Analyst Claims Lightning Network Adoption May Be Part of the Reason for BTC Rally

Bob Iaccino, an experienced fund manager and veteran trader, has argued that the introduction of the Lightning Network (LN), a layer-two solution for transferring cryptocurrency payments in a quick and cost-effective manner, may have contributed to the recent surge in the Bitcoin (BTC) price, as well as that of other cryptoassets.

Iaccino, whose comments came during an interview (on May 15th, 2019) on CNBC’s Futures Now, said:

[I am not sure] who’s actually doing the buying, but part of the reason why [cryptocurrency prices are increasing] is because of the inception and application of software called the Lightning Network. [It] actually makes [processing] small transactions a lot easier for those who hold Bitcoin.

Lightning Network Making It More Practical To Adopt Bitcoin

He continued:

When you look at Visa, which processes 65,000 transactions per second (TPS) [while the] Bitcoin [blockchain] does about seven. [However,] Lightning Network gets smaller transactions off of the blockchain network, making it [more practical] to adopt Bitcoin as a currency.

According to data from 1ML.com, there are presently 8,369 nodes running the LN protocol, up 4.29% in the past 30 days. 1ML data also shows that there are 37,405 LN-based channels currently available, with a total network capacity of 1,038.63 BTC, an amount valued at over $8.3 million at press time.

Moon’s Browser Extension Features Lightning Network Support

In order to make it easier to spend bitcoins at giant online retail outlets, such as Amazon, cryptocurrency payment processing startup, Moon, has added support for LN-enabled wallets. Users can send and receive LN-based payments by using Moon’s browser extension, which supports the layer 2 protocol.

Last month, Radar, a firm which has developed a decentralized cryptoasset exchange (DEX) on the Ethereum network, announced that it is planning to launch a suite of software tools for building various solutions using the LN protocol.

Radar Releases Suite Of Lightning Network Tools

Radar’s software includes a configuration helper, which may be used to set up a LN node. The company has also developed an invoice “playground” that allows users to test if their nodes are connected to each other, and a liquidity tool through which crypto payments can be transferred.

The LN-enabled toolkit is part of Radar ION, a service operated by Radar’s management that helps new users learn how to use the Lightning Network for business-related transactions. As mentioned, Radar’s development team has also been working on building decentralized Ether-based exchanges, including Radar Relay.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

Featured Image Credit: Photo via Pixabay.com