Bitcoin Hash Rate Reaches New High

Bitcoin Hash Rate

Bitcoin Hash Rate

This past Saturday, bitcoin reached a new milestone. The bitcoin hash rate – the measuring unit of the network’s processing power – reached an all-time high of 79 million tera hashes per second.

To understand why this is a significant milestone, we need to explore two things:

  1. What the hash rate indicates
  2. How far this number has come.


Bitcoin’s hash rate is widely accepted as an indicator of how strong bitcoin’s security has become. It essentially reflects the speed and computing power needed to mine bitcoin. The harder it is to mine bitcoin (which is basically solving superhard mathematical problems), the more computing or hash power you need.

Bitcoin miners perform a similar function that a central authority like Visa does for fiat users. They record transactions and check them for accuracy to prevent fraudulent activity like “double spending,” where someone tries to spend the same bitcoin twice. But unlike Visa, bitcoin miners are not centralized. They’re spread out across millions of computers across the world. This way, the network has no single point of failure. The more miners who mine, the more secure the network.

Bitcoin mining has become more difficult than ever. This shows that despite a brutal recent bear market, there’s an increasing level of activity on the bitcoin network. And the high level of difficulty means the network is more secure than ever.

Continued Growth

In July 2017, bitcoin’s hash rate was around 6 million tera hashes per second. That’s a 1,217% increase in just two years. In July 2013, the network was processing less than a million tera hashes per second. Now there are more bitcoin hashes per second than there are grains of sand on the Earth.

The hash rate’s growth hasn’t been a perfectly smooth climb. But the processing power will only keep growing.

One big reason for that is the bitcoin halving, which is coming up in May 2020. Bitcoin halvings historically boost bitcoin’s price, so miners will be more motivated than ever to mine for bitcoin. And because their rewards for mining will be cut in half after the halving, competition among miners will likely grow, which means there will be more miners to verify transactions and keep the network secure.

Good investing,

Allison Brickell

Assistant Managing Editor, Early Investing

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Source: Early Investing

Mailbag: Death Is Inevitable, but So Are Pilotless Passenger Drones

Q: Andy, let me just remind you along with everyone else: Death is inevitable, correct? Let me clarify by saying nobody lives forever. Have you ever seen that show 1000 Ways to Die? This just means now people could die by something going wrong with passenger drones. Are you claiming risk is off the table? Thank you kindly!

A: First off, I can introduce you to some very wealthy venture capital investors who might disagree with your assertion about the inevitability of death. They’re spending tens of millions to prove you wrong. But that’s a topic for another day.

To answer your question, risk is NEVER off the table. I could die tonight sampling my wife’s cooking. Maybe she mistook the arsenic for the salt. Maybe she grabbed something out of the fridge that was overripe and quite lethal.

But these things generally don’t happen often. And that kind of risk will go way down when we all have robotic chefs doing the cooking. As robots increasingly perform tasks previously reserved for humans, the risks we face on a daily basis will shrink accordingly.

Built-in automatic systems already do the majority of piloting commercial airplanes. And they will soon be doing the driving so we don’t have to. Pilotless passenger drones are just the next step as we transition to a robotics-dominated era. And they’ll give people a whole new level of speed and convenience.

Yes, there are risks.

A midair mechanical malfunction. A diabolical hack into the drone’s remote control system. A collision with a sudden swarm of birds. You, the passenger, mistakenly pushing the eject button. (Though I doubt they’ll even have such a button. Sends the wrong message.)

All of these could happen. But they are all extremely low-probability scenarios. And even if something like that happens to you, I have some good news for you.

You’re much better off relying on sophisticated drone software to return you to terra firma than a clueless flying taxi driver. There are not many Chesley Sullenbergers flying the good flight. But passenger drones will come with multiple sophisticated automatic responses to these scenarios, plus hundreds more. And “impregnable” protection from hackers will be part of the deal.

As long as there are humans, there will be mistakes, accidents, pratfalls… all caused by the vagaries of human error. But in the era of robotics, human error will not have the opportunity to cause quite as much havoc as it has throughout history.

I expect your odds of dying by passenger drone will be closer to plane odds than car odds. Car passengers meet their untimely end 130 times per 1 billion hours. Airline passengers – only 31 times per 1 billion.

Risk is not off the table. It never will be entirely. But it can and will be drastically reduced.

