5 Bearish Candlestick Patterns Every Bitcoin Trader Must Know

5 Bearish Candlestick Patterns Every Bitcoin Trader Must Know

There are simple bearish Japanese candlestick patterns that every Bitcoin and cryptocurrency trader should know — here are 5 of them.

As discussed in a previous article on bullish candlestick patterns, trading using Japanese candlesticks is the most popular method for analyzing price action by crypto traders.

There are many patterns worth learning and understanding — some of the most essential bearish patterns are discussed below. It is important to note, once again, that context and candle placement are essential in identifying patterns.

The same exact candlestick can be bullish when located in a different place on the chart.

Bearish Harami

The Bearish Harami is a two candle pattern that signals a likely reversal in price. In this pattern, the first candle is large and green and is followed by a red candle with a smaller body.

Bearish Harami

To be valid, the second candle must be completely within the range of the body of the first candle. Another notable version of this pattern is the Bearish Harami Cross, where the second candle is a perfect doji.

In Japanese, the term “Harami” is the word for pregnant. In this pattern, the green candlestick is the “mother” and the small candlestick is the “baby.”

Dark Cloud Cover

Price action following this pattern is often as ominous as its name, Dark Cloud Cover. This is another 2 candle pattern that signals a likely bearish reversal at the top of a bullish movement. The first candle is generally large, always green, and is followed by a similar red candle.

Dark Cloud Cover

The second candle opens with a gap up to a fresh high but closes the session more than halfway into the body of the first day’s candle. This is a signal that bears have dominated the session, pushing the price down with the intention of following through on future candles.

The Evening Star

The Evening Star is a bearish reversal pattern that appears at the top of an uptrend with a large bullish candle, followed by a gap up to a small-bodied candle and a gap down to a red candle that closes below the midpoint of the first day.

The Evening StarThe first candlestick in the evening star must be green and have a relatively large real body. The second candlestick is the star, which has a short real body that does not touch the real body of the first candle — it is the gap between the real bodies of the two candlesticks that makes a doji or a spinning top qualify as an evening star.

This pattern is confirmed by the candlestick that follows the star, which must be a red candle that closes well into the body of the first candlestick.

In legacy markets, there must be gaps between each of the candles. However, since crypto trades 24/7 and gaps are rare, some technical analysts argue that this pattern is still valid without the gaps.

Shooting Star

Similar to the previously discussed patterns, the shooting star is a bearish reversal pattern. This two candle pattern appears during an uptrend and signals an upcoming reversal to a bearish bias.

Shooting StarThe first candle is green, followed by a green or red candle that has a long upper wick and small body. The second candle looks like an inverted hammer, which is bullish when located at the bottom of a trend.

The long wick as an indication that bulls controlled much of the session, before losing ground to bears, who pushed the price back down to close near the daily open. This is a signal that price depreciation is likely and is confirmed when followed by a bearish candle.

Hanging Man

The Hanging Man is a single candle pattern that indicates a likely reversal from bullish price action to bearish price action. This candle has a long lower shadow and a small body and appears at the top of a trend or during an uptrend.

Hanging ManOnce again, when this candle is at the bottom of a downtrend, it is called a hammer and signals a bullish reversal — context matters. This candle shows that sellers were able to take control during a portion of the period. It indicates that bears defended the current price and are likely to continue selling through the subsequent candle.

Get to know these candlestick patterns — they are essential to understand as a crypto trader!

The views and opinions expressed here are solely those of the author (@HorusHughes) and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Bitcoin Price Diary: Long BTC and Profitable on Many Altcoin Positions

Bitcoin Price Diary: Long BTC and Profitable on Many Altcoin Positions

Bitcoin continues to trade sideways, leaving the door open to generate generous profits by trading altcoins.

Trading altcoins continues to be one of the most profitable strategies in the crypto market. The highlight of this week was the MATIC (MATIC) pump and subsequent dump, which I was lucky enough to time perfectly, securing a 60% profit near the all-time high. I closed a number of positions in profit, and am still trading EtherParty (FUEL), (IOST), Elrond (ERD), Chainlink (LINK), Zilliqa (ZIL), Verge (XVG) and FunFair (FUN).

I failed to take profits on some of these coins at the first resistance and target, only to see them retrace to my entry and this presents an important lesson about being too greedy. Each setup looked good, but the MATIC movement spooked the market and caused a ripple effect that saw temporary price depreciation across the board. Lesson learned.

