Cryptocurrencies Are Crashing Again

Tyler Durden's picture

The largest cryptocurrencies are under presure again today - Bitcoin, Ethereum down around 10% - as it seems some anxiety remains ahead of the August 1st scaling decision deadline, chatter about Russian Bitcoin viruses, and a new report from BofA has raised more questions than answers about the future of virtual currencies.

On average major crytos are down around 10%...

 

With Bitcoin back near $2500...

 

And Ethereum testing $200 support...

 

No obvious catalyst but several notes going around include... Concerns over a Bitcoin Virus infecting Russian devices... (via CoinTelegraph)

Russia’s chief presidential advisor on the Internet has stated a Bitcoin mining virus has infected up to 30 percent of Russian computers.

 

Speaking in interviews with RNS and RBC, Herman Klimenko said that although infection rates varied by region and device, it involved at least 20 percent of machines.

 

“In regions with lower bandwidth instances are reduced, but we’re looking at 20 to 30 percent of devices being infected - iPhones and Macs are less prone,” he commented.

Elliott-wave guru Prechter is predicting a bear market for Bitcoin.. (via CoinTelegraph)

Market analyst Elliott Prechter has projected that digital currencies, particularly Bitcoin, will experience a sharp decline in the near future. Prechter has correctly forecast the surge of Bitcoin in 2010 when the cryptocurrency’s price was just six cents.

 

In his July 13, 2017 report, Prechter claimed that the Elliott wave pattern, optimistic psychology, and Blockchain bottlenecks will lead to the collapse of the digital currency market.

 

"The price activity and manic sentiment that led to present prices have dwarfed even the Tulip mania of nearly 400 years ago. The success of Bitcoin has spawned 800-plus clones (altcoins) and counting, most of which are high-tech, pump-and-dump schemes. Nevertheless, investors have eagerly bid them up.”

 

Prechter, meanwhile, has correctly predicted Bitcoin’s rise when it was just priced at six cents in September 2010. Elliott Prechter, however, said that the excitement about Bitcoin surpasses the tulip bulb mania in The Netherlands in the early 1600s.

 

“A mania can be both a mania and a revolution at the same time."

and a big BofA report suggests to sustain a virtuous cycle of rising liquidity & falling vol bitcoin has to gain acceptance as collateral, an unlikely event...

Is bitcoin a currency? A commodity? Neither? A proper store of value like the EUR, T-bills, or gold is measured by 3 factors: safety, liquidity, and return. Diversification is a plus. Bitcoin remains very volatile. But it has experienced a surge in liquidity in the last six months, surpassing $2bn a day. Moreover, bitcoin is uncorrelated to any financial asset, commodity, or currency we study in this note. The flipside of extreme diversification is that there is no way to explain let alone predict returns. Could bitcoin see a virtuous cycle of increased liquidity, lower volatility, attractive returns, and wider acceptance? Possibly, if regulated financial institutions move to allow bitcoin as pledgeable collateral. However, large inherent risks to digital tokens such as fraud, hacking, theft, new protocol adoption, limited acceptance, and that it is not legal tender many places in the world make it an unlikely development.

 

A wide array of risks obscure the future of cryptocurrencies

 

When examining the safety of any asset, volatility is not the only source of concern. In the case of bitcoin and other virtual tokens, worries are magnified given that it is not legal tender in many places in the world or regulated by any government bodies. In fact, decentralization is central to bitcoin. As such, risks like fraud, hacking, and outright theft have plagued the cryptocurrency world in recent years. In particular, the surge in initial coin offerings seems hard to justify and creates a risk of fragmentation in the market. Confidence could suffer if many of these offerings turn out to be outright scams to circumvent investor protection regulations. After all, it is hard to "know your client" if a bitcoin transaction happens through an exchange in an obscure jurisdiction. Other issues more specific to the functioning of cryptocurrencies, such as finding an agreement regarding the adoption of certain protocols, are also worth mentioning. For example, should bitcoin split into two digital tokens because miners cannot find common ground, a collapse in confidence and value could follow. Lastly, it is worth noting that cryptocurrency transactions are taxable in many jurisdictions, presenting additional challenges to users that are unfamiliar with the fiscal implications of using bitcoin.

