Friday, March 2, 2018

Analyst: Bitcoin Hype-Cycle is Over

Bloomberg reports:
Earlier this year, when Bitcoin’s price fell by more than 60 percent from its record close, a less-noticed Bitcoin figure also plunged: the number of daily transactions.

There are many explanations for the fall-off in trading, from software- to news-related. What’s less understood is why the level hasn’t recovered as Bitcoin’s price made a 50 percent comeback since Feb. 5. That’s left some investors wondering whether the cryptocurrency is waning in popularity.

The average number of trades recorded daily has roughly dropped in half from the December highs and touched its lowest in two years last month, even as Bitcoin became a household name and roared back to near $11,000.

The transaction data may be bad news for Bitcoin bulls, according to Charles Morris, chief investment officer of Newscape Capital Group in London, who invests in cryptocurrencies. Trading and purchases on the Bitcoin network, which can be measured by metrics like transaction volume, is indicative of price direction, he said.

“We had a hype-cycle and now it’s cooling down,” Morris, who’s working on a project that will facilitate price discovery in various cryptocurrencies, said by phone from London. “We just may be entering a bear market” for Bitcoin.

Transactions plunged from a seven-day average of almost 400,000 in mid-December to about 200,000 this week, according to research firm
At the present time, Bitcoin is not a currency. It is a crazed digital trading toy with traders falling by the wayside.

   -Robert Wenzel 


  1. I recently heard someone say that bitcoin is "digital gold" not "digital cash", acknowledging that with transaction costs of many dollars per transaction it is only appropriate for holding rather than spending, and ceding the "digital cash" use to others, such as DASH.

    To the extent that in the long run there are buyers out there willing to buy more bitcoin as the price goes low enough I could see that happening. Anyone else think bitcoin as "digital gold" makes sense?

  2. I all for smart critique of Bitcoin and other digital currencies. I think your critique falls a little short. Is Bitcoin a currency? Offer up a definition and then compare and contrast.

    Merriam Webster says currency is "Define currency: circulation as a medium of exchange; general use, acceptance, or prevalence". Does Bitcoin meet that criteria? Can it both be a currency and a digital trading toy? Probably.

    It Bitcoin a good currency? By whose criteria? I'd say that there are many criteria established by many people. Some of those people knowingly or unknowingly acting as speculators. Many people have hundreds of thousands of dollars in monetary instruments in US dollar financial instruments that have no real understanding of how a US dollar functions or exists. Does this mean that the US dollar is not a currency?

    There are $187 billion USD of Bitcoin floating around out there. It is useful for many people for many purposes. Is it a stable investment? I say no.