Tag Archives: bitcoin

Wall Street Journal Argues Bitcoin Is “Probably worth Zero”, Joins Obituary List

Wall Street Journal Argues Bitcoin Is “Probably worth Zero”, Joins Obituary List

Wall Street Journal Argues Bitcoin Is “Probably worth Zero”, Joins Obituary List

One of the Wall Street Journal’s most read articles of the day implies that bitcoin’s volatility reveals that the cryptocurrency is “probably worth zero.” The author of the piece starts by stating that a borderless digital currency out of the government’s reach that allows for semi-anonymous transactions sounds good, but that he’s not really a bitcoin fan because of the small number of transactions it can handle, and the amount of power necessary to maintain the network.

Bitcoin is scalable and can eventually reach and surpass VISA’s volume of, on average, about 2,000 transactions per second (tps). As CCN previously reported, SegWit’s activation on both the litecoin and bitcoin networks enables cross-network transaction swaps between the two cryptocurrencies, facilitating a host of other innovations, making it clear that, in the future, the problems that currently haunt the cryptocurrency won’t be there anymore.

The author then uses Gresham’s law, the principle that “bad money drives out good money” to argue against bitcoin. The article reads:

“Given the choice of spending inflationary government-issued money or something which holds its value, everyone would spend the bad paper stuff and hoard the bitcoin.”

In his argument, he says that no one wants to be the person that once bought two pizzas for 10,000 bitcoins, when the cryptocurrency was nearly worthless. The point being that if no one spends the currency while waiting for it to gain value, it will never really get established as a currency. Then again, no one in Venezuela wanted to see their currency’s value decrease, but the people didn’t have much of a say in that and, as such, were forced to use bitcoin to survive.

Then, unpacking the idea of bitcoin being based on illegal transactions, the author uses math done by Dan Davies, a bank analyst at Frontline Analysts in London, to assume that all drug dealing moves online, so as to get to $571 per bitcoin. The argument adds that drug dealers might put up with bitcoin’s current problems – which I addressed above – as laundering dollars is harder and more expensive than transacting in bitcoin.

Given that various studies already clarified that criminals aren’t using bitcoin that much, the value would be much lower, according to WSJ’s article. As such, the author concludes that bitcoin’s current price, of nearly $4,000, is mostly speculation and that JP Morgan’s Jamie Dimon was right to compare it to the 17th-century Dutch tulip bubble.

Basing the cryptocurrency on illegal activity neglects that hundreds, if not thousands, of legitimate businesses already accept bitcoin, so much so that it’s possible to live on bitcoin. Plus, the cryptocurrency is mostly used for legitimate purposes by those who simply want to be in charge of their own money, not those who have something to hide.

 

Bitcoin as Digital Gold

WSJ’s article goes on to imply that bitcoin’s true believers cling to the idea of it being digital gold that will maintain its value if a government currency collapses, and that this idea is supported by history’s examples of it happening.

The article points out that gold has had thousands of years and a history of being used to back fiat money to support its current position. Bitcoin has had less than a decade to prove its worth and most people just only heard of it. A recent study by YouGov revealed that 34% of Americans never even heard of bitcoin, and that 29% thought the cryptocurrency was just used to purchase illegal goods or services.

Still, bitcoin’s potential to replace gold led to a $5,500 price per coin, switching Thomson Reuters GFMS’ estimate of 2,155 metric tons of gold held in exchange-traded funds to the cryptocurrency. If bitcoin was to completely replace gold coins and bars, given GFMS’ supply estimate of 24,000 metric tons bought for investment in the past half-century, we would get $61,000 per coin.

Finally, the author states that bitcoin’s volatility can somewhat be explained by it either succeeding or failing in completely displacing gold, implying that the cryptocurrency is either extremely precious, or worthless. The article reads:

“Based on the simple choice between total success and failure, we can very roughly say that bitcoin at 70% of the gold ETF-derived price suggests a 70% of displacing so-called paper gold as society’s chosen emergency store of value, and a 6% chance of displacing physical gold. Even digital dreams should accept that is far too high.”

At the end of the day, bitcoin’s value, just like the value of other cryptocurrencies, depends on its users as it is the first free market backed currency, and its growth is consistent with its userbase increase. A quick look at Google Trends shows us that interested in the cryptocurrency is still surging.

At the end of the day WSJ’s article is just one more to add to the bitcoin obituary list.