 

A key step for bitcoin would be to become pledgeable collateral

 

Still, bitcoin and ethereum have delivered impressive returns so far as fiat currency flowed into these digital tokens. Is it realistic to assume cryptocurrencies will continue to appreciate over time? The dollar price of gold has appreciated over centuries in line with inflation, but some periods have experienced much faster gold price appreciation than others. Moreover, periods of high real interest rates have been particularly damaging for gold returns in the past. In our view, cryptocurrency returns will mostly depend on the faith placed by individuals, corporations, and financial institutions on this emerging technology. As discussed earlier, there are large inherent risks to digital tokens such as fraud, hacking, outright theft, new protocol adoption, limited acceptance, and that it is not legal tender in many places in the world. Moreover, a crucial hurdle remains. Most regulated financial institutions allow their clients to borrow against financial or physical assets, but we are not aware of any major institution that takes cryptocurrency as collateral at the moment. Thus, in our view, a key step for bitcoin would be for it to become pledgeable collateral.

And finally anxiety remains ahead of the fork.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Shitonya Serfs's picture

Interesting "currency" volatility. Probably on purpose. Can buy a loaf of bread today, or car tomorrow, then a bag of chips in 2 days.

syzygysus's picture

All that AND a bag of chips next year?

Creepy_Azz_Crackaah's picture

"Currency."

LOL!

Although I have to admit that those electronic 1s and 0s backing them are incredibly useful and valuable...

tmosley's picture

As people are making idiotic comments about crypto and money, I'll cut and paste my post from the last article here:

1. General Acceptability-the dollar wins big, but crypto is making gains. Gold pulling up the rear.

2. Portability-crypto wins HUGE

3. Indestructibility or Durability-Gold and crypto are both indestructable in any practical sense--crypto requires an event that destroys the internet (which would have to destroy the world, realistically) to be destroyed, while gold needs a particle accelerator or has to be dropped into the heart of a star

4. Homogeneity/fungibility-gold, crypto, and dollars all tie here

5. Divisibility- gold is technically more divisible for now, but crypto is easier to divide. You don't need change for crypto transactions, so they beat cash, but are in line with digital dollar transactions.

6. Malleability-crypto wins big, with gold a distant second

7. Cognizability-dollars win big, quasi-tie between gold and crypto, as most people couldn't really tell you if a coin was actually gold or not where it is easy to identify a cryptocurrency, even if most people don't know much about them yet.

8. Stability of Value-Gold wins big, but crypto will stabilize once adoption levels off, at whichever level you think that will happen

9. No Damage to the Economy from Hoarding-my own addition. Gold loses to crypto and dollars as it has use in industry, but the difference isn't tremendous. This is the same reason why silver would be very bad as money today--it would destroy many industries thanks to the tremendous increase in cost that would come with hoarding as money.

In my judgement, crypto has surpassed gold in most aspects, and better, since it can be changed in order to meet market demands, whether through modification of the algorithm (with the implicit endorsement of the market) or via market selection of a crypto with better characteristics. Areas where the dollars exceed seem likely to not be the case for much longer, where areas where cryptos are deficient (stability) are likely to see huge improvements as they are fully adopted.

BaBaBouy's picture

1000 Separate Coinz out there now...

I Mean, what could go wrong ?

I Mean, how high is a stack when its composed of Air ?

tmosley's picture

Yeah, I mean, who wants variety and market pricing when you can just have one flavor as so dictated by the state?

Zero_Ledge's picture

You forgot

10) Printability.  Crypto and dollar are infinitely printable; precious metals are not.

VisaCoin, MasterCoin, GoldmanCoin (already "patented"), FedCoin, CitiCoin, etc. etc. etc.

