XRP Isn’t A Security, Declares Former CFTC Chairman
https://preview.redd.it/8yehv8lzsce51.jpg?width=960&format=pjpg&auto=webp&s=69f0a6eb4973a5a9974e42d15709434719a26a81 When Chris Giancarlo was the chairman of the Commodity Futures Trading Commission he became a rock-star of sorts in certain corners of the cryptocurrency community, helping establish criteria that eventually led to bitcoin and ethereum being declared commodities, more like coffee or sugar than stock in a company. The U.S. Securities and Exchange Commission largely followed suit, eventually also declaring that bitcoin and ether, the cryptocurrency powering the ethereum blockchain weren’t securities. Now chairman emeritus Giancarlo, who was deemed “Crypto Dad” following an impassioned speech he gave to Congress where he credited bitcoin for finally getting his kids interested in finance, is at it again, having co-written a detailed argument published this morning in the International Financial Law Review for why XRP, the cryptocurrency formally known as “ripples,” was also not a security. The only problem is he’s no longer a regulator. In fact, his employer is on the payroll of Ripple, the largest single owner of XRP, whose co-founders actually created the cryptocurrency. The bombshell paper, titled, “Cryptocurrencies and U.S. Securities Laws: Beyond Bitcoin and Ether,” co-authored by commodities lawyer Conrad Bahlke of New York law firm Willkie Farr & Gallagher LLP, methodically reviews the criteria of the Howey Test, established by the SEC in 1946 to determine whether something is a security, and point-by-point argues that XRP does not qualify. Rather, the paper argues, like its name would indicate, cryptocurrency is a currency of perhaps more interest to the Federal Reserve and central banks than securities regulators. What’s at stake here to the cryptocurrency world cannot be overestimated. XRP is now the fourth largest cryptocurrency by market cap, with $5.9 billion worth of the asset in circulation according to cryptocurrency data site Messari. While Ripple was valued at $10 billion according to its most recent round of funding, the company continues to fund itself in part by selling its deep war chest of 55.6 billion XRP, coincidentally valued at the same amount as the company itself. Not only could an eventual decision by the SEC to classify—or not classify—XRP as a security impact the untold individual owners of the cryptocurrency, but other clients using Ripple services that don’t rely on the cryptocurrency, including American Express, Santander, and SBI Holdings could stand to be impacted positively or negatively depending on the decision. After all if XRP were to be rescinded it would be a huge cost to their software provider. If Giancarlo is right though, Ripple could end up being one of the most valuable startups in fintech. “Ultimately, under a fair application of the Howey test and the SEC’s presently expanding analysis, XRP should not be regulated as a security, but instead considered a currency or a medium of exchange,” Giancarlo and Bahlke argue in the paper. “The increased adoption of XRP as a medium of exchange and a form of payment in recent years, both by consumers and in the business-to-business setting, further underscores the utility of XRP as a bona fide fiat substitute.” Giancarlo was nominated to be a commissioner of the CFTC by then-President Barack Obama in 2013. In 2015, he helped lead the thinking behind the CFTC’s decision that bitcoin and other cryptocurrencies were commodities, paving the way for the SEC’s related comments that neither bitcoin nor ethereum are securities. Then, at the height of the 2017 cryptocurrency bubble President Trump nominated him to be Chairman of the CFTC, where he oversaw the creation of a number of bitcoin futures projects, including at CME Group and the short-lived effort at Cboe. While many blame the creation of bitcoin futures for popping the 2017 price bubble, which almost hit $20,000 before halving today, others have seen the works as a fundamental process of maturity, helping pave the way for more sophisticated crypto-enabled financial offerings. Giancarlo’s last day in office at the CFTC was in 2019, after which he promptly got involved helping envision the future of assets issued on a blockchain. In November he joined as an advisor to American Financial Exchange, using ethereum to create a Libor alternative. The following January he co-founded the Digital Dollar Project leading the push to use blockchain at the Federal Reserve and now it would seem he’s hoping to influence the classification of XRP as he did for bitcoin and ethereum, but from the other side of regulation. Importantly however, a footnote in the report discloses that not only is Giancarlo and Bahlke’s firm, Willkie Farr & Gallagher LLP counsel to Ripple Labs, but they “relied on certain factual information provided by Ripple in the preparation of this article.” While it’s impossible to parse what information came from the co-authors and what came from Ripple, the resulting legal argument is fascinating, even if it does leave room for doubt. The Howey test Giancarlo uses to bolster his arguments is a three-pronged definition used by the SEC, none of which he says apply to XRP. The first prong, is that an investment contract should be implied or explicitly stated between the issuer of the asset, in this case XRP and the owner, in which money exchanges hands. “The mere fact that an individual holds XRP does not create any relationship, rights or privileges with respect to Ripple any more than owning Ether would create a contract with the Ethereum Foundation, the organization that oversees the Ethereum architecture,” he writes. This does however overlook the fact that OpenCoin, credited on Ripple’s own site in 2013 for creating XRP (then tellingly described as “ripples”), was run by many of the same people that founded Ripple. The original creators of XRP then donated the vast majority of the assets to Ripple, which they also ran, creating a sense of distance, tacit though it may be. The actual data around the creation of XRP was also muddled by a glitch in the code that means unlike bitcoin and ethereum the crucial genesis data is no longer attached to the rest of the ledger. The rebranding of “ripples” as XRP further extended the sense of distance between XRP and Ripple, followed by an aggressive campaign to get media to stop describing the cryptocurrency as “Ripple’s XRP.” With so much distance between the company that actually created XRP and the company that now owns more than half of it, one would be forgiven for wondering, if there was an implied contract between OpenCoin and XRP owners, does the donation from one group of people at one company to a very similar group of people at another company sever that responsibility? In spite of the sense of distance created by Ripple between itself and the cryptocurrency its co-founders created, a number of active lawsuits alleging securities violations have been filed. In all fairness though, Giancarlo appears to recognize this prong may not be Ripple’s strongest defense and concludes the section, hedging: “Even if XRP were to satisfy one or two of the “prongs” of the Howey test, it does not satisfy all three factors such that XRP is an investment contract subject to regulation as a security.” The second prong of the Howey test stipulates that there can be no “common enterprise” between shareholders or a shareholder and the company. While refuting both relationships, Giancarlo curiously goes onto to write that “given the juxtaposition between XRP’s intended use as a liquidity tool, its more general use to transfer value and its potential as a speculative asset, XRP holders who utilize the coins for different purposes have divergent interests with respect to XRP.” Ironically, there has always been a widely held belief that owning a cryptocurrency would unify interests around a single goal: to co-create the infrastructure that lets the cryptocurrency exist and ensure it was vibrant and diverse. Meanwhile, XRP, in spite of its aggressive supporters on social media, is one of the least diverse ecosystems, with the vast majority of serious development being done within Ripple. If XRP owners aren’t expecting an increase in value from the work being done by Ripple, they certainly aren’t nearly as involved in helping build that future as are owners of bitcoin and ethereum. In a related issue, the third prong of the Howey test stipulates that “no reasonable expectation of profit should be derived from the efforts of Ripple,” according to the paper. Supporting this position, Giancarlo writes: “Though Ripple maintains a sizable stake of the XRP supply and certainly has a pecuniary interest in the value of its holdings, it is not enough to suggest that a mutual interest in the value of an asset gives rise to an expectation of profits as contemplated by Howey.” Again, this strains credulity. According to its own site, Ripple currently has access to 6.4% of all the XRP ever created. But that doesn’t count the 49.2% of the total XRP Ripple owns, but is locked in a series of escrow accounts that become periodically available to Ripple and Ripple alone. Adding those two percentages together leaves a float of only about 44% of XRP that has been distributed for public ownership. For some comparison, Facebook went public the same year XRP was created and has a 99% float, according to FactSet data, meaning almost all of its stock is in the hands of traders.While Ripple does also have more traditional stock, this distribution shows that Ripple might not be as distributed as it claims. While it’s perhaps no surprise that Giancarlo would come out on the side of his own client, there’s also plenty of other reasons to believe his argument may in fact hold water. In February 2018, the notoriously compliant exchange Coinbase added support for XRP, something it would unlikely do if it were concerned it might accidentally be selling an unlicensed security. Perhaps most tellingly though, Ripple has also been granted a difficult-to-obtain BitLicense from the New York Department of Financial Services, giving it the blessing of a respected regulator. However, while the license was granted after then-superintendent Benjamin Lawsky stepped down from the regulator, it's perhaps no coincidence that a year later he joined Ripple on its board of directors and is now active in the cryptocurrency space. Perhaps a similar fate is in store for Giancarlo. Editor’s note: This article has been updated to clarify that Ripple Labs is a client of Giancarlo’s law firm.
