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Can a liquidity marketplace advance the crypto industry?

A two-sided liquidity marketplace just might be the catalyst that will drive the next wave of digital asset trading growth.

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Two-sided marketplaces are more than a smart business model. These platforms can democratize access and promote widespread economic inclusion in previously inaccessible markets. They have worked wonders in myriad verticals already — e.g., stock exchanges — and the world of digital asset liquidity may now be fertile ground for this business model.

Successful new platforms bring together buyers and sellers who would otherwise be unable to connect, creating entirely new value streams for sellers who capture more revenue. Meanwhile, buyers gain access to new capabilities, creating a win-win for everyone involved. A CoreSight research indicated that revenue of two-sided markets such as Airbnb, Fiverr, eBay and Uber could exceed $40 billion by 2022.

Google’s AdSense is a great example of how a two-sided marketplace can create an entirely new source of value for buyers and sellers. Its solution benefiting both publishers and advertisers has helped accelerate the growth of a new business category and built an industry-leading business. The Google Ads advertising service collected $134.8 billion in 2019 (including AdSense as well as Google’s other advertising products). Over 11 million websites have become AdSense users (sellers). Google has generated new sources of demand for advertising inventory on high-traffic websites by making ad space accessible to legions of smaller advertisers (buyers), leading to higher bids, more ads and higher ad sales.

AdSense made it possible for websites of all sizes to monetize their audiences by easily selling ad space. On top of that, AdWords helped small businesses needing an easy way to advertise to gain fast access to a previously inaccessible world. What had once required a team of media buyers and big budgets for TV, radio or print promotion was suddenly achievable via a few clicks and affordable pricing.

Crypto’s unexpected challenges

The creators of cryptocurrencies such as Bitcoin (BTC) founded their creations in large part on a philosophy of financial empowerment. Bitcoin’s genesis as a peer-to-peer electronic cash system was designed to enable consumers to pay each other directly, accurately and securely via a blockchain’s immutable audit trail.

Bitcoin’s creator, Satoshi Nakamoto, probably didn’t foresee that in a little more than a decade, Bitcoin would achieve over a $200-billion market cap. Satoshi probably also wouldn’t have predicted the appearance of countless new cryptocurrencies, which have been accompanied by hundreds of digital asset exchanges worldwide where investors could trade digital assets.

As new exchanges have sprouted up around the globe — each built in a disconnected silo — market fragmentation has increased exponentially. Ironically, this market fragmentation has prevented liquidity aggregation even as the overall market capitalization has grown. As a result, exchanges today face deep challenges in guaranteeing price/time priority of orders, reasonable spreads and transaction speed. This liquidity bottleneck is a drag on digital asset trading growth.

All-access

Markets must necessarily mature and reach critical mass before a two-sided platform can arrive on the scene. Crypto trading today has arrived at this juncture: With more exchanges and more traders, the demand for liquidity has continued to grow.

I believe that a two-sided market-making platform will be the solution to this problem. Crypto exchanges depend on market makers to commit to buying and selling at pre-chosen prices. These orders add liquidity to the exchange, benefiting an exchange’s clients. Meanwhile, the liquidity providers (aka market makers) must have the means to commit the required trading volume and capital. Their reward can be high, as market makers have the opportunity to capture the difference, or the spread, between their lower-priced buy and higher-priced sell orders.

Market makers not only require capital but also need technology and trading expertise to inform automated trading algorithms. While market making could potentially be an attractive use of capital for smaller players, they are shut out because they either lack the capital, trading volume, or expertise to participate.

Just like AdSense, a two-sided market-making marketplace platform would enable traders, big and small, to commit digital assets to specific exchanges and trading pairs (like publishers in the AdSense model dedicating ad inventory). Meanwhile, exchanges “bid” on this trading volume with fees paid to market makers (like advertisers in Adsense). While market making has traditionally been the domain of full-time, well-capitalized professional traders, an AdSense-like two-sided marketplace can expand that domain to include skilled traders of virtually all shapes and sizes.

Market maker metamorphosis

What if a platform could enable savvy retail investors to serve as crypto market makers by connecting them with digital asset exchanges and/or asset pairs that need more liquidity? A well-designed two-sided platform can empower retail investors to diversify and participate in a vital market function previously unavailable to them.

In the future, a two-sided platform could enable exchanges and asset issuers to list their market-making opportunities on the platform, along with the corresponding maker rewards. Retail investors could place funds into a market-making account, allocate it to a participating digital asset exchange, and select their preferred trading pairs, such as BTC/USD.

As each exchange’s liquidity increases, their clients will enjoy better price discovery, trade execution and higher fill rates. Better execution may even help exchanges attract more institutional investors, creating a virtuous cycle of market growth.

