• The Basics.

What is Bitcoin? In short – it’s a decentralized digital currency. That means no government or bank controls it. Partially cutting out the middleman, it should allow for safer transactions over the web, which sounds very enticing for myriad reasons. The technology that governs those transactions is called a blockchain. The currency can be ‘mined’ by those willing to lend their hardware for the needs of the system (processing transactions and securing the network, for example).

• The Origins.

It may seem that Bitcoin appeared out of nowhere, but it is the oldest of the cryptocurrencies and this makes it the most valuable one as well. Bitcoin is almost 9 years old at this point, and dates back to 2008. This is the year, when the first proof of concept was published by the creator of the currency – Satoshi Nakamoto.

• The Creator.

If you want to know more about Nakamoto, well, you’re not the only one. That name is just a pseudonym adopted by the mysterious demiurge. No one has been able to confirm the real identity. A number of people stepped up to claim the title, including an Australian businessman and computer scientist Craig Wright, but none had the evidence to back up their claim. Real Nakamoto moved on from the project back in 2010, and has not surfaced since. Whoever that is, that person can definitely afford the anonymity, as they are estimated to own almost a million Bitcoins.

• The First Transaction.

First documented Bitcoin transaction was made back in May, 2010, when Laszlo Hanyecz (who went by the pseudonim laszlo) purchased two pizzas for 10,000 Bitcoins. At this point, that would be more than $170 million.

• The Future.

It’s difficult to say what the future has in store for the first cryptocurrency. Its latest gains have been utterly staggering, but the jury is still out on whether or not this is indeed the future of finance. Bitcoin definitely has its proponents, including Tim Draper and Winklevoss twins, who invested considerable sums into the currency, but there are quite a few detractors as well.  Famously, Warren Buffet advised investors to “stay away” from it.

If you do want to understand all the intricacies of the world of cryptocurrency and understand whether or not this is something you are interested in, you’ll need to find a reliable source of information. And our blog will be happy to provide it.

If you look at what has happened in the past when it comes to reaching those type of heights, be it tulip bulbs or a bunch of other things over the centuries, the odds are against those who actually think that this is going to be the future.
Stefan Ingves, Governor of Sveriges Riksbank

So, what should we expect if this cryptocurrency surge is indeed a bubble?

The prices will most likely fall and become a lot more stable. Current volatility actually works against the cryptocurrency’s main purpose – facilitating access to the financial services. If the cost of blockchain transactions can increase tenfold or more in a very short period of time  due to the price hikes that become rather common, how can we expect to build a stable foundation for anything?

A significant number of currencies will fade away into oblivion, leaving only the most common and stables ones. Bitcoin and ethereum appear to be the two most likely survivors at the moment. There seems to be enough momentum behind those two to keep them afloat even in the grimmest scenarios. Provided the volatility issue is dealt with, these currencies can indeed become a significant part of our financial future, even if traditional banking is not likely to disappear altogether.

Stay updated on the latest cryptocurrency news by tuning into our podcast. Here, we discuss the hot topics of the day and look into the future to see what currencies will make the best investments and which ones you should avoid at all costs.

Ultra HD, 4K, 8K Time Lapse Stock Footage Showreel 2012 – Night Rush Around the World 3 from HDtimelapse.net on Vimeo.

Despite the almost libertarian premise and a noble goal of complete decentralization, realistically, blockchain technology will not be able to avoid at least some level of government regulation. And while some of them seek complete control over the technology, others embrace it. Here are the countries that do more than simply accept blockchain tech:

• Singapore
• Switzerland
• Russia
• Estonia
• Gibraltar

From government-backed cryptocurrency like ESTcoin, to Switzerland’s ‘Crypto Valley’, you can learn how those countries support blockchain technology for our special video report.

RIALTO.AI – a self-described “arbitrage, market making and prediction trading” platform – enables traders to directly profit from volatility.  As the profits come from arbitrage, the bigger the differences between varying exchanges, the bigger the profit.

The underlying algorithms deigned by the team of signal processing experts, economists and data scientists detect the most insignificant price fluctuations that trigger chain trades involving multiple cryptocurrencies. This effectively means that the market is monitored 24/7, maximizing potential gains.

Another bonus is a dedicated trading AI, created by the team. This self-learning bot is meant to track transactions and specific addresses to predict major shifts in the market. This alone could make the platform extremely attractive to cryptotraders.

