Archive for March, 2018

Cryptocurrencies are here to stay, and I believe that blockchain technology will change the world and eventually find in a place in our everyday lives, BUT there are scams and frauds that must be navigated around on the way up.

There is good and evil in this world, and evil will always try to perpetuate some scheme in an attempt to satiate their vices. Today it is this, tomorrow it is that. This article intends to point out a few of the mines in the mine field, the reader can decide which are evil or not.

For more context, in December 2016, this site foretold bitcoin reaching $10,000. Eventually, it will reach another all-time high, much higher than that. (the only disclaimer is if another coin dethrones bitcoin dominance in the meantime) So this article is from the mind of a long term crypto bull, but in the short term, I’d really like to see this current batch of mines cleared out before really getting bullish again.

Crytopcurrency Mines

Ponzi schemes like Bitconnect, Issuance of Tether, Possible Futures manipulation, Initial Coin Offering scams, Pump-and-Dumps, and Mt.Gox Trustee distribution are a few main issues right now.

If you are more of a visual learner, you gotta see this video. It’s about 40 mins…called Decentralized Deception.

Actually, everyone reading could benefit from the video. You will hear clips from the perpetrators themselves. You will also see the unfortunate conclusion for some people of the scams, like one man who was streaming from his new home, aka his car.


Ponzi schemes like Bitconnect are featured in the video and don’t require much more comment here. Watch the video and do your due diligence.

TETHER (USDT)

Tether (USDT) and the bots trading the Tether prints appear quite nefarious. On Tether’s own site, they have a 6 months old “Proof of Funds” report. Well 6 months ago there were only about 400 million Tethers. Today there are 2.2 BILLION. Now you may say “Travis, how much of an impact can 2 billion have on a market that is 400 billion?”

Fair question. But if you know about trading, you know it is a story of sentiment. And if you know that bitcoin dominance is down to around 40%, then you know that bitcoin’s market cap is around 153 billion.

Please stay with me… For the unaudited Tether to go from 400 million in September 2017 to 2.2 billion in March 2018, there would have to be an average of 10 million Tether added per day!! Now, Tethers are not printed daily, so these Tethers would be added more infrequently and in bigger batches, like 50 million or 100 million at a time. So with that, lets look at what a 100 million dollar dump would look like to a normal stock.

Let’s take Pepsico as an example of the issue here. Pepsico (PEP:NAS) trades at about $112.75 per share right now, and has a market cap of 160 billion, close to bitcoin’s 153 million. If one were to buy 100 million dollars worth of Pepsi stock, they would buy 886,917 shares. Pepsi’s average daily volume is around 4,000,000 shares. So a strategically placed order of 886,917 shares (more than 20% of daily volume) would have a considerable impact on the price of Pepsi and the sentiment around it. This is quite simple, and in reality, the application of this trade would be more complex, but I just want to show you what impact Tether has on bitcoin, if it is being printed out of nothing.

In bitcoins case, $100 million can buy almost 11,000 bitcoin. Most exchanges do not have 11,000 volume in an entire day. So hopefully you can see how it wouldn’t take much to manipulate the price. I assume it would go something like this..

1- Tether printed. 2- USDT traded for BTC  3- Spike in volume and price increase drives sentiment to bring in more buyers. 4- Arbitrage bots reach target and trade BTC for US dollars. 5- Tether now has USD to cover some of the new printing. 6- BTC price eventually falls. 7- More Tethers printed. Repeat.

To me, the faster Tethers crash the better, no matter what happens to the price of bitcoin and other cryptocurrencies because of it. Until then, I guess all that we can do is refuse to trade USDT, even if it’s convenient to use on any given exchange, don’t trade it. Whether it’s liquidity or regulator clamp down, Tethers need a bitconnect moment, in my opinion.

And if you want more, here is a THEORY of what a possible Futures manipulation would look like using Tethers.

