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With 80% of Bitcoin Mined, Investors Brace for Digital Scarcity

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As of Saturday, the amount of bitcoin in circulation crossed 16.8 million, a figure that represents 80% of the algorithm’s total supply. With fewer bitcoin left to be minted, investors are anticipating a steady increase in prices as digital scarcity makes the coin more valuable over time.

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An Important Milestone

The supply of the world’s most active cryptocurrency has increased by an additional 4,787 since Saturday, bringing the total to around 16,804,787, according to data provider CoinMarketCap.

Bitcoin mining is designed to become harder and possibly less profitable over time, although the latter hasn’t been true because the cryptocurrency’s value has skyrocketed since its inception. Currently, miners are awarded 12.5 BTC every time they mine a block. That’s half the amount they received over 18 months ago when the amount was 25 BTC per block.

Mining rewards are cut in half at pre-defined block intervals, with the next ‘halving’ event scheduled to take place more than two years from now, based on the current hashrate. That would bring the total rewards down to 6.25 BTC per block.

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The bitcoin protocol specifies a halving event every 210,000 blocks.

By reducing the reward for mining, bitcoin founder Satoshi Nakamoto wanted to ensure that the supply of coins wouldn’t rise too quickly. Theoretically, this would preserve its value and make the digital asset more attractive over time. Current mining trends suggest the final bitcoin will be minted on or around year 2140.

Scarcity and Bitcoin Prices

Bitcoin has been likened to a commodity for its finite supply, security against counterfeiting and durability. It is also viewed as highly divisible and transferable globally. Some investors even consider bitcoin to be a hedge against uncertainty since its underlying price moves independently of outside forces.

With only 20% of bitcoin left to be mined, the idea of digital scarcity could also play into the hands of the virtual currency.  In addition to its finite supply, bitcoin’s transaction fees have increased significantly since the coin surged in value. Data from blockchain.info revealed that miners earned nearly $23 million in transaction fees on Dec. 21, 2017, the day bitcoin approached $20,000.

Supply constraints and higher processing fees could mean more expensive bitcoin prices for the foreseeable future. Strengthening the case for bitcoin’s scarcity is the fact that coins cannot be copied (although they can still be lost).

It’s important to note that not all cryptocurrencies are mined like bitcoin. The supply of others, such as Ripple XRP, NEM and Lisk, are released all at once.

While many analysts content that bitcoin’s trajectory is still upward, the path forward will be rocky at best. The coin has struggled to regain momentum since hitting record highs nearly one month ago. It’s also clear that investors are more than just dabbing their toes into altcoins. At the time of writing, altcoins represent roughly two-thirds of the cryptocurrency market. That’s way up from 12 months ago, when altcoins represented about a tenth of the total market.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 145 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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CFTC Warns Crypto Investors About Pump-and-Dumps

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Washington’s top commodity regulator has issued a stern warning to investors about cryptocurrency pump-and-dump schemes, which have become more prevalent in the wake of the ICO boom that began last year.

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CFTC Issues Warning

In a strongly worded release, the Commodity Futures Trading Commission (CFTC) on Thursday urged investors not to participate in pump-and-dumps, which are classified as a form of security fraud. The regulator said this form of fraud is easier to implement than ever before, with mobile chat groups and internet message boards becoming the go-to method for disseminating false or misleading statements about a particular asset.

“The same basic fraud is now occurring using little known virtual currencies and digital coins or tokens, but thanks to mobile messaging apps and Internet message boards, today’s pump-and-dumpers don’t need a boiler room, they organize anonymously and hype the currencies and tokens using social media,” the CFTC said.

The regulator added the following:

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“Some pump and dumps use false news reports, typically about a famous high-tech business leader or investor who plans to pour millions of dollars into a small, lesser known virtual currency or coin. Other fake news stories have featured major retailers, banks, or credit card companies, announcing plans to partner with one virtual currency or another.”

Lesser Known Coins the Target

In the world of cryptocurrency, pump-and-dumpers often target lesser known coins that can be bought for pennies. The hype machine then goes to work convincing speculators to enter trades as quickly as possible. In a market that added 3,300% in the span of a year, convincing the masses that it’s now-or-never is fairly easy.

Although it’s not always easy distinguishing which cryptocurrencies have been artificially inflated by fake stories, some possible recent candidates include UBIQ, Golem Dragoncoin, DigiByte and Verge.

Others argue that all cryptocurrencies are pumped and dumped because it’s almost impossible to determine their intrinsic value (if they even have one at all). The author believes this argument conflates true pump-and-dump schemes from the common perception that cryptocurrencies are in a bubble (it’s possible to be in the latter without being a product of the former).

