CoinIRA Blog

bitcoin in the motherboard

New Bitcoin Competitor Shows Continued Strength of Cryptocurrency Market

A new cryptocurrency has come to market: the Divi coin billed as a “future proof” digital cryptocurrency. “Divi coin, designed to be a ‘superior Bitcoin,’ mitigates risk through a ‘future proof’ design,” a spokeswoman said. The coin is designed to combat three of the problems that its creators allege are problems with existing cryptocurrencies.

1. Anonymity: “Divi coin’s technology is designed to combat the use of cryptocurrency for illegal transactions,” she explained.

2. Securities laws: Divi is designed to pass what’s known as the “Howey Test” that the government uses to classify other cryptocurrencies and initial coin offerings as securities.

3. Taxation: “Divi’s entire system allows for the potential of taxation implementation,” the spokeswoman added. “Should the government choose to intervene in this respect, none of Divi’s value will be lost.”

Geoff McCabe, co-founder, and CEO of the Divi Project said in a blog that Bitcoin was created to be a currency, “but that hasn’t happened and probably never will. That’s because it’s been taken over by the miners, who want high transaction fees of $2 or more. They see BTC as a ‘store of value’ and it’s now fairly clear that it never needs to be used to buy hamburgers when it can instead be a digital form of gold.” Further, despite the efforts of others to create the “Lightning Network” to make Bitcoin run faster, Divi will have a better, faster, and cheaper system, he added. “People ask me how Divi is going to compete with Bitcoin in mass adoption, when there are already millions of Bitcoin users,” said McCabe. “The answer is that it isn’t, because we’re targeting different markets. Bitcoin will be mass adopted, but as a store of value, not as a currency used for day-to-day transactions.” The development of new cryptocurrencies such as Divi is an encouraging sign that the cryptocurrency market continues to grow stronger and more robust every day. Even better for investors who hold Bitcoin IRAs, these new competitors acknowledge Bitcoin’s place as the preeminent cryptocurrency. Every competitor to Bitcoin will spur Bitcoin’s developers to continue improving Bitcoin, delivering additional benefit to investors.
bitcoin on a laptop in the background

Companies Launch First Ever Cryptocurrency Index

Bitcoin and other cryptocurrencies are moving further into the financial mainstream, with news breaking after the start of the new year that Belpointe, a wealth management company in Greenwich, CT, and Chance River, a consultancy based in Stamford, CT, have launched the Belpointe Crypto Index. The companies say this new cryptocurrency benchmark will index a diverse basket of cryptocurrencies. “The index will include and weight cryptocurrencies based on their market capitalization, trading volume, quality of blockchain” as well as additional, unspecified factors, they said. Further, the Belpointe Crypto Index is intended to standardize measurement of the cryptocurrency markets and provide a benchmark for investment managers overseeing portfolios of cryptocurrencies. “We’re seeing strong adoption of cryptocurrencies worldwide, fueled in part by a rising mistrust of fiat currency,” said Nithin Eapen, who created the benchmark. “People are recognizing that we can transfer value over the wire without a trusted third-party in the middle, which causes friction.” Eapen conceded it is “absolutely impossible” to pick the future winners in this space. “But, we know this space is expanding, and the ability to invest in an index could be the best way to capture optimized returns,” he added. While so much attention has focused on how Bitcoin provided a 15-fold return in 2017, other crypto coins grew from $1 billion in market capitalization to a $300 billion market cap last year. “There is clear opportunity to educate the wider audience of portfolio managers, financial advisors and investing public about the crypto space,” said Eapen. Given the recent emergence of Bitcoin futures, the development of such an index was inevitable, as was the launching of the world’s first cryptocurrency index fund. In October 2017, Bitwise Asset Management rolled out the Bitwise HOLD 10 Private Index Fund, which holds the top 10 cryptocurrencies weighted by market cap.
Angry Uncle Sam

Will Uncle Sam Criminalize Concealed Ownership of Cryptocurrencies?

