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Three Reasons BIS Crypto Rebuke Is B.S.

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What a difference a week makes. Traders in recent days have found more reasons to celebrate cryptocurrencies than to fear them, despite the best efforts of central bankers. The combined market cap of the cryptocurrency market is hovering at more than $293 billion, top digital currencies are trading in a sea of green and investors who sold too early are kicking themselves.

As Hacked.com previously reported, the Bank for International Settlements (BIS) published a scathing report on the cryptocurrency industry, rehashing old arguments against decentralization and adding more fuel to the fire. But there are chinks in the armor of their argument, much of which surrounds a lack of trust, extreme volatility and cryptocurrency mining power consumption.

Ripple’s Brad Garlinghouse recently reminded us that bitcoin is not a panacea. The BIS report, however, is full of bias and fails to acknowledge that for every issue that bitcoin faces there are fixes, such as a push toward alternative power-fueled bitcoin mining as well as KYC and AML efforts among the leading exchanges.

Cryptocurrency trader Brian Kelly on CNBC outlined a trio of reasons to doubt the findings of the BIS report, which are summarized below.

  • Crypto Threat

Kelly points out that the very reason that bitcoin was created in the first place was as an alternative to the centralized financial system. That in and of itself places a bullseye on the back of bitcoin, even though central banks have explored developing their own digital currencies. He said: “Bitcoin itself is an existential threat to the central bankers.”

  • Old School vs. New School

The other secret that the BIS report reveals is the old-school mentality that central bankers are stuck in. Kelly likens it to the rise of digital news versus traditional newspapers, reminding us of the early 1980s when it took a couple of hours to download an article on the San Francisco Examiner. He calls it “new guard/old guard” but also concedes that the cryptocurrency market, e.g. prices, probably got far ahead of the technology.

  •  P2P Nature of Bitcoin

Lastly, it’s the peer-to-peer nature of bitcoin, which again removes the friction from payments as well as the hefty fees and lengthy transactions that are attached to them. “The middleman in this particular case is the BIS and the central banks,” Kelly said.

While bankers may feel threatened by decentralization, it’s not the other way around. Blockchain pioneers have repeatedly said that there’s room enough for both.

Market Rally

Cryptocurrency traders have glossed over the BIS report not because they aren’t willing to listen to reason. Instead, it’s more like the central bankers failed to accomplish much other than to point to the flaws in a nascent decentralized financial system without acknowledging the drawbacks of their own.

Meanwhile, the best defense is a good offense, and today’s cryptocurrency market rally is a big score.

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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4.6 stars on average, based on 61 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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  1. jksmith815

    June 20, 2018 at 5:32 pm

    You are being too nice… “chinks in the armor” should be replaced with “gigantic sinkholes” and “reasons to doubt the findings” should be replaced with “reasons to puke on the findings”.

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Cryptocurrencies

2018: Year of the Crypto Fund

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A protracted bear market in cryptocurrencies has not deterred hedge funds and other institutional players from entering the digital currency space. According to new research, 2018 is shaping up to be a record year for crypto funds, with the number of new ventures growing steadily.

Crypto Funds on the Rise

A total of 96 cryptocurrency funds have launched this year, according to Crypto Fund Research, putting the market on track to outperform last year’s pace of 156. The Rohnert Park, California-based research firm expects there will be a total of 165 crypto hedge funds launched this year.

“We expected a large number of new crypto funds to launch in 2018 to satisfy growing investor demand.” said Josh Gnaizda, founder of Crypto Fund Research. “However, the pace of new fund launches is a bit surprising given the dual headwinds of depressed prices and less than favorable regulatory conditions in many regions.”

If 2017 was “the year of bitcoin,” 2018 is shaping up to be the year of the crypto fund, Gnaizda says. There are now 466 cryptocurrency funds around the world, with more than half coming into existence over the past 18 months.

Pantera Capital, one of the earliest and most well known funds, boasts a lifetime return of 10,000% investing in digital assets.

Crypto funds are also proving popular among Chinese investors, who are barred from investing in digital assets in their home country. As Hacked reported in June, Chinese nationals have made Singapore their destination of choice for launching token investment funds.

The researchers claim that crypto hedge funds are the fastest growing segment of the market, accounting for more than half of the total. A total of 252 funds are located in the United States, followed by 34 in Hong Kong and 29 in the United Kingdom.

Protracted Bear Market

Although the rise of crypto hedge funds is evidence that more investors are taking interest in digital currencies, failure rates are likely to rise if bear-market conditions persist.

“While volatility in the crypto markets can attract some investors to sophisticated crypto funds. It remains unclear if the industry can support such a large number of funds, with limited track record, if we experience an extended bear market,” Gnaizda added.

The cryptocurrency market is once again becoming synonymous with bitcoin as traders cut ties to more speculative altcoins and tokens. At the time of writing, bitcoin’s dominance rate, or the share of the total market capitalization held in BTC, was 51.9%.

