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Op-Ed

Decoding Ripple

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Market Update: As of this writing, bitcoin is up to almost $10,800 with ETH at $962. Great news. What we saw this week was slow, consistent gains. It looks like most coins are gaining 3-10% daily, with not too much parabolic activity that would make me more nervous. We had a ton of tailwinds, too many to count. A White House Official said cryptocurrency regulation would not be in the immediate future, Wyoming & Colorado are trying to legislate crypto-friendly offerings/enforcements, and of course “Coinbase Merchant” was launched; which is a payment platform for businesses to begin accepting cryptocurrency payments. I couldn’t think of a better way to end the Chinese New Year.

Big players are announcing partnerships, and of course, Ripple leads the pack. A coin is only as good as their buyers, so I want to make sure that all of my readers know who those buyers could potentially be, and what they can buy. I want provide a background on Ripple & their 3 Products (Xrapid, Xcurrent, Xvia). Ripple is one of my largest holdings, so full disclosure here.

Ripple’s Market

Ripple’s products are all designed to work with businesses on sending and receiving payments instantly and securely. Their main competitor is the incumbent, the SWIFT system.

SWIFT facilitates money wire transfers, with many checks and balances along the way. Overall, it takes about 3-5 days to clear a transaction with the SWIFT system. That means if you want to send money from USA to Germany, you can either wait a long time or you can pay a high fee to get it there quicker (via Remittance company like Western Union). During your wait time, there is also security risk. Just recently, we saw hackers take SWIFT via a Russian Bank for $6M. When you don’t encrypt your transfers & information, there is always a possibility that someone is smart enough to hack in.

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The SWIFT system, regardless of Ripple’s success, will phase out of existence. Their way of transferring money in the 21st century is outdated, and people should expect more out of their financial institutions than their money going through the equivalent of snail mail to get to it’s recipient.

Blockchain is a simple solution for payment processing, which is why you are getting so many people trying to enter the space altogether. There are trillions of dollars being moved back and forth each year around the world, and there are certain niches that will require different blockchain characteristics to serve them. One of them is banks & remittance companies. They need Anti-Money Laundering/Know Your Customer procedures built in, just like the SWIFT system. Ripple (and Lumens!) designed their chains/coins specifically for this purpose.

XCurrent

The product I hate to love. This is Ripple’s solution for bank cross-border transactions. Their system not only uses blockchain, but also validates the parties in the transaction and the transaction itself BEFORE it even takes place, so there is no wait time in between.

One bank wants to send money to another bank, with a “correspondent bank” (wire facilitator) in the middle. There is a message sent from the sending bank that will outline their intended transaction. Ripple will decode the message, and put it into ledger format for all 3 banks to read, compliance screen, and validate instantly (Inter-ledger Protocol). Sender, receiver, account information, and transaction details are all used to determine the fee that each bank will tack on for their services to determine total cost to sender for approval.

The next step is cryptographic hold of funds. This puts a hold on the transaction at all 3 banks, so that they can generate a cryptographic signature that will serve as evidence that funds are available and have been pledged for dispensing. In other words, the banks send each other “I’m ready” signals. Once all parties have provided their cryptographic signatures, Ripple automatically releases the transaction, which is sent and settled within seconds.

Communication and uniformity are the solutions that Ripple brings with this system. No longer should banks have inboxes and outboxes. Blockchain ledgers automatically validate participants in the transaction, and the blockchain itself can serve as the highway to transfer the funds instantly. Overall, this is expected to yield a 30% decrease in transaction costs for customers, while also providing instant settlement. No brainer.

Raiden, why do you love to hate it? This is the main side chain product culprit. You don’t need to use XRP in these scenarios, and banks aren’t. Sure, there is some trial periods, but I haven’t heard a major bank using XCurrent with XRP. This is when I wish I was a shareholder, not a coin holder. The best we can hope for is that XRP will become a base currency for banks once society has warmed up to the thought of virtual shells that encapsulate and mimic the value of fiat currency. Until then, I am not happy when I hear the word XCurrent.

