Bitcoin Bounces Back Again - Beginning Of The End... Or Bump In The Road?

A crypto-Christmas miracle? Bitcoin is now unchanged from the pre-Friday bloodbath, having scrambled higher for the last 24-48 hours as much of the world enjoyed a day off.

 

The entire crypto space is rallying once again today but the question remains, is this another dead cat bounce on the way to "zero" or is Tom Lee, John McAfee, and Mike Novgratz right, this is a bump in the road to $40k and beyond...

 

As The Economic Collapse"s Michael Snyder notes, Bitcoin, Ethereum, Litecoin and other major cryptocurrencies have been on a wild ride this year, and over the past 10 days the volatility that we have witnessed in the marketplace has been absolutely breathtaking.  On December 17th, Bitcoin shot above $19,800 for a brief moment before it started plummeting dramatically.  At one point the price of Bitcoin dipped below $11,000, which represented close to a 45 percent decline from the record high that it had hit just five days earlier.  And Bitcoin was far from alone – virtually every other major cryptocurrency was also down between 25 and 50 percent during that five day period.  But now almost all of them are bouncing back, and at this moment the price of Bitcoin is $14,219.99.

So where do things go from here?

There are many that believe that in the short-term the price of Bitcoin will fall back toward the actual cost of production.  It has been estimated that the cost to produce a new Bitcoin is currently between three and four thousand dollars, and with the price of Bitcoin so high there is a tremendous incentive for Bitcoin miners to produce as many as possible right now.

But there are others that are convinced that Bitcoin could eventually go to zero…

Morgan Stanley analyst James Faucette and his team sent a research note to clients a few days ago suggesting that the real value of bitcoin might be … $0.

 

That’s zero dollars. (Bitcoin stood at around $14,400 at the time of writing.)

To back up his assessment, Faucette made the following arguments…

• Can Bitcoin be valued like a currency? No. There is no interest rate associated with Bitcoin.


• Like digital gold? Maybe. Does not have any intrinsic use like gold has in electronics or jewelry. But investors appear to be ascribing some value to it.


• Is it a payment network? Yes but it is tough to scale and does not charge a transaction fee.

Faucette also pointed out that the number of online retailers that accept Bitcoin is actually falling.  Five of the top 500 e-commerce merchants accepted Bitcoin during the first quarter of 2016, but now only three still do.

In order for Bitcoin to have a sustainable long-term future, it must become a real currency that is widely used, but many would argue that it is already being surpassed by better and newer options.  In fact, one top cryptocurrency expert recent stated that the old Bitcoin network “is as good as unusable”…

Emil Oldenburg, the co-founder of Bitcoin.com – one of the world’s largest sites devoted to the cryptocurrency – recently called the cryptocurrency the “most risky investment you can make,” after he switched to bitcoin cash, which he considers to be the future.

 

"The old bitcoin network is as good as unusable,” said in an interview with Swedish tech site Breakit.

That certainly doesn’t sound promising, but so far that hasn’t stopped the price of Bitcoin from heading into the stratosphere. 

So far in 2017 the price of Bitcoin has risen more than 1,400%, and that number is extremely impressive no matter how you look at it.

Of course virtually all of that “digital wealth” could disappear in just a matter of days during a major crash.  The CEO of Patriarch Equity, Eric Schiffer, believers that Bitcoin investments are eventually heading for “a thermonuclear death”…

“I think bitcoin is a ‘tower of death,’” Schiffer says. “It is going to result in the imminent death of your investment – a thermonuclear death.

 

“Right now we are looking at a financial bubble that is bigger than the tulip craze and I believe that we are headed for a bitcoin crash that will supersede any financial worries of the 21st century,” he added. “People are going to be shocked when they try to liquify their bitcoins.”

Schiffer might be right.

After all, Bitcoin and other cryptocurrencies don’t have any intrinsic value.  Essentially, they are nothing more than digital creations that only have value because people think they have value.

But those that got in back at the beginning and have cashed out now have made enormous amounts of money, and nobody can deny that.

With every form of “investing”, they are winners and there are losers.  Unfortunately, those that chose to jump in at the height of the madness could end up losing very big.  The following comes from Wolf Richter…

Betting on cryptos is a peculiar form of online gambling on a global scale that requires a consensus among participants that they only buy, and that you cannot ever cash out, and now that some folks are trying to cash out, the bets for everyone else are souring. The same dynamics that pushed prices up have reversed and are causing them to crash.

But what if the naysayers are wrong?

What if this current “Bitcoin crash” is just a bump in the road on the way to $40,000?

Years ago, the price of Bitcoin crashed 75 percent at one point.  What would have happened if the early investors had all bailed out then instead of holding on until now?

Those that sold Bitcoin at $12,000 might end up really kicking themselves if the price of Bitcoin does hit $40,000 by the end of next year, and that is exactly what some top experts are projecting…

Billionaire investors and highly respected analysts including hedge fund investor Mike Novogratz, prominent financial analyst Max Keiser, and Fundstrat’s Tom Lee stated that the price of bitcoin will likely surpass the $40,000 margin by the end of 2018, and achieve a $1 trillion market cap.

And let us not forget that big names such as John McAfee and James Altucher are predicting that the price of Bitcoin will eventually reach one million dollars.

To me, this is absolutely fascinating.  On the one side, you have financial experts that believe that Bitcoin is going to zero, and on the other side you have financial experts that are projecting that someday a single Bitcoin will be worth one million dollars.

I don’t know which side will ultimately prevail, but it will be a lot of fun to watch how everything plays out.

*  *  *

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

#BitcoinBreakdown: Five Easy Pieces

First Appearing on HedgeAccordingly

Fourth Part of a series. Part 1, Part 2, Part 3

By @sellputs

Isn’t Christmastime just wonderful, so much time with family, really, just… so… much time. With family.

If you caught the irony in that statement, you, too, need a distraction, an excuse to detach from the conversation and take a little “me” time. So take a few minutes to read this, our fourth column on bitcoin and all that it has unleashed. Your relatives will appreciate that you did.

*   *   *  

Gold, the precious metal found in dental work, beautiful jewelry and Fort Knox, has been a “store of value” for five thousand years.  Invented by nature or God (take your pick), it is able to survive global economic meltdowns and even nuclear meltdowns.  It has been said that if you accumulated, in one place, all the gold mined since humankind started doing it, you’d have enough to fill only three or four Olympic-sized swimming pools. 

