Category Archives: Bitcoin

The Federal Reserve Bank of Dallas president says bitcoin is clearly a store of value. Emphasizing the differences between cryptocurrencies, like bitcoin, and central bank digital currencies, he said the latter wont necessarily be a store of value.

The president of the Federal Reserve Bank of Dallas, Robert Kaplan, talked about bitcoin and central bank digital currencies (CBDCs) Friday at the Texas A&M Bitcoin Conference 2021 hosted by Mays Business School.

Firstly, Kaplan explained that he would distinguish between bitcoin and central bank digital currencies. I would differentiate between a cryptocurrency, like bitcoin, and the discussions that are being had about digital currency, such as the digital yuan experiment in China, he described.

He proceeded to explain that the challenge on bitcoin is how widely it will be adopted. The Federal Reserve Bank of Dallas chief elaborated:

Right now, its clear its a store of value.

It obviously moves a lot in value, he continued. That may keep it from spreading too far as a medium of exchange and wide adoption but that can change and that will evolve.

The Fed bank chief also confirmed that he and his team have studied intensely and will keep studying bitcoin and other cryptocurrencies.

He then talked about central bank digital currencies, emphasizing:

The discussions around the world on digital currency are slightly different in that a digital currency wont necessarily be a store of value.

If youre worried about the value of underlying currency, digital currency is likely to be, for example in China, tied to the value of the underlying, he detailed, adding that its also a way of ease of payment, domestic payments first, getting money to where its needed.

Kaplan further opined: In some cases, you could argue in China its a way to monitor flows and then ultimately how far will this go, and theres been speculation about global payments and the implications.

As for the digital dollar, Federal Reserve Chairman Jerome Powell said in February that the Fed is actively studying the possibility of issuing a digital dollar. He emphasized that it is a very high priority project for the Fed. Meanwhile, the Federal Reserve Bank of Boston and the Massachusetts Institute of Technology (MIT) plan to unveil at least two prototypes of a digital dollar in the third quarter of this year.

What do you think about what the Dallas Fed president said about bitcoin? Let us know in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

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Federal Reserve Bank President Says Bitcoin Is Clearly a Store of Value Regulation Bitcoin News - Bitcoin News

A representation of virtual currency Bitcoin is seen in front of a stock graph in this illustration taken March 15, 2021. REUTERS/Dado Ruvic/Illustration

Bitcoin hit a record high just shy of $65,000 last week, the latest landmark on the emerging assets march to wider acceptance. Its gains have been fuelled by growing acceptance among major U.S. companies and financial firms.

Here are some steps from big companies, large investors, banks and payment processors that have pushed bitcoin closer to the mainstream in recent months:

INVESTMENT

Dec. 2020:

* British fund manager Ruffer Investment Management says it made a bet on bitcoin worth in December around 550 million pounds ($765 million).

Jan. 2021:

* Investment bank JPMorgan Chase & Co (JPM.N) says bitcoin could hit $146,000 if it becomes an established safe-haven. read more

Feb. 2021:

* Carmaker Tesla Inc (TSLA.O) announces it bought $1.5 billion in bitcoin and says it will soon accept the cryptocurrency as payment for its vehicles. read more

March 2021:

* Morgan Stanley (MS.N) becomes the first big U.S. bank to offer its wealth management clients access to bitcoin funds, CNBC reported. read more

* Goldman Sachs Group Inc (GS.N) reopens its crypto trading desk and says it will offer investments in bitcoin and other digital assets to its wealth management clients from the second quarter. read more

* Daniel Loeb's hedge fund Third Point uses as a custodian cryptocurrency exchange Coinbase Global Inc (COIN.O), a regulatory filing shows.

April 2021:

* Inflows into cryptocurrency funds and products hit a record $4.5 billion in the first quarter, according to asset manager CoinShares. read more

* UK-based hedge fund Brevan Howard sets up a new fund to invest in digital assets, focusing on a long-only range of digital assets including bitcoin, according to a personal familiar with the matter.

* U.S. cryptocurrency exchange Coinbase Global Inc (COIN.O) was valued at $86 billion at the end of its Nasdaq debut, the biggest listing yet by a crypto company.

* U.S. business software firm MicroStrategy (MSTR.O), a major investor in cryptocurrency since 2020, says it now holds 91,579 bitcoin.

ACCEPTANCE

Feb. 2021:

* Mastercard (MA.N) unveils plans to support cryptocurrency payments across its network. read more

* BNY Mellon (BK.N) announces a new unit aimed at helping clients trade and own cryptocurrencies and other digital assets. read more

* The city of Miami votes in favour of a proposal to allow bitcoin to be used to pay city workers and for city residents and businesses to make fee and tax payments with the cryptocurrency. read more

* Canada's main securities regulator clears the launch of the Purpose Bitcoin ETF, the world's first bitcoin exchange traded fund. read more

March 2021:

* Payments processor PayPal (PYPL.O) allows U.S. consumers to use their cryptocurrency holdings to pay at millions of its online merchants globally. read more

* Tesla Inc (TSLA.O) customers can now buy its electric vehicles with bitcoin, its boss Elon Musk says. read more

April 2021:

* Swiss arm of French insurer AXA (AXAF.PA)allows its customers to pay for non-life insurance products with bitcoin.

($1 = 0.7186 pounds)

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FinanceFactbox: Bitcoin's march to the mainstream gathers pace - Reuters

Imagine a world where you could buy stocks, bonds, derivatives, cryptocurrencies or even pieces of art, all on one exchange, 24 hours a day, seven days a week, from anywhere in the world.

On this exchange, trades occur directly between two investors instead of through a complex latticework of brokers, clearinghouses and other middlemen and gatekeepers. They settle, or close, almost instantly, instead of taking up to two days. The system is cheaper, more transparent and ostensibly more open. It is also potentially more volatile and risky for investors; profits can turn into losses in the wink of an eye at any time of the day or night.

Entrepreneurs have for years dreamed of using blockchain technology, the concepts and software underpinning bitcoin, to enable digital trading of virtually any asset. Today the idea seems less far-fetched than ever.

When trading of videogame retailer GameStop Corp. exploded earlier this year, it illustrated just how fragile todays markets can be. It also showed that a new generation of stock traders operates much like crypto traders: Flash mobs of retail traders gathering on social media and targeting an asset for a mass-buy has been a hallmark of cryptocurrency trading for years.

The current capital markets arent built for that kind of trading, but a number of pilot programs and other experiments are investigating how to create digitized markets that can keep up with changing times. Were seeing a tectonic shift start to happen, says Jeffrey Schumacher, the founder of New Asset Exchange, a Manhattan Beach, Calif.-based startup that aims to help companies create and sell digital securities.

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GameStop and Bitcoin Renewed a Push to Digitize the Stock Market - The Wall Street Journal

Jesse Powell, CEO of cryptocurrency exchange Kraken, sits for a photograph at the company's San Francisco office in 2014.

David Paul Morris | Bloomberg via Getty Images

Cryptocurrency exchange Kraken is considering going public through a direct listing in 2022, after seeing record trading volumes and new clients amid a surge in the price of bitcoin.

Founded in 2011, Kraken is one the world's biggest crypto exchanges. It has more than 6 million clients and is the fourth-largest exchange by trading volume, according to CoinMarketCap data.

Jesse Powell, Kraken's CEO and co-founder, said in an interview that the firm had benefited significantly from the bitcoin rally. Bitcoin hit a record high price of over $60,000 mid-March, with traders attributing the move to institutional investors jumping into the market.

"For us, any volatility is good but it's always better when it's on the way up," Powell told CNBC. "The first quarter just completely blew away the entirety of last year. We beat last year's numbers by the end of February. The whole market has really just exploded."

Kraken saw four times as many new users sign up to its platform in the first quarter of this year than it did in the second half of 2020. Spot trading volumes in the first quarter were 1.5 times higher than in all of last year, reaching a record level of $160 billion.

Coinbase, Kraken's main rival in the U.S., posted record quarterly revenue of $1.8 billion in the first quarter, which is more than it made for the whole of 2020. The company is set to go public in a blockbuster direct listing next week which could value it at as much as $100 billion.

Kraken is also weighing a stock market debut for 2022, Powell said.

"We're looking at being able to go public sometime next year," he said. "It would probably be a direct listing, similar to Coinbase."

Direct listings which see firms list without issuing any new shares have become a popular route among valuable tech companies looking to go public through an alternative to initial public offerings. IPOs have long faced criticism from tech investors for mispricing shares, resulting in issuing companies sometimes leaving piles of cash on the table.

Kraken is currently in talks with investors for a new round of funding, which could reportedly value it at as much as $20 billion.

