Life Savings Stolen from Second-hand Ledger Hardware Wallet

A man’s life savings disappeared from a Ledger brand Nano hardware wallet after Reddit user moodyrocket purchased the wallet second-hand on eBay. The stolen coins amount to over $34,000.

According to posts on Reddit, the seller of the wallet utilized a ‘man in the middle’ attack, inserting his own recovery seed rather than the random seed assigned by the manufacturer. According to the post:

“I have not used my Ledger in a week, today I decide to check the value of my XRP, Litecoin and Dash only to discover that all of them showed up as zero and had been transferred somewhere else yesterday all around the same time at 7:30pm. I am not sure how this is possible as I have not access my Ledger in a week. I do not know what do to as the total value is over £25000, has by currency been stolen or is it something else? I am at a lost here and right now feel so physical sick. Some please help.”

The post shows the extent to which thieves will go to access coin wallets. Ledger’s CEO (user murzika) has offered to help ‘bring the seller to justice’ through legal means.

Need for security

As values of cryptocurrencies continue to increase, the reality of security needs continues to increase. Stories of theft and hacking continue to proliferate. For individual users some additional technology may eventually be required. Vadim Onishchenko, CEO of Blockchain photo security system Selfllery told Cointelegraph:

“We used to ask ourselves: Where is it better to keep your money, at home in a safe or in the bank? None of these options is ever completely safe. Cryptocurrency is no different: the safety issue is very complex, because there are lots of ways to break into accounts, or to force people to give over their holdings. There needs to be a mechanism ensuring complete safety, because the current options are all lacking. A new technology is needed to protect cryptocurrency.”

Welcome to World of Trident : New Method of Investing in Crypto

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This is a paid-for submitted press release. CCN does not endorse, nor is responsible for any material included below and isn’t responsible for any damages or losses connected with any products or services mentioned in the press release. CCN urges readers to conduct their own research with due diligence into the company, product or service mentioned in the press release.

Welcome To The World Of Trident

In the everchanging world of Cryptocurrencies it is important to know who you can trust with your investment. Having a partner whom is worth his gold in the fast-paced industry, is of paramount importance. Trident is one such a company.

What is Trident?

Trident was founded in 2016 and comprises of an expert team of leading wealth and investment managers whose priority is to give investors exceptional returns on their investments. Also known as the Trident crypto index fund, the company develops funds by means of insight, indexes and other relevant services. Trident combines the best of advanced technological systems and finance to bring customers the satisfaction that their investment is safe and sound.

The company strives to invest funds in Bitcoin and other top performing Cryptocurrencies and in so doing, giving investors financial stability and independence in an unstable environment. The Trident family believes in giving investors the freedom to be independent and freedom when it comes to finances.  

What does the company do?

The Trident TDC Private index fund invests funds into the top 10 performing Cryptocurrencies. These are determined by having a look at the specific coin’s market cap, volume and these are rebalanced on a quarterly basis. It is a known fact that other Cryptocurrencies besides Bitcoin are also excellent investment opportunities with huge gains waiting to be made. Prior to 2017, Bitcoin comprised more than 80% of the crypto market. However, it is interesting to see how certain alternative coins or alt coins, have slowly but surely made name for themselves. Some boasts gigantic market caps and have extraordinary features. Now, more than ever it is of paramount importance to diversify your investment to include alt coins.

What products and services do they offer?

Trident’s best features are no broker or exit fees, investors have full control over their assets and a perfect investment solution with full Blockchain transparency. Other ground-breaking features, products and services from Trident include the leading software platform it uses to securely store and trade with digital assets, it is open source and fully secured with advanced Blockchain technology. Trident is a self-regulated financial system that offers multiple investment opportunities to clients. The company is proud of the fact that it is an all-in-one Bitcoin and crypto community platform.

What are their unique features?

Trident offers a very safe and secure network for investors. This is done by regular internal and external audits that are meant to ensure the safety of your wallet.

Other unique features include:

  • Anchoring the value of a specific crypto to the price of currencies such as the Euro, Yen and US dollar to give investors stability.
  • Trident is 100% backed by traditional currency. This means that $1 will always amount to $1.
  • If you hold Trident, it can be sold, bought or used on a wide selection of exchanges.

What investment opportunities are available to investors?

Investing in Trident will be one of the best decisions you ever made since it offers clients the benefits of TDC lending or staking and excellent returns on trading with TDC on exchange platforms.

