Category Archives: Bitcoin
OKEx to integrate the Bitcoin Lightning Network, enabling cheaper and faster transactions for users – PR Newswire India
VICTORIA, Seychelles, Feb. 2, 2021 /PRNewswire/ -- OKEx (www.okex.com), a world-leading cryptocurrency spot and derivatives exchange, is thrilled to announce the integration of the Bitcoin Lightning Network, a second-layer scaling solution based on the Bitcoin blockchain, in the coming quarter. This major development will dramatically decrease transaction fees and times, improving user experience on the exchange. Lightning integration also highlights OKEx's deep commitment to deep commitment to bringing the most advanced Bitcoin technology to the world and furthering the development of the Bitcoin ecosystem.
Originally proposed by Joseph Poon and Thaddeus Dryja in 2015 as a Layer 2 scaling solution, the Lightning Network is a decentralized network that uses smart contracts on Bitcoin's blockchain to facilitate instant payments across the network. An off-chain scalability solution to Bitcoin's network congestion, the Lightning Network acts as a payment protocol on top of the Bitcoin blockchain, routing payments through participating nodes through a peer-to-peer system that greatly reduces transaction fees and times.
As BTC adoption becomes increasingly widespread and more users interact with the Bitcoin blockchain, the cost of transactions rises significantly, while transaction speed is greatly reduced. Currently, the average BTC on-chain fee is more than $10 and takes between 10 to 30 minutes to complete, discouraging many users from interacting with the network. Integrating Lightning with the OKEx platform will allow users to send and receive BTC in near real-time at next-to-no cost.
As OKEx becomes a participant node in the Lightning Network, users will be able to select the Lightning Network option when depositing and withdrawing BTC.
"OKEx is extremely proud to be one of the first major exchanges to integrate the Lightning Network. We are always looking for new ways of decreasing user transaction fees and times. By integrating Layer 2 payment protocols like the Lightning Network, we can offer more competitive products to our users and, at the same time, openly demonstrate our support for the Bitcoin network by increasing the number of participant nodes in the Lightning Network," commented OKEx CEO Jay Hao.
"OKEx's Lightning integration marks a big step for its users and the bitcoin community as a whole, enabling instant, global, low fee transactions. OKEx's leadership in adopting Lightning will help bring bitcoin to the next billion people around the world," said Elizabeth Stark, CEO and Co-Founder at Lightning Labs.
About OKEx
A world-leading cryptocurrency spot and derivatives exchange, OKEx offers the most diverse marketplace where global crypto traders, miners and institutional investors come to manage crypto assets, enhance investment opportunities and hedge risks. We provide spot and derivatives trading including futures, perpetual swap and options of major cryptocurrencies, offering investors flexibility in formulating their strategies to maximize gains and mitigate risks.
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OKEx to integrate the Bitcoin Lightning Network, enabling cheaper and faster transactions for users - PR Newswire India
16.4M transactions in a block! Bitcoin SV breaks another record – CoinGeek
We like big blocks. Bitcoins transaction capacity just keep getting bigger, and this weeks record is 16,415,525 transactions in a single blockthe highest number on any blockchain, ever. Bitcoins Scaling Test Network (STN) broke it with block #14287 on February 3rd, 2021, which also happened to be almost 3.15 GB in size.
The block also earned its miner 32.38 BSV in fees. Although it happened on the test network (meaning those arent bitcoins that can actually be used as money) its an indication of how much a transaction processor could earn by confirming blocks that size on a regular basis.
Just a year ago, a 1GB block on a previous incarnation of the STN was headline news. That block contained 5,449,866 transactions. All this demonstrates the BSV blockchain is getting ready for big data, enterprise-tier applications. These applications would operate on a global scale and could include financial applications, IoT data, government and property records, exchanges, health data, contracts, and a wide range of tokenized assets representing anything from loyalty points to other currencies.
Bear in mind, this is all utilizing the existing Bitcoin protocol, Bitcoin SV Node. Within a few years developers at nChain are looking to launch Teranode, an even higher capacity protocol aimed at enterprise, which will someday subsume SV Nodes operations (while maintaining Bitcoins original set in stone rules and economic incentives).
No blockchain can hope to gain widespread adoption and usage without this kind of capacity. And it needs to happen on-chain, or theres no point having a blockchain at all. Thats why the original Bitcoin, as BSV, focuses on on-chain speed and capacity to build a more useful (and secure) global network. Whatever the Internet can do now, BSV aims to do on its blockchainin a way that isnt as broken and insecure as todays Internet is.
Putting things into perspective
Although 16,415,525 transactions in a single block is a record for now, the STN homepage says: It is not too difficult to produce a single block with a large number of transactions, it is much more difficult to sustain this rate over a period of time. Just last week, the STN for a short period reached over 9,000 transactions per second, which was also a large jump.
