Crypto Currencies Go Ballistic

Capitalist Exploits's picture

By Chris at www.CapitalistExploits.at

Market dislocations occur when financial markets, operating under stressful conditions, experience large widespread asset mispricing.

Welcome to this week’s edition of “World Out Of Whack” where every Wednesday we take time out of our day to laugh, poke fun at and present to you absurdity in global financial markets in all its glorious insanity.

While we enjoy a good laugh, the truth is that the first step to protecting ourselves from losses is to protect ourselves from ignorance. Think of the “World Out Of Whack” as your double thick armour plated side impact protection system in a financial world littered with drunk drivers.

Selfishly we also know that the biggest (and often the fastest) returns come from asymmetric market moves. But, in order to identify these moves we must first identify where they live.

Occasionally we find opportunities where we can buy (or sell) assets for mere cents on the dollar – because, after all, we are capitalists.

In this week’s edition of the WOW: Crypto Currencies Go Ballistic

I've received at least 5 emails on this topic now.

What on earth is going on with the altcoins?

Here's one message I share with you from a particular gent who, apart from being a thoughtful, intelligent, and successful guy, has more hair than me:

"Dear Chris,

 

Just curious, have you been following crypto-currencies – the altcoins in particular ?  There are two very interesting developments under way:


  1. The total market value of all crypto-currencies has almost doubled from about $18 billion to about $34 billion … in just FOUR MONTHS !!
  2. While BTC has increased in price about 40% from $956 to $1,335, its market share has dropped dramatically from about 90% to just over 60% … also in just FOUR MONTHS !!  Altcoins such as ETH, Ripple, Dash, and especially PIVX have increased in value 600% or more (FYI, the percentage increase for PIVX is not a misprint – it increased in value 173 times). .  See spreadsheet below

 

The growth in the overall value of the crypto-currency markets makes me wonder if we reached an inflection point where the ‘dam has broken’ so to speak and a flood of money is about to pour into this market (n.b., SEC has agreed to revisit the Winklevoss Bitcoin ETF application as well as an application for an ETF that would invest in ETH).

 

The reasons behind the performance of the altcoins is something of a mystery to me.  I get it that the likes of Microsoft and Chase-Morgan announced they would be backing ETH which would explain its increase in price, but I do not know why the other altcoins have done so well especially relative to BTC.  BTC is about the only crypto-currency the vast majority of the investing ever has heard of and yet major amounts of money are flowing into the altcoins yet I have no idea how more than a handful of people with substantial amounts of money even know about these altcoins let alone why they would have invested in them.

 

FYI - I have begun diversifying into ETH.  It’s now 13% of my crypto-currency position.  I also am planning to take small positions in many of the other altcoins listed below over the next few months.

 

Pretty unbelievable"

 

WTF is happening?

Take a look at the Bitcoin market cap:

And this - all the altcoins combined market cap:

And Bitcoin's dominance wanes:

Ok... so this presents a host of questions.

Let's Start With What We Do Know...

Bitcoin, which I've written about extensively, got one helluva boost in the last week, rising to over US$1,400. Now, this was pretty easy to figure out. All it requires is curiosity, a stubby finger, and Google.

With those three things we can see that about 50% of trading volume in the 24 hours leading up to this record breaking rally came from the Bitcoin-JPY exchange rate.

We also know that our sake drinking friends recently deemed the cryptocurrency a legal form of payment. It seems that, given the option of holding yen and BTC, Mrs. Watanabe did some math.

Then, over in the land of trigger warnings, safe spaces, and rioting-latte-drinkers we had the stern-faced suits at the SEC suggest they'd be reviewing their decision for Zuckerberg's-old-buddies-proposed ETF, the Winklevii brothers (plural).

All obviously bullish for Bitcoin. No surprises there.

Altcoins

As my friend mentions in the article above, we've got the likes of Microsoft and the vampire squid's half brother JP Morgan backing Ethereum so it's easy to see why Ethereum got a shot of espresso.

What About the Others?

You tell me.

I suspect it's a momentum driven "who's next" game being played, though I profess I'm largely unencumbered by knowledge when it comes to the hundreds of altcoins out there.

