As financial markets plummet, Warren Buffett and his holding company Berkshire Hathaway is expected to make some huge investments over the coming weeks. Will Buffett ‘buy the dip’ in Bitcoin though? Berkshire Hathaway – Buying In Times Of Crisis Buffett — also known as ‘Oracle of Ohama’ always takes up headlines during times of crisis due to his investment strategy which tends to make huge fortunes by preying on the uncertainty of the market. He famously quipped that the best investors “should be fearful when others are greedy and greedy when others are fearful.” In other words, Buffett’s strategy revolves around recognizing and buying into the market when company stocks and other forms of investment are undervalued due to irrational fears. This is done with the expectation of an eventual spring-back. In even simpler terms: Buffett buys low on stocks he believes are undervalued and sells high. As a result, it is likely Buffett will make some major investments under the impression that the market drop has irrational foundations and that people have overestimated the threat of Coronavirus and other negative demand shocks. Displaying his encouraging and to say the least non-bearish attitude in an interview with Yahoo Finance, Buffett said: “I’ve always thought a pandemic would happen at some time. It won’t stop the progress of the country and the world. This is a terrible event that is occurring… but… The progress of mankind has been incredible. And that won’t stop.” The interviewer proceeded to say: “That doesn’t sound like you’re selling airline stocks today”, to which Buffett laughed and then remarked: “No, I won’t be selling airline stocks today”. What Investments Can We Expect Buffett To Make It is almost certain that Berkshire Hathaway will up their investments in what they view as ‘safe investments’. Moving into 2020, Berkshire had $128 billion of cash and equivalents on the company’s Balance sheet — giving the firm plenty of ready money for investments. Some of the safe blue-chip stocks Berkshire is likely to buy are Microsoft, Alphabet, Visa, and Cosco Wholesale. All stocks that the firm has invested in previously. Will Buffett Buy Bitcoin? For years, the answer has always been an unequivocal ‘NO’. In public, Buffett has always resided as a skeptic of cryptocurrency and never viewed it as an ‘undervalued’ asset as such. In fact, in the past, Buffett has suggested that Bitcoin has no true value at all — describing it as “rat poison squared”. For a value-investor, these beliefs completely rule out a big ‘buy-in’ that might be expected of short term traders. Given these beliefs, Buffett probably will not contradict the Bitcoin rout by buying in. However, should he really be holding back? Although Buffett does not view Bitcoin as undervalued, there are many other factors and arguments suggesting that the asset really is undervalued right now. With the exception of this week, over the years, demand for Bitcoin has overwhelmingly increased, as resembled by its humongous returns on investment in the last decade. Among some of the reasons for this is the growth of more practical use cases for fund-managers and retailers, made available by a growing number of layer 2 solutions that aim to solve Bitcoin’s liquidity problem. Bitcoin also has a first-mover advantage, meaning that institutional uptake of Bitcoin might be more likely than the uptake of other digital currencies, which, oddly enough Buffett thinks are stronger. Moreover, it was only after sudden shocks to the system — which do not usually occur — that the Bitcoin price has plummeted after its massive hike to $10,000. This could suggest that when the Coronavirus and other negative shocks blow over, the price may correct back to a similar level as before resembling the high demand for Bitcoin. With respect to these points, Buffett — as a value investor — should ‘buy the dip’ but probably will not due to his strong convictions or interest in rallying people behind financial entities like Visa and JP Morgan whose success may be at odds with the success of Bitcoin. Do you think Warren Buffet should buy the Bitcoin dip? Share your thoughts in the comments below. Image via Bitcoinist Media Library
