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Canada Gets First Bitcoin-Backed Loan Service for Businesses, Consumers

Ledn Inc has become the first company to offer Canadian dollar loans to businesses or individuals accepting Bitcoin as collateral.

Founded by Bitcoin bull Mauricio Di Bartolomeo, Ledn is attempting to fill a gap in the market for Canadian citizens who need to borrow money but are unable to do so for whatever reason through the traditional banking sector. Bitcoin is a relatively popular investment choice for Canadians, with around 5% of the population reportedly owning the cryptocurrency.

The first of these loans have already been issued to Bylls, a Bitcoin payment processor operated by Satoshi Portal. Francis Pouliot, CEO of Satoshi Portal, explained that as a self-funded blockchain startup with profits in Bitcoin, it was never able to leverage capital for reinvestment as fiat-earning companies can. Using its Bitcoin funds as collateral for a loan means that the company does not have to sell its coins for new investment money. Using Bitcoin also to receive fiat credit also means it can avoid some of the price volatility of the cryptocurrency market.

There are some risks to this alternative loan method, however. One of these is custody issues; with no third party cryptocurrency custody service operating in Canada, Ledn is relying on cold wallets to store the funds which should theoretically make it impossible for hackers to gain access. If the loan recipient sends the Bitcoin to the wrong address they could also lose this money.

Market volatility means that margin calls are also a risk in the process, with assets potentially losing or gaining significantly in the space of hours, leading to difficulties between the two parties in terms of how much collateral needs to be sent. A sharp drop in the Bitcoin market could mean that the borrower no longer has enough to provide Ledn to get its loan.

Unchained Capital is a firm in the US that offers similar cryptocurrency-backed loans, although its target client is market investors.

Despite issues of volatility and custody, these emerging loans are offering a whole new way to do finance, recognizing cryptocurrency as a tangible asset that can be used and trusted. It brings a lot of potential for blockchain startups looking for funding but turned away from traditional loans because they do not operate primarily in fiat.

 

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Blockchain Has 3-5 Years to Maturity, Russian Bank Executive

The CEO of Russia’s largest banking conglomerate, Sberbank has questioned whether governments will embrace new decentralized models while giving blockchain around 3-5 years before it is mature enough to be ready for mass adoption.

Despite Herman Gref saying that the nascent blockchain technology is not developed enough for proper use yet, he has faith in the ability of the underlying ideology of the technology to usher in much-needed changes in both commerce and communities.

Local news outlet RIA Novosti quotes Gref, ”the philosophy embodied in [blockchain] could drastically change approaches in many areas. Improving this technology could bring huge value both to business and society.”

He gave blockchain between 3 and 5 years to reach a level of maturity where it will be ”ready” for industry implementation.

His comments correlate with a recent poll of executives who claim that implementing blockchain in enterprises has been ”harder than expected.” They cited scalability as a significant part of the challenge, with close to half of poll respondents struggling to process high volumes of transactions on the blockchain network quickly.

Decentralized currency

Gref said that as he sees it, governments on a global scale do not look likely to accept any decentralized model of currency, such as cryptocurrencies like Bitcoin. However, he believes that in around 10 years opinions might change in favor of a decentralized money supply, although even this he says in an ”optimistic” time frame.

The CEO called on governments to find a middle ground in regulating cryptocurrencies in a manner that could prevent illicit activities, but also not stifle innovation or kill cryptocurrencies altogether. Any ban on crypto usage could also damage the blockchain industry, he said.

Russia-based Sberbank as an institution has taken a positive stance in both blockchain and cryptocurrencies. In June, Sberbank took the central bank’s ”regulatory sandbox” as an opportunity to begin testing options for investors looking for opportunities in cryptocurrency.

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Mike Novogratz: Institutional Investments in Bitcoin During Q1 2019 to Bring New Highs

Notorious Bitcoin bull and seasoned investor Mike Novogratz no longer stands by his USD 10K Bitcoin price prediction for 2018, instead suggesting that institutional investors may push it to that total early next year.

Novogratz’s comments came in a Bloomberg Television interview where he defended his previous prediction, saying the cryptocurrency process has been a learning curve with everything taking ”longer than expected.”

He compared the whole crypto ecosystem to a fourth grader being expected to materialize into a graduate. One of the issues Novogratz pointed to is the need for internal committees and testing to solve custody problems that leave investors ”screwed” if anything illicit happens to their assets.

The conversation turned to Fidelity Investment’s announcement of a ”world-class custody solution,” to quote Novogratz, aimed at institutional investors. Considering cryptocurrencies as bare financial instruments, this class of investors has been held back from entering the market due to uncertainty surrounding the storage of cryptographic keys that allow access to the assets

Fidelity is offering them insurance that they can place their bets with cryptocurrency knowing that they won’t lose their money in an illicit way.

Combined with Goldman Sachs’ crypto custody solutions in the works, Novogratz believes that ”slowly but surely institutional investors are becoming more comfortable with the whole asset class.” As he reasons it, the institutional flow of capital can be expected in Q1 of 2019, or early Q2.

Being a Bitcoin trader himself, Novogratz has shared that right now, he is going long. In defense of Bitcoin’s mid-week stumble last week, he argued that it is still a young asset that certainly is not without volatility. Meanwhile, he stands firm on his belief that it is a valuable store of value, particularly in countries facing economic crises such as Iran and Venezuela.

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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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