What We Learned in 100 Crypto Talks With Institutional Investors

Through meetings with over 100 institutional investors over the past four months from California to New York, one thing has stood out most − an overwhelmingly positive response.

These endowments, family offices, pensions and other institutions are enthusiastic about crypto assets despite an overall pullback in crypto valuations upwards of 75 percent from their all-time highs.

This is remarkable.

Though the majority of these investors want to dip their toes in the crypto pool, they come from varying backgrounds and have different levels of knowledge:

  • Those just beginning their crypto educational journey
  • Those that didn’t have a “crypto specific mandate,” but are evaluating crypto managers in the same way they evaluate all emerging fund managers
  • Those that are well versed in crypto, and considering an immediate allocation.

Not surprisingly, each category of investors had different questions and goals.

The ‘Beginning’ Investors

Learning a new industry can be daunting.

The typical learning curve looks something like this:

  • Phase I: The first time you hear about blockchain or crypto –> Skepticism
  • Phase II: You spend the next six months researching and learning –> Optimistic but confused
  • Phase III: You spend the next 12 months going deeper down the rabbit hole until you want to dedicate the next 20 years to this new technology –> Passion and full adoption

Most investors considering digital assets are somewhere between “Phase I” and “Phase II” and, even if they weren’t thinking of allocating, it was not uncommon to hear some variation of “crypto is hard to ignore right now.”

Two points resonate universally with this group:

  • You’re 100% long the financial system right now! Even if you moved to 100 percent cash across all of your investments, you are still 100 percent long the financial system (via the banking system). As we saw in the 2008 banking crisis, 2011 European sovereign crisis and the 2018 emerging market currency crisis, there is systemic risk out there that investors want to hedge against. Crypto offers investors exposure outside of the traditional financial system, and many argue it is actually more dangerous NOT to have some exposure to crypto than it is to have a small allocation.
  • Crypto is both an asset class and an infrastructure. As an asset class, there are opportunities today to participate in the growth of emerging technologies. The pie is growing even as prices collapse and, with enough research, you can figure out which slices of the pie to grab.As an infrastructure, you have time to wait. But you’ll want to familiarize yourself today because one day soon, every asset class you own may be represented in digital asset form (equities, fixed income, real estate, hard assets). Viewing the utility of cryptocurrencies through price alone misses the fundamental revolution. Cryptocurrency and blockchain have uses far beyond price.

What matters most is understanding how crypto assets can meet their goals and fit within their risk tolerances, as well as how it fits as a smaller piece of an overall balanced and diversified portfolio.

Understanding every nuance is secondary. For example, most investors who invest in healthcare equity funds don’t fully understand Medicare reimbursement, hospital admissions and patent processes. Instead, these investors know enough to recognize that they want exposure to healthcare, and then hire experts to express the individual views for them.

This is likely what will happen in crypto.

The ‘Traditional Hedge Fund Due Diligence’ Investors

Investors in this camp spend most of their time seeking out strategies that expose them to the potential upside while limiting downside risk:

This is what most often gets their attention:

  1. Don’t focus on how high it can go; focus on how low it can go. A good fund manager in any asset class tries to capture most of the upside, while ensuring that downside risk is mitigated. This is an especially important message for investors to hear in crypto, since most of what they see and hear strictly focuses on outlandish return potential.
  2. DO NOT short this market today. I’ve spent my entire career trying to isolate idiosyncratic risk and removing market risk through cap structure arbitrage trades and long-short trades, but this strategy does not yet work in crypto for a variety of reasons (asymmetric upside, low liquidity, high costs, etc). As such, the best hedge today is simply not to own a token that you don’t like. Currently, the best way to protect against the downside is by sizing positions correctly according to risk/return profiles, taking chips off the table when this equation is no longer favorable, and using derivatives to hedge tail risk.
  3. A top-down AND bottom-up approach. Active management matters in crypto, perhaps more than in any other asset class, because of the large swings and bifurcations between top performers and underperformers. Understanding the macro landscape (top down) while simultaneously searching for value (bottom-up approach to security selection) is how to take advantage of current market conditions. Few investors want to hear about best ideas because they are not ready to execute them on their own − but they do want to understand the process.

Conversely, the biggest pushback from this group is that the underlying asset class itself is still so new, and it’s hard to invest in something that has unknown tangible value. But it’s important to remember that many asset management strategies can work on top of any underlying asset class. For example, there are managed futures funds that focus on very esoteric underlying assets (like weather futures).

Others in this group point to how some crypto assets are “frauds” or have market values in large excess compared to value. But this exists in traditional asset classes too.

There are hundreds of penny stocks that retain market cap value and trade, despite no underlying value. And there are plenty of “stub bonds” in the corporate bond and distressed market that have no value but remain priced and trading for decades.

As the overall size of legitimate crypto assets grows, these outlier, “worthless,” tokens will fade and become less impactful.

