I was looking at a 3 hour chart of Bitcoin Cash since it began in August.
Around the 13th of August, it began consolidating at around $200. Then it shot upwards to around $1000 within 3 days. People began taking their profits and the rest followed suit. The result is a downward decline. By October 11, it began stabilizing. It then began a formation known in technical analysis as a 'sauce pan'. It is a trigger to buy. That's when I remembered. I've seen this chart two years ago.
I flicked through another market, BTC/USD, zoomed out to look at the daily charts and I saw it...
The resemblance is uncanny. It began its upward trajectory at around $150, shot up to $1200 and slowly drifted back down to $200. It is amazing to see the similarities between the two events. This to me, shows the psychology of people. The moments when they are optimistic and the moments when they became fearful and panicked.
I see a lot of comments online about people who, for multiple possible reasons, attack Bitcoin Cash. The obvious reason is that they are invested in Bitcoin and they see Bitcoin Cash as a competitor to their investment. So they go to articles and posts related to Bitcoin Cash and write things like, "Bitcoin Trash!" or "Bitcoin Cash is literal garbage". I've seen many who refer to the declining price of Bitcoin Cash to supposedly prove that it is a failed project. They actually do not know that Bitcoin went through a similar phase.
Here is an image of both charts. There's no permission necessary if you want to share it online.
There's a problem with Bitcoin. Its transaction fees are getting too expensive and it is taking too long for transactions to be confirmed because the size of the blocks are too small for the amount of usage the network is getting. In the original Bitcoin whitepaper published by the inventor Satoshi Nakamoto, it was written that the block size can and should be, enlarged to as big a size as it needs to be, to process transactions. For the first 8 years of its life, Bitcoin's block size grew to cope with the increasing demand for its use. The results are clear: people began to increasingly adopt Bitcoin. Its market share dominated that of all other cryptocurrencies.
In the last couple of years however, a group, identified as Bitcoin Core, kept refusing to increase the block size. In fact, it is their intention and vision that Bitcoin is to incur high transaction fees. The results are clear: people began using other cryptocurrencies. Bitcoin's market share drastically plummeted.
People began to say that Bitcoin's use case is and should not be to be used as cash to transact. Rather, it should be just a store of value, like gold. By this, they mean that if you want to store say, $10000, then buy the equivalent in Bitcoin and if you ever need it, you can convert it back. This concept of Bitcoin being developed to be like Gold, assumes that Bitcoin will hold it's value.
The problem is, Bitcoin is not gold. On its own, gold is useful in jewelry-making, medical and dental industries, manufacturing, construction and so forth. This is the reason why it was used as a store of value in the first place, because it has its own value. Bitcoin is not the same. It does not have value on it's own. The only value proposition Bitcoin has, is the promise that one day, it will be a widely-used currency. In countries like Japan, it is already explicitly declared, legally, as a form of payment. This is the reason why many people buy Bitcoin: so that they can use it as currency today or sometime in the future. This is the underlying motive behind why people invest or hoard it. With this utility and its limited supply of 21 million, Bitcoin's price indeed has more than held its value for almost a decade. Without its utility as currency, why would people believe it will hold its value in the future? They won't. Having no utility means Bitcoin will have no value. No one will have any reason to buy it. Its price will be zero. For Bitcoin to be anything, it must fulfill the reason for why it was created: to be currency. To be cash - electronic cash - as it was first defined in its original white paper.
This is the reason why Bitcoin Cash was created. Bitcoin Cash is a version of Bitcoin that is more inline with the intentions of its inventor/s. The group of people who split Bitcoin Cash from Bitcoin did so because the Bitcoin Core group was never going to increase the block size enough to ease network congestion. Bitcoin Core, the group, were and are, still dead-set on using a solution called Segregated Witness and Lighting Network instead of increasing block size.
Having a difference of opinion between solutions to a problem is normal especially for an open source project like Bitcoin. However, when I try to find out more of what is going on, I find the toxicity in the discussions so bizarre that comments are directed towards personally attacking people who advocate for Bitcoin Cash. Examples of such people are Jihan Wu, CEO of a major Chinese mining operation and Roger Ver, a man who heavily promoted Bitcoin in its early days and funded and got involved with many Bitcoin-related businesses. Later, I find out that similar tricks were used against previous projects. Worse, they seem to have worked. You can have a look yourself. Find a video or an article mentioning Bitcoin Cash and read the comments there.
The zeal and vitriol from people who are against Bitcoin Cash seemed too extreme for the type of technical discussion they're supposed to be having. When you dig deeper, here is what you will find out.
Many of the Bitcoin Core developers are being financially funded by a company called Blockstream.
Blockstream was co-founded by a Bitcoin developer named Dr. Pieter Wuille. (There is a potential conflict of interest. A developer champions for changes to Bitcoin, directly or not, to make Bitcoin reliant on the exact service that only his company can provide.)
Blockstream provides blockchain services like Lightning Network. That is how they make their money.
