Crypto has been vaunted variously as an inflation-proof asset and a digital answer to gold. But just how accurate are these descriptions? With inflation on the rise, the answer could well be around the corner.
The Problem of Inflation
Everyone with fiat savings fears the dreaded “i” word. But after years of low or almost no inflation in many parts of the world, it suddenly seems we cannot escape talk of a coming inflationary storm.
Much of the economic talk in 2021 centered on inflationary hotspots in Turkey, Argentina, Venezuela and the like.
But while these were once seen as outliers, nations that have been living without inflation for decades are now posting worrying figures. In countries like the UK and the United States, central banks are now finding themselves under increasing pressure to raise interest rates to fight back.
However, the problem cannot be so easily swept under the carpet. Wages in the West are on the rise, food prices are shooting up worldwide and energy price hikes are becoming commonplace.
Atlanta Fed Wage Growth Tracker – overall wages now rising faster than at any time since the Global Financial Crisis (and for a while before). pic.twitter.com/CQzxHQ8Pxn
If inflation is now a given, it is only logical to expect fiat currency holders to respond. Pressures like these naturally push investors toward “safe assets” – traditionally blue-chip stocks and gold. But more recently, the “safe asset” category has a new member: crypto.
Does Crypto Work as a Store of Value?
Many major economists say they think so, with some calling Bitcoin and the like “digital gold.”
One notable example is the Visa CEO Alfred Kelly, who last year said: “We see all [cryptoassets] as digital gold. They are predominantly held as assets that are not used as a form of payment in a significant way at this point.”
Just as gold or “safe-bet” stocks often experience price volatility, they are simply too valuable to bottom out. They are also a safe distance from currency markets, meaning that they might get dragged into periods of fiat-related volatility, but can never (or so the theory goes) experience the same kind of hyperinflationary pressures that can cause a currency to collapse, à la Germany in the 1920s.
While the Turkish Lira and the Argentine Peso are not quite at the same level, they too are edging ever closer to inescapable currency chaos.
In both nations, crypto adoption is flying up. Turks make a million crypto transactions a day, Reuters reported last month. In Argentina, even the President has called crypto a “hard currency, somewhat,” with the power to “nullify inflation.”
Is There Really Any Truth to All This?
This month, Rio de Janeiro’s Mayor said that he intends for the Brazilian city to keep 1% of its treasury reserves in crypto. Other cities have taken a similar tack, while there is now no shortage of mainstream financial advisors speaking to media outlets like CNBC and Time about the benefits of buying crypto. Most now advise investors to keep at least a small portion of crypto (10% or less, mostly) in their portfolios.
It looks like global politicians are starting to take this advice to heart.
Could Crypto Actually Replace Fiat?
Most critics think that crypto’s weak point is its use as a form of payment. Visa’s Kelly is just one of those who have pointed out that people seem happy to buy, trade and hold crypto, but seem unwilling to spend their coins on goods or services.
Bukele’s government last year adopted BTC as legal tender, and has since snapped up hundreds of tokens using public funds. That means that crypto is now being put to the test in the Central American nation as not only as a treasury reserve asset (a store of value), but also as a means of payment.
As these are perhaps the two key properties an asset needs to possess if aspires to be called a currency, perhaps we will find out very soon if crypto really has what it takes to go toe-to-toe with fiat!
A brand-new cryptocurrency made the headlines across the sphere due to its astonishing skyrocketing move after a tweet made by the eccentric billionaire and Tesla’s CEO, Elon Musk.
Of course, we’re talking about Santa Floki Coin (HOHOHO), whose price soared by over 18,840% in a couple of days ahead of the end of 2022.
The token surged from $0.000000012935 to a new all-time high of $0.00000245, according to data from CoinMarketCap.
Since then, the optimism around the coin as often happens with the sudden spikes that follow such patterns, faded away, and HOHOHO retraced back to exchange hands at around $0.0000002049 as of press time.
Who Are The Creators
According to Santa Floki’s official website, the coin was developed by Parabolic’s Development Team, which was established with the objective to produce “strong projects, offering the investor peace of mind.”
On November 16, 2021, it began a presale across social media platforms and the website, accompanied by official audits and an NFT launch.
The team behind the token also developed a personal wallet and announced a 3D metaverse gaming project, including major partnerships. However, the development team hasn’t given enough information on whether there are more plans for 2022, aside from growing the community of holders.
HOHOHO coin was developed under Binance Smart Chain (BEP20) blockchain, and it has a fully diluted market of over $2.5 million as of press time, according to CoinMarketCap. As per the rewards, the website says:
“(…) as a matter of fact, the contract is designed to allow 4% of all BUY/SELL transactions to be rewarded back to the holders of SantaFloki in the form of BUSD.”
Where Can I Buy Santa Floki Coin
Santa Floki can be bought via cryptocurrency exchanges like PancakeSwap and LATOKEN. The website also notes that HOHOHO can be acquired via Trust Wallet and Metamask.
Elon Musk and Santa Floki: Is He Endorsing the Coin?
As highlighted above, the Santa Floki coin price pumped strongly before the end of 2021 due to a tweet from Elon Musk, where he published the picture of a dog dressed in a Santa Claus outfit, accompanied with the text “Floki Santa.”
It’s not clear if Tesla’s CEO bought the cryptocurrency or not, as somebody could infer that after the cryptic tweet crossed the wires.
In fact, the creators of Santa Floki thanked Musk for the “recognition” granted through the tweet, although the billionaire never replied nor continued with the saga in other tweets to confirm if he’s legitimately endorsing the project.
@elonmusk just tweeted about us and we are humbled by this recognition! We will do a lot of good in the world! Elon, is this a good prediction?
Santa Floki creators’ tweet included a meme’s image comparing the surge of Dogecoin (DOGE) in 2020 and HOHOHO coin recently.
Risks of Trading Santa Floki
As usual with the brand-new tokens, there are high risks involved when somebody wants to invest in them. But, first, a cryptocurrency that just arrived in the space carries a lot of volatility because it’s gathering investors from around the world.
In fact, if it’s legitimate, the project is actively working to gain trust across people and make them acquire the tokens.
Second, the cryptocurrency will be highly susceptible to pump and dumps followed by tweets from celebrities or key crypto players’ statements, such as the one that came from Musk.
Moreover, as time passes, the market cap will increase and thus the volatility, which will produce even more savage swings that could make even riskier trading coins like Santa Floki.
Recent Brand-New Tokens Pumps
Early in December, FXEmpire reported that just a single joke during a Congressional hearing was needed to encourage cryptocurrency enthusiasts to create a brand-new coin.
A US Congressman, Representative Brad Sherman, made some statements in the midst of regulatory discussions with crypto CEOs, talking about meme coins and the relationship with the name of an animal.
In fact, Mongoose Coin (MONG) became a reality and hit a market cap of $14 million at that time, on December 10. After such a mention in the hearing named “Digital Assets and the Future of Finance: Understanding Innovation in the United States,” MONG gained an ROI of over 80,000%.
It became interesting how just an ironic mention sparked discussions about the risky nature of investing in meme coins like Mongoose Coin, which are exposed to such volatility.
The purpose of support and resistance levels is to identify favorable entry and exit points.
There are multiple trading strategies that incorporate support and resistance levels. Additionally, there are multiple support and resistance strategies, the most common being the use of pivot levels and their associated major support and resistance levels that are based on a time period’s pivot level.
When trading, it is beneficial to use more common strategies as these will tend to be followed by a greater number of traders.
Support levels refer to price levels below which an asset does not drop for an extended length of time.
At support levels, buyers enter into long positions thus delivering support and preventing further downside.
It is important to note, however, that there will be multiple support strategies. These include the use of the most recent lows as an example and Fibonacci’s. Pivots and major support levels are the most commonly used levels.
Once a support level has been breached, the support level becomes a resistance level.
Similarly, resistance levels are price levels at which sellers will look to exit an asset or enter into a short position.
Here, resistance levels are calculated for time intervals by using the highs and lows of the previous time interval. In the case of using major resistance levels, traders base their resistance levels on the pivot level for a specified time interval, t.
Other resistance levels commonly used include daily, weekly, monthly, yearly, and all-time highs and Fibonacci’s.
Once a resistance level has been broken, the resistance level becomes a support level.
How to draw support and resistance
Analysts and traders calculate the pivot and the major support and resistance levels for multiple time periods. These can be as short as hourly and as long as monthly.
Once you have calculated the pivot and major support and resistance levels, traders and analysts will then plot these on charts to assist in their trading decisions as shown in the chart below.
Calculating Pivot Levels
A pivot level is derived by calculating the average of the high, the low, and the closing price of a time interval, t.
Looking at a 1-hour time interval for the chart below, we would take the average of the day high $55,329, the day low $53,711, and the closing price $54,791 to obtain the next day’s pivot level. Here the pivot level would be $54,610.
Calculating Support Levels
Once you have calculated the pivot level, the major support levels, these being S1, S2, and S3 can be calculated. In the example below, using an hourly chart, a day’s pivot and major support levels can be calculated.
First Major Support Level: 2 x Pivot / the previous time interval high. In the example above, this would be (2 x $54,610) / 55,329 = $53,892.
Traders would be looking at the first major support level as an entry price.
Second Major Support level: S2 = Pivot – (Day high – Day low).
In the example above, this would be $54,610 – ($55,329 – $53,711) = $52,992.
Traders would be looking at the second major support level as an entry price in the event of an extended reversal.
Third Major Support level: S3 = S2 – (Day high – Day low).
In the example above, this would be $52,992 – ($55,329 – $53,711) = $51,374.
Traders would be looking at the third major support level as an entry price in the event of a market sell-off.
Calculating Resistance Levels
Once you have calculated the pivot level, the major resistance levels, these being R1, R2, and R3, can also be calculated.
First Major Resistance Level: R1: = 2 x Pivot / the previous time interval low. In the example above, this would be (2 x $54,610) / 53,711 = $55,510.
Traders would be looking at the first major resistance level as an exit price.
Second Major Resistance level: R2 = Pivot + (Day high – Day low).
In the example above, this would be $54,610 + ($55,329 – $53,711) = $56,228.
Traders would be looking at the second major resistance level as an entry price in the event of an extended rally.
Third Major Resistance level: R3 = R2 + (Day high – Day low).
In the example above, this would be $56,228 – ($55,329 – $53,711) = $57,846.
Traders would be looking at the third major resistance level as an exit price in the event of an event-driven breakout.
Support and Resistance trading strategies
As previously outlined, traders can use major support and resistance levels for a range of time periods. It is therefore important to decide the trading strategies to then select the appropriate time periods for calculating the pivot and major support and resistance levels.
For instance, day traders would use 1-minute charts and the previous day’s high, low, and closing price to calculate the support and resistance levels for the day ahead.
By contrast, swing traders would use 4-hourly and daily charts to calculate the respective pivot, major support and resistance levels.
Pivot and Support Levels
When considering major support levels, the pivot levels play a hand in whether support levels are likely to come into play. There are two ways in which to consider pivot levels:
A fall through a pivot level would be needed to bring support levels into play. This tends to be the scenario in a post-bullish or during a bullish session.
Failure to move through or back through the pivot level would also bring support levels into play. This tends to be the scenario in a post-bearish or during a bearish session.
Pivot and Resistance Levels
When considering major resistance levels, the pivot levels play a hand in whether resistance levels are likely to come into play. There are two ways in which to consider pivot levels:
A move through a pivot level would be needed to bring resistance levels into play. This tends to be the scenario in a post-bearish or during a bearish session.
Avoiding a fall through or back through the pivot level would also bring resistance levels into play. This tends to be the scenario in a post-bullish or during a bullish session.
Using Support Levels
In a correcting market, an asset may fall through its first support level, labelled as S1. Once breached, the second major support level will be the next key entry point for investors. In such an event, S1 would then become a resistance level.
The 3rd major support level is generally only breached and a major economic or financial event. These include earnings, central bank and government policy, and other global events.