The ‘Savvy Crypto’ Investors

As you might expect, investors in this bucket are trying to figure out which managers they trust to generate high risk-adjusted returns in the crypto space. In addition to focusing on risk management like group 2 above, this group of investors often got much more granular with their questions about what specifically goes into a crypto portfolio.

The two messages that resonated the most were:

  1. Developers are the new research analysts. Research has greatly evolved over the past decade, especially with the emergence of digital assets. The ability to read lines of code in GitHub, test pre-launch products and engage with various development communities is a must for any fund investing in this space.
  2. What is ‘fundamental research’ in crypto? This is a smart question. Unlike traditional asset classes like equities and fixed income, there is no widely agreed upon Graham & Dodd Security Analysis in crypto. BUT, that doesn’t mean valuation frameworks aren’t in the works. There has been great work done like MV = PQ, NVT analysis and even variations of Metcalf’s Law. It’s right to question the fundamental value of these new technologies, but wrong to dismiss the lack of progress.

Looking ahead, this group is already excited about today’s crypto assets, but also focused on what is coming in the future. They want to align themselves with managers who are in a position to take advantage of today’s opportunities, while also being on the front-line when new opportunities arise.

Conclusion

This past year has opened my eyes to the progress that is being made on both the technology side and the education side. Whether investors have a specific mandate or not, most are trying very hard to figure out where crypto fits into their process and portfolio.

While it is true that many funds already have some secondary or tertiary exposure to crypto via their traditional hedge fund or VC investments, it’s becoming clear this alone is not satisfying their needs.

As stated earlier, “Crypto is pretty hard to ignore right now.” Unless investors want to completely write it off, they will have to figure out how to get involved.


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Author: Jeff Dorman
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Rags to Riches to Rags – How One Bitcoin Enthusiast Made $1.2 Million and Lost It All

Peter McCormack created a small fortune from Bitcoin’s boom in 2017. These days are long gone, and McCormack shared his experience about his adventure with cryptocurrencies.

Numerous Bitcoin investors saw their wealth growing during the crypto frenzy last year, as Bitcoin’s price reached unprecedented highs.

Hodlers attended crypto events around the world, arriving with their shiny Lamborghinis and Ferraris to show off the massive riches, cryptocurrencies had brought them.

Peter McCormack is one of those people who went all-in with Bitcoin and lost everything, a story on which many could visualize themselves.

In a thread on Twitter, he shared his experience from going bankrupt to becoming a millionaire and then back to losing everything.

Going All in on Crypto Fueled By Greed and Ambition

With 20 years of professional experience in digital marketing, he owned an advertising agency which generated £3m annual turnover at its peak.

Both McCormack and his 35 employees were left without a job after his company defaulted in 2016.


McCormack, who was dealing with his mother’s fight against cancer at the time, decided to invest a part of his savings ($32k) on Bitcoin and Ethereum.

McCormack maintained a conservative investing strategy initially, withdrawing 25% of the profits frequently.

By summer 2017, his equity had reached $500k, and the capital gains seemed unstoppable.

McCormack then became greedy (as he says) and invested all his savings in creating a diversified portfolio of altcoins.

Dazzled by the wealth he generated so quickly, his life and spending habits soon changed.

He started purchasing expensive clothes, traveling business-class and donating his money to family and charity.

Cryptocurrencies were growing so rapidly, that he was even making plans to acquire his favorite football team in England.

McCormack was caught up in the hype and cryptos became his full-time employment.

Besides trading the highly volatile cryptocurrencies, he further invested $300k in mining hardware (70 S9s and 70 DragonMints) and joined mining pools.

Moreover, he started offering consulting services to traders and launched his podcast, which remains his only income source until now.

By the end of 2017 when Bitcoin reached its all-time high at $20,000, his assets were valued at $1.2 million, a point McCormack regrets he didn’t withdraw his massive profits.

As Bitcoin had previously crashed and recovered several times, McCormack believed the same would happen again.

He claims with certainty that experienced investors could have forecasted that a market crash was about to happen.

However, he added:

 “any sensible investor should have been taking money off the table when making such huge profits. There were though, many like me who just got caught in the hype and expected it to carry on.

Only Debris Left After the Stardust Settled

Bitcoin has plummeted but not recovered since.

Instead, it has undergone several price drops, and investors have suffered tremendous losses.

Bitcoin mining is not profitable anymore, and mining companies regularly shut down, trying to get rid of their costly ASIC rigs.

McCormack has decided to liquidate his holdings and terminate his active contracts with data centers that drain his BTC balance every month.

McCormack Now Retired From Trading

McCormack’s Bitcoins will be gone after he pays out a large amount for his tax liabilities.

In addition to the financial disaster, his involvement with cryptocurrencies also led to a broken marriage, as well as his addiction to drugs.

Although he has accepted this venture as a failure, McCormack does not feel bitterness about this journey.