Owners of Bitcoin or other cryptocurrencies might get ensnared by the latest efforts on Capitol Hill to address money laundering. In late November, the US Senate Judiciary Committee held a hearing on S. 1241, the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017, introduced by Sens. Chuck Grassley (R-IA), and Diane Feinstein (D-CA). The problem is that S. 1241 would revise the definition of “financial institution” in US law to include digital currencies and digital exchanges. Specifically, S. 1241 would amend the definition of “financial institution” in Section 5312(a) of Title 31 of the US Code, to include “an issuer, redeemer, or cashier of prepaid access devices, digital currency, or any digital exchanger or tumbler of digital currency.” The current definition of “financial institution” references entities such as banks, trust companies, credit unions, and currency exchanges. Further, “prepaid access device” would be defined as “an electronic device or vehicle, such as a card, plate, code, number, electronic serial number, mobile identification number, personal identification number, or other instrument, that provides a portal to funds or the value of funds that have been paid in advance and can be retrievable and transferable at some point in the future.” Additionally, Homeland Security and Customs and Border Protection would have to devise a strategy to detect and interdict prepaid access devices, digital currencies, or other similar instruments, at border crossings and other ports of entry. “This could have alarming consequences for users of cryptocurrencies both in the US and abroad,” according to Landon Mutch, a software and mobile app developer actively involved in drafting the Lightning Network, a Bitcoin layer-two protocol, in a recent blog post. “The US Senate [sic] is proposing a bill to make criminals out of anyone intentionally concealing ownership or control of a digital currency or digital exchange account.” While investors in Bitcoin IRAs shouldn’t have much to fear from this legislation, it could have a chilling effect on both regular users of Bitcoin and cryptocurrencies and on the future development and adoption of cryptocurrencies.
bitcoin cash

Are Bitcoin Billionaires Cashing Out?

One of the perennial knocks against Bitcoin has been its price volatility. Compared to other financial assets, Bitcoin is incredibly volatile, with intraday price swings often exceeding the percentages that would stop trading on major financial exchanges. There are a few reasons for that, one of them being that Bitcoin markets are still relatively new, immature, and thinly traded. That means that things that might affect other markets only weakly will have outsized effects on the Bitcoin market. The other reason is that much of the supply of Bitcoin hasn’t moved since it was created, as it is tied up in the holdings of “Bitcoin billionaires.” The Bitcoin billionaires aren’t all billionaires, but the top 1,000 holders of Bitcoin own about 40 percent of Bitcoin’s total supply. That’s an average holding of around $350 million per person. Many of those holders haven’t sold their coins, they’re still holding on to them in the hopes of further price appreciation. While that’s great for their portfolios, it means that there are fewer bitcoins available to trade on exchanges, meaning that relatively minor amounts of Bitcoin changing hands will have a major effect on Bitcoin’s market price. While there have been fears that major Bitcoin holders cashing in their holdings might lead to a Bitcoin crash, that shouldn’t be the case. For one thing, divesting themselves of a portion of their holdings would lead to a greater number of bitcoins available to other investors. The more people who are able to own Bitcoin, the greater the network effects and the greater the long-term viability for Bitcoin. That also would open up more bitcoins for trading and investment, which would benefit those investing in Bitcoin IRAs. More bitcoins available for trading will help markets by allowing for greater trading volume, which should help smooth out price fluctuations. For those who are looking to invest in a Bitcoin IRA for retirement, more stable and predictable prices should ease concerns about Bitcoin’s long-term price stability. So rather than fearing large Bitcoin holders cashing out, that type of behavior should be encouraged.
Goldman Sachs

Goldman Sachs to Start Bitcoin Trading

In another sign of the ongoing mainstreaming of Bitcoin, those in the know report that Wall Street investment bank Goldman Sachs is planning to set up a Bitcoin and cryptocurrency trading desk. Current plans are to have the operation up and running by June of this year, if not earlier. Goldman is already one of the banks involved in clearing the recently-begun Bitcoin futures contracts offered by CBOE and CME.

Goldman’s stance on Bitcoin runs counter to the public statements of its rival JPMorgan, whose CEO Jamie Dimon has publicly stated that Bitcoin is a fraud and that people who buy Bitcoin are stupid. Despite those comments, JPMorgan was considering getting involved in Bitcoin futures trading, with its analysts remaining bullish about Bitcoin’s prospects. And while the company ultimately decided not to get involved in futures contract clearing, Goldman’s moves may prompt JPMorgan and other Wall Street firms to jump into the Bitcoin market, if only just to keep from being left behind in the surging market for cryptocurrencies.

For those who invest in Bitcoin IRAs, Goldman’s move is a promising indicator of continuing acceptance of Bitcoin and other cryptocurrencies by Wall Street. Once seen as a threat, Wall Street has seen the light and begun to embrace and adopt cryptocurrencies and associated technologies such as blockchain.

