Tag Archives: Bitcoin
NEW YORK (Reuters) – Soaring crypto-currency prices last year are estimated to result in U.S. tax liabilities of $ 25 billion, adding further selling pressure to these assets in the short term, according to a research note by Fundstrat Global Advisers on Thursday.
This could mean a massive outflow from crypto currencies to the dollar by April 15, the deadline for filing taxes this year, the firm said.
“We believe selling pressures (in crypto) have been amplified by capital gains tax-related selling this year,” said Thomas Lee, Fundstrat’s co-founder and head of research. Lee was formerly J.P. Morgan’s chief equity strategist from 2007 to 2014.
Still, Fundstrat believes the outlook for bitcoin should improve after the April 15 tax deadline. It reiterated its mid-year target of $ 20,000 and year-end forecast of $ 25,000.
Bitcoin in 2018 has lost more than 50 percent of its value, with other crypto currencies such as ether and ripple also hurt by intense regulatory scrutiny around the world.
Bitcoin last traded down nearly 2 percent at $ 6,673.53 on the Bitstamp platform. In December last year, bitcoin hit a record just shy of $ 20,000.
Virtual currencies led by bitcoin grew $ 590 billion in 2017 in terms of market value, compared with an $ 11 billion increase in 2016, Fundstrat said, estimating that 30 percent of crypto holders are in the United States.
The $ 25-billion tax liability accounts for 20 percent of the expected total tax payments for capital gains of around $ 168 billion in 2017, the research firm said. The projected tax liability is based on taxable gains for crypto of $ 92 billion, it added.
Fundstrat also said crypto exchanges posted record profit in November and December and are expected to have huge tax liabilities, which should add to further selling in crypto-currencies. Many of the exchanges have net income exceeding $ 1 billion in 2017 and keep their working capital in bitcoin and ether, the research firm added.
To meet these tax liabilities, exchanges need to sell bitcoin and ether.
Reporting by Gertrude Chavez-Dreyfuss; Editing by Bernadette Baum
A version of the technology that’s meant to make cryptocurrency payments faster and cheaper went live Thursday.
The software, called Lightning Network, can now be used for Bitcoin payments after more than a year in which thousands of developers tested it. Lightning Labs, one of the firms developing the technology, released this initial version, which is compatible with networks being developed by other groups, such as Blockstream and Acinq.
Bitcoin has become digital gold — or a viable investment alternative — to many, but it has been harder for it to fulfill its original purpose of becoming digital money, as transaction fees have skyrocketed to as high as $ 50, while confirmation times took as long as a week at their peak. Enthusiasts say the Lightning Network will solve these problems with fees at a fraction of a cent and instantaneous transactions.
The Lightning Network rolls out, another technology meant to speed up transactions, Segregated Witness, gains traction, with the number of transactions using it doubling to more than 30 percent of total Bitcoin transactions in the past month. Bitcoin transaction fees have plummeted in part thanks to this, but the total number of transactions has also declined. Lightning Network is also meant to help lower fees on the main Bitcoin network.
The Lightning Network allows Bitcoin users to open payment channels between each other. The parties can than conduct transactions without having to post them to the Bitcoin blockchain, avoiding delays and costs that result from recording those transactions each time. Once the channel is closed, only the resulting balances are recorded on the blockchain, not the full transaction history of the channel, and only then are Bitcoin fees paid. There is no required time or transaction limit required to close a payment channel, so they can potentially remain open for months of years.
Elizabeth Stark, Lightning Labs founder and chief executive officer, says merchants and especially online businesses will be the most likely users as it facilitates a high volume of payments and its near-zero fees allow for micropayments. Cryptocurrency exchanges could also use the software to accelerate deposit and withdrawal of funds, she said.