Bitcoins Scaling Test Network has similar technical capabilities to the BSV mainnet, so processing transactions at that kind of volume is technically possible thanks to improvements in the software. However there are other issues to consider before unleashing this sort of power on the mainnet.
These include the size and makeup of the mainnet. Its much larger than the STN for starters in terms of numbers of nodes, and also in its variety of physical locations, systems, and independent operators. The STN, which is the fourth incarnation of the BSV testnet, is designed to model the real world mainnet, in order to see whats possible under ideal conditions.
The STN developers also note that Bitcoin, like the real-world economy, should expect to have peak and regular intervals of activity on a daily basis. Its goal is to show what can be achieved and sustained for longer periods of time, rather than break records with single blocks. A block with far fewer transactions could also be larger in (data) size too.
Even so, 16.4 million transactions in a block is a huge amount. Its beyond the capabilities of other blockchain networks, whether theyre data processing-oriented or single purpose. Its yet another demonstration of what Bitcoin really is, what it aims to do, and what it hopes to be used for in the future.
New to Bitcoin? Check out CoinGeeksBitcoin for Beginnerssection, the ultimate resource guide to learn more about Bitcoinas originally envisioned by Satoshi Nakamotoand blockchain.
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16.4M transactions in a block! Bitcoin SV breaks another record - CoinGeek
Bitcoin and Inflation: Everything You Need to Know – CoinDesk – CoinDesk
Crypto enthusiasts often talk about bitcoin as a hedge against inflation. Why?
The argument is that central bank money printing will lead to inflation or the decrease in the value of money over time. Bitcoin, by contrast, has a fixed limit of 21 million coins that can ever be created. This limited supply allows bitcoin to resist inflation.
The COVID-19 pandemic presented the ideal conditions to test this theory once countries across the world began injecting trillions of dollars into their economies. Many countries, including the U.S., printed money to meet stimulus requirements for its citizens.
Yesterday, the chairman of the U.S. Federal Reserve, Jerome Powell said the central bank welcomes higher inflation in 2021 as a sign that the economy is picking up again after the pandemic-slump.
Governments hoped an expansionary monetary policy, whereby central banks increased the amount of money available to people, would keep economies moving amid prolonged shutdowns of certain sections of the economy. By June 2020, stimulus action taken by countries had surpassed $10 trillion, according to a McKinsey Global report. U.S. government-spending alone amounted to $6.5 trillion in 2020, up 48% from the previous year.
Theres a crazy amount of money being printed right now, so the value of money is going down. Assets with limited supply, like bitcoin, real estate or shares/stocks, those price tags are going up, Oki Matsumoto, CEO of Monex Group told CoinDesk.
Its true that despite dramatic drops in global economic output and unemployment, market jitters drove asset prices up: the stock market ended the year with record gains. Even bitcoin, considered a fringe asset, had a historic price run, gaining more than 250% by the end of 2020.
These gains were partly influenced by traditional investors who saw bitcoins potential to work as a hedge against inflation.
And yet, the kind of inflation investors were expecting isnt here, at least not yet. In fact, U.S. inflation remained stable through 2020. Some economists dont believe that inflation in America will be running rampant any time soon. Others think a little post-pandemic inflation might even be a good thing.
What is inflation, anyway?
It depends on whom you ask.
The U.S. Federal Reserve defines inflation as the increase in the price of goods and services over time, but many associate it with a change in the money supply, or the total amount of money in circulation.
In the bitcoin world, they dont use the term inflation quite the way that economists do, as a general increase in consumer price. Instead, they tend to use it to mean an increase in the money supply, said economist and CoinDesk columnist Frances Coppola.
The crypto argument that printing more money leads to inflation does sound compelling, Michael Ashton, inflation consultant and JPMorgan alum, told CoinDesk. When there is a change in the relative quantity of two goods, the one that is increasing in quantity tends to get cheaper, he said, adding that this happens with foreign exchange all the time.
The reason why the Mexican peso has been cheap relative to the U.S. dollar for a long time is because the supply of Mexican Pesos has consistently outpaced the supply of U.S. dollars, Ashton said. Because here are a lot more pesos than dollars out there, he explained, the value of the peso in exchange markets goes down.
Thats part of the crypto argument. They say, Were gonna limit how fast cryptocurrency supply can grow and since we are printing all these dollars, then that means that the dollar has to depreciate a lot relative to crypto. Therefore, the price of crypto should rise over time, Ashton said.
Calvo said the view that you can control the price levels of goods and services through money supply is not limited to the crypto world but shared by investors in general, and for good reason. When you look at many countries over a long period of time, you can see some association between the increase in money supply and inflation, Calvo added.
