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What Stands in the Way of Global Cryptocurrency Adoption?

 6 min read / 

As outlined within a previous Market Mogul explainer article; a cryptocurrency (colloquially referred to as a ‘crypto’) is a digital asset designed to work as a medium of exchange and uses cryptography to secure the transactions and control the creation of additional units of the currency.

It’s first important to note that the market cap of the top cryptocurrency Bitcoin (BTC) is just north of $37bn and the second highest, Ether (ETH) is at $18bn. In addition, 24h trading volume for BTC is c $1.2bn and ETH is c$1.6bn, thus demonstrating that these cryptocurrencies are becoming a popular medium for investment, transactions and speculation.

There has also been a change in rhetoric around cryptocurrencies; away from the previous connections with Silk Road and Mt Gox and more towards the potential of ICOs and innovative cryptocurrency projects such as Monero and Golem.

Attention Grab

As such, cryptocurrencies are now beginning to capture the attention of hedge funds, banks and investment firms as a potential investment opportunity. Two recent examples of this are the announcement by Swiss private bank, Falcon, which will allow wealthy clients to store and trade bitcoins via their cash holdings, and Barclays who are speaking to regulators about bringing Bitcoin ‘into play’.

This is a significant move which could look to not only open up a potential high-risk, high-return investment for clients but also an additional revenue stream for the bank which, in-line with current market trends, is seeing squeezed margins due to market uncertainty.

However, before the portfolios of high net worth individuals and retail investors are diversified with cryptos, it is first necessary that regulation and definitions across markets are standardised.

In many countries cryptos are defined as a form of currency, for example:

  • Japan (legislated Bitcoin as legal tender in 2017)
  • Italy
  • France
  • Singapore
  • Russia
  • United Kingdom

However, in many countries they are listed as an alternative asset form:

  • China & USA – Commodity
  • India – Currently a commodity but looking to be regulated as a security
  • Germany & Philippines – Barter Good
  • Nigeria – Money
  • Poland – Property

And in some countries, bitcoin and other altcoins remain illegal:

  • Ecuador
  • Vietnam
  • The Republic of Macedonia
  • Kyrgyzstan

It is this lack of universal definition, as well as poor levels of understanding, which inhibits regulators from providing the guidance and legislation necessary for investment firms, and certainly banks, to be comfortable dealing with cryptos.

But whilst there are a plethora of conferences, breakfast meetings, whitepapers and PoCs being released in order to help boost cryptocurrency and blockchain understanding, there remains contention around how (and if) cryptocurrencies could/should be regulated.

The Philosophical Argument

One argument against regulation takes the philosophical route and looks to defend the vision of Bitcoin’s unknown creator – who goes by the pen name of Santoshi Nakamoto.

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”

Bitcoin’s original 2008 whitepaper

The above is the first line from Bitcoin’s original 2008 whitepaper and presents Bitcoin as an anarchistic method of finance, outside the control of financial institutions, central banks and regulators – for the people, by the people. As such, many Bitcoin purists are against regulation and look for Bitcoin to continue under caveat emptor (buyers beware).

The Distributed Model

A further difficulty of regulating Bitcoin, or other cryptocurrencies, is the distributed model which the underlying technology, blockchain, employs. As such, the ledger associated with the cryptocurrency does not exist on one server or in one location – it is distributed across computers, countries and continents. Therefore how does one attach a jurisdiction or set of legal parameters to the asset?

For example, under which country’s legal framework would a cryptocurrency holder residing in Italy, with cryptocurrency held in Poland and being transferred to a buyer in China, fall under?

In efforts to scale down the location problem, both the US and China have targeted cryptocurrency exchanges. Through January 2017, the Chinese government and People’s Bank of China (PBOC) worked with China based exchanges in order to improve Anti-Money Laundering protocols.

This led to a halt in exchange withdrawals and a dip in the price of bitcoin. A possible side effect may be improved confidence from other financial institutions as they see the PBOC is taking steps to mitigate the Wild West landscape. In the US, the New York State’s Department of Financial Services has a BitLicense which seeks to regulate exchanges directly and impose rules on record keeping and capital funds.


