Email of the day on blockchain
Comment of the Day

October 03 2017

Commentary by Eoin Treacy

Email of the day on blockchain

Been following some of your spreadbets successfully and thought I'd repay the favour with an interesting video on blockchain. Some readers may want to skip to about half way through this 18 min video

Best regards

Eoin Treacy's view

Here is a link to the video mentioned in the above email.

Thank you for this thought provoking video and congratulations on taking opportunities as they appear in the markets.

The idea he proposed that each person can take back their identity and only share what they choose is a powerful notion and could easily be a rallying call around which people coalesce to support the technology. The continued rise of cyber criminality and the enormous profits of companies like Facebook and Alphabet could both become politicised topics which help to grow participation in blockchain applications.

Right now, bitcoin represents the largest blockchain but rationally there is not particular need for a token to have value if transactions can simply be charged on a per use basis. Nevertheless, private blockchains have not yet gained wide acceptance.

The intraday volatility of bitcoin largely precludes it from being characterised as a mode of exchange. I think it is best thought as a reflection of the growing interest in blockchain as a both a repository of information and a network over which information can be transferred.

When analysing the price action there is one important consideration I believe is often overlooked. At present bitcoin and the other cryptocurrencies are largely free from financial leverage. That might change in the near future, as options have already been permissioned by the SEC and there are rumours investment banks like Goldman Sachs are opening cryptocurrency trading desks. However right now it is a market dependent on unleveraged capital.

That means a log scale chart is the most accurate depiction of what the crowd is thinking about. After all unleveraged investors/traders are not worried about margin calls and or interest rates. They tend to concentrate on price appreciation by percentages rather than points.

Simply compare the price of bitcoin on an arithmetic scale and a log scale. The arithmetic scale is a picture of how volatile the price is but the log scale chart is highly consistent with a staircase step sequence uptrend.

If a consistent trend is a trend in motion then that consistency should hold suggesting the price will break above $5000 and rally beyond the expectations of investors conditioned by the range. It should then pull back violently but find support in the region of the previous peak. The next reaction should then be followed by a clear and emphatic upward dynamic immediately following the nadir.

If that sequence of events fails to occur then we can conclude that the rhythm of the market has changed and therefore that the relationship between supply has been altered. That is when a rational investor would begin to reassess. 

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