14 April 2018

Bitcoin in the News : 2018-03 More++

In my previous post, Bitcoin in the News : 2018-03 Price, I noted,
The month of March saw a resumption of that 'steady downward trend'.

What other news for the month of March is worth mentioning? Here's one story that emerged at the end of February:-

The long article explained that the positive dynamics of power generation are at risk of being usurped by bitcoin mining. Here are a few of the key points:-

Colin L. Read, the mayor of Plattsburgh, N.Y., also sees it as a public nuisance. The city was guaranteed a fixed supply of cheap electricity as part of the construction of power-generating dams on the St. Lawrence in the 1950s. Bitcoin mining companies are plugging into that power supply like a swarm of hungry mosquitoes. [...] Employers historically have created 30.5 jobs in exchange for each megawatt of low-cost electricity, according to the power authority, while Coinmint is proposing to create just new 10 jobs per megawatt. But 10 is more than none.

A few weeks later, the story evolved:-

  • 2018-03-16: Bitcoin Mining Was Just Banned in Plattsburgh, N.Y. (fortune.com) • 'A small lakeside town in upstate New York is fed up with Bitcoin miners using up so much of its low-cost electricity. Plattsburgh, whose residents are a quick jaunt from the Canadian border, has put an 18-month moratorium on cryptocurrency mining to preserve natural resources, the health of its residents, and the “character and direction” of the city.'
  • 2018-03-17: New York Authorities Crack Down on Bitcoin Miners Hunting Cheap Power (ditto) • 'The New York state Public Service Commission has ruled that power companies can charge higher rates to cryptocurrency mining operations, which have moved into the state’s north to take advantage of low-cost hydropower.'

Cryptocurrency mining is getting a critical look for different reasons, mostly negative:-

  • 2018-03-02: Bitcoin heist: 600 powerful computers stolen in Iceland (nbcnews.com; Associated Press) • 'Some 11 people were arrested, including a security guard, in what Icelandic media have dubbed the "Big Bitcoin Heist".'
  • 2018-03-04: Top Cyberthreat Of 2018: Illicit Cryptomining (forbes.com) • 'Due to a combination of a leaked NSA hack, a cryptocurrency more anonymous than Bitcoin [Monero], and benign cryptocurrency transaction processing (aka ‘mining’) software that requires no command and control link back to the attacker, we now have the perfect combination of easy money, slim chance of detection, and billions of unsuspecting targets that may not even care they’ve been hacked.'
  • 2018-03-15: Bad news for bitcoin miners as it's no longer profitable to create the cryptocurrency (cnbc.com) • '"Bitcoin currently trades essentially at the break-even cost of mining a bitcoin, currently at $8,038 based on a mining model developed by our data science team," Fundstrat's Thomas Lee said in a report Thursday.'

Continuing with the negative slant on the bitcoin news, don't look to world class economists for any positive guidance:-

The silver lining in all this might be: What the Founding Fathers' Money Problems Can Teach Us About Bitcoin (smithsonianmag.com; April 2018) • 'Can you trust something that’s summoned into being, without a government backing it? As it turns out, this is precisely the conundrum that early Americans faced.' Meanwhile, in the 21st century bitcoin proselytizers run the risk of being branded criminals, probably because criminal activity is such a significant aspect of bitcoin lore:-

With so much bad news being associated with bitcoin and other cryptocurrencies, it's not at all surprising that an attempt at determining objective value is associated with the word 'misery'.

I'm tempted to start my own index: the 'Bitcoin Badnews Ratio', a contrarian signal. Let's see what happens in April. If the price trend is up, the BBR might actually have some merit.

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07 April 2018

Bitcoin in the News : 2018-03 Price

I started last month's report, Bitcoin in the News : 2018-02 Price, with
If the first week of February looked like a continuation of January ('a steady downward trend during the course of the month'), then the rest of the month looked more like a typical month in 2017.

The month of March saw a resumption of that 'steady downward trend'.


