UK dealer charged in US over multimillion-dollar fake Bitcoin site scam

Renwick Haddow created trendy companies and duped investors into thinking they were big successes, authorities in New York allege

US authorities on Friday charged a British businessman with securities fraud, accusing him of deceiving investors over what turned out to be a fake trading platform for the cryptocurrency Bitcoin.

The Securities and Exchange Commission (SEC) alleged the clandestine Renwick Haddow, a UK citizen living in New York, diverted funds invested in a phoney Bitcoin site as well as from a flexible workspace firm Bar Works into accounts in Mauritius and Morocco, totalling $5m.

It said he touted experienced senior executives as behind the operations who turned out to be phantoms, and misrepresented the details and success of both companies.

Andrew Calamari, director of the SECs New York office, said: Haddow created two trendy companies and misled investors into believing that highly qualified executives were leading them to quick profitability.

In reality, Haddow controlled the companies from behind the scenes and they were far from profitable.

Bitcoin Store claimed to be an easy-to-use and secure way of holding and trading Bitcoin that had generated several million dollars in gross sales. The SEC alleged that in fact it never had any operations nor generated the gross sales it touted.

In 2015, Bitcoin Stores bank accounts allegedly received less than $250,000 in incoming transfers, none of which appear to reflect revenue from customers, the SEC said.

Haddows investors pumped more than $37m into Bar Works, which claimed to provide workspaces in old bars and restaurants, but in fact primarily sold leases coupled with sub-leases that together functioned like investment notes, the SEC said in a statement.

The commission alleged that throughout Haddow was hiding his connection to the companies given his checkered past with regulators in the UK, where he has faced similar charges for investment schemes.

According to a report in Crains, 27 investors from China filed suit in the state supreme court on 16 June seeking repayment of more than $3m invested in Bar Works, which they called a Ponzi scheme.

Another investment group filed a similar case against Bar Works in Florida in recent weeks.

Read more: www.theguardian.com

Bitcoin investors hoping to make billions may end up with a sack of fool’s gold

The cryptocurrency may not be a threat to the world economy, but that should not stop regulators from protecting investors from it

Sifting the Yukon river for gold was a waste of time for most of the 100,000 prospectors seeking to make themselves rich in the 1890s. The same can be said of the bitcoin miners who dream of striking it rich by getting their hands on some of the extremely lucrative and painfully elusive electronic currency.

Relatively few people have managed to decipher the codes needed to extract bitcoins from the 21 million locked inside the mathematical problems set by its creator, the software engineer whose true identity is unknown but who goes by the name Satoshi Nakamoto.

Those who have employed enough computer power and code-cracking know-how can consider themselves rich now that the value of one bitcoin has soared from $753 last December to around $10,000. The rest have deployed huge amounts of energy and time for no return.

Should anyone be worried about this turn of events? Or will it go down as a moment in history when an asset was mined, some people got rich and … that was it?

The ambitions of the bitcoin community mean the creation of a new currency must be taken more seriously. Its stellar rise in the last 18 months is likely to have sucked in thousands of speculators, many of them ordinary investors.

And with mainstream financial exchanges looking to host bitcoin as a tradeable asset, or list derivatives of bitcoin on their trading boards, thousands more will be sucked in over the next 18 months.

Where ordinary investors, hunting in large numbers, seek a return on their savings in a high-risk environment, governments are usually minded to regulate.

The idea behind bitcoin was that it should be like any commodity that, once discovered, became increasingly difficult to extract. Like gold, it would become a store of value and make those clever enough to find it and believe in it very rich.

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Jamie Dimon described bitcoin as only fit for use by drug dealers, murderers and people living in North Korea. Photograph: Eric Piermont/AFP/Getty Images

The distributed ledger designed to make each bitcoin account secure and accountable without the need for third parties, like banks, to be involved became for many participants a potential template for all future deposit saving and trading.

To that end, it was also viewed as a replacement currency to the dollar, euro or pound – one that could not be manipulated by central banks, which are only too keen to print extra notes, and thereby devalue the currency, in times of trouble. It is a seductive package that has led many in the banking industry – those most under threat – to call it a fraud.

Goldman Sachs boss Lloyd Blankfein said so last week, adding his voice to JP Morgan’s Jamie Dimon.

Dimon described it as fraud that would ultimately blow up and said the desire to hide funds from regulators and the police meant it was only fit for use by drug dealers, murderers and people living in places such as North Korea. Blankfein was more concerned that its volatile price, which dropped 20% in less than 24 hours after topping $11,000 last week, disqualified it from being a sensible currency.

Sir Jon Cunliffe, a deputy governor of the Bank of England, summed up the view of many in the City when he said calmly that bitcoin was a sideshow and too small to pose a systemic threat to the global economy.

To cover his flank against accusations that the Bank, which is the UK’s chief financial regulator, was too dismissive of the issue, he also cautioned that bitcoin investors needed “to do their homework”.

No doubt all bitcoin investors think they have done their homework. And regulators probably think they have enough work to do. But while it is easy to say that a fool and their money are soon parted, anyone who interacts with the financial services industry is a potential victim. And, with this in mind, regulators should be ready to impose all the usual tools of misselling rules and compensation schemes on this freshly minted industry.

At the moment, bitcoin is having a free ride. The tipping point is close. Regulators should be prepared.