Blockstream is being funded by AXA, a big financial institution. (Source: https://www.axa.com/en/newsroom/news/axa-strategic-ventures-blockchain)
One way to make money is to install road tolls. Demand toll fees for every car that passes through a road. It seems that the road toll business model is being used here. The Bitcoin Core group is being made to develop Bitcoin so that transactions or portions of our transactions are funneled or processed outside of the Bitcoin Network, into what's called a Lighting Network, which is somewhat operated, controlled or serviced by Blockstream. Whatever the relationship is, the point is, that Blockstream will have managed to insert itself into the transaction process where they can either charge fees or impose certain conditions.
That's good for them: Bitcoin Core developers get their wages/salaries, Blockstream gets to profit from its services and AXA gets good returns for its investment. But for the rest of us, we get to pay the higher fees that goes into their pockets to use the Bitcoin network.
Knowing this tells us a lot about the incentives and motives of people. It becomes easier to believe that the examples and anecdotes of people are being paid to troll and be shills against Bitcoin Cash (BCH) are real. There is enough incentive and motive to censor individuals arguing for alternative solutions and to block them from participating in discussions.
If you like the idea that Bitcoin allows us to freely transact with each other, without the control of banks, central banks and governments, this should worry you. Let me explain.
With Bitcoin at the moment, people transact with each other directly. Person A gives Bitcoins to Person B. All miners do is to update the blockchain ledger to record that Person A gives Person B some Bitcoins. It is difficult for governments to regulate miners under the justifications that exist for current financial regulation because all they are doing is to actually just record our transactions on the blockchain.
However, when a corporation like Blockstream starts getting in between this whole process, it would be easier for government to justify exerting control over our transactions by regulating companies like Blockstream due to the importance of their function in such a scenario. I am not against regulation when it is important and necessary. What I am against is unnecessary regulation purely imposed so that only certain, selected groups of people stand to greatly benefit and profit at the expense of everyone else. This is what this situation looks like to me.
This Segwit/LightningNetwork solutions creates a form of centralization that we should be wary of. It forces us all to be reliant on a corporation or corporations and creates an opportunity for governments to regulate our transactions by regulating these companies. Isn't this the type of centralization that Bitcoin was supposed to overcome to protect its security and integrity? The Bitcoin Network, as it is, can process our transactions without the help or hindrance of corporations or governments.
If you want a centralized, regulated, payment system, use Visa, Mastercard and your current bank card. If Blockstream with their Bitcoin Core team get their way, Bitcoin will become a big disappointment. Thank goodness we have Bitcoin Cash. With Bitcoin Cash, we still have the hope of realizing the dream of having a decentralized, peer to peer, electronic cash that gives us fast, cheap, transactions, across geographical borders, unhindered by corrupting political forces.
Here is a video made by a YouTuber, Ed, who thinks and feels similarly about the issue. I urge you to watch it too because his style is more direct.
A couple of weeks ago, I wrote an article about the congestion in the Bitcoin Network.
A week later, the mempool and the unconfirmed transactions that piled up over days just seemingly cleared up in an instant.
The trend of miners favouring Bitcoin Cash and leaving Bitcoin seems to have stopped. Almost in an instant, the mempool got cleared up. I still do not understand what may have caused it but the bottom line is, I no longer think that the Bitcoin Cash Death Spiral caused by Bitcoin Cash attracting more miners and users, will happen so quickly, if at all. Unless another dramatic event, like the price of Bitcoin Cash surging spectacularly like it did a couple of weeks ago happens again, the chance of Bitcoin Death Spiral taking place is now low to non-existent in the short term.
I want to know the effect of Bitcoin Cash's Emergency Difficulty Adjustment (EDA) on Bitcoin (BTC) and Bitcoin Cash (BCH). The discussions between BCH fans and BTC fans are quite polarised and there's a lot of insults going around. It is hard to get a handle of what is really going on.
So what are at we to do if we just need to get real clarity? Let's look at the data. Specifically how is the EDA affecting the mempools of BTC and the hashrates. Why are these two important? They are important because the Mempool is a measure of congestion in the BTC network and hashrates measure the processing power of a network generated by its miners.
What we can see here is that as BCH's EDA increases, miners mine BTC but when it decreases, they mine BCH. Seemingly, in its short history, BCHs EDA seems to favour BCH longer than BTC.
When miners go to BTC, BCH's transactions get delayed but are pretty much processed quickly the next time the EDA reduces.
On the BTC network, this is not the case. Let's look at BTC's mempool.
As we can see, there are moments when BCHs EDA setting favours BTC. Miners are able to reduce the backlog of transactions but never far enough before the miners go back to mining BCH again. If this continues, we can expect the backlog of transactions in the BTC network to keep increasing as well as its transaction fees.
The implication of the two pieces of data above are:
Because of BCH's EDA, miners flip flop from mining BCHs and BTCs.
The BCH's network slows down when there's not enough miners on the network but when the miners come back, any transactions are processed straight away.