An ounce of gold currently trades at $1,280 or so.

Now compare that to bitcoin: extant less than a decade, invented by unknown creators in 2009, said to be in a finite supply of only 21 million coins, and weightless, invisible, untraceable.  It started the year 2017 priced near $1,000 and just bumped up against the $20,000 mark before settling down near $15,000, with millions of people trying to get in on the Bitcoin Bubble.

So, what holds up the price of bitcoin?  Not GDP growth or earnings at any particular company; not the price of gold. The main thing keeping bitcoin prices aloft is little more than speculative frenzy and the virally spreading desire to own a piece of this newfangled invention.  This is emotional, and it is important to force the emotional to bow to the rational.

Here are five easy pieces of advice for investing in bitcoin and its lesser brethren:

1. Bet only money you are willing to lose. When you buy a stock, usually the chances are almost zero… that the price will fall to zero.  Buying crypto-coins is more like trading in puts and calls on the CBOE, options that have a definite expiration date and which often end up worthless.  So invest only what you are willing to lose at this roulette wheel. 


2. It is utterly insane to borrow money from elsewhere to invest in bitcoin or any other cryptocurrency, whether the borrowing is from a new low-interest credit card or from a second mortgage on your home. Be smarter than that.


3. It may be safer to buy bitcoin and skip the imitators. In the long run, anyway. In this realm, the Shakespearean axiom that a rose-is-a-rose-is-a-rose seems untrue to us—there’s bitcoin, and then there’s everyone else.  We would advise betting more on bitcoin.  Other currencies such as Litecoin (LTC) and Ripple (XRP) may rise higher in percentage terms when they do rise, given bitcoin’s extraordinary climb, yet bitcoin’s price may fall less that that of its knockoffs.


4. Even bitcoin may be only a short-term play. Some “investors” may ponder putting up $20,000 for one bitcoin, locking it away in some Coinbase-like account (“cold storage”) and returning ten years from now to unearth a coin worth $20 million.  One-thousand-fold returns have happened for the earliest bitcoin buyers. Now, however, the Law of Large Numbers makes a thousand-fold rise from these levels much more difficult.  So if you do make a wager, watch it closely and constantly, and be ready to bail.


5. If you invest, consider the “halfsies” rule. I know, it’s pussy, right?  (As in “pusillanimous,” gutless, timid.)  Yet it is a way to avoid Bitcoin Bubble Bankruptcy!  So if you put up, say, $10,000 in a bitcoin account, and the price doubles from where you started, sell half your stake to recover your original bet, and let the other half ride.  This way your principal will be preserved, yet you retain a stake in the next round of upside.

Remember, my friends, the way to get rich is focused more on preserving and protecting what you have earned than on finding the next windfall.  Good luck.

Next: The new face of bitcoin investors. Gardener, a Burner and a Big Guy.

Bitcoin: Gold Rush in the Wild Wild Math Game

By EconMatters

 

Bitcoin has become a buzz word in the investing community, not as an alternate currency unit replacing the fiat money, but as an asset class with a spectacular 1,600%+ return this year, valuation almost doubled just in the December month alone. Bitcoin was heading towards $20,000 before pulling back to $15,000 level on 12/21/2017, and . The entire cryptocurrency market capitalization rose above $600 billion for the first time on Dec. 18, 2017.

 

Bitcoin Chart Dec. 21, 2017 

 

Despite what you might have heard people raving about the "money of the future," the fact is that bitcoin and other cryptocurrencies are very expensive and experimental as well.

 

Existed Since 2009

 

Bitcoin is a form of digital or virtual currency and is not as “new” as you might think. It has existed since 2009. In January 2009, a programmer implemented the bitcoin software as open source code and released it under the alias of Satoshi Nakamoto. There have been many rumors regarding the true identity of Nakamoto, but nothing conclusive so far.

A Mining Math Game for All

 

With many companies adopting it as form of payment and many others getting ready to, bitcoins are an extremely fast-spreading “currency”.

 

Unlike fiat currency controlled by world’s central bankers and partly backed by gold reserve, Bitcoin is based on mathematics and totally decentralized. That is, much like the precious metal, bitcoin can only be “mined”, not “printed”. All Bitcoin transactions, including Bitcoin creations, are recorded and verified on the blockchain, also originally developed by Satoshi Nakamoto. Today, around the world, people and companies are using software programs and computers following a mathematical formula to produce bitcoins around the world.

1,000+ Rival Crytocurrencies 

 

It was not until 2011 when other rival crypocurrencies emerged partly due to bitcoin’s increasing popularity. Currently there are over 1,000 cryptocurrencies in circulation with new ones frequently appearing.

 

How Many Bitcoins Are There to “Mine”?

 

It seems anyone, with proper equipment, can “mine” bitcoins. The logical question would be is there a limit to how many bitcoins can be mined? According to Bitcoin.org, the bitcoin protocol – the rules that make bitcoin work – say that only 21 million bitcoins can ever be created by miners.

Silk Road Anonymous

 

Because Bitcoin was purposely designed with anonymity and lack of control in mind, it is quite attractive for criminals. Heard of Silk Road, the darknet black market, best known as a platform for selling illegal drugs? Though the U.S. government shut down Silk Road in 2013, Bitcoin benefited from Silk Road’s headlines and front pages of the mainstream media.

Gone in 60 Seconds at Mt. Gox

 

The lack-of-control nature of Bitcoin also comes with some security issues. In January 2014, the world’s largest Bitcoin exchange Mt. Gox went offline, and its total of 850,000 Bitcoins disappeared. Investigations are still trying to figure out exactly what happened. At today’s prices, those missing coins would be worth about $12 billion. Nevertheless, the bottom line is that those owners never saw their Mt. Gox Bitcoins again.

Bitcoin Futures Launched

 

Despite debacles at Silk Road and Mt. Gox, Bitcoin futures debuted on CME Group late on Sunday, Dec. 17, 2017, and on CBOE a week earlier. Many hailed this recognition by major exchanges as the pivotal moment of bitcoin to legitimacy. However, as Reuters reports:

 

“…. an almost twentyfold increase [of Bitcoin] since the start of January has also led to increasing warnings about the dangers of investing in an immature, opaque and largely unregulated market.”