 

Author: Francisco Memoria on 20/09/2017

Posted By David Ogden Entrepreneur
David Ogden Cryptocurrency Entrepreneur

Alan Zibluk Markethive Founding Member

Bitcoin Price Technical Analysis for 19th September – Can Bulls Keep It Up

Bitcoin Price Technical Analysis for 09/19/2017 – Can Bulls Keep It Up

Bitcoin Price Technical Analysis for 09/19/2017 – Can Bulls Keep It Up

Bitcoin price seems to have completed a large correction and is ready to resume its long-term uptrend.

 

Bitcoin Price Key Highlights

  • Bitcoin price has bounced off a long-term area of interest after its recent sharp drop, signaling that the uptrend could still resume.
  • Applying the Fib extension tool on this major correction could indicate how high bulls could take bitcoin from here.
  • Technical indicators on the daily time frame also suggest that the long-term climb could carry on.

Bitcoin price seems to have completed a large correction and is ready to resume its long-term uptrend.

 

Technical Indicators Signals

The 100 SMA is above the longer-term 200 SMA on the daily chart, signaling that the path of least resistance is to the upside. The gap is also gradually widening to reflect strengthening bullish momentum. Also, the 100 SMA has recently held as dynamic support as it lined up with the rising trend line connecting the lows since April.

Stochastic has pulled up from the oversold region to show that buyers are regaining control of bitcoin price action. RSI is also turning higher and appears to be heading north so bitcoin could follow suit.

The next potential resistance is at the 38.2% extension just past the $4000 major psychological barrier. The 50% extension is at $4637, the 61.8% extension at the $5000 handle close to the record highs, and the 76.4% extension at $5464. The full extension is around the $6200 level.

Bitcoin 19th September

Market Factors

Chinese regulators have confirmed that they are stepping up their efforts to crack down on the cryptocurrency, following rumors that authorities are already shutting down exchanges in the country. However, investors seem to have moved on from this news as other markets like Japan and South Korea are taking majority of the market share and activity.

Meanwhile, the US dollar is giving up some ground to bitcoin price ahead of the FOMC decision, during which the central bank would likely keep rates on hold and downgrade growth forecasts on account of the recent hurricanes. A press conference will also follow and Yellen’s responses will be scrutinized as traders hunt for clues on December tightening.

Author Sarah Jenn on 4:23 am September 19, 2017

Time to ride the tiger

Posted by David Ogden Entrepreneur
David Ogden Cryptocurrency Entrepreneur

Alan Zibluk Markethive Founding Member

Bitcoin Price Technical Analysis for 09/18/2017 – Chance to Short?

Bitcoin Price Technical Analysis for 09/18/2017 – Chance to Short?

Bitcoin Price Technical Analysis for 09/18/2017 – Chance to Short?

Bitcoin price is making a correction from its recent selloff, but it might be ready to resume the drop soon.

Bitcoin Price Key Highlights

  • Bitcoin price has been selling off in the past few days on reports that China has officially confirmed it would be shutting down exchanges.
  • A bearish channel can be seen on the 1-hour time frame and it’s currently showing a pullback opportunity.
  • Price is stalling at the top of the channel resistance but a higher pullback to the $4000 area of interest might be possible.
  • Bitcoin price is making a correction from its recent selloff, but it might be ready to resume the drop soon.

Technical Indicators Signals

The 100 SMA is below the longer-term 200 SMA on this time frame, so the path of least resistance is to the downside. The 200 SMA dynamic resistance lines up with the channel resistance around $3850 and the 61.8% Fibonacci retracement level, adding to its strength as a ceiling.

However, there’s also another area of interest located at the $4000 psychological level, which held as support in the past. This could serve as the line in the sand for this correction and a break past the level could indicate that buying pressure is back in the game.

Stochastic is still pointing up so there’s some bullish momentum left. RSI is also heading north so bitcoin price might follow suit. If the selloff resumes, bitcoin could drop to the swing low near $3000 or form new ones closer to the channel support at $2800.

Bitcoin Price Technical Analysis for 09/18/2017 – Chance to Short?

Market Factors

News that BTC China would be halting trading for its clients by the end of the month pretty much sealed the deal for speculations that the world’s largest bitcoin market would see a large drop in activity. Liquidation has been taking place for the most part of the previous week and this would likely carry on in the coming days.

As for the dollar, the focus has been on tax reform, which has been bullish for the fiat currency. Easing fears of a North Korea missile strike have also weighed on bitcoin price as this is often treated as digital gold during risk-off days. Meanwhile, the upcoming FOMC decision could still be a risk factor for BTCUSD as downbeat remarks could lead to a selloff for the dollar.
 

