Your dose of crypto news and analysis from @BTO and @Goldfinger

Bitcoin is officially mainstream, folks. Ellen just covered it on her show, using a goat-based analogy:

Forbes had a quote from Vitalik as its Quote of the Day:

And guess who just released what has become known as the “Bitcoin Bible”? None other than “Bitcoin’s a fraud” JP Morgan!

And then — boom — positive news out of Korea, covered by Bloomberg no less:

And with that, the Bitcoin bears were put out to pasture and we’re back above US$10k, at least for now.

Back to JP Morgan’s Bitcoin Bible. I was able to get my hands on a copy of the 71-page report — called “Decrypting Cryptocurrencies: Technology, Applications and Challenges” — and it goes deep into the sector, covering many topics. Most articles discussing the report focused in on bullish statements made by its authors like, “[cryptocurrencies] could potentially have a role in diversifying one’s global bond and equity portfolio” — which is great! But what I found most interesting was the analysis done on the economics of crypto mining, which is of particular relevance to those of us invested in or following publicly traded crypto miners. Here is an interesting quote, which I think is important to understand when analyzing crypto miners:

As hash rate increases are accompanied by greater and greater difficulty levels, ensuring block rewards stay steady at one block roughly every 10 minutes, this boost in average cost estimates is driven by more and more rigs being employed and consequently greater levels of energy being consumed for the same overall production level. Yet… the more than 10-fold jump in prices has still greatly expanded global average mining margins, despite the rising average cost level...
However, unlike commodities, where supply is endogenous, i.e. it responds to changes in production technology and demand, Bitcoin supply is exogenous as it is predetermined by its Blockchain algorithm. In gold, higher prices incentivize more expensive production to come online, which increases the supply of gold. Similarly, lower prices squeeze out marginal miners, causing them to stop producing and reducing supply. This reduction in supply is the mechanism that supports prices at the marginal cost level.
In the case of Bitcoin, higher prices incentivize more expensive mining operations to come on-stream, but the production remains constant at least in the near term ... as difficulty will rise right along with the hash rate. Similarly on the downside, as prices fall through the cost curve, higher cost operators will close their operations to avoid losses but production will not shrink as difficulty will drop along with the decrease in hash rate and a block of Bitcoins will still be awarded every 10 minutes. This constant rate of block rewards rather radically alters the application of marginal cost analysis for Bitcoin. This means that, unlike gold, where the marginal cost producers sit somewhere around the 75th percentile on the cost curve, the marginal producer of Bitcoin, and hence its cost support floor, technically sits at the cost level of its lowest cost producer. As long as it’s still profitable for the lowest cost producer to mine, they will still receive a block of Bitcoins about every 10 minutes and the supply will remain the same compared to if there were thousands of miners.

Let’s check in on the performance of some of the major cryptos this week (close UTC time last Friday to today):

  • Bitcoin trading around US$10,100, up 15.7% on the week
  • Ethereum trading around US$942, up 6.6% on the week
  • Bitcoin Cash trading around US$1,514, up 15.4% on the week
  • Litecoin trading around US$229, up 39.6% on the week
  • Stellar trading around US$0.45, up 13.3% on the week
  • Dash trading around US$693, up 8.6% on the week
  • Monero trading around US$289, up 11.1% on the week
  • Ethereum Classic trading around US$34.91, up 34.3% on the week
  • ZCash trading around US$475, flat on the week

With every one of the above in the black for the first week in recent memory, I hereby declare the battle won by the crypto bulls. Here’s a dramatic reenactment of what happened in the last month:

WTF did I miss this week in crypto?

Wow — first Kodak and now Atari:

Taxman, Meet Bitcoin: Arizona Moves Toward Tax Payments in Crypto — https://bitsonline.com/arizona-tax-crypto-bill/

The Arizona Senate passed a bill this week that would allow residents in the state to pay their annual state tax bills in cryptocurrencies. The bill, and its passage, is the first of its kind in the United States. The legislation now moves to the Arizona House of Representatives for approval.

