Robinhood has done a great job at helping a younger generation become inspired to invest in the stock market, but let’s review how it holds up in the crypto space.
Soona Amhaz, Cofounder at Token Daily Capital tweeted a video last night of a “mainstream” Arabic news outlet talking about using Bitcoin as a way to get around capital control after protests in Lebanon. This week, thousands were protesting against the new Prime Minister who is backed by a militant group and its allies.
My mom has mainstream Arabic news on (@AlMayadeenNews) in our living room to track the protests in Lebanon and I just caught a clip of them talking about bitcoin to get around capital controls this is insane pic.twitter.com/CVCg9V7li7
— Soona (@soonaorlater) December 24, 2019
I am unable to translate the video, but Ahmaz did Twitter that favor.
“She’s says ‘okay to start, using digital money is illegal right – the bank of Lebanon will not allow it correct?” Amhaz continued, “He responds it’s not illegal btw and talks about bitcoin and dapps being the future. admittedly i did not expect them to know about dapps.”
Ahmaz posted a tweet shortly after of another clip where the newscaster said that people were buying Bitcoin with cash, not debit cards.
Coindesk Journalist, Leigh Cuen responded with a video on Instagram where an Arabic speaking influencer was promoting crypto, citing a person being unable to get their money from a bank. Again, we are not able to translate exactly what was happening at this Lebanese bank, but the original poster commented this.
“bank refused to give a poor man his money, so he came back with his friends to try and get it”
View this post on Instagram
Time to invest in crypto, cause our banks are the same thing as our sulta: thieves, stupid, liars and can never be trusted. Fuck the banks. Fuck the politicians (they're the same thing). It's time to start getting paid and paying in crypto, so these disgusting beings stop wiring our dollars to Switzerland, then condescendingly "explain" why I can't have my fucking money, and how it's our fault. Oh, and Bank Audi charges a DOLLAR to send you an SMS for transactions ??
They are actually using bitcoin for what it was designed to do but the adoption process is painful to watch. (& honestly idk how long the btc honeymoon period will last…)”
In the span of a day, YouTube flagged content from crypto channels like Chico Crypto, Chris Dunn and Boxmining and some were even temporarily banned. The YouTube strike system is automated by their own algorithms and allots three strikes before a channel is taken down, so even getting one can feel very threatening to channels. Not everyone has released exact details of their strikes, but Chico Crypto had a video pulled for “harmful and dangerous content.”
Mainstream YouTubers like iDubbbz have had their content pulled recently because of growing censorship policies. There was a long phase on YouTube where creators thrived from creating drama which often resulted in trash talking others or random people on the internet. YouTube was originally fine with the genre and even pushed that content to recommended feeds, but when iDubbbz was struck this month, it was obvious that things were changing.
It’s hard to say what exactly what type of crypto content YouTube is striking. For instance, BlockTV is a fairly classic style broadcast news outlet for topics about blockchain tech and they have not reported being flagged.
Chris Dunn was flagged for the “sale of regulated goods,” which according to Google includes “Counterfeit documents or currency,” and “Linking to an online gambling casino in the video description.” In the US, derivative exchanges like Binance, BitMEX, Deribit, ByBit, FTX and many others do not comply with regulations. Theoretically, having an old referral link to one of these exchanges could be considered linking to an online gambling casino. Some of those exchanges were originally available in the US and having not changed a description since they became unavailable might violate policies.
Same goes for “Counterfeit documents or currency,” as many ICO projects were not sold in legal accordance to US regulations. Maybe if these YouTube channels had even spoken positively about those projects it could have been flagged.
The bottom line is, YouTube’s censorship algorithms have always been imperfect, and they usually deal with issues after the matter. If Chico Crypto’s videos come back up in the future, then they probably can improve the algorithm with the successfully disputed information. Unfortunately, this process takes a while and even when huge channels like H3H3 were struck down, it took some time for their problems to become solved.
Launched in April, the Coinbase debit card allows European users to spend their crypto anywhere by swiping a card. Recently, they’ve been adding more and more crypto assets to pay with, and today, they listed the first stablecoin.
Crypto assets compatible with the Coinbase debit card
Bitcoin, the asset that everyone complains about not being able to spend, but probably shouldn’t be spending. Spending Bitcoin is like spending gold, it’s meant to be a store of value more than a medium of exchange.