"We have been in some talks to do another round," Powell said. "We've kind of been delaying a bit to see where the Coinbase valuation comes in at. I suspect that the price is gonna pump much higher than it has been trading at."

"We're not in a rush to raise capital," he said, adding the firm has a strong balance sheet. "The reason to do it would just be to bring on some more strategic investors who can help us with geographic expansion and growth."

Powell said the rise of NFTs, or non-fungible tokens, led to frenzied interest in alternative digital coins, such as ether. NFTs are a type of digital asset that represent ownership of unique collector's items, and they've exploded in popularity this year.

Ether, the digital currency of the Ethereum blockchain, notched a fresh all-time high of more than $2,100 on Tuesday, helping to lift the market value of all cryptocurrencies above $2 trillion for the first time.

"Ethereum is a big part of this," Powell said. "A lot of NFTs are created on Ethereum, a lot of these platforms operate on Ethereum."

Kraken's boss added that people are also turning to other digital currencies like flow and filecoin, as ether transaction fees spike due to the level of congestion on the Ethereum network. Ethereum is undergoing an ambitious upgrade aimed at making it faster and more secure.

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Bitcoin exchange Kraken considers going public after record trading volumes in the first quarter - CNBC

Bitcoin (CRYPTO:BTC) has risen dramatically to a price tag of nearly $60,000 as of early April. Is it still a good time to add the leading cryptocurrency to your portfolio? In thisFool Live video clip,recorded on March 18, senior analyst John Rotonti and Motley Fool Deutschland lead analyst Bernd Schmid discuss Bitcoin's price tag and how investors should think about it.

John Rotonti: So Bitcoin's price has skyrocketed recently. I think it's somewhere around $60,000 U.S. per coin. Is it too late for investors to get in?

Bernd Schmid: I don't think so. I personally don't buy it anymore. It always depends when you get in. I look at it from a portfolio perspective. But I think how I look at it, what could happen to Bitcoin with short term or in the longer term, the one thing I mentioned before, is the $1 trillion market cap compared to what Bitcoin might be in the future. I think a very likely use case is Bitcoin could be the digital gold. Then it could still 7X from today until whenever this might happen, or it could, like I mentioned, if it replaces more than just gold, the value could theoretically be even higher. I think it's the best way to get at least the gauge of could this thing be worth. It's certainly not too late, but, and this is what I want to mention, based on historical cycles, there's about a four-year cycle, which Bitcoin has, and Bitcoin has actually dropped every four years by about 80-90%.

Rotonti: Where are we in that cycle? Do you know where we are in that cycle? Year two, year three?

Schmid: Yes. Actually, the pool part of the cycle is quite short. I think it's about a year, don't fix like I'm not 100% sure. But we are like in the middle of same, in the beginning to middle. Actually, I have a chart what I did and actually PlanB, but I mentioned before he does as well. I did it myself. I chartered the last two cycles and the average of the last two cycles. Right now and the last two cycles you have from the start of the cycle about a 30X to 50X in terms of price movement. So from whatever, from $100 to $5,000 or last time, I think the top was about $20,000. This cycle started with around between five and $10,000. So if you count the 20x, you would be somewhere between $100,000 $200,000, that's where this can go into the cycle. Even when we talked about this cycle, I personally, if you think the top will we reached in the same timeframe like last two cycles, shifted, it will be reached about mid-to-end or begin mid-end. Two to three times increase of Bitcoin until the top is being reached in a couple of months. But then be aware, you never know what's going to go. You don't know if the top is, maybe even sooner, and there might likely, I think there will be a drop by 80% at some point of time I think. I still believe.

Rotonti: That's fascinating Bernd and I love how you scale it by comparing it to real gold. Because if this is the digital gold and it's currently got a $1 trillion market cap. I think you said so far we've mined about $7 to $10 trillion worth of gold, right? so if there's a potential 7-10x run from here, potentially.

Schmid: You know, if you look at it from a value investor's perspective, you actually know that's tough, actually. It never only goes to the value of actually has it always overshoot and undershoot. So it's quite likely that you go even beyond that. You just never know when all these things are going to happen. But one thing is certain, that are relatively certain is that we will have very high volatility. You might be down 50% in a short amount of time. You have to start like these kind of things and consider it if you invest into it.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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At $60,000, Is Bitcoin Too Expensive? - Motley Fool

Tom Jessop, head of Fidelity Digital Assets at Fidelity Investments, says that the maturation and adoption of digital assets as a class of investments will continue at a rapid pace in coming years, signaling that crypto may have turned a corner in traditional finance circles.

I think we continue to see adoption at an accelerated pace for a host of reasons, he said Wednesday afternoon during an interview at MarketWatch and BarronsInvesting in Crypto virtual event series.

Check out: U.S. is behind the curve on crypto regulations, says SEC Commissioner Peirce

Jessop said that a backdrop of ultralow interest rates and an environment that has been stimulated by easy-money policies has helped to drive momentum into bitcoin BTCUSD, +0.52% and other assets, which are increasingly being seen as alternatives to assets that are considered richly priced by some measure and bonds that are offering meager yields.

The S&P 500 index SPX, +0.42% booked its 18th record closing high of 2021 on Wednesday and the Dow Jones Industrial Average DJIA, +0.17% wasnt far from its all-time high as the 10-year Treasury TMUBMUSD10Y, 1.649% yielded around 1.66%.

Read: China may be using bitcoin as financial weapon against U.S., says Peter Thiel

Were not going to get out of this stimulated environment anytime soon, Jessop said. I think weve reached a tipping point.

I think youve had the accumulated experience of now roughly 12 years of the bitcoin blockchain being operative since the genesis block in early 2009. And the pandemic, quite frankly, was a catalyst for institutional adoption, and specifically bitcoin and the narrative, or use-case, around digital gold, Jessop said.

Particularly, in an environment where weve seen unprecedented monetary and fiscal stimulus from central banks and governments in response to the pandemic, he said.

Fidelity has been at the vanguard of integrating digital assets into traditional investment portfolios. The asset manager was one of the first major institutions to explore bitcoin, starting in 2015.

The company created the digital asset unit, which Jessop heads, in 2019.

Bitcoin was trading at $56,500 on Wednesday, up 95% so far this year.

Want to understand the future of cryptos and NFTs? Register for MarketWatchs free live event:https://events.marketwatch.com/crypto/home

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'We've reached a tipping point' on bitcoin adoption, Fidelity's Tom Jessop says - MarketWatch

Tyrone Ross is the CEO of Onramp Invest, and several publications have named him one of the top financial advisors in the United States. He's also a big believer in Bitcoin's (CRYPTO:BTC) potential to transform the financial system as we know it. In thisFool Live interview,recorded on March 18, Fool.com contributor Matt Frankel, CFP, asks Tyrone about Bitcoin's potential as a payment mechanism, why Bitcoin is such a volatile asset right now, when Bitcoin might reach mass adoption, and much more.

Matt Frankel: For those who don't know, Tyrone is CEO of Onramp Invest. He was named in InvestmentNews' top 40 advisors under 40, which is a pretty big accomplishment. WealthManagement.com called him one of the top 10 advisors set to change the industry in 2019. That's a pretty impressive resume I just read. I gave the short version. Can you briefly explain what it is that you do? What is Onramp Invest? What do you do?

Tyrone Ross: I'm the CEO of Onramp Invest, which is a platform that is going to allow financial advisors to interact with Bitcoin for their clients the same way they would Appleright now. We're going to get into the portfolio management software and the financial planning software to allow them to model, plan, build, and give them access to qualified custodians.

Frankel: OK. I know a lot of the work you do, it's involving cryptocurrency as a mechanism for the unbanked and underbanked segment of the population. Do you view Bitcoin as a replacement for U.S. dollar, like a payment bank or a replacement for bank accounts, or a way to store wealth, or all of the above?

Ross: First, I've got to say that I'm no longer saying "unbanked" and "underbanked." That has become a trope. I say underserved. Yes, I think Bitcoin and other crypto networks are a boon to the underserved of what is allowing for access in those that have been shut out of the traditional financial system due to financial redlining, so yes.

To your second point, Bitcoin is all of those things. It's currency, it's money, it's all savings, technology, depending on where you are in the world and the lens with which you look at it. But for me, growing up into a home that was underserved and having used the alternative financial system -- my parents, to this day, still use money orders. I came to Bitcoin because a friend sent it to me and I got it instantly, and I'm like, whoa, wait a minute. I don't have to wait three to six days for my money to settle? That's how I came to where I think the power of the Bitcoin, big "B," blockchain, is, as opposed to bitcoin, little "b," the coin, which is the price everyone is so over-concerned about.

