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“Institutions have Arrived:” Who, What, and Why

Reading Time: 7 minutes 2019 is the year we can finally say “institutions have arrived,” in the blockchain / crypto industry and in a big way. Despite being a commonly cited catalyst within the crypto space, progress has felt slow. After all, these are large organizations with significant value at risk, so they want to be careful and deliberate […]

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Reading Time: 7 minutes

2019 is the year we can finally say “institutions have arrived,” in the blockchain / crypto industry and in a big way. Despite being a commonly cited catalyst within the crypto space, progress has felt slow. After all, these are large organizations with significant value at risk, so they want to be careful and deliberate about embracing new innovations and opportunities. We’ve finally seen real momentum from legacy tech and financial institutions — with Square, Microsoft, Fidelity, and Facebook all announcing their forays into this space. Two years after the last crypto bull market, it is undeniable that institutions and enterprises have arrived. But why now? What does this mean for the future?

“We’ve got blockchain”

At a high level, institutions are looking to get into blockchain for a few reasons: research and development, growth opportunities, and in many cases, FOMO. For many, they are conducting research and development to understand the technology and gain a perspective on the landscape at large. As more companies decide to experiment in the space, the competitive pressures increase dramatically as institutions seek to capture early growth and revenue opportunities and fend off disruptive risk. In addition, innovation within large corporations is an important component of talent retention as more talent is leaving their Wall Street and tech roles for crypto startups.

We are also witnessing a large, generational demographic shift in financial services. Financial institutions are currently serving aging customer populations, and in many cases struggling to capture the minds and wallet share of the younger, more tech savvy customers. In an effort to understand these demographics, cryptoassets are a trend to watch. There is major FOMO — no one wants to “miss the boat” on what could be a massive growth opportunity or ignore what could potentially present existential risk to their business model. This has led to both thoughtful analysis of the space and what some call “innovation theater “— a proof of concept for the sake of “doing blockchain” with little practical utility. As more institutions embrace the space, it results in a net positive for the industry. But the details matter as we move out of the pilot and POC phase to serious implementations, products, and services. And, as an industry it is important to encourage use cases that utilize the technology optimally rather than simply instituted a new internal database.

Who are these institutions?

The term institution is overly broad — in reality, we are seeing many types of companies enter the space. For the sake of simplicity, the table below categorizes primarily U.S. institutions and enterprises. It is not meant to be comprehensive, but more representative.

While we have an extensive list of players entering the space, they can’t be treated equally. Rather, the implications will either be far reaching or stay siloed as “innovation projects” within these organizations. In order to understand potential outcomes, we consider their existing customer base, market trends they face and risk tolerance. Lastly, an important component which is largely outside of the public purview, comes down to the talent inside these organizations and how they shape the internal views of the space.


Asset Allocators
Who: Fund of funds, family offices, endowments, pension plans
What: venture fund, hedge fund, and direct investments
Examples: Stanford, MIT, Princeton

As crypto assets emerge as a new asset class, asset allocators have been forced to wrap their minds around the technology and space at large. Cambridge Associates recently published their report “Venture into the Unknown” where they evaluate crypto allocation strategies and recommend investors consider an allocation to digital assets. Their suggestion stems from the belief that blockchain investing can be likened to early internet investing, fraught with young, risky technologies that may end up spurring the next wave of capital inflows.

From the perspective of an asset allocator, exposure to the industry is beginning to play an important diversification role for their portfolio strategy. Considerations include what type of investment fits into their strategy (e.g., venture vs. hedge), which types of managers to invest in (emerging specialist or tenured generalist), and the liquidity profile of the asset class (greater liquidity with tokens but no IPOs to date given industry nascence).

Since the 2017 bull run, over $1B of dedicated crypto venture and hedge funds have been raised (Blockchain Capital $150M, A16z @$300M, Paradigm @$400M, Dragonfly $100M and more) with institutional participation. Asset allocation is an important indicator of market growth and the rate of capital formation in any new industry.