Here I lean on a friend, entrepreneur, fellow investor, and super nice guy Rolf Versluis, who wrote an excellent piece on altcoins. Read it. You will be better of for it... and probably more attractive, too.

The Bigger Picture

Blockchain is here to stay.

Anyone that thinks bank issued fiat currency as we know it today is going to still be with us in the next 50 years or likely less simply isn't paying attention.

Central banks absolutely will begin to use a blockchain to create their own currencies.

The simplest way for any central bank to do this right now would be for them to fork the Bitcoin protocol into a new protocol that is unchanged, except that the central bank would set and adjust the block mining reward as they see fit - not unlike modern day paper currency.

In this way the central bank’s crypto-currency would be decentralized in transactions and centralized in supply.

The Bank of England are already working on this, as discussed in this article.

Now, any blockchain could be used. It doesn't have to be the Bitcoin protocol as India proved with Indiastack.

A hypothetical situation...

Central bank A creates its own crypto currency, forbids the use of any others. Not any different from the situation today, except that it's fiat currency which individuals are forbidden from creating.

What's stopping them?

They're broke.

The monetary system is held together by termites and desperately needs a fix. QE and negative rates haven't done the trick and instead have left us with unimaginable debt loads.

Like the chubby boy north of Seoul, they're running out of options.

This is not to mention the unprecedented level of transparency a government would have with a crypto-currency. Every single transaction that takes place is irrefutable, tracked, and registered on the blockchain. Taxation could take place at source. A few lines of code would solve that problem.

Forget about banning cash, which can be transacted hand to hand as well as via the banking system.

With a crypto-currency everything would go through the chosen protocol meaning that when you buy that "pleasure toy" for your wife or shell out for drug rehab for your wayward cousin, it's all recorded, registered, archived - ready to be mined by "algos" which will eventually preclude you from buying too much booze since your health insurance won't permit it.

TOTAL control.

Bliss to sociopaths from Washington to Beijing and everywhere in-between. Not only can taxation take place at source but try speak out against the establishment and watch them seize your entire net worth with a click of a button.

At a policy level: think of the immediacy of data provided to policy makers, who - though they have proven completely inept at managing an economy - will see a treasure trove of granular data and think to themselves, "whoah Janet, this is exactly what we've needed all along".

Undeterred by a wall of evidence suggesting they're buffoons incapable of walking your dog and with a new set of tools they'll gleefully set to work.

The blockchain, when compared to their existing toolbox, will appear to be what a chainsaw is to scissors. Whoopeee!

Can you feel the onrushing Orwellianism?

Fools will say, “If you are not doing anything wrong, you have nothing to fear.” This is 100% true and completely plausible, if government were benevolent. It's not.

Right now we don't know whether governments will succeed or not.

We do know that the technology allowing for such a world exists. In a situation where things really come unglued it's possible their legitimacy comes into question and - combined with their inevitable incompetence - paves the way for something entirely different.

Remember, these discussions we're having here are based on technology which only a decade ago never even existed.

When gunpowder was created it would have been easy to extrapolate a view as dystopian as ever.

That never happened.

Maybe we get lucky and we find a world with more, not less freedom.

The jury's still out.

Question for the Week

Cryptocurrencies Poll

Cast your vote here and also see what others think will happen

- Chris

"The entire human populace is now taking charge of the means of production and changing the rules of the game. They’re making their own freaking currencies, for God’s sake." ? Paul Vigna, The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order

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allthegoodnamesaretaken's picture

Nothing new: in the beginning it was gold, the discovery and production of gold, the manufacturing of gold into a white powder.  Today and tomorrow it will be gold, always gold, gold is the value of all things.  We, us human begins, we have learned nothing new, we are still stuck in the past.  For the production of gold were we created for the insatisable desire to possess gold will we all die.  The truth is: we could pave their streets in gold, their, being the warmongers and selfish people running our world, in spite of us; we, could pave their streets in gold or cover them in blood, whichever comes first, in the end we will destroy ourselves and still, never have we known: the true value of anything or everything is only what we percieve it to be, the truth is: in all the Universe, nothing, and I do mean nothing, but life, really matters, at all.  What we today throw away is all that can matter.  Nothing else matters.  The value of a thing is the life it possesses; when we begin to plan for life its future, when we regard all life with reverance and care, when we truly learn to love life and its value to all the Universe, then, and only then, will we have learned the value of: anything and everything.  So you know, a weed because it is alive has more value than all the gold in the world. 

