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The Mt. Gox Timeline and What It Means for Today’s Trader

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There are a lot of weak hands in the market right now. We are below $10,000 BTC, and a lot of people are playing with short term money. The SEC has announced exchange registrations and Japan has started suspending exchange activity for regulatory reasons. Both things will make weak hands dump. However, the fundamentals of each coin that you and I like have not changed. Ripple has come out with more news in the past two weeks than Kim Kardashian, and we have only seen negative performance. This is a waiting game. I feel like a broken record, but I cheer for low prices in events like these. Who cares what happens in March? You are going to be holding until December anyway. My only theory behind all this volatility is immaturity.

I have a lot of millennial friends who invested in cryptocurrency and complain about its drop, and say they should have never have gotten into it in the first place. This is the first time they have lost money, and they don’t know how to handle it. They want their money back, so they listen to YouTube videos, sell their large-cap coins for ICOs and dog coins, and eventually lose more money. I don’t know how to help these people, and I just wish they would leave. The U.S. stock market doesn’t act like this. They have mature people who hold onto strong businesses, and don’t have stop limits on every single thing they own.

Immaturity doesn’t stop on the buy side. Exchanges have been victims to hacking, fraud, and manipulation. What other industries can run a modest website where millions (billions) of dollars are transacted? No one is prepared for the type of security issues that can arise with this type of volume and complexity. This is purely a reactive environment on the exchange side, as the true geniuses of blockchain are constantly testing new holes in their offerings. Mt. Gox was the poster child of cryptocurrency immaturity. Not only was security lax, the ownership was constantly confronted with temptation for financial gain through an array of fraudulent channels.

I wanted to go through the timeline again, and see if this type of behavior is truly going to be extinct moving forward. Almost all pundits within the cryptocurrency community complain about regulations and centralization, while also wanting mainstream adoption. If there are no guard rails to prevent another Mt. Gox, then thinking someone would bring their retirement savings on to the blockchain is naive. Disclosure: I have taken 95% my coins off of all exchanges, and I instruct you to do the same.

Background

Mt. Gox (Magic the Gathering Online Exchange) was started to trade Magic the Gathering Cards. Jed McCaleb (Ripple, Stellar) designed the exchange in 2006 in the belief that this would be an easy way to trade Magic Cards like stocks, instead of the traditional meet-up trades. Eventually Jed moved on from this project, only to return for a different reason in July 2010. He had read about bitcoin, and launched an exchange and price quotation system on the same domain as his former exchange: Mt. Gox.

2011

March: Having it less than a year, McCaleb wanted out. He wanted to focus on other projects, and lacked the capital  tomake it what it could eventually be. I believe this was an emotional decision for Jed. Clearly, this business could have made him wealthy beyond his wildest dreams with funding I’m sure he could have gotten. I think he wanted to build something instead of run something, and I am an investor in Stellar because of actions like this throughout Jed’s timeline.

McCaleb sold to a French developer living in Japan named Mark Karpeles. Before Mt. Gox, there is limited information other than he was a PHP developer who founded his own tech company in 2009. Jed received 12% of the newly incorporated company, and went on his way.

June: The first hack. Through an auditor’s computer, the hacker was able to change the value of bitcoin to a nominal value $.01, in which he sold them all to himself and transferred out. After the hack, there were first responders who had a financial interest in keeping this exchange up and running. The most notable two were Roger Ver (bitcoin cash) and Jesse Powell (Kraken exchange), who tried to work tirelessly to get the Tokyo-based exchange up and running again. Karpeles took time off the weekend following the hack, and even worked on non-relevant projects while people were trying to help his business succeed. These were the warning signs.

2013

Winter/Spring: After the hack in June, Mt. Gox seemingly began to flourish. The price of bitcoin began to rise, and there were only two owners of the exchange – Karpeles at 88% and McCaleb at 12%. This manifested itself lavish spending in Mt.Gox’s Shibuya neighborhood office space, and egos that were growing a little too large. Mt.Gox controlled 80% of bitcoin trading volume, and were getting mainstream attention.

The tech problems were beginning to show, however. The website was bare bones for the amount of volume that it was handling. It just recently launched a test environment for the first time, when before the untested code was immediately launched live (a hacker’s paradise, I am sure). The source code could also only be changed by one person, Mark Karpeles. For even simple fixes, all of it had to go through him first, which would make lag time on security/operational projects grow exponentially.

Fall: This was the first time that Mt. Gox met the SEC. After a sour business deal with an American business partner CoinLab led to a $75 million lawsuit, the SEC began looking into what exactly Mt. Gox was. This will sound eerily similar to today- The SEC said it was an unlicensed money transmitter. A $5 million American-based company bank account was seized, and this was the end of anyone wanting to play in  the American’s sandbox. We still see the remnants now. ICOs and exchanges try to limit their exposure to U.S. jurisdiction, as they watch Coinbase, Kraken, Gemini and the like deal with far more scrutiny than their neighbors. With U.S. investors complaining of delays and red tape, the darling of bitcoin exchanges fell to no. 3 from no. 1.

2014

Karpeles has been focused on a solution to his problems. That solution was a bitcoin cafe. While his company was in major disarray from all fronts, he spent an estimated $1 million on a cafe in the Mt. Gox offices that would use a cash register that he “hacked” to accept bitcoins. It was rumored that he spent all of his time on things not related to the major problems, as a 29 year-old with little to no experience was running a failing multi-million dollar enterprise with too many problems to solve for one owner.

February: The exchange stopped paying out customers in bitcoin, citing flaws in the digital currency. This set off the usual suspicions that the company had become insolvent. On Feb. 24, 2014, the exchange went offline, and a document was leaked that outlined a years-long $450 million (Approx. 850,000 coins) hack of bitcoins that went completely undetected. By Feb. 28, the company had filed for bankruptcy protection in Tokyo and the United States.

2015

Karpeles was arrested in August 2015 for embezzlement and manual manipulation of his own exchange. The trial of Mark Karpeles led to many new developments.

BTC-E: M0st of the stolen coins from the Mt. Gox exchange landed on a Russian-owned, Tokyo-based exchanged called BTC-E. The arrest of the exchange’s suspected owner was made by the FBI in Greece, and for the first time ever the U.S. had seized a foreign domiciled exchange. An investigative firm comprised of developers and Mt. Gox creditors released a report outlining that BTC-E acted as an exchange to launder the stolen Mt. Gox coins. The connections that the suspected BTC-E mastermind may have on his laundering clients, and the ones he’s willing to disclose, still remain unknown.

Willy Bot: During his trial, Karpeles admitted the existence of a “Willy Bot”, which was a trading bot that he said was built to stabilize the market. As it turned out, the Willy Bot may have been responsible for artificially increasing the bitcoin price, as it’s trading limits were beyond the scope of normal transaction volume in Bitcoin at the time.

2017/18

The trial of Mark Karpeles goes on. Mt. Gox’s assets in bankruptcy were mainly focused on a”found” number of 200,000 bitcoins that were on a cold storage device. Under Japanese law, bitcoin is not a tangible thing to give to creditors in the event of a liquidation. After Japanese courts ruled against providing a former Mt. Gox customer his/her bitcoins instead of the cash value at the time insolvency, that meant that the customers would not receive the exponentially more valuable bitcoins at current market prices.

The trustee of the bankruptcy liquidation, Nobuaki Kobayashi was in charge of selling the bitcoins at current market prices to pay off creditors. The litigation was still ongoing, so Kobayashi was tasked with the challenge of when to sell the coins to protect creditors from losing their full principal, while also giving them a chance to fight for the rightful ownership of the coins rather than cash at bankruptcy valuations.

