We are in a world of technology where Bitcoin comes before bank and Google comes before think! Yes, at present, the blockchain technology is getting a lot bigger than the database. And when it comes to digital marketing, Blockchain technology is evolving at a rapid pace.
The U.S. Securities and Exchange Commission (SEC) on Thursday stayed three orders denying bitcoin ETF applications that sought to list a total of nine such funds on regulated exchanges including NYSE Arca. However, in a potential reversal of fortune, the SEC on Thursday announced that the Commission, led by Chairman Jay Clayton, will review those orders, which had originally been drafted by staff members on behalf of agency leadership.
South Korea’s Jeju island is proposing a plan to become a blockchain haven wherein initial coin offerings (ICOs) would be allowed in the autonomous province despite the ongoing ban in the mainland.
According to a report by the JoongAng Daily on Monday, the governor of Jeju Island has formally proposed that the central government of South Korea designate the island as “a special zone for blockchain and cryptocurrency” in its interests to become a hub for the blockchain industry.
The market is down $25 billion from yesterday’s high of $219 billion, sliding to $193 at the time of writing.
Altcoins have been hit hard with Ethereum down almost 18% overnight according to coinmarketcap.com and hitting lows not seen since August 2017, now trading at $264. Ripple is also at a yearly low, down 14.33% to trade at $0.26, a value not seen since last December. XRP is down 92% from its all-time high of $3.37 making it one of the hardest hit altcoins in the top ten by market cap. Bitcoin Cash and EOS are also down 16% percent today, and Cardano has taken a 20% hit making it the biggest loser in the top 10 over the last 24 hours.
A new research paper published by an Economics Professor at Yale University recommends a portfolio with at least 6% in Bitcoin.
ADDING BITCOIN TO YOUR INVESTMENT PORTFOLIO
According to Professor Aleh Tsyvinski, Bitcoin should be an imperative part of your portfolio, regardless of whether you are enthusiastic about the cryptocurrency or not.
For an optimal construction of one’s portfolio, the economist holds that Bitcoin should account for at least 6 percent of it. Those who are less enthusiastic about the world’s most popular cryptocurrency should hold 4 percent of it.
In any case, though, regardless of your position on the matter, Bitcoin should comprise a minimum of 1 percent of your portfolio just for diversification purposes.
The study seems to fall in line with the observations of another scholar – Professor Dragan Boscovic from the Arizona State University. Speaking on the matter of cryptocurrencies, he noted:
Institutional investors are recognizing this new asset as a valued investment opportunity; this will encourage individual investors. It will also encourage consumers and small shops to start trading in cryptocurrency.
BETTER THAN TRADITIONAL STOCKS
The study titled, Risks and Returns of Cryptocurrencies, also outlines a very positive feature of cryptocurrencies when compared to traditional stocks and bonds.
Using the Sharpe’s ratio, Tsyvinski demonstrated that digital currencies show higher potential for return, despite their increased volatility. It’s noteworthy, however, that the professor only examined Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) for the purposes of his study.
The observation of Tsivinsky and his colleague fall in direct contradiction with another noted economist – Nobel Prize Winner Robert Shiller, who said earlier in May that Bitcoin is a failed experiment and “another example of faddish human behavior.”
Nevertheless, Bitcoin (BTC) $6495.62 +0.44% has been struggling as of late. While Ethereum $6495.62 +0.44% and Ripple $6495.62 +0.44% have fared even worse amid a prolonged bear market through 2018.
Ethereum has been a great player in cryptocurrency market following the global phenomenon of Bitcoins. Since then, investing in cryptocurrency seems a rational choice to take. As the market is growing, the mining activities have created a high demand for reliable hardware.
Major cryptocurrency exchange Binance has revealed a “rough, pre-alpha” demo version of DEX, its own decentralized exchange which could ultimately take over from its current platform.
‘A BIG STEP’
Introducing a video walkthrough of the exchange, CEO Changpeng Zhao said developers were “very aggressively” on getting a usable product to market.
The DEX demo is the first major event on the timeline of the Binance Chain project, the public Blockchain, which the exchange formally announced in May.
“As a public blockchain, Binance Chain will mainly focus on the transfer and trading of blockchain assets, as well as provide new possibilities for the future flow of blockchain assets,” a blog post issued at the time reads.
Binance Chain will focus on performance, ease-of-use, and liquidity. Binance Coin (BNB) will be upgraded to exist on its own blockchain mainnet, becoming a native coin. At the same time, Binance will transition from being a company to a community.
NO RELEASE DEADLINE
“I thought this would happen one to two months later or more, but the team delivered early,” he commented in the video. “It is very much still in early pre-stage development, so this is a casual early pre-alpha demo.”
Developers then created a mock-up token, issued it on the Blockchain, sold and created a buy order for it. A release timeframe was not specified.
In comments on Twitter, Zhao said he foresaw Binance and DEX “coexisting for some time,” but would “let the market decide” as to whether one usurps the other.
