With a bank, the coins and notes you hold in your hand are your connection to the currency system; with gold, you can hold your ounce in the palm of your hands, even stocks and bonds have certificates. When it comes to Bitcoin, they are ethereal.
For many everyday users of Bitcoin, their only connection to their asset, their money, is the exchanges. These applications, companies, websites essentially, are the only tenuous link between people and their digital assets.
Thus, when there are problems with the exchanges, it is little surprise that a degree of panic sets in. Coinbase, one of the biggest and fastest growing exchanges, suffered outages as the frenzy of FOMO rallied adoption to new high levels.
When people were met with outages and delays, it sparked panic, in two senses. More FOMO was met, and people fell back to the fear that Bitcoin can collapse - or pop - anytime. This prompted a rather large sell off.
The importance of exchanges
With parallels being drawn between the latest rally, and the boost in 2014 because of the mainstream adoption take up, it is important to see the role of exchanges back then, and how they play their part today.
It was in 2014 when some of the heavy hitters of exchanges, like Coinbase, burst onto the market, making the buying and selling of Bitcoin far easier and much more of a pleasant user experience.
Again, in today’s Bitcoin economy, the exchanges are the lifeblood of the network and the market, and even comparable to the central nervous system for if there is a problem at these centers, things often go pear-shaped quite quickly.
Catalysing the drop
Only hours after soaring past $11,000 - a price that represents a gain of more than two-fold since September - Bitcoin plunged nearly 20 percent in less than 90 minutes. Many are now pinning this latest drop to outages experienced on Coinbase, and others.
Traffic swelled during the US online hours yesterday as investors fought to get on the rocketship seemingly headed to the moon; however, Coinbase could not keep up.
Coinbase tweeted that traffic on its platform hit an all-time high at eight times the peak demand experienced in June. Access remained unavailable to some users.
“Issues in the exchanges add to it without a doubt,” said David Mondrus, chief executive of Trive, a Blockchain-based research platform. “When you have a lack of ability to exit, then people dump in order to exit faster.”
Bitcoin’s Achilles heel
It has been interesting to see how recently not much has phased Bitcoin in terms of negative press. News of Russia’s ban and the emergence of the Crypto Ruble, Jamie Dimon’s ongoing vitriol, and other factors barely even left a scratch on the digital currency. However, when issues affect the exchanges, it seems that is where the market can be hit hard.
“Bitcoin trading isn’t for the novice investor,” said John Spallanzani, chief macro strategist at GFI Securities in New York, who does technical analysis on the cryptocurrency. “Corrections are fast and furious and you can get run over just like in the movie.”
When the gates opened on Bitcoin’s post-Thanksgiving rally that saw it top $11,300 in a matter of days, everyone was queuing to get aboard the roller coaster as mainstream individual adoption seemed to be in full swing.
All this jubilation obviously triggered something in the volatile beast that is Bitcoin as just when you think you have a handle on things, the monstrous currency bucks the trend. $11,000 turned into $9,000 and suddenly a fifth of Bitcoin, and any investment for the newbies who put in at $11,000 disappeared into the night air. Panic.
Going to learn
There is a rather large sect of the global population sitting with pins held ready behind their backs waiting to pop the Bitcoin bubble and proudly declare it dead. They were there at $800 to $1,000 and they are still here at $8,000 to $10,000, but their pin is a lot more bent and blunt.
Bitcoin continues to die a thousand deaths, but like a cheesy Zombie movie, it is never down. The more things change, the more they stay the same and this latest drop has the same makings of many that have come before it.
Remember the post-chain split rally? Bitcoin had survived the war, and even made a new, very familiar looking friend, but it meant that the coin was invincible. Everyone and their mother was buying Bitcoin and the rally began as that boost of Wall Street money forced its way into the news and people were buying in like drunk partiers on the Las Vegas strip.
Suddenly, the speculative price became unsustainable and the inevitable correction came.
“So it’s just natural and normal for a market to have a correction after a run like that. Historically, Bitcoin corrects anywhere from 30 percent to 50 percent,” Adam Sharp, the co-founder of Early Investing, said in September - but that tidbit of advice is golden in most situations.
Still, weak hands were shook, Bitcoin flooded back into the market at discount prices, and the vultures swooped. One doesn’t need a degree in economics to understand what happens when supply and demand act like this…
‘Those who forget the past are doomed to repeat it’
Does that subheading not ring so true in the world of cryptocurrency? The amount of times Bitcoin has rallied, corrected, dipped and sprung back up to go even higher is too many to count on all your fingers and toes combined.
