Some Coinbase users closing accounts in protest at acquisition

The hash tag #deletecoinbase is ringing out across Twitter as some bitcoin users are closing their accounts on the exchange as a protest against Coinbase's acquisition of Neutrino.

The issue

The issue is not to do with Neutrino per se but Neutrino executives: CTO Alberto Ornaghi, CEO Ginacarlo Russo, and CRO Marco Valleri. The three previously spearheaded the startup Hacking Team. The Hacking Team sold spyware to several governments that are well known for human rights abuses such as Saudi Arabia and Ethiopia. In Saudi Arabia this included working with the enforcement group accused in the murder of Jamal Khashoggi. The Hacking Team website in Italy claims: "We believe that fighting crime should be easy: we provide effective, easy-to-use offensive technology to the worldwide law enforcement and intelligence communities."

A recent Vice article notes: "Normally, such an acquisition wouldn’t make many waves, but Neutrino isn’t your average startup. The company was founded by three former employees of Hacking Team, a controversial Italian surveillance vendor that was caught several times selling spyware to governments with dubious human rights records, such as Ethiopia, Saudi Arabia, and Sudan."

The founders of Neutrino, however, are not part of that industry anymore. Some people think that Coinbase shouldn’t forget their past. But for Coinbase, what matters is the technology they developed since leaving the spyware industry.

Not clear how widespread account closure is

In a Google search of the #deletecoinbase hash tag produced above 500 results. Not all of them are unique of course and some may have been before the acquisition was announced. It is likely a small percentage of the 13 million Coinbase accounts.

A recent Coindesk article reports several tweets on the issue and also notes: Meltem Demirors, founder of Shiny Pony Ventures and chief strategy officer at the asset manager CoinShares, told CoinDesk she will no longer use Coinbase after this incident. “There are so many other services out there that do [blockchain analysis] that don’t have these reputational issues, and frankly the ethical issues that some of these Neutrino founders have,” Demirors said. “This example, to me, clashes with all the messages [Coinbase] are trying to put out there about creating an open financial system, a more inclusive financial system.”“This acquisition of Neutrino supports the idea of using bitcoin for surveillance capitalism.”

Coinbase had declined to comment on the number of users leaving the platform at the time of the publication of the above referenced article. Coinbase has headquarters in San Francisco California.

Previously published in Digital Journal

Coinbase files for a patent for making secure bitcoin payments

The cryptocurrency exchange Coinbase has recently filed for a patent. The patent is for a new system that would enable online users to make their bitcoin payments more securely.

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Payments could be made directly from users" bitcoin wallets..

The patent application refers to the issue of users being required to compromise on the security of their own private keys: “Existing systems do not provide a solution for maintaining security over private keys while still allowing the users to checkout on a merchant page and making payments using their wallets.”

The new system will involve a "key ceremony" which encrypts the users private passphrases into a masterkey during the checkout process. This greatly reduces the risk of keys being stolen during the process. The masterkey encrypts private keys and transactions signing. Once used the key is then deleted.

Processes can be frozen when hacking or identity theft suspected

In the event that a user reports they are being hacked or their identity assumed the system allows administrators to freeze all processes. The patent application notes: “At any point in time after the master key is loaded, the system can be frozen. The system can be unfrozen after it has been frozen using keys from the key ceremony. The checkout process can be carried out when the system is frozen and when the system is unfrozen. The payment process can only be carried out when the system is unfrozen.”

Other websites and services can use payment system through an API

Wikipedia describes an API or application programming interface as follows: "In computer programming, an application programming interface (API) is a set of subroutine definitions, communication protocols, and tools for building software. In general terms, it is a set of clearly defined methods of communication between various components. A good API makes it easier to develop a computer program by providing all the building blocks, which are then put together by the programmer. An API may be for a web-based system, operating system, database system, computer hardware, or software library. An API specification can take many forms, but often includes specifications for routines, data structures, object classes, variables, or remote calls. POSIX, Windows API and ASPI are examples of different forms of APIs. Documentation for the API is usually provided to facilitate usage and implementation."

The Coinbase API will enable the new bitcoin system to be used by other websites and services.The API has two parts. One part will be stored on the Coinbase web service and the other on the user/host server providing an extra security measure. Transactions will be confirmed only if the API key received from the web server matches the key stored by the service. A system such as this that allows secure bitcoin payments through multiple websites could be widely adopted in the cryptocurrency space.