4:26 am September 18, 2017

Author Sarah Jenn

 

Posted by David Ogden Entrepreneur

David Ogden Cryptocurrency Entrepreneur

Alan Zibluk Markethive Founding Member

$11 Billion – 24-Hour Cryptocurrency Trading Volume Hits New Record

$11 Billion - 24-Hour Cryptocurrency Trading Volume Hits New Record

$11 Billion – 24-Hour Cryptocurrency Trading Volume Hits New Record

Cryptocurrency trading volume reached a new milestone on Friday, crossing $11 billion for the first time amid regulatory uncertainty in China.

Crypto Markets Post Record Volume

According to data obtained from CoinMarketCap, the combined 24-hour trading volume of all cryptocurrencies rose to $11.5 billion shortly after 16:00 UTC. The only other time daily trading volume has surpassed $10 billion was on August 19, when it briefly spiked to $10.5 billion


Cryptocurrency Trading Volume & Market Cap Chart from CoinMarketCap

Bitcoin topped the charts with $4.2 billion in volume, while ethereum and litecoin posted $1.9 billion and $1.5 billion, respectively. In all, 10 different currencies posted volume greater than $100 million.

$11 Billion - 24-Hour Cryptocurrency Trading Volume Hits New Record
Chart from CoinMarketCap

Bithumb and Bitfinex each handled about $1.5 billion in trades while Chinese bitcoin exchange OKCoin accounted for $750 million. Altogether, at least seven exchanges, including GDAX, Bittrex, Poloniex, and Huobi surpassed the $500 million mark (Volume had tapered off a bit by the time of writing, so it is possible Kraken and Coinone crossed $500 million earlier in the day).

Friday’s trading volume surge was caused by market volatility stemming from China’s crackdown on bitcoin exchanges. Yesterday, the markets crashed following reports that a bitcoin exchange ban was “certain” and BTCC’s subsequent announcement that it would shut down all trading services at the end of September. The markets continued to plunge Friday morning as Huobi and OKCoin were rumored to be meeting with regulators and two smaller exchanges–Yunbi and ViaBTC–also announced September closures.

However, later in the day OKCoin and Huobi issued concurrent statements that suggested they might continue providing cryptocurrency-to-cryptocurrency trading services. Both exchanges announced that they would close CNY trading pairs on October 31, but–unlike BTCC, Yunbi, and ViaBTC–they did not announce the suspension of “all trading.” Moreover, they indicated that they “expect to continue to provide Chinese users with [compliant] digital asset services.”

These announcements led to an immediate rally, and trading volume soared to a record level as the markets climbed back to $120 billion after dipping below $100 billion earlier in the day.

 

Author: Josiah Wilmoth on 15/09/2017

 

Posted by David Ogden Entrepreneur
David Ogden Cryptocurrency Entrepreneur

Alan Zibluk Markethive Founding Member

Bitcoin Finds Bottom at $4,000 as Price Awaits Post-China Breakou

Bitcoin Finds Bottom at $4,000 as Price Awaits Post-China Breakout

The bitcoin-US dollar exchange rate (BTC/USD) may have climbed back above $4,000, but it might be ready to push higher even though China uncertainty reigns supreme.

Following reports the country's regulators may be seeking to shut down domestic bitcoin exchanges, the bitcoin price fell to a low of $3,977 on the CoinDesk Bitcoin Price Index (BPI) this weekend. The rumor comes a week after the People's Bank of China (PBOC) banned initial coin offerings (ICO), suddenly outlawing the practice of creating and selling cryptocurrency to investors to finance startup projects.

The confusion about what might lie ahead cut short bitcoin's ascent on Friday following a repeated technical failure around $4,650 levels, and the subsequent sell-off was exacerbated by the bearish news out of China.

So far, Bloomberg and the Wall street Journal are out with the reports today, suggesting the ban will be limited to exchange-based trading and will not affect over-the-counter transactions.

Further, wires are reporting that the price of bitcoin could drop below $4,000 if China bans trading on continuous order books of the larger exchanges. China's biggest exchanges and traders across the globe are still waiting for official confirmation.

Investors aren't buying it

All in all, it's no wonder the trading is subdued this Monday morning.

However, bitcoin has been successful in defending the psychological support of $4,000 – meaning price action indicates investors do not think China would shut down bitcoin exchanges, or that if they did, it would only have a limited impact.

Furthermore, it appears any ban on exchange-based cryptocurrency trades will not extend to over-the-counter (OTC) transactions, meaning markets could still move.

As per Wall Street Journal, "A ban on crypto exchanges won't mean the end of trading in digital currencies."

