Tag Archives: Bitcoin

Are Charts Telling Us The $USD Is Heading For Trouble?

By quick way of review, here’s the key chart. As you can see, the $USD staged a large bull market run in 2014 as the [Foreign] Federal Reserve wound down its QE program. The greenback was then range bound for three years until this month when it broke down in a big way.

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US Dollar ($USD) dropping below critical support.

Here’s the $USD’s chart running back 40 years. I call this the “single most important chart in the world,” because how the $USD moves has a massive impact on all other asset classes.

As you can see the $USD broke out of a massive 40 year falling wedge pattern [between 2014-2016]. This initial breakout has failed to reach its ultimate target (120) and is now rolling over for a retest of the upper trendline in the mid-to low-80s.

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The Long Term [40 year] Chart Of The $USD

Question:

What happens when new currency is created with few limits by central and commercial banks?

Answer:

Far too much debt and currency are created.

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Central Bank Balance Sheets have increased by $10 trillion in the last decade and $1 trillion YTD in 2017.

Question:

What happens when an extra $10 trillion in central bank debt plus another $80 trillion or so in other global debt is created in a decade?

Answer:

Prices rise because each unit of fiat currency purchases less.

Market                             Early 2007                                  Early 2017

NASDAQ Composite            2,400                                        6,000

S&P 500 Index                      1,400                                        2,370

T-Bond                                     110                                            150

Gold                                         700                                         1,250

Silver                                         13                                              18

Crude Oil                                  60                                              50

Now might be a good time to grab some physical gold, silver and cold stored Crypto.

Source: Political Vel Craft

 

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Bitcoin Blows Through $4000 As Asian Demand Soars

While many of the largest cryptocurrencies are fading modestly this morning, Bitcoin is holding on to dramatic agains which saw the largest virtual currency spike to as high as $4190 as Yen, Yuan, and Won trading activity dominated volumes.

Bitcoin Cash remains in 4th place overall by market cap but Bitcoin is the only currency higher among the top 5 this morning.

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Soaring past $4000…

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As CoinTelegraph reports, the trading of Bitcoin in Japanese yen has accounted for almost 46 percent of total trade volume worldwide. The trading of Bitcoin in US dollar accounted for around 25 percent, while the trading of Bitcoin in South Korean won and Chinese yuan accounted for approximately 12 percent each.

Additionally, anticipated demand is being priced in after VanEck filed for an ‘active strategy’ Bitcoin ETF:

The Fund seeks to achieve its investment objective by investing, under normal circumstances, in U.S. exchange-traded bitcoin-linked derivative instruments (“Bitcoin Instruments”) and pooled investment vehicles and exchange-traded products that provide exposure to bitcoin (together with Bitcoin Instruments, “Bitcoin Investments”).

The Fund is an actively managed exchange-traded fund (“ETF”) and should not be confused with one that is designed to track the performance of a specified index.

The Fund’s strategy seeks to provide total return by actively managing the Fund’s investments in Bitcoin Investments.

Bitcoin’s solid performance in early August reflected that of gold’s amidst the selloff in stocks and bonds around the world due to the growing apprehensions over North Korea’s nuclear threat.

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And the latest moves this weekend in the crypto world suggest gold will open well north of $1300 tonight.

Live Gold Price

 

 

Bitcoin Spikes To New Record High Over $3800 – Best Week Since Brexit

Bitcoin is now up almost 35% since the August 1st fork, and up over 90% from the mid-July fork-fears panic low. Buying was heavy in the overnight Asian session but surged once again this morning, seemingly after US CPI data disappointed, lifting the price to a new record high of $3547.

As we noted earlier, The real demand for bitcoin will not be known until a global financial crisis guts confidence in central banks and politicized capital controls.”

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This is Bitcoin’s best week since pre-Brexit anxiety sent the virtual currency surging in June 2016…

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Coinbase CEO Brian Armstrong noted: “Digital currencies are having their ‘Netscape’ moment…The pace of innovation has been accelerating and we are now seeing exciting projects and companies being built on top of digital currencies.”

As CoinTelegraph also notes, recent tension between the US and North Korea has played its part on the global market, rattling some of the major asset classes. However, not being pegged, or controlled by any centralized force, Bitcoin was totally unaffected by the news.

