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?
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.
It’s the equity investor’s conundrum: how to get access to the skyrocketing returns of bitcoin and blockchain without actually owning the tokens.
To Thomas Lee, a major bitcoin bull who heads research for Fundstrat Global Advisors, a dozen stocks should do the trick.
“We believe investors should have exposure to blockchain, particularly given bitcoin has essentially zero correlation to equities, bonds and commodities —- hence, as a portfolio strategy, bitcoin is a good diversification tool,” Lee wrote in a note to clients Friday. “But this is impractical for many equity managers, given the parameters of their mandate or because of practical issues (custody of tokens, etc.).”
Investors recently have sought ways to participate in the eye-popping bitcoin rally without having to purchase the cryptocurrency on the unregulated exchanges that have proven susceptible to hacks. Absent from Lee’s list are bitcoin futures, regulated derivative products that will debut on Cboe Global Markets Sunday and CME Group Dec. 18.
Lee has long been one of Wall Street’s biggest advocates of the cryptocurrency. Two weeks ago he doubled his price target on bitcoin to $11,500 by the middle of 2018. It went for $15,552 as of 10:31 a.m. in New York on Friday, according to Bloomberg composite pricing.
He suggests equity managers look to these ideas to leverage blockchain in their portfolios:
The looming availability of futures weighed on these equity proxies this week, as speculators may be shifting away from stocks of companies that have benefited as bitcoin’s price rose more than 15-fold this year. Both HIVE Blockchain Technologies and U.S. Global Investors are down near 10 percent this week. Nvidia and Advanced Micro Devices have also suffered losses in the five days ending Dec. 8.
As for the totality of Lee’s picks, an equal weighted basket of these stocks is up 136 percent this year, according to the note. But as impressive as that may seem, he points out that it still lags bitcoin’s 1,685 rise in 2017.
The second dotcom boom may seem like a way for money to flow from older, richer people to talented young entrepreneurs. But its not worked out that way
Picture a startup founder.
Chances are you went straight for a Mark Zuckerberg-type: male, white, nerdy and, above all, young. Zuckerberg founded Facebook in 2004, three years after the collapse of the dotcom bubble, at the age of 20.
Twelve years later, the company he founded is worth $270bn, and the tech world is in the middle of a new boom. Valuations are going through the roof, and big money is flowing into every stage of the system: in 2015, almost $60bn of venture capital was invested in startups in the US alone.
As a result, it is easy to see the second dotcom boom as a rare volley in favour of intergenerational equality: huge sums of money flowing from older, richer, people into the pockets of hungry young entrepreneurs with ideas, talent and motivation but no access to capital.
In other words, the stronger the tech sector becomes, the more Mark Zuckerbergs there are, and the less millennials 18- to 34-year-olds, also known as Generation Y have to worry about their systematic economic disadvantage. Dont worry about a financial system tilted against your interests: just invent Facebook.
If that does not sound too reassuring, it is with good reason. Technology will not save us. For every way in which the sector stands alone from the wider economy, there are two more in which it reinforces the same constraints.
Go back and think about that stereotypical founder again: chances are you noted the other attributes that come alongside youth. White, male and nerdy is not the best recipe for a broad spread of wealth among a generation, and yet it remains sadly accurate for a large proportion of the industry.
Y Combinator, a prestigious startup accelerator that provides seed money, advice and connections in exchange for 7% equity, revealed last year that 22% of the companies in its latest intake had a female co-founder. Thats the highest ever. The proportion of companies with a male co-founder, meanwhile, fluctuates between 98% and 100%. And for black and Hispanic co-founders, the situation was even worse: 8% and 5% respectively.
There are definitely less girls in tech, and in science too, says Vivian Chan, 31, the co-founder of scientific search engine Sparrho. Theres only a few names that we can think of, globally, at the co-founder level. And being a female PhD science entrepreneur is a rarity.
At a town hall meeting in New York earlier today, Disney chief executive Bob Iger said hackers are claiming to havestolen an undisclosed new film from Disneys upcoming slate, according to a report in The Hollywood Reporter.
