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Cryptocurrency

The Hutch Report

Tools for the Crypto Millionaire

By | Cryptocurrency

We have received some thank you notes from some of our readers who, after purchasing and reading the The Hutch Report: Insights from the Top 50 Wealth Management Institutions, went and followed some of the smart money vehicles mentioned in the report. If you would have happened to have purchased and read The Hutch Report and reviewed some of the Bitcoin (BTC) and cryptocurrency vehicles being looked at by the smart money, you would have read about the OTC vehicle offered by Grayscale under the symbol GBTC.  One of our readers who invested at the time is boasting a nice return of 17% to 20%.  At the time of the report GBTC was trading around $115 to $120. Last week it hit a high of $143 and closed on the 28th of April at $137. BTC itself has surged in both price and market cap. At the time of the report the BTC market cap was about $20bn and last week it hit over $21.5bn with BTC itself breaking past $1300 even as high as $1330. And BTC is not the only one – Litecoin is surging as are most of the top market cap altcoins including Ethereum, Ripple, NEM, and PIVX and several more. Ethereum (ETH) broke out to an all-time high over $60 and as of this writing is now up to $71.32. PIVX which we first wrote about at the start of April hit some peaks over $2.00 and now seems to be maintaining around $1.80 levels. Another reader following the Insights section has sent us a thank you for the 77% return they have made so far on PIVX.

What is driving the growth in all of these? There is no clear answer. Some of the fuel is driven by renewed optimism of potential institutional investment vehicles for cryptocurrencies. Earlier this year, when we published our 2017 edition of The Hutch Report: Insights from the Top 50 Wealth Management Institutions, Bitcoin and other cryptocurrency values were climbing both in market-share and price. Bitcoin (BTC) in particular was climbing as excitement was mounting around the response from the SEC concerning the Bitcoin ETF applications filed by three different companies, SolidX, Gemini and Grayscale. BTC hit new records and exceeded the price of Gold at $1290. The SEC rejected all three applications causing the BTC price to falter as the market assumed the initiative was dead for the next few years.  Recently the SEC has opened the door and approved a review of the Gemini (run by the Winklevoss twins) application. A subsidiary of Grayscale, Digital Currency Group, is looking at creating vehicles for other cryptocoins.

Whatever the reasons are, which may at best only really become known in hindsight, there does seem to be a clear trend and momentum. Some of our readers have asked us how does one go about investing in cryptocurrencies. We would like to remind you that this website and content is produced for general interest, is not specific to you, is for entertainment only and is not intended to provide nor constitute financial advice. In full disclosure, the authors may or may not be holding positions in any of the vehicles mentioned. Prior to making any investment decision you should undertake your own due diligence and/or seek the advice of a qualified and registered securities professional. With the preceding in mind, listed below are some of the websites and platforms that some of our readers have indicated they are using:

Market Prices and Market Capitalizations

Coinmarket cap https://coinmarketcap.com/ provides a great list of almost all cryptocurrencies along with their market cap, average price, amount in circulation and volumes. The nice thing about this site is that the price in US dollar is provided. Do note that the prices listed are the average prices across exchanges. It is possible on this platform to drill down and see the prices on each specific exchange as well. The astute individual would remark the discrepancy of prices on the different exchanges and see an opportunity for arbitrage. However, in this case one would also want to pay attention to volumes and liquidity which would impact the ability for arbitrage.

Cryptocompare also provides a comprehensive listing of cryptocurrency market caps and prices and allows different currency comparisons.

https://www.cryptocompare.com/coins/#/usd for a listing of prices as compared to US dollar.

https://www.cryptocompare.com/coins/#/btc for a listing of prices as compared to Bitcoin (BTC)

https://www.cryptocompare.com/coins/#/eur for a listing of prices as compared to EUR.

Exchanges and wallets

In order to buy a cryptocurrency you have to have an account on one of the exchanges that allows trade in the currency. Cryptocurrencies can be traded similarly to stocks including features such as limit orders. Only a handful of currencies can actually be bought directly with fiat currency such as US dollars or Euros. The most common denominator is BTC. BTC can be bought for US dollars or Euros and then BTC can be used to buy the other currencies. In choosing an exchange we would recommend choosing one that has volumes otherwise you may suffer liquidity issues. Some of the most popular Bitcoin and cryptocurrency exchanges are:

Poloniex (https://poloniex.com): allows trades in about 107 different cryptocurrency markets, with most volumes from Ripple. Ethereum and Litecoin.

GDAX (https://www.gdax.com): only trades in Ethereum, Bitcoin, and Litecoin. It does facilitate fiat currency purchase in USD, EUR and GBP for Bitcoin.

Kraken (https://www.kraken.com): allows trades in about 40 markets and does facilitate USD and EUR purchases for Bitcoin, Ethereum, Ethereum classic and Litecoin as well as a few other currencies.

Korbit (https://www.korbit.co.kr/): only trades in Ethereum, Ethereum Classic, and Bitcoin and allows fiat purchases using South Korean Won.

