Bitcoin: Bubble Made of Mylar Not Soap

Soap-Bubble.jpgBitcoin stands at $8697 and has hovered around $8550 for the last twelve hours.  This has been the softest the cryptocurrency market has been since last summer.  Prices are still higher than they were at Thanksgiving time last year, yet coming down from highs around $19,500 the market doesn’t feel optimistic.  Broadly speaking the market has been plagued with bad news of late.  Governments are cracking down on cryptocurrency ICO’s, exchanges with bad trading practices are in the news and Facebook has put a ban on all crypto ads. The billions pouring into cryptocurrencies in hopes of making a fast buck have exited.  The entire cryptocurrency marketplace has fallen in lockstep with Bitcoin.

Yet, I can’t help but think what the naysayers that appear daily on Bloomberg and other financial talk shows speaking of Bitcoin going to zero and the “biggest bubble in human history,” are going to say when Bitcoin emerges from this episode in fine fiddle and goes on to bigger things. It is easy to see who understands what Bitcoin offers and who is clueless.

Bitcoin’s a bubble made of mylar, not soap.

#Bitcoin #BTC #ETH #LTC #XRP #crypto

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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Screen Shot 11 2018-01-30 at 11.45.40 PM.png Screen Shot 12 2018-01-30 at 11.48.53 PM.png Screen Shot 13 2018-01-30 at 11.50.56 PM.png Screen Shot 14 2018-01-30 at 11.52.58 PM.png

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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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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!!