 

eclectic syncretist's picture

You also forgot the most important property of money, the one that most goes hand in hand with the principle of all being entitled by divine right with life, liberty, and the pursuit of happiness. Namely,

1) Money must not be involuntarily confiscable at the whim of banksters, governments, or any other entity.

This was the intention of the US Founders. We are experiencing the repercussions of politicians and their bribing banksters having willfully violated the Founders intentions, a crime for which they deserve commensurate punishment.

tmosley's picture

So again, you are claiming that gold isn't money!

Did you forget that the US confiscated gold in the 1930's? Are you so ignorant of history as to fail to realize that it has happened NUMEROUS times?

Jesus Christ, get your shit together.

Herd Redirection Committee's picture

You know why I didn't get in on Bitcoin back circa 2015?  Because I could not find a goddamn chart of its price!  At this point the miners are in charge.  AFAIK that was never the expected outcome, for the miners to have control of it. 

PoppinFresh's picture

There may be infinite shitcoins but what drives price is market demand. If nobody wants to buy your shitcoin then it's worthless.

SILVERGEDDON's picture

A nothing burger is still a nothing burger by any other name. 

tmosley has turned into a retarded version of Fonestar.

At least Fonestar was funny.  

tmosley's picture

>I can't tell the difference between arguments and non-arguments

Which is probably why you still own silver.

HappyDeathMetal's picture

I enjoy tmosley's posts. Its entertaining. He makes good arguments and the silver stackers are pissed off and can't get their heads around Bitcoin because they've invested so much emotinal energy into it over the years. I read here to try and see both sides of the argument about Bitcoin and I'm yet to see how in any way how dollars or gold is better than Bitcoin.

Mementoil's picture

The advantages of gold over fiat currencies (including the crypto kind) are only revealed to the naked eye during the time of a true crisis (the kind of which none of us has seen in his lifetime).
Only then shall we see which form of money retains its value and which evaporates into thin air.

HungryPorkChop's picture

But, but, but...Goldman just released an article stating that Bitcoin would hit ~$3,900.  Did the Muppets get it again!

Raffie's picture

Hows the PM doing?

Looks like gold loves the $1250 mark... I'm sure in another 5 years it might be 'allowed' to get to $1300.

Silver looks like it wants to maybe go into the $15 range.........

Yes, only focus on Cryptos and ignore PM that get 24/7 beatings.

 

HungryPorkChop's picture

@Raffie: Blockchain in some form is here to stay just making fun of the usual muppet calls recently released.  When they say up it goes down.  Lordz Blankzfein is that you?

chubakka's picture

its not even air.  air would stack higher. 

Latitude25's picture

You better check the definition of malleability.  Your flash drive won't survive a hammer.  Otherwise the term is completely inappropriate for CCs.

tmosley's picture

Cryptos are malleable on a level that gold can't begin to emulate. They are formless. Sun Tsu would have liked them.

eclectic syncretist's picture

Uh Oh! It looks like they failed to reach the old highs.

tmosley's picture

You say that as though it is supposed to scare me or something.

Are you a child?

eclectic syncretist's picture

No Fonestar, I am not a child, and I don't believe that you are scared, although your continual incessant pumping of this subject smacks of a certain sense of desperation.

tmosley's picture

>Posting detailed arguments is pumping

If not a child, then you have the education level of a small one. Or you went to an American public school and failed to learn to think for yourself after.

OpenThePodBayDoorHAL's picture

Excellent attempts above tmosely.

But ask a genius dev sometime this simple question: "how do you bind the data to the hash?"

In other words how do you ensure that the data ("Joe has a bar of gold or a stack of currency in a vault") to the encrypted keypair (crypto "asset").

For blockchain "native" assets like Bitcoin it doesn't matter because the data IS the hash. For other crypto "assets" that say they "ride the crypto rails", fail. There's always a human, who lives in a jurisdiction, subject to its laws, who asserts this "indorsement" (look it up).

So that leaves Bitcoin. You perpetuate the nonsense that the limited supply is "built-in to the protocol". Nonsense. It's one line of code that can be changed by >50% of miners. Oh, look, >50% of mining is in China.

