Category Archives: Bitcoin

Bitcoin Magazine

Bitcoin Miners Miss the First BIP 148 Deadline Bitcoin Magazine As Bitcoin's scaling dispute appears to be heading for a climax, the next couple of weeks could prove pivotal. One scaling solution in particular, Bitcoin Improvement Proposal 148 (BIP 148), is scheduled to trigger activation of Segregated Witness ... and more »

Read the rest here:
Bitcoin Miners Miss the First BIP 148 Deadline - Bitcoin Magazine

This week the price of bitcoin has been descending downwards following a bearish trendline and is currently hovering just aroundthe US$2000 range. The price started its downtrend on July 10 after stayingaround the $2550 territory for a few days, but subsequently started dropping to a low of $2225 on July 14. At press time the price of BTC is struggling to stay above $2K, and current technical indicators are showing the bear run may not be over.

Also read:August 1 and the Potential Disruption of the Bitcoin Network

Its been a pretty grueling week if youve been watching cryptocurrency markets, as bitcoin and various altcoins have drastically corrected in value. On July 14 bitcoins price formed some new lows dipping to the $2225 range forming a downwards triangular pattern. Over the course of the day and into the overnight the price per BTC continued to slide until finally subsiding to just above the $2K mark. The decentralized currencys total market capitalization is now only $33 billion, but due to the significant drop in altcoin markets, BTC dominance is up to 46 percent. Bitcoin trade volume is seeing mediocre activity compared to weeks prior at roughly $1 billion USD worth of trading per day.

Technical indicators show that traders have allowed bears to reign over the market and the ball is in their court now. At press time the long term 200 Simple Moving Average (SMA) is well above the 100 SMA, pointing to continued market losses. The Relative Strength Index (RSI) has dropped pretty low since July 12 indicating the beginning of the sellers market takeover. Further stochastic indicators arealso signaling bearish conditions and those shorting the market may be able to set some downside targets. However, at the time of writing, there is a significant foundation at the $1950-2K range and the price may hover in this vicinity for a few more hours.

The bearish market sentiment is likely due to the protocol changes planned for the end of the month. There have been many discussions on the various scenarios where the bitcoin blockchain could split on August 1. Many bitcoiners are patiently waiting to see if the storm passes, but no one knows exactly how things will play out between UASF, UAHF, and Segwit2x. Some bitcoin proponents are fairly positive that Segwit will be implemented soon and the August 1 scenarios may not happen. Other bitcoin enthusiasts are waiting for the next Segwit2x release that is expected to come out this weekend, according to Jeff Garzik. When this happens, the vast majority of miners signaling support for Segwit2x will actually start running the code.

The uncertainty tied to the bitcoin ecosystem is likely affecting altcoins markets as well. Just like Crypto Compares Charles Hayter told us last week, a rising tide lifts all boats, but the opposite is also true.

Overall bitcoiners are either not happy about the price drop or enthusiastically detailing they are buying the dip. Its safe to assume as the next two weeks get closer, there will be some volatile action for intra-range players to profit off scalps and breaks. Some traders are speculating that Segwit will be activated soon and the price will reverse back up the ladder. Other traders are envisioning a continued drop to the $1800 territory and a possible following rise after that low price point. One thing is for sure is that traders are uncertain right now and the bulls have stepped off to the sidelines for a lower price entry.

Bear Scenario: If bitcoin breaks the key resistance range below $2K we will see lower trajectories towards the $1800-1900s. At press time according to order books and depth readings, there is a solid foundation within the $1800-2000 territory that should certainly last for the next few days. These critical zones, however, can cause quite a bit of fear and uncertainty which can always spark the possibility of more intensified panic selling.

Bull Scenario: If buy pressure picks up after consolidating above the $2K range we could see some nice recovery over the next 24-hours. Sell walls are pretty flat at the moment, and the price could break higher with ease if bullish traders decide to jump back in the game. However, it seems most buyers are waiting for a lower price trajectory and are assuming this will happen with the current looming possibility of a chain split. Another bullish theory that could take place is; Segwit gets activated within the next two weeks, and the price climbs upwards following this event.

