BITCOIN IS NOT A COIN (!) (meaning it is not backed by the full faith and credit of any federal gov’t like a real coin is); and bitcoin cryptocurrency is not a currency (!) (meaning it is not regulated by any centralized authority like a real currency is); and a bitcoin exchange is not an exchange (!) (meaning outright trades of bitcoin are not taking place on an actual centralized and heavily regulated entity like the New York Stock Exchange).
“Think of bitcoin as just another pay pal for transaction purposes, but with a floating numeraire.” Warren Mosler (NOTE: Meaning from Day One, Mr. Mosler knew bitcoin was not a coin. The value of bitcoin, or the fractional ‘numerator’, does indeed change just like a fiat currency; but the outstanding float, the ‘denominator’ of bitcoin, unlike a fiat currency, is fixed, making bitcoin more like a ‘virtual’, or digital commodity more similar to a limited collectible, like precious metals).
“Bitcoin grew out of the global financial crisis that began in 2008. At that time, trust in institutions and the governments that regulated them were at an all time low. In the mist of this crisis, someone going by the pseudonym of Satoshi Nakamoto published a paper that outlined how a peer-to-peer electronic cash network could be created without the need to trust banks nor financial institutions. Shortly afterward the published software that allowed people to start building the network began.” (Bangkok Post 12/13/17)
In January 2009, the network came into existence with the release of the first issuance and first open source client…Bitcoin was born.
The market for bitcoin now has two sides. One side compares it to Tulip-mania, while the other thinks bitcoin and other crypto-commodity markets will continue growing. It is still hard to tell which one of these two competing narratives is right. To help you decide for yourself, here are some of the many milestones of bitcoin, as well as some of the many insights, during 2017:
04/01/17: 95% of the crypto-currency is traded on Chinese exchanges (better to not be an April Fool?).
05/24/17: Buyers have been piling into the digital currency amid speculation that the U.S. Securities & Exchange Commission may overturn its decision to ban the creation of a Bitcoin Exchange Traded Fund.
06/06/17: Bitcoin rose as much as 8 percent to an all-time intraday high of $2,875.34, eclipsing the previous peak reached May 25.
06/15/17: Bitcoin sank as much as 19 percent, putting the digital currency on pace for its worst week since January 2015
07/16/17: Bitcoin down 10% to $1833 and that ‘ethereum’ is puking too, down 25% to $135.
08/11/17: ‘BITCON?’: The price of a single bitcoin hit an all-time high above $3500 this week, dragging up the value of hundreds of newer, smaller digital rivals in its wake. Does the rising value of bitcoin continue to be based on little or nothing, except how much more the next person will pay for it (the definition of ‘Greater Fool Theory’) (?)
08/11/17: Coinbase raised another $100 million at a private offerings. The percentage ownership sold gave Coinbase a valuation of $1.6B meaning Coinbase became the first bitcoin ‘Unicorn’. NOTE: There is a fixed limit (a total amount of outstanding bitcoins) which has been set at 21,000,000 (why ‘gold bugs’ or any other haters of ‘fiat’ currency love bitcoin)…So far, only 17,000,000 bitcoins have been ‘mined’ (are in existence).
Also note: You don’t have to buy a ‘whole’ bitcoin, you can buy a fraction of a bitcoin for just a few dollars (you buy as little as 1/100,000,000th of 1 bitcoin = 1 Satoshi).
08/11/17: “When you look at the price of bitcoin and the google searches for bitcoin, the correlation is 1, so it just kind of shows you that people are doing a very thin analysis as to why they are buying bitcoin.” Scott Gamm of The Street.
09/04/17: China BANS Initial Coin Offerings (ICOs), calling it ‘illegal fundraising’. (NOTE: An ICO is a glorified ‘kick-starter’, a simple ‘crowd-funding’ increasingly used by blockchain teams to fund the development and scaling of decentralized projects). Bitcoin goes down 31% in the next 12 days. China is also considering shutting down bitcoin exchanges that operate in the country. Bitcoin is not regulated and used by shady people for things like money laundering…which the Chinese gov’t is not a fan of. Last week China banned businesses from raising money in the foem of bitcoin for investors (ICOs), now China is looking to put the kibosh on all Chinese bitcoin exchanges.
