Ten years ago, Sandra Ro was working in finance in London when some currency-trading friends told her about bitcoin. The cryptocurrency had been released only a couple of years previously and was still far from a global phenomenon.

Bitcoin was only really known in geeky tech circles and eventually currency traders in London found out about it around 2010, says Ro. She invested in the cryptocurrency, made a substantial fortune and is now chief executive of the Global Blockchain Business Council, a Swiss non-profit organisation that promotes the technology behind cryptocurrencies.

With a background in markets at global banks such as Deutsche Bank and Morgan Stanley, Ro was quick to grasp blockchains revolutionary potential. What really piqued my interest was whether the tech could disintermediate financial markets. I thought, what the heck? she recalls. Bitcoin was trading at a couple of hundred bucks at the time and I bought a bunch thinking, what if it works? And guess what? It did!

Today, bitcoin and its digital peers are becoming mainstream. The hype reached new heights this year after the cryptocurrency gained 600 per cent in value in 12 months. The mania has swept up not only retail investors but also very wealthy people. Ultra-high-net-worth individuals (UHNWs people with assets of $30mormore) such as Paul Tudor or Stanley Druckenmiller were among the earliest backers of bitcoin,the biggest cryptocurrency, and are prominent in the market today.

Bitcoin and other cryptocurrencies are also gaining traction as a store of value for financial institutions. Banksare queueing up to compete Goldman Sachs is trading cryptocurrencies while Citigroup is considering providing trading, custody and financing services. Billionaire investors openly discuss their cryptocurrency-related investments, while some large publicly listed companies, such as software company MicroStrategy, hold billions of dollars worth of bitcoin on their balance sheets.

Neither the sharp sell-off that hit cryptocurrencies last month nor the surrounding turmoil should obscure the fact that these are now huge markets, with a combined value of $1.6tn. That is big enough as an investment pool for even the richest private investors and largest family offices.

But bitcoin still divides opinion. For some it is an obsession,for others a speculative bubble. Yet financial industry analysts say that few people really understand how it works. To make life more complicated, it has spawned scores of other cryptocurrencies, all based on complex computer-driven calculations but with different levels of liquidity and transparency. We have seen UHNW individuals and family offices looking into cryptocurrencies and becoming interested in allocating some portion of their investments into crypto, says Calvin Koo, a Hong Kong-based lawyer at Kobre & Kim. But its important to make sure investors dont inadvertently step into a minefield.

Clearly, what makes the crypto field tempting are the stories of those who have struck gold. Ro is reluctant to say how much she is worth as a result of her bitcoin punt, as she has been targeted by scammers and has received death threats after talking about the subject. But she was able to leave full-time banking in 2017 the year of bitcoins first significant rally, when prices rose from just above $800 to almost $20,000. Bitcoins surge to $63,000 earlier this year increased Ros fortune.

Lets just say, I have done very well. I have gone from being a banker to working at a non-profit, says Ro, who studied at Yale and Columbia universities. Getting in early because the tech seemed really cool also worked out as an investment, so thats also pretty cool. Being an early investor meant she has had to try a dozen exchanges, suffered hacks and been locked out of investments. Her friends have also done well from her foray, as she recalls giving them bitcoin just to test out how it works.

I wasnt surprised by bitcoin doing well, but there were always a lot of risks. There were hacks, regulatory risks and exchanges going bust, she says. Crypto used to be messy. Now there are multimillion-dollar companies being built.

Another early believer is Olivier Janssens, a Belgian-born entrepreneur who states his profession on LinkedIn as an investor in bitcoin since 2010. He is also proudly self-educated with an attraction to libertarian and voluntarist ideas and forged a career as a software entrepreneur. In 2014, when bitcoin was trading at around 600, he became the first person to pay for a flight by private jet with the cryptocurrency. He settled the bill for the trip from Brussels to Nice with, he estimates, 15 bitcoin in hindsight, a pretty costly trip. [That] would be worth about 400,000 today, he says.

Crypto used to be messy. Now there are multimillion-dollar companies being built

Janssens has also realised actual losses in the volatile world of cryptocurrencies, notably in the saga of the collapsed exchange Mt. Gox, one of the largest crypto-linked financial failures.

