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Tag #Bitcoin

Hayek predicted Bitcoin’s promise decades ago

TL;DR governments won’t give up control of money voluntarily, so we’re going to have to do it the sneaky way.

 

Anyone can make predictions about the future based on what they see around them, but it’s a rare mind that can take the temperature of the times and accurately understand the signs. Friedrich Hayek, the famous economist, was one such person.

 

Hayek was an Austrian economist who wrote The Denationalization of Money, which argued for different forms of private money instead of state-backed currencies. These different private currencies would compete on the market, just like any other stock or business, and the best and most reliable ones would rise to the top. It should be a free market for currencies.

 

He recognised that when the state took control of printing money, it opened the way to lots of abuses – exactly the ones we see now. More and more money is being created, and it’s being used to prop up markets and economies that are failing. Ultimately, this only defers and makes worse the inevitable crash.

 

Take a look at what Hayek said back in 1984, in this short video clip.

 

‘I don’t believe that we can ever have good money again before we take the thing out of the hands of government. And since we can’t take it violently out of the hands of government, all we can do is by some sly, roundabout way introduce something they can’t stop.’

 

Hayek was talking before the advent of the internet, let alone blockchain. This was the 1980s, when barely anyone even owned a cellphone. But he grasped the essence of the problem: whatever form of good money was created would need to be structured in such a way as to be unstoppable.

 

Bitcoin launched a quarter of a century after Hayek spoke those words and over 15 years since he died. But it’s about the best shot we have at honest money, outside the control of the state.

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The Battle for the Soul of Money is under way

USD, Libra, BTC. There can be only one.

 

Cryptocurrencies are a ‘national security issue’, says Steven Mnuchin, Secretary of the U.S. Department of the Treasury. He was talking about Facebook’s Libra, but the whole debate sparked by the tech giant has brought bitcoin back to centre stage as well – especially in the light of its 300% gains this year. Facebook execs are in the process of testifying before the Senate Banking Committee and House Financial Services Committee, to answer various concerns around Libra, and bitcoin keeps coming up alongside it.

 

On the surface of it, Mnuchin and other lawmakers are worried that Libra could be misused for money laundering and terrorist financing. He also affirmed Trump’s view of bitcoin being ‘highly volatile’ and ‘based on thin air’.

 

Ultimately, though, this is about something much, much bigger. There’s a saying in the Talmud to the effect that he whose coin is current in the land is king: the one who creates the money is in charge.

 

So this is looking like a three-way battle between the Fed and the might of the US government; Facebook, a multinational corporation with 2 billion monthly active users and half-trillion-dollar market cap; and Bitcoin, with its decentralised network and rapidly-growing global adoption.

 

What this whole episode is doing, in a way that we have not experienced since the US came off the gold standard in the early 1970s, is starting a debate about the nature of money. What is it? Where does it come from? Who makes it? What effect does that have? What backs it? What is it ultimately worth?

 

Back to that question raised by the Talmud: who is king? Is it the Fed and the US President? Is it Zuckerberg and a tech corporation with a shaky reputation for privacy and complicit in subverting democracy? Or is it everyone and no one, the model of Bitcoin?

 

All three will be very hard to stop, though for different reasons. None is designed to stay small – they must all keep growing or be consigned to the dustbin of monetary history. So make no mistake. This isn’t about terrorist financing, it’s about sovereignty: national, corporate or personal. And it could be one of the most important questions of our time.

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Tuesday Inferno market report

TL;DR up from here?

 

Bitcoin is looking like it has bottomed after its recent volatility, though concerns are still present. Let’s take a look at what the market has done over the course of the last few weeks:

  • A parabolic rise to the year high of $13,880
  • A retrace of 31% down to $9,614
  • Another run-up, stopping short of the year high at $13,200: a lower high
  • Another retrace, on lower volume, bottoming above the last one: a higher low
  • A perfect bounce off the 50-day moving average

 

On the latest correction, RSI on the daily fell to 45, its lowest at any point since February.

