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Occasional sighting of Bitcoin whales are leaving advocates of the biggest cryptocurrency anxious after what’s already been a choppy week of trading.
Sudden market swings in the cryptocurrency this week have left price charts looking like a jack-o-lantern’s smile. And some investors are blaming the gyrations on actions by large Bitcoin holders, known as whales.
“The best explanation is coming from those whales in the market who want to have some sort of control on what’s going on,” said Jonathan Benassaya, the founder and chief executive officer at San Francisco-based IronChain Capital. “It’s some sort of manipulation from actors."
Bitcoin’s recent choppy moves aren’t that unusual, cautioned Tom Lee, head of research at Fundstrat Global Advisors. "I think it feels off right now because, you know, we’ve been on a down trend since December, and now, even though the volatility hasn’t changed much, it’s hard to tell if Bitcoin is trying to stage a recovery or if it’s continuing its down trend," Lee said.
In a less mature market that lacks the same history and complexity that the stock market holds, the digital currency is a lot more vulnerable to liquidity movements. "It’s the state of it now because there isn’t a ton of liquidity and there is regulatory uncertainty and general nervousness," he said.
The premium version of the online forum Reddit used to let you pay for an upgraded membership with the cryptocurrency, bitcoin. But in the past few days it looks like the ad-free version of the site isn’t as gung-ho on the digital coin as it once was.
Now with bitcoin below $8,000, it looks like it’s fallen out of favor on the message board site. Though, as Cointelegraph first reported, it looks like the decision was based on cryptocurrency exchange Coindesk changing its terms of its merchant service Coindesk Commerce.
To confirm this is the case we reached out to Reddit, who referred back to a Reddit admin’s comments about the Coindesk changes and the slim chance that the cryptocurrency will return to the site.
The admin wrote over the weekend, “The upcoming Coinbase change, combined with some bugs around the Bitcoin payment option that were affecting purchases for certain users, led us to remove Bitcoin as a payment option.”
Christine Lagarde believes revisiting crypto-assets could harness gains and avoid pitfalls
The advance of bitcoin and other digital currencies could make the global financial system safer despite the prospect of inevitable accidents waiting to happen, the head of the International Monetary Fund has said.
Christine Lagarde said some tools built using the technology behind bitcoin, which are known collectively as crypto-assets, hold the potential to revolutionise the world of high finance by making it faster, cheaper and safer. Among them, there are real threats and needless fears, she said.
Writing in a blogpost as politicians and central bankers gather in Washington for the IMFs regular spring meetings, she said there was hope for a world where firms using digital currencies could coexist alongside traditional banks.
That level of diversity could build a financial ecosystem that is more efficient and potentially more robust in resisting threats, she said.
An increasing number of consumers have used cryptocurrencies as an alternative to the old ways of holding and moving money and prefer them to traditional banks, which crashed in the 2008 financial crisis. However, many have lost money from volatile price movements and after some cryptocurrency exchanges have been hacked.
Last month, she said authorities around the world could harness the potential of cryptocurrencies to help bring them under control. Failure to do so would allow the unfettered development of a potentially major new vehicle for money laundering and the financing of terrorism, she added.
The governor of the Bank of England, Mark Carney, has called bitcoin and other cryptocurrencies inherently risky and that they have failed to fulfil their most basic function as money. Bitcoin hit almost $20,000 (13,958) in value in the run-up to Christmas, before crashing by more than half earlier this year.
But ahead of the IMFs forthcoming global financial stability report, which looks at emerging risks from the world of banking, Lagarde said there were merits from looking again at crypto-assets. A clear-eyed approach can help us harness the gains and avoid the pitfalls, she said.
Comparing recent developments to the advances of the 1990s – when thousands of technology companies were started only to collapse a few years later during the dot-com crash – she said many crypto-assets were bound to fail. More than 1,600 digital currencies are in circulation, having ballooned in number in recent years.
However, just as a few technologies that emerged during the dot-com era have since transformed the world, she said crypto-assets that survived this process of creative destruction could have a significant impact on how we save, invest and pay our bills.