Public addresses associated with cryptocurrency transactions are pseudo-anonymous, meaning that unlike traditional bank accounts or financial transactions, auditors and regulators are unable to directly ascertain the sender and receiver of the funds. This introduces concerns regarding terrorist financing, money laundering and other nefarious monetary transactions (which many banks have been found guilty of previously) as well as possible tax evasion schemes.

As such, the Internal Revenue Service in the US recently subpoenaed cryptocurrency exchange Coinbase for customer account details. However where users may be required to register details with an exchange, those wishes to transact person-to-person do not require anything other than a public address, thereby removing the possibility of identification, and increasing the difficulty of regulation around Know Your Customer.

Variety of Categorizations

Finally, and as outlined above, the diverse categorization of cryptocurrencies across different jurisdictions makes it difficult to create universal regulations or guidance.

As such, Coin Desk’s Tim Enneking proposes a new term for the nascent technology – Cryptoasset:

“There are two problems with applying the phrase “cryptocurrency” to what’s going on in the space traditionally known by that name. First, the “coins” are acting less and less like coins and more and more like something else, perhaps equities.”

Tim Enneking

This may then better reflect the multi-use of cryptos and more accurately demonstrate their capacity as a tradable and investable asset. As such, a definition of ‘asset’ may better allow for frameworks to be put in place which support regulators such as the SEC and FCA. This may then allow for a more accurate assessment of the opportunities, risks and necessary regulations for new financial instruments associated with virtual currencies.


However until a standard classification is applied unilaterally, the piecemeal approach by regulators and countries will continue, with no overarching standard for crypto investment and trading, thus hampering the ability for cryptos to be consumed as a globally accessible asset class.

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NEO Reaches a New High at $51

 2 min read / 

China’s answer to Ethereum has broken past the $40 barrier and is finding new support near the $50 mark. NEO’s latest price surge has been prompted by its developers releasing an ICO template for companies that want to raise finance atop its decentralised blockchain platform. Additionally, NEO’s team also announced a partnership with RegTech specialists Coinfirm and venture platform QRC.

Much like Ethereum, NEO is a platform, not just a cryptocurrency. The platform facilitates the creation of “smart assets” such as self-executing contracts that enables individuals and companies to transfer, trade and store real assets via a decentralised peer-to-peer network free of third-party interference. NEO’s developers hope that their platform will accelerate the global move towards a “smart economy”.

Links to the Chinese State

While other cryptocurrency developers have been partnering with corporations, such as IOTA’s recent partnership with Microsoft, NEO is rumoured to be collaborating closely with the Chinese state. China, NEO’s native market, has banned ICOs and several commentators reckon that the country’s government might soon legalise them exclusively on the NEO platform.

This wouldn’t be the first time the Chinese state has helped domestic companies beat off foreign competition. China famously banned Google from operating in China, which enabled local search engine Baidu to establish an effective monopoly. However, many crypto-enthusiasts might feel that collaboration between the Chinese state and NEO’s developers would significantly undermine the “decentralised” nature of the platform.

Keep reading |  2 min read


When Will the Bitcoin Bubble Burst?

 4 min read / 

bitcoin bubble burst

Is bitcoin in a bubble? Currently, this is not the most important question for investors. The impressive price volatility suggests a speculative behaviour: current investors seem to be more concerned about speculative profit than about bitcoin’s intrinsic value or blockchain technology’s future.

In the theory of asset pricing, the value of an asset is its expected dividends or interest. Since bitcoin does not provide any dividends or interest and their price is positive, it is either in a bubble or an asset that provides a convenience yield. As pointed out by the economist and Senior Fellow at the University of Chicago John Cochrane, bitcoin phenomenon can be related to both: bitcoin has an intrinsic value but on top of that, a speculative demand in the form of a bubble exists.

The Convenience Yield

American economist Susan Athey said that “if people use bitcoins, they have a value”. Hence, future price appreciation is not the only reason why people hold it. For instance, physical cash gives no dividends and has a lower return than risk-free assets but people still hold it. This is because cash is needed to make transactions and, therefore, there is a “hidden return” called the convenience yield. Bitcoin has a higher convenience yield than cash it is easier to carry, it delivers transactions without physical interaction an is used internationally.

