BITCOIN PRICE NEWS
The legitimacy of Bitcoin as an asset has been one of the most hotly debated topics of the last half decade. Numerous operators have chimed in with various opinions and interpretations of just how the virtual currency and the technology that underpins it (blockchain) is going to affect global economics and – as things stand – the general trend is towards positive interpretation, but the overarching sentiment (outside of the community of enthusiasts) seems to be slightly more risk-averse.
This isn't a surprise – these sorts of technological and financial revolutions are very much a threat to the more traditional way of doing things and, when things change, people aren't always happy.
Take a look at the current landscape and there seems to be a solid divide between those forms those against and, interestingly, this divide is very much generational as well as rooted in the area of industry in which the person forming the opinion operates.
Finances, such as Jamie Dimon of J.P. Morgan, have expressed negative opinions. As have many of the more publicly operating finance individuals – Mario Draghi of the ECB, Janet Yellen of the Fed etc.
How nice it is, then, to see somebody that falls well within the above mentioned financier category cross the divide and stand in line with bitcoin enthusiasts.
This week, Mark Yusko, Founder & Chief Investment Officer Morgan Creek Capital Management, published this Tweet:
Yusko is a respected hedge fund manager and to have this auto caliber of individual supporting expected future gains in the big on space is exactly the kind of thing that is going to push prices higher and help establish virtual currency and blockchain technology as a mainstream endeavor.
As we kick off a fresh week in the Bitcoin space, price is hovering just hit the mark of $6000 and it's looking like this major milestone is only a matter of hours away, as opposed to days. Virtual currency is getting more coverage than ever before and the impact that cryptocurrency and the Blockchain could have on a whole host of different industries has translated to some major mainstream interest in the asset.
One of these pieces of coverage is here, from Peter Tchir of Forbes.
In the piece, Tchir puts forward a compelling and very interesting argument – that Bitcoin has matured into a Giffen good.
The economists reading will likely have already come across this term, but for those that haven't, it's used to describe a good that experiences an increased demand as its price rises. This is counterintuitive and flies against the standard supply and demand model, which dictates that the demand for goods should increase as price falls, but it is applicable to a number of well-established industries – yachts and private jets are good examples.
The driver behind Bitcoin becoming a Giffen good is rooted in people being afraid to miss out on the ongoing rise in price we have seen over the last few months. There are many traders and investors now trying to figure out whether bitcoin has a place in their respective portfolios and, as price continues to rise, the fear of missing out is forcing more and more to take the plunge and to buy Bitcoin. As such, the higher price rises, the more people will jump into the market in attempt to take advantage of the action.
Of course, some will say that this is exactly how a bubble is formed, but certain inherent properties of the Bitcoin suggest that, even if a bubble was to form, right now we are in its very early stages.
Let's see how things play out.
At the start this week, WikiLeaks found Julian Assange published the following tweet to his personal Twitter account:
The Tweet was published alongside a screenshot of the CoinDesk bitcoin price chart, with the chart spanning the period from July 2001 to October 14, 2017 – a period across which the price of Bitcoin has risen from just $0.06 to current prices in and around $5,800, or a total percentage increase of more than 9 million points.
The situation that underlies the Tweet is relatively simple. Back at the turn of the decade, the US government (as well as a consortium of other policymaking entities) forced big name financial entities like Visa and MasterCard to block services for the WikiLeaks Foundation. This made it incredibly difficult for the latter to receive and store funding which, in turn, led the entity to search for alternative financing methods.
This search just so happened to coincide with the introduction of Bitcoin as an asset that was (relatively) freely tradeable. Sure, the infrastructure that was in place then was nothing like it is today and sure, storing and sending funds was a little more complicated back then, but the capability was there for anyone who knew what they were doing and, as it turned out, Bitcoin offered a solution to the WikiLeaks problem.
Fast forward seven years and the latter is sitting on a more than 50,000% return on the investment it made back at the start of this decade, having been forced into the making said investment by the very authorities that were trying to push it out of operation.
