A Harvard economist claims that Bitcoin prices are falling

Bitcoin is more likely to be $100 than $100,000 in the next ten years, says Harvard economist

Harvard University professor and economist Kenneth Rogoff said Tuesday that the possibility of bitcoin prices falling to $100 is greater than the digital currency trading at $100,000 in a decade.

“I think bitcoin will be worth a fraction of what it is now if we go ten years from now … I think $100 is more likely than $100,000 ten years from now,” Rogoff told CNBC’s ” Squawk Box .”

“If you take away the possibility of money laundering and tax evasion, its actual use as a means of transaction is minimal,” said the former chief economist of the International Monetary Fund (IMF).

Many illegal transactions are associated with Bitcoin, whose valuations vary with the use of the digital currency used in illegal activities. According to Shone Anstey, co-founder and president of the Blockchain Intelligence Group, he calculated that the level of illegal transactions decreased to 20 percent in 2016 and was “significantly less than that” in 2017.

Regulations introduced by the government will cause bitcoin prices to fall, Rogoff said, although he stressed that it will take time to develop a global regulatory framework.

“It needs to be a global regulation. Even if the US goes along with it and China, but Japan doesn’t, people will still be able to move money through Japan,” he said.

According to industry site CoinDesk, Bitcoin was trading around $11,242.61 during Asian morning trade on Tuesday. The price of the digital currency has fallen this year from a record high of more than $19,000 in December last year.

The authorities have been passive in regulating bitcoin, and the reason for this is the anticipation of the technology behind the digital currency, according to Rogoff.

“They want to see technological advances,” Rogoff said, adding that the private sector has historically “designed everything” in the history of currency, from standardized coinage to paper currency.

Bitcoin is a significant area of ​​growth as an application of blockchain technology that enables transactions to be maintained and recorded.

However, there have also been claims of bitcoin prices falling in the past. Before bitcoin’s selloff last December, Rogoff said last October that valuations of the digital currency would “crash” because of governments’ attempts to regulate the space.

Crypto TREND – fifth edition

As we expected, since the publication of Crypto TREND, we have received many questions from readers. In this issue, we will answer the most common ones.

What changes are coming that could change the game in the cryptocurrency sector?

One of the biggest changes that will affect the cryptocurrency world is an alternative block validation method called Proof of Stake (PoS). We’ll try to keep this explanation fairly high-level, but it’s important to have a conceptual understanding of what the difference is and why it’s a significant factor.

Remember that the underlying technology with digital currencies is called blockchain and that most current digital currencies use a verification protocol called Proof of Work (PoW).

With traditional payment methods, you must trust a third party, such as Visa, Interact or a bank, or check clearing house to settle your transaction. These trusted entities are “centralized,” meaning they maintain their own private ledger that stores the transaction history and balance of each account. They will show you the transactions and you must agree that they are correct or open a dispute. Only the parties to the transaction see it.

With Bitcoin and most other digital currencies, the ledgers are “decentralized,” meaning that everyone on the network gets a copy, so no one has to trust a third party, such as a bank, because everyone can verify the information directly. This verification process is called “distributed consensus”.

PoW requires “work” to be done to confirm a new transaction for entry into the blockchain. With cryptocurrencies, this validation is done by “miners”, who have to solve complex algorithmic problems. As algorithmic problems become more complex, these “miners” need ever more expensive and powerful computers to solve the problems before everyone else. “Mining” computers are often specialized, usually using ASIC (Application Specific Integrated Circuits) chips, which are more adept and faster at solving these difficult puzzles.

Here’s the process:

  • Transactions are grouped together in a ‘block’.
  • Miners verify that the transactions within each block are legitimate by solving a hashing algorithm puzzle known as the “proof-of-work problem.”
  • The first miner to solve a block’s “proof of work problem” is rewarded with a small amount of cryptocurrency.
  • After verification, transactions are stored in a network-wide public blockchain.
  • As the number of transactions and miners increases, so does the difficulty of solving the hashing problem.

While PoW helped launch blockchain and decentralized, trustless digital currencies, it has some real drawbacks, especially with the amount of electricity these miners waste trying to solve “proof-of-work problems” as quickly as possible. According to Digiconomist’s Bitcoin Energy Consumption Index, Bitcoin miners use more energy than 159 countries, including Ireland. As the price of each Bitcoin rises, more and more miners try to solve the problems, consuming even more energy.

All this energy consumption just to validate transactions has motivated many in the digital currency space to look for an alternative method of block validation, with a leading candidate being a method called “Proof of Stake” (PoS).

