Bloomberg Coinbase Hit Piece – Sell Bitcoins No Payout

This article from Bloomberg talks about a “surge in customer complaints”…up to 293 about Coinbase. The article proceeds to use terms like “scam” and says that people who sold Bitcoin aren’t getting their money in the time frame quoted by the company.

Yes, they do mention that Coinbase is getting a lot of new users – but they don’t define just how many. Its MILLIONS of new users. 

I’m not suggesting that Coinbase has great customer support, or that they aren’t without problems. But linking them to “scams” is ridiculous. Step back for a second and think about this:

293 formal complaints against MILLIONS of new users, hard forks, record volumes.

That ain’t bad. Inconvenient even aggravating for users who need their money? Yes. Scam, no.

What Does this Bitcoin Google Trend Mean?

The Google Trend data for the “Bitcoin” topic has stayed in step with the Bitcoin Price for the last year. Quite interestingly the trend has fallen off yet the Bitcoin price has surged higher. Who is to say what it means, but its an interesting divergence.

Bitcoin Google Trends vs Price
Google Trends Data decline vs Bitcoin Price Rise

The IRS has Been Tracking Bitcoin

Coindesk reports that the IRS uses some software from “Chainalysis” to help trace Bitcoin. Its widely known that the IRS has been going after Coinbase to dump data on its users after it said that only 802 people reported Bitcoin gains in 2015.

While I’m sure most US citizens pay their taxes on Bitcoin gains there is no doubt that regulation will just increase as the US hunts down whats “theirs”.

When it comes to hunting down revenue the IRS is amazing. All the “know your client” regulation being imposed on crypto exchanges is feels much less about “fighting terrorism” than it does collecting taxes. After all,  banks are some of the most regulated organizations on the planet and they still launder billions annually. 

My point is that you are wise to pay your taxes on crypto earnings and avoid an expensive headache that is sure to come your way if you don’t.

This GBTC Bitcoin ETF Analysis Hurts My Head.

From seeking alpha comes this gem about GBTC the Bitcoin ETF. The author acknowledges the extreme premium in which the ETF trades over the Bitcoin price. In other words if you buy GBTC you are currently paying >80% or more than just buying Bitcoin. (see more here)

First, he claims that “buying directly through coinbase has a +40% premium”. I don’t know why and he doesnt support his claim in the article. Yes, coinbase charges a fee, but it is not where near 40%.

He offers that GBTC offers cold storage through Xapo, and Coinbase offers insurnace but it comes with astericks – see authors article here.

Ok, so lets say that GBTC is more secure for storage of Bitcoin over Coinbase. The author ignores the fact that most responsible crypto owners get a hardware wallet or some other “off exchange” wallet.  This fact doesnt help justify the massive premium you’re paying for GBTC.

Finally there is this, the author presents an argument by a GBTC investor:

“I’ve decided to go with GBTC as a way of safely getting exposure to Bitcoin via my brokerage account, because I’m VERY long on it, and I can easily liquidate high dollar amounts (over $10K) at any time I want. And it’s all on the up-and-up, easily trackable for tax purposes, which I care about. My thesis is that the current premium is less important to me than the exposure because it’s 41% (or whatever the current percentage is) of a small fraction of what the ultimate price of bitcoin will be 10 years from now. It’s not perfect, I acknowledge that, but it strikes me as my best option, especially if I’m viewing this as one of my high-risk, high-reward investments.”

The argument is that in 10 years, the GBTC premium will be irrelevant. Of course, this leaves out he problem of P/E compression, or the potential catastrophic failure of Bitcoin in general. But, this line of thinking is congruent with the thinking of a Bitcoin bull. This isn’t “blind” investing or totally ignorant. I can respect part of this.

This completely ignores the fact that there are at least two other proposed Bitcoin ETF’s with the SEC. Care to bet that in 10 years there will be even more? Whats going to happen to the GBTC premium when other ETF’s come out which dont trade a premium?

INVESTORS WILL GO TO THOSE OTHER ETFS, THEREBY ZAPPING THE PRICE OF GBTC. If you’re ETF currently trades at an 81% premium to Bitcoin, and that premium erodes to zero – thats a loss.

I think you lose holding GBTC, there really is no way around it.

Tip Strippers with Bitcoin in Vegas

I appreciate the innovation. I’d be curious how much of this is a marketing scheme versus something that actually improves profit. It seems like it would be beneficial to reduce credit card fees. I’m sure that all the cash gets reported to the IRS, as would all the Bitcoin.

Mashable: Tip Strippers With Bitcoin.

If you’ve amassed a fortune in Bitcoin and don’t know how to spend it, here’s an idea: Go to Las Vegas and squander it all on booze and lap dances.

Legends Room is a “gentleman’s club” that accepts Bitcoin, Ethereum, and its own cryptocoin LGD for all transactions.

