BITCOIN’S VALUE WAS FRAUD?

 The Coordinated Manipulation
According to research done by Professor John Griffin of Texas Finance, last years epic rise for Bitcoin was actually done by coordinated market manipulation.

Professor Griffin goes on to explain that he examined millions of transactions on cryptocurrency exchange Bitfinex, and says that “the US dollar pegged cryptocurrency Tether was used to buy Bitcoin at the times that the latter was falling- which helped ‘stabilize and manipulate’ the price”

First I’ll explain what Griffin’s said, and then I’ll explain why he’s wrong about Bitcoin but right about Tether. And it boils down to his understanding of how Exchanges work and how Bitcoin works.

Griffin said “Fraud and manipulation often leave footprints in the data and it’s nice to have the blockchain to track things,” Griffin told CNBC. Whenever bitcoin fell, Tether was used to buy it to prop up the price again.

“It was creating price support for bitcoin and, over the period that we examined, had huge price effects. Our research would indicate that there are sophisticated people harnessing investor interest for their benefit.”

Bitcoin started 2017 at below $1,000 and by Dec 2017 hit 20,000. But as if February to June 2018 it’s been jumping back and fourth from it’s lowest at $6k to the highest $10k (which didn’t even last)  Tether is the 11th largest cryptocurrency and is pegged to the US dollar. Some critics say Tether owners don’t have enough fiat currency to back its $2.5 billion market capitalization.

Bitfinex CEO J.L. van der Velde told CNBC that neither the exchange nor tether helped to boost bitcoin prices. “Bitfinex nor tether is, or has ever, engaged in any sort of market or price manipulation. Tether issuances cannot be used to prop up the price of bitcoin or any other coin/token on Bitfinex,”

Now here’s what I think:

I’ve personally used Tether but I do worry about it. A lot of people have accused Tether of fraud, and Tether certainly hasn’t proven the naysayers.  Do they have the 2.5 billion USD and how are they raising funds?  Essentially as far as I can see, Tether is a non-backed, way of essentially printing virtual USD.  I think Griffin is way off on this one.  USDT (Tether) is a convenient trading pair that can be used with some of the top cryptocurrencies to trade and exchange directly for other coins.

The issue is that a lot of people don’t realize most tokens and currencies are not directly convertible or tradeable for others on exchanges.  Generally you’ll have to sell your ABC alt-coin or tokens for Bitcoin, or USDT and then use the major currency you sold or exchanged to buy say another coin such as Ripple, Litecoin, Lisk etc..  So this is where USDT comes in, if Griffin thinks it propped up Bitcoin I think he is misunderstanding how the exchanges work.  Yes a lot of people are using USDT to buy other currencies but is USDT a market factor?  No, I don’t think so, it’s just simply convenient and I agree with Bitfinex that it doesn’t appear they are using it to prop up Bitcoin.

However, USDT could not be used in such a way if it wasn’t given prominence and primary trading pairs like Bitfinex and other major exchanges have used.  Could some of the exchanges be in cahoots with currencies like USDT and others?  Absolutely, and this is the more likely scenario of market manipulation in the sense that they essentially largely control which currencies fail and flourish.

Any coin that is used as a primary trading pair or in other words directly convertible has more value and will intrinsically be used more as a vehicle to buy coins like Bitcoin.

I think Griffin just raises the simple question about USDT being a fraud and this is the biggest concern but I highly doubt USDT’s existence or trading patterns are responsible for Bitcoin fluctuations directly.  He may derive this from trading patterns but I really just think USDT is a convenient and easy to understand intermediary trading pair vs how you wrap your mind around how many BTC another coin like Ripple, Ethereum or Litcoin is worth etc…

What do you think?

Cheers!
-A. Yasir

Warren Buffett Wrong About Bitcoin

A lot of seasoned and generally respected investors including Warren Buffett and even Jim Rogers have blasted Bitcoin as everything from a scam to a poor store of value.  Ironically, we view Bitcoin’s number one property as being a good store of value.

The real question is why do so many veteran and seasoned investors warn about Bitcoin?  Some of them say it is because it resembles the tech bubble of the 90’s and others say because the value is derived from nothing.

We feel that this is misinformed somewhat and could it just be that these older investors simply do not understand the technology and viability of cryptocurrency.   Or are they protecting traditional financial assets and tools either as  government shills or inadvertently?

It’s hard to say for sure but Warren Buffett has taken a lot of flak in recent years and has drawn the ire of almost every investor.

Bitcoin Fails To Defend 10K Mark

Let’s let the chart do the talking for the past 3 months where it currently sits at $9327.65

Bitcoin-2018-02-05-PriceChart

Back in February BTC posted the maximum high for the past 3 months of just over 11K.  As you can see from March to April the lowest moves of the recent past were posted around the 7K mark.  To me this looks like a classic sideways trading that eventually breaks out.  You can see since April there has been a steady upward trend.