Again, today, rather than set our sights on anything overtly fundamental, we're going to take a look at the price and, this time around, be a little bit more cautious. In yesterday's coverage, we noted that the break of $5,000 that we had seen a couple of hours earlier was likely to draw a huge amount of news media coverage, outside of the normal cryptocurrency coverage space, and that this, in turn, was almost certainly going to bring some speculative volume into Bitcoin.
This speculative volume should push price up further and stronger than would be the case if it was only the standard cryptocurrency volume taking control of action.
As it turns out, that's exactly what happened.
The fact that Bitcoin broke $5,000 is all over the news, with Forbes, Business Insider, CNBC, you name it, covering the break, and currently price sits in and around $5,700.
The important thing to recognize here is that this volume is very much temporarily driven and, just as importantly, it's far from unique to digital assets like cryptocurrency.
There is a theory called Dow theory first presented at the start of the 20th century by Charles H. Dow and later refined by journalists and economists William Peter Hamilton, Robert Rhea and E. George Schaefer.
Essentially, it breaks down any financial asset trend into three movements and each of these movements involve different participants. They are accumulation, participation and distribution. Accumulation is where people who are in the know pick up the asset in anticipation of value increase. Participation is when members of the public recognize that the asset is increasing in value and buy in an attempt to take advantage of the run. Distribution is where the smarter investors, those that got in first, start to offload their holdings to the later entrants in advance of a correction.
From a long-term perspective, there is a good chance we are still in the accumulation phase for Bitcoin.
From a short-term perspective, however, based on the recent run, we are now entering distribution. This implies a correction near term, so for the shorter-term operators out there, that's something to think about.
Lev Loginov, the co-founder of property investment company London Wall, which acquired the $22.6 million Notting Hill mansion in London four years ago, has revealed that the company will only accept Bitcoin payments for the sale of its property.
In an interview with local news publication EveningStandard, Loginov and his company explained that they aim to encourage the usage of Bitcoin in the UK real estate industry with its recent sale, as Bitcoin eliminates the necessity of intermediaries and provides a significantly easier, cheaper, and simpler platform for settling payments. He stated:
While the sale of London Wall’s multi-million dollar Notting Hill mansion is not the first Bitcoin-related real estate sale in London, it is the first sale to only accept Bitcoin as a payment method.
Already, Loginov disclosed that several buyers have expressed their interest in buying the property, including an Asian entrepreneur who is familiar with Bitcoin and the cryptocurrency market.
In the traditional financial market wherein banking transfers and fiat payments processed by financial institutions, taxes and regulatory hurdles are handled by third party service providers, which in most cases would be local commercial banks. But, with Bitcoin, Loginov emphasized that the taxation of the sale and incentive for commissioners would have to be facilitated independently.
According to the various market data providers and trusted financial consultancy firms, multi-million transactions through banks and financial institutions could cost senders upwards to tens of thousands of dollars. Recently, a study revealed that a $100,000 is likely to cost senders an average fee of $4,500, which could increase to tens of thousands of dollars depending on the amount that is processed by the bank.
More to that, banks require an inefficient procedure of verification, processing, and authorization, which could result in weeks or even months of delay for both realtors and buyers. As a decentralized financial network and a peer-to-peer protocol, Bitcoin eliminates such inefficiency by allowing realtors and buyers to process deals in a distributed and transparent ecosystem, with significantly lower costs and reduced verification periods.
Mention the name Michael Novogratz in financial circles associated with more traditional assets and you'll hear a couple of things – Fortress, Goldman Sachs, perhaps the US National Guard.
Mention him this week, however, and the word you will hear is cryptocurrency.
Novogratz just appeared on CNBC's Fast Money to give an interview with presenter Melissa Less and the focus of the interview was a fund he is in the progress of raising, dedicated to the cryptocurrency space.