Frankel: It definitely makes sense when you say "underserved," because it's not just people who don't have access to traditional banking services. It's people that, the traditional banking system doesn't necessarily serve them well.

Ross: Exactly.

Frankel: What you just said, three to six days for the check to clear.

Ross: Yeah.

Frankel: That's not even to mention international money transfers, how long, and cost how much money.

Ross: Absolutely -- $15 to receive a wire, to receive it; $30 to spend it. It's egregious.

Frankel: Bitcoin definitely cuts back on that. First of all, just to clarify, when you say cryptocurrency, do you focus on Bitcoin, or are there others? Because I just looked before we recorded this -- there are over 4,600 cryptocurrencies that exist. I know that some of them are really small. Let's call them very niche tokens. But do you think any other than Bitcoin, or is that what we're talking about here?

Ross: I think there are more. I think there's maybe 10, and there are probably two that I think are worth people paying most attention to right now, which is the Bitcoin blockchain and the Ethereum (CRYPTO:ETH) blockchain. Ether and Bitcoin. But there are some other projects out there that are notable, but the fact that there's 4,000 of them is a joke.

But for the purposes of this conversation, yeah, I think Bitcoin is the one with the biggest brand. It's the most Lindy. It's been around the longest. It's all in the news. That's the one that everyone talks and hears about. But I think what people should understand is, no matter how you feel about Bitcoin, I think that's where you should start. If you're like, I don't know, and you want to go to something else, that's fine. But you should at least start there because again, we always go back to the origin. You want to trace your roots back to the beginning. If you are into crypto networks whatsoever, then you've got to start at Bitcoin. Again, whether it's for you or not, that's a personal decision, but it's a good place to start for people to just get a feel for blockchains and things like that.

Frankel: Getting back to your financial advisory activities, I also saw in addition to all the recommendations you were given, that I already mentioned, you were named one of Investopedia's 100 top financial advisors. I was looking at that list before we were talking. There are some pretty good companies on there. I saw Josh Brown, who I see on CNBC every day.

Ross: Yeah.

Frankel: There was a Kiplinger's columnist that was in the top. You're in pretty good company there.

Ross: Yeah. I snuck on there.

Frankel: Well, I don't want to say you snuck on there, but there are over 100,000 financial advisors in the U.S.

Ross: Yeah.

Frankel: Technically, I'm a financial advisor. I'm a CFP. And I have a couple of people I advise. That puts you in the 0.1%, if I'm doing my math correctly there.

Ross: Yeah.

Frankel: How did you sneak on the list, as you put it?

Ross: For me, one of the things that I think is important is, as an advisor, you can do a lot of different things. You could work with veterinarians; you can work with horse jockeys; you can work with whoever you want, and you just got to find your lane. I'm a wirehouse baby. I came up through the wirehouse because I was in Merrill and I left Merrill, went independent, and when I went independent, I'm like, you know what, I'm going to find my voice. I'm going to leverage social media to talk about the things that I care about, which is being a voice for the voiceless and the underserved in this country. Then I had this passion for early-stage startups and crypto, so they all came together and it gave me my own unique lens and voice.

I think it also helped that, again, I'm an African American male. There's not too many of us. When you have a voice and you can speak to something and add value, it's very easy to stand out. I just leaned on what I cared about and shed the skin of I need to be this to fit in to get on these lists. And it's funny, when you try to get on the list, you don't; when you don't try, you get on the list. Take that for what it's worth.

Frankel: No, it makes sense. You said crypto is one of your big passions. What role can and should cryptocurrency play in a well-rounded investment portfolio? Even if I'm trying to use it for banking purposes at the moment, what role would it play?

Ross: I love how you asked it that way -- "can and should." What it can do, the asymmetric properties of it, and sharp ratios and diversified, all of those beautiful things that advisors care about -- it does have a place in the portfolio for that. The key is trying to find out, one, for a client, whether they should own it at all. If it helps them get closer to their goals. I'm not here to say that I think it does, but that's for an advisor to determine based on the risk profile of the clients.

Also, speaking of risks, how much risk can the client take? If a client comes in and says, "Yeah, tell me about this Dogecointhing or Bitcoin." You're like, "Wait, Mr. and Mrs. Client, your risk profile is a 2. Dogecoin is a 22. Why are you asking?" Re-profile the client, and look at the sweet spot is somewhere between 2.5% to 5% of the portfolio. When you look at the improvement, and risk-adjusted returns, and things like that, it's hard to ignore it. It can be a great add to a portfolio.

Should it is a totally different conversation. Where someone is in age; what their goals are. If I'm looking to retire, am I adding Bitcoin that has 80% drawdowns to my portfolio? Probably not. If I'm 35 and I've come into my own and I have ample liquidity, and I see this as a store of value at some point, or digital gold, or whatever, a venture type bet, sure. I think it all depends on if it should versus what it can do.

Frankel: OK. I know you saw this news, because you tweeted about it today. Morgan Stanley just announced that it's launching funds to give clients access to Bitcoin. I assume you applaud this move, first of all.

Ross: Well, I don't know if I applaud it so much as it's shocking to me that the broker/dealers are moving faster than the RIAs. That's shocking. I do think it's good news because again, if you go back a couple of years, it was Morgan Stanley, and JPMorgan, and Goldman Sachs, and this was stupid and it was tulips or whatever. It's just validation in that sense. What I don't like is Bitcoin is supposed to be for everybody, but yet they're saying you got to be accredited and you got to have $2 million of assets at the firm or whatever.

But again, I get it, because most of the folks at Morgan Stanley are high net worth or whatever and folks that want to get at the cash that they can. This is just part of the financialization of Bitcoin, and I get it. I applaud it in the sense it is great for the space, because one of the things before you get mass adoption, you get mass acceptance. We need to get through mass acceptance. Then we'll get mass adoption, and I think when your Morgans of the world, and your BNY Mellons, and all of these names that people know, start to get involved, then you go, all right, we're reaching the mass acceptance stage.

Frankel: When do you think we're going to see mass adoption of Bitcoin as a payment mechanism? I know just in the past year or so, I know PayPal (NASDAQ:PYPL) announced that they're planning to roll out Bitcoin acceptance on all of their merchants. Do you see this as a way in the future thing? Do you see it as a few years? In other words, how long do you think the speculative period of Bitcoin lasts?

Ross: When crypto has its iPhone moment, and I think that's going to take a lot more of design folks, UX/UI, that are used to designing this beautiful experience for people, where it's just operating in the background and you don't know. When I'm using Bitcoin, and blockchain, and all these things and I don't even know, and it's just this beautiful experience. Then you get the Steve Jobs of crypto, who says, I'm going to make you want something that you didn't even know you needed, and you're like, "Man, I really need an iPhone." Then we're going to make sure every time we update it, you're going to go out and get it. But it's a beautiful experience.

I think once we get beautiful design and experience into crypto, it's going to cross over, because then you get away from public key, private key, losing this. What about this? How do I store it? Where do I put it? Once all that's gone and it's just in my phone, my Apple Wallet or whatever. You saw the news of Visa (NYSE:V) yesterday again, saying that with a credit card and everything else, making Visa simply to access a Bitcoin, easy to use on your phone, and be able to convert it to dollars. When we get there, it's game on.

And regulation plays a part in that too, because if you use a Bitcoin to buy things, every one of those transactions are taxable. We have to make sure that we get away from that as well. There's a long way to go here.

Frankel: One of the things I often say about new technology is if it's not easy, people aren't going to do it, no matter how good it is.

Ross: One hundred percent.

Frankel: In other words, you're saying when Bitcoin becomes as easier or easier to use than U.S. dollar, that's going to be the iPhone moment, I guess you would say.

Ross: One hundred percent, because that's what it is. It's cash. The ease of which I could just walk up to you and hand you $20 and walk away. That's not taxable. I can do the same thing with Bitcoin right now. But when everyone does that and it's just a matter of fact -- "I just sent you Bitcoin" -- you get it and there's nothing to it, then we'll be there. But we're not there yet.

Frankel: OK. When I talk to people about Bitcoin, one of the things they're most worried about, and it's something that Bitcoin bulls are really excited about, it's the volatility. Right now, as we're speaking, Bitcoin is worth nearly 10 times what it was a year ago.

Ross: Yeah.

Frankel: Being fair, that's not stable as a payment mechanism.

Ross: No.

Frankel: What do you say to investors, even with a high risk tolerance, who are worried about the volatility of Bitcoin?