He remains positive towards Bitcoin, which he distinctively separates from other digital currencies.

He recognizes it as a commodity but urges investors always to cash out their profits.

Bitcoin could have been a life-changing experience for McCormack, but he acknowledges that money can’t affect happiness. He said:

“The last two years have been incredible, I have travelled the world and met some of the most interesting people. I have built up one of the largest podcasts in the industry and learned so much. I am now officially retired from trading, I am not good at it. What I have learned from this is that money does not really change happiness, it makes certain things easier but a lot of happiness comes down to your emotional state and personal relationships, money does not fix these.”


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Author: Nick Tsakanikas
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Binance CEO: ‘We Are Actually More Comfortable Investing Now’

On Friday (14 December 2018),  Changpeng Zhao (nickname: “CZ”), the CEO of crypto exchange Binance, said that his firm felt more comfortable with venture capital (VC) investing now than when the crypto market was in a much more bullish mood and cryptocurrency prices were at their all-time highs.

The Binance CEO made his comments via Twitter earlier today:

When CZ says that many VCs have “paused”, he is probably referring to comments made by Barry Silbert, the Founder and CEO of crypto-focused venture capital firm Digital Currency Group (DCG), on Wednesday (December 12th):


So, how “comfortable” does Binance really feel about VC investing at the moment? Well, yesterday, the VC arm of Binance, which is known as Binance Labstold crypto news outlet Coindesk that it “will launch new incubator programs in Berlin, Buenos Aires, Lagos, Singapore and Hong Kong come March 2019.”

Last month, Outlier Ventures, a VC firm that focuses on blockchain, IoT, and AI technologies, published a research report titled “State of Blockchains Q3”. This report said that “VC investments in the space at all time high as professionalisation of the industry continues”, and that this was due to the “drastic reduction in the frequency and size of token sales”:

“The drastic reduction in the frequency and size of token sales have created a gap that is now being filled by venture capital. VC financing is moving earlier in the funding cycle at Seed or Series A instead of the later stage, pre-ICO rounds we witnessed in Q2. Legal expenses, marketing costs and community building efforts are part of the reason why startups that don’t necessarily require a network or token have been avoiding token generation events completely. Until we see a recovery in Bitcoin’s price, it is likely that the model of token generation events that took center stage in 2017 would never return.”

In particular, the report found that:

  • “VC investments have surged from a total of $900 million in 2017 to $2.85 billion so far this year, a 316% increase”
  • “VCs are active across all funding stages with 119 deals disclosed this quarter the most ever as quality projects with developed products continue to receive financing”
  • “The US is still the dominant source of VC investments in the crypto space”

And yesterday, blockchain-focused investment firm Pantera Capital noted in its December newsletter (“Pantera Blockchain Letter”) that “there are many advantages of venture capital over ICO funding” (such as lower volatility), and that, in fact, “the majority of blockchain projects are better suited for equity rather than tokenization.”


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Author: Siamak Masnavi
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Eight Tips Every Cryptocurrency Investor Must Know

The Eightfold Path to Enlightened Crypto Investing

 

As a new cryptocurrency investor, kicking off your shoes and taking your first steps along the Path of The Blockchain, you’ve probably found yourself asking the following questions: did the bitcoin bubble really burst, is it too late to get started, and what are the best tips to be successful in this newly emergent investment space?

While you’ve been asking yourself these questions, along with many others, you’ve probably noticed the prolonged bear market cryptocurrencies have been facing the past year, with just last month being the worst month for Bitcoin since 2011. Taking a more historical view, we see this is only the most recent bear market, of which there have been many before. Likewise, for every bear market, there is a bull market; an endless cycle of perpetual balance, akin to the Taoist yin and yang. Thus, despite the recent significant drops, cryptocurrencies are far from being finished, and the path to cryptocurrency investing nirvana stands stronger than ever.

In fact, the securities platform SharesPost reported that 72 percent of cryptocurrency investors are planning to buy more holdings in the next 12 months. You should therefore expect some traffic on your journey and pack your bags accordingly. As with any successful trip, it’s best to be as prepared as possible. In this article, we’ll give you the necessary eight tips to help reach your desired state of cryptocurrency investing enlightenment.

1. Ignore the “noise”

Many naysayers in the media and financial sectors may preach that cryptocurrency is simply a fad, over-hyped speculation, or even a pyramid scheme. On the other hand, a growing population increasingly embraces the financial prospects and practical applications of cryptocurrency assets. Both sides have loud voices and like to make a lot of noise.

This noise level is only expected to increase, as Satis Group predicted cryptocurrency trading activity for personal investors will increase by 50% in 2019. To be a successful investor in this space, it is best to just buy and hold what you believe in (see tip 4!) while ignoring all the noise around you.

