One of the most interesting trends surfacing in the crypto industry today is the increasing likelihood of Bitcoin emerging as the next global reserve currency – something that Bitcoin fundamentalists have been preaching for the last decade. 

With the combination of transparency and decentralized trust brought on by the blockchain, individuals and companies across the world have had the opportunity to participate in a free financial system since the emergence of Bitcoin some twelve years ago. 

Since the dawn of Blockchain, trust in this trustless system has been slowly rising with a diverse range of individuals, institutional investors, and even world governments investing in the technology and the various tokens in circulation today. One result of this has been the free flow of liquidity across borders in a remarkably revolutionary way – satisfying the ever-growing need for a more efficient global financial system. 

Mr. Yoon Kim is an accomplished and dynamic crypto analyst and strategist. He successfully built the TMT sector of Tremblant Capital and helped the company increase its AUM from $200 million to $5 billion in five-years’ time. He then launched Vestry Capital, a global TMT equity fund as the head of which he served as an advisor and consultant to various hedge funds and blockchain projects.

With his 20 years of experience in investing and in the blockchain industry, Mr. Kim acutely understands these shifts in the global financial system. 

For that reason, one of the key topics of conversation during The New Normal of Blockchain & Cryptocurrency panel which AIKON organized in late October was “where the future lies for the USD and its long-term position as the world’s reserve currency”. 

Mr. Kim indicated that the USD losing some of its standing in the global financial system and possibly its status as the reserve currency as an inevitable product of blockchain’s accessibility and decentralization. 

“The timing is very auspicious […] it becomes rational and logical for a lot of people to push Bitcoin as a reserve currency” – Yoon Kim

Yoon Kim

As Mr. Kim has pointed out, the current financial system has been in place since World War II – 75 years now! On average, global financial systems have typically lasted for ~70-80 years each. We are, then, coming to the end of an era and can stand with bated breath awaiting the next financial revolution. 

Moreover, history has shown that significant global events often precede the breakdown of institutionalized financial systems. For the Pax Britannica, it was World War I. For the global financial system, we have today, it may very well be the impact of COVID-19 on the world economy. 

Having been a staple of the global economy, and considering the turmoil, the US has endured throughout 2020, USD is in serious danger of being dislodged from the position of power it has enjoyed over the last three-quarters of the 21st century. 

“The prevailing global systems of finance, trade [and] economic activity [have been around for] 70 to 80 years” – Yoon Kim

Given the amount of influence that US politics now has on the rest of the world, and being mindful that the level of engagement that USD (as a global reserve currency) will have on the rest of the world after the presidential election will probably never reach the levels from 40 – 50 years ago when it was at its peak. With the decrease in the level of engagement of the US with the world economy after the Soviet Union’s dissolution, what we see now are the effects of the politics that took 20 years to materialize. 

In that sense, Mr. Kim pointed out that it is very probable that USD is about to be dethroned as the most important currency in the world. 

And while there are those who would like to see the Chinese RMB take its place, Mr. Kim considers this very unlikely to happen. For one, dethroning USD from the position of the global reserve currency would put a significant amount of pressure and responsibility on the Chinese financial system, responsibilities the country seems to be shunning presently. For instance, China has been accused of intentionally increasing demand which then leads to an increase in the prices of international commodities. 

Therefore, the question is what will supplant USD as the global reserve currency or at least become an alternate reserve currency running in parallel with USD?

Mr. Kim stated that Bitcoin seems to fit perfectly, especially taking into account the timing of its rise, as well as its ability to cross borders with very little effort. 

As political and economic relations between the US and China continue to collapse, it is becoming increasingly unlikely that either the USD or RMB will be viewed as a viable global reserve currency going forward. 

Bitcoin may prove to be the thing that both nations, as well as the rest of the world, decide they can live within the upcoming decades. 

“BTC […] will become a reserve currency that stands aside and is not controlled by a single nation” – Yoon Kim

While the Chinese government is actively restricting crypto trades, there is massive support within the government for cryptocurrencies and blockchain. This implies that they have a long-term strategy in place, where Bitcoin would be used to dislodge the USD as the global reserve currency. 

In the same way, we’re seeing the causality of the US global economics politics conducted in the past 20 years and its effect on the situation now, there is a good chance that 20 years from now we will have Bitcoin as the reserve currency of the world simply because it will not be controlled by any one nation and its financial system. 

Should Mr. Kim’s predictions come to be realized, individual and corporate players in this new market that is quickly gaining momentum should be preparing for the shift.


This article was originally published at Aikon.com


Featured Image Credits: Pixabay

Want to buy a house with Bitcoin? Here’s what you need to know.

