Bitcoin nears $10,000 mark as hedge funds plough in
Cryptocurrency now worth seven times an ounce of gold, with market cap higher than IBM, McDonald’s or Disney – but analysts warn of ‘a huge bubble’
Bitcoin has hit a record high after passing $9,000 (£6,700) and is close to reaching five figures as investors in the cryptocurrency shrug off warnings of a bubble.
The cryptocurrency rose to an all-time high of $9,721 on Monday. It is now worth more than seven times an ounce of gold, which is seen as a haven in times of turmoil.
In a remarkable rally, bitcoin started the year at $1,000 and smashed through $5,000 in October.
Analysts said the decision by the Chicago Mercantile Exchange (CME) to launch bitcoin futures in December had fuelled buying, but also warned of the dangers of a speculative bubble building. The digital currency has gained more than 50% since the CME announced its decision on 31 October.
Neil Wilson, senior market analyst at ETX Capital, said: “The legitimacy this gives bitcoin as a tradeable asset is very important. The market cap of bitcoin now exceeds that of IBM, Disney [or] McDonald’s.”
The value of the 16.7m bitcoin units in circulation has exceeded $160bn.
Warning of looming pain for bitcoin buyers, Wilson added: “But for traditionalists, it’s hard to fathom. Rather than a commodity or currency, bitcoin is like owning stock in a company that will only ever issue 21m shares and never pay a penny in dividends.
“The only way it has value is if the next guy is willing to pay you more for it – the greater fool. With no intrinsic value to bitcoin, it’s hard to see this as anything other than a giant speculative bubble.”
Bitcoin is a virtual currency that emerged in the aftermath of the financial crisis. It allows people to bypass banks and traditional payment processes to pay for goods and services.
Banks and other financial institutions have been concerned about bitcoin’s early associations with money laundering and online crime, and it has not been adopted by any government.
The price has been volatile. Bitcoin plunged below $3,000 in mid-September after the Chinese authorities announced a crackdown. To help rein in some of that volatility, CME will not allow the trading of bitcoin futures at prices 20% above or below the settlement price from the previous day.
Hussein Sayed, chief market strategist at the online foreign exchange broker FXTM, said bitcoin was showing no signs of slowing.
It is not just retail investors buying the cryptocurrency. Many hedge funds have also decided to include it in their portfolios and, according to CNBC, the financial news service, there are more than 120 funds investment devoted to cryptocurrencies.
Sayed said it was almost impossible to give the cryptocurrency a fair value based on fundamentals, but added that there had been a strong correlation between the price of bitcoin and number of users opening new wallets.
He added: “Given that number of users haven’t exceeded 0.1% of the global population, there’s still more potential for this momentum trade to continue. Whether the price will be justified in the foreseeable future, depends on the adoption and the application of the new currency, but so far it still looks unstoppable.”
The starkest warning has come from the JP Morgan chief executive, Jamie Dimon, who said bitcoin was a fraud that would ultimately blow up.
There has been a boom in initial coin offerings (ICOs), in which new cryptocurrencies are launched into the market – often backed by a celebrity, such as the American socialite Paris Hilton and the boxing champion Floyd Mayweather.
ICOs have come under increased scrutiny from regulators, owing to fears that investors are not properly protected. David Futter, a partner in the digital economy at the law firm Ashurst, predicts that scrutiny will intensify.
“Regulators know the rewards of cryptocurrency and blockchain could be huge, but have more than one eye on the catastrophic ramifications if good governance, stability and control are not preserved.
“If the carrot of self-regulation proves insufficient, the regulators will not hesitate to use their stick.”
Written by the Guardian
Meet The World’s Most Powerful Bitcoin Backers
Cryptocurrency may be one of the biggest threats to governments, security and the entire financial system that we’ve ever seen. It can help fund terrorism and its anonymity makes it almost impossible to track. Most importantly, it is poised to revolutionize global finance and banking.