Traditional Financial Institutions
Who: custodians, exchanges, brokerage providers, asset managers, and banks
What: trade and execution services, custody, OTC desks
Examples: Fidelity, ICE (Bakkt), JPMorgan, DRW

Traditional financial institutions are cautiously watching the space, some with disregard while others leaned into the space. It wasn’t until recently many realized cryptoassets could pose both a serious threat and opportunity for their existing businesses. Regardless of their position, it became a strategic watch area inside virtually every financial services institution. Historically, financial services has been slow to respond to digitization that is prevalent in other industries. However, fintech is already eating at their products and pricing strategies with the rise of online robo-advisors and digital banking. These institutions are all facing similar trends: an aging investor base, fee compression across all products and services, decreased brand allegiance with millennials, largely outdated infrastructure, and of course, increased customer demand for more crypto education and access. From their strategic agenda, institutions are constantly looking for opportunities to diversify revenue streams with large growth markets and higher margin products. The balance here comes into play with risk tolerance and their ability to make decisions quickly and adapt to the market with their existing infrastructure.

At Matt Walsh noted — the best institutions will cut through innovation theater and really try to understand how they can leverage the technology. On one end we have Fidelity who is diving in deep to understand the entire ecosystem (mining, trade execution, custody, etc.) and have taken steps to offer custody and eventually execution services. On the other end of the spectrum JPMorgan’s enterprise coin is more conservative, by creating a proof-of-concept internal tool, rather than a revenue generating or customer facing product. While still a net positive for understanding and awareness, I’m paying closer attention to the Fidelity’s of the world.

Fintech
Who: technology focused, financial services providers
What: brokerage services, portfolio management
Examples: Robinhood, Square, SoFi

Fintech aligns well with crypto — both having a shared goal of using technology to reach underbanked or hard to access populations, with cheaper and accessible products. There is also a demographic overlap with younger, tech-savvy, less financially wealthy consumers. This backdrop coupled with nimbler operations and an updated tech infrastructure makes fintech players extremely well poised to capture crypto interest. Initially we are seeing brokerage products like Robinhood and POS systems like Square make the first leaps into the space — indeed, Square’s latest annual earnings report show they did $166M in revenue from bitcoin in 2019, with a net profit of $1.69M. The motivations here are less about disruption, and more focused on how they can use the technology and assets to spur new growth and address customer demand. 

Payment companies
Who: credit cards companies, payment processors, remittance services
What: strategic investments via venture capital and partnerships
Examples: VISA, PayPal

Payments or becoming a “medium of exchange” is one of the original use cases for cryptoassets. Over time, we’ve realized that the payment rails for most of the developed world actually work incredibly well, and may not benefit from introducing crypto for a few reasons. The most commonly cited is the traditional scale question, with blockchains unable to handle the scale of millions of transactions that Visa processes. However, more importantly, the additional friction of going from fiat to crypto, and then converting again at the other side of a cross-border remittance (dubbed the “last mile problem”) largely outweighs any value derived from processing payments with crypto today. The scenario where this starts to make more sense, is when people are holding the digital assets alone and able to transact with them more freely.

At this point, one major question for payment companies to consider is how a macro trend in holding and transacting with digital assets may impact their business model. In other words, how are their existing customers going to use digital assets in the future and what impact will this have on their market. A few scenarios include a world where consumers use multiple digital wallets regularly, conduct commerce in both fiat and crypto, or choose to self-custody some or all of their digital assets. Until now, payment companies have been slower to respond to the potential of crypto. But it would not be surprising if many significantly increase their engagement in efforts to identify the appropriate opportunities as these macro trends accelerate.

Social Media
Who: messaging applications, social networks
What: wallet infrastructure, tokens
Examples: Facebook Libra, Telegram, Kakao

The overlap of social media and cryptoassets is one of the most interesting trends to watch today. There are two ways to consider this — coming from a crypto perspective and then from within social media platforms. On the crypto side, social media adoption of digital assets has the potential to massively open up distribution channels around the world. This has implications for onboarding new users, building out infrastructure, and spreading acceptance and awareness. Facebook’s Libra is not viewed as competitive to bitcoin, but rather a gateway to more users adopting bitcoin.

