13 January 2018

Bitcoin in the News : 2017-12 More++

After posting last week's Bitcoin in the News : 2017-12 Price, and before looking at other news from December, I put together the following composite chart. It shows the graphs from all 12 of the '2017-NN Price' posts I wrote over the past year. The links to the individual posts are on the right sidebar. Exactly six of the 12 months (two per row) showed a steady upward trend during the course of the month.

After the price rise, the other story is in the volumes. Daily volumes in the range of 150.000.000 (units?) in January increased to a handful of days over 3.000.000.000 (ditto) in December. That's a 20-fold increase in volume, which roughly tracks the price rise over the same period. The price of bitcoin increased because interest increased, but the available quantity increased only modestly.

The increase in popular interest saw a corresponding increase in articles aimed at newcomers. Take, for example, Bitcoin: Seven questions you were too embarrassed to ask (arstechnica.com). It showed up in my news feed on 3 December, but is currently dated 22 December. The seven questions are:-

1) What's a bitcoin?
2) If Bitcoins aren't tied to a conventional currency, how did they get so valuable?
3) Why would I want to use bitcoin?
4) If Bitcoin has few practical applications, how can it be worth $200 billion?
5) OK, I'm sold. How do I get some?
6) I just made a killing! How do I cash out?
7) Is it true that Bitcoin wastes a ton of energy?

Here are a few more introductory articles that I picked at random. There were more to choose from:-

Last month I wrote another post, Bitcoin Futures, about the start of trading on the CBOE. Here are two more articles from mainstream sources, of which there were again many:-

As for other stories, contrasting news on the two Koreas is worth watching:-

Also relevant, because Coinbase holds my wallet:-

Some short takes from the article:-

Coinbase, the most popular U.S. crypto-currency exchange, released "Bitcoin Cash" -- a new currency created this summer and currently worth around $3,000 -- into many customer accounts on Tuesday evening. [...] While the arrival of Bitcoin Cash amounts to a windfall for Coinbase customer, it also has the potential to create a nightmare when it comes to dealing with the IRS.

For the Coinbase.com announcement, see Buy, sell, send and receive Bitcoin Cash on Coinbase. This is the fourth cryptocurrency in my account, after Buying Bitcoins (August 2015), Buying Ethereum (December 2016), and Bitcoin in the News : 2017-07 More++ (August 2017; Litecoin).

I can't let a month go by without at least one article on each of two related bitcoin topics: its value and its bubble.

The NYT Shiller article says,

One narrative that seeks to explain the price increases this year is that they have something to do with the difficulty of betting against -- making short sales of -- Bitcoin. Absent the opportunity to engage in short sales, "smart money" can only watch from the sidelines while prices soar.

I also like that word 'dabbling'. In for a penny, in for a pound? No, I'm in for a penny. The first and last time I was in Las Vegas I played a slot machine with nickels and won a whole bucket of them.

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06 January 2018

Bitcoin in the News : 2017-12 Price

The bitcoin price action for the month of December showed a different pattern than in last month's post, Bitcoin in the News : 2017-11 Price, or in any previous month in 2017. It looks like the cross section of a mountain range, with ever-higher/ever-lower peaks and valleys on either side of the monster mountain in the middle. Is this an example of what market technicians call a head-and-shoulders formation?


Bitcoin (BTC) Price Index

Once again, I'll rely on Cointelegraph's Bitcoin Price Analysis for an explanation of the key movements in the chart. The month splits easily into three parts: a rise at the beginning, a peak in the middle, and a fall at the end. Here are some stories from the first part of the month:-

And here are a couple of stories from mid-month. Any market peak is only apparent after the fact.

The price at the end of the month was unpredictable and volatile.

As usual, we don't know what will happen next. Since many pundits are expecting more of the same -- unpredictable and volatile -- the bitcoin market might surprise everyone by being predictable and flat. Anyone who prefers unpredictable and choppy can focus on another crypto-currency. There are plenty to choose from.

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16 December 2017

Bitcoin Futures

Last weekend saw the launch of bitcoin futures trading, and since this month has five Saturdays, I'll use the extra Saturday to write a short post about the event. The main product page appears to be XBT-Cboe Bitcoin Futures (cboe.com). It starts,
The First U.S. Bitcoin Futures • Bitcoin futures are now available for trading on the Cboe Futures Exchange, LLC (CFE). CFE launched trading in Cboe bitcoin futures on December 10 under the ticker symbol "XBT". This brings many benefits to traders, including transparency, efficient price discovery, deep liquidity and centralized clearing. XBT futures provides a centralized marketplace for participants to trade based on their view of bitcoin prices, gain exposure to bitcoin prices or hedge their existing bitcoin positions.

The related press release said,

Cboe Plans December 10 Launch of Bitcoin Futures Trading • CHICAGO – December 4, 2017 – Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, today announced that Cboe Futures Exchange (CFE), plans to offer trading in bitcoin futures beginning at 5:00 p.m. CT on Sunday, December 10, 2017, at the start of Global Trading Hours. Monday, December 11, will be the first full day of trading, and trading will be free through December.

