There have been few true constants in the evolution of cryptocurrencies over the last five years, but speculation around the arrival of institutions and institutional investors has been one of the most consistently heralded themes.
For years, “Wall Street is coming” to crypto has been prematurely declared, much to the dismay of less excitable researchers, journalists, and industry observers.
But as bitcoin continues marching further into its second decade of existence, and as we see more evidence of convergence between the crypto ecosystem and traditional finance, institutions have steadily moved from simply talking about crypto to taking action.
Recent research by Bitwise Asset Management found that the number of U.S. financial advisors allocating to crypto is expected to double in 2020 to 13%. While that might not sound like a lot, the advisors surveyed help manage roughly half the wealth in the United States.
Further, 65% of these advisors expect the price of bitcoin to appreciate over the next five years (up from 55% last year). This is notable given the United States is the dominant home to institutional capital and trends in the US often serve as an early indicator of how global capital is deployed.
Other recent data support the view that institutional interest and ownership is growing. For example, in May of last year Fidelity stated that 47% of institutional investors believe digital assets have a place in their portfolio, and 22% already own digital assets. Recently, a State Street survey showed that approximately 38% of their institutional clients plan to increase their exposure in 2020 to digital assets.
As institutions begin to offer insight into their cryptocurrency strategies, and market dynamics outside of their control are defined, the catalysts for their interest in crypto are crystalizing.
Past, meet Future
Over the last few years, institutions and global brands have slowly migrated toward becoming less secretive with their cryptocurrency plans.
Take for instance J.P. Morgan creating its own digital coin for payments between institutional clients, Fidelity launching a digital assets division, and the Libra project that counts dominant firms like Facebook and Uber among its founding members.
Not only have these initiatives offered insight into what these firms consider most strategically important to their success in the world of decentralized finance, but also have implicitly validated that the technology underpinning cryptocurrencies is vital enough to future success to warrant strategic investment.
At the same time, there’s never been more speculation around cryptocurrency unicorns using the public equity markets of traditional finance to IPO and fuel the next chapters in their growth. Such IPOs may take place ahead of another oft heralded future catalyst — an SEC approved Bitcoin ETF — and would give Wall Street and institutional capital even more reasons to support (and ways to invest in) expanding cryptoasset ownership.
As traditional finance and the cryptoasset ecosystem inch ever closer to what we believe is an inevitable convergence, the distrust and skepticism that has previously existed around any institutional discussion of cryptoassets is increasingly being replaced with not just comfort, but genuine enthusiasm.
A diminishing need for regulatory crystal ball gazing
Ask any institution what’s held them back from investing in the cryptocurrency sector, and one of the top reasons will undoubtedly be the lack of clarity from regulators. In defense of regulators, the questions posed by cryptocurrencies are dramatically different from other innovative technologies. It was never realistic to expect immediate, perfect clarity from authorities on such a disruptive technology.
Indeed, given the complexity of blockchain technology, and the concerns around the inherent challenge posed by this technology to how financial markets currently operate, the space created for crypto innovation to flourish mark regulators as one of the leading unsung heroes in the story of cryptocurrency’s rise over the last decade.
Today, after years of exploring and educating themselves on the crypto ecosystem, regulators are providing more decisive and comprehensive frameworks to oversee and guide both crypto companies and traditional financial institutions.
We are also now seeing refinement and further clarification around longer-standing regulatory frameworks, such as the New York BitLicense, which can open the door for institutions in the world’s leading financial hub to invest in crypto for the first time. Both the cost and time needed to obtain the license have steadily decreased, and now over 20 firms have been granted a virtual currency charter or license in New York.
By revisiting their early approach to regulating cryptocurrencies and digital assets, New York has also set a helpful example for other regulators across the world in countries like India and South Korea, which have been relatively more restrictive in their early efforts to regulate crypto.
Now, there is still plenty to resolve around regulation of the cryptoasset industry. And continued rapid evolution of blockchain technology makes the job of the regulator all the more difficult. But regulators are motivated to act and more equipped than ever with better data, tools, and research to make prudent decisions that promote rule clarity and responsible innovation.
As these regulations continue to go from ideation to codification, expect institutions to embrace the greater certainty and expand both their cryptocurrency investments and projects.
Capturing a share of history’s greatest generational wealth transfer
Cryptocurrencies have already become a key strategic component of many institution’s strategies to prepare for and claim market share in what will be the largest generational wealth transfer in history. Research and consulting firm Cerulli Associates estimates that as much as $68 trillion will transfer from Baby Boomers to younger generations over the next 25 years.
