Do you want to go from being a stock market dreamer to a high earner? A new tool could be what you need to transform your hindsight into insight.
How Rich Would You Be? uses market data from the past 12 months to reveal exactly what you could have made if you invested in a variety of cryptocurrencies, commodities and companies. It also forecasts the potential gains for each over the coming months to predict the next big investment opportunity.
Via a bespoke algorithm that uses machine learning, the tool feeds historical data on all 15 options through a recurrent neural network to unveil the future rise and fall in value for each investment.
The 15 commodities monitored include:
All data is displayed in concise visualisations, allowing you to compare individual or multiple investments side-by-side.
The future predictions reveal that the cryptocurrencies will experience the highest percentage increase, yielding more profit than commodities or companies.
The algorithm also reveals that the value of Ethereum will skyrocket from $289.26 per unit to $788.42 if it continues on its predicted path - an astounding 173% increase by October 28th.
Similarly, Ripple investors should look forward to the next month since the cryptocurrency is charted to rise in value by 159% - surging from $0.34 per unit to $0.88 per unit.
Alphabet Inc should perhaps be avoided as the value of the company is set to drop -10% per share. Following in Alphabet’s footsteps is Apple, which is set to fall -8% from $227.63 per share to $208.47.
Despite the unpredictability of the cryptocurrency market, the historical data shows that when compared against commodity and company investments, EOS, Bitcoin and Ripple boasted three of the top five investments.
EOS aficionados who invested in September 2017 will have noticed a 786% increase in price per unit over the last year - a jump from $0.73 per unit to $6.47.
Though it is now set to undergo a negative percentage change, Amazon experienced a 106% increase in value per share between September 2017 and September 2018.
Unfortunately for commodity investors, the two investments that have made the biggest losses over the past year include coffee and copper. Coffee has made the most significant loss over the last year, with a -20% change - dropping from $129.65 per pound to $1103.33.
Copper investors will also have been disappointed with the -12% change in value over the previous year from $3.06 per pound to $2.68.
Commodity investors who chose to invest in oil over copper would have enjoyed a 46% rise from $48.07 per barrel to $69.97 in just one year.
Values: Historical and predicted change in 15 leading investment choices
|
Investment |
Value in 11/09/17 ($) | Value in 03/09/18 ($) | Change % | Predicted Value in 28/10/18 ($) | Predicted Change % |
| Bitcoin (per unit) |
4,161.27 | 7,260.06 | 74% | 8,920.79 | 23% |
| Ethereum (per unit) |
294.53 | 289.26 | -2% | 788.42 | 173% |
| Ripple (per unit) |
0.21 | 0.34 | 62% | 0.88 | 159% |
| Bitcoin Cash (per unit) |
537.81 | 626.36 | 16% | 1,491.45 | 138% |
| EOS (per unit) |
0.73 | 6.47 | 786% | 9.93 | 53% |
| Gold (per ounce) |
1,334.20 | 1,200.05 | -10% | 1,292.70 | 8% |
| Oil (per barrel) |
48.07 | 69.97 | 46% | 70.96 | 1% |
| Copper (per pound) |
3.06 | 2.68 | -12% | 3.06 | 14% |
| Wheat (per bushel) |
440.00 | 539.00 | 23% | 555.68 | 3% |
| Coffee (per pound) |
129.65 | 103.33 | -20% | 111.90 | 8% |
| Apple (per share) |
161.50 | 227.63 | 41% | 208.47 | -8% |
| Alphabet (Google) (per share) |
929.08 | 1,218.19 | 31% | 1,097.68 | -10% |
| Microsoft (per share) |
74.76 | 112.33 | 50% | 108.68 | -3% |
| Amazon (per share) |
977.96 | 2,012.71 | 106% | 1,901.89 | -6% |
| Facebook (per share) |
173.51 | 175.73 | 1% | 184.87 | 5% |
(Source: How Rich Would You Be?)
Below Finance Monthly hears from Brian G. Sewell, Founder of Rockwell Trades, on the prospects of cryptocurrencies moving forward. Brian argues that cryptocurrency is still in the run for driving the future of commerce.
I would rather see the SEC make a methodical decision, with thoughtful guidelines, to approve a cryptocurrency ETF than a rash decision to reject one. And though the agency may not reach a final decision until next year on the proposed SolidX Bitcoin Shares ETF, I think the agency will eventually approve it. The proposal (requiring a minimum investment of 25 bitcoins, or $165,000, assuming a BTC price of $6,500) seems to meet the SEC's criteria -- on valuation, liquidity, fraud protection/custody, and potential manipulation.
Cryptocurrency’s Challenges and Potential
Since 2010, when it emerged as the first legitimate cryptocurrency, bitcoin has been declared “dead” by pundits over 300 times. Critics have cited the cryptocurrency’s hair-raising price volatility, it’s scalability challenges, or the improbability of a central bank ceding monetary control to a piece of pre-set software code. Yet since 2009, bitcoin has facilitated over 300 million consumer payment transactions, while hundreds of other cryptocurrencies have emerged, promising to disrupt a host of industries. Granted, no more than 3.5% of households worldwide have adopted cryptocurrency as a payment method. But I think cryptocurrency will transform how the world does business as developers, regulators, and demographics resolve the following key issues:
Data underscores the receptiveness of Developing World consumers to cryptocurrency. The Asia Pacific region has the highest proportion of global users of cryptocurrency as a transaction medium (38%), followed by Europe (27%), North America (17%), Latin America (14%), and Africa/The Middle East (4%), according to a University of Cambridge estimate. Although the study’s authors caution that their figures may underestimate North American cryptocurrency usage, they cite additional data suggesting that cryptocurrency transaction volume is growing disproportionately in developing regions, especially in:
Demographics will also likely drive cryptocurrency adoption in the Developing World, home to 90% of the global population under age 30.