1,000+ Whales Control the Market

 

The Bitcoin market cap is about $215 billion, but 40% of that “immature, opaque and unregulated” market is held by about 1,000 users/whales. What is even more disturbing about this market structure as Bloomberg reports:

 

“….the whales can coordinate their moves or preview them to a select few. Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market.”

 

Late Does Not Mean Never

 

In other words, whales can easily make or break the market by colluding and manipulating the Bitcoin prices. This is akin to the Hunt Brothers cornering the silver market back in the ‘70s. It was illegal what the Hunt Brothers did, do you think regulatory agencies around the world would just sit idly by and watch the same thing happen in the new Bitcoin market?

 

Regulations are notorious for lagging way behind technology. Nevertheless, it is inevitable that sweeping regulations will catch on in the near future. France’s finance minister already said his country would propose that the G20 group of major economies discuss regulation of bitcoin next year.

 

"Gold Rush in the Wild Wild West"

 

To sum up,

 

• Bitcoin is “created” or “mined” by a math program written by an unknown person.


• The program protocol caps the creation at 21 million bitcoins.


• 40% of the market is controlled by 1,000 whales who know and communicate with each other regarding buying and selling of Bitcoins.


• There are over 1,000 cryptocurrencies in circulation rival to Bitcoin with new ones frequently appearing.

 

The current Bitcoin Market lacks the proper structure that a healthy asset market should have, that is,

• Reasonable transparency,


• Long and short players (Bitcoin right now is a long only market),


• A diversified pool of producers (supply) and users (demand)


• Appropriate regulations/portocols to prevent collusion and market manipulation.

 

Bitcoin Investment

 

Right now, much of the hype is about getting rich by trading Bitcoin. One thing to remember is that just like any other exotic asset class, Bitcoin is even more vulnerable to the boom-and-bust cycle. Bitcoin’s first crash took place in 2013 when the price of one Bitcoin reached $1,000 for the first time, but then the price quickly plummeted to around $300. It took more than two years before Bitcoin reached $1,000 again.

 

Many traders are on the sideline right now waiting for a significant pullback to get in on Bitcoin. The key is to buy low and not develop a sentimental/emotional attachment thus missing the proper selling point. Before jumping in, it is also important to understand risks and opportunities in the bitcoin market. Expect much higher than normal volatility and sweeping regulations that could drastically change the market landscape.

 

© EconMatters.com All Rights Reserved | Facebook | Twitter | YouTube | Email Digest | Kindle

Trump"s Tax Bill May Be Reason for Crypto Rout

Content originally published at iBankCoin.com

Let"s be clear. The American market for Bitcoin is an aspirational one; but the true volume is done in Asia. Instead of going through the trouble of setting up shell corporations to launder their money, the Chinese have been using crypto currencies, which was beautifully marketed as some sort of rebellious form of capitalism -- creating millions of bedroom billionaires.

All of that might be ending soon, thanks in part of President Trump.

He"s gonna sick the IRS hard on your asses -- tossing evil tax evaders into ass-raping prisons.

Bloomberg:

New limits in the bill would bar cryptocurrency owners from deferring capital gains taxes when trading one type of virtual currency for another -- effectively closing a gray area in the tax code, experts say.

 

Those gains can be considerable. Bitcoin, which had an initial price of less than 1 cent when it first traded in 2010, was around $1,000 as 2017 began and surpassed $19,000 this week, at least briefly, before paring some of the gains. Many enthusiasts jump between bitcoin and a long list of similarly volatile competitors, such as ether.

 
For investors who hold the virtual currencies, “the bill is bad news,” said Kelsey Lemaster, a tax attorney with Goodwin Procter LLP. “Every time you trade one digital currency for another, one token for another, it’s going to be a taxable event.”

 

The change might not deter traders, who have been leaping into cryptocurrencies without researching what they are -- let alone their tax implications, said Brian Kristiansen, a partner in the digital currency services practice at Friedman LLP.

 

Under current law, Bitcoiners have been protected under the "like-kind exchanges", swapping one investment for another, notably Ethereum. That shit ain"t gonna fly in 2018. You"re gonna get taxed out.

The change goes into effect January 1st.

Bitcoin is off by 7,000 points from recent record highs, trading at $12,500.

Mystery Trader Places Massive Bet That Bitcoin Will Hit $50,000 Next Year

Contrary to what casual observers might believe, the Cboe and CME weren’t the first exchanges to offer trading and clearing of bitcoin derivatives in the US - that distinction belongs to a relatively obscure company called LedgerX, which received permission from the CFTC over the summer to create the first swap execution facility - or SEF - allowing it to clear trades of bitcoin-focused options.

While trading volume on LedgerX’s platform has been relatively subdued compared with its larger peers (during its first week of trading, LedgerX recorded a meager $1 million in trading volume) some traders are using its platform to place massive bets on out-of-the-money options.

According to data released by LedgerX on Wednesday, one anonymous trader bought $1 million in options that will only pay off if the price of a single bitcoin surges above $50,000 next year...

Here’s WSJ with more:

Daily trading records released on Wednesday by LedgerX, a startup electronic market for bitcoin derivatives, show that an unidentified trader or traders entered the bullish bets using bitcoin call options that expire next December.

 

Just under $1 million was paid for the options in one or more trades, the records show. It is unclear from LedgerX"s data who the buyer or buyers were.

Of course, if bitcoin even comes close to matching this year’s torrid rally in terms of percentage-point gains, this trade could be astonishingly lucrative.

But if the bitcoin price tanks - as many prominent figures in the financial services industry believe it will - well, the most the buyer can lose is his initial $1 million investment...

...To the average investor, $1 million might sound like a lot of money. But in the cryptoverse - where tens of billions of dollars in market cap can vaporize in an instant - $1 million is chump change.

Car Dealership Says It Will Accept Payment In Bitcoin

A rudimentary payments network that can only process - on average - about 7 transactions every 10 minutes isn’t deterring merchants from accepting bitcoin for large-scale purchases like homes and cars.

To wit, the owner of a car dealership near Albany told a local news station that he will begin accepting bitcoin, as the Associated Press reported.