We can see that BTC's network is struggling to process a majority of its transactions even during those moments when miners return from having mined BCH. This can result in an increasing backlog of transactions. This increases fees.
It is not clear when this pattern is going to break. Bitcoin's difficulty adjustments takes a long time to adjust and they cannot change it unless they do a hard fork. Segwit and Lightning Network are still not speeding up transactions. We still do not know when they will. Lighting Network is still being tested at the moment. So long as these conditions exists, it can trigger a sell off of Bitcoins in exchange for Bitcoin Cash, or other cryptocurrencies. This can then be the catalyst for the Bitcoin Death Spiral discussed in my earlier article.
These sets of conditions therefore favours BCH. There is a lot of reasons why users and merchants would want to start using BCH namely cheaper fees and faster transactions. There is also a lot of reasons why, given the current conditions, traders and investors may see Bitcoin Cash as an undervalued project. It is essentially similar to BTC in most respects and yet, why is it now around $600 only when it's struggling clone is valued at around $4000?
DISCLAIMER: None of this is financial advice specific to you. I could be wrong so you have to do your own research to find out what's best for you.
TOPIC: Bitcoin | Bitcoin Cash | Bitcoin Death Spiral
Bitcoin is around its highest valuation but there is a worrying trend. Bitcoin's Network is getting really congested. There are currently 85900 Unconfirmed Transactions. The following shows the aggregate size of transactions waiting to be confirmed.
People are now having to wait for days to get a transaction confirmed. They are paying even higher fees on top of already high fees, hoping that this will get their transactions processed faster. But it is not always guaranteed that higher fees means faster processing.
It happened before between May and June. At the time, we had no option so we all just had to put up with it. Now, however, it is a different story: we have Bitcoin Cash. We have an alternative. Miners are now switching to mine Bitcoin Cash. This trend might change temporarily in a couple of days when the mining difficulty level for Bitcoin Cash increases but will later again, decrease, as a consequence of how Bitcoin Cash is programmed. It is programmed to adjust its difficulty levels based on recent activity.
From what I understand, this difficulty-adjusting algorithm was encoded into Bitcoin Cash to enable it to survive its early days after the fork. It turns out to be serendipity because its effect is now having an impact that potentially determines the fate of BTC and BCH.
The net result is that, every time Bitcoin Cash difficulty levels reduce and assuming its current price is high enough, more and more miners mine Bitcoin Cash. As more miners leave the Bitcoin network, there are less left to process Bitcoin (BTC) transactions. This is why we are seeing this build up of unconfirmed transactions.
Bitcoin has its own difficulty adjustment algorithm but it works a lot slower than Bitcoin Cash's. It cannot be changed unless a hard-fork is done. Changing it is not something that's easy and quick to organize before November.
"A hash is the output of a hash function and, as it relates to Bitcoin, the Hash Rate is the speed at which a compute is completing an operation in the Bitcoin code. A higher hash rate is better when mining as it increases your opportunity of finding the next block and receiving the reward." [Source]. The following shows the hashrates between Bitcoin (BTC) and Bitcoin Cash (BCH).
As we can see the incentive for miners to divert their resources to Bitcoin Cash is close to matching Bitcoin's.
For all Bitcoin users, merchants, investors and traders and anyone else working with Bitcoin, all this should concern us. When you have to pay high fees and wait so long for transactions to complete, you would want to start looking for alternative cryptocurrencies.
Ethereum, Litecoin, Dash, Monero, Ripple are alternatives. However, if you are used to Bitcoin, Bitcoin Cash is the closest substitute for Bitcoin. Bitcoin Cash is a fork/clone of Bitcoin. It is exactly the same as Bitcoin in most respects except that it has a higher 8MB block limit instead of 1MB like what Bitcoin has.
Short historical background: The people who started Bitcoin Cash believed that increasing the block limit t0 8MB is the simplest and quickest way to handle more transactions easily and quickly. Others in the Bitcoin community argued to use technologies named Segwit, Segwit2x and Lightning Network instead. The discussions went on for at least two years with no resolution. Eventually those who supported the 8MB solution, forked Bitcoin  so that it can make Bitcoin have 8MB blocks. With the low transaction costs and zero unconfirmed transactions currently on the Bitcoin Cash network, they are proving correct.
The reason why I think this current situation is dangerous for Bitcoin is this:
When fees are high and waiting times are long, people will use alternative cryptocurrencies like Bitcoin Cash.
This reduces the demand for Bitcoin.
This reduces the price.
The reduction in price reduces mining profitability.
This reduces the miners mining Bitcoin.
This would further lead to even higher fees and even longer wait times.
The cycle repeats as Bitcoin's value and price spirals downwards.
Graphically, it is like this:
The danger for Bitcoin as it remains expensive and slow to use is that it can result in an ongoing cycle leading to its value and price eroding. Others refer to this event as the Bitcoin Death Spiral, which I find dramatic but I think alarming enough to catch the attention it deserves.
As fees go higher, all wallets that have balances under those fees cannot be withdrawn. Even if another wallet pays for the fee, there is no sense paying $15 on fees just to take out $10 worth of BTCs for example.
