As bitcoin’s price has surged, gold has suffered. Some market analysts see a correlation. Gold and bitcoin have both been viewed as safe havens for capital during periods of uncertainty for asset values.
GDX price for the last three months. Source: Ycharts.com
As bitcoin’s price has soared, some analysts think investors are favoring bitcoin as an investment, causing gold to lose value.
GDX, an exchange-traded fund for gold miners, has lost 15% of its value since September while gold prices have fallen to its July low point.
Larry McDonald, who oversees U.S. macro strategy at ACG Analytics, said gold’s declines have been accompanied by lower bond yields, a situation the strategist calls unusual.
McDonald told CNBC that every time rates have declined in the last two years, gold has increased. There has been an 82% correlation between bonds and gold prices, he said, but this past week, that correlation dissolved. He pointed to bitcoin as the cause for this.
The growth of bitcoin and cryptocurrencies could bring an even greater downside for gold, McDonald said.
Also read: 51% of respondents choose bitcoin over gold and fiat; Ron Paul survey
Cryptocurrencies currently have a market capitalization equal to 23% of liquid tradeable gold, McDonald said. That figure has increased 2% or 3% over a year ago, so cryptocurrencies are definitely eating into the gold.
While gold has declined more than 2% in the last month, bitcoin has more than doubled its value.
Sunday’s launch of the CBOE bitcoin futures took bitcoin to close to $16,800 by Monday morning. Gold, meanwhile, has remained near its July lows.
Phillip Streible, a senior market strategist at RJO Futures, said bitcoin futures contracts will hold a key indicator for gold’s future. If bitcoin futures collapse, gold will gain, he said on CNBC’s “Power Lunch.” Gold will regain its attraction as a safe haven store of value.
CME, another exchange, will launch its bitcoin futures on Dec. 18.
Featured image from Shutterstock.
Chris Corey CMO Markethive.com
Contributor: Lester Coleman on 12/12/2017
Paying with traditional banknotes is on the decline as interest in contactless payments and digital currencies rises.
That’s according to the co-founder of the Sohn Conference Foundation. Speaking with CNBC on the sidelines of the Sohn Conference in London, Evan Sohn said that a world without fiat money is quickly approaching, adding:
How far are we from a restaurant that says we only take online payment? If you eat here, you have to download this application and we only take electronic payment, no cash here, no check.
Even though most payments are still conducted with cash, Sohn thinks that we’re not far away from facing a reality that doesn’t include traditional banknotes.
These feelings similarly mimic those of venture capital investor Tim Draper, who believes that digital currencies, such as bitcoin, will replace fiat currency in five years time. At a conference in Portugal, last month, Draper explained:
In five years, if you try to use fiat currency they will laugh at you. Bitcoin and other cryptocurriences will be so relevant … there will be no reason to have the fiat currencies.
According to Draper, the fiat system will eventually disappear as more people turn to bitcoin and ethereum. He also believes that at some point all the digital currencies – currently numbering 1,025 – will interrelate making it simple to use them across borders compared to traditional money.
With the digital currency market increasing in value more interest will naturally turn to investing in them. At present, bitcoin’s is trading around $10,700, recovering from an earlier dip in price that saw it drop to $9,200 earlier this week, amid volatile trading. Whereas, ethereum is hovering around $461, according to CoinMarketCap.
Yet, even though bitcoin is rising in value, its acceptance at retail stores or even restaurants remains limited. Not only that, but with bitcoin’s value continuing its upward trajectory people are more than likely going to hold on to their coins rather than spend them.
One country that has embraced bitcoin payments is Japan. In May, it was reported that around 300,000 retailers and companies in the country may accept the digital currency in 2017. Earlier in the year, Japan imposed legislative changes accepting bitcoin as a legal form of payment, further highlighting bitcoin’s growing popularity in the country.
Sohn adds, though, that while he believes fiat currency will be replaced, he’s not sure if that will be by bitcoin, ethereum, Mastercard or something else, adding:
To learn more about cryptocurrency and blockchain come join Markethive for free
Contributor: Rebecca Campbell
Bitcoin jumped Wednesday after the developers behind an upcoming split in the digital currency through an upgrade called SegWit2x announced they were suspending plans for the upgrade.
