Microsoft: Hololense for a mixed reality world on the way to a Metaverse
The tech industry’s announcements about the #Metaverse have increased the curiosity of many consumers, more and more people are trying out VR goggles.
The German newspaper Handelsblatt expressed the view that for the subsidiary Oculus, the renaming of the parent company Facebook to Meta could hardly have been more successful. After all, the announcement by company founder Mark Zuckerberg that he would be putting all of his company’s energy into the development of a Metaverse in the coming years alone has brought the VR glasses manufacturer surprisingly high sales over the holidays.
Several market analysts estimate that the app needed to operate the Oculus glasses has been downloaded around 1.8 to two million times worldwide since Christmas. At times during the holidays, the Oculus app even topped the download leaderboards in the Apple and Google app stores. It is needed to set up the glasses and is therefore considered an indicator of sales figures.
It seems that the tech industry’s vague announcements about the Metaverse have piqued the curiosity of many consumers. While VR glasses were long considered a niche technology that could at best be used for video games or high-tech applications in industry, the devices are now becoming increasingly popular, contrary to the expectations of many experts – even though the Metaverse might not become reality for several years.
Even for industry experts, the success is therefore a surprise. The sudden rise of the Oculus app shows that virtual reality (VR) applications are more widespread than previously assumed, writes Jefferies analyst Brent Thill in a recently published study. Now, investment in the Metaverse in particular is “critical” to attracting younger users to VR games.
VR glasses are also becoming increasingly popular in Germany. According to a survey published by the industry association Bitkom last week, 17 per cent of respondents said they use VR glasses from time to time. At the same time, 21 percent of the non-users said they definitely wanted to use such devices in the future. Another 28 per cent are at least considering it.
For some time now, virtual reality has been demonstrating its diverse possibilities in gaming, construction and industrial applications,
Sebastian Klöß, Bitkom
says Sebastian Klöß, Head of Consumer Technology & AR/VR at Bitkom in an interview with German Handesblatt. With the Metaverse, the next development step is now imminent, which will give the industry further impetus.
For the vision propagated by Facebook founder Mark Zuckerberg and industry colleagues such as Epic boss Tim Sweeney, new types of devices such as VR glasses play a decisive role. In the long term, it is essentially about creating a three-dimensional digital image of reality, which can then be expanded at will to include virtual spaces and objects.
Blockchain to make virtual objects tradable If you believe Meta’s promotional videos, it will be possible in the future to attend concerts with friends while one is at home and the other is in the concert hall. “In order to immerse oneself completely in this virtual world, interact with others and create virtual objects, there is no way around VR glasses,” says Bitkom expert Klöß.
In the process, the metaverse is expected to create an entire economy around virtual objects. Similar to digital works of art that can be traded as individual pieces via “non-fungible tokens” (NFT), virtual objects should also be able to identify their origin in the metaverse in order to be considered originals. Adidas, for example, has already developed a virtual collection that is sold and traded via NFT – and is thus limited.
If Meta boss Mark Zuckerberg’s vision is anything to go by, an entire economy based around digital spaces and objects will emerge in the long term. The Metaverse is about “building a much larger creative economy”, the manager explained at his presentation last year.
As with any technology, the more users have devices, the more attractive a platform becomes for content and app developers. At the same time, a large variety of content and apps ensures that more consumers decide to buy a device.
However, an estimate by the strategy consultancy Boston Consulting Group (BCG) from last February shows that this process can happen very quickly. According to this, the global market volume for VR applications and devices will increase tenfold from 30.7 billion US dollars to 297 billion US dollars between 2021 and 2024. This estimate was made before the hype around the Metaverse really began.
Meta and Microsoft are working on the metaverse Even if this long-term goal is still many years in the future, users can already see individual building blocks of this future metaverse. Gaming platforms such as Roblox or Fortnite (Epic), which can already be entered with VR glasses, are the most advanced – even if the experience is limited to virtual space.
In addition to video games, VR glasses can also be used for digital meetings, which should offer a more personal experience than video conferences. Here, the future link with reality can already be foreseen. Examples of this are the meta-platform Horizon and the Microsoft service Mesh.
In both cases, the companies are relying on so-called mixed reality technologies to integrate parts of the physical workplace where the user is sitting into the digital space. This should, for example, enable typing on a real keyboard during a virtual meeting without the user having to take off the glasses.
Only seven percent of active users stated that they had used VR glasses at work.
However, VR glasses at the workplace are still one of the rarer application scenarios, at least in Germany. In the Bitkom survey, only seven percent of active users stated that they had used VR glasses at work. In contrast, the devices were used much more frequently for video games (77 percent) or virtual travel (71 percent). Some metaverse space for improvement… 😬
Mark Zuckerberg’s keynote speech at Connect 2021 beamed the term METAVERSE into the mainstream, but – sorry Mark – the metaverse is definitely NOT your idea!
The word was first coined in the early 1990s and the notion of an immersive digital reality separate from the physical world can be traced back to early 1980s video games.
Since the late 1970s, those belonging to the technology community have imagined the internet and its futuristic successor – which is a conglomeration of all the digital worlds and objects built across the decades. Now, in 2021, the metaverse is finally coming into its own.
In many ways, Facebook and its competitors aren’t building or inventing the metaverse – they are discovering it, some say they are monopolizing it and I think this is true!
Early roots of the Metaverse
The word Metaverse derives from the Greek term Meta and the English word universe. Meta in Greek is popularly used as a prefix to mean after or beyond, a use that continues on in the English language. Terminology like metadata or metaphysics refer to something more than data or physics.
The first recorded use of the word metaverse is in Neal Stephenson’s 1992 novel, “Snow Crash”
Set in the early 21st century, “Snow Crash” imagines a dystopian future: The global economy has collapsed, and federal governments have lost most of their power to a handful of giant corporations. Given the dominance of internet giants like Google, Facebook, Amazon, and other large multinationals it is astonishing how precisely Neal Stephenson predicted today´s world in 1992!
Some ‘metaverse’ elements already exist
The metaverse is an escape, and the novel’s main character Hiro, a nearly broke computer hacker and pizza delivery driver spends much of his time there. He accesses the metaverse by wearing goggles and “earphones,” and appears within the digital world as his own customized avatar.
Once there, avatars can stroll down a single wide street, tens of thousands of miles long, and home to amusement parks, shops, offices, and entertainment complexes. People with lesser means often use public terminals to access the metaverse and are generally looked down upon by users with superior technology.
And actions in the metaverse can have severe consequences: Much of the plot revolves around the protagonist trying to stop a computer virus that causes metaverse users to suffer real-world brain damage.
Virtual avatars also exist: They’ve been in video games for decades, and users of large online communities like Roblox, Microsoft’s “Minecraft” or Epic Games’ “Fortnite” are well accustomed to exploring virtual worlds with avatars.
People spend billions of dollars each year on digital clothing and accessories for their avatars. That willingness to spend could be a key monetization factor for companies like Meta.
“Being able to basically have your digital goods and your inventory and bring them from place to place, that’s going to be a big investment that people make,” Zuckerberg said on an earnings call in July.