You all want to know why Lawky's being careful about extending the public comments period?
The answer is here, in this judge's recent ruling on FAA regulations: http://online.wsj.com/news/articles/SB10001424052702304732804579423631819054164 In brief, in the past few months, judges are striking down the FAA's ability to regulate commercial drones because the FAA didn't integrate a public comments period prior to enacting their regulation, which is required by federal law. It's happened twice recently -- once with a commercial real estate photog who uses drones, and once for a volunteer team that saves lives with drones . Lawsky doesn't want some busybody judge doing the same to his "reg", so he's checking all the right boxes.
If you ever wondered why services like Shapeshift don't work in New York..
https://streamable.com/m9lyl You have Ben Lawsky of BitLicense to thank for that. Many of you are too new to remember when NY regulation was a huge topic and ultimately it resulted in the death of many bitcoin businesses operating in NY. Lawsky passed his regulation with the aid of FUD like "terrorism" and the usual. Then he goes on to create a private firm to consult for exactly the license he helped create. Bitcoin's price/adoption could be greater than what it currently is, But one man felt he should profit from it instead.
Why don't we fund and air a national TV commercial for Bitcoin? Banks plaster the airwaves with their sentimental crap. They rarely mention prices or details. We can.
1) get someone respected by the whole community like Andreas or maybe one of the Coinbase guys to put out a donation address. We know we can trust that person to move the funds toward production costs and hire a competent commercial director, and then media buyer. 2) something simple and low budget is fine. Just say the truth: you can send $1 or $10,000,000 and it only costs you five cents, you'll get notification immediately, and all funds will be fully available for use in about ten minutes. There are no account minimums or maximums, no maintenance fees, and no ability for any institution anywhere in the world to arbitrarily freeze or delay your funds. 3) run this ad as much as possible, to precisely the demographics who don't already spend all day on reddit. whoever runs the donation address for us could even keep it rolling, so that as the national ad boosts BTC interest and the price surges, we can continue funding the ad's airing more and more in new markets. We could even make it the most run ad in television history if we wanted to, because why not? Time to think a little bit bigger guys. Bitcoin is great, but history has its moments where the public goes "meh" to something that would have saved them. A small distributed expenditure now will push Bitcoin further along its fractal growth path. We do get to be a trillion dollar network, we all know that, but only if we do our part. Bitcoin feels like it is stalling because it is stalling. We got lazy, waiting for Circle to do this, or Ben Lawsky to clarify that, or PayPal to take us seriously (now they do). Bitcoin is all of us and we can do far more together over the next couple months than even the best funded companies like BitPay can. They're just a payment processor. We are the network.
Lawsky: regulator bat signal. Do not let exchanges naked short digital currencies. Four simple rules below...
For the uninitiated, short selling is when you borrow something from someone else and sell it, hoping to buy it back at a lower price to repay the lender of the item. This creates a credit risk because if you can't pay it back you default and the lender is not paid. Naked shorting is when an exchange allows you to "sell" a unit of something that you do not own and have not borrowed from someone else. It's essentially creating counterfeit units of account to sell, with the hope that you can buy the counterfeit units back at a lower price before anyone is the wiser. Lawsky, we do need regulation. Not of individuals, but exchanges. It's actually a pretty desperate situation. The thing could very easily go CDO and become a vehicle for fleecing the general public. Four simple rules: 1) the practice of naked shorting digital currencies is not permitted and is to be considered securities fraud. 2) shorting is allowed, but only if the holder of digital currency units on the exchange expressly authorizes the lending of units to parties that wish to borrow units for short selling. 3) holders of digital currency must have the option to not lend their units for short sale activities. Exchanges may charge or offer less favorable terms and fees for holders who decline to lend assets, but the option must be available. 4) at the close of each weekly trading period, exchanges must digitally sign for the addresses holding their digital currency assets and publish book sum of short and long holdings listed on their exchange. One and four are critical. The beauty of bitcoin is that everyone can see the ledger and private key holders can sign for balances securely. This includes signing for master private keys of exchanges use hierarchical deterministic wallets for internal pooled accounts. If we had this regulation with Mt. Gox the problems would have been public long before we learned about the fraud. It's also easy to do operationally, there is no reason exchanges cannot support these requirements. These rules will greatly reduce systemic risk and stop creative wallstreet derivative asset shenanigans. Those shenanigans all ride on the ability to create leverage from counterfeiting and creating credit risk. These derivative assets serve no purpose and out our economies at risk. Please do the right thing.
who else feels that the Rocket count down just started ?
i have a good felling from my reading to the charts and news and discussions that we just starting from getting out this deep beer market very soon maybe few days and the rocket engine is switched on and the takeoff count down is just started and remember what you afraid to happen on 2013 and earlier years is already happens in 2014 it can't never be worth than - mtgox Bankruptcy - china ban(s) and this bitcoin monster still alive with more users / companies / innovation flooding to the system it do not collapse but just getting bigger and bigger and stronger than ever . now the smart money " big investors / banks / market makers" is just waiting on the doors for BitLicense to open its doors which will happen in few days and i am sure that it will be positive according to the last speech of Lawsky about BitLicense in DC . also the weak hands is just gone from bitcoin market after they just report their loss on their TAX papers for year 2014 and now only the stronger hands holds . so please lock your seat pearl and enjoy your trip to Mars, 2015 will never be like any other previous year and try not to get hart attack when you see the bitcoin price much over 100,000 USD on 2015 . call me mad , call me a dreamer , but only time will tell and i am sure i am not alone .
Truth you don't want to hear. Bitcoin Price Matters. Grow the fk up.