What are you waiting for? Register on the site immediately and join a group of elite investors.

Bitcoin – A Long Way From an Everyday Currency: Expert Blog

Expert Blog is Cointelegraph’s new series of articles by crypto industry leaders. It covers everything from Blockchain technology and cryptocurrencies to ICO regulation and investment analysis. If you want to become our guest author and get published on Cointelegraph, please send us an email at mike@cointelegraph.com.

First, let me start by saying that I love Bitcoin and that I am bullish on the long-term prospects of cryptocurrency as a whole. It has changed my life for the better, and I’ve met a lot of people along the way that can say the same about it.

But I wanted to take a moment to “get real” about Bitcoin, especially after experiencing, first hand, it’s dramatic rise in value this year, and the accompanying surge of interest from the general public, many of whom are rushing to purchase the coin despite not knowing what it really is.

What is Bitcoin?

According to Satoshi himself, Bitcoin was designed to be a peer-to-peer electronic cash that would allow online payments to be sent between parties without a financial institution.

It accomplishes this by broadcasting transactions in an append-only public ledger. Records of these transactions are stored on blocks which are cryptographically linked to each block before it, in a chain-like sequence. This work is done by miners which require computing power to find the variable nonce that will yield the correct hash – called proof-of-work, which is an integral part of the consensus protocol.

Transactions take a long time

Even if none of the above really makes any sense to you, the important part to get out of it is, that the integrity of Bitcoin’s trustless system relies on a difficulty adjustment setting that pegs the cryptographic function solve time to 10 minutes, regardless of the total computing power on the network. This dynamically adjusting difficulty setting was designed into the protocol to intentionally slow the transaction time down, so that it would be difficult for an attacker to gain an advantage by attempting to solve a consecutive chain of blocks and therefore own the keys to history. This does not take into account the wait time in the mempool before a transaction gets added into the next block – figure that in and you’re looking at up to seven hours for a confirmation.

The takeaway is that transactions are not instantaneous. They take time.

Transactions are expensive

Bitcoin fees are measured in Satoshi’s per byte of data transmitted. Since a Satoshi is a fraction of a Bitcoin, as the price of the coin continues upward, so too does the relative price of the transaction itself. To compound the problem, the wave of new interest has congested the network, causing transaction delays. To overcome this, senders can prioritize inclusion of their transaction into the next block by increasing the fee tied to their transaction. The increased competition further raises the market price per transaction. As of this writing, each transaction costs about $24.23 or nearly the same price as a wire transfer.

Now imagine a scenario where you’re trying to buy a stick of gum at a gas station – will you wait 10 minutes or more and pay nearly $25 for the processing fee? Probably not. In fact, for the majority of your daily or even occasional purchases, Bitcoin doesn’t seem like a viable option against the methods you already use.

Competing systems are still better

Bitcoin’s network of miners can handle about 3.5 transactions per second (tps) on a 1MB block. Compare that with PayPal which easily processes 150 tps during peak periods or Visa, which does 2,000 tps without breaking a sweat and has a theoretical peak maximum of 56,000 tps, and you can see that competing systems can scale with transaction load a lot better. In order for Bitcoin to be an everyday payment system, it must at least compete on the same level as existing systems and have a hope to scale to greater heights.

Centralized systems like Visa and PayPal can continuously make infrastructure improvements to increase the transaction processing speed and throughput. However, Bitcoin’s decentralized structure means that it does not benefit from uniform decision making motivated by a business objective. Despite its rapid growth and adoption, improvements to the protocol have been few and far between, failing to keep up with demand, and therefore exacerbating the problems I’ve mentioned in earlier sections of this article.

Many have noticed other cryptocurrencies addressing the problems I’ve mentioned with Bitcoin. In the early days, Bitcoin relied on market dominance of its brand and was less encumbered by transaction time and costs. Today, it has brought awareness to the cryptocurrency community and allowed other “altcoins” exposure to interested buyers. Those that spend time researching the tech behind the currency are well aware of the problems I’ve mentioned and might see stronger merit in a competing currency. In fact, Bitcoin is losing market share rapidly to all other coins, representing just 36 percent of the cryptocurrency market, just half of it was a year earlier.

What about the coming improvements?

There has been a lot of discussion around off-chain tech that is supposed to address these issues. Many still seem a long way from being implemented, have their own issues, and still have to contend with consensus agreement and user education in order to work.

