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Remember Bitcoin? Some Investors Might Want to Forget

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  • Remember Bitcoin? Some Investors Might Want to Forget

    Last year around this time, a toy called a cryptokitty sold for $170,000. A real estate agent remade himself as CoinDaddy, producing cryptocurrency-themed music videos. The man behind a company called Ripple became for a moment richer than Mark Zuckerberg. Kids barely out of high school were buying Lamborghinis because of a crypto meme. Experts went on CNBC to say Bitcoin was going to reach $100,000 per coin.

    For a few sweet months of 2018, all of Silicon Valley was wrapped up in frenzied easy money and a fantasy of remaking the world order with cryptocurrencies and a related technology called the blockchain. A flood of joy hit the Bay Area. The New York Times ran with the trend in an article with the headline “Everyone Is Getting Hilariously Rich and You’re Not.” It was temporarily true.

    And just as the American public had been given every possible blockchain explainer that could be written, the whole thing collapsed. The bubble popped.

    Today the price of Bitcoin — $19,783 last December — is $3,810. Litecoin was $366 a coin; it’s now $30. Ethereum was $1,400 in January; today it’s $130.

    One recent crypto holiday party offered “broken Lambo dreams and an open bar to drown your sorrows in.”

    This December closes out cryptocurrency’s most exciting year, ending in a terrible, sober headache of a winter.

    At the meetups and the work spaces that remain, those who have stayed are calling this “the winter of crypto.” Believers say this is only “the trough of disillusionment,” pointing to a chart that posits all new technology goes through a similar trough before exploding into inevitable glory.

    Those still chipping away at crypto dreams insist that this is all a good thing because only the serious ones, the true crypto believers, remain.

    “It’s painful to lose money, but it’s a necessary step,” said Robert Neivert, an investor with the venture capital firm 500 Startups. “2018 was about moving from hype to product.”

    This year, the blockchain industry — a subset of the cryptocurrency industry that would very much like to live on its own — went through a Cambrian explosion. But first, an explanation of the blockchain: A blockchain is a relatively new kind of database that was initially introduced with Bitcoin. It is not the digital currency. It is the underlying technology that helps manage the currency. Most important, it is decentralized so no one person, government or business controls it.

    Blockchain became a solution for everything — blockchain for journalism, for pot, for dentists. At the kernel of it all was real technological progress and a growing understanding that this decentralized technology could transform financial systems. But the excitement spun out of control.

    Even adding the word “blockchain” made stock soar. When Long Island Iced Tea Company changed its name to Long Blockchain Company, its stock went up 500 percent in a day. Scammers flooded the space, launching dubious new investment schemes called “initial coin offerings.”

    The computing power needed to “mine” a Bitcoin or other cryptocurrency is now sometimes costing more than that coin is worth. Mines — actually, they are electricity-needy data centers — are shutting down. Images of electronics piled up on street corners are going viral. As demand for Bitcoin has dwindled, Bitcoin’s algorithm has adjusted and the coin has become easier to mine.

    But this is actually good, crypto experts argue.

    “The fact that miners are shutting down and difficulty is decreasing is a feature, not a bug, of bitcoin’s design,” the venture capitalist Arianna Simpson wrote on Twitter.

    Some in the cryptocurrency business would just like the world to know that there are still people working on it. Julian Spediacci, a cryptocurrency investor in San Francisco with his twin brother, James, said he would like people to know that he is still alive and identifies as a HODLer, or someone who is not selling despite market fluctuations.

    “A lot of people are reaching out, and they want to find out what happened to us, and if we’re still alive, so it’d be great to clarify that there are a lot of OG HODLers,” Mr. Spediacci said, using language common in the crypto industry to indicate he would remain an investor.

    Some of the friends they made have left town. The meetups are quieter. The most recent video from the community’s primary musical voice, CoinDaddy, né Arya Bahmanyar, is set to the tune of Beatles hit “Yesterday.”

    But the Spediacci brothers continue. They say they are starting a new hedge fund. And that weekend there would be a holiday party at a new blockchain incubator, Starfish, run by Alicia Ferratusco. An incubator is a space where a group of start-ups work together, in this case working on blockchain technology.

    “It’s called Starfish because when you cut off the leg of the starfish, it can grow back,” Julian Spediacci said.

    Not everyone is struggling in the downturn. For lawyers, it is a new gold rush.

    “Now that the market dropped, everyone is getting sued,” said Chante Eliaszadeh, a law student and the president of a blockchain law club called Blockchain at Berkeley Law.

    She said the legal scene is pretty exciting right now. As the Securities and Exchange Commission cracks down, some scammers are trying to escape to Bali or Malta, where regulations are more lax.

    At one holiday party in Palo Alto this year, the theme was “real.”

    Organizers had pasted the motto — “Real People, Real Money, Real Deals” — on the walls, on boards, on slide shows and handouts.

    Moderating a panel was Radhika Iyengar-Emens, a founding partner at a venture firm that specializes in cryptocurrency and blockchain start-ups called StarChain Ventures.

    “I think we’re going to see a lot of real use cases,” Ms. Iyengar-Emens said. “And these guys will be here for those very real use cases.”

