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Hot Crypto Topics For 2018

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It is pretty hard to understate what 2017 has meant for investors. The S&P 500 had one of it best years in more than five appreciating 20% to a record near 2700. The global economy continued to recover from the last vestige of the 2008 financial crisis. Everybody has the right to feel financially more secure.

But if you were for fortunate to be a crypto investor, you have cause to celebrate like never before. Bitcoin rewarded you with a 1660%+ price appreciation, Ethereum gained a monster 10,200%+ while Litecoin turned in a 6,500%+ price increase.

And these are just the majors. Returns with some of the successful ICOs were even more spectacular. Of course not every ICO paid off and some fell victim unscrupulous operators. Nevertheless, 2017 was a golden year.

When prices increase as much as they have it is easy to get fixated solely on price alone and forget about the underlying forces that represent true value.

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So what will be the fundamental forced in 2018? It is hard to know the future so far out because it is evolving so quickly, but here are some thoughts on several very important issues.

 The Need For Speed

 Turning away from the ton of good things that happened in 2017, there are the twin issues of slow speed and high transaction fees. It is a thorny situation. Each of us can appreciate the need to any system to be successful has to be capable of scaling. Appreciating the higher energy consumed can be a bit more obtuse but it a big deal.

The promise of cryptocurrencies like bitcoin going back to the beginning was “fast and free” As the table below illustrates, transaction speeds are stalling and falling short of the promise.

The high transaction costs for all cryptocurrencies is presently a major deterrent to broader acceptance. Depending on how you work the math, performing a transfer in bitcoin can be more the using a fiat currency and using the traditional banking system.

Presumably the solution to faster transaction speeds would be less energy consumed which in turn would allow competition to drive down fees.

At present even 10-15 transactions per second is not nearly enough to meet projected demand in the future. Finding a solution is important to everyone from the major currencies like bitcoin, Ethereum and Litecoin down to companies linked to each.

Some help for Ethereum may be on the way in 2018 when Casper is fully in action.

Casper changes the Ethereum verification process from “Proof of Work” to “Proof of Stake”. One of the issues Casper addresses is high-energy consumption.

Part of the issue spills over into security. In order to maintain adequate security of Ethereum POW protocol involves very high operating costs. Casper dramatically lowers these costs.

Experts who have deep knowledge of Casper claim that honest miners will be able to cheaply validate while attackers somehow will still face extremely high costs.

Casper addresses this problem. In doing so, Casper puts Ethereum in a much stronger position to serve the world. The more users, the more demand for Ether and that, of course means even more upward Ether price pressure.

And then there is the Ethereum Raiden Network. This is Ethereum’s version of bitcoins Lightning Network. The technical definition of Raiden is allowing off-chain scaling solutions for performing so called ERC20-compliant token transfers

Raiden supposedly enables near-instant, low fee, scalable transactions. The operative words here are off-chain scaling and privacy preserving. This is an option to watch closely in 2018 to see if Raiden can live up to some big promises.

Could Terabyte Blocks Be The Big Solution

 It is only a research paper but the founder of Lokad Joannes Vermorel has come up with a possible answer by creating terabyte size blocks. His idea has only focused on transactions for bitcoin cash but if it works there you can bet that adaptations for other currencies will follow.

 Joannes argues that terabyte blocks could not only be fast but economical. He explains how terabyte blocks could scale to far more than the current 1MB blocks size or about 3-4 transactions per second.

According to his research paper a terabyte block could contain around 7 million transactions per second. That relates to 50 daily transactions for virtually every human on planet earth. That promise alone is what makes Vermorel’s idea worth keeping an eye on.

How difficult it will be to translate Joannes idea into a real world application and then be adapt to cryptocurrencies beyond bitcoin cash is anybody’s guess. One thing is certain, transaction speed and costs are likely to be hot topics in the New Year.

Remember, one of the original selling points of bitcoin was that transactions were fast and free. At present neither of these two promises are being consistently met. Even so, the possibilities are so fascinating that it keeps our attention glued to events that will shape the future. Whatever 2018 brings we will share our views and hope your prosperity continues.

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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4.4 stars on average, based on 81 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Crypto Critics: Fractured Facts

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I have another confession.  As a long time investor, I believed in the theory of efficient markets. This basically means that every participant in the market has immediate and complete access to all information facts like price, earnings and other data.  

