Bitcoin Long-Term Overview
Bitcoin opened 2018 with a high of $13,290 and closed the year at about $3,800. This represents a 72% loss overall. By comparison, the Dow opened the year at $24,824 and close at about $23,300. This represents a 6.2% loss overall for traditional investors.
However, 2019 is a different story as bitcoin opened it at $3,700 but climbed up by almost 60% (as of today) and is currently hovering around $5,900.
If we are honest, bitcoin is still, for the most part, a favorite toy of experienced and less experienced speculators but number of builders is burgeoning as well. The surrounding ecosystem and infrastructure is being built at blinding pace while brand presence and recognition are hitting all time highs, especially among the younger generation.
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The old establishment, comprised of mostly old white men, is still yelling at bitcoin, throwing jabs, insults and calling for a ban (best evidence of their glaring lack of understanding of how bitcoin works). Luckily, biology is on bitcoin’s side – the old ruling class and archaic technologies they cling on are dying off, making room for new ideas and technologies.
Bitcoin already owns real estate in the heads of the upcoming decision makers and wealth holders and it is only question of when, not of will, bitcoin enter the mainstream financial world.
Let’s take a look at the fundamental forces that will propel bitcoin upwards in 2019.
We can divide the fundamentals into two categories: protocol enhancements and ecosystem/infrastructure construction.
Freelance journalist Ian Edwards wrote an excellent piece on bitcoin protocol improvements that you can read here. Here is the excerpt with most important developments. It is worth noting that prolific bitcoin developer Pieter Wuille unveiled two Bitcoin Improvement Proposals (BIP) on May 6th that offer plans that could prove foundational to a possible upgrade to the cryptocurrency.
Wuille’s first BIP describes a “new SegWit version 1 output type, with spending rules based on Taproot, Schnorr signatures, and Merkle branches.”
While the second describes “the semantics of the initial scripting system under bip-taproot.”
Below are most important protocol developments which are being worked on right now, with no firm deadlines when will they get implemented.
MAST, short for Merkelized Abstract Syntax Trees, proposes to improve Bitcoin by changing how smart contracts are written to the blockchain. In effect, it allows smart contracts to be split into their individual parts. This has several benefits in terms of privacy, transaction size and allowing for larger smart contracts. There are excellent articles about MAST here, here and here. There is no set timeline for its implementation.
Schnorr signatures, named after their inventor, Claus-Peter Schnorr, are a proposal to replace Bitcoin’s current digital signature algorithm (ECDSA) for a more efficient one. The first way they will improve the bitcoin protocol is that they will allow for the aggregation of multiple transaction signatures into a single signature.
This would make transaction sizes smaller in these types of transactions, and could reduce transaction’s use of storage and bandwidth of the Bitcoin network by around 25%. Second, Schnorr signatures would increase of the privacy of multisig transactions by aggregating signatures in these transactions, thereby masking the original signatures.
Bulletproofs promise to improve the privacy of Bitcoin by concealing quantities of transactions, while still leaving the sender’s and reciever’s wallet addresses public. They are already implemented on Monero while Bitcoin implementation is still pending and according to Wuille ” “far too premature to propose for inclusion into Bitcoin.”
Confidential Transactions (CT) would keep the amounts of Bitcoin transactions visible only to participants in the transaction.
Sidechains are intended to allow other blockchains to connect to the Bitcoin network using a separate coin that is tied to bitcoin. This means that each sidechain is a separate blockchain that can have different rules from the Bitcoin mainnet while still remaining connected to it. There are several different sidechain proposals under development currently: Liquid Network, RSK and Drivechain.
Liquid is a private sidechain, so there is some control over who can access it. The benefits of Liquid are that it allows instant transactions, privacy (Confidential Transactions are built in) and the ability for users to hold Liquid funds outside of an exchange.
RSK is a sidechain that plans to bring smart contract functionality and near instant payments to the bitcoin network. Like Liquid, it uses a federated system, with custodians tracking the movement of bitcoin between RSK’s network and Bitcoin’s mainnet. It does this by using a token called SBTC (smart bitcoin), which is pegged to BTC at a 1:1 ratio.
