How low will Bitcoin now go? The history of price bubbles provides some clues
by ilene - December 10th, 2018 7:33 pm
How low will Bitcoin now go? The history of price bubbles provides some clues
The Bitcoin bubble is perhaps the most extreme speculative bubble since the late 19th century. Shutterstock
Courtesy of Lee Smales, University of Western Australia
Nearly 170 years before the invention of Bitcoin, the journalist Charles Mackay noted the way whole communities could “fix their minds upon one object and go mad in its pursuit”. Millions of people, he wrote, “become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first”.
His book Extraordinary Popular Delusions and the Madness of Crowds, published in 1841, identifies a series of speculative bubbles – where people bought and sold objects for increasingly steep prices until suddenly they didn’t. The best-known example he cites is the tulip mania that gripped the Netherlands in the early 17th century. Tulip bulbs soared in value to sell for up to 25,000 florins each (close to A$45,000 in today’s money) before their price collapsed.
The Bitcoin bubble surpasses this and all other cases identified by Mackay. It is perhaps the most extreme bubble since the late 19th century. In four years its price surged almost 2,800%, reaching a peak of US$19,783 in December 2017. It has since fallen by 80%. A month ago it was trading at more than US$6,000; it is now down to US$3,500.
That’s still a fantastic gain for anyone who bought Bitcoin before May 2017, when it was worth less than US$2,000, or before May 2016, when it was worth less than $500.
But will it simply keep dropping? What makes Bitcoin worth anything?
To begin to answer this question, we need to understand what creates the values that drive speculative price bubbles, and then what causes prices to plunge.
The above chart shows the magnitude of the Bitcoin bubble compared with the price movement of Japanese property and dot-com bubble from four years prior to their peak until four years after.
When asset values diverge
We typically think about…
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Cryptogeddon Continues – Bitcoin Plunges To 2018 Lows Amid ‘Cash’ Chaos
by Zero Hedge - December 7th, 2018 8:36 am
Courtesy of ZeroHedge. View original post here.
Crypto markets have accelerated their losses again overnight with Bitcoin crashing to new 2018 lows, Ethereum back into double-digits, and Bitcoin Cash utterly devastated as lawsuits fly.
Once again a sea of red across the crypto space…
Bitcoin Cash is down 40% this week alone…
Bitcoin has puked back below last month's lows…
Second-largest crypto by market cap Ripple (XRP) is down by around 12 percent on the day, trading at almost $0.30 as of press time, according to Cointelegraph’s Ripple Price Index. Ripple’s weekly and monthly charts are also blisteringly red, with losses of around 23.5 and 40 percent respectively.
Third-ranked crypto, Ethereum is back into double-digits….
As CoinTelegraph notes, virtually all of the remaining top ten coins on CoinMarketCap are seeing deep red; Stellar (XLM) and Bitcoin Cash (BCH) are both down almost 18 percent, at $0.11 and $102.3 respectively; eighth largest ranked crypto Litecoin (LTC) is down close to 15 percent, trading at $25.3, and EOS (EOS) is the hardest hit, down almost 23 percent on the day at $1.68.
image courtesy of CoinTelegraph
Newly-forked “Bitcoin SV” (BSV) is the only exception among the top ten, soaring 20 percent on the day to trade at around $109, sealing the ranking of 5th largest crypto. With a market cap of around $1.94 billion as of press time, BSV is holding a slim margin ahead of BCH; the latter, ranked 7th, currently has a market cap of about $1.77 billion.
Just yesterday, news broke of a new lawsuit from tech development firm UnitedCorp against Bitmain, Bitcoin.com, Roger Ver, and the Kraken Bitcoin Exchange, which alleges the defendants engaged in manipulation and unfair practices during the immediate aftermath of the BCH-BSV hard fork.
The remaining coins in the top twenty by market cap are all seeing losses of between a 8 and 22 percent range.
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$1 Million “Moonshot” Options Betting On Bitcoin $50k About To Expire Worthless
by Zero Hedge - December 6th, 2018 7:40 pm
Courtesy of Zero Hedge
One year ago, as bitcoin prices were in free fall just after peaking above $20,000 (a peak that, as fate would have it, ended up marking the end of one of the most frenzied asset bubbles since the financial crisis) we reported that one "mystery trader" (later revealed to be BlockTower Capital) had dropped $1 million on a batch of one-year call options that would only pay off if bitcoin traded above $50,000 before their expiration date.
