Bitcoin’s price held steady in the last 24 hours even as the Bank of England’s governor Mark Carney declared the cryptocurrency a failure.
According to Carney, bitcoin had “pretty much failed” as far as “the traditional aspects of money” were concerned. “It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange,” he told audiences at Regent’s University in London this morning.
But that’s the bad news. A positive development occurred in South Korea, where the government has come out in favor of allowing “normal transactions” of cryptocurrencies. Choe Heungsik, the governor of Financial Supervisory Service, said South Korea would encourage banks to make cryptocurrency-related transactions.
The current stance is a reversal from earlier threats to ban crypto trading altogether. The Asian country is the third-largest trading venue for cryptocurrencies and its exchanges have an outsized influence on their prices. (See also: Why Is South Korea So Important to Bitcoin Prices?)
At 14:01 UTC on Tuesday, the price of a single bitcoin was $11,559.25, an increase of 3.58% from 24 hours ago. The price represents an increase of 66.5% from its lows on February 5th. It took slightly less than three days for bitcoin to traverse the distance between $11,000 and $12,000 in December 2017.
Other cryptocurrencies mostly imitated bitcoin’s movements. IOTA, a coin for the Internet of Things ecosystem, fell out of the top 10 cryptos and was replaced by Dash, a coin with aspirations to become a medium for daily transactions. It has tied up with sports betting site FanDuel to launch Crypto Cup. There are two NBA contests in Crypto Cup. The first one is a free contest while the other has a $3 entry fee. Winners will be paid in Dash.
Index Fund Outperforms Cryptocurrency Market
To be sure, there is some truth to Governor Carney’s assertions about bitcoin this morning. The cryptocurrency promised much but has delivered little so far. After a wild and volatile ride last year, bitcoin’s price has also shed most of its gains this year. But there are still profits to be made in cryptocurrency markets.
Bitwise HOLD 10 is an index fund for accredited investors run by startup Bitwise Asset Management. The fund holds the 10 largest cryptoassets and has delivered a 45% return versus 1.7% return for Bitcoin, since launch in November 2017. The original cryptocurrency was up by 78% in the fund during December’s bull market and down by only 18% (versus 39% in cryptocurrency markets) in January’s bear market.
The secret sauce to Bitwise’s returns is diversification.
“Many large cryptoassets don't have high correlations to each other, so they don't all move in the same direction at the same time historically,” explains Hunter Horsley, CEO of the startup. “For a diversified portfolio like the Bitwise HOLD 10, this has meant better performance than Bitcoin.”
According to Horsley, the price for DASH has had a 1% correlation to bitcoin in recent months while NEO, a cryptocurrency whose price has registered 90% gains this year, has a 20% correlation. Ethereum, another cryptocurrency with a solid track record this year, had a 38% correlation with bitcoin’s price, says Horsley.
The cryptocurrency market’s recent slump has not bothered investors in Bitwise’s fund. “Almost none requested early redemptions,” says Horsley, adding that some increased their investment during this time period. “We encourage our clients to take a long term view, to invest against that view, but then not to get caught up in the daily volatility." (See also: Elliott Management Calls Cryptocurrencies 'One Of The Most Brilliant Scams In History.')
Bitcoin Private Releases Whitepaper
Bitcoin Private, a privacy-focused cryptocurrency that marries ZClassic with bitcoin, released the final version of its whitepaper yesterday. It will use a new algorithm – Equihash – and a larger block size (2MB) as compared to bitcoin.
In addition, it has a shorter block time of 2.5 minutes versus approximately 10 minutes for bitcoin. Bitcoin Private is expected to play a “major role” in peer-to-peer and commercial transfer of digital assets.
“As of now, Bitcoin Private has already been approached by various vendors and merchants for use as a payment option for their merchandise,” the coin’s creators claim in their whitepaper. The new coin will have to compete with the likes of Litecoin, Dash, and Bitcoin itself to become a medium of daily transactions. Predictably enough, bitcoin twitter is up in arms against it.
But that criticism should be taken with a grain of salt, especially since bitcoin forks are big business. (See also: Will Bitcoin Undergo 50 Forks In 2018?) The cryptocurrency’s hard fork will take place during the first week of March.
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin.