richard bove on bitcoin letter 1 - bitcoin revisited

Monday, December 02, 2013 Bitcoin Revisited

P L E A S E S E E I M P O R T A N T D I S C L O S U R E A N D A N A L Y S T C E R T I F I C A T I O N L O C A T E D I N T H E A P P E N D I X O F T H I S R E P O R T .

Still Struggling to Understand

Richard X. Bove Vice President Equity Research

Financial Sector [email protected]

813.388.2900

Price Explosion On August 12, 2013, Rafferty Capital Markets released an initial report on Bitcoins entitled Reserve Currency/Bitcoin and Babel. The thrust of that comment was that despite the numerous problems with Bitcoins, the cryptocurrency continued to grow. Therefore, it was assumed that there were compelling reasons for this currency to exist and that it would continue to grow in usage. At the time the report was released Bitcoins were reported as selling on the Mt. Gox Exchange at an average weighted price of $106.09 per coin. On Friday, the reported average weighted price, per coin, on the Mt. Gox exchange was $1,155.30. The price had increased by 989% in three and one-half months.

Reducing the Unknowns This literal price explosion suggested taking another look at this currency to determine what is driving its success. I still find that what I do not know or understand about this currency and the cryptocurrency phenomenon far outweighs what I do know. Therefore this report will segregate the two issues, what I know and what I do not know, in an attempt to provide at least some information concerning what is happening here. What I Think I Know Cryptocurrencies Cryptography has a number of meanings depending on which dictionary one chooses. Merriam Webster defines it as: “the process of writing or reading secret messages or codes.” The cryptocurrency glossary written by CoinDesk broadens the definition. “[Cryptography is] the use of mathematics to create codes and ciphers that can be used to conceal information. It is used as the basis for mathematical problems to verify and secure Bitcoin transactions.” In sum, cryptography is used to create crypto currencies. And, as shown on the following page, there are a large number of these currencies in place; although, only one has developed a universal position – i.e., the Bitcoin. The listing shown here is from Wikipedia but there are many such listings available.

$0.00$100.00$200.00$300.00$400.00$500.00$600.00$700.00$800.00$900.00

$1,000.00$1,100.00$1,200.00

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/201

0

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0

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010

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2010

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13

Dolla

rs

Weighted Bitcoin Prices as Reported by the Mt. Gox Exchange

mailto:[email protected]



These currencies can be mined directly for those with a knowledge of programming and access to computers with enormous capacity. However, the currencies are also traded through exchanges literally in every region of the world and in every major fiat currency. Buying them in the open market is not terribly difficult. Note the listing of exchanges on the next page derived from Bitcoin Charts.