Social media reactions also hit a critical note after a user reminded Zhao of Binance’s reported 400 BTC listing tariff, which they argued did not fit in with decentralized principles.
This week Bitcoin Cash (BCH) proponents will be pleased to hear that more merchants can now accept bitcoin cash due to the crypto-payment processing firm Bitpay announcing a few strategic partnerships this week. The first announcement stems from the subscription television channel provider, Dish, who announced on August 9th that BCH is now accepted as a payment option after collaborating with Bitpay. Further Bitpay joined forces with the firm Flow.io and BCH payments can be used with global cross-border e-commerce platform on more than 60 different payment methods across 200 countries.
Television Network Dish Now Accepts Bitcoin Cash
Bitcoin cash payments can now be used to pay for television subscription services with the company Dish after the firm announced migrating away from its former payment processor to Bitpay. The partnership allows Dish customers to utilize their bitcoin cash to pay for monthly subscriptions, and pay-per-view movie events. The company says as a push transaction customers must send the exact amount of BCH needed to make a one-time payment. John Swieringa, Dish executive vice president, and the chief operating officer says the reason they adopted BCH is for the same reason they adopted BTC back in 2014.
Flow.io Platform Users Can Opt to Accept Bitcoin Cash
Another partnership with Bitpay that also adds more merchant acceptance to the Bitcoin Cash ecosystem is the company’s integration with the cross-border e-commerce platform Flow.io. The Flow business model is expanding its services to allow cryptocurrency payment processing through Bitpay. The collaborative effort enables Bitpay to process BCH transactions in real-time with more than 60 payment methods in over 200 countries on Flow’s application.
“As an addition to Flow’s platform, bitcoin and bitcoin cash are ideal for international e-commerce payments making it easy to buy and sell goods from countries where traditional forms of payment are unavailable,” said Sonny Singh, Chief Commercial Officer at Bitpay.
Of course, BCH enthusiasts are always pleased with more merchant acceptance and added BCH payment infrastructure support. Bitpay’s union with Dish gives BCH fans the ability to pay for cable television services with bitcoin cash. With the Flow.io partnership however it will still be up to the merchant if they want to accept cryptocurrency payments but nevertheless, the option is there for Flow.io customers.
The ICO economy succumbed to a dramatic decline in Q2 of this year. Such was the extent of the slump that its pushed the average ROI for ICOs into the red for the first time since records began. New figures released this week show the severity of the great ICO slowdown.
Token Sales Are in Trouble
The fact that most ICOs from the last quarter are mired in the red will come as no surprise: anyone who’s glanced at their portfolio in the last 90 days will have deduced that much. New figures from ICOrating.com reveal the extent of the decline, but do provide a glimmer of hope for certain segments of the market. A detailed report highlights a number of interesting trends, the most headline-grabbing being the fact that despite an increase in funding, from $3.3 billion in Q1 to $8.3 billion, 50% of ICOs in Q2 failed to raise more than $100,000.
Other noteworthy statistics include:
This latter statistic could be taken as a sign of progress, but as ICOrating.com observes, “The absence of a working business had no effect on fundraising success.”
If You Bought into an ICO in Q2, You’ve Probably Lost Half Your Investment
In Q1 of 2018, ICOs made a median return on investment of 49.32%. In Q2, that figure slipped to -55.38%. It’s hard to tell what’s more surprising: the fact that ICOs lost so badly in Q2 or that they turned a modest profit in Q1. Looking back, it’s hard to recall a lot of winners from the start of the year, or indeed from at any point this year. Like the cryptocurrency market as a whole, the ICO industry has suffered from the bloodletting that has seen every major cryptocurrency, bar three, at a loss for the year to date.
ICOrating.com’s research is to be commended for the level of granular detail it provides. Its 64-page report reveals, for instance, that 53% of all dapp-related ICOs failed, which tallies with figures showing that no one’s using dapps at this point in time.
The research also found that projects at the idea stage – i.e comprising little more than a whitepaper and a basic team – raised just $4.5 million in Q2, whereas those with an MVP fared 8x better.
Finally, Exchanges & Wallets, Real Assets, and Computing & Data Storage were the top three categories for fundraising during this period. Financial Services, Privacy & Security, and Banking & Payments, on the other hand, all wound up in the red. Q2 has been the toughest three months for ICOs yet. Token sales scheduled to go live in the remainder of 2018 will be praying for more forgiving conditions.
After strong gains by Bitcoin and other cryptocurrencies at the start of July, a downturn arrived a month later. Over a ten-day span the total market cap of cryptocurrencies cratered by 26 percent, from $297 billion down to $221 billion (8/9/18), according to CoinMarketCap. The market loss of $76 billion erased more than all of the gains made in July.
A Bloomberg News report revealed a massive margin call was made on a wrong-way trade as the likely cause behind the sharp drop in the market.
