I've long been interested in the apparent cyclical asymmetry in business fluctuations. So it's nice to see Paul Krugman publicize the issue here: On the Asymmetry of Booms and Slumps. His post, in turn, was motivated this one, by Antonio Fatas: Four Missing Ingredients in Macroeconomic Models. Fatas writes:

1. The business cycle is not symmetric. Most macroeconomic models start with the idea that fluctuations are caused by a succession of events that are both positive and negative (on average they are equal to zero). Not only this is a wrong representation of economic shocks but it also leads to the perception that stabilization policy cannot do much. Interestingly, it was Milton Friedman who put forward the "plucking" model of business cycles as an alternative to the notion that fluctuations are symmetric. In Friedman's model output can only be below potential or maximum. If we were to rely on asymmetric models of the business cycle, our views on potential output and the natural rate of unemployment would be radically different. We would not be rewriting history to claim that in 2007 GDP was above potential in most OECD economies and we would not be arguing that the natural unemployment rate in Souther Europe is very close to its actual.

Let me dissect the passage above.

1. "The business cycle is not symmetric." Agreed.
2. "Most macro models assume a symmetric impulse mechanism." Agreed.
3. "Not only is this a wrong representations of economic shocks..."

Not sure what to make of this claim. I think it's sensible to assume that the shocks are symmetric (unless there is compelling evidence to suggest otherwise). The asymmetry in question is more likely to be the byproduct of human interaction -- the economy's propagation mechanism.

4. "...but it also leads to the perception that stabilization policy cannot do much."

I'm also not sure what to make of this statement. Economists know that we cannot make any inferences about the desirability of policy interventions solely on the basis of the statistical properties of time-series data. And in any case, there are plenty of symmetric models suggesting beneficial policy interventions.

5. "If we were to rely on asymmetric models of the business cycle, our views on potential output and the NRU would be radically different."

I'm afraid that Fatas is placing the cart before the horse here. There is no logical basis for that proposition (in fact, I provide a counterexample below): see comment above.

6. "We would not be rewriting history to claim that in 2007 GDP was above potential..."

I hear people make this claim all the time. Typically, they are the same people who claim that the last recession was caused by a bursting asset-price bubble -- of an overheated real estate sector -- of a booming construction (and related) sectors--of over-accumulated capital--and over-accumulated debt. But now, apparently, these same people want to interpret the episode leading up to the crash as the economy just humming along at "potential." Strange.

In any case, on to Krugman's pet idea that asymmetry is explained by DNWR (downward nominal wage rigidity). Maybe there's something to this idea, but my own view is that any such effect is not likely to be very important. Why is this?

I've explained why before here, but let me summarize the argument here. I claim that economists who rely on sticky wage theories are unwitting slaves of Marshall's scissors--static supply and demand curves. If unemployment exists, it must be because reality does not correspond with scissor-intersection: markets do not clear.

But Marshall's scissors are meant to describe what happens in an anonymous spot market for goods like wheat or oil. The labor market is a market for relationships. Relationships are durable. Relationships are a form of capital. We have to move away from Marshall's scissors to understand these relationships (search theory is one way to do this). The economic surplus generated by a productive relationship is divided through a bilateral or multilateral bargaining process that specifies (among other things) how wages are to evolve through time over the life of the relationship. The spot wage (the wage that an econometrician might observe in a data set) plays no allocative role in the relationship. Stickiness in the spot wage does not matter.

That's the theory, anyway. But then, there is also some evidence: Evaluating the Economic Significance of Downward Nominal Wage Rigidity (Michael Elsby) and here: The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle (Beaudry and DiNardo).

Well then, if not a nominal rigidity, what might account for the asymmetry in the unemployment rate?


As it turns out, the sharp rise in unemployment followed by a slow decline follows as a natural property of labor market search models, something that I showed here (the example I alluded to above).

The basic idea is very simple. As I explained above, the labor market is a market for productive relationships. It takes time to build up relationship capital. It takes no time at all to destroy relationship capital. (It takes time to build a nice sandcastle, but an instant for some jerk to kick it down.)

We see the same sort of phenomenon in population dynamics--the so-called "heat wave effect." That is, mortality rates spike up during a spell of bad weather, causing a sudden decline in the population. There is no corresponding spike up in the population during a spell of good weather for obvious reasons (unless you believe in zombies returning suddenly to life).

***

PS. Some related papers where a shock destroys (reshuffles) match capital and takes time to recover: Adaptive Capital, Information Depreciation, and Schumpeterian Growth (Jones and Newman) and Distributional Dynamics Following a Technological Revolution (Andolfatto and Smith). 

I've written before that a desirable property of a monetary instrument is for it to hold its value over short periods of time (See: Why Gold and Bitcoin Make Lousy Money).

In other words, a good monetary instrument should have a stable short-run rate of return. If I earn some money today, I don't want to see its value decline by 50% tomorrow. If I spend a dollar today, I don't want to see its value rise by 50% tomorrow. Even if these fluctuations cancelled out in the long run, it would be terribly inconvenient and annoying. I'd rather live in a world where my money lost value at a slow but steady rate. Of course, I would not want to store my wealth in the form of such an instrument. But that's not how we store wealth anyway. To store wealth, we can always sell the money we do not need for transaction purposes and purchase other securities.

Now let's take a look at some data -- the type of data Ron Paul likes to use. Let p(t) denote the price-level at date t (I will use the consumer price index). Then 1/p(t) measures the purchasing power of money. If p(t) rises over time (inflation), the purchasing power of money falls over time. And so we have this familiar picture:


I've written about this before here: Ron Paul's Money Illusion.

Now, we can perform the same sort of exercise for gold. Let q(t) denote the USD price of gold at date t. Then the purchasing power of gold is measured by q(t)/p(t). So, if the price of gold rises as fast as the price level, the purchasing power of gold remains constant. If the former rises faster than the latter, then the purchasing power of gold is rising; and vice-versa.

We know that over very long horizons, the rate of return on gold exceeds that of money. But all this says is that gold is a better store of value than cash over long periods of time. (I discuss here whether gold is a good store of value relative to other assets.). How has the purchasing power of gold held up over the last little while?

