A startup called Basis has raised $133 million from top venture capitalists to build a “stable cryptocurrency” (also called a “stablecoin”).

A stablecoin is a cryptocurrency designed to eliminate the high volatility associated with most coins. The goal is to smooth out the ups and downs so the stablecoin is usable as an everyday currency.

Basis plans to stabilize its price by controlling coin supply, increasing it when demand is high and decreasing it when demand is low. It also mentioned possibly letting the coin’s price rise when the algorithms detect inflation. This is similar to how a central bank operates (or should operate).

The tagline on Basis’ site reads “A Stable Cryptocurrency With an Algorithmic Central Bank.”

Here’s an excerpt that describes the goal from Basis:

When demand is rising, the blockchain will create more Basis. The expanded supply is designed to bring the Basis price back down.

When demand is falling, the blockchain will buy back Basis. The contracted supply is designed to restore Basis price.

The Basis protocol is designed to expand and contract supply similarly to the way central banks buy and sell fiscal debt to stabilize purchasing power. For this reason, we refer to Basis as having an algorithmic central bank.

Basis does not plan to “peg” its price to the dollar like other successful stablecoins such as Tether (USDT) have done. Tether is currently the largest stablecoin, with a $2.3 billion market cap. (It trades within a tight range, around $1.)

Basis’ coin isn’t live yet, so we don’t know exactly how it will work in the real world. But the venture capitalists who are investing in this project clearly see huge potential.

The first signal is how much it raised: $133 million. That’s a monster round of funding for such a young company. The average funding round for a company at this stage is typically a few million dollars.

And the investors in this round include many of the best early-stage investors in the world. I almost never see a round of funding from such a prestigious group as this.

Let’s take a look at a few of the VC firms that just invested in Basis, a startup that says it’s “building a new monetary system.”

• Bain Capital Ventures: Manages $3.1 billion. Early investments include LinkedIn, Optimizely, Jet and Digital Currency Group.
• Andreessen Horowitz: Manages $2.7 billion. Early investments include Facebook, Skype, Reddit, Oculus and Box.
• Google Ventures (venture arm of Google): Manages $2 billion. Investments include Uber, Box, Jet and Nest.
• Lightspeed Ventures: Manages $4 billion. Early investments include Snapchat, DoubleClick and Brocade.

Don’t let the fact that these guys manage “only” $2 billion to $4 billion deceive you. That’s how much they’ve raised. They’re worth much more once you include the value of all the shares they hold and past profits. Lightspeed, for example, made $2 billion on its $8 million investment in Snapchat alone.

Other notable investors in Basis include leading cryptocurrency hedge funds Metastable and Polychain Capital.

This is a very powerful and influential group of investors. And they’ll need that power because they plan to take on one of the largest markets in the world: fiat money.

“Software Eating the World”

Andreessen Horowitz (usually called a16z) is a powerhouse in the venture capital world. Its investment thesis is that “software is eating the world.”

So it invests in disruptive technology companies. For example, it invested early in Skype, which, along with other chat platforms, disrupted the telecom business. It essentially killed the phone companies’ “long distance” business model.

In the case of Basis, a16z is investing in a startup that is attempting to disrupt the entire monetary system.

Competing with the dollar, euro and yen is an ambitious project, to say the least. Hence the $133 million monster round of funding…

If it can pull it off, it will be behind one of those technologies that could truly change the world: independent, stable, secure and inflation-resistant money. A system like this could immediately be utilized both as a payment platform and a store of value.

I believe it’s extremely possible to do from a technological standpoint. I strongly believe that, using blockchain technology and cryptography, a better, stable currency can be built.

The chief difficulty will be resistance from “establishment” groups. Primarily, we’re talking about governments and banks – our modern political elites.

These folks like the monetary and financial systems just fine the way they are and will likely make it hard to build a truly competitive currency. They already discourage other assets (like gold) from being used as money, primarily through regulations and taxes.

But the establishment is fighting an uphill battle in the long run. Its system of ever-increasing debt, high expenditures and easy money will ultimately collapse. At some point, people will adopt crypto despite its drawbacks. This has already begun around the world.

We’re seeing this play out acutely in Venezuela today. In the first quarter of this year, inflation in Venezuela raged at 454%. Its total inflation rate over the last 12 months is a staggering 8,900%.