Where do you see the price of bitcoin going from here? Let us know in the comments below.

Disclaimer: Bitcoin price articles and markets updates are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the money.

Images via Shutterstock, Bitcoin.com, and Bitstamp.

Need to calculate your bitcoin holdings? Check ourtoolssection.

See original here:
Markets Update: Bears Drag the Bitcoin Price Down to New Lows - Bitcoin News (press release)

MIT launched a study in 2014 that showedearly adopters help tospreadnew technology throughout society, if they feel they have exclusive access to it. The studys official research paper was released on Friday, which was published in Science. The experimentersused bitcoin as the new technology in the study.

Also read:Paul Sztorc Suggests Revising Bitcoins Scaling Roadmap

Researchers offered participants $100 dollars worth of bitcoin (Bitcoins pricewas around $400 at the time). The students would set up a digital wallet and then wait for researchers to allot funds to their wallets. The researchers, Christian Catalini and Catherine Tucker, saw this experiment as a one-time opportunity to study the role of early adopters in spreading technology in a controlled environment.

The experiments catch was that half of the early adopters wouldrandomly receive their bitcoin payments delayed. The MIT article elaborated, During the rollout, the researchers randomly delayed giving half the students their bitcoin allotment by a couple of weeks. Students who were identified as early adopters of Bitcoin, but whose payment was delayed, cashed out their balance and abandoned the technology at nearly twice the rate of early adopters who received their payment earlier. The early adopters who cashed out also influenced those around them to do the same in high numbers.

In other words, if the early adopters felt like they were not exclusive or did not gain any consumption value fromthe new tech, they were likely to cash out. If they were in a public setting, like the MIT dorm rooms, they would likewise influence others to cash out. This diminished the number of early adopters.

The study was the first to determine what happens when new early adopters are denied first and exclusive access to new technology.

The researchers identified who classified as an new early adopter by how fast they signed up to the study. They compared these new early adopters (NEAs) to natural late adopters (NLAs). The first 25% who signed up to the study were classified as an NEA. The study explained the qualities of NEAs:

Surveys showed that those NEAs were also more likely to be top computer programmers, to have built mobile apps, and to use peer-to-peer payment apps, among other identifiers. These characteristics align with popular definitions of early adopters, who generally possess advanced technical skills that help them start using new technologies.

Even though these NEAs were highly computer literate and understood the technology underlying bitcoin, social and psychological reasons caused them to cash out and stop using the technology. It seems randomly delaying payments caused internal frustration and made early adopters feel less than exclusive.One would expect people with high technological literacyto stay involved no matter what.

Randomly delaying the bitcoin payments resulted in two parallel universes, researcherssaid. They did this to determine the S-curve, or the measure of the speed of adoption of innovation in societies. Catalini explained, In one universe, we ended up seeding Bitcoin in the optimal way, by giving it first to early adopters and later to everybody else. In the other parallel universe, the opposite was likely to happen.

The researchers found the two-weekcash-out rate on those NEAs who received theirbitcoins late rose 18%, which was well over non-delayed NEA cash-out of 11%. The researchers said these alleged early adopters cashing out just because their payment was delayed was surprising.

The results off the study offer a couple of key insights for new tech startups, said the researchers. The most important is for technology firms to take advantage of peoples desire for exclusivity while using new technology. NEAs are likely to influence others to adopt it if they feel unique. This is the key to diffusing new tech throughout society. The researcher explained:

In settings where the decision to adopt is a social decision, where comparisons or conversations are taking place in communities and when there is uncertainty about the value of an innovation, it can be important for firms to take advantage of early adopters, as they do create this positive effect of others. But that comes with a cost, which is exclusivity.

The student participants who held onto their $100 worth of bitcoin would presently be holding $700, noted the MIT article.

Do you believe exclusivity is important for gettingearly adopters to promotenew technology? Let us know what you think in the comments below.