Grayling mustn’t shunt true cost of rail network into the sidings

Another private operator on the east coast mainline, another bailout. History is repeating itself – again – and Chris Grayling is in the middle of the farce.

The transport secretary’s efforts to drum up a narrative of reversing Beeching cuts could not eventually conceal the small print in his rail strategy: a shabby face-saving deal with Stagecoach and Virgin, two firms who have richly profited from privatisation. Their Virgin Trains East Coast joint venture is to be curtailed, meaning that billions promised to the taxpayer by private-sector firms have again proved to be notional.

The government was in an invidious position: a delay to infrastructure upgrades by Network Rail and the shaky entry into service of Hitachi trains commissioned by the Department for Transport certainly gave the operators cause for complaint. Yet it will appear once again that private firms expect the downside to lie with the taxpayer.

Stagecoach/Virgin has a rich history of getting its way with the DfT, notably during the 2012 west coast franchise debacle, where it wrested back control of the contract from First Group. Since then, soul-searching reports have concluded that franchising does, indeed, work – but evidence has also accumulated to the contrary.

Competition has all but vanished: both parties in that west coast fiasco have been allowed to hang on to large franchises well into the next decade. The Thameslink megafranchise has turned Govia, which previously ran Southern services without much mishap, into a basket case. National Express has turned its back on rail and Stagecoach’s shares rocketed once news sank in that it was exiting East Coast early.

What franchising does offer the government is the fig-leaf of privately owned railways, even as it effectively dictates whether guards stay on trains, and by how much fares should rise.

Taking the flak directly, from commuters or unions, would not be for the fainthearted: Labour’s pledge to renationalise, slowly, is pragmatic. Yet an honest conversation about the true costs of the rail network, and who does and should invest, is long overdue. Grayling’s latest sleight of hand shows it is unlikely to be forthcoming soon.

No, Jeremy Corbyn – banker baiting’s bad for business

Picking a fight with a banker is still a good sport, 10 years after Northern Rock collapsed. Jeremy Corbyn knows it will provoke his supporters to chant his name to the tune of the White Stripes song Seven Nation Army once again. He knows it will earn the cheers of many beyond Labour’s membership ranks.

So there is probably little shock value in his response to Morgan Stanley last week after the US investment bank’s analysis that a Corbyn government would be bad for its clients and investors more generally. However, a prime-minister-in-waiting might want to be more circumspect about revolutionising an industry that accounts for more than 10% of GDP and makes a huge contribution to improving the UK’s balance of payments.

It’s an uncomfortable truth that Britain would find life difficult without the foreign banks in the Square Mile. Careful reforms are needed, not knee-jerk reactions.

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Read more: www.theguardian.com

Iced tea company’s stock shoots up after adding blockchain to its name

The boom in Bitcoin, an electronic currency whose fanatical adherents have pushed its value to over $15,000 per digital coin has caused some very weird changes in the way people do business in the real world. For example, an iced tea company just rebranded itself as a company that does “blockchain”—the technology that makes sure all Bitcoins are unique and can’t be copied. And when it did, its stock value skyrocketed.

Long Island Ice Tea Corporation is now Long Blockchain Corporation, Ars Technica reports. Long Blockchain will continue to make iced tea, but it will also go into “blockchain infrastructure for the financial services industry.”

Because “blockchain” is one of the hottest corporate buzzwords you can summon in 2017, Long Blockchain’s stock “zoomed” nearly 200 percent after the Thursday announcement.

Long Blockchain isn’t actually offering Blockchain services yet, and Ars reports it’s looking to partner with other companies to do so.

Businesses are wild for blockchain not just because of its Bitcoin applications, but because it can be used for all kinds of things

But it’s also eerily similar to the internet stock craze in the late 1990s when several companies that weren’t destined to become the next Amazon simply added a dotcom suffix or ‘e’ prefix to their name and watched their stocks soar,” Paul La Monica wrote.

Blockchain is the new iced tea, and also the new “.com.”

Read more:

Is block power about to revolutionise banking? | John Naughton

Blockchain technology has the potential to bring the world of finance into the modern world. And it cant come soon enough

Science advances, said the great German physicist Max Planck, one funeral at a time. Actually, this is a paraphrase of what he really said, which was: A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it. But you get the drift.

I always think of Plancks aphorism whenever moral panic breaks out over the supposedly dizzying pace of technological change. Which happens all the time nowadays, even though the data says otherwise. If you take as your measure of speed how long it takes a new technology to be adopted by 50% of US households, for example, then radios (eight years) and black-and-white TVs (nine) reached that threshold faster than PCs (17) or mobile phones (15).

So when we talk about the pace of change, it makes sense to distinguish between different kinds of innovation. If the change requires the building of infrastructure the electricity grid or the internet, say then the pace of change can be very slow. But if it just involves innovations that harness existing infrastructure new TV formats or smartphone apps the pace can indeed be dizzying, because they just piggyback on existing infrastructure. This is why Uber and Airbnb took so long to materialise: they needed smartphones, GPS and ubiquitous wireless networking before they became viable, whereas Facebook only needed the web. And the web itself spread like wildfire only because the infrastructure it needed the wired internet was already in place. No digging required.

