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.”
The Chinese Center for Information and Industry Development (CCID) has presented the twentieth report evaluating the best crypto currencies on the market. EOS is still in first place, followed by Ethereum, IOST and TRON in 4th place.
The Chinese Ministry of Industry and Information Technology has presented its new project report, which examines the most valuable crypto currencies on the market based on various parameters. The authority updates this ranking once a month and wants to give potential investors and companies a first overview.
EOS further ahead, Ethereum fights its way up to 2nd plac
The top 3 crypto currencies have changed slightly. EOS is still in first place with 145.5 points, followed by Ethereum (formerly 3rd place) and IOST (formerly 4th place). TRON has dropped slightly to fourth place. IOTA, on the other hand, was able to advance to 30th place, after ranking 37th in last month’s ranking.
According to official information of the CCID, the analysis considers different indicators and categories in order to be able to illustrate the complex world of crypto currencies in a matrix in a simple and understandable way. The report goes on to say that the index assesses, among other things, the ability to use the currency in business and industry as well as in people’s everyday lives.
Beyond that the ranking possesses also a “creativity index”, which is not further in detail described, however with Bitcoin with 43,8 is largest. The strongest weighting in the Ranking finds the following metrics: Applicability, availability and adaptation of wallets, nodes, and the provision of a suitable test environment for developers.
Although some companies in the industry regard this ranking as useful, it has often been criticized in the past. Thus, the founder of QTUM, Patrick Dai, wondered why his crypto currency rose in the ranking even though there were no significant updates in the software or roadmap. He states:
Representatives from VeChain and IOTA were also wondering how the exact rating and ranking was arrived at. VeChain has numerous partnerships with the largest companies in the world and most recently received the China Green Technology Innovation Award at the largest high-tech exhibition in China. Also a consideration of the patents, which IOTA references as valuable technology, draws a clearly different picture.
For this purpose, IOTA Archive has examined the relationship between the number of patent references and the number of days since the respective start of the crypto currency. It was found that IOTA is in sixth place with 245 patent references, behind Bitcoin (8,806), Ethereum (4,530x), Litecoin (785x), Ripple (725x) and EOS (325x).
Although IOTA is one of the supposedly “young” crypto currencies on the market, companies are increasingly interested in tangle technology. The CCID has not yet disclosed the exact metrics, so the criticism from industry experts seems to be justified.
It´s like introducing a new currency or shift from horse carriages to automobiles. It´s a tremendous leap forward for decentralized systems!
In the first 4 hours over 230 times 32 Ether (totaling 2.9 Mio USD) have been transferred to the new system.
To trigger genesis at this time, there must be at least 16384 times 32-ETH validator deposits 7 days prior to December 1 2020. If not, genesis will be triggered 7 days after this threshold has been met (whenever that may be). For a more detailed discussion of how genesis is kicked off, see Ben Edgington’s genesis writeup.
Ethereum 2.0 Phase 0 has now been formalized for launch at some time around Dec. 1. The deposit contract is live and can collect the necessary funds to trigger staking.
An update by the Ethereum Foundation released on Wednesday explains how the genesis process is expected to happen.
Prospective stakers will now be able to deposit their 32 Ether (ETH) deposits to the contract via the dedicated launchpad and get ready for the launch.
The contract must collect 16384 deposits of 32 ETH each, a total of 524,288 ETH or about $200 million, to proceed with the launch.
The required sum must be collected at least seven days before the expected launch date of Dec. 1. If it is not, the launch is delayed to seven days after the threshold is reached.
The announcement marks the first time that a clear date for Ethereum 2.0 launch is set, after many years of anticipation and delays.
The community signaled its readiness, but there may still be potential issues in the clients. The Medalla testnet’s reliability has wavered in the past days, often failing to finalize due to issues with participation. While many believe this is due to the lack of incentives to staking, some issues in the software were reported as well. Nonetheless, the team considers most software clients to be “mainnet launch-ready.”
The end of one journey also marks the beginning of another — the launch of Phase 0 will not directly affect the existing Ethereum blockchain, which will continue operating as before with proof-of-work mining.