The network is currently able to process transactions in the low thousands per second, according to Stark, which is still far from Visa Inc.’s maximum of 56,000, but an improvement on Bitcoin’s five transactions per second. More than 4,000 payment channels have been opened since the technology was released in January 2017, and even though it was in testing, some merchants already started using it. Block & Jerry’s, an online ice-cream store playing on American ice-cream brand Ben & Jerry’s, is one.
“Bitcoin enthusiasts have gotten excited about this, merchants are excited about this,” Stark said. “It feels like we’re right on the edge of mass cryptocurrency adoption.”
LONDON (Reuters) – One of the biggest bitcoin exchanges has struck a rare deal which will allow it to open a bank account with Britain’s Barclays, making it easier for UK customers of the exchange to buy and sell cryptocurrencies, the UK boss of the exchange said on Wednesday.
Large global banks have been reluctant to do business with companies that handle bitcoin and other digital coins because of concerns they are used by criminals to launder money and that regulators will soon crack down on them.
San Francisco-based exchange, Coinbase, said its UK subsidiary was the first to be granted an e-money license by the UK’s financial watchdog, a precursor to getting the banking relationship with Barclays.
The Barclays account will make it easier for British customers. Previously, they had to transfer pounds into euros and go through an Estonian bank.
“Having domestic GBP payments with Barclays reduces the cost, improves the customer experience…and makes the transaction faster,” said Zeeshan Feroz, Coinbase’s UK CEO.
The UK is the largest market for Coinbase in Europe, and the exchange said its customer base in the region was growing at twice the rate of elsewhere.
Feroz said that it took considerable time to get a UK bank on board, partly because Barclays needed to be sure that Coinbase had the right systems in place to prevent money laundering.
Regulators across the globe have warned that cryptocurrencies are used by criminals to launder money, and some exchanges have been shut down.
“It’s a completely brand new industry. There’s a lot of understanding and risk management that’s needed,” Feroz said.
Despite growing interest in both digital currencies and the technology behind them, some big lenders have limited their customers ability to buy cryptocurrencies, fearing a plunge in their value will leave customers unable to repay debts.
In February, British banks Lloyds and Virgin Money said they would ban credit card customers from buying cryptocurrencies, following the lead of JP Morgan and Citigroup. [nL8N1PU10Y]
Coinbase said it had also become the first crypto exchange to use Britain’s Faster Payments Scheme, a network used by the traditional financial industry.
Reporting by Tommy Wilkes and Emma Rumney; Editing by Elaine Hardcastle
NEW YORK (Reuters) – Bitcoin rose above $ 10,000 on Thursday for the first time in more than two weeks, as investors bought back the digital currency after having fallen 70 percent from its all-time peak hit around mid-December.
On the Luxembourg-based Bitstamp, bitcoin rose as high as $ 10,095.82 and was last at $ 10,060.26, up 6 percent on the day.
Reporting by Gertrude Chavez-Dreyfuss
Most major U.S. credit card issuers have now banned the use of their cards to buy Bitcoin or other digital currencies, in a move intended to decrease both financial and legal risk.
Citigroup also says it is halting cryptocurrency purchases on credit, and Capital One and Discover had already enacted their own bans. That means all of the top five credit card issuers have announced or implemented bans.
The moves are above all in the banks’ self-interest. As Fortune previously reported, the mania surrounding cryptocurrency late last year appears to have motivated many retail investors to use credit cards as leveraging tools, buying more cryptocurrency than they could afford. With Bitcoin down roughly 50% from December highs, many of those investors are likely underwater right now, and may not be able to pay off their initial Bitcoin purchases soon, if ever.
Get Data Sheet, Fortune’s technology newsletter.
Further, as Bloomberg points out, banks may be responsible for monitoring customers’ behavior to prevent money laundering after they make a credit-backed Bitcoin purchase, a tough standard for them to comply with.
The bans — or more to the point, the news of the bans — may exacerbate ongoing declines in cryptocurrency prices. After a hefty bounce Saturday morning, crypto markets broadly retreated on Sunday. Bitcoin is now trading at around $ 8,500 from a December high near $ 20,000.