Cryptocurrency Code

Est. Founder Active Website Market Cap CommentsBitcoin BTC 2009 Satoshi Nakamoto Yes http://bitcoin.org $9,300,000,000 Decentralized ledger currency;SHA-256 proof-of-workLitecoin LTC 2011 Coblee Yes http://litecoin.org $1,000,000,000 Scrypt proof-of-workPeercoin PPC 2012 Sunny King Yes http://peercoin.net $43,300,000 SHA-256 proof-of-work/proof-of-stakeInfinitecoin IFC 2013 fisheater Yes http://infinitecoin.org $6,600,000 Scrypt proof-of-work; 30 second goalNamecoin NMC 2011 Vinced Yes http://dot-bit.org $4,700,000 SHA-256 proof-of-work; decentralized DNSNovacoin NVC 2013 Balthazar Yes http://novacoin.org $2,500,000 Scrypt proof-of-work/proof-of-stakePrimecoin XPM 2013 Sunny King Yes http://primecoin.info $2,200,000 Scientific use proof-of-workFeathercoin FTC 2013 Peter Bushnell Yes http://feathercoin.com $2,000,000 Scrypt proof-of-workWorldCoin WDC 2013 Yes http://worldcoinfoundation.org $1,500,000 Scrypt proof-of-work; target 30 secondsCopperLark CLR 2013 Yes http://copperlark.com $710,000 SHA-3 (512 bit keccak) proof-of-workTagCoin TAG 2013 Mark Vernon & Tagbond Yes http://tagcoin.org $450,000 Scrypt proof-of-work/proof-of-stake; 4-minute blocksDevcoin DVC 2011 Unthinkbit Yes http://devcoin.org $450,000 80% developers; 10% to administrators; 10% minersMinCoin MNC 2013 SandyCohen Yes http://min-coin.org $350,000Megacoin MEC 2013 Yes http://megacoin.co.nz $310,000 Scrypt basedIxcoin IXC 2011 Nasakioto Yes http://ixcoin.org $273,000DigitalCoin DGC 2013 baritus Yes http://digitalcoin.co $230,000 Target 20 secondsTerracoin TRC 2012 Yes http://terracoin.org $220,000 SHA-256 proof-of-workFreicoin FRC 2012 maaku, jtimon Yes http://freico.in $190,000 Uses demurrage (5% per year); 80% to Freicoin FoundationGoldcoin GLD 2013 Gldcoin & Akumaburn Yes http://gldcoin.com $150,000 Scrypt proof-of-workAnoncoin ANC 2013 Meeh Yes http://anoncoin.net $140,000 Scrypt proof-of-work; Users anonymousBBQcoin BQC 2012 Cubox Yes http://bbqcoinfoundation.org $53,000 Scrypt basedFastcoin FST 2013 Christopher Tao Yes http://fastcoin.ca $32,000 Scrypt proof-of-workYACoin YAC 2013 pocopoco Yes http://yacoin.org $25,000 Scrypt chcha proof-of-work;proof-of-stakeBytecoin BTE 2013 bryanmills Yes http://bytecoin.biz $12,300 Copy of BitcoinFranko FRK Yes http://frankos.org $10,000 Scrypt proof-of-workBitbar BTB 2013 Yes http://bitbar.biz $8,700 Novacoin scarce clonePhoenixcoin PXC 2013 PCS Network Yes http://phoenixcoin.org $5,000 Scrypt proof-of-workTimekoin TK 2010 KnightMB Yes http://timekoin.org N/A Temporal based, pooled currency productionRucoin RUC 2011 Yes http://rucoin.org N/A RussianSolidcoin SC 2011 CoinHunter Yes N/AI0coin I0C 2011 Yes N/A 10Coin cloneExtremecoin EXC 2013 CaptChadd Yes http://extremecoin.org N/A Scrypt proof-of-workCHNcoin CNC 2013 Yes http://chncoin.org N/ABetacoin BET 2013 betacoindev Yes http://betacoin.org N/A Goal 32 million units; then 0.39% growthRoyalcoin RYC Yes http://royalcoin.net N/A Scrypt based; Canadianwikicoin WPC 2004 anonymous No N/AGeist Geld GG 2011 Lolcust No N/A Proo-of-conceptTenebrix TBX 2011 ArtForz, Lolcust No N/A Scrypt proof-of-workFairbrix FBX 2011 coblee No N/A Tenebrix cloneCoiledcoin CLC 2012 makomk No N/A Proof-of-concept coinLiquicoin LQC 2012 Nicksasa No N/A Proof-of-concept coinSmallchange 2013 lightenup No N/A Proof-of-concept projectMMMcoin MMM Sergei Mavrodi No N/A 10T coins preminedJunkcoin JKC No junkcoin.org $3,000 OfflineWeeds (currency) No N/A Proof-of-

Cryptocurrency Market (November 2013)



Active Markets Inactive Markets Active Markets Inactive Markets Active Markets Inactive Markets Active Markets Inactive MarketsARS - Argentina: Pesos GBP - United Kingdoan: Pounds GBP - United Kingdoan: Pounds SEK - Sweden: Kronor LTC - LitecoinlocalbtcARS (LocalBitcoins) intrsngGBP (Intersango) bitmarketGBP (BitMarket.eu) fybseSEK (FYB-SE) bitmeLTC (bitme)

