Cryptocurrencies and Blockchain Technology are paving the way for digital transformations in the current world. Moreover, the global financial economy is already transformed into higher levels. This is with the implementation of Blockchain Technology in them. It is emerging in its full operational deployments and disruptions of fundamental processes. This is particularly related to the buying & selling of goods.
Additionally, the financial services industry contributes around 20% of the global GDP it seems. As the global financial system deals with a plethora of data every day, it is important to make them secured.
These financial sectors have a lot of intermediaries to process the operations. This includes Stock Exchanges, Payment processors, Money transfer services, etc. Thus, Blockchain could be a feasible solution to get rid of the major problems involved here.
Why Blockchain in Financial Sector can be beneficial?
Here are the four major reasons why Blockchain can be adopted than other popular technologies in the financial industry:
- Payment and data transfers facilitated by central authority are still the same. It has been more than a decade. Moreover, international transfers would take more than four days. With this, there are risks associated with credit/debit cards, exchange rates, etc.
In addition to this, industry too will involve a high amount of transaction fees. With Blockchain Technology, all these transfers can be made cheaper & faster which other technologies lack.
- Most of the industrial processes are delayed for an upgrade or other issues. This is to withstand security, hacks, higher volumes, etc.
Thus, by implementing Blockchain Technology, the process becomes more feasible as there is no centralized system involvement.
- There are greater chances that people would start making smaller transactions and payments. Hence for a smaller transaction, having a larger transaction fee won’t be better. With Blockchain, we can expect higher volumes and lower transaction fees.
- Blockchain Technology will also enable further disruptions of the traditional banks with fintech. Legacy problems, new participants, etc can utilize the blockchain platform to remain benefited.
In addition to this, Blockchain can be beneficial with the following factors:
Let me explain to you these main challenges and how blockchain can solve them in brief in the upcoming section.
Challenges in the Financial Sector & How Blockchain solves them efficiently:
- The Need for Decentralization
Most conventional financial systems are based on traditional centralization. As we have discussed earlier, it involves a great number of intermediaries to facilitate the transactions. This can, in turn, take additional time and cost for operation.
In addition to this issue, centralization lacks security. Security plays a couple of roles here. Initially, higher-level managers & individuals have access to employee and customer data. There are chances that they can use it for their beneficiary purpose.
While on the other hand, data are equally considered as gold. With centralized systems, customer’s sensitive data is held in central servers. This means that even a single breach of data can lead to the access of millions of records for the hackers.
With Blockchain in Financial Sector, one can eliminate the intermediaries by cutting down & saving time and money. The decentralized nature of Blockchain Technology will eliminate both these risks.
A consensus on a decentralized platform involves an agreement. This should be accepted by all the network participants. Hence, the decisions are not made by a single party but a set of individuals with the desired expertise.
Moreover, the data is not stored in a single server. They are spread out and encrypted throughout the network. So, there are no chances of fraudulent activities to take place. To hack this, hackers have to access the complete record of data which is impossible. Thus, Blockchain’s decentralized nature can secure the data efficiently.
- Cost-Savings for Border Payments
Because of its cost-saving benefits, the industry of finance is experiencing high-level changes. International Payments have become more expensive in recent years. These border payments include a lot of intermediaries to operate them. Hence, the cost involved will also be a bit higher.
By implementing Blockchain in Financial sectors, transactions can be completely streamlined leading to efficient yet instant transactions. It not only makes the cheaper but also safe & secure. This is done by handling the transactions over a reliable blockchain network and eliminating the intermediaries.
According to a recent report, it is stated that Blockchain technology could save up to $12 billion every year. Thus, Blockchain solutions can cut off additional and unwanted costs with international payments.
- Invoice Management & Billing
Managing a huge amount of data is always a daunting task not only in Finance but in every sector. Most of the financial companies have started adopting electronic invoicing. However, this equipment lacks the standards that are required to execute invoicing in the financial sector.
An Invoice usually contains a couple of steps:
- Verifying and tracking the information
- Forwarding & receiving the invoice information
Thus, while processing these two steps, it is important to store and maintain the data effectively & securely.
Financial companies can now upload their invoices with Blockchain through Smart Contracts. Invoice information such as Due date for payment, the total amount to be paid, the client’s personal details, are stored in the Blockchain Network.
Once the person pays his/her bill, the smart contracts update the data accordingly as “Paid”. Hence, Blockchain can help to make the decision if the client is safe to get started with trading.