Here is the purchasing power of gold vs the USD since the beginning of the year:

Gold can't even beat the rate of return on cash over a three-year horizon? That's pretty sad for a store of value.

Happy 100th birthday, Fed!

And a Merry Christmas to all.

PS. My colleague Christian Zimmermann points me to this potentially interesting paper: The Gold Dilemma by Claude Erb and Campbell Harvey.

Recap

In my last blog post, I recommended three alt coins to look out for: WorldCoin (WDC) , NXTcoin (NXT), and DogeCoin (DOGE). For those of you who followed my recommendations, I hope I helped you to make a decent profit. But for those of you who didn't, fret not, because there were 10 altcoins launched in the last 2 weeks alone, and so definitely more opportunities & recommendations coming your way!

I think one of the best ways to trade altcoins is to invest early in new, technically innovative, and strong (community, branding, developers) cryptocurrencies. Typically, I look out for certain technical aspects in a cryptocoin, including fast transaction times (1 minute or less), higher security, being able to overcome certain limitations Bitcoin possesses, or factors that can potentially give the altcoin more value. I also covered some important aspects of a cryptocurrency, such as marketing, branding, development and community in an earlier post here.

New Cryptocoins to Keep an Eye on: WorldCoin (WDC), NXTcoin (NXT), DogeCoin (DOGE) http://t.co/S7w525tRgy
— Alvin Lee (@onemanatatime) December 16, 2013

Since I recommended them on the 16th of December, we have seen a nice growth from each of them:

• WDC has risen from 0.0003 WDC/BTC to its current rate of about 0.0006; a 2x increase.
• NXT has risen from 800 Satoshis (0.00000800) per NXT, to a current price of 5500 Satoshis; a 6.8x increase.
• DOGE has risen from a low of 30 Satoshis per DOGE, to a high of 200 Satoshis (6x increase), and is currently trading at 85 Satoshis (3x increase).

As you can see from the previous post, both new coins (NXT, DOGE) made a good 6 fold increase, and I believe that we can expect the same huge growth for almost all subsequent new potential altcoins. The altcoin scene is growing at an exponential rate, and I will do my best to keep up with new coins and give you guys good recommendations. On a side note, it is interesting to see that even new clones (with no innovation) can end up gaining 10x or more value, so maybe it's all just a matter of first-mover advantage? And I'm not referring to DogeCoin, because I personally think DogeCoin has tremendous value in it's reach and backed up by a large community with a common emotional bond to the Doge meme, which matters A LOT in branding.

Introduction

So in this post, I want to cover another 3 cryptocoins to watch out for over the next weeks and months. 2 of them are so-called "2nd generation" cryptocurrencies, which have gained popularity recently since NXTcoin's rise to fame. It could be very interesting to see how these (and other newer) 2nd generation altcoins will develop over the next year, and what they can bring to the cryptocurrency table. Will these 2nd generation coins really be the beginning of something new, and spawn a new era of cryptocoins that have significantly more value/benefits than Bitcoin? I only found out about these 3 coins yesterday, and am excited to share them with you! Tell me what you think about them in the comments section below.

Credit goes to Twitter user @Tasorrog for introducing me to 2 of the coins I will be talking about here; eMunie, and SkyCoin. Lastly, I will also discuss another interesting altcoin, EarthCoin, that has some unique technical specifications, and also gained much attention since the 20th of December.

Thanks 4 recommending these 2nd gen cryptocoins: eMunie (eMu) & SkyCoin (SKY). Researching now; look out for my next blog post! @Tasorrog
— Alvin Lee (@onemanatatime) December 24, 2013

eMunie (eMu) was first announced sometime in June 2013, and has been in Beta testing since. It kinda went into hiatus for a few months, before picking up some momentum and attention again this month as people anticipate its official launch in January 2014.

Like NXT, there is no mining involved. But unlike NXT, eMunie has an infinite supply of coins, which interestingly is dependent on the demand of the coin. It is rather complicated, but user windjc succinctly explains it in an eMunie forum thread here:

"The entire beginning total of Emus will be created in 1 genesis block. 

Anyone can invest during the 30 day pre-launch investment period. The cost is .10 cents per Emu. So if the entire investment is $1 million, then the genesis block will contain 10 million Emus. 

Later as demand for emus increase, to keep price for going up dramatically, more emus will be "hatched" and those will be dispersed to both hatchers and coin holders. So by owning coins you will receive a % of the new coins. 

So there is eventually a limitless amount of Emu that will be created. It will depend on demand."

This will in turn keep prices more consistent, with a more sustainable growth compared to existing cryptocurrencies. In addition, it is also an attempt to improve fairness in coin distribution, and reduce susceptibility to Pump & Dump schemes.

To achieve this, eMunie will be launching with a pre-sale. Timb, a beta tester, pointed out on this thread about the pre-buys that there will be 100,000 EMUs available for the public during this pre-sale, and also discussed how the initial developers, contributors & beta testers will be rewarded for the work thus far. The pre-sale will last for 30 days. The exact date of pre-sale has not been confirmed, and was mentioned it will be delayed and would take a few more weeks, and that there's "no rush to completion by the developer".

I'm assuming this will be sometime end January, or early February, but don't take my word for it. To get the latest updates, sign up and be part of the pre-sale for eMunies by simply sending an email to prelaunch@emunie.com and they'll add you onto the list. For more information about the Pre-sale, please visit this comprehensive eMunie Pre-sale FAQ thread.

For more information on eMunie, here are a few more good sources to get your started:

• What is eMunie
• http://forum.emunie.com/index.php/topic/842-the-next-generation-digi-coins/
• http://www.reddit.com/r/eMunie/comments/1g5z72/emunies_original_post/
• http://forum.emunie.com/index.php/forum/3-emunie-discussion/
• http://forum.emunie.com/index.php/topic/115-newbies-read-me-first/
• Investing in eMunie
• http://forum.emunie.com/index.php/topic/619-as-an-early-investor-can-i-still-make-a-profit-from-holding/
• Pre-sale
• http://forum.emunie.com/index.php/topic/611-basic-questions-ahead-of-pre-sale/

SkyCoin (SKY) made its prelaunch announcement on the 22nd of December 2013. It has a total supply of 100 million coins, which like NXTcoin, requires no mining and all coins are already on the market. It uses the Proof-of-stake (PoS) system instead the Proof-of-work (PoW) system used by Bitcoin, and hence completely removes the mining process.

