The world is engaging in financial warfare, and China is winning. China’s digital yuan — also referred to as Digital Currency Electronic Payment, or DCEP — will soon be used around the world. The People’s Bank of China is one of the most advanced central banks in the world. For that reason, it has been advancing on the digital currency front, while by all appearances, the United States Federal Reserve has not.
And now that Donald Trump and his “America First” policy has been defeated — though counting remains ongoing and court cases over the results are pending — China’s supremacy in the area of digital currency has been assured.
Joe Biden has not outlined a clear technology policy, let alone a digital currency policy. That will assure China the opportunity to increase its lead in the digital currency race. Maintaining the American position as the world’s superpower does not appear anywhere in Biden’s agenda. Back in 2015, as a vice president, Biden once made a toast to China:
“To the hope and expectation that 50 years from now our great grandchildren will look back and say what a beautiful history we wrote together.”
In 1979, Biden traveled to China as a junior senator after President Richard Nixon normalized relations between the U.S. and China. During his visit to Sichuan University as Barack Obama’s vice president in 2011, he mentioned:
“I believed in 1979 and said so and I believe now that a rising China is a positive development, not only for the people of China but for the United States and the world as a whole. A rising China will fuel economic growth and prosperity and it will bring to the fore a new partner with whom we can meet global challenges together.”
In the meantime, China marches forward, rolling out the world’s first digital currency.
Related: Digital cold war? United States and China vie for blockchain supremacy
According to announcements, the administration of Biden and Kamala Harris is focused on the coronavirus, racial equality and climate change. In its foreign policy and American leadership plan, dubbed “The Power of America’s Example: The Biden Plan for Leading the Democratic World to Meet the Challenges of the 21st Century,” the word “digital” doesn’t appear once. In addition, Biden has long ties with China and has long been a proponent of its industrialization and growth into a world leader. When asked by a National Public Radio journalist if he as president would keep Trump’s tariffs on China, Biden shot back with a resounding “No.”
The Chinese yuan via the DCEP will become the dominant global currency. DCEP won’t only be successful because of the forward-thinking PBoC but also thanks to the fact that over 12 million Chinese people live outside of China — in fact, 2.5 million live in the United States. They could adopt the digital currency and spread the yuan globally.
With their help, the Chinese yuan can become an international currency. If the Chinese yuan is used by such individuals throughout the world, the Chinese currency can surmount U.S. monetary sovereignty.
Related: Central bank digital currencies are dead in the water
The current situation has been made possible by the COVID-19 pandemic, which has increased reliance on digital services. As tensions soar in the U.S., China could siphon off global influence. While the Federal Reserve has experimented with distributed ledger platforms to understand their potential benefits and tradeoffs, it has apparently not made a definitive decision to adopt such a currency.
Related: China and US must learn from one another and collaborate on CBDC
Jerome Powell, chairman of the Federal Reserve, has said the U.S. government is not particularly concerned with speed when it comes to developing a central bank digital currency. Morgan Creek Digital co-founder Anthony Pompliano sounded the alarm on this slipshod approach.
Powell explained the U.S.’s slow-moving efforts:
“We have not made a decision to issue a CBDC, and we think there’s a great deal of work yet to be done.”
Powell suggested that building a CBDC correctly was more important than winning the digital currency race. In the meantime, China marches forward. Pompliano sees this as an existential threat to the U.S. dollar. “They’re talking about, like, maybe we’ll build one in the next couple of years,” Pompliano said of Powell’s recent comments on CBDCs. “This is not a next-couple-of-years thing.” He added:
“This is a right-now thing, and if they don’t act, the U.S. is going to fall really far behind China because it all comes down to accessibility.”
Pompliano said accessibility to a digital fiat currency will determine the winner on this new fintech frontier. “If I’m sitting somewhere in the world and I can use the internet connection and I want a global currency, can I get a yuan, or can I get the dollar?”
Pomp is right. The U.S. dollar’s relevancy is on the line. But, the hour is late — perhaps, too late.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Alex Zha serves as director of global operations at MXC Exchange, a one-stop cryptocurrency service provider. Prior to MXC, he gained experience at OKEx as senior global marketing manager. Alex is a veteran in the cryptocurrency and blockchain industry and is a well-versed marketing and operations specialist who believes blockchain and cryptocurrency will usher in the era of modern financial inclusion. He holds a master’s degree from the National University of Singapore.
Professional traders need a global crypto sea, not hundreds of lakes
Published
23 hours ago
on
February 28, 2021
By
Coinbase’s IPO announcement has been hailed as “a milestone for the crypto industry” by Fortune Magazine. Similar to the Netscape IPO announcement that signaled the legitimacy of the internet, Coinbase’s impending public offering signals to the public at large that cryptocurrency trading is legitimate, legal and secure in the eyes of the Securities and Exchange Commission. And now, investors have an opportunity to own stock on the largest crypto trading platform in the United States.
