Matt Thalman on How Bitcoin Finished An Astonishing Year

If you look at a chart of Bitcoin during 2017, it really only went higher during the first 11 months. The in the middle of November it was as if the cryptocurrency was strapped to a rocket ship as the price shot higher until mid December.

While early investors made a killing on Bitcoin in 2017, the real excitement all happened in December. Bitcoin started 2017 at $996, began the month of December at $10,500, then peaked on December 17, 2017, at $19,206, but ended the year at just over $14,000. When Bitcoin hit its peak, it was up nearly 100% for just the month of December, but even after falling $5,000 in only 14 days, it still ended the month up more than 30%.

While Bitcoin may have only risen 30% in December, it increased more than 1,350% in 2017, with nearly 400% of that gain coming in December and 800% of its coming after November 1st. So what happened in the last two months of the year that caused the price of Bitcoin to rocket higher, in such as short period?

In one word, Exposure!

In early November the general public, those outside the world of finance, began hearing about Bitcoin and cryptocurrencies for the first time. They were being told Bitcoin and cryptocurrencies where the wave of the future. Blockchain technology was going to change how business transactions were being processed. They were being told that investors were making money hand over fist and this was the time to get in. There would only be 21 million Bitcoin’s ever mined, thus not allowing others to manipulate the price and that no one person, government, or central bank controlled this new digital currency.

They were told, buy a cryptocurrency now, and you will make a killing, Bitcoin only keeps going higher, it’s easy money.

None of the information the average person was being told was a lie. It was all true.

This increased exposure hit a tipping point when Thanksgiving rolled around. With the holiday falling on a Thursday, it is believed that the conversation at many dinner tables across the U.S. touched on cryptocurrencies and Bitcoin at some point, because over the course of the following three days coinbase, the largest and most well known cryptocurrency exchange had over 100,000 new accounts open up.

The price of Bitcoin jumped more than $2,000 from November 24th to the end of the month.

The coming December 2017, which will be known as the month of Bitcoin Futures. The two largest U.S. future’s markets both saw their proposals to offer Bitcoin futures approved, and trading of said futures began during the month. The Commodity Futures Trading Commission approved the bitcoin futures and the CBOE, CME, and the Cantor Exchange all began trading Bitcoin Futures during the month.

The reason Bitcoin Futures where so important is because simply by gaining the ability to have a futures market, Bitcoin’s legitimacy increased in a blink of an eye. Furthermore, now that there where Bitcoin futures trading, the big Wall Street funds and investors could now get in on the cryptocurrency action.

The new money would start flowing into Bitcoin through the trading of its futures. This was huge in terms of making the asset more well known and respectable. But, unfortunately, it only hurt Bitcoins greatest attribute, its limited supply.

See Bitcoin Futures, unlike other futures contracts, are not settled with Bitcoins, they are settled for cash. This means when you buy Bitcoin’s through the use of a futures contract; you don’t end up owning Bitcoin’s, you just get the value of the agreed-upon Bitcoins in cash.

Therefore, when Bitcoins are traded with futures contracts, the actual supply and demand of actual Bitcoin’s is not affected. There was one other thing that happened in December which affected the supply and demand of Bitcoin, Bitcoin Cash.

Bitcoin Cash was created when Bitcoin’s blockchain was forked back at the beginning of August. Those who owned one Bitcoin, now owned one Bitcoin and one Bitcoin Cash when the fork occurred. But, Bitcoin Cash was difficult to trade until Coinbase, began offering an exchange in December. Once it was easy to trade Bitcoin Cash, Bitcoin itself saw its price take a hit.

Furthermore, this event publicized the fact that Bitcoin had been forked in the past and that there were a lot of people planning to fork it again in the future. Each time Bitcoin is forked, and a new cryptocurrency begins, it increases the supply of cryptocurrencies available in the market. It hurts the original idea that there would only be 21 million Bitcoin’s ever mined. It hurts the idea that 1 Bitcoin is worth more than 1 Bitcoin Cash, or 1 Litecoin or 1 Ethereum or any of the other hundreds of cryptocurrencies now available.

Bitcoin futures are still new, how Bitcoin Cash or the other cryptocurrencies will affect Bitcoin, and how different world governments and agencies will handle cryptocurrencies is still very much unknown. But, after a wild end to 2017, the cryptocurrency industry isn’t yet showing signs of slowing in 2018. It should be fun to watch it unfold.

