The Simple Reasons Why the Bitcoin Price Will Never Go to Zero

By CCN.com: This publication recently covered a talk at Davos in which Jeff Schumacher claims the Bitcoin price is on the way to zero. In this article …
bitcoin price hodlbitcoin price hodl
There’s a simple reason why the bitcoin price can never go to zero. There will always be someone who refuses to sell. | Source: Shutterstock

By CCN.com: This publication recently covered a talk at Davos in which Jeff Schumacher claims the Bitcoin price is on the way to zero. In this article, we discuss two simple reasons why this is an impossibility.

As CCN’s Christina Comben writes:

Schumacher is a top investor and relative veteran in the space. He told an open-mouthed CNBC panel that he believed bitcoin has no value and that it was useless as a currency. Instead, he’s far more interested in blockchain technology.

Schumacher gave an opinion we haven’t heard in a while, the “based on nothing” argument.

I do believe it will go to zero. I think it’s a great technology but I don’t believe it’s a currency. It’s not based on anything.

Reason #1: True Believers

A hodl meme. Source: Know Your Meme

For the Bitcoin market to completely tank, virtually everyone would have to sell. This is something that has never happened. In fact, it can be safely estimated that less than half of the coins in existence are even available for exchange.

It’s hard to actually pin down how many coins exist on a given exchange, but we know that just over 1 million coins were moved across the blockchain in the last 24 hours. There are a total of just over 17 million coins. Satoshi Nakamoto is said to hold roughly 1 million of them. 21 million will ever exist.

Even in 2011 when that Gox hacker market-dumped 1million BTC, price dropped to $0.01, not ‘zero’. #davoshttps://t.co/7hCre4zpcG

— Dan McArdle (@robustus) January 23, 2019

A report from last year by Diar and another by Chainalsysis found that over 55% of the bitcoins in existence have never been sent. 42% of the people who hold more than 200 BTC did not even send an outgoing transaction during the price peak of December 2017, while 27% of those continued to add to their holdings later on.

If “hodlers” were not motivated to sell their coins when the price was massive, why would they suddenly do it when it was cheap? There is an issue of demand, but there’s no evidence that demand for Bitcoin is lacking. Even if it is only a speculative trading instrument, hedge funds and retail investors love it for that reason alone. That it doubles as a usable currency is a side-effect.

Although #bitcoin is the best known digital money system, more than 1,600 are on the market, with more being created all the time https://t.co/86DoEsFk79#blockchain via @ChloeNCornishpic.twitter.com/7w91l57EwP

— Jeff schumacher (@Jeffschumacher4) June 13, 2018

Reason #2: Rational Self-Interest

With such a high percentage of coins parked in various wallets and places, a number of cataclysmic events would have to conspire for the price to ever actually reach $0. Such a scenario requires that:

1) Hodlers suddenly have an economic incentive to rid themselves of coins (en masse).

2) Traders become willing to take losses in the thousands per token.

3) All trading bots programmed to buy cheap coins malfunction.

4) The majority of exchanges shut down or are hacked simultaneously.

5) Miners suddenly are willing to give their block rewards away for free.

It is a story of unimaginable entropy. In short, while Schumacher charges that Bitcoin “is not based anything,” this author must conclude that his theory of “zero” isn’t, either.

bitcoin pricebitcoin price
Bitcoin Price Chart (Logarithmic)

No one would sell at zero. A high percentage of people currently invested bought in higher than $1,000. The “buy and hold” strategy continues to reward those who see it through. Schumacher seems to fail to understand that a simple refusal to sell at a certain price makes for a true bottom.

Many early adopters continue to wait for a world where they can simply use the Bitcoin itself, rather than converting it to fiat currency for usage. This world is increasingly developing, but it may be decades before Bitcoin and cryptocurrencies are commonplace, especially outside of the developing world where they offer a superior and much-needed alternative to local cash solutions.

Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.

Featured Image from Shutterstock. Price Charts from TradingView.

Japan to Launch Blockchain Payment Experiment for Tokyo 2020 Olympics

It would also become the first large-scale deployment of a blockchain payment solution in Japan following similar experimental efforts by Mizuho …

Japan’s famously conservative financial system is set to receive the biggest shakeup in decades as one of the world’s largest financial institutions is building a blockchain-based consumer network designed to handle a million transactions per second in time for the Tokyo 2020 Olympics.