Then there’s the argument of improvements to Bitcoin’s protocol itself. The community has been highly fragmented after the breakup of the New York Agreement, which was supposed to help address Bitcoin’s lack of centralization, by allowing different, but important, factions of the community a vote. In its current state, it’s hard to imagine the implementation of any near-term scalability improvements to the protocol, to address these issues.

Bitcoin as digital gold

There’s another side of the virtual coin in this discussion – that Bitcoin doesn’t need to be an everyday currency, but rather serve as the store of value in the representative form of digital gold. If that is the case, then higher transaction fees and long confirmation times reduce the incentive for participants to move money, leading to more ‘hodling,’ theoretically reducing the supply and increasing the price. Other currencies can then serve as the decentralized payment method to allow for fast and low-cost transactions. The concern with this is that by removing the utility value of Bitcoin, larger capital flows of fiat into more useful currencies might also encourage a reduction in Bitcoin’s relevancy and thereby cause the opposite effect. It seems that with its dwindling market share, this might already be happening.

In the end, Mr. Nakamoto’s goal was to make Bitcoin a payment system, not a wealth accumulation medium. Only time will tell which argument wins out, but in its current form, Bitcoin is a long way from an everyday currency.

Arthur Iinuma is a co-founder and president of ISBX, a leading software consulting firm in Los Angeles. He was a former FINRA-licensed trader at Morgan Stanley and later VP at UBS. He is a cryptocurrency trader and an accredited angel investor. Arthur is also a contributor to Forbes.

Bittrex Stops Creating New Ethereum Deposit Addresses Due to Network Congestion

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Bittrex, the third largest cryptocurrency exchange in the global market behind Binance and Bithumb, has temporarily paused Ethereum deposits due to the current congestion on the Ethereum blockchain network.

Network Congestion

According to Etherscan, the Ethereum network is processing more than 1.2 million transactions on a daily basis, settling more payments than all of the cryptocurrencies and blockchain networks in the market combined, including bitcoin.

The Ethereum network has to process more transactions than other blockchain networks because it operates as the base protocol for large-scale decentralized applications. Applications like CryptoKitties and EtherDelta, that have many active users requesting multiple transactions per day, are placing a heavy burden on the Ethereum network.

“While innocuous at a glance, the project has become a problem for the Ethereum ecosystem. The cryptokitties multiply, are bought, sold, rented for breeding, in other words, involved in myriads of transactions, taking up the largest volume of Ethereum traffic (20%). This causes many transactions that had previously taken seconds to currently be either delayed to 10 minutes, or fail entirely,” explained the developers of Bankex that recently introduced the first practical implementation of Buterin’s second-layer solution Plasma.

The congestion of the Ethereum network caused by the rising popularity and activity of decentralized applications can be resolved through second-layer scaling and solutions such as Plasma, Sharding, and Casper. But, as Augur co-founder Joey Krug noted, there are not enough developers working on the core protocol of Ethereum and consequently, Ethereum co-founder Vitalik Buterin stated that fully scaling Ethereum could take two to five years.

Bittrex Disables Deposits

Given the recent increase in the transaction fee of Ether, Bittrex has disabled Ether deposits onto its trading platform temporarily. As seen in the chart below provided by Etherscan, the transaction fee of Ether has increased drastically over the past week, forcing Bittrex to take an extreme approach by disabling Ether deposits onto its platform.

“Due to incredibly high gas prices, we’re preventing new ETH and asset deposit addresses from being created. Existing deposit addresses will work as normal,” said Bittrex.

Gas is the transaction fee paid by decentralized applications to execute operations. On CryptoKitties and EtherDelta for instance, users pay gas to trade digital cartoon kittens or to execute trades on the decentralized cryptocurrency exchange of EtherDelta.

If the gas costs increase due to the congestion on the Ethereum network, it becomes more inefficient and challenging for decentralized applications to operate seamlessly and handle millions of requests in a brief period of time. For this specific reason, Bittrex also disabled new Ether and asset deposit addresses from being created.

Other major cryptocurrency exchanges like Binance and Bithumb have not disabled Ether deposits and the creation of new deposit addresses. Considering the large number of unconfirmed transactions on the Ethereum network, it is likely that Bittrex will disable new deposit addresses from being deployed for a relatively long period of time.

It has also started to cost users more than $1 to send Ether from one address to another. While the current rate of Ether transaction fee could decrease in the short-term, until then, users on exchanges and decentralized applications will struggle.