BTC/USD update

Bitcoin (BTC) has been chopping sideways with errant wicks both up and down throughout the past week, likely liquidating high leverage traders on both sides. I am presently long Bitcoin from $7,100 after taking two other positions that closed even or in a slight profit this week.

BTC USD hourly chart. Source: TradingView

BTC USD hourly chart. Source: TradingView

The first signal that sparked my interest in a long position was a clear bullish divergence with the Relative Strength Index (RSI) on the hourly chart. I normally do not trade lower time frames, but I noticed that there were potential divergences showing on larger time frames, so I zoomed in. Often we will see an hourly bull divergence confirm on the 4-hour, 6-hour and daily timeframes.

BTC USD 4-hour chart. Source: TradingView

BTC USD 4-hour chart. Source: TradingView

I decided to enter a position at $7,100 when the price dropped down to the previous swing low at $7,080 and then bounced. This looked likely to confirm as a bullish swing failure pattern (SFP). At the most basic level, when price wicks slightly below a previous swing low, it’s an indication that liquidity has been engineered by a whale.

In this case, it seemed likely that they pushed price down to compel retailer traders to take shorts, and also to fire existing stop losses on long positions – thus creating a ton of sell orders to buy into. The price has currently risen from that point.

BTC USD 4-hour chart. Source: TradingView

BTC USD 4-hour chart. Source: TradingView

Furthermore, the price is showing a potential bullish divergence with the RSI on the daily chart, which would be a likely signal of a bottom. I am awaiting confirmation, as this would make me feel far more secure in my current position.

FUN/BTC

Trade idea

FUN offered a very clear trading opportunity this week. I pulled up the chart after not looking at it for almost two months and found that price had continued traveling in a channel that I drew in October near the local highs. 

FUN BTC daily chart. Source: TradingView

FUN BTC daily chart. Source: TradingView

The ideal entry would have been a bounce off of the channel bottom, between .00000033 (sats) and .00000038 (sats). However, a clear resistance formed at .00000044 (sats), which flipped to support and was my entry, as shown below.

How it worked out

The price moved up very quickly, topping out at .00000060 (sats). I exited half of my position at .00000056 (sats), for a quick profit of 27%. The rest of the position is still open and my target is at the top of the channel.

IOST/BTC

Trade idea

This is a relatively straightforward trade. The price was forming a pennant at support (not shown) before the Binance shakeup. The MATIC move caused the price to drop through support at .00000080 (sats). I was watching for a bounce off of the blue ascending support but saw price quickly drop through and entered at .00000071 (sats) just above the horizontal support line.

IOST BTC daily chart. Source: TradingView

IOST BTC daily chart. Source: TradingView

I want little to do with IOST below that line, or below the .00000070 (sats) support and I have set my stop loss at .00000067 (sats) because this would allow for a wick below that .00000070 (sats) support and close back above.

How it worked out

IOST BTC 4-hour chart. Source: TradingView

IOST BTC 4-hour chart. Source: TradingView

This trade is currently still open and starting to move as anticipated. After my entry, the price continued to test the .00000070 (sats) support, dropping below by 1 sat but never reaching my stop loss. The price then formed a descending wedge, where it is currently breaking up from. Initial targets are shown as black horizontal lines.

The views and opinions expressed here are solely those of the (@scottmelker) and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

PayPal Sues Consumer Protection Agency for ‘Confusing’ Digital Wallet Rules

PayPal Sues Consumer Protection Agency for ‘Confusing’ Digital Wallet Rules

Digital payments giant PayPal is suing the Consumer Financial Protection Bureau for making it provide disclosures for fees it does not charge.

PayPal is suing the Consumer Financial Protection Bureau (CFPB) for requiring the firm to make “misleading and confusing” disclosures about its fees.

The digital payments giant filed a lawsuit against the CFPB on Dec. 11, arguing that the agency has ignored critical differences between digital wallets and prepaid products like prepaid debit cards (GPR).

CFPB makes PayPal provide disclosures about fees that it doesn’t charge, the suit says

According to a Dec. 11 court filing seen by Cointelegraph, the CFPB mandates that digital wallets and GPR cards should be regulated the same way, which allegedly resulted in a “fundamentally ill-suited” regulatory regime for PayPal digital wallets.

