One of the bitcoin addresses listed by Craig Wright's lawyers as belonging to him contains about 80 thousand BTCs (~$756 million) stolen from MtGox in 2011. This was stated by former stock exchange CEO Mark Carpeles.
An extensive guide for cashing out bitcoin and cryptocurrencies into private banks
Hey guys. Merry Xmas ! I am coming back to you with a follow up post, as I have helped many people cash out this year and I have streamlined the process. After my original post, I received many requests to be more specific and provide more details. I thought that after the amazing rally we have been attending over the last few months, and the volatility of the last few days, it would be interesting to revisit more extensively. The attitude of banks around crypto is changing slowly, but it is still a tough stance. For the first partial cash out I operated around a year ago for a client, it took me months to find a bank. They wouldn’t want to even consider the case and we had to knock at each and every door. Despite all my contacts it was very difficult back in the days. This has changed now, and banks have started to open their doors, but there is a process, a set of best practices and codes one has to follow. I often get requests from crypto guys who are very privacy-oriented, and it takes me months to have them understand that I am bound by Swiss law on banking secrecy, and I am their ally in this onboarding process. It’s funny how I have to convince people that banks are legit, while on the other side, banks ask me to show that crypto millionaires are legit. I have a solid background in both banking and in crypto so I manage to make the bridge, but yeah sometimes it is tough to reconcile the two worlds. I am a crypto enthusiast myself and I can say that after years of work in the banking industry I have grown disillusioned towards banks as well, like many of you. Still an account in a Private bank is convenient and powerful. So let’s get started.
A. What is required to open an account in a Private bank when you made your fortune through crypto.
There are two different aspects to your onboarding in a Swiss Private bank, compliance-wise. *The origin of your crypto wealth *Your background (residence, citizenship and probity) These two aspects must be documented in-depth. How to document your crypto wealth. Each new crypto millionaire has a different story. I may detail a few fun stories later in this post, but at the end of the day, most of crypto rich I have met can be categorized within the following profiles: the miner, the early adopter, the trader, the corporate entity, the black market, the libertarian/OTC buyer. The real question is how you prove your wealth is legit. 1. Context around the original amount/investment Generally speaking, your first crypto purchase may not be documented. But the context around this acquisition can be. I have had many cases where the original amount was bought through Mtgox, and no proof of purchase could be provided, nor could be documented any Mtgox claim. That’s perfectly fine. At some point Mtgox amounted 70% of the bitcoin transactions globally, and people who bought there and managed to withdraw and keep hold of their bitcoins do not have any Mtgox claim. This is absolutely fine. However, if you can show me the record of a wire from your bank to Tisbane (Mtgox's parent company) it's a great way to start. Otherwise, what I am trying to document here is the following: I need context. If you made your first purchase by saving from summer jobs, show me a payroll. Even if it was USD 2k. If you acquired your first bitcoins from mining, show me the bills of your mining equipment from 2012 or if it was through a pool mine, give me your slushpool account ref for instance. If you were given bitcoin against a service you charged, show me an invoice. 2. Tracking your wealth until today and making sense of it. What I have been doing over the last few months was basically educating compliance officers. Thanks God, the blockchain is a global digital ledger! I have been telling my auditors and compliance officers they have the best tool at their disposal to lead a proper investigation. Whether you like it or not, your wealth can be tracked, from address to address. You may have thought all along this was a bad feature, but I am telling you, if you want to cash out, in the context of Private Banking onboarding, tracking your wealth through the block explorer is a boon. We can see the inflows, outflows. We can see the age behind an address. An early adopter who bought 1000 BTC in 2010, and let his bitcoin behind one address and held thus far is legit, whether or not he has a proof of purchase to show. That’s just common sense. My job is to explain that to the banks in a language they understand. Let’s have a look at a few examples and how to document the few profiles I mentioned earlier. The trader. I love traders. These are easy cases. I have a ton of respect for them. Being a trader myself in investment banks for a decade earlier in my career has taught me that controlling one’s emotions and having the discipline to impose oneself some proper risk management system is really really hard. Further, being able to avoid the exchange bankruptcy and hacks throughout crypto history is outstanding. It shows real survival instinct, or just plain blissed ignorance. In any cases traders at exchange are easy cases to corroborate since their whole track record is potentially available. Some traders I have met have automated their trading and have shown me more than 500k trades done over the span of 4 years. Obviously in this kind of scenario I don’t show everything to the bank to avoid information overload, and prefer to do some snacking here and there. My strategy is to show the early trades, the most profitable ones, explain the trading strategy and (partially expose) the situation as of now with id pages of the exchanges and current balance. Many traders have become insensitive to the risk of parking their crypto at exchange as they want to be able to trade or to grasp an occasion any minute, so they generally do not secure a substantial portion on the blockchain which tends to make me very nervous. The early adopter. Provided that he has not mixed his coin, the early adopter or “hodler” is not a difficult case either. Who cares how you bought your first 10k btc if you bought them below 3$ ? Even if you do not have a purchase proof, I would generally manage to find ways. We just have to corroborate the original 30’000 USD investment in this case. I mainly focus on three things here: *proof of early adoption I have managed to educate some banks on a few evidences specifically related to crypto markets. For instance with me, an old bitcointalk account can serve as a proof of early adoption. Even an old reddit post from a few years ago where you say how much you despise this Ripple premined scam can prove to be a treasure readily available to show you were early. *story telling Compliance officers like to know when, why and how. They are human being looking for simple answers to simple questions and they don’t want like to be played fool. Telling the truth, even without a proof can do wonders, and even though bluffing might still work because banks don’t fully understand bitcoin yet, it is a risky strategy that is less and less likely to pay off as they are getting more sophisticated by the day. *micro transaction from an old address you control This is the killer feature. Send a $20 worth transaction from an old address to my company wallet and to one of my partner bank’s wallet and you are all set ! This is gold and considered a very solid piece of evidence. You can also do a microtransaction to your own wallet, but banks generally prefer transfer to their own wallet. Patience with them please. they are still learning. *signature message Why do a micro transaction when you can sign a message and avoid potentially tainting your coins ? *ICO millionaire Some clients made their wealth participating in ETH crowdsale or IOTA ICO. They were very easy to deal with obviously and the account opening was very smooth since we could evidence the GENESIS TxHash flow. The miner Not so easy to proof the wealth is legit in that case. Most early miners never took screenshot of the blocks on bitcoin core, nor did they note down the block number of each block they mined. Until the the Slashdot article from August 2010 anyone could mine on his laptop, let his computer run overnight and wake up to a freshly minted block containing 50 bitcoins back in the days. Not many people were structured enough to store and secure these coins, avoid malwares while syncing the blockchain continuously, let alone document the mined blocks in the process. What was 50 BTC worth really for the early miners ? dust of dollars, games and magic cards… Even miners post 2010 are generally difficult to deal with in terms of compliance onboarding. Many pool mining are long dead. Deepbit is down for instance and the founders are MIA. So my strategy to proof mining activity is as follow: *Focusing on IT background whenever possible. An IT background does help a lot to bring some substance to the fact you had the technical ability to operate a mining rig. *Showing mining equipment receipts. If you mined on your own you must have bought the hardware to do so. For instance mining equipment receipts from butterfly lab from 2012-2013 could help document your case. Similarly, high electricity bill from your household on a consistent basis back in the day could help. I have already unlocked a tricky case in the past with such documents when the bank was doubtful. *Wallet.dat files with block mining transactions from 2011 thereafter This obviously is a fantastic piece of evidence for both you and me if you have an old wallet and if you control an address that received original mined blocks, (even if the wallet is now empty). I will make sure compliance officers understand what it means, and as for the early adopter, you can prove your control over these wallet through a microtransaction. With these kind of addresses, I can show on the block explorer the mined block rewards hitting at regular time interval, and I can even spot when difficulty level increased or when halvening process happened. *Poolmining account. Here again I have educated my partner bank to understand that a slush account opened in 2013 or an OnionTip presence was enough to corroborate mining activity. The block explorer then helps me to do the bridge with your current wallet. *Describing your set up and putting it in context In the history of mining we had CPU, GPU, FPG and ASICs mining. I will describe your technical set up and explain why and how your set up was competitive at that time. The corporate entity Remember 2012 when we were all convinced bitcoin would take over the world, and soon everyone would pay his coffee in bitcoin? How naïve we were to think transaction fees would remain low forever. I don’t blame bitcoin cash supporters; I once shared this dream as well. Remember when we thought global adoption was right around the corner and some brick and mortar would soon accept bitcoin transaction as a common mean of payment? Well, some shop actually did accept payment and held. I had a few cases as such of shops holders, who made it to the multi million mark holding and had invoices or receipts to proof the transactions. If you are organized enough to keep a record for these trades and are willing to cooperate for the documentation, you are making your life easy. The digital advertising business is also a big market for the bitcoin industry, and affiliates partner compensated in btc are common. It is good to show an invoice, it is better to show a contract. If you do not have a contract (which is common since all advertising deals are about ticking a check box on the website to accept terms and conditions), there are ways around that. If you are in that case, pm me. The black market Sorry guys, I can’t do much for you officially. Not that I am judging you. I am a libertarian myself. It’s just already very difficult to onboard legit btc adopters, so the black market is a market I cannot afford to consider. My company is regulated so KYC and compliance are key for me if I want to stay in business. Behind each case I push forward I am risking the credibility and reputation I have built over the years. So I am sorry guys I am not risking it to make an extra buck. Your best hope is that crypto will eventually take over the world and you won’t need to cash out anyway. Or go find a Lithuanian bank that is light on compliance and cooperative. The OTC buyer and the libertarian. Generally a very difficult case. If you bought your stack during your journey in Japan 5 years ago to a guy you never met again; or if you accumulated on https://localbitcoins.com/ and kept no record or lost your account, it is going to be difficult. Not impossible but difficult. We will try to build a case with everything else we have, and I may be able to onboard you. However I am risking a lot here so I need to be 100% confident you are legit, before I defend you. Come & see me in Geneva, and we will talk. I will run forensic services like elliptic, chainalysis, or scorechain on an extract of your wallet. If this scan does not raise too many red flags, then maybe we can work together ! If you mixed your coins all along your crypto history, and shredded your seeds because you were paranoid, or if you made your wealth mining professionally monero over the last 3 years but never opened an account at an exchange. ¯_(ツ)_/¯ I am not a magician and don’t get me wrong, I love monero, it’s not the point. Cashing out ICOs Private companies or foundations who have ran an ICO generally have a very hard time opening a bank account. The few banks that accept such projects would generally look at 4 criteria: *Seriousness of the project Extensive study of the whitepaper to limit the reputation risk *AML of the onboarding process ICOs 1.0 have no chance basically if a background check of the investors has not been conducted *Structure of the moral entity List of signatories, certificate of incumbency, work contract, premises... *Fiscal conformity Did the company informed the authorities and seek a fiscal ruling.
B. The tax issue I am not a tax specialist, but I can say that this year I have seen it all. Again I am not judging. You made $100m hodling, and still wouldn’t pay your taxes ? Your decision.I personally advise everyone to pay their taxes, but also to be generous, to give to charities. I mean you eventually made it. Good for you. What about you contribute to make the world a better place now? I will stop patronizing you. It’s just my 2cts, and it’s your money.
