People active in bitcoin and altcoin circles are often referring to a trend known as “the flippening”. it is evident the cryptocurrency landscape is undergoing some major changes, even though some users remain oblivious to what is going on. Now is a good time to explain the flippening and how it can affect bitcoin’s position as the top cryptocurrency in the next few years.
What On Earth is The Flippening?
Truth be told, it took some time to figure out what people mean by referring to the flippening. Consumers, investors, traders, and speculators have shown an appreciation for bitcoin these past few years, despite the cryptocurrency being far from perfect. Any other currency, or altcoin if you prefer that term, seemingly derives its value from being paired to bitcoin’s price. Over the years, this caused the value of altcoins to go down if bitcoin’s price took a hit.
That being said, things are changing in the world of bitcoin and cryptocurrency. Bitcoin “maximalists” have held onto their BTC supply in the hopes of everything turning out to be alright. So far, there has been no evidence proving these people wrong, yet that does not mean bitcoin is in a good place right now. Particularly speculators are actively diversifying their portfolio by investing in altcoins, as they grow concerned over bitcoin’s scaling issues.
Altcoins, on the other hand, have always been looked at as “second-rate projects” by bitcoin maximalists. One could argue there was an air of disdain between most pro-bitcoiners and those whose see the merit of alternative cryptocurrencies. Multiple years of friction have caused a paradigm shift in the cryptocurrency world, an effect known as the flippening. To be more specific, it is evident most altcoin traders no longer base individual coins’ value on the bitcoin price.
As a result of this paradigm shift known as the flippening, it is very well possible bitcoin may not be the dominant cryptocurrency in the future. Or to be more precise, it may not hold such a big lead over other cryptocurrencies moving forward. Bitcoin’s share of the total cryptocurrency market cap continues to dwindle, allowing altcoins to rise in value, regardless of what is happening to the bitcoin price. Until a year or two ago, such a change seemed impossible, yet the charts speak for themselves.
This does not mean people will lose faith in bitcoin by any means. Instead, a more competitive cryptocurrency ecosystem will be created, and altcoins are expected to significantly rise in value over the next few months and years. Ethereum, Monero, Dash, Factom, and others are all trying to find their place in the world right now. Nearly all of these currencies have risen in value despite bitcoin’s price either stagnating or going down. While it is possible this is just a temporary change, the flippening is not a trend that should be ignored by any means.
Leading the charge during “the flippening” is Ethereum. Several dozen ICOs are offered on top of the Ethereum blockchain, rather than using Bitcoin’s technology. It is evident Bitcoin will not be suitable for every project one can think of, or at least not in its current state. Competition in the cryptocurrency industry can only be a good thing. The flippening indicates this shift towards a more competitive industry in which bitcoin will not necessarily be the center of focus any longer.
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Monday, March 20, 2017
Bitcoin Falls to Lowest Share of Cryptocurrency Market, Altcoins Surge
Bitcoin’s scaling fight has led to a record low in its percentage of cryptocurrency’s total market cap as investors hedge with top altcoins.
As its user base expands, Bitcoin’s transactions have also grown, leading to blocks, capped at 1mb, to be filled to capacity. As a result, transactions have slowed and fees have spiked. An effort to solve Bitcoin’s scaling issues has led to a civil war of sorts between the Core development team and its supporters backing the Segregated Witness (SegWit) soft fork, and the Bitcoin Unlimited miner-directed block size hard fork and its supporters.
In contrast to previous hard fork attempts (XT, Classic), Unlimited has gained speed, occasionally passing SegWit in adoption by miners. Recently, Unlimited has secured a solid lead, due in part to a major mining pool, Antpool, switching to Unlimited.
“Bitcoin Jesus” Roger Ver, who has led the opposition to the current state of Bitcoin and its hard cap of 1mb blocks, has stated that he believes that the current inability to find a resolution to the issue has cost Bitcoin billions of dollars already:
Other coins rise as investors hedge their bets
As a result of increasing uncertainty, lack of usability and conflict surrounding Bitcoin, its growth has stagnated- even receded, while other coins have seen exceptional gains. Ethereum, cryptocurrency’s number two contender, has seen a massive increase, more than doubling in market cap and price in the last 10 days alone. It currently sits at about $4 bln total and $45 per coin, with a current trading volume of over $200 mln.
Dash has seen even more impressive relative gains, multiplying its value and market cap five times over since one month ago. It has broken the three-digit barrier and appears to have settled above $100, having also broken 10 percent the price of Bitcoin per coin. As a result of this growth, Dash’s treasury, 10 percent of its block reward set aside for development and other projects, has passed $500,000 monthly, closing in on a million dollar monthly budget for the newly number three ranked coin. Monero has also picked up on the Bitcoin exodus, doubling in value over the last 10 days, maintaining a solid fourth place and passing $300 mln in market cap.
