The early days of crypto markets were heavily dominated by retail market participants and point-and-click traders. The market evolved and more experienced players entered the space. The high focus on systematic and algorithmic trading among the traditional financial community means that the very same strategies are now being employed across the very fast-growing cryptocurrency market. For these firms, their DNA is not just trading and speculation, but also technology.
In algorithmic trading, latency plays a vital role as speed is the key entity in executing a trade. In short, low latency leads to competitive prices for trade execution. For many firms, it was this lack of infrastructure that prevented entry to the market. As such, the introduction of low-latency solutions will not only facilitate the entry of well-established market participants from traditional markets but it will also improve the underlying quality of the crypto market by boosting liquidity and improving market fragmentation.
What should the crypto industry seek to implement?
The main barriers that the cryptocurrency market needs to overcome in matching the standards expected by institutional investors access to robust liquidity pools and improved infrastructure for high-speed trades with the lowest possible latency. Regulatory ambiguity is a huge issue. Although few jurisdictions have established mature regulatory systems in the cryptocurrency industry, it is nevertheless important for the majority to maintain a high level of corporate governance, in order to gain institutional trust. This can include robust Know Your Customer (KYC) procedures, as well as proper trade surveillance and market abuse monitoring.
The main barriers that the cryptocurrency market needs to overcome in matching the standards expected by institutional investors access to robust liquidity pools and improved infrastructure for high-speed trades with the lowest possible latency.
Education and awareness are areas where the market must also improve. The nuances of analysing crypto markets are very asset class specific and fundamentals are often disjointed from the prices seen on screens. The security of assets has also become of paramount importance, as increasing cases of exchange hacks are a major source of concern for many investors. Surprisingly, however, very few exchanges offer industry standard Financial Information Exchange (FIX) connectivity despite this currently being a significant shortcoming of the crypto industry for many institutional clients.
Why low-latency trading is high on the list of investors’ needs
The lack of industry standard connectivity in the majority of cryptocurrency exchange platforms is becoming increasingly apparent, especially as low-latency options begin to gain more prevalence. Traders looking to exploit price discrepancies across different trading venues are experiencing higher levels of competition in order to enhance network latency and tick to trade responses.
More and more, the solution to this is colocation and hosting at data centres in major financial hubs like New York, Tokyo and London. As colocation becomes more widespread within the crypto industry, the market will eventually demand Best Execution and Best Bid Offer quotes that require robust network infrastructure and low-latency connectivity across major liquidity pools.
Digital asset exchanges looking to tap into the increasing influx of institutional investment must ensure that product development is built using the best elements of traditional high-speed electronic trading. Partnering with time-proven custody solution providers and large liquidity pools within the market can offer the best of both worlds.
Although there are groups on both sides – with some claiming that Bitcoin’s day is over, while others argue a rise in price is imminent – the truth is far more complex. Bitcoin can rise again, but it requires a shift in the crypto industry to happen, says George Zarya, CEO of BEQUANT.
Institutional buy-in
Fundamentally, the retail aspect of cryptocurrency investment has been a huge driver for the market. Small groups of consumers have willingly put money into a wide range of digital assets with Bitcoin being one of the first examples of this. While this has led to huge growth in the market, there now needs to be an equal amount of attention from large financial institutions in order to take the crypto market to the next stage.
This has already begun to occur, with research from the Global Blockchain Business Council (GBBC) showing that up to 41% of institutional investors believe they will be entering the Initial Coin Offering (ICO) sector within the next five years. Through this kind of support from large industry bodies, the cryptocurrency sector will gain further legitimacy – a factor that has historically plagued the asset since its inception.
Compliance first
However, even with the investment of large financial institutions, there still needs to be further reliability in order for coins like Bitcoin to regain their presence in the market. Fundamentally, the ‘new frontier’ that is crypto-investment has been viewed as a lawless and unregulated, leading many financial leaders to resist investment in the sector. Without more consistent regulation in place, the large institutions will always be nervous about entering the market.
While those in the industry have done much to offset these concerns – such as aligning themselves to wider market regulation or creating self-monitoring bodies – there needs to be increased support at a governmental level to legitimise the efforts of the crypto-market. The challenge here is that the controls that different jurisdictions put in place need to strike a balance between making crypto assets more secure while still encouraging sector growth in a burgeoning market.
However, if governments can find this middle ground, the result will be a far more reliable market for investors. Fortunately, there have already been some developments in this area, with increased infrastructure for institutions and more accessibility to crypto banking on the rise.
Without more consistent regulation in place, the large institutions will always be nervous about entering the market.
Avoiding bubbles, promoting reliability
Ultimately, institutional buy-in and increased regulation will set the right framework for a more reliable market. This will result in more stable assets to invest in, with assets such as Bitcoin able to stabilise and grow in line with the market changes. The cryptocurrency market will become less volatile, with investors making better decisions on the future of certain assets and recognising the ICOs that have the most potential.
In doing so, the ‘bubbles’ that have previously characterised the market will decline and there will be a clear distinction between the assets being invested in. Some coins will serve the same use as traditional fiat currency, while others – such as Bitcoin – will feature as more of an investment option for traders. Investors – both retail and institutional – will have a much clearer distinction of these assets and will be able to make informed decisions on which coins to purchase.
To date, Bitcoin’s story has been viewed as a reflection of the wider cryptocurrency market. However, the reality is far more complicated. Regulation and buy-in from leaders in financial services is integral for any market growth and will ultimately inform the future of this well known, if hotly debated, currency.
