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Bitcoin Community Cheers as Miners Back New Scaling Framework

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  • Bitcoin Community Cheers as Miners Back New Scaling Framework

Bitcoin backers celebrated as the community embraced a new mechanism to improve usage and allow it to scale, boosting confidence in the virtual currency and sending prices back near record highs.

The community, which had been split on how best to make the cryptocurrency more manageable, rallied behind a code upgrade known as SegWit2x, which aims to increase the network’s transaction capacity. That fueled a rally on Thursday in bitcoin’s price against the dollar, which had plummeted from a peak in June as concerns grew about its future.

“We’re thrilled to get past this impasse,” said Andrew Lee, head of bitcoin-shopping startup purse.io, whose team celebrated with beers at their San Francisco office. The development opens “the doors to much-awaited innovations,” he said.

Bitcoin enthusiasts in New York and San Francisco, to Hong Kong and Tokyo, gathered in bars and offices to hold impromptu parties, while others took to Twitter and social media to cheer the move, as well as the price rally.

The impasse arose from a limit placed on the size of blocks underpinning the network in bitcoin’s early days, in order to prevent hacker attacks. As the virtual currency grew in popularity over the past nine years, transaction times and processing fees soared, curtailing the community’s ability to process payments with the same efficiency as services like Visa Inc. Miners and developers were locked in a heated debate for years on how best to upgrade the software, culminating in the recent clash.

More than 93 percent of miners who function as the backbone of the digital tokens network locked in support for BIP91, the first necessary step in implementing SegWit2x, according to Coin Dance, a website tracking adoption. Bitcoin’s miners are independent groups that verify and process bitcoin’s transactions by solving complex computational problems, in order to be rewarded by fees and creation of the digital currency.

SegWit2x is essentially a compromise between two main competing camps. One proposed a direct approach, seeking to increase the block size. The other, a group of developers known collectively as Core, pushed for a long-term solution by moving some data outside of the main network, a scheme called SegWit that had been resisted by miners because it also could diminish their influence. In the end, the miners agreed to adopt SegWit, but also increase the block size to 2 megabytes.

The upgrade isn’t final. The BIP91 lock-in has a grace period of about two days, during which miners will prepare to activate the software. It will then take about two weeks for SegWit to be fully adopted. Developers still warn about potential hacker attacks that could disrupt the process.

Then, three months from now, the community will face another challenge when some of the world’s biggest miners move to adopt the second phase of the proposal, the doubling of the blocksize. Still, many in the community agrees that the hard part is over, with prices seen stabilizing and strengthening.

“We do believe it will continue, now that we’ve gotten over this hump,” said Ryan Rabaglia, head trader at digital-trading company Octagon Strategy in Hong Kong.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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