As wait times go longer and longer, everyone will begin to worry that their BTC transactions will get stuck for a really long time. Miners too, will worry trying to mine Bitcoins because by the time they claim their rewards, their BTCs may already have gone down in value.
Eventually, using Bitcoin (BTC) becomes too risky. You don't want to be the one who gets stuck with Bitcoins in a Bitcoin wallet because there are little or no miners left to process your transaction for you even if you can afford the high fees by then to finally cash out.
I am trying to think of how this can be prevented. Unless people do not care about high fees or long waits, there does not seem to be a way for Bitcoin to solve this problem in the short term (even say 3 months). Segwit got turned on and Lightning Network might help but their effect is not likely to be felt soon enough. The details of whether and how they should be implemented are subjects that are still heavily debated between different factions in the Bitcoin community. As yet, they do not have a convincing consensus. Even after the Bitcoin Cash fork, there's still people within the remaining Bitcoin group threatening to fork/clone Bitcoin yet again because they have a different vision how Bitcoin should move forward.
It might be too late by the time they have figured out a solution that solves their issues. High fees and slow confirmation times will remain for months if Bitcoin lasts that long. But as the Bitcoin Death Spiral process sets in, then it is likely that people will begin rushing to sell their devaluing Bitcoins. Bitcoin's price will eventually go down to zero. That's a sad ending for Bitcoin but it is a good chance that people will re-invest their funds back in other cryptocurrencies like Bitcoin Cash. If all the funds get reinvested back to Bitcoin Cash, then we can expect Bitcoin Cash to go just as high as where Bitcoin is now and take its place, maybe even the name. So instead of it being called Bitcoin Cash, it might just be called Bitcoin. It is also more likely that people will diversify their investments between Ethereum, Monero, Dash, Ripple and others. We can therefore expect the prices of those cryptocurrencies to climb up.
UPDATE: Sunday, 3rd of September
After observing Bitcoin's network the last week, the probability of the Bitcoin Death Spiral taking place is now very low in my reassessment of the situation. I haven't seen it done before and I still do not know how it was done but the back log of transactions were processed almost instantaneously.
UPDATE : Saturday, 11thNovember2017
After the cancellation of the Segwit 2X fork, investors, traders, users and miners have moved on to Bitcoin Cash. As a result, Bitcoin is in the same position. This warning is relevant again.
 Making a fork of a project like Bitcoin is common in programming. It is not illegal or controversial in open source projects. All it means is that a group of developers copy the source code of a program so that they can make changes to it without affecting the other program. In this case, developers of Bitcoin Cash copied all the code of Bitcoin so that it can change the setting that says 1MB to 8MB. This way the people who want to try out Segwit, Segwit2x and Lightning Network can continue under the brand name Bitcoin, and they named their project Bitcoin Cash so that we can all distinguish between the two.
From a user's perspective, I would want cheaper transaction costs if I were to use a cryptocurrency to buy a good or a service or even maybe another cryptocurrency.
I would also want that transaction to be approved quickly.
If we compare Bitcoin (BTC) with Bitcoin Cash (BCH), here is what we see:
TRANSACTION FEES OF BITCOIN AND BITCOIN CASH COMPARED
BCH: 51.87 Satoshis
BTC: 229.28 Satoshis.
This means that with Bitcoin Cash my transaction costs are only 22% what it would be if I used Bitcoin. This means I save 78%.
CURRENT UNCONFIRMED TRANSACTIONS ON THE BITCOIN NETWORK
In May, transactions were stuck for days. Now, a lot of of people are just as frustrated because the network is getting congested.
When I try and look for Unconfirmed Transactions on the Bitcoin Cash Network, most sources say there is none. This is the problem that Bitcoin Cash wanted to solve. Bitcoin had 1MB blocks, which meant it got congested too quickly. By having 8MB blocks, Bitcoin Cash can handle more transactions.
This means that for the person I am transferring the coins to and I, will be happier. There is less transactions that neither of us would have to pay and we can finish the transaction quicker!
This is the beauty of market competition. Now that there are two types of Bitcoins the original BTC, sometimes referred to as Bitcoin Core, and now, Bitcoin Cash (BCH or BCC), people can choose between the two which cryptocurrencies they should use. For merchants, businesses and service providers, they now have an option to use a faster, less costly alternative as well.
The Bitcoin Cash ecosystem is still young, which means there maybe less businesses, wallets, exchanges using it but it is being adopted rather quickly considering that Bitcoin Cash was only forked out of Bitcoin on the 1st of August.
A hoax published on two websites* that the founder of Ethereum, Vitalik Buterin, has caused holders of Ethereums to panic and sell their Ethers. Mind you, there had been a pre-existing sell-off prior to the fake news. The hoax articles claimed that Buterin died from a car accident, along with a friend.