No news is good news

It's been 72 hours since the news of a China exchange ban broke out, and we are yet to hear official confirmation or denial. The broader market sentiment remains positive, hence, no news (official confirmation or denial) will be taken as good news.

Thus, investors may start snapping up bitcoins at current levels, although in such a case the digital currency would take a big hit if China, following a prolonged silence, suddenly confirms the ban.

Daily chart

Bears may be salivating at the idea of a big sell-off following the breach of the rising trend line, although, what we have now is a symmetrical triangle pattern.

The symmetrical triangle, which can also be referred to as a coil, usually forms during a trend as a continuation pattern. The pattern contains at least two lower highs and two higher lows. Prices typically breakout in the direction of the prior trend, i.e. in BTC's case, an upside breakout will signal resumption of the rally from the June 16 low of $1,826.

One may feel tempted to bet on the direction of the breakout, however, it may be advisable to stay on the sidelines and only trade the breakout.

One reason is that the 5-day moving average and the 10-DMA moving average are now capping the upside in bitcoin. The 14-day RSI is dangerously close to being bearish.

  • A downside break [an end of the day close below the symmetrical triangle floor] would mean bitcoin has made a near-term top at $5,000. The subsequent move lower could be extended to $3,164 (200-day moving average).

  • A bullish move is seen gathering pace following a break above $4,500. The level marks the confluence of the rising trend line resistance and symmetrical triangle resistance. Fresh record highs could be seen if prices break above $4,500.

 

Author: Sep 11, 2017 at 16:00 UTC by Omkar Godbole

 

Posted By David Ogden Entrepreneur
David ogden Cryptocurrency Entrepreneur

Alan Zibluk Markethive Founding Member

China Is Said to Ban Bitcoin Exchanges While Allowing OTC Trades

China Is Said to Ban Bitcoin Exchanges While Allowing OTC Trades

China Is Said to Ban Bitcoin Exchanges While Allowing OTC Trades

  • Order comes amid a broader clampdown on financial risk
  • China is home to nearly a quarter of world’s bitcoin trades

China plans to ban trading of bitcoin and other virtual currencies on domestic exchanges, dealing another blow to the $150 billion cryptocurrency market after the country outlawed initial coin offerings last week.

The ban will only apply to trading of cryptocurrencies on exchanges, according to people familiar with the matter, who asked not to be named because the information is private. Authorities don’t have plans to stop over-the-counter trading of virtual currencies, the people said. China’s central bank said it couldn’t immediately comment.

Bitcoin slumped on Friday after Caixin magazine reported China’s plans, capping the virtual currency’s biggest weekly retreat in nearly two months. The country accounts for about 23 percent of bitcoin trades and is also home to many of the world’s biggest bitcoin miners, who confirm transactions in the digital currency.

“Trading volume would definitely shrink,” said Zhou Shuoji, Beijing-based founding partner at FBG Capital, which invests in cryptocurrencies. “Old users will definitely still trade, but the entry threshold for new users is now very high. This will definitely slow the development of cryptocurrencies in China.”

While Beijing’s motivation for the exchange ban is unclear, it comes amid a clampdown on financial risk in the run-up to a key Communist Party leadership reshuffle next month. Bitcoin has jumped about 600 percent in dollar terms over the past year, part of a broad surge in virtual currencies that has fueled concerns of a bubble. The People’s Bank of China has done trial runs of its own prototype cryptocurrency, taking it a step closer to being the first major central bank to issue digital money.

“There has been a general tightening of the screw on regulating financial and monetary conditions,” said Mark McFarland, chief economist at Union Bancaire Privee SA HK in Hong Kong. “All of these things suggest a longer term process of tightening scrutiny of activities that aren’t in the normal sort of monetary realm.”

China Is Said to Ban Bitcoin Exchanges While Allowing OTC Trades

OKCoin, BTC China and Huobi, the country’s three biggest bitcoin exchanges, said on Monday that they hadn’t received any regulatory notices concerning bans on cryptocurrency trading. All three venues reported transactions on Monday, with bitcoin rising 6.3 percent on OKCoin as of 11:56 a.m. local time.

While bitcoin users will still be able to trade cryptocurrencies in China without exchanges, the process is likely to be slower and come with increased credit risk, analysts said.

The exchange ban is unlikely to have a major impact on the prices of cryptocurrencies because venues outside China will continue trading, according to FBG Capital’s Zhou. The country’s role in the bitcoin market had already started shrinking in recent months as authorities tightened regulation. At one point, exchanges in the country accounted for more than 90 percent of the world’s bitcoin transactions.

The bigger risk for global bitcoin traders may be the massive rally in prices, according to McFarland.