SkyCoin brands itself as a second-generation cryptocoin, and also boasts a quick transaction time of under 15 seconds, a higher level of security, and improved ease of use. Some of its features are listed as follows:

• Uses protocol called Obelisk instead of PoW. Obelisk is a provably secure PoW alternative for creating fair total orderings in decentralized systems with adversarial nodes. Obelisk was chosen over other proposals because it is provably secure and can be layered over Bitcoin's existing security model to eliminate the possibility of 51% attacks. 
• Transactions are free. Users receive coin-hours for each hour they hold a coin. Coin-hours are spent on transaction fees. Transactions bid to enter a fixed sized block. 
• Transactions are fast. Most transactions are executed within fifteen seconds. Off blockchain transactions are instant. 
• Inflation capped at 2% per year. Inflation will be used to fund open-source projects which enrich the community. Skycoin stakeholders will have per-project governance over project funding.

Depending on SKYcoin's entry-to-market price, we could see it grow in a similar fashion to NXT, as they both have rather similar specifications. I'm still unsure when SKY will officially launch, if someone out there knows, please let me know!

Note: This should not be confused with a dying altcoin, also named SkyCoin (SYC), but with a different ticker name.

Watch out for the new Altcoin; EarthCoin (EAC). Marketing & Branding looking good, Dev team & Community growing. https://t.co/yCrGSLwFF6
— Alvin Lee (@onemanatatime) December 23, 2013

EarthCoin (EAC) also recently launched less than a week ago, and a Bitcointalk forum post that started on the 20th of December has generated large amounts of attention and discussions, with over 75 pages of replies as of today. Apparently, the launch also attracted so much attention that the mining difficulty increased from 1 to 9 on the first day, before falling back down to 6.

EarthCoin is a Scrypt algo coin, with 60 second block target, a total of 13.5 billion coins, and a premine of 2% for support purposes. For more information on EarthCoin's technical specifications, visit this cryptocointalk introduction post. Although this altcoin is not as innovative as the previous two mentioned, it does have some very interesting technical differences. Cryptomaster highlights very well in an EarthCoin post on his blog, and an abstract is shown below:

"EarthCoin uses a 365 day period. It will start with 10,000 coins per block, and it varies in a sine curve with amplitude of 2,000, with a period of one year (like the Earth moving around the Sun). 

This means that you start with 10,000 coins, and it adjusts at each block, reaches a maximum of 12,000 coins per block after about 3 months, then it will descend gradually to approx 10,000 coins per block again at about 6 months. Then a new minimum of 8000 coins per block at about 9 months. 

Then we reverse that – to climb and return to 10,000 coins per block at one year, before finally cutting the payout in half."

Source: http://cryptosource.org/earthcoin-launches-neat-idea/

Lastly, I just wanted to comment on the issue of premining around EarthCoin. In again another of Hazard's post, this time calling EarthCoin a scamcoin because of the premine. There have been tons of coins with premines popping up lately, and it's sad to see that many have simply dismissed some potential altcoins because of the failure of others. Here's another discussion about the premine on Reddit.

In the case of EarthCoin, only 2% is premined, and is said to be "for promotions, giveaway, bounties, dev and long term support." First of all, they were transparent about it, and I think it is a rather reasonable rate. Of course, this is provided that the developers use the funds wisely, and aim for a fair distribution of the premined coins in exchange for a larger adoption/reach.

I have no clue how this is going to go in the end, but I don't have incredibly high hopes for it either. The main reason I have highlighted EarthCoin is because it is new, there is large interest in it, and is not currently on any exchange which means that we can expect a large growth as an early adopter.



This is only a preliminary investigation into these 3 cryptocurrencies. Please invest at your own risk. If you have questions or comments, feel free to leave them in the comments section below!

Always remember, Buy Low, Sell High! Avoid the herd mentality, and like Warren Buffet likes to say:

"Be fearful when others are greedy; and be greedy when others are fearful."

To end off, I'd like to share a video by Chris Dunn, a technical analysis & short term trader, whom I have been following for the last 3 or so weeks. He has made very good Bitcoin predictions over the last weeks (whether it's just luck or not, you decide for yourself), and also gives very good insight into understanding market psychology as a way to beat the market. If you like it, watch his other videos as well, and follow him on twitter @ChrisDunnTV.




Good luck trading. Peace.

Researching into more potential alt coins: NXTcoin (NXT), SecureCoin (SEC), Noirbits (NRB), YACoin (YAC), Argentum (ARG), WorldCoin (WDC).
— Alvin Lee (@onemanatatime) December 14, 2013

Alt coins that interest me: NXTcoin (NXT), WorldCoin (WDC), Globe (GLB), Dogecoin (DOGE). Anyone know anything, tell me more!
— Alvin Lee (@onemanatatime) December 15, 2013

NXTcoin (NXT) is a new cryptocurrency that is branding itself as a 2nd generation crypto that uses "a 100% new Proof of Stake currency with many exciting features in the pipline". It has 1 billion total coins, that are ALREADY fully in circulation. Mind-boggling huh. Read NXTcoin's specifications here on Cryptocointalk here. In fact, NXT has not officially launched yet. Read more about NXT on this wiki.

If it's still too confusing, here's a few videos that explains how NXT is different from Bitcoin:
Youtube: Introducing Next Coin - Bitcoin Litecoin - Nextcoin
Vimeo: What is NXT?

Here are also some points brought up by Reddit user Olliby in his post, How I think NXT could be a greater success:

No promotional webite - every coin needs a basic 'go to' official website to show they're a genuine product.

No Cryptsy support - traders of smaller crytpo-currencies love using Cryptsy, so talks need to begin to get this started.

Poor GUI - The actual visuals are great but the need to load a command prompt first makes the whole thing seem clunky, a single executable file is needed.

Tech support - A single email you could contact (on an official website) for all tech support issues would be great. I honestly think someone who has a big investment in NXTCoins could dedicate 30mins of their day to answer questions.