The second angle, is how digital asset adoption will change social media business models. Social media platforms are moving from sharing user-generated information to offering user-generated products and services. Instagram already made this leap with thousands of influencers building social media based businesses and their newest payment feature for shopping in-app. With Libra, Facebook is making a strong move into financial services to complement their massive adtech business. Similar to the way direct messaging or “DM-ing” competes with email for millennials, will social media digital wallets compete with the brokerages and banks of the world?

On the other hand, social media giants represent what crypto evangelists are trying to fight against (i.e., centralized monopolies). Centralized powers with unequal access to consumer data and privacy controls. Therefore, the way in which social media companies embrace crypto will be important. If successful, it could shift their models from centralized powers to open platforms with greater privacy protection for its users.

Software Enterprises
Who: SaaS, infrastructure
What: enterprise blockchains, supply chain use cases, identity
Examples: Microsoft, Salesforce, IBM, Amazon

Software enterprises have historically fallen into the innovation theater category. From their perspective they are trying to understand how public vs. private blockchains could be useful for their business models. In many cases this has led to private blockchain proof-of-concepts and not much more. However, there is a great deal of pressure to address the space (along with other technologies like artificial intelligence and machine learning) as a way to stay competitive and relevant. One of the better examples we have seen comes from Microsoft with the announced their decentralized identity tool building on bitcoin. Hopefully the industry will see initiatives like this geared at working with the open source community and understanding applications of public protocols rather than closed private implementations.

Where do we go from here?

We have major categories of institutions entering into the space, each with their own angle and value proposition. The industry has seen well over $1B of capital allocation to dedicated crypto funds, which will spur the next wave of startups and capital formation in the space. As more institutions enter we will see increased liquidity and onramps, massive distribution channels, and utility focused products & services. Perhaps most importantly, the professionals inside of these organizations will be forced to understand the space, debate its merits and learn. This will allow blockchain and crypto to move from a buzzword and proof-of-concept phase, to becoming truly understood and incorporated into strategic product roadmaps. The space is slowly moving into the mainstream, and with projects like Libra, it’s about to see a lot more institutional participation.

Thank you to Spencer BogartDerek HsueAleks Larsen for helpful feedback.

Source: https://blockchain.capital/institutions-have-arrived-who-what-and-why/

Blockchain

Tezos price analysis: Technical indicators suggest XTZ might surge towards $4.5

Tezos aiming to reach its all-time high again XTZ/USD pair maintaining parallel ascending channel Historically proven indicator presents another strong buy signal For the first time in the course of three months, Tezos price action sets forth a vital buy signal which should result in a massive upside break. In defiance of August’s crypto market […]

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  • Tezos aiming to reach its all-time high again
  • XTZ/USD pair maintaining parallel ascending channel
  • Historically proven indicator presents another strong buy signal

For the first time in the course of three months, Tezos price action sets forth a vital buy signal which should result in a massive upside break. In defiance of August’s crypto market flip, technical indicators signal a superb buying opportunity for XTZ. Furthermore, some bullish patterns suggest that Tezos price might have the capability to reach a new all-time high.

Following the March coronavirus-triggered market decline, the XTZ/USD pair was trading beneath $0.98. However, the bulls managed to consolidate enough momentum to trigger a 300 percent upside rally towards the $4.5 price level a few months after the crash, recording a massive rise in trading volume and number of transactions.  

Tezos price action prepared to recommence bullish momentum?

The XTZ/USD pair experienced a sharp correction after hitting a new ATH back in August. The value of Tezos depreciated by about 50 percent hitting a low of $2.3 after the correction. Nevertheless, regardless of the massive decline in Tezos price, a peculiar technical indicator implies the digital asset would soon switch red for green.

Tezos 3-day chart

The initial pattern to notice from the chart is an ascending parallel pattern in the Tezos price action in 2020. Notably, XTZ has been hovering within this ascending channel for most part of this year, having to bounce back from the bottom part of the channel multiple times.

