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What is happening to cryptocurrency valuations?

What is happening to cryptocurrency valuations?

    
The total market cap for all cryptocurrencies just surpassed $100 billion.

The vast majority of these gains have come in just the last few months — on April 1st the total market cap was just over $25 billion — representing a 300 percent increase in value in just over 60 days. While some of these gains are from bitcoin itself (BTC is up ~160 percent in the same two-month time frame), other digital currencies like Ethereum are also responsible for the increase, which on its own has increased ~439 percent over the last two months. There’s perhaps no better way to show this diversity in gains than by looking at a chart of bitcoin’s “dominance” — i.e. what percent of the entire cryptocurrency market cap is represented by bitcoin. For years this had always hovered around 80 percent, but in the last few months has fallen to below 50 percent — with currencies like Ethereum and Ripple taking its place.

Bubble talk? 

It’s hard to be an experienced investor, or even an at-home part-time trader, and not think of a massive bubble when you see that some asset has increased more than 400 percent in just a few months. It’s just how history works — when an asset rises that fast it’s a near certainty that it will come back down. Markets are irrational, after all. So don’t be surprised if there’s at least some type of correction. There already was, a few weeks ago — bitcoin pulled back from a high of $2,700 to around $2,000, but, as of today, has slowly climbed back up to a new all-time high of ~$2,850.

Latest Crunch Report

That being said, we may look back in 12 months and realize that this two-month period of insane growth was less of a bubble and more of a rebirth of cryptocurrencies as a whole. The fact that these gains have come from currencies other than bitcoin are a good sign that this is less of a bubble and more of a resurgence of interest in crypto. It makes sense that Ethereum is on a tear — the cryptocurrency has technological improvements over bitcoin, including the ability to code smart contracts directly into the blockchain, which in turn allow for things like the ability to build totally new tokens and even host ICOs

(initial coin offerings).

The public has never been able to put their money directly into a technology that has so much potential but is still developing.

And similarly, Ripple, a cryptocurrency based on inter-bank settlements, has signed up more than 100 banks worldwide. Even if this takes a while to implement (which anyone who works in the old-school banking industry will confirm), it’s still tangible news and a reason for people to get excited about the currency. These recent developments certainly don’t justify increases of 400 percent in 60 days. Both Ethereum and Ripple have been around for a lot longer than a few months. So if these were publicly traded companies, there would be (almost) no reason for drastic rise in value. But cryptocurrencies are new — most of the world has no idea what bitcoin is, let alone Ethereum and Ripple and other currencies. The public has never been able to put their money directly into a technology that has so much potential but is still developing.

For example, a technology enthusiast in the 1990s may have foreseen the rise of the internet, but had no way to directly take a stake in the technology. The idea of applying cryptography to the storage and transmission of data is still very new. And the fact that anyone can directly buy the currency that powers these cryptographically secured blockchains is much like the public actually getting a chance to invest in the internet during its infancy.

Impossible to value?

There is one rational explanation that, if true, would totally justify this rapid increase in price across some of the major cryptocurrencies. And that is, maybe these currencies are actually worth these high prices, and maybe even worth many times more than that at which they are currently trading. But the problem is we have no way to figure out their value. Cryptocurrencies aren’t public companies with earnings and expenses and EPS. For example, we can look at Apple’s financials and determine its book value — what the company’s assets would be worth if hypothetically liquidated today. Of course, stocks trade at a premium to this, because people are enthusiastic that Apple will continue to perform well and this book value will continue to rise.

But we can’t do this with cryptocurrencies. We could guess — and compare it to things like the total money or gold supply in the U.S. For example, if you’re someone who thinks of cryptocurrencies as a store of value, the total estimated value of all gold in the world is more than $8 trillion dollars… meaning if bitcoin would ever replace or supplant gold, its current value is pennies on the dollar. If you’re someone who thinks of cryptocurrencies as a genuine currency, you could compare the market cap to M2, which is the total money supply in the U.S. — cash and checking accounts, as well as “near-money” accounts like savings, mutual funds and money-market securities. The total value of M2 is about $13.5 trillion, also meaning cryptocurrencies are just a small fraction of that.

