According to a report by the South China Morning Post, a 24-year-old man is said to have tossed bank notes from the top of a skyscraper in Hong Kong, triggering agitation from passersby below.

The man, who was identified as Wong Ching Kit (with aliases such as “Mr. Coin” and “Coin Master”) is the owner of Coin’s Group and Epoch Cryptocurrency, a Facebook page that provides promotions for cryptocurrencies and miners. Kit is said to be a crypto enthusiast who made a large percentage of his fortune in last year’s cryptocurrency boom.

A Facebook Live Video which captured the occurrence showed the crowd rushing to catch HK$100 ($13) notes as they rained down from a building in the Fuk Wa neighborhood, one of the countries most impoverished areas. Kit is said to have been raising awareness for an upcoming event, choosing to take a somewhat unconventional approach to market.

While he was tossing the bills from the top of the building, the video recorded Kit telling bystanders:

“Today, December 15, is FCC’s big day in announcing the trading race. I hope everyone here will pay attention to this important event… [I] don’t know whether any of you will believe money can fall from the sky.”

Although it still remains unclear who- or what- he referred to as the FCC in his declaration, a Facebook video was released shortly after the stunt where he declared that he was similar to the fictional character Robin Hood, telling anyone who cares to listen that he was “robbing the rich to give to the poor.”. The “Coin Master” also claimed that he felt it was his responsibility to teach the world about Bitcoin.

Image from the Facebook video.

His “charitable” action triggered a mass reaction, as passersby began to scamper in a bid to catch the bills that were falling from the air.

The police claimed that he was arrested on charges of “disorderly conduct in a public place,” and they have also urged members of the public who were beneficiaries of his lawlessness to return the bills to where they got them. Luk Wai-hung, a local attorney, argued that while his motives for raising advertisement were understandable, his approach was the reason why he was arrested.

He said, “How did he do his promotion? He wanted to create chaos to do it.” He also added that the maximum penalty for his offense is a 12-month prison term and a fine of HK$5,000. Innocent bystanders at the location attested to the total amount of money that was thrown away could be millions, although the police reported that they were only able to recover HK$5,000 (the equivalent of $639) from the streets.

Sky News, a British TV station and mainstream media outlet, reported that investors lost homes as the Bitcoin price crashed. But, the same argument can be applied to the stock market, real estate, and every other major market.

The report claimed that investors put up their homes as collateral to receive loans and invest in Bitcoin. As the price of Bitcoin dropped, their homes were taken away along with their assets.

The report read:

Married men accessed equity through their family homes, and often – whether because they felt they needed to act quickly to make the most money, or because they feared that their investment would be criticised by their spouses – did so without informing their families, only to see the value of their assets evaporate, followed by their homes.

Bad Investment Method, Not Exclusive to Bitcoin

Crypto assets like Bitcoin (BTC) and Ethereum (ETH) are still at their infancy and are a part of an emerging asset class.

In February, Vitalik Buterin, the co-founder of Ethereum, said that cryptocurrencies are a hyper-volatile asset class and it is not an intelligent investment decision to allocate more than an amount that can be lost, as cryptocurrencies could drop near-zero in a short period of time.

“Reminder: cryptocurrencies are still a new and hyper-volatile asset class, and could drop to near-zero at any time. Don’t put in more money than you can afford to lose. If you’re trying to figure out where to store your life savings, traditional assets are still your safest bet,” Buterin said at the time.

bitcoin price vs s&P 500
Bitcoin Price (Blue) vs. S&P 500 (Red) | Year-to-Date Chart

The phrases “the rich get richer” and “money earns money” refer to the ability of the wealthy to hold on to risky assets and survive bear markets without liquidating their assets. On the contrary, investors that invest more than they can afford to lose in a highly volatile asset class but need the money to cover short-term expenses have no other choice but to liquidate their assets and obtain cash.

In the aftermath of the 2008 financial crisis, which affected the economy of the United States throughout the following years, the suicide rate of Europe and the Americas surged. Investors, especially retail or individual investors, who lost money in the stock market found it difficult to deal with anxiety, depression, and high levels of stress acquired from previous recessions.

Wealthy investors that had not cashed out of real estate properties and assets in the stock market throughout 2008, however, recorded no losses because they were able to wait out the bear market.