Remember The Internet - Investment Bubbles and Bursts Will Identify The Winners
High volatility is inherent in the investment value of this nascent technology, due to factors including technological setbacks and breakthroughs, the impact of pundits, the uneven pace of adoption, and regulatory uncertainty. Bitcoin, for example, generated a four-year annualized return as of January 31st 2018 up 393.8%, a one-year 2017 performance up 1,318% -- and year-to-date, a return of down over 50%. Bitcoin has previously experienced even larger percentage drops before resuming an upward trajectory.
In my view, bitcoin and other cryptocurrencies will experience many more bubbles and bursts, in part, fueled by speculators. But the bursting of an investment bubble may signal both a crash and the dawn of a new era. While irrational investments in internet technology in the 1990’s fueled the dotcom bust, some well-run companies survived and led the next phase of the internet revolution. Similarly, I believe a small group of cryptocurrencies and other blockchain applications, including bitcoin, will become integrated into our daily lives, both behind the scenes and in daily commerce.
Although “irrational exuberance” will continue to impact the price of cryptocurrencies, this disruptive technology represents not only the future of money, but of how the world will do business.
The recent sell-off of Bitcoin and other cryptocurrencies was simply a standard market correction, observes the deVere CEO.
The comments from Nigel Green, Founder and CEO of deVere Group, come as Bitcoin – the world’s biggest cryptocurrency by market capitalisation – was close to almost its lowest point of the year two weeks ago and continued its bearish action last week. Other major digital currencies also experienced a sell-off over the last fortnight.
But the crypto market headed back into the green on Monday, posting positive results as the bulls push Bitcoin back on a rally.
Mr Green, whose firm launched the cryptocurrency exchange deVere Crypto at the beginning of 2018, says: “Cryptocurrency markets are subject to volatility more than traditional ones.
“Despite what the doom mongers would want you to believe, the recent sell-off was only ever going to be temporary and prices were bound to rise again relatively quickly – as they are now doing.
"Previous to this sell-off, in recent weeks Bitcoin had experienced a pretty impressive rally, peaking at around $8,300. As such, what happened over the last fortnight was simply a standard crypto market correction.”
He continues: “For many investors, such volatility, of the kind that we saw recently, is used as a welcome buying opportunity.
“They look at the bigger picture. That’s to say, in today’s world, a digital, global currency simply makes sense to them. Or to put it another way, they believe that cryptocurrencies are the future of money.
“Such investors also appreciate that institutional and regulatory support is increasingly inevitable and could happen sooner than many previously expected.
“In addition they are seeing for themselves how more and more global financial institutions, major corporations and household name investors are now working with cryptocurrencies and blockchain, the technology that underpins them.”
Mr Green goes on to say: “Increasingly, savvy investors are aware that what is taking place is a maturation of a relatively new market – hence the highs and lows almost every other week.
“As such, they understand that they either have to buy and take a long-term approach – as is typically the best approach with almost all investing - or be prepared to miss the boat.”
The deVere CEO concludes: “As anyone who has analysed the sector in recent years will know, the dips and peaks are a usual part of the cryptocurrency market.”
(Source: deVere Group)
Brian G. Sewell, Founder of Rockwell Capital; a family office committed to educating investors about cryptocurrency, and Rockwell Trades, below explains the intricacies of cryptocurrencies, shares the latest SEC regulatory updates, and provides expert insight into the future of cryptocurrencies across the globe.
The August 6th SEC decision to postpone a ruling on whether to approve the SolidX Bitcoin Shares ETF for trading on The Chicago Board Options Exchange is a good sign. Given previous SEC statements, the postponement appears to suggest that the U.S. regulatory agency wants to issue a well-thought-out approval ruling that protects cryptocurrency investors and nurtures innovators. I agree with the CBOE that "investors are better served by products traded on a regulated securities market and protected by robust securities laws.” And I would rather see the SEC make a methodical decision to approve a cryptocurrency ETF, with thoughtful guidelines than a rash decision to reject one.
Bitcoin’s Challenges and Promise
Since 2010, when it emerged as the first legitimate cryptocurrency, Bitcoin has been declared “dead” by pundits over 300 times. Critics have cited the cryptocurrency’s hair-raising price volatility; it’s scalability challenges, to handle a large volume of transactions as a payment method, or the improbability of a central bank ceding monetary control to a piece of pre-set software code. T he adoption of Bitcoin as an alternative to transacting by credit card or other payment methods is rising. After its release as open-source software in 2009, Bitcoin alone has facilitated over 300 million digital transactions, while hundreds of other cryptocurrencies have emerged, promising to disrupt a host of industries.
Granted, no more than 3.5% of households worldwide have adopted cryptocurrency as a payment method. But as developers and regulators resolve the following key issues, global cryptocurrency adoption will likely grow -- both as a consumer payment method, and through business-to-business integration, streamlining a variety of operations in the private and public sectors. The prospect of more widespread adoption explains why I think cryptocurrencies may continue to outperform other investment assets in the long term and improve how the world does business.