But Calvo, Coppola and Ashton all agree that increasing the amount of money in the economy with a stimulus package, for example does not guarantee a rise in price levels.
If you increase your money supply, you may or may not get an increase in the consumer price level depending on what else is going on in the economy at the time. So there are a number of other factors to consider, Coppola said.
Money is printing, is inflation soaring?
Not really, at least in the U.S.
The U.S. Federal Reserve has an inflation target of 2% measured using the consumer price index (CPI). In 2020, despite inflationary fears due to pandemic-related spending, the U.S. inflation rate hovered around 1.5%, well below target.
One explanation for the relative stability of U.S. inflation is money velocity, which quantifies how fast money changes hands in an economy. If the money supply is increased, but people dont spend a lot of money quickly, inflation can remain in balance.
After the pandemic hit, consumer spending suffered around the world, with countries including the U.S., India, Japan and Germany reporting large drops in household spending. As multiple states in the U.S. went under lockdown, people stayed home instead of dining out, celebrations and gatherings stopped, and travel came to a screeching halt.
People spending less meant the demand for goods and services in general had dropped. Global energy demand declined 6% in the first few months of 2020, its biggest drop since World War II, according to the international energy agency (IEA).
Weaker demand and significantly lower oil prices are holding down consumer price inflation, the Federal Reserve wrote in its June 2020 monetary policy report.
The World Bank, in fact, projected a fall in global commodity prices.
It is under these prevailing conditions that the U.S. government was distributing stimulus funds.
So people are accumulating money, but it is not reflected in the price level, Calvo said.
Ashton explained this may be because money velocity is very low. People are not getting rid of U.S. dollars fast enough, so the price levels dont increase dramatically.
When you drop a ton of money into peoples bank accounts, they cant spend it instantly. So, mathematically, you have to have a declining money velocity. Thats what happened, Ashton said.
What about outside the U.S.?
American inflationary fears may be in part due to whats happening in other parts of the world. Some investors may be looking at countries like Argentina and Venezuela where printing money has led to very high inflation.
What investors are doing, in general, is looking ahead and saying, were seeing a lot of money going into the economy. Therefore, there is a risk that it could happen in the United States; therefore, we need to invest in things that will protect us from that inflation, if it happens. Thats the conventional inflation is coming, we need to protect against it argument, Coppola said.
But in the countries they are looking at, things work differently, Coppola added.
Venezuela and Argentina are hyperinflationary economies where price levels grow rapidly and excessively triggered by an increase in the money supply or a shortage in supply relative to demand.
In Venezuela, for instance, printing money led to jaw dropping increases in food prices last year. The international monetary fund (IMF) reported that the inflation rate in Venezuela was a whopping 6500% in 2020.
In hyperinflationary countries, years of political and economic instability have exhausted the option of printing money without leading to uncontrollable inflation, Calvo said. Coppola added that countries struggling with hyperinflation have other contributing issues like high foreign exchange debt, war, occupation or something political.
Argentina, for example, has had a long and complicated economic crisis riddled with astronomical debt obligations and political instability that often has citizens scrambling to convert their Argentine pesos into sturdier assets or currencies.
In Argentina, the minute [the government] starts increasing the money supply, very quickly, you see the consequences in the price level, Calvo said, adding, Some countries have the privilege of printing money if necessary. Nothing happens. Argentina doesnt have that privilege.
Interestingly, the pandemic has not particularly spurred inflation in Argentina either. By mid-2020, inflation in Argentina had reached a two-year-low, according to a Focus Economics report.
Because Argentines were also under lockdown during the pandemic, the slowed economy and low demand combined with increases in government spending hasnt caused a major rise in price levels, Calvo said.
If inflation isnt soaring, why are people hedging against it?
People may be buying bitcoin as a hedge against future inflation, and theyre not crazy to do so.
According to a statement made to the media by Federal Reserve Vice Chair Richard Carida, the Federal Reserve will continue to maintain near zero interest rates until inflation rises enough to meet its 2% target.
U.S. policy makers know exactly what theyre doing, said Phillip Gillespie, chief executive officer of crypto liquidity provider B2C2 Japan.
They are basically going to suppress the interest rates and let inflation run higher, Gillespie told CoinDesk.
But economists are saying that as the country reopens and spending picks up, reining in price levels to maintain the inflation target will be one of the biggest challenges in the Federal Reserves 108-year history.
So naturally, investors are reacting to all the inflation doom and gloom by betting against it, turning an alternative asset like bitcoin into the 2020 breakout star of inflation hedging in the process.
Bitcoin inherited a lot of the same selling points that made gold a preferred inflation hedge like scarcity and portability, according to J.P. Koning, Canadian financial writer and founder of the popular blog Moneyness.
But when it comes to serving as a hedge against inflation, bitcoin is hardly alone.
