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Bitcoin’s Real Value Could Be Zero, Says Morgan Stanley

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Attempts to quantify bitcoin’s ‘true’ value have proven notoriously difficult, but for a Morgan Stanley strategist, the digital currency is possibly worth nothing at all.

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In a research note to clients, Morgan Stanley analyst James Faucette said bitcoin may be worth zero dollars. At the time of writing, the digital currency was worth roughly $12,700 following another major slump.

Bitcoin’s Valuation Conundrum

The paper, titled “Bitcoin decrypted,” gave compelling reasons why the digital currency was difficult to valuate. In particular, bitcoin cannot be treated like a currency because there is no interest rate tied to it. Its daily volumes also pale in comparison to the $5 trillion-plus global forex market.

Though many have likened bitcoin to gold, it lacks the intrinsic value of precious metals. After all, gold and silver are not just investments, but key inputs in jewelry and electronics. Bitcoin does not appear to have the same use cases.

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Faucette argues that, while bitcoin has been marketed as a payment system, a lack of scalability has limited its adoption as a payment vehicle. This certainly explains the growing pressure within the blockchain community to improve the algorithm. Backers of Segwit2x and other hard fork proposals have sought to improve bitcoin’s transaction capacity in hopes of generating greater mainstream adoption of the digital asset.

Until now, bitcoin has attained mainstream appeal as an investment, but less so as a payment mechanism. Of course, there are exceptions to the rule. Japan’s recognition of bitcoin as a legitimate payment method has created more avenues for transacting the digital currency. Additionally, hundreds of thousands of merchants already accept bitcoin as a payment method. That being said, Faucette argues that the top e-Commerce merchants continue to neglect bitcoin.

The numbers certainly don’t lie. In the third quarter of 2017, only three of the top 500 global e-commerce merchants accepted bitcoin as a form of payment. That’s down from five a year earlier.

“If nobody accepts the technology for payment then the value would be 0,” Faucette said.

Growing Asset Class

Morgan Stanley has adopted a more upbeat position on bitcoin than fellow Wall Street banks, with CEO James Gorman arguing that cryptos are “more than just a fad.”

“The concept of anonymous currency is a very interesting concept — interesting for the privacy protections it gives people, interesting because what it says to the central banking system about controlling that,” Gorman said in September.

The bank says investors have already poured $2 billion into cryptocurrency funds this year alone, with 2018 shaping up to be an even bigger year.

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.

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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 453 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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  1. mvppvm_07

    December 24, 2017 at 10:06 pm

    95% – 98% of US gas stations do not have electrical charging. Tesla will fail.

    Morgan Stanley’s analyst is tainted by his career, I believe. His punch is juiced with Wall Street pixie dust. I’ve sold computer hardware and services for almost twenty years. I accepted Bitcoin in 2015. I sold the business in 2016 but still have myself set up to accept BTC or XRP or….. it’s pretty easy to do.

    The article seems to assume simplistic buying / selling / trading, not the arbitrage or parsing capabilities available to digitized monetization.

    This assault from the traditionalists will continue, get stronger and become nasty as crypto adoption shifts from bleeding edge to leading edge models. Who’s to say this week’s correction isn’t about some traditional multi-billion or trillion dollar player creating FUD attempting to weaken the market so that they can introduce themselves to significant profit in the next 24 months.

    Other than that, it’s a great article. Morgan Stanley: Making Stupidity Great Again.

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Chinese President Xi Jinping Comes to Terms With Blockchain

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Chinese President Xi Jinping may not like cryptocurrencies, but he is a fan of the blockchain. For a nation that has cracked down on the cryptocurrency industry more than any other jurisdiction, as evidenced by a ban on initial coin offerings (ICOs) and bitcoin trading in the mainland as well as a target on bitcoin mining, the process by which more coins are created, his acceptance of the blockchain is surprisingly refreshing. He reportedly said:

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“A new generation of technology represented by artificial intelligence, quantum information, mobile communications, internet of things and blockchain is accelerating breakthrough applications.”

While President Xi Jinping’s celebration of the blockchain is juxtaposed by the country’s intolerance for cryptocurrencies, it’s a step in the right direction. He said he wants China to “become the global center” for technological innovation.

China has seemingly been able to separate the blockchain from cryptocurrencies considering that in spite of the broader ban in Beijing blockchain startups and government officials have been working together to unlock the potential of the technology in the region, as CNBC reported. Meanwhile, as anecdotal evidence, hundreds of Chinese locals attended a recent blockchain conference in the United States where a pair of sessions were given in Mandarin.

But Bobby Lee, who is the co-founder of China’s maiden bitcoin exchange BTCC, which has since rebranded and whose China trading capabilities have been shuttered, suggests that the lines surrounding blockchain technology often get blurred.

