Here’s Why I Won’t Buy Bitcoin, and You Shouldn’t, Either – Motley Fool

This has been a history-making week, and I'm not just talking about the rollout of coronavirus vaccines. On Wednesday, Dec. 16, we witnessed the largest cryptocurrency in the world by market cap, bitcoin, blow past its previous high and eclipse $20,000 per token. In fact, bitcoin went on to also blow by $21,000 and $22,000 within a matter of hours.

For as volatile as the stock market has been in 2020, you wouldn't know it by looking at bitcoin, which is up by 201% on a year-to-date basis through the late evening of Dec. 16. This jaw-dropping rally is rebuilding the euphoria that overtook the crypto community back in 2017, and probably has folks believing cryptocurrency is a good investment.

But I am not part of that community, nor can I say I ever will be. The higher bitcoin goes, the more convinced I am that it's one of the most dangerous investments. Each of the major buy theses surrounding bitcoin can be easily debunked -- as follows.

Image source: Getty Images.

One predominant catalyst for bitcoin is the perception of scarcity. It currently has 18.57 million tokens in circulation and a cap of 21 million. Over time, the remaining 2.43 million tokens will be mined via transaction proofing and block rewards. With only so many tokens to go around (fractions of a token can be bought and sold), the buy thesis suggests that this scarcity makes bitcoin an excellent investment.

The problem is that bitcoin lacks genuine scarcity. Its perceived cap of 21 million tokens exists because of computer code. Last I checked, code can always be erased and rewritten. While it's unlikely that a community consensus would be reached to increase the circulating supply of bitcoin, the possibility of this happening isn't zero.

By comparison, a precious metal like gold has a hard supply limit. We can't use alchemy to make more gold. The only gold that's available is what's been mined or is still underground. When the only parameter of scarcity is written computer code, that's not true scarcity.

Image source: Getty Images.

Another buy thesis of bulls is that bitcoin's utility is growing by the day. More businesses are accepting digital tokens for payment, and a broader swath of people are buying bitcoin tokens for the first time. According to financial services company Fundera, around 2,300 U.S. businesses and 15,174 global businesses were accepting bitcoin at the end of 2019. More than a dozen multinational companies also accept bitcoin.

Slam-dunk proof of increasing utility, right? Not so fast.

Even following its monumental rally, bitcoin has a total market value of $400 billion. That compares to approximately $142 trillion in global gross domestic product (GDP) in 2019. While it's true that not all GDP is consumption based, this $400 billion accounts for less than 0.3% of global GDP.

Furthermore, approximately 40% of bitcoin tokens are being held by long-term investors with no desire to put those tokens into circulation. Rather than having $400 billion in buying power, there's more like $240 billion in purchasing power available, accounting for 0.17% of global GDP in 2019. There are not nearly enough tokens in existence to drive widespread adoption, based on these figures.

As one additional note, there are about 32.5 million businesses in the U.S., including sole proprietorships. Removing these nonemployer businesses leaves 7.7 million companies with at least one paid employee, per the U.S. Census Bureau in 2016. According to Fundera, just 2,300 of these businesses are accepting bitcoin.

Face the facts: There's no widespread utility.

Image source: Getty Images.

Bitcoin bulls are also pretty convinced that the most popular digital currency is now a bona fide store of value: i.e., an asset, commodity, or currency that maintains its value.

Every month, the Federal Reserve is buying roughly $120 billion in government-backed debt. When coupled with the central banks' pledge to keep its federal funds rate at or near record lows, it's pretty evident that the U.S. dollar will be under pressure. Crypto investors believe that a ballooning money supply is a green flag for bitcoin to head significantly higher.

The issues I have with the store-of-value thesis are twofold. First, bitcoin isn't backed by any other asset or government. Therefore, it has no tie-ins or official relationship to the movements of the U.S. dollar. Implying that a ballooning money supply should push bitcoin higher is nothing more than a dart throw.

Second, store-of-value assets are designed to maintain their value over time and protect investors from volatility. Yet in March, bitcoin nearly lost half of its value in a 24-hour period. In 2018, the largest cryptocurrency by market cap shed over 80% of its value. In 2013, bitcoin lost about half its value in about six hours. This isn't how a store-of-value asset behaves.

The truth is, buying bitcoin is pure speculation.

Image source: Getty Images.

Bitcoin optimists will also crow about bitcoin leading the digital payments revolution. Going cashless could resolve the issues created by certain regions of the world being underbanked. Additionally, the blockchain technology that underlies bitcoin could revolutionize the payment processing and settlement time frame, especially in cross-border transactions.

While I don't disagree that a digital payments revolution is underway, or that blockchain could offer global financial and supply chain solutions, bitcoin isn't the vessel that's going to make this vision a reality.

The interesting thing about blockchain is that it can be tethered to multiple types of digital currency, be used in conjunction with fiat currency, or can operate independent of a tethered token. There's absolutely zero evidence that bitcoin is necessary to support a blockchain revolution.

To add, buying bitcoin tokens does not give an investor any ownership in the underlying blockchain. With no ownership in the solution that has the potential to actually drive this digital revolution, bitcoin investors are pinning their hopes on other investors being willing to pay more for a currency that exists only in computer code than they did.

So, why is bitcoin rallying? I'd surmise it's a combination of short-term emotions, technical analysis (i.e., pretty charts), and a grossly inefficient crypto market that overwhelmingly favors the buy side. After all, it's nowhere near as easy to bet against bitcoin as it is to bet against a publicly traded stock.

History has proved that sentiment can shift at the drop of a pin in the cryptocurrency space. I'd suggest investors keep their distance from bitcoin.

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Here's Why I Won't Buy Bitcoin, and You Shouldn't, Either - Motley Fool

Market Wrap: Bitcoin Dumps to $21.9K; ETH 2.0 Affected Ether Locked in DeFi – CoinDesk – CoinDesk

After the past weeks record bitcoin volume for 2020, the price dipped on lower volume. Meanwhile, Novembers dip in ether assets locked in DeFi can at least partially be attributed to the Ethereum networks ambitious 2.0 upgrade.

Bitcoin trading on Bitstamp since Dec. 18.