localbtcGBP (LocalBitcoins) kptnSEK (Kapiton) justLTC (Justcoin)AUD - Australia: Dollars AUD - Australia: Dollars mtgoxGBP (Mt. Gox) localbtcSEK (LocalBitcoins)btcmarketsAUD (btcmarkets) bitmarketAUD (BitMarket.eu) mtgoxSEK (Mt. Gox) XRP - RipplelocalbtcAUD (LocalBitcoins) wbxAUD (World Bitcoin Exchange) HKD - Hong Kong: Dollars HKD - Hong Kong: Dollars justXRP (Justcoin)mtgoxAUD (Mt. Gox) anxhkHKD (Asia Nexgen) btchkexHKD (Bitcoin HK Exchange) SGD - Singapore: Dollars rippleXRP (Ripple)weexAUD (WeExchange) localbtcHKD (LocalBitcoins) fybsgSGD (FYB-SG)

mtgoxHKD (Mt. Gox) localbtcSGD (LocalBitcoins)BRL - Brazil: Reais mtgoxSGD (Mt. Gox)localbtcBRL (LocalBitcoins) ILS - Isreal: New Shekels ILS - Isreal: New ShekelsmrcdBRL (Mercado Bitcoin) bit2cILS (Bit2C) localbtcILS (LocalBitcoins) SLL - Sierra Leone: Leonean SLL - Sierra Leone: Leonean

virwoxSLL (VirWox) rockSLL (The Rock Trading Company)CAD - Canada: Dollar CAD - Canada: Dollar INR - India: RupeeslocalbtcCAD (LocalBitcoins) lybitCAD (LibertyBit) localbtcINR (LocalBitcoins) THB - Thailand: BahtmtgoxCAD (Mt. Gox) localbtcTHB (LocalBitcoins)virtexCAD (Canadian Virtual Exchange) JPY - Japan: Yen mtgoxTHB (Mt. Gox)weexCAD (WeExchange) mtgoxJPY (Mt. Gox)

USD - United States: Dollars USD - United States: DollarsCHF - Switzerland: Swiss Franc MXN - Mexico: Pesos anxhkUSD (Asia Nexgen) bitboxUSD (BitBox)localbtcCHF (LocalBitcoins) localbtcMXN (LocalBitcoins) bitkonanUSD (bitKonan) bitmarketUSD (BitMarket.eu)mtgoxCHF (Mt. Gox) bitstampUSD (BitStamp) intrsngUSD (Intersango)

btceUSD (btc·e) lybitUSD (LibertyBit)CNY - China: Yuan, Renminbi CNY - China: Yuan, Renminbi NOK - Norwegian: Krone cbxUSD (Camp BX)anxhkCNY (Asia Nexgen) rmbtbCNY (RMBTB) justNOK (Justcoin) crytrUSD (Crypto-Trade)btcnCNY (BTC China) localbtcNOK (LocalBitcoins) icbitUSD (ICBIT Stock Exchange)mtgoxCNY (Mt. Gox) justUSD (Justcoin)

NZD - New Zealand: Dollars localbtcUSD (LocalBitcoins)CZK - Czech Republic: Koruna bitnzNZD (bitNZ) mtgoxUSD (Mt. Gox)bitcashCZK (Bitcash.cz) localbtcNZD (LocalBitcoins) rippleUSD (Ripple)localbtcCZK (LocalBitcoins) mtgoxNZD (Mt. Gox) rockUSD (The Rock Trading Company)

vcxUSD (Vircurex)DKK - Denmark: Kroner PLN - Poland: Zloty PLN - Poland: Zloty weexUSD (WeExchange)localbtcDKK (LocalBitcoins) bidxtrmPLN (bid extreme) bitmarketPLN (BitMarket.eu)mtgoxDKK (Mt. Gox) bitcurexPLN (Bitcurex) intrsngPLN (Intersango) ZAR - South Africa: Rand

localbtcPLN (LocalBitcoins) bitxZAR (BitX)Eur - European Union: Euro Eur - European Union: Euro mtgoxPLN (Mt. Gox) localbtcZAR (LocalBitcoins)bitcurexEUR (Bitcurex) bitmarketEUR (BitMarket.eu)btcdeEUR (bitcoin.de) rippleEUR (Ripple) RUN - Russia: Rubles RUN - Russia: RublesbtceEUR (btc·e) btceRUR (btc·e) bitmarketRUB (BitMarket.eu)crytrEUR (Crypto-Trade) localbtcRUB (LocalBitcoins)intrsngEUR (Intersango) mtgoxRUB (Mt. Gox)justEUR (Justcoin)localbtcEUR (LocalBitcoins)mtgoxEUR (Mt. Gox)rockEUR (The Rock Trading Company)vcxEUR (Vircurex)

By Country By Country By CryptocurrencyBy Country



The table below provides some idea of the activity by Exchange based on the trading activity on November 29, 2013.

Market Last price Volume (24h) Bid Ask High LowbtcnCNY 7041.12 83,471.93 7031.78 7034.89 7499 6600mtgoxUSD 1149 49,133.34 1149 1149.87 1242 1050btceUSD 987.5 26,760.27 981.41 982 1018.7 927bitstampUSD 1080.95 24,274.03 1071.52 1075 1097.49 980mtgoxEUR 838 4,628.26 827 838 893 790mtgoxJPY 116000 2,101.20 116000 119000 127285.1 109657.97btcdeEUR 804.01 1,555.43 835 831 1200 415btceEUR 786.89 1,296.15 776.95 783.32 804 715.35btceRUR 34395 943.93 33840 33840.01 35000 31234.7bitcurexPLN 3431 925.88 3431 3439 3550 3333.1localbtcGBP 779.19 672.4 984.33 137.4 1068.96 597.19virtexCAD 989 581.1 963 976 997.9 935mtgoxGBP 704.3059 518.05 704.31 710 750 644.57mtgoxAUD 1276.895 501.19 1254.28 1276.92 1360 1154.19localbtcEUR 750.96 307.79 971.21 310.8 1069.87 540mtgoxPLN 3463.2591 284.93 3463.26 3600 3740.15 3315mrcdBRL 3000 225.01 2800 3000 3600 2750virwoxSLL 276680 222.57 266001 276698 279894 242005cbxUSD 1025 193.99 1025.06 1036.99 1049.49 974.31mtgoxCAD 1220.0911 162.11 1199 1234.83 1295.24 1110localbtcUSD 1187.44 160.55 4353.36 847.42 2295.3 717.85localbtcAUD 1462.88 140.45 1653.95 1152.93 1499 951.78anxhkHKD 8970 132.61 8650 9088 9450 7850rippleXRP 38000 120.86 37050 38000 41450 33333.33justNOK 6763 81.96 6455 6763 6779 6126rockEUR 754 74.44 755 785 790 730fybseSEK 7400 72.06 7480 7489.96 8000 6360justEUR 839.99 61.27 797.3 839.99 850 704.36fybsgSGD 1495.95 47.94 1480 1495.95 1520 1345bitcurexEUR 800 47.15 799.3 800 800 740justLTC 25.5 42.61 25.57 30.68 40.9 5localbtcCAD 1281.92 41.05 1368.59 1064.49 1683.47 894.9bitnzNZD 1280 40.56 1280 1300 1348.5 1223mtgoxSEK 7660 37.53 7499 7670.42 7933.09 7166.3bitxZAR 12700 27.96 12111 12700 16400 10001crytrUSD 1000 25.91 955 1000 1000 935btcmarketsAUD 1337 23.99 1300 1337 1337 1150mtgoxCHF 1034.8921 23.95 1017.54 1058.48 1100 995.07localbtcNZD 1500 22.83 1358.87 1299 1539.83 1209.76mtgoxDKK 6300 20.94 6158.76 6300 6646.62 5917.52localbtcCHF 910.19 19.65 1037.28 1008.02 1216.18 900.23localbtcHKD 8916.31 18.27 8416.81 8758.95 8979.29 8012.23localbtcTHB 33423.83 17.8 35611.65 30345.39 45886.88 31682.89kptnSEK 6800 15.75 6566.56 6800 6800 5805.8justUSD 1120 13.57 980 1120 1125 885mtgoxHKD 9168.9157 12.92 8701.09 9051.08 9591.23 8422localbtcZAR 10990.08 12.13 12050.96 12628.91 17884.94 10744.99mtgoxCNY 6818.9424 11.42 6837.75 7112.71 7550.43 6740.9justXRP 33800 10.73 33550 36800 44999 28000rippleUSD 1100 9.35 1100 1144 1125 1005localbtcSGD 1508.14 9.07 1378.17 1344.01 1508.14 1368.6mtgoxSGD 1425.9455 8.59 1409.27 1465.93 1532.97 1425.95localbtcNOK 7585.97 8.56 6920 6836.16 7585.97 6368.9localbtcARS 10123.05 7.06 10745.01 10700.53 11715.76 9128.02localbtcCZK 25315.58 6.2 23707.41 20549.71 27125.28 16761.86localbtcSEK 8228.63 5.18 8459.12 7253.99 8264.87 6260.46localbtcMXN 16836.34 3.92 15000 16514.41 18473.73 13500.52bitkonanUSD 1200 3.8 1181 1394.96 1400 1150localbtcPLN 3473.03 3.5 3661.33 3226.51 4114.66 3289.25anxhkUSD 1150 3.47 1108.97 1180.26 1200 1012.82localbtcBRL 3472.12 3.1 3166.07 2597.59 3504.02 2679.82intrsngEUR 591.5 2.52 550 591.5 591.6 508localbtcINR 64961.29 2.02 70421.49 67068.09 84030.29 64961.29mtgoxTHB 36500 2 36052.84 37503.03 36500 36156.39localbtcDKK 6572.52 1 6083.66 5888.38 6572.52 6572.52anxhkCNY 6747.9879 0.94 6811.02 7212.7 6747.99 6399.95rockUSD 990 0.88 925 1000 995 910vcxUSD 948.88 0.73 852 859 948.88 900mtgoxRUB 38244.7763 0.39 37200.19 38696.99 39676.88 36658.21intrsngGBP 727 0.07 486 727 785.86 363.4crytrEUR 899.99 0.03 575 779 899.99 899.99localbtcRUB 35192.68 0.03 35618.72 35019.74 35192.68 35192.68mtgoxNZD 1501.7451 0.02 1376.32 1412.9 1501.75 1417.65vcxEUR 700 0 576 700 700 700



