Buy Bitcoin's Dip Before New All-Time Highs, Analysts Suggest - Benzinga


Benzinga 12 October, 2021 - 04:41pm 2 views

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In early 2011, the then-obscure cryptocurrency Bitcoin (CRYPTO:BTC) reached $1 per coin for the first time. It was a milestone celebrated by the few crypto-enthusiasts around back then. The rest of the world was either oblivious or left scratching their heads about what Bitcoin even was.

Everyone has heard of Bitcoin now. As of this writing, the price per coin is more than $57,000, representing a total market capitalization of almost $1.1 trillion, according to CoinMarketCap. Therefore, owning 100 bitcoins -- a mere $100 investment in early 2011 -- would be worth an eye-popping $5.7 million today.

Of course, this hypothetical windfall ignores a very important point -- you probably couldn't have invested $100 in Bitcoin back then. At least not as easily as you can today. Here's why, why it matters, and what it might mean for the price of Bitcoin in the future.

Bitcoin was created in 2009. If you want to own bitcoins today, you can simply deposit money into an app like Coinbase, Square, or Robinhood and click "buy." But back in the early days, there weren't reliable third-party methods of exchanging dollars for coins.

Bitcoin Market was an early attempt at a cryptocurrency exchange. It used PayPal as a way to exchange money, but PayPal eventually stopped authorizing transactions on Bitcoin Market due to allegations of fraud.

Bitcoin Market and other early exchanges were unreliable, making it hard to invest $100 in Bitcoin in 2011. Chances are, if you owned Bitcoin in the early days, you obtained it by mining it yourself. Either that or you were a restaurant in Jacksonville, Florida, where a customer bought two pizzas for 10,000 bitcoins in 2010.

The struggle to convert dollars to bitcoins in the early days is a reminder that Bitcoin wasn't necessarily designed as something to invest in, hoping its value would increase. Bitcoin was built to be a digital currency used for buying and selling goods and services. We may joke that those two pizzas cost a staggering $500 million in today's price, but buying pizza was, in fact, precisely how Bitcoin was intended to be used.

Although Bitcoin was designed to serve as money, critics point out that Bitcoin would struggle to handle the world's financial transactions. Consider that there are relatively few transactions on Bitcoin's blockchain compared to the global financial system. With its current infrastructure, Bitcoin is prone to bogging down and, as a result, transaction fees spike outrageously high from time to time.

Bitcoin is due for an upgrade called Taproot, which should help alleviate its scalability bottleneck. But I believe the more important point is that Bitcoin isn't being used as intended. People aren't buying and selling with Bitcoin so much as they're holding Bitcoin.

For example, consider cryptocurrency mining companies. Two of the biggest are Marathon Digital Holdings and Riot Blockchain. Marathon Digital and Riot Blockchain have mined 2,098 and 2,457 bitcoins, respectively, so far in 2021. Neither company has sold any, meaning Marathon Digital now has 7,035 coins while Riot Blockchain has 3,534.

Many investors are doing the exact same thing. They're buying bitcoins and holding on to them, expecting they'll increase in value over time.

To me, a conversation about cryptocurrency always comes back to supply and demand. Consider that mining is the process of unlocking new bitcoins and releasing them into the overall supply. However, because miners are mostly holding, the supply available for trading isn't increasing as it otherwise would. And investors are holding bitcoins instead of spending them, and this is having the same effect of reducing Bitcoin's float. 

Therefore, Bitcoin's supply is constricting but demand appears to be growing. This demand isn't just coming from investors -- companies and world governments are buyers as well. MicroStrategy is a business-intelligence software company that holds more than 100,000 bitcoins. But companies like Latin America's e-commerce and payments giant MercadoLibre have quietly added bitcoins to the balance sheet as well in recent months.

El Salvador, meanwhile, recently made Bitcoin legal tender alongside the U.S. dollar. But to make this monumental change, El Salvador's central government bought bitcoins. By holding Bitcoin, it hopes to reduce the coin's volatility for local merchants. Brazil's legislature is slated to hold a vote to make Bitcoin legal tender as well. Like El Salvador, would Brazil buy and hold bitcoins to reduce volatility risks for businesses? Time will tell.

In short, Bitcoin is largely being held instead of spent, and this constrains supply. Meanwhile, demand from investors, companies, and governments is growing. If this continues, it won't be surprising to see the price of Bitcoin head higher in 2021 and beyond.

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Bitcoin And Ethereum Surge: New Highs By The End Of 2021? 13 October, 2021 - 02:20pm

Trading cryptocurrencies is like riding a psychotic horse through a burning barn. Just when it looks like they are ready to fall into a bearish abyss that confirms the warnings of the asset class’s high-profile opponents, they explode higher. Warren Buffett and his cohort Charlie Munger have called cryptos “financial rat poison squared” and “disgusting and contrary to the interests of civilization.”

