BTC is Ceding Ground to Stablecoins as the Settlement Currency for Crypto Derivatives

However, there is one area, where stablecoins are stealing a march on bitcoin – settlement of crypto derivatives.

For the uninitiated, derivatives are financial products that derive their value from an underlying asset or a group of underlying assets. In the case of crypto derivatives, these underlying assets are cryptocurrencies or crypto-assets. The currency in which profit/ loss of a derivative contract is denominated is referred to as the settlement currency.

Derivatives are currently the most exciting area of crypto trading and have seen remarkable growth in the last 12 to 18 months. This growth is being led by new entrants which are shaking up several aspects of derivatives trading, including settlement currency. The incumbents, namely BitMex and Deribit have preferred BTC settled contracts. Deribit now also offers futures and options on ETH that are settled in ETH. However, the broader market is quickly moving towards stablecoin settlement.

New Derivatives Exchanges are Driving Stablecoin Settlement

Delta Exchange, which is a relatively new entrant in the crypto derivatives space, has been pioneering stablecoin settled futures. Delta launched its first USDC settled futures contract back in January 2019. Considering that USDC was fairly new then, the choice of USDC over the much more established USDT was a bold one. This bet on USD paid off as both volumes on Delta Exchange and USDC market cap grew rapidly in 2019. Encouraged by the response of traders, Delta Exchange went on to list USDC settled futures and perpetual swaps on several leading altcoins.

With the trader demand for stablecoin settled futures clearly established, other derivative exchanges have started to follow suit. The most notable among these is Binance. The exchange launched its futures trading platform in the 4th quarter of 2019 and has selected USDT as the quoting currency for the entire platform. Given Binance’s reach, this will give a big fillip to the market share of stablecoin settled derivatives.

Why Traders Prefer Stablecoin Settlement

Trader’s preference for stablecoin pairs has been clearly visible in spot markets. In fact, having USDT pairs on altcoins was one of the key reasons behind Binance’s strong growth in 2017. Even now, for most cryptocurrencies, the trading volume in USDT pairs is higher than that in BTC pairs.

Focusing on derivatives trading, stablecoin settlement is preferred by traders for primarily three reasons:

  • Ease of understanding: Stablecoin settlement makes trading crypto futures quite similar to trading futures on stocks in traditional financial markets. A trader bets up on the $ price of a crypto-asset/ stocks and keeps USDT/ USD as collateral. If she is right (wrong), her USDT/ USD increases (decreases). Compare this to a BTC settled futures on BTC. A trader has to bet upon the price of bitcoin while keeping BTC as collateral. It requires some mental gymnastics to wrap your head around this.
  • Protection of collateral against market moves: Let’s continue with the BTC-settled BTC futures example. Consider a trader that believes bitcoin price is about to go down and takes a short position in BTC futures. For this, she is required to keep some BTC as collateral. If the trader is proven right and bitcoin price actually goes down, the following happens: (a) she makes profit on her short futures position, but (b) the $ value of her BTC collateral also goes down. So, in this case, the trader ends up with lesser money in dollar-terms. She could have avoided this hit if she had the option of keeping collateral in a stablecoin.
  • BTC price of altcoins is hard to predict: Bitcoin is quite volatile. The volatility in altcoin prices is even higher. This makes predicting prices of altcoins in BTC-terms incredibly difficult. Let’s explore this in detail. When the market is bullish, both BTC and altcoins go up in $-terms. However, in the early parts of a rally, BTC price tends to go up more than altcoin prices. This means that BTC prices of altcoins actually go down. Given these dynamics, traders find it easier to trade futures where prices are in USD or a USD-pegged stablecoin (e.g. USDC and USDT).

Conclusion

In mature asset classes, the sizes of derivatives trading is typically 4-5x of spot trading. The rapid growth of crypto derivatives suggests that the same relationship will likely get established for cryptocurrencies too. As crypto derivatives grow and mature, standardisation and a move towards established practices from traditional financial markets is natural. We believe stablecoin-settlement is part of this process. Introduction of more complex derivatives such as options and interest rate swaps is only likely to accelerate this trend. That said, it remains to be seen whether Delta Exchange can continue to innovate in stablecoin-settled derivatives and manage to stay ahead of its peers.

Top 5 Potentially Profitable Cryptocurrencies in 2020: Investment Advice

Cryptocurrency is a potentially great digital asset for investment. Some cryptocurrencies have better options for investment in 2020. Do you want to know what digital currencies are worth investing your money in the next 12 months? Read the following recommendations.

Factors to consider when choosing a cryptocurrency for investing in 2020

Despite the international trend of cryptocurrency devaluation in 2019, some coins still possess a very good potential for making quick and long-term ROI. Do not pay attention only to the current rate of cryptocurrencies because this index is the most volatile and may change drastically within a few weeks (take, for instance, the dramatic drop of Bitcoin price in 2018). On the contrary, consider the following factors and indicators:

  • Market capitalization – the value of all issued digital coins of the particular cryptocurrency. High market cap means a large volume of the crypto coins participating in active transactions, which means an enhanced interest of investors;
  • Liquidity level – the higher it is, the faster a cryptocurrency can be sold at the market price. The most popular cryptocurrencies – Ethereum, Bitcoin and Ripple – have a high liquidity rate. Trading activity on exchanges indicates the number of transactions with certain cryptos made over a certain period. This indicator shows an actual demand in particular cryptocurrencies among traders;

Check the current top 10 cryptocurrencies with the highest market cap (January 28, 2020):

Source: https://coinmarketcap.com/

Rules to learn before investing in cryptocurrencies in 2020

According to AMarkets expert Artem Deev, the following recommendations will help to minimize risks and increase ROI for cryptocurrency investors this year:

  • Diversify your investments – never invest money in one asset. New traders and investors make this mistake repeatedly and, as a result, lose all money after the first failing deal. Diversify your investment portfolio. At least one of the chosen cryptocurrencies will bring profits and you will be able to minimize losses;
  • Do not blindly trust one source of data – always use a few sources (chats, forums, expert opinion, financial analysis, brokers);
  • Learn and observe – it is the only way to pick the best cryptocurrencies and the entry point to this extremely volatile market;

Top 5 cryptocurrencies to invest in 2020:

1. Bitcoin

In May 2020, the first and major cryptocurrency developers will offer 50% reduced rewards – 6.25 BTC instead of 12.5 BTC for each verified block. However, apart from that, Bitcoin is likely to bring the dominance index to 65-70% compared to other altcoins. In such a way, it can become the cryptocurrency with the largest market capitalization. These factors may significantly affect the growth of its price in 2020. Active use of Lightning Network may also change the BTC ecosystem. It will enable the implementation of Bitcoin in decentralized applications, micropayments, and e-commerce platforms. The current Bitcoin price (January 28, 2020) is $8 994,85.

