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Who is Barry Silbert?

What do Coindesk, Digital Currency Group, and Second Market all have in common?

They’re all owned by Barry Silbert, the early investor worth about half a billion dollars who’s been cheering on Bitcoin and crypto for years.

Silbert heard about Bitcoin in 2011 and describes his perspective as evolving through arrange of emotions that all true crypto fans are probably familiar with.

 

  • Dismissive
  • Skeptical
  • Intellectually Curious
  • Believer/Investor
  • Evangelism!

He started buying Bitcoin in 2012 at $8 and began angel investing in different companies the same year. An influential and occasionally controversial figure in the space, Silbert is noted not only for his staggering success, but for his enthusiastic cheerleading of different coins that he or his company hold. This has lead some social media users to nickname him “Barry Shilbert”. That’s social media for you.

Perhaps both reputations are well-deserved. He invested in Ethereum Classic less than two years ago at $0.50 per token and saw it increase over 90 times in value, seeing more growth than Bitcoin did in the same amount of time. He continues to back the currency and offer tips on Twitter while posting bullish statements as well.

His social media activity have caused concern that US regulators may take an interest. Securities lawyers have pointed out that while there’s nothing to be done about individuals attempting to influence token value in the unregulated crypto space, one of Silbert’s companies deals in US government-regulated securities whose value is derived from crypto, raising the issue of whether Silbert’s actions constitute illegal price manipulation prohibited by US law.

Silbert didn’t let the concerns go unanswered. He insisted that he was “highly sensitive” to the regulations regarding price manipulation and stated that he and his companies were fully subject to “anti-fraud provisions and insider trading”. To date he has made no comment about his online nickname… I don’t think anyone will hold that one against him!

Regardless of the gray area he may be straying into legally, it’s always worthwhile hearing what crypto giants are thinking and how they got to where they are. Barry Silbert made an appearance at the Yahoo Finance All Markets Summit and made a number of interesting points that we’re going to get into today. First, let’s take a closer look at his companies.

 

Digital Currency Group

 

Digital Currency Group is a company that funds promising entrepreneurs as an “angel investor” and invests in cryptocurrency. Silbert claims the company almost never trades, and favors holding tokens long-term instead. At the end of last year, DCG held over $600 million worth of cryptocurrency, and 90% of that was in Bitcoin, Zcash, and Ethereum Classic.

DCG played a key role in the funding and development of projects like CoinDesk, BitPay, and Ripple. They even went on to buy CoinDesk outright in 2016. Another subsidiary company of DCG is Grayscale, an investment firm that manages Bitcoin Investment Trust, the first ever company to offer shares and securities whose value is derived solely from cryptocurrency. It’s a big step for adoption, but investment opportunities are available only to accredited investors with hundreds of thousands of dollars at their disposal.

 

Silbert’s Summit Predictions: Good news, Bad news


Bad news first. Silbert firmly believes that the vast majority of cryptocurrencies are going to crash all the way down to zero.

That’s right – not “drop to a lower market value”, not “suffer a permanent correction over time” – zero. Nothing. Worthless. Similar sentiments were expressed by Goldman Sachs’ Steve Strongin. “Because of the lack of intrinsic value (in some correlated currencies), the currencies that don’t survive will most likely trade to zero… Most, if not all, will not see their recent peaks again.”

But it’s not all doom and gloom – far from it. In fact, when you hear the reasoning behind Silbert’s prediction, it’s rather good news. It actually makes a lot of sense. Silbert is convinced that there will only be one major player in each available “role” in the crypto space. He thinks there will only be one digital gold, only one privacy coin, one fast transaction coin, etc. Unlike in other markets, he thinks that the results of crypto will be somewhat binary – succeed or fail completely.

 

Wall Street Infrastructure

Silbert also alluded to what many have come to suspect recently amid the recent onslaught of FUD, fake news, and price drops, which is that Wall Street is starting to get in on the action.

“Behind the scenes, infrastructure is being built – on ramp, off ramp – to enable Wall Street to access this asset class in ways that you cannot imagine,” Silbert said, predicting that a “tidal wave of capital” from asset managers around the world will make its way into crypto markets in the next 12 to 24 months.

Interesting tidings indeed. This would herald the beginning of real widespread mainstream adoption of cryptocurrency, flooding the market with big money and increasing the market cap significantly. With deep-pocketed investors and hedge funds comes reduced volatility as large amounts are held for stable and consistent time periods. If the predictions are true, crypto might soon exit the Wild West territory we see it in today. The coming years might see crypto enter the big leagues of international adoption and investment.

