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DeFi’s money markets are finally luring in institutional investors

April 8, 2021 by Blockchain Consultants

Bitcoin’s bull run from last year has caused even some of its biggest skeptics to soften their stance. From economists to hedge fund managers, the world is opening itself up to technology, and at the center of this movement is decentralized finance, or DeFi. While the market capitalization of all cryptocurrencies has hit $2 trillion, worth as much as Apple, it’s the promise of DeFi — a small corner of the blockchain industry today — that’s grabbing the attention of institutional investors.

As Bitcoin’s (BTC) bullish trend persists, interest-bearing crypto products have become all the rage. Some services offer up to 8% returns on Bitcoin holdings. For investors who are already expecting a rise in value, this can be incredibly useful for maintaining cash flow without selling any assets.

The three main factors solidifying institutional interest in Bitcoin are the current historically low interest rates, the inflation rate and geopolitical instability. With near-zero interest rates expected for the foreseeable future, investors are gearing up to move their funds into alternative locations for securing wealth.

The United States Federal Reserve’s 2% inflation target has incited concern in investors fearing devaluation, and with tensions between the U.S. and China on a precarious edge, portfolios denominated in U.S. dollars are becoming riskier by the day.

A market for money

Buying, storing and using cryptocurrencies securely is still quite a complex ordeal — far more involved than setting up a bank account. However, according to Larry Fink, the CEO of BlackRock — a global investment management fund with nearly $9 trillion in assets under management — Bitcoin could evolve into a global market asset and achieve new highs in the upcoming years.

In the traditional financial system, money markets are parts of the economy that issue short-term funds. They usually deal with loans for periods of a year or less, and offer services like borrowing and lending, buying and selling, with wholesale trading taking place over the counter. Money markets are composed of short-term, highly liquid assets and are part of the broader financial markets system.

Money markets are traditionally very complicated, with expensive overheads and hidden fees pushing most investors to hire a fund manager. However, their existence is paramount to operating a modern financial economy. They incentivize people to lend money in the short term and allocate capital toward productive use. This improves the overall market’s efficiency while helping financial institutions meet their goals. Basically, anyone with extra cash on hand can earn interest on deposits.

Money markets are composed of different kinds of securities, such as short-term treasuries, certificates of deposits, repurchase agreements and mutual funds, among others. These funds generally consist of shares that cost $1.

On the other hand, capital markets are dedicated to the trade of long-term debt and equity instruments, and point to the entire stock and bond market. Using a computer, anyone can purchase or sell assets in mere seconds, but companies issuing the stock do so to raise funds for more long-term operations. These stocks fluctuate, and unlike money market products, they have no expiration date.

Since money market investments are virtually risk-free, they often come with meager interest rates as well. This means that they will not produce huge gains or display substantial growth, compared with riskier assets like stocks and bonds.

DeFi vs. the world?

To hedge against currency risk, institutions have started using Bitcoin, and retail investors are following their lead. More than 60% of Bitcoin’s circulating supply hasn’t moved since 2018, and BTC is predicted to push well above $100,000 in the next 24 months.

If the current trend carries forward, investors will continue to stockpile BTC. However, while much of the supply of the world’s first cryptocurrency remains in storage, the DeFi industry is constantly producing alternative platforms for interest-bearing payments through smart contracts, which increases transparency by allowing investors to view and track on-chain funds.

The average return for DeFi products is also much higher than in traditional money markets, with some platforms even offering double-digit annual percentage yields on deposits. From asset management to auditing smart contracts, the DeFi space is creating decentralized infrastructure for scalable money markets.

According to Stani Kulechov, co-founder of the Aave DeFi protocol, rates are high during bull markets because the funds are used to leverage more capital, with the cost of margin pushing up the yield. “New innovation in DeFi is consuming more stablecoins, which further increases the yield. Unless there is a new capital injection — these rates might stick for a while,” he said.

The Ethereum network currently hosts most of the DeFi applications, and this has barred tokens that aren’t available on the network from participating in decentralized finance. Bitcoin, for example, despite being the largest cryptocurrency by market capitalization, has only recently found its way onto DeFi platforms.

