Lawsky on Bitcoin – Imaginary Capital Markets (夢幻市場)

XRP Isn’t A Security, Declares Former CFTC Chairman

XRP Isn’t A Security, Declares Former CFTC Chairman
https://preview.redd.it/8yehv8lzsce51.jpg?width=960&format=pjpg&auto=webp&s=69f0a6eb4973a5a9974e42d15709434719a26a81
When Chris Giancarlo was the chairman of the Commodity Futures Trading Commission he became a rock-star of sorts in certain corners of the cryptocurrency community, helping establish criteria that eventually led to bitcoin and ethereum being declared commodities, more like coffee or sugar than stock in a company. The U.S. Securities and Exchange Commission largely followed suit, eventually also declaring that bitcoin and ether, the cryptocurrency powering the ethereum blockchain weren’t securities.
Now chairman emeritus Giancarlo, who was deemed “Crypto Dad” following an impassioned speech he gave to Congress where he credited bitcoin for finally getting his kids interested in finance, is at it again, having co-written a detailed argument published this morning in the International Financial Law Review for why XRP, the cryptocurrency formally known as “ripples,” was also not a security. The only problem is he’s no longer a regulator. In fact, his employer is on the payroll of Ripple, the largest single owner of XRP, whose co-founders actually created the cryptocurrency.
The bombshell paper, titled, “Cryptocurrencies and U.S. Securities Laws: Beyond Bitcoin and Ether,” co-authored by commodities lawyer Conrad Bahlke of New York law firm Willkie Farr & Gallagher LLP, methodically reviews the criteria of the Howey Test, established by the SEC in 1946 to determine whether something is a security, and point-by-point argues that XRP does not qualify. Rather, the paper argues, like its name would indicate, cryptocurrency is a currency of perhaps more interest to the Federal Reserve and central banks than securities regulators.
What’s at stake here to the cryptocurrency world cannot be overestimated. XRP is now the fourth largest cryptocurrency by market cap, with $5.9 billion worth of the asset in circulation according to cryptocurrency data site Messari. While Ripple was valued at $10 billion according to its most recent round of funding, the company continues to fund itself in part by selling its deep war chest of 55.6 billion XRP, coincidentally valued at the same amount as the company itself.
Not only could an eventual decision by the SEC to classify—or not classify—XRP as a security impact the untold individual owners of the cryptocurrency, but other clients using Ripple services that don’t rely on the cryptocurrency, including American Express, Santander, and SBI Holdings could stand to be impacted positively or negatively depending on the decision. After all if XRP were to be rescinded it would be a huge cost to their software provider. If Giancarlo is right though, Ripple could end up being one of the most valuable startups in fintech.
“Ultimately, under a fair application of the Howey test and the SEC’s presently expanding analysis, XRP should not be regulated as a security, but instead considered a currency or a medium of exchange,” Giancarlo and Bahlke argue in the paper. “The increased adoption of XRP as a medium of exchange and a form of payment in recent years, both by consumers and in the business-to-business setting, further underscores the utility of XRP as a bona fide fiat substitute.”
Giancarlo was nominated to be a commissioner of the CFTC by then-President Barack Obama in 2013. In 2015, he helped lead the thinking behind the CFTC’s decision that bitcoin and other cryptocurrencies were commodities, paving the way for the SEC’s related comments that neither bitcoin nor ethereum are securities. Then, at the height of the 2017 cryptocurrency bubble President Trump nominated him to be Chairman of the CFTC, where he oversaw the creation of a number of bitcoin futures projects, including at CME Group and the short-lived effort at Cboe.
While many blame the creation of bitcoin futures for popping the 2017 price bubble, which almost hit $20,000 before halving today, others have seen the works as a fundamental process of maturity, helping pave the way for more sophisticated crypto-enabled financial offerings. Giancarlo’s last day in office at the CFTC was in 2019, after which he promptly got involved helping envision the future of assets issued on a blockchain. In November he joined as an advisor to American Financial Exchange, using ethereum to create a Libor alternative. The following January he co-founded the Digital Dollar Project leading the push to use blockchain at the Federal Reserve and now it would seem he’s hoping to influence the classification of XRP as he did for bitcoin and ethereum, but from the other side of regulation.
Importantly however, a footnote in the report discloses that not only is Giancarlo and Bahlke’s firm, Willkie Farr & Gallagher LLP counsel to Ripple Labs, but they “relied on certain factual information provided by Ripple in the preparation of this article.” While it’s impossible to parse what information came from the co-authors and what came from Ripple, the resulting legal argument is fascinating, even if it does leave room for doubt.
The Howey test Giancarlo uses to bolster his arguments is a three-pronged definition used by the SEC, none of which he says apply to XRP. The first prong, is that an investment contract should be implied or explicitly stated between the issuer of the asset, in this case XRP and the owner, in which money exchanges hands. “The mere fact that an individual holds XRP does not create any relationship, rights or privileges with respect to Ripple any more than owning Ether would create a contract with the Ethereum Foundation, the organization that oversees the Ethereum architecture,” he writes.
This does however overlook the fact that OpenCoin, credited on Ripple’s own site in 2013 for creating XRP (then tellingly described as “ripples”), was run by many of the same people that founded Ripple. The original creators of XRP then donated the vast majority of the assets to Ripple, which they also ran, creating a sense of distance, tacit though it may be. The actual data around the creation of XRP was also muddled by a glitch in the code that means unlike bitcoin and ethereum the crucial genesis data is no longer attached to the rest of the ledger. The rebranding of “ripples” as XRP further extended the sense of distance between XRP and Ripple, followed by an aggressive campaign to get media to stop describing the cryptocurrency as “Ripple’s XRP.”
With so much distance between the company that actually created XRP and the company that now owns more than half of it, one would be forgiven for wondering, if there was an implied contract between OpenCoin and XRP owners, does the donation from one group of people at one company to a very similar group of people at another company sever that responsibility? In spite of the sense of distance created by Ripple between itself and the cryptocurrency its co-founders created, a number of active lawsuits alleging securities violations have been filed. In all fairness though, Giancarlo appears to recognize this prong may not be Ripple’s strongest defense and concludes the section, hedging: “Even if XRP were to satisfy one or two of the “prongs” of the Howey test, it does not satisfy all three factors such that XRP is an investment contract subject to regulation as a security.”
The second prong of the Howey test stipulates that there can be no “common enterprise” between shareholders or a shareholder and the company. While refuting both relationships, Giancarlo curiously goes onto to write that “given the juxtaposition between XRP’s intended use as a liquidity tool, its more general use to transfer value and its potential as a speculative asset, XRP holders who utilize the coins for different purposes have divergent interests with respect to XRP.”
Ironically, there has always been a widely held belief that owning a cryptocurrency would unify interests around a single goal: to co-create the infrastructure that lets the cryptocurrency exist and ensure it was vibrant and diverse. Meanwhile, XRP, in spite of its aggressive supporters on social media, is one of the least diverse ecosystems, with the vast majority of serious development being done within Ripple. If XRP owners aren’t expecting an increase in value from the work being done by Ripple, they certainly aren’t nearly as involved in helping build that future as are owners of bitcoin and ethereum.
In a related issue, the third prong of the Howey test stipulates that “no reasonable expectation of profit should be derived from the efforts of Ripple,” according to the paper. Supporting this position, Giancarlo writes: “Though Ripple maintains a sizable stake of the XRP supply and certainly has a pecuniary interest in the value of its holdings, it is not enough to suggest that a mutual interest in the value of an asset gives rise to an expectation of profits as contemplated by Howey.” Again, this strains credulity.
According to its own site, Ripple currently has access to 6.4% of all the XRP ever created. But that doesn’t count the 49.2% of the total XRP Ripple owns, but is locked in a series of escrow accounts that become periodically available to Ripple and Ripple alone. Adding those two percentages together leaves a float of only about 44% of XRP that has been distributed for public ownership. For some comparison, Facebook went public the same year XRP was created and has a 99% float, according to FactSet data, meaning almost all of its stock is in the hands of traders.While Ripple does also have more traditional stock, this distribution shows that Ripple might not be as distributed as it claims.
While it’s perhaps no surprise that Giancarlo would come out on the side of his own client, there’s also plenty of other reasons to believe his argument may in fact hold water. In February 2018, the notoriously compliant exchange Coinbase added support for XRP, something it would unlikely do if it were concerned it might accidentally be selling an unlicensed security. Perhaps most tellingly though, Ripple has also been granted a difficult-to-obtain BitLicense from the New York Department of Financial Services, giving it the blessing of a respected regulator. However, while the license was granted after then-superintendent Benjamin Lawsky stepped down from the regulator, it's perhaps no coincidence that a year later he joined Ripple on its board of directors and is now active in the cryptocurrency space. Perhaps a similar fate is in store for Giancarlo.
Editor’s note: This article has been updated to clarify that Ripple Labs is a client of Giancarlo’s law firm.
submitted by wazzocklegless to u/wazzocklegless [link] [comments]

Bitcoin Price Could Reach Further Lows Below $6,000: Analyst

Bitcoin Price Could Reach Further Lows Below $6,000: Analyst submitted by ekser to technology [link] [comments]