It was found the trustee “Panic-sold” $352,000,000 in BTC and $45,000,000 in BCH over December 2017 through February of 2018, with most sales being at the bottom. With only 17,000,000 in supply, selling such large portions during volatile periods hurt everyone.

Conclusion

The true benefactor of the entire Mt. Gox saga may end up being Mark Karpeles. Being the 88% owner of Mt. Gox, the sale of the 200,000 bitcoins would be more than enough to pay back all creditors and investors at current prices, and leave a substantial sum for himself.

I can’t seem to find a reason why this exact scenario couldn’t happen again. The SEC has just begun watching, and government watchdogs aren’t equipped to handle the deep technological behavior happening on decentralized exchanges. ICO regulation is the easy part. They can find a website and shut it down. But when most of the volume from coins is coming from exchanges that have unregulated owners, there is no telling what can happen. This is a product of decentralization. A completely free market will come with bad actors who have the means to harm others. We’ve seen it with Mt. Gox, Coincheck/NEM, countless ICOs, and the list will go on. This is the first time a truly free market exists for the entire internet. I don’t think there is much people can do about enforcing rules, especially right now.

My response to this research is instructing everyone to buy Ledger/Trezor, and go offline. Why did you buy all these coins? Was it for profit in two months? If so, I am the wrong person to be listening to. I own very few coins, and they are under my complete control (knock on wood). Mt. Gox will not be an isolated issue, and there are plenty of scams taking place that we will all find out about over time. There is a (99%) solution, so please use it.

 

This is not a recommendation to buy or sell cryptocurrencies, but is certainly a recommendation for cold storage. Be careful, and trade safe. Best of luck.

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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  1. adrien

    March 11, 2018 at 12:57 pm

    Good article ! I’ve read that too : Mt. Gox Trustee Kobayashi still has 162k BTC valued roughly around 1.8 Billion USD to cash out at his own discretion.

    Track the cold wallet below:
    https://gaelb.alwaysdata.net/MTgox_watch_CW/index.html

    They are waiting for final judgement on Civil Rehabilitation proceedings. However, the court date is unknown to all parties. If it invokes this act, which conditions have been fulfilled by raising enough to cover the initial insolvency loss, the remaining BTC will be distributed to the creditors themselves (Mt. Gox shareholders).

    This is good news and bad news, as this is still a very grey zone. The trustee Nobuaki Kobayashi continues to state he can sell off BTC at his own discretion, legally claiming to follow the bankruptcy law verbatim.

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Bitcoin

Morgan Chase’s JPM Coin: A Banker’s Intranet, or the First Major Attack on Bitcoin?

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JP Morgan Chase unveiled plans for its JPM Coin on Thursday, sending the cryptocurrency universe into equal fits of both rancour and rapture.

While some see institutional adoption of cryptocurrency as the most bullish news of 2019, many are not quite sold on the concept; and some are already fearing the emergence of a ‘Ripple Killer’ or even a ‘Bitcoin Killer’.

As ever, the truth is probably more subtle, and more interesting than the sensational headlines suggest.

JPM Coin ‘Would Have Pumped BTC’ In Bull Market

At the most extreme end of the enthusiasm spectrum we have the assertion by one ‘crypto influencer’ on crypto-twitter that JPM Coin would have have positive effects on Bitcoin in a bull market scenario.

“This JP Morgan news would have pumped $BTC $1000+ in a bull market…”

Of course, a $1,000 increase when BTC’s priced at $20,000 is very different from when BTC’s priced at $3,000. One would equal a 5% increase, and the other a 33.3% increase – but let’s not deprive influencers of their fun and games.

One thing that influencers are good for is that the following they attract (43k in this case) can be put to good use. The poll below, taken from a relatively large sample size, shows that opinion is split on what JPM means for the broader crypto market.

Poll results showing response to JPM Coin.

