Down 80 per cent in just over a year: Why Bitcoin’s bubble burst

Bitcoin was the first of the crypto currencies and invented by a mysterious computer genius. This is how it’s taken a massive dive.

A little over a year ago we looked at Bitcoin and the whole crypto currency phenomenon.

Eerily, it turned out to be the same week as Bitcoin traded at its peak of $US19,891 on the Bitfinex exchange.

We were being accused of ignoring the “new age” investment darling.

We concluded it was an investment bubble waiting to burst. Our aversion to the whole crypto currency fad was based on a few reasons;

• We had no idea who was behind the Bitcoin business.

• The trading market was unregulated.

• It was too easily replicated by other crypto currencies

• People couldn’t work out what was fair value.

Around the same time the Australian Securities and Investments Commission issued this warning: “ICOs (initial coin offerings) are highly speculative investments, are mostly unregulated, and the chance of losing your investment is high. Consumers should understand the risks involved, including the potential for these products to be scams, before investing”.

We just weren’t convinced that Bitcoin and other crypto currencies were a legitimate investment option for average Australians.

THE BIG FALL

Since that week, Bitcoin and the whole crypto currency market has dropped 80 per cent in value. That’s bigger than the dotcom bubble and crash of 1995-2000.

As a couple we invest in start-ups and alternative investments so are pretty open minded about new trends. As we said at the time, crypto currencies had all the signs of an investment bubble, and reports of people mortgaging their house to invest was just plain crazy.

You can make big bucks investing in a fad. Just don’t be the sucker at the end when the crash comes. Always take profits along the way, try to get back your original investment and then just play with the profits.

HOW IT WORKS

As background for those who weren’t caught up in the hype, Bitcoin was the first of the crypto currencies and invented by a mysterious computer genius called Satoshi Nakamoto who decided there would only be 21 million ever created.

Bitcoins are created or “mined” by supercomputers which solve complex algorithms and, in return, receive a unit. The closer the number of Bitcoins gets to 21 million units the harder it is to mine and the bigger the supercomputers need to be to solve the puzzles.

The Bitcoins are then held in digital wallets of investors which are numbered and password protected. Some describe it as a peer-to-peer electronic cash system. No names are used so it’s very secretive and investors anonymous.

The Bitcoins are then traded on markets using “blockchain” technology. This is simply a decentralised network of computers around the world which monitor and record all transactions.

Basically a Bitcoin is a means of trading value. Think of it as a digital version of money. Before that there were shells or rum during the Rum Rebellion when Australia was an early colony. It’s used as a means to pay for good and services.

Its value is determined by good old supply and demand.

While Bitcoin is acknowledged as the first major crypto currency, at the peak of the boom there were around 1700 different electronic currencies being traded. Everyone was getting in on the action.

So what happened?

Like a lot of new investments, when they start to get popular, and move toward the mainstream, they attract scrutiny. Experts say the market has been hit hard by a number of factors.

REGULATOR CRACKDOWN

Regulators and traditional financial institutions are always spooked by new investment schemes. But when that new product is an electronic currency which is decentralised with no central regulating authority and avoids the regular payments process, it is going to get a lot of attention from authorities.

Governments and central banks around the world have hit the market with a series of regulations and warned against anyone investing in crypto currencies.

INADEQUATE SECURITY

Cyber thieves have attacked a number of the crypto trading exchanges and stolen money from investors. How much has been stolen is not clear because there are no formal tracking of these exchanges, but some estimates are that over $1 billion went missing in 2018.

That’s a lot of money, even for investors at the extreme of the risk profile, and undermines confidence.

TAX OFFICE STAKES A CLAIM

Where there are people making big money out of investing, government revenue agencies are not far behind to get their share of the action.

Despite the secretive nature of crypto currency investing, the Australian Taxation Office (and its counterparts around the world) ruled gains would be subject to tax.

One of the reasons given for the current market collapse is that US investors are cashing in to pay their tax bills on the big gains they made in 2017. The Internal Revenue Service ruled crypto currencies were property and would be taxed on capital profits.

