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Bitcoin: More Than an Inflation Hedge

Bitcoin held in self-custody runs on an entirely separate financial system than the traditional one, making it a systemic hedge.

The post Bitcoin: More Than an Inflation Hedge appeared first on Bitcoin Magazine.

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In May, billionaire hedge fund manager Paul Tudor Jones of Tudor Investment Corp. announced in a letter to investors that his fund is buying bitcoin futures as a hedge against “The Great Monetary Inflation.” In his letter, he argued that the $3.9 trillion (6.6 percent of global GDP) printed by central banks since February has the potential to trigger widespread inflation, once the global economy rebounds from the shocks caused by COVID-19.

Bitcoin’s capped supply is one of its most well-known features, and it is regularly cited as a hedge against inflation caused by government money printing. 

Most people don’t know that Bitcoin has another attribute that acts as a hedge against a far larger risk. 

Bitcoin can be “self-custodied” — meaning the owner has full control and does not need to rely on any third party (such as a bank) to complete transactions. People inherently understand the value of self-custody, even in traditional assets. In times of risk, people seek to hold more cash and physical gold, because they grant the holder full control simply by being held. At the beginning of the COVID-19 crisis, physical gold actually sold out as people rushed to buy it. 

Self-custody of bitcoin is easier to achieve than the self-custody of either gold or cash. Physical settlement is cheap and efficient due to bitcoin being entirely digital, and it’s easy to cryptographically verify authenticity. All of this is much more difficult for gold, which is part of why bitcoin self-custody is so attractive.

Bitcoin held in self-custody runs on an entirely separate financial system than the traditional one, making it a systemic hedge. In other words, Bitcoin is not only a hedge against inflation, it’s a hedge against failure of modern financial infrastructure such as banks, clearing and settlement networks, foreign exchange markets and payment rails. Bitcoin held in derivatives or on exchanges is not held in self-custody, and therefore it doesn’t have the same systemic hedging properties.

Why not? Because bitcoin held with a custodian is subject to approvals by that custodian. If the custodian is an integrated part of the traditional financial system, the bitcoin it holds is part of the traditional financial system as well. Those coins can be frozen in times of market stress or seized by governments. The threat of seizure may be small today, but in a world where the value of Bitcoin increases significantly, like the Tudor letter predicts, that threat could increase alongside Bitcoin’s value.

Needless to say, Bitcoin can’t be a hedge against the system if a large financial institution that is part of the system is holding it. 

Is systemic risk actually worth worrying about? It’s more of a risk than most people think. Sovereign debt crises and currency failures often go hand in hand with times of high inflation, as fellow billionaire hedge fund manager Ray Dalio pointed out in his latest post, “The Changing Value of Money.” In recent sovereign debt crises, such as in Lebanon today or in Cyprus in 2013, assets have been both frozen and seized, not to mention lost outright in bank failures. Just a few weeks ago, the FDIC reminded U.S. citizens via a creepy video that it’s perfectly safe to keep your cash in the bank. 

These are uncertain times, and we aren’t sure whether current global fiscal policy will save us from this crisis, or carry us inexorably into a deeper one. But if you’re investing in bitcoin to hedge against the unknown, doesn’t it make sense to reap the benefits from all of it’s hedging attributes? If your answer is yes, it’s time to take advantage of self-custody.

This is a guest post by Nick Neuman, CEO of Casa. Opinions expressed are entirely his own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

The post Bitcoin: More Than an Inflation Hedge appeared first on Bitcoin Magazine.

Source: https://bitcoinmagazine.com/articles/bitcoin-more-than-an-inflation-hedge?utm_source=rss&utm_medium=rss&utm_campaign=bitcoin-more-than-an-inflation-hedge

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Supercar maker Mazzanti Automobili launches security token offering

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Italian luxury car manufacturer Mazzanti Automobili has launched its security token offering on regulated digital marketplace STOKR.

As part of the offering, Mazzanti aims to raise 999,999 euros ($1.2 million) on STOKR to develop a special edition of its hypercar model Evantra Millecavalli R.

According to a Feb. 25 announcement, Mazzanti’s STO will allow investors to purchase MZZ tokens, priced at 1 euro each. The token is issued by Mazzanti via Blockstream AMP, a platform for the tokenization of securities built on the Liquid sidechain of Bitcoin (BTC), which has been directly integrated with STOKR.

As part of the STO, MZZ investors will be able to receive a 50% revenue share in the sale of the Evantra special edition. The offering is available for select European countries, with a minimum investment of 50 euros, the announcement notes.

Mazzanti’s founder Luca Mazzanti said that the company has been considering running an STO for a while. The company initially announced its upcoming STO plans earlier in February.

In conjunction with the STO, Mazzanti also announced that the company will allow its customers to purchase all editions of the Evantra model with Bitcoin starting from Feb. 25. The move echoes Tesla’s recent move toward accepting Bitcoin payment for its electric vehicles. 

Based in Luxembourg, STOKR has been listing various STOs in compliance with capital market laws of the European Union. Last year, Germany’s Federal Financial Supervisory Authority approved ParkinGO’s offering as the first cross-border STO on STOKR.

Source: https://cointelegraph.com/news/supercar-maker-mazzanti-automobili-launches-security-token-offering

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Finance Redefined: Ethereum exodus continues as Binance ‘helps,’ Feb 17–24.

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The parabolic rise of the Binance Smart Chain has been all over the news this week, aided by a few seemingly unfriendly moves by the exchange itself.

It started on Friday, when Binance suddenly froze withdrawals of Ethereum-based assets for about one hour. Many interpreted it as a move against the blockchain and its ecosystem, given that the cited reason was “congestion issues” — something one hardly imagines is a problem for an exchange, unless they shoulder withdrawal costs for the user.

The day after, FTX started shaming Binance for excessive promotion of BSC on the exchange. Specifically, FTX was apparently “spending millions” in failed deposits that came over the Smart Chain but were meant for Ethereum. FTX’s accusation toward Binance, one of its investors, is that the exchange put BSC as the default option for withdrawing many ERC-20 assets, which caused a lot of failed deposits to FTX.

I can’t say I’ve ever noticed Binance Smart Chain being “the default option” for withdrawals. BSC is the first listed when you attempt to withdraw something like USDC, though it does not actually select the blockchain for you. Still, I can see how some newbies could get swindled by this. People overestimate the degree to which terms like “ERC-20” are known in the casual crypto community. Testing the withdrawal now, Binance forces you to go through a quiz where you confirm you know what you’re doing by selecting BSC. I have no idea when this was introduced, but it’s not impossible that it’s a response to FTX’s statements.

Overall though, there’s nothing inherently wrong with one company using its products to promote another of its products. From the official responses it seems that the Ethereum congestion incident won’t happen again because they “upgraded the systems.”

Cheap tricks would never be able to undermine Ethereum without there being an underlying fundamental weakness. And I think we’ve all had enough with Ethereum gas fees. I tried a non-Ethereum DeFi product recently, and it felt so good to pay just a few cents for a complete interaction.

Binance Smart Chain is already processing more transactions than Ethereum and has over 5 million unique wallets. Ethereum, with its much longer history, is currently sitting at 140 million wallets in total.

Ironically, Ethereum fans should secretly want the bull market to end right now. The longer it goes on, the more gas fees will remain high, and the more people will want to migrate away and seed other environments.

Second largest liquidation day in DeFi history

Speaking of the end of the bull market, a massive slide in crypto markets triggered some $24 million in liquidations on Tuesday, the second highest loss in DeFi history. It would’ve been the highest if not for that infamous day in November when Compound thought Dai was worth $1.3.

The firesale was triggered by nothing in particular, though I suspect that rising bond yields are having their effect on the riskiest of assets on Wall Street, of which Bitcoin is the quintessential representative. And then Bitcoin dragged the rest of crypto with it.

I don’t normally talk about price because I’m not a financial advisor or even a successful trader. But I am feeling a lot of fundamental and sentimental indicators of a coming correction, ranging from a wavering stock market to, well, the strength of Tuesday’s dump.

To top it all off, my non-crypto feeds are being invaded by crypto stuff, which is never a good sign. I certainly hope that I’m misinterpreting what is actually unprecedented adoption and acceptance, but let’s face it — it’s all about price for now, while fundamentals are still lagging.

With layer two platforms and new blockchains coming online, we may get something useful out of crypto and DeFi soon. But everything could happen before we get there. Be especially careful right now and, most importantly, don’t get liquidated.

In other news

Source: https://cointelegraph.com/news/finance-redefined-ethereum-exodus-continues-as-binance-helps-feb-17-24

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Blockchain soccer gaming startup Sorare raises $50M

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Sorare, a major blockchain-based soccer gaming platform, has raised $50 million from high-profile investors backing major companies like Twitter, Instagram and Discord

The fresh Series A round brings Sorare’s total funding to $60 million, the company told Cointelegraph Thursday.

The funding round was led by Benchmark, an investment giant famous for funding companies like Twitter, Uber and Snap. Accel Partners was another lead investor, known for backing companies like Facebook and Spotify. The round also included some additional investment from investors like Reddit co-founder Alexis Ohanian, VaynerMedia CEO Gary Vaynerchuk, and Barcelona striker Antoine Griezmann.

With the new funding, Sorare is planning to continue growing its ecosystem, including launching a mobile application and onboarding the top global 20 football leagues. “We’re designing an experience where fans can celebrate, share, and live football moments at a deeper connection. We’re making fantasy football a reality,” Sorare said.

Founded in 2018, Sorare provides a digital collectibles platform based on the Ethereum blockchain. With non-fungible tokens, the platform offers a collective fantasy football experience allowing players to manage their players and earn prizes.

Gerard Piqué, strategic advisor at Sorare, explained that the platform aims to meet the significant shift to online and digital fan experiences:

“As world football has shifted from local supporters to global fanbases, football fans are looking for new ways to be connected to the game, the players and other fans.”

Blockchain and cryptocurrency startups have been actively tapping the soccer industry in order to bring new ways of fan engagement using emerging technologies. Socios and Chiliz represent some of the best-known industry efforts, jointly providing blockchain fan tokens for popular global soccer clubs like FC Barcelona, Juventus and Paris Saint-Germain. Earlier this week, Polish Legia Warsaw became the latest soccer club to join Chiliz and Socios.

Source: https://cointelegraph.com/news/blockchain-soccer-gaming-startup-sorare-raises-50m

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