Related: DeFi yield farming, explained

With Kava’s Hard Protocol, investors can yield farm using Bitcoin and other non-ERC-20 tokens like XRP and Binance Coin (BNB). Backed by some prominent names (Ripple, Arrington XRP Capital and Digital Asset Capital Management, among others), the platforms allow users to stake their cryptocurrencies into a pool of assets, which is lent out to borrowers to generate interest.

The team also plans to add support for Ethereum-based tokens in the near future. The network’s upgrade to Kava 5.1, which was postponed to April 8 after failing to reach the required quorum, will also introduce the Hard Protocol V2, bringing powerful incentivization schemes and enhancements to its governance model.

Most loans in DeFi are overcollateralized, meaning the pool always has more money than it lends out. In case the value of the issued token drops, funds in the pool are liquidated to compensate.

According to Anton Bukov, co-founder of decentralized exchange aggregator 1inch, blockchains are the first-ever unbiased executors in human history — very limited, but ultimately fair — and could deliver new services and new flows of interactions in future. “Developers are doing their best to solve potential dishonesty issues of existing flows and invent new flows by replacing intermediaries,” he said.

By creating an automated platform to borrow and lend assets, decentralized finance enables money markets without intermediaries, custodians or the high fees that stem from high infrastructural costs.

Honest work

Of the many trends DeFi has set into motion over the last few years, yield farming has attracted quite a lot of attention. Yield farming is when the network rewards liquidity providers with tokens that can be further invested into other platforms to generate more liquidity tokens.

Simple in concept, yield farmers are some of the most vigilant traders out there, constantly switching up their strategies to maximize their yield and tracking rates across all platforms to ensure they’re getting the sweetest deal. The potential rate of return can become obscenely high, but it’s still unclear whether yield farming is just a fad or a phenomenon in the making. Kulechov added:

“Yield farming is simply a way to distribute governance power to users and stakeholders. What actually matters is whether the product itself would find protocol market/fit. Most successful governance power distributions with yield farming have been with protocols that have found protocol market/fit before such programs.”

Yield farming has an incredibly positive feedback loop, with an increase in participation pushing the value of its governance token up, driving further growth. According to Kava CEO Brian Kerr, while this feedback loop can produce very positive results in bull markets, it can have entirely the opposite effects in falling markets:

“It will be up to the governance groups of the various projects to navigate bear markets effectively, by ratcheting back rewards before a full-on death spiral occurs. Regardless of bull or bear markets, yield farming will be a mainstay in blockchain projects for years to come.”

Money markets are the pillars of our global financial system, but most of its transactions occur between financial institutions like banks and other companies in time deposit markets. However, some of these transactions do find their way to consumers through money market mutual funds and other investment vehicles.

Decentralization is the next frontier for finance, and as prominent investors continue to engage with the DeFi space, a decentralized economy seems all but inevitable. Participating in the burgeoning environment may be a risky bet today, but what decentralized finance platforms learn now will be the foundation of the robust DeFi applications of the future. According to Bukov, the higher interest rates of DeFi platforms are “absolutely sustainable.” He added:

“Higher profits are usually involved with higher risks. So the risk-profit model of all these opportunities is always nearly balanced. Normalizing risks would decrease profits because more participants will join to share the rewards.”

From smart contract malfunctions to the unauthorized withdrawal of community funds, the DeFi space is a place of both miracles and nightmares. DeFi-based yield farming platforms are still in their very early stages, and while the numbers can be all too tempting at times, it’s crucial to do your own research before investing in any platform or asset.