As a result, many see an investment in Coinbase as an investment in the future of crypto trading. It is the highest volume U.S. crypto exchange, with three times the volume of its next closest U.S. competitor. The largest of anything in the U.S. must be the world leader. Except, it’s not. And conventional wisdom and current market realities are very far apart.
In order to understand the nuances of the crypto trading platform market, one must understand some important facts.
These are important implications that shape current market maturity and the problems institutional crypto traders face today. There is no single exchange that enables traders to access global trading markets, cross-border price discovery, global best prices, global liquidity or decentralized trading markets.
The crypto trading market is still highly fragmented with no dominant player
Together, the top five crypto exchanges represent only 41% of the total global trading volume. Coinbase, the largest exchange in the U.S., generates only 2.1% of global volume. The number one ranked exchange in the U.S. ranks only 19th globally. In the global market, there is no dominant player as we’d expect to see in a more mature market.
According to the data above, the New York Stock Exchange’s share of global equity trading is more than 12 times higher than Coinbase’s, and the top two U.S. equity exchanges account for over 50% of global daily trading volume, while the top two U.S. crypto exchanges represent only 3% of the global trading volume.
Compared to traditional stocks, the crypto market is also highly fragmented. The top two stock exchanges represent 51% of daily trading volume, while the top three crypto exchanges represent only 27% of daily trading volume.
No unified global trading market exists
The crypto trading market is still in its infancy. Based on my conversations with institutional traders and independent professional traders, I’ve learned that institutions are still clamoring for institutional-grade capabilities that are not yet available on a single platform, such as:
Global price discovery — e.g., prices from global markets normalized for local currency.
Global Best Bid and Offer — global order book, normalized for foreign exchange and fees in local currency.
Global liquidity access — access to global liquidity, not just that of one exchange.
Each exchange is its own trading “lake” with no “canal” connecting them. In the U.S., a trader can only trade with 2.1% of global users, with an order book that is completely separate and distinct from other U.S. trading markets — e.g., Coinbase and Kraken.
Global trading volume, liquidity and price discovery are available only to those who are able to manage multiple accounts across multiple exchanges in multiple countries and continents. It’s a tall order that ties up both legal and technical resources.
Clearly, traders would benefit from a single, global order book normalized in a single currency to discover the best global prices along with the liquidity required to execute large block trades. The industry sorely needs crypto’s equivalent of traditional securities’ National Best Bid and Offer.
Centralized exchanges are only part of the trading picture
Binance and Coinbase are centralized exchanges that match buyers’ orders with sellers’ orders, executing trades and settling accounts. Customers’ crypto assets are held in custody by an exchange, and users only trade with other users on the same exchange. Even in aggregate, centralized exchanges don’t capture the entirety of digital asset trading volume.
This is because decentralized exchanges are on the rise, enabling peer-to-peer trades (or swaps), in which assets are exchanged directly between traders, typically without Know Your Customer. At one point during 2020, Uniswap’s trading volume exceeded that of Coinbase’s. It’s possible that DEXs will gain an even footing with CEXs, so one cannot gain a full picture of the crypto trading market without taking DEXs into account.
The CEXs that figure out how to incorporate DEX price discovery and liquidity into their trading will have an important advantage.
Decentralized exchanges are growing but lack infrastructure to scale
Decentralized exchanges generate approximately 15% of the total crypto trading volume (based on CoinMarketCap data on Feb. 16, 2021). DEX trading has been growing fast, with Uniswap’s trading volume surpassing Coinbase’s in 2020 — a feat achieved with only 20 employees. Today, Venus is trending alongside Binance, which leads the market in 24-hour trading volume at the time of writing.
Professional traders may value DEXs for the security of wallet-to-wallet, or peer-to-peer, trades. However, there are two issues. First, without counterparty KYC, institutional traders cannot trade on DEXs. Second, the public chain technology supporting DEXs is slower and more expensive than exchange trading.
Institutional investors will need DEXs that are faster, with lower fees and robust KYC procedures. A DEX must be built on a faster, less expensive blockchain in order to attract institutional traders.
There are no true centralized exchanges — only brokers
Confusing matters even more, today’s crypto exchanges are more like regional brokers than true, global exchanges. For example, compare and contrast trading Apple (AAPL) on E-Trade versus trading Bitcoin (BTC) on Coinbase.
A professional trader in the U.S. seeking to trade BTC accesses only a small portion of the global market via Coinbase. Price discovery and liquidity are only by Coinbase’s BTC/USD order book. Over 97% of the world’s world’s supply, demand, price discovery and liquidity are only accessible via hundreds of other exchanges.
