Bitcoin, crypto currency and block chain...

[JohnRoberts]

Some maybe interesting (?) cryptocurrency stuff...

1- Putin is working on a crypto ruble???  I can imagine him wanting to know more about the here, how, what, of his citizens money flows, than bitcoin, but would also like to avoid sanctions limitations on shady capital transfers.

2- If that isn't strange enough Venezuela wants to make an oil backed virtual currency, again to avoid sanctions from western nations.

If you can't trust Putin and Maduro who can you trust?  : It seems like bitcoin might be easier for them.

Am I the only one who remembers "Ripple" wine? (not the new cryptocurrency). 

Still bubblicious, come to think of it Ripple wine was not carbonated.. ;D

JR

 

[Gene Pink]

Am I the only one who remembers "Ripple" wine?

I do remember it was Fred Sanford and Grady's favorite wine for entertaining the ladies, at least until Aunt Ester showed up to break up the party. 

 

[JohnRoberts]

Back in the 60's ripple was a cheap buzz.... I sometimes mixed it 50/50 with beer (miller) to add some carbonation.. 

Today I wouldn't drink that stuff with your liver (or Miller beer too). 

JR

 

[dmp]

So did the big crash happen in December, or is more still to come?
Predictions for 2018?

Ripple is a coin that has been going up in value recently. Topped $3 today when it was half that a week ago.
Supposedly it is being looked at for banking transactions. Kind of like a cryptocurrency adopted by the mainstream banks.
The organization created 100 billion ripple. No one mines them like bitcoin. And they are destroyed when used in transactions.
Perhaps all the people saying the blockchain is the only value in cryptos are buying Ripple.  I don't know.

 

[JohnRoberts]

So did the big crash happen in December, or is more still to come?
Predictions for 2018?

Probably up.... the slow money is just figuring out that it exists and keeps going up...

Ripple is a coin that has been going up in value recently.

I mentioned it because it supposedly doubled the other day... (oops missed another one).

Topped $3 today when it was half that a week ago.
Supposedly it is being looked at for banking transactions. Kind of like a cryptocurrency adopted by the mainstream banks.
The organization created 100 billion ripple. No one mines them like bitcoin. And they are destroyed when used in transactions.
Perhaps all the people saying the blockchain is the only value in cryptos are buying Ripple.  I don't know.

I read about one hedge fund who bought millions of bit coin...

I am not smart enough to predict when it will burst.

Blockchain is a different thing... that will be with us for a while and is already being adopted by many different business applications. 

I prefer investments that have fundamentals (like earnings).

Bitcoin doesn't seem to have any intrinsic value other than a theory about engineered in scarcity.  If i wanted to pursue scarcity how about owning land? They aren't making any more of that.

JR

 

[dmp]

I bought ripple back in May but didn't hold on to it long. I don't see much in the technology. The other coin that is doing well that is pretty uninteresting  technically is Dash (IMO). There are definitely people who will make a lot of money and others that will lose a lot.

Bitcoin is not a very exciting one anymore either. High fees, slow confirmation times. Other negatives like the electricity use of miners.
But many exchanges are built on bitcoin, so if you want to buy a newer coin, you need to get bitcoin first to trade it. Many of the exchanges that handle a lot of different coins don't trade with USD. So it will be around for a long time. It still has a lot of use in the space. But not worth holding any longterm. I think of bitcoin like a nice tool that was as revolutionary when you first got it, but now you have better versions (i.e. a nail gun vs a hammer).
Several cryptocurrencies are coming now that are trying to eliminate the need for miners for confirming transaction. Some new technology claims free fast trades. One method is for every transaction you participate in, your computer processing power is used for a few future transactions for other people. Clever idea. 
I am still positive on the coins that are fungible and have quick and fast transaction, without pre-mine, and without central authority. 
We are still in the 'netscape' phase (very early) so it will be sometime before the critics have to stop complaining about them  ;D
Of course, people still complain about the value of the tech stocks (amzn,  etc...)

 

[JohnRoberts]

I just sold my amazon in Dec... (a quick 20% was good enough for me).