The MIT Technology Review reports that Mitsubishi UFJ Financial Group (MUFG), which is Japan’s largest bank by assets and the fifth biggest bank in the world is collaborating with American internet startup Akamai, to build and deploy what is set to be the world’s fastest payment network, far superior to Visa and Bitcoin, which are currently the largest fiat and crypto networks.

If the experiment succeeds in time for the Olympics, it would signal a new era of financial innovation in a country still dominated by cash transactions despite the world leading electronic transaction infrastructure that is obtainable in many of its Asian neighbors like South Korea and China. It would also become the first large-scale deployment of a blockchain payment solution in Japan following similar experimental efforts by Mizuho Financial Group and SBI Holdings.

Japan’s Cash Problem

Despite its reputation for world-leading technology innovation in so many areas, Japan’s financial system remains a stubborn holdout, in part due to a stubborn cultural preference for paying in cash for goods and services. Japanese citizens are the world’s most prolific users of physical cash, with the cost of running the country’s 200,000-strong ATM network along with cash registers and bullion vans estimated at $18 billion annually.

While the Japanese financial industry may be willing to endure the cost of this status quo in exchange for keeping its stranglehold on the famously patriotic Japanese consumer market, the siting of next year’s Olympic Games in Tokyo will make the situation untenable. With hundreds of thousands of international visitors expected in Tokyo alone.

As many of these visitors are from countries where electronic transactions are par for the course, it is estimated that Japan could miss out on hundreds of millions of dollars which the stolid Japanese economy could really use at this point.

Primed to Leapfrog?

MUFG may likely have its eyes on some key facts about cryptocurrency use in Japan that has convinced it that this is the way to go. First of all, while Japanese consumers might be notorious for their cash preference, cryptocurrency is also wildly popular in the country, and at one point the defunct bitcoin exchange Mt. Gox processed as much as 70 percent of the world’s bitcoin exchange transactions.

The Japanese Financial Standards Agency (FSA) is also one of the world’s most experienced authorities in the field of cryptocurrency regulation, and MUFG’s bet is that these factors make Japan uniquely positioned to leapfrog from cash to cryptocurrency, skipping two decades worth of legacy electronic transaction technology in the process.

The only existing reference for leapfrogging on such a grand scale is probably the GSM revolution in sub-Saharan Africa which saw the world’s last population to come online become one of the tech-savviest in the space of 15 years, by leapfrogging legacy telecoms technology and going straight into GSM and CDMA networking. A similar move in Japan would see it overnight become the world’s biggest staging point for cryptocurrency adoption and a possible starting point for similar national or supranational network deployments around the world.

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Japan to Launch Blockchain Payment Experiment for Tokyo 2020 Olympics
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Japan to Launch Blockchain Payment Experiment for Tokyo 2020 Olympics
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Japan’s famously conservative financial system is set to receive the biggest shakeup in decades as one of the world’s largest financial institutions is building a blockchain-based consumer network designed to handle a million transactions per second in time for the Tokyo 2020 Olympics.
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David
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The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.


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Will people ditch cash for cryptocurrency? Japan is about to find out

It is relatively technologically savvy, cryptocurrency trading has been uniquely popular in the country for years, and Japan’s financial regulators are …

Japan’s citizens have an expensive habit: paying for things with cash.

Most payments in the world’s third largest economy involve paper bills and metal coins. That sets Japan far apart from China and South Korea, where various “cashless” electronic payment schemes dominate, as well as the West, where credit and debit cards are much more popular.

That means the country also has a lot of ATMs—probably over 200,000—as well as cash registers and fleets of vehicles for moving money around. It all adds up to an estimated $18 billion a year in costs, most borne by the financial industry.

Next year, hundreds of thousands of foreign visitors—most from countries where credit cards and digital payments are second nature—will descend on Tokyo for the Olympics. They’re expected to spend billions of dollars during the event, and Japan’s financial system simply isn’t equipped to handle it. Hundreds of millions could be left on the table.

