Bitcoin Blog a1

Friday, June 23, 2017

Don’t use Yobit

As you may have noticed, lately my blog has been getting a lot of spam comments. I just want to make it clear I don’t endorse these websites or products. In fact, I recommend staying away from many of them.

Specifically, I contacted the support team at Yobit, one of the worst spammers. It looks like it is just some guy with an affiliate link, but the company was unwilling to do anything about it. In addition, the support team clearly does not speak English as a first language. In short, stay away from Yobit. Support is lacking and they empower spammers.

Friday, June 16, 2017

The Atlantic and The Fed

The Atlantic recently published an article on cryptocurrency  ponzi schemes. Its a little funny, but I started reporting on Bitcoin ponzi schemes in 2014. As well as my failed attempt at being an investigative reporter (another link).

The Atlantic and my blog couldn’t be more different. The Atlantic is generally very wordy or even sesquipedalian at times. My articles are very short. Shorter than anywhere else sometimes. SEO experts are saying longer is better now days, but I don’t listen. Regardless, its interesting to see more mainstream media outlets reporting on what I have been doing for years.

In other news, the Bitcoin community has some interesting reactions to the Fed announcing a rate hike. The Bitcoin community always has colorful thoughts on fiat. This Reddit post states, "USD is a huge pre-mine SCAM!" For context, a pre-mine means refers to a cryptocurrency that had coins in existence, prior to being mineable by the public. The post links a video of Janet Yellen ( Chairman of the Fed) announcing a .25 % rate hike to the federal funds rate. The idea of the comparison between a pre-mine and the rate hike is the Fed alters the money supply in order to change the federal funds rate. Likewise, in a pre-mine, developers manipulate the cryptos supply in order to benefit themselves.

I’ll hopefully publish some more material later this month. In the meantime:

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Sunday, June 4, 2017

Bitcoin: Currency or speculative asset?

In Forbes, there is an article asserting Bitcoin is an asset, not a currency. Its two main criticisms were Bitcoin’s slow transaction time (calling into question its use as a medium of exchange) and its instability (which calls into question its store of value). Because it doesn’t meet 2 of the 3 defining characteristics of money, it therefore is not money (the last characteristic is a unit of account, which bitcoin is clearly very good at, see here for more).

Now, I think the author’s assertions about transaction times are misguided. If you want to transfer USD across the country, it can easily take days depending on how you do it. This length of time transactions take doesn’t make USD not a currency.

The author does have a point, Bitcoin does fluctuate quite a bit in value. But to this I might ask, how much fluctuation is too much? Regardless of all the fluctuation, Bitcoin still has an actively traded price and a value. Is Bitcoin an excellent store of value? Well, perhaps not the most stable, but ultimately, I think it is.

Overall, the author claims bitcoin is an asset, rather than a currency. He states: “Rather it is a commodity asset that one trades, like gold or silver, in hopes that its value will rise and yield a trading profit.“ I disagree with this idea. Bitcoin is not like gold or silver. First, gold and silver are physical. More importantly, Bitcoin’s source of value isn’t intrinsic, but is derived from belief in its value. Gold and silver both have fundamental values, they have uses besides that as a tool of speculators, whereas Bitcoin has an unclear fundamental value. It’s not that it doesn’t have a fundamental value, it's just not as clear (see past articles of use of bitcoin and other blockchain technologies). Overall, I reject the idea that Bitcoin is something to invest in. Rather, I assert, it’s something to invest with. I use services like Btcpop to invest my bitcoin to make a return. I don’t, however, invest my fiat in Bitcoin. As Warren Buffet said, that would be like investing in checks:

"Stay away. Bitcoin is a mirage. It's a method of transmitting money. It's a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money, too. Are checks worth a whole lot of money just because they can transmit money? Are money orders? You can transmit money by money orders. People do it. I hope bitcoin becomes a better way of doing it, but you can replicate it a bunch of different ways and it will be. The idea that it has some huge intrinsic value is just a joke in my view." Source

While I agree Bitcoin in its present form is not the future, it symbolizes the future. It is a step toward the future, a world where physical currency is no longer needed.  Certainly the technical limits of bitcoin prevent it from global adoption, but perhaps another cryptocurrency can do that.

Saturday, May 27, 2017

Is Poloniex is the next Mt. Gox?

Some people on the internet are saying Poloniex is the next Mt. Gox.  (As you probably know, Mt. Gox was the first big failed bitcoin exchange.) Well I don’t know if this is true, but if people think it is true, it may become true.

