Dogecoin passion could prevent government crypto bans

On By mehranmuslimiblogIn crypto, Governments, RegulationsLeave a comment

Dogecoin, which has existed for a few years, is not a cryptocurrency of the usual kind. It’s a fun, ‘meme’ coin and Elon Musk, Gene Simmons, The Jonas Brothers and Snoop Doge have been having some fun with it recently. However, although it has no utility, Noelle Acheson, says “it embodies two key themes impacting institutional interest in crypto assets: the role of “fundamentals,” and the likelihood of successful government bans.”

Acheson asks if fun should drive value (Dogecoin is up 1,350% in 2021, and answers her own question with, why not? She points to GameStop (yes, again!) saying that the market’s understanding of ‘value’ is shifting. Matt Levine at Bloomberg summed it up: “Money and value are coordination games; what we use for money depends on the channels that we use to coordinate social activity. Once society was mediated by governments, and we used fiat currency. Now society is mediated by Twitter and Reddit and Elon Musk, so, sure, Dogecoin.”

Even Dogecoin’s founders have no idea why its success has continued some seven years after launching it. But they can’t remove it, or close it down, because Dogecoin runs on a public, decentralized blockchain that no one controls. So, it will probably continue to exist so long as people value its fun element.

It’s about passion

GameStop and Dogecoin both exemplify what community passion can achieve, and how it may potentially block government bans on crypto. For example, India tried to ban cryptocurrencies recently, but the community mobilised, created a hashtag and rallied its members to lobby government representatives. They pointed out that the country has 10-20 million crypto users, plus 340 startups and 50,000 employees in the crypto space.

Something similar happened in Nigeria where the central bank ordered banks to close the accounts of cryptocurrency users. There was a public outcry, and the central bank had to issue a press statement “reminding the public that the rule was not new, and that it was for their own good.” The central bank had to unblock accounts of 20 people involved in the #EndSARS movement, which was about the dissolution of a federal police unit with a reputation for fierce brutality. Acheson says, “The fact that the accounts were frozen in the first place is one of the many reasons seizure-resistant cryptocurrencies are rapidly gaining in popularity amongst Nigeria’s young.” It is also the case that Nigeria is gaining recognition as Africa’s Silicon Valley, and trading crypto assets is a way of life for many young people. They have new tools to work with and a growing disrespect for institutions. Because of the central bank directive, they are simply moving from exchanges to peer-to-peer channels. As a result, the politicians have taken notice,, and some prominent voices in government have spoken out against the ban. Other countries will be watching this with interest, because as Acheson warns, “the very act of attempting to repress cryptocurrency’s use could light a fire under a generational understanding of why it’s necessary.”

Private finance is taking crypto mainstream

On By mehranmuslimiblogIn Bitcoin, Blockchain, DeFi, Fintech, UncategorizedLeave a comment

Last year was a turning point for cryptocurrencies. It turned blockchain from being a space for geeks into one where governments, institutions and retail traders now had a seat at the table. The 2021 GameStop story also played a major role in a change of perception.

Most interestingly, as Alex Shipp explains in an article for Cointelegraph, “cryptography and its primary feature, privacy, have been relegated from the front-and-center role they once played as cryptocurrency’s main attractions.” This has been replaced by the enticements of DeFi apps that offer “enhanced liquidity, yield farming and unprecedented economic models.”

Will 2021 be DeFi’s big year?

DeFI has become the Shangri-La of cryptocurrency it seems. Its allure is pervasive across the cryptocurrency landscape, with investors enchanted by its “double-digit APRs and seamless user experience,” which holds better long-term prospects for them than the “subtle, systemic benefits conferred by a privacy-centric exchange.”

Privacy is no longer the primary reason for entering the crypto space. Moreover, as the perceived benefits of DeFi grow, consumers are more than happy to make trade-offs to keep it growing. They really don’t want to forfeit these for the sake of privacy.

DeFi is the current Disruptor-in-chief within an already disruptive community. Now we can expect another to emerge – PriFi, or Private Finance. This, says Shipp, “brings privacy back on-stage by bringing it back on-chain — that is, into the Ethereum and Polkadot ecosystems — to integrate privacy into a robust network of rapidly evolving applications of decentralized finance.”

It’s significant because until now, “privacy solutions have remained siloed on standalone, privacy-oriented blockchains, isolated from the ever-expanding features of the DeFi landscape.” This ‘movement’ wants users to be able to have access to privacy without any trade-offs. Shipp says it could not have come at a more critical moment. Why?

The answer is GameStop. I won’t reprise the story, because I’m sure you know it. However, one critical factor is that after the hedge funds got caught over-leveraged in short positions, centralized companies, such as Robinhood, Charles Schwab, TD Ameritrade and others, restricted trading “thereby protecting the remaining capital of the exposed funds.”

This caused outrage amongst the retail investors, because these companies had essential hung them out to dry. What they learnt was, as Shipp says, “For retailers in 2021, that has meant awakening to a pair of sobering realizations: that centralized markets only remain free as long as they serve centralized powers and that surveillance is a primary supporting feature employed by such power structures.”