If you look around your house, everything is an inflation hedge, Koning said. Your house itself is an inflation hedge, your table, your personal capital, your education are all inflation hedges because all of those things will rise in value as the purchasing power of the currency falls.
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Bitcoin and Inflation: Everything You Need to Know - CoinDesk - CoinDesk
Demand Dips For Bitcoin Are Temporary; But Lack Of Supply Is Permanent – Forbes
Bitcoin's demand may fluctuate, but supply is known.
From the Double Spend scare of January 20, 2021 to the flight to the relative safety of cryptocurrencys decentralized trading platform on January 30, 2021, a ten day window in the life of Bitcoin illustrates the power of fixed supply versus variable demand on prices.
When rumors surfaced of a possible glitch in the blockchain system supporting Bitcoin, buying interest in the megacrypto briefly waned. In all markets, any seed of doubt, especially in a still nascent, somewhat hard to understand asset, will send some investors to the sidelines. This is what happened for about a week in the Bitcoin markets, and prices pulled back. But when instability hit trading platforms in the wake of the Reddit inspired investing frenzy in heavily shorted securities, resurgent demand for Bitcoin popped prices back up towards their all time highs, largely because Bitcoin supply did not increase rapidly enough to meet demand.
The double spend Bitcoin rumors were unequivocally proven false, stemming from a naturally occurring but extremely rare bifurcation in the resolution system for blockchain transactions that basically self corrects as blockchain activities progress. (At least thats the best way I can describe things with my very limited understanding of the process. Suffice it to say, in plain English, that the system is rock solid and Bitcoin lives on unscathed.)
Market prices decline when there is a lack of demand; buyers pull back and those needing to sell, being more motivated for whatever reason, have to chase prices lower in order to cash in their holdings. In Bitcoins case, the double spend rumors temporarily chased buyers away and left those needing to sell searching for buyers at lower prices. When the sellers had completed their initial round of selling, prices for Bitcoin had dropped around 15 percent from their peak in the early morning hours of January 20, 2021 to their trough in the evening of January 21, 2021. This is what happens when demand for something dries up. Prices go lower.
Prices also go lower when supply of something exceeds demand. In Bitcoins case, this rarely happens, because Bitcoins current supply is known, the rate of Bitcoins possible added supply (from mining activities) is also known, and the ultimate supply of Bitcoin is fixed at 21 million. In a macro sense, the supply of Bitcoin, being fixed, cant really ever keep up with demand, so long as demand keeps rising.
And while one-off events like the double spend rumors may negatively impact demand for Bitcoin temporarily, in the long term scheme of things demand for Bitcoin has more reasons to keep rising than can be reasonably enumerated in this article. But one reason stood out on January 30, 2021 more than others.
The actions that Robinhood and other brokerage houses took to limit the ability of investor participation in trading certain securities sent shockwaves through the retail investing world, seeding doubt, uncertainty, and anger amongst millions of new traders. Many of these new market participants came to the first time realization that the free market system isnt actually as free as they thought, and legions of them sought refuge in the still wild-west like, largely unregulated arena of cryptocurrencies.
Bitcoin, the king of the crypto world, saw demand rise again, and that demand rose faster than supply. In just 10 days time, the world saw the impact of fluctuating demand in a fixed supply market.
When demand for something goes up: prices go higher, but only if supply does not increase to meet demand. This price rationing is what makes markets work efficiently. Crypto markets are as efficient as any market in the world right now, which means they will behave according to the basic free market precepts of supply, demand, and pricing.
This is what happened in the case of Bitcoin, and its what will keep happening for the foreseeable future so long as Bitcoin keeps gaining popularity in the investment world. All of this suggests Bitcoin prices will likely go up over time, because price rationing is what ultimately balances the imbalances created by fluctuations in demand and supply. If demand rises and supply does not rise correspondingly, then prices will rise until demand is curbed.
Investing in Bitcoin will remain interesting, challenging, and volatile, because while Bitcoins ultimate supply is known and its rate of added supply is also known, demand is still the main variable that will move prices in the future. The events of the past 10 days have provided a valuable real time lesson in supply and demand economics.
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Demand Dips For Bitcoin Are Temporary; But Lack Of Supply Is Permanent - Forbes
Laying out the biggest risks of investing in bitcoin in 2021 – KTAR.com
(Pixabay Photo)
No matter where you stand on bitcoin, we can agree on one thing: Its polarizing. Some investors believe its the way of the future and others think its a scam.
However, its gaining popularity. Its likely that the coronavirus pandemic accelerated its acceptance by pushing more retail online. Now, more than one-third of small- and medium-sized businesses will take bitcoin as payment.
And even bigger businesses like Microsoft are starting to accept it. Also, fans of bitcoin see it as a safeguard against inflation. And since the Federal Reserve has been printing money left and right, some are getting nervous about the future of the dollar.
