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Trading Tip `The Wall´ – Why Do We Fall, Bruce?

January 20, 2018 |

Trading Tip `The Wall´ - Why Do We Fall, Bruce?

This week, the price of bitcoin reached a low-point of -53% from its December high. A few weeks ago, I wrote about the Death of the “Get in before Wall Street!”-meme and why it made sense to Short the Great Bitcoin Bull. My viewpoint remains unchanged in that I’m still confident that the CME bitcoin futures listing was a core ingredient causing the bull run up to $ 19,891, as well as the recent fall down to $ 9,017 (Gdax). In this post, we’ll take a look at the stats from the bloodbath’s aftermath.

Also read: Trade Like You’re John McAfee

Trading Tip `The Wall´ - Why Do We Fall, Bruce?

The Great Fall and Futures

This diagram shows the CME bitcoin futures trading volumes for the first month since their listing. During this month, 27,390 contracts were traded, which accounted for positions totaling 136,950 BTC (5 BTC per contract).

Upon CME entering the market, it was speculated that Wall Street would take charge over the price discovery of bitcoin. The futures market (CME) and the spot exchanges (e.g. Gdax, Bitstamp, Bitfinex) are indeed interconnected through the actions of arbitrageurs and market makers, so there is no flaw in that thinking. But at 136,950 BTC per month, the CME volumes are currently too low to have any noticeable impact on the market on their own accord. As a comparison, this Wednesday alone 128,631 BTC was traded on Bitfinex.

There however a certain signal value to the CME market action which may influence traders other ways. The clearest example of such a thing I’ve seen was during the initial hours of the Cboe bitcoin futures launch on Dec 10, where Cboe completely dominated the price direction even on minuscule volumes. The CME and Cboe are potential avenues for institutional traders. As such, other traders might assume that CME and Cboe traders have access to better information; that they are “in the know”, so to speak.

If you wanted to capture what the signal was from the CME during the days leading up to our recent Jan 17 $ 9,017 low, you would have needed to gauge whether the CME bitcoin futures traders were mostly entering short or long positions. To some people, this task is confusing since every futures contract has both a short and a long side, so no matter how many contracts are traded, the net difference will always be zero. But that thinking fails to encompass the fact that a trade is the match between two different types of orders; a market and a limit order. The limit order is placed by a person (often a market maker) who enters a price where he’s willing to buy (long) or sell (short) at. At that point that’s just an order; it doesn’t cause a trade to happen yet. The trade happens on the market order; a person hitting the “buy now”/”sell now” buttons that consumes the closest limit order in the order book. If we then compare the net difference between the different (buy/sell) market orders placed in a certain interval, we can then gauge where the price pressure actually came from.

Trading Tip `The Wall´ - Why Do We Fall, Bruce?

In the lower part of this image, we see the cumulative delta of the January CME bitcoin futures (big thanks to SpeculatorSeth for helping me pull this graph together). It tracks exactly what I described earlier; the difference between market order short/longs. As we can see in this graph (click here to expand image) there was an unusual increase in short positions around January 11.

Trading Tip `The Wall´ - Why Do We Fall, Bruce?

At the same time, the price was just bouncing around in the 12800-14200 range. Since the cumulative delta went negative while the price was more or less flat, that means the CME traders were to an extent betting on the crash to happen while the rest of the market didn’t. Thus, the signal you would have gotten from CME on January 11 would have been to sell.

Did CME cause the crash?

Probably not. We’re still in the Gangnam Style Era of Crypto and mainstream investors are the ones moving the market, not the ones at the CME. And most mainstream traders aren’t basing their trades at the CME bitcoin futures cumulative delta. I contend we’re going down because of increased regulatory concerns coming from South Korea and China, and because we went up too much in over-anticipation of the futures launch, i.e. this is a correction, not a crash. The CME futures traders were just right in betting that this would happen.

What should you during a crash?

In a previous post I detailed The Art of Dip-Buying. An alternative to buying the dip is converting BTC into altcoins during crashes. Big apartments’ prices are less liquid than small apartments, therefore big apartments’ prices fall more relative to small apartments in the event of a real estate price collapse. Thus, it can make sense to trade your smaller apartment for a bigger one during a dip. Altcoins and bitcoins behave the same way. Altcoins are less liquid and collapse much more drastically than bitcoin. Between 15-17 Jan, the bitcoin price fell -37% (Gdax), but the price of Cardano fell -55% (Upbit) in the same time span. If you stayed in bitcoin from the moment of the dip, your fiat value would have moved up +25%, while a move over to Cardano would have moved you up +32%.