This growth and reshuffling of the cryptocurrency field has led to a slipping in Bitcoin’s dominance. Bitcoin’s share of the total cryptocurrency market cap has sunk to 70 percent, a new all-time low since the previous low of 74 percent during Ethereum’s initial boom last year. Total cryptocurrency market cap remains slightly lower than its all-time high, while combined altcoin value has grown from approximately $2.2 bln at the year’s start to over $7 bln now, nearly $4 bln of that growth over the last month alone.
The scaling debate gets ugly
In spite of this growing shift, the Bitcoin scaling conflict continues to become more heated. Ver alleges that many Unlimited nodes identify as Core in order to avoid DDoS attacks, which have plagued Bitcoin.com all last week. Unlimited supporters have documented a pattern of alleged censorship on the Bitcoin subreddit, filtering out comments in support of an alternative implementation of Bitcoin than the one stewarded by the Core developers.
Meanwhile, faced by increasing resistance from large mining pools, such as Antpool, Core member Peter Todd publicly mused about a proof-of-work algorithm change in order to reshuffle mining power as a “backup plan”:
Meanwhile, Bitcoin’s network congestion remains an issue. Low-end fees remain above 50 cents and the median confirmation time continues to rise. The mempool of backlogged transactions has filtered out slightly, though it still remains in excess of 20mb over a seven-day average.
As its user base expands, Bitcoin’s transactions have also grown, leading to blocks, capped at 1mb, to be filled to capacity. As a result, transactions have slowed and fees have spiked. An effort to solve Bitcoin’s scaling issues has led to a civil war of sorts between the Core development team and its supporters backing the Segregated Witness (SegWit) soft fork, and the Bitcoin Unlimited miner-directed block size hard fork and its supporters.
In contrast to previous hard fork attempts (XT, Classic), Unlimited has gained speed, occasionally passing SegWit in adoption by miners. Recently, Unlimited has secured a solid lead, due in part to a major mining pool, Antpool, switching to Unlimited.
“Bitcoin Jesus” Roger Ver, who has led the opposition to the current state of Bitcoin and its hard cap of 1mb blocks, has stated that he believes that the current inability to find a resolution to the issue has cost Bitcoin billions of dollars already:
Other coins rise as investors hedge their bets
As a result of increasing uncertainty, lack of usability and conflict surrounding Bitcoin, its growth has stagnated- even receded, while other coins have seen exceptional gains. Ethereum, cryptocurrency’s number two contender, has seen a massive increase, more than doubling in market cap and price in the last 10 days alone. It currently sits at about $4 bln total and $45 per coin, with a current trading volume of over $200 mln.
Dash has seen even more impressive relative gains, multiplying its value and market cap five times over since one month ago. It has broken the three-digit barrier and appears to have settled above $100, having also broken 10 percent the price of Bitcoin per coin. As a result of this growth, Dash’s treasury, 10 percent of its block reward set aside for development and other projects, has passed $500,000 monthly, closing in on a million dollar monthly budget for the newly number three ranked coin. Monero has also picked up on the Bitcoin exodus, doubling in value over the last 10 days, maintaining a solid fourth place and passing $300 mln in market cap.
This growth and reshuffling of the cryptocurrency field has led to a slipping in Bitcoin’s dominance. Bitcoin’s share of the total cryptocurrency market cap has sunk to 70 percent, a new all-time low since the previous low of 74 percent during Ethereum’s initial boom last year. Total cryptocurrency market cap remains slightly lower than its all-time high, while combined altcoin value has grown from approximately $2.2 bln at the year’s start to over $7 bln now, nearly $4 bln of that growth over the last month alone.
The scaling debate gets ugly
In spite of this growing shift, the Bitcoin scaling conflict continues to become more heated. Ver alleges that many Unlimited nodes identify as Core in order to avoid DDoS attacks, which have plagued Bitcoin.com all last week. Unlimited supporters have documented a pattern of alleged censorship on the Bitcoin subreddit, filtering out comments in support of an alternative implementation of Bitcoin than the one stewarded by the Core developers.
Meanwhile, faced by increasing resistance from large mining pools, such as Antpool, Core member Peter Todd publicly mused about a proof-of-work algorithm change in order to reshuffle mining power as a “backup plan”:
Meanwhile, Bitcoin’s network congestion remains an issue. Low-end fees remain above 50 cents and the median confirmation time continues to rise. The mempool of backlogged transactions has filtered out slightly, though it still remains in excess of 20mb over a seven-day average.