Images via Shutterstock and MIT

Show the world how cutting-edge you are with abitcoin T-shirt, hoodie, bag, key-ring, even a Trezor hardware wallet.Shipping all over the world, quality merchandise and, of course, a payment system that makes people proud!

View post:
MIT Study Shows Exclusivity Encourages Greater Bitcoin Adoption - Bitcoin News (press release)

Got some bitcoin? An internal dispute over the digital currency could soon mean financial losses, whipsawing prices and delays in processing payments.

It's also possible that nothing much changes. It all depends on whether the people who maintain bitcoin can agree by July 31 to implement a major software upgrade one designed to improve capacity on the increasingly clogged network.

Not everyone is on board. In particular, some bitcoin "miners," who are rewarded for verifying transactions, aren't supporting the changes. Any split between miners and others who use bitcoin, including a number of startups and a few big companies, could cause a panic in the $39 billion bitcoin marketplace.

So far, bitcoin's value in U.S. dollars has soared amid the uncertainty. It's currently at about $2,300, more than triple what it was a year ago. But bitcoin is notoriously volatile; because the price spiked so rapidly, it also fell quickly, and bitcoin has lost about a quarter of its value since its peak in June at above $3,000.

Here's a look at the current dispute.

See original here:
Dispute could mean financial panic in bitcoin - CNBC

Bitcoin and other so-called cryptocurrencies have plunged in value in recent weeks, prompting some observers to wonder whether that's a sign of a market bubble bursting.

Prices for bitcoin, recently changed hands at $2282, a decline of about 12 percent over the past month. Rival ethereum has fared worse, plunging 47 percent during that same period to $191.92 even when this week's gains are included. The third-largest cryptocurrency, called ripple, has slumped nearly 25 percent over the past month, rebounding from earlier losses. Ripple, however, is priced at about 19 cents, so small price swings can have dramatic impacts.

Even with the recent drop, bitcoin prices have surged more than 130 percent this year. Still, given how unpredictable the market has proven to be, potential users may be leery about embracing the digital currency, said Wolf Richter, a financial blogger who edits the Wolf Street site. He expects bitcon, which was $10 in 2013, to continue falling.

"Given the volatility, bitcoin is not a usable currency," Richter wrote in an email. "And given transaction costs, it's a very expensive form of payment. And it takes a long time to process a transaction. So unless you're trying to hide your identity, it doesn't make economic sense to pay with bitcoin."

Play Video

Erik Finman, a 15-year-old from northern Idaho, founded an online education program that links students with instructors around the world. Michel...

The bitcoin market has already crashed three times between 2011 and 2014, plunging more than 50 percent on each occasion. Prices tumbled earlier this year after the U.S. Securities and Exchange Commission rejected plans by twin-brother entrepreneurs Tyler and Cameron Winklevoss to offer a bitcoin exchange-traded fund (ETF). By comparison, the S&P 500 index, the broad stock market barometer most closely followed by professional money managers, has gained "only" 9 percent this year.

Richter and Tone Vays, a derivatives trader and consultant who hosts a podcast on the digital currency, differ on the question of whether the market for bitcoin is in a bubble. According to Richter, it's bound to crash "someday," though he declined to provide a forecast. Vays' view is that the cryptocurrency market isn't in a bubble because prices have only tripled in price at the peak as opposed to prior bubbles when markets surged between 10 and 100 times.

One reason bitcoin prices have pulled back lately concerns debates over what code will be used to increase the number of transactions that can be done on the currency's network, according to Vays.

"The bitcoin ecosystem has been debating for a year on how best to scale bitcoin," Vays wrote in an email. "This should all be resolved by end of August, but it's hard to say if it will end with a good ending, or we end up with two coins both claiming to be the real bitcoin."

For bitcoin's rivals, however, the situation is different, especially with those who have crowd-funded new offerings through what's known as internal coin offerings (ICOs). Ethereum, which began this year priced at $8.17, has gained more than 2,600 percent. Ripple has skyrocketed more than 326,000 percent from less than half a penny to about 20 cents during that same time.

