She's Gonna Blow!

12:57 07/12/2017

The meteoric rise of bitcoin has accelerated yet again as the world’s number one digital currency broke a new record raising $2299 a coin in a 24-hour window.

Blogging about the price of bitcoin can be extremely frustrating at times with many articles becoming irrelevant even before they ever get to print. I’ve seen this before myself with several articles I was collaborating on but it seems to be an industry-wide thing.

Imagine, somebody from Reuters worked very hard on this article announcing bitcoin’s rise above $13,000 and within an hour of the time it was published the price had already breached $14,000.

For me, I’ll always do my best to give you the causes behind the moves and whenever I can inform my readers what could likely drive the prices going forward. For all we know, a major pullback or an additional surge may have already happened by the time you read this.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of December 7th. All trading carries risk. Only risk capital you’re prepared to lose.

Market Overview

Excitement is hardly the word to use but we’ll go with that for now. Nowhere is it more exciting than in South Korea. At the moment, a single bitcoin on the South korean exchange Bithumb is going for 19,391,000 KRW ($17,645 USD), which is 17% higher than the price listed on eToro at the time of this writing.

Recent estimates state that 21% of all global BTC volume are done in Korean Won. So what makes bitcoin so exciting for Korean traders?

I mean, aside from the same thing that makes it exciting for the rest of us. The idea of replacing our monetary system to be fairer and less reliant on inefficient and at times irresponsible government applies to South Korea even more than the rest of us for two reasons.

One, the obvious, they’re watching what’s happening in North Korea where the government has completely taken over the country. So they have a far fresher perception of what can happen when governments go bad.

Two, after recently going through a political meltdown and ousting the former President Park Geun-Hye, and after watching the CEO of the Samsung go to prison on corruption charges, their faith in the system is currently at a justifiable all time low.

Third, investing in bitcoin requires a certain appetite for risk that isn’t present everywhere but seems to be present just South of Kim Jong Un’s border.

Regulators in South Korea are doing their best to get a handle on the situation but are visibly struggling. They’ve already banned ICOs in September and in the last 24 hours have banned bitcoin futures trading.

Bitcoin futures may be more dangerous than we thought but we’ll explore that in tomorrow’s update before these potentially destructive futures markets hit Wall Street.

Network Status

This week we’ve been talking a lot about blockchain capacity both in Bitcoin and Ethereum. Both blockchains seem to be testing their limits at this moment in time.

The Ethereum network is still being plagued by cats. The overnight sensation of the new viral dApp Crypto-kitties currently accounts for about 20% of the transactions on the network.

Bitcoin on the other hand is becoming a victim of its own success. The number of transactions waiting for confirmation is now at a dangerous high of 136,000.

And the average transaction rate over the last 7 days is now at an all-time high of 4.6 per second.

It’s still possible to speed up transactions on both networks by paying a higher miner fee. However, those paying the regular amount will need to be patient and could experience severe delays.

The good news is, we don’t seem to be at the point where transactions are being rejected on a mass scale. So even though the capacity of the networks and the patience of alternative investors are being tested, we haven’t quite reached any hard limits just yet.

Ethereum founder Vitalik Buterin has been working on the Constantinople upgrade for some time and we hope that it comes through soon. For bitcoin, the problem is a bit messier. The lack of centralized leadership makes it a lot harder for any meaningful solutions. However, some analysts feel that as the SegWit solution is adopted by more miners it should increase the capacity somewhat.

Contrarian Thinking

Many traders like to try and take an opposite view on what’s happening and find the opportunities that may be hiding behind the FOMO.

For example, popular cryptotrader @Liamdavies, who’s made 170% for himself and his 1,437 copiers over the last year, has posted this trading thought on XRP.

For short term traders, finding this type of support line could present an excellent opportunity. To highlight Liam’s point, here’s a chart of XRP from the beginning of the recent boom.

The idea is that an order with a stop loss just under the support line has a lot more to gain if it goes in your favor than it does to lose if it doesn’t. Meaning, if it hits your stop loss, no big deal, it’s a small loss, but if it turns around now, in retrospect it will have been an excellent entry point.

In addition, over the last week the entire market has been dominated by Bitcoin, with BTC taking back a lot of the market share from the other currencies. So, if we do see a pullback in bitcoin for any reason, it may be a good idea to get in on some of the alts.

Let’s have a spectacular day ahead!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.