Cboe’s bitcoin futures will trade on CFE under the ticker symbol 'XBT'. XBT [SM] futures are cash-settled contracts based on Gemini’s auction price for bitcoin, denominated in U.S. dollars. Gemini Trust Company, LLC (Gemini) is a digital asset exchange and custodian that allows customers to buy, sell, and store digital assets such as bitcoin. XBT futures are specifically designed to allow participants to implement straightforward trading strategies, through settlement to a single, tradeable auction price.

Ed Tilly, Chairman and Chief Executive Officer of Cboe Global Markets, said: "Given the unprecedented interest in bitcoin, it’s vital we provide clients the trading tools to help them express their views and hedge their exposure. We are committed to encouraging fairness and liquidity in the bitcoin market. To promote this, we will initially offer XBT futures trading for free."

Tyler Winklevoss, Chief Executive Officer of Gemini, said: "Developing a regulated derivatives market is the next logical and crucial step towards advancing the broader digital asset market. We have been working for years to build infrastructure to grow the digital asset market and today’s news marks a significant milestone."

On Friday, December 1, Cboe announced that CFE had filed a product certification with the Commodity Futures Trading Commission (CFTC) to offer bitcoin futures trading. More information on XBT futures is available at www.cboe.com/xbt.

Over the last five years, the total value of all bitcoin outstanding (i.e., "market capitalization") has grown from less than $1 billion to over $183 billion with daily notional turnover over $10 billion. The total value of all cryptocurrency tokens outstanding is now approximately $332 billion.

The link www.cboe.com/xbt returns the main product page I gave above. That last paragraph of the press release has a footnote that says,

All data given as of December 1, 2017, source: https://coinmarketcap.com/

The Coinmarketcap.com link, which I can't remember seeing before, currently lists 1360 cryptocurrencies, sorted in descending order by market cap ('Total Market Cap: $583,439,429,633'); that's $583.4 billion! Has the introduction of futures dampened the explosive price rise of bitcoin? Not exactly. Here's a bitcoin price chart for the first week of futures trading.


Bitcoin (BTC) Price Index

As for what the pundits are saying, I'll cover that in my next two posts, 'Bitcoin in the News : 2017-12 Price++'.

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09 December 2017

Bitcoin in the News : 2017-11 More++

In my previous post, Bitcoin in the News : 2017-11 Price, I identified three stories that fueled the price of bitcoin in November:-
  • Bitcoin futures on CME (Chicago Mercantile Exchange)
  • Collapse of SegWit2x
  • Reaching the $10.000 mark

Curiously, those three stories occurred at the start, at the middle, and at the end of the month. Predictably, they each provoked an avalanche of commentary in the financial press. I'll mention just one article on each, although there were many more. Coincidentally, these three articles are all from cnbc.com:-

After these stories, the theme repeated the most involved the B-word : Bubble! I'll mention just two of the half-dozen that popped up:-

  • 2017-11-01: The Head and Tail of Bitcoin Bubble (entrepreneur.com) • 'More than as an instrument to buy and sell goods and commodities, increasingly money is being invested in bitcoin to make even more money.'
  • 2017-11-21: Bitcoin: An Unknowable Bubble? (seekingalpha.com) • 'There is a much-discussed in the crypto-sphere chart making rounds these days, plotting Bitcoin price dynamics against the historical bubbles of the past.'; chart gives graphical overview of past bubbles

Looking back, the first occurrence of the B-word on this blog was a passing reference in the post titled '2017-05 Price' (June 2017). Looking forward, there will be more occurrences until the bubble finally bursts. And burst it will -- maybe at a much higher price level -- but it will inevitably happen when everyone wants to exit at the same time. 'What goes up must come down', 'trees don't grow to the sky', yada-yada, etc. etc. (NB: I'm not a gloom-and-doom person, it's a party. I was reminded of this in a Yahoo.com article from Rick Newman, one of my current favorite financial writers.):-

  • 2017-11-30: Owning bitcoin is so much fun • The title I originally recorded was 'Owning part of a bitcoin is the most fun I’ve ever had investing-- even if it collapses', which echoes my sentiment exactly.

Bitcoin articles have been appearing with increasing frequency in Yahoo. (NB: Exploding popularity often precedes a bubble.) Another article bearing the same date as the one above was by Daniel Roberts, another favorite financial writer:-

Because I had never heard of most of these people, it's worth noting their names (listed alphabetically) and their companies. The ones I don't know I should research further, but there's only so much time in a day.

1. Brian Armstrong, Coinbase
2. Vitalik Buterin, Ethereum
3. Juthica Chou, LedgerX
4. Jack Dorsey, Square (also CEO Twitter)
5. Terry Duffy, CME Group (Chicago Mercantile Exchange)
6. Charlie Lee, Litecoin
7. Naval Ravikant, MetaStable, CoinList
8. Elizabeth Rossiello, BitPesa
9. Barry Silbert, Digital Currency Group ('portfolio of more than 100 investments includes all the biggest names')
10. Balaji Srinivasan, Earn.com
11. Elizabeth Stark, Lightning Labs

Yahoo has a page on bitcoin, BTC/USD ('BTCUSD=X; CCY Delayed Price. Currency in USD'), with links to current articles. I'll add this to the right navigation bar.