- Know Your Customer (KYC)
Banks and financial firms have implemented strict concerns with the cost involved with KYC & AML. These tasks consume a lot of time and money for the banks for every single individual.
One of the popular mass & information media firms called Thomas Reuters unveiled that the overall expenditure of this process ranges from $60 million to $500 million every year. Moreover, financial institutions should now have to upload the KYC data to their central repository to perform these.
With the adoption of Blockchain in Finance, the individual verification of each client by a financial organization will be accessible for other banks as well. This means that the duplication can be completely eliminated with Blockchain Technology.
In the same way, all the updates of the client’s will be visible to all the financial institutions. This would result in the reduction of Admin efforts & costs from the financial department representatives.
- Trade Finance
Trade Finance is considered to be one of the most useful applications of Blockchain in Finance. All the involved parties go with a complex mode of transactions Financial companies are planning to use Blockchain to save the immutable funds of finance-related information such as profits earned, MoM, financial history, etc.
With Blockchain in the financial sector, all the participants in the transactions will have access to the information shared by exporters, importers, banks, etc. Once the particular conditions are met, smart contracts start executing. Hence respective parties can view all the actions performed.
One of the popular statistics states that an Israel-based startup along with Barclays has successfully executed a trade transaction that takes around 7 to 10 days. But with Blockchain Technology, it was a matter of just 4 hours. Thus, when comparing to the traditional architecture, the usage of blockchain can drastically reduce time as well as the cost.
The future of Blockchain in Financial Sector:
The future of blockchain in finance is drafted every single day to make it reach higher levels for an efficient process. Once these Financial firm starts adopting Blockchain Technology, they can taste real success in them.
More and more intermediaries start emerging, Financial sectors would realize the importance of Blockchain Technology. Added, Liquidity is one factor that is entirely rendered by Blockchain compared to other technologies. Undeniably, with these top-notch facts, we can expect the Blockchain development company worldwide to cater to all these resources.
To put it all together, we can notice a very bright future for Blockchain Technology in Financial Sector. This technology would effectively enable financial transactions a bit easier, cost-effective by enhancing liquidity.
Crypto Writer at a leading blockchain development company. I love to share my ideas & thoughts on Blockchain & Cryptocurrency in a simple & readable manner.
The post How Blockchain Technology is Disrupting Financial Sector appeared first on coinweez.
Bitcoin Could Remain Slow Until the November Election
Bitcoin is presently trading for about $10,500, which is roughly $100 more than where it’s stood over the past few days, but it’s not quite where we’d like it to be. The fact is that bitcoin hit $11,000 again about 72 hours ago and has failed to keep up that momentum.
Bitcoin Is Struggling as of Late
There are many things that appear to be affecting bitcoin, one being the correlation between it and the stock market. As stocks are taking massive tumbles, bitcoin is also suffering, and so long as company shares continue to drop, the bitcoin market is going to remain in a bearish state.
There’s also the current political scene. As we all know by now, 2020 is an election year. There is just a little over a month left to go before America selects its next president for the next four years. Will the democratic contender Joe Biden come out on top, or will Donald Trump emerge as the country’s president through 2024? Either way, the situation is leading to heavy uncertainty throughout the nation, and many people don’t quite know how to react.
In addition, the death of Supreme Court Justice Ruth Bader Ginsburg is also adding to the concern and worry that are allegedly permeating people’s thoughts regarding the economy. Guy Hirsch – the managing director for cryptocurrency exchange e-Toro – explained in a recent interview:
Uncertainty around the election and in the aftermath of Supreme Court Justice Ruth Bader Ginsburg’s death has caused a panic in equities markets. When traditional assets nosedive as they have today, traders will often liquidate a broad cross-section of holdings while they try to cover liabilities, thus leading bitcoin to drop even more sharply today than any of the major equity indices in the US.
John Todaro – the director of institutional research at Trade Block – appears to agree, though he commented further that the continual drop of standard assets could potentially help bitcoin’s reputation further. With everything else in the red, people may turn to bitcoin as a hedge tool, and bitcoin could potentially return to form in the coming months.
You are seeing this spread across markets, including in digital currencies. Despite this drop, especially if uncertainty continues and markets become even more nervous about how the US election will play out, it makes sense if bitcoin were to see a significant recovery as equities continue to experience downward momentum.
Will Things Fix Themselves Over the Next Few Months?
Joe DiPasquale – CEO of Bit Bull Capital – mentioned that while the correlation between stocks and crypto has grown, he’s confident bitcoin and digital currencies have what it takes to break away and potentially enter bullish territory all on their own. He says:
While bitcoin’s correlation with the S&P 500 grew notably in recent months, the digital asset space remains highly volatile and able to decouple from traditional assets equally fast.