Ross: I want to address what you said. The Bitcoin blockchain is a beautiful payment mechanism. The price isn't. So you've got to separate those two. I agree with you. It shouldn't be a payment mechanism. Now, there's something called Lightning that's being built, but you shouldn't be buying things with your Bitcoin anyway for exactly what I said. Every time you buy a coffee, that would be a taxable event, and there's other things to that. What I think is important here with the volatility is, yes, those of us that are crypto-hippies look at the volatility and say, "Oh, it's great," because we can stomach it and we know better. The average person goes, "It's down 80%." A lot of people can't stomach a 10% drop, 5% drop, 1% drop. This thing drops 80%? A lot of people don't want to take that ride on the roller coaster.

But the volatility, when you learn about Bitcoin, is a feature, not a bug, and it's one of those things where, when you look at it, it also is proof of how early we are still. It will smooth out.

Last month, the 30-day volatility had jumped higher than it had been, I think, for the previous seven years. Going back to 2013, the 30-day volatility jumped up 160-plus percent. My company did some research on that. It got picked up. The volatility has picked up. The correlation to risk assets. A year ago, when things went nuts, it went down with it, because the first thing you do is you sell risky assets. So we're still there.

But every day it gets stronger and grows, and it stays around and you get more institutional adoption, and there's the ability for large investors to move in size with best execution and best price discovery. Those things are important, and we're getting there. But for the time being, yeah, the volatility for those of us that can stomach it and know go, "Yes, It's on sale," but not everybody can do that. And that will change.

Frankel: The way you look at it is the more important thing would be Bitcoin moving from say, 10% adoption to 20% adoption than moving from $20,000 to $50,000?

Ross: Exactly. That's the key, and there's that volatility and adoption, too. Because think about it. Go back to 2017. It's all retail, and now all the institutions are like, "Look at these idiots." Now you've got the institutions coming in, and now all the retail that was in and stayed in, they're like, "Look at these idiots." The volatility of who comes in; the volatility of price; the volatility of price discovery.

I did a webinar with Digital Assets Research and FTSE Russell, and at any point that you can check the price of Bitcoin across some exchanges, it could be off by 2%. That's crazy. There's volatility in a lot of different things which are new, and the best example is this: I'm not a parent, but I have three nephews. You ever watch a child learn to walk? That is very volatile. "Oh, they're going to hit their head. Oh, they fell again." And you know what they do? They get up and they keep trying, and they fall.

But it's a very volatile thing. It's new. Anything new, or any 12-year-old -- Bitcoin is 12 -- 12-year-olds are volatile. I say this is in jest comparing a technology to a human being, but anything that's new is going to be volatile. It just is. And then it has to find its way, and I think that's what's happening in this space.

Frankel: It's fair to say as adoption keeps going, it will eventually stabilize. That could be 20 years from now, but it should eventually find some kind of equilibrium.

Ross: Yeah, it will. I think folks like myself, a long-dated call option on a store value, I think it will get there. I don't think it's there now, but you're betting that it'll become that in the future.

Frankel: That's right. I mean, it's important to note that U.S. dollars aren't completely stable. They fluctuate against other currencies all the time. So that's never going to go away entirely.

Let me pivot to regulation just for a second, if I may, because you mentioned that earlier. Regulation and taxes are obviously two different things, but they're two big concerns in the Bitcoin community. On the tax issue first, do you think the IRS is eventually going to recognize Bitcoin as a currency, meaning that every time you buy a soda with Bitcoin it's not going to be a taxable event?

Ross: Oh, man. That would be nice. But I don't know if we ever get there. Right now they look at it as property. I think it will remain that way for a while, but we'll see. Sunayna Tuteja, who was just at TD Ameritrade, who is now on the Federal Reserve, she's very smart, and capable, and we're all excited that she's there. Maybe she gets them closer to recognizing that it should be recognized as a currency. I don't know. We'll see, I think that's a ways off. But it'd be nice if it happened. I do think we'll get there at some point, but I think it's a ways off.

Frankel: Should regulation be embraced by the cryptocurrency community or feared? Because I mean, this headline I saw in India the other day when they were proposing to outlaw cryptocurrency, obviously, that should be feared. But I mean, just normal oversight of Bitcoin, should that be embraced as mainstreaming?

Ross: See, the decipher punks and the original libertarians, they're like, "No." But I think if you want mass adoption, you need it to be mass-accepted by regulatory authorities. The financialization of it and putting these boxes in place if you really want it there. Ben Hunt was talking about this on Twitter. He was like, "Look, guys. That's where it's at. You've got to embrace this. We're here. The financialization of it is here."

The beautiful thing about Bitcoin and being decentralized and self-sovereign, there's only so much regulation you can put around it. It's open-source. It's borderless. It's open, decentralized, all of these different things that allow those properties to remain inherent to it, which is why it's so elegant and beautiful. But I think they should embrace it. I think it's good for it, but to an extent. You don't want overregulation, and I think that's what most folks are worried about, the overregulation.

But I think some regulation is good, like that clarity, property, well, now it's currency. For the SEC and the CFTC to get together, for financial advisors to give them clarity on it's a security, it's not a security; you can say this, you can't say that. There's a lot of the regulatory compliance environment that needs to be clarified, but I think we'll get there eventually.

Frankel: What is the best way you advise your clients to actually get involved in Bitcoin? Is it to buy directly through an exchange? Is it to use a broker that offers Bitcoin? Is it to use one of those, like, the Bitcoin Trust that trades on the exchange? I saw a look when I said that one.

Ross: Buddy, I literally just got done doing a webinar with an advisor. It was an Investopedia webinar, actually, on this. And that came up about what advisors should be. If I'm an advisor, I'm doing this, and this is me personally, as an advisor I don't really actively practice. But I would not, personally right now, actively put my clients in anything. Me, personally, I can't speak for every advisor. There's nothing out there that I would go "All right, I would put my clients into that." If there was a way for me to get direct exposure for my clients at a qualified custodian which exists right now, I would do that. That's available, and again, there's some piping that needs to happen, which is why I have a job. That's what Onramp is trying to do.

Now, take the advisor out of it, and I'm just an individual. There's a myriad of wonderful places you can go. I'm a big fan of Cash App. Swan Bitcoin is another good one. I mean, there's Coinbase; there's Robinhood; there's a million choices for people. Again, I love Cash App with what they're doing for the underserved and how they are giving people access. But as an advisor, I would be very careful to vet things, especially based on the SEC risk alert that came out, which is custody, policies and procedures, valuation methodologies, being able to disclose fees, all of the price of these vehicles. If you could do all that due diligence, have at it.

But again, if I'm RIA or even with BD, they can't do it anyway, even with Morgan Stanley. Maybe you put them in this fund and you're free and clear. But I would make sure that there's qualified custody -- that there's KYC, AML, all that other stuff that I can track an archive and everything else. But me personally, I'm not using anything that's out there.

Frankel: There are really no good exchange trading platforms yet for Bitcoin. They should be coming soon.

Ross: Yeah, they're coming, and there are some exchange-traded funds now that are out there. Again, it's not my job to say whether they're good or bad, but I can give my personal opinion. When I did have clients that were doing this, they already owned it before they came to me, but I've never made a suggestion like, "Hey, you should go buy," because I knew what was out there. What advisors should and shouldn't do, and you shouldn't be making recommendations on stuff, like, if you tell a client, "All right, we're going to buy Apple at Fidelity," that's a very safe thing to say, and you tell a client, "Oh, we're going to buy Dogecoin and Binance." Probably shouldn't be doing that. Totally different conversation.

Frankel: Sure. I mean, I'm glad you mentioned that. One of the biggest hang-ups that a lot of people have is, "Oh, my Bitcoin is going to get hacked or stolen," or something to that effect. That was a big problem in the early days. Not so much a problem anymore. I mean, most of the revenue exchanges, they personally became insurance, the U.S.-based exchange. A lot of their Bitcoins are in cold storage, which means not stored on the internet, so you can't track. Do you see any big security risk with buying Bitcoin, as long as people buy it from a reputable place? I know you said Cash App is one of your favorites.

Ross: There's always a security risk, and the main risk is the person. I've gotten five -- count them, five -- in the last couple of days, folks that have lost their crypto because they didn't store passwords properly, because they didn't follow proper protocol of storing their own keys or their seed phrase, all these other things. But the majority of people who don't want to handle all that would go to a centralized authority like a Cash App or a Coinbase. You are there, but again, there's the risk of they can cut you off from it or something happens, so there's all types of risks. It's just which risk you want to take. I think if you want to take that self-custody security risk away, yeah, you go to one of those platforms and they can help you with that.

Frankel: I guess, in that way, the slowness of the traditional banking system is an asset. Because if someone hacks into my bank account and tries to wire some money, there's usually a period I can catch it. That's not necessarily the case with Bitcoin.

Ross: You hit "send" on that, and then it's gone, right? Then you're like, "Oh, my God, please send me the confirm. It went through."

