Banks can tick a box and start trading with us, said CEO Rupertus Rothenhaeuser.
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Sunday, January 31, 2021
85% Dogecoin rally shows Wall Street Bets aren’t done with DOGE yet
Dogecoin rallied by more than 85%, suggesting Wall Street Bet’s crypto wing may have decided that they weren’t done with DOGE yet.
After gaining the spotlight due to a 980% pump on Jan. 28, Dogecoin (DOGE) briefly entered the top 10 ranking by market capitalization for the first time since 2015. Once the massive pump lost momentum and traders quickly took profits, it seemed that investors would move on past the meme-based cryptocurrency and find something else to invest in.
The pump initially started when exchanges prevented retail traders from buying more GameStop and AMC stock on Jan. 28. Fueled by the Reddit discussion group r/Wallstreetbets, the army of investors turned their attention to silver and a selection of ‘cheap’ cryptocurrenceis.
On Jan.28, Twitter user "WSB Chairman" asked, "Has Doge ever been to a dollar?" to his 750,000 followers. That was enough to trigger the monster rally, despite Dogecoin having no protocol upgrades or developments since 2015.
The 68% retracement that followed the peak at $0.087 resembled Bitcoin's (BTC) sharp drop after the December 2017 crash, except this time around, instead of 50 days, it took only 24 hours.
Multiple social media influencers and streamers expressed their discontent at buying the top, an indication that the momentary speculative frenzy had passed. After spending most of Jan. 30 and Jan. 31 hovering around $0.03, DOGE managed to produce another 80% pump in less than three hours.
It's almost impossible to find the exact trigger for those events, as there are multiple social networks, including private Telegram groups and trading signal apps.
Reddit's r/SatoshiStreetBets currently has 213,000 active users and following DOGE’s breakout a meme-post by user Woke_AF_Populist quickly climbed to its most upvoted list.
There seems to be endless support from the Dogecoin fanbase, including Tesla's CEO and founder Elon Musk. The lack of a concrete use case for the meme-coin certainly raises the question of whether members of r/WallStreetBets will jump ship from traditional markets and embrace the generally unregulated ethos of the cryptocurrency sector.
Regardless of the outcome, from now on, measuring social activity will become a norm instead of an alternative indicator.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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Bitcoin subreddit hits 2M subscribers following GameStop controversy
More than 200,000 Redditors joined the page last week.
One of the most well-known online Bitcoin communities passed two million subscribers in a surge of activity on Friday, purportedly due to the media attention over the r/Wallstreetbets subreddit.
According to the Metrics For Reddit analytics website, the subreddit r/Bitcoin has 2,184,941 subscribers at the time of publication, making it the 178th most popular subreddit among more than 100,000 active pages. The Bitcoin (BTC) subreddit hit the two million subscriber milestone on Friday, more than 18 months after reaching one million.
Though much of the growth in the subreddit following the 2017 bull run was gradual, interest in r/Bitcoin exploded last week, with more than 200,000 accounts subscribing to the page between Jan. 26 and Jan. 30, from 1,982,681 to 2,184,941.
Many of the new subscribers may have been drawn to the subreddit following mainstream media outlets reporting on retail investors from r/Wallstreetbets going up against major Wall Street traders short-selling GameStop stock in a financial David and Goliath story. In addition to being covered in rags like the Wall Street Journal and New York Times, the story — and allegations of market manipulation on the part of hedge funds and brokers — caught the attention of U.S. lawmakers and was featured prominently in a Saturday Night Live sketch yesterday.
The r/Bitcoin subreddit was created in September 2010, two years after the release of the Bitcoin white paper. Since that time, its influence on the crypto space has been immeasurable, providing news, rumors, memes, and comedy to Bitcoin newbies and HODLers alike.
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Crypto Long & Short: GameStop, Dogecoin and a New Market Paradigm
We’re not just witnessing the changing nature of market forces. We’re also seeing a shift in the definition of market “fundamentals.”
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Hedge fund behind shorting GameStop reports 53% loss in January
A Melvin Capital client claims that the firm has "massively de-risked" its investment portfolio following the controversy involving short-selling GameStop stocks.
Melvin Capital started 2021 with $12.5 billion in assets before retail investors from Reddit caused the firm to lose billions on its GameStop short positions.
According to a Wall Street Journal report, the hedge fund has a little more than $8 billion in assets at the end of January, which includes a $2.75 billion investment from Citadel and Point72 Asset Management earlier this month. This represents a 53% loss, according to people familiar with the firm.
In the report, a client claims that Melvin has "massively de-risked" its investment portfolio following the controversy involving short selling GameStop stocks. People familiar with the hedge fund said Melvin has restructured its portfolio to improve its ability to exit securities easily. The hedge firm, as well as Citron Capital — another firm involved in the shorts — reportedly closed out their positions with GameStop last week.
Many of the major players involved in the GameStop short squeeze are facing outrage online after Robinhood — a platform with financial ties to Melvin — and other investment tools restricted trading for GameStop stock in the middle of a price surge. Retail investors seemingly being cut off from financial tools afforded to major hedge funds prompted allegations of market manipulation.
The U.S. Securities and Exchange Commission announced on Friday that it would be “closely [reviewing] actions taken by regulated entities,” purportedly in connection to the situation surrounding Citadel, Melvin, Robinhood, and potentially the retail investors from the r/WallStreetBets subreddit. In addition, Robinhood is facing two class-action lawsuits in federal courts in Illinois and New York.
The price of GameStop stock was $325 when markets closed on Friday, having risen 67% in the previous 24 hours.
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Top 5 cryptocurrencies to watch this week: BTC, ETH, UNI, ATOM, COMP
Bitcoin price fell back into the descending triangle but this dip may attract buyers to altcoins and DeFi tokens in the short term.
Over the past seven days, the crypto market saw an uptick in volatility as Bitcoin (BTC) and Dogecoin (DOGE) price rallied higher simply because of social media activity. In situations like these, traders who make their investment decisions based on emotions tend to incur heavy losses and this is exactly what happened last week.
Dogecoin’s (DOGE) recent pump and dump caused several new traders who bought due to FOMO to lose money within a short time and this scenario is likely to play out again as social media groups have decided that collective pumps of altcoins is a new method of investing.
A similar trend currently seems to be developing in Bitcoin (BTC), which has retraced a large portion of the up-move that was caused due to the “Elon pump” on Jan. 29. This shows that barring a few emotional buyers, most professional traders may have used the rally to lighten their long positions.
Stack Funds head of research Lennard Neo believes the Bitcoin miners are selling on rallies and that trend may continue as the Chinese New Year holiday approaches. Neo expects Bitcoin’s price to remain volatile in the near term.
Even as Bitcoin’s price consolidates, the decentralized finance tokens continue to surge, which suggests traders' focus has shifted to the DeFi space. Let’s analyze the charts of the top-5 cryptocurrencies that could trend in the next few days.
BTC/USD
Bitcoin’s long wick on Jan. 29 shows the bears aggressively sold the rally above the downtrend line of the descending triangle. That was followed by a Doji candlestick pattern on Jan. 30, indicating indecision among the bulls and the bears.
The failure of the bulls to push the price above the downtrend line today has attracted further selling. The bears are currently trying to sustain the price below the 20-day exponential moving average ($33,395).
If they succeed, the BTC/USD pair may drop to the 50-day simple moving average ($30,631) and then to $28,850.
A breakdown and close below $28,850 will complete the bearish descending triangle pattern that has a target objective at $15,741. However, it is unlikely to be a straight fall because the bulls will try to arrest the decline at the 50% Fibonacci retracement level at $25,897.42 and again at the 61.8% retracement at $22,106.73.
