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Can Blockchain Exist Without Bitcoin?

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Hi Everyone,

One thing that you keep hearing, especially from the ultra-wealthy and corporate spokespeople, is that bitcoin is useless but blockchain is revolutionary.

So, today’s market update will be specifically dedicated to exploring this statement in depth so that you can draw some more informed conclusions for yourself and for your investment portfolio.

Hope that you enjoy. As always, please feel free to send any questions, feedback, or further insight.

@MatiGreenspan
eToro, Senior Market Analyst

Please note: All data, figures & graphs are valid as of June 6th. All trading carries risk. Only risk capital you can afford to lose.

Speculative Vehicle

The latest of the one-percenters to join the chorus of “bitcoin is a fraud” was the legendary investment manager Jim Chanos.

His exact words

To be fair, in an apocalypse scenario I doubt if paper money would be very useful either, certainly the digital representation of fiat money in an online bank account would not.

Chanos does have a point though when he said that this is a “speculation game masquerading as a technological breakthrough.” This morning we got word that one cryptotrader is now apparently apologizing for turning $600,000 into $8 million.

It’s exactly Chanos’ claim about the breakthrough that peaked my attention though because even bitcoin’s greatest critics have been known to praise the innovation of Satoshi Nakamoto’s blockchain technology.

Nobel laureate Professor Robert Shiller agrees with Chanos about the speculative aspect of bitcoin, but conversely has stated that the underlying technology is so complex that “Practically no one, outside of computer science labs, can explain how cryptocurrencies work.”

Jamie Dimon, the CEO of JP Morgan Chase, has famously called Bitcoin a fraud. Yet his bank has poured an untold amount of time energy and a fair bit of money developing the blockchain technology.

Blockchain without Bitcoin?

There are countless projects and pilots that are now being built on a blockchain.

Some of the ideas include tracking diamonds in order to verify their authenticity and point of origin, or creating a public ledger to manage property ownership, or a pilot by Wal-mart to track produce from the farm to the store shelf.

The idea of using blockchain for corporate purposes has become so popular that Microsoft has just published a blog showing how easy it is to set up an Ethereum Blockchain on their Azure platform.

A particular use case that’s gaining a lot of traction is to use an open blockchain to improve transparency in public democratic elections. Now it seems that West Virginia has become the first US state to implement such a pilot in their primaries on May 8th.

…but not so fast says Vitalik Buterin….

In a recent interview with CryptoTrader Ran Neu Ner, the brother of Litecoin’s founder Bobby Lee stated that “the blockchain cannot be used for any real-world applications besides bitcoin.”

Meaning, that because most data is actually subjective any information that’s uploaded to a blockchain is disputable. Therefore, most of the new blockchain projects that are happening would be better built on a centralized database.

Bitcoin is Ungentrifiable

Andreas Antonopoulos is arguably one of the most well respected thinkers in this space and at a recent conference he laid out his unique view on the above argument….

Any business considering implementing a use case for blockchain needs to ask themselves: Do you need something that is open, neutral, borderless, that no one controls, and that resists censorship?

If the answer is no, then what you need is a regular old-fashion database. If the answer is yes, then what you need is Bitcoin or Ethereum or a similar cryptocurrency.

He further predicts that sometime in the next few years, somebody will create a decentralized application on Ethereum that will be extremely controversial and will really upset all these corporate projects who have recently joined the network, who may be powerless against the rest of the network.

Real Use Case for Cryptocurrencies

This morning I had the pleasure to meet a real cryptotrader from Venezuela named Eduardo. In my mind, this is the real “use case” for crypto.

The economic situation is deteriorating so quickly that Eduardo estimates the real inflation on the ground to be as high as 10% per day, but that it is impossible to calculate. The official exchange rate of 10 Bolivars to the Dollar is so absurd that even the government won’t accept it.

“Last week, a hamburger at McDonald’s cost 2.5 million Bolivars,” he says “but today it costs 5 million.”

The popular website DolarToday.com used to be a reliable tool to track the rate on the street. Today’s rate on DolarToday shows 1 Dollar = 1.79 million Bolivar…

However, there is mounting speculation that the government is now controlling this website so it has been rendered unreliable. At this point, even though the price of Bitcoin is extremely volatile, Eduardo often uses the Bitcoin to Bolivar rate to try and gauge the depreciation of his nation’s own currency.

At this point, most people are not using cryptocurrencies for everyday transactions on the street. However, partially thanks to the government’s own initiative known as the Petro, awareness of cryptocurrencies is now widespread there and more and more people are using bitcoin as a store of value.

The volumes of online bitcoin transactions as tracked by Coin.dance has risen sharply this year, but the number of peer to peer “offline” transactions is thought to be much higher than that.