Coinbase's views on patents

Coinbase has applied for numerous patents related to bitcoin in the past. Nine were filed back in 2015 alone. Critics have accused Coinbase of attempting to create a monopoly in bitcoin services. CEO Brian Armstrong has replied to his critics in a blog post: "I’d personally prefer to see a world where software patents don’t exist (I think they hurt innovation, and waste a lot of time/money), but since they do exist, we have to take them seriously. Patents in business are a form of warfare, and it’s a dangerous world out there.

Our ultimate goal in obtaining bitcoin related patents is to keep them out of the hands of bad people, use them defensively to protect Coinbase from patent trolls, and help ensure the bitcoin ecosystem continues to grow."

Read more: http://www.digitaljournal.com/tech-and-science/technology/coinbase-files-for-patent-on-new-payment-bitcoin-payment-system/article/529761#ixzz5RZi3BQbW

Coinbase will store digital assets for establishment institutions

Coinbase, the cryptocurrency exchange, is reaching out to help Wall Street type institutional giants become more comfortable using its platform to invest in cryptocurrencies.

Coinbase's custody service

Coinbase is reaching out to establishment institutions such as sovereign wealth funds, pension plans, or asset managers by providing what it calls Coinbase Custody which will store digital assets for them.

The move will provide the exchange a new source of revenue. However, it is also an attempt to win over Wall Street and encourage establishment firms to invest in the cryptocurrency area. Institutional investors are used to having services such as keeping safe custody of assets.

Adam White, a Coinbase vice-president leads the new effort. He points out that the surge of interest in cryptocurrencies has been led by retail investors not large major financial institutions. As a result the type of services such institutions require have not been made available for the most part.

White said: “A bunch of institutions looked up and said, ‘We can’t ignore this anymore. We don’t understand it, but we’re going to have to.’” Coinbase expects the custody service will provide an incentive for major institutions to invest in the crypto market. Large financial institutions are used to such a service to keep their assets safe. Custodians may sometimes also execute trades on behalf of their clients.

Custody Service to be made available to a few firms at first

As the appended video featuring the CEO of Coinbase explains the service is only for institutional investors as it requires considerable investment to make use of the custody service.

The service will be made available to a few prominent cryptocurrency companies such as Boost VC and Scalar Capital. Boost VC is st VC is a​ startup accelerator for blockchain, virtual reality​, and other ​technology companies. It is well known as a business incubator​ for Bitcoin​ companies. Scalar Capital is an investment management company that specializes in crypto assets.

Some institutions already use Coinbase for trades. The company says it has stored almost $20 billion in crypto assets. However, so far the success of the exchange is mainly due to individuals who believe in the currencies rather than on large established institutions.

Traditional financial institution often wary of crypto assets

Many in the finance industry have negative views of the cryptocurrency market with some executives roundly condemning it and investors such as Warren Buffet are also very critical. The market has been extremely volatile and attractive mostly to those who are of a speculative nature rather than investors. Many cryptocurrency activists also saw the whole enterprise as a means of in effect avoiding or even replacing the existing financial system.

However, some coins such as Ripple have tried to make applications of the technology which will be useful to financial institutions and some major investment banks are now beginning to trade in bitcoin-related deals. Two large Chicago exchanges trade in bitcoin futures.

Coinbase

Coinbase is a large digital currency exchange with headquarters in San Francisco Californian. The act as brokers for bitcoin, bitcoin case, etherium, and litecoin with fiat currencies. They operate in around 32 countries. They provide bitcoin transactions and storage in 190 countries around the world.

Coinbase is also introducing a premium service called Coinbase Prime that will provide additional information for clients such as a sovereign wealth fund. Coinbase is also setting up an internal team to deal with these big spenders.

Previously published in Digital Journal

Coinbase closes account of Wikileaks Shop online store

The Wikileaks Shop an onlne store selling merchandise for the whistleblower site has reportedly has its account closed by Coinbase the San Francisco-based cryptocoin exchange for violation of its Terms of Service.

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Wikileaks Shop

The Wikileaks Shop sells shirts, phone cases, coffee mugs, posters, and other paraphernalia. Those making purchases can pay with a credit card or use a variety of cryptocurrencies. As Coinbase has closed the account the Shop will no longer be able to collect cryptocurrency payments and convert them into US dollars using Coinbase's service.

Wikileaks Shop's tweet

A tweet from the Wikileaks Shop made the announcement.

A Coinbase spokesperson refused to say anything to the Verge about the closing as they do not comment on individual accounts. Coinbase's terms of service allows it to terminate accounts at its discretion. Termination notices say it is regulated under the U.S. Treasury Crimes Enforcement Network which is designed to fight money laundering.