+ Early Investing Co-Founder Andy Gordon

Q: Why is the government going after bitcoin all of a sudden? Is this a real threat?

A: Yes, it is a real threat. A clash between government and crypto has always been inevitable. The fact that we’re starting to see more pushback from the establishment is a good sign, though. It shows that crypto is emerging as a legitimate contender on the world stage.

Today’s governments run on fiat money. Nothing finite, like gold, backs any country’s currency. Both physical and digital currency can be created at will. The value of fiat money tends to drop over time, and central banks often target an official inflation rate of 2%.

Meanwhile, cryptocurrencies like bitcoin have limited supplies, so their prices can rise over time. Modern governments tend to dislike “hard” forms of money like bitcoin and gold. When the value of these assets increases, it makes fiat money look bad in comparison.

So it’s no surprise that President Trump and his team attacked bitcoin. The most interesting part of this is how Trump framed the situation. After attacking bitcoin and Libra, Trump tweeted

We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the World, and it will always stay that way. It is called the United States Dollar!


This is what the conflict between crypto and government is all about. Cryptocurrencies are the first real threat to fiat money in modern history. So naturally, there’s going to be turbulence along the way.

+ Early Investing Co-Founder Adam Sharp

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Source: Early Investing

News Fix: Congress Grills Facebook, Doesn’t Get Anywhere

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Dear Early Investor,

In case you missed it, online pet supply retailer Chewy went public in June. Chewy, which PetSmart bought for $3 billion in 2017, priced its shares at $22 and closed its opening day up 59% at $34.99.

Why are we talking about Chewy? Well, the News Fix loves dogs. It loves startups. And it loves IPOs. And when you combine the three, you get a stock the Fix pays attention to. Plus, Chewy is back in the news.

On Thursday, Chewy reported its first earnings since going public. And the news was pretty good. It generated $1.1 billion in sales for a $29.6 million loss. The revenue and losses are in line with what the company was projecting when it went public. In the same quarter last year, Chewy posted a loss of $59.8 million on $763.5 million in sales (CNBC).

Between the launch of its online pet pharmacy and its new private label business, it looks like Chewy is headed in the right direction. We’ll keep an eye on future earnings reports as they come in.

Now to the Fix!


The Fix was in Washington this week to cover the congressional hearings on Facebook’s new crypto, Libra. We had live pre- and post-hearing video broadcasts. And we live-tweeted the hearings as well. If you missed our coverage on Twitter, where were you? Just kidding. Make sure you follow @vinistic on Twitter to catch up, and make sure you don’t miss future live reporting. You can also follow @early1nvesting to keep up with everything Early Investing is doing.

In my special analysis for First Stage Investor members on Thursday, I explained why the hearings themselves were a missed opportunity to figure out how best to regulate Facebook’s Libra project and cryptocurrencies in general. And I looked at why Congress might regret this week in the future (click here to sign up for First Stage Investor).

House Financial Services Chair Maxine Waters (D-Calif.) wants to bring in Facebook CEO Mark Zuckerberg to question him directly about Libra (The Hill). David Marcus, the head of Facebook’s cryptocurrency project, was the one to testify this week.

One of the key constructive takeaways from the hearing (and there weren’t many) is that Libra – and to a lesser degree, all crypto – can’t be regulated until legislators decide what Libra is from a technical standpoint (MIT Technology Review).

For some reason, Treasury Secretary Steven Mnuchin is convinced that bitcoin’s only use is criminal and the U.S. dollar is never used in the commission of a crime. He’s elevated bitcoin and other cryptos to a “national security issue” (Bloomberg). And he’s also vowed he’ll never let bitcoin become the equivalent of Swiss bank accounts for criminals (CNBC).

Let’s be clear: Bitcoin is not a national security threat. Politicians from both sides of the aisle frequently invoke national security when they want to stop something without having to understand it or justify it.

And as Rep. Patrick McHenry (R-N.C.) has eloquently noted, no country has ever succeeded in stopping bitcoin because “there’s no capacity to kill bitcoin” (CNBC via YouTube).

In one other crypto headline of note this week, the U.S. Commodity Futures Trading Commission is investigating BitMEX, a popular crypto exchange in Asia, for providing illegal services to American traders (Bloomberg).