According to the interview, Novogratzis is fronting $150 million of his own money and is seeking to raise up to $500 million, with the goal being to spread across the Bitcoin and Blockchain ecosphere. A couple of key points were raised with regards to both his approach and his expectations going forward.
First, he noted that, he first started investing in Bitcoin and Blockchain while he was at Fortress and his intentions with the new fund is to take a similar approach to that which he took then – spread relatively evenly across the major assets in the space (Bitcoin, Ethereum) and then dabble in the more speculative elements.
This approach, he says, is rooted in the fact that he doesn't feel he is smart enough to pick the winners in the space but that he feels the space as a whole is on the up, so by diversifying he takes home an exposure to growth regardless of which asset wins out.
He also noted that he now sees Bitcoin as a store of value and is the bellwether of the space (which is obviously correct) and that, over the next 20 years, Blockchain is going to revolutionize the way we live – again something that the space has been saying for some time now.
From a bitcoin price perspective, he expects up to $10,000 within the next 6 to 10 months.
Novogratz's net worth is estimated to be around $1.5 billion.
In the absence of any major fundamental news, the big news out of the Bitcoin space today is that price has finally broken the $5,000 mark. Having hovered in and around $4,800 for a few days, the bulls finally picked up the push required to respect the strong price action and carry Bitcoin over the mark.
The question now is how did it happen, whether things go from here?
First up, it's with noting that this price point is important on a couple different levels.
The obvious importance is that it is a key psychological resistance level that, for a long time, seemed unattainable. These sorts of round number price points serve to reinforce sentiment and there's no question that the major news media outlets globally will pick up on the fact that Bitcoin is now at $5000 today and, in turn, will likely attract a large degree of speculative volume inflow towards the Bitcoin market. This, in turn, should serve to push the price up even further. We saw it at $2,000, we saw it at $3,000, we saw it at $4,000 and we will almost certainly see it $5000.
The second reason why it is so important is that it has demonstrated the fundamental resilience of Bitcoin as both an asset (in terms of a store of value) and an industry (and specifically, a decentralized one).
This time last month, China was in the process of banning ICOs and shutting down exchanges. Jamie Dimon of J.P. Morgan was calling Bitcoin a fraud and the Russian government was suggesting it wanted to stymie Bitcoin as an asset that's only tradable over regulated exchanges and by accredited investors. Price collapsed but, importantly, and as the recent levels show, has now completely recovered from this setback.
In other words, if a large country like China (and one that accounts for the huge amount of volume in the space) can't stop Bitcoin's, nobody or nothing can.
Next up, $6,000.
It's been a rough few days for bitcoin. Towards the end of last week, news out of Russia and China hit press and book with its pretty substantial downside pressure on the bitcoin price. South Korea joined the fray at the start of this weekend and compounded the action. Now, however, it seems at least one of these regions is starting to reverse its bias – Russia.
First up, it's worth noting that much of the news and reports emanating from Russia right now seem to be conflicting with one another. It was only last week, after all, that we learned that policymakers in the nation want to restrict buying and selling of currency to the Moscow Stock Exchange, which, in turn, would restrict access to accredited investors.
We also learned that the government is considering setting up some sort of energy/bitcoin transfer service through which individuals can sell excess energy for bitcoin and vice versa. Fast forward to today and the latest news comes from this interview, as published by Russian media outlet Tass.ru at the site of this week.
As per the report,Deputy Prime Minister YuryTrutnev revealed that the Russian government has already approved a platform called Voskhod for cryptocurrency trading and that this entity is the first and only (right now) approved entity of its kind in the nation.
Chances are it will be government owned and run and as hinted at the interview, it seems only accredited investors will have access to the platform, but as a starting point, it's not a bad move by the Russians.
Some reading might already be familiar with the name –Voskhod was the name of the Soviet space program that beat the US's Gemini program to the first EVA (space walk) and, specifically, Voskhod1 and 2 were the names of the two spacecraft that spearheaded the program.