The metaverse in “Snow Crash” features an encrypted electronic currency, similar to today’s cryptocurrencies. And the novel explores the idea of spending real money on virtual real estate, which is already playing out on blockchain-enabled virtual reality platforms like Decentraland and The Sandbox, CNBC’s “Fast Money” noted in March.
What still needs to happen — and where it could go wrong
Even if the idea fully catches on, it will undoubtedly take some time before millions of users are regularly exploring metaverses.
Even Zuckerberg preaches caution. Meta could need “to invest many billions of dollars for years to come before the metaverse reaches scale,” he said at the Facebook Connect conference in early December 2021, his company’s augmented and virtual reality conference.
Such technology could make future metaverses extremely addictive — one of the major flaws in Stephenson’s imagined world. In “Snow Crash,” some characters develop unhealthy addictions to the virtual world, never disconnecting and avoiding reality at all costs.
Further complicating matters, Meta already faces an ongoing wave of criticism over the negative effects of its social media platforms, like Facebook and Instagram, on its users’ mental health.
Predictably, Zuckerberg seems undeterred.
“Obviously, the book has this whole environment around [metaverses] that’s sort of negative,” he told The Verge, when asked about the influence of “Snow Crash” on Meta’s vision of the metaverse. “But I don’t think it has to be that way.”. Well, in the hands of Facebook, the Metaverse would most likely beneficial to, guess…Facebook, …oh…Meta I mean.
The metaverse is coming – but in a different way than expected
The main idea of the Metaverse is still in the mist. We shall be humble and patient, that´s what history tells us. Even the internet was hard to predict decades ago, and now it exists as an organism, independent, with new properties, possibilities. One could it even call a new form of life! Same with the metaverse. It will connect the real world with the virtual one. We will live and work in both spaces, the real world will be more fluid, some of our activities will be done by ourselves, some by our twin avatars, by twin algorithms, in twin offices, factories, in twin teams. This permeability is the new quality of the metaverse. In the contrary we have to deal with data silos at the moment, static text and pic-based websites and apps, which will be seen as VERY old fashioned in 100 years when we can travel within seconds to different worlds, different universes…which we call METAVERSES
If you’re looking for the metaverse, you won’t find it so much on Facebook or in rock star video games or fashion shows – but in business. There, the physical world has long been virtually enriched, the virtual world infused with physical things.
The physical world has long been virtually enriched, the virtual world infused with physical things.
A self-reinforcing cycle of increased computer power, available data, and more intelligent software are getting underway. Germany tech giants Bosch and Siemens are building digital twins for machines, large thermal plants. The idea: the products are built digitally before they are created. This shortens development time, and improvements can be made to existing things faster and more productively.
The measurement of the world is in full swing. Companies, research institutes, or governments are creating digital twins of factories, road traffic, or entire cities. The European Space Agency is even working on a “Digital Twin Earth“, generated by satellite data, to better predict climate changes and weather.
In the next revolutionary step, these newly created avatars will link up, an ecosystem will form, a library of the world, just as the writer Jorge Luis Borges dreamed of in his story “The Library of Babel” almost 80 years ago.
Both the software company Microsoft and semiconductor giant Nvidia presented technological foundations, concepts and products for “enterprise metaverse” or (“Omniverse” as Nvidia calls it) at their annual customer conferences a few weeks ago. For example, Microsoft wants to introduce an avatar in its Teams platform in the next few months: Each of us can appear there in conferences with a digital double.
The next few years will see a competition for the emerging platforms between big tech and industry groups. Who has the data? And who can use it and to what extent? Will open or proprietary software be used? One thing is clear: providers like Microsoft or Nvidia will be ever more closely intertwined with companies. In extreme cases, so much so that the tech companies could demand a revenue share instead of a license fee.
New business fields and applications are tempting in the metaverse. For example, the French start-up Cosmo Tech is developing software with the help of Microsoft that allows companies to create digital twins and simulate their progress. The car company Renault uses it to monitor 20,000 plants in 40 factories. Industry made the start.
Now digital twins are being designed in more and more areas. For example, of organs and the human body, with which new medicines or interventions can be played through and examined more quickly. The British start-up CN Bio recently presented an “organ-on-a-chip”. It mirrors the biological reaction of humans so well that doctors from John Hopkins University are using it to study autoimmune diseases.
Holograms of homes or 3D telephone calls are becoming a matter of course. Google is currently testing a telephone booth of the future in Project Starline, in which people can talk in 3D – without VR glasses. At its developer conference a few months ago, Google’s head of augmented reality, Clay Bavor, presented a prototype that was convincing.
In Bavor’s experience, a 3D phone call conveys a sense of encounter: “The crazy thing is that I wake up the next morning and have the memory, ‘Oh, I saw Steve yesterday.’ Not like, ‘I had a video call with Steve yesterday’.”
The idea of the Metaverse derives mostly from science fiction. The Metaverse is typically portrayed as a sort of digital “jacked-in” internet – a manifestation of actual reality, but one based in a virtual (often theme park-like) world, such as those portrayed in Ready Player One and the dystopian cinema blockbuster The Matrix of 1999.
Even Elon Musk referred to “The Matrix” science fiction movie when mentioning taking the “Red Pill”.
The terms “red pill” and “blue pill” refer to a choice between the willingness to learn a potentially unsettling or life-changing truth by taking the red pill or remaining in contented ignorance with the blue pill. The terms refer to a scene in The Matrix.
While these sorts of experiences are likely to be an aspect of the Metaverse, this conception is limited in the same way movies like Tron portrayed the Internet as a literal digital “information superhighway” of bits.
Just as it was hard to envision in 1982 what the Internet of 2020 would be — and harder still to communicate it to those who had never even “logged” onto it at that time — we don’t really know how to describe the Metaverse. However, we can identify core attributes.
Be synchronous and live – even though pre-scheduled and self-contained events will happen, just as they do in “real life”, the Metaverse will be a living experience that exists consistently for everyone and in real-time
Be without any cap to concurrent users, while also providing each user with an individual sense of “presence” – everyone can be a part of the Metaverse and participate in a specific event/place/activity together, at the same time and with individual agency
Be a fully functioning economy – individuals and businesses will be able to create, own, invest, sell, and be rewarded for an incredibly wide range of “work” that produces “value” that is recognized by others
Be an experience that spans both the digital and physical worlds, private and public networks/experiences, and open and closed platforms
Offer unprecedented interoperability of data, digital items/assets, content, and so on across each of these experiences – your Counter-Strike gun skin, for example, could also be used to decorate a gun in Fortnite, or be gifted to a friend on/through Facebook. Similarly, a car designed for Rocket League (or even for Porsche’s website) could be brought over to work in Roblox. Today, the digital world basically acts as though it were a mall where every store used its own currency, required proprietary ID cards, had proprietary units of measurement for things like shoes or calories, and different dress codes, etc.
Be populated by “content” and “experiences” created and operated by an incredibly wide range of contributors, some of whom are independent individuals, while others might be informally organized groups or commercially-focused enterprises
There are a few other ideas that may be core to the Metaverse, but are not widely agreed upon. One of these concerns is whether participants will have a single consistent digital identity (or “avatar”) that they will use across all experiences. This would have practical value but is probably unlikely as each of the leaders in the “Metaverse era” will still want their own identity systems. Today, for example, there are a few dominant account systems – but none have exhaustive coverage of the web and they often stack atop one another with only limited data sharing/access (e.g. your iPhone is based around an iOS account, then you might log into an app using your Facebook ID, which itself is your Gmail account).
There is also disagreement on how much interoperability is required for the Metaverse to really be “the Metaverse”, rather than just an evolution of today’s Internet. Many also debate whether a true Metaverse can have a single operator (as is the case in Ready Player One). Some believe the definition (and success) of a Metaverse requires it to be a heavily decentralized platform built mostly upon community-based standards and protocols (like the open web) and an “open source” Metaverse OS or platform (this doesn’t mean there won’t be dominant closed platforms in the Metaverse).
Another idea relates to the fundamental communications architecture of the Metaverse. This is described in more detail later in the piece, but while today’s Internet is structured around individual servers “talking” to one another on an as-needed basis, some believe the Metaverse needs be “wired” and “operated” around persistent many-to-many connections. But even here, there’s no consensus around exactly how this would work, nor the degree of decentralization required.
It’s also helpful to consider what the Metaverse is often, but incorrectly, likened to. While each of these analogies is likely to be a part of the Metaverse, they aren’t actually the Metaverse.
HOWEVER, THE METAVERSE IS NOT…
A “virtual world” – Virtual worlds and games with AI-driven characters have existed for decades, as have those populated with “real” humans in real-time. This isn’t a “meta” (Greek for “beyond”) universe, just a synthetic and fictional one designed for a single purpose (a game).
A “virtual space” – Digital content experiences like Second Life are often seen as “proto-Metaverses” because they (A) lack game-like goals or skill systems; (B) are virtual hangouts that persist; (C) offer nearly synchronous content updates; and (D) have real humans represented by digital avatars. However, these are not sufficient attributes for the Metaverse.
“Virtual reality” – VR is a way to experience a virtual world or space. Sense of presence in a digital world doesn’t make a Metaverse. It is like saying you have a thriving city because you can see and walk around it.
A “digital and virtual economy” – These, too, already exist. Individual games such as World of Warcraft have long had functioning economies where real people trade virtual goods for real money, or perform virtual tasks in exchange for real money. In addition, platforms such as Amazon’s Mechanical Turk, as well as technologies such as Bitcoin, are based around the hiring of individuals/businesses/computational power to perform virtual and digital tasks. We are already transacting at scale for purely digital items for purely digital activities via purely digital marketplaces.
A “game” – Fortnite has many elements of the Metaverse. It (A) mashes up IP; (B) has a consistent identity that spans multiple closed platforms; (C) is a gateway to a myriad of experiences, some of which are purely social; (D) compensates creators for creating content, etc. However, as is the case with Ready Player One, it remains too narrow in what it does, how far it extends, and what “work” can occur (at least for now). While the Metaverse may have some game-like goals, include games, and involve gamification, it is not itself a game, nor is it oriented around specific objectives.
A “virtual theme park or Disneyland” – Not only will the “attractions” be infinite, they will not be centrally “designed” or programmed like Disneyland, nor will they all be about fun or entertainment. In addition, the distribution of engagement will have a very long tail
A “new app store” – No one needs another way to open apps, nor would doing so “in VR” (as an example) unlock/enable the sorts of value supposed by a successor Internet. The Metaverse is substantively different from today’s Internet/mobile models, architecture, and priorities.
A “new UGC platform” – The Metaverse is not just another YouTube or Facebook-like platform in which countless individuals can “create”, “share”, and “monetize” content, and where the most popular content represents only the tiniest share of overall consumption. The Metaverse will be a place in which proper empires are invested in and built, and where these richly capitalized businesses can fully own a customer, control APIs/data, unit economics, etc. In addition, it’s likely that, as with the web, a dozen or so platforms hold significant shares of user time, experiences, content, etc.
(If you want a simpler way to think about the Metaverse, you can imagine it as the Nightmare Before Christmas – you can walk into any experience or activity, and potentially address almost any of your needs, from a single starting point or world that’s also populated by everyone else you know. This is why hypertext is such a key example. But what’s important is to recognize the Metaverse isn’t a game, a piece of hardware, or an online experience. This is like saying is World of Warcraft, the iPhone, or Google is the Internet. They are digital worlds, devices, services, websites, etc.
Source: Handelsblatt, diginomica, Matthew Ball (visionary Venture Capitalist), ESA digital twin earth, Bosch, NVIDIA
Bitcoin will become legal tender in El Salvador on 7 September 2021. The cryptocurrency can pave new paths for the population in underprivileged regions and amongst unbanked people.
Is Bitcoin on its way to full adoption, well it be treated as currency? While we see that Bitcoin is the currency of the internet, that obviously a next level is reached in El Salvador.
As of September 7 this year Bitcoin will become legal tender in the Latin American country alongside the US dollar. Payments in #Bitcoin must then be accepted by all citizens and businesses as well as merchants, with the government guaranteeing to exchange all receipts into dollars on request. On CoinMarketCap, Bitcoin is already listed as another official currency (legal tender) of the country:
El Salvador’s approach is causing headaches for the regulatory and tax authorities of other states, as Bitcoin can thus formally be considered a foreign currency, which many #CentralBank representatives still reject!
Domestic financial institutions, and large parts of society in El Salvador are already intensively dealing with topics such as “lightning” and “liquid”. These “second layer” solutions – conceptually comparable to #Visa or #ApplePay – are essential to make Bitcoin transactions cheap and frequent in everyday life. Sustainable energy for mining Immediately after the announcement of the “legal tender” news by President Nayib Bukele, the initially rather half-hearted suggestion was made to him on Twitter to use the geothermal energy of the volcanoes in the country for Bitcoin mining.
In the meantime, there are already concrete projects in this direction. This shows that the recent discussion about the carbon footprint of mining has changed the search for surplus energy and that, besides the price of energy, the carbon footprint plays a more important role. This alone has made the discarded coal-fired power plants in China that were used for mining until recently less attractive
The idea of releasing mining bonds is being considered to finance the green “volcano mining”. These bonds are not to be issued in the usual way, but on the Liquid Sidechain, a decentralised platform based on the Bitcoin protocol.
Why El Salvador? One reason is the president, who has become successful through his social media presence. He has a clear majority in Congress, which helps to implement such a historic project in a short time. But there are also sober figures that speak for a special breeding ground for the project. If one applies three criteria – large remittances from abroad (at least 10 % of GDP), low financial inclusion (more than 60 % of the population without a bank account) and no exclusive currency of their own (for example, use of the dollar) – the list of countries that remain is very clear: Haiti, Liberia and El Salvador. While Haiti and Liberia have high inflation rates, inflation in El Salvador actually declined slightly in 2020.
