Monthly Archives: August 2017

It is mainly the new "token" cryptocurrencies that are issued in ICOs with no regulatory oversight, which have exploded since the start of the year, that are causing the most anxiety.

One, the "Useless Ethereum Token", which appears to have been set up as a way of showing how worthless many of the ICOs really are, is nonetheless changing hands for 3 cents a unit. "No value, no security, and no product. Just me, spending your money," its website states.

"It's just so easy to raise money on an ICO right now, it just feels like there's a gold rush going on there," said Moffat. "Some of the new currencies - beyond bitcoin and Ethereum - could crash to zero."

By mid-July, about $1.1 billion had been raised in ICOs this year, roughly 10 times more than that in the whole of 2016, according to cryptocurrency research firm Smith + Crown.

The rapid ascent of ICOs prompted the U.S. Securities and Exchange Commission (SEC) to warn last month that some ICOs should be regulated like other securities.

This is new digital territory and how the rapidly proliferating cryptocurrency market will play out is anyone's guess.

While critics say the highly correlated nature of the currencies means the weakness of newer entrants could bring the whole house down; others argue market forces will ensure the best players prevail.

"Will some of these (currencies) go away? Of course," said Vias of Ripple.

"We're going to see Darwinism in real-time here. Only the strong will survive."

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Buoyant bitcoin stirs crypto-bubble fears - CNBC

Two traders are unfazed by bitcoin's meteoric surge and say that between the cryptocurrency and gold, you're better off trading the yellow metal.

Bitcoin has jumped 240 percent this year to a high of $3,288 on Wednesday, while gold was trading at $1,280. But despite the bitcoin gains, Brian Stutland of Equity Armor Investments and Path Trading Partners' Bob Iaccino believe gold is still a better bet than bitcoin from technical and fundamental perspectives.

"When you look at gold over the past couple of months, [it has] tracked very well [relative] to the cryptocurrency," Stutland said Tuesday on CNBC's "Futures Now." "If you price adjust and volatility adjust, I think gold still has a little bit of catching up to do."

As for Iaccino, he believes that while bitcoin's popularity is indisputable, a takeover by another digital currency could be possible, leading him to believe that bitcoin is more unstable than many may think.

"Bitcoin, right now, is the most popular [cryptocurrency] and it is the most valuable one," he said. "But I don't see it as a store of value, because any [other cryptocurrency platform] could come out with a slightly better technology and completely replace bitcoin."

In order to catch up to all the action bitcoin is seeing, Stutland wants to buy gold at the $1,265 level, targeting a move up to $1,285 by December expiration with a stop at $1,250, a key support level that gold has held, according to the trader.

"The volatility is tremendous, so you're going to see wild swings in here and that is something to be aware of," he said.

Gold actually rose more than 1 percent on Wednesday off threats delivered by President Donald Trump and North Korea's Kim Jong Un to one another, the yellow metal being one of the biggest safety trades in times of possible turmoil. Bitcoin, on the other hand, dropped more than 3 percent Wednesday, reversing some of the cryptocurrency's gains from the week

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Bitcoin is almost triple the price of gold here's what traders think you should buy - CNBC

Currently, bitcoin transactions are validated through a process called mining, where powerful computers solve a complex math problem before the transaction is recorded on the blockchain. A whole confirmed transaction can take up to an hour.

The Lightning Network promises to reduce this process to seconds. It requires participants to agree to a transaction on a separate channel and then the blockchain will update their accounts accordingly. This can be done without the need for miners or third parties such as digital wallet providers.

The developers of Lightning say this means transactions can be instant, will allow for micropayments of bitcoin and enable a larger volume of transactions. It may even help bitcoin be used more on the high street.

"Lightning can be used at retail point-of-sale terminals, with user device-to-device transactions, or anywhere instant payments are needed," the developers said in a summary document.

Lightning will make bitcoin a long-term competitive payment platform and could revolutionize peer-to-peer payments, according to Gatecoin's Menant.

"Particularly with regards to micropayment transactions that may be useful for emerging markets with low-value local currencies," he said.

"It can also be implemented to facilitate machine to machine payments, using its smart contract framework, so that firms running various automated processes can benefit from direct payment relationships between its software and that of its clients or suppliers."

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As bitcoin comes off its record high, the next step is to avoid a 'lightning fork' - CNBC

Bitcoin saw a modest pullback from its recent record run on Wednesday, but the cryptocurrency enjoyed some upbeat news on the session, with Fidelity Investments announcing that it would start tracking the digital unit for its clients.

A single bitcoin was valued at $3,393.76, off by about 2.5%, based on levels from late Tuesday in New York, according to digital-currency research site Coindesk.com. The total market value for the most popular digital currency was at $55.4 billion, according to CoinMarketcap.com.