I made the mistake in applying this theory to cryptocurrencies. Lately, this has been a mistake.  Yes it is true that anyone with the time and interest can go about gathering all the facts. But are all facts telling the truth or are they really fractured facts?  Either way they are dictating investor thinking and that is a key to this market.

According to reports on MarketWatch, crypto prices slumped on the release of a 24 page report from the Bank of International Settlements. BIS stated that cryptocurrencies suffered from “a range of shortcomings that would prevent cryptocurrencies from ever fulfilling the lofty expectations that prompted an explosion of interest — and investment — in the would-be asset class”.

The BIS is no small town organization. They serve as a central bank for other banks and they have been doing this since 1930.  When the BIS talks, people take things they say very seriously.

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The doomsday article released Sunday paints an accurate picture of the state of cryptocurrencies today. But what about tomorrow?  Most everyone is familiar with the issues of speed, security and energy consumption, not to mention regulation. But for the BIS to conclude that none of this problems will ever be solved is down right nieve.  It is the equivalent of declaring in 2001 that the Internet was doomed because 90% of users were connect on dial up modems.

Rotten Research

The BIS report is not the first fracturing of facts presented by well regarded organizations that is scaring investors. Remember back in May? We were treated to the research headline: Bitcoin Futures Caused The Crypto Market Crash according to Federal Papers.

Both the Federal Reserve Bank of San Francisco and a Stanford University professor released a report concluding the launch of bitcoin futures last December contributed to the ensuing price collapse. Pretty far fetched stuff, and here is why.

Bitcoin futures trading began on December 10. BarChart.com shows the CME traded a measly 932 contracts while the CBOE handled 3,887.  Of that total some 2,828 contracts were still “Open Contracts” on December 29th leaving just 1991 coins to do all the harm. During that final week of December over 1.4 million coins were traded. The findings were simply flawed.

Much like the BIS, when the Federal Reserve speaks, people believe they have done their homework carefully.  Throw in Stanford and that adds further weight to this conclusion.

And Then There Are Those Other Facts

And then there was the revelation last week that, much of bitcoin’s 2017 boom was market manipulation, research says.  In a huge 66 page report it was claimed that at least half of the 2017 rise in bitcoin prices was due to coordinated price manipulation using tether.

The author, University of Texas at Austin finance professor John Griffin, argues that Tether was used to buy bitcoin at key moments when it was declining, which helped “stabilize and manipulate” the cryptocurrency price. BTW: this is the job of the specialist on the floor of the New York Stock Exchange.

Professor Griffin appears to have done an excellent job correlating events without much consideration for the economics involved.  According to Bloomberg’s Aaron Brown, for Professor Griffin to be correct in his assertion that tether pushed up bitcoin prices four basis points per 100 bitcoin, Bitfinex would have needed to spend a boatload to inflate the cryptocurrency.  With Bitcoin at $10,000, for example, that means Bitfinex spends $1 million to push the price up to $10,004.

When you look at things from this perspective, Griffin’s findings look pretty absurd.

Look Closely At The Facts

These days with crypto psychology the worst since Mt. Gox in 2014, it seems like a good time for investors to capitalize on the fractured facts.  Technical analysis shows that cryptocurrencies bitcoin, Ethereum, Ripple and others are hovering around key support levels. It would not be shocking at anytime to find some academic study linking crypto to the common cold.  By the way, it is a fact that last years dramatic crypto price spike came right at the start of the flu season.

A far more relevant fact was last week’s announcement by the Securities and Exchange Commission that neither bitcoin or Ethereum were securities. Perhaps equally important is the conclusion that when ICO do not convey an equity ownership position, they too are considered in the same non-security category as bitcoin and Etherrun.  This is a fact.

What we do know is that crypto prices are as low as they have been since well before the spike last December.  Just as the markets recovered from Mt. Gox, the mindset of investors will recover and that is the key.

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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4.4 stars on average, based on 81 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Bitcoin’s Stalled Recovery Keeps the Bulls in Check

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The bitcoin recovery engine stalled on Monday, setting the stage for a possible price reversal that mirrors last week’s 70-day low. With the total market cap so low, a decline in bitcoin would almost assuredly lead to a similar correction for other cryptocurrencies.

Bitcoin Price Levels

Bitcoin prices reached a low of $6,335.77 on Monday, as bearish pressure continued to undermine last week’s modest recovery. Bitcoin rallied to a high around $6,700 last Thursday shortly after bottoming near $6,100.

