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Bitcoin an Exotic New Asset Class

Bitcoin represents a difficult categorization effort by traditional financial organizations, resulting in some seeing this exotic new asset class as much as a hybrid of a currency as it is an investment.

The Commodities Future Trading Commission (CFTC) has declared Bitcoin a commodity, the Internal Revenue Service (IRS) has declared Bitcoin to be property, the Securities and Exchange Commission (SEC) polices the Bitcoin market like it’s a security, yet Bitcoin is mainly used as a currency.

Bitcoin was originally designed by Satoshi Nakamoto to be the first cryptographically secure and blockchain-based currency, and is regarded as the first cryptocurrency. Bitcoin is cryptographically secure and not even the most powerful supercomputer can hack it, so no Bitcoin transaction or wallet can be hacked, unless the password of the wallet software is compromised.

Bitcoin can be sent instantly anywhere in the world, making it an excellent choice for international finance. There is no waiting time like there is with banks when sending large amounts of money, and the fees for Bitcoin are usually extremely low. As of September 2018, someone could send as much Bitcoin as they want, whether it be USD 1 or USD 10 billion, for a fee less than USD 1. No fiat payment network in the world can compare to Bitcoin in terms of fee efficiency.

Perhaps most importantly, Bitcoin is decentralized, so transactions and accounts can never be frozen or seized. This is unlike every fiat payment service in the world, which can easily be seized or frozen. Additionally, Bitcoin transactions are immutable, meaning they can’t be reversed, making it safer for merchants than anything else.

Due to Bitcoin’s advantages over fiat currency, in addition to its 99.999% or so uptime over the course of nine years, in addition to global infrastructure and demand, people are buying and holding Bitcoin as an investment since they expect it to gain value relative to fiat long term.

There is one more very important factor when it comes to investment. Bitcoin is decentralized and coded so it can’t be printed at will or manipulated. There is a fixed supply of 21 million Bitcoins once mining is complete, ensuring a lack of money printing, unlike fiat currencies run by central banks which can be printed at will. Central banks have other powerful mechanisms besides money printing to control their fiat’s value, such as interbank interest rate modification and the issuing of debt denominated in their respective fiats.

Central banks have been manipulating their fiat currencies, mostly by issuing debt and money printing, as leverage to balance their national budgets. Bitcoin does not have this problem since it is not run by any individual, entity, or nation. Bitcoin is not being abused to balance budgets, unlike fiat.

Due to this, fiat currencies are experiencing tremendous inflation long term. This makes Bitcoin appear to be an ideal investment choice as a safe harbor to weather the global fiat inflation crisis.

Eventually, perhaps Bitcoin will mature and become the prime global currency, and be used mostly as a currency rather than an investment at that point. But for the foreseeable future, Bitcoin is an exotic asset that is both a currency and an investment, which leaves government regulatory agencies confused and in conflict over how to regulate it.

 

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Belarus Invites South Korean Investors as Korea Post Taps Goldman Sachs for Crypto Education

South Korea’s blockchain prowess is gaining international reach as reports show that the Eastern European nation of Belarus is opening its doors for South Korean investors, as its national postal service Korea Post seeks cryptocurrency know-how from Goldman Sachs executives.

Belarus

As reported by local news outlet Korea JoongAng Daily, the deputy foreign minister and ambassador of Belarus Andrei Dapkiunas told reporters that the European nation is open to investment into Fourth Industrial Revolution (4IR) technologies; this includes blockchain, Artificial Intelligence (AI), Robotics and the Internet of Things (IoT).

Between meetings with the Joint Committee of Belarus and Korea during a visit to Seoul, the ambassador noted that Belarus had made “groundbreaking state legislation regarding the IT sector”, adding, “We are the partner in Eastern Europe making innovative strides on blockchain, cryptocurrency, start-up development and software production.”

Business relations between the two countries are healthy, with South Korean exports to Belarus including IT products, vehicles, electronics, while Belarus supplies goods such as semiconductors, lasers and optical instruments.