2. Ethereum

Unlike Bitcoin, Ethereum is based on practical smart contracts used by many projects for the digitalization of transactions. The currency value may increase due to the increasing demand for its blockchain and functions, rather than a deficit of the asset as it happens with BTC right now. A major role in the success or failure of this currency will depend on upcoming fork updates and rapid implementation of the Proof-of-Stake algorithm. The approval by regulatory organizations and community decision to de-list ETH from the list of altcoins may also affect its price growth in 2020. The current ETH price is $171,38.

3. NEO

The NEO project is often included in different cryptocurrency investment ratings for the next year. This cryptocurrency breaks many stereotypes, including being the first open-source token originated from China. It claims to transform the traditional financial system by combining digital and real assets. Its unique Superconduct trading mechanism allows users to trust the funds through a decentralized platform. So, NEO’s appliance is beyond doubt, as its rapid demand growth. NEO may even hold an ICO, but so far it is trading at the level of $11,14 USD per token. The current NEO price is $11,14.

4. EOS

Chinese experts, according to CoinTelegraph, really like to include EOS to the list of the most promising cryptocurrencies for the next few years. Even if you don’t know much about crypto coins, it is definitely worth your investment in 2020. If Twitter, Uber, and Amazon ever move to a blockchain, the core of their work will definitely be EOS. The EOS system is free of Ethereum problems with scalability and it is ready to replace other competitive blockchains. If Ethereum fails, EOS can level up to 100 USD per token. EOS achievements become possible thanks to the consensus algorithm of delegated proof of ownership (DPoS) and an infinite number of similar blockchains. The current EOS price is $3,94.

5. Ripple

Some experts call XRP the “king of banking infrastructure”. The successful partnership with major financial market players made the Ripple ecosystem a breakthrough in the crypto industry. Take the latest integration with Western Union and the potential replacement of SWIFT to accelerate and reduce the cost of large money transfers between counterparties. However, do not expect huge profits with XRP in 2020, it is good for long-term investment. Even with the most optimistic approach, XRP price is unlikely to rise above 0.7 USD in the next couple of years. The current XRP price is $0,233759.

Source: https://i0.wp.com/www.tekedia.com/wp-content/uploads/2019/12/coins.jpg?resize=775%2C450&ssl=1

Cheap but potentially good for investment cryptocurrencies in 2020

Besides the obvious choices of popular cryptocurrencies, one of AMarkets experts – Basil Gamov – recommends to take a closer look at cheap but potentially great cryptocurrencies to invest in the next 12 months:

1) Chainlink (LINK) – appeared in 2017 in the USA. These crypto coins developed a technology that forms channels between different data providers employing smart blockchain technology. Chainlink allows all network operators, like information providers, to earn their token LINK. From an investment point of view, Chainlink has great potential. This is the list of partners who also believe in this crypto coin’s future: Dapps Inc, Google Cloud, ETHA, ConsenSys. The price (January 28, 2020) is $2,62. The market cap is $917 350 826.

2) Basic Attention Token (BAT) is another functional type of tokens based on the Ethereum blockchain. It is used only in the Brave browser. The cryptocurrency was launched in 2015. Developers offer a various concept of interaction for all network participants. Browser users pick to choose ads or not and can monitor the token’s price in real-time via Brave. The token has a very active and massive affiliate program, has the support of the Tor browser and DuckDuckGo search engine. The current token price is $0,218456. The market cap is $311 019 624.

3) Synthetix Network Token (SNX) is a potentially interesting platform network based on the ERC20 token. It helps to create synthetic assets (Synths) for tracking the value of physical assets. People can create and support their Synths and make money with them, without actually being the owners of these assets. The token appeared in 2017 and back then it was called Havven. The current token price is $1,19. The market cap is $193 220 205.

Final thoughts

Sure, you are free to pick any cryptocurrency to invest in 2020. Remember to diversify and work with reliable exchange services and brokers to protect your investment deals from any fraud. Make sure to include crypto coins into your asset portfolio as soon as possible while top currencies like Bitcoin and Ethereum are still hot for investment.

Just Sell And Go Away

  • Tremendous risks have been accumulated within the financial markets. We’re moving to outright shorting risk.
  • Trump’s impeachment is likely to play out under the “Bill Clinton 2.0” scenario, where the House votes to impeach, but the Senate does not remove the president from the office.
  • Credit risks are materializing at an alarming pace. The U.S. interbank market is the key issue and deserves particular attention.
  • The fundamental economic narrative remains weak. The surge in oil prices amid geopolitical tensions is still a good opportunity to sell.

The risks are rapidly building up. The fact that stock indices are still close to their all-time highs and credit spreads are tightening is outright surprising. To be fair, though, crises rarely happen when the crowd is prepared for them. Instead, the analyst community first goes from ultra defensive to balanced. And only after the risk assessments are lowered, the trouble strikes.

What kind of risks are we talking about? For the most part, the economic ones. Global economy continues to slow, dragged down by China. The country’s industrial output growth weakened to 4.4% y/y in August, the slowest pace since February of 2002. The reader is likely familiar with the number, but it’s crucial to fully understand its significance. Just like the market was late to recognize the scale of China’s growth and its consequences, it is now failing to grasp the magnitude of the slowdown. It is by no means priced in.

There’s no reason to expect an improvement either. As the U.S. presidential primaries get underway, it becomes clear that the Democrats’ stance on China isn’t much different than that of Trump’s. Virtually everyone favors a stricter policy towards China—the U.S. political elites haven’t been this united since the Russia episode not so long ago. Donald Trump himself has already promised a much tougher stance on Beijing when re-elected. And even if, hypothetically, the next American president is a Democrat, the chances for a softer policy are slim to none.

China’s response to the external challenges has been largely muted. It’s almost as if the officials have decided that if the economy goes down, it should take everyone with it (in our previous review we wrote about Germany being in a recession, which is a direct result of China’s problems). The government’s tax incentives primarily compensate for trade war losses. The PBoC is just keeping monetary conditions unchanged, but is not softening them. And both institutions are making sure that the real estate bubble doesn’t inflate.

Perhaps things could’ve simply stayed this way for a while, but the U.S. is ramping up pressure on China. In late September, it was reported that Trump’s administration considered limiting Chinese firms’ access to USD funding (both debt and equity). Treasury officials played down the reports, specifically saying they were “not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time.” But the key words here are “at this time.” If this does eventually happen, Chinese investors will be shut out of the U.S. markets.

