Smart investors check out a crypto’s utility

On By mehranmuslimiblogIn Bitcoin, Blockchain, crypto, Ethereum, Success Advice1 Comment

There are somewhere in the region of 4,000 cryptocurrencies to invest in, each representing a different blockchain project. When investment experts look at the array available, they don’t base their choice on price, they look at the utility.

When the exeperts talk about Utility, they are referring to digital tokens built on a specific blockchain ecosystem – most often based on Ethereum’s ERC-20 standard – which grants token holders certain rights. As Katharine Wooller, UK and Ireland managing director at crypto wealth-building platform Dacxi told Rich McEachran, “Any cryptocurrency is only as good as its use case.”

There is a tendency amongst investors to buy Bitcoin simply because it is the most famous cryptocurrency. But Bitcoin’s utility is limited to promoting financial inclusion and cross border payments. Ethereum on the other hand is the preferred ecosystem for building cryptocurrency projects. So, it is not hard to figure out which of the two has more long-term potential.

One of the issues facing investors, particularly retail investors, is that the digital assets they hear the most about and are therefore drawn to, are the “cryptocurrencies addressing or solving specific problems on a macro level,” says Roman Matkovskyy, an associate professor in finance and accounting at Rennes School of Business. But there are many, many more that offer solutions to more ‘micro’ questions. As Wooller says, “it’s essential to do your homework and spend time researching and analysing a coin’s long-term intended use,” usually via the project’s white paper that should be freely available online.

Of course, a coin may appear to have great utility, but that doesn’t guarantee it will be successful. What is required for that to occur, is demand for the coin’s ecosystem. Let’s not forget that there are over 2000 coins that have come and gone, their related projects dead due to lack of demand.

The meme coins, such as Dogecoin, are a good example of complete lack of utility. Yet, investors have poured money into them, resulting in a 12,000% gain for DOGE between January and May 2021. They may look good right now, but they won’t last, as they serve no purpose. Dogecoin was started as a joke, and that should really tell you all you need to know. Still, people buy DOGE because they hope for its value to skyrocket. It’s speculation rather than investment.

Where should you look for long-term investments?

For long-term gains based on utility rather than making a quick profit, experts point to Ethereum (ETH) as the top choice, because it provides a platform for developers to create apps and run them on a blockchain without the involvement of third parties.

Paddy Osborn, managing director of the London Academy of Trading, suggests three others with potential: Polkadot – a network that can support multiple different blockchains and enable them to work together; Internet Computer, which aims to disrupt the internet space by building a decentralised web platform that runs on a blockchain and vechain, which helps companies track their products safely and securely through each stage of the supply chain.

To conclude, nothing is certain, but if you’re looking for a solid, long-term investment, look for the cryptos that are showing the greatest level of user adoption and functionality.  

Read this before October 2021 if you’re in crypto!

On By mehranmuslimiblogIn Bitcoin, crypto, DeFi, Fintech, Governments, Regulations, Smart Contracts, StablecoinsLeave a comment

For those of us who believe in the concept of decentralization that underpins Bitcoin, I believe we are shortly going to receive a shock in the form of new regulations. The wealthiest countries in the world are snapping at the heels of the crypto universe and are looking at ways they can use financial regulations to bring fintechs, exchanges and crypto owners into line.

What do governments want to restrict?

Here’s a list of ‘things’ they are planning to target:

  • Peer-to-peer transactions
  • Stablecoins
  • Private wallets (phone, desktop, cold storage)
  • Privacy (privacy coins, decentralized exchanges, TOR and I2P)
  • Former ICOs & future projects (NFTs, DeFi, smart contracts, second layer solutions and more)

What is their intention?

At it’s most basic, you could say that they want to know EVERYTHING!

They want to:

  • Businesses active in crypto to be licensed and regulated like banks
  • Ensure full transparency for all transactions
  • Have the ability to freeze crypto assets belonging to persons or countries they believe are a ‘risk’
  • Force the disclosure of user information for all transactions
  • Revoke licenses of any that don’t comply with regulations.