But similar threats ... Governments are watching bitcoin and will want to regulate them before they get too disruptive to the economic balance of power (note Putin's and Maduro's adventures in crypto to avoid western sanctions control of money flows).  In the far east where citizens are desperately trying to protect their assets, crypto currencies are attractive, but this is not lost on China, and S Korea, and Japan, and....

If i was braver I would consider a trade, it could easily double again from here, but I am not confident I will find a chair when the music stops.  Other easier, albeit slower and safer trades almost everywhere you look.

The stock market is likely to leg up some more this year when tax law changes finally show up in P/E ratios... Many are just now being upgraded.

I worry that so many people buying indexes is putting a bid under weak companies (that would suffer under closer inspection from individual company trades). Not sure how to play this other than buying quality companies and wait for the weak sisters to eventually reveal themselves, but this can take years.

JR

 

[dmp]

I just sold my amazon in Dec... (a quick 20% was good enough for me).

But similar threats ... Governments are watching bitcoin and will want to regulate them before they get too disruptive to the economic balance of power

Amazon, Google and Facebook face continuing anti-trust challenges from Governments. What used to be tech companies are now retail, advertising, and advertising. Will be interesting how it plays out.
Crypto currencies  that do not have a central authority will be nearly impossible to regulate. They are worldwide, distributed networks. Countries with higher levels of freedom, like the US, will be the least likely to go on the offense, especially now that they are so pervasive in the national conscious.  Time will tell how disruptive they become.  I doubt they will destroy the USD.
It seems these fears are mostly with the tinfoil hat crowd. The US has been pretty receptive so far.
Hopefully, countries in the near term pass a exemption on spending that exempts from capital gains. A $600 exemption was floated in the US at the end of 2017.

If i was braver I would consider a trade, it could easily double again from here, but I am not confident I will find a chair when the music stops.  Other easier, albeit slower and safer trades almost everywhere you look.

The stock market is likely to leg up some more this year when tax law changes finally show up in P/E ratios... Many are just now being upgraded.

I worry that so many people buying indexes is putting a bid under weak companies (that would suffer under closer inspection from individual company trades). Not sure how to play this other than buying quality companies and wait for the weak sisters to eventually reveal themselves, but this can take years.

JR

Maybe I should start a crypto index.  Anyone want to buy? (j/k)

At some point, the economy will start to slow down again and the high value stock market will pop. With so much leveraged trades now I expect the stock market crash could be pretty spectacular (you can buy leveraged ETFs in any brokerage account now!) 
Many will be fighting to find a chair then.
The crypto space has that going for it - much less investing on margin.
The improved earnings in 2017 caught me by surprise and now it seems the bull market has a few more years. But time will tell.

 

[Mbira]

I first got some BTC back in 2013.  Of course I wish I had bought a lot more than I did.  I remember downloading the LTC wallet back when it was $.10 and I was going to try my hand at mining but never got around to it.  I jumped back in in June when the ETH flash crash caught my attention.  Bought some ETH and LTC then.  Then in early Dec when BTC was starting to really jump I got a bit more and started researching some of the alt coins.  ADA caught my attention and i've always been a fan of DASH and Zcash. 

It's been a fun ride and quite profitable so far.  I am a big ADA fanboy and I will talk it up to anyone that will listen. 

 

[JohnRoberts]

Amazon, Google and Facebook face continuing anti-trust challenges from Governments. What used to be tech companies are now retail, advertising, and advertising. Will be interesting how it plays out.

Yes I might trim some google too... I never liked facebook (I sold my apple in the 80s, wish I didn't). Right now the index investing is lifting the big cap FANG stocks (facebook, apple, netflix, google).

Crypto currencies  that do not have a central authority will be nearly impossible to regulate.

and likewise impossible to value.  A matter of trust until something happens to lose that trust. I still don't see the intrinsic value.  While my small gold position is only down 10% now, was down more than 20% before. Inflation should help that too.

They are worldwide, distributed networks. Countries with higher levels of freedom, like the US, will be the least likely to go on the offense, especially now that they are so pervasive in the national conscious.  Time will tell how disruptive they become.  I doubt they will destroy the USD.

Bitcoin will more likely challenge credit cards... Square (payments company) has already expressed interest in crypto, it would be smart of paypal and maybe card companies to incorporate it (blockchain).

