Tag Archives: Ethereum

Bitcoin Is Worth More than the GDP of Switzerland

Ah, Switzerland. Home of fine chocolate, discreet bankers and pharma giants. It’s one of the richest countries on earth per capita, and home to world-leading companies like Nestle and Novartis.

But this entire nation of nearly 9 million people with a history going back to the year 1300 has a GDP smaller than the total value of bitcoin, which has existed for just 13 years. The IMF pegs Swiss GDP at $824 billion, versus $921 billion for bitcoin.

The total value of all cryptocurrencies is over $2 trillion, comparable to the GDP of Italy, the number 8 economy worldwide.

These stats show just how accepted cryptocurrencies have become. They’ve gone from a fringe technology to a size comparable to the entire economy of major countries.

Will they someday pass the biggest GDP heavyweight, the United States?

Dig into these posts for more on bitcoin:

Photo: “Switzerland” by T@H!R – طاھر is licensed under CC BY-NC-ND 2.0

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“Everybody Thought I Was Crazy”: How Brian Armstrong Built Coinbase

“Everybody thought I was crazy.”

That’s Brian Armstrong, CEO of Coinbase. When he started the company in 2012, it was a small and quirky startup. Bitcoin had only been in use for three years and remained relatively obscure.

But now, it’s safe to say not many people think Armstrong is crazy. His company just went public yesterday and its valuation currently sits at $66 billion. Coinbase holds $200 billion in cryptocurrencies, around 11% of all crypto in existence. So how did Armstrong go from lunatic to visionary?

Armstrong had to build interest in his new product. He settled on a cost effective and attention getting marketing tool: send people free money. But not just any money; bitcoin, of course! He sent tiny amounts of the cryptocurrency to countless people. One of them was angel investor Garry Tan, who became one of Coinbase’s first backers. His $300,000 bet turned into $2.4 billion yesterday.

In an interview with Jason Calacanis on This Week in Startups, Armstrong emphasized the importance of entrepreneurs being scrappy and doing whatever it takes to get the job done. His original approach to investors, repeated countless times, paid off in a major way and Coinbase was accepted to Y Combinator, the most prestigious startup accelerator in Silicon Valley. Armstrong’s resourcefulness and persistence definitely inspire me.

To build a major business, Armstrong had to make sure not to run afoul of regulators. Unlike, for example, a social media app, finance is heavily regulated. Armstrong ditched the anonymity most people expect from cryptocurrencies, abiding by “know your customer laws.” In turn, he offered users a much more secure way to store their cryptocurrencies:

The selling proposition here is security—security conspicuously lacking at some of the exchanges with which Coinbase has competed. The Mt. Gox exchange in Japan went bust in 2014 after hackers spirited away coins worth $480 million. Customers of QuadrigaCX, which was one of Canada’s largest exchanges, have been unable to retrieve $150 million in crypto since the founder supposedly died suddenly in December 2018, holding the only set of keys to unlock their money. They now want the body exhumed.

Armstrong wasn’t afraid to reimagine the crypto business in a way that could grow big, and he doggedly pursued anyone who he thought could help him do it. I find his extraordinary career quite instructive.

For more on Coinbase and crytocurrencies, check out these posts:

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The First Stock Trades On the Blockchain Just Happened

Credit Suisse and Nomura just did the first stock trades settled via blockchain technology:

This week Credit Suisse cut some US equities trades with the Nomura-owned broker Instinet, using blockchain. This technology has been used before to verify other kinds of transactions. But these trades were a “first” because settlement occurred in hours and not the two days needed with America’s Depository Trust and Clearing Corporation, the industry-owned utility that normally settles stock trades.

This long settlement period is inefficient and costly:

“This is an incredibly inefficient way to operate,” Charles Cascarilla, Paxos’s chief executive tells me, pointing out that $15bn to $30bn of industry capital and twice as much liquidity are tied up in DTCC systems.

The two day settlement period was the key factor behind Robinhood stopping buy orders for GameStop shares earlier this year. The price had become so volatile that it could move against Robinhood a great deal in those two days. Given that, brokers insisted Robinhood post a large amount of colatteral. That expense was too great, so instead, Robinhood blocked buy orders for the stock. In a world where trades settled in hours via the blockchain, this would be much less likely.

