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

Nasdaq Plans To Become Cryptocurrency Exchange

This is huge news with the CEO of Nasdaq saying they would consider becoming a cryptocurrency exchange.   One caveat is that Adena Friedman said she is waiting for the market to mature.   I anticipate she sees the threat to cryptocurrency as the fact that we don’t know for sure which currencies will be around in the coming years.  She is waiting for the dot-com like bubble to burst which is an excellent strategy for managing the risk.

The fact that Nasdaq would even contemplate this plus the big money from Wall Street going into cryptocurrency is a very positive sign of where the industry is heading.  The coins that survive the bust will become incredibly valuable and I think Bitcoin is one of them dispute its many issues and drawbacks.  It is a tricky call, with one risk of course being hardforks.  After more Bitcoin scams and hardforks will people possibly lose interest in Bitcoin or will it increase interest in the real Bitcoin?

Either way it may be a bumpy and turbulent ride, but cryptocurrency is looking like its about to create its own economy.  Trading cryptocurrency is not the issue though, as we still wait the “messiah coin” which will hopefully resolve the many issues that we have today.  I’d like to see a coin that does everything right or most things right rather than focusing on just a single aspect.

The time will come and the market will follow.  Everyone hold on things are about to keep getting interesting in 2018!

Binance Moves HQ to a Welcoming Country of Malta

Recently, a famous cryptocurrency exchange, Binance got into issues in Japan although it is based in Hong Kong.  Malta is a Southern European island country which is essentially located between Italy and Tunisia. It moved its HQ to Malta to an apparently very welcoming Prime Minister who said the following on Twitter:

. We aim to be the global trailblazers in the regulation of blockchain-based businesses and the jurisdiction of quality and choice for world class fintech companies

Although this is very encouraging it remains to be seen how much they can weather storm from external pressures.  Malta is not a strong or powerful country so if a foreign country or powerful bankers threatened Malta to comply with their wishes against cryptocurrency could they really refuse?

The announcement from Malta is good but it will take a stable and powerful country to do the same for cryptocurrency people and business to migrate there.  It may provide temporary protection or respite but what is truly needed is for a place like Hong Kong or Singapore to step up and do something similar.

At this point I think Venezuela may be the leader in this regard but the major risk with Venezuela is the political, economic and social stability.  If they can resolve those issues Venezuela could be like the Hong Kong or Singapore of Latin America in no time.

Binance Proposes a new Decentralized Exchange

Binance’s new blockchain which will be its own decentralized exchange could be just what the decentralized world needs.  I am actually not a fan of a decentralized exchange as it really means no one is responsible for your losses and in fact more scams have happened on the more famous ones like Etherdelta.  One look at most other decentralized exchanges just screams insecure and scam to me.

So this is where Binance comes in as a trusted central exchange.  Centralization is not always bad so long as the person or team behind is trustworthy and conversely as we’ve seen with Etherdelta the opposite applies.

Binance has a real shot here of being the top player in cryptoexchanges.

I’ve found Binance to be easy, safe, and honest for an exchange.  If they apply this to their new blockchain for decentralized exchange trading it could be a huge winner.

We must always remember it’s not so much about the technology but about the integrity, intention and ability of the team behind it.

I am still hesitant on decentralized exchanges because of rampant losses and scams, but if anyone can do it right I bet it will be Binance.  Time will tell but this is exciting to me.

Ethereum’s Issues Stem From the Basics

Ethereum is certainly #2 in the market capitalization only second to Bitcoin but it doesn’t mean it’s as easy to use.  In fact I suspect my recent experience is what is keeping it from rising, Ethereum makes me nervous and reluctant to use it everyday. As someone who has used the client’s/wallets for both I find Ethereum’s is cumbersome and at times impossible to use, thus preventing the user from using it to do any transactions at all.

Imagine if a simple eTransfer or Wire from your bank took over a week to initiate?  That’s way too long and beyond the purpose of the infamous but in practice non-realtime transactions in the cryptoworld.

I spent nearly a week syncing 4 months of blocks!

I needed to do a transaction in Ethereum and opened up my Ethereum Client which slowed my whole computer down and ultimately wouldn’t update past a certain point.

I consider myself an above average user who is good at troubleshooting issues.

I updated to the latest Ethereum client and that still didn’t fix it.

Some users suggest deleting the “chaindata” folder and that didn’t fix it.

Eventually I decided to do delete the whole “Ethereum Wallet” folder (never do this without backing up your keystore files safely).  Also be aware that this folder “Ethereum Wallet” is not where your keys/wallet data are stored.  In Linux they are stored in “~/.ethereum/keystore”which is very misleading when you have a “~/.config/Ethereum\ Wallet” (which is not where your wallet data or keys are stored).  I stress this because I came across many who had sworn off the Ethereum Coin and team because of this confusion where they lost their keys and ultimately their investment and coins.

The solution was to delete “~/.config/Ethereum\ Wallet” but the fun didn’t stop there.  It was updating so slow through the missing blocks that it felt like I was mining the entire blockchaining (you could literally count 1 by 1 as it was processing or sometimes it would take minutes on a single block).  I’ve been able to sync the whole Bitcoin or Litecoin Blockchain more quickly and without or much impact on my computer.

I decided to switch the chaindata for Ethereum to SSD it did speed things up but not significantly and still took about a day to catch up and my computer still did slow down.

