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Cryptocurrencies - Asset Class

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I think Cryptocurrencies as an Asset Class has not only arrived but it is here to stay. My belief is that it is not going anywhere.

What I find quite remarkable though I have no data or evidence to support this assumption at this moment is as follows:

At a time when capital is leaving equities as shown by the price performance of indices around the world, Cryptocurrencies, begin rallying with double digit returns per day. An assumptive thought is that some of the capital (albeit small) is relocating itself to Cryptocurrencies. This is only an assumption which would need to be proven by evidence of 'hard data' showing this. 

Stablecoins, Digital Currencies, Cryptocurrencies and Tokens are all operating in this Crypto Universe and all have a different purpose within the Crypto Eco-System. 

I look forward to seeing how this asset class develops, changes, improves and performs in 2019. 

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Right now I have think the trends on the Cryptocurrencies that IG offer on its platform are downwards. There still remains a strong downward bias and the recent rally has not changed my view on that.

I think what we have just witnessed is most likely a 'short covering rally'. I think we will continue to see downwards pressure and movement with the odd rally here and there. I think there will be another major leg downwards and I see Bitcoin hitting between $1k to $2k and this should be in my opinion the bottom of this huge retracement from the high. This move will 'weed out the rubbish' and then we should see the asset class really improve and kick on going forwards. 

I think this was necessary as there were too many companies built on 'hype' and 'thin air' set up and these needed to be removed from the eco-system.

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Guest James Zicrov

Cryptocurrenices definitely have an edge over other forms of currencies but not everyone is fortunate and intelligent enough to understand insights about it and gain profits by transacting with it.

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Cryptocurrencies are moving fast and sharp upwards. How long it will last I don’t know but there is some powerful and strong trading going on with this asset class.

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There are reports that Facebook are looking for a whopping $1bn in funding for its Cryptocurrency. 

Facebook is Seeking $1 Billion in Funding for Its Cryptocurrency: Nathaniel Popper

https://www.cryptoglobe.com/latest/2019/04/facebook-is-seeking-1-billion-in-funding-for-its-cryptocurrency-nathaniel-popper/

Cryptocurrencies have carved their own niche and asset class. It seems they are getting stronger not weaker. Yes the junk has evaporated during the last 12 months of price declines and selling pressure. This was necessary and healthy for the asset class to move forward. 

My personal opinion is that Cryptocurrencies as an asset class is here to stay for the foreseeable future. It is not going anywhere. The participants within the asset class may change here and there. A tiny or small exposure during the early stages could be considered into investment portfolios before the herd arrives in five to ten years time. By then some really exciting returns will have been made. If you look back over the past ten years then some exceptional returns have already been made which would just not have been possible on other asset classes. 

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@JamesIG,

I have some questions for IG on its Cryptocurrency offerings.

As per CoinMarketCap, Neo, is listed as 17th with a market cap of $620m. I provide the link to support this. 

https://coinmarketcap.com

https://coinmarketcap.com/currencies/neo/

What is the trading volume like for Neo on IG's platform? Are people trading Neo over other Cryptocurrencies that IG offer? If so which are these? I am questioning whether there is a need for IG to continue offering Neo on its platform when there are potentially other Cryptocurrencies that have a far greater market cap and liquidity. They also have a market cap for $1bn which is I think must be the minimum to even stand a chance to remain on IG's platform. I accept that these market caps fluctuate on price movements so it is very difficult and challenging to implement.

Is there enough demand from IG's clients to trade both:

  • Ether/Bitcoin
  • Bitcoin Cash/Bitcoin

I am just wondering if IG's clients are trading the above and if so where do they stand compared to trading other Cryptocurrencies on IG's platform? I would assume that the above would be the least two that IG's clients are trading but this is only an assumption and I could be totally wrong. I am sure @JamesIG you will prove or disprove my assumption here.

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India is acting hastily in my personal opinion here. There are signs that the UK and US are starting to embrace Cryptocurrencies. France are too as well as Asia in general but India is totally missing the point. I fear it may get left behind should it goes ahead with any ban on Cryptocurrencies. It would totally send out the wrong message.

India mulls ban on cryptocurrencies

https://www.publicfinanceinternational.org/news/2019/04/india-mulls-ban-cryptocurrencies

I am actually surprised that this news is not causing the price of Bitcoin in particular as well as other Cryptocurrencies to fall dramatically. In the past it certainly would have. 

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Bitcoin currently has a market cap over $100 billion. This is in line with Uber potentially after the first day of trading after the IPO according to IG. 

https://coinmarketcap.com

As you can see from the link above, Bitcoin, is clearly well ahead with Ethereum in second. Ethereum is closely followed by Ripple and then there is a race between Bitcoin Cash, Litecoin and EOS. Stellar seems to have lost some of its momentum which it showed last year. 