PoS is still an algorithm, and the purpose is the same as in proof of work, but the process to the goal is quite different. With PoS, there are no miners, but instead we have “validators”. PoS relies on trust and the knowledge that all people validating transactions are in on the game.

In this way, instead of using energy to solve PoW puzzles, the PoS validator is limited to verifying a percentage of transactions that reflects his or her ownership stake. For example, a validator that owns 3% of available Ether can theoretically only validate 3% of blocks.

In PoW, the chances of solving the proof-of-work problem depend on how much computing power you have. With PoS, it depends on how much cryptocurrency you have on “stake”. The higher the stake, the higher the chances of solving the block. Instead of winning crypto coins, the winning validator receives transaction fees.

Validators enter their stake by ‘locking’ a portion of their token pool. If they try to do something malicious against the network, like creating an ‘invalid block’, their stake or security deposit will be forfeited. If they do their job and don’t breach the network, but don’t win the right to confirm the block, they will get their stake or deposit back.

If you understand the basic difference between PoW and PoS, that’s all you need to know. Only those who plan to be miners or validators need to understand the ins and outs of these two validation methods. Most of the general public who want to own cryptocurrencies will simply buy them through an exchange and will not participate in the actual mining or confirmation of block transactions.

Most in the crypto sector believe that digital tokens must move to a PoS model in order for digital currencies to survive in the long term. At the time of writing this post, Ethereum is the second largest digital currency behind Bitcoin and their development team has been working on their PoS algorithm called “Casper” for the past few years. We are expected to implement Casper in 2018, putting Ethereum ahead of all other major cryptocurrencies.

As we have already seen in this sector, major events such as the successful implementation of Casper could boost Ethereum prices. We will keep you posted in future issues of Crypto TREND magazine.

Stay with us!

Cryptocurrency Volatility, Profitable Slide

This year, we can notice that cryptocurrencies tend to move up and down by as much as 15% in value on a daily basis. Such price changes are known as volatility. But what if… it’s completely normal and sudden changes are one of the characteristics of cryptocurrencies that allow you to earn good money?

First of all, cryptocurrencies have recently hit the mainstream, so all the news and rumors about them are “hot”. After every statement by government officials about the possible regulation or ban of the cryptocurrency market, we observe huge price movements.

Second, the nature of cryptocurrencies is more like a “store of value” (as gold was in the past) – many investors consider them a backup investment option to stocks, physical assets like gold, and fiat (traditional) currencies. Transfer speed also affects cryptocurrency volatility. With the fastest ones, the transfer takes even just a few seconds (up to a minute), which makes them an excellent tool for short-term trading, if there is currently no good trend on other types of assets.

What everyone should keep in mind – this speed also applies to cryptocurrency lifetime trends. While in normal markets trends can last for months or even years – here they take place within a few days or hours.

This leads us to the next point – although we are talking about a market worth hundreds of billions of US dollars, it is still a very small amount compared to the daily trading volume compared to the traditional currency market or stocks. Therefore, one investor making 100 million transactions on the stock exchange will not cause a huge price change, but at the level of the cryptocurrency market, this is a significant and noticeable transaction.

Because cryptocurrencies are digital assets, they are subject to technical and software updates to cryptocurrency features or expansion of collaboration on the blockchain, making it more attractive to potential investors (like the activation of SegWit basically caused Bitcoin to double in value).

The combination of these elements are the reasons why we observe such large changes in cryptocurrency prices within hours, days, weeks, etc.

But the answer to the question from the first paragraph – one of the classic rules of trading is to buy low, sell high – so having short but strong trends every day (rather than weaker ones that last for weeks or months like in stocks) gives a much better chance of making a decent profit if use correctly.

How does cryptocurrency gain value?

Cryptocurrencies are the latest ‘big thing’ in the digital world and are now recognized as part of the monetary system. In fact, enthusiasts have labeled it a ‘money revolution’.

To put it plainly, cryptocurrencies are decentralized digital assets that can be exchanged between users without the need for a central authority, most of which are created using special computer techniques called “mining”.

The acceptance of currencies, such as the US dollar, the British pound and the euro, as legal tender is because they are issued by a central bank; however, digital currencies, like cryptocurrencies, do not depend on public trust in the issuer. As such, several factors determine its value.

Factors that determine the value of cryptocurrencies

Principles of free market economics (mainly supply and demand)

Supply and demand are the main determinants of the value of anything of value, including cryptocurrencies. This is because if more people are willing to buy a cryptocurrency and others are willing to sell, the price of that particular cryptocurrency will rise, and vice versa.

Mass adoption

Mass adoption of any cryptocurrency can send its price skyrocketing for months. This is because the supply of many cryptocurrencies is limited to a certain limit and, according to economic principles, an increase in demand without a corresponding increase in supply will lead to an increase in the price of that particular commodity.