Where the trope about accelerating technology-driven change really breaks down, though, is when you try to apply it to governmental, legal and commercial institutions. What you then find is a chaotic spectrum that runs from astonishingly rapid change in some areas to glacial inertia in others. On the governmental/regulation front, for example, data protection legislation is fighting a losing battle against the proliferating ambiguities of big data. Yet at the same time, we learn from Edward Snowden how far the NSA and GCHQ have been ahead of the technological curve while being at the same time supposedly answerable to government bureaucracies running the last but one version of Microsoft Windows (or even XP, for Gods sake).

Or take the finance industry. On the one hand, its banks are global institutions apparently able to move trillions of dollars between continents at the speed of light. High-speed traders spent billions of dollars digging a straight-line trench from Chicago to New York to shave nanoseconds off the time that it takes a buy-or-sell instruction to traverse a strand of glass fibre. On the other hand, it takes five working days to clear a cheque.

Illustration
Illustration by Matt Murphy.

In a fascinating article in the Financial Times last week, the veteran commentator Martin Wolf turned his gaze on the banks. Information technology, he wrote, has disrupted the entertainment, media and retail businesses and, most recently, the supply of hotel rooms and taxis. Is it going to do the same to finance? My first response is: please. My second response is: yes.

Wolfs reasoning is that banks and insurance companies are our core financial institutions because they do three essential things: enable payments, act as intermediaries between saving and investment and provide insurance. But they dont do any of these things well and mostly they do them with staggering inefficiency. Even today, Wolf says, 40% of the global revenues of the banking system thats $1.7tn come from payments and settlement can take still take hours or days.

So here we have a global industry that, in one of its core competencies, is operating at a pace that Mayer Rothschild, the founder of the great banking dynasty in the 1760s, might have recognised. Could digital technology help? Yes, says Wolf. It could, for example, transform payments using some variant of the blockchain technology that underpins cryptocurrencies such as bitcoin.

Hes right: blockchain technology could make payments nearly instantaneous and at very low cost. Which is presumably why the Bank of England has encouraged some UCL computer scientists to design a cryptocurrency that would combine the affordances of a blockchain system with the control over monetary policy that a central bank would expect to retain. And its also why the governments chief scientific adviser recently published a report extolling the potential of blockchains for streamlining government services.

So here we have an interesting conundrum: with astonishing speed, computer scientists have come up with a truly revolutionary technology that could transform both banking and the provision of public services. I said could. But we will have to wait until we can make blockchain payments every day before we know what the real pace of change is. One funeral at a time, remember.

Read more: www.theguardian.com

What Could Kill the Bitcoin Boom

If you bought a Bitcoin in early 2017, when one cost less than $900, you could have a profit of more than 1,200 percent now. But you almost certainly didn’t do that. Perhaps you dipped in a toe in November or December, as the price hit headline-grabbing records—$10,000, then $15,000, then higher. If you were very unlucky and bought at the peak of about $20,000 on Dec. 17, you’d have lost more than 40 percent of your money as of Jan. 16, when the price was $11,200. More than $2,000 of that decline came in about 24 hours, after South Korean Finance Minister Kim Dong-yeon indicated the country may crack down on cryptocurrency trading to discourage speculation. It’s not every asset that can feel like it’s in a bubble and a crash at the same time.

But based on no other valuation metric than what it cost a year ago, the price of Bitcoin is still dizzyingly high. For the many doubters who can’t believe things have come this far—and for Bitcoin owners who can see how much they might lose—the big question is what it would take to knock the price back further.

In past episodes, “Bitcoin and digital currencies have been incredibly resilient to bad news,” says Meltem Demirors, director of development at Digital Currency Group, which invests in Bitcoin and related technologies. Cryptocurrency exchanges such as Mt. Gox, Bitfinex, and BTC-e have been hacked over the years, with hundreds of millions of dollars’ worth of Bitcoin stolen. China in September moved to shut down exchange trading of the cryptocurrency. None of these permanently stopped Bitcoin’s rise up the price charts, especially after it drew the attention of hedge fund traders and futures markets.

One doomsday scenario would be a successful hack of the blockchain. That’s the underlying technology that records and verifies every transaction, using exact copies of a database spread on computers all over the world. Those host computers, called miners, are rewarded with new Bitcoin for doing the work of verifying transactions. An attacker might be able to alter the blockchain’s history by marshaling more than half the computing power on the network. But that would be monumentally difficult; someone with the technology to do it could instead “opt into the game” and get paid to mine Bitcoin, says Tyler Winklevoss, co-founder of the Gemini digital asset exchange and one of the largest Bitcoin holders.

The likelier risks are far more pedestrian. The first is that while plenty of investors and speculators have piled into Bitcoin, it’s a difficult currency to use in the real world. The network is slow and expensive for small transactions. And who wants to spend $4 in Bitcoin for a coffee if next week that could be worth $8? “My big concern as a company is that digital currency doesn’t find its quote-unquote killer use cases, where people are saying, ‘Wow, we now have tens of millions of daily active users that are using it for payments,’ ” says Adam White, who runs GDAX, the exchange for institutional investors run by Coinbase. “That’s one of the largest existential threats to the company.”

BitPay's Singh Calls Bitcoin Selloff an Overreaction

There’s been a very public civil war among Bitcoin developers: One group favors changes to the network, the other doesn’t. “It’s got to have the developer community come together and figure out how to scale it properly and continuously,” says Sheri Kaiserman, a managing director at Wedbush Securities and an early Wall Street believer in Bitcoin’s potential. Meanwhile, Bitcoin faces competition from other digital currencies, from Bitcoin Cash to Litecoin to Ether, which have also seen big gains and wild swings.