A growing number of big U.S. credit-card issuers are deciding they don’t want to finance a falling knife.
JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. said they’re halting purchases of Bitcoin and other cryptocurrencies on their credit cards. JPMorgan, enacting the ban Saturday, doesn’t want the credit risk associated with the transactions, company spokeswoman Mary Jane Rogers said.
Bank of America started declining credit card transactions with known crypto exchanges on Friday. The policy applies to all personal and business credit cards, according to a memo. It doesn’t affect debit cards, said company spokeswoman Betty Riess.
And late Friday, Citigroup said it too will halt purchases of cryptocurrencies on its credit cards. “We will continue to review our policy as this market evolves,” company spokeswoman Jennifer Bombardier said.
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Allowing purchases of cryptocurrencies can create big headaches for lenders, which can be left on the hook if a borrower bets wrong and can’t repay. There’s also the risk that thieves will abuse cards that were purloined or based on stolen identities, turning them into crypto hoards. Banks also are required by regulators to monitor customer transactions for signs of money laundering — which isn’t as easy once dollars are converted into digital coins.
Bitcoin has lost more than half its value since Dec. 18, falling below $8,000 on Friday for the first time since November. The drop occurred amid escalating regulatory threats around the world, fear of price manipulation and Facebook Inc.’s ban on ads for cryptocurrencies and initial coin offerings.
Now, cutting off card purchases could exacerbate those pressures by making it more difficult for enthusiasts to buy into the market. Capital One Financial Corp. and Discover Financial Services previously said they aren’t supporting the transactions.
Mastercard Inc. said this week that cross-border volumes on its network — a measure of customer spending abroad — have risen 22 percent this year, fueled partly by clients using their cards to buy digital currencies. The firm warned that the trend already was beginning to slow as cryptocurrency prices fell.
Discover Chief Executive Officer David Nelms was dismissive of financing cryptocurrency transactions during an interview last month, noting that could change depending on customer demand. For now, “it’s crooks that are trying to get money out of China or wherever,” he said of those trying to use the currencies.
Just in case you’ve been underground for the past few years, cryptocurrency is digital cash that banks or the government can’t touch. At the top of the crypto pack, despite its rises and falls, is Bitcoin (according to CoinMarketCap). If you want to get ahead of this revolution and start trading your own Bitcoin, you need to know what you’re doing. Because trust me, it’s easy to make mistakes.
The Bitcoin and Cryptocurrency Mastery Bundle features six courses covering the ins and outs of joining the Bitcoin revolution. Here’s what you’ll learn:
You’ll kick off your training by getting your first taste of Bitcoin. By the end, you’ll have a full theoretical and practical understanding of this cryptocurrency and even get .0001 BTC in your wallet just for taking the course.
Finally, you’ll take all the information you’ve learned and use it to enhance your professional standing in the Bitcoin world. This course will prepare you to pass the Bitcoin Professional exam, which can give you a leg up in your career.
Bitcoin is a digital currency. Like other currencies, you can use it to buy things from merchants that accept it, such as Overstock.com, or, as is more often the case, hold on to it in hopes that it will increase in value. Unlike traditional currencies, which rely on governments and central banks, no single entity controls bitcoin. Rather, it is supervised by a worldwide network of volunteers who maintain computers running specialized software. As long as people run bitcoin software, the currency will keep working, because everything needed to keep it working is stored in a distributed ledger called the blockchain. And even though it's all digital, bitcoin is scarce.
Its most wild-eyed proponents believe bitcoin's decentralized, cryptographic approach to currency can yield a host of benefits: limiting central bankers’ ability to damage economies by printing too much money; eliminating credit-card fraud; bringing the unbanked masses into the modern economy; giving people in unstable economies a safe place to park their money; and making it cheap and easy to transfer funds. But bitcoin has yet to realize these goals, and critics argue it may never live up to the hype.