Curaleaf is buying the Grassroots marijuana dispensary chain (GR Companies) for $900 million in cash and stock. The move will likely make Curaleaf the biggest pot retailer in the U.S. Grassroots’ operations are focused mainly in the Midwest, while Curaleaf has focused most of its operations on the East and West coasts (Barrons).

We’ll be taking a deep dive into this deal in Thursday’s First Stage Investor Cannabis Report (click here to sign up).

Recreational marijuana will be legal in Illinois next year. Should companies serve marijuana at corporate events the same way they serve alcohol? That’s one of many questions companies in Illinois are now exploring (WTTW).

Boston finally licensed its first recreational marijuana dispensary. It will be located in Dorchester (MassLive).

In theory, New Jersey’s new medical marijuana regulations will help patients. Among the new regulations…

  • Patients can now buy up to 3 ounces of marijuana instead of 2 each month
  • Patients no longer have to visit their doctor every three months to remain eligible for medical marijuana.

But with medical marijuana averaging $500 per ounce, it’s tough to tell just how big an impact the changes will make (


Chinese startups are struggling to raise money thanks to a cooling domestic economy and trade war concerns with the U.S. In the first half of 2019, Chinese startups raised $23.2 billion. That’s down 54% from the first half of last year (TechCrunch).

And finally, no industry is immune to disruption. And that includes toilet paper (Vox).

That’s your News Fix.

Have a great weekend.

Vin Narayanan
Senior Managing Editor, Early Investing

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Source: Early Investing

How One Small Tech Company Is Shaping the Driverless Car Market

Autonomous cars

The autonomous car market is expected to be worth $173 billion by 2023. By 2030, Goldman Sachs says it will total $285 billion.

And the player that will largely determine which companies grab a lion’s share of this enormous market?

Argo – a Pittsburgh-based artificial intelligence (AI) company I bet you’ve never heard of.

Argo is designing and building an automotive self-driving system. It’s caught the eye of Volkswagen and Ford, both of whom are now using Argo’s driverless technology. Ford acquired a majority stake in the company for $1 billion last year. And Volkswagen invested $2.6 billion in Argo last week.

That puts Argo’s valuation at more than $7 billion.

Waymo is currently leading the race for driverless cars. It’s starting to pilot ride-hailing services in two cities this year. And GM is a close second. But because of Argo, Ford and Volkswagen are not far behind the two front-runners.

Ford is testing its third-generation Fusion sedan with Argo’s technology and plans to have self-driving cars with Level 4 capability by 2021.

(A Level 4 car can drive on pre-mapped routes and handle anything on its planned course without the intervention of a driver. A Level 5 car is so independent that there’s no steering wheel.)

It’s still early, though. If this were a baseball game, I’d say we were in the middle innings. A lot can change in the next three to five years, when Level 4 and 5 cars should see accelerated adoption.

First-Mover Advantage

There’s no guarantee that the first company to scale the commercial use of driverless cars will be among the ultimate winners. But getting there first does matter. First-to-market advantages are real. Think of the critical competitive advantages Uber had in terms of brand and user adoption.

And the shifting web of partnerships and alliances among car companies and driverless tech companies will heavily influence which companies introduce their driverless cars first. That’s why Argo will continue to play an important role in determining who will come out on top.

Argo co-founder and CEO Bryan Salesky says that he’d welcome additional strategic or financial investors to help share the costs of bringing self-driving vehicles to market. “Our platform is scalable to just about any type of vehicle,” he says.

Salesky was there at the very beginning of self-driving cars. He was the senior software engineer on the winning team in the 2007 autonomous vehicle challenge funded by the Defense Advanced Research Projects Agency (DARPA). So it’s fitting that his company is at the forefront of the emerging market today.

Good investing,

Andy Gordon

Co-Founder, Early Investing

The post How One Small Tech Company Is Shaping the Driverless Car Market appeared first on Early Investing.

Source: Early Investing

Number of Financial Institutions Serving Cannabis Companies Nearly Doubles in Two Years

Chart - Depository Institutions Providing Banking Services to Marijuana-Related Businesses

Chart - Depository Institutions Providing Banking Services to Marijuana-Related Businesses

The cannabis industry has a banking problem. Because marijuana is still illegal at the federal level, most banks are unwilling to do business with cannabis companies that desperately need banking services. This forces cannabis companies to conduct most or all of their business in cash, which creates all sorts of problems.

The good news is that’s changing.