Featured image from Shutterstock.

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Crypto Tax Tips To Start 2018 Right

Even though cryptocurrencies are getting more and more exposure, their legislation seems to be a grey area for most governments, especially when it comes to declaring your income in digital currencies. The Internal Revenue Service, the US tax collection agency, has issued Notice 2014-21 stating that Bitcoin and altcoins are subjects to federal income and payroll taxes. So what to do with your crypto money and how to declare your taxes right?

Records

Let’s start with the dreary subject of records. Yes, that applies to crypto investors too. You’d better have some if you are thinking about taxes. If you’ve ever tried to tell the IRS “I lost my receipt,” you don’t want to do it a second time.

The IRS has heard every excuse in the book. While it is not without sympathy, you’ll find it far easier not having to go to the additional effort of proving something by another means. Periodically, the IRS issues reminders to taxpayers regarding the importance of safeguarding your tax records.

That’s especially true in cases of natural disasters that make traditional record-keeping go haywire. But think of it year-round wherever you are. The IRS suggests creating a backup set of records stored away from the originals. It is good advice for crypto investors.

Selling some assets?

If you are sitting on some big gains, you might consider how your tax picture will look for the entire year. It isn’t too soon to start thinking this way. In fact, try to do it long before year-end so you can make adjustments. You might want to sell or hedge some, even if you think the market is still headed up.

There is a lot more than taxes involved in such decisions. But it can be wise to at least think about it. For example, what if your tax year already has a big capital loss in it, or you have a big carryover loss from prior years? In general, unused capital losses can be used to absorb up to $3,000 per year in ordinary income.

But unless you have capital gains to offset your capital losses that $3,000 would be the extent of your tax benefit. Some people sit for years and years with unused capital losses that carryover each year. So, if you also have unrealized capital gains, you might consider selling some gain assets, to be able to absorb your losses. Run some numbers and see how it looks.

And what exactly are you selling?

Another topic as tax time nears is to ask whether you really know what you are selling. That is, if you have 100 Bitcoins and you sell 10, which 10 did you sell? There is no perfect answer to this question. Most of the tax law considers shares of stock, not cryptocurrency.  

However, many advisers think that the same kinds of rules should be applied in the case of multiple crypto assets that you hold. If so, specific identification of what you are selling, when you bought it, and for what purchase price, is likely to be the cleanest. But that may not be possible.

Some people use an averaging convention, where you essentially average your cost across a number of purchases. Consistency and record-keeping are important. You don’t want the IRS to claim that you denied the government its fair share of each sale. And remember, if you are claiming long-term capital gain treatment, being able to prove that you held the cryptocurrency for more than a year before selling is key.

Loans with interest and hedges

Loaning money shouldn’t be a taxable event to either the borrower or the lender, except for interest payments. So, can you loan out your cryptocurrency to people? You can, but the question is whether that loan will be treated the same as a loan of money by the IRS.

The jury is still out on that question. The IRS says cryptocurrency is property for tax purposes. You don’t want the loan and the repayment (of different cryptocurrency?) to be treated as taxable dispositions. Some of it may depend on your documents, and how much you make it look and feel like a real loan.

Hedges of cryptocurrency are another hot topic to consider. Hedges can help to avoid some of the volatility that has characterized the various crypto markets. But be careful that you are doing your best to avoid a disposition, meaning a sale for tax purposes, that you don’t want.

Gifts

The holidays may be over, but probably everyone in your family would still like some Bitcoin or other crypto issues. The prices have been so ever-present in the news, that gifts and donations are still very much in the news. But is it smart tax-wise?

A charitable contribution would be the best type of transfer. If you give to a qualified charity, you should get an income tax deduction for the full fair market value of the crypto. If you bought for $500, and donate to a 501(c)(3) charity when it is worth $15,000, you should get a $15,000 charitable contribution deduction. What’s more, you won’t have to pay the capital gain tax on the $14,500 spread.

Giving to private parties is not as impressive. The same gift to your niece gets you no tax deduction. And it requires you to file a gift tax return since the gift is worth more than $15,000. For 2018, $15,000 is the amount of so-called “annual exclusion” gifts you can give to any number of people each year with no reporting required.

Any gifts over that $15,000 amount require a gift tax return, even though you probably won’t pay any gift tax. You normally would use up a small portion of your lifetime exclusion from gift and estate tax. For 2018, that number just went up dramatically. The amount you can transfer tax-free during your life or on death just went up to $11.2 mln per person. That is $22.4 mln per married couple.