DD on Ripple's Board of Directors

With the appointment of Zoe Cruz, I did some research on the entirety of Ripple's board members and compiled in list form their employment history, accolades/awards, and other board relationships. I know most of this info is on Rippple's Board site, but having it in list form is sometimes easier for me to read and process.
I put this together for my own research, hoping this will be helpful to others. Seeing the many accomplishments and powerful connections Ripple's board has made me even more confident of my investment in XRP. To me, XRP is an investment in people, not just a currency or a technology. If I can trust the people running the show, it gives me more faith in XRP's future.
Most interesting person to research was Susan Athey. She is also on the Board at Expedia.com, who owns HomeAway, an AirBNB competitor. I know people have been guessing what those two household names are, and I've seen AirBNB including in the discussion. If people are speculating that AirBNB is one of the names, I think it makes sense that a competitor like HomeAway/Expedia should be considered as well. But this is just pure speculation.
If you're interested, Susan Athey also held a Quora session back in Jan 2016. She answered a couple questions on the future of Bitcoin and Ripple.
Anyways, here's the list:
Gene Sperling
*President, Sperling Economic Strategies (Present) *Director of the National Economic Council (2011-2014) *Counselor to Treasury Secretary Timothy Geithner (2009-2011) *Chief Economic Adviser for Hillary Clinton's 2008 Presidential Campaign *Director of the National Economic Council for the Clinton Administration (1996-2001) *Deputy Director of the National Economic Council for the Clinton Administration (1993-1996)
Founder and Director of the Center for Universal Education at the Council on Foreign Relations and the Brookings Institution.
Named one of the 100 Most Powerful People in Finance worldwide in 2013 by Worth Magazine. Named one of the 50 Most Powerful People in Washington by GQ in 2012.
Takashi Okita
*CEO, SBI Ripple Asia (2016-Present) *Co-founder and CEO, econtext Asia, leading provider of online payment services and e-Commerce solutions (2012-2015) *Co-CEO, SBI Research Co.,Ltd (2009-2015) *Co-founder and CEO, VeriTrans, leading online payment solution provider in Japan (2005-2015)
Non Executive Director of SOFTBRAIN Co,.Ltd. (2014-2017) Non Executive Director of Clara Online, Inc. (2015-2017) Council member for the Financial Agency of Japan (2014-2015)
Named one of the “100 People to Change Japan” in 2014 by Nikkei Business
Anja Manuel
*Co-founder and Managing Partner, RiceHadleyGates LLC (2009-Present) *Lecturer and Fellow, CISAC, Stanford University (2009-Present) *Counsel, WilmerHale (2007-2009) *Special Assistant to the Under Secretary for Political Affairs, Nicholas Burns, U.S. Department of State (2006-2007) *Associate, WilmerHale (2001-2005) *Investment Banker, Salomon Brothers International (1996-1997)
Board member:
Overseas Shipping Group, Inc. Flexport Inc. Center for a New American Security The Crown Prince of Bahrain The American Ditchley Foundation Governor Brown’s California Export Council
Benjamin Lawsky
*CEO, The Lawsky Group (2015-Present) *Superintendent of Financial Services, Department of Financial Services, New York (2011-2015) *Chief of Staff for Governor Andrew Cuomo, New York (2011) *Special Assistant to the Attorney General (2007-2010) *Assistant United States Attorney, US Attorney for the Southern District of New York (2001-2006) *Chief Counsel to Senator Charles Schumer, US Senate Judiciary Committee (1999-2001) *Trial Attorney, US Department of Justice (1997-1999)
Ken Kurson
*Senior Managing Director, Teneo Strategy (2017-Present) *Editor in Chief, Observer Media (2013-2017) *Columnist, Esquire Magazine (1996-2016) *Executive VP, Jamestown Associates (2008-2012) *COO, Rudy Giuliani Presidential Committee (2006-2008) *Deputy Communications Director , Giuliani Partners (2002-2006) *Editor at Large, Money Magazine (2000-2002) *Guest Analyst, CNN (1995-2000) *Editor of GreenMagazine.com, Bankrate, Inc. (1998-2000) *Staff Writer, Worth Magazine (1995-1997) *Associate Editor, United Media (1995-1996)
Named 2014's Journalist of the Year by Algemeiner magazine.
Brad Garlinghouse
*CEO, Ripple (2017-Present) *President and COO, Ripple (2015-2016) *CEO and Chairman, Hightail, formerly YouSendIt (2012-2014) *President, Applications and Commerce, AOL (2009-2011) *Sr. Adviser, SilverLake Partners (2009) *SVP Communications, Yahoo (2003-2008) *CEO, Dialpad Communications (2000-2001) *General Partner, @Ventures (1999-2000) *Bus Dev, @Home Network (1997-1999)
Board Member:
Ancestry.com (2013-2016) Tonic Health (2011-2016) Animoto (2012-Present)
Zoe Cruz
*Senior Advisor, Promontory Financial Group, LLC (2016-Present) *Independent Non-Executive Director, Old Mutual (2014-Present) *Founder and CEO, EOZ Global (2013-Present) *Founder and CEO, Voras Capital Management LP (2009-2012) *Co-President, Morgan Stanley (1982-2007)
On Forbes' Most Powerful Women list for three years, 2005 (#16), 2006 (#10) and 2007 (#34).
Susan Athey
*Professor, Stanford Graduate School of Business (2013-Present) *Professor, Harvard (2006-2012) *Professor, Stanford University (2001-2006)
Member, Board of Directors at Expedia, Inc. (2015-Present) Advisor, Nyca Partners (2014-Present) Consulting Economist, Microsoft (2007-Present) Advisor, XSeed Captial (2014) Member, President's Committee for the National Medal of Science (2011) Executive Committee Member, American Economics Association (2008-2010)
Numerous accolades, including:
John Bates Clark Medal (2007) Elaine Bennett Research Prize (2000) Elected to National Academy of Science (2012)
Chris Larsen
*CEO and Co-Founder, Ripple (2012-Present) *CEO and Co-Founder, Prosper.com (2005-2012) *CEO and Co-Founder, E-LOAN (1992-2005)
Advisor, Distilled Analytics, Inc. (2016)
Links used:
https://ripple.com/ripple_press/former-chief-white-house-advisor-gene-sperling-joins-ripple-labs-board-of-directors/ https://en.wikipedia.org/wiki/Gene_Sperling http://www.econtext.asia/ https://www.bloomberg.com/research/stocks/people/person.asp?personId=65309669&privcapId=7713659 https://www.linkedin.com/in/takashi-okita-ba03822b/ https://www.linkedin.com/in/anja-manuel-26805023/ http://anjamanuel.com/anjamanuelbio/ http://ricehadleygates.com/ https://en.wikipedia.org/wiki/Benjamin_Lawsky https://www.linkedin.com/in/ben-lawsky-6aa97014/ https://www.linkedin.com/in/ken-kurson-919a7a8/ http://www.teneoholdings.com/leaders/ken_kurson https://www.linkedin.com/in/bradgarlinghouse/ https://ripple.com/company/board-of-directors/ https://www.linkedin.com/in/zoecruz/ https://ripple.com/insights/zoe-cruz-joins-ripples-board-directors/ https://www.oldmutualplc.com/people/zoe-cruz.jsp https://www.forbes.com/lists/2007/11/biz-07women_The-100-Most-Powerful-Women_Rank_2.html https://en.wikipedia.org/wiki/Forbes_list_of_The_World%27s_100_Most_Powerful_Women https://www.forbes.com/lists/2005/11/Name_2.html http://www.expediainc.com/about/leadership/ https://www.linkedin.com/in/susanathey/ https://en.wikipedia.org/wiki/Susan_Athey https://www.linkedin.com/in/chris-larsen-7721772/ https://en.wikipedia.org/wiki/Chris_Larsen
[edited to deal with some spacing issues]
submitted by koodlemind to Ripple [link] [comments]

Anyone else feel like the Winklevoss Bitcoin Trust is going to be approved any day now?

We're approaching 2 years since they filed their first S-1. My winkle sense is tingling.
submitted by LeeWallis to Bitcoin [link] [comments]

Re: Blockchain Alliance Please explain: How is an alliance with Homeland Security and ICE is a good thing for Bitcoin tech?

Some people I respect a great deal have joined this Blockchain Alliance where Bitcoin companies will partner with agencies like the DHS, FBI and Immigration Service (of all things).
I must be missing something because I don't see how this is beneficial.
A couple years back, many industry leaders gladly cheered and supported the "bold" and "progressive" efforts of Ben Lawsky to proactively regulate Bitcoin.
At the time, I was one of the very earliest minority voices who spoke out against this and the reasons I thought supporting Lawsky was a terrible idea.
Our industry engaged him, we attended his media show hearings, we cheered at his Reddit AMA marketing and gave him fame, notoriety and legitimacy.
The result was a horrible and overbearing Bitlicense which took thousands of industry man hours and millions of dollars to roll back to the current point...which is still quite onerous and harmful to business. Did we learn nothing from this?
Unlike many who thought it was a good idea, I've actually been a regulated investment professional (with a spotless compliance record) for over 20 years...including 18 years as a FINRA General Securities Principal and time as an SEC Registered Investment Advisor. I've seen first hand the massive harm that many of these regulations do to business while doing little to nothing to actually stop actual fraud or bad behavior.
The investment industry spends billions of dollars annually on compliance with vague and ever changing rules directed by unelected bureaucrats who generally seek to increase influence and power with more far reaching regs.
Meanwhile, derivatives scams, penny stock pumping schemes, dishonest bond underwriting, conflicts of interest, corrupt rating services, fraudulent marketing and outright frauds run rampant.
Even one of their own, Bernie Madoff, the Chairman of the largest industry regulator, the NASD, was not caught for years...despite a 17 page detailed tip from a whistleblower to the SEC. The regulators simply are not adept at catching bad actors....they are far more adept at creating hurdles for legitimate business.
As with proactively supporting more regulations, the support of the Department of Homeland Security, FBI, ICE and others in partnership with Bitcoin industry leaders is unlikely to yield any positive results in improving the image of Bitcoin OR reducing bad behavior -- but will most certainly result in a form of reverse regulatory capture where the govt officials our industry are dealing with seek increased influence and control over Bitcoin and related technologies.
In what way is Federal involvement in our technology with peaceful, non criminal actors a legitimate role for government? By what logic does one assume that the government officials and agencies involved will not continually expand and increase influence and control over this technology? Would the cooperation of the Blockchain Alliance with government agencies continue if the agencies asked for blacklisting of coins, elimination of privacy features, removing fungibiliy features and other requests? Does the Blockchain Alliance support current actions by the agencies including the current methods of asset forfeiture without trial by which the government can seize property without even charging someone of s crime? Does the Blockchain Alliance support the Federal government's policy of ignoring the mandates of voters in jurisdictions such as Colorado and prosecuting crimes that the majority of state voters and representatives have already voted against? Is there ANY law, rule or policy by any future agencies or future politicians which the Blockchain Alliance would refuse cooperation on? From the current announcements it does not seem so.
I hope I'm wrong and have misunderstood somehow.
As I said, many I respect a great deal have supported this.
submitted by bruce_fenton to Bitcoin [link] [comments]

Why You Shouldn’t Fear the Blockchain Regulators

Kevin Werbach is a Professor of Legal Studies & Business Ethics at the Wharton School at the University of Pennsylvania, and the author of “The Blockchain and the New Architecture of Trust,” from which this article is adapted.
_______
In 2015, New York became one of the first jurisdictions in the world to adopt a regulatory regime for cryptocurrencies. The Department of Financial Services began requiring virtual currency businesses to obtain a “BitLicense” in order to operate or serve customers in the state.
“We want to promote and support companies that use new, emerging technologies to build better financial companies,” said then-New York Superintendent of Financial Services Ben Lawsky, when announcing the rules. He continued:
“Regulators are not always going to get the balance precisely right…. But we need to begin somewhere.”
Perhaps. Yet Lawsky picked the wrong somewhere. And he moved fast to formalize rules governing what was still, in 2015, a small-scale and fluid cryptocurrency community.
Bitcoin entrepreneurs and technologists argued that the threat of overbroad regulation, and the costs of compliance, would chill startup activity. More than 4,000 comments were filed on the draft rule, most of them critical.
And when the regulations went into effect, a substantial number of Bitcoin-related startups left New York, including the exchanges Kraken, Shapeshift, Bitfinex, and Poloniex. “The ‘Great Bitcoin Exodus’ has totally changed New York’s Bitcoin ecosystem,” declared the New York Business Journal.
Three years after the Great Bitcoin Exodus, the crypto-native exchanges have not rejoined the New York startup scene. But other firms have.
R3, the financial industry distributed ledger consortium with over $100 million in funding, is headquartered in New York. As one might expect, so are a number of finance-focused blockchain startups such as Digital Asset Holdings, Symbiont, and Axoni. Pillars of Wall Street such as Goldman Sachs, JPMorgan, and the parent company of the New York Stock Exchange are getting into the action.
And the activity is not limited to financial services. Consensys, a venture development studio building around Ethereum technology, grew from 100 to over 400 employees during 2017 alone in its Brooklyn headquarters, and is working on dozens of innovative projects around the world (though it recently announced significant layoffs). Blockstack, a high-profile startup hoping to build “a new internet for decentralized apps” on blockchain foundations, is located in New York as well. The New York bitcoin and ethereum meetup groups each have over five thousand members.
The BitLicense, for all its flaws, did not kill off cryptocurrency activity in New York. Neither did it create the model for regulatory innovation its creators intended. Subsequent jurisdictions developing cryptocurrency regulatory frameworks explicitly distinguished their policies from the overly restrictive elements of the BitLicense.

for more story...https://www.coindesk.com/why-you-shouldnt-fear-the-blockchain-regulators
submitted by smathium to u/smathium [link] [comments]

Bitcoin 2017 a Comprehensive Timeline

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submitted by BitcoinChronicler to btc [link] [comments]

Bitcoin In 2018

It's February 19th, 2018. I wake up, check my phone. Good, bitcoin is up another 5% overnight to around $18k per coin. The world is starting to come around to the notion of decentralized currency, but us early adopters know there's still more to come. A lot more.
I've been accumulating coins since 2014 with each paycheck. Not to brag, but I've got quite the nest egg. Best of all, nobody knows it but me. No bankers. No stock brokers. Just me and the blockchain.
I shower and get dressed. I take my dog for a walk. The sun is shining and all of the drones are headed to their lousy jobs. My phone beeps. Ha, Roger Ver just tweeted that Western Union is getting bought by Coinbase. Nice.
After a short breakfast I head to the car dealership where I test drive the latest from Tesla. Think I'll wait a bit. After world markets started quoting the price of oil in bitcoin, I don't really sweat the ups and downs of gas prices. Think I'll stick with what I have. Besides, I don't want my neighbors to realize that the scruffy guy next door is one of the richest people in town.
I drop by my office (literally MY office since I own the whole building). Bitcoin is up another 2% on the WU news..sweet! Most of my tenants pay their rent in bitcoin. Every month they each swing by with a Trezor. No need for a shady middle man or bank. Ah, forgot to mention that my office building is actually an old bank. They seem to be closing up left and right these days.
After a little work (have to keep up appearances, right) I close up and head over to the bar. Things are a little slow so I fire up some satoshi dice on the ol' android phone. Too bad IOS fell off the map...such a shame that ApplePay took the whole thing down. Over in the corner of the bar some goobers play video poker. Good luck fellas have fun putting your cash in uncle sam's wallet.
With not much going on around town I head home and watch Rise and Rise of Bitcoin Part 7 on Netflix. Man I love that movie. The part about Lawsky's trial is my favorite part. Afterwards I fire up the grill and cook up some prime steaks from the butcher, paid for in bitcoin of course. I love getting a 20% discount for paying in bitcoin. Just as the delicious smoke starts drifting away from the grill, the neighborhood suckers start coming home from their jobs. Bet you guys wish you hadn't bet on fiat.
Edit: Wow a lot of people think I'm nuts. I'm not saying that every single thing I predicted will come true. Also contrary to the negative comments I'm not obsessed with the price of bitcoin. This is just a thought exercise. It was Dwight Eisenhower that said "plans are useless, but planning is indispensable"
Edit2: Trolls are jumping on my 20% discount prediction. What you fail to understand is that when bitcoin starts to take off people are not going to want to hold fiat because the value will drop. So business owners will have an incentive to be paid in a strong currency and willing to accept less of it relative to fiat. After all why would someone accept something that rises in value on par with something that loses value? Econ 101
submitted by tryBitcoinDude to Bitcoin [link] [comments]

A few thoughts - Monday, August 18, 2014

Good afternoon! A few thoughts for lunch today:

bit_by_bit's thoughts on "social capital"

bit_by_bit made an interesting post on the idea of "social capital," which I thought was worth mentioning here. At http://www.reddit.com/Bitcoin/comments/2ds548/what_is_going_on_with_the_rise_and_rise_of/cjsmm5q, he talks about the death of his grandfather, for which I offer my sincerest condolences. Having attended the funeral, he mentions how friends and family have caused him grief about his support of bitcoins. bit_by_bit is incorrect in his posts where he writes bitcoins off as "dying." At the same time, if bitcoins were "dying" right now, then my least concern would be about what my friends think of me.
What bit_by_bit says about "social capital" is completely true. If your goal is to make lots of friends, then you can approach the problem scientifically by following rules. For example, a good way to make friends is to talk to lots of people and to never share controversial opinions. Toastmasters has a good template for this in one of their advanced communications manuals; there is a four-step process they suggest on how to introduce yourself to someone you've never met before. Following the process, you can move from talking about the weather to politics to discussing your divorce in ten minutes. I imagine it would be possible to attend lots of parties and use this technique on many people, making lots of people one might misinterpret as friends.
Once you have those friends, then the best way to keep them is to agree with them as much as possible. Some people are shallow creatures and turn against their friends easily. I mentioned the situation with the family member and the damaged property in a previous post, and the core issue in that situation preventing action was the family member's worry of what friends of friends would think should a stand be taken on repayment.
For good or bad, unlike bit_by_bit, I don't worry about "social capital." I worry about whether I treat people fairly and about what is right and wrong, not about how many friends I will lose or gain by taking actions. People who live their lives worrying about what other people think end up with legions of shallow acquaintences, like the people I know who do little with each other except go out on Fridays and get drunk. Even if bitcoins were dead, friends and family members who would make rude jokes at someone's expense are lesser people who aren't worth associating with. Why should bit_by_bit (or you or I) place the same level of credence in what they think as in someone who is caring and treats others with respect? Rather than losing respect, bit_by_bit has actually gained valuable information, because the respect of such people doesn't matter, and because he now has a smaller number of friends who he deserve more of his time and attention.
If bitcoins were to die, I would not be concerned whatsoever about what colleagues or friends thought of my discussions about them. I would be profoundly disappointed that I live in a world where people are so stupid and closed-minded that they were not able to recognize how bitcoins could have improved the lives of everyone so dramatically.

Some comments on the recent decline

sqrt7744 has an interesting comment about the ongoing decline at http://www.reddit.com/BitcoinMarkets/comments/2duufu/daily_discussion_monday_august_18_2014/cjti1za. In it, he mentions that markets are irrational and also talks about how the falling prices make it difficult to convince newer people to invest. But I don't think that this selloff is irrational like he does.
One thing that's noteworthy about his comment is where he discusses the impact of Ben Lawsky on bitcoin prices. It's reasonable to make a case that this decline was directly caused by Lawsky's regulations. There are some issues with the timing of that argument, so readers can consider for themselves whether Lawsky singlehandedly caused these declines.
The selloffs during the last cycle every time there was some Chinese news were irrational, because bans in China never represented a fundamental threat to bitcoins. While there are still a few posts that continue to claim the fundamentals have not changed (moral_agent has firmly sided with the people who think that we are still in the previous cycle by not changing his charts), some people in /bitcoinmarkets are finally starting to wake up now. The current selloffs are rational, because they are based on fear of one of the two things that can cause bitcoins to fail: that people simply don't want to use them. The question for this cycle is not whether governments will allow bitcoin usage but whether people will use them, and the cycle won't end until that is proven one way or the other months from now. What happened is very simple: people aren't using bitcoins at the same rate as before, July 24 came without adoption having increased, and people who see they can make more money in stocks and other investments left.
As an aside, I should note that the transaction volume has remained unchanged compared to the number of transactions, so it looks like the increasing number of transactions is a false indicator. Anyone can increase the number of transactions by spending a small amount to send a little money to lots of people. The chart to look at is "transaction volume," which hasn't moved.
My bottom line: I remain bearish, just as I did at every step since $620. This downturn does not end tomorrow or next week and because this crash was caused by a change in the fundamentals, there needs to be another change in the fundamentals before recovery begins. The only exception to this rule would be if the price reaches $150 or some unlikely absurd value in a matter of a day, in which case it would make sense to buy huge even if it is just to make short-term gains.

Redefining "speculation"

I think it's worth redefining the term "speculation" to mean "wealth storage." People who buy bitcoins and don't spend them are not leeches upon the network. In addition to providing liquidity, they are using bitcoins for one of their intended purposes: storing their wealth away from the hands of governments and everyone else so that it is available anywhere in the world.
Spending bitcoins on products and services is only one use of the bitcoin network. People who say that bitcoin is "overvalued" for its current uses based on spending alone are adhering to a very limited view of the network's usefulness. I argue that the most useful feature of the network is its ability to store huge amounts of wealth, and that is even more useful than the transactional features. When we redefine the value of bitcoins to include wealth storage, then we have to also redefine the "basic value" of the network to determine whether it is overbought or oversold.

PETA "changes its mind" about switching to P2Pool

On Friday, PETA changed its mind about switching to P2Pool, stating that its hardware wasn't compatible and that they could achieve lower variance by not switching. Such an action is likely illegal, as over 90% of shareholders voted for the switch. If I owned shares or had any association with them whatsoever, I would be selling and would get out immediately with whatever I can salvage.
The company made headlines a few months back when they announced that they would be switching to promote decentralization, and received huge support (and huge money) from the community. A post on Friday attracted quite a bit of negative publicity, so hopefully people who read it will stop supporting them and the company will pay for its duplicity.

Gavin Andresen makes over $206,000

I wanted to make a quick note that it was revealed last week that gavinandresen makes over $206,000 for his work as a bitcoin developer. I've never heard of a software engineer who makes anywhere close to that much; it's almost three times what I make.
As a genius, this is the one case where I can say that he deserves every cent he makes. Most of the time, you hear about stories of CEOs who earn $3m or $10m in cash and bonuses and stock options - but these CEOs don't actually produce any work for the company. Andresen works hard and actually produces meaningful stuff that advances the purpose of his organization. A company can survive without a CEO, but it can't survive if it doesn't have deveopers producing a product. It's good to see the right people getting rewarded for their work, rather than CEOs leeching off others' hard work.

Other

submitted by quintin3265 to BitcoinThoughts [link] [comments]

Altisource Portfolio Solutions S.A.

