Someone Just Bought 250,000 Bitcoin ($2.5 Billion)

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A little after one a.m. on January 31, 2018, Bitcoin hit bottom at $9647. After that, some interesting things began to happen.  
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There’s a fun website called BitListen which displays, in real time, every bitcoin trade as a soap bubble.  In the middle of each BitListen bubble is the amount of bitcoin that was traded.  With each trade, there is also a sound, much like wind chimes.  The pitch of each sound is relative to the size of the trade. If you or anyone you know is not convinced that bitcoin is alive and well send them over to Bitlisten.com.

Last night, while President Trump was giving his State of the Union Address, some unusual trading started happening.  Bitcoin had been falling for the past few days and most precipitously today.  By evening it was below $10,000 and by 10:00 pm EDT was hovering around $9800. Suddenly, on the BitListen screen appeared the largest bubble I’d ever seen.  It took up a quarter of the screen and read BTC 6209.02 Bitcoin!  That is sixty million dollars.  This bubble appeared with a deep — BONGGGG.  Was this the big sell off or an entry point for a big investor? 

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A 6209.84 Bitcoin (US$60,856,432) trade appeared on bitlisten.com as Bitcoin fell to $9800 earlier in the evening.  

BTC 6209.84 Bitcoin is $60,848,200.  That’s an enormous trade.  More astonishingly, almost as soon as that huge bubble drift off the top of the screen than another bubble appeared with an equal value.

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Another $61M trade appeared on the screen. The amount of Bitcoin represented by the bubble is written in the middle (B 6208)

Another $61M was traded.  Remember, every trade has a buyer and a seller.  Or, in this case, buyer and sellers.

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Trade after trade continued to appear for the next sixty minutes.

Another trade of an equal amount happened.

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Notice that the amount of Bitcoin with each of these enormous trades is slightly less than the trade before it if you can call four Bitcoin “slightly less”.  

Then another. Screen Shot 5 2018-01-30 at 11.31.53 PM.png

 

Then another. Screen Shot 6 2018-01-30 at 11.36.08 PM.png

As of this writing, I counted 40 such trades in the course of 45 minutes for 6200 Bitcoin or about $60,000,000.

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That was roughly $2.49 billion dollars spent buying Bitcoin in $60 million increments. What are we seeing?  It looks like a large exchange or brokerage preparing to trade bitcoin by stocking up so they can have a supply at the ready.  Getting in at a bottom means they will also earn money on the appreciation as well as the fees for trading.

 

 

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On Leaving the Poor Box Unattended

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It’s difficult to think what the advantages and new possibilities are for blockchain because we don’t think about strangers being trusted partners, especially on the internet.  We assume everyone is potentially a bad player.  For example, we’re not accustomed to trusting a website visitor unless they have been verified.  How do we know that visitor isn’t here to do malicious mischief for personal gain, to steal from other users, or harm someone else?

But let me give you an example:  Try to imagine a doctor’s office hosting an online public calendar, where any one of their present or future patients, without having to log in, can enter an appointment with name, date or time.  “Too much chaos,” you say? “The temptation for someone to grab another person’s appointment as their own would be too great.”

Ah!  But there it is.  No one can change your appointment but you, if that calendar were set up as a blockchain calendar.  Every transaction is recorded and you are given both a public key and a private key when you make an appointment.  The public key is accessible and known by everyone but only you know the private key.  For convenience sake, only your computer knows your private key so that you don’t have to think about it.  Anyone else would be denied access.  Secretaries no longer have to be a central clearinghouse.

It seems counterintuitive because we have been dealing with sites on the internet that are either open access without restrictions or sites requiring username/password protection.  Now, we have a third alternative that allows open access but provides strict, trustworthy private controls.  That’s valuable, indeed.

Altcoins: Which Are The Best Investment?

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Toaster with an Edison screw fitting, c. 1909

Both Warren Buffet and Paul Krugman believe cryptocurrency, e.g. Bitcoin, is a bubble.  Moreover, these well-respected gurus of the economy and finance say we should expect to see a bad ending.  Sorry to say, they’ve got it wrong.  When and where do cryptocurrencies end? They don’t.

Bitcoin is not a bubble.  Cryptocurrencies will never end.  Taken one at a time, a coin may or may not get the following it needs to thrive.  Some coins will see tremendous support and soar in value.  Still, others may grow and shrink in fits and starts.  But as a basket, you are going to see growth in the never-before-seen-as-an-investment category.  That is where we are at the moment.  New initial coin offerings (ICOs) and token sales are appearing daily.  New currencies are raising tens of millions of dollars in funding in just a few days time.

Having a basket of different cryptocurrencies is a form of diversification within the space, mitigating the risk.  Bitcoin is the most uncorrelated asset there is when compared to the stock market.  That means its movement is unrelated to how the stock market moves.  Fund managers, always looking to diversify, love uncorrelated assets to further reduce risk.  So should you.  Where we are today, however, is at a place where almost any coin with an active development team behind it will go up.  I know how flaky that sounds but I believe you can buy almost any coin and experience large returns in this moment in time.

This is similar to a period of history just after Edison electrified Lower Manhattan.  To supply enough electricity to power his street lighting and then indoor lighting for the Financial District Edison had to patent at least ten new inventions including the dynamo. By the time he had finished, buildings throughout Lower Manhattan were powered by electricity.  Suddenly, all of the ideas that had been floating around for decades that were never taken seriously or mass marketed because they ran on electricity, and electricity wasn’t available, were possible.