09/13/17: JPMorgan Chase chief executive Jamie Dimon doubled down on his past criticisms of bitcoin today, declaring it a “fraud” and saying he would fire any trader known to be trading the cryptocurrency for being “stupid”. Dimon later added that the cryptocurrency “will blow up”, according to CNBC. “It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed,” he added…
BUT, two weeks later, Goldman Sachs said they are considering the launch of a new trading operation focused on bitcoin and other digital currencies…
NOTE: Hmmmm, that is interesting (There is a good reason why Federal Reserve Bank policymakers are often alumni from Goldman Sachs, not JPMorgan Chase)…
What does Goldman know that Chase doesn’t (?)
09/25/17: Bitcoin, by and large, is made in China. The country makes more than two-thirds of all bitcoin issued daily. Bitmain China, one of the biggest bitcoin operations in the world, based on prevailing prices, issues about $300,000 a day which accounts for nearly 1/20th of the world’s daily production of the cryptocurrency.
“I do not think it’s going to be the money of the future. I think it’s the bubble of the present.” Peter Schiff
10/10/17: “The price of bitcoin will ‘collapse’ as cryptocurrencies face continued regulatory pressure from governments, Harvard economist Kenneth Rogoff said Monday.
“My best guess is that in the long run, the technology will thrive, but that the price of bitcoin will collapse,” Rogoff said.
Rogoff argued that increased efforts from governments to rein in virtual currencies could eventually contribute to a decline in speculative interest in the digital asset.
“The long history of currency tells us that what the private sector innovates, the state eventually regulates and appropriates,” he said.
“I have no idea where bitcoin’s price will go over the next couple years, but there is no reason to expect virtual currency to avoid a similar fate.”
10/11/17: Bitcoin exchange traded funds (ETFs) are struggling to get off the ground and receive approval from the U.S. Securities and Exchange Commission (SEC). Governments and traditional financial institutions are critical of Bitcoin and cryptocurrencies are being scrutinized carefully. In Europe there is currently an exchange traded note (ETN) available via the public exchange NASDAQ OMX in Stockholm, but clearing the bar in the US has been more difficult.
Laurent Kssis, Managing Director of XBT Provider, the Swedish company that actually launched the first Bitcoin ETN, and now a CoinShares Company, explains that the SEC has been fairly clear about its stance in recent months: “Until there is a professional grade futures market which has the liquidity and depth to supporting the hedging activities of a US based bitcoin ETF issuer, they will likely not be approving applications. So we are not surprised to see this (SEC rejections and registration filing withdrawals).” Laurent Kssis added that the three top reasons European clients like his bitcoin ETN is 1) that they don’t want to have a bitcoin ‘wallet’, just access via a normal broker/brokerage platform to invest, 2) they can invest bitcoin ETN in their tax-advantaged retirement account, and 3) because they are not experts in bitcoin they prefer that someone else is responsible for the security and storage of any bitcoin backing their bitcoin ETN investment.
Bharath Rao, CEO of of digital currency trading platform Leverj believes the SEC has been turning down applications for a Bitcoin ETF for some very solid reasons: “Bitcoin is correctly defined as a commodity and ETFs on other commodities such as gold are fairly standard. An ETF may choose to buy and hold the physical commodity held by themselves or a custodian. A cheaper alternative is to buy futures to back the ETF. A Bitcoin ETF that holds actual bitcoins is more likely to be approved than one that holds futures. This is because a regulated bitcoin futures market with sufficient history does not yet exist. Even a Bitcoin ETF with actual bitcoin is problematic without necessary operational readiness. The ETF would need to ensure that the coins cannot be lost or stolen and the shares issued reflect the amount of bitcoin held. This could be accomplished using multi-signature accounts with on-chain proof-of-audit. Eventually, these pieces will fall in place and an ETF could be approved. The advantage of holding a 100% backed ETF over actual bitcoin are minimal, since bitcoins do not have the transportation, security and storage costs of Gold or other commodities. However, a Bitcoin ETF is anticipated by the community as an endorsement and a fresh influx of capital, increasing value of each coin.”