Redditor Exotemporal gives a boots-on-the-ground opinion that feels a little more real than those sprouted from billionaires who dabble in cryptocurrency.
“They don’t remember the past because they weren’t there to witness the previous dips,” the redditor wrote. “I can see why someone would think that a 20 percent drop that happens within minutes is scary as hell. They’ll learn that these dips that aren’t accompanied by bad news are just transfers of money from the weakest to the strongest hands. Dips are a regular occurrence and an opportunity for newcomers to buy discounted Bitcoins.”
Another, little greener user, also gave his personal feelings on the wild whiplash of a ride.
“I bought in at $8,250 and it stayed constant till the 9-11k big push,” wrote user Leathermanhelppls. “I was worried for a couple days that I bought at the all-time high and I’d lose out….now the real fun begins! This is the exhilaration whiplash that I was promised. Going to [hold] for all it’s worth!”
The Hong Kong office of auditing and accountancy firm PricewaterhouseCoopers (PwC) has started accepting Bitcoin as payment for its professional services. The company noted that the first Bitcoin payments it accepted was from local companies involved in digital currencies and Blockchain technology.
According to PwC Asia-Pacific chairperson Raymund Chao, their decision to accept Bitcoin as a form of payment reflects their move to embrace new technologies. Chao also notes:
"It is also an indication that Bitcoin and other established cryptocurrencies have now developed into more broadly accepted forms of settlement."
Bitcoin’s phenomenal performance
The decision by PwC to accept Bitcoin as a method of payment came at a time when the leading cryptocurrency is registering an unprecedented rise in the financial markets. The most popular virtual currency has breached the $11,000 price for the first time in its short history. This phenomenal performance has resulted in the emergence of questions on whether Bitcoin is a true store of value and means of exchange that can be utilized in transactions or just a day trader’s plaything.
PwC’s previous works on cryptocurrencies
PwC has often been an early adopter of new technologies. The company has been involved withdigital currencies and Blockchain technology since 2014. Among its activities include the issuance of statements supporting the role of Bitcoin in advancing innovations in various industries, as well as conducting its own research on the virtual currencies.
One of the research initiatives launched by the company is a project to study the possible application of Blockchain in the wholesale insurance industry. The project was advanced in collaboration with the Z/Yen thinktank’s Long Finance initiative. PwC has also established its own consultancy services to offer advice to clients about the new technologies.
Based on the survey conducted Blockchain Capital, 70% of the 10,000 millennials who were polled claimed that they are not content with the interest rates offered by banks and almost 65% said that their money is safer in Bitcoin because they personally control it. The survey also showed that nearly two-thirds of female respondents have begun to branch out from Bitcoin and invested in other digital currencies in order to diversify their portfolio.
Other highlights of the survey
Despite their preference of Bitcoin as a form of investment, slightly less than 50% of the millennials surveyed said that they are also looking for a more convenient form of banking and 45% stated that they want their banks to integrate Bitcoin wallets in their operation so that they can directly invest in cryptocurrencies through their existing bank accounts.
The survey also estimated that the majority of millennials will invest around two-thirds of their savings into virtual currencies. According to the site founder Andrew Sung, the survey results showed that the younger generation is much quicker to embrace new technologies than their older counterparts.
“The younger generation has been notoriously quicker to act on new technologies, including the latest smartphones, which have enabled millennials to invest in Bitcoin over the last few years, before large hedge funds and financial institutions started to get involved.”
Given the strong views of JP Morgan CEO Jamie Dimon on Bitcoin, it is ironic that a global markets strategist at JP Morgan has come out with a note saying that regulated futures could give legitimacy to Bitcoin
Seal of approval
The decision of US regulators to allow Bitcoin futures to trade on the Chicago Mercantile Exchange (CME) has pushed Bitcoin into mainstream finance. CME obtained the regulators’ go-ahead after self certification, having assured the US CFTC that the products will follow existing law. The move could allow financial institutions with restrictive mandates to take Bitcoin exposure.
