Blockchain / Cryptocurrencies
Biggest bubble or Biggest opportunity

5 Bitcoin lessons for every investor / Price Analysis / Rising tide floating all boats

Burgess COMMENTARY

Peter Burgess

5 Bitcoin lessons for every investor

Bitcoin Investing Opinion

Whatever you think of bitcoin and crypto currencies, there is plenty to learn from their ascent, even if it is still a small part of the global financial system. Forget the noise of “Biggest bubble ever” – the market cap of the NASDAQ was $3.7 trillion in 1999 and fell 70% (a total of $2.6 trillion) by 2002. That puts the total of $500 billion in all crypto currencies outstanding into the correct context.

Still, even if you are in the “Bitcoin Bubble” camp, don’t let that blind you to the lessons of what has happened in the past few years. It is tempting – but wrong – to simply dismiss a 5-digit bitcoin price as the illogical mania of crowds.

Here is a list of 5 instructional points where bitcoin has a bigger story to tell.

#1 Decentralized technology – where no one is “in charge” – can both create and hold trust. Recall that bitcoin launched in January 2009, in the depths of the Financial Crisis. US stocks would not bottom until March of that year, and at the time no one knew how – or if – the global financial system would survive. That sounds like hyperbole now; it wasn’t then.

Combine that vacuum of faith with the growth of mobile technology and high-speed Internet around the world, and bitcoin was at the right place at the right time. Early adopters were a mélange of libertarians and tech nerds, each of whom saw their own reflection in the bitcoin mirror.

Bitcoin’s rise from there is similar to any FANG-y stock story. Global adoption of new technologies led to Facebook’s dominance in social, Google’s in search, and Apple’s in hardware/software. What is different with bitcoin is that it has no CEO, no board, and no proprietary physical assets. But that has proven to be a feature, not a bug. No one “needs” to be in charge … and that’s new and notable.

#2 Get out of your head. One thing I have noticed about bitcoin’s most vocal naysayers: They are almost all wealthy westerners. They cannot imagine why the world needs a crypto currency backed by nothing but computer code and the faith of the masses. For them, steeped in the status quo, it simply makes no sense.

Personal story here: My parents fled the Cuban Revolution in 1960 with $200 and a suitcase. They weren’t allowed to take anything else, or transfer funds overseas. They arrived in New York with no place to live and no work. My mom didn’t speak English.

Step outside the safe confines of western democracies, and my parents’ history is a relevant and cautionary tale. Similar stories happen every day, across multiple continents. Of course, there is intrinsic value in a decentralized store of value that governments cannot control or confiscate. To think otherwise is myopic.

#3 Have a Little Faith. Bitcoin and other crypto currencies are notoriously volatile, but few investors/traders seem to care. There is even a self-identifying moniker in crypto circles – HODLers (Hold On For Dear Life) – that captures this sentiment. Don’t sell on any dip, and add to your position if you can.

This confidence comes from a deep-seated faith, and it is something that equity investors in particular can learn from. A wise reader once told me, “The lows for US stocks in 2009 weren’t caused by people giving up on stocks – they were caused by people giving up on America.”

You’d think that after +70 years of consistent long-term value creation, US equities wouldn’t have to prove time and again that they are money-making investments, and America is a safe country in which to invest. Bitcoin’s rise shows such faith is possible; equities – and the US – have the track record to merit the same level of confidence.

#4 You never know where you will find the next Big Idea. We started looking at bitcoin in 2013 after reading about it on Zerohedge. Learning more meant studying the structure and uses of the Dark Web, boning up on computer-driven cryptography, and plowing through fringy tech websites.

In contrast, no large investment bank bothered with bitcoin. Financial news sites gave it a passing look when drug dealing website Silk Road was a thing, and when Japanese exchange Mt. Gox imploded.

Basically, the entire world missed the story. Too weird, too sketchy, too geeky, too ... strange. And in that is an important lesson: You need to go off the standard intellectual grid to make outsized returns. Some will pan out, and others won’t. But without any exposure, your returns are guaranteed to be zero.

#5 Imagination. There is an old Hindu saying that goes something like this: “From a drop of water, you should be able to imagine ice, steam, glaciers, rain, oceans, and waterfalls.”

Think back to when Amazon just sold books – its “Drop of water.” A few farsighted individuals could imagine everything that would come next. But not many. And certainly, none of its competition had an inkling until it was too late.

Regardless of where crypto currency prices go, remember the water drop. The use cases so far have varied, from the illegal to the sketchy to the current popular trading craze.