10/12/17 “Bitcoin smashed through the $5,000 barrier for the first time ever on Thursday, jumping as much as 7 percent to chalk up its biggest daily rise in over two weeks. Bitcoin, the original and still the biggest cryptocurrency, has been on a tear recently, rallying nearly 75 percent in barely a month. It has chalked up a more than fivefold increase in price since the start of the year.” (Reuters)
NOTE: Of the two main groups in this mania: 1) Compulsive gamblers looking to get rich quick ‘trading’ in bitcoin, plus crooks looking to hide financial transactions by ‘settling’ in bitcoin; and 2) those that see the enormous potential and future applications of the blockchain technology, perhaps the greatest financial innovation in 500 years.
Case in point, the latter, Kasikorn Bank (KBank), Thailand’s fourth-largest lender by total assets, in collaboration with IBM, is the first bank in the world to introduce blockchain services (cheaper and quicker remittances, overseas fund wiring, etc etc). Another example, Omise, one of Thailand’s most successful payments start-ups, is an expert in online payment and blockchain technology. Omise secured $25M through an Initial Coin Offering (ICO). A subsidiary of the Bank of Ayudhya in Thailand and a member of the Mitsubishi UFJ Financial Group in Japan has invested in Omise. This collaboration is another solid step in Omise’s journey to build on its foundation of payment services and underpin its base not only in Thailand, but in other countries as well.
Is all this bitcoin mania just folks simply confusing bitcoin with blockchain technology, thinking that both are the same; just like many confused dot com stocks with information technology, thinking both were the same (?)…
Or is bitcoin just like that other widely-misunderstood phenomenon that is here to stay: Presidential candidate Donald Trump (the more people made fun of it, the higher it went) (?)
10/17/17: Robert Shiller weighs in: Bitcoin is a fad, just like bimetallism before it, according to one Nobel Prize-winning economist who compares the cryptocurrency to the bimetallism fad of the late 19th century when both gold and silver were accepted as legal tender. “I’ll take bitcoin, too, because I know I can sell it and get out of it. There seems to be some strange enthusiasm for it,” Shiller said on CNBC’s Closing Bell . “People get excited about things like new monetary standards. Remember bimetallism? It went into a fad, everyone was talking about it for a while. And then it faded.”
10/23/17: Bitcoin, which is unarguably the world’s most prominent digital currency, today just broke through one of the most important milestones ever, vaulting to over $6000 and over $100 billion in value, proving that cryptocurrency is, in all likeliness, here to stay. Let’s look at other reasons driving bitcoin demand. Today’s Bangkok Post had an article about Venezuelans mining bitcoin to escape inflation (that the IMF says could reach 720% this year) which has intensified since the collapse of oil prices in 2014 (which accounts for 96% of the country’s revenue). Having no confidence in the bolivar and struggling to get US dollars, many Venezuelans are buying machines (for $2800 online from China) which are basically modified computers to perform complex computations (essentially book-keeping for worldwide cryptocurrency transactions) for which they earn commissions in bitcoins. Caracas office worker ‘Veronica’ says her boss (neither a computer geek nor a financial wizard) installed 20 of these data-crunching machines, some of them bringing in as much as US$800 equivalent a month, very profitable, especially where electricity to run these power-hungry computers is heavily subsidized (practically free). Bitcoin gains are helping to buy food and medicine that are currently in acutely short supply there. The point being that many people are (legitimately) buying and/or mining bitcoin to simply escape a crippling economic and political crisis. Add citizens of Venezuela to the shady folks using bitcoin (to evade taxes), to the investors saving bitcoin in retirement accounts (to avoid taxes), to the action-craving speculators and to the hedging gold-bug ‘stackers’ to the growing, worldwide appeal of bitcoin which is increasing the price against the USD (and while you’re at it, throw in the Chinese bitcoin players, who would love to see ‘King Dollar’ get knocked down a peg or two from the top of the hill). When the facts change, so should your opinion. As we can see, there are socially conscious use cases alike to buy bitcoin. Another specific example, Africans in Paris use it to send money home to their families in crisis. There are other legitimate reasons. Remi Coux, 33, recently invested in bitcoin and other cryptos (ethereum & litecoin) to “repatriate my funds to France without paying those high bank