Nikolaos Panigirtzoglou, a global markets strategist at JP Morgan, also feels that the move could give legitimacy to Bitcoin. In a note to investors, he said:
The prospective launch of Bitcoin futures contracts by established exchanges in particular has the potential to add legitimacy and thus increase the appeal of the cryptocurrency market to both retail and institutional investors
Analyst's views conflict with CEO
CEO Jamie Dimon has strong views about Bitcoin: he believes the currency is a fraud and has even threatened to fire anybody who is “stupid enough” to buy it. He has ranted that governments will shut Bitcoin down and that the currency is in a bubble which will wreck investors.
Dimon is not alone in his views - other industry titans like Warren Buffett have said that Bitcoin is best avoided. However, that hasn't stopped the currency’s price from climbing to new levels.
Panigirtzoglou seems to have taken a view diametrically opposite to that of his boss, calling Bitcoin a new asset class:
The value of this new asset class is a function of the breadth of its acceptance as a store of wealth and as a means of payment and simply judging by other stores of wealth such as gold, cryptocurrencies have the potential to grow further from here.
JP Morgan - BAU in spite of Jamie's Views
In spite of Jamie Dimon's views against Bitcoin, JP Morgan seems to be making the most of the opportunity presented by the currency’s rise. The bank recently invited Bart Stephens, a tech venture capitalist, to give a talk on Bitcoin at JP Morgan San Francisco. Stephens presented to fund managers and clients, even as Dimon slammed Bitcoin.
The comments made by Jamie Dimon against Bitcoin resulted in a dip in its price, which coincided with JP Morgan buying units of a Bitcoin tracker fund. This has resulted in a market manipulationcase against Jamie Dimon in a Swedish court. After CME announced the launch of Bitcoin futures, JP Morgan surprised observers by announcing that it may add Bitcoin futures to its own list of offerings. When opportunities for money making exist, there are no untouchables for the big banks.
Blockchain technology in the local transportation or taxi industry is only the continuation of an evolution that has gone on for centuries. Mankind has long sought more efficient technologies both in transport service providing and industrial administration.
From ancient forms of transportation that involved trekking, the use of animals and carts, to the complexity of present-day machines, the transportation industry has developed into an organized ecosystem with basic administrative departments.
Taxis are everywhere
The local taxi systems that exist in almost every major town and city across the globe have proven to be quite essential to modern life. Given the importance of commuting in daily life, it’s unsurprising that taxis are in high demand and the industry is exceedingly competitive. It is estimated that the global taxi market fluctuates between 50 and 100 bln dollars.
Traditional taxi management systems have revolved around centralized organizations. For instance, in the city of Lagos, Nigeria, local unions and associations demand that every taxi operator must be registered and pay periodic dues and levies for running the association. This is supposed to be a way of ensuring proper licensing of taxi drivers, but the centralized nature of its management leaves room for misappropriation and poor management.
The benefits of decentralization
The introduction of partially decentralized taxi systems like Uber and Lyft introduced some necessary competition into the taxi industries. This has provided commuters with more options, leading to reduced fares and better quality service. However, despite the extent of decentralization that is introduced by these systems, they are still governed by a single database and run by a single company.
Licensed taxi drivers are essential to the industry for purposes such as security and appraisals. The situation in the market is an inspiration towards the creation of a platform designed to connect customers with professional and accredited drivers directly. Providing a mobile application for customers to find a licensed driver, as well as drivers to manage their business more efficiently will go a long way in creating a sanitized taxi industry. It is an essential tool for both the security of commuters and motivation towards quality services.
Implementing the concept of tokenization, or using Blockchain-based apps to manage local transportation systems is a development that has been long coming. It’s likely that many taxi services based on Blockchain and tokenization will spring up. This is largely due to the various benefits that Blockchain offers, especially in the area of personal control and decentralization.
For example, imagine traveling to a new city where the local currency is totally different from where you are coming from, and you need taxi services to take you from the airport to a hotel. Using a Blockchain-powered service automatically eliminates the need for any form of currency conversion as the value of the token remains the same and is available all over the world.
A technology for the common man
In many circles, Blockchain is described as the technology for the common man. This is a description that is proving its correctness in by giving regular people more control over their resources. It also services to open up the marketplace in various industries while enabling a level playing field for all involved.
Blockchain implementation will automatically enable a transparent industry; opaque unions and associations will no longer override the will of taxi drivers and commuters. Instead, anyone who holds a Blockchain token will retain full control of all the benefits associated with such tokens, be it in exchange for other tokens or fiat, or for the payment of taxi fares.
Indian Finance Minister Arun Jaitley has claimed that the government of India is yet to recognize Bitcoin as a legal tender in the country as of late November 2017. He did point out that the recommendations regarding the possible legalization of Bitcoin and other virtual currencies across India are being worked at by the government.