This suggests that the initiated fundamental change in the monetary system is taking place from a situation of relative stability. Why the above criteria (which, incidentally, were also cited by the government in El Salvador) make Bitcoin adoption more attractive in the short and medium term is obvious. Compared to countries that have their own currency, the population of El Salvador has no national pride in this respect and is used to currency conversions. In addition, Bitcoin has great advantages for cross-border payments, especially since anyone can open a bank account on their smartphone without ID or proof of income. This is particularly advantageous in countries where large parts of the population do not have a bank account.
El Salvador is drastically “underbanked” by international standards: Just 30% of the population (15 years and over) have a bank account, which is less than the average in sub-Saharan Africa and seems tiny compared to North America. El Salvador’s experiment, which has already led to similar legislative efforts in other countries in the region, teaches one thing above all: unlike many investors from the US and Europe who are discovering Bitcoin as a new asset class, Bitcoin can pave entirely new paths for the population in less privileged regions.
An statement of the head of the Vienna Stock Exchange, Christoph Boschan, with Austria´s newspaper “Die Presse” has caused a stir in the crypto scene. When asked about Bitcoin, Boschan said that the cryptocurrency was “extremely important for criminal payment transactions”. When the Vienna Stock Exchange is attacked, the payment request comes exclusively in Bitcoin, he continued.
DerBrutkasten: Your LinkedIn post criticising Christoph Boschan’s statements went viral in the crypto scene. What is so wrong about Bitcoin being “important for criminal payments”?
Everything is wrong about it! It shocked and infuriated me that an experienced stock market manager would let himself be carried away by such a statement. Because the statement is not only wrong in terms of content, it also shows that the head of the Vienna Stock Exchange – after all, one of the largest trading venues in Europe – obviously has little idea about blockchain and the transparency of Bitcoin.
What specifically do you criticize about the statement of the head of the Vienna Stock Exchange?
Boschan’s claim that Bitcoin is important for criminal payments is not supported by facts. Bitcoin is much more transparent than cash, for example, due to its public “ledger”. Transactions with Bitcoin are traceable and completely unsuitable for criminal activities. Apparently, this has not yet got around to some criminals and stock exchange bosses.
Europol recently published the IOCTA report (thank you Prof. Markus Büch for the hint), in which they found that only 1.1% of all Bitcoin transactions have a criminal background, the rest are classic investment and trading activities. So there is no question of it being important for criminal payment transactions.
It is obviously a clash of cultures, the classical financial world and that of cryptocurrencies. How do you see the development of stock exchanges? Will trading venues be replaced by decentralized systems?
I believe that in ten years there will be no more stock exchanges, the “trading floor” has had its day. Managers who don’t recognize the signs of the times are accelerating the downfall. People will ask themselves how it was possible that they didn’t see it coming sooner. They did! Except most of the “elderly white men” who sat at the top of these exchanges. Some exchanges, however, are seizing the opportunity of the new digital crypto asset classes and making an effort to enter the world of cryptocurrencies.
The Stuttgart stock exchange offers bitcoin trading with its really cool Bison app, which also appeals to millennials. The Frankfurt Stock Exchange is stepping up its trading in Bitcoin and Ethereum, and Swiss exchanges have been in the Bitcoin business for a long time. The Vienna Stock Exchange is lagging behind. Although it allows trading in cryptos indirectly via two ETPs, the offer is half-hearted. Christoph Boschan admits in a press interview that the ETPs are only traded “to some extent”. This is not surprising, because if you put Bitcoin in the criminal corner, you should not be surprised if buyers stay away.
Bitpanda shows that it is possible to be successful with Bitcoin & Co. The Viennese crypto-fintech specialised in cryptocurrency trading early on and has a securities licence. Recently, it was announced that Bitpanda will soon also allow you to invest in shares, even in parts – you no longer have to buy the whole share! This is new and offers opportunities for small investors.
For me, this is a sign that classic stock trading venues are facing massive competition: The Austrian FinTech start-up Morpher maps share prices on the Ethereum blockchain, so shares can be traded around the clock. This also makes the stock exchanges look old.
How do you see the future of Bitcoin, is it an effective means of hedging against impending inflation?
You often hear that the massive Corona bailout programmes will lead to dramatic inflation. I am skeptical about that. Josef Stigilitz, former chief economist of the World Bank, recently said in an interview with Handelsblatt that the inflation warners are completely off the mark. Both monetary and fiscal policy could immediately take countermeasures if, contrary to expectations, inflationary pressures were to arise. Somehow I sense that he is right: the European Central Bank is criticised precisely because it is so consistent and unflinching in countering the threat of inflation.
However, Bitcoin is important for other reasons, and this has been appreciated by institutional investors since last year: Bitcoin is the new “digital gold”, an excellent store of value. The criticism that Bitcoin is a pyramid scheme, a tulip mania, is not justified. The same could be said about gold. The precious metal is still used industrially, but it is often replaced by platinum or other alloys, and thus has no real industrial function. Bitcoin, on the other hand, may become more important for payment transactions in the future. This also emerges from a much-noted study by analysts at Citi Bank.
And there is another important aspect to Bitcoin: the cryptocurrency is based on a computer program. No government or central bank can fire up the Bitcoin printing press according to its whim or need for money; there are and remain a maximum of 21 million Bitcoins that are gradually mined by miners. And this idea of the total political independence of Bitcoin is particularly appealing to many investors.
Deutsche Telekom AG, Europe’s largest telecommunications company is now one of the main data providers to Chainlink, the ubiquitous oracle service that decentralised finance (DeFi) relies on extensively.
Coindesk reports that Telekom subsidiary T-Systems Multimedia Solutions (MMS) says it has started staking on the Flow Network, the ultra-scalable proof-of-stake (PoS) blockchain from CryptoKitties creator Dapper Labs. In addition, the company is said to be planning to start staking on several other chains in the near future.
Deutsche Telekom wants to increase its engagement on public blockchains Deutsche Telekom offers DeFi data support and has quietly moved beyond helping with PoS blockchain infrastructure and has actually started stashing, staking and earning crypto rewards.
Commenting on this development, Andreas Dittrich, Head of Blockchain Solutions Center at Deutsche Telekom, said:
‘We started doing all these enterprise blockchain proofs-of-concepts about five years ago, like everyone else. But gradually we felt we weren’t focusing enough on public blockchains – that’s where digital assets will move in the future and that’s where a telco should really be active.
Andreas Dittrich, Head of Blockchain Solutions Center at Deutsche Telekom, via Bitcoin-Bude
T-Systems already operates the third largest Chainlink node T-Systems announced it was running a Chainlink node last summer, right around the time DeFi basically blew up. Since then, it’s been “a hell of a ride,” Dittrich admits.
We really jumped into something new by providing public blockchain infrastructure with a token-linked business model on top. So of course we started very small, with a few data feeds. But then we scaled quickly and now I think we are among the top three data providers on the Chainlink network.
Chainlink’s system of data feeds, known as oracles, funnels information into the blockchain world of smart contracts, eliminating reliance on a single, centralised source.
We offer 51 data feeds right now. We don’t select applications that we provide data to, but examples would be Synthetix, a couple of decentralised exchanges and Nexus Mutual for insurance. The data is mostly prices for digital assets, foreign exchange rates and commodity prices like gold, silver, etc. and these mostly go to Synthetix.