Needless to say, the king of Disneys castle is refusing to pay the demanded ransom.
Instead, the company is working with federal investigators and holding their breath to see if the online pirates will release their booty into the wild, according to the report.
Citing multiple sources,The Hollywood Reporter wrote that the hackers were demanding a huge ransom in bitcoin be paid out or theyd release the film into the wild.
Specifically, the hackers threatened to release the first five minutes of the film and then the rest of the film in 20-minute sections.
The cryptocurrency may have no physical form but the returns from trading it can be very real and for some theyre worth giving up your job for
On a sunny afternoon in west Beijing, on the auspicious eighth floor of a nondescript concrete high-rise, Huai Yang sits with the curtains drawn in his apartment, making his own luck.
For the past six months, 27-year-old Yang has worked mainly from home, mainly from his sofa, tracking and trading bitcoin, and watching the money roll in. The flat itself is modestly sized; Yang moved in in his pre-bitcoin days when he worked variously for a crowdfunder start-up, a branding consultancy and dabbled in hedge-fund management, all of which he describes as creative financial work. Now, though, his main focus is bitcoin, which is much younger, more fun, and much more money. Yang claims to make up to 1m yuan (116,000) a month, under the radar of the taxman, purely from trading the online cryptocurrency.
Bitcoin has no physical form but the rewards are very tangible; Yangs home is packed full of expensive gadgetry, most prominently a mega-sized flat screen smart board, over a metre wide, which Yang uses to chart bitcoins rise and fall in HD.
Normally, the graphs on Yangs screen show bitcoins and his own fortunes going up and up. At the time of writing, one bitcoin is worth 6,600 yuan (768) recent months have seen the value hover well above 8,000 yuan. The global worth of bitcoin is over $14bn USD (11.3bn), of which over 90% is in yuan, and Yang and his peers are cashing in. I want a more splendid life, he says.
Eugene Mutai’s Nairobi apartment is filled with the sound of money: That would be the hum of a phalanx of fans cooling the computers he’s programmed to mine cryptocurrencies around the clock.
The 28-year-old has given up a chunk of his living quarters to the enterprise. What’s more, he invests every spare cent in initial-coin offerings: fundraising tools some startups are using to crowdsource capital. He’s a proud citizen of a strange and controversial new world — and a rather rare breed, with just a high-school education and no formal training as a coder. That’s one thing he holds up as proof that cryptofinance isn’t the scam that a diversity of critics, from Jamie Dimon of JPMorgan Chase & Co. to Saudi Arabian Prince Alwaleed bin Talal, have suggested it is.
“The entire ecosystem could be the biggest wealth-distribution system ever,” Mutai said as his 2-year old daughter, Xena, named after the warrior princess, played with a tablet, swiping from app to app. In the world of internet-based currencies traded without interference from banks or regulators, “big players can’t deny anyone from participating in the financial system.”
For Mutai, the appeal is simple: It levels the playing field in global markets that don’t give people like him many breaks.
An opposing view is that what this young man is doing is wrong or stupid, sucking up massive amounts of electricity to create a software-fabricated asset that’s traded anonymously in a lottery criminals find irresistible.
So Mutai is either in the middle of a fraud, or a revolution. Whichever, the market has exploded — growing to $190 billion from just $17 billion at the start of the year. Hundreds of new digital tokens have sprung up as entrepreneurs started projects based on blockchain, the public bookkeeping technology that supports digital currencies, raising millions and even hundreds of millions of dollars in minutes. The value of bitcoin, the biggest of them all, has increased six-fold. And it’s about to go mainstream, with CME Group Inc. in Chicago planning to introduce bitcoin-futures trading contracts by the end of the year.
Cryptocurrencies are especially attractive in economies where there are restrictions on taking cash abroad, or people don’t have bank accounts, or the local currency is being trampled by inflation. That’s the case in Zimbabwe, for example, which is facing a liquidity crisis as inflation spirals: Bitcoin in the local Golix exchange has soared to more than $10,000, a 75 percent premium on global prices, as locals rush to it to protect savings.