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Technological Revolution

President Xi Jinping in his speech to the Chinese Academies of Sciences and Engineering acknowledged the feverish pace at which technological innovation has been unfolding in the 21st century, saying: “A new round of scientific and industrial revolution is reconstructing the global innovation map and reshaping the global economic structure.”

But in key ways, Xi has shut the door to that innovation by clamping down on what once comprising the lion’s share of bitcoin trading. But if you ask Lee, he reportedly believes that at some point, the ban on bitcoin trading will be eased and China could adopt a licensing process, he’s just not sure when.

Blockchain pioneers including the likes of Wences Casares and Joseph Lubin have offered perspective on cryptocurrencies that might serve Xi well, with Lubin recently saying that “cryptocurrencies should remain unfettered” as it relates to regulation. Casares, the CEO of blockchain startup Xapo, once described the harmony in which the blockchain and bitcoin are designed to operate, saying: “If you were to remove the bitcoin, miners would disappear and so would the blockchain.”

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 15 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.




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Financial Freedom

Considerations For Choosing An Immediate Annuity

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When it comes time to retire, one method for receiving income from your savings is to purchase an immediate annuity. The purpose of an immediate annuity is to provide a regular payment over a certain period of time or over the investor’s lifetime.

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An immediate annuity can preserve a minimum level of income that you cannot outlive. Allocating a portion of your retirement money to an option that will provide income for life can make sense for many retirees.

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So how does an investor decide what immediate annuity to purchase?

The scenarios discussed in this article apply in the United States. Readers are encouraged to consult their accountants about tax considerations related to buying annuities.

It’s also important to consider that when earnings from an annuity are withdrawn, they will be taxed as ordinary income, no matter how long the owner has owned the account.

Different Types Of Immediate Annuities

Steve Vernon, a research scholar for the Stanford Center on Longevity, writing for CBS News’ “Money Watch,” noted that immediate annuities can be fixed, inflation adjusted and variable and guaranteed lifetime withdrawal benefit (GLWB). GLWB combines the features of traditional annuities and systematic withdrawals.

Once you purchase a fixed or inflation adjusted immediate annuity, your payout is locked in, Vernon noted. Your payments will not be adjusted based on changes in capital markets.

The monthly payout on a variable annuity, by contrast, will change based on the annuity’s stock and bond portfolio. The owner can modify the portfolio even after they start receiving payments. Vernon recommends keeping the stock allocation between one third and two thirds.

When shopping for GMWB annuities, Vernon recommends annuities with management fees around 50 basis points or lower, and insurance fees round 100 basis points.

Vernon encourages people to use online annuity purchase services like www.immediateannuities.com and Income Solutions and Immediateannuities.com to compare different immediate annuities.

Immediate Fixed Annuity Considerations

Steve Goldberg, an investment adviser writing in Kiplinger, thinks of an immediate fixed annuity as term life insurance in reverse, the longer you live, the better you do.

The insurance company pools the premiums from thousands of its annuities and invests them primarily in bonds. The company also makes educated guesses about how long its annuity buyers will live. It then makes monthly payments to policyholders each month based upon both expected longevity and expected investment returns.

In today’s low-interest-rate environment, that’s much better than an investor can do in all but the riskiest bonds, according to Goldberg. It’s also likely better than an investor can do if he put all his money into stocks.

But there is a catch: With an annuity, you don’t get your money back, unless the buyer opts for what’s known as a “certain period annuity” or similar option. Additional features, however, usually bring additional costs.

Goldberg believes immediate fixed annuities usually make sense only for retirees. The older the retiree, the fewer years the insurance company will have to pay the benefits – so the bigger the monthly checks.

Immediate annuities seldom make sense for all of an investor’s money, Goldberg notes.

Like Vernon, Goldberg suggests going to ImmediateAnnuities.com to compare different immediate annuities. Plug in the state you live in, your age and your gender, and the website provides quotes from numerous companies.

How Immediate Annuities Are Bought

There are three typical ways to purchase immediate annuities, according to Rich White, a financial writer writing in Investopedia.

One method is the annuitization of a tax-deferred annuity. The purpose of a tax-deferred annuity, unlike an immediate annuity, is to build funds to create an income stream at a later date. Most tax-deferred annuities permit the account to be converted at some point in time to a guaranteed income stream.

Another method is the lump sum payment, in which the investor’s funds are transferred to an insurance company to purchase a revenue stream. Oftentimes, the investor is using cash from a retirement plan distribution, lottery winnings or an award from a personal injury settlement.

A third method is the terminal funding of a retirement plan. Some retirement plans offer annuity payouts. The plan in this case terminates its liability to the participant by transferring the participant’s funds to an insurance company. When retirement plans “pay out” in this manner, a “qualified immediate” annuity of offered for tax efficiency.

These choices all present options. The owner of a tax-deferred annuity who wants to annuitize is not limited to the payout offered by the insurance company, White notes. The policyholder can shop payouts offered by competing companies and conduct a tax-free transfer to the company offering the best terms. This is known as a Section 1035 exchange.

