Market news covering Libra, tightening regulations, market movements | Crypto Market News
Thrilling market news with CoinMetro’s CEO, Kevin Murcko in This Week in Crypto!
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This is one of those moments where Kevin can say, “I told you so”.
Facebook Libra will be done, but in a completely different manner than Libra 1.0, because Libra 1.0 was a sovereign currency. No government was going to allow them to create that. They are now changing it and structured it completely differently.
Libra 2.0 will likely not be pulled off exactly the way it’s designed today, but Libra will be released. The center of this is that instead of being backed by a basket of fiat currencies, it is basically backed by a bunch of other digital tokens. Which are denominated in different underlying values.
As crypto regulations come in, four things can happen: closure, mergers, sold in pieces, or bye-bye.
So as regulations come in, many operators can’t adapt. Others don’t want to adapt. This is common, not just cryptorelated. Especially in unregulated markets that introduce regulations. The bigger you are, the harder it is to go back and get yourself clean. And the smaller you are, the harder it is because you don’t have money to do it.
If you start off on the wrong foot, no matter if you grow yourself to a behemoth, or you are still too small to pay the bills: this is not a good thing for you, and it leads to one of those four scenarios.
Looking in the Morgan Creek’s Index, Kevin wouldn’t say that either XRP or XLM doesn’t “fit” in that portfolio. But XRP and XLM are very similar, and they are dissimilar towards many of the other assets in the portfolio. What does this mean for XRP and XLM really? Nothing, really. Both of them started out with the same vision to help banks. XLM went on a tangent to help the unbanked, while XRP wants to help the banks.
XLM didn’t create the asset to create a reserve. XRP did, but their reserve is still pretty healthy, and they have a lot of banking partners. So they probably don’t care about Morgan Creek Digital Index.
In a mature market, tools like price aggregation can be useful. However, crypto is an immature market, and the whole crypto market is OTC. In mature markets that are OTC — FX, for example — it makes a lot of sense to have a tool that aggregates price, because it allows you to see a more macro-picture of what the average/mean price is across the markets.
In an immature market where “Bitcoin” trades like to go to an “awesome platform” like “Binance Futures” to trade in and out of their “portfolios”, well, price aggregation — they don’t care. They look at one price, and that’s the platform they are on.
There is generally no reason to look at other prices, unless they’re arbitrating — and even then, they don’t want to see a mean price, they want to see prices at all the different exchanges.
So, this was probably a dud before it even launched.
Sufficient to say though, as the market gets more mature, these type of tools will be things true traders look for.
Kevin just had a big discussion the other day about innovation. Maybe no one will agree, but Kevin’s take on innovation is that there is no such thing as innovation. Innovation is like a Fibonacci sequence.
Fibonacci basically starts at zero, then goes to one, and every number thereafter is the sum of the two numbers before. So, 0, 1, 2, 3, 5, 8. The cool thing about Fibonacci is that the sequence is all around us in nature. How plants form. The length of branches, the length of the longest branches vs the height of the tree — all these things come down to Fibonacci sequences. It simply means that in nature, basically as things grow, they grow in a certain sequence.
So to Kevin, innovation is like a Fibonacci sequence. We start with almost nothing, and then someone goes “ah, what if we did this” and “ah, what if we did that”. And eventually the sum of these changes look innovative. But if you could take a time machine from the year 10 to the year 3000, it would look like a lot of innovation moving around. But if you were able to fast-track and see every single change from the year 0 to year 3000, it would look a lot less innovative.
So another “blockchain innovative alliance” — who cares. Blockchain is not that innovative. Kevin could care less if every place in the world uses blockchain. Every company in the world uses databases. There is no standardization in databases, even if everybody thought there would be, 30 years ago. There is not going to be any standard in DLT for a very long time.
If your company out there is building blockchains for healthcare or blockchains for whatever — good luck, it’s going to be a long road. Eventually there will be an oracle and other technology that will take over the market. But there still will more than likely never be a standard.
