Sunday, April 22, 2018

Bitcoin Buyers Are Hungry

This is the most significant Bitcoin news I've seen for some time now:

"For the first time since March 2017, buy orders now compose over 92% of market activity. Hot on the heels of a massive $120 billion recovery, the massive surge in buy orders heralds an impending bull market that could potentially exceed the monstrous late 2017 run up.

Data from TurtleBC demonstrates that cryptocurrency buy market percentage across a diverse range of coins including Bitcoin, Ethereum, Ripple, Dash, NEM, and money is currently at a massive 92.86%, greater than the December 2017 high of 88%." -- S. Town

Wednesday, April 18, 2018

Bitcoin Whale's $100 Million Cannonball Creates Only Small Splash

It's in the Bitcoin news this morning that a couple of "Bitcoin Whales" sold off $100 million of BTC yesterday, causing a "crash" of $200/BTC.

Two things:
  1. If a "crash" is now defined as a $200 move, I'd say we're in good territory again, and
  2. If these two were selling, that means people were eagerly buying, which kept the price from falling much further and hints that life is returning to this market post tax day.
BTC is at $8091.13 on Gemini as I type this.

"The balance of wallet 3D2oetdNuZUqQHPJmcMDDHYoqkyNVsFk9r — an anonymous digital account which is valued at $1.49 billion — fell by 6,500 bitcoin Tuesday, with the average sale price sale being $8,146.70, a total value of just over $50 million, according to bitinfocharts.

The sale comes a day after the third-largest wallet, which famously purchased over $400 million in bitcoin in February, let go of 6,600 bitcoin at an average price of $8,026. All told, the two whales dumped over $100 million of bitcoin within 24 hours." -- A. Hankin

Tuesday, April 17, 2018

got HODL?

Today is tax day in the U.S., the date upon which Federal income tax returns and payments (if you're in that miserable camp) must be postmarked. I sent mine in last week, electing to skip my usual ritual of making Uncle Scam wait until the very last second to get my money. I guess I've given up on doing that since the Feds won't even hardly notice what I sent in, despite the amount being more than the annual household budget I keep myself on, from my perspective.

I digress. Part of many people's tax returns this time around included gains and losses from trading cryptos. In fact, as I've written about recently, unexpected tax bills on crypto gains taken in 2017 may have prompted round after round of punishing selling as people sold off Bitcoin and other cryptos to raise funds to pay them. Add to that that others may have realized the mistake people were making in assuming that profits from Bitcoin et al. were not taxable, anticipated that they would sell to raise cash, and began selling themselves, either to protect their own profits or to drive down prices so they could buy back in lower later on. Think of it as a reverse short squeeze.

On my tax return, there was zero mention of crypto anything. I avoided all of the headaches, an even larger tax bill, any stress over the possibility that Bitcoin would take off again without me, etc.

Why? Because I HODL.

"...empirically, even in volatile assets like bitcoin, carefully choosing an asset and holding long-term positions has proven to offer the best return.

Warren Buffett, the most successful investor of modern times, has often said that he only invests in what he knows. His preferred holding period: forever. With that model, his company, Berkshire Hathaway, has averaged a 19 percent annual return since 1965 which means it has risen more than 1 million percent.

Theoretical models that assume participants know when markets will move against them can offer better returns but, in practice, market movements cannot be reliably predicted so even when people like Bernie Madoff try to make us think that they've figured it out, they haven't.

Long-term investment in quality assets remains the only reliable investment strategy.

Simply put, HODLing works." -- S. Hopkins
 The rest of the article is an interesting read, but I focused on this part because it echoes something I say often: all of this, everything that's gone on in cryptos up to this point, these are still only the early days. There's really not much to do except find the high quality offerings among all that are out there now, acquire some, and wait. The really big gains are ahead, so why hop in and out of the stuff in the near term for small gains, while also risking badly mistiming the market?

I also really hate paying taxes, so...

Thursday, April 12, 2018

Bitcoin Spiking As Tax Season Ends?

Tax season in the United States ends next week with the Federal income tax filing deadline fast approaching on April 17th. I just finalized my Federal and state taxes this morning. All I have to say about that is, "next year will be better" (thanks to the Trump Administration's tax cut passed late last year that are in effect now).

Between my pest control work picking up massively as we head into spring and having my head in the paperwork nightmare that is our tax system these days, I haven't kept up with this project. But in terms of cryptos and other investments, I also haven't seen much that is new and noteworthy either.

Except for one thing that I came across about a week ago that I thought was interesting: TechCashHouse discussing  Bitcoin regaining upward momentum after tax season passes, a prediction made by Fundstrat's Tom Lee.

Why? Basically that people are selling to raise money to pay tax bills. Once that need passes, so will the major selling.

When I first heard the idea, I shrugged and said, "well, it's as good a prediction as any other." That is, it will be believable when (if) it comes to pass.

Then today, this happened.

Given the position the Bitcoin market has been in as of late, maybe there's something to this after all...

Monday, April 02, 2018

Has The Crypto Market Reached Maximum Pessimism?

It's been a few days since I've posted anything, mainly because I have family visiting, which involves them taking new employment near where I live and then relocating to here. A lot of work to be done in a very short span of time, basically.

That pause in my blogging has given enough time for something to occur that I've been wondering about and looking for, maybe: I have been watching for signs of  "maximum pessimism" in the crypto space.

Maximum pessimism is the state of affairs where after a long period of punishing declines in the price of some thing or a whole market, many of the so-called "weak hand" traders and investors finally capitulate and sell off their positions. Some time after they have done so and gotten out of the market, a reversal occurs. How long it takes for that reversal to appear is anyone's guess, but considering how fast-paced crypto markets are, I would expect it to occur soon, because I think the moment of maximum pessimism has passed.

Consider this snapshot of the daily Bitcoin chart. The latest big event that was supposed to bring further pain to Bitcoin HODLers was the appearance of the "Death Cross," a technical analysis formation many traders watch for that is supposed to indicate the emergence of a long-term bear market. It is the crossover of a 50 day moving average line with a 200 day moving average line, heading down. Moving averages are plotted on the chart by taking the average of the price (opening or closing, depending on how you set up the indicator on your chart) over the number of sessions specified; 50 and 200 days, in this case. This gives you a picture of the near and long term price trends and is used as a backwards looking tool to forecast future trends. On the chart, the Death Cross is visible, having occurred this past Friday, displayed here as the cyan line crossing over the red.

If you count the candlesticks from right to left, you can see that there was major selling five days ago, which in my time zone was occurring on Thursday, March 29th, just ahead of the appearance of the Death Cross. And then... nothing.

So now, here we are, Bitcoin have bounced off of a previous low, which you can see by looking left on the chart, back to candles that represent activity that occurred during the first week of February, when prices hit these same levels and then began the short term rebound that took Bitcoin to a recent high around $11,500. Then as now, other indicators are pointing to a rebound: a price close to a 50% discount from the most recent high ($11,775, achieved on February 20th), price action below the 200 day moving average (again, the red line), and a Relative Strength Indicator reading below 40, placing the current prices deep into "oversold territory" (the RSI is the purple-ish box with the green line at the bottom of the chart).

And last but not least, the much feared Death Cross, which in this case appears to have merely confirmed what was already known, that we have been in a down trend for some time. Given that moving average indicators are "lagging indicators," meaning they can only display data derived from what has happened, they do not indicate what will happen in the future, just what might happen. In cases like this one, the Death Cross can take so long to appear that it is in effect playing catch-up to what the market already knows, and its formation only serves to scare away the last of the weak hands, evidenced by what has now happened: a lack of further drastic selling and successful "defense" of a price at a prior major support level.

The other thing I look for as an indication that the moment of maximum pessimism has passed is the character of the headlines reporting on the thing or market I am tracking. For the last several weeks, a search for "Bitcoin" on the news tab of the Google search engine was turning up piece after piece of doom and gloom.

This morning, the first page results looked dramatically different:
 So here we are, perhaps at the end of the bloodbath of the last few months. If going forward from here sentiment seems to continue to improve, and if the current low holds, then this might finally be "it." Time will tell, but as for me, I've already repositioned a few things in case this is the turnaround, and I may add some new funds in addition. As Sir John Templeton said, "The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell." I think this could be the former, so off I go, preparing to take advantage of the latter at some point down the road ahead.

Tuesday, March 27, 2018

The Twitter Crypto Ad Ban: Always Dig Deeper

I'll let this speak for itself:

"Joining Google parent company Alphabet and Facebook, Twitter revealed Monday its plans to ban some cryptocurrency-related ads in a bid to decrease fraud and deception on the site. Namely, the social media company plans to prohibit initial coin offerings and token sales, and it plans to only show ads of exchanges or wallets provided by companies listed on major stock exchanges.

Curiously, that would bar firms such as the largest U.S.-based exchange Coinbase from advertising on the platform, while presumably still allowing Twitter’s sister company, Square, to advertise its young Bitcoin buying and selling function on its Cash app [emphasis added]...

...The change for Twitter, meanwhile, comes amid comments from Dorsey that the poster child of cryptocurrency, Bitcoin, will be the world’s universal currency in 10 years or so." -- L. Shen
As a Square shareholder since the IPO back in 2015, I am highly amused. lol!

Monday, March 26, 2018

Node40: An OK Start To Crypto Tax Accounting

I found a fledgling service this morning called Node40, which aims to be a crypto tax tool service that can help you see long and short term capital gains at a glance.

Right now it's still so new that it's in beta, and as such currently comes with the attractive price of "free," so I decided to try it out.

At present it can link to a Coinbase account to gather data, or accept a transaction history file from Gemini. That was good news for me as those are the only two exchanges I've ever used (thanks to the idiots that run my state). It took me about five minutes to get all of my data imported.

Right off the bat I spotted a problem that I knew would be there: the system immediately told me I had lots of gains in accounts that I know I do not.

Basically, the system assumes that any transfer out of a wallet is a sale of an asset, then declaring a gain or a loss on it. In my Coinbase account, which I only ever used to purchase Bitcoin, it showed that I had gains and losses on transactions that were really just me moving my Bitcoin from my wallet account into Coinbase's cold storage. Then later in the year, it showed further gains on those same coins when I moved them out of cold storage, back into my wallet, and then off to a paper wallet, which I did prior to the Bitcoin Cash fork last August.

In all of that there's not actually a single taxable event that occurred. These assumptions the Node40 system makes can be fixed manually easily enough (though that is a bit tedious, especially if there's a lot of transactions). All you have to do is click on the transaction in the "manager ledger" screen and wipe out the gain or loss figures, then include an explanation if you like.

The real problem this demonstrates is going to be with the IRS.

With the 2017 tax year filing deadline approaching, articles are popping up all over the place that basically read, "the IRS is going to get you!" They think that because very few people have ever reported gains or losses on cryptos that it's this vast pool of untaxed gains just waiting for them to extort a slice from, so they're on the hunt for anyone not reporting their activities. To that end, they've successfully sued Coinbase to get transaction data, currently limited to a certain segment of users of that platform.

But what did the IRS really get? Basically, the exact same thing I got when I fed my data into Node40: the wrong answers.

The IRS will not be able to tell an account-to-account transfer apart from a sale, just like Node40 can't. Of course the "guilty until proven innocent" model the IRS uses against citizens will then mean the crypto owner will have to use further records to prove what was what, which is easy enough to do if you really were only moving assets between your own wallets without realizing a gain or a loss. But their assumption from the get-go will be that you're hiding something, and they'll then treat you like a criminal (maybe this will propel them to the top spot of most hated Federal agencies, which they're already not far from being).

Chances are then that this whole crypto taxation thing is just going to be a train wreck for years to come. The IRS will charge into the affair like a bull in a china shop, screw up massively, lawsuits will start flying in Federal courts, and in the end it will probably cost U.S. taxpayers more than the agency will legitimately collect in capital gains taxes. It would be wise of the IRS and lawmakers to slow walk the enforcement side of things until they really understand the technology involved here and come up with effective tools and techniques for identifying the truly taxable events that go on. This is government we're talking about here though, a combination of force that can be applied largely without consequence, fueled by other people's money, so they'll just screw it all up and leave the mess for someone else to clean up.

Friday, March 23, 2018

Cocainecoin: Pablo Escobar's Brother Launches A Crypto

It's not actually called "Cocainecoin," but considering who is behind this thing, how else was I supposed to poke fun at it?

Well, lots of other ways, probably.

This has to be read to be believed, so instead of turning this post into a bunch of spoilers, here's the whole kilo:

" coin is not a scam. You are free to buy the coin or not buy the coin. I don’t care. You can stick with your worthless coins. Keep the Ethereum, Keep the TRON, keep the Ripple, keep the Bitcoin. You will see what happens. They will all go to zero, almost zero,” he concludes. “But not my coin. Because my coin, this is going to be my new work in life.” -- R. Escobar

Thursday, March 22, 2018

Sell When Everyone's Buying, Not When Everyone's Selling

Any time I come across a story about Coinbase pissing people off, I'm never shocked. My own experience with them has been basically ok. The commissions charged on purchases and sales there are too high compared to rivals, and they're ridiculously slow to confirm purchases (which isn't entirely their fault, it's mostly the legacy of the antiquated money transfer systems that banks still use).

Their customer service though... wow. That was the last nail in the coffin for me, when I never received a referral credit from them. They claimed that there was no demonstrable relationship between my account and the one he opened. When I sent my friend the referral email, he was standing in my living room of my house, and we had the emails we sent back and forth to show as proof. The idiots at Coinbase customer service still denied everything and refused to pay me what they owed me. They lost all of my business over $10.

As such, I wasn't surprised at all by this story:

"When bitcoin users want cash, they don’t want to wait very long for it.

Thousands of cryptocurrency holders have submitted complaints to the Consumer Financial Protection Bureau (CFPB) in the last nine months, an analysis by personal finance site ValuePenguin found — and the number of complaints skyrocketed when bitcoin prices fell.

The biggest reason people made complaints, the number of which increased 669% between June 2017 and March 2018, was being unable to withdraw money from exchanges, said David Ascienzo, data scientist at ValuePenguin and author of the report...

...Exchanges struggled to keep up with customer support requests as people attempted to sell when prices fell. Higher numbers of complaints, especially about major exchange Coinbase, started coming in as prices started to plummet and reached a climax during the week when the decline in bitcoin’s price was steepest." -- K. Paul
So the short version, Coinbase sucks, specifically because they never seem to be able to wrap their heads around their own growth. They are always chasing it, trying to catch up, rather than ever be ahead of it.

But Coinbase isn't actually my main topic here. Rather, it's avoiding what specifically happened that led to all of these problems and complaints, and it's something that could be an issue at any exchange: selling with the herd.

These issues plagued Bitcoin sellers specifically because they were all trying to rush for the exits together. This was likely people whose only reason to own the asset in the first place was pure speculation, combined with a false confidence that they could call the top of the market and exit with maximum profit. How it usually plays out however is that once the market turns bear, these folks all get the news too late and they then  try to get out as fast as they can, chasing the price down. Add in the people who showed up late to the bull run and it gets even worse.

