Tag Archives: Cryptocurrencies

Government Tracking of Crypto Is Growing, But There Are Ways to Avoid It, by Simon Chandler

Many cryptocurrencies are not at all “anonymous,” free from the prying eyes of governments. From Simon Chandler at cointelegraph.com:

Much noise has been made about the untraceable qualities of Bitcoin and other cryptocurrencies. Bitcoin “can be used to buy merchandise anonymously” said early primers on crypto, it offers users the kind of financial privacy that was previously available only from a “Swiss bank account,” say more recent commentators. And given its ability to provide people with a layer of anonymity and privacy, it has been smeared by politicians, experts and mainstream journalists alike as a hiding place for almost any hacker, drug dealer, gang member, terrorist or despot you could possibly name (even if cash is still the preferred financial medium of such personae non gratae).

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Crypto-Mania Collapse Update: $638 Billion Gone, by Wolf Richter

Wolf Richter puts some dollars and cents on the latest cryptocurrency plunge. From Richter at wolfstreet.com:

Of the seven biggest, six have plunged by 78% to 92%.

Cryptocurrencies and tokens are multiplying like rabbits: There are now 1,926 listed on CoinMarketCap.com, 500 more than early 2018. And even as the number of cryptos continues to swell, each crypto constantly creates new units through “mining.” This dilution and hyperinflation is worse than with all but the worst fiat currencies, such as the Venezuelan bolivar.

Cryptos are “decentralized.” That was one of the major selling points in whitepapers full of intelligent-sounding gobbledygook and other propaganda promoted in myriad ways, including by an army of crypto trolls and celebrities paid by the tweet. Because cryptos are decentralized, everyone can create their own, and all kinds of outfits are mining new units of existing cryptos. It’s really just a big joke. But people are losing large amounts usually expressed in their hated fiat currency. The pain is real. And the numbers are big.

At the peak on January 7, total market cap was $704 billion, per CoinMarketCap at the time. Continue reading

Vitalik’s Wrong, Cryptocurrency’s Real Problem, by Allan Stevo

Before there is mass public acceptance of cryptocurrencies, somebody is going to have to figure out something that will make cryptocurrencies useful to the masses. From Allan Stevo at lewrockwell.com:

Vitalik Buterin, a powerhouse in crypto, the mastermind behind the Ethereum network, effectively denounced those obsessed with the price of crypto and its possibility for breeding derivative financial instruments, tweeting recently “I think there’s too much emphasis on BTC/ETH/whatever ETFs, and not enough emphasis on making it easier for people to buy $5 to $100 in cryptocurrency via cards at corner stores. The former is better for pumping price, but the latter is much better for actual adoption.”

But this too misses the point.

Crypto provides no value to the average Westerner. Making crypto more accessible is not enough.

There’s no reason for the average Westerner – my aunt and uncle for example – to care, because crypto brings no additional functionality to their lives. They ask me about it practically every time we talk. When they ask me what to do with it, despite my five years of involvement in the industry, I have no answer.

All crypto, Bitcoin included, is a speculative play at this stage. Like any early stage technology, we have yet to figure out many uses in which Bitcoin beats the legacy competition in functionality.

As an example, for payments, credit cards are better than crypto. So is PayPal. Cash is better too, if only for the network effects, but in reality for far more. That’s why more people use those methods for payments than Bitcoin.

Cheering on or otherwise attempting to rush the price movements of Bitcoin is futile. Praying for its movements is futile. Pitching its potential with slick marketing is more than futile, such marketing is in fact most likely counterproductive as it will leave early adopters disillusioned.

A curse of Bitcoin is that it is a currency and it is unable to be far removed in people’s minds from its very volatile price. Of course, the beauty of Bitcoin as well is that it is a currency. Through it and similar technologies, we will come to know the folly of applying natural monopoly theory to currency.