For the record, I am not into the tax avoidance business, so people come to me with a set up and I see if I can make it work within the legal framework imposed to me. First, stop thinking Switzerland is a “offshore heaven” Swiss banks have made deals with many governments for the exchange of fiscal information. If you are a French citizen, resident in France and want to open an account in a Private Bank in Switzerland to cash out your bitcoins, you will get slaughtered (>60%). There are ways around that, and I could refer you to good tax specialists for fiscal optimization, but I cannot organize it myself. It would be illegal for me. Swiss private banks makes it easy for you to keep a good your relation with your retail bank and continue paying your bills without headaches. They are integrated to SEPA, provide ebanking and credit cards. For information, these are the kind of set up some of my clients came up with. It’s all legal; obviously I do not onboard clients that are not tax compliant. Further disclaimer: I did not contribute myself to these set up. Do not ask me to organize it for you. I won’t. EU tricks Swiss lump sum taxation Foreign nationals resident in Switzerland can be taxed on a lump-sum basis if they are not gainfully employed in our country. Under the lump-sum tax regime, foreign nationals taking residence in Switzerland may choose to pay an expense-based tax instead of ordinary income and wealth tax. Attractive cantons for the lump sum taxation are Zug, Vaud, Valais, Grisons, Lucerne and Berne. To make it short, you will be paying somewhere between 200 and 400k a year and all expenses will be deductible. Switzerland has adopted a very friendly attitude towards crypto currency in general. There is a whole crypto valley in Zug now. 30% of ICOs are operated in Switzerland. The reason is that Switzerland has thrived for centuries on banking secrecy, and today with FATCA and exchange of fiscal info with EU, banking secrecy is dead. Regulators in Switzerland have understood that digital ledger technologies were a way to roll over this competitive advantage for the generations to come. Switzerland does not tax capital gains on crypto profits. The Finma has a very pragmatic approach. They have issued guidance- updated guidelines here. They let the business get organized and operate their analysis on a case per case basis. Only after getting a deep understanding of the market will they issue a global fintech license in 2019. This approach is much more realistic than legislations which try to regulate everything beforehand. Italy new tax exemption. It’s a brand new fiscal exemption. Go to Aoste, get residency and you could be taxed a 100k/year for 10years. Yes, really. Portugal What’s crazy in Europe is the lack of fiscal harmonization. Even if no one in Brussels dares admit it, every other country is doing fiscal dumping. Portugal is such a country and has proved very friendly fiscally speaking. I personally have a hard time trusting Europe. I have witnessed what happened in Greece over the last few years. Some of our ultra high net worth clients got stuck with capital controls. I mean no way you got out of crypto to have your funds confiscated at the next financial crisis! Anyway. FYI Malta Generally speaking, if you get a residence somewhere you have to live there for a certain period of time. Being stuck in Italy is no big deal with Schengen Agreement, but in Malta it is a different story. In Malta, the ordinary residence scheme is more attractive than the HNWI residence scheme. Being an individual, you can hold a residence permit under this scheme and pay zero income tax in Malta in a completely legal way. Monaco Not suitable for French citizens, but for other Ultra High Net worth individual, Monaco is worth considering. You need an account at a local bank as a proof of fortune, and this account generally has to be seeded with at least EUR500k. You also need a proof of residence. I do mean UHNI because if you don’t cash out minimum 30m it’s not interesting. Everything is expensive in Monaco. Real Estate is EUR 50k per square meter. A breakfast at Monte Carlo Bay hotel is 70 EUR. Monaco is sunny but sometimes it feels like a golden jail. Do you really want that for your kids? Dubaï
Set up a company in Dubaï, get your resident card.
Spend one day every 6 month there
Be tax free
US tricks Some Private banks in Geneva do have the license to manage the assets of US persons and U.S citizens. However, do not think it is a way to avoid paying taxes in the US. Opening an account at an authorized Swiss Private banks is literally the same tax-wise as opening an account at Fidelity or at Bank of America in the US. The only difference is that you will avoid all the horror stories. Horror stories are all real by the way. In Switzerland, if you build a decent case and answer all the questions and corroborate your case in depth, you will manage to convince compliance officers beforehand. When the money eventually hits your account, it is actually available and not frozen. The IRS and FATCA require to file FBAR if an offshore account is open. However FBAR is a reporting requirement and does not have taxes related to holding an account outside the US. The taxes would be the same if the account was in the US. However penalties for non compliance with FBAR are very large. The tax liability management is actually performed through the management of the assets ( for exemple by maximizing long term capital gains and minimizing short term gains). The case for Porto Rico. Full disclaimer here. I am not encouraging this. Have not collaborated on such tax avoidance schemes. if you are interested I strongly encourage you to seek a tax advisor and get a legal opinion. I am not responsible for anything written below. I am not going to say much because I am so afraid of uncle Sam that I prefer to humbly pass the hot potato to pwc From here all it takes is a good advisor and some creativity to be tax free on your crypto wealth if you are a US person apparently. Please, please please don’t ask me more. And read the disclaimer again. Trust tricks Generally speaking I do not accept fringe fiscal situation because it puts me in a difficult situation to the banks I work with, and it is already difficult enough to defend a legit crypto case. Trust might be a way to optimize your fiscal situation. Belize. Bahamas. Seychelles. Panama, You name it. At the end of the day, what matters for Swiss Banks are the beneficial owner and the settlor. Get a legal opinion, get it done, and when you eventually knock at a private bank’s door, don’t say it was for fiscal avoidance you stupid ! You will get the door smashed upon you. Be smarter. It will work. My advice is just to have it done by a great tax specialist lawyer, even if it costs you some money, as the entity itself needs to be structured in a professional way. Remember that with trust you are dispossessing yourself off your wealth. Not something to be taken lightly. “Anonymous” cash out. Right. I think I am not going into this topic, neither expose the ways to get it done. Pm me for details. I already feel a bit uncomfortable with all the info I have provided. I am just going to mention many people fear that crypto exchange might become reporting entities soon, and rightly so. This might happen anyday. You have been warned. FYI, this only works for non-US and large cash out. The difference between traders an investors. Danmark, Holland and Germany all make a huge difference if you are a passive investor or if you are a trader. ICO is considered investing for instance and is not taxed, while trading might be considered as income and charged aggressively. I would try my best to protect you and put a focus on your investor profile whenever possible, so you don't have to pay 52% tax if you do not have to :D
C. The cash out itself So you have accumulated patiently a good amount of wealth. For some of us who have been involved in crypto since 2010, it took years. Remember when BTC was stuck at 200$ for months? I personally feel like it was yesterday. There is no way you screw up your wealth by cashing out in a hurry or with low security standards. Here is how the cash out takes should place.
Full cash out or partial cash out? People who have been sitting on crypto for long have grown an emotional and irrational link with their coins. They come to me and say, look, I have 50m in crypto but I would like to cash out 500k only. So first let me tell you that as a wealth manager my advice to you is to take some off the table. Doing a partial cash out is absolutely fine. The market is bullish. We are witnessing a redistribution of wealth at a global scale. Bitcoin is the real #occupywallstreet, and every one will discuss crypto at Xmas eve which will make the market even more supportive beginning 2018, especially with all hedge funds entering the scene. If you want to stay exposed to bitcoin and altcoins, and believe these techs will change the world, it’s just natural you want to keep some coins. In the meantime, if you have lived off pizzas over the last years, and have the means to now buy yourself an nice house and have an account at a private bank, then f***ing do it mate ! Buy physical gold with this account, buy real estate, have some cash at hands. Even though US dollar is worthless to your eyes, it’s good and convenient to have some. Also remember your wife deserves it ! And if you have no wife yet and you are socially awkward like the rest of us, then maybe cashing out partially will help your situation ;) What the Private Banks expect. Joke aside, it is important you understand something. If you come around in Zurich to open a bank account and partially cash out, just don’t expect Private Banks will make an exception for you if you are small. You can’t ask them to facilitate your cash out, buy a 1m apartment with the proceeds of the sale, and not leave anything on your current account. It won’t work. Sadly, under 5m you are considered small in private banking. The bank is ok to let you open an account, provided that your kyc and compliance file are validated, but they will also want you to become a client and leave some money there to invest. This might me despicable, but I am just explaining you their rules. If you want to cash out, you should sell enough to be comfortable and have some left. Also expect the account opening to last at least 3-4 week if everything goes well. You can't just open an account overnight. The cash out logistics. Cashing out 1m USD a day in bitcoin or more is not so hard. Let me just tell you this: Even if you get a Tier 4 account with Kraken and ask Alejandro there to raise your limit over $100k per day, Even if you have a bitfinex account and you are willing to expose your wealth there, Even if you have managed to pass all the crazy due diligence at Bitstamp, The amount should be fractioned to avoid risking your full wealth on exchange and getting slaughtered on the price by trading big quantities. Cashing out involves significant risks at all time. There is a security risk of compromising your keys, a counterparty risk, a fat finger risk. Let it be done by professionals. It is worth every single penny. Most importantly, there is a major difference between trading on an exchange and trading OTC. Even though it’s not publicly disclosed some exchange like Kraken do have OTC desks. Trading on an exchange for a large amount will weight on the prices. Bitcoin is a thin market. In my opinion over 30% of the coins are lost in translation forever. Selling $10m on an exchange in a day can weight on the prices more than you’d think. And if you trade on a exchange, everything is shown on record, and you might wipe out the prices because on exchanges like bitstamp or kraken ultimately your counterparties are retail investors and the market depth is not huge. It is a bit better on Bitfinex. It is way better to trade OTC. Accessing the institutional OTC market is not easy, and that is also the reason why you should ask a regulated financial intermediary if we are talking about huge amounts. Last point, always chose EUR as opposed to USD. EU correspondent banks won’t generally block institutional amounts. However we had the cases of USD funds frozen or delayed by weeks. Most well-known OTC desks are Cumberlandmining (ask for Lucas), Genesis (ask for Martin), Bitcoin Suisse AG (ask for Niklas), circletrade, B2C2, or Altcoinomy (ask for Olivier) Very very large whales can also set up escrow accounts for massive block trades. This world, where blocks over 30k BTC are exchanged between 2 parties would deserve a reddit thread of its own. Crazyness all around. Your options: DIY or going through a regulated financial intermediary. Execution trading is a job in itself. You have to be patient, be careful not to wipe out the order book and place limit orders, monitor the market intraday for spikes or opportunities. At big levels, for a large cash out that may take weeks, these kind of details will save you hundred thousands of dollars. I understand crypto holders are suspicious and may prefer to do it by themselves, but there are regulated entities who now offer the services. Besides, being a crypto millionaire is not a guarantee you will get institutional daily withdrawal limits at exchange. You might, but it will take you another round of KYC with them, and surprisingly this round might be even more aggressive that the ones at Private banks since exchange have gone under intense scrutiny by regulators lately. The fees for cashing out through a regulated financial intermediary to help you with your cash out should be around 1-2% flat on the nominal, not more. And for this price you should get the full package: execution/monitoring of the trades AND onboarding in a private bank. If you are asked more, you are being abused. Of course, you also have the option to do it yourself. It is a way more tedious and risky process. Compliance with the exchange, compliance with the private bank, trading BTC/fiat, monitoring the transfers…You will save some money but it will take you some time and stress. Further, if you approach a private bank directly, it will trigger a series of red flag to the banks. As I said in my previous post, they call a direct approach a “walk-in”. They will be more suspicious than if you were introduced by someone and won’t hesitate to show you high fees and load your portfolio with in-house products that earn more money to the banks than to you. Remember also most banks still do not understand crypto so you will have a lot of explanations to provide and you will have to start form scratch with them! The paradox of crypto millionaires Most of my clients who made their wealth through crypto all took massive amount of risks to end up where they are. However, most of them want their bank account to be managed with a low volatility fixed income capital preservation risk profile. This is a paradox I have a hard time to explain and I think it is mainly due to the fact that most are distrustful towards banks and financial markets in general. Many clients who have sold their crypto also have a cash-out blues in the first few months. This is a classic situation. The emotions involved in hodling for so long, the relief that everything has eventually gone well, the life-changing dynamics, the difficulties to find a new motivation in life…All these elements may trigger a post cash-out depression. It is another paradox of the crypto rich who has every card in his hand to be happy, but often feel a bit sad and lonely. Sometimes, even though it’s not my job, I had to do some psychological support. A lot of clients have also become my friends, because we have the same age and went through the same “ordeal”. First world problem I know… Remember, cashing out is not the end. It’s actually the beginning. Don’t look back, don’t regret. Cash out partially, because it does not make sense to cash out in full, regret it and want back in. relax. The race to cash out crypto billionaire and the concept of late exiter. The Winklevoss brothers are obviously the first of a series. There will be crypto billionaires. Many of them. At a certain level you can have a whole family office working for you to manage your assets and take care of your needs . However, let me tell you it’s is not because you made it so big that you should think you are a genius and know everything better than anyone. You should hire professionals to help you. Managing assets require some education around the investment vehicles and risk management strategies. Sorry guys but with all the respect I have for wallstreebet, AMD and YOLO stock picking, some discipline is necessary. The investors who have made money through crypto are generally early adopters. However I have started to see another profile popping up. They are not early adopters. They are late exiters. It is another way but just as efficient. Last week I met the first crypto millionaire I know who first bough bitcoin over 1000$. 55k invested at the beginning of this year. Late adopter & late exiter is a route that can lead to the million. Last remarks. I know banks, bankers, and FIAT currencies are so last century. I know some of you despise them and would like to have them burn to the ground. With compliance officers taking over the business, I would like to start the fire myself sometimes. I hope this extensive guide has helped some of you. I am around if you need more details. I love my job despite all my frustration towards the banking industry because it makes me meet interesting people on a daily basis. I am a crypto enthusiast myself, and I do think this tech is here to stay and will change the world. Banks will have to adapt big time. Things have started to change already; they understand the threat is real. I can feel the generational gap in Geneva, with all these old bankers who don’t get what’s going on. They glaze at the bitcoin chart on CNBC in disbelief and they start to get it. This bitcoin thing is not a joke. Deep inside, as an early adopter who also intends to be a late exiter, as a libertarian myself, it makes me smile with satisfaction. Cheers. @swisspb on telegram
Why Bitcoin is NOT a scam / lottery / bubble / Tulip mania / whatever
So, another thread has hit /all and brought another influx of people new to Bitcoin. I usually don't pay much attention to all negative comments, but since I have some extra time today and nothing better to do... I wanted to address the main thing that often pops up in these threads. Namely: is Bitcoin a scam? First of all, if you asked me this question in few years back (2015 when price crashed back to $200)... I would've said: maybe. At that point jury was still out - I often like to quote Satoshi's genius observation:
In twenty years, Bitcoin will either be worth quite a lot or nothing
With marketcap below $4B Bitcoin was still an easy target. We all remember MtGox scandal, government dumping Bitcoin seized from Silk Road for $48m (boy... did they dropped the ball with that one ;), discussions in Senate etc. etc. Meaning - at that point - it was still possible for rogue actor to pump and dump and break the whole system beyond repair. But, it is end of 2017 now... and Bitcoin is worth over $7000 (boy, will it be fun when it's over 9000 ;). All this results in Bitcoin ecosystem being way more powerful now than few years back. Not only there is daily trading volume of over $3 BILLION going through Bitcoin... There are now Bitcoin companies that are worth over $1B. Hell, there are people who are Bitcoin billionaires. Which brings us to the main point:
Bitcoin is genuine technological revolution, accompanied by tangible merits. In a nutshell, Bitcoin is a scam in 2010s as much as Internet was a scam in 1990s.