The below chart shows flight to safety in response to the new Omicron COVID-19 strain. Demand for the Japanese Yen broke down support levels as the Greenback slid to sub-¥114 levels.
Historically, global events would include:
The global financial crisis.
Here, 1st and 2nd major support levels would have provided little interest to investors looking to enter the market.
3rd major support levels, however, may have drawn investors in. Key in using major support levels is for an asset price not to fall below for an extended period of time…
Using Resistance Levels
In a bull market, an asset may move through its first major resistance level, labelled as R1. Once broken, the second major resistance level will be the next key entry point for investors. In such an event, R1 would then become a support level.
The 3rd major resistance level is generally only broken through as a result a major economic or financial event. These include earnings, central bank and government policy, and other global events.
As with the above example, news of the new COVID-19 strain and government plans to contain the spread led to a reversal of EUR carry trades. The EUR broke down the 3 major resistance levels on its way to $1.13 levels against the Greenback.
Historically, global events would include:
COVID-19 Pandemic recovery.
Post-Global Financial Crisis recovery.
Central bank action.
U.S Presidential Election
In the case of equities, corporate action and earnings.
Here, 1st and 2nd major resistance levels would have provided little interest to investors looking to exit the market.
3rd major resistance levels, however, may have resulted in investors locking in profits. Key in using major resistance levels is for an asset price not to move above a specified price for an extended period of time…
Once a resistance level has been broken, however, the resistance level become a support level that forms part of the major support levels for the time period in question.
Other Major Support and Resistance Levels
There are multiple indicators/strategies that traders. Traders and analysts need to consider these when using pivot levels and the major support and resistance levels described above.
Of particular importance are all-time highs and lows, and daily, weekly, monthly, and yearly highs and lows.
For example, an asset class may face resistance at its current week high that may sit below the first major resistance levels.
Other strategies include the use of Fibonacci’s, moving averages, Bollinger’s, and MACDs.
Trading without the use of support and resistance levels would likely lead to losses. More significant losses are likely, however, without a trading strategy. Importantly, the two will need to be aligned.
The cryptocurrency space has grown to become a $3 trillion industry. Over the past decade, there have been numerous innovations within the cryptocurrency space. One of the most recent innovations is the decentralized finance (DeFi) space.
DeFi is one of the fastest-growing sectors within the cryptocurrency space. It offers numerous services to cryptocurrency investors and other market players. Due to its importance, this post will touch on an aspect of DeFi, which is lending.
What is DeFi?
DeFi can be defined in simple terms as decentralized finance. This is an ecosystem of financial applications built on top of blockchain technology. Unlike the regular financial ecosystem, the DeFi space operates without any third part of central authority.
Instead, DeFi relies on a peer-to-peer network to establish decentralized applications that would allow people to connect and manage their assets regardless of their location or status. DeFi aims to ensure people gain access to open-source, transparent and permissionless financial services from every part of the world.
The decentralized finance ecosystem is built on smart contracts. Smart contracts are self-executing and don’t require a third-party intermediary. DeFi started on the Ethereum network. Hence, it is not a surprise that most of the DeFi protocols are built on the Ethereum blockchain.
Understanding DeFi Lending
DeFi lending occurs thanks to the lending platforms or protocols. These platforms offer cryptocurrency loans in a trustless manner, allowing the holders to stake the coins they have in the DeFi lending platforms for lending purposes.
On the DeFi platform, a borrower can take a loan, allowing the lender to earn interests once the loan is returned. The lending process is executed from the start till the finish without intermediaries.
A coin holder sends the tokens they intend to lend into a pool using a smart contract. Once the coins are sent to a smart contract, they become available to other users to borrow. Afterward, the smart contract issues tokens (usually, the platform’s native token) that are doled out automatically to the lender. The tokens can be redeemed at a later stage in addition to the underlying assets that were sent to the smart contract.
Virtually all the loans issued via the native tokens are collateralized. This means that users who wish to borrow funds will need to provide a guarantee. However, unlike the centralized financial system, the guarantee in the DeFi space is in the form of cryptocurrencies that are worth more than the actual loan itself.
On paper, this idea might seem absurd as the borrower could potentially sell their assets in the first place to generate the money. However, there are numerous reasons why DeFi borrowing makes sense.
For starters, the users might require funds to take care of unforeseen expenses they may have incurred and don’t intend to sell their holdings as they believe the assets are due to an increase in value in the future. Furthermore, by borrowing money via DeFi protocols, users can avoid or delay paying capital gains taxes on their cryptocurrencies. Also, individuals can use the funds they borrow from the DeFi protocols to increase their leverage on some trading positions.
What are the Popular DeFi Lending and Borrowing Protocols?
Maker is one of the leading and unique DeFi crypto lending platforms. It allows users to borrow money via its DAI tokens. DAI is a stablecoin whose value is pegged to the US Dollar. Using the Maker protocol is available to anyone. Users can open a vault, lock collateral like ETH or other cryptocurrencies and generate DAI as a debt against the locked collateral.
The Maker protocol encourages users to take part in operational earnings via governance fees, acting as interest rates for the platform. MKR is the native token of the Maker protocol, and its holders serve as the last line of defense in the event of a black swan. As soon as the collateral value starts to decrease, MKR is minted and sold in an open market to raise more collateral. Hence, diluting MKR holders.
Another leading DeFi lending protocol is Aave. This is an open-source platform and one of the most popular DeFi lending protocols in the crypto space. Aave is a non-custodial liquidity platform for earning interests on deposit and borrowing assets. It allows the lenders to deposit their cryptocurrencies in a pool and receive an equivalent amount of aTokens, its native token. The protocol algorithmically adjusts interest rates based on demand and supply, indicating that the more a user holds aTokens, the higher the interest amount.
Another popular DeFi lending protocol is Compound. This is an algorithmic and autonomous money market protocol designed to unlock numerous open financial applications. Compound allows users to deposit cryptos, earn interests and borrow other cryptocurrency assets against them. By using smart contracts, Compound automates the management and storage of capital on the protocol.
As a permissionless protocol, anyone with a cryptocurrency wallet and an internet connection can interact with Compound and earn interest. Metamask is one of the wallets that support the Compound DeFi protocol. The Compound protocol supports the lending and borrowing of numerous assets, including DAI, ETH, WBTC, REP, BAT, USDC, USDT and ZRX.
There is little to no doubt that the world has definitely evolved and is ready to move even deeper into the NFT trend. However, like every new concept that grabs attention, many people run the risk of misunderstanding some fundamental things about NFTs.
NFTs Have Benefited the Art and Content Industries
One of the biggest misconceptions about NFTs is that they are only beneficial for artists and content creators who want to protect themselves. This misconception is completely understandable since NFTs have become especially popular because of these artists. Names like Snoop Dogg, Grimes, and more have been prominent in the push for artists to jump on the NFT train and become more self-sufficient.
Even in Africa, artists are using NFTs massively. Jude “MI” Abaga, one of the biggest hip-hop artists on the continent, has partnered with Binance and is looking at the possibility of launching his next album as an NFT. everywhere you go, artists are driving the adoption of NFTs.
Then, there’s the actual art scene. People are minting NFTs everywhere, using them to sell digital art and make money. They’re now side-stepping the conventional art industry, which involves exhibition houses and curators – all of whom take their own cut of the funds. Now, with NFTs, anyone can make money.
The same can be said for content creators. These people can build their following significantly and leverage that to sell NFTs to people. They set their own prices, and they get to enjoy all the profits that come from the sales of their tokens. If they like, they could program their NFTs so they take cuts out of any token sales that occur even after they’re done with their own purchases.
Utility NFTs: Their Rise, and Why They Look Appealing
But, NFTs are much more than this. Today, there is an interesting rise of “utility NFTs” – NFTs whose values are based on specific metrics which, to the largest extent, can be measured. Many NFT enthusiasts actually believe that these utility NFTs are the future of the industry.
Today, the NFT market is in an interesting position. Many tokens don’t specifically have a market value, and this has experts scared that the rise in popularity of NFTs will eventually create a bubble that will massively pop eventually. We saw a bit of a glimpse into this eventuality when the crypto market itself went on a downturn for months. Coins dropped significantly in value, and NFT volumes actually slowed down.
With NFT volumes rising significantly in February, things took a bit of a turn for the worse at the start of April. Coincidentally, this was also the period when the larger crypto market started what would be a months-long crash.
While things might be going great again, the crypto market has shown several signs of dangerous volatility that could wreck investors. What if we’re seeing the same thing with NFTs?
Despite the general belief that we could be in an NFT bubble, however, many experts believe that NFTs can still survive any wipeout that happens. One of the key factors that will play into that will be utility NFTs.
The concept of utility NFTs is pretty much the same as a utility token. These NFTs provide actual value, as well as the benefit of being scarce. A utility NFT could offer access to specific benefits and perks to its holder. Then, combined with the nature of being scarce, this token can drive massive value.
Several projects are already exploring the growth of utility NFTs. One interesting project is Sloties – an NFT project looking to revolutionize the gaming industry. Sloties are a collection of 10,000 NFTs built on the Ethereum blockchain. Each Slotie purchased offers ownership of an actual gaming platform’s profits. Sloties can also be used for staking, while the tokens offer additional perks like rakeback guarantees on bets and much more.
It’s easy to see the benefits that a project like Sloties will bring. The gaming industry is a real one, with billions of dollars in value and revenues. Instead of just buying an NFT for the fun of it, Sloties actually allow you to benefit from gaming.
There are many other projects using utility NFTs to their benefit – and those of the token buyers.
Should You Keep Faith in Utility NFTs?
For now, it is worth noting that utility NFTs are still in their infancy. If anything will be done with these tokens, prospective investors will need to verify the details of the utility that they claim to offer.
The cryptocurrency space is filled with several scam projects that claim to do something but aren’t true. Considering that there is still a lack of regulation in the NFT space, investors are tasked with verifying the details of the tokens they purchase.
Of course, this isn’t to say you shouldn’t invest in utility NFTs. Based on the intrinsic value that they offer, utility NFTs are actually a much better investment than just any other token out there. At the very least, they offer something. The problem is simply that you need to be more confident about the projects you’re backing by purchasing these tokens.
One of the most important trends in the cryptocurrency space over the past year is meme coins. The rise of Dogecoin has led to the creation of a wide range of other meme coins as investors flocked to them in hopes of making money.
Dogecoin rallied by more than 7,000% at some point earlier this year, attracting more people to the cryptocurrency world. As a result, investors started to focus on other meme coins and invest in them looking to make as much profit as Dogecoin did.
One of the biggest meme coins in the market is Shiba Inu (SHIB), the coin designed to “kill Dogecoin” and overtake it in the market. However, for those who are hearing about it for the first time, here is everything you should know about Shiba Inu.
What is Shiba Inu?
Shiba Inu (SHIB) is an Ethereum-based cryptocurrency that features the Shiba Inu dog. SHIB is considered by many to be an alternative to Dogecoin. However, the Shiba Inu coin was created to be the “Dogecoin killer.”
SHIB is a meme coin based on the Japanese Shiba Inu dog. The meme coins are usually launched as an inside joke rather than as digital products with real-world utility although Dogecoin has been around since 2013, Shiba Inu was launched in August 2020 by an anonymous individual or group called Ryoshi.
According to the 28-page whitepaper or woof paper, the goal of Shiba Inu’s creator was to move away from the rigid social structures and traditional mindset. Shiba Inu is designed to be an experiment in decentralized spontaneous community building” and to give power back to the “average person.”
How Does Shiba Inu Work?
Shiba Inu is an Ethereum-based token, which means that it is compatible with the vast Ethereum ecosystem. According to the developer, the Ethereum blockchain was the perfect host for Shiba Inu because it was already secure and well-established, and it allowed the project to stay decentralized.