“Whenever you start to hear about Hong Kong taxi drivers becoming millionaires from buying bitcoin, you start to think this is not necessarily driven by fundamentals,” he said. “So you will get quite substantial pullbacks at some point.”

 

Bloomberg News
11 September 2017, 05:36 BST
— With assistance by Steven Yang, Gary Gao, Yinan Zhao, Yuji Nakamura, Lulu Yilun Chen, Justina Lee, and Eric Lam

 

Posted by David Ogden Entrepreneur

David Ogden Cryptocurrency Entrepreneur

Alan Zibluk Markethive Founding Member

Bitcoin Price Sinks Below $4,200 on China Uncertainty

Bitcoin Price Sinks Below $4,200 on China Uncertainty

Bitcoin Price Sinks Below $4,200 on China Uncertainty

Markets for bitcoin and other cryptocurrencies have fallen over the course of the day, following contested reports that regulators in China are looking to shut down the country's exchange ecosystem.

CoinDesk's Bitcoin Price Index (BPI) is currently at about $4,184, representing a nearly 10 percent decline since the start of the day's trading. Markets peaked today at $4,698.73, per the BPI, though prices began to tumble around 13:20 UTC.

Additional data from CoinMarketCap reveals that – perhaps unsurprisingly – China's top bitcoin exchanges are reporting some of the steepest price declines. The BTC/CNY market on OKCoin is at $3,650.71, while Huobi and BTCC are reporting prices of $3,657.84 and $3,656.57, respectively, at press time.

Other major bitcoin exchanges, including Bitfinex and Bistamp, are reporting current prices above the $4,100 level, according to data from BitcoinWisdom.

As reported earlier today, Chinese news source Caixin, citing unnamed sources, said that regulators are looking to shut down the exchanges. That decision, the newspaper claimed, has already been made and disseminated to other sources. Yet in the wake of that story, exchanges in China said they haven't receive any notices from the Chinese government, casting doubt on the veracity of the Caixin report.

Amidst the uncertainty, other cryptocurrency markets have seen notable declines as well. Ether prices are down more than 10 percent today, trading at around $295.93. Broad market declines have pushed the collective cryptocurrency market capitalization below $150 billion, after spending several days above the $160 billion level.

 

Sep 8, 2017 at 22:58 UTC by Stan Higgins

 

Posted By David Ogden Entrepreneur

David Ogden Cryptocurrency Entrepreneur

 

Alan Zibluk Markethive Founding Member

Bitcoin Breakout – Price Action Analysis Hints at Possible Pullback

Bitcoin Breakout - Price Action Analysis Hints at Possible Pullback

Bitcoin Breakout – Price Action Analysis Hints at Possible Pullback

The bitcoin price [BTC to US dollar exchange rate] fell to a two-week low of $3,900 on Tuesday, a market movement that represented the biggest decline for the asset since July.

Triggered by the sudden news from China that the country’s financial regulators would ban initial coin offerings, the decline has also called into question just how big the appetite is for a higher bitcoin price given its 700% year-over-year gains.

However, traders appear to be bullish on the idea it can rise back above $5,000, the all-time high it set last Friday. In fact, traders who missed the rally appear to be utilizing the dip to board the bitcoin freight train – over the last 48 hours, the digital currency has recovered more than 50% of the losses it suffered during the four day period from September 2–5.

At press time, the BTC traded at $4,620, according to the CoinDesk Bitcoin Price Index. Week-on-week, bitcoin is down 2.69%. On a monthly basis, the cryptocurrency is up 34.8%.

Still, while the sharp rally from the weekly low of $3,900 has triggered speculation bitcoin is aiming for the fresh record highs, technical studies say the recovery lacks substance.

Money Flow Index [MFI] does not support further gains

The Money Flow Index (MFI) is an oscillator that uses both price and volume to measure buying and selling pressure. (MFI indicates rising or falling prices always through its own rise or fall.) If the MFI rises above the centre line [50], this is regarded as a buy signal.

Similarly, an intersection going down is regarded as a sell signal.

Daily chart

Bitcoin Breakout - Price Action Analysis Hints at Possible Pullback

The MFI index is pointing downwards and shows no signs of life despite the sharp recovery from the weekly low of $3,900.

The weakness in the MFI could be an indication that the technical recovery lacks substance, i.e. lacks buying pressure and could have been fuelled by unwinding [profit taking] on the shorts.

4-Hour chart

Bitcoin Breakout - Price Action Analysis Hints at Possible Pullback

The MFI is close to overbought levels. Typically, an MFI above 80 is considered overbought and MFI below 20 is considered oversold. These levels are often used to identify unsustainable price extremes.

