Month: February 2021

Coinbase Mafia Shows How Tight a Circle Holds Sway Over Bitcoin

Coinbase Show Hold Sway Over Bitcoin

Coinbase Global Inc.’s filing to become a publicly-traded company provides a glimpse into the remarkably small circle of mostly men who command the incredibly lucrative digital landscape.

This U.S.-based power list starts with Brian Armstrong, the now billionaire chief executive officer of Coinbase, and his co-founder, Fred Ehrsam, who went on to create Paradigm Operations. Fellow billionaire Fred Wilson of Union Square Ventures, and Andreessen Horowitz’s Chris Dixon, are among the original venture capitalists that will reap large windfalls from the direct listing of the exchange.

Even though verified users of Coinbase, the largest U.S. digital-asset exchange, jumped 34% to 43 million last year as Bitcoin more than quadrupled, control of the largest cryptocurrency remains narrow. Less than 2% of the anonymous ownership accounts that can be tracked on Bitcoin’s blockchain control 95% of the digital asset, according to researcher Flipside Crypto.

Included in the influential group of U.S. holders is Dan Morehead, who founded Pantera Capital Management in 2003 and launched the first U.S. crypto fund in 2013. Digital Currency Group founder Barry Silbert has created an empire that touches every corner of the crypto world. Cameron and Tyler Winklevoss bought their first Bitcoin stake in 2012 when it traded as low as $8 and then co-founded Gemini Trust Co., the first crypto firm to be regulated by New York state as a trust.

Like many within this select circle, Ehrsam seemed perfectly poised to adopt the new digital world. He played video games professionally in high school, then studied computer science at Duke University before becoming a foreign-exchange trader at Goldman Sachs Group Inc. in New York. Yet he grew bored at the bank and as he looked for things that interested him after work, he discovered Bitcoin through a Georgetown professor’s blog. He was instantly fascinated.

“I would literally trade Bitcoin in the bathroom on my phone at Goldman,” Ehrsam said in an interview. Bitcoin was going for about $6 at the time, compared with a record $58,000 last week. Back then, the main way to buy it was on the now bankrupt exchange Mt. Gox or through intermediaries, and Ehrsam realized there needed to be an easier way to buy and sell crypto.

After meeting Armstrong on the Bitcoin subreddit forum, they started Coinbase in 2012 out of an apartment in San Francisco. Armstrong declined to comment.

Morehead remembered the early days of Coinbase as he was creating the Pantera Bitcoin fund in 2013. He’d been an investor for a while, taking huge macro risks on things like Russian privatization and farmland in Argentina, bets with very steep downside potential but that could also pay off enormously if successful.

“I was first attracted to Bitcoin as an investment, it was something really interesting to learn about,” Morehead said. In 2013, however, amassing a large stake in the new digital currency wasn’t easy.

“I sent $2 million to Coinbase, and I started trying to buy $2 million of Bitcoin,” Morehead said. “My daily trading limit was $50.” Pantera has grown into one of the largest holders of cryptocurrencies and has invested in over 50 startups, including Circle, Bakkt, Polychain Capital, Shapeshift and Zcash, according to its website.

In the early days, though, Morehead had to contend with the drugs and criminals narrative that dogged Bitcoin. He went to every major university endowment in 2015 when Bitcoin was at $100 to tell them they should have it in their portfolio.

“The conversation was all Silk Road, drugs, whatever,” he said, referencing the early black-market exchange shut down by U.S. authorities.

That dark element to Bitcoin didn’t deter Wilson at Union Square and DCG’s Silbert, both of whom were series A investors in Coinbase. The company’s shares changed hands in recent private transactions at levels that would value Coinbase at close to $100 billion, a person familiar with the matter have said.

Read More: Crypto Boom Vaults Coinbase Founder Into Ranks of Mega-Rich

Union Square has focused its cash on about 15 firms in two main areas, infrastructure providers like Protocol Labs and Helium and in other crypto investment funds like Polychain Capital and Autonomous Partners. Wilson declined to comment.