To continue reading: Vitalik’s Wrong, Cryptocurrency’s Real Problem

Conflation of Bitcoin and Blockchain, by John R. Skar

While you may not know all the in and outs of cryptocurrencies and blockchain technology, it’s important to realize that they are distinct concepts. Blockchain, while used in many cryptocurrencies, also has uses entirely separate from them. From John R. Skar at lewrockwell.com:

There it is again! That smooth, subtle and seamless transition conflating cryptocurrencies, like bitcoin, with the blockchain technology. There are thousands of blog posts and news articles about bitcoin and cryptocurrencies, but the great majority fail to clearly distinguish between the technology and the digital currency that is created and transmitted by it.  In a “Bitcoin Primer” published by Coinlab, “The term Bitcoin refers to both the digital unit of stored value and the peer-to-peer network of computers transmitting and validating transactions of these units.”

In another bitcoin primer, we read “Bitcoin is a decentralized peer-to-peer payments network and a virtual currency that essentially operates as online cash.”

To some degree, it is understandable.  The original bitcoin white paper by Satoshi Nakamoto described a digital currency produced on a unique-to-bitcoin blockchain platform.  They were as inseparable as Siamese twins and many bitcoin enthusiasts share exactly that view of the world.

Conflation creates confusion, however, particularly when discussing valuation.  Allowing bitcoin to ride the coattails of the blockchain technology is misleading at best. A typical example of conflation comes from trying to compare the valuation of bitcoin to the franchise value of Mastercard and VISA.  “Quite simply, Bitcoins have value because a growing group of people believe that the underlying Bitcoin technology has value.”

Bitcoin as “coin” does not equate to VISA as transmittal medium.  Blockchain is the proper comparison.  I think that might be what Warren Buffet and Jamie Dimon are getting at when they call bitcoin a fraud.  They certainly are not referring to blockchain technology, which they know has potential to improve their businesses in many ways.  They just aren’t falling for the conflation.  In fairness, some people do try to clearly distinguish between cryptocurrency and blockchain. My point is that in most cases we should strictly confine the discussion to one or the other or at least clearly try to avoid the conflation.

To continue reading: Conflation of Bitcoin and Blockchain

Bitcoin Drops to $5,860, Lowest since October 2017. True Believers with Fake Hopes Got Cleaned Out by Early Movers, by Wolf Richter

Cryptocurrency prices go down as well as up. Who knew? From Wolf Richter at wolfstreet.com:

Down 70% from the peak. This is just not fun anymore.

Bitcoin dropped to $5,860 at the moment, below $6,000 for the first time since October 29, 2017. It has plummeted 70% in six months from the peak of $19,982 on December 17. There have been many ups on the way down, repeatedly dishing out fakes hopes, based on the ancient theory that nothing goes to hell in a straight line (chart via CoinMarketCap):

If you’re a True Believer and you just know that bitcoin will go to $1 million by the end of 2020, as promised by a whole slew of gurus, including John McAfee – “I will still eat my dick if wrong,” he offered helpfully on November 29 – well you probably don’t need this sort of punishment. You’re suffering enough already. And I apologize. I feel your pain. I was a true believer too a few times, and every single time it was a huge amount of fun, and I felt invincible and indestructible until I got run over by events.

With 17.11 million bitcoins circulating today, if bitcoin were at $1 million today, it would amount to a market cap of $17 trillion. But new bitcoins are constantly being created out of nothing (“mined”) by computers that suck up enormous amounts of electricity. And by the end of 2020, there will be many more bitcoins, and if the price were $1 million each, the total would amount to about the size of US GDP.

This doesn’t even count all the other cryptos that would presumably boom in a similar manner, amounting perhaps to half of global GDP, or something.

People who promote this brainless crap are either totally nuts or the worst scam artists. But I feel sorry for the True Believers whose fiat money got transferred and will continue to get transferred from them to others.

So OK, there’s still some time left. It’s not the end of 2020 yet. And True Believers still have room for the fake hope of a $1-million bitcoin.

But at the moment, bitcoin is even worse – incredibly – than one of the worst fiat currencies in the world, the Argentine peso, which has plunged “only” 35% over the period during which bitcoin plunged 70%. That takes some doing!