But let’s bear in mind that all that really happened was a new stablecoin was announced. The concept of it having a bullish or bearish effect on the cryptocurrency sphere is a loose one.

Bitcoin and Ripple Killer?

Any notion of JPM Coin being a Bitcoin killer was put to bed pretty quickly in this takedown by CCN’s P.H. Madore: Why JP Morgan’s ‘Bitcoin Killer’ Isn’t Even a Real Cryptocurrency – but that didn’t stop panic from spreading initially.

Where panic might be more readily directed however is in the vicinity of Ripple and XRP. Not to underplay some of Ripple’s payment solutions – which have already been massively adopted – but if major institutions now have the choice of doing business with JP Morgan Chase, or the often controversial, and relatively unknown Ripple Labs, which one are they more likely to choose?

A Banker’s Intranet?

Cypherpunk and maintenance man for one of the internet’s prime hubs of blockchain info, Jameson Lopp compared JP Morgan Chase’s stablecoin to private bankers intranets of the early 90s. He said:

“Banker stablecoins are a step forward, just as banker intranets were in the 1990s. Adoption of this technology will make the transition smoother when they are forced to capitulate and adopt the Internet of Money.”

This is probably a fairer assessment of the situation, and one that gives room for nuance – although the nuance is shattered by the cock-sure assertion that Bitcoin will become the internet of money.

Speaking of bankers intranets – one can imagine internet diehards complaining in the early 90s that the bankers were taking over their thing – their apparatus for freedom, from censorship and surveillance by corporations and the state – and that soon the internet would be taken over by the very people they had hoped to escape.

But that didn’t happen… did it?

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 144 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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Solve.Care Has Potential to Transform the Field of Healthcare Administration

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The last few years have been a crazy ride in the crypto markets.  We’ve seen both the buying frenzy and the panic selling.  Although the industry has a lot of potential, it is undoubtedly true that many projects will fizzle out during the next 12-24 months.  Traders need to carefully analyze projects that have the best chance for real world adoption.  Part of the analysis certainly needs to center around projected industry growth.  One of the areas in desperate need of transformation is healthcare administration and Solve.Care may have just the solution.

Problems with Traditional Healthcare

Healthcare administration around the world has become plagued by inefficiencies and soaring costs.  Global spending on health exceeds $8 trillion annually and is expected to increase to $18 trillion worldwide by 2040.  In the U.S. alone, up to $1 trillion is wasted through administrative costs, over-utilization, and fraud.  Much of this waste is due to an obsolete and cumbersome healthcare system.  These issues have placed a massive strain on patients, doctors, and system administrators for far too long.

For doctors, one of their major complaints is the amount of time spent completing paperwork and dealing with insurance companies.  For patients, one of the major complaints is lack of face time with their primary care physicians.

Change is definitely needed and that’s where Solve.Care comes into the picture.

What is Solve.Care

Solve.Care is a transformative healthcare administrative platform designed for use by patients, employers, doctors, healthcare groups, and insurance businesses.  This platform is the first to use blockchain technology as the underlying distributed ledger for all care events between patient, doctor, pharmacy, laboratory, insurer, and other parties.

Patients are encouraged to manage their healthcare decisions.  Employers can use the platform to administer benefits, reduce costs, and reward their employees.  Doctors and hospitals can issue prescriptions, manage appointments, and coordinate with a specialist.

The platform has the potential to save billions of dollars in annual costs by better coordinating all the normal healthcare administrative operations and thereby eliminating all the inefficiencies.

Prior Accomplishments

Solve.Care completed it’s token sale in May 2018 and has since had its token, SOLVE, listed on Bittrex and KuCoin.  The company sold 350 million tokens with a 100% subscription rate.  That certainly speaks to the demand of both the token to use Care.Wallet and the platform’s potential for real world adoption.

The company had made it a priority to hire some of the best talent in the world.  More than 100 people are currently working in the company with approximately 70 of them being engineers.  The engineers are making rapid progress as the platform is being continually expanded and improved.