Bitcoins price rode a roller coaster up and down over the past 24 hours. After a steady run above $23,800 in early hours trading, the worlds oldest cryptocurrency dumped as low as $21,960, according to CoinDesk 20 data. The price recovered somewhat to $22,843 as of press time.

Lower-than-average volume led to a thinner-than-usual market Monday as many traders were likely staying on the sidelines with the holidays and new year quickly approaching.

Trading activity is subdued. That doesnt motivate anyone to trade on Christmas week, said Misha Alefirenko, co-founder of crypto market maker VelvetFormula.

Bitcoin volumes on eight major exchanges tracked by the CoinDesk 20.

After Dec. 17s combined volume record $4.7 billion day across major exchanges Bitfinex, Bitflyer, Bitstamp, Coinbase, Gemini, ItBit, Kraken and Poloniex, that figure was much lower, down to $2.5 billion as of press time Monday.

Bitcoins historical price the past week.

Despite this, big-time buyers in the over-the-counter market have helped keep bitcoin well above the $20,000 level, first breached back on December 16.

Real demand from largely price-insensitive institutional buying drove us into that level, and the resulting fireworks we saw on the break came from the leveraged side as roughly half the markets outstanding leveraged short positions were liquidated, quant trading firm QCP wrote in an investor note Monday.

On derivatives venue BitMEX, over $44 million in sell liquidations, the crypto equivalent of a margin call, occurred, which put some pressure on the market for bitcoin to head lower. Sell liquidations are triggered when leveraged long positions start losing a significant portion of the money the buyer posted to place the trade.

Liquidations on BitMEX the past 24 hours.

The $20,000 spot level is now our firm bull/bear line, with $16,000 as our strong support, QCP Capital said in its investor note. We are lightening up on selling puts up here, as this week brings our very well flagged Christmas expiry, which is now officially the largest OI on record.

Open interest, or OI, is loaded up in the bitcoin options market for Dec. 25 expiration, according to data from aggregator Skew.

Bitcoin opens open interest by expiration.

The overhang of options expiration and the declining activity in the spot market may be the largest dynamics to watch for the market in the next several weeks.

We could be looking at an extended consolidation from here, considering the weak Q1 seasonality and risks associated with the new administration after [U.S. President-elect Joe] Bidens inauguration in mid-January, QCP added.

ETH Locked in DeFi rising from November trough

The second-largest cryptocurrency by market capitalization, ether (ETH) was down Monday, trading around $609 and slipping 7% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

The amount of ether locked in decentralized finance, or DeFi, for yield or a return in exchange for providing liquidity, hit a high of 9.4 million ETH on Oct. 20. In November, the amount of ether locked dipped as low as 6.7 million before rebounding in December, at over 7.2 million ETH as of press time.

The amount of ether locked in decentralized finance the past three months.

Cooper Turley, editor of newsletter DeFi Rate, told CoinDesk that Ethereums 2.0 upgrade dynamics, which also includes staking in the network, played a role in the amount of ether locked, dipping and then recovering somewhat. People unlocked ETH to stake via [Eth 2.0] and trade it during the recent run-up, Turley said. Now that things have settled a bit, most that did not stake into [Eth 2.0] are depositing back into DeFi.

Other markets

Digital assets on the CoinDesk 20 are mostly red Monday. One notable winner as of 21:00 UTC (4:00 p.m. ET):

The CoinDesk 20: The Assets That Matter Most to the Market

Link:
Market Wrap: Bitcoin Dumps to $21.9K; ETH 2.0 Affected Ether Locked in DeFi - CoinDesk - CoinDesk

Bitcoin FOMO? Tesla and these four stocks crushed BTC’s gains in 2020 – Cointelegraph

Bitcoin (BTC) has wowed investors with all-time highs and year-to-date returns of over 200% but there are stocks that still beat it.

As of Dec. 22, markets' data shows that no fewer than five companies stocks have given investors better rewards than a Bitcoin position since the start of 2020.

First pitting itself against Bitcoin and winning is an unlikely success story fitness equipment manufacturer Peloton Interactive.

At 384% annual returns, $PTON has delivered significantly thanks (most likely) to lockdowns forcing consumers to work out at home instead of at the gym or outside. The company also offers online fitness classes in a nod to the same market.

Peloton remains tiny compared to Bitcoin overall, however, with a market cap of $42.4 billion.

Another player keenly benefiting from COVID-19 is biotechnology heavyweight Moderna, one of the companies developing a vaccine for the coronavirus.

With its product already being rolled out as of late December 2020, Moderna has emerged as one of the frontrunners when it comes to immunization in the United States.

Unsurprisingly, its stock has reacted in kind with year-to-date returns of 619%, giving the company a $54.7 billion market cap.

Already a household name this year, Zoom has exploded as the medium of choice for recreating office environments online in 2020.

Despite controversies regarding hacks and susceptibility to downtime, Zooms software has allowed it to gain a giant $116 billion market cap and annual stock returns of 495%.

Should a vaccine give governments confidence to allow physical offices to operate as normal, however, demand for work-from-home conference software could well drop.

In one of two entries not strictly tied to the virus, Enphase Energy, a renewable energy management company, has made huge gains this year.

The company is still small with a market cap of just $21 billion, but in a formative 12 months, its stock has delivered returns of almost 490%.

Like the best-performing stock of 2020 (see below), clean energy forms a popular market sector which is only set to expand despite questions over how far renewables can go in replacing fossil fuels throughout the global economy.

This month, Apple co-founder Steve Wozniak even launched an energy savings business with its own token, WOZX.

It comes as no surprise, but Tesla is by far the best-performing stock of the year, shrugging off any suggestion of a bubble month in, month out.

The numbers are dizzying 850% year-to-date returns, a market cap of nearly $620 billion and most recently an entry into the S&P 500.

Compared to Bitcoins 218%, $TSLA looks like a unicorn never seen before, but priced in BTC, the stock looks decidedly less parabolic.

Elon Musk, its CEO, meanwhile continues to flirt with Bitcoin on social media, sparking wild speculation about a potential buy-in or stock conversion.

Zooming out, however, and Bitcoin remains the best-performing asset of the decade. Even at the start of the year, with BTC/USD at $7,200, its supremacy as an investment was undisputed.

