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).

How Governments Should Handle Crypto and ICOs

First of all after seeing so much confusion, panic and misinformation in the news, it is about time each country made a dedicated website for cryptocurrency.  The winners will be the countries who clearly communicate their policy, laws and intentions on handling cryptocurrencies.

Now in all fairness things are moving so fast, governments have genuine reason to fear cryptocurrency (aside from illegitimate reasons…) with most ICOs being absolute scams.  The real reason is of course is that governments can no longer vote or control who can fund themselves, the internet and public will judge.  However, there are still good reasons to have regulation or at least accountability so ICO fraudsters cannot hide overseas and disappear with the coins they collect.  This is my position where I feel the majority of token ICOs have no intention of completing their projects.

Getting back to what government should do, it’s not only ICOs but also the laws surrounding the purchase, use and trade around cryptocurrency.

The first country(s) to make fair, easy and favorable laws surrounding ICOs and cryptocurrency may find itself literally walking into digital gold and could be the next Hong Kong or Singapore of the crypto-finance world.  It’s up for grabs until countries clarify and cement their policies with crypto.

The first step if I were a regulator would be to hold public consultation and establish a staterun/government website domain to encourage discussion.  I also imagine it will be a hard case for government going after their citizens or businesses because they could simply leave the country with their crypto.  I think this is one element that business and government doesn’t like, that they can no longer control what people do with their money.  Typically governments and banks work hand in hand to achieve specific goals but with cryptocurrency, much like the world-wide web (initially) they are trying to find a balance and also ways to reign in control.

This time is very different, there is a lot at stake for governments, banks, people and business.  If a government moves too aggressively against the crypto world it could find itself sidelined and in financial ruin while their citizens and businesses will flock to countries that treat them better.

One of the first known examples of staterun conspiracy to harm cryptocurrency is Poland’s recent Youtube campaign: https://cryptoslate.com/polish-central-bank-caught-funding-anti-cryptocurrency-youtube-campaign/. They can’t be the only one and we know because of the well-timed press-conferences from various countries that threaten to ban ICOs or the currency outright.  On that note, as an investor this gives me more confidence than ever.  If crypto isn’t a big thing, then governments wouldn’t be talking about it.  The fact they warn so much about crypto suggests that governments and banks are well aware it is here to stay.

It could be that some governments are just playing games and waiting to see how things play out.  Perhaps internally if they see their attacks on crypto don’t kill it then they’ve already accepted that they will stop the fight against crypto.  Personally I think they are well aware that they cannot stop it and are maybe buying time so they can launch their own like Japan, Russia and China have announced.

I don’t think there’s a direct comparison but this standoff reminds me of the anti-piracy fight.  It used to be a fringe and underground element, but with crackdowns it actually has become more prevalent and easy for people to engage in piracy. Don’t get me wrong, crypto is not at all illegal or wrong (as compared to piracy) but the governments are essentially treating the crypto world the same way.  Much like the rule of investment after your strategy fails, trying again “won’t be different this time” I believe.

What do you think, how can governments handle crypto better and how would you react to bans and other aggressive action against crypto and related businesses?

Cryptocurrency vs the Current Financial System Which is more evil?

Hello internet friends!

So I’ve had a lot of questions and concerns from friends and family about cryptocurrency with so many scary and dire predictions and proclamations in the MSM.

If you’ve heard the news lately you may think it would be crazy to ever get into cryptcurrency because the news says it’s a dangerous bubble, pyramid scheme, illegal, used to finance criminal activity, used to finance terrorism, is completely anonymous and 200% evil.

While there are definitely some truths to the MSM articles like most issues in life I feel it is with an agenda and not an accurate reflection of the true picture, reality and future of cryptocurrency.

