This article was written by Mathieu Stalder, a Financial Analyst at I Know First.

“The four most dangerous words in investing are: This time it’s different”.

Sir John Templeton

Novogratz With A Stark Warning

What The World’s Central Banks Are Saying About Bitcoin

The Cost Of Bitcoin Mining

I Know First Algorithm Forecast On Bitcoin

Novogratz With A Stark Warning

Bitcoin is down more than 80% from its all-time high, having plummeted since the beginning of the year. Now Bitcoin is falling even further and former Goldman Sachs partner and founder of cryptocurrency merchant bank Galaxy Digital Holdings Mike Novogratz has a stark warning for the bitcoin. In an interview Novogratz stated: “Revolutions don’t happen overnight, while I believe in the underlying technology and believe in the crypto movement, when prices get stupid, I sell. A lot of my friends in crypto just couldn’t let go. They were saying, ‘This is going to change the world.'” This year it seemed that Bitcoin would stabilize at $6200 as it stayed there for month. But surprisingly it fell further down. On the other side Bitcoin has huge potential and Kenneth Rogoff, a professor at Harvard stated: “We shouldn’t be surprised by this year’s cryptocurrency price bust, [but] the price of these coins is not necessarily zero. Like lottery tickets, there is a high probability that they are worthless. There is also an extremely small outside chance that they will be worth a great deal someday, for reasons that currently are difficult to anticipate.”

What The Central Banks Think About Cryptocurrencies

[Image Source : dealbreaker.com]

Ten years after the birth of Bitcoin, central banks all around the world gave several positive and negative statements about the Bitcoin. There are two main concerns about cryptocurrencies. First central banks are concerned about the security, volatile prices and their introduction into regulated derivatives exchanges. The second question is whether to develop a central bank owned crypto currency. The newly installed Fed Chairman Jerome Powell said, “governance and risk management will be critical.” The Vice President Fritz Zurbruegg said: “Would broad access to a CBDC or broader access to digital central bank money have better results than the current monetary system? And would the Swiss National Bank thereby better fulfill its legal mandate? From our perspective it’s a no to both questions.” Also, the President of the European Central Bank Mario Draghi seems skeptical as he warned from the dangers of investing in digital currencies. Nevertheless he considers the blockchain technology behind it as “quite promising” and the bank is “very interested”. The Dutch are also optimistic about cryptocurrencies and started its own cryptocurrency called DNBcoin for internal circulation only to better understand it. After the experiment they confirmed that the technology is still underdeveloped and not applicable for payment systems but might be useful in the future. In summary this means that central banks generally like the technology behind bitcoin, but prefer it under their control. In the graph below, you can see the milestones for the cryptocurrency and its ups and downs.

[Image Source : Bloomberg.com]

The Cost Of Bitcoin Mining

The mining of Bitcoin is of course a costly thing. According to a report of MarketWatch, to mine a single bitcoin costs on average around $4758 in the US, which is under the value of the market rate for a bitcoin. Consequently, it does not make any economic sense to mine Bitcoin now. On the other end is Venezuela with a cost of $531 per Bitcoin, which is cheap, but you certainly face other challenges in that country. This cost consist basically of the bills for the electricity and the equipment that is used With a current course for Bitcoin of around $3500, mining Bitcoins has become a losing deal. Therefore, the supply is likely to stagnate until Bitcoin crosses again the mark of around $4500. As in the graph shown below the margin for mining Bitcoin has been constantly decreasing over this year to 0%. In general, the supply of bitcoin is maximum 21 million, which should lead to a rising Bitcoin in long term in a logic market. On the other side several variables affect Bitcoin demand. Bitcoin has achieved to be accepted to hundreds of companies as a possibility to pay, such as eBay and PayPal. Another important number is the confirmed transactions per day, which has been constantly increasing since 2012 from 7000 per day to 300’000 per day now. In the graph below, you can observe how the margin of bitcoin mining decreased.

[Image Source : dealbreaker.com]

I Know First Algorithm Forecast On Bitcoin

In the past few month the Bitcoin had another setback. After a long phase of stagnation, in mid November the Bitcoin started to fall from around $6300 to around $3500 in the beginning of December. I expect this correction to continue, as the markets are very volatile now and the trend points downwards. Also Walletinvestor.com predicts a continuously declining Bitcoin until mid-2019. An analyst from Bloomberg expects the Bitcoin to decline to $1500 and stagnate there. The speculators seem to lose hope in Bitcoin and do not expect another rally.

Past I Know First Success with Bitcoin

I Know First’s algorithm has previously predicted the price movement for Bitcoin such as in this forecast from December 15th, 2017 to March 15th, 2017. The forecast showed a baerish signal of -34.57 and a predictability of 0.33 for 3 month. During the next 3 month, the Bitcoin/USD price declined by -49.79 %, starting from $16’500 all the way down to $8’300. Current I Know First subscribers received this baerish BTC forecast on December 15 , 2018.

How to interpret this diagram

I Know First also released another Bitcoin forecast on December 4th for 7 days. The forecast showed a bearish signal for Bitcoin. After 7 days Bitcoin returned up to 14.67%. Current I Know First subscribers received this bearish Bitcoin forecast on December 4 , 2018.

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