This Bitcoin metric is reaching its historical reversal levels
Bitcoin and Ethereum have shared the center stage at regular intervals this year. In fact, some would argue that Ethereum has run more miles and gotten more attention than BTC this year. Such a scenario was playing out in the markets as well. Over the course of certain bullish spells in 2020, most particularly during July-end, Ethereum led the market with its rally before Bitcoin joined in 48 hours later. Such a brief spell was also observed during the last week of May.
However, at the time of writing, the going was getting tough, and the collective market was expecting ‘tough’ Bitcoin to lead them out of this drawdown period. Such expectations can be highlighted by observing the charts below.
As can be observed from the chart, the 3-month Ethereum-Bitcoin Implied Vol Spread was dropping after peaking in mid-August. It means that the market is currently expecting Bitcoin to bring back the volatility, rather than keeping their hopes on Ethereum. This is interesting since, for most of 2020, the ETH-BTC Implied Volatility had witnessed a lead from Ethereum’s end, especially with respect to bringing price action to the market.
However, with the market reaching a probable local bottom, all eyes are now set on Bitcoin, with most expecting BTC to drive the market’s valuation.
The Realized Volatility charts suggested a similar narrative. With the 3-month ETH-BTC realized spread on an incline, it is clear that BTC is already becoming more authoritative in the digital market space. Such a situation will definitely allow market correlation to climb over the next few months, with BTC possibly calling the shots in Q4 of 2020.
Bitcoin ATM Implied Volatility reaching historical reversal levels
With the limelight firmly placed on BTC, the market might not have to wait long before BTC starts pulling the strings again. The market narrative is supported by the fact that BTC’s 1-month ATM Implied Volatility was at 49%. For Bitcoin, the IV going below 50% has always been a sign of a reversal in the market. In light of its present levels, the stage is seemingly set for Bitcoin to project strong movements any time now.
However, it would be better if the Implied Volatility drops further over the next few weeks to attain a strong bottom, one that will eventually lead to a stronger rally. Altcoins can do a lot when it comes to bringing new users into the space, but at the end of the day, the market will always look up to BTC to solve its bearish dilemma.
Crypto ETP Trading Volumes Plunged 74% Over the Last Month
Cryptocurrency exchange-traded product (ETP) trading volumes have plunged over 74% in the last month, as the prices of these products have also been dropping. According to cryptoasset data aggregator CryptoCompare, in its newly launched The Digital Asset Management Review, exchange-traded products dropped 74% over the last month from $186.5 million in mid-August to an average […]
Cryptocurrency exchange-traded product (ETP) trading volumes have plunged over 74% in the last month, as the prices of these products have also been dropping.
According to cryptoasset data aggregator CryptoCompare, in its newly launched The Digital Asset Management Review, exchange-traded products dropped 74% over the last month from $186.5 million in mid-August to an average of $48 million in mid-September.
An exchange-traded product, it’s worth noting, is a type of security that tracks other underlying securities or an index. The document notes that Grayscale’s Bitcoin Trust product, GBTC, represented the “vast majority” of ETP volume and as such accounts for most of the decrease in trading activity.
The top three ETPs were Grayscale’s Bitcoin product, and its Ethereum Trust (ETHE and Ethereum Classic Trust (ETCG), and traded a combined $180 million per day in mid-August, and just over $40 million per day in mid-September.
Throughout the last 30 days, CryptoCompare adds, crypto ETP trading activity generally declined. If we exclude over-the-counter products – like GBTC, ETHE, and ETCG – the largest product was ETCGroup’s Bitcoin ETP (BTCE), which traded o Deutsche Boerse XETRA. Other large cryptocurrency ETPs include 3IQ’s QBTC product which trades on the Toronto Stock Exchange and BTCW by WisdomTree which trades on Six Swiss Exchange.
Over the last 30 days, Grayscale’s BTC and ETH products represented the largest average daily trading volumes at $49 million and $7.4 million respectively. These experienced significant losses over said period, dropping 20.4% and 43.4% respectively.
After Grayscale’s products, which often trade at a premium compared to their underlying assets, BTCE saw average trading volumes of $864,000 and experienced a near 9% drop over the last month.
It’s worth noting that the price of most top cryptocurrencies, including bitcoin and ether, dropped significantly over the last 30 days after BTC saw a breakout above $12,000 get rejected.
Featured image via Pixabay.
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