"A token like ethereum has gone up 10 times faster than bitcoin, and it's fueling an ICO bubble no different then the dot-com IPOs of the late 90s," Vays said. "It's possible that this bubble has popped with ethereum never reaching above $400 again, and many of the ICOs, which on paper made hundreds of millions on their token sales, may find their tokens to worthless in the near future."

2017 CBS Interactive Inc.. All Rights Reserved.

Read the original here:
Did a bitcoin bubble just burst? - CBS News

The Dread Pirate Roberts was never going to persuade Wall Street to love bitcoin. Maybe John Mack can.

Roberts was the swashbuckler alter ego of Ross Ulbricht, founder of the multimillion-dollar Silk Road online bazaar whos serving a life sentence for allowing customers to use bitcoin to buy drugs, hacking tools and fake identification. Ulbrichts was the early, ominous face of the cryptocurrency and no one on Wall Street wanted to touch it. What investors can no longer ignore is the incredible price gains -- almost 150 percent alone this year for bitcoin. Yet the problem of how to buy and sell digital assets while keeping compliance departments happy remains.

John Mack

Photographer: Chris Goodney/Bloomberg

Enter Mack, the former chief executive officer of Morgan Stanley.

Hes taken an interest in Omega One, a startup that plans to act as an agency brokerage for asset managers and institutional investors who want to own cryptoassets like bitcoin and ether but dont want to run afoul of know-your-customer and anti-money laundering regulations. Mack is one of a few private backers of Venture One, Omega Ones sole investor at this point.

I have been watching and investing in the cryptocurrency market over the last several years, and as a Venture One portfolio company, I find Omega One to be an important next step in the emergence of this new economy, Mack said in an emailed statement. We think Omega One is going to be transformative because it benefits the entire ecosystem -- making crypto assets cheaper and easier to access.

The need for a trusted firm to act as a middleman between the worlds of Wall Street and digital currencies is an indication of the growing pains these new markets face. Bitcoin has always been extremely volatile -- it has dropped about 20 percent since rising to a record last month -- a trait shared by ether and other digital coins. More than half of the computers that make up the bitcoin network are located in China, giving one nation outsized sway over the global market and leaving reputable investors cautious. And a history of alleged thefts and hacks in the last few years have shaken confidence in security measures employed by some digital asset exchanges.

The uncertainty among conservative investors toward cryptocurrencies is playing right into Omega Ones strategy, according to Alex Gordon-Brander, the companys chief technology officer. Were the bridge between the traditional capital markets and the crypto markets, he said in an interview. We will provide everything from balance sheet intermediation to a trusted counter party.

Wall Street has been captivated for the last two years by the prospect of applying blockchain technology to save banks billions of dollars a year in back office operations and slashing settlement times. A type of software that combines distributed computing and cryptography to make bitcoin and ether possible, blockchain is in a basic sense a shared database that has no central authority overseeing it. Rather than blockchain, however, Gordon-Brander said Omega One is focused on convincing the financial world that cryptocurrencies should be viewed as a new asset class.

There are a few signs of this already. Both Fidelity Investments and USAA allow customers to access their bitcoin or ether balances through their accounts if they are linked to the digital exchange Coinbase. Gordon-Brander said this is the year that attitudes will change.

Were seeing the very first signs of institutional adoption of crypto markets, he said.

Investing in bitcoin has never been for the faint of heart. Within two months in late 2013 it shot up from about $125 in October to $1,150 in December, an 820 percent appreciation. Within two weeks, bitcoin fell to $520 on Dec. 18, 2013, according to price data from Coindesk. Earlier this year it dropped to $775 from $1,129 between Jan. 4 and Jan. 11, a 31 percent loss. And then in four months it went from $964 in March to a record above $3,000 in June to a current price of $2,233, according to Coindesk.

Ether spent much of the second half of 2016 in a range between $10 and $12, then shot up to $396 over three months between March and June, an astounding 3,500 percent gain. It has since fallen 53 percent to a current price of about $187, according to Coindesk.