fees”, said the New York University geneticist who explained he was dismayed at the cost (approx 3% of the amount) of conventional bank wire transfers overseas. Therefore, people are buying bitcoin as a store of value; as a currency hedge; as a payment method for economies without widespread credit card or banking access. These are not unsound, unethical nor nonsensical currency plays at all; these are, IMO, justifiable reasons to be holding bitcoin. Just like I shouldn’t insult people who buy gold (as long as it’s not much more than around 5% of their portfolio), neither will I any longer mock anyone nibbling on bitcoin as an alternative investment. So from now on I won’t call bitcoin a ‘bitcon’; that said however, we should still warn folks not to get conned into buying bitcoin because they think the “bitcoin” “cryptocurrency” is a coin or a currency. Bitcoin is an asset, yes; but bitcoin is neither a coin nor a currency. Bitcoin is a crypto-asset, or more specifically, a crypto-commodity, the same asset class as plain gold, or any other (precious) metal. An actual coin, an actual currency, is backed by the full faith and credit of an issuer. Just like gold, bitcoin is not backed by any issuer or any centralized authority like a monetary sovereign backing actual coins or currency. Bitcoin is just another variation of a digital commodity with a newfangled twist. The only difference between a DIGITAL commodity (aka ‘derivatives’) like a gold futures contract for example, is that all gold futures contracts are backed, or ‘derived’ from an underlying PHYSICAL commodity that would be ‘delivered’ if so desired. For that reason, a gold futures contract will never become worthless; and all coin & currency deposits under $250k held at commercial banks, because they are guaranteed by the federal gov’t, will also never become worthless (BUYER BEWARE, you can’t say that for any crypto-commodity).
10/25/17: Similar to the launch of ‘Bitcoin Cash’, bitcoin further split yesterday, starting the process of creating a new currency called ‘Bitcoin Gold’. In principle, bitcoin users on the bitcoin exchange bitFlyer Inc will receive an equal number of Bitcoin Gold (BTG) and the exchange will start supplying and trading BTG from Nov 1. The aim of BTG is to decentralize bitcoin transaction records processing (aka ‘mining’).
NOTE: All these so-called ‘forks’, and not to mention a new crypto going online practically every week, is punching a hole in that ‘scarcity trade’ thesis (yet another misconception).
10/28/17: China’s crackdown in September (ordering Beijing-based crypto-‘exchanges’ trading crypto-‘currencies’ to close) has resulted in Japan regaining its title as the world’s largest crypto-market winner in the past weeks (Japan’s crypto-friendly decision in April allowed bitcoin as a legal payment method and officially recognized eleven crypto-‘exchanges’ as long as they register with the gov’t). Japan, South Korea, HK and Singapore (safe havens because of favorable gov’t policies) are now where startups (where their servers) are being newly located. “Making up to half the global trading volumes, digital currencies are very popular with many retail investors in Japan and S. Korea who have given up their jobs to trade them full time.” Bangkok Post
NOTE: Newspapers calling bitcoin a ‘coin’ or calling crypto a ‘currency’ only adds to the crypto-buying frenzy. Online articles saying that Japan recognized bitcoin as ‘legal tender’ also adds to the confusion that bitcoin is a ‘currency’. Just because the gov’t of Japan allows bitcoin to be used to settle debts (the definition of ‘legal tender’) or just because Thailand allows bitcoin to be used to pay a tab at a noodle shop in Bangkok doesn’t mean that those countries have declared that bitcoin is a ‘currency’ (for the same reason why the American colonies which allowed commodities like beaver skins, wampum necklaces, cotton & tobacco bales as legal tender to settle tax debts were not considered ‘currency’ either). Another reason why bitcoin is a commodity and not a ‘currency’: Washington DC allowed the trading of bitcoin futures at the Chicago Board Options Exchange (Cboe) and the Chicago Mercantile Exchange (CME), which are regulated by the Commodity Futures Trading Commission. Which brings up yet another questionable thing. All the worldwide voices over mainstream media calling the online websites where bitcoin trades an online ‘exchange’ is another dubious stretch. An actual exchange, where outright buying and selling takes place, is a centralized, heavily regulated entity that, by law, is fully compliant with local securities laws and ‘knows its customer’, like the CME, like the Cboe, or like the New York Stock Exchange (so as to prevent criminal activities or a fiasco like the collapse of an entity posing as a real exchange —like Mt Gox).