Four Key Reasons Why Cryptocurrency is Here to Stay:
1. An SEC-Approved Bitcoin ETF Can Boost Liquidity, Protect Consumers, and Nurture Innovators
Though the SEC may not reach a final decision until next year on the proposed listing of SolidX Bitcoin Shares ETF, I think the agency will eventually approve what many experts say represents the best proposal for a cryptocurrency ETF. The proposal -- which requires a minimum investment of 25 Bitcoins, or USD 165,000 assuming a Bitcoin price of $6,500 -- seems to meet the SEC's criteria on valuation, liquidity, fraud protection/custody, and potential manipulation.
By boosting institutional investment, SEC approval would represent another milestone in the validation of cryptocurrencies. To reiterate, rising adoption could benefit the U.S. financial system and other financial systems worldwide, because cryptocurrency promises to create significant financial savings and societal benefits -- by streamlining how the world transacts for goods and services, updates mutual ledgers, executes contracts, and accesses records.
2. Comprehensive U.S. Regulation Can Improve Protection, Innovation, and Investment
Beyond a potential Bitcoin ETF, demand is mounting for a comprehensive regulatory framework that protects consumers while nurturing innovation. Because the dollar remains the leading global fiat currency, institutional investors across the globe are especially watching for what framework of rules and policing U.S. regulators develop. Although many institutional investors are assessing the risk/reward proposition of cryptocurrency investments, that doesn’t mean they’re ready to invest. Many such endowments, pension funds, and corporate investors are awaiting U.S. regulatory guidance and protections to honor their fiduciary duties. How, if at all, for example, will exchanges be required to implement systems and procedures to prevent hacks and otherwise protect or compensate investors from cyber attacks?
Though there’s mounting pressure on regulators to act, cryptocurrency regulation that both protects consumers and nurtures innovation requires a nuanced set of rules, a sophisticated arsenal of policing tools, sound protocols, and well-trained professionals. Developing such a unique strategy takes time, and may involve some stumbles. But I think U.S. regulators will eventually succeed in developing a comprehensive and balanced regulatory framework for cryptocurrency. If institutions become more confident that regulations can help them meet their fiduciary duties, even small allocations from reputable endowments, pensions, and corporations could unleash a new wave of investment in cryptocurrencies.
3. Bringing the Technology to Scale
Bitcoin and other cryptocurrencies are still developing the capacity to function at a mass scale, which will require processing tens of thousands of transactions per second. But technology such as Plasma, built on Ethereum, and the Lightning Network, a second layer payment protocol compatible with Bitcoin, are being tested, which could enable cryptocurrencies to execute faster, cheaper payments and settlements than any other payment method. Though developing applications that bring cryptocurrencies such as Bitcoin and Ethereum to scale may not happen overnight, I think sooner or later; developers will get it right.
Making cryptocurrency scalable would probably unleash an explosion of new applications. That would boost adoption by allowing consumers and businesses to more easily take advantage of cryptocurrency by seamlessly integrating it with debit and credit payment systems – again, to execute transactions, update mutual ledgers, execute contracts, and access records. Such financial activities would likely happen more quickly, cheaply, and efficiently than ever because there would be no banking intermediary needed to validate the transaction and take a cut of the fees. This could improve the cost and efficiency of commerce – between businesses, between businesses and consumers, between governments and consumers, between nonprofits and consumers, and in every combination thereof. The seeds for this transformation of commerce have been planted, and like the internet before it, can innovate in ways we can’t fully anticipate.
4. Meeting Developing World Needs
At its current technological stage, use of cryptocurrency adoption as a payment method could grow fastest in emerging markets, especially those without a secure, reliable banking infrastructure. Many consumers in such regions have a strong incentive to transact in cryptocurrency -- either because their country’s current banking payment system is inefficient and unreliable, and they lack a bank account altogether. Globally, 1.7 billion adults remain unbanked. Two-Thirds of them own a mobile phone that could help them use cryptocurrency to transact and access other blockchain-based financial services.[2]
Data underscores the receptiveness of Developing World consumers to cryptocurrency as a transaction medium. The Asia Pacific region has the highest proportion of global users of cryptocurrency as a transaction medium (38%), followed by Europe (27%), North America (17%), Latin America (14%), and Africa/The Middle East (4%), according to a University of Cambridge estimate.[3] Although the study’s authors caution that their figures may underestimate North American’s proportion of global cryptocurrency usage, they cite additional data from LocalBitcoin, a P2P exchange platform, suggesting that cryptocurrency transaction volume is particularly growing in developing regions, especially in:
As more applications launch in the developing world to facilitate the use of cryptocurrencies to buy and sell goods and services at lower cost and in expanded markets -- and more young people receptive to such new technologies come of age -- cryptocurrency adoption could well rise exponentially.
Remember The Internet - Investment Bubbles and Bursts Will Identify The Winners
High volatility is inherent in the investment value of this nascent technology, due to factors including technological setbacks and breakthroughs, the impact of pundits, the uneven pace of adoption, and regulatory uncertainty. Bitcoin, for example, generated a four-year annualized return as of January 31st, 2018 up 393.8%, a one-year 2017 performance up 1,318% -- and year-to-date, down 52.1%. Bitcoin has experienced even larger percentage drops in the past, before resuming an upward trajectory.
I believe roughly thirty percent of Bitcoin investors over the past half year are speculators since the cryptocurrency has dropped on the negative news by as much as a third. In my view, Bitcoin and other cryptocurrencies will experience many more bubbles and bursts, in part, fueled by speculators, who buy on greed and sell on fear.