The trading restrictions placed on the retail traders highlighted the need for “a new line of emergent derivatives: fully private, on-chain synthetic assets whose values are securely pegged to traditional financial instruments — stocks, commodities, bonds, insurance products and more.”

The crypto space is opening up in ways the first enthusiasts probably never dreamt of, and while it may not suit purists, it is driven by the demands of the market. You could say everything has changed, and nothing has changed – depending on your perception.

Affirm finds favour with Millennials and e-commerce

On By mehranmuslimiblogIn FintechLeave a comment

Serial entrepreneur, Max Levchin, has made a cool $2.5 billion stake in Affirm, his latest brainwave in the fintech sector, and he drew on his personal experience as a Ukrainian immigrant to come up with the idea.

As he Jeff Kauflin at Forbes, when he arrived in the USA with his family in 1991, he wasn’t prepared for some of the trappings of a capitalist society after living in a socialist country: “I got my first credit card a couple years after coming to America and promptly destroyed my credit, because I had no idea how to use this power tool.”

Now he is CEO of Affirm Holdings, a buy now, pay later fintech that aims to end millennials’ aversion to the credit card system as it currently operates, and consumer debt. This is not Levchin’s first foray into finance: he co-founded PayPal, and his other ventures include Yelp, Slide and Glow, the latter a fertility-tracking app.

He identified that what millennials disliked most about credit cards were the late fees and the fact that it was all too easy to run up large debts, “particularly for those who didn’t understand the way interest charges on revolving credit cards compound,” as Kauflin explains.

Affirm doesn’t offer particularly low interest rates – they run from 0% to 30% a year, depending on a customer’s creditworthiness and if a merchant subsidises interest-free payments. What it does not do is charge late fees. Furthermore, the consumer is shown from the start the total amount of interest they will have to pay on any purchase, and these are fixed payments lasting from three to 12 months. With very large purchases this period can be extended to up to four years. What is more, Kauflin says, “Consumers can instantly finance an expensive item through Affirm while paying off routine credit card charges in full each month.” This is dramatically different to the current conditions for cardholders, who end up paying interest on every item bought, no matter the size, if their account carries a balance.

Affirm has also taken advantage of the millennial enthusiasm for point-of-sale finance, and upmarket brands, such as Peloton, Mittor and West Elm are now using Affirm to subsidise interest-free instalment loans. Indeed, retailer payments make up around 50% of Affirm’s $596 million revenue in the year to 30th September 2020. It is worth noting that it has booked a profit yet and lost $97 million in the same period of time.

That will probably change, as “buy now, pay later will become the fastest-growing e-commerce payment method on the planet by 2025, predicts Worldpay,” boding well for Affirm and its main competitors Klarna and Afterpay.

In a recent letter to investors about Affirm’s pre-IPO filing, Levchin said he was determined to accelerate the demise of companies that “peddle toxic financial products and derive profit from their consumers’ missteps.”

Affirm may have some way to go before it generates profit, but it looks like momentum is on Levchin’s side. In July 2020 he concluded a deal for Affirm to become the exclusive instalment-financing service for Shopify’s US-based merchants, and with $1.2 billion of IPO cash to spend, it could be something very interesting for the millennial consumer.

Will the Year of the Ox be bullish?

On By mehranmuslimiblogIn Bitcoin, BlockchainLeave a comment

This year the Chinese New Year is on 12th February and traditionally this event appears to coincide with a ‘Bitcoin dump’ and resulting price drop. However, analysts believe that this year will be quite different, simply because the “impact of retail traders in China has been reduced,” Coindesk reports.

Instead, in recent months, institutional investors in the USA and Europe have been the main drivers of the current bull run, whereas in 2017, Asian retail investors were the driving force.

According to Muyao Shen Chinese language social media platforms have been discussing the possibility that the bull run might have to pause over the New Year holidays, and concerns about Bitcoin have been reinforced by news showing that some Chinese miners sold their Bitcoin in January. There is speculation that this sell-off might have been prompted by the miners anticipating a bearish sentiment arising around the Year of the Ox festivities, as traditionally “Chinese traders tend to withdraw their crypto assets and cash out,” Alex Zuo, vice president of China-based crypto wallet Cobo, told CoinDesk.

The Chinese tradition of giving money to family and friends at New Year is well established. Felix Wang, managing director and partner of investment research firm Hedgeye Risk’s China business explained, “They need cash so they need to liquidate some of their financial holdings, and that could lead to a little bit of pressure in some of the financial markets.”

There is also a need for liquidity, as businesses, including over-the-counter service and crypto trading desks, are closed for a week. Data collected over the past two Chinese New Years shows that trading volume on Binance, Huobi and OKEx were down during the holiday period, and data from TradingView on Binance’s bitcoin/USDT pair shows “in each of the past three years, bitcoin’s price went down before the Chinese New Year.”

Significantly, whilst the Bitcoin price drop at the holiday time was 37.2% in 2018, in 2019 and 2020, it was only 8.3% and 10.5% respectively.

But, as this is the Year of the Ox, perhaps a more bullish sentiment will be sustained with the majority of Chinese traders and investors betting on a positive market trend and so holding on to their Bitcoin.