The Shiba Inu ecosystem is comprised of three tokens and other services that users can enjoy. The three tokens are;
Shiba Inu (SHIB): SHIB is the project’s main currency. It is the token that powers the entire Shiba Inu ecosystem and has a total supply of 1 quadrillion. However, the developer locked 50% of the supply in Uniswap for liquidity purposes while Ethereum co-founder Vitalik Buterin was tasked with holding the remaining 50%. Buterin sold some of the tokens in his possession and donated the money to a Covid-19 relief fund in India, an act that further pushed SHIB’s price higher. Buterin burned 40% of SHIB’s total supply, reducing the possible amount available to users.
Leash (LEASH): This is the second token in the Shiba Inu ecosystem and it represents the other side of Shiba. Its total supply is 107,646 tokens, far below the trillions of Shiba Inu tokens.
Bone (BONE): This is the governance token of the Shiba Inu ecosystem. It allows the ShibArmy to vote on upcoming proposals and has a total supply of 250 million tokens.
There are other sides to the Shiba Inu ecosystem and they include;
ShibaSwap: This is the decentralized exchange of the Shiba Inu ecosystem. This is an exchange designed to allow people to trade cryptocurrencies in a decentralized manner.
Shiba Inu Incubator: The incubator is designed to discover ways to honor the creativity of artists outside of the traditional artforms. It aims to breed genuine creators of art and other content.
Shiboshi: These are Shiba Inu-generated Non Fungible Tokens (NFTs) available on the Ethereum blockchain each Shiboshi has a different trait, making them unique.
Is Shiba Inu Real Money? Why has it Rallied so Much?
It is tough to think of Shiba Inu as real money. The cryptocurrency space has evolved over the past few years to involve stablecoins. Stablecoins are digital currencies whose values are tied to fiat currencies. They are the most likely to be considered real money.
We also have some coins such as Bitcoin, DASH, Litecoin and some others that are designed to serve as currency and have received adoption in various parts of the world. However, Shiba Inu is a meme coin, and is hard to consider it as real money.
SHIB has been one of the best performing cryptocurrencies so far in 2021. Over the past three months alone, SHIB has added more than 500% to its value. It briefly overtook Dogecoin in terms of market cap.
The rally was caused by a wide range of things including getting listed on the Coinbase cryptocurrency exchange a few weeks ago. The rally brought so much media attention to SHIB and more investors flooded into the cryptocurrency.
Tesla founder Elon Musk added fuel to the fire when he tweeted a picture of his new Shiba Inu puppy Floki last month. thus, generating massive retail investor interest in the meme token.
The launch of the Shiba Inu NFTs also added to the excitement as NFTs are gaining popularity in the cryptocurrency space and beyond. There are currency unconfirmed rumors that popular stock and crypto trading app Robinhood is set to list SHIB on its platform. All these contributed to Shiba Inu recording massive gains in recent weeks.
Shiba Inu Wallet
As one of the top 20 cryptocurrencies in the world, SHIB is very valuable in the crypto space. It is an ERC-20 token, which means that it can be stored in numerous wallets that support Ethereum-based tokens. Some of the wallets you can use to store your SHIB tokens include;
Professional money managers use several technical, fundamental, and sentiment indicators to determine the future direction of gold prices. The Metal is both precious and industrial and is viewed as both a commodity and a currency. The yellow metal, as it is often referred to as, is generally quoted in US dollars and trades both as an exchange-traded instrument as well as over the counter.
How Do Professionals Trade Gold?
Gold is considered a safe-haven asset that appreciates in value when investors are looking for an alternative to other currencies that are depreciating. When interest rates are declining around the world, the demand for a currency that will sustain its value provides a backdrop for rising gold prices. Gold is traded in the cash, futures, and forward markets.
Gold has a forward interest rate, like dollar rates or Euribor rates. This interest rate called the GOFO rate increases relative to the US dollar when gold demand rises. Officially, the Gold Forward Offer Rate, or GOFO, is the interest rate at which contributors are prepared to lend gold on a swap against US dollars, they can use gold as collateral and potentially pay a much smaller rate of interest to borrow the cash than otherwise.
Cash, futures, and forward traders will evaluate three dimensions that provide them with a view of the gold market. These include the technicals, the fundamental backdrop, and sentiment.
Technical Analysis of the Gold Market
Professional gold investors attempt to analyze the long-term trend in gold prices by evaluating a weekly chart. Gold prices trend and trade sideways like other capital market instruments. By using different tools you can determine if the price is likely to trend or remain in a range.
Weekly continuous gold futures prices in August 2021are trading sideways to lower based on its position relative to the 50 and 10 Weekly Moving Averages.
Momentum is confirming this assessment as the MACD (moving average convergence divergence) index is generating a crossover sell signal, while the relatively tight distance between the moving averages suggest nearly flat momentum. The indicator is also suggesting momentum may be getting ready to accelerate.
The MACD is a very useful momentum index that uses moving average to generate a crossover signal that describes when positive as well as negative momentum is accelerating.
Momentum is Important
An often used momentum indicator is the Relative Strength Index (RSI). This momentum oscillator describes whether prices are accelerating relative to the last 14-periods.
After peaking during the week-ending August 7, 2020, the RSI has been trending lower. With a reading of 70 the high threshold and a reading of 30 the low threshold, the current reading of 47.56 indicates nearly flat momentum with a slight bias to the downside. Bullish gold traders are now waiting for the market to cross over to the strong side of the 50 level. This will give them an early jump on a shift in momentum to higher.
The key to using the RSI is to look at prior highs to determine how far momentum has accelerated in the past. The weekly RSI has hit levels of 82, 77 and 75 in the past, which means that positive momentum can still accelerate over the upper threshold at 70 as gold prices break out.
Gold Market Sentiment
There are several ways to determine market sentiment within the gold market. One of the best indicators is using the Commitment of Trader’s report released by the Commodity Futures Trading Commission (CFTC). This report helps traders understand market dynamics.
The COT reports show position data that is reported by category. This information is reported to the CFTC by brokers and clearing members. While the actual reason that a trader has a position is not reported, experts make certain assumptions that provide information about those positions.
Positions are reported by category. For gold futures and options, the categories include swap dealers, managed money, and other reportables. Swap dealers include banks and investment banks as well as industry-specific merchandisers. Managed money includes hedge funds, pensions funds, and mutual funds. Other reportables is retail trade.
The CFTC staff does not know specific reasons for specific positions and hence this information does not factor in determining trader classifications. For example, the CFTC does not know if a swap dealer is taking a speculative position or hedging risk. What experts need to evaluate is why positions are increasing or decreasing.
Professional traders generally assume that all the swap dealer positions reflect hedges from deals transacted with gold producers and refiners. Those positions are offset with speculative positions taken by managed money.
Managed money takes positions that provide you with information about sentiment. There are two concepts that you need to evaluate. The first is a trend in place. If the COT information shows that managed money or large specs are increasing their long positions, sentiment toward gold is increasing. If they are increasing their short positions, then the negative sentiment is increasing.
The second concept is whether the open long or short positions in managed money is overextended. If managed money is overextended, sentiment is too high and prices could snap back quickly.
The two most important gold fundamental indicators are the direction of US Treasury yields and whether the US dollar is likely to rise or fall.
Higher Treasury yields or interest rates raise the opportunity cost of holding non-interest-bearing gold. In another way to look at it, since gold doesn’t pay interest or a dividend to hold it, rising or high interest rates make gold a less attractive investment. When interest rates fell to near zero as they did in 2020 – 2021, gold became a more desired asset.
Since gold is priced in US dollars, when the dollar rises, it makes gold more expensive to holders of foreign currencies. This means gold prices need to fall to accommodate the higher cost of purchasing it in dollars. The reverse is true when the dollar declines.
A third fundamental factor to watch is consumer inflation. Gold is viewed as a hedge against inflation, which can be caused by massive stimulus measures. When inflation is on the rise, gold prices will offset increases in a basket of goods or services.
Gold prices fluctuate weekly, and over the long term either trade within a trend or consolidate. There are several technical indicators, such as the MACD, RSI, and Moving averages that can help you determine the future direction of gold prices.
In addition, professional traders use a combination of technical analysis, sentiment analysis, and fundamental analysis to determine the future price of gold.
Sentiment analysis can include the Commitment of Traders report released weekly by the CFTC.
Additionally, professional investors will track the direction of Treasury yields and the value of the US dollar, which are the driving forces behind the value of gold.
Technical analysis is the study of trading activity through the use of patterns, trends, price movement, and volume. Fundamental analysis is the study of price movement to determine the value of an asset. Sentimental analysis is feeling the tone of the market through the study of crowd psychology.
Each of these methods of looking at an asset’s value has its merits and no one of them is complete on its own. Still, with some types of trading, you will want to rely more heavily on one type of analysis than another in order to better control the risk.
Analysis Tools Defined
Technical analysis differs from fundamental and sentimental analysis in that it only takes into account the price and volume of an asset.
The core assumption is that all known fundamentals are factored into price; thus, they become irrelevant and there is no need to pay close attention to them.
The technical trader is not attempting to measure the asset’s intrinsic value, but rather trying to use technical analysis tools like chart patterns, oscillators and trends to determine what an asset will do in the future.
Fundamental analysis relies on macro-and micro-economic factors to determine the long-term and short-term value of an asset. Fundamental analysis looks at the factors that cannot be measured in a price chart. Some of these factors include supply/demand, economic strength, and economic growth.
Sentimental analysis has often been described as “reading the news”. However, it is probably closer to “reading the price action”. This is because something reading the headlines can fool a trader. Therefore, sentimental analysis works better over the short run with technical analysis, but over the long run, fundamental analysis will likely override any short-term sentimental biases.
Trading with sentimental analysis alone can be effective, but you need to be patient when you utilize this method. News does not happen every day for every asset. If you specialize in currencies, for example, you might only be making a couple of trades per week.
How and When to Use the Three Analysis Tools
Every trader will have a slightly different way of analyzing their assets of choice, and this is okay.
Some traders refer to themselves as pure technical traders and choose to ignore the fundamentals completely. They rely on statistical confidence in trading signals and assume the fundamentals have been priced into their analysis.
Fundamental traders tend to develop a bias in a market based on the macro-economic or long-term fundamentals then make adjustments to the microeconomic or short-term fundamental news.
Sentimental traders tend to react to the headlines and trade the momentum based on the news. This implies that a sentimental trader leans toward the technical side since momentum refers to price action.
A sentimental trader is linked to the fundamental side of the equation because the best momentum-generating headline is often caused by a surprise in the news. In order to be surprised by the news, one has to know the fundamental expectations ahead of a report, for example.
There is no one way to trade that is better than another. However, when measuring trading risk, technical analysis is probably the best tool to use. Furthermore, when building a trading system, technical analysis is probably best because of the plethora of statistical tools available to back-test trading theories.
It’s difficult to measure the success of fundamental analysis over the short run because it takes a long-time for a major fundamental event to develop. Think about how difficult it is to trade central bank activity over the short run. Then think about how much easier it is once a central bank decides to loosen or tighten policy.
Sentimental analysis is primarily used by the trader who likes action. The sentimental trader often has an indication of what the fundamental report is expected to show then reacts to whether the report is above or below expectations. Furthermore, the trader likely takes a peek at the chart to determine the momentum of the price action. In this case, it’s safe to say the sentimental analysis trader is more likely to use a blend of technical and fundamental analysis.
Many people thrive on short-term trades, but just as many need to trade longer-term in order to be successful. A well-rounded approach will utilize both time frames and will also use all three types of analysis.
You’ve probably heard the popular phrase about how you shouldn’t keep all of your eggs in one basket. This is a fancy way of saying you shouldn’t rely solely on one method for success. This suggests that trading a blend of technical, fundamental, and sentiment analysis may be the best approach with more control over risk.
Trading is a high-risk activity any way you look at it and you will want to reduce that risk for long-term success. A little bit of short-term trading plus a little bit of long-term trading will be your best choice for sustained results. Just like blending a little technical analysis with a little fundamental analysis.
Meanwhile, if you like trading the action then sentimental trading is probably the best, provided you use technical chart points to control the risk.