Venezuela is not alone in this situation either. For anybody living in Zimbabwe, Argentina, Iran, or even Turkey, Bitcoin can realistically be seen as a stable store of value.

In this graph, we can see bitcoin’s value (black line) against that of the Turkish Lira (red) and the Argentine Peso (blue). This graph shows the time frame from the beginning of November, before the rise of bitcoin entered bubble territory.

Of course, the more we zoom out the more the difference is pronounced. Here’s the same chart since the beginning of 2016.

Now, the above 4 countries couldn’t possibly justify a price of $8,000 per coin. However, if we throw Japan into the mix, where the central bank is actively trying to devalue the Yen, and where bitcoin is legal, we can probably say that the price is pretty low at the moment.

In conclusion, despite what Chanos, Buffett, Dimon, and Gates are saying, Bitcoin has a clear use case as a store of value. However, the debate about decentralized apps and ledgers is ongoing.

Let’s have an awesome day ahead!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Analysis

Markets Looking for Direction as Dow Eyes All-Time High

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Global stocks have been trading without clear direction so far today, even after Asia kicked off the day in a bullish fashion, with the Shanghai Composite rallying for the second session in a row following Trump’s tariff announcement. The Nikkei retreated a bit after its recent surge, but Europe followed China’s lead and the majority of US stocks are also sporting gains, even as the Nasdaq is in the red, with the likes of Amazon (AMZN), Microsoft (MSFT) and Apple (AAPL) lagging behind.

Dow 30 Index Futures, 4-Hour Chart Analysis

The Dow, which has been relatively strong in the past weeks is outperforming again, thanks now mainly to the jump in mega-cap banks, and the index is edging ever closer to its all-time high from January which is less than 1% away currently. Should the industrial average set a record high, the correction that started with the February mini-crash would be erased by all the US indices, further widening the divergence compared to the rest of the world.

DAX 30 Index CFD, 4-Hour Chart Analysis

Looking closer at Europe, the DAX is trading at its highest level since the first days of the month, similarly to the EuroStoxx50, but the longer-term downtrends are not in danger yet. British assets were in the center of attention today, since the CPI came in higher than expected in the UK, giving a brief boost to the Pound in the generally choppy environment in the Forex segment.

In the US, the housing market provided the most excitement, with building permits significantly missing the consensus estimate of 1.31 million, coming in at 1.23 million, while housing starts beat expectations with 1.28 million units vs. the 1.24 units expected. The sector remains under pressure from rising rates, and activity is clearly below the cycle-peak earlier this year.

US Yields Continue Surge after the BOJ Meeting

2-year US Treasury Yield, 4-Hour Chart Analysis

The upward pressure on yields is apparent today again, with Treasuries plunging and rates rising across the curve. Today, the 30-, 5-, and 2-year yields all hit multi-year highs, and the 10-year yield is also close to the highs it hit in May, as rate hike odds continue to climb before next week’s Fed meeting.

USD/JPY, 4-Hour Chart Analysis

The Bank of Japan didn’t surprise the market today, sticking to its policy despite some recent tightening rumors, and the Yen is virtually unchanged after the decision, with a slight bullish bias.

Gold Futures, 4-Hour Chart Analysis

Commodities are higher today, even as copper gave back most of its early gains, with gold drifting higher towards the $1210 level and WTI crude oil getting back above the key $70 per barrel level. The precious metal is boosted by the slightly weaker Dollar, while oil gained ground after the larger than expected crude inventory draw in the US.

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Market Overview

Market Update: U.S. Stocks Rise as Investors Shrug Off Tariff War; XRP Leads Crypto Market Recovery  

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U.S. stocks rebounded sharply on Tuesday, with investors seemingly looking past a worsening trade spat between China and the United States. In cryptocurrencies, XRP surged more than 16% in anticipation of a major commercialization effort by Ripple, Inc.

Stocks Recover Lost Ground

All of Wall Street’s major indexes put up firm gains on Tuesday. The large-cap S&P 500 Index rose 0.5% to 2,904.31, with most major sectors finishing higher. The Dow Jones Industrial Average rose 184.84 points, or 0.7%, to 26,246.96. The technology-driven Nasdaq Composite Index jumped 0.8% to 7,956.11.

On a sectoral basis, consumer discretionary shares were the strongest performers Tuesday, gaining 1.3% as a whole. The S&P 500’s information technology component finished 0.9% higher. Healthcare, energy and industrials also put up firm gains.

The CBOE Volatility Index, also known as the VIX, fell 6.5% to 12.79. The so-called “fear index” surged more than 12% at the start of the week, snapping a five-day losing skid.