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Bitcoin FOMO? Tesla and these four stocks crushed BTC's gains in 2020 - Cointelegraph

Why Bitcoin Is Overpriced by More Than 50% – Barron’s

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Bitcoins price is more than 50% higher than its fair value of about $12,000.

Thats one of the implications I draw from a new analysis of the various valuation frameworks for determining the cryptocurrencys fair price. Entitled Bitcoin Is Exactly Like Gold Except When It Isnt, the analysis was conducted by Claude Erb, a former commodities portfolio manager at TCW Group.

I first wrote about Erbs analysis of precious metals in a February 2013 column for Barrons. His conclusion at the time, reached jointly with Campbell Harvey, a finance professor at Duke University, was that golds fair value was less than half its then-current price.

Gold fell by $600 an ounce over the subsequent 2 years. That alone inclines me to pay close attention to what he is now saying about Bitcoin.

This cryptocurrency has been on a tear of late, with a year-to-date gain of 170%. In recent days, in fact, Bitcoin has risen to new all-time highs, eclipsing its prior high set in late 2017.

The valuation framework that concludes Bitcoins fair price is about $12,000 is based on the thesis that its value derives from whats known as a network effect. That is, a networks value grows faster than the number of connected users. (This framework is related to whats known as Metcalfes Law, which holds that a networks value grows according to the square of the number of users.)

To test the explanatory power of this network-effect framework, Erb made the simplifying assumption that each Bitcoin that has been mined represents one user in a Bitcoin network. He then calculated the way that the price of Bitcoin has traded relative to the number of Bitcoins that have been mined up to that point. As you can see from the accompanying chart, his model does a good job of capturing Bitcoins price rise over the past decade.

According to this model, Erb said in an interview, Bitcoins fair price as of Dec. 14 is $12,315. Bitcoins actual Dec. 14 price of $19,201 is 56% higher.

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Of course, a social-network framework is not the only way in which analysts have proposed calculating Bitcoins fair price. Erb nevertheless suggests we give it serious consideration because no other relative valuation approach is empirically more plausibleand the predictions of the social-network framework are impressively correlated with the trajectory of Bitcoins price history.

Using the social-network framework to value Bitcoin also allows us to forecast how much it will rise in the future. Thats because its underlying code stipulates both the maximum number of Bitcoins that will ever exist (21 million) as well as how quickly they can be mined (this limit isnt likely to be reached until 2140). According to Erbs econometric model, a 21-million-user network translates to a Bitcoin price of $74,000. Relative to its current price, that represents a 1.2% annualized return over the next 120 years.

Some other approaches for valuing Bitcoin contend that its a good inflation hedge. But Erb says those approaches are less empirically plausible than the network effect framework.

He points out that a key precondition for something being a good inflation hedge is that its real, or inflation-adjusted, price is relatively stable. But Bitcoin doesnt satisfy this precondition, at least if we use the consumer-price index as a proxy for inflation. Over the past decade, the ratio of Bitcoin to the CPI has ranged from a low of near zero to a high of over 73.

Bitcoin is even less of a good inflation hedge than gold. Thats relevant because many of Bitcoins supporters argue that it is Gold 2.0. The gold/CPI ratio over the past decade has ranged between a low of around 3 to a high of around 8, and while thats wider than what it should be if gold were a good inflation hedge, its far narrower than the comparable ratio for Bitcoin.

The bottom line? Erbs analysis offers something useful for Bitcoins devotees: a valuation model that can be used to estimate the cryptocurrencys fair value. Its entirely possible that there is another model that does an even better job than his of explaining Bitcoins price history. Meanwhile, Erbs social-network framework introduces a quantitative discipline into an arena that heretofore has been characterized largely by marketing slogans.

Mark Hulbert is a regular contributor to Barrons. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com.

Comments? E-mail us at editors@barrons.com

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Why Bitcoin Is Overpriced by More Than 50% - Barron's

Bitcoin surges past $20,000, erasing 3 years of deep losses – The Associated Press

CHARLOTTE, N.C. (AP) The price of bitcoin rose above $20,000 for the first time Wednesday, as the speculative digital currency topped its previous peak reached shortly after it became tradable on Wall Street three years ago this month.

Like other instruments used to store value in times of uncertainty, bitcoin has benefited from the pandemic that has pushed other commodities like gold, silver, platinum to multiyear highs. Because of bitcoins structure, few coins are being created anymore and there is relative scarcity.

Heres a brief look at bitcoin:

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HOW BITCOINS WORK

Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously. The coins are created by users who mine them by lending computing power to verify other users transactions. They receive bitcoins in exchange. The coins also can be bought and sold on exchanges with U.S. dollars and other currencies. Some businesses also accept bitcoin, but its popularity has stalled out in recent years.

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WHAT HAPPENED?

Bitcoins got their big Wall Street debut in December 2017, when bitcoin futures became tradable on the Chicago Mercantile Exchange and the Chicago Board of Trade. The fervor and interest in bitcoin heading into its trading debut pushed the digital currency to record highs. The currency, which was worth less than $1,000 at the beginning of 2017, climbed up to $19,783 by the end of the year.

But once the trading began, bitcoin futures fell sharply over the course of several months. A year later, the currency was worth less than $4,000. Investors and bitcoin enthusiasts at the time said the 2017 jump was largely caused by speculative interest and media attention.

___

HOW MUCH IS IT NOW WORTH?

One bitcoin is worth roughly $20,700, according to Coinbase, a major digital currency exchange that also trades other tokens and currencies.

But the value of bitcoin is volatile and moves hundreds or even thousands of dollars in the course of a week. A month ago, it was worth less than $17,000 and a year ago it was worth less than $7,000.

Bitcoin is a highly speculative investment and has not performed as well as more traditional forms of investing, like stocks or bonds, unless a buyer was in the currency years before it caught on. For example, three years ago The Associated Press bought $100 worth of bitcoin to keep track of the currency and to possibly build stories about how businesses were accepting it. That portfolio only broke even this month.

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WHY BITCOINS ARE POPULAR

Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Transactions can be made anonymously, making the currency popular with libertarians as well as tech enthusiasts, speculators and criminals.