Happy New Year and Happy Investing in 2018,
Matt Thalman
INO Contributor - ETFs

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Preparing for the Cryptocurrency Swan Event

Our trading partner Chris Vermeulen sent over this great article he put together covering how the current crypto markets volatility might affect the rest of the markets. 

Many people have speculated that Cryptocurrencies can go to $10k or higher. Recently, the Chinese government has stepped up policy to regulate and eliminate Crypto ICOs as a means of increased speculation and gray market capital. Additionally, Jamie Dimon, of JP Morgan, stated that Bitcoin is a fraud and that it would “blow up” (MSN > Bitcoin is a Fraud That Will Blow Up Says JP Morgan Boss). What is the truth and what should investors expect in the future? Well, here is my opinion on this topic.

Bitcoin is based on the Blockchain technology architecture. I believe this architecture will continue to be explored under the basis of an open, distributed ledger method of developing opportunities. This technology improvement will likely drive advancement in other sectors of the global market as security and accountability continue to increase. Yet, the growing pains of this technology will likely continue to drive some wild moves over the next few years.

It has been reported that Cryptocurrencies fell $23 Billion in value since the peak. This would put the total valuation of the Crypto market at about $117 Billion near the same peak. Consider for a moment that the Bernie Madoff scandal was near $65 Billion total. Could a Cryptocurrency based “Swan Event” create chaos in the global markets?

In comparison to more traditional investment instruments, the risk exposure of Cryptocurrencies seems somewhat limited. Yet consider this… Many global firms jumped onto the Blockchain bandwagon within the last 12~24 months. This is not just individual investors any longer, this is most of the global financial market.

DATE TIMELINE OF FIRST INVESTMENT INTO CRYPTOCURRENCIES

So, now our “Swan Event” has a bit of depth in terms of risk exposure and breadth in terms of global market reach. What would an extended decline in Cryptocurrency valuations do to these firms and to the confidence in the Cryptocurrency market?

Could a collapse “Swan Event” drive prices back to below $1000 (USD) or further? What would the outcome of such an event be like for the global markets? Would this type of move reflect into the global market as an advance or decline overall? And what would this mean to the bottom line of these financial firms that have invested capital, resources and client’s capital into these markets?

It is our believe that the global markets are, without a Cryptocurrency event, setting up for a potentially massive corrective move. The chart, below, clearly shows what we believe to be a Head-n-Shoulders pattern forming that will likely prompt a breakdown move near October 2017 or shortly thereafter.

We believe this global market correction will prompt selling in weaker instruments and drive a massive “rip your face off” rally in the metals. We believe this move has already started with the formation of the Head-n-Shoulders pattern in the US markets as well as the recent upside move in the metals. The Cryptocurrency “Swan Event” may be the catalyst event that is needed to put pressure on other market instruments (US and Global equities, RealEstate, Consumer confidence/spending and Metals).

U.S. CUSTOM INDEX....HEAD-N-SHOULDER FORMATION

METALS : START OF RIP YOUR FACE OFF RALLY

REAL ESTATE CORRECTION

Are you prepared for this move? Do you want to know what to expect and do you need help understanding these market dynamics? The markets are setting up for what could be one of the most explosive cycle event moves in nearly a decade and you need to be prepared. We offer our research to our clients at The Market Trend Forecast for far less than you would imagine. For less than $1 per day, you can have access to our advanced research and analytics, market trend forecasts and more. We keep you informed with our timely updates and research to help you understand how these markets are moving, where to find opportunities and how to protect your investments.

Our research team has over 30 years experience in the markets and have been trained by some of the best technicians that ever lived. Isn’t it time you invested in a team of dedicated market analysts that can help you protect your assets and find opportunities for an unbelievable subscription rate?

When you join, we’ll send your our Guide to understanding trading PDF booklet to help you understand our advanced analysis techniques and adaptive learning strategies. These are all part of our commitment to providing you the best analysis, research and understanding of the market’s dynamics as well as making sure you understand what we are delivering to you each week.

Don’t miss this next big move, the “Swan Event”....Timing is everything.

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Chris Vermeulen

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