Bitcoins worth $10 million dollars have been transferred to the cryptocurrency exchange Bitstamp from an unknown wallet address. Will BTC dump again? Just two days after Bitcoin’s biggest crash in over 10 months, falling from a value of around $7200 per BTC to under $5500 where it currently resides, a huge transfer of the cryptocurrency has taken place today. According to whale-alert.io’s Twitter update: 2,000 BTC were transferred from an unknown address to the cryptocurrency exchange Bitstamp. 2,000 #BTC (10,601,299 USD) transferred from unknown wallet to #Bitstamp Tx: https://t.co/maBKHI5BKz — Whale Alert (@whale_alert) March 14, 2020 Although it is not certain where the movements originate from but there are a few likely suspects. Suspect Number 1: BitMEX Traders The first suspect would be that the funds have come from BitMEX traders. The price drop caught many derivative traders off guard and subsequently caused many forced sell liquidations on the BitMEX platform. Over $700 million worth of them, in-fact. Sell liquidations occur as BitMEX forces the end of long contracts when the price drops by a pre-set amount. In recent weeks, many people had taken up long positions on the BitMEX platform – expecting a stable market correction and eventual price rebound after last weekend’s comparatively small crash. In-fact, the forced liquidations of the long contracts represented 90% of all derivative contracts that were forced to close on Thursday. The force liquidations are likely to inspire fear and concern in many Bitcoin traders. This could show that the meaning of this Bitcoin transfer could be another huge dump — resulting in an even larger drop in the Bitcoin price. Suspect Number 2: PlusToken Scammers? It is possible that the PlusToken scammers from last week haven’t moved the fraudulent Bitcoin’s to their final destinations and that we can expect them to dump their Bitcoin’s via Bitstamp. This is an unlikely conclusion, I must admit, as Bitstamp requires ID verification and an incoming amount that large is very conspicuous. That would be a very unwise decision from a scammer. Can We Expect Another Bitcoin Price Dump? The current situation and the volatility we are experiencing on the network is unlikely to evoke positive beliefs, leading many in the community to believe that we may have another price dump on our hands. Wherever the funds came from, the fact that they’ve been moved to an exchange is a worrying one. Normally large funds are only held in exchanges when they are ready to be traded. And it seems unlikely that anyone will be making bull trades at this point. If these 2000 Bitcoins are sold on the market, this will further strengthen bearish indicators on the market-leading to even more sell-orders. The response is certainly a worried one as tweeters take to the social media platform with GIF and negative beliefs about the intentions of the massive transfer in Bitcoin. pic.twitter.com/NzCaL1vxdx — Satoshi Starlord (@satoshistarlord) March 14, 2020 What do you think about today’s massive Bitcoin transfer to Bitstamp? Share your thoughts in the comments below! Images via Shutterstock, Twitter: @whale_alert, @satoshistarlord
The crypto market has slumped $13 billion in the past 24hrs, leaving a vast majority of digital assets deep in the red, including Bitcoin price. Here are 3 things holding it back right now. Over the course of today and yesterday, anyone with bitcoin probably noticed that the value of their coins dropped quite substantially– over 5.26% to be exact. The Bitcoin price correction has left the asset trading around $8,500. The question plaguing the community now is will this price rise back to Marches’ resistance level of $9,200? After a healthy correction, the answer to this would be ‘probably’. However, concerns are rising that a handful of catalysts are currently turning this event from a harmless pullback into a malignant crash. Plus Token Scam Dumping As reported by Bitcoinst recently, at least 11,999 Bitcoins started moving from the PlusToken scam into unknown addresses — with a total value of over $107,000,000. The splitting of this amount means that it’s easier to mix. Splitting the fraudulent Bitcoin may be a sign that they’re preparing for massive sell-orders, which will hinder Bitcoin’s price recovery. Even if the dumping doesn’t occur, it’s likely that the very fact it’s on move is causing some wary traders to exit into more stable-valued assets. Coronavirus is infecting Bitcoin price This is a controversial one because many analysts have suggested in the past that coronavirus would help bitcoin price rise since the leading asset is supposedly used by funds to hedge against traditional finance risk. Yet, there are now concerns that Bitcoin’s recent drop and bearishness was strongly correlated with the coronavirus. Coronavirus may have affected Bitcoin in ways the community wouldn’t have predicted. Some people in the community are suggesting that the impact of coronavirus on crypto events, and mining facilities could have something to do with it. 70% of the Bitcoin miming Pools in China? Corona Virus Just Killed Your Bitcoin & it's coming for another big bite in