Bitcoin - where from, where now, where to

SovoS · December 28, 2024, 6:19pm

Wikipedia on Gold:
Because the Earth was molten when it was formed, almost all of the gold present in the early Earth probably sank into the planetary core. Therefore most of the gold in the Earth’s crust and mantle is thought to have been delivered to Earth by asteroid impacts about 4 billion years ago.

Wikipedia on Bitcoin:
Bitcoin is the first decentralized cryptocurrency. Based on a free-market ideology, bitcoin was invented in 2008 by Satoshi Sakamoto, an unknown person. Use of bitcoin as a currency began with the release of its open-source implementation in 2009

Perhaps the oldest and the youngest forms of currency on our planet!

No matter how many years anyone has been trading they have not traded Bitcoin for more than a theoretical max of 15 years.

My own interest in Bitcoin has been slow but progressive.

It interests me, as a technical analysis purist, because it has no intrinsic physical existence or value. Its price is a function of buying and selling. Therefore it is theoretically an exceptionally good experiment in pure TA. On the other hand, BTC is not immune to impacts from other alternative instruments.

It has not interested me, as a professionally oriented trader, because its encrypted, decentralised, and unregulated nature has previously made it the choice of disreputable dealings.

Bitcoin is maturing up from the unpredictability of youth into the characteristics of a defined adulthood. However, the nature of that adulthood is still unclear and in the stage of formation.

I feel the next few years will see important and far-reaching changes in global monetary systems and digital currencies like Bitcoin may well have a key role in those changes.

For these reasons, I started this thread for 2025 to record some thoughts on this “look back- look forward” stage in the life of Bitcoin and maybe some thoughts on trading it along the way.

It is a personal journey, not a trading journal. If others find the content of interest then fine, if not, then fine.

SovoS · December 28, 2024, 10:42pm

Why do we need Bitcoin, anyway?

I shouldn’t boast about it but I am actually a trillionaire… but, unfortunately, in Zimbabwe Dollars. Yep, I am the proud owner of one banknote with perhaps the highest currency denomination ever printed, 100 trillion (Zimbabwe) dollars:

Look at all those zeros!!!..it cost me 4€ about the time that Bitcoin was being developed! Maybe nowadays it is worth around 150€…that’s inflation!

Then there’s Hungary with its 100 million billion dollar banknote. I don’t have that one. The highest denomination I own is “only” 1,000 million pengo that is also inflation!

In fact, this is a classic photo of Hungarian banknotes after the impact of hyper inflation - which, at its worst, was the most extreme monthly inflation rate ever, reaching 41.9 quadrillion percent (4.19×1016%; 41,900,000,000,000,000%) for July 1946, amounting to prices doubling every 15.3 hours(Wikipedia) :

Hungary inflation

And there are so many other examples from around the entire world of hyperinflation and the loss of value and the result of bad monetary policies.

There was, and is, clearly a big need for something different, something that would, and could, preserve the value of wealth.

SovoS · December 29, 2024, 7:49am

Although Bitcoin was officially launched in 2009, it was not widely and actively acknowledged until many years later. In fact, after only a few years after its launch it was already considered by many as history and was mainly only of interest to the techies communities.

During that early period some early Bitcoin transactions entered into a folklore of their own. Perhaps the most famous story is the “two pizzas”, maybe the earliest recorded transaction using Bitcoin. It was described in 2021 as follows:

“Laszlo Hanyecz, one of the early adopters of the newfangled cryptocurrency that had just been coded into existence, purchased a pair of Papa Johns pizza pies using 10,000 bitcoins. The purchase equated to roughly $41 dollars back in 2010, based on the going rate for bitcoin back then, and is widely viewed as the first time a virtual currency had been used to buy anything in the real world. However, those 10,000 bitcoins would be valued at approximately $380 million at the current rate for the world’s most prominent crypto, which was last changing hands at roughly $38,000…”

…and currently Bitcoin is around the $100,000 level!

We could say that Bitcoin has only become a household name and of broad trading/investing interest since around 2017-2020. This chart shows the development of Bitcoin price history since its launch in 2009:

So we could conclude that, when it comes trading Bitcoin, we are all Newbies.

We are approaching the year end and the start of New Year 2025. Bitcoin, quoted as BTCUSD, currently stands at $95,000 and is very quiet in the run-up to year-end. So I’ll spend these last two days of 2024 looking back towards 2009 rather than forward into 2025… looking at some of the “why’s” and “wherefore’s” of this strangest of investment vehicles - one that is invisible, has no intrinsic value of its own, and doesn’t actually even exist outside of computer programs, files and memories.

Often referred to as “Digital Gold” Does Bitcoin actually say more about the pyschology of humanity than about the concept of value… Fascinating?

SovoS · December 29, 2024, 3:38pm

One aspect of Bitcoin trading that irritates some people whilst for others is a unique opportunity is the fact that the market is always open. That means Saturdays, Sundays and holidays. The only time it is unavailable is when one’s own broker chooses not to offer any quotes, like on Christmas Day - but the market is still there in the background…

I posted somewhere else that I feel the market is currently sitting on a strong support area but looking a little vulnerable to the downside. So the only trades at the moment for me are selling small rallies and buying back on small dips.

