Bitcoin fever is back.

Bitcoin hit a new high in early January, reaching a price of nearly $42,000. On Friday morning, the price of the notoriously volatile cryptocurrency was about 32,500, according to CoinDesk.

Even mainstream financial instituions are warming up: JP Morgan said, in the long-term, if the market cap gets high enough that it competes with gold, the price of bitcoin could reach $146,000, in a note published in January. (Bitcoin currently has a market value of over $600 billion.)

But more than just a cryptocurrency, bitcoin has become an obsession for many. Here are some of the behavioral and psychological reasons why.

Bitcoin is "more religion than solution to any problem," billionaire Mark Cuban told Forbes in December.

In fact, bitcoin aficionados have their own jargon full of acronyms and phrases from "HODL" to "whale," and (pre-Covid) bitcoin conferences would attract thousands of attendees. The crypto crow even has a preferred car to buy with their bitcoin: the Lambo (aka Lamborghini).

"The culture around bitcoin is part of the appeal," says Finn Breton, professor of science and technology at the University of California Davis and author of "Digital Cash: The Unknown History of the Anarchists, Utopians, and Technologists Who Created Cryptocurrency."

"When you buy bitcoin, you're actually buying into a whole scene," Breton says. "And it's a scene that can be a part of your identity."

Though bitcoin is getting more attention from some serious investors and mainstream financial institutions, it's still a somewhat subversive concept, so people who invest in it can view themselves as radical or participating in counterculture, Breton says.

From celebrities who invest in bitcoin, to a highly-engaged bitcoin community on Twitter, TikTok and Reddit, social media feeds into bitcoin's popularity.

"Suddenly, there's like a new way to see, finance and to have an identity of yourself as an actor in like the financial space," says Lana Swartz, assistant professor of media studies at the University of Virginia and author of "New Money: How Payment Became Social Media," tells CNBC Make It.

These social platforms can also drive behaviors, according to Utpal Dholakia professor of marketing at Rice University, who studies consumer financial decision-making. Research has shown that when people talk about their investments in online social environments, they tend to become more risk-seeking in the types of investments they make, he tells CNBC Make It.

"The same dynamic applies to a lot of investment decisions which are being made right now," Dholakia says.

Many smart investors, from Kevin O'Leary to CNBC's Jim Cramer, have likened buying bitcoin to going to Vegas. Berkshire Hathaway CEO and chairman Warren Buffett has been a longtime critic of bitcoin, saying that "cryptocurrencies basically have no value" and are a "gambling device."

And as with gambling, "some people certainly enjoy that thrill," Dholakia says.

Checking the price of stocks regularly is an activity that could get boring, says Tom Meyvis, professor of marketing at New York University's Leonard N. Stern School of Business. "With something like bitcoin, it's exciting because there's constantly something happening," he says. "You can check it 10 times a day and the price can vary wildly."

Also, many young people especially, who have grown up with video games and social media, are conditioned to want instant gratification and fast-paced cycles, Swartz says. Being drawn to high-risk high-reward investments like bitcoin "makes perfect sense," she says.

People get excited by the prospect of bringing a new, potentially life-changing, technology into the world. And with bitcoin bulls predicting the crypto's price couldgo as high $200,000 over the next decade, and with mainstream financial businesses from Paypal to Square getting into bitcoin, it's hard not to fear missing out.

Add to that the viral stories about people who have had success with bitcoin: There are enviable windfalls, from instant bitcoin millionaires to stories like the "Bitcoin Family," a Dutch family of five who liquidated their assets in 2017 in exchange for bitcoin (when bitcoin was priced at $900), moved into a van and traveled the world.

"People focus more on the upside than the downside," says Meyvis. So it's easy to get swept up in the possibilities that could come from bitcoin.

"Money is a technology that allows us to imagine futures," Swartz says.

