Bitcoin peaked a year ago: Here’s a look at 12 months of misery

Lee added the Bitcoin Cash hard fork and the floundering initial coin offering, or ICO, market to his list of factors that weighed on cryptocurrencies in …

Monday, Dec. 17, will mark one year since the price of bitcoin — the best-known cryptocurrency — hit an all-time high just shy of $20,000. For bulls who bought the hype, it’s been a long — and painful — ride down.

At the time, the digital currency was up more than 1,000% for 2017, both the CME Group and Cboe had just launched bitcoin futures contracts, and everyone seemed to be making money as talk about the previously obscure crypto market made its way into the mainstream media.

In retrospect, it appeared all too easy: Bitcoin rose 11 of the 12 weeks leading up to the Dec. 17 peak and logged gains in eight of the last nine months in 2017. Day traders were millionaires, analysts were predicting further drastic price increases and investors jumped on what looked like an endless gravy train.

According to Crypto Fund Research, 85 crypto-related funds launched in the first three months of 2018, and at Jan. 1 2018, there was $5.8 billion of assets under management in the crypto hedge fund industry, compared with $675 million a year earlier.

Crypto-related funds launched

But, in the blink of an eye, the tide turned: A January correction soon turned into a collapse and then turned into what was dubbed a prolonged crypto winter — a season that has yet to end.

From their peaks, most major coins lost more than 80%. Bitcoin BTCUSD, -2.17% has shed as much as 85%. Ether, ETHUSD, -1.58% the popular currency that runs on the ethereum blockchain, fell as much as 95%, losing its title of the second-largest digital currency.

Crypto, % Below all-time high…

BitConnect: -100%

Qtum: -99%

ICON: -98%

Cardano: -98%

Bitcoin Gold: -98%

Bitcoin Cash: -98%

NEO: -97%

Lisk: -97%

NEM: -96%

IOTA: -96%

Dash: -96%

TRON: -95%

zCash: -94%

Ethereum: -93%

Litecoin: -93%

XRP: -92%

EOS: -92%

Monero: -90%

Bitcoin: -83%

— Charlie Bilello (@charliebilello) December 8, 2018

As the selloff deepened, bitcoin pundits dug their heels in, failing to cave to a bear market that wiped as much as $700 billion off the total value of all cryptocurrencies.

Read:Opinion: Bitcoin is close to becoming worthless

There were warnings, of course. JPMorgan Chase & Co. JPM, -0.99% Chief Executive Jamie Dimon called bitcoin a “fraud” in September 2017, though he later said he regretted using the word. Billionaire investor Warren Buffett called bitcoin mania a “mirage” and predicted it would “come to a bad ending.” And they weren’t alone.

See:A list of what Wall Street CEOs have said about bitcoin

2018: The year of bitcoin predictions

After a stellar call in late 2016, when Kay Van-Petersen of Saxo Bank said bitcoin would rise to $2,000 in 2017 — a feat achieved five months into the year — the analyst told CNBC in January that bitcoin could trade as high as $100,000 in 2018.

“First off, you could argue we have had a proper correction in bitcoin, it has had a 50% pullback at one point, which is healthy. But we have still not seen the full effect of the futures contracts,” he told CNBC.

On the heels of Van-Petersen, venture capital guru Tim Draper, who famously purchased around 30,000 bitcoins in 2014 from the Silk Road bust, said the price of a single bitcoin could trade as high as $250,000. Draper can say he has time on his side, saying it would take until 2022 for bitcoin to reach the quarter of a million milestone.

Read:Bitcoin will rise to $250,000 by 2022, says Tim Draper

Former Goldman Sachs partner and hedge-fund manager Mike Novogratz was another who called the run-up in digital currencies, saying in 2017 that bitcoin would reach $10,000. However, after riding the wave up, Novogratz said on Sept. 13, with bitcoin trading around $6,300, that he believes the low for 2018 was in and a week later he told CNBC that he sees a potential 30% rally by the end of the year.

Read:Cryptos or the S&P? A $1-million ‘Buffett Bet 2.0’ is brewing as Twitter feud erupts

Another who thought bitcoin would base around $6,000 to $6,500 was Dan Morehead, chief executive and co-chief investment officer at Pantera Capital Management. In April he said widespread adoption would propel bitcoin to a new high.

“I rarely have such strong conviction on timing. A wall of institutional money will drive the markets much higher,” Morehead said in the company’s April newsletter.

