Newsletter 49: Bitcoin Update 2020

21 mins read

“Who controls the price of Bitcoin?” —asks every newbie to cryptocurrencies

#Bitcoin. It completely replaces the previous model.

In times of uncertainty, it is best to remind yourself why you and most others like Bitcoin and/or the idea behind it. From a localised perspective, we have full authority over how we can keep it, spend it, and send it to anyone, anywhere in the world, and at anytime. They say the world got smaller when transcontinental flights began in the early 20th century. It got smaller again when the internet connected us all across the globe at the end of the century. Now, still at the beginning of the 21st century, we’re able to talk, see, travel and remit funds to anyone in the world. All they need really, is a cheap and compatible digital storage device to send Bitcoin, and connect to the internet only when necessary.

In addition, its inherent features of portability and exacting divisibility are way ahead of its would be fiat competitors. A distributed ledger makes it transparent and its prices determined by global supply and demand forces. Bitcoin as a decentralised makes it even more attractive to would-be traders / investors / users as the value is not governed by a central authority.


Picture taken from a Mongolian mine shaft wall. Appropriate for Bitcoin miners too.

In fact, the only thing we need for Bitcoin are the miners who keep the network running for transactions to be validated and verified!

 

#Bitcoin. Now, and up to 2 years later.

2 years after Bitcoin hit USD 20,000 , traders have learnt hard lessons on the extreme volatility of digital currencies and the massive downside to when little or no risk management is applied.

Now, let us compare the start of this year and the year before. The price is DOUBLE of what it was last year, and even at today’s price (USD 8600) still 20% above 1 Jan 2020; where more than 60% of the time, the price has been above USD 8300. So right now, you could instill a trailing stop loss and still come out profiting if the price moves against you.

Prices from 1st Jan 2020

Things looked a lot brighter for 2020, especially with halving expected to prop the prices upwards towards May and beyond. But alas, global events will always affect the global economy. This time it has with the arrival of the Coronavirus or also known as Covid-19.

Originating from Wuhan in China, this disease has now spread across the world faster than even SARs ever did. It is contagious and no known vaccine and cure has yet to be found. Recoveries recorded have been through early detection and the treatment of specific ailments. Although more than 95% of deaths due to Covid-19 has been within China, the virus has now spread to the United States of America.

Coronavirus spreads (26 February 2020) from east to west.


China is the world’s largest importer of crude oil. Its consumption is between 12–15 million barrels per day. This month, China has decreased its import of crude oil by 20% or 1.5m–3m barrels per day. The slow down of the economy and the expected reduction of domestic oil production due to increasing inventories is forcing prices of crude oil to decrease to new lows over the past year.

With oil being at the top of the economic triangle, and China being the largest trading partner of the U.S.A., this has caused a cascading bearish effect on overall market sentiment.


Crude oil prices per barrel have plummeted to a new low in 2020.


If we take it a step further from the effect of Covid-19 on China’s economy, the reduction in oil consumption during the winter season only exacerbates the market downturn going into Q2 2020. Events are more likely to get worse before it gets better.


Top 5 uses for crude oil


Crude oil is currently one of the world’s most important commodities, with the two most popularly traded grades of oil being Brent Crude and West Texas Intermediate (WTI). Crude oil prices are a benchmark for global economic activity. “It’s likely the largest hit to demand since the global financial crisis in 2008, and the fastest since the September 11 attacks in 2001” — Market Insider.

As a result of this, the U.S. stock market has finally succumbed to domestic and international uncertainties as seen in the NYSE composite index.


Correcting to close the beginning of the bull run last year has the global market on a shakedown.


The NYSE Composite Index includes more than 1900 stocks of which more than 75% of them are U.S. companies. Global market sentiment has taken a turn for the worse and unsurprisingly, this has led to a very recent spike in gold spot prices. Price of gold now is just 8% shy of its all-time-high price of 8 years ago (USD1780+ per ounce).


Gold skyrockets to all-time-high in years


CNBC has reported Jan Hatzius, Goldman’s chief U.S. economist saying, “The risks are clearly skewed to the downside until the outbreak is contained.”

Goldman Sachs now expects the U.S. economy to grow just 1.2% in the first quarter due to the Coronavirus. That is a whopping 42% decrease in GDP growth from the Q4 2019.


CNBC reporting on U.S. GDP growth for 2019.


#Bitcoin. Halving in May 2020

When Bitcoin miners were setting up rigs in the early years, the community then wasn’t sure whether mining would continue after the 2012 halving. There were concerns that once the halving occurred and the rewards reduced by half, miners would simply switch off their rigs. What happened after that gave us insights for the future.

BTC prices rose in the months AFTER the first two halvings in 2012 and in 2016.

BTC miners kept on mining… and more joined in.

BTC transactions kept on rising.

Increasing number of transactions over the past 10 years


If you haven’t noticed it yet, halving follows the leap years thus far. Just as we expect the next halving in 2024 until the last fraction of a Bitcoin is mined in the leap year of 2140.

“It is almost poetic that Bitcoin miners take a leap of faith every leap year.”

You may have noticed as well that different sites have different halving clocks or dates as to when it will occur this year. This is because of the estimation used for the number of minutes it takes to mine (process) one block on the Bitcoin blockchain. Whilst most estimates put it at ~10 mins, in reality it varies according to the network hashrate (the processing power of the miners). Although an exact time can’t be given as yet but we can calculate it will occur sometime between 7–12 May 2020.

That’s just over 70 days away.