This work has taken many forms, most often focusing on creating “digital banks” with friendlier brands and mobile-first experiences, which keeps the next generation of investors easily connected (“banking everywhere”) as they discover their own relationships with institutions they learned to distrust following the 2008 Global Financial Crisis. A parallel development is that young people have more willingly embraced cryptocurrencies as investable assets than their predecessors — especially among the Millennial demographic.
Just last autumn, CoinShares, Blockchain.com, and MKS (Switzerland) launched DGLD, a token that represents allocated physical gold stored in Swiss vaults. Purchasers of DGLD benefit from the digital ease of use, security and transparency of cryptocurrencies, combined with the enduring value of physical gold. Tokenized gold use has grown significantly and we can expect to see many more traditional assets tokenized.
A 2018 survey by YouGov found that over 50% of American Millennials were interested in crypto, and were three times more likely than Generation X to invest in crypto according to a survey by Bankrate. There’s less data available on Generation Z, which will follow Millennials as the next wave of investors to join the market, but early signs indicate a similar affinity for digital assets.
Only time will tell if existing institutions are able to weave cryptocurrencies into their offerings in a way that will appeal to these younger generations, which will soon hold the purse strings for the vast majority of wealth, or whether new challengers will continue to dominate crypto.
Regardless of whether it is an incumbent or startup that ultimately wins, it’s clear that crypto will play a central role in the evolution of wealth management.
It’s impossible to predict with perfect certainty what will happen in the next decade of cryptocurrencies as the crypto ecosystem and technology are still rapidly evolving.
But something crucial happened in the last two years: It is now widely accepted that cryptocurrencies are not going away.
As institutions learn more about the growing appetite amongst their clients for crypto, receive necessary regulatory clarity, and increasingly cater to a younger generation that has bought into the promise of cryptocurrencies, the choice has become very simple: Either embrace crypto or become irrelevant.
Concordium Completes $15M Private Sale Round Following Successful MVP Testnet
[PRESS RELEASE – Please Read Disclaimer]
Zug, Switzerland, 9th March, 2021, // ChainWire // Privacy-centric blockchain Concordium has finalized its MVP testnet and concluded a private sale of tokens to fund further development. The company secured $15M in additional funding for the Public and permissionless compliance-ready privacy-centric blockchain.
Late February Concordium announced joint venture cooperation between Concordium and Geely Group, a Fortune 500 company and automotive technology firm. The partnership will focus on building blockchain-based services on Concordium’s enterprise-focused chain.
Concordium recently completed Testnet 4, which saw over 2,300 self-sovereign identities issued and over 7,000 accounts created, with more than 1,000 active nodes, 800 bakers, and over 3,600 wallet downloads. The successful testnet led to the release of Concordium smart contracts functionality based on RustLang, with a select group of community members participating in stress-testing the network. Test deployments for smart contracts included gaming, crowdfunding, time-stamping, and voting.
Concordium CEO Lone Fonss Schroder said: “The interest of the community, from RustLang developers, VCs, system integrators, family offices, crypto service providers, and private persons, has been amazing. Concordium has fielded strong demand from DeFi projects looking to build on a blockchain with ID at the protocol level.”
Concordium will bring its blockchain technology for broad use, which also appeals to enterprises with protocol-level ID protected by zero-knowledge proofs and stable transaction costs to support predictable, fast, and secure transactions. Its core scientific team is made up of renowned researchers Dr. Torben Pedersen, creator of the Pedersen commitment, and Prof. Ivan Damgård, father of the Merkel-Damgård Construct.
Concordium, which is on course for a mainnet launch in Q2, aims to solve the long-standing blockchain-for-enterprise problem by addressing it in a novel way with a unique software stack based on peer-reviewed and demonstrated advanced identity and privacy technologies providing speed, security and counterpart transparency.
The Concordium team intends to announce its post-mainnet roadmap in the coming days.
Concordium is a next-generation, broad-focused, decentralized blockchain and the first to introduce built-in ID at the protocol level. Concordium’s core features solve the shortcomings of classic blockchains by allowing identity management at the protocol level and zero-knowledge proofs, which are used to replace anonymity with perfect privacy. The technology supports encrypted payments with software that upholds future regulatory compliance demands for transactions made on the blockchain. Concordium employs a team of dedicated cryptographers and business experts to further its vision. Protocols are science-proofed by peer reviews and developed in cooperation with Concordium Blockchain Research Center Aarhus, Aarhus University, and other global leading universities, such as ETH Zürich, a world-leading computer science university, and the Indian Institute of Science.
