Bitcoin Weekly: the Bitcoin IRA has $3M AUM; 50c of every Chinese bitcoin dollar moves abroad

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Bitcoin Weekly, January 23rd

The Bitcoin IRA has 50-100 customers who invest an average of $56K for a total of $3M AUM. Small but interesting. You’re charged just one fee – but a high one – an upfront 15% of any contribution. [Source]

I’m answering bitcoin questions on Quora. Here’s my reply to whether it makes sense to buy Bitcoin in 2017. Tldr: Buy if you think the network will continue to grow in number of transactions and unique users [Source]

Took a small position in Dash coin, about 1% of my crypto portfolio. What’s working: 1) its incentive mechanism for node participation, 2) its decentralized governance model for upgrades and 3) a focus on privacy / anonymity (right now, I think this is the main cryptocurrency use case aside from “digital gold”). I was skeptical last year but having seen the progress of their team and the growth in their community, I made a small bet at $14 / coin. So now I hold: Bitcoin, Ethereum, Litecoin, Dash, Monero, Zcash. And a negligible amount of Ethereum classic. I’m looking at a few ICOs and will share when it’s ready. In particular Melonport (open investment management) looks interesting.

The SEC will make a yes/no decision on the Winklevoss twins Bitcoin ETF on March 11th. Signs point to No. But Trump seems pro-bitcoin based on his political appointments, so we’ll see. Needham estimates that a US bitcoin ETF would attract $300M in investor assets in its first week [Source]

Last week the PBOC conducted a series of investigations into the leading Chinese exchanges. They are ongoing. Immediate changes include restrictions on margin trading (you could borrow and trade up to 10x your collateral) and rules against marketing bitcoin by mentioning how it can be used to hedge RMB currency depreciation. Chinese exchanges have begun to charge trading fees of 0.2%, on par with Western exchanges. Trading activity is expected to fall at least 50% if not more. I think this is good news as it increases price stability [Source]

If you want to know what’s going on in bitcoin China, follow CNLedger. Fantastic account.

Is bitcoin a source of capital flight from China? Yes and no. Yes because 50 cents of every Chinese dollar invested in bitcoin left the country. No because that amount was only $2B in 2016 – at most 1% of the total capital leaving China. [Source] On the ground here, it doesn’t feel like a big use case. Too complicated, too volatile, without enough corresponding benefit. But it’s growing as the other ways get harder.

What drives the bitcoin price? Mainly, Transaction volumes and unique accounts growth. Even Google trends volumes, but only in times of a pricing bubble.
What doesn’t move the price: macroeconomic indicators (eg, stock market exchanges, currency prices, interest rates) [Source]

And I think there actually is a case for bitcoin as a store of value alone; there’s a clear portfolio theory argument that there exists an equilibrium where if cryptocurrencies end up growing with world GDP long term, and they are even slightly dis-correlated with other asset classic, then there’s an incentive for everyone to hold at least some of them. This point is underestimated – Vitalik Buterin, creator of Ethereum [Source]

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