Invesco Launches Blockchain-Focused ETF On London Stock Exchange
by Zero Hedge - March 10th, 2019 10:39 am
Courtesy of Zero Hedge
During a week where US prosecutors indicted the masterminds of a $4 billion crypto pyramid scheme and an auditor hired by a bankrupt Canadian crypto exchange revealed that its "lost" cold-storage wallets had been empty since April (leaving a giant $150 million hole where its customers' money should have been), Wall Street has broken through the crypto news clutter by announcing its latest tentative embrace of 'blockchain technology'.
Just weeks after JPM introduced its own in-house stablecoin, the Financial Times reported Saturday that the world's biggest blockchain-focused ETF will begin trading on the London Stock Exchange on Monday.
The fund will focus on companies with exposure to the emerging technology. companies from Taiwan Semiconductor Manufacturing to more established US-traded companies like Microsoft and Intel. Its total portfolio upon launch will include 48 companies.
The Invesco Elwood Global Blockchain ETF will start trading on the London Stock Exchange on Monday. The ETF will invest in companies such as Taiwan Semiconductor Manufacturing, which supplies cryptocurrency manufacturers with mining chips, and CME Group, the US exchange operator that has pioneered bitcoin futures trading. Other constituents of the ETF, which carries a 65 basis points management fee, include Apple, Intel and Advanced Micro Devices.
Chris Mellor, head of ETF equity product management in Europe at Invesco, said the potential for blockchain to boost earnings was often not reflected in the share prices of companies such as Rio Tinto, the mining company that owns hydroelectric assets that could be harnessed for cryptocurrency mining. The ETF will initially invest in a portfolio of 48 companies based on a proprietary scoring system developed by Elwood Asset Management, a specialist crypto investment boutique backed by Alan Howard, co-founder of the Brevan Howard hedge fund.
Bin Ren, Elwood chief executive, said the possible applications for blockchain extended far beyond cryptocurrencies. “We are beginning to see the technology being used by financial services companies in particular, but we expect greater application of blockchain technology across a wide range of industries,” said Mr Ren.
A handful of other blockchain-focused ETFs have launched in the US and Europe, but most have attracted a small amount of investor capital. The largest, the Amplify…
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Five reasons Bitcoin could enter a more extreme death spiral
by ilene - March 8th, 2019 3:00 am
Five reasons Bitcoin could enter a more extreme death spiral
Courtesy of Daniele Bianchi, Warwick Business School, University of Warwick
Back in December 2017, when its price reached close to US$20,000, Bitcoin looked like it had finally disrupted financial markets with the potential to enter the mainstream. A year later and things looked quite different. Bitcoin is now steadily trading below US$4,000 and has been constantly on a downward ride over the last year, losing more than half of its market capitalisation.
And yet cryptocurrency enthusiasts seem to ignore the fact that Bitcoin could yet enter an even more extreme death spiral. Bitcoin is not the only cryptocurrency whose market capitalisation has been hammered. Sell offs have happened across the board, with the price of major alternative coins such as Ripple and Ethereum falling in the past year.
It is not clear what the catalyst was for these price drops and selling. But what is clear is that cryptocurrency prices struggle to find a floor for a number of reasons. These range from the rising cost of mining, regulatory concerns, market manipulation, speculative trading, sky high power consumption, and the increasing scepticism from both the public and the world’s established financial industry.
1. Rising cost of mining
If its price continues to drop and the mining costs do not fall to the same extent, the incentives to update the public ledger and validate transactions can quickly disappear, threatening the very existence of Bitcoin as a viable payment system.
Bitcoin is dependent on a system of miners that verify transactions and record them on a digital ledger called the blockchain. This prevents copies being made of the digital tokens. As a reward for the energy and time involved, miners are rewarded in Bitcoin.
But the amount of work involved in mining keeps increasing (making it more costly), as the mining process was always designed to get more and more difficult, to limit the number of new Bitcoin that get issued. Seeing as mining requires vast amounts of energy, a number of miners have shut down their operations, as Bitcoin’s declining value has made mining less profitable.
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Regulations needed after cryptocurrency CEO takes passwords to his grave
by ilene - March 4th, 2019 10:35 pm
Regulations needed after cryptocurrency CEO takes passwords to his grave
Canadian CEO Gerald Cotten died in December, taking to his grave the passwords to unlock his cryptocurrency clients’ millions. Dmitry Moraine/Unsplash
Courtesy of Lisa Kramer, University of Toronto
A high-stakes legal drama featuring cryptocurrencies has been unfolding in a Canadian court recently.
The antics that led to the litigation almost defy credulity, and they highlight the need for new regulations to better suit a financial marketplace that includes virtual currencies.