You could spend weeks learning about the nuances of the various cryptocurrencies. But the main risk to Bitcoin is actually the easiest to understand. “The biggest factor in what’s driving the price up is potentially what will drive it down—a reversal of animal spirits,” says Adam Ludwin, chief executive officer of blockchain startup Chain. “There is essentially a belief this will continue to go up. If people believe it will continue to go down, that’s self-reinforcing.”

To explain that psychology, Ludwin invokes John Maynard Keynes. The economist likened investing to a newspaper contest where readers were asked to pick the picture of the person the majority of other people would find most attractive. To win, a reader would have to discard his own judgment and bet purely on a guess of what the average person would find beautiful. Or, maddeningly, even on what the other players would think the average player would like. Cryptocurrency in general is “really one of the most beautiful distillations of the Keynesian beauty contest that’s ever existed,” says Ludwin. All investments have some of this speculative element, but unlike, say, a stock, Bitcoin isn’t a claim on future earnings to which investors can hitch a valuation. To bet on Bitcoin is to believe simply that others will want it.

One read on the psychology of the Bitcoin boom is that it’s part of a broad bull market in all kinds of assets. Despite anxieties about politics, North Korea, and rising equity valuations, investors seem to be in a mood to embrace risk and are fearful of missing out on big gains. Or perhaps Bitcoin is the shadow side of that optimism: Many are drawn to cryptocurrency because they see it as a palliative to the system that came crashing down in 2008, and their belief in Bitcoin has been hard to shake. Market psychology is difficult to pin down—the one thing that’s reliable about it is its volatility.

    BOTTOM LINE – Despite its meteoric rise in the past few years, Bitcoin remains a wildly volatile investment, dropping more than $2,000 in a day when bad news hits.

    Read more: www.bloomberg.com

    How Craig Wright Privately ‘Proved’ He Created Bitcoin

    When rumors surfaced early last month that Australian cryptographer Craig Wright would attempt to prove that he created Bitcoin, Gavin Andresen remained skeptical. As the chief scientist of the Bitcoin Foundation, his opinion counts: Andresen is among the earliest programmers for the cryptocurrency, and likely the one who has corresponded more than anyone with Satoshi Nakamoto, Bitcoin’s pseudonymous, long-lost inventor.

    Today,Andresen fully believes that Wright is Nakamoto. Now he’ll have to convince the rest of the world, because he’s among the only people to have seen what he claims isthe best evidence in Wright’s favor.

    In an interview with WIRED on Monday following flurryof media reportsstating that Wright now publicly claims he created Bitcoin, Andresen described in detail a private meeting he had with Wright in London. And he explains why he left that meeting convinced that Wright is the same Nakamoto who unveiled Bitcoin in 2009 and emailed extensively with himin 2010 and 2011. Andresen says his belief is unwavering, despite a bizarre and highly unconvincing blog post Wright published Monday offering the flimsiest evidence that he invented the cryptocurrency—evidence of a very different sortfrom what Andresen says Wright revealed to him.

    “Im still convinced hes Satoshi despite the really weird proof hes put in his blog post,” says Andresen. He stands by a statement he published on his website this morning: “I believe Craig Steven Wright is the person who invented Bitcoin.”

    The Private ‘Proof’

    As Andresen tells it, a firm representing Wright contacted him in March and invited him to London for a private, in-person demonstration designed to prove Wright created Bitcoin. Andresen understandably expressed reluctance. WIRED and Gizmodo had named Wright in December as a Satoshi Nakamoto candidate based on leaked emails, accounting documents and transcripts. But thengaps in Wright’s story appeared following those reports—including signs he had backdated evidence and misrepresented academic credentials—it seemed Wright was likely pulling an elaborate hoax or con.

    But Wright followed up with a series of emails that piqued Andresen’s interest. “This is a person who knows an awful lot about Bitcoin and an awful lot about early Bitcoin stuff,” Andresen says. “The email conversations I had [with him] sounded like Satoshi to me. It sounded like I was talking to the same person Id worked with way back when. That convinced me to get on an airplane.”

    On the morning of April 7, Andresen took a red-eye to London and proceededdirectly to a hotel in the Covent Gardendistrict. He met Wright and two associates in a conferenceroom there that afternoon and, Andresen says, Wright performed the cryptographic featthat erased his remaining doubts.

    Cryptographers have suggestedat least two waysthe creator of Bitcoin could prove himself: Nakamoto could move some of the earliest Bitcoins, which are known to belong to him and have never been spent in their seven-year existence; or he could use the same cryptographic “private keys” that would allow those coins’ owner to spend them to instead “sign” a message—transforming the message’s data in a way that proves he or she possesses keys that only Nakamoto would have.

    Wright, Andresen says, offered to perform the second test, signing a message of Andresen’s choosing with a key from the first “block” of 50 coins ever claimed by aBitcoin miner, in this case Nakamoto himself. (He also performed a similar test for Jon Matonis, a former board member of the Bitcoin Foundation, and a reporter for the Economist, the magazine says, using both the first and ninth Bitcoin blocks.) Andresen says he demanded that the signature be checked on a completely new, clean computer. “I didnt trust them not to monkey with the hardware,” says Andresen.