But as the dot-com era underscores, the bursting of an investment bubble may signal both a crash and the dawn of a new era. While irrational investments in internet technology in the 1990’s fueled the dotcom bust, some well-run companies survived and led the next phase of the internet revolution. Similarly, despite periodic price crashes, I believe a small group of cryptocurrencies and other blockchain applications, including Bitcoin, will become integrated into our daily lives, both behind the scenes and in daily commerce.
Although “irrational exuberance” will continue to impact the price of cryptocurrencies, this disruptive technology represents the future not only of money but of how the world will do business.
Jeffrey Wernick is an independent investor whose portfolio includes early holdings in Uber and Airbnb. Wernick started buying bitcoin in 2009, the year it was created. Wernick says that people misunderstand bitcoin because it is often explained as a payment mechanism instead of as a store of value.
Bitcoin was created in the aftermath of a catastrophic economic recession and a fiasco in the worldwide banking system. It was the poster-child of the ‘cypherpunk’ movement, which believed in the transformative power of cryptography to mitigate that of governments and of capitalism. More broadly, it was the latest in a long line of political movements that have occurred throughout human history – from the French revolution in the 18th Century to the communist revolutions that gripped the 20th – all of which have aimed to give power “back to the people”.
But Bitcoin, the cryptocurrency once heralded by anarchists and libertarians as a technology that would unfetter us from a domineering financial system, now stands on the cusp of assimilating with the very sector which it was supposed to circumvent. For staunch advocates of total crypto liberty, that philosophical sea-change might feel like an expedient betrayal – and they would be right. But Bitcoin has evolved in a way that even its founder surely didn’t anticipate: its popularity has forged a whole new financial market, and an entire crypto ecosystem in its wake.
That’s no small feat, and it’s not one that financial institutions can realistically ignore. The power of blockchain, crypto’s underlying technology, may be in its decentralised nature – and in many sectors, that level of decentralisation is viable. But for the world of finance, this simply isn’t the case, and it never will be. The destiny of all successful financial products is institutionalisation, and given the triumph of crypto, institutional involvement – and the regulation that follows from that involvement – was always inevitable. If the client demand is there, which it is, then institutions have every right to meet that demand – and many already are.
The horse bolted last year, when two exchange giants, CME and CBOE, launched bitcoin future trading operations. That set the gears turning for other exchanges and banks. In May this year, Goldman Sachs, the most prestigious of the major Wall Street Banks, waded into the crypto world with a crypto futures trading operation and a dedicated trading desk. There’s plenty of activity on the horizon too: the New York Stock Exchange, part of the Intercontinental Exchange, is reportedly setting up an online platform for buying and holding crypto.
Crypto has also strayed into the world of asset management, where the number of funds currently stands at around 251, with $3.5 - 5 billion in assets under management. Considering only 20 hedge funds for cryptocurrency existed in 2016, this represents substantial growth. Even George Soros is said to have given approval to trade virtual assets in the last few months, having called it a bubble in January of this year.
Firms like Soros Fund Management and Goldman Sachs are far from outliers in the world of finance. According to a recent survey from Reuters, one in five financial institutions is considering trading cryptocurrencies within the next 12 months. That’s a noteworthy shift from 2017, when BTC and crypto were derided by the financial world as a scam and an avenue for criminality. Financial institutions may be saying one thing, but they’re doing quite another, and there will be fast followers now that Goldman has put the wheels in motion: very few want to lead, but everyone wants to be second.
As tends to be the case with the crypto market, wherever BTC goes, others follow. Ethereum futures appear to be on the horizon, at least as far as CBOE is concerned. The Initial Coin Offering market as a whole has also witnessed rapid institutionalisation. Back in 2017, all token sales were public, and widely advertised. Now, most ICOs get their money in private sales from a handful of investors. Even if start-ups do decide to run public sales, the vast majority of funding still comes from institutional money.
The elephant in the room is now working out the effect of all this institutional involvement. Most obviously, we’ll soon be seeing the impact of big money, as the process unlocks billions on billions of dollars that float in the world’s financial systems. With that, we’ll see more block trades occurring. Prices are likely to rise. Volatility may increase, or indeed, it may decrease as the market becomes more liquid.
Regardless of price movements, institutionalisation looks set to be a positive thing for the market, providing legitimacy in the space: after all, the more positive actors there are in the market, the better.
Cryptocurrencies are now “undeniably part of mainstream finance,” affirms the deVere Group.
The bold statement from the founder and CEO of deVere Group, Nigel Green, comes as the Financial Stability Board (FSB), has released a report that concludes Bitcoin and cryptocurrencies do not currently pose a risk to the global financial system.
It also comes as Bitcoin (BTC), the world’s largest and most influential digital currency, climbed the 50-day moving average (MA) on Monday for the first time in nearly two months, hiking its price above $6,700.
Mr Green comments: “Cryptocurrencies are the future of money and they are already undeniably part of mainstream finance.
“This is underscored today by the report by the Financial Stability Board (FSB), the international watchdog, which finds that cryptocurrencies do not pose a material risk to the global financial system – which many traditionalists with vested interests have hitherto argued in order to knock digital currencies.”
He continues: “This report comes after the FSB, which is headed by Bank of England Governor Mark Carney, previously wrote a letter to the G20 finance ministers and central bank governors earlier this year stating that Bitcoin does not pose a ‘systemic risk’ to the global financial system
“As such, the latest report can be seen as further recommendation of cryptocurrencies from the influential FSB — which has members from all the G20 major economies.”
Mr Green goes on to say: “The FSB's conclusion follows more and more global financial institutions, major corporations and household name investors now working with cryptocurrencies and blockchain, the technology that underpins them, and as international regulation is developed further."