More recently, the huge gain in the price has left early investors like Janssens dealing with the problem of having too much bitcoin as a proportion of their overall portfolio. Some bitcoin investors who vow never to sell their cryptocurrencies are known as hodlers (holding on for dear life). I sometimes rebalance my portfolio when it becomes 50 per cent of my assets. Im smart enough to sell sometimes Im not a hardcore hodler, says Janssens.

Seven years after the Belgians historic trip, paying for private charters by bitcoin is not quite mainstream but no longer newsworthy. More than one in 10 flights were settled with bitcoin in January at jet-hire company PrivateFly, where the share of cryptocurrency revenues grew to a fifth of the total. Denison, a US luxury yacht charter company, published a list of its 372-strong fleet in February with prices in bitcoin.

However, Janssens is slightly disappointed in bitcoins evolution from a peer-to-peer means of payment to a perceived store of value, which he says is completely against the original aim of the cryptocurrency. Its interesting to see big companies buy bitcoin as a digital gold, but I have personally shifted my focus to currencies like ethereum, he says.

There are hundreds if not thousands of alternative coins with varying characteristics. Like bitcoin, all are created by computers solving complex mathematical equations, churning out digital code. Some, known as shitcoins, are created purely as get-rich-quick schemes.

Janssens is among wealthy investors who think ethereum, launched in 2015 and now the second-most traded cryptocurrency, could be bigger than its erstwhile peer. Supporters say it could rewire the financial infrastructure. Billionaire financiers Mike Novogratz, Peter Thiel and Alan Howard are among investors who recently announced their backing of a venture that relies on ethereum.

Bitcoin might drop 20% in a day but its still up 85% this year; its about how far out you see the big picture

While bitcoin is just a piece of digital code, ethereum acts as a store of data and a marketplace for assets as well. It can perform the tasks of brokers, exchanges and other intermediaries, with the help of so-called embedded smart contracts. These ensure transaction details are correct, funds are paid and assets change hands as set out in a preprogrammed piece of code.

Ethereum is also behind most non-fungible tokens, which are digital representations of things, people or concepts that investors can buy in the form of units of data stored on a secure computer ledger artworks, for example. Christies, the UK auction house, is preparing for the sale of digital tokens created around the works of American artist Andy Warhol. Digital art is gaining momentum, says Emma Cunningham, a Christies spokesperson.

But not everyone is convinced the future is bitcoin-shaped. The cryptocurrencys volatility might be attractive to investors seeking fortunes. Those who are already wealthy, though, often avoid the rough and tumble. Our clients have already created substantial wealth, so theyre in preservation mode and only a very small proportion of clients have the high risk tolerance required for crypto, says Mohammed Kamal Syed, head of asset management at Coutts, the UK bank.

That does not mean UHNW individuals will ignore the siren call of extreme profits, says Syed. All clients have Fomo [fear of missing out], all the time. But with crypto, if anything, theyre bewildered; they dont understand why its gone up or down because no one knows, he says.

Sky-high valuations this year have raised fears of a bubble an outcome some hedge funds backed by wealthy investors are betting on. I believe we have passed the point of peak speculation crypto and bitcoin have this glamorous image, but that will get questioned ultimately, says Barry Norris, chief executive and fund manager at Argonaut Capital, a London-based equity specialist. He has started shorting crypto exchange Coinbase and software company MicroStrategy, a corporate holder of bitcoin.

Cryptocurrencies also face broader challenges. A growing concern is their environmental impact a Cambridge university study suggests the computers used to generate bitcoin consume more electricity than Sweden.

Meanwhile, governments in the US, China and the EU are raising questions about the sectors potential instability and lack of transparency. Criminal investigators say cryptocurrencies can be used for financing terrorism or other illegal activities, while tax inspectors are focusing on investors huge capital gains. Koo at Kobre & Kim says that despite a reputation for anonymity, cryptocurrency transactions are a lot more traceable than most investors think. Many UHNW individuals value privacy for different reasons, so they often have to make a choice between privacy and security, he says.

But despite these concerns, the potential returns keep the investors coming, including family offices. You cant find alpha like this in any other asset class, says Kevin Kang, founding principal of New York-based cryptocurrency hedge fund BKCoin, whose clients include rich individuals. Kang and his co-founder, Carlos Betancourt, manage $50m of assets in the fund they established in 2018.