But our new Enemy No. 1 can’t be fought; it can perhaps be controlled. Banks have figured that out and are bringing crypto currency into the fold.
The superpowers—U.S., China and Russia–will have to face the new reality. They love to hate it and hate to love it. Regardless, if they don’t embrace it, they won’t be able to control it. An enemy you don’t control is a much bigger threat.
So, welcome to the new balance of power, funded by cryptocurrency.
“This will ‘uberize’ banking to the extent that the major banks are spending billions to get into this Blockchain, says Frank Holmes, legendary gold investor, CEO of US Global Investors and Chairman of HIVE Blockchain Technologies (TSX:HIVE.V), the first public company where investors can participate in the build-up and infrastructure of crypto-mining.
“Bitcoin is the catalyst for crypto-mining the way emails were for the Internet. When we first heard about the Internet it was for the ‘dark world’, but with email, it exploded and became mainstream. Ethereum takes crypto-mining further with smart contracts,” Holmes told Oilprice.com
The Period of Uncertainty is Over
Russia is embracing it, with an eye to dominating it. China has banned it. The U.S. is struggling to figure out how to regulate it. But nothing can hold it back.
And now, many believe the uncertainty is over.
China tried to ban it in September, making it illegal for residents to trade in cryptocurrencies or start-ups to raise funds through ICOs, completely shutting down local cryptocurrency exchanges.
Bitcoin’s price plunged 40 percent. Then it recovered almost immediately.
This was a reminder that cryptocurrency is an autonomous system that can’t be knocked out.
“The ethos behind blockchain has been tested,” Ken Sangha, COO of Open Money and the Open Project in San Francisco, told Forbes. “A central, organized and powerful authority — China — said ‘no’ and we all have been tested worldwide because of it. But the system flexed its muscles. It’s doing what it was supposed to do.”
And its muscles are the envy of tangible currencies everywhere. Bitcoin hit a record $6,000 per coin on 21 October. Naysayers came out of the woodwork to say it couldn’t possibly last, and definitely couldn’t go any higher. Wrong again. By the last week of November it was approaching $10,000 a coin.
Threats and Opportunities
The potential security threats are clear and present, but let’s put things like new avenues of terrorism funding into perspective.
At this point, terrorist groups are certainly eyeing their options with cryptocurrency, and testing the waters. In January, we saw what appears to be the first case, with the Indonesian government claiming that members of the Islamic State were transferring Bitcoin to each other.
Terrorists could create a virtual currency that is even more powerful and untraceable—one that can completely bypass the global banking system. It hasn’t happened yet, but the potential is there.
While terrorist groups may be mildly courting cryptocurrency, it’s not widespread. Speaking to Newsweek, the Rand Corp’s Joshua Baron, a cryptographer and mathematician, says he doesn’t really see Bitcoin as the “go-to currency for terrorists”—yet. “It does not offer enough anonymity.”
While terrorism is a threat to the security of all states, another threat to the U.S. is an opportunity for Russia: sanctions busting.
The rise of digital currency means that Russian officials sanctioned by the U.S. and the European Union have a way to send and receive money.
While the U.S. Treasury’s Terrorism and Financial Intelligence unit puts sanctioned individuals on a blacklist that keeps them from doing any business in U.S. dollars, cryptocurrency, which isn’t backed or controlled by any state, makes it possible to bypass the blacklist.
But even this pales in comparison to the bigger story here: Bitcoin and its fellow cryptocurrencies are challenging the foundations of the global banking system.
Disruption of the global banking system at this point is “inevitable”, Bala Venkataraman, global chief technology officer of banking and capital markets for Computer Sciences Corp, whose sister company runs the IT backbone of the National Security Agency (NSA), told Newsweek.
“Cryptocurrencies could become the new driver of international business and financial transactions, and that would be transformative, if not revolutionary,” says Dr. Makarenko, whose consulting firm advises Fortune 500 companies.
But here’s the problem:
“If we don’t truly understand how they are operating, who is controlling them and how to avoid it being used for illicit purposes, it may inadvertently turn out to be one of the most innovative turning points in the underworld, whether it’s organized crime, terrorism financing or corruption.”
The Crypto ‘Embrace’ is All About Control
Just last year, Russia was toying around with throwing Bitcoin owners in prison, characterizing cryptocurrency as an infectious pyramid scheme.
Now, Vladimir Putin’s Russia is ready to embrace cryptocurrency—if only to control it.
The real push started in July, when a Putin aide unveiled his cryptocurrency mine: an industrial-scale server farm called Russian Miner Coin. In September, the company held an initial coin offering (ICO), raising over $43 million in Bitcoin and Ethereum.
Then came the regulatory push. After all, Russia has lost an estimated $310 million this year alone due to lack of ICO regulation.
In late October, Putin issued five presidential orders for controlling cryptocurrency. This means everything from taxing coin miners and regulating initial coin offerings (ICOs) to creating legislation for new blockchain tech and setting up a single payment space, presumably with the Central Bank.
Still, the Russian government is not entirely unified on the issue. The Central Bank thinks blockchain is cool, but isn’t keen on cryptocurrency itself. They’d like to have something like a crypto-ruble that could track transactions from cryptocurrencies into rubles.
It’s far more than a fad. Cryptocurrencies are becoming increasingly visible across Russia. Mining is becoming so pervasive, in fact, that computer stores are having a hard time keeping graphic and video cards in supply.
The Russian Finance Minister, Anton Siluanov, has even gone as far as to say that cryptocurrency will soon be treated like regular financial securities.
There’s no point in prohibiting this reality, says Siluanov.
The U.S. might be of the same mind—broadly speaking, but it’s moving at a slower pace in the race to control the world’s new currency.
And it’s its own worst enemy in this scenario, says Dr. Tamara Makarenko, managing director of West Sands Advisory, a UK-based global consulting firm.
But Russia, for one, is much more motivated. Cryptocurrency is a great way to skirt sanctions.
“The U.S. is rightfully concerned about cryptocurrencies, but like anything that may have a negative impact on national security, there are way too many stakeholders that need to be brought to the table to discuss, so the U.S. is not capable of acting quickly,” Dr. Makarenko told Oilprice.com.
“The right conversations are taking place, but at the end of the day, it is in the U.S. interest to secure the value of the global position of the dollar.”
So, while China is banning cryptocurrency and the U.S. is still trying to figure things out, Russia seeks to dominate.
But just like China’s ban will be largely ineffective, so too will Russia’s move to dominate. Cryptocurrency is stateless, and that is its real power. It can be regulated, but not enslaved.
Resilience Proven, Investors Flock to the Future
Right now, about 85 percent of the world’s bitcoin trading volume comes from China. Countries with heavily subsidized energy are obvious ether mining haunts, but now the colder countries have something to offer that has nothing to do with the government, and doesn’t involve any legal gray areas that will come under scrutiny.
With even Putin’s IT advisor getting into the great game, hoping to challenge China’s hegemony in Bitcoin mining, the race is on in full force. They’re hoping to capture 30 percent of the global cryptocurrency mining share in the future.
Japanese billionaire Masatoshi Kumagai, co-founder of giant GMO Internet, announced plans recently to invest over $90 million in a new Bitcoin mining business that will operate as a fund, partially by soliciting capital from investors and repaying them in cryptocurrency.
In North America, billionaire backing is going into HIVE (TSVX:HIVE.V), via Lionsgate Entertainment and Goldcorp (NYSE:GG) superstar Frank Giustra, a legendary mining figure known for being in the right place at the right time—and always in front of a trend.
The new Great Game is virtual reality, and while governments are busy trying to figure out how they can control it, investors are busy sinking billions into what is fast becoming a story of industrial-scale cryptocurrency mining.