Michael Severance, of Michael’s Auto Plaza, tells WTEN-TV the dealership recently started accepting the digital currency. Severance says he became interested in bitcoin as its value rose. The East Greenbush businessman says he wanted his dealership to take advantage of an opportunity.

 

Severance says he saw people buying large pieces of property with the digital currency and figured cars should be no different.

Severence told a local TV station that the digital currency"s staggering appreciation inspired him to accept it as payment.

“Certain things boom and they just take off. They take off quick. You have to capture it while it’s hot.”

He also asserted that bitcoin "isn"t going away any time soon."

As we pointed out late last week, sellers of luxury homes and apartments are increasingly demanding payment in bitcoin. One seller who accepted payment in bitcoin for his Texas home over the summer has already notched a return of more than 300%. When the transaction occurred, bitcoin was trading at around $4,000 a coin. On Wednesday, it was trading closer to $16,000 after touching an all-time peak near $20,000.

One seller advertising a luxury Miami condo on Redfin.com stipulated that he would only accept payment in bitcoin. And increasingly, high end real-estate brokers in markets like Miami and New York City say their clients are expressing interest in digital currencies.

But even though sluggish and unpredictable transaction times have become a barrier to adoption, in some places, bitcoin is still easier to use for small purchases than the local currency.

Venezuela is one prominent example. With the government-issued bolivar effectively worthless following a sustained period of hyperinflation, merchants say it’s easier and safer to accept payment in bitcoin.

Indeed, even some homeless beggars understand bitcoin"s potential, and have set up their own wallets to receive donations in the digital currency...

Seller Of Luxury Miami Condo Demands To Be Paid Exclusively In Bitcoin

And they said bitcoin would never work as a currency.

While that might be true for small transactions - for now - real-estate markets across the US are increasingly demonstrating that bitcoin is a viable medium of exchange. Case in point: the seller of a luxury Miami condo will only accept payment in bitcoin. The asking price - according to real-estate listings site Redfin - 33 bitcoins, or about $550,000 at bitcoin’s present valuation.

According to Redfin, this is the first time a seller is exclusively accepting payment in bitcoin. The seller’s identity wasn’t immediately clear.

It begins: Miami condo on sale for 33 bitcoins - seller won"t accept any other currency. First time that"s happened in U.S., per Redfin https://t.co/hAvnpcL5zX

— Mike Rosenberg (@ByRosenberg) December 13, 2017

But while this might be the first time that Redfin has noticed the phenomenon, homesellers have been asking to be paid in bitcoin since at least 2013, when an anonymous seller of a luxury condo in the Trump Soho of all places listed the price as 24,700 bitcoin, according to the Daily News. While this sale was the first that was documented in the media, it’s also notable that it occurred before the first bitcoin bubble burst.

Also over the summer, a realtor in Texas revealed that one of her clients had accepted payment for their home in bitcoin. The number of coins – and the identity of the seller and buyer – weren’t disclosed.

And as we recently reported, more realtors in hot markets like New York City and Miami are demanding to be paid in cryptocurrency, sometimes exclusively.

This trend in broader crypto acceptance - contrary to mainstream media reports - is undoubtedly a factor behind the unprecedented price appreciation whch has seen bitcoin soar from $1,000 to $19,000 in 2017.

Meanwhile, any buyer who has accepted bitcoin as payment and kept it, has so far managed to generate a staggering profit, given the digital currency’s aggressive appreciation. The real test will come after the digital currency inevitably tanks again.

Ron Paul Says He Was "Surprised" His Followers Prefer Bitcoin To Gold

Earlier this week, former Congressman Ron Paul posted a Twitter poll asking his followers to choose between four different assets for a long-term investment, with the stipulation that the bearer would need to keep their money locked up for ten years.

 

A wealthy person wants to gift you $10,000. You get to choose in which form you"ll take the gift. But there"s a catch: You must keep the gift in the form that you choose, and you can"t touch it for 10 years.

In which form would you take the gift?

— Ron Paul (@RonPaul) December 5, 2017

 

Paul admitted he was surprised when he saw that a majority of respondents – 54% - selected bitcoin over gold, dollars and a 10-year Treasury bond.

During an interview with the Street, a reporter asked Paul if he was surprised that his followers prefer bitcoin to gold.

Yea a little bit. I was a little bit - of course I wasn’t surprised that only 2% would store it in Federal Reserve notes, nor do they think they should buy Treasury bills. Gold has 36% but bitcoin has 54%...it’s the sort of information that tells me where my viewers are and what they’re thinking. Most of my viewers know how supportive I am of gold, and they know I’m tolerant of digital currencies.

Still, Paul believes cryptocurrencies are an interesting experiment and is generally supportive of their development and increasing popularity. But when asked for his thoughts on where bitcoin might be in ten years, he demurred.

What’s it going to be like in ten years? Nobody knows. But we have a pretty good idea where gold will be. It’s been around a long time and it’s not going away.

Though the market for gold is still much larger than the market for bitcoin, Paul’s interviewer asked if the interest in cryptocurrencies could be one reason for gold’s recent stumbles.

I think we could still be in a phase where gold could take off. It’s just a matter of figuring out when…the fed has created so much money and people have sort of caught on to it like a fever."

Paul said he doesn’t invest in bitcoin or any other cryptocurrencies, and has no plans to start.

No, I don’t intend to at all. I find it fascinating, but as an investor, no…"

At the interview’s conclusion, Paul explained that digital currencies have helped demonstrate an important principle about government and sound money: When a government loses all credibility and its currency becomes worthless, people will work out an alternative monetary system on their own. Venezuela and Zimbabwe have been perhaps the best examples of this: bitcoin trades at a premium in both countries. And in Venezuela, bitcoin miners risk being prosecuted by the government.

“Take a country like Zimbabwe or Venezuela. They change their attitudes quickly when they get in trouble.”
 

Top Crypto-Mining Executive Explains Why "We"re Hoarding The Coins"

Authored by Mac Slavo via SHTFplan.com,

If the price action in crypto currencies over the last several months has proven anything, it’s that the blockchain has gone fully mainstream with global investors, major financial institutions and governments showing significant interest in the space. While a number of blockchain projects are moving onto the stage, the primary focus for investors has been Bitcoin, which has seen an increase of over 1,600% in 2017. And according to Frank Holmes, there is much more to come.

