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Oil price below zero as oil demand collapses

The oil price is a commodity price that sets the standard for a lot of activity and trading of other commodities, sticks and bonds around the world. Today, Monday April 20th, 2020, marks a new day in history. The US oil price fell below 0 USD. Oil is priced differently according to where it is from, quality and characteristics. 

The oil price crashed because of the overproduction that is happening in the oil market. The corona pandemic has reduced the demand in oil prices beyond what we have seen in many years, while the oil producers have continued to produce large quantities of all. The North Sea oil is still trading at around 25 USD and thus the differences in pricing are huge compared to what it usually is. 

In the evening we even saw the price per barrel fall as low as minus 40 USD. That is a huge amount of money to receive to accept oil. The pricing challenge has occurred due to the lack of storage. The oil producers are dependent on a party buying oil, and the partner buying oil needs to store it somewhere. The current problem is that storage facilities are filling up. It is not so easy to just turn off the oil wells, but with the current problems, turning off the oil wells might be an alternative to giving away barrels of oil with a check attached to each barrel.

The collapse in the oil price will also cause political problems internationally. On April 11th the OPEC countries and their friends, called OPEC+, entered into an agreement to cut production with 9.7 million barrels of oil per day. This is about 10% of the daily production and considered a substantial number. However, even though substantial, the number is small compared to amounts of barrels per day continuously overproduced. We are currently looking at a daily overproduction of 18 million barrels per day. Rystad Energy has said that peak oil occurred in 2019 and that the oil overproduction was as much as 28 million barrels per day before the OPEC+ cut.President Trump will suffer a major political blow from the collapse in the oil price because he has gone to great lengths to protect the oil sector. Trump has been displayed in the media as the new master of oil policy when forcing through with about 10% in cuts per day, even though just for May and June. The American shale sector has transformed the US into the world’s largest oil producer in the past decade, giving the president a foreign policy tool, he has brandished as “US energy dominance”. That however is now changing quickly. There is no quick stop to the bleeding and the many bankruptcies that will come from the collapse. Are you following the news daily? It is time to tune in and protect your wallets as it is time to buckle down and take the hit. 

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Burying Bitcoin Code for a Doomsday Scenario

Aside from Arctic enthusiasts, not many people know about Svalbard. Part of an archipelago, the Norwegian island has few year-round inhabitants and more polar bears than humans. Its major association has been with coal mining and Arctic exploration, but now cryptocurrency is touching one of the world’s least-peopled locations. Regulated by the international Svalbard Treaty as a demilitarized zone, it is considered one of the most geopolitically stable human habitations in the world. 

The island already hosts the Global Seed Vault, which is a repository of an enormous variety of plant seeds, held as “duplicate samples” should the world need them one day. In case of regional or global crises, local seed banks may be compromised or destroyed, hence the need for storage in such a remote location. A tunnel leading into the seed bank is 120 meters, or 390 feet long, leading into the inside of a sandstone mountain, and is heat sealed to exclude moisture. The location was chosen because the area lacks tectonic activity and its existing permafrost aids in preservation. 130 meters (430 ft.) above sea level, the site of the vault will remain dry even if the ice caps melt. 

Taking inspiration from the seed vault, the tech world is likewise constructing a repository a mile away from the Global Seed Vault, in a decommissioned mine shaft. The mission of the GitHub Archive Program is to preserve open-source software for the foreseeable and unforeseeable future. Partnering with numerous foundations and world-renown libraries, the program will store multiple copies, on an ongoing basis and in varied data formats, as well as a very-long-term archive designed to last over 1,000 years. A “snapshot” of the myriad code will be copied onto film reels and stored in a steel container. 

The vault will also be 250 ft. inside of a mountain, and will include Bitcoin Core, the most popular code implementation of bitcoin’s infrastructure, which is also one of the most accessed repositories on GitHub. The official deposit into the mountain is slated for late April, but there is no word yet on whether the date will be pushed back due to coronavirus measures. 

Cryptocurrencies

Though Bitcoin Core is featured, the majority of other cryptocurrency projects on GitHub will also be included, such as bitcoin’s future-forward Lightning Network, as well as infrastructure code for other cryptocurrencies such as etherium and dogecoin. The current electronic record is quite fragile and apt toward disruption, therefore having a hard copy can help avoid a hole in history. A terrifying amount of the world’s data is stored on ephemeral media, such as SSDs, CDs online reliable for a few decades, and backup tapes, all of which assume a maximum 30-year lifespan in controlled temperature and humidity environments. If cryptocurrency manages to last a millennium, this will aid people 1,000 years from now in figuring out how it evolved, or if it is supplanted, to learn what cryptocurrency was.

