Updated: Mar 10
Cryptocurrencies…will they replace fiat currencies like our American Dollar. The demise of fiat currency is overstated. While the technology itself may be used increasingly in the behind-the-scenes plumbing of financial services, such as money being sent across borders, Our dollar, our credit cards, and alternatives like Paypal, Square, Amazon Pay, Payoneer, and Google Pay will be payment methods for years to come. To be sure, cryptocurrencies will become part of their DNA[i].
Crypto and blockchain make things more secure by strengthening the integrity in the chain of custody. According to the Cryptocurrency Payments Report, “Bitcoin (BTC), the oldest cryptocurrency, is today also the most acquired, with 82 percent of current or previous holders owning it. Twenty-six percent of individuals who currently own any cryptocurrency solely hold bitcoin, while 46 percent hold bitcoin and another cryptocurrency. Bitcoin is also widely recognized by nonowners: 72 percent of them report that it is the most familiar coin, followed by bitcoin cash (29 percent).” Ethereum, the third-most owned cryptocurrency, is only familiar to 13 percent of nonowners. “Meanwhile, Dogecoin, despite the recent hype, is far from being the most owned, as just 18 percent of nonowners are familiar with it,” per the report. Shiba Inu (SHIB) is a token that aspires to be an Ethereum-based alternative to Dogecoin (DOGE), the popular meme coin. The Shiba Inu Token ecosystem supports projects such as an NFT art incubator and the development of a decentralized exchange called Shibaswap. Shiba Inu and the SHIB token are part of a swarm of dog-themed cryptocurrencies, including Baby Dogecoin (BabyDoge), Dogecoin (DOGE), JINDO INU (JIND), Alaska Inu (LAS), and Alaskan Malamute Token (LASM).
Another key observation from the study is how consumers view crypto, The study noted, “Nearly three-quarters of consumers view cryptocurrency as an investment opportunity, but that does not mean that consumers are not keen to use cryptocurrency for making purchases. More than 60 percent of current and past holders purchased cryptocurrency to be able to ‘Transact’.[ii]”
Social and mobile companies were the building blocks of Web 2.0; Cryptocurrency and the blockchain will drive Web 3.0 which improves upon the past models to combine content, payments, and identity, on one platform. Cryptocurrency Exchanges are evolving from heavy reliance on trading to using multiple products across their platform, including debit cards and lending products that allow users to borrow money using cryptocurrency as collateral.
The Ability To ‘Transact’ Seamlessly and Safely
Ethereum: Let’s use Ethereum as our bridge to explain. Ethereum is similar to Bitcoin. You can send cryptocurrency to anyone for a fee. But unlike Bitcoin, it has evolved to be the world's programmable blockchain. It also powers applications that everyone can securely use.
Bounce Auction: an Ethereum token that powers Bounce, a decentralized auction protocol for Non-Fungible Token (NFT) (MORE on NFTs) Auction supports governance rights for holders and is used to pay for certified listings such as trading in scarce digital assets.
Amp: an Ethereum token that aims to ‘collateralize’ payments…making them instant and secure. If a Bitcoin or Ethereum payment fails due to unconfirmed or long transaction times the Amp collateral can instead be liquidated to cover losses while the vendor receives payment in fiat, potentially providing greater assurances to both parties.
Ankr: is a platform that combines node infrastructure, staking, and DeFi. Ankr's Eth2 staking solution combined with an attractive reward mechanism and instant staking liquidity through a bond-like synthetic token called aETHc allow you to hold or trade your staked assets at any time, without having to wait until transactions are enabled on Ethereum 2.0. ANKR brings two movements together (1) web3 and (2) decentralized finance (DeFI). The web3 movement is about decentralized applications, protocols, and smart contracts, while the DeFi movement creates the financial system for web3 i.e., money embedded in infrastructure. Ankr brings them together as engines to power the crypto economy[iii].
Over 6,000 Coins
We discuss a few but there are over 6,000 cryptocurrencies as of 2021. This is a quantum leap from just a handful of digital coins in 2013. Statista makes a point that a substantial portion of these cryptocurrencies might not be that significant. it is believed that the top 20 cryptocurrencies make up nearly 90 percent of the total market[vii].
Leveraged trading of cryptocurrency derivatives has become a huge business for exchanges. Traders use futures contracts to bet on the rise or fall of a specific cryptocurrency. To make returns more attractive, they are allowed to make oversize bets with little money. When the price of cryptocurrencies falls precipitously, margin calls force investors to liquidate. Also, a ‘whale’ might enter a large sell order that triggers margin calls and liquidations for investors.
Crypto Wild Swings
The good news is that cryptocurrencies trade 24 hours and seven days a week. The not-so-good news is that it is not unusual for crypto to swing wildly on weekends. Contributing factors to these gut-wrenching swings are thinner trading volumes and a market structure that consists of hundreds of disconnected exchanges that in effect are their own islands of liquidity.
We could take a couple of hours and run through the technical explanation, but I will not. Let’s take a high-level look at several real examples.