The unregulated nature of bitcoin and ether may also bias traditional investors from getting involved. Bitcoin transactions are verified by so-called miners, who use powerful computers to ensure transactions are valid and the bitcoin belongs to the user who wants to transact with it. For verifying transactions, miners are rewarded an amount of free bitcoin. Chinese miners account for over 50 percent of this network, and the country also produces a large share of the computer hardware used to mine, according to Brian Forde, director of digital currency at the Massachusetts Institute of Technologys Digital Currency Iniative.

That concentration risk may spur other countries to become involved in bitcoin mining to blunt Chinas effect on the global market, he said earlier this year.

There have been high profile losses of bitcoin and ether as well. The former head of Mt. Gox, the bankrupt Japan-based bitcoin exchange that imploded in 2014 after losing hundreds of millions of dollars worth of the cryptocurrency, began his trial earlier this week. Chief Executive Officer Mark Karpeles pleaded not guilty in Tokyo on Tuesday to charges of embezzlement and inflating corporate financial accounts.

Last month, Korean Bitcoin exchange Bithumb was hacked and users personal information was stolen, according to the exchange. Last year, about $55 million worth of ether was stolen from the DAO, a smart contract meant to crowd-fund development projects on the ethereum blockchain. The money was later recovered.

Omega One is also pitching itself to current cryptocurrency investors who want to limit transaction costs, Gordon-Brander said. He should know about that, as he previously was instrumental in building the algorithmic trading system for BridgewaterAssociates, the worlds largest hedge fund. The system helped break up large currency orders for Bridgewaters customers, a system known as smart order routing, to save Bridgewaters clients money in foreign-exchange trades, he said.

The same issue arises in cryptocurrency transactions, as difficulty in filling orders can cost users hundreds of dollars in transaction costs, he said. The system will be a dark pool, meaning orders are hidden, unlike a public exchange with an open order book. If Omega One cant fill a trade from resting orders in the dark pool, it will be shipped off to other exchanges around the world for completion, Gordon-Brander said.

Exclusive insights on technology around the world.

Get Fully Charged, from Bloomberg Technology.

Users of Omega One will have to possess a digital coin native to the system, what will be known as an Omega Token. The company plans to offer an initial coin offering in either mid-August or mid-September, Gordon-Brander said. He declined to say how much the ICO would raise, but put the range within hundreds of millions of dollars. That money will become the firms balance sheet that it will use to buy and sell bitcoin or ether on behalf of its customers, he said.

We can do a lot more with a $1 billion balance sheet than a $100 million balance sheet, Gordon-Brander said. The balance sheet is the grease that makes the liquidity work.

John Mack serves on boards including the Bloomberg Family Foundation, founded by Michael Bloomberg, the owner of Bloomberg LP, parent of Bloomberg News.

Read the original:
John Mack Takes Bitcoin Where Dread Pirate Feared to Tread ... - Bloomberg

Rep. Dana Rohrabacher

It was one hell of a segue.

Rep. Dana Rohrabacher took to the House of Representatives floor on Friday to defend the Trump administration from charges of collusion with Russia. We know now people are trying to frighten us and others not to meet with people, and not to talk to people, and I wonder why, the California Republican said.

I dont care if it was Donald Trumps relatives or his son or whoever it was, anybody in the campaign whatsoever wants to talk anybody in the world to get information, I think thats a good thing.

But he abruptly changed into a discussion on bitcoin BTCUSD, -3.63% .

Also read: Bitcoin fan who held up sign during Yellens testimony receives $10,000 for his effort

Rohrabacher says he fears terrorists will use the digital currency for nefarious purposes.

[Blockchain technology] empowers the good people of the world, but it could be used by those who have goals that are evil, Rohrabacher said, because of its anonymity.

Banning digital currencies will not prevent terrorists from using them any more than banning guns will prevent criminals from using them, he said. Instead, Rohrabacher, the chairman of the House Foreign Affairs subcommittee on Europe, Eurasia and emerging threats and vice chairman of the House Science, Space and Technology Committee, wants digital currencies to implement full money laundering and know-your-customer standards.