While people like Strongin and Silbert should always be listened to with a measure of skepticism due to their vested interest in the space, early crypto investors tend to be people to keep an eye on – all it takes is one investment like the many successful calls that Silbert has made to change a life forever.

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Decentralized Exchanges – What does this mean for crypto?

Decentralized Cryptocurrency Exchanges

This is the ultimate guide for cryptocurrency Decentralized Exchanges.

Centralization, or lack thereof, is a major talking point in cryptocurrency. While some people are attracted to the technology purely for the lucrative gains to be won investing or speculating on upcoming projects, cryptocurrency means something more to many other enthusiasts.

Decentralized blockchain technology heralds a changing of the status quo. A leveling of the playing field in which financial power is placed in the hands of the individual instead of centralized banks and corporate entities (can you tell which side I’m on yet?)

Yes, there will always be whales and hedge funds trying to game the system. Bitcoin is controlled mostly by a small number of powerful mining pools, for example, a far sight from Satoshi’s vision. However, it did get the ball rolling, and since then more projects have been striving for true decentralization.

Before we get too far into it, let’s clear one thing up;

What’s a centralized exchange exactly?

Good question. A centralized cryptocurrency exchange is one in which a third party controls everything. Custody of the currency, the order books, the whole thing. If you buy cryptocurrency on an exchange like Coinbase, Bitfinex, Binance, you know what I mean – these are all centralized exchanges.

You can buy and trade currencies on them, but any currency stored on the exchange is not in your possession, so it’s always a good idea to withdraw your currency to a private wallet where you alone control the private keys. Remember the wise words of Andreas Antonopoulos – not your keys, not your Bitcoin!

Why is decentralization important?

Let’s take a look at a current example of centralization failing miserably.

For months, Bitgrail was the number one place to buy XRB tokens from Raiblocks, now rebranded as NANO. Many people had difficulty withdrawing their currency, with only limited windows available to do so. This was a massive red flag, but for all the people who recognised that it seems there were just as many who didn’t, and when Bitgrail claimed to have lost hundreds of millions of dollars’ worth of user tokens in a “hack”, a lot of people lost a lot of money, possibly with no legal recourse.

One man, Francesco Firano, is in charge of Bitgrail. It’s an unregulated exchange with many international users from around the world, and the likelihood of those people successfully recovering their money is more or less zero.

What can we do to avoid scams and hacked exchanges like this? Reduce the human error.

Decentralized exchange projects

Decentralized Cryptocurrency Exchanges
Picture this as an alternative: An exchange not controlled by any one group or entity, with no single point of attack for hackers to steal information from. We already use nigh-unhackable blockchain technology as the protocol for cryptocurrencies – why not use it as the protocol for the exchanges themselves? Here are some promising projects working on exactly that.

Ethfinex

This is a project in development by Bitfinex, a well-established centralized exchange. Though not yet decentralized, the project aims to be “trustless, decentralized and scalable”, trustless meaning that users won’t need to place trust in a third party to secure transactions and trades.

Ethfinex plans to facilitate relatively liquid Ethereum trading – due to the nature of blockchain technology, decentralized exchange models are still quite illiquid, meaning that the assets are not easily and swiftly transferrable compared to other systems. Slower transaction times allowing for multi-node verification of each transaction are the trade-off for decentralization and security, but some projects are aiming to have the best of both worlds.

OASIS

Still, in the early days of alpha testing, this project is a “simple on-chain market for all token assets in the Maker registry”. The list currently includes ETH and a handful of others, and is likely to expand.

It’s an interesting system – while you have an on-screen balance, you can’t use it to trade directly. It needs to go through an Ethereum smart contract first, meaning that the process will be a slow one, not ideal for day trading, but fine for simple trading requirements, and of course, safe and trustless once it’s fully up and running.

0x

Described in the whitepaper as an “open protocol for decentralized exchange on the Ethereum blockchain”, 0x aims to increase liquidity and find a middle-ground between vulnerable centralized exchanges and slow, cumbersome blockchain exchanges. The image below from the Ox blog highlights the differences between 0x and other systems.