Bitcoin (BTC) Price Index

In last year's '2017-01 Price' post, I started using Cointelegraph's Bitcoin Price Analysis (BPA) as a source for news on price movements. Of the 19 stories in the category for March 2018, five were non-routine:-

The 14 'routine' BPA stories (although there's nothing routine about cryptocurrencies) were of the type I mentioned in last month's '2018-02 Price' post. There I wrote,

Most BPA articles discuss technical analysis and I should look at those in depth in one of my posts.

Where to start? I picked two BPA articles from mid-month:-

Both articles are structured similarly. First, there is a summary of news that might affect the price of cryptocurrencies.

[1st link:] 'Google has followed Facebook in banning cryptocurrency-related advertising. While this is definitely not good news for ICO campaigns that rely heavily on marketing, this is unlikely to hurt the prospects of the coins backed by strong technical fundamentals.'

[2nd link:] 'Fundstrat's Thomas Lee believes that Bitcoin mining is an unprofitable venture at current prices. A model developed by his data science team has pegged the breakeven price at $8,038. If prices fall further, the miners will start to lose money on their operations.'

This is followed by a chart and verbal analysis of the cryptocurrencies mentioned in the corresponding headline: BTC [i.e. BTC/USD; almost all prices are pegged to the U.S. dollar], ETH, BCH, XRP [Ripple], XLM [Stellar], LTC [Litecoin], ADA [Cardano, pegged to BTC, i.e. 'ADA/BTC'], NEO, EOS. Some of these I had never heard of before.

The technical analysis of a market is essentially an attempt to understand the human psychology driving that market. Considering that cryptocurrencies have almost no intrinsic value, there is undoubtedly a wealth of knowledge to be gained from these analyses. How to continue?

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10 March 2018

Bitcoin in the News : 2018-02 More++

Just as day follows night, a '2018-02 More++' post follows the previous post, Bitcoin in the News : 2018-02 Price. Or should it be 'as night follows day'? Last month's Bitcoin in the News : 2018-01 More++ (February 2018) was 100% bad news and I ended it with:-
Let's hope February brings better news for everyone.

First let's have some follow-ups. In January we had a couple of stories about 'Botnet/crypto hookups looking for miners', surreptitiously, of course -- otherwise it might almost be good news. Last month we had:-

In January we also had a couple of stories about 'Energy use'. Last month we had:-

  • 2018-02-13: How Iceland became the bitcoin miners' paradise (theguardian.com) • 'The island nation is the first to use more electricity on mining cryptocurriencies than on its households -- thanks in part to its magma-fuelled power plants.'

Granted, both of those February stories might be considered good news, depending on where you stand. How about this follow-up to January's '2018-01-13: Bitcoin Investors Are Using Credit Cards in Disturbing Numbers (fortune.com)'; is it good news or bad news?:-

The next two stories might also go either way: good news -or- bad news...

...until you read them. That first story, subtitled, 'The most memorable comments on the cryptocurrency from senior figures in world finance', was full of comments like:-

Yves Mersch, a member of the European Central Bank’s executive board: 'If you bought a bunch of tulips with bitcoin they may well have wilted by the time the transaction was confirmed.'

Agustín Carstens, the new head of the Bank for International Settlements: 'Cryptocurrencies could become more interconnected with the main financial system and become a threat to financial stability'.

Nouriel Roubini, the American economist credited with predicting the 2008 financial crash has called bitcoin "the mother of all bubbles" and "much worse" than tulip mania.

And the list of similar comments from financial movers & shakers went on and on. That second story had these bullets as section headers:-

The Cryptocurrency Bubble Has Only Started To Deflate
Bitcoin Has No Fundamental Price To Fall Back Upon
There Is Rampant Market Manipulation In Cryptocurrency
There Is Rampant Fraud In Cryptocurrency
Institutional Investors Are Staying Away

Now here a half-dozen stories that are strictly in the 'bad news' column:-

Unlike January, there were a couple of bright spots in February:-

The last two stories were from the end of the month, when the price of bitcoin was recovering. If this scenario continues, I might be able to test the hypothesis that bad news breeds bad news and good news breeds good news.