[BlockTower Capital is among the best known crypto hedge funds in a booming space that now includes over 175 such firms, according to fintech analytics firm Autonomous NEXT. BlockTower was founded by Ari Paul, formerly of trading firm Susquehanna, and Matthew Goetz, a former VP at Goldman Sachs. ~ ZH]
Now, with the knowledge of hindsight, we can safely say that this "moonshot" bet may be remembered as one of the most spectacularly wrong-headed wagers placed by an "institutional" crypto trader in the history of the nascent virtual currency market. And considering that a not-insignificant number of buyers paid $20,000 for a bitcoin (which was trading below $4,000 on Thursday), there has been quite a bit of competition for that dubious distinction.
Because as Bloomberg reminded us on Thursday, these options will expire worthless in about two weeks (barring a stunning recovery rally of 2,000% which…never say never).
Fortunately for Paul, the losses from this trade aren't quite as disastrous as 100% derivative loss would suggest. That's because, as Paul revealed during an interview with CNBC one year ago, BlockTower offset the risk from its OTM options bet by selling some of its bitcoin holdings in the spot market. Paul said the trade allowed him to hedge against losses while locking in some upside from bitcoin's torrid rally, with the added bonus of winning a big payout should bitcoin rocket higher.
One bitcoin was trading at roughly $16,200 when Paul purchased the options on LedgerX (the exchange said the trade remains the largest ever placed on its platform).
"These calls let me capture upside while reducing my downside risk," Paul told CNBC. He later tweeted that the trade – selling some of his Bitcoin holdings while buying the call options – was profitable.
Listen to Paul's interview from December 2017 in full below:
Man behind massive bet that bitcoin could hit $50,000 from CNBC.
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My Bitcoin Wealth Management Panel
by ilene - December 2nd, 2018 2:22 pm
My Bitcoin Wealth Management Panel
Courtesy of Joshua M Brown
Josh here…
I was honored to have moderated a panel at the 2018 Consensus: Invest conference this week in Times Square in which we discussed whether or not crypto currencies and Bitcoin will ever become a wealth management topic.
My panel, three gentlemen I invited personally:
Tyrone Ross of Noble Bridge Wealth Management, Mark Casady of Vestigo Ventures and the former CEO of LPL Financial and Ari Paul, founder and CIO of BlockTower Capital.
We tackle all of the most important crypto related topics as they pertain to wealth management – from trust to custody to ETFs to price. Join us and let and me know what you think in the comments below!
Be sure to subscribe to our channel, The Compound, so you never miss an update!
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The Commish
by ilene - November 30th, 2018 7:35 pm
The Commish
Courtesy of Joshua M Brown
Last night I had the pleasure of attending a talk put on by Andrew Ross Sorkin and the New York Times in their auditorium on 41st Street. Andrew’s special guest was Securities and Exchange Commission Chairman Jay Clayton and the conversation was about blockchain technology, crypto currencies, distributed ledgers, initial coin offerings and a lot more.
I want to say a couple of things about what I saw and heard at the event…
We are in good hands with both of our Jays. As regular readers know, I’m not a Trump fan. However, between his Fed Chairman pick, Jay Powell, and his choice for SEC Chairman, Jay Clayton, I feel that the investor class and market participants in general are in good hands. Jay Clayton is an accomplished securities and corporate attorney and genuinely has an affection for our capital markets and an appreciation for the rules he’s been sworn to uphold.
Clayton is open-minded…: We have a commissioner who is open to the idea of new technologies being used within our markets to make trading more efficient, and who has taken his time to learn about all of the optimism and skepticism surrounding crypto currencies. He’s done the research himself and is completely engaged in the subject matter.
…but he’s also a constructionist: In one of my favorite exchanges of the night, when asked about whether or not our regulatory capabilities were up to snuff in the age of blockchain, Jay shared his view that the people who created our current securities laws in the 1930’s were geniuses. These rules have withstood the test of time and have been in place to foster the growth of our economy to more than $20 trillion. “I think the new technologies ought to be able to adapt to our rules, we shouldn’t change our rules every time there’s new technology.” He’s speaking generally about the two main types of rules the SEC enforces: Those dealing with the offering and sale of securities to the public and those dealing with the secondary markets that securities trade in.
Bitcoin is a currency, not a security or a commodity: His view of what Bitcoin actually…
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Bitcoin Surges Most Since July, Back Above $4000
by Zero Hedge - November 28th, 2018 8:15 am
Courtesy of ZeroHedge. View original post here.
While it is certainly premature to say 'the bottom is in', buying pressure across cryptos has been strong in the last 24 hours – raising total market cap by over $11 billion for the biggest jump since July.
