Here we are in the early part of January 2015 and the state of cryptocurrency looks pretty bad.

The last few weeks have seen a number of things happen that have been bad for investors:

Bitcoin Price Crash

BitcoinBitcoin reached highs of $1,200 per coin in December 2013. Since then, its value has gradually declined. It’s always been a volatile currency but at least in 2014, it seemed to settle down in the $320-$380 range. It looked like Bitcoin might have matured somewhat.

Unfortunately, in early January 2015, the price crashed again. Today (Jan. 12th), it’s worth about $266. If you look at a graph of Bitcoin’s value over the last 12 months, there’s an obvious down trend in its value.

Bitcoin Chart 2014The question is whether it’ll continue on down towards zero or bottom out somewhere in the low $200 range.

Of course, this could be a blip or a correction and Bitcoin could soar in value to $10,000 per coin over the next 3-5 years as some pundits have predicted.

It’s a case of “watch this space” though.

Litecoin Price Crash

LitecoinLitecoin has often been regarded as Silver to Bitcoin’s Gold. As the price of Bitcoin went up and down, so did Litecoin. Up until mid December, it was trading at about $3.70 to $3.90 per coin. Then, on Dec. 16th, the price started to crash, dropping to below $3 per coin. By the end of the month, it was trading at about $2.70 per coin.

And, in the last 2 weeks since then, the price has continued its slide. Today (Jan. 12th) is valued at $1.72 per coin, so it’s dropped by over 50% in the last month.

Some of this drop can be attributed to the drop in Bitcoin’s value, but something else is going on with Litecoin that’s making its value drop by a greater percentage than Bitcoin’s.

Litecoin Value in 2014One side effect of this is that it’s now not profitable to mine Litecoin with home mining rigs (electricity costs outstrip profits), so a huge number of mining rigs are being turned off or redeployed to mine other coins.

GAW Exit From Mining

GAW MinersGAW Miners launched their always-profitable Hashlets (mining contracts) back in August 2014. Various flavours were available which mined different coins and pools. In late October/early November, the CEO announced the company was switching tack and that it was creating its own altcoin (PayCoin) and would allow coin owners to use that coin to make purchases from hundreds of merchants online (PayBase). It was supposed to bring cryptocurrency to the masses in a way that Bitcoin just hadn’t managed.

I joined GAW in September and had several Hashlets mining small amounts BTC for me. I had a reinvestment strategy laid out but what I found was GAW were constantly changing their goals and their goalposts. And they missed pretty much every deadline they ever set. They also made promises they never kept either. So it became impossible to think of them as a long-term investment.

Soon after the PayCoin announcement, mining was switched from mining Bitcoin/altcoins to mining “Hash Points”. The idea was that when PayCoin was officially launched, Hash Points would be converted into PayCoin at a 400:1 ratio (400 Hash Points = 1 PayCoin). Hash Points were valued at $0.01 each, so members would be getting PayCoins for a nominal $4.00 each.

GAW stated they had a $100,000,000 fund to cover the selling off of the PayCoin currency should there be a huge dump of them once they were available to the public. GAW also stated that PayCoin would have a floor value of $20 per coin at public launch which they would maintain.

I think when PayCoin launched initially, it did sell for $20 per coin but that didn’t last long. As of Jan. 12th, the coin is trading on Cryptsy for about $5.10 (at today’s USD/BTC exchange rate). The value has been depressed for a couple of weeks now.

So if you were slow to sell your coins, you’ve likely missed the boat on making some good profit.

GAW also introduced their HashStaker. This is a way to invest your PayCoins to earn interest over a 3 or 6 month period. Different HashStakers can hold different amounts of coins (selected when you buy). So a one coin HashStaker can hold one PayCoin. That PayCoin is out of circulation for the duration of the contract (3 or 6 months), so you can’t use it yourself. At the end of the contract, you get your PayCoin back, plus a set amount of interest and the HashStaker is destroyed. For 6 month contracts, interest is roughly 90% (so you’d get back 1.9 coins in this example).