Website: https://bequant.io/
Nowadays, it’s incredibly easy to buy bitcoin and the advantages and disadvantages of bitcoin are starting to be less blurry every day.
Despite all of that, we are still a long way from bitcoin mass adoption. Sure, there are a lot of businesses starting to accept bitcoin as payment, but there is still a huge chunk of the world that is unaware of how cryptocurrencies work. Some people are even unaware that crypto exists. Those are the people that need to be included in a global peer-to-peer currency.
Whether we like or not, cryptocurrencies are now part of the global economy. If more people could see why people buy, sell and trade these cryptocurrencies, then maybe we could move one step closer to mass adoption. Here are some of the main reasons why people should start using cryptocurrencies.
If you have a bank account, then you should know by now that these accounts usually have fees associated with them. Credit/debit card fees, ATM fees, merchant fees, checking account fees, etc.
Compare to cryptocurrencies, payment gateways such as Bitpay and Coinpayments charge between 0.5 and 1% per transaction. Compared to those fees of the bank, this is nothing. Digital wallets come free of charge (unless you decide to start investing in hardware wallets).
When you make a purchase using your credit or debit card, the bank, as well as the retailers and service providers, obtain and retain a lot of your personal and financial information. This information includes names, addresses, employers, social security numbers, etc.
Cryptocurrency transactions provide an alternative by limiting the data to a string of letters and numbers (a.k.a. A wallet address). Transaction IDs are also used to confirm that a wallet-to-wallet transaction took place.
3 words = cryptocurrencies are borderless. Transactions are not only instant and cost-effective, but you can also make these transactions across the world. There is no waiting, no international fees, and no limitations. All you need is a smart device that can connect to the internet. Because of this, the unbanked population has an alternative solution when it comes to paying bills and earning a living.
There are many exchanges out there that will help you get started on your crypto journey. Remember to do extensive research on all your potential bitcoin exchanges so that you can decide which one suits your trading style the most. If you are unsure about which bitcoin exchange to use, try making small investments on your top platforms and see which system works for you. Once you’ve settled on a platform, you can start making larger investments.
People can also start using crypto if other people give them the opportunity to use it. Adoption is the key here. The more businesses offer crypto as a payment option, more and more people will be more likely to follow. If more trading platforms showcase how crypto can help unbanked people around the world, more people will start to use it. It all starts with the community. For more article related to cryptocurrency you can check etherum mining software & Updates.
Bitcoin and other cryptocurrencies are in a more stable place now and people are starting to hop on the ride. All that stands in the way of mass adoption is people being educated on how cryptocurrencies work and what good they can bring to the world.
The crypto community owes it to itself. The more positive crypto news there is, the more other people will be attracted to the technology.
Gold has long been known as a store of value to help investors weather turbulent financial markets. Below, Shaun Djie, Co-Founder and COO of Digix, explains why digital gold is a forward moving solution for everyone.
In recent years, it has also become far easier for the average individual to buy and sell gold. There are online bullion dealers and high-street shops selling gold, as well as exchange-traded funds for gold, which are effectively investment funds that track the price of gold.
However, while it’s now easier to purchase, the spread between what individuals pay for this asset and what dealers sell it for can be very big. This is especially true for small denominations of gold. Exchange traded funds overcome many of the associated complications of investing in gold but they tend to be more expensive than physical gold because of the inclusion of brokerage and management fees.
But for those interested in investing in gold and getting a better deal for it, the good news is an alternative to owning physical gold and relying on ETFs is emerging – thanks to blockchain technology.
Understanding blockchain’s potential
Blockchains are shared digital ledgers that record every transaction ever made on them. So physical assets like gold can be divided and represented by tokens, and blockchain technology can keep track of the ownership of those tokens.
Gold has become one of the first real-world assets to be tokenised and freely traded on the blockchain. With this comes a level of divisibility that hasn’t been seen before. Emerging gold ownership and trading protocols can ensure that tokens are minted on a proportional basis – so, for example, one token is equivalent to one gram of a physical gold held in a secure vault.
In some systems, the delivered gold is subject to verifications at the point of deposit into the vault, as well as at quarterly reviews by independent auditors. Hence, there should never be more tokens created than the total weight of physical gold bullion backing them.
Simplicity and liquidity
In this way, gold-backed tokens not only bring divisibility but also an easy, reliable and secure way to own and trade gold. Liquidity would increase, which would be good news for current gold investors and any prospective investors who may have been put off by an inability to access small denominations or by the fees that ETFs charge.
For existing investors, more profits from gold can end up in their pocket too. Buying a gram of gold through leading smart asset companies on the Ethereum blockchain costs under US$40, where as the retail price for a 1g bar hovers around the US$77 mark.
That’s because, by removing the physical and administrative costs of creating 1g gold bars, tokenised gold can get as close to the the spot price of gold than any method – regardless of the size of purchase.
Stability that investors can rely on
While these benefits will sound appealing to many investors, some may point to the historical volatility of cryptocurrencies as a sign that they won’t appeal to gold investors’ needs. It’s certainly true that the huge speculative bubble in virtual currencies has led to immense volatility.
However, gold-backed tokens are totally different to existing cryptocurrencies because of the bridge they have to the real world asset. To build confidence in crypto markets, gold-backed tokens are needed. They can also diversify portfolios and be used as collateral for lending and other financial products.
For existing investors, gold forming a central part of the crypto economy would be beneficial, pushing up the demand for the metal even further. These investors have always been able to see the value of their investment in this asset. However, through the tokenisation of physical gold, they can benefit from the liquidity, divisibility and security of these digital assets just as much as entirely new investors can.