DeFi’s money markets are finally luring in institutional investors

Source

Filed Under: blockchain technology Tagged With: 1inch, aave, Adoption, Bank, Banks, Binance, Binance Coin, Bitcoin, blockchain, blockchains, bond, Bonds, btc, Capital Markets, Cash, ceo, China, Co-founder, Companies, crypto, Cryptocurrencies, cryptocurrency, Currency, debt, decentralized, Decentralized Exchange, Decentralized Finance, DeFi, DEX, Digital, economy, Environment, equity, ethereum, Ethereum network, exchange, Fees, finance, Fund Manager, hedge fund, Inflation, Infrastructure, Interest Rates, Investing, investment, Investment Management, Investments, loans, Market, market capitalization, Markets, Model, money, Mutual Funds, other, payments, ripple, smart contract, smart contracts, Space, Stablecoins, Stocks, storage, Technology, token, Tokens, Trading, trends, u.s., United States, view, Wealth, world, xrp, yield farming

A 3-Year in Ripple Price, Seeing a 55% Surge

April 7, 2021 by Blockchain Consultants

A 3-Year in Ripple Price, Seeing a 55% Surge

According to the latest announcement, the XRP price surges 55%, as the sixth-ranked cryptocurrency by market capitalization, has renewed its aim on the creation of a cross-border payment network. 

It was announced that in January 2021, XRP cryptocurrency hit a value of more than 0.40 US dollars per coin, more than double what it was in December 2020. Over the past year, Ripple’s value has been below a dollar, indicating little or even no signs of improvement.

The uptick in trading volume was seen when XRP renewed its center on the creation of a cross-border payment network that is inclusive and sustainable as well. 

XRP, which stands for ExpandThe Ripple coin, is a currency on the Ripple network. It is best known for its digital payment network and protocol, and it can be used by banks to source liquidity on-demand in real-time, as well as by payment providers to extend their scope into new markets. It facilitates faster payment settlements and lower foreign exchange costs.

Factors That Surged XRP Price

According to Data from Cointelegraph Markets and TradingView, XRP dropped to a low of $0.566 in the early hours on April 4. But after Ripple posted a blog titled “Creating a More Financially Inclusive and Sustainable Future,” it triggered a 55% rally in XRP price.

A blog titled “Creating a More Financially Inclusive and Sustainable Future” discussed how XRP has collaborated with “mission-driven financial technology corporations, reputed universities, NGOs, social entrepreneurs, and others in order to create higher economic fairness and opportunity for all, and this post has triggered XRP price to a great extent.

Another factor that triggered its price was when Ripple announced that it acquired a 40% stake in Asia’s leading cross-border payments specialist, Tranglo. 

The cumulative impact of these two recent announcements has resulted in a 257 percent surge in XRP trading activity over the last two days, from an average 24-hour volume of $5 billion on April 4, 2021, to $18.4 billion on April 5. 

To get instant updates about Blockchain Technology and to learn more about online Blockchain Certifications, check out Blockchain Council. 

A 3-Year in Ripple Price, Seeing a 55% Surge

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Filed Under: blockchain technology, cryptocurrency Tagged With: Banks, blockchain, cryptocurrency, Currency, data, Digital, entrepreneurs, exchange, financial technology, Market, market capitalization, Markets, payments, post, ripple, Technology, Trading, tradingview, us, xrp

CoinMarketCap removes South Korea crypto exchanges from Bitcoin price tracker

April 6, 2021 by Blockchain Consultants

Crypto price trackin website CoinMarketCap has removed many South Korean exchanges from its calculations for the price of Bitcoin as the coin dipped under $58,000 again.

As of today, CoinMarketCap’s Bitcoin price tracker shows no data from major South Korean crypto exchanges including Upbit, Bithumb, Coinone, and Korbit. The website uses data from many exchanges to estimate the average price for cryptocurrencies. At the time of publication, the price of Bitcoin (BTC) is $57,721, having fallen more than 2% this morning.

Speaking to Cointelegraph, CoinMarketCap content manager Molly Jane Zuckerman said the removal was due to the premium observed on crypto exchanges based in South Korea. The crypto analytics provider estimates the BTC price to be roughly 6% higher than that on other exchanges.

“If the prices on South Korean exchanges stabilize, then we will add the data back in, but that hasn’t happened yet,” said Zuckerman.

The last time the price tracking website took similar action was in 2018, when CoinMarketCap announced it had “excluded some South Korean exchanges in price calculations due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity.”