Gleb Dudka, an analyst at T-Systems via Bitcoin-Bude
According to the network’s co-founder, Sergey Nazarov, it is only a matter of time before other large companies follow Deutsche Telekom’s example and operate Chainlink nodes.
Chainlink allows top infrastructure teams like T-Systems to monetise their globally distributed infrastructure and security expertise across the many chains already served by Chainlink oracles.
Holding cryptocurrencies is challenging for businesses Providing complex infrastructure for the internet is something Deutsche Telekom has been doing for decades (it’s also worth noting that the telco has its own cloud offering, reducing its reliance on AWS). So, on the surface, it should come as no surprise that Deutsche Telekom is providing infrastructure support for the nascent “Internet of Values”.
However, Dittrich admits that the line between IT services and financial services is blurring in interesting ways.
The most difficult thing, he says, was getting a grip on the whole thing legally, risk-wise and tax-wise. T-Systems works with Bankhaus Scheich as a broker and the Berlin-based crypto-custodian Finoa, one of many German companies waiting for a crypto-custody licence from BaFIN. In doing so, such pioneers are entering uncharted territory in the corporate world, which presents them with many legal questions and issues. Dittrich explained:
‘It’s quite a unique thing because our business model means we have to be able to handle crypto tokens. We have to have different types of crypto tokens on our balance sheet. And managing that is a difficult thing for a company like us.
Telecoms plan to pile on Ethereum, Polkadot and Tezos Dittrich said his team has been busy looking at a number of other crypto staking candidates. The elephant in the room in this case has to be Ethereum 2.0 Staking. Ethereum is the largest blockchain after Bitcoin, which is currently in the first phase of its transformation to PoS.
No Ethereum 2.0 staking yet
The ETH that T-Systems is already buying, however, are needed for Chainlink, according to him. They are needed to authorise transactions on the public Ethereum blockchain. However, Dittrich added:
There are a whole bunch of networks in the pipeline that we plan to go live on. Obviously, the larger proof-of-stake networks are among them, which are Tezos, Polkadot and Ethereum 2.0.
While many industries and companies came under heavy pressure this year due to the Corona-related economic crisis, 2020 turned out to be a jubilant year for the cryptocurrency market. There are many indications that this positive momentum will continue in 2021. These are the 10 trends that I believe will shape the crypto year 2021.
1. Hedge funds and family offices rush into cryptocurrencies
In 2020, major hedge funds made concrete moves to get into cryptocurrency, with Bitcoin leading the way. For example, the Guggenheim Funds Trust filed with the U.S. Securities and Exchange Commission to be allowed to invest 10% of its total investment directly in bitcoin for its Grayscale Bitcoin Trust (GBTC). This allows the Guggenheim hedge fund to invest $500 million in Bitcoin with the approval of the Financial Industry Regulatory Authority. More asset managers are set to follow, as prominent hedge fund managers such as Stanley Druckenmiller and Paul Tudor Jones caused a stir when they took a swing, finally stopped Bitcoin bashing and touted the world’s largest cryptocurrency as a store of value.
In 2021, it is expected that large investment banks, pension funds and asset managers will jump on the bandwagon and stock up on cryptocurrencies, with Bitcoin leading the way. Accelerating the development is the fact that a variety of regulated, traditional solutions on financial markets in the form of classic funds and indices coupled with cryptocurrencies, allowing major players to include the new asset class of cryptos in their portfolios. Examples include the CME Bitcoin Futures in the U.S. and European providers such as the Postera Fund Crypto I Fonds listed in Liechtenstein. Even the Vienna Stock Exchange, which recently saw Bitcoin as a “best of evil” rather than an investment product, listed its first products directly tracking the Bitcoin price in September 2020, e.g., with its 21Shares AG Bitcoin ETP.
With numerous crypto exchanges regulated by financial regulators happy to service such funds, as well as crypto brokerage solutions, many of which did not exist during the last bull market three years ago, the field is set for a new boom in crypto trading in 2021.
2. Buying Bitcoin will be easier than ever before
“Where can I buy Bitcoins?” This is a question I’ve heard a lot in recent weeks, and the same goes for my crypto-savvy friends and acquaintances. And now the answer is easier for me than it was a few years ago, because the range of cryptocurrency exchanges has become more diverse: The largest exchange is Binance, based in Malta, with a 24h trading volume of about 9 billion US dollars, behind it comes the US crypto exchange Coinbase with 2 billion, both solid crypto exchanges where bitcoin can be easily bought and which are strictly supervised by the financial authorities. Austria is also in the game, with Bitpanda, based in Vienna, trading about 1.8 million per day.
In 2014 to 2017, this was much more difficult to find reliable exchanges. Crypto exchanges were regularly robbed by hackers, customers lost millions in funds, in many cases small investors who bet their savings on Bitcoin. The risk is now much lower, the ease of use high. There are numerous regulated fiat crypto exchanges, also the number of people with accounts grew from 5 million in 2016 to over 100 million this year and this trend will continue in 2021.
Additionally boosting this trend is also that major tech players like PayPal and Square stepped in and started allowing payments in Bitcoin in late 2020. Both companies bought the equivalent of 100% of newly mined Bitcoins in 2020, just to meet their own the demand they receive from US customers. More payment service providers will follow in 2021 which will have a lasting positive impact on the crypto market.
Macroeconomic developments support the upward trend of Bitcoin & Co, because the risk of inflation is high and could lead to some states prohibiting their citizens from withdrawing their own money. This increases the interest in Bitcoin as a safe store of value. Even Forbes, Bloomberg and the German Handelsblatt see in Bitcoin some kind of “digital gold”.
3. Love story of banks and Bitcoin
2020 was marked by the entry of institutional players into the crypto market. Large institutions such as JPMorgan, Deutsche Bank, and Citi are developing solutions to buy cryptocurrencies for their clients, regularly reporting on this new asset class of “digital assets.”
This trend is expected to accelerate in 2021, as while many banks were already working on blockchain and digital payment solutions in their backrooms, they are now making their crypto plans public. This will ensure the entry of more players and attract conservative companies, which in the future will be able to invest in cryptocurrencies at their principal banks not only in stocks and bonds, but also with a more comfortable gut feeling from 2021 onwards.
While the large investment banks have been the most active players so far, it is to be expected for 2021 that private banks in particular will increasingly enter the Bitcoin and cryptocurrency derivatives business. Players of the first hours in Europe were the Swiss Falcon Private Bank AG or the Liechtenstein-based Bankhaus Frick, which already wanted to attract customers to Bitcoin since 2018 and offered solutions for blockchain startups. However, most large private banks have paid little attention to Bitcoin as a non-serious asset, but their high-net-worth and family office customer base are increasingly asking for cryptocurrencies, so private banks will create relevant offerings for their noble clientele in 2021.