However, blockchain technology is incredibly energy hungry. If we moved the massive volume of stock trading onto it, I suspect the energy needed might be prohibitive. I think instant, or at the very least faster, trade settlement is likely. But I expect that to happen via more standard computer systems, rather than blockchain technology.

I think instant, or at the very least faster, trade settlement is likely. But I expect that to happen via more standard computer systems, rather than blockchain technology.

For more on blockchain technology and cryptocurrencies, check out these posts:

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Photo: “Crypto Kitties on Blockchain” by marcoverch is licensed under CC BY 2.0

Major Financial Firms Start a Bitcoin Lobby

Fidelity Investments, Square Inc. SQ +1.30% and several other financial firms are forming a new trade group that aims to shape the way bitcoin and other cryptocurrencies are regulated.

The Crypto Council for Innovation will lobby policy makers, take up research projects and serve as the burgeoning industry’s voice in championing the economic benefits of digital currencies and related technologies. Crypto investor Paradigm and Coinbase Global Inc., which operates a cryptocurrency exchange, also signed on as initial members of the group.

More here.

These companies are serious financial heavyweights. Fidelity has $10 trillion in assets under management. Square’s market cap is over $100 billion. And Coinbase expects to IPO soon as a valuation of nearly $70 billion.

I suspect these corporate giants are trying avoid the possible banning of bitcoin anonymity that I wrote about here on March 5. A proposed regulation from the last days of the Trump administration could have removed one of bitcoin’s most appealing features, its untraceability.

A major lobbying group, a Fidelity ETF…bitcoin is really becoming institutionalized. Although I don’t trade cryptocurrencies myself, I view this is a significant positive for the technology. Every step towards establishment adoption and away from crippling regulation helps.

For more on bitcoin, check out these posts:

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Photo: Coinbase CEO “Brian Armstrong – Caricature” by DonkeyHotey is licensed under CC BY 2.0

The Stimulus is Headed into Bitcoin

Even as Bitcoin sits near record highs, a new survey by Mizuho Securities finds that many Americans plan to put their stimulus check into the hot cryptocurrency:

…the Mizuho survey found around 20% of check recipients expected to allocate as much as 20% of their checks to bitcoin and/or stocks, while 13% expected to allocate 20% to 80%, and 2% expected to put 80% or more into the markets.

Bitcoin even outranked stocks, another popular choice:

“Bitcoin is the preferred investment choice among check recipients. It comprises nearly 60% of the incremental spend, which may imply $25 billion of incremental spend on bitcoin from stimulus checks,” wrote Mizuho analysts Dan Dolev and Ryan Coyne, in a Monday note (see chart above). “This represents 2-3% of Bitcoin’s current $1.1 trillion market cap.”

The graph below shows the extent to which bitcoin is favored over stocks as a home for stimulus funds:

This survey was small, so we shouldn’t put too much stock into it, but this could be a major shot in the arm for the cryptocurrency. I also expect a pop in other cryptocurrencies like Ethereum and Dogecoin, along with meme stocks like GameStop and AMC. But I’d advise my fellow Americans to buy stock/bond index funds instead.

For more on cryptocurrencies, check out these posts:

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Photo: “Bitcoin, bitcoin coin, physical bitcoin, bitcoin photo” by antanacoins is licensed under CC BY-SA 2.0

Who Is the Secret Dogecoin Billionaire?

Someone owns $2.1 billion worth of dogecoin. And no one knows who it is:

Records show that a person, or entity, owns about 28% of all of the cryptocurrency in circulation—a stake worth about $2.1 billion at current prices. The holder’s identity isn’t known, which is common in the opaque world of digital currencies.

The account could belong to an exchange on which dogecoin is traded, or to the individuals and groups who run the software that keep the digital currency’s network going, researchers say.

There is some speculation that the secret dogecoin billionaire could be the not-so-secret Tesla billionaire Elon Musk, but the evidence is thin:

The address also offers an intriguing “Easter egg” for people trying to decipher the identity of the owner: the account has on multiple occasions received 28.061971 dogecoins. Mr. Musk’s birthday is on June 28, 1971.