Augur, also known as REP. This is a utility coin for a site that where you can gamble on things like ‘Will Trudeau still win the next election?” as if it were a derivative product. It’s been around for a while and claims to be “decentralized.”
Ethereum, the coin with the second highest market cap. Potentially analogous to Amazon in the dot com bubble, Ethereum is also subjectively likely to perform well. I wouldn’t buy coffee with it, but I do use it to pay for gas when wandering about the DeFi ecosystem.
Litecoin, one of the best possible names to help market an asset that is faster than Bitcoin. People with a limited understanding of the blockchain world know that Bitcoin is the O.G., Ethereum is supposed to be better than Bitcoin and Litecoin is fast. Ironically, Litecoin being fast is supposed to make people want to spend it without needing a central intermediary (like Coinbase).
Bitcoin Cash, or BCH. Again, aren’t you supposed to supposed to be able to spend this stuff without an intermediary? lol.
XRP, built by Ripple. Tons of huge corporations use Ripple for things like inventory management, but the price of XRP just never seems to go up. I guess this is one that you would want to spend?
ZRX, or 0x is a liquidity tool for Ethereum’s DeFi ecosystem. Developers admitted that their business model hasn’t worked out in the past, but they hope to change things with new updates. Right now it’s worth 20 cents, but with the hype around DeFi and how much decentralized exchanges need a liquidity solution, its future looks promising.
XLM, Stellar’s utility token, is required for every transaction in the network. Stellar is a cross border payment solution whose performance isn’t reflected by its price, much like XRP.
BAT, who hopes to replace the current advertisement business model for websites and content creators. This is actually kind of cool because you can earn it from viewing ads on the Brave Browser. Just a couple hundred minutes of Depends commercials and you can treat yourself to some nice Starbucks.
DAI, last but not least, is a stablecoin that is backed by mostly Ethereum and balanced by an algorithm of incentives. On Maker’s site, you can lock your Ethereum position up in exchange for a DAI loan that is paid back with interest. The Coinbase card is logical for this process. If you are going to spend your DAI loan, this is probably the most efficient way to do it.
Does using the Coinbase debit card make sense?
If you read the snarky commentary on all of the listed crypto, you’ll have an idea of why spending some crypto might make more sense than spending others. But in reality, spending crypto might not even be the point of this card.
Watching mainstream media cover Bitcoin, you’ll often come across people who ask, “but can you spend it?” Coinbase’s card allows people to answer which is good for the market, and in turn good for Coinbase.
So yes, coins like BAT and DAI actually make sense to spend in certain situations, but the rest are supposed to be investments. If they weren’t supposed to be investments, Coinbase wouldn’t name the place you manage coins, your “portfolio.”
One of the biggest perception that holds crypto back from being traded and invested in is the threat of market manipulation. The SEC has cited market manipulation as a reason to not allow regulated ETFs, Tether and Bitfinex are facing a trillion dollar lawsuit for alleged manipulation and in general, traders of Bitcoin often refer to it as a “scam.”
Crypto market manipulation can be narrowed down to a few talking points. Problems being acknowledged and worked on could further the case for adoption. Here are the most prominent issues in the crypto market.
Pump and dump (sort of market manipulation?)
Traditionally, a “pump and dump” scenario is caused by a company misleading investors into buying. After price has risen because of suckered investors, the company sells. In crypto, companies don’t have control over coins in the traditional sense.
Bitcoin has no official dev team and the creator is nowhere to be found. Ethereum on the other hand does have an official team, but they still can’t change things by themselves. In decentralized blockchain networks, the user base chooses which version of a project’s open source code to adopt, so it’s harder for one organization to mislead them.
Still, “pump and dump” scenarios happen within Bitcoin on a regular basis. Instead of being caused by a company, they are caused by what crypto traders call “whales.” A whale is someone who owns enough Bitcoin to single handedly impact the market. Classifying this as manipulative is questionable since it can be done by one person. Some would argue that it is simply a trading tactic.