Yeah. Kevin talked about this before. And just to throw this out there, hedge fund-guys are not institutional investors. Institutional investors are sovereign wealth funds, pension funds, etcetera. Hedge funds are a bunch of guys sitting in a garage who says “let’s take other peoples’ money and make money on it”.
Most institutional money — and it’s not much of it, percentage wise compared to other markets — decided to get into Bitcoin mainly because they thought it was an uncorrelating asset. That in times of crisis, it wouldn’t correlate to the S&P 500. And they have been proven wrong.
That doesn’t mean that it can’t change. But this means what it always meant. In times of crisis, people run to cash. Primarily the US Dollar.
Let’s look at an example. If you are suffering in the Corona pandemic, and you have lost your job, and you have no idea when your income may come back, and you have no savings to pay your bills. And then the government gives you money. Is the first thing you are going to do is buy Bitcoin? Of course not. What fucking moron would go and buy Bitcoin with money that they need to lives? Staples, consumable commodities, become the thing that people buy in a crisis.
That raises a lot of questions about what’s going to happen. We saw Grayscale just published that they got 500m more into their portfolio in the first quarter of 2020. Everybody is jumping for joy and saying “Bitcoin, Bitcoin”. But what most people don’t realize is that most of it, is hedge fund money. So it’s third party money. And at the end of the day, there is a lot of retail money in there. Those guys invested other peoples’ money into Bitcoin, and the price just tanked. They are not going to make performance fees for the foreseeable futures.
How can they hope to maintain those performance fees? They need to pile in more money, cost-averaging, and hoping a small jump in Bitcoin will mean that they are back in profitability overall. It is simple cost-averaging. It is not good news. It is basically them kicking in that first crisis-lever, and that’s cost-averaging.
Again, like most people do in this industry, when there’s any type of news, they make it sound good. When in reality — not so good.
Kevin doesn’t think that Peter Schiff is a good advertiser for Bitcoin, because most people that look and watch and read Peter Schiff, generally have the same mindset. And while Kevin hates to say it, many of the things that Schiff has said, haven’t truly been proved wrong yet.
So Kevin would flip that around and say that CZ is probably adorable, and one of the best advertiser for every mainstream investor that says “don’t invest in crypto”. If you’re a guy who says “watch out with Bitcoin, you might get screwed”, then you might have a picture of CZ on your wall. Just maybe. Nice big poster that probably scares you to sleep at night.
This basically means that they are not a third party in the transaction, so there is no reason for them to get licensed. Also keep in mind that you don’t need a license in Singapore unless you process more than $35m per year.
Kevin talked about this a lot as well in the past. Exchange-business models that are exchange only, will go out of business because revenues will fall and compliance fees will skyrocket.
Kevin can say that what these companies consider “unusual”, is not unusual at all. They may be somewhat artistic or abstract, because the regulator doesn’t understand completely about AML on-chain. But they are not unusual. They are going to be derived from standard AML laws, that if you operate this type of business, you should have already known, and you are at fault.
CoinMetro has applied proper AML, CTF and KYT protocols since day one.
Kevin would say that this is partially correct. Ethereum with its “DeFi”-ability, smart contracts, tokens — all these things are so much more valuable than Bitcoin’s core tech.
Stablecoins are something for the mainstream market. Banks and central banks can use them. The FSB (Financial Stability Board) and other similar organizations around the world are kind of shitting on stablecoins, saying that one large centralized stablecoin like Libra 1.0 could basically bring down a government. It’s a bit far-fetched, but it’s possible. It could definitely provide instability in the currency markets, and instability in currency markets can lead to quite some unrest. It can crush economies, especially smaller ones that have their currencies pegged to the large behemoth currencies.
Think of all the currencies pegged to the US Dollar. Think what would happen if the US Dollar truly did go to shit. It would not be only the US economy. It would literally be almost every major economy that holds debt in US Dollars, as well as any economy that does business in oil, gold, or any commodity priced in US Dollars. And every country that peg their value to the US Dollar would be screwed.
That’s why the US Dollar isn’t going anywhere. In our life times.
Next “This Week in Crypto” with Kevin is LIVE on our Youtube channel on Friday!