Overbought levels alone are not enough to turn bearish. However, in BTC’s case, the overbought MFI on the 4-hour chart could be read as a signal that the recovery from the low of $3,900 has ended. This is because, the daily MFI is bearish as discussed above.

Furthermore, the decline from the record high of $5,000 was triggered by a bearish price-RSI divergence. A bearish price RSI divergence is formed when prices form higher highs while the oscillator – in this case an RSI – forms significantly lower highs.)

As such, bitcoin’s outlook remains bearish unless we break above $5,000 as such a move would signal the bearish price RSI divergence is no longer valid.

View

Daily chart

Bitcoin Breakout - Price Action Analysis Hints at Possible Pullback

Bullish factors

  • The rising trend line is intact and is likely to offer support at $4,265

Bearish factors

  • As discussed above, the MFI is not in favor of further gains in bitcoin
  • Bearish price-RSI divergence
  • Potential head and shoulders pattern

BTC is more likely to break below $4,265, in which case a lower highs pattern would be confirmed. An uptrend, which is a series of higher highs and higher lows, reverses into a downtrend by changing into a series of lower highs and lower lows.

Lower lows would be confirmed if prices break below the recent low of $4,900.

Also note that a lower highs would increase the odds of the prices forming a head and shoulders [H&S] bearish reversal pattern. The Head and shoulders is a reversal pattern that, when formed, signals the security [in this case bitcoin] is likely to move against the previous trend.

The H&S neckline [line drawn from the left shoulder bottom and right shoulder bottom] support is seen at $3980 levels. A break below the neckline level confirms bullish-to-bearish trend reversal.

Bullish scenario

A break above $4,640 could result in a rally towards $5000, although caution is advised as only a move above $5,000 would make the bearish price-RSI divergence invalid and shall revive the rally set in motion from the July low of $1,826.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

Sep 7, 2017 at 14:20 UTC by Omkar Godbole

 

Posted By David Ogden Entrepreneur

David Ogden Cryptocurrency Entrepreneur

Alan Zibluk Markethive Founding Member

What you need to know about the latest Bitcoin boom

What you need to know about the latest Bitcoin boom

 

You may have noticed reports about Bitcoin’s value recently – its price is headed into the stratosphere.

The crypto-currency’s recent meteoric price rise over the summer has seen one Bitcoin go from being worth $1,500 in early May to more than $5,000 over the weekend, before dropping to $4,654 at the time of publication.

And that has got all kinds of people interested – people like Andrew Beckwith, a DJ who goes by the name Supersede. “I play restaurants, lounges, nightclubs, corporate events,” he says.

But he also invests. Beckwith has just taken his first step into the world of crypto-currencies, having converted $100 into Bitcoin.

“I don’t know how far it’s going to grow,” he explains, “but if something is growing at hundreds of per cent, that’s a pretty valuable return.”

Bitcoin is notorious for its volatility, but the recent peaks are unprecedented. In late 2013 its value jumped from around $100 to $1,000 – a bigger percentage increase – but it is worth more than four times that today.

“Recently there’s been a lot more talk in the media and others have been investing,” explains Kiran Varughese, another amateur investor, who works for an elevator company in Dubai.


The notoriously volatile crypto-currency has been making headlines with its skyrocketing value, but some believe it’s a bubble driven by speculation (Credit: Getty Images)

A friend’s experiments with Bitcoin piqued his curiosity so he clubbed together with another pal to invest $1,000 in August. If they lose it, he says they won’t be too worried – the potential for a big return within the next few years is too tantalising for Varughese to resist.

But are investors like Varughese and Beckwith taking too much of a risk by buying into Bitcoin, and other crypto-currencies like Ethereum, Litecoin or Dash? Is there something about these digital currencies that underpins their soaring prices or are they simply subject to whims in the market that can make fortunes but also devastate them?

While the market capitalisation of all crypto-currencies now stands at $150 billion, they still occupy a strange space in the world of finance.

“Every year Bitcoin continues to exist is something to take note of,” says Garrick Hileman, a research fellow at the Cambridge Centre for Alternative Finance at the University of Cambridge. “It’s a significant achievement for Bitcoin to have survived the many setbacks and challenges that it has faced.”

One of these challenges occurred recently when Bitcoin split in two. It happened after the Bitcoin community became divided over how to allow more transactions to be processed with the currency. Because Bitcoin has no over-arching authority that controls it, any decision to alter the system that underpins it needed to gather enough support from Bitcoin users to go ahead. The system itself is called the blockchain – a huge digital ledger that records every single Bitcoin transaction in history.