BTC hasn’t been able to defend the 10K mark but I do believe we have stability around the 9K mark.  Some indicators claim BTC is currently neither overbought or oversold.  But common sense has to tell you that if the price is going down it appears we have more sellers than buyers at the $10K mark.  It could be people cashing out for fear of wondering when does BTC return back to the 20K mark?

Many people have said this  spells disaster but I really do think we are just getting started with the BTC rally and I think much higher prices are around the corner in the near future.  There has been a lot of positive news from around the world that seems to be increasingly towards accepting that BTC is here to stay.

Perhaps some regulators thought twice and realized that “like it or not BTC is too big and risky to ban”.  Because people can move BTC at will and it cannot be frozen or truly banned.  I think regulators are finding just as the case is with exchanges, if you put undue pressure on owners of cryptocurrency they will simply just move away to a friendlier jurisdiction.  I would imagine they should favor BTC as it is not anonymous and is easily and fully trackable.  If people switched to more private based coins they’ll have little chance at regulation such as with Monero.

BitPay Accepts Bitcoin Cash

Although we have used Bitpay I didn’t realize it was available for brick and mortar physical transactions since we’ve never done any.   On that end it puzzles me how on earth anyone would ever use them?

Bitcoin can take minutes and even hours to confirm!  Can you imagine waiting at the restaurant held hostage because “your transaction is unconfirmed?”.  This is the advantage fiat processing still has.

But, really I think Bitpay should rebrand to use currencies that are actually usable for instantaneous transactions at retail or restaurant.

They should be using a currency like Ripple or Lumens which is nearly instant.  There are a few currencies that have these properties but any Bitcoin or Ethereum derivative is simply not going to cut it in my opinion.

Personally I don’t know a single person who has or would use any of these coins for payments, we all reach for the cash, debit or credit.  These are people like me, who are crypto enthusiasts but we also value convenience and what works.  And I think a lot of the cryptoworld is stuck in a dream world that simply doesn’t exist.  Now, for us in IT we and the customer can often wait over night for the transaction to be confirmed, but at a grocery store or restaurant neither the seller or customer would be impressed.

 

Federal Reserve Says Bitcoin Cannot Replace the US Dollar

The new chief of the San Francisco branch, of the privately held, Federal Reserve Bank has stated that Bitcoin cannot, and will not ever replace the US Dollar.  First of all, they are doing a fantastic job and understand their market and duties.  They cannot step into this job and say anything else and expect to keep it.

I get it, Bitcoin is printed without supposed backing, although it is backed by a lot of physical hardware assets and electricity.  Fiat currency, especially the US Dollar is printed and floated without any controls or restrictions.  Well, actually, the only control and restriction is that there is none.  The Federal Reserve prints at will and on demand, without limitation or backing of any sort, and they have long abandoned the gold standard.

The fact that the Federal Reserve would comment at all on this matter and mention Bitcoin, to me, is very telling that it is very much a possibility.  When you have this much money put into something that is being traded worldwide, every second, and such an ecosystem I think it is an excellent contender to the US Dollar and fiat currency in general.  Remember, fiat is backed by nothing as well and printed without any limit.  Most cryptocurrencies actually are limited in how many coins can be mined or minted at any rate.

Cryptocurrency is currently at a $421 Billion USD market cap and I think it won’t be long before it is in the trillion dollar range.  This is ultimately the worst nightmare for any central banker with so many competitors, of course your number one priority should be outlawing them and shutting them down.

On that end the Fed is right to do it and is doing their job well.  However, for people who don’t essentially control the fiat financial system, we would do well to root for cryptocurrency as an alternative system.  I think both systems can survive and work together, but if fiat pushes it too much, I think there may be a digital currency revolution that far surpassed the digital rights movement of the late 90s and early 2000s that caught the RIAA and MPAA by surprise.

Wikileaks Shutdown by Coinbase

Apparently Julian Assange’s Wikileaks merchant account on Coinbase was shutdown.  This is not at all surprising since PayPal, VISA, Mastercard and the banks did the same thing to him/them in the past.  In all fairness I don’t think Coinbase is to blame, aside from the fact they are a US based company and under the jurisdiction of the US of course.

PayPal came out and admitted they were forced to close down Wikileaks account, and I am certain the same thing has happened with Coinbase.

They have no say in the matter when the US government comes knocking.  Coinbase even recently had to give out information to the US tax department (IRS).

Of course users can still directly pay and donate to any wallets that Wikileaks controls.  As of now he lists addresses for Bitcoin, Litecoin, Ethereum, ZCash and Monero.  This is where things will heat up if he were to have a centralized currency like Ripple or Stellar Lumens.  The US government could possibly have those accounts in XRP/XLM frozen since they are a US based company.