1 Bitcoin is valuable because you can do "technologically new" things with it. Never before in the history of humanity we had TRULY DECENTRALIZED "asset" that had properties traditionally associated with currencies (previously always backed by someone / government) or commodities (like gold).
Bitcoin is a store of value. You can easily hold it with your private key and NOBODY can take it away from you. Compare that to having $1 in the bank - government can block it. If you have $1 and you hold it in cash, government can still take parts of it from you through inflation (dollar has lost 99% of it's value from 1950s). Also, compare Bitcoin to gold - it's MUCH easier to store. And much easier to turn into medium of exchange.
Bitcoin is medium of exchange. You can buy stuff directly in Bitcoin. Numerous websites and people around the globe now accept it. You can easily transfer it. Wherever you are in the world, you can instantly send Bitcoin to other people. This is not a big deal for people in first world countries as they have numerous options. But for majority of the world this is a HUGE deal. More than 50% of population is without bank account (let along online bank account) and have no way to participate in global economy.
Bitcoin is unit of account. If you have Bitcoin you can exchange it for whatever currency you want. In a sense Bitcoin is MORE VALUABLE than native currencies of MANY countries. If you are in Venezuela right now, would you rather hold Bolivar or Bitcoin? It's kinda no-brainer, right?
I hope this overview gave you good insight into why it's pretty much impossible for Bitcoin to be scam at this point. Like, I understand that recent HUGE price jump can influence people to see Bitcoin as Tulip mania. But Tulip mania was a scam because nothing substantial changed with tulips over night. People just started paying more and more for them. Plus, you could always produce more Tulips. With Bitcoin you have genuine technological revolution behind. If you own Bitcoin you can do stuff you never could do before in various parts of the world. It's like banking infrastructure on steroids really. Plus, unlike Tulips, Bitcoin supply is limited. Hell, even gold - you can always mine more of it. Bitcoin is fixed at 21 million, for all eternity. Any question - fell free to hit me up. Always glad to help newcomers to Bitcoin! EDIT: One of the responses says - OK, we can agree Bitcoin is obviously not a scam. But, is it a bubble? Consider that Bitcoin has been a bubble for last 8 years. It was bubble when it was $2. It was bubble when it was $30. I thought it was bubble when it broke $2000. Hell, to me stock market is in the bubble. I like to compare Bitcoin to Internet... lots of people thought "Internet is a bubble"... yet 20 years later, here it is... completely changing humanity. In that sense I think Internet is best comparison to Bitcoin... time will tell whether or not Bitcoin is right now in the bubble... but I strongly believe that in 20 years Bitcoin will be above today's levels. Now, if you share my long term prospects - then "Bitcoin bubble" will never be too much of an issue for you. Like - I don't buy in batches... I dollar cost average my BTC investment (you can look through my history for more info). See also Max_Thundernice observation of using Bitcoin as vehicle for protection against inflation... EDIT: I've incorrectly presented amount of money pumped into Bitcoin... read this for explanation. EDIT: I also want to emphasize one thing:
DO NOT go ALL IN hoping that Bitcoin will hit whatever mark. Especially DO NOT BORROW MONEY and GO ALL IN unless you are ready to forget about whatever money you've invested for next 20 years.
95% of people I know that have been trading Bitcoin have LOST most of their money. I know bunch of people who bought at $20 and then sold at $2. Then there is a group that bought at $800 and sold at $200. There are also those on other side of equation... there was short worth tens of millions of $$$ earlier this year when BTC was breaking $1100. Crazy thing - Bitcoin price did drop few days later... but that was AFTER short was wiped out and whoever did it lost TENS OF MILLIONS of $$$. Profiting is not only about being right about eventual price... it's also about knowing when it'll happen. Final EDIT: Blow away by all the feedback. That's why I like to post here - I get interact with people and in the process learn something new. I'll be monitoring my Inbox so if you have more questions just drop them here. And if you like my writing, visit my motivational / various blog that I update occasionally.
I am a casual observer of bitcoin and how it operates, however, I cannot understand what role Mt. Gox interacts with the bitcoin community and how it has effected bitcoin in recent news. Any simplification would be greatly appreciated! edit: Also, what are the long term ramifications of the current Mt. Gox situation?
Hodl Hodl launches new project called "Predictions" on TESTNET
From the related blog post (https://medium.com/@hodlhodl/predictions-by-hodl-hodl-available-on-testnet-83f8ff97a98d): Today we’re officially announcing our project “Predictions by Hodl Hodl” which is now available on TESTNET — predictions.cc. In this blog post we want to give instructions, explain how everything works, and give you some use-cases for our new project. Let’s get everything in order. Overview Predictions is a project by Hodl Hodl that is a marketplace where you can go and create a contract with someone else, where the conditions of the payout depend on the outcome of a certain event. The payouts are only made in Bitcoin. Let’s say you want to predict that the price of Bitcoin will be above $15,000 by July 2019. The other party may disagree with you. The condition of the contract states that each one of you locks 1 Bitcoin into escrow and whoever turns out to be correct in the prediction of the price of Bitcoin gets 2 bitcoins in July. We provide you with a solution to make this possible:
An offer desk
Simply put, it’s a place where you can find other users’ predictions and create your own;
For each contract we generate two multisig addresses, where the funds are being stored safely during the prediction contract, with two out of three keys needed for release.
In case of a disagreement between the two parties on the prediction contract’s outcome, Hodl Hodl intervenes and resolves the dispute. Use cases The use case described above is the simplest one. Here are just a few more examples from an infinite number of options:
You can buy public company shares, and try predicting the price of that stock. Choose any public company, e.g. Google, and predict the price of its shares by, for example, the end of 2019.
If you’re long on renewable energy, you would probably expect the price of oil to fall at some point — predict when exactly.
Payouts to creditors of MtGox
If you’re a MtGox creditor (a Bitcoin exchange that was hacked and went bankrupt back in 2014) and awaiting the payout, you might be interested in creating a contract that says “creditors of MtGox will not be paid anything in 2019” even though your expectation is that they will be. Thus, if you get paid by MtGox, you receive bitcoins from them, but lose the ones you locked in your contract. If you don’t get paid by MtGox, you’d get some of the bitcoins that will be sort of a compensation for a longer wait period.
The outcome of the Champions League final
You can make the final more exciting by creating a prediction of who gets to be the Champions League winner in 2019.
Peter McCormack VS Craig Wright
If you follow these kinds of events and want to support either side, make a prediction of who wins the trial, or whether it goes to trial at all. Offer creation To make a prediction offer, simply press the “Add offer” button on the front page of the website, or on “My offers” page. When creating offers, you have to describe the event, the outcome you predict, how many bitcoins you would like to lock in escrow and how much your counterparty should lock in escrow. We made the process as simple as possible, and creating offers won’t take much of your time. Please note:
Every offer is pre-moderated by Hodl Hodl admins Your offer should not describe anything illegal You should be as specific and unambiguous as possible when describing the event outcome
Contract workflow When you create an offer and someone accepts it, or you accept an existing offer, a contract is created. Let’s analyze this step by step. 1) Contract is created; Right after the contract is created, Hodl Hodl generates two unique escrow addresses. It’s worth mentioning: We support native Bech32 SegWit addresses. This means you can send and receive the funds from escrow to Bech32 addresses when the contract is completed We generate P2SH-P2WSH SegWit multisig escrow addresses. For every contract we generate multisig addresses in SegWit format. 2) Both parties make deposits; Both offeror and acceptor make deposits to the escrow addresses we present them with, sending funds from their own Bitcoin wallets. 3) Waiting for the event to take place; When both counterparties have sent bitcoins to the escrow addresses and transactions are confirmed, we inform users that everything is alright, and we’re waiting for the event to take place. 4) Acknowledging the contract outcome; Once the event has happened, we ask both parties to decide who was right and who was wrong regarding the prediction made. Both parties are given 3 days to acknowledge this. If there’s a disagreement between them or one party doesn’t make the decision as to the outcome of the contract within 3 days, a dispute is started. It’s also possible for both parties to declare a draw — in this case, both parties are able to refund the funds they’ve previously locked in escrow. 5) Prediction contract is now complete! If the parties agreed on the contract outcome, the party that predicted the outcome correctly can release all locked funds from the escrow to their own Bitcoin wallet: both the funds the party itself locked and the funds that the counterparty locked. That’s it, the workflow is as simple as that. Dispute case It’s worth asking, what exactly happens in case of a disagreement between the two parties in a prediction contract? Say we have a dispute in which case Hodl Hodl intervenes and resolves the dispute by:
Analyzing the prediction contract;
Verifying the event outcome;
Deciding, who predicted the outcome correctly.
Administrator has the following options: either resolve the dispute in favor of one of the counterparties, or to recognize a draw. We do not expect this scenario to be difficult or waste our resources, because every offer is pre-moderated and we apply strict rules for offer creation. That’s it A new milestone begins in our company’s development, we would appreciate support from your side: please share this news, send us suggestions and bugreports about this project, and be sure you’ll see more exciting things to come very soon. Predictions on MAINNET The mainnet version is going live in June 2019, follow our news to stay informed!
Apologies for typos and grammatical errors; wanted to get this out as soon as possible for those that weren't able to watch the live stream. Cleaned up formatting to make it more readable.
While this isn't a 100% word-for-word transcript, the overtone of the meeting should have been conveyed. SEC and CFTC want protections for consumers, but don't want to outright ban crypto. I was under the impression that both agencies were well-educated, but understaffed. They both want to introduce protections for customers and investors and go after scam artists, but don't want to impose any restrictions or regulations that would be bad for crypto as a whole (both from a security perspective, and a technological innovation perspective). Overall a huge positive.