In an interview with the Economic Times, Jaitley said that he has already informed the Indian parliament that the country’s central bank, the Reserve Bank of India (RBI), has yet to issue any licenses to operate with digital currencies within its jurisdiction. He further claimed that the government is still assessing recommendations to regulate the virtual currencies.
"Recommendations are being worked at. The government's position is clear, we don't recognize this as legal currency as of now."
Efforts to regulate cryptocurrencies in India
The Indian government has been working to regulate the use of virtual currencies in the country for the past few months.
In April 2017, the government established an interdisciplinary committee to assess the possible drafting of regulations covering digital currencies. The committee is composed of several government agencies including the RBI, the Department of Financial Services and the Ministry of Revenue.
In October 2017, however, the Indian Supreme Court issued a notice to the RBI and other related agencies asking them to provide an answer to the petition filed on the cryptocurrency regulation issue. The original petition expressed apprehensionabout the possible use of Bitcoin and other virtual currencies in untraceable cross-border transactions, making them as attractive tools for cybercriminals and tax evaders.
Part of the petition read:
"The lack of any concrete [control] mechanism pending the regulatory framework in said regard has left a lot of vacuum and which has resulted in total unaccountability and unregulated Bitcoin trading and transactions."
Despite the increasing appetite for cryptocurrencies in the country, regulators have not yet decided how to regulate Bitcoin and other virtual currencies. Until then, Bitcoin will not be considered a legal tender in India. In a previous report, a chief economist predicts that Bitcoin will not become legal in India without the necessarily monitoring from the government.
CEO Andy Jassy made the announcement at the AWS annual re:Invent conference held in Las Vegas in late November. Jassy presented his views on Blockchain technology, claiming there are limited use cases of Blockchain “beyond the distributed ledger.” He also reiterated the company’s policy not to “build technology because we think it is cool.”
According to Jassy, there are a number of other solutions to the problems that Blockchain is supposed to solve. He stressed that the majority of the distributed ledgers that are available so far have very limited capabilities.
However, Jassy has not completely shut the door on the possibility of working on a Blockchain-based product in the future. He claimed that they are interested in ways that Blockchain could benefit their customers:
“We are very intrigued by what customers are ultimately going to do there.”
AWS competitors’ Blockchain efforts
Unlike AWS, rivals such as Microsoft and International Business Machines (IBM) are aggressively advancing projects related to Blockchain services and distributed ledgers. Over the course of the last couple of months, these companies have launched several Blockchain services and pilot projects in collaboration with their customers.
Brief profile of AWS
AWS is a subsidiary of major online retailer Amazon.com. The company offers information technology infrastructure services in the form of web services to its customers. Among the firm’s products and solutions are storage and content delivery, cloud computing, databases, analytics, application services, and mobile services.
Bitcoin had, by all accounts, a remarkably volatile week, losing $3 bln in market cap in just 90 minutes as the price slid from $11,400 to close to $9,000. Nevertheless, within 24 hours, the cryptocurrency has rebounded to over $10,500.
Causes down and up
The cause for the sudden slump is not clear, though it appears that the market’s incredible bull run, pushing through over $2,000 in valuation in just a week, made room for profit takers at the peak. As the price rose to dizzying heights, some found an opportunity to sell positions that they had purchased at much lower prices.
The upside, though, as the currency pushed back over $10,000, had a clear cause. The release of the futures decision by the US Commodity Futures Trading Commission (CFTC) which announcedFriday that CME Group and CBOE had met the requirements for regulated trading, led to raucous calls for massive gains in the cryptocurrency and pushed the price back toward the highs near $11,000.
While the bulls are back with the major news, it still remains unclear whether Bitcoin will be able to hold on and consolidate the gains above $10,000, and then press on for more. Some (notably billionaire Carl Icahn) have recently called Bitcoin a bubble, decrying any possibility for further gains. Others, though, are not as sure.
For example, Alex Mashinsky, founder of the Celsius Foundation makes a strong case that the sell point could possibly have been a coordinated sell around $11,000, potentially to buy in at lows. He says:
“There seems to have been a coordinated sell around 11,000. Many of the Telegram chat rooms were talking about that as a level to sell. It bounced back because there is too much money coming into the large players like Coinbase, so there is consistent buying pressure which overrides any selling. Also many of the crypto funds use these swings to scoop low-cost BTC from sellers who put limit sell orders as downside protection. There are now over 300 crypto funds which registered with the SEC. Four of them are over $500 mln so they are big enough to control the pricing at any moment.”