Now that everyone’s seen how resilient Bitcoin is, not only are things moving to the industrial phase, but everyone’s weighing the best venues for mining. Because even though this is virtual reality, location still matters.
That’s why HIVE has set up in Iceland, where Mother Nature’s natural cooling is friendly to these massive computing facilities, and where the massive energy required to mine cryptocurrency—in this case Ether–on an industrial scale is cheaper thanks to plentiful hydroelectric and geothermal sources. First, HIVE put $9 million into Hong Kong-based Genesis Mining Ltd., which just built the biggest ether-mining facility in the world—Enigma. Genesis acquired 30% of HIVE in the deal. A second deal in mid-October saw HIVE close a $30-million bought deal financing, completing a $7-million investment by Genesis Mining, acquiring a second data center in Iceland.
And now HIVE is setting up in another ‘cold country’—Sweden—with Genesis.
From China and Russia to North America, virtual is the reality. It’s no longer a question of whether cryptocurrency will survive. It’s a question of what it will disrupt on its way to the top of the global finance chain.
Written by Oil Price
Iranian High Council Of Cyberspace Supports Proposals To Regulate Cryptocurrencies
Iran’s cyberspace authority, the High Council of Cyberspace (HCC), has claimed that it supports any move to regulate the use of digital currencies like Bitcoin in the country’s jurisdiction. The council has also reiterated the importance of creating and following laws in the country.
Based on a report by Irani newspaper Financial Tribune, HCC Secretary Abolhassan Firouzabadi stated that they welcome the regulation of Bitcoin and other virtual currencies and following the rules is a must.
“We welcome Bitcoin, but we must have regulations for Bitcoin and any other digital currency … following the rules is a must.”
State of the cryptocurrency market in Iran
Bitcoin and other digital currencies are used for various purposes in Iran despite the lack of laws to regulate their use.
According to Firouzabadi, the virtual currencies are used in the country in different transactions like payments, trading and mining. He added that there are already mechanisms that are being implemented by the responsible agencies like the central bank to control and supervise the supply of digital currencies across the country.
“Mechanisms of control and supervision over the supply of cryptocurrencies are being implemented through the collaboration of the central bank and related entities, but the people must be aware of their risks and dangers on the demand side.”
Firouzabadi further clarified that the HCC and the Central Bank of Iran are cooperating in conducting a study on the cryptocurrencies amidst their recent price increases. He added that the process will continue until a definite decision on the issue is agreed upon.
Meanwhile, the central bank’s Deputy Director of New Technologies, Naser Hakimi, has recently issued a public warning regarding the risks over the use of Bitcoin and other virtual currencies. He also cautioned investors that they are putting their capital at risk if they invest in them.
Written by CoinTelegraph
Roger Ver Has a New Bet To the World
On Nov. 30, back in 2011, Roger Ver made a bet to the world, that Bitcoin is going to outperform gold, silver and the dollar by 100 times. This Nov. 30 is going to be the sixth anniversary of his bet, and Ver is set to make another bet to the world – this time about Bitcoin and Bitcoin Cash.
Previously known as Bitcoin Jesus and now a vociferous advocate for Bitcoin Cash, Ver has recently advised NAGA Group, a German public fintech company who’s about to launch an ICO, to accept Bitcoin Cash and other cryptocurrencies alongside Bitcoin and Ethereum.
A company shouldn’t limit itself to Bitcoin, which has a higher fee, Ver said. “As long as it’s good money they should accept it.” He said he also spent the past Friday with bankers demonstrating the different network fees of Bitcoin and Bitcoin Cash.
Leading up to his new bet, Ver had a Q & A with Cointelegraph. Wearing a blue shirt with a white Bitcoin insignia and “Too free to fail” printed on it, Ver joked that he’s going to get his Bitcoin Cash shirt soon.
Cointelegraph: Where do you think Bitcoin and Bitcoin Cash prices will be?