With everyone going cryptocurrency crazy and the value of a single Bitcoin having skyrocketed as high as $19,000, there’s two things guaranteed when you work at a real estate startup:

1. Your parents and non-tech savvy family members will ask you to explain what the hell it is over and over again
2. Tech-savvy buyers who’ve mined their way to Bitcoin and other crypto riches will want to know if there is a way for them to buy a house using Bitcoin

For these questions, we say: “It’s like internet money, Mom.” and “Yes, it’s totally possible to buy a house with Bitcoin.”

Buy a House with Bitcoin

How buying a house with Bitcoin works

If you’re serious about purchasing a house with Bitcoin, there are a few factors that come into play:

The seller has to be down

First, you have to find a seller who is willing to accept Bitcoin as payment for the house. You can use our search to look for the words “Bitcoin” or “Ethereum” or whatever your cryptocurrency of choice happens to be to find potential property matches.

Once you have an accepted offer, the title and escrow companies have to agree to handle the transaction

Even if you are able to find a seller that’s willing to accept your offer in Bitcoin, it can be tricky to find title insurance and escrow companies who feel comfortable handling virtual currency transactions. To take on your home purchase, they may require you to cash out your Bitcoin so that your transaction can be treated more like a traditional house purchase.

This article was previously published on OpenListings.com

NEO Global Capital Interview

If you’re reading this, chances are you have experience or are interested in trading or investing in cryptocurrency assets such as NEO Global Capital

Chances are pretty high that a majority of our readers have invested a number anywhere between $100 to $10,000 in a mixture of assets such as Bitcoin, Ethereum, Ripple, and NEO. There’s also slim minority that has taken a walk on the wild side and invested in ICOs – some getting lucky, the bulk getting burnt.

Your decisions were likely fueled by news and impulse, and since your risk was relatively low, it didn’t take much convincing to place your orders

But what happens when that $100 to $10,000 figure is multiplied by 100x to 1,000x, in some cases 10,000x. And it’s your full-time job. And it’s not your money. The landscape changes a bit.

Cryptocurrency funds have a unique task ahead of them that involves navigating through a noisy and clamorous environment to get access to high-quality deal flows and investment targets. The stakes are much higher and reputation starts to matter.

CoinCentral connected with the team behind one of the world’s leading blockchain investment firms, NEO Global Capital, at their inaugural Boston meetup. The event featured heavy hitting figures from organizations such as Arrington XRP Capital, Pantera Capital, Block72, and, of course, NEO Global Capital.

The NEO Global Capital Fund I has a high-octane diverse portfolio of blockchain projects such as OntologyBluzelleZilliqa, Trinity, Mainframe, and Top.

The following interview provides some serious insights into the mechanics behind running an international blockchain fund, especially in the bear market that is 2018, from NGC Founding Partner Roger Lim.

Enjoy!


Can you tell us a bit more about what gives you a sense of a good investment opportunity? What specific traits are you looking for in the team, in the idea, in the technology?

NGC’s founding team has been involved in the blockchain industry since its early days, so we are fortunate to have worked alongside some of the early adopters of the technology. With time comes a better understanding of what industries are most in need of a digital overhaul, as well as where decentralized technologies will have the greatest impact, so our experience has certainly played to our advantage.

As such, we’ve developed a strong sense of which sectors will benefit most from blockchain; what stands out in terms of a projects founding team; and whether an idea is innovative and disruptive versus one that is similar to something that already exists and can really only offer incremental improvement.

That being said, NEO Global Capital has a well-rounded portfolio of investments, and we hope to continue supporting a variety of industries, including identity solutions; gaming; online content streaming; the financial services industry (i.e. banking, financing, payments, and exchanges); and so on.

We will also continue to invest in public chains, as well as privacy and security projects because we see them as strong examples of addressing a specific problem. Overall, it’s important to look at how competitive the market is for whatever that project is trying to solve.

Perhaps most importantly, we place a heavy emphasis on the strength of the team at the heart of a project: Does this project have strong leadership? What is their experience? Do they have high success rates from previous projects? A strong team is often the best indicator of whether or a not a project will succeed.

Could you tell us a bit about the fund’s relationship with NEO?

Our affiliation with NEO is a strategic one that allows NGC to fulfill its position as a leading investment firm. While NEO Global Capital is a fully independent entity, we are long-term believers in NEO and have created a dedicated fund aimed at fostering the growth of the NEO Smart Economy ecosystem. Through strategic capital deployment, project incubation, and utilizing all of our available resources, we believe that we can help accelerate the growth of the overall crypto market.

The NGC Fund I seems to be a newer fund compared to the NEO Eco Fund. Can you explain what are the differences between the two funds, in terms of objectives and potential investment targets?

The NGC Fund I is our for-profit fund, where we invest in the most promising and innovative projects related to blockchain. Our wider interest is in advancing the industry, so we invest in projects that have strong use cases and can help drive the mainstream adoption of blockchain.

Our second fund is the NEO Eco Fund and our goal here is to promote the growth of the NEO Smart Economy ecosystem. In alignment with our belief in NEO, we occasionally invest in projects that would specifically benefit from NEO’s infrastructure.

