Andrew Lockley – Exponential Investor (United Kingdom) –
It’s been a mad week in cryptos.
We’ve had price crashes, rallies, regulation and central bankers all weighing in on the future of crypto.
The price is all over the place, but the fundamentals are getting stronger and stronger.
When crypto is going up, bad news seems to have little impact, until it does. And when crypto is going down, good news seems to have no impact, until it does.
Given that crypto has been on a downward slide pretty much since mid-January, what good news are we missing? Quite a lot, it turns out. And most of it came this week.
Mark Carney: “crypto-assets do not pose risks to global financial stability”
First up, we have the letter that was credited with reversing the decline.
On Sunday the total value of crypto went down to $278 billion, a figure not seen since late November. Then over the next few days we saw consecutive double-digit gains.
Why? Well, as ever it’s easy to point at one thing and say, “There! That’s the reason. The whole reason why this happened.” And as ever, it would be a convincing story, but probably not very accurate.
So, the reason for the reversal? Most crypto communities are crediting our own Mark Carney for that.
In his opening letter to the G20, as chair of the Financial Stability Board (FSB), he stated:
The FSB’s initial assessment is that crypto-assets do not pose risks to global financial stability at this time. This is in part because they are small relative to the financial system. Even at their recent peak, their combined global market value was less than 1% of global GDP.
Crypto-assets raise a host of issues around consumer and investor protection, as well as their use to shield illicit activity and for money laundering and terrorist financing. At the same time, the technologies underlying them have the potential to improve the efficiency and inclusiveness of both the financial system and the economy.
This letter, although dated 13 March, wasn’t actually released until Sunday. You can read the whole thing here.
Its release was timed perfectly with the deepest crash we’ve seen in weeks. Basically when people were looking at prices crashing and worrying over what draconian measures the G20 would bring in, this letter surfaced.
It showed that the G20 does not actually want to crush crypto; in fact, it doesn’t even see it as a risk “at this time”. And what’s more, it recognises it has “the potential to improve the efficiency and inclusiveness of both the financial system and the economy.”
This was all the good news crypto needed to rebound, and rebound hard.
The biggest threat on the horizon once again turned out to be a positive for crypto. This seems to be happening more and more lately. Which brings me on to this week’s second story.
A million in 7 weeks
French finance minister: “We will not miss the blockchain revolution!”
I didn’t even add that exclamation mark, that’s how France’s minister of the economy and finance Bruno Le Maire wrote it.
In a seemingly massive turnaround, France has come out in favour of crypto, and initial coin offerings (ICOs) in particular.
Here’s what Le Maire wrote for Numerama on Monday:
A revolution is underway, of which bitcoin was only the precursor. The blockchain will offer new opportunities to our startups, for example with the Initial Coin Offerings (ICO) that will allow them to raise funds through “tokens”, cryptoactives or not. It promises to create a network of trust without intermediaries, to offer increased traceability of transactions and, overall, to make the economy more efficient.
BECOME ACTORS IN THIS REVOLUTION
France has every interest in becoming the first major financial center to propose an ad hoc legislative framework that will allow companies initiating an ICO to demonstrate their seriousness to potential investors.
At this very moment in Buenos Aires, on the occasion of the G20 summit, I place this ambition at the heart of discussions with my international partners. This is the role of France: to be force of proposal to build the world of tomorrow. We will not miss the blockchain revolution!
You can read the full piece here (but be warned, it’s in French. So you may want to use Google translate).
You may remember that France has famously been quite anti-crypto, with its calls for heavier regulation. Not any more, it wants to become a leader and a hub for ICOs.
And that’s direct from its minister of finance, not some rosy interpretation written by a pro-crypto journalist. The minister is the author of the article.
This statement was also credited with keeping the recovery going through Monday and Tuesday. Whether it did or not is up for debate, but it certainly can’t have hurt.
What else? Well…
South Korea wants more crypto adoption
South Korea is one of the biggest crypto markets in the world.
Its citizens are so into crypto they are willing to pay a premium for it. That’s why CoinMarketCap recently delisted Korean prices from its calculations. Korea was skewing the prices too much.