There’s been a clear uptick in banks and credit unions providing services to marijuana-related businesses, according to the Financial Crimes Enforcement Network’s (FinCEN) most recent marijuana banking update. There are 633 banks and credit unions serving marijuana companies as of March 31. That’s nearly double March 2017’s number.

This is a good sign for the cannabis industry. The more cannabis businesses that lock down banking services, the more those businesses will be able to grow… and the more the industry will be able to grow and thrive.

There’s still a long way to go, of course. As long as marijuana is illegal at the federal level, marijuana businesses will have to navigate a labyrinth of conflicting laws whenever they cross state lines (or even just cross into the next town over).

But change is happening. And it’s not coming just from marijuana activists or cannabis companies. The banking industry wants it too. The American Bankers Association recently sent a letter to top government finance officials asking for guidance on how bankers can lawfully provide services to hemp businesses.

And in response, lawmakers are advancing the SAFE Banking Act of 2019. According to the text of the bill, the act would “create protections for depository institutions that provide financial services to cannabis-related legitimate businesses and service providers for such businesses, and for other purposes.”

The bill is currently being considered in the House. But it’s already been passed by the House Financial Services Committee and the House Judiciary Committee. And the latter advanced the bill without reporting on it so it could get to the floor sooner.

Hopefully, more government guidance is coming. And the number of financial institutions serving cannabis companies is going to continue its steady climb.

Good investing,

Allison Brickell

Assistant Managing Editor, Early Investing

The post Number of Financial Institutions Serving Cannabis Companies Nearly Doubles in Two Years appeared first on Early Investing.

Source: Early Investing

Mailbag: Why You Should Steer Clear of Crypto Trading Bots

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Q: Andy, I know you cast a wide net in searching for startups to invest in. What’s the sector that is most challenging to get a bead on?

A: That’s a tough one. The easy answer is consumer markets. It’s really tough to figure out what consumers will like six months from now, never mind five or 10 years down the road. That’s why I stay away from companies jumping on hot trends.

But let me go in a different direction here. I apply a five-question test to every company I look at.

  1. Does it have (or can it develop) the technology?
  2. Can it build the product?
  3. Can it market the product?
  4. Does it solve a big problem or address a big market?
  5. Can it do all of these things better than the competition?

One of the industries where it’s hardest to answer these questions is robotics. The technology is hard to perfect. A good analogy is driverless cars.

We’re about 80% of the way there in terms of getting autonomous vehicles onto the road – and it hasn’t been easy. Only a handful of companies will be rolling out Level 4 driverless cars in the next year or two, and not a single car company has mastered Level 5. (Level 4 cars can drive on pre-mapped routes and handle anything on their planned course without driver intervention. Level 5 cars are so independent that there’s no steering wheel.)

Building a robotics product is also hard. The prototype is an extremely complex undertaking. Scaling production presents an entirely new set of difficulties. And marketing a robotics product is tricky because the category is so new.

There are dozens of companies working with cutting-edge technology to make robots never seen or deployed before. And each is determined to outdo the others.

How can an investor be sure that a company that’s in the lead today will still be at the head of the pack five or 10 years from now?

Well, robotics is one of the most impactful future industries I know. So I fully expect it to spawn several huge world-beating companies. There’s no way I’m going to ignore this sector. I’m looking forward to delving in and taking a shot at a couple of robotics companies that excite the hell out of me.

The financial reward for getting just one company right in this industry could be off the charts.

+ Early Investing Co-Founder Andy Gordon

Q: Is it possible to make, say, $100 a day by day-trading crypto using a bot?

A: My advice is to steer well clear of trading bots and hold high-quality cryptos like bitcoin instead.

I’ve never seen any legitimate crypto bot programs. Perhaps some exist. But if they do, I suspect the bots’ owners would simply use them privately or sell them to hedge funds for millions of dollars.

I would be very careful with programs like these. There have been cases where the program carries what’s called a “Trojan horse virus.” So it’s possible that hackers could use such a “bot” to take control of your computer and steal your coins.

Never download anything that you aren’t 100% sure is legitimate. The problem is, it can be very hard to tell if crypto trading bot programs are real. My guess is that 95% of them are not, and the other 5% don’t make money. So the safest choice is to simply not use them.

