Tag Archives: Cryptocurrencies

Cryptocurrencies – Questioning The Value Proposition, by Stephen Englander

When the tech bubble popped in 2000, many companies went to zero, but many had value and are still with us today. Their values were lower than the euphoric values assigned to them at the height of the tech bubble, but they were or became profitable going concerns. A similar weeding out process will probably hit cryptocurrencies. From Stephen Englander at Rafiki Capital Management via zerohedge.com:

Bitcoin is deciding whether this is the moment to crash and burn.

My conjecture is that cryptocurrency holders are trying to decide whether to abandon Bitcoin because its limitations mean it will be superseded by better products or bet that it can thrive despite them.

The dilemma is that once you stop pricing Bitcoin and its derivatives as new assets that will head to the moon, the pricing model is more conventional and much less breathtaking.

We discuss these issues below.

Below we go through some of the questions on why Bitcoin and cryptocurrencies have certain characteristics, and whether these characteristics are needed or even desirable.

  1. Is Bitcoin Netscape?
  2. How limited is the supply of cryptocurrencies?
  3. If Bitcoin crashes what happens to other alt-currencies?
  4. What asset market lacunae do cryptocurrencies fill?
  5. Why mine?
  6. Why distribute the ledger?
  7. Do cryptocurrency transactions need coins or tokens?
  8. Can you make cryptocurrencies KYC and AML compliant?​

1) Is Bitcoin Netscape?

Bitcoin emerged in the shadow of the financial crisis, when the reputations of the financial and economic policy community was at a post-1930s low. It is designed for a world in which there is no confidence in major fiat currencies. Bitcoin gives you pseudonymity (albeit imperfect), the distributed ledger means that transaction records are unlikely to disappear, the mining can take place anywhere and there are built-in incentives for miners to keep mining.

The question is whether there is a problem that the original Bitcoin solves in developed economies. Some Bitcoin characteristics superficially suit a ‘Mad Max/Hunger Games’ world, but add little now. My suspicion is that even in the Mad Max world, the value of Bitcoin will be de minimis since hard assets will be the currency, not an abstract string of code.

 

To continue reading: Cryptocurrencies – Questioning The Value Proposition

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Crypto Collapse Crushes Hedge Funds that Touted Huge Gains for 2017, by Wolf Richter

What goes up can also go down? Who knew? Don’t tell the stock market. From Wolf Richter at wolfstreet.com:

Are they causing the rout by trying to get large sums out of an illiquid market?

At the moment, cryptocurrencies and tokens are bouncing up and down in wild, double-digit gyrations by the hour. Bitcoin plunged below $9,300 and as I’m writing this is trading at around $9,800, down about 50% from its peak on December 17. Gone up in smoke in one month: $168 billion.

Ripple, the crypto that has recently been touted as the “next bitcoin” or “better than bitcoin,” plunged to $0.88 and is currently trading at $0.98, still down 76% from its peak on January 4. Gone up in smoke in two weeks: $110 billion.

Ethereum, after having plunged to $775, is now at $852, down 40% from its peak on January 13. Gone up in smoke in two weeks: $60 billion.

There are now over 1,400 of these “cryptocurrencies” and “tokens” out there, according to CoinMarketCap. Anyone can issue a new one. The supply is unlimited. On January 8, they were valued at $830 billion. Now they’re valued $472 billion. About $358 billion have been eradicated or transferred from those holding the bag to those that got out early.

Then there’s BitConnect, which is down 97% from $476 on December 28 to $14.39 currently, but bouncing wildly up and down. Nearly $4 billion evaporated, using the number cited by the Texas Securities Commissioner, which has entered an Emergency Cease and Desist Order. The Securities Division of the North Carolina Department of Secretary of State has issued a Temporary Order to Cease and Desist. Much of the operation has now been shut down.

“Gain financial freedom with a secure and practical alternative to centralized banking,” BitConnect said on its website. In the crypto-craze, people fall for anything.

So have crypto hedge funds triggered the collapse by trying to get their money out of an illiquid market?

An index by Eurekahedge that tracks nine crypto hedge funds soared 1,167% in 2017 through December 31 and over 17,000% since June 2013. So it’s understandable if, after this run-up, the funds might try to take some profits.

But the index does not yet include the collapse so far this year.

To continue reading: Crypto Collapse Crushes Hedge Funds that Touted Huge Gains for 2017 

My Joke Cryptocurrency Hit $2 Billion and Something Is Very Wrong, by Jackson Palmer

A cryptocurrency whose coin features the Japanese dog the Shiba Inu and was started as a gag is now worth $2 billion. From Jackson Palmer at motherboard.vice.com, h/t Stucky at theburningplatform.com:

Dogecoin’s inventor looks to the past for insight into the future.

