11 November 2017

Bitcoin in the News : 2017-10 More++

Continuing with Bitcoin in the News : 2017-10 Price, before I get to the rest of the news from October, I have to look after my own affairs. A few weeks ago I received an email from Coinbase, saying,
We wanted to remind you that the upcoming Bitcoin Segwit2x fork is projected to take place on November 16 and will result in two bitcoin blockchains.

This reminded me that two months ago, in Bitcoin [Cash] in the News : 2017-08 Price, I wrote,

Since I'm a Coinbase user, the Bitcoin Cash fork doesn't affect me (at least for now).

For this next fork, I had to pay more attention. The latest Coinbase email linked to two more resources, both dated 24 October:-

The 'Clarification' link led to a previous blog post, Timeline and Support - Bitcoin Segwit2x and Bitcoin Gold, which informed,

The Bitcoin Gold fork is projected to take place on 23 October. [...] The Bitcoin Segwit2x fork is projected to take place on 16 November.

As you might expect, the news from October carried further reports about these two events. The first event occurred in October:-

The second event will happen in a few days:-

The two forks focused attention on a question that has been in the back of my mind for some time now: how to value bitcoin (or any other cryptocurrency)?

  • 2017-10-06: Bitcoin Metric Doesn't Lie, But It Obfuscates (bloomberg.com) • 'The metric is called the network value-to-transaction ratio, or NVT. Some have dubbed it bitcoin's P/E. And, at least in the community, it's becoming something of an industry standard valuation metric. [...] It's based on bitcoin use, not just its wild price swings. [...] On Wednesday, bitcoins had a network value, that is the total value of all bitcoins, of nearly $70.2 billion, and $591 million daily in transactions, for a NVT of nearly 119.'
  • 2017-10-24: NYU's 'dean of valuation' says can't 'value' bitcoin, only trade it (cnbc.com) • 'New York University professor of corporate finance and valuation Aswath Damodaran argues that bitcoin is a currency, but it is still not that practical for transactions. [...] Wall Street's "dean of valuation" said Tuesday that bitcoin's price could be justified if it is widely usable as a currency for daily transactions.'
  • 2017-10-28: How Bitcoin Forks Influence Bitcoin Price Rise and Fall (cointelegraph.com) • 'Preparing for the fork' & 'What happens when a chain forks'

There were other stories that would be worth reporting in a normal month, but I'll stop here. The Segwit2x fork is roiling markets as I write this and all else appears to be secondary.

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04 November 2017

Bitcoin in the News : 2017-10 Price

In last month's post, Bitcoin in the News : 2017-09 Price, I wrote, 'I must remember to prepare the chart on the first of the month rather than for the first post'. In this I was successful. In the previous month's post, Bitcoin [Cash] in the News : 2017-08 Price, I wrote of the monthly chart, 'The following chart might be captioned, "Straight Up!".' The same goes for the current month's chart. In trying to understand why it went straight up, I was unsuccessful.


Bitcoin (BTC) Price Index

As in previous months, let's look for clues to the price action in Cointelegraph's Bitcoin Price Analysis (BPA).

Most of the BPA articles were of the type in that last bullet. They show short-term charts of each of the mentioned cryptocurrencies, along with a technical analysis of the price action (resistance & support levels, that sort of thing) indicated by the charts. I don't recall ever seeing anything like a fundamental analysis and don't know if it's even possible. Is the price of bitcoin++ driven entirely by market psychology?

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14 October 2017

Bitcoin in the News : 2017-09 More++

I ended the previous post, Bitcoin in the News : 2017-09 Price, with an observation and a question.
Can we conclude that the bitcoin price is mainly driven by rumors from China? Crackdown on ICOs, ban the activities of cryptocurrency exchanges, ban of mining farms; what's next? Despite all of this, the price of bitcoin at the beginning of the month was only a few percentage points above the price at the end of the month. Does China really matter?

Let's go a little deeper into the news from China.

