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Is Bitcoin Really A New ‘Safe Haven’ Asset?

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Safe Haven Asset

The launch of the Bitcoin blockchain in 2008 was a low-key affair among a fringe group of cryptography enthusiasts. Just over a decade later, the pioneer cryptocurrency is a world-famous phenomenon with a market value of about $10,000 at press time.

This is certainly a remarkable turnaround, which only the most ardent early supporters could envision. That said, bitcoin as a currency has taken a life of its own and is gaining rather sophisticated market functions. One of these is the emergence of Bitcoin as a possible ‘safe haven’ asset. How ready is bitcoin to perform this unique function? Let’s find out.

Bitcoin currently has a solid market presence. Moreover, a great number of retailers in the market, especially online, accept bitcoin payments. This means that bitcoin users can freely operate and trade which is a great leap forward.

Trading is efficient and simple because of modern exchanges where you can trade for USD, trade BTC-EURX or any major fiat and crypto trading pairs. Generally, bitcoin is now a currency and an asset you can freely own and transact with ease. At the moment, there are over 250,000 bitcoin transactions each day across the world.

Incidentally, some of bitcoin’s intrinsic factors have made it play a unique market function. For one, bitcoin is a finite currency. Unlike fiat which is freely printed by Central Banks, there will only ever be 21 million bitcoin. Whilst this has placed a ceiling on mass adoption as a currency, the finite virtue has made it an attractive proposition as an asset.

The Case for Bitcoin as A Safe Haven Asset

goldFor a historically volatile asset, bitcoin being discussed as a potential safe haven asset is remarkable. In years gone past, equity investors would regularly purchase gold during periods of market uncertainty to distribute risk. Gold is a traditional safe haven investment due to its scarcity and value. Can bitcoin take up such a role?

In the first few days of August 2019, stock markets went wild on fears of a USA-China trade war escalation. Simultaneously, bitcoin booked impressive gains of more than seven percent as opposed to the drops in the major stock markets. This is certainly not a fool-proof case for bitcoin as a safe asset. Regardless, crypto enthusiasts took the development with glee as part of a general argument for bitcoin’s status as a safe haven asset. The major arguments include:

  • Bitcoin is effectively immune to geopolitical tensions like the trade wars.
  • By virtue of decentralisation, bitcoin is independent of government monetary policy. This means that bitcoin prices are entirely market dependent. Accordingly, bitcoin (though significantly volatile) is attractive because it has no direct correlation to the volatility of other asset classes.
  • Bitcoin’s scarcity gives it innate value, like rare metals. Satoshi Nakamoto capped bitcoin supply at 21 million.

Potential Drawbacks

Is it that simple though? The fact that bitcoin has a life of its own is an impressive aspect of its position as an asset class. However, the case for bitcoin as a safe haven asset is not as straightforward as it may seem.

goldTraditional safe haven investments are usually boring. Gold, for all the credibility it has, has generated an average annualised return of 0.32 percent over the last five years. As a matter of fact, its value most of the time is relatively consistent. This would be fitting for the name ‘safe haven’ as it remains safe in the midst of market volatility.

However, bitcoin, even in the most generous terms, would be a ‘colorful’ safe haven. Bitcoin may have a value trajectory unique from the regular stock markets. However, this does not take away bitcoin’s volatility issues. Therefore, investors are as motivated to diversify risk in a volatile stock market as they are to cash in on potential outsize gains.

Taking prices from August 2018 to August 2019, bitcoin has appreciated more than 100 percent. This is certainly a very impressive return from an investment perspective. However, it does little to lend credence to the general idea of a ‘safe haven’ asset.

Moreover, bitcoin still has to navigate a number of regulatory challenges with global financial entities because to truly gain the status of a mainstream ‘safe-haven’, regulators like the SEC have to be on board. Additionally, the stability of the coin against hard forks and security of secondary players like exchanges can add to its credibility.

Is It a Safe Haven Asset?

From the aforementioned, you can look at it both ways. For an investor looking to distribute risk and have an asset class whose volatility does not correlate to mainstream asset volatility, bitcoin can act as a safe haven investment. However, it fails to live up to the classic role of a safe haven like gold in the market. Regardless, this debate will only intensify as bitcoin matures and grows further.

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Retired NBA Player Allegedly Scammed Ghanaian Company Out of $825,000 in Bitcoin

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NBA Player

Retired NBA player, Isaac Edward Austin, has allegedly scammed a Ghanaian Company out of $825,000 in bitcoin (BTC). The money was reportedly acquired with the promise of investing it in a bitcoin automated trading programme.

Bitcoin Investment Scam

bitcoin doublerThrough the Isaac Edward Austin (IEA) and Tudor Trust, Austin reportedly masqueraded as a trustee with the ability to help a Ghanaian company make a profit on a bitcoin investment. The two parties signed a contract on July 3, 2019. This contract is among other documents that have been shared on mynewsgh.com indicating the scam took place.

