It wasn’t too long ago that Bitcoin and cryptos were largely frowned upon, seen as a tool only relevant to terrorists and drug dealers. But 2018 has seen a huge spike of interest from Wall Street and many of the top firms in the traditional financial space have been scrambling to find their footing around regulatory uncertainty and react to the surge in demand from their clients.
It’s no secret that fresh capital and demand is needed to take the crypto market to new highs, and thus everyone has been wondering where the institutional demand will come from and which large companies will lay the groundwork to allow this on-ramp to happen. Below we present the key actors that are starting to make moves and could serve as catalysts to drive demand upwards.
Assets Under Management: $2.8 Trillion
JP Morgan has been exploring blockchain tech for over two years in a bid to use the nascent technology to solve banking-related inefficiencies. The bank’s Blockchain Center of Excellence department developed in conjunction with the Ethereum Enterprise Alliance a project called Quorum, which is currently branded as an “enterprise-focused version of Ethereum”. In March 2018 JP Morgan announced that in light of the platforms popularity and potential, they were considering spinning it off as a separate entity. This is just one of the enterprise platforms that they’re working on and JPM has continuously been at the forefront of financial firms seeking to patent blockchain based securities services.
Even JP Morgan CEO Jamie Dimon who grabbed headlines in September of 2017, when he slammed Bitcoin as a fraud and pretty much threatened anyone in his company they’d be out of a job if he caught them trading cryptocurrencies, has since softened his tune. In an interview with HBR in July 2018, Dimon admitted that blockchain is something they’re testing and that they “will use it for a whole lot of things”.
JP Morgan has thus far been more focused on blockchain tech than offering its clients with crypto investment opportunities, despite a report in November 2017 by the WSJ that they were considering whether to provide its clients access to CME’s new bitcoin product through its futures-brokerage unit. In May 2018, the firm created a new position called “Head of Crypto-Assets Strategy” with the aim of seeking out cryptocurrency projects that can be taken to market. It’s recently been rumored that they will be using Bakkt’s infrastructure to service their clients.
Assets Under Management: $1.5 Trillion
In 2015 Goldman Sachs got its feet wet into the world of cryptocurrencies by investing in a Bitcoin brokerage firm called Circle. Towards the end of 2017, rumors began circulating that Goldman Sachs was setting up plans to open its own crypto trading desk. This was confirmed by Bloomberg in December 2017, with plans to launch sometime at end of June 2018. In May of 2018 the NY Times reiterated Goldman’s crypto ambitions, but regulatory approval was quoted as a key hurdle from allowing them to move forward. In July 2018 Lloyd Blankfein’s 12 year long tenure as the Goldman Sachs CEO came to an end, replaced by David Solomon who was reported to be much more keen on Bitcoin and crypto than his predecessor. Solomon mentioned that his firm already offered clients publicly-traded derivatives tied to Bitcoin but said they must “evolve its business and adapt to the environment.”
On September 5 2018, Business Insider surprisingly reported that Goldman was ditching its near-term plans to open a trading desk to focus instead on a crypto custody solution, which was hinted at in August. Goldman CFO Marty Chavez quickly refuted that report as “fake news” the next day in an interview with TechCrunch and said that while their custody solution is not ready so trading ‘physical’ Bitcoin wasn’t not yet possible for them, they were building a trading platform modeled on a commodities futures trading platform. Thus currently Goldman is on track to provide over the counter derivatives, with physical custodial solutions coming further down the line.
Assets Under Management: $474 Billion
Morgan Stanley, just like JP Morgan, has been a bank that’s been proactively testing blockchain technology in some use cases. Along with Bank of New York Mellon, Morgan Stanley have been using blockchain technology based platforms as far back as March 2016 to maintain backup records and process transactions.
Morgan Stanley joined Goldman in January of 2018 when it announced that they too were clearing Bitcoin futures contracts for big institutional clients. CFO Jonathan Pruzan said at the time that Morgan Stanley were not offering custody solutions but were having regular meetings among executives to consider how else to engage with cryptocurrencies. Morgan Stanley CEO James Gorman hasn’t been as dismissive as some other Wall Street CEOs regarding digital currencies and admitted back in September 2017 that they were ‘more than just a fad’.
In July 2018, the firm hired Andrew Peel, a self declared “subject matter expert for bitcoin and cryptocurrency” as “Head of Digital Asset Markets”. In September 2018, Bloomberg got the scoop on Morgan Stanley’s plans for a product that would allow clients to get synthetic exposure to the performance of Bitcoin. It would allow investors to go long or short price return swaps and Morgan Stanley would charge a spread for each transaction. The technical capability seems to be there and Bitcoin swap trading will supposedly go live following an internal approval process and once there is proven institutional client demand.
Assets Under Management: $6.3 Trillion
As the world’s largest assets manager , BlackRock made huge waves in July 2018 when they announced they were setting up a working group to assess their potential involvement in the crypto space. A BlackRock spokeswoman said the company had been “looking at blockchain technology for several years”, dating back to 2015. The newly formed cross-functional team will investigate crypto currencies and their underlying infrastructure and report their findings to senior management.
BlackRock CEO Larry Fink hasn’t historically been too fond of cryptos, highlighting back in October 2017 its frequent association with money-laundering. Fink remained skeptical on cryptos in an interview with Bloomberg in July 2018, but expressed that he’s “very excited” about blockchain technology. It was reported in September 2018 that Coinbase has been in talks with BlackRock’s aforementioned working group to seek help in launching a Bitcoin ETF. BlackRock reportedly didn’t give any concrete recommendations, which is inline with the firms mixed stance on the subject after the CEO had said in the previously mentioned interview he didn’t believe “any client sought out crypto exposure”. It remains to be seen how the world’s largest exchange-traded fund (ETF) provider will proceed.
In August of 2018, the crypto world got perhaps its biggest news of the year when ICE (Intercontinental Exchange) announced their 14 months in the making grand ambitions in the digital asset space. In conjunction with Microsoft’s cloud expertise, Starbuck’s extensive know-how in the field of mobile payment, and ICE’s (as one of the largest exchange groups in the world) leadership in the field of financial and commodity markets – a new platform called “Bakkt” was formed.
At the time much of the focus was on the consumer facing section of the platform, and whether the likes of Starbucks would really be accepting cryptos. However it soon became apparent that this was only a fraction of the plans and perhaps most important was the announcement of a fully regulated onramp, which would combine a major CFTC-regulated exchange with CFTC-regulated clearing and custody. Such a solution would actually be backed by real bitcoins and contrary to many of the services offered by other names on this list, would signify direct exposure to physical Bitcoin and potentially other digital currencies down the line.
Bakkt, which has been actively recruiting former Coinbase employees, will begin its onboarding and testing phase in November 2018 with trading scheduled to begin in December, subject to CFTC approval. Bakkt CEO Kelly Loeffler hasn’t shied away from expressing the extent of the company’s vision: “We are collaborating to build an open platform that helps unlock the transformative potential of digital assets across global markets and commerce.”
Assets Under Management: $2.6 Trillion
Fidelity has always had a bullish tone when it came to Bitcoin and cryptocurrencies. The world’s 4th largest asset manager dipped its toes into the world of cryptos back in 2015 when it began accepting Bitcoin donations for its charity operation Fidelity Charitable (the second-largest nonprofit fund-raiser in the U.S). The company has mined cryptos and even allowed employees to make purchases with Bitcoin in their Boston offices. In 2017 the firm’s internal crypto fund was forced to suspend operations after two employees involved in the project left to start their own crypto funds. However Fidelity plans to resume operations as it seeks to find a new fund manager.
