Gerald Cotten, founder of the largest Canadian cryptocurrency exchange, passed away on Dec. 9 from complications related to Crohn’s disease while away on a trip to India.  The founder of QuadrigaCX was reportedly building an orphanage in India at the time of his death.

According to a report by The Wall Street Journal, shareholders of the exchange say some $136 million (C$180 million) worth of customer holdings remain inaccessible because the founder died without sharing the password.  Mr. Cotten’s wife, Jennifer Robertson, is in possession of the laptop which holds the customer funds, but so far, the company’s attempts to break into the laptop, including hiring a security consultant, have all failed.

In a court filing last week, Robertson claimed that she was not even sure if the funds were held on the laptop, some 26,500 bitcoin, 430,000 ether, 200,000 litecoin, 11,000 bitcoin cash, 11,000 bitcoin cash SV, and 35,000 bitcoin gold – totaling some $147 million according to the affidavit.

Robertson and two other executives took control over the company after Cotten had passed, and filed for creditor protection in an attempt to suspend any customer lawsuits, while it tried to buy time and find a solution.  A Nova Scotia Supreme Court judge granted the exchange its application, giving it a 30-day stay.  In a statement provided on its website, available here, the company said,

“Over the past weeks we have worked extensively to address our liquidity issues…we are operating under the assumption that a solution will not be reached in the near term,” providing uncertainly as to when or if, customer funds will be made available.  Depending on the type of security implemented on Gerald’s laptop, it may be possible that the funds are permanently frozen.  The website had been experiencing uptime issues in the weeks prior, with customer reporting difficulty in withdrawing funds.

Still, some experts question whether or not the exchange even had the funds to begin with.  Cryptocurrency analyst, James Edwards who publishes research on a website called Zerononcense, has collected information from more than 50 Quadriga clients.  From his analysis, he was unable to find any transactions going into the kinds of reserve accounts Quadriga claims it has.

“None of the withdrawal addresses provided by customer led to a wallet that could be considered anything comparable to a ‘reserve’ wallet,” Mr. Edward wrote.   A summary of the reports finding are below:

1. It appears that there are no identifiable cold wallet reserves for QuadrigaCX.
2. It appears that QuadrigaCX was using deposits from their customers to pay other customers once they requested their withdrawal.
3. It does not appear that QuadrigaCX has lost access to their Bitcoin holdings.
4. It appears the number of bitcoins in QuadrigaCX’s possession are substantially less than what was reported in Jennifer Robertson’s (wife of allegedly deceased CEO and Owner Gerry Cotten) affidavit, submitted to the Canadian courts on January 31st, 2019.
5. At least some of the delays in delivering crypto withdrawals to customers were due to the fact that QuadrigaCX simply did not have the funds on hand at the time. In some cases, QuadrigaCX was forced to wait for enough customer deposits to be made on the exchange before processing crypto withdrawal requests by their customers.
6. After completing the analysis, it is the author’s opinion that QuadrigaCX has not been truthful with regards to their inability to access the funds needed to honor customer withdrawal requests. In fact, it is almost impossible to believe that this is the case in lieu of the empirical evidence provided by the blockchain.

MyCrypto founder and CEO, Taylor Monahan came to the same conclusion, “I haven’t seen anything indicating a large reserve or cold storage mechanism being used on the Ethereum chain,” she explained.

Others cast doubts that the story about Cotten’s death adds up at all.  The outspoken CEO of prominent cryptocurrency exchange, Kraken, posted on Twitter, “As far as I know, a death certificate has been produced by a Canadian funeral home.  Who knows if it’s legit.  We also don’t know if there were any witnesses or an autopsy, or whether any authorities in Canada have seen the body and verified the identity.”

Gerald Cotton filed a will just 12 days before his death, listing substantial assets according to a report by Bloomberg.  The court documents reveal that he had left all assets to his wife and made her the executor to his estate.  Of the assets listed were “several properties in Nova Scotia and in Kelowna, British Columbia, a 2017 Lexus, an airplane, a Jeanneau 51 yacht and his pet chihuahuas, Nitro and Gully. He also left his frequent flier points and reward points to Robertson. He held accounts with Bank of Montreal and Canadian Tire.”