That’s a far cry from what Silbert has created at DCG. Among its nearly 300 investments and acquisitions it touches upon every part of the crypto market. Among them, it has stakes in Etherscan, the block explorer used for the Ethereum blockchain; Coindesk, a crypto news service; Genesis Global Trading, one of the largest over-the-counter crypto dealers and lenders; Chainalysis, a blockchain forensics firm; Decentraland, a virtual world built on Ethereum that sells plots of digital land and has its own cryptocurrency Mana.

Silbert also created the Grayscale Bitcoin Trust in 2013, which is the largest crypto investment product with assets of about $31 billion. Silbert declined to comment.

A lack of a career on Wall Street helped the Winklevoss twins approach Bitcoin with an open mind, Cameron Winklevoss said.

“Tyler and I didn’t have 20 years of capital markets experience when we came to Bitcoin,” he said. “We were very open to this possibility and that’s how we’ve always been, driven by curiosity.”

The brothers famously battled Mark Zuckerberg over the early fate of Facebook, an experience that left them with lessons about Bitcoin.

“In the early days of Facebook, in watching and being a part of that ride, we saw the power of networks, and so many people dismissing social networks as a fad,” Winklevoss said. Yet he’d watched as 90% of the Harvard University student body signed up for Facebook within 48 hours. When Bitcoin came around, the twins recognized the same forces at play.

“It’s a money network,” Winklevoss said. “What happens when you put an economic incentive around that network? That’s possibly the most effective network in the world.”

For Paradigm’s Ehrsam, the size of Bitcoin and crypto in general has exceeded his wildest dreams. If you’d told him in 2012 that Bitcoin would top $1 trillion as it did at one point last week, “people would think you were absolutely insane,” he said.

“The idea of a new digital money seemed very strange to most people because a new money has never come about in our lifetimes, at least as Americans,” Ehrsam said. “So you’re not used to seeing a phenomenon you’ve never seen before.” That will eventually change.

“It just takes time for a powerful new idea like that to permeate society and build trust in it,” he said.

Source – Bloomberg News

Bitcoin blows past $48,000 to hit another record high

Bitcoin blows past $48,000 to hit another record high as major financial firms warm to crypto

Bitcoin’s price soared past the $48,000 level for a second time this week, hitting a fresh all-time high as Bank of New York Mellon said it would provide custody services for digital assets. The world’s most valuable cryptocurrency hit an intraday record of $48,297 at roughly 8:30 a.m. ET on Thursday, according to data from industry site CoinDesk. It was last trading up by more than 7% to around $47,913.

BNY Mellon, America’s oldest bank and a major custody provider, said Thursday that it would begin financing bitcoin and other cryptocurrencies. The company will eventually allow crypto assets to pass through the same financial network it currently uses for more traditional holdings like U.S. Treasury bonds and equities. “BNY Mellon is proud to be the first global bank to announce plans to provide an integrated service for digital assets,” Roman Regelman, CEO of asset servicing and head of digital at BNY Mellon, said in a statement Thursday.

“Growing client demand for digital assets, maturity of advanced solutions, and improving regulatory clarity present a tremendous opportunity for us to extend our current service offerings to this emerging field.”

Three ‘overlooked’ altcoins with potential for growth

Three 'overlooked' altcoins with potentials for growth

With Bitcoin having surged 156% year-to-date (YTD) in 2020, there is clearly a growing interest in the crypto asset class among investors. For instance, back in October, billionaire hedge fund manager Paul Tudor Jones opined that Bitcoin’s rally is still in its “first inning.”

More recently, a similar opinion came from investor Mike Novogratz, who said that the infamous cryptocurrency could potentially hit $65,000. I would not be surprised by that, especially considering its supply is limited to 21 million coins.

I believe that asset class diversification is important. And clearly, cryptocurrencies are here to stay. Even BlackRock CEO Larry Fink noted that Bitcoin could “evolve into a global market” asset.