Such a step can be very damaging to China’s financial system and economy. The country’s corporate debt stands at 165 of GDP, the broad money supply is 200% of GDP. This is 2-2.5 times higher than that of developed countries and is a sign of enormous risks. In fact, China is long overdue for a credit crisis, but has managed to avoid it, chiefly due to its closed capital account. But the Trump administration seems to have found a creative way to trigger a fundamental repricing of Chinese assets that also serve as collateral for the country’s banking system. Should the U.S. proceed with this idea, it is highly likely to trigger extreme risk aversion across global markets.

Another key story of the month was the liquidity crisis in the U.S. interbank market. The fed funds rate broke out of the Fed’s target corridor, which, in theory, shouldn’t be happening. Even worse, it seems like the Federal Reserve doesn’t have a clear understanding of why exactly that happened. So far there are two working hypotheses. One is that there is still a liquidity surplus in the system, but it is unevenly distributed across banks. The other boils down to reaching a certain “terminal” reserve level, i.e. the lower limit of the Fed’s balance sheet has been empirically established.

Of course, the Fed needs to determine the source of market stress. For traders, however, the picture tells only one thing: any positioning should account for an episode of sharp risk aversion. If the first hypothesis proves correct, it would imply that the financial institutions are experiencing difficulties obtaining a loan. Because if the whole theory is based on the assumption that the system is still operating under liquidity surplus, then someone must be hoarding that liquidity. This is called a lack of trust, and it can quickly turn into a full-fledged crisis. If the second hypothesis is to be accepted, the U.S. financial system has reached the point when there’s simply no natural supply of fresh liquidity anymore.

Perhaps the only significant takeaway from this discussion is when to expect a crash-type episode. If what we’re seeing is loss of trust between interbank players, 2019 could end much worse than 2018. If the system has hit a structural bound, the Fed’s repo purchases can buy another 3-6 months. Unlike most of the market, we do not expect recent events to push the Fed back into QE as such operations are not flexible and do not adjust to fluctuations of demand for reserves. The beginning of the U.S. fiscal year should also be very telling (it is known that the Treasury’s expenses were one of the factors that led to a surge in interest rates).

Finally, a few words on the U.S. political landscape. Democratic leader Nancy Pelosi announced that Congress officially opened an impeachment investigation against Donald Trump. We’re not political analysts, so we will not delve too deep into the issue. But the impeachment is likely to play out under the “Bill Clinton 2.0” scenario, where the House votes to impeach, but the Senate does not convict. A different outcome is very unlikely as the upper chamber is controlled by the Republicans, and the evidence for Trump’s impeachment is too weak. So far, at least.

However, if the Democrats somehow manage to succeed in removing Trump from office, the immediate effect on risk appetite will be negative. Donald Trump has proven to be an investor-friendly president. His policies have been directly beneficial for those holding higher-risk assets, and are still indirectly supporting the dollar. We also note that back in the Clinton impeachment days, the main market stories were the Asian financial crisis and the Fed’s response to that external shock. Which is why we’re putting politics third among our key trends and keeping a closer eye on credit markets and developments in China.

XAUUSD, XAGUSD: a litmus test for interbank stress.

We remain long XAUUSD, XAUEUR. If stop-loss is reached, will again buy XAUUSD at 1390 targeting 1562, stop-loss at 1335.

The stress in the U.S. interbank market has surprisingly had no initial effect on the dollar. Even as rates were skyrocketing, USD strengthened only moderately. This is interesting for the simple reason that if someone needed liquidity (and could not borrow it), that could be done by selling some assets. And if the bank settled the transaction in a foreign currency, the next step would be to convert it into dollars. In turn, the demand for the USD would cause the currency to appreciate.

But the greenback only rallied at the very end of the month. EM-currencies and commodities took a hit, and gold was no exception. The yellow metal plunged more than 5% from its recent highs. We did expect the move (see our previous review), even though this severe shortage of dollar liquidity wasn’t a factor a month ago. From the technical viewpoint, the 1480 mark, as well as the critical support at 1435 is now important for XAUUSD. A break through these levels would mean bad news for gold in the long-term, while a return to the 1300 area could even make the old targets below $1000 per troy ounce possible.

Actual trading isn’t the only reason we are carefully monitoring precious metals (as well as for cryptocurrencies). In the current environment both gold and silver help gauge the degree of the dollar-funding stress. If XAUUSD drops below the mentioned levels, but, say, EM-currencies don’t go down with it, it would be a good reason to go short on them. This strategy works for risk-related assets in general, but of course, requires thorough quantitative modelling.

EURGBP: the euro is endogenously weak, while the pound gains ground.

We remain short EURGBP, looking for EURUSD rebounds to 1.118 оr a breach of the 1.086 to enter shorts targeting 1.0325, stop-loss at 1.131/1.093 respectively.

While the dollar has been gaining broad-based strength, the euro has been just as broadly weak. In our last report we stressed the very low probability for the EURGBP parity. While this scenario still can not be ruled out, the chances are getting slimmer. However, shorting the pair at the current levels is tactically impractical: the rate has gone down significantly, thanks to both the Brexit drama and the general weakness of the European currency.

But it is not about the EURGBP anymore. EURUSD has been showing signs of life, with a shallow, but consistent downtrend emerging. The unit closed September at 1.09, which is just above the critical support at 1.086. This is of an equivalent importance to the 1435 level in gold. If things worsen in the U.S. interbank market, the euro and gold can become highly correlated and tank simultaneously. For the euro, the first intermediate target lies at 1.064, and then the move could extend towards 1.032-1.046.

USDRUB: from testing lows to testing highs.

We buy USDRUB at 65.00 targeting 68/69.7, stop-loss at 64.00.

EM-currencies in general and the rouble in particular were also late to react to surging dollar rates. Over the past 3 trading sessions, however, they did all the catching up. USDRUB is trading by a full figure higher, and it’s very likely that it’s only the beginning. From a technical point of view, the conservative target is 68. But it is very well possible that it will reach levels closer to 70 before 2020 (or at the very beginning of the year). Our models suggest that the next year is to be challenging for the entire EM universe. In the worst-case, but still realistic scenario, the rouble could depreciate by another 15% by the end of 2020.

In our previous review we also pointed out USDMXN as another candidate to go long. The unit still trades at levels where longer-term investors can enter. Among the potential losers are also ZAR and TRY. No one is immune to the U.S. interbank stress and it will first affect crosses with the dollar itself. The entire EM-sector still has a long way to fall.