This negative view will invalidate if the price turns up from the current level or rebounds off the $28,850 support and sustains above the downtrend line. Such a move will suggest strong accumulation at lower levels, which could result in a rise to $40,000.
The 4-hour chart shows the breakout above the downtrend line met with strong selling pressure and the price quickly retracted back into the triangle.
The failure of the bulls to push the price back above the downtrend line has attracted selling and the bears have pulled the price below the 20-EMA. The bulls are currently attempting to defend the 50-SMA but if this support also cracks, the pair may start its journey towards $28,850.
This negative view will invalidate if the price rebounds off the current level and rises above the downtrend line. Such a move could push the price to $38,519.63.
ETH/USD
Ether (ETH) broke above the $1,400 resistance on three previous occasions but the bulls could not sustain the breakout, which shows profit-booking at higher levels. However, the positive thing is that the bulls have not given up much ground in the past few days. This shows the bulls are accumulating on dips.
The ETH/USD pair had formed a Doji candlestick pattern on Jan. 30, indicating uncertainty. That indecision has resolved to the downside today and the pair may now drop to the 20-day EMA ($1,253), which is likely to act as strong support.
A bounce off the support will suggest the sentiment remains bullish and traders are buying on dips. The bulls will then try to resume the uptrend. If the bulls can drive the price above the $1,400 to $1,473.096 resistance zone, the pair could rally to $1,675 and then to $2,000.
This bullish view will invalidate if the bears sink the price below the 20-day EMA and the uptrend line. In such a case, the pair may drop to the 50-day SMA ($990).
The 4-hour chart shows the formation of an ascending triangle pattern, which will complete on a breakout and close above $1,440. This bullish setup has a target objective of $1,768.
However, the moving averages have flattened out and the relative strength index (RSI) is just below the midpoint, which suggests a balance between supply and demand.
If the bears sink the price below the support line of the triangle, it will invalidate the pattern. The next support on the downside is the uptrend line and then $1,050.
UNI/USD
Uniswap (UNI) is in a strong uptrend that has pushed the RSI deep into the overbought territory. While the RSI can remain overbought for an extended period, traders should be cautious as corrections from overbought levels can be swift and sharp.
The first support on the downside is the 38.2% Fibonacci retracement level at $15.3963. If the price rebounds off this level, it will suggest the bulls are aggressively buying the dips and are not waiting for a deeper correction to enter.
If the bulls can push the price above $20.5612, the UNI/USD pair could rally to $28 and then to $32. Both moving averages are rising and the RSI is above 79, indicating the bulls are in control.
However, if the correction deepens below $15.3963, the next support is at the 20-day EMA ($11.85), which is near the 61.8% Fibonacci retracement level at $12.2054. A deeper fall usually delays the start of the next leg of the uptrend.
The 4-hour chart shows the pair has made a flag pattern. If the bulls can push the price above the flag, the uptrend could resume and the pair may rally to $22 and then to $25.
Another possibility is that the pair continues to correct and drop to the 20-EMA. If the price rebounds off this support, it will suggest the sentiment remains positive and the bulls are buying on minor dips.
During the current leg of the uptrend, the price has repeatedly taken support at the 20-EMA. Therefore, a break below the 20-EMA will suggest the bullish sentiment may be waning and could result in a drop to $15.3963 and then to the 50-SMA.
ATOM/USD
Cosmos (ATOM) has formed a cup and handle pattern that will complete on a breakout and close above $8.877. If the bulls can propel the price above the $10.20 resistance, the uptrend could begin.
The first target on the upside is $11.151 and the next level to watch out for is $13.554. The rising moving averages and the RSI’s bounce from the midpoint suggest the bulls have the upper hand.
If the bears sink the price below the 20-day EMA ($7.65), the ATOM/USD pair may remain range-bound between $6.603 and $8.877 for a few more days.
The bullish assumption will be negated if the bears sink and sustain the price below the 50-day SMA ($6.4). Such a move may pull the price down to $5.50 and then to $4.50.
The 4-hour chart shows the bulls have pushed the price above the downtrend line of the descending triangle. This has invalidated the bearish setup but the bulls are struggling to thrust the price above the $8.877 resistance.
The flat moving averages and the RSI near the midpoint suggest the pair may remain range-bound between $8.877 and $6.726 for some more time. If the bulls can propel the price above $8.877, the pair could rise to $10.20, while a break below $6.726 will suggest the bears are trying to make a comeback.
COMP/USD
Compound (COMP) completed a rounding bottom pattern on Jan. 29 when it broke and closed above the $272.61 resistance. This reversal setup has a target objective of $464.60.
The upsloping moving averages and the RSI near the overbought territory suggest bulls are in command. After the breakout from a pattern, the price usually retraces and retests the breakout level, but if the trend is very strong, it only consolidates or enters a minor correction before resuming the up-move.
If the COMP/USD pair rebounds off $272.61, it will suggest the bulls have flipped the previous resistance into support. That could then act as a launchpad for the next leg of the uptrend.
This positive view will invalidate if the bears sink and sustain the price below $272.61. Such a move will indicate profit-booking at higher levels and a lack of buying on dips.
The 4-hour chart shows traders booked profits near $340 but the correction was short-lived as the price turned up from $304.84. If the bulls can now drive the price above $340, the pair may rally to $405.
On the other hand, if the price again turns down from $340, the pair may drop to the 20-EMA. If the price rebounds off this support, the bulls will again try to resume the up-move, but if the bears sink the pair below the 20-day EMA, a drop to $272.61 will be on the cards.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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‘When alt season?’ eToro may have some answers
In 2020, holding the top 100 altcoins equally was a more lucrative investment than Bitcoin up until Dec. 18, according to eToro.
Investors who knew when to swap Bitcoin (BTC) and altcoins could have boosted their gains significantly in 2020, according to new research from eToro, the popular social trading platform. The challenge, of course, is pinpointing when the coveted alt season begins.
In its latest quarterly report, eToro breaks down various cryptocurrency investment themes related to the 2020 bull market. It also devotes an entire section to alt season – the part of the cryptocurrency market cycle where altcoins rally against the dollar and, possibly, outperform Bitcoin.
The research found that the top 100 altcoins, when held equally, were “a more lucrative investment” than BTC for most of 2020 – until Dec. 18, to be precise. However, investors who knew when to cycle from BTC to altcoins and vice versa could have nearly doubled their gains for the year.
As eToro explains:
“If you started with bitcoin, with only two swaps the entire year – bitcoin to altcoin in May, and back into bitcoin in September – the 3x or 4x gains seen by either investment grows to over 7x.”
Although eToro admits that predicting alt season and BTC season is notoriously difficult, the research looks at various metrics that may help investors pin-point market cycles.
Relative trade volume, social media activity, new coin listings and the number of news articles published from crypto projects appear to have an impact on whether altcoins are about to have their time in the sun.
Of course, trade volumes present a classic chicken or egg situation, as it's not always clear whether trading activity is increasing organically or simply because the price is rising.
On the topic of social media activity, eToro uses data from The TIE, a crypto analytics company, to compare altcoin tweet volume versus Bitcoin.
The data suggests that “alt season may be defined by the relative number of tweets about altcoins,” the report says.
It continues:
“This metric seems to not only capture the May and October swaps, but also potentially the short alt season in late February.”
Dogecoin (DOGE), the meme-based cryptocurrency, has hogged the social media spotlight of late. Last week, DOGE became the first altcoin to surpass Bitcoin in terms of daily trade volume, according to The TIE.
Regarding exchange listings, eToro used The TIE’s data to show there was a “clear increase in the number of listings in late summer” 2020, which was during the same period that altcoins outperformed BTC the most significantly.\
Spikes in news stories published directly by cryptocurrency companies also appears to be correlated with alt season. "This makes intuitive sense," eToro says, as these articles usually pertain to project updates and other big announcements.