News broke in early February that Canadian cryptocurrency exchange QuadrigaCX was seeking creditor protection, leaving in financial limbo about 115,000 people who had entrusted the firm to maintain their deposits of cash, Bitcoins and other digital tokens worth an estimated C$250 million.
The company’s need for bankruptcy protection arose when its founder and chief operator, Gerald Cotten, died suddenly in December while vacationing in India. Normally, if a financial institution’s executive officer meets an untimely demise, he or she doesn’t bring to the afterworld the only keys to the vault. And thus clients maintain continued access their deposited funds all the while.
In the case of Quadriga, unfortunately, Cotten was the only living soul who knew the password to an encrypted offline repository, known as cold storage, where the firm had enshrined the vast majority of clients’ cryptocurrency deposits. Without the password, no one can access those holdings.
Murky or absent regulations
While the Nova Scotia Supreme Court wades its way through some very novel and complex issues, the question that comes to my mind is: How has one bad decision about password custodianship caused more than 100,000 people to lose access to their deposits?
The answer lies in the murky and mostly lacking regulations that govern the cryptocurrency world. Nothing stops entrepreneurs like Cotten from running companies like Quadriga with no independent oversight.
Had he ever raised equity capital from investors in return for tokens or coins, that process would have been governed by Canadian securities regulations. But because Quadriga is an exchange — maintaining deposits and facilitating conversions between regular cash and cryptocurrencies, but not issuing cryptocurrencies in exchange for ownership shares —…
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Cryptos Are Surging: Bitcoin, Ethereum Hit One-Month Highs As Institutions Dip Toes
by Zero Hedge - February 18th, 2019 9:30 am
Courtesy of Zero Hedge
Cryptocurrencies are surging while the US equity markets take the day off. Ethereum is up over 18% from Friday's 'close' and the rest of the crypto space is a sea of green. While no immediate catalyst (headline or technical level) is clear, increasing chatter over institutional investors dipping their toes in the space have prompted an extension of the positive trend.
A sea of green…
Ethereum is leading the charge followed by Litecoin and Bitcoin Cash…
Bitcoin has broken back to one-month highs…
And Ethereum is really accelerating…
As CoinTelegraph notes, the total market capitalization of all cryptocurrencies is around $128 billion as of press time, up a strong 3.7 percent on the week.
In an interview with Cointelegraph this week, prominent CNBC commentator Brian Kelly argued that Bitcoin is currently around 50 percent undervalued, and that the asset is likely near a bottom. While holding back on optimism in regard to the approval of a Bitcoin exchange-traded fund, Kelly predicted that 2019 would be better for the crypto markets overall, conceding however that 2018 had set “a pretty low bar.”
In adoption news, it appears that the forthcoming update of the Rakuten Pay mobile app from major Japanese e-commerce firm Rakuten will support cryptocurrency payments in addition to fiat.
While no immediate catalyst jumps to mind for today's surge, Bloomberg notes that institutional investors should consider dipping their toes into cryptocurrencies, according to Cambridge Associates, a consultant for pensions and endowments.
“Despite the challenges, we believe that it is worthwhile for investors to begin exploring this area today with an eye toward the long term,’’ said analysts at Boston-based Cambridge in a research note published Monday.
“Though these investments entail a high degree of risk, some may very well upend the digital world.’’
Most large institutions have steered clear of the 10-year-old, $120 billion industry because it’s largely unregulated and cryptocurrencies have been used to finance illicit trade. The…
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Is blockchain all hype? A financier and supply chain expert discuss
by ilene - February 16th, 2019 5:49 pm
Is blockchain all hype? A financier and supply chain expert discuss
Coutesy of Carlos Cordon, IMD Business School and Arturo Bris, IMD Business School
This is an article from Head to Head, a series in which academics from different disciplines chew over current debates. Let us know what else you’d like covered – all questions are welcome. Details of how to contact us are at the end of the article.
Arturo Bris: Have you ever watched footage from the early 1980s of people trying to explain the internet? They’re sceptical and confused and have no idea how to say “@”, which is comical given what we now take for granted. But that’s where we are with blockchain now. People don’t believe in it because they don’t understand it.
Blockchain is a technology with two ingredients: the first is a distributed ledger, meaning a database with identical copies held by everyone in a network. There is no intermediary, no central data depository. The second is a consensus algorithm (and this is the true innovation in the technology): the ability to digitally agree on any change in the data. It is the set of decision rules by which any new entry in the database is accepted and then shared by everyone.
The consensus algorithm will be different for every blockchain – some work on a simple majority rule, some (such as Bitcoin) have a subset of members paid to fulfil that role, and others have much more complicated arrangements. The structure of the database is also particular, because it is structure as a sequence of entries (a ledger), not a deposit.