Therefore, it makes sense to allocate some funds to alternative coins (altcoins). For example, Ricardo Pliego has invested 10% of his liquid portfolio in Bitcoin. A 10% to 15% allocation to cryptocurrencies could boost any portfolio returns.

According to data from CoinGecko, there are over 6,000 coins listed in 417 exchanges. But looking further into the world of altcoins, I found some attractive medium- to long-term opportunities that I think can outperform Bitcoin in the future.

So, let’s delve deeper into these three promising crypto picks:

  • SingularityNet (AGI)
  • Filecoin (FIL)
  • Vidt Datalink (VIDT)

SingularityNet (AGI)

AGI crypto is among the smaller names in the altcoin industry, but it has big potential. Artificial Intelligence (AI) has been the subject of much interest and investment opportunities. For the current year, the  global AI software market is expected to grow approximately 54% year-over-year (YOY). That growth will likely remain strong in the next five years.

SingularityNet is the world’s first decentralized AI network. Currently, AGI trades at 5 cents with a circulating supply of over 950 million coins. I would not be surprised if the crypto delivers multifold returns from current levels.

However, one of the biggest reasons to be bullish on AGI is the team behind the business. Ben Goertzel is the CEO at SingularityNet and the “AI pioneer behind Sophia the Robot.” Therefore, the team is high on innovation with a vision to bring decentralized AI to companies. In terms of products, this altcoin offers one of the largest open AI marketplaces in the world.

So, clearly AGI’s industry is attractive. Right now, it looks undervalued at current levels.

Filecoin (FIL)

The cloud computing market is already big and is growing at a healthy pace. However, the market is dominated by only a few players, including Amazon (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Alibaba (NYSE:BABA). These names are all part of the centralized network of cloud service providers.

This is where Filecoin becomes interesting as an investment. The company is among the few decentralized cloud service providers in the world. The coin, FIL, is a relatively new listing on exchanges and I believe that the altcoin has potential to deliver robust long-term returns.

When it comes to its business progress, the following company note is already encouraging:

“Fewer than four weeks after its mainnet launch, the Filecoin network is celebrating a major milestone. As of today, the global community of Filecoin miners has dedicated 1 exbibyte (EiB) of decentralized storage capacity to the Filecoin network.”

In the altcoin world, there are thousands of names to choose from. So, it makes the most sense to invest in coins that are backed by a strong business plan. From that perspective, Filecoin is one of the better crypto picks.

Vidt Datalink (VIDT)

Last on my list of cryptocurrencies is Vidt, another interesting name to consider out of all the altcoins.

As a business overview, Vidt Datalink protects digital data of organizations against fraud and manipulation. The unique feature of the company’s application is that V-ID — its main blockchain component — is compatible with any existing system without impacting the workflows. Therefore, organizations will not find it challenging to adopt the company’s blockchain-powered document certification and protection service.

In the last year, the Vidt coin has surged by almost 845%. However, at over 70 cents, the crypto is still attractive from a long-term perspective.

It’s also worth noting that Vidt has a maximum supply of just 56.7 million coins. Limited supply can push the coin price higher as strong business developments continue.

The company already has clients that include the likes of AmSpec and IBM (NYSE:IBM). That blue-chip client base is an indication of its service quality. Again, it’s great when an altcoin has this sort of strong company behind it.

Overall, I think this crypto has the potential to deliver huge returns even after its big rally in the last one year. As the client base swells, this name will likely trend higher.

On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

Will Bitcoin reach an all time high of $100,000 in 2021?

Will Bitcoin reach an all time high of $100,000 in 2021?

Bitcoin could soar to $100,000 this year on the basis of current trends, according to Marcus Swanepoel, chief executive of Luno, a London-based cryptocurrency platform.

The cryptocurrency climbed above $34,000 for the first time on Sunday, extending a record-breaking rally in the volatile currency that delivered a more than 300 per cent gain last year.