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XRP Posted Biggest Single-Day Gain in 3 Years in a Coordinated Buying Attack
"Traditional Crypto-Pump groups are being copied and legitimized by WallStreetBets," Jehan Chu, co-founder and managing partner at Kenetic Capital, told CoinDesk.
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Bitcoin Falls Back to $32K as Elon Musk’s Bio Change Fades Into Memory
The price jump coinciding with Elon Musk's Twitter attention retraced over the weekend.
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The future of crypto trading will be omni-chain
The only way for DeFi to realize its potential is through an omni-chain approach, enabling assets of any kind to flow freely through all platforms.
It’s now virtually unarguable that decentralized finance is blockchain’s “killer use case.” Total value locked in DeFi grew by over 3,000% over the year leading up to January 2021. On the DApp Radar rankings, eight of the top 10 DApps on Ethereum are DeFi. Uniswap sees more users than any other application and is set to average $1 billion per day in trading volume for January.
Given the challenges we see with centralized exchanges, the push toward DeFi is hardly surprising. Centralized platforms offer limited lending and staking opportunities, and those that do exist depend on users putting their trust in the exchange. They’re also subject to region blocking and trade censorship, suffer from fragmented liquidity due to a disparity in product offerings, and have a limited range of instruments.
By comparison, DeFi users now have access to a range of on-chain lending and staking options. DeFi is also censorship-resistant, with composable apps that many have dubbed “money Lego” and to have almost limitless possibilities for different types of financial vehicles.
However, DeFi’s biggest Achilles heel is Ethereum. The more apps that pile onto the platform, the more Ethereum starts to show its wear as a dated technology in dire need of upgrades. Ethereum 2.0 shows some promise, but the timeline is distant, with scalability only expected in 2022 or later.
Related: DeFi users shouldn’t wait idly for Eth2 to hit its stride
In the meantime, users are left to put up with slow confirmation times and, more importantly, exorbitant fees that limit DeFi participation to big spenders and whales. In January, the average transaction fee was up to over $10. When DeFi transactions rely on more complex smart contract interactions or users engaging in multi-protocol trades, these costs can become prohibitive for many people.
Interest in multi-chain DeFi is growing
Partly driven by Ethereum’s problems, interoperability and second-layer platforms became a significant focus area for many platform developers in 2020, which has recently started to bear fruit with several notable examples.
For instance, Aave’s venture into nonfungible tokens, Aavegotchi, recently decided to migrate to Matic Network from Ethereum, citing high transaction fees as the driver. Late last year, Sam Bankman-Fried, founder of centralized exchange FTX, opted to build his DeFi project, Serum, on the Solana blockchain, following the platform’s launch of an interoperability bridge with the Ethereum blockchain. Elsewhere, Ethereum-based 1inch announced it was expanding to the Near blockchain, which also operates its own bridge connected to Ethereum.
The rationale is clear. DeFi projects want to retain the ability to interoperate with Ethereum, and those platforms that bridge into the Ethereum ecosystem offer that opportunity. But this approach still comes with some critical limitations. Ultimately, it promotes a scenario where multiple blockchains are bridged to Ethereum but not to one another. It’s not a genuinely interoperable blockchain ecosystem.
Furthermore, it will always inherently lack composability because the bridge model depends on two separate platforms running their own blockchain. There still needs to be a bridge transaction in between any two token transactions on either side.
Omni-chain is the only sustainable future of DeFi
Currently, there are only two contenders with a live mainnet — Cosmos and Polkadot. Polkadot shows significant promise and is attracting substantial development from the DeFi community. Projects such as Acala, Equilibrium and Akropolis have ambitious goals to create multifunctional DeFi platforms based on Polkadot.
However, the Polkadot approach to interoperability between the parachains connected to its central Relay Chain involves a technically complex technology called inter-chain messaging among parachains. While this offers great potential for a wide variety of transaction types, the more simple yet elegant inter blockchain communication protocol used by Cosmos focuses on asset transfers between chains. It allows any Cosmos SDK chain to connect to any other.
For this reason, Cosmos lends itself as the ideal platform for DeFi developers. Cosmos SDK chains are 100x more efficient than Ethereum in terms of TPS and block space. Furthermore, the Cosmos Network is reaching an inflection point for its growth, with several notable apps now operational.
These applications include successful DeFi components such as Thorchain’s cross-chain DEX, Kava’s CDP, e-money’s token fiat currency platform, or Terra’s $100 million-plus stablecoin. They each use their own blockchain with their own unique tokenomics model that supports a token with $10M–$100M in market cap.
The Cosmos Network also supports non-DeFi projects with their own token models, such as Althea’s mesh network of internet routers or Persistence’s enterprise blockchain product.
From development to adoption to liquidity
As transactions increase among Cosmos Network tokens, demand for liquidity will rise. The Cosmos Network can support an exponentially larger volume of economic activity than Ethereum while attracting a wider customer base with lower transaction fees. This makes it an optimal basis for processing a massive chunk of on-chain, cross-chain commerce.
Cosmos can support DEXs for swapping assets, but it can also support derivatives like shorts, futures, leverage, perpetual swaps, tokenized interest, liquidity pools, identity management, automated market making and other core aspects of a highly sophisticated centralized market.
Finally, banks and other financial institutions are already showing signs of readiness for blockchain adoption, but they almost certainly won’t use Ethereum. More likely is that they’ll adopt customized solutions. An omni-chain platform that can interact with a wide variety of enterprise networks is, therefore, a must-have in preparing for the point when there’s a demand for trading traditional financial instruments with decentralized digital assets.
2020 was the year that DeFi cemented its place as blockchain’s killer use case, but 2021 will be the year that interoperability starts to become the norm, rather than the exception.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Luke Kim, originally from Tokyo and Seoul, is a co-founder of Berkeley Blockchain Xcelerator, a co-inventor of two blockchain-based public finance models in partnership with a U.S mayor’s office, and is now creating the future of trading with Sifchain.finance.
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Indian government looking to crack down on crypto scams with proposed ban: Cashaa CEO
Kumar Gaurav said "there is no way any government" can outright ban crypto given its nature as a global and decentralized system.
Kumar Gaurav, founder and CEO of cryptocurrency exchange Cashaa, believes the Indian government’s latest efforts to regulate digital currencies are more of an attempt to prevent illicit activities in the industry rather than outright ban crypto.
According to a bulletin released by the Parliament of India on Friday, the governing body will be considering a bill intended to "prohibit all private cryptocurrencies" while also creating a regulatory framework for a digital rupee issued by the Reserve Bank of India, or RBI. The central bank announced last week that it would be "exploring the possibility" of a digital currency. However, the bill also says it will allow for "certain exceptions to promote the underlying technology of cryptocurrency and its uses."
In a statement from Gaurav shared with Cointelegraph, the Cashaa CEO said "there is no way any government" can ban crypto given its nature as a global and decentralized system. However, he was uncertain as to what India’s parliament was referring to with the term "private cryptocurrencies."
"They can certainly ban the legitimate use of crypto which will only make it difficult for a common person who does not understand it to get involved in it," said Gaurav. “However, what we understand is that the Indian government is trying to crack down on scams that are running in the name of Bitcoin."
He added:
“We are positive that the government will come up with regulations and policies that will put control on the scams and let the innovation in the industry [...] grow and thrive.”
India’s government has had a complicated relationship with cryptocurrency. The country’s supreme court effectively overturned a blanket ban on crypto that the RBI had imposed on crypto businesses for nearly two years. Though India’s parliament has largely not taken a firm position on regulating digital currency since that time, reports from August suggested that the governing body was working towards banning crypto.