Today was a good example of both Sunday trading and one of these small trades within the orange-coloured support zone (the pink area is the area between midpoint and low of last week’s trading range):

SovoS · December 30, 2024, 7:22am

The model for Bitcoin, invented and created by Satoshi Nakamoto, is considered brilliant amongst its enthusiasts for many reasons, some of which are:

Decentralised:
There is no single central agency such as a government or central bank, etc that can interfere with, interrupt, or influence, the movement of Bitcoin between buyers and sellers wherever they may be in the world.
Encrypted:
Ownership of Bitcoin is identified by a code which is only known by the owner themselves. And all transactions are carried out using only this code name. Therefore, even though the entire history of every single transaction in Bitcoin is registered and open to public scrutiny, it is virtually impossible to identity the actual persons involved in any transaction.
Distributed verification:
The blockchain method of verifying and retaining records of all transactions means that copies of the entire blockchain are held in, and cross-checked across, thousands of independent computers all around the world. This means corruption of data is almost impossible as it would require altering the data in every single node.
Scarcity:
The manner in which Bitcoins are created means that there is a final limit of only 21 million coins that can ever be created. Some 19.8 mill coins have so far been minted (26.12.2024) and the final total of 21 million coins should be achieved around the year 2140.
This creates the same psychological “possession” instinct that we see in all forms of scarce resources that have some form of natural intrinsic value.
However, Bitcoin does not have the same inherent types of value characteristics that we can see in, for example, gold or art works or properties, etc. If something is very rare but no one has any interest in it, anyway, its value will remain at, or return to, zero.
So scarcity alone, although an important factor in determining value, will not sustain Bitcoin unless there is also an underlying benefit associated with it.
Security
The structure of the node network and the characteristics of the Blockchain method, combined with the encryption process and the decentralised nature of the Bitcoin environment means that it is extremely difficult to steal or fraudulently misappropriate Bitcoin. However, this does not cover attacks on the Bitcoin “brokerages” themselves, and there have been many cases of Bitcoin disappearing in the past.
The lack of any central authority control over Bitcoin movements and the quantity of coins in existence, both make Bitcoin immune to any external manipulation such as found with fiat currencies. This means governments cannot simply print more money whenever they wish and create serious inflation problems that eat away people’s savings. Neither can they impose currency regulations affecting exchange rates and restricting border crossings of currencies.

These are all major issues and identify and create huge question marks on a global basis. They simultaneously impose both benefits and threats upon the current structure of monetary policies across the globe.
They also, ironically, simultaneously offer inflation-proof security to the general public’s income and savings whilst offering an almost perfect vehicle for the storing and transmission of illegal and criminal gains.

I am not any kind of expert in BTC and if anyone wishes to comment, add, or correct anything I write on this thread than please feel free to do so!

SovoS · December 30, 2024, 7:39am

On the other hand…will Bitcoin turn out to be just another, albeit rather extreme, example of the story of “The Emporer’s New Clothes” written by Hans Christian Anderson back in 1837:

"The tale concerns an emperor who has an obsession with fancy new clothes, and spends lavishly on them, at the expense of state matters. One day, two con-men visit the emperor’s capital. Posing as weavers, they offer to supply him with magnificent clothes that are invisible to those who are either incompetent with their post, or stupid. The gullible emperor hires them, and they set up looms and pretend to go to work. A succession of officials, starting with the emperor’s wise and competent minister, and then ending with the emperor himself, visit them to check their progress. Each sees that the looms are empty but pretends otherwise to avoid being thought a fool.

Finally, the weavers report that the emperor’s suit is finished. They mime dressing him and he sets off in a procession before the whole city. The townsfolk uncomfortably go along with the pretense, not wanting to appear inept or stupid, until a child blurts out that the emperor is wearing nothing at all. The people then realize that they have all been fooled"… (Wikipedia)

SovoS · December 30, 2024, 5:05pm

It has been a slow market but price had remained soggy. Kind of more like a lack of buying interest rather than any aggressive selling.

And there is also the issue of year-end account dressing which, in the case of 2024, could easily mean booking of profits from long positions, thus creating some downward pressures on price - that would certainly fit the profile of price (lack of) action over the last few days…

But we have eventually managed to break down a bit lower and through last week’s lows.

I didn’t trade this, I’ve already finished for this year. But interesting to see where we end up by the end of tomorrow, 31.12.2024. (remembering of course that BTC doesn’t actually stop for any event…)

Hourly chart:

SovoS · January 1, 2025, 8:18am

Happy New Year to all on BP.

Here we are on the other side of the year-end and, in spite of some jiggling around with price, we are pretty much unchanged.

We have managed to embrace the entire lower half of the previous week’s range (rose area) but remained within it. The overall picture is still vulnerable on the downside in the near term, but the Daily is looking neutral, kind of like “resting” for the holiday break.

Too soon to make any conclusions where we go from here but I would keep shorts as very brief in/out trades whilst watching for signs of time to buy.

