Bitcoin in the News : 2019-10 More++

As summer is followed by autumn, so a Bitcoin in the News : 2019-10 Price post is followed by a review of news from the same month. Of the 90 or so bitcoin articles presented by Google News alerts, only 16 made my short list, making it a shorter short list than I can remember. Most of the other articles were about someone predicting a price: bitcoin will go {up / down / sideways}. Since anyone can predict anything about price movement, I tend to ignore these. One prediction that did make the short list was:-

• 2019-09-30: McAfee Explains ‘Rationale’ For Why He Still Sees $1 Million Bitcoin By 2020 (forbes.com)

I've seen this prediction before, but what's behind it? After some estimates about the 'real' number of bitcoins that are available -- "21 million bitcoins, 7 million of which have been lost forever" -- the argument goes like this:-

"In any case, just run some numbers," McAfee said. "If bitcoin gets to be 5% of world financial transactions, which, you all know it will," he said, even mentioning "maybe 10% or 20%," then bitcoin would be worth "$10 million per coin, based on those numbers." • "I’m just a very conservative man," McAfee said with a laugh. "I said one [$1 million] and I’m sticking to one."

'You all know it will.' We do? There are so many assumptions built into that argument -- 5% of financial transactions, the supply isn't expanded, nothing better comes along -- that it's based entirely on faith. By coincidence, another article a week later goes further into potential pitfalls.

• 2019-10-08: Two Bitcoin Developers Explain How The Cryptocurrency Could Still Fail (forbes.com)

The story mentioned a number of risks. The first two have been recognized for some time; the last two are less well known:-

51% attacks; government crackdowns; rules of the Bitcoin network are changed in favor of a more centralized model; an accidental bug

Finding no other stories as compelling as those two, I returned to the '2019-10 Price' post, where I identified two sharp moves and wrote, 'Apparently, no one understands the cause of these sharp movements.' I should know better than to make statements like that. There were three stories from Forbes.com that addressed the causes:-

• 2019-10-25: Bitcoin Has Crashed Again -- What Now? (forbes.com) • 'Bitcoin (BTC) is falling because China is closing with the U.S. on a trade deal.'
• 2019-10-25: Forget China -- Is This The Real Reason Bitcoin, Ethereum, Litecoin, And Ripple’s XRP Bounced? (ditto) • 'Bitcoin has swung wildly this week, as many had expected it to, with it losing $1,000 per bitcoin a few days ago before suddenly shooting back up earlier today. [...] Bitcoin volumes have been struggling recently, leaving the market especially vulnerable to so-called whales placing large orders or liquidating short positions.'
• 2019-10-25: Bitcoin Defies Death Cross, Surging Close To 20% (ditto) • '"China’s endorsement of blockchain technology helped Bitcoin recover, and along the way, a short squeeze helped push prices even higher," said Joe DiPasquale, BitBull Capital’s CEO.'

It's not clear to me why a China / U.S. trade deal is bad for bitcoin, but I'll watch for more clues. As for the other China connection, here's a story from a different source:-

• 2019-10-26: Bitcoin surges to over $10,000 in biggest single day move since April (marketwatch.com) • 'Since a 2017 decision by the People’s Bank of China, cryptocurrencies are banned in the country, although a digital renminbi is being developed by the central bank and likely to launch soon. China was one of the biggest sources of demand for cryptocurrencies during the 2017 bull run.'

Although an endorsement of blockchain technology doesn't necessarily lead to a lifting of a cryptocurrency ban, it's a step in the right direction. The explanation makes more sense than technical jabber like the so-called 'death cross' that pops up in so many negative analyses.

Bitcoin in the News : 2019-10 Price

Just like last month's post, Bitcoin in the News : 2019-09 Price, last month's price chart had two stories. The first story was an observation on the trend for the month: the first time since June when the price increased during the month. The second story was a recurring observation that I've repeated several times this year:-

The market is in a state of equilibrium, then something happens -- always accompanied by significant volume -- to move it quickly to another state of equilibrium.

The chart below shows a heavy volume for the most important move, heavier than I have recorded at any time this year (remembering that the bars in the chart cover a four hour period, if they can be believed at all).

Bitcoin (BTC) Price Index

The starts of the two most pronounced price movements were:-

2019-10-22 0800 (Drop)
2019-10-25 0400 (Jump)

Each movement lasted about a day. Cointelegraph's Analysis category had nothing about the movements, while the site's Price Analysis tag covered both. First, here's an interesting, but misleading, observation from a few days before the drop.

2019-10-21: Price Analysis 21/10: BTC, ETH, XRP, BCH, LTC, EOS, BNB, BSV, XLM, TRX • 'While the supply of fiat currencies has been steadily increasing for the past few years, Bitcoin’s (BTC) block rewards has reduced at each halving. The rate of supply will reduce further following the halving in 2020. Previous instances of halving resulted in a sharp price increase and for this reason analysts are anticipating a repeat rally as the 2020 block reward halving approaches.'

If everyone knows when an event will occur and if there is general agreement on the impact of the event, then that information is already baked into the price. There is no 'insider information' in bitcoin, although this isn't necessarily true of all crypto currencies.

2019-10-23: Price Analysis 23/10: BTC, ETH, XRP, [...] • 'Bitcoin’s (BTC) plunged today, dragging the whole crypto space along with it. [...] At the moment, there is not a direct reason that explains today’s strong correction. Some analysts believe that Facebook CEO Mark Zuckerberg’s testimony before the United States Congress on Libra might have triggered the fall.'

A news article on the same day, 3 Likely Reasons Why Bitcoin Price Crashed, offered a few more explanations:-

1. Technicals: support finally gives after 9th try
2. Mr. Zuckerberg goes to Washington
3. Google’s quantum breakthrough spooks Bitcoin investors?

That last explanation deserves a deeper look than I can give it now. For a previous post on this blog concerning quantum computing, see Shor's Algorithm (November 2016). Back to the chart and the associated Cointelegraph analysis, the 2000 point increase was covered a few days after it occurred.

2019-10-28: Price Analysis 28/10: BTC, ETH, XRP, [...] • 'The seesaw price action over the past week has lightened up the crypto space once again. While the aggressive bulls view the sharp upside move as a bottoming signal, the bears consider the rise as a bear market rally that should be sold into.'

That wishy-washy forecast continued for the rest of the article. Apparently, no one understands the cause of these sharp movements. There were two smaller volume spikes starting 2019-10-09, but I have no reason to believe that they would shed new light here.