The Phase 1 and Phase 2 transitions, expected to occur in the next few years, will at some point move the existing Ethereum infrastructure and state to the new staking-based consensus.
#Ethereum is the second largest blockchain after #Bitcoin. However, in terms of adaptation and innovation it has a brighter future than #Bitcoin as more than 4,5 million different token have been issued on this truly decentralised blockchain. Moreover, #Ethereum will also use almost no energy in the future. And more than 46000 startups and industry enterprises are actively using this blockchain for their applications.
Reuters reports that PayPal Holdings announced on Wednesday it will allow customers to hold Bitcoin and other virtual coins in its online wallet and shop using cryptocurrencies at the 26 million merchants on its network.
The new service makes PayPal one of the largest U.S. companies to provide consumers access to cryptocurrencies, which could help bitcoin and rival cryptocurrencies gain wider adoption as viable payment methods.
The San Jose, California-based company hopes the service will encourage global use of virtual coins and prepare its network for new digital currencies that central banks and companies may develop, President and Chief Executive Dan Schulman said in an interview.
“We are working with central banks and thinking of all forms of digital currencies and how PayPal can play a role,” he said.
U.S. account holders will be able to buy, sell and hold cryptocurrencies in their PayPal wallets over the coming weeks, the company said. PayPal plans to expand the service to its peer-to-peer payment app Venmo and some other countries in the first half of 2021.
The ability to make payments with cryptocurrencies will be available from early next year, the company said.
Other mainstream fintech companies, such as mobile payments provider Square Inc and stock trading app firm Robinhood Markets Inc, allow users to buy and sell cryptocurrencies, but PayPal’s launch is noteworthy given its size.
The company has 346 million active accounts around the world and processed $222 billion in payments in the second quarter.
PayPal’s shares were up 4% at 1418 GMT, set for their best day in a month.
Bitcoin hit its highest since July 2019 on the news. It was last up 4.8% at $12,494, taking gains for the original and biggest cryptocurrency above 75% for the year. Cryptocurrency market players said the size of PayPal meant the move would be a plus for bitcoin prices. “The price impact will be positive overall,” Joseph Edwards of Enigma Securities, a cryptocurrency brokerage in London, said. “There’s no comparison with regards to the potential exposure between the upside of PayPal offering this, and the upside of any similar previous offering.”
Bitcoin and other virtual coins have struggled to become established as widely used forms of payment despite being around for more than a decade. Cryptocurrencies’ volatility is attractive for speculators, but poses risks for merchants and shoppers. Transactions are also slower and more costly than other mainstream payment systems.
PayPal believes its new system will address these issues as payments will be settled using traditional currencies, such as the U.S. dollar. This means PayPal will be managing the risk of price fluctuations and merchants will receive payments in virtual coins.
“We are going about it in a fundamentally different way to make sure we provide the maximum amount of safety to our merchants,” Schulman said.
PayPal’s service comes as some central banks have announced plans to develop digital versions of their currencies, following a Facebook-led <FB.O> cryptocurrency project Libra in 2019, which was met by strong regulatory pushback..
PayPal was among the founding members of this project but dropped out after a few months.
PayPal has secured the first conditional cryptocurrency licence from the New York State Department of Financial Services. The company will initially allow purchases of bitcoin and other cryptocurrencies called ethereum <ETH=BTSP>, bitcoin cash <BCH=BTSP> and litecoin <LTC=BTSP>, it said.
PayPal is teaming up with cryptocurrency firm Paxos Trust Company to offer the service.
Source: Yahoo Finance, reporting by Anna Irrera and Tom Wilson in London. Editing by Richard Chang and Jane Merriman
Find the original article here (in German), transcript in English:
In a crisis, people are in need of financial stability. Some take refuge in the purchase of gold and real estate. At the beginning of the pandemic, many also stocked up on cryptocurrencies, causing a short-term rise in the price of Bitcoin and other digital currencies. Would you agree with people saying that Bitcoin is the new gold?
It has certainly proved its value in the crisis. The price of Bitcoin did not skyrocket as much as gold, but it has remained stable and that is a positive sign. That was not always the case. Provided, of course, that the price remains stable, it is a good store of value. Like gold. It is the digital gold! Statistics are showing that 31 percent of the working population in South Korea has invested in cryptocurrencies. In Austria, it is only two to three percent.
But in view of the exchange rate fluctuations, you would not fill your safe with it.
To invest in Bitcoin is at present still like going to the casino. You can try it out with smaller amounts. It is not there to save money for grandchildren or to believe that you can make a big fortune. It should be amounts that you are also willing to lose. It is still a risky investment. But it is the future, the technology is still in its infancy. However, blockchain technology can do much more than just serve as a portfolio.
It is held very high by people who want to democratize society more. Why?
First, blockchain enables direct contact between economic partners. You no longer need a bank, but can transfer amounts to other people securely, fast and almost without any deductions. Payment transactions are returned to a direct interaction between the participants, and I think that’s a wonderful aspect. Passing money on through the bank is economic inefficiency. The economy thrives on the elimination of inefficiencies.
Cryptocurrencies are not there to save money or make a big fortune with it. One should be able to easily cope with the sums one uses in case of loss.
But there have been some teething troubles in the past, such as the possibility to launder money or smuggle it past the tax authorities via cryptocurrencies.
For that, people would have had to stick to cash. With it one can drive delightfully to Liechtenstein and open an account. With cryptocurrencies there could even be systems in which the tax would be withheld automatically. In this sense, cryptocurrencies would be an advantage, not a disadvantage.
A new directive is currently being negotiated in the EU Parliament to make cryptocurrencies less vulnerable to crime. How can one imagine this, if anonymity prevails here?
Bitcoin is no longer anonymous. It is a combination of transparency and anonymity. This state is called “pseudonym”. In other words, it can be traced very well when which money flows were moved where. There is also a special forensic department at the Ministry of the Internal Affairs that can successfully track how companies send their Bitcoins back and forth. That is an important development. Control is a good thing. Cryptocurrencies that remain completely anonymous probably have no future.
You mentioned trust. When it comes to money, trust is linked to the state. How can blockchain technology replace that?
Blockchain is actually called the trust technology. People trust the algorithm. No one can steal the encrypted codes.
But there are repeated reports of hacked cryptocurrency exchanges.
But that doesn’t happen because the blockchain would be insecure. But because, as with money, many a storage location be insecure. If somewhere a theft is done, no one blames the monetary system actually. To Bitcoin: There were certainly criminals who pulled money out of people’s pockets with the promise of making them rich. But here, too, the system is not the culprit. The Bitcoin code is public and has been verified thousands of times. It is very robust. So far Bitcoin is not has been hacked. In this sense Blockchain interweaves transactions with each other, as in a solid fabric. In this sense, one trusts the programming.
What if the programmer makes a mistake?
This happens with blockchains again and again, and also with new cryptocurrencies. We live in an age comparable to the conversion from horse-drawn carts to automobiles. Of course, there will be the odd mistake in development. But generally, the advantages of the automobile will clearly outweigh the disadvantages.
Are cryptocurrencies the death of banks?
I don’t think so. The systems will converge, i.e. the banks will converge to blockchain. We will see a new world of money. The currencies will converge and offer bitcoin-based currencies. The EU is still in discussion. But China has been working on a digital renminbi for three years. It is already being tested as an app among 500,000 workers in some regions. And it works. The central bank also has access to this currency again.
You mentioned other possible applications above.
Current developments are moving towards services being integrated into products via blockchain. In the case of industrial companies, this is about payment transactions, accounting and other important things. In everyday life, the forms of application are even more colorful. The Austrian blockchain company “Riddle & Code” has programmed a “Car Wallet” for Daimler Chrysler, an electronic purse for cars. With it, cars will be able to pay parking fees or refueling independently in the future. A payment system integrated into the car is an important component for autonomous driving. After all, who is supposed to pay for services when cars are moving around the streets without drivers?
There remains the disadvantage that only a few people understand the technology and the products are sometimes extremely user-unfriendly. At least this is the conclusion drawn from relevant studies.
In fact, a lot of work still needs to be done on user-friendly solutions. But that in turn is an opportunity for start-ups and many new jobs. It is a long process and it has only just begun.