This would be a good point to sign off, but I touched an important subject in last month's post, Bitcoin in the News : 2017-10 More++, and there were a few relevant articles this month: 'How to value bitcoin (or any other cryptocurrency)?':-

We know how to value stocks by looking at various ratios of the underlying company, market share (and pricing power) being one piece of the analysis. How those ratios compare to the stock's current price -- showing good or bad value -- is a matter of judgement. What are the factors besides dominance that temper the judgement for a crypto-currency?

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02 December 2017

Bitcoin in the News : 2017-11 Price

I ended last month's bitcoin price review, Bitcoin in the News : 2017-10 Price, with the cryptocurrency just under $6500. This month's chart shows the price starting at $7000. Why the gap of $500? Maybe it's an error in the charting service; maybe it's the day or two difference in my capture of the chart; maybe it's something else. Whatever the reason, it's not the gap at the start of the month that matters; it's what happened during the rest of the month that matters.


Bitcoin (BTC) Price Index

The main critical points were around 12 November (I'm not sure where to attach the dates on the x-axis) and around 28 November. Let's look once again at the stories from Cointelegraph.com's Bitcoin Price Analysis to understand the dynamics.

Wait a moment! It looks like there was another critical point at the beginning of the month. Maybe the gap I flagged does matter after all.

  • 2017-11-02: Bitcoin Shatters $7k Barrier After Futures Trading Announcement by CME Group • 'Bitcoin continued its five-day surge, rising from $5,750 on Oct. 28 to just over $7,000 at press time on the GDAX exchange. The currency’s definitive smashing of its most recent all-time high and the $7,000 barrier seems to be tied to its increasing integration in mainstream finance.'
  • 2017-11-03: The What and Why Bitcoin Price Reached $7,000 • 'This week, Bitcoin price, on its usual upward trajectory, barely blinked as it smashed through the $7,000 mark. [...] The biggest factor behind the rally was the announcement of Chicago Mercantile Exchange’s decision to offer Bitcoin futures.'

Let's skip ahead to mid-month.

  • 2017-11-13: Counting Costs of Bitcoin’s Big Three Drops of 2017 • 'A lot has happened in a week for Bitcoin. The on-again-off-again plans for SegWit2x were officially put on ice and the effervescent Bitcoin celebrated by reaching yet another all-time high of $7,888. However, what comes up, must come down. Bitcoin then went into a spiral as a number of factors influenced its latest drop of 29 percent, which saw $38 bln wiped clean off the market cap.'
  • 2017-11-13: Bitcoin Price is Up 17%, Will it Achieve a New All-Time High in Short-Term? • 'Bitcoin price has risen by 17 percent within the past 24 hours, after dipping below $5,560 earlier today. Since then, Bitcoin price has stabilized at $6,450, recording a daily increase of around $890. [...] Triggered by the sell-off of major Bitcoin investors and the rapid surge in the value of Bitcoin Cash, Bitcoin price plunged over the past weekend.'

That second article continued, 'As expected, Bitcoin price recovered relatively quickly as the Bitcoin Cash price declined from over $2,800 to $1,200'. Is there an inverse, negative correlation between the prices of Bitcoin and Bitcoin Cash? If so, why? I covered the introduction of Bitcoin Cash in Bitcoin [Cash] in the News : 2017-08 Price (September 2017), but there was no indication that the two crypto currencies were in any sort of quantum entanglement. To be watched...

The end of the month saw the bitcoin price hit five figures for the first time. That milestone number provoked an avalanche of stories.

  • 2017-11-28: Increasing Adoption Demonstrated by Huge Trading Weekend for Bitcoin, Soaring Prices Market-Wide • 'In a sign that adoption is massively increasing, trading numbers from last weekend indicate that the volume of cryptocurrency trades exceeds that of many U.S. equities trading markets.'
  • 2017-11-28: Why Bitcoin Continues Its Phenomenal Rise • 'Bitcoin continues its phenomenal surge in the financial trading market as it already reached the $9,000 per token mark as of late November 2017. The leading cryptocurrency was also traded at $10,000 in some markets. The sustained upward trajectory of the most popular cryptocurrency has continued to baffle both the virtual currency markets and the wider investment community'
  • 2017-11-28: Bitcoin Price Hits $10,000 • 'Black Friday [Thanksgiving weekend] saw the currency hit new highs in the upper $8,000s before surmounting the $9,000 level Saturday and immediately charging toward the $10,000 mark Sunday.'
  • 2017-11-30: Experts Answer Question: “How Did Bitcoin Reach $10,000?” • 'In January this year, $1,000 was the milestone Bitcoin owners were eager to reach. The digital currency hit that, overcame it and increased ten-fold to over $10,000.'

That last link lists two answers to the 'How' question:-

  • Institutional money
  • Newcomers are still early adopters

Will those two groups -- institutions and newcomers -- continue to provide funds? They represent opposing points of view toward investing that are often described as 'smart money' and 'dumb money'. They can't both be right, can they?

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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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