The proposed legislation, the Cryptocurrency and Regulation of Official Digital Currency Bill, is being considered in the Rajya Sabha — the upper house of India’s Parliament — as part of its budget session. The Bharatiya Janata Party of the National Democratic Alliance currently controls both houses of the country's bicameral legislature.
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Thanks Bitcoin, MicroStrategy stock is up 113% since being downgraded by Citigroup
MSTR stock has surged by roughly 113% since Dec. 8 when it was downgraded by a Citigroup analyst.
On Dec. 8, 2020, Citigroup, one of the largest banks in the world, downgraded MicroStrategy'ss stock (MSTR). Since then, MSTR stock is up 113.27% from $289.45 to $617.31, as the price of Bitcoin (BTC) rallied.
In the same period, the Citigroup stock has declined slightly by 0.63%, from $58.36 to $57.99.
Why has MicroStrategy stock performed so strongly despite the downgrade?
MicroStrategy has been investing its treasury holdings in Bitcoin, making BTC is treasury reserve asset. Currently, it is the biggest public company holder with over 70K BTC worth roughly $2.4 billion at today's prices.
Moreover, on Dec. 9, 2020, MicroStrategy announced raising $550 million in capital from convertible bonds.
In an official statement, MicroStrategy explicitly said that it intends to invest in Bitcoin with the proceeds of the bond. This is also the statement that is said to have triggered Citi to downgrade MicroStrategy. The statement read:
“MicroStrategy intends to invest the net proceeds from the sale of the notes in bitcoin in accordance with its Treasury Reserve Policy pending the identification of working capital needs and other general corporate purposes.”
At the time, Citigroup analyst Tyler Radke issued a sell rating. He acknowledged that the return on MicroStrategy’s Bitcoin investment has been “impressive,” but said the market is overpricing the core business of the firm. He wrote:
“MSTR's bitcoin investment has returned $250M (or worth $26/share or +20% towards stock) since August '20. While impressive, it pales in comparison to the 172% return in the stock. At the current stock price, our analysis suggests that the market is pricing in much more optimistic valuation scenarios for the core business and Bitcoin.”
Since December 2020, however, the price of Bitcoin saw an explosive rally. While the skepticism toward the core business of MicroStrategy could have some merit, BTC saw a rally of over 100% in the last month of the year.
In just December, Bitcoin rallied from $18,319 to over $42,000 on Binance, outperforming most assets in both the stock market and the crypto market.
What’s next?
MicroStrategy remains an important multi-billion dollar business intelligence firm with strong core business.
But as long as the price of Bitcoin continues to increase in the near term, it will likely have a positive impact on the stock price of MSTR.
Michael Saylor, the CEO of MicroStrategy, remains fully confident in the company’s position on Bitcoin, and often buying the price dips. In the fourth quarter financial results for 2020, Saylor wrote:
“Going forward, we continue to plan to hold our bitcoin and invest additional excess cash flows in bitcoin. Additionally, we will explore various approaches to acquire additional bitcoin as part of our overall corporate strategy.”
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Decentralized identity is the way to fighting data and privacy theft
In the digitizing world, identity is everything and blockchain is to make it safe for everyone: users, businesses and governments.
Decentralized identity is a function of blockchain technology that delivers real-world benefits to users quickly and easily, allowing them to benefit from things such as easier logins, faster credit checks and an overall smoother online experience.
The proliferation of websites, e-commerce hubs and social media platforms means we can all have a huge database of logins, passwords and usernames to remember. As these increase, the use of password managers has become commonplace (as has the use of one-time passwords and two-factor authentication) to effectively allow websites and services to double-check our identity.
The result is that the end-user now faces an almost overwhelming number of hoops to jump through if they lose their password or two-factor authentication application or access to their smartphone.
The whole process of transacting online has become much more complicated. However, with the advent of blockchain, businesses are now in a far stronger position to provide their customers and end-users with a much more streamlined identity verification process, which removes many hurdles and comes with the added benefit of not placing users at risk of harmful privacy or data breaches.
Growth area
Digital and social media have become an indispensable part of everyday life for people all over the world: “More than 4.5 billion people now use the internet, while social media users have passed the 3.8 billion mark.” However, data misuse remains a major problem. This is a huge issue for all stakeholders in the digital economy: individuals, enterprises and governments.
Today’s digital identity frameworks are centralized, suffer from a growing lack of trust, are not portable, and don’t give consumers any control over their own personal information. Trust has been eroded further by high-profile data and privacy breaches, for example, the Facebook–Cambridge Analytica privacy breach that led to the personal details of millions of the social media site’s users being harvested to build voter profiles.
Identity theft, online fraud and data breaches cost the global economy trillions every year, and that number is growing as the use of digital services increases. Additionally, 1.7 billion people around the world lack access to financial services, and a further 1 billion have no legally-recognized identity. This poses a unique challenge to ensure these people are not left behind and do not miss out on the economic benefits of the digitized world.
Decentralized ID is the solution
Decentralized identity, or DID, can be built into different applications to enable blockchain users to benefit from the many advantages of being able to transact and communicate data and assets over a secure, decentralized blockchain network — thereby reducing the risks stated above.
In the digital world, identity is key to everything that people do online, and as individuals trying to succeed in the digital world, being able to prove who they are is critical to inclusion, equality and opportunity.
For businesses, being able to operate without the extreme costs of data security is an economic benefit on top of the value gained in consumer trust. The onboarding of customers alone costs banks a huge sum in administration costs.
However, by using a DID alternative, there is an immediate gain in efficiency and ongoing cost saving. This will provide both banks and the largest of enterprises with the scales of economy that were not previously possible. This is why our government (in Vietnam) understands the importance of having blockchain implemented, and Nguyễn Xuân Phúc, the Prime Minister of Vietnam, made cryptocurrency and blockchain among the top five national priorities as part of the Fourth Industrial Revolution recently.
What is clear is that the problems of data and privacy breaches are not going to disappear. With more and more people using smartphones, computers and laptops, and social media use forecast to grow to 4.4 billion by 2025, unfortunately, there will be ample opportunity for malicious actors and hackers to try and siphon off even more personal information and put the identities of everyone online at risk.
Blockchain can and is delivering a solution to this. We expect DID to become a major use case for blockchain in the next five years and believe this represents the perfect opportunity for the technology to demonstrate that its time has come. What’s more, it is able to deliver a safer, faster and less centralized alternative to the status quo.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Huy Nguyen is the chief technology officer and co-founder of KardiaChain. Huy is a senior tech lead manager at Google, with over 10 years of experience in building large-scale distributed infrastructures. Huy has a track record of leading many high profile projects, most notably Google Access Wireless Platform and Google Fiber Network Infrastructure.
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Bitcoin ‘ascendant’ as GameStop saga unfolds, Bitfinex CTO says
The GameStop short squeeze and Bitcoin have a lot more in common than appears at the surface, according to Paolo Ardoino.
The sudden rise of stocks like GameStop (GME) have shined a positive light on Bitcoin (BTC), as more retail investors look to “rail against” the financial status quo, according to Bitfinex CTO Paolo Ardoino.
Bitcoin’s price peaked north of $38,500 on Friday, just as U.S. stocks concluded their worst week of trading since October. The divergence between BTC and stocks was partly due to a massive short squeeze of institutional investors by a Reddit group called r/WallStreetBets. The Reddit buying frenzy was centered around GameStop, the video game and consumer electronics retailer.
Elon Musk, the world’s richest man, also added the Bitcoin symbol to his Twitter page, possibly signaling his newfound support of the digital currency.