Rohrabacher said the action could be taken on a bipartisan basis. Former U.S. Attorney General Eric Holder has made similar comments in the past.

Earlier this year, Japan required bitcoin exchanges to toughen know-your-customer policies.

The rest is here:
After defending Trump Jr.'s meeting, Rohrabacher says bitcoin world needs to adopt know-your-customer procedures - MarketWatch

Bitcoin $55,000? Fundstrats Tom Lee, one of the biggest equity bears among the major Wall Street strategists, says its possible, but not necessarily for the reasons many bitcoin bulls have suggested.

One of the drivers is crypto-currencies are cannibalizing demand for gold GCQ7, +0.01% Lee wrote in a report. Based on our model, we estimate that bitcoins value per unit could be $20,000 to $55,000 by 2022 hence, investors need to identify strategies to leverage this potential rise in crypto-currencies.

Thats a major jump from the $2,530 level that bitcoin BTCUSD, -0.03% fetched recently. Of course, this would be on top of whats already been an impressive stretch, with the price more than doubling since the start of the year.

Lee predicts investors will look to bitcoin as a gold substitute, and the fact that the amount of available bitcoin is reaching its limit makes this supply/demand story even more compelling for those looking to turn profits in the crypto market.

Bitcoin supply will grow even slower than gold, Lee said. Hence, the scarcity of bitcoin is becoming increasingly attractive relative to gold.

Another driver could come from central banks, which he expects will consider buying bitcoin if the total market cap hits $500 billion.

This is a game changer, enhancing the legitimacy of the currency and likely accelerating the substitution for gold, Lee wrote.

The trick is that there arent very many ways to play bitcoin, other than via direct investment or the bitcoin ETF GBTC, -2.10% he said, adding that we will identify other opportunities in the future.

Read more from the original source:
Bitcoin the new gold? Yes, says one Wall Street strategist ...

The coins are created by computer farms that "mine" them and verify other users' transactions by solving complex mathematical puzzles. Miners receive bitcoin in exchange. It's also possible to exchange bitcoin for U.S. dollars and other currencies.

Bitcoin has been touted as a currency of the future, but so far it hasn't proven very popular as a way to pay for goods or services. Its price, however, has soared amid the uncertainty. Bitcoin prices peaked in June above $3,000, and while it's fallen back to around $2,300, that's still more than triple what it was a year ago.

___

SO WHAT'S THE FUSS ABOUT?

In a word, speed.

The bitcoin network is limited in how quickly it can shuffle around digital money. As bitcoin has grown, payment delays have become more common and worrisome.

Some software developers came up with a new way to speed things up by reengineering bitcoin's universal ledger, a file called the blockchain. Supporters of the new method include Microsoft, the bitcoin exchange Coinbase and a variety of other bitcoin proponents who would like to see the currency used more widely in commerce.

But this bitcoin software update doesn't have unanimous support.

___

WHAT HAPPENS ON JULY 31?

The reformers say they've run out of patience, and so have set a deadline for moving to the new system.

At 8 p.m. Eastern time on July 31, they're threatening to stop recognizing transactions confirmed by miners who haven't adopted the upgrade. That would create enormous uncertainty in the bitcoin economy, since no one could really know if the bitcoin they'd just paid (or received) was actually moving through the system the way it's supposed to.

Some big bitcoin miners like Chinese bitcoin mining equipment giant Bitmain haven't signaled support for the new system. A rift could result in two or even more incompatible versions of bitcoin.

___

WHAT WOULD THAT MEAN?

Generally speaking, chaos though mostly limited to those who use or squirrel away bitcoin. No one using bitcoin could be sure which version they held, or what might happen if they spent it or accepted bitcoin as payment.

Taking bitcoin, for instance, could leave you with currency you couldn't spend freely and that might disappear entirely if it ended up being the "wrong" kind.

That's one reason the community-supported website Bitcoin.org warned users Wednesday not to accept any bitcoin up to two days prior to the deadline and to wait for confirmation the situation had been resolved before trading again.

"It's a rather awful situation," said David Harding, who posted the warning for Bitcoin.org, in an email.