The bitcoin excitement, particularly among young people, illustrates that people feel "locked out of the ability to have the kind of assets that would let them generate any form of wealth," Breton says. Millennials, those born between 1981 and 1996, controlled just 4.6% of U.S. wealth through the first half of 2020, according todata from the Federal Reserve.

"When we look at the fever around bitcoin, we really need to see it like in part as a demonstration of the fact that this is happening because there are not reliable, non-speculative mechanisms whereby people who don't already have access to a chunk of wealth could produce wealth over time," he says. "And that's a real indictment of the way things are currently set up for younger people."

Check out:Thinking of buying bitcoin? What experts say about big crypto concerns: You have to be mentally prepared

Don't miss: The best credit cards for building credit of 2021

See more here:
Why people are so obsessed with bitcoin: The psychology of crypto explained - CNBC

Cryptocurrencies could come under renewed regulatory scrutiny over the next four years if Janet Yellen, Joe Biden's pick to lead the Treasury Department, gets her way. During Yellen's confirmation hearing on Tuesday before the Senate Finance Committee,Senator Maggie Hassan (D-New Hampshire) asked Yellen about the use of cryptocurrency by terrorists and other criminals.

"Cryptocurrencies are a particular concern," Yellen responded. "I think many are usedat least in a transactions sensemainly for illicit financing."

She said she wanted to "examine ways in which we can curtail their use and make sure that [money laundering] doesn't occur through those channels."

Blockchain-based financial networks are attractive to criminals because they do not require users to identify themselvesas the law requires most conventional financial networks to do. Because no individual or organization controls these networks, there's no easy way for governments to force them to comply with money-laundering laws.

So instead of trying to force the networks themselves to comply, regulators in the USand many other jurisdictionshave focused on regulating bitcoin exchanges that help users trade between dollars and cryptocurrencies. Once a bitcoin exchange identifies who initially received a particular bitcoin payment, law enforcement can often trace subsequent payments through a blockchain network's open payment ledger.

In December, Trump's outgoing team at the Financial Crimes Enforcement Networka unit of the Treasury Department focused on money launderingproposed a new set of rules to tighten the screws on cryptocurrency-based money laundering.

Under the new rules, cryptocurrency-based exchanges would need to file transaction reports with FinCEN any time a customer made a cryptocurrency transaction worth more than $10,000. This would mirror existing rules requiring conventional banks to report when customers make cash withdrawals or deposits worth more than $10,000.

Even more controversial in the cryptocurrency world, FinCEN wants to impose new record-keeping requirements for transactions involving users who manage their own private keysdubbed "unhosted wallets" by FinCEN. Under FinCEN's proposal, if a cryptocurrency exchange's customer sends more than $3,000 to an unhosted wallet, the exchange would be required to keep a record of the transaction, including the identity of the customer who initiated the payment.

These new rules didn't take effect before Trump left office, so theincoming Biden team will need to decide what to do with them. The Biden administration couldsign off on the existing rules, rewrite them, or scrap them altogether. Yellen's comments on Tuesday suggest that she is unlikely to scrap the rules. If anything, the Treasury Department is likely to consider additional regulations of the blockchain economy over the next four years.

This story originally appeared on Ars Technica.

More Great WIRED Stories

Continue reading here:
Janet Yellen Will Consider Limiting the Use of Cryptocurrency - WIRED

A study by blockchain analytics firm Chainalysis finds that cryptocurrency-related crime has fallen significantly. The criminal share of all crypto activity fell to just 0.34% in 2020. This contradicts recent statements by U.S. Treasury Secretary nominee Janet Yellen and ECB President Christine Lagarde that cryptocurrencies are mostly used for illicit financing.

Chainalysis shared some findings from its 2021 Crypto Crime Report this week. While acknowledging that cryptocurrency remains appealing for criminals as well due primarily to its pseudonymous nature and the ease with which it allows users to send funds anywhere in the world instantly, the blockchain analytics firm detailed:

The good news is that cryptocurrency-related crime fell significantly in 2020 In 2020, the criminal share of all cryptocurrency activity fell to just 0.34%, or $10.0 billion in transaction volume.