Roger Ver: I think there’s a pretty good chance that Bitcoin price goes over $10,000 by the end of the year. It can very, very much happen, maybe on Monday, Bitcoin Core is going to be $10,000. Both Bitcoin and Bitcoin Cash will reach new all-time highs.
CT: The cryptocurrency space has attracted large numbers of new, mainstream investors. Does the technical difference between Bitcoin and Bitcoin Cash make a difference to them?
RV: In the short term, it doesn’t make that much of a difference. In the long term, the coin that’s the most useful becomes the one that’s used the most. The one that’s used the most will have the largest market cap, the most liquidity, and the biggest user base. And Bitcoin Cash is much, much more useful with Bitcoin Core.
CT: Bitcoin Cash critics have said that its big block approach is unsustainable in the long term, what is your response to that?
RV: Increasing the block size is a long-term, sustainable solution. If you remember your first modem, it’s probably a 24-hundred bite [2,400-bit/s] modem. And then they increased them to 14.4 K[bit/s] modem, that’s the big one that was coming. And then 28.8 kilobit (per second) modem, and then 56K modem, and then you have DSL lines, that are twice the speed, and then it went up, faster and faster, network and the company I did before Bitcoin was selling 100-gigabyte optical transceivers. It was about three mln times faster than the modems I was first selling. In 20 years they got three mln times faster.
If a one megabyte block is easy to handle today, 20 years from now we are going to have three gigabyte blocks just as easy to handle.
I don’t think that scaling on chain is not a practical solution. It very clearly is.
CT: What about Lightning Network as a scaling solution for Bitcoin?
RV: Lightning network is still just a science project at this point. Nobody’s having it in commerce, nobody’s having lighting network wallets, so it’s complete vaporware at this point.
Maybe it will come together, maybe it will be fantastic someday, but they intentionally broke Bitcoin which was working incredibly well and grew into this worldwide phenomenon.
CT: You got to meet cryptocurrency communities around the world. What did you notice?
RV: When you go to a meetup, the majority of people are in favor of Bitcoin Cash, on chain scaling. It’s only on the Internet that there’s a lot of people who are not in favor of that. The vast majority of people who support Bitcoin Core don’t even use Bitcoin, whereas everybody who actually uses Bitcoin on a regular basis is in favor of Bitcoin Cash or in favor of on-chain scaling.
It won’t take too many more months until Bitcoin Cash completely surpass Bitcoin Core in price number of users or market cap. It’s not a question of if, it’s just a question of when. I think it’s going to happen next year.
CT: Jamie Dimon said he would fire any trader that trades Bitcoin. How would you respond to that?
RV: I’m sure Jamie Dimon is a smart guy. I think he probably realizes that Bitcoin is going to cut into his business. It’s not going to be Bitcoin specifically though, but all cryptocurrencies.
But the smart ones [bankers] are going to adopt, right?
CT: Interest on ICOs has been spiking. What are your tips for new investors interested in ICO?
- The ICOs I would be the most interested in are those that are like securities. That you own a piece of asset of some company or to that effect. And that’s the thing the SEC should mind their own business about. It’s none of their business what people would want to do with their own money on the Internet or to invest in risky things.
- I would also recommend reading How an Economy Grows and Why It Doesn’t, by Irwin Schiff. (Schiff is famous for protesting federal income tax. His son, Peter, wrote How an Economy Grows and Why It Crashes). He was not a proponent of Bitcoin, but the book’s a great primer on economics. If you have better understanding of economics, and how something becomes useful as money, you’ll have an idea of how to invest in cryptocurrencies.
- Do your own diligence and do your own research, do not just blindly believe people on the Internet. Look at their business model. Are they moving their resources to where they are worth less or to where they are worth more? Is there a use case for the token?
- I don’t really invest in ICOs very much. I’m so busy with being the CEO of bitcoin.com. I regret that I don’t have more time to pay attention to ICO’s because I think it’s probably a lot of interest and opportunity on it.