Buying and holding high-quality cryptocurrencies is the best way to make money in this space. Historically, this strategy has yielded incredible returns. And as long as you have good passwords and security practices, it’s also very safe (unlike bots or day trading).

+ Early Investing Co-Founder Adam Sharp

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Source: Early Investing

News Fix: Don’t Get Spooked by the Fed

An image of a red map of the world

Bitcoin’s price fell 12% to $11,450 on Thursday. It started sliding down after Fed Chairman Jerome Powell said he had serious concerns about Libra, Facebook’s new digital currency.

“Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability,” Powell told a congressional committee Wednesday. “These are concerns that should be thoroughly and publicly addressed.”

Powell has called for Facebook to halt the project until regulators’ questions about Libra are addressed.

Asking Facebook to halt development is pretty extreme. But the rest of the questions regulators are asking are the exact same questions they’ve asked about every digital advancement, including the internet, they’ve seen in the last 30 years.

So why is the Fed, and the House of Representatives for that matter, going the extra mile and asking Facebook to pause its work on Libra?

Because the government doesn’t trust Facebook. And it doesn’t trust Silicon Valley. It doesn’t trust the tech industry. And the distrust is bipartisan. The government is looking closely at everything Google, Amazon and Facebook do with a critical – and skeptical – eye.

There’s no reason for the crypto market to get spooked by this. The government doesn’t trust Facebook. And that’s why it’s reacting this way.

Let Facebook talk through it with regulators. Let them put everything on the table and address all the potential problems with Libra.

It doesn’t matter.

Libra is not a bitcoin competitor. It’s tied to fiat currency, so it will always be tied to fiat’s flaws.

But Libra could be good for crypto. Facebook is big enough to have a major impact on the market.

Facebook is also powerful enough to withstand the regulatory setbacks that small altcoins or other promising crypto projects may not. It’s better for Facebook to take a few blows while the Securities and Exchange Commission (SEC) struggles to clarify its crypto guidelines than for other, more decentralized projects to struggle or get shut down while fighting the same battle.

One more thing. To put that bitcoin price drop in perspective, even with the price drop on Thursday, bitcoin is up 206% since the beginning of the year. It’s never a smooth ride, but it’s steadily moving up.

On to the News Fix…


Lawmakers seek marijuana reform: The House Judiciary Subcommittee on Crime, Terrorism and Homeland Security held a hearing on Wednesday to seek input on how to reform federal marijuana laws. Multiple members of Congress called for loosening those laws – and even legalizing marijuana (CNBC).

“There is a growing consensus in this country that current marijuana laws are not appropriate, and we must consider reform,” said Rep. Karen Bass, D-Calif. “Today’s hearing is a first step in that process.”

One of the most popular cannabis bills is the STATES (Strengthening the Tenth Amendment Through Entrusting States) Act, which would amend the Controlled Substances Act and protect state-approved marijuana activity from federal law enforcement activity. Proponents of the bill say it goes a long way to eliminating federal concerns in legal marijuana states. But others say it doesn’t go far enough.

Researchers dispel the reefer madness myth: Researchers from Montana State University and San Diego State University have found that teenage weed consumption has declined in states where marijuana is legal. The authors of the study reported that the results fall in line with previous studies that showed a drop in teen use after recreational pot sales began in 2014 in Washington state (ABC News).

The new study found an 8% decline in the number of high school students who said they’d used marijuana in the past 30 days. It also found a 9% drop in the number of students who said they’d used marijuana at least 10 times in the past 30 days.

Florida court says state’s weed regulations aren’t gonna fly: A Florida appellate court has ruled that the state’s approach to regulating marijuana is unconstitutional. The court said the state’s vertically integrated system (companies have to grow, produce AND sell their own products) conflicts with the voter-approved amendment that legalized medical marijuana in 2016. It also ruled that the existing caps for medical marijuana treatment centers were unreasonable (CBS Miami).

If the ruling stands, Florida could also be forced to lift the cap on the number of medical marijuana treatment centers. That would be a huge win for the state’s marijuana industry.

Michigan’s recreational marijuana industry almost ready for prime time: A week and a half ago, Michigan’s Marijuana Regulatory Agency released emergency regulations for businesses planning on entering the recreational marijuana retail marketplace (Michigan Radio). Here are some of the highlights: The agency will begin accepting business license applications on November 1 and will start approving licenses by December 6, and cities and townships have until November 1 to ban marijuana businesses.

More than 600 communities in Michigan have already banned adult-use marijuana businesses. If more follow, it will create an increasingly complicated minefield for cannabis businesses in the state.


Tiger Global Management eyes India: Venture capital firm Tiger Global Management is betting big on India. The firm has examined at least a dozen deals with Indian startups in the past few months and has closed investments in at least half of them. Nearly all of the startups focus on enterprise software or fintech (Bloomberg).

SEC clears path to crypto brokerages: The SEC has issued guidance on how securities rules apply to some of the complicated compliance issues posed by digital tokens (Bloomberg).

According to the joint statement issued by the SEC and the Financial Industry Regulatory Authority, crypto brokers that store customer holdings need to keep them separate from firm assets, maintain accurate books and records, and, in certain cases, use a third-party custodian. Noncustodial services will face a lower level of scrutiny.

Any regulatory clarity on digital tokens is a welcome one, especially since the SEC has been notoriously unclear so far. This seems like a step in the right direction.

Construction tech startups may be past their peak funding period: 2018 was a record year for construction tech startup funding. U.S.-based construction startups raised $1.3 billion in the first half of 2018. Halfway through 2019, they’ve raised just $197 million (Crunchbase News).

It’s unclear exactly what caused the drop in funding. But Trevor Zimmerman, managing partner at Blackhorn Ventures, suspects 2018 may have been influenced by particularly large funding rounds. 2018 was indeed a year of mega-rounds for many startups – but 2019 is also shaping up to be a big year for IPOs. So who can say how high the venture capital money river will flow?


Trump doesn’t like bitcoin: President Donald Trump decided to weigh in on crypto this week with one of his famous Twitter hot takes. It’s not a positive one (The Verge). He tweeted…

I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.

Similarly, Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National and International.

Speaking of Facebook…

Facebook won’t launch Calibra in India: Facebook won’t be bringing its crypto project to India anytime soon. The reason? India’s current regulatory restrictions (CoinDesk).

Last April, the Reserve Bank of India (RBI) effectively banned banks from doing business with crypto-related firms, including exchanges. Since then, several of India’s crypto exchanges have shuttered and have blamed the RBI restriction for putting them out of business.

“Calibra will respect the legislation,” Facebook representative Alexandru Voica told The Economic Times. But Voica also added that Facebook plans to work with local lawmakers to see if legislation can be amended.

Visa invests in another crypto startup: Visa has recorded its second investment in a crypto company. It led a $40 million funding round for crypto custody service Anchorage (Cointelegraph). Both companies are members of the Libra Association.

The investment is yet another indicator that Visa sees the potential of blockchain tech – and doesn’t want its own business to lag behind it.

Canadian crypto exchanges must register with financial watchdog: Our neighbor to the north is stepping up its crypto regulations (Cointelegraph). As of June 1, 2020, crypto exchanges in Canada will be legally required to register with the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC).

Exchanges will also be required to observe know-your-customer (KYC) policies, keep records of their clients and report suspicious activity to FinTRAC.

The motive behind the new policy is reportedly to get Canadian banks to work in cooperation with crypto exchanges. It will be interesting to see whether the banking industry plays nice.

Have a great weekend!

Allison Brickell

Assistant Managing Editor, Early Investing

The post News Fix: Don’t Get Spooked by the Fed appeared first on Early Investing.

Source: Early Investing

Bitcoin Processed More Payments Than PayPal Last Year

Bitcoin Speaks Volumes

Bitcoin Speaks Volumes

The bitcoin blockchain processed $3.2 trillion in transactions last year. That beats out PayPal, which had $578 billion in payments volume. And it’s not too far behind Mastercard ($5.9 trillion) and Visa ($8.2 trillion).

That $3.2 trillion doesn’t even include the volume of the second layer Lightning Network, which grew to more than 5,000 nodes and more than 19,000 channels by the end of 2018.

This is a great sign for bitcoin. And it’s an even better sign for its future. Here’s why.

The Lightning Network, one of the most promising bitcoin scaling solutions available, will keep this momentum going. Lightning allows users to make payments quickly and cheaply. And it’s helping bitcoin become more scalable, which has been its biggest obstacle on the way to mass adoption.