Paolo Ardoino believes the GameStop saga is only the beginning of a mass revolt against the financial status quo and that Bitcoin stands to benefit significantly from this narrative.
“Bitcoin is ascendant again as the GameStop issue takes center stage,” Ardoino tells Cointelegraph. “As advocates for retail investors rail against the current structure and practices of financial markets, it is important to note that much of the work being done in the blockchain space has been inspired by these barriers.”
He continues:
“Removing obstacles to normal, everyday working people that are building and seeking wealth growing opportunities has always been part of the ethos of crypto.”
The retail crowd was dealt a significant blow last week after Robinhood – a trading platform that supposedly empowers the little guy – suspended trading of GME and other stocks over fears of extreme volatility. A class-action lawsuit was filed against Robinhood shortly thereafter.
Ardoino isn’t the only one who thinks Bitcoin will benefit from the GME short squeeze. Anthony Scaramucci, the founder of billion-dollar hedge fund SkyBridge Capital, believes GME is “more proof of concept that Bitcoin is going to work.”
Meanwhile, Galaxy Digital’s Mike Novogratz called the GME melt-up a “giant endorsement of DeFi,” or decentralized finance, which represents one of the largest use cases for blockchain technology.
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Institutional demand for crypto isn’t subsiding, but impact will be gradual
As another $2-trillion stimulus package looms in the U.S., institutions will continue to look at BTC as a hedge against inflation.
For example, just last week, when the currency was hovering around the $30,000 threshold, a whole host of pundits was warning investors to brace for impact, suggesting that the premier crypto asset was on the verge of a correction and could once again dip to around the $20,000 region.
However, in just one day, Bitcoin was once again playing with the bulls, retesting the $38,500 limit, only to witness a selloff and eventually settle around the $33,500 region. While for most crypto veterans that might have been another day at the office, others branded the upsurge as “Elon’s Candle,” which relates to Elon Musk, the CEO of Tesla, who included “Bitcoin” in his Twitter bio as well as sent out the following cryptic message “in retrospect, it was inevitable” to his 40 million-odd followers online.
Regardless of the cause, has the recent price volatility scared off institutional investors, or are they still looking to buy Bitcoin? But if they are, it is strange to see BTC continuing to hover between the $30,000–$40,000 range amid reports of big-name players lapping up sizable sums of Bitcoin. For example, on Jan. 22, when BTC dipped by 15%, MicroStrategy announced yet another BTC purchase deal, worth around $10 million.
On the subject, George Donnelly, CEO of Panmoni — a commerce system for Bitcoin Cash — told Cointelegraph that there is absolutely no doubt in anyone’s mind as to whether institutions are still looking to buy Bitcoin, saying:
“Grayscale is expanding to create some new DeFi trusts, and people are buying shares in MicroStrategy to get exposure to BTC. BTC may be stuck around 30K because retail interest seems slack. This bull market so far is not as noisy as the last one. Fewer people seem to be getting excited about it.”
Furthermore, he opined that a core reason as to why BTC is not able to break out is because the currency’s developers have “consciously limited network throughput for ideological reasons” and even attempted to divert use into its layer-two networks, thus reducing the ecosystem’s security. Even then, he does believe that in the coming three months, the currency “will top the $40K mark.”
Bitcoin hasn’t stalled but is merely adapting
With another $2-trillion stimulus package seemingly on its way thanks to the new United States President, Joe Biden, and the Federal Reserve, a lot of hype is once again being generated around crypto, especially as an increasing amount of people are beginning to understand the future implications of such uncontrolled money printing and how it can devalue the U.S. dollar to unprecedented levels.
Filipe Castro, co-founder of Utrust — a crypto-enabled e-commerce platform — told Cointelegraph that the continued expansion, or rather dilution, of the U.S. dollar money supply pool is going to sooner or later bring into perspective the effects of hidden inflation into the American economy, adding:
“While inflation has not been greatly felt by consumers in goods and services, it has manifested itself with the rise of dollar-denominated assets like stock market valuations, real estate, commodity and cryptocurrency. Many institutions have chosen not to hold onto cash as a safe haven but instead invested their capital accordingly.”
He further highlighted that institutions don’t typically directly trade in the market but instead purchase from a custodian intermediary, with the latter usually securing the necessary liquidity beforehand, thus minimizing immediate market influence upon the entry of large buyers.
What this means in layman’s terms is that a surge in demand is reflected asynchronously over time, and what’s more, it comes in large periodic variations instead of a swift outcome from the latest announcements. “It is likely thus that any future surges will take time to manifest and will do so in large and sharp swings,” he added.
Institutional interest isn’t going anywhere anytime soon
While one may be tempted to believe that mainstream interest in crypto may be finally dying out, it’s worth bearing in mind that institutional purchase cycles work very differently from the activity of individual traders and smaller institutions.
For example, Castro highlighted only a few institutions have actually taken an active position on Bitcoin, including some family offices. Not only that, it should be noted that approval procedures relating to new assets and risk assessments can usually take months or years to complete and represent a completely new investment paradigm for many traditional investors.
On the issue, Lennix Lai, director of financial markets for cryptocurrency exchange OKEx, pointed out to Cointelegraph that as the world’s global reserve currency, the U.S. dollar, becomes increasingly weaker, many institutions are turning to other assets such as BTC for its undeniable potential in regard to capital appreciation, saying:
“BTC remains a high-risk asset, and I believe that some institutional investors still have conservative clients with a wait-and-see attitude. If BTC can maintain its de-coupling from the stock market, and equities eventually flatline upon tapering asset purchases by the FED, we could see another wave of funds flowing into BTC.”
That being said, COVID-19 virus mutations, a slow rollout of vaccinations, global lockdowns and rising unemployment are adding to the ongoing economic uncertainty — something that has the potential to spill over into various financial markets, including crypto, as was previously seen over the course of the last 12 months.
Related: Risk it for the Bitcoin: Has BTC matured to be a safe investment play?
On the issue, Nischal Shetty, CEO of cryptocurrency exchange WazirX, reiterated that the reason why an increasing number of funds are continuing to explore Bitcoin is that it is turning into a legitimate hedge against inflation, the effects of which he believes are bound to be felt eventually as the global money pool continues to be diluted. He added: “As inflation increases, we believe that there will be more inflow of institutional investors buying into Bitcoin.”
Castro stated that institutional interest is only just beginning and that recent announcements should simply be viewed as a “wake-up call” for other players who haven’t yet been able to understand the proposition that has been put forth in front of them. “This is yet far from the widespread institutional [interest] that is to come. We are sure to see a higher ceiling if more and larger institutions diversify into BTC and other cryptocurrencies,” he added.
Is another breakout inevitable?
While on paper there may be a host of ways to analyze and attempt to predict the price of BTC, the fact of the matter is that it is pretty much impossible to guess the price action of an asset with any sort of certainty. However, there are a few indicators we can look at in order to glean its potential valuation.
For example, Lai pointed out that based on historical data related to BTC’s performance post-halvings, it could be close to breaking out to $50,000 soon and even surging as high as $100,000 by April 2021.
On the subject, Castro believes that there is still no accurate model to describe BTCs fundamental behavior, adding that the only framework that he actually considers when evaluating BTC is PlanB’s stock-to-flow model, which, if one is to believe, will see the premier cryptocurrency surge to anywhere between the $100,000–$288,000 region before the end of 2021.
Related: Believing, not seeing: Institutions still predict $100K Bitcoin price
Lastly, another reason why making such predictions is so tough in Shetty’s opinion is that with every jump in Bitcoin’s price, an increasing amount of selling pressure seems to be coming from long-term investors: “These are the investors who take long positions and want to dilute at certain historic price points. $40,000 seemed to have been that historic price point where a lot of old Bitcoin holders decided to liquidate.”