The international cryptocurrency market enjoyed a few golden years prior to 2017, but the shine has started to wear off as people began to realize the bubble effect being created by disproportional media hype.

For a little while there, people were making glorious profit from their cryptocurrency investments. Like all booms however, it didn’t take too long before there was a rush, and not everyone who was rushing to release an ICO was really qualified to do so.

Not that there’s an official qualification required, but that more than a few of those ICOs were being issued by people with no real solid background in either finance or technology. A string of embarrassing cryptocurrency failures later, and the whole of the market, including top performers like Bitcoin and Ethereum, was paying the price for the misadventures of a few.

That tends to happen when people see vast fortunes wiped out due to unguided speculation on unproved technology. It’s this kind of problem that slammed the brakes on the cryptocurrency growth rate.

This could actually be a fantastic opportunity

Figuring out the real value of a cryptocurrency is not something that can easily be done. It’s not like investing in stocks or shares where there are easy metrics to base calculations on. Much of what makes a particular cryptocurrency valuable is the market’s opinion of it.

The best way to go forward is research carefully what blockchain sectors a currency is focusing on, and anticipate which sectors seem to have the best long term growth potential.

If you can accurately predict where the demand is likely to originate from, then you are setting yourself in the best position for when a surge in investment comes along. This is the real money making potential of investment in blockchain based currencies, and it is far better to get in early than to wait for the market to move in ahead of you.

With this type of investment, diversification is not as important as it is in most other investment types, but still you should be cautious of putting all your eggs in one basket.

Spreading the risk carefully over a handful of options will give you some protection against short term falls, and also means you have something on hand to trade so you can take advantage of short term gains. Investing in cryptocurrency is not difficult, it just requires common sense and a bit of research to make sure you’re backing a technology that is going places.

There has been quite a bit of resistance within banking circles and certain governments to the growth of blockchain based currencies, and considerable negative press has been launched which could be regarded as a propaganda campaign intended to undermine the public’s faith in decentralized currency markets.

Even though the face value of the major cryptocurrencies has fallen during the past year, these currencies are far from keeling over. In fact, they are still going strong and won’t be that easy to get rid of. Worldwide economies will need to adjust to the presence of decentralized competition, and this is a good thing because it provides people with an alternative to the traditional economic system while simultaneously not excluding them from it.

At the extreme end of the anti-crypto movement, there are murmurings of the desire to exclude people from the option of using cryptocurrency. Given the nature of cryptocurrency, however, it’s very unlikely that bans will prove effective.

Countries which have already banned cryptocurrency include Algeria, Bolivia, Cambodia, Ecuador, Egypt, Morocco, Nepal, and Pakistan. Implicit bans exist in Bangladesh, China (excluding Hong Kong), Colombia, Indonesia, Iran, Saudi Arabia, and Taiwan.

Countries where cryptocurrency is legal but there is a banking prohibition or heavy restrictions include Canada, India, Jordan, Thailand (easing), and Vietnam.

The problem for these countries is that the currencies exist on the Internet. There is no enforceable way for any individual territory to prevent citizens from participating in this economy.

Bans are pointless and set countries back

A citizen of Algeria wishing to speculate in cryptocurrency merely needs to ensure that none of his or her trades are executed inside the borders of Algeria. Traveling outside the country is one option, but VPN and proxy technology make it unnecessary. It is just too easy to thwart bans, making it pointless to enact them.

The serious downside for countries that ban cryptocurrency is that this denies local businesses the opportunity to participate in the lucrative blockchain industry, consequently stifling innovation and research. This sets those countries back, where other countries around them are able to make advances.

Right now that’s not a very big problem, but in the future the results will be easy to see. Those who are surging forward with blockchain innovation now will be very far ahead of the territories which don’t allow use of cryptocurrency (an essential unit of payment needed for blockchain applications).

No matter where you live, you should be able to invest in this technology. The artificially created bear market won’t last, and this has to be a great time to buy into crypto while the prices are holding steady.