Be an informed “investor”

I’ve long cautioned readers (and friends) from buying cryptocurrencies because they have seen it rise and just want to make a quick buck. The past two months have led to a tremendous surge in public interest, with mainstream news like CNBC and CNN explaining how to “invest” in bitcoin and other cryptocurrencies. Just make sure you’re doing it for the right reasons. Buy cryptocurrency to learn about it and transact with it. Or buy it because you are betting that this new technology will change the world by:

  • Supplanting gold as the main store of value in the world
  • Transforming inter-bank settlements
  • Making international remittance affordable
  • Revolutionizing the fundraising and IPO process

These are just a few options, and if you’re in tune with the cryptocurrency world, you’ll know the opportunities are endless. So if you’re going to buy cryptocurrency, do it because you see the long-term vision (and sure, ostensibly the financial gains that may come from them), not because you think it will blindly appreciate and give you a good return on your “investment.”

Chuck Reynolds
Contributor
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TCC-Bitcoin.

Alan Zibluk Markethive Founding Member

Why Buy This Expensive Bitcoin ETF Instead of Actual Bitcoin?

    

If you're interested in getting invested in the digital currency world,

now seems to be as good a time as ever. Bitcoin has seen repeated record-setting price levels, and a host of other digital currencies are becoming increasingly popular around the globe. And yet, there are some reasons why even seasoned investors may be reluctant to get involved in direct investments relating to cryptocurrencies. Fortunately for those people, there is an exchange-traded fund focusing on Bitcoin in particular that can simplify the process. It is called the Bitcoin Investment Trust (GBTC) and it is provided by Grayscale Investments. Here are some of the basic details about the new ETF and its relationship to the digital currency itself.

Significant Returns Possible, But Are They Likely?

The Bitcoin Investment Trust sported a tremendous 248% increase in the month of May. This far surpasses the gains of 72% overall for the Bitcoin-U.S. dollar currency cross. With that figure in mind, investors may be jumping to get access to GBTC shares. However, there are other factors to consider as well. First, May's performance seems to be a relative anomaly for the ETF. For the three months prior to May, Bitcoin performance superseded ETF performance two months. This suggests that the two are actually more neck-and-neck than May's figure would suggest. Second, investors looking to buy into GBTC should keep in mind that the shares of the ETF are currently trading at more than double the cost of Bitcoin itself, according to a report by Business Insider.

Why the Huge Premium for GBTC?

Potential investors are likely wondering why GBTC shares can be found at such a high premium over Bitcoin. The issue seems to lie in supply and demand. While Bitcoin demand has skyrocketed, GBTC has kept its shares outstanding close to 1.7 million in the two years that it has existed. In fact, the ETF seems unlikely to change the number of total outstanding shares in the future, according to the company's head of research, Ihor Dusaniwsky. He explains that "with the operational risk of buying and holding actual Bitcoins to support ETF creation very high, and difficult and expensive to insure, it is unlikely that GBTC's outstanding share amount will climb above 1.7 million anytime soon."

It is useful to note that GBTC didn't always seem this expensive in comparison with Bitcoin. Before Bitcoin's price spiked in the past several weeks, the ETF traded on an average premium of just 10% above the cryptocurrency in 2017. The issue seems to have come about when Bitcoin's demand blew up and GBTC's supply did not change. As Bitcoin continues to spread further into the financial world, it will be interesting to see where GBTC's share prices go as well.

Chuck Reynolds
Contributor
Please click either Link to Learn more about – TCC-Bitcoin.

Alan Zibluk Markethive Founding Member

How to Buy Bitcoin

How to Buy Bitcoin

When it comes to some exotic investments like bitcoins, investors not only need to consider the worthiness of the investment, but how to even buy the digital currency in the first place.

 

Bitcoin is a digital cryptocurrency with no intermediaries or banks necessary

to conduct transactions. It was designed as open-source software in 2009 by an individual or group known only as Satoshi Nakamoto with the intention to minimize transaction costs and deregulate currency. The cost of a bitcoin has skyrocketed this year. When the calendar rolled over to 2017, a price of one bitcoin was just a shade under $1,000. As I write, the price of bitcoin has more than doubled to slightly more than $2,500.

This huge increase in price has led some investors to not only some to wonder if they should invest in bitcoin, but even how to invest in bitcoin in the first place. After all, it's not like they can purchase a bitcoin at their brokerage or bank. Heck, one can't even buy a bitcoin at Amazon.com, and Amazon sells everything! With this question in mind, let's look at some different ways investors can buy bitcoins or otherwise gain exposure to this unique asset class. (If you're still a little confused about what exactly a bitcoin is, here is an excellent primer on the unregulated virtual currency by fellow Fool Matthew Frankel).

What's in your (bitcoin) wallet?

The most popular way to buy bitcoins is through bitcoin wallets, digital wallets for the exclusive use of bitcoins. There are many different types of bitcoin-based wallets and you need to be very careful to choose something that will best meet your needs. Some bitcoin wallets are device-specific, while others are web-based.

Coinbase is one of the most popular digital wallets used to purchase bitcoins. As with almost any of these wallets, customers must sign up for an account online and then link a bank account. If they just want to buy, a valid credit card number will do. Coinbase accepts Mastercard and Visa. Before any bitcoin transaction, Coinbase shows users the current value of the digital currency in U.S. dollars. When making a withdrawal from a Coinbase account, account holders can choose to have the funds go to either a linked bank or PayPal account.

Since third-party cryptocurrency wallets have been famously known to be hacked resulting in a permanent loss of funds, investors must be careful to properly secure their bitcoin wallets. Remember, bitcoins are not stored in FDIC-insured accounts and most third parties do not offer insurance in case of theft or fraud. How bad is this problem? Last August, Reuters reported that a full third of bitcoin exchanges had been breached.

Security is vitally important in keeping bitcoin accounts safe. Back-ups are critical in cases of computer crashes or stolen wallets. Wallets must be encrypted so anyone withdrawing bitcoins from your account must know a password. Many wallets offer two-factor authentication, where a unique code is texted or emailed to you before withdrawals can be made. Bitcoin passwords are also critical as, unlike bank accounts, there is no customer service line to reset your password. Bitcoin.org recommends either memorizing the password or writing it down and storing it in a safe place.

Alternative ways to purchase bitcoins

There are other ways to purchase bitcoins; some more exotic than others. Bitcoin Depot, in conjunction with the bitcoin wallet Airbitz, allows users to buy bitcoins with cash at dozens of special ATM locations spread across six states: Alabama, Florida, Georgia, Massachusetts, Tennessee, and Texas. After setting up an account, all customers need to do is deposit cash in the ATM and scan a QR code with a special scanner attached to the ATM and, within minutes, the purchased bitcoins will be available in the Airbitz account.

The bitcoin-based ETF

The most convenient way to gain exposure to bitcoins is through the Bitcoin Investment Trust (NASDAQOTH:GBTC). This fund was created so that buying bitcoins could be as easy as buying any stock or ETF share. All people have to do is buy shares through their regular broker using the ticker symbol. Each share represents about one-tenth of a bitcoin. But, as fellow Fool Jordan Wathen recently pointed out, this convenience comes at a steep cost. According to his calculations, a share costs about 105% more than the value of the underlying bitcoin. Yikes! As with any security, one should do their due diligence before buying bitcoins. Not only on its worthiness as an investment, but on the right exchange platform that best meets your security and convenience needs.

Mark Cuban predicts this will make someone a trillion dollars

Shark Tank's Mark Cuban recently predicted that an emerging tech trend would make someone $1 trillion. That lucky future trillionaire is just the beginning — and the trend itself could be worth as much as $19.9 trillion. Fortunately, this hasn’t yet gone mainstream — most people haven’t recognized the scale of opportunity here. We believe that one market expert has the right answer for investors looking to get in early — and potentially win big.

Chuck Reynolds
Contributor
Please click either Link to Learn more about –
TCC-Bitcoin.

Alan Zibluk Markethive Founding Member

AMD shares are surging with bitcoin because digital currency ‘miners’ need its graphics cards

AMD shares are surging with bitcoin because digital currency 'miners' need its graphics cards

  • AMD told CNBC on Monday the "newly resurgent cryptocurrency mining markets" are driving demand for its graphics cards.
  • Computer hardware retailers are sold out of most AMD RX 570 and RX 580 graphics card models, according to NowInStock.

    

AMD shares rose as much as 7 percent

Tuesday after the company revealed the dramatic jump in digital currency prices is driving demand for its graphics cards. The stock was the top performer in the S&P 500 on the day. "The gaming market remains our priority. We are seeing solid demand for our Polaris-based offerings in the gaming and newly resurgent cryptocurrency mining markets based on the strong performance we are delivering," an AMD spokesperson wrote in an email to CNBC late Monday.

Ethereum cryptocurrency is up over 2,900 percent year-to-date through Tuesday morning, while bitcoin is up nearly 200 percent this year, according to data from industry website CoinDesk. The digital currency jumped more than 8 percent at one point Tuesday to a record nearing $3,000. AMD is one of the market's best performing stocks in the past year with its shares up nearly 170 percent in the past 12 months through Tuesday morning compared with the S&P 500's 15 percent return.

Cryptocurrency miners use graphics cards from AMD and Nvidia to "mine" new coins, which can then be sold or held for future appreciation. AMD traditionally has a better reputation for mining cryptocurrencies. Computer hardware retailers are sold out of most AMD RX 570 and RX 580 graphics card models, according to NowInStock. AMD launched the RX 500 series of graphics cards on April 18. The strong demand is spreading to older graphics cards as well. Used AMD RX 470 graphics cards are selling for well over $100 list price on eBay.

Chuck Reynolds
Contributor
Please click either Link to Learn more about –
TCC-Bitcoin.

Alan Zibluk Markethive Founding Member

BitCart Ditches Bitcoin For Dash, User Uptake “Soars”

BitCart Ditches Bitcoin For Dash,
User Uptake “Soars”

    

Discount gift card supplier BitCart

has taken the unusual step of abandoning Bitcoin in favor of Dash payment, with demand “soaring” as a result.

BitCart, an Irish startup competing with the likes of Gyft, now only offers customers the option of paying for their Amazon gift cards with Dash. The cards, purchased at a discount, effectively give holders a 15 percent saving on Amazon products. The scheme will shortly expand to include hotels.com. “From a merchant’s point of view, bitcoin is extremely problematic,” CEO Graham de Barra said in a press release about the move.

“Bitcoin as a method of payment on BitCart is simply not sustainable and it's a nightmare from a merchant point of view; every twenty or so transactions the platform would stop working and we would have to reintegrate the API.” Dash has meanwhile managed to keep its value in the face of rising and falling altcoin markets, while Bitcoin’s network woes are compounded by an influx of new users. “Since we integrated Dash six weeks ago, we haven't had a single problem. Dash is so easy to use from both a consumer and merchant perspective and since we disabled bitcoin, demand for BitCart has gone through the roof,” de Barra continued.

Chuck Reynolds
Contributor
Please click either Link to Learn more about –
TCC-Bitcoin.

Alan Zibluk Markethive Founding Member

GAW Miners Creator Josh Garza Fined $12 mln For “Ponzi Scheme”

GAW Miners Creator Josh Garza Fined $12 mln For “Ponzi Scheme”

    

Former GAW Miners creator Josh Garza faces a $12 mln fine

for running what lawmakers have certified was a “Ponzi scheme.” Garza, who was charged with securities fraud in 2015 and is also facing separate criminal proceedings for running the fraudulent mining operation, received a final judgment from the US Securities and Exchange Commission (SEC) on June 2. “According to the SEC's complaint, GAW Miners and ZenMiner did not own enough computing power for the mining they promised to conduct, so most investors paid for a share of computing power that never existed,” the official filing reads. “Returns allegedly paid to some investors came from proceeds generated from sales to other investors.”

GAW Miners and sister scheme Paycoin attracted widespread accusations while it was active during 2014, despite Garza’s persistent efforts to denounce what he considered defamatory propaganda on the part of users, commentators and the media. A ruling is yet to be made on what should happen to the Bitcoin funds collected by Garza and his associates, with the virtual currency’s price having markedly increased in the intervening period. The penalty specifically takes the form of “$10,384,099 in disgorgement and prejudgment interest. The final judgment also requires each entity to pay a civil penalty of $1,000,000.”

Chuck Reynolds
Contributor
Please click either Link to Learn more about –
TCC-Bitcoin.

Alan Zibluk Markethive Founding Member

Qatar Blockchain Experiments Can Help Rescue Country From Sudden Isolation

Qatar Blockchain Experiments Can Help Rescue Country From Sudden Isolation

    

Blockchain could come to Qatar’s rescue after four Middle Eastern countries cut ties

with the country over its alleged support of terrorism. Egypt, Saudi Arabia, Bahrain and the United Arab Emirates announced they had severed diplomatic and transport ties on Monday while neighboring Pakistan said it currently had “no intention” of following them. The Financial Times quotes a Saudi news agency stating the government enacted the policy for the “protection of national security from the dangers of terrorism and extremism.”

Qatari sources reacted saying the collective move “was founded on allegations that have no basis in fact.” While the government added it would “not affect the normal lives of citizens and residents,” Qatar’s isolation could provide a timely opportunity for disruptive innovation to take hold. The country has been an active participant in Blockchain experimentation, specifically in its banking sector, with pilot schemes being successfully completed for money transfers in April.

“We have just started blockchain, a cutting-edge technology that will be used for remittances. We are the first bank in Qatar to actually pilot this approach,” Joseph Abraham, CEO of the Commercial Bank of Qatar, told local news resource The Peninsula last month. Of the four states pressuring Qatar, the UAE and increasingly Bahrain are also becoming major players in Blockchain.

Chuck Reynolds
Contributor
Please click either Link to Learn more about –
TCC-Bitcoin.

Alan Zibluk Markethive Founding Member

Fujitsu Joins Blockchain Race With Hyperledger Platform

Fujitsu Joins Blockchain Race With Hyperledger Platform

    

Japanese technology giant Fujitsu has announced it is developing Blockchain

software for data handling, access and distribution. The as-yet unnamed product, which the company hopes to commercialize later this year, will offer three core features putting data handling on the Blockchain for business. Registering data information based on the storage location, managing access and automating data request processes are all part of the plan for the product.

“Recently with the spread of technologies such as IoT, a variety of information relating to people and things has been recorded and stored as data. Efforts to create new value through big data analysis and artificial intelligence (AI) have also become significant worldwide,” an accompanying press release explains.

“In order to generate such value, large volumes of diverse data will be necessary and it will be important for organizations and individuals to share them.” Like IBM’s competitor Blockchain platform, Fujitsu is leveraging Hyperledger technology to build its solution, while a prototype demonstration will go live at the upcoming Interop Tokyo 2017 conference, taking place from June 7-9. The company is just one of an increasing number of international enterprises looking to Hyperledger to help them get ahead of the curve in implementing Blockchain technology.

Chuck Reynolds
Contributor
Please click either Link to Learn more about –
TCC-Bitcoin.

Alan Zibluk Markethive Founding Member

Blockchain Success Sees BTL’s Interbit Aim For Production

Blockchain Success Sees BTL’s Interbit Aim For Production

    

Blockchain platform BTL Group has announced it is to pursue the development

of its Interbit trading solution after a successful oil market pilot. Interbit, which has been used by BP and Eni in conjunction with Wien Energie to handle oil trades, will now work towards a “go-to production phase,” Finance Magnates reports.

“Having demonstrated the reductions in risk and cost savings that are achievable we now have an opportunity to deliver the first successful blockchain based application to the energy market,” BTL co-founder and CEO Guy Halford-Thompson said. “We are also very excited that the pilot has enabled participating companies to better understand the benefits of Interbit and identify other areas in their organizations where they can apply it.” The 12-week oil pilot, which began in February, showed its value even while under initial scrutiny, Reuters further reports on Monday, as it unearthed an accounting issue which would otherwise have caused delays later on in the trading process.

Ernst & Young, which provided consulting support during the pilot, said the benefits of Blockchain extend far beyond simple accounts reinforcement. “Use of such technology can help by streamlining back office processes, leading to reduced risk, better protection against cyber threats and ultimately significant cost savings,” partner Andrew Woosey commented, adding that “further engineering and organisational effort is needed to achieve these outcomes.” Blockchain is also making inroads into oil trading streamlining elsewhere thanks to IBM’s Hyperledger-based IBM Blockchain platform and other partnerships.

Chuck Reynolds
Contributor
Please click either Link to Learn more about –
TCC-Bitcoin.

Alan Zibluk Markethive Founding Member

Newegg Canada Drops Bitcoin Payments, BitPay in Spotlight

Newegg Canada Drops Bitcoin Payments, BitPay in Spotlight

    

Newegg’s Canada arm appears to have dropped Bitcoin payments

after BitPay’s halting of settlements in Canadian dollars (CAD) last week. Citing information from a company representative, a Reddit user claimed Newegg, which was one of the first major retailers to begin accepting Bitcoin, will no longer offer the option to customers on its Newegg.ca platform. Asked why Bitcoin was no longer a payment method, the representative during an instant chat stated they were “not provided with more information” but that “bitcoin is no longer available to be used on Newegg.ca.” Newegg’s main .com site appears not to have adopted the policy, suggesting the problem lies with the company’s payment processor, BitPay.

In a circular last month, BitPay said that it “will no longer be able to support settlements in CAD” and that businesses in Canada would have to accept BTC or USD payouts instead. “You still have the option to continue accepting bitcoin payments via our platform and receive your settlement in BTC (bitcoin) or via USD (US Dollar) wires going forward,” it stated, with the new arrangement effective May 31. BitPay introduced minimum $1,000 minimum withdrawals after losing its Canadian banking partner in May last year. More recently, it has added further changes to its gateway in response to rising mining fees.

Chuck Reynolds
Contributor
Please click either Link to Learn more about –
TCC-Bitcoin.

Alan Zibluk Markethive Founding Member