Unsurprisingly, bitcoin trading volume is at an all-time high in Venezuela. LocalBitcoin, a site that facilitates person-to-person bitcoin exchanges, saw volume in the country spike from $18 million in all of March to more than $55 million in just the last week.

And in a desperate (but calculated) move, the country launched its own cryptocurrency, the Petro, this year. Venezuela’s president just officially made it “legal tender,” meaning it can be used the same way as cash and is accepted as payment by the government.

The Petro aims to be a stablecoin of sorts too, with the government “backing” every coin with a barrel of oil. Again, it’s not clear if this experiment will work, and the country has a bad record financially.

The interesting thing is this almost certainly marks the beginning of a trend.

Stablecoins’ Massive Potential

Stablecoin projects are some of the most promising in the crypto world. They could offer the world an alternative to inflationary fiat currencies, which are usually losing value. And done well, they won’t have the extreme volatility of bitcoin and other traditional cryptos.

This could actually change the world. One day we might be paid our salaries in a stablecoin (or a basket of stablecoins).

I don’t believe stablecoins’ primary challenge will be technological. I’m confident better fundamental currencies can be built with blockchain tech and VC money.

Naturally, stablecoins don’t have the same profit potential as coins like bitcoin. They don’t have the appeal that has been a big part of crypto’s viral success.

But I’m betting those stablecoins that can find a balance between price appreciation and stability will be extremely attractive assets. A truly stable crypto investment would be incredibly useful. And if it has some price increase potential too, that would be great.

We’re going to see some amazing developments in the stablecoin space over the coming years. Clever models will emerge that reward holders, spenders and people who refer friends.

Good investing,

Adam Sharp
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Dear Early Investor,

A broker from a big bank just did something I’d never do…

He put a number on the potential value of the blockchain market.

If you think, as I do, that blockchain technology will expand from dozens of uses to hundreds and then thousands, how can you calculate a precise market value for that?

It’s like Thomas Edison trying to predict in the late 1800s how much the electricity market would be worth a few decades into the 20th century.

Did he realize at the time that almost everything we now make and use, not just lights, would be electrified?

Probably not. How could he?

(And the one thing he thought would be electrified – vehicles – didn’t catch on until more than 100 years later!)

I believe at some point in the future (10 years? 20 years?), most of the services we’ll be using on a daily basis will be enabled by the blockchain.

Again, how can you put a price on such a ubiquitous technology?

Is it in the tens of billions? Hundreds of billions? More?

A Report From Deep Inside Wall Street

Here’s the best thing about the report this broker put together…

It doesn’t come from crypto investors talking their own book… initial coin offering companies hyping their future growth… or blockchain evangelists espousing best-case scenarios as a given.

Mitch Steves, the author of this report, is a traditional Wall Street equity analyst. He works for the RBC Capital Markets subsidiary.

His only connection to blockchain and crypto?

Among the companies in his bailiwick is NVIDIA because it makes graphics processing units for mining cryptocurrency.

By the way, he says the $4 billion-plus market for mining cryptocurrency is here to stay.

Steves says that blockchain technology is misunderstood – that store of value and payment use cases are the most commonly cited but “the least interesting.”

The single most “positive technology” breakthrough is the one staring us in the face: The blockchain, the underlying technology, HAS NEVER BEEN HACKED.

(And, in my opinion, it WILL NEVER be hacked.)

This is no small thing. Steves compares Box, a content management platform, with Filecoin, a decentralized blockchain equivalent, to highlight the differences…

With Box, your data is owned and controlled by a third party that has access to your information (a photo loaded can be retrieved by anyone with access to Box servers – employees). With Filecoin, your storage is distributed and decentralized, making the holders unable to retrieve your photo (they would need to hack every computer on the decentralized network – blockchain). Your information is now secure, and without your private keys, it cannot be accessed.

This is an early case of how a globally decentralized network of computers can work using the blockchain. Steves calls this network of computers the “World Computer.”

He says that same concept can be applied to a “wide variety of decentralized applications (aka ‘dapps’).”

I completely agree.

Rose-Colored Glasses?

What Steves is saying is reasonable and, frankly speaking, not entirely novel. People who aren’t paying close attention may be confusing hacks of exchanges and individual wallets (which has happened) with hacks of the blockchain itself (which has never happened).

But insiders have well understood the security benefits of putting data, transactions, assets, documents and sensitive information on the blockchain… and how the blockchain makes it fast, easy and secure to track these things.

