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Why Government Regulation Will Fail

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The crypto markets have been buzzing lately with as much price volatility as ever.  The attention, as usual, often appears to be on how many dollars have been lost or what ginormous percentage loss has taken place.  There is all this talk about broken support levels and the urgent need of a price reversal.  

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Not to dismiss the importance of keeping everyone informed on the latest action, what about the underlying cause of investors running for the sidelines.  On the technical side one thing is certain.  The still pathetically slow transaction speeds of both bitcoin and ether magnify price spikes and corrections.  

That is what happens in illiquid markets.  Over time this will change but in the short run it is something that is part of daily life.  This alone is what makes it so difficult to apply classical Dow Theory based technical analysis to crypto.

Let’s Dig Into The Causes

When we look at cryptocurrencies in general, starting with bitcoin, one of the big questions is the future role of government will play.  It is not so much a big question as hundreds of little questions.

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The most relevant question in the past few months is the role of government in controlling cryptocurrency exchanges.  Back in September it was the Chinese closing local exchanges. Now it is the South Korean proposal to enact legislation that could have a similar effect.

From December peak levels, bitcoin has fallen more the 40%. At its low ether was down as much as 38%.  Neither price movement can be attributed to technicalities like profit taking.  It was the perception the governments in two of the big crypto trading countries hold some sort of absolute power.  In reality, this is a false perception and here are some of examples of their powerlessness.  

BTCC Shows Crypto Power

BTCC is China and the world’s first Bitcoin exchange going back to its founding in 2011. At one point last year China was the biggest source of demand for Bitcoin by some measures accounting for 40% of the global action.  Then China slammed down the hammer by closing local exchanges threatening BTCC very existence.

Survival – Revival

The story of BTCC is like a slap in the face to the Chinese government and a good example of their lack of power.  Just the other day, BTCC announced they had been acquired by a Singapore investment fund.  Very few terms were announced so there is more to be revealed but some things are obvious.

I am guessing that if a sophisticated Singapore investor is putting real money into BTCC they see a bright future. BTCC has since relocated to Hong Kong and re-registered in the UK.

BTCC already has the tools to become a global exchange.  For example its Mobi Bitcoin wallet supports over 15 languages and more than 100 cryptocurrencies.  Now with enhanced financial support, they are able outflank the powerful Chinese government.

The Korean Contradiction

Investors reading the news this month from South Korea learned about a legislative proposal to restrict exchanges domiciled in the country.  Judging from the negative price action, it would have been easy to suspect the government was banning ownership of cryptocurrencies.  That was never the case.  

In reality, South Korean exchanges were setting prices that any reasonable observer would consider egregious.  Regulating South Korean exchanges could help level the playing field for small investors and open up the crypto market to new investors. But, judging from the price action this month, you would have to expect government restrictions on ownership. That is not going to happen and here is why.

Korean Pension Funds Invested in Crypto Exchanges

Local news in Seoul are talking about the giant South Korean National Pension Fund holding investments in as many as four local cryptocurrency exchanges.  At just a few million dollars, it amounts to less than 1% of total SKNPF assets.  

Nevertheless, this amounts to a political embarrassment to any effort that would potentially diminish the value of the four exchanges in the SKNPF portfolio.  The South Korean Pension Fund is no slouch ranking as one of the largest in the world.  So their decisions could also serve as an example elsewhere in the world.

Lots of Sound And Fury, Signifying Nothing

Emerging markets like cryptocurrencies are inherently volatile and subject to a heavy dose of emotion.  The past two months have been good examples of how investors can read the headlines and react.  It is important to keep the true cost of trading on trading on headlines can be.  Under the new tax law long term investment is rewarded.  Short term profits can no longer be deferred by a swap into similar assets.  Five years from now will anyone remember the fears from Chinese or South Korea?

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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4.4 stars on average, based on 75 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Blockchain

The First Governmental Elections Powered By Blockchain Technology

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While blockchain technology can be used in countless different ways and applied in any possible industrial and/or governmental sector, not all of them have been explored so far.

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One of these yet unexplored regions is using the disrupting tech for elections, allowing users to vote in a decentralized fashion from anywhere at any time, while secured by blockchain technology.

United States’ West Virginia took the first step and started the first-ever government-run, blockchain-mediated vote globally.

In the primary elections that concluded on May 8th, blockchain voting was trialed on a limited amount of people, namely deployed military members and Americans eligible to vote absentee under the Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA), as well as their spouses and dependents.

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Participation in the trial was further restricted to voters registered in two of the state‘s 55 counties: Harrison and Monongalia.

Voatz, the company behind the voting system has created an application that basically allows you to vote regardless of your geolocation, while the company makes sure the person voting is eligible to do so.

If the trials prove to be successful and trustworthy, Mac Warner, the West Virginia Secretary of State, is considering making the system available to all UOCAVA voters registered in West Virginia for the general election this November.

He is expected to make the decision during this summer so that the process is as smooth as possible during the election period, already tested and “ready-to-go”.

“Our team believes blockchain does provide a heightened level of security on this type of mobile voting app. We’re genuinely hoping that will allow this type of a mobile app to be made available in the future – as early perhaps as our general election – to military voters.” 

Mike Queen, communications director for Mac Warner stated on Ethnews.

In charge of conducting the results of the audit will be Voraz, clerks representing Harrison and Monongalia counties and the state’s governor among other parties.