Listen, I am a Crypto-anarchist. I've read all those books you've read - Ayn Rand, Friedman, listened to the Molyneux podcasts and all that. And I just went full time on Bitcoin. So yeah I am in this boat with all of you. But I also worked on Wall Street for many years and all I see is amateur hour in the bitcoin community and people with no fucking business sense. You want to extend the commenting window for Ben Lawsky to set regulations for NY? Yeah go fucking do that. And watch every startup in the space run out of money waiting 2 years to get clarity while you write your letters of 'truth'. You want to keep being 'intellectually smart' and go to meetups about Stellar this week, Ethereum last week, Bullshit coin next week and watch Bitcoin startups fail in the meantime? Then go ahead. You want to keep showing up at Bitcoin conferences spewing your bullshit to make yourself sound hard saying stuff like "Ethereum is Bitcoin 2.0. I see a world of many successful altcoins each with their own purpose" or "I will die defending freedom and I don't care how much it costs me, I will never get in bed with those evil regulators" Go right on ahead. But remember this: Currencies are winner take alls. The only reason we have many different 'healthy' fiats is because these countries all have a military to defend their own paper. That's why GBP, USD, EUR, CNY etc can coexist for now. In Crypto space however, there are no borders or guards. You can freely switch from one coin to another. That means 1 crypto will win and only 1. If you spend any time or money on altcoins, it means you either don't understand how money works, or you have left Bitcoin. The first thing you should say then to other people you see at a Stellar meetup is "My name is Bob. I hate fiat and I hate Bitcoin." You can't believe both Bitcoin and Stellar can have monetary value. Believing that just shows you're an amateur. Stripe, you're anti-Bitcoin. Here's my message to you all: Stop fucking supporting 18 year old engineers with no idea of how money works who come up with fancy new features for some new bullshit Ethereum coin. Stop thinking it's fun and funny to get some Doge. Stop thinking somehow that because Stellar is being distributed in a more fair way than Ripple that it's going to end up being worth any monetary value. If you trade on an exchange that also supports litecoin, that means they have no idea what they are doing. Bitcoiners and Altcoiners are enemies not friends. If you want to convince me your Ethereum is 2.0, then show me your skills by breaking Bitcoin first. Otherwise, you are a supporter of the state. You are as big a harm to Bitcoin as anybody in government. The people that should be giving you Bitcoin for Ether are the corrupt politicians. Bitcoin's Price is why there is even a conference for you to get paid to speak at. Bitcoin's Price is what pays your salary at your startup. Bitcoin's Price is the only reason VCs have poured money in. If you believed in Bitcoin, you'd let the regulators pass whatever they want - paying no attention to them. If you believed in Bitcoin, you'd let anyone invent their own coin - paying no attention to them. The sooner regulators can help take it mainstream by making it 'safe' the sooner you can get to work finding a workaround for Bitcoin. Letting Lawsky play the delay game means a ton of bitcoin startups will fail. The only thing you should focus on is 'what can I do today to help the Bitcoin price go up'. Cause the honest truth is unless the price keeps going up, there isn't going to be more jobs, more conferences, more startups, more freedom, more prosperity, more people in this reddit thread. So either help the cause by hoarding Bitcoins, developing for the Bitcoin ecosystem and the Bitcoin ecosystem only, or GTFO. Nothing else matters.
Bitcoin Community, As many of you know, Bitpay is sponsoring the NCAA (college level) Bitcoin Bowl which plays the 26th at 8pm EST. http://stpetersburgbowl.com/ A huge thanks to Tony and the Bitpay team for putting the Bitcoin name out there, over their own company, and all the work done to get hundred of merchants accepting around the stadium. I'm excited to watch, just to see some crusty football announcers forced to talk about bitcoin. The Tampa Bay Times put out an article, finishing with a helpful “How Bitcoin Works,” with such gems as, “Now the QR code, after being scanned, links the merchant and the buyer's bitcoin wallet. The buyer then enters the amount owed, a private access code and payment approval. (You'll still pay tax on certain things. You can still tip your waiter at a restaurant. It's actually not that different. Well, kind of!)” http://www.tampabay.com/news/business/retail/at-espn-bitcoin-bowl-push-is-on-for-football-8212-and-cryptocurrency/2211278 Few bitcoiners are... traditionally interested in American football. I thought I'd put together a quick guide so that any bitcoiner can watch the game and sound like they know what they are talking about. With no further ado, How Football Works for Bitcoiners, with some silly analogies. bitcoin – I'm sure you have some far better ones... :) Quarterback: touches ball every offensive play, hands off to a running back, or passes to a receiver or tight end. Bitcoin analogy: Gavin Andresen. If he isn't on his game, it isn't a guaranteed loss, but everyone else will need to pick up the slack. Touchdown: Get into the end zone - either end of the 100 yard (91.44 meters for international readers) field yields your team 6 points, with a short kick for an additional point to make it 7 points. Bitcoin analogy: Price bubble – we're going to the moon! Both seem great and unstoppable at the time, there is a lot of irrational celebration, and in both cases, the game is rarely over. Touchdown celebration: https://www.youtube.com/watch?v=5dmqGg6Ccvw Randy Moss goes to the moon Price bubble celebration: http://i.imgur.com/UPuMUx8.jpg Bitcoin price goes to the moon Interception: Quarterback throws a pass, but the defense catches it, you have an interception. Bitcoin analogy:http://arstechnica.com/tech-policy/2014/11/feds-will-auction-off-19-million-in-bitcoins-from-alleged-silk-road-kingpin/ First Down: When the offense advances 10 yards or more from the line of scrimmage within 4 plays, they get a first down, and a set of new 4 plays. Bitcoin analogy: Block confirmation – this is the lifeblood of a football team, and the bitcoin space. Wait, is bitcoin dead yet? Wait..... http://isbitcoindeadyet.com/ Goxxed: A familiar term to bitcoiners, I propose as new football term to describe a play like this: https://www.youtube.com/watch?v=d2EOees58eQ Defense: Tries to halt the offense from advancing down the field and stop a touchdown. Bitcoin analogy: NY DFS headed by Ben Lawsky. Much like the terribly ranked Jacksonville Jaguars defense, they can't slow this thing down for long. http://espn.go.com/nfl/team/_/name/jax/jacksonville-jaguars Anyone have any better analogies? Excited to see what 2015 brings for Bitcoin - Justin Blincoe, Coinapult
there is an exceptional amount of speculation regarding the upcoming "bubble" and events surrounding it. the majority (if not all) of these speculative "ideas" are spread by a few people who have little (if any) experience in finance and/or economics. let's look at things from a much more realistic perspective: 1) lawsky has stated that: NYDFS is also providing notice today that it intends to propose that regulatory framework no later than the end of the second quarter of 2014. http://www.dfs.ny.gov/about/po_vc_03112014.htm 2) no "tbtf" (and/or similar) institution will be involved in bitcoin and/or similar virtual currency without the appropriate regulatory framework in place 3) one of the main problems prohibiting growth of bitcoin right now is the lack of potential "input" services. once regulation is in place, many of these "stealth" startups (i.e.: circle, buttercoin (approval for kraken, etc)) will come online, "opening the floodgates" for fiat > btc purchases 4) once these regulations are released, the price will increase dramatically, potentially (if not, probably) remaining elevated and not resulting in another "bubble" like state
