Sideways

A tale of two exchanges

One of the biggest stories from last month was the exchange Bitgrail being hacked of $200 Million worth of Nano. The way they handled it and the actions of the owner and CEO were frankly disgraceful. No one in their right mind should trust anything this group has to offer.

So suffice to say we were very surprised that not only were they back declaring that they would be opening their doors once again, but all of those who were personally affected by the hack would be receiving 20% of their original Nano balance. Here are the most interesting excepts from the udapte found here: https://docs.google.com/document/d/1AvWoKmiVHsaZsw69A0ZyXRvsnyGQnnlwGi_szSlUqgY/edit

“- purely voluntarily to help affected customers, Bitgrail is going to create a cash fund to reimburse customers for stolen funds over time

– for this a new token BGS (Bitgrail Shares) will be established on the platform

– on reopen for all non-nano funds will be available and withdrawable, nano balance will be set to 20% of what it was before, for the remaining 80% according number of BGS will be in the wallet, not withdrawable or depositable, but tradable

each end of month, Bitgrail will use 50% of platform profits to buy back BGS from customer proportinally, at a fixed buyback price of 10.5$ / BGS. Of course alternatively users can trade their BGS on the platform for market price instead of fixed buyback price

– use of platform after reopen qill require a waiver of all rights for legal action, this will include a paper that users need to doanload, sign and reupload”

So, the remaining 80% of the missing Nano is going to be replaced with this token BGS, which will be bought back from customers at a fixed price, and any use of these funds constitutes waiving your ability to pursue legal action. So, Bitgrail is essentially giving the choice of take the money and run, or hope that justice comes through.

While we are not in a position to advise you if you are affected by this hack, we feel strongly that this is a terrible deal meant to prey on those who need the payout. The Bitgrail debt token will be deemed worthless because no one will ever want to touch that exchange again, so selling it immediately won’t yield much and waiting for the exchange to buy it back will take a very long time. The token itself is server sided and essentially worthless as it is unregulatable. It’s a money printing machine that the Bitgrail owners can use to buy anyone’s BTC should they be foolish enough to trade it for BGS.

Unfortunately, the legal option might not be much better. There are still lawsuits ongoing against Mt.Gox years later and people affected by that hack have not seen any compensation.

Once again, get your crypto off exchanges.

That even applies to Binance, which continues to dominate headlines and our recommendations as today it announced Binance Chain, it’s new decentralized exchange.

“After extensively researching decentralized exchange frameworks and analyzing existing implementations, we believe significant improvements can be made in providing Binance users with a level of trading experience to which they are already accustomed. Centralized and Decentralized exchanges will co-exist in the near future, complementing each other, while also having interdependence. We stand here today because we believe that Blockchain technology will change the world. In the face of adversity, we have always elected to tackle issues head-on, instead of retreating. As such, we have decided to officially launch the development of the Binance Chain.

As a public blockchain, Binance Chain will mainly focus on the transfer and trading of blockchain assets, as well as provide new possibilities for the future flow of blockchain assets. Binance Chain will focus on performance, ease-of-use, and liquidity. Binance Coin (BNB) will be upgraded to exist on its own blockchain mainnet, becoming a native coin. At the same time, Binance will transition from being a company to a community.”

We find this to be extremely exciting news for the future of crypto. Since we participated in the very first day Binance was open back in July, we’ve watched it absolutely shake up the crypto world. It’s meteoric rise can likely be traced to its insistence on professionalism and being community focused. It’s extremely rapid coin listings, its community coin vote, the giveaways, the referral system, some of the lowest trading fees in the industry making it a haven for day traders, one of the best fee split exchange tokens around, and time and again showing that in the face of adversity they are communicative and treat their customers with respect. Comparing them to Bitgrail, for example, is night and day.

That being said, the rise of Binance has slowed it down considerably. Coins are not listed as quickly anymore, giveaways are less frequent and the referral system has been reduced. So suffice to say we’re delighted this is the direction they’re pursuing. For those who don’t know, decentralized exchanges are exchanges in which you control the private key, meaning you control the crypto, not the exchange. The current decentralized exchanges, which having somewhat improved this year, are still miles away from being user friendly and accessible for most traders. At the end of the day, most traders don’t mind sacrificing some security if it means the trading is easier and there’s less steps involved.

So, we’re very curious to see what Binance will do with this. We theorized last month when discussing decentralized exchanges that most exchanges were working in secret on their own versions. This announcement today was only their declaration that they’ve begun work on this. It will likely be months before we see any indication that we can begin trading using this. Furthermore, they will not be integrating the decentralized exchange into their existing platform, rather making it seperate. Binance hasn’t exactly been known for intuitive UI so we’re a little cautious to say they’re going to make the decentralized exchange process remarkably easier than it currently is, but nonetheless it’s exciting to see a large exchange tackle this so publicly.

Speaking of publicly, it seems the WinkleVoss twins are going to be featured two days a row in our newsletter. It’s natural to assume they’re humbled.

Since they became involved in Bitcoin, the WinkleVii have been pushing for regulation that works with and not against cryptocurrencies. They rightly assume that once the proper channels and frameworks are in place, the floodgates will open and institutional investors will invest in the space. To that end, they’ve put forth a framework for self-regulation of the virtual-currency sector called the Virtual Commodity Association (VCA).

From a blog post on their exchange, Gemini, they say that the dearth of regulation and a need for the market to evolve has pushed them to try and shepard the industry forward with adoption of broad practices around responsible financial management, transparency, cybersecurity, and record-keeping.

‘The promise of virtual commodities and their impact on the future will be profound—but individuals and institutions need to feel safe and secure when transacting. We believe a thoughtful SRO framework that provides a virtual commodity regulatory program for the virtual commodity industry is the next logical step in the maturation of this market.’

The proposal comes as the Securities and Exchange Commission has warned that it is taking a hard look at exchanges, threatening to crack down on cryptocurrency platforms.

“If a platform offers trading of digital assets that are securities and operates as an ‘exchange,’ as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration,” the SEC said.

While we support such an initiative, if the recent Bitcoin fork is any example of solidarity or lack thereof in the crypto community, getting all parties to agree on something will be a daunting task. Furthermore, it could quickly become a situation of “Who will guard the guards themselves?” and a powerful oligarchy could emerge.

Still, cooperation with the governing bodies looking into this space is preferable to having no solutions and waiting for them to write the rules.

On Wednesday we’ll be making available our next premium class, “How To Find Your Next Big Cryptocurrency: Intro To Fundamental Analysis”, which will be a comprehensive guide on how Mav finds his picks, evaluates coins, assesses ICOs, and builds a portfolio of solid coins that aim to be strong performers. As a primer, we’re offering a FREE one hour webinar on Wednesday where Mav will walk through each of the steps he uses to evaluate coins! Be sure to sign up even if you can’t make it — we’ll email you the recording!

To sign up for Wednesday Evenings 8pm ET (New York) webinar, please visit this link. If you cannot attend the webinar, we’ll record and archive the replay for you to watch later.

Have a great weekend everyone.  

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Defensive Actions for the next trading day: 

• None.

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