Waving or drowning?

Thursday, 22nd March 2018

Waving or drowning?

Sunday 17th December 2017 was the day things turned sour for Bitcoin….

For the 5-weeks beforehand, the cryptocurrency had been flying – rising from $5,857.32 all the way up to a high-close of $19,086.64….

It was a remarkable ascent. Folk could recall nothing quite like it….

Heading into Christmas, it seemed that obtaining life-changing wealth was no more complicated than buying as much Bitcoin as you could afford and letting the natural order of things take care of the rest….

It was all so easy. All so clear. Nothing could be more obvious. The future was bright. The future was Bitcoin….

Then came Black Sunday and little has gone right for Bitcoin since….

Almost 3-months into the New Year, Bitcoin continues to trade beneath the $9,000 ceiling….

And each day that dawns seems to deliver more negativity that adds more fuel to what has become a mass Bitcoin sell-off….

  • A sting in the tail….

Just prior to Christmas – at the point Bitcoin was soaring to the heavens – tax was the last thing on the mind of crypto-investors….

And that was particularly the case with young investors – many of whom might never have invested before and might not even have considered the tax implications to what they were doing….

They were too busy betting the farm to worry about what might happen if or when the government came a-knocking for its share of the action….

Such investors are thinking about tax now though – especially those located in America….

They’ve been landed with tax demands they are unable or struggling to pay – and for many the value of their crypto-holdings no longer covers the amount due to Uncle Sam….

‘I feel like I might have accidentally ruined my life because I didn’t know about the taxes,’ says one recent poster on Reddit.

For many, the solution is to raise funds by selling off their remaining crypto-holdings – market activity that is doing its bit to depress the Bitcoin price – and to get on a payment plan with the IRS to fund the rest of their outstanding liabilities….

  • The machines fall silent….

Bitcoin miners are feeling the pinch too….

What had been a great pre-Christmas party has slowly developed into a painful hangover….

Many Bitcoin miners have suspended operations. At the current price, it is no longer profitable for them to create the cryptocurrency – according to the Fundstrat data science team….

The current Bitcoin price is little better than a break-even proposition for miners. There is little or no incentive for them to carry the costs involved in doing the digging and the heavy-lifting….

Some have simply turned off their machines ‘temporarily’ – waiting for the price to rebound and make mining viable again….

But there are no guarantees the Bitcoin price will ever bounce back to where it was. If it doesn’t, those machines might never see action again….

What had been a constant buzz and hum around Bitcoin has now fallen silent. Boom time has been and gone….

  • Social media cuts cryptos loose….

Pre-Christmas, finding a website NOT bitten by the Bitcoin bug was a major challenge….

Bitcoin was everywhere. The entire Internet was mad for it. You couldn’t avoid the advertisements and endorsements. They rained down like confetti….

Social media sites were littered with opportunities to get rich quicker than had ever been possible before. It was a modern gold rush. A stampede to certain profits….

Then – just after Christmas – people who had responded to such advertisements began to complain that they had been misled and that they had lost money….

Facebook were first out of the blocks – banning ads for what were now termed ‘unregulated or speculative financial products’.

Google is to follow suit. They say they will ban cryptocurrency advertising on all their platforms – starting in June….

It’s clever of Google to build some lag into their plans. They get the kudos of being seen to ‘do something’ – but the delayed implementation serves to encourage advertisers to spend-out their marketing budgets in the meantime….

Twitter is also reported to be making changes to its advertising policies. It is thought they too will ban crypto-advertising….

The great engines of social media played a primary role in encouraging investors into the cryptocurrency sphere. Now, those engines too have fallen silent….

  • The ‘Death Cross’…. 

Just last week the Internet news services were abuzz with chatter about a ‘Death Cross’ that was close to appearing on the Bitcoin price chart….

Complex technical charts make about as much sense to me as a sonar map of the sea bed. I think the last time I studied one with any real conviction, I spent an hour looking at it upside down….

But, apparently, a ‘Death Cross’ is the technical term applied to a situation where the 50-day moving average drops below the 200-day moving average….

Analysts see this as a sign that a short-term decline is about to turn into something more akin to a death spiral….

It boils down to this. Bitcoin might be drowning rather than waving….

‘The Bitcoin fad is fading….’ says Bloomberg….

Google searches focused on Bitcoin are in sharp decline says Google Trends….

So too are Bitcoin focused tweets reports Bit Info Charts….

Meanwhile, stories focused on the impending demise of Bitcoin are on the up and up….

And crypto-advocates like Floyd Mayweather, Harry Redknapp, Paris Hilton and Bjork – all talking up cryptos pre-Christmas – are nowhere to be found….

  • Reasons to be optimistic? 

I must confess that all the bad vibes and negativity currently surrounding Bitcoin succeeds in getting my contrarian antenna twitching….

When the herd moves away, that’s when I’m most interested in taking a closer look….

Has the Bitcoin price fallen far enough off the cliff to become interesting again? Some people would appear to believe so….

Fundstrat’s Tom Lee forecasts that the Bitcoin price will hit $91,000 by March 2020. He bases his prediction on Bitcoin’s performance after previous market dips….

Jack Dorsey, CEO of Twitter, came out this week and stated his belief that Bitcoin will be the ‘single currency’ on the planet inside the next decade….

Crypto-expert Teeka Tiwani recently made the point that the smartest kids coming out of college with computer science degrees no longer want to work for Facebook or Google. They want to work in blockchain….

Tiwani takes the view that so much brainpower can’t help but create value and profits. He sees the influx of talent into the blockchain sphere as the potential driver of another forthcoming cryptocurrency boom – one you’d expect the Bitcoin price to benefit from….

  • Opinions….

You never have to go far to find an opinion – most of them conflicting and all of them confusing when taken together. Opinions are a commodity that is never in short supply….

The trick lies in knowing which opinion to put your faith in and your money on….

And if you don’t know enough to know which way to lean, you probably shouldn’t be in the market at all….

When you make an investment – any investment – you must understand what you are putting your money into. If you don’t, you’re probably in trouble….

A good many investors who got into Bitcoin just ahead of Christmas – now licking their wounds in the shadows – learnt that lesson the hard and expensive way….

That’s how it looks from here….

All the best,

Dave Gibson

Money Truths