    Andresen says anadministrative assistant working with Wright left to buy a computer from a nearby store, and returned with what Andresen describes as a Windows laptop in a “factory-sealed” box. They installed the Bitcoin software Electrum on that machine. For their test, Andresen chose the message “Gavin’s favorite number is eleven.” Wright added his initials, “CSW,” and signed the message on his own computer. Then he put the signed message on a USB stick belonging to Andresen and they transferred it to the new laptop, where Andresen checked the signature.

    At first, the Electrum software’s verification of the signature mysteriously failed. But then Andresen noticed that they’d accidentally left off Wright’s initials from the message they were testing, and checked again: The signature was valid.

    “Its certainly possible I was bamboozled,” Andresen says. “I could spin stories of how they hacked the hotel Wi-fi so that the insecure connection gave us a bad version of the software. But that just seems incredibly unlikely. It seems the simpler explanation is that this person is Satoshi.”

    The Problem With the Public Proof

    Underother circumstances, the Bitcoin community could almost be convinced by Andresen’s account, too. But in contrast to Andresen’s private demonstration, the evidence that Wright publicly offered to support his claim almost immediately collapsed. “The procedure thats supposed to prove Dr. Wright is Satoshi is aggressively, almost-but-not-quite maliciously resistant to actual validation,” wrote security researcher Dan Kaminsky early Monday. After more analysis, Kaminsky updated that assessment: “OK, yes, this is intentional scammery.”

    On a newly-created website, Wright published a blog post featuringwhat appeared to be a cryptographically signed statement from the writer Jean-Paul Sartre. It seemed intended to show, as in Andresen’s demonstration, that Wright possessed one of Nakamoto’s private keys. But in fact, Kaminsky and other coders discovered within hours that the signed message wasn’t even the Sartre text, but instead transaction data signed by Nakamoto in 2009 and easily accessedon the public Bitcoin blockchain. “Wright’s post is flimflam and hokum which stands up to a few minutes of cursory scrutiny,” wrote programmer Patrick McKenzie, who published an analysis of Wright’s message on Github. “[It] demonstrates a competent sysadmin’s level of familiarity with cryptographic tools, but ultimately demonstrates no non-public information about Satoshi.”

    Even Kaminsky and McKenzie say they can’t explain the discrepancy between their analysis and Andresen’s story. “But for the endorsement of core developer Gavin Andresen, I would assume that Wright used amateur magician tactics to distract non-technical or non-expert staff of the BBC and the Economist during a stage-managed demonstration,” McKenzie writes. “I’m mystified as to how this got past Andresen.”

    The Disconnect

    Andresen, for his part, remains equally mystified by Wright’s highly dubious public evidence. The contradiction between the two accounts is so stark that at first some in the Bitcoin community believed that Andresen’s blog, where he’s vouched for Wright, must have been hacked. He says Wright and his staff wouldn’t let him leave the hotel meeting room with his own much stronger evidence, for fear that Andresen would leak it before Wright was ready to come forward. But Andresensays he can’t understand why Wright didn’t release that information publicly now. He hopes Wright still might.

    Andresen’s only attempt at an explanation for Wright’s bizarre behavior, he says, is an ambivalence about definitively revealing himself after so many years in hiding. “I think the most likely explanation is that he really doesnt want to take on the mantle of being the inventor of Bitcoin,” says Andresen, who notes that his own credibility is at stake, too. “Maybe he wants things to be really weird and unclear, which would be bad for me.”

    That uncertainty, Andresen says, seemed to be evident in Wright’s manner at the time of their demonstration. Andresen describes Wright as seeming “sad” and “overwhelmed” by the decision to come forward. “His voice was breaking. He was visibly emotional,” Andresen says. “Hes either a fantastic actor who knows an awful lot about cryptography, or it actually was emotionally hard for him to go through with this.”

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    Bitcoin Plunges After Plans for Split Called Off

    Bitcoin continued its retreat from a record high after traders weighed in on the cancellation of a technology upgrade that threatened to disrupt the biggest cryptocurrency.

    Investors who were expecting the extra coins stemming from a split of the chain may be taking profits, while others who are disappointed the update was scrapped earlier this week may be switching to alternative coins, according to Charlie Lee, founder of litecoin, the fifth-largest cryptocurrency by market value.

    While bitcoin soared to a record $7,882 within minutes of news that it would avoid another split on Wednesday, the gains have evaporated. Bitcoin is now trading more than $1,000 below where it was after a faction of the community scrapped plans for a so-called hard fork. Bitcoin was down 8 percent to $6,575 at 2:19 p.m. in New York.

    Some speculators are disappointed they won’t get the additional coins that would have been created by a hard fork. While bitcoin splits are potentially disruptive, they’ve so far amounted to free money for holders of the cryptocurrency. Bitcoin Cash, the result of a hard fork in August, has climbed to about $900 from as low as $565 on the day the split was canceled, while bitcoin has slipped almost 10 percent after touching a record right after the news.
    The main architects behind a change to its underlying software, known as SegWit2x, canceled their controversial plans Wednesday, saying they wanted to avoid deepening divides in the developer community.

    Bitcoin developers, users and miners — those running computers that crunch the complex math required to verify transactions — have been trying to agree on ways to make transactions faster, as the network’s growing popularity has led to congestion. After an initial upgrade in August known as SegWit, short for Segregated Witness, a group in the bitcoin community was calling for SegWit2x. The second upgrade hadn’t gained as much support and was only a week away from confronting bitcoin with one of its hardest tests ever.