Down, but not out…
image courtesy of CoinTelegraph
Bitcoin is back above $4000…
But it's not just Bitcoin – the cryptospace is a sea of green this morning…
Notably, Litecoin has erased the weekend's carnage and the rest of the cryptospace is getting close…
In news for institutional crypto exposure, CoinTelegraph reports the world’s second largest stock exchange Nasdaq and U.S. investment firm VanEck yesterday announced a partnership to jointly launch a set of “transparent, regulated and surveilled” digital assets products. The announcement echoes yesterday’s report from Bloomberg, citing “two people familiar with the matter,” that Nasdaq would be rolling out a Bitcoin (BTC) futures contract as early as Q1 2019.
The chairman of the world’s largest stock exchange, New York Stock Exchange (NYSE)’s Jeffrey Sprecher has also this week said he believes the survival of digital currencies as an asset class is “unequivocal.”
It appears – for now – that Michael Moro was right.
The CEO of cryptocurrency trading companies Genesis Trading and Genesis Capital Trading, said that the Bitcoin (BTC) price could bottom at $3,000 in an interview with CNBC Nov. 23. Speaking on CNBC’s “Squawk Box,” Moro suggested that the leading cryptocurrency will lose another 30 percent before bottoming at $3,000. Moro said, “You really won’t find [the floor] until you kind of hit the 3K-flat level.”
Moro addressed small resistance levels, saying that he does not think the BTC price can stabilize in “the mid-3s,” also noting that the $4,000 level was tested twice in the previous days.
The crypto trader said that long-term investors are more poised to handle BTC’s slump and wait until the price rebounds, while at the same time advising not to buy the cryptocurrency at the dip:
“This is about the fifth or sixth 75 percent-plus drawdown that we’ve seen in the 10-year history of Bitcoin. And so if you have that [long-term] lens, I don’t believe institutional investors really ultimately care where the price of Bitcoin ends in 2018, simply because they’re looking at things three to five years out.”
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Cryptogeddon: Bitcoin Battered Below $4000 As Long Liquidations Continue
by Zero Hedge - November 24th, 2018 8:16 pm
Courtesy of Zero Hedge
Amid a series of liquidations of large long positions, Cryptocurrencies have crashed to fresh 2018 lows today with Bitcoin blowing through the $4000 level.
It's a sea of red…
With the majors down 8-13%…
But, as CoinTelegraph reports, Michael Moro, the CEO of cryptocurrency trading companies Genesis Trading and Genesis Capital Trading, said that the Bitcoin (BTC) price could bottom at $3,000 in an interview with CNBC Nov. 23.
image courtesy of CoinTelegraph
Speaking on CNBC’s “Squawk Box,” Moro suggested that the leading cryptocurrency will lose another 30 percent before bottoming at $3,000. Moro said, “You really won’t find [the floor] until you kind of hit the 3K-flat level.”
Moro addressed small resistance levels, saying that he does not think the BTC price can stabilize in “the mid-3s,” also noting that the $4,000 level was tested twice in the previous days.
The crypto trader said that long-term investors are more poised to handle BTC’s slump and wait until the price rebounds, while at the same time advising not to buy the cryptocurrency at the dip:
“This is about the fifth or sixth 75 percent-plus drawdown that we’ve seen in the 10-year history of Bitcoin.
And so if you have that [long-term] lens, I don’t believe institutional investors really ultimately care where the price of Bitcoin ends in 2018, simply because they’re looking at things three to five years out.”
When asked about what the low price of Bitcoin could mean for miners, Moro suggested that the cost to mine one Bitcoin will go down because “the hash rate has dropped.”
The recent cryptocurrency market decline has resulted in a similar drop in mining profitability and forced Chinese operators to sell their mining devices at a loss. Some mining machines are being sold on the second-hand market for merely 5 percent of their original value.
Bitcoin’s price has kept falling, along with the rest of the crypto market,…
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One year later
by ilene - November 23rd, 2018 6:11 pm
One year later
Courtesy of Joshua M Brown
We’re officially at the one year mark from the day everyone in America temporarily went crazy for Bitcoin.
The story goes: Bitcoin prices had doubled from $3,000 to 6,000 in the fall of 2017 and had become a gigantic, raging mania across the Internet and social media globally. The olds had begun to hear bits and pieces about it from the evening news and their local newspapers, but then on Thanksgiving, when their sons and daughters, nephews and nieces brought personal stories of large gains to the table, it was game on.
This is a real article from 11/22/2017:
Bitcoin would double and then double again over the next month toward it’s all-time high just below $20,000. And then Chicago listed a futures contract that (finally) allowed professionals to short it. Game over. Fever broken. The ensuing 12-month period has been a veritable clinic in wishful thinking, bitter denial and intellectual ass-covering, from the Valley to The Street.
It was the perfect bubble. They’ll be studying it in finance courses forever.
(Narrator: it stopped.)