Touched on the definition, use, history, all-time-high, market cap, negative news
Mentioned that the techonology has positives to transform the financial landscape, transfer risk
Volatility, 1000% rise, 60% fall, compared to DOW Jones
touched on scam artists/hackers, undereducated market participants
mentioned there are regulatory gaps, potentials for abuse
neither SEC/CFTC has authority to police all aspects
mentioned some analogies to the dotcom bubble
may be used to fund illicit activity
says they need to do more to get ahead of the curve
"don't forget your day jobs to pursue and punish misconduct", mentioned the 3 big banks being punished recently
crypto brings us to a new age, but don't overlook the princilpes of going after the bad guys and being tough
estimated highest market cap $700 bn; promising new technology
great efficiencies, including capital markets; seek to WORK WITH those who seek to bring innovation
Crypto currencies - replacement for dollars
widely known introduced as substitutes
make it easier and cheaper ot buy and sell goods
verification and fees/costs eliminated
ICOs - stock offering
stocks and bonds, under a new label
security being offered is a virtual token
"if it functions as a security, it IS a security"
doesn't mean you are investing in blockchain ventures
market have less oversight than traditional securities
if it looks like a stock exchange, don't take comfort
no capital and conduct requirements
many ICOs are conducted illegally
creators not following securities laws
those who try to circumvent the SEC are in their crosshairs
do not have control over the regulation of the markets that exchanges exist in
"do not view this as a request for increased SEC jurisdiction"
"I believe every ICO I have seen is a security"
we are working with the DOJ to enforce laws
story about how his kids recently showed an interest in Bitcoin
"we must foster their interest, but crack down hard on those that abuse"
response should have several elements:
learn as much as we can - Lab CFTC to engage with innovators
put things in perspective - as of this morning, Bitcoin 113 bn market cap. less than the market cap of McDonald's. sometimes compared to gold; value of gold dwarfs Bitcoin at 8 trillion market cap
educate consumers - podcasts, webinars, visits to libraries, outreach to seniors
legal authority - "The CFTC does not regulate the dozens of cryptocurrencies"; through their authority, they have enforcement over spot coin markets; analyze manipulation
tough enforcement - they have already launched civil actions, more will follow overall take: wants to work to foster education but introduce protections
Suggesting that perhaps one or both of SEC/CFTC may or should have full control
we should all come together and have a coordinated plan for dealing with the virtual currency market
far from how the stock market is addressed
asked by Crapo if there needs to be additional measures, responded "we may"
FINCEN has been active with AML/KYC
there isn't a comprehensive structure to deal with this
cross-border and international concerns; what challenges?
international nature means patchwork is not sufficient
FINCEN reports that these currencies are used for
encourages FINCEN to continue pursuing this
Markets have been global
Challenge working with overseas and bringing regulations
Challenge requires a lot of new thinking
Encourage to work together to decide how the regulation should look
ICOs raised $4bn globally
SEC focused to protect investors
not clear how much was raised in the U.S., due to unregulated basis; "significant portion"
cooperation between SEC and CFTC regulating Bitcoin but doesn't mention consumer protection bureau CFPB
we're in the enforcement perspective, i can check on that
report that "SEC has stopped enforcement actions against wall street firms"
"I saw that report"; found it annoying; gestation period is 22-24 months, latency period
we've put out a comprehensive report; i'm happy with that
we're pursuing our securities laws vigorously
troubled by a statement "SEC might lose 100 of its enforcement staff by not hiring those who leave"
how are you going to stay on top of everything else we've talked about as well as virtual currencies
personnel is my biggest challenge at the moment
we have a hiring freeze - natural cost, trouble finding people, etc
would receive the "greatest return for additional bodies"
is that the message that you're not the cop it should be?
not at all
I hope you will ask for money and flexibility
I've been very straight about money and value that can be added
Federal reserve is the biggest bank regulator we have
how are you going to put together a task force to deal with crypto currencies before this gets out of control
treasury secretary has brought us together to talk about this
"the funny thing is, they only work for their purported purpose if they're integrated with the financial service"
we are going to be coordinating responses; needs to be clear as to what we're doing
do you need additional legislation
we may be back to ask for that
virtual; go to a virtual doctor, virtual currency, etc
"i started out with pencil and paper in school"
Lack intrinsic value, lack liquidity
gained money going up, lost money going down
don't know where the floor is
relation between Bitcoin value and the cost of mining
charts plotting the correlation
the floor isn't zero, because there is some cost
"think there is something to the value of the crypto exchange"
"I'm not seeing the benefits manifesting themselves in the market yet"
"I'm interested in protecting the main street investors; they should see that"
in the securities world, there are rules that dictate how much you have to tell someone about what they're investing in
we will give you every tool you need to do your job and to hire every person you need to execute that
(essentially) do you have any cryptologists?
emerging area; could always use more horsepower
hired the industry's first "chief innovation officer"
started Lab CFTC
formed virtual currency task force
brought 3 cases against bitcoin fraudsters
used bypass authority for additional resources (13% over budget)
Bitcoin isn't the only one; there are seemingly new ones every day
are you tracking them all?
is someone looking at the long-term systemic effects
eerily similar to late-90s derivatives
Bitcoin is one of many; important to know that many are fraudulent
"MyBigCoin" which became known as "MyBigCon" - Ponzi scheme; we went after them
relatively small market, but we have to watch it
we have had to watch it because they're integrated with the markets we do oversee
on systemic - agrees with Giancarlo
if people are getting ripped off, that is an issue
"I used a pen and pencil as well"
fascinating to see how things are moving
we keep coming back to dollars and cents
new type of exchange; bartering
could avoid determination of the value of the dollar and cents
how do you tax? how do you recognize income?
seems that have to be filled, but basics that a lot of us don't understand
how do you respond to ICOs?
definition of a security is broad
"when you're offering me something and i give you money and the purpose of me giving you money is to profit from your actions going forward"
is Bitcoin a commodity or a security or is it both?
has characteristics of both
is a "medium of exchange, store of value, or a means of account"
we hear a lot of people holding - "HODL - hold on for dear life"
30 year old niece bought some years ago, is holding on
in this regard, it's a commodity
we are looking for fraud and manipulation so that people like his niece are protected
Jan 26th Bloomberg "SEC weighs a big gift [...] blocking class action lawsuits"
wants to get a straight yes/no - "do you support this enormous change in SEC policy"
bottom line - "I can't dictate whether or not this issue comes to us, but I'm not anxious to see a change in this area"
change can't happen without your approval
I'm only 1 of 5 votes
I'd guess there will be at lest 2 votes against it
It would take a long time
I'll let you get away with that
SEC's mission is to protect; not throw under bus
advisers that put fees, kickbacks for recommending product ahead of interest of clients
I want to know that you will not weaken the protections for retirement savers
that's what I'm trying to do - the relation between a broker and their client is regulated by no less than 5 people (the SEC)
want to make sure you're not jeopardizing investors
insufficient standard, lack of clarity, "the standard is only as good as the remedy available"
what dollars do you actually collect when someone does you harm?
if you want to strengthen it, i'm with you
who pays for frivolous lawsuits?
regulatory arbitrage, hard to trace
South Korea, China
was a largely unregulated space
each country is now taking regulatory measures
there's a lot happening beyond the understanding of your average investor
what do we need to do to combat this?
regulatory arbitrage, price arbitrage
different regional and international market
regulation - i think some time ago there was a perception Bitcoin was off the regulatory grid
enforcement / ICOs - we're using our full authority
we will go after misconduct
pump and dump
unregulated exchange, ability for price manipulation
we've taken 3 cases in the last few weeks, more to come
digging deep, learning a lot, seeing a lot
we are working the beat hard
what about retail investors?
formed partnership with CFPB (Consumer Financial Protection Bureau)
Bitcoin is one of the most frequently searched term on library computers
enhancing outreach to educate people coming to the library
getting the word out - financial intermediaries
are you protecting retirement investments
seniors seem to be the prey of choice - not just for Bitcoin
we seek to prosecute these predators
article from Kentucky "Bitcoin is my potential pension"
what would you do to protect them?
troubling, which is why we're putting out so much material
"if it sounds too good to be true, it is"
"if you're giving them money, you'd better be prepared to lose it"
disruptive technologies, but you shouldn't bank on it
pumping all of your money into a disruptive technology has a very high probability of not working out
"there will be winners, but there will be many losers"
want to ensure it's not used against terrorist groups and countries like N Korea
working with FBI; will require cooperation among multiple organizations
also has a dark web working group
when was the last time you bought a fund?
a year or two ago, index funds
did you read the fine print?
not cover to cover
so what's the point of all this over-disclosure if nobody's reading it?
why do we want to do the same for Bitcoin?
adequacy of full disclosure
"I don't think the disclosure we have right now works"
good for lawyers / financial advisers, but right now, we over-disclose
how far should we go to protect people from themselves?
how far do you think we ought to go here? should we just go after the shysters and fully disclose?
what is the right way to deal with this new technology?
we want to deal with ICOs; don't want to go too far
our securities laws work pretty well, but disclosure can be improved
we have to have disclosure that works, and helps the helpless people
if we see the same continued growth, we may see the market cap at 20 trillion dollars by 2020
we may see the same transformation take place
we are going to have to wrap our hands around this
not sure what the right answer is, but this could systemically rise to an FSOC-level event
if this does keep going, is this a systemic issue?
want to go back to separating these two things
should regulate ICOs like securities
false disclosure is fraud, period
so much more to be done
Ethereum - creating "file sharing or extra computer time"
are these in your realm?
if it's an ICO that promises to deliver server time, it's a security
worried that we need a much more coordinated effort
could be as transformational as wireless technology
it is important; we are all working to understand our authorities
bitcoin futures are different; fully transparent and regulated, compared to Bitcoin that's opaque and unregulated
ICOs should be taken under our regime
Putting aside Bitcoin and other distributed ledger, what do you think the value is?
Without Bitcoin, there would be nothing. everything grew out of it.
applications range from financial services and banking, to charity dollars are spent, refugee, access to banking for those who don't have it
66 million tons of soybeans were traded using Bitcoin
allow regulators to do really close market surveillance with precision
challenges, but the potential is significant
agree the potential is significant
hope people pursue it vigorously
DOW Jones fell 4.6%; dollar seen 2% inflation or less; Bitcoin seems to be very volatile in comparison
we have seen volatility but in our world, we're used to it
emergence of futures to provide those who are exposed to it
don't really know what's driving the volatility
not related to foreign currencies
must be something different
lot of volatility compared to what they're supposed to be a substitute for
(essentially) so how does that bode to its claim?
it would not be a very effective means of exchange
with the volatility and delays, there's a significant risk
(quick shout out to) rogue nations, hackers, etc
under what circumstances do the SEC and CFTC have a role in regulating this?
fraud and manipulation - will not hesitate to take authority
what about manipulating to avoid U.S. sanctions?
I'll have to look into that
are there gaps that could create vulnerabilities?
part of a virtual currency task force; includes the fed and FINCEN
meeting with FINCEN this week to get some discussion of cooperation started
seen increase in ICOs; investors using digital tokens
grew from $96mil in 2016 to $4bil in 2017
celebrity promotion - Floyd Mayweather, Kardashian, et al
investors may not understand true risk when they see a product promoted by celebrities
we put out an alert that if you promote a security, you are taking on securities law liability
can you walk us through why the SEC is not comfortable with approving ETFs with crypto currencies?
we've made it clear that there are some issues - price discovery, custody, volatility
don't want to approve an ETF product with a cryptocurrency underlier without working out these issues
don't ETFs mitigate those concerns? are crypto currencies different?
MGT act - modernizing government technologies
create a fund for federal agencies to rid themselves of legacy technology
allows access to dollars; move to cloud
i would be delighted that there isn't a SEC/CFTC hack in the papers soon; advise strengthening cyber security
Kodak and Burger King investments
companies are using block chain as an opportunity to pump up stock prices
Long Island Ice Tea - Long Blockchain
nobody should think it's okay to chain your name to something that contains block chain when you have no idea what you're doing
any time there's something new that can raise the value of their stock without the underlying goods being there, it's not good
ICOs misrepresenting their affiliation where there are wild claims
"Our big task is bringing in enforcement cases and letting people see that"
3bn Bitcoin have been hacked, $500bn hack weeks ago, MtGox
what can buyers do to get their money back?
when you engage in investing online with an offshore entity, the chances that we can do anything to get your money back are very low
for the underlying spot markets, we don't have the authority to enforce safeguards and protections; this is a problem
"It's the old axiom "buyer beware"."