4. Central Bank Digital Currencies: China is three years ahead of us
2021 will be an important year for Central Bank Digital Currencies (CBDC). The vast majority of central banks are now in favor of CBDCs. Central bank digital currencies are a key component of the Digital Revolution. The major central banks are being squeezed from two sides: Facebook founder Mark Zuckerberg is backing his digital currency Diem, formerly Libra. With Facebook’s 2.4 billion users, a currency launched by Zuckerberg could spread rapidly and threaten the local currency system in economically weaker countries.
However, all eyes are on China in 2021, as the introduction of the digital yuan as a powerful CBDC is progressing rapidly. In the 2020 pilot phase, more than two billion RMB ($300 million) was transacted in the Middle Kingdom in over four million transactions using the digital renminbi. The question is not if, but how fast China will move forward with this project.
Europe and the U.S. are hesitant about CBDCs: initial research projects have been launched, but serious implementation of a CBDC is not expected before 2030. This indecision could prove fatal, as China will try to impose its digital currency on the world: Goods orders from China in the future could only be made with the digital yuan. For China, as the world’s largest exporting country, the digital yuan is an enormous opportunity to shape payment processes according to its wishes, to gain control over financial flows abroad and to further push back the supremacy of the US dollar.
5. Treasury provides clarity on crypto taxation
Tax authorities took cryptocurrencies much more seriously in 2020, especially with regard to crypto taxation. Since 2020, for example, the German government decided to explicitly take crypto trading into account for the first time in an amendment to the law. To do so, Germany amended the German Banking Act, which regulates the lending business of credit institutions and financial services providers, and included crypto-assets such as tokens and coins in the standard. Businesses and retail investors are also likely to benefit from the change in the law, as they will be able to entrust their crypto assets to a provider that is under the supervision of the German Federal Financial Supervisory Authority (BaFin).
In the U.S., things are even stricter: the U.S. Internal Revenue Service sent a questionnaire about crypto holdings to every American, crypto exchanges are put on a short leash with the consequence that they either bend and implement strict control mechanisms, or leave the U.S. and seek customers elsewhere in the world. Around the world, tax authorities are increasingly issuing explicit crypto tax notices on profits from crypto trading or mining income.
In Austria, the startup Blockpit relies on automated crypto tax reports. People link the Blockpit app to cryptocurrency exchanges and receive regular tax reports that are sent directly to the authorities. This solution also provides a glimpse into the evolution of the tax consulting industry: apps are available in the cryptocurrency world that make tax consulting largely obsolete.
6. Crypto-unicorns turn into crypto-multinationals
Despite the economic crisis, 2020 was an impressive year for corporate sales. Data shows that the total value of crypto mergers & acquisitions in the first six months of 2020 has already surpassed the total value of 2019, with the average transaction value increasing from $19.2 million to $45.9 million. This trend will continue in 2021 as crypto unicorns increasingly become crypto octopuses, spending portions of their profits to acquire more companies.
Blockchain and crypto-related M&A activity will shift from the U.S. to Asia in 2021 because of the better regulatory situation. In addition, the U.S. in particular is scaring away crypto startups with sensational court cases. Last week, the US regulator SEC announced a lawsuit against the fourth largest cryptocurrency Ripple. Ripple founders allegedly created an unregistered security with their XRP token, amount in dispute US$1.3 billion.
PWC Asia reports that 57 percent of blockchain and crypto M&A deals in the first half of 2020 were in Asia-Pacific and Europe, the Middle East and Africa, up from 51 percent in 2019 and 43 percent in 2018. The trend will continue to strengthen in 2021, with Asia increasingly becoming the epicenter of developments for cryptocurrencies and blockchain technologies.
7. Ethereum, the blockchain of the industry.
The second largest cryptocurrency Ethereum recently switched to a new consensus mechanism. The new Ethereum 2.0 is much more energy efficient and faster in transactions, this is made possible by the so-called sharding. The switch to sharding and the new Proof of Stake (ETH2) consensus mechanism will happen gradually, with much more data being able to be stored on the Ethereum 2.0 blockchain in 2021.
In the process, the number of transactions per second can be significantly increased, enabling new industry applications. Microsoft has announced that it will use Ethereum for its gaming app starting in 2021. Ethereum 2.0 could also serve as a basis for digital central bank currencies in the future. The blockchain experts at ConsenSys, for example, are currently working with the monetary regulator of Hong Kong, as well as with the central banks of Thailand and Australia on CBDC solutions on Ethereum.
8. Lawyers instead of nerds: crypto startups consolidate
The first generations of crypto startups came from the tech sector, with chief technical officers and genius nerds calling the shots. Many of the larger crypto companies changed their strategy since 2018 and started to organize themselves better and build a classic corporate structure. The priority was stringent strategy, improved communication, adequate investor information and legal security. Therefore, lawyers and financial market professionals were hired to bring order to the often chaotic crypto startups. T-shirt, hoodie and beer are joined by shirt, suit and red wine.
It is foreseeable that this trend will continue in 2021. However, the crypto industry is in constant up and down motion because “crypto never sleeps”: cryptocurrencies, unlike stock and bond markets, can be traded around the clock and the industry is evolving many times faster than traditional financial services. Executives in the old business world have to get used to operating outside their comfort zone and reacting quickly to new market developments.
With the freshly hired managers in the pinstripe, new style is entering blockchain companies, which will contribute to further growth and sustainability. However, in 2021, many crypto startups will still not survive the transformation from pioneering to consolidation, and competition will become fiercer.
9. Will stablecoins remain stable coins?
2020 was a record year for stablecoins. With assets growing from less than $5 billion at the beginning of the year to over $25 billion in December, this momentum is expected to continue in 2021. All eyes will be on the U.S. Tether and other cryptos tied to fait currencies.
Data suggests that the use of stablecoins is already increasing in certain corridors, such as between Latin America and Southeast Asia, where traders are using stablecoins to conduct transactions, bypassing traditional banking channels entirely. In 2021, it will be interesting to see if this trend continues. The downside, however, lies in a question that the fiat world is also familiar with: is it possible for a cryptocurrency’s value to be pegged to, say, the U.S. dollar, the euro, or the Swiss franc? There are already expert opinions that doubt whether even in times of crisis stablecoins are collateralized enough to be able to exchange fiat for crypto on a 1:1 basis at any time.
This is because discrepancies could arise, which we know all too well: Black markets for stablecoins, where the supposedly stable coins trade far below their value. Or when investors artificially inflate the value of stablecoins and the interests of the stablecoin issuers are fundamentally different from those of their users. Regardless: The stablecoin trend will continue in 2021, with Tether (USDT) leading the way, USDC from Coinbase and Circle, TrueUSD, and the oddball DAI from MakerDao backed by algorithmic trading and smart contracts.
10. ICOs are dead, long live DeFi!
The popular and later discredited Initial Coin Offerings as a funding opportunity for blockchain startups turned out to be flash in the pan in retrospect. While some startups were able to raise large sums of seed funding via token issuance. However, 99 percent of the ICOs failed, mostly because the blockchain business did not turn a profit quickly enough or because the business models simply proved to be complete bullshit.
In 2020, Decentralized Finance experienced a boom very reminiscent of ICOs of the years before. Decentralized Finance, or DeFi for short, stands for the combination of traditional financial concepts and products from banks with blockchain technology. DeFi is about applying principles of finance to cryptocurrencies and distributed ledger technology.