The cryptocurrency later recovered around $6,660A7 but remains in a bearish pattern going all the way back to June 9. BTC/USD is down roughly $1,000 over that stretch. Price action over the past 24 hours suggests that a further breakdown is probable.

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The cryptocurrency market cap reached a high of $284 billion on Monday. Bitcoin and altcoins exhibited price stability over the weekend as trading volumes continued to plummet.

Depressed Market

As we reported this weekend, cryptocurrencies have witnessed a steady decline in trading volume that could make the market more prone to volatility. Daily trade volumes bottomed near $9.5 billion Sunday, the lowest in over two months. Volumes are down a staggering 80% since the market peaked in early January.

The absence of new money paints the picture of a depressed market in need of direction. With organic searches for “bitcoin” and “cryptocurrency” the lowest in around nine months, a large influx of new retail traders is highly unlikely.

Exchanges such as Coinbase are betting big that the next major catalyst will come not from retail traders, but large institutions. To help make that a reality, Coinbase has launched a new crypto-custody service targeting bitcoin whales. According to crypto hedge fund manager Kyle Samani, regulated custody services are the game changer that will attract institutional-scale capital.

“There are a lot of investors where custodianship was the final barrier,” Samani told Bloomberg in a phone interview. “Over the next year, the market will come to recognize that custodianship is a solved problem. This will unlock a big wave of capital.”

Coinbase isn’t the only organization vying to become a qualified custodian. Goldman-backed Circle and BiGo have also been in negotiation with regulators on the matter. Earlier this year, investment bank Nomura Holdings joined forces with two cryptocurrency firms to create a custody consortium. Bloomberg reports that at least three Wall Street custodians – Bank of New York Mellon Corp., JPMorgan Chase & Co. and Northern Trust Corp. – are exploring cryptocurrency custody services.

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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4.5 stars on average, based on 455 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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Crypto Expert Maintains $60,000 Price Target for Bitcoin

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Back in January, cryptocurrency expert Phillip Nunn made two bold predictions: bitcoin will reach a low of $6,000 this year before rebounding to a high of $60,000. With his first prediction proving true, Nunn remains steadfast that the latter price point will also come to fruition in spite of recent market turmoil.

The Bulls Will Prevail

In a recent interview with BusinessCloud U.K., Nunn said market volatility will ultimately work in favor of bitcoin, leading to an historic rally before year’s end.

Referring to his January forecast, Nunn said “the prediction was based on, first of all, market volatility which we’re experiencing at the moment.”

Nunn, who heads The Blackmore Group and Wealth Chain Group, said his $60,000 price forecast is “absolutely” possible given bitcoin’s long-term trajectory and role in disrupting traditional sectors. However, at present, bitcoin and other digital currencies are at the mercy of market sentiment and price manipulation, given the relatively small size of the industry. Case in point: cryptocurrency trade volumes plummeted to around $9.5 billion this weekend, the lowest in over two months. Such low turnover makes crypto assets prone to extremely wild swings not unlike the price forecasts Nunn put forward in January.

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“All the money that exists in crypto at the moment is from the public, so it’s all about market sentiment,” he said. “A flood of bad news can wobble the market, stuff like regulation. The industry is so small that there’s market manipulation.”

Ultimately, Nunn says bitcoin is helping to create an “internet of value” that will disrupt everything from money to record-keeping.

His view differs markedly from an institution like the Bank for International Settlements (BIS), which on Sunday released a report arguing for bitcoin’s ultimate demise. Although BIS didn’t frame the outcome exactly in those terms, the Swiss institution said the digital currency is ultimately too costly and too prone to manipulation to become a mainstay in traditional finance.

Bitcoin Prices

Bitcoin was little changed on Sunday, as prices consolidated around $6,500. With daily turnover of $3 billion, bitcoin’s trade volumes accounted for more than a third of the crypto market total.

The world’s largest cryptocurrency by market cap is down nearly 5% over the past week. That pales in comparison with some of the leading altcoins, which have fallen double digits over the same period.

Bitcoin has experienced multiple selloffs this year, with some analysts attributing the decline to the launch of bitcoin futures in December. Fundstrat Global Advosrs’ Tom Lee recently argued that bitcoin prices tend to fall into the expiration of the monthly futures contracts. This is likely caused by traders longing actual bitcoin and shorting the futures market.

Like Nunn, Lee maintains a strongly bullish outlook on bitcoin and has called for prices to rebound to $25,000 this year despite recent market dynamics.

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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4.5 stars on average, based on 455 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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