Specifically, the lawsuit refers to a new CFPB rule known as the “Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) Rule.” Adopted in April 2019, the rule allegedly requires PayPal to provide disclosures about fees that the company does not charge as well as misrepresent the actual fees paid by most customers, the firm claimed.

Simplified structure of fees requires PayPal to only include the highest possible fee

Basically, the CFPB’s rule requires PayPal to simplify its fee disclosures that “undermine PayPal’s own clear disclosures” and ban the firm from providing “the very information that would assist consumers in making an informed decision.”

As part of the rule, PayPal allegedly has to disclose the highest possible fee under the worst-case scenario for each required fee category, “even if the fee would rarely be incurred.” PayPal wrote in the filing:

“The Rule mandates that customers be given — and actually view — ‘short form’ fee disclosures. The requirements for this short form disclosure are extremely prescriptive and rigid. Certain fee categories must be placed in specified positions and presented in certain font sizes […] The Rule further prohibits PayPal from including explanatory phrases within the disclosure box to describe the nature of these fee categories.”

Apart from petitioning the court to deem the CFPB’s rule unconstitutional, PayPal’s prayer for relief asks the court to award PayPal its costs and reasonable attorney’s fees as appropriate.

Lack of regulatory understanding regarding new technologies

Speaking to Cointelegraph, Ohio-based internet attorney Andrew Rossow said that PayPal’s lawsuit serves as a clear demonstration that regulators like the CFPB do not understand emerging technologies like blockchain, digital money and artificial intelligence:

“I think the CFPB’s recent expansion of Regulation E (Prepaid Accounts Under the Electronic Fund Transfer Act) and Regulation Z (Truth in Lending Act) was premature because it still doesn’t understand, in my opinion, how these digital wallets (which includes cryptocurrency wallets—hot and cold) operate and the parties that involved in even the most ‘basic’ of digital money transactions.”

Rossow added that a ruling in PayPal’s favor could prove groundbreaking for the crypto space as “PayPal is stepping up and defending the business operation of each of its competitors, protecting themselves from unwarranted and almost endless liability at any given point in time.”

News of the lawsuit comes after PayPal revealed a better-than-expected quarterly profit as its payment platform recorded more users and transactions.

While apparently expanding its business, PayPal has cut some major partnerships recently, making more room for cryptocurrencies to fill the gap and enter the payments space. In mid-November, adult entertainment website Pornhub revealed that PayPal had abruptly stopped servicing its models. As reported by Cointelegraph, Verge (XVG) — which is supported on Pornhub — skyrocketed in price right after news of PayPal ceasing business with the platform.

Monero Compliance Workgroup Says XMR Exempt From Funds Travel Rule

Monero Compliance Workgroup Says XMR Exempt From Funds Travel Rule

Monero’s compliance workgroup concludes that FinCEN Funds Travel Rule does not apply to underlying assets and cryptocurrencies such as XMR.

The Monero Compliance Workgroup has stated that the Monero (XMR) network is not subject to U.S. Financial Crimes and Enforcement Network (FinCEN) guidelines regarding the Funds Travel Rule, in a Dec. 5 blog post.

What is the Funds Travel Rule?

The Funds Travel Rule requires financial institutions who are sending and/or receiving funds to store and transmit certain information about the transfer if it is valued at over $3,000 or equivalent amount.

However, in its May 2019 guidelines, FinCEN states that:

“If a given transmission protocol is unable to accommodate such information, the obligated person may provide such information in a message different from the transmittal order itself.”

This suggests that there is no need to transmit this information on-chain.

Compliance is the responsibility of exchanges, not cryptocurrencies

Any regulated Anti-Money Laundering/Know Your Customer compliant exchange should have the required transactional information and is probably already storing it. But in its statement, Monero concludes that the Funds Travel Rule does not apply to Monero itself, or indeed to any cryptocurrency.

Monero’s Compliance Workgroup notes:

“It would appear to be inappropriate to state that any cryptocurrency is compliant or not compliant with the Funds Travel Rule since the Funds Travel Rule appears to apply to regulated entities, rather than the underlying assets in which the entities trade.”

This may, however, be too late to convince some exchanges who have already decided to play it safe by delisting Monero and other privacy-coins to avoid potential scrutiny from regulators.

