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Bitcoin Segwit2x – An Opportunity

Bitcoin Segwit2x – An Opportunity

by | Nov 5, 2017 | Cryptocurrency

8 November 2017 Update: The fork that was supposed to  happen has been called off. It was decided there was not enough support.

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Bitcoin is likely forking again as a result of new code known as Segwit2x. Forks are negative for a cryptocurrency from a store of value perspective because they are essentially inflationary. However, this could present an opportunity similar to when Bitcoin forked to create Bitcoin Cash (BCH).

In theory, if a cryptocurrency hard forks it should reduce the value of one currency by the amount gained by the other. So if the market cap of Bitcoin is $6,000, it forks, and the new crypto is $500 the “original” BTC should be worth $5,500 all else given. This is similar to how dividends work with companies, where the value of the share is automatically reduced by the amount of the dividend. Now there are two cryptocurrencies instead of one, which compete for market share.

However, one of the last times Bitcoin had a significant fork, the advent of Bitcoin Cash, both Bitcoin and Bitcoin Cash went up. I think this is illogical, but the market will do what the market will do.

I’m skeptical of Bitcoin in particular and cryptocurrencies in general. However, I’m willing to try to profit from them provided I only use money I can afford to lose. People who bought into bitcoin when it was trading for a few dollars have made a fortune with BTC trading upwards of $7,000. A new hard fork is scheduled to happen on November 16 called Bitcoin2x (B2X). It is another attempt to address some of Bitcoin’s shortcomings.

Segwit2x

Bitcoin Cash and Bitcoin Gold are some of the recent Bitcoin Forks

This fork is somewhat unique because it might not be a fork at all, at least practically speaking, because everyone might switch over to this new Segwit2x code.

But this could an opportunity to get some “free” coins–albeit not without significant risk. Simply buy some BTC on coinbase and then transfer them to your account on GDAX (run by the same folks who run Coinbase). GDAX has already indicated they will credit accounts with BTC with an equal amount of B2X.

So, if you were to have 1 BTC, after the fork you would then have 1 BTC and 1 B2X. It is my opinion that B2X will probably not be worth as much as the BTC, but will still be valued and it is “free” money.

Some of the Risks with Segwit2x

There is certainly a lot of risk with cryptocurrencies and they increase during hard forks. Here are the possible scenarios:

1) Bitcoin forks, there is now BTC and B2x.

2) Bitcoin does not fork, B2X is not adopted

3) B2X is adopted, and everyone switches over to it

I don’t have an opinion on Segwit2x as a technology at this time. In either of the three scenarios the desired outcome (as far as my strategy goes) is for the overall value of the BTC and or B2X to be higher than it is now.

However, it is possible that the fork does not go well and in the ensuing chaos both the price of Bitcoin and any forked coin goes down, or bitcoin goes down, or the new coin goes down.

So it’s certainly not a strategy for widows and orphans. But I think it is worth considering. I took this approach when BTC forked to create Bitcoin Cash (BCH) and it worked out for me.

It’s important to make sure you have BTC in GDAX or another location where you will be able to take advantage of the fork and that your BTC is there by the 14th or 15th (fork will likely happen at some point on the 16th).

As always I’m not recommending any particular course of action or strategy. You need to make up your own mind.

If you already own bitcoin, you might consider ensuring that they are held in an exchange that will support B2X, so that you get this “dividend” as some are calling it. If you don’t have any Bitcoin and would like to buy some, you can do so AND at the same time support this site. Simply buy $100 or more of BTC using this Coinbase referral link. If you do we’ll both get $10 worth of BTC. Not bad.

The Bitcoin Segwit2x is risky, but recently it seems like all news is good news for Bitcoin and despite large setbacks Bitcoin continues to rally higher.

Bitcoin Cash

Bitcoin Cash

by | Aug 1, 2017 | Cryptocurrency, Learning from Mistakes, Preservation of Purchasing Power

As expected the Bitcoin Hard Fork occurred around 12:20 UTC today. A new cryptocurrency, Bitcoin Cash (BCH or BCC depending on the exchange) was born. It shares the same history as Bitcoin up until today in what I’ve already referred to as a modern day Ship of Theseus paradox.