There was the idea for fans for moving air, fans for cooling, toasters to bake bread, elevators to lift people, stamping machines for manufacturing, signals for directions and signage, clocks to tell time, clocks to manage industrial processes, illuminated signs at night, musical instruments, mixers in the factory, blenders in the kitchen, washers for clothes, dryers for paint shops, lifts for industry, vacuums, motors, drills, vibrators, and scales for weights and measures, could be electrified and sold, and made available in every office across the city. Bonanza!  Eureka!!! But which idea would sell?  Which would become a viable product?  THEY ALL WOULD!!

Bitcoin Wallets: Stressful and Demanding Concentration

applepayYes, the automobile is a wonderful invention.  Actually, it is probably 1,000 inventions all contributing to a vehicle which moves us about in comfort effortlessly.  Blockchain and Bitcoin are wonderful inventions, too, with the promise of doing miraculous things for us.  However, at the moment, you cannot say these work with little or no effort.  In fact, it takes a great deal of effort and concentration, often fraught with stress and uncertainty.  Before Bitcoin can become a natural part of our lives, much more technology needs to be brought to bear upon the problem.

As secure as the blockchain itself is, going into or out of the blockchain wallet is still dangerous and difficult.  It has to be as easy, thought-free, and fast as taking cash from your leather wallet or putting money in a piggy-bank.

The Wallet on my iPhone uses NFC (Near Field Communication) which allows two electronic devices, my iPhone and the merchant’s card reader, to communicate with one another by bringing them within 4 cm of each other.  The Wallet also makes use of the iPhone’s fingerprint authentication to validate me as the user.

So far, the best blockchain wallets I’ve seen use text SMS messages to copy/paste public addresses, or, use the iPhone’s camera to take a picture of QR barcode to deliver the same public addresses to the wallet.  Neither is as good as NFC or fingerprint authentication.  A first-rate wallet would have to use all of these technologies to work intelligently and quickly.  The user must be able to pocket Bitcoin without a second thought, with one hand tied behind his back, underwater, covered in mud with the lights out. It has to become THAT easy.

Blockchain: Not a Bubble

three menBlockchain, the technology behind Bitcoin and other cryptocurrencies, is a big deal.  Huge.  Blockchain offers a degree of security, trust, and anonymity, so often sought in contracts and financial dealings, yet seldom achieved.

Imagine if you were to buy a beautiful, three-bedroom home in a nice neighborhood with a yard and a garage. The day you move in with your family, three men with baseball bats burst through the front door and order you to leave. “This house is the property of Carlos Danger,” they tell you.  You don’t want heads of your family to be smashed to a bloody pulp so you follow instructions and scram.  In most parts of the U.S., you would be calling the police in hopes of justice.  In many other parts of the world, that would be that; end of the story, end of the house.

It is only because we have all of the other social systems in place, including the police, the legal system, the jury system, jails, insurance, banks, currency, Department of Buildings, Department of Sanitation, Fire Department, Real Estate Boards and elected officials that our ability to purchase and own property in the U.S. is somewhat secure.  In many other parts of the world, it is not.

Blockchain provides a methodology for the same kind of security without the need for rangers with guns, or police with Tasers, or lawyers with Court Orders.  Because blockchain provides this new found security, trust, and anonymity, all sorts of new currencies will appear representing all sorts of values and worth.  Remember Airmiles?Airmiles are valuable forms of currency for travelers.  There will be cryptocurrencies for travel, for health, for sports gambling, for online gambling, stocks, international monetary trade, insurance, cybersecurity, petrol and just plain old spending money.  Many coins will be very good ideas.  No one can predict which currencies will be the most valuable but many will be around for a long time to come.

SWIFT, Not So Fast

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If you’ve ever tried to send an international wire transfer you know what a headache it can be.  You have to fill out multi-page forms at a participating bank, including the routing number, account number, SWIFT number, the recipient’s address and the receiving bank’s address and telephone number.  The fees are never quoted precisely because they are unknown until the transaction is completed.  The waiting period is never less than half a day and usually two.  The only way you know the wire went through is to wait an extra day for the bank to send you an email, if you request it, or call the recipient and ask.  Moreover, both banks have you sign forms that say they are not responsible if the wire does not go through even though they will do their best to keep the information guarded and secret.  The sense of insecurity you get from bank customer service reps, performing the service, does not exactly exude confidence.

A definition of the SWIFT banking system taken from the internet reads —

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunications. It is a messaging network that financial institutions use to securely transmit information and instructions through a standardized system of codes.

Notice the definition says “a messaging network…to…transmit information.” The system doesn’t carry, or transmit any money, just the instructions to the receiving bank on what to do with the money when it arrives.  All of the hubbub is over trying to keep those instructions error-free and tamper-free.   In the end, the money is sent from one bank to another to another, if necessary, until it has reached the recipient’s bank by predesignated routes.  It’s an archaic system, to say the least.

Ripple is a cryptocurrency designed specifically to replace the SWIFT system.  The bank will convert your money to Ripple currency, send it instantaneously over the internet to the recipient’s bank who will convert it into local currency.  You are notified when the transaction is complete in a few minutes with minimal fees.

The big news today is that Moneygram, the money transfer service is launching a pilot program to test Ripple.  If adopted, Moneygram has an almost unbeatable product.  And, Ripple gets an incredible boost in the cryptocurrency space.