Thursday, March 16, 2017
Crypto Market Is On Fire Right Now - Market Cap Nears $25 Bln
While people have been observing coins like Ethereum and Dash reach all-time highs, the crypto ecosystem as a whole seems to be taking off. The market capitalization of all cryptocurrencies in circulation has neared $25 bln.
Bitcoin – the dominant one
Bitcoin is, of course, the dominant cryptocurrency. It currently accounts for approximately 80 percent of the total market capitalization of all cryptocurrencies in circulation. In the run-up to the decision on the Winklevoss’ Exchange Traded Fund (ETF), Bitcoin dominance was as high as 88 percent.
Post rejection of the ETF, Bitcoin price has stabilized, and it has been in a consolidation mode.
Secondary coins take off too
Crypto investors, who were betting on ETF approval, now seem to prefer secondary coins like Ethereum and Dash. Both these coins have reported massive gains in the last three months and seem to be further increasing post the rejection of the ETF.
Ether’s market capitalization has shot up from $1 bln a month ago to over $2.5 bln currently.
Dash has recorded impressive gains too, with current market capitalization of $500 mln which is up from $120 mln a month ago.
Altcoins which have enhanced privacy features (like Monero and Zcash) are other coins which seem to be leading this bull run.
Bubble territory? Not even close!
Does a total market capitalization of $25 bln mean that cryptocurrencies are in bubble territory?
The market capitalization is a pittance when compared to other asset classes. The market capitalization of US stock markets is approximately $25 tln, or a thousand times the value of all cryptocurrencies in circulation. The value of all gold in circulation is approximately $7 tln.
The total market capitalization of all cryptocurrencies is roughly equal to the market capitalization of Snapchat and less than one eighth the market capitalization of Visa Inc.
Given the huge potential of cryptocurrencies in areas ranging from money transfers to smart contracts, cryptocurrencies are definitely not overvalued. If adoption increases further, their value could skyrocket.
Bitcoin – the dominant one
Bitcoin is, of course, the dominant cryptocurrency. It currently accounts for approximately 80 percent of the total market capitalization of all cryptocurrencies in circulation. In the run-up to the decision on the Winklevoss’ Exchange Traded Fund (ETF), Bitcoin dominance was as high as 88 percent.
Post rejection of the ETF, Bitcoin price has stabilized, and it has been in a consolidation mode.
Secondary coins take off too
Crypto investors, who were betting on ETF approval, now seem to prefer secondary coins like Ethereum and Dash. Both these coins have reported massive gains in the last three months and seem to be further increasing post the rejection of the ETF.
Ether’s market capitalization has shot up from $1 bln a month ago to over $2.5 bln currently.
Dash has recorded impressive gains too, with current market capitalization of $500 mln which is up from $120 mln a month ago.
Altcoins which have enhanced privacy features (like Monero and Zcash) are other coins which seem to be leading this bull run.
Bubble territory? Not even close!
Does a total market capitalization of $25 bln mean that cryptocurrencies are in bubble territory?
The market capitalization is a pittance when compared to other asset classes. The market capitalization of US stock markets is approximately $25 tln, or a thousand times the value of all cryptocurrencies in circulation. The value of all gold in circulation is approximately $7 tln.
The total market capitalization of all cryptocurrencies is roughly equal to the market capitalization of Snapchat and less than one eighth the market capitalization of Visa Inc.
Given the huge potential of cryptocurrencies in areas ranging from money transfers to smart contracts, cryptocurrencies are definitely not overvalued. If adoption increases further, their value could skyrocket.
Monday, March 13, 2017
Altcoins Make a Comeback in Wake of Bitcoin ETF Decision
With most traders focusing on the bitcoin market right after the ETF decision was made public, people tend to forget altcoins are worth keeping an eye on as well. A lot of altcoins are appreciating in value ever since the bitcoin ETF rule change was rejected. Dash, for example, has been doing extremely well these past few days. Other currencies are seeing similar results right now, indicating the altcoin market is in firing on all cylinders.
Altcoin Trading Gains Momentum After ETF Rejection
It has become evident the SEC decision means there will never be a bitcoin ETF. In fact, there will never be a cryptocurrency ETF, or at least not until something changes drastically in the regulatory department. It is doubtful the SEC will ever grant their approval for such an investment vehicle, though, but that is of little concern to the cryptocurrency community. In the end, cryptocurrencies continue to truck along regardless of what the traditional financial world feels is right.
One thing that has become apparent over the past few days is how altcoins see a lot of trading action as of late. Various alternative cryptocurrencies have seen an influx of bitcoin trading volume, pushing nearly all markets in the green. According to some altcoin traders, the time is now to invest in alternative cryptocurrencies, although it is doubtful any of these currencies can ever gain as much traction as bitcoin. Considering bitcoin is still a very niche market, that does not bode well for most altcoins.