So which Bitcoin is the real Bitcoin? BTC continues with a similar price as before and Bitcoin Cash was a new node to begin with so certainly Bitcoin remains bitcoin.

But it’s another example of how a brand new cryptocurrency, one which a current market cap of over $6 billion, can be created seemingly out of thing air.

I understand that Bitcoin Cash has the support of some miners, and work went into the technical changes (it has a larger block size, in an attempt to overcome some of Bitcoin’s scaling issues). But is it really worth $6 billion?

Source: coinmarketcap.com

The market seems to think so and that is all that matters in the present.

In the short term each BCH is trading for around $375 as of writing. My plan, which I previously shared, worked flawlessly.

Upon hearing about the hard fork, I moved my Bitcoins from an exchange that did not support BCH, to an exchange that did. When the fork happened I retained my original Bitcoins, but was also awarded an equal amount of Bitcoin Cash. I doubled my Bitcoins! (Sort of) The original Bitcoin is still trading around $2,700 and as stated above the new BCH I receive are only worth $375 each.

Learning from Past Mistakes

This is an example of how I was able to learn from a past mistake to benefit.

I missed out on coins resulting from when Ethereum forked. The place where I had my coins, hashflare.io, famous for unprofitable cloud mining, did not support the fork. I wasn’t about to let that happen again. If I’d been on an exchange that supported Ethereum Classic, or had my Ethereum in a wallet where I controlled the keys, I could have received 1 ETC for each ETH I held.

Cryptocurrencies are Inflationary

As I’ve written about before, one of the things that I dislike about cryptocurrencies is that there are no natural limits on the supply. Bitcoin Cash is a perfect example. Sure, the number of Bitcoins (BTC) did not increase, but a coin very similar to BTC, albeit with less network hashing power and some technological differences, was created, which in some sense doubles the amount of Bitcoins in existence.

Playing the Fork

The market doesn’t seem to care about the Bitcoin hard fork, BTC was trading up near around it’s all time high of $2,910 the day before the fork and is still at $2,700.

One could theoretically have purchased 3 BTC right before the fork for $2,900 each ($8,700 total). Then the fork happens, and the person gets to keep their 3 BTC and also gets 3 BCH, each worth $375 ($1,125 total). The price of BTC then falls to $2,700. So one would have lost $600 total on the BTC, but gained $1,125 on the BCH, for a net of $525. Not bad. That’s a 6% increase over just a few days.

Easier to talk about with the benefit of hindsight, but if someone is already holding Bitcoins, there is no financial risk to being a position to get the newly created cryptocurrency.

Long Term Problems

The market doesn’t seem to care about the Bitcoin hard fork, it was trading up near around it’s all time high of $2,910 the day before the fork and is still at $2,700. But in effect 6 billion USD worth of value was created out of thin air. Over the long term this simply isn’t sustainable. Is the price really coming from new money buying up BCH as the future cryptocurrency? It seems unlikely. The supply of cryptocurrencies continues to grow and Bitcoin Cash is only the latest example.

I’ll continue to hold various cryptocurrencies as a speculation that one or more takes off (even more) and reaches widespread adoption but as a long term investment I think it remains very risky.

Bitcoin Fork

Bitcoin Fork

by | Jul 28, 2017 | Cryptocurrency, Currencies, Wealth Protection

Bitcoin is going to undergo a hard fork.

What is a Hard Fork Anyway?

A hard fork in cryptocurrencies is when one cryptocurrency effectively becomes two and the number of units of currency is effectively doubled, albeit existing in two separate, incompatible blockchains. This has already happened to the second largest cryptocurrency by market capitalization: Ethereum.

Ethereum underwent a hard fork back in 2016, so there are now two blockchains, Ethereum and Ethereum classic, which both trace their origins back to the 30 July 2015 launch of Ethereum in a modern day Ship of Theseus paradox.

More information about hard forks.

Hard Forks are Logically Bad for the Price of a Cryptocurrency

As I’ve written about in the past in What I Dislike About Cryptocurrencies cryptocurrencies, like Bitcoin, aren’t scarce.

More correctly, cryptocurrencies are not very limited in supply.