While it fell in value on Monday, it remained close to record levels.

With 2021 trading in key financial markets only just commencing , bitcoin has resumed its dizzying ascent, rising more than 10 per cent in the first few days of January.

“Even the most bullish of bitcoin advocates could not have foreseen such a meteoric rise in price in such a short space of time,” said Marcus Swanepoel, chief executive of Luno, a London-based cryptocurrency platform. History suggests a small pullback could follow, he added.

“But the pattern we’ve seen in the build up to this milestone — a consistent increase, rather than one sharp spike — sets bitcoin up extremely well for this year,” Mr Swanepoel said. He added that “something approaching the $100,000 mark before the year’s end” was possible.

The rally has fed concerns that bitcoin is set to repeat the events of three years ago, when a bull market dramatically collapsed. When the cryptocurrency set a record high in November, economist Nouriel Roubini called it a “pure speculative asset and bubble with no fundamental value”.

But some analysts have pointed to an increase in corporate and institutional interest in bitcoin. Well-known investors such as Paul Tudor Jones and Stanley Druckenmiller have thrown their weight behind it, and crypto-focused hedge funds have outshone peers.

The recent gains have far outpaced mainstream asset classes. Bitcoin rose 305 per cent last year, compared with the 16 per cent lift in Wall Street’s blue-chip S&P 500 stock index, and gold’s 25 per cent rally.

Marc Bernegger, a board member at digital asset manager and broker Crypto Finance, said he would not be surprised to see a “healthy” correction in bitcoin’s price in the short term. But he is positive over the longer term, due to “massive demand from professional and non-speculative oriented investors”.

Fundstrat analysts in late December said “the conditions remain in place for a continued rally”, citing institutional demand and a clearer approach to the sector from US regulators, as well as the possibility that the latest fiscal stimulus package agreed by Congress could fuel demand from retail investors.

Bitcoin’s rally has been helped by signs that the cryptocurrency is becoming more integrated into the financial system. In October, PayPal said US customers would be given the option of holding bitcoin in their digital wallets. In December, crypto exchange Coinbase filed with regulators to go public. – Financial Times

Nigerians Look to P2P Exchanges After Crypto Ban

Nigerians Look to P2P Exchanges After Crypto Ban

Some Nigerians plan to continue using bitcoin (BTC) and other cryptocurrencies despite a directive issued by the Central Bank of Nigeria (CBN) last week ordering banks to close down accounts associated with cryptocurrencies. Some users think they can get around them by not using centralized exchanges. 

“Bitcoin is peer-to-peer, meaning that it can be transacted without intermediaries. Your bank may be able to shut down your account but no one can shut down your bitcoin wallet. This development, while concerning, will not be the end of bitcoin in Nigeria,” said Nigerian Bitcoin Core contributor Tim Akinbo on Twitter.

Exchanges such as Binance have been affected because payment partners that store the naira are no longer willing to deal with them due to the directive, putting an indefinite pause on naira deposits to exchanges. 

But there’s an alternative: peer-to-peer transactions, where two users connect directly to each other to trade cryptocurrency. In return for bitcoin or other cryptocurrencies, a user might make a bank transfer directly to the other user, or pay that person with cash. Platforms such as Paxful and a Binance’s peer-to-peer platform help connect users to other users so they can coordinate these transactions. 

“As we all know, [peer-to-peer] can’t be stopped,” one trader in Nigeria, Lucky, told CoinDesk.

Despite CBN’s directive, several sources in Nigeria told CoinDesk they plan to continue trading bitcoin via peer-to-peer exchanges, and more aired similar conclusions on social media. 

“Most people will return to [peer-to-peer] transactions, some will leverage several alternatives that connect crypto to legacy financial systems, like reloadable Visa or Mastercard. Most will simply use crypto as a choice reserve asset. […] A lot of activities will also go clandestine, or underground,” said developer and cryptocurrency educator Chimezie Chuta.