Boston-based money-management giant Fidelity Investments said it would, starting Wednesday, enable clients to monitor their digital-currency holdings via their accounts, in partnership with digital-wallet provider Coinbase.

This is an experiment in the spirit of learning what these crypto assets are like and how our customers may want to interact with them, Hadley Stern, senior vice president and managing director at Fidelity Labs, the companys innovation unit, told Reuters.

Fidelity CEO Abigail Johnson has been one of the biggest champions of bitcoin and its underlying blockchain among traditional financial-services companies. Digital-currency blockchains refer to the peer-to-peer digital network designed to transfer and track ownership of he currency.

Recognition by mature, Wall Street enterprises has appeared to both help support demand and reaffirm to some the growing legitimacy of virtual monetary units, even if they are not totally understood or used by average investors.

Bitcoin and its virtual ilk have drawn increased attention from businesses and regulators in recent months, which may also account for its record rally in 2017. Bitcoins value has surged by 250% since the start of the year, compared with a 10.5% year-to-date rise for the S&P 500 index SPX, -0.04% and a nearly 12% gain for the Dow Jones Industrial Average DJIA, -0.17%

Rising geopolitical tensions, headlined by North Korea threatening to launch a ballistic-missile attack against U.S. territory Guam, didnt appear to influence digital currency moves Wednesday.

Read: Guams governor: There is no threat but American island will be defended

Elsewhere in digital currencies, the ethereum networks ether token bought $299.77, up 6.7% from its levels late Tuesday in New York. Ethers total value was at about $28.2 billion.

Meanwhile, Bitcoin Cash was down about 7% at $308.79, compared with its late-Tuesday value. The new digital currency, which emerged out of the original bitcoin Aug. 1, is the result of a small faction of bitcoin developers demand for a version of the currency that allowed for so-called miners, who support the unit, to process transactions in larger increments. The currency is presently the fourth-largest cryptocurrency, with a value at $5 billion.

Also read: Meet Bitcoin Cash the new digital-currency that surged 122% in less than a day

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Bitcoin retreats from all-time high even as Fidelity debuts digital-currency tracking - MarketWatch

There aretwo bitcoins now?

It's safe to sayuncertainty cast a pall over the cryptocurrency markets last week when on August 1, a group of developers and miners split the blockchain and created a new cryptocurrency.

It was the first (high-profile) bitcoin fork to date, and in response, the price very well could have entered a period of unprecedented churn. With bitcoin and bitcoin cash competing, it wasn't hard to foresee this creating market dislocations and downward pressure on price.

What happened, however, was the opposite, as in the last few days markets have surged past all-time highs. In fact, analysts have indicated a major upswell in confidence and a broad consensus that the upward march of bitcoin's price could continue.

Brad Chun, CEO of blockchain startup Mooti Digital Identity, went so far as to argue that institutional money is likelyto pour into bitcoin as a result.

Chun told CoinDesk:

"For early tech adopters who can't fathom a market cap of over $50 billion or $100 billion for bitcoin, they haven't seen anything yet. While we might see profit taking short-term, I view any dips as buying opportunities."

Chun, who plans to hold bitcoin through the remainder of 2017, has a $5,000 end-of-year price target on bitcoin, a price figure that includes bitcoin cash and any other potential "fork currencies" created as a result of disagreements over the network's future.

Kevin Zhou, of the cryptocurrency fund Galois Capital, is also bullish on the price of bitcoin, particularly after Segregated Witness locked in on the main bitcoin blockchain yesterday and the split went by without incident.

Zhou said bitcoin could see price gains of 200 to 300 percent year-over-year, for the next two years. And added that $3,000 to $4,500 "seems reasonable" as a price target for the year, though he hedges a bit on that range.

Harry Yeh, managing partner at Binary Financial, is more categorical now that the hard fork has passed.

"Expect a big move past $3,500 possibly this week," he told CoinDesk. Yeh believes $4,000 "is on the horizon" for bitcoin by the end of the year.

But perhaps the most prevailing view in the wake of the bitcoin cash fork is that a major headwind has just come off the table.

The argument goes like this: bitcoin survived a fork without a major technical or price catastrophe. As a consequence, the market has stabilized, clearing the way for higher prices in the future.

Yehexplained:

"Traders trade based on technical and fundamental analysis. With the hard fork issue gone and the technicals being very bullish again, long term there is definitely a lot more confidence amongst traders."

Once again, confidence has risen because the downside risks weren't realized.

Tellingly, and in keeping with this thesis, Yeh points out that this is only the case until "the next" fork arises to darken markets.

