Crypto Currency Crashes & Bitcoin's Chain Split Disruption of July 31, 2017.

Crypto Currency Crashes and Bitcoin’s July 31st Network Disruption.
 
Ethereum is down 60% in just a few weeks. Bitcoin is off 34% from its high of $2,894, set on June 10, 2017. So, is this a buying opportunity? Before we jump in, let’s figure out what’s causing all of the volatility.  
 

Source: CoinBase.com

Bitcoin Network Disruption on July 31, 2017
Bitcoin.org is warning of a potential network disruption on July 31, 2017 during the User Activated Soft Fork (UASF). The official website for Bitcoin is recommending to stop accepting Bitcoin on July 28, 2017, and to “be wary of storing your bitcoins on an exchange or any service that doesn’t allow you to make a local backup copy of your private keys.” GDAX, the leading crypto currency exchange will be monitoring the situation closely. According to Adam White, the general manager of GDAX, GDAX will " temporarily suspend the deposit and withdrawal of bitcoin on GDAX and may pause the trading of bitcoin as well."

For a full list of the action points, and further explanation on the Bitcoin chain split, go to BitCoin.org and read the alert. You can also follow GDAX and Coinbase (GDAX' owner) on Twitter and on the exchange website for live updates during the chain split. Ultimately, the chain split should sort itself out. It's mainly the transition leading up to August 1, 2017 and the days/weeks thereafter where existing and potential bitcoin investors need to be more cautious.
 
Is this potential disruption what is behind the current sell-off of BitCoin, Ethereum and LiteCoin? Investors don’t like uncertainty, and they love gains. The July 31st event offers an incentive for anyone who has seen an extraordinary run-up of their investment to make sure that those paper gains are translated into their local, traditional currency. We’ll know in just a few weeks whether the July 31st chain split goes more smoothly than expected. Until then, I’d expect to see more volatility. Bitcoin.org is advising everyone that the currency could see “significant price fluctuations.”  However, Ethereum is experiencing even more volatility more Bitcoin.
 
Ethereum’s Flash Crash
On June 13, 2017, investors were buying Ethereum at $381. The rapid rise from just $7 a year ago, prompted a multi-million dollar sell order on June 21, 2017 that triggered a cascade of chaos, where limits and stops were triggered. In a matter of seconds, an Ethereum flash crash caused an implosion of the price to just ten cents! GDAX, the premiere crypto currency trading exchange, is honoring the purchases and reimbursing the forced sales. This will help to reinforce legitimacy, and reduce the customers’ righteous indignation of massive, instant losses. However, the flash crash illustrates one of many concerns of investing early in any disruptive innovation. (See below.) Refer to my first report of the Flash Crash and other problems with crypto currency in June 2017.
 
Other Concerns
Flash Crashes
Early Adopters Cashing In
Schumpeter’s Creative Destruction
Lessons from Skype
Hucksters and Hackers
 
Opportunities
Become an Early Adopter
Being on the Right Side of Massive Opportunity
That 10 Cent Trade
 
And here’s additional information on each Concern and Opportunity.
 
Other Concerns
Flash Crashes
Flash crashes – massive drops in an investment – are exacerbated by High Frequency Trading, automated programs and derivatives. Ethereum’s drop to 10 cents on June 21, 2017 was the result of a multi-million dollar sell order that triggered multiple stop-loss and margin covers. Because those orders are automated, the crash occured in nano-seconds – before GDAX had a chance to halt trading. The large exchanges – NYSE and the Nasdaq stock exchanges – have breakers to stop rapid drops in the overall exchange. However, the May 6, 2010 Flash Crash, which saw a drop of 9% in the Dow Jones Industrial Average in less than half an hour, exhibits just how far and how fast the mood can change in an investment. Incidentally, Flash Crashes are one of the reasons why it is critically important to have a Capture Gains strategy, rather than a Stop Loss mentality. I teach this important distinction at my Investor Empowerment Retreats. Call 310-430-2397 to learn more about the Oct. 13, 2017 retreat now.
 
Early Adopters Cashing In
Whenever you see gains of 1000% or more, like we’ve seen this year Ethereum, you have to worry about the early adopters cashing in their gains. If you’re trying to buy while most are selling, it’s like trying to catch a falling knife. You’re bound to get cut.
 