The digital currency hit a record high of $7,879.06, according to CoinDesk. Bitcoin gave up much of those gains Wednesday afternoon to trade near $7,212 after hitting a session low of $7,078.96.
The SegWit2x upgrade was scheduled to take effect around November 16 in an effort to increase the speed and cost of bitcoin transactions. However, more and more major bitcoin developers dropped their support in the last few months.
Bitcoin in the last 24 hours
"Our goal has always been a smooth upgrade for Bitcoin," a group of leaders in bitcoin development told members of the SegWit2x mailing list Wednesday. "Unfortunately, it is clear that we have not built sufficient consensus for a clean blocksize upgrade at this time. Continuing on the current path could divide the community and be a setback to Bitcoin's growth. This was never the goal of Segwit2x."
As fees rise for bitcoin transactions, the developers said they hoped the digital currency community could find agreement on how to solve the problem. "Until then, we are suspending our plans for the upcoming 2MB upgrade."
The statement ended with the names of six major figures in the bitcoin business community:
BitGo CEO Mike Belshe, Xapo CEO Wences Casares, Bitmain co-founder Jihan Wu, BloqInc co-founder Jeff Garzik, Blockchain CEO and co-founder Peter Smith and ShapeShift CEO Erik Voorhees.
For most of this year, investors have had a negative view on bitcoin splits out of uncertainty over the digital currency's future. However, since bitcoin rose to record highs after its August split into bitcoin and bitcoin cash, investors began betting that subsequent splits would send the price of the original bitcoin higher. Investors at the time of a split also technically receive an equivalent amount of the offshoot currency.
Bitcoin cash traded mildly higher near $619 Wednesday, according to CoinMarketCap. Another digital currency, ethereum, rose about 4.5 percent to $307.55, according to CoinDesk.
Video: Blockchain in 60 seconds
After spending two years researching blockchain and the evolution of advanced ledger technologies, I still find a great spectrum of understanding across my clients and business at large about blockchain. While ledger superpowers like Hyperledger, IBM, Microsoft and R3 are emerging, there remains a long tail of startups trying to innovate on the first generation public blockchains. Most of the best-selling blockchain books confine themselves to Bitcoin, and extrapolate its apparent magic into a dizzying array of imagined use cases. And I'm continuously surprised to find people who are only just hearing about blockchain now.
It can seem that everyone is talking about blockchain and ledger technologies, but the truth is most people are not yet up to speed. No one should be shy to ask what blockchain is really all about.
Many blockchain primers and infographics dive into the cryptography, trying to explain to lay people how "consensus algorithms", "hash functions" and digital signatures all work. In their enthusiasm, they can speed past the fundamental question of what blockchain was really designed to do. I've long been worried about a lack of critical thinking around blockchain and the activity it's inspired. If you want to develop blockchain applications you only need to know what blockchain does, and not how it does it.
So I've written a report that explains how the blockchain works. It examines the founding principles of blockchain, describes its properties, and dispels common myths about its powers. The explanation below is an abridged excerpt from the report.
WHAT IS BLOCKCHAIN?
Blockchain is an algorithm and distributed data structure for managing electronic cash without a central administrator among people who know nothing about one another. Originally designed for the crypto-currency Bitcoin, the blockchain architecture was driven by a radical rejection of at (government-guaranteed) money and bank-controlled payments.
Blockchain is a special instance of Distributed Ledger Technologies (DLTs), almost all of which have emerged in Bitcoin's wake.
HOW DOES BLOCKCHAIN WORK?
Blockchain is a Distributed Ledger Technology (DLT) that was invented to support the Bitcoin cryptocurrency. Bitcoin was motivated by an extreme rejection of government-guaranteed money and bank-controlled payments. The developer of Bitcoin, Satoshi Nakamoto envisioned people spending money without friction, intermediaries, regulation or the need to know or trust other parties.
Technically, the original blockchain is separable from Bitcoin, but this report will show that the blockchain design is so specific to Bitcoin that it's not a good fit for much else.
The central problem in electronic cash is Double Spend. Because pure electronic money is just data, nothing stops a currency holder from trying to spend it twice. Blockchain solves the Double Spend problem without a digital reserve fund or similar form of umpire.