This comes down to the wider issue of privacy, rights and freedom online and how cryptocurrency can prevent persecution for political reasons.  It also stands to reason that entities based in the US have very little say when the government comes knocking.  Coinbase and PayPal couldn’t have said no to the US government or by doing so they would be in seriously hot water.

I always advocate having some IT resources out of the reach of PRISM countries for reasons of privacy and freedom.  One of my current favorites are Singapore and Hong Kong in Asia.  Hong Kong I place particularly high value on because it has the British based system, yet it is under the protection of China.  Hong Kong is less likely to be influenced by a foreign entity than a smaller country like Singapore.  A good example of this is how Edward Snowden miraculously made it out of Hong Kong as a wanted fugitive.  Surely, Hong Kong was pressured and asked to hand him over, but somehow it never happened.

There are positives here, it looks like some brave entities in Europe have stood up for Wikileaks and at least for now, in France, Germany and Iceland there are some banks, foundations and even a University who are providing him access to the fiat system.

Just Keep Hodling Your Cryptocurrency Coins!

As of the time of this writing on 2018-04-15 coins have started a rally just before the weekend and they’re all up.  Could it be that there is some pumping going on from Soros, Rothschild and Rockefeller?  Or could it be an emotional reaction to their announcements that they will invest in crypto?

Coins are up between 3-16% at the time of this writing with the big news being that it looks like Bitcoin has strongly cleared the $8000 mark and is hanging there fairly well.  We are back to where we were later last year.  Could this be the next leg up of a bull run? No one can be sure since only the whales and FUD and FOMO can control the market but I’ve been hodling.

Ethereum, Ripple, Litecoin to me are key indicators of something big possibly heading our way.

 

2018-04-15-CoinsGoingUp

Trezor Hardware Wallet to Support Bitcoin Cash

A maker of hardware wallets for cryptocurrency has recently confirmed they will add support for Bitcoin Cash.  I’ve also been an advocate of not using these even before the Ledger Nano hack came out.

I suspect that some will lose their currency or at least have to try to recover it based on confusion over the two.  I really think it’s a bad idea since most currencies have no built-in protection to sending into the abyss to a non-existent address of another blockchain.

 

Swiss Researchers Forecast Sideways Trading and Downward Pressure on Bitcoin for 2018

They have based it on Metcalfe’s law which says at this point that Bitcoin could lose another 27%.  The group also cites the part I agree with, in that so far cryptocurrency prices are mainly driven by Bitcoin which means Altcoins (other than Bitcoin) have risen and fallen in direct correlation.

Where I am not sure if I agree or disagree is their theory that a lot of this is driven by fear in the news.  While I am sure it is, if the fear is unfounded why should bad news reflect on the long-term valuation?

A sensible market would be wise to react to say the hacks that have happened to Ethereum or the fact that illegal content has been inserted into the Bitcoin Blockchain.  That is bad news that has relevance since these issues potentially threaten the integrity of the entire blockchain.

While we’re on the topic of Metcalfe’s law, since cryptocurrency is a completely new and largely irrational market can we trust this is a valid predictor?  I am not aware that any other traditional models have successfully called any of the major events in cryptocurrency.

I do agree it was time for a significant correction but the same has happened in commodities and stocks before, yet the stock markets keep moving (albeit with a lot of money printing and manipulation-is that what regulators mean by regulation for cryptocurrency? :) ).

Only time will tell where things head but I do think that currencies that are efficient, secure and easy to use will stand the test of time (which admittedly are very few and I cannot think of a single one that solves all of the issues just yet).

Bitcoin Down 53%? Time to panic or time to be happy?

We’ve got to put this all into perspective when people come panicking and asking if you’ve sold all of your Bitcoin.  Just hold, the chart isn’t a lot different than a lot of stocks or commodities.  Let’s speak in terms of the chart since May of 2016.

 

BitcoinMay-2016-toApril-01-2018

Let’s first look back to May 2016 where it was worth about $423 USD.  Is today’s $6974.84 USD so bad?

How about April 20, 2017 whereit was worth $1216 is that so bad compared to today?

The time that makes people nervous is when Bitcoin went on a bullrun around November 1st, 2017 and was worth around $6700 USD to an all time high of around $19500 on December 16th.  I would expect like with any stock that there will be a digestion period or a pullback.

Am I worried yet?  No, unless Bitcoin drops below a year ago’s $1000 why would anyone worry?

Bitcoin on top of that now owns about 50% of the market with this drop so it has shown resiliency and leadership.

It’s not time to panic, it is time to hold steady and wait for the next bull run.  At the end of the day government policy can’t stop Bitcoin.  There will always be a country where it is legal and exchangeable.  If a blanket ban happens people will start trading directly with Bitcoin for other goods.  There’s no way people who have invested thousands of dollars in hardware and power will be throwing these coins away or walking away from them.