In May, deVere revealed findings of a global survey that found 35% of wealthy investors will have exposure to cryptocurrencies by the end of 2018.
At that time, Mr Green said: “The survey’s findings demonstrate that high net worth individuals are increasingly unable to ignore the huge potential of cryptocurrencies.”
The deVere CEO concludes: “There’s now surging awareness of the value, need and demand for digital, global currencies in a digitalised, globalised world.
“The world of money has fundamentally changed – and despite what some crypto cynics want, it can’t and will not go backwards. Therefore, the FSB’s proactive and positive work in this sector must be championed.”
(Source: deVere Group)
Neil Williams, Senior Associate Solicitor at business crime experts Rahman Ravelli, considers the possible fate of cryptocurrencies.
It has been reported that more than 800 cryptocurrency projects have died a death in the past year and a half. It is a statistic that cannot be ignored for a number of reasons.
There is little doubt that the rise – and, from what we are seeing, the fall – of cryptocurrencies has been dramatic. It wasn’t a slow and steady rise in popularity. Cryptocurrency seemed to arrive in a bang. Suddenly, as if from nowhere, it was everywhere. And now, it appears, we are seeing a dramatic reversal of that trend.
To explain such a reversal requires a brief examination of the way cryptocurrency functions. In a nutshell, new digital tokens are created through an initial coin offering (ICO); which sees those behind the start-up issuing a new coin. Investors can then choose to buy that coin. By doing this, any investor is not purchasing equity in that company but the cryptocurrency that they do purchase can be used on the company's product. Such a process is, in effect, speculation. Those who invest in an ICO do so because the coins are usually cheap in their early days – and they hope that they will increase in value and provide a tidy profit if and when they cash in.
It is a process that has attracted plenty of enthusiastic followers. Researchers examining the market have stated that companies raised £3.8 billion through ICO’s last year, whereas the figure for this year is expected to be more than triple that. The sheer scale of investment in cryptocurrency demands that we pay attention to the problems it is currently suffering. Those problems may have implications for the financial wellbeing of many individuals and organisations who have staked a lot on the continued rise of cryptocurrency – only to discover that hundreds of such coins are already dead or worthless.
This is due largely to cryptocurrency’s unreliability factor. Many were set up with the simple intention of making fraudulent gains. Fake start-ups have been known to see the initial hard sell swiftly followed by those behind an ICO disappearing with investors’ money. Others were created but the company’s product never became a reality. And even those that have been regarded as the “major players’’ have struggled. Bitcoin, the biggest cryptocurrency, has seen its value fall by about 70% since 2017’s record high of $20,000. It is certainly still in existence and still has its enthusiastic following. But the fact that even Bitcoin has suffered a major battering to its reputation and its value shows that cryptocurrency has a credibility problem. Cryptocurrency has to be seen as a risk. And the more its credibility is eroded, the less chance cryptocurrencies – both the legitimate and fraudulent ones – may have of attracting and retaining investment.
Cryptocurrencies may, therefore, face a struggle to regain credibility – and see that reflected in rising values. Cryptocurrencies, as originally devised, are by their nature a friend of the fraudster. They have no tangible product, they allow anonymity and the lack of regulation historically has made them a virtual haven for those who want to conduct their dealings away from the authorities’ prying eyes. An awareness of this may be behind the sudden attack of cold feet among many who were so keen to invest not so long ago. But conversely, we may still be some way off the logical outcome.
What has to be recognised is that as cryptocurrencies attract the attention of mainstream investors, and even banking institutions, the lure and attraction of them is diminishing for those who wish to remain in the shadows: the very people who have given the currencies their damaging credibility problem. If such mainstream investment in cryptocurrencies continues, it is sure to be followed by closer official scrutiny and / or regulation – either of which will have the effect of further driving out those looking to make fraudulent gains. The consequence of this may not only be these types of currencies having less appeal to those who originally traded in them, it may also lead to a more stable market being created for honest investors.
We may, therefore, see another swing upwards in cryptocurrencies’ fortunes, as they become increasingly marketable and viewed as safer and more legitimate than at present. This is something that could only be hastened if and when regulation is introduced. It would be unwise, therefore, to announce the demise of cryptocurrencies.
Cryptocurrency values have risen and fallen in spectacular fashion over the last year and while financial watchdogs are looking to tighten the regulatory grip on how cryptocurrency trading operates, some traders have already profited from the volatility in the new currencies – and they’re not the only ones. Below Martin Voorzanger, EclecticIQ, explains for Finance Monthly how criminals are making the most of the current crypto sphere.
Another group making profits from the turbulent cryptocurrency market is cybercriminals. In fact, last year there was a marked increase in cryptomalware reports and breaches of crypto exchanges and it’s clear that 2018 will be no different. After all, where there is money, there is crime.
The future ‘bank job’
In some cases, criminals are adapting tried and tested cybercrime techniques – such as hacking email accounts, social engineering and spoofing emails – to prise digital coins out of the hands of those that own them.
For example, in late 2017, criminals pulled off the classic bank heist – with a twist. Making off with approximately 4,700 Bitcoins (valued at the time as $70m) in a raid on digital currency exchange, NiceHash, hackers gained access to the company’s payment services through an employee’s PC. The organisation described the attack as “sophisticated social engineering”.