Differences between GDAX, Oasis and 0x

As you can see, it’s a similar concept to that of the Lightning Network. Activity on the blockchain is minimized by handling all pre-transaction processes on an off-chain system. This only involves the blockchain to execute the Ethereum smart contract.

It’s important to note that 0x doesn’t seek to be an actual exchange – it’s simply a protocol, a program that facilitates trading. The main takeaway from this project is that it won’t be lightning fast or incredibly slow, but somewhere in between. It doesn’t require third-party trust and it won’t clog up the Ethereum blockchain. Now in development, this could well be the exchange solution we’re all looking for.
Other projects take a different approach, like Ether Delta, a decentralized exchange with a centralized order book. Obviously, the more approaches being tested, the more data gathered for the seemingly inevitable success of the technology.

Tax and regulation

While centralized exchanges are liable to government regulation, their decentralized counterparts are not. Though regulation comes with an increased sense of security for some, with regulation comes tax. In the US, cryptocurrencies are technically as capital assets. This means they can be subject to capital gains tax of 15% – 20%.

Ideally, decentralized exchanges won’t require regulation to ensure security from loss of funds, as the technology itself will provide this. The blockchain tech also makes it difficult to regulate the exchange even if the government wants to. Why? There’s no one person, entity, or authority in charge of the exchange. Such exchanges have heightened anonymity and will be very difficult to tax or regulate. Not just user compliance, but legislating for such regulations in the first place.
It’s all very interesting – is it possible?

OK, we don’t have a truly 100% decentralized exchange up and running just yet. However, the above projects are only a handful of those working on a solution. It’s certainly possible in theory. If past developments in the space are anything to go by, that means that we could be seeing functional, unregulated, and secure decentralized exchanges sooner rather than later.

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Is Crypto going Mainstream?

Is Crypto going Mainstream?

crypto going mainstream

Let’s be honest – the last few months have been rough. Huge amounts of uncertainty and market fear amid and speculation regarding government regulation of cryptocurrency worldwide. The market took a dive, people panic sold their digital assets on cryptocurrency exchanges, prices plummeted further and it’s all been a bit of a mess.

But life goes on.

In fact, every time the crypto market has dipped, pulled back, corrected, burst, or “crashed”, it’s always come back stronger than ever before. Certain coins die off, sure, but with Bitcoin paving the way for most of the high cap coins, the projects with real promise and merit always just weather the storm and continue to rise in value.

Far from the dreaded crypto-apocalypse the mainstream media seems to be trying their hardest to propagate recently, cryptocurrency might be about to cross the fence and have crypto mainstream itself, forever casting aside doubts of its legitimacy.

What makes me say this?

 1 million people waiting to trade crypto on Robinhood

That’s right. The app that brought the formerly inaccessible stock market to the masses by offering free trading is about to do the same for crypto, and that’s a big deal. Many potential users are turned off and intimidated by what they perceive as complicated, non-user friendly cryptocurrency exchanges.

Sure, if you’re an old hand at this by now it might seem easy, but be fair! Crypto as we know it is less than ten years old, and the accompanying technology is still truly in its infancy. We don’t even know if blockhain will end up being the underlying software for currencies of the future – these are the early, early days, and developers are still pioneering unreleased tech that may go on to revolutionize many aspects of modern life.

Users in the space surrounded by crypto news day in, day out are nevertheless bound to know a lot of people with only a vague awareness of the existence of crypto, to whom cryptocurrency and Bitcoin are one and the same (“and the fake money is stored, like… in the computer, right?”)

Not everyone is willing to carry out their due diligence and learn about the ins and outs of technology, and that’s ok. For the market to grow, casual mainstream users are needed as well – without investment from a wider audience, the market won’t grow, and the more people involved the better.

The app now has over 3 million users contributing a transaction volume of $100 billion. The app is mostly in service in the US only at the moment, but when it expands, which it plans to, that number is sure to grow to enormous levels.

Crypto Exchanges can barely keep up with the demand 

Even last year, cryptocurrency exchanges were freezing waiting lists and crashing under the weight of so many users. The market has grown since then, with no sign of stopping.

A Reddit user recently pointed out that stocks in the 1940s were viewed in much the same way as crypto is today, with 90% of the population saying they wouldn’t get involved due to them being “unfamiliar” and similar to “gambling”. Of course, it turned out that the suspicions and doubts that the stock market wouldn’t’ amount to anything were unfounded, and these days the stock market is now in the hundreds of trillions of dollars.