This implies that their financial “overvaluation” should also be higher. However, during the past months, many investors have been buying bitcoin only to benefit from its increasing price trend. This speculative demand has likely raised bitcoin’s price above the equilibrium. As in every rational bubble, a burst is to be expected at some point down the line. Now that bitcoin derivatives are being traded, the focus shifts from bitcoin’s intrinsic value to the timing of this potentially rational bubble.

The Bubble

The political and technical issues surrounding bitcoin have not influenced its speculative demand so far. In fact, the increase in transaction fees, the increasing presence of substitutes and negative opinion of globally trusted leaders have had no relevant impact on the price trend. At some point, the value of bitcoin will recover and this will happen even without the Chinese government’s ban.

So, when will the overvaluation end? Well, since the price is determined by optimists, the answer depends on the ratio between optimists’ risk-bearing capacity and the supply of bitcoins: the price will only collapse when the optimists’ risk-bearing capacity becomes lower than the supply. As a consequence, the current ratio between these two quantities becomes extremely important for the prediction of bitcoin’s future price.

Even though there are a large number of optimists, the current ratio is temporarily influenced by the low tradable supply. According to Bloomberg, 40% of bitcoins are currently held by approximately 1000 people, many of whom are founders or early adopters that do not trade bitcoin, which makes the tradeable supply just 60% of the effective supply. However, “the prospective introduction of bitcoin futures has the potential to elevate cryptocurrencies to an emerging asset class”, as said by Nikolas Panigirtzoglou, a global markets strategist at JPMorgan, because of the increased liquidity.

What the Future Holds

However, this does not help to determine precisely when the reduction in bitcoin’s price because will occur. The reason is that bitcoin’s demand is very difficult to estimate or predict because it is volatile and influenced by a myriad of factors, including the amount of money the Russian mafia wants to bring offshore in any given period.

Overall, it is reasonable to expect continued bitcoin volatility in the short run followed by a sharp decline in bitcoin’s price in the medium run. This does not necessarily imply that Bitcoin will not be used anymore in the future and that its price will collapse to zero. The most likely scenario is that bitcoin’s value will finally converge to its convenience yield value and still be widely used unless other cryptocurrencies demonstrate that they are more efficient and safer. As sovereign debts become more critical and the risk of inflation rises, cryptocurrencies like bitcoin can be seen as a bet against classical currencies and as a store of value.

Keep reading |  4 min read


Crypto Briefing: Bitcoin Futures, Scams and ICOs

 11 min read / 

Crypto Briefing

 The Week of the Altcoins

This graph show how prices have changed since the midnight December 7th with prices at that point being rebased to 100
Prices as of 11:59 PM UTC 13/12/17 (Source: coinmarketcap)

The cryptocurrency market has seen another week of volatility. Litecoin’s market cap has increased by over 200% as it becomes a popular alternative to bitcoin, as the latter has faced fears of increased regulation. XRP has also been riding the wave, seeing a 50% price hike from last week.

1. Bitcoin Futures Live on Cboe

The Story

Plans to launch bitcoin futures contracts on the Chicago Board Options Exchange have gone ahead as contracts began trading at 23:00 GMT on Sunday. The contracts will allow investors to bet on the future value of bitcoin. On the news bitcoin’s price rose significantly.

Why It’s Important

The contract allows individuals to bet on bitcoin’s price at a specified time in the future. Given bitcoin’s rise of over 1,000% this year, many investors are keen to get in on the action; CBOE’s  Bitcoin futures contract will enable investors to do so without actually owning the cryptocurrency. Additionally, it will be possible to short sell the digital asset for the first time, allowing investors to profit from price falls.

The move suggests the cryptocurrency is now becoming a mainstream investment, however, Bitcoin remains to be traded on unregulated markets. Consequently, its price is likely to remain volatile.

High Volatility

In an effort to ease volatility, the CBOE decided it would suspend trading for two minutes for price fluctuations of more than 10% and five minutes for more than 20%. In the contract’s first session, trading was stopped twice: once for two minutes and once for five minutes. While bitcoin remains traded on largely unregulated markets, it is questionable whether this policy will have any effect on the underlying cryptocurrency’s volatility.