So let's talk about China for a minute. In China the Communist Party owns 100% of all land. If you're lucky they might give you a 70-year lease on land that was confiscated from peasants. Approximately 40 million have "lost" their land in this way, land that was usually paid for in gold, that they had controlled throughout the Japanese occupation, throughout The Great Leap Forward, when cadres raided homes looking for evidence of "capitalism" and 800,000 landlords were executed. Even they did not do what the CP has done, and continues to do (estimated 3 million people displaced annually).

But hey, China has laws and courts, too! You could sue! 99.5% of court cases in China end in convictions. So the real game is with local prosecutors, and getting them (with the help of a little paper bag full of money) to file charges. Every law imaginable is on the books so it's just about enforcement, whether you picked the right local faction (do the reformers or the established guys in the region have the juice at the moment). If you picked wrong then not only will you get stuffed but you might get a bullet (financial crime is punishable by death).

OK so this is the jurisdiction that you want controlling your MIM (Magic Internet Money)?

Bitcoin can keep going up, sure. The investment thesis is "it's going up because it's going up", not because some huge numbers of people in the world are using it for anything at all.

And for Mr. BoA genius analyst, riddle me this: would a bank loan against an "asset" that drops 28% in 24 hours?

tmosley's picture

Hate commenting after something has slipped off the front page, but maybe you will see it.

If miners were to do something so stupid as to increase the number of bitcoins, there would be a hardfork, because the market doens't want there to be more bitcoins. While the miners control the main chain, the market picks which chain will be worth more, and the secondary chain where that idiot move didn't happen would appreciate in price while the other would drop to near zero quickly. Miners realize this and are very careful about keeping the interests of the user in mind when talking about modifying the code. If the commies seized the miners, they would just become pariahs, mining a dead crypto.

As to your last question, nobody needs loans against crypto. Hence, crypto will expand its market cap to include loan money. This is a big deal.

SILVERGEDDON's picture

Ah, Quai Chang Mosley - when you can snatch Crypto from my hand - then, you will be ready.

Ha ha ha. 

tmosley's picture

You don't have any cryptos. You are a poor nocoinz loser.

So sad :(((((

Raffie's picture

Don't encourage these hive mind stackers to get cryptos.

Let them lose out big time.

Let them do the WAITING GAME. vhttps://www.youtube.com/watch?v=rLJQT3jbd5I

Herd Redirection Committee's picture

I am interested in cryptos.  I just don't want to buy at alltime highs.

Blood in the streets and all that.

Raffie's picture

In the VERY LEAST have an accounts setup and expande the limts of how much you can buy.

Have a software or hardware wallet in hand and ready to go. Exodus wallet and Ledger Nano S are both great wallets.

I'm setup on Coinbase and Gemini exchanges.

On Gemini you wire xfer USD to the exchange, setup your buy orders so when it goes low you will buy.

Many ways to do it.

malek's picture

"Cryptos are malleable on a level that gold can't begin to emulate."

You are entirely correct here
as nothing is more malleable than fantasies.

Latitude25's picture

In your little world 1. may be true but certainly not world wide.

tmosley's picture

Hahaha, where do you go shopping with gold and silver coins? I want a store name and address.

Latitude25's picture

Your statement is poorly written.  Acceptability as what?  A store of value certainly not.

BLOTTO's picture

Of the 100's of crypto currencies available...how do you which is the right one to invest in, if any?

tmosley's picture

Buy the ones with the best features. They tend to be the ones near the top of the market cap rankings with lots of volume. The banker "cryptos" are near the top of the market cap rankings as well, but have low volumes because nobody but bankers want them.

Herd Redirection Committee's picture

T, what do you think of LTC and Dash?   Are Ripple and Ethereum the banker cryptos?

Raffie's picture

I am hearing Litecoin is going to rush upwards in price in the next few months.So I'd buy LTC and hold right now. $45 is a great buy considering it is expected to go tripple digitals in the very near future.