Coinbase Launches a PayPal Like Plugin For Ethereum, Bitcoin, Bitcoin Cash and Litecoin — https://www.trustnodes.com/2018/02/10/coinbase-launches-paypal-like-plugging-ethereum-bitcoin-bitcoin-cash-litecoin

Coinbase, the biggest crypto broker and one of the biggest exchanges, has launched a new service for merchants, allowing them to seamlessly integrate crypto payments by adding a Coinbase Commerce button, not much different than the PayPal button. Unlike previously where their merchants service was directly integrated with Coinbase, requiring a Coinbase account, all you need now to make the payment is crypto.

Nvidia CEO Huang: Crypto Is Real, The World Is Coming to Terms With It — https://www.barrons.com/articles/nvidia-ceo-huang-crypto-is-real-the-world-is-coming-to-terms-with-it-1518188630

Says Huang: “Crypto is a real thing — it’s not going to go away… This year, the world is starting to come to terms with the existence of crypto. It’s based on blockchain, and it's very secure and very low overhead. I think there’s clearly real utility. It’s a real phenomenon, and so everyone is coming to terms with it. I’m not against the concept of virtual currency — it’s as real as virtual goods, and video games. And as you know, tens of millions of virtual goods are created and shared and sold in virtual reality, and people invest thousands of hours to create space ships in space that they battle against each other. So, the concept of virtual goods and virtual worlds and virtual currency all ties together.”

UK Government Websites Hit By Crypto Mining Malware — https://www.coindesk.com/uk-government-websites-hit-by-cryptocurrency-mining-malware/

U.K. government websites and more than 4,000 others worldwide have reportedly been exploited by malware that harnesses visitors' computers to mine cryptocurrency. According to BBC, the incident was first revealed after British security researcher Scott Helme, who raised the alarm that users browsing the website of the U.K. Information Commissioner's Office are affected by the malware, dubbed Coinhive, which illicitly mines the anonymous cryptocurrency Monero.

Brian Kelly Now Has “90 Percent” of Personal Wealth in Cryptocurrency — https://bitsonline.com/kelly-90-percent-cryptocurrency/

BK Capital Management founder and CNBC financial pundit Brian Kelly kicked the new week off by noting he’s officially put “90 percent” of his wealth in the top digital assets of the cryptocurrency craze. How’s that for going long?

GMO Internet Eyes August Launch for Crypto Cloud Mining — https://www.coindesk.com/gmo-internet-eyes-august-launch-crypto-cloud-mining-service/

GMO Internet, a publicly listed IT firm headquartered in Japan, has set August as the tentative launch date for its previously announced cloud mining service. The company revealed last fall that it was devoting tens of millions of dollars to its mining venture. In a Feb. 9 announcement, GMO said that it would, beginning in March, hold a series of events in order to drum up interest in the service, which will feature two-year contracts for a whopping $5 million. Though the exact location of the GMO mine isn't publicly known, the facility is said to be based in northern Europe.

John McAfee Apologizes to Binance CEO, Walks Back Outage FUD — https://bitsonline.com/mcafee-apologizes-binance/

When Binance cryptocurrency exchange went down for unscheduled repairs last week, many in the cryptoverse jumped to the worst possible conclusions. Among that lot included firebrand crypto pundit John McAfee, who contributed to the panic in suggesting Binance had been hacked. Now, McAfee is apologizing.

To ethically mine crypto we need to use renewable energy — https://qz.com/1204842/bitcoin-mining-should-use-renewable-energy-if-we-want-cryptocurrencies-to-be-ethical/amp/

Blockchain computation (and the server farms that power it) is distributed: processing can be conducted from anywhere and is not tied to given geographies or jurisdictions. To maximize profits, there is a strong economic incentive for miners to locate where energy is cheapest. In this article, the author emphasizes that it should not just be about price—it should be about the environment, too. I couldn’t agree more.

Ethereum’s Scalability Partially Solved as DappChains Prepares to Launch — https://www.trustnodes.com/2018/02/12/ethereums-scalability-partially-solved-dappchains-prepares-launch

“Twitter-scale apps on ethereum” claims a team of VC funded eth developers that have been running Solidity coding lessons when not working on their game dapps or how to scale them. This coming March, they are to showcase a dapp that runs on its own blockchain (dappchain) while connected to the ethereum network, potentially solving the scalability problem for at least some projects, while providing an important piece of the puzzle for the entire network.