It's February 19th, 2018. I wake up, check my phone. Good, bitcoin is up another 5% overnight to around $18k per coin. The world is starting to come around to the notion of decentralized currency, but us early adopters know there's still more to come. A lot more. I've been accumulating coins since 2014 with each paycheck. Not to brag, but I've got quite the nest egg. Best of all, nobody knows it but me. No bankers. No stock brokers. Just me and the blockchain. I shower and get dressed. I take my dog for a walk. The sun is shining and all of the drones are headed to their lousy jobs. My phone beeps. Ha, Roger Ver just tweeted that Western Union is getting bought by Coinbase. Nice. After a short breakfast I head to the car dealership where I test drive the latest from Tesla. Think I'll wait a bit. After world markets started quoting the price of oil in bitcoin, I don't really sweat the ups and downs of gas prices. Think I'll stick with what I have. Besides, I don't want my neighbors to realize that the scruffy guy next door is one of the richest people in town. I drop by my office (literally MY office since I own the whole building). Bitcoin is up another 2% on the WU news..sweet! Most of my tenants pay their rent in bitcoin. Every month they each swing by with a Trezor. No need for a shady middle man or bank. Ah, forgot to mention that my office building is actually an old bank. They seem to be closing up left and right these days. After a little work (have to keep up appearances, right) I close up and head over to the bar. Things are a little slow so I fire up some satoshi dice on the ol' android phone. Too bad IOS fell off the map...such a shame that ApplePay took the whole thing down. Over in the corner of the bar some goobers play video poker. Good luck fellas have fun putting your cash in uncle sam's wallet. With not much going on around town I head home and watch Rise and Rise of Bitcoin Part 7 on Netflix. Man I love that movie. The part about Lawsky's trial is my favorite part. Afterwards I fire up the grill and cook up some prime steaks from the butcher, paid for in bitcoin of course. I love getting a 20% discount for paying in bitcoin. Just as the delicious smoke starts drifting away from the grill, the neighborhood suckers start coming home from their jobs. Bet you guys wish you hadn't bet on fiat. Edit: Wow a lot of people think I'm nuts. I'm not saying that every single thing I predicted will come true. Also contrary to the negative comments I'm not obsessed with the price of bitcoin. This is just a thought exercise. It was Dwight Eisenhower that said "plans are useless, but planning is indispensable" Edit2: Trolls are jumping on my 20% discount prediction. What you fail to understand is that when bitcoin starts to take off people are not going to want to hold fiat because the value will drop. So business owners will have an incentive to be paid in a strong currency and willing to accept less of it relative to fiat. After all why would someone accept something that rises in value on par with something that loses value? Econ 101
Barry Silbert interview with FoxBusiness is very bullish
This was posted in /Bitcoin: http://www.reddit.com/Bitcoin/comments/2asvxw/new_bitcoin_exchange_in_the_works_barry_silbert/ Here are some key excerpts: "The next big move is for Wall Street to get in... for the past 6 months all the banks/hedge funds have started to dig in... there is the potential for a lot of money entering the market. The 'Who's Who' are looking at bitcoin." "It's either going to be as big as the internet and one of the best investments you'll ever make or you'll lose all your money." "Bitcoin in Silicon Valley is a religion. The senior decision makers at some of the most well known technology companies all love bitcoin and are trying to figure out how to incorporate it into their business model. A couple hundred million dollars has moved into bitcoin from venture capital firms. They have been focused on hiring and building the product. What you'll see soon is they will start marketing... tv ads... billboards... creative ways to drive adoption." "Bitcoin can't fulfill the promise of being this global platform until the size of the market and trading volume is a lot larger... I think Wall Street is probably the catalyst. If the money comes in we will see a large increase in the price and in the trading volume." It's hard for me to focus on the big picture when following the market and news everyday. With this kind of stuff happening behind closed doors I can't wait to see the action after Lawsky gets on with the regulations. Maybe we're all a bit crazy, but I'm still on the boat that's saying we probably won't have an investment opportunity like this for a long time, and the ship is about to sail.
Suppose that you agree with all the New York regulations and don't think that they will hurt small businesses. Or, you think that the bitcoin industry would be better served by large corporations that have compliance programs and insurance and all the other things that big banks do. However, if the New York regulations pass, bitcoins will actually become more expensive to use than dollars will, because the number of regulations proposed for bitcoins is higher than the number of regulations currently required for many types of banking activities. Bitcoins are useful largely because they can allow anyone to transact with very low fees. Even if the 1MB transaction limit is resolved, it will be expensive for payment processors to accept bitcoins when they have to comply with hundreds of pages of regulations. It seems difficult to imagine that Bitpay could continue to operate with their current fee structure if they have to hire people to push the massive amount of paperwork demanded by Lawsky.
Hardware wallet launched
The greatest positive news this week was the launch of the TREZOR hardware wallet. The launch is significant because the wallet is the first device which is immune to the standard viruses that spread on cell phones and computers. Since the code on the TREZOR is far simpler than the code of an operating system like Linux, the wallet is far more secure. Linux has thousands of packages, and any one of them could contain a security vulnerability which allows access to a hacker. Nobody understands all the Linux packages, but it is possible for one person to understand the firmware in the TREZOR. The ability for one person to understand the entirety of the code for a hardware wallet makes it less likely that there was an oversight allowing remote code to execute on the wallet. These are the devices that will expand bitcoin usage to people who don't know how to secure their money properly. Being able to plug one of these into a terminal at a grocery store is the end goal. They are more secure than cash, because they are useless to a hacker who steals them. Once the device is stolen, the person simply transfers the funds out of it before the hacker figures out how to break the password on the device. Unfortunately, the TREZOR will not result in any immediate bitcoin uptake and will remain a curiosity because of its high price. They are charging $119, which is unattractive to most people. Knowledgable people are not going to spend so much on something they can do themselves, and lazy people are not going to spend so much to start using bitcoins because they don't have to pay anything to open a credit card. The TREZOR is only important as a proof of concept that will hopefully be supplanted by a company who manufactures these at a lower price.
Russia banned bitcoins again
While everyone was wondering why the price of bitcoins dropped so much last week, it turns out that Russia banned bitcoins again. I guess that these bans still have some impact on the price. What's interesting about this is that the news was not reported anywhere - not in the press, not in /bitcoin, not on bitcointalk.org, but yet the price still went down a lot. That shows a few things: first, it's confirmation that people who hang around /bitcoinmarkets are not moving the market, and second, it means that the things that people around here pay attention to are not relevant to price. I read a lot of posts discussing theories of price rises and falls. Some reasons given are that people get paychecks on certain days, they are saving for Christmas, it's August, which means it's the vacation month in Europe, and so on. These reasons are off the mark. Bitcoin is big enough that people who put in a few dollars from each paycheck are not going to be the cause of $50 rises and falls.