Converted my BTC to LTC then after LTC goes up in price to where I want will convert back to BTC.

Ripple is owned by banks, so beware. I'd avoid Ripple, but you can make money on it.

Ethereum is great as well not banker owned, just 'liked' by many. https://blog.coinbase.com/a-beginners-guide-to-ethereum-46dd486ceecf

BTC/ETH/LTC are the 3 main coins I'd focus on.

Aug 1st has maybe BTC being hardforked and LTC going big time with MIT.

That is my input.

SC1SS0RS's picture

LTC and DGB have the best outlook through August.  DGB's are about .02c today.  It's innovative with some sharp people behind it, so has the potential to turn into rainbow puking unicorn.  BTC is in flux for a few weeks and ETH is riding the ICO pump and dump waves if you enjoy vomit rides jump in :D.  Just remember to swap you MIM's for PM's before the music stops!

tmosley's picture

LTC is what bitcoin could be if it had governance that wasn't so bogged down by precedent. It waits in the wings for the day that Bitcoin fails, so I have a good bit of it. Dash is great, and forms the majority of my "digital cash" IE quasi-anonymous crypto. I also have zcash, but significantly less. I never reaserached Monero, so never bought any, but a white paper some kind ZHer posted showed its anonymity was reliably defeated, so I think I will stay away from it.

Ripple is a banker crypto. Ether is something different. Though it is used and boosted by bankers, I think its use is much broader. I have quite a bit of it, where I have zero Ripple (I had some early on where my policy was "buy the top five", but I have soured on it enough that I excluse it).

eclectic syncretist's picture

Gold is for storing value, not blowing it, jackass. Get yourself another dozen credit cards if that's all you're interested in LOL!!!!!!!!

tmosley's picture

So you are saying that gold isn't money then?

SILVERGEDDON's picture

Gold - is lasting value. 

Fiat - is faith based paper promises.

Crypto - is currently a vaporware control pilot project.

tmosley - is a pump and dumper. 

Raffie's picture

Everything is faith based when it comes to value.

If you are stranded and alone on a island and have a gold coin. Exactly how much value does it over a bottle of drinking water? NONE.

The situation dictates what value is on a item.

Please link that cryptos are vaporware. I'm sure you got proof and we would like to see the hard facts.

 

Golden Phoenix's picture

When I was a kid - which was a long time ago - I'd go to the bank and come back with rolls of coins. Finding a silver mercury dime was a rare, major score. They were worth 45 cents at the time. I promptly sold any silver coins I found and enjoyed the fruits of the proceeds as kids will do. As an adult I regretted it and decided to do some research to find out what I'd missed out on.

What I found was the same dimes are currently for sale on Ebay for $1 or less. The return to date, indexed to inflation, is actually negative. Then there's opportunity cost. A savings account would've performed better. Stocks outperformed silver dimes by several orders of magnitude. 

Fonestar stopped advising you to buy bitcoin at $2. It's at $2500 or more. If you had bought then and sold BTC today you'd be able to buy 1250 times more silver mercury dimes. 

If bitcoin goes down to 1000 no doubt you will celebrate this as justification of your viewpoint oblivious to the fact you'd be celebrating not still being able to buy 500 times as many silver mercury dimes as you started with. 

You think you're burning people with your remarks when you're standing in a tarpit. The only person you're burning is yourself. If it wasn't so sad it'd be quite comedic. I'm just kidding, it's funny as hell.

 

 

Raffie's picture

Haters can only hate.

I also find them mildly amusing too.

PM and cryptos are against the system, but the hive mind stackers view everything with EYES WIDE SHUT.

eclectic syncretist's picture

Are you trying to sound like a dumbass? It doesn't really matter what I think is money, because Article I, section 10, clause 1 of the US constitution states:

No State shall ...... emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts.

Congress, banksters, and your boy Saki may have found a temporary end around the supreme principle that money should not be a confiscatable entity, but that's not what the Founders wanted.