Bitcoins have to be stored in a digital wallet, either online through an exchange like Coinbase, or offline on a hard drive using specialized software. While the bitcoin community knows how many bitcoins exist, where they all are is anyones guess.

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WHOS USING BITCOIN?

Some businesses have jumped on the bitcoin bandwagon. Overstock.com accepts payments in bitcoin, for example.

The currency has become popular enough that more than 300,000 transactions typically occur in an average day, according to bitcoin wallet site blockchain.info. Still, its popularity is low compared with cash and credit cards, and most individuals and businesses wont accept bitcoins for payments.

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HOW BITCOINS ARE KEPT SECURE

The bitcoin network works by harnessing individuals greed for the collective good. A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction. The blockchain prevents rogues from spending the same bitcoin twice, and the miners are rewarded for their efforts by being gifted with the occasional bitcoin. As long as miners keep the blockchain secure, counterfeiting shouldnt be an issue.

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HOW BITCOIN CAME TO BE

Its a mystery. Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto. Bitcoin was then adopted by a small clutch of enthusiasts. Nakamoto dropped off the map as bitcoin began to attract widespread attention. But proponents say that doesnt matter: The currency obeys its own internal logic.

In 2016, An Australian entrepreneur stepped forward and claimed to be the founder of bitcoin, only to say days later that he did not have the courage to publish proof that he is. No one has claimed credit for the currency since.

Original post:
Bitcoin surges past $20,000, erasing 3 years of deep losses - The Associated Press

This family traded all their gold for bitcoin in 2017. That bet has nearly tripled as bitcoin breaks above $20,000 – CNBC

In the Dutch town of Venray, Didi Taihuttu decided to make his first big gamble on bitcoin. In early 2017, the father of three searched every corner of his five-bedroom house, gathering the family's supply of gold jewelry and trinkets. Taihuttu had a hunch that it was time to swap their stockpile of gold for bitcoin.

Three years later, and that bet has paid off big time for Taihuttu. Bitcoin broke above $20,000 for the first time ever on Wednesday. His investment is now nearly three times bigger today than it would have been had he kept his nest egg of gold.

"Central banks and governments are slowly starting to understand that bitcoin is the 21st century gold," said Taihuttu.

Amid economic and geopolitical tumult, more investors are looking to bitcoin as a safe haven play.

"Especially over the last few weeks, it's clear that bitcoin has stolen gold's thunder," said Mati Greenspan, portfolio manager and founder of Quantum Economics.

Strategists at JPMorgan say the price of gold will suffer as institutional investors continue to buy into bitcoin.

While the cryptocurrency has indeed matured into a permanent fixture in the financial industry, some Wall Street investors caution that the volatile cryptocurrency will never supplant gold as a store of value, because it has no value to store.

When the coronavirus pandemic began to shut down economies around the world, investors did what they typically do amid economic uncertainty: they fled to safe haven assets. Only this year, gold and cash weren't the only safe haven plays.

Bitcoin is up about 190% year to date, outperforming a mix of major assets, including gold. And unlike its rally in 2017, analysts don't think we are heading toward a bursting price bubble anytime soon.

Mike Novogratz, CEO of investment firm Galaxy Digital, thinks this comeback rally is only just getting started. He sees bitcoin rising to $60,000 by next year.

Tom Fitzpatrick, global head of CitiFXTechnicals, said the charts signaled that bitcoin could reach $318,000 by December 2021, in a report meant for Citibank's institutional clients and obtained by CNBC.

Meanwhile, the price of gold has been sliding since its all-time peak in August 2020, not least of all because of optimism over progress on the Covid vaccine front.

"Let's face it, who needs a safe haven if the pandemic is over?" said Scott Nations, of Nations Indexes, in an interview with CNBC's "Fast Money Halftime Report." "And if you still want a safe haven, you're not looking at gold. You're looking at bitcoin."

Part of what is different about bitcoin's rally in 2020 versus 2017 is that institutional investors are adopting bitcoin, lending it newfound legitimacy and helping to erase the reputational risk of investing in the cryptocurrency.

Old-school, billionaire hedge fund managers Stanley Druckenmiller and Paul Tudor Jones now own bitcoin and big fintech players like Square and PayPal are also adding crypto products.

"Bitcoin is now a regulated financial asset that is uncorrelated with high-risk adjusted return, and that's why we're seeing a record percentage of institutional flow enter through our brokerage and exchange platforms," explained Dave Chapman, executive director of BC Group.

"It's for all these reasons and others that bitcoin is being seen as a true safe haven asset; a digital gold," Chapman continued in an interview with CNBC's "Capital Connection."

But keep in mind, bitcoin has a long history of wild volatility. While 2020's price moves look to be more stable than in rallies past, ultimately we just have to wait and see how bitcoin performs over time.

"It would be difficult to label a nascent asset like bitcoin as a safe haven as it has not yet withstood the test of time," Greenspan said. "It might be more accurate to say that it is chomping on its [gold's] market share as the go-to inflation hedge."

After taking the plunge from gold into bitcoin, Taihuttu decided to go all in on the cryptocurrency. The Dutch family of five liquidated their assets, from their retirement accounts and cars, to their clothes and toys. They bet it all on the volatile cryptocurrency, back when it was $900 a coin in 2017. Bitcoin is up more than 2,200% since then.

Analysts say that bitcoin's rally this year has a lot to do with the fact that there is a finite supply of bitcoin in the world. There will only ever be 21 million bitcoins produced.

Whereas we are not likely to run out of gold anytime soon, the total number of mined bitcoin is at roughly 18.5 million, which is nearing its maximum threshold.

The surge in interest from mainstream financial players hasn't just reformed bitcoin's image; it has also fomented a supply shortage.

Bitcoin is now being seen as a true safe haven asset; a digital gold.

Dave Chapman

executive director of BC Group

"The basic reason for the 2017 and 2020 rallies are the same," Greenspan said. "It's a matter of digital scarcity. There is a strictly limited supply of bitcoin available in the market, so when everyone is buying and nobody is selling, it can cause tremendous upward pressure on the price. What's different this time are the players involved."