Bitmart: a Cryptocurrency Exchange that has served over 5 million users. They promise to help you buy, sell, and store your cryptocurrency with their fast, secure, and professional crypto trading services for individuals or institutions. Not so fast… Cointelegraph.com reported that Bitmart lost nearly $200 million in a hot wallet compromise hosted over the Ethereum (ETH) and Binance Smart Chain (BSC) blockchains. The $200 million Bitmart hack was first revealed by Peckshield, a blockchain security and data analytics company, who initially identified a transfer of roughly $100 million over the Ethereum blockchain. Further investigation from the team revealed a concurrent hack of $96 million over the crypto exchange’s BSC reserves. The hackers made away with a mix of over 20 tokens that includes altcoins such as Binance Coin (BNB), Safemoon, BSC-USD, and BPay. Sizable amounts of meme coins such as BabyDoge, Floki and, Moonshot were also compromised in the hack. According to Peckshield, the hack was a straightforward case of transfer-out, swap, and wash[iv].
Celsius: Hackers never sleep in the cryptocurrency ecosystem. In the same report, Cointelegraph.com informed us that Celsius a crypto exchange of over 1 million users confirmed a loss of $50 million in the exploit of decentralized finance (DeFi) protocol BadgerDAO. The first reports on BadgerDAO’s security breach surfaced with the protocol officially announcing that it received multiple exports of unauthorized withdrawals of user funds on Wednesday. The Badger team immediately paused all smart contracts on the protocol to avoid any further losses.
Rug Pulls: Cryptocurrency scammers continue looting innocent investors for millions…daily. So much that the industry has coined the term ‘rug pull’ to describe disastrous situations that can leave an investor with extreme losses. Most recent scams include:
The crypto project BNB 42 promised 100% profits after 10 days to anyone who bought their coin. About 6,000 people invested in the project before it was rugged. The scammers behind BNB 42 knew this claim was not sustainable. They made off with roughly $2.7 million, according to crypto monitoring firm Peck Shield.
Baby Musk Coin scammers raised $2 million in a so-called initial coin offering (IPO). What’s an initial coin offering? It’s like an IPO but for fake money. Elon Musk, one of the wealthiest persons on the planet had nothing to do with this particular project. The website claimed Baby Musk Coin was ‘unruggable.’ Well… guess what folks.. They were wrong.
Porn actress Lana Roades launched an NFT collection called CryptoSis before reportedly abandoning the project and draining most of the funds. The porn star made off with roughly $1.8 million, according to the blog ‘Web3 Is Going Great.’ Rhoades has since deleted her Twitter account, but denied the project was a scam. Lana stated she is giving the money to her ‘development team.’
Here’s Good News
The Federal Bureau of Investigation (FBI) seized bitcoin worth more than $2.2 million tied to ransomware payments. The cryptocurrency allegedly belongs to an affiliate of Gandcrab and Revil/Sodinokibi ransomware. Gandcrab and Revil organizations operated as Ransomware-as-a-Service (RaaS), where core operators partner with third-party hackers, known as affiliates. Ransom payments are split between the affiliate and core operators. The operators usually earn between 20% and 30% of the ransom. This ‘grab’ by the FBI was approximately 40 bitcoins from a Russian resident tied to Revil and Gandcrab ransomware. At the time of writing, the price of bitcoin is around $56,318.06 based on data from Bitcoin.com Markets. The amount seized totals approximately $2.247 million[v]. Also see our blog titled: Crypto-Theft: The Feds Angered
Investing In Crypto
You do not have to pay salespeople for Cryptocurrency Financial Literacy. If you go to the “LEARN’ section of most Cryptocurrency Exchanges websites, surprisingly you will find ample easy to read information. CoinMarketCap is a helpful source On their website, click ‘Exchanges’ to go to a specific exchange and go to the selected exchange’s ‘Research, Review or Learn section[vi].
So, when you invest in Crypto…start with small amounts. Get confident and comfortable with what you are doing. There is an investment idiom that holds true even with cryptocurrencies. It goes like this:
Bull Wins, Bears Wins but PIGS always lose.
References and Resources
[i] Bloomberg Online, By Sydney Maki and Vildana Hajric. ‘Wall Street Asks If Bitcoin Can Ever Replace Fiat Currencies.’ June 13, 2021, 9:00 AM EDT [ii] Cryptocurrency Payments - BitPay Study: How Consumers Want To Use Crypto To Shop And Pay in 2021 And After, PYMNTS.com | May 19, 2021 [iii] Ankr StakeFi Internet bond | https://stakefi.ankr.com/liquid-staking [iv] Cointelegraph.com, "Bitmart Hacked for $200M following Ethereum, Binance Smart Chain Exploit" by Arijit Sarkar [v] Bitcoin.com News, Kevin Helms, “FBI Seizes Bitcoin Worth More Than $2.2 Million From Ransomware Affiliate, 3Dec21 [vi] CoinMarketCap: https://coinmarketcap.com/rankings/exchanges/ [vii] Statista, Raynor de Best, Number of Cryptocurrencies Worldwide from 2013 to November 2021, Nov 3, 2021, | https://www.statista.com/statistics/863917/number-crypto-coins-tokens/