Fidelity CEO Abigail Johnson (who’s family owns 49% of Fidelity) hasn’t shied away from from evangelizing Bitcoin and admitted to being a big fan of the space in a rare speech at Consensus 2017. Ms. Johnson first became interested in Bitcoin and blockchain tech back in 2014 when the company’s Fidelity Labs began researching disruptive emerging technology and has allegedly personally participated in several of the firm’s crypto initiatives since.
In June 2018, Business Insider reported that Fidelity is planning to make a big move into the world of cryptocurrencies after it got its hand on some job ads. While some clients can already view their crypto holdings next to their other accounts, the plan is to go much further including building its own digital asset exchange as well as custody solutions. During Boston Fintech Week, Ms. Johnson confirmed they had “a few things underway” and that they hoped to have some things to announce by the end of 2018.
In mid-October Fidelity announced a new and separate company called Fidelity Digital Asset Services that will handle custody of cryptocurrencies and execute trades on behalf of institutional clients. The new standalone company has around 100 employees and is already in the process of onboarding its first clients with more widespread availability scheduled in early part of 2019.
Assets Under Management: $158 Billion
Citigroup have been looking into blockchain technology for a long time. Back in 2015 Ken Moore, head of Citi Innovation Labs, was quoted as saying that they have been looking at distributed ledger technology for “the last few years”. They were running tests on their very own version of Bitcoin called Citicoin, in the hopes of removing inefficiencies and counter party risk relating to the bank’s cross border prescence. In an interview with Bloomberg in 2017, Citigroup CEO Michael Corbat made it clear that he didn’t think cryptocurrencies were going away and that governments would likely feel threatened and produce their own versions.
In 2017 Nasdaq and Citigroup partnered up and revealed a new blockchain payments initiative that was 3 years in the making. In July 2018, it was announced that Citigroup and 8 other banks would be part of a trial project by CLS and IBM called LedgerConnect, an app store trial for programs based on blockchain technology. In September 2018, Citigroup announced perhaps their biggest plans yet with a product called Digital Asset Receipt (DAR) that is said to enable institutional investors to invest in cryptocurrencies in a fully insured and regulated manner. This direct investment method goes around the tricky regulatory hurdles by emulating American depositary receipts, which has enabled US investors to own foreign stocks for decades.
Assets Under Management: $1.1 Trillion
Bank of America
Bank of America are part of R3‘s consortium of dozens of banks developing frameworks for applying blockchain tech to markets. America’s second largest bank doesn’t exactly see cryptos in the best of lights however. In May 2017, BofA CTO Cathy Bessant expressed her opinion that cryptocurrencies as a payment system are ‘troubling’ since there is no transparency in between the sender and receiver. They admitted in February of 2018 in their annual 10-K filing with the SEC hat cryptocurrency poses a threat to their business.
Despite what they’ve said publicly, BofA have been quietly trying to get its hands onto blockchain technology for years now, filing for over 50 blockchain patents going back to 2014, making it the largest holder of blockchain related patents. Recently in August of 2018, they filed for patents for a system that manages cyrptocurrency storage in an enterprise environment. Their recent filings relating to an online vault storage system and cold storage system suggests they might also be thinking of getting involved on the custody size as well.
Other Key Developments
Below is a series of important news that further demonstrate large players entering the space.
In May 2018 Nomura, a leading investment bank headquartered in Japan with nearly half a trillion dollars in assets under management, became the first bank to offer custody services for digital assets by partnering with Ledger and Global Advisors. The new venture called Komainu will provide infrastructure and operational framework to allow institutional level investments that previously was not possible.
After being one of the first online brokerages to offer investors access to Bitcoin futures back in December of 2017, TD Ameritrade announced in October 2018 that it was making a strategic investment in a cryptocurrency spot and futures exchange called ErisX. The platform will provide a crypto on-ramp to retail and institutional investors and signals the company is “all-in” to the world of cryptocurrences.
That wraps up our look at what some of the biggest members of the traditional financial space are up to when it comes to cryptocurrencies. There seems to be a clear trend across the board on Wall Street first largely dismissing cryptocurrencies but instead electing to focus on researching the underlying blockchain technology itself. However in the last few months the trend has largely shifted with all major players seriously looking into providing their clients with custodial solutions to actually owning Bitcoin or derivatives of it. Whether this is due to overwhelming current client demand or just an expectation of the future remains to be seen – but one thing is clear and that’s the fact that cryptocurrencies have become something Wall Street can no longer ignore.
We’ll be sure to keep this page updated with any developments, so do bookmark it and revisit from time to time.
BitMEX Guide For Beginners: How To Make Money Shorting & Longing Bitcoin With Leverage
It used to be that making money with Bitcoin was as simple as buying and holding for a long period of time but as the price of Bitcoin declines, crypto investors have begun looking for other ways to profit. This is where BitMEX comes in. It’s recognized as the clear top platform when it comes to wanting to short Bitcoin – which is essentially making money as the price of Bitcoin goes down (going long is betting that the price goes up, which you can also do on BitMEX). Another advantage BitMEX has over many other exchanges is the ability to do leveraged trading, which allows you to play with more money than you actually have (up to 100x more). By borrowing money from the exchange and using your funds as the collateral in case the price movement goes in the opposite direction of your position.
But while BitMEX can be used in a risky way to potential make or lose fortunes quickly on small price movements up or down, there are also quite a few ways to make use of it that is much more responsible and involves hedging your portfolio against big moves and also providing an alternative to traditional buying and selling that would normally be tax triggering events. We’re going to cover all of this and more in this guide, so read on below and follow along this guide if you want to get started with the exciting world of BitMEX.
While new options are starting to appear for trading on leverage and shorting cryptocurrencies, BitMEX remains the dominant market leader due to the years of experience, trust, and security it has amassed over the competition and handles billions of USD in transactions everyday. BitMEX, which stands for Bitcoin Mercantile Exchange,was founded in 2014 by HDR Global Trading Limited and constitutes of a talented and transparent team that includes former banker Arthur Hayes who can regularly be found doing interviews on channels such as CNBC. They have never been hacked, their platform is very fast & clean, and operating in Hong Kong and the Republic of Seychelles they are in a jurisdiction that is pro-crypto. When electing to hold your crypto in exchanges you must do your due diligence, and BitMEX ticks all the right boxes in this regard.
Setting Up A BitMEX Account
We would highly encourage that soon upon registering an account to enable Google’s Two-Factor Authentication in order to up your level of security and ensure no one can get in your account without having access to your phone. This is done under “Account and Security” under your account settings in the top right.
Making Your First Deposit
To be able to make use of the exchange you’re naturally going to need to transfer some money over. While you can trade multiple different cryptocurrencies on BitMEX, they only accept Bitcoin so that is the only currency of choice to be able to use the platform (even if you’re for example wanting to long or short Ethereum). Head over to your account settings and press “Deposit” and send the amount of BTC you wish to be able to trade with to your personal address that’s provided as shown in the example below:
How To Trade On BitMEX
There are a few number of different trading options available on BitMEX but the most popular one and the one you’ll likely be most interested in is the Perpetual Swap. A perpetual swap essentially leaves your long or short position open indefinitely until you close it (or until it gets liquidated aka you lose all the money you’ve risked on the trade) as oppose to normal futures trading where the contract closes at a predefined date. That means you can open a position and close it as soon as a few seconds or as late as a few years, it’s all up to you. Do note that there is a small funding fee that is taken (or given depending on market condition and whether you’re short or long) every 8 hours but we’ll cover the costs/fees aspect further down the guide.