Lastly, this unofficial NXT forum is also a great treasure trove of information about this new cryptocoin. Read more here. If you are interested in purchasing some NXT, you can do so at this exchange, Dgex.com. I have tried it myself and seems to be legit, although it is quite difficult to get a position closed. If you have any questions, feel free to ask in the comments section below. You can also view NXT market prices on this spreadsheet.




DogeCoin (DOGE) is a totally ridiculous coin that is basically a clone of Litecoin with a shorter block time of 60 seconds (Source: Cryptocointalk - Dogecoin). In the short time since its launch, the DogeCoin Subreddit has grown to a size of 2500 subscribers, or as they like to call it, "rich shibes". You can find the current trading prices of DogeCoin at these sites, Dogepay, and DOGE Calc. I don't know how this is going to go, and it still sounds ridiculous to me. But in the alternative cryptocoin scene, I've found out that, albiet unfair, early adopters always win.

If you're interested to buy them, there are currently two options. Buy them from other sellers on forums, such as this subreddit, or this doge forum here. I personally don't recommend the first option, because there are lots of scammers out there on the Internet. The second option is to buy them from an exchange, currently there's only one that I know of; CoinedUp.

Disclaimer: Invest at your own risk!

Well, this is just a preliminary investigation into these potential alt coins. Please do not take this as investment advice. Do your own research before investing in any cryptocoin!

If you're interested to see how other crypto enthusiasts' portfolios look like, check out this Reddit discussion: What does your Crypto Portfolio look like?

I hope this post was helpful for you. If you have any questions, please shoot away in the comments section below! Wishing you an awesome week ahead, peace.

Fancy a donation?
WDC: Wc9MN3SURdTHyBJ2G4s2fPYNgyxEyi9LoF
NXT: 6635869272840226493
DOGE: D97CRC3JDgpdBZJppuDKHxRG6BSniLnkzS

Question: How much of the recent decline in LPR is due to a bad economy (cyclical factors)? And how much of it might be due to long-term trends associated with changing demographics (structural factors)?

The answer to this question is important for policy because a cyclical interpretation suggests the presence of an undesirable "output gap," whereas a structural interpretation does not.

Christopher Erceg and Andrew Levin have a new paper out which suggests that cyclical factors are responsible (Labor Force Participation and Monetary Policy in the Wake of the Great Recession). Much of their estimate of LPR trend, however, seems to be based on a particular BLS projection. On pages 9-10, they state:

In our view, the labor force projections published by the BLS in November 2007 serve as an invaluable resource in assessing the influence of demographic factors on the subsequent decline in the LFPR. In making such projections, BLS sta¤ consider detailed demographic groups using state-of-the-art statistical procedures in conjunction with micro data from the Current Population Survey (CPS) and various other sources, including interim updates from the U.S. Census Bureau.

But as the following figure demonstrates, BLS projections of trend LPR seem to vary quite a bit over time:

The figure above is drawn from A Closer Look at the Decline in the Labor Force Participation Rate (Maria Canon, Peter Debbaut, and Marianna Kudlyak). The authors state:

It is tempting to interpret the prerecession projections as reflecting the long-term trend in the LFP rate. However, we observed that the BLS's projections did not necessarily capture the long-term trend; rather, to a substantial degree, they were influenced by the most recent data points. Consequently, this cautions against treating the difference between the actual LFP in 2012 and its BLS projection released in 2007 as entirely due to cyclical factors.

[Note: Erceg and Levin do not rely solely on BLS measures of trend LPR. Much of their empirical work is based on state-level differences in labor market variables.]

It is of some interest to note that this is not the first time policymakers have been interested in the cyclical vs. structural decomposition of LPR. The same questions were being asked nearly a decade ago following a much milder recession (and jobless recovery).

In 2006, economists Stephanie Aaraonson, Bruce Fallick, Andrew Figura, Jonathan Pingle, and William Waacher published this interesting study: The Recent Decline in the Labor Force Participation Rate and Its Implications for Potential Supply.

The authors use a cohort-based model to estimate LPR trend. They state their conclusions as follows:

On balance, the results suggest that most of the decline in the participation rate during and immediately following the 2001 recession was a response to business cycle developments. However, the continued decline in participation in subsequent years and the absence of a significant rebound in 2005 appear to derive from other, more structural factors. Indeed, the participation rate at the end of 2005 was close to our model-based estimate of its longer-run trend level, suggesting that the current state of the labor market is roughly neutral for the participation rate. Finally, projections from the model suggest that many of these structural factors will continue to put downward pressure on the participation rate for some time, so that any future cyclical fluctuations in participation will take place around a declining trend.

The most remarkable picture they produce is, in my view, their Figure 12 (pg. 111):


Their 2006 forecast of the U.S. LPR for 2013 was 63%. Not bad.

 

As I have mentioned in my previous post, there are two main arguments against Quark (QRK).

First of all, the biggest argument lies in the "premining" issue. Let me clarify again, that Quarks were not "premined"! Instead, Quark was launched such that only a small number of early adopters were able to mine a majority of coins within 6 month timespan (99.64% already mined). However, the interesting thing about having almost all the supply out there, is that the price of Quark will stabilize much much faster than Bitcoin. Because Bitcoin will take another 20 odd years to be completely mined out, we could be speculating on the price for much longer than Quark.

Secondly, having a few people own a large number of coins leads to our second argument. How then, can we ensure a fair distribution of Quarks to the rest of the market, following the 6 month accelerated mining period? Sure, we can argue that it's unfair because the early miners get to sell the Quarks for massive profits. But doesn't that also apply to any other cryptocoin? In fact, the issue of fairness is as prevalant in Bitcoin as well as other cryptocoin mining. Bitcoin's mining power is currently being hoarded by the ASIC miners, which in turn gives GPU & CPU miners very little room for profitability. By limiting Quark mining to CPUs only, this can be argued to actually be more beneficial to the community, although it also does bring about a potential problem of Botnets mining from user's computers without their permission.

On another note, besides the technical specifications of each cryptocoin, I have also come to find that there are several other factors that affect a cryptocurrency's adoption, price, and eventual success. This includes:

1. Infrastructure
2. Community & Development team
3. Branding & Marketing

If we look at Bitcoin, it is clear that first-mover advantage is crucial as we can see with Bitcoin's clear lead in the Cryptocurrency market. However, this is not the only reason behind Bitcoin's success. Looking at the landscape chart below, we can see that the Bitcoin infrastructure is well developed with many services competing in various sectors, who are ultimately cooperating to build an ecosystem currently unrivalled by any other cryptocurrency.