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On 04/04/2019 at 19:08, TrendFollower said:

Now add leverage to the mix and one can begin to see the staggering returns on offer.

 

What could possibly go wrong? 

  • Great! 1

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@dmedin,

Several things.

You may not time any trades correctly or do not trade with the trend. Your stop loss management may be ineffective to deal with the extreme volatility so you keep on getting stopped out with losses. I could go on and on. There are lots of things that could possibly go wrong. 

Make no mistake, trading Cryptocurrencies, is extremely high risk. 

  • Like 1

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Bitcoin is one of the best performing assets in 2019 to date and Cryptocurrencies are probably though I do not know for sure one of the best performing asset classes to date in 2019 when you factor in the likes of Litecoin and Bitcoin Cash, etc.

I think this article is rather interesting.

Amazing! Bitcoin Is 2019’s Top-Performing Asset, Outpacing Stocks & Oil

https://www.ccn.com/surging-bitcoin-2019-best-asset-globally

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All the Cryptocurrencies available on IG are all above 10% today.

Simply amazing and it is something that very few other asset classes can deliver in just one normal day and which happens to be a Saturday!

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Those of you who have followed me on the IG Community will know my positive stance on Cryptocurrencies, Blockchain and Tokenisation over the past three years or so regardless of price action. 

It is quite amazing how the current price action of Cryptocurrencies can get those who were no where to be seen during the downturn all of a sudden interested. They could have shorted Bitcoin et al but they did not because they stated Bitcoin had no future. It was rubbish and it was going to zero. They argued that Bitcoin would be replaced with a superior Crypto in the future but Bitcoin itself had no future. I explained that Bitcoin would evolve, improve and adapt over time and that is exactly what is happening now. 

Most of you will recall that even during the 80% drop of Bitcoin (yes it was a great shorting opportunity) I still posted in relation to this asset class and was I an advocate of the asset class and believed in its fundamentals and potential. Many shared their negative bias wisdom (NBW) and now all of a sudden seem to be spending time following Cryptocurrencies.

I would suggest if anyone really is interested in this asset class to read some of the fantastic books out there that can really help define your thoughts around this area. I am more than happy to share some of the books which I found both very useful and interesting. 

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I do wonder what these very people will think when Bitcoin hits $10k and then goes above and beyond. Yes, there will be large corrections and pullbacks along the way but what will these people think?

It is amusing that when the prices are increasing the negativity around Bitcoin and Cryptocurrencies stops but appears when prices are declining!

I was posting about Bitcoin and Cryptocurrencies during the declining prices and I am posting when the prices are increasing.

The 'negative' in relation to this asset class only seem to share their thoughts during declining prices as they may fear looking a bit silly if they do so when the prices are appreciating the way they are.

What will they come up with next? Tulip Mania part 2, part 3, part 4!

How many times has Bitcoin died? How many times has it resurrected? How many bubbles has Bitcoin experienced?

I always have stated that traders must embrace any potential bubbles as they represent a fantastic trading opportunity to profit. 

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I'm a Bitcoin/crypto skeptic, one of these "very people" you talk about @TrendFollower

I think that the utility/adoption of Bitcoin is independent of it's value in relation to fiat currencies. How much of the price action is due to Bitcoin adoption/progress news and how much to speculation? (i.e. if I buy it now I can sell it for more tomorrow). I believe it is based purely on speculation.

I just had a quick glance at recent news articles trying to explain the rise. There appears to be nothing about how Bitcoin is becoming more useful, being adopted more widely, becoming easier to hold/convert/etc:

  • "Fidelity buying and selling Bitcoin"
  • "The launching of a possible Facebook coin"
  • "Bitcoin ETFs"
  • "Elon Musk’s interest in cryptocurrencies"
  • "Safe haven"
  • "Mainstream appeal"
  • "Exodus from alt coins"
  • "The Bitfinex scandal drove Bitcoin purchases"
  • "The Binance hack proved Bitcoin's integrity"

The recent price rise has not changed my thinking at all. I believe that one day the bubble will permanently burst, bitcoin will die and we will all wonder what that was all about. It may reach $10k/$100k/$1m before then, who knows.....

In the meantime I will watch from the sidelines with interest.

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@andysinclair,

You may well be right but I would argue that if the market lets Bitcoin reach $20k, $50k or even $100k then large organisations and the big players supporting Bitcoin will find a way to make it work. They will improve it, adapt it and make demand for it. 