Benjamin Bilski, who’s been named in Forbes 30 under 30 and is the Founder and Executive Director of The NAGA Group AG, a publicly listed FinTech that unites financial, cryptocurrency and virtual goods markets, discusses upcoming trends and predictions for the future of the cryptocurrency sector.
When it comes to virtual currencies, 2018 will go down in history as the year in which experts and renowned economists proclaimed the death of cryptocurrency, yet again, due to the deep plunge of the global market cap from its all-time high of over $850 billion in January to below $200 billion at the time of writing this. Bitcoin has faced a price decline of almost 70% from its peak of $20,000 in December 2017, tech giants imposed bans on crypto ads and the US Securities and Exchange Commission (SEC) just suspended ETF trading in two crypto-based securities. The list of negative news goes on.
However, cryptocurrencies have been declared ‘dead’ over 300 times to date and after resurrecting so many times, it is fair to say that “what doesn’t kill you only makes you stronger”. Pessimists often disregard the fact that cryptocurrencies once again have demonstrated their resilience against volatility and price shocks. To put things into perspective: in 2011, Bitcoin was valued at only $0.23, a year ago - at $2500 and today, it’s worth almost $6000 – despite the plunge. Therefore, it’s far too early to say farewell to cryptocurrencies. Technologies that shift the paradigm often take a long time to be fully understood before they gain real traction. I believe that the recent cryptocurrency bubble burst marks the beginning of a far more interesting era.
4 cryptocurrency trends to watch out for
1.Maturity kicks in after the bubble
The recent burst of the crypto bubble is the result of a rampant ‘gold rush’ and everyone’s fear of missing out. Ventures without strong fundamentals or good tech embarked on unrealistic projects, trying to gain the attention of investors who were driven by the prospect of getting rich quickly. $5,6 billion in 2017, a staggering $6,3 billion in the first quarter of 2018 (or 118% of the total for the previous year) - sums in ICO funding were skyrocketing. However, many of them were scams, and under the pressure of price collapse, over 800 coins went dead.
But this is actually good news. Certainly, the losses many investors had to face are infuriating, but the disappearing of ‘dead coins’ will also sort out the bad apples. As part of a self-cleaning process of the market, remaining projects with real value will have a better chance of showing stable and organic growth. Eventually, naked greed for short-term profit will give way to long-term projects of true Blockchain utility that investors and interested parties can track. This process of maturation with serious players emerging is likely to decrease volatility and increase market stabilisation
2.More regulation to come – though limited on national levels
At the same time, the crypto economy can expect more regulation to come across the globe as a result of the recent bubble and the underlying ICO fraud. Whether we look at South Korea’s decision to recognise crypto exchanges as regulated financial institutions and banks, or the recent legislative developments in Australia: regulators are looking to catch up.
Although one would think that regulation may be detrimental to cryptocurrency, it will eventually be central to its future. Without proper regulation, cryptocurrency investors and those participating in ICOs will have little protection, should their digital wallets be compromised. Recent surveys have shown, however, that 40% of traders see lack of security as one of the biggest concerns. As regulation of cryptocurrencies rises, investors' faith in them will rise, too.
However, the capacity of regulation will not create a panacea for the cryptocurrency sector. Across the world, we will see more regulation on nation-state level but not so much on international. This is likely to maintain some uncertainties for investors since national regulation runs contrary to the global and transnational conception of cryptocurrencies.
3.Crypto attracts new investors, becoming mainstream
Though cryptocurrency has previously garnered minimal investments from larger institutions and hedge funds due to its volatile nature and non-regulatory framework, the industry as a whole can expect major shifts in the long run. Plans of multinational investment banking giant Goldman Sachs to open a cryptocurrency trading desk have laid out, although there’s no official confirmation that the project will be realised.
However, Goldman Sachs CEO’s comments that it’s too “arrogant to deny cryptocurrencies” signify that even institutional investors see imminent winds of change for the entire financial sector thanks to the evolution of cryptocurrencies. These indications of further mainstream adoption will have an impact on price, even before there is significant institutional activity. Eventually, this will encourage many pessimists to enter the cryptocurrency market which will further lead to a legitimisation of virtual coins as an asset class.
4. Crypto will create more jobs
As the adoption of cryptocurrencies by start-ups and more established institutions is gaining ground under the new frameworks, the higher demand for Blockchain technology talent will fuel a next generation of engineering jobs across the globe. Even now, Blockchain jobs are the second fastest growing market and the future is promising more. The latest quarterly skills index by global freelancing website Upwork shows that the fastest growing skill in the United States during the second quarter was Blockchain. On the other side of the globe, Asia has seen a 50% increase in the number of roles related to Blockchain or cryptocurrencies since 2017.
Education plays a crucial factor in here. As demand for greater understanding of these technologies grows, business schools and universities are rushing to launch courses on cryptocurrencies and Blockchain. Currently, 42% of the top 50 universities offer at least one class related to Blockchain or cryptocurrencies. And I’m sure there’s more to come.
The Outlook
While the cryptocurrency landscape is still nascent, there are a lot of exciting developments happening. With the market maturing after the bubble burst, growing regulation, the attraction of new investors and the ensuing creation of crypto-related jobs, the future promises a lot of exciting things for the sector. All these trends will pave the way for mass adoption of cryptocurrencies and its acceptability as an asset class.