When you send or receive bitcoin, your bitcoin software, referred to as a “wallet,” records the transaction in the blockchain. The blockchain is maintained by, and distributed across, the roughly 200,000 computers running bitcoin software. If someone tries to alter the ledger to make it look like they have more bitcoin than they’re supposed to, the tampering will be apparent because it won't match the other copies of the blockchain.
People who commit the computing resources to processing bitcoin transactions are paid in bitcoin, but only if the computers they operate are first to complete complex cryptographic puzzles in a process called "mining.” New bitcoins are created automatically by the software and awarded to the winners of the race to solve these puzzles. As of February 2018, that award is 12.5 bitcoins. By design, only 21 million bitcoins will ever be created. Those who process transactions can also collect fees; the fees are optional and set by the person who initiates a transaction. The larger the fee, the faster the transaction will likely be completed. This system keeps bitcoin scarce while rewarding people for investing in the infrastructure required to keep a global payment-processing system running. But the mining process comes with a big catch: It uses an enormous amount of electricity.
Adoption of the cryptocurrency has been hobbled by a series of scandals, high-tech heists, and disputes over the software's design, all of which illustrate why financial regulations were created in the first place. The bitcoin community has solved some mind-boggling technological problems. But making bitcoin a true replacement for, or even adjunct to, the global financial system requires more than just great tech.
The History of Bitcoin
On Halloween 2008, someone using the name Satoshi Nakamoto sent an email to a crytography mailing list with a link to an academic paper about peer-to-peer currency. It didn't make much of a splash. Nakamoto was unknown in cryptography circles, and other cryptographers had proposed similar schemes before. Two months later, however, Nakamoto announced the first release of bitcoin software, proving it was more than just an idea. Anyone could download the software and start using it. And people did.
In the early days, bitcoin was used almost exclusively by cryptography geeks. A bitcoin sold for less than a penny. But the idea slowly caught on. Bitcoin emerged in the aftermath of the 2008 financial crisis when some people—especially free-market libertarians—worried the Federal Reserve's attempts to increase the money supply would lead to runaway inflation.
Nakamoto disappeared from the internet before bitcoin attracted much mainstream attention. He handed control of the project to an early contributor named Gavin Andresen in December 2010 and quit posting to the public bitcoin forum. To this day, Nakamoto’s identity remains a mystery.
No one knows who the creator of bitcoin really is. These are a few of the suspects.
The value of a bitcoin first hit $1 shortly after this transition, in February 2011. Then the price jumped to $29.60 in June 2011 after a Gawker story about the now-defunct black-market site Silk Road, where users could use bitcoin to pay for illegal drugs. But the price fell again after Mt. Gox, the most popular site at the time for buying bitcoin with traditional currency and storing them online, was hacked and temporarily went offline.
The price fluctuated over the next few years, soaring after a financial crisis in Cyprus in 2013, and sinking after Mt. Gox went bankrupt in 2014. But the overall trajectory was up. By January 2017, bitcoin was trading at nearly $1,000. The price soared in 2017, reaching an all-time high of nearly $20,000 in December. The reasons for this rally are unclear, but it seems to have been driven by a mixture of wild speculation and regulatory changes (the US approved trading bitcoin futures on major exchanges in December).
Bitcoin’s price surged despite discord among its adherents over the currency's future. Many prominent members of the bitcoin community, including Andresen, who handed control of the software to Dutch coder Wladimir van der Laan in 2014, believe bitcoin transactions are too slow and too expensive. Although transaction fees are optional, failing to include a high enough fee could mean your transaction won’t be processed for hours or days. In December 2017, transaction fees averaged $20 to $30, according to the site BitInfoCharts. That makes bitcoin impractical for many daily transactions, such as buying lunch.
Developers have proposed technical solutions for this problem. But the plan favored by Andresen and company would require bitcoin users to switch to a new version of the software, and so far miners have been reluctant to do so. That's led to the creation of several alternate versions of the bitcoin software, known as "hard forks," each competing to lure both miners and users away from official version. Some, like Bitcoin Cash, have attracted miners and investors, but none is close to displacing the original. Meanwhile, many other "cryptocurrencies" have emerged, borrowing heavily from the core ideas behind bitcoin but with many differences (see The WIRED Guide to Blockchain).