You might be wondering: Should I jump on the bitcoin bandwagon, or run in the opposite direction? Here are four risks I want you to consider before taking the plunge:
Bitcoin is one of the most volatile investments you could make
Bitcoin goes through incredible spikes and plummets in value. Back in July of 2010, a year after bitcoin was released to the world, a bitcoin was worth only eight cents.
The value jumped all over the place until it really started to make some waves in 2017. One bitcoin reached a value of $1,000 early on, then zoomed to $5,000 in October, then doubled to $10,000 in November.
By mid-December one bitcoins value was almost $20,000. The bubble finally burst and the value dropped to about $3,500 by November 2018.
But bitcoins value started to skyrocket again in 2020. Just a couple weeks ago, the value of a bitcoin had hit an all-time high of just under $42,000, but then tanked within 24 hours down to $34,863.
Will it continue to grow in value? We dont know. But the reality is that volatility always equals risk. And risk isnt a bad thing, but you need to be aware of what it might cost in the end.
Bitcoin has a bit of an identity crisis
Does bitcoin have more in common with the U.S. dollar or with gold? The answer is both.
While bitcoin is a currency, Uncle Sam has a different take. The Commodity Futures Trading Commission sees bitcoin as a commodity (like gold), while the IRS treats it like property, which means you guessed it they can tax it.
We need to keep in mind that bitcoin is still the new kid on the block. While its been around for over 10 years now, we still dont have any tried and true best practices for building wealth with bitcoin.
Bitcoin is not regulated by any central bank or nation
Bitcoin has been shrouded in mystery ever since it was released in 2009. It operates without oversight from any bank or nation-state, meaning its exchanged peer to peer.
Its like the Wild West of currencies theres no marshal to uphold the law. For some, this is an attractive feature. Others recognize the risk that comes with zero regulation.
Bitcoin is widely used for illegal activity
Since all bitcoin trading is handled anonymously, the cryptocurrency scene is a hot spot for cybercrimes.
All sorts of shady things, from blackmail to phishing to Ponzi schemes to deals done on the dark web, take place using bitcoin.
Of course, there are plenty of upstanding people who use cryptocurrencies as well. But hackers who know a lot more about coding and software than the average Joe can use that knowledge to their advantage, so be careful.
As youve probably guessed, Im not a fan of bitcoin. I would much rather see you invest your hard-earned cash in proven methods for building wealth, like tax-advantaged retirement accounts and growth stock mutual funds.
But if you want to learn more about bitcoin, check out our full blog post on the subject.
The most important thing is to be aware, informed and in control of your financial choices at all times!
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Laying out the biggest risks of investing in bitcoin in 2021 - KTAR.com
Guggenheim CIO Says Institutional Demand Not There to Sustain Bitcoin Above $30K – CoinDesk – CoinDesk
Scott Minerd, chief investment officer of the multi-billion dollar investment firm Guggenheim Partners, believes bitcoin may struggle to stay above $30,000.
In an interview with Bloomberg Television on Wednesday, Minerd said he doesnt think bitcoins institutional investor base is big enough or deep enough to justify its current valuation. The comments come weeks after he publicly declared bitcoins price should be in the hundreds of thousands of dollars.
Right now, the reality of the institutional demand that would support a $35,000 price or even a $30,000 price is just not there, he said.
Recently, a JPMorgan analyst said a bearish outlook could be triggered if bitcoin failed to claw its way back over $40,000, leading to steeper losses in the mid-term.
Starting in mid-December, the price of bitcoin soared 110% from $20,000 to $42,000 over a two-week period. Since Jan. 9, 2021, bitcoins price has fallen 25% and is changing hands for around $30,960 at press time.
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Guggenheim CIO Says Institutional Demand Not There to Sustain Bitcoin Above $30K - CoinDesk - CoinDesk
"Bitcoin can collapse completely," says Agustn Carstens, former Secretary of the Treasury – Entrepreneur
The current manager of the Bank for International Settlements, ensures that central banks must control Bitcoin and all digital money.
This book gives you the essential guide for easy-to-follow tips and strategies to create more financial success.
January30, 20212 min read
At the height of the cryptocurrency boom, the manager of the Bank for International Settlements (BIS) , Agustn Carstens , warned about the dangers of investing in them. The former finance secretary warned that Bitcoin is increasingly vulnerable and could completely collapse .
Yesterday, January 27, during the policy seminar of the Hoover Institution , the Mexican economist said that Bitcoin is a speculative asset, not money .
Investors should be aware that Bitcoin can completely crash. Scarcity and crypto alone are not enough to guarantee exchange, " explained Carstens , adding that " Bitcoin is increasingly vulnerable .