We hope these trade ideas will be useful for you. Be free to try them in AMarkets.


Analytical materials and comments reflect only personal views of their authors and can’t be considered as trading advices. AMarkets is not responsible for losses as the result of analytical materials usage.

Brexit and the Pound: Plenty of Downside Left

So where are we now? It seems to me that “terrible” is not just the most likely scenario, it’s not even the worst possible scenario any more. In my view, an interim government under Labour with Jeremy Corbyn at its helm represents the worst of all possible worlds for GBP: economic dogmatism that will frighten markets coupled with a pro-Leave bias. Which is not to say that I’m any great fan of the incumbent Conservative government either, except insofar as I’m an American citizen and so grateful for any group of politicians that make our Congress seem reasonable and well-functioning by comparison.

But let’s put politics aside and look at the economics. Where is the pound nowadays? The simplest way to value the currency is relative to its past value. For this exercise, we use the real effective exchange rate (REER): the value of the currency against the country’s major trading partners, adjusted for inflation. It’s important because trade imbalances are one of the major factors moving currencies over the longer term.

On this metric, back in March, the pound was just 1.2% undervalued against a basket of currencies of the major economies. Currently, it’s about 7.1% undervalued – still not at the 10% undervalued line that has sometimes (but not always) been a barrier in the past. That means even under normal circumstances, it can fall further. And as you can see, in extraordinary circumstances, such as the Global Financial Crisis in 2008/09, that 10% line is no barrier to GBP depreciation. (Last time I used the IMF’s calculation for the GBP REER, but this time I’m using the BIS’, which is updated more frequently.)

The more theoretical way of valuing the pound would be with purchasing power parity. That’s as close a metric as we can get in forex analysis to seeing whether a currency is “fairly valued.” Looked at this way, the pound is still relatively expensive against the euro. According to the OECD’s way of calculating PPP – taking a large basket of goods and services and pricing them in different countries — the pound is 12.7% undervalued vs USD but still 8.1% overvalued vs EUR! This compares with -8.7% and +11.%, respectively, back in March. And considering that the EU is Britain’s largest trading partner (51.6% of total trade) vs 10.6% to the US and 7.6% to China, the two dominant USD trading partners, it’s clear that the pound’s value relative to EUR is the more important of the two prices. It’s got far to go before it hits up against the 20% line that has in the past provided some resistance (as that’s about the level where the currency starts to impact trade flows).

For GBP/USD to hit the -20% line, the pair would have to be at 1.14. For EUR/GBP to hit that level, the pair would have to be 1.20 (implying GBP/USD at 1.08, assuming EUR/USD stays at its current rate). It looks like the long-awaited “pound parity party” is coming up!

This analysis so far builds on what I said last time: although the pound has fallen considerably since before the Brexit vote, that doesn’t mean it’s cheap yet. It can still fall further.

Back in March, I made the balance of payments argument for why sterling should fall further: that after Brexit, the current account deficit is likely to widen further (because exports will be held up) while the financial account surplus is likely to diminish (as both direct investment and portfolio investment turns into an outflow). That argument still holds. Now I’d like to focus on the monetary reasons why the pound is likely to weaken, namely: the market isn’t at all discounting the Bank of England’s likely reaction to Brexit.

Basically, the market sees little chance of any significant Bank of England easing – it’s only pricing in a 50% chance of even one rate cut by June of next year.

The market is implying that over the next year, the BoE may cut rates about as much as the ECB – which already has negative rates – and the Bank of Japan – which hasn’t had significant inflation for about two decades.

Over the longer term, it’s expected to cut rates very little – even less than the Bank of Japan, somehow.

The small amount of rate cuts that are priced in probably reflect the fact that Bank’s policy rate may be positive, but it still isn’t that high in international terms, neither in nominal nor in real terms, even if it is positive.

However, that comparison fails to take into account the impact of the quantitative easing that other central banks undertook. If we adjust for that, we get what are called shadow policy rates.* These show much better just how tight UK monetary policy is relative to the urozone or Japan. It’s nearly the same as in the US, where rates had been lifted from almost the same starting point (effectively) nine times before coming down once (the graph only has month-end data and so doesn’t encompass the Fed’s rate cut this week).

In other words, UK monetary policy is still very tight and yet the market is only pricing in the minimum amount of loosening – about as much as central banks that are already well into negative territory for their policy rates. Is this reasonable? It was back before Brexit, when the Bank of England was in the process of “normalizing” interest rates (on the assumption that “normal” was still the way the world worked before September 2008). And that’s basically what the Monetary Policy Committee (MPC) would have us believe. Following Thursday’s meeting, they repeated their usual comments that if it looks like Brexit will go smoothly, they would raise rates “at a gradual pace and to a limited extent.” Even in the case of a no-deal Brexit, the Bank’s response “would not be automatic and could be in either direction.”

Does anyone believe that? Will the one rate cut that’s not even fully priced in be enough to fight the biggest shock to the UK economy since James Callaghan had to borrow money from the IMF in 1976? Of supermarket shelves empty while lambs that were destined for foreign markets are being slaughtered by the thousands? Central bankers may be dedicated to fighting inflation but they also have to be aware of what the population is facing. Besides, even the BoE itself said Thursday that if there was “entrenched uncertainty” over Brexit, “domestically generated inflationary pressure would be reduced.” That gives no reason to expect a hike in rates any time soon – and a lot of reasons to expect the Bank of England to join the world’s rate-cutting cycle.

I think the market is being too, too sanguine about the likely impact of Brexit on the UK economy and the Bank of England’s likely response. The rational course in case of a downturn would be for the Bank to cut rates and let sterling act as a “shock absorber” in troubled times. I still see plenty of downside to the pound as the prospect of below-consensus interest rates add another reason to sell on top of impending economic and political chaos.

This article was written by Investment Strategy Contributor Marshall Gittler that shared his exclusive insights in an in-depth Brexit analysis powered by BDSwiss


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Cryptocurrency vs. Penny Stocks

Since the price is low, an investor with little capital can buy shares, and, in case he can read the market correctly, his investment will have healthy returns.

When cryptocurrency was introduced in 2009, and subsequent cryptocurrencies, a lot of investors witnessed similarities between penny stocks and cryptocurrencies. Despite their similarities, they also have differences you should take note of.

After reading, you will determine which one is better for short term investments.