A Fortune article claims that the Coinbase notice appears to cite US government financial regulations as one reason for the suspension of the account. However, it did not say how Wikileaks Shop violated those rules.

As the tweet noted, people can still donate through cryptocurrencies but not through the Coinbase account.

Wikileaks and supporters angered by move

Wikileaks and its supporters called for a boycott of Coinbase. There are over 10 million users of the exchange, so the boycott may not have a huge effect.

Andreas Antonopolous, author of the books Mastering Bitcoin and Internet of Money, said on Twitter that the move was ironic as Paypal, Visa and Mastercard cut off donations to Wikileaks in 2010. However, there are numerous other exchanges that the Shop can use and the closure may have little effect.Court rulings eventually forced the big finance companies to resume processing donations.

The appended video has a screen shot of the notice that WIkileaks Shop received, that claims that the Shop has violated its terms of service but does not really explain how.

Previously published in Digital Journal

US-based Coinbase exchange to launch its own cryptocurrency index fund

Coinbase the large U.S.-based digital currency exchange announced that they will be launching a passively managed cryptocurrency index fund.

Coinbase

Coinbase is headquartered in San Francisco California. The firm brokers exchanges of Bitcoin, Bitcoin Cash, Ethereum and Litecoin with fiat currencies in about 32 countries. It offers bitcoin transactions and storage in 190 different countries.

Coinbase's two core functions are as a Global Digital Asset Exchange (GDAX) that trades a variety of digital assets on a professional asset trading program and a retail broker of Bitcoin, Ethereum, Litecoin and Bitcoin Cash for fiat currencies as mentioned. It also has an Application Program Interface (API) for developers to build applications and accept payments in digital currencies.

Coinbase's cryptocurrency index fund

The fund will require a $10,000 dollar minimum investment and charge a two percent annual management fee. However, there will be no performance fee. Although this is rare in traditional investment funds, it is becoming the norm for crypto passive investment vehicles.

The Index Fund is the first investment vehicle as part of Coinbase's new asset management division. Cryptocoins in the fund will consist of all the currencies on the company's GDAX. At launch it is to contain: 62 percent Bitcoin, 27 percent Ethereum, seven percent Bitcoin Cash and just four percent Litecoin. The fund resembles traditional index funds that mimic the performance of indices such as the S & P or even the entire stock market.

Whenever a new asset is added the fund will be rebalanced. Ripple is rumoured to be added soon.

In the future, Coinbase plans to offer investment vehicles that are not listed to those that are listed on GDAX. However, for now the company feels that keeping to the coins listed will increase the liquidity of the fund.

Reuben Bramanathan, a product manager at Coinbase said: “Index funds have changed the way that many people think about investing. By providing diversified exposure to a broad range of assets, index funds enable investors to track the performance of an entire asset class, rather than having to select individual assets.”

Investing in the fund

Investors can use either U.S. dollars or any of the cryptocoins in the fund to invest in the fund but with the $10,000 minimum. Investors have to be accredited and U.S.-based. Coinbase hopes to removes these restrictions in the future.

New investments can be made once a month. Redemptions can be made quarterly. There is no lockup period.

Funds will be secure

The funds will be held in cold storage by Coinbase. The exchange has considerable experience in keeping high-value assets and even has a product called Coinbase Custody which offers custody services for investment funds.

The fund is expected to launch in a few months but accredited investors are able to sign up now.

Coinbase already has competitors.

Bitwise Investments has the HOLD 10 index sanctioned by the Securities Exchange Commission. Others are allowing investors to create their own basket of custom-weighted crypto assets. However, Coinbase may have an advantage in that it is already a well-established name in the field.

Previously published in Digital Journal

Coinbase hiring a chief financial officer

Coinbase is hiring a chief financial officer (CFO). This would be a significant move in the company's growth plans but also raises questions about whether the company plans to launch an initial public offering (IPO).

Coinbase

Coinbase is a US cryptocurrency exchange founded back in 2011 by Brian Armstrong and Fred Ehrsan. It has two core products. One is a Global Digital Asset Exchange (GDAX) that trades a variety of digital assets. Coinbase is reported to have had revenue of $1 billion in 2017. The company was valued at $1.6 billion last August.

Hiring a CFO is top priority for Coinbase

Often adding a CFO to a company is looked at as a sign that the company is contemplating an IPO. However, with Coinbase it may simply be that it needs a CFO to properly manage its complicated business model.

Coinbase is already in late-stage talks with several candidates. Tim Laehy a veteran CFO had already joined the company last October but just as an interim CFO. He is not expected to remain.

