Tag: markets

---

It turned out to be a dreadful Monday for the stock markets with both major US indexes plunging to historic intra-day lows. While the Dow Jones Industrial Average fell by 1,000 points for the first time, with all 30 members plummeting, the S&P 500 had only two stocks that were above water. All gains notched up by the two indexes in 2018 have now been swiftly decimated.

Not a big deal really since the underlining amazing fundamentals from the tax cuts are still there. But America does continue to pile on the debt, when is America going to realize its system does not work? See New York and California, that type of socialistic behavior does not work. See Greece too!

It has been a particularly difficult phase for companies such as Alphabet (the parent company of Google). Though not in the Dow index, the company suffered $40 billion blows to its market capitalization on two consecutive trading days. In effect, Alphabet investors have been rendered poorer by a whopping $80 billion since Friday. Perhaps they should stop firing people for telling the truth. Google has a cultural issue.

 

Not Really a Market Crash

However, comparisons of the Dow’s dismal performance with the 2008 fall of Lehman Brothers may be premature and ridiculous. Admittedly, the 1,175-point plunge was pretty gloomy to watch, but it cannot be classified as a market crash as of now.

Barney Frank is no longer destroying the real estate market so that is always something to smile about and Alan Greenspan is not around either so that is a positive note as well. He held interest rates too low in 02, 03, and 04 which led to the financial crisis. The Community Reinvestment Act did not help either!

A sudden, fast crash of 20% or more is usually termed a market crash. It is called a bear market when prices fall 20% from the zenith, albeit at a slower pace. Examples of a market crash include the infamous Black Tuesday of 1929, Black Monday witnessed in 1987, the dot com collapse of 2000, and the most recent financial upheaval of 2008.

Market correction, a more palatable version of the market crash, is defined as a price fall of a minimum 10% from peak figures. Not to worry, at least not yet. The Dow is down by just 8.5% while the S&P is 7.8% lower than its peak. This is despite a multi-day sell-off triggered partly by apprehensions of soaring inflation in the aftermath of a sturdier-than-expected jobs report.

Bitcoin’s Decline Continues

While things were dismal for the stock market with stocks listed on the Dow losing over $300 billion, bitcoin too continued with its recent bad run and declined by 23% on the first day of the week and lost about $18 billion in market value.

As for Bitcoin, its price has been crashing for quite some time. But this should not come as a surprise, given the fact that it has been on a roller coaster of peaks and plunges almost on a daily basis over the past couple of months. The fluctuations on some days even go up to 20% either way.

Yet, there is a ray of hope for those who have clung on to the cryptocurrency technology despite these tormenting moments. The loss is sure to hurt now but the withdrawal of mass speculators might do Bitcoin some good in the long run.

Silver Lining for Bitcoin

Up to the end of 2017, there was a blind rush to hoard Bitcoin. Investors could be found purchasing Bitcoin through all means possible. Frenetic buying not only poses risk to investors, it also jeopardizes the inherent value of Bitcoin. This type of hysteria in buying and investing in markets is at the root of many a financial bubble and crash. Known as the Fear Of Missing Out (FOMO), it shows signs of building up to a bubble.

So, the current situation could be a blessing in disguise for alt currencies if it helps do away with such investors who have pushed the panic button on seeing the rapidly declining cryptocurrency prices.

A lower and more stable price for Bitcoin is not only acceptable, but also likely to improve its long-term prospects in the absence of FOMO investors. Think back to the dotcom bubble which went bust after similar hype. However, the situation improved manifold and in fact the dotcom sphere has grown by leaps and bound. All you need to do is look around at the impact of the internet and dotcom today.

Correlation between Stock Market and Bitcoin

There are some experts who assert that there is indeed a relationship between the two. They claim that confidence in the stock market boosts Bitcoin price and vice versa. Thus, Bitcoin falls into the category of risk-on investment while gold is on the other end of the spectrum.

From this assessment, it is evident that the prospects of cryptocurrencies dims in an extended bear market. However, a bull market might prove favorable to Bitcoin and other cryptocurrencies.

If the crypto market stabilizes, investors might cash out of stocks and turn to crypto, while shunning commodities and bonds. In such a situation gold and silver might barely hold their ground, but crypto is bound to be the prime beneficiary kind of like the franchise Fast and Furious and Transformers are to amazing directing and writing but let’s get back on topic.