Bitcoin (BTC) is proving to be one of the biggest mysteries of the decade, and anyone who claims to know where the currency might be heading is most likely deluding themselves at this point.
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What Ray Dalio Really Thinks of Bitcoin
A reading of Dalio’s first long-form essay on his thoughts about bitcoin and cryptocurrencies.
from CoinDesk https://ift.tt/3t9y13I
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DeFi has to be improved by embracing its peer-to-peer aspect
The time has come to make decentralized finance more P2P-oriented than it has been so far.
During this first wave of decentralized finance projects and services, users have been more than willing to part with their funds. It is very similar to how decentralized exchanges work, as convenience seems to trump privacy and security in DeFi. Just because some platforms offer a high annual percentage yield does not mean anyone should give up control of their funds.
Considering that DeFi is designed to be built on blockchain technology, there is no reason for go-betweens, intermediaries or fees. Unfortunately, these aspects are all present in a lot of solutions today. Regrettably, users have to pay to deposit funds and withdraw them again afterward. Concepts like these will eventually be the downfall for DeFi unless developers address them soon.
Uniswap, currently the fourth-largest Ethereum DeFi project by total value locked, shows how noncustodial DeFi works. The DEX never takes control of user funds — not even when adding liquidity to trading pairs. Its downside is that the escalating Ethereum gas fees hamper it. Using Uniswap is very easy, but paying over $20 to move funds in and out is unacceptable.
Ultimately, the end goal of DeFi is to let crypto enthusiasts earn a passive revenue stream without contracts or platforms taking custody of funds. Several projects already explore that option, but there is room for further improvements.
Why DeFi needs peer-to-peer solutions
In the current landscape, interfacing with decentralized finance relies on trusting smart contracts that may need an external audit. Unfortunately, this has given rise to a growing number of scams, rug pulls and projects suffering from hacks or other attacks. It makes the entire industry look weak and unprofessional.
A CipherTrace report from November 2020 confirms that half of the 2020 cryptocurrency-related hacks were due to insecure DeFi protocols or scams — an astonishing development — yet people keep pouring money into unknown projects. While exchanges lose more funds than decentralized finance projects, these statistics need to improve quickly.
Related: Roundup of crypto hacks, exploits and heists in 2020
Having the ability to earn up to 12% passive interest on one’s existing crypto holdings is a lot more appealing — especially when there are no lock-in periods for funds, as you can take money out of a solution at any time. It makes for a smarter, safer, more passive approach to putting one’s crypto assets to work. While an APY of up to 12% may not seem significant when compared with returns of up to 1,000%, it involves less risk and trust. I know where I’d put my money.
More importantly, a solution such as this comes with a peer-to-peer marketplace. Users looking to make loan offers have many options to choose from without requiring approval from intermediaries. Combined with a platform’s approach to insurance and creating a protection fund — as well as thorough audits — there is a lot to appreciate from this “second-gen” DeFi protocol. Moreover, support for more digital assets has to become the norm in decentralized finance.
Changing the LP and native token narrative
A popular trend in the current DeFi landscape is providing liquidity or liquidity protocol token farming. The concept has gained momentum thanks to Uniswap and other automated market maker platforms. The biggest drawback is that users are parting with two tokens and their balances to provide liquidity.
For example, if one wants to provide Uniswap liquidity, you need Ether (ETH) and Tether (USDT), or Dai and MKR, and so forth. For newcomers, this creates a big hurdle to overcome. This requirement of having to own the “correct asset” to partake in LP farming will not survive much longer. A new solution needs to be found, and LP grouping will make a significant impact.
LP grouping ensures that users only need to own one “asset” of the liquidity pair to provide liquidity. The smart contract can match them with other users who have the opposite asset. Creating a “grouped pool” to match these users will significantly boost overall DeFi participation and reduce the risks of providing liquidity.
An extra benefit is that LP grouping entitles users to earn compounding interest on their original asset and earn platform-native tokens. It is a curious concept that will make users more “loyal” to the platform of their choice. This is certainly an option worth exploring for anyone serious about advancing DeFi to the next stage. I hope to see more initiative involving LP grouping — or concepts that can perhaps improve upon it — pop up in the coming months.
The same applies to issuing native DeFi tokens as governance assets. More often than not, some tokens serve a speculative purpose first and foremost. Some platforms take a bolder approach by actively separating their utility and governance tokens. A dual-token approach is the way forward, and proper boundaries need to be established by DeFi providers. Dual tokens can also boost liquidity provision and trading volume when executed correctly.
Similar to how Bitcoin evolved from “play money” to the world’s leading cryptocurrency, DeFi platforms need to undergo an evolution. That will only happen by building new infrastructure and growing the overall community.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Alex Zha serves as director of global operations at MXC Exchange, a one-stop cryptocurrency service provider. Prior to MXC, he gained experience at OKEx as senior global marketing manager. Alex is a veteran in the cryptocurrency and blockchain industry and is a well-versed marketing and operations specialist who believes blockchain and cryptocurrency will usher in the era of modern financial inclusion. He holds a master’s degree from the National University of Singapore.
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How much is too much? Crypto art market brings together deep pockets and big artists
In the future, owning unique art won’t be restricted to the elites, but will everyone have digital art on their walls?
With the nonfungible token market approaching the frothing point, perhaps it’s time to sit back and ask: “What’s happening here?” The $750,000 in proceeds from the recent sale of a single “alien” CypherPunk NFT, after all, could have paid for a reasonably sized house.
The crypto world at large is only 12 years old, entering adolescence, but crypto art — art on a blockchain — and nonfungible tokens are just out of their terrible twos. The launch of an epoch-defining CryptoKitties goes back to 2017 and 2018, and Ethereum’s nonfungible token, ERC-721 — which is used by many digital galleries and also non-art NFTs — wasn’t developed and rolled out until early 2018. What is being discussed here is still very new.
Moreover, Bitcoin (BTC), the world’s first blockchain project, was initially just a more efficient way to transfer money, though it soon became more — a kind of social movement. In a similar vein, crypto art might evolve to be more than just another collectible. The technology behind it could make every person on the planet — not just the top 1% — owners of unique art pieces, proponents say. Or, as the winner of a crypto art auction said in December: “It’s my biggest wish for crypto to become understood as a liberating technology.”
There’s no question, though, that art — physical or digital — is also about money. The “liberating” art owner cited above has also bid $777,777 for a crypto work by artist Beeple (aka Mike Winkelmann), and it seems fair to ask in light of similar events whether the digital art market is overheating.
An emerging culture?
“It’s a bubble in the sense that capital is rapidly flying into the NFT market and much of that capital is coming from individuals who would otherwise be using that capital to invest and/or trade-in cryptocurrency,” Vladislav Ginzburg, CEO of digital art and collectible market Blockparty, told Cointelegraph. But something else is going on too, he added: “There is a real culture of collectorship emerging around NFT-backed digital art and cultural assets.”
Giovanni Colavizza, assistant professor of digital humanities at the University of Amsterdam, told Cointelegraph: “I believe we are in full price discovery mixed with rapid growth of the NFT collectibles space.” Furthermore, he added that as more wealthy individuals come into the market, the more the “creatives realize how this space can allow them to monetize their work.”
The crypto art world as presently constituted is two-fold, said Ginzburg, embracing artists who have been creating digital art from the beginning but had trouble monetizing and distributing their works — and for whom tokenization is a boon — as well as traditional, physical artists, many with significant followings but who are seeking a still larger global audience.