When I get a chance and more time, I will post a more technical post on Cryptocurrencies and Blockchain and copy you in with some of my more technical thoughts and see what you think.

Did you see the recent Microsoft announcement? I posted the link on one of the  threads but you may have missed it. They are going to use Bitcoin on the Blockchain. What do you think of that announcement? Another recent article I shared was for Starbucks using Blockchain for their coffee supply chains. 

I accept that Bitcoin and Blockchain are different and that Blockchain is the technology underpinning Bitcoin but I have shared as much as I have had time about recent developments on other threads maybe not this one.

I agree that speculation is likely to be a big part of the current price action we are seeing. I do not doubt that.

The real question from a trading perspective is that can you make money going long Bitcoin? The evidence clearly points to a yes. Just look at the hard data from Bitcoin’s origination to now. You could also make money shorting Bitcoin as it will encounter large drops. Bubbles can create the best and most profitable trading opportunities. 

Even if you were right and Bitcoin hit $1m and then died. Surely a trader would want to take advantage of such price action as it could be life changing? One could argue that the US stock market is a large bubble and the valuations of the participants are in bubble territory but that does not mean that the US markets cannot continue to go upwards from here over many months and years. 

I believing in trading the opportunity and price action. In terms of Bitcoin, I shall post a more technical view in the coming weeks and copy you in to see what you think. 

 

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@andysinclair,

Bitcoin has outperformed Gold since its inception over 10 years ago. If you had invested say $1000 in both at the same time then your return in Bitcoin would be monumental compared to Gold in the very same time period. So I ask the question, which has performed better as a store of value in that same time period?

Bitcoin has died many times, it has been resurrected many times and it is still here and alive. The media can be very dangerous and little knowledge by the media is also very dangerous. I accept the progression is slow but that is to be expected as to change the mindset of the world's population is no mean feat.

Driverless cars will also face the same scepticism and negativity. Yes, Tesla, have incurred deaths in their driverless testing but when you actually look at the data and results then the evidence suggests that there are less deaths on driverless (albeit testing results) than real drivers on the road based on similar numbers. 

Have a look at some of the articles below:

Bitcoins for Frappuccino: Will Starbucks’ Crypto Endeavours Pave the Way for Mainstream Adoption?

https://cointelegraph.com/news/bitcoins-for-frappuccino-will-starbucks-crypto-endeavours-pave-the-way-for-mainstream-adoption

Starbucks is a large brand and institution around the globe.

Also just look at the Grayscale Investment Trust for Bitcoin. This only allows High Net Worth (HNW) individuals to invest. They must also invest a minimum of $50,000 and the volume has increased no end recently. 

Have a look at this article. They do not come much bigger than Microsoft.

Microsoft Looking To Build Decentralized Identity Network On Top Of Bitcoin Blockchain

https://www.forbes.com/sites/darrynpollock/2019/05/14/microsoft-looking-to-build-decentralized-identity-network-on-top-of-bitcoin-blockchain/#1da99b011de5

The articles above do not necessarily mean that Bitcoin will succeed. I think it has already done one of its main jobs which is to create a new asset class in Cryptocurrencies and create mainstream awareness. This was a mammoth task and Bitcoin has succeeded not in just one country in the world but several countries and continents across the globe. This is no mean feat. 

Now Bitcoin could fail and it could go to zero. But who cares. One must not get emotionally attached to any asset they invest or trade in. Trade the opportunity either long or short and try and profit from this opportunity. One can apply the same technicals (signals and indicators) to Bitcoin's charts as you can with any other assets. If one thinks it is going to zero then do not stay on the sidelines. When that downward trend is confirmed, short Bitcoin and profit. 

Searching on the internet will not provide you with all the answers. If only it were that simple to understand Bitcoin and Blockchain by searching the internet. There are some very good books which I highly recommend which will really open your mind to Cryptocurrencies, Blockchain and particularly Bitcoin. 

I really recommend the following books for those who want to get their head around this asset class and appreciate and understand it better rather than relying on the bias online media articles. 

  • Digital Gold - The Untold Story of Bitcoin by Nathaniel Popper 
  • The Business Blockchain by William Mougayar
  • The Book of Satoshi - The Collected Writings of Bitcoin Creator Satoshi Nakamoto by Phil Champagne
  • Blockchain Revolution by Don Tapscott and Alex Tapscott
  • Cryptoassets - The Innovative Investor's Guide to Bitcoin and Beyond by Chris Burniske & Jack Tatar
  • Blockchain - Blueprint for a New Economy by Melanie Swan

I personally have all of the above books and I have read them. They are all excellent books in their own way. Once you read these books you may come to a different view but I strongly recommend these books to anyone who is interested in Cryptocurrencies, Bitcoin, Blockchain, Tokenomics, etc. These books will really open your mind. 

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@andysinclair,

Another big company and brand getting involved in this space as the article below explains. Why would all these big companies be looking at integrating this asset class into their business models? Are Microsoft, Starbucks and Samsung all stupid and would you argue that you know more than these companies?

Budget Samsung Galaxy Phones Champion ‘Blockchain Wallet’ in Major Crypto Adoption Boost

https://www.ccn.com/samsung-galaxy-budget-crypto-wallet-adoption-boost

Right now we are seeing the infrastructure being developed for these businesses to try and integrate this technology. Many will join in the future and it will be slow but when it happens those who did not make the effort to understand the technology by reading quality material from quality books will regret it.

In my experience 'Bias and Ego' are the biggest destroyers of serious wealth creation in terms of trading and investing by refusing to embrace new concepts and appreciate new revolutionary visions. 

If I am wrong then I will happily hold my hands up and admit I was wrong and you were right. I have no problem with that what so ever. I just hope if I am wrong then I am wise enough to short Bitcoin down to zero and profit handsomely from such a opportunity. 

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4 hours ago, andysinclair said:

I'm a Bitcoin/crypto skeptic, one of these "very people" you talk about @TrendFollower

I think that the utility/adoption of Bitcoin is independent of it's value in relation to fiat currencies. How much of the price action is due to Bitcoin adoption/progress news and how much to speculation? (i.e. if I buy it now I can sell it for more tomorrow). I believe it is based purely on speculation.

I just had a quick glance at recent news articles trying to explain the rise. There appears to be nothing about how Bitcoin is becoming more useful, being adopted more widely, becoming easier to hold/convert/etc:

  • "Fidelity buying and selling Bitcoin"
  • "The launching of a possible Facebook coin"
  • "Bitcoin ETFs"
  • "Elon Musk’s interest in cryptocurrencies"
  • "Safe haven"
  • "Mainstream appeal"
  • "Exodus from alt coins"
  • "The Bitfinex scandal drove Bitcoin purchases"
  • "The Binance hack proved Bitcoin's integrity"

The recent price rise has not changed my thinking at all. I believe that one day the bubble will permanently burst, bitcoin will die and we will all wonder what that was all about. It may reach $10k/$100k/$1m before then, who knows.....

In the meantime I will watch from the sidelines with interest.

 

The main question I have for people who are negative against crypto is “do you see any value in crypto currencies whatsoever? Do you see a utility or usefulness in it that something else may not provide, or can’t provide as efficiently?”

I think a large number of people mix up ‘BTC has no value’ with ‘BTC is overvalued’. 

If it was 23cent would we have this discussion? Who knows... 

Now if you believe it has value then you need to find the floor price. If you agree someone isn’t going to create something to sell for less than the cost to create in the long term (or mine, or drill for in oils case, or produce or farm) then you have a floor price of BTC. 

If you believe these two premis then BTC has value, and a value inthe thousands of dollars (around 3/4ish). 

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@PandaFace,

Value can be defined in different ways by different people. So let me explain. Bitcoin has a current value of around $7800 at the time of writing this post. That is fact. It is what the market values Bitcoin at this moment in time. Let us not worry about whether we think it is worth that value or not right now as that is a very long and complicated discussion.

So value can be defined in monetary terms for Bitcoin. 

I would argue that Bitcoin has value in terms of importance to the Cryptocurrency asset class and to the underlying technology underpinning it, Blockchain. Bitcoin on the Blockchain could have a useful value to a particular organisation based on its needs. It could be a supply chain company or an insurance auditing company. 

Bitcoin and digital currencies could be beneficial in terms of lowering transaction costs going forwards into the future. It could create borderless and frictionless monetary transactions. The potential of this in the future can be valued today. So sort of like a start up company. It can have a valuation on projected worth and earnings potential in the future. Bitcoin is no different. The market is valuing its worth today on future potential. It may not be correct, it may be obscene but you should see some of the start up business opportunities that are presented to me and their valuations. They could be deemed even more ridiculous. 

Bitcoin has a value in terms of USD as we know how many USD we need for one Bitcoin or vice versa. 

So thank you @PandaFace for your contribution to this thread. It is very much appreciated. Also a big thank you to @andysinclair for allowing this discussion to be conducted which can only benefit the IG Community regardless of whether my arguments are right or wrong. 