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03 March 2018

Bitcoin in the News : 2018-02 Price

If the first week of February looked like a continuation of January (as in Bitcoin in the News : 2018-01 Price; 'a steady downward trend during the course of the month'), then the rest of the month looked more like a typical month in 2017 (see BITN : 2017-12 More++; 'Exactly six of the 12 months showed a steady upward trend during the course of the month').


Bitcoin Price Index

I ended the '2018-01 Price' post with a link to a CoinTelegraph.com article from its Bitcoin Price Analysis (BPA) for February. Here it is again, with an extract of its section titles:-

It's not exactly revolutionary thinking, is it? Most BPA articles discuss technical analysis and I should look at those in depth in one of my posts. In the meantime, here's a selection of other BPA articles for February. The first two coincided with the steep slide during the first week of the month.

The rest are from the price recovery during the last three weeks of the month.

Note the two references to the $10K level. Is it a floor or a ceiling? I doubt that anyone really has any idea what a bitcoin is worth.

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10 February 2018

Bitcoin in the News : 2018-01 More++

Does bad news breed more bad news? Along with a particularly dismal month for the price of bitcoin (see last week's Bitcoin in the News : 2018-01 Price for an overview), there were many other negative stories about the cryptocurrency community. Take, for example, the stories about Monero. We saw these last year in Bitcoin in the News : 2017-09 More++ (October 2017), and they resurfaced in force in January, for example, in:-

These were joined by another botnet/crypto hookup (Satori/Satoshi?) looking for miners:-

  • 2018-01-17: New botnet infects cryptocurrency mining computers, replaces wallet address (arstechnica.com) • 'Satori -- the malware family that wrangles routers, security cameras, and other Internet-connected devices into potent botnets -- is crashing the cryptocurrency party with a new variant that surreptitiously infects computers dedicated to the mining of digital coins.'

Another recurring theme, which is not going to disappear, was energy use:-

I could have chosen negative stories by throwing a digital dart at Google news alerts. Here are ten more:-

  • 2018-01-06: Breaking Bitcoin With a Quantum Computer (fortune.com) • 'A Toronto-based physicist and pension fund analyst is skeptical about Bitcoin but sees one useful purpose for the crypto-currency: It may detect when someone creates a working quantum computer.'
  • 2018-01-09: Fund managers say bitcoin ETF proposals withdrawn due to SEC concern (cnbc.com) • 'Two U.S. companies shelved proposals to launch bitcoin exchange-traded funds, citing ongoing concerns by the Securities and Exchange Commission (SEC), filings showed on Monday. Staff at the regulatory agency "expressed concerns regarding the liquidity and valuation" of futures contracts based on the digital asset, according to one of the filings.'
  • 2018-01-11: South Korea considers Bitcoin trading ban (bbc.com) • 'South Korea is considering a law to ban cryptocurrencies such as Bitcoin being traded on local exchanges. Justice Minister Park Sang-ki said virtual currencies were "great concerns" and that the ministry was preparing a bill to ban trading.'
  • 2018-01-13: Bitcoin Investors Are Using Credit Cards in Disturbing Numbers (fortune.com) • 'A recent poll shows that nearly one-fifth of all Bitcoin buyers are using credit cards to fund their investments, likely paying hefty fees for the privilege. A large portion of those buyers then carry the balance instead of paying their cards off, implying that they’re highly leveraged – but confident that their investments will grow in value.'
  • 2018-01-15: Researchers find that one person likely drove Bitcoin from $150 to $1,000 (techcrunch.com) • 'Researchers have written a fascinating paper on Bitcoin price manipulation. Entitled “Price Manipulation in the Bitcoin Ecosystem” and appearing in the recent issue of the Journal of Monetary Economics the paper describes to what degree the Bitcoin ecosystem is controlled by bad actors.'
  • 2018-01-16: New Report: Bitcoin Drug Money Laundering Is Highly Centralized (cointelegraph.com) • 'The report’s authors indicate that much of illicit Bitcoin is laundered through mixers.' • Wikipedia: Cryptocurrency tumbler; 'Cryptocurrency tumbler or cryptocurrency mixing is a service offered to mix potentially identifiable or 'tainted' cryptocurrency funds with others, so as to obscure the trail back to the fund's original source'
  • 2018-01-19: CFTC brings two more cases against bitcoin fraud schemes (marketwatch.com) • 'In both cases, fraudsters allegedly took investors money instead of trading and investing in virtual currencies.'
  • 2018-01-26: Bitcoin criticized at [World Economic Forum] in Davos but cryptocurrency world fights back (cnbc.com) • 'While the potential of blockchain, the underlying technology behind cryptocurrencies, was praised, bitcoin got slammed.'
  • 2018-01-29: Bitcoin robbers 'alerted to fortune by prolific trading' (dailymail.co.uk) • 'Bitcoin robbers who held trader's family at gunpoint "knew about victim's fortune because of his prolific trading on the internet".'
  • 2018-01-30: Facebook bans all ads for Bitcoin, ICOs, and other cryptocurrency (theverge.com) • 'Facebook is banning all advertisements for cryptocurrency, including Bitcoin and initial coin offerings, as part of an “intentionally broad” policy against deceptive marketers.'