Instead of completely falsifying then destroying a stock, a whale can take advantage of Bitcoin at a low volume time to spike the price up. Whales look for low volume intersecting with an area they know traders have automatic orders placed at. This is usually by areas of big support or resistance. When support or resistance is broken, traders expect big movement to follow because the price is “breaking out.”
So whales put multi-million dollar orders up where price is thought to be breaking out, triggering traders orders and sending the price up even further. Since the move isn’t organic, the price will flatten out and then drop back to where it started. The whales who created this movement sell at the top, and people consider them to be “smart money.”
This process ends up leaving a pattern that can closely be filled in by Bart Simpson’s head, so traders refer to it as a “bart.” It is unique to the crypto market because of its illiquidity, high leverage and lack of regulation.
Tether pumping the crypto markets
Tether is a “stablecoin” created by the Bitfinex exchanges’ parent company, iFinex. As a centralized stablecoin, it is supposed to be backed entirely by U.S. dollars, held by the Tether Limited company. Controversy has surrounded them ever since Crypto Capitol, who managed funds for Tether shut down. Tether lost $850 million that was tied up in Crypto Capitol
In order to compensate for the lost money, Tether borrowed the $850 million from their sister company, Bitfinex. USDT, Tether’s stablecoin, kept printing after these events. Some people have correlated Tether printings with Bitcoin price increases and became under the impression that they were printing money from nothing. Eventually, they were ordered to send financial documents to the New York Supreme Court.
Bitfinex and Tether turned in documentation from April 2019 until October 2019. When they were no longer forced to turn in documents, the New York State Attorney General wasn’t happy and alleged they were stalling. Bitfinex won an appeal to not have to turn in documents any longer, but that was followed with a trillion dollar lawsuit.
The same legal team who took down Craig Write for impersonating Satoshi Nakamoto is suing Bitfinex and friends for $1.4 trillion. They believe that Tether illegally printed their USDT currency to pump the market, costing $1 trillion in damages. The damages come from people who lost money during the collapse, which the legal team credit to Tether pumps. Ironically, this is more like a grand scale classical pump and dump scheme from the picture above.
If this turns out to be true, it would mean that a company used fake money to bring Bitcoin’s price to $20,000. Since that price point was crypto’s greatest accomplishment, it could have negative consequences on morale if it was a hoax the whole time.
Tether can be found on exchanges like Bitfinex, Binance and oKEX.
Crypto wash trading
There are tons of crypto exchanges that abide by no regulations whatsoever and are not registered. This makes it easy for an exchange to fake trading volume by buying and selling with their own funds.
CoinMarketCap is the first site someone might find by searching “popular crypto exchanges” because it ranks all exchanges by volume. Unfortunately, it is very easy to fake volume and get listed on this site. One report said that nearly 70% of volume reported on CoinMarketCap is fake.
The harm comes from users deciding to spend their money on an exchange with fake liquidity. The lower the volume, the higher the slippage. Slippage translates to the amount of crypto available at the price that you want to buy it for. For instance, an exchange might say that you can buy Bitcoin for $9120 but not clarify the supply available at that price. A trader might get the first $1000 worth of Bitcoin at $9120 per Bitcoin, but if they were buying $10,000, the average price might move to $9300 on an illiquid exchange.
Price increasing because of their order gives the fraudulent exchange an incentive to sell their holdings. People trading on these types of exchanges aren’t long term customers because the exchange simply isn’t competitive with others. A trader might be tricked in to exchange on their platform, lose some money, and then leave.
Regulators don’t like that this practice because it means their citizens are being scammed out of money, and it’s hard to get an accurate read on volume. 70% of volume recorded being fake is a large number and it’s easy to see how allowing a Bitcoin ETF on a major stock exchange based off of that data could be problematic.
We’re still in the Wild West
Crypto markets are still in many ways the Wild West. The stock market is made up of mostly made up of data from regulated, documented business. Crypto exchanging began as a global, unregulated market and the biggest centralized exchanges operate outside of the U.S. where there are more lenient trading policies.
In order to bring standards up to what mainstream, institutionalized investors are used to, there needs to be a more global consensus on regulation. It often seems like U.S. regulators are the only ones trying to crack down on wash trading, printing fake money and allowing access to unnecessary leverage. As long as the U.S. is the only threat to scams, they will have somewhere to run and hide.