Investor Gary Shilling Is Staying Away From BTC Over Its Lack of ‘Transparency’

Francisco Memoria

Gary Shilling, a well-known investor, has recently called bitcoin a ‘black box’ and added that he won’t invest in bitcoin, the flagship cryptocurrency, as he is “very suspicious of things that are not transparent” and, as such, won’t invest in it.

During an interview with Business Insider, the financial analyst revealed he recently met with a friend who’s a venture capitalist in the US who was “very early on [in bitcoin]” and through made a lot of money.

At a cocktail party, Shilling revealed, he asked his friend to explain what bitcoin is, and that he was given an answer revolving around its underlying blockchain technology and its limit supply. When he asked the venture capitalist about “the guys behind this” he was told that no one knows exactly who’s behind the cryptocurrency.

It’s known that someone, under the Satoshi Nakamoto pseudonym, submitted the Bitcoin whitepaper to a mailing list little over 10 years ago. Who was behind the pseudonym isn’t clear, although various journalistic investigations have pointed towards various directions.

Taking this into account, Shilling compared the cryptocurrency ecosystem to the South Sea bubble – one of history’s biggest bubbles created by false claims. He noted a book written by Charles MacKay describing the bubble reveals someone put an ad on a paper at the claiming it was a “great discovery” and a “wonderful investment” but didn’t add any details.

Shilling went on to describe an exit scam, as the person behind the ad grabbed everyone else’s money and left to “never be heard of again.” Using this story, the investor added:

I’m just very suspicious of things that are not transparent. If I can’t understand it I don’t want to invest in it.

The investor’s words notably come after bitcoin and the cryptocurrency ecosystem endured a year-long bearish trend, that saw BTC drop from a near $20,000 all-time high to about $3,900 at press time. The MVIS CryptoCompare Digital Assets 100 Index, a market cap-weighted index that tracks the 100 largest cryptos, notably dropped 84.6% in the last 12 months.

As for what’s I store for the future, not all analysts are bearish. As covered, Chinese analysts have recently argued BTC may not yet make a comeback this year, although they expect it to get back on track in “3 to 5 years.”

Juan M. Villaverde, a crypto-focused econometrician and mathematician at Weiss Cryptocurrency Ratings, has recently forecasted that although 2018 was a “disaster” for cryptocurrency prices, it was also a year of “major progress.” Per his words, BTC will again “rise up and head for new all-time highs.”

BlockFi Updates Terms of Service for Its BTC and ETH Interest Accounts

On Tuesday (April 23), FinTech startup BlockFi announced new terms of service for its Bitcoin (BTC) and Ether (ETH) interest accounts, and said that it had made the BlockFi Interest Account (BIA) available in India.

BlockFi, which is based in New Jersey, United States, was founded in July 2017 by Zac Prince (CEO) and Flori Marquez (VP of Operations) and launched in August 2017. Among others, it is backed by ConsenSys Ventures, Fidelity subsidiary Deonshire Investors, Morgan Creek Digital, and Mike Novogratz's Galaxy Digital. 

In April 2018, BlockFi started offering USD loans collateralized by your cryptoassets (Bitcoin and Ether). Roughly six months later, it expanded the range of cryptoassets that it accepts as collateral to Litecoin and stablecoin Gemini dollar (GUSD).

Then on March 4, BlockFi launched the BlockFi Interest Account (BIA):

... users can securely store their Bitcoin or Ether at BlockFi and receive 6% annual interest, paid monthly in cryptocurrency. Interest earned in a BIA compounds monthly, delivering an industry-leading APY of 6.2%. The program has been in private beta since the beginning of 2019 and already holds over $10 million in assets from retail, corporate, and institutional crypto investors."

BlockFi said that this product offered the following advantages over competitors:

  • compound interest
  • institutional backing
  • interest paid monthly in crypto (i.e. in BTC if you have a Bitcoin interest account and in ETH if you have an Ether interest account)
  • no-notice withdrawals

We also found out via the FAQ section of the BlockFi website that although "there is no minimum or maximum deposit for the BlockFi Interest Account," only "deposits over 1 BTC or 25 ETH will accrue interest" and that "6% interest will only be earned on balances below 250 BTC or 7500 ETH."

Sadly, on March 20, some bad news was announced for holders of the BlockFi Interest Account with large balances (over 25 BTC or over 500 ETH). 

BlockFi said that since the launch of the BIA program, it had discovered that "approximately 75% of BIA clients have a balance of less than 5 BTC or 150 ETH," and that the "median account balance is $7,000 USD."

Furthermore, it had seen "unanticipated demand from businesses like crypto hedge funds and VC firms," and realized that these firms open large BlockFi interest accounts "as a way to bolster their returns." 

BlockFi added that "starting April 1st, only BIA balances of up to and including 25 BTC or 500 ETH (equivalent to roughly $100,000 and $70,000 respectively) will earn the 6.2% APY interest rate," while "balances over that limit will earn a tiered rate of 2% interest."

The second bit of bad news—this one affecting everyone not just BTC/ETH whales—was that from April 5, it will be "adding a flat withdrawal fee of 0.0025 BTC and 0.0015 ETH."  

In today's announcement, BlockFi had several interesting things to say:

  • As of April 2019, BlockFi is holding $53 million in crypto deposits for its clients in BIAs, and these funds are earning interest every day.
  • BlockFi is "retroactively" (as of April 1) reducing the minimum balance requirement for the Bitcoin BIA from 1 to 0.5 BTC. It hopes to reduce this minimum balance limit even further in the near future.
  • For Ether BIAs, from now on, only balances up to 250 ETH will earn the higher interest rate (i.e. 6.2% APY), whereas balances over this limit will earn only the lower interest rate (2% APY). BlockFi says that its "ability to pay interest to our clients is based on crypto market lending conditions," and since (1) it needs to "work with institutional counterparties to generate this yield" and (2) "demand for borrowing ETH has dropped" during the past month, its has no choice but to adjust "ETH tier rates" accordingly.
  • The BIA product is now available in India. This brings the total number of countries served by BlockFi to 65.


Featured Image Courtesy of BlockFi