Saxo Bank, a fintech specialist focused on multi-asset trading and investment, today published its quarterly outlook for global markets, and questions whether cryptocurrencies are entering a new cycle.
In its 35-page Quarterly Outlook Q2 2018 report, Saxo Bank focuses on how we are nearing the end of the largest monetary policy experiment of all time. This combined with ascendant nationalism, staggering inequality, and a widespread loss of hope among the younger generation. In its Q1 report, the bank focused on bubbles within the financial markets; for Q2 it is alerting investors to the fact that we are nearing the ‘end of a cycle like no other.’
One of the areas that are featured in its report is the cryptocurrency market and whether it’s entering a new cycle. After enjoying unprecedented highs toward the end of 2017 – with bitcoin within reach of $20,000 – digital currencies fell back to earth during the first three months of 2018. In the first quarter, bitcoin recorded its worst first quarter, dropping over 50 percent in value, making it its second-worst quarter of all time.
According to Jacob Pouncey, cryptocurrency analyst at Saxo Bank, the situation remains in a fragile state due to increased regulatory pressure and social media advertising bans. He added, though, that ‘we can’t rule out the possibility of a comeback.’
In the short term, Pouncey is of the opinion that there will be further declines due to the possible increase in regulations and a continued sell-off of large units of cryptocurrency such as the bitcoin with the Mt. Gox trustee. Not only that, but steep losses has driven market consolidation, while the sector has seen acquisitions of cryptocurrency exchanges from major organisations. These include Japanese online broker Monex Group acquiring Coincheck, Yahoo Exchange purchasing a 40 percent stake in BitARG Exchange Tokyo, and Goldman Sachs-backed Circle acquiring Poloniex.
Despite this, however, several events could potentially serve as springboards for the cryptocurrency bull market during Q2, Pouncey said.
“If there is a significant pullback in the equity markets, there will be an inflow of money into uncorrelated assets, or assets that lie outside the reach of the traditional financial system in which cryptocurrencies are a potential alternative,” Pouncey said. “The inflow of institutional capital to the cryptocurrency market due to the increase in regulation and investor protection could lead cryptocurrencies to a positive quarter.”
With cryptocurrencies experiencing price rises during periods of global uncertainty such as Brexit, the election of President Trump, and North Korea’s missile tests, Pouncey says that this current negative digital currency cycle will eventually come to an end. As weak investors get dropped from the market remaining ones will be hanging on for some good news.
Image: South Korea flag by railway fx via Shutterstock.com
Singapore startup Aelf announced on Monday that its token ELF has been listed on Bithumb, one of South Korea’s major cryptocurrency exchanges platforms. The listing comes at a time when Aelf is looking to tap into South Korea’s thriving blockchain and cryptocurrency industry and comes just over a month after its listing on South Korean trading platform Gopax.
Aelf is a customizable operating system specifically for blockchains. The platform features parallel processing and nodes clustering to enable scaling, multi-chain structure to cope with various business scenarios, and well-governed mechanism to incentivize the self-evolution of the ecosystem. The infrastructure is being developed by Singaporean non-profit organization Aelf Foundation.
“South Korea is a crypto trading powerhouse, backed by a rapidly-growing mainstream community of digital asset owners,” said Aelf’s co-founder Zhuling Chen. “Aelf’s new strategic alignment with Bithumb is highly significant for our community; not only is Bithumb the seventh largest cryptocurrency exchange by global trading volume, meaning users now have greater access to ELF and its ecosystem, it’s also at the forefront of bringing cryptocurrency to real world, commercial applications — one of Aelf’s primary values.”
South Korea is one of the world’s largest markets for cryptocurrency trading. According to data from Cryptocompare.com. Bithumb, a subsidiary of publicly traded company BTCKorea, is the country’s biggest exchange platform for bitcoin and ether trading against the won, capturing 78% and 83% of market share respectively.
Bithumb’s reported sales in 2017 were of ₩333.4 billion (US$312 million), a 171-fold increase compared to the previous year. The company generated a net income of ₩427 billion (US$400 million) with an additional US$90 million in non-operating income, according to BTCKorea’s audit report.