I avoid this by hardly selling at all. A few days ago I briefly mentioned that this is because most of my decision making is on entries, but my sales have more to do with what's going on in my life, not what's going on with the price of an asset I hold. Basically, I like to avoid transaction fees and taxes, so I tend to wait to cash out of something until an opportunity comes along that would lead to major improvements in my quality of life. My Bitcoin holdings are right now up about 1000% over my cost basis, and were obviously far higher back in December at the peak. I could have cashed out, but then I would have lost at least 25% to taxes, and doing so at that point in time would not have achieved a major goal that I have: to wipe out my remaining debts in one shot. Until I can do that, I see no reason to add expense and complication to my portfolio and my tax return, which selling does.

I know there's probably someone out there going, "but you could have had X amount of cash and gotten rid of Y amount of debt," or something to that effect, to which I would say, "be honest, when would you have hit the 'sell' button?" Everyone loves to imagine that they would sell at the very top, but in truth, most will get nervous all the way up and sell as soon as they're up a few percentage points. The fear of loss is often stronger than the willingness to let gains develop over time, and so many cash out early before their positions really get a chance to run.

It's actually those people that this post is for, and ironically, that's exactly what I recommend that they do in order to avoid the problems other sellers ran in to on the way down: if speculation is your only motivation to be in this space, and "more money" is your vague goal, then sell on the way up, don't try to call the top and think you're going to make a perfect exit, because you won't. As your position appreciates in value, exit in stages, say 10% of the initial position at a time. It's far easier to sell into a market of rabid buyers than the opposite, and you likely won't experience any problems with a lack of liquidity on the part of the market maker (if that's even the problem - it's more likely that there's just no one out there accepting your asking price).

Maybe that will lead to fewer self-made problems, fewer complaints, and less likelihood of .gov thinking it needs to "fix" this stuff and screw it up completely.

Tuesday, March 20, 2018

Yes, There Are Taxes On Your Crypto Gains

Quick post today as "bug season" is in full swing now and my time and attention is turning more toward killing ants and spiders for fun and profit.

There's a persistent myth in crypto circles that somehow this "magic internet money" exists outside of tax law. As such, I've come across many folks who insist that their hopping in and out of cryptos "doesn't count" unless they actually sell them for fiat currency. Here in the U.S., in a limited number of cases in the past this may have worked, provided things were done just-so, but that possibility was shut down with the passage of the 2017 tax reform law. Now if you sell or trade a crypto, it creates a taxable event.

Such is the cautionary tale of this poor fellow, who in his own words said, "I feel like I might have accidentally ruined my life because I didn't know about the taxes."

Take the advice given toward the end of the article: if you sell off a crypto asset for a gain, set aside 30% of the proceeds in something like a money market account so that your tax liability is fully funded when April 15th(ish) rolls around (keep records of losses, too, because you can use up to $3k of losses each year to offset other income on your taxes).

The rest of it is yours to drive Lambos across the moon with.

Monday, March 19, 2018

Another Crypto Ad Ban, Dead Altcoins, And Big Bitcoin Predictions

I spent my afternoon yesterday taking in more financial education videos via YouTube while relaxing on my couch. My pest control business went from activity of about two days per week to ridiculous hours overnight last week, so I'm back to the part of my season where relaxation time is well and best spent doing exactly that.

While I was taking in the videos, I noticed that the price of Bitcoin, which has been falling for two weeks, started spiking up significantly. Since I was already sitting in front of one news source, YouTube, I looked to see what "Bitcoin" would bring up.

That's when Tom Lee of Fundstrat started popping up all over the place in my search results. Tom Lee is someone I've mentioned on this blog before: he is the creator of the "Bitcoin Misery Index." As I wrote about then, his index has been flashing a "buy" signal on Bitcoin. Lee is coming up as a top search result again bceause of his newest Bitcoin price prediction: $91,000 USD by March of 2020, two years from now.

It's been known for some time now that the price of Bitcoin tends to correlate with Google searches for it and related terms, basically as an indication of whether Bitcoin is on people's minds at the moment or not. Sure enough, around the time that the articles about Lee's prediction began to be published, there was a spike in searches for "bitcoin" (without capitalization, as most people will not bother to capitalize stuff while searching):

I've circled the spike in activity, which occurred roughly one hour after these articles started to appear, which was roughly twenty hours ago as of the time of this writing.

I don't know if Lee's prediction is worth anything, and I generally ignore specific price predictions entirely (like John McAfee's call for Bitcoin at $1,000,000 USD per coin within the same time frame as Lee's prediction - yikes!). However, such claims do get people curious, curiosity leads to exploration, and at least some of the time, buying.

The next thing I came across that I think is relevant to what's potentially happening with this latest price spike was one mention of a significant piece of news about the alt coin space: a major exchange, Bittrex, is delisting dozens of alt coins that are under performing or are completely dead.

The reason this is significant is that people who have funds in those coins have to withdraw them from Bittrex before the delistings or their funds will be lost forever (if they're not already because of the coins on the list that are already dead). Owners have a choice to move their coins to other exchanges that will still list them (for now), to private wallets outside of any exchange, or, the most likely outcome, to exchange them for other coins as all of the coins on this list are likely doomed. Bitcoin stands to gain from this as money flows out of these dying alt coins and back toward proven, reliable blockchains, Bitcoin being the first, longest running, and most known of them all.

A third factor that came up in the last couple of days is news that now Twitter will join Facebook and Google in banning cryptocurrency advertisements.

As per the usual, much of the financial media out there wrote their headlines on this news as, "Twitter To Ban Bitcoin Advertisements," in keeping with their habit of either outright lying about Bitcoin, or using "Bitcoin" as shorthand for "cryptocurrencies," which is grossly misleading. The fine details of the story, at least what has been commented on by Twitter thus far, read differently: the focus of the ban will be on "cryptocurrency wallets, exchanges, and initial coin offerings, with limited exceptions."

What "limited exceptions" means exactly is impossible to say at this point, but in light of recent news on the regulatory front, it probably means "vetted." This also builds on something I blogged about just a few days ago, that these crypto ad bans are basically only targeted at all of the ridiculous alt coins that are out there, because they absolutely need advertising to exist at all. Bitcoin and other "household name" coins like Litecoin and Ethereum, and a coin like Ripple that is rapidly gaining traction in international money transfers by traditional banking players, do not need paid advertising. People already know of them, and they are reported on daily in the financial media. That is because they, unlike the sea of copycat crap coins that are out there, actually exist as original solutions to real-world problems, not just as pointless also-rans. They're relevant; the vast majority of alt coins simply are not.

Finally, at the end of the 24 hour period in the market where the price spike began to occur, the result at the end of the day was the formation of a bullish "hammer" candlestick, occurring below Bitcoin's 200 day moving average in the midst of "oversold" conditions on the Relative Strength Indicator, on a spike in trading volume, my favorite setup for a buy:

Where to from here? Who knows. Like I said before, I don't like price predictions. I do like combining fundamental analysis with technical analysis and then identifying entry points (exit points I'm fairly lax on because I tend to just sit on assets until something in my life makes it advantageous to liquidate them, not because I think I've found the "top" in a particular span of time in a market). In fact, as I am typing this paragraph, Bitcoin just broke through $8500 and appears to be moving higher, significant because round numbers tend to act as "psychological barriers" in markets. When these barriers are surpassed, more traders jump in, momentum builds, and the action really heats up. Combine this with all of the factors I described above, and this could be the starting point of big things.