The also former governor of Banco de Mxico , affirms that central banks must control the issuance and management of digital money . Consider that they have the financial structure to guarantee the stability of the cryptocurrencies .
For digital money to exist, the central bank must play a fundamental role, guaranteeing the stability of the value, ensuring the elasticity of the aggregate supply of said money and overseeing the general security of the system. Such a system must not fail and cannot tolerate serious errors , Carstens said.
The BIS manager said that other private stablecoin projects, such as Facebook's , are more credible than Bitcoin , but need to be regulated.
"In general, private stablecoins cannot serve as the foundation for a sound monetary system ," he said. But to remain credible, they must be strictly regulated and supervised. They must build on the foundations and confidence that the existing central banks give them and, therefore, be part of the existing financial system .
For now, many countries are targeting Central Bank digital currencies (CBDC) . In fact, 86% of major central banks are actively exploring CBDCs , according to a recent BIS survey.
Carstens indicated that national CBDCs would be used in various ways, such as the transmission of monetary policy and the management of interest rates. He explained that they should be complementary to the existing cash system , as completely replacing all bank accounts and cash with digital money is "undesirable" and "unrealistic ."
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"Bitcoin can collapse completely," says Agustn Carstens, former Secretary of the Treasury - Entrepreneur
Should you invest in bitcoin in 2021? | Local News Stories | willistonherald.com – Williston Daily Herald
No matter where you stand on bitcoin, we can agree on one thing: Its polarizing. Some investors believe its the way of the future and others think its a scam.
However, its gaining popularity. Its likely that the coronavirus pandemic accelerated its acceptance by pushing more retail online. Now, more than one-third of small- and medium-sized businesses will now take bitcoin as payment.1 And even bigger businesses like Microsoft are starting to accept it.2 Also, fans of bitcoin see it as a safeguard against inflation. And since the Federal Reserve has been printing money left and right, some are getting nervous about the future of the dollar.
You might be wondering: Should I jump on the bitcoin bandwagon, or run in the opposite direction? Here are four risks I want you to consider before taking the plunge:
Bitcoin is one of the most volatile investments you could make
Bitcoin goes through incredible spikes and plummets in value. Back in July of 2010, a year after bitcoin was released to the world, a bitcoin was worth only eight cents. The value jumped all over the place until it really started to make some waves in 2017. One bitcoin reached a value of $1,000 early on, then zoomed to $5,000 in October, then doubled to $10,000 in November. By mid-December one bitcoins value was almost $20,000. The bubble finally burst, and the value dropped to about $3,500 by November 2018.3
But bitcoins value started to skyrocket again in 2020. Just a couple weeks ago, the value of a bitcoin had hit an all-time high of just under $42,000but then tanked within 24 hours down to $34,863.4
Will it continue to grow in value? We dont know. But the reality is that volatility always equals risk. And risk isnt a bad thing, but you need to be aware of what it might cost in the end.
Bitcoin has a bit of an identity crisis
Does bitcoin have more in common with the U.S. dollar or with gold? The answer is both. While bitcoin is a currency, Uncle Sam has a different take. The Commodity Futures Trading Commission sees bitcoin as a commodity (like gold), while the IRS treats it like property which meansyou guessed itthey can tax it.5, 6
We need to keep in mind that bitcoin is still the new kid on the block. While its been around for over 10 years now, we still dont have any tried and true best practices for building wealth with bitcoin.
Bitcoin is not regulated by any central bank or nation
Bitcoin has been shrouded in mystery ever since an unknown person named Satoshi Nakamoto released it into the world back in 2009.7 It operates without oversight from any bank or nation-state, meaning its exchanged peer to peer. Its like the Wild West of currenciestheres no marshal to uphold the law. For some, this is an attractive feature. Others recognize the risk that comes with zero regulation.
Bitcoin is widely used for illegal activity
Since all bitcoin trading is handled anonymously, the cryptocurrency scene is a hot spot for cybercrimes. All sorts of shady things, from blackmail to phishing to Ponzi schemes to deals done on the dark web, take place using bitcoin.8
Of course, there are plenty of upstanding people who use cryptocurrencies as well. But hackers who know a lot more about coding and software than the average Joe can use that knowledge to their advantageso be careful.
As youve probably guessed, Im not a fan of bitcoin. I would much rather see you invest your hard-earned cash in proven methods for building wealth, like tax-advantaged retirement accounts and growth stock mutual funds. But if you want to learn more about bitcoin, check out our full blog post on the subject. The most important thing is to be aware, informed, and in control of your financial choices at all times!
Chris Hogan is a two-time #1 national best-selling author, financial expert and host of The Chris Hogan Show. He is a frequent guest on Fox News, Fox Business, Yahoo! Finance, and the Rachael Ray Show. Since 2005, Hogan has served at Ramsey Solutions, where he gives practical money advice on retirement, investing and building wealth. Follow Chris on Twitter, Instagram, Facebook, and YouTube or online at chrishogan360.com.