To give you an idea of my perspective to be honest when my wife first told me about Bitcoin I said “there is PayPal”, “it will never be anything”, and there will be “lots of fraud and scams”.  I was right about the third one at least (1/3) :)

The Main Points The Media Makes About Cryptocurrency and How They Fair Against Fiat Currency

  1. Cryptocurrency facilitates illegal transactions, terrorism, money laundering by being anonymous and without regulation.
  2. Cryptocurrency is a bubble and pyramid scheme that won’t last.
  3. Investing in it is too speculative and risky.
  4. There are lots of scams.
  5. Coins are worth nothing because they were created from nothing.
  6. Cryptocurrency can and will be banned.

The reality as I see it in comparison to fiat

  1. While I am sure it is true crypto has been used for illegal purposes the same can be said of fiat cash ever since the beginning of time.  Cash can be used anonymously and is used that way each day.  I think this is a moot point since almost anything in the world with legitimate and good purpose can and will be used for illegal activities.
  2. I do believe crypto will have a serious crash in line with the 1929 Wall Street stock crash or the 2008 financial crisis but that didn’t stop stocks and I believe the same of crypto.
  3. This is a broad term, there are literally thousands of coins which serve completely different purposes.  There is no doubt some have stronger fundamentals and will last while others are truly worthless for various reasons.  There is also massive speculation in our traditional financial system, whether the US housing crisis that put people under water, penny stocks and failed stocks, bonds and mutual funds.
  4. This is absolutely true, there have been a lot of scams in the crypto world, however there are scams with fiat such as fake money, debit/credit card skimming etc.
  5. This is true, just as it was of fiat money but this depends on the time period.  It’s arguable that back when the gold standard existed that fiat had a certain value and was backed by gold, but today the world is freely printing money out of thin air or “nothing”.
  6. I do believe it will be banned in some countries, primarily what we’ve seen is exchanges getting shut down in China and Korea but it hasn’t stopped cryptocurrency from sky rocketing.

The Universal Truth

While the media does make some valid points, they are really blown out of perspective.  Cryptocurrency does have issues, as does fiat but what I suspect this really is about is the fact that our modern banking and financial system is at risk.  Since most cryptocurrencies are decentralized, no one person, organization typically has any control over them.  You cannot freeze an individual, organization or country’s assets anymore.  In times of war, duress or even genocide such as Myanmar it would be possible for the underbanked to use a cryptocurrency such as XLM (Stellar Lumens from the creator of XRP/Ripple) to safe guard your money across borders and against unjust seizure.  With cash or wire there would likely be no time to do such a thing if your city is being razed by the Burmese army.

There is significant risk in the future for cryptocurrency’s which really haven’t seen a seriously long, sustained correction.   Yes there have been flash crashes and drops of 25% in a day but they usually all come back higher than ever.  This is a bull market without question.  On that note I’d like to point out that the financial side of the crypto world functions almost entirely like the current financial system.

Take for example the dominant US dollar, it is still one of the most commonly used settlement currencies in the world which is a way it has artificially held value regardless of how the US economy has performed.

In the crypto world I feel Bitcoin/BTC is on top because it is the main currency used on trading exchanges.  In fact on most exchanges you have to convert your other coins into BTC usually to buy into other coins.  You can place traditional Limit and Stop Market orders as well.  In this sense the crypto world has volatility because it’s a fast changing world with new coins, players and buyers/sellers are coming in and out of the market.  You can see people taking profits when some coins surge, just as you would with traditional stocks.  If the currency or project behind the currency hasn’t changed in a negative way there’s usually no reason to worry or panic.  Instead seasoned investors will wait for the pullback to buy more of their favorite coins.

The Final Word

I think the death of cryptocurrency is highly anticipated and overstated.  I do agree the weak coins and ICOs will die, but the coins with strong fundamentals will not be going away.  Cryptocurrency is here to stay and there’s no way it can be stopped, it can be regulated and this will somewhat shape the future but we’re now in a period where more regular people will not only invest and trade in cryptocurrency but it will be used as commonly as everyday debit and credit, something that obviously banks and government will take issue with.  The answer is truly that you can’t fight the market or will of the people, there are solutions and ways for there to be a win-win but the bankers won’t let their market without a fight.