But it’s nice hearing this confirmed by a big bank with no vested interest in the crypto or blockchain markets.

And because Steves hails from outside the crypto community, he openly acknowledges the “many risks to crypto.” No rose-colored glasses on him.

Among the risks, he lists the possibility of an attack if a single entity were to garner more than 50% of the computing power (which, I should add, would be near impossible).

Other risks mentioned? Coordinated attacks to manipulate prices… and the potential for smartphone wallet hacking.

The Worth of the Market?

How he arrives at this big round number turns out to be the most disappointing part of his 38-page report.

He basically took a third of the roughly $30 trillion in assets held in offshore funds and gold. Just a rough stab, in other words.

But perhaps that’s as it should be. At this early stage, trying to do anything more would be a reach.

We simply don’t know how big this number will be. Anybody who says differently is lying to themselves or everybody else.

However, I believe it will be a big number. Blockchain technology is driving a surge of innovation in the development of new protocols and blockchains.

There’s a long way to go. And nothing is a given at this point. But decentralized computer technology has the potential to reinvent huge swaths of the global economy.

With that kind of upside, even a modest investment could yield quite a large return.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

I have good reason NOT to trust the government.

It stole something from me.

It did it in such a brazen manner that even now – 20 years later – I get mad whenever I think of it.

It involved a public bid. A big tank cleaning job. My company, based in Jakarta, had been eyeing it for a while.

We won the bid – a good feeling. The story should have ended there.

In most countries, it would have.

But Indonesia isn’t most countries.

Its economy is run according to a set of unwritten rules that can be summed up this way…

If you’re not taking a bribe, you should be giving one.

It’s rated 96 out of 180 countries in Transparency International’s Corruption Perceptions Index.

Fifteen years ago it was much worse. I’m sure it rated well above 100.

So let me tell you what happened.

Gone, Contract, Gone

After winning this project, we received a signed, sealed and stamped letter from the government agency whose project it was.

And that happened to be Pertamina, Indonesia’s big, bloated and corrupt state agency involved in the country’s oil production and trading.

The vice president who ran our Jakarta office – James T. – was summoned to a meeting by a Pertamina official. This is how he described it to me…

I entered this enormous boardroom at Pertamina headquarters. At the far end of a long table sat an official whom I had met once or twice but did not know very well. He greeted me like we were old friends.

He then told me there was a small problem. He had found a small error in the approval letter sent to us. He asked for the letter, explaining he’ll fix it and return it in five minutes. He returned 20 minutes later and said he found a couple more errors. He said he needed to keep the letter and I could pick it up the next day. As I left the room, he said he’d call me in the morning.

James never saw or heard from him again.

Nor did he ever see the letter again.

Two weeks later, Pertamina issued a new letter to another company. We learned that the copy James had made carried no legal standing because it was not the original.

We were, in a word, screwed.

Later on, we found out that the Pertamina official James had met was given a generous bribe by the new winner of the project. Surprise, surprise.

Of course, I’m not the only one this stuff happens to. You and I know… IT HAPPENS ALL THE TIME.

Just recently, for example, countries from Peru to Mexico were rocked by a big scandalinvolving the Brazilian construction company Construtora Norberto Odebrecht. It had paid bribes to a number of government oil officials (of course).

Kickbacks at Brazil’s Petrobras and Mexico’s Pemex were unearthed. Ecuador’s vice president was put behind bars.

According to Reuters, the company has paid $3.5 billion in settlements in the U.S., Brazil and Switzerland.

Here, There, Everywhere

For every company that’s caught (like Odebrecht), I bet there are 100 running around handing out gifts to their favorite officials.

Based on my global business experience, I’d say that in a good 50 countries, it’s impossible to do a sustainable level of business without handing out bribes.

The U.S. isn’t one of those countries. Here it’s a little subtler…

A network built on mutual back-scratching at the highest levels of government, business and entertainment exerts a nefarious influence on how deals get done.

If you’re on the outside looking in, it stinks.

Dumping the Toll Takers

Just a couple of years ago, I would have said to those outsiders, “Deal with it.”

It’s the way of the world. Nothing you can do.

With the advent of trustless blockchain technology, I’ve changed my tune.

The blockchain itself confirms a transaction. No middleman (like a bank) is needed.

And you can put all kinds of things on the blockchain, not just payments.