The company sent to a bitcoin investment at a strike price of $11,000 per bitcoin, totaling to $825,000, to Austin expecting to receive back the original investment plus profits. However, Austin failed to make the payment at the close of trading as per the agreement.

A victim of Austin’s scam shared his experience as follows: “He will take your BTC and you will never get your investment back or your returns. On the day of payment, he will tell you story after story filled with lies of issues why the BTC could not be delivered on the day of payment. From him having a heart attack, to the coin being sent to the wrong wallet, to him being in a queue at the bank, to him waiting for the trade to conclude, to the funds being held by the bank. Week after week after week of unresolved issues even when he has confirmed the day before that all is set 1000 percent to deliver and conclude the transaction. He is a fraudster of the highest order. Stay away from him. We have all the proof – contracts, letters, and messages.”

One of the other documents mynewsgh.com obtained is a letter sent to Austin notifying him of his failure to meet the agreed terms of the contract. The Ghanaian company expected their money back on the same day they signed the contract with Austin. The funds expected should have been 75 BTC going for a strike price of $11,000.

In the letter, the company gave Austin 48 hours to pay them their money – failure to which they were going to take legal action.

Is the Scammer an Imposter?

According to the documents shared on Ghana Web, the bitcoin scammer’s date of birth and height is similar to the former NBA player, Isaac Edward “Ike” Austin as indicated on Wikipedia. So, could this be a case of a retired basketball player turning into a scammer or is someone impersonating him? The answer to this question is unclear.

This LinkedIn profile of an Isaac Austin, who has been the Finance Director and Trustee of Tudor Trust and Finance Society LLC since June 2012, does not seem authentic. Although this profile has some similarities to the former NBA player’s personal information as written on Wikipedia, the years he attended Arizona State do not coincide.

Furthermore, the profile on LinkedIn says Isaac Austin took a Bachelor’s Degree in Liberal Arts and Sciences for one year which is not the usual study period for a degree course. There is also no mention of the former NBA player being a trustee of IEA and Tudor Trust.

The upturn of the crypto market experienced in mid-2019 appears to have spurred scammers into action. This scam comes after another bitcoin investment deal in Nairobi went wrong between December 2018 and May 2019.

That said, these scam stories are a lesson to potential bitcoin investors that they are better off managing their own investments as opposed to handing funds to someone to manage them. If the Ghanaian company had carried out thorough research, perhaps they would have noticed the obvious red flags.

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The Golix Controversy: Has the African Exchange “Exit Scammed” Users And Investors?

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Golix exit scam

Prior to May 2018, Zimbabwe-based bitcoin exchange Golix was bullish about its future prospects. The startup claimed it had raised $32 million from a token sale and had plans to set up operations in several other African countries. However, more than a year later, the digital asset exchange has had a reversal of fortunes and, after its forced shutdown in Zimbabwe, some of Golix’s former clients are struggling to get their funds reimbursed despite promises and frantic efforts to recover these. 

Embezzlement Allegations

Former Golix users now point to possible embezzlement of funds by Golix executives while one investor in the startup blames the hostile operating environment as the reason for the company’s general failure.

Tawanda Kembo was the chief executive officer (CEO) of Golix when it was shut down in Zimbabwe. Bitcoin Africa reached out to him to get his side of the story but he had not responded to our questions at the time of publishing.

However, Bitcoin Africa still managed to contact Taurai Chinyamakubvu, an individual who says he was an investor in the company. Chinyamakubvu claimed he is not aware if client funds had been reimbursed or not since he was not involved in the day to day affairs of the crypto startup.

“On funds, you can check with the CEO, he was doing the day to day stuff. I was just an investor,” Chinyamakubvu pushed back when asked if they had recovered client funds that were reportedly locked in banks.

In May 2018, Zimbabwe’s central bank issued a directive that forbade financial institutions from dealing with crypto exchanges. According to Golix, this led to banks blocking access to client funds and the company from using the financial system.

Central Bank Defiance And Crypto Adoption

GolixWhen asked why Golix had not resumed operations following a High Court ruling that set aside the central bank order, Chinyamakubvu suggested that Golix’s Zimbabwe operations remain hamstrung by the central bank’s reluctance to lift the order.

“They (Reserve Bank of Zimbabwe) did not lift the order they sent to banks. So no bank wants to defy a regulator. But that said, you muddy the water once, that’s enough to change its colour for a while,” he stated.

Chinyamakubvu is convinced that the central bank’s apparent defiance of a court ruling continues to hinder the growth of the crypto space in a country that should be embracing privately-issued cryptocurrencies.

Zimbabwe has been plagued by hyperinflation for the past two decades, which is spurred on by a volatile fiat currency. Critics point to the central bank’s penchant for unrestrained printing of money as the main cause of the country’s currency troubles.

The Golix investor called the central bank’s decision to shut down the crypto exchange ‘retrogressive’.