During roughly the same time three years ago, the price of XRP was falling significantly after reaching an all-time high of $2.96 on Jan. 2. However, the token is looking bullish today, having briefly surpassed $1.00 for the first time since 2018 after it rose more than 20% in the last 24 hours. The price has since fallen to $0.9694 at the time of publication.

CoinMarketCap said only its Bitcoin price index was affected today, given the large volume of the crypto asset on South Korean exchanges. Last month, the volume of transactions in the South Korean digital currency market — driven in part by the price of BTC reaching an all-time — briefly exceeded the daily average transaction amount of the country’s stock market.

CoinMarketCap removes South Korea crypto exchanges from Bitcoin price tracker

Source

Filed Under: blockchain technology Tagged With: Bitcoin, Bitcoin Price, btc, btc price, Business, coinmarketcap, crypto, Crypto Exchanges, Cryptocurrencies, Currency, data, Digital, digital currency, Exchanges, index, korea, Market, other, South Korea, stock market, token, world

Tokenomics From Myths to Reality

April 5, 2021 by Blockchain Consultants

Codezeros

Now that the world is transforming towards a more technologically enhanced environment, newer terms are occupying markets. Every day there is something new coming up and surprising us. The tech market has given us a brand-new term to ponder upon, Tokenomics!

So, what is it? Well, Tokenomics is widely defined as a system used for formatting pricing policy for tokens. Tokenomics is basically an amalgamation of two words: Token and Economics.

The driving concept of Tokenomics is none other than Blockchain and cryptocurrency development services. Here, we will have a look into how Tokenomics is becoming prevalent for tokenized transactions and what the challenges are waiting on its way.

codezeros.com

Tokens and Tokenomics:

Tokens are value units assigned by a specific organization and a part of an existing blockchain. Tokens can have value in the form of a certain service, ownership, or rights over any asset. The values are more of use cases than currency.

Tokens should also possess certain qualities to qualify as valid Tokens. The value assigned to a token must be scalable and be resilient to inflations. The basic Tokenomics is what helps a token to get funded, thus promoting a financially sustainable business model of tokenization blockchain service provider.

The future is digitized, and thus, improvising on the revenues in digital spaces can be richly aided with the involvement of Tokenomics. Digitization of assets is the very first step towards building a digitally stable and competent business system by virtue of tokenization security.

Why Tokenomics?

Tokenomics is fundamentally different from economics and has an important role to play in the growth of digitization. With the intervention of Blockchain and cryptocurrency, the security of transactions has increased manifolds, and it is strongly believed that the future is tokenized.

Let’s see some applications of Tokenomics.

Producer-Consumer Alignment:

Tokenized economies are helpful for consumers whose values are not aligned with big profit-centered enterprises. Bypassing such enterprises will bring you closer to token-based blockchain networks where consumers and producers join hands to meet each other’s specific needs and establish a healthy relationship.

Full Cost Accounting:

With the use of tokens, the prediction of both social and economic costs can be done effortlessly. This is a great benefit for multiple stakeholders, and thus, the involvement of Tokenomics is highly encouraged in such fields.

Investments:

Investors all around the globe are searching for opportunities that will let them analyze and look through the vulnerabilities and benefits of each investment made. This not only lets them build a reliable and robust model but also helps them to mobilize their business throughout the community. Token Development Services, along with Tokenomics, is an aid for the aforesaid plan and certainly is a factor that lets the business ecosystem grow to match the ongoing digitization standards.

Challenges about Tokenomics

Now there are four challenges that Tokenomics is facing while growing into a reliable business aid.

The first one is mental inertia. This is basically a stopping force that is raging among people who have never used such technologies in their business. Thus, fear and uncertainty creep in to form a rigid belief that may be; the outcome would not be as expected.

Tokenomics, being quite an infant technology, is still not preached globally, and many businesses resort to equip such newer technologies in their model. This is certainly because Tokenomics is either overly simplistic or cautious.

The next challenge about Tokenomics is associated with the inculcation of Artificial Intelligence. A lot of stakeholders believe that AI involvement might lead to False paths, and thus, the ultimate outcome will be that the business failed to reach where it headed to. The lost path might not be a good risk to take, and hence tokens are avoided by such businesses.