  • 2017-09-06: Bitcoin Comes Clawing Back After Selloff on China Ruling: Chart (bloomberg.com) • 'Bitcoin traders seem to be taking Monday’s 11 percent slump -- triggered by China ruling initial coin offerings illegal -- as a buying opportunity.' [NB: This drop is missing from the price chart I used in the previous post.]
  • 2017-09-08: Bitcoin's price tanks after report China plans further crackdown (cnbc.com) • (Title now: 'Bitcoin's price tanks after report China may shut down exchanges') 'Local outlet Caixin is reporting the Asian country is planning to shut down local bitcoin exchanges, according to a Google translation'
  • 2017-09-11: China is shutting down domestic Bitcoin exchanges (theverge.com) • 'China plans to shut down domestic Bitcoin exchanges, anonymous sources told The Wall Street Journal today. The sources said that regulators weren’t giving a clear message on when the shutdown would occur.'
  • 2017-09-15: China's bitcoin crackdown forces exchanges to close (cnn.com) • 'Two of the country's most prominent bitcoin exchanges, BTC China and Via BTC, said they will halt trading this month. BTC China has also stopped registering new users, it said in a statement posted on social media.'
  • 2017-09-19: China orders Bitcoin exchanges in capital city to close (bbc.com) • 'China is moving forward with plans to shut down Bitcoin exchanges in the country, starting with trading platforms in key cities.'
  • 2017-09-20: China's bitcoin clampdown is likely here to stay, analysts say (cnbc.com) • 'Chinese authorities banned token sales this month and local exchanges, under regulatory pressure, plan to close by the end of September. Analysts told CNBC the crackdown is likely part of a longer-term effort by regulators to control bitcoin. '
  • 2017-09-23: How Shanghai Govt Came To Forcing All Bitcoin Trading to Stop: The Insider Story (cointelegraph.com) • 'The Paper news agency reported that the Chinese regulators not only banned the exchange between Bitcoin and other cryptocurrencies and the Chinese Yuan, but they also called for all trading of cryptocurrency to any fiat currency to end'

There was no news about Chinese mining farms, but other governments appear ready to take up any slack.

Meanwhile, there were reminders about the dark side of mining.

  • 2017-09-14: Cryptocurrency Mining Malware Infection Attempts Are on the Rise Again • 'As we have documented on this site multiple times, rogue cryptocurrency mining malware is of keen interest to cybercriminals. By distributing this mining malware, criminals can effectively use victims’ computer resources to mine Ethereum, Monero, and a few other currencies.'
  • 2017-09-28: Monero Windows IIS mining made over $60,000 for a hacker • 'Stealing computing resources for cryptocurrency mining can be profitable—to the tune of tens of thousands of dollars a month. Security software vendor ESET found that a hacker has infected hundreds of Windows servers with a secret cryptocurrency mining program, generating $63,000 over three months. [...] The malware mines Monero, a cryptocurrency that currently has a total market value of about $1.4 billion. It’s just one of the thousands of crypto coins in the marketplace.'
  • 2017-09-28: The Ridiculous Amount of Energy It Takes to Run Bitcoin (ieee.org) • 'Running Bitcoin uses a small city’s worth of electricity. Intel and others want to make a more sustainable blockchain.'

The mining news was accompanied by other news from the same Asian countries. Some of the news was good for bitcoin.

  • 2017-09-29: Bitcoin exchanges officially recognized by Japan (cnbc.com) • 'Japan's Financial Services Agency officially recognized 11 companies as registered cryptocurrency exchange operators. This is the latest decision in Japan to show support for digital currency. In April, it passed a law recognizing bitcoin as legal tender'

Some of the news was not so good.

  • 2017-09-12: North Korea is trying to amass a bitcoin war chest (cnn.com) • 'Hackers linked to North Korea are ramping up attempts to steal bitcoin in order to bring in money for Kim Jong Un's regime, a top cybersecurity firm says. Bitcoin and other forms of virtual money -- known as cryptocurrencies -- appeal to North Korea as the U.S. pursues international sanctions aimed at further isolating the country.'
  • 2017-09-14: North Korean Hackers Blamed for Bitcoin Attacks (infosecurity-magazine.com) • 'North Korean state hackers are increasingly looking to steal crypto-currency to fund the regime and circumvent tightening sanctions, according to FireEye. The security vendor’s ?senior cyber threat intelligence analyst, Luke McNamara, revealed a spike in spear-phishing attacks targeting South Korean Bitcoin exchanges since May.'

Two of the negative stories mentioned 'Monero'. What exactly is it? Wikipedia: Monero (cryptocurrency):-

Monero (XMR) is an open-source cryptocurrency created in April 2014 that focuses on privacy, decentralization and scalability that runs on Windows, Mac, Linux, Android, and FreeBSD. Monero was originally launched under the name BitMonero, which is a compound of Bit (as in Bitcoin) and Monero (literally meaning "coin" in Esperanto). Five days later, the community opted for the name to be shortened to just Monero.