Some alternative cryptocurrencies may have a better shot at gaining mainstream traction alongside bitcoin, though. Dash, for example, has seen a spectacular value increase over the past few weeks. Particularly once the bitcoin ETF news came out, Dash saw an influx of new trading volume. It is evident bitcoin holders are looking to diversify their cryptocurrency portfolio, which is always a smart strategy. There is no reason to put all of one’s eggs into the same basket.
With the Dash price currently sitting at US$72.75, it is evident demands for more anonymous cryptocurrencies is not dwindling anytime soon. A lot of the current Dahs supply is locked up in masternodes which provide anonymous transaction services to the network. It takes 1,000 Dash to run such a masternode, which needs to be locked into a wallet at all times. Users also receive a small reward for providing these services to the network, hence there is no reason for people to sell their existing Dash supply all of a sudden.
Dash continues to rally against bitcoin in quite spectacular fashion as well. With a 26.5% gain in the past 24 hours alone, it is evident the ETF rejection is doing wonders for the Dash price right now. It is a bit unclear how long this trend will be maintained, though. Volatility is a part of the cryptocurrency ecosystem, particularly in the altcoin market. Always be careful when investing your bitcoin in altcoins, as values can shift in a matter of minutes.
Other altcoins are reaping the rewards from the bitcoin ETF rejection as well. Monero and Ethereum have all seen nice appreciations a swell these past few days. Similarly to Dash, however, it is impossible to tell what is driving these price trends exactly, other than the bitcoin ETF rejection. Bitcoin trading is usually a bit stale during the weekend, which gives alternative currencies a chance to shine. The bigger question is whether or not this trend can spill over to next week or not.
If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.
Altcoin Trading Gains Momentum After ETF Rejection
It has become evident the SEC decision means there will never be a bitcoin ETF. In fact, there will never be a cryptocurrency ETF, or at least not until something changes drastically in the regulatory department. It is doubtful the SEC will ever grant their approval for such an investment vehicle, though, but that is of little concern to the cryptocurrency community. In the end, cryptocurrencies continue to truck along regardless of what the traditional financial world feels is right.
One thing that has become apparent over the past few days is how altcoins see a lot of trading action as of late. Various alternative cryptocurrencies have seen an influx of bitcoin trading volume, pushing nearly all markets in the green. According to some altcoin traders, the time is now to invest in alternative cryptocurrencies, although it is doubtful any of these currencies can ever gain as much traction as bitcoin. Considering bitcoin is still a very niche market, that does not bode well for most altcoins.
Some alternative cryptocurrencies may have a better shot at gaining mainstream traction alongside bitcoin, though. Dash, for example, has seen a spectacular value increase over the past few weeks. Particularly once the bitcoin ETF news came out, Dash saw an influx of new trading volume. It is evident bitcoin holders are looking to diversify their cryptocurrency portfolio, which is always a smart strategy. There is no reason to put all of one’s eggs into the same basket.
With the Dash price currently sitting at US$72.75, it is evident demands for more anonymous cryptocurrencies is not dwindling anytime soon. A lot of the current Dahs supply is locked up in masternodes which provide anonymous transaction services to the network. It takes 1,000 Dash to run such a masternode, which needs to be locked into a wallet at all times. Users also receive a small reward for providing these services to the network, hence there is no reason for people to sell their existing Dash supply all of a sudden.
Dash continues to rally against bitcoin in quite spectacular fashion as well. With a 26.5% gain in the past 24 hours alone, it is evident the ETF rejection is doing wonders for the Dash price right now. It is a bit unclear how long this trend will be maintained, though. Volatility is a part of the cryptocurrency ecosystem, particularly in the altcoin market. Always be careful when investing your bitcoin in altcoins, as values can shift in a matter of minutes.
Other altcoins are reaping the rewards from the bitcoin ETF rejection as well. Monero and Ethereum have all seen nice appreciations a swell these past few days. Similarly to Dash, however, it is impossible to tell what is driving these price trends exactly, other than the bitcoin ETF rejection. Bitcoin trading is usually a bit stale during the weekend, which gives alternative currencies a chance to shine. The bigger question is whether or not this trend can spill over to next week or not.
If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.
Friday, March 10, 2017
China Bitcoin Exchanges: What “Withdrawal Suspension” Really Means for Users
Barely a few days before the expected resumption of withdrawals by the big Chinese exchanges, a statement by OKCoin indicated an imminent extension of the suspension. In a statement to users on Wednesday, OKCoin said: “Once the regulatory authorities have given their approval, you may withdraw currency.”
A lot of Bitcoin users now think that the decision concerning the resumption of withdrawals is dependent upon the timing and decision of the PBoC.