It seems these fears are mostly with the tinfoil hat crowd.

fear is mostly from people trying to protect their personal wealth with virtual currency, these would be in China, Korea and lots of trading activity in Japan. I think S. Korean government has already made noises about restricting it, china already has capital flows restrictions.

The US has been pretty receptive so far.
Hopefully, countries in the near term pass a exemption on spending that exempts from capital gains. A $600 exemption was floated in the US at the end of 2017.

why?  It seems like trading profits from a cryptocurrency should be taxed just like buying and selling gold or securities?

Maybe I should start a crypto index.  Anyone want to buy? (j/k)

your late to the game, initial applications for ETF were rejected, but now that some exchanges are selling futures contracts they are reapplying for bitcoin ETF...  Many people (like me) think it is a bubble, but some serious investors are trading around the rapid increase.  There is much money to be made while it keeps going up and it could do that for a while longer. I am not smart enough to time it. (I can't even make a profit on gold  : ).

At some point, the economy will start to slow down again and the high value stock market will pop. With so much leveraged trades now I expect the stock market crash could be pretty spectacular (you can buy leveraged ETFs in any brokerage account now!) 

We are way past due for a market correction. I can't recall going this long without one, but I think perhaps the rapid trading algorithms are buying the dips, and index investing is reducing volatility. But after a correction which is likely a buying opportunity, the market is expected to be up for 2018 too.

More likely scenario is economic stimulus from tax cuts and offshore repatriation of retained earnings, will heat up inflation causing the central bank to finally raise interest rates higher. Most (all?) economic contractions are directly caused by central bank tightening.  In fact the historical bull market  "was" driven by central bank easing and injected liquidity, but they are now withdrawing liquidity (here at least, europe is still easy).  The near term market rise is driven by corporate earnings that just got a huge boost from tax law changes.

2018 looks good for now, but nothing goes up to the sky so eventually they will kill this golden goose market.

Many will be fighting to find a chair then.

bitcoin is more likely to be a bubble that bursts suddenly than the stock market... A HUGE drop for the stock market is 20%, (black monday in 87 was -22%) bitcoin swings that much with the weather. 

The crypto space has that going for it - much less investing on margin.

in fact the few firms trading bitcoin futures have significant margin requirements to discourage using so much leverage

The improved earnings in 2017 caught me by surprise and now it seems the bull market has a few more years. But time will tell.

Yup, I would still buy the dips in 2018.

JR

PS: It seems like slow money is finally catching on to index investing (i worry that this too can cause distortions since individual stocks are not being bought/sold on merit). Warren Buffet just won his million dollar bet that an index fund would outperform a basket of hedge funds over 10 years, so smart money is not that smart.  If i was smarter (braver) I would trade options that are cheap because of the unnaturally low volatility, but this won't last forever and I am getting too old for risky investments. Stocks are already risky enough.

 

[dmp]

While my small gold position is only down 10% now, was down more than 20% before.  Inflation should help that too.

I've read a lot of money has rotated out of gold into cryptos. Similar demographic. Bearish on the dollar, seeing the world ending any day. Not everybody who owns gold obviously.

why?  It seems like trading profits from a cryptocurrency should be taxed just like buying and selling gold or securities?

Because it is a headache to keep track of with small purchases. Buy a $2 cup of coffee and have to keep the receipt and report the capital gain? The same way the internet got some preferential treatment to get it off the ground, i.e. taxes. Of course the contingent that wants cryptos to fail will oppose it, but I think the cat is out of the bag - cryptos will be a great disruptor over the next few decades - making transactions much more efficient, cheaper, and faster. It will cut out a lot of dead weight in the finance sector by automating contracts & transactions. 

Many people (like me) think it is a bubble,

Yeah, but there are bubbles everywhere due to all the money sloshing around looking for gains.
For stocks, it will take earnings quite a while to catch up to prices.
Housing is probably a bubble, especially considering demographics (boomers looking to downsize over the next decade) and interest rates hitting the floor.
Crypto is years away from mass adoption which current values are taking for granted.