The third and one of the biggest challenges that token development services face is the existence of Government rules and restrictions. In many cases, these rules and regulations are contradicted by Tokenomics policies, and thus, they are unable to cross through the judicial barriers, to reach out to potential businesses.

The last Challenge to mention regarding Tokenomics is that people think differently about this new aspect of the digital business scheme. The dilemma to decide on whether to bring in Tokens or avail of cryptocurrency development services as part of a business is a confusing question, and the answer solely depends on one’s requirement.

How to overcome the challenges?

Now that these challenges are visible around, it is important to seek help from crypto security companies and systemize the entire process of bringing in Token services in a business.

  • Start with describing the expectations from the product of the project, along with customer characteristics. This will enable you to assign the value of each Token accurately.
  • Locate and segregate the people who are potential stakeholders for your project. Also, identify the investors, consumers, partners, and judicial bodies that can directly impact your business.
  • With Tokenomics, you can detect the interests of various parties linked directly or indirectly with your business. With that said, always remember to note down points that could lead to a conflict of interest.
  • The next step is to discover the type of Token that will protect the interest of all parties while staying true to the legal standards and inheriting all its technical specialties.
  • Find out the blockchain platform that will support your Token’s functionality. Also, form models that will motivate stakeholders.
  • Calculate the total project fund and make sure that your project development cost follows the roadmap.
  • Sketch down the token distribution structure from the two sources of business dev funds. This is helpful in building a predictive financial model as the next step. With this model, you can have a better look at the costs and investments made on your project.

Conclusion

The arrival of new technologies does face a bit of resistance in the first go, but with time and developments, the option available widens, and people start trusting the newcomer. Tokenomics has a long way to go, and it has already started the journey with little steps. Businesses that have equipped Tokenomics will serve as encouragement for others, and the growth will stabilize soon.

Tokenomics From Myths to Reality

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Filed Under: blockchain, blockchain development, blockchain technology Tagged With: ai, artificial intelligence, Better, blockchain, blockchain-development, blockchain-technology, Business, Companies, cryptocurrency, Currency, Developments, Digital, economics, Environment, Go, government, investment, Investments, IP, Market, Markets, Model, other, security, tech, Technology, token, token sale, Tokenization, Tokens, us, vulnerabilities, world

Bitcoin is outshining gold in the battle of the safe havens

March 30, 2021 by Blockchain Consultants

As the Bitcoin (BTC) price edges closer to $59,000, its value relative to gold is approaching new all-time highs, possibly hinting at the emergence of a new preferred store of value.

Measured against gold, Bitcoin’s price reached 34.94 ounces on Tuesday. The BTC-gold comparative peaked at 35.35 ounces on March 13 as Bitcoin surged past $61,000.

Bitcoin continues to outperform gold by a significant margin. | Chart via BuyBitcoinWorldwide

Bitcoin’s value relative to gold has more than doubled over the past three months and has grown nearly sevenfold since October 2020.

Gold futures, meanwhile, plunged below $1,700 a troy ounce Tuesday on the Comex division of the New York Mercantile Exchange. The price bottomed at $1,676.50, marking a new three-week low. Since peaking above $2,050 a troy ounce in August 2020, bullion has corrected nearly 18%.

2020 was a big year for gold, as the yellow metal set new all-time highs in every major currency before toppling $2,000 per U.S. dollar for the first time. Bullion ended the year with a gain of around 22%. Still, that paled in comparison with Bitcoin’s 265% yearly return.

With the recent $1.9 stimulus package fueling inflation fears, assets like gold and Bitcoin should, in theory, perform well as investors hedge their bets against the declining dollar. However, the recent rise in bond yields may have taken some of the shine away from gold.

Others, even some prominent analysts like Bloomberg’s Mke McGlone, believe gold is losing ground to Bitcoin in the battle of the safe-havens. Earlier this month, McGlone tweeted:

“Gold will always have a place in jewelry and coin collections, but most indicators point to an accelerating pace of Bitcoin replacing the metal as a store of value in investor portfolios.”