Turning an investor or a trader into a market maker may seem like a tall order, but a well-designed, two-sided marketplace makes it quite feasible. It isn’t far-fetched to suggest that such an efficient platform can spark one giant leap forward for the digital asset ecosystem.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Josh Li is the chief business officer of Apifiny — a fintech and DeFi startup building a new internet of financial services. Prior to Apifiny, Josh was an executive at Google where he led strategic partnership and innovation teams in both North America and APAC. He holds a BA degree from Harvard University in East Asian Studies and an MBA in Marketing from the Anderson School of Management at UCLA.

Source: https://cointelegraph.com/news/can-a-liquidity-marketplace-advance-the-crypto-industry

Blockchain

Aave and Chainlink hit new highs as Bitcoin price fights to hold $32K

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Bitcoin (BTC) price opened the weekend trapped within the $33,500 to $32,000 range but at the time of writing the digital asset is struggling to hold above $32,000. 

A few analysts have warned that the recent price loss of momentum may be a sign of ‘institutional exhaustion’ as selling pressure from Asia has increased since Jan. 19.

Despite Bitcoin’s current downtrend, some institutional investors are sticking to their prediction that BTC price will reach $100,000 before the end of 2021. This suggests that institutions are buoyed by rising investor sentiment and the new proposals for a Bitcoin ETF.

BTC/USDT 4-hour chart. Source: TradingView

While Bitcoin still faces resistance around the $33,000 level, on-chain analyst Willy Woo sees one potentially positive development for BTC. Woo said that the Bitcoin Spent Output Profit Ratio (SOPR), a metric that shows the profit ratio of BTC by dividing the price sold by the price paid, had “a touchdown”.

According to Woo there was a:

“Full on-chain SOPR reset. Coins moving between investors per hour (24h MA) no longer carry profit on average. To push SOPR lower, investors would have to be willing to sell at a loss.”

Bitcoin adjusted SOPR. Source: Glassnode

Woo also suggested that investors are less likely to sell at a loss, an early signal that Bitcoin could be close to finding a bottom.

Altcoins and DeFi tokens soar

DeFi tokens and altcoins continued to forge their own path as Bitcoin searched for support. Polkadot (DOT), AAVE, Curve DAO Token (CRV) and Sushiswap (SUSHI) all rallied roughly 5% to 7%.

The surge in the price of many DeFi-related tokens has in large part been the result of an increase in DEX activity. Data from Dune Analytics shows monthly DEX volumes have increased since July 2020 and currently the total value locked in DeFi is at $23.89 billion.

Monthly DEX volume by project. Source: Dune Analytics

Chainlink (LINK) continued its strong rally, setting a new all-time high at $25.50 and surpassing Litecoin (LTC) in terms of total market cap to become the seventh-largest project listed on CoinMarketCap. Aave price also broke to a new all-time high at $229.39 and the total value locked in the platform is $3.44 billion.

The overall cryptocurrency market cap now stands at $936.8 billion and Bitcoin’s dominance rate is 63.5%.

Source: https://cointelegraph.com/news/aave-and-chainlink-hit-new-highs-as-bitcoin-price-fights-to-hold-32k

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Blockchain

Ultra-rare alien CryptoPunk NFT sells for 605 ETH, or $750,000

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Amid a wild market-wide bullrun for non-fungible tokens (NFTs), an ultra-rare “alien” CryptoPunk has sold today for 605 Ether, worth over $750,000 at today’s prices. 

CryptoPunks are widely considered to be the original NFT project, released even before Cryptokitties, the blockchain-based collectibles project that propelled NFTs to mainstream consciousness. CryptoPunks developers Larva Labs report that Punks have accounted for $26 million in lifetime sales on their native marketplace, and the average sale price for Punks over the past year has been $6,199.

Each Punk has unique attributes, such as background color, accessories, and even some ultra-rare features, such as an “alien” or “zombie” appearance. The Punk that sold today, #2890, is one of nine alien Punks in existence.

The bidding for the Punk was competitive throughout the last week, with DeFi megawallet-turn-Twitter personality 0x_b1 putting in a 500 ETH bid. The Punk was last sold in July of 2017 for 8 ETH, meaning the owner made a 75x return on their investment. 

The new owners are a group of investors that include FlamingoDAO, a “NFT collective that supports and collects premium NFTS,” according to a Flamingo spokesperson. The official FlamingoDAO Twitter handle confirmed the purchase with a meme:

“It’s simple: Cryptopunks is a groundbreaking project; it pre-dated the ERC 721 standard and crypto kitties,” said the spokesperson on the investment thesis. “Aliens are the rarest form of Cryptopunk and we believe that the acquired Alien will be prized by collectors over time and mature into an iconic digital art piece.”

Crypto art collector @gmoneyNFT, who himself dropped 140 ETH on a Punk earlier in the month, thinks that the alien is a fine investment despite the sky-high valuation.

“I think it was a great purchase. As the world moves more digital, the digital “flex” will be more and more important. It’s how humans operate in the physical world. It won’t change in the digital realm,” he said.

Long-derided as a secondary usecase for blockchain, sales like today’s demonstrate that NFTs are just beginning to have their day in the sun. NBA Topshot, a collectible highlight project from Dapper Labs, has proven to be tremendously popular, and Axie Infinity’s native critters have been selling for remarkable prices as of late as well.

Some critics have called into the question the sky-high prices rare NFTs have been fetching, however, arguing that simple digital scarcity is a shaky foundation on which to justify a $750,000 sale. @gmoneyNFT dismisses these criticisms, saying that there are plenty of real-world analogues that make just as much — or as little — sense.

“Why would someone pay millions of dollars for an original Andy Warhol screen print when you can buy the same one online for $20? Why would someone buy a pair of yeezy’s for $300 when you can buy a fake from the same factory, made with the same materials for much less? Humans like to feel special. The provenance has value.”

Source: https://cointelegraph.com/news/ultra-rare-alien-cryptopunk-nft-sells-for-605-eth-or-750-000

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Blockchain

Voyager Token (VGX) gains 926% as mergers and acquisitions bring new users

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Voyager Token (VGX), also known as BQX at some exchanges, is the native token of Voyager cryptocurrency exchange. 

The exchange separates itself from its competitors by claiming to be a commission-free crypto broker platform and its smart order router also allows clients to trade at multiple exchanges.

Since the turn of the year, VGX has gained 620% and on Jan. 15 the token reached a new all-time high at $1.48.

Voyager (BQX) token price at Binance. Source: TradingView

In addition to having a fiat gateway, the platform also offers market data, interactive charts,crypto research and up to 9% interest on stablecoins, along with staking returns for Bitcoin and other cryptocurrencies if users leave them in their exchange wallets.

Token activity sees exponential growth

On-chain data shows that activity started to pick up just a few weeks ago, with the number of daily active addresses surpassing 1,500 while transfers quickly reached $60 million.

VGX daily transfers and unique addresses. Source: etherscan.io

The Invest Voyager app allows traders to earn interest with no lock-ups and users staking a certain quantity of VGX token unlocks higher yields. Furthermore, the platform is owned by a listed company in Canada, Voyager Digital Ltd. (CSE:VYGR), a $600 million market capitalization fully-regulated entity.

The Canada TSX exchange listing deal also hides an interesting story. By acquiring a defunct shell company, Voyager was able to manage a reverse merger in Feb. 2019. More interestingly, not a single USD has been paid for the deal, which involved shares of the new company.

In Oct. 2019, Voyager announced a partnership with Celsius Network to manage a portion of its clients’ assets. Thus, the broker was able to diversify its staking offering.

Another notable milestone was Circle Invest acquisition completed in Feb. 2020, converting more than 40,000 accounts. Circle Invest was previously involved with the USD Coin (USD) stablecoin, besides Poloniex exchange, although both projects had already been divested. It is worth noting that the deal did not involve cash, being settled in Voyager Digital shares.

These developments explain the current uptick in user accounts and token activity and similar to Coinbase, Voyager’s fiat on-ramp and regulated status could make the exchange a top choice for future crypto investors located in the United States.

VGX price growth follows new acquisitions and European expansion

Currently, Voyager exchanges is available to every U.S. state except New York, as the company waits for its BitLicense approval. In October 2020, Voyager Digital acquired France-based LGO, a fully licensed European digital asset exchange focused on institutional investors.

LGO CEO Hugo Renaudin explained that the French company would discontinue its dedicated institutional exchange, while LGO would operate under the Voyager brand, although focusing mostly on retail.

The overall traded volume on Voyager’s platform reached $120 million in Nov. 2020, while its asset under management surpassed $485 million on Jan. 15. To date, more than 200,000 users have downloaded the iOS and Android applications and further expansion into Europe should increase the platform’s user base.

Voyager (VGX) Twitter user activity vs. price (USD). Source: TheTie

Data from TheTIE, an alternative social analytics platform, shows that the recent price spike was preceded by increased social network activity. Apart from a few users complaining of KYC-related withdrawal issues, the general sentiment around Voyager and VGX are positive.

Offering up to 9.5% annualized interest returns on stablecoins and being a fully-licensed broker offering altcoin trading and staking to U.S. citizens seem to be the primary drivers behind the platform’s momentum.

As for the economics behind the VGX token, the possibility of a debit card with cashback rewards, withdrawal fee discount, and interest booster on staking might be needed to drive its valuation further.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Source: https://cointelegraph.com/news/voyager-token-vgx-gains-926-as-mergers-and-acquisitions-bring-new-users

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