In the longer term, however, tighter cryptocurrency investment controls, whether from regulators or lenders, seem likely to help mitigate the consequences of both hype and scams. For much of 2017, those threatened to overshadow the underlying promise of blockchain technology, which is still in the very early stages of evolution.
TOKYO/SINGAPORE (Reuters) – Bitcoin extended its sharp tumble of the past 24 hours, skidding more than seven percent on Wednesday in a rapid downturn in fortunes as investors were spooked by fears regulators might clamp down on an asset whose value has skyrocketed in the past year.
The price of the world’s biggest and best-known cryptocurrency fell to as low as $ 10,567 on the Luxembourg-based Bitstamp exchange, not far from its six-week nadir of $ 10,162 touched the previous day. The session’s high was $ 11,794.07.
It led the fall in cryptocurrencies, although others such as Ethereum and Ripple, have also slid sharply this week after reports South Korea and China could ban trading, sparking worries of a wider regulatory crackdown.
“Cryptocurrencies could be capped in the current quarter ahead of G20 meeting in March, where policymakers could discuss tighter regulations,” said Shuhei Fujise, chief analyst at Alt Design.
At its lows on Tuesday, Bitcoin had fallen 25 percent in the session, its biggest daily decline in four months. It was a far cry from its peak close to $ 20,000 in December, when the virtual currency had risen nearly 2000 percent over the year.
Tuesday’s decline followed reports that South Korea’s finance minister had said banning trading in cryptocurrencies was still an option and that the government plans a set of measures to clamp down on the “irrational” cryptocurrency investment craze.
Separately, a senior Chinese central banker said authorities should ban centralised trading of virtual currencies as well as individuals and businesses that provide related services.
“Bitcoin is deciding whether this is the moment to crash and burn,” said Steven Englander, head of strategy at New York-based Rafiki Capital.
“My conjecture is that cryptocurrency holders are trying to decide whether to abandon Bitcoin because its limitations mean it will be superseded by better products or bet that it can thrive despite them.”
Bitcoin futures maturing on Wednesday on the Cboe Global Markets Inc’s Cboe Futures Exchange were at $ 10,740, with 1,586 contracts traded, after having opened at $ 10,850. The open interest was 2,895 contracts. The Cboe 14 March 2018 contract was quoted at $ 11,130.
The futures are cash-settled contracts based on the auction price of bitcoin in U.S. dollars on the Gemini Exchange, which is owned and operated by virtual currency entrepreneurs Cameron and Tyler Winklevoss.
The MVIS CryptoCompare Ripple Index, which covers the performance of a digital assets portfolio which invests in Ripple (XRP), a cryptocurrency developed by Ripple Labs, dropped 15 percent to $ 7,298 on Wednesday.
That equity index has seen a 66 percent slide in its value since the start of the year. Ripple itself was quoted at $ 1.15 on website CoinMarketCap, down from a high of $ 3.81 on Jan 4.
“The run-up in Bitcoin created a mystique of one-way trading which is being shaken but the pricing requires faith that there will always be demand,” Englander wrote.
“This is far from guaranteed given the existence of alternatives with better characteristics.”
Reporting by Hideyuki Sano in TOKYO; Writing by Vidya Ranganathan; Editing by Shri Navaratnam
In my previous articles, I talked about the surprising correlation between the supply of Tether and the price of Bitcoin. I encourage you to read both of them for some background. In essence, there are good reasons to believe that Tether Limited is issuing Tethers that are not backed by USD as promised in order to purchase Bitcoin through Bitfinex. After examining the flow of Tethers, which originate from Tether Limited and are then subsequently distributed to various other exchange all through Bitfinex, I believe that Tether’s correlation to Bitcoin is no simple coincidence.
It continues to baffle me why this issue is not the most talked about topic in the Bitcoin community (OTCQX:GBTC, COIN, RIOT, OTC:BITCF, OTCPK:BTSC, OTCQB:BTCS, OTCQB:MGTI). I can assure all stakeholders that just because you bury your head in the sand, the problem is not going to go away.