DeFi instruments include crypto loans, currency swaps between cryptocurrencies (atomic swap), interest rate models, and stocks and bonds on blockchain. In 2019, the run on DeFi apps started, the DeFi trend is not only noticeable in the increased usage of the respective apps, currently circa three percent of all Ether is stored in DeFi. DeFi has really exploded in 2020, with the total value of completed transactions (TVL) increasing from less than $1 billion in January 2020 to more than $15 billion today.
In 2021, DeFi will likely continue to grow. However, Decentralized Fiance is currently only for specialists and crypto enthusiasts who study the content in depth. Institutional investors will still leave DeFi out in 2021 and watch the development from the sidelines.
Bitcoin fans are excited. Three years passed before Bitcoin reached a new all-time-high at 28,000 US dollars again. The last massive rise happened in 2017, when the digital cryptocurrency made a fabulous run from US$1,000 at the beginning of the year to US$19,655. In a super cycle, price jumps beyond a million euros for a bitcoin are mathematically conceivable due to network effects, the fixed bitcoin money supply, the increasing sluggishness of gold. Purely hypothetical, but possible.
Much seems similar now at first glance. but this time much is different:
the COVID pandemic of the century is keeping the world on tenterhooks.
Bitcoin is now being called the gold 2.0, the digital version of the store-of-value gold
institutional investors stepped in to buy the blockchain-based currency after the crash in 2018
Bitcoin is now much more user-friendly than it was three years ago
Bitcoin’s super cycle But something else could be happening: The cryptocurrency could also defy classic thought models of a bull/bear cycle, break all conventions and experience a massive price increase through a “super cycle”. Bitcoin’s market cycle is typically around four years, and some experts hypothesize that the super cycle could be triggered by the “halving” written into the blockchain code, the pre-programmed halving of Bitcoin’s new supply.
Bitcoin inventor Satoshi Nakamoto had the idea that reducing the supply of digital coins by halving them over time while increasing demand would create more value. An accepted explanatory model among experts for Bitcoin’s viral market loops is gradual scarcity. Specifically, Satoshi Nakamoto explains in the Bitcoin white paper:
As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as the number of users increases, the value increases, which could attract more users to benefit from the increasing value.
As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as the number of users increases, the value increases, which could attract more users to benefit from the increasing value.
Satoshi Nakamoto white paper
Satoshi is thus addressing network effects, postulating them at a time when Bitcoin had a value of 50 cents. In the chart below we have the bitcoin price and halves, which are the dashed lines. It is clear to see that there has been a bull run after each halving:
The difference this time is that Bitcoin has strong fundamentals and there are additional substantive reasons for the price rise: Bitcoin is now needed to hedge against impending inflation. This narrative makes 2020 unique for the largest cryptocurrency.
Bitcoin was launched during the 2008 financial crisis and is a counter-model to what Nakamoto saw as an ailing financial and banking system at the time. The global economy has grown steadily since then, with no significant recessions in traditional financial markets since 2008. This changed with Corona: a veritable health crisis developed as an accelerant to a monstrous economic crisis, the most severe recession since the world wars, far more dramatic than 2008.
And this is the first litmus test for Bitcoin. Will all the Bitcoin disciples and crypto fans lose their nerve and sell? Will the Bitcoin price plummet as the global economy staggers? Is Bitcoin not a “safe haven” in times of crisis after all and cannot hold its own against gold and real estate as a valuable asset class?
At first, everything pointed to this: Bitcoin crashed dramatically along with the stock markets on 13 March 2020, Black Friday, to 4,121 US dollars. But the much-criticised cryptocurrency experienced a resurrection and emerged from this crisis strengthened, as we stand today at a price of 28,000 US dollars.
Inflation of fiat currencies
While Bitcoin was recovering, governments were outbidding each other with bailout programmes that they funded by printing money. And this cranking up of the money printing presses is unprecedented in financial history: Never before has the money supply been increased so massively in such a short time. But central banks are also moving with the times: they are not printing money, but buying bonds from financial institutions and banks and transferring fresh fiat money created out of thin air. Commercial banks put the fresh funds into circulation in the form of loans.
This means that governments are currently actively devaluing their currency. And this is exactly the scenario against which Bitcoin is one of the remedies: an inflation-proof currency that is not controlled by a state, whose money supply cannot be expanded at will. On the contrary, through halving, a smaller amount of Bitcoins is gradually issued, or more precisely only half of them at a time, until all 21 million Bitcoins have been distributed among the people.
Bitcoin as a store of value
Bitcoin was created as a store of value in a world where you cannot trust your government or bank. Such moments do not come often in life, world financial crises are rare, but the current financial crisis is a key event that could help Bitcoin to super-cycle and thereby dramatically increase in value.
In addition to the Corona crisis, there is another aspect: in contrast to 2017, institutional investors are adding this new digital asset class to their portfolios and buying Bitcoin in large quantities. Whereas in 2017 it was mainly retail investors and computer geeks who caused the bull run, now FOMO, the “Fear Of Missing Out”, is being felt by large investors: when COVID brought turmoil to the markets, financial service providers, pension funds and asset managers were looking for safe asset classes. Bitcoin offered itself as a store of value, as it proved to be better than gold, with a lot of imagination, carried by the tailwinds of digitalisation and with high upside potential.
Who are the main banks and financial services providers that have stocked up on Bitcoins, the “digital gold”, in the last three months:
and many more.
Bitcoin shook off competitors
When Bitcoin had to contend with many serious competitors during the bull market of 2017, there are now no opponents left in the field. We remember the ICOs of 2016 to 2018, Initial Coin Offerings, with which blockchain startups tried to raise money and develop similar applications to Bitcoin and Ethereum, the second largest cryptocurrency. This was done by issuing coins and tokens that were in direct competition with Bitcoin. What followed was a bloodbath: almost all ICOs failed, the cryptocurrencies, often called shitcoins, lost value, only a few blockchain startups survived.
Annoying forks no longer play a role
Another opponent was the Bitcoin family itself. For the once sworn Bitcoin community of the years 2013 – 2015 was joined by the desire for technical further development of Bitcoin, added to this was the greed of some involved and high criminal energy of a get-rich-quick mania. As a result, the Bitcoin blockchain, loosely translated as a chain of data blocks, was often split and forked in fierce trench warfare, and Bitcoin spin-offs were created. The most important Bitcoin fork and competitor was Bitcoin Cash, which saw itself as a means of payment with which small amounts could have been settled quickly at the cash register. But the Bitcoin-Cash narrative did not catch on. Another important fork was Litecoin, which had already split off in 2011. However, Litecoin did not make the breakthrough either, the reason being that Litecoin founder Charlie Lee sold all his Litecoins at the last all-time high in December 2017 and left the project, the background of the exit is still not completely clear. Other Bitcoin competitors are Bitcoin SV (Satoshi version), Bitcoin Gold, Bitcoin Diamond, Bitcoin Zeo, Bitcoin Private, Super Bitcoin, all of no significance today.
Bitcoin unchallenged at the top
In 2020, Bitcoin clearly led the cryptocurrencies, the narrative of digital “Gold 2.0” bringing the coin a crucial unique selling point.
In the early years of Bitcoin, it was difficult for many people to buy Bitcoin and keep it safe. You often had to make a transfer in advance and then trust that the cryptocurrency exchange would actually buy the Bitcoins for you. Today, crypto exchanges are controlled by state supervisory authorities, in Austria by the Financial Market Authority. Numerous cryptocurrency exchanges with excellent user experience and impeccable services are now available to buyers. In addition, PayPal offer Bitcoin as a means of payment, and the Stuttgart stock exchange operates its own app Bison, which can be used to buy Bitcoin.
Is the super cycle coming?
If and when there will be a Bitcoin super-cycle cannot be predicted. However, compared to currencies, bonds, stocks and gold, a super cycle is more likely. This is because one should ask what will happen when part of the world’s managed wealth flows into Bitcoin. World financial assets are estimated at around €100 trillion. Even if only 0.01% of this is invested in Bitcoin, this could bring an almost unbelievable price increase to unimagined heights.
Here we are no longer talking about a rise from 20,000 US dollars to 100,000 US dollars, which is the result of the Fibonacci chart technique used many times.
In a super cycle, price jumps beyond a million euros for a bitcoin are mathematically conceivable due to network effects, the fixed bitcoin money supply, the increasing sluggishness of gold. Purely hypothetical. The super-cycle is where Bitcoin’s imagination lies, which other asset classes usually lack. That makes Bitcoin unique.
Tether (UDST) has overtaken Ripple (XRP) in the market cap ranking as the world’s largest stablecoin. This comes at a crucial time, as the cryptocurrency market has been experiencing an absolute surge for weeks. While Bitcoin and Ethereum remained unchallenged in first and second place in this autumn run, the third place on the podium is far more contested.
Yesterday, Tether clearly prevailed over XRP: The crisis-ridden blockchain project Ripple, with a market cap of 15.9 billion, clearly fell behind, while the US dollar-pegged Tether stablecoin rapidly caught up, beating XRP by a long way with a market cap of 20.4 billion.
Tether has been ahead before The recent movement of the third and fourth places is not new in the 2020 crypto market. Tether was already ahead this year in May and September, surpassing XRP as the third largest cryptocurrency by market cap, but crashed afterwards. The reason for this was emerging doubts as to whether the stablecoin Tether is actually sufficiently secured by capital reserves and can actually maintain its price peg to the US dollar.
This discussion is now off the table, because confidence in Tether has grown strongly. In addition, Tether’s jump to the top spot is trend-setting, because USDT, as the acronym is called, is used for buying and selling other cryptocurrencies and is a reliable indicator of trading activity and thus sentiment in the cryptocurrency market.
XRP crash due to SEC lawsuit The drop in XRP comes at the worst possible time, as yesterday the US financial markets regulator SEC announced a fat lawsuit against San Francisco-based Ripple, causing the XRP coin to fall a further 25%. Ripple and its founders Garlinghouse and Chris Larsen are accused by the SEC of taking a whopping $1.3 billion over the years in a securities offering for digital assets.
Ripple’s lurching price Ripple is further burdened by a lurch in its business model: as recently as the summer, Emi Yoshikawa, Ripple senior director of global operation, claimed that XRP does not compete with either stablecoins or central bank digital currencies (CBDCs). According to Yoshikawa, Ripple was supposed to develop in a complementary way to stablecoins and CBDC. This direction is now being changed, as last week Ross Edwards, Ripple Global Head of Client Solutions made people sit up and take notice when he gave CBDCs and blockchain technology a key role in shaping the future of a global and interoperable financial system in a presentation.
Edwards emphasised that Ripple has built good relationships with the existing financial ecosystem through its partnerships. Ripple’s clients include some of the world’s major financial institutions such as Banco Santander and Bank of America. In addition, Edwards pointed out that Ripple is developing products, solutions and initiatives to provide businesses with a next-generation cross-border payments infrastructure, as he explained in a presentation on 14 December 2020.
Specifically, Edwards believes that Ripple’s products will be used to address and solve real-world problems, adding that “…Ripple is able to further leverage this technology as infrastructure suitable for the exploration, ideation and eventual deployment of a fully functional CBDC.” So CBDC after all: Ripple plans to position itself as an infrastructure provider for central bank currencies. The SEC’s lawsuit could permanently tarnish Ripple and massively impact its CBDC strategy.
Tether’s 3rd place sustainable? Yes, Tether is likely to hold third place and prevail over Ripple in the long run. This is because Tether’s high market cap runs parallel to massive growth in other stablecoins this year. Both Tether and the stablecoin USDCoin (USDC) have recently cleared important hurdles, with USDC passing the US$1 billion trading volume mark in July 2020.
Unlike volatile crypto assets such as Bitcoin (BTC), stablecoins such as USDT and USDC are designed to provide a digital version of fiat currencies with a fixed peg to the US dollar, ensuring a ‘stable’ price. The one-to-one peg to the USD means that the price of Tether is always equal to one US dollar.
As a stable cryptocurrency, Tether is by far the largest cryptocurrency in terms of daily transaction volume. It is also exciting that at the time of going to press, Tether’s daily trading volume was more than 73 billion US dollars, while Bitcoin only has 45 billion in 24h trading volume.
Austria´s Innovation Magazine Brutkasten published an interview with me on Bitcoin, which hit an all-time-high of 20.000 USD.
Now that Bitcoin has surpassed the magic mark of 20,000 US dollars, many are wondering what will happen next with the “digital gold”. Crypto expert Robert Schwertner gave us his take on this.
Crypto expert Robby Schwertner sees two ways Bitcoin can continue:
It happened. Bitcoin managed to do what it failed to do three years ago in the “crypto hype”: Surpassing the $20,000 mark. Crypto expert Robby Schwertner, aka CryptoRobby, saw this development coming, as he explains to Brutkasten: “This has been on the horizon since Paypal allowed payment with Bitcoin and some companies are buying massively to hedge against impending inflation.”
“Market capitalization of 1000 billion conceivable” When asked how the cryptocurrency will now continue, Schwertner sees two possible scenarios: “Either Bitcoin continues to go up. The market capitalization today is 367 billion US dollars – 1000 billion is conceivable, which means a BTC price of over 50,000 euros,” says the crypto expert, but he also sees a second possible development.
Robby Schwertner: “Completely new group of investors”. “Or it repeats the scenario at the turn of the year 2017/2018 and the 20,000 is a ‘bounce-back’ limit that cannot be overcome sustainably. However, the fact that a completely new group of investors is now entering the market argues against this version,” he says. Schwertner is referring to institutional investors, pension funds or family foundations that are turning to alternative asset classes due to the threat of inflation “from massive money printing by central banks.”
The “digital gold” “Bitcoin, which is already being referred to as the ‘digital gold,’ has its finger on the pulse,” concludes crypto-influencer Schwertner: “Values can be transferred in a cheap, fast and in secure way via the Internet. Even although most people don’t believe it yet – Bitcoin meets these criteria.”