Cryptocurrencies are famous for their volatility, but the non-correlation between the global market slipping and cryptocurrencies mostly staying up shows that these decentralized forms of currency won’t be affected like traditional assets.

Source: ZeroHedge

Goldman $3915 Bitcoin Target

Having ‘nailed’ the price action recently in Bitcoin (calling the recent pull back, extension beyond $3,000, with a target of $3,915), Goldman notes that it’s getting harder for institutional investors to ignore the rise of cryptocurrencies.

Last month Goldman’s chief technician, Sheba Jafari, issued their forecast of where bitcoin is headed next. Recall, that as we first reported three weeks ago, Jafari said that “due to popular demand, it’s worth taking a quick look at Bitcoin here” and warned that “the market has come close (enough?) to reaching its extended (2.618) target for a 3rd of V-waves from the inception low at 3,134.” She concluded that she was “wary of a near-term top ahead of 3,134” and urged clients to “consider re-establishing bullish exposure between 2,330 and no lower than 1,915.”

She was right: on the very day the note came out, both bitcoin and ethereum hit their all time highs and shortly after suffered their biggest drop in over two years.

So what does Jafari thinks will happen next? According to the Goldman technician, Bitcoin is now “in wave IV of a sequence that started at the late-’10/early-’11 lows. Wave III came close enough to reaching its 2.618 extended target at 3,135. Wave IV has already retraced between 23.6% and 38.2% of the move since Jan. ‘15 to 2,330/ 1,915.”

What does this mean for the uninitiated? In short, while bitcoin remains in Wave IV, it could go up… or down. She explains:

It’s worth keeping in mind that fourth waves tend to be messy/complex. This means that it could remain sideways/overlapping for a little while longer. At this point, it’s important to look for either an ABC pattern or a more triangular ABCDE. The former would target somewhere close to 1,856; providing a much cleaner setup from which to consider getting back into the uptrend. The latter would hold within a 2,076/3,000 range for an extended period of time.

However, at that point the next major breakout higher would take place, one which would take bitcoin as high as $3,915.

Either way, eventually expecting one more leg higher; a 5th wave. From current levels, [Bitcoin] has a minimum target that goes out to 3,212 (if equal to the length of wave I). There’s potential to extend as far as 3,915 (if 1.618 times the length of wave I). It just might take time to get there.

Goldman’s analyst concludes with the following summary: “[Bitcoin] could consolidate sideways for a while longer. Shouldn’t go much further than 1,857. Eventually targeting at least 3,212.

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And now, Goldman offers an FAQ for the institutional investor…

The debate has shifted from the legitimacy of the ‘fiat of the internet’ to how fast new entrants are raising funds. The hype cycle is in full effect with Bitcoin, the first, largest and most widely recognized cryptocurrency up almost 200% YTD (v 11% for the S&P 500) and a host of other emerging ‘alt coins’ growing in scope and presence (witness the growth of Ethereum).

Whether or not you believe in the merit of investing in cryptocurrencies (you know who you are) real dollars are at work here and warrant watching especially in light of the growing world of initial coin offerings (ICOs) and fundraising that now exceeds Internet Angel and Seed investing.

FAQs:

1. Two Sides To The Coin: Is Cryptocurrency a “Currency” or “Commodity”?

Answer: It depends who you ask. The complexity exists because coins have attributes of a currency (e.g. presented and trusted by some medium of exchange) and commodity (e.g. limited resource). The classification of cryptocurrencies varies by country, government and even application. In the U.S., the IRS has ruled that virtual currency does not have legal tender status in any jurisdiction. For tax purposes, the IRS treats virtual currency as property. 

2. How Big Is The Cryptocurrency Market?

Answer: Nearly $120 billion. Bitcoin remains the largest and accounts for nearly 50% of the total market cap (Exhibit 5).

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There are currently over 800 cryptocurrencies out there, though just 9 have a market cap in excess of $1 billion.

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While its growth has been impressive, the aggregate market cap of cryptocurrencies equates to less than 2% of the value of all the mined gold in the world.

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3. What Is Ethereum? 

