Bears, Bulls, and Whales; Why this FinTech Revolution is Here to Stay

The young history of cryptocurrency is already a dramatic saga that even the best novelists couldn’t replicate. As this technology continues to evolve, new challenges present themselves. Thus far, the market has overcome these challenges. Especially over the past five months. We’ve seen promising market movements, innovative trends and government interventions, Facebook and Telegram announcements. All culminate into a healthier, more stable market. It seems the industry is setting itself up for something big in the near future, but what?

From Crypto Winter to Bull Run: The State of the Current Market

After the comically outrageous bull run of 2017, the crypto market entered a seemingly endless bear market in 2018. This «crypto winter» saw the market purge itself of ICO scams and worthless altcoins. It took a while but eventually, there was a large market uplift. Some say this most recent bull run occurred too fast and too soon. This is evidenced by the constant corrections following these bull runs. What we have today is a healthier crypto market but still susceptible to high levels of volatility. There is still more risk behind this financial instrument than many big institutions prefer. But of course, for those ones who are ready to take risks, very good opportunities are now open.

For example, at the beginning of 2019, the price of 1 BTC equaled ~ $3,800 USD. Just six months later, 1 BTC equals ~ $8,000 USD. That’s over 100 % growth, a more than doubling in its value in six months.

Pic. chart (Coinmarketcap from Dec 2018 till now. Data: Coinmarketcap + YouHodler.com)

Some FinTech platforms have found the way to offer easy to use tools to succeed in highly volatile markets in both bear and bullish conditions. Anthony Cerullo of FinTech platform YouHodler states that «crypto-backed loans on our platform have multiple uses in a variety of market conditions. In bear markets, a loan can help users HODL while using the value of their crypto assets to hedge their portfolio or simply pay their bills. During a bull run, a wisely timed crypto-backed loan can be used to multiply crypto assets to up to 400 % in some cases».

What Does it Mean to be a Cryptocurrency Today: payment tool or asset class?

Back when Bitcoin first came out, the definition of «cryptocurrency» was a simple one. Now, with all sorts of coins and tokens offering a wide array of utility, the explanation is a little more complicated.

Anthony Cerullo from FinTech platform YouHodler states that «crypto is best represented in two dimensions. The first dimension being crypto as a payment solution and the second being crypto as an asset class».

In terms of crypto as payments, one can examine Ripple (XRP) and Stellar’s (XLM) success. Ripple has made fantastic progress when it comes to their technology and partnerships with international banks and organizations like IBM. Stellar, as a direct competitor to Ripple, has also shown there is enough room in this niche for multiple players.

As for payments, a very important step forward came from the aptly named «stablecoins», like Tether (USDT). According to Mr. Cerullo, «Due to their consistent nature and fixed 1:1 rate to the US dollar stablecoins become very popular for cross border transactions. Being here in Monaco you can easely pay for your new Miami house. To do so, you just need to convert EUR or USD to USDT at your local exchange and your real-estate broker needs to execute a reverse conversion at his/her exchange. The overall transaction takes from a few minutes to a couple of hours and costs almost nothing in comparison with traditional banking».  

Of course, whether it’s USD, BTC, USDT, etc., all payments should be properly monitored in accordance with AML rules, and applying sources of funds checks, etc. And nowadays that is not a big deal. To open an account at a crypto-exchange or FinTech platform everyone must pass mandatory KYC/AML checks.

Crypto as an asset is the more lucrative use — this is the second dimension we referred to earlier. Many traders/investors are very interested in Crypto as an asset.

Because of Crypto’s rapid volatility, price movements throughout the market can be large in either direction. Hence, it’s possible to get great returns on your investment if one is willing to accept the risk.

The reason behind this risk is the market’s size. Crypto is still a small market, meaning it’s easier for groups of people to manipulate the price. When working together, big «whales» can move the market easily and start trends. We’ve seen many cases of these whales operating their own «pump and dump» schemes and making huge profits as a result.

As the market grows and the wealth is more evenly distributed, this will change. For now, though, crypto as an asset is risky but has massive potential.

At the end of 2018 a new format appeared on the market, which will likely have a positive impact on the market risks. We are talking about the tokenization of assets. STO — Security Token Offering is a vehicle now available to replace risky ICOs. ICO’s were unregulated, high risk and wrought with fraud. Security Token Offerings are now taking centre stage. In an STO, investors receive crypto coins or tokens that represent assets. Unlike an ICO, an STO represents a contract into these investment assets. With a security token, investors have proof of ownership of their investment, fully transparent and recorded on the blockchain. This eliminates the risks that came with ICO’s since all STO’s must comply with securities laws and thus accountability is enforced.  More and more countries recognize tokenization of assets and an STO as a legitimate tool useful in investment operations. The trend is traditionally initially established by the US SEC.

Can Governments Influence the Popularity of Cryptocurrency?

Major governments are starting to use cryptocurrency to their advantage. Due to the trade war between China and The United States of America, some analysts predict the Chinese government will use crypto for cross border payments during this trade war and further push the market to grow.

In Europe also, there are already several crypto friendly countries like Switzerland, Lichtenstein, Malta, Estonia and more. They are finding new, innovative ways to integrate cryptocurrency and blockchain technology into their government processes for increased efficiency.  

Yes, there are still issues with the black market, volatility and fraudulent behavior, but each year, we are seeing positive signs and healthy growth with this technology.

The Future of Crypto is Here: A Few Tips on how to benefit from it

Gone are the days of simplicity in the crypto market. Now, we have so many options to work with. Instead of just basic exchanges, we have the birth of multi-dimensional FinTech platforms, crypto-fiat banks offering multiple fiat/crypto options with payments, lending, exchange, investments, etc.  

Market professionals are witnessing the merger of both traditional banking and crypto banking services. These two worlds will no longer compete but instead, work in parallel to streamline the global economy.

While the full vision of this future is not yet here, it’s already possible to benefit from the ongoing FinTech Revolution in multiple ways.

• Use of Crypto as a payment tool: legal and significantly reduces transaction costs;
• Short term trading:high risk, but extremely profitable with the right knowledge;
• Mid and Long term investment strategies (e.g. HODLing):can also deliver good profits when used in line with crypto-backed lending for hedging and leveraging;
• Investments in blockchain DLT (distributed ledger technology) projects: debt financing, direct investments or participation via STOs can be a great way to support this new economy and also take advantage of the low competition before the market reaches its full potential.

The content has been prepared with YouHodler FinTech platform support.