In the context of Quark, the community has also been working hard to build up an extensive infrastructure and network. They have revamped their website to make it look much cleaner, and are already in the midst of launching Quarkspend, an ecommerce platform that uses Quark as currency of choice.

I love the energy coming from the Quark community. The work of the community is commendable, and is a prime example of the power of crowdsourcing. The community, not unlike the currency itself, is decentralized and each individual contributes his expertise with a common goal of developing the Quark ecosystem.

This closely knit group of Quark supporters have bonded together in the discussion forums (Quark Forum, and Quark Talk), and are currently developing an introductory video for Quark under their marketing thread here. Also, a user in the forums, Konrad pointed very aptly that the Quark community needs to:

"find out the path Megacoin took to promote Mega and build on it. Megacoin adds nothing new to Altcoins but look at the price, they are doing their marketing perfectly. Since Quark actually has something new to offer in the world of Cryptocurrency building upon Megacoin's marketing plan will increase the price at least 5x over."

Before we investigate the factors driving the success of MegaCoin, I'll first discuss about ZetaCoin. Like Quark, Zetacoin (ZET) has a supply of 160 million coins that will be mined out within a year, with a "small yearly inflation" (as can be seen here). And as such, will also see a quick consolidation in price, followed by a deflationary price for ZetaCoin. In this sense, we can similarly argue that ZetaCoin is to Quark, as Litecoin is like silver is to Bitcoin's gold. Over the last week, ZetaCoin has skyrocketed to its current 11th position on Coinmarketcap. ZetaCoin's value has grown about 5 fold over the last 4 days against BTC, from a low of 0.012 to a high of 0.12 and a current rate of 0.07. Moreover, the ZetaCoin dollar value has also increased from its sub $0.01 price to a current value of $0.065.

I also like the work of the development and community team at ZetaCoin. Unlike most other cryptocoin communities who use Forums to collaborate on their projects, ZetaCoin uses the Cryptocoin Social Network, Nobs.is, to discuss and develop their marketing efforts. The team is still young and there's still much work to be done, but I believe that they have a strong and motivated community, and are on the right track to making ZetaCoin succeed.

Quark, similarly, has also exploded into 4th place on Coinmarketcap. I still stand by my prediction that Quark prices will soon experience the Keiser Effect. And in the context of the analogy of ZetaCoin to Quark, I do believe that there is a huge potential for ZetaCoin to follow Quark's price. Just saying.




MegaCoin (MEC) launched in June 2013, and is a clone of Litecoin's scrypt crypto. It has a rather interesting specification which generates half of the total 42 million coins in the first 5 months, while the rest will be released over the decades with increased difficulty. The intriguing thing about MegaCoin is that it has climbed to the 7th position on Coinmarketcap in the short time that it has been around. As such, we will take MegaCoin as a case study to explore how the other cryptocurrencies can learn from them to better brand and market their cryptocoins.

With a quick content analysis of the MegaCoin website, we can see a well-built website, with a clean simple design, and full of useful links. Apart from the usual informational and download links, I want to also highlight how they have implemented a "shopping & services" tab to allow users to easily spend MegaCoin, a community link for easy access by users, as well as links to their social media accounts. The website also boasts a wide range of translated versions, with 15 different languages, including English, Mandarin, Korean, and many other European languages. We can also find an active community of MegaCoin supporters on their forum and the Reddit page.

With this, I would like to make a few suggestions for the Quark and Zetacoin community.

1. Revamp homepage to include more links to community sites
2. Social Media integration on website
3. Increase engagement on existing networks such as Reddit (instead of focusing on internal community platforms)
4. ZetaCoin should build a platform to allow users to spend their cryptocoins.

I hope this article has helped you better understand some of the external factors that drive a Crytpocurrency's adoption and price. It will also be interesting to also examine and compare the other leading alternative cryptocurrencies. With most of them being simply a fork of or a clone of Bitcoin/Litecoin, I'm really curious about what determines a certain cryptocurrency's price (besides it's technical characteristics). Of course, first-mover advantage is crucial, as we can see with Bitcoin's clear lead. But I have a hunch that the community, branding, and marketing of a cryptocurrency also play a big role in its success.

If you still don't know what Quarkcoin (QRK) is, Jason explains it pretty well in his recent video below.

Since Bill Still talked about Quark in his recent video, it has exploded within the Bitcoin community and has received huge critism, with many dismissing it as a "scamcoin" or a "pump and dump" scheme. See the Reddit discussions below for more information.

Reddit: Are we being mislead by Quarkcoin Propaganda? 
Reddit: Pump and Dump scheme

nice to see someone else hasn't lost their fucking mind. http://t.co/IrMJjUG094 attacking #quark and the fraud it's built on. #nicejob
— BitcoinSachs (@BitcoinSachs) December 2, 2013

Apart from Quark being more secure by using 6 different hashing algorithms, I have yet to be able to find any substantial evidence that this coin is "not a scam" or "better" than most other alts out there. The conversations about Quark have exploded in Reddit over the last few days, and the most asked question is regarding the issue of 98.9% of the Quarks being already mined out.

In fact, almost everyone in the Bitcoin community has been calling Quark a scam, and saying that the heavily vested (Max Keiser & Bill Still) are overhyping a premined coin for their own profits. However, someone like Bill Still or Max Keiser pumping a "useless" coin solely for their own benefits seems like a stupid thing to do. In my opinion, there has to be a better reason as to why they really believe so!

Also, I want to emphasize that Quarks were NOT pre-mined! Instead, the 98% of Quarks that have already been mined were mined by a community of ~100 or so people, who in the case of Quark, will be the central nodes of distribution for Quarks. This then leads to the more important question, how can the Quarks held by 100 people be fairly distributed among the rest of the new adopters?

This was covered in depth in a few discussions that I found, but there is still no concrete answer to the question posed.