In July, global customer experience provider Voxpro - powered by TELUS International, hosted a major event at its Centre of Excellence in Dublin, Ireland, entitled The Future of Money. Over one hundred FinTech innovators from around the world gathered to discuss the current state of the cryptocurrency industry, regulatory and operational challenges, and the opportunities that lie ahead.
“If you ask any crypto company what their biggest issue is, they're not going to tell you regulation; they're going to tell you getting bank accounts.”
That’s according to Jeremy Allaire, Founder & CEO of Circle - a speaker at The Future of Money event in Dublin. Allaire, whose company recently acquired cryptocurrency exchange Poloniex, revealed the significant obstacles that traditional banking institutions are putting in the path of his industry.
“Banks have pretty systematically limited companies’ ability to operate in this space, and that really is a challenge. I think part of that is regulatory uncertainty and part of it is just hostility to a technology which basically threatens to eliminate a lot of their profit margin and business models.”
Allaire believes the solution lies in the establishment of ‘”crypto-native banks” that will work closely with both crypto companies and central banks to provide the connectivity that is urgently needed.
The fact that traditional banks are under threat at all points to a fundamental shift in how the world views money, something that David Schwartz, Chief Cryptographer at Ripple, believes was inevitable in an increasingly global economy. Schwartz told the Dublin audience that the key problem with money as we know it is that it is neither “universal nor interoperable” and that currency needs to be one or the other if it is to serve the modern economy.
“If it was universal and everybody in the world could accept it with equal ease, then that would be fine. And if it could operate with other systems that other people use, that would be fine too. If you're stuck on an island as the economy becomes increasingly global and more and more people want to do business internationally, but have to do it through intermediaries and slow systems, then we start to really hit the problems created by that system.”
So how exactly does cryptocurrency solve this ‘money problem’? Schwartz pointed to the example of how financial services company Cuallix is using XRP, a digital currency created by Ripple, to move money between the United States and Mexico. Instead of relying on the conventional method, which is very expensive and takes several days, Cuallix buys XRP the moment they need it and a few seconds later sells it for Mexican Pesos. The speed of the transaction avoids the market volatility of both the peso and cryptocurrency, and, according to Schwartz, makes the whole process up to 60% cheaper.
As the adoption of cryptocurrency rapidly grows, so will the need for a new kind of infrastructure to support it, particularly with a view to enhancing the customer experience. Jeremy Allaire of Circle described how a new infrastructure layer of the internet is going to allow a lot of the functions currently performed by the financial industry, mostly record keeping in very proprietary siloed systems, to run on the open internet, at a radically lower cost, and with a much better consumer experience.
And he foresees a new wave of industry enabling this shift: “There are going to be very significant large technology companies built that support the move to crypto finance, just like there have been really big technology companies that have supported the move into digital media and digital communications.”
Gregoire Vigroux, a Vice President at TELUS International Europe, shared a powerful prediction with the audience at The Future of Money event. “Within just a few years, over 95% of the world’s population will hold cryptocurrencies.” Moreover, he believes that we are currently witnessing a landmark moment in history, telling the audience:
“If this was the early 1990s, we would have a panel of internet professionals telling us that the internet is coming and is going to represent a major disruption. Well, it’s now 2018 and today we’re talking about the biggest revolution since the dawn of the internet – cryptocurrency.”
The disruption of traditional financial institutions is being fuelled in part by cutting-edge customer (CX) and user (UX) experiences that are now being offered by digital currency providers. Today, more and more FinTech innovators are forming partnerships with customer experience experts like Voxpro – powered by TELUS International, in order to successfully capitalise on crypto’s increasing popularity.
With experience powering customer operations for some of the world’s leading technology companies, Voxpro has the agility, talent, and digital capabilities to ensure a world-class end-to-end experience for every user, even during periods of intense onboarding.
Leading exchange Binance, for example, recently experienced onboarding rates of up to 250,000 new users per day. If that company fails to successfully deal with the increased levels of customer contact that will naturally come their way, those users may head straight to a competitor. As crypto approaches mass adoption, companies must prioritise investments in their customer experience in order to avoid brand-devaluing issues that can come with a major spike in business.
At the end of the day, the overall customer experience provided by companies is what will differentiate them in an increasingly competitive market. Simply put, the FinTech and cryptocurrency brands that ‘put their money where their mouths are’ when it comes to investing in their customer and user experience will win the day in the modern economy.
Contact details:
telusinternational.com
voxprogroup.com
CoinMetro is a cryptocurrency exchange that aims to make buying and selling cryptocurrency as easy as purchasing pounds, dollars and euros.
Offering a complete and supportive financial platform, CoinMetro provides an avenue for both newcomers, as well as professional and experienced currency traders to begin trading in cryptocurrency. Through a tokenized ecosystem, the trading platform supports familiar investment options such as professional asset management and ETFs, and also allows users to invest in up-and-coming Initial Coin Offerings (ICOs).
The team behind the business has years of experience in the forex industry, with CoinMetro’s sister company FXPIG. Drawing on their substantial experience developing technology for financial trading and understanding of the liquidity needs of currency markets, CoinMetro is uniquely positioned to support and understand the needs of the growing cryptocurrency space, as well as support the trading needs of investors wanting to add crypto to a diverse portfolio of new and traditional securities. To discuss all things forex and crypto, we caught up with the CEO of the company Kevin Murcko.
As a long-standing expert in forex and crypto, what would you say are the reasons behind, and the impact of Bitcoin’s price volatility?