    Bitcoin had climbed from about $6,00O since CME Group Inc., the world’s largest exchange owner, said on Oct. 31 that it wants to offer bitcoin futures by the end of the year, only a month after dismissing such a plan. Cboe Global Markets Inc. said in August that it wants to sell futures. Both need approval from the U.S. Commodity Futures Trading Commission.

    Skeptics of the digital currency ranging from billionaire Warren Buffett to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon have warned that the unregulated asset is a speculative bubble in danger of bursting after its almost sevenfold increase this year.

      Read more: www.bloomberg.com

      Bitcoin just surged past $2,000 for the first time

      The worlds most popular cryptocurrency is now worth over $2,000 per coin. Thats according to a range of bitcoin exchanges, including Coinbase and Kraken. That valuation puts the total market cap of bitcoin the total number of coins in circulation at $32.92 billion.

      Bitcoin has been on a tear this year, as this chart from Coindesk shows.

      Bitcoinfirst broke the $1,000 valuation mark way back in 2013, but a combination of factors including the implosion of then-top exchange Mount Gox saw the currency drop in value. Support from financial institutions trialedbitcoin and blockchain-based services, and a general stability following new regulation in China,saw bitcoin return tothe $1,000 mark again at the end of last year. Since then, itsvaluation has continued to grow consistently through 2017.

      When we wrote about bitcoin (and ethereum) hitting all-time highs back at the end ofApril, you could buy a bitcoin coin for$1,343. Now, some three weeks later, the valuation is up 50 percent. The price of a coin rose 12 percent over the past week alone.

      But bitcoin isnt the only cryptocurrency on the rise. Ripple, the centralized currency that is aiming to be a settlement protocol for major banks, has surged more than 10x, or 1000% in under a month making it now the second most valuable cryptocurrency (only behind bitcoin) in circulation.

      Similarly, ethereum, a cryptocurrency designed to function as a blockchain-based computing platform for developers, is now trading $130 per coin with a total market cap of just under $12B, which represents a a little more than a 2x increase over the last month.

      The result of these increases is that bitcoin no longer constitutes the majority of the market cap for all cryptocurrencies. Today the total market cap of bitcoin represents just 47% of total cryptocurrencies up until a few months agoit consistently hovered around 80%.

      Why have these other cryptocurrencies been performing so much better than bitcoin? Some say its because of bitcoins scaling issue. The currency has grown so large that the network is having trouble quickly confirming transactions unless users attach hefty fees for minors. And while the problem can be fixed with solutions like SegWit or Bitcoin Unlimited, the most powerfulminers (who effectivelycontrol the codebase of bitcoin) havent been able to come to a consensus on which new protocol to implement.

      While increases of 10x in a month would typically be an obvious sign of a bubble, its a little different with cryptocurrencies because no one really knows how much they should be worth. Unlike a company there are no assets or revenues we can use to assess a predictable valuation. Soin one sense, a total cryptocurrency market cap of $70B is insane considering there is no tangible value behind it.

      But on the other hand, if (any of) these cryptocurrencies actually replace or supplant a global store of value like gold, then $70B is nothing. For example, the total estimated value of all gold mined is around $8.2 trillion USD. Meaning that right now all cryptocurrencies put together dont even equal 1% of the worlds gold reserves. Similarly, there is currently about $1.5 trillion USD in circulation, meaning that all cryptocurrenciestoday are still worth less than 5% of USD in circulation.

      The currency is in unchartered waters at $2,000, but some punditsbelieve it has the potential to reach $10,000 (or more). To achieve this the community would likely have to sort out the scaling issue, which would give investors confidence that bitcoins infrastructure be able to support it as it grows.

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      Heres What the World’s Central Banks Really Think About Bitcoin

      Eight years since the birth of bitcoin, central banks around the world are increasingly recognizing the potential upsides and downsides of digital currencies.

      The guardians of the global economy have two sets of issues to address. First is what to do, if anything, about emergence and growth of the private cryptocurrencies that are grabbing more and more attention — with bitcoin now surging toward $10,000. The second question is whether to issue official versions.

      Following is an overview of how the world’s largest central banks (and some smaller ones) are approaching the subject:

      U.S.: Privacy Worry

      The Federal Reserve’s investigation into cryptocurrencies is in its early days, and it hasn’t been overtly enthusiastic about the idea of a central-bank issued answer to bitcoin. Jerome Powell, a board member and the chairman nominee, said earlier this year that technical issues remain with the technology and "governance and risk management will be critical." Powell said there are "meaningful" challenges to a central bank cryptocurrency, that privacy issues could be a problem, and private-sector alternatives may do the job.

      Euro Area: Tulip-Like

      The European Central Bank has repeatedly warned about the dangers of investing in digital currencies. Vice President Vitor Constancio said in September that bitcoin isn’t a currency, but a “tulip” — alluding to the 17th-century bubble in the Netherlands. Colleague Benoit Coeure has warned bitcoin’s unstable value and links to tax evasion and crime create major risks. President Mario Draghi said this month the impact of digital currencies on the euro-area economy was limited and they posed no threat to central banks’ monopoly on money. 