We are way past due for a market correction. I can't recall going this long without one

2017 set a record for not having a single down month in sp500

2018 looks good for now, but nothing goes up to the sky so eventually they will kill this golden goose market.bitcoin is more likely to be a bubble that bursts suddenly than the stock market... A HUGE drop for the stock market is 20%, (black monday in 87 was -22%) bitcoin swings that much with the weather.  in fact the few firms trading bitcoin futures have significant margin requirements to discourage using so much leverage Yup, I would still buy the dips in 2018.
JR

4 days into the year and it looks good?  ;D
Rising interest rates, yield curve close to inverting, oil prices climbing, lots of storm clouds on the horizon.
The stock market is currently ~120% of GDP and at the next severe recession, could easily drop to 80% - that's a 30% drop, similar to 2008. If I were near retirement I would be very worried about standing in the casino. But we are most likely in a FOMO melt up  that could stay irrational quite awhile.
The interesting thing will be how the Fed responds at the next crash. Bounce interest rates off the floor again? More QE (money printing)? Will crypto be a haven?

 

[JohnRoberts]

I've read a lot of money has rotated out of gold into cryptos. Similar demographic. Bearish on the dollar, seeing the world ending any day. Not everybody who owns gold obviously.

Same demographic?? In what universe?  There is over $7T of gold out of the ground, and something like $100B of Bitcoin, so only another 100x to go to catch gold.

Note I am not advocating for owning gold either, it has been a loser for me, but less of a loser lately.  Of course it would only take a tiny fraction of gold converted to bitcoin to dramatically affect the marginal price of bitcoin.

Because it is a headache to keep track of with small purchases. Buy a $2 cup of coffee and have to keep the receipt and report the capital gain? The same way the internet got some preferential treatment to get it off the ground, i.e. taxes. Of course the contingent that wants cryptos to fail will oppose it, but I think the cat is out of the bag - cryptos will be a great disruptor over the next few decades - making transactions much more efficient, cheaper, and faster. It will cut out a lot of dead weight in the finance sector by automating contracts & transactions. 

if bitcoin logs all transactions it seems like something a computer could handle, but at some point the price volatility must settle down.

Yeah, but there are bubbles everywhere due to all the money sloshing around looking for gains.

indeed...  but technically a bubble is an irrational price distortion, where the prices strongly exceed the intrinsic value of the asset.  I have written here for years about the housing bubble that was caused by too easy credit and eventually collapsed when that easy credit disappeared.  A similar phenomenon occurred with college prices as too easy student loans led more money to chase finite goods inflating the prices.  After the housing collapse instead of foreclosing on all the underwater mortgages, the central bank pumped in liquidity to inflate asset prices (like homes, and the stock market) to bail out all these underwater homeowners in houses they never should have bought.  It has taken years but the bail out is almost complete.

For stocks, it will take earnings quite a while to catch up to prices.

current p/e in mid 20s is not cheap but not crazy compared to recent past history, with an expectation that earnings will increase growing into the multiples.

Housing is probably a bubble, especially considering demographics (boomers looking to downsize over the next decade) and interest rates hitting the floor.

don't forget boomers dying...  recent change in housing is millennials actually starting to move out of their parent's basements and buying homes.

I can't downsize much from here, but may move further south if this cold weather keeps up.

Crypto is years away from mass adoption which current values are taking for granted.

Future is always hard to predict with certainty.

2017 set a record for not having a single down month in sp500

yup... record low volatility

4 days into the year and it looks good?  ;D
Rising interest rates, yield curve close to inverting, oil prices climbing, lots of storm clouds on the horizon.

oil prices hitting $60 is far from an economic anchor, recall that oil peaked at >>$100 barrel. $60 will make many marginal operators profitable again and many DUCs (drilled but unfinished) oil/gas wells will now be finished increasing supply and moderating oil prices. We are already a net exporter but will just gain more export revenue and more jobs from higher priced oil.

Right now OPEC is restricting output to keep oil prices high so they can cash out with the Aramco IPO.  Buying an arab oil company from arabs this century seems a little late in the game.

The stock market is currently ~120% of GDP and at the next severe recession, could easily drop to 80% - that's a 30% drop, similar to 2008. If I were near retirement I would be very worried about standing in the casino.

me too but I am not near retirement, at 69YO I still have a few good years in me.