Contrary to this assumption, active participants in the Chinese Bitcoin community, as well as BitLox Director Dana Coe, tell Cointelegraph that the present “suspension” may have been misunderstood by a lot of people as most users in China have carried on with their normal businesses.
Coe says:
“I don’t really see a huge disruption for the majority of the users. The selling of Bitcoins and withdrawal of RMB is not impeded at all.”
According to Coe, most Chinese participants in the Bitcoin community are interested in Bitcoin for its value in trading and arbitrage. Most users of the Chinese exchanges deposit RMB so that they may purchase Bitcoins and take advantage of market movements, as any gains are normally converted back to RMB or held on the exchange as Bitcoins.
However, Coe notes that even though it may be an inconvenience for users to not take their profits in Bitcoins, it is only appropriate to wait and see what sort of a plan the Chinese regulators and exchanges will come up with:
“It appears they are negotiating for a plan, but it is difficult to say what such a plan will look like as the motives of the regulators is somewhat unclear.”
Chinese regulation is good for Bitcoin
Coe continues by telling Cointelegraph of his suspicion that regulators in China may want to reduce overleveraging and what they call “excess” speculation.
The rationale behind this is that they do not want to be blamed and/or asked to reimburse losses from risky trades or system failures. Regulators want a reduction of such “horror stories” where people lose their shirts from 20x leveraging or not being able to get onto a website so as to sell in a stop-loss capacity. This development in Coe’s opinion is, in the long run, a good thing for Bitcoin in China as stories about sensational losses always scare people.
Another aspect that Coe observes is the regulation of exchanges in that they must have transparent volume reporting. This he says is healthy for the whole Bitcoin system, as a more accurate picture can be drawn of volumes and transactions.
Coe concludes by saying:
“When the exchanges resume withdrawals of Bitcoin, I expect it will be heavily encumbered with some sort of a quota or reporting system, as China has rather strict controls on the amount of currency that may be taken out of the country. But as noted, on the whole, I do not believe this will actually have a great effect on the market or exchanges. The market and Bitcoin community as a whole will probably breathe a sigh of relief and rally once the decisions come out, whatever they are. Markets hate uncertainty.”
A lot of Bitcoin users now think that the decision concerning the resumption of withdrawals is dependent upon the timing and decision of the PBoC.
Contrary to this assumption, active participants in the Chinese Bitcoin community, as well as BitLox Director Dana Coe, tell Cointelegraph that the present “suspension” may have been misunderstood by a lot of people as most users in China have carried on with their normal businesses.
Coe says:
“I don’t really see a huge disruption for the majority of the users. The selling of Bitcoins and withdrawal of RMB is not impeded at all.”
According to Coe, most Chinese participants in the Bitcoin community are interested in Bitcoin for its value in trading and arbitrage. Most users of the Chinese exchanges deposit RMB so that they may purchase Bitcoins and take advantage of market movements, as any gains are normally converted back to RMB or held on the exchange as Bitcoins.
However, Coe notes that even though it may be an inconvenience for users to not take their profits in Bitcoins, it is only appropriate to wait and see what sort of a plan the Chinese regulators and exchanges will come up with:
“It appears they are negotiating for a plan, but it is difficult to say what such a plan will look like as the motives of the regulators is somewhat unclear.”
Chinese regulation is good for Bitcoin
Coe continues by telling Cointelegraph of his suspicion that regulators in China may want to reduce overleveraging and what they call “excess” speculation.
The rationale behind this is that they do not want to be blamed and/or asked to reimburse losses from risky trades or system failures. Regulators want a reduction of such “horror stories” where people lose their shirts from 20x leveraging or not being able to get onto a website so as to sell in a stop-loss capacity. This development in Coe’s opinion is, in the long run, a good thing for Bitcoin in China as stories about sensational losses always scare people.
Another aspect that Coe observes is the regulation of exchanges in that they must have transparent volume reporting. This he says is healthy for the whole Bitcoin system, as a more accurate picture can be drawn of volumes and transactions.
Coe concludes by saying:
“When the exchanges resume withdrawals of Bitcoin, I expect it will be heavily encumbered with some sort of a quota or reporting system, as China has rather strict controls on the amount of currency that may be taken out of the country. But as noted, on the whole, I do not believe this will actually have a great effect on the market or exchanges. The market and Bitcoin community as a whole will probably breathe a sigh of relief and rally once the decisions come out, whatever they are. Markets hate uncertainty.”
Bitcoin ‘mining’ is big business in Venezuela, but the government wants to shut it down
CARACAS, Venezuela — Venezuela has become widely known as an economic basket case in recent years. But with its cheap electricity and volatile national currency, the country has at least one competitive advantage: It’s a good place to make the digital cash known as bitcoin.
