Hi Everybody,

If we celebrate every piece of good news, then we must also listen to the bad. However, when listening to bad news we can always find some good. 🙂

Recently, the Polish government has issued a strong warning against Bitcoin and the entire cryptocurrency industry. Some of the things they’ve said are already known to those in the Crypto-world. Like, this is an extremely high risk market and that it is largely unregulated, as well as saying that online exchanges are dangerous and prone to hack attacks.

The good news is that they haven’t squashed the thought entirely. Two weeks ago, the largest website in the country for ordering food online called Pyszne.pl announced that they will be accepting digital gold as one of their payment methods for the 5062 locations they are partnered with.

The two main events affecting bitcoin at the moment are the pending decision on cryptos from the Indian government and the bitcoin scaling debate, wich we’ll explore below.

eToro, Senior Market Analyst

Today’s Highlights

  • Something Snapped
  • Fed Speaks You Should Listen
  • Time to Scale

Please note: All data, figures, and graphs below are valid as of July 11th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

(Click here for the full post from @NestorArmstrong)

Today is Amazon Prime day in the United States. This new All-American holiday was invented by the online retailer to cross-sell their products and put their $99 Prime service right down the throats of the public consumer.

The timing in the market couldn’t be better. Tech stocks and the Nasdaq are coming off a very shaky June and as Nestor pointed out, the summer months are critical.

In this chart, we can see Amazon shares since the beginning of the year. Circled are yesterday’s gains. The green line is the fragile Nasdaq 100.

Indeed, investors seem to be repricing everything at the moment. In fact, the recently made public company behind Snapchat just fell to it’s lowest price ever.

I even overheard on one news station that “investors feel that the company has a smaller chance of survival now that tech stocks are volatile.” Still trying to work out the correlation in my head. Seriously, what does the long-term survival of a chat messenger app for teens have to do with the stock market?

Fed Talk

I know this stuff can be quite boring but these guys are in charge of the money so if the goal is to make money, we should listen up.

Yesterday Williams said that we can expect another rate hike by the end of the year. This is more or less in line with expectations. The market is currently putting the odds of a rate hike by December at about 52%.

Today, we’ll hear from Lael Brainard. As one of the Feds largest doves, she’s likely to advocate the other half expectations and tout that inflation and wage growth is not strong enough to support another hike.

Of course, the market is far more interested in what the Head Honcho has to say. Janet Yellen will be testifying before Congress tomorrow and Thursday. Rate hikes are not interesting. We know that the Fed is on a slow but steady path to higher rates. Whether it comes in December or March is really beside the point.

What is at the top of investors minds is the $4.5 Trillion worth of financial assets that the Fed has purchased over the past decade and how they plan to unwind that mountain of money.

Scaling the Bitcoin

This is by now by far the largest pullback the cryptomarket has ever seen. If not by percentage than certainly by market cap.

The total market cap of all (812) digital assets, as reported coinmarketcap.com has come from a peak of $116.5 Billion in mid-June all the way down to less than $78 Billion today.

Forefront on the minds of alternative investors is the scaling debate that is currently playing out largely behind the scenes in the bitcoin world.

See, as the popularity of the bitcoin network grows, so does the number of transactions that need to be processed. By design, each block of the blockchain is big enough to handle about 3000 transactions. Over the past few months, thanks to popularity in Japan and other countries, we’ve seen times when this was simply not enough.

So, a decision needs to be made. Do we improve the code and make transactions smoother, or do we make the blocks bigger?

At the moment, the community is divided but the clock is winding down. On August first a solution known as BIP 148 will start to take effect. This represents the first solution, to improve the transaction protocol.

However, a solution called segwit2x is quickly gaining in popularity. This represents the second solution to make the blocks bigger, but will also improve the protocol like the first option.

At the moment, about 85% of miners are signaling that they like the segwit2x solution.

If that number goes up to 95% over the next two weeks then we will likely go to a hard fork. Meaning, that bitcoin will branch out into two different coins.

It’s almost like a stock split. So each person holding one bitcoin will keep the original coin and will be credited with an equal amount of the new coin. However, in theory, the old coin should lose its value while the new one should replace it.

The issue is that this stuff is quite complicated and most people even after explaining it, fail to understand how it works. Certainly, making the network stronger is a positive thing but getting to that point is very likely to get painful.

Let’s have an awesome day ahead!

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