In an interview with SGT Report, Holmes, the Chairman of Hive Blockchain Technologies, the world’s only publicly traded blockchain mining company explains that, while roughly 78% of the available 21 million Bitcoins, or about 16.4 million, have been mined up to this point, there are probably only about 10 million coins in actual circulation around the world because somewhere on the order of 25% have been lost forever due to misplaced wallet access keys and other issues. Moreover, of those 10 million or so available coins, it has been widely reported that about 1000 “whales,” or high net worth investors, own some 40% of the coins, creating a scarcity in the market that has left millions of global investors chasing a limited supply of BTC.

Holmes suggests that this limited availability works to the advantage of cryptocurrency miners who use expensive computer hardware mining rigs to process transactions on the blockchain, because with so much investment capital moving into the space they can hoard the coins they mine and sell into the market during price spikes while loading up on more coins when markets dip. Hive currently mines Ethereum, Ethereum Classic, Bitcoin and will soon move into Litecoin and other popular cryptocurrencies using the same strategy:

We’re hoarding the coins… we mine virgin coins and in fact we are getting offered premiums for our coins because they’ve never been tainted.

 

We never buy the coins… anytime it has a huge surge we will sell one, two or three percent… and as soon as it corrects we just mine more and replenish ourselves…

 

We want to wait until we get at least 20,000 coins and then we can turn around and use our quant models, so we’re doing things very unique…

Most crypto currencies have a maximum supply of coins that can ever be mined. As Bitcoin demonstrates, a percentage of those already-mined coins will be lost. Another percentage will be locked up by high net worth and long-term investors. These mechanics create a situation where, perhaps only a little over half of the actual listed circulation of coins is actually circulating.

With this being the case it’s not difficult to see why, as tens of billions of dollars, and perhaps even trillions as has been suggested by investment gurus, continue to pile into these assets, prices for top tier crypto currencies could continue to rise exponentially in coming months and years.

The Man Who "Threw Away" Bitcoin Now Has Over 100 Million Reasons To Dig Up Landfill Site

A British man is about to undertake what he calls a "big, expensive project" but he has over 100 million reasons to do so...

James Howells is a British IT worker and was an early Bitcoin ethusiast...

He may also be the most frustrated man in the world currently, but hopefully that"s all about to change.

As The Independent reports, Howells began his fascination with the cryptocurrency in February 2009, and through his computational expertise, he mined 7,500 Bitcoins in the preceding years.

However, there was a woman in Howells" life and, as Gizmodo reports, his girlfriend got fed up with the noise of his block-mining hardware and made him stop. At the time, it was not a big loss he notes, bitcoin was worth next to nothing.

 

"After I had stopped mining, the laptop I had used was broken into parts and sold on eBay. However, I kept the hard drive in a drawer at home knowing it contained my Bitcoin private keys, so that if Bitcoin did become valuable one day I would still have the coins I had mined," he told the Telegraph.

 

Then "in mid-2013 during a clear-out, the hard drive was mistakenly thrown out and put into a general waste bin at my local landfill site, after which it was buried on site."

And so buried deep below thousands of tons of garbage on a Welsh landfill site, lies a hard drive with bitcoins potentially worth more than $100 million.

Four years later and he still - understandably - hasn’t let it go.

He says he’s now considering digging up the landfill in order to find the lost hard drive.

“A modern landfill is a complex engineering project and digging one up brings up all sorts of environmental issues such as dangerous gasses and potential landfill fires,” he said.

 

“It’s a big, expensive and risky project.”

We wish you luck James!

Bitcoin Explodes Above $14,000 - Korean PM Fears "Serious Pathological Phenomena"

Well that escalated quickly...

Just a few hours ago, Bitcoin surged above $13,000 and now, on notable volume, it has reached the stunning $14,000 level... up 20% today...

The real surge began at 1715ET...

For those keeping track, this is how long it has taken the cryptocurrency to cross the key psychological levels:

• $0000 - $1000: 1789 days


• $1000- $2000: 1271 days


• $2000- $3000: 23 days


• $3000- $4000: 62 days


• $4000- $5000: 61 days


• $5000- $6000: 8 days


• $6000- $7000: 13 days


• $7000- $8000: 14 days


• $8000- $9000: 9 days


• $9000-$10000: 2 days


• $10000-$11000: 1 day


• $11000-$12000: 6 days


• $12,000-$13,000: 17 hours


• $13,000-$14,000: 4 hours

As Bitcoin has soared, it appears traders have sold other cyrptocurrencies to chase it as Ether has dropped in sync..

One of the regions in the world with the most active Bitcoin community is South Korea where so many Koreans have embraced bitcoin that the prime minister recently warned that cryptocurrencies might corrupt the nation’s youth.

As Bloomberg reports, while neighboring Japan hosts more transactions by some measures, Korea punches far above its weight: In the 24-hour period through Wednesday evening in Seoul, about 21 percent of the world’s bitcoin trades on fee-charging venues involved the Korean won, according to Coinmarketcap.com. The country accounts for about 1.9 percent of the world economy.

As Korean policy makers grow increasingly worried that the mania has gone too far, the nation could become a focus for bitcoin traders around the world. Korea’s top financial watchdog, which briefly roiled cryptocurrency markets with its ban on initial coin offerings in September, said this week that it has “grave concerns” about overheated speculation and has formed a task force with other government bodies to increase supervision.

While it’s unclear what measures will emerge from Korea’s cryptocurrency task force, the government seems intent on acting. The tax authority is considering a levy on cryptocurrency trading gains, Yonhap News reported on Tuesday, while Prime Minister Lee Nak-yon warned last month that cryptocurrencies could become gateways to pyramid schemes and other illicit activity if left unchecked.

“If we let things continue, I feel some serious pathological phenomena could occur,” Lee said.

Bitcoin’s stateless status appeals to some Koreans who’ve grown wary of keeping their savings in a country that shares a border with Kim Jong Un’s increasingly belligerent regime in North Korea, according to Kwak Keumjoo, professor of psychology at Seoul National University.

“People want to take comfort in something outside and beyond the country,” Kwak said.