Elsewhere, perennial bitcoin bull Tom Lee said in July that he’d rather own bitcoin than equities, putting a price target of $25,000 by the end of the year. As the cryptocurrency continued to stumble, Lee dropped his price target to $15,000 in November.

Since Lee’s July 5 call, bitcoin has fallen 48% compared with the S&P 500, SPX, -1.97% which has fallen 3.1%, the Dow Jones Industrial Average, DJIA, -2.15% which has gained 0.9% and the Nasdaq Composite, COMP, -2.09% which has lost 6.8%.

The head of New York-based Fundstrat Global Advisors said bitcoin’s network value, coupled with a supply model that uses break-even mining costs to value bitcoin puts the fair value of the largest cryptocurrency between $13,800 and $14,800.

Read:Here’s how much it costs to mine a single bitcoin in your country

What went so wrong

Now, 12 months since the peak and two weeks out from the end of the year, many analysts are in a reflective mood. Lee said a number of factors lead to the underperformance of the broader crypto market, including regulatory hurdles, industry disagreements and a generally risk-averse, global market environment.

“Global markets have seen massive de-risking, and this resulted in further selling pressure on bitcoin. Consider that some holders of bitcoin have large exposure to FANG or equities (Silicon Valley entrepreneurs, for instance),” wrote Lee, in a note to clients. FANG is an acronym referring to previously highflying, large-cap tech shares, including Facebook Inc. FB, -0.41% Apple Inc. AAPL, -2.79% Netflix Inc. NFLX, -2.17% and Google parent Alphabet Inc. GOOG, -1.78%GOOGL, -2.04%

Lee added the Bitcoin Cash hard fork and the floundering initial coin offering, or ICO, market to his list of factors that weighed on cryptocurrencies in 2018.

Investment in ICOs stalled in the second half of 2018 as a number of regulatory rulings turned investors off the alternative method of capital raising. In November, the Securities and Exchange Commission slapped two companies with fines for launching unregistered coin offerings. The ruling was the first nonfraudulent case, meaning the companies could continue operations once they registers the tokens as securities.

Read:Are cash-strapped ICOs behind Ether’s underperformance?

A hard fork occurs when developers and miners no longer agree on a proposed change to the software, despite operating on the same blockchain. Once the fork takes place, one group of so-called nodes — computers that are connected to the network and are part of the transaction confirmation process — will upgrade to the new software and the other will operate on the old rules, creating two separate blockchains and digital currencies.

For Novogratz, he agreed the contentious hard fork played a role in bitcoin’s underperformance.

“It felt like the selling was finished. But then Bitcoin Cash decided to fork again,” Novogratz told Bloomberg in Dec. 11 interview. “At the same time the SEC came out and sanctioned a few ICOs and said, ‘Oh, by the way, your investors can sue for damages.’ That scared the heck out of a lot of people.”

Read:A string of great bitcoin calls makes this Chilean trader a must-follow

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Aurora Big Data Study: China’s Bitcoin Ban Not As Effective As Expected For The ‘Anti-Crypto …

Although virtual currencies might not be allowed in the country, blockchain technology continues to expand. There are several companies that are …
Aurora Big Data Study: China's Bitcoin Ban Not As Effective As Expected For The 'Anti-Crypto' Country

Back in 2017, China decided to ban cryptocurrency trading activities and Initial Coin Offerings (ICOs) from the country. This is something that severely affected the whole space at that time. However, it seems that the ban did not work as good as expected.

According to a new study, Aurora Big Data shows that the industry penetration rate of cryptocurrencies entered a rising channel in November, reports Trustnodes. Compared to the last year, the number of users of virtual currency applications reached 7.51 million, representing an increase of 230% compared to the last year.

The growth seems to start in December the last year when Bitcoin was reaching its all-time high in the market of $20,000. According to the report, the most popular platforms are the light wallet imToken, Huobi Pro and OKEx. Exchanges seem to be the most popular apps in the country, followed by crypto media apps.

This suggests that the ban in China did not have the effects that the government was searching for. China is a very authoritarian country that tends to control everything that citizens do. With virtual currencies, the government is not able to control the flow of money in the country.

The report reads as follows according to a translation made by Trustnodes:

“The user-level distribution results updated to September show that 12.7% if virtual currency application users are distributed in first-tier cities, and the proportion of users in new first and second-tier cities is 19-8% and 19.5% respectively.”

The study suggests that China’s poor are more than interested in virtual currencies than other social classes.

During the last months, WeChat users in China were complaining that the government was cracking down crypto-related groups in the popular messaging application, one of the most important in China. This is why users decided to move to Telegram, that is secure and provides more privacy features.

