Bitcoin & other cryptos soar on North Korean hostilities

Asian investors have been driving the bitcoin price to all-time highs over the last few days on fears North Korea will provoke regional hostilities with its missile launch actions.

Bitcoin hit $4,705 overnight Wednesday morning with Japan and South Korea investors binge buying the cryptocurrency. For August the price has risen 70% despite the technical split within the crypto community over the handling of blockchain, which is the underlying code enabling the digital currency to function as it does. For 2017, bitcoin has soared roughly 450%.

Bitcoin cash, which is the new crypto that forked off of bitcoin in the beginning of this month, is trading around $575. The alternative version of bitcoin is still up about 170 percent from a debut low of $210 on Aug. 1.

Another digital currency, ethereum, climbed nearly 5 percent Tuesday, to around $364. Ethereum is up more than 4,400 percent this year and has gained nearly 79 percent this month.

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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.

Ethereum exchanges need to right flash crash losses

The cryptocurrency market suffered a major flash crash on Wednesday losing 96% in value in 10 seconds, before bouncing back.

Ethereum — which is a derivative off of bitcoin — plunged from $315 to $0.10 on massive volume created by a deluge of stop-loss orders and margin squeezes.

A stop-loss order is a trade that is executed automatically once a security – in this case ethereum – hits a particular price.

Again as I wrote earlier, the culprit in the crash is the exchanges, which could not correctly process a large sell order. Of course the exchange alleges that there could be market manipulation behind the crash, due to a large sell order.

Adam White, the vice president of GDAX which is an exchange run by Coinbase, posted on the firm’s blog, outlining what took place at around 12:30 p.m. PT on Wednesday. According to White, the multimillion dollar market sell order resulted in a number of orders being filled from $317.81 to $224.48.

“Our initial investigations show no indication of wrongdoing or account takeovers. We understand this event can be frustrating for our customers. Our matching engine operated as intended throughout this event and trading with advanced features like margin always carries inherent risk,” White said in a blog post.

“We are continuing to conduct a thorough investigation and will keep customers updated with any resulting actions.”

Some investors point the  initial coin offering (ICO) demand on Ethereum to a funding launch for an ethereum-based messaging app called Status which took plenty of processing power off of the network.

Message boards point to Ethereum buy orders at $0.10, which were fulfilled and as the price soared back to $300, made millions on the crash.

When stock exchanges flash crashed in May 2010, trades such as the one above were cancelled. It is still unclear what will happen to crypto investors who had their Ethereum was sold for pennies on the dollar, due to stop-loss orders that were executed at far lower levels than the contract specified.

Ethereum is trading at $328 Thursday morning.

 

$10,000 bitcoin can’t happen with these exchange outages

While bitcoin was dropping like a stone on Monday with sellers clamoring for the exit, thereby crashing the Coinbase exchange, another digital crypto-like token, ethereum, soared to record highs.

Other exchanges like BTC-e, tweeted on Monday that it was hit by a distributed denial-of-service attack, or DDoS. Their website was back online at 4:00pm EST.

This was the second outage for Coinbase in the last three weeks and both outages were when bitcoin was falling.

So what is with the bitcoin exchanges, that they work fine when there are $200-$500 run ups in price, but fail miserably on the downside? And why can’t they get their stories straight?

For any cryptocurrency to gain broader appeal safeguards must be put in place to give each investor equal opportunity to buy and sell. The last thing anyone needs is a government to step in to regulate the market.

Another question is how is it that a digital currency exchange is developed that is not robust enough to handle spikes in traffic? The exchanges are built with the express purpose of having scalability. It’s not like you built a physical market and then people started trading it online and you were caught short.

The exchanges by using the ploy of server outages due to traffic or DDoS attack at a critical junction are setting themselves up for comparison with Mt. Gox and its implosion some years ago.

If you want to see a $10,000 bitcoin price, these exchanges — and there are about 10 of differing sizes on bitcoin — must come together to execute sales for each other if one exchange goes down.

You can’t expect neophytes, new to the cryptocurrency markets, to be able to manage navigating different exchanges to find one to buy or sell on.


The Federal Reserve is schedule to announce Wednesday the result of its two-day meeting on whether to raise rates another quarter point.

I’ve written numerous times that Yellen & Co. will not raise again this year.

So I’ll stand by that and say the Fed will stand pat and wish to monitor the markets and inflation and stand ready to raise at upcoming meetings, but will stand pat today.

While the low rates have created numerous asset bubbles from stocks to bitcoin, the tightening of credit will have a disastrous effect on the overall economy. GDP is looking at below 2% for the quarter after coming off a sub 1% first quarter.

That’s my call we will see at around 2PM EDT whether I am right or not.

Bitcoin on a tear reaching for $1,500

Global stock indices are not the only asset class making new highs on a daily basis. Cryptocurrencies — specifically bitcoin — are soaring as well to fresh levels.

Despite two major set backs for bitcoin in 2017, the digital currency has soared nearly 45% from its year-to-date  lows as Asian investors flock to the new-age currency.

Bitcoin prices are now trading at previously uncharted levels as the value of the cryptocurrency reached a high of $1,462 on CoinDesk  on Tuesday morning in NYC.

In January the People’s Bank of China, the country’s central bank, launched a crackdown on bitcoin believing that citizens were using it to move wealth out of the country. Prices fell as low as $750 on January 12th, before recovering.

In March the cryptocurrency had a run up on the anticipation of the Securites and Exchange Commission would decide in favor of a bitcoin ETF driven by the Winklevoss brothers. Bitcoin prices reached a high at the time of $1,350, before the feds nixed the proposal  sending prices falling to a low of $891 soon afterward.

Prices began to recover making their present move upward as Japan officially acknowledged the use of cryptocurrencies and passed legislation allowing retailers to accept payment in digital form.

Also Russia and India have also loosened restrictions on cryptocurrencies, leading to wider acceptance within their borders as both countries — India more so — struggle with their own internal currency crises.

The SEC announced last month that it would take a second look at a bitcoin ETF by reviewing its ruling in the Winklevoss brothers’ application. No timetable has been released on when that may happen.

Bitcoin’s market cap is now north of $23 billion, which is chump change for any asset class, however with more acceptance and wider appeal the digital currency can be divided into smaller units such as decibits, millibits and centibits to make smaller transactions possibly.

Ethereum, which is the second most prominent cryptocurrency after Bitcoin, struck a new all-time high Tuesday as well, trading at $85 and it now has a market cap of $7 billion on the strength of its acceptance in gaming circles in the Asian countries.