 

At this point, it looks like the correction might be over and bitcoin will consolidate a while longer before moving back up to test the $14k line. However, we should be aware of that higher low and lower high. It would not be surprising if bitcoin bounced up and down for a while within the $10-12k range in an ever-tightening band before making a final decision. The fact that bitcoin neatly respected the 50DMA is encouraging, and at the time of writing bitcoin is trading at $10,800.

 

BTC did find resistance at the 21-day EMA, around $11,100. Overcoming this is important to establish that the uptrend is still in progress. 

 

Bitcoin has been in the news as very before since President Trump tweeted his thoughts, and regulators have been weighing in on both Facebook’s Libra and Bitcoin itself. The proposed ‘Keep Big Tech Out of Finance Act’ has been unveiled, and Facebook will be involved in congressional hearings to explain how it will avoid the abuses for which cryptocurrency is well known. The Bill will effectively prevent tech corporations from acting as banks or other financial institutions, and prevents them from launching digital currencies that fulfil the purposes of money.

 

It’s a time of great uncertainty, and that’s probably being reflected in the market. There are both positive and negative elements to what has been reported. The medium-term trend could move either way at this point.

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Swissborg: trading fun without the risk

TL;DR Swissborg have created a beautifully gamified price prediction app and an active community around it.

 

Buy low, sell high. Easy right? The thrill of trading, the adrenaline surge of calling the market right and winning millions in the comfort of your own pajamas. Just fire up BitMex, max leverage and – 

 

Yep, rekt. Back to that spare room in your parents’ house and a minimum-wage job at MacDonalds. So much for retiring at 30.

 

Thing is, trading is harder than it looks, at least if you want to come out of it with more money than you had when you went in. But it’s so FUN. 

 

Swissborg have taken the fun of trading and left behind the agony of getting wiped out with an awesome little community app. It’s actually part of a wider bitcoin price prediction service that uses machine learning and community insights to forecast where BTC is heading. That’s yet to launch, but this app is a first step and absolutely worth a look in its own right.

 

They have reduced the complexities of trading to a straightforward UX in which you simply predict whether the price of bitcoin will be higher or lower in 24 hours’ time. You can stake different amounts on your hunch, depending on how many points you have already (which depends on how successful you’ve been in the past). Get it right and you double your stake, get it wrong and you lose it. Keep winning and you unlock new limits and earn badges for different qualities (accuracy, risk taking, loyalty, etc). The better you do, the higher up the Hall of Fame you move, with the chance to win a share of a prize pool of up to $500,000.

 

Overall, it’s a beautifully gamified price prediction tool. The simple UX makes it instantly accessible to anyone, and the company has worked hard to maximise that little dopamine hit you get from calling the market right. Refer new users with your code and win more points, helping grow the already active community. It’s all very well designed.

 

Data from the app will ultimately be integrated into the price prediction tool. As well as machine learning, it will take insights from the most successful and reliable community members – the ones who are best at forecasting price movements. In all, it’s a lot of fun and a great idea.

If you want to download the app, feel free to use referral code J7NG5HI as a little thank you for putting you onto this.

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Sunday Inferno round-up

It’s the weekend, and so we once again have our regular round-up of the biggest crypto stories and market movements. Here’s what we’ve covered this week:

  • The 2020 Halvening is just one of a series of further supply reductions in Bitcoin’s future. What happens when miners rely solely on transaction fees for revenues?
    What happens when mining rewards end?
  • TL;DR with $12k breached, the next major obstacle is the yearly high around $14,000 – and if that goes, then the sky is the limit.
    Tuesday Inferno market report
  • When Lambo? We don’t know. When Ferrari 599 GTO? Now!
    Tokenised car ownership with BitCar
  • What happens with LTC is often a signal for what happens with BTC later.
    Watch Litecoin’s halvening
  • TL;DR Bitcoin rekt, alts ded. Just another day in the crypto bull market.
    Friday Inferno market update
  • Bitcoin is not money. I don’t like cryptocurrency. If I wanted to make a cryptocurrency it would be the best currency in the world, let me tell you. Believe me. I already did create the best currency in the world and it’s the US dollar. It’s the best currency and it always will be, forever. I should know, I created it.
    Trump launches war on crypto, loses war on crypto

That’s all folks – see you next week for the next installment of the rollercoaster ride that is crypto life.