What's Next for Bitcoin
The future of bitcoin depends on three major questions. First, whether any of the hard forks or the hundreds of competing cryptocurrencies will supplant it, and, if so, when. Second, whether the sky-high valuations can last. And third, whether bitcoins will ever be used as currency for day-to-day transactions. The answer to the third question hinges in large part on the first two.
One thing holding bitcoin back as a currency is the expense and time lag involved in processing transactions. Emin Gun Sirer, a professor and cryptography researcher at Cornell University, estimates that the bitcoin network typically processes a little more than three transactions per second. By comparison, the Visa credit-card network processes around 3,674 transactions per second. Worse, bitcoin transaction confirmations can take hours or even days.
The First Real-World Bitcoin Transaction
There were few places to spend bitcoin during its early years, before the black markets that made the currency famous emerged. The first time someone actually used bitcoin to buy something is widely considered to have been May 22, 2010. Programmer Laszlo Hanyecz paid 10,000 bitcoin (worth around $41 at the time) to have two pizzas delivered to his house. Those 10,000 bitcoin are worth millions now. “I don’t feel bad about it,” Hanyecz told WIRED in 2011, when the coins would have sold for $272,329. “The pizza was really good.”
In addition to the hard forks of bitcoin, there are now countless alternative cryptocurrencies, sometimes called “alt-coins,” that aim to solve some of bitcoin’s shortcomings. Litecoin, for example, is designed to process transactions more quickly than bitcoin, while Monero focuses on creating a more private alternative. None trade for as much as bitcoin, but several sell for hundreds of dollars.
If one of the bitcoin variants or alternatives can solve its main problems, and win over users and miners, that currency would become much more suitable for day-to-day use. It's also possible that the developers behind the official version of bitcoin will find a way to make the network cheaper and faster while maintaining compatibility with old versions of the software. The maintainers of the original bitcoin software platform are working on a solution called the “Lightning Network” that would shift many transactions to “private channels,” to boost speed and reduce costs.
And then there's the environmental impact. Critics argue that mining bitcoin is an enormous waste of electricity because they don't have any intrinsic value.
Even if the technical issues of cost and performance are solved, there's still the question of volatility. Businesses and consumers can exchange dollars for goods and services with the confidence that those dollars will be worth the same amount in three weeks when the rent is due. But bitcoin has proven far more volatile than most other assets, according to a study conducted by the bitcoin wallet company Coinbase. For example, On November 29, bitcoin surged from just under $10,000 to well over $11,000 before sinking back to about where it started the day.
The founders of Coinbase have argued that derivative markets could help users cope with the volatility by allowing participants to essentially buy insurance that pays out if the price of bitcoin drops. That might not reduce the volatility, but it might reduce the risk of accepting bitcoin as payment. In 2017, US regulators cleared the Chicago Mercantile Exchange and the Chicago Board Options Futures Exchange, the world’s largest derivatives exchanges, to offer bitcoin futures. But it's too early to tell if it will make bitcoin more acceptable to retailers.
Bitcoin has come an enormous way since its origins as a paper by a pseudonymous author. But it still has a long way to go to fulfill its creator’s dream.
Bitcoin Is Splitting in Two. Now What? A deeper dive on why some bitcoin community leaders want to switch to new, more efficient, versions of the software, and their struggle to win over miners and users.
The Inside Story of Mt. Gox, Bitcoin's $460 Million Disaster Mt. Gox’s bankruptcy caused the first major bitcoin crash and served as a hard reminder that banks are regulated and insured for a reason. This is the Mt. Gox story, from its beginnings as a planned Magic: The Gathering card-trading site to its emergence as the biggest bitcoin trading platform to its downfall.
Expert Explains One Concept in 5 Levels of Difficulty – Blockchain
Blockchain, the key technology behind Bitcoin, is a new network that helps decentralize trade, and allows for more peer-to-peer transactions. WIRED challenged political scientist and blockchain researcher Bettina Warburg to explain blockchain technology to 5 different people; a child, a teen, a college student, a grad student, and an expert.