2. Expect the unexpected

However, significant volatility does exist in cryptocurrency markets which cannot be ignored. Experienced cryptocurrency investors are accustomed to huge price swings that you often don’t find in traditional markets. By mentally preparing for these unfavorable, and occasionally terrifying, investment performances, the intelligent crypto investor will be able to act rationally instead of emotionally in times of unexpected price drops.

3. Avoid a bad trade or investment strategy

A common mistake for beginner cryptocurrency investors is joining what is known as a “pump and dump” group. Certain social media communities or ‘gurus’ may even promise investment tips regarding a particular coin. You should avoid these types of places at all costs; when travelers go down these roads, they don’t often come back.

The problem is that since derivatives trading is a zero-sum game, there is always a winner, but more importantly a loser. Unless a solid trading or investment strategy is in place, heedlessly following such advice is the fast track to losing your money to modern-day snake oil salesmen.

4. Perform your due diligence

In this modern digital age, there is even wifi on the path to crypto investing enlightenment, hence there is no excuse to make an investment with little to no understanding of the underlying asset. Almost every single coin has easily accessible whitepapers online. And just like having maps in the car, the savvy traveler must be prepared.

From the heavily traded to the most niche, resources such as the All Crypto Whitepapers will help any individual brush up their knowledge on potential future investments. If it is impossible to tell how the coin operates and more importantly, makes money, then it would be wise to seek another investment opportunity. From the biggest initial coin offerings (ICOs) to the most niche altcoins, this site will have you covered.

5. Don’t place all your crypto-coins in one basket

Common investment wisdom prevails when it comes to cryptocurrency investment: diversification is key. Just as financial advisors recommend taking positions in multiple types of stocks and other investments, diversification is also essential for any healthy cryptocurrency portfolio.

You’ve done your research, so now seize the opportunity to invest in multiple coins. As one example, you can invest across different sectors which serve different use cases. Just like it’s always safer to travel as a group then as a single person when you’re in unfamiliar territory, establishing a diversified portfolio will help you along your path toward realizing potential future cryptocurrency gains.

6. Opt for an alternative personal email

Using a regular email account places an investor at an unnecessary risk of exposure for a data breach. To overcome this risk, it is recommended to create a unique account just for trading, especially with added two-factor authentication password security. No matter what, ensure that two-factor authentication is utilized for every service that offers it (for example both your email account and your exchange account should require two-factor authorization to access). Likewise, make sure to use a dedicated two-factor application (such as Google authenticator, or Authy) as opposed to using text messages for two-factor authorization (these are susceptible to social engineering hacks).

Additionally, when setting up your accounts, be sure to select a unique username and password that has no personally identifiable information that would-be hackers could trace back to you.

7. Understand the uses for both cold and hot wallets

Cryptocurrency can be stored via an offline “cold” wallet or an online “hot” wallet. Ease of access makes hot wallets a more desirable option for the beginner investor. However, as convenient as hot wallets are, they are susceptible to being hacked, whereas cold wallets are not able to be hacked (if prepared properly). Ideally, it’s best to store cryptocurrency you plan on saving for a long time in a cold wallet, and keep only a small amount that you might use on a daily basis in a hot wallet.

Additionally, one common mistake made by many new investors is mistaking exchanges for wallets. Although it might seem convenient keeping everything online at an exchange, a common mantra you might hear others chanting goes like ‘if you don’t own your keys, then you don’t own your bitcoin’. And when you keep your digital assets on exchanges, you don’t own the keys. This can become important when exchanges go down, get hacked, or both (for example, the famous Mt. Gox incident from a few years back). Take the time to research different wallet providers. There are lots of great options available today, and you can start learning more by clicking here.

8. Remain careful around mobile wallets

Trading or storing large sums of any cryptocurrency via mobile phone is simply too great a risk. Mobile phones are more prone to being compromised electronically or physically. Although convenient, convenience should not  surpass the security concerns that abound with executing trades or storing assets on mobile devices.

Hopefully, these eight tips will help give you solid footing on the road toward crypto-investing nirvana. Looking for more tips? For more information about security practices, investment strategies or other best practices in the cryptocurrency trading space, visit Blockforce Capital.


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Author: Eric Ervin
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How To Invest – Basic Investing Strategies

Investors now have a plethora of options to choose from, steering them onto the path of financial freedom

 

As we move towards generational parity, there has been a substantial shift in ideology and perception towards savings and long-term financial planning. The millennials are getting their feet wet, delving into investments for greater financial freedom, while the baby boomers and Generation X target wealth maximization and preservation, thus altering their investment strategies.

Understanding the risks involved before investing, and how to mitigate losses could fast-track the process of achieving your investment goals. This is only possible through a proper investment strategy which guides you through the investment journey. An investment strategy acts as a manual, enabling you to choose and opt for the best investment plan depending on your profit objectives and timeframes, and provides you with the risk-reward potential of your investments.