I documented my own experiences with Bitcoin during 2017 here on the site. I had a lot of fun and met some great people during the mania. I was extremely lucky to have gotten a peek behind the curtain in early December – there was no Wizard of Oz after all – and this enabled me to call bullshit on the whole thing. You can see all the comments and links here as my views evolved. This is one of the main reasons I blog, by the way – to keep an accurate record of how my own attitudes change along with market developments.
I ended up getting even more bullish on the technology but bearish / skeptical / ambivalent about the prices of coins. So far, this has been a reasonable viewpoint. I think blockchain’s big impact is going to be on the expense side of corporate and government balance sheets, not on the revenue line. It strikes me as an efficiency thing more than as a growth thing. I may change…
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Bitcoin’s high energy consumption is a concern – but it may be a price worth paying
by ilene - November 9th, 2018 2:12 am
Bitcoin's high energy consumption is a concern – but it may be a price worth paying
Shutterstock
Courtesy of Steven Huckle, University of Sussex
Bitcoin recently turned ten years old. In that time, it has proved revolutionary because it ignores the need for modern money’s institutions to verify payments. Instead, Bitcoin relies on cryptographic techniques to prove identity and authenticity.
However, the price to pay for all of this innovation is a high carbon footprint, created by Bitcoin mining.
Fundamental to that mining process is a peer-to-peer network of computers, referred to as validators, who perform Proof of Work. In essence, this involves computers solving computationally-intensive cryptographic puzzles that prove blocks of transactions, which are recorded in a public asset ledger, known as a blockchain. This ledger is publicly viewable by all computers, which helps the system achieve consensus in an unreliable network of participants.
Validators are called miners because the computer, or node, that successfully validates one of those blocks is rewarded with “mined” Bitcoin. Thus mining is also the process by which Bitcoin adds new coins to the network.
But these processes consume a vast amount of power.
In my 2016 article, Socialism and the Blockchain, I estimated Bitcoin mining’s annual energy use at 3.38 TeraWatt hours (TWh), which I equated to the total 2014 annual consumption of Jamaica. Recent estimates show the currency’s annual consumption rising exponentially, currently reaching an incredible 55TWh. Indeed, a new paper in Nature Sustainability suggests that the energy costs of mining cryptocurrencies exceed the costs of mining physical metals. Furthermore, the paper estimates that Bitcoin emitted between 3m and 13m metric tonnes CO? in the first half of 2018. A team in Hawaii even suppose that, if Bitcoin’s adoption continues to rise, within a couple of decades, such emissions could help push global warming above 2°C.
The energy costs of mining Bitcoin, it has been estimated, now exceed the costs of mining actual metals. shutterstock
However, both the study in Nature and the team in Hawaii make assumptions about…
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Bitcoin Volatility Collapses To 2-Year Lows – More Stable Than The S&P 500
by Zero Hedge - November 7th, 2018 6:25 pm
Courtesy of ZeroHedge. View original post here.
Bitcoin, like most cryptocurrencies, has experienced tremendous pain in 2018, but there is a silver lining developing – in stark contrast to the violent swings in global equity markets, wild price swings have been absent in daily Bitcoin flows in the last month or so.
image courtesy of CoinTelegraph
Measured on a weekly basis, absolute levels of Bitcoin volatility is probing levels not seen since late 2016, right before the most massive pump and dump in modern times took the coin from $700 to almost $20,000 within 12 months.
"Volatility has been a major characteristic of the digital currency, which turned 10-years-old last week, throwing up major hurdles to its emergence as a mainstream asset class," said Reuters.
Bitcoin volatility sinks to a near two-year low
However, even more noteworthy is the fact that Bitcoin is now less volatile intra-month than the S&P 500 (October saw Bitcoin's high to low range of 11.3%, smaller than the 12.9% range in the S&P 500)…
And on a weekly basis, Bitcoin remains notably less volatile than stocks…
Many of Wall Streets' seasoned institutional traders were skeptical about Bitcoin's ability to store a value from the start, with most of them stayed clear and watched the spectacular rise, then fall of the coin.
From the high of roughly $20,000 in late December 2017, the coin collapsed 70% to the 6,000 handle, where it currently trades lifeless today.
During the collapse, regulators across the world emphasized price instability when issuing warnings to gullible retail investors who mistakenly listened to CNBC's cryptocurrency research desk's 24/7 pump.
Institutions are still waiting for more guidance on how regulators will handle bitcoin products such as exchange-traded funds, leading most compliance segments within firms to heavily restrict their trading desks from buying.
Oliver von Landsberg-Sadie, CEO of BCB Group, a cryptocurrency prime broker, warned Reuters, that a decline in trading volumes over the last three months had been a key factor in declining volatility.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site