Whether this offers up any clues what Russian policymakers' intentions are (to once again get a jump on the Americans, perhaps?) is unclear.
The major news today isn't that the bitcoin price has risen by a couple of hundred dollars overnight, nor is it that any fresh company or nation has adopted bitcoin as acceptable tender. Instead, it's perception based.
Forbes just published this article titled:
Many reading will remember tens if not hundreds of articles over the last three or four years from the same outlet calling for the death of bitcoin, suggesting it's a temporary bubble and that all bubbles must pop. Keep in mind that most of these are written by the same author.
How the tables have turned.
The crux of the article in focus here is that bitcoin has become the new safe haven asset. This term refers to the asset that individuals flock to (in other words, buy) when there is a degree of uncertainty, or risk, surrounding things like the global economy, global politics or geopolitical stability.
For the past thousand years or more, gold has been the safe haven asset. As Forbes author Panos Mourdoukoutas now points out, there is a large degree of geopolitical uncertainty hanging over global economies right now. North Korea is firing missiles here there and everywhere. The state of US politics is in a practically never before seen mess. The European monetary system is unstable and its economic bloc has taken a huge hit with the UK set to leave and go it alone. Central banks across the globe don't know what to do with interest rates or whether anything they do decide to do is actually going to have any effect.
These are uncertain times and it's not gold that's rising in price – it's bitcoin.
Sure, some of the recent price rise in bitcoin is likely due to speculative acquisition on the back of the run that we have seen over the last few months; that's reasonable and to be expected. For years now, however, the cryptocurrency community has been pitching its poster boy as a potential risk off asset and – finally – it looks as though this pitch has been validated.
When bitcoin price surged past the $4,000 mark, prominent financial analysts including Brian Kelly attributed the upward momentum of bitcoin to an increase in demand from institutional and retail investors.
Earlier this week, the share price of GBTC, the Bitcoin Investment Trust operated by Grayscale Investments, a subsidiary company of Digital Currency Group, reached $908.6. Each share of GBTC represents the value of one tenth of bitcoin. Hence, a $908.6 per share equates to a price of $9,086 per bitcoin, which is substantially higher than the global average bitcoin trading price of $4.583 at the time of reporting.
By law, many corporations, investment banks and retail investors are only permitted to invest corporate, personal and client funds into regulated investment channels such as the stock market. Because GBTC is the only tradable bitcoin instrument in the US stock market, large-scale investors are required to purchase shares in GBTC in order to invest in bitcoin rather than purchasing bitcoin directly on trading platforms like Coinbase, GDAX, Bitfinex and Kraken.
Since 2016, GBTC has been trading at a high premium in the stock market primarily due to its limited supply and the continuous increase in demand from institutional investors. However, the premium rate of GBTC had never surpassed the 30 percent mark in the past. As of current, investors in the stock market are paying almost double the global average price of bitcoin to invest in the digital currency.
In terms of security and privacy, experts have always encouraged and advised investors to safely store their own private keys, and remain absolute control over their funds. Non-custodial bitcoin wallets such as Trezor, Ledger, Blockchain, KeepKey and Breadwallet enable bitcoin users to oversee their private keys, eliminating the possibility of hacking attacks and security breaches leading to the loss of user funds.
But, as mentioned above, a small portion of investors in the public market are required to invest through strictly regulated channels and at the moment, without the existence of any bitcoin ETF in the market, GBTC remains as the only option.
In the upcoming months, the entire ecosystem could change drastically for retail and institutional investors. Coinbase and its flagship trading platform GDAX along with Gemini, three of the largest exchanges in the US, announced that they are actively developing platforms to better serve large-scale investors.
Gemini in particular secured a strategic partnership with the Chicago Board Options Exchange (CBOE), the largest options exchange in the US, to provide an efficient and secure trading ecosystem for institutional investors. Earlier this month, Gemini co-founder and CEO Tyler Winklevoss stated: