Yahoo Finances Akiko Fujita and Zack Guzman discuss cryptos wild ride with Kraken CEO Jesse Powell.

AKIKO FUJITA: Bitcoin surging ahead to a 10-day high. Let's take a look at where it's trading right now, well above that $36,000 level, up 6%. Some attributing the spike here to Elon Musk and his Twitter bio, specifically. Not necessarily endorsing Bitcoin, but sort of alluding to it. That providing a big lift.

Let's bring in Jesse Powell. He is the CEO of Kraken. And Jesse, I imagine you have been listening to all of the conversations over the last several days about the users who are on Reddit, this movement behind GameStop. It feels like, in many ways, that has strengthened the case for something like a Bitcoin and this need for a decentralized financial system.

How much of the sentiment that we have seen in the equity markets have spilled over into cryptocurrency?

JESSE POWELL: Quite a lot, actually. And people that started trading with cryptocurrencies first are shocked to find out how the equities markets actually work, with so many middlemen in the process, not actually owning your stocks, having someone else technically own them, having someone else custody them, not being able to move them wherever you want instantly.

It's a very different system, and I think it's a system that is really no longer necessary now that we have a crypto system. And I think we'd be much better off with a bare instrument system where people can take their shares, move them anywhere they want, trade them anywhere they want, and trade directly on exchange.

And because they can't do that now, because there's so many middlemen involved in the process, you have so many opportunities for bad things to happen. There's just not much transparency there. And the little guy really is at a disadvantage in a system like that.

ZACK GUZMAN: And so Jesse, I mean, what kind of boost in users have you seen here in the wake of all this? And, I guess, as a follow up question to that, crypto seems very similar in the fact that you sometimes got to go through, like, a Coinbase or a centralized exchange to, maybe, get started. But then from there, we're seeing decentralized finance and the applications there, really start taking off now.

Story continues

JESSE POWELL: Yeah. So people can buy Bitcoin in a number of places. There are more than 100 exchanges around the world. Kraken is a great way to buy Bitcoin all over the world. Once you get into Bitcoin, you can move your Bitcoin anywhere. It's a permissionless blockchain. And you can convert your Bitcoin into other assets like Ethereum.

And Ethereum gives you access to a whole world of decentralized smart contracts, decentralized exchanges, lending protocols. DeFi is really eating the world of finance, whether people know it or not yet. I think 10 years from now, we're all going to be doing 90% of our financial services on a blockchain.

AKIKO FUJITA: So what does that look like? If you think about how trading is done today, at least in equities, how do you apply what we have seen in cryptocurrencies to the way things are traded in the traditional markets?

JESSE POWELL: I think it's going to be up to the regulators and the lawmakers to allow for this to happen. I mean, there's technically nothing preventing this from happening today. Conceivably Kraken could buy a bunch of Apple shares, tokenize them, and allow people to buy them and trade them even on a decentralized exchange.

So what we really need is some innovation in the regulatory and legislative space. The technology is there today. So I think you'll see stocks trading, just like people trade Bitcoin, just like people trade FX, where they're bare instruments. You can take them anywhere you want. You can hold them yourself. You don't have to go through a clearing agency. They're settled instantly. I think all of that is eventually coming to equities on blockchain.

ZACK GUZMAN: Jesse, I mean, when we think about where we go from here, I think that is a very interesting break in terms of what we're seeing play out as more attention shifts over to the world of DeFi. And it kind of becomes a little bit more attractive. And we've had a number of guests talking about Ethereum being the overlooked opportunity in the crypto space.

When you look at the way, maybe, Bitcoin's dominance as a percentage share of all the crypto assets out there, and what money is flowing into Bitcoin over some of these other tokens, what does it say to you about, maybe, where we're at in this adoption cycle of more people realizing the capabilities?

JESSE POWELL: I think we're still extremely early in the space. Most people in the world don't have cryptocurrency. Most people aren't even paying attention to it. You still hear people asking you who the CEO of Bitcoin is. So I think there's not the understanding there yet, but I think with more players getting into it-- PayPal is getting into it, CashApp is getting into it-- I think those guys with that retail reach will expose Bitcoin to more consumers, and more consumers will start to realize the value of it, start to use it as a store of value, start to use it as a transactional currency.

And I think just the more money printing that's going on, the less trust people have in governments the less trust people have in the financial system, the stock market, the more they will look to the crypto markets where they have complete transparency, full custody of their assets, and the ability to do what they want when they want.

AKIKO FUJITA: Jesse, it feels like the conversation around Bitcoin, at least, has really shifted. Because we've seen a lot of these institutional investors get in over the last year or so. But for every one of those, we have something like a dogecoin. Can you explain to me the spike that happens? What do you make of it?

JESSE POWELL: Yes. Dogecoin has been around for a long time. It started as a meme. It started as a joke, but it has gained a lot of traction with the online-- the Reddit community, the online meme community. And it has gone up to $0.08 in the last 24 hours, and I think it's back down at $0.04 or $0.05 right now. And it was $0.01 a couple of days ago. So it is all over the place, highly volatile. The internet has taken a liking to it.

I would not see it in the same category as Bitcoin as a store of value. But it is certainly a fun coin. You know, historically people have used it to play around with, to dabble into cryptocurrency because it's so cheap. You know, you can buy dogecoin-- well, until today-- for a penny or less. So it's a good way to get in and start experimenting. And there's a great subreddit, r/dogecoin, if people want to learn more about it.

ZACK GUZMAN: And that, to me, is kind of the breaking point here, too. Because it's become clear this week, if anything has made it clear, there are such a thing as speculative bubbles for things that don't have any necessarily underlying value. And it's just kind of made clear, when we talk about Bitcoin and Ethereum, these are two different camps.

But just real quick, before we let you go, Jesse, because I want to make sure I had it right. We were talking-- have you seen-- it was a six-fold increase in the amount of sign-ups?

JESSE POWELL: Yeah. I mean, in the last 24 hours. Something obviously happened that caused a lot of people to come into cryptocurrency just in the last day.

ZACK GUZMAN: That's insane. That's insane, as we talk about this. Jesse Powell, the CEO of Kraken, I appreciate you joining us to break down the moves we're seeing play out there. Thanks again. Be well.

JESSE POWELL: Anytime. Thanks for having me.

Read the rest here:
Bitcoin outlook: '10 years from now we'll all be doing our financial services on a blockchain': Kraken CEO - Yahoo Finance

The price of Bitcoin has reachedrecord highs over the past few months, prompting the CEO of Galaxy Digital tocall the cryptocurrency a digital gold story.However, the comparison is a flawed one.

While gold has shown time and time again that it is a resilient form of money, the price of Bitcoin saw thebiggest single crash in its history at the beginning of the year. Blockchain-based cryptocurrencies like Bitcoin are volatile, and they lack the necessary components to scale as a global currency and payments platform. The way in which blockchain was designed will ensure it remains so.

Blockchain technology lacks fundamental regulatory guidance and therefore poses a number of risks to crypto holders. Bitcoin was intended to be transparent and decentralized, but as it has grown, the core framework has been augmented with retrofitted capabilities like off-chain transactions where deals cannot be publicly tracked and dont actually write transactions to the public ledger when they are made.

This lack of visibility is a problem in any financial setting, and thats just one of the problems of blockchain-based cryptocurrencies like Bitcoin. Blockchain has instabilities that are inherent to its framework: They cannot be fixed, and ultimately result in a poor store of funds for money and savings purposes. Whats more, the increased utilization of blockchain-based cryptocurrencies like Bitcoin will only serve to exacerbate these issues. And as people adopt crypto, leveraging blockchain as the distributed ledger of choice, these problems will grow larger and expose a looming end-of-life. Crypto traders wont exactly be advertising these weak points.

So if no-ones told you before, here's what you should know about Bitcoin, other blockchain-based cryptocurrencies and how it affects you.

Cryptocurrencies are subject to quick and severe value changes. The surge in price over the past few weeks is not the beginning of a settling period, its mostlikely been triggered by a drop in the U.S. dollar and investors flocking to a seeming safe haven in the coronavirus pandemic (probably encouraged by BlackRockexpressing interest in Bitcoin and Paypallaunching a new service to buy, sell and hold crypto).

Its important to remember that Bitcoin ishistorically volatile. Just this year, itsprice was sliced in half between February and March, before doubling in price between November and the end of the year. Even after hitting its record high on January 3, its value fell by nearly 15 percent only hours later.

Because cryptocurrencies hold no intrinsic worth, their value is purely speculative. Unlike other financial assets like gold which has other uses such as material for electronic devices, medical equipment and jewelry cryptocurrencies also dont serve any other purpose other than a store of value. As a result, there is no real connection between the price and longevity of cryptocurrencies, so the bubble around them could burst at any time.

This volatility means that Bitcoin and cryptocurrencies in general cannot offer the long-term security that people need especially not during a recession and such uncertain market conditions. As the Guardians Kenneth Rogoff puts it, Like lottery tickets, there is a high probability that [cryptocurrencies] are worthless.

Theres also thecrypto paradox, whereby people buy cryptocurrencies but dont use them because they want their value to grow. Ironically, unless crypto is used as a currency (its only purpose), its value will fall and investors will eventually offload it to avoid further losses. Theres no sign of cryptocurrencies becoming widely accepted as payment either, as the volatility and lack of transparency makes it too high risk for most vendors. These reasons are why leading economists predict that cryptocurrencies will sooner or later return to a value near zero.

The previously mentioned off-chain transactions are particularly problematic for cryptocurrency users because they arent individually written to the blockchain. What that means is that people can buy and sell crypto coins outside of the wider blockchain consensus essentially undermining the entire reason to use the technology in the first place.

These off-chain transactions are supported by constructs like the Lightning Network, which operates as an external layer on top of a cryptocurrency blockchain and allows for private payments to take place separately before being written back onto the main blockchain.

Blockchain is intended to be a trustless environment: Every transaction requires the different nodes in the system to reach a consensus, so no single actor is responsible, and its nearly impossible to manipulate. But off-chain sales depend on the individuals managing those transactions, which opens the door for foul play. Its already been discovered that off-chain transactions can be manipulated before being written to the blockchain. For example, if an off-chain transaction takes place but one party stops cooperating, the transaction wont be confirmed back into the Blockchain, and the other party wont be able to withdraw their money or take action to redeem the transaction.

Bitcoin cant be the digital gold investors are alluding to because it doesnt have the characteristics to make it a good store of value. Gold has intrinsic value and is in finite supply: Theres a fixed amount of it in existence, and it cant simply be manufactured out of thin air. While Bitcoin can be considered finite because there is a limited amount of it, there is no cap on the number of other cryptocurrencies that can be created. This ability to continually reproduce cryptocurrencies will dilute their value over time, which is why theyll never be a place for people to safely store their money.

The speculative nature of cryptocurrencies also means that their purchasing power is unstable. That means that anyone who buys crypto could find that when they need to buy services, be it the following day or the following year, they have less money than when they started out.

Theresalso great concern over cryptocurrencies in the banking sphere. In 2019,eight of the 10 major U.S. retail banks had dealings with illicit crypto money service businesses. The U.S. Financial Crimes Enforcement Network has sinceemphasized the importance of anti-money-laundering schemes in relation to cryptocurrencies, but many banks still find themselves unsure of protocols when it comes to virtual currencies. If banks are plagued by such crypto gray areas, it could seriously undermine their stability as financial institutions.

Just as fiat (government-run) currencies lose their value over time, so will Bitcoin and other cryptocurrencies but at a greater pace. Already, a large majority of cryptocurrencies have ended up listed asdead coins, or failed currencies. Spikes in crypto prices should not be taken as a sign that they are digital gold but rather that there are so many unknowns surrounding virtual currencies that raw speculation is dictating their price. This couldnt be further from the historic reliability of gold: As the worlds oldest currency, gold has endured countless recessions and economic dips and dives. Yet it has come out stronger than ever, and it continues to be used as money universally. Any emerging currency has to pick up a lot more mileage, experience and security before drawing such a comparison.

As blockchain-based crypto utilization expands globally, there are clear limitations to their speed and scale. It takes huge computational time and energy to write transactions to a blockchain, which is why fewer than 10 transactions are written per second. This slow speed cannot be improved without rebuilding the original framework of the Blockchain technology. But even if this were successfully done, the augmentations would mean that the blockchain wouldnthave the same security as before, nor the same capabilities, and it would be proven to be susceptible to modifications.

Blockchain also relies on the immutability of previous transactions and the related algorithms that maintain the network. That means blockchains are intrinsically difficult to enhance; they cant be simply upgraded from version to version and still maintain the integrity of the original system.

There are also concerns around the environmental impact of crypto processes. Transactions made by Bitcoin users are verified via mining, a process that involves solving a problem on a computer. Because people are rewarded with cryptocurrencies for correctly solving the problems,Bitcoin mines have emerged: warehouses full of mining computers that run all day. The energy consumption associated with crypto is breathtakingly high;estimates showthat Bitcoin uses around 90 TWh of electricity per year, about as much as the entire country of Finland.

Bitcoin and blockchain can be thought of as version 1.0 of cryptocurrencies. They were built to serve the core purpose of providing a distributed ledger of tokenized assets that utilizes cryptography principles and a trustless network of distributed ledgers (nodes) to ensure the security, accuracy and non-repudiation of cryptographic transactions. Version 2.0 added the ability to use the same blockchain framework to support binding legal contracts, but it still suffers from the problems of scalability.

There is an alternative distributed ledger technology to blockchain that could support digital payments outside of cryptocurrencies, while providing a far more efficient and borderless service compared to traditional banking.

Hedera Hashgraph can be considered version 3.0 of distributed ledger technologies. Hashgraph takes all the benefits of a distributed ledger security, cryptography, binding contracts between entities, non-repudiation and builds a secure, mathematically proven distributed ledger framework that can scale to support the demands of global adoption.

As a distributed ledger platform, Hashgraph is much faster and more secure than Bitcoin, supporting up to10,000 transactions per second compared to Bitcoins 2.8 per second. The network also utilizes a gossip protocolto ensure the network remains resilient even if the entire internet was turned off in the middle of a transaction. Furthermore, the network has been proven to be Byzantine-fault tolerant, meaning that, as long as two-thirds of the nodes are controlled by reputable entities, no data can be manipulated on the DLT. Byzantine-fault tolerance is also proven mathematically to be the best possible outcome any distributed network of nodes can hope to achieve.

Distributed ledger technologies stand poised to change the landscape not only for fintech as a means to transact and allocate funds but also as a mechanism for cradle-to-grave asset tracking, legally-binding contracts between entities and, of course, as a platform for generating an infinite number of cryptocurrencies.

In order to properly utilize crypto as a transactional currency with a long-term store of value, it must satisfy two requirements:

Due to the inherent gaps in both scalability and as a store of value, its my view that Bitcoin will never live up to the hype surrounding it as a crypto platform.

Read More From Our Experts in FinanceBreaking Out of the Bubble: Why Im Committed to Investing Beyond Silicon Valley

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What We Don't Know About Bitcoin and Why It's a Problem - Built In

Maybe its just that winter is dragging on, but I find myself getting increasingly irritated with mainstream reports about Bitcoin that say it was a result of the financial crisis.

It wasnt, and that matters.

First, lets look at why it wasnt, and then Ill explain why this misunderstanding bothers me.

Bitcoins pseudonymous creator Satoshi Nakamoto started working on the Bitcoin white paper in early 2007, over a year before the financial crisis hit mainstream markets.

In early 2007, the subprime mortgage industry was collapsing, but even lifelong finance insiders didnt foresee the scale of what was to unfold. As Satoshi worked, bankruptcies and bank tremors would have been making the headlines, but there is no indication this added to his* urgency.

(*We dont know that Satoshi was a he, but to avoid linguistic clutter Ill use that pronoun throughout.)

By the time Satoshi uploaded the white paper to a cryptography mailing list in October 2008, the markets were in full meltdown, the U.S. government was taking over parts of the financial ecosystem, and central banks around the world were dropping interest rates and printing money.

The genesis block, mined by Satoshi in early January 2009, included the text of a headline from that day: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.

Many have taken this as proof that Bitcoin was created in reaction to the crisis. This reveals a lack of understanding of how much work went into the design of Bitcoin, as well as the long history behind the idea of peer-to-peer finance.

History matters

The confusion is also potentially damaging to the Bitcoin narrative.

Why? Because it misrepresents the intentions of the army of cryptographers that had been working on a decentralized electronic cash solution for decades. It diminishes the bigger picture.

Satoshi was not reacting to an event, just as those on whose shoulders he stood werent planning for a specific circumstance. They were all trying to solve the fundamental issue of financial sovereignty.

While we do not have (that Im aware of) evidence of Satoshis thoughts on the financial system from before the publication of the Bitcoin white paper, shortly after the genesis block was mined, Satoshi wrote:

The root problem with conventional currency is all the trust thats required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.

Satoshi was not referencing the financial mess at the time, even though its fallout was loud and hard to ignore. He showed signs of bigger thinking.

And as for the genesis block itself, maybe the timing and choice of embedded text was intentional, or maybe it was a coincidence well never know for sure. Either way, a point was made.

That point was a dig at how politically beholden the banking system had become. It highlighted the lack of solid financial structure and the diminishing trust in institutional solvency. It essentially represented the financial crisis that was unfolding. But it was an example rather than a smoking gun.

The financial crisis was not the reason for Bitcoin. It was a symptom of the reason for Bitcoin. And if we continue to hear claims that the crisis was the cause, we will start to believe that Bitcoin is a new solution to a relatively new problem.

It isnt. Its a long-awaited solution to a long-standing problem.

If we continue to think of Bitcoin solely in the context of financial crises, we could start to believe that the need for it will diminish as the painful adjustments recede into the mists of time.

It wont the technology cant be put back into its bottle. Nor can the growing awareness of the vulnerabilities inherent in the financial system on which we all rely.

Bitcoin has managed to spread ideas that were previously the purview of an arcane mailing list, and in so doing has changed the way we look at our financial rights, our data, even our identity. True, the timing of Bitcoins emergence helped with that spread, and the recent departure from traditional monetary policy has accelerated it. Financial privacy, seizure resistance and fiat debasement are just some of the concepts that the crypto market price swings have pushed into conversations that now reach even the hallowed halls of traditional finance.

But Bitcoin was not created to fix crises. It was created to give people a choice.

Lets stop treating it as a reaction to a specific situation, and recognize that Bitcoin is a technological evolution of a process that started decades ago.

Lets also give credit to a group of thinkers who realized from way back where centralization of finance and our economy could eventually lead.

Regime change

After a momentous week in which COVID-19 briefly stepped back from the headlines to give space for us spectators to appreciate hope, rhetoric and a peaceful transfer of power, it feels good to take a breather and contemplate the scope of potential change ahead.

Its not just that market infrastructure and institutional interest are growing in leaps and bounds (more on that below). Its also that many of the regulatory authorities that determine the framework of financial markets, custody and value transfer are changing guard.

Gary Gensler is expected to be the next chairman of the U.S. Securities and Exchange Commission (SEC). This possibility was reported last week, and was flagged as potentially very good news for the crypto industry because Gensler has not only researched and often spoken in public about crypto assets and blockchain technology he also has taught a course on the subject at MIT.

Chris Brummer, a Georgetown University law professor who runs the annual D.C. Fintech Week conference, edited a book on crypto assets and hosts the excellent Fintech Beat podcast, which often features compelling crypto content, may be the next chair of the Commodity Futures Trading Commission (CFTC), according to Reuters.

According to the Wall Street Journal, Michael S. Barr, a former U.S. Treasury Department official and onetime member of Ripples board of advisers, is likely to become the next Comptroller of the Currency.

This almost seems like a crypto-savvy trifecta of financial regulators which, as my colleague Nik De hinted at in his new crypto regulation newsletter The State of Crypto, is almost too much to ask for. It doesnt guarantee crypto-friendly legislation, but at least it means the discourse will be relatively well informed.

CHAIN LINKS

Investors talking:

While it is nigh on impossible to forecast an expected return for bitcoin, its volatility makes the asset almost uninvestable from a portfolio perspective. Barclays Private Bank chief market strategist Gerald Moser, talking to Financial News. He goes on to claim that the current bull run has been driven by retail investors rather than institutional money, which is a bewildering interpretation of the data.

Guggenheim Partners Chief Investment Officer Scott Minerd, who recently said that he thought bitcoins fair value could reach $400,000, has been looking at the BTC charts and now believes that the cryptocurrency could be in for a sell-off down to $20,000.

Bill Miller featured bitcoin in his Q4 income strategy letter, and his son talks about the funds investment in the MicroStrategy convertible security. The world is ruled by fat-tail events, or seemingly improbable occurrences that have an outsized impact, and all indicators so far point to Bitcoin being one.

You know what, if you won the lottery Yes, Im gonna say it 5% in bitcoin. Jim Cramer, host of the Mad Money program. Cramer apparently sees bitcoin as an important new store of value.

Takeaways:

BlackRock, the worlds largest asset manager with $7.81 trillion under management, appears to have granted at least two of its funds (BlackRock Global Allocation Fund Inc. and BlackRock Funds V) the ability to invest in bitcoin futures, according to prospectus documents filed with the U.S. Securities and Exchange Commission. TAKEAWAY: For now, the funds will only be able to invest in cash-settled bitcoin futures, not actually hold bitcoin. And we shouldnt assume that BlackRock will be betting on upside it could use bitcoin futures to express bearish positions. But this move does echo comments made last month by CEO Larry Fink, when he said bitcoin could possibly evolve into a global market asset. And it is encouraging to see official acknowledgement that the worlds largest asset manager has invested resources in understanding the market.

If any of you heard some alarming chatter about a double-spend on the Bitcoin network (when a certain amount of BTC is spent twice, which in theory is impossible), here is an explanation of what really happened and how its nothing to worry about.

While bitcoin is still usually the first crypto investment for professional investors, due largely to its relative liquidity and range of onramps and services, Ethereums native token ether is starting to attract more institutional attention. A report from Fundstrat Global Advisors posits that the wide array of potential use cases for Ethereum gives ETH the best risk/reward scenario in the market, and believes that the asset could rally up to $10,500. TAKEAWAY: ETH has outperformed BTC for eight of the past 12 months (and looks set to do the same for this one), yet it is currently below its all-time high (ATH), while BTC left its ATH in the dust three months and 52% ago (at time of writing). It is not easy to directly compare the two, however, since the underlying technology, use case outlook and risk profile are very different. Well be following this closely, so watch this space. (See our report on Eth 2.0 for more detail on its upcoming protocol shift.)

U.S. Treasury Secretary nominee Janet Yellen got off on the wrong foot with the cryptocurrency community by claiming that bitcoin was mainly used for illicit financing. This happened on the same day that blockchain forensics firm Chainalysis published a report that shows that cryptocurrency-based criminal activity fell to 0.34% of total transaction volume, down from 2.1% in 2019. TAKEAWAY: That doesnt look like mainly to me. Thankfully, she rectified shortly after in a written response to the Senate Finance Committee, stressing the need to encourage their use for legitimate activities while curtailing their use for malign and illegal activities. That sounds more reasonable.

London-based crypto liquidity provider Wintermute has raised $20 million in a Series B funding round, led by Lightspeed Venture Partners, with participation from Pantera Capital, Sino Global Capital, Kenetic Capital, Rockaway Blockchain Fund, Hack VC, DeFi Alliance and Fidelity-affiliated Avon Ventures. TAKEAWAY: Most of the meaningful raises weve seen recently have been for market infrastructure firms, which points to strong under-the-surface development and increasing sophistication from crypto markets, and expectations of significant growth in service demand.

Sen. Mike Flood (R) of Nebraska has introduced two bills that would allow the states banks to offer custodial services for digital assets. TAKEAWAY: Several states are likely to follow Wyomings lead in making their jurisdictions crypto asset-friendly. This will not just attract new businesses or retain existing ones in an industry with growth potential. It could also serve to attract investment funds, and enhance the opportunities for interstate crypto commerce and business deals.

Market research commissioned by trading platform eToro, which surveyed 25 large institutions in Q3, revealed that interest in crypto markets from pensions and endowments is increasing. TAKEAWAY: This would be a big shift if it materializes, as pensions and endowments are traditionally risk-averse investors. Crypto markets, as we were reminded this week, are not for the risk-averse. Its a relatively small sample, and so cant be taken as indicative of pending inflows, but it does hint at a shift in market perception.

According to a Deutsche Bank survey of market professionals, over 50% believe that BTC is at a 10 on a 1-10 bubble scale, and is likely to halve in value over the next 12 months. TAKEAWAY: Is this a sign of the market getting tired? Or, a sign of growing awareness amongst people who have yet to do research?

JPMorgan strategists have said in a report that a bitcoin price breakout over $40,000 would require daily inflows into the Grayscale Bitcoin Trust (GBTC; Grayscale is owned by DCG, also parent of CoinDesk) of approximately $100 million. TAKEAWAY: So far, that does not look too farfetched: On Monday, the firm had its largest daily inflow ever, almost $700 million, bringing the daily average since it reopened for new investment last week to approximately $200 million.

Digital asset management firm CoinShares has launched an exchange-traded bitcoin product (ETP) on Swiss stock exchange SIX. TAKEAWAY: It is becoming increasingly obvious how much livelier in terms of variety the listed crypto product landscape is in Europe vs the US.

Valkyrie Digital Assets filed an application this week for a bitcoin exchange-traded fund (ETF), the Valkyrie Bitcoin Fund, which would be listed on the New York Stock Exchange. TAKEAWAY: This is the second bitcoin ETF filing weve seen in the past three weeks, and is probably the first of many in 2021. With Gary Gensler as nominated head of the U.S. Securities and Exchange Commission, expectations are rising that the industry will see a bitcoin ETF approved this year.

Wall Street CFOs are more wary of putting company funds into bitcoin after last weeks 30% price plunge, according to Bloomberg. TAKEAWAY: As they should be. CFOs putting company reserves into BTC just for the headlines and possible share price bump are being irresponsible. BTC has a place on balance sheets, but it should be a cautious one. Microstrategy, the software company that kicked off this trend in August of last year, is placing conviction above caution, however, and revealed this week that it has added another $10 million worth of bitcoin during the dip.

More:
Bitcoin Was Not a Response to the Financial Crisis of 2008 - CoinDesk - CoinDesk

No matter where you stand on bitcoin, we can agree on one thing: Its polarizing. Some investors believe its the way of the future and others think its a scam.

However, its gaining popularity. Its likely that the coronavirus pandemic accelerated its acceptance by pushing more retail online. Now, more than one-third of small- and medium-sized businesses will now take bitcoin as payment.1 And even bigger businesses like Microsoft are starting to accept it.2 Also, fans of bitcoin see it as a safeguard against inflation. And since the Federal Reserve has been printing money left and right, some are getting nervous about the future of the dollar.

You might be wondering: Should I jump on the bitcoin bandwagon, or run in the opposite direction? Here are four risks I want you to consider before taking the plunge:

Bitcoin is one of the most volatile investments you could make

Bitcoin goes through incredible spikes and plummets in value. Back in July of 2010, a year after bitcoin was released to the world, a bitcoin was worth only eight cents. The value jumped all over the place until it really started to make some waves in 2017. One bitcoin reached a value of $1,000 early on, then zoomed to $5,000 in October, then doubled to $10,000 in November. By mid-December one bitcoins value was almost $20,000. The bubble finally burst, and the value dropped to about $3,500 by November 2018.3

But bitcoins value started to skyrocket again in 2020. Just a couple weeks ago, the value of a bitcoin had hit an all-time high of just under $42,000but then tanked within 24 hours down to $34,863.4

Will it continue to grow in value? We dont know. But the reality is that volatility always equals risk. And risk isnt a bad thing, but you need to be aware of what it might cost in the end.

Bitcoin has a bit of an identity crisis

Does bitcoin have more in common with the U.S. dollar or with gold? The answer is both. While bitcoin is a currency, Uncle Sam has a different take. The Commodity Futures Trading Commission sees bitcoin as a commodity (like gold), while the IRS treats it like property which meansyou guessed itthey can tax it.5, 6

We need to keep in mind that bitcoin is still the new kid on the block. While its been around for over 10 years now, we still dont have any tried and true best practices for building wealth with bitcoin.

Bitcoin is not regulated by any central bank or nation

Bitcoin has been shrouded in mystery ever since an unknown person named Satoshi Nakamoto released it into the world back in 2009.7 It operates without oversight from any bank or nation-state, meaning its exchanged peer to peer. Its like the Wild West of currenciestheres no marshal to uphold the law. For some, this is an attractive feature. Others recognize the risk that comes with zero regulation.

Bitcoin is widely used for illegal activity

Since all bitcoin trading is handled anonymously, the cryptocurrency scene is a hot spot for cybercrimes. All sorts of shady things, from blackmail to phishing to Ponzi schemes to deals done on the dark web, take place using bitcoin.8

Of course, there are plenty of upstanding people who use cryptocurrencies as well. But hackers who know a lot more about coding and software than the average Joe can use that knowledge to their advantageso be careful.

As youve probably guessed, Im not a fan of bitcoin. I would much rather see you invest your hard-earned cash in proven methods for building wealth, like tax-advantaged retirement accounts and growth stock mutual funds. But if you want to learn more about bitcoin, check out our full blog post on the subject. The most important thing is to be aware, informed, and in control of your financial choices at all times!

Chris Hogan is a two-time #1 national best-selling author, financial expert and host of The Chris Hogan Show. He is a frequent guest on Fox News, Fox Business, Yahoo! Finance, and the Rachael Ray Show. Since 2005, Hogan has served at Ramsey Solutions, where he gives practical money advice on retirement, investing and building wealth. Follow Chris on Twitter, Instagram, Facebook, and YouTube or online at chrishogan360.com.

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Should you invest in bitcoin in 2021? | Local News Stories | willistonherald.com - Williston Daily Herald

After notching jaw-dropping returns in 2020, Bitcoin is scuffling to start 2021, but that may be more a case of seasonality than weak underlying fundamentals. The largest digital currency could be in stronger form several months from now.

Some crypto market experts believe one reason Bitcoin is slumping to start the new year is tax selling, Many investors that made profits on Bitcoin waited until January to sell to avoid paying taxes on those gains for the 2020 tax year.

By selling this month, those investors wont have to pay Uncle Sam his taxes until they file for the 2021 tax year, which will be sometime in early 2022.

According to Delphi Digitals January bitcoin outlook report, one of the biggest reasons for the drop is that those [investors and traders]who realized significant gains trading various crypto assets last year will likely have to sell at least a portion of their holdings to cover expected tax liabilities, reports Muyao Shen for CoinDesk.

Recently, some big name investors signaled their interest in blockchain technology and cryptocurrencies. That comes against a backdrop of potentially favorable seasonality. Recently, the Bitcoin Dominance Index has been rising, confirming the dominant perch of the cryptocurrency.

There is significant room for growth in the cryptocurrency universe. Recent data suggest a small amount of American investors own any digital currencies and after Bitcoin, the numberof crypto owners dwindles precipitously.

Its difficult to pinpoint exactly how much selling pressure can be expected, and different jurisdictions treat capital gains more favorably than others, Kevin Kelly, co-founder and head of global macro at Delphi Digital, said. But bitcoin alone added more than $400 billion to its total market value last year. A decent portion of those returns accrued to speculators and traders who may have already realized some gains or rolled profits into other corners of the crypto market, thus triggering taxable events.

Investors wondering when favorable Bitcoin seasonality kicks in dont have to wait long. This time period tends to arrive late in tax season when tax selling abates.

For more news, information, and strategy, visit the Crypto Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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How Tax Time Is Taking a Toll on Bitcoin - ETF Trends

This was the week that the stock market became the stonks market. For those of you unaware, stonks is an internet meme, an absurdist play on the word stock thats now almost unavoidable on social media. On Jan. 26, Elon Musk, recently the worlds richest man, tweeted Gamestonk!!, and received more than 200,000 likes. It included a link to the WallStreetBets forum on the internet message-board platform, Reddit.

WallStreetBets has become the communications hub for a phalanx of bored-at-home, stick-it-to-the-man retail traders who have cast themselves as the heroes in a David-versus-Goliath battle against hedge funds, big banks and other avatars of Americas elite. These include the blue checks on Twitter , talking heads on CNBC, even Robinhood, the trading platform on which many of them had been buying options, until it halted some of those trades Thursday morning. (The financial machinations of this battle have been described in fascinating detail by my colleagues, including an interview with the man who started, then subsequently lost control of, WallStreetBets.)

But this is a tale of something much bigger and more consequential than the fate of a single stonk, I mean stock, or even, as homebound day traders look for other quick wins, a handful of them. Whats happening on WallStreetBets is of a piece with other internet phenomena, from bitcoin mania to the online conspiracy theories of QAnon, and the events leading up to the Capitol riot.

Research on how innovation happens has revealed that small groups of people, not large networks of them, are often the best at incubating new ideas, which only later spread to the world at large. But in the case of recent collective manias, people are developing ideas that may carry a kernel of truth, but are largely fictions, often crafted in defiance of authoritiesand of authoritative information.

Once cultivated in small, anything-goes online forums, these fringe ideas-turned-movements are amplified by a powerful complex of social-media giants, including Facebook, Twitter, TikTok and YouTube. The algorithms on these platforms that select for the most engaging contentthat is, content that moves, inspires and/or terrifies uspush these notions in front of as many people as possible, and eventually into the mainstream.

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GameStop, Bitcoin and QAnon: How the Wisdom of Crowds Became the Anarchy of the Mob - The Wall Street Journal

TORONTO, Jan. 29, 2021 (GLOBE NEWSWIRE) -- Ninepoint Partners LP (Ninepoint) announced today that Bitcoin Trust (the Fund) was over 99% invested on its first day of trading, January 27, 2021, at an average cost per unit of Bitcoin of US$30,888.84. The Funds Class A Units trade in both US dollars and Canadian dollars on the Toronto Stock Exchange under the symbols BITC.U and BITC.UN, respectively.

Were pleased with our early success, said John Wilson, Co-CEO and Managing Partner of Ninepoint. This speaks to the way we designed this Fund: offering the lowest management fee for a listed Bitcoin investment fund in Canada and structuring the Fund to better serve retail and institutional investors who would like to participate in this emerging asset class.

We are still in the early innings of widespread institutional and retail adoption of Bitcoin as a store of value and alternative to gold in a portfolio. This initial strong interest is very encouraging and bodes well for the future, commented Alex Tapscott, Managing Director of Ninepoints Digital Asset Group.

Investment Objectives

The Funds investment objectives are to seek to provide holders of units (Unitholders) of the Fund with exposure to digital currency bitcoin (Bitcoin) through an institutional-quality platform that is cost-efficient to Unitholders and to provide a secure, simpler and exchange-traded investment alternative for buying and holding Bitcoin.

Investment Strategies and Fund Highlights

The Fund intends to achieve its investment objectives by investing directly in Bitcoin while using high quality service providers, including digital asset trading counterparties, trading platforms and custodians, and independent auditors, legal and valuation agents, in order to manage the assets of the Fund. By having in-house expertise, through Ninepoints recently formed Digital Asset Group, Ninepoint expects to offer a cost-efficient structure to Unitholders for ongoing management fees.

Ninepoint believes that the Fund has the lowest management fee structure for a listed Bitcoin vehicle in Canada. An annual management fee of 0.70% of the Funds net asset value, calculated daily and payable monthly in arrears, plus applicable taxes, will be paid to Ninepoint in respect of each of the ClassA Units, the Class F Units and the ClassS Units of the Fund.

The Funds Bitcoin is valued based on the MVIS CryptoCompare Institutional Bitcoin Index maintained by MV Index Solutions GmbH (MVIS), or a successor or alternative institutional-quality index. MVIS is a wholly-owned subsidiary of Van Eck Associates Corporation, a large, long-standing, and well-regarded financial services firm.

Ninepoint acts as trustee and manager of the Fund.

The Units have not been and will not be registered under the United States Securities Act of 1933, as amended (the U.S. Securities Act), or the securities laws of any state of the United States, and may not be offered or sold, directly or indirectly, in the United States (as defined in Regulation S under the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable securities laws of any state of the United States or in reliance on an exemption from such registration requirements. This news release does not constitute an offer to sell, or a solicitation of an offer to buy any of the securities set out herein in the United States.

About Ninepoint Partners LP

Based in Toronto, Ninepoint Partners is one of Canadas leading alternative investment management firms overseeing approximately $7 billion in assets under management and institutional contracts. Committed to helping investors explore innovative investment solutions that have the potential to enhance returns and manage portfolio risk, Ninepoint offers a diverse set of alternative strategies including North American Equity, Global Equity, Real Assets & Alternative Income. Ninepoint Digital Asset Group is a division of Ninepoint Partners.

For more information on Ninepoint, please visit http://www.ninepoint.com or inquiries regarding theFund, please contact us at (416) 943-6707 or (866) 299-9906 or invest@ninepoint.com.

Media Contact:Wealth Matters ConsultingMary Victoria Falzarano561-578-0697MVF@WEALTHMATTERSCONSULTING.COM

Certain statements included in this news release constitute forward-looking statements, including, but not limited to, those identified by the expressions expects, intends, anticipates, will and similar expressions to the extent that they relate to the Fund. The forward-looking statements are not historical facts but reflect Ninepoint's current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Although Ninepoint believes the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, readers are cautioned not to place undue reliance on such statements due to the inherent uncertainty therein. Neither the Fund nor Ninepoint undertake any obligation to update publicly or otherwise revise any forward-looking statement or information whether as a result of new information, future events or other such factors which affect this information, except as required by law.

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Bitcoin Trust Fully Invested on First Day of Trading - GlobeNewswire

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SAN FRANCISCO Jack Dorsey, Twitters chief executive, publicly wrestled this month with the question of whether his social media service had exercised too much power by cutting off Donald J. Trumps account. Mr. Dorsey wondered aloud if the solution to that power imbalance was new technology inspired by the cryptocurrency Bitcoin.

When YouTube and Facebook barred tens of thousands of Mr. Trumps supporters and white supremacists this month, many flocked to alternative apps such as LBRY, Minds and Sessions. What those sites had in common was that they were also inspired by the design of Bitcoin.

The twin developments were part of a growing movement by technologists, investors and everyday users to replace some of the internets fundamental building blocks in ways that would be harder for tech giants like Facebook and Google to control.

To do so, they are increasingly focused on new technological ideas introduced by Bitcoin, which was built atop an online network designed, at the most basic level, to decentralize power.

Unlike other types of digital money, Bitcoin are created and moved around not by a central bank or financial institution but by a broad and disparate network of computers. Its similar to the way Wikipedia is edited by anyone who wants to help, rather than a single publishing house. That underlying technology is called the blockchain, a reference to the shared ledger on which all of Bitcoins records are kept.

Companies are now finding ways to use blockchains, and similar technology inspired by it, to create social media networks, store online content and host websites without any central authority in charge. Doing so makes it much harder for any government or company to ban accounts or delete content.

These experiments are newly relevant after the biggest tech companies recently exercised their clout in ways that have raised questions about their power.

Facebook and Twitter prevented Mr. Trump from posting online after the Capitol rampage on Jan. 6, saying he had broken their rules against inciting violence. Amazon, Apple and Google stopped working with Parler, a social networking site that had become popular with the far right, saying the app had not done enough to limit violent content.

While liberals and opponents of toxic content praised the companies actions, they were criticized by conservatives, First Amendment scholars and the American Civil Liberties Union for showing that private entities could decide who gets to stay online and who doesnt.

Even if you agree with the specific decisions, I do not for a second trust the people who are making the decisions to make universally good decisions, said Jeremy Kauffman, the founder of LBRY, which provides a decentralized service for streaming videos.

That has prompted a scramble for other options. Dozens of start-ups now offer alternatives to Facebook, Twitter, YouTube and Amazons web hosting services, all on top of decentralized networks and shared ledgers. Many have gained millions of new users over the past few weeks, according to the data company SimilarWeb.

This is the biggest wave Ive ever seen, said Emmi Bevensee, a data scientist and the author of The Decentralized Web of Hate, a publication about the move of right-wing groups to decentralized technology. This has been discussed in niche communities, but now we are having a conversation with the broader world about how these emerging technologies may impact the world at quite large scales.

Bitcoin first emerged in 2009. Its creator, a shadowy figure known as Satoshi Nakamoto, has said its central idea was to allow anyone to open a digital bank account and hold the money in a way that no government could prevent or regulate.

For several years, Bitcoin gained little traction beyond a small coterie of online admirers and people who wanted to pay for illegal drugs online. But as its price rose over time, more people in Silicon Valley took notice of the unusual technical qualities underlying the cryptocurrency. Some promised that the technology could be used to redesign everything from produce tracking to online games.

The hype fell flat over the years as the underlying technology proved to be slow, prone to error and not easily accessible. But more investments and time have begun to result in software that people can actually use.

Last year, Arweave, a blockchain-based project for permanently storing and displaying websites, created an archive of sites and documents from the protests in Hong Kong that angered the Chinese government.

Minds, a blockchain-based replacement for Facebook founded in 2015, also became an online home to some of the right-wing personalities and neo-Nazis who were booted from mainstream social networks, along with fringe groups, in other countries, that have been targeted by their governments. Minds and other similar start-ups are funded by prominent venture capital firms like Andreessen Horowitz and Union Square Ventures.

One of the biggest proponents of the trend has been Mr. Dorsey, 44, who has talked about the promise of decentralized social networks through Twitter and has promoted Bitcoin through the other company he runs, Square, a financial technology provider.