VC bubble is accelerating
While most people are paying attention to bitcoin prices, the venture capital bubble surrounding bitcoins is accelerating. The amount of investment in bitcoin companies last quarter was more than all of last year combined. This rate of investment is clearly unsustainable and most of the VCs are going to be burned. It seems like there is a classic supply and demand problem here. There is a huge supply of money, with people wanting to throw millions into in anything that comes their way. On the other hand, there aren't that many products available for investment that require money. Most of the VC money has gone to mining hardware and exchanges, two types of companies that need money to get started. The cost of manufacturing ASICs is enormous, and complying with regulations is expensive. But there are only so many exchanges that the market can support. Eventually, the VCs will need to look for other companies to buy in to, like colored coin implementations and legal contracts and altcoin development. The problem, however, is that software development is not expensive. You don't need huge fabrication plants to start programming a new application of bitcoin technology. And software is what is most needed, as the great challenge now is providing killer applications for users to adopt bitcoins. Innovative software applications don't need millions of dollars in VC money to get started, so software companies don't accept the money because they have no reason to give away 90% of their companies. That creates the bubble. The VCs are squaring off against each other in fields which are saturated with competitors. Not only that, but the money going into those fields will push those businesses ahead of the curve. The VC-backed exchanges and payment processors will open, but the software that makes bitcoins useful to people won't be there yet. Most of those companies, which (like Circle) are burning cash at unsustainable rates, will collapse until the software applications catch up to them, and the VCs will lose a lot of money. moral_agent should create a "VC bubble" chart. I wonder if it is inversely correlated to the usual bubble chart.
An unbelievable waste of money
As another example of this bubble, the domain BTC.com was sold for $1.1m last night. If anyone reading this note can justify such spending, please let me know. Domain names are important, of course, but there is no possible way that a company can make $2m more by having BTC.com than a more branded domain name. Note that I say that the opportunity cost of purchasing the domain is at least $2m, because the $1.1m could have been invested in some other aspect of the buyer's business. Of course, the company can make more than $2m total, but to justify this purchase it would have to make $2m more than if it had an alternate domain name. On the other hand, like all bubbles, the buyer might be talking up his plans for the site just to hold on to the name for a while longer, so that he can sell it right before the VC bubble pops, so that the next sucker can lose all his money.
bit_by_bit made an interesting post on the idea of "social capital," which I thought was worth mentioning here. At http://www.reddit.com/Bitcoin/comments/2ds548/what_is_going_on_with_the_rise_and_rise_of/cjsmm5q, he talks about the death of his grandfather, for which I offer my sincerest condolences. Having attended the funeral, he mentions how friends and family have caused him grief about his support of bitcoins. bit_by_bit is incorrect in his posts where he writes bitcoins off as "dying." At the same time, if bitcoins were "dying" right now, then my least concern would be about what my friends think of me. What bit_by_bit says about "social capital" is completely true. If your goal is to make lots of friends, then you can approach the problem scientifically by following rules. For example, a good way to make friends is to talk to lots of people and to never share controversial opinions. Toastmasters has a good template for this in one of their advanced communications manuals; there is a four-step process they suggest on how to introduce yourself to someone you've never met before. Following the process, you can move from talking about the weather to politics to discussing your divorce in ten minutes. I imagine it would be possible to attend lots of parties and use this technique on many people, making lots of people one might misinterpret as friends. Once you have those friends, then the best way to keep them is to agree with them as much as possible. Some people are shallow creatures and turn against their friends easily. I mentioned the situation with the family member and the damaged property in a previous post, and the core issue in that situation preventing action was the family member's worry of what friends of friends would think should a stand be taken on repayment. For good or bad, unlike bit_by_bit, I don't worry about "social capital." I worry about whether I treat people fairly and about what is right and wrong, not about how many friends I will lose or gain by taking actions. People who live their lives worrying about what other people think end up with legions of shallow acquaintences, like the people I know who do little with each other except go out on Fridays and get drunk. Even if bitcoins were dead, friends and family members who would make rude jokes at someone's expense are lesser people who aren't worth associating with. Why should bit_by_bit (or you or I) place the same level of credence in what they think as in someone who is caring and treats others with respect? Rather than losing respect, bit_by_bit has actually gained valuable information, because the respect of such people doesn't matter, and because he now has a smaller number of friends who he deserve more of his time and attention. If bitcoins were to die, I would not be concerned whatsoever about what colleagues or friends thought of my discussions about them. I would be profoundly disappointed that I live in a world where people are so stupid and closed-minded that they were not able to recognize how bitcoins could have improved the lives of everyone so dramatically.
Some comments on the recent decline
sqrt7744 has an interesting comment about the ongoing decline at http://www.reddit.com/BitcoinMarkets/comments/2duufu/daily_discussion_monday_august_18_2014/cjti1za. In it, he mentions that markets are irrational and also talks about how the falling prices make it difficult to convince newer people to invest. But I don't think that this selloff is irrational like he does. One thing that's noteworthy about his comment is where he discusses the impact of Ben Lawsky on bitcoin prices. It's reasonable to make a case that this decline was directly caused by Lawsky's regulations. There are some issues with the timing of that argument, so readers can consider for themselves whether Lawsky singlehandedly caused these declines. The selloffs during the last cycle every time there was some Chinese news were irrational, because bans in China never represented a fundamental threat to bitcoins. While there are still a few posts that continue to claim the fundamentals have not changed (moral_agent has firmly sided with the people who think that we are still in the previous cycle by not changing his charts), some people in /bitcoinmarkets are finally starting to wake up now. The current selloffs are rational, because they are based on fear of one of the two things that can cause bitcoins to fail: that people simply don't want to use them. The question for this cycle is not whether governments will allow bitcoin usage but whether people will use them, and the cycle won't end until that is proven one way or the other months from now. What happened is very simple: people aren't using bitcoins at the same rate as before, July 24 came without adoption having increased, and people who see they can make more money in stocks and other investments left. As an aside, I should note that the transaction volume has remained unchanged compared to the number of transactions, so it looks like the increasing number of transactions is a false indicator. Anyone can increase the number of transactions by spending a small amount to send a little money to lots of people. The chart to look at is "transaction volume," which hasn't moved. My bottom line: I remain bearish, just as I did at every step since $620. This downturn does not end tomorrow or next week and because this crash was caused by a change in the fundamentals, there needs to be another change in the fundamentals before recovery begins. The only exception to this rule would be if the price reaches $150 or some unlikely absurd value in a matter of a day, in which case it would make sense to buy huge even if it is just to make short-term gains.
I think it's worth redefining the term "speculation" to mean "wealth storage." People who buy bitcoins and don't spend them are not leeches upon the network. In addition to providing liquidity, they are using bitcoins for one of their intended purposes: storing their wealth away from the hands of governments and everyone else so that it is available anywhere in the world. Spending bitcoins on products and services is only one use of the bitcoin network. People who say that bitcoin is "overvalued" for its current uses based on spending alone are adhering to a very limited view of the network's usefulness. I argue that the most useful feature of the network is its ability to store huge amounts of wealth, and that is even more useful than the transactional features. When we redefine the value of bitcoins to include wealth storage, then we have to also redefine the "basic value" of the network to determine whether it is overbought or oversold.
PETA "changes its mind" about switching to P2Pool
On Friday, PETA changed its mind about switching to P2Pool, stating that its hardware wasn't compatible and that they could achieve lower variance by not switching. Such an action is likely illegal, as over 90% of shareholders voted for the switch. If I owned shares or had any association with them whatsoever, I would be selling and would get out immediately with whatever I can salvage. The company made headlines a few months back when they announced that they would be switching to promote decentralization, and received huge support (and huge money) from the community. A post on Friday attracted quite a bit of negative publicity, so hopefully people who read it will stop supporting them and the company will pay for its duplicity.