In March, Bithumb partnered with Korea Pay, the country’s largest digital payment services provider, to facilitate the acceptance of cryptocurrencies by 8,000 merchants by the end of the year. The move followed similar partnership deals Bithumb signed with domestic Internet companies to integrate cryptocurrency payments including WeMakePrice, a leading e-commerce operator in South Korea, and Yeogi Eottae, a local hotel booking platform.
The listing of ELF allows Aelf to gain visibility in South Korea where the startup hopes its technology would attract firms looking to jump on the blockchain bandwagon.
Aelf is currently developing the so-called Central Business District, basically a multilayered blockchain system that will enable different industry players to have dedicated blockchains serving their commercial needs on Aelf’s platform.
“As aelf builds its blockchain-based Central Business District that will enable businesses of all sizes to integrate blockchain into their operations, we look forward to working alongside such a prominent exchange renowned for bringing crypto to the masses in South Korea,” said Chen.
Aelf launched its testnet last month. The mainnet is expected to be released later this year.
ELF is up 90% this month, rising from 0.53 USD/ELF at the beginning of April to 1.01 USD/ELF, according to data from Coinmarketcap.com.
Ireland-incorporated fintech startup Blackmoon Financial Group has announced the launch of its platform services, a new product that aims to bridge the traditional investment world with the cryptocurrency world.
Founded in 2014, Blackmoon specializes in tokenized investment funds and vehicles. The company has developed a platform that allows asset managers to create and manage tokenized investment funds in a legal and compliant manner.
Users can now register and complete KYC procedure to get full access to the information and, upon verification, become eligible to purchase asset tokens. Asset tokens provide their holders with access to the performance of the wide variety of funds investing in fiat and crypto-oriented strategies without leaving the blockchain ecosystem.
One of the first asset tokens available in the platform will track the performance of the S&P 500 Index, the company said. The token will allow holders to gain exposure to the US large cap space.
Created in 1957, Standard and Poor’s 500 is an American stock market index based on the market capitalization of 500 large companies which have common stock listed on the New York Stock Exchange and NASDAQ.
Blackmoon COO Sergey Vasin said two other asset tokens that provide exposure to US-based hedge funds will be listed on the platform in the coming months. Blackmoon also plans to launch a token that would gives access to emerging markets ETF indexes.
The release of the Blackmoon platform comes just a few months after the company raised US$30 million in a 20-hour token sale last September.
“The (Blackmoon) platform has been under ongoing development these past 7 months. During this time, we have dedicated our effort and signed several strong partners, including banks and brokerage firms, to ensure that our service provides the necessary tools for asset managers that are willing to take the industry to the next level,” said Oleg Seydak, CEO and founder of Blackmoon Financial Group.
“Since our initial token sale, the (blockchain) industry has developed at high speed, and we have made sure that the underlying benefits of our value proposition have been up to par, especially our continuous goal to ensure we provide a fully compliant solution for the asset management industry.”
On April 1st, 2018, Ethereum founder Vitalik Buterin announced a proposal that he now terms a “meta-joke”. In a surprise, Ethereum improvement proposal (EIP) Buterin suggested a hard cap for currently uncapped Ether (ETH) of 120 million coins.
“In order to ensure the economic sustainability of the platform under the widest possible variety of circumstances, and in light of the fact that issuing new coins to proof of work miners is no longer an effective way of promoting an egalitarian coin distribution or any other significant policy goal, I propose that we agree on a hard cap for the total quantity of ETH,” said Buterin.
The Ethereum community immediately began to discuss the EIP with many wondering if it was an April fools joke, or if Buterin was actually serious. Nevertheless, the arguments for and against began to appear.
“We don’t know what Ether supply model is optimal,” answers Zamfir, project lead for the Casper Update in a Medium post on April 15th, 2018. “It’s still unclear today how much issuance will be required (if any) for the security of the consensus protocol. This is true today with PoW, and in the future with Casper and sharding.”
