Bitcoin still seems to be blue chip in crypto market

Here’s what stumps me. Why would you invest in a newer derivative of volatile newish alternative investment?

I have written extensively on bitcoin. I’ve told readers about its soaring run up in price and its less than equally roller coaster rides down. Pointed out it reaching $3,000 and the $500 drop in the span of 18 minutes soon after.

Also questioned the exchanges that seem to have outages as prices begin to fall.

However when I wrote of the other cryptocurrencies that have popped up in response to bitcoin, such as litecoin and ethereum I was a bit more skeptical. Some of these digital currencies are not currencies at all and are based off bitcoin pricing, but not 100% correlated.

You can see this in their pricing over the last 10 days, while bitcoin is in a range between 2,550 and $2,700, these alt coins are falling faster on a percentage basis.

I still have a somewhat conventional investing philosophy, stay in the best-known entity in the space. While bitcoin’s pedigree is somewhat questionable, it still has a far longer track record of trading than any of these other instruments.

Oh, and one other thing, ethereum has an instrument attached to it called “gas”, which you can purchase with the crypto to enhance your ethereum investment. Gas is something that vaporizes quickly and that may be what happens to your investment in these other digital instruments.

Advertisements

Bitcoin falls $500, but Coinbase cratered worse

Well right after I posted yesterday that bitcoin had broken through the $3,000 mark all hell broke loose.

The digital currency lost $350 in an 18-minute span and an hour later would fall another $150 before finding a floor at $2,530 or so.

This is why I caution “investors” in the currency. You need to be able to stomach the market gyrations on the up side as well as the down side. If you enjoy roller coaster rides, then this may be the investment instrument for you.

A I write bitcoin sits at $2,743, up 3% for the past 12 hours.

The more troubling aspect of yesterday’s drama was the performance of Coinbase, one of the largest digital currency exchanges.

Coinbase tweet

The platform was “down” for a good part of the day, while prices were cratering. Above is the tweet the company put up yesterday at 2PM EDT.

“Investors” could not log on to their accounts and pricing information was spotty at best with no ability to trade. This needs to be rectified immediately if the cryptocurrencies are going to have broader appeal. You can’t have  a major exchange go down when traffic spikes.

This is the second time in a month Coinbase has suffered an outage due to high trading volume. This lack of quality control leads me to believe that the exchange did not want to suffer a liquidity squeeze as sellers were trying to get out of the market.

If that is the case, this could be the first sign of trouble in the cryptocurrencies.

Fangs may lead marts south; BTC heads north of $3K

On Thursday, I wrote about hearing on the street that Friday was going to be a difficult day for stocks.

I then wrote on Friday that futures were not showing any worries from either the James Comey testimony, the English election results nor the possible rate hike this week by the Federal Reserve. However, the headline I wrote was “Nothing to see here, please go buy some FANGs”.

Well the FANGs were the problem. The Nasdaq traded lower by 1.8% Friday as Facebook (-3.3%), Apple (-3.8%), Netflix (-4.7%) and Google (-3.4%).

The selloff came from a Goldman Sachs analyst report saying these and other tech firms’ stock prices are getting overvalued and reaching valuations like the pre-Internet bubble burst.

The pullback should not be too much of a surprise since the Nasdaq is up more than 15% year-to-date, which is double the Dow Jones industrial average’s gains over the same period.


Bitcoin spent much of the overnight trading session above the $3K mark, before pulling back to $2995 by 6AM EDT.

The cryptocurrency is finding strength on each pullback, which for a market technician means there’s a large base being formed. This base is allowing for $80-$100 spikes in daily pricing like we saw Sunday.

Weekends are still the best price appreciation days since the buying does not need any major trading outpost such as London, New York or Hong Kong to execute the trade.

The ABCs of bitcoin for those wishing to jump in

As bitcoin reaches for $2,500 again, I thought this would be a good time to let my readers know exactly how digital currencies work and how to get more information if you wish to partake in this alternative investment.

It’s called a decentralized digital currency because it is stored electronically, there are no “coins” to put in your pocket and no one controls its value except the marketplace. The images of gold coins used by media to represent bitcoin are not real and do not exist.