Blockchain monitors and verifies Bitcoin transactions by calling upon a decentralized network of volunteer-run nodes to, in effect, vote on the order in which transactions occur. The network's algorithm ensures that each transaction is unique.
Several thousand nodes make up the Bitcoin network. Once a majority of nodes reaches consensus that all transactions in the recent past are unique (that is, not double spent), they are cryptographically sealed into a block. Each new block is linked to previously sealed blocks to create a chain of accepted history, thereby preserving a verified record of every spend.
The Bitcoin blockchain's functionality and security results from the network of thousands of nodes agreeing on the order of transactions. The diffuse nature of the network ensures transactions and balances are recorded without bias and are resistant to attack by even a relatively large number of bad actors. In fact, the record of transactions and balances remains secure as long as a simple majority (51 percent) of nodes remains independent. Thus, the integrity of the blockchain requires a great many participants.
One of the Bitcoin blockchain's most innovative aspects is how it incentivizes nodes to participate in the intensive consensus-building process by randomly rewarding one node with a fixed bounty (currently 12.5 BTC) every time a new block is settled and committed to the chain. This accumulation of Bitcoin in exchange for participation is called "mining" and is how new currency is added to the total system afloat.
Original article is here: http://www.zdnet.com/article/blockchain-explained-in-plain-english/
Use this straightforward guide to learn what a cryptocurrency wallet is, how they work and discover which ones are the best on the market.
A cryptocurrency wallet is a software program that stores private and public keys and interacts with various blockchain to enable users to send and receive digital currency and monitor their balance. If you want to use Bitcoin or any other cryptocurrency, you will need to have a digital wallet.
Millions of people use cryptocurrency wallets, but there is considerable misunderstanding about how they work. Unlike traditional ‘pocket’ wallets, digital wallets don’t store currency. In fact, currencies don’t get stored in any single location or exist anywhere in any physical form. All that exists are records of transactions stored on the blockchain.
Cryptocurrency wallets are software programs that store your public and private keys and interface with various Blockchain so users can monitor their balance, send money and conduct other operations. When a person sends you bitcoins or any other type of digital currency, they are essentially signing off ownership of the coins to your wallet’s address. To be able to spend those coins and unlock the funds, the private key stored in your wallet must match the public address the currency is assigned to. If public and private keys match, the balance in your digital wallet will increase, and the senders will decrease accordingly. There is no actual exchange of real coins. The transaction is signified merely by a transaction record on the blockchain and a change in balance in your cryptocurrency wallet.
There are several types of wallets that provide different ways to store and access your digital currency. Wallets can be broken down into three distinct categories – software, hardware, and paper. Software wallets can be a desktop, mobile or online.
Wallets are secure to varying degrees. The level of security depends on the type of wallet you use (desktop, mobile, online, paper, hardware) and the service provider. A web server is an intrinsically riskier environment to keep your currency compared to offline. Online wallets can expose users to possible vulnerabilities in the wallet platform which can be exploited by hackers to steal your funds. Offline wallets, on the other hand, cannot be hacked because they simply aren’t connected to an online network and don’t rely on a third party for security.
Although online wallets have proven the most vulnerable and prone to hacking attacks, diligent security precautions need to be implemented and followed when using any wallet. Remember that no matter which wallet you use, losing your private keys will lead you to lose your money. Similarly, if your wallet gets hacked, or you send money to a scammer, there is no way to reclaim lost currency or reverse the transaction. You must take precautions and be very careful!
Although Bitcoin is by far the most well-known and popular digital currency, hundreds of new cryptocurrencies(referred to as altcoins) have emerged, each with distinctive ecosystems and infrastructure. If you’re interested in using a variety of cryptocurrencies, the good news is, you don’t need set up a separate wallet for each currency. Instead of using a cryptocurrency wallet that supports a single currency, it may be more convenient to set up a multi-currency wallet which enables you to use several currencies from the same wallet.
There is no straightforward answer here.