China is also one of the countries with the largest number of crypto miners. With electricity costs that are cheaper than in many other countries and cold weather, allowed several companies to locate their mining operations in the country. This could also be one of the reasons why there is an increase in the number of users in the crypto space. Some of the BTC mined by these industries might be transacted in a peer-to-peer network of investors.

Although virtual currencies might not be allowed in the country, blockchain technology continues to expand. There are several companies that are working in China with distributed ledger technology and some of them have released very interesting services and products to the market.

The ban in China could be less effective than expected. If one day the ban is eliminated, the number of crypto users entering the market would have a clear effect on the most popular virtual currency asset.

2019 cannot be worse for cryptocurrencies

This is a step forward from the initial coin offering (ICO) boom and bust of 2018. Investors poured billions into acquiring tokens that do not generate …

The year 2018 has been a terrible one for cryptocurrencies, which have been on a race to the bottom that shows no real sign of abating. Even for a market accustomed to turbulence, losses of 80% or more are somewhat unsettling.

Almost all of the top 100 tokens by market cap listed on crypto analytics site CoinMarketCap are in the red for the year – the impact is especially so for Bitcoin, the first and still most popular digital currency.

Despite this rather dire situation, Mathieu Saint-Cyr, MD of the Geneva Management Group (GMG)’s crypto unit, believes that 2019 will be a better year for cryptocurrencies. He is quick to point out though that cryptocurrencies as we know them (Bitcoin and Ethereum for instance), are just one of many possible applications that can be derived from the underlying blockchain technology.

Security token offerings

He believes 2019 will see the advancement of new applications, also underpinned by blockchain, that have the potential to be of far greater value to investors. For example, he references security token offerings, a relatively new way of raising funds for a start-up business. This is in some ways similar to a traditional business that is going public through an initial public offering because the token is considered a legally binding investment contract that gives investors access to a share of the company, a regular dividend or a voice in the business decision-making process.

This is a step forward from the initial coin offering (ICO) boom and bust of 2018. Investors poured billions into acquiring tokens that do not generate equity or any other kind of asset from the company. Instead, they are issued as an IOU or coupon which owners can exchange for future products or services. But in most cases there were no future products or services – the underlying company went bust and the investor was left with the puff of a good idea.

“These tokens [security tokens] are based on something tangible, like bonds or real estate,” says Saint-Cyr. He cites as an example Crowdlitoken, a real-estate-backed crypto coin registered and regulated in Switzerland.

“The regulator in Switzerland is very proactive,” he adds. Earlier this year the regulator issued a set of guidelines that harmonised the regulatory regime; it focused on which tokens would be classified as securities and how crypto companies can be compliant while carrying out ICO activities.

Blockchain-based assets

In October Crypto Fund AG became the first company to get the green light from the Swiss Financial Market Supervisory to offer a wide range of blockchain-based assets to institutional investors in the country. This empowers the fund to legally act as an asset manager that can offer investment advice and issue an array of investment products that “track bitcoin and other cryptocurrencies,” including Swiss-based funds.

It is this trend towards increased regulation of the crypto space, also happening in other jurisdictions, that Saint-Cyr believes will ensure that legitimate operators gain a greater share of the market and that investors will gain confidence in the asset class.

Depending on where you stand, the news in November that the US Securities and Exchange Commission had ruled that two companies, CarrierEq (Airfox) and Paragon Coin, conducted illegal ICOs is a setback or step forward for the nascent industry. Both companies have agreed to return funds to harmed investors, register the tokens as securities, file periodic reports with the commission, and pay penalties.

Saint-Cyr does not see it as a setback. “After a year like this year, if people want cryptos to reach a mass adoption stage they will need to follow the same guidelines and regulations that other asset classes are following.

Strong effort globally

“I think we are moving into a new phase. History is filled with people investing in new products or asset classes that go bust. Look at tech stocks in the 2000s, or property speculation in 2008. The same has happened with cryptocurrencies. Now there is a strong effort around the world to add a layer of regulatory protection. This may prevent some of the excesses we saw in the last year. One way to protect people is to establish clear guidelines and regulations.

“My hope is really that the public will see ICO 2018 as bubble that has been replaced by something more fundamental, with practical and useful applications. That will be the condition for this new asset class.”

GMG will not develop crypto assets, nor will it run crypto portfolios. Instead, the company is responding to the interest coming from its clients who are high-net-worth individuals and interested in blockchain and cryptocurrencies for the portfolio diversification opportunities and peer-to-peer settlement options, among others.