Who knows... Maybe McAfee won't have to break out the mustard in a few years after all...

Saturday, March 17, 2018

Old News In The Latest News: Criminals Don't Prefer Bitcoin

As increasing regulatory scrutiny is directed at Bitcoin, something that those of us who have been involved in cryptos for a long time know about is finally starting to creep into the awareness of the major financial media: criminals don't prefer Bitcoin.

One of the constant attacks levied at Bitcoin by critics who do not actually study what they're criticizing is that it's a tool for criminals, terrorists, and North Korea to launder money.

At one point, it was, no doubt. This is because names are not explicitly attached to Bitcoin wallets, and wallets can be generated anonymously. Instead, Bitcoin wallets are in essence "numbered accounts." A key difference between a classic numbered account and the blockchain within which Bitcoin wallets reside is that there is no central authority who actually knows the identity of the owner of such an account, who is charged with keeping that information secret.

However, unmasking the identity of a Bitcoin account owner is possible to do with associations between wallets, by tracing transactions between wallets with known owners and other wallets with which a known wallet has conducted transactions. All of this is publicly available information on the blockchain, and it always has been.

For example, here's one of my wallets, which I have posted to this blog before:

Now that the world knows that I am the owner of this wallet, it's possible to begin tracing my wallet's association with other wallets. In this case, you can see that this wallet has only ever received spends from other wallets. Most of these sending addresses trace back to Coinbase, and maybe a few to Gemini, where I was purchasing Bitcoin prior to storing it here in my paper wallet. 

So then, if I were suspected of conducting illegal activity of some sort, investigators could use this information to trace relationships between me, others suspected of the same crimes, and Bitcoin wallet addresses we had interacted with in common. As more and more of these associations are detected and mapped out, it becomes increasingly likely that the owner of a particular wallet can be unmasked. There are now many software tools that make this process even easier.

Basically then, Bitcoin was only ever "anonymous" when it was relatively new and no one had begun to map out the associations between wallets. But owing to the antics of people who used Bitcoin's early pseudo-anonymity for illegal activities, the attention and resources of law enforcement agencies were focused on it and that pseudo-anonymity quickly went away.

So while "anonymous Bitcoin" has never really existed, the myth has persisted. Finally, it appears that the reality of the situation is coming to light. Anonymous cryptos do exist, and that is actually where criminal enterprise shifted to a long time ago:

"According to a recent report, illicit activity that is typically associated with bitcoin is on the decline, with the cybercrime industry and money launderers moving away from bitcoin to so-called privacy coins, like Monero—coveted by the underworld for the anonymity of transactions—luring away those who once turned to bitcoin for such features.

“It was clear from this research and from other sources that Bitcoin’s moment in the criminal sunshine may be declining in favor of other types of VC,” officials at virtualization-based security firm Bromium wrote in a recent news briefing on cryptocurrency usage.

“One reason why criminals avoid Bitcoin relates to the transparency of the blockchain and the increasing number of tools for detecting how funds are transferred via bitcoin wallets,” Bromium wrote." -- A. Hankin
Monero (XMR) is one of a few so-called "privacy" coins that were built to do something that Bitcoin does not: completely hide the identity of wallet owners (I own a little bit of Monero, which I have mined with spare CPU cycles on my several computers using Minergate). Law enforcement agencies can pick off individual Monero wallet owners, but that would only be because they had seized equipment upon which said owner had a Monero wallet. Beyond that, the trail runs cold, because Monero and other cryptos like it scramble the identities of other wallets with which a particular one has sent and received spends (it even disguises amounts of Monero sent between wallet addresses, taking away all possible "bread crumbs" that could conceivably be used to map out relationships between entities).

It's good to see this information finally getting out there in front of a broader audience. The criticism, "Bitcoin is used by money launderers and blah blah blah" has force in that it can convince those who are not yet involved in cryptocurrency that they should stay away from it. Never mind the fact that the same criticism can be levied against the U.S. Dollar and that these same people would not stop using it; the fact of the matter is that they are already familiar with the USD and really can't stop using it, and that it's simply not relevant what someone else does with their units of USD to an individual's moral character. All the same, perceptions drive decisions, both personal and of public policy, so a misguided perception that Bitcoin is a tool of crime will be reflected in the actions taken in both spheres, which then is reflected in the price of the commodity. Greater awareness of what has been stated here, that those days are more or less behind now for Bitcoin, will in time bring more people into the space.

Friday, March 16, 2018

Panos Mourdoukoutas: Google Crypto Advertising Ban Good For Bitcoin

This will be a quick one since I have a 3am start time at my first job site today (yeehaw...).

Most of you probably have heard by now that Google is banning advertisements for crypto currencies from its ad services. That has caused a big slide in the market and made many think that it's all over.

But perhaps not...

What if instead, this only hurts the multitude of pointless crypto coins that have proliferated out there?

Bitcoin is a household name. But the latest crap coin to come along? No one knows of it and it needs tons of advertising to even crack .01 cent per coin.

"Major cryptocurrencies like Bitcoin, Ripple, Ethereum, and Litecoin do not need advertisement, because they are well-known in the investment community...

...banning cryptocurrency advertising on the part of Facebook, Google and other websites is actually cause to be bullish, not bearish, over the long term. At least for major cryptocurrencies for major cryptocurrencies like Bitcoin, Ethereum, Ripple, and Litecoin...

...Another reason is that the ban will help weed out scam coins from the market, and therefore, install confidence among investors in legitimate coins...

...Weeding out scam coins, in turn, will eventually limit the overall supply of coins, and therefore, help the prices of major cryptocurrencies rally." -- P. Mourdoukoutas
 Food for thought at we continue to slide.

Thursday, March 15, 2018

BBVA Successfully Transfering Funds Internationally Via Ripple

Good news is hard to find in the crypto space this week. Many are once again on the "Bitcoin is really dead... this time!" bandwagon again (the Bitcoin Obituaries will probably be busy for a while here). There is good news out there though, and if you can spot it in the torrent of FUD, then you may get ahead of an opportunity that others will arrive late for.

Ripple (XRP) is offering a bit of that right now.

Several articles appeared over the last twelve hours or so about a successful test by BBVA Compass of Ripple's xRapid transfer system, the one that uses the XRP crypto currency. The articles I'm finding all say the same thing, that transfers of assets between countries in Europe and Latin America where the bank has operations all went smoothly, with each transaction completing in a matter of seconds (all of these articles seem to trace back to a Dallas Business Journal article that is behind a pay wall).

The significance of the speed of this transfer is that the existing money transfer networks in place around the world would have taken three to four days to complete each of these transactions, and at a much higher price...

It's also no small thing that many of the partnerships that Ripple is forming are occurring in the developing world, which as this article on Ripple's website points out, is where 85% of the global population lives, which includes 90% of the globe's population of people under 30 years old (a very key point if you're familiar with how demographics and consumer cycles function) and where much of remittances from developed countries flow to.

When all of this is put together, it's easy to see the trend that is emerging here for XRP. However, at the moment, with everyone's attention fixated on the torrent of Bitcoin FUD that the major media is spewing like a broken sewer pipe, it can be easy to miss. Many will, and the price of XRP will likely continue down. That's where the opportunity exists, because while the price may be going down for now, the use case for the technology is rising.

Wednesday, March 14, 2018

Crypto Mining For... Tomatoes!