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Trump launches war on crypto, loses war on crypto

Bitcoin is not money. I don’t like cryptocurrency. If I wanted to make a cryptocurrency it would be the best currency in the world, let me tell you. Believe me. I already did create the best currency in the world and it’s the US dollar. It’s the best currency and it always will be, forever. I should know, I created it.

 

Did the US president just say that bitcoin would reach $100k in the coming months? Not in so many words, but inadvertently, between the lines, he may just have done that. 

 

Just so we know what we’re dealing with here, we’ll give you the full tweet series:

 

I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity….

 

….Similarly, Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National…

 

…and International. We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the World, and it will always stay that way. It is called the United States Dollar!

 

As you can imagine, Crypto Twitter was swift to reply, argue with, educate and troll the president, with Tron’s Justin Sun inviting him to his lunch with Warren Buffett, and Kraken’s Jesse Powell observing that the US dollar is privately operated, unpredictable and opaque. Some noted that there has been no financial innovation in the US for 50 years, and that Bitcoin and blockchain are the country’s best hope to stay ahead in fintech. Donald has started a debate, to be sure.

 

Good or bad?

On the face of it, this may seem bearish. The president could decide to try to make trouble for crypto, not to mention Facebook. Libra (or ZuckBucks, as the crypto community knows it), represents a direct threat to the US banks and control of the money supply, and Congress has been extremely concerned – going so far as to request that all development stops until Facebook can address major concerns around money laundering, terrorist financing and other crime.

 

But what about bitcoin and ‘pure’ crypto, rather than a glorified Tether issued by a centralised company?

 

Bitcoin itself is practically impossible to eradicate, due to its decentralised nature. You can’t stop Americans using it unless you shut down the internet. Trump could theoretically try to prevent them moving funds between the crypto and conventional financial worlds via action against exchanges, but it’s unlikely that would happen at all. Remember that the Silk Road auction of 2014 de facto legitimised bitcoin (the US would not have auctioned off something it deemed illegal, like drugs it had seized). And the BitLicense has established a regulatory framework for blockchain and crypto companies. Not to mention the recent strides forward in terms of products like Bakkt and the fast-developing regulatory landscape, plus the SEC’s approval of the first security token offerings. TL;DR that genie is out of the bottle and the legal barriers to rowing back on those developments are insurmountable.

 

Enemies of Trump might be friends of crypto

Then you have the fact that Trump is such a polarising character. People love him or hate him. Those who hate him have just been given a new reason to buy bitcoin. Trump has just advertised crypto to most of the world. Anyone who questions his judgement or fitness as president might be curious about what his problem is with this new technology.

 

There’s also the reality of his enemies in high places. Notably, Jerome Powell, Chairman of the Federal Reserve, recently told the Senate Banking Committee that people use bitcoin as a ‘speculative store of value, like gold’, acknowledging its place in the world. At least two of the 2020 presidential hopefuls are accepting bitcoin donations. Nationally and internationally, commercial and central banks, state leaders and regulators are waking up to bitcoin and blockchain. The list is growing fast.

 

The saying is that no publicity is bad publicity. Donald may just have put bitcoin – as well as the surrounding debate about privacy and honest money – in the spotlight like never before.

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Friday Inferno market update

TL;DR Bitcoin rekt, alts ded. Just another day in the crypto bull market.

 

When bitcoin broke resistance and took another run at the yearly high, it was looking very promising. $13k fell, and it looked like BTC might manage to take out the $13,880 level where it had stalled last time – which also happen to be the golden fib level, from the top of the bubble to the bottom of the bear market.