In general, transaction fees are a tiny fraction of traditional bank fees. Sometimes fees need to be paid for certain types of transactions to network miners as a processing fee, while some transactions don’t have any fee at all. It’s also possible to set your own fee. As a guide, the median transaction size of 226 bytes would result in a fee of 18,080 satoshis or $0.12. In some cases, if you choose to set a low fee, your transaction may get low priority, and you might have to wait hours or even days for the transaction to get confirmed. If you need your transaction completed and confirmed promptly, then you might need to increase the amount you’re willing to pay. Whatever wallet you end up using, transaction fees are not something you should worry about. You will either pay minuscule transaction fees, choose your own fees or pay no fees at all. A definite improvement from the past!
Kind of, but not really. Wallets are pseudonymous. While wallets aren’t tied to the actual identity of a user, all transactions are stored publicly and permanently on the blockchain. Your name or personal street address won’t be there, but data like your wallet address could be traced to your identity in a number of ways. While there are efforts underway to make anonymity and privacy easier to achieve, there are obvious downsides to full anonymity. Check out the DarkWallet project that is looking to beef up privacy and anonymity through stealth addresses and coin mixing.
There is an ever-growing list of options. Before picking a wallet, you should, however, consider how you intend to use it.
Bread Wallet is a simple mobile Bitcoin digital wallet that makes sending bitcoins as easy as sending an email. The wallet can be downloaded from the App Store or Google Play. Bread Wallet offers a standalone client, so there is no server to use when sending or receiving bitcoins. That means users can access their money and are in full control of their funds at all times. Overall, Bread Wallet’s clean interface, lightweight design and commitment to continually improve security, make the application safe, fast and a pleasure to use for both beginners and experienced users alike.
Advanced users searching for a Bitcoin mobile digital wallet, should look no further than mycelium. The Mycelium mobile wallet allows iPhone and Android users to send and receive bitcoins and keep complete control over bitcoins. No third party can freeze or lose your funds! With enterprise-level security superior to most other apps and features like cold storage and encrypted PDF backups, an integrated QR-code scanner, a local trading marketplace and secure chat amongst others, you can understand why Mycelium has long been regarded as one of the best wallets on the market.
Exodus is a relatively new and unknown digital wallet that is currently only available on the desktop. It enables the storage and trading of Bitcoin, Ether, Litecoins, Dogecoins and Dash through an incredibly easy to use, intuitive and beautiful interface. Exodus also offers a very simple guide to backup your wallet. One of the great things about Exodus is that it has a built-in shapeshift exchange that allows users to trade altcoins for bitcoins and vice versa without leaving the wallet.
Created by Bitpay, Copay is one of the best digital wallets on the market. If you’re looking for convenience, Copay is easily accessed through a user-friendly interface on desktop, mobile or online. One of the best things about Copay is that it’s a multi-signature wallet so friends or business partners can share funds. Overall, Copay has something for everyone. It’s simple enough for entry-level users but has plenty of additional geeky features that will impress more experienced players as well.
Jaxx is a multi-currency Ether, Ether Classic, Dash, DAO, Litecoin, REP, Zcash, Rootstock, Bitcoin wallet and user interface. Jaxx has been designed to deliver a smooth Bitcoin and Ethereum experience. It is available on a variety of platforms and devices (Windows, Linux, Chrome, Firefox, OSX, Android mobile & tablet, iOS mobile & tablet) and connects with websites through Firefox and Chrome extensions. Jaxx allows in wallet conversion between Bitcoin, Ether and DAO tokens via Shapeshift and the import of Ethereum paper wallets. With an array of features and the continual integration of new currencies, Jaxx is an excellent choice for those who require a multi-currency wallet.
Armory is an open source Bitcoin desktop wallet perfect for experienced users that place emphasis on security. Some of Armory’s features include cold storage, multi-signature transactions, one-time printable backups, multiple wallets interface, GPU-resistant wallet encryption, key importing, key sweeping and more. Although Armory takes a little while to understand and use to it’s full potential, it’s a great option for more tech-savvy bitcoiners looking to keep their funds safe and secure.
Trezor is a hardware Bitcoin wallet that is ideal for storing large amounts of bitcoins. Trezor cannot be infected by malware and never exposes your private keys which make it as safe as holding traditional paper money. Trezor is open source and transparent, with all technical decisions benefiting from wider community consultation. It’s easy to use, has an intuitive interface and is Windows, OS X and Linux friendly. One of the few downsides of the Trezor wallet is that it must be with you to send bitcoins. This, therefore, makes Trezor best for inactive savers, investors or people who want to keep large amounts of Bitcoin highly secure.