In six of the largest African nations for which there is trading data in the online exchange Local Bitcoins, the average premium to the Bloomberg bitcoin index is 7 percent; the gap in major bitcoin trading hubs such as China, South Korea, Germany and the U.K. doesn’t surpass 3 percent. Mutai said he sees cryptocurrencies as safe because “local political issues don’t affect them” — something of note in Kenya, where after two elections within three months there’s still a stalemate over who is the rightful leader.
Just last year, Mutai hadn’t heard of bitcoin, which hardly makes him unusual. Neither does the fact that a decade ago he didn’t have access to a computer. He was interested in technology, though, and borrowed a friend’s Nokia Symbian S40, one of the first non-smartphones that could download apps. In between odd jobs in farming, herding sheep and ferrying people on his motorcycle, he taught himself the basics of HTML and CSS coding languages.
He was living at the time in his mother’s home village — they moved there from the city for his last year of high school, after his twin brother died and his mom lost her job — and was barely earning enough to survive. So he decided to move in with his uncle in Nairobi, who happened to have a desktop computer and a WiFi connection. “It was do or die,” he said.
Mutai spent four months glued to the computer, worrying his uncle, who at one point took the machine away. After mastering the mysteries of code, he landed a job as a programmer. He also became a consultant for the technology incubator iHub and for the Nairobi County government. By 2016, he was named Kenya’s top-ranked software developer by Git Awards, which bases its rankings on data from GitHub, a site where coders store and share their work.
Now Mutai works for Andela, which trains developers and engineers throughout Africa and connects them with companies including Microsoft Corp. His current contract is with Restaurant Brands International Inc., building an ordering app for Tim Hortons. He’s in the Kenyan middle class, a feat for a guy without a college degree.
But his opportunity for real wealth, Mutai figures, is in cryptocurrencies, which he can exchange for dollars or hold as an investment. His mining rig runs six 1080 Ti graphics cards. Maintenance is pretty low, as he wrote on his Facebook page: “It sits in my living room doing its thing all day every day with little or no supervision.”
At the moment, the rig churns out mainly digital coins called Zcash and LBRY Credits. Mutai said he’d like to increase production by plugging in two more graphics cards, but that will have to wait until he can upgrade the power supply to his apartment. As it is, his monthly electric bill is about $200, steep for a residence in Nairobi.
His initial-coin offerings investing takes more personal energy. “I do a lot of research,” Mutai said. “I feel like a small VC.”
Is he treading dangerous waters? Possibly, but he’s up for the gamble. “They say no-risk, no-return, and I’m willing to take the risk.”
Ripple, also known as XRP, peaks at more than $100bn and surpasses Ethereum to become second most valuable cryptocurrency after bitcoin
If 2017 was the year of bitcoin, the pioneering cryptocurrency that neared $20,000 in December, will 2018 be the year of Ripple?
The market value of Ripple, also known as XRP, rose more than 50% on Friday, to a record $85bn. Ripple continued to climb over the weekend, peaking at over $100bn, and now surpasses Ethereum ($72bn) as the second most valuable cryptocurrency after bitcoin ($237bn).
Friday’s sharp run-up puts the currency on track to have risen in value by more than 35,000% over the course of 2017. It began the year trading at around $0.006 and now sits at $2.25, according to coinmarketcap.com. Just three weeks ago, the currency was trading at 25¢.
According to Bloomberg, Ripple’s gains in 2017 have far outpaced the gains of Ethereum and bitcoin, which have gained roughly 9,000 and 1,400% year-to-date, respectively.
Ripple’s CEO, Brad Garlinghouse, said on Twitter on Sunday: “Proud to be ending 2017 with incredible momentum on a number of fronts! A huge, heartfelt thank you to the amazing @Ripple team, our great partners and an incredibly supportive $XRP community.”
The gains come as Ripple has made steps to establish itself as a coherent currency used by institutions. Established in 2012 and designed for interbank payments and settlements, Ripple has articulated a vision to ease the intense volatility experienced by other cryptocurrencies by establishing the structured sale and use of its currency.