the Bitcoin price in March. pic.twitter.com/HJV5yJcxB2 — Cosmic Lover ~ aka Purple (@CosmicLover10) February 27, 2020 This is still a hugely speculative conjecture though, as there’s not a lot of evidence that mining closure is correlated with a drop in Bitcoin demand. In reality, it’s not certain how mining closures will affect interest in Bitcoin. The protocol designed the difficulty of the mining process to alter every two weeks to adjust to the computing power available on the network, meaning that closures have a limited effect on processing speed. Ideally, this would mean that the effect of coronavirus closing Chinese mining facilities will be offset naturally by the protocol. However, there’s a strong case for coronavirus decreasing demand for cryptocurrency, as people begin dumping it for fiat money in order to prepare for a wider outbreak. Miner hoarding Ahead of the halving event in May, Bitcoin owners are more likely to hold onto their assets if they predict that the supply will decrease and demand increase. This is the same case scenario for miners, who control a significant percentage of Bitcoin supply. Optimism about the Bitcoin halving may explain the drop in trade volume which as suggested by analysts, is a sign that a precursor for a financial pullback. If this lack of trade volume persists, then recovery is made more unlikely keeping the network in a state of a pull-back. Fortunately, if miner hoarding is the primary reason for the major pull-back, then there’s nothing for the community to worry about in the long-term. It shows that the trading behaviour which appears to be bearish could actually have underlying bullish beliefs that Bitcoin demand will increase after the mining event. In that case, the pull-back may only be temporary. What do you think is the key thing holding back Bitcoin’s price right now? Add your thoughts below! Images via Shutterstock, Twitter @CosmicLover10
The electricity used to power the Bitcoin network is enough to power the Czech Republic more than once over. New figures by a PwC researcher have shown that the Bitcoin network uses more electricity to keep it running than the Czech Republic, a European country with a population of over 10.5 million people. The process of Bitcoin “mining” uses 77.78 TerraWatt hours per year. Mining is the computing process that is used to add a new group of transactions (blocks) to the global, publically visible ledger (the blockchain) which displays all historical transactions. To put this into a more relatable context, each individual transaction uses the equivalent of two months worth of electrical consumption in an average British household. Perhaps most disappointing for Bitcoin advocates is the fact that the carbon footprint of all the computers used to mine Bitcoin, is currently the same as the carbon footprint created by 780,650 Visa transactions. The problem has become amplified over recent months because of the recent bullish conditions and the high demand for Bitcoin transactions resulting from this. Where Does All The Energy from Bitcoin mining Go? During the mining process, super custom-made computing devices called ASICs, are programmed to endlessly complete mathematical equations. By completing these complex equations, they are able to add a ‘block’ of transactions onto the ledger – known as the blockchain. Together, all the computers used to try and figure out the answer to these hyper-complex equations are very inefficient. Each computer requires a huge electrical input and has an average lifetime of just over one and a half years. As a result, Bitcoin also quickly produces a large amount of waste. This waste isn’t even recyclable or reusable. Bitcoin currently produces as much electronic waste than Luxembourg — 10.71 Kilotons to be exact. To make the case for Bitcoin’s sustainability worse, only 2% of devices used will ever calculate the equations. This means that 98% are arguably just calculating pointless equations before being thrown away as waste after just one and a half years. Alternatively, the computer companies and banking institutions use to process and maintain the current financial ledgers are all ‘useful’ and thrown away less often as they don’t require the power to work endlessly through difficult equations. Are There Any Solutions? Some blockchain professionals have suggested that this is an infrastructure problem in the mining community. Anton Shelupanov, managing director of Mattereum, suggests that the heat generated by the Bitcoin ASICs to heat up dwellings. He recommends transporting mining devices to areas in winter to heat up buildings. Others have suggested that as layer 2 Bitcoin programs develop, the efficiency of the network will increase. Layer 2 changes are designed to add secondary frameworks to the Bitcoin protocol. For example, the lightning network was designed to speed up transactions by pooling off-chain ‘transfers’ as part of a private payment channel. Like settling a tab, the lightning network prevents people from a liquidity pool having to do multiple transactions that need to be verified by high energy-consuming miners. Instead, only when the payment channel needs to be closed, are transactions made. What do you think about the current state of bitcoin mining? Let us know your thoughts in the comments below! Image via Shutterstock