 

#Bitcoin. Over the fence, 2–5 years from now.

If you get the idea behind Bitcoin and cryptocurrencies, then very quickly you realise that ultimately it offers us all the freedom to choose over how we handle our “material” wealth. As Buckminster Fuller once said,

“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.”

If more people understand that peer-to-peer cryptocurrencies like Bitcoin offers users full authority, then the outcome of the ongoing war of financial perception becomes like every battle ever fought for freedom. It ends with the tyrant on their knees. This decade already has two battlefronts and both have the same goals.

Climate Change & Capital Controls

Capital controls are residency-based measures such as transaction taxes, other limits, or outright prohibitions that a nation’s government can use to regulate flows from capital markets into and out of the country’s capital account. These measures may be economy-wide, sector-specific, or industry specific (wiki).

Designer | Author | Inventor Richard Buckminster Fuller (1895–1983)


Although it sounds like cryptocurrencies could be a way to evade such controls, in fact, if blockchain technology is used in tandem across industries, it would be more challenging for malicious or irresponsible parties to avoid getting caught, when compared to using fiat currencies (USD etc). Most governments are hesitant to fully embrace digital currencies and it is understandably so, since this new technology only understood by a community that is relatively small in comparison to its financial peers.

They are also cautious because they are aware that although blockchain can be used for transparency, other data supporting such transactions must also be immutable (unable to edit). Like all great endeavours, it takes multiple technologies to come together to create a grand solution.

Just a few examples of how blockchain technology is or will be, disrupting the way we live and trade.


New generations are taking over leadership positions. They are very much leaning towards greater simplicity and higher speeds in everything they want in life. Efficiencies gained in processes such as transfer of ownership and capital access is increased many fold using blockchain. It makes the current system obsolete. This makes adoption inevitable.

Blockchain technology is still in its early stages of applications. Its unique features open up a spectrum of opportunities. At BitOrb, we focus on digital currencies and assets.

 

 

#Bitcoin. Over the horizon, 5–10 years from now.

The price now doesn’t matter. This is because you are playing the long game. In any financial decision you make, the 5–10 years commitment is a serious matter and shouldn’t be taken lightly. However, you now see the vision.

4 years ago (coinmarketcap.com).


What you see is the growing trend of interest in the market of digital assets and currencies, that has obviously been doing so over the years. The volume traded since before the last halving in 2016, has grown by 600 times! Even if we assume that 90% of the volume has been generated by automated bots trading, trading of cryptocurrencies has grown by a factor of 60. You could do an exercise and find out what other part of the financial industry has done this in a span of 4 years.

4 years later.


Why is volume important? Liquidity is essential for traders and especially larger funds to acquire a justifiable position to be able to exit accordingly without impacting the market prices (ideally). Of course, traders also want highly liquid markets to avoid price manipulation. That being said, no one should be so naive to think that all fishes are the same size and everybody plays by the rules. To an extent, every market is manipulated, across all industries.

Zoom in on the past year and see the same increasing trend in volume.


Regardless, there is wealth to be created from good trading, and cryptocurrencies provides an opportunity for anyone to be a trader. Some will be better than others but at least everybody can learn to trade and profit from it if they know how. The easy access to these financial instruments is why cryptocurrencies are considered inclusive as opposed to the current capital markets that have a “caste” system of its own. The saying “the rich get richer” is definitely true when the barriers to entry are so high that the poor never even get a chance to participate.

Gen X and those who were born in the 1980s with no experience in trading as a career are now learning about trading online on crypto exchanges. This is a generation that is looking to make good in preparation for family life and retirement. Just the other day, a Gen X walked into the office, and he admitted that he has never tried trading shares on the conventional stock exchange. This is a common response but everyday, more are learning about crypto exchanges where trading is made easier to understand and execute.

Many online FX trading sites now include crypto as an option


For those who are in their teens who are now watching videos online and participating in the major social media platforms, are bound to catch on what skills are important and what opportunities are available online. More than 10 universities in the top 50 of the world already offer degree courses on blockchain related studies.

3 of the top 20 online ways to make monies is

  • Market trading
  • Affiliate marketing
  • Competitions

All of the above can be found in the trading of cryptocurrencies. Other than trading the market, the other two ways are usually free in crypto. This brings exposure to the Gen Y and millenials, where they can learn the basics of market trading. Whether they trade or not is not the point. The exposure to a revolutionary concept of how we look at money and learning how to trade will further increase the rate of interest in the industry has experienced thus far.

Even Twitter recently released a Bitcoin hashtag!


Online reports from audit companies suggests the industry market capitalisation (currently USD 250bn) will grow into the trillions within the next decade. Evidence suggests that the growing number of sophisticated traders and forex platforms getting involved in the space supports this assessment.

CNBC channel reporting about gold and commodities whilst having a Bitcoin chart on screen.


Yahoo finance and google searches (like Siri) now make it very easy to find information on Bitcoin and cryptocurrencies. Increasing coverage through mass media platforms is also evident of a long term trend towards accepting that digital assets are here to stay.

So we return to the earlier question on “Who controls the price of Bitcoin?”

The answer is: “Nobody does. But everybody can have a Bitcoin account.”

Now that’s a teaser.

The question should be: “How can I get involved?”

 

TESTNET UPDATE TODAY!

If you just saw your playBTC in the testnet exchange account reset to 10 playBTC, then you’re on the latest update dated Feb 25! Start your training today and learn how to trade using the BitOrb Exchange.

by

Hoong-Teng Lim

27th February 2020

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