Currently on BitMEX only Bitcoin and Ethereum (limited to 50x leverage) have Perpetual Swap trading so if you’re looking to trade other cryptos like Cardano, Bitcoin Cash, EOS, Litecoin, Tron or Ripple then you’ll be limited to more traditional Futures contracts that expire at a given date.
Your First Trade
The best way to learn how the system works is making a real life trade with a small amount. All the action takes place in the order box in the left hand sidebar and we’ve broken down all the bits you need to worry about to place your first order. You can see the screen below after logging in and pressing the “Trade” link right next to the big BitMEX logo on the top.
2) As mentioned before there are different types of futures trading options but the one we are interested in is called Perpetual which should automatically be selected so you’re fine as long as you didn’t misclick somewhere.
3) When you’re placing an order you can either place a Limit order or a Market order. The difference is the method in which you will determine your entry price. Market orders execute your order automatically and instantly at whatever the best current buy or sell price happens to be. The advantage of this is in the speed of execution as you don’t wait for your orders to be filled. However the disadvantage is that it invokes a fee (0.075% FEE as opposed to a 0.025% REBATE for Limit orders which means you’re actually making a small amount of money). Unless you have a specific reason to want to execute an order as soon as possible (like some time sensitive breaking news you’ve learned that will immediately impact the price of BTC), it is recommmended to use a Limit order in order to save on fees.
4) The quantity field refers to the quantity of contracts you wish to transact in and is denominated in USD so 1 contract = 1 USD (this is true when trading Bitcoin but not necessarily other markets). This is the amount of USD that you will actually be playing with and this is what is used when calculating your fees and profits and such. So if you go long $1000 worth of contracts and the BTC price goes up 10%, then you will make $1000 x 10%= $100 in profit before factoring in fees. This is not the amount that you’re actually risking to lose (that amount is shown below the buy/sell button under “Cost”) and depends on how much leverage you’re using to trade with this amount. If you’re trading at 1x (and thus not using any leverage) then you will be risking exactly the amount you specify in this contracts section but if you for example choose 10x leverage then you will only be risking roughly 1/10th of the amount you’ve entered in this quantity section (and the cost section should mirror that but calculated in BTC).
5) As you might have inferred from step 4, the leverage amount you choose is very important in determining the level of risk you wish to undertake. You can choose any amount from 1x to 100x (and you can specify custom amounts not displayed in the slider by clicking on the pen icon next to ‘100x’ and inputting your desired leverage there). While high leverages allow you to trade with big amounts (actually with amounts much more than you actually have in your account) there is obviously also quite a big tradeoff in that you’re exposing yourself to liquidation. Liquidation occurs very roughly when your “leverage multiplier” x “% your trade is down” = 100%. So for example if your short entry price was when BTC was at $7500 (box number 6 in our original screenshot) and you used 10x leverage, then your liquidation price will be around when the price goes up 10% (because 10x leverage multiplied by 10% in wrong direction = 100% and thus liquidation) or ~8250$. This is a very simplistic view of how liquidation is calculated and there are some different factors that changes this calculation so make sure to check your liquidation price by hovering around the question mark inside the buy or sell buttons shown in step 7.
6) As we mentioned in step 3 we are doing a Limit Order so the price you want to execute at will need to be determined by you here.
If you’re not in a hurry to take a position and are actually waiting for the price to get to a certain level before you long or short, then you can specify your desired figure here and the order will eventually fill itself should it come to the limit price you chose.
7) The final step after having filled out everything mentioned above is pressing either the green buy/long button or the orange sell/short button. A confirmation screen will appear and once you confirm that your order will go ‘live’ and either immediately execute if you have a market order or execute when conditions are met if you’ve used a limit order.
Unfilled orders will display under “Active Orders” as in the screenshot below. You may cancel this without incurring any fees or loss as long as it has not yet been filled:
Closing Your Positions
When you want to close your positions to either cash-in the profit you made or to limit your losses, there are a few ways to go about this. Remember that if you went short, you will need to buy to close your position while if you went long you will need to sell. The simplest way is if you happen to be staring at your positions tab as illustrated above there will be a section to the far right that says “close position”.
Setting a Stop Loss
Putting a limit close order is fine if your trade is going in the direction you wish but what about if the price ends up moving in the opposite price you bet on. You will want to put a stop loss and protect yourself from losing too much. There is once again a limit and market option for setting your stop loss which you can find at the top left of the screen in the order box.
Last Price vs Index/Fair/Mark Price
So far all the prices we’ve been discussing and looking at revolves around the BitMEX order book and the price in the middle of the order book is referred to as the “last price”. While this is the price that is used when calculating your eventual profit/loss settlement, it is not the price that is used for triggering liquidations. There is a lot of different terms used like Fair Price, Index Price, Mark Price but basically all you need to know is that in order to prevent manipulation and forcing people into liquidation, BitMEX uses roughly the average price between Coinbase Pro, Kraken and Bitstamp exchanges over a small period of time to trigger liquidations. So even if the last price happens to reach your liquidation price for a split second on BitMEX it might not actually force you into liquidation if the prices on Coinbase Pro, Kraken and Bitstamp exchanges don’t ever reach that point.
In regular crypto exchanges, you probably wouldn’t care much about the fees since they represent such a small amount of your transactions. However with BitMEX things can be quite different as the fees are calculated based on your contracts position (which can technically be 100x larger than your account balance). Therefore if you want to be profitable in the long term, being mindful of the different fees can be crucial. Below we cover the fees associated with Perpetual Swaps which has been the focus of this guide.
Deposit & Withdrawal: BitMEX doesn’t take any fees when it processes deposits and withdrawals. It also aims to use the minimum network fee based on blockchain load. Do keep in mind that withdrawals on BitMEX are only processed once per day around 13:00 UTC, which might seem inconvenient at first sight but has a lot of safety advantages both for the exchange the users as a result.
Taker Fee: The taker fee happens whenever you use a market order and is 0.075% of your total position. This will be triggered if you use a market order both when you buy and when you sell so it can add up, especially when trading at high leverage.
Maker Fee: The maker fee, or more accurately the maker rebate, happens when you use limit orders and instead of being charged you’re given 0.025% for providing liquidity to the market.
Funding Fee: This is a fee that is taken every 8 hours at 04:00 UTC, 12:00 UTC and 20:00 UTC. If there are more people shorting than going long, then those who short will pay this fee to those who’re going long and vica versa. The fee will rise the more the balance is skewed between shorts and longs but can be anywhere from 0.01% to 0.35%. You can see the upcoming funding rate at the bottom of the left sidebar when trading:
Hidden Order Fee: Not that you should have any use for this, but having a hidden order (that doesn’t show on the order book) will be considered in the same fashion as a market order and will thus invoke a Taker fee of 0.075%.
-Try to minimize your fees by following the advice in the section above. As oppose to traditional exchanges, BitMEX fees can really add up, even when using our special sign-up link that reduces your fees by 10%.
-As a beginner start with small contract amounts and small leverage multipliers. It will take you time to figure out all the bells and whistles of the system and how it functions so you don’t want to make expensive mistakes at the very start.
-It’s not advised to use leverage above 25x unless you really know what you’re doing. This is true both because of the up and down nature of crypto markets but also because the liquidation price at such high leverage is not in your favor. BitMEX has something called a Maintenance Margin Requirement that protects their Insurance Fund at high leverage and you would be wasting your margin feeding this requirement that only protects BitMEX itself.