The Lightning Network has been taking off since November 2018, when its capacity grew from 125 bitcoin to 450 bitcoin in just two weeks. During the first three months of 2019, the network capacity increased to 1,059 bitcoin. And the number of Lightning Network nodes has been steadily increasing along with it. The network’s current capacity is 939 bitcoin, or $11 million. And that’s just the testing phase!

This capacity will continue to grow. The Lightning Network has some of the world’s smartest developers working to improve it every day. And it’s gaining support from other crypto services. Popular crypto wallets, including Electrum, are adding support for the Lightning Network. And Bitrefill, a service that allows users to top up any prepaid mobile phone using bitcoin, is now allowing many Coinbase users to access its Lightning Network services directly from their Coinbase accounts.

The Lightning Network is playing a very important role in driving bitcoin adoption. It’s not just improving scalability on a large scale but also making bitcoin more accessible and convenient at an individual level. If someone thinks of bitcoin as an obscure, hard-to-understand asset, they’re unlikely to use it. But if they can make a bitcoin payment as easily as a PayPal or Mastercard payment… why not use bitcoin?

Good investing,

Allison Brickell

Assistant Managing Editor, Early Investing

The post Bitcoin Processed More Payments Than PayPal Last Year appeared first on Early Investing.

Source: Early Investing

Mailbag: Why Wisdom of Crowd Beats Analyst Expectations

Digital Email Icons Around Smartphone

Q: Why do investors get spooked by companies not meeting or exceeding analyst expectations? Who died and made analysts kings?

A: This is “a game within a game within a game” stuff. It can get as complex as you want. But, I warn you, if you go down this rabbit hole, you may never find your way back.

Let’s begin with a simple question…

If not analysts, who are you going to listen to about how much companies should be making?

You? Fine, all the more power to you. But not many people with full-time jobs and lives to lead can find the time to make these projections.

Me? Well, that’s more like it. If you have an expert you trust who can see through all the corporate tricks, who knows how company metrics work and who can reach their own conclusions (that may or may not agree with those of the analysts)… then you’re in pretty good shape.

I’ve been on dozens of quarterly earnings calls. They’re pretty predictable.

A company will tell you that every quarter is a battle won with problems conquered, new markets and opportunities discovered, and old growth drivers replenished with new ones. To the extent a company admits headwinds, it’ll tell you it’s dealing with them in ways that are far more effective than the competition, and that if growth slows, it’s not its fault.

The analysts then ask questions, all of them predictable. And the CEO, CFO or COO has canned answers to all of them. None of the questions are, “Why didn’t you do as well as I predicted a quarter ago?” or “Why did you do a lot better than I predicted a quarter ago?”

Because that would be admitting forecasts are not all about facts and hard metrics. It’s just as much about interpreting the facts and metrics. Is the company being overly optimistic or overly pessimistic? Usually it’s the former. But not always.

One tactic executives might employ is this: If they expect a bumpy road in the months ahead, they make the already disappointing numbers even lower and put the company in a position to outperform them. That just might boost share prices (or at least slow the price decrease).

It’s up to the analysts to sniff this tactic out. It’s not easy. Perhaps the company is putting out slightly negative news but is actually expecting things to get far worse than it’s admitting. Why would it do this? So a downturn in fortunes would be less of a shock to investors and, hopefully, make a future sell-off less severe.

We’re now in “a game within a game within a game” territory. I’ve seen this dance result in all kinds of share price movements. I’ve seen companies with great numbers that don’t meet analysts’ expectations do well and do poorly. I’ve seen companies with poor numbers that beat analysts’ expectations do well and do poorly.

It can be very confusing, as complex systems usually are. Here’s a quote from a University of Chicago report on “How Complex Systems Fail”:

 Complex systems run as broken systems. The system continues to function because it contains so many redundancies and because people can make it function, despite the presence of many flaws.

And that brings us to your question…

Who made analysts kings? Wouldn’t we be better off just getting the quarterly scoop directly from the top company executives? After all, they’re the ones who know their own company the best. Using analysts as our filter seems only to muddy the waters.

I don’t want to put thousands of analysts out of work. But I’m a big believer in the wisdom of the crowd concept. Some believe that the bigger the crowd, the easier it is to fool them. It’s just the opposite, though. The bigger the crowd… the more sets of eyes on a particular issue or company… and the harder it is to fool them.

Give me 20,000 people following a company with, say, 10% (2,000 people) taking it very seriously. You’re going to get much closer to the truth than a dozen analysts following a company and relaying their incredibly subjective opinions (as gospel) to you.