All this is as powerful a cautionary tale as I can imagine. It echoes through the expansive challenge of equity investing even more than the narrow confines of crypto currencies. Technology writ large is a largely ungoverned force for societal change. It can engender high levels of trust very quickly, in the right framework.

What comes next for crypto currencies, we have no idea. But we know a drop of water when we see it.

We’ll close out with a quote from Bruce Lee, who in an alternative universe would have made a great investor: “You must be shapeless, formless, like water. When you pour water in a cup, it becomes the cup. When you pour water in a bottle, it becomes the bottle. … Water can drip, and it can crash. Become like water, my friend.”
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https://bravenewcoin.com/news/bitcoin-price-analysis-reversal-in-the-near-term/

Josh Olszewicz , 18 Dec 2017 - Bitcoin , Opinion , Price Analysis

Bitcoin (BTC) has continued to ratchet higher, rising 94% since December 1st, on continued institutional and retail interest. The market cap now stands at US$316 billion on US$6.1 billion in trading volume over the last 24 hours.


Bitcoin Price Analysis 18 Dec 2017 1

Hash rate and difficulty continue to make new highs, with hash rate nearing 15 exahashs per second. This far exceeds the estimated computational power required to simulate a human brain in real time. Difficulty, which is adjusted every 2016 blocks, has seen six double-digit percentage increases this year, with a seventh due in a few hours.


Bitcoin Price Analysis 18 Dec 2017 2

The hash rate boon in recent years has been directly related to the development of Application-Specific Integrated Circuits (ASICs) designed solely for mining cryptocurrencies. The most recent ASICs from Halong Mining, which have quickly sold out, promise 16TH/s of computing power per rig. These rigs are connected in mass in large warehouses all across the world, often where electricity is cheap and/or subsidized.

The largest concentration of mining is in China, although this may change abruptly with regulatory oversight. Venezuela also has a large mining community, thanks to political unrest and cheap electricity. In the United States, Louisiana and Washington State are the cheapest places to mine based on electricity costs, with Hawaii and Alaska being the most expensive.


Bitcoin Price Analysis 18 Dec 2017 3

If Bitcoin miners were a country, they’d rank 60th in the world in terms of electricity consumption, between Belarus and Bulgaria. One estimate by Digieconomist suggests that Bitcoin mining will consume the entire global energy output by 2020, if the pace continues at the current rate. This global footprint has been under fire recently as awareness of Bitcoin grows.

Peter Van Valkenburg of CoinCenter, a non-profit research and advocacy center focused on the public policy issues facing cryptocurrency in Washington D.C., has argued that instead of destroying the planet, Bitcoin will push the energy market towards more sustainable alternatives, driving an energy revolution. Mining in Canada and Iceland currently use hydro and geothermal power, while wind and solar are among the cheapest energy sources currently available. Bitcoin advocate Andreas Antonopoulos also shares this view and expresses concern for the hidden resource needs in other payment platforms.

Despite the increasing hash rate, difficulty adjustments create relatively steady block times, around 10 minutes per block, based on the Bitcoin protocol. This keeps block rewards and transaction confirmations relatively steady as well.

As transactions per day increase, recently hitting a high of 490,000, the block size limit is reached and real estate in the block size becomes more and more scarce, hence increasing transaction fees. While fees in USD terms continue to increase, fees in BTC terms have remained relatively steady.


Bitcoin Price Analysis 18 Dec 2017 4
Bitcoin Price Analysis 18 Dec 2017 5

SegWit has allowed for an effective increase in the block size limit by decreasing the size of each SegWit transaction. Hardware and software wallets, along with smaller companies who use Bitcoin transactions, have led SegWit adoption. Larger companies in the space have dragged their feet despite being aware of SegWit, or supporting SegWit2x, for over a year. Coinbase and GDAX have announced that they will support SegWit addresses in 2018.


Bitcoin Price Analysis 18 Dec 2017 6 There are currently around 100,000 unconfirmed transactions, down from over 175,000 earlier this month. Although this looks dire, more than 50% of the current transactions in the mempool are attempting to pay a fee of .0038/byte. Leading up to December, most of the mempool was filled with essentially zero fee transactions.


Bitcoin Price Analysis 18 Dec 2017 7

While the blockchain continues to fill, tomorrow is the first full trading day of the Chicago Mercantile Exchange (CME) BTC futures product. The product is currently live, although with low liquidity. The CME facilitates trading in the largest portion of derivatives contracts in the world. The Chicago Board Options Exchange launched their cash-settled futures product on December 11th. The contract will be available on TD Ameritrade tomorrow.