1. Quark Forum: Decentralization and Supply of Quark
2. Reddit Discussion: How to answer the Premining question
3. Quark Forum: Question Pre-Mining

The closest answer we have lies in Quark's design. QRK is designed in a way that only CPU mining is efficient. Quark is being mined during a short period of time, which discourages GPU or ASIC miners and keeps the coin fair since Developing ASIC miners takes considerable time and man power. Quarks are mostly mined by early miners, and have been well distributed before the value of this coin goes high like Bitcoin. So there are no ASIC miners and hence we don't have a case where a minority of privileged people mining using specialized hardware gain big profits. From this point of view, Quark is more decentralized since virtually everyone (rather than certain groups of people with special hardware) can mine it; the likelihood of monopolization is smaller.

[Source: Quark Forum: Decentralization and Supply of Quark, Quark Forum: Question Pre-Mining]

Secondly, from the official information posted on Cryptocointalk, it is interesting to note that the supply of QRK is inflationary, wtih a total of 247 million QRK will be mined in ~ 6 months, after that ~ 1 million QRK p.a. (~ 0.5% p.a inflation). This is interesting because it is a completely opposite take on Bitcoin's limited supply. And this means that the value of QRK is deflationary.

Thirdly, Quarkcoin also brings with it several technical benefits when you compare it to Bitcoin, as pointed out by user majormax (see the discussion here). Some of them are listed below:

1. Secure and different Hashing algorithm. 9 rounds of hashing from 6 hashing functions, rather than a single Hash function, which most coins use. Although the single hash function is considered sufficient at present, the multiple hash gives a further layer of security against future unknowns.
2. Rapid block generation times. The block generation time for QRK is 30 seconds against 10 minutes for BTC.
3. A rapid decrease in the Mining Subsidy. This increases scarcity at a greater rate: the newly mined coins available for sale do not affect market price as much as other alternative currencies.

I have also compiled some Quarkcoin related news, which I recommed you watch/read before investing in Quark.

1. http://www.reddit.com/r/Bitcoin/comments/1rvcpd/bill_still_to_talk_about_cryptos_on_the_max/
2. http://dailysilverupdate.com/blog/2013/12/max-keiser-bill-still-on-bitcoin-litecoin-quarkcoin-prices/
3. http://www.youtube.com/watch?v=7daKwO3cgiU
4. http://www.reddit.com/r/Bitcoin/comments/1rwfni/shame_on_you_bill_still_you_hate_on_bitcoin_for_2/
5. http://www.reddit.com/r/Bitcoin/comments/1rr4eg/keiser_promoting_another_scamcoin_pump_and_dump/
6. http://www.reddit.com/r/QuarkCoin/comments/1rxcs4/stop_pulling_out_of_quark_there_is_nothing_to/

After doing this preliminary research, I still have no clue as to whether or not Quark will be here to stay. On the other hand, Quarks will soon experience the Keiser Effect, and I'm not going to miss this boat. I will continue to research into Quark, and buy more (as the price decreases, just my prediction) until it rises after the 19th of December, when Keiser Report airs. Don't forget to vote on my Quark poll on the right column! Also, please tell me what you think in the comments section. Whether not you agree or disagree with me, I just want to know what you think, so shoot me!

Another coin to watch is Zetacoin, which also has an infinitely inflationary supply. Read up more about Zetacoin by clicking here. Also, watch out for Bitcoinsachs' upcoming blog post or follow his Twitter account @BitcoinSachs. Might cover that over the weekend. Stay tuned!

All this Bitcoin craze has inspired me to make my first Meme ever! I call it To Le Moon, enjoy!

Or this guy?

Since I mentioned a resistance/support of $50/$25 for LTC in my post from 2 days ago, LTC prices have found it's support at $23.51, and has risen over the last 4 hours to it's current BTC-e price of about $32. Hold on tight to your Litecoins because I think prices are going to continue going up and break the $50 resistance by Friday, probably earlier. I wasn't thinking of writing a post today, and I still owe you a post about Panic selling/buying & Bull/Bear traps, but I found some interesting topics to write about that will interest you altcoin and crypto junkies.

What really triggered this blog post was a tweet I saw by Keiser, featuring Quarkcoin (QRK) alongside Bitcoin and Litecoin as the cryptocurrenies of choice. I first saw the word Quarkcoin when it broke into the top 10 market cap with over 300% increase in market capaitalization value overnight.


I overlooked it even after seeing it rise from 6th to 5th, until I saw what Keiser tweeted:

If Jesus were born today, the 3 wise men would bring him BTC, LTC and Quark.
— Max Keiser (@maxkeiser) November 30, 2013

If Keiser said it, it has to be worth something. With his reach and influence within the Bitcoin community, we could see a huge jump in Quark prices soon, even if it doesn't have much value. From my research so far, I found out that Quark uses nine rounds of secure hashing from six different algorithms to make Quark transactions super secure. Many programmers have been worried about whether or not the Bitcoin protocol is hackable, but Quark has just made it even closer to impossible by using a mix of algorithms. On the other hand, what intrigues me is that 98.9% of the Quarks have already been mined (see the Reddit discussion here), which makes me wonder how this is a good thing. If you know how this is beneficial to the community, please drop a comment down below! Greatly appreciated!

Apparently the prices surged after a video of Bill Still, a legendary Economics cult figure went viral among the Bitcoin community. What's notable is that Bill will be appearing on a Keiser Report interview, which airs on the 19th of December, so keep your eyes peeled.

http://t.co/3hKy9t93DS WILL INTRODUCE QRK IN THE COMING DAYS!! CHINA IS COMING!!
— Mega Coin Pumper (@MegaCoinPumper) December 1, 2013

During my research into Quark, I found out about Zetacoin (ZET). The prices of Zetacoin have increased 550% against the bitcoin, with ZET/BTC prices skyrocketing from 0.0065 at the beginning of 30th November to a peak of 0.055 and is currently hovering around 0.036 at the time of posting (Source: Cryptocoincharts.com). Looking into Zetacoin, I found that it actually has an inflationary characteristic. There are a total of 160 million Zetacoins, and upon the depletion of this initial supply, 1 million additional Zetacoins will be added to the supply every year. This is quite a different take from the limited supply of all other cryptocurrencies, and could be an interesting tweak that can potentially solve some of Bitcoin's existing limitations.