Multiple cryptocurrencies have invested more resources to ensure their mass adoption, and some have focused on the applicability of their cryptocurrency to pressing personal life issues as well as key everyday cases, with the intention of making them indispensable in everyday life.

Fiat Inflation

If a fiat currency, such as the USD or GBP, becomes inflated, its price rises and its purchasing power falls. This will then cause cryptocurrencies (take Bitcoin as an example) to rise against that fiat. The result is that with each bitcoin you will be able to acquire more of that fiat. In fact, this situation is one of the main reasons for the increase in the price of Bitcoin.

History of fraud and cyberattacks

Scams and hacks are also key factors affecting the value of cryptocurrencies as they are known to cause wild swings in valuations. In some cases, the team behind the cryptocurrency can be scammers; they will pump up the price of the cryptocurrency to attract unsuspecting individuals, and once their hard-earned money is invested, the price is driven down by scammers, who then disappear without a trace.

Therefore, it is imperative to be wary of cryptocurrency scams before investing money.

Some other factors to consider that affect the value of cryptocurrencies include:

  • The way cryptocurrency is stored, as well as its utility, security, ease of acquisition and cross-border acceptability

  • The strength of the community that supports the cryptocurrency (this includes funding, innovation and loyalty of its members)

  • The low associated risks of cryptocurrency as perceived by investors and users

  • News sentiment

  • Market liquidity and cryptocurrency volatility

  • Government regulations (this includes banning cryptocurrency and ICOs in China and accepting it as legal tender in Japan)

Practical tips on how to trade cryptocurrencies

I have been closely watching the performance of cryptocurrencies for some time to get a sense of where the market is headed. The routine my primary school teacher taught me – where you wake up, say a prayer, brush your teeth and eat breakfast has changed a bit to wake up, pray and then visit the web (starting with coinmarketcap) just to know what crypto assets are in the red.

The start of 2018 has not been pretty for altcoins and related assets. Their performance was crippled by bankers’ frequent opinions that the crypto bubble was about to burst. Despite this, ardent followers of the cryptocurrency are still “HODLing” and truth be told, they are reaping big.

Recently, Bitcoin bounced back to almost $5,000; Bitcoin Cash approached $500 while Ethereum found peace at $300. Almost every coin took a hit except for the newcomers who were still in the excitement phase. As of this writing, Bitcoin is back on track and is trading at $8,900. Many other cryptocurrencies have doubled since the start of the uptrend, and the market capitalization rests at $400 billion, up from the recent $250 billion.

If you’ve slowly warmed to cryptocurrencies and want to become a successful trader, the tips below will help you.

Practical tips on how to trade cryptocurrencies

• Start modestly

You’ve heard that cryptocurrency prices are skyrocketing. You’ve also probably received word that this uptrend may not last long. Some opponents, mostly respected bankers and economists, tend to call them get-rich-quick schemes without a stable foundation.

Such news can make you invest in a hurry and not apply moderation. A little analysis of market trends and valuable currencies to invest in can guarantee you good returns. Whatever you do, don’t put all your hard earned money into this property.

• Understand how exchanges work

I recently saw a friend of mine post a Facebook feed about one of his friends who continued to trade in a stock market that he had no idea how it worked. This is a dangerous move. Always review the site you intend to use before signing up or at least before you start trading. If they give a fake account for the game, take this opportunity to find out what the dashboard looks like.

• Don’t insist on trading everything

There are more than 1400 cryptocurrencies to trade, but it is impossible to handle them all. Spreading your portfolio to a huge number of cryptocurrencies than you can effectively manage will reduce your profits. Just pick a few of them, read more about them and how to get their trading signals.

• Stay sober

Cryptocurrencies are volatile. This is both their downfall and blessing. As a trader, you need to understand that wild price swings are inevitable. Uncertainty about when to make a move makes one an ineffective trader. Use hard data and other research methods to know when to trade.

Successful traders belong to various online forums where cryptocurrency is discussed in relation to market trends and signals. Of course, your knowledge may be enough, but you have to rely on other traders for more relevant data.

• Diversify purposefully

Almost everyone will tell you to expand your portfolio, but no one will remind you that you are working with currencies that are used in the real world. There are a few crappy coins out there that you can dabble in for a quick buck, but the best cryptocurrencies to tackle are the ones that solve existing problems. Coins used in the real world tend to be less volatile.

Don’t diversify too early or too late. And before you decide to buy any crypto asset, make sure you know its market capitalization, price changes, and daily trading volumes. Maintaining a healthy portfolio is the way to get the most out of these digital assets.