What Is Bitcoin?
Under The Hood
So what is bitcoin and how does it work? Bitcoin is a peer to peer digital currency that operates without the need for a centralized bank or authority to dictate its value. Bitcoin uses blockchain, a shared public ledger to confirm transactions and validate end users. All transactions on Bitcoin’s network are confirmed by the entire system using individual private keys or seeds. These seeds are cryptographically secure prices of digital information that belong only to the end user and are used to confirm throughout the entire system whenever a transaction on bitcoin takes place. The seed key prevents transactions from being altered once that are confirmed by the network as a whole. Bitcoins are mined to confirm transactions, this process involves creating the cryptographically secure private keys for each individual transaction that takes place. (www.bitcoin.org)
Kodak the the once giant camera company who feel to the digital revolution in photography recently announced that they were building a blockchain for photography in order to prevent theft and misuse of photographs. The currency, dubbed “KodakCoin,” propelled the companies stock up 92 percent in January, giving the company new hope after a 2013 bankruptcy. Long Island Iced Tea corp has been another to jump on the blockchain bandwagon, changing its name to Long Blockchain Corp (Reuters).
In China there has been a widespread crackdown on trading bitcoins for fear of financial risks involved. Many of these measures have been in place since September 2017, and China has increased efforts to stop traders from circumventing the firewall and using offshore platforms to trade the cryptocurrency (Coin Telegraph). Similar crackdowns have taken place in South Korea which accounts for about 12 percent of all cryptocurrency trading (US News).
With the advent of Bitcoin futures by both the NASDAQ, CME Group, and CBOE many investors thought that a Bitcoin ETF would soon follow using the Bitcoin futures markets as an index. However the SEC requested that Bitcoin ETF filers withdraw their filings in January due to liquidity concerns and concerns that we are unable to price cryptocurrencies accurately. (Seeking Alpha)
Is there a bubble?
Bitcoin is the oft talked about cryptocurrency that has investors scrambling to understand its inner workings. Bitcoin reached its highest valuation of about $19,000 per coin on December 17, 2017 (Coindesk). Since this peak bitcoin has fallen 28 percent in January tumbling through a widespread sell-off and various speculations about the asset’s value. (CNBC) As of this writing bitcoins valuation has fallen to below $8,000 per bitcoin, yet the total market cap of all cryptocurrencies is around $400 billion. in recent months while Bitcoin has fallen, about a third of other types of digital currencies, often called alt-coins, have gained ground.
Dierking, Dave. “The SEC Is Saying 'No' To Bitcoin ETFs, But This One May Still Get Approved” Seeking Alpha. 1/12/18. https://seekingalpha.com/article/4137093-sec-saying-no-bitcoin-etfs-one-may-still-get-approved
Duggan, Wayne. “Cryptocurrency Doors Close in Asia, Open in U.S.” US News. 1/19/18. https://money.usnews.com/investing/cryptocurrency/articles/2018-01-19/cryptocurrency-blok-gbtc-blcn
Randewich, Noel. “Eastman Kodak unveils cryptocurrency, stock doubles.” Reuters. 1/9/18. https://www.reuters.com/article/us-eastman-kodak-stocks/eastman-kodak-unveils-cryptocurrency-stock-doubles-idUSKBN1EY2AD
Suberg, William. “Ban Complete: China Blocks Foreign Crypto Exchanges To Counter ‘Financial Risks.’” Coin Telegraph. 2/5/18. https://cointelegraph.com/news/ban-complete-china-blocks-foreign-crypto-exchanges-to-counter-financial-risks