Coinbase has already hired vice presidents to deal with communications and corporate development. The two will help Coinbase manage its massive growth as interest in cryptocurrencies has soared.

Although Coinbase has refused to comment. Brian Armstrong the CEO said last year that it typically takes him 6 to 12 months to choose the right person.

Investors clamoring for shares

Investors have been pestering the company to allow them to buy shares even though Coinbase told them to desist. The company has been evaluated by investors seeking shares at from as low as $2 billion to as high as $8 billion showing that the market is volatile, unclear, and also not liquid.

Company ponders whether to launch a fund-raising secondary transaction

The company is considering whether to launch a new financing secondary transaction though the company is not wanting for money. The purpose would be mostly intended to allow existing investors who want to, to cash out although the transaction would also include a small primary element to raise money.

The pressure from investors might be alleviated through a sanctioned round of secondary trading. Such trading is not officially allowed. Investors in recent weeks have been negotiating with the company whether to sell or buy shares. This trading could weaken the pressure for an IPO and allow investors to have a piece of the action.

It remains to be seen if Coinbase will offer an IPO this year.

New CFO will have many problems to deal with

As reported in a recent Digital Journal article Coinbase has had many problems with Visa and the banks as customers have experienced duplicate charges, reversals, and extra fees. Visa has admitted it is at fault but Coinbase gave an incorrect explanation of what happened. The appended video discusses some issues. If Coinbase's problems are not solved it will lose customers to other exchanges.

Previously published in Digital Journal

Coinbase customers having problems associated with Visa and banks

The credit card issuer Visa has been the cause of Coinbase's multiple problems with its users' cryptocoin accounts that have included reversed transactions, unauthorized withdrawals and unexplained fees.

Coinbase

Coinbase is a cryptocurrency exchange with headquarters in San Francisco, California. So far, they broker Bitcoin, Bitcoin Cash, Etherium, Litecoin and now perhaps Ripple. Coinbase operates in about 32 countries and offers bitcoin transactions and storage in 190 countries.

Coinbase issues an incorrect explanation of what happened

Last week, Coinbase said that a change in the way that credit card companies classified digital transactions was responsible for the glitches and that it had identified a solution to the problem.

Later on Friday, Coinbase claimed that it was VIsa that actually reversed many weeks' worth of transactions under what it called a new merchant category code or MCC. This code is used to classify businesses by the type of service provided and it helps determine how the Internal Revenue Service (IRS) deals with taxes for the service.

Coinbase claimed that Visa had switched to an MCC “that allows large banks and card issuers to charge consumers additional fees,” with the result that there were charges that looked erroneous.

Coinbase said that it was actively working with major card networks to devise a new MCC for purchase of digital coins that hopefully would not involve additional fees.

Visa denies any MCC changes

Visa issued a statement saying: “Visa policies with respect to the correct coding of transactions have not changed. Cryptocurrency transactions must be properly coded so that issuers can rely on accurate and consistent information when making authorization decisions. We recently sent a communication to clients to explain the existing requirements, but there were no changes or reclassifications. It is inaccurate to say Visa made recent changes to the MCC code.”

Later Visa issued another joint statement with the payments processor Worldpay that handles the transactions with Coinbase saying: “This issue was not caused by Coinbase.” It is not clear what the dispute is between Coinbase and Visa but Visa admits it is the cause not Coinbase. The statement noted that some clients may have had duplicate transactions posted to their accounts when there should have been only one.

The statement goes on to note that Worldpay and Coinbase were working with Visa and the banks to make sure the duplicate transactions were reversed and appropriate credits posted to accounts. It claimed all reversals had been issued and should appear within client's credit and debit card accounts within the next few days. The statement advises those who continue to have problems and issues related to card fees or charges to contact their card issuing bank.

SItuation still unclear

Coinbase customers complained that there funds were still being tied up by both card issuers and banks. Visa claims it is refunding, yet insists that the onus is on parties who had their accounts drained to pursue the appropriate party and determine what to do.

Neither Coinbase, Visa or some banks come out of this without some blame and it seems they are not working well together to handle cryptocurrency trading.

Examples of problems

One user claimed on Reddit to have bought Bitcoin, Ether, and Litecoin on Coinbase worth $300. A few days later the user found that his account was charged with five transactions of $300 worth $1,500 which together with fees emptied his account. The user exclaimed: “My bank account went from very comfortable to negatives balance, not to mention extra $5 charges, and overdraft fees. As a result my rent check bounced, and my bank went further into negative for a NSF charge for $25. My landlord is not a nice person and is on my CASE and I have nothing to offer him. I am FREAKING OUT.”