There are currently 16,475,250 BTC in circulation and that number will continue to grow by design until 21 million are mined, at which point the supply of BTC will cease to grow.

So while only 21 million Bitcoins will ever exist on a given Bitcoin blockchain because of how the cryptocurrency is programmed, if Bitcoin forks, there will eventually be 21 million units of Bitcoin A and 21 million units of Bitcoin B.

In one sense the number of Bitcoins that will exist is 42 million. Now certain places might only accept Bitcoin A and not accept Bitcoin B and the price of Bitcoin B could drop to a low value and no one uses it. So in that sense there are still only 21 million Bitcoins. But when a cryptocurrency hard forks, some people favor one fork over the other and the price is lower than it otherwise would be if there was only one blockchain.

If Ethereum had not forked there would only be around 93 million ETH in existence right now. But because Ethereum did hard fork there are now 93 million ETH and 93 million ETC. The market capitalization of ETH is currently around $18.3 billion and the Market cap of ETC is around $1.3 billion. It’s beyond the scope of this article to posit how much the hard fork impacted the price of ETH, but I think it is logical to believe that the price of ETH would be higher if not for the hard fork.

Bitcoin Hard Forks

On August 1st Bitcoin is also going to fork, forming two separate and incompatible blockchains: Bitcoin (BTC) and Bitcoin Cash (BCH).

The market does not seem to care and Bitcoin is trading near all time highs around $2,800.

Time will tell what kind of impact this will have on the network and the price of the cryptocurrencies. If the hard fork does not go well and the network is adversely impacted I could see short term price drops. It’s possible (although I would guess unlikely) that Bitcoin Cash becomes more popular than Bitcoin and overtakes it in price. It’s also possible (and in my opinion much more likely) that it becomes a somewhat niche cryptocurrency like Ethereum Classic.

Bitcoin currently has a market capitalization of $46,622,650,965. It’s certain that after the fork both Bitcoin Cash and Bitcoin will not both have a $46.6 billion market capitalization.

While we wait and see what unfolds I’ve taken one important step. I had my modest BTC holdings at Coinbase. Coinbase is NOT supporting the hard fork.

So I’ve moved my BTC to Kraken. Kraken IS supporting the hard fork. By moving my BTC to an exchange that does support the fork I will get Bitcoin Cash in addition to Bitcoin.

The reason for this is because if one were to hold one BTC (Kraken uses the abbreviation XBT) at Kraken during the hard fork, Kraken will award the holder of that BTC one BTC as well as one BCH. Whereas if BTC is held at Coinbase no BCH will be credited.

I like Coinbase and I plan to move my BTC back to Coinbase after the hard fork takes place.

If you don’t currently own any Bitcoins and are interested in purchasing some, check out my easy to use walkthrough guide How to buy Bitcoins on Coinbase. Using my affiliate link when buying Bitcoins on Coinbase to get $10 worth of bitcoins free when you buy at least $100 worth of Bitcoin.

Unconfirmed Bitcoin Transaction

by | May 28, 2017 | Cryptocurrency

The largest cryptocurrency by market capitalization, Bitcoin, is supposed to be the payment technology of the future. Gold 2.0. The decentralized currency of tomorrow.

On May 22nd sent about $1,000 worth of Bitcoin from an exchange to another address and it was not confirmed until 27 May. The BTC fee paid to process the transaction was $25 worth of Bitcoin (at the time of the transaction).

This is worse than decades old wire transfer technology.

Bitcoin has risen substantially this year. It started off around $1,000 per coin, recently ran up as high as $2,700 and is now back to around $2,100.

I don’t pretend to know the exact catalyst for the upward volatility but it could have a lot to do with Asian demand particularly in Japan.

Although unconfirmed transactions and long delays in transaction confirmations are not new to the Bitcoin network, with the recent surge in price the network has been overwhelmed and the backlog of unprocessed transactions has grown.

I found a study that asserts 43% of Bitcoin transactions are not included within 1 hour.

There is a technical proposal that I understand would help with some of the Bitcoin performance issues but it has not yet been implemented.

I do think Blockchain technology pioneered by Bitcoin is here to stay. I just don’t think Bitcoin will be at the forefront forever.