Forks can be confusing, and, allegedly, there are quite a few of them coming in the nearest future. While not all of them (or none of them) might come to pass, you should be prepared to the possibility and know how to manage your assets effectively in case they do.

A fork is a result of an update to the specific coin’s programming. And it can either be intentional and unintentional. Both can potentially cause serious price fluctuations, and it is difficult to say which one can be more damaging. In both cases, two ledgers are created, and if an unintentional or accidental fork is a result of an unforeseen bug that is, ideally, promptly eliminated. The intentional hard fork is born out of the decision by the developer to update the programming (which results in discrepancies between the older and newer versions of the coin), and, in that case, users need to upgrade in order to continue to use the currency.

In short, forks introduce uncertainty, and that often leads to panic. They potentially devalue the currency and can downright destroy the smaller ones.

If the fork does come, the risks are very real, so be prepared to lose some of the value. If you prefer to keep your bitcoins, you should be ready for the future.

First of all, make sure you control your wallet without any intermediaries like various custodial services (Xapo or Coinbase, for example). Not all of them support forks, and if you wish to continue using them, make sure you know their stance on the issue. However, creating your own wallet is probably the best solution.

Do not rush in to invest into new coins immediately after the fork. It is better to wait for a confirmation from one of the major players to start buying and trading with them. The times after the fork are rife with scam opportunities.

Not all of the forks end up being real, but it is a lot safer to assume they are. Bitcoin Gold actually happened despite having been dismissed by large parts of the community initially. So, don’t panic every time the fork comes up in the news, but be in control of your assets and exercise caution in case they do.

I think the internet is going to be one of the major forces for reducing the role of government. The one thing that’s missing but that will soon be developed, is a reliable e-cash.
Milton Friedman, Nobel Prize Laureat

Despite the skepticism towards the surging and volatile cryptocurrencies, UBS is pretty optimistic regarding the broader issue of blockchain technology. Here is what the report has to say about this:

While we are doubtful whether cryptocurrencies will ever become a mainstream means of exchange, the underlying technology, blockchain, is likely to have a significant impact in industries ranging from finance to manufacturing, healthcare, and utilities. We estimate that blockchain could add as much as USD 300-400bn of economic value globally by 2027.

 

Shrewd investors should be focusing their attention on the tip of the spear of the blockchain tech – companies that enable its adoption and use the technology in interesting new ways. And, as the report states, the applications of said technology are almost limitless. While some industries stand to gain more from the integration, most of them will likely benefit from the tech.

Another important point of the paper is its prediction about the bright future of hardware manufacturers, whose products will be vital for blockchain network realization. The processing speeds vital for the technology will undoubtedly mean increased business for companies that produce the necessary hardware.

Until now, every major drop has been accompanied by high volumes, with low volumes leading to significant hikes. It’s not the best dynamic, as it shows that the supply overtakes the demand. We might be at a tipping point for the currency – something known as the “Last Point of Supply” or simply LPSY. This means one thing – the highest price point in this cycle has been reached, and we are looking at the downward trend in the nearest future. The demand has pretty much been exhausted at this point.

This does not mean that the Bitcoin value will plummet, but we should be prepared to see the lower end of the trading range. There should be enough momentum to stabilize the prices and check the price drops, however, passing the LPSY means the prices are on the way down.

Streets of New York from Harry Garcia on Vimeo.

Despite the recent downturn, some of the experts believe that bitcoin has not exhausted its growth potential. Notably, Mike Novogratz, known for his extremely successful hedge fund management strategies, stated the following in an interview with CNBC:

Bitcoin could be at $40,000 at the end of 2018.
 

This does not mean that you should dump everything you have into bitcoin. In fact, for smaller investors, this is more likely to cause problems than anything else. Ideally, one should invest no more the 3% into the cryptocurrency.

Uncertainty and volatility seem to be inseparable from the crypto-market at this point, but it is hard to deny that the recent growth has been staggering. Just to remind you, at the start of this year, the bitcoin went for no more than $1,000. And the most recent peak has seen the coin rise to the $20k mark.

As Novogratz’s statement implies: not everyone believes the recent downward trend is going to last. Bitcoin needs to stabilize and correct the price after the hike as the current model does not seem to be particularly sustainable. This should not necessarily mark the end of the value rise, however.

How realistic is this prediction? It is difficult to tell given that this optimism is hardly unanimous in the investment community, but one thing is certain – cryptocurrency in general, and Bitcoin in particular, should not be underestimated.