There are a few points to be derived from the two tables above:

• Crypto currencies are becoming universal; certainly the Bitcoin is. • Bitcoins trade in every currency. • If one multiplies the 200 million coins traded on Friday by the U.S. price on that day, the market turnover was $230 million. • If one annualizes the Friday volume, it becomes $50 billion; a big number but less than 1/1,000th of 1% of the world’s fiat

currencies of $56 trillion by my calculation.

So the Bitcoin is growing and it is sizable but it is yet to threaten any aspect of the fiat currencies of the world. Still it does require investigation given the apparent enthusiasm to own the currency.

Starting Point

Supposedly a gentleman named Satoshi Nakamoto created the Bitcoin in 2009 and then after never have being seen announced his retirement from the Bitcoin scene in 2011. Whether Mr. Nakamoto ever existed or not his creation the Bitcoin clearly does exist. It has some of the following characteristics:

Creation

• Bitcoins are created whenever a computer programmer or other individual, using any machine, solves a mathematical puzzle or algorithm.

• Anyone can try to solve the puzzle on any computer anywhere in the world. The problem however gets more and more complicated as time passes. For example, it is easy to solve a mathematical query asking for the first prime number. It requires enormous computer power to solve the problem of supplying the 5,001st prime number. The University of Tennessee already has located the first 5,000.

• For those fortunate enough to solve the early algorithms, the reward was 50 Bitcoins. Every 210,000 blocks of issuance (or every four years if the Chicago Fed’s estimate is correct) the number if Bitcoins provided for solving the increasingly difficult algorithm is cut in half.

• At this rate, the maximum number of Bitcoins that will ultimately be produced will be 21 million (it is thought that 12 million are out today). If George Mason University’s Mercatus Center is correct the last Bitcoin will be produced in 2140.