The 2017 rally was driven by retail speculation, and in 2020, it's the billionaires and corporations that are buying bitcoin en masse.

"When PayPal starts to sell bitcoin to its 350 million users, they also need to buy the bitcoin somewhere," said Taihuttu. "There will be a huge supply crisis, because there won't be enough new bitcoins mined everyday to fulfill the need by huge companies."

Bitcoin behaves a lot like gold. Its value is highly volatile, there is a marketplace where it is bought and sold, and similar to other commodities, you can speculate on the future price of bitcoin through the derivatives market.

Mainstream adoption has been hugely important to bitcoin, because cryptocurrencies like bitcoin aren't backed by an asset, nor do they have the full faith and backing of the government. They're valuable because people believe they're valuable. So it goes a long way when bitcoin gets buy-in from some of the biggest names on Wall Street.

Bitcoin's digital infrastructure also offers certain advantages to gold.

"Physical gold needs to be stored, is not readily portable across borders, has paper equivalents on exchanges that may or may not fully reflect the actual move in gold and could possibly be called 'yesterday's news' in terms of a financial hedge," explained Fitzpatrick.

"Bitcoin is the new gold," Fitzpatrick said. "It moves across borders easily and ownership is opaque."

Taihuttu agrees. "We have a limited supply of bitcoin and demand is growing tremendously. More people are realizing that bitcoin is the perfect 21st century gold."

In a Skype call with Taihuttu, I noticed that he was wearing a gold watch on the same arm that bears a tattoo of the bitcoin logo. When I asked whether he was having any seconds about gold, he said, "The only gold I wear now is fake."

More:
This family traded all their gold for bitcoin in 2017. That bet has nearly tripled as bitcoin breaks above $20,000 - CNBC

Orchid VPN review: It uses the tech behind Bitcoin to improve privacy – CNET

Orchid

If I wanted to tell you why Orchid VPN is poised to be not only the next evolution of virtual private networks but also a futuristic answer to global online privacy threats, I could tell you its cryptocurrency-fueled decentralized bandwidth market makes it a blockchain-supported VPN-Tor hybrid ready to upend even the fastest, most secure VPN on the market.

And that's what I've beensaying since March, but for most people (myself included) it still sounds like I'm speaking cyberpunk marketing gibberish. So, instead, I want to tell you about bootleg whiskey and outrunning the law. Hop in.

Now, if you were going to do any respectable amount of moonshining in the 1920s, you were going to need more than just a bubbling still and a handshake with the sheriff -- you'd need a car. And not just any car. What you'd need is an unquestionably reliable machine with massive trunk space and hidden compartments. One that looked as unassuming as a church lady with a basket of biscuits, but one whose engine could -- at the toe-tap of a pedal -- roar to life with the fury of seven hells and leave cops wondering how to charge you with breaking the laws of physics.

Read more:The best VPN service of 2020

That's how stock car racing was born. It's also what the world of commercial VPNs looks like right now. VPN innovations are spurred by a competition to be fastest over long distances, to best hide your product (your data) and to offer the biggest bang per buck. Likewise, VPN companies can be aggressive in their hype-making -- their businesses live and die by whether they've ever been caught selling you out to a G-man and you'll find some of them bolster their reputations by swearing their competitors are all patsies.

The toughest part for you in all this, dear moonshiner, is that no matter how good a VPN might seem, you're still confronted with the core vulnerability shared by every VPN: Since you can't inspect the routes these VPNs travel and the servers through which your data passes, you've ultimately got to risk trusting one. For some of you, that trust is low-risk -- you're just looking for better online gaming or a wider streaming media library. For a slice of you, though, the stakes couldn't be higher -- evading censorship and government snooping in countries where VPNs are illegal can be a matter of life and death if you're caught.

Discover the latest apps: Be the first to know about the hottest new apps with the CNET Apps Today newsletter.

While I can inspect the nuts and bolts of all these VPNs for you and dig up dirt on the people associated with them, even I can't see the routes nor track all the shell companies behind their owners. Caveat emptor.

So imagine my face when this latest hot shot VPN rolls into my shop and I pop the hood to find not just an engine but a fractal of engines. Imagine my jaw dropping when I realize this thing isn't just one souped-up privacy vehicle but a fleet of its competitor cars, each of which is autonomous and paid per mile in anonymized currency to carry a tiny piece of your product in a hyper-coordinated yet seemingly chaotic convoy.

That's Orchid VPN. It's changing the nature of VPNs as we know them and resisting all attempts at categorization using my normal testing and review process. No, it's not ready for the mass market quite yet: It's not as fast as our top-tier VPN speedsters and it isn't as easy to handle for new users as some of our trusted standbys. And no, I can't even give you a specific monthly cost.

But this is what the future of VPN tech looks like. And you gotta see it.

This is normally the part where I give you a slate of speed test scores about a VPN and compare it to its nearest competitor. But it's hard to get a lock on average speeds for Orchid because it doesn't test the same. Orchid's service is unique in that its speed, its security and its cost are all inseparable and interdependent.

My normal speed testing routine includes extended multiplatform speed score averaging across at least five countries and a few oceans. Orchid's normal client, however, isn't yet fully available for Windows, so any attempt to average the scores would start out slanted. Also, Orchid doesn't allow you to connect to a specific country the way other VPNs do. Instead, you've got to manually add a "hop" to another VPN server by pasting that server's configuration file into a screen on your Orchid app. That VPN server can be selected from either from Orchid's global pool of service providers or from your own current, non-Orchid VPN provider.

The structure looks a lot like Tor's network, which obscures your traffic by letting you hop between user-run nodes. And while a multihop feature is a security boon in any VPN, it's not going to give us an accurate baseline speed comparison.

We put the Orchid mascot's speed to the test.

What's more, anyone can set up an Orchid node on the company's bandwidth marketplace, meaning the speed of each node you connect to will vary based on what kind of connection its operator is working with. The person running the node also gets to set their node's bandwidth price.

So I threw my framework out the window and decided to see how much this thing could handle.