In comparison, the firm explained that in 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume, or roughly $21.4 billion worth of transfers. Last year, One reason the percentage of criminal activity fell is because overall economic activity nearly tripled between 2019 and 2020, the company noted.

Chainalysis noted that darknet markets were the second-largest crime category. It accounted for $1.7 billion worth of cryptocurrency activity, which was an increase from $1.3 billion in the previous year. Ransomware accounted for just 7% of all funds received by criminal addresses, which was just under $350 million worth of cryptocurrency. While small, ransomware saw a 311% jump over 2019.

The findings by Chainalysis contradict the recent statements made by Joe Bidens pick for the U.S. Treasury Secretary, Janet Yellen, and ECB President Christine Lagarde. Yellen said Tuesday that many cryptocurrencies are used mainly for illicit financing. Meanwhile, Lagarde said last week that bitcoin has conducted some funny business and some totally reprehensible money laundering activity.

Several people in the crypto industry have pointed out the error of their statements, including a well-known economist who called Lagardes statement outrageous. He emphasized, we all know that the vast majority of money laundering globally is conducted in fiat currencies, particularly in U.S. dollars and euros.

What do you think about the falling rate of crypto crime? Let us know in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Go here to read the rest:
Crypto Crime Fell Sharply to Only 0.3% of All Cryptocurrency Activity in 2020 Featured Bitcoin News - Bitcoin News

2020 was a seeming conundrum in financial markets. In the midst of the pandemic, many investors turned a tidy profit. In particular, owners of bitcoin and other cryptocurrencies had a banner year. Bitcoin increased over 300% in value. Congrats if you called it and got in ahead of the boom. And as cryptocurrencies are a scarce resource, there could be more long-term upside in crypto prices.

But I'm not here to make that call. Instead, I'm talking about stocks that will benefit from the long-term increase in usage of digital assets. And CME Group (NASDAQ:CME) could be the best business for investing in the trend.

Image source: Getty Images.

Cryptocurrency prices are not the best measure of how useful a digital currency actually is. Rather, they're a short-term measure of supply and demand. This is the case with any asset price in the short term, stocks included. Think back to your Econ 101 class: All resources are finite in supply, so changes in demand dictate the price of said resource. If demand exceeds supply, then prices go up; if demand dips below available supply, prices go down. Cryptocurrencies -- embodied by bitcoin -- were in very high demand in 2020 relative to the limited supply of digital coins in actual circulation. (Of note, most bitcoins in existence are not actually in circulation, as explained by fellow Fool.com contributor Sean Williams.) In 2018, it was the opposite situation.

Data by YCharts.

But these wild fluctuations in price don't exactly measure digital money's (and the underlying blockchain technology's) usefulness -- that is to say, how many (or how few in this case) consumers and businesses are using bitcoin in their daily activities. For many investors, myself included at the moment, a lack of utility makes cryptocurrencies a hard pass after their epic run in the last year.

But is there a way to bet on the long-term growth in acceptance of digital currency (the true measure of any currency's worth as a storage of value) without needing to worry about wild swings in cryptocurrency prices themselves? Yes, and I think the ticket is CME Group.

CME Group is the world's largest marketplace of derivatives contracts -- options and futures (a pre-agreed-upon price for delivery of an asset at a future date) for a long list of things from company stock to commodities like oil and agricultural products to fiat currencies like the U.S. dollar. While derivatives have a bad rap in some investors' minds (thanks to the wild speculation they can help enable), contracts like options and futures have been in use for centuries as a way for people and organizations to manage risk and from which to discover information about expectations within the economy.