-Always set a stop-loss just before your liquidation price in order to avoid the hefty fees associated that BitMEX takes dealing with liquidations.
-In fact, it’s good practice that for every order you have an entry price (your limit order), an exit price (the limit price you will close at and take profits), and a stop-loss so that your downside is limited. Get into this habit and you will discipline yourself like a calculated investor instead of being a mere hopeful gambler.
-Keep an eye out on the funding rate at critical times in the market when shorts and longs are not in balance. When the funding rate is large, people who are paying the fee (when it’s positive it’s those who went long, and when it’s negative it’s people who are short) will be wary of paying the fee and thus look to close their position before the 8 hour interval. This can create large upward and downward swings just before and after these periods.
-While the BitMEX trading engine is top of the line, even it struggles at times dealing with all the activity, especially in really crazy periods. This can cause the system to be overloaded or for price action to be a few steps ahead of you trying to time your entries. You will need to be proactive in setting your limits, stops, and such so that the system can work for you instead of against you.
-Sometimes BitMEX announces a maintenance and this can be detrimental to you if you have positions open with no stop-loss set up. Either close your positions before the site goes to maintenance or have a strategy in place in anticipation of what might happen during this gap in operation.
-This should go without saying but never invest more than you can afford to lose. Be careful when using “cross” margin (at the very left of the margin slider) as this option uses all the money in your account to fund your position and you can have your whole balance wiped out if things go wrong and you don’t have a stop-loss in place.
So while a lot of people who’re trading on BitMEX will use their own Technical Analysis to come up with trading ideas, or perhaps follow signals posted on Twitter or private signals groups, there’s also a few different ways to make use of the platform.
Hedging Your Portfolio
While BitMEX’s massive money making potential might be the more attractive reason to short and use leverage, it actually makes most sense if you want to hedge and protect your crypto portfolio against price movements. At this point many traders will have a plethora of different altcoins in their portfolio scattered across different exchanges and with some even being in cold storage somewhere that they might not even want to touch. In such a case, it becomes nearly impossible to try to quickly sell all your positions if you anticipate a sudden downturn in the market.
This is where BitMEX can really come in handy because you only need to keep a certain amount of your crypto on there and thanks to the leverage options you can represent much more money than you have in your wallet. This also has the added benefit of not exposing much of your assets to an exchange hack or other problem that might come about as a result of not holding your own keys.
We know that during critical periods most altcoins will follow the price of Bitcoin so in order to protect your portfolio from going down, you can take a short position and profit from the price of Bitcoin going down. Ultimately you can set it up so that any downward price movement will not negatively impact your total portfolio holdings. This strategy can be particularly effective especially when BTC price is at a certain price support level and going below it and breaking the support is expected to lead to a huge downfall of BTC price and as a result of every other crypto asset as well.
Avoiding Tax Triggering Events
Even if you’re a BTC maximalist and have all your assets in BTC in one easy to sell location, there’s still a very important advantage that a platform like BitMEX allows. In many countries the selling of your BTC is a tax triggering event as it is considered capital gains. If you want to exit or hedge your BTC position, you can simply short BTC at 1x and that will act as the equivalent of selling to USD but it won’t trigger any capital gains tax.
Resistance and Support
There are nearly countless different techniques a technical analyst has at his disposal to make educated guesses on where the price might go next but arguably the most powerful is looking at where the support and resistance lines are at. At times BTC will be trading in range between the support and resistance (until it can decide which one will be broken first) and at these moments it can be profitable to go long at support and go short at resistance. Similarly, in bull markets it has historically been wise to long after a dump in price, or to short after a pump during bear markets. These are all quite basic and oversimplified tactics but hopefully it gives you some ideas on how to get started even without being a TA expert.
Reacting To News Events
Even if you don’t know any technical analysis or have no idea which direction BTC will go, there’s still a very good reason to have a BitMEX account with some funds in it. Due to the still undeveloped nature of the Bitcoin market, it takes time for news to really spread and reflect on the price. While in the traditional stock market it might be reflected in milliseconds due to highly optimized HFT bots, with Bitcoin you sometimes have as much as a few hours until a particular big news really affects the price. We’ve seen this in the past with news coming out of China, or more recently with ETF rejection/delay news. If you keep your ear to the ground and follow things actively on Twitter and Telegram groups, you can profit from this heftily. Make sure to use a tool like Tweetdeck so that tweets can immediately popup as notifications and alert you in real-time.
Useful Tools & Resources
Coinfarm – Lots of detailed stats and information regarding the open long and short positions on BitMEX. There’s also a chart that shows you the funding fee for the past week so you can anticipate whether you will be the one paying or earning the funding fee in those 8 hour windows.
Anti-Liquidation – A useful tool/calculator that aids you in placing your BitMEX orders in a way that meets different criteria you might have.
Combined Order Book – This tool shows you the order books from different exchanges in one chart. You can see the order sum required to move BTC in a certain direction.
BTCUSD Shorts – This simple chart on TradingView shows you the number of shorts currently open for BTC. A high number here indicates that a lot of people expect BTC to go down but this has also historically opened up the possibility of a short squeeze where price temporarily flicks up (sometimes in a matter of seconds while other times taking as long as a few weeks) in order to liquidate the short positions.
Signficant Trades – This little tool helps you see and hear in real-time big buy and sell transactions being made on various exchanges including BitMEX. Tune this to your liking and keep it running in the background and you’ll be alerted via sounds when big moves are happening.
Cryptopolis – This is a free private Discord community dedicated to discussing specifically BitMEX strategies and price action. Most of the action takes place in the #general-bitmex channel and while you shouldn’t use what’s discussed there as financial advice, it can be a good place to hangout if you’re trading on BitMEX heavily.
That wraps up our guide towards using BitMEX. If you found this useful, please remember to sign-up using our referral link. You will benefit from paying 10% less fees for six months at no extra cost to you and it will help us towards producing more content of this type.
Gods Unchained Guide: Investing In The First Blockchain TCG
Birth of NFTs
Collectibles has been a hot topic in the crypto world ever since CryptoKitties exploded onto the scene in December 2017. Combining the power of the Non-Fungible Token (NFT) technology, the mainstream adoption of creature catching/breeding games thanks to Pokemon Go, and the soft-spot we all have for just about anything with kitties, CryptoKitties became an overnight success. Its disruption was so significant that it not only congested the Ethereum network, using 20% of its computing power at one point, it also had some of its kitty tokens sell for over $100,000. Seeing the immense potential ERC-721 NFTs, many blockchain developers entered the space with their own Dapps – one of those being Gods Unchained developer Fuel Games.
Fuel Games’s first foray into the field happened in March with a game called Etherbots. Etherbots allowed users to create their own bots with parts of varying rarities (ERC-721 tokens) randomly dropped from purchasable crates, and ultimately battle others’ bots – all on the Ethereum network. At its much-anticipated launch, more than $1 million worth of parts were sold, accounting for 5% of all Ethereum transactions, while some parts were selling for as high as $18,000. With the success of Etherbots, Fuel Games were able to secure $2.4 million in funding in July from various Capital ventures, including Coinbase, for their next title: Gods Unchained.
What is Gods Unchained?
Gods Unchained is a Tradable Card Game (TCG) with a unique IP that borrows some gameplay mechanics from industry leaders like Hearthstone and Magic the Gathering while also mixing in some of Fuel Games’ own innovations. Players choose one of six God, each with their own unique God Powers, and build 30 card decks to do battle (see the Gameplay Trailer – revealed on November 15th – below).
