that software upgrade should be. So, we've got ourselves a Crypto Civil War... and that has people in the market concerned.

So, what happened today? People are concerned that both Bitcoin and Bitcoin Cash networks might slow down, they might not work as well, that software upgrade might not go through, or if it does go through, we'll end up with some chaos.

People started selling. That triggered stops. Everybody got concerned. And that's what happened today."

However, Kelly himself was not worried:

"In my view, very short term type of event. I think it's probably an opportunity. In fact, we did some buying at my fund today."

Lee then asked guest Meltem Demirors, the Chief Strategy Officer at CoinShares, if "there was a catalyst to the upside" after this "short-term selling event." She answered:

"Absolutely... We had six months of Bitcoin and a lot of other assets trading sideways, and I think there were just a number of events that piled up that led to this mass release, the sell-off... My view is that it's probably some institutions, some funds, deleveraging, taking some money off the table. Any time there are forks, things tend to trade weird and strange. So, I think people are trying to take some risk off the table. There are a number of exciting events coming up. In December, ICE's new subsidiary, Bakkt, is going to launch... And then, in January, we'll see Fidelity new crypto custody arm starting to operate."

According to data from CryptoCompare, BTC is currently trading at $5,637 (down 1.81% in the past 24-hour period) and BCH is trading at $444.89 (down 8.74% in the past 24-hour period).

The Bitcoin Cash hard fork is scheduled to take place on November 15th 2018 around 16:40 UTC.

Featured Image Credit: Photo via Pexels.com

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Chinese Court Rules Bitcoin Is Legally Protected Virtual Property

The Hangzhou Internet Court, in China, has recently ruled bitcoin is seen as virtual property in the country, and as such is legally protected.

The ruling came in a case in which the plaintiff, Mr. Wu, sued the Shanghai Technology Company, which allegedly operated the FXBTC cryptocurrency exchange on Taobao, a leading Chinese online marketplace, and sold bitcoin back in 2013.

Wu reportedly bought 2.675 BTC for 20,000 yuan, about $2,900, back in 2013 from the exchange. In 2017, during the cryptocurrency market’s bull run that saw bitcoin hit a near $20,000 all-time high, the buyer wanted to access the funds, but found out FXBTC closed and could no longer get to the BTC.

According to Beijing News, the plaintiff claims the Shanghai Technology Company didn’t warn it was closing the platform nor gave him a chance to access the funds afterwards. The store likely shut down as between 2013 and 2017, the Chinese government made it illegal to trade cryptocurrencies, which in turn forced Taobao to stop vendors from selling cryptos on its platform.

While the plaintiff failed to prove Shanghai Tech was the vendor that sold him the bitcoin and lost the case, the court did determine bitcoin is legally protected virtual property.

According to Dovey Wan, this was seen as a bullish signal in China and chatter on Weibo, a Chinese microblogging platform similar to Twitter, seemed to point to this as the reason behind bitcoin’s recent price surge.

According to CryptoCompare data, BTC rose 4.8% in the last 24-hour period, and is currently trading at $10,300. Earlier today, bitcoin jumped from a $9,400 low to as much as $10,500 before facing a small correction.

Notably, this isn’t the first time a Chinese court defends bitcoin. As CryptoGlobe covered late last year, an arbitration court ruled bitcoin should be protected as property by law, and clarified at the time Chinese law doesn’t forbid owning or transferring bitcoin. Earlier this year, a prominent Chinese lawyer argued owning and occasionally trading bitcoin is legal in the country.

On Twitter, Wan clarified that while holding bitcoin as private property is legal, trading the cryptocurrency “in a systematic way” isn’t.