The Differences Between the Cryptocurrency and Penny Stocks

What makes the two different from each other comes from what makes them similar because neither of them is regulated. When you trade penny stocks over the counter, it means they are not under the monitoring and regulation of the stock exchange. No central bank controls cryptocurrencies because they are decentralized. However, lack of regulation is riskier with penny stocks since their susceptibility to fraud and scams are higher.

Cryptocurrency is less risky because of the blockchain technology they use, which is a public ledger. There is less fraudulent activity because all records, accounts, and transactions are public.

Strong Returns of Bitcoin

Bitcoin has had a strong performance over the years with huge returns and continuing customer adoption. Compared to the worldwide currencies, Bitcoin yielded bigger returns than any of them for 5 out of 6 years.

2011 – Bitcoin + 1500%

2012 – Bitcoin +299%

2013 Bitcoin + 5400%

2014 – USD + 13%

2015 – Bitcoin + 37%

2016 – Bitcoin + 130%

The percentages show how outstanding payouts were during a 5-year stretch for all assets, stocks, currency, or bond. Since Bitcoin is on the rise again, the underlying computational network has become stronger and more secure than before. In addition, there are a lot of user-friendly wallets, applications, and arising resources.

The Similarities Between Cryptocurrency and Penny Stocks

Whenever cryptocurrency is launched, founders become interested in circulating the currency virtually so certain amounts of units are resold to investors. They will either get an existing digital currency, or fiat currency, which is normally USD. The majority of cryptocurrencies have a value between $3-$4 per unit during the early months of existence, like the price of penny stocks.

There are opportunities that have a low entry fee. It involves some hunting, but you do not need a lot to get started. With penny stocks, you can get involved in big board stocks options trading at a few hundred dollars in every share. Another similarity is that penny stocks and cryptocurrency can have low commission rates and they are both volatile with gains and losses.

Cryptocurrency Volatility Decreasing

It is an encouraging sign that the volatility is decreasing because of the lower daily returns in the previous years. In the past, Bitcoin was perceived as a volatile investment, which is true. However, this has lessened because of market maturity.

There is already a decrease in variation to levels that are more synonymous to traditional currencies. That is because of the daily standard deviations which decreased the returns from 5% to 10% daily from 2014, and under 2 before that. The reason behind this is the deeper liquidity among exchanges, a better understanding and use of Bitcoin, and overall confidence in buying Bitcoin. The network experiences less panic in buying and selling cryptocurrency. With a lower variability, the asset is less risky and becomes more comparable to the behavior of investment in gold as a global hedge when there is a collapse in the currency and negative pressures from the market.

Bottom Line

You can invest in penny stocks and cryptocurrency with a low capital and they both have the potential to bring high yields, and highly speculative. A lot of traders prefer to trade in safer environments, which involves price movement investments.

Whichever you choose, there is always a risk in penny stocks and cryptocurrency investment, but you can be sure that the returns are healthy if it works out.

Why Crypto Processing Systems Is The Future

Thousands of years ago people were exchanging goods for other goods – that’s what we call bartering. Then the government-controlled currencies, also known as fiat currencies were introduced. It was a huge leap forward for our society because people were finally able to trade more conveniently and huge distances between parties became much less of a problem. The appearance of the term “money” is one of the most important keys to creating the world we live in today.

However, since the beginning of the new century, like many great inventions, traditional currencies started to become obsolete. Nowadays, our society demands things to happen immediately. By today’s standards, waiting for more than a week for goods to arrive and more than an hour for the transaction to complete is unacceptable. As CEO of cryptocurrency payment processor CoinsPaid said in his interview: “As a currency becomes more digital, customers’ wants to become more aligned to faster payment methods”. And this trend will only become more present. From exchanging bread for butter to ordering sushi via messenger app: we are on the verge of another drastic change in how we approach payments.

In this article, we will talk about how the introduction of cryptocurrency payment systems will affect both customers and businesses.

Consumers

You own your data

Financial institutions like banks collect most of the information about customers’ personalities and finance. Your bank knows your name, where you live, how much savings you have, everything about your investments, credit score, whether you married or not and the list goes on. Moreover, businesses also gather information about their consumers. Your browsing history on e-commerce sites and bits of your personal information are always stored and used by them.

Using cryptocurrency payment systems allow users to remain anonymous. The nature of blockchain technology implies that the only accessible piece of information is a string of numbers that is tied to your virtual wallet. Surely enough, there is still some personal information available to businesses, but the amount and significance of it are not comparable to what credit card transactions provide.

Less or no commission at all

One of the main ideas of the banking system is to make money using the money of its clients. ATM withdrawals fee, transaction fee, the yearly fee for having an account – almost any service offered by a bank comes along with a certain amount of money you have to pay.

Crypto wallets are superior to bank accounts on this matter. The majority of crypto processing systems offer to open a wallet for free and transaction fees are small or non-existent. For example, CoinsPaid provides its customers with 0% commission from transaction fees through its ecosystem.

Global and instant

Cryptocurrencies often don’t belong to any country, as traditional currencies do. Most of the cryptocurrencies available on the market are decentralized, which means it can be instantly traded across all of the parts of the globe. Banks on the other hand often have limitations when it comes to international trade, but all you need to trade crypto is internet access.

Businesses

Speed, thus security

Today’s payment system provided by banks is always under a risk. Billions of dollars are lost due to credit card fraud worldwide. When you buy goods or services using credit cards, your transaction often takes days to complete, because your money always has to go through a third party, before reaching the receiver. This is the time when fraudulent actions take place. The customer cancels his payment before it’s processed, which means that business may already send goods or perform service without receiving any money. When it comes to crypto, once a transaction has been performed, there is nothing that can be done to reverse it.

Moreover, fraudsters often use drawbacks of the centralized nature of the banking system. The thing is that if a person may hack into the bank’s database – he instantly has access to information of every person in that database. However, because of the fact that most cryptocurrency processing systems are decentralized, there is much less risk of such a situation.

Customer loyalty

This may be not so obvious advantage at first sight, but considering the number of people that use crypto today, this may be a turning point for some businesses. If a customer happens to be an active cryptocurrency user and there is 1 out of 10 businesses in a particular niche that accepts crypto, it may be the determining factor in customer’s choice.

Moreover, he will most likely return to the same company next time. The adoption of the cryptocurrency processing system by most businesses is inevitable in the long run, but those who can get ahead of the competition earlier can easily win over this specific target audience.

Installing a cryptocurrency processing system for your business can be done easily and in the shortest period of time. Service like CoinsPaid would be a perfect example.