Overall, the goal of both funds is to help startups create lasting competitive advantages in an industry that’s become very crowded, very quickly.

NEO Global Capital

What kinds of short-term targets and goals do you typically agree with a startup firm once you have decided to invest? How do you go about agreeing on these targets?

Goals, objectives, and targets differ depending on the type of projects we are supporting. If it’s a public chain, for example, we would work with the project to identify gaps in the technical team, the roadmap, and milestones in advance of the mainnet launch. We are generous with our time for each of our investees; we want them to succeed, and if they wish to tap on the experience of any of our partners or reach out to our network, they have the full backing and support of the firm.

It tends to be typical that venture funds require a founding team to have a longer-term target that the company should be sold within a set period of time. Is it any different with NGC? What kind of timeframe do you work to for long term goals, and how do you define long term goals?

In general, token investments achieve liquidity a lot faster on exchanges than equity investments (months rather than years). Nevertheless, at NEO Global Capital we want all our investees to succeed whether we make a token or equity investment. We still hold tokens of many of our investments and we continue to work with them and expect them to continue their growth, development and to achieve the key business objectives over the coming years.

Are there any advantages to operating a cryptocurrency fund in a bear market?

In a way, bitcoin’s dramatic rise last year has solidified the blockchain industry: there is now an interest in blockchain and cryptocurrency that did not exist previously. As we move away from the crypto mania that ensued, the benefit of operating our crypto fund in a bear market is that most projects now come with good intentions.

This is not to say we have completely eliminated bad actors, but there were certainly more projects and players that emerged in the market at its peak when there was a greater opportunity for quick wins. Likewise, the current market allows investors to spend time researching, understanding a new technology or problem a project may solve — in a bull market, investors may act from a fear of missing out.

In addition to good valuations, the current market has produced stronger projects with experienced leadership teams, compelling use cases, and cutting-edge tech. We believe that the competitiveness of the market has not decreased in any way.

What separates a high-quality investment fund from a low-quality one?

A high-quality investment fund is one that makes educated and thoughtful investment decisions. One thing we are very proud of at NEO Global Capital is that our founding team comes from a varied background of crypto investment, traditional financial markets, emerging technologies, and mergers and acquisitions.

We would say that the best investment funds are those that are able to marry their crypto-specific knowledge with experience from more traditional verticals, thereby taking a more well-rounded and considered approach to investment.

A major component for any investor in the ICO space is access to deal flow. What gives NEO Global Capital an advantage here? Do you have any advice for smaller retail investors?

A strong reputation for helping projects post-investment is important and also entices more founders and entrepreneurs to want to work with us. We not only work closely with, but we welcome other funds to work with us to share deals, insights, and expertise. We strongly believe in collaboration and that a variety among blockchain investors (geographical expertise, background, and networks) brings diverse experience and immense benefits to a project.

As for retail investors, As Warren Buffet once said, “never invest in something you don’t understand” so definitely do your research, understand what you are investing in; and diversification is important. Cryptos are highly volatile and therefore risky, weigh up the risks before diving in.

Looking out on the wider market which is becoming very crowded. From the ICOs that have been completed so far in 2018, which ones stand out to you as being unique or otherwise interesting opportunities?

We think all the projects we have invested in have innovative teams and unique solutions to today’s problems within the industry. Ontology, for example, provides a solution to digital identity; Certik solves security problems in blockchain with formal verification; Hadron helps enterprises like NASA outsource their computation tasks with a large user and device population so that these tasks are done efficiently and timely. All hugely ambitious projects making immense progress and we look forward to supporting them in the future.

How does the NEO Global Capital team reach an agreement over which projects to invest in, or not?

While there are no hard and fast rules, a strong product, an effective business plan, and an ambitious, goal-orientated founding team would certainly be the cornerstone of what we consider a promising venture. Each of NEO Global Capital’s partners understands that investors are interested in seeing and investing in projects that are both unique and impactful, so we are often in agreement when it comes to whether to invest or not.

In your view, what is the outlook for the overall price of Bitcoin and cryptocurrencies over the next 12 months? What are the crunch points that may end up turning the markets in one direction or another?

If I had to hazard a guess – I would say bitcoin could see new highs over the next 12-18 months. As regulations, standards, and infrastructure become more mature, I expect the market to react positively.

What would be your single best piece advice for any founders of an ICO or blockchain startup?

As the blockchain space becomes increasingly noisy, a recommendation we always make to founders and entrepreneurs is to consider whether or not they really need blockchain. Focus on the problem you are trying to solve and decide if blockchain is truly the solution.

What is the outlook for NEO Global Capital as we move to the end of 2018 and beyond?