Justin Roiland, who just sold a crypto art piece for $150,000 at a silent auction on a Gemini-owned art platform, for example, belongs to the first group. “He is an animator — a form of digital art — who has been able to monetize his characters and animations via commercial means on a popular television show,” explained Ginzburg, adding:
“Getting into the NFT space has enabled him to stay natively digital but sell truly unique and ownable works of art without having to learn a new medium, such as printmaking.”
For traditional artists keen on adopting NFTs, “the path is less clear,” added Ginzburg, whose firm is exploring with such artists how NFTs “can support their physical works, as either an ‘add-on’ or possibly a digital extension.”
A niche within a niche market
The traditional art world, where total annual transactions exceed $60 billion, dwarfs digital art, but it still remains a niche market “full of information asymmetries and all kinds of arbitrary obstacles to entry which keep it artificially small,” noted Colavizza. The NFT space, by comparison, is fully transparent and open to anyone, so it isn’t surprising that some established artists would want to test the waters, and that may have something to do with recent NFT activity.
“Several recent big drops have been due to established creatives with a follower base moving to NFT and bringing it with them,” said Colavizza, citing Beeple, who auctioned off his entire NFT collection for $3.2 million, including the single work cited above that went for $777,777, smashing Trevor Jones’ previous crypto art record by 14 times.
Another reason for recent activity, surely, “is the new surge in crypto,” said Colavizza. Bitcoin and Ether (ETH) reached historic highs in the past month. “Several deep pockets are being or have been made. The high liquidity means many are looking for ways to invest, and NFT collectibles are a rapidly growing space to do so.” The downside to this is higher market volatility, he added.
There might be a DeFi aspect to the NFT run as well. “Some collectors have clear plans for their collections — e.g., using it as backing for other DeFi assets or for developing estate/projects in virtual worlds,” added Colavizza. Indeed, FlamingoDAO, the crypto art collective that purchased the “alien” CryptoPunk for $750,000, announced its intent to acquire NFTs and convert them “into fractionalized works so that they can be plugged into emerging DeFi platforms, with rights to these works held and managed by a growing number of people in the Ethereum ecosystem.”
A haven for speculators?
Many, of course, view this all as so much rationalizing of what is just market speculation. Misha Libman, co-founder at art marketplace Snark.art, told Cointelegraph: “There are clearly a lot more speculative purchases in the crypto space with some buyers interested in flipping the NFT tokens for profit,” surely more so than in the traditional art world. Moreover, “we are seeing a lot of emerging artists, and it is difficult to gauge where the prices reflect the quality of the artworks or where they are more driven by speculation.”
Ginzburg agreed that there was a lot of speculative money coming into the NFT market, which could leave just as quickly, but this happens in the traditional art world, too. Still, the foundation of the traditional art market is collectorship. He added:
“Pure speculators tend to be identified, isolated, and shown out pretty quickly. Collectorship keeps prices stable and the market reliably growing. This culture of collectorship is emerging in NFTs, and it’ll be exciting to see.”
Asked how crypto art prices are determined, Ginzburg answered that the basic rules resemble those in traditional art: Who are the artists? What are their backgrounds and achievements? Does their work have quality? Which collectors are interested in them or already own their work? Which galleries/platforms are showcasing their art?
“If there is one primary difference I see, it’s the new creative freedoms that digital art affords the creator,” said Ginzburg. “I would judge NFTs additionally on how many new elements they can bring together: audio, movement, physical accompaniment, etc.”
Priyanka Desai, a community representative at FlamingoDAO, told Cointelegraph that a big difference from pricing traditional art is that there “is no auction house taking a cut, it’s peer to peer,” and it’s also up to the content creators to decide when an offer will be accepted. Traditional art auction houses like Christie’s and Sotheby’s can charge commissions of 25% or higher. Open Sea, an NFT sales platform, by comparison, takes only 2.5% for sales on its platform.
Most NFT transactions are in Ether, the world’s second-largest cryptocurrency after Bitcoin. What would happen to crypto art activity if the price of ETH and/or BTC collapsed, as happened in March 2020? “It can happen in any market, and it happens in traditional art,” said Desai. In any event, the NFT market began rising well before the latest cryptocurrency run-up.
Who are the collectors?
Speculators aside, does the profile of the typical crypto art collector differ much from traditional art collectors? The crypto art buyer “tends to be young and tech-savvy. They’re already familiar with crypto, even if they don’t own any,” said Ginzburg. The market is global, but most participants are American or European, though he conceded that “this is changing very rapidly. They may or may not be art collectors, but they are definitely interested in culture as it relates to music and fashion.”
Libman told Cointelegraph: “The collectors we are seeing in this space are usually not from the traditional art world. They are generally young, educated, technology-friendly, and just like other collector markets, profess specific tastes and strategies.” As the crypto art world becomes more saturated with NFTs, they are becoming more selective, added Libman.
Related: Tokenized art: NFTs paint bright future for artists, blockchain tech
FlamingoDAO, the crypto art collective launched in October, has 55 members — all accredited investors — including “deep crypto, deep NFT people,” said Desai, but also collectors from the traditional art world who want to move into crypto art. They are a mix of ages — “even a few people over 50.”
A COVID-induced fad?
Will demand for tokenized art plunge if and when the coronavirus pandemic ends and people again visit museums and art galleries? “There is no question that the pandemic has given a huge boost to the digital art market,” said Libman, but museums were expanding their digital art collections art before COVID-19, and he expects that process to continue.
“When we look across the adoption of digital format across other industries, from publishing to film and music, we believe that the expansion of the digital art market is unavoidable,” he said, adding:
“Whether the person is experiencing it on a wall or through their smartphone only changes the format. Digital allows artists to reach much wider audiences without the complications of crossing physical borders, applying for visas, and concerning themselves with various logistics.”
Will everyone own digital art?
Overall, said Libman: “The NFT art space is an emerging market, and over time, it will mature and probably resemble its traditional counterpart.” Colavizza added: “I am bullish while also conscious that volatility is high and so there will be bumps along the way.”
According to Ginzburg: “The outlook here is extremely positive, as we’re going to see some of the truly great digital artists — who have been confined to monetizing their work via commercial means — start seriously focusing on their personal artwork as a revenue generator via NFTs.”
In the future, owning unique art won’t be restricted to elites who patronize Christie’s and Sotheby’s, Desai told Cointeleraph. “Everyone will have digital art on their walls. Owning digital art will be a part of your digital (online) existence,” part of your identity, like sharing your likes in music or films over social media.
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Is the weakness of Bitcoin after the 'Elon Musk pump' hinting at a bull trap?
Bitcoin is slowing down and weakening on-chain metrics are forcing traders to turn cautious in the short term.
The price of Bitcoin (BTC) is showing overall weakness as it struggles to establish $34,000 as a support level. Overall, BTC appears to be stagnating without signs of a short-term relief rally, leading traders to be cautious.
One concerning trend is that the volume of Bitcoin has been stagnating along with its price, apart from the “Elon pump” on Jan. 29. This trend indicates that there is an overall drop in buyer demand since the $42,000 top despite BTC hovering in the low $30,000 region.
Bitcoin gets choppy after revisiting $38,000
On Jan. 29, the price of Bitcoin rose to as high as $38,461 on Binance after Tesla CEO and the world's richest man, Elon Musk, ostensibly showed support for Bitcoin.
However, before this rally, on-chain analysts were already warning that the momentum of Bitcoin was slowing.
Ki Young Ju, the CEO of CryptoQuant, for example, pinpointed the high selling pressure from Bitcoin miners as a sign of a short-term bearish scenario.
Although the price of Bitcoin briefly surged 14%, it snapped back down to sub-$34,000 within 24 hours. Hence, weakening on-chain indicators were likely a warning that BTC would retrace most of its "Elon pump" gains.