But Goldman Sach’s chief investment officer Sharmin Mossavar-Rahamani added fuel to the fire, declaring:
“…We expect further declines in the future given our view that these cryptocurrencies do not fulfill any of the three traditional roles of a currency: they are neither a medium of exchange, nor a unit of measurement, nor a store of value.”
Yet, within the same week, Goldman spoke from the other side of its mouth as the investment bank considers launching its own cryptocurrency custody solution.
What is going on?
One of the contributing factors in the initial rise of cryptocurrencies at the start of July can be attributed to Coinbase claiming it solved the custody issue. Later in the month, press releases from Fusang family office in Singapore and Northern Trust state they, too, are going to solve the number one problem plaguing the market.
Coinbase’s crypto-custody announcement got a lot of press. But if the six-year-old company that makes a digital wallet and an exchange-trading platform had really, fully solved the custody issue, then why did the surge in the cryptocurrency market decline despite that whale margin call? Stranger still, why did Coinbase announce the hiring of Jeff Horowitz, the former head of compliance at Pershing Capital in the same capacity at Coinbase, a full month after the custody press release?
Yes, Coinbase’s media push is to win new institutional business. But there isn’t a point for ‘smart money’ – hedge funds, pension funds, endowments, mutual funds, banks, and insurance companies – to enter the market. So has Coinbase actually solved the underpinnings of a true crypto custodian solution?
What is Custody?
Custody is “a service in which a brokerage or other financial institution holds securities on behalf of the client. This reduces the risk of the client losing his/her assets or having them stolen. They are also available to the brokerage to sell at the client’s demand. Like a bank, custody provides an investor a place to store assets with little risk. Unlike a bank, custodians are not allowed to use the items in safekeeping for their own ends…”
In “reducing the risk” of losing clients’ assets in the Digital Age means that security and safe storage of assets are paramount importance. Yet when one looks at the cryptocurrency landscape it is littered with data breaches, with billions of dollars in assets hacked or stolen. In the first five months of 2018, $1.2 billion were stolen – three times the amount of theft in 2017.
That hardly instills confidence in the emerging market.
Beyond security, selling assets “at the client’s demand” is also crucial for a complete custody solution.
There are other components as well, such as over-the-counter trades (OTC). How would OTC work with crypto-wallets?
What Custody is Not
With blockchain products leaking digital coins institutional investors will remain on the sidelines waiting for the new market to cure its most pressing need. The three main products in the space include exchanges, wallets, and “sharding” of assets into bits of data stored on hundreds of nodes around the world. Yet, with each one of the solutions there are gaping security holes.
The exchanges, which have suffered three-quarters of the breaches the past three years, according to www.myntum.io analysis, are trading platforms first. Security is an afterthought. Getting an exchange approved by regulators and into the market is the main focus. On digital wallets: When a person can lose, steal, or throw a device away it does not meet the definition of custody. Nor does sharding, which stores pieces of assets on a network of nodes, the same nodes that cryptojacking siphons mining power and has disrupted at least one online videogame.
“There are OTC trades, where wallets won’t work and where reporting mechanisms don’t exist – not in the way they do on Wall Street,” said Manny Alicandro, a New York City lawyer in the cryptocurrency space at a FinTech event. That might change, as the New York Stock Exchange announced it plans to launch a Bitcoin trading platform.
Coinbase lists five categories that make up its quasi-custody solution: segregated cold storage, dedicated coverage, financial and security control, SLAs for fund transfers, and insurance provided by Coinbase.
The most problematic is the most important: Who is watching over the segregated accounts?
It appears Coinbase partner Electronic Transactions Clearing (ETC), Inc.; a Los Angeles based broker-dealer, will manage the custody piece. ETC, however, just paid an $80,000 fine to the SECfor breaking several custodian rules of the 1934 Securities Exchange Act in 2015, including using clients’ money to cover margin accounts.
Sure, the fine is a pittance. But does it instill confidence in the market?
In Coinbase’s custody solution there is no mention of reporting to the public or how OTC trades would be handled. Sure, moving crypto assets offline, offchain in cold storage is one way to safeguard them, but having in place service level agreements (SLAs) to seek permission of a future date from Coinbase on when clients could transfer money from their accounts doesn’t meet the custody definition of selling assets “at the client’s demand.”
Other solutions with “hot” – as opposed to cold – storage and transparent reporting of transactions, clearing, and settlements need to come to the fold to solve custody. When they do, then institutional money will flow into the new asset class. Xapo wallet, with a cold storage Bitcoin vault, has an institutional page, but like Coinbase, it falls short on solving custody.
It’s good to see Nomura, Fidelity, Fusang, and Northern Trust try to solve the problem. But none of these financial institutions are blockchain-based software companies, so it will be interesting to see what they produce.
The real litmus test for the market is when trillions of dollars from institutional investors will flow in and the cryptocurrencies market will expand in value.
Until then, custody remains a complex problem for the crypto community to solve.