In uncertain times, if the lure of the crypto market proves irresistible to leading stock investors, spectacular gains could be in store for bitcoin owners, provided the stock market continues to be in a downward spiral.

---

Cryptocurrency and Bitcoin are all the rage now, but that doesn’t mean that everyone is looking to become rich off of virtual coins. A recent survey from Survey Monkey and Global Blockchain Business found that while about 60% of all Americans have heard of Bitcoin, only about 5% actually have some in a digital portfolio.

Another January study from the COBINHOOD cryptocurrency service platform found out that half of respondents understand how cryptocurrency is a digital decentralized currency, but the vast majority still have no idea what an ICO is. Despite the solid amount of people who had an idea about cryptocurrency and its uses, about 80% of respondents said they had no idea where to actually buy virtual currency. In addition, 44% of those in the survey said there were currently less than 10 different cryptocurrencies out on the market right now.

These latest survey results represent a sharp uptick in the amount of people who have some sort of understanding of Bitcoin and the cryptocurrency world as a whole compared to previous years. They also encapsulate the changing ideas about the place of virtual currencies in the financial world.

Things were a lot different back in 2013 when Bitcoin was just a fraction of the price it is at today. Echoing some of today’s sentiments, the coin was split into camps of supporters and early adopters who saw it as the future of money, and others who dismissed it as a Ponzi or get rich quick scheme.

Survey firm On Device set out to ask 22,000 consumers in May 2013 about Bitcoin and found that about 25% of respondents had heard of it. However, people who were knowledgeable about the cryptocurrency displayed a high degree of trust in it. 62% of people in the survey who were Bitcoin-aware also had confidence in it. Most people who were actually using Bitcoin were purchasing electronic items, computer hardware, and DVDs with the digital coins.

The survey results drew the interest of some VC firms who were intrigued that people displayed a high degree of trust in a currency that was markedly different then traditional money.

Views started to shift as Bitcoin’s popularity slowly began to rise in subsequent years. A survey from January 2015 by Coin Center revealed that about 65% of people who responded had no familiarity with Bitcoin.

Coin Center expressed alarm at the results due to the intense media hype Bitcoin was starting to accrue, and because people in the survey were divided about if the government should come in and totally ban the virtual currency or just leave it alone. Coin Center wrote about the need for more public policy work about educating the public about Bitcoin, but also expressed hope that people would come around to the digital currency and begin to see its usefulness in the modern world.

Much has changed again just a couple of years later. An October 2017 survey from LendEDU found that younger Americans consistently had more knowledge then their older counterparts on Bitcoin, Ethereum and Ripple, and were planning to invest in cryptocurrencies at far higher rates than adults who were over 45.

The latest results from Survey Money and Global Blockchain Business seem to echo the trends in the past couple of years. Knowledge about Bitcoin and cryptocurrencies continues to grow, but the number of people actually buying and investing is still a bit low. People in the survey said they were getting into cryptocurrency in order to circumnavigate government regulations, to use it a store of value, and hold on to it as an investment.

Even though the prices of cryptocurrency skyrocketed last year, a solid number of respondents saw a direr 2018 for digital currency. 38% of those sampled think the cryptocurrency bubble is going to pop this year, while 41% of those holding Bitcoin have the same sentiments. However, 70% of people who were in the survey think Bitcoin’s price is going to be much higher five years from now.

---

There is no doubting that cryptocurrencies have made some monumental steps forward in the past twelve months. Not only have most skyrocketed in value, but new applications for these currencies (and the blockchains they exist on) have been coming out very frequently.

So while the market and industry is definitely growing and getting bigger all the time, a problem is starting to arise that could create some huge issues going forward. This is none other than the constant struggle between keeping everything decentralized, and being able to scale it too. As more people decide to become involved with blockchain technology and cryptocurrency, the struggle has become more noticeable.

Before diving into the power struggle between decentralization and scaling, it is important to have a good understanding about what each of these mean. Decentralization essentially means that no one entity or person controls the system, which prevents certain people manipulating it for their own goals or personal gain. Scaling, on the other hand, means that the system can support a large number of different users. If a business cannot scale, it will never become massive as it simply will not function correctly.

Now that you know that, let’s look at why this struggle exists and how to potentially fix it. The struggle exists because as more users flock to use the blockchain and crypto, those blockchains begin to experience issues. High fees and a backlog of transactions are two very real issues being caused by so many people using these systems. While it is still semi-manageable now, as more and more continue to become interested in the technology, it will get worse and worse.