Prime Minister Shinzo Abe says he wants 40% of payments to be cashless by 2025. In August, the government announced plans to offer tax breaks and subsidies for companies that get on board. And while everything from credit card payments to transactions using QR codes would qualify, some of the country’s biggest financial players think the way to wean Japan off cash lies in the technology that runs Bitcoin.

Mitsubishi UFJ Financial Group (MUFG), the country’s largest bank and the fifth largest in the world by total assets, has teamed with American internet company Akamai to build a blockchain-based consumer payment network in time for the Olympics. If they pull it off, it could be the fastest and most powerful consumer payment network to date. They claim that in tests it’s been able to handle more than a million transactions per second, with each transaction confirmed in two seconds or less, and say it could eventually achieve 10 million transactions per second. (Visa’s credit card network, by comparison, handles several thousand transactions per second. Bitcoin tops out at about seven transactions per second, and each transaction can take up to an hour to confirm.) The system is designed to handle all kinds of payments, from automated highway tolls to payment-card swipes to in-app purchases.

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MUFG, which has also tested its own crypto-token, is far from alone. Mizuho Financial Group, a large holding company, has been experimenting with blockchain technology for several years as part of a project dubbed “J-Coin” and plans to release its own digital currency for retail payments in March. SBI Holdings, a big financial-services firm, says it’s building its own token, also for retail payments, called S Coin.

The wager all these companies are making is that Japan’s society is primed to start using digital cash. It is relatively technologically savvy, cryptocurrency trading has been uniquely popular in the country for years, and Japan’s financial regulators are more familiar with blockchain technology than any others in the world. With the government’s pressure to go cashless, and little competition from credit cards and other forms of e-payment, Japan could leapfrog the technology underlying today’s electronic payment networks and go straight to blockchains.

If the experiment works, the country’s economy might be remade. Everything from huge transactions between banks to small retail purchases could be carried out with barely any delay and at a fraction of the current cost; even today’s credit cards would be slow and expensive by comparison.

In the process, Japan will become the world’s biggest test bed for the decade-old idea that a cryptographic ledger and a network of computers can be used to create an electronic form of cash. It might even regain its position as a global leader in both finance and technology—a status it hasn’t enjoyed for decades.

The story of how it got to this moment, however, begins with a catastrophe.

Franziska Barczyk

The legacy of Mt. Gox

Long, long ago in cryptocurrency time—which is to say, between 2010 and early 2014—Tokyo-based Mt. Gox was the global online platform for buying and trading Bitcoin. In 2013, it accounted for 70% of all Bitcoin transactions. So when hackers made off with $450 million worth of Bitcoin from the exchange, causing it to collapse, the shock waves were felt worldwide.

The disaster was particularly traumatic for Japan, recalls Aya Miyaguchi, who at the time was working for Kraken, a US-based exchange that was one of the few competitors to Mt. Gox. “For the most part, people did not know anything about Bitcoin,” she says. When the news of the collapse broke, “many in the country panicked,” she says, and the Japanese media panned cryptocurrencies.

This worried Miyaguchi, a native of Japan who moved to the US 10 years ago and now heads the Ethereum Foundation. “I thought the entire ecosystem could be at risk without proper information and education,” she says. She felt a duty to help educate regulators, investors, and the public about cryptocurrency and blockchains.

Just a month after Mt. Gox’s meltdown, Miyaguchi met with Mineyuki Fukuda, an influential lawmaker in Japan’s ruling party who had been given the job of figuring out how to regulate the technology. She was struck by his foresight. “He saw this technology as bringing a potential competitive advantage to Japan,” says Miyaguchi. “We even talked about how we could use crypto for the Tokyo 2020 Olympics.”

Fukuda was not acting in a vacuum. In the late 1990s and early 2000s Japan’s tech industry, once the envy of the world, had lost big chunks of global market share to foreign companies, particularly in South Korea and China. The government was on the lookout for new industries in which the country could compete. Policymakers were particularly concerned about how Japan had fallen behind China in fintech, says Thomas Glucksmann, a former Mt. Gox employee who now runs Asian corporate partnerships for Diginex, a Hong Kong–based consulting firm focused on blockchain technology.