With a relatively small circulation of coins, prices of cryptocurrencies are often affected by the actions of ‘whales’ – early investors with large stakes in specific markets. News is also a force to be reckoned with. News of countries enforcing bans of course plays out bearishly in the markets, while news of government endorsement predictably sends prices upward. Lack of regulation has also contributed to instability.
The impact of volatility has been twofold. On the one hand, rapid price fluctuations have made the space a profitable one for eagle-eyed traders. In order for anyone to make money in financial markets, there must be price movement, and the crypto markets have offered traders exactly that.
On the other hand, with a larger price bracket, comes larger levels of risk: sizeable gains on one day can be all but wiped out in the following day of trading.
Of course, a currency should ideally hold its value and be a reasonably reliable store of wealth. In this sense, extreme volatility has also tarnished the reputation of cryptocurrency as a traditional currency, and resultantly, countries are increasingly choosing to regulate crypto as an asset.
But it’s important to note that while cryptocurrencies have been volatile assets in the past, this doesn’t mean that this will always be the case in the future. In fact, some cryptocurrency developers are taking active measures to limit volatility by, for example, pegging the price of their token to that of the US dollar.
Can you tell us a bit about the history of forex regulations? How have they affected the marketplace?
The history of FX regulation really depends on which country you’re looking at. All countries have their own independent regulatory bodies, and are typically subject to different rules.
China, for example, was late to enter the foreign exchange market and late to impose regulations. As recently as August 2016, Chinese authorities found 192 illegal banks conducting shady forex transactions valued at $30 billion. The State Administration of Foreign Exchange (SAFE) also found instances of companies evading regulations by using false information, transferring illegal assets, and evidence of money laundering via forex trading schemes.
Globally, of course, there are regulations with global ramifications. MIFID II, for instance, has caused an upheaval in FX markets this year.
The net effect of all this regulation has been to achieve what I suppose is the goal of all regulation: it’s helped the FX markets to thrive and maintained financial stability.
What can be learnt from the introduction of regulations in the forex industry?
By reflecting on how the forex industry has been shaped by regulation over the last 20 years, we can get a rough idea of how everything might play out for a decentralised international cryptocurrency marketplace.
Before Bitcoin and alternative cryptocurrencies were established in the late 2000s, the forex industry was facing radical change as the internet opened up the market to the public. New retail brokers started to appear alongside the traditional banks, providing new services and competition. As forex trading made the move online, there was an element of the ‘wild west’ culture that has also characterised the early stages of cryptocurrency. As both markets have experienced a similar introduction to the trading space, the future development of regulations for cryptocurrencies will mirror that of forex trading 10 years ago.
The current conditions in FX enforce businesses to jump through a variety of hoops - such as meeting minimum capital requirements, establishing audit requirements, and adhering to reporting and bookkeeping - before becoming a licensed forex broker. Thanks to this detailed process, regulators are able to weed out fraudulent brokers before they get to market. We expect equivalent hoops to be introduced into the cryptocurrency space. This is all likely to happen quickly, given that cryptocurrencies are now very much a mainstream financial asset.
Like the historic forex market, there’s a certain pull and push in the crypto world between the need for overt regulation and control, versus a laissez-faire approach in which a free market is allowed to regulate itself. In the case of crypto, I expect the regulated approach will win out.
Why does the crypto community need to adopt wider regulation and become part of the regulatory process?
Regulation, if done correctly, legitimises the cryptocurrency market by removing that ‘wild west’ element to it – the very same which once characterised the forex markets.
Regulation brings stability to a market often regarded as excessively volatile, and protects investors from criminal activity; given just how many fraudulent Initial Coin Offerings, cryptocurrency hacks, and fraudulent exchanges are about, this is long overdue.
Why does the crypto community need to be part of this process? For the simple reason that, if left in the hands of potentially misguided legislators, regulation could undermine the growth of this booming part of the financial services sector.
We’ve seen just how awry crypto regulation can get. Chinese policy for example, has achieved little other than to quash innovation and growth, and has simply driven cryptocurrency activities abroad.
What do you think the rest of 2018 holds for forex and crypto?
We have a rough idea of what this year holds for crypto, following on from the recent G20 meeting of finance ministers in Buenos Aires. Member nations have agreed that cryptocurrencies needed to be examined, but that more information is needed before any regulations could be proposed. While there will be further details on this in July, we do have some signs about what recommendations will be announced. Expect
- A bilateral approach to regulation, as Christine Lagarde has recommended on numerous occasions this year;
- Crypto to be treated as an asset, and not as a currency, as various financial regulators have hinted at throughout the year;
- Crypto regulation to ultimately consist of a mixture of existing rules and new rules.
Forex is more difficult to pin down at the moment, with US protectionism on the rise and the prospect of a trade war. This year, the Euro looks bearish, with the dollar’s value as the reserve currency of choice diminishing in step with uncertainty over US trade policy. Whether this will persist to the end of the year remains to be seen.
Website: www.coinmetro.com
With ICOs at the forefront of cryptoculture worldwide, blockchain technology is predominantly being driven by digital currencies and their markets, but why? Below Finance Monthly hears from Drew Bell, Chief Developer at Ethercoin, who explains why.
2018 is set to be an even bigger year for Initial Coin Offerings (ICO) than 2017, with more startup’s turning to the fundraising method to remain in control and transparent in the process. According to a report by CNBC[1], around $100million a month is raised via ICO’s, showing the demand is increasingly prominent between investors and individuals.
