DCU - A Tale of Two Bitcoins (19th August '17)


I'll admit it; I thought that Bitcoin Cash would plummet when it hit the open market. While I appreciate the philosophical reason for Bitcoin Cash, I didn't believe that the market needed two Bitcoins, the associated confusion and thus I expected the market to reject it.

I've never actually supported either side of the debate as I've never been technical enough to understand either side of the arguments entirely. From the little I do know, I could appreciate both approaches to scaling.

When Bitcoin cash first hit the open market and investors started dumping what many considered "free coins" I decided to hold both my BTC and BCC. I wanted to support both sides of the and let the market decide where we will go. 

While Bitcoin has rallied to new highs since the hard fork, the Bitcoin Cash price has been making big jumps up and down, but it now appears to be finding some support with significant gains this week. CNBC reported that the current price surge is investors betting on faster processing speeds, where "miners successfully demonstrated that the digital currency could support an eight-megabyte block", a huge benefit win over the current 1MB blocks of Bitcoin. This proving that Bitcoin Cash is now more profitable for miners, an enormous competitive advantage.

Whether this is a battle with only one potential winner or whether both can coexist, only time will tell.

Bitcoin itself is still trading sideways, bouncing between $4k and $4.5k. In the short-term, the $4k marker is important to hold, or we could see a drop back down to the mid to lower $3ks.

One voice in support of Bitcoin long term is Fundstrat founder Tom Lee who is setting a price target of $6k by mid-2018 and $25k by 2022, due to wider awareness and adoption. While I don't disagree with either target, I do think we need wider adoption of Bitcoin as a payment option alongside the likes of cards and PayPal.

If we do hit $6k by mid-2018, I would expect this to be a rough journey as this would represent less than a 50% gain over the next year against a +600% gain over the last year. Also, this price may depend on the battle between Bitcoin and Bitcoin Cash.

What is certain is that more and more institutional investors, banks and institutions are adopting Bitcoin and providing methods for investing in Crypto. As the report regarding Tom Lee's price predictions on Business Insider says:

Investors who don’t want to buy bitcoins will soon have a way to invest in the cryptocurrency. In July, the Commodity Futures Trading Commission cleared LedgerX, a cryptocurrency-trading platform, to offer bitcoin options by this fall. While also making it easier for investors to bet against bitcoin, Lee sees this as a bullish development because it would increase participation.

My strategy for riding this out is to hold both as I don't think anyone else can predict what will happen. I can foresee one of three scenarios which will mean holding both coins is a safe bet:

  • BTC remains dominant coin, and BCC fades. Cool, I own BTC. 
  • BCC grows to take BTC market cap. Cool, I own BCC. 
  • BTC and BCC coexist and are both successful. Cool, I own both. 

The scenario that both fail is not one I'm considering because if this happens, it is likely the whole market fails. 

The rest of the market is continuing to trade sideways and as is my portfolio. This could be due to the market running out of steam in the short term or a reaction to many coins leveling out after rapid price gains and traders taking profit.

I am always looking for signals of a correction and while past events are not a prediction of future events. The previous June/July correction followed rapid price gains and three separate occasions of significant short-term market crashes.

While yesterday didn't crash, I did see my portfolio drop by 10% at one point, and it has yet to fully recover. While I don't see this yet of a sign of a massive correction coming, I am preparing in advance. I would always rather miss market gains than lose unlocked profits. 

I am currently tracking behind my 5% for 25% cash off the table, so I will be waiting the weekend out and looking for options to cash out some more of my investments into fiat.

The crypto market doesn't like to trade sideways. It usually wants to fly up or down, and I always suspect there are players able to control the market and make significant returns on these moves, whether up or down. 

I'm still preparing to enter some new coins and currently have the following on watch: 

  • OMG
  • Qtum
  • Patientory
  • TenX
  • QRL
  • Civic
  • Gulden

It is getting difficult to track everything now as there are so many new coins entering the market. We've had many new entries into the Top 100 and a constant stream of ICOs. The market is feeling saturated though full of opportunities. I am looking for stability supported by potential high growth coins and will be fully rebalancing my portfolio next weekend.