But we are most likely in a FOMO melt up  that could stay irrational quite awhile.

funny you consider the stock market an irrational  bubble and bitcoin a solid store of value....  :  All I can say is we do not agree on that.

Even if the stock market drops 30% it will be  a bad day (on paper) but not constructively change my quality of life.  I expect cryptocurrencies could drop far more than stocks ever would or could.

The interesting thing will be how the Fed responds at the next crash.

Crash?  They are expected to cause the next economic contraction by raising interest rates too fast in response to an overheated economy (that hasn't even happened yet). We are just now starting to see the first signs of upward wage pressure and inflation. They kept interest rates too low for too long and don't have much dry powder to work with yet... At least they finally started raising rates again a while back but QE seems to be driving the bus more than interest rates. And the rest of the world has not pulled back on QE as much as we have. Since the QE is fungible world markets still have an updraft. 

Bounce interest rates off the floor again? More QE (money printing)? Will crypto be a haven?

No, but maybe my gold will finally turn a profit.  ;D ;D

JR

 

[dmp]

Same demographic?? In what universe? There is over $7T of gold out of the ground, and something like $100B of Bitcoin, so only another 100x to go to catch gold.

Demographic means a particular sector of a population.  What I've read is that sector of people who hold gold as a safe haven, have now rotated into cryptos.

funny you consider the stock market an irrational  bubble and bitcoin a solid store of value....  :  All I can say is we do not agree on that.

hum... I think you're putting words in my mouth. I've been defending the technology of cryptocurrencies but I am not making any predictions about price in the future. They could continue going up, they could go down. I think the technology is exciting and potentially revolutionary, and has inspired some exuberance. The prices have very likely gotten ahead of the themselves, but I don't know one way or the other. I see cryptos as being in the early '90s phase of the internet.
And I've sold nearly all my bitcoin. I've been buying lesser know coins that have better technology, imo.

 

[bluebird]

I bought a couple hundred dollars worth of bitcoin a couple weeks ago when it was close to the peak just to see what it was all about. As it started falling I switched to Ether and am now almost even again. I feel like the extreme volatility right now is partly because of people like me who are just jumping in to gamble. My son is a lot braver than me and has more invested. I helped him transfer bitcoin from Coinbase to another exchange so he could buy Ripple. It felt like a game. There are so many different types of coin out there! I see the value in the utility of block chain technology, but what is ultimately going to create monetary value for one over the other? Will it be the one with the most broad set of functionality? The quickest to be hashed? And then couldn't that technology just be cloned to yet another block chain?

I am a big ADA fanboy and I will talk it up to anyone that will listen.

I'm all ears!

 

[Mbira]

I'm all ears!

The Cardano project (ADA) was started by Charles Hoskinson.  He is one of the people that starter Ethereum and split away.  He has assembled a really good team of solid academics to work on building a Proof Of Stake model based on scientific research of what has and hasn't been working with Bitcoin and other coins (what a concept!).  These are people that have been publishing academic papers on cryptography since at least 2001 and are professors, etc, etc.  Basically, I just really started researching to find projects that are actually built on science and trying to confront some of the issues that are important to me-like moving away from extreme electricity use, and maintaining a tendency towards decentralization instead of the ASICs that have centralized bitcoin mining and kept the "little guy" out of mining.  They are the only people that I am seeing that are doing peer-reviewed research and are very transparent about what they are working on and the issues they are working to solve.  Here is a whiteboard video where he talks about some of the differences between ADA and Bitcoin:
https://youtu.be/Ja9D0kpksxw

You mentioned using Coinbase.  I recommend using Gdax.  It is part of coinbase but you do not have to pay fees and it's a much more robust system-where you can set up stop-loss and limit orders, etc. 

For buying other stuff I recommend Binance because you have to jump through the least amount of hoops for verification.  Transfer ETH from Gdax in to Binance and do your alt coin buying there.