Drivechain plans to allow for multiple blockchains to be linked up to Bitcoin’s mainnet. Like RSK, Drivechain sidechains built can be secured by Bitcoin miners using merged mining. Unlike RSK, Drivechain is flexible, and developers could create sidechains tailored to the specifications they want, such as larger block sizes or privacy features.
Mimblewimble is a proposal for a bitcoin-like blockchain which claims to provide higher security than the current Bitcoin protocol, improved scalability, a different kind of cryptographic security and ASIC-resistant mining algorithm to encourage mining decentralization.
Of course, there is the highly contentious Lightning Network project, the long awaited layer 2 scaling solution that bears a lot of bitcoiners’ hopes and attracts a lot of disputes and detraction from other camps, mostly from bitcoin forks like BCH and BSV.
Lightning Network, has seen significant growth last year. The first Lightning implementation developed by Lightning Labs launched in beta in March 2018.
In a little over a year since being live on mainnet, there are now nearly 4,300 nodes with active channels and about 38,000 total channels. The steeper node growth in the last three months could potentially be connected to the release of the Casa Lightning Node, which made running a node significantly easier for a regular non-technical user.
It’s also worth pointing out that the average number of channels per node has been steadily increasing throughout the last year. Also the capacity of nodes and overall network has been increasing over the last year to the current 1,079 BTC (more than $6m) locked up in nodes and channels.
Ecosystem and Infrastructure
The Big Bitmain Fall
Bitmain, on the other hand, has suffered tremendous losses under the leadership of Jihan Wu and Micree Zhan. They had followed Roger Ver’s technological direction to fork Bitcoin into Bitcoin Cash. In August, 2017 Bitcoin Cash successfully forked from Bitcoin and Bitmain had bet big on this fork and technology adding a huge amount of hash power behind the Bitcoin Cash fork. Bitmain had been planning an IPO as well in early 2018. Bitcoin Cash forked again, the IPO was turned down and together with $400 million in losses, Jihan Wu and Micree Zhan are exiting Bitmain.
Institutional Money Is Coming Into Bitcoin
- Last year, reports emerged that George Soros and the Rockefeller family were beginning to take positions in the emergent crypto asset class, according to Bloomberg. The family’s $26 billion Soros Fund Management was supposedly considering trading digital assets. The Rockefeller family’s VC arm, Venrock, decided to take a different approach by partnering with Coinfund to assist entrepreneurs in launching blockchain businesses.
- In the tail end of April, Charlie Lee, the creator of Litecoin, revealed that he spotted Bitcoin and Litecoin trading pairs appear on his TD Ameritrade Think or Swim portal. While some cast this news aside as a joke or glitch, other users confirmed that they too saw “BTC/USD” appear on their accounts on TD Ameritrade. TD Ameritrade has more than 11 million client accounts with more than $1 trillion in assets. The U.S. broker already offers Bitcoin futures trading.
- Circle, Coinbase, BitGo, Goldman Sachs, Citigroup, Morgan Stanley, and other major financial institutions have either already launched crypto-focused custodian solutions or plan to offer crypto custody in the short-term begin to serve an increasing number of institutional investors in the months to come.
- In July, Blackrock — the world’s largest exchange-traded fund (ETF) — announced that it has launched a working group to assess the potential of investing in Bitcoin.
- Goldman Sachs has been making inroads toward crypto adoption throughout the year. Thus, in April, cryptocurrency trader Justin Schmidt was hired by the firm in response to client interest in the space.
- The following month, Goldman Sachs executive Rana Yared confirmed that the company intends to buy and sell Bitcoin — after concluding the preeminent cryptocurrency was “not a fraud.”
Bakkt — which will facilitate bitcoin futures trading for institutional investors — electrified the crypto community in August 2018, when it announced its imminent launch.
Bakkt will provide custody and price discovery for bitcoin — which is regulated as a commodity by the CFTC — in a way that’s designed to be free from market manipulation and fraud. Bakkt was supposed to go live in January 2019, but the roll-out has been postponed several times amid regulatory delays. Right now, there is no set launch date for the new platform.
Fidelity Launches Institutional Platform For Bitcoin And Ethereum
Fidelity Investments is spinning off a stand-alone company dedicated to bringing cryptocurrencies to institutional investors.
Called Fidelity Digital Assets, the limited liability corporation based in Boston will provide enterprise-grade custody solutions, a cryptocurrency trading execution platform and institutional advising services 24 hours a day, seven days a week, designed to align with blockchain’s always-on trading cycle.
Fidelity Investments provides financial services for $7.2 trillion in customer assets and provides clearing, custody and investment services for 13,000 institutional advisory firms and brokers.
According to cryptocurrency research group Diar, institutional cryptocurrency trading on traditional exchanges has been diminishing in volume due to BTC being welcomed into major outfit portfolios this year. There has instead been a shift to OTC trading.
During OTC market hours, there has been an increase in BTC trading volume by 20 percent, while Grayscale’s Bitcoin Investment Trust (GBTC) volumes were down 35 percent in 2017 vs. 2018 for the same period. It seems institutional traders might be shifting towards higher liquidity OTC physical BTC markets.
The approval of a Bitcoin exchange traded fund (ETF) has been chased by a number of industry players over the past few years.
Several crypto companies, such as Gemini and Bitwise, have filed for crypto ETFs, but so far, regulators have not approved any. However, the U.S. Securities and Exchange Commission might be shifting its position. The agency is now more concerned about curbing fraud on platforms that propose ETFs rather than the ETFs themselves. We believe the SEC could soon approve a crypto ETF.
Universities Dipping Their Toes
In addition to big individual investors and backers, universities like Harvard, Yale and Stanford have all invested in cryptocurrency funds. An undisclosed source has revealed that endowments of the respective universities have invested tens of millions of USD into at least one crypto fund.
It’s no secret that one of the impediments to institutional investors entering the crypto space is the need for a suitable regulatory framework; hedge funds can’t simply invest their clients’ funds in the same free-and-easy manner as a retail investor.
Regulation is not a crypto killer. Regulation will provide much-needed clarity to investors big and small, as well as the entities issuing the coins themselves. People can start to focus on how these assets can best be leveraged to diversify portfolios, transfer money overseas, and improve business models, instead of looking over their shoulders in fear of running afoul of the SEC. With increased regulation, increased adoption will follow, particularly among those for whom due diligence is paramount. Financial institutions will be able to confidently bring these investment options to their clients, pension funds can incorporate cryptocurrencies into their long-term holdings — the applications are endless.
This article of ours covers bitcoin regulations and current legal frameworks around it, worldwide.
Jack Dorsey is the CEO of Twitter and has been showing its support for Bitcoin (BTC) and the Lightning Network .
Steve Wozniak is known for co-founding Apple, one of the largest companies in the world. Wozniak said that Bitcoin will become the world’s currency.
There is another Bitcoin bull in the market, Peter Thiel. The venture capitalist has already bet on Bitcoin and the possibility for it to become a gold-like safe haven. During a conversation with CNBC, he said that he would be long Bitcoin and neutral of everything else.
Tim Draper, a recognized venture capital investor, has been participating in the crypto market for a very long time. He invested in Bitcoin when it was traded under $1,000 and it has also made very bullish predictions for the future of this digital asset.
Ashton Kutcher has been an outspoken advocate for Bitcoin and he invested in a sports betting blockchain, UnikoinGold, along with billionaire, Mark Cuban.
Joe Rogan said that he is fascinated by the idea, but haven’t given bitcoin his full attention, but he thinks it could really shake up the global economy.
Price Action and Market Shifts
Quick historic overview
Here is a brief history of highs and lows of bitcoin prices, as compiled by colleagues at U.today:
- At the beginning of its journey, Bitcoin was worth less than $1.
- The first peak was a mark of $30 in July 2011, followed by a fall to $4.
- In mid-2013, Bitcoin broke through the price of $200 but rolled back to $120.
- An important point was the end of 2013 when the price raised to $1,100. However, the next 2 years were a solid drop for Bitcoin. The bottom was a mark of $240.
- The turn happened at the end of 2015, then the stable growth of the coin began. It lasted until the end of 2017 when the price reached a historic high of $20,000.
- The entire 2018 was marked by a tremendous fall. Any analysis and forecast turned out to be wrong. Bitcoin reached the bottom of $3,200.
- In 2019, new cycle of growth began, and the price exceeded $5,000 again.
Since the start of 2019, bitcoin is clearly most profitable asset class, as indicated by Binance Research.
Market Prediction For Bitcoin Price:
Everybody and their mother made a bitcoin prediction for this and upcoming years. Not everyone’s opinion should concern us, but some forecasts are more valuable than others so we will pick out the most relevant ones below.
Let’s take a look at some of these Bitcoin predictions.
John McAfee Bitcoin Price Prediction – $1 million by 2020
John McAfee, the eccentric founder of the popular security software and a controversial Bitcoin follower predicted that Bitcoin will hit $1 million by 2020. He also added his own flair to the whole prediction betting to eat his male parts should he fail to be true. He subsequently relativized his bet and you can read more about it here.
The founder of Woobull.com predicts an upcoming bearish momentum in Bitcoin’s price as we head into Q2 2019. Willy expects the price of Bitcoin to bottom in the coming months before entering an accumulation period for the rest of the year.
“All our blockchain indicators remain bearish. NVT, NVTS, MVRV, BNM, NVM. They are experimental but have served to make very correct calls to date, even when traditional on-exchange indicators were reading to the contrary.” – Willy Woo
The billionaire made his predictions on the price of Bitcoin late last year stating the coin could reach highs of $10,000 by the end of March (missed on this one) and cross its ATH price of $20,000 by the end of the year. The Galaxy Digital founder believes institutional investment from firms such as Fidelity and Bakkt will be key to the surge in BTC’s price.
Sonny Singh Bitcoin Price Prediction – $15-20k by Thanksgiving
Sonny Singh, the chief commercial officer at Bitpay commented on Bitcoin’s future calling Bitcoin an “800-pound gorilla, as it has access to the most notable “network effect” of all decentralized networks. He firmly believes that there is a high probability that BTC might reach $15,000- $20,000 by Thanksgiving, 2019, explaining that the probability of a crypto ETF and an influx of funding for startups is high on the cards.
Fundstrat’s Sam Doctor and Tom Lee Bitcoin Price Prediction
Tom Lee, co-founder and head of research of Fundstrat, believes that the break-even point of mining 1 BTC directly correlates with the price of the cryptocurrency.
Tom Lee stated that the BTC fair value is much higher than the current price. The current fair value is somewhere between $13,800 and $14,800 which he believes might increase and reach $150,000 per coin as soon as bitcoin wallets account for seven percent of 4.5 billion Visa’s holders.
Sam Doctor, an analyst from Fundsrat along with Lee predicted that by 2019, BTC might reach nothing less than $36,000, with the probability of $64,000 at the maximum and $20,000 at its lowest.
Zhao Dong Bitcoin Price Prediction
Zhao Dong, one of the biggest Bitcoin OTC traders in China and an influencer recently predicted that Bitcoin might reach $50,000 by 2021. He reiterated that now is the best time to invest in BTC and said that you might get a yield of 100 to 200% over 3 years if you invest now.
Anthony Pompliano Bitcoin Price Prediction
In a recent tweet, Anthony Pompliano, founder of Morgan Creek said that Bitcoin isn’t going anywhere. He stated that BTC might go as low as $3000, after which it will continue being bullish starting from 2019. He enunciated that there is no reason to freak out on the declining price as Bitcoin’s fundamentals are becoming stronger.
Murad Mahmudov, host of ‘On The Record’, believes that Bitcoin will hit a new all time high sometime in late 2020. Prominent crypto personality and analyst Tone Vays generally agreed in an interview with this statement, adding that there is a 40% chance of seeing a new all time high in 2020. This percentage increases to 45% for 2021.
Fran Strajnar: $200,000
Fran Strajnar, CEO of crypto research firm Brave New Coin, expects the price of Bitcoin to hit $200,000 no later than January 1, 2020. In an interview with Inverse in 2018, Strajnar stated that “the adoption rates are continuing to be quite steady, and adoption rates heavily correlate to the price, so therefore, unless for some reason people just simply stop continuing to adopt Bitcoin, we should see $200,000 per Bitcoin by 1st January 2020 at the latest.”
Wheatley model: $2,352.03
According to a Forbes article, the Wheatley model predicts Bitcoin will be trading at a rather bearish $2,352.03 in 2020. The article explains that the Wheatley model focuses solely on Bitcoin’s demand and also notes that Wheatly and researchers gave a far lower total market cap to bitcoin than the actual cap is ($20 billion is the figure used in their estimation model). Bitcoin’s slow demand growth is why its 2020 price prediction is so low.