Like all markets, cryptos look great on the way up and awful on the way down. As they rally, they validate the growing number of supporters adopting the asset class’s libertarian ideology that removes control of the money supply from central banks and governments and returns it to individuals.

The incredible volatility only exacerbates the emotional responses. In May and June, Bitcoin and Ethereum looked ugly. In August and September, they recovered and consolidated. They are back on the bullish trail in early October, with prices looking like a challenge of the all-time highs is in the cards before the end of 2021.  

It’s been a wild ride in Bitcoin in 2021. After reaching a high of $65,520 per token on Apr. 14, the day of the Coinbase Global (NASDAQ:COIN) flotation, the price nosedived to a low of $28,800 on June 21.  

The weekly chart shows the recovery that took the leading cryptocurrency to $53,125 in early September when it put in a bearish key reversal trading pattern. However, Bitcoin made a higher low at $40,085 in late September and rose above the $53,125 resistance level, reaching $56,815 last week. The technical break puts the $65,520 record high in play for the end of 2021.

Ethereum, the second-leading crypto, has been just as volatile. After reaching a high of $4,406.50 during the week of May 10, the bottom fell out of the Ethereum futures market.

The chart shows the plunge to a low of $1,697.75 in late June and a recovery that took it back over $4,000 in early September. At the $3,570 level at the end of last week, Ethereum was trending higher, and a new high by the end of the year is not out of the question. 

Historical volatility is a statistical measure of the past price variance of an asset. The cryptocurrency asset class exhibits extraordinary volatility levels compared to other markets.

The chart highlights that weekly historical volatility in Bitcoin futures has traded as low as 52.20% and as high as 128.50% in 2021.

The range in Ethereum volatility has been even higher at 79.82% to 149.95% since the end of 2020.

While the past is not always a guarantee of futures results, high levels of price volatility in the leading cryptocurrencies are a good bet for the coming months.

Many markets take the stairs higher and an elevator to the downside during corrections. Cryptocurrencies seem to be an express elevator in both directions.

The libertarian means of exchange that returns control from governments, monetary authorities, and central banks to individuals are likely to receive support from the following factors:

I also caution that capital invested in any cryptocurrency is at total risk. Risk is a function of potential rewards. You should never part with any money you are not willing to lose when approaching cryptocurrencies. The reasons for high caution in the asset class are:

Be careful out there in crypto land! New highs in Bitcoin, Ethereum, and many of the over 12,570 cryptocurrencies by the end of 2021 are a real possibility. However, like all assets, the risk of substantial pullbacks and elevator shaft rides lower increases with the prices.

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Bitcoin price is correcting, but what does futures data show?

Cointelegraph 13 October, 2021 - 02:20pm

BTC price rejected near $58,000 but derivatives data shows traders positioned in a neutral-to-bullish, leaving sufficient “room” for a new all-time high in 2021.

The current positive momentum could be dangerous if Bitcoin traders become overconfident and abuse leverage to open long positions. To avoid this, traders need to carefully analyze derivatives markets to exclude this risk.

Notice above how the altcoin market capitalization increased by 5.8% while Bitcoin posted a 20.8% gain in the same period. Sure enough, there were some outliers like Shiba Inu (SHIB) which rose by 200%, Fantom (FTM), which rallied 60%, and Klaytn (KLAY), which gained 36%. However, the aggregate market capitalization from altcoins did not accompany Bitcoin's performance.

Some well-known personalities, such as billionaire Wall Street investor Bill Miller recently expressed their optimism for Bitcoin while raising concerns on most altcoin projects. Miller explicitly mentioned the "big banks" getting involved and referred to "huge amounts" of venture capital money flowing into Bitcoin.

The recent Bitcoin frenzy seems driven by the macro-economic scenario. The United States increased its debt limit by $480 billion to pay off its obligations until early December. The inflationary pressure brought by unending stimulus packages and meager interest rates has been fueling the long rally in commodities.

For example, oil reached its highest level in seven years, and wheat futures recently hit a record high not seen since February 2013. Even the S&P Case-Shiller home price index has presented an annualized 23.3% gain.

To understand if Bitcoin traders got overly excited, traders should analyze Bitcoin's derivatives indicators like the futures markets premium and options skew.

The basis rate measures the difference between longer-term futures contracts and the current spot market levels. This indicator is also frequently referred to as the futures premium.

A 5% to 15% annualized premium is expected in healthy markets, which is a situation known as contango. This price difference is caused by sellers demanding more money to withhold settlement longer.

The recent 20% Bitcoin price rally caused the indicator to reach the upper limit of this neutral zone, meaning investors are bullish but not yet overconfident. Whenever buyers demand excessive leverage, the basis rate can easily surpass 25%, as seen in mid-May.

To exclude externalities specific to the futures instrument, one should also analyze options markets.

