Daily Archives: November 29, 2017

Cryptocurrency

4 Cryptocurrencies to Buy If You Missed the Boat on Bitcoin

Not known for providing conventional trading dynamics, bitcoin prices again shocked the world, this time exceeding $8,000. At this juncture, we may be standing on a critical inflection point. For those that believe that cryptocurrencies are in a bubble, the present bitcoin prices are a perfect argument. But to crypto supporters, the dramatic rise only proves the viability of the digital markets.

I’ve written extensively about cryptocurrencies, and I’ve traded them as well.

But even I have to admit that the meteoric skyrocketing of bitcoin prices is a shocker. I’m not so surprised in terms of nominal targets: a few months back, I wrote about the not-so-crazy case for $10,000 bitcoin. My InvestorPlace colleague, Will Ashworth, did the same. Rather, the speed at which bitcoin prices accelerated caught me flatfooted.

Obviously, I stand with virtual currency supporters. My personal view is that if cryptocurrencies were a bubble, it would have popped by now. While I get why investors are hesitant to jump onboard what appears to many as internet tokens, we shouldn’t underestimate how much information we have available today.

If Google was around during the tulip-mania era, I doubt that so many people would have lost their life savings. And in the same logic, we hear so many stories about bitcoin prices being unsustainable. This is a bull market that has had every opportunity to collapse.

Still, bitcoin prices today represent a considerable risk. Not too many can afford to plop down more than eight grand for a single coin. But if you feel that you missed the boat, don’t worry! The following cryptocurrencies are much more reasonably priced, and have greater return potential. 

Cryptocurrencies to Buy: Bitcoin Cash

Source: Shutterstock

Cryptocurrencies to Buy: Bitcoin Cash

On Aug. 1, 2017, virtual-currency investors learned firsthand the strange beauty of a “hard fork.”Yes, I’m sure the granular programming details are sublime for tech geeks. However, most folks recognize this date as the day when they received “free money.”

Bitcoin Cash was born as an offshoot currency from Bitcoin. In recent years, the enormous popularity surrounding cryptocurrencies meant that the original digital token could not satisfactorily handle transaction volumes. Bitcoin had to be upgraded, but as a decentralized platform, this would require consensus. That consensus never came, resulting in a new platform: Bitcoin Cash.

For Bitcoin holders prior to the hard fork date, they received an equivalent unit of Bitcoin Cash. At first, the offshoot currency soared to the moon, and then crashing down. Now, it’s back up to the moon, or nearly $1,200.

But more so than free money, Bitcoin Cash does indeed solve Bitcoin’s onerous and costly transactions. One of the personal oddities that I’ve experienced is that the original token doesn’t scale its transaction cost. It doesn’t matter if you want to send $1 or $1,000 of value — the cost is the same.

The other problem is that Bitcoin’s transaction speeds are deathly slow. Several years ago, transactions were nearly instantaneous. Now, it’s not unusual to wait days for your payments to go through. It’s maddening, which is why Bitcoin Cash could really be the next Bitcoin.

Cryptocurrencies to Buy: Ethereum

When Bitcoin first emerged, early adopters viewed it as an alternative payment mechanism. That obviously caught the attention of unscrupulous characters, who used the medium for illicit purposes, outside of prying government eyes. But what if a cryptocurrency could do more than just transfer value from one party to another? This is where Ethereum comes into play.

Underlining Ethereum is the “smart contract” concept. This is similar to all other contracts except for one significant difference: no intermediary party, such as an attorney, exists. The terms of the contract are stored in a distributed ledger that is immutable. Furthermore, any contractually-bound payouts won’t occur until the agreed-to terms are fulfilled. Artificial intelligence essentially governs this process, which ironically, people trust more than human intelligence.

Because Ethereum has a much broader scope than Bitcoin, it arguably has greater potential. Financial institutions and big banks are analyzing how the Ethereum blockchain can reduce risks with dealings involving untrustworthy parties. Others are exploring its use as a supply-chain efficiency solution.

But the real reason why people are looking at Ethereum is the attractive entry point. Currently ranked at number two in terms of market capitalization, Ethereum’s total value is $35.3 billion. A $100 billion market cap isn’t unreasonable, considering this blockchain’s potential. If so, this valuation would imply a $1,000 price tag.

Cryptocurrencies to Buy: Litecoin

If you check its official website, you’ll discover that Litecoin is a “peer-to-peer” internet currency. In other words, Litecoin is just like Bitcoin, but without the drama or the scrutiny. And while it may sound dismissive to call Litecoin the silver to Bitcoin’s gold, the programmers have no issues. In fact, their site describes their cryptocurrency as a complement, not a competitor, to the original digital token.