Among the better-known individual cryptocurrency enthusiasts is Derrick Brown, a former NBA basketball player. Now chief executive of US venture company Free Fenix, he says he is an investor first and foremost, who also happened to play sports in the past. He adds that were he starting his sporting career now, he would ask for part of his pay to be in crypto.

Brown first invested in cryptocurrencies partly through an allocation in specialist hedge fund BlockTower. I look at everything from a diversification standpoint, he says, noting that less than 5 per cent of his portfolio is allocated to cryptocurrency. Bitcoin might drop 20 per cent in a day, but year to date its still up 85 per cent; its about how far out you see the big picture, he adds.

Ro agrees. This is a market at an experimental stage and this is what happens, she says. Im a typical hodler. I believe in crypto in the long run, but Im not going to put all my life savings in it. I have stocks, real estate, jewellery, art...its about diversification.

This article is part ofFT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment

For the latest news and views on fintech from the FTs network of correspondents around the world, sign up to our weekly newsletter #fintechFT

Sign up here with one click

Excerpt from:
Bitcoin and the wealthy - Financial Times

CoinShares chief strategy officer Meltem Demirors and Defiance ETF CIO Sylvia Jablonski on the latest headlines surrounding Bitcoin and cryptocurrencies.

Bitcoin was trading more than 3% lower on Friday morning.

The price was around $37,934 per coin, while rivals Ethereum and Dogecoin were trading lower at around $2,356 and 30 cents per coin, respectively, according to Coindesk.

ELON MUSK QUESTIONS ASSERTIONS BITCOIN IS SUSTAINABLE

Tesla CEO Elon Musk continues the Bitcoin debate, On Thursday he tried to refute claims that Bitcoin is "greener than critics say."

As part of a string of tweets Thursday, Bitcoin Magazine cited Kraken CEO Jesse Powell saying not only that the digital currency is green but that Musk who has recently questioned the digital currency's environmental impact "has some more studying to do."

"Based on what data," Musk replied.

To bolster their point, Bitcoin Magazine released a round of back-to-back tweets citing information from its latest article using data from The Cambridge Centre For Alternative Finance.

"The Cambridge Centre For Alternative Finance estimates that 76% of all miners use renewable energies as part of their mix. CoinShares estimates that total share of renewables may even be as high as 73%," the magazine tweeted.

In recent months, Musk has drawn attention to cryptocurrency, expressing concern over its mining process the process of creating the cryptocurrency. Bitcoin mining is done by solving mathematical puzzles on powerful computers that require large amounts of energy.

NRCC BEGINS ACCEPTING CRYPTOCURRENCY CAMPAIGN DONATIONS

The National Republican Congressional Committee, the financing arm for House Republicans, will become the first national party committee to begin acceptingcryptocurrency for campaign contributions.

"The NRCC is proud to lead the charge in acceptingcryptocurrency campaign contributions," NRCC Chairman and Republican Minnesota Congressman Tom Emmer said in a statement. "We are focused on pursuing every avenue possible to further our mission of stopping Nancy Pelosis socialist agenda and retaking the House majority, and this innovative technology will help provide Republicans the resources we need to succeed."

The NRCC will accept cryptocurrency contributions using payment service Bitpay, which will convert the donations into dollars prior to landing in the organization's account.

Axios, the first to report the story,

Follow this link:
Bitcoin continues slide to end the week - Fox Business

I believe that the Founding Fathers of the United States inscribed the idea that liberty is inherent to life in the Declaration of Independence. While they made an astounding first step in declaring this, there has been, since the uprising of technology, a necessity of this in monetary form.

I believe that bitcoin is the codification of monetary liberty. Like the Declaration of Independence, Bitcoin was set into existence from the very moment it was realized;

The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime. - Satoshi Nakamoto

The mere existence of the idea now facilitated a reality in which liberty was to be demanded. Having had the taste of freedom, man had realized the fullest potential of life, in that of sovereignty.

Financial freedom is achieved the moment you begin acquiring bitcoin. Immediately, you obtain digital value verifiably scarce and unstoppably mobile. There are no outside entities who can lay claim to your property; there are no boundaries on the transfer of your money. Each individual reclaims their inherent right to liberty, as expressed in the Declaration of Independence, and now too expressed in the form of Bitcoins code.