However, other industry insiders are convinced that the price movement should be expected to continue northward, particularly with all the current news being opened. As greater levels of finance enter the market, more buyers will drive prices further. Alexandre Tabbakh, CEO of PUBLIQ said:
“Mainstream adoption, institutional flow with the creation of futures and derivatives from the CME and other hedge funds, more statement and regulation from governments and regulators, acceptance of Bitcoin payments from significant corporations (PwC...), the ICO flow is constant and maintains an upward momentum.”
Beyond simply the issues relating to market frenzies, others see problems with exchanges as a potential source, both of the downward and upward pressure. It’s no secret that Coinbase has suffered some technical issues, even restricting transactions because of server overload. This sort of concern could clearly drive markets into a short-term selling panic, only to be reversed when the tech problems were corrected. According to Amos Meiri, co-founder and CEO, Colu:
“The Bitcoin price is influenced by the Nasdaq listing, news and big worldwide exchanges eyeing the opportunity for Bitcoin futures. Adding to that we are usually seeing such a bounce in price when we have many people who want to buy, but couldn't deposit as exchanges closed their gates, while others who wanted to sell are having issues due to the banking system and challenges around tax regulations.”
Regardless, by and large, the news of the day is positive for Bitcoiners, as another massive drop has been followed by a rebound. If the pundits are right, this price should hold stable and may increase.
European Securities and Markets Authority (ESMA) issued two same-day warnings concerning initial coin offerings (ICO) on 13 November after the preceding weekend was witness to dramatic swings in prices and volatility. One release is geared toward investors and the other is aimed at participating firms.
In what might be taken as a response to a rollercoaster weekend for cryptocurrency markets, where bitcoin cash traded places with ethereum, and bitcoin shed billions, ESMA has issued two same-day statements regarding ICOs.
Dated 13 November 2017, ESMA50-157-829 focuses its attention on investors. “If you are considering investing in ICOs or have already done so, be aware of the many risks this may entail,” ESMA begins, “including the total loss of your investment. In particular, be aware that you will have no protection,” they note.
ICOs are indeed largely unregulated in the traditional sense, having gained great traction this year as at least a tail in the price-comet that is bitcoin.
“ESMA has observed a rapid growth,” they write, “and is concerned that investors may not realise the high risks that they are taking.” “ICOs are highly speculative investments,” and “depending on how they are structured, may fall outside of the regulated space, in which case investors do not benefit from the protection,” they reiterate.
The regulatory arm is one of the three European Supervisory Authorities within the European System of Financial Supervisors bureaucracy.
They continue, “ICOs are also vulnerable to fraud or illicit activities, owing to their anonymity and their capacity to raise large amounts of money in a short
timeframe.” Risks include the above along with money laundering, losing one’s entire capital, lack of exit options and price volatility, inadequate access to information, and fundamental flaws in early, untested technologies, the body urges.
“Virtually anyone who has access to the Internet can participate in an ICO,” they point out.
ESMA Warns Participating ICO Firms
ESMA50-157-828 is decidedly more stern in its tone. Issued the same day, it urges firms “to meet relevant regulatory requirements.” In a cat-and-mouse, near Orwellian turn of phrase, they argue, “If their activities constitute a regulated activity, firms have to comply with the relevant legislation and any failure to comply with the applicable rules would constitute a breach.”
This might be very difficult for firms to ascertain, especially when the very same body refers to them as “unregulated.” Keen readers might ask, are such offerings regulated or not?
Some clarification might be had in the following: “where the coins or tokens qualify as
financial instruments it is likely that the firms involved in ICOs conduct regulated investment activities, such as placing, dealing in or advising on financial instruments or managing or marketing collective investment schemes,” the body details. These too seem rather broad and vague.
The memorandum then sets out some basic guidelines for firms. A prospectus is urged among start-ups in the field, containing “necessary information which is material to an investor for making an informed assessment of the facts and that the information shall be presented in an easily analysable and comprehensible form,” ESMA advises.
It continues in this manner, imploring firms to also be transparent in their organizational dealings and structure along with complying with anti-money laundering regulations. “Firms have an obligation to report any suspicious activity and to co-operate with any investigations by relevant public authorities,” they say.