To sum up, selling Apple on E-Trade compared to selling Bitcoin on Coinbase:
E-Trade places orders on Nasdaq, which captures nearly 100% of AAPL spot trades.
Coinbase places orders on its own order book, which captures 2.1% of all global trades.
There is no truly global crypto trading market but rather hundreds of smaller, local markets. Imagine AAPL selling on 300+ different exchanges, each with its own buyers and sellers. This is the current state of the global crypto market.
The problems with this are twofold. First, trading on a CEX strips away many of the benefits of decentralized assets. Second, crypto trading is segregated into hundreds of discrete trading “lakes” — each with its own local fiat/crypto supply and demand.
Decentralization ensures no single entity can fully control a cryptocurrency. Users cede significant control when depositing in centralized exchanges that manage token listing privileges, custodianship, order matching and execution, and brokerage services.
This centralized power presents security and compliance hazards, which has led to market criticisms. In fact, Asia–Pacific traders have launched several coin withdrawal campaigns to show their resistance to CEX trading. The younger generation is averse to centralized power and daring to challenge it, as evidenced by the recent retail shorting war in the United States.
Centralized exchanges are also limited in their access to the global market and are severely limited. Why? Exchanges, such as Coinbase and Gemini, accept users from limited regions (the U.S. only) with limited fiat currency trading pairs (the United States dollar only) unlike E-Trade, which opens the doors for its traders to a multitude of exchanges, equities, exchange-traded funds and more. In contrast, CEXs close the doors to all others, severely limiting price discovery and liquidity, which leads to higher spreads, lower fill rates, higher slippage and, generally, inefficient markets. The concept of Best Bid and Offer does not yet exist in the crypto world, as the BBO on Coinbase is not the same as Gemini’s, Binance’s or Huobi’s.
Professional traders are underserved
From the perspective of professional traders, the market maturity and global trading capabilities required are not yet available. Cryptocurrency trading market segmentation is in its infancy, and the needs of professional traders are far from being met because: (1) they cannot efficiently access a global market; (2) they cannot access the best prices in a global market, and they cannot access institutional-grade liquidity.
Furthermore, DEX trading is not yet viable for institutional traders due to the lack of KYC during onboarding. Yet, the average Uniswap trader is far more active. Uniswap users are completely on-chain, open and transparent, and its 300,000 users trade more than Coinbase’s, which claims to have 35 million users. Therefore, an entire market of whales is trading outside of centralized exchanges, completely overturning the market misperception that Uniswap and DEX users are mainly retail investors.
No trading market exists that provides true global coverage, and retail and institutional traders cannot access a truly global market. And no trading market exists that provides institutional-grade DEX trading.
Asset digitization will drive growth
Industry consensus is that the continued digitization of assets is inevitable. Bitcoin and Ether (ETH) are blockchain-native tokens that constitute the main trading volume of the current cryptocurrency trading market. Yet the cryptocurrency market cap is less than half of Apple’s.
The stock market is almost negligible compared to the untapped digitized asset market. While the opportunity is large, it is also too early to predict the outcome.
Many exchanges expose traders to compliance risks
Some of the world’s leading exchanges allow trading in a large number of controversial tokens. Many exchanges’ Anti-Money Laundering regulations are not robust enough. Despite claiming to have licenses in some countries, it is hard to imagine the legitimate compliance of offering derivatives trading to users all over the world by using an exchange license in a single country. These compliance risks pose a serious challenge to the stability of the position of some exchanges, and not long ago, the market landscape for derivatives changed rapidly after BitMEX was indicted, resulting in a loss of users and a decline in trading volume.
Innovation in institutional-grade exchange technologies is not yet widely available. Volume rankings tell today’s story. Tomorrow’s story will be told by the trading markets that provide a true, global Best Bid and Offer price discovery, institutional access to DEX pricing and liquidity, and the ability to execute global trading strategies on a single platform.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Haohan Xu is CEO of Apifiny, a global liquidity and financial value transfer network. Prior to Apifiny, Haohan was an active investor in equities markets and a trader in digital asset markets. Haohan holds a Bachelor of Science in operations research with a minor in computer science from Columbia University.
NFTs based on STARZ show ‘American Gods’ coming soon from Curio
Published
2 days ago
on
February 26, 2021
By
Curio, a platform which sells non fungible tokens, is helping to bring to life NFTs based on the TV series American Gods. The show is based on a novel of the same name by author Neil Gaiman.