Don’t Invest More Than an Amount That Can be Lost

Investments in hyper-volatile assets without necessary risk management which publications have focused on when reporting about Bitcoin throughout the 2018 bear market are not exclusive to cryptocurrencies.

Many investors in the stock market and real estate often rack up debt to engage in high-risk investments and deals without proper risk management, which in most cases lead to full-blown bankruptcies.

When investing, especially in emerging asset classes, it is of the utmost importance for investors to weigh the risks involved in the trade and expect to survive a long-lasting bear market if it arrives.

Over the past two months, despite the expectations of increased sales during the Christmas season, major retailers such as Target and Walmart have continued to record large losses.

Since November 9, the share price of Walmart has dropped from $105 to $87, by more than 17 percent, a steep loss for the largest retailer in the US market valued at $253 billion.

walmart stock
6-Month Price Chart of Walmart, Data From Google Finance

Other retailers like Target and Costco have recorded losses in the range of 20 percent to 30 percent, with Target suffering a 30.3 percent loss from $87.6 to $61 within a two-month span.

Worse Than Walmart For UK Retailers

According to a report released by FT, analysts are anticipating a massive sell-off in January and potential full-blown bankruptcies.

The report comes in a time in which the Office for National Statistics has shown a 1.4 percent monthly increase in sales for UK retailers with two days before Christmas.

However, while sales figures are high, Richard Lim, the chief executive of Retail Economics, said that the profit margins of retailers tend to drop during holiday seasons with large discounts.

Lim stated that the increase in sales are keeping retailers afloat in both the US and UK stock markets, but in January, both major and small retailers will experience the impact of Christmas discounts and perks provided to consumers.

“Pre-Christmas discounting is damaging for margins and I think we will see the effect of that in January,” Lim said.

Mike Ashley, the head of Sports Direct, went as far to say that retailers were “smashed to pieces” in the pre-Christmas season, informing investors about a likely market carnage in the first quarter of 2019 following a brutal Christmas season for most retailers.

Amidst the intensifying trade war between the US and China that has caused major stock markets in the likes of South Korea, Japan, China, and the US to struggle, and the uncertainty surrounding Britain’s plans to leave the European Union, one retail executive said that consumers have become more cautious in spending.

The executive, who asked to remain anonymous, said:

People see the headlines about no deal, and [Bank of England governor] Mark Carney talking about house prices falling 30 per cent, and they start to think: ‘do I really want to be loading up my credit card right now?’

Overall Bad Time For Investors

Throughout the fourth quarter of 2018, analysts have said that retailers are expected to demonstrate a steep decline in value due to the threats posed by Amazon, Alibaba, and the e-commerce sector on traditional retail.

However, the bloodbath in the US stock market has also taken a toll on e-commerce platforms and retailers. Since September, Amazon has lost 31.15 percent of its market cap as its share price plunged from $2,000 to $1,377.

6-Month Price Chart of Amazon, Data From Google Finance

With the Dow Jones below 23,000 points and several prominent analysts seeing a potential decline below 20,000 points, the US market is at risk of entering a bear market.

A bear market is generally considered as a 20 percent decline from an asset or a market’s all-time high. As of December, the Dow Jones is down 18 percent from its ATH reached on October 3.

Known for inventing torrenting (BitTorrent) in the early noughties, Bram Cohen might also end up getting famous for an entirely different thing – solving the electricity wastage problem of bitcoin.

Cohen’s newest creation, a cryptocurrency known as Chia which bills itself as ‘green money for a digital world’, is the very antithesis of bitcoin. Unlike bitcoin which uses the electricity-guzzling proof-of-work consensus mechanism, the chia cryptocurrency uses proof-of-space where the mining process uses the hard disk space.

Speaking to Breaker magazine Cohen stated that hard disk space is readily and widely available and most of the time unutilized:

The idea is that you’re leveraging this resource of storage capacity, and people already have ludicrous amounts of excess storage on their laptops, and other places, which is just not being utilized. There is so much of that already that it should eventually reach the point where if you were buying new hard drives for the purpose of farming, it would lose you money.

More Secure?

Besides reducing electricity usage, Cohen also claims that Chia cryptocurrency is relatively more secure compared to bitcoin.

bittorrent
Bittorrent’s creator is developing a new cryptocurrency.

According to Cohen who created the BitTorrent protocol in 2001 while still a student at the University of Buffalo, though it would be monstrously expensive to purchase the resources required to attack the bitcoin network, it is possible to do it. For the Chia network, per Cohen, not so easy though:

To attack Chia you’d have to get access to more resources than the network as a whole, which will be a huge amount of resources once everyone has signed up. The cost of acquiring them upfront would be huge, higher than the cost of the ASICs you’d need to attack bitcoin, so to overwhelm the system would be much more difficult.

While the proof-of-space consensus mechanism may appear more secure on paper, it also has its own limitations and this includes the possibility of a re-mining from genesis attack occurring.

Proof-of-time

With this sort of attack, a bad actor possessing significant network resources creates a new blockchain from the ground up with the goal of switching it for the original blockchain when it gets longer. When executed perfectly the bad actor gets into a position where they can get the new blockchain accepted by the majority of nodes while also taking possession of any number of coins and/or cancelling previous transactions.

To prevent this sort of attack, Cohen has introduced the proof-of-time consensus mechanism. While this does not prevent a bad actor from rewriting years of work, they would require a lot of time to pull it off.

Though it was supposed to be launched towards the end of this year, the world will have to wait a little longer for a ‘greener’ cryptocurrency as the rollout has been pushed forward.

Mike Novogratz, Jim Breyer, and Tim Draper are some of many billionaire investors in the traditional financial market who remain optimistic towards the long-term trend of crypto.

How are these investors able to maintain their positive stance in regards to the growth of the cryptocurrency sector following an 85 percent decline in valuation across the board?

It’s About Cycles

For the most part, high profile individual investors are able to handle severe losses in emerging asset classes and high-risk assets like cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) because they account for a small part of their wealth and portfolios.

As is the same in real estate and other traditional markets, wealthy investors have the ability to hold onto assets and properties even during the event of an unexpected market crash or the occurrence of a bear market.

But, normal retail investors and individual traders who need quick cash to cover day-to-day operations and expenses have no other option but to sell most of the high-risk assets they hold in their portfolios.

bitcoin price
Source:  TradingView

In bear markets, retail traders often suffer a significant loss because they are unable to handle an 80 to 90 percent drop in value and are forced into a position to liquidate their holdings. Billionaire investors and large-scale institutions, in contrast, have the luxury to hold and sustain their portfolios.

Perhaps a bigger factor that has high net worth individuals remaining relatively positive on the long-term growth of the cryptocurrency market is the historical performance of Bitcoin.

Throughout the past nine years, Bitcoin has suffered five bubble-crash-build-rally cycles wherein the dominant cryptocurrency dropped by about 85 percent on average and recovered to a new all-time high.

From $19,500, Bitcoin has dropped about 82 percent in value and the 85 percent point would be at around $2,950.

On Wall Street, most of the high profile investors that are currently involved in the cryptocurrency market have gone through many cycles like the bubble-crash-build-rally pattern of cryptocurrencies, and for a big portion of those investors, such cycles do not come across as untypical.

This year has also demonstrated to investors that cryptocurrencies as an asset class is not a fad because both cryptocurrency-related businesses and major financial institutions continue to build and strengthen the infrastructure surrounding the asset class, as seen in the efforts of NYSE, Nasdaq, and ICE.

Jim Breyer, a billionaire venture capitalist, added that the world’s best computer scientists are flocking to the blockchain space and it would not be a smart move to bet against the industry:

“So many of the very best computer scientists and deep learning Ph.D. students and postdocs are working on blockchain because they have so much fundamental interest in what blockchain can mean. You don’t want to bet against the best and brightest in the world.”

Question is, When Will it Recover?

On average, it has taken 67 weeks for Bitcoin to recover in its past five major corrections and achieve a new all-time high. 67 weeks from the point in which Bitcoin achieved $19,500 would be the 2nd quarter of 2018.

The past is not a guarantee of the future performance of the cryptocurrency space, but it provides a hint on how the market normally performs and survives through intense sell-offs.

On December 4, seven EU countries led by Malta and France have established a group called the “Mediterranean seven” to encourage and promote the usage of blockchain technology.