“The Secretary’s office is very encouraged so far today and we believe that [blockchain-based voting] is a real viable option. There are a lot of other states who are asking about this mobile voting solution and who are also interested in it.” 

However, despite all the excitement of the Secretary of Office state, the whole exercise was questioned by third parties.

Professor Duncan Buell, a computer scientist in the University of South Carolina, doesn’t seem to trust the process, as he considers that Voraz application does not run a trustworthy fingerprint-scanning and facial-recognition technology, meaning the results could be vulnerable to hacking. Thus voting actually becomes trusting a company instead of the government.

While the traditional way people participate in the election process is working for some political systems, it might not be ideal for other.

In traditional elections, participants are required to travel to the city they are registered in order to take part in the process, and even if they do so, they are obliged to vote for a decision that in most common scenarios will not be able to be altered until the next planned elections.

Blockchain technology may empower voters, allowing them to actually make direct decisions regarding their residential location, rather than deciding the person to represent their decisions.

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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Politics

Trump Blocks U.S. Purchases of Venezuela’s State-Backed Cryptocurrency

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U.S. President Donald Trump has issued an executive order prohibiting Americans from purchasing the Petro, Venezuela’s state-backed cryptocurrency. The order is part of a broader initiative to pressure the socialist government of Nicolas Maduro over its handling of Venezuela’s social and economic collapse.

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Trump Issues Ban

Executed on Monday, the executive decision bans transactions with the U.S. involving “any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018.”

The order applies to U.S. citizens, permanent residents and all others residing in the country.

Venezuela launched a national cryptocurrency in February as part of a campaign to boost foreign reserves and restructure a collapsing economy. Venezuela’s economic downturn has spiralled into a full-fledged humanitarian crisis with massive food shortages and hyperinflation. This has prompted an outflow of Venezuelans to neighboring countries.

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Maduro’s government claims that the Petro is backed by domestic energy reserves, with its price pegged to one barrel of Venezuelan oil. The president’s office has called the token sale a resounding success with billions raised to date. Last month, the government reported to have sold $735 million worth of Petro tokens on day one of the presale. As of last week, a total of $5 billion had been raised.

U.S. Steps Up Pressure

In January, the U.S. Treasury Department warned investors against participating in the Petro presale amid Washington’s ongoing effort to restrict the Maduro regime’s access to capital. In August, President Trump prohibited U.S. residents from trading new debt issued by the Venezuelan government. He also warned the Maduro regime that a military option was on the table.

Without U.S. capital flowing into Petro, the Venezuelan government loses out on a huge chunk of the speculative market. According to some analysts, interest in the token is likely to be much smaller than it was initially.

U.S. Vice President Mike Pence will deliver a fresh warning to the Maduro administration on Wednesday in a speech to the Organization of American States.

“The Vice President will call on all members to increase pressure on the Maduro regime to restore the country’s democracy and address the humanitarian crisis unfolding in Venezuela,” the Vice President’s spokeswoman, Alyssa Farah, said in a statement.

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 404 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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BOE’s Carney Comments on the Evolving Threat of Crypto-Assets Ahead of G20

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The growth and widespread adoption of cryptocurrencies does not pose a risk to global financial stability, but could do so in the future unless proper regulation is enforced, according to Mark Carney, who heads the G20’s Financial Stability Board. The remarks come on the eve of the G20’s first ministerial meetings in Buenos Aires.

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Assessing the Risk of Crypto-Assets

In a Mar. 18 letter to G20 central bankers and finance ministers, Carney gave a low-risk assessment of cryptocurrencies on the basis that the new asset class was small relative to the global financial system.

“The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time,” Carney said. “This is in part because they are small relative to the financial system.”

The crypto-asset market peaked at more than $830 billion earlier this year, which was still less than 1% of global GDP, Carney said. This pales in comparison to credit default swaps, which had a notional value that was 100% of global GDP prior to the 2008 financial crisis.

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Carney continued:

“Their small size, and the fact that they are not substitutes for currency and with very limited use for real economy and financial transactions, has meant the linkages to the rest of the financial system are limited.”

Ending Crypto “Anarchy”

In addition to his role at the FSB, Carney serves as Governor of the Bank of England (BOE). In that capacity, he has called for new measures that will contain crypto “anarchy.” In his letter to the G-20 on Sunday, he explains why:

“Wider use and greater interconnectedness could, if it occurred without material improvements in conduct, market integrity and cyber resilience, pose financial stability risks through confidence effects.”

The BOE Governor has called for cryptocurrencies to be governed by the same standards that currently guide the rest of the financial system.

Though Carney has joined the chorus of policymakers calling for more regulation, few have actually developed actionable guidelines that will help traders and exchanges stay on the right side of the law. At this point, the “right side” appears to be an arbitrary line that is shifting constantly.

U.S. officials have opined recently that we could be a long ways away from an overarching framework for cryptos because regulators are still evaluating them. The U.S. is considered a bellwether for global regulation; measures adopted here could impact how other countries approach crypto-assets.

Lawmakers from Germany and France are expected to present the G20 with a new proposal to regulate cryptocurrencies. Economy chiefs from both countries have expressed concern that crypto-assets pose serious risks for investors.

G20 meetings will continue all year long, with over 45 gatherings planned in Argentina. The final event will be held on Nov. 30 and Dec. 1.

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 404 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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