Hackers found a similar route into Bithumb – South Korea’s biggest cryptocurrency exchange – earlier in 2017. Again, the weak link was an employee – and this time it was their home computer which was compromised. While, in this case, no currency was stolen, a vast amount of personal computer data was. Despite Bithumb suffering no real, initial monetary loss, the theft of sensitive personal data can actually be even more damaging to a business. In this instance, Bithumb stated that no passwords were stolen, but customers reported receiving calls and emails that scammed them out of funds, ultimately resulting in financial loss for Bithumb and potentially an irreversibly damaged reputation.
While, bitcoin and other cryptocurrencies may have been designed with security in mind through the blockchain platform, to keep their crypto assets and data safe, organisations can’t rely on this alone. Yes, blockchain is notoriously difficult to tamper with, however opportunist criminals have found something much easier to compromise – the computers and employees within exchanges.
It is for this reason that organisations must exercise more caution and ensure all security technology and practices are fit for purpose. Good security hygiene should always be front of mind in finance matters – whether it’s around cryptocurrency or not.
A new kind of ‘botnet’
Potentially more worrying than these older, but still successful, cybercrime tactics, is when criminals start to adapt new techniques specifically with the intention of defrauding holders of crypto assets. One of the methods that is becoming popular with criminals in a bid to exploit digital currencies is cryptojacking – where cybercriminals take over employees’ computers to secretly mine cryptocurrency. While the method itself has been around for some time, the surge in the value of cryptocurrencies means mining coins has become an incredibly enticing prospect for criminals. And although each infected device can only mine a small amount of value, criminals are collecting enough machines to create data-mining ‘botnets’ which collectively, can deliver a large profit.
While cryptojacking in itself may not carry the destructive payload of ransomware or other malware, it still represents a device compromise and one which, at best, affects the performance and longevity of devices and, at worst, provides an open doorway for more destructive threats, such as ransomware.
Furthermore, it’s not just the cryptocurrencies themselves that are under threat of attack. Worryingly, earlier this year, security firm Radiflow reported that a European water provider had been compromised. This attack represented the first public discovery of cryptocurrency mining malware in the systems of a critical national infrastructure organisation proving that criminals are no longer just after currency – they want power.
The threat to cryptocurrencies is real and growing - whether the end game of the criminals is financial gain or to disrupt critical infrastructures. Indeed, Microsoft warned earlier this year that it has seen a surge in currency-mining malware infecting Windows PCs in enterprises around the world. The company believes this could be the work of external criminals or, equally, insiders with access to company systems.
Ultimately, while cryptocurrencies themselves are secure, the exchanges and the systems that surround them are not. Humans remain the weakest link – whether intentionally or not – criminals continue to use the same tried and tested vectors of attack and humans are still just as vulnerable to being conned or manipulated by social engineering.
One thing is for certain though – cybercrime activities in this area will not decrease anytime soon. Organisations need to make sure they have the correct security measures in place, including ensuring that employees understand the threats associated with social engineering, to best protect against this new kind of threat.
Almost a decade in the making since the inception of Bitcoin and with a current market-cap hovering around half a trillion dollars USD, Bitcoin, cryptocurrency and blockchain have become common to the tech savvy, but face several challenges in becoming mainstream processes in the payments sphere. Below Alex Mihaljcic, VP of Product Development for Eterbank.com, talks Finance Monthly through the challenges and solutions ahead.
While most people don’t understand how they work, Bitcoin and cryptocurrency are not only hot topic buzzwords, but they’ve created thousands of multi-millionaires. Even so, the vast majority of people in the mainstream have no interest or intent to embrace Bitcoin and, as such, it still has veritably no bearing on everyday life as one still can’t even pay for a cup of coffee with any cryptocurrency.
In the last year alone, the cryptocurrency market cap has grown over ten-fold, and even taking into consideration “bubble-effects” of hype speculation, the fact remains that, since the inception of Bitcoin, the cryptocurrency market cap is following an exponential growth curve. Today this amounts today to over $150Bn, and various expert opinions estimate its future growth in the next 5-10 years to be in the trillions of dollars. With these kinds of numbers, it begs the question: With over $150 billon of cryptocurrency already in circulation, why can’t we yet pay for coffee or a slice pizza with crypto?
Not only this, but why is cryptocurrency languishing in a tech world of its own, far removed from adoption by the regular consumer or average business? And why does it exist only in a digital space, largely accessible only to the tech-wise cryptocurrency investors? Perhaps the most fundamental question that everyone is asking—from economic pundits to families around the kitchen table—is will crypto will ever become common currency to be used by the average person to pay for their groceries, bills or the hair dresser? Or are Bitcoin and Altcoins just a fad, doomed to remain ensconced in a cult-like tech realm?
While it’s clear that the only way for cryptocurrency to avoid falling into oblivion is by enabling its widespread adoption and acceptance as a “real” payment method, the reality is that the infrastructure and protocols have not been in place to foster this. In fact, there have been seemingly insurmountable obstacles faced by merchants across the board preventing them from accepting cryptocurrency as a viable form of payment.
Four of those key reasons include the following:
1. High volatility promotes fiscal vulnerability
Businesses are not cryptocurrency investors and, as such, they cannot be expected to accept risky payments that may lead to serious financial losses. Every business operates with supply costs, margins, etc. Therefore it would make little business sense to take on a risk of such magnitude by accepting crypto as payment for their goods and services. What if the local mechanic accepted Bitcoin for several large jobs and then Bitcoin value dropped 20%? This leaves these sort of business owners, whom have fixed overhead costs, in a vulnerable space where they take payments that fluctuate.