“We are working with Fremantle on creating officially licensed digital collectibles for the hit TV show American Gods, which airs on STARZ in the U.S. and Amazon Prime Video internationally,” Curio’s CEO, Juan Hernandez, told Cointelegraph, adding:
“This is a first-of-its-kind use of NFTs with mainstream media, and it shows how larger marquee brands are starting to embrace them as an integral piece of their broader digital strategy. Curio enables Fremantle to modernize how they engage with fans, to develop emotional connections for a more digital native generation of viewers who are hardwired to do more with the things they love. Now they can own a piece of the action wherever they go, in a manner that is certified and authentic.”
Fremantle, a media production company, and Canada Film Capital serve as the producers behind the American Gods tv show, according to IMDB.
What is an NFT though? NFTs are non-fungible tokens, meaning they provide a provably unique sense of ownership over the property they represent. Fungibility refers to an item’s uniqueness, or lack thereof. If something is fungible, it can be traded or act interchangeably one-for-one with another item of its kind.
“Technically speaking, an NFT uses blockchain technology to prove that a digital item is unique (scarcity), or that it is what it says it is (verifiable authenticity),” Hernandez explained, adding:
“But many people simply think about NFTs as ‘digital Beanie Babies,’ with limited utility outside of collecting. However, we see the potential for NFTs to create unique digital experiences that weren’t previously possible before the advent of the technology; to modernize fan engagement. This is what we’re excited to enable for our brand partners.”
Last fall, a digital artwork NFT called “Right Place & Right Time” by artist Matt Kane fetched over $100,000. In the months since, NFTs have become an even hotter market. Bidders recently paid millions of dollars for NFT’s based on a former Major League Baseball second baseman’s artwork. Other NFTs have also recently hit multi-million dollar price tags as well.
Why is the crypto market’s interest in NFTs on the rise? Hernandez said the world is going more digital. “There are generational trends on the shift away from physical to digital, and certainly the COVID pandemic accelerated these trends as people have been forced to stay home,” he said.
“Philosophically, the same elements of verifiable scarcity and immutability that have given rise to Bitcoin’s market dominance are at play with NFTs,” he added. “The ability to have full sovereignty over a digital asset is a new experience for many, and it causes you to truly rethink your ‘ownership’ of goods within the digital economy.”
Delphi Digital launches Labs wing to bolster portfolio company development
Published
3 days ago
on
February 26, 2021
By
Why wait for one of your investments to release a new feature when you can just build it yourself?
Delphi Digital’s newly-announced expansion aims to do just that. The cryptocurrency investment, media, and research company is now adding a Labs department which will be focused on contributing to Venture portfolio company development.
0/ We’re happy to announce the next stage in @Delphi_Digital‘s evolution: Delphi Labs
Our goal with Delphi Labs is simple: to become the leading contributor helping to build out the decentralized futurehttps://t.co/DEmgfPORmQ
The move will help expand Delphi’s current developmental wing, which presently houses 9 employees, according to Delphi Digital analyst José Macedo. Before they branched off from Research, the Labs team assisted with tokeneconomic design for multiple projects, and is currently spearheading an overhaul of Aave’s $1.4 billion Safety Module.
According to Macedo, the impetus for the new company wing is a lack of developmental and smart contract engineering resources endemic to the space.
“I think what led to this model was working with top projects and witnessing first hand how much work needs to be done and how there just isn’t the talent to do it. We realised the IP we’ve gained compounds and can be leveraged across the entire space.”
While Labs’ current focus will continue to be on tokeneconomics and governance proposals, as it expands it will eventually help to incubate younger projects, as well as potentially launch entirely new protocols under the Delphi brand, per a two-year timeline in the announcement.
Big money governance
Delphi isn’t alone in taking a more active role in the protocols they invest in. How venture capital funds interact with DAOs has been a hotly debated topic as of late, with some crypto community members arguing against preferential treatment (and/or governance token investment terms) for deep-pocketed investors, while others saying that fund are welcome like any other participant to become a part of public good governance.
So far protocol founders remain resolutely in favor of VC involvement, particularly when the VCs make material contributions. Uniswap founder Hayden Adams argued as much in a long Twitter thread two weeks ago:
1/
I think it’s worth briefly explaining the positive and mutually beneficial experience I’ve had working with @paradigm@a16z@usv and other investors.
I’ve seen a lot of negativity and propaganda so I think it’s worth sharing my personal experience.
Likewise, earlier in the month Synthetix announced a $12 million dollar raise from three venture capital funds, noting that the institutions would help with protocol development and participate in governance where able.
It’s a model Macedo says makes sense: projects can leverage Delphi’s research and developmental heft, and Delphi will in turn see their investments flourish:
“We only want to work with projects whose tokens we intend to hold for several years and our goal is to be long-term participants with aligned incentives.”