The carnage witnessed in the cryptocurrency market this year has left investors licking their wounds. Virtual currencies touched an all-time high in January 2018, but have plunged to wipe out more than $640B in value.
The MVIS CryptoCompare Digital Assets 10 Index is down 80% since the all-time high of January. Compared to this, the NASDAQ Composite Index had fallen 78% from its peak in 2000.
The Great Crypto Crash of 2018 has now surpassed the decline witnessed during the dot-com bubble of 2000.
Bitcoin And Ethereum Have Lost Substantial Value
Bitcoin and Ethereum are the two biggest cryptocurrencies as per market cap. The price of Bitcoin fell nearly 70%, from close to $20k to around $6k. This was after its value accelerated 60x in the years leading to the crash.
Ethereum has not escaped the fall either—it shed over 40% of its value in September alone.
Investors who had pumped in money before the start of 2017 have still garnered strong returns. However, people who entered the crypto market post September 2017 have lost a significant chunk of their money.
Crypto investors had placed huge bets on what is still a revolutionary technology in its infancy. But there was way too much speculation coupled with investor hype and security concerns for cryptos to sustain the record levels reached earlier this year.
Bitcoin Was Likened To Digital Gold
The crypto mania witnessed last year was driven by the hope that Bitcoin and other currencies would revolutionize industries with their breakthrough technology. But emerging economies like China and India are still sceptical about cryptos.
Further, the slower than expected Wall Street adoption and tighter regulations have also contributed to this bear market.
Can Bitcoin And Cryptos Rise From the Ashes?
There have been ardent supporters of crypto currencies such as John McAfee who are optimistic about the Bitcoin price reaching even a million dollars sometime in the future. In July 2017, McAfee tweeted this.
Bitcoub's low of $1,800+ yesterday simply could not be maintained. In the long term Bitcoin moves above $500,000 within three years. Bets?
— John McAfee (@officialmcafee) July 17, 2017
When Bitcoin was a part of a spectacular bull run late last year, McAfee tweeted :
When I predicted Bitcoin at $500,000 by the end of 2020, it used a model that predicted $5,000 at the end of 2017. BTC has accelerated much faster than my model assumptions. I now predict Bircoin at $1 million by the end of 2020. I will still eat my dick if wrong. pic.twitter.com/WVx3E71nyD
— John McAfee (@officialmcafee) November 29, 2017
Crypto enthusiasts remain unconcerned about this crash and believe that bitcoin and alt-coins will be as revolutionary as top internet companies. Bitcoin though has survived many such declines in the past. Its price fell from $1163 in November 2013 to $152.4 in January 2015.
Many still believe the blockchain tech to be the start of something special but the ride to riches will be more bumpy than smooth.
Once crypto currencies find a way to integrate with traditional financial assets there will be no stopping that bull market. For now, it is time to wait and watch.
CHART: How Blockchain Powers Bitcoin
Blockchain, Bitcoin. Bitcoin, blockchain.
The two terms go hand in hand—and have become almost ubiquitous with this year’s insane rise (and fall) of Bitcoin.
But what does it all really mean? How does it come together? In this week’s chart, our friends at CB Insights break down exactly how blockchain powers Bitcoin.
This Mogul Became America’s 1st Black Billion-Dollar Businesswoman
Where to start?
She’s the first black billion-dollar businesswoman. Before Oprah Winfrey.
She started as a TV executive, founding Black Entertainment Television (BET), the first TV network targeting African Americans. She then became a real estate mogul.
Oh, she also owns a stake in three major sports franchises, the NBA Wizards, NHL Capitals and the WNBA Mystics, the African American, period, to boast that claim.
In honor of Black History Month, let’s dive into her remarkable career.
- Born Sheila Crump in McKeesport, Pennsylvania, Johnson co-founded BET in 1979 with then-husband Robert Johnson. The couple sold it to Viacom in 2000 for $2.9B
- Sheila Crump Johnson became the first African American woman on the Forbes’ Billionaire list in 2000—beating Oprah Winfrey to the distinction.
- Per Forbes, Johnson has an $820M net worth as of 2019
Foray into real estate…
After closing the sale to Viacom, Robert and Sheila pocketed around $1.5B each. Johnson used that windfall as seed money to build a hospitality real estate empire in 2005.
“There’s a disparity in paychecks between whites and blacks,” she told the Wall Street Journal. “I will never forget that.”
As CEO of Salamander Hotels and Resorts, Sheila controls a spectacular portfolio of six luxury hotels in Florida, Virginia and South Carolina. And she’s built it from the ground up—literally—in her own spirit.
“I’ve been to many hotels, not only in the US, but all over the world,” she told Forbes last year. “And I wanted to find something that was going to really make Salamander stand out beyond all of these hotels.”
So what does that mean?
“You have to understand, there are a lot of people, investment companies, with very deep pockets,” she says. “They can do it, but they don’t have the experiences that we’re able to bring. I am constantly trying to find a way to help Salamander Resort & Spa stand out head over heels above any other hotel — not only in the area, but in the nation.
“I want them to leave that resort wanting to come back and not just say, ‘I’ll be back in six months.’ I want them to come back all the time.”
And so far it’s worked. In fact, on Forbes Travel Guide’s 61st list of Star-Rated hotels, Johnson’s Salamander Resort & Spa outside of Washington, DC earned a Five-Star distinction.
Forbes: “Everything [she] touches turns to gold.”
That’s a real quote. From Forbes. Last year. It’s also true.
BET? Billion-dollar exit. Washington Capitals? Stanley Cup.