US Fed to Print $425B for New Year’s — 3 Times Bitcoin’s Market Cap

US Fed to Print $425B for New Year’s — 3 Times Bitcoin’s Market Cap

A statement confirms the Fed will ease the strain on banks over the new year period by creating more than three times Bitcoin’s market cap in new money.

The United States central bank will inject at least $425 billion of nonexistent money into the economy by the middle of next month.

In a statement released Dec. 11, the Federal Reserve confirmed it would ramp up so-called repurchase, or “repo,” operations on key dates over the new year period.

Fed to “print” 3x Bitcoin market cap in weeks

The time of year required extra assurances for banks, the Fed claims, with repo operations designed to support their day-to-day operations. 

“The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has released the schedule of repurchase agreement (repo) operations for the monthly period from December 13, 2019 through January 14, 2020,” the statement reads.

The Fed then confirms:  

“In accordance with the most recent FOMC directive, the Desk will conduct repo operations to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures around year end that could adversely affect policy implementation.”

Repo offerings on Dec. 31 and Jan. 2 will be $150 billion. By the Jan. 14 deadline, the minimum the Fed expects to generate is $425 billion.

“Everything’s fine”

While common, such moves involve conjuring vast new liquidity based on zero backing — essentially money printing without physically printing any money. 

Critics, especially in Bitcoin (BTC) circles, have long highlighted the policy as an example of the failure of central banks to “manage” economies. 

The argument forms a central tenet of Saifedean Ammous’ popular book, “The Bitcoin Standard,” in which he argues that the fall of nations and empires stems from the fall of a currency that is not allowed to operate free of manipulation.

Similar calls in favor of Bitcoin surfaced in September during a previous repo spike.

Commenting on the most recent Fed announcement, Bitcoin advocate known as Rhythm on Twitter noted that $425 billion is over three times the size of Bitcoin’s market cap.

“Everything is fine though,” he ironically summarized.

As Cointelegraph previously reported, U.S. national debt reached $23 trillion in November — around $12 million for every Bitcoin that will ever exist. That figure is now at $23.12 trillion, according to online monitoring resource U.S. National Debt Clock.

43% of Investors Interested in Bitcoin Are Women: Grayscale Survey

43% of Investors Interested in Bitcoin Are Women: Grayscale Survey

A recent report published by Bitcoin fund operator Grayscale suggests that 43% of investors interested in Bitcoin are women.

A report published on Dec. 4 by Bitcoin (BTC) fund operator Grayscale suggests that 43% of investors interested in Bitcoin are women.

The study involved 1,100 United States investors of ages between 25 and 64 surveyed between March 28 and April 3, 2019. All the respondents were involved in personal investing and held at least $10,000 in investable assets with at least $50,000 in household income.

Bitcoin not as male-dominated as believed?

As the report points out, cryptocurrencies are believed to be a predominantly male space. Additionally, GoogleAnalytics suggests that over 90% of Bitcoin community engagement is male. But the data uncovered in this survey challenges this perception. The report notes:

“Bitcoin conversations tend to focus on a predominantly male investor audience, and yet data indicates women have a healthy interest in Bitcoin as well.”

Notably, 56.2% of women and 56.4% of men see significant growth opportunities in digital currencies. Also, 49.8% of women believe Bitcoin’s finite supply could drive demand and price higher as do 49.9% of men.

Moreover, 47% of women compared to just 39% of men think this is the time to buy Bitcoin because they believe the price will only rise. Interestingly, 63% of women compared to 56% of men agreed that the ability to buy only a small fraction of BTC was a compelling reason to join the space.

Among the 43% of investors interested in BTC were women. While 80% of women were also intrigued by its potential while 93% noted that they would be more open to the asset class if more educational resources were available.

Women more risk-averse than men 

The report also concludes that women tend to view investments as a way to protect themselves and their families rather than a way to get rich. For example, 60% of the women gave more importance to financial security than building wealth while only 48% of men shared this view.

This apparently higher risk adversity is in line with the ideas of Miss Universe Finland 2015 winner Rosa-Maria Ryyti. In September, she said that Bitcoin is less popular among women because it’s seen as a risky investment.

Also, 42% of women noted that they plan to “play it safe” with their investment whereas 35% of men said the same.