They want control of a space that emerged precisely as a reaction to government and bank controls on money, both of which allowed a global financial crash to happen in 2008.

Why do governments suddenly want more regulations?

The answer is fear. Wesley Thysse in his document “Government Planning Worldwide Regulation of Bitcoin”, he points to one event that suddenly made them sit up and take real notice of cryptocurrencies, and that was Facebook’s 2018 announcement that it intended to create and launch a ‘so-called’ stablecoin. As Thysse says, “Until then they didn’t see cryptos as a risk to the global financial system.”

Why did Facebook’s Libra coin, as it was called at the time, send a ripple of unease through wealthy governments? Because Facebook’s billion users would have access to an instant payment system that was faster and more importantly cheaper than anything offered by the existing financial system.

Governments and the central banks huddled together in talks about what to do, and engaged an organization called Financial Action Task Force (FATF). Its goal is “to protect the integrity of the global financial system.” A real Big Brother!

FATF has already passed similar legislation for global governments, and it is the organization behind the rule insisting that all cryptocurrency exchanges that exchange fiat for crypto have the same KYC and anti-money laundering requirements as banks. What they will do now is turn their attention to all the elements of the industry outside this kind of control and as Thysse says, “declare what is, and isn’t acceptable.”

In 2018 FATF set out to control money laundering and terrorist financing, but now it is going much farther, and they are making swift progress. The document anyone in the crypto space should be looking at right now is FATF’s ‘Guidance for a risk-based approach to virtual assets and VASPS’ (GVA). This is due to be implemented in October 2021. Furthermore, it is impossible to move FATF out of its powerful position, because the organization is protected by the Vienna Conference on Diplomatic Intercourse and Immunities, which means they enjoy immunity with regard to their actions and are unburdened by the rules the rest of us must live by.

The so-called public consultation on the GVA was a farce, as they only chose the feedback that suited their agenda. They have delayed the implementation of the GVA until October, but after that expect to see their recommendations being implemented at national level, and in our legal systems. You should also note that the GVA will not apply to central bank-issued digital currencies. So, the agenda is very clear!

It may not be all bad news

As much as those dedicated to crypto may be horrified by all this, let’s take a moment to look at a possible upside: regulations may just pave the way for mass adoption, something the crypto community has long been waiting for. But at what cost? However, I urge you all to read the FATF GVA, because in just a few months it is going to start affecting your life, and most likely it won’t be in the way you would like.

USDC stablecoin is in the limelight

On By mehranmuslimiblogIn DeFi, Ethereum, StablecoinsLeave a comment

It’s noticeable that in today’s leading cryptocurrency press, i.e. Coindesk and Cointelegraph, the USDC, a Circle stablecoin, is receiving a lot of media attention.

Cointelegraph has a story based on recent Messari research, which has revealed that USDC is growing much faster than Tether in 2021 and is “emerging as the dominant stablecoin on Ethereum thanks to its popularity in DeFi.” The stablecoin has also taken a chunk of Tether’s market share, and researcher Ryan Watkins predicts that in the coming weeks, this could result in Tether’ share of the stablecoin supply on Ethereum falling below 50%.

Watkins also pointed out that half of the total USDC supply is now sitting in smart contracts and is worth around $12.5 billion. It has also become “the preferred dollar-pegged asset staked in smart contracts in DeFi protocols,” he says. Messari estimates that more than 40% of the stablecoin supply on Ethereum is USDC.

The USDC supply has surged by more than 1,820% since the beginning of 2021 when there was just 1.3 billion circulating and currently stands at about 25 billion, according to Circle’s figures.

One of USDC’s attractions now is a new product called Compound Treasury, which is offering 4% interest on USDC to institutions. Furthermore, This week Coinbase announced it would pay 4% interest on USDC holdings, giving the stablecoin a further boost.