How big is crypto really going to get? Is it realistic to imagine the market staying at below 1 trillion forever? If you’re currently invested in cryptocurrency, you’re in on the ground floor of something that could be destined for true greatness. Just as the internet changed the world forever, so too will blockchain technology and the developments that arise from it.

We recently discussed the possibility of the value of Bitcoin rising to $1 million, and took a look at what would need to take place for the value to increase to that figure.

We make no predictions as to whether or not that will come to pass, but is it impossible? We don’t think so, and we’re not the only ones.

Square Inc’s Cash app launches Bitcoin trading

Square cash recently announced that they were offering Bitcoin trading to all users, and immediately saw a 4% increase in their stock market value. The company also has an interactive storybook available to explain what Bitcoin is to new users unfamiliar with blockchain tech.

This move coupled with the positive response from investors is a clear sign of the market demand for cryptocurrency adoption.

With the release and development of cryptocurrency debit cards allowing people to carry out instant transactions in person and online, and even withdraw fiat cash from ATMs, the wheels are set in motion for a huge shift in the way we manage and view money and transacting in general, and big companies like Square Inc. and Robinhood know it.

Your thoughts?

Don’t just take it from us. DYOR is a golden rule in cryptocurrency – always do your own research. We think the writing is on the wall for the low-key status of cryptocurrency, and mainstream adoption might be just around the corner – what about you?

We’d love to hear your opinions on whether crypto is going mainstream. Is it too complicated for true mainstream adoption? Will crypto remain a misunderstood phenomenon relegated to the tech-head underground?

Are we all just a little bit crazy?
Or will people start seeing crypto as a viable means to transfer money without any centralized authority making the rules?

Better make your mind up – I have a feeling we’re going to find out sooner rather than later.

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New Crypto Saint Canonized: Twitter goes mental

A Saint is born

Quite often in the Cryptoverse someone storms onto the scene like a raging bull. Other times they flame out in such a glorious fashion we all get to watch and enjoy (*coughMcAfeecough*). But on occasion, once in a blue moon, a Crypto Saint is born. A person of such high regard and repute he need not speak to make you agree. A person who changes cryptocurrency market dynamics with a calm and eloquent sit down in capitol hill. A demanor so cool and  confident that even the most forlorn crypto bulls, deep in despair during this BTC correction, have turned their frowns upside down.

Who is this Crypto Saint? Why none other than Christopher Giancarlo, Chairman, U.S. Commodity Futures Trading Commission. Whaaaaaaaat? Just watch this quick vid below to understand why:

Did he just say #HODL?

Yep. The Hon. J. Christopher Giancarlo just HODL’d a commission. Not just any commission: The Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission. Mouthful huh? HE JUST HODLd that commission! Just check how the crypto twitter space’s collective brains were blown out for their new, devout and holy crypto saint:

Hooray for crypto!

All joking aside it’s fantastic to see someone, a government person, not bashing bitcoin or mansplain to us how it can be used for fraud or criminal organisations, but about the potential the technology has. It’s refreshing. What other reason do you need for this turnaround in BTC? A new saint has been born on Feb 06. The market and twitter have spoken. Praise the seven!

Other things we learned from the comission (which are more important than HODL, but who cares):

  1. The SEC is going after ICOs, but
  2. ICOs done with a SWAFT agreement are prolly ok….prolly
  3. The SEC is going after the lawyers who enabled above ICOs (*Insert Lawyers deserve..blah.blah.blah stupid joke)
  4. BTC ETF…Kiss those dreams buh bye. For now
  5. The FBI is involved in analyzing stuff. But who cares the FBI has their hands full of MAGA
  6. US Congress could give the SEC of CFTC more power to reign in our wild wild west crypto party

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Can we trust Tether?

Should you trust Tether?

Here’s one of the big problems faced by people holding and trading crypto: if prices start to drop and you want to get out fast, it can be difficult to cash it in for fiat. This is where Tether comes in.

Many of us dream of a day when it won’t be necessary to cash out at all, and crypto will be a stable and widely used form of currency. You’ll be able to leave your money in a wallet and use a crypto debit card to make your daily transactions without the concern that overnight your funds will suddenly lose value. That’s the goal, but we’re a long way off from that yet.

That’s a problem that the Tether project proposes to solve by creating a token with a value constantly equal to that of the US dollar. By holding a US dollar for every USDT Tether token, Tether claim that the value is pegged to the USD and will remain stable.