By and large, it's for this risk mitigation that options and futures contracts are used. And CME is an efficient and very profitable facilitator of risk transference. The marketplace generated free cash flow (revenue minus cash operating expenses and capital expenditures) of $1.77 billion on revenue of $3.73 billion through the first nine months of 2020 -- an incredible margin of 47%. The company has a nearly two-decade-long track record paying a steadily rising quarterly dividend (currently $0.85 per share each quarter in 2020, yielding 1.8% at Friday's prices) and often pays a special dividend at the end of the year to distribute excess cash. For 2020, the one-time special dividend was $2.50 per share, boosting the stock's effective annual yield to 3.1%.

But what's all this to cryptocurrency? CME launched futures contracts on bitcoin in 2017, expanded the market to include bitcoin futures options in early 2020, and will add a new cryptocurrency marketplace via Ether futures (a unit of Ethereum, the second-largest crypto behind bitcoin) in February 2021. Derivatives contracts on the two largest crypto assets are a big deal if you believe adoption of digital currency will increase over time. Derivatives can help make a market for an asset more stable and could encourage businesses and organizations to accept their use. And CME earns a small fee every time a contract is traded.

For example, let's say a retailer wants to begin accepting bitcoin or Ethereum as a form of payment from customers, but it needs to report financial results and pay its bills (including taxes) in U.S. dollars. Derivatives can help it hedge against loss from possible declines in crypto prices on the revenue it collects. CME is helping make such risk mitigation possible, and adding legitimacy for bitcoin and Ethereum as a form of payment along the way.

By expanding its steadily growing marketplace into digital assets, CME Group could benefit from continual adoption of cryptocurrencies in the economy -- not just yielding its growth from how many investors want to buy or trade the digital currencies themselves at any given point in time. Over the long term, this could be an important area of growth for CME if digital assets like bitcoin and Ethereum gain momentum as a form of payment and blockchain technology finds other areas of use.

It would be a mistake to draw a hard comparison between the current phenomenon occurring with bitcoin prices and bubbles in the past (like, say, the tech bubble of the late 1990s). However, a current lack of mainstream adoption of digital assets gives me pause before investing directly in bitcoin and other cryptocurrencies. That isn't to say there isn't actual use of cryptocurrency in the economy -- and I think there's a very high chance adoption will continue to expand in the decades to come. But if you want to bet digital currency usefulness will increase over time, I think CME Group is a great place to start.

More here:
What's the Best Cryptocurrency Stock? It Might Be CME Group - The Motley Fool

Bitcoin prices fell sharply amid the global sell-off in equities.

Luke MacGregor | Bloomberg | Getty Images

Bitcoin briefly tumbled below $30,000 on Thursday, as the cryptocurrency continued a slide from record levels.

The digital currency dropped as much as 17% to $29,246.77, wiping out about $100 billion from the market, according to data from CoinDesk. It's since pared losses slightly Friday, climbing back above $30,000 after trading beneath that level for over an hour.

Bitcoin was last trading down around 3% at a price of $31,668. It's fallen more than 12% so far this week, and is now down roughly 25% since peaking at $41,940 earlier this month.

The latest plunge, which comes without any clear reason, underscores the volatility of a currency that's become a popular investment for day traders in recent years even as it still has limited real-world application. Bitcoin rose over 300% in 2020, closing the year just above $29,000.

Ether, the digital currency that's second to bitcoin in total value, dropped even more on Thursday, declining 22% to $1,053.80. It's since recouped some of its losses, off 3% at a price of $1,204, but still 16% below its high from earlier this week, according to CoinDesk. Ether rose 471% last year.

President Joe Biden picked Gary Gensler, the former chairman of the Commodity Futures Trading Commission and an ex-Goldman Sachs banker, to be the next chair of the Securities and Exchange Commission. Gensler taught about cryptocurrencies at the Massachusetts Institute of Technology, starting in 2018.

However, Biden's choice of Treasury Secretary, formerFederal ReserveChair Janet Yellen, is a crypto skeptic who warned earlier this week that the government may need to "curtail" the use of virtual currencies to prevent illicit activity.

- CNBC's Ryan Browne contributed to this report.