Fukuda decided not to slap down the cryptocurrency industry after the Mt. Gox collapse, but to cultivate it. Instead of immediately creating new rules for blockchain technology, the government set up an industry-led self-regulatory organization. Eventually, Japan rolled out the world’s first (and still only) licensing regime for cryptocurrency exchanges, which went into effect in April 2017.

The authorities were less forgiving after hackers looted half a billion dollars in January 2018 from Coincheck, an unlicensed exchange that was operating under an exemption. Japan’s Financial Services Agency (FSA) launched investigations of the nation’s cryptocurrency exchanges and ordered several of them to fix shoddy security practices. The regulators toughened up licensing, slowing new approvals to a halt; Coincheck, now under new management, finally got its license only this month.

Regulating cryptocurrency without hindering innovation is a challenge for many governments. But Japan seems to be striking a pretty good balance. After the Coincheck incident, the FSA “studied very hard about cryptocurrency and cybersecurity” and wound up better informed than most consultants in the industry, says Oki Matsumoto, chairman and managing director of Monex, Coincheck’s new owner. As with the Mt. Gox fiasco, the government turned the Coincheck hack into a teachable moment.

Franziska Barczyk

Inventing crypto-cash

There’s at least one more reason to think blockchain-based cash can succeed in Japan: retail investors there already love crypto.

The affection apparently stems from their affinity for trading foreign currencies. Japanese traders account for more than half of all global margin trading in the foreign exchange market. Of late, they’ve expanded to cryptocurrency trading, taking advantage of Japan’s bustling (and now regulated) exchange scene. It’s hard to pin down the Japanese cryptocurrency market’s exact size, but it has become Asia’s biggest market since China clamped down on trading in 2017. Analysts at Deutsche Bank say Japanese retail investors were a big reason why Bitcoin’s price shot up to almost $20,000 in late 2017.

Of course, cryptocurrency trading is popular in many countries, yet it isn’t used much in retail payments anywhere. Why should Japan be any different? Its retail sector is decidedly low-tech: most stores don’t even accept credit or debit cards. To shop online, people commonly print out a bar code at home and take it to a convenience store, where they pay in cash.

On the other hand, they aren’t completely averse to electronic payments. Prepaid card services like Suica, which are sold by the country’s major railway companies, are popular. Grocery and convenience stores tend to accept Suica cards, too. Andy Champagne, CTO of Akamai, is convinced that the pieces are in place for Japan to end its love affair with cash. “It’s an extraordinarily technical society, and a society that’s very interested in transacting digitally,” he says. Given the government’s push to go cashless fast, “it’s a unique opportunity at a unique time.”

But even if that’s the case, why blockchains? Today’s cryptocurrencies tend to be volatile unless they’re backed by fiat currency in a bank account. They are difficult to use and keep safe from hackers, and blockchain transactions that turn out to be fraudulent can’t be reversed. Third-party services like exchanges can have big security problems, as the Mt. Gox and Coincheck hacks showed. And the most popular blockchains are slow and require masses of computing power to secure the ledger, which gives them huge carbon footprints.

The systems Japan’s banks are building could change that. MUFG’s blockchain will run on Akamai’s servers. The company is skilled at building proprietary algorithms to deliver web content to users around the world, its core business. That expertise readily translates to running a network that’s more energy efficient, faster, and cheaper to operate than a public blockchain, Champagne says. So much so, MUFG believes, that even payments too small to make sense on traditional credit card networks will be feasible.

Will people in Japan really ditch their cash for blockchains, though? Yoriko Beal, cofounder of HashHub, a co-working space for blockchain startups in Tokyo, is skeptical. The popularity of Suica cards shows that it’s not outside the realm of possibility. But she believes it’s about utility, not about the underlying technology. Suica cards are very useful, so people adopted them, she says: “If MUFG and Akamai are so sure that using blockchain can reduce costs a lot compared to, like, using metro cards, it might happen.”

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Oops! South Korean Crypto Exchange Accidentally Sends Traders $5 Million in Bitcoin

Coindesk Korea has reported that the Korean crypto exchange Coinnest has accidentally airdropped over $5 million in bitcoin and Korean won and is …
Image: Shutterstock

By CCN.com: Did you ever dream of waking up in the morning to unexpectedly find a vast amount of cash miraculously appearing in your account? That is what recently happened to users of a prominent South Korean crypto exchange.