Hayes model: $55,931.60
The Hayes model on the other hand predicts a much more bullish trading price for BTC in 2020. This is because that while the Wheatley model focuses on Bitcoin’s demand, the Hayes model focuses on its supply. Bitcoin’s supply is expected to slow as it approaches its supply cap, which should drive up prices.
The current sentiment in the Bitcoin community is positive and technical improvements along with overall ecosystem growth are foretelling a bright future going forward. The technical indicators are signaling an upcoming bullish run and with more people understanding the unique features and advantages of bitcoin over traditional system. While past performance is not a great indicator for future price, the fundamentals underlying Bitcoin may well see it soar in the near future to $20,000 USD crossing its all-time high price.
Analyst Who Projects Bitcoin Boom to $1,000,000 Warns BTC Halving Headaches Incoming
A crypto analyst known for applying the stock-to-flow ratio to Bitcoin says the leading cryptocurrency is facing a number of headwinds as the 2020 halving approaches.
The halving, which happens about every four years, will slash the supply of new BTC entering the market in half this May.
The pseudonymous analyst known as PlanB says Bitcoin’s supply schedule is strongly linked to the price of BTC. He was the first to apply the stock-to-flow model to BTC, which tracks the circulating supply of an asset against the amount of new supply hitting the market. Often used to track the price of gold and precious metals, PlanB says the ratio is strongly correlated with Bitcoin’s past price movements and shows BTC hitting a high of $1,000,000 within a decade.
But with the halving on the horizon, PlanB now says Bitcoin has a number of issues to overcome, including regulatory uncertainty in the US, hacks and concerns about large sales of BTC from crypto hackers and the seemingly never-ending fallout from the collapse of the crypto exchange MtGox.
“2020 Bitcoin halving will not be an easy ride:
– US/Mnuchin: draconian anti-btc laws
– Craig Wright: legal and patent FUD
– Hacks: like 2016 halving (DAO, Bitfinex)
– MtGox and PlusToken selling narrative
– Miner death spiral and futures FUD
Stock-to-flow skeptics say the advent of Bitcoin derivatives could prevent Bitcoin from rising this time around. They also point to the fact that Bitcoin has only gone through two halvings in the past, saying there’s too little data to confirm their impact on Bitcoin’s price.
Ethereum creator Vitalik Buterin is also not a fan of stock-to-flow. He says it’s part of a crypto culture of “post-hoc rationalized bullshit” analysis that includes tying Bitcoin’s price to global events like the coronavirus.
Despite the fear, uncertainty and doubt, PlanB says his model shows the price of Bitcoin is right where it should be. He likens Bitcoin’s stock-to-flow ratio to a drunk walking his dog, and says although the price of BTC may wobble higher and lower than the predicted price of BTC, it can’t stray too far and always falls back in line.
It won’t be too long until we see how the stock-to-flow model holds up. PlanB says he expects Bitcoin to hit $100,000 by the end of 2021.
We Shouldn’t Want Buffett to Invest in BTC Right Now
Yesterday, we reported that Berkshire Hathaway CEO Warren Buffett was again bashing bitcoin, and for not taking it seriously, he’s potentially missed out on some big profits.
We Shouldn’t Want the Presence of Buffett in Crypto
Now, one source claims that if Warren Buffett were to ever change his mind about the world’s number one cryptocurrency by market cap and become a serious investor, that might be a sign that it’s time to sell one’s stash.
It’s interesting because Buffett recently sat down to lunch with Justin Sun, the CEO of TRON – one of the world’s top altcoins. Sun gifted him a phone with an entire bitcoin on it and swore to his followers and fans that he would work his tail off trying to make Buffett a believer.
Buffett commented that he enjoyed his time with Sun, and that he was intrigued by some of the ideas he presented during their lunch meeting. He said:
When Justin and four friends came, they behaved perfectly, and we had a very friendly dinner and the whole thing was a very friendly exchange of ideas.
While the two seemed to get along well during their initial meeting, it seems like all of Sun’s alleged efforts to change Buffett’s mind were in vain, as the real estate mogul is once again attacking BTC every chance he gets.
