Tag: cryptocurrency investment advice

Buffet Says Cryptocurrency is a Gamble, Not Investing

By Mason Mohon | @mohonofficial

World-renown investor and head of Berkshire Hathaway Warren Buffet spoke out once again against cryptocurrency recently.

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Facebook Sued for Defamation Over Scam Cryptocurrency Ads

By Mason Mohon | @mohonofficial

United Kingdom financial advisor Martin Lewis is suing Facebook for defamation after cryptocurrency ads using his name and face continued to pop up on the site.

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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.

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.