Digital #Gold Pushing Aside the Old Guard –
Gold will always have a place in jewelry and coin collections, but most indicators point to an accelerating pace of #Bitcoin replacing the metal as a store of value in investor portfolios. pic.twitter.com/RR0CCWmksF

— Mike McGlone (@mikemcglone11) March 8, 2021

Even JPMorgan, an organization long critical of Bitcoin, has claimed that the digital currency will consume a portion of gold’s market share. “The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced,” JPMorgan strategists led by Nikolas Panigirtzoglou said in a December 2020 report. “If this medium to longer-term thesis proves right, the price of gold would suffer from a structural headwind over the coming years.”

Bitcoin’s digital gold narrative continues to strengthen post-halving. The quadrennial deflationary event, which last occurred in May 2020, reduces the amount of new Bitcoin that enters circulation after each block is mined.

Bitcoin is outshining gold in the battle of the safe havens

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Filed Under: blockchain technology Tagged With: Adoption, Bitcoin, Bitcoin Price, bond, Cryptocurrencies, Currency, Digital, digital currency, exchange, Futures, gold, Inflation, jpmorgan, Market, New York, twitter, u.s.

Visa Testing Crypto-Based Transaction Settlement Systems

March 30, 2021 by Blockchain Consultants

The COVID-19 pandemic has done quite a number on the world’s economy, one many parts of society have yet to recover from. The blockchain industry, however, managed to get severely crippled by it and recover to brand new all-time highs directly after. One of the crypto space in general’s key wins, particularly Bitcoin’s was a new frenzy of positive sentiments regarding both companies and institutions, as both started to make heavy investments by the millions of USD into the space.

Visa Seeing Crypto Demand

Many nations tried to counteract the damage of the economic downfall by printing money. They did so by way of various stimulus packages. This, alongside the fears of inflation and the budding NFT space, has growth be the prime idea behind the crypto space at large. The industry itself is growing and people hold fears that the fiat space is weakening. Many a company has now incorporated crypto services into its offering, with Visa being one of the more prominent ones.

Guy Sheffield stands as the Head of Crypto at Visa, and gave a public statement to Reuters about the matter. He highlighted that the demand to hold, use, and otherwise access digital currencies have increased by the company’s customers. Thus, Visa’s clients are demanding products to help provide access to these things for the consumer.

crypto

Innovating With The Times

Visa is aiming big, making an announcement on Monday. This announcement revealed that it will allow for crypto-based payment settlements in the future, having partnered with the Anchorage crypto bank and the Crypto.com exchange platform for the pilot as a whole. Users of Crypto.com boasting a prepaid Visa card from said exchange will be capable of paying for goods through it. All they need to do is top it up with their respective crypto balances.

Prior to this move, any sort of settlement like this would involve Crypto.com wiring fiat currency to Visa at the end of each day in order to settle any processed transactions of that day. This pilot, however, will see Visa using USD Coin (USDC) in order to settle transactions. USDC is a stablecoin pegged 1:1 on the USD, making every USDC worth one USD proper.

Through this action, Visa has chosen the Ethereum blockchain to settle its various transactions and completely removing the fiat part of these crypto settlements. This, in turn, means that Crypto.com will now make use of USDC in order to settle transactions.

Plans To Expand

This new settlement service will allow Visa to significantly speed up the speed at which settlements are made, at the same time significantly decreasing its cost. As it stands now, the exact scope and volume of the pilot program between Visa and Crypto.com is unclear, but Visa made it clear that it plans to extend this offering to other partners, as well.

Visa Testing Crypto-Based Transaction Settlement Systems

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Filed Under: blockchain, cryptocurrency Tagged With: Anchorage, Bank, Bitcoin, blockchain, Companies, COVID-19, crypto, cryptocurrency, Currencies, Currency, data, Digital, digital currencies, economy, exchange, fiat, head, Inflation, Investments, Market, money, nft, other, printing, Space, stablecoin, Trading, USDC, visa

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