Ironically, the Reserve Bank of Zimbabwe recently announced the setting up of a committee to study financial technologies such as bitcoin. The regulator now says it wants to come up with what it calls a “National Fintech Strategy.”

Disappeared Client Funds

Bitcoin Africa also reached out to former Golix clients as it tried to establish what happened with their funds. Some did not respond but a few did – although they requested anonymity. One lady, in particular, expressed exasperation with the way Golix has been handling the issue.

“I do not know about others but I still have not been reimbursed. Tawanda (CEO of Golix) has made several promises to settle but nothing has happened,” claimed the lady who preferred to remain anonymous.

She further explained that currently there is nothing noteworthy happening but promised to reveal more details as and when they become known. 

Kembo on the Run?

Following the central bank decision to stifle cryptocurrency trading, some crypto traders have gone on to create informal trading platforms using social media networks like Whatsapp, Telegram, and Facebook.

Bitcoin Africa was also able to get access to one such Whatsapp chat group feed wherein clients are discussing strategies of recovering funds from Golix. In a discussion that occurred in July 2019, one member of the group asks fellow members to furnish her with information that includes Kembo’s personal identification number or even a vehicle registration number. This could then be used to help a hired tracing agent to locate him.

Tawanda Kembo

Tawanda Kembo, Golix CEO

It is apparent from the discussions that Kembo has made several promises – including re-payment plans – to reimburse but nothing has happened to date. Adding intrigue to the controversy, this client claims Tawanda told them he had lost the key to the cold storage wallet. Thus, he could not access the bitcoin.

Keys to a crypto wallet are essentially a passcode that grants access to funds and without them, the funds are lost and cannot be recovered.

In the meantime, another post on the same thread suggests that Chinyamakubvu was being disingenuous when he expressed ignorance about the status of client funds. In the post, another member insists that prior to the central bank order, Golix was asked to remove all funds before accounts were closed.

The anonymous member was referring to a part of the central bank circular to banks which states the following:

“Exit any existing relationships with virtual currency exchanges within sixty days of the date of this Circular and proceed to liquidate and restitute existing account balances.”

This central bank circular was issued on May 11, 2018, and Golix seemingly had enough time to exit from banks as well as to reimburse clients.

No Consumer Protection

The anonymous member suggests that since this did not happen, the issue should now be treated as a criminal case.

It is apparent from the rest of the discussion that members were aware of the risks involved with crypto businesses. The central bank had warned the public of risks of dealing with cryptocurrencies and associated businesses prior to Golix’s demise.

Zimbabwe does not have consumer protection laws that specifically deal cryptocurrencies and those dealing with such digital currencies do so at own risk, a point clearly articulated by the central bank circular. Perhaps it is with this in mind that some Golix clients are now pursuing fraud charges against Golix executives.

Lack of legal protection is another factor inhibiting the widespread adoption of cryptocurrencies but that may yet change as the central bank is now having a change of heart.

Bitcoin Africa will continue to follow the events surrounding the alleged exit scam of Golix and update our readers when new information surfaces.

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Alleged Con Man Taken to Court in Kenya Over Fake Bitcoin Deal

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Fake Bitcoin Deal

A man is reportedly facing charges in a Nairobi court after allegedly swindling an accountant out of 375,000 Kenyan shillings (KES) in a fake bitcoin deal. The accused, Patrick Kamau, allegedly committed the fraud on several dates between December 2018 and May 2019.

Bitcoin Investment Deal Goes Sour

Kamau reportedly promised to open a forex trading account for the complainant and invest in forex bitcoin through BNB Forex. Benjamin Mugoya entered into the deal with the hope of making crypto trading profits after a friend introduced him to Kamau. The accused posed as a sales representative for BNB Forex in Kenya.

BitcoinGet

To open the forex trading account, Kamau asked Mugoya to wire KES400,000 to his bank account. However, after receiving a total payment of KES375,000 on May 22, Kamau switched off his phone.

In addition to this payment, Mugoya had sent Kamau KES50,000 in two installments in December 2018 and January 2019.

This is not the first bitcoin-related case that has been heard in a Nairobi court. In 2017, three bitcoin traders were charged with allegedly stealing KES10.2 million from I&M bank and Mpesa. The case involved a purchase of bitcoin from the traders using stolen money.

The case against Kamau has been scheduled for 22 February 2020. The accused was released on a cash bail of KES150,000 or a bond of KES200,000.

Unregulated Crypto Space

Mugoya could be one of many victims that have fallen prey to fake bitcoin investments despite the Central Bank of Kenya’s warning against investing in bitcoin.

The Bank’s Governor, Patrick Njoroge, has been vocal about the risks associated with cryptocurrencies such as fraud.  In 2018, the Governor ordered Kenyan banks to refrain from making crypto transactions or engaging with entities transacting in virtual currencies.

The unregulated crypto space in Kenya means that victims of crypto fraud are unprotected, thereby, preventing them from recovering their funds. However, with sufficient evidence, Mugoya could obtain justice from the Kenyan court system.

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