AE911Truth's picture

If you are concerned about digital transactions be tracked, then use a privacy enhanced crypto-currency like Monero, Zcash or Dash.

silverer's picture

I think I'll issue a crypto currency and set the value to $500 a "coin". 100 million coins ought to do it.

Silver Savior's picture

Yeah why not? Now everyone is making their own currencies out of thin air. lol.

pparalegal's picture

Oh they will create alright. Just not for public use. A two tiered system. One for the club in international trade and loans and one the prols get to use in whatever local currency they are issued. Under the guise of terrorism, drugs (or some such thing) they will outlaw anything they don't control. The taxman cometh with a sickle.

Silver Savior's picture

I primarily prefer Ethereum but even that is getting too expensive. I am starting on the Litecoin. Trying to get on the Gemini exchange too. And of course I need my 10 ounce silver bars too. 

GRDguy's picture

Shake Shack went ballistic in its early public days, too.

Someone's pumping, and soon they'll be dumping.

Silver Savior's picture

It's different this time. lol.

JTBfromtheWL's picture

I been trading them on high leverage 10x or more. It is far from over. Been trying to help you ZH folks! I always just lurk, but this is serious, lol. Marketcap of ALL crypto (btc included) is 46billion ATM. GDP of Nigera is 481billion. Tiny market, crypto. I could make predictions all day, but you can too. I made a site to explain what I'm doing. http://cryptoinvesting.net  As long as they go up and down, it's worth trading! Doesn't matter if they are worth anything or not...I own multiple and buying buying everyday. Selling once in awhile to take some profit away, and reinvest into even larger positions. Sure sounds speculative...because it's still infancy. 46billion market cap is insignificant today...it'll grow. If you want to know how a non-manipulatedmarket trades, take a look.

Silver Savior's picture

Yeah I got on with it and I can't believe how much money it's making from seemingly nothing. I just wonder what really cheap ones offer great potential. 

Secret Weapon's picture

Good read.  Thanks ZH.

Hugh_Jass's picture

Buy the alt-coin Unobtanium $UNO

You'll be glad you did!

Pop3y3too's picture

That's what they'll be calling the Silver Eagle, soon.

GodSpeed_00's picture

The way cryptocurrency works it will literally be the world against bankers. People will have to give them the power to take over bitcoin. Not gonna happen.

Pop3y3too's picture

I dunno. Most people I know are clueless. Getting them to give up their power so far has seemed to be child's play to TPTB. I like to hope as much as the next guy but...good lord we some stupid people.

Pop3y3too's picture

I gotta gripe here.  I split my coins up between two different wallets for safety and security's sake and let core decide for me how much fee would be paid to make it happen. I was surprised at how much it took to transfer those funds and when the time came to transfer them back so I could make a purchase with the combined value I chose the smallest possible fee (.0001 I think) per kb.  Now my transaction is hung in limbo because apparently I didn't pay enough.  WTFudge?!  I'm merely moving my coins from one wallet to another, like taking dollar bills out of my jeans wallet and transferring them to my dress pants wallet and it COSTS me to do that.  And what's worse, they say "oh it's not THAT much of a fee".  Well, it may not seem like it now but if BTC value is supposed to "go to the moon" then at some point .0001 is going to be worth a LOT.  

 

And it's not like I don't hold my own weight on the network. I used my own rigs to mine (in a pool) so why am I not paying MYSELF that fee? And, I leave at least one core run all the time, usually two, with typically 15 clients connected to each.

 

I think I've found the utimate downfall of the BTC network.  If it upset me enough to spend 15 minutes writing a gripe post about it it must be significant because I don't usually complain about anything.  !!  !!!!

 

Buck Johnson's picture

Govt. will issue crypto currencies, just you wait.

 

Pop3y3too's picture

Oy!  I'mz strongz to dee finnich cause I eats me matzah balls, yep.

1.21 jigawatts's picture

No Kike with ANY supercomputer can compute faster than (and thus not manipulate) a ledger shared by a network of millions of Goyim.