Aiming to find the lowest likely base speeds, I loaded Orchid onto an Android device with less processing power than my normal MacOS testing device, connected to Wi-Fi and clocked a non-VPN speed of 372.47 megabits per second. Connecting to Orchid via a single US VPN hop, I pulled 45.5 Mbps. Not as fast as I'd hoped, but a perfectly usable connection speed for nearly any streaming media that yielded zero performance issues (for context, our Editor's Choice ExpressVPN pulled an average US speed of 66 Mbps, during our last tests). Then I went beyond the default VPN connection and added another cross-country Orchid hop to California, pulling 28.9 Mbps and still streaming video.

A key feature of Orchid is that you can add a server of your choice to your list of in-app hops. So I manually configured an additional OpenVPN protocol hop which would double-ricochet my traffic from California to an OpenVPN server in London for a total of three hops. For any VPN with a multihop feature (especially one sending your traffic overseas and back), three hops should be enough to throw pretty much anything off your trail, but it will slow you down. Sure enough, I was stalled to a sputtering 2.9 Mbps.

Using 5G mobile data, I saw comparable speeds. I measured a non-VPN speed of 212.6 Mbps. With one US Orchid hop, I saw 13.84 Mbps. At two US Orchid hops, I saw 9.82 Mbps. Replicating the same trio of hops described above, I still pulled 1.83 Mbps.

Now playing: Watch this: Top 5 reasons to use a VPN

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While you might be able to get some streaming services to work on the slower of those speeds, you shouldn't count on it. I managed to get HBO Max playing on the slower of the two-hop connections, but it took a few tries. That may have been related to Orchid's sluggish pace at making that first connection. There's more lag than you normally find in a VPN app. Two-hop connections were even more touch-and-go about video calls, though voice calls and music apps held steady compared to what you'd see with other multihop VPNs, and I was able to play Netflix.

I was impressed. So, naturally, I tried to kill it.

Working on mobile data only, I took an elevator underground until I was directly beneath 290 feet of continuous-pour reinforced concrete framing enclosed by an aluminum curtain-wall system (in a very chic shade of 1960s turquoise blue), straining my connection until non-VPN test speeds were repeatedly under 60 Mbps. From this location, I kicked on Orchid, opened every data-sucking app I had, loaded media-intensive sites across multiple tabs in all the browsers and ran some tests.

No IP leaks. No DNS leaks. This version of the app may have its glitches, but even when I dragged Orchid all the way down to 0.7 Mbps and taunted it with intermittent signal disruptions, it never exposed my identity and I could still listen to Spotify before the VPN finally guttered out. Never mind speed. That's performance.

One reason I was able to get streaming content on a multihop connection is Orchid's own home-brewed protocol. While the backbone of its encryption is in the blockchain, Orchid's protocol is specifically designed to travel on the back of WebRTC -- the same technology your browser uses to facilitate high-quality video and audio calls. Not only does this give Orchid an advantage in streaming media content that you'd never be able to get using Tor, but it also makes your traffic look like just another video call.

Some privacy advocates will tell you that, given how opaque VPN corporate ownership is, you might as well just write off consumer VPNs altogether and stick to using Tor. They're not entirely wrong. Decades have passed without government entities fully cracking Tor's core technology and exposing users at will.

Tor has its limits, though. Tor traffic makes you stick out like a sore thumb to your ISP and network administrators. Sites can see it too and are often quick to block in-bound Tor traffic. Likewise, the CIA, NSA and FBI have all been known to camp out in Tor exit nodes or set up their own. If that weren't enough, you can't transport nearly as much data via Tor as you would a VPN, making voice and video calls nearly impossible over Tor's network of volunteer-run nodes.

On the VPN side of security, the encryption we normally test with (and which we consider the minimum security you should expect of a VPN) is OpenVPN protocol. It's generally considered by privacy gurus to be a healthy mixture of speed and security, and its popularity among consumer VPNs makes it a great control variable in testing. But OpenVPN is also getting up there in Internet Years, and has a history of being somewhat vulnerable if not deployed carefully.

Orchid's protocol is similar to OpenVPN but based on blockchain and, as a decentralized network, Orchid is built to adapt to different types of protocols. Normally, I wouldn't recommend any US-based VPN company, but decentralized blockchain encryption changes that altogether. Decentralized VPNs, in general, are the next step in end-user privacy tools because their nature prevents any single, central company from being able to keep logs of all of your activity.

And Orchid isn't the only one out there. Mysterium, Kelvpn, Tachyon, BitVPN and Lethean are all decentralized, peer-to-peer style VPNs aimed at resisting censorship efforts by creating a nearly subpoena-proof network of bandwidth providers over which your traffic is scattered. Orchid is ahead of the field here in several notable ways, among them its contracts with other VPN companies, which allows users to travel on its partner VPNs' networks.

If you really want to understand why decentralized blockchain is the next step for VPNs and why Orchid is brilliant, you'll need to know what blockchain and cryptocurrency actually are. Despite the hype, it's not that complicated.

A blockchain is basically just an encrypted, tamper-proof ledger for transactions. Everyone gets a copy of the ledger and everyone's copy automatically changes when someone adds a transaction to their own. You build computer networks on blockchain tech when you need a trustworthy record of information that a lot of people are working with at once -- financial trading, digital copies of paper documents, movements in food supply chains and global shipping, or art brokering.

The "block" is a block of data that is added to the ledger when a transaction occurs. The "chain" is the metaphorical ledger itself. Simple.

Orchid is built on blockchain, the technology that underpins Bitcoin cryptocurrency.

Cryptocurrencies work on blockchain. Just like paper money has its anti-counterfeiting designs, each unit of cryptocurrency has its verifiable blockchain. When a transaction occurs and a block is about to get added to the chain, a whole network of computers working with that chain jumps in to verify the transaction is legit by checking its math. The first computer to prove the block's math gets paid.

That's called mining. It's how Bitcoin works. It's also a process that takes too long -- imagine standing at a grocery store register for 10 minutes while your cashier calls the bank -- and sucks up way too much computing power. But there are thousands of types of cryptocurrencies. One of those is Ethereum. It's faster because its verification process is different. Using Ethereum, Orchid developed its own cryptocurrency, called OXT.

In a 2018 explainer, CNET's Stephen Shankland offers one of the clearest and simplest explanations of blockchain I've read. I've cribbed from him liberally here, but that same explainer was remarkably prescient.

