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Antonopoulos: Only Invest a Percentage Equivalent to Your Understanding of Bitcoin

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Andreas Antonopoulos, the prominent bitcoin and security expert who has spent the past few years providing insights into the cryptocurrency market by providing presentations and hosting talks at meetups, conferences, and events, has recommended investors and traders to only invest an amount that they are willing to lose when including bitcoin and cryptocurrencies to their portfolios.

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At Coinscrum, a conference hosted by the prestigious research institution Imperial College in London, Antonopoulos revealed that he has invested 100 percent of his personal savings into bitcoin and a portfolio of diversified cryptocurrencies and crypto-assets. But, he emphasized that it is important for investors to invest an amount that is proportional to their knowledge and expertise in bitcoin and cryptocurrencies.

“What percentage of your wealth should be tied up in bitcoin? A percentage that is equivalent to your understanding of how the technology works and your ability to absorb the risks it entails, which for most people is a small percentage” said Antonopoulos.

In response to a question from one of the attendees at the Coinscrum UK event, Antonopoulos noted that the majority of his savings has been invested in bitcoin and cryptocurrencies because he has invested most of his career and intellectual capacity in the development of the bitcoin industry and market. But, Antonopoulos stated that his investment strategy should not be implemented by casual investors that are still learning the technology and the structure of bitcoin.

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“My small savings that I do have are invested in bitcoin. 100 percent [of it]. I actually have a tiny debt in US dollars that I’m still trying to pay off so it is more than 100 percent in bitcoin. Now, I’d like to emphasize again, that is not a recommendation to invest. Because I haven’t invested by money in bitcoin, I invested my career, my intellectual capacity, my creativity energy, my passion, and my work in bitcoin. The money is the least of the investment that I have made in bitcoin and I could lose everything of it and I’d still have everything else.”

Antonopoulos also encouraged investors to invest in bitcoin and cryptocurrencies for education, not speculation.

In the traditional finance and technology markets, several multi-billionaire investors such as Marc Cuban and Tim Draper have also made investments in bitcoin. Cuban, who is still trying to understand bitcoin as a technology, revealed to Bloomberg that he has purchased several bitcoins through the Swedish Nordic Nasdaq, by purchasing shares in XBT Provider, a bitcoin exchange-traded note (ETN). While Cuban had been a critic of bitcoin for many years, recently, he has started to acknowledge the growing demand for bitcoin and cryptocurrencies.

In the contrary, Draper, a highly successful billionaire early-stage technology investor and venture capitalist, has invested large amounts of capital in bitcoin, even purchasing a batch of 30,000 bitcoins from the US government in 2014. From that investment alone, Draper has profited over $110 million in less than three years.

But, like Antonopoulos, Draper has been a key figure in the cryptocurrency sector since 2013. Draper invested in regional bitcoin exchanges in Mexico, South Korea, and Japan, along with other innovative blockchain companies such as Factom. Korbit and Coinplug, two companies which Draper funded in 2014, evolved into major bitcoin trading platforms in the South Korean market. Recently, Korbit was acquired by NXC, the parent company of the $10 billion gaming company Nexon, at a valuation of $140 million.

Draper has made significantly large investments in bitcoin relative to his other investments in his portfolio because of his firm belief in bitcoin as a technology, a digital currency, and a store of value. Like Antonopoulos, Draper has allocated most of his intellectual capacity, resources, and effort in improving the global bitcoin industry and cryptocurrency market.

For new investors, casual traders, and potential investors that are planning to invest in the cryptocurrency market, it is vital to create a portfolio of cryptocurrencies such as bitcoin at a size which is directly proportional to their knowledge and understanding of cryptocurrencies.

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Technical Analysis: Litecoin Continues Surge as Bitcoin Tests Highs

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With the crypto world being focused on the historical futures launch, the major coins all enjoyed buying following a hectic weekend, and a volatile week as a whole. BTC itself got another boost from the widespread publicity and the volatile correction of the recent days ended, with the most valuable coin bouncing back towards its all-time high.

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While the long-term picture remains severely overbought, the short-term picture is not stretched and further gains are possible even amid the elevated correction risk. That said, investors should wait for a more favorable entry point to ad dot their holdings, while traders should control position sizes in the light of the long-term setup. Major support levels are now near $13,000, $11,300, and $10,000, with stronger levels still at $8200 and $7700.

BTC/USD, 4-Hour Chart Analysis

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The major altcoins are all up today, but only Monero and Litecoin are still within short-term uptrends, and the segment as a whole is still dangerously overextended, and a deeper correction is very likely in the coming weeks. LTC continued its recent break-out, getting close to the $200 level, and joining the extremely overbought group regarding the long-term momentum, and triggering a long-term sell signal in our trend model. Key support levels are found $100 at $75 and $64, with a weaker primary level at $125.