    A use case would be a regular consumer’s being able to use a cryptocurrency to do something other than make a speculative investment.

    The audience sat in folding white chairs. The snacks were Ritz Bits.

    “What is QuarkChain?” QuarkChain’s founder and chief executive, Qi Zhou, asked the audience. “Next generation blockchain.”

    Kerry Washington, a member of the Litecoin Foundation, which promotes Litecoins, gave a presentation about the year, in which the coin lost more than 90 percent of its value.

    He talked about a big Litecoin summit this year, which on one slide he specified cost a quarter-million dollars. There, guests could buy candy with Litecoins. This showed everyone how useful Litecoin could be, he said.

    The trouble was always that we already have something that lets us buy candy.

    An ad played for something called Bitrue, a wallet. It was just a half-dozen people looking straight at the camera saying: “I trust Bitrue.”

    And then Curtis Wang, the chief executive of Bitrue, stood up to announce a very special offer. He could promise investors a 10 percent annual percentage yield. There was scattered applause in the crowd.

    Someone in the audience raised a hand and asked whether that was even legal to offer.
    "I guess I just hate the fact there is public property at all." - Mr. Raceboy.

  • #2
    I am still amazed it is holding any value at all...

    Pete (wonders why it does)


    • #3
      Its way down from the bubble, but seems to hold its own in the 3-4k range.


      • #4
        Originally posted by Danisr1 View Post
        Its way down from the bubble, but seems to hold its own in the 3-4k range.
        Which to me is shocking. I don't understand how it could possibly be worth so much, especially with every Tom Dick and Harry still making new cryptocurrencies seemingly every day.

        Pete (thinks it should be worthless, but then again so should dollars be)


        • #5
          It does take money to produce a bitcoin, and I guess that what keeps it afloat. I am still in the corner that it will always have some value as a dark web/cartel type person to move money around.


          • #6
            Originally posted by Danisr1 View Post
            Its way down from the bubble, but seems to hold its own in the 3-4k range.
            There was no bubble, remember?
            I'm for defending all rights for everyone.


            • #7
              Oh there was, but I still don't agree with the tulip mania comparison. Tulips crashed overnight and were of little to no value. If you had crypto currency you had your window to leave and still make out pretty well ( I did). A Bitcoin is still worth around 4 thousand dollars.


              • #8
                Tulips are in bloom!


                • #9
                  Any of y'all still hodling?

                  Pete (suspects the price will go higher as we approach next May)


                  • #10
                    1 bought 1 at around 3500 a few months ago
                    purely as a blind gamble. I watched it hold around there and every time it dipped it came back, so I bought one.


                    • #11
                      Top Bank Analyst Issues Dire Warning Over Bitcoin Returns

                      Bitcoin and the wider cryptocurrency market has been going through something of a resurgence in recent weeks though investors and analysts remain wary of volatile crypto-assets, with many warning that bitcoin's gains could be fleeting.

                      The bitcoin price, which rocketed throughout 2017 before declining steadily through most of last year, has proven to be hard to predict. Many well-respected (and some less respected) bitcoin and cryptocurrency watchers have made bold and brave bets on the bitcoin price only to have to eventually eat their words.

                      Now, a top tech analyst at Swiss bank UBS has warned that this recent bitcoin price rebound does not mean bitcoin will be heading back to its all-time highs of near $20,000 any time soon, despite bitcoin rising around 40% so far this year and many so-called altcoins recording triple-digit gains over the last few months.

                      "The argument here is that bitcoin has gone through its bubble phase and is ready to rise phoenix-like from the ashes just as other assets and indices did in the past," Kevin Dennean of UBS wrote in a research note to clients.

                      Dennean compared the rapid rise and fall of the bitcoin price to previous well-known bubbles such as the Dow Jones in the Great Depression, the Nikkei in 1989, the Dotcom Boom and Bust, oil in 2008, and China’s recent stock market crash.

                      "We’re struck by how long it took other asset bubbles to recover their peak levels (as long as 22 years for the Dow Jones Industrials) and how pedestrian the annualized returns from trough to the recovery often are," Dennean wrote.

                      If the bitcoin price bubble follows the same path as that of the Dow Jones after the 1929 stock market collapse, bitcoin investors will have to wait a whopping 22 years to see the same all-time highs again.

                      All the asset classes named by Dennean dropped by more than 75% after hitting their all-time highs, bar one but including bitcoin, while only two ever recovered to previous levels.

                      The bitcoin price, despite a recent rally back to $5,000, fell over 80% in under 12 months after hitting its all-time high, while other smaller cryptocurrencies have seen price reductions of more than 90%, leaving investors reeling.

                      "Maybe crypto-bull contingents should consider what happens after the bubble–not every bubble that bursts recovers the old highs," Dennean warned.
                      "I guess I just hate the fact there is public property at all." - Mr. Raceboy.


                      • #12
                        As long as you can use it to buy sex and drugs it'll have some value.

                        Pete (knows the score)


                        • #13


                          • #14
                            I must be dense, because I would think that with Facebook and JP Morgan launching their own cryptocurrencies, you'd want to get out of the old ones...

                            Pete (shrugs)