Zamfir is the project lead for the Casper update, which as part of the Constantinople upgrade will likely hard fork Ethereum and change the consensus algorithm from proof of work (POW) to proof of stake (POS). He calculates that Ethereum has around $10 million USD per day of issuance for miners and questions the correct rate to achieve consensus, saying he is confident the price is not right.
“Is Vitalik’s proposed amount of issuance (another 22M ETH, and then no more) the correct amount? We don’t know that. But today we’re talking about giving miners/validators a pile of ETH valued at market at over 11B USD. But I suppose that Vitalik did not say what the ETH should be issued for!”
He goes on to point out “we don’t know” what the optimal supply of Ether will be or what publicly beneficial supply numbers should be. He doesn’t believe that the Ethereum community has enough understanding of Ethereum’s future economic realities to make a decision on an Ethereum hard cap.
“Do we know what public goods we collectively will be willing to issue ETH to fund? Can we forecast the cost of those goods today? Is it more or less than 22M ETH? Are there publicly beneficial supply numbers?”
Buterin is known to not focus on Ethereum’s price. Zamfir appears to share that sentiment stating his main reason for opposing the hard cap proposal is that speculators are seeking scarcity. A hard cap would limit supply, producing a finite number of coins and potentially attracting buyers who are seeking a capped asset to invest in.
“The perception of scarcity of a good makes it more psychologically appealing to potential buyers. Indeed, the powerful behavioural effect of perceived scarcity has taken the altcoin space by storm, where nearly every altcoin is advertised with their finite supply model, and where the norm is for “scarcity-buyers” to know the supply model before purchasing.
Another Ethereum developer, Nick Johnson tweeted his support for Zamfir’s arguments.
Zamfir concludes that the EIP discussion is premature and an “artifact” of broader cryptocurrency culture which expects supply models to be part of a blockchain’s social contract. Complying with this norm for the benefit of coin holders and minors/validators doesn’t make sense to Zamfir “especially given the current state of our knowledge about the amount of issuance that would be required (nevermind ideal) for consensus or for other purposes.”
Bitcoin looks like it will end the week with a 15% price increase and all but four of the top 100 cryptocurrencies by market capitalization are still showing green. Investors are demonstrating increased confidence illustrated by trading volumes.
Experts have shared their predictions and explanations for the increase, which may well indicate a recovery for the cryptocurrency market after months of trepidation.
Thursday’s sudden price increase for Bitcoin is the result of what experts term a “short squeeze” and it sparked a frenzy of activity in the charts.
“This is what’s known in the markets as a short squeeze. When a lot of people are short on heavy leverage, a small movement up can trigger someone’s stop-loss,” said Mati Greenspan, Senior Market Analyst at eToro. “Keep in mind that when a short position gets closed it actually creates a buy order. After a prolonged period of moving within the range, stop losses start to pile up. And so, even a small movement in the market can trigger a chain reaction of stop losses all at once and lead to a breakout on the charts.”
The following chart from eToro shows the breakout:
The orange and blue dotted lines represent the tight range, between $6500 and $7500, that bitcoin has been trading in for the past two weeks.
“We would normally look for a test of the blue line before moving forward. However, should the excitement start to come back into this market, it might not need to.” Said Greenspan.
“The ratio of short margin trades versus longs has been increasing recently,” said Nick Kirk, quantitative developer and data scientist at Cypher Capital. “Buying volume ticked up today and a lot of these short trades got liquidated, helping fuel the rally.”
In an earlier interview with Bloomberg on April 11th, 2018, Greenspan predicted that Wall Street was “building bridges” and would “at least even things out” in the cryptocurrency markets by injecting new liquidity.
On April 6th, 2018, news broke that hedge fund legend George Soros might begin to invest in cryptocurrencies. According to reports, Adam Fisher, head of macro investing for Soros Fund Management received internal approval to trade cryptocurrencies.
Hedge Fund Research indicates the average return on funds that started investing in cryptocurrency at the beginning of 2017 is 2,908%, compared to 9% gains for traditional hedge funds over the same period.