Yesterday, the active supply of Bitcoin on the market was at its lowest in months — suggesting consistent demand for BTC ahead of the halving. The next Bitcoin halving is expected to occur on the 18th of May, 2020 — marking 4 years since the last halving event. This could explain why the active supply of Bitcoin dropped by 3.3% yesterday: people are buying more of the cryptocurrency ahead of the halving event which they expect to increase the value of Bitcoin. What Is A Bitcoin Halving Event? Bitcoin halving is an ‘event’ that was coded into the Bitcoin protocol whereby the miners, who receive an amount of Bitcoin for verifying a block of transactions, receive 50% less for their work than before the event. Halving was designed to limit the supply of Bitcoins on the market, and steadily control inflation of the cryptocurrency. Why Might People Be Buying Before An Event? Since halving limits the acceleration of future Bitcoins in the network provided that demand stays the same or increases, the price of Bitcoin will rise since supply is lower than demand. Before an event, traders and asset managers alike are likely to go long on Bitcoin if they expect this price increase. Moreover, people who believe in the value of the coin are likely to buy up and hoard. Mining events: Guaranteed Profit For Buyers? Mining events do not certify that people will make a profit from halving events — despite the positive results from past halving events. In-fact there are many different theories about how greater halving will affect the market. Some, such as Marco Streng, CEO of Genesis Mining, believe that halving weakens the incentive for miners to verify transactions as miners are competing with more-and-more miners for less profit. As a result, after a mining event, you could see many mining companies drop out of the race and the centralization of mining — putting a great deal of power in the hands of select mining companies. This itself could mean a loss of support and price drop for Bitcoin which was initially valued so highly because of its potential as a decentralized currency. The Difference Between Long & Short Term All-in-all, the immediate profitability of a mining event largely depends on how much demand there is for Bitcoin immediately before the event. If the popular expectation is that the halving event will increase demand and thus raise prices — this will push up demand for Bitcoin and actually, raise the price. Yesterday’s negative supply shock seems to suggest that this expectation is present and that investors could see big returns after the May Halving event — provided that there are no positive supply shocks on the horizon (people selling en-masse due to a negative event). And as for the long run, there are far too many possible factors such as government regulation and new, alternative crypto projects and institutional investment which could affect Bitcoin’s price and profitability. At this moment in time, it is hard to tell whether halving will have a positive or negative effect on Bitcoin’s price in the long run. Do you think people are buying bitcoin in large numbers to benefit from the upcoming halving? Let us know your thoughts in the comments below! Image via Shutterstock
JPMorgan released a report last Friday, detailing the global enthusiasm for blockchain technology in the financial sector. In the 74-page report, JPMorgan described several projects that have developed the ‘real world’ financial application and as a result describes 2019 as the year of “the rise of digital money”. In the report, the US investment banking heavyweight elucidates many of the most promising use-cases which it sees as having the potential for wide-spread adoption in the financial sector. JPMorgan Reports Huge Moves Towards Blockchain In the report, JPMorgan describes the way in which blockchain — the technology which allows a ledger to be controlled by multiple agents — is being rapidly taken up by financial and political actors. They suggest that the “groundwork is now in place” for the massive