Trade-War Escalates

In response to new tariff measures by the Trump administration, China on Tuesday announced it will tax $60 billion in American-made goods. More than 5,000 U.S.-made goods will be targeted in the new round of levies, including meat, alcoholic beverages, automotive parts, clothes and machinery. Levies placed on American products range between 5% and 10%, according to China’s state council.

Hours prior, President Trump said he will impose 10% tariffs on $200 billion in Chinese imports, the most comprehensive measures taken in the yearlong trade spat. The new round of levies will take effect as early as next week.

With respect to China’s countermeasures, Trump issued the following tweet Tuesday morning: “There will be great and fast economic retaliation if our farmers, ranchers and/or industrial workers are targeted!”

Both sides were aiming to return to the negotiating table later this month but those plans appear to have faded. Given China’s massive surplus with the U.S., it is already running out of products to penalize.

XRP Leads Cryptocurrency Rebound

The cryptocurrency market made incremental gains back toward $200 billion on Tuesday after Ripple announced new commercialization efforts for its technology. As a result, XRP surged more than 17% to $0.319, the highest in almost two weeks.

Ethereum exhibited unusual trading activity as prices rose sharply and suddenly over the span of an hour. The second-largest cryptocurrency by market capitalization reached a session high of $222, more than offsetting the previous day’s drop. ETH was last seen trading at $210 for a gain of more than 7%.

Bitcoin also clawed back most of its recent slide, signaling renewed stability in the market.  BTC rose 0.7% to $6,347, based on latest available data.

The total crypto market cap briefly climbed above $200 billion. At the time of writing, the market was valued at $198.7 billion, according to CoinMarketCap.

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.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 604 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Pre-Market: Sell The Rumor, Buy The News?

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After a long period of uncertainty, the US finally decided to commence with the second round of tariffs directed at China, slapping a 10% levy on $200 billion worth of goods, and threatening with tariffs on another $267 billion of goods in case of a Chinese retaliation. The tariffs will increase to 25% in 2019, but for now, the Chinese response was measured, with only an announcement coming from the Chinese ministry of commerce, saying that the country has no choice but to retaliate.

Shanghai Composite, 4-Hour Chart Analysis

While stock futures fell initially following the after-hours announcement by Donald Trump, today equities are slightly higher across the board, with even the Shanghai Composite staging a rally off its fresh bear market low. The new tariffs were widely expected by the market, so the “buy-the-news” response is understandable, but for a sustained rally in Chinese assets, a resumption of the trade talks between the two largest economies would likely be needed.

DAX 30 Index, 4-Hour Chart Analysis

The main European indices are little changed with the DAX still hovering around the 12,000 level and the EuroStoxx 50 being stuck ear 3350. Both benchmarks hit three-week highs in early trading, but the rally on the Old Continent is still lacking real momentum, especially given the distance to the bull market highs.

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Emerging markets are still very weak with the recent bounce being barely visible on the charts, and the segment is still stuck in a strong downtrend, with especially the most vulnerable countries weighing heavily. Emerging market currencies are mixed today, with the Turkish Lira completely erasing its rate hike gains, but with the Brazilian Real, the Chinese Yuan, and the Argentinean Peso being relatively stable after the US trade announcement.

S&P 500 Index Futures, 4-Hour Chart Analysis

Stocks are set to open slightly in the green on Wall Street, with the major indices still being within striking distance of their all-time highs, and with only the Nasdaq pulling back meaningfully recently. The S&P 500 is just a tad below its record high, and with the MACD indicator back in neutral territory, a move to new highs could still be just around the corner.

Dollar Stable as Oil Jumps Amid Syria Escalation

Interestingly forex markets remained stable despite the trade war escalation, with the Dollar drifting slightly lower compared to its major peers, and losing a bit more ground against the main China-related currencies. Commodities are also higher today, with especially the China-linked copper and crude oil being in the green and gold trading virtually unchanged.

WTI Crude Oil Futures, 4-Hour Chart Analysis

While the scope of the Syrian conflict shrank in recent months, the tensions around the last rebel stronghold Idlib are rising. Russia and Turkey (which back opposing forces) surprisingly announced the formation of a demilitarized zone around the city to avoid a siege and a likely bloodbath, but overnight, a Russian recon plane was downed, which could lead to a reescalation in the country.

Russia is blaming Israeli forces for the casualty, and an open conflict between the two countries would be increase risks in the region, and possibly drive oil prices higher. The Brent Oil contract has been already outperforming the WTI one thanks to the sanctions against Iran, and today Saudi officials stated that the Kingdom is comfortable with the $80 per barrel Brent price, further widening the divergence between the two contracts.

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 348 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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