The Ledger Wallet Nano is a new hierarchical deterministic multisig hardware wallet for bitcoin users that aims to eliminate a number of attack vectors through the use of a second security layer. This tech-heavy description does not mean much to the average consumer, though, which is why I am going to explain it in plain language, describing what makes the Ledger Wallet Nano tick. In terms of hardware, the Ledger Wallet Nano is a compact USB device based on a smart card. It is roughly the size of a small flash drive, measuring 39 x 13 x 4mm (1.53 x 0.51 x 0.16in) and weighing in at just 5.9g.
Green Address is a user-friendly Bitcoin wallet that’s an excellent choice for beginners. Green Address is accessible via desktop, online or mobile with apps available for Chrome, iOS, and Android. Features include multi-signature addresses & two-factor authentications for enhanced security, paper wallet backup, and instant transaction confirmation. A downside is that Green Address is required to approve all payments, so you do not have full control over your spending.
Blockchain (dot) info
Blockchain is one of the most popular Bitcoin wallets. Accessing this wallet can be done from any browser or smartphone. Blockchain.info provides two different additional layers. For the browser version, users can enable two-factor authentication, while mobile users can activate a pin code requirement every time the wallet application is opened. Although your wallet will be stored online and all transactions will need to go through the company’s servers, Blockchain.info does not have access to your private keys. Overall, this is a well-established company that is trusted throughout the Bitcoin community and makes for a solid wallet to keep your currency.
Bitcoin Alt Coin Exchanges
Bitcoin exchanges are digital marketplaces where traders can buy and sell bitcoins and alt coins using different fiat currencies or altcoins. Exchanges also act as wallets.
We will discuss exchanges in our next blog
I have built Markethive as a walk in faith. Sometimes it has nearly broken me financially, but the Lord kept prodding me to build it. Through treachery with previous partners, financial collapse with Trivita’s damaged income, through suffering from heart failure and actually death in the hospital from heart failure, diagnosed with diabetes 2, having to move from Wyoming to Fargo, a wife that needs special care daily, I persevered because the Lord kept inspiring and prodding me to keep building it.
Last year (July 2016) I took Markethive out for trials, utilizing the Inbound Marketing tools and built the Valentus opportunity and became diamond in 12 days (breaking, even shattering the records!), then I rolled Markethive out to assist in an ICO opportunity and within 3 weeks produced over $180,000 in commissions and broke records again.
Keep in mind neither of these opportunities had the longevity capacity, like Trivita did, to become a legacy lifetime income. I was still looking.
This year, I actually died (obviously recovered)then was given a sobering diagnosis which sidelined me from any work for 5 months. Living on savings off my Bitcoins, I was able to focus on recovery and 4 weeks ago was diagnosed with no heart failure and no diabetes (a miracle blessing from the Lord, walking 10 miles a day and a strict diet) and was able to actually get back in the saddle again.
I was ready to get back into the fight and had a few false starts with The Trade Coin Club and Jet-Coin. Then an associate from my Trivita down line made me aware of Bitclub. Joe Able, one of the 3 founders of Bitclub Networks called me and paid to fly me out to meet him. I went with the intentions to pitch him for Markethive investments (I am obsessed with Markethive). Boy was I in for an amazing revelation.
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I could go on but I made a video to really illustrate how I am engaging Markethive into this. Millionaires will be made. 100s of them in my organization perhaps even 1000s because of the raw marketing power Markethive brings to this and I own Markethive.
Please join my group to get rolling into this huge opportunity tsunami. Surf is up. Big wave surf. Wax your boards and let’s safari brothers and sisters.
Standpoint's Ronnie Moas raises bitcoin forecast to $7,500 Standpoint's Ronnie Moas raises bitcoin forecast to $7,500
1:14 PM ET Mon, 14 Aug 2017 | 00:50
Longtime stock researcher Ronnie Moas raised his price target on bitcoin by $2,500 on Monday after the digital currency hit all-time highs over the weekend.