Author: Anmol Gupta

Don’t Be Your Own Worst Enemy When Investing

Looking for someone to blame for the not-so-stellar performance of your investment portfolio? Try checking the mirror.

 

Decisions about money aren’t always rational, even when we think we’re acting logically. Common tendencies that make us our own worst enemies when investing include: selling winning investments too soon or holding onto losers for too long, loading up on too-similar assets or failing to assess the future implications of today’s decisions.

Researchers have found dozens of unconscious biases that can drive people to make money decisions they later regret. These behavioral economics concepts include things like “anchoring” — when a specific and perhaps arbitrary number you have in mind sways your decision-making, such as selling Apple just because the company’s stock hit a round number, like $200 a share. Or, the “endowment effect” can cause you to overvalue something simply because you own it, leading you to cling to a stock that’s tanking.

Here are some common human errors in investing, with strategies to overcome them.

Pursuing past predilections

Financial institutions remind us that past performance doesn’t guarantee future results. We don’t always listen.

It’s tempting to look at a stock’s (or the broader market’s) recent performance and conclude gains will persist in the near term, says Victor Ricciardi, a finance professor at Goucher College and co-editor of the books “Investor Behavior” and “Financial Behavior.” “People take a very small sample of data and draw a major conclusion, and that’s a pretty bad pitfall,” Ricciardi says.

How to overcome it: Don’t base investing decisions solely on what’s happened in the past; think about what will drive gains in the future. When investing for the long term, prioritize selecting companies with solid long-term potential.

Diversification that’s not diverse

You may interpret diversification to mean more is better. That’s only half the story; what’s important is owning a variety of assets (both stocks and bonds) with exposure to various industries, companies and geographies.

Sometimes investors exhibit “naive diversification” by owning too-similar assets, which does little to reduce risk, says Dan Egan, director of behavioral finance and investments at robo-advisor Betterment: “People will have three or four different S&P 500 funds and think they’re diversified but don’t look at how correlated they all are.”

Similarly, many investors invest only in companies they know, which results in over-concentration in certain industries, Ricciardi says. That may mean underexposure to “the unknown” — like international stocks — which they perceive to be risky, he adds.

How to overcome it: Invest in a wide range of assets. This can easily be accomplished with a simple portfolio constructed of just a few mutual funds or exchange-traded funds.

Making emotional decisions

When money’s on the line, it’s hard not to let emotions creep into your decisions.

Prior to the 2016 presidential election, many professional investors expressed concerns about a market slump if Donald Trump won. Betterment data suggested that investors who supported Hillary Clinton might let politics shape their investment strategy — and cash out following the election, Egan says. So after the election, the robo-advisor messaged investors with information about the importance of staying invested for the long haul, he says.

On a stock-specific basis, we often let emotions dictate when to sell — not wanting to admit we made a losing bet. “People tend to sell winners too quickly when they go up and, on the downside, they hold on to losing investments too long,” Ricciardi says.

How to overcome it: Think about individual investments in the context of your entire portfolio and craft a plan for when you’ll sell that’s not triggered by short-term factors (like emotions) alone.

Focusing on today

It can be difficult to see the value of saving money for tomorrow when there’s so much to spend it on today. That myopia can make investors either too active or too passive.

If you’re too passive, you may avoid regular check-ins on financial health and stick with a status quo that doesn’t properly prepare for the future, Ricciardi says. Meanwhile, being too active can drive up trading expenses, resulting in lower returns, he adds.

How to overcome it: Let the numbers do the talking. Sit down with a retirement calculator when charting your investing journey. Make sure you fully understand the tax implications and costs associated with selling investments.


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Author: Anna-Louise Jackson
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How Psychology Affects Consumers’ Use of Cryptocurrency

Despite benefits, early consumer adoption is in gambling and other niche areas.

Along with a steep decline in the value of the most popular cryptocurrencies like Bitcoin, Litecoin, and ether, the hype surrounding them has died down considerably in recent months. Yet cryptocurrency remains the most innovative and potentially transformative form of digital money. It has the potential to move us towards an entirely cashless existence as consumers in the not-too-distant future.

But what about the present? To what extent have consumers adopted cryptocurrency as money, not as a speculative investment?  What is its value to consumers? And how are the early adopters using it?

The blockchain technology behind cryptocurrency has been widely discussed and explained. So have the various risks associated with owning cryptocurrency.  These topics are beyond the scope of this post. Here, I want to specifically consider the influence of cryptocurrency on consumer behavior as of late 2018.

