Leaving Every Currency and Digital Token in the Dust

Each year millions of traders are fixed to their screens. They’re looking for trends and momentum in the forex market. According to the Bank for International Settlements, the average daily value of forex is around US$5.3 trillion!

That’s about US$220 billion trading hands per hour. Of course, this isn’t all traders. Forex participants include institutional investors, corporations, governments and banks. But according to Daily Forex, around 90% of the volume is generated by speculators trying to make a quick buck.

So, if currencies are volatile, traders have more opportunities to make money. This year, however, hasn’t been terribly exciting.

The graph below shows the following exchanges rates:

  • AUD/USD (white)
  • CNY/USD (orange)
  • EUR/USD (blue)
  • GBP/USD (green)

money exchange rates

Source: Bloomberg

The two largest movers are the Aussie dollar and the British pound. It’s why traders are enticed to move over to digital currencies, where price moves are 30% in a day.

But, of late, even many digital tokens aren’t faring too well. Take a look at the Bletchley Ethereum Token Index below:

ethereum token index

 

Source: Bloomberg

The index is made up of various tokens which run of the ethereum platform. As an example, bitcoin is not included as it run on its own platform. But digital coins like Golem, First Blood and Aragon are.

Bitcoin’s a Standout Performer

The standout performer this year has been bitcoin. The original crypto trades at around US$5,875 per coin, which is up more than 489%.

bitcoin price

Source: CoinDesk

Yet while bitcoin is gaining popularity, its usefulness is starting to decline. The purpose of the digital coin was to make transactions faster, cheap and without financial middlemen. But as you can see, as more people have piled into bitcoin, transactions fees have skyrocketed.

bitcoin transaction fees

Source: Bit info charts

Without getting bogged down in the details, currently, if you want to make a bitcoin transaction, you need a miner to work it into the blockchain. Of course, miners aren’t doing this for free.

Thus, if you want your transaction to be processed fast, say in the next few seconds, you’ll have to offer a large fee to incentivise miners. This is why crypto developers continue to work on bitcoin, helping it to scale better.

According to Bloomberg, bitcoin’s network is going through another major software update in November. The idea will be to increase transaction speed and reduce costs. But ‘it could also cause disruption,’ Bloomberg writes.

Investors are playing it safe and shifting funds from other digital currencies into bitcoin because it typically offers greater liquidity in times of uncertainty.

And there is the bonus of additional coins being issued to owners if developers split the blockchain, the digitized ledger on which the bitcoin is based. That already happened this week with the creation of bitcoin gold, which came about three months after bitcoin cash was created.

price of bitcoin

Source: Bloomberg

Want to learn how to buy and sell bitcoin before the crypto potentially rises even further? Click here to find out how.

Cheers,

Härje Ronngard,

Junior Analyst, Money Morning


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Port Phillip Publishing, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


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