Lower prices, same profit

Cryptocurrency transactions can have a commission between 0 and 1.6%. Banks, on the other hand often charge somewhere between 0.5 to 5% for one transaction, depending on location, type of currency, etc. With this in mind, businesses now can attract more customers by lowering the prices, while receiving the same amount of profit per transaction.

Conclusion

Centuries ago the introduction of traditional fiat currencies was an enormous step for better living and convenient trading. However, unfortunately, those payment options don’t satisfy the needs of the current society.

Cryptocurrency payment methods offer huge advantages over traditional ones: lower fees, faster speeds, lower prices and a higher level of security. The introduction of crypto payment systems is the next step for better trading worldwide.

Alternative Methods to Buying Cryptocurrency

You should first know that cryptocurrency exchanges are popular these days because of the Bitcoin and Ethereum digital assets. Those who have cryptocurrency can exchange with each other and fiat currencies like USD, GBP, and EUR. These facilities are highly regarded and have brought a new level of modernization that was not achieved by the established global financial system.

Do not worry because there are a lot of ways on how you can buy cryptocurrency.

From Cryptocurrency Exchanges

You are allowed to exchange fiat currencies to cryptocurrency when you buy them from cryptocurrency exchanges. It is the most common way that people go for when they want to buy cryptocurrency. Normally, newbies use this option because exchange websites are easy to use and setting up is quick.

The payment method is normally Paypal, bank transfer, or credit card. If you want to use a credit card, here is a list of Money Under 30’s top rewards credit cards. Using a rewards credit card to buy cryptocurrency has the potential to earn quite a large sum of rewards points, especially considering the current value of 1 bitcoin.

You can choose from a lot of exchanges, and each one has its own level of security that accepts different payment methods.

Coinbase

If you want to buy well-known cryptocurrencies, the most popular digital exchange is CoinBase. Here, you can buy Bitcoin, Bitcoin Cash, Litecoin, and Ethereum. You will find it easy to use Coinbase and it is widely trusted. Occasionally, it goes offline when there is a trading frenzy. The Coinbase app is downloadable to your phone or create an account with them. When you are paying, the fees are based on the payment method you choose, so make sure to check before paying. Credit card fees are 3.75%.

Buying Cryptocurrency Peer to Peer & with Cash

Peer to peer is one of the simplest ways to purchase cryptocurrency because they remove the need for a middleman. It lets users purchase and sell cryptocurrency directly from each other. When you do this, you do not have to pay for any extra fees, you can use cash, gold or silver, and it is not mandatory to provide your ID.

Buying bitcoin using cash has a couple of advantages in comparison to buying them on cryptocurrency exchanges or through bank transfers. First of all, cash purchases because you do not have to give personal information and submit documents. Furthermore, buying cryptocurrency with cash are faster for first-time buyers or have not set up a crypto wallet address. Wire transfers could take 3 business days, and account verification when you use cryptocurrency exchanges can take up 21 days if everything is fine. Bank transfer could make you lose money, especially when the market is volatile and you want to move credits.

You can buy cryptocurrency using cash from a trusted friend or peer who wants to sell their cryptocurrency. All you have to do is pay them based on the agreed amount, and pay them through bank deposit or cash-in-hand. Then, you will receive the cryptocurrency on your chosen wallet address using a private key or other methods. If you meet the seller in person, they can scan the QR code that is on your crypto wallet and the digital assets will be directly sent.

Bitcoin ATMs

The Bitcoin Automated Teller Machine is recognized as the best option for those who do not want to use the bank. Take into consideration that consumers without accessing a reliable banking system or have become disillusioned can use crypto funding. The BTC ATM appears and operates similarly to commercial bank ATMs but only accepts cash for crypto coins.

The disadvantage of using ATM to purchase Bitcoin is having to provide your ID photos or self-portraits before you can buy because your privacy can be compromised. In addition, the fees that range between 2% to 5% is a huge disadvantage. However, a lot of users say that ATMs are the best alternative because of the familiarity, convenience, speed, physical aspect, confidentiality, and liquidity it can offer.

These are just some of the current alternative ways of buying cryptocurrency. Let us know if you can think of any others. Still not ready to buy? Keep an eye out on the market trends because eventually the leading cryptocurrencies will react in real time to unfolding economic situations.

The Fiat Market Vs The Cryptocurrency Market: Competition or Partnership?

Last year the well-known futurologist Thomas Frey predicted that by 2030 cryptocurrencies will replace 25% of fiat assets. Venture investor Tim Draper stated as far back as 2017 that Bitcoin and its derbitcivatives will completely replace traditional money in 5 years. Morgan Creek Capital Management analysts in their Q2 2018 stock market review also made a statement to the effect that fiat will be completely replaced by cryptocurrency in the future.

However today traditional money and cryptocurrencies remain inextricably connected: cryptocurrency’s worth is estimated in terms of fiat, fiat is going digital, and many more cryptocurrency platforms are launching traditional asset trading. One way or the other the existing competition between the fiat and the cryptocurrency markets may very well lead to their complete merging.

Amongst the many platforms that support the relationship between fiat money and the cryptocurrency market is CoinsPaid.

The platform was developed to support storage and payment processing with cryptocurrencies, CoinPaid’s target base includes businesses looking to adopt cryptocurrencies as an alternative payment option.

As cryptocurrency adoption continues, businesses already set up with cryptocurrency payment processing platforms are likely to fare better than those restricting payments to fiat currency. Cross-border fees, exchange rates and transaction times are just a few hurdles that such platforms remove.

The advantage of platforms such as CoinsPaid is that users are, not only able to receive and send cryptocurrencies, but are also able to store and exchange. The platform also caters for fiat money, which is key as both forms of payment coexist.

As the likes of Facebook, Telegram and even governments develop and issue cryptocurrencies, the existence of independent but regulated platforms is key.

After a slow start, the adoption of cryptocurrencies has taken place at a far quicker pace than had been the case with bank cards and international wire transfer platforms.

Transaction times and fees, transparency, and lack of geographical boundaries continue to be the cryptocurrency advantage over fiat money and the traditional banking platform.

Fiat players in the crypto industry: how the fiat market is adapting to the cryptocurrency market

According to Coinmarketcap, at the beginning of August of 2019, the total market capitalization of 2,420 cryptocurrencies amounted to $302.7 billion. Compared to the fiat market, this is only 0.36% of the $81 trillion of all 159 fiat currencies in circulation recognized by the UN.

Making services cheaper with cryptocurrencies

The cryptocurrency market is only at the beginning stage of its development. However, fiat platforms are already seeing their potential, which addresses inefficiencies and excessive fee structures.