Mining Bitcoin takes time and computer processing power, so it’s often done in massive farms such as this converted warehouse in Moscow, Russia (Credit: Getty Images)

As computers on the Bitcoin network verify transactions, “blocks” of data are added to the ledger, storing this information. Computers that do this work receive a small sum of bitcoins as a reward – this is the process known as mining. Every single computer on the network has a copy of the blockchain and their copy of it is constantly updated.

But until recently, Bitcoin blocks were limited in size to a megabyte every 10 minutes, meaning that the rate at which the blockchain could grow was capped. In early August, a new version of the crypto-currency – Bitcoin Cash – was mined for the first time. Its blocks can be up to eight megabytes in size.

Some believe the smooth transition through this “fork” without any technical disasters has contributed to renewed confidence in Bitcoin, in turn helping to pump the price up. One “coin” of Bitcoin Cash is worth less, around $630 today, but that’s up $200 since its inception a month ago.

Another fork to upgrade the block size further is expected in November and if successful, it might have a similar impact on Bitcoin’s buoyant price.

But “currencies” like Bitcoin aren’t really playing the role of a traditional currency at the moment, says Vili Lehdonvirta, an economic sociologist at the Oxford Internet Institute, which is part of the University of Oxford.

“When I called up a restaurant in Helsinki earlier this year to ask if they accept Bitcoin, the response was that they tried it a few years ago, nobody ever used it, and thus they no longer accept it,” he explains.


Most retailers don’t accept the crypto-currency (Credit: Getty Images)

BBC Capital contacted 10 businesses in London that have advertised an ability to accept Bitcoin in the past. Four of them said they had stopped accepting and two that did accept them reported hardly ever processing such payments.

Instead, it appears many people are simply speculating on Bitcoin – investing in what is a relatively high-risk asset in the hope of a short-term gain in profit. But lucrative outcomes are by no means guaranteed – and many still think that Bitcoin is just a bubble.

In the short-term there may be various reasons why people are buying in while the price is buoyant. Some may like investing in a currency unconnected to nation states, suggests Hileman. It could be seen as good insulation against uncertain political developments that can cause traditional currencies to plummet dramatically – as happened to the British pound in the aftermath of the Brexit vote. Volatile international disputes, such as those involving North Korea, could be driving people to put their money elsewhere.


The pound dropped sharply after Brexit – since Bitcoin is not tied to any one nation-state, it’s less affected by large political events (Credit: Getty Images)

“If you’re in South Korea and you’re concerned about a geopolitical event, do you trade in the US dollar?” asks Hileman. “Maybe that’s not a great idea because the US will be involved, as will China and Japan, so it’s not surprising to see people look for alternative currencies,” he says.

Applied cryptography consultant and Bitcoin-watcher Peter Todd says some are also attracted by Bitcoin’s independence for broader political reasons, too.

In an uncertain world, people’s financial freedom is sometimes limited by their governments. Take India, which recently tried to curb public investments in gold as this was harming the nation’s economy. Bitcoin is a global entity, no one government can fiddle with it – although there are countries where trading it is illegal.

Still, crypto-currencies remain associated with plenty of risks that go beyond their volatility. Many people store their bitcoins in online exchanges and should these be hacked or go bust, which has happened more than once, then the money is often lost forever.

With all the technical ups and downs of crypto-currencies – their changes and potential to split into new currencies for example – there is also a significant degree of complexity that can leave less informed investors bewildered.


MtGox, a Bitcoin exchange based in Tokyo, collapsed after losing nearly $500m in Bitcoin to what it says was a hack attack (Credit: Getty Images)

A new area of excitement, known as initial coin offerings (ICOs), are also beginning to worry some experts. ICOs allow owners of crypto-currencies to invest in fledgling companies, with many using Ethereum as their digital coin of choice. However, ICOs have already been associated with a number of scams and hacks, and China just banned them, calling ICOs 'illegal fundraising'.

“I think the main thing we’re seeing in ICOs is straight-up fraud,” says Todd. He is concerned about efforts by regulators to clamp down on this because such an approach could backfire and encourage scammers to become more sophisticated.

“It’s when things look legit that they get dangerous,” he says, pointing out that a few years ago Bitcoin and other digital tokens had more of a “Wild West” feel to them, which perhaps meant people were less likely to be duped since scams were crude and easy to spot. As more and more investors get involved in crypto-currencies, scams can get slicker and the natural wariness that can keep people cautious may also diminish.