• Each Bitcoin can be broken into 100,000,000 million “satoshis”. So if observers are correct by 2140 there will be 21 million Bitcoins outstanding or 2.1 quadrillion satoshis.

Ownership

• Once someone acquires a Bitcoin s/he is actually obtaining an encrypted computer file called a wallet. The file has two methods of identification to the outside world: a public key and a private key.

• The existence of the new Bitcoins is ultimately recorded on the thousands of computers that have been involved in Bitcoin transactions in the past.

• When a Bitcoin is used by a holder to make a purchase or transfer funds, the transaction must be approved by a majority of the thousands of nodes (computers held by other Bitcoin owners) or the transaction will not go through.

• The transaction is recorded but the owner of the Bitcoin associated with the transaction is not; although s/he can be tracked if a governmental entity is determined to do so.

• Users of Bitcoins are able to effect transactions at much lower prices than if they use a credit or debit card, or if they were using Western Union to move cash from one place to another.

• For those who do not wish to make transactions in Bitcoins, but do want to participate in the capital gains being created by the rise in Bitcoin prices, there are Bitcoin investment trusts.

Multiple Cryptocurrencies

There are a number of reasons as to why there are so many other cryptocurrencies such as Litecoin, the only real competition to Bitcoin:

• It may take 10 minutes for a Bitcoin transaction to be approved by the thousands of nodes involved. Therefore, there is a competition to develop a safe system that is much faster. Digital Coin is promising 20 seconds.



• Despite the protections that Bitcoin has built into its systems, every element of the system has been successfully attacked in the past. This includes everything from Exchanges themselves, one at least was driven out of business, to individual wallets. A variety of proof-of-work and proof-of-stake systems are being experimented with.

• If a file or wallet is lost so is the currency associated with that wallet. It is similar to losing a $100 dollar bill. One can never get the “money” back. Paper wallets are being developed in place of digital only wallets.

• There is a desire for more anonymity. Anoncoin believes it is a leader here. • There is an effort to unseat Visa and MasterCard in handling transactions. Visa is believed to handle 200,000 transactions

per minute while Bitcoin is believed to be at 30. There is a big market to capture. • Another real problem is the enormous amount of energy required to run thousands of nodes necessary to validate

transactions. This is driving up the cost of the overall system. • There is a great deal of profit to be obtained if one can actually get a successful cryptocurrency up an in use. Devcoin is

maximizing the developers’ profits at the moment.

Reasons for Use

Initially, it was my belief that there were three core types of users for this product:

• Criminals; • Citizens in countries with unstable or potentially unstable fiat currencies; and • First adopters in the technology world.

I would now add three more users:

• Individuals and companies seeking to lower the cost of transactions. • Speculators seeking the opportunity to gain an investment profit. • The country of China which may be seeking to gain control of the system to get control of transactions in this new currency.

What I Know I Do Not Know

Technology

I do not understand any of the terminology related to the technology behind the cryptocurrencies such as:

• SHA-256 vs. SH-3; • Proof-of-work vs. proof-of-stake vs. proof-of-concept; • Scrypt based vs. non scrypt based or scrypt proof-of-work/proof-of-stake; • Hash marks; • Blocks; • CPU vs. GPU vs. ASIC

And that is just the beginning. In delving into cryptocurrencies there is a good deal of religion – i.e., faith that the systems actually work. It is unlikely that the average user or investor will ever understand how this system actually does work.

Control

As the number of transactions grows, the need to reduce the number of nodes seems apparent. Holders of Bitcoins cannot be expected to grow their computer systems to meet the need of validating what may at some point be thousands of transactions per minute. Once a single entity gains control of 51% of the transaction proofing, it is quite possible that the whole ethos of the Bitcoin system may collapse because now there will be a central user like a central bank controlling the system.

It does appear that China may have reached this position. If this is true, Bitcoin has already become a Chinese entity.