You may remember a few weeks ago all the FUD (fear, uncertainty and doubt) spread about Korea banning crypto exchanges, just as China had before it.
The rumours were credited with helping crash the market and it’s been unclear what Korea’s policy on cryptos would be going forward.
That changed on Wednesday, when Korea Joongang Daily broke news about Korea’s new fintech policies.
From the article:
Korea has big dreams for its fintech industry, and the Financial Services Commission (FSC) is planning to use new payment systems, communication technologies and blockchain to realize them.
The FSC will encourage banks and insurance companies to use blockchain technology to enhance the security of clients’ financial information. Blockchain can also make consumers’ lives easier by simplifying the verification process.
“Fintech is an area that requires new technologies, and it will solve the youth job problem by increasing job positions for young people,” said FSC Chairman Choi Jong-ku.
So it looks like crypto is back on the menu for South Korea. Was this news credited with helping the price rally? Of course! Did it actually? Perhaps.
But that’s not all. The US has released another official economic report praising blockchain, and even ICOs.
“The buzz surrounding digital currencies resembles the internet excitement in the late 1990s when people recognized technology companies could change the world.”
That’s a direct quote from the US’ 2018 Joint Economic Report.
Here is its conclusion and recommendations:
Technology presents evolving challenges and generates new solutions. Blockchain technology essentially stores and transmits data securely, in large volume, and at high speeds. So far, the technology has proved largely resistant to hacking, and given this feature, developers first applied it to digital currencies. Yet blockchain has many more potential applications, such as portable medical records and securing the critical financial and energy infrastructure that the Report identified.
Policymakers and the public should become more familiar with digital currencies and other uses of blockchain 225 technology, which have a wide range of applications in the future.
Regulators should continue to coordinate among each other to guarantee coherent policy frameworks, definitions, and jurisdiction.
Policymakers, regulators, and entrepreneurs should continue to work together to ensure developers can deploy these new blockchain technologies quickly and in a manner that protects Americans from fraud, theft, and abuse, while ensuring compliance with relevant regulations.
Government agencies at all levels should consider and examine new uses for this technology that could make the government more efficient in performing its functions.
It recommends that government agencies should think about and find new uses for cryptos. The report also outlines a number of places cryptos could vastly improve the way things are done, such as in storing medical data.
Blockchain technology, could provide a powerful solution for portability, enabling medical records to be carried on a smartphone or other mobile device with very little risk of being vulnerable to cyberattacks.
It also talks about used in energy and supply chains. You can read the full report here, if you’re interested.
This is just yet another example of how countries are starting to see the huge opportunity crypto provides them.
True, the price of crypto may be all over the place, but the technology is massively useful. It will save and make companies and investors millions.
Once we have just a few big blockchain success stories it will become clear, even to the old guard, that cryptos are the future.
And one such success story may be popping up very, very soon.
“… there’s a big deal coming in New York in three weeks… it’s a $400 million dollar coin issuance for a real estate asset that you’ve heard of,” said Kevin O’Leary, multimillionaire and Shark Tank investor talking on CNBC this week.
You can watch the full clip here. But the main takeaways from this are:
- Tokens will be internationally issued.
- It is SEC approved – so fully complaint and regulated.
- It’s happening in the next three weeks.
- You will be able to invest with as little as $20 or $50.
This could be the first real-world big asset sold through blockchain. It will open up real estate investments to whole new world of investors. And, as O’Leary said, it will save the issuers a whole lot of money.
This could be the catalyst that takes cryptos mainstream. Not mainstream as in lines about bitcoin’s price, but as in – you can use crypto to invest in real assets.
This could be the story that makes people realise there is more to cryptos than just “internet money”. It could be the first story that makes people wake up and see even a small fraction of crypto’s true potential.
Real-world use and adoption is just getting started, and you in early enough to enjoy the ride.
There will be more crashes, there will be more FUD, there will be more regulations. But, in the end, this revolution will change the world. And if you’re already invested, or if you get in soon, it could make you a whole lot of money in the process.
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Until next time,
Editor, Exponential Investor