10/29/17: “I believe there is still a nontrivial chance bitcoin goes to zero, but each day it does not, that chance declines as more venture capital flows into the bitcoin ecosystem and more people become familiar with bitcoin and buy it.” Bill Miller, whose ‘cryptocurrency’ position has been a major contributor to this year’s very strong performance in his Miller Opportunity Fund (up 19% YTD).
11/01/17: The world’s largest futures exchange, the Chicago Mercantile Exchange (CME), announced today that it plans to launch bitcoin futures by the end of the year, pending regulatory review. “We have decided to introduce a bitcoin futures contract which will be cash-settled and based on the CME CF Bitcoin Reference Rate (BRR),” Terry Duffy, CME Group chairman and CEO, said in a statement. Bitcoin rose to a record high above $6,400.
11/07/17…More insight on CME’s decision to launch bitcoin futures: “Bitcoin is a new asset class, not a crypto-currency…it is likely to become a new asset class in its own right, such as gold or stocks, which can be traded by major investors and regulated, not simply a crypto-currency,” as per Chicago Mercantile Exchange (CME) group’s Chairman Emeritus Leo Melamed. While he was initially skeptical about bitcoin, “I too went from not believing (in bitcoin) to wanting to know more,” he said. We will regulate, make bitcoin not wild, nor wilder. We’ll tame it into a regular type instrument of trade with rules,” Melamed, 85, told Reuters.
11/13/17: In the news today, bitcoin had extended its recent drop to 29 percent from the record high (due to a cancellation of a technology upgrade to increase its block size). At the heart of the debate is how bitcoin’s underlying technology can accommodate rising transactions as its popularity booms. While increasing its block size would help, opponents argue it would only concentrate mining power, undermining the decentralized nature of bitcoin.
NOTE: Just to give you an idea of the roller coaster ride bitcoin is, the next morning bitcoin was recovering, it was up $557.93 (UP 9.05%).
11/17/17: It took just four days for bitcoin to make back last week’s loses and reach another record high close of $7843 on 11/16/17. In the news today: In anticipation of the launch of bitcoin futures trading by establishment firms (Cboe and CME) which will give bitcoin even more legitimacy as an alternative asset for investors, bitcoin trading firms are aggressively seeking top Wall Street talent, from back office to front office, to build-out infrastructure for the now-booming ‘cryptocommodity’ space.
11/21/17: “Bitcoin’s ‘market cap’* just passed McDonald’s, the McDonald’s with 37,000 locations, 375,000 employees, and $24 billion in revenue).”
Logan Mohtashami / Charlie Bilello
*NOTE: Great click bait, but keep in mind that it’s kinda silly to compare the ‘market cap’ of bitcoin to an actual market cap (of a real business). For an apples to apples comparison, you should measure bitcoin’s ‘aggregate value’ against other commodities. For example, gold has an aggregate value of approx $10T (h/t Warren Buffett: “The world’s gold stock is about 170,000 metric tons. If you molded all of it into a cube, it would be about 68-feet per side, about the size of a tennis court, which would fit comfortably in the middle of a baseball infield).”