The company has more than 100 banks signed on to its platform, RippleNet, and was recently accepted for testing by a consortium of Japanese banks. Global banks including Bank of America, RBC and UBS are also customers.
The company initially created 99bn XRP, and has released around 38bn. In May, Garlinghouse announced the company would place 55bn of its XRP into escrow and will unleash up to 1bn into the market each month.
Garlinghouse, formerly a senior executive at Yahoo and AOL, and CEO of the file transfer site Hightail (formerly YouSendIt), told the Wall Street Journal that the recent gains are a reflection of confidence in the coin’s development.
“We have real customers, really in production using this,” Garlinghouse, 46, said, “not science experiments. Science experiments are not a business model.”
Bought in 2009, currency's rise in value saw $27 turn into enough to buy an apartment in a wealthy area of Oslo. By Samuel Gibbs
The meteoric rise in bitcoin has meant that within the space of four years, one Norwegian mans $27 investment turned into a forgotten $886,000 windfall.
Kristoffer Koch invested 150 kroner ($26.60) in 5,000 bitcoins in 2009, after discovering them during the course of writing a thesis on encryption. He promptly forgot about them until widespread media coverage of the anonymous, decentralised, peer-to-peer digital currency in April 2013 jogged his memory.
Bitcoins are stored in encrypted wallets secured with a private key, something Koch had forgotten. After eventually working out what the password could be, Koch got a pleasant surprise:Â
“It said I had 5,000 bitcoins in there. Measuring that in today’s rates it’s about NOK5m ($886,000),” Koch told NRK.
Koch exchanged one fifth of his 5,000 bitcoins, generating enough kroner to buy an apartment in Toyen, one of the Norwegian capitals wealthier areas.
Two ways to acquire bitcoins
Typically bitcoins are bought using traditional currency from a bitcoin “exchanger”, although due to strict anti-money laundering controls, the process can can be tricky. A user can then withdraw those bitcoins by sending them back to an exchanger like Mt Gox, the best known bitcoin exchange, in return for cash.
However, bitcoin is gaining more and more traction within the physical world too. It is now possible to actually spend bitcoins without exchanging them for traditional currency first in a few British pubs, including the Pembury Tavern in Hackney, London, for instance. On 29 October, the world’s first bitcoin ATM also went online in Vancouver, Canada, which scans a user’s palm before letting them buy or sell bitcoins for cash.Â
A small group of hardcore users also generate extra bitcoins by “mining” for them a process that requires computers to perform the calculations needed to make the digital currency work, in exchange for a share of the built-in inflation.
Mining is a time-consuming and expensive endeavour due to the way the currency is designed. Each subsequent bitcoin mined is more complex than the previous one, requiring more computational time and therefore investment through the electricity and computer hardware required.
Rising price of the cryptocurrency, now worth four times as much as an ounce of gold, has led to warnings of a bubble
The price of bitcoin has smashed through $5,000 to an all-time high.
The cryptocurrency rose by more than 8% to $5,243 having started the year at $966. Bitcoin has soared by more than 750% in the past year and is worth four times as much as an ounce of gold.
But the price has been volatile. The digital currency plunged below $3,000 in mid-September after the Chinese authorities announced a crackdown. Beijing ordered cryptocurrency exchanges to stop trading and block new registrations, due to fears that increasing numbers of consumers piling into the bitcoin market could prompt wider financial problems.
Jordan Hiscott, the chief trader at Ayondo Markets, said: “The returns are truly remarkable, especially given the recent ban on bitcoin trading in China, where demand had previously accounted for at least 10% of all global volumes.”
Vladimir Putin, the Russian president, called this week for regulation of cryptocurrencies, saying their use “bears serious risks” such as money laundering, tax evasion and funding for terrorism. But he also warned against imposing “too many barriers,” which appears to have given bitcoin a boost.
Two weeks ago, Japan’s government implemented rules that recognise bitcoin as a payment method. Celebrities have also got involved, with the boxer Floyd Mayweather, the socialite Paris Hilton and the actor Jamie Foxx promoting coin offerings.
Using bitcoin allows people to bypass banks and traditional payment processes to pay for goods and services directly. Banks and other financial institutions have been concerned about bitcoin’s associations with money laundering and online crime because transactions take place anonymously.
The soaring value of bitcoin and other cryptocurrencies comes despite growing warnings over a price bubble.
The starkest warning came from the JP Morgan chief executive, Jamie Dimon, who said bitcoin was a fraud that would ultimately blow up. Speaking last month, he said there was a limited market for the digital currency, arguing that it was only fit for use by drug dealers, murderers and people living in countries such as North Korea. He pledged to sack any JP Morgan trader investing in Bitcoin, but also admitted he had not been able to dissuade his daughter from investing.
Dimon declined to comment on the surge in bitcoin during an earnings call on Thursday. “I’m not going to talk about bitcoin any more,” he said.
Kenneth Rogoff, a professor of economics and public policy at Harvard University and a former IMF chief economist, has predicted that the technology behind cryptocurrencies will thrive, but the price of bitcoin will collapse.
“It is folly to think that bitcoin will ever be allowed to supplant central bank-issued money,” he wrote in the Guardian this week.
“It is one thing for governments to allow small anonymous transactions with virtual currencies; indeed, this would be desirable. But it is an entirely different matter for governments to allow large-scale anonymous payments, which would make it extremely difficult to collect taxes or counter criminal activity.”
Daniel Murray, global head of research at EFG Asset Management, noted that in 2013, bitcoin soared twelvefold in just four months but within a month had lost a third of its value and four months after its peak had lost 60% of its value.
“Investors buy [an] asset because they are seduced by the prospect of further rapid gains without necessarily thinking about intrinsic value,” he said. He noted that historically currencies were backed by precious metals, and these days most currencies were based on macroeconomic fundamentals such as inflation, interest rates and growth, and were backed by a central bank and government. None of this applied to bitcoin, although the supply is carefully controlled.
“It is hard to argue that bitcoin does anything better than existing currency arrangements whilst it does some things to a lower standard,” Murray added. “Individuals are already able to transact electronically using a plastic card.”
Jeff Bezos speaks during the 32nd Space Symposium on April 12, 2016 in Colorado Springs, Colorado. Bezos, founder and CEO of Amazon, spoke to the crowd about the business and future of commercial space travel.
Image: Brent Lewis/Denver Post via Getty Images
Jeff Bezos just snuck pastWarren Buffett to become the third-richest person on Earth.
TheAmazon.com Inc. founders net worth was $65.05 billion Thursday, topping Buffett by $32 million on the Bloomberg Billionaires Index. With the gain, Bezoss wealth has increased by $5.4 billion this year, marking a resurgence after it fell to as low as $43 billion in February amid turbulent global markets.
Most of Bezoss wealth is tied to Amazon, which has benefited from robust demand for quick-turnaround delivery, cloud services and gadgets like the Kindle and Echo.
In April, the Seattle-based company posted its biggest-ever net income and said first-quarter sales climbed 28 percent, including a 64 percent rise at its cloud-computing division. The shares are up 54 percent since hitting a low of $482.07 on Feb. 9.
Bezoss rise in the billionaire ranking has been helped by Buffetts philanthropy. The Berkshire Hathaway Inc. chairman donated about $2.2 billion worth of stock this month in his annual gift to the Bill & Melinda Gates Foundation. Even so, the 85-year-old has still seen his net worth rise by $2.7 billion in 2016, with Berkshires Class A shares up 9.4 percent.
Bezos, 52, now lags only Spains Amancio Ortega, the Inditex SA founder who has a $73 billion fortune, and Microsoft Inc.s Bill Gates, the worlds richest person, with $89 billion.
Bezoss rank could climb higher. Carlos Kirjner of Sanford C. Bernstein & Co. set his Amazon price target at $1,000 in May, 34 percent above Thursdays close of $744.43. With the stock at that price, Bezoss fortune would be about $86 billion, just under Gatess current level.