Bitcoin Volatility

Volatility is a measure of how rapidly and unpredictably change occurs, a risk assessment. By comparison with other assets, such as gold (1.2%) and the dollar (1.8%), Bitcoin (3.13%; 30-day est.) is a risky investment indeed. That being said, what is interesting is the change to Bitcoin’s volatility over time.

In the early days, while Bitcoin was just beginning to gain traction, it was difficult to assign meaningful numbers to its volatility since the prices fluctuated so drastically but the absolute values were so low. Bitcoin could have gone from $0.000125 to $0.000190 in one day but that 65% rise in valuation did really amount to much. But, remember the fall of 2017 when Bitcoin’s price soared to $19,500? The volatility index was hitting values of 7.5% and 8.0%. Since then we watched as Bitcoin’s value returned to earthly amounts like $4500 and $3800.

Now, Bitcoin’s price is steadily rising again ($10,350 as of 9/11/2019). Meanwhile, Bitcoin’s volatility index continues to fall. This is a good thing. If Bitcoin is to be the asset class of world finance, the volatilty index has to be equal or less than that of gold today. It looks like we’re going that way.

Why Are There So Many Different Cryptocurrencies?

During my professional career we publishing software for graphic designers who wished to put barcodes in their graphics such as the barcode on the back of a paperback book or grocery box. In the process, we became experts at printing all of the various barcode types. Barcodes come in many different forms. Think of different barcode types the way you would think about different languages. If you print Code 39 and someone’s scanner reads Code 39 they understand each another. If you are shipping groceries in cartons you’ll need Interleaved 2 of 5. If you want to distribute coupons, you’ll need a GTIN number. The list goes on and on. There are hundreds of barcode types and they have all been optimized to do something well whether it be easily readable, large data content or small image. Each has been optimized to do something well. The same can be said for cryptocurrencies.

Each cryptocurrency has been optimized to do something well whether it be fast transactions, handling large values, being ultra-secure and so forth. As I read through the various schemes that have been designed in the cryptocurrency raison d’être some strategies are more compelling than others. At this early stage of development, it is difficult to see which problem being solved is the problem that makes the cryptocurrency that solves that problem famous. It’s worth taking a look at a few different strategies to see which resonate. For example, a couple of years ago a new crypto appeared called Electroneum.

Electroneum drew attention to the fact that cryptocurrency was a huge drain of energy. I read one statistic that said that all Bitcoin miners are now using the equivalent energy of the country of Denmark. In this day and age that’s not good. Electroneum was designed so that it could reside on a person’s smartphone, and, if there were enough smartphones with Electroneum, the app would use the smartphone in the background to mine Electroneum. By sharing the load with millions of smartphones the mining function could be done without an additional drain on precious resources. That sounded like a sensible approach to solving a real problem. Unfortunately, Electroneum, two years later, is still struggling to find a footing in the crypto space. Only one exchange that I know of actually trades Electroneum.

Bitcoin’s Killer App

In my quest for Bitcoin’s killer app, I watched David Schwartz, CTO of Ripple, being interviewed by Fortune’s Jeff Roberts on YouTube. The interview was recorded on June 12th, 2019 at the Future of Fintech conference in NYC. For those interested in Bitcoin’s nuts and bolts, this was a very interesting discussion. As far as killer apps were concerned, Schwartz touches on some very promising technologies in the works that may be killer apps.

The killer app would be the application that launches Bitcoin into the stratosphere by making Bitcoin indespensible, giving anyone using it such a definitive advantage over those that don’t that Bitcoin becomes a must have, go to asset. There have been many proposed killer apps but so far none have stepped up. I’m seeking that application that makes Bitcoin impossible to live without.

If you were living in Venezuala right now you might feel Bitcoin was your only guard against the rampant, runaway inflation. By Venezuelan standards, Bitcoin’s valuation barely fluctuates. If you were a drug dealer or holding someone’s computer for ransom, Bitcoin might also be your goto application. But David Schwartz mentioned an application which I felt is worth further investigation — micro-payments.

Micro-payments are very small payments, sometimes as little as $0.0001 (one ten thousandth of a cent) or less. For some applications they are very useful but impossible to manage. For example, have you ever run up against a pay-wall when trying to read an article from a publication you don’t subscribe to and you forego reading it because the $19.95 per month or whatever the cost is wasn’t worth it for this one article. Besides, you weren’t really interested in a subscription, anyway. It would have been nice to get charged $0.99 for this one page article, and leave it at that. But in order for the publisher to charge you that $0.99 with a credit or debit card, there would be a $0.35 minimum charge plus between 2% and 6% fees from the publisher, and several forms to fill out for you, the reader, before you could read the article. Since those type of transactions take a day or so to post, there will also be enough follow up work that the small publisher would opt NOT to offer the small fee. In fact, few if any do.