Schumpeter’s Creative Destruction
Disruptors and unicorns are the hallmark of the tech industry today. They were in 1999 as well before the Dot Com REcession. As Schumpeter pointed out in his econ classic, Capitalism, Socialism and Democracy, there are two waves of innovation. The first is fast and furious, which is followed by a big crash that wipes out most of the investors and the more vulnerable companies. The second wave of the new technology, after all the chaff has been winnowed away, tends to be longer and more prolonged. For instance, Bitcoin was the first, but is LiteCoin (developed by Charlie Lee) or Ethereum (co-founded by Vitalik Buterin) the better platform? And what about all those Bitcoin clubs that are sprouting up?
 
Hucksters and Hackers
I’ve seen a massive amount of questionable opportunities (i.e. most likely scams) associated with Bitcoin lately. They have all of the hallmarks of hucksters, including claims of fast, easy profits and demands that you “join now or miss out.” Behind these billboards, are multiple red flags, including toll-free 800 numbers and P.O. boxes, often without any mention of where the company operates or who is running it.  
 
Over the past few years, hackers have breached Bitcoin Wallet providers. Hucksters have faked Bitcoin Wallets, photoshopping in multi-millions of dollars worth of the crypto currency. And scam artists have faked Bitcoin wallet apps that they’ve successfully made available in your smart phone store. If you want to be sure that you’re dealing with a legitimate wallet source or exchange platform, then rely on information from BitCoin.org and CoinBase.com.
 
Lessons from Skype
Bitcoin has become a religion for people who are fed up with banksters preying on the Middle Class American. Be careful drinking the Kool-Aid that crypto currency will replace the banking industry altogether, however. Even Bitcoin.org, in its alert on the July 31, 2017 chain split, recommends that you only hold as much Bitcoin as you can afford to lose. A lot of the same predators who were selling you gold a few years ago as the apocalypse currency are now cashing in on Bitcoin hype. Skype was marketed as a disruptive technology that would put the telecom industry out of business. That never happened, though the industry now enjoys video conferencing as a result of the innovations that Skype pushed forward. The financial industry is moving fast to figure out how Bitcoin's block-chain might benefit the industry.
 
Opportunities
Become an Early Adopter
Getting in early on a trend always pays off. Investing fundamentals must still be applied, however. Buying high, or at the top of a market, is never a good idea. Investing in Amazon pre-Dot Com crash would have cost you 80% in losses -- something that would have taken a decade to recover from.

Source: Google Finance. (c) Google. Used with permission.

 
 
Being on the Right Side of a Massive Opportunity
There is no doubt that purchasing any crypto currency in January of this year was a great idea, particularly if you’re cashing in with 1000% gains, as some Ethereum investors are. However, whenever you start hearing about sure-fire investments on Facebook, that’s often your sell signal, not your buy opportunity. I started getting inundated with requests to report on crypto-currency in June, after a number of Bitcoin clubs started emerging from highly questionable founders and ads were everywhere touting gains. In my blog then, I warned of many scams and of high prices. Since that 4-alarm warning, all of the currencies have fallen 27-70%. Click here to access my June 2017 Bitcoin blog.
 
Though I do believe that crypto currency is a unicorn. It may have to spend some time back in the stable before it grows to its full glory. I’ll report again on the currency soon – after the July 31, 2017 Bitcoin chain split. However, the crypto currency environment right now is the Wild, Wild West. Be sure that you associate yourself with a town that has a sheriff, and buy your bank at a great price.
 
That 10-Cent Trade
The investor who is sitting pretty with an Ethereum investment that s/he picked up for just 10-cents on June 21, 2017, the day after someone else paid $318 has a Capture Gains, Buy on Opportunity mentality. Most clubs that I’m reading about are talking about a Stop Loss strategy, a losing strategy that is wiping out wallets, with egregiously high fees piled on top of the losses. Successful investing requires learning the fundamentals. Join me for my Investor Educational Retreat in October, where you can learn how to swim in this sea of opportunity. Otherwise, you could be jumping in without your water wings, and drown.
 
Are Bitcoin, Ethereum and Litecoin Great Buys Now?
All of the currencies are experiencing extreme volatility this summer. If you are an experienced trader who knows how to be on the right side of volatility, then there’s opportunity. If you’re a novice who is interested in jumping into the hottest investment of the year, your first investment should be in wisdom so that you learn how to be on the right side of the Wild, Wild West, in the first phase of a disruptive innovation.

Call 310-430-2397 to learn more about our #finlit #fintech training. Receive the best price when you register by July 31, 2017.