Large players are adding to existing service capabilities to support the buying, selling and implementation of cryptocurrencies. According to a study carried out by Blockchain Clovr, 15.8% of respondents (112 out of 707) use cryptocurrency to send money home and the number is likely to only rise further.

The popular international payment system Neteller also provided users with the option of buying and selling Bitcoin, Ethereum, Ethereum Classic, Litecoin and Bitcoin Cash with the help of one of 28 available global currencies. Webmoney, Payeer and many others provide similar services.

Banks’ cryptocurrencies.

Banks’ controversial position when it comes to cryptocurrencies is well-known. For example, Bank of America, Citigroup, and Lloyds Banks forbid their customers to buy cryptocurrency using their credit cards. Morgan Chase’s CEO Jamie Dimon called Bitcoin a scam before announcing the development of its own cryptocurrency for accounting and payments.

In reality, large banks have also had to change strategy vis-à-vis cryptocurrencies. Thus in 2015, Goldman Sachs invested in an innovative financial company Circle and at the beginning of 2018 Circle acquired one of the largest cryptocurrency exchanges Poloniex for $400 Mln.

The Bank of England, China, and a number of EU member states are just a few of many central banks and governments looking to develop cryptocurrencies. Liechtenstein’s Bank Frick was the first to allow its customers to make direct investments in digital assets, protecting user funds through cold storage.

The crypto industry’s active development, which involves an increasing number of companies and consumers, is turning into an opportunity for traditional market players to strengthen their positions and play a significant role in the evolution of the financial system.

How the cryptocurrency market is adapting to the fiat market

Cryptocurrency platforms have from the beginning been trying to find a compromise between digital and fiat currencies to attract traditional traders and popularize cryptocurrencies.

Depositing and withdrawing cryptocurrencies

Popular crypto exchanges (Bitfinex, CEX.io, Bittrex, and others) support deposit and withdrawals in fiat currencies, as well as the trading of crypto assets in pairs to fiat. In this area, platforms that support the transfer, storage, and trading of both fiat and cryptocurrencies also include CoinsPaid. Looking ahead, the next key development will be the addition of custodial services to support the adoption of cryptocurrencies as an alternative to fiat money.

Earlier this year, the SEC cited a lack of custodial services as one of the reasons for delaying the approval of Bitcoin ETFs. As the market evolves, a number of players are already exploring and providing such services. CoinsPaid is targeting to provide custodial services by 2020.

Collaboration with custodians

Custodians are organizations that hold custody of securities and other assets that belong to customers.

Cryptocurrency services are moving to a qualitatively new level of customer service, attracting third-party custodians who provide security for client funds or introducing their custodian solutions.

Thus Coinbase became an official custodian in the summer of 2018, having concluded an agreement with n SEC-accredited broker Electronic Transaction Clearing and received the approval of a New York regulator. Coinbase Custody service is aimed at large institutional investors, and BitGo company and Xapo cryptocurrency wallet provide custody services for a wide range of users.

Bank License Acquisition

Some cryptocurrency services acquire a banking license to simplify internal operations. For example, a successful startup called Circle plans to obtain a U.S. federal banking license for trading tokens, which U.S. law classifies as securities, and also to avoid difficulties associated with registering a cryptocurrency platform in various states.

The cryptocurrency bank Foundrs Bank is also working on acquiring a European license. The largest cryptocurrency exchange Binance has a 5% stake there.

Since the advent of cryptocurrencies, many supporters of this new money have been positioning them as a replacement for fiat. Today it has already become apparent that digital currencies are not only analogous to monetary units, but also solve many other problems, providing fast and secure transactions, transparent and stable management of financial payment systems in companies, significant reductions in costs due to absence of intermediaries, and others.

At the same time, the cryptocurrency market works in close conjunction with the fiat market, and companies that use the strengths of both systems gain a serious competitive advantage. Therefore, the leading players in the fiat and cryptocurrency markets are joining forces to provide business and private users with even more opportunities using new multifunctional solutions (Coinbase, CoinsPaid, BitGo, Xapo, and others).

The fiat Market Vs The Cryptocurrency Market: Competition or Partnership?

Last year the well-known futurologist Thomas Frey predicted that by 2030 cryptocurrencies will replace 25% of fiat assets. Venture investor Tim Draper stated as far back as 2017 that Bitcoin and its derivatives will completely replace traditional money in 5 years. Morgan Creek Capital Management analysts in their Q2 2018 stock market review also made a statement to the effect that fiat will be completely replaced by cryptocurrency in the future.

However today traditional money and cryptocurrencies remain inextricably connected: cryptocurrency’s worth is estimated in terms of fiat, fiat is going digital, and many more cryptocurrency platforms are launching traditional asset trading. One way or the other the existing competition between the fiat and the cryptocurrency markets may very well lead to their complete merging.

Amongst the many platforms that support the relationship between fiat money and the cryptocurrency market is CoinsPaid.

The platform was developed to support storage and payment processing with cryptocurrencies, CoinPaid’s target base includes businesses looking to adopt cryptocurrencies as an alternative payment option.

As cryptocurrency adoption continues, businesses already set up with cryptocurrency payment processing platforms are likely to fare better than those restricting payments to fiat currency. Cross-border fees, exchange rates and transaction times are just a few hurdles that such platforms remove.

The advantage of platforms such as CoinsPaid is that users are, not only able to receive and send cryptocurrencies, but are also able to store and exchange. The platform also caters for fiat money, which is key as both forms of payment coexist.

As the likes of Facebook, Telegram and even governments develop and issue cryptocurrencies, the existence of independent but regulated platforms is key.

After a slow start, the adoption of cryptocurrencies has taken place at a far quicker pace than had been the case with bank cards and international wire transfer platforms.

Transaction times and fees, transparency, and lack of geographical boundaries continue to be the cryptocurrency advantage over fiat money and the traditional banking platform.

Fiat players in the crypto industry: how the fiat market is adapting to the cryptocurrency market

According to Coinmarketcap, at the beginning of August of 2019, the total market capitalization of 2,420 cryptocurrencies amounted to $302.7 billion. Compared to the fiat market, this is only 0.36% of the $81 trillion of all 159 fiat currencies in circulation recognized by the UN.

Making services cheaper with cryptocurrencies

The cryptocurrency market is only at the beginning stage of its development. However, fiat platforms are already seeing their potential, which addresses inefficiencies and excessive fee structures.

Large players are adding to existing service capabilities to support the buying, selling and implementation of cryptocurrencies. According to a study carried out by Blockchain Clovr, 15.8% of respondents (112 out of 707) use cryptocurrency to send money home and the number is likely to only rise further.