Bitcoins are increasingly accepted online for buying real-world goods and services. And, unlike the Venezuelan bolivar, the virtual currency has been going up in value.
Making bitcoins is known as “mining,” but it requires a powerful computer instead of a pick and shovel. Those computers produce bitcoins by creating elaborate algorithms, but they also suck up a lot of electricity. In many countries, the cost of running a “mining terminal” can run higher than the value of the actual bitcoins.
Today's WorldView
What's most important from where the world meets Washington
That’s not the case in cash-poor, oil-rich Venezuela, where state-subsidized electricity is so cheap it’s virtually free. But Venezuela’s government isn’t pleased. It’s cracking down on bitcoin mining, even though the country has no laws on the books outlawing the currency or its manufacture.
In November, Venezuela’s secret police raided the house of two brothers in Caracas and found more than 90 mining terminals. The agents demanded $1,000 in bribes for each machine, according to the brothers, who spoke on the condition of anonymity because they fear arrest. The brothers said they paid the bribes to stay in business.
This isn’t an isolated case — and such operations appear to be expanding. In January, Venezuelan federal police arrested four bitcoin miners in the town of Charallave. They were accused of Internet fraud and electricity theft. According to an Instagram post published by Douglas Rico, the director of the federal police agency CICPC, the miners were endangering the stability of the town’s electrical service. During that same week, Edward and Erick Tapia Salas were also arrested in Caracas for selling bitcoin-mining machines through a Venezuelan e-commerce site.
Miners have taken to websites such as Reddit to share their fears of being caught. “Miners are getting jailed and accused of terrorism, money laundering, computer crimes and many other crimes,” read one comment from a user who claimed to be Venezuelan. “It's getting crazy here and I really don't want to waste my life for money.”
Those who keep mining in Venezuela said they have started taking extreme precautions to hide their activities. Luis León, 25, a business student and bitcoin miner, said miners have learned not to keep all of their computers in one place. If they do, the state power corporation can detect the abnormal amount of electricity the mining terminals use.
“That was [the brothers’] big mistake,” León said. “They were consuming 20 times the normal level of electricity for that house.”
Venezuela’s crackdown on the bitcoin industry started in March 2016 with the arrest of two miners in the city of Valencia. According to news accounts of their arrest, Joel Padrón, 31, and José Perales, 46, were charged with electricity theft and possessing contraband computers.
CONTENT FROM WELLS FARGO ADVISORS
Keep these factors in mind when planning for retirement
Understanding the risks that can come between you and the retirement you want is an important step toward meeting your goals.
But miners and bitcoin users are not the only ones at risk. When Padrón and Perales were detained, Daniel Arraez, a 30-year-old economist who was working as a consultant for a Venezuelan bitcoin market called Surbitcoin, was called by the secret police to testify in their case. Padrón had told the agents that he and Perales had exchanged money through Surbitcoin.
Arraez was asked to come to the secret police offices in Valencia. “To my surprise, I never returned home,” he said. He was placed in the same cell with Padrón and Perales and charged with making illegal transactions and criminal association.
Arraez said his arrest was a way for the government to blame someone else for its ruinous policies, including chronic mismanagement of public utilities. “We were only the scapegoats of the disastrous situation in the country’s electricity sector,” he said.
After eight months in jail, Arraez was released in October. He’s awaiting a pretrial hearing. Despite having to share a small cell with eight other men and seeing the sunlight only twice a week, he said Venezuelan miners should keep making bitcoins to “advance technologically like other countries.”
The crackdown has not stopped Venezuelans from using the currency, either. The continued decline of the Venezuelan bolivar has fueled a growing internal demand for bitcoins. According to Surbitcoin, the number of bitcoin users in the country rose from 450 in 2014 to 85,000 last year.
In a country with the world’s highest inflation rate and strict controls on currency exchange, users see bitcoins as a safe alternative to protect their savings. People have also used bitcoins to buy basic products online that have disappeared from Venezuelan shelves.
But the widespread adoption of the currency seems unlikely any time soon: nearly one-third of the population doesn’t even have a bank account.
Bitcoins are increasingly accepted online for buying real-world goods and services. And, unlike the Venezuelan bolivar, the virtual currency has been going up in value.
Making bitcoins is known as “mining,” but it requires a powerful computer instead of a pick and shovel. Those computers produce bitcoins by creating elaborate algorithms, but they also suck up a lot of electricity. In many countries, the cost of running a “mining terminal” can run higher than the value of the actual bitcoins.
Today's WorldView
What's most important from where the world meets Washington
That’s not the case in cash-poor, oil-rich Venezuela, where state-subsidized electricity is so cheap it’s virtually free. But Venezuela’s government isn’t pleased. It’s cracking down on bitcoin mining, even though the country has no laws on the books outlawing the currency or its manufacture.
In November, Venezuela’s secret police raided the house of two brothers in Caracas and found more than 90 mining terminals. The agents demanded $1,000 in bribes for each machine, according to the brothers, who spoke on the condition of anonymity because they fear arrest. The brothers said they paid the bribes to stay in business.
This isn’t an isolated case — and such operations appear to be expanding. In January, Venezuelan federal police arrested four bitcoin miners in the town of Charallave. They were accused of Internet fraud and electricity theft. According to an Instagram post published by Douglas Rico, the director of the federal police agency CICPC, the miners were endangering the stability of the town’s electrical service. During that same week, Edward and Erick Tapia Salas were also arrested in Caracas for selling bitcoin-mining machines through a Venezuelan e-commerce site.
Miners have taken to websites such as Reddit to share their fears of being caught. “Miners are getting jailed and accused of terrorism, money laundering, computer crimes and many other crimes,” read one comment from a user who claimed to be Venezuelan. “It's getting crazy here and I really don't want to waste my life for money.”
Those who keep mining in Venezuela said they have started taking extreme precautions to hide their activities. Luis León, 25, a business student and bitcoin miner, said miners have learned not to keep all of their computers in one place. If they do, the state power corporation can detect the abnormal amount of electricity the mining terminals use.
“That was [the brothers’] big mistake,” León said. “They were consuming 20 times the normal level of electricity for that house.”
Venezuela’s crackdown on the bitcoin industry started in March 2016 with the arrest of two miners in the city of Valencia. According to news accounts of their arrest, Joel Padrón, 31, and José Perales, 46, were charged with electricity theft and possessing contraband computers.
CONTENT FROM WELLS FARGO ADVISORS
Keep these factors in mind when planning for retirement
Understanding the risks that can come between you and the retirement you want is an important step toward meeting your goals.
But miners and bitcoin users are not the only ones at risk. When Padrón and Perales were detained, Daniel Arraez, a 30-year-old economist who was working as a consultant for a Venezuelan bitcoin market called Surbitcoin, was called by the secret police to testify in their case. Padrón had told the agents that he and Perales had exchanged money through Surbitcoin.
Arraez was asked to come to the secret police offices in Valencia. “To my surprise, I never returned home,” he said. He was placed in the same cell with Padrón and Perales and charged with making illegal transactions and criminal association.
Arraez said his arrest was a way for the government to blame someone else for its ruinous policies, including chronic mismanagement of public utilities. “We were only the scapegoats of the disastrous situation in the country’s electricity sector,” he said.
After eight months in jail, Arraez was released in October. He’s awaiting a pretrial hearing. Despite having to share a small cell with eight other men and seeing the sunlight only twice a week, he said Venezuelan miners should keep making bitcoins to “advance technologically like other countries.”
The crackdown has not stopped Venezuelans from using the currency, either. The continued decline of the Venezuelan bolivar has fueled a growing internal demand for bitcoins. According to Surbitcoin, the number of bitcoin users in the country rose from 450 in 2014 to 85,000 last year.
In a country with the world’s highest inflation rate and strict controls on currency exchange, users see bitcoins as a safe alternative to protect their savings. People have also used bitcoins to buy basic products online that have disappeared from Venezuelan shelves.
But the widespread adoption of the currency seems unlikely any time soon: nearly one-third of the population doesn’t even have a bank account.
How Bitcoin Is Set to Crush Other Currency in 2017
When the crypto currency was created back in 2008, it rose a couple of eyebrows but very few people took it seriously. Less than a decade later, Bitcoin is on the lips of all those who care about the direction in which financial markets are heading. If we were to look back at its rise and paraphrase Schopenhauer, we’d say that it passed through three stages. First, it was ridiculed. Then, it was violently opposed. Now it is accepted as being self-evident and people no longer dismiss it as an alternative to traditional currency.
Early adopters always have the upper hand over people who wait for a trend to be established. Back in the day, it was relatively easy to mine Bitcoin and the price of the crypto currency was quite low. Most people have serious doubts of its potential and even fewer understood how Bitcoin work in the first place. Downswings caused by the high profile incidents, such as the Mt. Gox currency theft further hurt its image and brought the specter of doubt back. Somehow it survived and is now going strong.
The Best Year yet for Bitcoin
2016 started on a positive note and the crypto currency increased its value significantly in just a couple of months. It gained a lot of traction and didn’t lose steam in the second half of the year, despite the turmoil caused by US elections. In fact, Donald Trump’s election pushed it to new highs and growth is expected to continue. By December, it crushed every other currency in 2016 and financial pundits predict that it will set new milestones in 2017.