Bitcoin and much of the crypto market is getting hammered yet again right now, with the so-called "Tokyo Whale" selling off hundreds of millions of dollars USD worth to partially cover Mt. Gox debts, Google deciding to follow Facebook and ban cryptocurrency and ICO advertisements (not a bad thing on the ICO part of that, really), and Christine Legarde of the IMF beating the "Bitcoin money laundering" dead horse again, because everyone knows that drug dealers and terrorists prefer publicly visible permanent blockchain records for hiding their money! (Not to mention that the international order of fiat institutions she represents hates competition for such business...)

So, for some pleasant crypto news amidst all of the doom, gloom, and FUD, have some tomatoes!

‘Cryptomatoes’ Grows 5 Acres Of Fruit From Bitcoin Mining Heat
"The co-founder of Czech cryptocurrency exchange NakamotoX will launch a Blockchain startup based on growing edible crops from excess mining heat.

In a Twitter discussion March 10, Kamil Brejcha said staff had created bespoke housing for Bitcoin servers, which harnesses heat and sends it to greenhouses currently growing tomatoes.

The project, which will soon be accompanied by a new business called Agritechture, has been in stealth mode but has now delivered its first crop - a five-acre greenhouse full of tomatoes dubbed ‘Cryptomatoes.’

“We are using the excess heat for the tomato greenhouse and it is working,” Brejcha confirmed." -- W. Suberg
This is a neat idea. Crypto mining does produce a huge amount of heat, and aside from hobbyist miners running rigs at home that sometimes allow them to keep their houses warm in the winter, most industrial scale crypto mining operations just have to deal with the heat as a waste product.

This company is recycling that heat. As the article goes on to describe, the heat generated by their mining rigs is pumped into specially built greenhouses, where so far they've been growing tomatoes. In fact, in their case, the electricity they're using to power their miners is coming from biowaste, giving their project more of a closed energy loop than any other I've heard of.

Maybe an approach to crypto mining like this will make the Siberian tomato more than "Siberian" in name only one day.

Just in terms of where Bitcoin was this time last year, the price is still up about nine times compared to then. Like I wrote about the other day, right now regulatory uncertainty is being cleared away, bit by bit, and once much of that news has been digested more people will wade in to this space. More people getting in means more demand, prices rising, and a reduction in volatility as ownership continues to spread out into smaller positions in an increases number of hands. So relax, have a cryptomatoe, and try to ignore the FUD.

Monday, March 12, 2018

Changelly Bringing A New Trading Platform Online, "Oxygen"

Today I received an email from the folks behind Changelly announcing that they are bringing the latest distributed ledger tech trading platform to the world, Oxygen.

There's three interesting things to be aware of from the get-go:
  1. Oxygen will be based in Gibraltar, which is the first jurisdiction in the world to establish a regulatory framework governing distributed ledger technology-based entities
  2. The creators of Oxygen are well aware of the U.S. regulatory situation in regard to crypto assets and trading and appear to be conscious of the mistakes others have made; they have retained counsel to help them navigate regulations and plan to be registered as an "Alternative Trading System"
  3. One of the things this platform is being created to do is allow crypto asset holders to leverage their holdings for income via repurchase agreements
  I highlighted #3 because I think this is the most important feature of this new platform.

A repurchase agreement, briefly explained, is a collateralized loan from Party A to Party B that occurs for a very short amount of time. The party wishing to borrow, in this case Party B, pledges an asset in exchange for cash from Party A. This makes B a seller and A a buyer. A receives the collateral item, and B receives the cash.

A short time later, B makes good on the loan by repurchasing the collateral from A, plus a little more. That little more is in effect the "interest" that A earned on the loan. A then returns the collateral to B. The assets have been repurchased, as agreed; hence, a "repurchase agreement."

If B fails to make good on the terms of the agreement, A can liquidate the collateral and be made whole (or as close to it as possible).

In the white paper that is available on the Oxygen site, they describe on page 16 how this would work. It is essentially the same, just with a few extra steps since it appears that a "Oxygen token" will be used for transactions on the platform, but that other crypto assets can be used as collateral. The entire transaction will be facilitated via smart contract, ensuring that all terms and appropriate actions will occur as the repo agreements execute between parties. Additionally, in step 5 of the process, there is a description of what happens should the borrower default, with a possible settlement option made available to the lender to be to convert the collateral into any other crypto asset they prefer via Changelly. So if your borrower pledges Litecoin but you would rather have Bitcoin, presto! Their collateral becomes Bitcoin.

So what would you do with this? Basically, it's going to enable you to play a crypto asset long or short, depending on what you think it's going to do over the term of the repo agreement.

An example is given in the white paper beginning on page 24 (apendix 1). You can read their explanation, which I think is perhaps needlessly complex, or try my attempt at briefly explaining it:

Party A owns Bitcoin Max Horsepower and thinks it's better than everything.

Party B has regular old BTC and thinks that Bitcoin Max Horsepower is dumb and will crash in price.

Party B approaches Party A and says, "hey... lend me your crapcoi... er... Bitcoin Max Horsepower for 60 days, and I'll return them to you plus 15%. You can hold my BTC in the meantime."

Party A says, "15%! I think that's what plants crave! You have a deal!"

Party B, now in possession of Party A's crapcoi... er... Bitcoin Max Horsepower, sells it for cash at $100 per coin. Let's just say it was 100 of the coins, giving Party B $10,000.

Sixty days later, Bitcoin Max Horsepower has achieved the amazing sum of .50 cents each, and Party B must return 115 of the coins to Party A. Party B takes the cash he got from selling the coins sixty days prior, purchases 115 Bitcoin Max Horsepower crapcoi... er... coins for $57.50, returns them to Party A (who may have already jumped off a building), pockets about $9,943, and gets his regular old Bitcoin back that he pledged as collateral.

Now, had things been different and Bitcoin Max Horsepower actually did something amazing, Party A would be profiting nicely from the 15% additional coins he would receive per the terms.

What you can already do with any crypto is bet "long" on it by purchasing and holding it. But the way it works out there now, you really can't get interest on your holdings, not in a smart-contract driven, trustless fashion. And you certainly can't go short as described here for the same basic reason. That's been one of my chief disappointments with the crypto sphere thus far, an inability to profit on the short side from the inevitable crash of many of the absolute garbage coins that are out there being pumped and dumped. All I can do to profit from them is go long and hope I can time my exit well, which I don't really care to do.

Will this be available to us here in the U.S.? That's the other thing. This may be another one of those shiny, awesome, profitable objects that Uncle Scam places just out of our reach here. What's included in the white paper to that effect is encouraging, but who knows what regulatory shenanigans will occur along the way. And of course, I live in Washington state, where the morons in Olympia will probably decide that this is one more tool for achieving prosperity that should be denied to me "for my own protection."

This will be something to keep an eye on, that's for sure.

Sunday, March 11, 2018

Clarity On The SEC "Crypto Crackdown" And The Bitcoin Misery Index

A few days ago some news came out that I've been expecting for quite a while, because the Securities and Exchange Commission has been telegraphing in no subtle way that they would do this: the SEC is moving to crack down on "Initial Coin Offerings" because in essence they meet the definition of a security.

That's not how the headlines read, of course. Typical of the obviously anti-crypto major financial media outlets, they cast it as a "cryptocurrency crackdown." And, naturally, crypto prices plunged.

As it usually goes with these media drive-by shootings, a day or two later and clarifying articles begin appearing, such as this one:

The government's crypto crackdown may not affect bitcoin: Blockchain venture capitalist
"The U.S. Securities and Exchange Commission on Wednesday released a statement saying digital assets that are considered securities must register with the agency.