Pete Kingree a Coinbase client from Virgina said there were unauthorized additions to a Coinbase trade of $931 dollars plus $7.45 bank fees. He said he was writing the Coinbase CEO and the Governor of Virginia. Numerous other complaints are listed in this Verge article.

Previously published in Digital Journal

Ripple rose on talk of its being listed on Coinbase

(February 17)Ripple did very well in 2017 making far greater gains than the top two cryptocoins Ethereum and Bitcoin. The gains extended into early January.

For a brief period Ripple was even the second largest cryptocoin by market cap after bitcoin as reported in a Digital Journal article.

Ripple's development

Ripple was launched in 2012 and was designed specifically to carry out interbank settlement and payments. Ripple is one of several cryptocoins that looks to be adopted by mainstream financial institutions rather than replacing them or even regarding them as the enemy of cryptocoins.

The developers of Ripple hoped that the present volatility of the cryptocurrency market would be lessened through the use of Ripple and its payment system.

The company claims to have more than 100 banks using its RippleNet platform. A group of Japanese banks is also testing the system. Also involved are RBC, Bank of America and UBS.

Positive news for Ripple

Originally the Ripple team developed 99 billion Ripple coins or XRP. The group raised about $38 billion from global sales. However in May last year the team moved $55 billion XRP into an escrow account, and then released one billion onto the general market. Recent gains show growing confidence in its development.

Talk continues surrounding Coinbase, a widely used exchange operating in over 32 countries, and whether it will announce Ripple as a trading option according to this article. This will no doubt stimulate interest and activity in Ripple trading.

Price of Ripple affordable but variable

There is considerable discussion of Ripple as it is added to the Coinbase roster. When talk of its listing first started the price of Ripple rose to about $2.50. In early January this year Ripple hit levels of $3 to $3.50. A recent article claims that, due to the move increasing the sense of confidence in the design and makeup of Ripple, its price is expected to be about $5 dollars.

The price prediction may be rather optimistic as the price as I write this is just $1.18 and that is up just over four percent on the day.

In January, Ripple even hit levels of $3 to $3.50. However, the price of Ripple (XRP) when it does arrive on Coinbase is expected by some to be around $5, thanks to the inflating sense of confidence around its design and makeup.

I have not found any official announcement that Ripple will be listed on Coinbase but it certainly is high up on the shortlist to be listed and the appended video also accepts that it will be listed. There were earlier rumours in January that it would be listed but it was not bitcoin cash was added instead. One worry about Ripple is that the founders and the company still control about 50 percent of the coins.

Ripple website

On its website Ripple describes itself and its mission:Ripple connects banks, payment providers, digital asset exchanges and corporates via RippleNet to provide one frictionless experience to send money globally. Built on the most advanced blockchain technology that is scalable, secure and interoperates different networks. Provides optional access to the world’s fastest and most scalable digital asset for payments, XRP.

Published previously in Digital Journal

Bitcoin takes huge drop below $11,000 before recovering

(December 22)At 11 a.m. Eastern Time today, December 22, Coinbase announced that all buys and sells had been temporarily disabled. This is the second time in two days that the exchange temporarily disabled buys and sells.

At just before 6 PM Thursday Coinbase temporarily disabled buying and selling but was able to resolve the issue within 15 minutes.

Bitcoin's big drop

The service interruption today came as the price of bitcoin fell below $11,000 briefly. It is down 44 percent from its record high last Sunday.

Last Sunday bitcoin established a new record high more than $19,800. On Thursday, it traded at around $15,500 for much of the day but then in the afternoon a selloff developed that gathered steam over the night. Friday morning it set a low of $10,400 but by the afternoon recovererd some to $13,100 Friday afternoon.

In just five days bitcoin lost 47 percent of its value from its high about $9,400. In just one hour Friday morning bitcoin lost a thousand dollars.

Alex Sunnarborg, a founding partner of the cryptofund Tetras Capital said in an email:"I would say the drop in bitcoin is a result of the massive new inflows of retail investors who are relatively 'weak hands' and more prone to sell at the sight of falling prices than the capital that has been in the system for a while that has a longer term outlook."

It could be that given the high prices some big players decided to selloff at a huge profit and then buy back in at a price thousands of dollars less than they paid. Perhaps there are some short sellers as well.

Bitcoin futures also declined significantly

There could have been short selling on the futures exchanges as well as investors bet on a drop in price.

Tne new CME bitcoin January futures managed to reach "limit down" as they fell nearly 20 percent to $12,265 in early morning trading Friday. They recovered slightly to $12,750 later but trading was still going on.