Frankel: The exchanges themselves are safe, but make sure you save all your passwords and keys on that.

Ross: Again, Coinbase, Gemini. Gemini has a very robust security system. A lot of these exchanges know, and they do have insurance as well. Yeah, I think you are in safer hands there using a centralized custodian than doing it yourself.

Frankel: Just to clarify real quick, a lot of these that you mentioned -- Coinbase, Gemini, they cater to people who want to buy and hold Bitcoin as well as traders. They have pretty sophisticated trading platforms.

Ross: Yeah, they do. If you want to buy and hold or you want to trade your life away.

Frankel: I assume you're a buy-and-hold type of guy.

Ross: Buy and hold. I do not trade. I buy it, buy it, buy it, hold it, and I don't look at the price. Don't care about the price. I've never met a rich trader popping bottles in the club.

Frankel: I would definitely agree with that one. Buy and hold is definitely the way to go. I assume you would advise clients the same. Buy the coin; hold it; don't trade.

Ross: Sure. Again, depends on the client. I mean, I had clients that would trade in their brains out, but that's what they wanted to do with their own money. Again, it was held away from me. I couldn't see it, couldn't do anything with it, but they had their Bitcoin, which is away and safe and then they wanted to trade. All right. It's just like an advisor now. You don't think your clients have a little play account where they're trading GameStop? Of course they do. They just got their safe assets with you, and I think any advisor would be OK with that. But the advisor is like, "Don't bring that to me. Keep it over there." And you do it right in. I'm not going to give you any advice on that. That's on you.

Frankel: Since we are an all-around investment website, you mentioned, I think, the ideal Bitcoin -- you said the sweet spot is 2% to 2.5%, I think, if I'm quoting you correctly?

Ross: Yeah, somewhere between 2.5% to 5%. That's the sweet spot when you add it to a portfolio.

Frankel: So depending on risk tolerance, as you said?

Ross: Yeah.

Frankel: What are the other 95%, then? Your opinion as the advisor.

Ross: To 5%; that's the sweet spot there when you add it to a portfolio.

Frankel: So depending on risk tolerances, as you said?

Ross: Yeah.

Frankel: What are the other 95%, then? Your opinion as the advisor.

Ross: Again, that has a lot to do with the client's age and goal, things like that. I think right now, how do you not look at emerging markets? I think value has suffered, but growth stocks have done well. I'm still a fan of holding individual stocks. I think there's value in that, but again, it's tough.

But as far as a crypto portfolio, I think there's Bitcoin, and you can possibly look at adding in some Ethereum, if that makes some sense to you. Things are going on in Ethereum in blockchain and Ether, the actual token. The Ethereum blockchain and what's going on with DeFi allows you to get some yields, so that might make some sense if you have some stable coins there, USDC or whatever. Ether, the actual token, is a good hold as well for some people. But again, it's all a personal type of thing. But I think having a sleeve of Bitcoin and then depending on your goals, a nice mix of overseas -- everyone should own SPY; don't know why they don't. But it's a personal situation with goals and risks and age and everything else.

Frankel: We are just about out of time, but I wanted to give you the last word. If people want to find out more about what you're doing and give a website at whatever you would like to share or anything like that?

Ross: If you want to find out more about what I'm doing, please go to nokidhungry.org and help feed a hungry child. There is no reason why there is child poverty in this country, and I will not shut up and stop until every child is fed and they have the best chance at achieving financial success and freedom in the United Great States of America.

Frankel: You heard it. Thank you so much for joining us, Tyrone. That was a great interview.

Ross: Thank you so much for having me. I appreciate it.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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This Financial Advisor Thinks Bitcoin Could Be Headed for Mass Adoption - Motley Fool

Todays episode of Decoder is about a very big idea: bitcoin. The Verge has been covering bitcoin since we launched in 2011. And since then Ive heard many loud, powerful voices talking about how its going to be the future of something. Everything. Maybe nothing at all.

To be honest, Ive been a bitcoin skeptic: over the past 10 years weve seen the value of bitcoin skyrocket, but very few actual uses for what should be a revolutionary digital currency. But that value keeps going up, and it feels like we might be at an inflection point for the bitcoin story. And there doesnt seem to be a lot of gray area between the people who think bitcoin is going to change everything and the people who think its nonsense.

For this episode, I had two conversations. First I spoke to a bitcoin investor. Then, a few days later, I spoke to a bitcoin skeptic. In each conversation, I tried to play the other role but without the usual yelling and chaos that seems to characterize bitcoin debates.

The investor is Nic Carter. Hes a general partner at Castle Island Ventures, which funds startups that are building on top of the bitcoin infrastructure to make payments more accessible. Basically, making sure bitcoin can function like a currency.

The skeptic is Steve Hanke. He is a professor of applied economics at the Johns Hopkins University and senior fellow and director of the Troubled Currencies Project at the Cato Institute. He has also advised other countries on how to deal with hyperinflation and how to stabilize currencies.

In the end, my biggest question about bitcoin is whether people are interested in it because its bitcoin or because its worth a lot of dollars.

Here we go.

This transcript has been lightly edited for clarity.

Nilay Patel: Nic Carter, youre a general partner at Castle Island Ventures. Welcome to Decoder.

Nic Carter: Thanks for having me. Im really excited for this.

NP: You have kind of an interesting history. You were the first crypto-analyst at Fidelity. Now you manage investments into the bitcoin ecosystem at Castle Island Ventures. I want to start at the very beginning. What drew you to bitcoin and crypto, generally?

NC: It wasnt anything super dramatic. It wasnt like my family had our wealth confiscated by some tyrannical government or anything. As much as I, weirdly enough, wish I had a great bitcoin origin story, I dont, but I just was attracted to the playful community initially on Reddit, believe it or not. And I thought it was really cool to tip people through the internet and do P2P payments that werent being cleared through any traditional financial medium.

That was really interesting and exciting to me to have that instant, final settlement on internet payments. And then it was only with time and it took me a long time that I came to realize that there was actually a deeper, sort of philosophical underpinning behind the project, that it was a real monetary project, and it was tightly intertwined with some normative views on economics and the role of central banking in society.

NP: I want to pull back out of that. Im really interested in your perspective on what the normative aspects of central banking are and how they might change with bitcoin. But just help me out from the very beginning. How would you define bitcoin at this moment in time?

NC: So the thing about bitcoin is that we have a bit of a definitional problem because the word bitcoin actually refers to a number of different things, and that causes confusion. So on the one hand, its a protocol.

Its a set of rules that people opt into to send value through a communications medium in a final way so you get final settlement. And on the other hand, its also a financial asset, so bitcoin is the name of the monetary unit that circulates within the bitcoin protocol.

That doesnt make a lot of sense to a lot of people, but the bitcoin network is such that, really, theres only one native currency that is changing hands on the bitcoin network, and we call that bitcoin.

And as of today, all of the bitcoins are worth about a trillion dollars. So thats our problem, is that we use the same word to refer to the network itself and to the actual medium of payment on the network.

NP: I think theres a lot of focus on the dollar value of the outstanding bitcoin right now. But one thing that strikes me is there is the bitcoin network; theres the Ethereum network; theres Dogecoin, which Elon Musk just tweeted about, and it spiked in value.

Theres a wide variety of cryptocurrencies and now crypto assets, right? The NBA is selling highlight clips as non-fungible tokens, or NFTs, for a quarter of a million dollars, right?

So theres all these crypto assets and crypto networks and cryptocurrencies. Bitcoin still seems like the center of that conversation. How do you think it relates to all of the others?

NC: Bitcoin is the alpha and the omega. I mean, its the originator of this whole thing. Bitcoin is the reason we have the word blockchain, right? Bitcoin kicked this whole thing off in 2009. It was the first public blockchain, the first cryptocurrency. It wasnt the first digital cash project, but it was the first successful one; the first decentralized one; the first one that people realized, Wow, we can actually transact outside of the purview of the state here. We dont necessarily need financial intermediaries.

And bitcoin has this great set of embedded values and this commitment to genuine decentralization, and genuine distribution of governance, such that no one individual or entity can co-opt or change the network. And it has this extreme resilience and robustness and this unwillingness to change or be changed by anyone.

Thats what gives it a lot of strength. Thats what a lot of the clones of bitcoin and the competitors and the alternative cryptocurrencies lack, fundamentally. Most of them are set up by corporations, venture investors, that try and own a huge percentage of the initial stake, things like that. And they have CEOs and foundations and leadership. Bitcoin is much more organic, which kind of explains its sticking power. Its this real phenomenon that people can align with. And all of the competitors, theres certainly some interesting technology out there. But its not surprising to me that bitcoin has endured in the way that it has because its kind of unique in terms of its own trajectory, its history.