      China: Conditions ‘Ripe’

      China has made it clear: the central bank has full control over cryptocurrencies. With a research team set up in 2014 to develop digital fiat money, the People’s Bank of China believes "conditions are ripe" for it to embrace the technology. But it has cracked down on private digital issuers, banning exchange trading of bitcoin and others. While there’s no formal start date for introducing digital currencies, authorities say going digital could help improve payment efficiency and allow more accurate control of currencies.

      Japan: Study Mode

      Bank of Japan Governor Haruhiko Kuroda said in an October speech that the BOJ has no imminent plan to issue digital currencies, though it’s important to deepen knowledge about them. “Issuing CBDC (central bank digital currency) to the general public is as if a central bank extends the access to its accounts to anyone,” Kuroda said. “As such, discussion about CBDC revisits fundamental issues of central banking.”

      Germany: ‘Speculative Plaything’

      In a country where lot of citizens still prefer to pay in cash, the Bundesbank has been particularly wary of the emergence of bitcoin and other virtual currencies. Board member Carl-Ludwig Thiele said in September bitcoin was “more of a speculative plaything than a form of payment.” A shift of deposits into blockchain would disrupt banks’ business models and could upend monetary policy, Thiele said. At the same time, the Bundesbank has been actively studying the application of the technology in payment systems.

      U.K.: Potential ‘Revolution’

      Bank of England Governor Mark Carney has cited cryptocurrencies as part of a potential “revolution” in finance. The central bank started a financial technology accelerator last year, a Silicon Valley practice to incubate young companies. Carney says technology based on blockchain, the distributed accounting database, shows “great promise” in enabling central banks to strengthen their defenses against cyber attack and overhaul the way payments are made between institutions and consumers. He has nevertheless cautioned the BOE is still a long way from from creating a digital version of sterling.

      France: ‘Great Caution’

      Bank of France Governor Francois Villeroy de Galhau said in June that French officials "advise great caution with respect to bitcoin because there is no public institution behind it to provide confidence. In history all examples of private currencies ended badly. Bitcoin even has a dark side — there were this data attacks." He said "those who use Bitcoin today do so at their own risk."

      India: Not Allowed

      India’s central bank is opposed to cryptocurrencies given that they can be a channel for money laundering and terrorist financing. Nevertheless, the Reserve Bank of India has a group studying whether digital currencies backed by global central banks can be used as legal tender. Currently, the use of cryptocurrencies is a violation of foreign-exchange rules.

      Brazil: Support Innovation

      The Banco Central do Brasil sees “no immediate risk for the Brazilian financial system" but remains alert to the developments of the usage of those currencies, it said in a statement this month. The bank pledged “to support financial innovation, including new technologies that make the financial system safer and more efficient.”

      Canada: Asset-Like

      The Bank of Canada’s senior deputy governor, Carolyn Wilkins, who is leading research on cryptocurrencies, said in an interview this month that cryptocurrencies aren’t true forms of money. “This is really an asset, or a security, and so it should be treated that way,” Wilkins said. As others, she viewed distributed ledger technology as promising for making the financial system more efficient.

      South Korea: Crime Watch

      The Bank of Korea’s focus has been protecting consumers and preventing cryptocurrencies from being used as a tool of crime. Deputy Governor Shin Ho-soon said this month that more research and monitoring was needed.

      Russia: ‘Pyramid Schemes’

      Russia’s central bank has expressed concerns about potential risks from digital currencies, with Governor Elvira Nabiullina saying “we don’t legalize pyramid schemes” and “we are totally opposed to private money, no matter if it is in physical or virtual form.” For the moment, the Bank of Russia prefers to delay a decision on regulating the financial instruments unless President Vladimir Putin pushes for action sooner. The central bank will work with prosecutors to block websites that allow retail investors access to bitcoin exchanges, according to Sergey Shvetsov, a deputy governor.

      Australia: Monitoring Closely

      The Reserve Bank is closely monitoring the rise of digital currencies and recognizes the technology underpinning bitcoin has the "potential for widespread use in the financial sector and many other parts of the economy," head of payments policy Tony Richards said last month.

      Turkey: Important Element

      Digital currencies may contribute to financial stability if designed well, Turkish Central Bank Governor Murat Cetinkaya said in Istanbul earlier this month. Digital currencies pose new risks to central banks, including their control of money supply and price stability, and the transmission of monetary policy, Cetinkaya said. Even so, the Turkish central banker said that digital currencies may be an important element for a cashless economy, and the technologies used can help speed up and make payment systems more efficient.

      Netherlands: Most Daring

      The Dutch have been among the most daring when it comes to experimenting with digital currencies. Two years ago the central bank created its own cryptocurrency called DNBcoin — for internal circulation only — to better understand how it works. Presenting the results last year, Ron Berndsen, who was in charge of the project, said blockchain may be “naturally applicable” in the settlement of complex financial transactions.

      Scandinavia: Exploring Options

      Like the Dutch, some Nordic authorities have been at the forefront of exploring the idea of digital cash. Sweden’s Riksbank, the world’s oldest central bank, is probing options including a digital register-based e-krona, with balances in central-database accounts or with values stored in an app or on a card. The bank says the introduction of an e-krona poses "no major obstacles" to monetary policy.

      In an environment of decreasing use of cash, Norway’s Norges Bank is looking at  possibilities such as individual accounts at the central bank or plastic cards or an app to use for payments, it said in a May report. Denmark has backtracked somewhat from initial enthusiasm, with Deputy Governor Per Callesen last month cautioning against central banks offering digital currencies directly to consumers. One argument is that such direct access to central bank liquidity could contribute to runs on commercial banks in times of crisis.