Gavin Andresen makes over $206,000
I wanted to make a quick note that it was revealed last week that gavinandresen makes over $206,000 for his work as a bitcoin developer. I've never heard of a software engineer who makes anywhere close to that much; it's almost three times what I make. As a genius, this is the one case where I can say that he deserves every cent he makes. Most of the time, you hear about stories of CEOs who earn $3m or $10m in cash and bonuses and stock options - but these CEOs don't actually produce any work for the company. Andresen works hard and actually produces meaningful stuff that advances the purpose of his organization. A company can survive without a CEO, but it can't survive if it doesn't have deveopers producing a product. It's good to see the right people getting rewarded for their work, rather than CEOs leeching off others' hard work.
Altisource Portfolio Solutions S.A. This is gonna be a long one. "You don't have to know how much a man weighs to know he is fat."
Market Cap: $1.85 billion ($84 per share)
9.25x 2014 Free Cash Flow with a trailing and predicted future CAGR of 30%
35% Return on Invested Capital
Very asset light business, almost no capex required
Discounted Cash Flow analysis valuation- current fair value of $5.5 billion ($250 per share): in the formula a growth rate of just 20% and a 12% discount rate along with some negative tangible book value is added in.
Currently at 52 week low
Background: Altisource Portfolio solutions "Altisource" was spun off from Ocwen Financial in 2009. Ocwen financial is a mortgage servicer. Of all the mortgage servicers, Ocwen is the most cost efficient, best run, and best capitalized. As a mortgage servicer, Ocwen acquires mortgage servicing rights (MSRs). Owners of MSRs collect a small fee from every mortgage payment it is servicing. Ocwen may service a mortgage by handling day to day tasks of servicing a loan, process payments, keep track of principal and interest paid, manages escrow accounts, initiate foreclosure, modify loan payments for subprime and delinquent loans and so on. The reason Altisource was spun off from Ocwen in 2009 is because Ocwen's Chairman Bill Erbey knew the software division of Ocwen was not being valued properly within the business. Altisource is now incorporated in Luxembourg for tax reasons but it basically does everything a United States company would do. It files with the SEC, gets audited and does almost all business in the United States. Thesis: What does Altisource do? From the 2013 10k- "Altisource®, together with its subsidiaries, is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content. We leverage proprietary business process, vendor and electronic payment management software and behavioral science based analytics to improve outcomes for marketplace participants." If you figured out what they did from reading that, congratulations, because I couldn't. I own the company and I still do not know all of the services they provide. What I do know is that more than half of Altisource's revenue is derived from Ocwen. Ocwen uses Altiosurce's state of the art servicing technology to service their loans. Altisource's technology allows Ocwen to be such a low-cost servicer. Altisource only provides their technology to Ocwen and no other servicers. http://oraclefromomaha.files.wordpress.com/2014/04/1.png In the above link, you can see the ways Altisource generates revenue. The main thing to know here is that Altisource generates a huge portion of their revenue from Ocwen. When Ocwen makes less modifications on loans, they use Altisource's services less so Altisource makes less money. When Ocwen modifies more loans then Altisource makes more money because Ocwen uses their serivices more. It provides a hedge against parts of their business that may struggle in a recession like any other business. During the natural economic cycle if there is a recession and Ocwen is modifying more loans because more homeowners cannot make payments then Altisource is making more money than they would during good economic times because Ocwen uses their services more. The more MSRs Ocwen acquires, the more Altisource makes. Ocwen's growth (basically a quick long thesis on Ocwen) When a bank loans money to an individual to buy a house, a mortgage is originated and an MSR is created. The bank then keeps the mortgage on its books or sells the mortgage to another entity. Perhaps Fannie or Freddie. But what happens to the MSR? The MSR is then sold to a servicer such as Nationstar, Walter Investment Management Corp, or Ocwen. The reason the banks or originator of the mortgage sell the MSR is because they cannot service it properly and/or they would lose money in the process of trying to service it. Because of Dodd Frank, banks are trying to get MSRs off their books even faster because they cannot service them efficiently as previously mentioned and because they will have to hold 250% more capital against the MSRs. All banks are moving away from owning MSRs and non-bank servicing is becoming a larger industry, and Ocwen is leading the way. Due to the high supply of MSRs that are wanting to be sold by banks the MSRs can currently be bought at a 20-30% yield. Ocwen can buy the most MSRs because they are the best capitalized and they use the most conservative balance sheet. Ocwen being the lowest cost operator provides them with a huge competitive advantage when bidding for MSRs as well. Ocwen will continue to lead the non-bank servicers in buying MSRs. Ocwen currently has $464 billion of unpaid principle balance of loans they are servicing and another trillion dollars of subprime (Ocwen specializes in subprime) UPB is expected to get into the hands of non bank servicers by 2018 (3-4 trillion in UPB of regular MSRs). Ocwen will get the most of that trillion dollars of UPB of any servicer because of their competitive advantages. Another competitive advantage of Ocwen is their relationship Home Loan Servicing Solutions Ltd. HLSS was also created by Bill Erbey. HLSS provides the capital for Ocwen to service loans so Ocwen does not have to tie up their capital. In the future, HLSS will acquire more loans and allow Ocwen to sub-service them through a unique financing strategy. This strategy called the accretion model is a genius way to get capital for HLSS to afford a virtually unlimited amount of MSRs. HLSS pays a huge dividend and because of this dividend, HLSS trades above its tangible book value due to fixed income hungry investors who want a fat dividend. HLSS then issues more shares above tangible book value to then acquire more MSRs. Issuing shares above book value actually creates value for HLSS shareholders also instead of diluting value as many people would think issuing shares does. Those MSRs are then sub-serviced by Ocwen, who still uses Altisource's technology. Ocwen is also getting into foreword and reverse mortgage origination so they can have a constant stream of MSRs. Basically, Ocwen and HLSS are going to acquire more MSRs and Ocwen will be servicing more mortgages. More mortgages serviced by Ocwen = more revenue for altisource. All MSR transactions have currently been stopped by a New York financial regulator but we will get to that issue later. Share Repurchases Up until a few months ago the laws of Luxembourg restricted the amount of shares that Altisource could repurchase. Altisource recently created a foreign subsidiary that does nothing called "MidCo" to hold all other parts of the business so there would legally be no restrictions on share repurchases. Until Altisource did this, they were repurchasing the maximum amount of shares that Luxembourg would allow. Here is Altisource's entity structure to bypass Luxembourg share repurchase laws http://i.imgur.com/J6LPEc0.jpg The highlighted dark blue entity will be the entity repurchasing unlimited shares because MidCo, its parent company is not in Luxembourg. How smart is that. Altisource currently authorized the repurchase of up to 2.9 million shares. 