Bitcoin and other crypto-currencies are gradually cementing their stated position – providing a radical new alternative to the investment options that existed before them. But there is no certainty as to how this massive experiment will play out. Though when did that ever stop hopeful investors taking a punt?

 

By Chris Baraniuk
7 September 2017

This story was produced under the BBC's guidelines for financial journalism. A full version of those guidelines can be found at bbc.co.uk/guidelines.

 

Posted by David Ogden Entrepreneur

Alan Zibluk Markethive Founding Member

Bitcoin’s Golden Future

Bitcoin Golden Future

Bitcoin's Golden Future

Could bitcoin be the next gold?The idea has a lot of intuitive appeal. Gold bugs and bitcoin fetishists tend to share a deep distrust of fiat currency and the nation state, an impregnable bullishness about their favored asset class, and an obsessive attention to details of market movements combined with a blithe disinterest in bigger-picture issues.The idea has become particularly popular as the value invested in bitcoin and other cryptocurrencies has marched upward over the past year. Even after this week's selloff, prompted by China declaring initial coin offerings illegal, the value of all cryptocurrencies in circulation is around $155 billion, according to Coinmarketcap.com.

That may sound small compared to the $7.8 trillion notional value of the world's 187,200 metric tons of gold. At the same time, it's already about a tenth the value of the 40,000 tons of yellow metal used for investment as bullion bars and coins, and has overtaken the amount held in gold exchange-traded funds. At more than $78 billion, Bitcoin alone isn't far from overtaking the $90 billion-odd invested in all gold ETFs.There are two main reasons to doubt bitcoin's viability as an investment. One is an engineering issue: Its creaky infrastructure is likely to be a turn-off for all but the hobbyist fringe. Another is more philosophical: Digital currencies have no fundamental value, so have no place in a portfolio.Both objections are weaker than you might think.Take infrastructure. It's certainly true that bitcoin's operations are surprisingly clunky. Just confirming a single transaction typically takes more than an hour or longer — it briefly took more than a day at one point last month, according to software company Blockchain.info.
Having said that, financial markets are generally built on similar Rube Goldberg foundations. It's comically difficult for ordinary investors to buy an actual barrel of crude oil, as Tracy Alloway of Bloomberg News found out a few years back. The economist John Maynard Keynes, according to one possibly apocryphal story, once measured up the storage capacity of the chapel of King's College, Cambridge after coming perilously close to having to take delivery of a month's worth of the U.K.'s wheat supply. Completing transactions in the real world is often so clunky that some banks are already exploring using, um, blockchains instead.What makes markets investable for the most part is not their physical foundations, but the superstructure of derivatives contracts, exchanges and clearing houses built on top.To date, the world of bitcoin exchanges has been the wild west. When Mt. Gox filed for bankruptcy in 2014, it said it had lost 850,000 coins worth more than $450 million. Another $70 million-odd was stolen in a hack of Bitfinex last year. The likes of Deribit and Bitmex have been offering bitcoin futures and options for some time, but major institutional investors are only going to participate if they think the clearing and settlement process is rock-solid and the exchange itself reliably solvent.Change on that front is imminent. The Chicago Board Options Exchange is planning to start offering cash-settled bitcoin futures by next April, CNBC reported last week. Trading platform LedgerX LLC last month won regulatory approval from the U.S. Commodity Futures Trading Commission to act as a clearing house for derivatives settled in digital currencies. The ability to short or take leveraged positions in digital currencies could open them to a far wider array of investors.

What, though, is the value of a digital currency? It's a fair question, but one that could equally be leveled at gold. Since Richard Nixon ended the fixed $35 an ounce convertibility of gold in 1971, its value has risen at times (the 1970s, the 2000s) and fallen at others. The best argument to justify investing in gold these days is not that it's an eternal "store of value" but that its very weirdness makes it special: According to modern portfolio theory, you should buy the shiny stuff not for its superior investment returns, but because it doesn't correlate much to other asset classes such as stocks, bonds and commodities.

However, while gold did exhibit weak or negative correlations to returns on the S&P 500 for much of the 1980s and early 1990s, it's been positively correlated for extended periods since then. During gold's 2012 run-up, the two moved more or less in tandem. If gold deserves investment dollars because its inconsistent correlation with equities helps diversify portfolios, the same argument can be made for bitcoin, too.Digital currencies may be as vulgar as the original barbarous relic, but neither is going away any time soon. If that makes investors in both look less like seers and more like problem gamblers betting on where a fly will land — well, welcome to financial markets.

 

Author: David Fickling

 

Posted By David Ogden Entrepreneuer

David Ogden Cryptocurrency Entrepreneur

Alan Zibluk Markethive Founding Member