11/22/17: ‘BITCOINS ARE THE LADYBOYS OF INVESTMENT’: Another head’s up for anyone considering hooking up with bitcoin or any of the other cryptos: BEWARE especially of the other ‘coins’ out there as well. I attended a seminar hosted by Paul Gambles, Managing Director of the MBMG Group investment advisory held at the Foreign Correspondents Club in Bangkok last night. Before the main speech on Artificial Intelligence and ‘Machine Learning’ portfolio management applications in legitimate Digital Financial Analysis services, Mr. Gambles warned that there are signs of ‘pump & dump’ price action taking place in the crypto space. Sites like ‘Pump My Coin’ that are QUOTE a “Cryptocurrency voting community that will choose the next coin to pump” UNQUOTE are ‘flourishing’. Remember folks, none of these ‘coins’ are regulated, meaning that any pumping and dumping, painting the tape, churning, and/or manipulating is NOT illegal (yet) (!) “I just keep trying to make the point that I see the scope for blockchain…I can’t envisage a way to design cryptos that rely on the trust of the users AND ensure absolute anonymity – if they’re totally anonymous, I just don’t see how they won’t get gamed – especially if (unregulated) therefore perfectly legal! Bitcoin, I’m afraid, is just as much a pump & dump as any other manipulated crypto. That doesn’t mean there aren’t opportunities to profit, but just as here in Bangkok after dark, things aren’t always as you’d expect. The lack of regulation is evident. Our research led us to discover that there are quite open pumping and dumping websites, and that users of Russian communication App ‘Telegram’ are actively and brazenly banding together to choose which crypto to pump & dump each week. These scams typically involve parties with hidden identities, who are acquiring a low value amount in assets and then bid up the price in such a way that genuine investors get tempted to part with hard earned cash for fake promises. Sometimes these actors are shells, registered for the sole purpose by pumpers; sometimes they can be legitimate innocent actors suffering setbacks causing the value of their assets to fall sufficiently that allow the bad actors to acquire a sufficient float to further manipulate the price” said Mr. Gambles
11/26/17: Bitcoin prints $9,000. In the news, Coinbase, the largest bitcoin exchange in the U.S., added about 100,000 accounts around Thursday’s Thanksgiving holiday, bringing their total customer base to 13.1 million…
…Also in the news, remember ‘Blue Horseshoe loves Anacott Steel’ (?) Now it looks like Ms. Watanabe* loves bitcoin. The bitcoin (BTC) / Japanese yen (JPY) pair has the largest share of total trading in the ‘cryptocommodity’ space. The bitcoin / U.S. dollar (USD) pair trading volume accounts for 24 percent and the bitcoin / South Korean won pair comes in third at 10 percent.
*NOTE: In Japan, housewives make up approximately 25% of the nation’s vast retail forex-trading market. They are such a force, that during the prolonged recession of the 1990s, the market gave them a name: ‘Mrs. Watanabe’, a common surname.
11/29/17 Bitcoin prints $10,000 (that’s a 945% YTD) at 10AM during Asia morning trading hours, and then at this writing, was already up another $1200 (12%+) to $11,156 only 12 hours later at 10PM (Bangkok time)….
In the news today, Vanguard Founder Jack Bogle Says “Avoid Bitcoin Like the Plague”…
…”Did I make myself clear?”
“Bitcoin has no underlying rate of return,” said Jack Bogle, 88, who started the first index fund in 1976. “You know bonds have an interest coupon and stocks have earnings and dividends. There is nothing to support bitcoin except the hope that you will sell it to someone for more than you paid for it.”
“It’s crazy to invest in the digital asset”, he added. “Bitcoin may well go to $20,000 but that won’t prove I’m wrong. When it gets back to $100, we’ll talk” Jack Bogle added.
HOWEVER, Max Keiser, born in NY in 1960, who went to New York University, and is now a journalist living in London, hosting The Keiser Report, has this take: “Bitcoin is unique…It answers two questions at the same time. Gold is the case study. Gold is also used as a store of value and a means of exchange as well…Bitcoin is gold 2.0…It does the same functions as gold…It’s true it takes a lot of electricity to mine bitcoin, but it also takes a lot of energy to produce gold as well. Everything in the protocol to make bitcoin, the proof of work, everything involved, makes bitcoin the perfect crypto-currency over the other coins (which are like the silver, bronze, and the other collectibles that are not as popular as gold). Bitcoin is the motherload…It is taking over global finance…It’s putting fiat money out of business and it has the bankers on Wall Street running scared. Jamie Dimon is peeing in his pants at this point because he knows he’s going to be out of a job in five years. We don’t need the Jamie Dimons of the world ripping us off…We don’t need Wells Fargo stealing money out of everyone’s accounts…We don’t need HSBC funding drug lords in Mexico to the tune of billions…We don’t need those bad actors in society and bitcoin gets rid of all those financial terrorists. It’s about time that someone stood up and did battle because the government is not doing it, the academics aren’t doing it, so we have bitcoin to do it.” Keiser is the creator, co-founder, and former CEO of HSX Holdings/Hollywood Stock Exchange, later sold to Cantor Fitzgerald. Alongside Michael R. Burns, he co-invented the ‘Virtual Specialist’ platform on which the Hollywood Stock Exchange operates. This technology allows traders to exchange virtual securities, such as “MovieStocks” and “StarBonds”, with convertible virtual currency called the “Hollywood Dollar”.