Vitalik had to tweet a selfie with a hash number for a block on the Ethereum network, a hash number that existed AFTER his purported death. It is the Blockchain equivalent of holding a photo of today's newspaper to prove that you are still alive today. This means that people sold their Ethers based on fake news. Others bought those Ethers cheaper than they would have.
It is interesting to think that even though Buterin is not Ethereum because Ethereum is a worldwide project contributed to by many people, people see him as Ethereum.
Contrast Buterin's story with that of Satoshi Nakamoto. We still do not know who he is, she is or they are. He has published a document outlining how to build Bitcoin and how it would work. And that was it. We never heard from him, her or them again**. For this reason, the continuity of Bitcoin is disassociated from the health or state of any person alive today.
*I intentionally will not mention the websites because that's like promoting websites publishing stuff they know not to be true.
**There is an Australian man who claims it but so far has delivered no evidence convincing enough that he is indeed the real Nakamoto.
According to an article in the Futurism, "China’s central bank — the People’s Bank of China — has developed a prototype of a cryptocurrency that it could end up in circulation in the near future. It would be introduced alongside the China’s primary currency the renminbi (also called the yuan). China will be simulating possible scenarios and running mock transactions using the cryptocurrency with some commercial Chinese banks."
"Cutting costs is an obvious benefit, but the impact of shifting to blockchain-based digital money from the current payment structure goes beyond that," said Larry Cao, director of content at the CFA Institute in Hong Kong. "There’s a potential you can pay anybody in the system, any bank, and any merchant directly. Blockchain will change the whole infrastructure. This is revolutionary." (Bloomberg: China Is Developing its Own Digital Currency)
They've already developed it. They're now just testing. Go China!
This is proof of the benefits and legitimacy of Cryptocurrencies. If Bitcoin scaled fast enough to have made it an easier decision for a nation like China to adopt it instead of having to develop and test its own, then Bitcoin would have made a major step to becoming a global currency. I'm guessing all the infighting and delays dealing with the scaling issue, pushed China to decide against adopting Bitcoin as its currency.
This makes for an interesting case study for how to organise huge projects. You have Bitcoin, a project based on decentralised decision-making and you have the Chinese Government, an organisation with centralised decision-making. Who will act quicker? Who will innovate better? Who will adapt and change faster in catering for consumers' and public needs better?
(IMPORTANT: This is not an advice for you or anybody to do anything.)
There's been an established buying range. Trendlines as well as Support and Resistance levels are set to be broken. Volume had been going up the last three days as the price slightly rose. The troughs of the prices and the MACD confirm. If people buy above R1, that might trigger more buying until R2, then if the price goes R3, people will likely want to carry it up further.
As I understand it, delegates from the Ripple team are in Europe attending conferences to let people know about what they do. That might generate some excitement and maybe the needed catalyst!
Overall, there seems to be enough there to indicate a small hop, if not a big leap upwards.
Today, (Thursday, 15 June) prices for Bitcoin, Ethereum and the majority of Cryptocurrencies are nosediving. It started yesterday, actually. I tried searching for what the reason could be. So far here are potential contributors:
1. There is an announcement that some mining company is going to fork Bitcoin.
So what? They split Bitcoin, then you just choose which version you like right? It is no reason to panic now.
2. Some politicians in Europe and America want to regulate Bitcoin and Cryptocurrencies.
Some of, what seems to me, sneaky ways they do this is to associate Bitcoin to terrorism or drug dealers and other criminals. Have they ever made the association between the person from a first world country sending cryptos to a relative in Asia or in Africa, incurring less cost and taking less time than what it would normally cost? How would regulation affect that relatively low-cost?
Sure. If you want to regulate it, look into it. But there's still a lot to talk about. How exactly, do you want to regulate it? Is it technically possible? What is the cost for the industry? What is the cost for society? Is being regulated good or is it just a way to keep those who are already rich and powerful remain try to stay rich and powerful by embedding themselves within the Crypto ecosystem like they have for the rest of the financial system?
3. Theresa May has proposed banning Bitcoin or Cryptos
This is not the first time that a British PM suggested this. David Cameron proposed it too but since they haven't gone ahead and done it yet, I take that as there being not enough good reasons to do it. If people are spooked by this, causing them to sell their cryptos, more likely at a loss, why? It is only a proposal, a suggestion. It takes time to discuss all this.
4. Some big investing company (Goldman Sachs) in America says something like Bitcoin is looking 'broadly heavy'.
They want in but they want to get in at a cheaper price. Because they have a big name and people revere big names, that move worked favourably for them. They spooked enough people to sell, causing the price to drop, then they can buy in cheaper. If you sold because of this piece of news, then it is likely you did not read between the lines. They actually indicated that they wanted to buy at a lower price. The take-home message is that, they like Bitcoin, they want to buy Bitcoin. It did not say, sell your holdings.
5. Mark Cuban says Bitcoin is in a Bubble.
This may have caused some traders to sell but when you look at what he actually said, he meant that according to him, Bitcoin is overpriced. He did not say Bitcoin was a bad idea. Even if he did, does that mean he's right? Yes, Cuban is a billionaire but his opinion is just one of the many opinions of billionaires, including many who would disagree with him.