Bitcoins are “mined” or searched for by using computing processing power in a distributed network to locate and solve mathematical problems to acquire the code for the “coin”. It’s not something you or I will be doing so let’s move on.

However this distributed network also provides the backbone to use bitcoin to purchase items or identify the bitcoin you hold.

Bitcoin and other alt coins are called cryptocurrencies not because they are so secretive or used by spies, but because the are based on blockchain technology, which uses robust encryption to secure the identity of that coin.

The blockchain or code behind bitcoin is the innovative technology that allows digital currencies to exist.

But enough about the back-end of bitcoin, to start out acquiring a digital currency you need to have a digital wallet.The wallet can be thought of more like a bank account, which can reside on your computer, phone or other smart device. It is always advisable to have your wallet backed up in another location so that a crashed hard drive does not wipe out your bitcoins.

There are many wallets out there to choose from depending on your security needs and whether you wish to be an active trader or a more passive buy and hold investor.

I say investor, because the majority of people holding digital currencies are doing just that. One year ago bitcoin was trading at $525, it is now nearing $2,500 so at this point it does not make sense to purchase items using bitcoin.

Now like any other investment, there’s no guarantee that bitcoins will continue this rapid rise, but there are some aspect of bitcoins that point in that direction.

The bitcoin protocol, which governors how bitcoin works will only create  21 million bitcoins.As of earlier this year 16.8 million or 80 percent of all the bitcoins to be created have been mined. So unlike the paper currencies in the world today, no governing body can print more bitcoin to dilute its value.

A second bullish marker for bitcoins is that a vast majority of the planet does not know of or is involved in digital currencies, so as this news moves into the mainstream more investors may wish to jump in.

There are some very outlandish predictions for bitcoins value in the next three years as the scarcity and growing numbers of investors become aware, but like I said no investment chart goes straight up.

As the value rises a very important aspect to bitcoins is it can be divided into smaller parts. The smallest divisible amount is one hundred millionth of a bitcoin and is called a ‘Satoshi’, after the founder of bitcoin, the software developer called Satoshi Nakamoto.

Remember this is just a primer and there are many resources out there to study up on this new form currency. I wanted to give the readers some guideposts to study and to get familiar with the protocol and tools needed to tap into this new technology.

 

 

Bitcoin soars $1,000 in week as Wall St. firms take notice

Ok it’s time to dig into the reason for bitcoin’s surging price moves. The digital currency is up just under $1,000 in the last week.

While it was easy to attribute the earlier rises to gamers and then nefarious dark web sites trading on drugs, weapons and sex, or Chinese investors looking to move money out of the country, these latest moves bringing the price to more than $2,750 have far more deep-pocketed investors.

And that’s who is coming into the market — investors — looking for these 5% up daily moves.

I took a look at 5 minutes of bitcoin trading around the globe on Thursday morning and more than 200 bitcoins were traded with the US taking down 150 of them. China in the middle of the night there bought 40.

That’s $55,830 in purchases of bitcoin in dollar terms in five minutes trading window at 7am EDT.

The most surprising country from this trading activity window was that of South Africa, which had such a big presence accounting for roughly 2.5% of the sales recorded over the time. Understanding that this is just a snap shot, it still backs up earlier observations at different times of the buyers distribution.

As I wrote earlier this week, many Wall Street firms are quietly offering well-heeled clients the ability to buy bitcoin and other digital currencies through their trading operations.

While these firms are not publicly endorsing cryptocurrencies, there’s money to be made there. You would need that type of liquidity in the market to see the price jumps of the recent weeks.

Has bitcoin taken on the role of gold and silver as a hedge against the dollar?

Many of the currency desks are the ones trading bitcoin now. So it would make prefect sense that the unencumbered bitcoin — which has no futures, options or ETFs with the ability to suppress pricing — may have replaced precious metals as the dollar hedge.

Now understanding that this trading has taken on a life of its own. And the knowledge and acceptance of bitcoin is in its infancy, but these price movements have some big institutional players behind it. If you can take wild price changes over the course of 10 minutes as sometimes a free market will do, then the rewards can be quite handsome.