GOOGLE’S ADVERTISING BAN

At its peak, the crypto phenomenon was fuelled by huge marketing dollars spruiking the different “coins” and their incredible investment returns. Most of our online screens were flooded by advertising showing we were fools not to get involved.

But Google turned off the tap by banning online advertising of crypto currencies and the marketing machine ground to a halt.

Originally published as Why the Bitcoin bubble burst

 

DAVID & LIBBY KOCH

 

David Ogden – Http://markethive.com/david-ogden

Bitcoin price analysis – experts call the bottom, the market does not believe

• BTC/USD retested the lowest level of 2019 despite growing transactions volume.

• A sustainable move above $3,600 is needed.

Bitcoin is hovering marginally above $3,500 at the time of writing. The digital coin No.1 has lost nearly 4% since this time on Sunday, resuming the decline that started on the second week of January. The market seems to see the glass half-empty, paying attention only to negative news.

Meanwhile, the researchers note that Bitcoin's average daily transactions volume returned to the levels registered in October 2017 (a short reminder: that was the period of a strong rally on the cryptocurrency market).

"Bitcoin daily on-chain transactions grew 63% in the last ten months. Volumes are now the same as we had during the 2017 bull run, a Twitter user ArminVanBitcoin notes.

While the share of SegWit transactions has not changed in recent six months, LighteningNetwork activity has been gathering pace.

This makes the experts believe that the market has bottomed out and the bull run is about to start in the nearest future.

Bitcoin’s technical picture

Looking technically, BTC/USD retested the lowest level of 2019 at $3,480 before the recovery pushed it back above $3,500. It is worth noting, that the upside momentum has faded away, which means that the sell-off may be resumed later during the day. If the above said $3,480 is broken, the price might slide towards $3,400, which is guarded by 23.6% Fibo retracement level, monthly.

On the upside a sustainable move above $3,600 is needed to mitigate the immediate bearish pressure.

 

Tanya Abrosimova

FXStreet

David Ogden – Http://markethive.com/david-ogden

Bitcoin Nears $3,750 as Top Cryptos See Moderate Gains

Saturday, Jan. 19 — all the top 20 cryptocurrencies are seeing slight to moderate gains in the 24 hours to press time. Bitcoin’s (BTC) price is nearing $3,750 again, according to Coin360 data.

At press time, Bitcoin is up about 2 percent on the day, trading at around $3,730. Looking at its weekly chart, the current price is higher than $3,663, the price at which Bitcoin started the week.

Ripple (XRP) is up just over 1.6 percent on the day, trading at around $0.331 at press time. On the weekly chart, the current price is higher than $0.329, the price at which XRP started the week — and notably lower than $0.337, the midweek high reported on Jan. 14.

Ethereum (ETH) has seen its value increase by nearly 3 percent over the last 24 hours. At press time, ETH is trading at almost $125, having started the day around $121. On the weekly chart, Ethereum’s current value is near identical to $126, the price at which the coin started the week.

Among the top 20 cryptocurrencies, the ones experiencing the most notable growth on the day are NEO, which is up over 5 percent, and Maker (MKR) and Litecoin (LTC), both up about 4 percent.

The combined market capitalization of all cryptocurrencies — currently equivalent to about $124.5 billion — is higher than $121.8 billion, the value it reported one week ago.

As Cointelegraph recently reported, the Organisation for Economic Cooperation and Development (OECD) has stated that global regulators should work together to facilitate the development of initial coin offerings (ICOs).
 

Also, crypto entrepreneur and regular contributor to CNBC, Brian Kelly, claimed that there is no chance for a Bitcoin exchange-traded fund (ETF) approval in 2019. Kelly made his remarks in an interview with Cointelegraph at the Crypto Finance Conference this week.

 

 

By Adrian Zmudzinski

David Ogden – Http://markethive.com/david-ogden

Daily bitcoin transactions on darknet markets doubled throughout 2018 – Report

• Bitcoin is a popular form of payment on darknet markets because users do not need to reveal their identities.