Is the Market really Crashing?
Is there really a 'bloodbath'? Be careful of the words that articles use as their titles. They are designed to be sensational by maximising emotional effect. But let's try to think as clearly as we can. Let's put things in perspective.
You see a chart similar to this being used in articles online:
The article would say something like: "Bitcoin crashed. Bloodbath everywhere." It looks darn right scary right? But this is a 2 hour chart from the start of June to now, June 15. If you bought in from June 6 onwards (the start of the plateau) and this begins to happen and you've allocated too much of your life savings into this trade, then naturally, you will see it as being a bloodbath.
However, let's look at a more long-term perspective. Here is daily charts from the start of the year:
You'll see the long run that this has been a normal pattern in Bitcoin price movement. The movements when it was cheaper looked less violent because this is a linear chart. If you look at it from a logarithmic chart, this dip is no bigger than the rest.
From this chart, we can see that in the long-run, this dip is merely a reversal of the latest burst of equally humongous price hikes.
The Cryptocurrency market had indeed been going through such euphoric rallies that sent many people to believe that it cannot be sustained or that it must correct. That in itself is interesting because we are basing this on the markets we have known before. Yet we apply it here with cryptocurrencies, we tell enough people about it and it becomes a self-fulfilling prophesy.
It's understandable that people get emotional especially when they came late to the party and bought at the most recent expensive prices. The moment, the price starts falling, the more emotional they get and they sell. Then what happens? Around the same time that they got out, most of the other scared people were doing the same thing. We are all human beings, we have the similar thresholds for pain. By the time, they have gone out, all the other people in the same boat have also sold their holdings. Then what happens? Less sellers means upward pressure on the price. They miss out again because now people are buying in and the price begins to go up. They bought high and sold low. The opposite of what they hoped to do.
That's why it is good to buy a little at the start. Don't be greedy. Expect that the market does NOT DO what you want it to do. Wait for that to make some profit then you buy some more. That profit you made from your initial investment acts like an emotional cushion so that when you add more in, you are not too emotional when the market moves against you.
Let's look at a chart for as far as Poloniex can take us, back to April 2015. It looks like this:
So if you hold Bitcoins (or any cryptocoins) at the moment, you're probably asking, should you cash out or should you stay? That's not for me to say. You have reasons why you bought in. Do those reasons still stand? Do you still believe that Cryptos are a good idea for the long term? Do any of these news items actually prove to you that Cryptos will end tomorrow?
As a trader, you must remember your reasons for your trades and not allow big names like Mark Cuban or Goldman Sachs influence your thinking.
What I am trying to do here is to inject my perspective out of this event to balance out the articles that to me are either 'fanning the flames' of already-emotional traders and investors and those that are trying to push for regulating crypto-currencies on oversimplified and commonly used-excuses of terrorism and criminal activity to regulate.
Bitcoin is splitting between BTC and BTU. BTC is Bitcoin Core and BTU is Bitcoin Unlimited.
Why is Bitcoin splitting? Bitcoin is splitting because it is growing in use and popularity. It is considered normal that new technologies go through such growing pains. Put simply, Bitcoin is approaching a technical limit (1MB block size).This poses issues about how the system can handle more transactions. For years, the Bitcoin community had been discussing how to solve it.
Some people say that we keep the 1MB restriction as laid out by the designer Satoshi Nakamoto. (Nakamoto's identity is yet unknown. We do not know if he is an individual or groups of individuals.) They propose a solution called Segregated Witness (SegWit), which effectively enlarges the block size from 1MB to 2MB. These group of people are referred to as the Bitcoin Core Group.
Alternative to the Bitcoin Core Group is the Bitcoin Unlimited Group. They say, let's just get rid of the block size altogether. That way, we do not have to worry about this problem anymore.
There are discussions as to the good and bad reasons between these two solutions. But ultimately, these two camps cannot convince each other of which is the better option. Inevitably, it seems the issue is going to be resolved by splitting Bitcoin into two and see how each solution fares.
It is because of this issue that Bitcoin's price has been dipping the last few weeks. Uncertainty does that.
How does this all affect you? If you merely bought Bitcoin as an investment or long-term trading play, and you do not transact heavily, then apparently, this will all be resolved eventually. What will happen is that the Bitcoins you own will be copied in both networks. This means you will own both BTCs and BTUs if you have your Bitcoins where you control your private keys. With those where you don't, it is a bit uncertain. Then hold back at least until the dust settles (a few weeks) before you decide to transact or get back to your normal operations.
The big tip that I gathered however, was to transfer your Bitcoins to actual wallets (paper or hardware) and ensure that you have your Private keys with you. Back them up. If you want to know what I am doing, I am simply transferring my Bitcoins to a paperwallet. That seems to be the best option at the moment.
If you have Bitcoins in Exchanges, you might want to check with them to see what they recommend you do.