Jackson Palmer is an Australian entrepreneur and technologist best known for creating the infamously successful “joke” cryptocurrency Dogecoin. Currently based out of San Francisco, Jackson works as a product manager but is still active in the cryptocurrency space. Jackson has holdings in various cryptocurrencies, including less than $50 worth of Dogecoin. You can follow him on Twitter and YouTube.

When I jokingly tweeted about “investing in Dogecoin” in late 2013, I never imagined that the tongue-in-cheek cryptocurrency I had just brought into the world would still be around in the year 2018, let alone hit a $2 billion market cap like it just did over the weekend.

Last year saw an explosion of interest and investment in cryptocurrencies across the board, so it’s tempting to see 2017 as the best year to date for the industry. But I feel it is shortsighted to mistake this explosive growth as being sustainable—in fact, I feel 2017 was arguably the worst year for cryptocurrencies yet. To understand why, let’s revisit what I learned from the currency I created as a joke.

Dogecoin started as a parody of the multitude of alternative cryptocurrencies, or “altcoins,” flooding the market at the time. As interest in Dogecoin grew through social media and an active Reddit community, it went on to become an educational gateway for many people dipping their toes into the world of cryptocurrencies for the first time, thanks to its low price and welcoming community.

In 2013, the vision for the future of cryptocurrencies seemed relatively clear: To deliver a peer-to-peer alternative to cash that, through decentralization, did away with the need for trust in financial institutions, which the 2008 crisis showed to be unscrupulous, and often corrupt. Bitcoin, which ignited the cryptocurrency movement in 2009, brought real technical innovation to the table in achieving this vision. Back then, I hoped that through the power of community, a project such as Dogecoin may help drive further awareness of and innovation in that technology.

To continue reading: My Joke Cryptocurrency Hit $2 Billion and Something Is Very Wrong

The Value Of Bitcoin Isn’t what most people think it is, by Chris Martenson

What is cryptocurrency worth? Good question. Chris Martenson tries to look at the question logically. From Martenson at peakprosperity.com:

So… in the past week, I’ve been asked for advice on Bitcoin by my brother-in-law, my local realtor, and close friends from as far away as Texas.

None of them cared to learn what it actually is. Or how it works. They just wanted to understand why suddenly so many folks they know are trying to buy Bitcoin hand over fist. And, of course, should they buy in now, too?

If you (or people you care about) have similar questions, this report is for you.

A Brave New World

Remember the scene from the movie Avatar, where the main character first explores the alien world of Pandora? I found that scene astonishing and beautiful. He’s encountering an entirely new and completely foreign ecosystem.  Every element is fascinating and wondrous, even the dangerous elements — yet it all still follows understandable rules.

Everything is involved in either gathering sunlight or eating something else that had. Every niche is filled. Every organism has its own strategy: some light up, some fly, some run, some crawl. As entirely alien as everything is, if you understand the basics of how organisms filled their niches on Earth, you have a great starting point for understanding of the rules of life on Pandora.

Similarly, a great way to begin to understand the new world opened up by Bitcoin (and the other cryptocurrencies) is to realize that it’s an ecosystem that, at its heart, maps neatly into the universe you already understand. A few examples: payments, identity, contracts, verification, and record keeping (ledgers).

As with any ecosystem in nature, a new organism will survive and flourish if and only if it’s more efficient and effective than the prior model. For example, nothing has displaced sharks in the past 425 million years because they’re extremely efficient in their niche. To displace them, a new ocean predator would have to come along that does what they do faster, better, and (energetically) cheaper.

So the operative questions we need to keep in mind when looking at the brave new world of digital currencies are: What problem(s) are they solving?, and, Are their solutions faster, better, and/or cheaper?

To continue reading: The Value Of Bitcoin Isn’t what most people think it is

 

Straight Line Logic’s New Cryptocurrency! by Robert Gore

Money for Nothing!

Get In On the Next Big Thing In Cryptocurrencies! Straight Line Logic Announces the Bobcoin! Order Today!

It’s never too late to join the most stupendous trend of a generation, still in its infancy. Straight Line Logic announces the issuance of the Bobcoin, a Cryptocurrency that will use Blockchain Technology! Yes, that’s right, a Cryptocurrency that will use Blockchain Technology!

Here’s a chance for you to exchange all your legacy moneys, currencies, and debt instruments—precious metals, credit cards, debit cards, money orders, checks, traveler’s checks, cashiers’ checks, second mortgages, euros, pounds, yen, yuan, rubles or good old fashioned Federal Reserve notes—for the exciting, innovative, liberating Cryptocurrency of the future, the Bobcoin. Count on it, the Bobcoin will be the next Cryptocurrency they’re talking about at cocktail parties and bongathons.