Coindesk Korea has reported that the Korean crypto exchange Coinnest has accidentally airdropped over $5 million in bitcoin and Korean won and is looking how to reclaim their misdirected funds.

Accidental Airdrop Lands Exchange in Trouble

Coinnest has announced it has accidentally sent 6 billion Korean won worth of bitcoin, which equates to $5.3 million, to the accounts of traders. The Korean crypto exchange was attempting to airdrop We Game Tokens (WGT), but somehow their wires got crossed and they wrongly airdropped bitcoin instead in a catastrophic blunder.

Amidst the madness, Coinnest also accidentally sent some Korean won to users but has been trying to roll back their servers to recover their losses. As expected, some account holders saw the crypto and withdrew it right away. The exchange is now asking their users to return the misdirected funds. Coindesk Korea also noted that because so many Coinnest users were scrambling to withdraw their surprise winnings that it crashed the bitcoin price on the site to almost $50.

Cryptocurrency BitcoinCryptocurrency Bitcoin
The Korean exchange admitted to an airdrop of ₩6 billion in bitcoin to traders’ accounts. Pic: Shutterstock

The server issues were apparently fixed on Jan 19, with approximately half of the Korean won already returned. At this point in time, Coinnest does not have any plans to compensate anyone for the losses, although we believe the issue is not yet over.

Coinnest in the News Again

This is not the first time Coinnest have made the crypto news due to blunders and buffoonery. In the first quarter of 2018, the Korean crypto exchange was caught up in a scandal where their former chief executive Kim Ik-hwan was suspected of allegedly embezzling billions of Korean won from client’s accounts and transferring them to his own accounts.

The Coinnest board of directors swiftly acted to remove their former president and continued to apologize to their users for any negative impact they had experienced due to the alleged embezzlement.

Kim Ik-hwan was arrested and questioned by local Korean authorities, but the outcome of the case seemed to evaporate into the ether and has remained very quiet ever since.

It seems that Coinnest and controversy go hand in hand. As of yet, no-one from the exchange has answered our questions pertaining to the misguided airdrop. But we will keep you up to date on any developments.

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Bitcoin [BTC] thefts: Cambridge scholars find an ‘ancient’ way to combat future cryptocurrency crimes

While the true number of Bitcoins [BTC] stolen till date will actually remain a mystery, the official number exceeds $1 billion in BTCs. Transactions in …

While the true number of Bitcoins [BTC] stolen till date will actually remain a mystery, the official number exceeds $1 billion in BTCs. Transactions in the Bitcoin ecosystem are not anonymous and are public in nature, but they are quite untraceable. The reason as to why they are impossible to track is because, unlike each US Dollar bill, which is engraved with a serial number, individual Bitcoins are not numbered and hence, trailing the genesis of the coins [or stolen coins] is pretty elusive.

However, few Cambridge University scholars namely, Mansoor Ahmed, Ilia Shumailor and Rose Anderson, have released a paper called – Tendrils of crime- visualizing the diffusion of stolen coins, elucidating a system to trace back the stolen coins which can be further reclaimed by the victim it was stolen from.

The paper also said that ‘one-to-many’ kind of transactions are, although very rare [as many wallets do not permit the transactions from one source to multiple entities at a given time], the ones which are commonly used for money laundering purposes.

The paper, in brief, explains two types of tracking processes, of which the second one seems to be helpful in drawing a recourse of the stolen coin (or coins). This approach is called Taintchain, which uses a device called FIFO (stands for first in, first out). FIFO is an ancient accounting method that has been applied in various fields including law and most recently – in the cryptocurrency space.

It fundamentally splits each Bitcoin into its smallest unit called satoshis, i.e., 1 Bitcoin into 100 million unique satoshis carrying all the information of its movement. The FIFO algorithm enables trailing the course of the coin movement right back to the genesis wallet. The rule that applies here is that if the first coins that got into the wallet were stolen, then the first ones which were paid out of the wallet are considered to be stolen too.

With graphical interpretations along with apt visualization tools, the paper asserts the second approach to be much more practical. The paper concluded by bringing into notice that despite several shortcomings, this approach seems to work and that they are up for improvisation.


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