About cryptocurrency in simple words. To buy bitcoin: is it already late or yet early?

05 Mar 2018

While cryptospeculators are remaining deep in thought, Alan Greenspan found an interesting analogy for bitcoin and forecasteditscrash. South Korea banned exchanges to tradefutures on the most popular cryptocurrency. The USA, on the contrary, authorized futures. So the market is guessing where to move when the signals will be absolutely different.

The snowball is gaining momentum.

On the CoinMarketCap website, next to the bitcoin exchange rate graph, a button “buy immediately with a credit card” appeared. Next to the other currencies, there are no such buttons; there is only “buy and sell”. The word “immediately” reflects the market situation, you can briefly describe it as “agiotage”, “gold fever”, and sometimes “panic”.

In just 7 days, bitcoin skyrocketed on some exchanges to almost $ 20 thousand, then rolled back to about $ 14,5 thousand, and at the time of writing this column it is at $ 16,8 thousand. This figure, however, can be omitted, since by the time you read this text, it is likely to have changed a lot.

Before proceeding to the analysis of the situation, let us briefly outline what happened to the other leading crypto currencies.

Ripple was steadily falling, then dramatically rose and began to fall again. Bitcoin Gold launched a global advertising on the Internet, which did not save it from a downward graph without any clear space and prospects so far. Bitcoin Cash,similar to Ripple,began with a steady fall;then there was a sharp rise which was followed by the resumption ofa fall after the unexpected rise.Litecoin lived for most of the week without strong fluctuations, then dramatically rose and remained on a new level, falling and lowering at the value of error. The ether drew a beautiful geometric figure, similar to stairs: first, slowly going down and then up.

All these charts, except perhaps Bitcoin Gold, resemble classic figures from technical analysis. Pay attention to the fact that Ripple and Bitcoin Cash took a sharp rise to about the level from which the former long fall began.And, most likely, the second phase ofdecline in value will last until the moment, whence this very dramatic rise began. There are signs that speculators are waiting for the currency to fall to a certain level, then therewill be a quick buy-up, after which things will calmdown when a pre-determined bar is reached.

Before our eyes a new market of speculative trade is being formed, in which bitcoin is gradually acquiring energy, and the remaining leading cryptocurrencies are converted to the counterparts of the dollar, yen, pound sterling and euro.

Where does the explosive growth of bitcoin come from? We have already answered this question in previous columns, and the analyzed events confirmed once more the traders’ observations: it’s a snowball effect, when new participants increase demand, which, in turn, attracts even more participants according to the logic of the closed circle. To prove it we can cite the phenomenal statistics of downloads from the AppStore and Google Play mobile applications of the Coinbase exchange, which in the first week of December were approximately 575 thousand times against just 177 thousand for the same period in November. The application, of course, “collapsed” for a while, but soon resumed its work.

Forecasts do not reassure or upset.

Now the majority of participants are concerned with another question: how long will this celebrationof life last? No reasonable grounds for forecasting work, there is nothing to rely on, the stock indicators are out of place here, soone can only guess. But to guess, or better to divine is necessary, otherwise there is a risk of losing a lot of money or not to make money at all.

There is no shortage of predictions. Let’s give the floor to the former chairman of the Federal Reserve Alan Greenspan. Mr. Greenspan, as you can see on the video under the link, looks much weakened. Of course we wish him health, yet he hurries to finish the business he started. His words, I think, can be trusted, because hehardlyhas a motive to say what he really thinks. He said that bitcoin reminds of the continental dollar, some analogue of the official US dollar, which was circulated among the northerners in 1775-1782 during the Civil War. The “basis” for this currency in the form of tangible assets did notexist; it was supported only by the faith of users. Of course, it helped to solve the necessary tasks, but when they became non-topical, they depreciated. The same thing, Greenspan is sure, will happen to Bitcoin.

Probably, theman who knows best of all the structure of the world financial system, is right, but in any case it’s just words. But the actions of large structures – this is a serious signal. And it happened on Sunday with the opening of bitcoin futures trading on the largest US stock options exchange CBOE. The auctions have attracted so much attention that the exchange site even “lied down”for some time, unable to cope with all those wishing to look at the course of operations. When its work was restored, everyone saw that for a short time the bitcoin rate on this site even jumped seriously relative to the average market rate.

However, the main thing for us is not the start of futures trading, but what strategies will be chosen by those who will use them. There are suspicions that these will be strategies for downgrade. In other words, the opinion of large funders is supposedly that bitcoin will become cheaper, so they will put it on short positions and earn on falling. This means nothing in itself, of course, but it can deceive mostother players. Then the snowball effect will reverse in the opposite direction.

Buta team of developers suggests a solutionwhich may be interesting to the panic-stricken and to Alan Greenspan. It is called «Bitcoin Bubble Burst”, which can be rendered as “Explosion of the Bitcoin Bubble”. It is intended to warn about the approaching “bitcoinoheddon”. The idea is simple: the system analyzes the auction on several exchanges, publications in the media, as well as messages in social networks. On the basis of this information, a forecast is issued, then it is compared with reality, the system draws conclusions for itself when it needs to “adjust” itself or “pull up”, and thus improves the effectiveness of further forecasts. In general, that is what is called today “artificial intelligence” or, more modestly, “machine teaching”. Accordingly, before the crash, the application, the description of which is available on the internet link, must give out something like a warning that it is time to get rid of the currency.

Users refuse bitcoin

It is possible that Bitcoin Bubble Burst will eventually be needed, as it turns out that even those countries which officially have approved bitcoin and which have a huge number of its holders, are not so happywith it. So South Korea unexpectedly banned local exchanges to arrange futures trading on the leading cryptocurrency. Well, business is a master of course, but this has strained the world crypto community, many of itsmembers have, by the way, a South Korean passport. Most importantly, it is not very clear what in reality is behind the actions of regulators. There are assumptions that they have fears of uncontrolled inflation, but in this case it is necessary in principle to “close” the turnover of cryptocurrency on their territory, as they want to do in Russia – exactly out of the same fears.

There are also smaller signs, butnegative ones. The service of video games Steam announced that it no longer takes bitcoin in payment because of its incredible volatility and high commission for the transaction. With volatility, everything is clear – during the passage of payment, the stock exchange rate of the cryptocurrency can change beyond recognition, which creates problems for both the service and its user. But the high commission arose recently, when, due to the stock market boom, the bitcoinblock chain turned into a traffic jam: at some moment the number of transactions that hung on the Web exceeded 200,000; coin holders had to wait for the completion of the procedure almost a day. Steam has the following statistics: if at the beginning of reception of the cryptocurrency as payment the commission paid by gamers was only $ 0.2, it has now grown to $ 20, or exactly 100 times.

Well, and now the last interesting fact discovered by analysts last weekwhich strongly suggests where bitcoin will go in the near future. It turned out that 40% of the coin belongs to just one thousand people. The possibilities for manipulating the course are limitless. Draw your conclusions.

Reporting by Gilbert Castro


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