Like most people, I had a quiet confidence that Hillary Clinton was going to win the US election. “If Trump is lucky enough, the number of votes he will get might come close but, Hillary will pull through in the end”, I thought. Like those those in the Clinton camp who began their pre-emptive celebrations popping open champagne bottles, I was shocked to find out that Trump had won.
How can Americans vote for a man who makes up facts, blatantly lies and makes up his own statistics without caring to know whether his opinions are in fact based on anything with substance?
How did the polls and the media, and all who were supposed to be experts of elections, get the results so wrong? It is obvious that whatever was working before in the field of predicting and analysing elections, is terribly out of date and is out of kilter with what is going on the ground. Either the journalists and media organisations have become so biased on their enquiry and reporting, or, we all have our blinkers on and we just choose to go to the websites and read the articles that confirm our pre-existing opinions. The truth, I suspect, is a mixture of both.
It has become clear that there is a tremendous amount of issues and perspectives that concern many people, most of which have been obviously disregarded or unrepresented by the most of the media channels. Many people have dismissed the opinions of Trump voters as those of red-neck, racists, bigots and bitter white people. We (I mean people who have been shocked with this election result) stopped listening to what people on the other side of the picket fence is saying and thus failed to understand why they would think the way they do. Because if we were aware of their concerns, we would not be so surprised by the result. To me, this is one of the most proof of Media Bias and Confirmation Bias, effects that we must mitigate in our societies.
For my part, I did have a look at what Trump had to say numerous times. I did try. But most I've dismissed because he knew that the media loved printing every outrageous thing he had to say: the sillier, stupider and headline-grabbing it is, the happier was the media to serve it to the public. He also seemed to be a person who is very reactionary, emotional, vindictive, cruel, misogynistic and retaliatory. He struck me as someone whom, I was sure, the American people would not entrust nuclear codes to. I thought that video of him talking about how he grabs women "by the pussy" was enough to sink his campaign. Along came the FBI Director simply saying there might be amiss with Hillary Clinton's emails. That was enough to divert focus and now, look where Trump is: he is about to sit in the most powerful office in the world. (At the time of writing, the FBI, the CIA and the White House also say they have evidence that convinces them that Russia helped Trump win with hacking and fake news.)
The lesson to learn in all of this, is to not dismiss what people say, especially when that person is running for the US Presidency. There's a clip I saw of a CNN Reporter interviewing a panel Trump supporters who were talking about their world-view which were so bizarre and ridiculous that left the reporter so dumb-founded, she didn't know how to tackle it. I think she was like most of us. We did not know what to say when we came across other people's opinions based on a different set of perceived facts. But we need to be better prepared. We need to be ever-vigilant and persistent in pushing through conversations regardless of how uncomfortable they are.
Along with many of you, my urgent concerns with Donald Trump as the US President is his stance on Climate Change. If he really believes and cannot be persuaded that Climate Change exists, then it will make the struggle all the more difficult. Thank goodness at least that we have China, Japan, Germany and India who are all seemingly tremendous progress into transitioning their societies to alternative sources of energy.
Looking at the last few months, comparing the exchange rates between Bitcoin, the Australian dollar, the Euro and the US Dollar, as well as the news in India, Europe and China, there is tension visible on the trading charts.
Traders and investors seem to be jostling for positions and placing their bets. It seems optimistic to me. There's a heightened probability that Bitcoin is about to strongly push above its current price.
Brexit has raised a few problems for people and companies in the UK, now that its people have voted to exit the EU. Estonia, a smart cookie, in this story is wanting to provide a solution for those who wish to remain part of the EU. From what I understand, you can incorporate in Estonia, without being a resident or a citizen there. It is an interesting proposition to look into. I am all for giving governments competition for their services. In the modern world of technological businesses, government who choose not to cater for modern businesses will risk losing the rewards of having a vibrant entrepreneurial-friendly economy.
According to an article (link below) : "The European Central Bank (ECB) has proposed a directive of the European Parliament and of the Council stating that ‘virtual currencies do not qualify as currencies from a Union perspective,’ and wants digital currencies to be explicitly defined as not legal currencies or money... the use of digital currencies, such as bitcoin, pose a threat as terrorists and criminal groups are able to transfer money within digital currency networks with a certain level of anonymity."
Because of this, the ECB is discouraging the promotion of Bitcoin.
The European Central Bank is right to be concerned with terrorism and money laundering. But isn't that domain primarily the concern of law - enforcement and other more appropriate branches of policy makers?
I'm not exactly sure if their reasoning is sound because most illegal activities, without bitcoin, is done by cash, anonymously and relatively untraceable... at least digitally. Drug dealers don't transact using credit cards or bank transfers where their activities are tracked from what things like the ECB have control over or access to. In war zones, transactions are mostly in cash.
What the ECB is doing now, is basically saying, let's not help promote Bitcoin because we do not control it. But that's one appeal of Bitcoin: groups of people, representing a narrow interest, cannot control it. It is a hedge against political and economic institutions when they fail.
I think this sends out a message to potential investors and innovators to put on hold the development of technologies that takes advantage of Bitcoin.