The bitcoin price rise in 2017 has provoked an avalanche of related stories as general interest in the subject rises. I could continue by looking at those stories, but I think I've covered enough territory for one post.

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07 October 2017

Bitcoin in the News : 2017-09 Price

A comparison between the chart shown in last month's post, Bitcoin [Cash] in the News : 2017-08 Price, and the chart shown below, reveals a significant change. The upper right corner no longer says 'Powered by CryptoCompare'; it says 'The Cointelegraph Price Index'.


Bitcoin (BTC) Price Index

Other than that, I see two more features worth mentioning. The first is the one week gap at the beginning of the month -- (I must remember to prepare the chart on the first of the month rather than for the first post) -- although the price at the end of 2017-08 coincided with the price at the beginning of 2017-09. The second is the big, sudden price spike downward at mid-month, corresponding to the big, sudden spike upward in volume.

What does Cointelegraph's Bitcoin Price Analysis say about the spike? The beginning of the month was marked by rumors from China.

  • 2017-09-04: Bitcoin Price Drops to $4,300, What’s Next: Factors and Trends • 'Subsequent to achieving a new all-time high at $4,975 merely two days ago, Bitcoin price has decreased to around $4,350. Many analysts including Welt financial desk senior editor Holger Zschaepitz attributed the decline in Bitcoin price to China’s recent crackdown on initial coin offerings (ICOs).'

Mid-month was also marked by rumors from China.

  • 2017-09-14: Bitcoin’s Price Declines Anew, Hits Three-Week Low • 'The price of Bitcoin price has declined below the $4,000-level, extending its losses in overnight trading to reach a three-week low of $3,275. This represents a 35% drop from its high of $5,000. [...] There are several possible reasons behind the recent drop in the price of the number one virtual currency. One of these is the alleged plan by the government of China to ban the activities of various cryptocurrency exchanges in the country.'
  • 2017-09-15: Bitcoin, Ethereum, Bitcoin Cash, Ripple, Litecoin: Price Analysis, September 15 • 'BTC China has decided to shut down operations by Sept. 30. The first reaction by harried traders on such announcements is to sell and encash their holdings. Therefore, the sharp fall is understandable.'

The end of the month was marked by rumors from China.

Can we conclude that the bitcoin price is mainly driven by rumors from China? Crackdown on ICOs, ban the activities of cryptocurrency exchanges, ban of mining farms; what's next? Despite all of this, the price of bitcoin at the beginning of the month was only a few percentage points above the price at the end of the month. Does China really matter?

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16 September 2017

Bitcoin in the News : 2017-08 More++

I ended my previous post, Bitcoin [Cash] in the News : 2017-08 Price, with a promise:-
Now that I understand that Bitcoin Cash is a new cryptocoin, I can return to the August price analysis for good old bitcoin. I'll do that in my next post.

That '2017-08 Price' post included a chart of the month's bitcoin price movement. It can also be explained verbally:-

Bitcoin started the month around $2800, climbed steadily in price, and ended the month around $4800. That made for a 70% upward movement in price during a single month.

Like many people, I've been interested in investing since I first started working full time and there is a good adjective for that sort of price climb: 'Extraordinary!' What do the price analysts at Cointelegraph.com say about this? Here's an example from the first week of the month:-

  • 2017-08-06: Bitcoin Weekly Price Analysis: July 29 - August 6 • 'On Aug. 1 Bitcoin was traded in the long-term $3,000 channel. Technically, the movement needed a pullback, as it had larger scale resistance. The fork resulted in the instant correction for Bitcoin price. The buyers’ prevailed, which is proved by the purchase volumes. There was also an attempt to form a reversal down at the peak of the correction. But you need to remember, that a reversal shatters the previous trend. Price movement is the result of the market demand and supply. So for a reversal, the demand volumes at the correction peak need to be at least equal to the ones, formed previously at this level.'

Some keywords: channel, pullback, resistance, correction, reversal. This is technical analysis, which means looking at psychological factors rather than fundamental values. It's also poorly written: "buyers’ prevailed", why the apostrophe?; "equal to the ones, formed previously", why the comma? The first sentence in the article was:-

Exchanges are announcing to allow the Bitcoin Cash deposits and withdrawal, which caused Bitcoin Cash price fall.