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Bitcoin Halving in a Nutshell: Part 2

The halving is on the forefront of bitcoin investors’ minds (likely second only to the coronavirus), due to the belief that it will quickly compound the price of bitcoin, likewise compounding their wealth. However, is this belief well founded?

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In its history, bitcoin has seen two prior halvings, which can be looked to for guidance. 2012, the first halving, was a test run for the reduction in mining rewards and effects upon bitcoin price, and indeed, shortly after the halving the price began to rise. The second halving in 2016 was so highly anticipated that Blockchain.com even had a running countdown. The first effect of the second halving was an immediate price drop of 10% to $610, with a swift recovery to its prior price. Huge gains did not immediately follow either of the prior halvings, however, they did usher in steady growth in the price of bitcoin. This may prove the theory that while the rate of available bitcoin drops, the demand stays the same, resulting in a growth in price in what bitcoin is already on the market. Others argue however that because the halvings are scheduled and anticipated for years before, they don’t compel a quick response from the market, as traders have had plenty of time to prepare. It is also possible that in anticipation of getting rich quickly due to the halving, some traders will buy more before the halving, pushing the price up in anticipation. 

To return to the topic of block rewards, bitcoin’s monetary policy relies on the ability to answer through the bitcoin ledger, who owns what bitcoin when. Cryptography answers the first part of the question since only the owner of the private key (much like a secret access code) can spend that bitcoin. However, the “when?” part of the question is what truly distinguishes bitcoin from any form of money that came before it. In theory, with enough computing power, miners could put the system into chaos by double spending coins or by halting transactions from continuing. However, they are incentivized not to do so through block rewards, which they would lose if attempting either. Miners are incentivized to mine honestly through their wish for money, and not to attempt dishonesty, in their drive to keep that reward. As miners gain more monetary rewards into mining, the increased computing power results in a stronger, quicker system overall. Therefore, what happens when the rewards for mining eventually trickle down to zero? This may eventually prove to be an issue for bitcoin. Mining is an expensive venture, so not only do miners need to be incentivized, the reward must surpass the cost of the activity. The only other way that miners earn money is through transaction fees, which may grow in importance. This means that while transactions fees are theoretically optional now, they will become quite costly in order to keep the network safe. Bitcoin is still relatively new, and for now, the minimum cost of security is still an open question. However, in eight to ten years, as rewards really dwindle, this could grow into a bigger issue. 

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Bitcoin Halving in a Nutshell

Bitcoin halving is due to occur at some point in May 2020. What is it, and what does it mean for investors? “The halving” is one of the most anticipated events in the history of cryptocurrency. In short, the number of block rewards, or bitcoins, dropping into circulation, will be reduced by half from 12.5 to 6.25. This has occurred every four years, twice before in the existence of bitcoin. Theoretically, the halving may result in quick wealth, since while the rate of supply of new bitcoin will be reduced, but demand will hopefully stay the same, making each coin more desirable and possibly compounding its price. This is why to existing investors, the prospects of the halving are exciting. 

Aside from a possible short term price fluctuation, the more relevant effect for bitcoin may be the change in the function of the currency due the decline in minting rate. The incentive for mining bitcoin is an essential component of the security the currency offers, since mining is what encrypts transactions. With time, as more bitcoin enters the world, the reward for mining dwindles, which will eventually undermine that entire side of interacting with the currency. A more thorough explanation of this process follows. 

Not all bitcoins that will eventually exist have yet entered circulation. The way that each new coin is “born” is as a block reward received by “bitcoin miners” who, generally in teams, engage in “mining” through immense joined computing power. Approximately every four years, or every 210,000 blocks, the total sum of bitcoins available to be mined is halved, which is the event occurring at some point in May 2020: “The Halving”. This also explains why a specific date and time for the event is not yet known, since it is through mining the 210,000 blocks that the halving occurs. 

At the dawn of bitcoin, 50 coins were mined within every 10 minutes; however, that rate halved every four years to the current rate of 12.5 coins each 10 minutes. The total amount of 21 million coins will be the ending point of the entire process, likely in the year 2140. This illustrates why bitcoin mining was far more lucrative a decade ago than it will be a decade from now. 

Satoshi Nakamoto, the pseudonymous individual or team behind the creation of bitcoin, disappeared in 2010, and so the reasons behind the methodology are not new. Shortly after releasing the bitcoin whitepaper, Nakamoto, who could not yet have known the future success of bitcoin, theorized how the reward system may play out. Bitcoin differs from most centralized monetary policies in that the supply schedule is set in stone, whereas a central bank, such as the US Federal Reserve can control the supply of money in circulation. The bitcoin supply schedule removes politics and human machinations from the equation, resulting in a predictable inflation schedule.

The unwavering scarcity of bitcoin is what makes it valuable. In stark contrast to bitcoin’s halving reward, the quantity of US dollars in circulation has roughly tripled since 2000, largely as result of human intervention and government bailouts. Therefore, Nakamoto’s choice to end the reward for mining bitcoin at 0 may be a political statement as well as monetary policy. 

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Bitcoin Updates in the Time of the Coronavirus

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At a time of unprecedented upheaval in the traditional markets due to the worldwide coronavirus pandemic, is Bitcoin plunging as well or is it a safe haven? Would are Bitcoin investors to expect from cryptocurrency in the uncertain future to come? Perhaps a result of the political fallout and economic tumult, decentralization is to play a stronger role in the world post-coronavirus. While tourism, restaurants, travel, and many others are being pummeled, this is a time of great opportunity for the likes of healthcare and health technology. Whether Bitcoin is a safe haven at this time is a matter of whether the factors affecting its rise and fall are seen as forces of detriment or opportunity.

Panic sell

For those investors who have recently bought into cryptocurrency and who do not hold a great deal of it, this is a moment in which many may panic-sell and return to more traditional holdings. Similarly, some investors must sell in order to convert their crypto holdings to pay for living expenses at a time when most individual’s incomes have suddenly ground to a halt. These types of sales do drop cryptocurrency prices. 

Since cryptocurrency is only a tiny share of the overall financial market, it is inevitably affected by enormous upheavals such as the one in play now; however, because Bitcoin is of a finite supply that is unwavering regardless of traditional financial markets, it is a safer bet. Interestingly in the past few weeks, institutions in both India and Korea have opened freer pathways forward for the crypto industry. 

Print money

In some of the bailout situations occurring around the world and in the US, long-term problems will follow the current stopgaps, which may result in governments just printing more money. The depreciation of fiat currencies is obviously problematic when your assets are held in those currencies. Obviously in that case, Bitcoin is a safer bet.

The beauty of decentralization at times like these is that the teams powering blockchain technology are dispersed throughout the world. Therefore, while this pandemic is worldwide, it does not affect all areas simultaneously or equally, allowing for growth opportunity in areas where teams are able to continue working. 

To conclude, we may see some currency fluctuations, as a result of panic-selling or of sales that are necessary for investors to cover living expenses while traditional economies are paused. However, the likely effect of government bailouts will be the devaluations of fiat currencies, which cannot occur with the likes of Bitcoin, the quantity of which is finite. Therefore, the financial world post-coronavirus is headed toward decentralization. Cryptocurrency investment is the long game, and to truly see results and the fruits of investment, one must be in it for a stretch far longer than this crisis looks to be.

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When is it time to buy Bitcoin?

We are continuing to see a slight drop in the value of the Bitcoin today. However, today shows that Bitcoin is not tied to the dollar, oil price or anything else. Bitcoin is a free-standing cryptocurrency that can hold its own weight. In another massacre where we saw the oil price drop over 12% and the dollar racing against other European currencies the Bitcoin is down to around 5400 USD. This is of course much lower than what we saw at its peak, at around 20000 USD. 

Bitcoin has shown today that it can hold itself over 5000 USD for now, but that it is having a tough time breaking through or stabilizing at 5500 USD. If you are a day trader of cryptocurrency it might be a tough day to make the choice to buy. However, are you a trader that sits long, now might be the time to investigate how long you can sit and at what cost you can start picking up Bitcoins. In the big picture, we are looking at a price four times less what we saw at its peak. 

Most countries around the world are pumping money into the economy in an effort to restart the financial markets. The U.S. Federal Reserve delivered an emergency rate cut of 100 basis points early Monday. The Feds also announced new quantitative easing in the form of at least $700 billion in asset purchases. We have also heard much talk yesterday and the day before about helicopter money, where President Trump would send out as much as 1000 USD to every American. That would be part of a $1 trillion stimulus program.  