Our primary interest lies in advancing the industry of blockchain towards mainstream adoption, so as we move towards the end of 2018, we will continue to strive towards that goal by investing in the most innovative projects; sponsoring higher education initiatives; and facilitating conversation between industry leaders and business professionals that will address what the industry needs, where exactly the market stands, and what steps can be taken in the New Year to advance the industry as a whole.

In line with this, we’ve recently invested in several key blockchain-focused initiatives in higher education: most recently at Berkeley and the National University of Singapore. We also held our inaugural meetup in Boston to discuss project funding and development, best investment practices, and emerging industry trends. We plan to do more of this as we wrap up the year, and hopefully into 2019.


This article by Alex Moskov was previously published on Coincentral.com

About the Author:

Alex Moskov is the Editor-in-Chief of CoinCentral. Alex also advises blockchain startups, enterprise organizations, and ICOs on content strategy, marketing, and business development. He also regrets not buying more Bitcoin back in 2012, just like you.

Institutional investors are getting into the Bitcoin market via OTC trading platforms. Currently, the OTC trading market is said to be over two times the size of regulated exchanges with some desks handling over $100 million a day in transactions.

However, the entry of more institutional players is huge news for the crypto industry. According to many crypto pundits, institutionalized investors are the missing element needed to kick-start the cryptocurrency price recovery journey. This is after the spectacular price dip that occurred at the beginning of the year, which dragged down the market into a bearish stretch.

According to a report by Bloomberg, institutional investors have already started to invest in the industry, with some buyers currently buying over $100,000 worth of digital currencies through OTC trading platforms. This is as revealed by Bobby Cho, head of trading at Cumberland, which operates an OTC trading platform under DRW Holdings LLC.

In his view, the crypto industry has been waiting for big institutionalized investors to jump on the bandwagon, most likely following a bitcoin ETF, to help prop up the flagging market. But apparently, the big investors are already here, and many are using the OTC crypto industry to make huge buys.

Established crypto mining firms are reportedly also utilizing OTC trading platforms to sell digital coins to institutional investors at higher prices instead of waiting for the rates to go up, and many have their own liquidity desks. According to the Bloomberg report, coins from mining companies apparently command a price premium of up to 20 percent of their prevailing market value. This is because they are what many digital currency investors consider as ‘unadulterated’ crypto assets.

Because the coins are brand new and untainted by illegal activity, they easily meet regulatory requirements imposed by government bodies.

 

OTC Trading

OTC Markets Have Major Advantages for Investors over Crypto Exchanges

According to Cho, many investment firms are choosing to invest in the cryptocurrency industry at this time because of current market stability. It allows for better market prediction and risk evaluation.

Among the main advantages of using OTC trading platforms, especially for big investors, is that they generally have sufficient cryptocurrency liquidity to facilitate multi-million dollar digital coin orders. Moreover, buying millions of dollars worth of crypto on exchanges is hardly a straightforward process. Market movements arising from the huge transactions are also greatly subdued, and unlikely to sway prices by a significant margin.

Another noteworthy advantage is that cryptocurrency prices can be fixed beforehand by OTC trading entities, subsequently mollifying fears of sudden price slides and spikes, which could affect the final value of transactions.


This article by Elizabeth Gail was previously published on Coincentral.com

About the Author:

Elizabeth Gail is crypto-enthusiast and a blogger. Her specialties include cryptocurrency news and analysis. When not writing about crypto, she’s out taking part in humanitarian endeavors across the world. You can reach out and engage with her on Twitter and Google Plus.

Well into the second half of 2018 and it’s been a white-knuckle roller coaster ride for most. With Ether shedding 44 percent of its value in just two weeks and the media speaking of a Bitcoin bubble, is it possible to lose faith in crypto but remain bullish on blockchain? Apparently; if continued corporate statements like the UBS blockchain endorsement are anything to go by. But can you really separate cryptocurrency and blockchain?

UBS Bullish on Blockchain, Bearish on Bitcoin

CEO of Swiss investment banking giant UBS, Sergio Ermotti, came out with a bold claim recently. He said that blockchain was “almost a must” for business. UBS blockchain support is nothing new, however. Neither is their stance that cryptocurrencies are risky and will probably never become mainstream currencies.

UBS CEO Sergio ErmottiYet, when it comes to blockchain, UBS changes their point of view. The bank believes that blockchain technology can help companies become more efficient and reduce their operating costs across the board, from healthcare to finance. This implies a separation between cryptocurrencies and the technology that they run on.

But is it possible to separate the two? Furthermore, since the original vision of Satoshi was to send peer-to-peer electronic payments without the need for a middleman, UBS blockchain support could be misplaced.

Disrupt or Be Disrupted

“While we are doubtful cryptocurrencies will ever become a mainstream means of exchange, the underlying technology, blockchain, is likely to have a significant impact in industries ranging from finance to manufacturing, health care, and utilities,” UBS wrote in October of 2017.