“Our investors are looking for trading, analysis, corporate services, fund formation, and management assistance,” he says. “In the process of providing them with support, we want to demystify this world for others, such as relationship managers and compliance officers.”

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TokenSoft Global Markets Acquires 20% Stake in Marpine Securities Regulated Broker-Dealer …

For instance, now it can take the clients across all the most important steps of the Initial Coin Offering (ICO), including the sale of tokens. According to …

TokenSoft, a STO technology platform, has decided that it was the time to launch a regulated broker-dealer service with its brand. This is part of a new push promoted by the company to offer more services for startup companies and token issuers.

This company is known for its work in assisting starts with the launch of their token sales. The new affiliate will be called TokenSoft Global Markets and will act as a fully U. S.-regulated broker-dealer company. TokenSoft was able to get a license from the New York office of Financial Industry Regulatory Authority (FINRA), which is very hard.

Now that TokenSoft has a regulated affiliate, the company will be able to provide for its clients some things that it could do before. For instance, now it can take the clients across all the most important steps of the Initial Coin Offering (ICO), including the sale of tokens.

According to Mason Borda, the co-founder of the company, having a broker-dealer license will be a gamechanger for TokenSoft. This would provide the company with the ability to offer new possibilities for their customers and, most of all, to offer full services. Now, they will not need to use the services of any other company at all.

Before the company was able to acquire this license, TokenSoft’s customers would have to coordinate with some other company and this would make their path considerably harder than it currently is.

To be able to acquire the license, the company had to buy a 20% stake in Marpine Securities LLC, a regulated broker-dealer company in the state of New York. Despite part of the company being rebranded as TokenSoft Global Markets, both companies will remain with a separate leadership and will be two distinctions companies.

The first important plan top is to provide referral services for all kinds of custody providers and exchanges. They will help the companies which are set on issuing tokens to set up accounts on exchanges and similar services. The own division of the company will also manage the ICOs for some clients and will provide the support for all the stages of the ICO process so that it is compliant and successful. Marketing support will also be provided by the company.

Compliance support is very important now as U. S. Securities and Exchange Commission (SEC) is focused on going after any American ICO that is not fully regulated and offers securities.

The company is evaluating all the possibilities that they have at the moment with the new division of the company and what can be done to make the lives of their clients easier. The company is set to bring more safety and compliance to companies thinking about launching ICOs and get them on the right regulatory footing.

TokenSoft Global Markets has regulatory approval since October and has been ready to offer its services legally, but it is still lacking the platform. The platform is almost ready and there has been a lot of effort lately to coordinate the launch so that the users will have the best experience when the product is finally out there.

Crypto suffers a black eye after a buzzy $130 million project crumbles

Basis said it raised $133 million just this April from blue-chip venture capitalists like Andreessen Horowitz and Alphabet’s GV. That shocking amount of …

The cryptocurrency industry has had a wild, peak-to-valley year. Case in point: The news today that Basis — one of Silicon Valley’s buzziest attempts to create an alternative to traditional currency — is shutting down.

Basis said it raised $133 million just this April from blue-chip venture capitalists like Andreessen Horowitz and Alphabet’s GV. That shocking amount of dough was meant to build a “stablecoin” — or a currency that would be insulated from inflation — and to try and prevent the price sensitivity that has bedeviled other cryptocurrencies.

But Basis felt the project would really only work if its tokens, or what Basis created to adjust the supply of its stablecoin and therefore keep its value relatively stable, wouldn’t be subject to U.S. securities laws. Regulators have been trying to assess whether to apply standard laws that govern things like stocks to digital assets like coins — and Basis said it was reading the tea leaves and predicting a crackdown.

“Unfortunately, having to apply US securities regulation to the system had a serious negative impact on our ability to launch Basis,” its CEO Nader Al-Naji wrote Thursday.

But at a bigger-picture level, this is a black eye for the entire cryptocurrency industry. As the amount of money it raised makes clear, Basis was seen as being at the vanguard of the cryptocurrency revolution. And while the company says it is returning the money it raised to its investors, it’s nevertheless a very public stumble for its prestigious backers.

Of course, crypto investing — just like startup investing — produces lots of failures. That’s normal. But this particular failure also is a reminder why some Silicon Valley investors shied away from investing in crypto projects such as initial coin offerings in the first place: The regulatory landscape is just too uncertain to be able to predict much of anything.

Basis’ demise was first reported by The Block.

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