After a minor recovery, coin values were down again on Monday. According to CoinMarketCap, the total value of all coins in circulation is $210.5 billion. Last week, the market bottomed near $207 billion, the lowest in a year.

A look at the technical charts reveals little evidence that a bullish reversal is imminent. However, fundamental developments have been positive with banks and stock exchange operators announcing big plans to enter the 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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4.6 stars on average, based on 606 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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Altcoins

Predicting Bitcoin Returns with Momentum Effect and Investor Attention Effect

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Yale economists have proposed a new model for predicting bitcoin’s future valuation based on historical price data and Google search queries. According to the researchers, momentum and investor attention are the two key factors that can enable market participants to accurately predict future returns.

Predicting Bitcoin

In a newly published study called “Risks and Returns of Cryptocurrency,” economists Aleh Tsyvinski and Yukun Liu claim the Momentum Effect and Investor Attention Effect can accurately predict the future valuation of leading cryptocurrencies like bitcoin, Ethereum and Ripple XRP.

The Momentum Effect

The Momentum Effect essentially states that cryptocurrency prices are more likely to continue rising following a significant breakout. For example, a large rally in bitcoin one week is likely to generate continued growth the following week. In this vein, momentum applies to cryptocurrencies in the same way it does to stocks, bonds and currencies, though the size of the rallies are usually much larger tha conventional assets

“Momentum is actually something simple,” Tsyvinski said in an interview with CNBC. “If things go up, they continue to go up on average, and if things go down, they continue to go down.”

The researchers believe that the best strategy for making money in crypto is to buy an asset after its price has already spiked and sell it just seven days after purchase. Using this strategy, a trader can still make an average of 11% on bitcoin even if they bought it following a 20% increase.

Tsyvinski explained that the Momentum Effect was stronger for bitcoin than for Ethereum or XPR, although still statistically significant for the latter two.

The Investor Attention Effect

The level of interest and hype around cryptocurrencies also plays a significant role in predicting price movements, the researchers claim. The Investor Attention Effect measures Google and social media search trends for terms like “bitcoin” “Ethereum,” and “cryptocurrency.” The higher the search results, the greater the chances of rising prices.

“For weekly returns, the Google search proxy statistically significantly predicts 1-week and 2-week ahead returns,” the report says.

This is not unlike what Hacked has reported several times before: Google search trends for crypto keywords are positively correlated with rising values. In June, we reported that Google searches for “bitcoin” had fallen to nine-month lows, a sign that first-time buyers were no longer flooding the market.

Google search trends gave “bitcoin” a perfect score of 100 back in December, around the time that BTC was trading at all time highs. Our view at the time was the following:

“Bitcoin’s bull market was largely predicated on the arrival of new traders buying cryptocurrency for the first time… Without new first-time buyers entering the market, bitcoin could face a prolonged lull period characterized by sideways movement and false breakout patterns.”

That outlook has largely panned out in the midst of multiple peaks and troughs.

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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4.6 stars on average, based on 606 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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Research

Over Half Of All ICOs Failed In Q2 2018 Market

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Icorating.com, a high-quality source for independent research into the ICO market, has published their quarterly analysis of ICOs.

There are several important findings in the report, but perhaps none more notable then the fact that 50% of ICOs failed in Q2. Icorating.com attributes this mainly to the fact that half of the projects couldn’t raise more than $100k.

Another important finding was the fact that only 7% of all announced ICO tokens were able to be listed on exchanges. They also found that there was an average 6-day listing time increase compared to last year for tokens on exchanges.

The general view of this report seems to be an increasing bifurcation of success and failure. The projects that hold successful fundraises raise enormous sums, (with EOS being the most obvious example). The ones that don’t, tend to flame out.

This is reinforced by data in the report that the top projects raised an average of $50,000,000 during the ICO. While this is an eye-popping sum, it’s worth noting that the report mentioned that average ICO duration increased by 10%. This is presumably indicative of an ICO market that is becoming less of a Wild West.

Interestingly, the actual number of projects who had an already-operating business represented only 15% of the total ICOs.

Although there does seem to be a common view in the crypto landscape that the days of just holding an ICO with a white paper and idea alone are over, the data in the report showed that whether or not an ICO was held by an existing business in Q2 had zero impact on whether or not the fundraiser was successful.

Whether this is a reflection of a still-new market that has not yet adopted accepted funding norms remains to be seen. But it does give hope to promising projects without sufficient capital, (which in theory was the entire purpose of ICOs in the first place.)

That said, projects in the idea stage did tend to aim for (and raise) less money then those with existing businesses. Specifically, these idea stage projects raised an average of $4.5 million USD/raise.

The vast majority of funding for projects came from North America, 64.67% to be exact. Asia-based projects meanwhile showed an increase in funds raised, but also showed fewer projects seeking capital overall.

This could suggest an approach of “quality not quantity” in the region, although the truth of this remains to be seen as the projects rollout.

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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4.6 stars on average, based on 18 rated posts




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