Men more “confident” in their investments than women

Furthermore, women are also more likely to rate themselves as less investment-savvy than men, with 44% percent of women and 22% of men saying they didn’t feel confident in investing. 

At the same time, women have a more pessimistic outlook on the U.S. economy — with only 46% expecting positive development — while 57% of men were optimistic. A similar contrast is seen when examining their views on the global economy, with only 36% expecting positive developments compared to 43% of men.

While the report suggests that interest in Bitcoin is nearly equally split between men and women, other sources, however, indicate that much fewer women invest in Bitcoin than men overall. As Cointelegraph reported at the end of July, it is estimated that only 20% of European cryptocurrency holders are women.

Bitcoin Price Must Hit $7.3K to Avoid Bearish Bollinger Band ‘Squeeze’

Bitcoin Price Must Hit $7.3K to Avoid Bearish Bollinger Band ‘Squeeze’

The inventor of Bollinger Bands warns his price instrument shows Bitcoin and other cryptocurrencies are facing an imminent return to volatile conditions.

Bitcoin (BTC) briefly fell back below $7,200 on Dec. 14 as bearish sentiment continued to pervade cryptocurrency markets.

Cryptocurrency market daily overview

Cryptocurrency market daily overview. Source: Coin360

Bollinger: Bitcoin preparing for next breakout

Data from Coin360 showed BTC/USD hit a sharp downturn on Saturday, losing around $70 in a matter of minutes and abandoning ground gained on Friday. 

Over the past 24 hours, Bitcoin hit local highs of $7,290 but still failed to break out of its general downtrend, which has persisted throughout the past week.

Bitcoin seven-day price chart

Bitcoin seven-day price chart. Source: Coin360

Nonetheless, among technical analysts, signs that a decisive move was on the horizon were already trickling through. One indicator, in particular, Bollinger Bands, predicted volatility would soon return to both Bitcoin and altcoins. 

“Most crypto currencies are at or near Bollinger Band Squeeze levels. Time to pay attention,” inventor John Bollinger tweeted on the day.

Bollinger Bands are a price-performance forecasting model revolving around the 20-day simple moving average (SMA) of an asset. The SMA has an upper and lower band around it, which analysts plot using standard deviation. 

As volatility increases, so the bands become further apart. In times of low volatility, the bands contract, or “squeeze.” In Bitcoin markets, resolving the implied “pressure” on the price tends to come via a price breakout.

“Eventual resolution of all moves of this caliber have resulted in initial 20%+ price swing,” fellow pundit Josh Olszewicz added in separate comments on Bitcoin’s Bollinger Band position. 

Olszewicz noted that Bitcoin was currently in a squeeze that had occurred only a handful of times in 2019; each resolved with an upward or downward breakout.

If BTC/USD failed to crack $7,300 first, however, this time around, the direction was likely lower.

As Cointelegraph reported, others shared the sentiment that conditions were not likely to remain predictable for Bitcoin for long. In a recent analysis, regular contributor Michaël van de Poppe described the market as “boring and fragile.”

For filbfilb, meanwhile, pointers conversely suggested the weekend could produce a price uptick to $7,400.

VeChain hack contrasts steady altcoin market

In line with Bollinger’s words, altcoins mimicked Bitcoin’s low volatility as the weekend began, trading at broadly the same levels on the day.

Ether (ETH), the largest altcoin by market cap, barely moved, down just 0.1% at press time to trade at $144.50.

Ether seven-day price chart

Ether seven-day price chart. Source: Coin360

The only exception from the top-twenty cryptocurrencies was VeChain (VET), which shed 8% after investors panicked due to a wallet hack that lost funds worth around $6.7 million.

The overall cryptocurrency market cap was $196.4 billion, with Bitcoin’s share at 66.6%.

Keep track of top crypto markets in real time here

TikTok Owner Reportedly Working With Chinese State Media on Blockchain

TikTok Owner Reportedly Working With Chinese State Media on Blockchain

Owner of popular social media app TikTok has launched a joint venture with a state-owned Chinese media group to develop business lines for blockchain and AI.

Owner of major social media app TikTok, ByteDance, has launched a joint venture with state-owned Chinese media group and ThePaper.cn operator Shanghai Dongfang Newspaper to develop business models that include blockchain and artificial intelligence (AI), Bloomberg reported on Dec. 14. 