(in regards to the stock market) "Is this perhaps more than ordinary correction?"
I asked my staff and the federal government the same question
nothing to indicate any of our systems didn't indicate properly
largest volume since 2016
Neither single stock nor circuit breakers triggered
Nothing that came out of this are concerning
Is it profit taking? Is it a spook?
Interest rates? Fed has info we don't have?
Economy high, unemployment low?
Combination? Can we really say?
I can't really say. Lots of opinions.
Our job is to look at the systemic risks.
I've not seen anything.
"Markets up? More people bought than sold. Market down? More people sold than bought."
Markets are very complex. Fundamentals are sound. Doesn't appear to be any significant breeches.
Some ICOs are legitimate, some are just Ponzi schemes
"It's now so bad that Facebook recently banned all ads for virtual currencies"
How do we make ICOs safer?
Companies raised more than $4bil
How many companies registered with SEC?
Can you say just a word as to why that's so?
the gatekeepers haven't done their job. we've made it clear what the law is.
there are thousands of private placements. we want them to raise capital. but we want them to do it right.
folks somehow got comfortable that this was new and it's okay.
There was a critical case in Japan where the judge ruled that we cannot "own" Bitcoin, according to the article below, because, among other things, Bitcoin does not fill a physical space. We need to ask the Trustee to challenge this, not only for our claims against MtGox, but also because this line of thinking is very dangerous. It could set precedence that all financial instruments are not owned, and therefore, cannot be stolen. Maybe such types of theft fall into another category of law? Furthermore, we are Depositors, not creditors. Does anyone have any connections to Masumi Krachi? It seems that this case could probably be overturned by a higher court today, now that governments have a better understanding of how Bitcoin works.
The judge in the case, Masumi Kurachi, ruled that the Japanese law only allowed for proprietorship of tangible entities that occupy space and which allow for exclusive control over them.
Why the "Trustee" sold YOUR BTC/BCH now in quiet and on open Markets..?
Dear Creditors! Finita la Commedia with the trustee's claims to act in the best interests of Mt.Gox creditors. RIP. We need to URGENTLY act collectively on this revelation in a manner that will make SURE creditors interests are upheld in this bankruptcy process and justice is made. As the matters stand now we are drifting in the wrong direction.
1. Mt.Gox trustee sells 35,841 Bitcoin and 34,008 Bitcoin Cash for a total of 42,988,044,343 JPY (~405,167,934 USD).
Why now and not before distribution in couple of years?
Why has he decided that $10K/btc is a "high" price? What if in a year 1BTC worth $100k? What he will say then?
Why not sell OTC to avoid market crash?
Why not disclose beforehand?
Why dump on market and not put limit sell order?
Why is this magic number? Why not sell 100,000 BTC?
This is because the total amount of claims that have been accepted until now is 45,609,593,503 JPY with YOUR bitcoin price fixed by the trustee in 2014 at 50,058.12 JPY (~471 USD). All this because the trustee wanted to be "in compliance with Japanese Bankruptcy Laws." not taking into account the reality of deflationary crypto assets. After the current sell-of by the trustee, he has a total of 44,952,982,218 JPY in fiat assets almost enough to pay all the accepted claims of creditors by fixed price of 50,058.12 JPY (~471 USD) per BTC. 2. All Bitcoin Cash and other forks that belongs to creditors has just been unilaterally confiscated by the trustee's decision in favor of Mark Karpeles and other Gox shareholders with the following decision on page 12 par. II.3 of latest meeting report:
"It is my understanding that the cryptocurrencies split from BTC of the bankruptcy estate belong to the bankruptcy estate."
Do you see where this is drifting? 3. Moreover, the trustee in the last creditors meeting report on page 12 paragraph II.2 Says:
With the trustee now playing a role of amateur shady surprise trader on open markets, we are in a worse situation then we have thought. Just FYI, this "trader" have panic sold 18,000 (50%) of all BTC he sold at near bottom prices at around February 5 crashing the market even further. If this is not a blatant market manipulation then this is utter incompetence. See this: https://twitter.com/matt_odell/status/971432146656202752 So at the current trajectory the trustee is planning to give ~24,750 user victims of Mt.Gox fiasco ~45 billion JPY (~430 Million USD) and Mark Karpeles with other Gox shareholders the remaining 166,344 Bitcoin with 168,177 Bitcoin Cash with the remaining forks! Is this justice? Does this scenario suit US? NO! All this bogus conduct is justified by the trustee "to be in compliance" with existing outdated Japanese bankruptcy laws. Common sense, justice, moral values, honor or any other value besides what's in the outdated "Japanese bankruptcy law" does not play any role here. These people dragging feet for years while letting Mark Karpeles get away with the biggest scam in crypto history. Remember the "it's only technical" explanations while continuing to accept deposits from his own users while he perfectly well knows that his company is INSOLVENT? Now it got to the point that this masterpiece Mr. Karpeles claims that because the remaining fiat value of btc left is much higher today then the value of all the btc his company possessed in 2014 it is somehow makes Mt.Gox "solvent". Huh? Didn't he loose more than 75% of all crypto assets he held and this state remains to this day? Yes? Then his company is INSOLVENT! Period. Any other type of bogus calculation to make a thief rich and proud of himself on the misery of tenth's of thousands of users whose trust he has abused is nothing short of preposterous and should be challenged in the supreme court at the very least!
So what can be done? I propose the following: A. Prepare what ever necessary legal proposal to change the bankruptcy law in Japan to take into account the new reality of deflationary monetary assets/currencies. The Japanese bankruptcy law as it stands today is one sided, outdated and not reflecting on the reality of existence of appreciating (deflationary) assets like crypto, some stocks, real estate in a growing market. We need a specific change that when the bankruptcy deals with holding appreciating assets then the initial asset exchange rate to JPY ($483) will be used as an "assessment" price only to determine the Pro-Rata % amount of each creditors portion of the assets at the time of bankrupt entity's collapse. The "actual" exchange rate will be determined by the assets price at the time of liquidation of those assets for JPY or distribution. In this case the creditors will receive their rightfully owned percent of the assets in the time of distribution/conversion. This is the only just way to avoid a scenario when a bankrupt insolvent entity suddenly claims to become "solvent" during the process of bankruptcy proceedings because of prematurely determining the exchange rate of the assets before hand. B. Prepare what ever needed application to Japans supreme court to freeze any distribution to Mt.Gox shareholders until the necessary amendments to the bankruptcy law are passed. C. Stop the Mt.Gox trustee trader from selling more BTC in a surprise and anonymous manner. Until the final ruling by the supreme court about the belonging of the crypto assets held by the trustee either to Mt.Gox creditors or shareholders is decided. The Mt.Gox Trustee has no right to sell or trade with these assets as he sees fit. D. Prepare a lawsuit against MtGox/sharehoders for unjust enrichment/conversion and get a preemptive lien/garnishment against the distribution that might go to them. (proposed by jespow). E. We as Mt.Gox creditors are not organized in due manner to effectively enforce our interests. We need one UNIFIED representative body to act on our behalf in this bankruptcy saga. I propose we set up for all creditors a voting process through which we will be able to elect "Mt.Gox creditors representative counsel". People we absolutely trust to think and act in accordance with the best interests of the creditors. These people can be big creditors (for example, Josh Jones CEO and Founder of Bitcoin Builder), Other people that are not creditors but have proven themselves over the years to be on the side of the creditors like Jesse Powell jespow the CEO and owner of Kraken, he has done a lot over the years to help us. You can read his proposals on here: https://www.reddit.com/mtgoxinsolvency/comments/7dyr74/re_inquiries_about_mtgox_disbursements_and/ Unless we step up our organizational game it's game over. I think the best and easiest for creditors would be communicating by email: E1. We have a list of all the creditors from the list of acceptance or rejection for all claimants posted by the Mt.Gox trustee. E2. We need to get from trustee or build an email list of all the creditors to send them periodic communication like monthly news, voting proposals, status updates, password for forum, etc. All this managed by trusted party like Kraken preferably or with oversight by them with unsubscribe option. E3. We need more than 50% of the creditors to join this list preferably to claim we have the majority of creditors support in courts. Best for this process to be all inclusive not requiring any mandatory financial contributions because of the fact that many investors got themselves into debt and financial hardships by Gox fiasco. If a creditor that was not active until now, can't help financially but can commit his support by voting or pledging some financial support once the successful distribution of BTC is made then this is a big win. E4. We probably need a new forum. Best would be to allow only the original email addresses of Mt.Gox creditors to set up accounts there to avoid trolls signing up and ruining or influencing our decision making. Also new accounts could be set up for trusted people after review by the moderator and marked as such. Example: Lawyer, People the creditors hire for different jobs, etc. All of the above together with monthly or weekly updates can create a positive momentum and keep this issue afloat with a lot of new organizational ideas coming in and helping improve our overall chance as creditors to win this battle for the benefit of all of us and the crypto community! Please keep your comments and info constructive! Suggest names for possible representative council members, ping users, post ideas, let's get this brainstormed. Pinging for input: jespow -- Kraken CEO andypagonthemove --Coordinating Mtgoxlegal.com P.S. I apologize for the long post. Thank you for your time & contribution!
Possible reason for BTC sell offs. Tin Foil Hat time.
This is total tin foil hat ish however I think futures came online in Jan for a reason.It may not be a coincidence that the market crashed 4 weeks after BTC crashed.The last thing 'the centralized bankers' want is BTC to be a hedge for overprice equity and bond markets. They knew they could not stop the BTC so what they did is bought enough coins 1500 to 3200 range to be able to then leverage their coins at key times to cool off BTC. Remember derivative markets can and often do distort supply levels (at least in the short term) It is 'akin to counterfeiting' as you are introducing coins into the market that would ordinarily not have been sold. 'Supply limits' is what makes BTC fundamentally stronger than any other asset on the planet, but if they can be counterfeited via derivatives? (perfectly legal for the immoral banker cabal - sigh) They knew in January that a major correction had to happen (which it did in February) So by helping fuel the bull run in Jul-Dec they could accomplish a few things;
They support the meme of 'bitcoin is too volatile to be useful' (ironically caused by them and their unbacked paper derivatives)
They dumped on leverage along side the mtGox trustee and used media to further panic people. (bubble bubble bubble bubble etc)
BTC then did not 'look' like a good hedge when it came to equity markets deflating a few weeks later.
I think they are doing it again and stocks and perhaps bonds will suffer a huge 'unexpected' correction again very soon (any day to next 6 weeks). So despite the good BTC fundamental news it will not come into the mind of most to use BTC as a hedge. For me , while this is total speculation, but I am shorting stocks (as of a Friday) and will long btc as the market tumbles. Ok now go ahead and beat me up since I have insulted the establishment and their dubious practices.
Big Czech PC site writing about BTC - calls it a scam and ponzi scheme
The article is in Czech language and its very long, but you can use google translator if you want: http://pctuning.tyden.cz/hardware/site-a-internet/28745-bitcoin-nafouknuta-bublina-nebo-spasa-stradatelu?start=1 TL,DR: The author claims that Mt. Gox owes him hundreds of thousands of dollars (he tells, that he sold ?hundreds? of BTC at the price of $1200 and did not receive the money). He also tells, that the mining in the future wont have any sense, because even the fastest computers/asics wont be able to be profitable and under this circumstances the whole network wont even have enough power to confirm transactions. -according to him the exchanges dont have enough cash and they will crash immediately if enough people decide to cash out (=calls it a ponzi scheme) -he tells that Satoshis anonymity is telling us, that it will be the biggest scam in history -he writes about the possibility to add more btc than they should ever be and that many thousands of hackers are working on it -he ridicules Mt.Gox that it was a site trading some game cards -he says, that BTC isnt backed by anything, so its a scam What do you think?