Since my last article (read Regulators Must Investigate Bitcoin), Tether Limited has minted another 350 million Tethers (that’s a rate of 13 billion per year). At the time of writing, there were over 1.2 billion Tethers outstanding. Meanwhile, no one actually knows or seems to care about where Tether Limited is holding the USD funds. If market participants truly care about the integrity of the cryptocurrency, this should be the most pressing issue at hand.
A lot of things happened since my last article, and today, we’ll see some new developments at Bitfinex and Tether Limited that further strengthen my belief in that Bitcoin is manipulated by the issuance of unbacked Tethers.
After my first article on the subject (read Bitcoin Only Has One Way To Go), Bitfinex instated a minimum withdrawal policy of $ 250 or equivalent, which according to my calculations, locked up 75% of its clients. Soon after, the exchange also completely stopped new account registrations until January 15th, 2018.
At first glance, halting account growth doesn’t benefit Bitfinex since an exchange typically wants more users. However, the implication here is that now, members of the media who want to investigate the platform will be unable to do so (luckily for me, I had signed up last year). In addition, manipulating Bitcoin through Tether doesn’t require new users in the short term. In fact, it may be harmful for the manipulators if we assume that new accounts would be buying Bitcoin on Bitfinex (i.e. trading with Bitfinex when fraudulent Tethers are used to buy Bitcoin, giving Bitfinex a higher cost basis). Certainly, over time, an influx of additional users is required, from whom Bitfinex can then purchase Bitcoin (or other cryptocurrencies) with unbacked Tethers, but that isn’t a concern in the near term since there are still many Bitcoins that are not owned by Bitfinex.
Many readers have urged me to forward my findings to relevant authorities, and it is interesting to note that a Bitfinex employee’s warrant canaries have disappeared. Warrant canaries serve as a warning mechanism that indirectly indicates to the public that the related entities have not been investigated. Their disappearance implies that he or the firm are being investigated by law enforcement.
Tether Limited Developments
On Wednesday, Tether Limited came out with a press release that included updated policies and a few paragraphs that directly addressed “conspiracy theories.” There were images of historical “audits” and the promise of another “audit.” But if we peel back the wordplay, predictably nothing of substance was said, and more importantly, the company revealed some new restrictions regarding the use of Tether.
Clearly, Tether Limited is following Bitfinex’s playbook of freezing customer funds, which isn’t surprising considering that the two companies are run by the same management.
An arbitrary redemption minimum will prevent small Tether holders from cashing out, meaning that they will be unable to redeem their tokens for USD in the event of a run on Tether. As I’ve mentioned in previous articles, it’s unclear at what point this will occur, but rest assured that it will happen at some point in the future as Tethers must be converted into USD for the holder to derive any utility from the tokens (i.e. so users can actually buy goods and services in the real world). In the meantime, these new policies give the uninformed and naïve traders reasons to continue to trust the Tether system. I believe that this game of confidence will inevitably collapse, but as with anything in a market, anything can be real as long as enough people believe in it.
In the hopes of calming investors about “conspiracy theories” of insufficient USD reserves, the company also posted pictures of bank confirmations for the periods prior to them losing bank access from Wells Fargo (NYSE:WFC) as a correspondent bank in April.
December 31, 2016
January 31, 2017
February 28, 2017
March 31, 207
Note that the above confirmations are literally just pieces of paper confirming bank balances (i.e. not a full audit). These pictures do not prove that the funds actually belonged to Tether Limited (e.g. could be funded by debt) nor do they show the flow of funds, which should match the Tether issuances visible on the blockchain. Furthermore, these confirmations were completed when there were merely 45 million Tethers outstanding at most; that number has now ballooned to over 1.2 billion. Most importantly, bank confirmation is pretty much useless in China (where the bank was located) because this flimsy piece of paper cannot only be easily doctored, the bank rep responsible for the confirmation can be easily bribed as well.