Here, Zhou's comments reflect how forks can be both positive and negative factors in the market. While forks can create uncertainty and risk, he noted forks also have an upside the ability to spawn new assets.

"I also think after the success of bitcoin cash forking off bitcion, we might see a lot of other forks happening. 2014 was altcoin mania; 2015-2016 was blockchain mania; 2017 is ICO mania; maybe 2018 will be fork mania," he said.

Elsewhere, Petar Zivkovski, director of operations at Whaleclub, struck a more nuanced note on price direction and short-term price targets.

"2017 has been a stellar year for bitcoin. Barring a black swan event (this is a big assumption in the industry), I think the bull run will continue through the end of the year since it's the predominant trend," he remarked.

While Zivkovski has admitted that the price could see a short-term pullback, he said he is watching out for whether the $3,000 price will hold. If it does, he said $4,000 might not be far off.

Interestingly, Zivkovski struck a novel note that none of the other analysts picked up on: The possibility that soaring bitcoin prices could cause a negative feedback loop for the price of bitcoin.

In a nutshell, his thesis is that the "incredible price rise" in bitcoin is attracting the attention of both governments and regulators on a global basis. As a consequence, "a wider crackdown on bitcoin exchanges," he said, could mitigate price gains.

In other words, bitcoin could become a victim of its own success.

Fork art image via Shutterstock

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Bring on the Forks: Bitcoin Traders See Improving Price Outlook for 2017 - CoinDesk

Bitcoin is either an enormous bubble or has a lot further to run. Financial forecasters are weighing in on the cryptocurrency, trying to divine where bitcoins price is headed, now that it sits at around $3,400, up from around $600 a year ago.

Here are the arguments for bitcoin hitting $5,000or higher.

Ronnie Moas of Standpoint Research has a target of $5,000 for bitcoin by 2018, or in five months time. He published his call in a 122-page report at the end of July, which you can get via the Standpoint website or if you contact him on Twitter.

His rationale is that a fraction of the worlds $200 trillion in stocks, bonds, gold, and cash will eventually make its way into bitcoin and other cryptocurrencies over the next 10 years. Moas thinks cryptos will be used as a payment system in emerging economies, and a store of value elsewhere. Cryptocurrencies then establish themselves as an asset class that mainstream investment advisers pitch to clients, he says. This scenario takes bitcoins market value from $56 billion today to $1 trillion. Overall, he believes cryptocurrencies will reach $2 trillion in market valueand thats his conservative estimate.

It would not shock me to see cryptocurrencies go to 4% of global investment assets, Moas says. Before anyone laughs at me for suggesting that something like that could happenjust look at what happened [in bitcoin] in the last five years. People who put in $10,000 made $1 million already. It happened already and I think it will happen one more time. We are in the 15th minute of a 90-minute soccer gameand it could go to overtime.

Both bitcoin and gold are scarce commodities with a finite supply, notes Tom Lee of Fundstrat. Both, arguably, have no particular utility beyond the value ascribed to them by the markets.

In July, Lee published a report setting out the case for valuing bitcoin as a gold substitute, according to CNBC. His methodology implies bitcoins price will reach $20,000 to $55,000 in five years, representing a 12 to 43-fold increase from todays price. The value of all the worlds gold is around $7.6 trillion at current prices, or around 130 times the size of the bitcoin market. As bitcoins market value rises, Lee reckons central banks will start buying it, pushing the price up further and accelerating the substitution of gold, he told CNBC.

Goldman Sachs technical analyst Sheba Jafari sees bitcoin potentially hitting $3,915, or about 15% above current prices. Jafari has identified four waves of bitcoin price rises over the past several years, and believes that a fifth is coming, eventually: It just might take time to get there.

Saxo Banks Kay-Van Petersen argues that a Trump administration spending spree could send US growth and inflation soaring, forcing the Federal Reserve to hike interest rates aggressively. Emerging markets, especially China, will then look for alternative asset classes not so beholden to central bank-controlled monetary policies. Enter bitcoin. Petersen predicted last year that bitcoin would hit $2,000 based on those factors this year. That target was achieved, but not quite for the reasons he spelled out.

In May, he set out a 10-year forecast for bitcoin hitting a whopping $100,000, based on cryptocurrencies capturing 10% of all currency trading volume within a decade. Bitcoin would account for about a third of that, or some $175 billion traded daily. If the daily traded volume is typically 10% of bitcoins total market capitalization, that values bitcoin at $1.75 trillion, he told CNBC.

Correction: An earlier version of this article misstated Ronnie Moass prediction of bitcoins market value.

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The case for $5000 bitcoin - Quartz