While the Declaration of Independence proclaimed the idea and theory of self sovereignty, Bitcoin created the physical implementation of such property rights, allowing the manifestation of such liberty to proliferate in reality. What the Declaration did on a theoretical level, Bitcoin achieves on a material level via monetary property rights.

It is interesting to think that such an achievement was only possible given the creation of the internet. As much as the printing press led to the proliferation of education, writing and reading which were necessary for such a thing as the Declaration of Independence to occur the internet enabled Bitcoin. The printing press, being the origin of worldwide mediums of content absorption, interconnected people across space and time. The internet accomplishes this feat even more so, more quickly and exponentially more effective.

And so, it is with this realization that we understand; Bitcoin, being enabled by a present global interconnectedness, is a physical manifestation of liberty.

Continued here:
The Quickest Way To Achieve Financial Freedom Is With Bitcoin - Bitcoin Magazine

When Bitcoin burst onto the scene in 2009, fans heralded the cryptocurrency as a secure, decentralized and anonymous way to conduct transactions outside the traditional financial system.

Criminals, often operating in hidden reaches of the internet, flocked to Bitcoin to do illicit business without revealing their names or locations. The digital currency quickly became as popular with drug dealers and tax evaders as it was with contrarian libertarians.

But this weeks revelation that federal officials had recovered most of the Bitcoin ransom paid in the recent Colonial Pipeline ransomware attack exposed a fundamental misconception about cryptocurrencies: They are not as hard to track as cybercriminals think.

On Monday, the Justice Department announced it had traced 63.7 of the 75 Bitcoins some $2.3 million of the $4.3 million that Colonial Pipeline had paid to the hackers as the ransomware attack shut down the companys computer systems, prompting fuel shortages and a spike in gasoline prices. Officials have since declined to provide more details about how exactly they recouped the Bitcoin, which has fluctuated in value.

Yet for the growing community of cryptocurrency enthusiasts and investors, the fact that federal investigators had tracked the ransom as it moved through at least 23 different electronic accounts belonging to DarkSide, the hacking collective, before accessing one account showed that law enforcement was growing along with the industry.

Thats because the same properties that make cryptocurrencies attractive to cybercriminals the ability to transfer money instantaneously without a banks permission can be leveraged by law enforcement to track and seize criminals funds at the speed of the internet.

Bitcoin is also traceable. While the digital currency can be created, moved and stored outside the purview of any government or financial institution, each payment is recorded in a permanent fixed ledger, called the blockchain.

That means all Bitcoin transactions are out in the open. The Bitcoin ledger can be viewed by anyone who is plugged into the blockchain.

It is digital bread crumbs, said Kathryn Haun, a former federal prosecutor and investor at venture-capital firm Andreessen Horowitz. Theres a trail law enforcement can follow rather nicely.

Ms. Haun added that the speed with which the Justice Department seized most of the ransom was groundbreaking precisely because of the hackers use of cryptocurrency. In contrast, she said, getting records from banks often requires months or years of navigating paperwork and bureaucracy, especially when those banks are overseas.

Given the public nature of the ledger, cryptocurrency experts said, all law enforcement needed to do was figure out how to connect the criminals to a digital wallet, which stores the Bitcoin. To do so, authorities likely focused on what is known as a public key and a private key.

A public key is the string of numbers and letters that Bitcoin holders have for transacting with others, while a private key is used to keep a wallet secure. Tracking down a users transaction history was a matter of figuring out which public key they controlled, authorities said.

Seizing the assets then required obtaining the private key, which is more difficult. Its unclear how federal agents were able to get DarkSides private key.

Justice Department spokesman Marc Raimondi declined to say more about how the F.B.I. seized DarkSides private key. According to court documents, investigators accessed the password for one of the hackers Bitcoin wallets, though they did not detail how.

The F.B.I. did not appear to rely on any underlying vulnerability in blockchain technology, cryptocurrency experts said. The likelier culprit was good old-fashioned police work.

Federal agents could have seized DarkSides private keys by planting a human spy inside DarkSides network, hacking the computers where their private keys and passwords were stored, or compelling the service that holds their private wallet to turn them over via search warrant or other means.

If they can get their hands on the keys, its seizable, said Jesse Proudman, founder of Makara, a cryptocurrency investment site. Just putting it on a blockchain doesnt absolve that fact.