The first innovation Gods Unchained brings to the table is the ability for each player to choose and lock one of 5 God Powers at the very beginning of each game. This allows for players to somewhat adapt their deck’s strategies on the fly according to their expected match-up. Here are the Gods along with their revealed Powers:
The other innovation that sets Gods Unchained apart from the other card games is the game’s very own Mana Lock resource system. In Gods Unchained, you will unlock one mana lock at the start of each of your turn and refresh all empty mana gems. There is one lock on each of your first five mana gems, so you’ll be unlocking one gem turns 1–5, just like any other traditional automated system. The sixth mana gem, however, starts the game with two locks on it, and won’t be accessible until turn 7. There will be two locks on your seventh mana gem (accessible turn 9), three locks on your eighth mana gem (accessible turn 12), and four locks on your ninth mana gem (accessible turn 16). Designers hope this unique system will create snappier games with more interactions between players while they have the leeway to print much more powerful cards at higher mana costs.
The other aspects of the game are made up of the tried and true characteristics of successful TCGs of the past. Cards are obtained via opening randomized packs. Packs contain 5 cards, which are all unique ERC-721 tokens, that come in 4 different Rarities (Common, Rare, Epic, Legendary) as well as 4 different Shine – or cosmetic – levels (Standard, Shadow, Gold, Diamond). Each card even has its own Purity value within each Shine category and the highest ones actually have shinier in-game graphics. The probability of each Rarity, Shine level, and Purity value is hard-coded into smart contracts while the scarcity of each and every card is visible for all to see thanks to the transparency of the blockchain. You can check the Purity values of your cards by inputting your Eth address here.
True ownership of their cards is something TCG players had never achieved going from the paper card days to the modern era of digital card games – until Gods Unchained. In fact, the hype for this unreleased game is so high that $2 million worth of Genesis Set packs have already been pre-sold on their website. A Mythical card (one-of-a-kind, with only 4 unique ones released per year) was auctioned off for over $60,000, making it the second most valuable card in the world behind Magic the Gathering’s Black Lotus.
The game is expected to release its Beta in Q4 of this year and purchasing any amount of packs will grant you access to the Beta. The Limited Edition Genesis Set, made up of 380 unique cards, will be sold until either the hard-cap of $15 million is reached or the game launches in Q1 2019 and will never be available again. There is also still 1 ultra-rare Mythic card that have yet to pulled from the Genesis Set packs. There will be a separate non-tradable Core Set of 250 cards that is fully unlocked with Free-to-Play, with which one can make decks good enough to compete. However, having access to the Genesis Set cards will give an edge through the flexibility of being able to craft the most powerful meta decks of one’s choosing. The rarer Genesis Set cards are therefore expected to fetch hefty prices in the secondary markets.
Another good reason for backing this project is that Fuel Games have established a good track record with the success of Etherbots and are known to reward their early adopters handsomely with goodies in their future titles (see Etherbots promotion below), already mentioning having plans for Genesis card owners. Last but not least, the importance of the design team having the influential mind and streamer “ADWCTA” from a game whose playerbase is being targeted (Hearthstone) cannot be understated.
What Packs to Buy?
There are currently 4 types of packs on offer at different price points: Rare Pack, Epic Pack, Legendary Pack, and Shiny Legendary Pack. Which pack has the best value? How much of each pack should you buy? We’ve done the math and here are the results:
If your goal is to complete a Set of all 380 cards:
Rare Packs + Legendary Packs
Rare Packs are the best source of Rares + Epics and should be prioritized over the Legendary packs (Epic Packs are terrible value and should not be touched). Once you reach the desired amount of Epics – as you will collect all Commons & Rares way before Epics – you can switch to cracking Legendary packs only.
If your goal is to complete a Set of all 380 cards in Shadow, Gold, or Diamond Shine level:
Rare Packs + Legendary Packs
It’s not really feasible to collect a Shiny Set of any level from solely opening packs as their drop rates are very low (5% for Shadow, 1% for Gold, 0.2% for Diamond). For Commons, Rares, and Epic Shinies, Rare packs are still the best source because you’re giving yourself the maximum chance to proc the Shinies for the least amount spent. For Legendaries, regular Legendary packs offer better value than Shiny Legendary packs. Shiny Legendary packs at first seem great due to having 25% Gold and 74.8% Shadow chance (Diamond is still 0.2%), increasing your Gold chance by 25 times and Shadow Chance by 15 times while only being 9 times more expensive than regular Legendary packs. However, when we factor in plain Legendaries and our ability to forge them into higher Shine (5 Regular –> 1 Shadow, 5 Shadow –> 1 Gold, 5 Gold –> 1 Diamond), the regular Legendary packs end up giving the better deal.
Forging along with Trading will be the best way to complete your Shiny collection once the game launches.
If your goal is to pull the undiscovered Mythical card from packs:
The chance for any card in any pack to be Mythic is one in a million – literally. “So you’re saying there’s a chance?!” Yes! And Rare packs are once again your best bet.
If your goal is to achieve maximum value now so you can trade your cards for whatever you want later:
Every Rare Pack gives you 1/40 of a Legendary, 1/5.7 of an Epic, and 1.1 Rares, not to mention the greatest chance at Shinies and Mythic per amount spent. If we assume some of the most played and sought-after cards will be Rares and Epics (as Legendaries will be limited to one per deck, compared to 2 for every other Rarity), you will be able to trade your duplicates for great value in the secondary markets.
Note: If you’re unfamiliar with Metamask or don’t know how to get some Eth, you can find full instructions on how to buy a pack here.
As Gods Unchained labels itself an E-sports game, the competitive scene will be heavily supported. Sometime in Q1 2019, the first Gods Unchained World Championship will take place. The prize pool is set to be $100,000 + 10% of all card pack sales, capping at $1.6 Million if the project hard-cap is reached. Entry into the tournament will require a Championship Ticket, which are ERC 20 tokens that were inserted into the first 20,000 Legendary Packs sold. They have long since sold-out but can be purchased second-hand in exchanges such as Emoon, Idax, Radar Relay, and GUdecks.
Other Ongoing Promotions
Gleam Giveaway (now concluded)
Until the end of October, the Gods Unchained Gleam giveaway gave you a shot at winning $10,000 in prizes. You could increase your entries by spreading the word through different channels, with 5 Entries guaranteeing a Gold Legendary (Blessed Chimera) prize. Prize winners were chosen and pack prizes were sent. Chimeras will be distributed right around the time Beta is released.
Each Etherbot part that has existed before July 17th can be used to receive 1 random card in the Etherbots Promotional Set – a special Set made up of 16 unique cards. Shadow or Gold parts used will earn you Shadow or Gold cards. Parts will be turned in sets of 5 to redeem a pack of 5 cards, and if one of those parts happens to be a Lambo or an Ancient Protector, you will receive an exclusive Etherbots Promotional Legendary card.
Etherbot parts can be purchased second hand in Fuel Games’ official Etherbot Marketplace (look for parts with the “GU Eligible” label). The promotion contract will launch in November, and will be available for at least two weeks.
OpenSea and Rare Bits are 2 marketplaces where users will be able to trade Gods Unchained cards. Special Promotional cards Open Sea Raider and Rare Blitzer will be made available through these 2 marketplaces, respectively. Details on how to obtain these non-tradable cards have not yet been disclosed.
Global stats of all cards in existence & global collection ranking & detailed collection browser with stats, including packs bought, referrals used, and estimated collection value.