There is always some reason or other that is cited for the drops: The endless series of hacks into exchanges during which crypto tokens and coins just vanish. Nervous regulators cracking down on the scams surrounding cryptos, initial coin offerings (ICOs), and how they’re being promoted. Or advertising platforms such as Facebook, Google, and Twitter, and email newsletter platforms restricting ads and promos about cryptos and ICOs.

To continue reading:

The End of the Debt-As-Currency Era, by Jeff Thomas

The end of that era can’t come too soon. From Jeff Thomas at internationalman.com:

Gold is the currency of kings, silver is the money of gentlemen, barter is the money of peasants, but debt is the money of slaves.

—Norm Franz, Money and Wealth in the New Millennium

We are nearing the end of the debt-as-currency era.

This is quite a broad statement and, of course, since debt is the foremost currency of our day, it would be quite understandable if the reader were to regard such a prognostication to be utter nonsense.

Indeed, many would say that, without debt, the world couldn’t function. Debt has always existed and always will. However, in eras past, debt often played a much smaller role, and those eras were marked by greater progress and productivity.

We’re now living in the era of the greatest level of debt mankind has ever created. In fact, we’ve come to regard it as “normal.” Most governments are far beyond broke. And they won’t be saved by confiscation or taxation, as their people and corporations are just as heavily in debt. For this reason, a collapse is inevitable. And, since the severity of a collapse is invariably directly proportional to the severity of the debt, when it arrives, it will be a collapse that eclipses all previous collapses.

The present uncontrolled level of debt is made possible through the ability of central governments to create more currency at will. And this is only possible through the existence of a currency that is fiat in nature—that has no inherent value.

Aristotle was right on the mark when he stated that for something to be appropriate as money, it must have intrinsic value—independent of any other object and contained in the money itself.

The great majority of what passes for money today is digital, although, for daily use, paper currency is still widely used. But it must be said that paper currency is also fiat, having a far lower intrinsic value than the denomination printed on it.

To continue reading: The End of the Debt-As-Currency Era

Collapse of Cryptocurrencies in Q1: Even the Biggest Crashed 67% to 88%, by Wolf Richter

What goes up a lot can come down a lot. From Wolf Richter at wolfstreet.com:

But nothing goes to heck in a straight line.

I don’t think there has ever been an entire sector that skyrocketed as much and collapsed as quickly as the cryptocurrency space. The skyrocketing phase culminated at the turn of the year. Then the collapse phase set in, with different cryptos choosing different points in time.

It doesn’t help that regulators around the world have caught on to these schemes called initial coin offerings (ICOs), where anyone, even the government of Venezuela, can try to sell homemade digital tokens to the gullible and take their “fiat” money from them and run away with it. There are now 1,596 cryptocurrencies and tokens out there, up from a handful a few years ago. And the gullible are getting cleaned out.

And it doesn’t help that the ways to promote these schemes are being closed off, one after the other.

At the end of January, Facebook announced that, suddenly, “misleading or deceptive ads have no place on Facebook,” and it prohibited ads about ICOs and cryptos.

On March 14, Google announced that it will block ads with “cryptocurrencies and related content,” including ICOs, cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice. Its crackdown begins in June.

On March 26, Twitter announced that it would ban ads of ICOs, cryptocurrency exchanges, and cryptocurrency wallet services, unless they are by public companies traded on major stock markets. It will roll out its policy over the next 30 days.

On March 29, MailChimp, a major email mass-distribution service, announced that it will block email promos from businesses that are “involved in any aspect of the sale, transaction, exchange, storage, marketing or production of cryptocurrencies, virtual currencies, and any digital assets related to an Initial Coin Offering.” This broadened and tightened its policy announced in February that promised to shut down any account related to promos of ICOs or blockchain activity.

To continue reading: Collapse of Cryptocurrencies in Q1: Even the Biggest Crashed 67% to 88%