Altisource Portfolio Solutions S.A.
This is gonna be a long one.
"You don't have to know how much a man weighs to know he is fat."
Background:
Altisource Portfolio solutions "Altisource" was spun off from Ocwen Financial in 2009. Ocwen financial is a mortgage servicer. Of all the mortgage servicers, Ocwen is the most cost efficient, best run, and best capitalized. As a mortgage servicer, Ocwen acquires mortgage servicing rights (MSRs). Owners of MSRs collect a small fee from every mortgage payment it is servicing. Ocwen may service a mortgage by handling day to day tasks of servicing a loan, process payments, keep track of principal and interest paid, manages escrow accounts, initiate foreclosure, modify loan payments for subprime and delinquent loans and so on.
The reason Altisource was spun off from Ocwen in 2009 is because Ocwen's Chairman Bill Erbey knew the software division of Ocwen was not being valued properly within the business. Altisource is now incorporated in Luxembourg for tax reasons but it basically does everything a United States company would do. It files with the SEC, gets audited and does almost all business in the United States.
Thesis:
What does Altisource do?
From the 2013 10k-
"Altisource®, together with its subsidiaries, is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content. We leverage proprietary business process, vendor and electronic payment management software and behavioral science based analytics to improve outcomes for marketplace participants."
If you figured out what they did from reading that, congratulations, because I couldn't. I own the company and I still do not know all of the services they provide. What I do know is that more than half of Altisource's revenue is derived from Ocwen. Ocwen uses Altiosurce's state of the art servicing technology to service their loans. Altisource's technology allows Ocwen to be such a low-cost servicer. Altisource only provides their technology to Ocwen and no other servicers.
http://oraclefromomaha.files.wordpress.com/2014/04/1.png
In the above link, you can see the ways Altisource generates revenue. The main thing to know here is that Altisource generates a huge portion of their revenue from Ocwen. When Ocwen makes less modifications on loans, they use Altisource's services less so Altisource makes less money. When Ocwen modifies more loans then Altisource makes more money because Ocwen uses their serivices more. It provides a hedge against parts of their business that may struggle in a recession like any other business. During the natural economic cycle if there is a recession and Ocwen is modifying more loans because more homeowners cannot make payments then Altisource is making more money than they would during good economic times because Ocwen uses their services more. The more MSRs Ocwen acquires, the more Altisource makes.
Ocwen's growth (basically a quick long thesis on Ocwen)
When a bank loans money to an individual to buy a house, a mortgage is originated and an MSR is created. The bank then keeps the mortgage on its books or sells the mortgage to another entity. Perhaps Fannie or Freddie. But what happens to the MSR? The MSR is then sold to a servicer such as Nationstar, Walter Investment Management Corp, or Ocwen. The reason the banks or originator of the mortgage sell the MSR is because they cannot service it properly and/or they would lose money in the process of trying to service it. Because of Dodd Frank, banks are trying to get MSRs off their books even faster because they cannot service them efficiently as previously mentioned and because they will have to hold 250% more capital against the MSRs. All banks are moving away from owning MSRs and non-bank servicing is becoming a larger industry, and Ocwen is leading the way. Due to the high supply of MSRs that are wanting to be sold by banks the MSRs can currently be bought at a 20-30% yield. Ocwen can buy the most MSRs because they are the best capitalized and they use the most conservative balance sheet. Ocwen being the lowest cost operator provides them with a huge competitive advantage when bidding for MSRs as well. Ocwen will continue to lead the non-bank servicers in buying MSRs. Ocwen currently has $464 billion of unpaid principle balance of loans they are servicing and another trillion dollars of subprime (Ocwen specializes in subprime) UPB is expected to get into the hands of non bank servicers by 2018 (3-4 trillion in UPB of regular MSRs). Ocwen will get the most of that trillion dollars of UPB of any servicer because of their competitive advantages.
Another competitive advantage of Ocwen is their relationship Home Loan Servicing Solutions Ltd. HLSS was also created by Bill Erbey. HLSS provides the capital for Ocwen to service loans so Ocwen does not have to tie up their capital. In the future, HLSS will acquire more loans and allow Ocwen to sub-service them through a unique financing strategy. This strategy called the accretion model is a genius way to get capital for HLSS to afford a virtually unlimited amount of MSRs. HLSS pays a huge dividend and because of this dividend, HLSS trades above its tangible book value due to fixed income hungry investors who want a fat dividend. HLSS then issues more shares above tangible book value to then acquire more MSRs. Issuing shares above book value actually creates value for HLSS shareholders also instead of diluting value as many people would think issuing shares does. Those MSRs are then sub-serviced by Ocwen, who still uses Altisource's technology.
Ocwen is also getting into foreword and reverse mortgage origination so they can have a constant stream of MSRs.
Basically, Ocwen and HLSS are going to acquire more MSRs and Ocwen will be servicing more mortgages. More mortgages serviced by Ocwen = more revenue for altisource.
All MSR transactions have currently been stopped by a New York financial regulator but we will get to that issue later.
Share Repurchases
Up until a few months ago the laws of Luxembourg restricted the amount of shares that Altisource could repurchase. Altisource recently created a foreign subsidiary that does nothing called "MidCo" to hold all other parts of the business so there would legally be no restrictions on share repurchases. Until Altisource did this, they were repurchasing the maximum amount of shares that Luxembourg would allow.
Here is Altisource's entity structure to bypass Luxembourg share repurchase laws http://i.imgur.com/J6LPEc0.jpg
The highlighted dark blue entity will be the entity repurchasing unlimited shares because MidCo, its parent company is not in Luxembourg. How smart is that.
Altisource currently authorized the repurchase of up to 2.9 million shares. 2.9 million shares is 13% of their market cap. They could easily repurchase that amount. Altisource also just finalized a loan with BAC for $200 million to repurchase shares so the share repurchases will really start to kick into high gear with the new liquidity and cheaper price. Up until the sharp share price drop, Altisource was repurchasing for the past several months around $110. That shows the board and management think the company is undervalued at $110 and now it is at $84 and nothing fundamentally changed about the company.
Insider Purchases
During the past 6 months, 3 insiders have purchased at $102, $103, $106, and $120. Between 20% and 43% above current market prices. Bill Erbey also owns 30% of Altisource and 13% of Ocwen. His views are directly in line with other shareholders.
Bill Erbey and his Capital Allocation
Bill Erbey is the Chairman of Ocwen, Altisource Portfolio Solutions, Altisource Asset Management Corporation, Altisource Residential, and Home Loan Servicing Solutions. Bill has done a great job of creating shareholder value for Ocwen and Altisource shareholders. Bill has also greatly benefited from this because of his stakes in thise companies. Before the sharp share price drop due to outside forces, Bill compounded Ocwen's stock at 30% per year since 2002 WITHOUT including the Altisource spinoff which compounded itself since 2009 at almost 75% a year. Altisource then spunoff Altisource Residential and Altisource Asset Management. Every spinoff is a value creating machine. At one point AAMC had compounded 430% in a year and a half, although it was due to a stretched valuation. Bill is dedicated to doing whatever it takes to create shareholder value. He relocated to the Virgin Islands just to save Ocwen some money on taxes.
I once read a story about Bill in his Virgin Islands home and his electric bill for the air conditioning. Keep in mind, Mr. Erbey is a multi billionaire. Bill got his electric bill and saw his costs had skyrocketed due to his air conditioning. Bill then sat there after that baking and sweating in the heat in his home so he could save a couple thousand on his electricity bill. He will do anything to save a dollar.
Hubzu
Hubzu is owned by Altisource. Hubzu is currently an online marketplace to buy and sell foreclosed homes. Like Zillow and Trulia but for foreclosed homes. Hubzu takes foreclosed homes from Ocwen and lists them on their website Hubzu.com. Hubzu is trying to get into the non-distressed house listing like other real estate websites like Zillow and Trulia. This will grow Hubzu at an even faster rate. Altisource states Hubzu gets about 1 million unique new visitors per month. When you buy Altisource you are also buying the jewel of Hubzu. Bill Erbey claims that Hubzu makes "as much money in one quarter as Zillow does in 4 quarters" Zillow has a market capitalization of $5 billion. Zillow's market capitalization is definitely stretched but a spinoff would create a lot of shareholder value even if the market gave Hubzu a fraction of Zillow's valuation.
Why is the company undervalued?
All this greatness in one company so why is it so undervalued? Remember how Altisource's earning were pretty much directly tied to how well Ocwen does? A New York State Financial Department regulator named Benjamin Lawsky halted a $2.7 bilion ($39 billion in UPB) Wells Fargo MSR transfer to Ocwen. This also halted all of the other MSR transactions between banks and servicers. Benjamin Lawsky is probing into Ocwen and other servicers. He states that he wants to make sure Ocwen and other servicers have the capacity to service loans efficiently because they are "growing too fast". The relationships these 5 companies share though is somewhat sketchy. They have a lot of the same board members and they all work with each other and make money off each other. Ocwen is the best servicer of them all though. They provide more loan modifications than anyone else and they have the lowest re default rate.
A slide from an investor presentation shows how they compare to others http://i.imgur.com/YkIKD2O.png
Even if Lawsky did find that some servicers do not have the capacity to service loans then Ocwen would be the last one in question because it is easy to see they are doing the best for their consumer compared to anyone other servicer.
Benjamin Lawsky is doing this for his own political reasons. He wants his name on the news. He wants people to see his name. Perhaps he wants to run for governor or something. Why would he schedule an interview with CNBC about the probe into the mortgage servicers right after it is announced. Why would he send a letter to Altisource and at the same time send it to the press, therefore ruining Altisource's reputation without giving them a chance to respond. He is also really into regulating bitcoin in New York which is just another vehicle to get his name in the news.
There are very recent updates with the regulatory pressure and basically the probing is narrowed down to an issue with force placed insurance and Altisource. Ben Lawsky could not find anything else. He sent this letter on Aug. 4th to Ocwen. So this is what the probe is narrowed down to.
http://www.dfs.ny.gov/about/press2014/pr140804-ocwen-letter.pdf
Basically, if a homeowner is struggling to make payments and can't pay their insurance, Ocwen has the right to force place insurance into their payments so the mortgage owner does not incur massive losses if a catastrophe happens. Ocwen has to outsource whoever force places the insurance and the issue that Ben Lawsky was worried about was why Altisource was appointed to find someone to force place that insurance, why Altisource received commission for basically doing nothing, and why Bill Erbey did not consult with any of the Ocwen board before making this decision to allow Altisource to find an insurer.
Altisource will probably get a one time fine settlement and they will go on doing business as usual. I believe this because an almost identical situation happened with Assurant and the New York State Financial Department and they settled for $14 million. There is also an interview on CNBC with someone who talks to the CEO of Ocwen and they are sure that Ocwen and Altisource will just settle with a deal with Lawsky and that will be the end of it.
Interview:
http://video.cnbc.com/gallery/?video=3000298804
Risks Benjamin Lawsky actually finds something else that Altisource was doing wrong. Bill Erbey Dies. He is in his 60s and overweight.
Conclusion
In conclusion Altisource is extremely cheap. Remember that quote about not knowing how much a man weighs but knowing he is fat? That is the case with Altisource. Altisource is definitely undervalued but there are a range of possibilities of the valuation with Hubzu, regulatory matters, growth, etc.
submitted by nomcow to SecurityAnalysis [link] [comments]

Bitcoin in 2018

It's February 19th, 2018. I wake up, check my phone. Good, bitcoin is up another 5% overnight to around $18k per coin. The world is starting to come around to the notion of decentralized currency, but us early adopters know there's still more to come. A lot more. I've been accumulating coins since 2014 with each paycheck. Not to brag, but I've got quite the nest egg. Best of all, nobody knows it but me. No bankers. No stock brokers. Just me and the blockchain.
I shower and get dressed. I take my dog for a walk. The sun is shining and all of the drones are headed to their lousy jobs. My phone beeps. Ha, Roger Ver just tweeted that Western Union is getting bought by Coinbase. Nice.
After a short breakfast I head to the car dealership where I test drive the latest from Tesla. Think I'll wait a bit. After world markets started quoting the price of oil in bitcoin, I don't really sweat the ups and downs of gas prices. Think I'll stick with what I have. Besides, I don't want my neighbors to realize that the scruffy guy next door is one of the richest people in town.
I drop by my office (literally MY office since I own the whole building). Bitcoin is up another 2% on the WU news..sweet! Most of my tenants pay their rent in bitcoin. Every month they each swing by with a Trezor. No need for a shady middle man or bank. Ah, forgot to mention that my office building is actually an old bank. They seem to be closing up left and right these days.
After a little work (have to keep up appearances, right) I close up and head over to the bar. Things are a little slow so I fire up some satoshi dice on the ol' android phone. Too bad IOS fell off the map...such a shame that ApplePay took the whole thing down. Over in the corner of the bar some goobers play video poker. Good luck fellas have fun putting your cash in uncle sam's wallet.
With not much going on around town I head home and watch Rise and Rise of Bitcoin Part 7 on Netflix. Man I love that movie. The part about Lawsky's trial is my favorite part. Afterwards I fire up the grill and cook up some prime steaks from the butcher, paid for in bitcoin of course. I love getting a 20% discount for paying in bitcoin. Just as the delicious smoke starts drifting away from the grill, the neighborhood suckers start coming home from their jobs. Bet you guys wish you hadn't bet on fiat.
Edit: Wow a lot of people think I'm nuts. I'm not saying that every single thing I predicted will come true. Also contrary to the negative comments I'm not obsessed with the price of bitcoin. This is just a thought exercise. It was Dwight Eisenhower that said "plans are useless, but planning is indispensable"
Edit2: Trolls are jumping on my 20% discount prediction. What you fail to understand is that when bitcoin starts to take off people are not going to want to hold fiat because the value will drop. So business owners will have an incentive to be paid in a strong currency and willing to accept less of it relative to fiat. After all why would someone accept something that rises in value on par with something that loses value? Econ 101
https://np.reddit.com/Bitcoin/comments/2weevu/bitcoin_in_2018/
submitted by desantoos to circlejerkcopypasta [link] [comments]