The earlier futures contracts offered by CBOE on December 10 also plunged down to $12,050 as there too the price volatility caused a brief halt in trading.

Bitcoin offshoot and competitor bitcoin cash also crashes

Bitcoin cash had just recently been added to the roster of the Coinbase exchange. The listing caused a huge rise in the price of bitcoin cash and a drop in the price of bitcoin as discussed in a Digital Journal article at the time.

After reaching a new high over $4,000 just two days ago the price fell back a full 40 percent to $1,873 on Friday but had recovered to trade near $2,500 by the early afternoon.

While these drops seem steep, no doubt some analysts will see them as a needed correction and perhaps even a sign that there will be a period of consolidation before any further rise. It may be that some newcomers are now panic selling trying to save some of their investment.

Bitcoin is still well up over its price at the beginning of the year, more than 1,300 percent. Bitcoin cash is also up 380 percent from when it was listed on August 1. This probably does not provide much solace for those who jumped in recently and bought the coins near their peak prices.

Jamie Lee founder of litecoin sells off his holdings

Many have warned of the risk of investing in crypto currencies. Jamie Lee founder of litecoin warned that anyone buying litecoin should do so only if they were ready to lose all their money. Lee just last Wednesday sold off all his litecoin. He might have been ready to lose all his money but I imagine he collected a tidy sum after selling his coin.

Litecoin is a competitor of bitcoin and had been rising in price lately. Just shortly before Lee sold out it had risen 8,000 percent this year.

Sell off of bitcoin was inevitable

That there was a large drop in bitcoin's price is hardly surprising. What is surprising is that it has come so late a many investors continued to hold their coin even after having made huge profits.

Benjamin Roberts, CEO of Citizen Hex a start-up based on the secoond largest crypto coin etherium (ether) said: "Investors were sitting on such significant gains that a correction was inevitable. These markets are driven in the short term by word-of-mouth adoption and profit-taking, and in the long term by the increasing utility of blockchain tech."

Problems at Coinbase

Coinbase is the leading US exchange and platform for trading major cryptocurrencies. Unitl last Tuesday it traded only three major currrencies, bitcoin the largest, etherium second largest and litecoin.

For months Coinbase had been saying that it would start allowing for withdrawing of the bitcoin offshoot bitcoin cash as of January 1, 2018. Instead it suddenly announced it would launch trading in bitcoin cash with full support.

Some think that there may have been insider trading involved before the launch and as a recent Digital Journal article reports Coinbase is carrying out an investigation.

With a huge influx of new customers, it is hardly surprising that social media sites Reddit and Twitter report that some customers are having trouble completing transactions smoothly. The company admitted Friday that high transaction volumes were causing delays in wire transfers resulting in wire deposits being delayed up to 5 business days.

South Korean and Japanese investment in cryptocurrencies slowing.

Asian investors especially from South Korea and Japan have helped inflate cryptocurrecy prices. However, China has clamped down on the market banning initial coin offerings (ICOs) and also closing cryptocurrency exchanges at least temporarily. The result has been that South Korea and Japan have dominated trading volumes and often prices are higher than on Coinbase.

One lesser South Korean exchange Youbit was hacked recently for a second time and lost 17 percent of its assets. It subsequently filed for bankruptcy. There is an investigation to see if North Korea was involved. It has been blamed for other hacks.

The Governor of the Bank of Japan said at a recent media conference that the recent surge in bitcoin prices was abnormal

However, Joe DiPasquale founder of the cryptofund BitBull Capital said: "These don't concern me for the long-term because we've seen more and greater issues in the past. Right now people are biding their time until the bottom is felt. It is a buying opportunity, perhaps in the next day, but you have to see where support is reached to make that decision."

It remains to be seen whether enough investors see this situation as a buying opportunity or whether they will simply wait for a further decline in the price of bitcoin and other cryptocurrencies.

As I ready this for posting , bitcoin has recovered considerably trading at about $14,050 and appears to be trending upward at around 1:30 AM UTC. December 23rd. Perhaps many do see this as a buying opportunity.

Previously published in Digital Journal

Bitcoin cash a new addition to trading on Coinbase exchange

(December 20) Coinbase just added support for trading bitcoin cash on the exchange. You can now send, receive, buy and sell bitcoin cash on the exchange. Bitcoin cash will also trade on Coinbase's institutional-focused exchange GDAX.

The launch of trading of the new coin has been experiencing difficulties and apparently trading has been suspended for a while at least.