 

It was not to be. Instead, we got what looks like a double top, and a sharp slide in the price of bitcoin afterwards. BTC didn’t get any higher than $13,200 this time, a lower high, and plummeted to $10,967 late on Thursday.

 

That’s a 17% crash, which is significantly less than the 31% fall we saw immediately following the year high at $13,880. However, the move may not have finished playing out. The parabolic rise has been set for a reckoning. We may have seen it already, with those two corrections – 31% and 17% are serious by any normal standards. We did bounce off the 21-day exponential moving average, which has happened repeatedly in this bull run and in previous ones

 

If not, then keep an eye on the 21-week exponential moving average and the 100-day simple MA, which have often proven strong support in previous bull markets and in this one. That could see bitcoin going much lower – back down below $10k and potentially into the $8k zone. Right now, however, bitcoin is trading well above its recent lows

 

History repeats?

There may be a parallel in the November-December 2015 correction. A similar pattern played out then. Bitcoin rose from near its low around $230 in a parabolic move that saw it hit $500. It made a 40% correction to around $300, not so different to the 30% correction we saw at the start of this month. It then recovered; weekly RSI double-topped above 70, as it just has again, as bitcoin made a lower high, as it just has again. There was a second major pullback, though not as large as the first – this time about 22%. That again matches the pullback this time, which is around half as much as the first. After that, BTC went into yet another parabolic rally and sharp correction, and ultimately began its long climb to $20k. 

 

History doesn’t repeat, but it does rhyme, and when patterns like this play out again they’re worth paying attention to.

Alts have been feeling the pain, with many falling hard against BTC as BTC falls against USD. Dominance is now over 65%. In other news, Binance has launched margin trading, and the SEC has approved its first ever STO – both bullish developments in the sector as a whole. And, of course, we’ve had the insanely bullish news that Donald Trump is against bitcoin. You’ll be hearing more from us on that soon.

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Watch Litecoin’s halvening

What happens with LTC is often a signal for what happens with BTC later.

 

Litecoin has gained a reputation as Bitcoin’s sandbox. As silver to bitcoin’s digital gold, Litecoin isn’t technically incredibly sophisticated, but it is more agile and faster moving. While it can take months or years to agree and implement changes on Bitcoin, Litecoin can do the same far more quickly. Litecoin offered SegWit long before Bitcoin. And Litecoin’s price movements often signal what bitcoin will do too. LTC bottomed and bounced before BTC, for example.

 

The Halvening

Next month, Litecoin’s block rewards will be cut from 25 to 12.5 LTC. This Litecoin Halvening will take place nine months before Bitcoin’s own Halvening event.

 

Halvenings are keenly anticipated in the crypto world, because the supply reduction means more net demand on the market – and therefore higher prices in the long run. In the short term, the markets can get very choppy as traders try to anticipate what the market will do.

 

Last Bitcoin halving event, in 2016, took place in the middle of a massive bull run. The Halvening itself had little immediate effect on price, but surely contributed to the surge to $20k as there was less BTC for miners to sell. This time, the crypto community expect the same: an epic bull run, driven not only by greater awareness from institutions and the public, but by the simple economic impact of reduced supply.

 

Caveat emptor

But Buyer Beware: in the medium-term, that reduction of supply may have less impact on price this time. Bitcoin could be trading above $10k precisely because speculators anticipate the effect of the halving in nine months.

 

For Litecoin – which has seen 500% growth from the bottom in December – Charlie ‘Satoshi Lite’ Lee says it’s already priced in. He has warned that many Litecoin miners may shut down – and that there could be a savage crash when the bubble pops, as there was last time.

 

We have to ask whether Litecoin will offer a signpost for Bitcoin’s future, as it so often has before. So: watch Litecoin’s Halvening. Observe what the market does and factor that into your bitcoin trading strategy.

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Tuesday Inferno market report

TL;DR with $12k breached, the next major obstacle is the yearly high around $14,000 – and if that goes, then the sky is the limit.