The SEC uses the so-called Howey Test, or a test created by the Supreme Court, to determine which transactions are considered a security investment, Bogart said. To qualify as a security, investors must "contribute money to a common enterprise with the expectation of profit," primarily from the "efforts of others," he explained.

"In the case of bitcoin, that just never has been the case," Bogart argued. "There was nobody that launched bitcoin and said ... 'I'm going to sell you 20 percent of the coins for a specific price.'"

"The software was launched into the world. People started mining it, and it grew organically," he added. "There is no central enterprise that receives the money that investors pay for bitcoin and deploy." [emphasis added] -- K. Ell
This is an important distinction to make, because it's the difference between a currency, or a commodity, (Bitcoin) and a security (what in effect results from an initial coin offering, or ICO), and consequently what agency has jurisdiction over them.

The Securities and Exchange Commission has jurisdiction over what its name implies: securities. As the definition I linked to above at Investopedia describes, a security is a share of ownership in something, the ownership of which can be traded, with the thing owned being an enterprise operated by a third party. There are several different types of securities, different forms of them, but for now that basic definition will suffice.

This is specifically why I have never invested into any ICOs. I used to be a stock broker, having held the SEC Series 7 license (and a few other SEC licenses). When ICOs first started appearing, it appeared to me that they were by and large meeting the definition of a security (and that they were also running afoul of the "accredited investor" law in the way they were being offered). Some of them tried to obfuscate what they were doing by describing the fractional ownership they were offering in the underlying endeavor as "coins" or "tokens," but semantics are no defense against this kind of thing. I knew it was only a matter of time before the SEC would weigh in, so I've stayed out of this part of the crypto sphere; I think the result of this is going to be most, if not all, of these ICOs simply being crumpled up and thrown in the trash, taking their investor's equity with them.

This will be for two reasons. The primary one I think will be that most of these ICOs simply flouted the accredited investor rules, which among other things prohibit the offering of "unregistered securities" (not registered with the SEC, that is) to investors who fall short of the minimum criteria to be an accredited investor. Any operations that did so are likely to be attacked and mauled by the SEC in every case where they are found to have accepted funds from U.S. investors despite their lack of this key status. Before the SEC even sinks its teeth into these operations, investors in them the world over will dump their ownership, tanking the value overnight.

Some ICO creators were aware of this law, which is why a few out there refused to take funds from U.S. citizens during their offering periods. They did well by being aware of this regulatory reality and potentially avoiding a direct assault on their operations by the SEC, but they may be severely damaged, if not taken down, by the other aspect of this crackdown: the requirement that exchanges that offer trading in coins, tokens, etc. that resulted from these ICOs, with the particular structuring of a security, be registered with the SEC in order for U.S. citizens to participate. This could put a major chill on these platforms that offer such cryptos for trading, or these platforms might restrict trading to only "pure commodity cryptos" in order to remain accessible to the U.S. market, also destroying much of the value of the type of coins and tokens I'm discussing here.

"Pure commodity cryptos" is a term I just made up to distinguish the neo-securities that resulted from ICOs with cryptos that lack any such ensnaring features, such as Bitcoin, Litecoin, etc. This is where the bit I highlighted in the article above factors in: these cryptos, from the beginning and now, lack any central operating entity that took in money from investors to seed some productive activity, the ownership of which was represented by the coins. Bitcoin and others like it came into being as the thing to be traded in and of itself, the value of which is simply what a buyer and seller agree upon, the exchange of which confers no title to anything but the coins. If you own Bitcoin, you are not promised any share of mining activities, interest, anything like that at all. You are only promised absolute title over the Bitcoins you hold.

That is why the Commodities Futures Trading Commission (CFTC) in the U.S. has asserted for years that it is the proper agency to regulate the pure commodity cryptos, which a Federal judge agreed with just days ago. 
The being the case, Bitcoin, Litecoin, Ethereum, and others, are likely to continue trading just as we are used to them trading. Sure, with increased regulatory scrutiny and oversight some changes are likely to come, the potential change of most concern being access. But if the recent behavior of the CFTC on the subject of Bitcoin in regard to its own employees is any guide, not much is going to change for us. 
In fact, the biggest change might be what happens to scammers who try to operate in this sphere from now on, a big plus for the perceived value and security of cryptos like Bitcoin.

For now though this has dinged the asking price of Bitcoin and all other cryptos, as per the usual. Globally, this is still a very tiny market, and with fewer hands comes easier panics and more dramatic price moves. Since the major financial media outlets love to FUD the crap out of this market with deliberate misinformation, the effects come swiftly, given these factors. But looking at my charts this morning, it appears to me that the market may be realizing that this latest bit of panic selling was for naught (in the pure commodity cryptos, that is), and that this was actually something that has been sorely needed: the further elimination of regulatory uncertainty. With a big bit of that out of the way, this could be the launching point of the next major upswing in the crypto space. 

That said, I wanted to close with a novel technical indicator I came across this morning that can be applied to Bitcoin, the "Bitcoin Misery Index:"
"Tom Lee, Fundstrat Global Advisors' Head of Research, introduced a Bitcoin Misery Index, or BMI, on Friday. Lee describes the BMI as a proxy for how investors feel about Bitcoin’s “price action.” It is a numerical index that ranges from 0 to 100 and incorporates the win-ratio, or percentage of days that Bitcoin is up, and the upside less downside volatility...

...Lee’s trigger points for Bitcoin are 27 for a Buy signal and 67 for a Sell signal. The BMI is currently at 18.8, the lowest point since 16.2 in September 2011." -- C. Jones
Put all of this together, and maybe it is time to be buying...

Friday, March 09, 2018

The Story Of Bitcoin Coming To The Columbia Basin

I came across this article this morning while reading up on the drivers of the latest crypto market drop (and, in the midst of it all, noticed that Bitcoin and Ethereum are both bouncing off past lows on rising volume with action below each coin's 200 MA with RSI numbers below 40...).

This is the story of how Bitcoin mining first came to my state, Washington, on a scale greater than just hobbyists plugging away at it in their basements and spare bedrooms. I've blogged about this briefly in the past, but this article, appearing in Politico, dives deep into the whole story:

 "What separated these survivors from the quitters and the double-downers, Carlson concluded, was simply the price of electricity. Survivors either lived in or had moved to places like China or Iceland or Venezuela, where electricity was cheap enough for bitcoin to be profitable. Carlson knew that if he could find a place where the power wasn’t just cheap, but really cheap, he’d be able to mine bitcoin both profitably and on an industrial scale.

The place was relatively easy to find. Less than three hours east of Seattle, on the other side of the Cascade Mountains, you could buy electricity for around 2.5 cents per kilowatt, which was a quarter of Seattle’s rate and around a fifth of the national average. Carlson’s dream began to fall into place. He found an engineer in Poland who had just developed a much faster, more energy-efficient server, and whom he persuaded to back Carlson’s new venture, then called Mega-BigPower. In late 2012, Carlson found some empty retail space in the city of Wenatchee, just a few blocks from the Columbia River, and began to experiment with configurations of servers and cooling systems until he found something he could scale up into the biggest bitcoin mine in the world. The boom here had officially begun." -- P. Roberts
I've highlighted just one small piece of the story here,  a bit of the early "grit and determination" days of how this all began as it happened for David Carlson, one of two major players in the Columbia Basin mining game that feature prominently in this article.

The entire article goes into the many aspects of the crypto mining industry, the related issues that are arising and the conflicts springing up around it. The author represents both sides to the stories very well, reporting on some of the common FUD that's out there, but then providing the countering arguments. It's refreshing to find an honest, balanced, objective article like this one.