Enough already; when it rains, it pours. Let's hope February brings better news for everyone.

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03 February 2018

Bitcoin in the News : 2018-01 Price

In my previous post, Bitcoin in the News : 2017-12 More++, I showed a composite image made from the twelve monthly charts of 2017. I also noted,
Exactly six of the 12 months (two per row) showed a steady upward trend during the course of the month.

None of the 12 months looked anything like the chart for January, which shows a steady downward trend during the course of the month.


Bitcoin Price Index

Before moving to an analysis of the price, I'll mention a few changes to the look of the chart. First, it uses a different color. In changing from green to yellow, are we imagining a traffic light? Next stop: red? Second, the upper right corner used to say 'Price Index'; now it says 'The Future of Money'. Floating over this particular chart, the irony isn't even subtle. Cointelegraph's Bitcoin Price Analysis threw up some unusual stories for the month.

On that first story, it's not clear when the fund bought bitcoin (although it was some time ago), what price it paid, or whether any was sold. 'Market Reacts' ... with a yawn? On that second story, they're kidding, right? Both of these stories are grasping at straws when the overall trend is depressing.

In a rising market, every participant is a genius. In a falling market, everyone is a potential scapegoat.

  • 2018-01-18: GDAX Starts BCH Trading, Users Angry About Focus • 'The addition of BCH on GDAX follows the addition of the hard fork coin on the Coinbase site, which saw the price of BCH rocket to new all time highs. While Coinbase owns GDAX, they are not the same entity. [...] However, the cryptocurrency community was not particularly thrilled with the news, given the slowness of GDAX to implement the SegWit protocol.'
  • 2018-01-24: Why are Potential Forks not Accounted into the Bitcoin Futures Price • 'New Bitcoin forks became a sensitive issue after CME launched Bitcoin future contracts. Their average price does not include new offsprings as CME has no fork policy yet.'
  • 2018-01-25: What the FUD? Bitcoin Market Beset by January Woes • 'It has been a depressing fortnight for anybody reading various mainstream headlines touting the ‘end of Bitcoin’ and the arrival of the ‘crypto bubble’ crash. Unsurprisingly, the most recent cryptocurrency market slump has led to naysayers stepping onto their soapboxes, crying out messages of ‘I told you so’.'

That last story mentions South Korea, UBS at Davos, and potential regulations esp. in China. None of these is a game changer, but when the herd is nervous, any noise might cause a stampede. The January chart shows a mid-month decline from $14K to $10K over a couple of days, accompanied by high volumes. Let's call this 'rushing for the exit'. What will happen if a genuine panic arises?

The last story will certainly come up for next month's '2018-02 Price' post. I'll mention it here, because it's a recurring theme and because the FUD acronym is mentioned again.

  • 2018-02-02: Finding a Price: Why is Bitcoin Worth What it is? • 'Bitcoin price, as any investor knows, can move in the blink of an eye. It can go from $20,000 to the half of it in a few weeks, and Bitcoin is on a constant rollercoaster of price discovery. This leaves many asking what determines the price of this digital currency, especially for an intangible asset that exists only on the Internet.'

As for FUD, see Fear, uncertainty and doubt (wikipedia.org).

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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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