This is great for people looking to secure profits from their holdings, and even better for day traders – nobody wants to profit by exchanging one coin for another only to see both plummet in value.In theory, it’s a great idea – people fleeing market volatility can seek refuge in by exchanging coins for USDT and either cash out in fiat or swap back in when things have died down. But as you may have heard, it’s not that simple.

The Tether project has been marred by widespread fear, uncertainty, doubt, and a host of different rumours claiming that the project is a scam. The aim of this article isn’t to provide financial advice as to whether you should trade USDT or not, but just to get a closer look at the rumours and their validity so that you can make up your own mind as to whether Tether can be trusted or not.

The issue behind Tether is that as more people transfer holdings to USDT, Tether has to “print” or create more tokens and put them in circulation. As long as the company has the fiat assets to back that up, there’s no cause for concern. And obviously, they have those assets, right?

Yeah – about that. While Tether certainly claim to have the $2 billion USD required to back up USDT, the lack of transparency on that claim is a major cause for concern. Tether recently dissolved the relationship between them and their third party auditor, and have stated that they can’t reveal their account balance due to issues with the US government. Feeling uncomfortable yet? Let’s start at the beginning.

Think about that for a moment

This is a token supposedly pegged to the US dollar. 1 USDT = 1 USD, that’s the whole point. What happened was, people began to sell their Tether at below market value in case they couldn’t get out in time. Of course, that new low price became the market value, and the price dropped 8% – not even noteworthy for most volatile cryptocurrencies, but a huge red flag for Tether, and entirely created by the panic of the holders.

It ended up being an unfounded panic, and nobody had their Tether frozen or removed permanently – however, many people “lost out” simply by choosing to sell their assets at a reduced price, defeating the purpose of the token. The company was only indirectly at fault – panic was to blame here, but the situation illustrated that the token could be destabilized with relative ease.

The very next month saw a market pullback in crypto across the board, leading people to once again flee to Tether. However, so soon after the April scare things weren’t quite stable yet, and the sudden surge in people buying back in to Tether to secure their holdings led to the price increasing and decreasing by several cents, most likely due to day traders taking advantage of the volatility that Tether is never supposed to exhibit.

These were far from the only problems that came into play

In September 2017, the company was “audited” and everything was said to be in order, with 1 USD per one USDT in the company’s possession. Despite my reassuring phrasing, everything was not quite above board here – the audit was revealed to be an internal memo, and not an audit at all. The auditors themselves, Freidman LLP, said that the information was “not to be relied upon”.

Seemingly Tether had the money alright, but there was no verification of whether the funds were procured legally, whether they related to the project, and the name of the bank was redacted. Furthermore, the amount of USDT in circulation and USD required to back it up has drastically increased since that time.

Everyone happy so far? No? Moving on, then.

In November 2017, $31 million dollars were stolen from Tether’s main wallet, and in the same month the company parted ways with their third party auditor Freidman LLP. The scepticism and doubt surrounding the project was further fuelled by the reason cited for this by Tether themselves, who blamed Freidman’s “excruciatingly detailed procedures”. Ditching an auditor for being too thorough after they admitted that they hadn’t been thorough enough to validate the project seems like just about the worst PR move I can think of, and many others felt the same way.

Finally, the next month dealt the project another blow – in September 2017 project details were leaked in the Paradise Papers, revealing that an offshore law firm helped Bitfinex founders Phil Potter and Giancarlo Davisini incorporate Tether in the British Virgin Islands, something that further reduces the transparency of the company and sheds more doubt on their intentions in the eyes of many sceptical observers.

The remote tax haven location didn’t stop US regulators from issuing Bitfinex a subpoena in December 2017, the results of which may eventually shed light on the reality of Tether’s holdings. While many big names in crypto seem to think that Tether have the assets to put their money where their mouth is, the fact is that they haven’t proved it yet – there’s no evidence whatsoever that USDT is indeed backed by USD, and that’s a pretty scary thought. Is Tether a safe place to keep your money?

The convenience offered by a stable cryptocurrency is plainly evident, and Tether has been a great project for a lot of people.

As in all things crypto, there’s a risk involved. In Tether’s case, they’re unregulated, centralized, USDT isn’t classified as a financial instrument, and Tether have no legal obligation to redeem USDT for your fiat – so bear that in mind when you’re looking for a place to wait out the storm of the next market scare.

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