Answer: A Platform 1st, a Cryptocurrency 2nd. Ethereum differs primarily from Bitcoin in the latter is set up to be an alternative to ‘real money’ while the former is more of a platform set up to run any decentralized application and automatically execute “smart contracts” when certain conditions are met. Ethereum offers a digital currency like Bitcoin – called Ether – but this is just one component of its smart contract execution and primarily used to facilitate and reward using the network. However, the rise of Ethereum has not come without setbacks, including the ~$60 million hack of “The DAO”, a venture capital like organization with the mission of “investing” in Ethereum-related start-ups and projects (and is no longer operational today).

4. How Does One Trade Cryptocurrencies in the United States?

Answer: Digital Exchanges, Block Trades and (soon to be) Options. Individual investors can trade virtual coins on various online exchanges. Institutional traders have largely stayed out of the cryptocurrency market due to its relatively small size, structure of mandates and volatility, but block trading exists to facilitate the execution of larger orders. In addition, Bitcoin options exist and are traded on offshore exchanges. Futures and options may also be coming to the US soon. On August 2, 2017, the CBOE entered an agreement with Gemini Trust Co to allow cash-settled Bitcoin futures on CBOE Futures Exchange in 4Q-17 or early 2018.

5. What is an Initial Coin Offering (ICO)?

Answer: Fundraiser through token sales. The amount of money funding ICOs has grown exponentially and the speed at which money is raised via a white paper and internet browser has sounded the alarm bells from parties including the SEC and the People’s Bank of China. According to Coin Schedule, ICOs have raised $1.25 billion this year, outpacing global Angel & Seed stage Internet VC funding in recent months.

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The Tezos blockchain raised a record breaking $232 million worth of Bitcoin and Ether through an ICO completed last month. The next closest? Bancor’s ICO which raised $150 million in mid-June. And the speed of ICOs is an added benefit: Gnosis raised more than $12 million in under 15 minutes.

Source: ZeroHedge

Mortgage Arbitrage Is Back: Homeowners Take Out Mortgages To Buy Bitcoin, Cars And Wine

It’s been about a decade since the term “mortgage arbitrage” made headlines. It’s back.

In the clearest sign yet of just how late far the investing cycle the developed world finds itself, the FT writes that wealthy British homeowners are again borrowing against their property to invest in bonds, equities, alternative investments or commercial property as the low cost of debt creates opportunities for “mortgage arbitrage”. And while taking out a mortgage to invest in “safer” arbs like corporate bonds, commercial real estate or private equity would be at least understandable, if not excusable, in the current low-yield regime, some more extreme “investment” decisions suggest that the madness and euphoria that marked the peak of the last asset bubble is back: because while growing numbers are prepared to risk using their primary residence as collateral, some are ready to gamble on extremely volatile assets like bitcoin, wine and cars.

One broker said a mortgage-free homeowner with a house valued at £10m had taken out a fixed-rate loan of just under £2m to buy bitcoin, the crypto currency that has seen huge volatility in recent months. Others have invested in classic cars or fine wine. One former banker took out a £500,000 mortgage, not for investment purposes, but to provide a fund for routine spending and other eventualities.

To be sure, while these are extreme – and for now rare – examples of investor euphoria, even the more mundane “mortgage arbitrageurs” are willing to take major gambles: “Interest rates of less than 2 per cent on two- and five-year fixed-rate home loans are tempting high-income, mortgage-free homeowners to raise money against their property in the hope they can profit from higher rates of return elsewhere.”

Simon Gammon, director at mortgage broker Knight Frank Finance, said the arbitrage had emerged as a trend among financially sophisticated clients as mortgage rates fell.

“We’re a specialist lender at the top end but we’re seeing up to a dozen of these deals a month,” he said. “This is something that has come about because of the current environment of low rates.”

 

How prevalent is this behavior which peaked during the last housing/credit bubble?

Mark Pattanshetti, a mortgage manager at broker Largemortgageloans.com, said the number of borrowers taking out loans to fund investments had risen by about 50% since 2009. “Borrowers have realized the cost of debt is cheap and it isn’t going to get much cheaper,” he said. Unfortunately, what borrowers are forgetting is that home prices can drop as mortgage rates rise, while risk assets – impossible as it may sound – can correct sharply, hitting borrowers with the double whammy of rising LTVs as inbound margin calls force them to liquidate into a sliding market.