The 25% delta skew compares similar call (buy) and put (sell) options. This metric will turn positive whenever "fear" is prevalent because traders expect potential downside.

The opposite holds when option traders are bullish, causing the 25% delta skew indicator to shift to the negative area. Readings between negative 8% and positive 8% are usually deemed neutral.

The above chart shows that there hasn't been a single instance of options traders becoming overconfident in the past six months, which would signal "greed" because the 25% delta skew dropped below negative 8%. Meanwhile, the indicator has ranged near 0 for the past week, showing balanced risks between the bears and bulls.

Those findings necessarily show a lack of confidence from buyers, but it is quite the opposite. Had Bitcoin bulls already been overly confident at $57,000, there would be little room for additional leverage, increasing the risk of a cascading liquidation if a momentary price correction occurred.

Bulls are modestly confident and even a 20% price correction is unlikely to change the situation because the futures market's basis rate shows a reasonable premium after the recent rally.

5 Reasons You Should Invest in Cryptos Besides Bitcoin

Motley Fool 13 October, 2021 - 02:20pm

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by Lyle Daly | Published on Oct. 13, 2021

If you've started investing in crypto, you may be tempted to stick to Bitcoin (BTC). It was the first cryptocurrency, and it's the biggest by far. Since it leads the market, it's generally considered the safest option. It's also the easiest crypto to invest in, since there are so many places to buy Bitcoin.

While Bitcoin has its advantages, a Bitcoin-only approach isn't the best strategy for crypto investing. It's better to add other cryptos (often referred to as altcoins, because they're alternatives to Bitcoin) to the mix. Here's why.

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Bitcoin is famous for being the first cryptocurrency. Although that has made it extremely successful, being first also has its drawbacks. Since Bitcoin's 2009 launch, developers have created all kinds of more advanced and more useful cryptos.

While Bitcoin was originally intended as a digital currency, newer cryptos can offer much faster payments at a fraction of the cost. Solana (SOL) is one example, and there are many more cryptos that are faster than Bitcoin.

Bitcoin introduced blockchain technology, but more recent coins have taken it several steps farther. Ethereum (ETH) launched its own programmable blockchain that developers can use to create decentralized apps. There are also cryptocurrencies, such as Polkadot (DOT), that can use and bridge multiple blockchains.

At this point, Bitcoin's primary purpose is being a digital store of value. Other crypto projects have much more ambitious goals.

Since Bitcoin is the largest, most popular cryptocurrency, it often doesn't grow as much as smaller cryptos that catch on. Here's a look at how much Bitcoin has grown this year compared to a few altcoins:

Bitcoin has done well, but its results don't come near those of smaller cryptos that only recently started getting more mainstream attention.

To be fair, smaller cryptos carry more risk. Bitcoin is volatile, but it's less likely to fail because it's so firmly established as the top cryptocurrency. But if you're interested in crypto as a high-risk, high-reward investment, it makes sense to pick out altcoins to watch that potentially offer much greater profits.

Staking is a simple way to earn more crypto. When you stake crypto, you're pledging it to the blockchain, where it's used to verify transactions. There's no risk involved, and in return for staking crypto, you earn rewards. It's like earning interest on your crypto.

Not every cryptocurrency offers staking, and Bitcoin doesn't. For a cryptocurrency to offer staking, it must use a system called proof of stake to verify transactions.

Quite a few new cryptos use proof of stake and offer impressive rewards rates. For example, one of my favorite cryptocurrencies, Cardano, uses the proof-of-stake system. Anyone who owns Cardano can stake it and earn rewards of about 5% per year at the time of this writing.

Bitcoin uses an older system, proof of work, to verify transactions. You can't stake Bitcoin, which also means that you can't earn rewards on it.

Bitcoin's proof-of-work system operates through a process called mining. Bitcoin miners use special machines to solve complex equations, and the first miner to solve an equation gets to verify transactions and earn rewards.

The problem is that this leads to massive energy usage and waste. Recent estimates suggest that Bitcoin's annual energy consumption is similar to that of the entire country of Poland. It also generates about as much annual electronic waste as the Netherlands.

Not all cryptocurrencies are like Bitcoin. Proof-of-stake cryptocurrencies in particular are much better for the environment, because they don't use mining. Considering the negative attention Bitcoin has gotten for its environmental impact, greener cryptos could be a better long-term bet.

Not only does it make sense to add other cryptos to your portfolio, it's also easy to do so. Most major crypto platforms offer 10 or more cryptocurrencies. Some of the top cryptocurrency exchanges have over 50, giving you plenty of options.

If you're buying or planning to buy Bitcoin, you can probably buy lots of other cryptocurrencies at the same place. Consider using some of your crypto money for altcoins instead of putting it all in the Bitcoin basket.

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Why did Riot Blockchain stock go down today? (NASDAQ:RIOT)

Seeking Alpha 13 October, 2021 - 02:20pm

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