Seychelles’ FSA issues notice cautioning against use of Huobi services
Huobi, one of the market’s most-popular crypto-exchanges and one synonymous with Seychelles, is in the news today after the archipelago’s Financial Services Authority clarified that it has never supervised or regulated the exchange in question. This is an interesting development, especially since Huobi, with a daily trading volume of over $29 billion at press time, has often been perceived as being headquartered in Seychelles.
“The FSA strongly urges investors and members of the public to exercise caution in respect to the services offered by the above mentioned IBC and any other company providing such services,” it said, with IBC bearing reference to Huobi’s International Business Company number.
What’s odd and interesting here is that according to the crypto-platform, Huobi Global Limited “is a company incorporated in the Republic of Seychelles under the laws of the Republic of Seychelles.” In fact, its User Agreement “in its entirety is a contract concluded under the laws of the Republic of Seychelles, and relevant laws of the Republic of Seychelles shall apply to its establishment, interpretation, content, and enforcement.”
Also, Seychelles’ actions are uncannily similar to Malta’s handling of Binance in 2020.
On 21 February 2020, the Malta Financial Services Authority (MFSA) issued a similar statement to investors stating that Binance is not authorized by the MFSA to operate in the cryptocurrency sphere and is therefore not subject to regulatory oversight by the MFSA.
To this date, there is much ambiguity around the cryptocurrency exchange’s “real headquarters” since Binance Holding Company has reportedly been established in the Cayman Islands, with several other offices across the globe.
“We have offices in Malta for customer services, and some compliance people there, but it’s not the headquarters per se. It’s the spiritual headquarters,” Ted Lin, Binance’s Chief Growth Officer had said in an old interview.
After multiple attempts to extract information regarding where exactly the company’s headquarters are, Binance CEO CZ had gone on record to state that Binance has multiple offices across different cities with staff across 50 countries.
“It’s not that we don’t want to admit it, it’s not that we want to obfuscate it or we want to kind of hide it. We’re not hiding, we’re in the open,” he had said. According to CZ, Binance is a new type of organization that doesn’t need registered bank accounts and postal addresses.
Here, it’s worth noting that some have speculated that Seychelles FSA’s actions in this regard may force Huobi to relocate its official place of business to an entirely new geography. At the time of writing, Huobi was yet to come out with a statement regarding the development in question.
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Bitcoin whales ‘bought the dip’ as orders for $100K or more hit all-time highs
Bitcoin (BTC) whales and institutions alike have made the most of the recent BTC price “dip” by buying big, data suggests.
In an update on March 9, on-chain analytics service Material Indicators noted that buy orders of $100,000 and higher on Binance — the biggest cryptocurrency exchange by volume worldwide — are reaching all-time highs.
Big Bitcoin buyers don’t hesitate
In stark contrast to orders worth less than $100,000, larger buys are more frequent than ever before in Bitcoin’s history.
Smaller allocations have plummeted in 2021, matching an existing narrative that institutions are scooping up liquidity on exchanges which surfaced during the recent bull run.
“The $100k – $1M class is now also about to make a new ATH,” Material Indicators commented on Twitter alongside a chart.
“Meaning, they bought the dip.”
Material Indicators previously voiced concerns about this week’s price rise, arguing that whales could “sell into” the surge, producing a repeat of the run to $58,000 all-time highs and subsequent 25% correction.
While this has so far not come to pass, analysts also noted that macroeconomic factors were also having a different impact to that which was expected.
Whale orders declined after news that the United States’ $1.9 trillion stimulus package had passed the Senate, while China providing support to tech stocks had the opposite effect. As Cointelegraph reported, tech had led a dramatic change of fortunes on equities markets.
$54,500 surge followed major Coinbase buy
Later, meanwhile, another batch of nearly 12,000 BTC left professional trading platform Coinbase Pro as an example of major BTC allocations continuing at current prices.
“That happened just before the recent surge in price. Nice coincidence,” quant analyst Lex Moskovski commented on data from fellow on-chain analytics resource Glassnode.
BTC/USD hit two-week highs of $54,500 earlier on Tuesday.
Zooming out, the increasing institutional involvement around Bitcoin could fuel its entry as a standard for investors alongside traditional plays.
“We do think it will behave, actually, I would say more like the fixed income markets, believe it or not,” Cathie Wood, founder and CEO of ARK Investment Management, told CNBC this week.
Binance orderbooks show the next major BTC/USDT resistances for the bulls are around $58,000 — the all-time high — and $59,500.
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