Microsoft concludes that layer 2 solutions are required for Bitcoin to scale — https://cloudblogs.microsoft.com/enterprisemobility/2018/02/12/decentralized-digital-identities-and-blockchain-the-future-as-we-see-it/

After a year of research Microsoft has concluded that on-chain scaling doesn't work. I.e., A solution like Lightning Network — a layer 2 solution — is required for Bitcoin to scale.
A dagger through the heart of Bitcoin Cash backers.

Coinbase and Others Launch a Self-Regulatory Trade Body — https://www.trustnodes.com/2018/02/13/coinbase-others-launch-self-regulatory-trade-body

Seven companies, including Coinbase, eToro, CoinShares, CryptoCompare, and others, have launched a self regulatory body for the crypto industry. Iqbal V Gandham, UK Managing Director of eToro, who has been elected chair of CryptoUK for the first year, stated: “This is a severely misunderstood sector that has great potential to improve our society. But we are hearing instances of rogue operators and consumer harm. That’s why CryptoUK has been established: to promote best practice and to work with government and regulators to ensure that the UK benefits from the exciting potential of this international technology.”

Monero Declares War on ASIC Manufacturers — https://www.ccn.com/monero-declares-war-asic-manufacturers/

On Sunday, a group of Monero developers published a development update addressing what has become a recurring question among altcoins that can currently be mined profitably with GPU hardware — how to respond to the threat that Bitmain or another mining rig manufacturer will develop an Application Specific Integrated Circuit (ASIC) miner built to mine Cryptonight, which is XMR’s Proof of Work (PoW) hashing algorithm.
Monero’s response? — a preemptive strike. Moving forward, developers will seek to protect the network’s ASIC resistance by slightly modifying its PoW algorithm at every scheduled hard fork, which generally occurs twice annually. These changes will not be noticeable to ordinary XMR users, but they will alter the network’s hashing algorithm enough that Cryptonight ASIC miners would become obsolete following every fork. But in case these planned PoW adjustments are not enough to disincentivize the development of ASIC miners for Cryptonight, Monero will “perform an emergency hard fork to curb any potential threat from ASICs.”

Coinbase Cuts Off New Credit Cards for US Customers — https://www.coindesk.com/coinbase-cuts-off-new-credit-cards-us-customers/

Cryptocurrency startup Coinbase said Tuesday that its U.S.-based users won't be able to add new credit cards as a payment option. Making the announcement through its official blog post on Feb. 13, Coinbase said the platform currently is unable to offer a smooth credit card purchase experience. As a result, it has "disabled adding new credit cards as a payment method for U.S. customers."
News like this would have resulted in a 15% nosedive in the January crypto markets, but February FUD stands no chance:

Crypto All-Stars Trading Cards Launch 🚀 — https://hackernoon.com/crypto-all-stars-trading-cards-launch-cf2a333c2077

This is hilarious. ETH-based trading cards featuring your favorite shitposters. Each Crypto All Star Card is linked to one, and only one, Smart Contract Token on the Ethereum blockchain. When you purchase an All Star Card (Smart Contract), you own the only one in existence. The value of your Crypto All Star Card is automatically re-listed at a higher price, and anyone can buy your card from you by paying the new list price. Actual website here: https://cryptoallstars.co/. @CryptoCobain costs 15.6853 eth and @SatoshiLite costs 27.7368 eth — lol!

World's first digital currency 'cold storage' vault launches in Dubai — https://www.thenational.ae/business/world-s-first-digital-currency-cold-storage-vault-launches-in-dubai-1.704097

Regal RA DMCC, a gold investment and trading firm in Dubai, is the first company in the Middle East to receive a license to trade cryptocurrencies, the Dubai Multi Commodities Centre said. The company said it launched the world's first “deep cold storage” solution, which allows investors and traders to store their digital currencies - bitcoin, ethereum and other altcoins - in a vault located in Dubai's Almas Tower, the headquarters of free zone DMCC. More here.

Bitcoin Isn't the Only Crypto Adding Lightning Tech — https://www.coindesk.com/bitcoin-isnt-crypto-adding-lightning-tech-now/

Lightning is spreading across the cryptocurrency landscape. Originally designed for use on bitcoin, the concept is touted as a way to make transactions faster and cheaper by moving them to a layer above the blockchain. But with scalability emerging as a pressing issue across the industry, litecoin, zcash, ethereum, and ripple are just a few of the many cryptocurrencies planning to implement or test some form of the lightning network this year.