Highlighting the potential future success of a 4IR relationship with South Korea, Dapkiunas said, “…we feel that this potential is not fully realized. We believe that there is a significant potential for mutually beneficial cooperation in such fields as aerospace, artificial intelligence, biotechnologies, electric and self-driving vehicles, robotics and electronics, nanomaterials and digital economy.”

It wouldn’t come as a surprise should South Korean investors see the benefits of such a cooperation. This is due to the governments of South Korea and the United States having a cooperative partnership in place for the coming 4IR era.

Goldman Sachs and Korea Post

Earlier this week, Bloomberg reported that the South Korean postal service is actively seeking an understanding of cryptocurrencies.

The president of Korea Post, Kang Seong-ju, said that he had spoken about cryptocurrencies with David Solomon, a Goldman Sachs chief effective, at a New York meeting.

Staff members of Korea Post are said to be meeting with the Goldman Sachs crypto-research team in Hong Kong to educate themselves on blockchain, digital assets and other technologies such as AI.

Kang said, “I asked Goldman to pass on their know-how in the cryptocurrency area… Since cryptocurrencies are considered to have potential, and are something many people are watching, we’ll need to learn the strengths and weaknesses.”

According to the Bloomberg report, Korea Post presently has no intention of investing in cryptocurrencies. However, the meeting in Hong Kong should prove fruitful given its national status and the present hype of blockchain in South Korea.

 

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Price Poor Metric to Judge Bitcoin, Says CoinShares

Digital asset management company CoinShare’s chief strategist Meltem Demirors featured on CNBC’s Fast Money on Monday, where she discussed the problematic nature of judging Bitcoin on price alone.

Demirors offered that actual utilization may be a better alternative metric for institutional and retail investors to consider, which she put down as the real struggle right now. Although she said that it is not yet clear when or how Bitcoin may regain its value, the best way to predict this is by determining solid metrics that best fit Bitcoin.

The strategist noted that ”real traction” is imminent but a lot is relying on analysis to find the key metrics that will drive growth.

She compared cryptocurrency with similar innovative enterprises such as Intel, Amazon, and Microsoft in the early days of internet stocks, noting that it took Amazon nine years to recover from its initial price high during the dotcom bubble, Intel 15 years, and Microsoft 17 years.

Such as these early internet stocks, Demirors said that the real traction for Bitcoin will come with time. The late 2017 price run can be put down to “fear of mission out” (FOMO), which caused a similar type of speculative bubble, she said. With that bubble burst, real businesses with real-life use applications are being developed in the space.

As she put it: “New technologies that shift the paradigm take a long time to really understand.”

This goes to what she described as a key issue right now in the lack of a coherent narrative from the cryptocurrency community. With institutional interest in the space growing, Demirors said that this could well be an opportune time for Bitcoin, but it is not being considered a store of value because of the poorly-relayed narrative.

Bitcoin (BTC) currently sits at USD 6,038.18 after struggling this year to make significant gains compared with last years highs of nearly USD 20,000.

 

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tZero to Receive Largest Recorded Investment for Blockchain Startup

Chinese private equity firm GSR Capital has confirmed it signed a letter of intent to invest USD 270 million in blockchain startup up tZero, making it the largest recorded investment to such a company, according to Forbes.

Atypical investment structure

The USD 270 million investment came with an 18% stake in tZero, a platform for trading blockchain-issued securities, with GSR confirming it will spend another USD 104.55 million for approximately 10% of the platform’s parent company Overstock’s shares. Additionally, the private equity firm has pledged another USD 30 million in tZero’s initial coin offering (ICO).

This funding would bring the aggregate investment past USD 404 million, pushing tZero’s company valuation to USD 1.5 billion, surpassing its parent Overstock.com (USD 1.07 billion) despite the flagship product not even having been launched yet.

Independent letters of intent were configured and signed by all parties to secure the deal.