2. Technical know-how
Generally speaking, retail operators and cashiers cannot be expected to possess the technical expertise needed in order to safely process a cryptocurrency transaction. This is clearly one of the largest problems preventing mainstream adoption, since dealing with cryptocurrency transactions does require a determined level of technical expertise for which it would be absurd to expect a critical mass of front-line service staff to possess. The fact is that any new person coming across even a simple Bitcoin address can be overwhelmed by its perceived complexity.
3. Brand Confusion
The very word “crypto” suggests cryptic. Mix that in with all of the other various terms that are used including virtual currency, digital currency, alt coins, and Bitcoin, and it all creates confusion. It will be paramount for industry insiders to adopt consistent language to be consistently utilized in the mass market.
4. Uncertain regulatory environment
Regulations regarding cryptocurrencies are still not even close to being set in stone. As concerning, these same regulations actually discourage the use of such currencies in a B2C environment, regarding them as an “unnecessary risk” that may lead to legal problems for any business down the road.
Collectively, these four points above paint an ominous picture for the future of cryptocurrency. Not only relating to its progress and adoption, but also for its very survival in a very real scenario where an innovative payment technology fails to fulfil its potential. In fact, this isn’t the first technology to be introduced with the aim of creating a major cultural shift. Twenty-five years ago, fax communication was far more common and even preferred over email messages.
The Innovation Life Cycle Must Ensue
In all forms of innovation, there is always a lag between the advent of the actual innovation and the time that the average intended user starts to adopt and employ the technology. As the “technology adoption life cycle” has well established, in order for people to adopt and use a new innovation, technological abstraction layers are needed to hide all of the complexity of the core product and make it unequivocally user friendly. Of course, this takes time and innovation of its own until all the layers have been developed and refined around the core product, which is the main reason why there is always a lag between innovation and mass adoption.
The Game Changer: Crypto-to-Fiat Point-of Sale Solution
The tremendous amount of complexity associated with using Bitcoin and other cryptocurrencies in the real world financial marketplace, as exemplified by the four problems detailed above, has ushered in a new breed of leading-edge technology aimed at wholly solving the glut of mass market limitations. Emerging Point-of-Sale (POS) applications are finally permitting cryptocurrencies to be transacted as easy as a credit card payment, allowing small and large businesses alike to accept and instantly translate crypto into U.S. dollars, thus eradicating any risk and uncertainty. With this advancement, technical or crypto-specific know-how on the part of the consumer or the merchant is rendered unnecessary and businesses can readily convert crypto to real cash. Not only will this Point-of-Sale development quickly shift brand perceptions, but the regulatory environment will also eventually temper given the reduced volatility this POS technology proffers.
Once this business-friendly solution is adopted as a viable transaction method, enabling consumers to very easily spend their crypto currency and retailers to charge and settle crypto payments in the business’ preferred currency—whether dollars, euros or other, technical proficiency will no longer be barrier and volatility will subside since businesses will continue to deal strictly in Fiat currency (government-issued legal tender), resolving any possible crypto-specific regulatory issues that are rendered a non-concern.
Given its extrapolated impact, a POS innovation of this nature would be poised to unlock the full potential of the cryptocurrency industry and its utility in the real-world. A Crypto-to-Fiat business tailored POS solution will effectively allow for cryptocurrencies to penetrate the consumer market and truly disrupt day-to-day payments as we know them. The first business with a minimum viable product (MVP) will be to cryptocurrency transactions what AOL was to email.
Retailers today are accustomed to using Point-of-Sale terminals for processing credit card payments, and are increasingly adopting new solutions in the space such as Square’s retail POS smartphone app, replacing bulky hardware with Android and iOS devices. In order for merchants to accept and adopt a Crypto-to-Fiat POS solution, it must be tailored in a manner that seamlessly accommodates the retailers current understanding and knowledge base, with a near zero effort or learning curve required to adopt the new solution. At the same time, the innovation must demonstrate its ability to drive new value, new customers and, ultimately, new profits by expanding its ability to process transactions—and at a fraction of standard costs.
Such an end-to-end solution can truly catalyze cryptocurrency adoption, finally bringing Bitcoins and Altcoins to “Main Street” and crossing that crucial milestone for blockchain technology—and technology as a whole—to usher cryptocurrency into the modern world is a genuine, viable and enduring way.
More and more institutional investors are starting to invest in cryptocurrencies. As they do, the issue of crypto custody and how it fits within their existing workflows and regulatory requirements becomes a bigger and bigger issue. While a range of approaches are currently being used, everyone wants a better solution. Below David Wills, Co-Founder and COO of Caspian , reveals more.
Since the beginning of last year, cryptocurrencies have surged in popularity, usability, and, most importantly, value. While crypto markets have historically been dominated by individual investors, institutional investors have only recently joined the fray. However, with two Chicago-based commodity exchanges, Cboe and CME, launching the first regulated Bitcoin futures contracts at the end of last year, this new wave of involvement is growing.
As it does, the issue of crypto custody, which is essentially how an investor’s digital assets are stored and ‘kept safe’, gains more attention. In traditional markets, years of regulation have meant that organisations and mature systems, such as the broker/dealer relationship or future commission merchants, have developed for this purpose. In the world of cryptocurrencies, such institutions are only just being imagined or established and they are doing so against the grey area of crypto regulation.
Which begs the question, what solutions are institutional investors using now and are any of them good enough to survive for the long term?
Crypto custody as it exists today
While specific solutions for institutional investors are appearing with greater frequency by the day, they are normally a combination of established crypto storage practices. After all, much of the risk associated with holding and trading cryptocurrencies come from the fact that they are digital assets, which are as vulnerable as an individual’s personal online security measures.