And Roma. Won 10 Oscars. Who showed it before a single soul started caring? Johnson’s Middleburg Film Festival. (Which, by the way, has 32 films and counting in Academy Award contention.)
Remember her golf resort at Innisbrook? Oh, yeah. Hosts the Valspar Championship, one of the PGA calendar’s most-anticipated tournaments.
Becoming a billionaire comes with a new level of clout as well. “When you don’t have money, you’re not invited to special events; you really don’t matter,” she told WSJ. “It’s a society thing.”
So instead, she’s turned to giving back. Her Sheila Johnson Fellowship’s paid for more then 40 scholarships at Harvard University for students who otherwise wouldn’t afford to attend.
Breaking glass ceilings.
There’s an alarming statistic in business and diversity—especially as it pertains to women. According to research by investor Richard Kerby, 18% of all VCs are women—and only 3% are black. In addition, less than 50 black women ever have raised $1M in funding.
“When I got started,” Johnson says, “I couldn’t get a loan. I had to use my own money to get Salamander Resort and Spa.”
She explained to WSJ last year that men can go to any bank with a bank proposal. And no matter how “wacky” the idea is, she said, “they’re going to get the financing. Women do not have that ability.”
Johnson’s taken it upon herself to do something about that, becoming one of the founding partners of WE Capital, an investment firm that invests in female entrepreneurs.
“I started out in a very unique position where I had my own capital to be able to get started,” she says. “But there have got to be banks and investors that believe in helping women who want to be entrepreneurs in the hospitality business.
“And it’s just really, really important that they really take a look at this.”
100% Immediate Expensing Won’t Help Bring Back American Jobs
As the country continues to battle the health and economic crises brought on by the Coronavirus pandemic, leaders and policymakers in Washington are considering a number of tax-related measures to hasten recovery and stimulate the economy in the wake of this generational crisis. One such proposal would expand full and immediate expensing to include structures. The popular thinking is that this measure would incentivize companies to invest in US facilities, including and especially those companies who have historically opted to offshore much of their manufacturing footprint. While this proposal is certainly well-intentioned, if enacted it would have far more negative consequences, and far fewer benefits, than many realize.
It is important to remember that the tax reforms of the 1980s tried this approach, accelerating depreciation to 15 years for real estate in an attempt to stimulate the economy. While thoughtfully considered, this measure resulted in massive overbuilding and the use of real estate as a tax shelter, a dynamic that contributed significantly to the savings and loan/real estate crisis at that time. As a result, the depreciation schedule for structures was eventually lengthened to better reflect the true useful life of a structure or real estate. While measures were put in place to try to prevent entities using the construction of buildings as a tax shelter, there are ways to get around the rules. Expanding immediate expensing to include structures today would incite the same unintended consequences the U.S. experienced in the 1980s.
Some economists continue to cite that immediate expensing of structures, to include manufacturing plants, office buildings, and commercial real estate, would contribute substantially to the growth of gross domestic product and encourage companies to return to the U.S. However, these assumptions are flawed as they do not account for the tax consequences and restrictions unique to real estate, which prevent immediate expensing for structures and buildings from yielding the same economic benefits that may result if applied to other capital expenditures.
These models also do not reflect the very real dynamics of a post-COVID-19 business environment. In the last few days, some of our country’s largest employers including Facebook and Twitter have offered their employees extended teleworking flexibility well after a phased re-opening of America begins. COVID-19 has shown that through technology, a large number of employees are capable of being highly productive working from home, providing an opportunity for companies to shed tremendous office space costs from their books, and leaving uncertainty to the future need for office space in the U.S. We cannot afford a situation where office buildings are built for tax benefit rather than market need.
Most economists’ models that demonstrate GDP growth from the inclusion of real estate in full and immediate expensing do not factor in basic real estate tax rules, such as, recapture taxes, passive loss, basis, at-risk limitation rules, or other market drivers, as well as company valuations and shareholder requirements. They also often rely on European data that does not effectively reflect U.S. economic realities. As a result, many of these models overstate both the increased investment that would result from immediate expensing, as well as the extent to which immediate expensing would incentivize U.S. companies to re-shore production lines and facilities currently located overseas.
Also of great concern is the possibility that providing immediate expensing for structures will greatly increase the incentive to utilize debt financing, which many economists believe is already too attractive. Take, for example, an investor purchasing a $10 million building with $8 million in debt financing and just $2 million in equity. Under immediate expensing, that investor would receive a $10 million tax write-off despite having only expended roughly $2 million. This is a dangerous tax loophole that could hinder the U.S. recovery from the economic fallout of COVID-19.
Finally, there is the cost. The most recent estimate conducted by the Tax Foundation found that providing full and immediate expensing for structures would cost the Treasury nearly $1 trillion over the next ten years. While many agree that repairing the damage COVID-19 has wrought to our economy will require significant and innovative government support, there are better ways to stimulate growth and encourage U.S. companies to re-shore their innovation and manufacturing capabilities that do not carry the same unintended consequences.
Fortunately, there are much stronger alternatives to bring companies and innovation back to the United states, to lessen our reliance on foreign countries, and to support small businesses in the wake of COVID-19. Allowing companies to continue to immediately expense research and development and equipment expenses, providing manufacturing facility credits to companies committed to stay in the U.S. and on-shore, developing a robust, but low risk government backed loan program to support critical next generation technology development and manufacturing in the U.S., and providing a more immediate payroll tax holiday for small businesses and individuals. These types of highly effective actions that would result in a more impactful near-term and long-term stimulus to the nation’s businesses and job opportunities for Americans.
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