Will the crypto price boom be followed by a major Bitcoin bust?

December 2, 2017 2:00 pm

Stop wishing you had invested in cryptocurrency.

You’re right to think you could have now become a millionaire, make it billionaire, but no one could have predicted why bitcoin, originally priced at less than $1 cent in 2010, and valued at $1000 at the start of 2017, suddenly broke the $11,000 barrier November 29, 2017, only to drop back in the $9000 range again.

“Even plenty of people who believe in Bitcoin’s future think some wild rides lie ahead. As if in proof, the Nov. 29 surge to over $11,000 was followed by a 20 percent drop. And yes, you can bet on a crash,” said Bloomberg.

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So is it a gamble or not?

Price to quadruple in 2018?

Hussein Sayed, Chief Market Strategist at FXTM, told AMEinfo that bitcoin has become a very hot topic and many fund managers have raised the price target for the cryptocurrency.

“Former Fortress hedge fund manager Michael Novogratz commented on CNBC, that bitcoin could be at $40,000 by the end of 2018 and he expects that total market capitalization could reach $2 trillion, from $309 billion currently. I think that we will hear more skyrocket predictions, but few will provide an economic metric that supports their valuations.”

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Crypto bandits can’t believe their luck!

Anti-malware software Malwarebytes said it stopped almost 250 million attempts to place coin-mining malware onto PCs, in just one month, BBC reported.

Software giant Symantec said malicious code related to crypto-cash has witnessed a 10 time increase of late and cyber-thieves are using software, hacked websites and emails to lure unsuspecting prey.

Malwarebytes told the BBC that its security software was now, on average, stopping about eight million attempts a day by coin-mining code to compromise users’ PCs.

Once on a computer, the malware often runs processors at close to 100% to get as much mining work done as possible.

“On smart phones, this can mean batteries are depleted very quickly,” said BBC.

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Bitcoin Bubble ready to burst?

According to Coin desk, a specialized digital currency site, cryptocurrency is much smaller than the subprime bubble that popped a decade ago, which was roughly two orders of magnitude larger than bitcoin today.

“But bitcoin has shown, on several occasions, a persistent ability to defy detractors to grow an order of magnitude in less than 12 months, (from $1k to $10k),” said the site.

“Most digital-currency ideas, however, had the same tragic flaw which the ability to replicate just about everything that exists online (think text, photos, or files) can be copied, so fear of rampant counterfeiting would spell death for a digital currency.”

Bloomberg said JPMorgan Chase & Co.’s Jamie Dimon, calls bitcoin a “fraud” and that Fund manager Mike Novogratz calls cryptocurrencies “the biggest bubble of our lifetimes”.

“Bitcoin’s value could double again — or it could go down to zero,” reported Bloomberg.

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The Bitcoin hype

In 2014, cryptocurrency was a way for drug lords to peddle in everything illegal. It relished anonymity until it flourished into a $1.2bn marketplace, called Silk Road, which was shut down by US federal agents that year.

Several US senators then praised bitcoin and other virtual currencies and the value of bitcoin tripled within the month to $900, and venture capital in bitcoin rose from nearly nothing in 2012 to $400 million in 2014 and $600 million in 2016.

Bloomberg recently described how “buy bitcoin” had overtaken “buy gold” as an online search phrase.

According to The Wall Street Journal, $34 billion in bitcoin is traded weekly, which is currently less than 1% of the global foreign-exchange market.

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No consensus over legitimacy

Joseph Stiglitz, a Nobel laureate in economics, recently said that bitcoin “ought to be outlawed” because it’s designed to evade regulation and “doesn’t serve any socially useful function,” Bloomberg reported.

“CME Group and other exchanges plan to offer bitcoin futures contracts, potentially expanding bitcoin’s appeal.”

Bloomberg added that bitcoin’s software guarantees that there will be a finite supply (no over printing) has added to the fear of missing out for some investors.

“Coinbase, a bitcoin exchange, was overwhelmed by two to three times its normal traffic on Nov. 29, as new users signed up, making its service temporarily unavailable to some users. New crypto-focused hedge funds are opening up weekly, and already surpass 100. Most of them invest at least part of their funds in bitcoin” said Bloomberg.

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What to invest?

Bloomberg said there are numerous ways to invest such as purchasing coins directly from exchanges like Coinbase.

“Accredited investors can also invest in vehicles like the Bitcoin Investment Trust, which tracks bitcoin’s price,” it said.

“Soon investors will be able to invest through their regular brokers in bitcoin futures, and possibly in bitcoin exchange-traded funds, once regulators feel comfortable with the idea.”





Hadi Khatib
By Hadi Khatib
Hadi Khatib is a business editor with more than 15 years' experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it.