Sonny Wu, GSR Capital’s chairman and founder, told Forbes that his company has a long-term view on scaling the platform globally. This investment is GSR Capital’s first public blockchain venture, with its previous history focused on electric vehicles and clean energy.

tZero executive chairman and CEO of Overstock.com, Patrick Byrne, said that the money would be used to open more tokenized securities exchanges internationally for uses such as his SEC-licensed US platform. He envisions tZero’s token to be listed on each of these exchanges.

Byrne noted that raising capital from the businesses home in the US was proving challenging, hence they had to look further abroad. He told Forbes, “US capital is, to be honest, they’re gun shy on this whole blockchain issue… I’m sorry to say the US is not the leading country in the world.”

Hitting into US economics harder, Byrne said that he started the venture to undo what he called the ”original sin” of Wall Street – separating the trade of a stock and its settlement. tZero’s tokenized securities are designed to enable real-time, transparent lending of securities.

Such sentiments have led Byrne to be called the ”scourge of Wall Street” by those whose practices he criticizes, but this does not trouble him. Instead, he believes that the significant investments to tZero show that the tides are turning on traditional Wall Street practices.

 

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Bitcoin Googled More Than Taylor Swift, Stock Market, Donald Trump

Whether Bitcoin is celebrated by everybody or not, one thing is for sure: people can not stop talking about it. Between August 2017 and today, the number of times Bitcoin was Googled surpassed both pop icon Taylor Swift, and even the stock market.

In December 2017, when the value of Bitcoin reached nearly USD 20,000, it was searched for up to 25% more times than US President Donald Trump. Not to forget this was the month that Trump announced Jerusalem as the official capital of Israel, the Senate passed his significant tax reform legislation, and he sent out a series of Tweets condemning his own Federal Bureau of Investigation.

Tickets for Swift’s 2018 stadium tour went on sale on 13 December, but Bitcoin was pulling in around 70% more Google traffic than the pop star.

Interestingly, when the stock market experiences a slump, the number of times it is Googled increases, whereas Bitcoin sees an increase when there is a bull market. This perhaps indicates it is the younger generation losing interest in crypto when there does not appear to be big gains to be had, whereas the older generation that is more heavily invested in stocks for the long-term keeps a closer eye on their investments when they appear to be depreciating.

As well as this, for the majority of people consuming just mainstream media, the extremities of the market are only covered; while it may not be so intriguing to investigate what is being portrayed as a failing market on the verge of collapse, a 10% investment increase in 24 hours is far more interesting.

What can we take from this data?

While Bitcoin simply being Googled more times doesn’t provide any steadfast data regarding its popularity or give us any indication of a change in market price, there is no denying that the concept has entered and intrigued the general population. And that counts for a lot.

What the trends indicate is that there is still a ways to go in turning around the conversation to keep people confident in the market despite the inevitable downward trends.

Just keep in mind, last year Bitcoin was googled more than the US president for around a month. That is progress right there.

 

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US Department of Justice Opens Criminal Case into Bitcoin Price Manipulations

The US Department of Justice (DOJ) has opened a criminal investigation into whether traders are manipulating the price of Bitcoin and other cryptocurrencies, according to a report published Thursday by Bloomberg.

The most notable concern coming from the DOJ relates to a suspected potential that the volatility of the market creates an opportunity for investors to push price valuations in a way to favor themselves.

Additionally, authorities feel cryptocurrencies are particularly susceptible to fraud due to a concern over the lack of regulations, as well as skepticism that every exchange actively pursues those deceiving the rules of the platform.

Spoofing and wash trading

People familiar with the situation told Bloomberg that the DOJ is specifically looking into spoofing and wash trading from colluding traders. These two illicit tactics are forms of market cheating that have been combated by regulators in the futures and equity markets for years.

Spoofing involves a trader submitting a number of orders, then cancelling them once they are satisfied they have affected the prices enough in the desired direction.