Berkshire's Charlie Munger calls bitcoin 'noxious poison' — https://www.cnbc.com/2018/02/14/berkshires-charlie-munger-calls-bitcoin-noxious-poison.html

"Bitcoin is noxious poison” … “totally asinine.” The renowned sidekick to Warren Buffett had some choice words to describe the Bitcoin craze this week. At the same time, he urged regulators to “let up” on Wells Fargo, which has been struggling with intense regulatory and media scrutiny since 2016, when a massive fake account scandal came to light. Since then, Wells has admitted it also sold car insurance to customers who didn't need it and improperly charged fees on some mortgage rate lock extensions.
Berkshire BTC balance = $0.00. Berkshire Wells Fargo holdings: $27 billion worth… hmmm...

Number of crypto hedge funds soars amid bitcoin volatility — https://www.cnbc.com/2018/02/15/number-of-crypto-hedge-funds-soars-amid-bitcoin-volatility.html

Fintech research house Autonomous NEXT said this week that the number of hedge funds focused on trading cryptocurrencies more than doubled in the four months to Feb. 15. The firm recorded a record high of 226 global hedge funds with such a strategy, up from 110 global hedge funds as of Oct. 18. That itself was up from 55 funds at Aug. 29 and just 37 at the start of 2017. Assets under management hit between $3.5 and $5 billion, according to the firm.

Coinbase admits it accidentally overcharged tons of cryptocurrency buyers — https://thenextweb.com/hardfork/2018/02/15/coinbase-cryptocurrency-multiple-charges/

Woops — Following numerous complaints from concerned users on Reddit, Coinbase confirmed a bug in its system resulted in accidentally charging tons of users multiple times for the same purchase. “You [meaning Coinbase] drained my bank account and now I have nothing,” one user cried out on Reddit. “Welp officially broke, charged 17×1000$ on my account,” said another user.

Unprecedented $100 Million Ethereum Community Fund Is Launched — https://bitsonline.com/ethereum-community-fund-launched/

The Ethereum Community Fund — or ECF — is being collaboratively launched by the teams behind Raiden, Golem, OmiseGo, Maker, Cosmos, and Japanese venture capitalist play Global Brain. Ethereum co-creator Vitalik Buterin will advise the initiative, which has already raised the equivalent of US$100 million to help foster the Ethereum ecosystem.

Coins and tokens and stocks, oh my!

[Note — Net change and % change figures are from the close last Friday to the close today.]

HIVE Blockchain (TSXV:HIVE) — $HIVE — Net Change: +$0.17; % Change: +9.0%

By the end of the month, we’ll finally get a good look under the hood of a large-scale crypto miner when HIVE releases its first financial statements covering a full quarter of mining operations (October through December of 2017). For the first half of October, the company was operating its initial data centre in Iceland, but the balance of the period will include operations from both the initial and second data centre in Iceland. Sweden Phase 1 didn’t come online until mid-January, so won’t be included, but it would be nice if the news or MD&A includes an update on how that is performing and/or how the second and third phases are tracking for roll-out.

In the meantime, take a look inside the Enigma mine in Iceland — which is HIVE’s — in this new video blog, and meet Genesis’ Marco Streng.

Riot Blockchain (NASDAQ:RIOT) — $RIOT — Net Change: -US$4.59; % Change: -28.6%

CNBC put out a scathing piece on RIOT Blockchain today and its share price suffered badly. RIOT, which has invested in privately-held Canadian crypto exchange Coinsquare.io, is getting the investigatory journalist treatment it seems, and it could get ugly. Check out the article here, which includes a video. The company responded today with a press release highlighting its achievements.