"There's lots of work to free blockchain from the problems of transaction speed and energy consumption, though," he wrote. "One idea, 'proof of stake,' uses no significant computing power and looks to be the future for the Ethereum Project, which is responsible for the ether cryptocurrency."

Proof of stake is how Orchid works. And Orchid's currency, OXT, is based on Ethereum.

As Shankland explained, "ether has popularized a newer idea called smart contracts. These are programs that run on the Ethereum network and take automated if-this-then-that actions. For example, a smart contract could look for the highest bid in an auction at a certain time and automatically transfer ownership rights to the auction winner."

That bidding system is also how Orchid works and bandwidth sellers are working in that automated, auction-like environment.

This is normally where I compare costs between VPNs in the same league as the one I'm reviewing. I'd love to do that here. But Orchid again defies simple explanation. There's no set monthly price and no one is in its league.

Instead, you pay for the bandwidth that you use in OXT and Ethereum, or ETH. The downside is that you're subject to market changes, so it can be difficult to estimate long-term cost and you've got to figure out how it works. On the plus side, you're only paying for what you use, you're more anonymous than you would be paying by cash or card and even a heavy data user will find it pretty affordable.

Mercifully, Orchid made the process easier when it obliterated an enormous barrier to entry in July. It now lets you buy your cryptocurrency within the app in semidisposable accounts (think: burner phones but for cryptocurrency wallets) instead of jumping through hoops to set up and connect an outside cryptocurrency account.

To get started, you need at least $4 worth of OXT and $1 in ETH. At current exchange rates, that'll get you around 60 gigs of VPN service. Not bad.

Now playing: Watch this: What the heck is blockchain?

1:49

I plan to keep fiddling with this service until I know it inside-out, but Orchid has some work to do before I can recommend it as everyone's daily driver VPN. Privacy hounds should absolutely give this a whirl and get a look at the future of VPNs. But for most of us, the onboarding is a little too complicated, the pricing too much guesswork and the learning curve still steep enough to be a major hurdle to adoption.

By itself, a crypto-financed hybrid VPN based on a bandwidth-trading market is already a hard pitch to make to the average person. This novelty of the underlying tech and its payment method mean the app's designers are under even greater pressure to create a welcoming, intuitive interface.

The app launches smoothly and its interface is simple and attractively designed. The home screen has one button for connecting and another to manage your hops, while other functions are hidden in a three-bar menu in the top-left corner. While this simplicity aims to create an intuitive experience, I found it too minimalistic where I needed more information and too complicated in places where I needed clarity. The experience left me unsure if I'd done it right, tapping around the app searching for confirmation of some kind that I hadn't missed a step or misconfigured a connection somehow.

The central button of the app is labelled with a universally familiar power icon that says "connect" when the app is opened, says "connecting" as it works and, when connected, changes to "disconnect." Once connected, the Orchid icon and its connection status appear at the top of your phone's home screen.

This would normally be fine design, but the option to stop or start Orchid from the device's main screen rarely works as intended, the app sometimes freezes while attempting to connect, and sometimes it says it's connected when it's not.

To check for data flow, you can access the Traffic Monitor feature in the three-bar menu, but if terms like "TLSv1.2" and "UDP" don't ring any bells for you, then that screen might not be useful. Glitchiness aside, if you're new to cryptocurrency, you might also struggle trying to figure out how much currency you have within the app, how much you're burning at any given time, how the unfamiliar in-app "tickets" work and how to gauge bandwidth value. We're going to need a little more hand-holding here from Orchid to get us neophytes all onboard.

Likewise, as VPNs are loosely understood to be technology that takes us from one location to another, Orchid could help visually signal that we've used the app correctly and that our connection is active by telling us what city we're now connected to on its main screen, and perhaps for how long we've been connected.

It's not fair that the app interface has so much heavy lifting to do on behalf of the technology, but it's Orchid's best vector for removing adoption obstacles and getting more of us where we all need to be for our own good -- on a decentralized VPN, leaving trust in the dust and outrunning the all-seeing eye of government surveillance.

Originally posted here:
Orchid VPN review: It uses the tech behind Bitcoin to improve privacy - CNET

As bitcoin busts out new records, these market watchers see $250,000 and even $400,000 on the horizon – MarketWatch

A positive day for stocks is building after the Federal Reserve pledged to keep policy accommodative until the economy is on its feet. And investors remain hopeful that U.S. lawmakers will get a stimulus deal done.

To be sure, equities have had a pretty decent 2020, considering the misery brought on by the COVID-19 pandemic. But the S&P 500s SPX, -0.21% year-to-date gain of 14% has nothing on how one group of alternative assets have been faring.

Up over 200% this year, cryptocurrency superstar bitcoin BTCUSD, +0.83% sailed to a new record of $22,000, tapping above $23,000 at one point early on Thursday, a day after reaching above $20,000. And weve got a couple of fresh calls on the cryptocurrency that indicate it may have much, much further to go.

Try $400,000, says Scott Minerd, chief investment officer of investment bank Guggenheim Partners, who made that prediction to Bloomberg News late on Wednesday.

Minerd said his bank started allocating toward bitcoin when it was at $10,000, and while that becomes challenging as the price is now closer to $20,000, our fundamental work shows that bitcoin should be worth about $400,000.

The leap from here to $400,000 is based on scarcity and relative valuation to such as things like gold as a percentage of GDP [gross domestic product]. Bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions, said Minerd.

Wall Street wasnt exactly hot for bitcoin in the early days, but interest from institutional investors has been growing as they look for ways to shield from the threat of future inflation. Larry Fink, the founder and chief executive officer of the worlds largest asset manager BlackRock, said earlier this month that bitcoin could possibly turn into a global market asset.

Read: Paul Tudor Jones says bitcoin reminds him ofinternet stocks of 1999

Another big bull on bitcoin, Goldman Sachs alumnus Raoul Pal, tweeted early on Thursday that he sees bitcoin 10 times higher a year from now. His December 2021 target is $250,000, Pal said in an emailed comment.

In the words of Pal, the chief executive officer of Global Macro Investor and co-founder of Real Vision financial and Crypto TV, bitcoin is eating the world when it comes to asset returns.