For example, you can put government projects and public bids on the blockchain. Hmmm…

The blockchain applied to public contracts – what a great idea!

It’s turning into a reality, thanks to a team of university graduates from Mexico who initially developed it.

The blockchain would track bids and store records of the bidding process. It would allow audits to review every step of the bidding process.

Imagine if government officials knew this was in place.

Such a technology wouldn’t stop bribery altogether, but it could make a serious dent.

For example, I’m not sure how it could expose one subtle form of favoritism – structuring a bid to play to a particular company’s strengths.

(Confession: I’ve played this card myself back in the day. It’s very effective.)

It’s definitely a step in the right direction.

Mexico’s national digital strategy coordinator said it would eliminate the “easily corruptible” human element and introduce transparency to the public tender process.

What the Future Could Look Like

I would love to see public projects won based on sophisticated algorithms embedded in the blockchain. No human intervention.

It would empty out hundreds of buildings around the world filled with government pencil pushers.

That’s the beauty of the blockchain. It gets rid of the middlemen, the gatekeepers, the toll takers.

And it eliminates the rent – that also can take the form of bribes – for the users.

Massive adoption of blockchain technology would make the world not only more efficient but also more honest.

How great would that be?

Good investing,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

Dear Early Investor,

Cryptocurrencies can offer investors dazzling returns.

That’s a nice conversation starter.

But cryptocurrencies can do so much more.

Adam and I have talked a lot about the gains that have been made (and the gains likely to come).

We’ve also talked about how nice it is to finally have a viable alternative to fiat money (aka traditional currency).

Cryptocurrency prices rose so quickly in 2017 (more than 10X) that progress made in the equally exciting blockchain technology has been drowned out.

The profits are real… and happening now. It’s definitely created a buzz.

But what about the technology itself?

Well, it’s developing about as well as can be expected. Every day, new advances are announced.

A bipartisan bill in Colorado proposes using blockchain tech to protect state data.

Developers of TrueBit, a smart contract that scales transaction computations through interactive verification, were able to move Doge coins to the Ethereum network and back again. Once the technology is fully developed, it could allow a degree of scalability currently out of Ethereum’s reach.

American Express has applied for a patent to use blockchain tech to boost transaction speed.

None of this is surprising.

There are thousands of developers around the world working on new blockchain technologies. The companies that employ them announce their breakthroughs with as much fanfare as possible, in hopes of attracting both funding and top-caliber engineers to their projects.

Yet it seems that cryptocurrency is garnering as many detractors as enthusiasts and eager investors. Here are three rules to explain why this is happening.

Rule No. 1: The more transformative a technology, the more skepticism it engenders in its early days. Breakthrough technology is hard for most people to understand and accept. What’s more, it doesn’t come fresh out of the lab fully developed. New products are greeted with disbelief or bemusement, as if they’re toys. (See my article here for more of my thoughts on this.) Past examples include Skype, mobile phones, iPads and desktop computers.

It’s why bitcoin wasn’t taken as seriously as it should have been when it first appeared on the scene. And it’s still the case today!

Rule No. 2: It takes time for external technological forces to catch up. An ecosystem needs to mature around any breakthrough technology. Thomas Edison invented the lightbulb in 1879. Two years later, he patented a system for electricity distribution. A year after that, the first few thousand houses in New York City were electrified. And efficient scaling was still years away.

Because prices and fees fall, network effects kick in and accessibility improves. Basically, technology adoption is sluggish at first, but it gains speed over time.

But that is neither a smooth nor a linear process. I’m a big believer in an adage known as Amara’s law…

We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

Roy Amara was a co-founder of the Institute for the Future in Palo Alto. He describes a typical pattern with new technologies as “a big promise upfront, disappointment and then slowly growing confidence in results that exceed the original expectations.”

This is true, he says, of computation, genome sequencing, solar power, wind power and even home grocery delivery.

Let me add blockchain technology to his list.

Rule No. 3: Unproven technology is where the biggest investment gains (and risks) are made. I think very few people would dispute this. Yet this same rule makes early and unproven technology an easy target.

A typical comment I hear: “Lots of people invest in it, few use it.”

Of course, I can say the same thing about crowdfunded startups that have thousands of investors but little or no sales to speak of.

That doesn’t mean a thing to early investors. It comes with the territory. But we do expect the technology to work… and eventually make a profit.