In the months to come, the seven countries that include France, Italy, Spain, Malta, Cyprus, Portugal and Spain, will work to implement the blockchain in education, transport, mobility, shipping, Land Registry, customers, company registry, and healthcare.

The declaration obtained by FT read:

“This can result not only in the enhancement of e-government services but also increased transparency and reduced administrative burdens, better customs collection and better access to public information.”

Will This Affect Crypto in Any Way?

Malta, the home of Binance, the world’s largest cryptocurrency exchange, has mostly been forward-thinking and open-minded in approaching digital asset and blockchain regulation.

Its flexible and practical regulatory frameworks have led major cryptocurrency-related businesses to migrate to the region throughout the past 11 months.

The involvement of Malta in the initiative could result in a positive effect on the European cryptocurrency sector as a whole, as it indirectly demonstrates the approval of the other six countries in the declaration of Malta’s efforts in facilitating the growth of the local cryptocurrency market.

The formation of the Mediterranean seven follows the call of the G20, a forum of government officials that represent 20 of the largest economies in the world, to monitor and regulate cryptocurrencies as an asset class and the market surrounding it.

Malta’s innovation minister Silvio Schembri, who has played a vital role in transforming Malta to the “Blockchain Island,” said:

“Malta is the first world legislator to offer a regulatory environment for all blockchain technology. We are not only interested in cryptocurrencies.”

The blockchain is the base technology of cryptocurrencies but open blockchain protocols cannot be run without incentive systems, which are cryptocurrencies. The two cannot operate without one another and if a blockchain network operates without a native asset, it can only do so if its structure is centralized.

As the group explores the potential of the blockchain and begins integrating it into various areas of the European economy, native digital assets could naturally come around and consequently, the European nations could integrate more practical regulatory frameworks pertaining to the asset class.

Already, France has approved an initial coin offering (ICO) regulation in September to become Europe’s first ICO hub.

At the time, France’s Finance Minister Bruno Le Maire said that the government hopes the newly established legal framework for ICOs will attract investors from all around the world.

Europe’s Struggle

Despite the efforts of several European nations like the U.K. and Malta, Europe has struggled to compete against the U.S., Japan, South Korea, Singapore, and Switzerland for several years.

Most of the global market’s cryptocurrency exchange volume is heavily concentrated in three countries, the U.S., Japan, and South Korea, and the majority of blockchain-related businesses have relocated to Japan and Singapore in the past year.

Apart from Malta and Switzerland, most of the Europe’s regional cryptocurrency markets remain significantly weak when compared to Asia and the U.S.

The Mediterranean seven could reignite the cryptocurrency and blockchain ecosystem of Europe, if the regulators begin to provide a friendly environment for startups.

Between September and November 2018, a total sum of $78,000 was lost to cryptocurrency scammers in Singapore after they used a series of strategies involving spreading false information about fake investments online to attract investors.

A  Straits Times report reveals that the scams were specifically designed to appeal to Singaporean residents by using well-known local personalities to endorse the scams – possibly without their knowledge or approval.

Growing Concern for Local Authorities

Speaking to the media recently, local police stated that the basic format of the scam involves the use of online articles which function as recruitment material for investors who do not carry out enough due diligence. Typically, the articles feature glowing endorsements and testimonials about the scam investment programs purportedly from prominent Singaporean public figures and celebrities, which attract several low-level investors who want to imitate the success of the featured individuals.

CCN reported on one such website in September, which used comments falsely attributed to Tharman Shanmugaratnam, the MAS chairman and Deputy Prime Minister as bait for investors to put their money into a dodgy bitcoin investment scheme. The website solicited personal data of users including contact details and bank or credit card details.

When the unsuspecting investors click on links in these articles, they are then taken to websites offering these investments and asked to submit their contact details, after which they are contacted by representatives operating on behalf of the investment schemes. According to the police, these schemes generally operate from outside Singapore and are not recognised or regulated by the Monetary Authority of Singapore (MAS).

It will be recalled that Singapore is currently one of Asia’s friendliest jurisdictions for cryptocurrency and blockchain technology, with several concurrent moves being made toward government-level blockchain adoption, cryptocurrency payment regulation and ICO oversight. Despite all of this, the MAS currently does not have a comprehensive crypto regulation framework, and no safeguards or guarantees are offered for cryptocurrency investment.