What I Learned About Ethereum

For all of its features I think the team is out of touch with getting the basics right first, as evidenced by the “Parity” fiasco where through no fault of the users people have essentially lost or have 160M worth of Ethereum coins frozen and lost presumably forever.  I have never seen this with another major coin.

Nor have I seen or experienced the confusion on basics of why their client is so complex.  Why does it use another program geth to sync the data?  Why are there so many different choices, fast sync (which didn’t help speed things up for me), a MIST client and so many different confusing and unnecessary choices and complexity?

I like how I can just download the Bitcoin client or Litecoin client and it works simply, there’s no guessing or confusion.

When it comes down to it, if someone with my background is having to troubleshoot and it slows me down from doing transactions, or I fear my coins could randomly be lost it doesn’t bold well for Ethereum’s future.  I don’t mind leaving other wallets running but Ethereum just takes too much computing with SSH so it’s not practical.  I will consider Ethereum a wise investment with some risks I’ve highlighted above but for any cryptocurrency to truly be accepted and successful it must be secure, fast, reliable and easy to use (something which most cryptocurrencies still fail at if not for the reason that you require the whole blockchain to keep your money in your own possession or have to rely on dangerous uninsured third party exchanges or services that are often hacked).

As we can see below this is not a sustainable practice for cryptocurrency going forward and I will be posting more about how I think the future of crypto will be significantly different than we currently see.

Screenshot-Ethereum Wallet-19

Trading Cryptocurrency Emotionally Is Good For Me and Bad For You!

With all the hype of cryptocurrency driving all of the coins it creates both opportunities and risks depending on where you’ve bought in and your emotional state.
Emotional buying is for example hearing Bitcoin has hit $6000 USD and then buying it worrying that it is your last chance. In reality buying into new highs doesn’t leave a lot of room for comfortable declines which is why I never buy new highs but patiently wait for a strong pullback. But we must always remember the famous proverbs of “Be Fearful When Others Are Greedy”, “Be Greedy When Others Are Fearful”, “Sharp Rises Are Often Followed By Sharp Corrections”, “What Goes Up Must Come Down” which depending on the time period in general means manage risk, do not trade on emotion, and be prepared that markets can turn either way without warning or in a sudden bearish or bullish trend. If all goes wrong just remember “Buy Low, Sell High” of course as simple as these terms are very few of us actually do or achieve such simple sayings as the end result is often more complex based on a lack of discipline or abundance of emotion.

I fully agree with the many parties that say cryptocurrency is extremely risk, volatile and does trade like the stock market with even less safety and regulation. Therefore my approach is to treat such trading as extremely high risk stock investment with the goal of limiting risk and exposure.

In the case of Bitcoin if you look the chart for the past few years it has been extremely volatile and has had numerous crashes. A lot of people made a lot of money by holding and believing in the long-term value, but just as many lost huge amounts by panicking and selling off at the bottom. At the end of the day the best of us cannot always predict that we know the top or bottom of a market. Instead it is important to look at the fundamentals. Bitcoin is still #1 by market cap today, unless it were specifically banned around the world or the entire network or blockchain itself was compromised there’s no reason to panic based on this kind of emotion. I echo a similar sentiment when people rush to the markets when Bitcoin is the news when things are flying high is when you have the most risk. Before some of you think I’m suggesting to be a contrarian on a fundamental market I’m just saying you shouldn’t fight the trend or the market but be sensible. If you’ve made your own research or belief that a currency is in a bullish upswing then wait for an opportunity such as the “sharp correction” that has been the trend with large rises in cryptocurrency.

Stick to your plan unless the fundamentals have changed so unless Bitcoin has been banned around the world or the blockchain has been compromised or some other fundamental value of Bitcoin has been eroded it doesn’t make sense to dump it on a sharp decline (well it’s good for me and other holders) but for yourself it would probably disastrous.

I am mainly quoting Bitcoin but whenever I watch the charts of the top currencies by market cap I see a very similar trend usually, that often all currencies will be diving or climbing at the same time as a generalization.

The above strategy is only for coins that you have reason or proof have real value and long-term viability. If you have invested in a new ICO and could realize a large profit shortly after I would sell a large portion of that position and continue to hold. In that way you’ve maximized your profit and limited your risk exposure.

I’m going to give you an example of when I bought into some Litecoin. I noticed a sharp decline that eventually hit 5% Monday morning just after midnight and keep watching it. Once the market hit -5% and climbed to -4.5% I bought without regret even though I observed later on the day the decline hit as high as about -8-10%. Obviously buying lower would have been better but in recent trends I’ve seen fast recoveries I was happy with the likelihood that Litecoin would recover my 4.5% discount and more in a few days and it has currently risen to +5.89%. Not a bad spread for less than 24 hours! I think the key is not to be greedy and try to plan what the purpose is.

In my case I am watching some of the top 20 coins in market cap and looking for the chance to trade some Litecoins as they go up and some of the others decline to maximize profit and minimize risk.

Going back to the point of the article is that try not to be emotional when buying or selling, but know that everyone’s actions create an opportunity on either side.

Good luck to all of my fellow traders and please share your thoughts and strategies in the comments!

Disclaimer I am by no means giving out financial or trading advice and am simply giving my opinion, experience and rational for my personal decisions.