However, as with many emerging trends, ICOs have been met with some scepticism and criticism. Before new businesses start jumping on this trend to become the next blockchain success, it is important to understand the challenges it might face and why trust should be built into the core of its offering.
Whilst there can be fraudulent ICOs, businesses and mainstream audiences need educating and to be made aware that ICOs are a viable fundraising mechanism.
The fastest growing form of investment
There’s no denying the fact that ICOs, “the fastest growing form of investment” carries numerous benefits for businesses looking to generate significant ROI without having to seek out venture capitalists. An Initial Coin Offering can be created by just about anyone, and offers businesses an efficient and streamlined fundraising opportunity.
Aside from the obvious benefits like being able to streamline a fundraising campaign for a startup business, by conducting a decentralised application, users will be offered a much better experience.
There is also the added benefits of online marketing, where an ICO can be marketed to a large, global targeted audience with little effort and cost. Potential investors can therefore research about a particular ICO via online ads, social media and websites no matter where in the world they might of originated from. The ICO investment model is open to everyone and free from the geographical restraints associated with IPOs.
An unpredictable market
It’s widely known that the blockchain and cryptocurrency market is an unpredictable place, where the majority of business see it as a sure fire way to attract investors who are looking for the next big blockchain score. Yes, an ICO looks to be an easier and more cost-effective way to raise funds for your business, but it can be just as challenging as as securing a venture capital; but you do have more control.
One of the biggest challenges a new business can face when journeying down the ICO route is the sheer amount of competition. In an interview with Business Insider, the founder of Evercoin announced there were around 30 new ICOs launching everyday, and raising as much as $200million per ICO[2]. Businesses need to make sure they are distinguishing themselves from such a saturated market with a strong unique selling point that will not only put them ahead of the game, but generate interest and a buzz amongst investors. With so many ICO projects not having an effective marketing plan and channels to promote themselves, they can get lost in the sea of ICO scams that take centre stage.
Essential to make a difference
ICO’s are essential for businesses wanting to enter the market, and to be able to thrive, ICOs need regulatory safeguards to be implemented and investors need to be educated. Trust should be at the forefront of any businesses fundraising project, and one of the first steps to building trust is for businesses to create an extensive whitepaper and detailed roadmap.
Due to the volatile nature of the blockchain technology, it can be hard to understand the true nature of the transaction during an ICO sale. Businesses should ensure they offer a safe and secure platform to boast legitimacy can help to instill trust amongst investors.
Communication is the key to success with generating trust amongst the blockchain market. By using social media to engage and update its audiences, investors will start to feel empowered and as if they are a part of the process. This will promote a higher level of transparency and result in more investment.
In today’s unstable and saturated blockchain market, it is essential that businesses looking to start on their fundraising journey are putting security, transparency and trust at the forefront of raising capital to maintain solid investment and build credibility amongst investors.
Now a booming trading market, cryptocurrencies do however create an avenue of risk. Below Schalk Nolte, CEO at Entersekt, discusses said risk and the overall safety of trading Bitcoin and the likes.
It’s official: Bitcoin is now the golden child of the investment community. Following news headlines about becoming instant millionaires, starry-eyed cryptocurrency enthusiasts are flocking to online exchanges to get in on the action. Sign up, transfer funds and trade – the faster, the better. To keep the eager traders’ money and data safe, these exchanges all need to have transaction security in place. And most of them do – except that their security appears to be stuck in the early 2000s.
Nine years ago, Bitcoin didn’t exist. Today, between three and six million people are estimated to have a bitcoin wallet, with over $3 billion worth of the currency traded every 24 hours. Nine years ago, the one-time password, SMS OTP or mobile transaction authentication number (mTAN), represented the apex of transaction security. Today, other technologies have left SMS OTPs in the dust in terms of both user experience and security – and for good reason.
OTPs are typically reliant on mobile network operators for delivery, and they require additional effort from the user without rendering transactions fraud-proof as a reward. They are vulnerable to man-in-the-middle (MITM) attacks for the simple reason that an OTP is never truly out of band, whether it’s delivered via SMS or another route. Because it’s entered into a potentially compromised primary channel, it will always be susceptible to MITM attacks, while the involvement of mobile networks also introduces the possibility of attacks such as SIM swapping and number porting.
In fact, in August 2017, Sean Everett, CEO of artificial intelligence startup PROME, lost a significant cryptocurrency investment with the platform Coinbase as a result of a simple number porting attack made possible by SMS OTP. Soups Ranjan, Coinbase’s head of data science, commented: “I firmly believe we have the hardest payment fraud and user security problem in the world right now.” So how is it possible that the OTP is still the security measure of choice at the majority of cryptocurrency exchanges – and, more importantly, what are the alternatives?
In order to protect its trader members and allow them to match the pace at which cryptocurrency fluctuates, a cryptocurrency exchange needs to do three things:
Minimize risk: This is done by implementing a solution that offers solid app security and strong customer authentication for all transactions.
Make things easy: A convenient and user-friendly trading platform will attract and retain customers. To put it another way, play to a real-world trading scenario: if you were a trader, would you want to open an app, copy an OTP, switch apps, and then paste it? Or would you prefer to simply open an app and scan your fingerprint? The choice isn’t difficult – especially considering that the easier option is also the safer one.
Achieve regulatory compliance: It’s cheap and easy for a trading platform to recommend or require that their traders install a third-party app like Google Authenticator, but this will mess with regulatory compliance – such as with PSD2’s Regulatory Technical Standards on Strong Customer Authentication. Third-party apps often only authenticate logins, not transactions, and as such are not compliant with these requirements. OTPs, needless to say, do not comply either.