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Should you invest in bitcoin in 2021? | Local News Stories | willistonherald.com - Williston Daily Herald
How Tax Time Is Taking a Toll on Bitcoin – ETF Trends
After notching jaw-dropping returns in 2020, Bitcoin is scuffling to start 2021, but that may be more a case of seasonality than weak underlying fundamentals. The largest digital currency could be in stronger form several months from now.
Some crypto market experts believe one reason Bitcoin is slumping to start the new year is tax selling, Many investors that made profits on Bitcoin waited until January to sell to avoid paying taxes on those gains for the 2020 tax year.
By selling this month, those investors wont have to pay Uncle Sam his taxes until they file for the 2021 tax year, which will be sometime in early 2022.
According to Delphi Digitals January bitcoin outlook report, one of the biggest reasons for the drop is that those [investors and traders]who realized significant gains trading various crypto assets last year will likely have to sell at least a portion of their holdings to cover expected tax liabilities, reports Muyao Shen for CoinDesk.
Recently, some big name investors signaled their interest in blockchain technology and cryptocurrencies. That comes against a backdrop of potentially favorable seasonality. Recently, the Bitcoin Dominance Index has been rising, confirming the dominant perch of the cryptocurrency.
There is significant room for growth in the cryptocurrency universe. Recent data suggest a small amount of American investors own any digital currencies and after Bitcoin, the numberof crypto owners dwindles precipitously.
Its difficult to pinpoint exactly how much selling pressure can be expected, and different jurisdictions treat capital gains more favorably than others, Kevin Kelly, co-founder and head of global macro at Delphi Digital, said. But bitcoin alone added more than $400 billion to its total market value last year. A decent portion of those returns accrued to speculators and traders who may have already realized some gains or rolled profits into other corners of the crypto market, thus triggering taxable events.
Investors wondering when favorable Bitcoin seasonality kicks in dont have to wait long. This time period tends to arrive late in tax season when tax selling abates.
For more news, information, and strategy, visit the Crypto Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
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How Tax Time Is Taking a Toll on Bitcoin - ETF Trends
5 Hard-to-Believe Bitcoin Facts – Motley Fool
Whether you're a diehard bitcoin fan or you can't stop screaming mania, it's hard to ignore just how monumental bitcoin's surge has been. Bitcoin gained over 300% last year and is already up over 10% this year.
Here are five hard-to-believe facts about bitcoin and cryptocurrency that could be helpful for your own investment purposes, to impress your friends, or simply to gain a better handle on what bitcoin is and why it's surging.
Image source: Getty Images.
Human beings have been buying, selling, and trading things since the dawn of time, but currency is quite a different concept. At its core, currency is a store of value. The first currencies had intrinsic value, which could be anything from yams in Chinua Achebe's Things Fall Apart to precious metals. Under the economic system of mercantilism, buying and trading gold became an obsession that sparked widespread colonization, imperialism, and war. Having a gold standard meant that money was tied to how much gold a country had, not the wealth of a nation itself.
Adam Smith famously criticized this policy in his book The Wealth of Nations, published in 1776. One of his core arguments was that economies should grow based on incentives, productivity, technology, and industrialization, not how much gold you have. The result was capitalism and the popularization of fiat currency. Fiat currencies, like the U.S. dollar, are easily transferable stores of value meant to represent the wealth of a country or collection of countries despite being worthless in and of itself. (And we should note China figured this out long before Smith, having adopted fiat currency around 1000 AD.)
Bitcoin is the third generation of currency. It doesn't have any intrinsic value like gold or silver, or representative value like the U.S. dollar. But it has a limited supply, it's hard to counterfeit, and it can be transferred without a third party. (This isn't to say it's been successful as a currency -- more on that later.)
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Bitcoin was developed during the global financial crisis and made available to the public in early 2009. Whether the crisis played into the development of bitcoin is unknown. But the context is key. Widespread distrust of banks and a crippled economy paved the way for new ideas. Cryptocurrency was a natural fit because it provided a way to conduct private transactions without going through a bank. Bitcoin became the first established cryptocurrency and combined the ease of a credit card with the privacy of cash, independent of an institution or government.
Bitcoin was made for a clear purpose, the details of which are outlined in "Bitcoin: A Peer-to-Peer Electronic Cash System," now commonly referred to as "the bitcoin white paper." Published in 2008, it detailed the flaws of existing currencies and outlined the benefits of a decentralized peer-to-peer network that eliminated the need for a third-party middleman like a financial institution.
The problem and solution that bitcoin's founder(s) identified can be best summed up by the following excerpt from the white paper: "What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers."