      New Zealand: Considering Future

      The Reserve Bank of New Zealand, once a pioneer on the global stage with its early introduction of an inflation target, said Wednesday it’s considering its future plans for currency issuance, and how digital units may fit into those strategies. “Work is currently underway to assess the future demand for New Zealand fiat currency and to consider whether it would be feasible for the reserve bank to replace the physical currency that currently circulates with a digital alternative,” the RBNZ said in what it termed an analytical note.

      Morocco: Violating Law

      Representing one of the more stringent reactions, the country has deemed that all transactions involving virtual currencies as violating exchange regulations and punishable by law. Cryptocurrencies amount to a hidden payment system, not backed by any institution and involving significant risks for their users, authorities said in a statement this month.

      Bank for International Settlements: Can’t Ignore

      The central bank for central banks has said that policy makers can’t ignore the growth of cryptocurrencies and will likely have to consider whether it makes sense for them to issue their own digital currencies at some point. “Bitcoin has gone from being an obscure curiosity to a household name,” the BIS said in September. One option is a currency available to the public, with only the central bank able to issue units that would be directly convertible to cash and reserves. There might be a greater risk of bank runs, however, and commercial lenders might face a shortage of deposits. Privacy could also be a concern.

        Read more: www.bloomberg.com

        Youd Be Crazy to Actually Spend Bitcoin

        A little more than four years ago, Coupa Café, a caramel-macchiato joint in Palo Alto, began accepting bitcoin. This was shortly before the first big bitcoin rush briefly pushed the cryptocurrency’s price from about $100 to more than $1,000. At the time, two or three Coupa customers a week would pay their bills with bitcoin, says co-owner Camelia Coupal. Today, the number is … still two or three people a week. “It’s a really minimal part of our sales,” she says. “It’s really just a quirky thing for our customers.”

        That’s the story of bitcoin this past year: The cryptocurrency has made fortunes for speculators, but—for that reason and others—it hasn’t been much use as a medium of exchange. Except in countries such as Venezuela, where inflation makes the local money even more volatile than bitcoin prices, its use by online merchants is virtually zero and shrinking, according to Morgan Stanley. When businesses like Coupal’s started accepting bitcoin, advocates predicted it would eventually replace money. Those voices have grown quiet. “The value of bitcoin is really predicated on its being a useful means of transactions,” says Jacob Leshno, an assistant professor at Columbia Business School. “If you take that away, all you are left with is a bubble asset.”

        In 2017 bitcoin’s value rose from about $1,000 to as much as $19,000, often with swings of thousands of dollars a day. (As of publication, it’s trading at about $15,000.) Governments including China’s and Japan’s tightened the rules governing cryptocurrency businesses, and China has shut down its exchanges. Bitcoin’s popularity has also made its network much slower and sent transaction fees spiraling. In late December, sellers had to choose between waiting hours and sometimes days for their transactions to go through or paying an average $55 fee to jump the line. (In mid-2016 such fees topped out at about 15¢.) That’s made bitcoin impractical for everyday transactions, such as $3 cups of coffee.

        The eight-year-old bitcoin network is “really janky,” says John Quinn, co-founder of Storj Labs Inc., whose dozen employees worked 12-hour days for two months last spring to switch their data-storage startup from bitcoin to the rival cryptocurrency ethereum. Two-year-old ethereum has its own problems, including rising transaction fees, but it’s become the first choice for most startups seeking to use so-called smart contracts or raise money through initial coin offerings, which generated about $4 billion in 2017. While ethereum has added lots of features and uses, bitcoin looks almost the same as it always has, says Lucas Nuzzi, a senior analyst at Digital Asset Research.

        Bitcoin’s limitations are becoming bigger issues as banks and other financial institutions build out their own similar networks. “Cost, we expect that to be sub-1¢,” says Richard Brown, chief technology officer for industry consortium R3, which is helping companies build such networks. Completing a transaction, he says, “takes the speed of light, seconds at most.”

        Some bitcoin developers are trying to tweak the network software to speed transactions, but disagreements about the approach have led some groups to split off and create their own smaller networks. “Startups need to be aware that they are building a house on moving ground,” says Michael Dunworth, chief executive officer of Wyre Inc., a cross-border payment service using the bitcoin network.

        Because only 21 million bitcoins will ever be issued, there’s a case to be made that the currency is simply evolving from a transaction network to digital gold. Longtime advocates say different. “At the end of the day, it is bitcoin’s use in commerce that drives its price and further adoption,” says Roger Ver, the advocate known as Bitcoin Jesus, who spent bitcoin last year to cover his startup’s 60-person payroll and book hotels on Expedia. (He’s become a vocal champion for “bitcoin cash,” a cryptocurrency that’s facing an internal insider-trading investigation after having splintered from bitcoin last summer.)

        Amid the current fervor, Ver is the exception. “No one is spending bitcoin,” says Iqbal Gandham, managing director at EToro Ltd., a cryptocurrency exchange. “It could be the most expensive piece of pizza you ever bought.”

          BOTTOM LINE – There’s little sense in using bitcoin for its intended purpose as a medium of exchange when its value can fluctuate by thousands of dollars in a given trading day.

          Read more: www.bloomberg.com