The question is what value will PayCoin have in 6 months? Will it’s value drop even lower than it is today?

GAW members could opt to have their Hashlets converted into HashStakers at no additional cost. Hashlets were originally meant to be always profitable, even if that was only 1 satoshi a day, but fees would never be more than what the hashlets paid out. Any Hashlets converted to HashStakers now had a limited lifetime which means a huge number of Hashlets have been destroyed in the process. Apparently, those that are still mining BTC or altcoins are now returning negative payouts; i.e. fees cost more than the hashlets make.

GAW recently bought the Coin Swap exchange and that’s angered a lot of altcoin enthusiasts who see it as a way for GAW to manipulate the price of their own PayCoin. The LiteCoin Association has asked that Litecoin be delisted from the exchange as a result. Other coins (Blackcoin and Dogecoin) have followed suit.

GAW CEO Josh Garza challenged Litecoin Association director Andrew Vegetabile to a public debate on the issue.

Vegatabile’s response is here.

PayCoin’s drop in value means it hasn’t got the purchasing power it was claimed it would have. Some of the merchants that were supposed to be on board with taking payments via PayCoin, aren’t (Amazon is one of those).

So it’s all a bit of a mess.

LTCGear Issues

Litecoin Gear LogoLTCGear stopped giving payouts on December 19th. Some investors weren’t paid on the Dec. 19th either; and some didn’t receive payments on Dec. 12th. I guess I’m one of the lucky ones in that I was paid up to (and on) the 19th.

Whether LTCGear is a ponzi or not is open to question. Many claim it is. Many others say it isn’t. What is clear is that the LTCGear database was hacked (possibly repeatedly) and the owner has said that payments have been suspended until the issue can be resolved. The site is also said to have undergone a number of DDoS attacks in the meantime.

However, it’s been 3 weeks since anyone received a payment from them and updates on what’s happening have been few and far between. So it’s still not clear if LTCGear is effectively on hiatus while security issues are resolved or whether investors are being led down the garden path in the hopes it will come back online “soon” and all outstanding payments will be issued.

One way or the other, there’s not much anyone can do but assume the payments won’t arrive and hope LTCGear will reappear. Maybe outstanding payments will be made, maybe they won’t.

But everyone’s in a holding pattern for now till we wait and see which way the dominoes fall on this one.

Hashie.co Issues

hashie.coHashie was one of the better regarded cloud mining services. However, at the end of December their site went down and payouts ceased. There was speculation that Hashie was actually reselling LTCGear mining contracts to its members and the problems at LTCGear had a knock-on effect for Hashie.

Hashie were also resellers for AMHash (another cloud mining service). Since the site collapsed, AMHash have honored any purchases of their contracts through Hashie, but while Hashie is now back online, they are no longer reselling AMHash contracts. It’s likely that AMHash have withdrawn the contract reselling option.

AMHash Sold Out

AMHash had a Christmas promotion where they likely sold a lot of altcoin mining contracts. Combined with the debacle at Hashie.co, they have been sold out of contracts for quite a while now.

AMHash Sold Out

Genesis Mining No Longer Selling Scrypt Mining Contracts

Genesis MiningGenesis Mining was also seen as one of the best altcoin cloud mining contract providers. However, they’ve now stopped selling Scrypt based altcoin contracts and only Bitcoin mining contracts are available. However, given the fall in Bitcoin’s value and the fact that electricity fees are still charged in dollars, daily profit is miniscule if it’s even there at all.

PBMining Collapse

PBMining was also see as one of the better cloud mining operations. It had been online for months, leading people to think it was a stable and long-term investment opportunity. However, in December it collapsed and its investors lost their funds.

Final Thoughts

To anyone looking at the world of cryptocurrency from the outside, these events will only reinforce their views that Bitcoin really is a Wild West frontier where drug lords, criminals and scam artists go to town fleecing the unwary.

The world of cryptocurrencies really is in a sorry state at the moment.

If you’ve got an opinion on what’s going on or where you think crypocurrencies are heading in 2015, sound off below in the comments…

 

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