This is a long article but it will be well worth your time to read, whether you're active in this space or not.

Thursday, March 08, 2018

Ripple Not Added To Coinbase, What Really Matters To XRP

I told you so.

Actually, it looks like I was a bit too conservative with my estimate for how low Ripple (XRP) would sink after, once again, the rumor that it's going to be listed on Coinbase turned out to be false. I thought it would return to its pre-rumor spike of .90 cents each, but it's currently at about .86 cents and I saw it get as low as .84 cents on

If you did what I would have done were XRP trading not a complete pain to do here in Washington state because of our abysmally stupid government in Olympia, then selling the rumor at $1.05 and buying back in on the actual news at or below .90 cents is probably treating you well right now.

The takeaway here is that these Coinbase/XRP rumors that keep popping up and popping the price are nothing more than a combination of wishful thinking and pump-and-dump manipulation, click bait to get you to watch monetized videos and whatnot, and a myopic viewpoint on what XRP is and where it is going. True, a listing on Coinbase would make it more accessible to the everyday crypto investing public, but the true source of XRP's future success is in its actual intended use case, which has nothing to do with a listing on Coinbase.

Here's the kind of news that should be moving the price of XRP dramatically:

Ripple Partners with Payment Provider Fleetcor to Foster XRP Use
"In another move that aims to facilitate the widespread adoption of cryptocurrencies, Fleetcor Technologies is partnering up with Ripple to foster the creation of an international payment system that will enable Ripple use for commercial purposes.

Fleetcor announced on March 1 that they have entered a pilot program which uses Ripple’s xRapid platform to bring together their international payments subsidiary Cambridge Global Payments and enterprise blockchain solution firm Ripple to process over $20 billion worth of [business-to-business] transactions." -- S. Jagati
That's a lot of cash moving through XRP, which goes from its point of origin to its destination almost instantly, even between different currencies. As I've written about before, this is compared to the existing money transfer networks that take days to settle transactions, are extremely expensive compared to this new technology, and which require huge pools of idle capital to be kept in order to create liquidity within the current system. So for the intended users of XRP, the value proposition is definitely there and adoption of the technology is growing. This will increase transaction volume through the network, which then brings up the other key driver of XRP's future value prospects: a tiny amount of XRP is destroyed every time a transaction occurs, over time reducing the amount of XRP that exists. The scarcity of XRP increases as it is used, a process that will accelerate as adoption grows.

So with a combination of massive savings of time and money, freeing up of trillions of dollars worth of capital (some of which would likely flow right into XRP), and a decreasing amount of XRP available, the only thing that Ripple really needs to be successful and put up huge gains is time. Getting listed on this exchange or that exchange just doesn't matter; Ripple's real use and usefulness exists elsewhere, and it is increasingly being put to work toward that end.

I'm not saying that a listing on Coinbase would not permanently boost the price of XRP. I don't doubt that it would. However, if your only interest in XRP is profiting from a quick spike in its asking price, then yes, such a thing would be a big deal. If all you know of XRP is that you might make some quick profits that way, you might want to get more familiar with what it really is, what it does, and what its future potential is, because you might otherwise miss really big gains over a longer time horizon...

Tuesday, March 06, 2018

Actually Hacking Bitcoin: It's Easier To Win The Lottery

Since this past weekend I keep seeing headlines about the latest "Bitcoin heist," which occurred in Iceland.

For accuracy, the headlines should read something to the effect of, "Bitcoin-RELATED heist," or, "Bitcoin EQUIPMENT stolen." But, no, of course we can't have that. The headline must be attention grabbing and sensational! If it's misleading, well...

What really happened: thieves broke into a mining center and stole mining computers. They didn't steal anyone's Bitcoins at all (but notice the headline Fortune put on this, still implying that cryptocurrency was stolen).

That's why a guy by the name of Brian Liotti of Crypto Aquarium put out this:

This is a table showing you the chances of guessing the private key of a random Bitcoin wallet, with funds in it, and the odds of guessing the private key of a specific Bitcoin wallet, versus winning Powerball.

Nine. Times. In. A. Row.

Previously I've written about the difference between the security of a Bitcoin wallet and cryptocurrency exchanges, what a private key represents (in two parts, here and here), and how the media frequently (maybe even intentionally) conflates a hack of an exchange with "hacking Bitcoin."

I explained then how it isn't really possible to hack Bitcoin itself, and I even posted the public address of one of my Bitcoin paper wallets for the world to see.

Go ahead and try to guess my private key and steal my Bitcoins. Or take all of your money and go buy Powerball tickets. You stand a better chance of your numbers being drawn in that game than you do of stealing my Bitcoins.

The reason Liotti created the table I've included above is simply that people's understanding of Bitcoin/cryptocurrency security is lacking, thanks in no small part to an often hostile, agenda-driven media that misrepresents the technology and events surrounding it ("FUD," in short). This slows wider adoption of the technology as it takes time for people to get legitimate news and information about it. It also warps the regulatory frameworks that governments erect around things, because regulation based on misleading or outright false information will be aimed at the wrong targets and ruin markets. Often that's good for entrenched special interests, and bad for the rest of us.

So go ahead and put a little money into a Bitcoin wallet instead of a Powerball drawing. Your chances of still having money for years to come are many times better!

Monday, March 05, 2018

Curb Your Enthusiasm: The Latest Ripple Rumor Surge

Last night I started seeing videos get uploaded to YouTube and articles appear on various crypto/financial websites about Ripple (XRP) being added to Coinbase.

Soon. Again. No seriously, guys!!111 This time it's totally going to happen zomg XRP to the moooooooooooooon!!!11lolz *somethingsomethingeatmylambodust*

The price per XRP has jumped close to 17% from about .90 cents each when I looked at it yesterday morning, before the rumor mill fired up, currently at $1.05 as I type this.

Most of the time, I ignore these prediction videos and articles, because they're usually written and produced by people who can never support their claims. They see patterns in things that typically do not exist and are really just imposing their wishful thinking and get-rich-quick mentality on the item or topic at hand.

I can almost guarantee that if any of these guys do hit their numbers with something like Ripple, they're going to end up like the people in this video:

Anyway, what's driving the rumors this time is that tomorrow night, the CEO of Ripple, Brad Garlinghouse, is going to appear on CNBC's Fast Money with Coinbase President Asiff Hirji. That is why the XRP moonshot rumor mill is running wild, because if those two are going to be on TV together, it can only mean one thing, right?

If it really were just those two appearing together, maybe. But that's where context steps in and downgrades your future Lamborghini to a reasonable Japanese economy sedan (probably a used one):
"The surge comes the day before Ripple CEO Brad Garlinghouse is scheduled to appear on CNBC's Fast Money program on Tuesday evening alongside Coinbase President Asiff Hirji and two other cryptocurrency executives, fueling fresh rumours that the exchange might announce support for XRP.

Neither Coinbase nor Ripple responded to a request for comment. It's likely that CNBC convened the panel to discuss cryptocurrency trends, and not for any announcement by either company. [emphasis added]" -- G. Rapier
It's likely that the panel discussion is only going to be what the author suggested in the last bit of the second paragraph above: CNBC is gathering some of the big players in the crypto space to talk about where the whole thing is going next. It's not going to be Garlinghouse or Hirji getting down on one knee and presenting a ring to the other.

This isn't to say that Ripple will never be listed on Coinbase. It could very well be at some point in the future. This panel appearance by executives of each company, that's just not evidence that any such thing is on the way in the near term, however. If XRP were not so difficult to trade in my state (because of how Olympia, in its infinite stupidity, has "protected the consumer" by thoroughly limiting our exchange choices here), I'd probably take some profits off of the top of this rumor spike and plug them back in once it returns to where it was yesterday morning, around .90 cents, once reality sets in.