Visual card browser, including all cosmetic versions & deck editor, importer, browser with draw-test tool & multiple-pack-opener tool.
Deck editor, browser & card, collection browser.
Rough card pricing estimates based on rarity probabilities and scarcity (Note: we do not endorse their “buyer’s guide”).
Further Official Info (from Discord)
Status & Beta
– Beta will roll out in several stages. The Closed Beta has been released to about 130 active community members on November 28th. The next big wave of invites will go out around the time of the next Beta build (0.8) on December 10 to other users who have purchased packs (and registered on apollo.gg). Smaller waves are also going out between patches as the engineering team sees fit. An Open Beta period of around three months will come next, followed by full launch.
– Gods, Genesis Set Cards and Core Set cards will all be released gradually over the course of the beta to give each God and card more analytic attention. You’ll always be able to play the game once you’re in Closed Beta, but there will be time windows where PvP is enabled for stress testing which will gradually expand as beta goes on.
– In Beta, you will have access to the Genesis Set cards you have purchased, and all the Core Set cards (the Core Set cards will be earned through gameplay once the game launches).
– The 1st build of the Closed Beta includes 131/377 Genesis Set cards, 50/250 Core Set cards, 4/6 Gods, and 8/30 God Powers. The 2nd build will have around 400 cards total (around Dec. 10).
– The Beta’s computer spec requirements are quite high for now and does not run well on Mac. Optimization is important to the Devs but it is at least one major update away – they’re focusing on getting all the core functionality into the game first, so the can optimize at the right time.
– Streaming the game and sharing videos is permitted. Devs would just ask at the beginning of any stream or video to share how this is a closed testing beta, with limit cards and features in play, where the point is to gather initial feedback and find bugs.
– Sound effects for individual cards is on the roadmap but may be a couple of releases (builds) away. Voicing is being worked on and casting for it is most likely already finished.
– Shiny cards will get a new animation in a future build (targeted within December) + more cool stuff after that.
– In its current form with most cards not being in the game, Beta gameplay is naturally not balanced (the two most aggressive Gods are not out yet, and the board clears are barely there. So, midranged tokens is going to be dominant). Devs have an internal target for when balancing will kick in and that’s when they will actually start reviewing things from that perspective in terms of beta analytics and feedback.
– The current Mulligan system is not the one Devs designed and the first/second mechanic is just a placeholder that is not designed to be balanced.
– Beta roll-out priority can be summarized as: 1.Fun & competitive gameplay, 2.Missing cards, 3.QoL features (such as chat/friendlist), 4.Missing game modes (such as Battle Royale).
– The Genesis Set is aimed to be evergreen (will not rotate out of Standard play). Also the Genesis cards will never be re-printed (there may be functional re-prints depending on the meta, but the exact same card will never be released again).
– Prometheus and Atlas are the 2 Mythics in Genesis packs. Prometheus was opened on November 23 but Atlas is still waiting to be found. If it never gets opened, Devs have not confirmed whether it will ever exist. A pack-based lottery is the first system they discussed as it seems the best way to do it, but nothing is finalized.
– The 4th Mythic will not be in packs, will also not be auctioned off.
– The God Powers are a little higher impact than Hearthstone hero powers and have varying mana costs (1 to 6). They are designed to be evergreen and the goal is for them not to change or rotate out in any fashion after game launch. God Ultimates are designed to not really be played around (or else they wouldn’t be powerful enough).
– Devs want to create classes (Gods) that play drastically differently in their goals, but are forced to interact with each other repeatedly. Comparatively, MTG’s deck construction aspect is amazing, but its interactions are clunky. And Hearthstone’s decks feel on rails or gimmicky, but interactions are good. GU aims for Lego-like design, but to still retain the Hearthstone levels of interaction (and make those interactions more meaningful).
– Devs have a set power level for all cards, and they won’t be printing cards that are intentionally above the power level of cards that see play.
– There are no “Color-mechanics” in the game because the new player experience wasn’t great with it. For deck-building, GU cards are a lot more modular than Hearthstone. Devs wanted the cards to feel like Lego blocks, as opposed to in Hearthstone where they feel more like puzzle pieces.
– Generally, Deception is the RPS (Rock Paper Scissors) heavy God, Nature is the RNG heavy God, War is the math heavy God, Magic is deep strategy heavy God, and Death/Light are more middle ground.
– Devs’ approach to RNG in GU is to avoid absolute randomness (which is rampant in Hearthstone) and limit it to strategic randomness and/or give players ways to reduce or remove randomness. Controlling RNG of resource generation is one of the top levels of skill to master in a card game, and Nature is the class that will explore it the most. Variance will always be high, but overall, GU’s variance will be significantly lower than Hearthstone, but still present. It will be nowhere near chess.
– Balancing is taken very seriously as GU aims to be an esports game. A lot of math in the form of formulas and processes is used to balance the mechanics and stats of cards. Devs also have a pro Hearthstone player to help with light deckbuilding for basic archetypes of each God to make sure they’re relatively balanced.
– In terms of depth, GU will be more strategic than Hearthstone which is designed for a wider audience. GU cards will have a lot more text space than Hearthstone, but still nowhere near what MTG allows for.
– When comparing GU card power to Hearthstone cards in terms mana cost, the design wants 1 and 2 mana cards to be more powerful than Hearthstone, 3 and 6 mana cost cards to be on the same level, and 4 and 5 mana cost cards to be less powerful than the Hearthstone cards. GU’s removals are also more costly than Hearthstone (Arcane Explosion is where removal options are balanced around, not Twilight Flamecaller).
– All the cards that aren’t blatantly super RNG/meme-y have been designed with archetypes (not specific decks) in mind, that works with God Powers and Core Cards. The goal is any time you think “my deck needs a bit more X”, that you can do that without destroying your whole deck. Subgoal is for the vast majority of cards to be usable by at least 2 God Powers
– There will not be another re-balancing at anywhere near the scale that happened right before Beta. But individual cards will be adjusted through beta, so catching them early means the correct version will get more testing time which would be super helpful. Devs appreciate feedback if anything looks out of balance.
– Starting deck size is 30 and the starting hand size is 3 cards. Max creatures on the board is 6 and max cards in hand is 9.
– Runes (a set of small spells), Anims (small creatures), and Enchanted Weapons are are all properly valued (same as if they were independent cards) 2 Mana cards.
– The mechanic “Delve” lets you choose a card at random (not from your deck). All Delve effects from your deck will specifically say so.
– The mechanic “Foresee X” lets you look at the top X cards of your deck and choose whether to keep any of those cards on top or send any of them to the bottom of the deck.
– The mechanic “Ward” blocks one effect that originates from a Spell or a God power (including friendly ones). It does not block Weapons, creature Abilities or Roars.
– The mechanic “Backline” means the creature cannot attack. The creature also cannot be attacked until all friendly non-backline creatures are dead.
– The mechanic “GodBlitz” means the creature or weapon can attack any target the turn it is played (Weapons without this keyword cannot attack right way, just like creatures cannot).
– The mechanic “Flank” allows you to attack any target (including Backline) as long as one other attack has been made this turn.
– Any mechanic appearing more than once in a class (God) is probably a core class concept that will occur in its pure form in the Core Set.
– Gods cannot go above 30 health with the Heal mechanic.
– The order of things when a creature dies is as follows: creature dies, afterlife effects trigger, then it goes to the Void (or is removed from the game if Soulless). Buff effects do not remain when a creature is moved to the Void, unless specified.
– Discards do not go into the Void unless specified. The Void is for cards that have been played from your hand or from the board.