In addition to the bank confirmations, the company also stated that Friedman LLP is working hard on completing a full “balance sheet audit” for the periods going back to December 31st, 2016. Presumably, a balance sheet audit does not entail a full audit, which would verify the flow of funds, the key to identify (or deny) potential fraud. If the company produces an “audit” similar to the report produced earlier (i.e. not an audit as specifically stated by Friedman in the numerous disclosures as discussed in my previous article), then all of the efforts to come clean will be moot. In addition, due to the intertwined relationship between Tether Limited and Bitfinex, only a simultaneous audit of both companies over time can rid me of my doubts. This is important because Bitfinex could be supporting Tether’s balance sheet in the event of fraud, and vice versa. For example, even if Tethers are not fully reserved by USD, Bitfinex can easily move some of its funds into Tether Limited’s bank account to temporarily make up for any shortfalls.
It is astounding that mainstream Bitcoin media aren’t treating Tethers more seriously. Even exchanges (Chicago Board Options Exchange (CBOE), CME (CME)) are marching ahead with plans to introduce ETFs based on Bitcoin futures. Packaging a complex asset into futures then ETFs to create artificial liquidity, I wonder what could go wrong? Perhaps everyone is too busy counting their paper gains, but I must warn market participants that if my suspicions prove to be accurate, the wealth that is being created is just an illusion. It is in the interest of all stakeholders to ensure that manipulation does not stifle blockchain innovation, or worse, cause the next financial crisis should this be allowed to perpetuate.
Click the “Follow” button beside my name on the top of the page to be updated with my latest insights on important topics. If you are a long-term investor, check out the Core Value Portfolio (now available at an all-time low price to make it affordable to everyone), whose goal is to compound capital at 20% over the long term. If you need convincing, see for yourself if you are the right fit to achieve 20% annual returns and if you agree with the investment philosophy. Premium subscribers get full access to the Core Value Portfolio.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Editor’s Note: This article covers one or more stocks trading at less than $ 1 per share and/or with less than a $ 100 million market cap. Please be aware of the risks associated with these stocks.
SINGAPORE/TOKYO (Reuters) – Bitcoin extended its recovery in holiday-thinned trading on Tuesday, rising 10 percent to be up more than a third from last week’s lows of below $ 12,000.
Bitcoin, the world’s biggest and best-known cryptocurrency, fell nearly 30 percent at one stage on Friday to $ 11,159.93 and, despite a late recovery, had its worst week since 2013. At 0445 GMT on Tuesday, it was quoted around $ 15,049 on the Luxembourg-based Bitstamp exchange.
The digital currency had risen around twentyfold since the start of the year, climbing from less than $ 1,000 to as high as $ 19,666 on Dec. 17 on Bitstamp and to over $ 20,000 on other exchanges. But it has posted heavy declines since.
While bitcoin investors and analysts believe the decline in its value was a natural correction after a heady run-up in prices, there have been further warnings from market regulators and central banks.
“There is no right current price which would reflect the right current valuation,” said Andrei Popescu, Singapore-based co-founder of COSS, which describes itself as a platform that encompasses all features of a digital economy based on cryptocurrency.
“Taking profit is right, while buying into a long term projection is also right. You don’t have to be right in this market, just less wrong than the rest,” Popescu said.
Shmuel Hauser, the chairman of the Israel Securities Authority, said on Monday he will propose regulation to ban companies based on bitcoin and other digital currencies from trading on the Tel Aviv Stock Exchange.
Singapore’s central bank last week issued a warning against investment in cryptocurrencies, saying it considers the recent surge in their prices to be driven by speculation and that the risk of a sharp fall in prices is high.
Prices of rival cryptocurrencies, which slid along with bitcoin last week, have also recovered, with Ethereum, the second-biggest cryptocurrency by market size, quoted around $ 771, up from Sunday’s low of $ 689 but still far from highs around $ 900 hit last week.