2.9 million shares is 13% of their market cap. They could easily repurchase that amount. Altisource also just finalized a loan with BAC for $200 million to repurchase shares so the share repurchases will really start to kick into high gear with the new liquidity and cheaper price. Up until the sharp share price drop, Altisource was repurchasing for the past several months around $110. That shows the board and management think the company is undervalued at $110 and now it is at $84 and nothing fundamentally changed about the company. Insider Purchases During the past 6 months, 3 insiders have purchased at $102, $103, $106, and $120. Between 20% and 43% above current market prices. Bill Erbey also owns 30% of Altisource and 13% of Ocwen. His views are directly in line with other shareholders. Bill Erbey and his Capital Allocation Bill Erbey is the Chairman of Ocwen, Altisource Portfolio Solutions, Altisource Asset Management Corporation, Altisource Residential, and Home Loan Servicing Solutions. Bill has done a great job of creating shareholder value for Ocwen and Altisource shareholders. Bill has also greatly benefited from this because of his stakes in thise companies. Before the sharp share price drop due to outside forces, Bill compounded Ocwen's stock at 30% per year since 2002 WITHOUT including the Altisource spinoff which compounded itself since 2009 at almost 75% a year. Altisource then spunoff Altisource Residential and Altisource Asset Management. Every spinoff is a value creating machine. At one point AAMC had compounded 430% in a year and a half, although it was due to a stretched valuation. Bill is dedicated to doing whatever it takes to create shareholder value. He relocated to the Virgin Islands just to save Ocwen some money on taxes. I once read a story about Bill in his Virgin Islands home and his electric bill for the air conditioning. Keep in mind, Mr. Erbey is a multi billionaire. Bill got his electric bill and saw his costs had skyrocketed due to his air conditioning. Bill then sat there after that baking and sweating in the heat in his home so he could save a couple thousand on his electricity bill. He will do anything to save a dollar. Hubzu Hubzu is owned by Altisource. Hubzu is currently an online marketplace to buy and sell foreclosed homes. Like Zillow and Trulia but for foreclosed homes. Hubzu takes foreclosed homes from Ocwen and lists them on their website Hubzu.com. Hubzu is trying to get into the non-distressed house listing like other real estate websites like Zillow and Trulia. This will grow Hubzu at an even faster rate. Altisource states Hubzu gets about 1 million unique new visitors per month. When you buy Altisource you are also buying the jewel of Hubzu. Bill Erbey claims that Hubzu makes "as much money in one quarter as Zillow does in 4 quarters" Zillow has a market capitalization of $5 billion. Zillow's market capitalization is definitely stretched but a spinoff would create a lot of shareholder value even if the market gave Hubzu a fraction of Zillow's valuation. Why is the company undervalued? All this greatness in one company so why is it so undervalued? Remember how Altisource's earning were pretty much directly tied to how well Ocwen does? A New York State Financial Department regulator named Benjamin Lawsky halted a $2.7 bilion ($39 billion in UPB) Wells Fargo MSR transfer to Ocwen. This also halted all of the other MSR transactions between banks and servicers. Benjamin Lawsky is probing into Ocwen and other servicers. He states that he wants to make sure Ocwen and other servicers have the capacity to service loans efficiently because they are "growing too fast". The relationships these 5 companies share though is somewhat sketchy. They have a lot of the same board members and they all work with each other and make money off each other. Ocwen is the best servicer of them all though. They provide more loan modifications than anyone else and they have the lowest re default rate. A slide from an investor presentation shows how they compare to others http://i.imgur.com/YkIKD2O.png Even if Lawsky did find that some servicers do not have the capacity to service loans then Ocwen would be the last one in question because it is easy to see they are doing the best for their consumer compared to anyone other servicer. Benjamin Lawsky is doing this for his own political reasons. He wants his name on the news. He wants people to see his name. Perhaps he wants to run for governor or something. Why would he schedule an interview with CNBC about the probe into the mortgage servicers right after it is announced. Why would he send a letter to Altisource and at the same time send it to the press, therefore ruining Altisource's reputation without giving them a chance to respond. He is also really into regulating bitcoin in New York which is just another vehicle to get his name in the news. There are very recent updates with the regulatory pressure and basically the probing is narrowed down to an issue with force placed insurance and Altisource. Ben Lawsky could not find anything else. He sent this letter on Aug. 4th to Ocwen. So this is what the probe is narrowed down to. http://www.dfs.ny.gov/about/press2014/pr140804-ocwen-letter.pdf Basically, if a homeowner is struggling to make payments and can't pay their insurance, Ocwen has the right to force place insurance into their payments so the mortgage owner does not incur massive losses if a catastrophe happens. Ocwen has to outsource whoever force places the insurance and the issue that Ben Lawsky was worried about was why Altisource was appointed to find someone to force place that insurance, why Altisource received commission for basically doing nothing, and why Bill Erbey did not consult with any of the Ocwen board before making this decision to allow Altisource to find an insurer. Altisource will probably get a one time fine settlement and they will go on doing business as usual. I believe this because an almost identical situation happened with Assurant and the New York State Financial Department and they settled for $14 million. There is also an interview on CNBC with someone who talks to the CEO of Ocwen and they are sure that Ocwen and Altisource will just settle with a deal with Lawsky and that will be the end of it. Interview: http://video.cnbc.com/gallery/?video=3000298804 Risks Benjamin Lawsky actually finds something else that Altisource was doing wrong. Bill Erbey Dies. He is in his 60s and overweight. Conclusion In conclusion Altisource is extremely cheap. Remember that quote about not knowing how much a man weighs but knowing he is fat? That is the case with Altisource. Altisource is definitely undervalued but there are a range of possibilities of the valuation with Hubzu, regulatory matters, growth, etc.
Coinbase transactions do not account for low volume
Some people like to point to "off-chain" transactions as the cause for bitcoin's recent lower volume. While off-chain transactions could theoretically reduce on-chain volume, the commonly repeated causes of such transactions are inaccurate. Bitpay, for example, does not use off-chain transactions at all, because they claim that they support "transparency." Coinbase does use off-chain transactions, but only when bitcoins are sent within its own network. However, these off-chain transactions are offset by an interesting mechanism that actually increases transaction volume beyond what normally would be expected. To see how this works, log into a Coinbase account and generate a new "receive address." Then send money to the new address. Immediately after receipt, Coinbase moves the money from the receive address into one of its larger wallets. To pay for his 8% of the production server, a partner in the mining pool recently sent 0.54 bitcoins to a Coinbase account where we hold the pool's reserve. Immediately after the bitcoins were received, he said that they were "moved." I asked him how that was possible, seeing as how the balance was correct, and it turns out that Coinbase reshuffles its wallets periodically. If you had looked at the blockchain and tried to compute transaction volume, you would have thought that 1.08 bitcoins was actually spent, but half of that was actually a duplicate transaction. Even if Coinbase is handling payments between users off-chain, this doubling of inbound transactions is significantly offsetting the reduction in volume caused by its off-chain transactions.
Danger signs forming
There are some danger signs forming that place the mid-term price of bitcoin as bearish. Every day, I am shocked at how there hasn't been a crash (which I still think is coming). Here's why the big investors are holding back in generating a new bubble.
The transaction volume is unbelievably low. It doesn't make sense that bitcoins can be supported at this price for so long with such a low volume. Volume has stopped increasing at the same rate as it was in the past, and that can't be explained entirely by off-chain transactions or any other known reason. If the reason the volume is low is because people simply don't find bitcoins useful, there is no way to fix that issue and investors will wait for a sign that people are willing to adopt them.