Sentiment about cryptocurrencies was split among users after the market drawdown in May. More experienced traders were ready for the fall, and mainly newbies and enthusiasts lost their funds and exited the market in anger.
In this review, I will try to tell, based on personal experience and knowledge, all the subtleties of trading on the crypto market.
Cryptocurrency trading spot or derivatives
Today, exchanges and marketplaces offer many trading tools for trading in the cryptocurrency market. Crypto markets offer different contracts, like spot and derivatives. A significant difference between trading on the spot market and the derivatives market is the actual acquisition of an asset. So, for example, when trading on the spot market, a person acquires an asset for the purpose of selling it in the future to generate profit from a difference in price.
Trading in the spot market can be compared to trading in the stock market, and the person trading in this market will be considered an investor. To fix profits on the spot market, you can set only one order – a sell order, and place a buy order to buy putting the amount of the purchased or sold the asset. The most popular exchanges for spot trading are Coinbase, Kraken, Gemini, Binance.
Unlike the spot market, when trading in the derivatives market, a person does not actually acquire an asset but opens a position for the purpose of price speculation, and a person trading in this market is classified as a trader. The advantage of trading in the derivatives market is trading in both directions, that is, profits can be obtained even if the price of an asset falls, comparable to trading contracts for differences (CFDs) and trading futures (also a class of derivatives). Derivatives trading platforms provide a fairly high leverage, which allows a trader to increase his capital and reap great benefits, but also implies the risk of losing all funds in the position.
It is also important to take into account that trading on the derivatives market, a trader can set various orders to make a profit from the trade or accept a loss for the trade: take profit and stop loss functions. That is, since the asset is not actually purchased, two orders can be placed simultaneously. The advantage is that a trader, when the price reverses, will be able to close the position with an insignificant loss, and if the price continues to move in the predicted direction, close the position and fix the profit automatically. Popular exchanges and platforms for trading crypto derivatives: FTX, Bybit, Overbit, and Bitget.
Market analysis and education
There are several types of analysis for predicting price movement: technical, fundamental, market sentiment analysis.
The most popular type of market analysis, which includes the study of asset price movements and trading volumes. Everyone determines for themselves a trading strategy based on technical analysis, but mainly Dow theory, Elliott Wave theory, and Fibonacci mathematical tools are used. The best tool for technical analysis nowadays is considered TradingView.
The study includes an analysis of such fundamental data as the financing of the project, reports on the updates made, deposit/withdrawal of funds to/from the exchange, the open interest ratio, the funding rate, as well as, if the asset is traded against a currency, economic data affecting this currency (more often the US dollar).
Market sentiment analysis
The second most popular analysis method in the cryptocurrency market. Market sentiment is calculated using algorithms that wander popular social networks and all over the Internet looking for positive and negative comments about the cryptocurrency. Such algorithms are used to calculate one of the important indexes – the “Fear and Greed” index.
Most crypto exchanges and cryptocurrency trading platforms provide their own training materials, but they are more introductory and do not contain detailed information. Therefore, after reading materials on any type of analysis of the cryptocurrency market, you should not consider yourself a pro and open positions that exceed 50% of your deposit. Coinbase is a good example of providing educational material. To start trading after completing the training, you can use indefinite demo trading on HitBTC for spot, Binance and Bitget for derivatives, the latter provides only a few pairs, but the balance can be replenished with an unlimited number of times.
There are groups and traders, as well as various applications/indicators that sell signals for a certain fee. Signals are calls to open a position or place an order when a certain price is reached. You must study each received signal yourself, if you are ready to use such services, then do not disregard your own analyses, so you can learn how to trade yourself even faster.
You can use signals and enter manually into the market, or you can copy the orders of popular traders. Copy trading is based on the automatic opening of a position with the copying of all settings: entry price, take profit, stop loss. The world leader and first social trading platform, eToro pioneered copy trading in the forex market, and now provides the same platform with minor modifications for trading cryptocurrencies. Copy-trading can also be used to conduct your own analysis, to consider why the trade was successful and vice versa.
On BitGet platform, which claims to have a higher copy trading turnover than eToro, it is possible to view all traders in detail, consider the trading strategy and positions, which can also be used to study trading in the market. Just like trading with other tools, copy-trading has its own risk of account drawdown, therefore, before subscribing to a trader to copy his trades, you need to view the history of his trades in detail, as well as find information about him on the Internet, in social networks.
Trading in the cryptocurrency market has its risks, but so does the reward. You should always take a cold-blooded attitude towards all market situations. To begin with, study the market, study and possibly start using signals and copy trading on small volumes, but always strive for an independent understanding of the market and analyze. Study carefully risk management, never trade more than 50% of the balance at the initial stage. Do not get upset about low profits, a small profit is better than any loss.
U.S. corporate buybacks are on the rise in 2021 lifting investor spirits after last year’s pandemic dampened activity. While most investors are eager to see how much buybacks may support their investments, some are confused over what they are and how they work, and whether they are actually good or bad for a company’s stock price.
Corporations often buy back large blocks of their stocks typically when share prices are low, but some may choose for other reasons to buy their company’s stock even when analysts believe company shares are overvalued. Whether they buy their shares at cheap or expensive levels, a stock buyback is not always beneficial for individual investors.
Stock repurchases weren’t always legal per se. After the stock market crash of 1929 and the Great Depression, the U.S. government passed the Securities Act of 1933 and the Securities Exchange Act of 1934 to try to prevent it from happening again.
The 1934 legislation didn’t bar stock buybacks, per se, but it barred companies from doing anything to manipulate their stock prices. Companies knew that if they did a stock buyback, it could open them up to accusations from the Securities and Exchange Commission (SEC) of trying to manipulate their stock price, so most just didn’t.
Tax cuts during the Trump administration made stock repurchases very popular as corporations spent billions on their own stock to reward shareholders and investors. However, corporate executives and insiders have also been accused of taking advantage of the stock buyback boom to sell shares they own to the companies they work for, profiting handsomely. Companies are spending millions or billions of dollars to reward shareholders and prop up their stock prices with buybacks, even if that means laying off workers to do it.
Recently, the Biden Administration announced it was planning on reforming current tax laws. If corporations begin to fear that some of the tax advantages of a stock buyback may be reduced or eliminated then this may encourage companies to become more active in 2021 before the tax changes become law.
What is a Stock Buyback?
A stock buyback, also known as a share repurchase, takes place when a corporation buys its own outstanding shares in order to reduce the number of shares available on the open market.
In a stock buyback, a company repurchases its own shares from the broader marketplace, usually through the open market. That leaves the remaining shareholders with a bigger chunk of the company and increases the earnings they reap per share, on top of the regular dividend payments that companies make to shareholders out of their profits.
Why Companies Perform Buybacks
Corporations buy back shares for a number of reasons such as to increase the value of remaining shares available by reducing the supply of outstanding shares or to prevent other shareholders from taking a controlling stake, sometimes called a hostile takeover.
Another reason for a buyback is for compensation purposes. Companies often award their corporate employees with stock and stock options. This benefits the existing shareholders and board members who are usually paid in stock options.
Pros of Stock Buybacks for Investors
Boost in share prices
Better earnings per share
Less excess cash
“With the market being as expensive as it seems, share repurchases could drive the market that much higher,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
“It adds to the Street’s belief that there’s an underlying bid, we’re not in this alone, and someone else is going to support the stock and that’s the company,” he said. “It turns out to be a good thing for share prices. But they run the risk of overvaluing stocks, and it speaks to the broader question about why companies are doing it.”
Cons of Stock Buybacks for Investors
Poor use of capital
Cover for stock handouts
Larry Fink, CEO of BlackRock, one of the largest investment companies in the world, in 2014 warned U.S. companies to slow down on buybacks and dividends.
“We certainly believe that returning cash to shareholders should be part of a balanced capital strategy; however, when done for the wrong reasons and at the expense of capital investment, it can jeopardize a company’s ability to generate sustainable long-term returns,” he wrote in a letter.
Recent Activity Indicates Companies Leaning to the Pro Side
The rapidly improving economy and stocks at record highs may be fueling a flurry of stock buyback activity in 2021.
Banks have improved their capital positions and should be allowed to continue to buy back their own shares, Treasury Secretary Janet Yellen said in March.
Regulators restricted share repurchases in 2020 for the biggest institutions in the country as a precautionary measure after COVID-19 reached pandemic status. After those banks passed a pandemic-focused stress test in December, the Federal Reserve said it would allow buybacks to resume, though with some restrictions.
Yellen, speaking in March before the Senate Committee on Banking, Housing and Urban Affairs, said she agreed with allowing the share buybacks.
“I have been opposed earlier when we were very concerned about the situation the banks would face about stock buybacks,” Yellen said. “But financial institutions look healthier now, and I believe they should have some of the liberty provided by the rules to make returns to shareholders.”
They are expected to do just that as the buyback restrictions eased during the first quarter of 2021.
While Yellen see no problem with financial institutions resuming buyback activity, Warren Buffett’s capital-deployment machine pulled back on several fronts at the start of the year as the billionaire took a more cautious stance on stocks.
Berkshire Hathaway Inc slowed its buyback pace, according to a regulatory filing Saturday. Buffett has struggled in recent years to keep up with Berkshire’s ever-gushing cash flow. That’s led him to repurchase significant amounts of Berkshire stock, pulling a lever for capital deployment that he had previously avoided in favor of big acquisitions or stock purchases. He set a record in the third quarter of last year, snapping up $9 billion of stocks, but slowed that pace during the first quarter with repurchases of $6.6 billion.
Berkshire repurchased more stock in January and February than the company did in March when the stock climbed 5.8% according to the filing. Buffett’s long been disciplined on the price of buybacks, noting in 2018 when the company loosened its repurchase policy that he and his longtime business partner and Berkshire Vice Chairman Charlie Munger can repurchase shares when they’re below Berkshire’s intrinsic value.
Despite buybacks that fell short of Buffett’s quarterly record, the billionaire investor has continued to go after Berkshire’s own stock since the end of March, with at least $1.25 billion of repurchases through April 22, according to the filing. And given that Berkshire has no set amount allocated for buyback plans, sizable repurchases are still a nice bit of capital deployment, according to CFRA Research analyst Cathy Seifert.
“The fact that Berkshire allocated over $6 billion to buybacks this quarter is going to be positively received by investors” Seifert said.
What Bloomberg Intelligence Says
“The $6.6 billion 1Q buyback was an expected drop from 4Q, but still significant. Nearly all segments showed accelerated revenue and earnings.”
Share Buyback Plans are Booming
Corporate buyback announcements ‘exploded’ as trading in April wrapped up and that helped push stocks higher, said Vanda Research.
A jump in buybacks should help soften the blow in the U.S. equity market in the event of a drawdown.
“As net equity supply shrinks every dollar invested in the U.S. market will have a larger marginal impact,” said Vanda.
These are essentially cryptographic assets on blockchain with unique identification codes and metadata. These codes and metadata make them individual and unique.
One characteristic of an NFT, therefore, is that it cannot be copied or duplicated.
An example of an NFT from the real world would be a piece of art, such as the Mona Lisa. While Leonardo Da Vinci is known for numerous pieces of art, there is only one Mona Lisa.
While you can trade one Litecoin for another, you can’t trade one Mona Lisa for another Mona Lisa.
For the world of blockchain, a key advantage of NFTs is that they cannot be copied. And so, unlike the Mona Lisa, NFTs can be bought and sold without the possibility of fraud.
In the art world, a lot of money is spent to authenticate pieces of work before being sold. An NFT does not need middlemen to ensure authenticity.
What is fungible vs. non-fungible?
According to the Cambridge Dictionary, fungible or fungibility means simply interchangeable. “This is a characteristic of most financial instruments and market assets.”
By contrast, non-fungible property/assets/funds are not easy to exchange or mix with other similar goods or assets.
In other words, stocks, Certificates of Deposits, Cryptos, etc. are fungible assets.