Wash trading involves a cheater creating trades with themselves to create a false impression of market movements, which influences others to move in a specific way.

It was reported that both Bitcoin and Ether are being investigated for this, but the DOJ declined to comment on the case at Bloomberg’s request.

Protecting investors

After a Bitcoin price surge last year spanning between USD 1,000 and USD 20,000, the cryptocurrency industry has found a host of new supporters and investors. The number of ICOs has also skyrocketed, with a growing number of people aware and involved with altcoins.

Regulators across the globe are now seeing the industry as a growing concern, as investors enter the market without a clear understanding of what cryptocurrencies are, and the risks involved.

Cryptocurrency exchange platforms operate internationally, with many remaining unregistered with any government agencies, leading to a heightened fear of fraudulent activities in general.

Of course, the vast majority of platforms maintain there own strict security measures to protect users and are willing to pursue fraudsters, if not only to protect their own reputation.

 

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Almost Essential to Include Crypto in Your Portfolio, Michael Novogratz Tells CNN

Speaking to Maggie Lake on CNN Wednesday, billionaire bull and CEO of Galaxy Digital Capital Management Michael Novogratz, suggested that every investor should have 1% to 2% of their portfolio in cryptocurrency, declaring it ”almost irresponsible” not to.

”Challenging every verticle”

The reasoning behind Novogratz’ statements is not because of any potentially massive financial gains that cryptocurrencies might make, but because of the blockchain technology behind them. ”These technologies in two to four years are going to give every verticle a challenge,” said Novogratz, referring to blockchain.

Blockchain has been generally received with more widespread positivity than cryptocurrencies, particular from financial institutions and governments. The technology allows transactions to take place nearly instantaneously, recording all payment data from those using the service.

Even NASA recently gave its backing, utilizing the Ethereum blockchain in a project that would increase the efficiency and safety of deep space travel.

Another prediction provided by Novogratz outlined a vision that sees the New York Stock Exchange incorporating cryptocurrency trading within six months.

When Novogratz was questioned on acclaimed investor Warren Buffett’s recent critical comments that described Bitcoin as ”probably rat poison squared”, his response perfectly summed up the sentiment of many cryptocurrency enthusiasts. “In a lot of ways, this is a Millennial-led revolution… what I’ve found is guys with gray hair [are] much more skeptical,” he said.

More on Novogratz

Novogratz was also promoting the launch of his firm’s collaborative project with Bloomberg, the Bloomberg Galaxy Crypto Index. The cryptocurrency index was launched Wednesday and is currently tracking ten digital currencies including the main players Bitcoin and Ethereum.

His previous job roles include hedge fund management at Fortress Investment Group and a partnership with Goldman Sachs.

During the interview, he disclosed that 10% of his net worth was currently held in cryptocurrencies.

 

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Circle Invest Adds Monero Functionality

Investing app Circle Invest has announced that it is adding Monero (XMR) to its list of supported cryptocurrencies. Currently, it includes functionality for Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), Ethereum Classic (ETC), Litecoin (LTC), and Zcash (ZEC). Circle allows for instant buying and selling directly connected to user bank accounts.

Monero has a market cap of USD 3.75 billion as of this writing, and is unique from Bitcoin in that it uses the CryptoNote protocol, which obfuscates sender, recipient, and transaction amounts. This makes Monero virtually untraceable, and is a preferred cryptocurrency when anonymity is the priority.

Circle was founded in 2013 and since that time has become one of the most popular places to buy and sell cryptocurrency. The company trades over USD 2 billion of cryptocurrency per month, providing excellent liquidity for traders and investors. Circle Invest doesn’t charge any commissions on investments, making it much more attractive than investing in stocks which almost always requires paying a broker commission. There is a 1.5-2% spread between buy and sell prices on Circle Invest, which is how it makes money, but such a spread is completely normal for a cryptocurrency exchange.