Bitcoin price is way down — bitcoin cash way up

The announcement that bitcoin cash would trade on Coinbase was followed by a drop of as much as 25 percent in the price of bitcoin. It fell to a low of $14,000 but obviously had support at that level and recovered to $16,600 when the Techcrunch article reporting on the launch went to press.

On the other hand, bitcoin cash rose about 50 percent just in the last two hours trading around $3,000. Given these extreme price swings it is not surprising that the exchange felt that it should pause trading. It could be the exchange is also unable to handle the volume.

Details of trading stoppage

According to Coindesk, trading was stopped after four minutes of trading.

The exchange said at 18.30 Pacific Standard Time: "All BCH books will enter cancel-only mode, and all existing orders will be cleared. While in cancel-only mode, no new orders will be accepted. We will post an update shortly," BCH is the trading symbol for bitcoin cash.

The service outage was only trading in bitcoin cash, as trades continued in bitcoin, ether and litecoin, the other three coins traded on the exchange.

No doubt the flock of new users put a strain on the resources of the exchange.

What is bitcoin cash?

The coin was created when bitcoin experienced a hard fork in the beginning of August creating the new coin. There were a group of developers who wanted bitcoin blocks to be increased in size eight times. This would allow more and faster transactions and lower fees. These developers created bitcoin cash when the other bitcoin miners and developers refused to go along.

Another attempt to increase the size of bitcoin blocks did not go through in November and another possible hard fork was avoided. Some analysts touted bitcoin cash as an alternative to bitcoin. Litecoin was also mentioned as a possible successor too. Both are faster and have lower transaction costs.

Coinbase has changed its tune on bitcoin cash

Back in early August when bitcoin cash was first created, Coinbase said they would not support it. However within a couple of days they changed their mind and promised that customers would be able to withdraw it by January 1st next year. They did not however, promise full support.

This early development with full support surprised many.

Coinbase's rationale for adding bitcoin cash to its trading roster

Coinbase claimed that they considered ”developer and community support, security, stability, market price and trading volume” in deciding to fully support bitcoin cash. The company said: “Coinbase operates by the principle that our customers should benefit to the greatest extent possible from forks or other networks events. This is essential in our mission to make Coinbase the most trusted, safe, and easy-to-use digital currency exchange."

The exchange intends to support a number of digital currencies in the future so it makes sense that they have now added bitcoin cash which is the third largest coin by market cap. Coinbase already offers ethereum (ether) the second largest cryptocurrency.

Present prices

As I write this about 10:30 Central Standard Time coinmarketcap lists the price of bitcoin cash at $3,339 up over 50 percent on the day.

On Universal Coordinated Time (UTC) it is already December 20th about 5:00 a.m. The opening for bitcoin was $17,608, far off its recent high of over $19,000. Its low today was $15,577 according to Coindesk and are an average from several exchanges so you may find different figures elsewhere on a single exchange.

It remains to be seen if bitcoin can continue to recover from its losses or if it will drop further due to competition from other cryptocurrencies such as bitcoin cash. Many cryptocurrencies appear to be gaining value. The attention to bitcoin and the launch of bitcoin futures trading appears to have created more interest in many other cryptocurrencies as well, perhaps to the detriment of the price of bitcoin.

Previiously published in Digital Journal

Coinbase was for a brief time the number one app at the iPhone store

(December 9)The huge spikes in the value of bitcoin that has gone from well under a thousand dollars a coin at the beginning of the year to a recent high on Friday of over $17,000 have spurred a great deal of interest in bitcoin trading and in Coinbase.

What is Coinbase?

Coinbase is a digital asset broker based in San Francisco, California. They broker a number of different cryptocurrencies including the one with the largest capitalization Bitcoin, and the second biggest Etherium, plus Litecoin and a number of others. They operate in 32 countries changing cryptocurrencies to various fiat currencies and also perform bitcoin transactions and storage in 190 countries.

The company was founded back in 2011 by Brian Armstrong and Fred Ehrsam.

The CEO of Coinbase is Brian Armstong. He has just made it onto the Recode 100 list just as his company became the most download app for iPhones. The app is available for android phones and can be used with computer browsers as well.

Coinbase has its own website here.

Coinbase CEO urges users of his exchange to invest responsibly

Brian Armstrong, Coinbase CEO, warns users:“We also wanted to remind customers of some of the risks associated with trading digital currency. Digital currencies are volatile and the prices can go up and down.”

High volume disrupts Coinbase service

Yesterday was a rough day for Coinbase as it was so deluged with orders that it could not keep up. Many users found the app unavailable for considerable periods of time. They were unable to even check their balances let alone do trades. This happened at the same time as the app became the most downloaded app in the iPhone app store.