And I think people really align with that. They align with the unique circumstances of its launch.

They like the fact that its pretty decentralized. I think, ultimately, bitcoin is our best shot to basically strip some of the power from governments, in the monetary context, and from large financial institutions for that matter.

NP: Why should we strip the power from governments in the monetary context?

NC: Because they misbehave. Because they mismanage their currencies, and in the US, things seem pretty much okay. Inflations not too bad. But the US experience, the experience of Americans, is not the typical experience for people globally, right? Were only something like 4 percent of the population. Your average person on the planet Earth probably does not have a high degree of trust in their banking sector. They may be living under inflation or conditions of monetary repression.

They might have to deal with capital controls, which exist so that their government can manage exchange rates. So because central banks tend to misbehave, because they tend to plunder the currency of savers in order to achieve their own government aims, we have plenty of reason to be skeptical of monetary authorities.

And I would actually extend that to the Federal Reserve. I mean, the Fed is not behaving in a way that I think is consistent with good objectives for society. My interpretation of what theyre doing is that their actions are actually worsening inequality, but thats a whole different conversation. I think the very fact that sovereign currencies do fail and you see hyperinflations, I think that justifies the existence of an alternative thats not state-controlled.

And historically, gold has been that alternative. And its actually quite a good alternative, I would say, but bitcoin just improves upon golds qualities in some critical respects.

And I think its totally valid to propose one alternative which is not state-controlled because ultimately, thats just a tool for freedom, and you cant mandate that anyone use it. Its a free choice to opt into it, but I think its really inspiring that probably around 100 million people worldwide have opted into the system so far.

So what does a Bitcoin critic think of this decentralizing potential, specifically in the context of places outside the U.S.?

Now is a good place to bring in Prof. Steve Hanke. As I said at the top, he is a professor of applied economics at the Johns Hopkins University and a senior fellow and director of the Troubled Currencies Project at the Cato Institute.

NP: Steve Hanke, Welcome to Decoder.

Steve Hanke: Great to be with you, Nilay.

I wanted to start the conversation addressing the big promise Bitcoin seems to be offering: that there can someday be a stateless or decentralized currency that can replace the US Dollar.

Right off the bat, Prof. Hanke tells me that: A) Bitcoin is not a currency; And B) Bitcoin is not really decentralized.

SH: Everybody says that bitcoin is decentralized. It is not decentralized. Its heavily centralized; 99 percent of all the transactions occur on centralized exchanges, which well get into that later, because that leads to all kinds of issues about potential vulnerability in terms of privacy.

According to Prof. Hanke, there are three criteria for something to be considered a currency: a reliable unit of account, a medium of exchange, and a store of value.

SH: And to become considered a currency, it has to be a reliable unit of account, a reliable measuring rod. And obviously, bitcoin has a problem in that area. It is highly volatile. Just in the last week, its shed about 25 percent of its value from its all-time high, so its very volatile and moves around. Its not a very stable system, if you will, and its a yardstick thats moving around all over the place. That means two things. Its not used to price current transactions, and thats what a unit of account is, something thats used as a unit that can be assigned and used as a price, to price current things, or price inventories and things like that.

So unit of account is a very big thing. Its a big bugaboo for bitcoin. Its a big bugaboo, by the way, for many so-called currencies. Many national currencies produced by central banks are not used as reliable units of account.

And thats why, if you look at transactions for commodities, for example, almost all the commodities in the world are traded in US dollars. That is the unit of account thats used for corn, oil, soybeans, you name it. Most people dont realize, its also used as an invoicing currency, the US dollar, for many manufactured goods. In other words, if you go to England, for example this is a good example we have British pounds sterling. And when you go to Germany, and what does Germany use now, they use the euro. But what is the invoicing currency for about 35 percent of the manufactured goods in England? Its a US dollar.

So if youre going to replace anything with bitcoin, it would be the US dollar, to put it into context. Thats what were talking about.

The second currency criteria is a medium of exchange, and bitcoin is not used as a medium of exchange. Its not used because its very expensive. Transaction costs are very high, so about the only places that you find that are places experiencing hyperinflation like Venezuela, or very high inflation like Argentina, maybe Zimbabwe, these kinds of places. But its not used because its very expensive to use.

The third item in the currency criteria is a store of value, and the store of value, of course, its no good. Its not safe. There have been a lot of infringements and lack of trust, and its extremely volatile. So on all those three criteria, basically, you cant check the box, for bitcoin.

NP: Lets take them in order. Unit of account is really interesting to me. Youre saying in most places around the world, youre making a large transaction, youre making a series of repeated transactions for commodities or manufacturing, you are working across currencies. The backstop is the dollar.

The argument here is, well, the reason the backstop is a dollar is because those currencies are unstable. They might be mismanaged by the central banks of those countries, there might be hyperinflation, there might be all kinds of shenanigans. The currencies might collapse. The dollar is stable because the United States does a good job, or a reasonably better job, maybe not even a good job.

Bitcoin solves the problem in those countries. It is decentralized, you can see it. It might flow in a volatile way against the dollar, but compared to a mismanaged currency in an unstable country, it might be a much better bet to clear some of those repeated transactions, to be more secure in terms of knowing who is making the transaction with who, preserving a ledger. There are lots of benefits of bitcoin as a currency compared to the unstable currencies that we currently backstop with the dollar.

SH: Well, I would argue, number one, in these countries where you do get some usage of bitcoin, they are not used as units of account in those countries, like Venezuela. The dollar is the unit of account. Everything will be priced in dollars, you pay for it in bitcoin. So bitcoin comes in and is used for transactional purposes there, but its very costly to do it. And people who are doing it are very inefficient. Lets put it this way, they are really speculators, theyre not transacting.

It comes in, and it got started in these places due to the fact that the local unit of account, the Venezuelan bolvar, has completely disappeared. Its not used. The unit of account used in Venezuela is a US dollar. And by the way, I have very good sources on the ground in Venezuela, and today as we speak, with inflation, as I measured, over 2,000 percent in Venezuela, about 80 percent of all the transactions are actually done in US dollars. And bitcoin, at most were talking about a fringe footnote thats picked up by bloggers and bitcoin fanatics and that kind of stuff, but its peanuts. Its really irrelevant. It doesnt make any difference. Eighty percent, in Venezuela, of all transactions [are] in US dollars.

And the only reason you get other units being used, like the Venezuelan bolvar, its small change. Lets say you have an $85 bill thats invoiced to you. And to pay, youve got four $20 bills and you hand them over to whatever you bought. But youve got $5 left over, and there is a small change problem. There arent that many $1 bills running around in Venezuela. So the small change, what do they do? They use bolvars. For the $5 differential and residual in that transaction, they would use bolvars. And bitcoin is somewhere way off in the horizon someplace. Its more or less kind of an academic footnote, but it is used to some extent. And its used because of hyperinflation, and its attractiveness for basically speculators, not people really doing transactions.

NP: I think my question there is, what you were describing with the dollar and the bolvar is a bad system for most Venezuelans, right? Thats not an ideal monetary system for the average citizen of Venezuela to participate in.

The opportunity to participate in a more decentralized system that is perhaps free of interference from the government, or free of actually having to have cash, like physical cash, and whatever elements around you. That seems like a better system. Why wouldnt you want to transition to a better system from a broken financial system that relies on a weird exchange rate between the bolvar and the dollar, and the dollar isnt even your currency?

SH: Well, the ideal system for someplace thats hyper-inflating would be to do officially what spontaneously has already occurred. What spontaneously occurred is dollarization; Venezuela is dollarized at the tune of about 80 percent of all transactions. And savings, its even a bigger percentage. Of course, the savings are safe in Miami or someplace else, not in Caracas, but theyre in dollars. Thats what the big lumps of savings, or cash thats held by corporations in Venezuela, its in US dollars.

So the ideal thing to do would be, Nilay, to officially dollarize and get rid of the bolvar completely. The day you would do that, hyperinflation would end immediately, and youd end up someplace like Panama thats officially dollarized, they use the US dollar. Ecuador is officially dollarized. El Salvador is officially dollarized. There are 37 countries around the world that are officially dollarized. They use some other currency rather than a home currency.

NP: I think this leads right into... In my previous conversations about bitcoin, you just quickly arrive at nationalism concerns. You quickly arrive at international relations concerns. If you are a country and your currency is unstable, giving up your monetary policy to the whims of the United States seems like a bad idea.

If youre a citizen of one of those countries, you are 5,000 steps removed from the value of the currency that you hold. I just see the incentive to say, you know what, Im going to go to the different decentralized system that does not have state actors on top of me, acting on a whim.