On April 10th, 2018, Venrock, the Rockefeller family’s venture capital businesses announced a partnership with cryptocurrency investor group CoinFund.
“We wanted to partner with this team that has been making investments and actually helping to architect a number of different crypto economies and crypto token-based projects,” said Venrock partner David Pakman
The Rockefeller family has an estimated net worth of over $1 trillion, with Venrock reportedly holding $2.6 billion in managed assets. Venrock made significant gains with early investments in Intel and Apple.
“There are a lot of crypto traders in the market,” continued Pakman. “There are a lot of cryptocurrency hedge funds. This is different. To us, it looks a little bit more like venture capital.”
There are also disputed rumours that the Rothschild family now hold cryptocurrency related investments.
Commenting to Bloomberg, leading Wall Street strategist Tom Lee describes Bitcoin’s sudden price hike as “overdue”.
“We still feel pretty confident that bitcoin is a great risk-reward and we think it could reach $25,000 by the end of the year,” said Fundstrat co-founder Lee.
It’s not just Bitcoin that is seeing health price increases. Only a handful of coins in the top 100 are still showing declining prices. A number of coins have 24-hour average price increases of 20% and more.
Ripple (XRP), with the third largest market capitalization after Bitcoin and Ethereum, is currently trading at $0.67 after a 21% increase. This is directly compared to a current rate increase of 5% for Bitcoin today.
Ripple’s increase is likely fuelled by the announcement that Santander is launching an international payments service “OnePay FX” based on Ripple’s xCurrent blockchain technology. With the move, Santander becomes the first bank to offer a blockchain-based international payments service across a number of countries at the same time.
“One Pay FX uses blockchain-based technology to provide a fast, simple and secure way to transfer money internationally – offering value, transparency, and the trust and service customers expect from a bank like Santander.”
Other notable price increases include IOTA (MIOTA), currently 10th by market capitalization at 21%, NEM (XEM) at 17% and Vitalik Buterin backed OmiseGO at 18%.
Image: Liechtenstein, Pixabay
A new co-working space has been launched in Liechtenstein to support blockchain startups. House of Blockchain is an initiative of Aeternity, an open source, blockchain-based distributed computer platform, and aims to attract blockchain-focused businesses that are looking to scale.
House of Blockchain will support teams and startups developing decentralized applications with guidance and support from industry experts. One of the first projects to move into the space is Chainium, an equity crowdfunding platform.
Aeternity founder Yanislav Malahov said:
“We are thrilled to officially launch Liechtenstein’s House of Blockchain and sincerely look forward to watching numerous projects come to life under the one roof. Today’s announcement is another important step in our mission to become the enablers of innovation, helping to extend the reach of blockchain technology both in Liechtenstein and on a global stage.
“A blockchain-friendly environment with swift and direct contact with regulators, Liechtenstein is an ideal location for our House of Blockchain.”
Founded in 2016 by Malahov, the “Godfather” of Ethereum, Aeternity is a new platform for decentralized applications. The project focuses on increasing the scalability of smart contracts and decentralized applications. Scalability is accomplished by moving smart contracts off-chain.
The launch of House of Blockchain comes in line with Liechtenstein’s desire to become a blockchain hub. Earlier this year, Liechtenstein’s crown prince said cryptocurrencies were “something to look into more into the future,” but admitted the principality does not currently have the “internal expertise to do that [invest] directly.”
Speaking to CNBC, Prince Alois said he was interested in the way blockchin could be used as a way of improving administrative tasks in the country.
“Blockchain will change a lot of things. It could even help make our state more efficient the way it is administered,” said Liechtenstein’s Crown Prince.
The country’s prime minister stated last month that the government was looking to introduce comprehensive blockchain legislation to create a legal framework that’s conclusive to innovation and light on regulation.
In February, Bank Frick became the first financial institution in the country to offer trading of five cryptocurrencies, namely Bitcoin, Bitcoin Cash, Litecoin, Ripple and Ether, as well as offline storage.