• In 2017 bitcoin became wildly popular with speculators who trade it online against other virtual currencies.

• Bitcoin’s price peaked in December 2017 at just above $20,000 and is now down more than 80 per cent from its high.

Overall bitcoin flowing into darknet markets fell to $600 million in 2018 from $700 million a year earlier.

NEW YORK: Use of bitcoin as a form of payment doubled in 2018 on darknet market sites, where users can buy anything from illegal drugs to fake IDs, even though the price of the cryptocurrency crashed, according to a study by data firm Chainalysis.

Bitcoin transaction volumes on darknet markets rose throughout 2018 to an average of $2 million daily, nearly double the activity measured at the start of the year, according to Chainalysis.

Overall bitcoin flowing into darknet market .

“The reason for that drop is more law enforcement activity,” Grauer said. “It would be misleading to think that this year it (the volume) will go down.”

Bitcoin, the largest cryptocurrency, is a popular form of payment on darknet markets because users do not need to reveal their identities.

In 2017 bitcoin became wildly popular with speculators who trade it online against other virtual currencies as well as hard currencies such as the US dollarNSE 0.45 %. Bitcoin’s price peaked in December 2017 at just above $20,000 and is now down more than 80 per cent from its high.

 

Reuters|Jan 19, 2019, 10.56 AM IST

Read more at:

//economictimes.indiatimes.com/articleshow/67597940.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

 

David Ogden – Http://markethive.com/david-ogden

Why you should be patient for a big Bitcoin payoff

Cryptocurrency remains the subject of much speculation amongst investors and regulators, and the prices of major tokens remain volatile enough for traders to make decent profits trading at the right times.

Popular cryptocurrencies Bitcoin and Ethereum have shown significant growth recently, increasing by 16.26% and 67.77% respectively from 9 December 2018 to 9 January 2019.

These surges in value may have helped to placate investors following the dismal performance of the overall cryptocurrency market throughout 2018.

Hopeful investors – like those who purchased Bitcoin in 2017 to cash in on the currency’s meteoric price rise – should not hope for a similarly quick return on their buy-in, however.

Cryptocurrency expert Simon Dingle and South African exchange Luno have both cautioned against buying cryptocurrency for quick returns, and instead urge buyers to learn more about the technology behind it to better understand their investment.

Expert predictions

A collection of predictions for 2019 by industry experts compiled by Forbes also paints an outlook which focuses on the development of technology and its subsequent effect on cryptocurrency prices.

Some investors, such as venture capitalist Tim Draper, state that Bitcoin will skyrocket over the next few years – reaching up to $250,000 by 2022.

Those involved in the cryptocurrency industry have also expressed excitement surrounding the new products coming to market, and the subsequent increase in adoption and price.

“2019 will be an exciting year. We will see several great products shipped to market, especially from our Binance Labs incubation programme, now taking place on five continents,” said Binance Labs head Ella Zhang.

“The projects and teams who are focused on building and achieving product-market fit will bring more real use cases to our lives. This will open the gateway to the mass adoption of crypto.”

Most agreed that the age of ICO hype, scams, and get-rich-quick schemes had passed, with more long-term investments now becoming the focus of the market.

Technology and development

While the prices of Bitcoin, Ethereum, and other digital currencies plummeted over the last year, the blockchain technology behind them has been under constant development.

This underlying trend of continued improvement will be the true driving force behind the steady increase of Bitcoin’s price, according to industry experts.

Luno recently stated in a blog post that one big challenge the cryptocurrency community still faces is that of instant gratification.

“The reality is that the existing financial system was built over hundreds – if not thousands – of years and we’re not going to build a new financial infrastructure overnight,” the company said.

“We need to be patient and take it one step at a time. The stakes are high and it would be irresponsible and potentially outright dangerous to rush things.”

The number of Bitcoin transactions taking place per month have been steadily increasing, showing that despite price decreases, the technology’s adoption continues to grow.

