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Nearly One-Fifth of Investors Used a Credit Card to Buy Bitcoin, LendEDU Survey Finds

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Investors desperate to get a piece of the bitcoin craze are using credit cards to fund their purchases, signaling that the the fear of missing out is possibly bigger than going into debt.

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Credit for Bitcoin

Nearly one-in-five (18%) investors used their credit card to buy bitcoin, according to a survey conducted by LendEDU. Of those, 22% indicated they could not pay off their balance after purchasing the cryptocurrency.

A total of 672 active investors participated in the survey, which was administered in December.

Investors who used credit cards to fund their crypto accounts were likely tantalized by bitcoin’s unprecedented growth over the last 12 months. The coin finished 2017 with gains of around 1,400%. Although it will be difficult to repeat those numbers, 2018 is shaping up to be another positive year for the world’s most actively traded cryptocurrency. That being said, LendEDU research analyst Mike Brown cautioned against going into debt to buy cryptos. This is “not a wise decision no matter which way it is spun,” he said in the report.

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He added: “There is no guarantee that bitcoin investment returns will be profitable in the long run, but one can guarantee that the credit card company will need to be paid back.”

The data showed that about 90% of those who hadn’t paid off their credit card said they plan on using the proceeds of their bitcoin purchase to do so.

Brown’s warning is even more relevant when we consider LendEDU’s audience of young people seeking information about student loan and financial aid news. The website recently ran an article dissecting a new report by the Consumer Financial Protection Bureau (CFPB) on credit. The report, which compiles two years’ worth of data on the consumer credit markets, found that Americans are spending more money on credit even though they held less credit cards than they did before the financial crisis. Over the past two years, credit card debt grew by 9%, the report showed.

The cost of financing credit card debt is expected to rise gradually as the Federal Reserve continues to raise interest rates. Interest rates on credit cards are more sensitive to the federal funds rate than other types of loans, such as mortgages.

The Fed will hold its next policy meeting at the end of January. Although no change is expected, policymakers said last month they expect three upward rate adjustments this 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.

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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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 tent 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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Kraken Cryptocurrency Exchange Back Online After System Upgrade

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Cryptocurrency exchange Kraken was back online Sunday after a series of troublesome upgrades disabled trading, withdrawals and other account features. The news comes amid widespread concern over the reliability of online cryptocurrency exchanges.

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Back Online

Kraken was back online Sunday following a lengthy upgrade to system infrastructure, according to a blog that was posted on the company’s website. The firm has guaranteed that all funds were kept secure during the downtime. All orders that were open prior to trade resuming have been canceled, with funds in open position returned to account holders’ balance.

The company also said new account verification will be delayed to give priority to tier upgrades. Like other crypto exchanges, Kraken operates a tiered verification system that unlocks new account features when the user submits more personal information.

Kraken apologized for the downtime and said it was needed to upgrade the platform’s trading engine. Based on the most recent blog posts, traders can probably expect more downtime in the future.

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“The scheduled downtime was to replace our old trading engine with a brand new trading engine – an improvement that customers have long asked for and that we have long been working hard on. We still have some more work to do before the new trading engine is as good as we want it to be, but this week’s replacement was an important first step to having a better trading experience,” Kraken said.

The brokerage, which is now the crypto world’s fifth largest, first announced the system upgrade on Jan. 10. At the time, the platform was scheduled to be offline for roughly two hours or “possibly longer.” The company also said withdrawals in all currencies will be on hold for “an additional 2-3 hours…”

Kraken said the delays were caused by “an elusive bug,” which was holding up the launch of its new trading engine.

Are Online Brokers Really Reliable?

Kraken isn’t the first cryptocurrency exchange to experience technical difficulties or go offline. Several major online exchanges have either halted trading temporarily or prevented new users from signing up due to the unprecedented surge in buying interest. High demand recently caused Bitfinex and Bitstamp to suspend new account registrations. Just three days ago, Bitfinex re-opened account signups, but limited registration to accounts with a minimum equity of $10,000 USD or its equivalent.

The list of exchanges that have been hacked is also growing, with Bitfinex and Bitstamp among those subjected to multi-million-dollar security breaches. South Korean exchange Youbit closed its doors and filed for bankruptcy last month after being hacked for a second time in a year. The latest security breach was worth 17% of the assets on the exchange, with the company’s court proceedings set to recoup only three-quarters of funds held on the platform.

Many brokers are beefing up their cyber defenses to mitigate against the growing threat of attack. However, this doesn’t change their attractiveness as a target. As cryptocurrency prices continue to rise, crypto exchanges will become an even bigger target for cyber criminals.

Security breaches, slow transactions and delayed withdrawals have made more investors weary about working with online exchanges. This growing discomfort reflects a similar trend in online forex trading – a market that has seen significant churn in service providers over the past decade. It’s exceedingly rare to find a forex exchange that has operated successfully for at least ten years. While the more established crypto exchanges appear more promising, they still have a long way to go in proving themselves.

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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Goldman Sachs Says Cryptocurrencies Could Make it as Real Money

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Bitcoin as a viable transaction medium may not be so far-fetched after all, according to Goldman Sachs Group. The investment behemoth touted the digital asset class as a valuable tool in regions inflicted with high inflation.

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Cryptocurrency as Unit of Transaction

Although bitcoin payments may be less viable in countries like the U.S., they could be an invaluable tool in regions such as sub-Saharan Africa, according to Goldman Sachs. In these regions, national currencies have lost significant value due to high inflation, leading to an influx of foreign notes. As Bloomberg notes, more than 90% of deposits and loans in the Democratic Republic of the Congo are made in foreign money. Zimbabwe, which faced one of the most dramatic episodes of hyper-inflation in history, has demonetized its national currency in the wake of the financial crisis.

“In recent decades the U.S. dollar has served its purpose relatively well,” Goldman Sachs strategists Zach Pandl and Charles Himmelberg wrote in a report that was quoted by Bloomberg Technology. But “in those countries and corners of the financial system where the traditional services of money are inadequately supplied, Bitcoin (and cryptocurrencies more generally) may offer viable alternatives.”

However, the analysts were quick to caution traders that more transactions in cryptocurrency wouldn’t necessarily lead to the same dramatic price gains of the last 12 months.

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“Our working assumption is that long-run cryptocurrency returns should be equal to (or slightly below) growth in global real output—a number in the low single digits,” they said. “Thus, digital currencies should be thought of as low/zero return or hedge-like assets, akin to gold or certain other metals.”

Efforts to make bitcoin more transaction-friendly resulted in a hard fork last summer that introduced bitcoin cash, a coin that now trades for more than $2,700. The dramatic rise in bitcoin has inspired thousands of other companies to launch their own cryptocurrencies. According to data provider CoinMarketCap, there are more than 1,400 coins on the market today. Forty-three of those companies have a market cap of $1 billion or more.

Goldman Sachs is venturing into the cryptocurrency market, according to sources quoted by Bloomberg. The investment manager plans to launch its own bitcoin trading desk by the end of June, becoming the first large Wall Street firm to make markets in digital currencies.

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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Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is concidered a failure either way.
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