SH: Well, I was a state counselor in Montenegro in 1999, an adviser to the president, [Milo] ukanovi. And we had a hyper-inflating currency, it was called the Yugoslav dinar. Because in those days, Montenegro was still part of the rump Yugoslavia. ukanovi decided and there was a strategic thing in this, and it was nationalistic he wanted to exit Yugoslavia, and he also wanted to do so in a way that would be very popular with the population. So how do you do this? My advice was that you make the German mark legal tender.

And if you did that, you would stop hyperinflation immediately. It would be very popular. So we did this, it smashed inflation, and started the first step towards independence, actually. It wasnt viewed as a dependency thing, it was viewed as a way to get out from the stranglehold of [Slobodan] Miloevi in the rump Yugoslavia. And so that was that particular case.

Look at Panama. Panama is actually a big financial center, theyve been dollarized for over 100 years. To put it back, Nilay, into your context, this is a problem politically. I completely agree with you. But if you adopt the US dollar, one argument has said, Oh, gee, we dont want to be dependent on the US government and so forth. So thats a negative. But its actually a positive: youre telling me that these local central banks are more reliable than the US Federal Reserve? And why does everyone in the world use the US dollar as a unit of account? Well, right now its the best alternative. And by the way, if we go back 2,000 years and look at [the] history of currency, theres always one dominant international currency. Always one.

And the US came into the picture after World War I. The dominant currency before World War I was the pound sterling, that was the international currency. They got into trouble because of financing requirements and burdens associated with World War I; sterling became very unstable. And as that started happening, that instability, the US dollar became a competitor, a challenger. And what youre arguing here, your conjecture was, well a decentralized non-sovereign currency I wouldnt call it a currency because it isnt ... bitcoin isnt a currency.

Recently, somebody said, Well, whats the fundamental value of bitcoin? Does it have a fundamental value? And to have a fundamental value not the market value; the market value is whatever the value in the price of bitcoin, thats the market value. The fundamental value is zero. Because to have a fundamental value, you have to have an asset that generates some kind of free cash flow that can be discounted back into present value, and bitcoin doesnt. Now, people say, well, other currencies dont have a fundamental value. Well, if you look at money in the United States, broadly defined, the most broad measure is M4. M4 is computed and calculated reliably at the Center for Financial Stability.

That has 14 components, and a currency is only one, very small component at the one end. And at the other end of the 14 youve got Treasury bills. So in that sense, the US dollar has a fundamental value. It is comprised of 14 components, and 10 of them pay interest and four do not.

NP: Im not going to do better at financial system regulation than you are, but let me push back on this from the perspective of a regular person. The interest rate in this country is very low; it has stayed low for a long time. If you have a dollar, the purchasing power of that dollar goes down over time. That is what most people experience. You put your money into a savings account, youre making a tiny fraction of interest compared to just putting it into the stock market, in an index fund. If you put it into bitcoin, you have massive gains over time, right? It has just gone up because more people believe that it will become a challenger currency.

So the idea that the dollar per your M4 definitions, generates value from the perspective of a regular person, does not hold. It might hold in a larger financial ecosystem, because the Treasury would print more money. But from my perspective, I just have some dollars, the best thing I can do is spend them on something that might generate value. If I have some bitcoin, the best thing I can do is hold it because it will itself increase in value.

SH: Well, my conjecture is that I think eventually it will enter a death spiral and go towards zero, towards its fundamental value.

NP: Why do you think it will go into a death spiral?

SH: Oh, because therell be many superior alternatives in the crypto space that will move bitcoin out of the picture. And I know exactly how to design them, they arent there yet right now.

Picking up our conversation with Nic Carter, I wanted to know why anyone would spend bitcoin. Its happening all the time but I just cant figure out why if all it does is appreciate in value.

NP: Well, let me ask you this. I dont have any bitcoin. For our ethics policy, were not allowed to own stock, and we extended that to cryptocurrency because we cover it, and we do have the ability to affect the prices. So I dont have any.

But if I did have some bitcoin, why would I ever spend it at this point in time?

NC: At this point in time, you probably wouldnt want to. And so its not really a widely offered or used or employed medium of exchange at this stage in its life cycle, and thats okay. Right now, the focus is more on getting it up to speed as a large-scale monetary good. And then maybe once it is more mature, we can develop ways to spend it. But if you expect it to appreciate relative to the dollar and I think we all do, or most bitcoiners do, rather thats a deflationary thing, and you dont necessarily want to spend. I think thats totally fine.

We expect this experiment to play out over the course of decades. Its the same way that you dont really spend gold, but gold is worth $10 trillion in the aggregate. The fact that its not used in a retail payments context, no one buys coffee with grains of gold, that doesnt delegitimize gold as a monetary good. It just means that people are using it more as a way to store value over time, especially relative to sovereign currencies.

NP: But I think this brings you back to your core definitional problem. Youve described bitcoin and gold as monetary goods. Youve also described them as currencies. I think bitcoins initial philosophical underpinning was a new kind of currency, a replacement for cash, untraceable, free of government and corporate constraints. I cannot think of a reason to use it as a currency at this time. I can think of a reason to hold it as an asset. When do you think the shift to actually using it as a currency would arrive?

NC: Yeah, its a good point. And a lot of bitcoiners, we actually fought a civil war over this exact question, a largely bloodless civil war, thankfully.

NP: [Laughs] I hope so.

NC: Well, yeah.

NP: When you say largely, that implies there was some.

NC: Well, things get really heated on Reddit and the bitcoin talk forums and Twitter, but this was a great question that people in the bitcoin community struggled over, right? Because if you want to create a peer-to-peer digital cash, is that even compatible with the way the bitcoin network works?

And unfortunately, or for better or for worse, bitcoin can only throughput so much data per unit of time, right? Bitcoins divided up into blocks. We have about 144 blocks a day, or they max out at about three megabytes.

And because transactions carry a payload of a few hundred bytes, that means you can only squeeze so many transactions into a days worth of blocks, and thats there for good reason. Its because you dont want to overwhelm the network with data, because then nobody would be able to run a node and participate in the network, right?

So theres a physical constraint, which limits the transactional throughput of the network, right? We have to keep that in mind. Some people wanted to lift that constraint and embrace this vision that you promote here and some people would say the original vision of Satoshi.

I might contest that, but hes not around to clarify what his vision was, which was to facilitate cheap, fast payments on the internet, especially for small-dollar transactions. And that tribe kind of lost the battle, I would say. And the tribe that won was one that said, Look, we want to do that too. We just want to pursue it in a more measured way whereby we introduce layering into the system.

And so thats really the key concept to understand is, at the base layer, you have a fast-settling settlement network, which you might think of as equivalent to sending a wire transfer, right? You send a wire, it costs you $15. Its kind of annoying, but once youve done it, that payment is totally final. Theres no reversing it. The money really settles between banks. Same thing with bitcoin. Once youve done it, its pretty much final within 30 minutes to an hour.

Then the way the payments system works in the real world is we introduce many, many other layers on top of that. So you have ACH [Automated Clearing House], and then obviously banks kind of sit on top of that, [the] Fedwire network. And then the banks themselves, youve got payment processors on top of them. And then you move up five rungs in the ladder, and you get to you making a Venmo or a PayPal payment to me, or you get to you making a credit payment with a merchant. That payment doesnt really settle immediately. It takes some time to settle. A credit card payment might settle in 90 days, 120 days. The settlement is occurring on the base layer, but the financial messaging and the financial settlement are totally distinguished from each other, right?

So thats the way bitcoiners really began to think about it too was, lets distinguish payment and settlement. We can settle large transactions on the base layer. Thats suitable if you want to send a billion dollars from Mexico to the Philippines, and you want to have it settle within 30 minutes, and everybody can trust that it cleared. But if youre buying groceries, you probably actually dont need final settlement for that transaction. Thats a low stakes transaction. You dont need to employ this powerful, utility-scale infrastructure to do that. So this was the alternative vision of bitcoin that emerged. And I grant that its complex. And its not that intuitive, and it doesnt even sound that much like the way Satoshi [Nakamoto] described bitcoin.

Thats okay. Things evolve, right? We are discovering product market fit. How should this protocol actually interact with the real world, real constraints that exist in the world? And I think the way to do that is to mirror the layered approach of the payment system. And thats kind of the way that people are thinking about it today.

Its not mature yet. We dont have these half dozen layers that I described that work in the payments stack. We do have some emerging second layer solutions, but thats sort of the current thinking around this, is that not every transaction needs that final settlement. And so well have more convenient payments networks that are built on top and that settle to bitcoin.

NP: One of the things that strikes me about that comparison is one, it does look an awful lot, or sound an awful lot, like the existing layers of the payment infrastructure that banks control, and second, youre describing it as product market fit, which is language that as a tech product person I deeply understand.

