Talking forks, fraud and FUD

With forks and fraud and FUD, bitcoin is down roughly 55% from its all-time highs of last fall.

So is that a good thing for the cyptocurrency? Will it allow bitcoin to have staying power for the long haul? Continue reading

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Investors double down on new to chase returns

Out with the old and and in with the new at double the price.

That’s what we have in the markets today. Wal-Mart has a market cap of $236B, while Amazon’s value is twice that at $478B with a share value of nearly $1,000 as compared to $78 for the predominantly brick and mortar retailer.

Also, bitcoin in the next few minutes may be worth twice the price of an ounce of gold, again.

On Tuesday it was reported that former SAC Capital chief Stevie Cohen is looking to raise at least $10B to add to his own $11B for his new hedge fund to launch in January.

Cohen was riding high until the Securities and Exchange Commission forced him to shut it down in 2013 and accept a four-year ban from the industry for not properly managing his staff when some SAC employees were charged with insider trading by then NY Federal Prosecutor Preet Bharara.

The doubling down on the new seems to be a signal of a top to the markets as the tried and true cannot find the legs to go to the next level as valuations are stymied thereby forcing capital to find a newly formed bubble.

 

A bitcoin ETF will be death knell of true price discovery of cryptocurrencies

As I wrote for the New York Post on Sunday the brief recent history of bitcoin and its rise to $1,600 this year, despite having some setbacks early in 2017.

Many commenters cited bitcoin as a better “investment” than gold and silver because the cyrptocurrency cannot be manipulated like precious metals, through rehypothecation, or the selling the same bar of gold or silver  many times through paper trades in the ETFs.

While this is true right now, I have written that this is the primary reason the Securities and Exchange Commission is reopening its decision not to allow bitcoin’s use as an ETF backed asset.

Many supporters of the  cryptocurrencies are looking to the creation of an ETF as giving bitcoin the legitimacy it so craves. I believe if and when the SEC approves the use of bitcoin for an ETF it will be the death knell for the digital currencies price discovery freedoms.

While the feds may still have a sizeable stake in bitcoin through its prosecution of various organizations and the forfeiture of the digital currency after being found guilty for fraud or other capital crimes, the feds probably do not have enough to continue keeping the price of bitcoin in check.

This is why I believe the SEC has decided to take a second look at the BTC ETF to give the feds a mechanism to manipulate the price through papers trades.

Edited: I have added the below section on how the ETF would suppression pricing due to criticism by some.

When you have an ETF — or paper contracts that will far exceed the number of bitcoins in circulation — the ETF can short the BTC price or sell off the contracts without ever buying the underlining commodity, in this case BTC.

Both these actions will drive the price of BTC down as we have seen for the last 10 years in gold and silver prices.

As with all ETFs on commodities, the contract can be settled in US dollars. So there is no reason for the ETF to load up on BTC. It is a derivative product on the price only.

 

 

Bitcoin on a tear reaching for $1,500

Global stock indices are not the only asset class making new highs on a daily basis. Cryptocurrencies — specifically bitcoin — are soaring as well to fresh levels.

Despite two major set backs for bitcoin in 2017, the digital currency has soared nearly 45% from its year-to-date  lows as Asian investors flock to the new-age currency.

Bitcoin prices are now trading at previously uncharted levels as the value of the cryptocurrency reached a high of $1,462 on CoinDesk  on Tuesday morning in NYC.

In January the People’s Bank of China, the country’s central bank, launched a crackdown on bitcoin believing that citizens were using it to move wealth out of the country. Prices fell as low as $750 on January 12th, before recovering.

In March the cryptocurrency had a run up on the anticipation of the Securites and Exchange Commission would decide in favor of a bitcoin ETF driven by the Winklevoss brothers. Bitcoin prices reached a high at the time of $1,350, before the feds nixed the proposal  sending prices falling to a low of $891 soon afterward.

Prices began to recover making their present move upward as Japan officially acknowledged the use of cryptocurrencies and passed legislation allowing retailers to accept payment in digital form.

Also Russia and India have also loosened restrictions on cryptocurrencies, leading to wider acceptance within their borders as both countries — India more so — struggle with their own internal currency crises.

The SEC announced last month that it would take a second look at a bitcoin ETF by reviewing its ruling in the Winklevoss brothers’ application. No timetable has been released on when that may happen.

Bitcoin’s market cap is now north of $23 billion, which is chump change for any asset class, however with more acceptance and wider appeal the digital currency can be divided into smaller units such as decibits, millibits and centibits to make smaller transactions possibly.

Ethereum, which is the second most prominent cryptocurrency after Bitcoin, struck a new all-time high Tuesday as well, trading at $85 and it now has a market cap of $7 billion on the strength of its acceptance in gaming circles in the Asian countries.

Fed leaks lead to billions on Wall Street balance sheets

My collegue at The New York Post, John Crudele, wrote on Monday about how the New York Fed President Bill Dudley, back in 2011, was meeting with the Street during “quiet periods” at the Fed.

Crudele FOIAed Dudley’s calendar to see who is was lunching with during the tumultuous time in 2011.The quiet period is the time frame where the Fed is considering policy changes prior to a meeting. The prep work prior to the meeting with position papers and economic modeling gives the participants a strong sense of what is being considered, hence the quiet period.

During one of these times in March 2011, Dudley met with Jan Hatzius, chief economist of Goldman Sachs. Dudley held the same position at Goldman, so he and Hatzius were friends. Yet Goldman could profit immensely knowing if the Fed was leaning toward implementing QE2.

This all comes to life as Richmond Fed President Jeffrey Lacker resigned immediately last week for leaking information ahead of the Fed minutes being released.

However, Lacker “crime” was confirming and advancing a bit information on the Fed that was published days before by Jon Hilsenrath at the Wall Street Journal.

That story prodded an investigation by many federal agencies from the SEC, CFTC and then NY federal attorney Preet Bharara. No further information has been uncovered who was involved in tipping off Hilsenrath for his  exclusive story.

The Federal Reserve’s purchase of trillions of dollars in specific securities is the prime reason why Wall Street wanted to get the tip in order to front run the Fed. There are billions to be made in fees and profits by the actions.

Let’s not forget that Goldman and other Wall Street financial firms own the Federal Reserve, by holding shares in the institution, so the conflicts are tremendous.