If a retirement plan offers a particular insurance company for terminal funding, the policyholder can shop for others and select the plan they find most suitable.

An annuity payout over a fixed number of years that is purchased with a single sum can be converted to an annual interest rate equivalent, White noted.

If, for example, the policyholder is quoted an annuity of $600 per month for 20 years in exchange for paying a premium of $10,000, an annuity rate calculator will find this payout converts to an annual interest rate of 3.96%. This rate can then be compared to other fixed-period annuity payouts, perhaps over longer or shorter periods, and also to rates available on bonds, money market funds or CDs.

For a lifetime annuity payout, there is no fixed period to evaluate. Death could occur at any time, and the payments would discontinue. White recommends a good starting point is to use the annuitant’s life expectancy as the payout period.

If a 67-year-old female is offered a lifetime payment of $600 per month for a $100,000 premium, her life expectancy would be 17.67 years, based on the 2007 Period Life Table published by the Social Security Administration.

Immediate Annuity Payout Options

One payout option for immediate annuities is income for a guaranteed period, which is also called “certain period annuity,” according to CNN Money, as noted in a previous article on annuities’ role in financial planning. This guarantees a specific payment for a specific time period. If the owner dies before the period ends, their beneficiary receives the remainder of the payments.

Another option is lifetime payments that guarantee a payout for the owner as long as they are alive, but there is no survivor benefit. The payouts can be variable or fixed, depending on the type of annuity selected. The amount of the payout depends on the amount invested and the owner’s life expectancy.

Still another payout option is life with a guaranteed period certain benefit, also known as “life with certain period.” The owner receives a guaranteed payout for life along with a period certain phase. If the owner dies during the certain period, the beneficiary continues to receive the payment for the remainder of that period.

Joint and survivor annuity is one in which the beneficiary continues receiving payments for the rest of their life after the owner dies.

Do Your Homework

It is important to buy an annuity from a company that holds a top credit rating from the three leading agencies of U.S. insurance companies: A.M. Best, Moody’s and Standard & Poor’s.

The considerations for shopping for an immediate annuity are extensive. Investors must spend their time comparing options. Many retirees will find it worth their time to work with a financial adviser.

Those who seek the assistance of an insurance agent must keep in mind that insurance agents are paid commissions by the insurance companies offering the annuities. Investors have the option of working with a non-commissioned financial adviser.

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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3.9 stars on average, based on 8 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.




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Binance Denies Being Hacked, as CEO Confirms “All Funds are Safe”

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The head of Binance has officially denied rumors that the exchange was hacked on Wednesday, claiming that “irregular trades” have now been fixed. Speculation that the exchange might have been hacked triggered a sharp reversal in the fortunes of most major cryptocurrencies.

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No Hack

The company’s CEO Changpeng Zhao reassured traders Wednesday that their accounts had not been compromised.

“We have localized the irregular trades, they will be reversed. All funds are safe, thanks to the fast alarm. Please learn to secure your accounts against phishing,” he tweeted Wednesday afternoon.

Users took to Reddit, Twitter and other social media channels on Wednesday to report highly suspicious activity on their Binance accounts. Several traders reported that their altcoins were suddenly liquidated without prior warning or consent. Oddly enough, the loss of altcoins was associated with a massive spike in Viacoin (VIA), a relatively obscure cryptocurrency that more tripled in value on Wednesday.

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Following the reports, Binance quickly froze trading and withdrawals to investigate the matter further. The loss of coins seems to inflict accounts with registered API keys, which are used to enable trading bots. The exchange issued a follow-up statement informing traders that the Binance platform had not been compromised:

“As of this moment, the only confirmed victims have registered API keys (to use with trading bots or otherwise). There is no evidence of the Binance platform being compromised.

Please remain patient and we will provide an update as quickly as possible.”

Fears of a coordinated cyber breach made for a highly turbulent session in the crypto markets. The total value of all crypto assets briefly plunged by more than 10% as traders rushed to exit their positions.

Cyber Security Remains a Major Concern

Crypto exchanges are routinely the target of sophisticated cyber attacks, a trend expected to intensify as digital currencies rise in value. Attackers have already made off with billions of dollars worth of stolen cryptocurrencies over the years.

It was just last month that Japan’s Coincheck was drained of $500 million in NEM after hackers successfully redirected the coins into alternate account. The heist was the biggest the market had ever seen, surpassing the 2014 attack of Mt Gox.

Exchanges have stepped up their security guidelines in response to the wave of attacks. This includes adopting stricter KYC/AML requirements and reminding users how to better safeguard their accounts.

Hacking attempts aren’t just limited to exchanges. It has been estimated that roughly 10% of all ICO funds have been compromised by cyber criminals. With billions flowing into the ICO market, that’s no small number.

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 453 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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