However, not everyone agrees with the Bitcoin bulls:

See: This bitcoin fund just went up over 1,000%. Beware

And also: Why Bitcoin Is Overpriced by More Than 50%

The markets

Stock futures YM00, -0.48% ES00, -0.50% NQ00, -0.35% are holding gains after a batch of data, while European equities SXXP, +1.18% are mostly higher, and Asian markets had a mostly positive day. Oil prices CL00, -1.60% are higher and the pound GBPUSD, +0.17% is rising on post-Brexit deal hopes and ahead of the outcome of a Bank of England policy meeting.

The buzz

Weekly jobless claims hit a four-month high, with continuing claims also on the rise. New home construction charged ahead, and the Philadelphia Federal index showed contnued elevated activity.

Extra doses in vials of the COVID-19 vaccine from drug company Pfizer PFE, -1.71% and its partner BioNTech BNTX, -5.54% could boost the U.S. supply by 40%. The Food and Drug Administration approved the use of leftover vaccines, which were being reported by pharmacists. The first case of an allergic reaction to the vaccine has been reported by an Alaska health worker.

French President Emmanuel Macron has tested positive for COVID-19, tossing several other European leaders into quarantine after they came in contact with him. A Hong Kong police dog is also now in quarantine after contracting coronavirus.

Social media micromessenger Twitter TWTR, +0.49% will remove any posts it deems misleading about COVID-19 vaccines.

Were still talking and I think were gonna get there.That was Senate Majority Leader Mitch McConnell on Wednesday afternoon, after leading lawmakers failed to reach a deal. Talks will roll on for Thursday.

The chart

Random reads

Some parts of the U.S. Northeast are bracing for 2 feet of snow on Thursday.

A beloved Lord of the Rings actor has now been vaccinated against COVID-19.

Need to Know starts early and is updated until the opening bell, butsign up hereto get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Want more for the day ahead? Sign up for The Barrons Daily, a morning briefing for investors, including exclusive commentary from Barrons and MarketWatch writers.

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As bitcoin busts out new records, these market watchers see $250,000 and even $400,000 on the horizon - MarketWatch

Blockchain Veterans Create Blockcap, a Massive Bitcoin Mining Operation in North America – Business Wire

LAS VEGAS--(BUSINESS WIRE)--Veterans of major crypto mining infrastructure firms, including one of the largest blockchain infrastructure companies in the United States, today announced the formation of a new mining entity, Blockcap Inc. (Blockcap), which is believed to be the largest independent cryptocurrency mining operator in North America.

Blockcap combines the assets of five pre-existing Bitcoin mining companies, taking advantage of economies of scale in purchasing equipment and managing energy risk in order to ultimately provide higher returns for its investors. Blockcap operates what is among the largest collections of hashing power in North America, including highly-valued public companies. Blockcaps current mining fleet includes close to 13,000 next generation Bitmain S19 mining rigs and 500 upgraded S17s, of which 8,442 are presently deployed and 1,426 in the process of being deployed. Present hashing power is approximately 800 Petahashes, with projections to reach close to 1 Exahash at full deployment. With the entire Bitcoin mining network operating approximately 132 Exahashes at present, Blockcaps operation could represent approximately 0.75% of the total hashing power.

Blockcap mined 425 Bitcoin (BTC) in Q3 2020. Publicly-traded mining company Riot Blockchain, Inc. (NASDAQ: RIOT) reported that it had mined 222 BTCs during the same period. Blockcaps recent gross earnings also exceeds that of other competitors including Hive Blockchain (OTCMKTS: HVBTF), Hut 8 Mining (OTCMKTS: HUTMF), and The Marathon Patent Group (NASDAQ: MARA). During this same period, Blockcap operated on a cash flow positive basis, and projects further BTC revenue growth in Q4.

From the team we have put together, to our state of the art ASICs, and our top notch infrastructure partners, we are proud about what we have achieved with Blockcap, said Peter Novak, President of Blockcap. Moreover, we have the resources and relationships necessary to continue to scale Blockcaps mining operations in a financially efficient manner to take advantage of the rapidly expanding market for digital currency.

In the coming months, Blockcap will look to expand its operations by adding more servers and acquiring other existing mining companies.

About BlockcapBlockcap, Inc. (the Company or Blockcap), was founded in 2020 by blockchain industry veterans who have successfully structured or co-founded other large technology companies. All mining equipment is currently hosted at data center facilities in the United States. The Company will exceed more than 1 Exahash of processing power within Q1 2021.

For more information, visit https://www.blockcapinc.com/.

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Blockchain Veterans Create Blockcap, a Massive Bitcoin Mining Operation in North America - Business Wire

Tech 24 – Charities turn to Bitcoin and other cryptocurrencies for donations – FRANCE 24

Issued on: 21/12/2020 - 11:04

In this edition, aswe enter the holiday season - a time during which NGOs launch donation campaigns and people tend to ponder more on generosity - we look at how blockchain and crypto funds are now facilitating the actof donating. We speak to the executive director of Unicef France, an agency that has been a pioneer in launching its very own crypto fund.

We also take a look at the city transport of the future. The Urbanloop project, designed by engineering students from eastern France, is a pod-like system that offers agreener and cheaper mode of transport.With the ultimate aim of ridding towns of cars, it could see the light of day as early as 2024, but first it has to pass a test to beat the world energy-saving record for an autonomous vehicle.

Our tech editor Peter O'Brien also explains that while some may see these mobility projects as futuristic, we've actually been transporting humans in tubes, on and off, for more than 150 years.

Also, how can NGOs increase their transparency to regain people's trust? Indeed, NGOs around the world receive donations through various channels. But, like everyone else, NGOs also face corruption and money-laundering accusations. We speak to Sbastien Lyon, the executive director of Unicef France about why NGOs are looking to cryptocurrencies and blockchain in a bid to address thisissue.

In Test 24, we try a system by French developer Iod that will help you prevent your data from being harvested or correlated. An easy system accessible to all, even for people who aren't tech savvy!

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Tech 24 - Charities turn to Bitcoin and other cryptocurrencies for donations - FRANCE 24