Let companies play their little tricks. The crowd will figure out who the straight talkers are and who the manipulators are.

+ Early Investing Co-Founder Andy Gordon

Q: How does one sell cryptocurrency and get cash? I am on three exchanges and do not know how to get cash out of any of them.

A: The most common way to sell cryptocurrency for cash in the U.S. is through a regulated exchange like Coinbase.

To sell, log in to your account. Then go to the “Sell” page and enter a sell order. The proceeds of the sale, in dollars, can either go back into your Coinbase account or be transferred to an external bank account. You’ll need to verify your identity (usually by providing a driver’s license or passport). Regulated exchanges are required by law to verify your identity.

There will be limits on how much you can withdraw. Most people will be able to sell up to $25,000 per day, according to an August 2018 blog post from Coinbase.

Not all crypto exchanges offer fiat trading. It is very difficult to obtain the required licenses, and there are only a few operating in the U.S. Though I expect this to improve dramatically over the next few years.

If your coins are on a non-fiat exchange, you’ll need to send them to one that does offer fiat trading to cash out.

If you’re looking to sell larger amounts of bitcoin, many people choose to work with an OTC (over-the-counter) broker. They can help match you up with a buyer and process the transaction.

Another option to sell bitcoin for fiat is LocalBitcoins. This site matches up traders on a local basis. LocalBitcoins holds the funds in escrow and allows buyers and sellers to develop transaction ratings, so people can feel confident dealing with each other.

Alternatively, you can use bitcoin to settle personal transactions. If you owe somebody $50, ask if they want bitcoin or your preferred crypto. Most people will say no. But some will go for it, and crypto will pick up a few new adopters.

+ Early Investing Co-Founder Adam Sharp

The post Mailbag: Why Wisdom of Crowd Beats Analyst Expectations appeared first on Early Investing.

Source: Early Investing

News Fix: 13 Headlines for 13 Colonies

Fireworks in the Sky

Welcome to a special Independence Day long weekend edition of the News Fix. On July 4, 1776, 13 colonies declared their independence from the British, vowing to create a country dedicated to the idea “that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”

In honor of those 13 colonies that went on to form the United States of America, we bring you 13 headlines shaping the startup, cannabis and crypto sectors.

  1. “Canopy Growth Shares Slump After Q4 Earnings; Canadian Pot Sales Slow” (TheStreet)
  2. “Constellation CEO ‘not pleased’ with pot investment Canopy Growth’s recent earnings” (MarketWatch)
  3. “Bruce Linton says he was fired as co-CEO of Canadian pot company Canopy Growth” (CNBC)

If you’re sensing a theme in those first three headlines, well, you’re right. It’s been an interesting couple of weeks for Canopy Growth. On Thursday’s First Stage Investor Cannabis Report, I will be taking a deep dive into Canopy Growth’s earnings report, the firing of Linton and the future of the company.

  1. “Illinois Governor Signs Law Legalizing Recreational Use Of Marijuana” (NPR)
  2. “Congressional Committee Calls For A ‘Moratorium’ on Facebook’s Libra Project” (Forbes)
  3. “Bitcoin internet searches have a stunning correlation with bitcoin prices” (MarketWatch)
  4. “60% of Bitcoin hasn’t moved in a year – despite a 220% price bump in 2019” (The Next Web)
  5. “Bitcoin Rally Fuels Market in Crypto Derivatives” (The Wall Street Journal)
  6. “World’s First Zero-Fiat ‘Bitcoin Bond’ Now Available on Bloomberg Terminal” (Cointelegraph)
  7. “Ripple Alum to Spearhead Binance US Crypto Exchange” (CCN)
  8. “First Successful Blockchain-tracked Shipment from South Korea to the Netherlands” (Cointelegraph)
  9. “Visa, PayPal May Bear a ‘Heavy Burden’ With Facebook Crypto Plan” (Bloomberg)
  10. “Sony announces a new $185M fund to invest in tech startups” (TechCrunch)

And that’s your News Fix… 13 headlines for the 13 colonies that started it all.

Hope you have a great Fourth of July holiday weekend.

Good investing,

Vin Narayanan

Senior Managing Editor, Early Investing

The post News Fix: 13 Headlines for 13 Colonies appeared first on Early Investing.

Source: Early Investing