Monthly Archives: May 2017

With President Trump's problems and political grandstanding dominating the daily news cycle, several major stories have been pushed out of the spotlight. A global cyberattack that covered 150 countries, 200,000 computers and major institutions like FedEx (FDX) , the U.K. National Health Service and the Russian central bank has received comparatively limited coverage. At the same time, the alternative digital currency, Bitcoin, which was born in cyberspace, has reached all-time highs. Gold gets honorable mention as a safe haven, but not much more. But where does the real risk, as well as the real value, lie?

In view of the severity of the latest cyberattack, it is only prudent to examine cybersecurity in relation to our financial system. The central bank of Russia, Bank Rossii, was one of the victims of this latest attack, but the Federal Reserve Bank of New York was also a victim of cybertheft as recently as February 2016. That heist of $81 million was linked to Bangladesh and possibly North Korea.

With these types of large international players constantly attacking the core of banking and finance, how safe are all the digital dollars that we have stored in cyberspace? Cybersecurity experts estimate that there are over 200 million attacks on the system daily. Although very few of these attacks succeed, their severity continues to grow, exposing the inherently fragile nature of our highly interconnected financial system. This risk underscores the value of holding a real asset whose value is not dependent upon the financial system.

Bitcoin has got everyone talking these days. Even though it is a relatively new phenomenon (it's only been in existence since 2009), it has captured the imagination of many in the financial community. With an eight-year track record, bitcoin has demonstrated that it has value. The question is, how much value and value measured by what?

Bitcoins can be attained by digitally mining for them or in exchange for other currencies. Its value lies in the qualities it possesses. Like other forms of money, it is a medium of exchange, unit of account and store of value. According to a research produced by Cambridge University in 2017, there are 2.9 million to 5.8 million unique users actively using a cryptocurrency wallet, most of them using bitcoin. Clearly bitcoin has a use as a medium of exchange and unit of account, but will it perform as a store of value? Only time will tell.

Currently bitcoin is valued at 1 bitcoin to roughly $1,850. Quite a valuation for a currency backed only by an algorithmic data mining process married to the good faith and trust of its users. The question remains, will bitcoin users be able to reach into the cybersphere and grab those bitcoins in times of financial stress, or will that wealth simply vanish in a haze of government intervention, cybertheft or internet malfunction.

Where does gold fit into this modern crypto world of finance? For the answer, we return to the basic properties of money. Gold clearly is a unit of account. It is measured and valued against all other major currencies daily. Gold is a medium of exchange. Gold remains a staple of all major central bank reserve assets. It remains valued as a medium of exchange in global trade especially in times of stress. This has been demonstrated most recently by Iran, Venezuela and Greece using gold to settle debts.

The most important use of gold, however, could very well be its property as a store of value. For more than 5,000 years, gold has been synonymous with wealth. Its inherent physical properties have been universally valued. Gold is not tied to any country, financial system or counterparty. It is no one's liability.

In fact, it is the only tangible, liquid, non-financial asset that is practical to own outside the financial system while remaining marketable at transparent prices across the world's financial centers.

This is where the real value of gold lies. It is a store of wealth outside the digital, crypto and cyber worlds of finance. Physical gold greatly reduces, if not totally eliminates, this new, unknown cyber risk. Gold will never just vanish into the ether or be stolen by a phantom hacker on the other side of the planet. So as I watch the news and assess where the risks to wealth lie, I think physical gold is a pretty good place to be. And it sure is nice that it's cheap now relative to most other asset classes.

David Yoe Williams Jr. is a principal at Strategic Gold, a Naples, Fla.-based firm that buys and stores physical gold for investors.

Original post:
Is Bitcoin Safer Than Gold? - TheStreet.com

Bitcoin has now shown about eight weeks of consecutive buying, leading into new all-time highs (ATHs) for the past three weeks. Trying to stay objective with mild to extreme euphoria in times like this can be difficult. As someone who was a new trader during the 2013 bubble, the chart is beginning to look very similar.

Market capitalization and trading volume both on exchanges and over-the-counter markets have hit ATHs as well.

Despite being in price discovery mode, there is an established, longstanding trend we can compare the current price against, as well as the entire left side of the chart. Past results dont always predict the future, but they can influence it.

There are a few questions we can investigate:

Is the price near an interim top?

Is the price nearing parabolic conditions?

Will the price continue on the previous trend at the same rate?

Looking at the monthly Bitstamp chart, there have not been too many candles of this proportion. This would suggest we are nearing bubble-like conditions.

Price has also begun to close outside of the longstanding trend. This weekly candle has not closed yet, but if it does close outside of the diagonal, it will be the first weekly candle to do so. This again points to breaking the trend strongly to the upside.

Fibonacci retracement and extensions are admittedly partly magic voodoo, but there are plenty of traders who use and watch them to make the resistance and support levels legitimate. Drawing this Fibonacci from the local high established on March 10, 2017, to the low on January 14, 2015, several Fibonacci extensions emerge as well.

These can be seen as resistance levels, the next being the 1.618 at $2,088. Although the horizontal levels are arbitrary, we can confidently predict resistance based on the fit of the previous horizontals. Most of the prior Fibs match the price. This should be seen less as curve fitting and more as levels that just make sense. Based on the Fibonacci levels alone, there is not necessarily evidence for top or bubble just yet.

We can tease apart the trend even further by using the Fibonacci tool on each previous high and low.

In the trend, a consolidation from the previous high to low has yielded a price that has seen resistance at the 2.272 Fibonacci extension. Currently, the price has exceeded the previous 2.272 Fibonacci extension and shown it was supported based on the multiple candle touches. This suggests price is moving faster than the previous trend as well as closer to bubble-like conditions.