The bitcoin craze has officially jumped to real estate.
Despite the risky, volatile nature of cryptocurrency, homes and property across the U.S., Australia, Canada, and beyond are for sale for the unpredictable coin. Even after one bitcoin dropped from $14,000 to $11,000 in value in a matter of days, homeowners are still putting up their homes for some of that flashy money.
It’s not just a few listings here and there. According to Bitcoin Real Estate, a site that has been tracking the business for several years, the trend is growing more and more and not slowing down.
At the end of 2017 a Miami condo reportedly sold for 17.7 bitcoin and actual cryptocurrency was exchanged between the buyer and seller. Not just bitcoin converted into cash, which is the more popular way to use the coin.
Trulia spokeswoman Andrea McDonald found 80 listings on the site that reference cryptocurrency in some way. Many just note “bitcoin accepted,” but others really get into it.
A property near Joshua Tree National Park in Southern California makes that case for paying with cryptocurrency, insisting that the property “can be a nice investment for future at a very reasonable $5,250 per acre for a total of $2.1 million or 124 bitcoins.”
Another home in West Palm Beach, Florida, is open to buyers with bitcoin and ethereum and litecoin, but with the caveat that cryptocurrencies are constantly changing. “Owner financing possible $149,900 USD, 13 bitcoin 375 ethereum, 950 litecoin (crypto price subject to change. Inquire crypto price at time of interest),” the listing says.
So far Trulia hasn’t officially seen a sale go down with the coin, McDonald said, but it’s probably just a matter of time.
Redfin, another online real estate database, has also seen a crypto trend in its listings, especially in hubs like the Bay Area and Miami. The number of listings that accepted cryptocurrency jumped from 75 in December to 134 in mid-January. Some of those 134 listings have sold, but as a Redfin spokesman explained it’s unclear if cryptocurrency was used for all or a portion of the sale price.
Some of the listings are trying so hard to initiate a cryptosale. A Florida home used all caps and asterisks to lure in investors, screaming, “**BITCOIN SALE PREFERRED! Unique opportunity to be one of the first transactions using Bitcoin.**”. Another listing for a property in Washington state, meanwhile, was generous with exclamation points: “Seller willing to accept BITCOIN!!! The new rate of cryptocurrency that [sic] taking the world by storm!”
Aaron Drucker, a Redfin agent in Miami, said in a phone call that including cryptocurrency in a listing gives a property more exposure. He’s also noticed that bitcoin listings tend to be luxury condos. “Earlier investors in bitcoin have made a lot of money,” he said. “They may want to convert some of that into a tangible asset.”
“I wouldn’t recommend this for first-time home buyers.”
But bitcoin sales aren’t for everyone. “I wouldn’t recommend this for first-time home buyers,” he added. “But if you want to buy a second home, this might be something to consider.” No matter how you look it at, Drucker said, it’s “definitely risky.”
Others are using bitcoin and other coins for their lucrative value. A Redfin agent in San Diego helped a buyer cash out two bitcoin valued then at nearly $7,500 each to cover closing costs for a home in Carlsbad, California.
Carina Isentaeva, a Redfin agent in San Francisco, is in the center of the crypto-mania. In a call she said it’s all about “crypto homes” now. She had a deal that fell through because the buyer’s ICO flopped. But more surprising to Isentaeva was that the seller was willing to work with a cryptocurrency contingent sale. “You couldn’t imagine this a few years ago,” she said. “Everyone would want to see a bank statement,” not ICO filing paperwork.
Another big issue holding up more sales with actual cryptocurrency is regulation. Just finding an escrow service that will handle a crypto sale instead of traditional cash is difficult. As Isentaeva noted, the technology is moving much faster than government and laws. So the workaround is to convert bitcoin into cash and then buy property. But eventually the tech should catch up and the transaction will be more streamlined — at least that’s what Isentaeva hopes.
But no matter the difficulties, the crypto listings keep coming. Welcome to the neighborhood, bitcoiners.