Bitstamp (https://bitstamp.net): only trades in Bitcoin and Ripple and facilitates fiat currency purchases in USD and EUR.

Bittrex (https://bittrex.com): supports over 190+ cryptocurrencies. This is the platform recommended by many of our readers. Bittrex does not facilitate direct fiat currency purchases. What some of our readers do is they buy Bitcoin on one of the other platforms that allows purchases in fiat currency and then they send the Bitcoins to their Bittrex wallet and then purchase the other currencies using their Bitcoins. The same process would be followed in reverse to extract fiat currency.

Coinbase (https://www.coinbase.com): Coinbase is a wallet for Bitcoin and Ethereum. It also facilitates purchases for both of these cryptocurrencies in USD.

Wallets:  You can keep your crypto-money on the exchanges directly or store it in a wallet. The bitcoin.org site lists several bitcoin wallet solutions (https://bitcoin.org/en/choose-your-wallet). If you become adept at a specific cryptocurrency you may want to download the wallet specifically for those alternative currencies from the organization directly. For example if you are into PIVX, at https://pivx.org/ you can download the defacto PIVX wallet for your operating system directly. The advantage of using the wallet provided by the organization is that you can potentially also benefit from mining or staking and earn extra coins from the wallet. This is the case with the PIVX wallet which allows you to earn PIVX by keeping your wallet on and keeping PIVX in it. Whatever you do, be sure to make back-ups of your wallet and where possible use 2 or even 3 factor authentication.

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The Hutch Report

PIVX – Why it has grown 2150% in thirty days!

By | Cryptocurrency, Money

Since the start of March, the market capitalization of the cryptocurrency PIVX has grown a whopping 2150% growing from a mere $2M to over $43M in under thirty days. This phenomenal growth caused it to pop up on our radar and really intrigues us as to why it is growing so exponentially. Is there really something here or is this just a pump and dump?

In “The Hutch Report – Volume 1 – Insights from the Top 50 Wealth Management Institutions” we reported that there are hundreds of cryptocurrencies in circulation. There are more being launched all the time. According to coinmarketcap.com, the total market cap of all cryptocurrencies in circulation combined is currently on the order of $25.2B, with BTC (Bitcoin) clearly dominating with 67.1% market share and corresponding market cap of $16.9B.  BTC is followed by Ethereum which has a market cap of $4.5B and Ripple with $721M.  PIVX is now number 17 on the list at about $45M and given the recent pop it is experiencing, may even move up to 16th or 15th place by the time this post is published.

The cryptocurrency market is a fascinating mash-up of technologies, philosophies, economics and ideologies. Most share the concept of privacy and freedom. The reason for the proliferation of cryptocurrencies is probably due not to just one but a variety of forces. In most cases the driving force behind the creation of a cryptocurrencies is that they are iterations and forks (Forking is to take the source code from an open source software program and develop an entirely new program) of others in an attempt to make improvements on prior versions of a cryptocurrency. In some cases, they may also just be launched by folks looking to cash in on a growing trend and execute pump and dumps, however, due to the nature of the communities that get involved in supporting a cryptocurrency it is doubtful that the ones that are not established with a strong charter will ultimately not survive. One should always be vigilant particularly with the lower market cap cryptocurrencies which may be more susceptible to a simple pump and dump scheme. For example, a cryptocurrency with a low market cap of less than $10K could be easily popped up by someone investing $5k into it, all of a sudden the currency has grown 150%. Attracted by the sudden spike, unconscious speculators may jump on the currency, causing it to spike even more. Meanwhile, the original investor then can dump it and leave the later investors holding the bag.

When it was first launched in 2016, PIVX was launched as Darknet (DNET). The community realized that Darknet was associated with a more, sometimes nefarious side of the Internet called darknet which is the hidden internet available through anonymous routing platforms such as Tor. In order to eliminate any confusion, the cryptocurrency was re-branded at the start of 2017 as PIVX (Private Instant Verified Transaction). PiVX is based on the bitcoin core and is a fork branched from Dash which itself was an initial fork from bitcoin. The PIVX manifesto at https://www.pivx.org emphasizes privacy, freedom, technology along with community based and inclusive governance. The key issues which PIVX seems to address are improvements in privacy along with transaction and verification times.

BTC transactions are not anonymous and based on a cryptographic address or pseudonym. All transactions are completely public and include the cryptographic address (or pseudonym). All it takes is for that cryptographic address to be traced to a computer and user and the person can be identified. PIVX apparently provides options to enable transactions with a greater degree of privacy.

A PIVX transaction can take about 60 seconds to complete and verify which is incredibly favorable when compared with Dash transactions which take about 150 seconds. Both PIVX and Dash are much quicker than Bitcoin which can now take several hours to have a confirmed transaction. The growth in the transaction delay is due to the growth in the size of the blockchain and the increasing amount of time and processing power to process blockchain transactions.