An example of a non-fungible asset would be land or even diamonds. While land is a simple one to classify, each individual diamond is also unique. Each diamond has a different cut, size, grade, and so forth and therefore can’t be interchangeable with another diamond.
How Are NFTs Created?
NFTs are very simple to create, unlike blockchains and cryptocurrencies.
A number of NFT market places allow users to freely create an NFT and no programming knowledge is required.
Market places that currently allow users to freely create NFTs include OpenSea, Raible, or Mintable.
Creating art NFTs is particularly popular and these market places cater for just that.
How do NFTs work?
NFTs are digital tokens that are on a blockchain ledger. Once created, the market then trades the NFTs across market places.
Once an NFT is created, there is a proof-of-ownership that must be stored securely in an NFT wallet.
It is the proof-of-ownership that is ultimately the tradeable and non-fungible asset.
Once created, the blockchain ledger records the NFTs and their unique identifying codes. The blockchain ledger then also records each sale and resale and ownership.
This not only prevents the copying of an NFT but also removes fraudulent claims of ownership or even claims over creation.
Why do NFTs have value?
This is simply a case of supply and demand. The key here is the supply side that drives up the value of NFTs. Since there is only one individual asset, high demand can lead to significant increases in value.
Taking the Mona Lisa as an example, experts estimate the value of the Mona Lisa at more than $800m. Had Leonardo da Vinci painted numerous Mona Lisa paintings to exactly the same quality, these would be fungible. Their value would also be significantly less than the single painting thought to be edging towards $1 billion.
As the NFT market expands, the number of NFTs are likely to increase significantly. At this stage, demand will likely become the key price dictator.
Market appetite will continue to dictate value. A unique NFT of interest versus one of little interest to collectors and investors will vary significantly in price.
For example, Twitter CEO Jack Dorsey recently tweeted a link to a tokenized version of his first-ever written tweet.
Bids have reportedly reached in excess of $2.5 million. Other Jack Dorsey tweets are unlikely to have a collectible value, however, even though each tweet is unique.
How do I buy or trade NFTs?
For those looking to buy or trade NFTs, identifying the right marketplace is the first step.
There are numerous market places at present that cater to different areas of the collectible world.
For instance, NBA Top Shot is a marketplace for those looking to buy video highlights. Cryptoslam! is a site that lists the largest market places by sales volume for those looking to enter the NFT space.
There is also Sorare, which is a fantasy soccer marketplace, where you can manage, and buy and sell virtual teams. At the time of writing, Sorare ranked fifth on the all-time sales list, with $24.41m in total sales.
CryptoPunks ranks 2nd on the all-time sales volume list has 10,000 uniquely generated characters. Each can be officially owned and proof of ownership is logged on the Ethereum blockchain.
While there are many market places, those wanting to purchase an NFT will need an NFT wallet in order to store any purchased NFTs.
There are a number of NFT wallet providers in the marketplace. As with cryptos, NFT holders must store-purchased NFTs securely. Hard wallets would be more secure, protecting NFT holders from hackers.
When it comes to purchasing NFTs, some market places support purchases with a credit card. Others, however, require purchases with Ethereum.
For Ethereum purchases you will need to fund your NFT marketplace account with Ethereum to proceed.
To purchase your NFT, most market places sell NFTs in an auction. You simply need to place your bid and wait until the conclusion of the auction.
If your bid was successful, your account would be debited and your NFT wallet credited with your newly purchased NFT.
What are the most expensive NFTs?
Of late, NFT market news has flooded the crypto and mainstream newswires. With tech-savvy investors looking to be first to market, there have been a number of eye-watering bids for NFTs.
The largest NFT market places ranked by sales volume (all-time) at the time of writing include:
NBA Top Shot: Total sales $386.55m.
CryptoPunks: Total sales $161.32m.
Hashmarks: Total sales $43.71m.
For a full list of the largest marketplace NFT sales over the last 24-hours, 7-days, 30-days, and all-time, visit Cryptoslam.io.
Here you can view sales over a specified time period, the price change over the specified time period, and the number of buyers and transactions.
Taking a look at NBA Top Shot, there have been a total of 2.46m transactions that have led to total sales of $385.56m.
What is NBA Top Shot?
An NBA-Dapper Labs collaboration, delivering an on-line platform for trading virtual basketball cards.
These all exist on the blockchain making them unique and impossible to copy. More importantly, for some, authentication is immediate.
With the added advantage of virtual tech, it’s not just virtual basketball cards that are drawing attention.
There are also “moments” that are selling for 6 figure sums. Moments are video clips of the more popular players from the NBA.
One LeBron moment reportedly sold for $208,000…
Looking at the numbers for the broader NFT market, the last 30-days has been headline-grabbing.
From the $385.56m total sales across NBA Top Shot, more than $300m came from the last 30-days.
Looking at individual NFT sales
Christie’s Auction sold Beeple NFT for a whopping $69.3m. This is by far the largest sale to date.
The next 4 largest NFT were the sales of CryptoPunk characters. Sale prices ranged from $7.6m for CryptoPunk #3100 to $1.3m for CryptoPunk #4156.
When choosing a suitable exchange to buy Dogecoin, the trading volume must be among one of the key deciding factors.
When selecting an appropriate exchange, there are also a number of other factors to consider. These include:
Jurisdiction: Ensure that you find an exchange that supports your jurisdiction and language.
Exchange security: When considering the cases of exchange hacks in the not too distant past, 2FA should be a minimum requirement if you plan to hold your Dogecoin on an exchange.
Exchange Capabilities: For those look for more than just buying and holding, access to trading indicators and risk management controls including stop loss would be a consideration.
Trade pairings: For those looking to purchase with fiat money, the option to deposit fiat or purchase with fiat money is important. Not all exchanges support crypto purchases with fiat money.
Exchange Fees: Fees do vary significantly across the exchanges. This becomes a greater consideration for those looking to buy and sell Dogecoin on a more frequent basis.
Platform customer support: It is always important to have access to customer support to assist with any issues.
When considering the above, WenX Pro has the largest 24-hour DOGE/USDT trading volume at $360.16m
A distant 2nd and 3rd, by volume, are Binance ($149.81m) and CoinDCX ($149.70m), according to Coinranking.com.
For many, Binance may be the preferred exchange simply for market position and the sheer size of its global network.
When trading cryptos, significant daily volatility means that liquidity must be a deciding factor to limit slippage.
Before signing up to an exchange in order to purchase your Dogecoin, you will need a Dogecoin wallet.
To get started, simply:
Get a Dogecoin compatible wallet.
Buy some Dogecoin.
Use your Dogecoin.
From the Dogecoin homepage, you can download a Dogecoin wallet for desktop or smartphone.
For your desktop, you can select a wallet for Windows, OS X, or Linux.
We do recommend that you store all of your purchased Dogecoin within your personal Dogecoin wallet.
Once you have your Dogecoin wallet, sign up to a Dogecoin-supported exchange and purchase your Dogecoin.
<h2 “what”>What can I buy with dogecoin?
The main uses of Dogecoin are currently:
Purchasing goods and services.
Tipping across the Dogecoin community.
Donating to charities.
For those looking to purchase goods with Dogecoin, there are numerous merchants that accept Dogecoin.
Dogecoin holders can purchase a wide array of goods ranging from cars to precious metals.
One of the more prominent companies accepting Dogecoin is the U.S NBA franchise the Dallas Mavericks.
In early 2021, the Dallas Mavericks owner claimed to have done more than 20,000 #Dogecoin transactions. Mark Cuban’s NBA franchise had become the largest Dogecoin merchant in the world.
What is going on with it now?
Its rise to fame has led to a far wider acceptance of Dogecoin.
Across the U.S, CoinFlip announced in early 2021 that people could purchase Dogecoin at 1,800 ATMs across 46 states.
Through the early part of 2021, Dogecoin had hit the crypto news headlines as more famous members of the crypto community began to plug Dogecoin.
Unlike other cryptos, such as Bitcoin and Litecoin, there is an infinite number of Dogecoins. As a result, Dogecoin will not face the same supply and demand outlook as the likes of Bitcoin and Litecoin.
While the endless supply means that the upside for Dogecoin may not be as meteoric as Bitcoin’s, there are also benefits.
The endless supply does mean that Dogecoin is ideal for smaller transactions.
At the time of writing, DOGE stood at $0.0575. While well below the January 2021 all-time high of $0.1004, DOGE has managed to retain much of its 2021 gains.
The crypto newswires contributed to late January’s spike and the upside for the current year.
Year-to-date, Dogecoin was up by over 1,000%, with the Dogecoin Shibes looking for a return to $1 levels.
As the community grows and Dogecoin becomes more widely accepted, more plugs by the crypto elite would support a return to $1 levels.
What are the risks of investing in dogecoin?
As is the case with any crypto, the volatility alone means that investors must trade Dogecoin with care.
As previously mentioned, the other issue that Dogecoin holders face is the endless supply.
This means that any intrinsic value could be diluted as the crypto market gets flooded with more Dogecoin.
As Bitcoin and Litecoin gain market interest, their finite supply remains an allure that Dogecoin is unable to compete with. This leaves holders facing downward pressure as the broader market makes ground.
On the tech side, there have been no material changes to the Dogecoin blockchain in recent years. This means that Dogecoin could also become dated and fall behind its peers.
There have been reports of Dogecoin Shibes leaving the Dogecoin community in favor of more current platforms.
As things stand, the Dogecoin community has been key to delivering price support. The community has, in the past, raised funds to return monies to those who have been hacked.
Once the community begins to weaken, Dogecoin may lose ground without any blockchain enhancements.
Why is dogecoin so popular?
In the early years, Dogecoin’s almost instant popularity was attributed to the founders’ lightheartedness.
While a number of crypto communities were battling it out, Dogecoin was meant to be a joke.
More significantly, however, was undoubtedly the generosity of the Dogecoin Community.
Not only did the community raise funds for multiple charities and good causes but also raise funds to cover losses faced by hacked Dogecoin holders.
To this day, the Dogecoin Community remains integral to the ongoing success of Dogecoin and its continued popularity.
Celebs and Dogecoin
A number of crypto celebs have surfaced and 4, in particular, have plugged Dogecoin, contributing to its early-2021 surge to $1.
Elon Musk, Gene Simmons, Mark Cuban, and Snoop Dogg are perhaps the most famous of them all.
Tesla Motors CEO Elon Musk single-handedly drove Bitcoin to its current all-time high $61,699 and Dogecoin to its all-time high.
After Tesla Motors’s purchase of Bitcoin and its acceptance of Bitcoin as payment, the Dogecoin plug had hit in the midst of the crypto market frenzy
As more prominent crypto advocates plug the likes of Dogecoin, the markets will be looking for fresh highs.
How Will State-Backed Digital Currencies Shape the Global Economy?
With improved transparency, traceability, security, CBDCs help central banks in creating a more efficient economy.
As cryptocurrency adoption has significantly increased among retail investors, institutionals, and numerous traditional finance players, central banks have entered into a heated race to develop their own CBDCs.
According to a Bank of International Settlements (BIS) survey from last May, 65% of the polled central banks stated that they had actively researched CBDCs. And multiple governments are well beyond the decision-making and research stages.
While the Bahamas have launched the digital sand dollar last October as the world’s first CBDC, China has emerged to be a leader in this field among major economies, conducting extensive pilots and preparing a draft law for its digital yuan project.
Sweden’s Riksbank has also been actively testing its e-krona CBDC, with its central bank recently announcing a one-year extension for the project. The Scandinavian nation’s government has already started reviewing whether to implement the digital currency expecting to complete it by November 2022.
CBDCs have become a top priority for central banks that had been previously hesitant about digital currencies. While the US published a research paper on central bank digital currencies last month, the EU announced the end of its public consultation on CBDCs in January.
Why Are Governments So Interested in CBDCs?
It’s no surprise that there is such a high demand for CBDCs among governments.