___

WHAT'S BEHIND THIS FIGHT?

Money, of course. Some companies that pool miners together believe the new system could result in lower transaction fees, cutting into their profits. At the same time, the reformers foresee new business opportunities in a faster, more reliable form of bitcoin.

Samson Mow, chief strategy officer at blockchain developer Blockstream, said the looming showdown has been propelled by bitcoin users frustrated at having a "simple bug fix" blocked by miners out for profit.

"People are fed up," he said. "The users are taking back their voice."

___

The rest is here:
AP Explains: Bitcoin's Possible Financial Panic - New York Times

Bitcoin, and by default, the Bitcoin Investment Trust (OTCQX:GBTC), is becoming a binary - and rather volatile - investment. Granted, cryptocurrency isnt known for its stability, bitcoin will be borderline bipolar over the next couple weeks as the cryptocurrency goest through an internal battle that may lead to a split into two currencies.

Digital gold.

Many point to the silver lining for bitcoin. Bitcoins market cap is roughly $40 billion, just a fraction of golds $7.5 trillion market value. The supply of bitcoin will also grow slower than that of gold over the next half decade. Bitcoins ability to prove itself as a better store of value than gold could be the next legup for bitcoin and cryptocurrencies in general.

There will be near-term volatility and uncertainty with bitcoin; however, longer-term the idea that made bitcoin so exciting could still be intact. Fundstrat believes that bitcoin could hit $20,000 by 2022. Part of what fuels that extreme price target is the idea that bitcoin could get a major boost from central banks moving from owning gold to owning cryptocurrencies.

The problem, however, is getting cryptocurrencies to a solid level - that is, the market value will need to move up about five-times from the current $100 billion before central banks show interest. But such a move would help cryptocurrencies become legitimate and truly compete with gold. Sure, bitcoin is volatile. Bitcoins annualized volatility is roughly 75%. But volatility isnt anything new for currency investors, even for gold investors. During the 1970s, golds volatility was 90%.

But ... the near-term issues are big: There is a bitcoin civil war.

Bitcoin is scheduled to get two competing software updates at the end of the month, which could split the currency in two. This internal battle is all over how to increase processing time and capability of the blockchain. On one side of the fence is the miners who want to increase the block size limit on the blockchain. Then theres the developers that want some of the data managed outside the main network to help with congestion.

What that means for holders and miners, no one really knows. But it is in everyones best interest to come to an agreement and settle without a split. A new version of software that doubles the block chain size in the near-term, until a longer-term solution is found, will be released on July 21. By all accounts, this could be an amicable solution. For 10 days after the software release, itll be monitored to see if 80% of miners adopt it, but anything less will create a gross uncertainty on the August 1 deadline for a decision.

If things go bad, itll should be a quick and volatile. I dont own any bitcoin, but will likely hold out until being able to get in between $1,600-$1,800 - pre-split that is.

But the likelihood of a settlement has been increased in recent months given the pressure from ethereum, which is gaining traction and market share on bitcoin. Or, some might consider this the right time for the currency to folk/split and explore their own solutions - likely at the expense of a price crash. That, would also be a positive for ethereum. Either way, all this bitcoin uncertainty creates a win-win situation for ethereum.

Bitcoin is still also facing practical application overhang - one of the big issues for bitcoin is that its still too expensive to use bitcoin for small things like coffee. The transaction fee for bitcoin is up to $5, the highest ever. A lot of the use cases for bitcoin as a transactional currency are dead before beginning. Meanwhile, ethereum isn't interested in transactions and is focused on more productive things like smart contracts.

All in all, all of this still points to interim pressure for the GBTC and bitcoin - although the case for GBTC is a mess 'as is.' But if central banks and governments show an appetite for cryptocurrencies, bitcoin can win, so can ethereum. Its the number two currency behind bitcoin and quickly gaining ground. If bitcoin can sort out its internal conflict, ethereum could overtake bitcoin in terms of market cap before 2018.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am/we are long Ethereum.

View original post here:
Bitcoin: Civil War - Seeking Alpha