LTC/USD, 4-Hour Chart Analysis

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Power Consumption for Bitcoin Mining Is Now Ranked 61st in the World

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Bitcoin Miners
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Bitcoin prices have been towering in the past couple of weeks. This is cause for celebration for users who have heavily invested in the cryptocurrency; but, it appears the value of bitcoin is not the only thing that has hit the roof in 2017. Bitcoin mining energy consumption has also reached new heights.

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A research study conducted by PowerCompare—a U.K.-based company for energy comparison tariff—found that the average power used to mine bitcoins this year has already gone beyond the annual energy consumption for some 159 countries. In particular, the global average power spent on bitcoin mining has far outstripped the energy consumption in Ireland and a couple of African countries.

This new study was based on data from Digiconomist, whose current estimation of power used to mine bitcoin hovers around 30.14 TWh annually. This figure is way above Ireland power consumption that currently stands at 25 TWh yearly.  In fact, recent research from Dutch Bank ING found out that one bitcoin transaction consumes sufficient electricity to power an average household for a whole month.

At this rate, if bitcoin miners were a single country, it would be positioned 61st in the world based on power consumption, comparable to Slovakia and Morocco. PowerCompare has already predicted that if the trend continues, bitcoin mining will expend the entire world’s electricity by February of 2020!

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Why bitcoin mining is increasing power consumption levels

What makes bitcoin mining an energy black hole?

Apparently, it is the computational requirements that process the complex cryptographic problems that miners must solve to be rewarded with the cryptocurrency. Just like other notable cryptos such as Ethereum and Litecoin, Bitcoin depends on miners to validate transactions performed in their respective blockchains.

To verify transactions, miners are required to solve complex mathematical problems, which on becomes increasingly difficult as more and more miners join the mining bandwagon. The more byzantine the cryptographic problems, the more the processing power that is needed to solve them.

In the case of bitcoin—the most popular cryptocurrency—a multitude of miners now make it absolutely necessary to use ASICs (Application-Specific Integrated Circuits) which consume considerable amounts of electricity. At present, ASICs have been designed to provide far more efficient computations, both in terms of the hash rate and power consumption when compared to CPU or GPU mining.

But the ASICs haven’t really resolved the hurdles of power consumption.

Ideally, the use of ASICs meant that the total time required to validate new blocks drastically reduces too. This hasn’t happened because of the way the bitcoin protocol was conceived. Apparently, the mining difficulty in bitcoin ensures that the total time taken for generation of new blocks must be kept constant.

As a matter of fact, the Bitcoin network automatically alters the difficulty level for bitcoin mining to ensure the discovery of new blocks every 10 minutes by miners based on two factors. First, there is the global block difficulty that forces valid blocks to have a hash value that is below the target to ensure the difficulty level is maintained.

Second, the number of miners that are actively participating in the mining process has been soaring, meaning the difficulty level has remained constant for a while now. Also, the mining difficulty automatically adjusts after every 2016 blocks on the Bitcoin network. Depending on how many users were actively mining – together with their combined hashpower—and the time it takes to find the 2016 blocks, the difficulty can either go up or down.

As the mining difficulty increases, miners should acquire more powerful hardware to accommodate for the adjustment which again increases the computational electricity. It is also worth noting that there is no maximum mining difficulty that has been set for the Bitcoin network. There is a possibility that the mining difficulty will continue to rise until all the Bitcoins are mined have been mined by the year 2140.

This means that power consumption in Bitcoin is not likely to decrease in the near future.

Challenges of mining Bitcoins

Here are some challenges of Bitcoin mining:

#1: Environmental hazards

The massive growth of cryptos has set up an exponential demand for processing power. The inordinate amounts of power required to mine bitcoins make it an environmental hazard since much of the earth’s electricity is still generated from greenhouse-gas-generating fossil fuels. This implies that bitcoin mining could be contributing to the climate changes and global warming.

#2: Stumbling block for mass adoption

The bitcoin cryptocurrency was conceived as a decentralized, peer-to-peer and trustless currency free from regulations of government agencies and financial institutions such as banks. Unfortunately, the adoption rate is discouraging. This can partly be attributed to the high energy consumption costs.

A recent study conducted by researchers from the HINUI (Hamilton Institute at the National University of Ireland) found that the cost of Bitcoin mining on the commodity hardware at present far exceeds the price of the rewards. In fact, Bitcoin mining has now been left to the big players who have the money to buy expensive ASICs with some of them leasing their hardware to small players in the so-called cloud mining.