Luno said that despite criticism of the cryptocurrency industry and the falling price of digital tokens, it is optimistic about Bitcoin in 2019 – particularly its increased adoption and the development of blockchain scaling options.

Price movements

When it comes to price predictions, Dingle previously told MyBroadband that while he does not like to make them, he does not expect any more sudden surges to all-time highs this year.

Instead, he said that technological developments and positive changes would continue to steadily drive the average price of Bitcoin and other major cryptocurrencies higher.

He also stated that Ethereum was undervalued and may have a powerful recovery, after which the price of Ethereum increased by around 60%.

While it has deterred many investors, the recent long-term bear market has aided in forcing out scammers and flakey ICOs, and has allowed the cryptocurrency community to focus on creating value and developing technology.

Dingle expects cryptocurrency to continue its steady pace of growth throughout the year, although investors will need to be patient until they are able to take advantage of its potential for meteoric growth again.
 

 

Jamie McKane 17 January 2019

David Ogden – Http://markethive.com/david-ogden

Bitcoin – Is Another Reversal on the Cards?

It’s slow and steady through the early hours, with Bitcoin needing to make a move to avoid a reversal later in the day…

Bitcoin fell by 2.53% on Tuesday, partially reversing a 4.41% gain on Monday, to end the day at $3,654.3.

An early morning intraday high $3,780.9 saw Bitcoin come up short of $3,800 levels and the day’s first major resistance level at $3,839.13, leading to a reversal through the day alongside the broader market.

Bitcoin fell to a late afternoon intraday low $3,623.1 to come within range of the first major support level at $3,619.73 before steadying, a return to $3,500 levels avoided on the day.

For the broader cryptomarket, it was red across the board through the day, with Ethereum amongst the biggest losers, falling by 6.5% to $120 to raise the prospects of a return to sub-$100 levels should markets not settle in the coming days.

Focus going into Wednesday had been on an Ethereum fork to which the recent cryptomarket volatility and slide in Ethereum had been attributed.

News of vulnerabilities being discovered in the Ethereum upgrade that could ultimately leave Ethereum exposed to a hack and theft weighed on sentiment. This was not the first time that the Ethereum network has experienced a hiccup. The DAO hack was the largest Ethereum attack and left developers with little choice but to create a whole new coin, Ethereum Classic.

Following the Bitcoin Cash debacle and increased volatility ahead of the Ethereum fork, news of an issue in the upgrade ultimately led to the late afternoon sell-off on Tuesday, with Bitcoin, Ethereum and the broader market only finding support following an announced delay to the planned Ethereum fork.

For the Bitcoin bulls, the good news will be that Monday’s rebound was less of a dead cat bounce, though for Bitcoin to avoid another sell-off, not only is a move back through to $3,800 levels needed going into the weekend, but the Ethereum team of developers will also need to restore some confidence .

At the time of writing, Bitcoin was up 0.49% to $3,672.3, with moves through the early morning seeing Tuesday’s late recovery continue into the early hours.

A move from a start of a day morning low $3,642.4 to a morning high $3,685.2 left the day’s major support and resistance levels untested, with Bitcoin continuing to face stern resistance on any attempted moves through to $3,800 levels.

For the day ahead, a move through the morning high $3,685.2 would support a run at $3,700 levels to bring the first major resistance level at $3,749.1 into play before any pullback. It’s been 5 consecutive days in which Bitcoin has stalled on a run at $3,800 levels, Monday’s high $3,999.4 as close as it’s got, following last Thursday’s sell-off. Investors will likely show some caution should Bitcoin fail to make up lost ground, range bound moves tending to end in tears for the cryptomarket.

Failure to move back through the morning high $3,685.2 could ultimately see Bitcoin slide back through the morning low $3,642.4 to bring sub-$3,600 levels and the first major support level at $3,591.3 into play.

 

Heavier losses could be on the cards should the broader market be deep in the red, with any hint of a possible fall to $3,400 levels likely to lead to some Bitcoin panic through the 2nd half of the week.