Space on the Straight Line Logic server is limited. We’ll only be able to issue 1,000,000,000,000,000,000,000,000,000 Bobcoins before we run out. The pace of issuance is controlled by an algorithm written by a group of bright eighth graders in Mrs. Mendies’ math class at Baltimore’s Ivar Kreuger Middle School. Act now! The initial price of $1000 per Bobcoin can only be held open for a short time. Our astrologers project that once these treasures are free to trade in the Cryptocurrency market, they’ll rocket to $100,000, a 9,900 % return. Not bad for the first half-hour!

And don’t forget, Bobcoins are a Cryptocurrency that uses Blockchain Technology!

Yes, I want to get fabulously wealthy by owning a computer entry!

Name:

Home address:

Email Addres:

Asylum address:

Credit card number (Straight Line Logic encrypts nothing and has no security policy):

IQ:

Act today and we’ll discount your first Bobcoin to $999!

While Blockchain Exploded in 2017, Has it Grown Up? by Tom Luongo

Tom Luongo reviews the promise and pitfalls of blockchain technology. From Luongo at zerohedge.com:

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2017 will likely be remembered as the Year of the Blockchain. There’s no doubt in my mind that blockchain technology is here to stay and will alter the way we organize and distribute capital within the global society.

But, at the same time, as I look around (admittedly within my own myopia) I see the explosion of blockchain projects and wonder about their usefulness. While everyone is looking for new ways to utilize the blockchain I don’t see a lot of people asking whether we should be.

Aren’t there use-cases where a simple encrypted database would be better, faster and cheaper than creating a blockchain to handle that function? I’m not sure I have an answer to that question but I think it’s one we should be asking whenever we are looking at new projects.

Because, it’s easy to say, “But it’s Blockchain!” as if that is the sole reason for a project’s existence. Case in point, any publicly listed company that adds blockchain to their name or announces some blockchain-based product to their offerings has been immediately rewarded with scads of speculative money.

How many crypto-boiler rooms are out there now trying to convince people this is coin is ‘the next big thing?” I question the motives (and nee the sanity) of John McAfee’s “Coin of the Day” gig he’s been doing on Twitter.

When you have the kind of power within the space that McAfee has, using that power responsibly is paramount. I mean, really, isn’t Jim Cramer bad enough? At least you don’t see Cramer out there boiler-rooming a bunch of thinly-traded penny stocks on CNBC.

It’s behavior like this that will invite SEC attention, if not to McAfee himself then the space in general.

Moreover, the plethora of needless hard forks of Bitcoin itself, the obvious scam-coins and the pure mania inherent in certain projects has me worried that a lot of this activity will ultimately do much more harm than good.

To continue reading: While Blockchain Exploded in 2017, Has it Grown Up?

 

Australian Banks Reportedly Freeze Accounts Of Bitcoin Users, by Tyler Durden

It seems odd that the currency of the future is so dependent on traditional banks. From Tyler Durden at zerohedge.com:

Adding to the pressures on bitcoin early this morning, the Sydney Morning Herald reported that bitcoin users across Australia are reporting that their accounts have been abruptly frozen by the country’s “Big Four” banks. And while the banks have remained largely tight-lipped about the closures, many angry account-holders are jumping to conclusions and blaming the banks for punishing them because of their involvement with bitcoin.

Bitcoin investors are claiming Australia’s banks are freezing their accounts and transfers to cryptocurrency exchanges, with a viral tweet slamming the big four and an exchange platform putting a restriction on Australian deposits.

According to the Herald, cryptocurrency trader and Youtuber Alex Saunders called out National Australia Bank, ANZ, the Commonwealth Bank of Australia and Westpac Banking Corporation on Twitter for freezing customer accounts and transfers to four different bitcoin exchanges  – CoinJar, CoinSpot, CoinBase and BTC Markets.

So @NAB @CommBank @WestpacNZ and @ANZ_AU are all freezing customer accounts and transfers to @BTCMarkets@coinspotau @GetCoinJar @coinbase . can fight it, but people want control of their money

While not every bank had explicit policies governing their relationship with cryptocurrencies, according to the Morning Herald, Commonwealth Bank’s June 2017 terms and conditions for CommBiz accounts specifically excludes this activity, saying it can refuse to process an international money transfer or an international cash management transaction “because the destination account previously has been connected to a fraud or an attempted fraudulent transaction or is an account used to facilitate payments to Bitcoins or similar virtual currency payment services”.

A Commonwealth Bank spokesman said it was receptive to innovation in alternative currencies and payment systems “however, we do not currently use or recommend any existing virtual currencies as we do not believe they have yet met a minimum standard of regulation, reliability, and reputation compared to other currencies that we offer to our customers”.

“Our customers can interact with these currencies as long as they comply with our terms and conditions and all relevant legal obligations,” he said.

To continue reading: Australian Banks Reportedly Freeze Accounts Of Bitcoin Users