If that $0.99 transaction were made using Ripple (XRP) cryptocurrency, the transaction could be accomplished totally anonymously, with a few cents in fees, in seconds. The website could be charging you per column inch read, or any other smaller scheme which would be served by micro-payments. Let’s say you read 18 column inches at a cost of $0.0016. MasterCard would charge the publisher $0.365 cents for you to pay this $0.0016. The publisher would lose money with every visitor. With cryptocurrency you would pay $0.0016 plus $0.00012 in service charges. In other words, you’re paying next to nothing for Ripple payments. It’s all done safely and securely and in a matter of seconds. If this capability is built into your browser, as it will some day be standard on all browsers, micro-payments will be nothing more than a key stroke.

Environmental Protection Act

I, for one, am so disheartened and disgusted with what is happening to the environment these past two and a half years I want to cry, almost daily.  Instead of watching the Trump administration rape and plunder the environment, I propose the following: let’s just write a check and be done with it.  Give a billion dollars to each company that promises not to drill, mine, frack, pump or dump. That’s the idea. They don’t have to lift a finger. In fact, that’s just what we want they to do: nothing at all.  

Why do we have to watch as these companies undo all of the decades of environmental good deeds we’ve accomplished cleaning the air, purifying the lakes, rivers and streams and making our food supply safe?  The only reason those companies do what they do is money. So why don’t we just give it to them, no questions asked, in exchange for them stopping altogether. 

The Exxon-Mobils, Cargills and Kochs get their money and we get to keep the parks, national monuments, fields, rivers and streams.  We get the birds and the honey bees, and the icebergs for another generation or two.

Climate Change

Perpetuating the myth that if only we are able to keep climate temperature increases to 2ºC everything will be okay is almost worse than the claims of the climate change deniers.  The complacency today in the face of the absolute collapse of our planet’s biosphere is unconscionable. We watch as the world is turned uninhabitable, and rather than take up the challenge, we continue, if not accelerate, in the wrong direction.  More carbon has entered the atmosphere in the last thirty years due to mankind’s activities than in all the time we had been on this earth till then combined. Instead of reducing our carbon emissions to zero, we have increased our output by 1.5% since Al Gore wrote An Inconvenient Truth in 2006.

We’re apathetic because we’re losing, and see no possibilities of a good outcome. But it’s much worse than that.  We’re already seeing the devastating effects but have not yet felt them at home. Those days are about to commence.  We’re literally dancing at our own funeral. The insect world has collapsed. Amphibians are disappearing around the globe.  The bumblebee has been put on the endangered species list. Did you see any smashed bugs on your windshield this past summer? Any moths dancing by the night lanterns? I just drove from NYC to Boca Raton, FL and back.  Not a bug on my grill in twenty-six hundred miles. Last spring I drove to San Francisco and back. The state of Utah was practically covered in the smoke from forest fires the entire time I was crossing the state.  Tornadoes in the middle of winter? Arctic cyclones? Meteorologists are having to invent new names for weather events. The end has already begun, we just don’t know it yet.

Bitcoin: State of the Art

It’s been some time since I’ve written here regarding Bitcoin and for good reason.  There were no clear trends developing that I could see.  While my faith in Bitcoin remains unwavering, I did not see what might have been influencing the marketplace, in general, nor Bitcoin in particular.  Meanwhile, the price of Bitcoin had fallen in a series of steps downward to $6500, then $4500, then $3500.  Two factors made my ears perk up this morning.  Perhaps, we’re at a crossroads, now.  Only time will tell.

Blockchain Now!

Reuter’s reports that Germany’s justice and finance ministries have proposed to launch a state-run register to boost the use of blockchain. We’ve seen these same efforts repeated with other governments across the globe. While bitcoin is slowly being adopted, its underlying blockchain technology is being widely adopted. That the blockchain regulations, policing of the blockchain technologies, and the registration of blockchain based exchanges are being put in place now will later prove useful to a bitcoin economy.

Blockchain technology replaces a centralized network with a decentralized, distributed network. Instead of a central clearinghouse for all transactions, exchanges are made throughout the network. Instead of a physical token for each transaction, such as printed shares of stocker each trade, trades can be made in blockchain technologies entirely digitally. In order for investors to pay their fair share of taxes on blockchain transactions, both the government agency and the tax payers have to have the apps that allow them to compute the necessary amounts. To follow up on complaints of foul play, emergencies, and general police detective work, law enforcement agencies need to know what blockchain technology is and how to deal with it. There is no difference between researching a transaction made in a blockchain network for real estate and for a bitcoin transaction. The list goes on, but in short, learning to work with blockchain is the very skill required to work with bitcoin.