According to the police, putting money into any crypto investment schemes which are run from outside Singapore presents an additional layer of fraud risk for Singaporean investors as it is more difficult to ascertain their authenticity and identify the individuals behind the schemes. In addition, when pursuing claims against operators of such schemes, this presents an extra layer of difficulty as the promoters are not subject to Singaporean law.

CCN recently reported that Singapore is increasingly becoming a global centre for cryptocurrency investment and blockchain innovation, with the island state hosting more ICOs than the USA for the first time ever in August.

When Craig Wright formed an alliance with CoinGeek founder Calvin Ayre to launch a hostile takeover of the Bitcoin Cash (BCH) network, the two men predicted that their BCH implementation — Bitcoin SV (BSV) — would quickly accrue near universal support among miners due to its allegedly miner-friendly protocol specifications. This support would be so comprehensive, they boasted, that the other BCH would quickly cease to exist. Actual events, of course, took a very different turn, and before long, BSV’s backers had resigned themselves to pursuing “Satoshi’s original ‘original vision’” on yet another independent blockchain.

Now that the dust has settled, Bitcoin Cash and Bitcoin SV have similar hash rates, though BCH has accumulated 28.9 percent more proof of work since the fork. Notably, though, there is a stark contrast in the economics of mining these two networks, both of which continue to utilize the SHA-256 hashing algorithm.

Taking coin price, network difficulty, and block rewards into account and using Bitcoin (BTC) as a baseline, Coin Dance estimates that BTC is a full 43 percent more profitable to mine than BSV, meaning that BSV miners are throwing away significant revenue by continuing to mine this blockchain — much as they mined at a loss in the aftermath of the fork.

bitcoin mining bitcoin cash bitcoin sv

That’s more than a bit ironic, considering that BSV was supposed to be the miner-friendly implementation of BCH, which itself positioned itself as the miner-friendly alternative to BTC.

Speaking of Bitcoin Cash, despite its post-fork price collapse, BCH is currently the most profitable of the three major Bitcoin iterations, at least for miners. At present, BCH is 9.2 percent more profitable than BTC — even after its recent difficulty reduction — making it around 47 percent more lucrative for miners than BSV.

Of the three networks, Bitcoin’s is not only the most secure but also features the most decentralized hash rate. BTC’s largest mining pool, BTC.com, accounts for 16.5 percent of the blocks mined over the past week (BTC.com is owned by Bitmain, which also owns AntPool. Together, these pools possess 30 percent of the hash rate). Bitcoin Cash, in contrast, features two Bitmain-linked mining pools — ViaBTC and BTC.com — that collectively manage around 56 percent of the BCH hashrate. BSV is also quite centralized, with CoinGeek’s mining pool accounting for 36.1 percent of the hash rate and SVPool — which is operated by Craig Wright’s firm, nChain — possessing another 20.8 percent.

For all their talk of on-chain scaling, BCH and BSV continue to process much smaller blocks than BTC. As of the time of writing, most BTC blocks were approaching the maximum block weight of 4 MB. BCH, with its 32 MB block size limit, was averaging blocks around 50 KB, while BSV — which Craig Wright claims will process blocks up to 1 TB within two years — was averaging less than 13 KB per block.

Over the last 48 hours, since November 7, the global crypto market has lost $6 billion of its valuation as it dropped from $220 billion to $214 billion, while Bitcoin remained stable.

On November 6, major cryptocurrencies including Bitcoin Cash (BCH), Ripple (XRP), Ethereum (ETH), Stellar (XLM), and Cardano (ADA) recorded large gains in the range of 5 to 30 percent, as BCH surged by around 40 percent within a two-day span.

Subsequent to demonstrating a significant increase in value, most major cryptocurrencies retraced, which was expected amongst the majority of cryptocurrency traders in the community.

On a Monthly Basis, Crypto Still Performing Well

Fueled by the drop of Bitcoin Cash and many small market cap tokens, the cryptocurrency market recorded a drop of 2.7 percent in its valuation. But, on a monthly basis, the market is up more than $16 billion since mid-October, from $198 billion to $214 billion.

Since October 15, the crypto market added $22 billion to its valuation, rising by more than 11 percent. A minor correction was expected following a major 11 percent increase within a 30-day span.

Despite the 2.7 percent drop in the valuation of the market, the volume of major cryptocurrencies remains relatively high. In early October, the daily trading volume of BTC was hovering at around $3.2 billion.

As of November 9, the daily trading volume of BTC remains above the $4.5 billion mark, up 40 percent within the past three weeks. The noticeable surge in the trading activity of BTC and other major cryptocurrencies like Bitcoin and Ethereum is attributable to the general increase in positivity and optimism towards the mid-term growth trend of the market.

Many traders consider the Bitcoin futures market of Bakkt to act as a major catalyst for the next rally of BTC, as unlike other futures trading platforms, Bakkt physically delivers BTC to future contract holders. Hence, institutional investors could actually impact the price of BTC in a positive manner, as CCN reported on November 8.

While the general sentiment towards BTC and major cryptocurrencies is positive, the recent crackdown on decentralized crypto exchange EtherDelta has led investors to be more cautious in investments in tokens.

Tokens in Trouble

On November 7, CCN reported that tokens could suffer a correction throughout the months to come if the US Securities and Exchange Commission (SEC) decides that most tokens are securities under existing regulations.

“While many tokens have recorded gains in the range of 5 to 20 percent over the last week, regulatory uncertainty around tokens and their regulatory nature could lead to a decline in the value of tokens in the weeks to come, as the SEC releases its new guideline.”

Over the last 24 hours, decentralized cryptocurrency exchange EtherDelta was targeted by the SEC for the distribution of unregistered securities, and the categorization of tokens as securities could lead to a further decline in the price of most tokens.

Already, tokens have started to drop substantially in volume, as seen by the sell-off of Polymath, 0x, and Basic Attention token.

Reggie Browne, who is a senior managing director of the ETF group at Cantor Fitzgerald, isn’t holding his breath for a bitcoin ETF. Despite the determination of crypto asset managers jumping through hoops to satisfy US regulators, Browne, who earned the nickname as “the Godfather of ETFs” from Forbes for his influence over the $4.7 trillion market, has his doubts, saying it will happen “no time soon.”

Browne addressed what he finds to be slim odds of a bitcoin ETF amid an inability by regulators thus far to craft a regulatory framework by which cryptocurrencies could operate. In the interim, “it’s very difficult for the commission to wrap their heads around a positive approval because there’s no data yet…the markets just aren’t here,” said Browne, who was speaking at the Georgetown University’s Financial Markets Quality Conference held in Washington, D.C. this week, an event at which SEC Chairman Jay Clayton was also present. Browne’s remarks were cited in Business Insider.

Crypto Catch-22

There’s a bit of a catch-22 in the crypto markets, as the arrival of a bitcoin ETF is widely deemed to be a sign of maturity in the nascent market, which just celebrated its 10th anniversary. Meanwhile, the approval of such a product is dependent on regulation that is waiting for a more mature market. The SEC has already declined nine bitcoin ETF applications, and the crypto community has their hopes pinned to a product designed by asset manager VanEck and blockchain startup SolidX.

wall street bitcoin

VanEck Director of Digital Asset Strategies Gabor Gurbacs on Nov. 1 told Fox Business: “I don’t know exactly how close we are but we are the closest we can be,” adding: “It’s very clear to me America wants a bitcoin ETF and we are here to build it.” In the meantime, VanEck is waiting on pins and needles for SEC feedback on its application.

Waiting Game

It isn’t the first time a Wall Street executive has weighed in on the fate of a bitcoin ETF. In recent days Larry Fink, who is at the helm of BlackRock, the world’s largest asset manager boasting $6.3 trillion in assets under management, quashed any expectation that the firm would issue its own bitcoin ETF in the near future. BlackRock, which is one of a trio of asset managers that together control 82% of ETF market share, is on the sidelines until there are signs the crypto market is “legitimate,” which to him requires government backing.

Meanwhile, if the SEC’s motivation for suppressing a bitcoin ETF is, in fact, a lack of data and markets, as the Godfather of ETFs suggests, they are going to have fewer reasons to decline the product once institutional capital makes its way into the crypto space, which is largely expected to coincide with the opening of regulated crypto exchange Bakkt this year.