Category Archives: Crypto

US$6 billion of inflows –> US$400+ crypto market cap

Source: ZeroHedge, Dec 2017

If JPM is right, the implications are staggering: contrary to expectations that bitcoin’s market cap is a rough reflection of its inflows, JPM’s calculations reveal that a mere $6 billion in net inflows since 2009 has resulted in a market cap of $330 billion. This goes to what Mike Novogratz said last week when he said that cryptos are unique, because unlike all other asset classes, there is no corresponding increase in supply when prices surge.

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The Biggest Bubble Ever

Source: CNBC, Dec 2017

Imagining New Possibilities for Math (i.e. Crypto)

S0urce: HackerNoon, Dec 2017

There are four additional problems with a blockchain-driven approach.

  1. First, you’re relying on single-point encryption — your own private keys — rather than a more sophisticated system that might involve two-factor authorization, intrusion detection, volume limits, firewalls, remote IP tracking, and the ability to disconnect the system in an emergency.
  2. Second, price tradeoffs are entirely implausible — the bitcoin blockchain has consumed almost a billion dollars worth of electricity to hash an amount of data equivalent to about a sixth of what I get for my ten dollar a month dropbox subscription.
  3. Fourth, systematically choosing where and how much to replicate data is an advantage in the long run — the blockchain’s defaults on data replication just aren’t that smart.
  4. And finally, Dropbox and Box.com and Google and Microsoft and Apple and Amazon and everyone else provide a set of valuable other features that you don’t actually want to go develop on your own. Analogous to Visa, the problem isn’t storing data, it’s managing permissions, un-sharing what you shared before, getting an easy-to-view document history, syncing it on multiple devices, and so on.

The same argument holds for proposed distributed computing and secure messaging applications. Encrypting it, storing it forever, and replicating it across the entire network is just a ton of overhead relative to what you’re actually trying to accomplish. There are excellent computing, messaging, and storage solutions out there that have all the encryption and replication anyone needs — actually better than blockchain based solutions — and have plenty of other great features in addition.

A Timeline of the Bitcoin Scaling Debate

Source: HackerNoon, Dec 2017

Coming to a Conclusion

I can’t claim to know whether Bitcoin will ever get larger block sizes through a hard fork, but inaction will lead to the following problems:

  1. Unusable Wallets: Users with balances below the minimum fee will essentially lose their Bitcoin since the amount is unspendable. Many users use day-to-day wallets with smaller amounts, and have larger amounts locked in cold storage.
  2. Merchants and platforms will increasingly adopt and accept currencies with lower fees. Bitcoin Cash, Monero, Zcash, Dash and Litecoin are all fulfilling the role Bitcoin excelled at when the block size limit was not being hit. Projects like IOTA and MaidSafe are making the whole idea of limits, and the ecological of impact of hashpower ridiculous. Bitcoin Cash is especially easy for merchants to drop in to replace Bitcoin because implementation is easy, and adoption will accelerate as transaction space remains limited.
  3. Periods of high transaction volume or price decline will exacerbate the daily transaction rate limit. Price decline combined with growing transaction backlogs will reduce the mining reward and encourage miners to switch to another SHA256-compatible chain such as Bitcoin Cash. A situation some have called a ‘Chain Death Spiral’ looms in this situation. TrippySalmon runs a great site to monitor the self-interest calculations miners must make called Fork.lol.

Crypto Enters its Frenzy Phase

Source: ZeroHedge, Dec 2017

Bitcoin and friends ….

Bitcoin Whales

Source: Bloomberg, Dec 2017

About 40 percent of bitcoin is held by perhaps 1,000 users; at current prices, each may want to sell about half of his or her holdings.

The recent rise in its price is difficult to explain because bitcoin has no intrinsic value. Launched in 2009 with a white paper written under a pseudonym, it’s a form of digital payment maintained by an independent network of computers on the internet‚ using cryptography to verify transactions. Its most fervent believers say it could displace banks and even traditional money, but it’s only worth what someone will trade for it, making it prey to big shifts in sentiment.

The top 100 bitcoin addresses control 17.3 percent of all the issued currency, according to Alex Sunnarborg, co-founder of crypto hedge fund Tetras Capital. With ether, a rival to bitcoin, the top 100 addresses control 40 percent of the supply, and with coins such as Gnosis, Qtum, and Storj, top holders control more than 90 percent. Many large owners are part of the teams running these projects.

Related Resource:

 https://bitinfocharts.com/top-100-richest-bitcoin-addresses.html

1,000 – 10,000 1555 0.01% (0.01%) 3,373,483 BTC 54,602,556,316 USD 20.18% (37.99%)
10,000 – 100,000 111 0% (0%) 2,738,912 BTC 44,331,510,398 USD 16.38% (17.81%)
100,000 – 1,000,000 2 0% (0%) 238,159 BTC 3,854,797,303 USD 1.42% (1.42%)

99% of Crypto Projects will Fail – Olaf Carlson-Wee

Source: BitsOnLine, Dec 2017

When Bloomberg anchor Emily Chang asked Carlson-Wee to approximate how many cryptocurrency projects would end up dying off, the hedge fund innovator wasn’t charitable:

“I think easily 99 percent will fail. Many of the new tokens and protocols coming out. I think that’s not unique. Any new fast moving startup ecosystem, that’s basically what’s going to happen.”