Crypto Update/ Coinbase Concerns & Conundrums

Good Morning!

Please take the time to read about exchanges below!

Yesterday afternoon Bitcoin rose as expected right to the top of the channel I’ve been depicting.  It overthrew the top slightly, but then began selling in what I believe is wave 2.  Wave 2 is gathering downward momentum, and so far is following the path I predicted almost perfectly.

Wave 2 should take approximately 3 days to finish – that is if its length of time is half the length of wave 1 up.  If its length equals wave 1, then it could take up to six days.  But down strokes usually move much faster than upstrokes, so I’m favoring a faster completion for wave 2.

Here’s the 2 hour chart for Bitcoin showing the expected path:

BTC5

Note that the peak of wave 1 finished well above the top of wave B.  This means that we clearly have both a higher high, and a higher low.  That is confirmation that a new uptrend has begun.  Also confirmation of a new bull BTC market is the clear 5 waves up that wave 1 and each of its sub-waves produced.

So, I see a BTC correction continuing, then a powerful wave 3 up that will challenge the old highs and I think it will do so sometime prior to the end of the month.

During this pullback in BTC, I expect the prior rotation to regather steam – this means XRP, XLM, LEND, and many others will enjoy a nice bounce.  This will be short lived, though, so be careful!

Also, ETH is likely to get above, then stay above the $1,000 mark.  Both Litecoin (LTC) and Bitcoin Cash (BCC or BCH) are now following the upstroke that BTC took yesterday.  Be careful with these too, as they simply lag BTC.  They will also fall back as the descent in BTC picks up steam.

Actually, the dollar is a good place to be if you can be to ride out BTC wave 2.  That’s difficult I know as was reinforced yesterday with my Coinbase experience.

COINBASE CONCERNS & CONUNDRUMS

It is difficult to get dollars in and out of the Cryptos – for now.  We all need to remember that exchanges in this space are relatively new and mostly not well regulated.  I’m okay with little to no regulation, and think that’s the way it should be.  But that means that we all need to be educated and aware of the risks they pose.

Mt. Gox was an early Crypto exchange that basically had a “run on the bank” and could not produce the coins to cash out that clients thought they had.  This is called fractional banking, it is exactly what the Jews and Chinese invented thousands of years ago.  Blacksmiths had safes.  They learned that they could store other people’s gold and issue a “gold receipt.”  They then figured that the odds of all of the people claiming their gold at the same time was rare, so they began STEALING the gold, keeping only enough to satisfy what they believed would suffice to keep their scheme going.

That scheme turned into the fractional banking system we have today – and history is littered with bank runs where this Ponzi collapsed.

In come Cryptos and immoral people who start dishonest exchanges figure they can do the same.  That was Mt. Gox.  But now who’s to say the same thing isn’t happening with the other exchanges?

Oh, I know it is!  I can guarantee you that Coinbase, Binance, and most exchanges do not possess all the coins needed to cash out all accounts!  Should you be concerned?  YES.

Yesterday I tried to sell what little BTC I still have with Coinbase.  I waited perfectly until wave 1 hit the top of the channel, then I went to sell to my cash wallet, only to find that all buys and sells were suspended!  Oh boy was I mad!!

They did resume trading later, but by then the descent had already begun and I missed exiting at the top – this literally costs me money, and is just the latest of many frustrations with Coinbase.  So my next course of action was to send the remaining BTC I had in that account to my Trezor – in order to get it off their exchange.  Also, I now feel that I have too much money with Binance, so I sent BTC from there to my Trezor as well.

That was yesterday afternoon.  This morning I still have not received my BTC from Coinbase.  On my Coinbase account it says pending, but they have NOT sent it as there is no link to see that the miners have started to process the transaction!

This from Coinbase:

Transaction Delays

Identified – Due to high transaction volumes, we are currently working through a backlog of outgoing BTC and ETH transactions. Customers sending these assets from Coinbase to an external address may experience a delay before the transaction appears on the blockchain. Deposits, buys, and sells are unaffected by this incident.

Customers should anticipate the following wait times:

– BTC: up to 72 hours

– ETH: up to 5 hours (reduced from 12–36 hours)

Our team is working to add resources and optimize our system so that we can process transactions more quickly. We apologize for any inconvenience this may cause.

Jan 4, 13:07 PST

Hmmm… “Transaction volumes” is the reason for delaying my access to my money for up to 3 days?!  HIGHLY UNLIKELY, as in I don’t believe that statement.  I believe the real reason to be liquidity – not enough new money coming in to handle all of the withdrawals.

So BEWARE, this seems to me to be worse than just a backlog, I believe they have destroyed people’s confidence enough that there may be a run on the exchange.  Hopefully I’ll get my BTC from them.  I also sold all but 1 ETH I had with them and am sending the cash to my savings account until I see more stability from them.

The question then is, should you do the same and remove most of your holdings from Coinbase?  I do think it would be prudent to limit your exposure!  If a run is occurring, you want to sneak out the door before they completely lock it shut.

If there is ever a run at any of the exchanges, you could get trapped.  This is why you should mostly have possession of actual coins and they should be located in a wallet that you possess.  I would only keep enough money on any exchange to cover any trades or cash in and out that you plan to do near term.

Yes, Coinbase has been flooded with millions of new accounts, and that is only gathering steam.  As new money comes in, exchanges’ main problem is tooling up to handle the volume.  But when the tide goes out, even if it’s just temporarily, then their biggest concern immediately becomes staying liquid enough to handle withdrawals.

If enough people are as frustrated with Coinbase as I am, then they may have millions of accounts, but very few assets.  There is no transparency into these exchanges, so extreme caution is advised.

The cure for all of this is direct peer to peer trading using Plasma technology.  That is why I support OMG and other companies working on bringing this to the masses.  But it is taking a little time to get to the point we can all use it, but be patient, it is here and will come on strong I think this year.

Going more peer to peer is more the model of Bittrex, Bitshares, and many others.  Bitshares is true peer to peer, but they have limited coins for trading.  Bittrex, on the other hand, takes in BTC, then converts for trading to other coins, so it is not truly peer to peer – I would place their model in between, but their user interface is clumsy and their site is slow.

Binance is by far the best site I’ve experienced for trading.  There was no delay yesterday at all sending BTC to my Trezor – that transaction was complete in just 15 minutes.  So for right now I trust them the most, even though they are in Hong Kong.  And that location also poses a risk as they reside in a communist controlled country that is unfavorable to Bitcoin.  So I am also limiting my exposure here.

Until Plasma is in widespread use, I will be storing the bulk of my Crypto wealth on my personal electronic wallet.  I will do my trading on Binance as Coinbase is not built for trading, and I have lost confidence in their business.

The great thing about Cryptos, though, is that we all have a choice!  But once again, this proves that you must pay attention and don’t be afraid to keep your Cryptos under YOUR CONTROL, not someone else’s!

Nate



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