What are your thoughts about why the market dumped? Let us know in the comment section below!


Images via Shutterstock.


Disclaimer: Bitcoin price articles and markets updates are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the “money.”

The post Trading Tip `The Wall´ – Why Do We Fall, Bruce? appeared first on Bitcoin News.

Bitcoin News

Trading Tip `The Wall´ – Trade Like You’re John McAfee

January 15, 2018 |

Trading Tip `The Wall´ - Trade Like You're John McAfee

The cryptocurrency markets have turned into a casino and everyone is a winner, including perhaps the charismatic John McAfee. Following the dramatic bitcoin price rally to $ 19,891, and subsequent dump to $ 10,400 (GDAX), bitcoin is now in what is known as a consolidation phase where it will remain until it breaks out from that range. What characterizes consolidation is that the price movement is uncertain and pretty boring.

Also read: Did Ripple Almost Dethrone Bitcoin “Using This One Simple Trick”?

Trading Like John McAfee

Meanwhile that is happening, record-breaking amounts of new users are signing up to get a piece of the latest price action in crypto, and many of those users have little interest in waiting around for bitcoin. At the same time, the level of insane gains some traders make are warming up even the most conservative speculators to the idea of picking up some small cap coins just for the heck of it. Valuations have completely detached from reality, but nobody cares right now. The mentality is to make hay while the sun is shining — and it seems to be working.

I’ve decided to take a look at how you would have done if you would have instantly bought every coin John McAfee (old dude notorious for namedropping random coins with 0 research) has tweeted about since the beginning of 2017 (the first time he mentions a coin). While 13 out the 22 coins he mentioned aren’t currently tradeable, his performance with the coins that are is quite remarkable.

Trading Tip `The Wall´ - Trade Like You're John McAfee

Now, it may be true McAfee’s price calls are self-fulfilling prophecies because the market has collectively agreed to pump everything McAfee mentions, it’s perhaps also interesting to consider if the biggest factor to his success might be we’re in an extremely bullish market.

Trading Tip `The Wall´ - Trade Like You're John McAfee

A few months ago, if you asked me how to be successful at picking small cap coins I would describe the methodology I use to scrutinize projects (actually reading whitepapers, looking into Github activity), but given the state the market is in, I would say that none of that matters right now.

No Research, Buy What You Feel

My advice to you is instead to channel your inner McAfee. Do no research and buy whatever you feel like. This is the Gangnam Style Era of Crypto and the people who are moving the market buy things because of reasons such as low unit prices or cool looking logos. If you want to ride the waves with them, you’ll need to think like they do.

Nobody is going to be able to tell you how long all of this is going to last. There’s still massive amounts of new users finding their way to the cryptocurrency market, and it could keep going for years. At the same time it could all be over tomorrow. That’s something you can’t estimate and can’t control. Instead, focus on the things you can control, which include:

  1. Don’t invest anything that you’re not willing to lose
  2. Have an exit strategy

Personally, I’ll be looking into bitcoin conversion for many of the small cap coins I’ve invested in during the coming months, even if I fundamentally believe in their long-term prospects. For many people this sounds counter-intuitive since buy & hold has proven to be an outstanding strategy for all of crypto history. What has changed is that people are buying cryptocurrencies at much higher valuations now than what they did before — in some cases, valuations are starting to exceed what’s rational even if the coin would actually be successful at capturing their target use case.

Many of them are likely to crash spectacularly at some point. Sadly, that’s usually not an isolated event. Most people who have been trading cryptocurrencies for some time have noticed that cryptos often rally individually but dump together. Statistical models show the same thing. There’s going to be days where you wake up to everything being red on Coinmarketcap — even the good coins, and you’ll be surprised at how fast you can lose everything you made when the market turns. Have a strategy for converting the assets you know have gotten their valuations through rampant market speculation (that’s 99% of them) and convert them to something less volatile. That’s what I’m assuming McAfee will do, and you should too.

What do you think about the cryptocurrency valuations? Let us know in the comment section below!


Images via Shutterstock, Wired.


Disclaimer: Bitcoin price articles and markets updates are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the “money.”

The post Trading Tip `The Wall´ – Trade Like You’re John McAfee appeared first on Bitcoin News.

Bitcoin News

Hawaii’s Missile Scare: ‘The System Failed Miserably’

January 14, 2018 |

“This system failed miserably and we need to start over.” Those are the words of Hawaii Sen. Brian Schatz in the wake of a false alarm broadcast Saturday warning residents of an incoming missile . The FCC apparently agrees and says it will open an investigation into the incident, which had…
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TMZ

‘The Wire’ Star Wood Harris Chooses Between Trump and Pence

January 14, 2018 |

“The Wire” star Wood Harris has strong but conflicted views on who he wants in the Oval Office. Harvey ran into Wood — who’s heading to Philly to shoot “Creed II” — Saturday on Melrose in L.A., and asked who’s better to occupy the White House at…

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Arpaio on Senate Run: ‘The President Needs Me’

January 9, 2018 |

Arizona’s most high-profile former sheriff had said he was mulling a Senate run , and it now looks like he’s made up his mind. “I think Washington needs me, the president needs me,” Joe Arpaio told Talking Points Memo on Tuesday, confirming he’ll enter the race. “I’ve got a lot of…
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Trading Tip `The Wall´ – Did Ripple Almost Dethrone Bitcoin “Using This One Simple Trick”?

January 6, 2018 |

Trading Tip Column, `The Wall´ – Did Ripple Almost Dethrone Bitcoin "Using This One Simple Trick"?

2017 was the year cryptocurrency speculation went mainstream, which is something many bitcoiners have been yearning to happen for years. But going mainstream means that the market is no longer dominated by cryptocurrency enthusiasts, and until Wall Street steps in, we’re simply going to have to accept that mainstream speculators with little knowledge of cryptocurrencies are in charge of the market.

Also read: Absurd Profits from Zclassic a.k.a. Bitcoin Private

A Wall Between Investor and the Unimaginably Stupid

If you’re a cryptocurrency old-timer, things that annoy you will become popular for reasons that seem unimaginably stupid. If you were a musician in 2012 and competing for the #1 spot on YouTube, it didn’t matter if you were the best singer in the world if your competition was “Oppa Gangnam Style”. In the same way, it won’t matter if your cryptocurrency is the most sophisticated and decentralized in the world, if the market doesn’t value those characteristics.


Trading Tip Column, `The Wall´ – Did Ripple Almost Dethrone Bitcoin "Using This One Simple Trick"?

The “Gangnam Style” Era of Crypto

To explain what I mean, I’ve analyzed the percentage gains of each of the top 27 coins by market cap since 2017. One thing that is clear to me is that the cryptocurrency characteristic the market favored more than anything else in 2017 was not so much decentralization, technological soundness or real world usage, but rather the dollar digit bracket the coin belonged to; in this case, sub-cent unit prices.

Trading Tip Column, `The Wall´ – Did Ripple Really Dethrone Bitcoin "Using This One Simple Trick"?

Of course, the unit price of a coin is a totally senseless basis for making investment choices on. Any cryptocurrency–even Bitcoin–could have been a sub-cent item, if Satoshi chose the final cap to be 21 quadrillion instead of 21 million. In that case, the unit price of a bitcoin (price per each whole bitcoin) would be $ 0.00001697 right now instead of $ 16,790 but the total market cap would still have been $ 284 billion. Everything would be the same, except that everyone would have a million times more bitcoin–and the unit price would be cheaper.

Since bitcoins (as well as many other cryptocurrencies) are divisible down to 10^8 satoshis (smaller units), it doesn’t really matter what the supply is, as long as there’s enough “particles” of the currency to go around for the economic use cases imagined to function properly. The number itself is not important. But it does directly effect the unit prices, which apparently has an enormous impact of the investment choices of mainstream investors. As stupid as it may seem, I contend that apart from what’s outlined in this great summary, the perceived “cheapness” of Ripple’s XRP (100 billion supply) is one of the reasons why it overtook Bitcoin as the largest cryptocurrency in the world by implied market cap this week.

The reason why we look at market caps when we compare coins is because that’s how we compare the values of a cryptocurrency as a whole rather than just looking at the unit prices, which we know, as illustrated before, to be completely arbitrary and therefore not a good measure of anything. To visualize this is in the clearest way possible, we can normalize the supply for different altcoins to see what the prices really would look like if they all had the same supply. This is how they would compare (as of 5 Jan 2017):

Trading Tip Column, `The Wall´ – Did Ripple Really Dethrone Bitcoin "Using This One Simple Trick"?Another interesting aspect to look at is how many units of each altcoin you need to hold to own the equivalent of 1 bitcoin of that coin:

Trading Tip Column, `The Wall´ – Did Ripple Really Dethrone Bitcoin "Using This One Simple Trick"?

In these tables, I’m using the “fully diluted market cap” (max supply) as a basis for the normalization. The currencies for which the max supply is unknown such as Ethereum, I’ve used the Y2050 estimations given by Onchainfx(*). The calculation I’ve used for the  normalization table is as follows:

Altcoin price x Altcoin max cap / 21M

And the bitcoin equivalent altcoin holding amounts:

Altcoin max cap / 21M

I recommend always doing this when trying to gauge the relative value of a coin to bitcoin for long-term investments. In my opinion, it’s better than looking at unit prices or market caps based on circulating supply, because it’s the only way to correctly assess the actual valuation you’re giving a coin when buying.

I think the easiest way to understand what I mean is by looking at Zcash as an example.

Zcash’s supply when all coins are mined will be the same as bitcoin, 21 million, but currently, there’s only ~3 million mined (circulating supply). As such, when you’re looking at sites like Coinmarketcap, it will tell you that Zcash has a market cap of just $ 1.7 billion. That’s just 0.6% of bitcoins market cap and places Zcash far down the list, at #27 where it looks small and leaves much room for growth.

Trading Tip Column, `The Wall´ – Did Ripple Really Dethrone Bitcoin "Using This One Simple Trick"?

But the price of Zcash is $ 589 which is actually 3.5% of bitcoin’s $ 16,790. If you’re buying with bitcoin, that means you have to pay 0.035 bitcoin to buy Zcash. Another thing you have to factor in when buying Zcash at $ 589 is that in order for Zcash to actually keep that price over time, Zcash must amass a market cap of $ 12bn, climbing to what’s currently the 12th spot on Coinmarketcap. And even if Zcash were to somehow do that, you would still only break even on your investment–because you bought it at a price ($ 589) that implied a valuation of $ 12bn. That’s the reason why the Onchainfx site is listing the coins the way they are–because it tells us what the implied valuation are for coins when bought at current prices.

Unfortunately, using the slightly deceitful metric “circulating supply” seems to be the norm when comparing valuations in the crypto-space. In a recent example, the Twitter-user @boxmining shared a tweet where he showed a similar supply-normalized valuation as mine but based off of circulating supply:

With this tweet he got the key message across – at the time, the implied valuation of XRP valued it above bitcoin. But if we look carefully, we’ll see Zcash at #28 on that list, with the deceitful price tag of $ 105, implying that the relative price of Zcash to Bitcoin is 0.6%, when as we know in reality, you have to pay 0.035 bitcoins (3.5% for a Zcash).

The point I want to make is that you can get far in your ambitions to become a more informed trader than most people in the market just by using common sense and a calculator. But being able to properly compare coin valuations doesn’t matter if nobody else is doing it — at least not in the short term. It can take a long time before the market fundamentals eventually force these prices to sort themselves out. And until they do, I recommend you do your diligence to make sure you’re on the right side of that correction.

(*) For Qtum, Onchainfx estimates the Y2050 supply to be 100 billion, which is erroneous. Speaking to one of the Qtum developers, David Jaenson, I confirmed this number to instead be 107822406.25.

What do you think about the cryptocurrency valuations? Let us know in the comment section below!


Images via Shutterstock


Disclaimer: Bitcoin price articles and markets updates are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the “money.”

The post Trading Tip `The Wall´ – Did Ripple Almost Dethrone Bitcoin “Using This One Simple Trick”? appeared first on Bitcoin News.

Bitcoin News

Rising Ripple Threatens to Usurp Bitcoin and Usher In “The Rippening”

January 3, 2018 |

Rising Ripple Threatens to Usurp Bitcoin and Usher In “The Rippening”

First came ethereum, which threatened to unseat bitcoin as the dominant cryptocurrency in an event dubbed The Flippening. Then came bitcoin cash, which lay a glove on bitcoin core in The Cashening. Now, a revitalized ripple (XRP) is eyeing bitcoin’s top spot. Could the centralized cryptocurrency usurp bitcoin’s market cap, heralding The Rippening?

Also read: Is the Centralized Ripple Database With the Biggest Pre-Mine Really a Bitcoin Competitor?

Big Ripple in a Small Pond

Scarcely a month passes when an alternative cryptocurrency doesn’t make huge inroads on bitcoin’s dominance. Percentage gains are easy – any coin outside of the top five can realistically double or triple in price within a week. Overtaking bitcoin’s market capitalization however is significantly harder, and while ETH and BCH have both given it their best shot, they’ve yet to achieve that feat.

Rising Ripple Threatens to Usurp Bitcoin, Ushering In “The Rippening”

The Numbers Behind the Letters XRP

Despite bitcoin making gains of 14% in the last 24 hours off the back of news on Peter Thiel’s involvement, XRP has outperformed BTC, recording gains of 16%. Ripple at the time of writing had a market cap of $ 104 billion versus bitcoin’s $ 245 billion. In other words, ripple is worth 40% of bitcoin’s valuation. Each XRP token is currently trading at around $ 2.70. If XRP were to reach $ 6.75 while BTC stood still, it would overtake bitcoin to become the world’s most valuable crypto asset.

Rising Ripple Threatens to Usurp Bitcoin, Ushering In “The Rippening”

It is much easier for a sub-$ 10 coin to double in value than it is for one costing well into five figures. On December 29, ripple soared from $ 1.52 to a high of $ 2.50. If another similar ripple run were to occur, it could send XRP above bitcoin in the space of a week. One ripple will never achieve parity with one bitcoin, as there are a lot of ripples out there – around 39 billion as it stands. Put them all together and, priced at $ 6.75 a coin, you would be looking at the new cryptocurrency market leader.

Rising Ripple Threatens to Usurp Bitcoin, Ushering In “The Rippening”The psychological effect of bitcoin being toppled, for the first time in cryptocurrency history, would be huge. It would be the equivalent of a rival search engine overtaking Google. The mainstream media would have a field day and the crypto community would be up in arms, but beyond that, not much would change. Bitcoin would retain its use as a store of value, medium of exchange, and pseudonymous digital currency, and ripple would retain its use as, well…what is ripple’s use?

Who’s Buying Ripple?

Ripple was designed as a SWIFT alternative, providing banks with a means to send funds across borders quickly and at low cost. Like many assets, however, it is primarily used as a speculative instrument. It is the users who determine how an asset is purposed, but it is the markets that set the price – and right now the markets are buying a whole lot of XRP.

Most of the trading volume is coming from Korea, although that holds true for the majority of cryptocurrencies. Anecdotal evidence suggests there’s something about ripple that’s alluring to non-traditional cryptocurrency investors. An increasing number of women seem to be taking an interest in XRP, and mainstream coverage has been extensive, with ripple surfacing in the unlikeliest of publications including British tabloid newspapers.

Rising Ripple Threatens to Usurp Bitcoin, Ushering In “The Rippening”
Bitcoin’s dominance of the cryptocurrency markets is at an all-time low.

Investors are piling into ripple because they see it as a profitable purchase, and thus far they’ve been vindicated. But what happens when the music stops and ripple drops? Naysayers have been predicting a major correction ever since ripple approached the dollar mark, and yet the coin is showing no signs of slowing down.

Many crypto newcomers know and care little of Satoshi, decentralization, full nodes, and Bitcoin Improvement Proposals, but they recognize profit when they see it, and right now XRP is providing that. The question that would-be investors should be asking themselves is not who’s buying ripple now, but who bought it back in the day when it was trading for cents. The answer to that question includes a number of crypto billionaires. Cofounder and former CEO Chris Larsen owns 5.19 billion XRP, around 13% of the total circulating supply. Forbes reports that this makes ripple’s executive chairman the 15th richest man in America.

Whales Making Ripples

Rising Ripple Threatens to Usurp Bitcoin, Ushering In “The Rippening”
Jed McCaleb: owns a lotta ripple.

Current ripple CEO Brad Garlinghouse also holds a significant number of ripple tokens, with Forbes calculating his net worth to be at least $ 9.5 billion. Then there’s the 5.3 billion XRP cofounder Jed McCaleb owns. These are held in a fund and released on a monthly basis to prevent the former ripple boss from cashing out and crashing the market. Finally, there’s the additional 55 billion XRP that ripple holds in escrow, over and above the 38.7 billion tokens currently on the market.

Add that together and you get a whole lot of ripples, with as much as 35% of the total circulating supply in the hands of just three people. Realistically, Larsen, Garlinghouse, and McCaleb aren’t about to offload 20 billion ripples onto the market. It is not in Larsen’s or Garlinghouse’s interests to do so, while McCaleb, who now runs Stellar (and owns one billion XLM) is unable to do so.

Reasons to Be Cautious

There are evident risks inherent to investing in a project whose market price is hostage to a handful of whales. But there are also other reasons why ripple is a controversial cryptocurrency that should be approached with caution. News.Bitcoin.com recently reported on how ripple has the power to “freeze” funds at its discretion, and the 55 billion XRP currently on lockdown at ripple XRP are effectively the biggest pre-mine of any digital currency.

Rising Ripple Threatens to Usurp Bitcoin, Ushering In “The Rippening”

As one dissenter pithily put it: “Ripple can f– off. They’re the Intel of crypto – backdoored from the start”. Cryptocurrency maximalists, who are passionate about matters such as financial freedom and the decentralized economy, are especially skeptical of ripple. One thing ripple’s rise arguably does show is that there is an appetite for a centralized currency that isn’t beholden to community concerns. Obtaining consensus for improvements to bitcoin core is notoriously tricky; ripple on the other hand, can be modified by the company without consultation or advance warning.

Ripple’s rise means little to the average bitcoiner, whose preference for decentralized financial systems will remain unwavering. The success of XRP could mean a lot to central banks, however, who are watching the token’s ascent with keen interest. How fitting if Ripple, a centralized cryptocurrency, were to prove the gateway drug to a centralized banking coin.

What are your thoughts on ripple and where do you see its price going? Let us know in the comments section below.


Images courtesy of Shutterstock, Coincodex, and Coinmarketcap.


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The post Rising Ripple Threatens to Usurp Bitcoin and Usher In “The Rippening” appeared first on Bitcoin News.

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Trading Tip `The Wall´ – Absurd Profits from Zclassic a.k.a. Bitcoin Private

December 30, 2017 |

Trading Tip `The Wall´ – Absurd Profits from Zclassic a.k.a. Bitcoin Private

In just 3 months, the price of Zclassic (ZCL) has increased by +5,768%. In this post, I’ll give some background to what Zclassic is and try to explain what is going on with it.

Also read: The Art of Buying the Dip

A Quick History Lesson on Zclassic

Zcash (ZEC) is a privacy-centric cryptocurrency that launched Oct 28, 2016. It put cutting-edge cryptographic research in non-interactive zero-knowledge proofs (zk-SNARKs) into practice, allowing users to make transactions concealing both the sender and receiver of a transaction, as well as the amount being sent. The cryptography itself provides possibly the strongest privacy guarantees of any cryptocurrency, but part of the integrity of the protocol (specifically, preventing counterfeit coins from being issued) relies on a process known as trusted setup. Zcash launched with a founder’s reward, which for the first 4 years subtracts 20% of every block reward and distributes it to stakeholders of the Zcash Company to guarantee maintenance and development of the protocol. Zcash is an open-source project based on the Bitcoin codebase.

Since Zcash is an open-source project, there’s nothing to stop anyone from simply copying the codebase and removing the 20% founder’s fee if they wanted. That is exactly what happened, and that fork now goes by the name of Zclassic, which launched only a week after Zcash, reusing the same parameters from the trusted setup. Up until August 24 this year, Zclassic devs have been merging code updates from Zcash and issuing new releases in parallel. Since then, development on the Zclassic branch appears to have stagnated. Currently, I’m not even able to find a working block explorer for Zclassic. On Dec 14, the developer of Zclassic, Rhett Creighton proposed a relaunch and rebranding of Zclassic into “Bitcoin Private”, as a means of “revitalizing” the coin.

This announcement caused the price to surge +2,000% in only a matter of days.

Trading Tip `The Wall´ – Absurd Profits from Zclassic a.k.a. Bitcoin Private

Why is this happening?

Bitcoin hard forks have become somewhat of a trend in recent months, with the first successful one being Bitcoin Cash. At the time, it was joked within the community that soon Bitcoin hard forks would cover the entire Coinmarketcap-spectrum.

The joke has turned prophetic in the sense that 3 of the top 13 cryptocurrency positions by market capitalization are now held by Bitcoin or Bitcoin hard forks (Bitcoin, Bitcoin Cash & Bitcoin Gold). One could argue that Bitcoin Diamond (BCD) should make the 11th spot if Coinmarketcap had info on the total supply (which should be around ~167M), as 10 BCD are supposedly credited for every 1 BTC as their website claims.

What does it mean for an altcoin to become a Bitcoin hard fork?

Trading Tip `The Wall´ – Absurd Profits from Zclassic a.k.a. Bitcoin Private

The Zlassic and Bitcoin UTXO sets will merge, creating a total of 1.8M + 16.7M = 18.5M Bitcoin Private coins upon launch. Inflation schedule will be revised so 21M cap is still kept intact.

What “Bitcoin Private” essentially will be is a coin that borrows the name and UTXO set from Bitcoin (and Zclassic) and technology from Zcash. I contend that the rebranding from Zclassic to Bitcoin Private is a stroke of genius from Rhett Creighton’s side as it is going to make traders value Zclassic in relative terms to other Bitcoin hard forks such as Bitcoin Gold and Bitcoin Diamond. It is the cryptocurrency-equivalent of putting the word “blockchain” in your company name and seeing your stock soar 394%.

The great thing for Bitcoin Private is that Bitcoin Gold and Bitcoin Diamond are both ridiculous projects. I’ve written a piece on Bitcoin Gold previously which you can read here.

Bitcoin Gold: $ 269
Bitcoin Diamond: $ 31.6 ($ 316 when adjusted to equal supply)

Bitcoin Diamond’s valuation is even more absurd, since it is traded at a valuation which would place it at the ~11th spot among cryptocurrencies worldwide right now even though background research suggests that the project may be entirely fraudulent. That didn’t prevent the valuation from reaching that high before any source code for it even existed. My theory as to why Bitcoin Diamond is trading at such a high valuation is that there’s always going to be a handful of traders that either are trading by the greater fool theory or are entirely oblivious to fundamentals when valuating Bitcoin hard forks (i.e. not understanding that the tenfold increase in supply means $ 31.6 per coin is actually equivalent to $ 316). The price of these forks is simply determined by the size of the group of irrational buyers and the free float of the coin, which for both Bitcoin Gold and Bitcoin Diamond is deceivingly small.

Meanwhile, the free float of Zclassic (ZLC) is even smaller than that of Bitcoin Gold or Bitcoin Diamond. Merely 1.8M ZLC has been mined since Nov 2016. As Zclassic essentially becomes “Bitcoin Private futures” they’ll be exposed to the same group of irrational buyers, and prices beyond $ 400 per ZLC all of a sudden doesn’t seem that unthinkable (currently trading at $ 80). What’s funny is that buying Bitcoin Private doesn’t even have to be such an irrational idea. Fungibility is one of the most sought-after additions to Bitcoin, and zk-SNARKs do provide a solution to that problem. The relaunch will increase the coin’s network effect tremendously, forcing wallet support as well as listings on a multitude of exchanges. The only thing that is ridiculous about Bitcoin Private is the notion that an altcoin can fork into becoming a “Bitcoin hard fork” just by merging the Bitcoin UTXO set.

What do you think the next coin adding the Bitcoin UTXO set and rebranding will be? Let us know in the comment section below!


Images via Shutterstock


Disclaimer: Bitcoin price articles and markets updates are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the “money.”

The post Trading Tip `The Wall´ – Absurd Profits from Zclassic a.k.a. Bitcoin Private appeared first on Bitcoin News.

Bitcoin News

Trump on Iran Protests: ‘The World Is Watching’

December 30, 2017 |

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Trading Column `The Writing on the Wall´ – The Art of Buying the Dip

December 23, 2017 |

Trading Column `The Writing on the Wall´ - The Art of Buying the Dip

While I’m writing this article, the bitcoin price is crashing, but by the time you read this, it’s entirely possible that it already recovered to some extent. If you didn’t buy the dip, this article is for you.

The Why

GDAX BTCUSD trading volume 18-22 Dec 2017: 236,880 BTC
CME Bitcoin Futures trading volume 18-22 Dec 2017: 6236 = 31,180 BTC

Both the CBOE and the CME launched bitcoin futures during the past two weeks, which have been trading at unsurprisingly low initial volumes. My theory for this particular dip, as I’ve detailed in several previous posts, is that owing to the futures launch, there is no longer any investable allure of “getting in before Wall Street” anymore. However, I’m still bullish on bitcoin long-term. As for the CBOE and CME futures, there’s still plenty of time to get in before the accessibility of these instruments improves. As such, this dip presents an excellent opportunity to engage oneself in what has all but turned into a mantra in the bitcoin trading class of 2017; buy the dip.

The How

One thing I struggled with as a novice trader buying my first dips was the fact that I didn’t always have fiat on exchanges to buy the dip with. Many times, I was already in BTC, and if I were to wire more fiat to the exchanges, the dip would oftentimes already have disappeared before the transfer completed. That meant that to buy the dip, I would also have to somehow succeed at selling the top. That was until I learned that you could buy the dip with the BTC you already have, using leverage on derivatives exchanges or exchanges that provide margin trading. For this article, I’ll write from the perspective of BitMEX trading, as this is the exchange which I am currently conducting my dip-buying activities on.

Here are the things you’ll need to be a successful BitMEX dip-buyer:

  • A BitMEX account funded with a portion of your BTC
  • Basic knowledge of the BitMEX platform
  • A plan
  • Good nerves
  • Discipline

A BitMEX account funded with a portion of your BTC

One of the best things with high-leverage exchanges is that you can enter very large positions using only a small portion of your stash. This means you’ll be exposed to a much smaller custodial risk compared to when you’re trading on spot exchanges. Personally, I keep 90% of my BTC in cold storage and 10% on BitMEX solely for dip-buying purposes.

Basic knowledge of the BitMEX platform

The best way to get started with BitMEX is to use the BitMEX testnet. This allows you to trade with some fake bitcoin to get a feeling of how to use the interface and how the different order types work.

Before you start trading with real, large amounts I recommend that you read the info pages carefully and make sure you can explain what the following means: automatic liquidation, auto-deleveraging, difference between entry price and mark price, the BitMEX swap funding model and what the meaning of “inverse” is in “XBTUSD inverse perpetual swap”.

A plan, good nerves, discipline

Everyone who is not trading is a good trader. It’s very easy to look at the charts and imagine when you would have bought and when you would have sold. It’s much harder when it’s real. The best way to handle that is to have a plan that you simply follow. You should have an idea of the price you want to buy in at and the price you want to close your position at; both a price you’ll take profit at, and a price you’ll cut your losses at.

As you hone your dip-buying abilities, you’ll notice that your performance correlates with your ability to not get caught up in the heat of the moment while executing your strategy.

The When

Some people believe that the fastest price movement in bitcoin is when it crashes. There’s even a saying: “Bitcoin takes the stairs up and the elevator down”. But there is one movement that is faster than the crash, and that is the bounce. In moments of true desperation, the price can fall thousands of dollars over the course of minutes. But on the bounce the order book is cleared out, so the price can jump back the same amount in a matter of seconds. That is why when you buy the dip, you do it on the way down, not on the way up.

This means that you have to make a guess at where you think the bottom is. Here’s a selection of tools bitcoin traders commonly use to guess bottoms:

  • Technical analysis (TA) indicators such as RSI and MACD
  • TA patterns such as inverse H&S, double/triple bottoms
  • Fibonacci lines
  • Trend lines
  • Previous support levels

A few years ago, I backtested every TA indicator I could think of without finding very convincing results. I use a different strategy which is completely unscientific, but seems to work well for me. Here’s what I do:

Seeing as hodling is a perfectly fine strategy for bitcoin speculation, there is really no need to buy the dip unless the dip is too good to pass up. Therefore, I only buy dips if I think the price drop is really exaggerated. So I imagine a price point which would feel really brutal, wiping out several weeks or months of gains, and then some.

The second thing I do is watch the price drop in real time. During a crash, there’s going to be a point when there’ll be a red candle on the 5-minute chart that just keeps growing and growing. On BitMEX, you’ll see red numbers in the order book showing up; these are other traders’ automatic liquidations being triggered. I’ll also take a look into chat rooms and trading subreddits and make sure that everyone is talking about the crash. Lastly, I’ll monitor the notifications on my phone and wait for my brother to ask me if bitcoin is dying and if he should sell. At the point of maximum pain and desperation – that’s when I buy the dip.

Sizing: I usually use 10x leverage on BitMEX, which gives me headroom for another 10% price decrease after I’ve bought before I get automatically liquidated myself. I do not enter with my whole trading balance at once. I usually enter with 20-25% initially and keep increasing as we go down, depending on how intense the desperation feels.

Warning: The last few weeks the BitMEX trading engine hasn’t been able to cope with the trading volumes and will sometimes not accept orders during critical moments.

Do you agree buying the dip is a succesful trading strategy? Let us know in the comments below.


Images via Shutterstock


Disclaimer: Bitcoin price articles and markets updates are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the “money.”

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