Bitcoin is an attractive alternative to existing currencies for many reasons. The ECB is using it's trusted brand to discourage the use of Bitcoin for the sole reason that it does not have controls on it. If, as a Central Bank, that's how their members feel about it, they are well within their rights to choose not to promote Bitcoin. However, transactions and the development of products and services for Bitcoin must not be hindered just because a Central Bank does not have influence over it.
According to an article by The Register (Last accessed: 18 June 2016), "CIA director John Brennan told US senators they shouldn't worry about mandatory encryption backdoors hurting American businesses. And that's because, according to Brennan, there's no one else for people to turn to: if they don't want to use US-based technology because it's been forced to use weakened cryptography, they'll be out of luck because non-American solutions are simply 'theoretical'".
Basically what this person is saying is that, let's just spy on non - Americans and not worry about the rights of citizens around the world, because the world has no-one to rely on apart from American companies and American infrastructure anyway!
At the moment, the US dominates information technology globally. That, in itself is not a problem. But problems begin when policy makers are influenced by logic like this. As arrogant and wreckless as I find this statement to be from someone who holds such an influential position, it is a rational view from his standpoint.
The rest of the world - their rights to privacy and their rights over their information - is, to an extent, massively affected by American policy makers, yet we do not have any say as to who their leaders are. We cannot vote for the leaders who affect our lives. The only way so far as I can, see is to compete.
Such proclamations are really a challenge for citizens, companies and governments all over the world to give the USA some real competition. The problem is, the rest of the world seems to stifle their young businesses from growing while America continues to encourage and support their entrepreneurs. I say this because I have looked into incorporating in Europe (Belgium) and Asia (Philippines).
For starters, minimise the tax and regulatory burden for small businesses. Make it easy for them to work on their ideas and start a business. Wait until they grow then by all means, tax them appropriately. For example, in Belgium, the simplest private company structure requires you to show how your shareholders can raise a particular amount of capital, about 20000 EURs or Dollars, if I remember correctly, even if you are establishing an online service-based business, where there is little capital required, when you do not need an office and employees because all you need is a computer and an internet connection. In the Philippines, they require 5 directors, 3 of which need to be a resident in the Philippines! They're basically limiting enterprises that have less than 5 directors, let alone three living in the Philippines. In Australia, there is no need for 5 Directors (just 1 will do).
Every nation, every government should think of how their regulations and their funding policies are helping out or harming small businesses, especially those in technology because their future depends on it.
I have heard of Bitcoin. It's currency but it's digital. Interesting. But I didn't read up on it until mid 2015.
My interest was piqued after hearing an interview of an entrepreneur who founded a company offering bitcoin services. [It had been a while so I've forgotten his name.] He grew up in Argentina. His family accumulated wealth and within two generations, the Argentinian government mismanaged the economy and crashed the value of their currency several times and every time it happened, they had to rebuild their wealth.
It was this main point that highlights the need for a currency that does not depend on how governments manage their economies. In countries like Australia, the US and the UK, you can reasonably depend on their government institutions to ensure that the value of your currency does not come crashing to the ground without you having the time to manoeuvre. But there are several countries with stupid or weak governments that keeps mismanaging their economies and therefore, keep penalising citizens who are doing the right thing by saving and accumulating wealth.
We need a currency that no longer relies on national governments. We need a planetary currency. Bitcoin may be it.
National currency rely on sound economic institutions, which in turn, rely on sound political institutions. These are no easy feats. In many ways, Bitcoin, offers a lot of solutions to the many negative aspects of our financial and monetary system.
That's all I have time to blog today. Well get more into Bitcoin another time.
I heard about Bitcoin around 2012 but I just sat and waited to see if I would hear more of it.
I really got interested about Bitcoin when I heard an interview of an entrepreneur starting a business providing Bitcoin services and his reasons for why it is a good currency.
Bitcoin is a long term play for me. By long term, I mean one, two or three decades. It is not something I want to trade on a weekly, let alone daily basis. The spreads are too far apart in relation to its daily movements.
I went long the Bitcoin last September when it was around $350 AUD, and kept adding on to my position. Now it is $1000 AUD.
I had a quick scan of the headlines to see what is happening with it. Apparently, Microsoft now accepts bitcoin.
"It can be used to buy apps, games, and other digital content from Windows, Windows Phone, Xbox Games, Xbox Music, or Xbox Video stores. Be aware, that Money added to the Microsoft account using Bitcoin cannot be refunded.(Source: https://bitcoincharts.com/ accessed: 16/6/2016)
Mozilla accepting Bitcoin. Paypal is in its first step to integrate Bitcoin. Wikimedia Foundation accepts Bitcoin. AirBaltic is the World's first airline to accept Bitcoin. Dell partners with Coinbase to accept Bitcoin.
When I get the time, I would like to write an article or a post about why I think Bitcoin is a good thing and so, well worth your time to invest or trade in it.
Image source: https://bitcoincharts.com; Last accessed: 16/6/2016.