 

Mt.Gox Trustee

As if the pressure of Tethers on the market was not enough, we have the Mt. Gox bitcoin dump to contend with. Mt. Gox was an exchange that went belly up, and years later, the bankruptcy trustee is recently moving the bitcoin from cold storage onto exchanges. This has a similar effect as the Tethers from the previous section. Below you can see the distribution of bitcoin, and the impact it had on the market.

mtgox-dumps

 

This is the impact of 40,000 BTC. The trustee has 160,000 BTC more from what I can tell. As of this writing, there is no word on future distributions, as it seems the next court proceedings are not until September 2018.

Whether it’s Tethers or Mt.Gox dumping, these actions have huge impact on the price of bitcoin. When they do it on any one exchange, it is more than enough to trigger a large enough move, which then triggers existing stop and/or limit orders, and can bring the entire market down in short time. Trade responsibily.

 

Ongoing Scams

Tether and Mt.Gox are the big fish to me right now. Though in general you should always beware of ICOs and Pump-and-Dumps, etc. These will be ongoing obstacles.

Initial Coin Offering – ICO

As the use of cryptocurrency and blockchain technology develops, there will be many new coins and utilities. They will range from between ‘world changing’ and scams. Before investing in any ICO, read it’s whitepaper, study the team behind it, and exercise overall diligence.

Pump-and-Dumps

Just see twitter or certain ‘newsletters’ and these will not be hard to find. A person/group will shill for a coin, drive it’s price up, then dump it.

FUD

Fear, Uncertainty, and Doubt. This is a disinformation strategy used by others to influence perception in order to attain a certain goal. Fake news.

Regulations

As crypto grows, so will the attempt to regulate it. Regulations in of themselves may not be that bad, some may actually be good and beneficial. But again, learn to discern between the actual regulation being discussed, and the aforementioned FUD surrounding it.

Tether Alternative

Back to Tether for a moment.

There has been news lately of Amazon inquiring about banking. Ask yourself…if Amazon or Apple took some of there cash and made a real 1:1 crytpo USD pair, do you think the price of Tether would crash? I do. Even those weary of a Jeff Bezos world takeover would still trust him over Bitfinex and Tether.

Actually, I find it amazing that no major, regulated bank has tried this. They could literally issue their TRANSPARENTLY AUDITED 1:1 USD crypto, then charge a meager fee for the customer to exchange to USD at anytime. Maybe legally it would have to be a separate entity from the actual bank… but one of the banks or an Amazon/Apple should clear with the SEC to see what would be legal…and do it. Just do it honestly.

This seems like a no-brainer for Amazon or Apple to do to essentially accept bitcoin at checkout, without the risk of the volatility. And I suppose the ideal coin would have an elastic supply, instead of a fixed one, to maintain the 1:1 ratio with USD. Anyway, I’m sure some developer could figure it out for a price that Bezos can easily afford.

Closing

Once the current mine field is cleared out, those of evil nature will no doubt devise other schemes to attain ill gotten gains. Such is a part of the ongoing battle between good and evil. We will just have to be vigilant as cryptocurrencies continue their widespread adoption.

All and all, I still believe cryptocurrencies and blockchain will be an integral part of our lives. I still believe they will change the finances of many that ‘invest’ in them. This is to serve as a warning to navigate the obstacles in realizing that ascent. Also, may this serve as a psychological aid for if the time comes when prices become unbelievably low again. That you view it as an opportunity of a lifetime, not the end of it.

Among all that was in this article, you can still actively trade crypto with this knowledge. Though I only recommend it with proper attention and risk mitigation. You can learn a lot about this and get access to a crypto trading program from RealLifeTrading. Disclaimer: I am currently subscribed there.   

Also, you can find several people who know what they are doing on Trading View like MPC and RLT.

Did I misrepresent anything? Do you have anything to add or correct? Please comment below if so.

Hope this article serves you well.

-Travis

God Bless

JMJ – UIOGD