His public support for Bitcoin and Bitcoin-related designs dates to around 2017. In late 2019, Mr. Dorsey announced Blue Sky, a project to develop technology aimed at giving Twitter less influence over who could and could not use the service.

After shutting down Mr. Trumps account this month, Mr. Dorsey said he would hire a team for Blue Sky to address his discomfort with Twitters power by pursuing the vision set out by Bitcoin. On Thursday, Blue Sky published the findings of a task force that has been considering potential designs.

Twitter declined to make Mr. Dorsey available for an interview but said it intended to share more soon.

Blockchains are not the only solution for those in search of alternatives to Big Techs power. Many people have recently migrated to the encrypted messaging apps Signal and Telegram, which have no need for a blockchain. Moxie Marlinspike, the creator of Signal, has said decentralization made it hard to build good software.

The experimentation with decentralized systems has nonetheless ramped up over the last month. Brave, a new browser, announced last week that it would begin integrating a blockchain-based system, known as IPFS, into its software to make web content more reliable in case big service providers went down or tried to ban sites.

The IPFS network gives access to content even if it has been censored by corporations and nation-states, Brian Bondy, a co-founder of Brave, said.

At LBRY, the blockchain-based alternative to YouTube, the number of people signing up daily has surged 250 percent from December, the company said. The newcomers appear to have largely been a motley crew of Trump fans, white supremacists and gun rights advocates who violated YouTubes rules.

When YouTube removed the latest videos from the white supremacist video blogger Way of the World last week, he tweeted: Why do we waste our time on this globalist scum? Come to LBRY for all my videos in HD quality, censorship free!

Megan Squires, a professor at Elon University who studies new computer networks, said blockchain-based networks faced hurdles because the underlying technology made it hard to exercise any control over content.

As a technology it is very cool, but you cant just sit there and be a Pollyanna and think that all information will be free, she said. There will be racists, and people will shoot each other. Its going to be the total package.

Mr. Kauffman said LBRY had prepared for these situations. While anyone will be able to create an account and register content on the LBRY blockchain that the company cannot delete similar to the way anyone can create an email address and send emails most people will get access to videos through a site on top of it. That allows LBRY to enforce moderation policies, much as Google can filter out spam and illegal content in email, he said.

Even so, Mr. Kauffman said, no one would lose basic access to online conversation.

Id be proud of almost any kind of marginalized voice using it, no matter how much I disagreed with it, he said.

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They Found a Way to Limit Big Techs Power: Using the Design of Bitcoin - The New York Times

SIOUX FALLS, S.D. (KELO) Sioux Falls police are investigating after two people lost money to a phone scam that required a unique payment form.

Police say an individual and a business got the same kind of call. Someone claiming to be Xcel Energy saying they were past due on payments and needed to pay right away or their power would be shut off. Police say the scammers had the victims make a payment through a BitCoin kiosk.

The end result is the same, that we want people if they get a call from a utility company or somebody claiming to be with the government or whoever, especially if they said they are owed money and need to pay right away, get some contact information, get the information from that person, hang up, then do your own independent research, Sioux Falls police spokesmanSam Clemens said.

Police say both victims didnt realize it was a scam until they called Xcel the next day.

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Scam calls claim electricity will be shut off unless BitCoin payment is sent - KELOLAND.com

As institutions are increasingly considering incorporating cryptocurrency into their portfolios, one question remains: How do you allocate money to bitcoin without taking on too much risk?

Traditional risk modeling strategies like factor, statistical, or macroeconomic models cannot be applied to bitcoin in the same way that they are applied to other asset classes, according to new research from Joel Coverdale, a risk consultant with Hong Kong-based consulting and advisory firm Eight Isle and ex-BlackRock director.

Bitcoin, as an emergent asset class, poses a tricky dilemma in that it doesn't fit neatly into the existing modeling frameworks, according to Coverdales paper. At least, not at first glance.

Coverdale first modeled bitcoins returns on a weekly basis, finding that since 2011, bitcoin had largely volatile weekly returns that skewed slightly positive over time. Coverdale estimates that bitcoins volatility is about two or three times that of most other asset classes.

People see this kind of volatility and think immediately that it has no place in an institutional investment framework, Coverdale wrote. But as Nassim Taleb points out, Volatile things are not necessarily risky, and the reverse is also true.

Coverdale argued that bitcoins lack of correlation to other asset classes makes the level of volatility less concerning.

Using estimations based onrisk data and analytics firm Axiomas multi-asset class risk engine, Coverdale looked at the correlation of bitcoin to other asset classes as of December 2020. His estimates show that although bitcoin is slightly positively correlated to most asset classes, that correlation never goes beyond 0.2, which is not the case for the other asset classes he measured.

Whilst the volatility is likely to increase the overall portfolio volatility when allocating capital to bitcoin, due to the correlation effect, the overall impact when accounting for correlation is much more muted, Coverdale wrote.

Philippe Bekhazi, chief executive officer of XBTO Group, a cryptocurrency finance firm, agreed.

What bitcoin provides is not a hedge to the other risk assets, but instead diversification amongst other risk assets, Bekhazi said via email Thursday.

With this all in mind, Coverdale constructed sample portfolios that substituted bitcoin in for a percentage of equities, a percentage of currency, or as a replacement for currency altogether.

He found that replacing 5 percent of equities with bitcoin increased the portfolios overall risk by just 0.35 percent. When he replaced currency with bitcoin instead, the portfolios risk increased by around 1 percent.

[II Deep Dive: Bitcoin Prices Are Likely Manipulated, Research Affiliates Warns]

XBTO found the same when comparing major assets. This holds true irrespective of whether we are looking at daily returns for the last year or looking at monthly returns over the last ten years, Bekhazi said via email.

Its an obvious point but one worth making clearly at a 5 percent weight, even if bitcoin were to go to zero, the most it would impact our portfolio is 5 percent, Coverdale wrote. The upside is unconstrained, however.

Coverdale argued that because of this, from a risk-adjusted return perspective, it doesnt matter how one allocates to bitcoin, but rather, that they do it.

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Bitcoin is Risky. Here's How Institutions Can Manage It. - Institutional Investor