That means you could go there on August 26 to watch the boxing bout between boxer Floyd Mayweather and MMA fighter Connor McGregor, and pay for everything with bitcoins.

The basic experience is in the main room of the club, which is open to the public and charges $150 (payable in crypto) to watch the fight. If you opt for the members area, you need to own 5,000 LGD tokens (if you don’t have them, you can rent them at the entrance). And if you don’t really care about this crypto business, you can pay for everything in cash and credit card.

The current price of the LGD token on Bittrex is about $2.15 per token, but you know how it is with these volatile cryptocurrencies — prices could go up or down before the event. The token itself doesn’t appear to have any technical advantages over similar cryptocoins, but ownership nets you significant discounts on drinks and club services.

If you’re still unsure whether all this is too adult-only to bring your underage nephew along, keep in mind that the place will be teeming with porn stars during the event, including Jesse Jane and Tasha Reign.

Public Service Notification: Bitfinex

First I’d like to say I have no idea if any of the below is either:

A) True

B) If it is true – that it results in Bitfinex blowing up.

This is a notification that if you use Bitfinex you should be doing some homework.

The general outline is that Wells Fargo cut off Bitfiniex – and Bitfinex started to leverage Tether for their funding. Tether is a currency their sister company started. Since April there has been a 400% increase in the amount of Tether. A second site offers that this Tether can be used for margin trading and this could be influencing the price of Bitcoin.

Read in depth research here:

I’d note that Mt. Gox made some errors and attempted to inflate the price of Bitcoin to get out of their trouble.

There were also some other strange happenings with Bitcoin Cash. After the fork Bitfinex changed their distribution method i.e. they went back on their word.

They also recently announced to stop adding US Customers.

Again – I am not saying to panic. But I am saying do some research.

Bitcoin: Move +$160 million for 67 Cents

Imagine what sirens would go off if you walked into your bank and asked to move $160,000,000. What do you think that would cost? How long do you think it would take? What body tissue samples would they ask for in the name of terrorism or the IRS?

Not with Bitcoin. Someone moved $160 million for 67 cents. It only took a few minutes.

Large Bitcoin Transaction
Large Bitcoin Transaction

This image is not mine – I unfortunately lost the link. If its yours please contact me.

Some Guy From Forbes Craps on Bitcoin

This article from Forbes: 

A Bitcoin Is Worth $4,000–Why You Probably Should Not Own One

is quite a ridiculous read. I don’t disagree with his underlying thesis: (I’m paraphrasing )”Bitcoin is rife with speculation”. But his article is full of contradictions and he demonstrates a lack of knowledge about the utility of Bitcoin. He says its just some currency, but it has no value. And he ignores any of the current and future utility of Bitcoin.

He advocates “investing” your money, not “speculating”. That makes sense it a lot of situations. Buying bitcoin is pure speculation, he says. I mean no one ever speculated in stocks or real estate, right? And he forgets to mention that just holding a fiat currency is inherently speculation that your purchasing power wont decrease.

This is the final line, which is all you need to really see:

The Bitcoin currency is not managed by any government agency, nor is it backed by any government.  Bitcoin values are purely dependent upon holders having faith they will continue to have value.

Talk to the people in Venezuela about currencies “managed” by government agencies. See how that “investment” worked for you:

Venezuelan Bolivar Chart

Second – the entire economy runs on faith. EVERYTHING. Its all trust. Houses have values only when people trust they will hold. Same with stock markets, food and all the rest. What happens when people lose faith in the economy? Just look back to 2008 when the entire economy almost collapsed.

His advice has some merit. I think hes trying to say that Bitcoin is a volatile investment and you should know what you’re doing before investing. But that goes for every investment you will ever make. Its no different than art, real estate, gold, or anything else – do your homework and make informed decisions.

Another Bitcoin ETF Proposed

Van Eck, a large ETF provider announced they are seeking approval to launch their own Bitcoin ETF. Instead of actually holding Bitcoin they are going to leverage the Bitcoin Derivatives market to track the price of Bitcoin. This is quite smart and I think has a better chance at approval before the Winklevoss Gemini ETF.

The CFTC approved a Bitcoin Derivatives exchange “LegderX” several weeks back. Because Van Ecks ETF will rely on that rather than Bitcoin it means that clearing and moving funds will arguably be more transparent and secure because the derivatives settle in cash. The SEC and CFTC understand cash better than they do Bitcoin.

I personally thing the challenge the SEC has with the Winklevoss ETF is that they cannot wrap their heads around how the storage of Bitcoin will take place and where the funds will held. There are lots of security issues here which needs to be addressed and that makes for a lot of challenges.

There is “GBTC” which is not actively managed and usually trades at a very high premium to Bitcoin – see here.