4H chart:

PrestonRiver · January 1, 2025, 8:50am

btc is never where to go but it is where we go!

SovoS · January 1, 2025, 9:31am

Thanks for the contribution, good to see someone else here!

I hope I have understood what you meant, i.e. that BTC price is solely the net result of changes in buyer/seller volumes?

That is precisely how I see it, although the volume of buyers and sellers is not only limited to whether someone wants to own it or lose it. BTC is also only another alternative vehicle in the whole range of investment vehicles.

One “drawback” with BTC is that it does not offer any holding benefits such as dividends or interest payments.

And therefore, as I mentioned at the start of this thread:

This is what interests me with BTC. We do not know what “everyone else” is doing and the only way to see and assess the changes in net buying/selling pressures is via technical analysis of its price movement.

Bitcoin has no intrinsic value of its own, therefore there is no core underlying value supporting it other than the quantity of buyers wanting it. If, for some reason, suddenly no one wanted BTC anymore then its value would be zero.

SovoS · January 1, 2025, 12:51pm

Looking ahead, one area where we will see a significant amount of change during 2025 is in government legislation and market regulation.

This is interesting! Adding solid structure to the digital markets creates greater stability, improves confidence and reduces improper usage. It also creates greater opportunity for digital currencies to takes a greater role in commercial transactions rather than as just an investment asset – an important step in stabilising and consolidating the position of cryptocurrencies in global economies.

However, at the same time, greater regulation and legislation also counter the original concept of Bitcoin to remain totally outside of, and immune to, any interference from any external agendas…

Some examples of what we can expect during 2025:

In the US we are likely to see the Commodity Futures Trading Commission installed as the primary watchdog for crypto trading.

In the UK, the Labour party will be issuing comprehensive draft legislation early 2025. The FCA, as the crypto regulator, will also be issuing new rules during the year.

Even before the recent UK elections, the Labour party said that it would support the country in becoming a “securities tokenization hub” and to advance plans on the digital pound already during 2025. In fact, the government has also, apparently, launched a pilot for a digital gilt (British govt bonds).

In the EU, we can expect the implementation of its “Markets in Crypto Assets” (MiCA) legislation. The EU has also said that it will issue a final draft of the “digital euro rulebook” and whether or not the region will also consider issuing a digital euro once the legislation has been implemented.
(Source: Coindesk)

Is 2025 going to be the year when BTC finally shrugs off the doubters and pessimists?

SovoS · January 1, 2025, 1:07pm

But one problem I have with BTC is its maximum issue of 21 million coins. This is not even the size of a fly dirt on the window of global economies and finance.

Although the widespread use of financial derivatives such as futures and CFD’s broadens the overall exposure to BTC pricing, any increase in the overall value of BTC coins will result in these 21 million coins being sub-divided into ever smaller portions (in the opposite way as banknotes in hyperinflation conditions). Can we really deal in units of, for example, 0.000 000 000 0001 BTC’s?

How can BTC become a significant global currency unit with a major role in international trade, economic policy and finance? And if it cannot, due to its limited issue, but other digital currencies can, then where will BTC be left?

SovoS · January 1, 2025, 6:42pm

However, one could add that the total investment value of the BTC coins mined so far, based on a current price of around USD100,000 is about USD2,000,000,000,000 i.e. 2 trillion dollars. And that is just the actual coins. It excludes the total of BTC-based derivative instruments.

That is no small sum! In fact one could argue that it places BTC in the same class as some large banks that have been classified as “too large to be allowed to collapse”!!

SovoS · January 1, 2025, 8:29pm

This is from Babypip’s own Crypto course, I thought it was an interesting summary:

“…here are the price milestones that bitcoin has reached over the years:”

February 10, 2011: $1
March 31, 2013: $100
November 28, 2013: $1,000
November 29, 2017: $10,000
December 04, 2024: $100,000

That is real F1 style racing!

SovoS · January 2, 2025, 9:56am

BTC is making a positive start to the New Year. Too early to say if it is sustainable or just sentiment. We held within the lower half range of last week and now trying the upper edge. Still flat but looking more on the buy side potential from here…?

SovoS · January 2, 2025, 12:44pm

I couldn’t resist just a little buy today now that we have moved into the upper, green zone. In and out for a small reward. Its just that I always like to start a new year or month with a gain But this is obviously (still holiday season) moving very slowly, so it was a quick one - but a plus one !

These charts are actually from a new MT5 platform account that I set up towards the end of last year. It is part of a project born out of a discussion with an old friend. We were reminiscing on bygone days and small accounts and how to build them into something worthwhile.

The end result was to start up a brand-new $500 account and relive those thrills and frustrations experienced back in those old times. In my opinion, a small account is exceedingly challenging to succeed with. The constant pressures from achieving accurate timing of entries and exits, and the discipline with handling risk/reward issues are critical to survival.

No EA’s, no automated this or that, not even a rigid trading strategy (don’t get me started on that one! ). Just reading the price and with a little help from some lines here and there - real retro-trading like it used to be back in the day. I love it!