Despite his interest in dogecoin, the major holder’s address is unlikely to belong to Mr. Musk, said Elias Ahonen, author of “Blockland.” Anyone can send dogecoin to a publicly listed address, which could explain the amounts linked to Mr. Musk’s birthday.

Having 28% of the currency in the hands of a single, unknown person makes dogecoin very susceptible to wild swings in price. If that holder sells suddenly, it could crash the currency. One has to balance that against a major positive for dogecoin: it uses the same technology as bitcoin but is a tiny fraction of the price.

Any guesses on who it is? Leave them in the comments!

For more on dogecoin and cryptocurrencies, check out these posts:

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Photo: “Doge Meme: Japanische Hunderasse Shiba und Vorbild für den DogeCoin” by marcoverch is licensed under CC BY 2.0

How Alex Jones Lost Bitcoin Worth $563 Million

Ten years ago, when bitcoin was worth only $5 each, cryptocurrency proponent Max Keiser gave conspiracy theorist Alex Jones a laptop. It contained 10,000 bitcoin, which would now be worth over $500 million.

That laptop has gone missing:

Alex Jones, the founder of the right-wing media group Infowars, has revealed that he has lost the laptop containing 10,000 bitcoins given to him by television personality and bitcoin proponent Max Keiser. During the Flagrant 2 show with Andrew Schulz and Akaash Singh on Tuesday, he said that Keiser gave him 10K BTC on a laptop 10 years ago.

This highlights a real problem with cryptocurrencies. Unless you use an application to manage and store your crypto, you can lose the USB or laptop, forget the password, etc. Do that and the money is gone forever.

Better starting looking, Alex!

For more on the latest in cryptocurrencies, check out these posts:

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Photo: “Alex Jones” by seanpanderson is licensed under CC BY 2.0

This New Indicator May Tell You Where Bitcoin Is Headed

For many years, investors in stocks have been able to see how volatile the market is expected to be by relying on a gauge called the CBOE Volatility Index, or VIX. This measure, often called the “fear gauge,” reads how much volatility investors are expecting based on option prices.

Nothing like this has ever existed for cryptocurrencies. Until now:

A bitcoin “fear gauge,” similar to the Cboe Volatility Index (VIX) investors use to gauge volatility in the stock market, saw its first trades on Wednesday.

The T3i BitVol Index measures the expected 30-day implied volatility in bitcoin derived from tradable bitcoin option prices.

The index goes two years back so far. Current expected volatility appears higher than normal.

A high VIX tends to correlate with a drop in stocks. A low VIX tends to predict calm, gradually rising markets. This pattern may hold with Bitcoin as well, giving crypto holders a chance to see a bit into the future.

For more on the latest in cryptocurrencies, check out these posts:

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Photo: “Winklevoss Twins – Caricature” by DonkeyHotey is licensed under CC BY-SA 2.0

Bitcoin Anonymity Could Become A Thing of the Past If This Regulation Passes

In the waning days of the Trump administration, the government proposed regulations that would ban anonymity for holders of cryptocurrencies:

Users whose wallets now are only identified with codes would have their true identities recorded with the financial institutions they zealously avoided.

This proposed regulation has now been passed on to the Biden administration. There’s no timeline for a decision, but removing anonymity from crypto transactions could hammer the price:

If adopted, the regulations could cause a sharp fall in the prices of virtual currencies like Bitcoin, said Matthew Maley, chief market strategist for Miller Tabak & Co., adding that he thinks Bitcoin’s price will continue to rise in the long term.

There are some major companies like Fidelity and Coinbase pushing to retain anonymity, and I think their political influence may stop such regulations. But on the other hand, the possibility for anonymity to facilitate drug deals and terrorism could push the government in the opposite direction.

For more on the latest in cryptocurrencies, check out these posts:

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Photo: “Bitcoin, bitcoin coin, physical bitcoin, bitcoin photo” by antanacoins is licensed under CC BY-SA 2.0