Tezos price analysis: Technical indicators suggest XTZ might surge towards $4.5 1
XTZ/USD 3-day chart: TradingView

At the moment, the XTZ/USD pair is protecting the 100- simple moving average(SMA) at $2.39 and a vital anchor point and the relative strength (RSI) near 40. During the pandemic-driven cryptocurrency market crash in March, the RSI level declined towards 39, from which the XTZ/USD pair recovered resolutely. An identical level was protected back on July 2.

TD sequential indicator presents third buy signal in 2020

Additionally, in the above chart 3-day chart, the TD sequential indicator presents traders with a buying signal. The initial buy signal presented by the indicator was formed on March 19, on the heels of the RSI touching 39. The subsequent second signal was created on July 5, and the third formed just the other day on September 12. Historically, the previous two buy signals this year have been validated, recording an average return of 84 percent.

Tezos price analysis: Technical indicators suggest XTZ might surge towards $4.5 2
XTZ/USD 3-day chart: TradingView

Given the fact that the RSI is over long and TD indicator just signalled a buy signal, the XTZ/USD pair could be targeting to reach its all-time high of $4.5 once more, recording a 70 percent rise in value. Regardless of the degree of doubt in the market recently, traders should take the buy signal under serious consideration given the substantial gains recorded during the previous two occasions.  

What to expect from XTZ/USD?

Although Tezos price action has presented a firm buy opportunity, the cryptocurrency is still facing vital challenges onwards. XTZ bulls have successfully created a couple of higher lows but still face vital resistance near $2.64. Tezos price action must clear this rejection to move further upwards.  

Notably, if the bears can manage to exert more selling pressure at this critical resistance, it would be calamitous for the bulls and XTZ. Although there are several higher lows formed, there is no firm anchor point and the price of XTZ might sink back to the $2.3 lows.

Disclaimer. The information provided is not a trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Bitcoin’s uptrend is only beginning and here’s proof

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In the cryptocurrency world, every sign is a bullish sign. From China getting into blockchain, to Facebook launching its own cryptocurrency, to Donald Trump tweeting about Bitcoin, nearly everything can be construed to be a sign of the upcoming bull run. Needless to say, not all of these signs actually have any backing behind it.

When everything is a sign of a bull run, well, nothing is. However, looking at the actual price of Bitcoin against its previous trend, one can find signals that are worth their salt. Even if these signals aren’t flushed with ‘Bitcoin to the moon,’ they usually have one or two key points which suggest that the swing, in either direction, is strong or stronger than it has been previously. We have one such signal for you.

Looking at the Bitcoin markets of late, one would think that the bears have taken over. With a drop to $10,000 from over $12,000 after nearly a full month of holding strong, a collapse to four-digits is likely. While the initial hesitancy of the drop can override the long-term market feeling, a look at the data would suggest that Bitcoin’s price has just crossed a major threshold, despite the drop.

Plotting Bitcoin’s daily close against its yearly moving average presents a good snapshot of where the current price stands against its YTD value. Based on this premise, the drops of 12 March would have a huge impact on the MA because of two reasons – the severity of the crash (around 50 percent of the trading price) and the timing (72 days since the beginning of the year). Just that one day drop increased the difference between the BTC daily close price to its moving average from less than $1,000 to over $3,500.

The above chart plots the daily difference between Bitcoin’s closing price and its yearly moving average from the beginning of the year to the most recent drop on 4 September. Unsurprisingly, the difference began rising after the drop in March and has been increasing every day since then, with the current trading price closing the distance against the average.

Now, looking at how that gap has closed is important. Prior to the drop, the highest point of the moving average was $8,988, recorded on the 26th of February when Bitcoin rose above the $10,000 mark for the second time. While its rise above the level didn’t last long, it pushed its average up. Since then, the average has been consistently dropping, made worse by the March drop. However, at the beginning of September, the yearly moving average jumped over the 26 February-mark, marking a high of $9,028 on 1 September.

If you’re thinking the crash down to $10,000 on 4 September affected the average, it didn’t. The average has been consistently rising due to the number of days Bitcoin has maintained its price above $10,000 since the end of July. As things stand, the average is at $9,141, less than $1,200 away from the trading price of Bitcoin, but still, a good distance considering it took nearly four months to close the gap between $8,200 to $9,000 in the first place.