The Future

Bloomberg’s Adam Haigh said the futures contracts was “an incremental step that allows Wall Street and indeed the professional finance community to make a bet either way on bitcoin.” The Chicago Mercantile Exchange is expected to list a similar contract next week, and Nasdaq has announced plans to host such trading too.

Last week Revolut’s decision to facilitate the trading of bitcoin and other cryptocurrencies could increase demand for the underlying asset.

Allegations that 1,000 people own 40% of all bitcoins in circulation suggest its price could be manipulated by a relatively small number of individuals.

2. 1,000 People Apparently Own 40% of Bitcoin


The Winklevoss twins invest $11m in bitcoin back in 2013. (Attribution: By cellanr [CC BY-SA 2.0 (], via Wikimedia Commons)

The Story

Roughly 40% of the cryptocurrency is owned by 1,000 people, claims Aaron Brown, head of financial markets research at AQR Capital Management. In such an unregulated market, Brown said large holders of bitcoin could potentially be working together to orchestrate price changes. Given bitcoin’s recent spike, now could be a great opportunity for these users to part with a portion of their bitcoins, locking in the near 1600% price increase since the start of the year.

BTC price


Why It’s Important

Bitcoin appears to be making its way into mainstream investing. Last Friday the US regulator gave the CME group and CBOE Global Markets the green light to launch bitcoin futures. Just yesterday, London-based digital banking company Revolut launched Bitcoin, Litecoin and Ether trading for their users.

As the cryptocurrency becomes a more mainstream investment and demand for it rises, these bitcoin ‘whales’ will be able to part with their bitcoins for a hefty profit. This could leave new investors with an asset in the midst of a bubble.

Roger Ver, a well known early adopter of bitcoin said, regarding ‘whales’ working together, “I suspect that is likely true, and people should be able to do whatever they want with their own money.”

While the question of whether Brown’s allegation is true must be approached with scepticism, there is evidence of some very large investors in the space. Bloomberg recently reported that on November 12th, “someone moved almost 25,000 bitcoins, worth about $159 million at the time, to an online exchange.” Bitcoin’s market cap is roughly $270bn at the time of writing, but if this investor was to sell on a single exchange, it could potentially crash the market.

Large Bitcoin Investors

Cameron and Tyler Winklevoss, who gained fame for attempting to take control of Facebook, invested $11m in bitcoin back in 2013. This amount has many times over.

Tim Draper, a billionaire venture capitalist best known for his investment in Skype – during the companies early days – bought 30,000 bitcoins back in 2014. He has since invested in Tezos’ ICO.

Barry Silbert, the founder of the Digital Currency Group, picked up 48,000 bitcoins when the cryptocurrency was worth $350 a piece.

3. Ethereum Wallet Scam Closed Down

The Story

Digital wallet provider announced yesterday that it had no affiliation with an iOS-based cryptocurrency wallet app using its name. The app, which became the third most popular on the finance section of the App Store, allows users to import and open a digital wallet to store ether. Fake digital wallets could lose investors their cryptocurrencies permanently, so it is important investors (and app stores) keep an eye out for scams.

Security and Ethereum

In July, a developer error on the ethereum network meant a hacker pocket $31m worth of ether. While the technology is still in its infancy mistakes are bound to be made. However, several digital wallet hacks have emerged since cryptocurrency prices have skyrocketed and users need to take security seriously while safeguards are not in place.

When it comes to cryptocurrencies security, the owness is with the users. Sending ether from a digital wallet means I am responsible for my transfers. If I make a mistake when typing in the amount, or address of the receiver, I cannot call my bank and ask them to void the transaction. Consequently, user’s wallets are being targeted by scammers.

So far there have been no reports that the fake wallet stole from anyone. The company may have simply used the name for its familiarity in the ethereum community. have since announced the removal of the app from the iOS store.

4. San Francisco ICO Closed Down by SEC

The Story

San Francisco-based restaurant reviewing app Munchee has been forced to stop its initial coin offering (ICO) and reimburse investors after regulators raised concerns over the company’s tokens not meeting securities regulations. Munchee was looking to obtain $15m to “improve an existing iPhone app centred on restaurant meal reviews and create an “ecosystem” in which Munchee and others would buy and sell goods and services using the tokens,” according to the US Securities and Exchange Commission (SEC).