Product market fit is not predictable for people. Slack started as a video game company and then they made Slack, and the investors were just along for the ride, and now theyre invested in a B2B software company that got bought by Salesforce. That was not what they thought they were doing when they sat down at Slack the first day. They thought they were making a video game.

NC: Totally.

NP: Banks and governments to some extent are far more predictable for consumers, and theres a democratic process, that if you hate one presidents financial policy you can at least vote for the other guy. Its very hard to participate in bitcoin governance, or even understand the fights between the tribes you are talking about.

It might be more democratic in that the decision-making is more decentralized, but in another way it just seems far more opaque, complicated, and unpredictable, and I just dont know how to reconciles that initial vision of fast-clearing payments for regular people with the opaque chaos I sometimes hear about from the bitcoin community.

NC: No, thats a fantastic point, and theres this concept, the tyranny of structurelessness. Have you come across this?

NP: Yes.

NC: This characterizes decentralized communities, especially cryptocurrencies where governance is not codified. There is a lack of hierarchy, and its bewildering for people oftentimes when they try to determine who has power in bitcoin, how much power do the core developers have relative to the minors, and the economic node operators.

The answer youll get is, Well, just read the bitcoin stock exchange, or subscribe to the mailing list. Its completely incomprehensible jargon. There have been efforts to reckon with that and identify the power structures, but there is a real structurelessness. I think its sort of beautiful in a chaotic way that its this organic, collaborative, open-source phenomenon. It sounds esoteric and difficult to penetrate when youre hearing it from me, but the debates really do happen in the open. Its just they dont happen in a specific place. Its just this constant low-grade warfare on Twitter, and mailing lists, and at conferences, and so on.

NP: Wait, let me stop you, if I was to say, where should I invest my money? And you say, one quality of the asset that youre investing in is constant low-grade Twitter warfare, my instinct would just be to run the other way.

NC: Yeah, its not at a stage in its development where its that well understood by society, but I would say thats where the opportunity is, right?

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Is there a future for bitcoin? An investor and a skeptic debate - The Verge

Fidelitys head of digital assets says that bitcoin adoption will continue at an accelerated pace, noting that weve reached a tipping point. He explained that investors are increasingly drawn to bitcoin Particularly, in an environment where weve seen unprecedented monetary and fiscal stimulus from central banks and governments in response to the pandemic.

Tom Jessop, president of Fidelity Digital Assets at Fidelity Investments, talked about bitcoin adoption Wednesday during an interview at Marketwatch and Barrons Investing in Crypto event. Jessop is also head of Corporate Business Development for Fidelity Investments.

The Fidelity executive says that the maturation and adoption of bitcoin as an investment class will continue at a rapid pace in the coming years, Marketwatch detailed, adding that this suggests that cryptocurrency may have turned a corner in traditional finance circles.

He was quoted as saying:

I think we continue to see adoption at an accelerated pace for a host of reasons.

The head of digital assets at Fidelity has previously talked about the bitcoin market becoming more mature. Theres more liquidity. Volatility is down about 50% from where it was in 2017. So we believe, that the composition of this investor base, whats driving the market higher today, is fundamentally different than what we saw three years ago, he said in January.

Jessop further explained Wednesday why investors are increasingly drawn to bitcoin, citing factors such as the ultralow interest rates and an environment stimulated by easy-money policies.

I think youve had the accumulated experience of now roughly 12 years of the bitcoin blockchain being operative since the genesis block in early 2009. And the pandemic, quite frankly, was a catalyst for institutional adoption, and specifically bitcoin and the narrative, or use-case, around digital gold, Jessop described.

The Fidelity executive elaborated, Particularly, in an environment where weve seen unprecedented monetary and fiscal stimulus from central banks and governments in response to the pandemic, adding:

I think weve reached a tipping point Were not going to get out of this stimulated environment anytime soon.

Jessop is not the only finance executive who believes that bitcoin has reached a tipping point. Bitcoin bull Mike Novogratz, CEO of Galaxy Digital, said last month that Bitcoin adoption has hit a tipping point and investors dont want to sit on the sidelines. His comment followed the approval of some bitcoin exchange-traded funds (ETFs) in Canada. Meanwhile, investment bank Goldman Sachs also sees the bitcoin market becoming more mature.

Do you agree with Tom Jessop about the tipping point of bitcoin adoption? Let us know in the comments section below.

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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.

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Fidelity Says Bitcoin Adoption Will Keep Accelerating 'We've Reached a Tipping Point' Featured Bitcoin News - Bitcoin News

The IRS wants Circle, a Boston-based financial technology company enabling trade in various types of cryptocurrencies, to produce account-registration information, account activity records and other materials for customers who had at least $20,000 in transactions any year from 2016 to 2020.

Cryptocurrency has gained prominence and value over the year, but the IRS says tax reporting hasnt kept up.

The IRS issued Circle with a summons, which is part of an ongoing investigation by the Internal Revenue Service to make sure all sorts of cryptocurrency users across the board are reporting and paying up their tax obligations, the government explained in court papers.

The IRS treats cryptocurrency as property and, when its sold at a profit, the tax collection agency will assess a capital-gains tax. If, that is, the IRS knows the transaction occurred.

The IRS treats cryptocurrency as property and, when its sold at a profit, it will assess a capital-gains tax. If, that is, the IRS knows the transaction occurred.

The IRS and the Justice Department note they are not alleging any wrongdoing on Circles part but based on dealings with some people who have Circle accounts, the feds want more information to see who else might be owing tax money.

For example, one unidentified taxpayer amended 2014-2017 returns to show $1.6 million in previously unreported virtual currency sales, the government said. Poloniex was one of the exchanges the taxpayer used.

(Circle sold the Poloniex exchange in late 2019 and customers in America can no longer trade on the exchange, court papers noted.)

Massachusetts Federal District Richard Stearns signed off on the summons Thursday, saying it was narrow enough and supported by a reasonable basis to think some account holders might not be following tax laws.

Were reviewing, and of course expect to work collaboratively with the IRS in responding to the court order, a Circle spokesman told MarketWatch.

The summons sends the clear message to U.S. taxpayers that the IRS is working to ensure that they are fully compliant in their use of virtual currency, IRS Commissioner Chuck Rettig said in a statement. We will enforce the law where we find systemic noncompliance or fraud.

The IRS has filed other court summons seeking information from other exchanges in previous years, said Dale Werts, a partner at Lathrop GPM in Kansas City, Mo., where he advises companies on blockchain and cryptocurrency matters.

But its also coming during tax season, at a time when rising cryptocurrency prices are at the front of mind for many investors. This is their way of reminding you, Hey, you better fill out your tax return properly,' he said.

For Werts, its not that the tax laws on cryptocurrency are new. Since 2014, the IRS has stated its view that capital gains taxation rules apply. Its just a new crowd that has to learn the laws that have been on the books for years, Werts said. Lots of folks, I discovered, believe that cryptocurrency is new and existing laws dont apply. This is just not true.

The summons is another sign of cryptocurrencys growing mainstream appeal, according to David Sacco, practitioner in resident at the University of New Havens Pompea College of Business. The IRS has its eyes on the money in the emerging market and more eyes may ultimately mean more regulation and investor protections, said Sacco, who teaches finance courses.

The IRS revised its tax paperwork this year to give prominent play to one question about cryptocurrency. Near the top of the 1040s first page, it asks, At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?

When Sacco looked over the revamped 1040, the question struck him as a little creepy but on the other hand, it makes it like any other asset class now.

Two accountants specializing in cryptocurrency and taxes were split when previously talking to MarketWatch on whether to answering yes for merely buying currencies like bitcoin or ether. Answering yes doesnt necessarily mean more taxes, they note.

Either way, a lots happened for cryptocurrency in 2020, and 2021 so far looks to be no different. Bitcoin BTCUSD, +0.52% tripled in value during 2020. Ethereum ETHUSD, +0.94% hit a record value above $2,000 on Friday, and was trading above that on Monday, as Bitcoin traded near $58,000 on Monday.

Between 2013 and 2015, a mere 800 to 900 taxpayers filed returns reporting cryptocurrency, the IRS said. That number increased from 2016 to 2018, but the numbers still fall far short of what would be expected given the number of users, transactions, and value that the exchanges publicize occur on an annual basis, court filings said.

Over the years, the IRS has stepped up enforcement. In the summer of 2019, it sent more than 10,000 letters to people it believed potentially failed to report virtual currency income. The taxpayer who amended returns to report $1.6 million in previously unreported sales was one of the letter recipients, the court filing said.

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The IRS wants to know all about your Bitcoin holdings --- and this court summons is a reminder - MarketWatch