Although I think I understand what the writer wanted to say, it wasn't said very well. And why should announcing the possibility of deposits and withdrawals cause a price to fall? I'm not picking on this particular writer; other articles published during the month were comparable: poorly written psychological analysis. On top of this, the Cointelegraph price analysis was loaded with predictions:-

Pick a price, any price? No one can convince me that we're looking at serious analysis here.

After 'Bitcoin Cash' and the bitcoin price rise, what other bitcoin stories were in the news in August? Here are an even handful, all of them from the last days of the month:-

That second-to-last story -- 'illegal transactions in bitcoin have fallen' -- might be because volumes of legal transactions have increased. It might also be because growing interest in bitcoin means growing scrutiny. In last month's post, Bitcoin in the News : 2017-07 More++, I noted, 'No Bitcoin in the News would be complete without mainstream press reports on the dark side of bitcoin'. This month, I didn't detect any such reports. What will September bring?

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09 September 2017

Bitcoin [Cash] in the News : 2017-08 Price

If last month's price post, Bitcoin in the News : 2017-07 Price, had only a little real news behind it, this month's post makes up for it. The following chart might be captioned, 'Straight Up!'.


Bitcoin Price Index

Keeping to a single source, Bitcoin Price Analysis (BPA; cointelegraph.com), here is the first significant price news for August:-

Whoa! What is going on here? I go away for a month and nothing makes sense anymore. What was the first mention of 'Bitcoin Cash' on Cointelegraph.com?

  • 2017-07-25: Bitmain: Bitcoin Cash Hard Fork Merely Contingency Plan for UASF • 'In its initial announcement earlier this month, Bitmain, arguably the largest mining equipment manufacturer and mining pool operator in the industry, threatened the community with a contentious hard fork in response to the user-activated soft fork (UASF). As users, node runners and businesses proposed the activation of BIP 148, a user-activated soft fork that ignores the presence of miners and activates Segregated Witness, Bitmain, the operator of Antpool, emphasized that it will lead a Bitcoin hard fork on Aug. 1 and create Bitcoin Cash, a separate Bitcoin Blockchain.'

Here are some more early Cointelegraph articles on 'Bitcoin Cash'.

Since I'm a Coinbase user, the Bitcoin Cash fork doesn't affect me (at least for now). For the record, here are two more BPA articles from the first week of August.

Now that I understand that Bitcoin Cash is a new cryptocoin, I can return to the August price analysis for good old bitcoin. I'll do that in my next post.

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12 August 2017

Bitcoin in the News : 2017-07 More++

Bitcoin price movement was the main story in my previous post, Bitcoin in the News : 2017-07 Price, and speculation about the cause of the movement was the secondary story. Several sources mentioned 'civil war', as in
  • 2017-07-20: Bitcoin swings as civil war looms (bbc.com) • 'The value of the virtual currency Bitcoin has always been volatile. Even so, there has been particular turbulence in recent days as fears of a "civil war" among its adherents first grew and then subsided, although they have not gone away altogether.'

I could give many examples of related stories, but one article was more comprehensive than the others (NB: needs Flash).

Since no 'Bitcoin in the News' would be complete without mainstream press reports on the dark side of bitcoin, here are three:-

I could again give other stories, many of geographical interest, but I'll stop to document a personal experience. At the end of last year, I wrote a post about Buying Ethereum (December 2016). While writing this current post, I checked on the status of that trade and was surprised to see that the value of the Coinbase account had increased twenty times. I exchanged some of the ethereum for cash and used part of that to buy a small amount of litecoin, a cryptocurrency introduced by Coinbase since I last looked at the account.

Why mention this? First, because bitcoin++ is more than an arbitrary collection of news stories. Second, because cryptocurrencies are part virtual, part real. Third, because it introduces the last story.

  • 2017-07-29: Howard Marks says bitcoin isn’t real -- and we can all blame millennials for its rise (marketwatch.com) • 'Howard Marks has some harsh words for the bitcoin community and the rise of digital currencies, which have become all the rage lately. “Digital currencies are nothing but an unfounded fad,” said the co-chairman of Oaktree Capital Management, who was among the first to sound the alarm on the 2008 financial crisis.'

Will Howard Marks be massively right a second time? Time will tell, but it brings to mind the old saying, 'You don't make any money until you sell.'

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