If you don’t understand blockchain, get educated, because it’s an amazing new technology that’s going to revolutionise the world. It’s going to monetise and unlock value that today is hidden. The social impact is going to be massive. It’s going to permit new avenues for human interaction that didn’t exist before.
Carlos Cordon: I’m not sure about that, Arturo. I, for instance, understand what blockchain is, but I don’t believe that it’s…
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People don’t trust blockchain systems – is regulation a way to help?
by ilene - February 5th, 2019 5:52 pm
People don't trust blockchain systems – is regulation a way to help?
Using blockchain technology can feel like falling and hoping someone will catch you. Nicoleta Raftu/Shutterstock.com
Courtesy of Kevin Werbach, University of Pennsylvania
Blockchain technology isn’t as widely used as it could be, largely because blockchain users don’t trust each other, as research shows. Business leaders and regular people are also slow to adopt blockchain-based systems because they fear potential government regulations might require them to make expensive or difficult changes in the future.
Mistrust and regulatory uncertainty are strange problems for blockchain technology to have, though. The first widely adopted blockchain, bitcoin, was expressly created to allow financial transactions “without relying on trust” or on governments overseeing the currency. Users who don’t trust a bank or other intermediary to accurately track transactions can instead rely on unchangeable mathematical algorithms. Further, the system is decentralized, with data stored on thousands – or more – of internet-connected computers around the world, preventing regulators from shutting down the network as a whole.
As I discuss in my recent book, “The Blockchain and the New Architecture of Trust,” the contradiction between blockchain’s allegedly trust-less technology and its trust-needing users arises from a misunderstanding about human nature. Economists often view trust as a cost, because it takes effort to establish. But people actually want to use systems they can trust. They intuitively understand that cultures and companies with strong trust avoid the hidden costs that stem from everyone constantly trying to both cheat the system and avoid being cheated by others.
Blockchain, as it turns out, doesn’t herald the end of the need for trust. Most people will want laws and regulations to help make blockchain-based systems trustworthy.
Problems arise without trust
Bitcoin’s creator wrote in 2009 that “The root problem with conventional currency is all the trust that’s required to make it work.” With government-issued money, the public must trust central bankers and commercial banks to preserve economic stability and protect users’ privacy. The blockchain framework that bitcoin introduced was supposed to be a “trustless” alternative. Sometimes, though, it shouldn’t be trusted.
In 2016,…
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Explosive Report Claims Two Hackers Stole $1 Billion In Crypto
by Zero Hedge - January 30th, 2019 5:20 pm
Courtesy of Zero Hedge
Crypto related hacks have fallen in frequency since the great crypto bust of 2018 – or at the very least, they don't grab headlines like they once did. They've also become an accepted risk of trading in crypto: Gone are the days when a devastating hack like the one that brought down Mt. Gox back in 2014 have had serious repercussions for the entire crypto market.
But that hasn't deterred firms like Chainalysis, the respected crypto forensics firm that has reportedly helped the FBI and other US law enforcement agencies track illicit activity and bust money launderers using crypto, from exploring the methods used by hackers to conceal the provenance of stolen coins on a system that touts transparency as one of its biggest selling points.
During the course of its research, Chainalysis happened upon a surprising finding: Just as there are "whales" who hold concentrated portions of crypto wealth, so there are whale-like hackers who are responsible for much of the thievery that has plagued the eco-system. According to a Wall Street Journal summary of Chainalysis' findings, two groups of highly sophisticated criminals appear to have stolen some $1 billion in cryptocurrency, an amount that accounts for the majority of the money lost to hackers. Some $1.7 billion in crypto has been reported stolen over the years, mainly from exchanges (Mt. Gox and Bitfinex being two of the most infamous hacks).
Chainalysis spent about three months tracking the stolen funds in known hacks, and noted that there's a slight chance that its analysis is incorrect.
The analysts at Chainalys christened the groups "Alpha" group and "Beta" group. The MOs of the two groups differ in one important way. While established government-linked groups like the Lazarus Group have been identified as the culprits behind certain hacks (like the hack of South Korea's Bithumb), Chainalysis said these two groups appear to be independent – and possibly amateur – criminals.
Chainalysis’s digital investigators determined that likely wasn’t the case when they analyzed the transaction flows from known hacks. The firm believes it has connected most of the hacks to two groups, which it labeled alpha and beta.
Alpha is “a giant,
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Transparency and privacy: Empowering people through blockchain
by ilene - January 17th, 2019 8:59 pm
Transparency and privacy: Empowering people through blockchain
Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock
Courtesy of Ajay Kumar Shrestha, University of Saskatchewan
Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.
Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The redundancy of the system ensures many backups, and the lack of a central storage place ensures there is no one target for hackers. Some suggest that blockchain could become a component of the next generation of the internet.
Many blockchain systems provide a technology called “smart contract:” these are the rules by which records can be accessed and modified by creating new versions. These rules define, for example, who gets access to the stored records, under what conditions, for what declared purpose and in exchange of what (payment or virtual credit). Smart contracts also record every access to the data in the blockchain.
In this way, users can permanently and securely store their data, set their own conditions and control who accesses the data and for what purpose. Because of these features, blockchain technology can be used to store user profile data.
Political scientist and blockchain researcher Bettina Warburg explains blockchain in five levels of difficulty. WIRED Magazine.
Hoarding the data
Currently, social media giants hoard user data and use it to sell targeted advertisements (their main source of revenue). These social media networks don’t give users a real choice or awareness of what data about them are kept. They provide very few control options and no rewards for users in exchange of their data.
Recently, we have seen many cases when user data has been stolen by hackers, leading to breaches of privacy, the possibility for identity theft or exploitation of the data to manipulate people and influence public opinion towards voting. This…
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Crypto-Bubble: Will Bitcoin Bottom In February Or Has It Already?
by Zero Hedge - January 15th, 2019 4:46 pm
Courtesy of Michelle Jones via ValueWalk.com
The new year has been relatively good for the price of bitcoin after a spectacular collapse of the cryptocurrency bubble in 2018. It’s up notably since the middle of December and traded around the psychological level of $4,000… so is this a sign that the crypto market is about to recover?
Of course, it depends on who you ask, but one analyst discovered a pattern which might point to a bottom next month.
A year after the cryptocurrency bubble popped
CCN pointed out that this past Monday marked exactly one year since the cryptocurrency bubble popped, leading to a tremendous crash in the bitcoin price throughout 2018.
Data from CoinMarketCap indicates that the market capitalization of all cryptocurrencies hit $835.7 billion on Jan. 7, 2018, making the cryptocurrency bubble market temporarily worth more than Facebook and Twitter combined. A year later, the crypto market cap is only $136.3 billion — even though the number of cryptocurrencies tracked by CoinMarketCap has increased significantly over the last year.
So exactly why did the bitcoin price surge suddenly? Citing a tweet from Whale Alert, a price tracker for bitcoin, a Forbes contributor traced the sudden movement to the sale of about 2,500 bitcoin for nearly $10 million on the Bitstamp exchange. The huge sale shifted the cryptocurrency’s daily volume over $5 billion. What makes it particularly interesting is that the bitcoin price is so far holding on to the key support level of over $3,500.
News on bitcoin ETFs could be lending support
One thing which could be helping support the cryptocurrency bubble and bitcoin price is the news that Japan’s financial regulator is reportedly considering approving the first exchange-traded fund for the cryptocurrency. Citing an anonymous source, Bloomberg said Japan’s Financial Services Agency (FSA) has decided not to allow bitcoin futures but is exploring potential demand for bitcoin ETFs.
Of note, the Securities Exchange Commission has delayed its decision on bitcoin ETFs in the U.S. until February. Meanwhile, U.S. regulators have allowed bitcoin futures, unlike their Japanese counterparts.
Key trend identified in bitcoin price movements
Crypto enthusiasts have long focused on technical indicators in an attempt to forecast where cryptocurrency bubble and…
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Russia Prepares To Buy Up To $10 Billion In Bitcoin To Evade US Sanctions
by Zero Hedge - January 14th, 2019 2:28 pm
Courtesy of Zero Hedge
While the market has been increasingly focused on the rising headwinds in the global economy in general, and China's economic slowdown in particular, while the media is obsessing over daily revelations that Trump may or may not have colluded with Russia to get elected, a far more critical, if underreported, shift has been taking place over the past year.
As we reported in June, whether due to concerns over draconian western sanctions and asset confiscations following the poisoning of former Russian military officer Sergei Skripal, or simply because it wanted to diversify away from the dollar, Russia liquidated virtually all of its Treasury holdings in the late spring and early summer, in the process sparking a major repricing of the 10Y US Treasury, whose yield jumped from 2.70% at the start of April to a high of 3.10% in May, a move which economists were struggling to explain at the time.
The obvious next question is what did Russia do with the proceeds, and it came as little surprise that, as we wrote back in July, as Russia was selling nearly $100BN worth of Treasurys, it was aggressively buying gold.
In addition to gold, the Kremlin also instructed the Russian finance ministry to load up on Yuan, something which we noted at the end of September, when we showed the surge in reserves allocated to the Chinese Yuan.
As part of its reallocation away from the dollar, Russia also bought a substantial amount of other non-USD currencies, and according to a recent report, the money pulled from the dollar reserves was redistributed to increase the share of…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site