If you want, you can sign up with my Binance affiliate link.  It reduces your fees and also gives me a cut of the fees so it's a win/win.  My affiliate link is: https://www.binance.com/?ref=12612210  or just go straight (non-affiliate) link: https://www.binance.com/

I like them a lot and I use them exclusively for coins that aren't on gdax because they are based in China and a lot of times you can actually arbitrage the price difference between ETH to your benefit when you do a trade.  Be sure and use ETH because sending BTC is really expensive these days.

 

[JohnRoberts]

I bought a couple hundred dollars worth of bitcoin a couple weeks ago when it was close to the peak just to see what it was all about. As it started falling I switched to Ether and am now almost even again. I feel like the extreme volatility right now is partly because of people like me who are just jumping in to gamble. My son is a lot braver than me and has more invested. I helped him transfer bitcoin from Coinbase to another exchange so he could buy Ripple. It felt like a game. There are so many different types of coin out there! I see the value in the utility of block chain technology, but what is ultimately going to create monetary value for one over the other? Will it be the one with the most broad set of functionality? The quickest to be hashed? And then couldn't that technology just be cloned to yet another block chain?

I'm all ears!

This mindset reminds me of the housing bubble when people were buying houses because they kept going up...

If you have a 100% profit (double), sell half to recover your basis and play with the houses money. That way you can never lose.

JR

 

[JohnRoberts]

Demographic means a particular sector of a population.  What I've read is that sector of people who hold gold as a safe haven, have now rotated into cryptos.
hum... I think you're putting words in my mouth.

sorry I know EXACTLY how that feels.

I've been defending the technology of cryptocurrencies but I am not making any predictions about price in the future. They could continue going up, they could go down. I think the technology is exciting and potentially revolutionary, and has inspired some exuberance. The prices have very likely gotten ahead of the themselves, but I don't know one way or the other. I see cryptos as being in the early '90s phase of the internet.
And I've sold nearly all my bitcoin. I've been buying lesser know coins that have better technology, imo.

Just tonight one of the traders I follow (not very closely) just announced a virtual curreny ETF.

https://www.cnbc.com/video/2018/01/04/bitcoin-expert-brian-kelly-launches-a-suite-of-crypto-etfs.html

interesting times...

JR

 

[Mbira]

If you have a 100% profit (double), sell half to recover your basis and play with the houses money. That way you can never lose.

I think it's better to set up a stop-loss sell with a limit price.  Then you can keep your coins in there and you have your profits locked in.  Once it's set up, you can slowly ride the price up and you know what your minimum profits are.

 

[bluebird]

Thanks for the info Joel, my kid is trading ripple on Binance. There seems to be a registration hold on Binance right now, but I may take you up on the affiliation for your advice when they resume registration

This mindset reminds me of the housing bubble when people were buying houses because they kept going up...

If you have a 100% profit (double), sell half to recover your basis and play with the houses money. That way you can never lose.

JR

Yup, Ether is up to 1K (tonight) and I've recovered all the money I lost on bitcoin. If I was smart I would just pull it out and call it a day, but whats the fun in that? 8)

 

[JohnRoberts]

I think it's better to set up a stop-loss sell with a limit price.  Then you can keep your coins in there and you have your profits locked in.  Once it's set up, you can slowly ride the price up and you know what your minimum profits are.

The trouble with limit orders is you do not always get trade execution at the specified price (only somewhere below that limit price) if there is a rapid sell off, and thin trading it can execute well lower. 

During the handful of flash crashes where sudden market dips caused prices to drop suddenly, then recover. People with stop loss orders in place, actually ended up with deep losses locked in at prices well below their limit price, then missed the recovery back to normal price levels because they were stopped out of their long positions during the dip.

In a stable slow moving market stop-loss orders may work, but bitcoin and the like strikes me as pretty volatile. If the price drops 30% suddenly do not expect your stop loss order down only 10% to execute at the limit price, you will most likely get stopped out down 30%, unless extremely lucky. 

I repeat my advice, if you are long Bitcoin or some virtual currency, with significant gains, protect you basis by selling it and converting to a more stable asset. If you can play without risk there will never be regrets. If it goes up another 100x as some predict you can still make plenty of money.

Am important aspect of investing is understanding upside and downside. Stop loss orders are not as protective as they appear. If you don't believe me ask your broker if the stop loss limit price is guaranteed (hint it isn't).

JR