Adding that, “Just as [the] internet has transformed our lives with email, e-commerce, or smartphone apps, we believe blockchain as an infrastructure technology can power future disruptive technologies through distributive ledgers, smart contracts, tokens or identity management.”

So, what about cutting out the middleman? The centralized authority taking its fees? UBS blockchain research does acknowledge a certain level of risk, although they limit this to technological shortcomings and an uncertainty as to which application will benefit the industry most. They fail to mention whether digital currencies will threaten fiat ones, or if central authorities will be cut out of the loop.

In fact, within the financial sector, UBS predicts that blockchain technology will have irreversible and positive effects. And UBS blockchain support doesn’t stop at words. The bank is also investing in research into distributed ledgers and smart contracts in its business model.

UBS currently holds a number of blockchain patents. Yet, despite Ermotti’s bullish stance, their blockchain activities are dwarfed by other large banks and credit card companies. The list includes American Express, BBVA, Mizuho Financial Group, Goldman Sachs, BNP, and Bank of America (who’s buying up blockchain patents like they’re expecting a war). Is this a bid to disrupt or be disrupted? Or a defensive maneuver to protect themselves against blockchain innovation?

Blockchain and Bitcoin Are One and the Same

Plenty of people criticize Ermotti’s point of view, seeing it as a convenient way of taking a politically acceptable view and a safe position. Leaving the door open without scaring away existing clients. Others believe that more than just convenient, it misses the point completely. After all, blockchain and cryptocurrency are one and the same.

Consider the Bitcoin network for a moment. The way it was created requires miners to believe that the value of the Bitcoin they are rewarded will increase over time (or at least, not decrease in value). Otherwise, there is no incentive or rational reason to invest in expensive mining equipment, electricity, and time.

Bitcoin mining company, Bitmain would benefit from an IPO

So, for those like UBS that are skeptical on Bitcoin, but busy singing the praises of blockchain, they may not fully understand. In an interview with Malta’s Steve Tendon, a member of the country’s Blockchain Taskforce and author of Malta’s National Blockchain Strategy, he expressed his concern with viewpoints such as the UBS blockchain one.

He argued that many regulators and institutions tried to draw a distinction between blockchain and cryptocurrencies, viewing crypto as a bad thing because of its criminal associations and scams, but blockchain as a positive technology with infinite possibilities.

“There is no way you can have a smart contract platform that is as sophisticated as the one that Ethereum has implemented today (but there will be others in the future) unless you also have a cryptocurrency that is being used to “pay” for the computation. So the distinction between cryptocurrency and blockchains are really artificial: they are just two aspects of the same coin,” he said.

Final Thoughts

Ermotti and the UBS team may be making headlines with their views on the transformative technology. Calling blockchain “crucial and disruptive” is all well and good. But frowning on Bitcoin at the same time may just be missing a trick.


This article by Christina Comben was previously published on Coincentral.com

About the Author:

Christina is a B2B writer and MBA, specializing in fintech, cybersecurity, blockchain, and other geeky areas. When she’s not at her computer, you’ll find her surfing, traveling, or relaxing with a glass of wine.

About OTC

What’s the first thing that pops into mind when you hear “over-the-counter”? For many, the phrase will create images of easy access to medication. OTC, however, has been around for quite some time and draws its roots from some of the first store-based exchange of goods. It refers more specifically to the easy access part than anything else.

The crypto markets are evolving, and big and small players alike are looking for the best ways to get involved. We’re going to take a deep dive into OTC as it relates to crypto and find out what opportunities the virtual currency markets are opening up for a new class of investor.

But before we do, we should probably get some pesky definitions out of the way:

Security (n): A security is any financial instrument which has a monetary value and is exchangeable/tradable on a market. Securities in most cases are used as a tool for making a profit but can also be used for technical reasons such as hedging.

Exchange (n): Most securities trade on exchanges. An exchange is a marketplace which trades securities and other complex financial instruments. They bring together brokers, dealers, and investors in a centralized way to standardize the buying and selling of these instruments. Through regulation, they also monitor markets to prevent fraud.

OTC (n): Over-the-counter is a fancy way of saying “decentralized trading”. Orders are not listed on a public order book. Clients can trade with each via broker without anyone else knowing about their transaction.

OTC Over the Counter

In the traditional financial world, companies that don’t have the right reputation and/or required funds to pay for exchange fees may go the OTC route to raise capital. In the crypto context, we are now seeing this phenomenon unfold as the ICO boom gathers pace.

Elsewhere, very large crypto holders (whales) would prefer to make large trades without drawing too much attention and therefore seek out specialized brokers to make this happen.