Forms 1099

Finally, don’t forget about the coming onslaught of IRS Forms 1099. Normally, these not-so-fun little tax forms arrive around the end of January, reporting income paid to you in the previous calendar tax year. The IRS says that wages paid to employees using virtual currency are taxable, must be reported on a Form W-2, and are subject to federal income tax withholding and payroll taxes.

Similarly, payments using virtual currency made to independent contractors are taxable to them, and payers who are engaged in business must issue Form 1099. A payment made using virtual currency is subject to Form 1099 reporting just like any other payment made in property. That means if a person in business pays virtual currency worth $600 or more to an independent contractor for services, Form 1099 is required.

If you are a recipient of Form 1099, as most everyone is, keep track of them. Each one gets reported to the IRS and applicable state tax authorities. If you don’t report or otherwise address the reported income on your tax return, you can expect that the IRS will follow up.

This may seem confusing, but you shouldn’t worry. The IRS is usually much more lenient to those who fill in taxes, even with mistakes, rather than to those who avoid doing it at all.

On the Verge of a Crypto Controversy: John McAfee, Twitter Hacks, and a Mess of Questions

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Cybersecurity forefather John McAfee is ringing in the New Year on a contentious note.  The programmer turned multi-millionaire recently claimed that his Twitter was hacked in the days following Christmas, stating that a series of promotional coin of the day tweets were not his own.  To complicate matters further, McAfee has come under fire from the crypto community recently for his seemingly capricious attitude towards Verge, a popular privacy coin.   

“I am a target for hackers”

John McAfee’s Twitter has over 600k followers, in large part due to his former coin of the day tweets. McAfee began the practice in December of 2017, and he quickly became an investing mouthpiece that perked the ears of many community members.  

According to McAfee, though, the same platform that has made him a fount for financial advice has also made him vulnerable to hackers looking to make a quick buck.

On December 27th, McAfee’s account was compromised as hackers rifled off multiple coin of the day tweets in a matter of minutes:

McAfee was quick to alert his followers to the developments, cautioning them that he had discontinued his quotidian promotions the day prior:

In an interview with RT, McAfee admitted that the hacking method was “brand new” to him, claiming the hackers “managed to hack AT&T to move [his] phone number to another phone” so that they could change his account’s password.  He also insinuated that, unless the job was some “secret method of hacking,” an AT&T employee could have been “bribed” to assist with the hit.

McAfee continued to claim resolutely that the hackers were looking to capitalize on the investing community he has cultivated through Twitter:

“Why would they do that? Because I was issuing every day a recommendation for new alternative coins, alternative to bitcoins cryptocurrencies. People would invest hundreds of dollars into these coins. What the hacker did was to recommended six different coins within six minutes and invested, I’m sure, much money beforehand into those”

“If they can do it for me they can do it for anyone,” he added, concluding the interview with the caveat that such advanced hacking methods could spell trouble for exchanges in the future.  Citing Mt. Gox as an example of exchange vulnerability, McAfee predicted that “every exchange will at some point in the near future get hacked.”

The Verge Effect

While all of this was going on, McAfee was (and is) staring down the barrel of another controversy: his endorsement of Verge.

On December 13th 2017, John McAfee came out in favor of the popular privacy coin, tweeting the following day that Verge, trading for nearly $0.02 at the time, could feasibly see a $3.00 valuation in the future.

Trading at less than a cent going into December, Verge hit an all time high of $0.27 on Christmas Eve. Many believe that Verge has McAfee’s tweets and endorsements to thank for this meteoric appreciation.

And it’s easy to see why some in the community think as much.  Around Christmas, rumors began circulating of McAfee speculating  on Instagram that Verge could hit an astronomical $15 in 2018.  

Such a price leap would put Verge at a $225bln market capitalization, about $30bln shy of Bitcoin’s own. While possible, such a terrific rise is unlikely, and McAfee went to Twitter to deny that he ever made the predication.

McAfee claims that the predictions came from fraudulent accounts, warning his followers that Verge’s price has been artificially pumped as a result.  He disavows ever setting up an official Instagram account, but community members are not convinced.  In the comment sections of numerous tweets, Twitter users provided evidence that John McAfee created an Instagram for himself back in the early days of 2016.  