If they want to offer winning and secure trading options for cryptocurrency aficionados, it makes no sense for these exchanges to insist on using obsolete, not to mention risky, technology. Instead, exchanges should be employing a more robust and convenient out-of-band authentication solution that does not rely on mobile networks. They should look for a solution that offers PKI-based authentication and transaction signing directly from the mobile phone, which will eliminate fraudulent transactions and build trust in cryptocurrency trading practices – all while providing a user-friendly experience.
On the flip side, cryptocurrency traders should be demanding better security from the platforms they use. It is the only way for them to keep their investments safe and avoid becoming the next cybercrime news headline. After all, if cryptocurrency is at the cutting edge of innovation, shouldn’t the same apply to the protection of its trade?
2018 is the year you make more money. It’s one of your New Year’s resolutions – but you’ve got no idea where to start. You’ve done the research, read as much as you can, and are suffering from a serious case of paralysis by analysis. With so many options to choose from, it’s understandable that doing nothing at all seems like the easiest option. It’s also the worst. Below Jitan Solanki, Senior Trader at Learn to Trade, sheds light on your options for the year ahead.
So, where exactly should you invest your money this year? Read on to find out more about the pros and cons of different investments and make 2018 the year your money works harder.
ISAs
The beauty of cash ISAs is that you do not pay tax on the interest you earn. However, today, basic rate taxpayers can earn £1,000 in savings interest a year, and higher taxpayers can earn £500 – so ISAs are no longer quite as attractive.
Indeed, a standard ISA only offers one – two% interest per year. Even a stocks and shares ISA that can offer 13-14% per year typically incurs a 6p to every £1 charge. This eats away at margins and, when you factor in inflation – at its highest level for half a decade – not only is money not growing, it’s actually decreasing in value.
Cryptocurrency
Unless you’ve been living under a rock, you will have seen the hype surrounding cryptocurrency, the decentralised virtual form of money that can be used to make purchases or be exchanged for other traditional and digital currencies. VeChain (VEN) is one of the hottest new cryptocurrencies around, having struck major deals with Renault, PwC and Fanghuwang, one of the fastest growing online lending platforms in China. Another that you may have heard of, Ripple, is also one to watch as it announced partnerships with American Express and Santander. When considering an investment in cryptocurrencies, the focus now has to be on identifying which coins offer the best technology and are most likely to be used by everyday people in the future – that will be where the value is.
Now that the hype around bitcoin has somewhat subsided, there are good opportunities for those with longer-term ambitions. However, cryptocurrencies are a highly speculative investment without government regulation so investors are warned to tread carefully. It remains to be seen how the crypto craze will play out, but whatever happens, ensure you research thoroughly before making any investments.
Stocks and Bonds
If you’re happy to tie up your money for a number of years, some of your investment options include: bonds, investing money into managed funds, and directly trading stocks, shares and commodities. A fixed rate bond with NS&I might be worth considering, if you’re willing to put away savings for three years, as it guarantees a 2.2% a year growth bond with no risk but is unfortunately taxable. Premium bonds, while not guaranteed, do offer savers the chance to win tax-free prizes between £25 and £1m.
In terms of stock, investment returns and risks for both types – common and preferred – vary depending on factors such as the economy, political scene and the company’s performance. In the short-term, this form of investment is volatile and choosing stocks requires substantial research. There are also a lot of hidden fees and a lack of transparency involved when buying and selling stocks. This said, we’d call out the Hang Seng 50 index as one market that remains a strong core focus for us. This has been on a radar for over a year now when new Shanghai Stock Exchange to Hong Kong Stock Exchange link launched. We continue to see outflows from mainland China into Hong Kong and continue to trade the trend.
Forex Trading
As it stands, by far the most lucrative choice – and one that manages the risk – is forex trading (the trading of currencies), turning over $5.3 trillion annually. Return on investment is typically four% per month on average, which equates to roughly a 60% increase on starting balance after one year.
The British Pound, which has benefitted greatly from open talks between UK and European ministers surrounding Brexit, and the Japanese Yen – weak due to changes in the Bank of Japan’s personnel and upcoming elections – are, currently, a highly effective pairing.
Though it’s hard to argue with the returns above, there is always risk involved. However, while trading does demand a disciplined mindset, as long as you stick to some simple rules you can largely mitigate risk and start to see consistent returns.
The best thing you can do this year is spend some time getting familiar with each of your investment options, understand the pros and cons of forex trading, ISAs, stocks and bonds, and new kid on the block, cryptocurrency, and make 2018 the year you see a return on your investment.
With the rise of several follow ups to Bitcoin, cryptocurrencies are proliferating at a very serious rate. With ICOs left, right and centre, Bitcoin could soon be facing serious competition; or is the competition already here? Below Richard Tall from DWF explains why Ethereum could be the new kid on the block.
I was helping a client the other day, to identify some of the legal issues surrounding his cryptocurrency trading business. One of my questions to him was which cryptocurrencies he trades in - and he very kindly shared a list of them with me.
It was pretty long.
I have previously made the point that, in the last four years, humankind has invented seven times more "currencies" than the governmental currencies that already existed. The two most famous of these, to those of us not immersed in the market, are Ether - the token associated with Ethereum - and Bitcoin.
Seemingly to most, Bitcoin is a bigger beast than Ethereum. But does the latter present a threat to the former's dominance?