4/23/14 - Bitcoin into space, Atlas ATS pushes forward, & Dorian Nakamoto says thank you

Video: http://www.moneyandtech.com/apr23-news-update/
Here are today's top news stories in Money & Tech:
The blockchain is headed for space. Jeff Garzik’s Dunvegan Space Systems is partnering with Deep Space Industries to build satellites called ‘BitSats’ that will be launched into space as a backup bitcoin orbital system. From orbit, these BitSats will be able to broadcast out transaction data from the blockchain to any users with a downlink. Garzik made the first payment to Deep Space Industries via BitPay, where he is also a senior software developer, and is now accepting bitcoin donations to help complete the project.
Bitcoin trading platform Atlas ATS has formed a partnership with The National Stock Exchange to speed up regulatory approval. By partnering with this self-regulatory organization, Atlas ATS hopes to bypass FinCEN's money-transmitting license in favor of SEC-approved rules that are more tailored to digital currency exchanges. Kraken and CoinMKT are also taking this route, as several exchanges race to become the first fully regulated digital currency exchange.
Nine state banking officials from the US Conference of State Bank Supervisors (CSBS), including New York Superintendent Ben Lawsky, have launched the Emerging Payments Task Force. The new task force plans to investigate bitcoin and other virtual currencies in the hopes of developing state regulation best practices, as well as more educational resources. The discussion will begin with a public hearing on May 16th in Chicago.
With the reluctance of Irish banks to accept bitcoin, ATM provider BitVendo and safe deposit box facility Merrion Vaults have partnered to provide cold storage to BitVendo's local cryptocurrency users. The service allows users to store their bitcoins safely in Merrion Vaults' high quality and secure safe deposit vault in Dublin.
Butterfly Labs has been on rocky ground since this month's lawsuit against the bitcoin mining hardware company, accusing it of collecting payments for false orders and using customer equipment for their own mining. This recent lawsuit is only the latest accusation of fraud against the Kansas-based company. What's more, co-founder Sonny Vleisides has been found in violation of his probation since pleading guilty to one count of mail fraud in 2010, which will likely extend his probation another two years.
Dorian Nakamoto, the man famously falsely identified as bitcoin's creator, has filmed a YouTube video with Andreas Antonopoulos to thank the bitcoin community for its support. Antonopoulos led a fundraising campaign for Nakamoto that raised over 47 bitcoins - worth nearly $23,000 dollars - in a new bitcoin wallet that Nakamoto says he will keep open as a new bitcoin user. Watch that YouTube video at https://www.youtube.com/watch?v=w7YmJZ-qVW8.
Bitcoin documentary The Rise and Rise of Bitcoin premieres today at the Tribeca Film Festival in New York City. Money & Tech will be attending the screening, as well as the film’s after-party hosted by Charlie Shrem. We will be bringing you video coverage and interviews from that event soon.
We will also be attending the next major digital currency event this Friday, Dogecon SF, which will be San Francisco's first dogecoin conference. The event is hosted by Follow The Coin, and will feature prominent industry speakers such as litecoin creator Charlie Lee, industry expert Andreas Antonopoulos, and of course, Dogecoin's own creator, Jackson Palmer. We sat down with Tina Hui and Matt Schlicht from Follow The Coin to talk about what we can look forward to at Dogecon SF. Find that interview here: http://moneyandtech.com/follow-the-coin-dogecon-sf/
submitted by moneyandtech to BitcoinMarkets [link] [comments]

Altisource Portfolio Solutions (S.A.) Long Thesis

Altisource Portfolio Solutions S.A.
This is gonna be a long one.
"You don't have to know how much a man weighs to know he is fat."
Background:
Altisource Portfolio solutions "Altisource" was spun off from Ocwen Financial in 2009. Ocwen financial is a mortgage servicer. Of all the mortgage servicers, Ocwen is the most cost efficient, best run, and best capitalized. As a mortgage servicer, Ocwen acquires mortgage servicing rights (MSRs). Owners of MSRs collect a small fee from every mortgage payment it is servicing. Ocwen may service a mortgage by handling day to day tasks of servicing a loan, process payments, keep track of principal and interest paid, manages escrow accounts, initiate foreclosure, modify loan payments for subprime and delinquent loans and so on.
The reason Altisource was spun off from Ocwen in 2009 is because Ocwen's Chairman Bill Erbey knew the software division of Ocwen was not being valued properly within the business. Altisource is now incorporated in Luxembourg for tax reasons but it basically does everything a United States company would do. It files with the SEC, gets audited and does almost all business in the United States.
Thesis:
What does Altisource do?
From the 2013 10k-
"Altisource®, together with its subsidiaries, is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content. We leverage proprietary business process, vendor and electronic payment management software and behavioral science based analytics to improve outcomes for marketplace participants."
If you figured out what they did from reading that, congratulations, because I couldn't. I own the company and I still do not know all of the services they provide. What I do know is that more than half of Altisource's revenue is derived from Ocwen. Ocwen uses Altiosurce's state of the art servicing technology to service their loans. Altisource's technology allows Ocwen to be such a low-cost servicer. Altisource only provides their technology to Ocwen and no other servicers.
http://oraclefromomaha.files.wordpress.com/2014/04/1.png
In the above link, you can see the ways Altisource generates revenue. The main thing to know here is that Altisource generates a huge portion of their revenue from Ocwen. When Ocwen makes less modifications on loans, they use Altisource's services less so Altisource makes less money. When Ocwen modifies more loans then Altisource makes more money because Ocwen uses their serivices more. It provides a hedge against parts of their business that may struggle in a recession like any other business. During the natural economic cycle if there is a recession and Ocwen is modifying more loans because more homeowners cannot make payments then Altisource is making more money than they would during good economic times because Ocwen uses their services more. The more MSRs Ocwen acquires, the more Altisource makes.
Ocwen's growth (basically a quick long thesis on Ocwen)
When a bank loans money to an individual to buy a house, a mortgage is originated and an MSR is created. The bank then keeps the mortgage on its books or sells the mortgage to another entity. Perhaps Fannie or Freddie. But what happens to the MSR? The MSR is then sold to a servicer such as Nationstar, Walter Investment Management Corp, or Ocwen. The reason the banks or originator of the mortgage sell the MSR is because they cannot service it properly and/or they would lose money in the process of trying to service it. Because of Dodd Frank, banks are trying to get MSRs off their books even faster because they cannot service them efficiently as previously mentioned and because they will have to hold 250% more capital against the MSRs. All banks are moving away from owning MSRs and non-bank servicing is becoming a larger industry, and Ocwen is leading the way. Due to the high supply of MSRs that are wanting to be sold by banks the MSRs can currently be bought at a 20-30% yield. Ocwen can buy the most MSRs because they are the best capitalized and they use the most conservative balance sheet. Ocwen being the lowest cost operator provides them with a huge competitive advantage when bidding for MSRs as well. Ocwen will continue to lead the non-bank servicers in buying MSRs. Ocwen currently has $464 billion of unpaid principle balance of loans they are servicing and another trillion dollars of subprime (Ocwen specializes in Subprime) UPB is expected to get into the hands of non bank servicers by 2018 (3-4 trillion in regular MSRs). Ocwen will get the most of that trillion dollars of UPB of any servicer because of their competitive advantages.
Another competitive advantage of Ocwen is their relationship Home Loan Servicing Solutions Ltd. HLSS was also created by Bill Erbey. HLSS provides the capital for Ocwen to service loans so Ocwen does not have to tie up their capital. In the future, HLSS will acquire more loans and allow Ocwen to sub-service them through a unique financing strategy. This strategy called the accretion model is a genius way to get capital for HLSS to afford a virtually unlimited amount of MSRs. HLSS pays a huge dividend and because of this dividend, HLSS trades above its tangible book value due to fixed income hungry investors who want a fat dividend. HLSS then issues more shares above tangible book value to then acquire more MSRs. Issuing shares above book value actually creates value for HLSS shareholders also instead of diluting value as many people would think issuing shares does. Those MSRs are then sub-serviced by Ocwen, who still uses Altisource's technology.
Ocwen is also getting into foreword and reverse mortgage origination so they can have a constant stream of MSRs.
Basically, Ocwen and HLSS are going to acquire more MSRs and Ocwen will be servicing more mortgages. More mortgages serviced by Ocwen = more revenue for altisource.
All MSR transactions have currently been stopped by a New York financial regulator but we will get to that issue later.
Share Repurchases
Up until a few months ago the laws of Luxembourg restricted the amount of shares that Altisource could repurchase. Altisource recently created a foreign subsidiary that does nothing called "MidCo" to hold all other parts of the business so there would legally be no restrictions on share repurchases. Until Altisource did this, they were repurchasing the maximum amount of shares that Luxembourg would allow.
Here is Altisource's entity structure to bypass Luxembourg share repurchase laws http://i.imgur.com/J6LPEc0.jpg
The highlighted dark blue entity will be the entity repurchasing unlimited shares because MidCo, its parent company is not in Luxembourg. How smart is that.
Altisource currently authorized the repurchase of up to 2.9 million shares. 2.9 million shares is 13% of their market cap. They could easily repurchase that amount. Altisource also just finalized a loan with BAC for $200 million to repurchase shares so the share repurchases will really start to kick into high gear with the new liquidity and cheaper price. Up until the sharp share price drop, Altisource was repurchasing for the past several months around $110. That shows the board and management think the company is undervalued at $110 and now it is at $84 and nothing fundamentally changed about the company.
Insider Purchases
During the past 6 months, 3 insiders have purchased at $102, $103, $106, and $120. Between 20% and 43% above current market prices. Bill Erbey also owns 30% of Altisource and 13% of Ocwen. His views are directly in line with other shareholders.
Bill Erbey and his Capital Allocation
Bill Erbey is the Chairman of Ocwen, Altisource Portfolio Solutions, Altisource Asset Management Corporation, Altisource Residential, and Home Loan Servicing Solutions. Bill has done a great job of creating shareholder value for Ocwen and Altisource shareholders. Bill has also greatly benefited from this because of his stakes in thise companies. Before the sharp share price drop due to outside forces, Bill compounded Ocwen's stock at 30% per year since 2002 WITHOUT including the Altisource spinoff which compounded itself since 2009 at almost 75% a year. Altisource then spunoff Altisource Residential and Altisource Asset Management. Every spinoff is a value creating machine. At one point AAMC had compounded 430% in a year and a half, although it was due to a stretched valuation. Bill is dedicated to doing whatever it takes to create shareholder value. He relocated to the Virgin Islands just to save Ocwen some money on taxes.
I once read a story about Bill in his Virgin Islands home and his electric bill for the air conditioning. Keep in mind, Mr. Erbey is a multi billionaire. Bill got his electric bill and saw his costs had skyrocketed due to his air conditioning. Bill then sat there after that baking and sweating in the heat in his home so he could save a couple thousand on his electricity bill. He will do anything to save a dollar.
Hubzu
Hubzu is owned by Altisource. Hubzu is currently an online marketplace to buy and sell foreclosed homes. Like Zillow and Trulia but for foreclosed homes. Hubzu takes foreclosed homes from Ocwen and lists them on their website Hubzu.com. Hubzu is trying to get into the non-distressed house listing like other real estate websites like Zillow and Trulia. This will grow Hubzu at an even faster rate. Altisource states Hubzu gets about 1 million unique new visitors per month. When you buy Altisource you are also buying the jewel of Hubzu. Bill Erbey claims that Hubzu makes "as much money in one quarter as Zillow does in 4 quarters" Zillow has a market capitalization of $5 billion. Zillow's market capitalization is definitely stretched but a spinoff would create a lot of shareholder value even if the market gave Hubzu a fraction of Zillow's valuation.
Why is the company undervalued?
All this greatness in one company so why is it so undervalued? Remember how Altisource's earning were pretty much directly tied to how well Ocwen does? A New York State Financial Department regulator named Benjamin Lawsky halted a $2.7 bilion ($39 billion in UPB) Wells Fargo MSR transfer to Ocwen. This also halted all of the other MSR transactions between banks and servicers. Benjamin Lawsky is probing into Ocwen and other servicers. He states that he wants to make sure Ocwen and other servicers have the capacity to service loans efficiently because they are "growing too fast". The relationships these 5 companies share though is somewhat sketchy. They have a lot of the same board members and they all work with each other and make money off each other. Ocwen is the best servicer of them all though. They provide more loan modifications than anyone else and they have the lowest re default rate.
A slide from an investor presentation shows how they compare to others http://i.imgur.com/YkIKD2O.png
Even if Lawsky did find that some servicers do not have the capacity to service loans then Ocwen would be the last one in question because it is easy to see they are doing the best for their consumer compared to anyone other servicer.
Benjamin Lawsky is doing this for his own political reasons. He wants his name on the news. He wants people to see his name. Perhaps he wants to run for governor or something. Why would he schedule an interview with CNBC about the probe into the mortgage servicers right after it is announced. Why would he send a letter to Altisource and at the same time send it to the press, therefore ruining Altisource's reputation without giving them a chance to respond. He is also really into regulating bitcoin in New York which is just another vehicle to get his name in the news.
There are very recent updates with the regulatory pressure and basically the probing is narrowed down to an issue with force placed insurance and Altisource. Ben Lawsky could not find anything else. He sent this letter on Aug. 4th to Ocwen. So this is what the probe is narrowed down to.
http://www.dfs.ny.gov/about/press2014/pr140804-ocwen-letter.pdf
Basically, if a homeowner is struggling to make payments and can't pay their insurance, Ocwen has the right to force place insurance into their payments so the mortgage owner does not incur massive losses if a catastrophe happens. Ocwen has to outsource whoever force places the insurance and the issue that Ben Lawsky was worried about was why Altisource was appointed to find someone to force place that insurance, why Altisource received commission for basically doing nothing, and why Bill Erbey did not consult with any of the Ocwen board before making this decision to allow Altisource to find an insurer.
Altisource will probably get a one time fine settlement and they will go on doing business as usual. I believe this because an almost identical situation happened with Assurant and the New York State Financial Department and they settled for $14 million. There is also an interview on CNBC with someone who talks to the CEO of Ocwen and they are sure that Ocwen and Altisource will just settle with a deal with Lawsky and that will be the end of it.
Interview:
http://video.cnbc.com/gallery/?video=3000298804
Risks Benjamin Lawsky actually finds something else that Altisource was doing wrong. Bill Erbey Dies. He is in his 60s and overweight.
Conclusion
In conclusion Altisource is extremely cheap. Remember that quote about not knowing how much a man weighs but knowing he is fat? That is the case with Altisource. Altisource is definitely undervalued but there are a range of possibilities of the valuation with Hubzu, regulatory matters, growth, etc.
submitted by nomcow to valueinvestorsclub [link] [comments]

