Archive for the ‘Bitcoin’ Category

Bitcoin vs Ripple (XRP)

Posted on: February 16th, 2018 by jms No Comments

I once wrote how I thought Ripple’s XRP is the only other cryptocurrency worth investing in besides Bitcoin (this was before Ethereum hit the scenes).

 

At the time I didn’t fully understand Ripple’s intent for its own blockchain technology. Now I have some different opinions about XRP, but do I still believe it has value and a lot of potential (maybe even more so than Bitcoin) as it relates to the future of digital transactions.

 

 

What is Bitcoin really?

 

Satoshi Nakamoto’s whitepaper is what you’ll want to read in order to fully understand the original intent behind Bitcoin, but I’ll sum it up by saying… Bitcoin was originally meant to be a peer-to-peer system for handling digital financial transactions. It was meant to take intermediaries like banks out of the picture while also seeking to solve the problem of double spending.

 

What Bitcoin has become

 

Bitcoin today is less of a means of payment as much as a perceived store of value. As long as the price of Bitcoin can fluctuate double digit percentages every day it can’t really be a viable means of handling ordinary transactions. Why would someone ever want to use Bitcoin to buy something if the price of their Bitcoin may go up 20% in the next hour? And why would someone want to accept Bitcoin in exchange for something if the price of the Bitcoin they accept may go down 20% in the next hour? People are not acquiring Bitcoin today because they believe in the ideology it was meant for. They are acquiring it because they believe it will go up in value faster than other types of investments. Bitcoin has become a version of digital gold more than a version of digital cash like it was originally intended.

 

 

What is Ripple?

 

Ripple is a company, not a cryptocurrency. Ripple has created their own version of a cryptocurrency called XRP. This cryptocurrency is unique to the Ripple system, which is really intended to favor the banking system by creating a cheaper and faster alternative to the current SWIFT system. Ripple is trying to solve a very different problem than other cryptocurrencies, and it is not decentralized.

 

The value of XRP is directly tied to the value other financial institutions place on the Ripple system. It may one day evolve into a better form of handling ordinary transactions if banks and credit card companies adopt XRP as a better way to validate transactions, especially since it will help solve the double spending problem. What this ultimately does for the value of XRP is yet to be determined. Personally, I don’t see this type of adoption causing the price of XRP to skyrocket like Bitcoin, but I do see it allowing XRP to become a new standard for payments, which should cause it’s value to go up at a relatively steady pace over time.

 

 

So there you have it… XRP and Bitcoin are meant for two very different purposes, and Bitcoin has evolved to be something very different than what it was originally intended for. XRP and Bitcoin should not be compared as similar types of assets. Bitcoin will likely be the better store of value for faster growth in the foreseeable future, assuming it doesn’t come crashing down. XRP has a better chance of becoming the standard cryptocurrency for handling ordinary payments since it favors existing financial institutions and improves the way they can handle transactions. This will allow XRP to be a safer store of value long term once Ripple solidifies it’s position as a better alternative to the status quo.

 

 

Here’s another great article on the differences between Bitcoin and Ripple’s XRP.

 

Time to Sell?

Posted on: February 5th, 2018 by jms No Comments

 

I did it… I pulled the trigger and sold my entire position in Bitcoin, Bitcoin Cash, and Ethereum.

 

I was holding off for a while as I watched the price of cryptocurrencies fluctuate a few hundred every day. But I just couldn’t ignore the steady decline over time, so I decided to gamble on the fact that ongoing government regulations and consistent shorting on futures funds is prompting a big sell-off.

 

What’s even worse, the days of using credit as leverage to buy into cryptocurrencies are dying, resulting in a smaller pool of buyers, which can drive prices down even further.

 


 

There is a lot of news circulating that has a lot of bias, and it’s bias on both sides of the spectrum. What I’ve always tried to do when writing my own personal opinions on this topic is to offer a more balanced view. Granted, I am very bias towards favoring Bitcoin and other cryptocurrencies, but I do make a concerned effort to put my personal bias aside for a more balanced look at things. This will not only benefit anyone who reads this, but myself as well, since it forces me to ignore the noise and formulate my own opinions that will ultimately dictate my own actions. And my own opinions say it’s time to sell, especially if you got in early and saw a significant gain over time.

 

I thought about selling when the price was making a push towards $20,000, but I let my cognitive bias get the best of me then. I decided to not let that happen again, since the idea of losing more would border on stupidity in my opinion. If I can walk away with a decent profit, why not? I may have missed an opportunity to sell higher, but I can still sell high, and that’s a good thing.

 

There are many forms of cognitive bias, but the one at play with Bitcoin I think is the idea that we tend to seek out or favor the information that supports what we want to believe, or confirmation bias. In this case I want to believe that the price of Bitcoin will keep going up even as it’s falling, so I’ll trick myself into believing that this is actually the case.

 

I’ll convince myself that tweets from “experts” on the topic telling me to “hodl” (hold) is the right thing to do, even though other experts, like Warren Buffet and Ray Dalio, who I should probably trust more, say that Bitcoin is in a big bubble.

 

I’ll convince myself that news I read from sources like bitcoin.com, or other popular crypto-news sites, have a valid point and aren’t just putting a creative spin on the negative news from other sources.

 

I’ll convince myself that governments starting to crack down on cryptocurrencies won’t really have a significant impact because of a funny meme I saw online like this one…

 

 

(It turns out that some countries can make a significant impact)

 

 

It’s time to get real. Bitcoin is dropping fast and for a number of reasons. All the wishing and positive spins in the world won’t change what’s actually happening. Don’t get me wrong. I’m still a big believer in the technology and ideology, and I’m still long on Bitcoin. But while it’s dropping I’ll take a profit while I can. I’m sure I’ll buy again when prices bottom out, but for now I’ll cash out and cover my gains.

 

My advise to anyone who can sell at a gain is to sell now. Unfortunately, this isn’t the case for everyone. For anyone who can’t sell at a gain I only see 2 options.

 

1) Hold if you can afford to and hope for the best. I do think there will always be value tied to Bitcoin in some way, even if it never climbs back to where it was. Remember that Bitcoin and blockchain technology is still relatively new and evolving, and so it still has a lot of potential. Holding if can afford to is probably not a terrible strategy.

 

2) Cash out and accept your loses. Despite what we may read, cryptocurrencies are a gamble right now. When we place bets we have to be willing to lose sometimes, otherwise we shouldn’t be placing bets. The good news is that most people (governments included) agree that blockchain technology is here to stay and cryptocurrencies, in one way or another, are likely to have a place in the future of trade. So even if you decide to sell at a loss now, there is a good chance you can buy back in later when things level off, and hopefully make a profit then.