XRapid

Our future hero. This is XCurrent, but with XRP being added in. Cross-Border/Currency payments are completely inefficient. In order for me to send dollars and someone to receive Rupees, Currency (USD) must be sent to a correspondent bank, and exchanged in a “Nostro-Account”, which serves as a liquidity pool of the foreign currency (INR). Then it has to be sent to the receiving bank in the foreign currency, going through the wire system. Long, expensive, and complicated. It is so troublesome, that most banks and remittance companies need to set minimums on transactions because it is so economically inefficient for smaller users.

Nostro-Accounts, what Ripple CEO Brad Garlinghouse calls “Dormant Cash” are just pools of sitting money that have to remain there in order to convert all of these cross-currency transaction requests. XRP can serve as the unified currency for all banks to transact with, and exchange into their intended currency. Ripple takes a multi-step/multi-party process, and eliminates almost of all it.

The U.S. dollar can eventually take the form of XRP, be sent anywhere in the world, and XRP will then take form of the intended foreign currency, and settle itself within the intended bank account. As coin holders, this is what everyone should be dreaming of prior to the Beta version launch in the Spring of 2018.

During my research, Ripple’s 2016 White Paper was the only source I could find to properly explain this system, and even my explanation may be lacking. This system is expected to free up massive amounts of Emerging Market liquidity through the lessening use of the “nostro-account” system, while also cutting transaction costs by up to 60%. I am trying to get my hands on more XRapid material, but this is very very new. I am going to keep you all posted on developments, as I have set up an RSS feed to give me anything related to XRapid as it comes out in the future.

Xvia

This system for is a platform for point of sale payments. There is not one piece of information on XVia. It is actually kind of scary how little information is available on any of these products. Here is my most educated guess based on the limited information. This is Ripple’s version of Coinbase Merchant. It is software that can be imbedded in E-Commerce sites that people can use XRP to pay for goods and services. Based on the level of information, XVia is not going to be used in the near future. If it is, then their customers must have more information on it than the public does.

Conclusion

This research was tougher than I expected. Ripple has provided good information on XCurrent, but the others are severely lacking. There also isn’t much interest in the Youtube community, with rocket ship memes being more important than content. As a coin investor, I am disappointed. Their main product right now is private labeling chains, which does not benefit coin holders. I want more information on XRapid and Xvia. You can go look at my Lumens article. There is enough information from Jed, IBM, and followers to fill a textbook. If Ripple wants to have products listed on their site, there better be some information for me to look at. We may not be owners, but we are investors. I think it’s time for them to start treating us that way.

 

None of what I am saying is an offering to buy or sell coins. Full disclosure, this author owns XRP. You certainly wouldn’t think it based on this article! I wish you the best of luck on the exchange. Please do follow me @raijincrypto on Twitter. I try to send out thoughts throughout the week.

 

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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Market Overview

Comparing Nasdaq and Bitcoin: What Lessons Can We Learn?

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Bubbles

Over the past few months, lots of people have talked about the similarities between the .com bubble in the early 2000s and the bitcoin market today. It seems that the further down the bitcoin market goes; the more people are using this analogue to help them stay in the game for the long-run.

One of the influential people in the crypto space who often refers to this comparison is Teeka Tiwari at Palm Beach Research Group. While he usually compares the Nasdaq during the late 1990s with the total cryptocurrency market cap, we are here going to compare the Nasdaq during that same period with the market for bitcoin specifically.

Nasdaq vs Bitcoin

In the image above, the top chart is a weekly chart of bitcoin, while the bottom chart is a monthly chart of the Nasdaq 100 Index from 1989 to 2004.

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As we all know, the crypto market tends to behave like the stock market on steroids. Moves are larger, and trends change faster in crypto compared to in stocks. It therefore makes more sense to compare these two charts using different timeframes, which is why I have chosen the monthly chart for Nasdaq while bitcoin is represented with a weekly chart.

There are a few interesting things to take note of regarding this comparison:

The Nasdaq found support following the crash in 2000 and 2001, and has later gained more than 600%. The Nasdaq has, in other words, returned more than three times as much for investors than the broader S&P500 index has done.