The popular international payment system Neteller also provided users with the option of buying and selling Bitcoin, Ethereum, Ethereum Classic, Litecoin and Bitcoin Cash with the help of one of 28 available global currencies. Webmoney, Payeer and many others provide similar services.

Banks’ cryptocurrencies.

Banks’ controversial position when it comes to cryptocurrencies is well-known. For example, Bank of America, Citigroup, and Lloyds Banks forbid their customers to buy cryptocurrency using their credit cards. Morgan Chase’s CEO Jamie Dimon called Bitcoin a scam before announcing the development of its own cryptocurrency for accounting and payments.

In reality, large banks have also had to change strategy vis-à-vis cryptocurrencies. Thus in 2015, Goldman Sachs invested in an innovative financial company Circle and at the beginning of 2018 Circle acquired one of the largest cryptocurrency exchanges Poloniex for $400 Mln.

The Bank of England, China, and a number of EU member states are just a few of many central banks and governments looking to develop cryptocurrencies. Liechtenstein’s Bank Frick was the first to allow its customers to make direct investments in digital assets, protecting user funds through cold storage.

The crypto industry’s active development, which involves an increasing number of companies and consumers, is turning into an opportunity for traditional market players to strengthen their positions and play a significant role in the evolution of the financial system.

How the cryptocurrency market is adapting to the fiat market

Cryptocurrency platforms have from the beginning been trying to find a compromise between digital and fiat currencies to attract traditional traders and popularize cryptocurrencies.

Depositing and withdrawing cryptocurrencies

Popular crypto exchanges (Bitfinex, CEX.io, Bittrex, and others) support deposit and withdrawals in fiat currencies, as well as the trading of crypto assets in pairs to fiat. In this area, platforms that support the transfer, storage, and trading of both fiat and cryptocurrencies also include CoinsPaid. Looking ahead, the next key development will be the addition of custodial services to support the adoption of cryptocurrencies as an alternative to fiat money.

Earlier this year, the SEC cited a lack of custodial services as one of the reasons for delaying the approval of Bitcoin ETFs. As the market evolves, a number of players are already exploring and providing such services. CoinsPaid is targeting to provide custodial services by 2020.

Collaboration with custodians

Custodians are organizations that hold custody of securities and other assets that belong to customers.

Cryptocurrency services are moving to a qualitatively new level of customer service, attracting third-party custodians who provide security for client funds or introducing their custodian solutions.

Thus Coinbase became an official custodian in the summer of 2018, having concluded an agreement with n SEC-accredited broker Electronic Transaction Clearing and received the approval of a New York regulator. Coinbase Custody service is aimed at large institutional investors, and BitGo company and Xapo cryptocurrency wallet provide custody services for a wide range of users.

Bank License Acquisition

Some cryptocurrency services acquire a banking license to simplify internal operations. For example, a successful startup called Circle plans to obtain a U.S. federal banking license for trading tokens, which U.S. law classifies as securities, and also to avoid difficulties associated with registering a cryptocurrency platform in various states.

The cryptocurrency bank Foundrs Bank is also working on acquiring a European license. The largest cryptocurrency exchange Binance has a 5% stake there.

Since the advent of cryptocurrencies, many supporters of this new money have been positioning them as a replacement for fiat. Today it has already become apparent that digital currencies are not only analogous to monetary units, but also solve many other problems, providing fast and secure transactions, transparent and stable management of financial payment systems in companies, significant reductions in costs due to absence of intermediaries, and others.

At the same time, the cryptocurrency market works in close conjunction with the fiat market, and companies that use the strengths of both systems gain a serious competitive advantage. Therefore, the leading players in the fiat and cryptocurrency markets are joining forces to provide business and private users with even more opportunities using new multifunctional solutions (Coinbase, CoinsPaid, BitGo, Xapo, and others).

Facebook’s Libra Cryptocurrency is Already Facing Some Challenges

The entire internet was bombarded with news about the recently announced Facebook’s Libra cryptocurrency. Despite the positive impact that Facebook hoped the digital coin will have, the announcement has received a chilly response. Regulators, nonprofits, and politicians have all expressed their concerns regarding the ambitious project of Facebook.

The Libra cryptocurrency project has been initiated by the Libra Association which has been co-founded by the social network Facebook. The purpose of the digital coin is to be the monetary authority for cryptocurrency, aiming to be used by almost 1.7 billion adults who don’t have a bank account. It has been designed with the purpose to serve as a cheap and easy method of transferring money online.

Yet, despite the Libra’s cryptocurrency showy announcement, it seems that many people from the public show their concerns or lack of interest. The digital cryptocurrency has already started to face some challenges which could result in a scenario that its creators never thought about.

Delayed release date

Facebook’s Libra cryptocurrency has been announced to be released in the first half of the next year. However, some policy experts tend to have doubts regarding the cryptocurrency’s release to take place as planned.

Angela Walch, a researcher from the University College London’s Center for Blockchain Technologies, believes that the chances for the Libra digital cryptocurrency to receive regulatory approval in time for its announced release date are very small. She explains that the concept behind the new digital cryptocurrency is very complex and could have global scale consequences. Thus, before Libra will receive regulatory approval, all specialists must take their time to analyze the effects the cryptocurrency could have.

Scams

As mentioned before, Facebook’s Libra cryptocurrency faces skepticism politicians, nonprofits, and regulators. However, a series of scams can make things even harder for the launch of the digital coin.

A multitude of fake accounts and scams are already online trying to sell Libra on Facebook, Instagram, and other social media networks such as YouTube, something very similar to what is happening with fake online brokers, say the experts from InvestinGoal. Facebook announced that the social network does its best to remove any scam, post, page, or ad that violates its policies. However, seeing that scams regarding the Libra cryptocurrency are able to take place right on the social network’s own platform, the public is once again drawn to skepticism regarding the digital coin.

Low level of interest

According to a recent study, another challenge that Facebook’s Libra is facing these days is a low level of interest from adults. Since its announcement, the internet has been filled with negative speculations and concerns regarding the functionality and the consequences the digital coin could have. Thus, according to the study conducted by CivicScience, only 5% of 1,799 US adults showed a little interest at all in Facebook’s cryptocurrency. A percentage of 86 expressed that US adults are not interested at all in the digital coin.

Perhaps one of the reasons might be the fact that Facebook has a bad rap among its users when it comes to privacy protection. The social network has faced many cyberattacks in the past which made its users doubt its capability of keeping their data safe. Consequently, a percentage of 77 said that they lack trust in the social network Facebook.