Don’t get me wrong: Litecoin has a number of awesome features aside from being relatively “cheap” at $70. Primarily, the transaction speeds are much faster than its older brother, which is a huge deal. Remember, slow transactions were the primary catalyst for the Bitcoin Cash hardfork. Moreover, Litecoin has very reasonable transaction costs and purchasing costs from exchanges such as Coinbase.

Still, I think the biggest Litecoin driver is the price point. With Bitcoin prices going ballistic, Litecoin provides a psychologically easier path to public integration. Would you rather pay one Litecoin to pay your utility bills, or 0.00853 Bitcoin?

More importantly, as the Gen-Z demographic enters the workforce, they’re going to be interested in virtual currencies. They’ll consider Bitcoin prices way too onerous. But Litecoin at under $100 may be a deal too sweet to pass up!

Cryptocurrencies to Buy: Ripple

I don’t think it’s too much of a stretch to say that most people bought cryptocurrencies to avoid the banks. Why on Earth, then, would it make sense to buy a virtual currency owned by the banks?

The digital toke in question, Ripple, is a tough nut to crack. Not only is Ripple an extremely speculative vehicle (currently priced at 23 cents), it’s “theologically” controversial. On one hand, major financial institutions supporting the coin provides significant confidence and credibility. On the other hand, it could be an Illuminati trap, or something to that effect.

I personally view Ripple as a bigger, “badder” SWIFT network. A properly scaled blockchain platform has proved effective in transacting value quickly and efficiently. Ripple is exactly that — a platform that can meet the demands of tomorrow. Furthermore, banking institutions can’t afford to sit back and let the blockchain technology overcome them. Ripple is their answer.

At the same time, we have to acknowledge the risks. A good portion of the crypto community will not trust Ripple, so integration is a problem. More critically, nearly 39 billion of these coins are in circulation. If Ripple hits $1, its market capitalization would exceed Bitcoin’s by a wide margin.

It’s a crapshoot, but one worth taking with your speculative money fund.

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Source: Investor Place 

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How to Invest Your Money in 2018

You’ve heard it a thousand times: Past performance is not a guarantee of future performance.

Yet, past performance is all we have to forecast the future. This is true everywhere. If you play fantasy football, you make decisions for next weekend based on past performance. When hiring or promoting someone, managers make decisions based on past performance.

So, it makes sense to consider the past when thinking about the future for the stock marketand how to invest your money.

I use several mathematical tools based on the past to forecast the direction of price moves. And my tools tell me 2018 could be a challenging market environment.

My 2018 Stock Market Forecast

The chart below shows my 2018 forecast for the Dow Jones Industrial Average.

My tools tell me 2018 could be a challenging stock market environment. Here's exactly how to invest your money in 2018 according to my analysis.

The forecast shows the direction of the expected trend, not price levels. For prices, I expect new all-time highs for major stock market averages in the first months of 2018.

This forecast is based on a combination of the recent price action and longer-term cycles. For example, one of the cycles is the presidential cycle. This is a recurring four-year pattern related to the president’s term in office.

According to a recent article in in The Wall Street Journal, the second year of a president’s term has the lowest average return. That includes data going back to 1896.

This is a great example of why you shouldn’t believe everything you read in The Wall Street Journal. The 20th Amendment to the Constitution moved the presidential inauguration from March 4 to January 20. That means the presidential cycle shifted slightly in 1937.

In the chart above, I combined the presidential cycle since 1937 with other cycles and then accounted for recent market action. The result is generally a more accurate roadmap for the year ahead than simpler models.

How to Invest Your Money in a Difficult Market

In 2018, we should expect a difficult stock market. The chart shows a trading range is likely to develop in the first months of the year. This will likely include at least one pullback of 5% or more.

Between April and June, a drop of 10% or more is likely. Treat that as a short-term buying opportunity. But be ready to sell quickly in September, where there is a high probability of a decline.

It’s too early to tell with certainty, but the decline I expect in September could be the beginning of a bear market.

A bear market beginning next fall fits with my forecast that the Federal Reserve is set to trigger a recession at its December meeting. I explained why in an earlier article.

But, as I noted then, the stock market tends to climb before a recession. The S&P 500 rose an average of 22% in the year before the past three recessions triggered bear markets.

The roadmap confirms my Fed recession indicator. This all means that now is the time to buy stocks, with a plan to sell next year when the bull market finally ends.

Over the next few weeks, I’ll go into more detail on my 2018 forecast.

Regards,

My tools tell me 2018 could be a challenging stock market environment. Here's exactly how to invest your money in 2018 according to my analysis.

Michael Carr, CMT

Editor, Peak Velocity Trader

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