WATCH: Crypto market sheds $100B as investors await Biden's regulatory approach

Nominations are open for the 2021 CNBC Disruptor 50, a list of private start-ups using breakthrough technology to become the next generation of great public companies. Submit by Friday, Feb. 12, at 3 pm EST.

Read the rest here:
Bitcoin briefly tumbles below $30,000, falling 12% so far this week - CNBC

The rise in the value of Bitcoin and media coverage of cryptocurrencies could make the industry ripe for startups going public in 2021. One of the methods for cryptocurrency companies to go public could be through a special purpose acquisition company.

Coinbase is considering a 2021 initial public offering, but could also be a candidate for a SPAC deal. Here is a look at some SPACs that could target cryptocurrency companies or have already announced a deal in the space.

GS Acquisition Holdings II (NYSE: GSAH): The Goldman Sachs (NYSE: GS) SPAC raised more than$700 million in its offering. The company has been linked to eToro after the cryptocurrency exchange talked to Goldman about a potential IPO. Goldman is also said to beexploring entering the cryptocurrency market soon, which could mean it pursues partial ownership of a cryptocurrency-related company via this SPAC.

Related Link: 10 SPACs Trading Under $11 For Investors To Consider In 2021

Burgundy Technology Acquisition Corp(NASDAQ: BTAQ): Led by the former CEO of Hewlett Packard and SAP SE (NYSE: SAP), Burgundy Technology Acquisitionis targeting technology or enterprise software. The company has mentioned Israel as an area of focus, which could make eToro a potential target company for this SPAC.

Lefteris Acquisition Corp (NASDAQ: LFTR): Targeting the fintech space, Lefteris Acquisitioncould merge with a cryptocurrency-focused company. The management team includes former management from TD Ameritrade and Etrade. Asiff Hirji, who is attached to the SPAC, was the Coinbase COO from December 2017 to June 2019. Hirji also works for blockchain startup Figure as its president since January 2020.

Ribbit Leap(NYSE: LEAP):This SPAC from Ribbit Capital is targeting a company in the fintech space. Ribbit Capital is an investor in several fintech companies yet to go public including Coinbase and Robinhood. The SPAC is led by two current Ribbit Capital executives and couldconsidera cryptocurrency company.

Far Peak Acquisition Corporation(NYSE: FPAC): Led by former New York Stock Exchange President Tom Farley, Far Peak Acquisitioncould be a SPAC that goes after a cryptocurrency company. The NYSE invested $75 million in Coinbase in 2015, which was the largest investment ever made in a Bitcoin company at the time. The NYSE also launched a Bitcoin Index that same year. Farley called Bitcoin a growth market then and could still be bullish on the industry.

VPC Impact Acquisition Holdings (NASDAQ: VIH): Shares of VPC Impact Acquisition Holdings surged on reports it was acquiring cryptocurrency exchange Bakkt. The companies formally announced the merger being done at a $2.1 billion valuation. Bakkt launched the first regulated Bitcoin futures exchange and first fully-regulated options contract for Bitcoin. Shareholders of the SPAC will own 8% of the new company. Intercontinental Exchange (NYSE: ICE) will own 65% of Bakkt after the merger.

Diginex (NASDAQ: EQOS): Former SPAC, now trading as Diginex, is the first full digital asset ecosystem comprising a cryptocurrency exchange to be listed on the Nasdaq. Diginex traded under $10 after the SPAC merger until December when it was seen as a Bitcoin play. The company offers a cryptocurrency exchange and OTC trading operation. Diginex is launching a derivative product with Bitcoin perpetual futures contract in January. The company is planning on expanding its operations from Europe and Asia to enter the United States market.

Disclosure: The author hasa long position in shares of GSAH andBTAQ.

Related Link (You Tube Video):What SPAC Could Take Coinbase Public?

2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

See the rest here:
7 SPACs To Play The Rise Of Bitcoin, Cryptocurrency Stocks - Benzinga