This means that individual institutions are dealing with the same issues of hot storage on exchanges, which enables speed of trading, and cold storage offline, which means increased security of the digital assets held. One option that combines the benefits of both approaches for institutional investors is vault storage. In this scenario, the risk of hot storage is reduced because an exchange creates a private key offline, making it easy to send purchased cryptocurrency to the public address but much less easy to move it from the account using the private key.
Such solutions are being utilised in order to find the right combination of security and efficiency that institutional investors need. For the most part, they are using a diversified combination of hot and cold storage in combination with multi signature wallets and monitored concentration limits to mitigate risk.
As one can imagine though, this is still not the ideal solution for experienced investors used to a mature toolkit that has been optimised to make regulatory compliant trading as quick and easy as possible within a regulated fiat environment.
Solutions for the future
Innovation and consolidation in the area of crypto custody are occurring in parallel, signalling what the future direction of the solution might look like.
As mentioned, crypto funds are already providing a variety of custody solutions for institutional investors, including insurance, and this consultative approach will continue.
In addition, established crypto players are developing their own custody offers to attract the more security conscious players entering the market, either through internal innovation or acquisition. BitGo’s recent acquisition of digital asset custodian Kingdom Trust, which holds more than $12 billion in assets, is a recent example of the latter and it would not be surprising to see crypto exchanges making similar purchases to boost their offer.
On the technological side, recent innovations like the Glacier Protocol suggest that the development of blockchain-focused solutions will also play their part. Although designed for personal, long-term storage itself, the development of similar protocols to solve the problems of institutional investors would not be a surprise.
FInally, the role of the regulator cannot be ignored here. Institutional investors utilise custody solutions in the traditional fiat world that have been designed around the frameworks laid out by regulators. We already know that the SEC has kicked off a consultation with over 100 crypto funds, during which custodianship will undoubtedly be covered.
While a single solution has not yet revealed itself, as more and more regulated institutions enter the crypto space, more regulatory frameworks will be established, more solutions to fit this need will appear and the picture will become much clearer.
Below Finance Monthly hears from David Jones, Chief Market Strategist at Capital.com, on why Bitcoin's infamous reputation for extreme volatility may be coming to an end.
With the benefit of hindsight, there can be no doubt that the moves seen in Bitcoin, and other crypto-currencies, from the summer of 2017 through to February 2018 has all the hallmarks of a classic bubble - and corresponding bust. No doubt it will become a popular part of market history - just like the technology shares boom and bust of the late 1990s. Somewhat ironically, weekly volatility in Bitcoin recently hit a one year low below 3% - at pretty much the same time as the NASDAQ, that barometer of technology stocks, moved out to fresh all-time highs.
So why has volatility evaporated? There are a few reasons we could point to, but first let's set the scene. From the middle of November to the middle of December the price of Bitcoin increased threefold. After spending years just being something of a niche IT interest, Bitcoin went mainstream and dragged plenty of other crypto-currencies along for the rise. The mainstream media picked up on the story with almost daily coverage on TV programmes and in newspapers that would never have even heard of crypto-currencies just a few months before. The gains in cryptos seemed to represent easy money and individuals, who would never dream of speculating in more traditional markets, were keen to find out how to get involved. Facebook and Google were full of adverts on how to profit. The prices moved ever higher.
It's a classic rule of market psychology - whenever the general public gets involved in a market in large numbers, expecting further rises, then a top could well be near. This of course proved to be the case - at the time of writing Bitcoin is around 60% below its December all-time high.
Why the lack of volatility?
The obvious reason is that the hype has gone from this market. Plenty of latecomers to the crypto currency rally have had their fingers burnt, have taken their losses (or are still sitting on them) and have vowed never to return. Activity amongst the wider public has slowed.
There are not as many new entrants buying and selling as the price has burst - the story of it being a somewhat boring market in recent months, is not going to make people excited about the potential for "easy money". Wider media coverage has dried up, reducing awareness amongst the public.
Facebook and Google have banned crypto currency adverts - so an incredibly important section of the digital media world is not increasing awareness of this market. You can see this in internet searches - Google searches for Bitcoin for example are down by 75% for the year so far, again pointing to a significant shift in interest by the casual investor.
Arguably, the introduction of a listed futures contract for Bitcoin has also calmed the wilder market moves. The additional media coverage resulted in widespread speculation prior to the listing. The unregulated crypto exchanges experienced extremely high numbers of new signups and in some cases stopped on boarding new customers. The futures contract was launched in the first week of December last year and, less than three weeks later, Bitcoin started falling. Now, institutions and more professional investors have a regulated way of gaining exposure to Bitcoin without having to worry about online wallets and the worries over lack of security. The futures contract also gave the ability to "sell short" - so to profit from Bitcoin falling. This has no doubt gone some way to initiate a more orderly two-way market in Bitcoin - making it more like most other markets. But even the official futures market has suffered as volatility has dropped off - current volumes are best described as modest.
The lack of volatility is seen as a positive sign by those who see more adoption of blockchain technology. It's hard to claim that cryptos are a store of value when the price is moving 10% and more in a very short period of time. More price stability and less volatility certainly helps this value arguement. Significant new money continues to move into blockchain, with billion dollar VC investment funds being raised to new blockchain startups. The world’s leading financial regulators and institutions continue to engage and determine how to regulate and participate in what has become a disruptive new area of investment. Although the boom and bust is over (for now, at least), it could end up being one of the best things to happen for the future of crypto currencies.