Finally, we note that growth continues as Coinbase CEO today noted they currently have 220 customer service reps and will add 400 next year:

"it"s very difficult to keep up with the user influx."

As CoinTelegraph reports, since China, Russia, and a few others cracked down hard on Bitcoin, it has been relatively quiet on the regulations front as Bitcoin has continued to soar unbridled. However, the head scratching on how to regulate continues.

The next fear, for Former Fortress Hedge Fund Manager Michael Novogratz, is that Bitcoin’s continued rise and prominence in the mainstream media could reawaken the regulation beast.

However, Novogratz still feels that Bitcoin is difficult to regulate and it will be hard for governments to make an impact immediately. Novogratz, who has been outspoken on Bitcoin for some time now, claiming it could be a bubble, but one to profit from has his concerns now.

"I"ve got concerns that if price movements go higher, we"re going to get more regulation," Novogratz said.

 

“But I think it"s hard to shut down. ... I don"t think that"s a probability."

 

"One of the big risks out there right now is that prices are moving so fast that regulators are going to get nervous," he added.

 

"I could legitimately see Bitcoin go $13,000, $14,000, $20,000, $25,000 and see somebody balk."

Novogratz adds:

"We"re in a speculative frenzy. Period. Stop. How long can it go? Who knows," Novogratz said. "What"s interesting about this is it"s global."

Another reason that Bitcoin has hit such heights must also be attributed to it finding its identity. Many were scratching their heads as to what Bitcoin is - a currency or an asset - but recent changes have set it straight.

"Bitcoin is winning out as digital gold," Novogratz explained.

 

"I don"t think it"s going to be a currency... Nothing that volatile is going to be a currency."

 

 

Bitcoin Rockets Higher, Then Crashes Lower, Then Repeats

Written by Nathan McDonald, Sprott Money News

 

 

The Bitcoin markets are in utter turmoil at the moment - the cryptocurrency that has become the envy of all speculative assets, possibly one of the greatest in modern history, is experiencing extreme volatility.

 

 

Long familiar with extreme ups and downs, Bitcoin has a history of moving higher rapidly, and also crashing suddenly. This past 24 hours appear to be encompassing both of these directions as the markets engage in an active game of tug of war, with billions of dollars on the line.

 

 

Those who have only recently gotten on the cryptocurrency bandwagon, buying into the recent parabolic rise of Bitcoin, have to be vomiting in disgust as they watch their hard-earned money being beaten like a dirty rug, but this is it - this is what it looks like to be involved in the cryptocurrency space, and something that veterans of the markets have seen time and time again. It is not all peaches and cream.

 

 

It began yesterday, when Bitcoin surged higher, out of nowhere, rising to a high of $11,323 USD from a $9721 USD start of the day. This was a monstrous gain in less than 24 hours. However, it was not meant to last as it promptly plummeted downward to $9435 USD, causing many of the major Bitcoin exchanges to crash themselves and go offline, including Coinbase, which is the most well funded exchange within the sector.

 

 

Following this crazy few hours, Bitcoin began to climb higher once again, easily breaking the $10,000 USD mark in overnight hours trading, but this too was not meant to last.

 

 

 

Chart Source, CoinDesk

 

 

Seeing this extreme volatility has caused many holders of the cryptocurrency to take profits, pulling out their money and causing another rapid crash lower - which as of this writing, has Bitcoin resting around $9,362 USD.

 

 

Compounding these problems is the fact that prominent names within the precious metals space have recently come out and suggested that perhaps it is time to take some gains, as the price of Bitcoin has gone parabolic throughout 2017, shocking even some of its most stout supporters.

 

 

As I have previously mentioned, 2017 has been a phenomenal year for Bitcoin. For those who got in even at the start of the year, you should be congratulated, as you made the right call and are now looking at huge gains. But as I have also seen numerous times in the past, Bitcoin can evaporate the majority of your gains in the blink of an eye. This isn"t the first time, nor will it be the last time that Bitcoin suffers uncontrolled volatility.

 

 

It has been, and continues to be, a wild, uncontrolled and incredibly speculative asset - one that has the potential to either change the financial world for all time, or possibly be the greatest scam we have seen since the Tulip mania.

 

 

I lean towards the former, but remember this always: there are powerful forces actively working against Bitcoin and its success - forces that will not take this change and threat to their fiat power lying down.

 

 

 

 

Questions or comments about this article? Leave your thoughts HERE.

 

 

 

 

Bitcoin Rockets Higher, Then Crashes Lower, Then Repeats

Written by Nathan McDonald, Sprott Money News

 

 

Check out these other articles by our contributors:

Jeff Thomas - What Will Push Them Over the Edge?

Rory Hall - If You THINK About Taking Someone’s Golden “Pet Rock” It Would Be a “Declaration Of Financial War”

Stewart Dougherty - The War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat (Part 1)

John Rubino - “The Money Is Just Sitting There…Doing Nothing for Society”

 

White House Says It Is "Monitoring The Bitcoin Situation"

In the past few days two Federal Reserve presidents have discussed cryptocurrencies and concluded they are "niche" and "don"t matter today."

The total market capitalization of the entire cryptocurrency space is around $300 billion - smaller than the Top 10 names in the S&P 500.

In the last three years, Bitcoin has gained a similar amount of market cap as Nvidia...

A de minimus percentage of Americans are exposed to Bitcoin and crypto-currencies.

But it appears the last few days of turbulence in Bitcoin  - which saw total losses of around $3 billion yesterday, compared to $60 billion lost in FANG stocks alone - has "triggered" the world"s media into a frenzy..

Which led to today"s White House Press Briefing and an unusual question from one reporter...

"Has the president been following cyrptocurrencies at all? Specirfically the major run-up in it...

 

Does he have an opinion on it, and does he feel it is now something that needs to be regulated?"

The answer was, perhaps, somewhat surprising...

"The [Bitcoin situation] is something that is being "monitored" by our team...

 

Homeland Security is involved."

Which made us wonder...

Is Homeland "monitoring" FANG stocks and how dangerous they are?

 

Is The White House aware of the billions of dollars bing slammed through precious metals paper markets every morning?

 

Does President Trump have opinion on the massive spike in EONIA this week?

Did Bitcoin just make it to the big show?