That being said, investors should be especially weary of obscure coins that surge unexpectedly without cause or explanation. Although it may not be an apparent pump-and-dump, it could be a case of excessive speculation.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 145 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Barely Any Cryptocurrency Traders Have Paid Their Taxes

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2017 was an earth shattering year for cryptocurrencies as the total market appreciated by 3,300%. However, a new survey suggests the vast majority of U.S. traders haven’t reported their gains. In fact, the number of traders who have reported their crypto-related capital gains to the IRS is less than 100.

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Nothing for Uncle Sam

Credit monitoring company Credit Karma has released a report showing that, of the first 250,000 tax filings it received, less than 100 filers reported owning digital currency. Cutting through the FUD, it’s not entirely clear whether this number refers to 250,000 cryptocurrency traders or simply 250,000 American tax filers.

Given the extent of last year’s price rally, there should be more Americans reporting a hefty increase in their capital gains. Various news sources have reported that nearly 57% of respondents in a recent Qualtrics survey said they made money from crypto investments. The survey’s sample size was 2,000.

Cryptocurrency investments that result in profit are considered a form of capital gains by the Internal Revenue Service.

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Americans have until Apr. 17 to file their taxes. The IRS expects 156 million individuals will file returns this year.

Market Concentration

Although Credit Karma said it expects more people to report crypto-related earnings later in the tax season, nobody was counting on so few numbers. While gains were relatively easy to come by for “hodlers” – traders in it for the long haul – speculators may have had a more difficult time converting deposits into profits due to the market’s heavy volatility.

If we use bitcoin as a proxy, it’s easy to see that the market’s value is highly concentrated in a few hands. In the case of bitcoin, about 1,000 people own 40% of the supply.

One way to alleviate market concentration is to democratize cryptocurrency as an investment. The introduction of bitcoin futures last year was seen as a watershed moment for wide scale adoption, at least in the institutional sense. Several fund managers have also been pushing for bitcoin ETFs, but have so far been unable to overcome the SEC’s scrutiny.

The cryptocurrency market has been in a funk as of late, but finally appears to be showing signs of recovery. At the time of writing, a single bitcoin was worth nearly $9,500, the most since Feb. 1. The total value of all cryptocurrencies was $460.4 billion, according to latest data.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 145 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Weiss Ratings Issues Fresh Warning Over Tether Cryptocurrency

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Weiss Ratings has warned investors about the dangers of Tether, the high-profile cryptrocurrency startup that has been summoned by U.S. regulators to appear in court. Although no charges have been filed, Tether has raised suspicion over its close relationship with Bitfinex and the sudden spike in circulation of its native USDT token.

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Weiss Rating Weighs In

The Florida-based rating agency raised several warning signs in its evaluation of Tether, including a lack of transparency and virtually no proof that the company’s USDT tokens are fully backed by the U.S. dollar.

In a Feb. 12 blog post, Juan M. Villaverde issued the following statement:

“The big issue: There’s never been an audit, and the folks behind Tether has been quite shady when asked. They have continuously claimed their tokens are backed 100% by actual dollars, yet they have failed to present any evidence to support this claim.”

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The blog post also cited the growing belief that Tether is really operating a fractional reserve system. In other words, Tether’s USDT tokens are not fully backed by dollars.

Since issuing its ratings, Weiss appears to have launched an entire division devoted to cryptocurrency. The company rates coins from A to E, or scores ranging from “excellent” to “very weak”. No cryptocurrency received an A in Weiss’ first-ever cryptocurrency rating. B-rated Ethereum and EOS were given the highest ranking of 74 coins studied.

Tether’s Growing Controversy

Tether has been the center of enormous controversy in recent weeks after severing its relationship with auditor Friedman LLP. The decision raised fresh warning signs about the company’s finances and whether it had enough reserves on its balance sheet.

According to Bloomberg, Tether was issued a subpoena alongside Bitfinex back in December, although the details of the court order were not provided. It was later discovered that both companies operated under the same chief executive.

The USDT token is ranked 17th in terms of market cap, but is third-largest by trade volume.

In January alone, the supply of USDT tokens surged by 850 million, according to data provider CoinMarketCap. Some analysts have speculated that the token circulation has spiked to keep bitcoin prices artificially inflated, with more coins created every time the coin’s value drops. Based on this hypothesis, Tether has had an oversized impact on bitcoin prices over the past year, which means the company’s solvency issues could have an equal or greater impact on the market moving forward.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 145 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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