He added he plans to use “alternative channels” to remain a part of the cryptocurrency community.

Crypto exchange Bundle made a similar comment in a statement to its customers about moving to “alternative channels” to ensure they can still buy and sell cryptocurrency. The email stated the exchange will provide more information about how this will work in the coming days. 

CBN did not respond to an inquiry from CoinDesk by press time about whether these alternatives are lawful. 

Why is dogecoin dropping? it tumbled 20% since Monday

Why is dogecoin dropping? tumbling 20% since Monday

The popular dogecoin crypto asset, engineered as a joke back in 2013, has tanked over the past week after reaching a record value on Monday, leaving few investors laughing.

Dogecoin, at last check, was trading at 0.06784 cent, down over 20% from its Feb. 7 record high of 0.087159, according to data from CoinDesk. That decline meets the commonly used criteria among Wall Street chart watchers and technical analysts for a bear market.

Read: Dogecoin? A lot of ‘retail punters are going to lose money,’ says crypto expert

It isn’t clear where the crypto is headed from here, it is still up by about 50% over the past seven-day period and enjoys an eye-popping 1,350% gain since the start of 2021, boasting a market value of $8.7 billion, as of Friday afternoon. That ranks dogecoin just outside the top 10 cryptos, with bitcoin BTCUSD, +5.27% atop the leaderboard with a market value surpassing $880 billion.

Doge’s rally got started on the back of a series of bullish, albeit sometimes cryptic tweets from Tesla Inc. TSLA, +0.55% Chief Executive Elon Musk.

A number of celebrities including, Calvin Broadus, otherwise known as Snoop Dogg, and Gene Simmons of the rock band Kiss joined Musk—as well as billionaire investor Mark Cuban—have been tweeting about investing in dogecoin.

On Reddit’s popular SatoshiStreetBets chat forum, some expressed a hope to push dogecoins value to $1.

However, crypto experts have warned that dogecoin, pronounced “dōj-coin” and commonly associated with a popular meme featuring a shiba inu dog, has limited utility compared with other decentralized cryptographic assets, including bitcoin.

Dogecoin co-founder Billy Markus told The Wall Street Journal in an article at the beginning of February that he created the asset in 2012 as a “lighthearted cryptocurrency,” then known as Bells, to serve as the fun version of bitcoin. In an open letter on Reddit this week, Markus also wrote about the cryptocurrency.

“It went from a silly joke to something worth something to people very quickly, and a community was developing fast, with lots of shady people and lots of new people, quickly putting up services and infrastructure around it,” the co-founder wrote.

Nic Carter, a crypto and blockchain venture capitalist who founded Castle Island Ventures, on CNBC earlier in the week cautioned that average investors could be badly hurt by making speculative bets on an asset with no real purpose. He also found it quizzical that Musk would support the virtual asset.

“It’s somewhat disconcerting to see Elon Musk so enthusiastic about it,” the Castle Island co-founder said.

Bullish bitcoin investors make the case that price gains in bitcoin, the world’s No. 1 cryptocurrency, are supported by the limited supply of the crypto that is inherent in its code. Only 21 million bitcoin will ever exist, and so-called mining for bitcoin, or solving complex computational problems that are rewarded by bitcoin, become harder as time goes on. The final cache of bitcoins likely aren’t going to be mined until around 2140.

The supply of dogecoin, on the other hand, has no built-in limit, with the number of dogecoin that can be mined at any given time varying from one to hundreds of thousands.

Nonetheless, interest in dogecoins underscores the appetite for alternative assets in an environment where 0% interest rates are prevalent as governments around the world attempt to mitigate the economic harm from the COVID-19 pandemic.

Charles Hayter, CEO of London-based research site CryptoCompare, told MarketWatch earlier this week that investors need to apply caution to such investments like dogecoin.

“People are moving markets en masse and are playing greater fool with each other without understanding the ramifications or their own psychological limitations.