Biggest OTC Markets

It’s fairly difficult to gauge which markets and brokers are the biggest in the cryptosphere because a lot of business in this area is done privately. Vinny Lingham of the Civic project outlined some of his thoughts on the subject in a blog post and via twitter a few years back:

Overlooked fact: The OTC market for Bitcoin is bigger than the exchange market. Exchanges set the price but large trades don’t happen there. — Vinny Lingham (@VinnyLingham) June 26, 2016

The key takeaway from his experience was that the wealthy do not use exchanges to purchase their Bitcoin. Because these whales trade in such large quantities, the orders would overwhelm exchanges and move the price dramatically. As a result, the volume of exchanges doesn’t represent the true supply and demand for Bitcoin.

Some of the well-established and respected OTC brokers in this space include:

  • BitStocks
  • CircleTrade
  • Cumberland
  • itBit
  • JumpTrading
  • IBC Group
  • Genesis Trading

Unfortunately, these brokers only deal with high net-worth traders. Nevertheless, we’ll provide some alternatives for the so-called “little fish” in the following section.

How to Get Started

There are a number of ways to get started trading your favorite cryptocurrency over-the-counter:

ICO Investing

The trendiest OTC instrument to have arrived on the scene in recent years. In most cases the ICO model allows investors to support their favorite projects and receive tokens directly without strict oversight from authorities. Companies have raised enormous amounts of capital in only a few days creating the opportunity to drive the project goals forward. Here are some tips on how to find the best ICOs to invest in.

AirSwap

The AirSwap project is an innovative way to exchange cryptocurrency tokens via a global decentralized network. AirSwap is not a cryptocurrency exchange and does not list tokens or token prices. Instead, users of the network make tokens available to trade and the system with automatically match buyers and sellers according to their requirements:

OTC - The AirSwap trade process

To completely remove the middleman, their team has implemented exciting cryptocurrency tech called atomic swaps. Trading can be done via MetaMask or directly from your highly secure Ledger Nano S or Trezor hardware wallet. Check out our Ledger guide if you need some setup assistance.

AirSwap will only provide you a recommendation on trading prices. It’s probably a good idea to pay attention to prices listed on a cryptocurrency exchange like Binance to get a ballpark when making a trade. Furthermore, they only provide trading in Ethereum tokens at the moment but will presumably add other blockchain tokens as the platform develops.

LocalBitcoins

Based out of Helsinki Finland, bitcoin startup LocalBitcoins allows over-the-counter Bitcoin and altcoin trading in exchange for local currency. Payment methods and exchange rates are listed on the site. As you can see from below, prices vary quite a bit as a result of different supply and demand forces.

OTC - LocalBitcoin sellers with a variety of offers

Contrast this with exchanges which list the latest trading price and give you a feel for what you should be paying for your cryptocurrency. Furthermore, LocalBitcoins provides an escrow service so you can trade with peace of mind.

Consumer to Consumer

There is nothing stopping you from buying and selling cryptocurrency directly to your neighbor. Most people do not understand or use crypto in this way because it’s not immediately necessary. But in places like Venezuela and Zimbabwe exchanging cryptocurrency over-the-counter is/was used to keep small economies going due to the Government destroying their economy with hyperinflated paper currency.

How to Make Money in OTC

Arbitrage

Arbitrage is the process of buying/selling a product or service in one location and then selling/buying it back in another location at a better price to secure a profit. In most cases, this happens virtually but it’s not uncommon for crafty arbitrage traders to carry large amounts of money to other countries to cash in on these differences.

Your first port of call would be to monitor exchange feeds to get an idea of how prices are trading. You could then pick up some crypto cheap on an exchange or one of the methods mentioned previously. Selling via AirSwap or LocalBitcoins at a better price would probably be your final step. Cryptocurrency arbitrage is fairly advanced and in volatile markets like crypto you really need to know what you’re doing.

Risks For and Against

Completely Open Marketplace

In the strictest sense of the word, OTC means you can trade in a completely open marketplace. In fact, you could sell x amount of Ethereum for y amount of Bitcoin and not be anywhere near to the current price (ETHBTC) found on any major exchange.

Frenzied pit traders on a centralized exchange floor. Courtesy of Loren Friedman

This can be either a good or bad thing, depending on your point of view. A completely open marketplace allows the free flow of trade between parties without middlemen interfering in the process.

The drawbacks though are a higher degree of fraud and price inconsistency. It’s much easier to get ripped off.

Regulation & Legal Concerns

Obviously, trading in any financial instrument will catch the attention of the authorities. Where there’s a profit to be made, big brother will be watching. Since OTC trading provides the possibility of avoiding official records, it’s important to know the risks associated with going this route.

Modern-day regulations tend to favor the rich (people and corporations) because only the wealthy can afford to list on some exchanges. Also, in many cases, only investors with a high net value (so-called “accredited”) are allowed to invest in other companies/projects. Cryptocurrency is a grassroots movement designed to level the playing field.

We have somewhat of a stalemate in all of this. On one hand, regulators are biased and cater for the rich and on the other, OTC traders are brokering deals recklessly without any thought to safe investing. A healthy middle ground needs to be found.