Whenever new technology attempts to disrupt an industry hanging on to outdated software and practices, it is imperative that startup companies have the right leadership.  Fortunately, Solve.Care appears to have someone very capable at the top.  The company is led by Pradeep Goel, who has been in the CEO, COO, CIO and CTO roles at various technology companies over the past 26 years.  Pradeep has a wealth of knowledge from both the private and public sectors, most notably from his time designing and building solutions for public programs such as Medicaid, Medicare, and SNAP.  Pradeep has also been named in the Goldman Sachs list of the top 100 entrepreneurs in the world.

The company has a growing pipeline with more than 25 clients and partnerships.  Perhaps the most impressive of which was the recent deal struck with Arizona Care Network.

Arizona Care Network Partnership

Solve.Care has a proven track record of developing blockchain-based healthcare solutions and introducing them to the U.S. healthcare market.

In February 2018, Solve.Care announced a multi-year contract for its decentralized healthcare administration platform with Arizona Care Network (ACN), one of the largest accountable care organizations in the United States.  ACN manages value-based care contracts for its network of more than 5,500 physicians covering more than 250,000 members.

David Hanekom, CEO of Arizona Care Network, had this to say about the partnership:

“ACN is focused on innovation in the healthcare industry and seeks to be the leading technology-enabled ACO in the U.S.  This is why we chose to partner with Solve.Care, a true innovator in the healthcare administration and payments sector.  Solve.Care brings a lot to the table in terms of their ability to simplify and decentralize complex processes related to value-based care delivery and payments.  We couldn’t be more excited as a result of this partnership and look forward to launching the platform with our providers and members.”

Since that announcement, Solve.Care has continued to innovate with the launch of Care.Wallet for Physician and Care.Wallet for Family.

Care.Wallet for Physician Development

Care.Wallet for Physician, launched in October 2018, allows the providers of the Network to track the successes and overall score, while receiving corresponding rewards according to the Provider Rewards Program.  These value-based payments inside the network of 5,500 physicians are happening with the healthcare digital currency, Care.Coin.  It is important to note that Solve.Care is the first company to implement digital currency and blockchain technology for value-based payments in the U.S. healthcare industry.

Conclusion

Of all the industries, I can’t think of any that needs a complete overhaul more than health administration and care coordination.  With soaring costs and an aging population that will need quick and easy access to care in the coming years, this is an area that could see a lot of innovation in the near future.  Solve.Care is already doing its part to transform the industry, and will no doubt reap the rewards for its innovative spirit.

 

 

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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Gold Rush 2.0: Who’s Selling Shovels to the Bitcoin and Cryptocurrency Pioneers?

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There’s an old saying that goes something like: “During a gold rush, sell shovels.”

At the height of the California gold rush, the most profitable venture (on average) was not mining for gold itself, but selling the tools that facilitated the mining of gold.

The legacy of this fact is still present even today – your Levi jeans are a product of Bavarian immigrant Levi Strauss, whose business boomed when he began manufacturing tough, durable trousers specifically for gold miners.

While adventurers took to the hills in search of their fortunes, the more conservative personalities found a way to make money from the process before a pick-axe even struck the soil.

So who are the ‘shovel sellers’ in the cryptocurrency space?

Exchanges

By the second quarter of 2018, Binance had already become more profitable than Germany’s Deutsche Bank. That was less than a year after launch, and the exchange’s meteoric rise was such that the likes of Forbes and Business Insider began writing about the likelihood of $1 billion yearly profits being recorded by CZ and the gang in 2018

By the end of the year those profits ended up being closer to half a billion, and Binance’s BNB utility token was the only major altcoin to increase in value from 2018 to 2019.

Although exchanges aren’t in the business of selling physical tools essential to cryptocurrency mining or usage, they do occupy a gatekeeper role similar to local goldsmiths in the old west. Yes, gold miners could just keep their bounty to themselves and use it (with some difficulty) as its own self-contained currency. But if they wanted to exchange it for an equivalent value of fiat currency, then they’d have to go through a confirmation and notarization process – one which would require some form of KYC, and would ultimately demand a percentage fee.

With the presence of authority-less services like Local Bitcoin, and a recent increase in the number of decentralized exchanges, it may seem surprising that one of the most profitable gigs in the cryptocurrency space happens to be that of a centralized exchange.

However, this phenomena makes a little more sense when viewed through the lens of human nature: Read: 5 Things Cryptocurrency and Blockchain Investors Should Beware of in 2019.

Mining Tools

Perhaps the most obvious example of ‘selling shovels’ to the crypto space comes from the mining hardware industry.

Bitmain Technologies Ltd has already earned its co-founder and CEO, Micree Zhan, an estimated $4 billion in profit – all from selling mining equipment to would-be cryptocurrency prospectors.

Towards the end of last year Bitmain announced its intention to undergo an initial public offering (IPO) – predicted to be worth an estimated $18 billion if it goes ahead. There are some obstacles to overcome before that can happen, such as gaining the approval of Hong Kong’s financial regulators.

But with that kind of money flying around, there’s a good chance Bitmain could become the modern day Levi. Even if crypto mining fades out due to concepts like Proof-of-Stake, we’d most likely see Bitmain continue to sell shovels of some kind, even if it were just general computing technology.

Bitmain’s estimated worth if the IPO goes ahead will eclipse the market capitalizations of Ethereum (ETH), Litecoin (LTC), EOS (EOS) and Bitcoin Cash (BCH) combined – possibly the best example of ‘selling shovels’ since the gold rush itself?

Storage

Cryptocurrency can be stored safely on its native blockchain without too much trouble. However, if you want to gain access to your funds in order to spend it, divide it, or move it from place to place, then you’re going to need a wallet service of some kind.

Many free software wallets exist for this purpose, however not all of them can be trusted. The most secure way to store cryptocurrency is with a hardware wallet.

The popularity of the secure storage service offered by Trezor is such that it had become a multi-million dollar industry by as early as 2017. That’s the same year the company had to issue an apology to its customers after it ran out of stock due to high demand, when a spike in the value of BTC saw a sudden influx of Trezor orders:

“With much regret, Satoshi Labs would like to inform you that due to the exceedingly high and unanticipated demand associated with the increase in bitcoin value, our stock at TREZOR Shop has been depleted. We would like to sincerely apologize for this inadequate foresight related to the development of bitcoin value. Production plans have been fixed and this situation should not occur in the future again.”

Ledger hardware wallets have proven just as popular in recent years, or even more so considering their compatibility with a higher number of cryptocurrencies. Meanwhile numerous would-be usurpers to the Ledger/Trezor dominance have also attempted to make their presence felt, with varying degrees of success.

Conclusion

In terms of pure profit, wouldn’t it be accurate to say that the people involved in the peripheral industries surrounding cryptocurrency have found more success than those involved in the main industry itself?

This also raises the question of just what the main industry is – is it mining? Is it trading? Is it purely the pursuit of profit? Or does all of this amount to no more than the setting of foundations for the true crypto use-case – i.e. it’s role as a global transactional currency?

Note that I didn’t mention the phenomena of ‘blockchain influencers’ and self-professed ‘experts’ – another booming industry that seeks to siphon off value from the main expedition; and one that also had its equivalency during the gold rush era.

When the global cryptocurrency market struck its all-time high on January 7th, 2018, its $835 billion valuation was worth 11% of the total value of all the gold ever mined (according to current gold prices).

If the value of cryptocurrencies continue to increase as the global supply available from mining continues to decrease (as predicted), then the gold rush isn’t anywhere close to being over – and it may be worth figuring out how to sell a few shovels of your own.

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 144 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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