As a form of money, cryptocurrency has notable benefits for consumers

You may have heard news about cryptocurrency theft, like the bitcoins getting stolen from Apple’s founder Steve Wozniak. But there’s another side to the story. When compared with other forms of money, cryptocurrency has significant advantages. Because it is entirely digital, using it for making purchases incurs dramatically lower transaction costs, than, say, using a credit card or cash. If and when enough shoppers use cryptocurrency regularly, sellers may save 2%, 3%, or even more, and pass some of those cost savings on. What’s more, when using cryptocurrency, financial institutions are usually disintermediated or bypassed, increasing the user’s accountability and privacy, and reducing the likelihood of identity theft. Just consider how many customer data breaches have occurred at major retailers like Target and service providers like British Airways within the past five years. The result is a loss of trust, anxiety, and considerable inconvenience for those affected. (However, the anonymity afforded by cryptocurrency does make it susceptible to illicit uses such as money laundering). Cryptocurrency can be readily used anywhere in the world, reducing the costs and inconveniences associated with exchanging one national currency to another.

Yet the usefulness of cryptocurrency to the average consumer today is minimal

In the mainstream consumer domain, so far cryptocurrency has almost entirely been used for speculative investment purposes, not as currency. A 2016 study found that less than 1 percent of Americans owned or used any cryptocurrency. More recent estimates put the number of adopters at 5-8 percent. However, almost all of these individuals are trading cryptocurrency, not using it as money.

Why is the adoption of cryptocurrency as digital money so low and so slow?

The first reason is the lack of standards. At present, there are dozens of different cryptocurrencies, each with its own protocols and potential market. These currencies compete with each other, and new currencies continue to be launched every month. Furthermore, because of the possibility of “hard forks” or divergent development, there is always the risk that new variants of even established cryptocurrencies may be formed. No one knows which currency will dominate or if all the currencies that exist currently will survive. Consumer psychology research shows that when a market lacks one standard, consumers are slow to adopt the innovation because of the uncertainty.

Just as problematic for consumer adoption is the dramatic fluctuation in its value. In the past one year alone, bitcoin has ranged in value from $5,857 to $18,343. Just imagine, if you used bitcoin as money and wanted to spend one BTC to buy a car, you’d have been able to purchase anything from a Honda hatchback to a BMW sports utility vehicle (both used) depending on when you purchased the vehicle. This degree of variability is not desirable for any form of money that serves as a medium of exchange. It is supposed to maintain its value.

The third significant limitation for consumers is that almost no retailers or service providers accept cryptocurrency at present. Among major retailers, Overstock.com is the only one that has consistently accepted bitcoin. And even in its case, things haven’t always gone smoothly. Earlier this year, it confused bitcoin with bitcoin cash, a much cheaper currency, and ended up selling products to some shoppers for steeply discounted prices.

The classic chicken and egg problem is at play here. Until enough shoppers clamor to spend cryptocurrency, companies won’t accept them. And because few companies accept cryptocurrency, consumers won’t really bother with it. For shoppers, cash, credit cards, and mobile payment services like Paypal and Venmo fueled by dollars are good enough for now.

How are consumers using cryptocurrency?

Despite the fact that cryptocurrency hasn’t yet caught on as digital money, there are some niche consumer areas where it has made some headway within the past year. Not surprisingly, one application is sports gambling. Introduced at this past summer’s (2018) FIFA World Cup tournament, Cryptocup is a way of betting on particular sports outcomes using ether. It has since expanded to NFL football.

Cryptocurrency has also been used in a handful of real-estate transactions in Florida and California, either to generate social media buzz because of the novelty, to target the property to successful cryptocurrency traders looking to diversify their wealth or to attract wealthy foreign buyers. A third interesting application is in art where consumers can buy shares in iconic artworks using cryptocurrency or digital tokens from a blockchain themselves become art (in the artist’s blood, no less).

These exceptions underscore the rule. As consumers, we’re still a ways away from using cryptocurrency to pay for an oil change or buy a gallon of milk.


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Author: Utpal Dholakia
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Insights on the Future of Cryptocurrency as 2018 Draws to an End

The idea of cryptocurrencies (digital currencies that are cryptographically encrypted) has been moving around in the academic circles since the 1970s. The idea, however, took on form and shape with the arrival of Bitcoin in 2009. Over the last 9 years, Bitcoin has grown on to be disruptive in the fields of monetary policy, finance, economics, and e-commerce – and it has spawned an industry of more than 2,000 coins, tokens, and altcoins in what is being generally referred to as the cryptocurrency market.

 

Future of Cryptocurrency

Interestingly, the cryptocurrency market peaked last year when the price of Bitcoin rallied more than 1400% to $19,000 and the market cap of the cryptocurrency market skyrocketed to almost $700B. However, in the year-to-date period, the trading price of Bitcoin has crashed about 53% to about $6,500 and the market cap of the crypto market has declined more than 56% to $209B.

Now, no one knows for sure how cryptocurrencies will fare going forward. There’s an ongoing debate on whether cryptocurrencies will become the future of money or whether the idea will eventually fade into oblivion if it is unable to build up a critical mass. This piece provides insights into how the fate of cryptocurrencies might pan out going forward.