BTC exchange traded volume has been led by the US dollar (USD), Japanese Yen (JPY), and Korean Won (KRW) pairs on Bitfinex, Coincheck, and Bithumb respectively. In addition to record traffic, GDAX, Bitfinex, BitMex, Bittrex, and Kraken have all reported continued and sustained DDoS attacks.


Bitcoin Price Analysis 18 Dec 2017 8

Global over-the-counter volume on LocalBitcoins reached new all time highs, in most of the countries with available data. This suggests that global on-ramping and awareness of BTC has never been higher.


Bitcoin Price Analysis 18 Dec 2017 9

Technical Analysis

The price of Bitcoin continues its upward ascent, flirting with US$20,000 on several exchanges. Based on the Pitchfork of the current trend, price is on track for US$30,000 in early January.

The Pitchfork is an indicator that projects a diagonal trend using three anchor points. The median line (red) represents the mean of the trend while the top and bottom zones represent overbought or oversold territory, respectively.


Bitcoin Price Analysis 18 Dec 2017 10

The Ichimoku Cloud on the daily chart indicates that all signals remain strongly bullish, with Kijun support around US$12,300. The last long entry signal, a bullish TK cross above Cloud on October 7th, has yielded a 328% move. A long exit signal would occur on a bearish TK recross.

The Cloud uses a moving-average-type system with dynamic support and resistance to make projections of key zones, as well as capturing 80% of any given trend. As long as the price remains above the Cloud, sentiment remains bullish. Price in the Cloud indicates a neutral trend, and below the Cloud indicates a bearish trend.

When the Tenkan (blue) is over the Kijun (red) sentiment is bullish, as shown below. When the Kijun is over the Tenkan sentiment is bearish. When the Lagging Span (dark green) is above the Cloud and current price sentiment is bullish, as shown below. When the Lagging Span is below the Cloud and current price sentiment is bearish.

The best entry signals when using this indicator occur when the trend is obvious, but 1 or 2 of the signals have yet to become confluent on a higher timeframe trend.


Bitcoin Price Analysis 18 Dec 2017 11

On the four hour chart, price has formed a rising wedge. This is typically a bearish reversal pattern, with a descending volume profile. There is also a growing bearish divergence on RSI and Volume, meaning price has continued to move up on less momentum.

While rising wedge has formed several times over the past year, on various timeframes, most of them have preceded bullish continuation and not a reversal. Resistance stands between US$20,000-$22,000 with support around US$14,850-$15,850.


Bitcoin Price Analysis 18 Dec 2017 12

On a wider timeframe, the one hour chart, Ichimoku Cloud signaled a long entry on December 15th with a Kumo breakout and bullish TK cross. At the time, price was also bound in a bullish continuation pattern, an ascending triangle.

The Cloud signal proved to be reliable, with a break of the ascending triangle horizontal resistance confirming a long trade entry. The chart pattern yields a 1.618 Fibonacci extension and measured move of US$21,000 and US$23,500 respectively.


Bitcoin Price Analysis 18 Dec 2017 13

Lastly, the OKEX quarterly futures rollover date begins in nine days, and continues throughout the remainder of the month. The rollover dates have been significant since 2015, with an alternating top/bottom price pattern between contract expirations. Based on this pattern, the top for the quarter will likely occur around December 17th.


Bitcoin Price Analysis 18 Dec 2017 14

Price is also the furthest from the 200EMA it has been during the entire trend, only adding to evidence that price is overbought and a support test will likely occur sooner rather than later.

Conclusion

Worldwide institutional and retail interest continues to grow unabated, perhaps stronger than ever, with many users reporting problems with exchange verification allowing them to trade or buy cryptocurrencies. All of the exchanges have reported record traffic over the past month.

Technicals suggest an immediate target of ~US$22,000 with a heavy reversal in the near-term based on previous cyclical moves since 2015.
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https://bravenewcoin.com/news/will-bitcoins-rising-tide-continue-to-float-all-boats/

Alex Lielacher , 17 Dec 2017 - Altcoin , Investment , Opinion

Since the announcement by the Chicago Mercantile Exchange (CME) to launch bitcoin futures contracts, the price of bitcoin has rallied by over 215 percent from $6,200 to over $19,800 in only six weeks. This rally was further fuelled when the U.S. CFTC approved the bitcoin futures contracts and the CBOE announced that it would follow suit and also offer bitcoin futures on its exchange. By receiving official approval from a major financial regulator, bitcoin has finally become accepted as an alternative asset class.

This has not only sparked more institutional investors interest in the digital currency but has also led private investors to jump on the opportunity to potentially generate above average returns by choosing to invest in bitcoin instead of stocks. Exploding private investor interest can be seen by the popular bitcoin wallet and exchange platform Coinbase temporarily becoming the most downloaded iOS app on the App Store surpassing downloads of apps such as Instagram, Facebook, and Snapchat.