One explanation for why all financial bubbles have so much in common is that the one thing that causes them – human fear and greed – never changes.

What was different during the dot-com bubble back in the early 2000s was that communication was slow and ineffective compared to the high-speed Internet connections we have today on our phones and laptops. This is one of the reasons why it took the Nasdaq a few years to rise 1,700%, while bitcoin managed to achieve the same return in just a few months.

Similarly, it took the Nasdaq 30 months to fall 78%, while bitcoin lost 70% in just one and a half month.

Another thing both markets have had in common is that when they were down 70% from the top, many people completely lost faith in the future of these markets.

It has been pointed out by observers that even the arguments these people used against investing in the said markets were largely the same: No underlying value, too much volatility, too much regulations/lack of regulations/bad regulations, lack of social responsibility from the market actors, etc.

In hindsight, it has become clear that only the investors who had the mental clarity to ignore all this noise during the early 2000s were able to catch the 600% move that followed in the Nasdaq.

Diversification saved investors

When we are talking about ignoring noise and riding out the storm, let’s not forget that many of the companies that made up the Nasdaq in the early 2000s did eventually go out of business. Betting everything on a single company, in many cases, ended up being a catastrophe for the investor, despite the fact that the sector as a whole did incredibly well. This really made the benefit of diversification clear to everyone.

We can assume that the same is true for the cryptocurrencies of today. Some will emerge and become hugely successful, while others will slowly but steadily decrease in value and become irrelevant. Which ones they are is extremely difficult to tell at this early stage, but the lesson to be learned is clear: Diversification may be the only free lunch we will ever get in the world.

Featured image from Pixabay.

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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4.3 stars on average, based on 33 rated postsFredrik Vold is an entrepreneur, financial writer, and technical analysis enthusiast. He has been working and traveling in Asia for several years, and is currently based out of Beijing, China. He closely follows stocks, forex and cryptocurrencies, and is always looking for the next great alternative investment opportunity.




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Op-Ed

Is Manipulation Behind Bitcoin Cash’s Absurd Rally?

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Although you wouldn’t know it by today’s prices, bitcoin cash (BCH) has topped the crypto market leader board this month. The digital currency more than doubled over the span of 18 days, and in doing so far outpaced the broader market. But a closer examination of the value drivers suggest manipulation could be partly responsible for the rally.

As a reminder, the author has no vested interest in smearing BCH as I believe it to be one of the more advantageous coins on the market today. That said, the circumstances surrounding the most recent rally are peculiar to say the least.

What’s Up with Bitcoin.com?

A Hacked user informed me earlier this week that Bitcoin.com has been using the “BCH” ticker next to the word “bitcoin”. Normally, the ticker “BTC” is reserved for bitcoin, which is the original blockchain we all know about. Instead, the website quotes “BTC” next to the term “bitcoin core”.

In other words, BCH is quoted next to bitcoin and BTC is referred to as bitcoin core. See here for yourself:

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For most readers of Hacked, the distinction is easily discernible, but for new traders the difference isn’t easily gauged.

The first question I have is, how many people bought bitcoin (BCH) thinking they were receiving actual bitcoin (BTC)?

Bitcoin.com describes itself as the “premier source for everything bitcoin.” Although the website doesn’t appear to offer a full-fledged trading platform, users can purchase bitcoin and bitcoin cash using the following link.

It is unclear how long the website has been referring to BCH as bitcoin. For those of us who’ve been following the market for some time, the way BTC and BCH are quoted is certainly strange.

Antpool

A large cryptocurrency mining group by the name of Antpool has also been accused of pumping BCH in recent weeks. The pool announced about six days ago that it is responsible for confirming more than 8% of all bitcoin cash transactions. In addition to confirming those, Antpool is also said to be burning BCH on a daily basis in order to reduce supply and boost prices.

Of course, crypto pumps do not require such elaborate setups to achieve their goals. Pump-and-dumps can be orchestrated rather easily through a chat group on social media. But Antpool does have a large and privileged position in the BCH ecosystem, which has raised suspicion over its recent actions.

Bitcoin Cash is Overbought, According to Tom Lee

Fundstrat’s Tom Lee recently weighed in on the bitcoin cash phenomenon, concluding that the cryptocurrency was overbought. In his view, investors should stick with bitcoin if they had a choice between Core and Cash.

In a segment on CNBC’s Fast Money, Lee said:

“I prefer not to pick winners and losers when we’re looking at cryptocurrencies like bitcoin/bitcoin Cash… Both have merits but if I was putting new money to work today… I would be a lot more interested in buying a lagger that could attract inflows rather than something that’s potentially overbought.”

Bitcoin cash added around $1,000 to its value between Apr. 6 and 23, with prices peaking near $1,600. The cryptocurrency corrected sharply lower on Wednesday and was still declining as of Thursday’s early-morning session. At the time of writing, BCH/USD was down 4.6% at $1,268.

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 455 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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Decentralization

JP Morgan’s Surprise Cryptocurrency Fees are a Reminder of Why Decentralization Is Sorely Needed

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JP Morgan Chase & Co has been hit with a class-action lawsuit by cryptocurrency traders over allegations of unannounced fees and higher interest rates on purchases of digital currencies. Though the allegations have not been proven, extra fees are a tactic routinely employed by traditional banking institutions. In the case of JP Morgan, this has karma written all over it given the way its chief executive has ridiculed digital assets by associating them with fraud.

Class Action Lawsuit

Traders from across the United States are seeking statutory damages of $1 million for unannounced interest charges and fees on cryptocurrency transactions between January and February of this year. The named plaintiff in the lawsuit is Brady Tucker, an Idaho resident who paid a total of $163.91 in fees and surprise interest charges over a six-day stretch.

According to information obtained by Reuters, the lawsuit accuses the bank of violating the U.S. Truth in Lending Act, a piece of legislation that requires credit card issuers to inform customers in writing of any notable change in fees.

The lawsuit asserts that Tucker tried to resolve the dispute by calling Chase’s customer support service directly. His request was turned down, prompting him to seek legal help. According to Bloomberg, the case in question is Tucker v. Chase Bank USA NA, 18-cv-3155, U.S. District Court, Southern District of New York (Manhattan).

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The Growing Case for Decentralization

Depending on who you ask, the allegations against JP Morgan are akin to cryptocurrency fraud not unlike the kind Jamie Dimon talked about while ridiculing bitcoin. But the irony in Dimon’s comments extend far beyond Chase’s latest dealings.

As the actions of Chase bank and other financial institutions have clearly demonstrated over the years, those who control the size and growth rate of fiat money cannot be trusted to do the right thing. As Nassim Taleb argues in The Black Swan, banks have a tendency of losing as much money as they make in the long run due to shady business practices and high-risk ventures. Decisions like these are easy when you are Too Big to Fail.

Decentralization, like the kind advocated by blockchain startups and cryptocurrencies, allows users to trade directly with each other without having to go through a (predatory) middleman. Decentralized systems not only help participants avoid unnecessary fees, red tape and other forms of unwanted intervention, they are virtually impossible to shut down. In this vein, decentralized currencies give people a fighting chance in their battle against never-ending inflation. As we’ve argued before, this is not only a prudent fight, but a noble one as well.

Cryptocurrencies that rely on decentralization offer society a unique value proposition unlike anything we’ve seen in recent history. What’s more, their adoption is not contingent upon us leaving the realm of traditional finance – at least, not yet. That’s because cryptocurrency started off as an obscure and esoteric asset class but has since become a value store for investors. Tomorrow, it will become a viable medium of exchange accepted worldwide.

That said, we are still in the very early days of the crypto revolution and it may be a while still before we can conclusively prove people like Dimon wrong. But crypto backers and investors should take comfort in knowing that big banks rarely lead in disruption these days. They have the resources to play catch-up, which they are clearly doing with blockchain.

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 455 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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