A caveat of Circle Invest is that users can’t withdraw their coins into personal wallets. Instead, they must keep coins in the Circle Invest wallet, and as cryptocurrency prices fluctuate their USD equivalent balance changes. The user can sell their coins at any time for USD which is directly deposited into their bank.

Generally, it is best to move coins into a personal wallet when investing in cryptocurrency, to ensure that coins are fully in possession and secure. However, this makes selling much slower than when using Circle Invest as it takes times to send cryptocurrency from its wallet to an exchange. Also, when buying cryptocurrency from an exchange that allows users to withdraw coins, it generally costs at least 5% of fees, on top of the spread between buy and sell prices, resulting in significantly more costs than when using Circle Invest.

Circle Invest is expected to add even more cryptocurrencies and digital assets in the future in its quest to become the top cryptocurrency investment platform.

 

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Are The Rothschilds Investing in Bitcoin?

Recent developments appear to confirm that the Rothschild family have entered the cryptocurrency market, following earlier reports that they began purchasing the assets through the Bitcoin Investment Trust (GBTC) in 2017.

The Rothschild family are more well known for their close relations with banks and other financial institutions, rather than advocating for a decentralized currency system. It has been reported, however, that the family has been active in cryptocurrency trading for a sizeable period of time.

In the footsteps of Soros

This news follows George Soros’ apparent entry to the cryptocurrency market earlier this week. The Soros Fund Management enterprise was reported to have gained internal approval for the trading of virtual coins for asset management purposes. There are no known records of large trades taking place on behalf of Soros yet.

In January, Soros denounced cryptocurrencies as a ”bubble”, so his recent change in opinion came as a surprise to many. Following his negative labelling of digital currencies, Bitcoin was subject to a market devaluation of approximately 40%, leading some commentators to speculate if his comment was designed for this purpose.

It does raise questions that these high-profile individuals have chosen to enter the market at this point after the price crash, while no longer speaking in an openly negative way about Bitcoin.

These questions aside, the cryptocurrency market should benefit from an injection of new investment, and with financial moguls like Soros and the Rothschilds coming into play, this could create a momentum for more high-profile figures to join them.

It makes for an interesting development that might influence Bitcoin’s future, even if the impact has yet to be determined.

 

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UK Financial Conduct Authority Warns Firms About Crypto Derivatives

The UK Financial Conduct Authority (FCA) has issued a warning to firms that deal with cryptocurrency derivatives, as they likely require authorization from the agency to do business.

Posted Friday on the official FCA website, the statement advised that cryptocurrency derivatives have the qualities necessary to be considered tradeable assets. As the statement reads, this means that firms involved with regulated activities using cryptocurrency derivatives are subject to FCA guidelines, as well as any relevant provisions indirectly applicable to European Union regulations.

Despite the FCA declining to acknowledge cryptocurrencies as either currencies or commodities in regards to regulation, the statement notes that it is ”likely” that firms offering cryptocurrency derivatives require authorization to do so.

This would potentially require companies holding initial coin offerings (ICOs) to comply with the FCA guidelines, although the statement noted that this would depend on the nature of the token offered.

Other areas outlined that would fall within the FCA’s regulatory parameters include cryptocurrency futures, cryptocurrency contracts for differences (CFDs) and cryptocurrency options.

The final warning of the statement precautioned firms that neglecting to authorize activities under the FCA’s regulation is a criminal offense. The statement finished, ”Authorized firms offering these products without the appropriate permission may be subject to enforcement action.”.

The FCA on the industry

In 2016, the FCA said that there were no plans in place to regulate the blockchain industry for the time being, as it needed what it described as space to develop.

However, the agency has been outspoken on its unfavorable view towards cryptocurrencies and ICOs. Chief executive of the FCA Andrew Bailey said in December 2017 that Bitcoin investors must be prepared to ” lose all your money”. He compared cryptocurrency investments as similar to gambling.

December 2017 also saw the FCA announce a further study into ICOs, scheduled to determine if there was a need for further regulatory action depending on the applicability of UK laws to the investment model of ICOs.

 

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