The regulations in New York significantly increased uncertainty. Lots of people were eagerly awaiting the New York regulations in the hopes that they would bring clarity to companies operating in New York. Instead of bringing clarity, they started a fight that will be waged for years. In the best case, Lawsky relents and produces a minimal set of regulations. The most likely case is where they pass with some revisions, and someone sues the day they are released. Lawsuits then will prevent implementation of any regulations for a long time. It is pretty obvious that this fight needs to go on for years now, even though that is going to significantly delay bitcoin uptake. It is far more important to correct the regulations than it is to give banks clarity to expand their operations.
The development crisis in core protocol code continues to hold the technology back. There are many features that could be implemented to make bitcoins more attractive for merchants, payment processors, and small businesses, but the only things getting done now are minor fixes and small improvements. The bitcoin daemon is still difficult to build and deploy on many operating systems, for example, and there are features that are talked about as possibilities but which are far down the road. Investors look at the state of development and are hesitatnt to invest in something where nobody may work on it.
The 1MB transaction limit still has no feasible solution. There is a price ceiling that cannot be exceeded because the 1MB transaction limit will make it impossible to move money at a reasonable cost to the exchanges to conduct trades. The bitcoin protocol can no longer be hard-forked, as too many companies have custom implementations and would oppose a change, so any solution to this problem needs to come as a secondary layers (like the "new P2Pool" idea). But there is no progress in resolving this issue, and some people think that it will be resolved in a day once there is a crisis that requires a solution.
Note that these danger signs don't include things like the claim that bitcoins are too difficult to use, or that few merchants accept them. The problems holding them back are all people-based. There aren't any difficult technical issues here. Every day these problems aren't resolved, the outlook becomes more negative. If the transaction volume stays low for a long time even as more merchants accept bitcoin, there is more evidence that people aren't interested in using them (and I have said that the only way bitcoins fail is if people aren't interested in using them). If the regulations are not revised, the long court battle will encourage banks to adopt other technologies because their outlook is more certain. If developers don't get to work, then altcoins will continue to increase in features and pose a risk of overtaking. If the 1MB transaction limit is not resolved, then the likliehood of a fork increases by people impatient to come to a solution. Right now, it seems that the current state of bitcoins is an uneasy calm that is waiting for any spark to ignite a big fallout. The timing aligns very nicely with the upcoming point where the current price will cross the lower boundary, as the lower boundary continues to increase while the price does not. If I were a frequent trader, I would be watching that point very closely to sell, because if the exponential growth that has held for 5 years breaks, we start a new pattern where all bets are off. Watching this transaction volume makes it very difficult not to panic sell. I'm going to search moral_agent's back posts to find on what date the lower boundary will reach $630 and post that date tomorrow. Perhaps we have a new date to watch out for.
Yesterday, we reached what others might call a "beta" stage of mining pool testing, by successfully deploying it to the production server, so I'll be notifying the people who volunteered to test tomorrow or Thursday.
I know this post will be downvoted, But I have to say these words because I love bitcoin so much. This should be the last post I show pessimistic mood here. I still own 2200 BTC, after losing more than 1000 BTC on mtgox. I was fascinated by the thought of decentralized payment system and invested 10 months ago. The ideas of Bitcoin is still dazzling me, While the infrastructure is in the process of "Gresham's law". To prosper, holders of bitcoin have to spend/deposit BTC into exchanges/other service, while most of those service webmasters are anonymous. There is no sound reason for them to dare to ask people to give BTC/money to them while persuading people to believe "anonymous is the convention of Bitcoin World. Convention? Now the price is more than $500, instead of $1. We can see what happened all these days. With the rising of price, people who used to be a good man and enjoy managing a website can't resist the tempt and they became fraudster one after another. What's more important is that nearly none of them got punished. That's to say, people who keep honest got "punished" by such "convention". Even Mark Karpeles can carried out embezzlement, let alone those anonymous people. I don't understand why so many people dare to recommend people to deposit BTC to service founded by anonymous person. For example, Coindesk.com encouraged people to use the service of inputs.io, a scam site founded by "tradefortress". Let alone Btc-e. Who trusts such site would be called idiot in the real world. However, it's "convention" in the "Bitcoin World". I am not Afraid of disaster. What frightened me is "There is no solution to prevent a repeat“ I walk around from Bitcointalk to Reddit/bitcoin, I read carefully all the known scam in the short history of Bitcoin. I, now, feel deep despair and extreme bearish for Bitcoin's destiny. Those theives and fraudsters happened again and again, but nothings changed since then. In the fact, the situations now is becoming worse and worse. Crime occurred, much more crime is going to happen in the disguise of Self-Govern. Without all those sites that will out to be scam eventrually, what infrastructure does and will Bitcoin World has? Bitcoin World has coinbase, bitpay, overstock, tigerdirect, zynga...... Not too bad. I see a giant who stand behind, Mark Andressen, Who invests in Bitcoin frastructure to prosper this industry. However, according to what I learnt from this subreddit and bitcointalk, This titan has gained much less respect than he deserves for what he contributes to Bitcoin. A hero stood out, Benjamin Lawsky, who believes in bitcoin more than most of you. I listened the hearings and knew holy spirit blessed him. What he proposed last week is exactly what Bitcoin World needs. Of course he is cursed by those bad guys. And what supprising me is that so many people still hate regulations while they are calling them bitcoin enthusiasts. I know the proportion of fraudsters and theives is surprising high under this subreddit and bitcointalk, which makes me feel uneasy. I don't want to argue with them. In the fact, I don't want to talk about same thing with them. This is the reason why I quit.
Bitcoin price tumbled after South Korea announced more measures to regulate bitcoin trading, including a potential shutdown of exchanges, amid volatile moves in the world’s third-largest cryptocurrency market. “Cryptocurrency speculation has been irrationally overheated in Korea,” the government said in a statement. “We cannot leave the abnormal situation of speculation any longer.” While analysts have highlighted inconsistencies in bitcoin’s “digital gold status” and pointed to its weak correlation with the S&P 500, Bitcoin’s price has stayed relatively stable and unaffected by industry-centric developments. “Movements in the S&P 500 will play a major role in BTC price movement so changes in macroeconomic conditions is something we should keep an eye on ... Benjamin Lawsky, the BitLicense Creator returns and advised a new $140 million fund a few years after creating the controversial BitLicense. In our latest cryptocurrency news, we find out what the creator has in mind now.. The BitLicense creator leveraged his position as a lawmaker in order to serve the Bitcoin fund. Benjamin Lawsky reiterated that regulations will go a long way in promoting Bitcoin adoption and foster healthy competition between the companies. He hoped that the wary consumers will look to adopt Bitcoin and other cryptocurrencies post the licensing, and when the licensed companies report a bigger customer base, it will only push other companies to adopt the framework and apply for the ... Since the start of May, bitcoin’s price has rarely strayed outside its $9,000 to $10,000 range. Occasions where it has crossed the $10,000 boundary, or sunk beneath $9,000 have, so far, remained ...
The Bitcoin Group #18 (Live) - Mt. Gox (part III ...
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