Liquidity

Liquidity refers to how easily you can buy or sell your cryptocurrency. Bitcoin is considered the most liquid cryptocurrency in the world because of high demand and therefore a high frequency of trading. Take a look at the market capitalization of Bitcoin on our crypto tracker. As you can see, the capital flows into Bitcoin have far outpaced any other cryptocurrency.

You won’t have a hard time buying or selling Bitcoin but in the current ICO boom, you will almost certainly have issues trading altcoins with low liquidity. Ethereum has fast-tracked cryptocurrency creation and it has therefore never been easier to create what is amusingly known as the “shitcoin”. Getting hold of some is usually not a problem. Getting rid of them, however, can be a real nightmare. Buying illiquid cryptocurrencies over-the-counter is risky.

Safety

A major benefit of online exchanges is a level of anonymity and fast trading. Carrying around a couple thousand dollars in cash to exchange for crypto is probably not the smartest idea. People have still been known to do this anyway. Use some common sense if you plan to trade in physical goods and/or currency.

Closing Bell

People have been negotiating since the dawn of humanity. Trying to get the best price for a product or service is possibly just the nature of the human beast. Over-the-counter could mean a decentralized international marketplace or simply making a deal with your neighbor.

In the crypto context, if it weren’t already a sort of wild west experience, OTC services are springing up to provide untested opportunities for entrepreneurial businessmen/women, brokers, traders, investors and dreamers alike. In the dusty digital towns of the new frontier, amazing bargains can be found while other deals go bad. Where will you slot in?


This article by Ryan Smith was previously published on Coincentral.com

About the Author:

Ryan is a web developer, writer, and cryptocurrency trader who hails from sunny South Africa. He eats, breathes and lives crypto. When not meticulously looking over charts he can be found planning his next road trip or running around a 5-a-side soccer field.

 

Written by Gary Ross

This article was originally published on UpCounsel.

Cryptocurrency

The meteoric rise of cryptocurrencies has taken the world by storm. Innovators, investors, users, and governments are scrambling to wrap their heads around cryptocurrency and the blockchain technology that they rely upon. The emergence of a new market and business model has created great opportunities for participants, but it also carries significant risk.

Cryptocurrencies present an inherently unique challenge to governments because of their new technology, cross-jurisdictional nature, and frequent lack of transparency. Governments are struggling to develop new ways to regulate cryptocurrencies, adapt existing regulations, and identify fraudulent schemes. Cryptocurrencies and their regulations are evolving before our eyes, and this article will provide a brief background on cryptocurrencies and an overview of where cryptocurrency regulations currently stand.

What are cryptocurrencies?

Cryptocurrency is, by any other name, a currency—a medium of exchange used to purchase goods and services. Or, as some have suggested, cryptocurrency is a “peer-to-peer version of electronic cash.” However, this currency has two qualities that distinguish it from traditional bills and coins.

First, cryptocurrency is a virtual currency that is created through cryptography (i.e. coding) and developed by mathematical formulas through a process called hashing. Second, unlike traditional bills and coins that are printed and minted by governments around the world, cryptocurrency is not tied to any one government, and thus is not secured by any government entity. The fact that cryptocurrencies are not secured by a government authority has led to concerns from critics that this is the second coming of Tulipmania, because we are ascribing value to an otherwise valueless item. However, the potential for cryptocurrencies as a medium of exchange remains enormous.

What is blockchain?

Blockchain is the technology at the heart of most cryptocurrencies, and explaining the technology in detail would require a blog post of its own. What is important to know is that blockchain is a record of peer-to-peer transactions categorized into blocks on a distributed ledger. Despite the obtuse terminology, blockchain functions similarly to a local bank authorizing and recording a transaction, but instead of only one party holding the entire ledger book, the transactions are recorded communally by member nodes, with each node being a computer in a peer-to-peer distributed network.

The blockchain can confirm a transaction within minutes, removing errors that exist when trying to reconcile and audit separate ledgers and transactions. Whenever a transaction takes place, the miners on the blockchain develop a new hash and digital signature to update the ledger and create a new “block.” This block, or recorded transaction, is time-stamped and encrypted and will remain on the blockchain for life.

lockchain is the technology at the heart of most cryptocurrencies

Regulation in the US – Utility Tokens v. Investment Tokens

In the United States, there has been no federal regulation of cryptocurrencies. Instead, cryptocurrencies are often grouped into two non-binding categories: (1) investment tokens that fall under the purview of already existing U.S. securities laws like the Securities Act of 1933 and the Securities Exchange Act of 1934, and (2) utility tokens, which remain largely unregulated (for now).