– For any card that has “obliterate cards in the void”, if you have less cards in the void than the amount specified on the card you will not be able to cast the spell. Obliterating specified number of cards in the void is part of the casting condition.
– The God “replace” Legendary cards all have God powers that are stronger than your starting God powers. If you have picked and already used an Ultimate God Power, you cannot get the stronger God power as you have no existing God power to “replace”.
– One does not need to Activate their cards (turning them into ERC 721 tokens) in order to play the game. This is just for selling/trading/transferring your cards once trading is enabled with game launch. Developers have also hinted at implementing a way to only activate the cards/packs of your choice and recommend waiting on activation till Gas prices are low.
– There are plans to support the bundling of cards/sets/decks so they can be transferred in large amounts with one transaction.
– There are no plans for an in-game currency. Although there will be a progression tier where you unlock untradable cards, earning tradable cards/packs through gameplay will not be easy. They will be reserved for winning tournaments / Battle Royales.
– Forging (turning 5 identical cards into 1 of higher Shine) is essentially a burn and mint process, as you’re exchanging old tokens for new ones.
– The upcoming version of the Activation tool will allow for activation of individual cards and will make it possible to forge cards before activating them (you also will be able to forge without doing the activation step at all).
– Unopened packs will not be sold due to legal purposes. Although Devs don’t think they would be classified as securities, they lack the utility to make the team comfortable enough to sell them in such a grey space.
– The official GU marketplace that is being developed with 0x tech is targeted for release sometime between Beta and game launch. It will at first be web-based (as opposed to having an in-game interface) and will allow GU cards as well as Etherbots parts to be traded.
– The goal is to have 4 Seasons per year (new Set every 3 months) with Rare packs for each Season priced around $5 and pegged to USD.
– There will be many customization options including Card Backs and custom board items (things which show up on your side of the board which the opponent can also see).
– A deck builder with a share button + an easy way to import decks into the game is in the works.
– In the game when you mouse over cards, you will get an explanation of the relevant keywords to reduce confusion.
– The Tribe info will be on the cards in the game.
– There will be an Elo/Ladder-based Standard competitive (Constructed) mode besides the Battle Royales (Limited mode). Battle Royale may feel a little like “a PvP Slay the Spire”.
– There’s no set date for the World Championship but the target is March – April 2019. In terms of what cards will be legal for it, Season 1 cards most likely will also be in play besides the Genesis Set and The Core Set.
– After about 2 years, Devs will likely create 2 play modes: Standard and Extended. All the cards printed in the last 2 years will be legal in Standard (along with the evergreen Genesis Set) and all the cards in existence will be legal in extended.
– “Single player vs the AI” mode is in the game. However, some type of PvE Story mode will not be in at launch, though the Devs plan to have it eventually.
– There could be content/modes allowing for “dual-god” gameplay in the future (like Hearthstone’s dual-class events). But the early days testing will first make sure the vanilla constructed experience is well-balanced.
– Card bans, if necessary, will be done in a decentralized and community-driven manner.
– One is allowed to have more than 1 account. Devs feel they can’t do much to stop that & won’t bother – they’ll leave it trustless.
– Each Eth address can use only 1 World Championship ticket.
– Devs are forbidden from selling their cards on the marketplace.
– It is possible to buy packs on mobile using Coinbase Wallet (old name: Toshi), though desktop MetaMask extension is recommended. You cannot transfer the cards from Coinbase Wallet to MetaMask Wallet until the game’s launch, but you can export your private keys from Coinbase Wallet and import into MetaMask to have access to them on your desktop.
– imToken wallet has rolled out support for NFTs and is officially endorsed by GU.
– You will be able to change your email address associated with your card wallet once the game launches.
– Devs have plans to support the game in Japanese, Korean, Chinese (simplified), German, and Spanish with plans to support additional ones based on demand.
– When you buy super quickly with two separate purchases of same size, same user, same type on the same block, it is possible to get duplicate packs. Can be avoided by spacing out transactions.
– As of September 12th, Fuel games has 15 full-time employees. Lots of devs are working on the Apollo platform which underpins all their games, as well as the games themselves.
– GU team overseas about 70 different artists from different studios who have all come together to create the beautiful card art. Each artist is sent a description for each piece of art which are commissioned exclusively for the game.
– The concept of renting/lending cards as well as distributing prize winnings in a trustworthy way (with blockchain contracts), and this in turn enabling an E-sports team ownership infrastructure has been acknowledged as “awesome” by devs. They will try to push this concept forward.
– The Etherbot promotional set and how to claim the cards (for part owners) will be revealed at the same time as the GU in-house marketplace – because this will be the marketplace for both GU and Etherbots.
– In terms of blockchain code security, an external contract developer was hired to perform an audit for the Genesis contract (it’s also been reviewed by MANY people). Additionally, Devs will be deploying new contracts for Season 1+ to add functionality such as single card activation. All these contracts will also undergo an external audit.
– There will be no rush to try and reserve the desired in-game username as they will not be required to be unique.
– Game APIs (including image API) are being moved around in preparation for Beta and will receive a large update soon. Fansites relying on these APIs may experience repeated downtimes as a result.
– The game will eventually be released on mobile/tablet, but launching on PC first is the priority.
To interact with the Gods Unchained community or dev team, make sure to drop by the official Discord.
Disclosure: Some of the links in this article are affiliate links. If you’ve found this guide helpful, feel free to purchase Gods Unchained packs using our referral code (at no extra cost to you).
Debunking The Top 5 Reasons Why You Shouldn’t Invest In Bitcoin
The topic of whether you should invest in Bitcoin is one of the most polarizing topics in the financial world today. Some see it as an outright scam while others view it as the investment opportunity of a lifetime. History will ultimately end up deciding who is right, but until then what we can do is evaluate the merits of each side of the argument. What certainly doesn’t help matters is when well respected figures in the business and finance world make uninformed and illogical arguments in order to paint Bitcoin in a bad light, sometimes out of pure ignorance and other times in a more malicious manner due to the conflicting bias that they hold. Some of these arguments you will have heard yourself when discussing Bitcoin with friends and family, and hopefully debunking these arguments coming out of the mouth of prominent figureheards will also help you in your pursuit of informing the doubters around you.
The "No Intrinsic Value" Argument
Warren Buffett is a legend in the investing space, but the 88 year old tycoon has always been better known for his value investing approach than an understanding of bleeding edge technologies. Similar to his negative stance on gold, Buffett doesn’t view Bitcoin as an investment since it “doesn’t produce anything”. Not every investment type needs to actually product something, this is only one class of investment types (and clearly where Buffett’s strengths as an investor lies). Paintings, luxury watches, classic cars, antiques, rare collectibles, sports memorabilia are all examples of assets that don’t technically produce anything but yet have clear value to many individuals and can be great investments if bought at the right time or right price. Intrinsic value is more of a philosophical term than the ultimate way to analyze investments, so forcing the concept upon an asset is a flawed argument from the outset. Let’s focus on the general non-speculative value that Bitcoin holds instead and see if there is anything more here than just trying to find the next bigger fool to sell your “worthless” holdings to.
In the case of Bitcoin, the value is in an apolotical digital means of exchange and store of value like we have never seen before and perhaps never thought possible until Satoshi Nakamoto’s Bitcoin whitepaper in 2008. Huge companies like PayPal and Western Union (which Buffett would classify as companies producing value) are on their way to complete irrelevancy due to the emergence of Bitcoin. What price that commands is the topic of another discussion, but to deny that there is real value here in the network and the currency itself would require a completely oblivious outlook on what is a transformative and revolutionary asset that is made for our time.