Bitcoin, Nuclear War, And The "Real World Use" Argument

Authored by Tom Luongo,

I received a comment this morning challenging my contention that Bitcoin should be thought of as a foundational asset for the crypto-based monetary system.

With Bitcoin topping $11,000, arguments like this continue to be made by gold-bugs (of which I’m one) and hard-asset enthusiasts because they make fundamental errors in their analysis of Bitcoin.

And it’s important, in my mind, to counter those arguments to help the community refine its response to them rather than simply dismiss them.

The Bitcoin/Gold Conundrum

Like gold, Bitcoin should sit at the bottom of the crypto-version of John Exter’s inverted pyramid which describes the monetary system.

The comment can be found here in full.  The commenter means well, but misses a fundamental point that most hard asset enthusiasts miss about Bitcoin and cryptocurrencies in general.

I’m going to break it down step by step because I believe it’s a perfect illustration of how one wrong assumption can lead to a wrong conclusion.

Comment: Why do you think gold belongs to the bottom of exter’s pyramid and diamonds/gemstones are found near the top…?

First, gold belongs at the bottom of Exter’s Pyramid because it is the only asset in that mix that has zero counter-party risk.  Everything else is secondary.

So, to begin the argument in earnest, do Bitcoins have counter-party risk?  No.

No one can issue Bitcoins that someone else, by Bitcoin’s very nature, has a claim to.

You may pledge your Bitcoins as collateral for some other transaction, but that transaction, say a loan denominated in Bitcoins, is what has counter-party risk, not the Bitcoin itself.  Just like gold.

So, it could qualify as a reserve asset like gold.  Okay, step #1 completed.

 [Comment continues:] …that is because gold has certain physical properties that are intrinsic to its values while diamonds/gemstones don’t have… from ancient times until modern times… the properties of gold like good conductivity of heat and electricity… resistance to corrosion and oxidation… high malleable.. it makes physical gold to be ACTUALLY useful… diamonds and gemstones don’t have all these properties.. although diamonds is still useful for making into extremely strong diamond cutters…

However, many things have zero counter-party risk, for example diamonds. But diamonds are terrible mediums of exchange, as he points out.  The rest of this portion of the comment does a credible job of explaining gold’s rise as money and satisfying Mises’ Regression Theorem.

But the diamond-cutter argument applies to gold.  Gold is more fungible than diamonds. But gold is not fungible compared to the dollar or Bitcoin.

Money is liquid.  You can receive it now and immediately exchange it for something else.

Property that isn’t money has time-risk. Finding a buyer of your non-money property is the risk of losing value in the transaction.

This is the fundamental problem with barter.  It’s why gold no longer satisfies, except in specific situations, as a good medium of exchange.

Bitcoin has tremendous liquidity when you realize that 10 minutes to fully clear a transaction is stupendously fast compared to the three days behind the scenes that the average credit card transaction takes.

The Digital Road Not Taken

Now onto the next portion of his argument:

as for bitcoins… it doesn’t have ACTUAL use… so it is more useless compared to diamonds/gemstones…

This is where so many hard asset enthusiasts go wrong.  Bitcoin does have actual use.  We wanted something like Bitcoin to use as money before it existed.

There was latent demand for a digital asset with its properties.  We wanted something better than the dollar, so someone, Satoshi Nakamoto, created it.

That latent demand for a money like Bitcoin imbued it with value from the moment the software started building the blockchain.

Bitcoins are encrypted packets of information.

Do encrypted packets of information traversing the Internet not have use?  Yes.

If they don’t, then why do we send them?  We wouldn’t.

If we do, then they must have value.

So, it follows, that certain types of encrypted packets will potentially have more value than others.  In this case the signed, hashed, confirmed and stored packets represented by the nine-year old Bitcoin blockchain has a lot more value than literally most of the information on the internet.

So, we have the perception of value, we have zero counter-party risk all we lack is use.

Does anyone use Bitcoin?  Yes. This is self-evident.

That is its ACTUAL USE.

Bitcoin came into existence to solve the very modern problem of centrally-issued debt-based monetary units and the corruption of our society those monetary units engender.

And it had to do so better than gold.

The World Bitcoin Could Make

All of those things make it a foundation for a new monetary system. This is not to say gold will not be part of this system or that there can be only one system.

In fact, as we move forward I expect to see the nascent crypto-system and the current debt-based one merge.  Gold alongside Bitcoin and other Bitcoin-like coins with strong blockchains and hashing networks will form that foundation.

Commenter Concludes: in the worst case scenario if we have global nuclear fallout and whatever remaining humans degenerate back into stone age days where we resort to barter trade for survival… then nobody will want bitcoins while gold/silver will STILL survive…

 

of cos.. the worst case scenario may never happen… or at least not in a few centuries… then bitcoin may well survive all the other kinds of crisis…

 

so… I don’t agree that bitcoins can substitute gold/silver…

As for post-Nuclear War, if conditions change that radically then the value of everything changes radically.

In this case, there is no ‘financial system,’ Exter’s Pyramid or the like. 

There is survival and not even gold is useful until civilization and the division of labor are sophisticated enough to support such concepts.

Bitcoin is the money we are choosing to take human society to the next level. If we don’t get there all of this is moot.  QED.

At which point the cycle starts all over again.

*  *  *

I want to thank “wacky” for his thoughtful comment, even if I disagreed with it.  That is the point of forums like this, discussion in order to clarify truths.

Valuing Bitcoin Using Metcalfe"s Law

Just over a month a go we discussed Frank Homes, CEO of US Global Investors, who had returned from the LBMA/LPPM Precious Metals conference in Barcelona after giving the key note address on Day 2, “Quant Investing: From Gold to Cryptocurrencies.” Homes’s presentation was voted the best – no doubt helped by the topical subject matter – and he was the recipient of an ounce of gold.

Seeing a role for both gold and cryptocurrencies in portfolios, he aimed a couple of blows at recent Bitcoin detractors, including you know who from JPM. As we noted at the time, however, it was Homes’s observations on Metcalfe’s law, i.e. the economics of network effects, which we particularly enjoyed.

This was his take on the surge in the price of Bitcoin...

“Metcalfe’s law states that the bigger the network of users, the greater that network’s value becomes. Robert Metcalfe, distinguished electrical engineer, was speaking specifically about Ethernet, but it also applies to cryptos. Bitcoin might look like a bubble on a simple price chart, but when we place it on a logarithmic scale, we see that a peak has not been reached yet.