 

Bob Mason

37 minutes ago (Jan 16, 2019 5:10 AM G

David Ogden – Http://markethive.com/david-ogden

Bitcoin (BTC) Could Bottom At $1,700

Murad Mahmudov, a Princeton graduate with dreams of launching his own crypto-centric hedge fund, has quickly become a leading Bitcoin (BTC) analyst, posting an array of in-depth, respectable bits of technical, historical, and fundamental analysis that have resonated with investors.

On Sunday, the industry insider took to Twitter to issue his latest analysis thread.

View image on TwitterMahmudov first drew attention to Bitcoin’s historical price action, drawing lines between the bear market of 2014/2015, specifically the “Baby Capitulation and Final Capitulation” events, and today’s market. Long story short, through a mashup of historical and technical analysis, BTC could fall to as low as $1,700-$2,200 by Spring 2019. So, in closing, the analyst wrote:

If the above dynamics are correct and history does indeed rhyme – which is a big if — We can expect a 1700-2200 bottom in the Spring (most likely April).

This recent quip comes just weeks after Mahmudov took to Tone Vays’ Youtube channel to talk cryptocurrencies. In the podcast-esque environment, the Princeton graduate drew attention to this $1,700 price forecast, explaining it from more of a fundamental level. As reported by us previously, he explained that a number of altcoins, like Ethereum (ETH), EOS, XRP, along with an array small-cap assets, are still drastically overvalued, especially considering their often misconstrued and sometimes non-existent value propositions.

Moon Overlord, a respected crypto trader, echoed Mahmudov’s thoughts. The pseudonymous commentator explained there’s a fleeting chance that Bitcoin has another “substantial draw-down” ahead of itself, also citing historical data. As the harrowing, yet also optimistic adage goes, “history does not repeat itself, but it rhymes.” So, if previous trends prove to be an accurate indicator, the flagship cryptocurrency could fall to as low as $1,700 before another “knock your socks off” rally.

In the same vein of “rhyme, not repeat” thought, other analysts have been more optimistic. Chris Burniske, a partner at Placeholder Ventures, recently claimed that if the crypto market truly moves in multi-year cycles, 2019 will be the year of crypto projects shipping product, echoing sentiment touted by Fred Wilson.

Another analyst, going by Filb Filb, once explained that BTC could surpass $333,000 by 2022, drawing parabolic lines in a somewhat nebulous sense.

Crypto Analyst Expects “New Bull Cycle” In Mid To Late-2019

In related news, another investor, who goes by the online moniker “GalaxyBTC (Galaxy),” claimed that the crypto market is currently entering an accumulation phase, meaning that lower lows are possible but somewhat unlikely. He/She noted that 2014/2015’s bear season lasted for 420 days. So, if history is any indicator, BTC could be nearing the end of its downturn, and will subsequently enter a “new bull cycle” in mid to late-2019.

Per previous reports from Ethereum World News, Delphi Digital, an independent market research consortium, also recently claimed that Bitcoin is currently entering a bout of accumulation.

The analysis completed by Delphi routed through The Next Web’s Hard Fork segment claims that there’s actually been an uptick in Unspent Transaction Outputs (UTXOs), indicating that investors are accumulating Bitcoin en bloc — which could potentially account for the increase in active accounts.

The independent research group noted that “older owners have exhausted much of their selling efforts,” drawing attention to UTXO data they compiled. Delphi’s team went on to write that this all indicates that a round of accumulation, purportedly similar to one seen at the end of 2014 (the previous drastic bear market), is occurring. Or in other words, a bottom could be in sight. However, considering the aforementioned calls, BTC may have quite further to fall in a relatively short period of time.

 

David Ogden – Http://markethive.com/david-ogden

Bitcoin (CRYPTO:BTC) Market Capitalization Hits $62.52 Billion

Bitcoin (CURRENCY:BTC) traded down 2.5% against the dollar during the 1-day period ending at 23:00 PM E.T. on December 22nd. One Bitcoin coin can now be bought for approximately $3,576.61 on exchanges including xBTCe, OKEx, ABCC and IDAX. Over the last seven days, Bitcoin has traded down 12.1% against the dollar. Bitcoin has a total market capitalization of $62.52 billion and approximately $4.79 billion worth of Bitcoin was traded on exchanges in the last 24 hours.

