Cryptocurrencies: Revolution or Scam?

By Shae Russell – Markets & Money

Cryptocurrencies are ruffling feathers at the moment.

It may have something to do with the US$1.6 billion in initial coin offerings (ICOs) in the past year.

It may have something to do with the most well-known cryptocurrency, Bitcoin, gaining 333% since January this year.

It may have something to do with what The Age labels ‘hard money enthusiasts’.

It may have something to do with the ‘profusion and untested concepts [that] has spurred talk of a bubble’, as Bloomberg explained on Sunday.

Or it may have to do with the fact that the greatest monetary disruption in our lifetime has fallen into our lap. And that it’s unsettling the people that control the money supply.

The pervasive mistrust of cryptocurrencies is coming from short-sighted governments and central banks that fear what they can’t control. And it doesn’t help that the media is towing the government line.

An Australian-based start-up launched its own cryptocurrency last week, and The Age couldn’t help but point out all the things ‘wrong’ with cryptocurrencies, writing:

This week a Perth-based energy trading start-up called Power Ledger said it raised $17 million from speculators and crypto enthusiasts in Australia’s first ICO (initial coin offering). An ICO is a bit like an IPO, except digital tokens created from thin air are up for grabs, rather than small pieces of ownership in a business. There are no regulators or stock exchanges involved.

What bothers me most about this isn’t the lack of regulators or exchanges involved. It’s pointing out that digital tokens are created from ‘thin air’.

While that’s true, the mainstream doesn’t bother to point this out about banks. Banks essentially create money out of thin air too. Yet you don’t see the media pointing that out often.

I’ve never seen them take the time to remind us that the billions in dollars of banking profits that shareholders love to see come from loans made out of thin air.

You know why? Because it’s what they know. It’s much easier to stick by what has always been, and pick out the faults of the new.

The Age continues:

To describe ICOs as the wild west of finance would be an understatement but, at the moment, lots of people are making a killing from them.

Bitcoin also appeals to anyone seeking to move money across borders (relatively) anonymously. This includes — but is not limited to — money launderers, drug dealers and other criminals.

Because it can’t be easily manipulated by central banks or governments, Bitcoin initially found favour among “hard money” enthusiasts, who worry that an ever-expanding money supply will eventually trigger a financial crisis.

To their credit, at least The Age did mention that people who fear endless money creation are flocking to bitcoin.

For years, the hard-money enthusiasts were the gold and silver bugs. The people who supported something that had been money for millennia. Gold and silver are favoured by hard-money types because powerful elites can’t fiddle with the supply.

And initially, that’s where bitcoin found its support.

However, why is the anonymity of cryptocurrencies now an issue? I don’t know many people that go around bragging about how much money is or isn’t in their bank account.

More importantly, rather than just saying that people like the anonymous nature of cryptocurrencies, they instead tell you that money launderers, drug dealers and other criminals use cryptos.

Few people truly ‘get’ what this cryptocurrency boom is all about. While I have no doubt there are charlatans out there looking to make a quick buck, there’s a much bigger story behind it. As Sam Volkering, editor of Secret Crypto Network, told me recently, ‘Revolutions don’t take a few months or a year, they take a generation or more. We’re still right at the start of it all.’

Bitcoin and other cryptocurrencies aren’t going away. And they aren’t the domain of money launderers, thieves and drug dealers. Cryptos are a legitimate way to get your money out of the financial system, and to protect your wealth.

How to Play the Odds in the Crypto Casino

By Callum Newman – The Daily Reckoning.

We’re living in the crypto casino now. The total value of cryptos fell 11% over the weekend. This wiped off billions in the valuations of all of them.

Why? Who knows. Maybe traders ran a big sell program to shake out the weak holders so they can buy them back cheap.

Maybe it’s the end of a massive bull run.

I think it’s a dip. News just keeps coming in to suck more people into these markets.

Already, two tokens — issued via an ‘initial coin offering’ (ICO) this year — have hit US$1 billion valuations. These two coins only began life in March and July 2017.

Both were issued at a price under $1 and now trade over $10 — despite neither of the companies behind them having a product to sell as of now.

These sorts of speculative gains in the crypto markets dwarf anything else on offer.

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China lets some air out of the ICO bubble

By Simon Black – Soverign Man.

Earlier today the government of China banned ICOs– initial coin offerings. …
Through an ICO, any company can raise money by selling ‘tokens’ to investors, who typically pay with cryptocurrency like Ether or Bitcoin.

And those tokens normally represent shares in the company.

The entire transaction takes place over the blockchain, i.e. the cryptocurrencies’ decentralized ledger systems.

There are no government agencies involved. No regulators. No banks or brokers extorting huge fees. It’s just the company and its investors… a voluntary seller of tokens and voluntary buyer of tokens.

This is a good thing. So naturally the practice was banned.

It’s not just China, by the way.

In the Land of the Free, the SEC has also been busy squashing certain ICOs and warning companies that are thinking about issuing tokens.

In general, governments don’t like ANYTHING that’s independent and decentralized, so they come up with useless regulations to make everything more difficult.

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There’s literally a ‘token’ called F*ck that’s up 370% in the last 24-hours

By Simon Black – Soverign Man.

I vividly remember having a conversation several years ago with a woman about her real estate investments in the United States.
It must have been around 2005 or 2006… the peak of the property bubble.
She was a psychologist from somewhere in the midwest, telling me about how she was flipping off-plan condominiums in Florida.
Basically she would put money down to secure a condo unit in a building before it broke ground, then sell her contract to someone else at a higher price when the building was closer to completion.
I remember as she told me this story she was practically cackling at how quickly and easily she was doubling and tripling her money, and at one point said, “It is just soooo easy for me.”

Those words stuck.

I remember thinking, “Investing isn’t supposed to be easy. There’s supposed to be risk and hard work involved.”
But she wasn’t alone. Legions of amateur investors were piling into the market doing exactly the same thing.
Everyone seemed to be flipping condos. And everyone seemed to be making money.
It didn’t add up.
I remember one investor explaining to me how he would flip his condo contract to someone else when the building was 30% complete. Then that buyer would flip the contract to another investor when the building was 60% complete.

Then another sale when the building was 80% complete, etc.
“But who is the person at the end of the line?” I asked. “Someone has to eventually live in all of these condos and be willing to pay the highest price.”
“Oh there will ALWAYS be plenty of people who will live here,” he told me.
To these investors it was a foregone conclusion that required zero analysis: there will
always be buyers, no matter how high the price gets.

One of the marks of a good investor is learning from his/her mistakes; when an investment performs poorly, a good investor will try to figure out WHY, and incorporate those lessons into future decisions.

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