These talks of efforts and efforts seem not to work quite yet. The stock market is falling, and many say we are heading into a recession. The corona virus is not helping causing too much panic among investors and no place to hide. Looking at the current exchanges there are no obvious stocks that sticks out as safe heavens. Instead, investors are flocking to the dollar. 

It is therefore hard to predict when the value of the Bitcoin will stabilize and can again be a place for investors to place value. The global economy is seeing a double crisis in the virus placing the world economy in a global lock- down, as well as the oil price war between Russia and Saudi-Arabia over market shares is flooding the market with too much oil. The combination of these two crises are causing a huge liquidity squeeze in the market leading to a shortage of cash being placed in Bitcoins, and instead pulled out of the markets. That said, Bitcoins are a great alternative to the markets when the stocks are being out of control.  Bitcoin is currently consolidating, showing indecision in the marketplace.

See the list of websites where you can buy Bitcoin: Coinmarket.no/buy-bitcoin/

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Bitcoin in a historically attractive zone

Bitcoin is a cryptocurrency that fluctuates in value. We have seen dramatic changes in the last 12 months, from 10,200 in mid-February to 12-month lows below $4,000 last week. Such a drop unfortunately makes it hard to believe in a huge really before the May 2020 mining reward being cut by 50%. 

However, with the price reduction there is hope in sight. There is a key indicator called the “Puell Multiple” that is important and worth paying attention to. This Multiple looks at the supply side of Bitcoin’s economy, which means that the Multiple loos at bitcoin miners and their revenue.

The Puell Multiple is calculated by dividing the daily issuance value of Bitcoins in USD by the 365-day moving average of daily issuance value.

The important part for our purposes, Coinmarket, and Bitway is that the Multiple explores market cycles from a mining revenue perspective. When you are a Bitcoin miner you generally have to sell your Bitcoins to cover you cost. In this way you are always a seller. Bitcoin miners’ revenue stream can therefore influence price over time.

To understand why we are moving into a time of buying we need to understand the historical standards. Bitcoin has declined to very low levels. The levels are so low that the value of newly issued bitcoins is also low compared to earlier issued Bitcoins from mining. This indicates that Bitcoin is now undervalued.

Coinmarket.no/price/bitcoin/

2018 bear market

It is always interesting to look back in time when trying to assess what the future will bring. Bitcoin peaked back in December 2017 with a price of $20,000. Within a year the price was very low at near $3,200 in mid-December 2018. When the price was that low the Puell Multiple indicated that the cryptocurrency was undervalued and the price started to rise again. 

If we take a look a bit longer back in history, the Bitcoin went through similar things. Bitcoin experienced a then high of $1,100 in November 2013, which fell back to a low of $150 in January 2015. The Puell Multiple also bottomed out near the current level as today before raising again. 

Is the bear market over?

If we have a look at the Multiple, the worst is behind us. However, the Puell Multiple has not dropped to the same level as we saw twice before rebounding. We therefore expect a bit of rough seas before we are in the clear. 

If we use history, we may see one more bout of selling, which could give us prices at around $4,000-$5,000. We have experienced better prices in the earlier parts of the month. Currently, however, the Bitcoin is trading around $6,500. That is quite a bit higher than the possible $4,000 low. Prices hit a high of $6,907 early Friday, which indicates that the currency has juice to start a climb.

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Cryptocurrency Regulation Under Coronavirus Quarantine

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Though over a decade old and having evolved from fringe hobbies to a multibillion dollar asset class, cryptocurrencies have thus largely evaded the attention of regulators. Though in the US, the IRS and SEC have proactively hunted down taxpayers who neglect to report cryptocurrency trades, as well as businesses who skip the registering of tokens as securities, they have largely failed to outline and update guidance on the value of specific crypto transactions and which initial coin offerings qualify as security offerings. The recently-introduced Cryptocurrency Act of 2020 aims to elucidate consumers by categorizing cryptocurrencies as well as delegating regulation and enforcement to specific agencies. 

An example of governing in the time of coronavirus, Arizona congressman Rep. Paul Gosar introduced the Cryptocurrency Act of 2020 while under quarantine, though he initially brought it forth in December 2019, following a joint statement from the SEC, FinCEN, and the CFTC that those engaging with digital assets must actually observe laws. A specific point was adherence to anti-money laundering and counter-terrorism financing obligations as defined in the Bank Secrecy Act (BSA). Therefore, all institutions using cryptocurrency are obliged to report suspicious activity and maintain record-keeping practices. This fell short though of outlining who it falls upon to regulate and enforce these requests. 