adoption of blockchain in the realm of “Payments, trade finance, and custodial services”, which “remain the clearest use cases for blockchain”. JP Morgan says that the merits of the technology are to facilitate cross-border payments using digital assets and in allowing some equity trades. The Recent Growth Of Blockchain Over the last several years, research, investment in blockchain technology have been taken up by some famous brand names: Facebook (with their Libra coin), the Winklevoss brothers’ (Gemini coin), and JPMorgan (with the JPM coin). Governments are moving in as well: For example, China is said to have been developing a new digital Yuan, which will be regulated by the central bank there, and Great Britain’s Bank of England has announced the start of its research into creating a digital currency. The attempt to successfully adopt distributed ledger technology and create a digital currency has become akin to a technical arms race mirroring the episode Winklevoss vs. Zuckerberg to establish a social network and the historical arms race between West vs East. What are the challenges — according to JPMorgan? While the report discusses the massive uptake and rise of blockchain technology — it is not overly optimistic. After giving encouraging descriptions of the changes, the firm demotes the cryptocurrency project as a second rate investment. “Developments have not altered reservations about the limited role that cryptocurrencies play in global portfolio diversification or as a hedging instrument,” JPMorgan warns. They argue that crypto acts as a ‘hedge’ to protect their investments from loss of confidence in traditional currency. This differs from the attitudes of many crypto asset management firms, such as Enigma Securities who recently told me that they believe cryptocurrency should soon play a pivotal role in hedge fund portfolios. What do you think about JPMorgan’s observations on the rise of blockchain technology? Share your thoughts in the comments below! Image via Shutterstock
Five hedge fund managers. Each earning more than one billion dollars. But they could have earned more with Bitcoin. According to the latest research by Bloomberg, the top 5 hedge fund managers are estimated to have earned over $1 billion each. Among the top 10 investments contributing to the success of these 5 were tech stocks such as Facebook Ltd and Alibaba. While it was a successful year for these fund managers, their results could have been more impressive had they invested in cryptocurrency. Based on Bitcoin’s results in 2019, which regularly beat the S&P index, had they made steps to integrate the cryptocurrency into their portfolios, there’s a strong chance that these hedge funds could have majorly increased their returns. Wh0 were the top 5 fund managers? Coleman Chase – Tiger Global Management Steve Cohen – Point72 Asset Management Ken Griffin – Citadel Jim Simmons – Renaissance technology Chris Hohn – TCI Fund Management Bitcoin Beat The Top 5 Fund Managers By the end of 2019, Bitcoin vastly outperformed the S&P index’s 29% returns. It also beat all the funds included in the portfolios of each of the top 5 hedge fund managers. Case in point: While Coleman Chase’s main fund returned 33% by the end of the year, the Bitcoin price returned over 85% to people who bought the coin at the start of 2019. As a result, the replacement of poorer performing assets in the portfolio with Bitcoin or Grayscale Bitcoin Trust Stocks would have upped each of the top 5 hedge fund managers’ returns. After hedge fund managers compare their results with the results of Bitcoin, perhaps we will see greater investment by hedge funds into Bitcoin and even larger results for the top 5 managers this time next year. A Bright Future for Funds Containing Bitcoin Just one and a half months into 2020, Bitcoin has already outperformed the entirety of the S&P’s gains from 2019. At the start of the year Bitcoin traded at $7,250. Now, one bitcoin costs over $10,000. These are monumental gains for the cryptocurrency, and if the asset continues to behave this bullish it could mean similarly huge results for hedge funds investing in the cryptocurrency. Already, crypto asset managers, such as the Grayscale Bitcoin Trust, are reaping in the benefits of the Bitcoin market trends. According to their press release, the Trust had a record-breaking year. Professionals: ‘Hedge Funds Need To Enter This Bullish Market’ According to professional crypto asset managers, hedge funds investing in Bitcoin would be a strong choice, with the market giving off plenty of bullish signs. Benjamin Zennou — Managing Partner at Enigma Securities, which is a crypto liquidity provider and