Hello, I know Bitcoins isn't a ponzi scheme. Why do some people think Bitcoin is a ponzi? A ponzi is something which is controlled by one person or a group of people right? Bitcoin isn't controlled by anyone but yourself right?
Bitcoin gets another day in court- I had to testify for 30 minutes
I invested in Bitcoin in June of 2012 and I've done pretty well since then. Today I was posting bond for a friend of mine who was booked on a drug-related charge and I sold some BTC to cover the bond. I had to produce statements from MtGox in order to show how I obtained the money. I was grilled by the prosecution for about 30 minutes regarding Bitcoin. The prosecution had looked up some stuff in Bitcoin and they were trying to argue that I might have obtained the money by illegitimate means (i.e. laundering money), but their arguments were dismissed pretty quickly by the judge. Mind you that pretty much nobody in the court room, including the defense, had any idea what Bitcoin was when we started. Some of the questions I was asked by the prosecution: 1. Is it true that Bitcoin is not regulated by any state? 2. You are aware that MtGox is not a registered money transmitter? 3. Bitcoin is not a real currency in the sense you can't use it in Wal-Mart, is that correct? 4. Your MtGox account is not an investment account, such as a traditional mutual fund, stock or options, correct? 5. Is it true that Bitcoin is not the official legal tender of any country or jurisdiction? 6. Is it your understanding that Bitcoin is not regulated by FinCEN? 7. Do you realize gains from the rise or fall of the current Bitcoin price? 8. Do you know how Bitcoin mining works? 9. Do you mine Bitcoins? (there are many other questions in the span of 30 minutes, but these were the ones that stood out) My answers: 1. Yes, it's a decentralized currency so there is no country or state that controls it. 2. Objection by defense and sustained. 3. Is that relevant? (the judge said that he's going to determine if it's relevant and I should just answer the question) ... Yes, you can't use it in Wal-Mart. It's not a traditional currency in that sense. 4. It's not a traditional investment account, but it's no different from investing in currency. (the judge and the prosecution went back and forth here about how one can invest in DollaYen, DollaEuro and they agreed that it's an investment) 5. Objection by the defense (asked and answered) and sustained. 6. Yes. Objection by the defense, but it was overruled and I had already answered the question. 7. Yes. It works just like any other investment: you buy in at a certain price and you sell at a different price. If I have profit, then that's a capital gain. 8. Yes. 9. No. Statements by the prosecution (most of them dismissed by the judge): 1. Bitcoin is used for money laundering and other illegal activities. 2. Bitcoin is not a real currency. He went on about how it's not regulated, it's not real currency and it's used for illegal activities such as money laundering, but the judge dismissed it saying that it's irrelevant. They also tried to suggest that money obtained from Bitcoin is not traceable, but the judge agreed with the defense that the statements from MtGox are sufficient to prove where the money came from. The judge also made statements that this seems to be in line with any other investment and it should be accepted as a legal source for the bond. Closing statement from the defense (this was the best part): "Some people like to keep their money in the bank, some keep it under the mattress and some invest it in geeky stuff like Bitcoin. (the whole courtroom, including the judge, erupted in laughter) However, that's not grounds for rejecting the bond. It is entirely reasonable that the witness, who is x-years-old, not married, has no children, has no mortgage and makes x amount of money per year is capable of producing the bond amount." All and all, it was pretty fun to be up there and testify in defense of both my friend and Bitcoin. I'll try to get the court transcripts and post them up here, it was pretty entertaining to see the prosecution struggle with Bitcoin.
Objective thoughts on the latest comment to the SEC? The comment below was posted by this professor (received his PHD in Comp Sci. from Stanford): https://en.wikipedia.org/wiki/Jorge_Stolfi "Dear SiMadam: I am not a US citizen, but the proposed ETF has a global impact, given its connection to Bitcoin -- a venture that is intrinsically international in scope. Bitcoin is being itself traded and advertised as an investment instrument, the world over; and the proposed ETF would legitimize it even in my country. So, please let me offer my comment about that proposal. For the purpose of the fund, bitcoin is being characterized as a commodity. However, bitcoins do not really exist. They do not have material existence, of course; but they don't have even the virtual existence of MP3 or video files. The latter are specific patterns of bits, that can be "owned" in the broad sense of the DCMA and other "intellectual property" legislation. Bitcoins are not specific patterns of bits, however. One cannot display them on a screen, print them, play them on a speaker -- as one can do with other forms of intellectual property. In that respect, bitcoins are similar to the money in a bank account. The bank client cannot see his money, either. All he can do is see a ledger entry that states that he has a certain amount in his account. Likewise, he cannot display his bitcoins, but only see a ledger entry -- in the "blockchain" -- that states that he owns a certain amount of bitcoins. There are important differences, however. A bank is bound by contract and by law to transfer the amount stated in that ledger to other banks, or to cash, if the client requests it; and the government is morally obliged to preserve the purchase value of that cash, to a reasonable degree. But there are no legal, contractual, or moral obligations about bitcoin transfer or conversion to other money instruments; and there is no entity tasked with preserving its value. Thus, bitcoins are more like "penny stock", shares of a company with no assets, no products, and no staff; or shares in a pure ponzi schema, like Madoff's fund. The value of bitcoin is supposed to come only from the existence of an (allegedly) secure ledger that records the distribution of coins among numerous accounts ("addresses" in the system's terminology), and therefore allows their use as a means for internet payments. But penny stocks and ponzi funds offer that capability, too. Another important difference between bitcoin and other assets, real or virtual, is that the ledger (blockchain) does not really establish ownership of the bitcoins to identified individuals. The bitcoins are assigned to "addresses" (accounts) that are identified by numbers, and can be moved anonymously by using "private keys" associated to the addresses. Anyone who knows the private key of an address can move the bitcoins stored there. By design, there is no identity verification, not even the possibility of it. In that regard, bitcoin accounts in the blockchain are like the old numbered accounts in Swiss banks. As the case of the MtGox exchange showed, when btcoins are stolen, it is nearly impossible to identif the thief, or even to determine whether it was an outside or inside job.Â This feature creates a security risk that is impossible to quantify. Since 2010 or so, bitcoin has been heavily used for for investment and speculative trading, more than as a currency or payment network. All that trade has been occurring in totally unregulated exchanges that are not subjected to any meaningful auditing. The market price of bitcoin, like that of a penny stock or ponzi fund, is entirely speculative, based on expectations of traders about future prices, which will be based on expectations of future expectations... Unlike legitimate stocks and bounds, that infinite regression is not ultimately grounded on fundamentals -- because bitcoin does not have any. In fact, its primary use as speculative financial instrument causes extreme price volatility, that prevents its use as a currency. Ownership of bitcoins does not yield any dividends or interest. While eventual users of bitcoin as a currency would be required to pay transaction fees, those fees will not be paid to bitcoin holders, but to the "miners" that maintain the public ledger. The only way to make a profit by investing in bitcoins is by selling them to other investors, for more than their purchase price. Thus, bitcoin has the essential character of a penny stock, or a pyramid schema: the profit of early investors comes entirely from the investment of later ones. Investment in bitcoin does not contribute to mankind's real wealth or well-being: it does not finance the creation of any material goods or real services. On the other hand, it has ruined many naive investors who have been induced to put their savings into it, by spurious promises of fantastic price increases in some undefined future. In my view, since it is primarily used for investment, bitcoin should be regulated like a security; in which case it would probably get from the regulators the same treatment that a penny stock or ponzi fund would get. As for the proposed ETF, it does not add any productive mechanism to the underlying bitcoins. It only provides a level of indirection, that is intended to make bitcoin accessible to investments funds that it would not otherwise get (such as retirement funds). But, would the SEC authorize an ETF whose shares are to be backed exclusively by shares of a specific penny stock? I hope you will consider these points when deciding on whether to authorize the ETF. Thank you for your attention, --stolfi PS. Another minor problem with the proposal is that the nominal price of the shares is supposed to be tied to the market price of bitcoin at the Gemini exchange. That exchange is closely tied to the ETF proponents, and has relatively low liquidity and trade volume. There seems to be a significant risk that the nominal ETF share price will be manipulated, by relatively small trades that manipulate the bitcoin price at that exchange. Jorge Stolfi Full ProfessoProfessor Titular Instituto de Computação/Institute of Computing UNICAMP" https://www.sec.gov/comments/sr-batsbzx-2016-30/batsbzx201630-2.htm EDIT: Apparently this guy is a redditor, and an avid poster in Buttcoin. This guy sounds ridiculously bitter, even his post titles reek of disdain. I won't post his username, but will say that it can be found in the comments here.
I've been pondering this for a while, how do we know what the actual price of a bitcoin really is? I don't think the “price” reported by say Coinbase is evidence of much. On chain volume seems low and a large portion at the exchange level could wash trading or painting the tape. We also don't know for sure how much of the tether market cap can be recouped into dollars in peoples pockets. Then there's the belief held by some (including many on /bitcoin) that a large portion of the recent drop is because of the MtGox trustee and the sale of 35,841 bitcoins AKA less than 0.2% of the eventual 21 million bitcoin supply. Is that possible? How would we be able to know for sure? If it is true then the “price” these exchanges are claiming is ALMOST if not completely meaningless. The price of something is not able to be destroyed over 60% by a 0.2% liquidation. Stocks that aren't publicly sold on regulated exchanges are often talked about in terms of FMV or Fair Market Value. How would we go about figuring out the FMV of bitcoin? Mr_R_Andom posted a link with an intriguing wash trading analysis: https://medium.com/@sylvainartplayribes/chasing-fake-volume-a-crypto-plague-ea1a3c1e0b5e Resident anti-buttcoiner biglambda shared an interesting link about tether printing and “price” correlation: http://forklog.net/so-have-we-got-tethered/ What can we know and what could we reasonably infer with the information available to us? Side note: Should one of us try to get like a $100 or $1000 of tether and try to redeem it for actual USD through the Tether company or Bitfinex and see how far we can get in the process?
Hello! My name is Slava Mikhalkin, I am a Project Owner of Crowdsale platform at Platinum, the company that knows how to start any ICO or STO in 2019. If you want to avoid headaches with launching process, we can help you with ICO and STO advertising and promotion. See the full list of our services: Platinum.fund I am also happy to be a part of the UBAI, the first educational institution providing the most effective online education on blockchain! We can teach you how to do ICO/STO in 2019. Today I want to tell you how to sell and transfer cryptocurrencies. Major Exchanges In finance, an exchange is a forum or platform for trading commodities, derivatives, securities or other financial instruments. The principle concern of an exchange is to allow trading between parties to take place in a fair and legally compliant manner, as well as to ensure that pricing information for any instrument traded on the exchange is reliable and coherently delivered to exchange participants. In the cryptocurrency space exchanges are online platforms that allow users to trade cryptocurrencies or digital currencies for fiat money or other cryptocurrencies. They can be centralized exchanges such a Binance, or decentralized exchanges such as IDEX. Most cryptocurrency exchanges allow users to trade different crypto assets with BTC or ETH after having already exchanged fiat currency for one of those cryptocurrencies. Coinbase and Kraken are the main avenue for fiat money to enter into the cryptocurrency ecosystem. Function and History Crypto exchanges can be market-makers that take bid/ask spreads as a commission on the transaction for facilitating the trade, or more often charge a small percentage fee for operating the forum in which the trade was made. Most crypto exchanges operate outside of Western countries, enabling them to avoid stringent financial regulations and the potential for costly and lengthy legal proceedings. These entities will often maintain bank accounts in multiple jurisdictions, allowing the exchange to accept fiat currency and process transactions from customers all over the globe. The concept of a digital asset exchange has been around since the late 2000s and the following initial attempts at running digital asset exchanges foreshadows the trouble involved in attempting to disrupt the operation of the fiat currency baking system. The trading of digital or electronic assets predate Bitcoin’s creation by several years, with the first electronic trading entities running afoul of the Australian Securities and Investments Commission (ASIC) in late 2004. Companies such as Goldex, SydneyGoldSales, and Ozzigold, shut down voluntarily after ASIC found that they were operating without an Australian Financial Services License. E-Gold, which exchanged fiat USD for grams of precious metals in digital form, was possibly the first digital currency exchange as we know it, allowing users to make instant transfers to the accounts of other E-Gold members. At its peak in 2006 E-Gold processed $2 billion worth of transactions and boasted a user base of over 5 million people. Popular Exchanges Here we will give a brief overview of the features and operational history of the more popular and higher volume exchanges because these are the platforms to which newer traders will be exposed. These exchanges are recommended to use because they are the industry standard and they inspire the most confidence. Bitfinex Owned and operated by iFinex Inc, the cryptocurrency trading platform Bitfinex was the largest Bitcoin exchange on the planet until late 2017. Headquartered in Hong Kong and based in the US Virgin Island, Bitfinex was one of the first exchanges to offer leveraged trading (“Margin trading allows a trader to open a position with leverage. For example — we opened a margin position with 2X leverage. Our base assets had increased by 10%. Our position yielded 20% because of the 2X leverage. Standard trades are traded with leverage of 1:1”) and also pioneered the use of the somewhat controversial, so-called “stable coin” Tether (USDT). Binance Binance is an international multi-language cryptocurrency exchange that rose from the mid-rank of cryptocurrency exchanges to become the market dominating behemoth we see today. At the height of the late 2017/early 2018 bull run, Binance was adding around 2 million new users per week! The exchange had to temporarily disallow new registrations because its servers simply could not keep up with that volume of business. After the temporary ban on new users was lifted the exchange added 240,000 new accounts within two hours. Have you ever thought whats the role of the cypto exchanges? The answer is simple! There are several different types of exchanges that cater to different needs within the ecosystem, but their functions can be described by one or more of the following: To allow users to convert fiat currency into cryptocurrency. To trade BTC or ETH for alt coins. To facilitate the setting of prices for all crypto assets through an auction market mechanism. Simply put, you can either mine cryptocurrencies or purchase them, and seeing as the mining process requires the purchase of expensive mining equipment, Cryptocurrency exchanges can be loosely grouped into one of the 3 following exchange types, each with a slightly different role or combination of roles. Have you ever thought about what are the types of Crypto exchanges?