While bitcoin holders are rejoicing about the incredible year-end rally that bitcoin is experiencing, many holders of alternative cryptocurrencies and digital tokens are positioning themselves to benefit from a possible altcoin rally off the back of bitcoin’s success — but should they be?

Will Altcoins benefit or suffer from Bitcoin futures?

2017 has been the year in which bitcoin finally become mainstream. However, it has also been the year in which the cryptocurrency market as a whole has moved into the public light. Thanks to bitcoin rallying, investors took notice of altcoins in Q1/2017, which led to an incredible altcoin rally that had its first peak in June.

This altcoin rally was also heavily fuelled by the boom in initial coin offerings and the popularity of many of its newly issued digital tokens as well as bitcoin investors’ desire to diversify into other cryptocurrencies. After the August 1 hard fork that created bitcoin cash, the focus of the cryptocurrency market briefly went back onto bitcoin while the altcoin market struggled to maintain its June all-time highs. By September, however, leading altcoins such as Dash (DASH), and litecoin (LTC), and monero (XMR) were able to surpass their June highs.

Since the CME and CBOE announcements to launch bitcoin futures, the entire crypto market received a massive boost. While bitcoin benefitted the most, all leading altcoins have managed to reach new all-time highs with ether (ETH) hitting $750, litecoin (LTC) hitting $300 and Dash (DASH) surpassing the $1,000 mark.

However, now that bitcoin has been officially sanctioned as an investment asset class will bitcoin’s performance decouple from the altcoin market for which there are no futures and no exchange-traded investment vehicles providing exposure to them? Bitcoin futures could affect altcoins in two ways. Bitcoin could become the dominant go-to digital asset for institutional investors, which would lead to a continuance of its impressive price rally and, thereby, attract more investors while altcoins struggle to receive the same attention.

To drill down a little — Institutional investors have specific investment constraints, which dictate what they can and cannot invest in. One of these constraints is that they can only invest in regulated securities. Hence, mutual funds and pension funds, for example, have found it near impossible to invest directly in bitcoin or other digital currencies. With the approval of bitcoin futures and the existence of other regulated bitcoin investment vehicles such as the bitcoin exchange-traded notes, institutional investors have been able to gain exposure to bitcoin.

This has, however, not been possible for ether or litecoin, for example, as there are no investment vehicles currently available for them. Hence, it could be argued that bitcoin may decouple from the altcoin market thanks to institutional investor money boosting its price.

However, it’s hard to envision bitcoin becoming the sole focus of future digital currency investment as the popularity of digital assets increases and the earning potential of altcoins become more apparent to investors. Indeed, investors could choose to take bitcoin futures as a stamp of approval for the entire crypto asset universe and start diversifying heavily into the most liquid altcoins directly.

While bitcoin will likely receive the most institutional investment in the coming months, it will likely only be a matter of time until we see ether or litecoin futures trading on exchanges. Furthermore, by approving bitcoin futures, it appears the doors may be opening again for the potential approval of a bitcoin ETF as both the VanEck and Rex ETFs, have refiled for SEC approval earlier this month.

'it is unlikely that the rest of the digital asset market will not be integrated with the global financial markets in the long run — as its potential for high returns is simply too alluring..'

Certainly, there is a business case for ETF providers to not only issue bitcoin ETFs but to also issue altcoin ETFs or a crypto asset ETF that includes a basket of the leading digital currencies. The potential inflows a digital currency could receive when an ETF is issued on it are substantial and it is hard to imagine that ETF issuers would give up on the opportunity of issuing a wide range of digital asset ETFs in the future if regulators allow them to do so.

Then, there are the hedge funds, which have no issue with investing directly in altcoins. In the past eleven months, for example, over 75 new digital currency-focused hedge funds have been launched to capitalize on the booming digital asset market. As these funds see more inflows from investors, the altcoin market will benefit greatly as hedge funds look for “the next bitcoin” to invest in.

While the ICO market has cooled down and most newly issued tokens have been underperforming bitcoin, leading altcoins have been rallying aggressively as the year is coming to a close. Due to their liquidity and historic performances, many of the leading altcoins found in the top 20 largest cryptocurrencies by market capitalization are well-positioned to attract new inflows as many investors believe that more money can be made in the altcoin market than in the quickly maturing bitcoin market.

Whether bitcoin will pull away from the rest of the digital asset market or not remains to be seen. In the near term, that’s definitely a possibility. However, it is unlikely that the rest of the digital asset market will not be integrated with the global financial markets in the long run — as its potential for high returns is simply too alluring.