NOTE: I doubt bitcoin ‘gets back to $100’ nor will bitcoin ‘put fiat money out of business’ and if anyone actually believes that bitcoin gets rid of the ‘bad actors’ then they better google ‘Mt. Gox’ ‘NiceHash’ ‘Youbit’ or ‘Silk Road marketplace’.
12/08/17 “A dizzying week for bitcoin, with the price soaring 82% during the past seven days (2,200% during the last year). The action has been so volatile lately that by the time you read this, any price changes I note as I’m writing it will assuredly be obsolete.” Rick Newman Yahoo Finance. “At one point today (Dec 7) various exchanges quoted bitcoin prices that varied by more than $2,000, from a low of $15,592 to a high of $18,259 — all at the same time. On established financial markets, there can be very minor discrepancies in prices quoted simultaneously on various exchanges— but never in the range of 15% of a security’s entire value” he added.
12/10/17: Bitcoin futures begin trading on the Chicago Board Options Exchange (Cboe Global Markets Inc’s Futures Exchange) tomorrow. Chicago’s two largest derivatives exchanges are battling for the US bitcoin futures trade market. Both companies say that deals will be settled in cash the day after the contracts expire. It remains to be seen what the introduction of US futures trading will do to bitcoin. The speculative buzz is that the influx of institutional investors could spur bitcoin even higher; while others say that the ability to short bitcoin will crash the market. Brian Quintenz, the CFTC Commissioner, has warned that “it is incumbent on market participants to conduct appropriate due diligence to determine whether these products, which have at times exhibited extreme volatility, are appropriate for them.”
What’s the difference between the two exchanges? First, CME plans to limit investors to 1,000 contracts, while the Cboe will set the limit at 5,000. Second, CME prices will derive from four different Bitcoin exchanges, while Cboe contracts will be based on prices from Gemini, the crypto-commodity exchange run by the Winklevoss twins. Cameron Winklevoss is the chief executive officer and co-founder; his brother Tyler Winklevoss is the chief financial officer and co-founder of Gemini Trust Company LLC. The Winklevoss twin brothers (portrayed in the movie ‘The Social Network’) sued Mark Zuckerberg, claiming he stole the idea for ‘The Facebook’. They settled the legal battle for $65 million ($20 million in cash, $45 million in Facebook stock) and invested $11 million of the cash payout in 1% of the entire float of bitcoin in 2013 (then trading at $120). When the price of bitcoin traded over $11,500 recently, it was reported that with a combined net worth of $1.2 billion, the Winklevoss twins could be the first ‘bitcoin billionaires’. However, even the twins themselves have noted that older bitcoin aficionados probably have larger holdings. A likely candidate: the mysterious father of bitcoin, known as Satoshi Nakamoto. It is estimated that the person behind the Nakamoto pseudonym holds about 980,000 bitcoin (Today that would be worth over $11 billion). Cameron Winklevoss thinks the crypto-commodity’s blazing gains this year are just the start. He predicts it will rise as much as 20-fold as investors come to view it as an upgrade to gold.
12/12/17: “This is a very big victory for bitcoin last night,” said CNBC’s Jim Cramer, who like many folks, has been a vocal critic of bitcoin, warning investors that it’s like ‘Monopoly Money’ and people would be better off going to Las Vegas….
The Winklevoss twin’s claim that bitcoin could eventually replace gold as a repository also helped “mightily”, he added.
Meanwhile, U.S. Securities and Exchange Commission Chairman Jay Clayton warned investors of the dangers of putting money into ‘cryptocurrencies’, as crypto-mania swept markets with the launch of bitcoin futures. Clayton said in a statement that trading and public offerings in the emerging asset class may be in violation of federal securities law. The warning came as the SEC intervened to halt a $15 million initial coin offering. Munchee, a food review app, on Monday cancelled its ICO which was aiming to raise $15 million, after the company failed to register it as a security.