The chart below plots the daily close price of Bitcoin against the moving average, and you can see that the latter is crossing above its previous highest point in February.

To conclude, Bitcoin’s recent price run has not only pushed its current price higher, but also its yearly average. This is not just a positive sign in the here and now, but shows that the price surge is not a mere “pump,” but has enough backing to sustain itself for quite some time.

Source: Coinstats

Source: https://eng.ambcrypto.com/bitcoins-uptrend-is-only-beginning-and-heres-proof

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YFI Founder Puts Himself Forward for Uniswap (UNI) Delegation Duties

Andre Cronje has announced his intent to become a Uniswap delegate. Those delegates receiving sufficient community backing will be able to submit governance proposals, influencing the way the platform operates. The founder of the hugely popular yEARN Finance protocol identified various issues with Uniswap that the platform’s governance could address. These include a reevaluation of […]

The post YFI Founder Puts Himself Forward for Uniswap (UNI) Delegation Duties appeared first on BeInCrypto.

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Andre Cronje has announced his intent to become a Uniswap delegate. Those delegates receiving sufficient community backing will be able to submit governance proposals, influencing the way the platform operates.

The founder of the hugely popular yEARN Finance protocol identified various issues with Uniswap that the platform’s governance could address. These include a reevaluation of the UNI token’s distribution and tokenomics, as well providing support for other projects that may provide value to the exchange platform.

One of DeFi’s Biggest Names Interested in Uniswap Community Governance

One of the biggest stories to break in the world of cryptocurrency this week was the launch of the UNI token. On Sept. 16, UNI tokens were distributed to Ethereum wallets that had interacted with the popular automated market making platform before Sept. 1.

Initially, the price of UNI tokens declined as those claiming the free airdrop cashed out. Since then, buying pressure has moved the price up aggressively.

At their highest point during the few days since launch, the 400 UNI tokens that previous platform users received were worth more than $3,400. At the time of writing, the current UNI market cap is over $780 million.

The newly launched token will provide additional incentives to those providing liquidity on Uniswap. It will also allow holders to participate in the platform’s governance.

According to a Uniswap blog post detailing the launch, users can delegate their tokens to others so that they meet the required percentage of the total supply needed to submit governance proposals. Those submitting proposals will need a total of 1% of the total supply of 1 billion tokens.

One of those interested in becoming a Uniswap governance delegate is Andre Cronje. The yEARN Finance founder tweeted as such earlier Saturday:

As part of the above thread, Cronje stated that he did not think the platform should rush to provide incentives to liquidity pools. He added that he believes there are other opportunities to improve the protocol. These include a reevaluation of UNI’s tokenomics and distribution, along with efforts to bring stablecoins like DAI and sUSD back to their pegged values.

Cronje’s Delegation Pitch Prompts Increased UNI Buying Pressure

Having a name as big as Cronje’s is to the DeFi niche taking an interest in serving as a Uniswap delegate appears to have further excited the market. At around the time of his tweet, UNI traded at around $6.40.

The price went on a short-lived run following his announcement, topping at just over $7.30. It has since pulled back slightly to $7.

Uniswap UpUniswap Up

Cronje is best known for his work on the yEARN Finance protocol. The automated yield farming optimizer grabbed the attention of the DeFi sector earlier this summer.

Cronje inspired the cryptocurrency industry by electing to launch the YFI token without a pre-mine or any reward for himself. This “fair launch” subsequently inspired other teams to experiment with different token distribution models — such as that employed by Uniswap itself.

The YFI price shot from less than $700 at launch to more than $42,000 by Sept. 13. The token’s stellar performance is thanks to both community interest in YFI and its incredibly low circulating supply of 30,000.

Judging by engagement on Cronje’s Twitter post, the developer will be a popular candidate for delegation duties. If he is delegated enough tokens, it should be interesting to see the direction the popular developer attempts to steer Uniswap.

Source: https://beincrypto.com/yfi-founder-puts-himself-forward-for-uniswap-uni-delegation-duties/

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