Ki wrote before the rally:
“Exchange Whale Ratio hit the eight-month high, meaning $BTC might have a large red candle if the price drops. It's supposed to be below 85% if this bull-run is legit. Otherwise, it's likely to be a bull trap.”
Whales likely sold as the price of Bitcoin abruptly surged to the $38,000 resistance level, causing a sharp correction.
With shaky on-chain indicators and some selling pressure coming from miners, traders are also showing caution about longing BTC/USD in the near term.
A pseudonymous trader known as “Salsa Tekila” said that he is not using leverage until Bitcoin breaks out or drops back to $30,000. He said:
“We're at that point where $BTC is far enough from the 30k for me not to be comfortable longing with any form of leverage but at the same time I wouldn't short. Therefore being spot long until a big down / legacy open / probably Monday morning is best. NO LEVERAGE”
Meanwhile, another popular pseudonymous trader known as “Byzantine General” argues that the rally is broken. Hence, even if Bitcoin is bullish in the macro picture, more downside is possible until it sees a convincing breakout on lower time frames. He noted:
“The bull run is still on IMO, but the rally is broken. If we re-claim the yearly TWAP we can continue ze pump, but until then it looks kinda meh.”
What to watch out for
Traders and technical analysts are closely observing Bitcoin’s reaction to the $34,500 to $35,000 range.
If Bitcoin breaks out of it with strength, momentum, and high volume, then the probability of a short-term trend reversal rises.
However, if Bitcoin struggles to retest the $34,500 resistance level and continues to stagnate in the $33,000 region, the risk of a further breakdown to the $33,000 support remains.
Additional signs that BTC price could see another pullback include the Crypto Fear and Greed index remaining at "extreme greed" levels and Google searches for "Bitcoin" dropping by 50% since multi-year highs seen earlier this month.
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Blockchain is not a panacea, but where needed, it’s the savior
For managers, entrepreneurs and builders working with blockchain, performing a cost-benefit analysis of DLT implementations is crucial.
Blockchain technologies and their associated market gained tremendous momentum this past year. The colossal developments and the aggressive funding of ideas across this nascent industry have sparked some serious debate as to the veritable value of blockchain. Before implementing blockchain technology, managers, builders and developers need to ask themselves one question: “why blockchain?”
What necessitates a decentralized system?
In order to understand how best to use blockchain technology, we must first define the trust assumptions in the system under consideration. Often, blockchain use cases overlook this question of a third party without ever considering whether that use case could be better met with a distributed or centralized alternative.
Criteria for a decentralized system:
- A uniformly accepted single source of truth.
- The system must receive inputs from two or more parties.
- The parties must not trust each other and their interactions must, therefore, be authenticated via a third party.
Next, we must determine whether a centralized or distributed third party could serve in the place of a blockchain. Centralized third parties do more than simply manage transactions for their clients. They provide usability services and manage disputes. They update the protocols and ensure that they stay efficient and usable. Distributed intermediaries have all of the above advantages yet they are also more efficient. A hierarchical structure keeps the central overseer from becoming overwhelmed.
Thus, by choosing either a distributed or centralized third party, one can avoid the host of token distribution and governance questions that plague modern-day blockchains. One can avoid the scalability challenges and regulatory obstacles and make use of a reliable and productive third party.
That’s not to say decentralized third parties are irrelevant. In some situations, it’s simply impossible to trust a centralized third party. This is key to understanding blockchain’s benefit. If we can establish a framework for understanding when (and why) centralized or distributed third parties should be avoided, then we can accurately predict when and why blockchain should be embraced. Additionally, we can avoid creating decentralized networks that naturally migrate toward centralization given that they may have been better served by distributed third parties in the first place.
Three criteria for why a centralized third party cannot be trusted
The first criteria. A single source of truth is required. The third party cannot be trusted to impartially mediate between clients or parties due to a conflict of interest.
At times, third parties are incapable of remaining impartial. The intentions of such a third party may not even be malicious; it is just that in the case of a conflict, their interests will be served first. We’ve seen this with Facebook and other tech giants time and time again.
With the right incentives, decentralized governance can change stakeholder interactions from a zero-sum short-term game of tit-for-tat to a more collaborative and circumspect long-term game, with rewards to those who act in the best interests of the broader stakeholder set, rather than just any one preferred individual or group.
The second criteria. There is a monopoly that prevents competition from protecting users’ best interests. Interactions across a network necessitate refinement and abstraction.
Provided that competition exists, self-serving or irresponsible behavior by a third party is strongly disincentivized by market forces. However, if there is no alternative because one entity holds a monopoly over the sector or because there exists a resource constraint, then the power of competition collapses and the third party has essentially no constraints on their behavior. Apple’s control of the App Store is a strong argument for why the perceived good intentions of centralized gatekeepers can act contrary to the best interests of the ecosystem they claim to support.
The third criteria. Antifragility is a must. The stakes are too high and the consequences of malicious behavior by a third party would be catastrophic.
Even if the effects of competition are able to penalize malicious behavior, the cost of a single fault cannot be too high. Competition is a reactionary force that only takes effect after a mistake has been made. If the mistake cannot, under any circumstances, be allowed to happen, then preemptive measures must be implemented.
We see this reality reflected in regulation. Governments are more content to let free markets manage the plumbing industry than they are the nuclear energy industry. Shotty plumbing work only results in a few angry customers, while a single nuclear meltdown is disastrous.
As the world and every aspect of our lives move online, there is a growing understanding that over-optimization can lead to fragility and that we need to build more robust infrastructure for essential digital services that ideally can become antifragile. Blockchains have the potential to form the backbone of antifragile systems, which not only survive in adversarial environments but get stronger from every challenge, block by block.
The above criteria help us identify promising blockchain use cases.
Which blockchain use cases are ready?
Banks, markets and other elements of the financial industry generally require third-party management to protect against counterparty risk. This situation demands an impartial third party capable of managing and assessing financial risk. Decentralization serves to mitigate this counterparty risk by serving as a third party, aligning incentives between market makers and users, distributing risk across the platform, and greatly reducing the chance of system default. The extraordinary growth across DeFi ecosystems is a powerful example of blockchain’s disruptive properties and the successful implementation of decentralization across highly valuable systems.
Some use cases propose promising opportunities for decentralization but require an ensemble of technologies to actually benefit a particular value chain. Supply chains are a strong example of a mega-industry ripe for disruption by blockchain-powered solutions and products. They are highly collaborative environments with a low tolerance for error. Especially with regards to high-risk goods such as pharmaceuticals or even fresh meat, proper transport and supply-chain tracking are crucial. The same goes for high-value supply chains like diamonds and art, where the validity of the inputs makes a colossal difference for the different parties across the value chain.
In building solutions for these value chains, blockchain can’t possibly be the end-all. It must be a part of a broader, holistic solution that expands the reach and actual value of the supply chain itself. Blockchain won’t immediately decentralize the private entities that form supply chains, but it can be monumentally impactful by providing a fully immutable, semi-centralized environment for these various entities to interact more efficiently and freely.
Blockchain and you
Understanding which properties of blockchain bring the most value to an entrant or incumbent’s value proposition and business model will be the first step to drive disruptive innovation through blockchain and other transformative technologies.
Quantifying the costs of trust and understanding how the properties of blockchains can enable (or improve) your business is the first step in actually utilizing these technologies for veritable impact — and industry-wide disruption.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Lior Messika is the founder and a managing partner at Eden Block, a research-focused EU VC Fund focused on disruptive blockchain technology implementations. His entire career has been dedicated to strategy, growth and disruption. Lior’s early involvement in global businesses and industry-wide disruptions has shaped his professional approach in a uniquely deep manner. Lior has spent all of his life researching business theory, deciphering the ideas behind parabolic growth and competitive strategy.
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