For low-timeframe, intra-day trading, there was a long entry signal when the price cleanly broke the consolidation triangle. On the next correction, pullback or consolidation event, Id expect the support diagonal (green) to remain the same.

Remember that splashy gold parity headline? BTC is now sitting several hundred dollars above it.

Summary

Bitcoin is making ATHs by almost every available metric: price, market capitalization, volume, hashrate, difficulty and fee per transaction.

Although $2,000 is the next milestone and resistance target, the price will likely exceed that level based on the strength and rate at which the price is exceeding current trends.

Watch for signs of a large pullback or correction in the near future, two to three months at the latest, based on previous price history.

Trading and investing in digital assets like bitcoin is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTCMedia related sites do not necessarily reflect the opinion of BTCMedia and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.

See the rest here:
Bitcoin Price Analysis: Nearing a Bubble...but We're Not There Yet - Bitcoin Magazine

I had planned to put out our research on "Will there be an ETF Bubble?", but two things came up:

One: This is so outrageous, I had to write about it. In my mind, the only way you can treat absurdity is by laughing at it. See article, unless you have no sense of humor.

Two: I have a couple quoted comments from experts coming in, that will be weighing in on ETFs.

So, next week: "The ETF Bubble"

Now, about Bitcoins: Here's a quick guide: (italics and bold, mine)

What is it:

Crypto-currency

What actually is that? A made up name?

Who invented it? Satoshi Nakamoto (an alias)

When did it debut?

2009 - An actual fact.

What's the hook about it?

It's the first decentralized peer to peer payment network that is powered by users with no central authority or middlemen.

Is it a network or a currency, or what? No controls, no backing and no regulations about it.

Who owns/controls it?

Nobody

Is that anarchy or chaos or both?

Where do you get them? There are about 50 Bitcoin exchanges, 2 in the US, 7 "international," the rest in somewhat civilized countries, including one in China. Comfortable yet?

Where do you use it?

It's hard to tell. It's up to the individual businesses. No directories I could find. About 20 countries may have businesses that take it. There is a Crypto-Currency Foundation in Russia. Um not much help, there.

How is its use protected?

There's a Full Node. I can't even go there, it's too easy.

Is it safe?

The Royal Bank of India has been repeatedly flagging concerns on virtual currencies like Bitcoins, stating that they pose potential financial, legal, customer protection and security-related risks. In recent cyber attacks, "ransomware'' hackers held victims hostage by encrypting their data and demanding them to send payments in bitcoins to regain access to their computers. (Economic Times, 5-17-17). So the answer is:

No.

Is it widely used?

Between 3-6 million people use them.

That's a lot of dupes.

So, how do I get them, then?

"Mining"

Get a shovel, in more ways than one.

Who "runs" it?

Somebody named Gavin Andersen, formerly Gavin Bell; maybe Satoshi Nakamoto, who knows?

Is it a good investment?

Stanford and Princeton say bitcoin has volatility seven times greater than gold, eight times greater than the S&P 500, and 18 times greater than the U.S. dollar. My answer:

No.

Some of the hype tossed by Bitcoin sellers include:

Buy bitcoins with your IRA

Seriously? Sure, reverse mortgage your house while you're at it.

It's a new kind of money

Wait, I thought it was a network?

Buy bitcoins in 30 seconds. So I can lose money at the speed of light. We can double your bitcoin value in 100 hours

You just write it down and give it to me, right?

Earn .025% in daily interest

Is that FIDC insured?

Worldwide payments

To whom?

A control against fraud

Wanna Bet?

Low processing fees.

It costs money to use "money."

Fast peer to peer transactions.

Spend it at the speed of light.

If you're a vendor you can sign up to receive bitcoins.

Then what do I do with them?

The Bitcoin network never sleeps.

You can pay for them anytime.

Choose your own fees.

WHAT? How about -0-?

Some effort may be required to protect your privacy

That's reassuring.

Trust and Integrity, not like banks

Enough, already!

So, here's the worst part:

Last month, the SEC trashed an application to list a Bitcoin ETF. Under corporate pressure (from the financial firms, now). NOTE: IF YOU KNOW OF A WORSE IDEA, PLEASE LET ME KNOW. I'M RUNNING OUT OF MATERIAL.

The SEC said they will review that decision.

An ETF that tracks a mythical digital currency bitcoin that has no financial fundamentals, no earnings except for the collectors, and a handful of peculiar markets.

Based on what I read from the proponents, "Bitcoin is a virtual currency that can be used to move money around the world quickly and with relative anonymity, without the need for a central authority, such as a bank or government. A fund holding the currency could bring more professional investors to the asset and push its price higher."

All in the name of profits, right. Do you think the description is self-serving?

What about risk? SEE "VOLATILITY, ABOVE. At least with Krugerrands, there was a country involved; and, they're GOLD! I could not find Bitcoinistan on any global map.

It is virtual.

There's nothing behind it.

What about cyberscamming or cyberstealing?

Governments have not rushed to endorse it, although some merchants have.

China is going to endorse it as a currency. Does that give you comfort?

It apparently sells for something like $1250 or so, now. Did I hear "BUT, IT MAY GO UP THROUGH THE ROOF. I NEED TO OWN SOME"?

Still, some people will buy it as an "investment." In my opinion, Monopoly money is safer.

Next week: "The ETF Bubble" (with experts)

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I do have serious exclusive research, analysis and opinions on the Marketplace as: The Fiduciary Sale: In Search of the Ethical Advisor. Also see somebodyelsesmoney.com. Thanks.

Excerpt from:
Bitcoins - Are You Kidding Me? - Seeking Alpha