"What's happening is the floodgates are opening," Moas, founder of Standpoint Research, said in a phone interview with CNBC on Monday. "I believe there are hedge funds and very deep-pocketed individuals going into this now, really hundreds of millions of dollars."
Moas first laid out his views on bitcoin's potential in early July and issued a formal report at the end of last month with a price target of $5,000 for next year.
He told clients Monday he now expects bitcoin to climb nearly 80 percent from the weekend's records to $7,500, and maintained the digital currency could surge to $50,000 in 2027 — representing a 28 percent annual compounded growth rate.
Bitcoin three-month performance
After bitcoin's uneventful split into bitcoin and bitcoin cash on Aug. 1, bitcoin has soared more than 40 percent to all-time highs.
Bitcoin climbed 5 percent Monday morning to a record high of $4,321.08, more than quadruple in value for the year, according to CoinDesk. At that price, the digital currency has gained about 50 percent in August.
As institutional investor interest in bitcoin grows, Moas expects digital currencies to become part of "strategic reserves" and "asset allocation models in the near future." He also said people in foreign countries will likely want to buy digital currencies as a more stable alternative to their national currencies.
"You can't look at this as a normal situation," he said. "We're in an industry that will probably go from $140 billion to $2 trillion and the bitcoin price will probably move with that."
The total market value of more than 800 digital coins listed on CoinMarketCap.com has climbed from around $20 billion at the start of this year to about $140 billion on Monday. Bitcoin accounts for about half of that value.
Year-to-date change in global value of digital currencies
Published by and fro
Another digital currency, ethereum, traded 1 percent higher near $307, according to CoinDesk. Ethereum has shot up more than 3,000 percent this year.
Bitcoin cash, an alternative version of bitcoin supported by a minority of developers, held steady near $300, according to CoinMarketCap.
Moas told CNBC that 100 percent of his investments are in digital currencies, with the majority in bitcoin and ethereum. He said he never invested in the stocks he issued reports on.
He added in his Monday note to clients:
"Any way that I look at these numbers, my forecasts are looking conservative. It looks to me as though we are at the same point in the adoption curve as we were in 1995 when we went from one million internet users to ten million. The following year the Netscape browser came online and we went from 10 million users to hundreds of millions of users overnight.
I expect that within a couple of years we will have between 50 and 100 million cryptocurrency users — up from approximately ~10 million today. We only have 0.15% market penetration right now — if that goes to 2% or 3% we will get to the $50,000 price target that I set at the beginning of July."
To be sure, many note that bitcoin remains like the Wild West compared with the established Wall Street market.
"People should understand they're not dealing with the NYSE right now. There's no regulation, there's no face that you can attach to these exchanges," Moas told CNBC, noting his digital currency holdings are spread across five exchanges.
Bitcoin lost more than half its value in 2014 as Mt.Gox, then the largest exchange by far, said it lost about 850,000 bitcoins (worth about half a billion U.S. dollars at the time) and filed for bankruptcy.
This July, the U.S. Department of Justice alleged in an indictment that a "sizeable portion" of the Mt.Gox losses were deposited in accounts controlled, owned and operated by an exchange called BTC-e and a Russian national named Alexander Vinnik. Vinnik was arrested in late July.
— Reuters contributed to this report.
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Just because Grindelwald and Dumbledore had a deadly brawl during their quest to revolutionize magic doesn’t mean two great powers cannot be used in concert to change the world. This could be the worst way to start an important conversation about financial technology, but stick with me, it gets more interesting. We are speaking about the world-altering technology of Artificial Intelligence as the first superpower coupled with the financial system disruptive technology of cryptocurrency — a decentralized payment system that circumvents government manipulation of currency and is forcing us to redefine the concept of money. The question is: Can these two technologies be used together to change the way ordinary people like you and me invest our money — without expiring in a shower of blue sparks? “Avada Kedaura!”
But first, let’s take a step back and look into them as individual concepts, with respect to their relationships to investment and trading.
Artificial Intelligence (AI) means software that after its initial programming continues to improve its performance based on experience of the environment it has been set to ‘learn.’ Unlike in movies, where AI is characteristically portrayed as menacing, human-destroying droids, AI software has actually bettered our lives in fields as diverse as healthcare, education, safety, transportation and entertainment. In the field of financial trading, AI has been clandestinely used for two decades to generate profits for hedge funds, banks and other large trading companies.