One of the biggest things bringing people to blockchain is the fact that it is decentralized and not controlled by one person or entity. But as more people come to the technology, it becomes way harder to handle, control and manage, so you can see where the tension exists between this love for the decentralized nature of blockchain, but also the need for scaling when dealing with a large number of users.

In simpler terms, think of this problem as a triangle (an idea published in a paper by Greg Slepak). Basically, each point on the triangle represents one of the three properties that blockchain needs in order to become a viable technology.

One is scale, another is decentralization and the third is consensus (the ability for each node on the blockchain to ensure each transaction is valid. On a triangle, each line can only touch two of the three points, which is quite similar to blockchain, as in the current landscape, only two of those three can ever be fully satisfied. For example, they could have a scalable system that can reach a consensus, but it wouldn’t be 100% decentralized.

Scaling in itself isn’t hard, and many companies, systems and services have done it, but it often goes hand in hand with decentralization. So it appears that a compromise will need to take place in some form.

So what is the solution going to be for this problem? As of right now, there is no concrete answer and many people have their own thoughts and ideas as to what is the best way to go about dealing with this issue. One possible solution is the Lightning network by Bitcoin. This network aims to provide not only cheap and fast transactions, but also transactions that are fully scalable.

A few experts have also given their own potential solutions for how to deal with this predicament. These range from on-chain scaling to changes at the consensus protocol level. Only time will tell which solution (if any) becomes the best and most effective.

In conclusion, it will be interesting to see how cryptocurrencies and the blockchain as a whole attempt to solve this issue of decentralization and scalability. If they don’t it could very well hinder the growth and development of this potentially great and valuable industry.

---

Researchers and financial experts increasingly seem to believe that bitcoin and gold prices may have an intriguing inverse relationship. In the past one year, cryptocurrencies have increased in value, while the gold markets were depressed. Similarly, when gold prices shot up, the digital currencies depreciated in value.

Strategic Investment Shift

Analysts have observed this inverse relationship better over the previous two weeks when the bitcoin market saw its largest value declines since the beginning of 2017. For example, Daniel Marburger, Director at Coininvest (a precious metals company) recently stated in an interview that he had sold 30 kilograms of gold and reinvested that money into bitcoin.

Marburger explained that they have been flooded with emails and phone calls from customers enquiring how they could convert their cryptocurrency holdings into gold.

It is an extraordinary situation, which highlights a strategic shift from bitcoin and other virtual currencies to a stable, solid investment in these unpredictable times for the crypto market.

Near-term Rise of Bitcoin Predicted

Research analyst Scot Macdonald from Seeking Alpha has said that the inverse relationship between bitcoin and gold has been in existence for some time, and this relationship has become stronger after the creation of bitcoin futures markets. Macdonald’s “Elliot Wave” research points to the fact that bitcoin prices have hit the bottom, and may be set to rise in the forthcoming days and weeks.

Meantime, after gold markets rose in value last week, Macdonald’s analysis indicates that the metal’s value is set to enter a bearish market phase. Macdonald recommends that traders should buy bitcoin and sell gold in the weeks ahead.

Bitcoin futures markets had seen a meteoric rise and the valuation of bitcoin had hit $19k when gold was trading at $1,265. And ever since bitcoin valuations started receding from the $19k zone, the value of gold began to increase.

Macdonald says that an identical market reaction had occurred in March and September last year. He believes that the inverse relationship between these two variables can help to predict each asset’s movement in the short-term future.

This market behavior between these price markets indicates that gold and bitcoin are closely inversely related to each other. Traders looking for profitable short-term investing opportunities are closely observing this relationship, which might give them clues about whether to purchase bitcoin and dispense with gold at this time.

Gold Seen as a Safer Alternative

Mark O’Bryne, founder of Goldcore (another precious metals firm), has stated that his organization too has observed this apparent inverse correlation between these two markets. O’Bryne highlights that conventional investors are reducing the risk of highly volatile cryptocurrencies to a more traditional investment asset like gold, which is typically more solid.

O’Bryne explains to the press that bitcoin traders had conveyed concerns to them that the unprecedented price escalation in bitcoin was not sustainable and that they felt skittish about it. He further highlighted that people are realizing that the digital currencies signify a much higher level of risk than conventionally safe assets.

Ross Norman, who also deals in gold in London, informs that customers of various ages are coming to them to trade bitcoin for gold. He says that they are witnessing sales upwards of a million pounds every two weeks.