#3: Rise of illegal piracy

In order to work around the hurdles of power-intensive requirements of bitcoin mining, some users have resorted to using dirty tricks to obtain the computational power from other people’s machines. A recent study published by Futurism found that Pirate Bay has covertly been testing a Javascript mining app on their website which allocates a huge volume of their visitors’ CPUs for purposes of mining the cryptocurrencies.

While the website in question was developed to help users in illicitly downloading files such as games, movies, and music, the JavaScript app hijacks the users’ CPUs to mine cryptocurrencies which is illegal.

Conclusion

The rise of bitcoin values is a cause for celebration in the crypto universe. It means that the entire global community is beginning to appreciate the value of cryptocurrencies in the world economy. However, mining energy consumption is soaring at an alarming rate. The quicker we find mechanisms to make bitcoin and other cryptocurrency mining electricity use “greener,” the better it would be for the Blockchain technology that is often heralded as the next internet.

Featured image courtesy of Shutterstock. 

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Bitcoin Futures Officially Launch on CBOE

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The long-awaited bitcoin futures contract officially debuted on CBOE Global Markets Sunday, sending BTC/USD sharply higher. Trade volumes were reportedly thin as CBOE’s website crashed immediately after the contract went live.

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XBT Goes Live

CBOE’s futures contract, which trade under the symbol XBT, went live at 6:00 p.m. ET. Within minutes, bitcoin prices surged over $1,000, a sign that institutional money was pouring into the market. The BTC/USD exchange rate reached a session high of $15,811 before giving up gains later in the session. XBT traded at $16,000 soon after the contract went live, giving it a premium over the spot price.

At press time, BTC/USD was trading at $15,248, where it was little changed compared with the previous close.

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Bitcoin’s total market capitalization is $260 billion. Trade volumes over the past 24 hours have exceeded $13.5 billion, according to CoinMarketCap. South Korean trading desks drove much of the daily turnover, with Bithumb accounting for roughly 16.5% of transactions. That’s equivalent to roughly $2.2 billion.

The Bitfinex exchange turned over 12% of total bitcoin transactions, which is equivalent to $1.6 billion, data showed. Coinbase’s GDAX exchange saw 6% of the volumes, or roughly $823 million. GDAX experienced technical difficulty last week as bitcoin prices crossed $19,000.

Although trade volume on the exchanges was robust, liquidity in the futures market was relatively thin.

Highly Speculative Instrument

It has been argued that bitcoin futures represent one of the highest forms of speculation in recent memory, given that they are cash settled and have no delivery requirement. This point was raised by Randy Mitterling in Twitter of all places in response to Nassim Nicholas Taleb, the world renown essayist, scholar and former trader. Mitterling, who serves as a Chief Investment Adviser, said:

“Bitcoin futures are cash settled. No delivery requirement. It’s just a sentiment indicator that could be completely wrong compared to the actual price. Truly the most highest form of speculation ever created.”

Taleb, himself a brilliant writer and probability theorist, had provided a series of insightful tweets about bitcoin in general and the new futures contract in particular. In a Sunday post, Taleb said the following:

“Note that Bitcoin has a limited number of natural sellers. The entire concept is very concave supply (it costs more and more to extract). The number of producers shrinks with time.”

In an earlier tweet, Taleb also said:

“No, there is NO way to properly short the bitcoin “bubble”. Any strategy that doesn’t entail options is nonergodic (subjected to blowup). Just as one couldn’t rule out 5K, then 10K, one can’t rule out 100K.”

The arrival of bitcoin futures probably ups the ante on other forms of institutional investments involving cryptocurrency. Some analysts speculate that bitcoin exchange-traded funds (ETFs) are the next logical step for a market growing more comfortable with the idea of cryptocurrency.

CBOE chief Edward Tilly recently told CoinDesk that the case for a bitcoin-linked ETF is stronger now that futures trading is under way. As such, CBOE may be prepared to submit a new proposal to the Securities and Exchange Commission (SEC) to allow bitcoin ETFs and exchange-traded notes (ETNs) to be traded.

Tyler and Cameron Winklevoss failed to launch their bitcoin ETF earlier this year after the SEC rejected their proposal on grounds that the Bats exchange would be unable to enter necessary surveillance-sharing agreements.

A bitcoin ETF would allow investors to buy and sell the asset class much like a stock transaction. For many, it is seen as a precursor to greater mainstream adoption of the world’s no. 1 digital currency.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

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