Author: Jeff Broth

5 Powerful Factors that Influence the Price of Bitcoin and other Cryptocurrencies

Jeff Broth Cryptocurrency, Guest Posts
5 Powerful Factors that Influence the Price of Bitcoin and other Cryptocurrencies
The price of cryptocurrency is volatile, and the volatility could see prices trade upwards or downward rapidly within minutes or hours. In January 2018, Bitcoin was trading around $17,000; over the last three quarters, the cryptocurrency has lost about 56% and it trades around $6,600. Before the end of the year, some analysts have predicted that could be trading up at $10,000 and some bulls believe that a $20,000 trading price is possible. Unlike stocks or other traditional securities, the price of cryptocurrencies is not tied to any core fundamental analysis. Traditional investors who try to predict cryptocurrencies based on fundamental and technical analysis often find their models useless in the fast-paced world of cryptocurrencies. Nonetheless, below are five notable factors that have consistently proven powerful enough to influence the price of cryptocurrencies.
  1. Hype
Many people disdain the fact that cryptocurrencies tend to move on hype – but the disdain will not change the realities of the market. Influencer tweets, fake news, exaggerated promises, and misleading headlines could move the price of cryptocurrencies positively or negatively. Some traders choose to ignore the hype and trade cryptocurrencies purely on its merit as a disruptive force across target industries. Some other traders choose to ride the hype in buying coins during the rumor phase and selling the coins when the hype become public. If you are buying a coin for its long-term prospects, you can choose to ignore the hype around you. If you are trading coins for short-term gains, ride the hype and exit your trades before the hype simmers.
  1. Government regulation
Cryptocurrencies are essentially digital money existing outside the direct control/influence of governments or its agents. Nonetheless, the government has the law and the instruments of state at its disposal. Government regulations to encourage or stifle cryptocurrencies could trigger uptrends or downtrends in the prices of cryptocurrencies. The decision of the United States SEC to ban ICOs dampened the cryptocurrency exuberance. Conversely, you can expect the cryptocurrency markets to return to winning ways if the U.S. or any major country recognizes Bitcoin as a legal tender.
  1. Exchange listing/delisting
Another factor that subtly exerts enormous power on the pricing of a cryptocurrency is its listing or delisting on a cryptocurrency exchange. One of the major differences between Binance and Coinbase for instance, is that Coinbase has listed a handful of coins whereas Binance has hundreds of coins listed. However, the listing of a new coin on Coinbase will potentially cause the coin to record a bigger price surge than could be expected if the coin was listed on Binance. Conversely, delisting a coin from an exchange is probably one of the biggest casualties that a coin could suffer – delisting a coin is essentially a vote of no confidence and very few traders or investors would be interested in a coin that got kicked out of an exchange.  
  1. Internal politics
Cryptocurrencies are built on blockchain technology; hence, they are inherently decentralized and beyond the control of anyone individual or group. The decentralized nature of cryptocurrencies however means that different people (or factions) with different agendas often have different views on what is best for a particular cryptocurrency per time. When these different ideas come into conflict the price of the cryptocurrency will become increasingly volatile because the market is often uncomfortable with uncertainty. The internal disagreements and politics of a cryptocurrency can lead to software upgrades or forking out of new coins such as Bitcoin Cash from Bitcoin and Ethereum Classic from Ethereum.
  1. Attempted/successful hacks and heists
Cryptocurrency transactions are technically irreversible; hence, a successful hack often means that the stolen funds can’t be recovered unless the perpetrators are apprehended and are willing to return the funds they stole. In 2018 alone, at least $731 million has been stolen across successful hacks on different exchanges. Hence, any news of a cryptocurrency hack on a major exchange will most likely trigger a sell-off as traders try to convert their cryptocurrency to fiat before they lose their funds to hackers. Paying attention to news about hacks and how much cryptocurrencies was stolen in the hack could provide insights into predicting where the price of a cryptocurrency is headed.

Living Better with Less: How to Manage Your Finances

Jeff Broth Guest Posts, Personal Finance
Living Better with Less: How to Manage Your Finances
It has often been said that debt is one of the ugliest four letter words on the planet. Truth be told, the biggest empires have been built on debt-fueled financing. All big-ticket purchases require credit approval. These expense items include things like homes, college education, vehicles, exotic vacations, et al. Without loan approval, none of these things is possible for the typical US household. The problem is not so much debt; it’s one’s ability to meet these financial commitments. There is a particularly uplifting story from a gentleman by the name of Mr. Jim Davies. He was in debt to the tune of $400,000 +, and he managed to repay it within two years. According to leading debt management website, DebtConsolidation.com, Jim Davies paid off $400,000 within 21 months. Many folks complain about debt burdens of $5,000, but for Jim Davies his debt burden amounted to 80 times that. For most middle income families, that is the equivalent of an entire mortgage that gets paid off within two years. But it’s the way Mr. Davies went about his debt repayment that is astounding. His is a story that has inspired many US households, and for good reason. What Mr. Davies did was genius. He was determined to repay his debt as quickly as possible, and it began with a budget. Not just any budget – a strict budget. He also carefully considered his personal loan options. Since student loans were a big part of his overall debt burden, he tackled that with gusto. The game plan can work for anyone, since all of us are saddled with debt of one kind or another. Statistics indicate that 65% of Americans have a mortgage debt, 50% have credit card debt, 32% have automobile loan debt, 25% have student loan debt, and 21% have medical loan-related debt. Collectively, it’s easy to see how good debt and bad debt gets lumped together into a mountain of repayments. For Jim Davies, the game plan was simple: get qualified as a specialist medical doctor and pay down the debt as quickly as possible. His advanced education was to take 14 years (school and training) with 5 years of undergrad studies, 5 years of medical school, and 4 years of residency. So how did he get into such debt to begin with? The cost of tertiary education in the United States is extremely high. Besides student loan debt, he used credit cards to support him while he was studying. His debt/income ratio was 138%, and he owed $300,000 in student loans consider that the average interest rate on these types of loans was around 6.8%. The annual percentage rate on his credit card was hovering around 16%, and interest rates for his credit card repayments amounted to $1,300 per month. The monthly minimum payments amounted to $4,000, and at that rate it would take 2 decades to repay this debt. So how did he do it in 21 months? For starters, he had a decent credit score, and when he finished medical school, his base salary was $250,000 a year, which amounted to $175,000 per year after taxes. He was also married, and his wife was making $40,000 a year. Instead of paying rent while he was a student, he had a condo that was purchased for him for a price of $200,000. It had appreciated to $300,000 by the time he finished medical school. He sacrificed everything, except the bare necessities to repay his debt. He stopped making big purchases, and he bargain shopped everywhere he went. There were no vacations for a while, and he and his wife lived off her salary while they were aggressively paying off the debt. He managed to find an online lender to help refinance the student loans at no extra charge, and he chose a no-penalty repayment loan with a variable interest rate which was lower than the prevailing interest rate. It worked in his favor. The story of Jim Davies could be the story of anyone with enough financial sense to attack debt on every level. The problem with debt is that many people continue living the same lifestyle even while they are heavily indebted. The only way to avoid excessive debt is to make lifestyle changes and sacrifices.