Editing by Sam Holmes
(Reuters) – Major cryptocurrency exchange Coinbase said on Wednesday it will investigate accusations of insider trading, following a sharp increase in the price of bitcoin cash hours before it announced support for the virtual currency.
Bitcoin cash, a clone of bitcoin, jumped to $ 8,500 on Coinbase’s exchange on Tuesday afternoon, hours before the San Francisco-based exchange launched trading in bitcoin cash.
Trading in bitcoin cash will be suspended until 1200 ET (1700 GMT) Wednesday, a Coinbase status page showed.
Meanwhile, bitcoin, the world’s most popular cryptocurrency, fell more than 10 percent on Wednesday to a one-week low of $ 15,800. Bitcoin has risen some 1,700 percent this year and nearly 80 percent this month alone.
“If we find evidence of any employee or contractor violating our policies — directly or indirectly — I will not hesitate to terminate the employee immediately,” Coinbase Chief Executive Brian Armstrong said in a blog post. (bit.ly/2CMbaA3)
Additionally, Coinbase employees have been restricted from trading in bitcoin cash for several weeks, Coinbase said on Twitter.
Earlier on Tuesday, traders on Twitter alleged that news of Coinbase’s launch of bitcoin cash support had been leaked before the official announcement.
Bitcoin cash was created on Aug. 1 when Hong Kong-based exchange Bitfinex said a minority of bitcoin miners would create a new version of bitcoin to make trading faster and easier.
Reporting by Nikhil Subba and Mekhla Raina in Bengaluru; Editing by Amrutha Gayathri and Sai Sachin Ravikumar
(Reuters) – A suburban New York hospital technician accused of using bitcoin and other cryptocurrencies to launder money meant for the militant group Islamic State was arrested on charges of money laundering in support of a foreign terrorist organization and bank fraud, prosecutors said Thursday.
Federal prosecutors in New York’s Suffolk County claimed in court papers that Zoobia Shahnaz, 27, used fraudulent credit cards and loans to accumulate $ 85,000, which she attempted to transfer to the radical group Islamic State before attempting to go to Syria to join it.
Prosecutors said that after traveling to Jordan to work with the Syrian American Medical Society, Shahnaz returned to the United States and applied for six credit cards, which she used to buy bitcoin and other cryptocurrencies.
The resident of the hamlet of Brentwood in Islip on Long Island appeared before a federal judge late on Thursday and was ordered detained, prosecutors said.
Shahnaz’ lawyer, Steve Zissou, did not immediately respond to a request for comment on the case.
After borrowing about $ 85,000 with fraudulently obtained credit cards and loans and withdrawing another $ 22,000 from bank accounts in her own name, Shahnaz sent funds to recipients in Pakistan, China and Turkey, prosecutors said.
Some of that money came in the form of $ 63,000 in bitcoin and other crypto-currencies purchased with the credit cards, prosecutors said.
Arraignment and detention documents released on Thursday showed that Shahnaz, a U.S. citizen born in Pakistan, was arrested on Wednesday.
Prosecutors said that in July Shahnaz obtained a Pakistani passport and booked a flight to Pakistan with a layover in Istanbul with the intention of going to Syria. She was stopped by law enforcement investigators at John F. Kennedy airport and questioned about her trip and the financial transactions, prosecutors said.
She had $ 9,500 in cash with her, just under the limit of $ 10,000 that a person can take out of the country without declaring it to immigration and customs officials, they said.
Subsequent searches of Shahnaz’ electronic devices showed numerous searches for Islamic State-related material, including travel checklists.
She faces three charges of money laundering, including money laundering in support of a foreign terrorist organization, and is also charged with bank fraud. She faces up to 20 years in prison on each of the money laundering charges and up to 30 years for the bank fraud charge.
Reporting by Sharon Bernstein; Editing by Cynthia Osterman