The takeaway here is that bitcoin wasn't founded to make money like a corporation. It was never intended to be an investment. Rather, its purpose was to change commerce itself by protecting consumers from corruption, whether that be from a government or an institution.
It's a common belief that each successive bitcoin is harder to mine than the last. While that is generally true, there are plenty of times when it isn't. In fact, just a few weeks ago, bitcoin was easier to mine -- that is, it took less computing power. The explanation is simple.
Let me back up. While bitcoins can be bought, or received for goods or services, they're alsofound (mined) by exerting computing power to solve a puzzle. These puzzles are random and require a lot of guesswork, so it's easier to solve them by increasing computing power. But there's a catch. The puzzle difficultly will increase based on the total computing power being used on the network. This is because bitcoin's founders wanted to limit supply by ensuring that one block of bitcoin is mined, on average, every 10 minutes. To counteract rising computing power, the difficulty adjusts every two weeks based on the prior period's average computing power.
The bitcoin reward per block also decreases. In fact, it halves after every 210,000 blocks are mined. It started at 50 in 2009. And since May 11, 2020, it's been 6.25 coins per block. Despite a surge in computing power (the cost to mine), and puzzles that are literally trillions of times harder now than 10 years ago, bitcoin's price increase has helped mining remain profitable.
Mining will continue to be profitable as long as the costs to mine remain less than the reward for mining. But because it takes so much more computing power and electricity to mine now than before, investing in a mining rig only makes sense if you believe bitcoin can stay above a certain price. It's like oil drilling. If the fixed and variable costs to drill an oil well can result in a breakeven price of $50 per barrel, and oil is at $52 per barrel, then it would be a bad idea to invest in that well considering you're only making a 4% return and could actually lose money if oil prices fall.
At an electricity cost of a conservative $0.07 per kWh, even the most sophisticated mining rigs break even at around $7,070 bitcoin. But their profit is just $17.70 per day at $30,000 bitcoin. With a starting cost of $3,000 per rig, it would take half a year to recoup your upfront costs. And that's assuming $30,000 bitcoin. Just like oil, it doesn't make sense to mine bitcoin -- even with the best technology available -- unless the price stays above a certain point.
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Bitcoin has been a great investment but a terrible currency. As I mentioned earlier, fiat currencies like the U.S. dollar can't compete with bitcoin's security or flexibility. But the surge in bitcoin pricing has similar effects to hyperinflation. Currencies are meant to be stable. Lately, the value of the U.S. dollar has been decreasing by less than 2% per year (known as inflation), which is counteracted by saving and wage increases. But bitcoin can never be stable if the price routinely moves up or down by 1% in one day, let alone by 5% or more in a day. Just last week, bitcoin crashed 13% on Tuesday and then rose 7% on Wednesday. Imagine buying a car for 2,000 bitcoins in 2016 then selling it for two bitcoins in 2021. Or trying to buy a gallon of milk for 0.0001 bitcoin. Volatility has been bitcoin's fatal flaw as a currency.
It's difficult to know what percentage of bitcoin transactions are due to trading versus legitimate payments for goods and services. But there's a good chance its use as a currency generally goes down as volatility goes up. This is because bitcoin transaction volume (likely from trading) increases with volatility. And as a result, transaction fees rise as well. Bitcoin's metrics during the first week of the year illustrate this relationship well.
Bitcoin Price data by YCharts
Bitcoin's price rose above $40,000 for the first time in history, transactions crossed 400,000 per day, and the average fee per transaction surged past $12 by the end of the week. Bitcoin's transaction fees can be $1 or less during times of low volatility, so paying $12 for a transaction signals desperation. Again, the irony is that bitcoin's "success" as an investment works against its effectiveness as a currency.
As of Friday, Jan. 15, the cumulative value of all bitcoin was $678 billion, right behind Alibaba Group and ahead of Taiwan Semiconductor Manufacturing. If it were a company, it would have been the ninth-most valuable company traded on a U.S. stock exchange. We can verify this math by taking the supply, about 18.6 million, and multiplying it by the value of each coin, around $36,500.
Bitcoin's surge in value is due in part to Wall Street's interest in it. Jamie Dimon, the CEO of JPMorgan Chase, went from calling it a fraud to thinking it has upside. PayPal and Square have allowed their users to buy and sell cryptocurrency. And hedge-fund managers are even starting cryptocurrency funds to get in on the action. The irony is potent and painful -- the very institutions and third parties bitcoin's founder(s) was trying to avoid are now its biggest fans. As mentioned before, heightened trading drives volatility which increases transaction fees and makes bitcoin an ineffective currency. Bitcoin could very well continue to succeed as an investment. But it needs to be boring to succeed as a currency.
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5 Hard-to-Believe Bitcoin Facts - Motley Fool