I'm still not entirely sure about the benefit and utility of Zetacoin, but I'm going to jump on the bandwagon and bet on the hype of the Zetacoin, while I do more research over the next few days.

Buy #zetacoins. A million of something doesn't take much increase to make a small fortune. #zetacoin up 80% today
— BitcoinSachs (@BitcoinSachs) November 29, 2013

Everything is a buy right now. $0.05 zetacoin is a great price. $0.25 on Monday
— BitcoinSachs (@BitcoinSachs) December 1, 2013

If you don't own at least 100k zetacoins you're going to spend a life time regretting that
— BitcoinSachs (@BitcoinSachs) December 1, 2013

To buy either of these 2 cryptocurrencies, along with almost any other alt coin out there, set up an account at Cryptsy.com to get started! I only started my account today, and I've had a pretty decent experience so far. Still some problems with the site such as:

1. Deposits take way longer than they should. Bitcoin deposits take about 45mins to 2 hours.
2. Cancellation of open orders will result in your funds being "stuck" in limbo for up to an hour.
3. It took 45 mins for my account verification email to arrive. 
4. Interface is less responsive (laggier) than I would prefer.

I think its just a problem with them being unable to handle the surge in traffic over the last 5 days, and I hope that fix it soon. But apart from these problems, looks really good, and I'm definitely using this over BTC-e from now on.

I hope this post was useful for you. These are my own views and thoughts, which like the Bitcoin market, is largely driven by speculation. Follow my recommendations at your own risk. With that said, to all of you guys holding Quarks and Zetacoins, I'll see you on the moon and give lets China's Chang'e-3 a surprise! ;)


http://bitbash.blogspot.sg/2013/11/quarkcoin.html
http://www.reddit.com/r/Bitcoin/comments/1rmuf8/quark_coin_is_up_450_since_yesterday_got_any/
http://www.reddit.com/r/QuarkCoin/comments/1rrrqe/welcome_to_quarkcoin_as_btce_would_put_it_to_the/

Source: Bill Still on Quark

And lastly, we could see Quark on a Chinese exchange over the next few days. If this is true, you better get your Quarks as soon as you can!

The answer may be "yes," according to a new paper by Steve Williamson. In examining the effects of a QE experiment in his model economy, he reports the following (p. 16):

Some of the effects here are unconventional. While the decline in nominal bond yields looks like the "monetary easing" associated with an open market purchase, the reduction in real bond yields that comes with this is permanent, and the inflation rate declines permanently. Conventionally-studied channels for monetary easing typically work through temporary declines in real interest rates and increases in the inflation rate. What is going on here? The change in monetary policy that occurs here is a permanent increase in the size of the central bank's holdings of short-maturity government debt - in real terms - which must be balanced by an increase in the real quantity of currency held by the public. To induce people to hold more currency, its return must rise, so the inflation rate must fall. In turn, this produces a negative Fisher effect on nominal bond yields, and real rates fall because of a decline in the quantity of eligible collateral outstanding, i.e. short maturity debt has been transferred from the private sector to the central bank.

So what happened? It all started out by Williamson discussing two "fearsome equations" that emerge as theoretical restrictions in a wide class of macroeconomic models. Some people call these restrictions "Fisher equations." I like to think of them as no-arbitrage-conditions.

Let's make some assumptions. There is no uncertainty. We are (the model economy is) in a state-state, so that output grows at the gross rate G. The level of output may be above or below its "natural" level (the level that would prevail if all frictions were absent). Let B denote the discount factor. Absent all frictions, the "natural" rate of interest is given by (G/B).

Let P denote the gross rate of inflation. There are two nominal assets, a bond that yields a gross nominal return R >= 1, and money, which yields a gross nominal return equal to 1. Money is assumed to be more liquid than bonds (bonds cannot be used in a subset of transactions).

The "Fisher equations" that emerge from the model can be written as follows:

[1] R*K = (G/B)*P and [2] 1*L = (G/B)*P

where K and L denote "liquidity premia." In most models, K=1. In this case, the two equations above imply R = L. That is, the liquidity premium on money is equal to the nominal interest rate.

In the "newmonetarist" models that Steve studies, assets apart from money may serve in some manner as exchange media. If financial markets do not work perfectly well (say, because of limited commitment and asymmetric information frictions), then the supply of exchange media may be "scarce." In the present context, this implies K>1, and equations [1] and [2] imply: R*K = L.

The traditional Friedman rule policy implies R = 1, K = L =1, so that P = (B/G). But Steve is assuming the government does not have enough instruments to implement the Friedman rule. In fact, he makes a distinction between the monetary and fiscal authorities. And, as he stresses in his paper (not his blog post), a lot hinges on exactly how one models this relationship.

One scenario that emerges in Steve's model is R =1 and K = L > 1. In this case, the economy is at the ZLB, but government liabilities (cash and bonds -- they are perfect substitutes in this case) exhibit a liquidity premium. On open market operation of cash for bonds in this case has absolutely no effect -- this is the classic liquidity trap -- something that Krugman stressed long ago. From [1] and [2], the equilibrium inflation rate is given by P = (B/G). The equilibrium real rate of interest on government liabilities is 1/P = G/(B*L), which is less than the "natural" real rate of interest (G/B). This is the sense in which the real rate of interest is "too low." (Of course, if you have a different theory of the way the world works, you may be thinking that the real rate of interest is "too high"--but I'm not here to talk about that theory.)

Suppose that the bond we are talking about above is a short-maturity instrument. Imagine that the fiscal authority also issues a long-maturity instrument. Moreover, assume that this long-bond is less liquid than the short-bond (the short-bond is, in present circumstances, viewed as a perfect substitute for cash). Steve then asks what the model implies when the open market operation consists of a swap of cash for the long-bond. In this case, not surprisingly, QE matters. But how does it matter?

The effect of this policy in Williamson's model is to lower the nominal interest rate at the long end of the term structure. Because the Fed is sucking out relatively less liquid assets and replacing them with relatively liquid assets, liquidity premia decline (as one would expect). So, if we take a look at equation [2], we see that the model implies that inflation must decline: P = (B*L)/G. What is the economic intuitions for this? Evidently, one of the effects of QE (in the model) is to increase the real stock of currency held by the private sector, and agents require an increase in currency's rate of return (a fall in the inflation rate) to induce them to hold more currency. (Remember that the results are all contingent on the way monetary and fiscal policy are modeled.)