CBDCs combine most of the benefits of existing cryptocurrencies – such as the lack of intermediaries, enhanced transparency and traceability, secure and continuously operating networks, as well as instantaneous and cost-efficient payments – with increased government control and oversight.
For that reason, CBDCs allow nations to transform their existing financial and payment infrastructures to create a new, more efficient economy while maintaining their control over money issuance.
As state-issued and controlled digital assets tied to the value of national currencies, CBDCs use permissioned blockchain networks or another form of distributed ledger technology (DLT).
This allows the government to have full control over the network and the state-backed digital currency powering it and a deeper insight into its citizens’ finances.
While the latter could hurt users’ privacy, a government-controlled digital currency allows the state to crack down on illicit activities more efficiently. Examples of such include terrorism financing, money-laundering, and payments-related fraud, all of which have been presenting major problems for most nations worldwide.
In addition to a better taxation system and real-time insight into the current macroeconomic situation, CBDCs can finally offer a proper solution to the unbanked.
And we shouldn’t forget about cross-border payments, which have been traditionally going through obsolete and inefficient networks. Instead of slow and expensive transfers, international CBDC transactions feature (near-)instant settlements with inexpensive fees due to the lack of intermediaries.
The Future of CBDCs and Their Impacts on the Market
In 2021 and beyond, I expect the central bank digital currency race to further intensify, with multiple governments launching their CBDCs in the next few years.
However, even with several CBDCs on the market, the demand for decentralized cryptocurrencies will significantly increase among both retail and institutional investors in the coming years.
In addition to hedging against general market risks and inflation, crypto will provide a more private, trustless, and democratic alternative to the centralized and government-controlled networks of CBDCs.
For these reasons, even before state-backed digital currencies are launched, regulators will take action to provide more clarity around crypto, especially if more high net worth players join the space and put pressure on governments to act.
On the other hand, banks that have been the primary beneficiaries of the current financial system will face significant losses of revenue after the appearance of CBDCs.
Since central bank digital currency networks will operate without intermediaries, banks will lose out on most of the fees they currently collect from customers.
For that reason, they will be forced to innovate to minimize their losses and maintain their growth and market positions.
Creating a New World Economy
CBDCs have the potential to significantly improve finance while providing multiple benefits to both individuals and governments, such as making cross-border transactions faster and cheaper, combatting payments-related crimes, and controlling money issuance more efficiently.
With that said, there is still a lot of work to be done in this field.
But if it all works out, CBDCs could become the rails by which the world will move into a new economy.
Petr Kozyakov, co-founder and CBDO of the global payment network Mercuryo
NEM is a blockchain written in Java, the double-layer blockchain supports multiple ledgers on its cryptocurrency layers. NEM’s ecosystem is built in such a way that seamlessly connects and transfers any type of digital assets between private and public blockchains. A collective growth mindset, made NEM to abdicate the POS consensus and introduce the POI. NEM is the world’s first practitioner of POI (Proof-of-Importance) consensus. Although it is similar to Proof-of-Stake which requires locking of certain amounts of coins in the ecosystem, there are several major differences.
The key difference between the POS and POI consensus is that in the POS consensus the amount of coins staked does matter, whereas a staker allocating 10% of the staked amount will be able to mine only 10% of blocks in the network. The POI consensus is used to determine network participants which are eligible enough to add blocks to the blockchain, in NEM’s ecosystem adding blocks to the blockchain is called “harvesting”.
In POS the more coins one stakes, the higher the reward and the reputation, however in POI mechanism, there are three key factors which build the reputation of the node: vesting (holding of 10000 XEM in the wallet), transaction partners, number of transactions within 30 days.
Symbol is NEM’s project mainly focused on Enterprise. Symbol is a hybrid blockchain, which means that the blockchain is not fully accessible by anyone although it still bears features of a blockchain such as transparency, security and solidness. The hybrid blockchain is fully customizable and blockchain nodes can decide which transactions should be verifiable, who can participate in the blockchain and which transactions can be public.
The interoperability of public and private chains from what it seems like allow a cost-efficient, seamless data transfer between these two chains, avoiding third party bridges, which are used in interconnection of public and private chain protocols. Just like other blockchains built nowadays, Symbol is interoperable, which means no intermediaries needed for data transfer and token swaps between any blockchain and Symbol.
As NEM commented, the launch of the mainnet of Symbol is scheduled on March 15, after a long 4 years of developments. On March 12, the project will pre-launch Opt-in and snapshot phase at a block height of 3,105,500.
The Opt-in means that any NEM’s proprietary token – XEM holders can receive Symbol’s proprietary token – XYM upon the mainnet launch. Basically what that means is that during the block height of 3,105,500 the system will read all wallets that have participated in the Opt-in and will allocate XYM to the Symbol account created during the Opt-in, which is exactly the same as the balance of one’s XEM wallet. In other words, hold your XEM in your NEM wallet (note: the wallet must be updated to the latest one), apply for Opt-in, create a Symbol account, for each 1 XEM in your balance you will receive 1 XYM, the XEM balance will remain intact, according to the announcement on NEM’s official website.
How is it going to impact XEM?
The Symbol is a promising project, it already made partners with some big names in the industry. The XYM token is already listed in Poloniex, Bitpanda, Gateio and others, and listing of the XYM is already on the task list of giants such as Binance, Huobi, Kucoin and 17 other exchanges. Some exchanges will support the snapshot of wallets for XYM allocation, among such are Binance, Kucoin, and recently announced Coinex.
While the excitement in this airdrop is heavy, XEM price seems to be silent and waiting for an alert to trigger. While the cryptocurrency market is in an uptrend today with Bitcoin gaining almost 4% today only according to the data of the cryptocurrency trading platform Overbit,
XEM/USD lies low like a leopard before a jump.
Based on the technical chart analysis, XEM/USD is currently in a corrective 5-wave ABCDE formation, which formed a symmetrical triangle. Based on the technical analysis, the chart pattern and the MACD indicator, XEM/USD will probably break the upper edge of the triangle and move upwards. The resistances to watch here are $0.7530 and $0.8000. Closing below the lower edge might lead to a drop to $0.6100 and $0.6000.
One should bear in mind that in most cases listings of new coins and airdrops led to massive sell-offs among the token investors. In case of NEM and Symbol such might not be the case or the so-called “dump” might not be as heavy as during the boom of ICO’s.
The first reason is that in the emerging ecosystem of NEM, many might consider becoming network participants, the overall crypto market sentiment still remains bullish and tokens of cross-chain networks such as Polkadot are among the top investment appealing, enterprises are going blockchain and are integrating blockchain into their existing network another example of a project which allowed enterprises to connect their external data to blockchain is Chainlink, whose token LINK is along-side Polkadot’s DOT is an outperforming coin and still is appreciated by long-term investors.
As the crypto-adoption is growing, more stores are tend to accept cryptocurrencies as payment, projects like Symbol will assist in bringing the crypto and blockchain to the IoT we got used to.
The US dollar is the most widely used and recognized currency worldwide. Central banks and governments hold US dollars as the primary exchange asset of their foreign exchange reserves. The dollar is the world’s reserve currency.
Reserve currencies are liquid, making them the foreign exchange instruments of choice for central banks and financial institutions for settling international transactions. Settling cross-border obligations with a reserve currency eliminates the need to exchange a country’s currency for each transaction.
The US dollar is the leading reserve currency because of the long history of political and economic stability in the US, the world’s leading economy. The dollar index (DXY) trades in the futures market on the Intercontinental Exchange (ICE) and the over-the-counter market between foreign exchange dealers.
The DXY reflects dollar strength or weakness and is a pricing mechanism for many commodities
Commodities are the raw materials that feed, clothe, power, and shelter the world. Production is a local affair in areas where the earth’s crust is rich in ores, minerals, metals, and energy. Agricultural products require suitable climates and available water supplies. Consumption is ubiquitous as people worldwide require essential commodities.
The pricing benchmark for most commodities is the US dollar because of its liquidity, stability, and role as the leading reserve currency. Local production costs and consumer prices may in various currencies, but wholesale supplies use the US dollar as the means of exchange. Over time, a rising dollar is typically bearish for commodity prices, while weakness in the reserve currency is a bullish factor. A strong dollar makes local production expenses fall, allowing foreign producers to sell output at lower prices and vice versa.
How is the DXY Index Calculated
The dollar index measures the US currency against other reserve currencies. Since the euro is the second-leading reserve currency, it has the highest weighting in the dollar index.
The dollar index is calculated according to the following formula of currency pairs:
The six currencies that comprise the dollar index are freely traded foreign currency instruments from politically stable countries. There is no regularly scheduled rebalancing or adjustment in the dollar index. The ICE exchange monitors the index methodology. The index calculation occurs in real-time from a multi-contributor feed of the spot prices of the Index’s components.
The dollar index reached an almost two-decade high in March 2020
In March 2020, at the height of the risk-off price action caused by the global pandemic, the dollar index spiked higher. The US dollar’s role as a reserve currency makes it a safe-haven during turbulent market periods. Source: CQG
As the chart highlights, the ICE dollar index rose to a high of 103.96 in March 2020, the highest level in eighteen years since 2002. While the index exploded higher during the week of March 16, it turned lower the next week.
A falling knife led to price consolidation
The dollar index entered a bear market after reaching its highest level in nearly two decades. Source: CQG
As the weekly chart illustrates, the index moved from an eighteen-year high to its lowest level since February 2018 as it fell steadily through 2020 and into early 2021. The most recent low was at 89.165, only 1.015 above the early 2018 bottom, which was the lowest level since late 2014.
Interest rate differentials play a leading role in the value of one currency versus another. The short-term Fed Funds rate dropped to zero percent as the financial fallout from COVID-19 gripped markets, narrowing the rate difference between the dollar and the euro currency. As the yield benefits of the dollar declined, it sent the US currency lower.
Moreover, as Europe settled the Brexit issue in late 2020, it lifted the cloud of uncertainty hanging over the euro and British pound. The two currencies account for 71.2% of the dollar index.
After dropping from 103.96 to 89.165 or 14.2% in nine months, the dollar index has traded in a narrow range. Source: CQG
The daily chart shows that the ICE dollar index futures contract has traded between 89.165 and 91.605 in 2021, a narrow 2.44 range after falling 14.795 points. The index remains not far from the low, but it is consolidating and has yet to challenge its critical technical support level at the 88.15 low from February 2018.
Bearish sentiment is a dark cloud over the dollar for three reasons
The trend in the dollar index remains bearish since the March 2020 multi-year high. Three compelling factors are weighing on the dollar as it consolidated near the downside target at 88.15.
Short-term US interest rates remain only 50 basis points higher than short-term euro deposit rates. The narrow differential continues to support the euro as the yield difference collapsed from pre-pandemic levels.
The US Fed continues to inject record liquidity into the financial markets, increasing the US money supply. Government stimulus to stabilize the economy has caused the US deficit to soar over the $28 trillion level. The tidal wave of liquidity and tsunami of stimulus weigh on the dollar’s purchasing power.
The technical trend in the dollar remains lower. The trend is always your best friend in markets as it reflects the wisdom of the crowd. Crowds tend to make better decisions than individuals.
The dollar remains the world’s reserve currency, but that does not mean it will not continue to lose value versus other world currencies. A break below the February 2018 88.15 low in the dollar index could cause technical traders and speculators to pile in on the index’s short side. Meanwhile, central banks, monetary authorities, and governments tend to manage the foreign exchange market via coordinated intervention that provides stability by reducing volatility. Currency trends can last for prolonged periods. At the beginning of March 2021, the dollar’s trend remains lower.
Money-lending services, decentralised exchanges and liquidity protocols, all running on smart-contracts, became a new popular agenda in the world of cryptocurrency in 2020. Many of these projects experienced wild fluctuations, both in terms of liquidity locked in the protocols and price action of their digital tokens.
Now, I will share with you my take on the most successful DeFi assets in 2020. In my list of projects I will use the data provided by the cryptocurrency data aggregators Messari and CoinGecko.