In an article, Bitcoin and Metcalfe’s Law, Stephen Powaga of ETF Momentum Investing acknowledges the challenges of valuing Bitcoin and has also turned to Metcalfe’s Law.

With the recent run up in the Bitcoin price, cryptocurrencies have been garnering much greater attention from the public at large.

 

A rapid price rise like this presents a difficult situation for potential new investors into the space. On one hand, this price action appears to be a classic asset price bubble, but on the other hand investors can wait years for a meaningful drawdown, all while missing out on the intermediate price appreciation.

 

How then can one determine a benchmark value for Bitcoin? On the most basic level Bitcoin is a distributed payment network, and like all networks should be subject to Metcalfe’s Law.

Powaga continues by leading us through some of the basics of Metcalfe’s Law.

Metcalfe’s Law states that a network’s value is proportional to the square of the number of users. For instance, it’s obvious that if you’re the only person with a telephone then that network would have no value, when one additional person gets a phone the network has achieved a tiny bit of value, and if virtually everyone has a phone, then the network becomes extremely valuable. This relationship has been observed in many industries where increased adoption boosts the network’s overall usefulness, such as European internet usage, Facebook’s value, and more recently Tencent’s value.

A recent white paper by Ken Alabi finds that blockchain networks also appear to follow Metcalfe’s Law, in his paper he states, “it was demonstrated that the growth in the value of the network was related to the number of unique addresses”. This intuitively comports with our understanding of how Bitcoin’s value should operate, if you’re the only holder of Bitcoin it’s not very valuable because there is no one to exchange it with for goods and services, however if many people hold Bitcoin then it should be much more valuable since there are now many people to potentially exchange it with.

As Powega explains, he can show us how Bitcoin’s valuation has traded over time based on Metcalfe’s Law principles.

Given this information, what can Bitcoin’s network size tell us about its value and the size of the current bubble? Utilizing Alabi’s method we can arrive at Bitcoin’s Metcalfe Value through time and compare historic Price-to-Metcalfe Value ratios for Bitcoin.

 

This is somewhat analogous to price-to-book ratio in public equity analysis in that a higher ratio implies investors expect a given network to create more value from a given number of users.

As you can see above, the Price-to-Metcalfe Value ratio seen in the previous Bitcoin bubble of 2013/14 was far larger than where it currently stands.

 

Obviously, the future is unknowable, but given the enormous growth that Bitcoin has seen in its user base, the recent price appreciation may not be as “bubbly” as it appears.

What Powaga can’t tell us, however, is what is the intrinsic value of Bitcoin now, or what it might be in the future. Who knows? As we discussed, high-profile cryptocurrency investor, Mike Novogratz, sees Bitcoin at $40,000 at the end of 2018. In contrast, Peter Tchir, is taking some Bitcoin chips “off the table”.

Why Bitcoin-Mining May Be Elon Musk"s Next Big Problem...

If you thought Tesla was burning cash now, wait until this latest scheme goes mainstream...

As EcoMotoringNews.com reports, some creative Tesla owners came up with a way to make a few bucks from their parked EVs: Cryptocurrency mining.

This raises questions that shouldn’t just be aimed at bitcoin mining, or even electric vehicles.

For those unfamiliar, cryptocurrencies only work because there is a network of distributed computing that processes the transactions. To reward those offering the computing power, cryptocurrencies give fractions of new bitcoins to those who did the work of running the network. This is referred to as “mining” bitcoins and other cryptocurrencies. This was an expensive and power-hungry task that could wear out computer components much faster than usual.

Initially, many doing this used high-end graphics processing units, but as the money earned per device diminished, miners turned to specialized computer units, called ASICs, to do the task faster with less electricity. But the units are still not free and they still can use kilowatts of electricity for a handful of them. To reduce the overall cost of running mining computers, some miners put the computers throughout their homes to act as small space heaters and reduce their heating bill. Others run their rigs on solar panels to avoid a monthly power cost.

Any source of electricity you don’t have to pay the normal rate for, or that you don’t have to pay for at all, is an opportunity for miners to increase their already thin profits. Teslas and other EVs have free access to power at many charging stations, so it was probably only a matter of time until somebody decided to plug their mining computers in.

One member of the Tesla Owners Worldwide on Facebook suggested the idea, possibly in jest. Then another owner went ahead and did it, posting a photo of his setup (above). Some members suggested that his setup could pull as much as 3 kilowatts of power and would probably require the vehicle’s air conditioning to be on for cooling. Other members raised ethical questions.

Is it stealing to use the power for something other than driving?

On the one hand, this could be a good way to offset the cost of owning an electric vehicle. On the other hand, it lowers the efficiency of the vehicle and increases the environmental impact. But then again, the mining was going to be done somewhere anyway, so does it really? Will many EV owners do this? Will they do it at places they were going to charge anyway, or will there be opportunistic fleets of EVs blocking up charging stations to make a quick buck? How will charging station owners respond?

But really, these questions shouldn’t just be aimed at bitcoin mining. Computing power is going to be in higher and higher demand going forward. Self-driving cars are already running on graphics processing units like bitcoin miners once all used. Infotainment systems are getting more and more powerful, and that power needs to come from somewhere. Mobile devices used by passengers are going to need more and more power to charge. Even beyond that, there are “V2H” systems that can run a house on an electric vehicle’s battery, and that goes far beyond the tiny bit of power needed to run a few mining computers.

And these questions shouldn’t just be applied to electric vehicles. Many of these power strains will apply to hybrid, regular gas and regular diesel vehicles. Alternators, the parts that charge most car’s 12v batteries, are already a big part of the car’s fuel consumption. Ecomodding hobbyists have gained as much as 15% fuel efficiency by removing them, and that amount is only going to grow as more demand is placed on it. Some companies are suggesting waste heat recovery to generate the electricity needed for the future.

When we look at these wider power issues, it becomes clear that bitcoin mining is just a drop in the bucket. Even if a large number of EV owners did it, it would still be nothing compared to the other computing future cars will eventually be doing. Where that power is going to come from is a good question we shouldn’t just be aiming at the odd bitcoin miner.