When a coin has just skyrocketed by 300%, take profits. HODLing everything after such a major run-up is greed, nothing more. I’ve made this mistake more than once, thinking that it’s completely rational that since a coin’s value has gone up by that much, it will probably continue that way. It won’t. There will always be a correction. When you see a major run-up, like the one in December, it’s wise to start taking profits. How the hell can you buy the dip if you have nothing left to buy it with?
Returning to the question of calculating potential investment upside here, there are countless other ways to make projections on the future potential value of bitcoin, and I encourage you to try to make some depending on your personal beliefs regarding the level of success bitcoin might have, and the ultimate utility it might provide to the world. For instance, if you see bitcoin primarily as a way to simplify making international transactions and cut out inefficiencies there, you might look to see what the overall market size is for a solution that might solve that problem and capture that market. Western Union, as one example, is a company with a market cap of $9 billion. Consequently, it might be reasonable to expect that bitcoin’s true ultimate value would be something roughly in that order of magnitude, if this were to be bitcoin’s one true long term use case.
MintChip – Unlike most cryptocurrencies, MintChip is actually the creation of a government institution, specifically the Royal Canadian Mint. MintChip is a smartcard that holds electronic value and can transfer it securely from one chip to another. Like Bitcoin, MintChip does not need personal identification; unlike Bitcoin, it is backed by a physical currency, the Canadian dollar.
These characteristics make Bitcoin fundamentally different from a fiat currency, which is backed by the full faith and credit of its government. Fiat currency issuance is a highly centralized activity supervised by a nation’s central bank. While the bank regulates the amount of currency issued in accordance with its monetary policy objectives, there is theoretically no upper limit to the amount of such currency issuance. In addition, local currency deposits are generally insured against bank failures by a government body. Bitcoin, on the other hand, has no such support mechanisms. The value of a Bitcoin is wholly dependent on what investors are willing to pay for it at a point in time. As well, if a Bitcoin exchange folds up, clients with Bitcoin balances have no recourse to get them back.
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The emergence of Bitcoin has sparked a debate about its future and that of other cryptocurrencies. Despite Bitcoin’s recent issues, its success since its 2009 launch has inspired the creation of alternative cryptocurrencies such as Litecoin, Ripple and MintChip. A cryptocurrency that aspires to become part of the mainstream financial system would have to satisfy very divergent criteria. While that possibility looks remote, there is little doubt that Bitcoin’s success or failure in dealing with the challenges it faces may determine the fortunes of other cryptocurrencies in the years ahead.
Bakkt explains that they continue to develop their platform but they focus on supporting regulated institutions in serving customers in this emerging asset class. At the same time, the involvement of new players such as enterprises legitimizes the market. It confirms that there is a real interest from both retail and institutional investors on these assets.
This is fine most of the time, as generally the customers of that bank won’t all try to cash out at the same time, and the bank is able to stay liquid. However, the moment customers start to question the bank‘s financial stability, things can go south very quickly. If just a small number of customers begin asking for all their deposits back, a bank can rapidly become depleted of all its liquid funds.
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For instance, if you wanted to send $100,000 of ethereum somewhere, you’d need to buy all that ethereum and withdraw over the course of 10 days (assuming you withdrew perfectly each day every 24 hours — realistically more like 11–14 days) back to Coinbase or your personal ethereum wallet before you could then send that ethereum on to somewhere else all at one time, like you would need to do in a token sale.
There is one risk involved with stop-losses because of this though, which is when a price drastically drops. This is because a stop-loss is automatically triggered once the price threshold is reached. It could be that the price plummets so hard that the stop-loss sells for a far lower price than you anticipated. This is because during a crash, a lot of people are selling but nobody’s buying, meaning the price can only be determined once anyone buys. Using the example above, if Lisk were to drop from $32 to $27 without anyone buying in between, your stop loss would sell at $27.
When buying altcoins, I always keep an eye on Bitcoin’s value, and over time I’ve made some important observations with regard to this. There are almost never three green days in row, and when the market is in the red, Bitcoin tends to decline less then altcoins. Once this happens, your order will be filled and you’ll get your 3% discount, since the altcoin tends to drop harder than Bitcoin.
A long-term investor using futures would have to buy a series of contracts to keep the position, but the futures exchange's customer fees tend to be small — as little as 50 cents for one futures contract — and the investor could stay in the market a long time before the costs exceeded those on a spot exchange, Mollet said. Brokerages like TD Ameritrade advertise commission-free futures trading, but would charge interest for margin loans, with the rate based on the size of the loan.
The Times reported Wednesday that while the exact launch date of the new trading operation is not yet set, the move came after the bank's board of directors signed off on the initiative. Goldman is also set to "create its own, more flexible version of a future, known as a non-deliverable forward, which it will offer to clients," according to the report.
The Bank for International Settlements, the central banker for global central banks, has warned that cryptocurrencies in the future could become a "threat to financial stability" if regulators aren't vigilant. U.S. regulators appear to be playing catch-up. As of Feb. 6, the cryptocurrency working group put together by Treasury Secretary Steven Mnuchin had held a single meeting.
Historical statistical data of a growing economy has proven that it works: Looking at the S&P 500 over a 5-year period, it has achieved a return of around 60%. The same can be said for the FTSE 100, which achieved a return of 25% over the same time period. Markets generally tend to trend upwards over a period of time, so with this in mind, long-term investing does have its merits. This can be said not only about the last 5 years, but for almost every 5 years throughout the history of the new economy.
The purpose of hedging is not to gain from favorable price movements but prevent losses from potentially unfavorable price changes and in the process, maintain a predetermined financial result as permitted under the current market price. To hedge, someone is in the business of actually using or producing the underlying asset in a futures contract. When there is a gain from the futures contract, there is always a loss from the spot market, or vice versa. With such a gain and loss offsetting each other, the hedging effectively locks in the acceptable, current market price.
I’ve also seen plenty of people who intend to hold long term, but lose faith when they see their investment crater 30%, 50%, or even 70%. At this point, they lose faith, and decide to sell their investment to at least recoup some of their initial capital, and not lose everything outright. Thus, they end up buying high and selling low, and then having double regret when bitcoin eventually ended up rebounding even higher than the ‘high’ they bought at.
Indeed, some market movements are fundamentally unpredictable in their short term timing. Two very vivid examples of this were the collapse of Mt Gox for bitcoin, and the hacking of the DAO for ethereum. Both of these events absolutely cratered the price of bitcoin and ethereum respectively, and both of them were fundamentally unpredictable in their exact timing. These are examples of the black swan events I mentioned that are certain to continue playing a large role in short term price developments for bitcoin and all other cryptocurrencies at large, that make it doubly dangerous for those who day trade.
Right now, I can use my bitcoin holdings to pay for purchases at Overstock (OSTBP), or book a hotel on Expedia (EXPE). But if I use bitcoin to buy $25 worth of socks on Overstock today, and the price of bitcoin quadruples next week, I'll feel like those socks actually cost me $100. Then again, if bitcoin crashes, at least I'll always have the socks.
These are tokens built on one of the above mentioned platforms. They give access to a specific blockchain application, and are designed for a specific task. Utility tokens are not really my cup of tea yet, as they’re extremely risky due to two things. It’s still too early for mass adoption of these utilities because the technology is not ready yet (Ethereum’s scalability issues, for example), and because we don’t know what platforms will actually become the blockchain backbone of the digital world.
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