Ironically, anecdotal evidence suggests that this troubling behavior has been prompted be declining UK home prices – until recently one of the best performing British assets. This has been the result of Brexit-related concerns, a decline in Chinese and other foreign investors rushing after UK real estate, as well as concerns that the BOE will soon raise rates, resulting in increasingly more “for sale” signs.

As the FT notes, “for debt-free homeowners, remortgaging during the years of booming house prices was often a means of raising cash to carry out home improvements or expand a buy-to-let portfolio. But slowing house price growth and a regulatory and tax crackdown on landlords have made these options less attractive.

Hugh Wade-Jones, group managing director of mortgage broker Enness, said: “It’s accepted that property is no longer going to be the all-conquering investment, doubling every 10 years, so people are looking elsewhere for returns.

In addition to bitcoin, cars and wines, borrowers with housing equity are putting money into everything from bonds and private equity and commercial property, brokers told the FT. David Adams, managing director of John Taylor, a Mayfair-based estate agent, said investors were borrowing against London residential properties to fund investment in commercial and mixed use developments from Southampton to Birmingham at returns of 6 to 7 per cent.

Wealthy investors are no longer chasing capital gain. There is a switch to yield, Adams said.

According to Knight Frank’s Gammon, the practice typically appealed to those with investment experience. “People who have not needed to borrow have looked at the rates available — and we’ve now got five-year fixed rates from 1.65 per cent — and said if I can’t make 1.65 per cent or more from my money, then I don’t know what I’m doing.

Unfortunately, should home prices in the near future tumble while risk assets slide, crushing the “experienced” investors, that’s exactly what one can conclude.

Making it easier for the “smart investors” to bury themselves with margin calls, there are no regulations prohibiting this kind of behavior:

There is nothing in mortgage regulation to prevent someone raising a loan on a mortgage-free property for personal investments, as long as the lender assesses that the loan is affordable and not being used, for instance, to prop up a business generating income for its repayment.

Lenders, however, may choose to apply criteria that restrict the use of capital raised through a mortgage, although private banks are typically more relaxed about non-property investments than high street banks. For bigger mortgages, lenders will also moderate risk by insisting that the size of the loan does not exceed 60 per cent of the property’s value.

Naturally, it doesn’t take a big drop in the value of the property coupled with a slide in the “alternative investment” to wipe out the LTV buffer, pushing the value of the loan above the underlying collateral.  That said, “the Financial Conduct Authority, which regulates mortgage lenders, declined to comment on individuals borrowing against their house for personal investments.”

In a tangent, the FT then focuses on the tax considerations of this risky behavior.

Unlike gains on a principal private residence, any gains on investments would be subject to capital gains tax (CGT). A wealthy homeowner may therefore seek to transfer borrowed funds to a spouse who has not used his or her annual CGT allowance. If the investment is designed to provide a stream of income, there could be a case for a transfer to a spouse who pays the basic rate of income tax, advisers said.

Nimesh Shah, a tax adviser at accountants Blick Rothenberg, said that if a homeowner took out a loan to invest in commercial property — and this was specified as the purpose of the loan — residential mortgage interest could potentially be offset against the commercial rental income.

Of course, the above assumes capital appreciation and therefore, capital gains. For now nobody is worrying on the more unpleasant outcome, one where there are no gains to book taxes again. Then again, in a wholesale wipeout at least the “smart money” will have years and years of NOLs carryforward losses to offset any future income taxes. Just like Donald Trump.

Latest on Cryptocurrency …

Source: ZeroHedge

Swiss Bank Becomes First To Offer Bitcoin To Its Clients

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A Swiss bank is now offering to buy bitcoins for its clients. As of Wednesday, investors can ask their asset manager at Falcon Private Bank, a boutique investment firm headquartered in Zurich, to purchase and store bitcoin on their behalf – a first for conventional banks. Despite the cryptocurrency’s infamous volatility, this is another indication that is here to stay.

“We have various clients that are interested in buying bitcoin for investment purposes, and we’re making it very convenient for them,” says Arthur Vayloyan, the global head of products and services at Falcon. Because Falcon will be doing the buying and storing of the digital coins, its customers won’t require any specialist knowledge to switch their cash into bitcoin. The Swiss financial authority, FINMA, granted Falcon regulatory approval on Tuesday.