We have legitimate “proof of concept” claims from blockchain technology companies, but we’re so early in the life of this technology that we don’t know for sure if it will be put to work on a massive scale… or even if it will work at all.

It goes to show just how nascent the technology in this current period is.

We’re basically in the experimental, pre-commercial phase of blockchain technology. Lots of things are being tried and tested in controlled trials, but very little is being trotted out for actual use. Mass consumption is still years away.

Late, Early or Just Right?

Most of you probably wonder if you’re too late. Ha! You should be concerned whether you’re too early.

The good news: You’re neither. I’m very bullish on the long-term outlook for blockchain and cryptocurrency investments. We’re at the very beginning of a multidecade phenomenon.

I’m convinced that dozens of industries will be reinvented by distributed ledger technologies and decentralized digital-asset-backed protocols. The change will be massive and global… and will develop into a multitrillion-dollar space. In terms of scale and impact, it will be similar to the internet, which transformed EVERYTHING.

The extraordinary returns come very early in the cycle. Your timing couldn’t be better.

Of course, it all has to play out. And maybe it will never amount to anything (though I doubt that very much).

My advice? Invest a small percentage of your savings – enough to make a difference in your life if the cryptocurrency/blockchain space overcomes current skepticism and gains broad acceptance, as we expect it to.

Remember, needle-moving technologies have always experienced tremendous challenges early on.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

Sometimes it feels like we’re living in a sci-fi movie.

Governments vs. hackers. Digital currency. And now, government-issued digital currency.

Venezuela has officially launched the presale of its “petro” cryptocurrency. According to the government, more than $735 million has been raised in the presale in just 20 hours. (I wonder how that compares with the country’s last bond sale…)

Venezuela plans to issue 100 million tokens in total, each backed by a barrel of oil. The starting price for each token is $60, and the presale ends March 19.

Apparently, the coins will be used to purchase deliverable oil from state-owned companies. The country also says that citizens who use the coin to pay taxes will get a 10% discount.

I’m very curious as to who’s buying these early tokens. Is it industrials that plan to actually use them for oil purchases? Venezuelan citizens who are sick of hyperinflation wiping away their savings? Neighboring countries that trade with Venezuela?

By the way, the U.S. Treasury has issued a statement saying that Americans should not participate, as it would probably violate sanctions against Venezuela.

Hinting at Crypto’s Potential
We don’t know if the Venezuela experiment will work. It certainly could because people who have suffered through horrific inflation tend to seek out alternatives: gold, silver, real estate… and now cryptocurrencies.

A government-backed digital currency could be attractive to both companies and people, especially when compared with the old, hyperinflated, nearly worthless currency, the bolivar. So even though the government has a bad financial record, local citizens, at least, may be willing to overlook it.

However, this is the first time a centralized power has released a cryptocurrency. It could go horribly wrong, in many ways.

We don’t know if they plan to “fix” the price of the petro to the price of oil, for example. That would take some serious engineering since there may be more demand than supply, or vice versa.

What if people start using the petro for everyday things? Do they plan to let the price rise far above the price of a barrel of oil, if demand is there? If each petro is worth $120, does it buy you two barrels?

We’ll know the answers to these questions soon enough. But the interesting thing about this story is how it demonstrates what crypto can do.

In the next few years, more countries, local governments and companies will begin issuing tokens or coins.

Let’s look at a hypothetical example. A city needs to finance a new toll bridge. They could use a platform like Ethereum to issue a token for that purpose.

There would be a “smart contract” that automatically shares a predetermined percentage of toll revenue with owners (once it’s operating). The tokens would trade freely on exchanges and find price equilibrium at a yield that investors are comfortable with.

Traditionally, the city would raise this money by issuing municipal bonds. Only institutional investors participate in these deals, so locals are left out in the cold.

But if they used a token or coin instead, they would get three major benefits:

Far more liquidity
Participation from small, non-institutional investors (aka 99% of all investors)
Efficient distribution of revenue with smart contracts on the blockchain.
It’s also a lot easier to store a token than it is a bond. Anyone can do it. And you don’t have to trust a bank or money manager to hold your money for you.

The toll bridge is just one example of how blockchains have the potential to transform the financial world.

There will also be equity tokens soon. They will be very similar to cryptocurrency but will represent shares in the company.

We’re already starting to see some amazing applications of blockchain technology. But if this were the internet, I’d say we’d be in about 1993. This is the very early adopter phase.