TikTok may use blockchain and AI to fight Deepfakes

The joint venture was launched in the capital of eastern China’s Shandong province, Jinan, on Dec. 10 with a registered capital of 10 million yuan ($1.43 million). ByteDance owns 49% of the venture while the rest is owned by the Chinese media group.

TikTok sees 500 million monthly active users and is currently the second most downloaded app in the Apple App Store in the United States. The app’s short video feed is completely managed by a purpose-built AI to predict and deliver content that the user will likely prefer. 

While it’s not yet clear how ByteDance and TikTok could benefit from blockchain technology, one possible use-case could be for digital media data verification. For instance, U.S. law enforcement Axon Enterprise aims to test blockchain for its body cameras to fight Deepfake AI-generated videos.

China leads the way in blockchain

As recent reports suggest, blockchain technology is rapidly maturing and seeing wide adoption in China.

Earlier this month, the Bank of China has reportedly issued 20 billion yuan ($2.8 billion) in blockchain-based special financial bonds for small and micro-enterprises. Furthermore, China is also expected to conduct the first real-world test of its central bank digital currency in the near future. 

As Cointelegraph reported in late November, the European Commission and European Investment Fund launched a new investment initiative for AI and blockchain in Europe.

Europe’s New Regulations Force Bitcoin Service Bottle Pay to Shut Down

Europe’s New Regulations Force Bitcoin Service Bottle Pay to Shut Down

Recently funded social media Bitcoin transfer service, Bottle Pay, is shutting down citing new AML regulation in the EU as the reason.

The Bottle Pay service, which allowed users to send Bitcoin (BTC) via social media accounts, announced on Dec. 13 that it would be shutting down due to Anti-Money Laundering (AML) regulations. 

Funds will remain available for withdrawal until 13:00 GMT on Dec. 31, 2019.

New user data collection would negatively impact user experience

Bottle Pay, developed by United Kingdom-based company Block Matrix, enabled Bitcoin payments to any social media contact regardless of whether they had an account or not. 

Just two months ago, the company raised $2 million in funding, with the aim of increasing the user-base tenfold over the next year.

However, as a UK-registered custodial Bitcoin wallet provider, the company must comply with the European Union’s 5AMLD EU regulation coming into effect from Jan. 10, 2020.

Block Matrix believes that the additional user information the new regulations require would “alter the current user experience so radically, and so negatively, that we are not willing to force this onto our community.”

Next steps

New signups, deposits and social media bots have already gone offline. Funds already sent will not be claimed and returned to the sender within 7 days. The withdrawal function will be taken offline and all wallets closed at 13:00 GMT on Dec. 31, 2019. Any funds remaining in wallets donated to The Human Rights Foundation.

A similar service for micro-payment tipping on Reddit, also closed down recently, although for different reasons. TipJar, designed for sending Ether (ETH) payments to other Redditors, shut down in October, citing lack of user interest.

Blockchain Pilot Makes Waves in Russia’s Energy Sector

Blockchain Pilot Makes Waves in Russia’s Energy Sector

Russian tech startup Waves announced it has been testing a blockchain solution for payments in the retail electricity sector.

Earlier this week, Russian tech startup Waves announced it has been testing a blockchain solution for payments in the retail electricity sector. The pilot program was initiated by Rosseti, Russia’s national energy grid operator, which is looking to automate and make transactions between energy producers, suppliers and consumers more transparent.

Now that the first stage has been successfully completed, the partners will proceed to scale up their efforts. Ultimately, they envision rolling the blockchain-powered solution out nationwide.

Blockchain and energy: What makes them work together?

According to Wood Mackenzie, a global natural resources research and consultancy group, the first documented use case of distributed ledger technology in the energy sector can be traced back to April 2016, when residents of Brooklyn, New York, started trading solar power via a blockchain peer-to-peer system. From that point onward, the technology has been gaining traction with the energy industry. The report goes on to say that investments in the blockchain-in-energy industry reached over $300 million between the second quarter of 2017 and the first quarter of 2018.

Indeed, these days, the energy sector is widely considered to be one of the most attractive fields for DLT. A 2019 academic study titled “Blockchain Technology in the Energy Sector: A Systematic Review of Challenges and Opportunities” reviews as many as 140 blockchain commercial and research initiatives within the field.