There seems to be a common misconception, especially among the older folk, that because you can’t touch or hold something, that it doesn’t hold value but what Bitcoin allows, when put in perspective is one of the most valuable things one could ever imagine. Bitcoin allows people to near instantly transact value with anyone around the wold they wish without the involvement of any third party at practically 0 fee. The decentralized nature means it’s removed from any government, central bank or single entity, and has transparent pre-programmed deflationary monetary policy which assures that it will not be diluted into worthlessness like practically every other currency in history. That, to people who have studied history or those who are currently experiencing the devaluation of their currency like in Venezuela, holds the upmost value. This is no longer a theoretical argument, Bitcoin has demonstrated use cases in the real world by helping store and transfer value when no other option would have worked. Even the almighty US dollar has lost 97% of its value in the last 50 years, anything that holds potential to counteract this trend should hold a lot of promise to investors who appreciate that fiat money, ultimately, is flawed.
The "It Will Be Replaced" Argument
Peter Schiff has been one of the most vocal and persistent voices against Bitcoin. Being heavily invested and involved in the gold business, one can’t really blame him for having such a strong bias against Bitcoin and the very real threat it poses to his livelihood. One of his most repeated arguments as to why Bitcoin makes for a bad investment is his claim that actually Bitcoin isn’t really limited to 21 million coins because you can make an infinite amount of clones and forks.
There’s actually two facets to this argument and they need to be tackled separately. The first is that even if Bitcoin’s code is open source and can easily be replicated, that’s not actually where it derives its value from. That would be like arguing that because someone can quickly create a Twitter or Facebook clone (which can easily be done), that those companies don’t deserve the valuations that they currently hold. The clear value that Bitcoin holds is in the network effect that it has garnered and secured over the years. The developers, the brand name, the network of users and miners, and the ecosystem of startups built around supporting it is not something that can be easily copy pasted. The Bitcoin Cash experiment, which initially looked like a crack in its armor, only ended up proving that even a (at the time due to cheaper fees) ‘improved’ clone backed by some of the most powerful figures in the space wasn’t enough to displace Bitcoin as the king.
The second aspect that makes his argument irrelevant as far as investing goes, is that if we were to apply this logic, we wouldn’t be able to invest in any stock whatsoever. Who is to say that in 10 years Facebook itself won’t be displaced similar to Myspace before it, or that Ford won’t go out of business like many other American car companies, or that Netflix won’t be as irrelevant as the business it made irrelevant before it due to a change in technology and consumer habits. The thing is that Bitcoin has been around for a decade and remains the clear leader regardless of competitors around it like Bitcoin Cash, Litecoin, Dash, Monero to just name a few. And if there ever comes a time when as an investor you feel there is a real superior alternative, you can sell your Bitcoin and react accordingly…just like any other investment.
The "It's For Criminals" Argument
If we are to believe Bitcoin has caused deaths in a direct way, than Bill Gates as the creator of the Windows operating system is the father of one of the biggest death inventions in history. This is frankly an embarrassing claim, especially when you consider that research suggests that 90% of US dollar have traces of cocaine due to the overwhelming amount of drug trades using the US dollar.
The U.S. Congress Subcommittee on Terrorism and Illicit Finance recently concluded that crypto is a poor form of money for terrorists. Thanks to the public and immutable nature of blockchains, many analytics tools and methods have emerged that allow investigators to track down complex criminal operations. When you compare it to the truly anonymous and no-record nature of cash, it’s no surprise that fiat money is the much better tool for crime related transactions.
The "They Will Shut It Down" Argument
If there was a Bitcoin movie, Jamie Dimon would probably be the head villain after the direct and nefarious way in which he has repeatedly gone after the nascent digital currency. As if calling it a fraud and “worst than tulip bulbs” wasn’t enough, Dimon made headlines went he said that if he caught anyone at JPMorgan trading bitcoin he would “fire them in a second”. Yet his company continues to try to apply for patents to Bitcoin-like technology despite having been rejected 175 times. Dimon has backed off Bitcoin recently and said , “I’m not going to talk about bitcoin anymore” during a third-quarter earnings call so let’s focus on the argument he lays forward in the quote above, which is the ability of governments to close Bitcoin down.
First we should realize that investing in Bitcoin IS banned in quite a few countries, with China coming at the top of the list. This had an effect on Bitcoin price but the technology continues to march forward. Ironically China is at the forefront of blockchain technology R&D and many of the Bitcoin miners are still operating from China. Many Chinese citizens continue to hold and even invest in Bitcoin despite China taking more and more steps against it. Thanks to VPNs, foreign based exchanges that require no KYC, and the digital nature of it all – it’s practically impossible for any country to actually prevent someone that really wants from owning and trading Bitcoin. Even if you prevented citizens from accessing foreign exchanges somehow, local peer-to-peer services such as Localbitcoins could still be used.
In the grand scheme of things, getting every nation in the world to agree on one specific thing is practically impossible as we have seen with peace accords, trade deals, environmental standards and other topics. In fact we are witnessing a more protectionist outlook by countries, and the clear separation of interest between parties like the US, the EU, and BRIC nations means that there will always be jurisdictions that will be pro-crypto even if it is smaller places such as Malta, Seychelles, and Hong Kong.
The reality is that now with powerful nations such as South Korea, Japan, and Switzerland already making grand steps towards adopting crypto regulations, the thought of a worldwide Bitcoin shutdown is no longer a viable possibility like it was in its very early days especially with the aforementioned “criminal uses of Bitcoin” largely debunked.
The "It's Slow and Wasteful" Argument
Nobel Prize winning economist Paul Krugman thinks that Bitcoin is eroding 300 years of monetary evolution due to the apparent slow speeds at which it functions and the resource-intensive nature of its security. While we’re not going to put much weight on the predictions of someone who once claimed the “Internet’s effect on the economy will be no greater than the fax machine’s”, it still presents us a chance to tackle the “speed” and “energy consumption” arguments against Bitcoin.
In terms of speed, Bitcoin developed a bad rep towards the end of 2017 when its network was congested causing transactions that took at times hours to process and fees that climbed way above the double digital dollar mark. While speeds and costs have normalized now, there is still the issue currently with Bitcoin block sizes/times and resulting throughput capacity making it incapable of handling volumes at the scale of VISA. While the speed and fees isn’t a problem for those who view Bitcoin as a store of value (since you hardly ever need to actually move it) it does present problems as a digital currency. That’s where the development of offchain/second-layer solutions like the Lightning Network comes in, and how the speed and cost problems will be solved.
In terms of the resource-intensiveness and reports of how the Bitcoin mining is consuming more energy than entire countries, it’s actually quite the opposite. If you are to factor in how much energy the current financial system takes to keep together (with its thousands of banks, ATMs, vaults, vans and the people consuming energy to operate them in each country) then Bitcoin actually is a drop in the bucket. With many aspects taking place in the digital realm, a future where Bitcoin and cryptos are the backbone of the financial system presents immense energy saving potential to the planet. If, of course, the environment was ever the concern of the people making the claims.
While it’s very easy to be swayed by these massively succesful and influential people, many of their arguments fall flat when analyzed from a logical and historical perspective. New technologies have shaken up industries to their core, made fools out of brilliant men and left once huge companies in the dust. Whether Bitcoin is one of those technologies still remains to be seen. After reading this, Bitcoin might still not be for you, but hopefully you at least are aware of both sides of the argument in the great debate.
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