In its early days, AI trading systems relied on human intervention to provide trade execution but since the rise of electronic exchanges, AI trading has probably changed the character of the world’s markets without the general public’s knowledge.
Today, it is the hedge funds, banks and major international corporations like Goldman Sachs that are reaping the benefits from AI-based trading of forex and stock markets. These companies harness “deep learning” — evolving mathematical and statistical models of prediction and probability — to forecast the short-and-long term outcomes of various financial markets. These models, because of their nature, should be able to track the changes in market condition and therefore continue to improve their performance over time.
Deep learning models aren’t concerned with the fundamentals of the underlying market. They work through pattern recognition, and like their human quantitative analyst counterparts seek the relationships between chart patterns and expected outcomes to generate a return. However, even the most disciplined human trader can be influenced by the fear of loss or greed which may change their trading behavior. AI Bots, however, execute trades consistently without emotion at lightning speed directly onto the exchange, placing and closing trades on behalf of their clients. They stick faithfully to limits, never lose discipline or waver from their assigned course based on the idiosyncrasies of emotion.
Digital Currency Trading
Digital currency trading, which until recently has been mostly centered on bitcoin, has gained momentum in recent years. Since Feb 2011, when bitcoin stood at parity with the US dollar, bitcoin has risen to where it is trading now some six years later at prices between $1,200 and $1,425. The reasons behind Bitcoin’s success are many. Coupled with its decentralized nature which protects it from all good and bad government policies; bitcoin is beginning to be seen as a viable alternative in certain countries where hyper-inflation or lack of confidence in government has rendered the local currency a less attractive alternative. Bitcoin is also becoming easier to manage, simpler to use, safer than carrying paper money and cheap enough to transact and carry, without needing an intermediary.
Despite the last 6 month’s remarkable price increase, bitcoin as an asset class has its share of ills, including periods of extreme market volatility. For example Bitcoin’s limited supply coupled with the inability of governments to intervene to counteract market forces means that bitcoin reacts quickly to market bias. Take for example, the very recent bitcoin ETF buzz: Bitcoin’s price trended northward comfortably ahead of the SEC’s ETF ruling amid growing optimism, hitting a peak of $1,327 a coin. But after the SEC shot down both the Gemini and SolidX bitcoin ETF projects, the price nosedived 20% before rallying within the month back to similar levels.
In addition, shorter term fluctuations can be seen if one looks at intraday bitcoin charts. On average an BTC/USD chart, Bitcoin’s value fluctuates between 10 and 15 USD every 4 hours and sometimes quite a bit higher. For many investors, such fluctuations make bitcoin an uncomfortable investment choice. However, there are day traders who use this volatility to take tidy profits out of the market on a daily basis. These are the traders who are fixed, glued to their computer monitors and mobile screens all day long, tracking the market to enter and exit positions.
So we return to the original question: “can a market as young and volatile as cryptocurrency be successfully partnered with Artificial Intelligence to produce a profitable outcome?
With market capitalizations in the low millions up to low billions, cryptocurrency markets present too small an opportunity to interest most trading banks and hedge funds. They use the power of their deep pockets coupled with AI to generate massive profits from high frequency trading where a few millisecond advantage over competitors can generate big returns.
This means, there is room while cryptocurrency markets are still in their infancy for AI developers to create systems that learn to identify profit opportunities in these young, highly volatile markets. And while a Goldman Sachs may snort at a market cap of 20 billion dollars, investors like you or me would be delighted with this kind of profit. We are starting to see young talent, like the people running the Our AI Bot blog out of the UK. These types of cryptocurrency enthusiasts are coupling their Deep Learning System knowledge with innovation, imagination and an understanding of the inputs that are relevant to predicting digital currency market movement to yield what look like fairly outstanding results.
But many within the cryptocurrency space feel the markets are moving towards mainstream and already there are players like Pantera Capital and banks like Santander and Citibank that are looking at how to generate profits from the cryptocurrency markets. So the window of opportunity for individuals to benefit from what AI can do in digital currency trading is probably limited. The time to look at this opportunity is now – “Expecto Patronum!”