Related: Green Policy and Crypto Energy Consumption in the EU

The most notable examples include Grid+, a blockchain energy company focusing on wholesale energy distribution, as well as Brooklyn Microgrid, the aforementioned blockchain-based peer-to-peer energy trading platform run by Transactive Grid, which is a collaborative startup initiated by LO3 Energy and Ethereum-centered company Consensys.

But what exactly makes blockchain a good fit for the energy sector? As per a 2018 Deloitte report, adopting blockchain in energy and resources “could improve visibility, increase operating efficiencies, and streamline regulatory reporting.”

More specifically, the paper’s authors argue that blockchain could provide a reliable and efficient platform for executing and recording energy trading; store vast amounts of clean, tamper-proof data accessible to regulators; and track efforts of numerous parties involved in the end-to-end process of creating and delivering electricity to consumers.

Russia’s energy industry problems — and how blockchain can solve them

In the blog post announcing its blockchain solution, Waves explained that the main drivers for the project are the inefficiency, opacity and mounting debt that currently plague the Russian energy industry. The post cites data from the Russian government, which revealed that total debt for electricity as of Sept. 1, 2019, had reached 1.3 trillion rubles ($15.7 billion‬), with households accounting for 800 billion rubles ($12.6 billion).

The reported underlying causes for this debt include customers who do not pay their electricity bills, the failure of some payments to reach manufacturers, siloed or inaccessible data, and inaccurate metering calculations by intermediaries. If implemented correctly, blockchain can indeed help to overcome these hurdles, Eyal Shani, a senior researcher at blockchain-focused research firm Aa​ykesubir, told Cointelegraph. He elaborated:

“By its nature the sector consists of consumers and producers which are widespread across the entirety of a country. I can only imagine that in Russia, the largest country in the world, the magnitude of the problems can be much bigger than we see in other regions. In today’s modern electricity almost everyone can create voltage and hence the management problems of such a wide supply chain is inevitable. Particularly, it’s hard to introduce trust relation and proper monitoring when dealing with such systems.”

In response to Rosseti’s request for solutions, Waves’ project — which has been in development for nearly 9 months — aims to “entirely remove opportunities for manipulating data in the electricity market, including when measuring electricity use and making payments,” according to the company’s representative.

Waves’ solution: A blockchain-assisted app that could go nationwide

Waves’ solution, which is “directly integrated into electricity meters,” includes a blockchain platform, mobile and web applications, and a gateway for data transmission. To establish the end-to-end payment chain between consumers and electricity suppliers, Waves struck a partnership with Alfa Bank, Russia’s largest privately owned bank.

Earlier this month, the company presented the initial results of its blockchain solution — involving 400 households in the regions of Kaliningrad and Sverdlovsk — at the Electric Networks Forum in Moscow, hereby finishing the first of three stages.

The two remaining phases entail “scaling up all houses in these two regions” and “scaling to other regions of Russia” respectively, the startup’s spokesperson told Cointelegrah. The second stage will be implemented in 2020–2021, the representative added.

But skeptics would ask: Are blockchain and smart contracts really necessary here?

“It turns out that the bureaucracy and internal fraud involved with the intent to manage everything in one place is larger than the added costs of running a blockchain system,” Shani from Aa​ykesubir said. It would be possible to refrain from using the technology, he added, but centralizing the solution “could create a strong incentive for internal fraud” — which is exactly the problem Rosseti is hoping to tackle.

Nevertheless, as Shani noted, “since the project didn’t provide with the exact way they structured their network we don’t know if they benefit from trust sharing in their system or just from standardization and consolidation of processes into one network.” He continued to say that creating a private blockchain network would be a step in the right direction, adding:

“Generally this seems like a classic case where a closed or even open network could cut governance costs and introduce all the benefits of modern payment solutions like real-time tailored pricing, custom packages and added transparency and privacy.”

In regard to this, Waves’ spokesperson told Cointelegraph that there are many players involved in the retail electricity market, such as generating companies, distribution companies, grid companies, consumers and banks. Additionally, the process of transferring is accompanied by technical losses of electricity, with the representative adding that:

“The blockchain captures data at each stage, makes the process completely transparent and allows to permanently resolve the dispute between the participants on the issue of ‘who made the loss and who to pay for them?’, while smart contracts make it possible to ensure that all participants fulfill their financial obligations.”