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I’m not debating what market value it has as that decidedly obviously. Furthermore obviously different people perspective different value to things... 

what I was doing was providing what I thought was a simple logical deduction on a couple of simple premises for people to see ‘the logic’ in BTC value even if they don’t see the worth it has right now. I was also trying to show a mathematical reason for value rather than just suggesting that big companies adoption was a mover of price. 

Looking through your posts I would say I disagree with the majority of what you say is worth looking at when it comes to causality of price, which I don’t think is very much. 

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@PandaFace,

Bitcoin has always moved on news both upwards and downwards.

When positive news is released by the online media it causes a frenzy in Bitcoin's price behaviour. I have witnessed this many times over the years I have been following Cryptocurrencies.

However, there are times when Bitcoin just moves for no apparent reason. Sometimes there is no driver but it moves or the reason is not both obvious nor available via the online media.

Like I said to Andy Sinclair when I get a chance I will post some of the more technical information on this subject area which you may or may not find of interest. 

Why don't you offer your thoughts when it comes to causality of price for Bitcoin. What do you think? 

 

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@andysinclair & @PandaFace,

This article really puts an emphasis on the 'digital identity' which is going to be the future and Microsoft are having a real go at building the infrastructure for this.

Microsoft’s Blockchain Obsession, Including ID Push, Is Good for Bitcoin

https://www.ccn.com/microsoft-blockchain-id-good-bitcoin

These things can take a very long time. Bitcoin is only around 10 years old. 

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15 hours ago, TrendFollower said:

Bitcoin has outperformed Gold since its inception over 10 years ago. If you had invested say $1000 in both at the same time then your return in Bitcoin would be monumental compared to Gold in the very same time period. So I ask the question, which has performed better as a store of value in that same time period?

Thank you @TrendFollower for your comments, it's certainly an interesting discussion.

Responding to the above quote: I think also there is a difference between buying "physical" bitcoin and trading via IG Index, an ETF etc. Bitcoin in theory may have been a better store of value purely from a price perspective, but if you owned "physical" bitcoin there is a higher probability (than gold) that either your bitcoin would have been stolen or you would have lost access to it.

Anyway, I do notice companies (from startups to large, established giants such as Microsoft) announcing various blockchain/crypto related initiatives/projects. I do however remain skeptical about the motivation for this, are the big companies "doing something" so that they are seen to be "doing something"? And how many of these projects are producing real world solutions?

I've just read the Starbucks news: "Starbucks will install Bakkt’s payment software in its branches, which will allow customers to pay with digital assets. Such payments will be instantly converted to fiat, however, so that the coffee giant does not have to deal with crypto".

From another article: 

"So how is Flexa already letting Cameron Winklevoss pay for that Starbucks coffee with crypto, and how are the 15 other enterprises also doing so? First, users need to download the app from Apple’s App store, then send it their asset of choice from any cryptocurrency wallet. While Gemini custodies the crypto funds, Spedn takes care of the payment itself by generating a one-time QR code on the phone’s screen, which is scanned by the participating store’s existing scanner, debiting the amount charged from the customer’s account. While the customer gets a receipt showing the purchase as a gift card, Spedn settles the payment with the merchant in the preferred currency at a later date."

So Starbucks is not taking any risk on Bitcoin nor holding Bitcoin on it's accounts - it will simply allow bitcoin to be converted to fiat at it's stores, or rather it's accepting a "voucher" for a coffee, the voucher just so happens to have been bought with Bitcoin. In this case you could replace this process with any other form of voucher/coupon/points/loyalty scheme.

There is no doubt that Bitcoin is an interesting speculative instrument and can provide lots of trading opportunities. However I will remain skeptical until I start getting paid in crypto and can spend it anywhere (with no fiat conversion) - the ultimate sign of adoption will be when I can pay my taxes in it (and my parents start using it).

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@andysinclair,

No problem. I agree this is a very interesting discussion so thank you for participating. 

I agree with your point in the first paragraph. One could argue that Gold is far less risker than the two. So from a risk management perspective your point is very valid. 

I take your following points too. We are still at a very early stage in this area. The infrastructure, processes and systems need to be developed and tested in real businesses within real markets. You make good points but must remember that if this asset class is to succeed then it will require patience and time. The asset class is still only 10 years old and there is a lot of junk and rubbish which needs to fail and disappear. Ten years ago we would not be discussing this. So just think how far we have come in this time where the possibility of digital currencies exists potentially in the coming future. 

There are states in the US which now allow you to pay US taxes in Bitcoin. Companies operating in the Blockchain and Cryptocurrency sphere pay some of their employees in Crypto. I accept this is not happening outside of this spectrum. This in my opinion is many, many years away if at all in my lifetime. I would not hold your breath about your parents using it. The chances are more that your children or grandchildren will start using it.

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