Altisource Portfolio Solutions S.A.

Altisource Portfolio Solutions S.A.
This is gonna be a long one.
"You don't have to know how much a man weighs to know he is fat."
Background:
Altisource Portfolio solutions "Altisource" was spun off from Ocwen Financial in 2009. Ocwen financial is a mortgage servicer. Of all the mortgage servicers, Ocwen is the most cost efficient, best run, and best capitalized. As a mortgage servicer, Ocwen acquires mortgage servicing rights (MSRs). Owners of MSRs collect a small fee from every mortgage payment it is servicing. Ocwen may service a mortgage by handling day to day tasks of servicing a loan, process payments, keep track of principal and interest paid, manages escrow accounts, initiate foreclosure, modify loan payments for subprime and delinquent loans and so on.
The reason Altisource was spun off from Ocwen in 2009 is because Ocwen's Chairman Bill Erbey knew the software division of Ocwen was not being valued properly within the business. Altisource is now incorporated in Luxembourg for tax reasons but it basically does everything a United States company would do. It files with the SEC, gets audited and does almost all business in the United States.
Thesis:
What does Altisource do?
From the 2013 10k-
"Altisource®, together with its subsidiaries, is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content. We leverage proprietary business process, vendor and electronic payment management software and behavioral science based analytics to improve outcomes for marketplace participants."
If you figured out what they did from reading that, congratulations, because I couldn't. I own the company and I still do not know all of the services they provide. What I do know is that more than half of Altisource's revenue is derived from Ocwen. Ocwen uses Altiosurce's state of the art servicing technology to service their loans. Altisource's technology allows Ocwen to be such a low-cost servicer. Altisource only provides their technology to Ocwen and no other servicers.
http://oraclefromomaha.files.wordpress.com/2014/04/1.png
In the above link, you can see the ways Altisource generates revenue. The main thing to know here is that Altisource generates a huge portion of their revenue from Ocwen. When Ocwen makes less modifications on loans, they use Altisource's services less so Altisource makes less money. When Ocwen modifies more loans then Altisource makes more money because Ocwen uses their serivices more. It provides a hedge against parts of their business that may struggle in a recession like any other business. During the natural economic cycle if there is a recession and Ocwen is modifying more loans because more homeowners cannot make payments then Altisource is making more money than they would during good economic times because Ocwen uses their services more. The more MSRs Ocwen acquires, the more Altisource makes.
Ocwen's growth (basically a quick long thesis on Ocwen)
When a bank loans money to an individual to buy a house, a mortgage is originated and an MSR is created. The bank then keeps the mortgage on its books or sells the mortgage to another entity. Perhaps Fannie or Freddie. But what happens to the MSR? The MSR is then sold to a servicer such as Nationstar, Walter Investment Management Corp, or Ocwen. The reason the banks or originator of the mortgage sell the MSR is because they cannot service it properly and/or they would lose money in the process of trying to service it. Because of Dodd Frank, banks are trying to get MSRs off their books even faster because they cannot service them efficiently as previously mentioned and because they will have to hold 250% more capital against the MSRs. All banks are moving away from owning MSRs and non-bank servicing is becoming a larger industry, and Ocwen is leading the way. Due to the high supply of MSRs that are wanting to be sold by banks the MSRs can currently be bought at a 20-30% yield. Ocwen can buy the most MSRs because they are the best capitalized and they use the most conservative balance sheet. Ocwen being the lowest cost operator provides them with a huge competitive advantage when bidding for MSRs as well. Ocwen will continue to lead the non-bank servicers in buying MSRs. Ocwen currently has $464 billion of unpaid principle balance of loans they are servicing and another trillion dollars of subprime (Ocwen specializes in subprime) UPB is expected to get into the hands of non bank servicers by 2018 (3-4 trillion in UPB of regular MSRs). Ocwen will get the most of that trillion dollars of UPB of any servicer because of their competitive advantages.
Another competitive advantage of Ocwen is their relationship Home Loan Servicing Solutions Ltd. HLSS was also created by Bill Erbey. HLSS provides the capital for Ocwen to service loans so Ocwen does not have to tie up their capital. In the future, HLSS will acquire more loans and allow Ocwen to sub-service them through a unique financing strategy. This strategy called the accretion model is a genius way to get capital for HLSS to afford a virtually unlimited amount of MSRs. HLSS pays a huge dividend and because of this dividend, HLSS trades above its tangible book value due to fixed income hungry investors who want a fat dividend. HLSS then issues more shares above tangible book value to then acquire more MSRs. Issuing shares above book value actually creates value for HLSS shareholders also instead of diluting value as many people would think issuing shares does. Those MSRs are then sub-serviced by Ocwen, who still uses Altisource's technology.
Ocwen is also getting into foreword and reverse mortgage origination so they can have a constant stream of MSRs.
Basically, Ocwen and HLSS are going to acquire more MSRs and Ocwen will be servicing more mortgages. More mortgages serviced by Ocwen = more revenue for altisource.
All MSR transactions have currently been stopped by a New York financial regulator but we will get to that issue later.
Share Repurchases
Up until a few months ago the laws of Luxembourg restricted the amount of shares that Altisource could repurchase. Altisource recently created a foreign subsidiary that does nothing called "MidCo" to hold all other parts of the business so there would legally be no restrictions on share repurchases. Until Altisource did this, they were repurchasing the maximum amount of shares that Luxembourg would allow.
Here is Altisource's entity structure to bypass Luxembourg share repurchase laws http://i.imgur.com/J6LPEc0.jpg
The highlighted dark blue entity will be the entity repurchasing unlimited shares because MidCo, its parent company is not in Luxembourg. How smart is that.
Altisource currently authorized the repurchase of up to 2.9 million shares. 2.9 million shares is 13% of their market cap. They could easily repurchase that amount. Altisource also just finalized a loan with BAC for $200 million to repurchase shares so the share repurchases will really start to kick into high gear with the new liquidity and cheaper price. Up until the sharp share price drop, Altisource was repurchasing for the past several months around $110. That shows the board and management think the company is undervalued at $110 and now it is at $84 and nothing fundamentally changed about the company.
Insider Purchases
During the past 6 months, 3 insiders have purchased at $102, $103, $106, and $120. Between 20% and 43% above current market prices. Bill Erbey also owns 30% of Altisource and 13% of Ocwen. His views are directly in line with other shareholders.
Bill Erbey and his Capital Allocation
Bill Erbey is the Chairman of Ocwen, Altisource Portfolio Solutions, Altisource Asset Management Corporation, Altisource Residential, and Home Loan Servicing Solutions. Bill has done a great job of creating shareholder value for Ocwen and Altisource shareholders. Bill has also greatly benefited from this because of his stakes in thise companies. Before the sharp share price drop due to outside forces, Bill compounded Ocwen's stock at 30% per year since 2002 WITHOUT including the Altisource spinoff which compounded itself since 2009 at almost 75% a year. Altisource then spunoff Altisource Residential and Altisource Asset Management. Every spinoff is a value creating machine. At one point AAMC had compounded 430% in a year and a half, although it was due to a stretched valuation. Bill is dedicated to doing whatever it takes to create shareholder value. He relocated to the Virgin Islands just to save Ocwen some money on taxes.
I once read a story about Bill in his Virgin Islands home and his electric bill for the air conditioning. Keep in mind, Mr. Erbey is a multi billionaire. Bill got his electric bill and saw his costs had skyrocketed due to his air conditioning. Bill then sat there after that baking and sweating in the heat in his home so he could save a couple thousand on his electricity bill. He will do anything to save a dollar.
Hubzu
Hubzu is owned by Altisource. Hubzu is currently an online marketplace to buy and sell foreclosed homes. Like Zillow and Trulia but for foreclosed homes. Hubzu takes foreclosed homes from Ocwen and lists them on their website Hubzu.com. Hubzu is trying to get into the non-distressed house listing like other real estate websites like Zillow and Trulia. This will grow Hubzu at an even faster rate. Altisource states Hubzu gets about 1 million unique new visitors per month. When you buy Altisource you are also buying the jewel of Hubzu. Bill Erbey claims that Hubzu makes "as much money in one quarter as Zillow does in 4 quarters" Zillow has a market capitalization of $5 billion. Zillow's market capitalization is definitely stretched but a spinoff would create a lot of shareholder value even if the market gave Hubzu a fraction of Zillow's valuation.
Why is the company undervalued?
All this greatness in one company so why is it so undervalued? Remember how Altisource's earning were pretty much directly tied to how well Ocwen does? A New York State Financial Department regulator named Benjamin Lawsky halted a $2.7 bilion ($39 billion in UPB) Wells Fargo MSR transfer to Ocwen. This also halted all of the other MSR transactions between banks and servicers. Benjamin Lawsky is probing into Ocwen and other servicers. He states that he wants to make sure Ocwen and other servicers have the capacity to service loans efficiently because they are "growing too fast". The relationships these 5 companies share though is somewhat sketchy. They have a lot of the same board members and they all work with each other and make money off each other. Ocwen is the best servicer of them all though. They provide more loan modifications than anyone else and they have the lowest re default rate.
A slide from an investor presentation shows how they compare to others http://i.imgur.com/YkIKD2O.png
Even if Lawsky did find that some servicers do not have the capacity to service loans then Ocwen would be the last one in question because it is easy to see they are doing the best for their consumer compared to anyone other servicer.
Benjamin Lawsky is doing this for his own political reasons. He wants his name on the news. He wants people to see his name. Perhaps he wants to run for governor or something. Why would he schedule an interview with CNBC about the probe into the mortgage servicers right after it is announced. Why would he send a letter to Altisource and at the same time send it to the press, therefore ruining Altisource's reputation without giving them a chance to respond. He is also really into regulating bitcoin in New York which is just another vehicle to get his name in the news.
There are very recent updates with the regulatory pressure and basically the probing is narrowed down to an issue with force placed insurance and Altisource. Ben Lawsky could not find anything else. He sent this letter on Aug. 4th to Ocwen. So this is what the probe is narrowed down to.
http://www.dfs.ny.gov/about/press2014/pr140804-ocwen-letter.pdf
Basically, if a homeowner is struggling to make payments and can't pay their insurance, Ocwen has the right to force place insurance into their payments so the mortgage owner does not incur massive losses if a catastrophe happens. Ocwen has to outsource whoever force places the insurance and the issue that Ben Lawsky was worried about was why Altisource was appointed to find someone to force place that insurance, why Altisource received commission for basically doing nothing, and why Bill Erbey did not consult with any of the Ocwen board before making this decision to allow Altisource to find an insurer.
Altisource will probably get a one time fine settlement and they will go on doing business as usual. I believe this because an almost identical situation happened with Assurant and the New York State Financial Department and they settled for $14 million. There is also an interview on CNBC with someone who talks to the CEO of Ocwen and they are sure that Ocwen and Altisource will just settle with a deal with Lawsky and that will be the end of it.
Interview:
http://video.cnbc.com/gallery/?video=3000298804
Risks Benjamin Lawsky actually finds something else that Altisource was doing wrong. Bill Erbey Dies. He is in his 60s and overweight.
Conclusion
In conclusion Altisource is extremely cheap. Remember that quote about not knowing how much a man weighs but knowing he is fat? That is the case with Altisource. Altisource is definitely undervalued but there are a range of possibilities of the valuation with Hubzu, regulatory matters, growth, etc.
submitted by nomcow to investing [link] [comments]

