Bitcoin Market Could Be Too Good To Be True blog update courtesy of CNBC.bitcoin-scams

In December, covered the emerging bitcoin market and in January, MarketMuse profiled the Winklevoss twins’ plans to launch a bitcoin ETF. The bitcoin market is still emerging and was on track to be a booming business but the market now is taking a step back. In fact, UK International Business Times is saying that the bitcoin market is dying off, now with the supposed bitcoin scam occurring in Hong Kong, the bitcoin market seems to be even more hopeless.

Hong Kong-based bitcoin exchange MyCoin has allegedly shut its doors and stolen HKD 3 billion ($386.9 million) in the process.

The South China Morning Post reported Monday that 30 MyCoin clients approached a local lawmaker with complaints that the company had fled with funds from up to 3,000 investors.

The reports coming out of Hong Kong would seem to indicate that there may have been a Ponzi scheme at play.

“No one seems to know who is behind this,” a woman surnamed Lau, who said she lost HKD 1.3 million, told the paper. “Everyone says they, too, are victims … but we were told by those at higher tiers [of the scheme] that we can get our money back if we find more new clients.”

One warning sign of a pending collapse could have been that when the company changed its trading rules to bar people from exchanging all of their bitcoins unless they solicited new investors for the firm.

As bitcoin-focused site CoinDesk reasons, the incident may lead to new regulations for the cryptocurrency industry in Hong Kong, “which has so far operated with little scrutiny.”

According to the SCMP, MyCoin had hosted events at luxury hotels and a roadshow in Macau in 2014.

MyCoin did not immediately return a request for comment.

For the entire article from CNBC, click here.


BrokerDealers Speculate China’s Yuan Will Be Next blog update courtesy of MarketWatch’s Craig Stephen.

Some brokerdealers are still recovering from the shock they received last week, when the National Swiss Bank unexpectedly announced on Thursday that they would be scrapping a three-year-old cap on the franc. Now they are trying get ahead of the curve and are predicting that China’s yuan will be the next shoe to drop, so to speak.

The surprise move by Switzerland to scrap its currency ceiling against the euro EURCHF, -0.94%  last week is a reminder there can be unexpected collateral damage from central banks waging currency wars. As markets digest last week’s turmoil, expect focus to turn to other fault lines on the global currency map.

Here China stands out, as like the Swiss, it runs an implicit currency peg that is becoming increasingly painful to maintain.

Due to its longstanding crawling peg to the U.S. dollar, the yuan USDCNY, -0.21%USDCNH, +0.00%  has increasingly found itself pulled higher against just about every major currency. The world’s largest exporter has already had to endure two years of aggressive yenUSDJPY, +0.85%  devaluation since the introduction of Abenomics and its accompanying quantitative easing.

Now comes a new front, as the European Central Bank (ECB) looks ready to green-light its own QE next week. The move by Switzerland also means the Swiss National Bank (SNB) ceases its purchases of euros needed to maintain its peg, again meaning the euro will all but certainly head lower.

Further currency strength is likely to be distinctly unwelcome for the Chinese economy. Later this week, gross domestic product figures for 2014 are widely expected to show growth at its slowest pace in 24 years if, as some predict, the government’s 7.5% annual growth target is missed. This comes at the same time that the economy is flirting with outright deflation and amid a new trend of foreign capital exiting China.

Last week’s currency ructions present a new headwind to growth as exports will be harder to sell across Europe, China’s second biggest market after the U.S.

The other danger looming for China is that a strong currency exacerbates deflationary forces. Producer prices have been falling for almost three years, and the plunge in crude-oil prices adds a further disinflationary bent. The property market looks as if it could also push prices decisively lower. Prices of new homes in big cities fell 4.3% in December from a year earlier, according to new government data released over the weekend.

The difficulty for Beijing is that these external movements in currencies are outside its control. If moves to depreciate the euro EURUSD, -0.38%  trigger another round of competitive deprecations, just how much more yuan appreciation can China withstand?

While the policy actions of both the Swiss and European central banks last week appear quite different, they share a common feature: Both acted with reluctance only when the pain became too much to bear.

The reason deflation is public enemy No. 1 for central banks is that debt becomes much harder to service and can stall growth and employment as consumers put off purchases and business put off investment.

China certainly has debt levels that would make deflation worrisome. Total debt levels are now estimated to be in excess of 250% of GDP. Lower-than-expected bank loan growth in December also suggests demand in the economy is already weak.

The other area to be concerned about is capital flows, as investors remove bets on further yuan appreciation. In recent quarters, we have seen signs of hot-money flows exiting China and foreign-reserve accumulation reversing.

Fourth quarter 2014 figures showed that Chinese forex reserves declined by $48 billion to $3.84 trillion. This could reflect both a forex-valuation effect and capital outflows with the euro and yen depreciating by 4.2% and 9.3%, respectively, against the dollar during the period, according to Bank of America data in a recent note.

Outflows widened to $120 billion in the fourth quarter from $68 billion in the third quarter, Bank of America said.

Meanwhile there are already signs liquidity is tightening. Latest figures show China’s money supply contracted in December, with M2 growth slowing to 12.2% from 12.3% a month earlier. Bank of America notes that M0 — the most narrow measure of liquidity — has been growing very slowly due to slumping foreign-exchange purchases by the People’s Bank of China (PBOC).

This combination of money outflows and tighter liquidity shows the challenge facing the PBOC. If capital outflows were to accelerate, it will need to use up more of its foreign-exchange reserves to maintain its currency peg.

This will reduce liquidity, unless the PBOC finds new loosening measures, among which, lower bank reserve requirements are expected this year.

But the danger lies in a possible a loss of confidence in the yuan, in which case new liquidity may just facilitate more capital outflows. Such a scenario would make it more likely that China would have to “go Swiss” and also let its currency loose.

A Chinese Menu of Deals Drives Venture Capital Guru East; spotlight

Investing in China and sourcing private equity, venture capital and deal opportunities is getting better every day. blog extract is courtesy of New York Times Dealbook

SHANGHAI – James W. Breyer, the venture capitalist who made a fortune with an early bet on Facebook, is putting some of his winnings to work in China, partnering with Beijing-based venture capital firm to invest in Chinese technology start-ups.

IDG Capital Partners said on Wednesday that Mr. Breyer, a longtime partner at Accel Partners in Palo Alto, Calif., would advise and invest alongside a $586 million IDG fund that closed June 3. The fund is expected to make early stage investments in Chinese technology, media and telecommunication companies.

The announcement comes as interest soars in Chinese technology companies after two years of frenzied deal-making, much of it involving China’s Internet giants: Alibaba, Baidu and Tencent. Those three companies alone have spent more than $10 billion buying up start-ups and rivals during the last few years.

And with other technology highfliers here, including, the Chinese e-commerce company that recently raised $1.78 billion in its New York public listing, China has rapidly become a prime destination for the world’s biggest venture capital and private equity firms. Among the biggest and most active in China are Sequoia Capital, Qiming Ventures, SAIF Partners, IDG Capital Partners and Northern Light Venture Capital.