The meteoric rise of bitcoin has accelerated yet again as the world’s number one digital currency broke a new record raising $2299 a coin in a 24-hour window.
Blogging about the price of bitcoin can be extremely frustrating at times with many articles becoming irrelevant even before they ever get to print. I’ve seen this before myself with several articles I was collaborating on but it seems to be an industry-wide thing.
Imagine, somebody from Reuters worked very hard on this article announcing bitcoin’s rise above $13,000 and within an hour of the time it was published the price had already breached $14,000.
For me, I’ll always do my best to give you the causes behind the moves and whenever I can inform my readers what could likely drive the prices going forward. For all we know, a major pullback or an additional surge may have already happened by the time you read this.
eToro, Senior Market Analyst
Please note: All data, figures & graphs are valid as of December 7th. All trading carries risk. Only risk capital you’re prepared to lose.
Excitement is hardly the word to use but we’ll go with that for now. Nowhere is it more exciting than in South Korea. At the moment, a single bitcoin on the South korean exchange Bithumb is going for 19,391,000 KRW ($17,645 USD), which is 17% higher than the price listed on eToro at the time of this writing.
Recent estimates state that 21% of all global BTC volume are done in Korean Won. So what makes bitcoin so exciting for Korean traders?
I mean, aside from the same thing that makes it exciting for the rest of us. The idea of replacing our monetary system to be fairer and less reliant on inefficient and at times irresponsible government applies to South Korea even more than the rest of us for two reasons.
One, the obvious, they’re watching what’s happening in North Korea where the government has completely taken over the country. So they have a far fresher perception of what can happen when governments go bad.
Two, after recently going through a political meltdown and ousting the former President Park Geun-Hye, and after watching the CEO of the Samsung go to prison on corruption charges, their faith in the system is currently at a justifiable all time low.
Third, investing in bitcoin requires a certain appetite for risk that isn’t present everywhere but seems to be present just South of Kim Jong Un’s border.
Regulators in South Korea are doing their best to get a handle on the situation but are visibly struggling. They’ve already banned ICOs in September and in the last 24 hours have banned bitcoin futures trading.
Bitcoin futures may be more dangerous than we thought but we’ll explore that in tomorrow’s update before these potentially destructive futures markets hit Wall Street.
This week we’ve been talking a lot about blockchain capacity both in Bitcoin and Ethereum. Both blockchains seem to be testing their limits at this moment in time.
The Ethereum network is still being plagued by cats. The overnight sensation of the new viral dApp Crypto-kitties currently accounts for about 20% of the transactions on the network.
Bitcoin on the other hand is becoming a victim of its own success. The number of transactions waiting for confirmation is now at a dangerous high of 136,000.
And the average transaction rate over the last 7 days is now at an all-time high of 4.6 per second.
It’s still possible to speed up transactions on both networks by paying a higher miner fee. However, those paying the regular amount will need to be patient and could experience severe delays.
The good news is, we don’t seem to be at the point where transactions are being rejected on a mass scale. So even though the capacity of the networks and the patience of alternative investors are being tested, we haven’t quite reached any hard limits just yet.
Ethereum founder Vitalik Buterin has been working on the Constantinople upgrade for some time and we hope that it comes through soon. For bitcoin, the problem is a bit messier. The lack of centralized leadership makes it a lot harder for any meaningful solutions. However, some analysts feel that as the SegWit solution is adopted by more miners it should increase the capacity somewhat.
Many traders like to try and take an opposite view on what’s happening and find the opportunities that may be hiding behind the FOMO.
For short term traders, finding this type of support line could present an excellent opportunity. To highlight Liam’s point, here’s a chart of XRP from the beginning of the recent boom.
The idea is that an order with a stop loss just under the support line has a lot more to gain if it goes in your favor than it does to lose if it doesn’t. Meaning, if it hits your stop loss, no big deal, it’s a small loss, but if it turns around now, in retrospect it will have been an excellent entry point.
In addition, over the last week the entire market has been dominated by Bitcoin, with BTC taking back a lot of the market share from the other currencies. So, if we do see a pullback in bitcoin for any reason, it may be a good idea to get in on some of the alts.
Let’s have a spectacular 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.
Technical Analysis: Litecoin Continues Surge as Bitcoin Tests Highs
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.
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
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
Power Consumption for Bitcoin Mining Is Now Ranked 61st in the World
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.
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!
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
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.
Bitcoin Futures Officially Launch on CBOE
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.
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.
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.
- Bitcoin Futures Officially Launch on CBOE
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- Monero Forges Ahead as Prices Cross $290 December 12, 2017
- Ethereum Flirts With Record Highs as Buterin Compares Crypto Surge to Salvator Mundi Auction December 12, 2017
- Altcoin Investing Strategy as Futures Hit the Market December 12, 2017
- Companies are Lining Up to Launch Bitcoin ETF, According to SEC December 12, 2017
- Technical Analysis: Litecoin Continues Surge as Bitcoin Tests Highs December 11, 2017
- Trade Recommendation: Ride ETN and EW on Breakout December 11, 2017
- Trade Recommendation: Buy BBY, ZNH, CLX, and USCR December 11, 2017
- Power Consumption for Bitcoin Mining Is Now Ranked 61st in the World December 11, 2017
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