Cryptsy was an interesting example of unjustified fears becoming reality. Cryptsy had cryptocurrency stolen from them. This meant that if everyone withdrew their digital currency from Cryptsy, they wouldn’t have enough to cover all the deposits with them. (This meant they were operating similar to a traditional bank with fraction reserve banking.) Or in other words, they didn’t have the cash on hand to pay everyone that has deposited money (Cryptsy, however, was insolvent as well). They continued business as usual and did not announce the theft for fear of causing a scare. As Cryptsy made money, their capital was essentially restored. (In banking terms, Assets - Liabilities = Bank’s capital).  Once Cryptsy made enough money, they would no longer have to worry about a run on the “bank.”  An unrelated, unjustified rumor caused people to question Cryptsy. People simply questioning Cryptsy caused a mass panic which caused Cryptsy to fail and the stealing to come to light.

Now people are questioning Poloniex, just like they questioned Cryptsy in the past. Just the questioning of Poloniex could cause a scare, which could cause people to withdraw their Cryptocurrency. If enough people withdraw, it could bring to light other problems with Poloniex which could bring the exchange down. However, if there is no real issue, this might not affect them.

An additional reason Poloniex could be in trouble is that upward prices also increase credit risk. If a lender has traded cryptocurrency for fiat, the increase in price may make it difficult to repay a loan denominated in crypto. So if Poloniex has borrowed from his users, this may be an issue.

Lastly, it looks like many people are very delayed in when they can withdraw their money from Poloniex. This is a bad sign, and could be a sign of eventual shut down. Ultimately, I don’t think Poloniex will shut down right now, but only time will tell.

Thursday, May 25, 2017

Next Stop, Moon.

As you may be aware, the price of Bitcoin is going through the roof right now, its an exciting time. Another blog I follow has some interesting insights on volatility in Bitcoin's price. You can check it out here. Lots of other good posts should be coming in the next few days, my editor is very behind. Check in soon.

Tuesday, May 9, 2017

Still time to jump on the rocketship

I've made posts like this before, but Bitcoin's price is a bit crazy right now.
If you bought may book a few weeks ago, you would have had gotten a 43% return on your bitcoin holdings! Wow! (This is using CoinDesk BPI as of the official launch date compared to today).There is still time to jump into the arena, check it out on Amazon or Payhip.

Litecoin has made some big upward price movements too. This is probably due to segwit being activated. Thus resolving any uncertainty and improving the usefulness of the coin. Perhaps we might see similar results if BTC did that as well. But it's not just BTC and LTC that are big winners, lots of coins are going up. Nyan is the only coin in my holdings that hasn't gone way up.

Who knows what the future will bring. Either way, it might be a good idea to acquire some of your own Bitcoin. Not buying it necessarily, read my book to learn more.

Monday, May 1, 2017

The Price of Bitcoin

As promised in my last post, here is another guest post. This was written by Elliott Killian; to see more of his writing, check out his blog here:

The price of bitcoin for the past eight years has been very volatile ranging between less than one US dollar to over one thousand US dollars. Because of this drastic change, many ask: “What is Bitcoin?”. Is it a currency? A Technology? An investment tool? Or a scam? To answer these questions we have to examine how people use and value Bitcoin. A paper by Pavel Ciaian, Miroslava Rajcaniova & d’Artis Kancs did just that. They looked into the factors behind how bitcoin is priced. They wanted to know what the largest factor was. They examined the effects of the: global economy, number of learning about bitcoin (by views to the bitcoin Wikipedia page), attractiveness as an investment opportunity, and as a currency.

If you take any one theory each can not explain the pricing of bitcoin by itself. No factor by itself fully explains the price of bitcoin. If you split the price of bitcoin into different time periods at before or after October 2013 then these influences make more sense. This split represents early bitcoin when people were still learning about it from established bitcoin where people know what it was and were using it. For example, the number of people viewing the bitcoin site on Wikipedia searches did have an influence on the price of bitcoin when it was new, however, once it was established the number of people searching for bitcoin on Wikipedia had little effect on the price.

For the global economy, they found that it had no influence on the long-term price of bitcoin. This was similar to speculation. Speculation had little effect on the long-term price of bitcoin.

Here are my own thoughts after reading the paper and looking at bitcoin prices. I found that speculation had little impact surprising. Many people talk about using bitcoin as a get rich quick scheme by speculation. But speculation cannot deviate too far away from the true value of bitcoin measured by its use as a currency. Overall the use of bitcoin as a currency is what drives long term value and price of bitcoin. Simply put if more people use bitcoin the price goes up the fewer people use it the price goes down. What may be driving the price of bitcoin now is the black market online stores and legitimate businesses accepting bitcoin. In the future bitcoin may be used to as an alternative to currencies with high inflation or uncertain futures.

There is no one factor that determines the price of bitcoin. Multiple factors have affected bitcoin throughout its use. The long term price of bitcoin will ultimately be determined by how people use it. If more people use it as a currency the value and the price will increase. With this other factors such as speculation will have less of an impact on the price of bitcoin. Where ever the price of bitcoin goes you can know it is acting more and more like a currency than a speculative investment or scam.

Work cited
Pavel Ciaian, Miroslava Rajcaniova & d’Artis Kancs (2016) The economics of BitCoin price formation, Applied Economics, 48:19, 1799-1815,