Security Tokens

Whether the tokens being offered in connection with a particular cryptocurrency are security tokens is decided on a case-by-case basis that even experienced securities lawyers can disagree upon. Tokens are usually analyzed under the four-part Howey Test below to see if the token is in fact a security. Securities must meet the following criteria:

  1. An investment of money
  2. In a common enterprise
  3. With an expectation of profits
  4. Predominantly from the efforts of others

Each characteristic of the token is analyzed against this framework to see if the cryptocurrency is in reality functioning as a new-age security. If it is, then regulators treat it as such, and cryptocurrencies must then be registered and handled with all of the same disclosures and precautions as any other security sold in the United States or to U.S. investors.

Utility Tokens

Cryptocurrencies can also be categorized as non-security utility tokens. These tokens purport to offer intrinsic utility and value, and are typically instrumental in powering the blockchain technology. These tokens function more like commodities than securities, and while they may act like currency in a fully functional network, they also have other values.

However, having a utility token with a properly formed and functioning network does not preclude said token from being labeled a security by the SEC. In In the Matter of Munchee, Inc., a purported utility token with a non-functioning network was labeled a security by the SEC. While labeling a token without a functioning network as a security – as it has no present utility – is not unexpected, the SEC also concluded that: “even if [Munchee] tokens had a practical use at the time of the offering, it would not preclude the token from being a security.”

After analyzing the Munchee Tokens under the Howey test, the SEC concluded that they were investment contracts because purchasers of the tokens had an expectation of profits predominantly from the efforts of Munchee and its staff. The SEC further concluded that Munchee had primed such expectations through its marketing efforts.

While this new case does not eliminate the distinction between utility and security tokens, it does caution that, when deciding whether a given token is a security, the SEC will look beyond utility at the character of the instrument, and base their conclusion based on the terms of the offer, the plan of distribution, and the economic inducements held out by the token issuer.

State Regulation

So far only the state of New York has issued any kind of regulation specifically regarding cryptocurrencies: the BitLicense. The BitLicense is New York’s attempt to control cryptocurrencies within its borders by requiring cryptocurrency businesses to register and comply with several different disclosure and financial obligations. The regulation has been divisive, and many businesses have rallied against its high costs. While a few companies have applied for and received the license, most other companies have simply left the state or stopped offering services to its residents.

Regulation Abroad – The Ever-Shifting Jurisdictional Question

The United States is not the only country grappling with how best to regulate cryptocurrencies. Many cryptocurrency businesses face daunting questions regarding in which jurisdictions to form and to do business in. In the end, the question is quite difficult and fact-specific, requiring communication between legal counsel in different jurisdictions and taking into account nebulous and piecemeal country-by-country regulations. It is impossible to do a detailed analysis without knowing how a country’s existing securities laws, financial regulations, and banking regulations will operate (or will be adapted to operate) with cryptocurrencies. The fact that cryptocurrency-specific regulations are still developing does little to add clarity, and makes the analysis even more challenging. Yet a few global trends are noticeable:

Suspending Cryptocurrencies

Some notable countries, like China, and South Korea, have suspended cryptocurrencies. These countries have cited the risk of fraud and the lack of adequate oversight in suspending cryptocurrencies and their exchanges, forcing cryptocurrency companies and exchanges to relocate.

Regulating Cryptocurrencies

Other countries, like Japan and Australia, have adopted disclosure and regulatory measures, or have companies register with the applicable government authority. Several countries have also tried to implement disclosure or registration regulatory regimes when it comes to cryptocurrencies, but such regimes are cumbersome and expensive to fledging companies.

Cryptocurrencies as Commodities

On the other hand, Switzerland and Singapore, two of the countries at the forefront of the cryptocurrency market, have simply stated that cryptocurrencies are assets not currency, and that they will treat them as such under existing regulations.

Conclusion

Ultimately, cryptocurrency regulation remains in its infancy. Piecemeal regulation has already begun around the world as governments enact new regulations to control and legitimize cryptocurrencies, fold cryptocurrencies into existing regulations, or ban them outright. These splintered attempts at controlling a global phenomenon will keep the cryptocurrency market volatile, and pose a challenge to innovators, investors, and users. They will continue to work in the cryptocurrency space while pushing for legislation and regulation that will remove ambiguity and legitimize cryptocurrencies. At the same time, they must grapple with the possibility that new regulations may be confusing, detrimental, or have negative inadvertent effects.


This article was previously posted on Upcounsel.com

About the Author:

Experienced corporate & securities attorney eager to help you and your business reach its goals. My services range from fund formation and capital raising (e.g. Reg D offerings, crowdfunding) to contract negotiation and compliance with securities and other regulations. I have extensive experience with cryptocurrency and non-U.S. companies.

Prior to co-founding my firm, I worked in the law firms of Sidley Austin, Alston & Bird, and Holland & Knight. From 2009 to 2012, I served in the U.S. Department of the Treasury, where I oversaw financial agents engaged by Treasury to provide asset management and other services relating to the Troubled Asset Relief Program (TARP).

 

 


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