Everything You Need to Know About Trading CFDs

Jeff Broth Advanced, Guest Posts
Everything You Need to Know About Trading CFDs
  For a new investor Contracts for Differences (CFDs) are where it starts to get complex. Sure, the start of an investment journey can seem overwhelming at first. But after the initial establishment of a trading account and the first couple of buys, the process gets easier. Ultimately building investment expertise is a long road, and CFDs are one stage in it.

Contracts for Differences Defined

New buyers understand the ‘regular’ purchase of a stock today sees them take ownership of the stock the same day. Futures trading still features a buying and selling process, but has a different structure when it comes to ownership. Instead of ownership of the actual asset, a CFD sees a buyer acquire a tradable instrument that ‘mirrors’ the assets market behaviour. When someone buys one of these tradable instruments they take what is known as a ‘position’. This position is obtained by forming a contract with a broker, with an agreement they will ‘reverse’ the process at a certain date. For example, a broker agrees to sell a buyer 10 stocks at the market price on May 1, and the buyer agrees to resell them to the seller at market value on June 1. If the price has increased in value between May 1 and June 1, the broker agrees to pay the buyer the difference. If the price has decreased during the same period, the buyer will pay the broker the difference. Like any investment there are risks involved in CFDs but when done successfully it can be a solid avenue Because the buyer agrees to buy a tradable instrument (a mirror) rather than the asset itself (the stock), it is a good way to gain exposure to international stocks more easily, and reduce regular commission fees. Put simply, CFDs can be a simple and cost-effective way of investing for those who want to gain market exposure, without having to navigate all the bother that can come with buying a stock‚ monitoring it daily‚ needing to anticipate market movements around it‚ and then being ready to sell it when a good time arrives.

How Do Investors Use CFDs Successfully

At its heart, a good investment strategy will always be at its best with diversification. Diversification may mean you miss out on some gains occasionally – if a stock you bought for $1000 in skyrockets you may wish in hindsight you put $10‚000 in it! – but ultimately it’s really a form of ‘investor’s insurance’. In event something does go wrong in one sector a diversified list of assets will minimise your fall out‚ and ‘spread the loss’ over your portfolio. This is always preferable to being invested in just one stock or sector‚ and being always at risk a market crash could totally ruin your portfolio. Some investments will deliver (essentially) risk-free returns, but they will be small. Other investments can deliver great returns but their risk is high. There is no one magic stock of form of investment that will the perfect combination of low-risk and high reward each and every time. When pursued with this understanding in mind, investors can use CFDs to gain access to greater leverage than they could by buying regular stocks. They can also seek to invest in a wide array of investment classes, such as indexes, currencies, treasury, sector, and commodity CFDs. Diversification is at the heart of all good investing, and CFDs can be a great way to achieve this.

What Are the Common Pitfalls of CFDs

The risks surrounding CFDs are a lot like the risks of a regular driver using a race car. With this right mindset and experience, CFDs can be a great vehicle to drive you towards your investment goals. But speed can be dangerous, especially when you can’t fully see the road ahead. Even within relatively stable sectors where CFDs can be obtained, there is still the risk that there could be the outbreak of a scandal, or some major crisis, that sees a stock’s price crater. This can happen to blue chip stocks too, like Volkswagen in 2015, or Facebook with the Cambridge Analytica scandal in 2018. Stock prices tumbled for both due to public relations disasters. At its core this is the chief risk of CFDs. That an investor may be able to reasonably shoulder a small loss in stock price value, but a colossal loss could be really damaging. The risk of these events occurring is arguably only getting big, as the disruption era changes the face of business, and means the old stability certain sectors once enjoy are replaced by permanent volatility.

Conclusion

CFDs can come with a higher risk than buying a regular set of stocks, the rewards can be greater. Especially when pursued with research and experience in-hand. These two qualities grow the odds any CFD an investor pursues will prove beneficial in the end. Overtime, a seasoned investor comes to understand its wise their portfolio has some element of higher risk to it. Built upon a foundation of other low-risk investments, exposure to higher risk via CFD can deliver really strong returns. Provided the pitfalls of doing so can be navigated, incorporating regular acquisitions of CFDs in your investment strategy can prove beneficial. This article is for informational purposes only and should not be taken as constituting professional advice.