The F.B.I. has partnered with several companies that specialize in tracking cryptocurrencies across digital accounts, according to officials, court documents and the companies. Start-ups with names like TRM Labs, Elliptic and Chainalysis that trace cryptocurrency payments and flag possible criminal activity have blossomed as law enforcement agencies and banks try to get ahead of financial crime.

Their technology traces blockchains looking for patterns that suggest illegal activity. Its akin to how Google and Microsoft tamed email spam by identifying and then blocking accounts that spray email links across hundreds of accounts.

Cryptocurrency allows us to use these tools to trace funds and financial flows along the blockchain in ways that we could never do with cash, said Ari Redbord, the head of legal affairs at TRM Labs, a blockchain intelligence company that sells its analytic software to law enforcement and banks. He was previously a senior adviser on financial intelligence and terrorism at the Treasury Department.

Several longtime cryptocurrency enthusiasts said the recovery of much of the Bitcoin ransom was a win for the legitimacy of digital currencies. That would help shift the image of Bitcoin as the playground of criminals, they said.

The public is slowly being shown, in case after case, that Bitcoin is good for law enforcement and bad for crime the opposite of what many historically believed, said Hunter Horsley, chief executive of Bitwise Asset Management, a cryptocurrency investment company.

In recent months, cryptocurrencies have become increasingly mainstream. Companies such as PayPal and Square have expanded their cryptocurrency services. Coinbase, a start-up that allows people to buy and sell cryptocurrencies, went public in April and is now valued at $47 billion. Over the weekend, a Bitcoin conference in Miami attracted more than 12,000 attendees, including Twitters chief executive, Jack Dorsey, and the former boxer Floyd Mayweather Jr.

As more people use Bitcoin, most are accessing the digital currency in a way that mirrors a traditional bank, through a central intermediary like a crypto exchange. In the United States, anti-money laundering and identity verification laws require such services to know who their customers are, creating a link between identity and account. Customers must upload government identification when they sign up.

Ransomware attacks have put unregulated crypto exchanges under the microscope. Cybercriminals have flocked to thousands of high-risk ones in Eastern Europe that do not abide by these laws.

After the Colonial Pipeline attack, several financial leaders proposed a ban on cryptocurrency.

We can live in a world with cryptocurrency or a world without ransomware, but we cant have both, Lee Reiners, the executive director of the Global Financial Markets Center at Duke Law School, wrote in The Wall Street Journal.

Cryptocurrency experts said the hackers could have tried to make their Bitcoin accounts even more secure. Some cryptocurrency holders go to great lengths to store their private keys away from anything connected to the internet, in what is called a cold wallet. Some memorize the string of numbers and letters. Others write them down on paper, though those can be obtained by search warrants or police work.

The only way to obtain the truly unseizable characteristic of the asset class is to memorize the keys and not have them written down anywhere, Mr. Proudman said.

Mr. Raimondi of the Justice Department said the Colonial Pipeline ransom seizure was the latest sting operation by federal prosecutors to recoup illicitly gained cryptocurrency. He said the department has made many seizures, in the hundreds of millions of dollars, from unhosted cryptocurrency wallets used for criminal activity.

In January, the Justice Department disrupted another ransomware group, NetWalker, which used ransomware to extort money from municipalities, hospitals, law enforcement agencies and schools.

As part of that sting, the department obtained about $500,000 of NetWalkers cryptocurrency that had been collected from victims of their ransomware.

While these individuals believe they operate anonymously in the digital space, we have the skill and tenacity to identify and prosecute these actors to the full extent of the law and seize their criminal proceeds, Maria Chapa Lopez, then the U.S. attorney for the Middle District of Florida, said when the case was announced.

In February, the Justice Department said it had warrants to seize nearly $2 million in cryptocurrencies that North Korean hackers had stolen and put into accounts at two different cryptocurrency exchanges.

Last August, the department also unsealed a complaint outing North Korean hackers who stole $28.7 million of cryptocurrency from a cryptocurrency exchange, and then laundered the proceeds through Chinese cryptocurrency laundering services. The F.B.I. traced the funds to 280 cryptocurrency wallets and their owners.

In the end, cryptocurrencies are actually more transparent than most other forms of value transfer, said Madeleine Kennedy, a spokeswoman for Chainalysis, the start-up that traces cryptocurrency payments. Certainly more transparent than cash.

More here:
Bitcoin Is Actually Traceable, Pipeline Investigation Shows - The New York Times