Unless Garlinghouse and Hirji kiss on camera tomorrow night, that is. Then I'm going to buy Roman Abramovich's yacht.

Sunday, March 04, 2018

Stacking My Investing Cash In Life Insurance

I didn't blog yesterday because of two things, the first being going to weekly coffee with my mom, and the other being that I spent the afternoon refreshing my memory on the benefits of a particular financial vehicle I own, a cash value life insurance policy.

Let's get this out of the way first: I don't give a damn what Dave Ramsey thinks on this topic. Period, end of discussion.

A few days ago I wrote about how legendary investor, Warren Buffett, is letting Berkshire Hathaway's cash position swell because he and Charlie Munger can't find any good deals they want to invest in. In 2017, they made just one acquisition and accumulated a cash position of $116 billion USD. That's unusual for Berkshire.

In that post I asked the question that others are asking, too: "If Buffett isn't buying, why should I?"

It's a good question, especially right now. The U.S. stock market is at all-time highs, interest rate hikes and inflation brought on by low unemployment and wage growth is probably on the way, and tens of thousands of workers of the Baby Boom generation are retiring, possibly prompting them to rotate out of equities.

I don't think this should be looked at as a recipe for disaster, like some do (right before a pop-up ad appears on their site offering gold, freeze dried foods, and heirloom seeds for sale). Rather, it's just going to be part of a cycle, maybe even something to be expected that goes hand-in-hand with demographic trends the world over. In any case, it makes the argument that perhaps the best thing to do for now is prepare for big opportunities.

As such, I've recently stopped making any asset purchases and have begun stacking cash instead. Basically, I want fast access to capital; I want liquidity.

I also want a decent return, at all times. "Cash under the mattress" doesn't generate a return. In fact, thanks to inflation, it actually loses purchasing power whenever it is not put to work somehow.

That's where my cash value life insurance plan comes in.

I've had this thing for six years now. Basically, I purchased it with a vague plan to use it for an "Infinite Banking" strategy. Also known as "Bank On Yourself," this is an approach to saving and investing some use where the particular features of a cash value life policy allow them to act as their own banker to themselves.

The quick version: cash value life insurance can be borrowed against. You can request a loan from the insurance company, which will lend to you at contractually guaranteed rates (it's part of the insurance contract) using the cash value in the policy as collateral. Because the loan is collateralized, the insurance company won't ask what it's for, there is no underwriting process, and they won't say, "no." The loan also does not appear on your credit report. You then use the loan proceeds to buy whatever, then you "pay yourself back" by not only paying down the loan principal, but adding additional funds to your policy by also paying into it the interest you would have otherwise paid to a bank. In that way, you are your own bank, your total borrowing cost can be the same as if you had borrowed the money from someone else, but you keep the profits from the loan instead of that someone else getting them.

Now, the key thing going on here is that the cash value inside of my policy is always there, no matter how much of it I borrow. That's because policy loans are borrowed against the cash value, not from it. This means that during the entire time I have a loan out, my policy's cash value continues to earn interest, just like it was before I took a loan.

Think about it. While I have loan proceeds plugged into something that's generating cash flow (or maybe my next car), and while I'm paying myself interest on the loan that would have gone to some bank otherwise, the full amount of my principal is continuing to compound. Had I saved up my cash in a checking or savings account, a retirement plan like an IRA, a certificate of deposit, etc., any borrowings from those kinds of accounts take my capital out and halt its compounding. Depending on the type of account and the nature of the loan taken from it, there can also be penalties and interest owed to the IRS; not so with mine.

These interest earnings I'm receiving daily within my policy (that's right, mine credits interest every single day) are also accumulating tax free. Right now with annual bonuses, my policy's interest rate is effectively 4.69% with a guaranteed minimum of 3%. Because this is tax-free accumulation, however, in my 2018 tax bracket of 22%, this is a taxable-equivalent yield of just over 6%.

Does anyone reading this know of a stable savings vehicle earning a 6% pre-tax yield that will continue to compound interest while it's leveraged into another investment?

Finally, in my later years, I can actually use this policy as a source of tax-free retirement funds, also by borrowing from the accumulated cash value. Life insurance policy loans do not necessarily need to be paid back. If you don't pay the interest on the loan each year, the insurance company simply adds it to the balance of the loan. If the balance of your loans ever equals the cash value of the policy, the insurance company simply closes the policy and pays off the loans with the cash value. If however there is still cash value left in the policy at the time of your death, then the loans evaporate and your beneficiaries receive the benefit payout, or in the case of the manner in which my policy is structured, they get the specified benefit plus the net amount of accumulated cash value. It's just a matter of timing the loans versus life expectancy and sizing them correctly, which because they are loans are not taxable as income. I can also do this any time I want to, not only after a certain age that the government decrees.

You can get close to this with a Roth IRA, but unless you liquidate everything in it and keep it in idle cash, you could face wild swings in the value of it during your retirement years, and unlike the capital in my life policy, yours would not be continuing to compound by any significant amount.

There's a few more benefits to this approach that I'm familiarizing myself with again, such as being able to structure the loans from my policy to a business endeavor in such a way that the interest paid to my insurance company and to myself are fully deductible by the business. Suffice to say, there are a lot of benefits to be had here. There are some costs, too, the chief one being the cost of the insurance itself. And that's where a lot of the critics of this method focus, by chanting the platitude that "insurance is for insurance, not for investing" and then comparing the cost of cash value life versus term life insurance. Without going too far into why they're wrong, I'll just say this: the kind of insurance I have should be called "life insurance," because I can use it during my lifetime, whereas the kind of insurance the critics prefer should be called "death insurance," because you can't do anything with it during your lifetime, only pay for it, and it only provides a benefit to someone else after you've died (assuming you don't outlive the term of the policy, in which case all of your money is just gone...).

Why haven't I been more aggressive with this asset of mine in the past? Well, basically it's because I haven't been thinking in terms of building up a war chest ahead of anticipated big opportunities. I do fund my policy monthly, but nowhere near the maximum amount that I can each year. I think from here on out, good markets or otherwise, I'm going to make it my default investment every time I allocate cash. After all, I'm not getting 6% with stable value and rapid, tax advantaged access to my cash from anything else that I have at my disposal...


For more info on this topic, you can Google "infinite banking" or, "bank on yourself." YouTube searches for this topic will turn up tons of materials, too.

Also, if this sounds intriguing to you, find an insurance agent who is familiar with these topics and work with them. Remember: the younger you start, the cheaper the costs and the more time your money has to compound.

Friday, March 02, 2018

Back Yard Alternative Investing

Yesterday I took a small amount of the funds that I have earmarked for investment and I put them toward an investment of a different sort than what I typically do:


These are Barred Plymouth Rock chicks. It cost me $9.80 for the three of them. In about six months they'll begin laying eggs, which in the grocery stores around here sell for about .17 cents each ($1.99 per dozen, typically). I can probably expect between 18 to 21 eggs per week from these three for about two-thirds of the year, saving me the cost of buying eggs from the store (which are also pretty bland tasting - farm fresh eggs are so much better!), as much as $104 in savings each year. Figure that I might spend $50 on supplemental and winter food for them (during the spring and summer there's plenty of bugs for them to eat) and I'm looking at a net of $54, or an annual rate of return in the range of 550%. And that's assuming I don't sell any of the eggs!

I wonder how many hedge fund managers are going to start keeping chickens now...

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