Over the coming years, we’re going to see some amazing technologies emerge.

The best part is almost anyone can participate in this blockchain revolution.

Good investing,

Adam Sharp
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

I have long believed that the biggest threat facing cryptocurrency is government.

Most countries don’t appreciate competition from private markets when it comes to currency. Nearly all governments have operated with a central bank-controlled monopoly on money for a century or longer.

And after China shut down its domestic crypto exchanges and banned initial coin offerings (ICOs) last year, the fear was that other countries around the world would follow suit.

This regulatory risk factor has been stalking cryptocurrency markets ever since. It’s the No. 1 concern I hear about from our subscribers and other crypto enthusiasts.

Fortunately, we now have more clarity on this issue. In many countries where crypto trading is popular, discussion has shifted away from rumors of bans to talk about smart regulation.

In a U.S. Senate hearing this month, Commodity Futures Trading Commission Chairman J. Christopher Giancarlo was surprisingly upbeat about the future of U.S. crypto markets. Here’s a quote from the hearing…

“Do no harm” was unquestionably the right approach to development of the internet. Similarly, I believe that “do no harm” is the right overarching approach for distributed ledger technology… With the proper balance of sound policy, regulatory oversight and private sector innovation, new technologies will allow American markets to evolve in responsible ways and continue to grow our economy and increase prosperity.

You can read Giancarlo’s full written testimony here.

However, Giancarlo and Securities and Exchange Commission Chairman Jay Clayton struck a more cautionary tone about fraud in the market. They’ve already acted to stop a few cryptocurrency operations that were allegedly operating like Ponzi schemes.

Here’s an excerpt from a joint statement by Clayton and Giancarlo…

The CFTC and SEC, along with other federal and state regulators and criminal authorities, will continue to work together to bring transparency and integrity to these markets and, importantly, to deter and prosecute fraud and abuse. These markets are new, evolving and international. As such they require us to be nimble and forward-looking; coordinated with our state, federal and international colleagues; and engaged with important stakeholders, including Congress.

Similar developments are happening around the world. South Korea, a major crypto hub, has backed off a rumored ban on crypto trading. Government policy coordinator Hong Nam-ki said the following, as reported by Reuters…

The government’s basic rule is to prevent any illegal acts or uncertainties regarding cryptocurrency trade, while eagerly nurturing blockchain technology.

This is exactly what I’ve been hoping for. We need regulators to step up and prevent bad actors from tarnishing the industry.

Regulation has the potential to legitimize the nascent cryptocurrency markets. Done correctly, it would clear the path for institutional buyers to step in and rocket the market higher.

Of course, there’s still the risk that governments could reverse their opinions. But based on what we’ve seen so far, I would argue that this is the most positive development we’ve had in years.

I cannot overstate the importance of the clarity we’ve gotten on the government/regulatory risk situation.

This prospect of widespread bans has been a looming threat hanging over the crypto world. For now, that threat has passed.

Crypto Markets Rebound Strongly

With the biggest near-term threat to crypto largely overcome, markets have reacted to this bullish news appropriately.

During the low of the sell-off on February 6, bitcoin briefly dipped below $6,000. We last saw prices that low just before Thanksgiving 2017.

That same day, I sent out a note to First Stage Investor subscribers titled “Crypto Markets: Nearing a Bottom?”

In the alert, I noted the following…

We are reaching a retracement point where, historically, a bottom forms… So if you believe in the long-term fundamentals of cryptocurrency (as I do) and have been waiting for a chance to buy the dip, now seems a fine time to do so across our recommendations.

So far, it looks like we may have called it (near) the bottom. Bitcoin is trading back above $10,000 as I write this, with most altcoins following bitcoin’s lead.

I continue to believe we’ll see new all-time highs in crypto this year.

Here’s how I think about it: 99% of the world is still on the sidelines. And other than a handful of early institutional adopters, 99.99% of the professional investing world remains on the sidelines as well (venture capital funds, hedge funds, wealth managers, family offices, etc.).

There’s no question in my mind that the potential rewards still far outweigh the risks.

The difficult part remains holding through nasty corrections and buying the dips when it seems as if the crypto world is ending. If you can discipline yourself to do that, you’re well on your way to making money in crypto.

Good investing,

Adam

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

Crypto is in a tough spot…

One of those lousy, unsought, “damned if you do, damned if you don’t” spots.

You see, it needs a well-thought-out and fair regulatory regime.

And it needs the government to get it right.

What Are the Chances?

Man, that’s a big ask.

It’s like inviting Uncle Sam to tax your money but not too much… to raise the interest rates but not too much… to shrink government but not too much…

How do you arrive at “too much” or, for that matter, “too little”?

Chances are, when you invite the government into your personal or professional life, you usually regret it.

You simply don’t expect them to get this stuff right.

What I hope for?

That they don’t get it completely wrong.

That’s what I’d like with crypto.

It’s pretty clear that the government wants to throw the hammer down on scamsters and schemers…

What the SEC calls “bad actors.”

Great. I agree with the SEC when it says that a thinly traded and volatile market is ripe for fraud from many different actors.

Question is, can it do this and also maintain a light touch?

Can it choose its targets with a minimalist approach?

Can it regulate what is absolutely necessary and leave the rest alone?

As I said, it’s a big ask.

Some Surprising and Not-So-Surprising Signs

Ninety-nine times out of 100, the answer is “of course not.”

But this time may be different.

The government has recently shown surprising signs of NOT wishing to drown the crypto sector in overly restrictive regulations.

A great sign?

It came from the chairman of the Commodities Futures Trading Commission (CFTC) in a recent Senate hearing. He said that “do no harm” was the right approach for distributed ledger technology…

Just as it was some 40 years ago for the internet.

The SEC has also chipped in with some surprisingly sensible statements. A recent one said that ICOs “can be effective ways for entrepreneurs and others to raise funding.”

This is real ground for optimism.

But, alas, the government has also been sounding… well, like what we’ve come to expect from Washington.

Consider these statements that come from Congressional testimony and an article co-written by SEC Chair Jay Clayton and CFTC Chair Frank Giancarlo…

• “We are disturbed by many examples of form being elevated over substance, with form-based arguments depriving investors of mandatory protections.”
• “Cryptocurrencies are now being promoted, pursued and traded as investment assets, while their much-touted utility as an efficient medium of exchange is now a ‘distant secondary characteristic.’”
• “Experience tells us that while some market participants may make fortunes, the risks to all investors are high. Caution is merited.”
• “The SEC is devoting a significant portion of its resources to the ICO market.”
• “The SEC has made it clear that federal securities laws apply regardless of whether the offered security – a purposefully broad and flexible term – is labeled a ‘coin’ or ‘utility token’ rather than a stock, bond or investment contract.”
• “Simply calling something a ‘currency’ or a currency-based product does not mean that it is not a security.”
• “Market participants should treat payments and other transactions made in cryptocurrency as if cash were being handed from one party to the other.”

Don’t get me wrong.

None of these statements are unreasonable.

They point to three valid concerns…

First, frivolous ICOs created by so-called entrepreneurs wishing to make a quick buck need to be reined in.

Second, fraudsters need to be identified and prosecuted.

And third, companies can’t circumvent security regulations merely by calling their coins “utility tokens” or a currency.

What Makes Me Nervous?

It’s what they said about “Main Street” investors…

[Our] concern [is] that too many Main Street investors do not understand all the material facts and risks involved.

This is classic Big Brother – “we’ve got to protect the little guys from their own ignorance” – talk.

I was inundated with this kind of talk when startup investing was limited only to accredited investors.

It took several years for the SEC to get off its hindquarters and extend startup investing opportunities to EVERYBODY, as the JOBS Act intended.

But there’s no JOBS Act here.

The government is free to act in the name of investor protection to limit and even bancryptos and ICOs.

What Will the Government Do?

A hint came last September.

The SEC’s new Cyber Unit will “recommend enforcement actions” relating to cryptocurrencies against those who violate securities laws.

So it looks like the SEC is shifting into a more aggressive approach.

But then there’s this hint…

In testimony to the Senate, the SEC said it would apply the same “facts and circumstances” analysis to determine whether ICOs and cryptocurrency markets should be classified as securities.

Instead of a broad crackdown on ICO activity, the SEC plans to continue enforcement on a case-by-case basis.

So perhaps not so aggressive, after all.

Some may even call this approach “balanced.”

Which, to me, is just another way of saying it can’t last.

A Leap in the Making

Blockchain technology is allowing us to make the leap from systems based on trust in people and institutions to trust in math.

One recent crypto roundtable chose this motto for its conference: “No leaders. No rulers. In code we trust.”