Defending himself, McAfee raised the familiar alarm that this was the outcome of yet another attack on his Twitter account:

In early 2016 my Twitter account was taken over for nearly a month by an employee in a hostile move. There were thousands of acts of mischief during that time. When was the last alleged post from me on that Instagram account?”

Since facing questions from the community about the veracity of his Instagram posts, the posts in question have been deleted.

Verge’s Wraith Protocol Launches to Little Fanfare

Verge launched its Wraith Protocol, an update that allows the currency’s users to choose between transparent or anonymous transactions freely, on January 1st.  And to add to the slew of Twitter publicity mishaps a la McAfee, Verge’s fan-base was unimpressed.  

The protocol was slow to launch and buggy for certain users, according to Verge’s official Twitter.  In addition, one Twitter user indicated that Wraith’s IP obfuscation was not functioning as intended.

Verge’s price dropped from its rise of $0.20 in anticipation of the release to $0.14 after the complications.

All the while, McAfee enters the cross hairs of continued controversy.  Now, he faces accusation of blackmailing the Verge team, demanding compensation for his endorsements.  According to leaked messages in a tweet by XVG Whale, a popular Verge investor, McAfee demanded $1mln in Ethereum for his promotions, otherwise he would withdraw his support.  In the following days, XVG Whale has removed the posts, claiming that his own account was hacked, as well.

Between the host of alleged hacks, accusations, and online rumors, John McAfee’s involvement in Verge has woven itself into a messy thread of information and misinformation all knotted into one.  We cannot verify the claims of extortion and fraud, nor do we know what to make of the counterclaims by McAfee and XVG Whale that hackers are the reason for this mess.

But the drama makes for an interesting showcase nonetheless.

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New York Stock Exchange Moves on Bitcoin ETFs

The New York Stock Exchange has filed for permission to launch a number of Bitcoin-related exchange-traded funds (ETF) just one week into 2018.

As reported by BusinessInsider, a filing sent to the United States Securities and Exchange Commission shows that the exchange intends to launch five different ETFs offering ‘bull and bear’ futures contracts on the Arca stock exchange.

These EFTs will be linked to the price of Bitcoin futures listed on the CME and CBOE exchanges, which launched Bitcoin futures contracts in December 2017:

“The target benchmark’s value will be calculated as the last sale price published by the CME or the CBOE or any other US exchange that subsequently trades bitcoin futures contracts on or before 11 a.m. E.T.”

Bull Funds

The three ‘Bull Funds’ are categorized as 1.25X, 1.5X and 2X, offering 100 percent, 150 percent and 200 percent returns on the given contract.

As stated in the document sent to the SEC, the funds are not intended to be traded any longer than a day – and offer percentage returns based on the given contract entered into:

“According to the Registration Statement, the 1.25X Bull Fund, 1.5X Bull Fund and 2X Bull Fund seeks daily leveraged investment results (before fees and expenses) that correlate positively to either 125 percent, 150 percent or 200 percent the daily return of the target benchmark.”

However, investors stand to a chance of facing the same multipliers in loses, should the market move against their contracts:

“Conversely, its value on a given day (before fees and expenses) should lose approximately 1.25 times, 1.5 times or 2 times, as applicable, as much on a percentage basis as the level of the target benchmark when the benchmark declines.”

Bear Funds

As the name suggests, the ‘Bears Funds’ allow investors the chance to leverage against a decline in the value of Bitcoin. The two funds offered are 1X and 2X, offering 100 percent and 200 percent gains should the contract meet its target on the given day of trading.

Once again, should the benchmark rise in value, Bear Fund investors stand to suffer loses compounded by the multiplier (1X or 2X) they’ve agreed to, as per the description of the 2X Bear Fund:

“If the 2X Bear Fund is successful in meeting its investment objective, its value on a given day should gain approximately two times as much on a percentage basis as the level of the target benchmark when the target benchmark declines. Conversely, its value on a given day should lose approximately two times as much on a percentage basis as the level of the target benchmark when the target benchmark rises.” 

Keeping up with the game

Should the NYSE be permitted to launch these ETFs, they will be the third American exchange to offer Bitcoin futures contracts. CME and CBOE have been trading futures since December.

Wasting no time in sending their application to the SEC, this move shows that there is plenty of interest in Bitcoin by Wall Street money.

While the likes of Merrill Lynch have denied its financial advisors from offering clients Bitcoin-related investments, exchanges are looking to set up of various offerings.

Once a number of ETFs and trading options have been available for a while, there will be more information on how well these options are trading. Given that knowledge, could we see a change in sentiment by financial institutions whose clients are looking to enter the cryptocurrency market?

Bitcoin Cash Surges to $3,800 in Korea amid Flurry of Mainstream Media Coverage of Roger Ver

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Within the South Korean cryptocurrency exchange market, the price of Bitcoin Cash has surpassed $3,800, due to a flurry of mainstream media reports that have emerged over the past few days.

Price of cryptocurrencies on Bithumb, South Korea’s largest cryptocurrency exchange

Mainstream Media

Earlier this week, Roger Ver, an early investor in bitcoin and the CEO at Bitcoin.com, did an interview with SBS (Seoul Broadcasting System), a national South Korean television and radio network company, to discuss the current trend in the cryptocurrency market and the vision of Bitcoin Cash.

SBS featured the interview as a main section of one of its most popular shows that often secures over a million active viewers. Following the initial report of SBS, other mainstream media outlets, especially finance and business-focused news publications, started to cover Bitcoin Cash more actively, ultimately leading the price of the cryptocurrency to surge.

Apart from the mainstream media coverage Bitcoin Cash has been receiving, the entire cryptocurrency market has started to receive more attention from the general public due to the recent success of cryptocurrency exchanges.

This week, SBS and KBS, two of the largest networks and mainstream media outlets in the country, reported that South Korean cryptocurrency exchanges Bithumb, Coinone, and Korbit have started to add more employees than banks and financial institutions in the traditional finance market.

The hiring of a massive number of employees by South Korea’s major cryptocurrency exchanges has given general consumers and investors in the market confidence that the local cryptocurrency market is growing at a rapid rate, even with the strict regulations imposed by the government.

Job security and opportunities are sensitive subjects in South Korea because fresh university graduates have started to struggle in finding decent jobs as companies have started to favor skillful and experienced employees. Hence, if a company or a sector start to hire many employees, the attention of young individuals naturally shift to that particular industry. A similar trend has been shown by the cryptocurrency market.  

High Premium

Consequently, the demand for cryptocurrencies in South Korea has exponentially grown, pushing the premium rates of the South Korean market even further up. Bitcoin Cash is currently being traded in the South Korean market with a $900 premium, or a staggering 30 percent premium, which is the highest its ever been.

The imposition of a cryptocurrency trading ban for foreigners have led to larger premium rates and disparity in the price of major digital assets between South Korea and the rest of the global market.

High premium rates in the South Korean market will likely sustain in the long run, because it is virtually impossible for foreign investors to take advantage of the arbitrage opportunity in South Korea.

Featured image from Shutterstock.

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Exponential Growth: Cryptocurrency Exchanges Are Adding 100,000+ Users Per Day

Major Bitcoin and cryptocurrency trading platforms within the global market have been adding more than 100,000 users per day.

Many of the leading cryptocurrency exchanges such as Coinbase (GDAX), Binance, Bittrex, Bitstamp and Kraken have struggled in dealing with the abrupt surge in demand for cryptocurrencies. Some exchanges have overhauled their systems to improve their scalability, while others have temporarily stopped opening new user accounts.

Unexpected growth rate

This week, Changpeng Zhao, the founder and CEO of Binance, the global market’s largest cryptocurrency exchange with a staggering $9.5 bln daily trading volume, revealed that it has added more than 250,000 users on a single day.

“Sorry guys, servicing existing members is higher priority at this point. Full team working around the clock. Both tech and support. Just too much demand. Added 250,000 new users in the last 24 hours,” said Zhao, referencing the official statement released by the company.

On Jan. 4, Binance stated, “due to the overwhelming surge in popularity, Binance will have to temporarily disable new user registrations to allow for an infrastructure upgrade. We apologize for any inconvenience caused.”

In December, both Kraken and Coinbase allocated a significant portion of their resources and capital in improving customer support and the scalability of their platforms. On Dec. 23, Kraken, which has found difficulty in processing account verifications, disclosed that it has implemented major system upgrades and improvements in performance and will continue to develop its trading platform to support new users.

The Kraken development team admitted that its current infrastructure is “degraded and unreliable,” and vowed to improve it throughout January. The company said:

“We have made significant progress in the last week with the system upgrades and have realized moderate improvement in performance. Unfortunately, we were not able to complete all of the upgrades and the most impactful measures are yet to come. For the time being, systems should still be considered degraded and unreliable.”