The present state of the cryptocurrency market
As I write this article, the market capitalisation of all cryptocurrencies has taken a hammering as they suffer further setbacks. These range from UK mortgage companies refusing to accept funds generated from cryptocurrencies as deposits for properties, to concerns about further governmental bans in jurisdictions such as South Korea.
All of the major cryptocurrencies have trended in much the same way, albeit they do different things. Ether's market cap today is about $102 billion (slightly larger than Kraft Heinz) and Bitcoin's is about $190 billion (about the same as Citigroup).
In 2017 alone, the value of Ether rose by 13,000 per cent against a somewhat modest showing of 2,000 per cent from Bitcoin. There is little point in trying to ascribe reasons to the differing levels of value increase though, as a market driven by those seeking to get rich quick is no real market at all.
Ethereum's perceived threat to Bitcoin is not a simple comparison of relative worth, then. There are essential differences to what each does and while Bitcoin is currently synonymous with cryptocurrencies in the minds of the public, as the market matures the value of both Bitcoin and Ether will be driven by factors other than the frenzied speculation which currently persists.
Crucial differences between Ethereum and Bitcoin
In reality, Bitcoin and Ethereum are quite different.
Ethereum is a computing platform which provides scripting language for smart contracts. This means that there is a blockchain upon which a number of contracts can be written and which automatically execute on the happening of a set series of events.
As with most blockchains, it is open source, which means that anyone minded to do so can use the Ethereum blockchain to write and implement smart contracts, which are simply a series of promises in digital form. A bit like a contract really, just with the word "smart" added at the front.
Ether is the unit of value deployed on the Ethereum blockchain, and consequently shares certain characteristics with Bitcoin. It is a potential store of value and is fungible between persons who perceive it to have a value.
Bitcoin is ubiquitous. It has become mainstream, can be used as a means of payment in a number of different arenas and is part of common parlance.
Technically, there are no limits to the use of Bitcoin. While it settles in a way different to dollars or pounds, it essentially does the same thing - which is not a lot, really. Money exists and it sits in our bank accounts. It may enable us to do things but in itself it does not undertake any activity.
Ethereum - more than just a cryptocurrency
As we are currently seeing, governments are starting to put restrictions on cryptocurrencies, driven not by a desire to see their citizens exchanging any particular kind of asset for another asset, but because their citizens are speculating on something which their governments perceive they do not understand.
Ether is simply a child of Ethereum. Ethereum is actually a huge computing network which enables anybody to build a decentralized application. A business, if it determined that it needed a blockchain developed solution, could employ a programmer to build that on the Ethereum platform.
Ether, while associated with the Ethereum platform, is capable of performing the same function as Bitcoin. Whether or not it does so is simply a factor of the parties to any transaction determining whether or not Ether has any value to them.
So back to the central question, is Ethereum a threat to Bitcoin? Probably not.
While Ether is clearly a competitor to Bitcoin, bearing in mind that the combined market capitalisation of both is way south of the market capitalisation of some of the world's biggest companies, there is room for both. Ether has the advantage of being associated with Ethereum, and Ethereum does what Bitcoin cannot do, and came to be because of the limitations and single function of Bitcoin.
Mainstream businesses are beginning to embrace Ethereum technology with banks and other entities using Ethereum-led solutions for things such as payment services. The biggest threat to Bitcoin remains Bitcoin itself, with the continuing creep of government regulation and the ongoing tag of financial crime driving market behaviours.
Fiorenzo Manganiello is a recognised expert in the FinTech and private equity space. With an entrepreneurial mind-set, he is currently developing an investment banking team in a Swiss private bank and he puts his energy into projects where finance boosts human capital and innovation. He is fluent in five languages and has a distinguished academic background, having studied at IMD, London School of Economics and Luiss Business School. Earlier this month, we caught up with Fiorenzo to discuss the blockchain industry and the way it impacts the private equity industry.
How a low interest rate environment impact the private equity/direct investment industry?
A low interest rate environment is particularly beneficial for PE firms, in fact, borrowing at a lower interest rate positively impacts the cash outflows in terms of interest repayments and enables them to achieve a higher internal rate of return (IRR). However, low rates bring more dry powder to PE firms and create a more competitive market. As a consequence, the valuation multiples increase and acquiring a target at an attractive entry price becomes challenging.
What’s your view on the blockchain industry?
The blockchain technology is extremely powerful and has many potential applications in our economy, society and environment. The real potential relies on the high level of flexibility provided by the platform which increases the value creation for the ecosystem. However, in today’s 4th industrial revolution, I believe that other technologies like Artificial Intelligence (AI) and Internet of Things (IoT) will have a higher disruptive potential in the coming years.
How can this technology affect the private equity industry?
The PE industry present high barriers to entry for entrepreneurs and UHNWI. A lot of paperwork is still required and GPs are more comfortable with institutional investors that are able to manage the workload. The blochchain represent an opportunity to democratise the asset class and operationalise those time consuming activities. As an example, sharing data, signing contracts and managing transactions will be more efficient and transparent.
What will be the impact on the fees structure?
The adoption of the blockchain technology will disrupt the classical 2/20 fees structure. Early adopters of the technology are already improving their operations and today are able to reduce by 50% the fee structure. As a consequence, the pressure on the fee structure is likely to continue to grow.
What do you think 2018 holds for cryptocurrencies market?
I truly believe that the market will continue to be characterized by a high level of volatility. The interest of institutional investors will move towards an asset class approach. Some improvements in the regulatory environment are expected to guarantee a higher level of investors’ protection.