blockchain advisory firm, expects asset allocations for Bitcoin to increase over time as the cryptocurrency is perceived as less risky. Evidence of that change, he says, is the fact “Open interest on CME’s BTC futures just hit its highest level for open interest on record. Importantly, ‘Leveraged funds’ have always been a significant majority of that according to the CFTC (commodity futures trading commission).” Leveraged funds are funds that use financial debt to amplify returns. An increase in leveraged funds being used to pay for Bitcoin could suggest that fund managers have more trust in Bitcoin since using leveraged funds increases risk. Benjamin’s analyst, Joseph Edwards attributes three things to the growing interest in Bitcoin: increased liquidity, regulated investing infrastructure and a track record of performance that “prove it has some level of baseline value” Each of these trends helps change the image of Bitcoin as a “very difficult ride” for investors — as Alistair Cotton described it, into a stable, trust-worthy investment worth receiving a larger asset allocation. Should BTC be a part of traditional hedge funds? Let us know what you think in the comments below! Image via Shutterstock
The United Kingdom’s FCA is looking for crypto experts as part of their latest efforts to regulate digital currencies operating in the UK. The UK’s financial conduct authority posted a job role on LinkedIn, calling for someone with “experience working with crypto assets” and other relevant financial experience to help the organization expedite its aims of bringing more supervision and regulatory oversight to the cryptocurrency industry. FCA and its Punishing Oversight The FCA (financial conduct authority), is a governmental body responsible for fair, lawful conduct in financial activity, and became the UK’s official legal authority and supervisor in matters of crypto behavior on January 10, 2020. As part of the body’s role, it is responsible for bringing Anti-Money Laundering and Counter-Terrorism Finance Policy into action. To date, British policy reflects a stringent version of the EU’s fifth Anti-Money Laundering Directive, bringing in a more invasive approach to crypto regulation. The EU directive advises regulating companies that are directly involved with the transfer of fiat currency into crypto, whereas British law – closely in line with FATF – recommends deeper oversight of all ‘virtual digital asset service providers’ or ‘crypto exchange providers’. According to Paul Hastings LP, this brief includes UK entities that facilitate: Exchanging, or arranging or making arrangements with a view to the exchange of, crypto-assets for money (i.e., Pounds Sterling or any other currency or money in any other medium of exchange) or money for crypto-assets; Exchanging, or arranging or making arrangements with a view to the exchange of, one crypto-asset for another; or Operating a machine, which utilizes automated processes to exchange crypto-assets for money or money for crypto-assets. The difficulty with this wide-spanning objective is that it likely creates an immensely broad jurisdiction for the FCA — covering many complex elements of the crypto industry, which explains why they’re looking for more man-power for their regulatory campaign. Effect On Crypto Companies And Cryptocurrency Owners As part of their efforts, the FCA is encroaching on the pseudo-anonymity of many as well as the privacy element of many altcoins. One of the compliance orders in their supervisory guidelines stipulates that crypto businesses must: “Undertake ongoing monitoring of all customers to ensure that transactions are consistent with the business’ knowledge of the customer, the customer’s business and risk profile.” For some UK exchanges, where privacy and anonymity is their selling point — the growing regulation is a crushing blow. The crypto wallet provider Bottle Pay, for example, decided to terminate in response to demands to reveal their customers’ information. However, not all business models, such as those which connect buyers and sellers without facilitating an exchange will be affected by growing regulation. According to the co-founder of AgoraDesk.com, a business that provides a forum where private Bitcoin and other cryptocurrency buyers and sellers post their bids and offers in a peer-to-peer manner, “these types of regulation don’t affect a business with our kind of structure because we never match transactions and the traders settle the transactions themselves.” What are your thoughts on governments regulating crypto? Share your thoughts in the comments section below! Image via Bitcoinist Media Library The post appeared first on Bitcoinist.com.