Tag: Cryptocurrency crash

No, Cryptocurrency Is Not “Quietly Dying Out”

By Mason Mohon | @mohonofficial

On Sunday, Russia Today posted an article titled “Is the cryptocurrency market quietly dying out?”, which was full of nothing more than explanations of recent cryptocurrency events along with market declines.

The article merely discusses recent market trends but uses a loaded editorialized headline to make it seem like crypto is dying. The recent decline and widespread burns are quite the opposite, though. The market is organic, and consumers have to take responsibility and learn for themselves.
Those who were scammed or bought Bitcoin at $19,000 may be too depressed to ever buy cryptocurrency again, but if they are wise they will see it as a learning experience. People who have been burned will now use a skeptical eye when looking towards any potential investments.
The failure of the cryptos with “broken blockchains” is just creative destruction at work. They couldn’t serve the consumers, so a better and safer technology is coming to take their place.
A decline in the price of popular currencies is not the end of an era. It is a learning opportunity, so take advantage of it and use it as such.
Note: This is not investment advice.

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THE BITCOIN FOMO SELLOFF IS HERE?

By Jesse Stretch | USA

Newcomer Bitcoin hotshots are panicking on Reddit, crypto forums, everywhere. We read these quotes and sigh:

“Why is it crashing? Help!”

“Soon it will be worthless. SELL OUT NOW.”

“Bitcoin is dying! Agh!”

According to an article in Newsweek, the international suicide hotline is/was advertising on the Cryptocurrency Reddit forums.

The “Fear of Missing Out” or FOMO sell-off attitude in the crypto space prompts criticism from a wide host of onlookers and participators alike, and yet as it occurs, those same writers preaching “hold hold” have their Binance accounts open dumping everything they can back into Coinbase on the prayer of cashing out ahead or at a slight loss.

But alas how some of us forget that this was and is the point.

Volatility. Lots of movement. Big Charts. Big gains, big losses.

Without volatility, cryptocurrency is boring. After all, what small or medium-sized investor wakes up and checks the price of Ford stock every single day—virtually none. Glance at the Ford Stock Reddit and see that in the top four topics is this heading, Why does Ford price fluctuate so little day to day?… Enough said. The stock market is basically a bore to this caliber investor, and rightfully so.

Young crypto-minded investors don’t want to wait. The tech culture doesn’t have time to wait. We need lunch delivered to the office, we need fast electric cars, we need Prime for toilet paper, leggings, and custom bearding kits. We don’t have a decade to gain 40% on Ford stock like Grandpa did. In a decade, many of the Bitcoin investors will be in their late twenties or early thirties—nearly dead and/or retired! There’s simply no time to wait for the NYSE.

Bitcoin is a rollercoaster, and roller coasters are a short, wild ride; but, the ride starts again at some point or another when new people get on. Sometimes, if you know the ride operator like we did when we worked at the theme park growing up, you get to ride over and over again as many times as you like. When you’re done, you have nothing to show for it, but it was a wild ride. Such is the same with Bitcoin—but maybe not if you hold.

In his seminal guide, the Intelligent Investor, Benjamin Graham espouses the idea that in the instance of a very large short-period investment gain of over 100%, the investor should consider selling half of the investment to safeguard the principal and capture some gain on the initial capital. This is an easy theory to read and comprehend, but it’s a bit harder to practice. One might argue that with prices moving from $10k to $20k and back to $10k, all essentially inside of one rolling month’s time, this is exactly what has happened—profit grabbing, a correction, a harvest of income. It is one of the most common occurrences in high-risk investing.

My point here is that the FOMO selloff on Tuesday and Wednesday the 17th and 18th of January of 2018 were expected, was predicted, is expected to continue for an indefinite time, and is likely not the “end” of crypto-currency. People harvest profits, and harvesting profits lower the market cap and price of the stock or commodity. This is normal. What we are seeing here is just another exaggeration of what would usually take much longer to happen in your grandad’s brokerage account.

In crypto, the equivalent of weeks on the NYSE happens in mere minutes, sometimes moments. Percentage gains and losses are exacerbated by an eager, new, and often timid investor who is likely not as flush or seasoned as the rich boys on Wall Street. For this reason, there is a great hunger for a rapid gain and a great fear of a rapid loss. Were it Gold these crypto investors were trading in, we’d see the movements occur much slower, but this isn’t gold—it isn’t, arguably, anything.

The FOMO selloff may be just so, or rather it may also be a high-volume version of the traditional marketplace profit grab. Tomorrow, Bitcoin may be worth $2. Tomorrow, Bitcoin may be worth $25,000. Neither would surprise anyone with a history in this market space. The fear (and the hope) is real.