Traditional Cryptocurrency Exchange: These are the type that most closely mimic traditional stock exchanges where buyers and sellers trade at the current market price of whichever asset they want, with the exchange acting as the intermediary and charging a small fee for facilitating the trade. Kraken and GDAX are examples of this kind of cryptocurrency exchange. Fully peer-to-peer exchanges that operate without a middleman include EtherDelta, and IDEX, which are also examples of decentralized exchanges.
Cryptocurrency Brokers: These are website or app based exchanges that act like a Travelex or other bureau-de-change. They allow customers to buy or sell crypto assets at a price set by the broker (usually market price plus a small premium). Coinbase is an example of this kind of exchange.
Direct Trading Platform: These platforms offer direct peer-to-peer trading between buyers and sellers, but don’t use an exchange platform in doing so. These types of exchanges do not use a set market rate; rather, sellers set their own rates. This is a highly risky form of trading, from which new users should shy away.
To understand how an exchange functions we need only look as far as a traditional stock exchange. Most all the features of a cryptocurrency exchange are analogous to features of trading on a traditional stock exchange. In the simplest terms, the exchanges fulfil their role as the main marketplace for crypto assets of all kinds by catering to buyers or sellers. These are some definitions for the basic functions and features to know: Market Orders: Orders that are executed instantly at the current market price. Limit Order: This is an order that will only be executed if and when the price has risen to or dropped to that price specified by the trader and is also within the specified period of time. Transaction fees: Exchanges will charge transactions fees, usually levied on both the buyer and the seller, but sometimes only the seller is charged a fee. Fees vary on different exchanges though the norm is usually below 0.75%. Transfer charges: The exchange is in effect acting as a sort of escrow agent, to ensure there is no foul play, so it might also charge a small fee when you want to withdraw cryptocurrency to your own wallet. Regulatory Environment and Evolution Cryptocurrency has come a long way since the closing down of the Silk Road darknet market. The idea of crypto currency being primarily for criminals, has largely been seen as totally inaccurate and outdated. In this section we focus on the developing regulations surrounding the cryptocurrency asset class by region, and we also look at what the future may hold. The United States of America A coherent uniform approach at Federal or State level has yet to be implemented in the United States. The Financial Crimes Enforcement Network published guidelines as early as 2013 suggesting that BTC and other cryptos may fall under the label of “money transmitters” and thus would be required to take part in the same Anti-money Laundering (AML) and Know your Client (KYC) procedures as other money service businesses. At the state level, Texas applies its existing finance laws. And New York has instituted an entirely new licensing system. The European Union The EU’s approach to cryptocurrency has generally been far more accommodating overall than the United States, partly due to the adaptable nature of pre-existing laws governing electronic money that predated the creation of Bitcoin. As with the USA, the EU’s main fear is money laundering and criminality. The European Central Bank (ECB) categorized BTC as a “convertible decentralized currency” and advised all central banks in the EU to refrain from trading any cryptocurrencies until the proper regulatory framework was put in place. A task force was then set up by the European Parliament in order to prevent and investigate any potential money laundering that was making use of the new technology. Likely future regulations for cryptocurrency traders within the European Union and North America will probably consist of the following proposals: The initiation of full KYC procedures so that users cannot remain fully anonymous, in order to prevent tax evasion and curtail money laundering. Caps on payments that can be made in cryptocurrency, similar to caps on traditional cash transactions. A set of rules governing tax obligations regarding cryptocurrencies Regulation by the ECB of any companies that offer exchanges between cryptocurrencies and fiat currencies It is less likely for other countries to follow the Chinese approach and completely ban certain aspects of cryptocurrency trading. It is widely considered more progressive and wiser to allow the technology to grow within a balanced accommodative regulatory framework that takes all interests and factors into consideration. It is probable that the most severe form of regulation will be the formation of new governmental bodies specifically to form laws and exercise regulatory control over the cryptocurrency space. But perhaps that is easier said than done. It may, in certain cases, be incredibly difficult to implement particular regulations due to the anonymous and decentralized nature of crypto. Behavior of Cryptocurrency Investors by Demographic Due to the fact that cryptocurrency has its roots firmly planted in the cryptography community, the vast majority of early adopters are representative of that group. In this section we cover the basic structure of the cryptocurrency market cycle and the makeup of the community at large, as well as the reasons behind different trading decisions. The Cryptocurrency Market Cycle Bitcoin leads the bull rally. FOMO (Fear of missing out) occurs, the price surge is a constant topic of mainstream news, business programs cover the story, and social media is abuzz with cryptocurrency chatter. Bitcoin reaches new All Timehigh (ATH) Market euphoria is fueled with even more hype and the cycle is in full force. There is a constant stream of news articles and commentary on the meteoric, seemingly unstoppable rise of Bitcoin. Bitcoin’s price “stabilizes”, In the 2017 bull run this was at or around $14,000. A number of solid, large market cap altcoins rise along with Bitcoin; ETH & LTC leading the altcoins at this time. FOMO comes into play, as the new ATH in market cap is reached by pumping of a huge number of alt coins. Top altcoins “somewhat” stabilize, after reaching new all-time highs. The frenzy continues with crypto success stories, notable figures and famous people in the news. A majority of lesser known cryptocurrencies follow along on the upward momentum. Newcomers are drawn deeper into crypto and sign up for exchanges other than the main entry points like Coinbase and Kraken. In 2017 this saw Binance inundated with new registrations. Some of the cheapest coins are subject to massive pumping, such as Tron TRX which saw a rise in market cap from $150 million at the start of December 2017 to a peak of $16 billion! At this stage, even dead coins or known scams will get pumped. The price of the majority of cryptocurrencies stabilize, and some begin to retract. When the hype is subsiding after a huge crypto bull run, it is a massive sell signal. Traditional investors will begin to give interviews about how people need to be careful putting money into such a highly volatile asset class. Massive violent correction begins and the market starts to collapse. BTC begins to fall consistently on a daily basis, wiping out the insane gains of many medium to small cap cryptos with it. Panic selling sweeps through the market. Depression sets in, both in the markets, and in the minds of individual investors who failed to take profits, or heed the signs of imminent collapse. The price stagnation can last for months, or even years. The Influence of Age upon Trading Did you know? Cryptocurrencies have been called “stocks for millennials” According to a survey conducted by the Global Blockchain Business Council, only 5% of the American public own any bitcoin, but of those that do, an overwhelming majority of 71% are men, 58% of them are between the ages of 18 and 35, and over half of them are minorities. The same survey gauged public attitude toward the high risk/high return nature of cryptocurrency, in comparison to more secure guaranteed small percentage gains offered by government bonds or stocks, and found that 30% would rather invest $1,000 in crypto. Over 42% of millennials were aware of cryptocurrencies as opposed to only 15% of those ages 65 and over. In George M. Korniotis and Alok Kumar’s study into the effects of aging on portfolio management and the quality of decisions made by older investors, they found “that older and experienced investors are more likely to follow “rules of thumb” that reflect greater investment knowledge. However, older investors are less effective in applying their investment knowledge and exhibit worse investment skill, especially if they are less educated and earn lower income.” Geographic Influence upon Trading One of the main drivers of the apparent seasonal ebb and flow of cryptocurrency prices is the tax situation in the various territories that have the highest concentrations of cryptocurrency holders. Every year we see an overall market pull back beginning in mid to late January, with a recovery beginning usually after April. This is because “Tax Season” is roughly the same across Europe and the United States, with the deadline for Income tax returns being April 15th in the United States, and the tax year officially ending the UK on the 6th of April. All capital gains must be declared before the window closes or an American trader will face the powerful and long arm of the IRS with the consequent legal proceedings and possible jail time. Capital gains taxes around the world vary from jurisdiction to jurisdiction but there are often incentives for cryptocurrency holders to refrain from trading for over a year to qualify their profits as long term gain when they finally sell. In the US and Australia, for example, capital gains are reduced if you bought cryptocurrency for investment purposes and held it for over a year. In Germany if crypto assets are held for over a year then the gains derived from their sale are not taxed. Advantages like this apply to individual tax returns, on a case by case basis, and it is up to the investor to keep up to date with the tax codes of the territory in which they reside. 2013 Bull run vs 2017 Bull run price Analysis In late 2016 cryptocurrency traders were faced with the task of distinguishing between the beginnings of a genuine bull run and what might colorfully be called a “dead cat bounce” (in traditional market terminology). Stagnation had gripped the market since the pull-back of early 2014. The meteoric rise of Bitcoin’s price in 2013 peaked with a price of $1,100 in November 2013, after a year of fantastic news on the adoption front with both Microsoft and PayPal offering BTC payment options. It is easy to look at a line going up on a chart and speak after the fact, but at the time, it is exceeding difficult to say whether the cat is actually climbing up the wall, or just bouncing off the ground. Here, we will discuss the factors that gave savvy investors clues as to why the 2017 bull run was going to outstrip the 2013 rally. Hopefully this will help give insight into how to differentiate between the signs of a small price increase and the start of a full scale bull run. Most importantly, Volume was far higher in 2017. As we can see in the graphic below, the 2017 volume far exceeds the volume of BTC trading during the 2013 price increase. The stranglehold MtGox held on trading made a huge bull run very difficult and unlikely. Fraud & Immoral Activity in the Private Market Ponzi Schemes Cryptocurrency Ponzi schemes will be covered in greater detail in Lesson 7, but we need to get a quick overview of the main features of Ponzi schemes and how to spot them at this point in our discussion. Here are some key indicators of a Ponzi scheme, both in cryptocurrencies and traditional investments: A guaranteed promise of high returns with little risk. Consistentflow of returns regardless of market conditions. Investments that have not been registered with the Securities and Exchange Commission (SEC). Investment strategies that are a secret, or described as too complex. Clients not allowed to view official paperwork for their investment. Clients have difficulties trying to get their money back. The initial members of the scheme, most likely unbeknownst to the later investors, are paid their “dividends” or “profits” with new investor cash. The most famous modern-day example of a Ponzi scheme in the traditional world, is Bernie Madoff’s $100 billion fraudulent enterprise, officially titled Bernard L. Madoff Investment Securities LLC. And in the crypto world, BitConnect is the most infamous case of an entirely fraudulent project which boasted a market cap of $2 billion at its peak. What are the Exchange Hacks? The history of cryptocurrency is littered with examples of hacked exchanges, some of them so severe that the operation had to be wound up forever. As we have already discussed, incredibly tech savvy and intelligent computer hackers led by Alexander Vinnik stole 850000 BTC from the MtGox exchange over a period from 2012–2014 resulting in the collapse of the exchange and a near-crippling hammer blow to the emerging asset class that is still being felt to this day. The BitGrail exchange suffered a similar style of attack in late 2017 and early 2018, in which Nano (XRB) was stolen that was at one point was worth almost $195 million. Even Bitfinex, one of the most famous and prestigious exchanges, has suffered a hack in 2016 where $72 million worth of BTC was stolen directly from customer accounts. Hardware Wallet Scam Case Study In late 2017, an unfortunate character on Reddit, going by the name of “moody rocket” relayed his story of an intricate scam in which his newly acquired hardware wallet was compromised, and