Bitcoin is still the king of crypto

Bitcoin is still the biggest and most popular cryptocurrency in the market; in fact, the first interaction that most people have with cryptocurrency and blockchain technology can be traced to Bitcoin. Bitcoin currently has a dominance of about 53% of the cryptocurrency market; hence, its price often determines how other coins and the general cryptocurrency market will fare. Going forward, the realities of the market suggests that the dominance of Bitcoin might not increase but it will most likely remain unchallenged. Of course, some coins are correlated to Bitcoin and some other coins have inverse relationship with Bitcoin; nonetheless, smart cryptocurrency traders and investors will do well to pay attention to Bitcoin in formulating strategies about how they want to play other coins.

Massive changes are coming to cryptocurrency exchanges

Cryptocurrencies exchanges serve the dual function of facilitating the exchange, buying, selling, and trading of cryptocurrencies – they are a large cog in the wheel of the cryptocurrency industry. Ironically, most of the cryptocurrency exchanges in the market are centralized in nature—in sharp contrast to the decentralized nature of cryptocurrencies and blockchain technology. The centralized nature of these exchanges has made them prone to data breaches, hacks, and outright heists. Going forward, there will be growing demand for DEX Exchanges, which are decentralized in nature and maintain a public ledger of transactions through consensus.

The volatility of the markets won’t die anytime soon

Cryptocurrencies are inherently volatile, and their volatility is one of the reasons fortunes are made (and lost) in the market. One of the main reasons behind the volatility in cryptocurrencies are that they are still in the early adoption phase and there’s a huge upside potential if they could break out into the mass market. However, every bit of news about cryptocurrencies will either hint at the possibility of stunted growth (and the prices fall) or hint at the possibility of reaching the mass market (and prices rise). The volatility in the crypto markets will continue to be felt since news moves the market and the volatility won’t likely stop until there’s mass-market momentum.

Institutional investors will bring more funds and insist on sanity in the market

In the early day s of cryptocurrency, traditional financial institution and government financial agencies were quick to denounce, criticize, and vilify cryptocurrency enthusiasts. The crypto market has however proven to be incredibly adept and resilient in the face of these attacks. Now, the perception of traditional financial institutions about cryptocurrency is changing. Going forward, stakeholders can expect to see an increasing inflow of funds from Wall Street into the crypto market as crypto funds, ETFs, and other investment vehicles debut. However, the inflow of Wall Street will also require increased transparency, accountability, and regulations.


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Author: Guest Author
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While Major Crypto Exchanges Flourish, Minor Platforms Struggle in Bear Market

The world’s largest crypto brokerage Coinbase is reportedly close to finalizing a $500 million funding round at a valuation of $8 billion, and Binance has started to become more active in the investment sector, funding blockchain startups internationally.

While major cryptocurrency exchanges like Coinbase, Binance, and BitMEX are seeing their businesses flourish with lucrative business models and high profit margins, minor exchanges are struggling in the bear market.

This week, the UK’s oldest exchange, Coinfloor, has slashed the number of its employees after recording a decline in its revenues as a consequence of the drop in daily trading volume of major cryptocurrencies and the emergence of many cryptocurrency exchanges in the local market.

Hard to Deal With Competition

As CCN reported, on Sept. 6, Coinbase integrated the British pound sterling into its exchange, officially expanding into the UK cryptocurrency market.

Coinbase entered the local cryptocurrency exchange market of the UK, which has stagnated over the years due to the lack of infrastructure and user demand, by eliminating exchange rates and appealing to local users that have been awaiting a reliable cryptocurrency exchange in the region.

Coinbase UK CEO Zeeshan Feroz told CCN in an interview:

“We have been working to introduce Faster Payments for as long as we’ve been operating in the UK. Customers not only benefit from increased speed, but reduced cost as well. By no longer having to convert funds from Pound Sterling to Euros and vice versa to add and remove funds, there will be no more exchange rates. This will make crypto easily accessible to most people in the UK.”

This week, possibly due to the increase in competition in the UK market fueled by the entrance of Coinbase and, reportedly, Bithumb, Obi Nwosu, chief executive at Coinfloor, announced that it is reducing its employee count in the weeks to come.

The significance of Coinfloor’s cut of its employee count cannot be dismissed, particularly because of the strategic partners and investors the UK based exchange has secured over the years.

TransferWise founder Taavet Hinrikus, venture capital firm Passion Capital, and Adam Knight, a former managing director at Goldman Sachs and Credit Suisse, invested in and supported the exchange since its launch.

Yet, despite the involvement of high profile investors and venture capital firms, Coinfloor has not been able to face stiff competition and is undergoing restructuring.

“Coinfloor is currently undergoing a business restructure to focus on our competitive advantages in the marketplace and to best serve our clients. As part of this restructure, we are making some staff changes and redundancies,” Coinfloor CEO Obi Nwosu said.