Another big difference with PIVX from Bitcoin is that coins are not mined and not based on Proof of Work, but based rather upon Proof of Stake.  This eliminates the resource and hardware intensive dependency on mining and instead members of the PIVX community are rewarded by holding onto a required minimum number of PIVX tokens in a masternode and keeping them connected to the internet. The minimum amount of PIVX to run a masternode is 10’000. At the start of February, the cost to set-up a masternode was about $76. Today, that cost is now approaching $10’000.

Apparently there is also some mathematical limits to the number of masternodes that can be set-up and run each year and the limit for 2017 is calculated to be 2184. With the increased buzz on PIVX it appears that there has also been a bit of a landgrab going on in order to get masternodes set-up. This begs the question of when the great masternode wars will start? What incentives are there for masternode holders not to attack or create DDOS attacks on other masternode owners, in order to both increase their share of PoS processing and rewards as well as staking a masternode spot? We have not yet found the answer to this question yet …

So why has PIVX suddenly increased so much? We think it has to do with increased market awareness as a result of the recent re-branding, the buzz created around this, as well as a probable landgrab around a limited annual supply of masternodes that can be established each year. It still remains to be seen if this is a sustainable trend or if this was just a pop due to the buzz that will then recede and whether or not the PIVX community will turn their servers to other currencies or keep their masternodes and staking wallets. According to pivx.org, the community has some aggressive plans for 2017 to increase security and transaction flexibility. If the PIVX community is successful in these developments it should help to keep up the growth trajectory of PIVX in terms of both market share and mindshare.

Note: We remind you that cryptocurrencies are not legal tender, are not backed by any government and therefore no government protections provided to accounts and value balances. This article is for entertainment and information only and does not constitute an offer to invest nor investment advice.

The Blockchain – A New Business Model?

By | Business, Cryptocurrency, Technology

As in any new disruptive technology, there are usually more questions than answers. This, of course, has a tendency to bring out the naysayers and cynics in droves. But does that mean one should just push aside all this Blockchain excitement and momentum as a fad?  All those that reacted to the Internet in a similar way are feeling quite silly about now.

The prospects for the technology are impressive. It has the ability to replace most trusted third parties in a business transaction; therefore there are a very large number of possible applications for it. However, having read a large number of articles referring to all of the possible disruptions that the Blockchain could create it occurred to me that there were very few discussions about business models. After all, anybody building a business around the Blockchain technology would have to consider a business model to create a long-term competitive advantage.

So, what would the business models look like? Right now it looks more like the Blockchain technology has brought to the forefront all the inefficiencies in many different industries, and how it could alleviate them.  You could therefore imagine the number of companies that it will help to completely remove or reduce a number of current costs and fees. Helping a company to reduce these fees and taking a percentage of what you could save them could produce a very profitable business and is in itself a solid business model.

However, if a company uses the Blockchain to charge for their product or service the challenge becomes greater.  A company would need to determine which currency they would use in the transaction. Bitcoin, as well as other crypto currencies are an integral part of the Blockchain. They provide a monetary incentive for the miners to be motivated to verify all transactions.  Therefore the most obvious and secure choice would be the use of a digital currency. However, which one would that be? Bitcoin has been the most prominent, however, many other crypto currencies are now available yet no one can be certain which ones will still be in existence in 1 year.

This would most likely mean you would have hundreds of different currencies fluctuating daily depending on their rate of usage.  It would be up to each business to decide which currency they want to use as a means of exchange in their Blockchain.  Eventually one of these currencies would most likely become the dominating force.  Until this happens, it would create a lot of potential forex exposure. You could make some transactions then find your crypto currency has lost 5% in a matter of hours. This, of course will not deter the most motivated to move forward, continue to innovate and solve these problems. We have already experienced the like.

As we saw in the Internet boom and bust, the regard for the business model went out the window.  Revenues and profits were not something to be concerned with in the short or even medium turn. They would eventually come and in the meantime there was more than enough money waiting to be thrown at every new venture that came to the door.

Due to the rise of commercial growth of the Internet, venture capitalists saw record-setting growth as dot-com companies experienced meteoric rises in their stock prices and therefore moved faster and with less caution than usual, choosing to reduce the risk by starting many contenders and letting the market decide which would succeed. Most company’s business models relied on harnessing network effects by operating at a sustained net loss and to build market share (or mind share). These companies offered their services or end product for free with the expectation that they could build enough brand awareness to charge profitable rates for their services later. The motto “get big fast” reflected this strategy. It was all about “eye balls” and less about profit.

This was, of course, the wrong attitude to have and although there were a few winners in the end, many lost, and lost big. In hindsight we are able to see that speculative bubbles do not turn out well.  The companies that manage to avoid the euphoria and create real value for their customers (as opposed to the attitude of give it away for free and they will come) will develop sustainable profitable business as we move into a new era of innovation.

The Blockchain technology is attracting more and more attention, but as we have seen in the past, it is easy to be blinded by what technology could offer. However, business is business. In order to function, companies need to turn a profit and to do so there has to be a clear value proposition.  So, what will the business models look like?