Other crypto/blockchain-related stocks riding the wave:

  • Mogo Finance (TSX:MOGO) — $MOGO — Net Change: +$0.12; % Change: +2.5%
  • Neptune Dash (TSXV:DASH) — $DASH — Net Change: +$0.09; % Change: +24.0%
  • Overstock (NASDAQ:OSTK) — $OSTK — Net Change: +US$5.55; % Change: +9.5%
  • MGT Capital (OTC:MGTI) — $MGTI — Net Change: -US$0.27; % Change: -10.2%
  • LeoNovus (TSXV:LTV) — $LTV — Net Change: -$0.02; % Change: -8.2%
  • Global Blockchain (TSXV:BLOC) — $BLOC — Net Change: +$0.10; % Change: +8.1%
  • BTL Group (TSXV:BTL) — $BTL — Net Change: -$0.37; % Change: -3.7%
  • NetCents Technology (CSE:NC) — $NC — Net Change: +$0.20; % Change: +10.3%
  • 360 Blockchain (CSE:CODE) — $CODE — Net Change: +$0.03; % Change: +23.1%
  • eXeBlock Technology (CSE:XBLK) — $XBLK — Net Change: +$0.01; % Change: +2.9%
  • BIG Blockchain Intelligence Group (CSE:BIGG) — $BIGG — Net Change: -$0.07; % Change: -6.5%
  • And a few others that have been getting some attention: Atlas Cloud (CSE:AKE) - $AKE; Block One Capital (TSXV:BLOK) - $BLOK; Calyx Bio-Ventures (TSXV:CYX) - $CYX; ePlay Digital (CSE:EPY) - $EPY; LottoGopher (CSE:LOTO) - $LOTO; HealthSpace Data Systems (CSE:HS); Stompy Bot (CSE:BOT); Imagination Park (CSE:IP); Blockchain Power Trust (TSXV:BPWR.UN) - $BPWR-UN; CryptoGlobal (TSXV:CPTO) - $CPTO; DMG Blockchain Solutions (TSXV:DMGI) - $DMGI.

Follow @Evenprime’s crypto watchlist should you wish to track the now dozens of names apparently in the crypto/blockchain game.

The CryptoTechnician Report

Cryptocurrencies continued last week's rebound by clawing back to nearly US$500 billion in total crypto market capitalization (US$480 billion at time of writing on Friday afternoon).

The US$500 billion level is not only a big psychological round number, but it also represents the neckline of the head & shoulders pattern which formed during the last few months. It's normal to expect some consolidation around this level before the next large directional move takes place in the cryptocurrency sector.

While Bitcoin and Ethereum have run into resistance near former areas of support ($10,000 for Bitcoin and $950 for Ethereum), the big story of the week was Litecoin coming back to life (surging more than 50% for the week):

After the impressive gains this week Litecoin has retaken the #5 spot in the cryptocurrency market cap rankings, displacing Cardano. I have made it no secret that I have been bullish on Litecoin (see here and here) and while my short term target at $240 has essentially been reached, I continue to see Litecoin reaching $400+ within the next couple of months as the LitePay roll out (set for February 26th) gains traction.

Imagine sending Litecoin from the wallet of your choice to a LitePay Debit card, allowing you to spend Litecoins anywhere in the world debit cards are accepted. This is the vision that LitePay is committed to achieving and the potential upside is enormous; $400 Litecoin might seem like a modest price target by the end of the month if the LitePay launch is executed successfully.

Finally, yesterday I received a trading alert from a premium service which costs US$3,000 per year. It was a bullish call on a coin called Gifto (GTO) and I watched a digital stampede unfold in front of my eyes as GTO proceeded to double in price in a span of less than 30 minutes:

It is impressive to watch how powerful some of these trading alerts can be in terms of generating aggressive buying pressure. As is typical for these sorts of pumps, GTO proceeded to give back more than 1/2 of its gains over the next 8 hours before steadily trending higher and moving back to the previous day's highs.

These are trading patterns that are worth following closely as they tend to repeat in similar fashion over and over again. Whenever we see coins up 50%-100% in the span of less than an hour we can be certain that a group with a large following has put out a pump call. I don't advise chasing after the pump, however, the aftermath of the pump call often offers high probability actionable setups i.e. buying on a 50% retracement from the high.

Funny things we saw this week

Courtesy of Twitter user $ArminVanBitcoin, there is one lightning node no one wants to connect with. Zooming in reveals why:

This week in strange headlines:

Fidget spinners are coming to the blockchain — for real… http://cryptospinners.io/

Weirdest Bitcoin explainer video every — courtesy of BBC News

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