[Table] IAmA full-time Bitcoin day-trader, blogger, and explainer. I was a pro TCG player. Here until Midnight EST. AMA!

Verified? (This bot cannot verify AMAs just yet)
Date: 2014-02-20
Link to submission (Has self-text)
Questions Answers
Let's say someone was looking for a stay at home computer job, would you recommend doing what you do? Is it something you can hop into, or is it something a lot of time must be put into before considerable income comes? You handle risk and pressure well, and you don't let your emotions guide your decision-making. Professional Poker and TCG players often develop this skillset.
You have experience working with stocks, bonds, derivatives, foreign exchange, or other financial instruments. If you have a strong mathematical background, that would also likely fulfill this.
You can invest significant capital into trading while remaining financially secure if it all suddenly vanishes.
You are capable of constantly monitoring a situation, waking up in the middle of the night if an alarm goes off, etc. It requires serious dedication.
You are good at keeping up with news, understanding market psychology, and "feeling" shifts in attitude and perception among other market participants.
Of those, I'd be most cautious if you don't meet no. 3. Going bust is a real possibility--day-trading a volatile commodity is inherently extremely high-risk. Nos. 2 and 4 are the easiest to learn or force through routine. No. 1 requires a person who approaches things in an emotionally detached manner. No. 5 is something that comes with investing enough time.
Second question: I'm answering this after that big block of text because this answer will come off like a get-rich-quick scheme. Yes, you can hop into it very quickly, and you can start making very high profits very quickly. I put in a small initial investment to test the waters, and made 10% on it in a few days. If you have the right skillset, composure, and resources, yes. It is a potentially very lucrative and exciting stay-at-home job. It is not for everyone, though.
As much as it would be beneficial for me (being in the industry and all), to tell everyone it's easy and that it will help them provide for themselves I feel that people need to know the real risks that are involved. Regardless, that's all a little irrelevant. We're not playing the house, and we're not flipping coins. We're playing other investors, and we're making actual decisions. You keep saying things like "98% lose money" and "Go onto any FOREX forum, and you will see from the users posts that they pretty much all lose money" but you don't back it up. Cool, yeah, it's a zero-sum game with a rake: a little more than half of the players will lose. That's expected. They'll probably complain about it, too, huh?
Retrospect can have a very positive effect. Got any real account trading statements I can have a look at? Let's see how fast you can come up with excuses not to show me ;) I only have and need one: I have chosen not to disclose my personal valuation for privacy reasons. Same reason I've had all along. I instead publicly disclose my trades, as they happen, on my website. The posts are timestamped, and the ones that are the start of a position contain the price I entered at. Go check the posts, then go check the charts, then go check my archive. But feel free to continue to arbitrarily call my credibility into question--that makes your argument better!
What leverage do you use? In Australia the leverage is typically 100:1, perhaps that's why your not seeing how risky I deem it to be. First, our argument so far has had nothing to do with risk. Second, I told you I am leveraged 2.5:1, two posts ago. Third, you realize I'm trading Bitcoin, not ForEx, correct? And that no one in their right mind would offer 100:1 leverage on Bitcoin due to its volatility?
What's your last year's hourly salary? A year ago I was finishing up college and extricating myself from the TCG business I'd co-founded. I took very little in take-home pay over that period, but kept part ownership of the continuing business. Money isn't just about the number on your bank account--it's also about residual future income.
How many hours a week are you typically on a computer? On a computer, probably 50-55, if you add in time I spend on my phone, I'd say 65-70. Day trading takes constant watchfulness. I imagine it's like an easier version of taking care of a baby.
What are your favorite to sources of news besides waiting for it to get to the front/hot page of /Bitcoin when it's several hours old? I have an IFTTT for /BitcoinMarkets and /Bitcoin that notifies me early on about some posts.
What's the weirdest thing about your mom? She started a bookselling business online in her 50s and makes more money than me.
Or.
She's a little old lady who loves gadgets and technology.
What are your thoughts on Dogecoin and other bitcoin competitors? Do you think any have staying value? LTC.
DOGE.
NXT.
VTC.
Coins that offer something different or that have a strong community to them can be valuable prospects.
LTC is the first-mover scrypt coin - DOGE has the most non-techies interested in its success and is spreading quickly as a result - NXT is a cool generation two coin that has a lot of features BTC doesn't have - VTC is ASIC-resistant
Ok, let me spell it out to you. The retail forex market only makes up 5% of the total forex markets liquidity. The other 95% is from hedge funds and institutions. Therefore, 99% of the retail market losing their money is very possible, as that only makes up 4.95% of the whole market. Is it possible that 4.95% of the market generally loses? Yes. How is that infeasible? Nope. That's a false equivalence. It is possible that 4.95% of the market loses. It is not feasible, that, say, 99% of people with blue eyes lose. What, exactly, in empirical terms, is the difference between retail investors and hedge/institutions that causes this INCREDIBLE disparity? Would you care to respond to my above empirical argument that demonstrates that a zero-decision system is flipping a losing coin? Do you consider it feasible for 99% of people playing a 45-55 game to lose?
Are there options and/or futures markets for Bitcoin? Not really yet, but there will be more prominent ones soon. I hear about a new one pretty regularly, it seems, but nothing that seems truly legitimate has come out. I'm certainly excited for them, though.
Eventually, once Mr. Lawsky and co. get things sorted out, I'm certain we'll see a big-name investment bank start offering them.
From the time you started trading until today, what is your overall percentage return? In USD, my percentage return calculated from investment to current valuation is about 300% over a little more than 2 months.
In BTC, my percentage return calculated from investment to current valuation is about 425% over a little more than 2 months.
Using my average per-coin buy-in price, if I had just bought-and-held, I would have lost about 27% of my initial investment value.
Ben, i told you I'd be here and asking about Hearthstone first. If there's one class that needs a bit of tuning, up or down, which is it and why? I think Mage needs basic, class-level tuning. I'm not sure what needs to be done exactly, but I don't like what the Mage class power does to gameplay. I've thought some about how different it would be if it could only hit minions, and I'd want to know if Blizzard had tried that out. The Mage power is too versatile, and over the long-term I think it will prove to be problematic.
What's your favorite card? Lord Jaraxxus is my favorite card. He has a truly legendary feel to him when you play him, but your opponent can still win, even though he's very powerful.
So, where do you think we go from here? I'm currently short, but I don't expect to be so for a lot longer. I don't think we'll get past 550. I also don't expect this drop to hold on for a really long time.
I haven't seen a good, substantive rationale for what the MtGox situation really has to do with Bitcoin price. Yes, it looks bad, it certainly doesn't help with our legitimacy, but is it really worth the incredible price declines we continue to see? I don't think so. I think we are seeing these impressive declines because the price on MtGox (which is a reflection of trust in MtGox relative to Bitcoin price, not just Bitcoin price) has been declining heavily. I don't expect it to continue forever, especially not with things like the Winkdex and the accompanying ETF launching.
MtGox is basically dead to me, for now at least. The sooner everyone stops paying attention to it, the sooner we can all get back on track, which I, for one, will be quite happy about.
Do you think that it's a good thing for a game when the developers of that game discourage certain playing styles (e.g. mill decks or decks that try to win in unconventional manners) whether in hearthstone, MTG, or other TCGs? It can be. I don't want the developers metaphorically over my shoulder outlawing strategies, but I don't mind if the strategies that are "less fun" for your opponent (Draw/Go, Mill, or Hard Combo from MTG, for example) are also less powerful. Most players prefer a game where the best decks are also among the most fun, because it means that they are playing against fun decks more often. Clearly the 2-cost 3/3 will be played most often. If you fix this by making both 2-cost guys 2/2s or 3/3s, or by making one a 2/3 and the other a 3/2, then you've done something--but it's not that interesting. If you instead make the 2-cost 2/2 have text that says "While you control the 3-cost 3/3, this gets +2/+2" and you give the 3 cost 3/3 text that says "While you control the 2-cost 2/2, it has Taunt" you now have more complex cards that reward players for doing something other than just playing the best stand-alone card.
Which do you think is a better option to encourage diversity in TCGs; improving/buffing cards/decks that hardly see any play versus weakening/nerfing cards that are overwhelmingly played? This is obviously a very simplistic example, but I hope it makes the point. Games are more fun when you give players more relevant choices: buffing and nerfing cards tends not to do that as well as promoting synergies does.
Where/what is the actual money behind bitcoin? If it does exist. You might need to rephrase your question for me to understand what you're asking. If you're asking why a Bitcoin has value, the answer is the same as any other good: because someone is willing to pay it.
If you're asking why someone is willing to pay that amount, my answer would be utility.
I just got started on Bitfinex (using your referral link) and am a little intimidated. What types of trades would I recommend I try as a beginner? From there, just keep careful watch, and see what happens. Be neutral and objective toward your own hypothesis, just like in science. Don't be biased by your hopes, be focused on the reality.
So far I've only done a liquidity swap offer to try it since it seemed (nearly) risk free. Have you done any liquidity swap or is it too low in profit? If I'm not going to be able to check my computer for a day or two, or I'm uncertain of what's going to happen the next few days, I do use the liquidity swap function. It's actually very profitable, relative to traditional investments. And you're right, it is low-risk. I'm a fan. Good job selecting it if you were intimidated--that's a good place to start. As far as actually starting trading, do science. Start with a hypothesis. If you were up at 5 AM today when MtGox published their announcement, a good hypothesis might have been something like: "This announcement is going to be a blow to their credibility, and might panic the markets. We'll probably drop by some amount as a result." Invest based on it, figure out around what price you want to take profits, and at what price you'll cut your losses and get out. Stick to those determinations unless something substantive changes. The time you tell yourself you can afford to not close your position because it will "rebound" back to where you want is also the time you lose your shirt.
Is it true that you like Balloons? No, I <3 them.