Overheard on LinkedIn: “The bitcoin ‘bubble’ argument seems weak…The global shifts to cheaper, transparent and efficient payment methods is real. I’ve stopped watching stock and bond markets because of the ridiculous ‘bubbles’ created in those markets by global central banks. Boy, if there were a ‘bubble’ anywhere that’s where it is.” Ken Yagami
12/18/17: After bitcoin set a new record of $19,666 on Sunday, Singapore’s central bank joined other central banks worldwide and issued their own warning the next day. “Cryptocurrencies are a digital commodity rather than a digital currency” the central bank said. ( READ : B I T C O I N I S N O T A C O I N )
12/22/17: BITCOIN BULLS V. BEARS: In the worst selloff since 2015, bitcoin plunged 30% on Friday, as the frenzy surrounding it faced one of its biggest tests yet. Bitcoin and most other crypto-commodities clawed their way upward the next day on Saturday, halting the four-day tumble that drew worldwide attention to the unregulated $500 billion market that is frequently being called a bubble.
(NOTE: Many of the recent news stories and market moves connected to bitcoin and the crypto-space continues appearing to carry hallmarks of garden-variety, bubble mania; while at the same time more news keeps coming out that the crypto-craze is here to stay. For example, also this week, shares in Long Island Ice Tea Corporation, a ready-to-drink iced tea company, rose as much as 289% after the unprofitable, Hicksville NY-based company renamed itself ‘Long Blockchain Corp’; while at the same time Goldman Sachs confirmed that they are setting up a trading desk that will be operational by June to make markets in crypto.)
12/28/17: BOTTOM LINE: Here’s my last entry (since this post is just for the bitcoin highlights of 2017). I hope there was enough information above for readers to make their own decision whether to be a bitcoin bull or a bitcoin bear (and like all the rest of your financial decisions, not let someone else make them for you). I hope one of the takeaways readers get out of this post is that if anyone is a bitcoin bull, hopefully they aren’t confusing buying bitcoin with ‘investing’. Buying bitcoin only appears as if they are investing (the main takeaway of pretty much everyone else and why they are bitcoin bears). IMO, the rising price of bitcoin is mainly due to 1) Short-term speculating (folks driven by greed, Fear Of Missing Out, or an endless craving for ‘action’, etc etc); 2) ‘Investors’, another stretch, more like long-term speculators (folks buying and holding because they believe bitcoin is here to stay which could very well be true); and 3) Hedging (folks with ‘gold-bug mentality’ that don’t have faith in fiat currency). I personally have no problem with anyone buying bitcoin. There is nothing wrong with going to the track, picking horses and having fun watching them run (as long as they know they are gambling, and as long as they are only using ‘play money’). Full disclosure, after hearing both sides, I am personally leaning slightly bitcoin bullish but I never bought any. I presently live in Bangkok, I tried to buy bitcoin, but so far the online sites I tried will not yet accept Americans to open accounts (most likely because they have not yet met US regulations & compliance requirements). My understanding, the only way for a citizen of the US to buy bitcoin in Thailand is by cash, a so-called ‘cash exchange’, after which your bitcoin goes into your bitcoin ‘wallet’ (instead of going into your account at a so-called ‘online exchange’). Meaning that a ‘cash’ bitcoin trade is a person-to-person (P2P) transfer, which is sort of like a glorified ‘Craigslist’ or ‘eBay’ arrangement that you make with people that didn’t need to show any ID to become my counter-party (which I’m not comfortable with). So for now, I will keep watching bitcoin from the sidelines and wishing I was long bitcoin (especially when that day in the not-too-distant-future comes when that 21st millionth bitcoin is ‘mined’ and the scarcity games actually begin). I will end this post with a quote from Andrei Popescu, co-founder of the Crypto-One-Stop-Solution (COSS) exchange. This is my favorite bitcoin quote of all of 2017, especially the last line, which goes for any market (heck for life itself): “There is no right current price to reflect the current right valuation of bitcoin. Buying bitcoin into a long term projection is right. Selling bitcoin and taking profit is also right. You don’t have to be right, just less wrong than the rest.”
Happy New Year!
Thanks for reading,
Photo of Gemini Trust CEO & co-founder Cameron Winklevoss with twin brother CFO & co-founder Gemini Trust Company Tyler Winklevoss