Many bitcoin advocates, bullion dealers, and financial researchers are now convinced of a unique interrelationship between bitcoin and gold, which have both been considered “safe havens” over the past year.

The volatile global economy has attracted investors to both physical and digital gold. Financial researcher Andy Hoffman states that both these kinds of investments are actually allies against the “most destructive and largest Ponzi scheme of fiat currency.” Well, nothing is as big as the Barney Frank real estate fiasco of 2008 but that is another story.

Hoffman states that these two investment tools, bitcoin and gold, are not adversaries but allies in the disintegration of the fiat regime. Kind of like Autobots and humans, they are both fighting the Decepticons in those amazing Transformers movie but let’s not digress anymore.

More Research Needed

While market observers increasingly agree to the existence of a correlation between bitcoin and gold, certain members of the digital currency trading community tend to disagree. Some members of this community have accumulated data to highlight that this relationship might only be speculative.

Drawing meaningful and conclusive insights into the relationship between gold and bitcoin will need more in-depth research. More data from the markets gathered in the weeks ahead could indicate a definitive relationship between bitcoin and gold.

---

Cryptocurrencies have gotten everyone’s attention in 2017. Digital currencies like Bitcoin, Litecoin, and Ethereum have taken the financial world by storm, shooting up in price and making a lot of investors very happy.

Plus, they’ve no doubt put a smile on the face of those interested in alternates to fractional reserve banking.

One of the byproducts of cryptocurrency use is as a method to seemingly escape the cycles of debt and credit which have become a mainstay of modern economics.

Virtual currency’s peer-to-peer architecture means all transactions are settled on an equal basis, since digital assets obviously can’t be in two wallets at the same time.

Plus, some blockchain securities platforms like tZERO have made it a mission to simplify the Wall Street practice of ‘trade, clearing, and settlement.’ One type of new transaction called the atomic cross-chain swap even makes it impossible for just one side of a trade to get done.

But even with these technological innovations, some worry that the potential to make big profits with cryptocurrencies encourages investors and other buyers to make the same types of risky decisions with credit, that those in the crypto and blockchain world are actively seeking to get rid of.

For example, there are reports that some consumers in the United States are happy to go into debt in order to collect cryptocurrency. Joseph Borg, the president of the North American Securities Administration, told CNBC about instances where credit cards, equity lines, and even mortgages were created in order to buy Bitcoin.

A lot of leading virtual currency exchanges also offer margin trading. One in Japan even lets users leverage up to 15x their cash deposits. Even though much of the lending on these exchanges are peer to peer, there was talk at CoinDesk’s Invest conference last month to introduce things like prime brokerage and securities lending-type services.

These moves were discussed as a way to meet big demand from institutional investors.

There’s also swirling rumors that Tether has been pumping out tokens in order to boost the price of Bitcoin on Bitfinex, a major Asian cryptocurrency exchange. However, Tether says an upcoming audit will put these speculations to rest.

Examples like these are pieces of a growing concern from many in the cryptocurrecy community. Some believe that the introduction of Bitcoin into the mainstream is going to lead to fake Bitcoin that doesn’t even exist.

This could all but eliminate cryptocurrency as a legitimate store of value.

However, some see the concept of credit and cryptocurrency as a necessary component. Professor Perry Mehrling of Barnard College at Columbia University wrote that “Cryptos fear credit, but I suspect they will soon discover that credit is a feature not a bug, and that will require them to re-examine the implicit monetary theory that underlies their coding.”

He explained how the forces creating the markets around cryptocurrency are inevitably relying on the concept of credit in order to manage a balance sheet in search of a profit.

Still, Caitlin Long of enterprise blockchain startup Symbiont sees things a bit differently. She casts doubt on the idea that net settlement has to be a feature in a market, labeling the concept as just “allowing multiple buyers for only one asset.”

She believes the financialization of Bitcoin would ultimately kill its status as a true store of value even if prices might go up in the short term.

Even with these contrasting viewpoints, the concept of credit and cryptocurrency is an important one. Digital currency has called several longstanding financial practices into question, and credit is one of them, especially since cryptocurrency transferred between people is just an electronic abstraction.

Many are hopeful that virtual currency represents liberation from both the all-encompassing power of central banks, and from particularly nasty forms of credit, truly carrying out the adage of: ‘Debt is slavery.”

However, even as the technological innovations of cryptocurrency seem to at least reduce the influence of credit, it’s still starting to sneak inside the blockchain economy.