Lol to the question about your mom... Ben, from my understanding Bitcoin is anonymous, does this mean that you can avoid taxation when receiving payment? Bitcoin isn't anonymous. That's actually a common misconception. It's actually pseudonymous, like Reddit. You end up with an online identity--a wallet address--that you use with Bitcoin.
If I walk up to you on a street corner and buy Bitcoin with cash, then I'm pretty much anonymous. If I buy it from a large institution like Coinbase or some other company, they will have records of the address my Bitcoin was bought for. As a result, you can trace them down, generally speaking.
As for avoiding taxation, that's a general no.
What do you think Bitcoin's biggest hurdle is and how do you think it can be overcome? Are there any misconceptions about Bitcoin that you think people have? The biggest hurdle for Bitcoin to overcome is governments. Governments have a variety of reasons not to want an alternative currency. We seem to have done pretty well on that front here in the US, but for other countries (China) that is not the case. Past that, the other major hurdle is something I consider an inevitability: consumer adoption. Business adoption has begun in earnest, consumer adoption hasn't. It will when enough businesses take Bitcoin to give it sufficient utility for the average customer.
What trading platform do you use to daytrade Bitcoin? What is the standard margin that Bitcoin brokers offer? what's the typical ask/bid spread? I primarily use Bitfinex.
Very few Bitcoin brokers currently offer leverage, Bitfinex offers 2.5:1. Over time, I anticipate it will become more like current Forex, where 10:1 or greater leverage is common.
It varies by exchange depending on their fees. Huobi charges 0% fees, so their spread is generally tiny. Some exchanges can be as wide as 1.5%. Typically, I see spreads between .5 and .7%.
Do you invest in any other type of cryptocurrency? if so, which is your favorite besides bitcoin? I currently have no other holdings, but I've held DOGE and LTC at points and am considering VTC and NXT. DOGE is probably my favorite, because if the community can keep this up for a little longer it will snowball into amaze.
Can you trade me a Jace? TMS WWK, TMS FTV, Beleren, MA, or AoT?
Beleren. M10, M11, LOR, JVC, JVCJPN, or Book Promo?
M10 and if not possible then M11. Sure.
I've been reading your blog for quite some time and especially like your summaries for recent events. Keep up the good work! Do you use strict stop-loss orders for your trades? When do you decide to close a trade? Especially in situations where you can basically see you profit/loss grow by the minute. When is enough? Do you have a longterm bitcoin investment you don't touch or do you use everything you have for trading? I do use relatively strict stop losses, but they're not stop loss orders. My conditions usually aren't just the price hitting a certain point, but instead it sustaining for a brief period, or hitting it with a certain volume, or with a certain amount of resistance to retreat. I don't want my stop loss to be triggered by some idiot who dumps 300 BTC and temporarily drops the price 15, but only ends up really dropping it 3. I am very strict with myself about this, though, generally speaking--if I can't trust promises I make to myself, what good am I?
Let's say for example you have a sum x dollar and a sum y bitcoin on your trading account. How much % of x or y do you risk at every trade? I've seen a formula for the max. amount of investment and read numerous times that traders shouldn't risk more than one or two percent of their "bankroll". Do you generally have dollar and btc or just one of them at any given time? 100% of funds in every trade, so long as all funds are easily moved into the position. Common exceptions are lack of liquidity and funds being on other exchanges. My reasoning for being all-in all-the-time is that it's a profit-maximizing move. It is also risk-maximizing. My risk tolerance is infinite; most people's isn't. Only ever one. Generally BTC if I'm long, dollar if I'm short. I prefer to double-dip, as otherwise it would be in contradiction to the 100% plan. I use everything I have for trading. Again, profit-maximization, infinite risk tolerance.
I decide a closing price when I'm near either my stop loss or my profit aim. I place a limit order or multiple limit orders wherever I need to. I avoid market orders whenever possible. Enough is when I hit my goals or my loss tolerance. I decide these at the start, but I frequently re-evaluate them as news and market conditions develop.
What is a typical bid/ask spread for Bitcoin? It depends what exchange you're looking at, but generally .5-.7%.
What's the best way to popularize Bitcoin among the masses? Add your own but would love your thoughts on: -microtransactions developing nations -gift economy (tipping) I would suggest just running around shouting "You get to be your own bank" is probably the best way.
In all seriousness, though--we don't need to try. It's going to happen on its own from now on, as the news media slowly starts to pick up the story. People will start appearing on TV talking about it with more and more frequency. Things like the Dogelympic teams are great PR and help boost it up, as well, of course, but in general it's just going to follow the adoption curve of every other technology.
If it picks up in a few developing nations that have stable internet, it will be a massive revolution for them. Self-banking can do a huge amount of good for an economy like theirs. We might see reports on that. If a major newspaper decides to run a permanent paywall like what the Sun-Times tested recently, that could be big as well. The slow PR from tipping on Reddit is another way, to be honest. Every bit helps, but the cryptocurrency community is now large enough that we're going to do a significant amount of organic, word-of-mouth style growth.
Do you think that a magic game could beat harthstone? If they do a good job, absolutely. They have to focus on the right things. It needs to be mobile-available, easy to pick up and play, and fun.
Is there a good crypto currency to get in on now, before it explodes like bitcoin did? There are plenty of options. Check out coinmarketcap.com. Fair warning, there are plenty of horrible things there--treat it kind of like penny stocks. I like BTC, LTC, DOGE, NXT, and VTC.
Also, why is it such a pain in the ass to buy them with actual money? Like you have to have bitcoins to buy other crypto currency. It's such a pain to buy them with USD because no one has made a good system to do it on, like Coinbase. If you think there's a desire, go do it!
Well the way I look at it, is how the hell else would you be able to buy them? Not everyone has piles of bitcoins lying around and I really don't want to spend $600+ on a single bitcoin just to buy some other currencies. Ah, I see the problem! You can buy fractions of a Bitcoin using Coinbase--I think .01BTC (~$6) is their minimum.
The March 2013 appreciation was from American and European investors and November 2013 was mainly from Chinese investors. Which group of people do you think will be the next to buy (I hate using the word invest when talking about bitcoin) bitcoin for investment purposes? American institutional and hobby investors. That is, Wall Street and people who pay attention to Wall Street.
Which do you think will be a better long term (~5 years) investment, Bitcoins, Litecoins, Dogecoins, Fetch Lands, Shock Lands, or Original Dual Lands? Does it change for ~10 years? Either Bitcoin or Fetch lands for 5 years. For 10 years, Bitcoin. I'd be worried about the 10-year view for paper MTG.
Ive been mining Bitcoins for years now, i have a good sum im my wallet but i never plan to use them. Does this make me a bad person? Approximately yes.
Ben, I should've simultaneously copied and pasted all of my questions from the Spreecast over to here but here are a few... It seems like the conspiracy crowd has really latched onto the idea of Bitcoin as being a discreet form of currency. If Bitcoin is backed up by the internet why would people choose having a currency that's being tracked over say cash, gold, different commodities? Having a currency be tracked has negatives and positives, but it's overwhelmingly positive for the average consumer. Because it's tracked, you don't need to pay someone to move your money for you. There also are no chargebacks, which means merchants aren't getting scammed and passing those costs onto consumers. Theft costs everyone money. It's also very fast--transactions confirm in just 10 minutes, regardless of size or where it's going. Transferring dollars from here to China is very difficult--transferring Bitcoin? Just as easy as from anywhere else to anywhere.
My job is a mix of voodoo, intuition, science, and news. In USD, my percentage return calculated from investment to current valuation is about 300% over a little more than 2 months.
No, just gambling. In BTC, my percentage return calculated from investment to current valuation is about 425% over a little more than 2 months.
Anyway, how have the profits been from start to finish compared to the market? Using my average per-coin buy-in price, if I had just bought-and-held, I would have lost about 27% of my initial investment value.
Are you willing to disclose how much you have in your trading portfolio/what kind of profit you turn both % and $ wise? In USD, my percentage return calculated from investment to current valuation is about 300% over a little more than 2 months.
In BTC, my percentage return calculated from investment to current valuation is about 425% over a little more than 2 months.
Using my average per-coin buy-in price, if I had just bought-and-held, I would have lost about 27% of my initial investment value.
What would you say is the easiest method of shorting bitcoin or any other coin? For shorting Bitcoin or Litecoin, check here.
For other coins, there isn't really a good way yet, to the best of my knowledge. A few exchanges have plans to add short-selling, but Bitfinex is really the only one I know of that has.
What did you have for breakfast today. Didn't breakfast, was delicious.
Hey Ben, I know next to nothing about Bitcoin. I went to /bitcoin after seeing this AMA on your FB, and I noticed that everyone is going apeshit over "Gox". I have no idea what that means or why everyone is so sad/angry/suicidal. MtGox (which originally stood for Magic the Gathering Online eXchange) was the first prominent Bitcoin exchange. They've been going through some rather rough times lately, some of which I was an early cataloguer of here. In short, everyone is freaking out because the exchange may be insolvent. It's not really a big deal to Bitcoin as a whole, but it's certainly an obvious blow to credibility. In my view, people are primarily upset because MtGox has been a part of Bitcoin for a very long time, and it can be hard to let go of what we're used to. I expect that they will either fix the issues or will go out of business officially very soon.
Please explain what happened.
Tell me every artist in your iTunes. Daft Punk, detektivbyrån, Kid Cudi, Matisyahu, The White Panda.
Spotify for life, yo.
Follow up question, what % are you in BTC vs Fiat and when you are on the losing side of a trade do you find your self dumping in more to get right or do you pull the cord Unless my positions are on different exchanges or in different coins, they're all always 100% of what I'll put into that trade at entrance and exit. As a result, I end up with a binary choice: stay or reduce/close. I very rarely reduce position size, nearly always preferring to just end the position instead.
Last updated: 2014-02-25 04:57 UTC
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Bitcoin could be viable money alternative in 5 years -Lawsky The Bitcoin Group #18 (Live) - Mt. Gox (part III ... Ripple Expands In The UAE, Ethereum Bonds And Lawsky Joins Ripple - 148 Bitcoin buff confronts infamous regulator STOCK TO FLOW RATIO NA BITCOIN SV? INDYWIDUALISTA - NIE TWÓRZMY RELIGII? WASZE KOMENTARZE?

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Bitcoin could be viable money alternative in 5 years -Lawsky

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