In a recent interview, he states:
Cryptocurrencies basically have no value and they don’t produce anything. In terms of value: zero. I don’t have any cryptocurrency and I never will.
Apparently, he’s forgotten about the phone Sun gave him. In any case, men like Buffett getting involved in crypto could potentially be a bad sign that the market is becoming “overheated” or saturated. In other words, too many people are getting involved, which could lead to an influx of activity and a responding price drop.
Buffett is, however, taking flack from people like Anthony Pompliano, the co-founder and partner of crypto-based financial firm Morgan Creek Digital. Recently, Buffett admitted to utilizing a flip phone all these years and has only recently upgraded to a “smart” edition. In an age of growing technology and gadgets, Buffett clearly hasn’t kept up with the times.
Pompliano took note of that, explaining:
I really don’t take technology advice from somebody who uses a flip phone or doesn’t use email.
A Follower of “Old” Ideals
Former e-Toro analyst Mati Greenspan also takes issue with Buffett’s attitude, saying he represents a world that is no longer in motion. He stated:
Buffett made his billions in a world that doesn’t exist anymore. Whoever the oracle of the next generation will be, my feeling is that they’ll have a much keener understanding of emerging technology and will be less reliant on baseless fiat money.
In the past, Buffett has referred to bitcoin as “rat poison squared.”
Bitcoin price drops below $9k after news of coronavirus infections in Italy
Bitcoin prices continue to slide, falling below the US$9,000 [AU$13,700] level following the sustained sell-off by investors due to fear of the coronavirus. This most recent drop comes just days after northern Italy became the scene of Europe’s biggest outbreak of the virus to date.
Meanwhile, the Italian government has quickly imposed measures to contain the spread of the deadly virus. Among them are the prohibition of public events and the closure of public buildings in at least 10 towns in the northern regions of Lombardy and Veneto.
According to Italian Health Minister Roberto Speranza, they issued advisory asking residents in the affected areas to stay at their homes to prevent the further spread of the disease. He said,
“WE ARE ASKING BASICALLY THAT EVERYONE WHO HAS COME FROM AREAS STRICKEN BY THE EPIDEMIC TO REMAIN UNDER A MANDATORY HOUSE STAY.”
Crypto and traditional markets affected globally
The coronavirus has already affected more than 30 countries, including Iran, Kuwait, Bahrain, and South Korea. Its presence in Italy has prompted investors and authorities to worry about the possibility of a worsening global pandemic.
Though Bitcoin has recovered somewhat – at press time it is trading in the $8,900 range – it is still down more than 14% from last week’s high of near $10,200. It is not certain whether the leading cryptocurrency will continue its slide or will perform better in the coming days.
On the other hand, the Dow Jones Industrial Average posts a 123.77-point drop to 26,957.59. The decline entirely wiped out the gains made by the index since January. Meanwhile, the S&P 500 also continuously slide and currently trades at 3,116.39.
However, the Nasdaq Composite Index showed some positive signs as it gains 0.17% to 8,980.77. The majority of the stock markets in Europe are also showing signs of recovery.
Mad Money advice: Avoid stocks with China connection
Meanwhile, Mad Money host Jim Kramer advised investors to keep away from American stocks that are too dependent on manufacturing products in China. He claimed that the COVID-19 outbreak would result in supply chain interruptions and a simultaneous slowdown of businesses around the world.
Part of his statement read:
“I NEED TO EMPHASIZE, AGAIN, THAT THE BIG RISK FROM THE CORONAVIRUS OUTBREAK HAS TO DO WITH INTERRUPTED SUPPLY CHAINS AND A CONCOMITANT BUSINESS SLOWDOWN WORLDWIDE. THAT MEANS WE HAVE TO BE CAREFUL. YOU DON’T WANT TO BUY SOMETHING THAT’S ABOUT TO HAVE ITS SUPPLY LINES CUT.”
Among the companies cited by Kramer as “too toxic to touch” are tech giant Apple and cruise industry players Norwegian Cruise Line, Carnival Corp, and Royal Caribbean Cruises. Also included are the casino stocks of Las Vegas Sands and Wynn Resorts, as well as bank and airline industry stocks.Micky readers – you can get a 10% discount on trading fees on FTX and Binance when you sign up using the links above.