There are several reasons for why Bitcoin is now at an all-time high, but one of them is that the crypto currency has earned the trust of users and markets as well. People view it as a credible form of payment and have started to act on it, especially those who want to keep transactions anonymous. Not even the regulatory crackdown enforced by the Chinese authorities was enough to stop the trend. Users are adamant in their resolve and love a currency that is seemingly outside the control of authorities.
In 2017 help arrived from an unlikely source, as Congressman Mick Mulvaney was chosen as the new Office of Management and Budget chief. Donald Trump’s pick was both a surprise and extraordinary news for Bitcoin users and owners. Mulvaney is known as a crypto currency proponent and was invited to or hosted several conventions discussing its usefulness. Under these circumstances it’s not that surprising that bitcoin has smashed a record in February and the sky seems to be the limit.
New Challenges and Promises at the Horizon
Now that Bitcoins can no longer be ignored, regular people, businesses and governments pay more attention to the crypto currency. There is already a huge exchange coinbase and more people join, drawn by the advantages. The fact that sovereign currencies are plagued by global restrictions is convincing more people to adopt Bitcoin. Those who are concerned about the anticipated reduction in remittances also regard it as a safe haven.
Increased acceptance is perhaps the main reason for why the price of Bitcoin is higher today than ever before. In the beginning, only a couple of online casinos accepted the crypto currency and most chose to stick to traditional money. Even today not many entertainment websites use bitcoin as a payment method, and usually have other banking options. However, more consumers are using it and companies regard it as a reliable means of payment.
Not everyone is enthusiastic about its popularity surge and governments are particularly concerned. If Bitcoin would render traditional money useless, central banks will have no means to manipulate currency. They did it more than once to mitigate the effects of financial crisis and regard it as a solution of last resort. This means that governments are expected to oppose the crypto currency at any corner. There are also technical problems to factor in, which can disrupt the big coin services. The recent Amazon outage caused a stir and brought this sensitive issue back on the table.
Early adopters always have the upper hand over people who wait for a trend to be established. Back in the day, it was relatively easy to mine Bitcoin and the price of the crypto currency was quite low. Most people have serious doubts of its potential and even fewer understood how Bitcoin work in the first place. Downswings caused by the high profile incidents, such as the Mt. Gox currency theft further hurt its image and brought the specter of doubt back. Somehow it survived and is now going strong.
The Best Year yet for Bitcoin
2016 started on a positive note and the crypto currency increased its value significantly in just a couple of months. It gained a lot of traction and didn’t lose steam in the second half of the year, despite the turmoil caused by US elections. In fact, Donald Trump’s election pushed it to new highs and growth is expected to continue. By December, it crushed every other currency in 2016 and financial pundits predict that it will set new milestones in 2017.
There are several reasons for why Bitcoin is now at an all-time high, but one of them is that the crypto currency has earned the trust of users and markets as well. People view it as a credible form of payment and have started to act on it, especially those who want to keep transactions anonymous. Not even the regulatory crackdown enforced by the Chinese authorities was enough to stop the trend. Users are adamant in their resolve and love a currency that is seemingly outside the control of authorities.
In 2017 help arrived from an unlikely source, as Congressman Mick Mulvaney was chosen as the new Office of Management and Budget chief. Donald Trump’s pick was both a surprise and extraordinary news for Bitcoin users and owners. Mulvaney is known as a crypto currency proponent and was invited to or hosted several conventions discussing its usefulness. Under these circumstances it’s not that surprising that bitcoin has smashed a record in February and the sky seems to be the limit.
New Challenges and Promises at the Horizon
Now that Bitcoins can no longer be ignored, regular people, businesses and governments pay more attention to the crypto currency. There is already a huge exchange coinbase and more people join, drawn by the advantages. The fact that sovereign currencies are plagued by global restrictions is convincing more people to adopt Bitcoin. Those who are concerned about the anticipated reduction in remittances also regard it as a safe haven.
Increased acceptance is perhaps the main reason for why the price of Bitcoin is higher today than ever before. In the beginning, only a couple of online casinos accepted the crypto currency and most chose to stick to traditional money. Even today not many entertainment websites use bitcoin as a payment method, and usually have other banking options. However, more consumers are using it and companies regard it as a reliable means of payment.
Not everyone is enthusiastic about its popularity surge and governments are particularly concerned. If Bitcoin would render traditional money useless, central banks will have no means to manipulate currency. They did it more than once to mitigate the effects of financial crisis and regard it as a solution of last resort. This means that governments are expected to oppose the crypto currency at any corner. There are also technical problems to factor in, which can disrupt the big coin services. The recent Amazon outage caused a stir and brought this sensitive issue back on the table.
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