However, “in the course of the offering, the company and other promoters emphasized that investors could expect that efforts by the company and others would lead to an increase in value of the tokens,” they added. The regulator felt investors were led to believe they would gain a return on their tokens, however, the tokens did not meet the authority’s standards. The company was not fined due to its quick response to the SEC’s requests.

Why It’s Important

Last week PlexCoin’s founders were charged with defrauding investors. This was the first time the SEC’s newly established Cyber Unit filed charges. The regulator issued a statement back in July saying ICOs will be subject to US security laws.

Both cases suggest a serious commitment to ensuring investors are not mis-sold securities, particularly in the ICO space.

5. Goldman Sachs: Bitcoin Not A Substitute for Gold


The Story

The simultaneous rise of bitcoin and relatively poor performance of gold has provoked many to ask whether the two assets are in competition. The short answer is no, they are not.

“Bitcoin has real potential, if it were to become digital gold it might have tremendous space to grow,” said Gabor Gurbacs, Vaneck Securities Director of Digital Asset Strategy. It is this sentiment which has put the two in contest. However, the investor pool for each is “vastly different”, according to Jeffrey Currie, head of commodities research at Goldman Sachs.

Gold based exchange-traded funds are currently at close to their highest since May 2013, suggesting the metal remains part of investor’s portfolios, and not that investors have not cashed out and moved over to bitcoin. The reason this is not the case lies in comparing the function each asset serves and the investors it attracts.

Comparing Bitcoin and Gold

Bitcoin attracts more speculative investors looking for quick returns, while gold is often held as a portion of investment portfolios to spread risk. In times of economic downturn gold tends to go up in price, balancing any losses from stocks and bonds. The two assets currently serve distinct purposes. Consequently, bitcoin’s price rise is unlikely to have turned investors away from gold.

6. Jamie Dimon Eases Hostility Towards Bitcoin After Futures Contracts Go Live

Source: By Steve Jurvetson (Flickr: Jamie Dimon, CEO of JPMorgan Chase) [CC BY 2.0 (], via Wikimedia Commons

The Story

Source: CNBC

“I remain highly skeptical of it,” said JPMorgan’s CEO Jamie Dimon, when recently asked about bitcoin. “I’m open-minded to uses of cryptocurrency if properly controlled and regulated,” Dimon added. The executive, who famously called bitcoin a “fraud” appears to have softened his opinion just days after the bitcoin-based futures derivative began trading on the Chicago Board Options Exchange.

Why It’s Important

This is the first time Dimon has spoken about bitcoin for two months. The timing of Dimon’s comments might suggest JPMorgan will offer the bitcoin derivative to its clients. The contract would allow clients to take long or short positions on bitcoin’s price.

Similar contracts will trade on the CME and Nasdaq exchanges in the near future.

7. Cryptocurrency as Collateral for Loans 

The Story

A growing number of early cryptocurrency adopters, who have seen astronomical gains, will now be able to use their cryptocurrencies as collateral for loans. London-based Nebeus is helping third-party lenders create loans guaranteed by cryptocurrency collateral. The company created 100 of these loans on its first day and has made 1,000 more since says Nebeus’ Managing Director Konstantin Zaripov.

Given bitcoin’s market cap of almost $300bn, and a total cryptocurrency market cap of over $500bn, the market for these loans could be colossal. However, some worry that these assets are in a bubble, and their collapse makes these loans hugely risky for lenders.

Why It’s Important

Around 40% of all bitcoins are held by 1,000 people, Bloomberg reported last week. Prior to this innovation, these users would only be able to cash in on their gains by selling their cryptocurrencies. “I can see a lending industry in the tens of billions of dollars,” said Aaron Brown, former managing director at AQR Capital Management.

The loans could attract attention from cryptocurrency miners, who earn tokens for processing blockchain network transactions. This group are typically ideologically attached to the idea of decentralised currencies, and such loans could allow them to hold on to their cryptocurrencies while they cover their overheads.

However, bitcoin’s 1700% rise since the start of the year has caused many to stay clear. A collapse of these digital assets would leave lenders in a tough position.

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