1. Aave (AAVE)
The money-lending platform Aave was launched in January 2020. At the end of 2020, its native token AAVE reached a $1 billion market cap and comfortably leads the DeFi project ranking by market cap.
Aave’s original token launched at the end of 2017 was Lend (LEND). In July 2020, the AAVE governance token was launched, and LEND tokens were swapped for AAVE at a ratio of 1:100. The AAVE token enjoyed spectacular growth in both spikes of the DeFi market in 2020: in August and November. From under $30 in July, the token rose to $90 in August, then fell to $25 on 5th November. Then the second wave of DeFi market growth began, taking AAVE to $96 on 3rd December.
As of mid-December 2020, AAVE is mainly trading between $75 and $90.
2. Uniswap (UNI)
Uniswap stormed the scene of decentralised exchanges (DEX’s) in 2020. It made a real breakthrough in terms of decentralised liquidity, quickly becoming the most popular DEX. In December 2020, the project’s reported market cap fluctuates around $850 million.
Since the launch of the UNI token on exchanges, its price quickly travelled from $0 to $8.5 in mid-September. Then the UNI price quickly reversed the gains in a corrective move toward $2 and sank below it in early November. But the second wave of DeFi market growth let the UNI token recover its positions above $3.
Since the launch of the UNI token on 17th September 2020, it has grown by over 200% as of mid-December 2020.
3. Yearn.finance (YFI)
The popularity of AAVE governance token and the governance tokens of such DeFi projects as Compound and Balance led to the rise of Andre Cronje’s Yearn.finance. The platform features several services, such as money lending, liquidity provision and insurance. As of mid-December 2020, the Yearn.finance market cap sits at around $734 million.
The platform was created single-handedly by developed Andre Cronje as iEarn, but the platform suffered an exploit in February 2020, creating a wave of criticism and making Andre Cronje step away. But he later returned and rebranded iEarn into Yearn.finance.
The project increased in capitalisation multifold after the launch of its governance token YFI on July 18th as people began pouring liquidity into the protocol. According to CoinGecko, YFI grew from $31.65 on 18th July to the dizzying $32,358 on 30st August. As of 16th December, the YFI price remains at around $24,500, with the astronomical 77,000% profit over 5 months, because there was no pre-sale or private sale of this token.
4. Compound (COMP)
Compound was the first big player among money-lending protocols in the DeFi space, and it remains one of the top DeFi players at the end of 2020. According to Messari, the project’s reported market cap amounts to around $660 million as of mid-December 2020.
Compound rose rapidly with the launch of its own governance token COMP. The token let people maximise their profits by benefiting from the liquidity locked in the protocol and mining the YFI, which surged from $61 on 18th July to $336 on 22nd July.
As of mid-December 2020, the COMP profit amounts to over 145%.
5. Synthetix (SNX)
Synthetic assets are derivative assets, created through liquidity locked in different liquidity protocols. Using crypto synthetic assets investors can peg the protocol’s token to any underlying asset and thus invest in various types of assets with a single token.
The most popular synthetic assets DeFi project has so far been Synthetix. As of 16th December, its reported market cap, according to Messari, constitutes around $560 million. The price of its SNX token launched in March 2019 has grown from $0.5 to an all-time-high of $7.84 on 1st September 2020.
The rise of DeFi in 2020 has clearly shown its potential in the financial world. The classic services revolutionised through trustless smart contracts have quickly gained public trust and interest, signaling high-profit potentials to high-net-worth investors and large companies. And this may only be the beginning of a larger adoption of DeFi technologies that the world may see in 2021.
An investor’s attitude to risk is usually associated with their wealth, job security, and inflation. Having this in mind, you might conclude that two people from entirely different cultures and countries will invest similarly if their economic situation is the same. And you would be right. The whole concept of investment starts within communities and individual households, built on the foundation of the societal norms that surround them and constitute the fabric of their culture.
A study by Mei Wang and Marc Oliver Rieger, professors in behavioural finance, shows that cultural background influences investment behaviour, even when inflation rates and wealth are taken into account.
According to Wang and Rieger, the more impatient the investors are, the higher the value premium in a country is. Russia and Romania, for example, are such countries. Anglo-Saxons are willing to pay more for equities. Traditionally some societies tend to be quite risk averse than others, which is reflected in the make-up of the overall economy. “Ego-traders” are usually situated in the United States. More patient ones live in Germany and the Nordics, where there are more value traders who prefer to wait for more significant returns.
People’s expectations and the idea of value or value creation have changed with time. Yet culturally, many societies still favour traditional investment tools as a way to preserve or create wealth.
The most historical of all emotional connections between cultures and specific asset classes is the one that exists with gold. The demand for gold trading has moved East over the last decade, and this is primarily due to the cultural affinity that exists between precious metal and countries such as India and China, where gold is considered one of the safest stores of value.
A lot of capital in India is stuck in hard assets because that’s the traditional and cultural mindset of the society there. The culturally defined beliefs in the country drive high demand for gold as an asset class, whether it is traded as physical gold or as a CFD (contract for difference) on the precious metal. This cultural affinity to gold is also similar in China. It is instrumental in the Lunar New Year, and 24-carat jewelry featuring the zodiac sign is frequently given as presents, both for its symbolism and centuries-old value.
Superstition is another emotional factor influencing the investment. In the Western world, stock market returns are always lower on Friday the 13th. A similar situation can be observed in East Asian cultures, primarily China, with the number four – investors avoid all sorts of trades on the fourth day of every month.
The coronavirus pandemic has already played out differently around the world according to individual cultures. The majority of investors globally have responded by increasing their trading activity significantly, not least because most people were quarantined at home for months, with more time on their hands to trade.
Multi asset broker Exness offers some products by region depending on geographic behaviour, popular asset classes, and even religion. Its swap-free trading accounts, for example, are explicitly created for traders of the Islamic faith. According to the Koran, they cannot take part in any trading activity that accumulates interest. These particular accounts, however, allow clients in some of Exness’s most essential regions to invest freely without compromising their faith.
According to Stanislav Bernukhov, market analyst at Exness:
“Though some specific behavioural patterns may be visible through different countries, the financial markets liberate people, allowing them to achieve success no matter what education or background one might have. Mr. Market doesn’t care whether you hold a CFA license or graduated from the Ivy League – you just need to have the skills and knowledge which comes from persistent learning and usually has nothing to do with nationality.”
Investors don’t necessarily have something to learn from their counterparts in other countries, but understanding cultural differences in trading behaviour can certainly point them to opportunities they haven’t considered before.
After a number of years of consolidation across the cryptomarket, new innovative protocols are drawing interest.
The interest has created a new crypto hype that is more than just reminiscent of the 2017 ICO boom.
As was the case back in 2017, there are a mass number of protocols hitting the crypto market.
This time around, the focus has shifted away from the CeFi space to DeFi. Decentralized Finance, better known as DeFi has become the buzz word of 2020.
Bitcoin and the broader crypto market delivered blockchain technology and decentralization. There was, however, an element of centralization in the CeFi space. Centralized finance became laden with governance and KYC/AML requirements and more in order to meet investor and government demands.
DeFi, by contrast, currently stands as truly decentralized. With an ethos of Permissionless and Trustless, there is no actual governance. And, there are no KYC/AML requirements. In fact, to access decentralized finance all a user needs is a wallet.
In concept alone, it is a mouthwatering prospect. True cryptocurrencies have yet to really make a dent in fiat money’s unwavering position as a primary payment source.
When considering the unbanked, the disgruntled, and the anonymous, however, DeFi may well give the banking sector a run for its money.
The Projects and the Returns
As entrepreneurs and scam artists enter the world of DeFi, a number of protocols have caught the eye amidst the mist…
While there are no guarantees that these protocols will be here tomorrow, there is the hope and with it the dream of incredible earnings potential.
Based on DeFi market caps from Coingecko, some of the more promising protocols that have enjoyed early success. These include:
Chainlink sits at the top of the DeFi coin charts at the time of writing. Not only is Chainlink at the top of the DeFi list, but Chainlink’s meteoric rise has also seen it join the crypto giants in the top 10 by market. CoinMarketCap has Chainlink currently sitting at number 8, impressively outgunning the likes of Litecoin…
Year-to-date return: 473.2% to the end of day 28th September 2020.
What’s the hype? With DeFi driven by smart contracts, Chainlink connects smart contracts to data sources. Additionally, users can send payments from a smart contract to bank accounts and payment networks.
Dai sits at number 3 on the DeFi market cap table and is ranked at number 25 on the CoinMarket Cap.
Year-to-date: Investors will have missed gains from elsewhere, however, with Dai up by just 2.02%.
Why the lowly return? Dai is decentralized and backed by collateral. In other words, Dai is a stablecoin and as such, looks to maintain a value of $1.00. The position by market cap, however, reflects the degree of adoption across the DeFi space.
Uniswap comes in at number 6 and number 42 on the CoinMarketCap ranking.
New to the market and launched on 17th September, founding investors have received a return of 1,318%.
The protocol allows investors to supply liquidity and to swap tokens.
Yearn.finance sits at number 4 on the DeFi market cap list and number 27 in the crypto CoinMarketCap ranking.
New to the market, with a launch date of July 2020, YFI has delivered genesis investors a since launch return of 2,623%.
What’s on the package?
Yearn.finance provides investors with an array of financial products. These are categorized under:
Earn: A yield aggregator that seeks out the best ROI from leading DApps.
ZAP: Allows investors to swap between assets, whilst saving on gas fees.
Vaults: Delivers returns from liquidity mining and higher yields from more aggressive investments.
Cover: Yinsure allows investors to get insurance. A key product in the world of decentralized finance.
And there are other worthy protocols worth mentioning including Synthetix, Ox, Oracle, Kava, Band, and Aava
In addition to viewing the DeFi rankings by market cap, DeFi Pulse provides a platform for protocols to list. Here, you are given a brief summary of what the protocol delivers and a direct link to the webpage.
The Road Ahead
While a number of these protocols will likely survive the early boom days, there are many that will fall by the wayside.
Investors only need to go back 3-years to the ICO boom of 2017 to get a glimpse of what likely lies ahead.
Just like back in 2017, however, talk of 1,000% returns are drawing investors back into the crypto world. For those, who entered the 2017 boom late, it may take a little longer, however.
At present, market leaders report the large existence of scammers and Ponzi schemes in the DeFi space. The current upward trend in DeFi’s market cap suggests that investors are willing to take another bite of the cherry.
Unlike investing in CeFi protocols, however, DeFi is a Trustless and Permissionless space. This means that there is little to no governance, testing, auditing, etc. It, therefore, means that some of the protocols drawing investor money could vanish in weeks, if not days.
For that very reason, investors are seeing exception returns. The protocols are drawing investors into the DeFi space, wooing them with double-digit returns from the least risky products on offer.
These include Yield Farming and Liquidity Pooling that puts the cherry on the top for investors today.
When considering the fact the DeFi is still niche, the rally may have some way to go. This is assuming, of course, that the victims of the 2017 crypto meltdown lick their wounds and return to the fray…
With platforms such as Binance setting up US$100m funds to seed new projects and fund development, the future of DeFi does look bright. It does not mean, however, that there will not be any cautionary tales.
After a slow start, with a number of DeFi protocols having been around for a few years, the segment has recently drawn plenty of attention.
Projects are on the rise and some of the main players within the CeFi space are making sure that they aren’t left behind.
As with any new space, however, the pitfalls are many and the gold rush could be short and sweet.
At the time of writing, simply comparing the market cap of non-stable coins and stable coins shows how far behind DeFi is from CeFi.
Based on numbers at the time of writing, the total market cap of non-stable coins stood at US$310bn. By contrast, the total market cap of stable coins stood at just US$16bn
Some of the main players within the DeFi space predict a 20 fold increase in the market cap of stablecoins. It is, therefore, unsurprising that there is an explosion in the number of protocols hitting DeFi.
To view the current protocols launched within DeFi, DeFi Pulse provides a platform for protocols to list.