Armstrong claims that the recent dramatic rally has strained the Coinbase infrastructure but he hopes to scale the system to meet the demand rapidly. Armstrong says the company has increased its ability to handle traffic at peak times by 40 times.

It has also scaled up its support team over 600 percent and added features such as phone support.

Nevertheless Armstrong still warned users about gaps in service during high volume or volatility: “Despite the sizable and ongoing increases in our technical infrastructure and engineering staff, we wanted to remind customers that access to Coinbase services may become degraded or unavailable during times of significant volatility or volume. This could result in the inability to buy or sell for periods of time.”

As I write this on Saturday evening bitcoin is trading at 13,428 down thousands from its recent high of over $17,000 but the price is so volatile it could easily recover over the week end. I have appended an interview with the right-wing TV and radio host Glenn Beck and the founder of Litecoin, Charlie Lee.

Previously published in Digital Journal

US IRS demands information on some users of bitcoin to see if they paid taxes

(November 30) Last Tuesday a California Federal Court ordered the popular cryptocurrency exchange Coinbase to turn over records on thousands of its customers to the U.S. Internal Revenue Service (IRS).

The court order demands that the name, birthdate, address and account activity be provided for any customer who bought, sold, sent or received more than $20,000 worth of bitcoin between the years 2013 to 2015.

The court battle between Coinbase and the IRS

Originally the court order last November asked that it be provided with user records for all Coinbase customers. Both the company and its customers complained that the order was much too broad.

The IRS agreed to narrow its request so that it applied only to those who had traded more than $20,000 in bitcoin during the time period.

The text of the court order can be found here.

14,000 Coinbase users affected by the Court order

Of these 14,000, 6,200 of them had received less than $60,000 between 2013 to 2015 according to a Coinbase internal audit.

In January, Brian Armstrong CEO of Coinbase complained that asking for detailed transaction information on so many people just for using bitcoin was a violation of its customers rights to privacy. Armstrong argued that it was not the best way to address the objective of the IRS.

Capital gains taxes are to be paid on gains from cryptocurrency transactions

The court order notes that more than 10,000 people bought or sold more than 20,000 worth of cryptocurrency during the period. Cryptocurrency is regarded as property for tax purposes.

Only 800 to 900 taxpayers filed returns with a property description related to bitcoin during the period. This suggests the court order notes that many Coinbase users are not reporting their bitcoin gains.

U.S. citizens are supposed to pay capital gains tax on cryptocurrency transactions as the IRS labels virtual currencies as property for federal tax purposes.

Perhaps the law is behind development of technology

Some think that the problem is that the law has not kept up with new technology. 14,000 users of the new technology are being put under investigation simply because they use the new technology.

In the U.S. Congress a bill was introduced in September that would at least exempt any cryptocurrency transaction under $600 dollars from taxation. As it is now, every single bitcoin transaction no matter how small must be recorded and later reported to government in order to pay a capital gains tax. This tax is normally applied when someone sells property, stocks, or precious metals

The Cryptocurrency Tax Fairness Act of 22017

The bill was introduced by Rep Jared Polis a Democrat and Rep. David Schweikert a Republican. As mentioned, the bill exempts any transaction under $600 from taxation. This would mean that when bitcoin is simply used to pay for items of limited value the person would not have to pay tax on that.

Jerry Brito, executive director of the Coin Center noted:

"Right now, under the law, you have to keep track of every transaction, whether it's for a coffee here or an MP3 player there. Because the IRS treats Bitcoin as property for tax purposes, you owe capital gains tax whenever you dispose of Bitcoin, whether that's selling 10,000 bitcoins or buying a coffee."

Congressman Schweikert said of the bill: "Individuals all over the world are starting to use cryptocurrencies for small every day transactions, yet here in the States we have fallen behind and make cryptocurrency use more of a challenge than it needs to be. With this simple legislative change, anyone can make digital payments to buy a newspaper or a bike without worrying about tax code challenges."

Another court battle or an alternative system?

Coinbase said that if it ultimately produced the documents ordered, it would notify those users who were impacted in advance of any disclosure. However, CEO of Coinbase Brian Armstrong suggested that the company will go to court with the IRS and said "..it appears we will be forced to contest [the subpoena] in court to protect our customers' privacy at great expense"

Coinbase suggested an alternative solution to the issue. Coinbase would send a yearly tax form as is commonly done by stock brokers to report gains and losses both to customers and the IRS. It remains to be seen whether this is acceptable to the IRS.

Previously published in Digital Journal