Possibly a Good Sign

Perhaps the establishment of large-scale exchanges and companies in the cryptocurrency sector is beneficial for the long-term growth of the cryptocurrency market, as it allows the strengthening of infrastructure.

In South Korea, for instance, cryptocurrency exchange backed by the country’s biggest commercial banks, Internet conglomerates, and technology corporations including Upbit, Gopax, and Korbit have imposed dominance over the local market throughout the past two years.

The fact that even an exchange in the magnitude of Coinfloor cannot sustain high-cost operations demonstrates that, for startups to compete in the market, they need strong infrastructure and backing from major investors and conglomerates.


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Author: Joseph Young
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What Will It Take To Send Bitcoin Flying Into 2019

The majority of Bitcoin investors are holding out for something special, an expected climb beyond $20,000.00 and new heights reached in terms of Bitcoins value. Whilst nobody can ever guarantee that this will happen, many do believe that Bitcoin can and will hold its own once again at a value exceeding $20,000.00, marking a huge return for many investors and marking yet another exciting time in the crypto era. The big question is, how long will it take before Bitcoin see’s $20,000.00 again? Admittedly, many investors are getting very impatient now. We’re almost 10 months into the year, that’s 10 months since Bitcoin hit $20,000.00, and 10 months of waiting for the second coming, the return of Bitcoin.

Institutional Investment

Many believe that the bull run that started all of this off, the one that sent Bitcoin to $20,000.00 in the first place, was triggered by the launch of Bitcoin Futures contracts, alongside growing optimism regarding the markets. As a result of this, the general consensus is that in order for Bitcoin to be able to swing upwards again, a huge change needs to come, or a huge product needs to be launched on the markets. This is where the Bitcoin ETF comes to play. As a product that is guaranteed to inspire institutional investment, it is slowly becoming the product most associated with having the capacity to send Bitcoin to the moon once again.

This is simply because institutional level investment will bring huge amounts of money into the markets. Products like the Bitcoin ETF will pump large amounts of cash into Bitcoin, boosting the value of Bitcoin upwards and giving investors a healthy return on their investment.

Please don’t go and buy Bitcoin based on this alone, we can’t actually guarantee the full scale of the Bitcoin ETF, or even if any will be approved. Furthermore, if an ETF is approved, then we can’t actually guarantee institutions will buy into it en masse, straight away.

Very long story short – none of this is guaranteed, although it is what we all hope to happen at the very least.

What are the experts saying?

It wouldn’t be a Bitcoin prediction without the ‘experts’ weighing in, would it? Bitcoin Bull Mike Novogratz, the CEO of Galaxy Digital has recently spoken out about his future (and very optimistic) Bitcoin predictions.

Novogratz believes that institutional interest is already starting to peak, with big companies such as Starbucks and Microsoft already starting to recognise Bitcoin and accept cryptocurrency payments. Novogratz told CNN:

“Starbucks and Microsoft will allow you to use bitcoin. As you see more adoption of just people being comfortable with it, it feels like it’s going to go up.”

As more institutions gain interest, they will start to fear missing out, or FOMO as it’s known in the industry. As a result of this, inquisition will climb and more institutions will want in, boosting the prospect of institutional investment. Novogratz continues:

“More institutions will jump on board for fear of missing out. There’s an institutional FOMO going on all of a sudden.”

The next stage however is by far the most interesting bit. Once FOMO reaches an all time high, certain types of institution and industry will want in. When Bitcoin starts attracting financial service providers, things will start to get interesting, we could see investment from companies within pension funding, insurance, banks and other financial groups – groups that are notorious for the ways in which they handle money, as Novogratz states:

“As you start getting custody and service providers in and around the system, it allows pension funds and endowments to get involved.”

Then what happens?

According to them:

“Novogratz thinks the cryptocurrency hit bottom earlier this month. He predicts bitcoin will rally 30% by the end of the year. And in the first quarter of next year, you’ll really start seeing it move.”

Novogratz believes that this institutional investment will start to have an impact going into 2019. As a result of this, Bitcoin won’t stoop any lower than it is now and that the only way is up from here. A 30% climb will be the start of something far bigger and far more exciting.

Can this happen before 2019?

This is the tricky part of the question. We don’t know when Bitcoin will surge again. We can assume that Bitcoin will hit $20,000.00 someday and we know that institutional investment is the change needed to make this happen, but the timing of it all is very much uncertain.

If a Bitcoin ETF is launched within the next few months, we could very well see Bitcoin hit $20,000.00 before 2019. As stated though, we can’t guarantee when a Bitcoin ETF will go live, nor can we guarantee that a Bitcoin ETF will have such a big impact. Therefore, we are going to assume that Bitcoin probably won’t hit $20,000.00 before the new year.

Going into the next year however, this could change massively. If not 2019… how about Bitcoin at $30,000.00 by 2020?

 

 

 

 

 


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Author: Mark Nezvisky
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