Bitcoin Losses Gather Pace, With Prices Nearing Three-Week Low
Comment of the Day

January 21 2021

Commentary by Eoin Treacy

Bitcoin Losses Gather Pace, With Prices Nearing Three-Week Low

This article by Anchalee Worrachate and Eric Lam for Bloomberg may be of interest to subscribers. Here is a section:

“Bitcoin has already achieved the fastest-ever price appreciation of any must-have asset,” wrote JPMorgan Chase & Co. strategists John Normand and Federico Manicardi in a report on Thursday. “Current prices are so far above production costs that mean-reversion lower in returns is a recurring concern.”

Bitcoin was down 10% to $31,532 as of 10:08 a.m. in New York. Prices are on track for their first back-to-back weekly decline since early October.

Adding to the anxiety, a report in a trade blog suggested that there had been what’s known as a double purchase, where the same “coin” is used in two separate transactions.

“This really will chill a lot of that relentless buying and belief that Bitcoin is a stable form of providing transactions” if a double-spend actually happened, said Edward Moya, senior market analyst at Oanda.

Eoin Treacy's view

Talk of a double purchase went wild on social media overnight. The primary issue is that bitcoin is designed to ensure that is impossible. Bitcoin processing is slow because it is designed to ensure that a bitcoin cannot be used to make a transaction twice. People try all the time to make double purchases but in order for a transaction to be considered “secure” it needs to go through six blocks. Therefore, I believe it is unlikely that bitcoin has been hacked or that a double purchase has taken place. However, the whole issue does highlight the difficulty bitcoin has in scaling the number of transactions. It is the primary argument against it being a medium of exchange for everyday purchases.

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