But some worry that people may be underestimating the importance of decentralisation to the digital currency. Traditional banks that hold large sums of bitcoin for their customers will be obvious targets for hackers. “It’s a lot easier to steal digital currency than a traditional currency,” say Andreas Antonopoulos, host of the Let’s Talk Bitcoin podcast.

Spaced out

“This is why decentralisation is so important,” Antonopoulos says. Indeed, Bitcoin is built on decentralization. Instead of central banks and governments, Bitcoin relies on a network of computers that anyone can join to check the legitimacy of transactions. Every Bitcoin is accounted for on a digital ledger called the blockchain that records how many coins each digital wallet holds.

Whenever currency changes hands, everyone on the network updates their copy of the blockchain too. Underpinning the whole system is some complex mathematics that makes it incredibly difficult to deceive or control without infeasible amounts of computing power.

The wallets are decentralized too. Instead of bank accounts, anyone can create and store their own bitcoin wallet. Because there is no centralised collection of wallets, there is no central target for hackers to try to steal large amounts of digital currency. Or at least that’s the idea (in practice centralised pockets can emerge).

Put lots of wallets in the same place, and the system may no longer hold. If a thousand people each hold a single bitcoin, a certain level of security will be sufficient protection. However, if one place holds a thousand bitcoin, you increase the appeal to hackers a thousand-fold too, which means you have to similarly up the security. “But there is no way to do this. By putting in more eggs you make the basket weaker,” says Antonopoulos.

Hack attack

We have seen this problem before in exchanges, where people trade different digital and traditional currencies. The biggest of these until 2014 was Mount Gox, which at the time was handling more than half of all bitcoin transactions. In February of that year, 850,000 bitcoins corresponding to $450 million at the time went missing, with most thought to have been stolen by hackers.

Only a few years ago, many conventional banks still thought that bitcoin was doomed to fail, but as the price has soared and it has continued to survive, it has become too attractive for investors to resist. In 2012, you could buy a bitcoin for less than $10, last month they were selling for a record high of $3000. Illustrating the currency’s volatility, it’s currently trading at just under $2500, but overall has tripled in value in the last year alone.

Users of Falcon’s bitcoin service will have to sign a waiver to show that they understand the risks, as they would with other high risk investments. In future, the bank plans to expand to other digital currencies.

We’ve definitely come a long way since Mt. Gox …

By Timothy Revell | New Scientist

Bitcoin The New Gold? Yes, Says A Wall Street Strategist Who Sees A 21-Fold Surge

When Central Banks start buying, watch out

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(MarketWatch) Bitcoin $55,000? Fundstrat’s Tom Lee, one of the biggest equity bears among the major Wall Street strategists, says it’s possible, but not necessarily for the reasons many bitcoin bulls have suggested.

“One of the drivers is crypto-currencies are cannibalizing demand for gold GCQ7, +0.12% ” Lee wrote in a report. “Based on our model, we estimate that bitcoin’s value per unit could be $20,000 to $55,000 by 2022 — hence, investors need to identify strategies to leverage this potential rise in crypto-currencies.”

That’s a major jump from the $2,530 level that bitcoin BTCUSD, -0.84%  fetched recently. Of course, this would be on top of what’s already been an impressive stretch, with the price more than doubling since the start of the year.

Lee predicts investors will look to bitcoin as a gold substitute, and the fact that the amount of available bitcoin is reaching its limit makes this supply/demand story even more compelling for those looking to turn profits in the crypto market.

“Bitcoin supply will grow even slower than gold,” Lee said. “Hence, the scarcity of bitcoin is becoming increasingly attractive relative to gold.”

Another driver could come from central banks, which he expects will consider buying bitcoin if the total market cap hits $500 billion.

“This is a game changer, enhancing the legitimacy of the currency and likely accelerating the substitution for gold,” Lee wrote.

The trick is that there aren’t very many ways to play bitcoin, other than via direct investment or the bitcoin ETF GBTC, -1.75% he said, adding that “we will identify other opportunities in the future.”

How Bitcoin (and other cryptocurrencies) actually work

By Shawn Langlois | MarketWatch