Pricing

One of the great appeals that founder “Satoshi Nakamoto” outlined for Bitcoins is the low cost of facilitating transactions. If Bitcoins are trading as investment vehicles at $1,200 per coin, it is questionable if this is truly a low cost transaction vehicle. Moreover, it would appear that the pricing of the Bitcoin has become unusually erratic. This destroys the effective use of any currency and may



open the way for another non-Chinese controlled cryptocurrency to rise in value. This creates more volatility and less ability for holders to use any cryptocurrency.

Conclusion

The concept of creating a new currency that is limited in size and not controlled by any government has great appeal. Whether this can truly be done is open to question. However, maintaining some understanding of the developments in this sector is important particularly for financial analysts where currency is the raw material of the business.



Financial Analyst Institutional Sales Richard X. Bove Vice President Equity Research [email protected] 813.388.2900

Joseph Bove Vice President Institutional Sales [email protected] 646.572.3378

Ed Bugniazet Managing Director [email protected] 646.572.3389

Ed Perley [email protected] 646.572.3386

Appendix: Analyst Certification and Other Important Disclosures Analyst Certification I, Richard X. Bove, certify that with respect to each security or issuer that I covered in this report; (1) all of the views expressed accurately reflect my personal views about those securities or issuers; and (2) no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report. Regulatory Disclosures Analyst Stock Ratings Definitions Rafferty Capital Markets’ (“RCM”) ratings, effective January 2, 2013, are defined as follows: Buy – A stock that at initiation displays projected Price-to-Book ratio less than 100% and projected Earnings Direction greater than zero. The rating may be maintained following initiation as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the rating to fall outside of the above parameters. Hold – A stock that at initiation displays projected Price-to-Book ratio less than 100% and projected Earnings Direction less than zero; projected Price-to-Book ratio between 100% and 200% and projected Earnings direction less than 10%; or projected Price-to-Book ratio greater than 200% and projected Earnings Direction greater than 10%. Sell – A stock that at initiation displays Projected Price-to-Book ratio greater than 100% and projected Earnings Direction less than zero. The rating may be maintained following initiation as long as it is deemed appropriate, notwithstanding price fluctuations that would cause the rating to fall outside of the above parameters. Distribution of Ratings RCM must disclose in each research report the percentage of all securities rated by the member to which the member would assign a "buy", "neutral" or "sell" rating. The said ratings are updated on a quarterly basis. Below is the distribution of RCM’s research recommendations:

Buy: 53.1% Hold: 43.8% Sell: 3.1%

There are 32 stocks under coverage Market Ratings Negative – A 10% expected decline in S & P 500. Neutral – The S & P is expected to trade within 10% bounds up or down. Positive – A 10% expected rise in the S & P 500. Valuation and Risks The primary risks to achieving our target price include general market fluctuations, unexpected shifts in economic activities, and/or unexpected reversals in company fortunes. Additional Information is Available upon Request to Barbara Martens at Rafferty Capital Markets, LLC, 1010 Franklin Avenue, Garden City, NY 11530 or 516.535.3800



Other Disclosures Rafferty Capital Markets ("RCM") is an institutional brokerage firm that does not engage in investment banking. RCM and its affiliates, including its principals, may own securities of the companies which are subject of this report but do not own 1% or more of any class of common equity securities of any subject company. The information and opinions presented in this report are provided for informational purposes only and are not to be used or considered as an offer or solicitation of an offer to buy or sell securities or other financial instruments. RCM has not taken any steps to ensure that the securities referred to in this report are suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about any such investment. Information and opinions presented in this report have been obtained or derived from sources believed by RCM to be reliable, but RCM makes no representation as to their accuracy, timeliness or completeness. RCM accepts no liability for loss arising from the use of the information presented in this report. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information and opinions contained in this report reflect a judgment at its original date of publication by RCM and are subject to change without notice. RCM may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them and RCM is under no obligation to insure that such other reports are brought to the attention of any recipient of this report. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject RCM to any registration or licensing requirement within such jurisdiction. All material presented in this report is the property of RCM and is under copyright to RCM. This report may not be reproduced, distributed or published by any person for any purpose without the prior express written consent of RCM.

richard bove on bitcoin letter 1 - bitcoin revisited

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