So this is kind of interesting for a couple of reasons. First, the model offers an explanation for why we do not observe deflation, given that we are at the ZLB (a bit of a puzzle, for conventional theory.) Second, it offers an explanation for how QE may be putting downward pressure on inflation. How quantitatively important these effects are relative to others remains an open question.
 
Krugman and DeLong seem to want to argue that Williamson's results are "incorrect" because the model equilibrium he is focusing on is "unstable." I'm pretty sure I know where they're coming from, but I'm not sure that the criticism applies here.

First, to demonstrate the "stability properties" on an equilibrium, one actually has to go and work out the math. I think it's fair to say that nobody has done that.

Second, what Krugman writes in his "Little Arrows" post is correct, but it is correct only in the context of a particular theory. As I've mentioned before, Peter Howitt demonstrates here how pegging the nominal interest rate is unstable under a wide class of algorithms that govern the manner in which inflation expectations are formed (essentially, adaptive expectations). This led Howitt to argue that stability required a policy to raise interest rates more than one-for-one with inflation expectations. Hence, Howitt came up with the "Taylor principle" before Taylor did.

It is interesting to note, however, that the "stability properties" induced by the Taylor principle in standard New Keynesian models (which embed rational expectations) is something very different. At the opposite extreme, one might take the view that inflation expectations are formed in a manner described here, by Stephanie Schmitt-Grohe and Martin Uribe. Let me reproduce the diagram I used in that blog post here:


As you can see, it is identical to Krugman's "Little Arrows" diagram. The one big difference here is that--under this particular theory of expectations formation--rational expectations--A is unstable and B is stable. So the "little arrows" run in the opposite direction here.

The little circle in the picture above demonstrates how the New Keynesians use the "Taylor principle." Essentially, they restrict attention to trajectories around the steady state point A that never leave that circle. If the Fed follows the Taylor principle, then there is only one point that satisfies this property, and it is point A. Viola-we say that point A is "locally stable" (Yes, I know it sounds weird, but I'm just reporting the facts.) In their Perils of Taylor Rules, Benhabib, Schmitt-Grohe, and Uribe argue that only point B (the liquidity trap) is globally stable. (The fact that Japan has spent decades around a point like B suggests that it may in fact be stable.)

The other thing I'd like to add is that Williamson's results continue to hold even away from the ZLB. So, Krugman's post in particular, which focuses on the properties of Taylor rules (absent in Williamson's model) seems a little off target.

So my interpretation of the criticisms I am hearing of Williamson's paper is that his critics are claiming that he is wrong because his results are inconsistent with the type of models these people are used to working with. It seems to me that the critics should have instead attacked his results and interpretations with empirical facts (or am I too old-fashioned in this regard?). After all, Williamson at least motivated his post with some data (the diagram at the top of this post). And he makes what is potentially a testable prediction (notice the if-then structure of the statement):

In general, if we think that inflation is being driven by the liquidity premium on government debt at the zero lower bound, then if the Fed keeps the interest rate on reserves where it is for an extended period of time, we should expect less inflation rather than more.

I have a little more difficulty in understanding Nick Rowe's objection. Certainly, a part of it seems to be what I just described above. Partly, I think that Nick is disagreeing not with Williamson's model, but with the way Williamson seems to run off at the end of his post with his "the Fed is in a trap" ideas.

And so, this now leads me to my own criticism of Williamson's post.

I wish he had spent a little more time elaborating on this statement he makes:

But the power of monetary policy to mitigate the inefficiency is limited. Basically, it's a fiscal problem. The U.S. government could issue more debt, by temporarily running a higher deficit. But that's not happening, so what can the central bank do about it?

It's a fiscal problem (well, the fundamental problem is limited commitment and asymmetric information in these models). The Treasury could alleviate the "asset shortage" by expanding the supply of Treasury debt! I discussed this idea here some time ago: Not Enough Debt? So isn't this nice? Different models, but similar policy conclusions. Implicitly, Williamson is taking the view that political constraints are preventing this from happening, so let's move on to study Fed policy.

The tone of his post near the end strikes me as odd. He seems rather critical of the way Fed economists generally think about the way monetary policy works. Fair enough. On the other hand, if we read his paper we find the following statement:

QE is a good thing, as purchases of long-maturity government debt by the central bank will always increase the value of the stock of collateralizable wealth.

That is, QE is a good thing in his model economy. In fact, I think his model suggests that the Fed should buy up all outstanding treasury debt (but that even that would not be enough because the problem is the limited supply of the stuff).

So what's his problem? Well, it seems that conventional Fed thinking is that QE is inflationary and, well, as Williamson's paper shows, it may have the opposite effect. O.K., well, so what?

Then Williamson remarks that if the Fed really wants inflation, it should raise its policy rate (IOER). This, of course, is the statement that drew all sorts of criticism when Narayana Kocherlakota suggested something similar a few years back (thanks to Nick Rowe for once again starting that one). Williamson believes that raising the policy rate would be disruptive in the short-run, but that this is the way to achieve higher inflation in the long-run. I am not sure, however, whether his model suggests that higher inflation is a good thing (I don't think so.) These are all positive (not normative) statements.

So, the Fed is "stuck." That is, the Fed seems compelled to continue QE and keep the IOER at 0.25%. Williamson's model seems to suggest this is a good thing. But his model also suggests that the policy is ultimately deflationary (perceived to be a bad thing). The only way to prevent this trajectory is to raise the IOER (another way would be to expand the supply of treasury debt). But doing so will cause a recession because of monetary non-neutralities.

Not sure what any of this has to do with eating more crow though. What would the Fed be doing differently if they took this view? Not much, as far as I can see.

Williamson describes these findings on his blog here: Liquidity Premia and the Monetary Policy Trap. 

Well, it must have been a slow news day on the economics front. The normally mild-mannered Nick Rowe set off a tempest in a teapot when he wondered out loud what "went the hell went wrong with the best and brightest in the profession?"  Nick's little tirade was then picked up by the charming duo of Brad DeLong and Paul Krugman.