How can you chart future price bitcoin? No one knows.

On July 15th bitcoin was trading at $1,999, with the news being that there was a split in the direction that the people working within the digital community of how the cryptocurrency was going to move forward.

This morning it is trading at an all-time high of $3,392. It rose $70 by the time I wrote the paragraphs below this one. The question is why?

How can I rationalize telling people to get into BTC, if I have no idea what the price will be in 12 hours, or two hours from now?

Understand that this is so new that 99% of Americans have no idea what I am talking about. And if they heard about BTC, 99% of them do not know how to buy it.

So with that said and according to the bitcoin white paper that roughly 70% of the 21 million bitcoins that will be created are in the marketplace, what the driving force behind the price discovery?

It’s not like buying Apple at $0.21 a share in 1982, based on the idea they have a magical box called Lisa. The reason being they had a box and how well the box was received would determine the price.

Bitcoin has the utopian premise that it is outside the dollar hegemony, yet it is priced in dollars and all other currencies. It has the full-faith and credit of the code behind it, which means it is not legal tender for all debts public and private.

How can you turn any profit into a purchase, since most retailers will not accept bitcoin because the transfer of the transaction could take days sometimes. So if you buy something worth $4,000 with a BTC on Moday and the price crashes on Tuesday, the retailer is out.

Listen I have dabbled in it, just like I did in Apple in the early 80’s, because I’m into those type of things and am not complaining about the run up in price of either investment.

However, telling someone this is a good investment and you should get in, is another thing entirely.

These are heady times for all cryptos, and a year from now I could be laughing at this post as the price hits $10,000 or maybe $1,000. I have no way of knowing which outcome is more likely, since I have no way of modeling the price movements.

I will say this about BTC. If someone builds a better and easier way to purchase BTC, without needing to be a computer whiz of finding a digital wallet and yada, yada, yada, that would go a long way of bringing more people into the pool.

 

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Bitcoin replacing gold as the perfect dollar hedge

What does gold, silver and cryptocurrencies have to do with the US dollar? They are all a flight from the greenback. A hedge against the falling dollar.

At the beginning of the year the dollar was trading at 93.6 on the currency markets. This morning it’s at 86.4. It is no coincidence that bitcoin was trading at $1,000 in early January and this morning — despite its recent $1,000 pullback — is at $2,780. Gold was $1,178 an ounce at the start of 2017, this morning is $1,262, but has posted recent highs over the $1,300 an ounce mark, despite the paper ETF market whipsawing prices.

These movements along with a flattening of the US bond yields are all anti-dollar moves.

Some will point to the Fed raising rates as the impetus for the moves, however that is the opposite move in the current environment. Raising rates should bring more confidence — no matter how misplaced that confidence may be — not the other way around.

According to the CFTC, short bets on the dollar by traders is the highest since early 2013, with hedge funds piling into 279,100 futures contract favoring the euro and Aussie dollar.

So these moves need to looked at far more closely than equities setting all-time highs, since the dollar weakness is a tool used by the Fed secretly to spur the inflation they so desperately need.

Is there a truce in bitcoin civil war? Price rise says yes

Is the bitcoin civil war reaching a truce?

Only through price discovery can we decide that. The cryptocurrency has been in a battle between the two camps involved in the decentralized digital currency that has been beating it down since hitting an all-time high in mid-May of more than $3,200.

The new bitcoin software was unveiled over the weekend as the miners (those who look for the code on the net) and the developers known as Core (which maintain the code and keep it stable, bug-free).

The new software, called SegWit2x, is seen as a compromise between the two camps. As truce talks continue, through adoption of the code, bitcoin’s price rebounded from $1,750 over the weekend to trade Tuesday morning $2,265.

Part of the software fix was to help scalability of bitcoin as well as speeding up payment transfers to help with payment systems, which other lesser cryptocurrencies have going for them.

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.

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 haveĀ  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.