In order to designate enforcement and regulation, the Cryptocurrency Act of 2020 has divided cryptocurrencies into three designations. Crypto Currencies are defined as any currencies or synthetic derivatives within a blockchain or a cryptographic ledger, such as Bitcoin, Litecoin, or even stable coins. Crypto Commodities, on the other hand, are exemplified by Bitcoin futures contracts, and are economic goods or services treated by markets in regard to their producer, resting in a blockchain or decentralized ledger. Finally, Crypto Securities are initial coin offerings, or debt, equity, or derivative instruments resting on a blockchain or decentralized ledger. It is vital to note that the Cryptocurrency Act of 2020 is still a bill and therefore does not hold the force of law; however, if it passes, the following agencies will regulate these three categories. Normally tasked with regulating banking and money service institutions, FinCEN, the Financial Crimes Enforcement Network, would regulate what are defined as Crypto Cureencies. The SEC, or Securities Exchange Commission, would regulate Crypto Securities, since it typically watches over the securities markets. Lastly, the CFTC, or Commodity Futures Trading Commission, the usual watchdog of commodities and futures markets, would regulate Crypto Commodities as well. In addition, the Federal Digital Asset Regulator would be responsible for maintenance of all licenses, certifications, and/or registrations employed in creating, issuing, or trading digital assets. FinCEN, working with the Security of the Treasury, would develop sets of comparable rules for tracing crypto transactions by traditional financial institutions. 

Many aspects of the Cryptocurrency Act of 2020 read as anathema to those attracted to cryptocurrency in the first place, in that it will be regulated and watched over by centralized authorities and traditional banking institutions. Its very existence though is also a testament to the prevalence and staying power of cryptocurrency. 

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Bitcoin in the Time of Coronavirus

March 9, 2020 saw the worst tumble that the S&P 500 has seen in over a decade, to the point of triggering the “circuit breakers” instituted in 2013 for the first time, and halting trading. At fault is the lightning-fast spread of the coronavirus and the economic monsoon that the virus threatens to herald. With fears of a looming global recession, consumers are flying, driving, and consuming less and factories are shuttering during quarantines, decreasing a demand for oil. Two of the world’s more ornery oil giants, Saudi Arabia and Russia, fell into an unexpected spat when they could not come to an agreement over the quantity of oil to produce and offer on international markets. Without a consensus, Saudi Arabia announced that it would ramp up production, flooding the market with cheap oil and dropping prices over 20 percent in a single day, oil’s sharpest drop since the first Persian Gulf War. Many world currencies are tied to the price of oil, sending them into a tailspin also.

For fans of cryptocurrency, times like these demonstrate the advantage of a de-regulated currency that is not tied to a central bank. When the economies of major nations are in a state of dread and uncertainty, those of smaller, poorer countries are doubly so. This is why especially in markets with unstable local currencies, cryptocurrencies are the far more promising option for investment. However, cryptocurrency itself is only a decade old and known to be volatile. Bitcoin, as the oldest, most well-known cryptocurrency is a bit more of a sure bet. At moments of uncertainty, platforms like Coinmarket truly demonstrate their worth. A free cryptocurrency tracking and portfolio management platform, it offers up-to-the-minute prices for several cryptocurrencies, as well as changes over a 24-hour span, the marketcap, volume of trading in 24 hours, and the supply. Since the situation with the world economy promises to become more, not less combustible in the near future as infections skyrocket, Coinmarket is a site for any cryptocurrency enthusiast to bookmark and check several times daily. 

How has the economic panic affected the cryptocurrency and bitcoin market? February 26th, 2020 already ushered in a mass headache with a price plunge that shaved $25 billion off the entire cryptocurrency market. Since then, most digital currency trading patterns have shown triangular consolidation. Though every market has felt the wrath of the world economic downturn, including safe bets such as precious metals, over the last 90 days, BTC is up 18%, and over the last 12 months, up 123%. There has been some selloff on the cryptocurrency market since February 26th, which coronavirus fears may worsen. However, Bitcoin, while not independent of the world, is largely disconnected from Wall Street. It is an unrelated asset and often grows during Wall Street downturns; this turn though may be for the worse. Bitcoin’s price has fallen since Monday morning, but not nearly to the extent of traditional investments and safe bets like gold.