Regional exchanges such as South Korea’s Bithumb, the world’s second largest cryptocurrency exchange in terms of daily trading volume, have also stopped accepting new users.

Why are large exchanges struggling?

In late 2017, South Korea’s third-largest cryptocurrency exchange Korbit was acquired at a valuation of $140 mln by a $10 bln gaming giant in Nexon. Given the size and the market valuation of Korbit, major exchanges like Bithumb, Bitstamp, Kraken and Binance could be worth more than $1 bln, as Coinbase was valued at $1.6 bln in its latest funding round.

Even with such large market valuation, high-profit margins, and many resources, cryptocurrency exchanges are struggling to address the exponentially increasing demand from investors because of the strict Know Your Customer (KYC) and Anti-Money Laundering (AML) systems the companies were forced to implement by the authorities.

Each user application must be manually approved and verified. The failure to segregate fraudulent accounts from legitimate users could result in large fines and lawsuits for exchanges. Consequently, the vetting process of users is rigorous and requires significant efforts from the employees of exchanges.

Given that exchanges are adding more than 100,000 users per day, it is likely that exchanges are also receiving more than one mln trading account approval requests per month, at least.

That is, if the approval process of accounts take around 10 minutes per account, 166,666 hours on a monthly basis that employees have to cover manually.

In the next few months, global cryptocurrency exchanges will make drastic changes to their systems. Until then, users, especially newcomers, will find it difficult to open approved trading accounts.

US Government to Sell 513 Bitcoin and 512 Bitcoin Cash Seized From Dark Web Dealer

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The US government has been approved by a federal judge in Utah to auction off 513 bitcoin and 512 Bitcoin Cash seized from an investigation into Aaron Michael Shamo, a dark web dealer.

8.5 Million Sale

In the upcoming weeks, the government is expected to sell all of the assets seized after the arrest of Shamo, including a Ford F-350 pickup, BMW 135i, and the millions of dollars worth of bitcoin and Bitcoin Cash.

On May 31, 2017, Shamo along with other dark web operators including Drew Wilson Crandall, Mario Anthony Noble, and Sean Michael Gygi were found guilty of conspiracy to distribute a controlled substance, aiding the importation of a controlled substance, intentional adulteration of drugs, use of the US mail in drug trafficking, conspiracy to commit money laundering, and engaging in monetary transaction in property derived from specified unlawful activity.

Immediately after the dark web criminals were found guilty of the charges filed by the FBI, the bitcoin and Bitcoin Cash holdings of the dark web operators were seized and moved to the custody of the United States Marshals Service (USMS).

However, in the official court document released and approved by Utah district judge Dale A. Kimball, the US government stated that it is costly to securely store the seized cryptocurrencies for a long period of time. According to the court document, the USMS has been paid $465 per month to store the two cryptocurrencies.

The US government also expressed its concerns over the high volatility rate of bitcoin and Bitcoin Cash, and suggested to sell the two cryptocurrencies before their value depreciate.

“The vehicles [bitcoin and Bitcoin Cash] have been seized and are in the custody and control of the United States Marshals Service. Every month, the USMS is accruing $465/month in storage fees for these vehicles. The total expenses for these two vehicles currently is $5,010.70. The BTC and BCH have been transferred to a Government wallet. Due to the volatile market for cryptocurrencies, the BTC and BCH risk losing value during the pendency of the forfeiture proceedings,” read the court document.

US Government Lost $2.36 Billion by Selling Bitcoin Early

In October, it was disclosed that the US government sold 144,336 bitcoins at a price of $336 per bitcoin. The entire batch of 144,336 bitcoins were sold at $48.5 million. At the time, the US government sold bitcoin with the same line of thinking with the most recent sale, assuming that the price of bitcoin would decline due to its volatility.

Today, the 144,336 bitcoins the US government sold in 2014 at $48.5 million is worth $2.36 billion. The opportunity cost for selling bitcoin three years early for the US government was $2.02 billion.

In the next few weeks, the US government is expected to proceed with the sale of the 513 bitcoins and 512 Bitcoin Cash at the current value of around $8.5 million.

By 2021, three years from now, the opportunity cost for the US government in selling the assets seized from a dark web investigation into Shamo could be significantly higher, given that the cryptocurrency industry is still at an early phase in development, adoption, and growth.

Featured image from Shutterstock.

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