 

For the past two weeks bitcoin has been trading in a descending triangle, with support around the $11k region. Descending triangles more often break to the downside, which could have resulted in BTC diving to $9k or below. In this instance, however, bitcoin broke the upper resistance line.

 

That resulted in an immediate move higher, with bitcoin hitting $12,883 overnight – just $1k below its yearly high at the top of the parabola. That was above resistance at $12.5k. Had bitcoin not overcome that, there was a very real chance it would retrace back down, testing first $10k and then lower levels.

 

That still could happen, of course – bitcoin is nothing if not unpredictable in the short term. But breaking upwards puts the yearly high back in play – and after that, it could get impressive fast.

 

Assuming it breaks $14k, which would be a new yearly high, there’s very little resistance above. We might expect another triple-digit rise from that point, and it could even put the all-time high in our sights. 

 

The other side of this is that RSI and other indicators are now screaming overbought. The weekly RSI, in particular, is well into the red above 70. At the time of writing, bitcoin has just plummeted $500 with the space of a few minutes. 

 

This is what tends to happen when the market is so overextended. Even if we’ll see $13k or $14k again soon, in the short term, there’s a lot of volatility. Shake-outs, bots hunting for stop losses, traders getting margin called as whales push the price up and down to reload cheaply and then fire the market higher. It’s all on the cards. Lots of new traders are now being attracted to bitcoin as they see the price rise, and they’re likely unprepared for the pain of seeing their investments crash in value as easily as it can rise. FOMO and panic-selling are the order of the day.

 

The HODLers, of course, know what to expect. Good luck!

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What happens when mining rewards end?

The 2020 Halvening is just one of a series of further supply reductions in Bitcoin’s future. What happens when miners rely solely on transaction fees for revenues?

 

Over the course of Bitcoin’s history, tx fees have played a changing role in the way miners are rewarded. In the past, the proportion of miners’ income that was composed of block rewards and transaction fees respectively has been quite different. 

 

In normal times, transaction fees currently account for around just 2% of miners’ income. At the time of writing, tx fees provide miners with 30-50 BTC per day, while block rewards provide 1,800 BTC. 

 

As block rewards decrease (May 2020 being the next Halvening event), tx fees will become more and more important – and so will bitcoin’s price. Bitcoin can only remain secure if the cost of attacking the network is high compared with the potential benefits of doing so. In other words, as overall rewards decrease, price must increase if Bitcoin is to survive.

 

Bitcoin’s daily rewards are currently around 0.01% of the value of its overall market cap. In the past, this has been much, much higher – for example, when MtGox first opened back in July 2010, it was 0.21%. Not only were block rewards higher (50 BTC instead of 12.5 BTC), but there were fewer BTC in existence, so the diluting effect of new coins was larger.

There have been a few rare occasions when tx fees made up a significant proportion of mining rewards. On one day in December 2017, tx fees accounted for a third of revenues: miners received over 900 BTC in tx fees, plus 1,800 BTC in block rewards. But that really was unusual. As Bitcoin’s rewards reduce over the coming decades, block rewards are going to drop dramatically. 

 

It is very difficult to game out what is likely to happen, but there are a handful of obvious conclusions:

  • Since block rewards halve every 4 years, the importance of tx fees becomes disproportionately more important. Tx fees must do far more than double to offset the difference.
  • The more txs Bitcoin supports per day, the better.
  • However, since block space is limited, tx fees may need to rise significantly to ensure total revenues are high enough – much like they did in December 2017.
  • Additionally or alternatively, regular miners will need to supplement revenues with income from second-tier solutions like the Lightning Network. 

 

In short, the cost of attacking the network must be sufficiently high as a proportion of network value, and in the long term that cost is directly related to miners’ income. History suggests that 0.01% of network value in mining rewards per day is easily enough to secure the network. It is unclear whether 0.001% or 0.0001% will be enough.

 

Bitcoin, after all, is still a colossal experiment. It’s one we love and think has a bright future, but there are no guarantees.

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