 

BTC is a proof-of-work (PoW) coin that uses the SHA-256 hashing algorithm. It was first traded on January 3rd, 2009. Bitcoin’s total supply is 17,480,612 coins. The official website for Bitcoin is bitcoin.org. Bitcoin’s official Twitter account is @bitcoin and its Facebook page is accessible here. The official message board for Bitcoin is bitcointalk.org. The Reddit community for Bitcoin is /r/bitcoin and the currency’s Github account can be viewed here.

 

According to CryptoCompare, “Balances – block chain The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender. The integrity and the chronological order of the block chain are enforced with cryptography. Transactions – private keys A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining. Processing – mining Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain. This way, no individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends.”

 

David Ogden – Http://markethive.com/david-ogden

Tim Draper Paid $18 Million For His First Bitcoin Batch, What’s it Worth Now?

If someone was to ask about fervent crypto investors, who would come to mind? For most Bitcoin enthusiasts and investors, Mike Novogratz, the Winklevoss Twins, and Tim Draper would be the first mentioned. And for good reason too, as the aforementioned four have invested copious amounts of time, money, and mental capacity into the nascent blockchain world.

Tim Draper, often clad in a grey suit, white dress shirt, and purple Bitcoin logo-studded tie, recently divulged his hero origin story, if you will, taking to Coindesk.

Tim Draper — A Fervent Crypto Bull

To celebrate Bitcoin’s tenth birthday, Tim Draper, the world-renowned American venture capitalist and forward-thinker, wrote an op-ed piece for a recent Coindesk feature series. Draper, whose investor son also believes cryptocurrencies are also tantalizing, noted that it was fifteen years ago when he saw value in digital currencies

However, a viable digital medium of value didn’t appear in Draper’s scope until 2011, when Peter Vincennes, chief executive at Coinlab, met with the investor to introduce him to Bitcoin. Vincennes and Draper hit it off near immediately, with the latter asking for the former to purchase $250,000 worth of BTC on Mt. Gox.

Draper was satisfied with his investment, keeping the coins on the now-defunct exchange in a likely state of naivety. But of course, Mt. Gox collapsed, with Draper losing his thousands of BTC, which he never really got his digital hands on, as it were.

Yet, later, Draper was given an opportunity to purchase cryptocurrency again, when the U.S. Marshall’s office auctioned nearly 30,000 BTC. The entranced venture capitalist, still reeling from the Mt. Gox collapse, decided to attend the auction, purchasing 29,656 coins at $632 apiece — $14 above the going rate on spot exchanges. In all, he spent $18.74 million on Bitcoin.

And since that day, he’s been overly optimistic about cryptocurrency and related technologies. This shouldn’t be much of a surprise, especially considering his beefy vested interest. Regardless, many have seen his perpetual, seemingly undying support of this asset class as a positive sign.

Even during 2017’s market run-up, which sent Bitcoin to $20,000, he didn’t sell his stack for fiat. And while many common Joes chirp at Draper for this, claiming that he’s an irresponsible investor, the venture capitalist is doing just fine financially.
 

Draper’s Bitcoin Outlook

At current rates, Draper would be left unscathed if he liquidated his Bitcoin stash, as he would still be able to secure $107 million if sufficient liquidity/demand is present. However, Draper, seemingly not willing to sell his BTC, sees even higher highs for this industry in the future.

The zealot, now emotionally involved in this industry, noted that there’s still “great potential” in Bitcoin. He noted that not only could BTC become a global, decentralized, frictionless store of value and digital cash, but blockchain could get implemented in some of society’s most important facets. Summarizing his points into a short and sweet quip, he wrote, “[blockchain] is honest, incorruptible, secure, and fair.”
 

NICK CHONG | JANUARY 13, 2019 | 12:00 AM

David Ogden – Http://markethive.com/david-ogden