But as bulls, let’s be optimistic: Any high-volume selloff will ultimately increase the strength of the crypto market, should it sustain itself, because it will trim out the weak-stomached investor. When this investor returns, he/she will return with a confidence in the market, which will make FOMO selloffs less likely to occur in the future. Should the crypto market continue to grow over the coming years, this is how its legacy and stability will be forged. The new investor must experience both gain and loss, and then a recovery from loss, in order to develop a trust and a respect for the market, and through time this trust will stabilize the currency and lessen its fluctuation as an investment vehicle and/or pseudo-commodity.

And so as you distractedly read this article, I will continue clicking my mouse to see if Coinbase will finally process the lagging sale all of my holdings and transfer them safely back to my FDIC insured big-brother bank account—all for a hefty but reasonable fee.

Relax… I’m kidding…


Author’s Note: The author currently holds positions in numerous cryptocurrencies and is not engaged in a volume-oriented selloff of these positions—but he knows you are.

The Banker’s Bitcoin: How Ripple is Against the Goal of Cryptocurrency

By Max Bibeau | USA

Cryptocurrency is a newly popularized method of transferring value. It prides itself primarily on three things: decentralization, security, and its lack of banking influence. However, while popular cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) check all of these boxes, Ripple (XRP) finds itself surprisingly lacking. As Ripple becomes a serious contender for the top spot based on market cap, we must fully recognize the many problems that Ripple is plagued with.

First, it’s important to note that Ripple is not decentralized. In fact, it was created and is owned by a 2012 startup by the name Ripple Labs. So the first thing we will look at in this article is decentralization. Cryptocurrencies like Bitcoin utilize the blockchain to allow pretty much anybody with a computer to run their own individual “node.” A node is, to put it simply, a copy of the ledger. Who has how much of the cryptocurrency? Whenever a transaction occurs, it is recorded on each node, and the ledger updates, changing the amount of cryptocurrency with everyone involved in the transaction. The more nodes running in the world, the more decentralized the network. As of the time of this writing, Bitcoin has 11,682 individual, independent nodes, making it impossible to hack or edit. As of July 2017, Ripple has only 55 nodes. Ripple has a shockingly low amount of nodes because the company Ripple Labs maintains a list of “validated nodes,” called the UNL (Unique Node List). In order to run your own node, Ripple must confirm your node, and add you to the programmed list. This means that there are far fewer nodes in existence, therefore offering less decentralization. If 28 of the 55 centralized nodes agree to change the ledger then they have full control over the distribution of the cryptocurrency. It is far easier to get 28 of 55 node runners to agree to a change, as opposed to 5,482 independent Bitcoin node runners.

Second, the security of the cryptocurrency leaves much to be desired. Researchers at Perdue University in 2016 decided to test the security of the network – and it has a major flaw. They found that within the technology, individual “verified nodes” are actually able to hold some of the cryptocurrency themselves, acting as virtual banks. Now first, this leaves a huge potential for hacking. If an individual node acting as a bank is hacked, the hackers essentially have full reign over one of Ripple’s banks. This could cause transactions to fail, and users to lose their funds. Another, more complex example was exposed by the researchers:

When we look at a security perspective, Moreno-Sanchez and team have established that small-sized networks could be potentially vulnerable to attacks, because the Ripple network always finds an alternative way to move a transaction via it’s network, even if one of the important “gateways” nodes is removed. So can this be secure? To test the transactions via small networks, the researchers performed a simulation, where they simulated the removal of important nodes in the Ripple network, similar to what a financial event leading to those circumstances would occur. The results of the simulation was that removing those nodes would isolate the amount of Ripples stored within them, if they are already on those nodes, since they become offline, but not lost forever. According to the researchers this may result in approximately 50,000 wallets to be vulnerable to a disruption and the XRP’s in them are also at risk.

So, Ripple’s centralization leaves it open to many potential security issues as well.

Finally, many (but notably not all) cryptocurrency users share a dislike of the banking world, and it’s influence over individual finances. However, Ripple is made for the banking world. The problem that Ripple is made to solve revolves around bank transfers – so we can’t exactly hold it against them that banks have begun to use their technology. It is concerning to many, however, that banks have begun playing a major part in Ripple’s success and price jumps. If you’re looking for a cryptocurrency made for individuals, Ripple may not be for you. Ripple does solve a real-world problem – but when looking at the centralization and security concerns, paired with the fact that Ripple has no concern for anonymity, it becomes clear that Ripple is a niche technology, perfect for big banks, but less than ideal for individuals buying into the future of monetary transfers.

