What is Crypto currency – Bitcoin? Will the buying mania continue? Or Will Bitcoin be responsible this time for the Global crises! Crypto currency
is a new age, decentralised, digital currency which works on the
mechanism of cryptography. Being decentralised it is not governed by one
single monetary or legal authority – See astonishing charts and
similarity between movement of Bitcoin and US – DJIA
Cryptocurrency is a new
age, decentralised, digital currency which works on the mechanism of
cryptography. Being decentralised it is not governed by one single
monetary or legal authority. It works through a series of communicating
nodes which runs bitcoin software and maintains the blockchain which is
the public ledger recording bitcoin. Through mining, the record keeping
system, miners keep the blockchain updated, consistent and unalterable.
Miners use complex algorithms to mine (or “discover”) bitcoins which are
then added to the blockchain. There are various other types of
cryptocurrencies like Litecoin(LTC),Ethereum (ETH),Ripple(XRP) etc but
Bitcoin remains the most used and traded.
Bitcoin is the first
and the most famous cryptocurrency used till date. ……..Recently bitcoin
trading has increased significantly, mainly because of the following
reasons-
(please refer actual Monthly research report for more details)
See the below charts and you will be thrilled how highly correlated the movement has been between US major index – DJIA and Bitcoins
The above charts clearly highlight the
Fractal Nature – It means that irrespective of the markets or assets the basic
emotions that drive the prices remains the same. It is Greed, Hope, Fear that are responsible for movement of any asset
class.
The above chart shows classical
example that everyone is too focused only on Bitcoin but people are forgetting
the fact that movement of US major index is mimicking that. The magnitude might
be different but the slope of rise looks similar. There also seems to be high
correlation between movements of both of these assets which is highlighted by
black box.
The Bitcoin mania can be compared to
that of the Tulip light bulb mania of 16th century. Prices of Tulip
………………..
I am not here to catch a top in mania
but definitely the risk does not justifies entering at current levels. It might
very well move higher as measuring people extreme emotions like greed can be
everyone’s guess but I think we are nearing that phase and the apocalyptic
decline in Bitcoin might be a trigger for Global selloff this time. Food
for thought – How will this be correlated to other assets! My take is when you
run for cover you do not care what are you selling to save your …..!!!
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