The list is broken down by function to make it easier for investors to find the protocol of their liking. These categorizations include:
Lending; Trading; Payments; Wallets; Interfaces; Infrastructure; Assets; and Scaling.
Additionally, there are the following categories to assist DeFi communities or new entrants:
Analytics; Education; Podcasts; Newsletters; and Communities.
While the projects are readily accessible, with DeFi Pulse making it easier for DeFi investors, key risks exist.
As a result of the very nature of DeFi, which is Permissionless and Trustless, not all of the protocols are audited.
Without governance and the anonymous nature, the protocol developers are anonymous. This has led to a vast number of scams and Ponzi schemes. Akin to any industry, bad news and dishonest participants tend to slow progress and, in particular, adoption.
Due to the sheer number of projects coming to the market, we, therefore, expect a period of consolidation. Many of the main players within the DeFi space expect that the vast majority of the existing projects will eventually fail.
What to look out for
When considering the view that a large number of scams and Ponzi schemes exist, there are ways to at least mitigate some of the risks.
These would include:
Avoid protocols that are unaudited or unverified: While DeFi is a Trustless and Permissionless world, the more serious projects provide investors with the necessary comfort.
Look for projects with longer vesting and incentive periods: Projects with vesting periods of as little as 2-weeks are unlikely to be there in a few months, let alone a few years. The anonymous founders will take their money and run… The same view is taken on incentives given to protocol communities. Within the DeFi space, it is the communities that are of greater importance. Short-term incentive schemes will not keep a community together for the longer-term. This should be considered negative.
Look for innovative protocols: The key to the success of DeFi is to deliver protocols over and above those available within the CeFi and banking space. Finding protocols that bring innovative financial services to the DeFi space will find support. This is assuming that they address the issues raised above.
Reputable Communities: As previously mentioned, communities are key to the success of a project. Not only must they be appropriately incentivized but they must also be reputable.
Governance and Transparency: Alongside the communities, some sort of governance is also needed. That should come from a degree of transparency in the early years before becoming fully Permissionless and Trustless.
As with anything nascent, there are plenty of risks associated with DeFi. An advantage for the DeFi space, however, is certainly the lessons learned from the ICO boom.
For the DeFi space key risks and threats to its evolution include:
Bad news: As with any investment opportunity, bad news does not help. The ever-present threat of scams and hacks leave DeFi exposed to unscrupulous participants. News of thefts and hacks would give DeFi a bad name and put its advancement back by years.
Blockchain constraints: Ethereum’s blockchain is already at capacity. This means that the market requires a degree of fragmentation. Currently, Tron’s blockchain is the next viable alternative. Ensuring that there is not a complete fragmentation is important, however. A degree of specialization would be an acceptable solution. Here different blockchains would support different sectors…
Vesting and incentive periods: As previously discussed these would need to tie in developers and communities for the long haul. A cut and run mentality would slow the evolution and adoption of DeFi.
Financial Risk: Investors are currently exposed to the risk of significant loss. The developers and communities can mitigate some of the risks by:
Carrying out greater testing and verification to eliminate debilitating bugs.
Provide insurance to protect investor capital.
Educate: Vastly increase the education currently available on DeFi.
Platform Access: Simplify access to DeFi. The more user-friendly the greater the degree of user comfort. This is another avenue to build trust in the Trustless world of DeFi.
When considering the risks associated with DeFi, these are not wholly different from those seen in the CeFi space.
The key to the success of DeFi is to deliver communities with solutions that are also available in the CeFi and banking space. At a minimum, DeFi must deliver viable alternatives that deliver greater earning power.
Additionally, DeFi will need to be far more innovative and offer protocols that address the shortcomings of both CeFi and banks. In essence, this would be the development and mass adoption of automated asset managers.
Communities don’t need people but smart contracts that are able to locate the best earnings power across DeFi.
Coupled with smoother user experience, zero gas fees, and addressing the issue of unaudited smart contracts, the future does look bright.
DeFi will need to experience some consolidation, however. As was the case in the .Com and ICO booms, a large number of the DeFi projects will not last.
To prevent a DeFi implosion, however, developers and communities must address existing blockchain constraints. There will also need to be a greater degree of auditing, addressing vesting and incentive periods, and the availability of insurance to protect investors.
Fishing out the scammers and Ponzi schemes with limited reputational damage to DeFi will also be a must.
Having said that, there are certainly some positives that yield optimism. These include:
Speed of innovation: While currently lagging CeFi, market leaders expect DeFi to grow exponentially relative to CeFi.
The benefit of hindsight: DeFi can take the lessons learned from CeFi and the ICO boom and avoid the same mistakes.
Early Awareness: There is early awareness of some of the key DeFi risks. This gives communities the opportunity to mitigate the risks quickly to support growth.
Education: As the news wires report huge earnings potential, the education side is also improving. There is yet the widespread awareness needed, however, to compete with the banking sector. DeFi remains a niche space today and will likely remain so for the near-term.
When considering the risks and the positives, addressing these while continuing to offer a greater earnings multiple would support a positive future for DeFi.
There is a sizeable audience that DeFi can capture with relative ease. Target audiences would include:
The non-banked: At the time of writing, the World Bank estimated 1.7bn people with access to basic banking. In the DeFi world, all a user would need is a mobile phone or a computer. There are no KYC or AML requirements…
CeFi Users: For CeFi users, a migration to DeFi seems a natural one. Once DeFi has gone through its teething problems it is hard to envisage CeFi keeping up.
Disgruntled banking customers: This is possibly the largest target audience of them all. For DeFi, the inflection point is expected to be when users don’t know that they are on DeFi. At this point, the banking community and CeFi may well find themselves in the history books.
We don’t expect a bust. The more innovative and transparent projects will likely enjoy longevity.
There is undoubtedly going to be some pain ahead, however, something that is hard to avoid in the early days.
As with blockchain and cryptos, the concepts are right and so it rests in the hands of innovators to deliver.
One curveball to consider, as always, is whether governments and central banks will allow the untimely demise of the global banking system.
If we learned anything from back in 2017 and 2018, anonymity within the world of finance is a no-no for governments.
How this plays out may eventually decide the fate of DeFi
While Satoshi Nakamoto’s Bitcoin creation was to bring an alternative to fiat currency, DeFi is looking to take it one step further.
After the evolution of centralized finance in the crypto space, DeFi is looking to battle global finance and the long-established financial sector head-on.
As the name suggests, DeFi looks to bring a truly decentralized, community-driven financial services platform.
DeFi is designed to be both “Permissionless” and “Trustless” in a decentralized world akin to that of Bitcoin.
This is in contrast to the world of CeFi, where there are governance and control over the financial platforms.
As the market leaders look to innovate and deliver an alternative to the existing banking model, there are a number of ways in which crypto holders are able to generate income.
When considering the lack of KYC and AML requirements, due to the decentralized nature of DeFi, DeFi is not only targeting the banked but also the non-banked that is estimated to sit at around 1.7bn.
As is the case with more traditional financial products, investors have the option to generate active or passive income.
Active income would include the trading of assets available across DEX platforms, these being decentralized exchanges. Similar to trading cryptos and other asset classes, this is a hands-on practice and even more so in the volatile crypto world.
Passive income is just the opposite, where investors and crypto holders may earn income from cryptos held but are not being actively traded.
While DeFi is in its very early days, there are a number of ways in which investors can earn passive income. The entire reason for the existence of such platforms and products is to deliver liquidity to the DeFi space through incentivization.
Income-generating DeFi products currently include:
Decentralized Exchanges (“DEX”)
Unlike the CeFi space, there is also a low barrier to entry, supporting innovation that will be key in delivering an alternative financial services platform.
So, for those holding stablecoins looking to generate a steady income stream, the DeFi world offers just that.
Taking a closer look at the passive income products on offer:
Yield farming is the generation of yield from crypto assets.
The product is comparable to bank deposits, fixed-term deposits, and even government bonds.
Investors deposit fiat money into financial institutions via bank deposits and fixed deposits, which gives the institution liquidity. Investing in government bonds gives governments liquidity. The liquidity is then used to generate growth by the institution or government.
Not only can the community generate income from crypto assets already held. Yield farmers can also borrow crypto and generate income. This is profitable when interest rate differentials are aligned in favor of the borrower.
Yield farmers can farm yield from DeFi money markets, liquidity pools, and incentives.
As an example, a yield farmer places 10,000 USDT into a DeFi protocol, delivering liquidity to the platform. The protocol gives the yield farmer a reward for depositing the USDT.
The yield farmer then takes the rewarded USDT or other tokens that may be given and deposit it into a DeFi liquidity pool accepting USDT or the token received. The yield farmer then receives a yield kicker from the incentives.
While at present there is an element of active management of assets, the DeFi space is evolving. Currently, yield farmers are manually in search of the best yields on offer. There are new protocols on offer, however, that can do the work for you. These are known as Robo-Advisors or Robot yield toppers.
Smart contract systems use “Oracles” in order to automatically transfer Robo-managed tokens to protocols offering the highest yields for a fee.
“Oracles” are services that provide “off-chain” data to smart contracts. “Off-chain” data is typically market prices of assets and world events, such as sports scores, weather, etc.
The types of returns that a yield farmer can earn are as follows:
Capital growth: Assets, fees, and rewards may be in stablecoins or non-stablecoins. Capital growth during a staking period is a passive income source. There is a risk, however, of “Impermanent Loss”.
“Impermanent Loss” is an opportunity cost incurred between supplying liquidity to an AMM pool vs simply holding the tokens in a wallet. The loss happens when asset prices diverge from original levels when tokens were first deposited.
Additional income streams include:
The 2nd step that yield farmers take in yield farming is liquidity mining.
From a protocol perspective, a token issuer or DEX rewards liquidity miners for providing liquidity to a specific token.
Here token holders deposit collateral into a liquidity pool offered by an automated market maker, (“AMM”).
Once you have identified a mining pool that accepts your idle tokens, simply stake your token in exchange for incentives. Incentives are normally tokens that holders can later exchange on a DEX.
It’s worth noting that liquidity pools tend to offer better yields than money markets. There is a greater risk, however, which justifies the greater reward.
Automated Market Makers
Automated market makers, more commonly known as AMMs, offer the liquidity pools to enhance farming yields.
In essence, the community trades with smart contracts and not with other community members.
AMMs are smart contracts that create liquidity pools, typically traded by an algo or “Robots” rather than order books.
From a DeFi perspective, AMMs are pivotal in its evolution. The liquidity is a must for the DeFi space to continue to evolve and deliver new protocols and products to the community.
As is the case with any investment, yield farming is not risk-free.
Such risks stem from:
Smart Contracts: Developers can’t change smart contracts once the rules are baked into the protocol. This makes bugs permanent and could result in the material loss of assets.
Exchange Rates: Asset price volatility is unavoidable. As previously mentioned, “Impermanent Loss” is one risk related to exchange rates.
Price Oracles: Price-feed providers rely upon the quality of the data. That leaves “Price Oracles” exposed to price tampering. In an automated world, there are no audits to verify the accuracy of the data.
Hacks: Thieves and hackers target AMMs, particularly in the early days.
For the crypto market evolution, the most enticing element of DeFi must the offering of financial services without KYC and AML requirements. The DeFi community can enjoy full anonymity, while also enjoying the products on offer than range from trading to taking out loans…
Passive income is a key element, as the DeFi world innovates to even greater automation.
Investing does not come without its own risks, however. In the Trustless and Permissionless world of DeFi, there is no governance to identify the good from the bad.
As we saw in the boom days of crypto, however, this will eventually stabilize. Until then, investors need to tread cautiously when investing in the DeFi space.
Try to avoid investing in unaudited protocols unless you are fully aware of the risks and can stomach the loss.
Don’t invest money that you cannot afford to lose. There are Ponzi schemes abound.
Do some research and identify protocols that are likely to exist for the longer term. The longer the vesting periods and incentives for communities to remain in place for the long haul the better.