 

The Free Market of Cryptocurrency is Under Attack

By Ryan Lau | USA

Last week, after a hard-fought legal battle in both the House and Senate, the Republican tax bill passed by a narrow majority. Since then, conservatives claiming to advocate for a smaller government have touted the move as a political success, and the biggest tax reform in decades. Though it does reduce some personal and corporate income taxes, the bill is in fact incredibly disturbing on a much different ground. In fact, the very people who claim to be calling for a reduction in government size have just taken a major step in killing the future of cryptocurrency. This tax bill, in its reclassification of the 1031 Exchange law, has in fact done more to extirpate any trace of legal economic freedom than any bill since the Affordable Care Act.

What is the 1031 Exchange, and why is it important? Essentially, this measure, an important part of our tax code, allows for investors to defer capital gains taxes, in the event that an investor is selling a property with the direct goal of purchasing a new one. This has been widely used by house flippers and cryptocurrency traders alike. However, the tax bill has removed cryptocurrency from the list of acceptable 1031 references. Though the IRS has classified cryptocurrency as a taxable capital gain since 2014, it previously was only taxable when exchanging large amounts of it for fiat currency. Hence, reinvesting and exchanging between cryptocurrencies was treated as a 1031 exemption, though this is no longer true. Now, the IRS has permission to tax any and all exchanges between cryptocurrencies, which is an attack on individual liberty and economic freedom.

What does this mean for the future of cryptocurrency? Though small investors will not be significantly impacted due to the simple fact that capital gains tax has a minimum threshold, the impact of larger investments is astronomical. A day trader, who may exchange cryptocurrency multiple times in one single day, he may now find himself subject to a 20% capital gains tax for each exchange. This new implementation will naturally take away some of the perks of trading, reducing the demand for such exchanges. Though investors may still leave their money in one single cryptocurrency for extended periods of time, this action naturally has a smaller maximum profit margin. Even so, the IRS is tight their fists around long-term investments, with a new Senate bill that threatens the future of all cryptocurrencies recently passing.

Though some coins, such as Monero, have greater levels of privacy than others, this ability to hide from the state is quickly shrinking. Action must be taken immediately to protect the rights of cryptocurrency traders, whether it be done through the law or the market. Though investing cryptocurrency in a 401K or Roth-IRA would currently avoid these taxes, these funds have virtually no liquidity, and there are very few, bleak alternatives, such as surrender of citizenship. One should never have to give up their United States citizenship or invest in an offshore account in order to avoid mass theft on personal property, yet with the government’s recent actions, is this fate inevitable? The IRS is concerned with losing out on income, yet forget that they are merely a collective of individuals with no legitimate claim to any individual’s income. This must be recognized, and this bill altered, if we are to protect the rights of the individual.

Does The Government Use Cryptocurrency to Spy On Us?

By Emily Merrell | USA

Bitcoin was started in 2009 and in 2017 it’s now making its way into the mainstream. Cryptocurrency promises us a way of currency that does not include central-banking or government regulation. However, this anonymous way of using money is putting us at risk to government agencies.

One clear example of this is the now shut-down dark web drug market, Silk Road. This online drug market promised users to be able to purchase drugs anonymously with the use of Bitcoin. This is what puts the cryptocurrency world at risk. People use it to purchase illegal items anonymously. And after a long investigation and monitoring the found of Silk Road Ross Ulbricht was arrested.

Encryption Does Not Make You Instantly Anonymous

Anonymous internet transactions are clearly the current biggest way for people to purchase illegal goods. However, the European Union has released that cryptocurrency cannot even work for terrorist organizations. A European Commission stated that terrorist groups need to use fiat currency in order to function.

Blockchain transactions are complex, that is one factor. Another part is the fact that it’s publicly available. Every transaction made with Bitcoin is recorded for the public to see, which gives the government some sort of idea how the currency is being used.

Terrorism has also caused the government to develop huge security and spy agencies. They are known for spying on all people, regardless of if they have committed crimes or not.

Fraud and Taxation

Governments are making big efforts in order to follow up with cryptocurrency users that don’t declare their earnings. The Cryptocurrency network Coinbase was ordered to release details of their user’s exchanges in order to help the US crackdown on tax evasion.

The government believes that investments should be made taxable, no matter what the currency. Cryptocurrency is currently one of the biggest ways that we have gone against the state and we need to protect it. Let’s make sure the government doesn’t get a handle on this.