his $34,000 life savings were stolen. He bought a second hand Nano ledger into which the scammers own recover seed had already been inserted. He began using the ledger without knowing that the default seed being used was not a randomly assigned seed. After a few weeks the scammer struck, and withdrew all the poor HODLer’s XRP, Dash and Litecoin into their own wallet (likely through a few intermediary wallets to lessen the very slim chances of being identified). Hardware Wallet Scam Case Study Social Media Fraud Many gullible and hapless twitter users have fallen victim to the recent phenomenon of scammers using a combination of convincing fake celebrity twitter profiles and numerous amounts of bots to swindle them of ETH or BTC. The scammers would set up a profile with a near identical handle to a famous figure in the tech sphere, such as Vitalik Buterin or Elon Musk. And then in the tweet, immediately following a genuine message, follow up with a variation of “Bonus give away for the next 100 lucky people, send me 0.1 ETH and I will send you 1 ETH back”, followed by the scammers ether wallet address. The next 20 or so responses will be so-called sockpuppet bots, thanking the fake account for their generosity. Thus, the pot is baited and the scammers can expect to receive potentially hundreds of donations of 0.1 Ether into their wallet. Many twitter users with a large follower base such as Vitalik Buterin have taken to adding “Not giving away ETH” to their username to save careless users from being scammed. Market Manipulation It also must be recognized that market manipulation is taking place in cryptocurrency. For those with the financial means i.e. whales, there are many ways in which to control the market in a totally immoral and underhanded way for your own profit. It is especially easy to manipulate cryptos that have a very low trading volume. The manipulator places large buy orders or sell walls to discourage price action in one way or the other. Insider trading is also a significant problem in cryptocurrency, as we saw with the example of blatant insider trading when Bitcoin Cash was listed on Coinbase. Examples of ICO Fraudulent Company Behavior In the past 2 years an astronomical amount of money has been lost in fraudulent Initial Coin Offerings. The utmost care and attention must be employed before you invest. We will cover this area in greater detail with a whole lesson devoted to the topic. However, at this point, it is useful to look at the main instances of ICO fraud. Among recent instances of fraudulent ICOs resulting in exit scams, 2 of the most infamous are the Benebit and PlexCoin ICOs which raised $4 million for the former and $15 million for the latter. Perhaps the most brazen and damaging ICO scam of all time was the Vietnamese Pincoin ICO operation, where $660million was raised from 32,000 investors before the scammer disappeared with the funds. In case of smaller ICO “exit scamming” there is usually zero chance of the scammers being found. Investors must just take the hit. We will cover these as well as others in Lesson 7 “Scam Projects”. Signposts of Fraudulent Actors The following factors are considered red flags when investigating a certain project or ICO, and all of them should be considered when deciding whether or not you want to invest. Whitepaper is a buzzword Salad: If the whitepaper is nothing more than a collection of buzzwords with little clarity of purpose and not much discussion of the tech involved, it is overwhelmingly likely you are reading a scam whitepaper. Signposts of Fraudulent Actors §2 No Code Repository: With the vast majority of cryptocurrency projects employing open source code, your due diligence investigation should start at GitHub or Sourceforge. If the project has no entries, or nothing but cloned code, you should avoid it at all costs. Anonymous Team: If the team members are hard to find, or if you see they are exaggerating or lying about their experience, you should steer clear. And do not forget, in addition to taking proper precautions when investing in ICOs, you must always make sure that you are visiting authentic web pages, especially for web wallets. If, for example, you are on a spoof MyEtherWallet web page you could divulge your private key without realizing it and have your entire portfolio of Ether and ERC-20 tokens cleaned out. Methods to Avoid falling Victim Avoiding scammers and the traps they set for you is all about asking yourself the right questions, starting with: Is there a need for a Blockchain solution for the particular problem that a particular ICO is attempting to solve? The existing solution may be less costly, less time consuming, and more effective than the proposals of a team attempting to fill up their soft cap in an ICO. The following quote from Mihai Ivascu, the CEO of Modex, should be kept in mind every time you are grading an ICO’s chances of success: “I’m pretty sure that 95% of ICOswill not last, and many will go bankrupt. ….. not everything needs to be decentralized and put on an open source ledger.” Methods to Avoid falling Victim §2 Do I Trust These People with My Money, or Not? If you continue to feel uneasy about investing in the project, more due diligence is needed. The developers must be qualified and competent enough to complete the objectives that they have set out in the whitepaper. Is this too good to be true? All victims of the well-known social media scams using fake profiles of Vitalik Buterin, or Bitconnect investors for that matter, should have asked themselves this simple question, and their investment would have been saved. In the case of Bitconnect, huge guaranteed gains proportional to the amount of people you can get to sign up was a blatant pyramid scheme, obviously too good to be true. The same goes for Fake Vitalik’s offer of 1 ether in exchange for 0.1 ETH. Selling Cryptocurrencies, Several reasons for selling with the appropriate actions to take: If you are selling to buy into an ICO, or maybe believe Ether is a safer currency to hold for a certain period of time, it is likely you will want to make use of the Ether pair and receive Ether in return. Obviously if the ICO is on the NEO or WANchain blockchain for example, you will use the appropriate pair. -Trading to buy into another promising project that is listing on the exchange on which you are selling (or you think the exchange will experience a large amount of volume and become a larger exchange), you may want to trade your cryptocurrency for that exchange token. -If you believe that BTC stands a good chance of experiencing a bull run then using the BTC trading pair is the suitable choice. -If you believe that the market is about to experience a correction but you do not want to take your gains out of the market yet, selling for Tether or “tethering up” is the best play. This allows you to keep your locked-in profits on the exchange, unaffected by the price movements in the cryptocurrency markets,so that you can buy back in at the most profitable moment. -If you wish to “cash out” i.e. sell your cryptocurrency for fiat currency and have those funds in your bank account, the best pair to use is ETH or BTC because you will likely have to transfer to an exchange like Kraken or Coinbase to convert them into fiat. If the exchange offers Litecoin or Bitcoin Cash pairs it could be a good idea to use these for their fast transaction time and low fees. Selling Cryptocurrencies Knowing when and how to sell, as well as strategies to inflate the value of your trade before sale, are important skills as a trader of any product or financial instrument. If you are satisfied that the sale itself of the particular amount of a token or coin you are trading away is the right one, then you must decide at what price you are going to sell. Exchanges exercise their own discretion as to which trading “pairs” they will offer, but the most common ones are BTC, ETH, BNB for Binance, BIX for Bibox etc., and sometimes Tether (USDT) or NEO. As a trader, you decide which particular cryptocurrency to exchange depending on your reason for making that specific trade at that time. Methods of Sale Market sell/Limit sell on exchange: A limit sell is an order placed on an exchange to sell as soon as (also specifically only if and when) the price you specified has been hit within the time limit you select. A market order executes the sale immediately at the best possible price offered by the market at that exact time. OTC (or Over the Counter) selling refers to sale of securities or cryptocurrencies in any method without using an exchange to intermediate the trade and set the price. The most common way of conducting sales in this manner is through LocalBitcoins.com. This method of cryptocurrency selling is far riskier than using an exchange, for obvious reasons. The influence and value of your Trade There are a number of strategies you can use to appreciate the value of your trade and thus increase the Bitcoin or Ether value of your portfolio. It is important to disassociate yourself from the dollar value of your portfolio early on in your cryptocurrency trading career simply because the crypto market is so volatile you will end up pulling your hair out in frustration following the real dollar money value of your holdings. Once your funds have been converted into BTC and ETH they are completely in the crypto sphere. (Some crypto investors find it more appropriate to monitor the value of their portfolio in satoshi or gwei.) Certainly not limited to, but especially good for beginners, the most reliable way to increase your trading profits, and thus the overall value and health of your portfolio, is to buy into promising projects, hold them for 6 months to a year, and then reevaluate. This is called Long term holding and is the tactic that served Bitcoin HODLers quite well, from 2013 to the present day. Obviously, if something comes to light about the project that indicates a lengthy set back is likely, it is often better to cut your losses and sell. You are better off starting over and researching other projects. Also, you should set initial Price Points at which you first take out your original investment, and then later, at which you take out all your profits and exit the project. That should be after you believe the potential for growth has been exhausted for that particular project. Another method of increasing the value of your trades is ICO flipping. This is the exact opposite of long term holding. This is a technique in which you aim for fast profits taking advantage of initial enthusiasm in the market that may double or triple the value of ICO projects when they first come to market. This method requires some experience using smaller exchanges like IDEX, on which project tokens can be bought and sold before listing on mainstream exchanges. “Tethering up” means to exchange tokens or coins for the USDT stable coin, the value of which is tethered to the US Dollar. If you learn, or know how to use, technical analysis, it is possible to predict when a market retreatment is likely by looking at the price movements of BTC. If you decide a market pull back is likely, you can tether up and maintain the dollar value of your portfolio in tether while other tokens and coins decrease in value. The you wait for an opportune moment to reenter the market. Market Behavior in Different Time Periods The main descriptors used for overall market sentiment are “Bull Market” and “Bear Market”. The former describes a market where people are buying on optimism. The latter describes a market where people are selling on pessimism. Fun (or maybe not) fact: The California grizzly bear was brought to extinction by the love of bear baiting as a sport in the mid 1800s. Bears were highly sought after for their intrinsic fighting qualities, and were forced into fighting bulls as Sunday morning entertainment for Californians. What has this got to do with trading and financial markets? The downward swipe of the bear’s paws gives a “Bear market” its name and the upward thrust of a Bull’s horns give the “Bull Market” its name. Most unfortunately for traders, the bear won over 80% of the bouts. During a Bull market, optimism can sometimes grow to be seemingly boundless, volume is rising, and prices are ascending. It can be a good idea to sell or rebalance your portfolio at such a time, especially if you have a particularly large position in one holding or another. This is especially applicable if you need to sell a large amount of a relatively low-volume holding, because you can then do so without dragging the price down by the large size of your own sell order. Learn more on common behavioral patterns observed so far in the cryptocurrency space for different coins and ICO tokens. Follow the link: UBAI.co If you want to know how do security tokens work, and become a professional in crypto world contact me via Facebook to get all the details: Facebook
Find Bitcoin On Stack Coins Mtgox Logo stock images in HD and millions of other royalty-free stock photos, illustrations and vectors in the Shutterstock collection. Thousands of new, high-quality pictures added every day. A years-old $75 million lawsuit against Mt Gox by US company CoinLab is delaying payouts to creditors, the Japanese bankruptcy trustee revealed today. Bitcoin history for 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019. Bitcoin price chart since 2009 to 2019. The historical data and rates of BTC - End of January 2018 - MtGox deciding to sell 35000 bitcoins... - at this time (~11.10.2018) Tether USD losts PEG!!! (see my article about on bitcointalk.org) - at start of next year: MtGox Trustee planning to send the remained the 165000 bitcoins to the market... The shutdown of Mt.Gox -- one of the world's largest bitcoin exchanges -- and the potential loss of more than $400 million worth of bitcoins is the result of abysmal mismanagement at the company.
Bitcoin Mt. Gox FLASH CRASH! Bitcoins at $0.01 Each
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