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SEC Halts Trading in Crypto Co Over Possible Price Manipulation

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It didn’t take long for the U.S. Securities and Exchange Commission (SEC) to spot shady behavior in the cryptocurrency market. The U.S. regulator has reportedly shut down trading in shares of The Crypto Co over concerns of price manipulation.

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Crypto Co’s Stock Spikes

Trading in Crypto Co, a California-based cryptocurrency consultancy, have been suspended temporarily after share prices surged 2,700% in a month, raising red flags among the nation’s regulators. The suspension will continue until Jan. 3, according to the SEC, which issued a statement Tuesday on the matter.

Regulators expressed concerns about the “accuracy and adequacy of information in the marketplace about, among other things, the compensation paid for promotion of the company, and statements in Commission filings about the plans of the company’s insiders to sell their shares of The Crypto Company’s common stock.

The SEC also acknowledged that, “Questions have also arisen concerning potentially manipulative transactions in the company’s stock in November 2017.”

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Prior to the suspension, Crypto Co’s share price was valued at $575 for a total market cap of $11 billion.

On Dec. 4, the company announced the launch of its cryptocurrency trading platform. The company was officially incorporated in March of this year before going public three months later.

According to Bloomberg, the company recently disclosed a private stock sale to accredited investors at just $7 per share, which is only a fraction of the closing price when the shares were suspended.

Regulatory Clampdown

Although clearly on the SEC’s radar, Crypto Co’s story is hardly unique in a market that has witnessed unprecedented gains over the past 12 months. The cryptocurrency market extends far beyond bitcoin to include more than $620 billion in virtual currencies and hundreds of initial coin offerings (ICOs) attracting billions of dollars in investment.

That being said, Crypto Co isn’t the first blockchain company to have its stock suspended by the SEC. Back in August, the regulator suspended trading in three stocks over concerns about the issuing companies’ ICOs. The SEC has been highly critical of tokens that operate like securities.

Prior to the SEC’s crackdown, market operator OTC Markets Group was also investigating Crypto Co. OTC Markets head Cromwell Coulson warned investors to exercise extra caution when selecting stocks in a highly volatile sector such as 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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Fed Official Says Bitcoin Not a Credible Threat to the Dollar, but Is That True?

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Bitcoin may be the most groundbreaking asset in the market today, but it is no match for the U.S. dollar, according to Minneapolis Federal Reserve President Neel Kashkari.

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 Not “Credible” Enough

In a public appearance in Minnesota Tuesday, Kashkari said bitcoin and other cryptocurrencies do not post a significant threat to traditional fiat system. In his view, virtually anyone can create their own coin, but none can replace the greenback as a universally accepted unit of exchange.

“I don’t see bitcoin as a credible competitor to the dollar in the United States of America, and the reason is the barrier of entry to you creating your own coin and me creating my own virtual currency … is zero,” he said, as quoted by CNBC.

Although Kashkari didn’t talk about volatility, those who share his views felt vindicated on Tuesday as the cryptocurrency market crashed. Bitcoin and hundreds of other digital currencies underwent a huge correction as South Korean regulatory fears dragged the market sharply lower. At its lowest point of the day, the total market cap lost around $190 billion.

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Kashkari was a voting member of last year’s Federal Open Market Committee (FOMC), where he opposed raising interest rates. Investors refer to policymakers like him as “doves.”

Dollar vs. Bitcoin

Of course, Kashari’s sentiment is not unlike what you’d expect form government officials, mainstream media and traditional financiers. However, if the cryptocurrency revolution has demonstrated on thing, it’s that governments and big banks do not hold a monopoly over value. Just as the bitcoin protocol requires a consensus for any change to be implemented, its value is based on what people believe it is worth.

That’s not to say bitcoin isn’t or hasn’t been overpriced. Many people have made a compelling case why bitcoin is overvalued. But that in itself does not negate the power and possibility of a decentralized exchange system.

Kashkari is correct in implying that bitcoin isn’t universally accepted. Unlike the greenback, it has struggled for mainstream acceptance as a unit of exchange. That’s a problem the blockchain community is still sorting out.

That being said, bitcoin and other cryptos hold a number of advantages over fiat currencies like the dollar. For starters, bitcoin is decentralized, which means it gives power to common people rather than the big banks. We don’t need to elaborate on why this is a benefit to all of humanity.

Bitcoin’s appreciation is also far more attractive than the dollar’s inflation. Remember: rising prices are the affect of inflation, whereas inflation itself refers to an increase in the amount of currency available. The dollar’s value has declined sharply since the Second World War as more greenbacks entered circulation. So, while there are more dollars, they are worth less.

While bitcoin may have transaction issues, the token is much easier to transfer anywhere in the world. This is even true for large transfers, which usually take fiat money and the banks several days or more to process.

So, while bitcoin may not be a credible threat to the dollar at this stage, it or some other cryptocurrency like it may become a viable contender in the not-too-distant future. Central bankers may not realize this, but they have been keen to experiment with blockchain technology, bitcoin’s underlying infrastructure. This suggests the cryptocurrency revolution has something for everyone.

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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