With greater support from Wall Street comes greater ease in dealing with regulators, easier integration of Bitcoin and cryptocurrencies with other financial products, and more widespread demand. All of that combines to create a vibrant and growing market for Bitcoin and other cryptocurrencies. So if you’re thinking about opening a Bitcoin IRA or other cryptocurrency retirement account, now is the time to do it. There is still plenty of opportunity for great wealth appreciation as the Bitcoin market continues to mature and more and more investors see the possibilities that Bitcoin opens up.

banning virtual currency

CFTC Warns Investors of Risks of Virtual Currency Trading

The US Commodity Futures Trading Commission issued a customer advisory to inform the public of possible risks associated with investing or speculating in virtual currencies or recently launched Bitcoin futures and options. “Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status,” the CFTC said. Further, virtual currencies are sometimes exchanged for US dollars or other currencies, but they are neither backed nor supported by any government or central bank. Moreover, “Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional fiat currencies,” added the agency. “Profits and losses related to this volatility are amplified in margined futures contracts.” For investors in cryptocurrencies looking to hedge against potential losses or to buy virtual currencies at some point going forward, futures contracts and options are ways to protect against this volatility. “However, like all futures products, speculating in these markets should be considered a high-risk transaction,” the CFTC warned. What makes virtual currency risky? “Purchasing virtual currencies on the cash market – spending dollars to purchase Bitcoin for your personal wallet, for example – comes with a number of risks,” it continued.

For instance:

  • Most cash markets are not regulated or supervised by a government agency;
  • Platforms in the cash market may lack critical system safeguards, including customer protections;
  • Volatile cash market price swings or flash crashes;
  • Cash market manipulation;
  • Cyber risks, such as hacking customer wallets; and/or
  • Platforms selling from their own accounts and putting customers at an unfair disadvantage.
Also, “Virtual currencies are commonly targeted by hackers and criminals who commit fraud,” said the agency. “There is no assurance of recourse if your virtual currency is stolen.” That’s why it is important if you intend to invest in a Bitcoin IRA or other cryptocurrency that you do your homework when choosing a custodian. The custodians with whom CoinIRA works are among the highest-rated and most secure in the industry and will ensure that your cryptocurrency assets won’t be susceptible to hacking or other nefarious activity.
locked down cryptocurrency

The Tax Reform Bill Will Affect Cryptocurrency Trading

The recent tax reform bill brought many welcome changes to taxpayers and should benefit most people through lowering their tax bills. But for cryptocurrency traders and investors there was one change that the tax bill made that could see them liable to pay taxes that they up to now have been avoiding. The tax reform bill changed the types of in-kind transactions that are eligible to remain free from capital gains taxation. An in-kind transaction is one in which an individual swaps one asset for another similar asset. For cryptocurrency traders, that meant that they could swap their Bitcoin for Litecoin, or their Dogecoin for Bitcoin Cash, without having to pay capital gains taxes on any gains that accrued to the cryptocurrency they were exchanging. Thanks to the ease of using, purchasing, and exchanging cryptocurrencies online and the development of new technologies to enable these swaps, these swaps are relatively easy to do. But the tax reform bill changed the exemption on in-kind transactions to limit them to “real property” rather than just “property.” That means that exchanging Bitcoin for Litecoin would now trigger capital gains taxes on the gains made from those bitcoins. That obviously will have a dampening effect on the swapping of cryptocurrencies. Of course, many cryptocurrency users may just be tempted to ignore the tax implications of their exchanges and continue operating as they always have. But that is tempting fate, as the IRS is beginning a slow but steady crackdown on cryptocurrency users who have avoided paying taxes on their gains. For investors in Bitcoin IRAs, the new rules shouldn’t have much of an impact. It obviously makes switching your cryptocurrency IRA investments from one cryptocurrency to another a little more difficult, but most IRA investors are holding those cryptocurrency investments for the long haul and so wouldn’t be switching out cryptocurrencies anyway. Still, the attention that the government is paying to cryptocurrencies makes it all the more important to investors in Bitcoin IRAs and other cryptocurrency IRA investments to make sure that they maintain compliance with all federal laws and regulations. Trying to fly under the radar is not a good idea.
virtual currency

CFTC Proposes Rule on Virtual Currency “Actual Delivery” in Retail Transactions

The Commodity Futures Trading Commission has proposed a legal interpretation of its authority over retail commodity transactions involving virtual currencies like Bitcoin. The proposal details the conditions under which the retail trading of such currencies would not have to comply with the agency’s rules. More specifically, “The Proposed Interpretation sets out the CFTC’s view regarding the ‘actual delivery’ exception that may apply to virtual currency transactions,” according to the agency. Retail commodity transactions are subject to the Commodity Exchange Act “as if” they were commodity futures. The statute includes an exception for contracts of sale that result in “actual delivery” within 28 days from the date of the transaction. The CFTC’s proposal would establish two primary factors necessary to demonstrate “actual delivery” of retail commodity transactions in virtual currency: First, “a customer has the ability to: (i) take possession and control of the entire quantity of the commodity, whether it was purchased on margin, or using leverage, or any other financing arrangement, and (ii) use it freely in commerce (both within and away from any particular platform) no later than 28 days from the date of the transaction;” and Second, “the offeror and counterparty seller (including any of their respective affiliates or other persons acting in concert with the offeror or counterparty seller on a similar basis) [is] not retaining any interest in or control over any of the commodity purchased on margin, leverage, or other financing arrangement at the expiration of 28 days from the date of the transaction.” Some market observers anticipate the proposal will increase the number of virtual currency operators that fall under the CFTC’s authority. And that means the proposal probably will result in more enforcement actions against operators who may expose investors to excessive risk. Interested parties have until March 20, 2018, to submit comments to the agency.
terrorist using computer

Pakistani-Born Long Island Resident Accused of Laundering Crypto to Help ISIS

Crypto critics felt vindication after years of warning that digital money could be used by the likes of terrorists. According to Time, a woman born in Pakistan and residing in Long Island is accused of laundering Bitcoin and other cryptocurrencies and wiring the money overseas to ISIS. Zoobia Shahnaz, 27, has been charged with bank fraud, conspiracy to commit money laundering, and money laundering. It is unclear how long she has been in the US and she had no known criminal history. A former lab technician, she quit her job in June without telling her family and had been sending several wire transactions “to individuals and opaque entities in Pakistan, China, and Turkey,” after she fraudulently obtained more than $85,000 through a bank loan and credit cards to buy the cryptocurrencies. Court documents show that her intent was to benefit ISIS and that she “ultimately sought to join in Syria.” Shahnaz had visited several ISIS propaganda websites and message boards, which led to her traveling to Jordan and then making plans for Pakistan. She was caught on her way to Pakistan at a layover in Istanbul, Turkey, which prosecutors pointed out is a common point of entry for individuals trying to join ISIS. However, Shahnaz’s attempt to send Bitcoin to ISIS is still a rare event. According to Foreign Affairs, since most “cryptocurrencies afford only limited anonymity and it is difficult to quickly transfer large amounts of money through these systems,” they do not appeal much to terror networks. Plus, there is the logistical problem of having “limited acceptance of digital cash in regions such as the Middle East and North Africa.” And “ISIS receives most of its funding from sources that require control of territory,” such as oil, extortion, and stolen property. While Shahnaz’s actions of criminally using Bitcoin to help a violent terrorist organization are disturbing, it is good to know that Bitcoin has not become a common finance method for terrorists and it is hard to say if it ever will.
hands reaching into cryptocurrency ICO box

SEC Cease and Desist Order Stops Munchee ICO

Munchee Inc., a San Francisco-based company selling digital tokens to investors to raise capital for its blockchain-based food review service, brought its initial coin offering to a halt recently, after the US Securities and Exchange Commission delivered a cease and desist order that declared the company’s conduct constituted unregistered securities offers and sales. According to the commission’s order, the privately owned firm had created an iPhone application for people in the US to use to review restaurant meals. In October and November 2017, the company offered and then sold its MUN digital tokens to be issued on a blockchain or distributed ledger. “Munchee conducted the offering of MUN tokens to raise about $15 million in capital so that it could improve its existing app and recruit users to eventually buy advertisements, write reviews, sell food and conduct other transactions using MUN,” said the SEC. “In connection with the offering, Munchee described the way in which MUN tokens would increase in value as a result of Munchee’s efforts and stated that MUN tokens would be traded on secondary markets.” Based on the results of the agency’s investigation, the SEC determined that MUN tokens were securities as per Section 2(a)(1) of the Securities Act and put the kibosh on the offering. The commission said investors received refunds before any tokens were delivered after it intervened. Because the company stopped the ICO quickly, immediately refunded investor proceeds and cooperated with the investigation, the SEC decided not to impose any penalty. In a brief statement on its website, the company said “Munchee, Inc. has elected to close its current offering to ensure it is in compliance with applicable regulations. Munchee will be refunding sales participants. Munchee appreciates the support it has received from the community and will be announcing a new offering in the near future.”
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