More blockchains to adopt USDC

Meanwhile, over at Coindesk the focus is on USDC adoption by more blockchains. At the moment it is native to four blockchains, but the report says, “We anticipate that in the coming months USDC will become available on Avalanche, Celo, Flow, Hedera, Kava, Nervos, Polkadot, Stacks, Tezos, and Tron.”  Following USDC’s launch in 2018, it expanded to Algorand, Stellar and Solana in 2020.

The USDC administrator, CENTRE, which is a consortium run by crypto exchange Coinbase and payments firm Circle, said expanding to other chains helps “drive individual and enterprise adoption of open blockchain technologies.” The announcement also said, “We anticipate that USDC on these blockchain platforms and multichain protocols will further accelerate the use of the world’s fastest growing digital dollar currency.”

The potential expansion to other blockchains follows announcements “showing momentum behind USDC as an interest-generating savings vehicle.”

Integration of USDC into other chains won’t happen immediately, but will probably be spaced out over the rest of this year.

Fintech will win the battle for the future of financial services

On By mehranmuslimiblogIn Banks, Fintech1 Comment

The world has experienced a seismic shift over the last year and a bit, and the effects are about to become evident as we start to move into a post-pandemic future. Financial services are one sector where we are seeing major changes, especially in the role that fintechs play in the world of money.

In the Deloitte study ‘Fintech 2021’ a ‘second wave’ of fintech activity is predicted and the authors write: “Despite the Covid-19 pandemic we appear to have entered a new phase in the evolution of the financial technology sector.”

To start with the traditional financial institutions are pursuing partnerships with fintechs, or those identifying as technology companies, so that they can access new markets. The fact that more of these institutions are now engaging with digital assets is a clear sign of this. Visa’s CEO Al Kelly recently stated why his company is moving in this direction: “We’re trying to do two things. One is to enable the purchase of bitcoin on Visa credentials. And secondly, working with bitcoin wallets to allow the bitcoin to be translated into a fiat currency and therefore immediately be able to be used at any of the 70 million places around the world where Visa is accepted.”

Morgan Stanley is another giant that is moving in a crypto direction. It is  “eyeing up a $441m play for a stake in South Korea’s largest digital asset exchange, Bithumb,” writes Maxim Bederov, who then points out that Bithumb’s exchange volume “recently exceeded mainstream equity stock market volume.”

Morgan Stanley’s move came only days after its analysts published a report: “The Case for Cryptocurrency as an Investable Asset Class in a Diversified Portfolio” arguing for a 2.5% allocation for sophisticated investors. It also noted that cryptocurrencies as an asset class, “has crossed the critical thresholds of market liquidity, regulatory scrutiny and institutional acceptance.”

Who else is buying? Paypal has confirmed it is buying crypto-security firm, Curv, on top of providing a crypto buying service to its users. And we are likely to see many more mergers and acquisitions in this space “as power consolidates upwards from crypto-asset startups to institutional giants.” Bederov says.

And, after the Covid crisis we are also seeing a major shift to cashless societies: an outcome of the fear surrounding touching coins and bank notes which were seen as a source of spreading the virus. As a result, there was massive growth in the use of contactless payments. In the UK, the limit for contactless payments was elevated twice in the past year. The limit increased from £30 to £45 in March 2020 (a modest 50% hike) then by over 120% in March 2021 to £100.

Consumers are moving away from cash at record speed, according to a major new report by FIS Worldpay. The annual 2021 Global Payment Survey found that e-commerce exploded in 2020. The use of cash has declined by 42% since 2019, and the report says cash will be the least-used traditional payment method within four years. It also states, “by 2024, digital wallets, credit and debit cards will account for 84.5% of e-commerce spend.”

Bederov concludes by saying, “Whatever results in the near term, this powerbase tussle between cryptocurrency, cash and central banks will be the defining fintech battle of 2021 and beyond.” The signs are good for a fintech victory.