Meaning…

The government is NOT to be trusted. The banks are NOT to be trusted. Fiat money is NOT to be trusted.

And individuals with wealth or power? NOT to be trusted.

How much longer can the government remain “balanced” in the face of such a radical creed?

Blockchain technology has already created much wealth among its creators and adherents. It’ll create much more when it commercializes and scales.

So before answering, we need to acknowledge another question lurking below the surface…

How much longer can it remain committed to disrupting the existing financial order and replacing fiat money?

History says not long.

The blockchain is something new and potentially powerful.

Who will be the ones to unleash its power?

The government? The banks?

Or people who distrust both but trust code?

Nobody knows. If somebody tells you they do, they’re lying.

We all have a vision of how the world could change for the better, and it’s always according to our own principles.

So I’ll leave you with a bit of wisdom from the Liverpudlian gang, circa 1968…

You say you want a revolution
Well, you know
We all want to change the world
You tell me that it’s evolution
Well, you know
We all want to change the world.

Okay, they didn’t have crypto in mind.

But, from the sound of it, they could have.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

Editor’s Note: In light of cryptocurrency’s recent pullback, we’re presenting an updated version of an article Adam originally wrote in November of last year. The message is simple: You should buy and hold… even though it can be hard not to panic-sell during sharp corrections like those we’re seeing today.

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Dear Early Investor,

The key to making money in cryptocurrency is simple.

Buy. Hold.

That’s it.

Yes, you need good security too. But the most important thing is simply being able to hold on during volatile years.

Many are tempted to take profits after they’re up 2X or even 5X. Both would be a mistake (unless you desperately needed the cash).

Let me explain why…

Cryptocurrencies are a (potential) monetary revolution. Bitcoin could become a common investment asset and value transfer vehicle.

As I often point out, ownership today is tiny, with far less than 1% of the population owning any cryptocurrency at all.

But adoption is accelerating incredibly fast. Let’s look at some metrics.

Coinbase, the largest U.S. cryptocurrency exchange, was adding around 55,000 new accounts per day last November.

In a month, that’s 1.7 million new crypto (mostly bitcoin) users.

Let’s say half of those actually invest, and that they invest $3,000 on average (less than half a bitcoin). I suspect this may be a conservative average, but it’s hard to say.

This influx of new buyers from Coinbase would add more than $2.5 billion in buying pressure per month (if they each bought less than half a bitcoin).

The total value of all 16.6 million bitcoins in the world today is around $140 billion, with each coin being worth around $8,315 as I write this.

On the supply side, 1,800 bitcoins are currently being “mined” per day. Not all of those are sold, but let’s pretend they are for this example. That’s $15 million in selling pressure from new coins per day. In a month, that’s $449 million worth of new bitcoins mined.

So from just one exchange, we have perhaps $2.5 billion in new buying pressure. And selling pressure from new coins is just around $449 million.

Let’s also factor in the following:

• Bitcoin owners are loyal and tend to stick around.
• There are dozens of other large crypto exchanges around the world.
• There’s been an influx of 130-plus hedge funds looking into crypto.
• There will only ever be 21 million bitcoins.
• CME Group has launched crypto futures.
• Now that crypto futures are live, bitcoin ETFs are likely to follow.
• The big money players are dipping their toes in this market.

And there you have a recipe for a feeding frenzy of epic proportions.

Upside for Altcoins

Cryptocurrency owners tend to fit a pattern: They buy bitcoin first and fall in love with the idea of independent money.

Holders tend to do very well on their bitcoin, and eventually some of these profits make their way into “altcoins,” or alternative cryptocurrencies.

The lure of altcoins is simple. Many of them have borrowed from bitcoin’s code (it’s free to use), but have improved it in important ways.

They’re trying to beat bitcoin in transaction speed and cost (and a few are succeeding wildly). Competitors like Ethereum create additional functionality, such as the ability to execute “smart contracts” on the blockchain, leading to endless potential applications.

Bitcoin will always have a special place in my portfolio. I’ll always own some. But much of my time is now spent analyzing its competitors.

It’s an absolutely fascinating field. Competition keeps the technology moving very fast. Some of the most talented developers in the world are racing to make their coins the best.

To learn more about altcoins, you can check out our Crypto Asset Strategies service. We have a portfolio of four altcoins, user guides, research reports and more.

I think we’re just getting started.

Good investing,

Adam Sharp
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing