Thursday Afternoon Check-Up: Happy New Year (?) Edition

Happy New Year fellow crypto enthusiasts! We here at Coin Clarity certainly wish your 2018 to be a prosperous year, perhaps even more so than it was in 2017. If you missed the boat on all the different, up-and-coming altcoins or ICOs, or didn’t partake in bitcoin’s breathtaking rise, don’t worry: we guarantee there will still be several more opportunities in the blockchain space for you to partake in during this new year. So just sit back, relax, crack a cold one (soda or non-alcoholic beer if that’s your thing), and let us help guide you through the cryptocurrency investment maze. Even if things don’t look good for bitcoin right now, we firmly believe that blockchain technology will continue to transform the world as we know it for the better, bringing some semblance of power and control back to the masses, as our Great Leader Satoshi Nakamoto once intended.

Bitcoin: Currency, Commodity or Property?

As you might have read in our previous editions, different federal governments around the globe have classified bitcoin as any or all of the above, with the majority of countries still unwilling to officially declare it as “money.” The Wall Street Journal has decidedly taken a definitive step forward by declaring bitcoin to be a commodity – gold, oil and wheat being primary examples – which actually makes a lot of sense, given the fact that bitcoin transaction fees remain near all-time highs.

Indeed, bitcoin no longer makes sense as a currency, with the median transaction fee currently sitting at about $16.15 as of the writing of this article. This means that if one were to buy a $4.85 Venti cup of Java coffee at Starbucks using bitcoin (which you can’t do anyway), they would have to pay a grand total of $20. Thus lies the underlying push to rationalize bitcoin as a commodity, like gold, instead of as a currency. Much like you wouldn’t pay for a cup of coffee using gold, you won’t be using bitcoin to pay for it either. The WSJ article concludes with the dire prediction that as bitcoin continues to lose its use as a currency, its price should plummet accordingly.

Though the price of BTC is still up some 25% over the course of the last 30 days, rising to a record price of $19,900 during intra-day trading on Dec 16th, it did indeed sink to as low as $12,000 before the year’s end, before beginning to stabilize at about $14,500, where it currently sits. As 2017 was the Year of Bitcoin, we ended last year’s Roundup by predicting that 2018 will be the Year of the Altcoin, with many competitors vying to take bitcoin’s spot as the most accessible digital currency. Sure enough, altcoins such as Stellar, NEM, Dogecoin and Ripple have seen massive gains during the first four days of the year as big-time investors begin to explore alternatives to bitcoin.

Jihad Against Bitcoin?

To make matters worse, clerics in the Islamic world have declared bitcoin to be haram, which basically means it is to be banned for use by all Muslims worldwide. Top reasons cited are its use by terrorists and “direct responsibility (for) financial ruin,” both which are not without merit. For example, the U.S. federal government caught an ISIS sympathizer attempting to launder $85,000 worth of bitcoin for the reason of funding the Islamic State (better known as ISIS) before traveling to Syria. The charged woman allegedly took out multiple loans and used several credit cards to purchase the bitcoin, and by doing so triggered a series of red flags that alerted the government to her suspicious activities.

So why is this a problem? There are approximately 1.5 billion practitioners of Islam, or about 20% of the earth’s population. Many of these practice Sharia law, which now strictly forbids the usage of bitcoin, and where dealers and exchanges can now face severe penalties if caught peddling the digital ware. Not much of the Middle East had caught onto bitcoin anyway, but if you happen to live in a country heavily populated by Muslims, be prepared to deal with possible blow-back in your community if you are the type to publicly announce your usage of the digital currency.

Is There Any Good News For Bitcoin Right Now?

Unfortunately, we can’t say that there is. Though Wall Street’s “top analysts” continue to make incredulous, somewhat ridiculous predictions about the future rise of the price of bitcoin, we have to take them with a grain of salt, remembering what they did to the world economy during the Great Recession of 2006-2010. As a matter of fact, real estate and banking titans Merrill Lynch (also bailout recipients) have gone as far as barring their agents from advising clients to purchase bitcoin, or any other cryptocurrency for that matter.

Compounding the bad news are multiple reports of top cryptocurrency exchanges with-holding massive amounts of user funds under the guise of attempting to comply with ever-expanding customer identification laws. This has resulted in something of a widespread panic among long-time cryptocurrency users who now find thousands of their crypto-dollars trapped in still largely-unregulated exchanges such as Poloniex and Bittrex. Even though these exchanges have withstood the test of time while many others have failed, it is suspected by many “in-the-know” that they may secretly be on the brink of failure; whether it is due to caving in to the pressures of greed, or to the quagmire of financial regulation, the ultimate cause for their seemingly impending demise remains to be determined.

Regardless, we strongly recommend applying two of our golden rules for cryptocurrency investing, perhaps now more than ever: 1) never leave too much money on any given exchange (especially Poloniex and Bittrex at the moment), and 2) never invest more than you can afford to lose. Having said that, we remain assured that blockchain technology will continue to change the world in ever-increasingly brilliant and positive ways, only limited by the bounds of human imagination.

Good luck out there crypto hunters, and Happy 2018 from all of us at Coin Clarity.