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“Institutions have Arrived:” Who, What, and Why

Reading Time: 7 minutes 2019 is the year we can finally say “institutions have arrived,” in the blockchain / crypto industry and in a big way. Despite being a commonly cited catalyst within the crypto space, progress has felt slow. After all, these are large organizations with significant value at risk, so they want to be careful and deliberate […]

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Reading Time: 7 minutes

2019 is the year we can finally say “institutions have arrived,” in the blockchain / crypto industry and in a big way. Despite being a commonly cited catalyst within the crypto space, progress has felt slow. After all, these are large organizations with significant value at risk, so they want to be careful and deliberate about embracing new innovations and opportunities. We’ve finally seen real momentum from legacy tech and financial institutions — with Square, Microsoft, Fidelity, and Facebook all announcing their forays into this space. Two years after the last crypto bull market, it is undeniable that institutions and enterprises have arrived. But why now? What does this mean for the future?

“We’ve got blockchain”

At a high level, institutions are looking to get into blockchain for a few reasons: research and development, growth opportunities, and in many cases, FOMO. For many, they are conducting research and development to understand the technology and gain a perspective on the landscape at large. As more companies decide to experiment in the space, the competitive pressures increase dramatically as institutions seek to capture early growth and revenue opportunities and fend off disruptive risk. In addition, innovation within large corporations is an important component of talent retention as more talent is leaving their Wall Street and tech roles for crypto startups.

We are also witnessing a large, generational demographic shift in financial services. Financial institutions are currently serving aging customer populations, and in many cases struggling to capture the minds and wallet share of the younger, more tech savvy customers. In an effort to understand these demographics, cryptoassets are a trend to watch. There is major FOMO — no one wants to “miss the boat” on what could be a massive growth opportunity or ignore what could potentially present existential risk to their business model. This has led to both thoughtful analysis of the space and what some call “innovation theater “— a proof of concept for the sake of “doing blockchain” with little practical utility. As more institutions embrace the space, it results in a net positive for the industry. But the details matter as we move out of the pilot and POC phase to serious implementations, products, and services. And, as an industry it is important to encourage use cases that utilize the technology optimally rather than simply instituted a new internal database.

Who are these institutions?

The term institution is overly broad — in reality, we are seeing many types of companies enter the space. For the sake of simplicity, the table below categorizes primarily U.S. institutions and enterprises. It is not meant to be comprehensive, but more representative.

While we have an extensive list of players entering the space, they can’t be treated equally. Rather, the implications will either be far reaching or stay siloed as “innovation projects” within these organizations. In order to understand potential outcomes, we consider their existing customer base, market trends they face and risk tolerance. Lastly, an important component which is largely outside of the public purview, comes down to the talent inside these organizations and how they shape the internal views of the space.


Asset Allocators
Who: Fund of funds, family offices, endowments, pension plans
What: venture fund, hedge fund, and direct investments
Examples: Stanford, MIT, Princeton

As crypto assets emerge as a new asset class, asset allocators have been forced to wrap their minds around the technology and space at large. Cambridge Associates recently published their report “Venture into the Unknown” where they evaluate crypto allocation strategies and recommend investors consider an allocation to digital assets. Their suggestion stems from the belief that blockchain investing can be likened to early internet investing, fraught with young, risky technologies that may end up spurring the next wave of capital inflows.

From the perspective of an asset allocator, exposure to the industry is beginning to play an important diversification role for their portfolio strategy. Considerations include what type of investment fits into their strategy (e.g., venture vs. hedge), which types of managers to invest in (emerging specialist or tenured generalist), and the liquidity profile of the asset class (greater liquidity with tokens but no IPOs to date given industry nascence).

Since the 2017 bull run, over $1B of dedicated crypto venture and hedge funds have been raised (Blockchain Capital $150M, A16z @$300M, Paradigm @$400M, Dragonfly $100M and more) with institutional participation. Asset allocation is an important indicator of market growth and the rate of capital formation in any new industry.

Traditional Financial Institutions
Who: custodians, exchanges, brokerage providers, asset managers, and banks
What: trade and execution services, custody, OTC desks
Examples: Fidelity, ICE (Bakkt), JPMorgan, DRW

Traditional financial institutions are cautiously watching the space, some with disregard while others leaned into the space. It wasn’t until recently many realized cryptoassets could pose both a serious threat and opportunity for their existing businesses. Regardless of their position, it became a strategic watch area inside virtually every financial services institution. Historically, financial services has been slow to respond to digitization that is prevalent in other industries. However, fintech is already eating at their products and pricing strategies with the rise of online robo-advisors and digital banking. These institutions are all facing similar trends: an aging investor base, fee compression across all products and services, decreased brand allegiance with millennials, largely outdated infrastructure, and of course, increased customer demand for more crypto education and access. From their strategic agenda, institutions are constantly looking for opportunities to diversify revenue streams with large growth markets and higher margin products. The balance here comes into play with risk tolerance and their ability to make decisions quickly and adapt to the market with their existing infrastructure.

At Matt Walsh noted — the best institutions will cut through innovation theater and really try to understand how they can leverage the technology. On one end we have Fidelity who is diving in deep to understand the entire ecosystem (mining, trade execution, custody, etc.) and have taken steps to offer custody and eventually execution services. On the other end of the spectrum JPMorgan’s enterprise coin is more conservative, by creating a proof-of-concept internal tool, rather than a revenue generating or customer facing product. While still a net positive for understanding and awareness, I’m paying closer attention to the Fidelity’s of the world.

Fintech
Who: technology focused, financial services providers
What: brokerage services, portfolio management
Examples: Robinhood, Square, SoFi

Fintech aligns well with crypto — both having a shared goal of using technology to reach underbanked or hard to access populations, with cheaper and accessible products. There is also a demographic overlap with younger, tech-savvy, less financially wealthy consumers. This backdrop coupled with nimbler operations and an updated tech infrastructure makes fintech players extremely well poised to capture crypto interest. Initially we are seeing brokerage products like Robinhood and POS systems like Square make the first leaps into the space — indeed, Square’s latest annual earnings report show they did $166M in revenue from bitcoin in 2019, with a net profit of $1.69M. The motivations here are less about disruption, and more focused on how they can use the technology and assets to spur new growth and address customer demand. 

Payment companies
Who: credit cards companies, payment processors, remittance services
What: strategic investments via venture capital and partnerships
Examples: VISA, PayPal

Payments or becoming a “medium of exchange” is one of the original use cases for cryptoassets. Over time, we’ve realized that the payment rails for most of the developed world actually work incredibly well, and may not benefit from introducing crypto for a few reasons. The most commonly cited is the traditional scale question, with blockchains unable to handle the scale of millions of transactions that Visa processes. However, more importantly, the additional friction of going from fiat to crypto, and then converting again at the other side of a cross-border remittance (dubbed the “last mile problem”) largely outweighs any value derived from processing payments with crypto today. The scenario where this starts to make more sense, is when people are holding the digital assets alone and able to transact with them more freely.

At this point, one major question for payment companies to consider is how a macro trend in holding and transacting with digital assets may impact their business model. In other words, how are their existing customers going to use digital assets in the future and what impact will this have on their market. A few scenarios include a world where consumers use multiple digital wallets regularly, conduct commerce in both fiat and crypto, or choose to self-custody some or all of their digital assets. Until now, payment companies have been slower to respond to the potential of crypto. But it would not be surprising if many significantly increase their engagement in efforts to identify the appropriate opportunities as these macro trends accelerate.

Social Media
Who: messaging applications, social networks
What: wallet infrastructure, tokens
Examples: Facebook Libra, Telegram, Kakao

The overlap of social media and cryptoassets is one of the most interesting trends to watch today. There are two ways to consider this — coming from a crypto perspective and then from within social media platforms. On the crypto side, social media adoption of digital assets has the potential to massively open up distribution channels around the world. This has implications for onboarding new users, building out infrastructure, and spreading acceptance and awareness. Facebook’s Libra is not viewed as competitive to bitcoin, but rather a gateway to more users adopting bitcoin.

The second angle, is how digital asset adoption will change social media business models. Social media platforms are moving from sharing user-generated information to offering user-generated products and services. Instagram already made this leap with thousands of influencers building social media based businesses and their newest payment feature for shopping in-app. With Libra, Facebook is making a strong move into financial services to complement their massive adtech business. Similar to the way direct messaging or “DM-ing” competes with email for millennials, will social media digital wallets compete with the brokerages and banks of the world?

On the other hand, social media giants represent what crypto evangelists are trying to fight against (i.e., centralized monopolies). Centralized powers with unequal access to consumer data and privacy controls. Therefore, the way in which social media companies embrace crypto will be important. If successful, it could shift their models from centralized powers to open platforms with greater privacy protection for its users.

Software Enterprises
Who: SaaS, infrastructure
What: enterprise blockchains, supply chain use cases, identity
Examples: Microsoft, Salesforce, IBM, Amazon

Software enterprises have historically fallen into the innovation theater category. From their perspective they are trying to understand how public vs. private blockchains could be useful for their business models. In many cases this has led to private blockchain proof-of-concepts and not much more. However, there is a great deal of pressure to address the space (along with other technologies like artificial intelligence and machine learning) as a way to stay competitive and relevant. One of the better examples we have seen comes from Microsoft with the announced their decentralized identity tool building on bitcoin. Hopefully the industry will see initiatives like this geared at working with the open source community and understanding applications of public protocols rather than closed private implementations.

Where do we go from here?

We have major categories of institutions entering into the space, each with their own angle and value proposition. The industry has seen well over $1B of capital allocation to dedicated crypto funds, which will spur the next wave of startups and capital formation in the space. As more institutions enter we will see increased liquidity and onramps, massive distribution channels, and utility focused products & services. Perhaps most importantly, the professionals inside of these organizations will be forced to understand the space, debate its merits and learn. This will allow blockchain and crypto to move from a buzzword and proof-of-concept phase, to becoming truly understood and incorporated into strategic product roadmaps. The space is slowly moving into the mainstream, and with projects like Libra, it’s about to see a lot more institutional participation.

Thank you to Spencer BogartDerek HsueAleks Larsen for helpful feedback.

Source: https://blockchain.capital/institutions-have-arrived-who-what-and-why/

Blockchain

Ethereum price prediction – Bulls take ETH/USD beyond $384 to target $400 next

Ethereum price prediction largely following a broader altcoin rally ETH/USD posted a 2.74 percent rise on Sunday and continued the upsurge today Volume and liquidity combination to fuel the next rally upwards Ethereum price prediction – Current price overview The current Ethereum price sits at $379 after piercing through the Bollinger Bands to show a […]

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  • Ethereum price prediction largely following a broader altcoin rally
  • ETH/USD posted a 2.74 percent rise on Sunday and continued the upsurge today
  • Volume and liquidity combination to fuel the next rally upwards
Ethereum price prediction – Bulls take ETH/USD beyond $384 to target $400 next 1
Cryptocurrency heat map by Coin360

Ethereum price prediction – Current price overview

The current Ethereum price sits at $379 after piercing through the Bollinger Bands to show a bullish resolve. Unlike Bitcoin, Ethereum ended last week on a relatively positive note and traded near the upper channel at $367. After a successful close above $370, ETH/USD pair rose to touch a high of $384 propelled by solid buying activity.

The upward push also demolished the resistance at $374, and the pair look set to close the day above this crucial resistance. Even if the pair settles in a range between $375 to $381, traders would be happy to maintain their positions and continue further bullish momentum.

Ethereum price movement in the last 4 hours – Bulls are holding the fort

Ethereum price prediction – Bulls take ETH/USD beyond $384 to target $400 next 2
Ethereum price chart by TradingView

Though rejected from $384, the Ethereum price is currently settled around the $378 pivot point. As long as $374 support holds well, Ethereum price prediction remains high. In case ETH/USD closes above the $382 resistance, traders can start booking profits on a rally higher towards $395.

There is sufficient support from the broader altcoin realm, which is basking in positive sentiment. In case the rally falters, the 38.2 Fibonacci support at $367 would emerge as strong support where further accumulation may take place. An extended sell-off can bring $257 support into the picture, which is also the 23.6 percent Fibonacci levels for the pair.

The ETH/BTC pair is now in a symmetrical triangle. Bulls have been rejected multiple times from the upper end of the triangle at 0.0337 level. The pair is trading around 0.0327 BTC after failing to break the bearish pattern.

ETH/USD 4-hour chart– Bulls confidently maintain 2019 highs

The key support levels at $364 and $374 represent the 2019 highs. Ethereum touched $396 a few days ago, which was met with some selling pressure. However, the bears faltered as they could not bring the price under $355 support, and bulls closed in near the $374 level.

Over the weekend, Ethereum price prediction turned positive as ETH/USD pair gained to touch $380. The coin is currently in consolidation after a relentless push upwards with a rising trend line. The pair may soon witness historic $400 highs as bulls follow the broader crypto rally.

On the 4-hour chart, buyers are consistently emerging around the $380 level helping the pair maintain bullish Ethereum price prediction. The ‘Relative Strength Index’ is biased towards the positive side and is far from any overbought levels.

The rising wedge pattern in the daily ETH/USD charts is signalling a bearish trend. The pair must break above the pattern with a strong bullish up-wave. Any significant breakout from the pattern can result in a 15 to 18 percent upsurge in price. However, a false breakout can bring down the price towards the $200 level, a severe dent.

Ethereum price prediction – Conclusion

The technical indicators don’t point towards any untoward price action in the near term. The RSI is neutral to positive. MACD is on the verge of a bullish crossover. Backed by substantial volume, the price can continue its momentum upwards. The bullish action also depends on the severity of correction, if any. It remains to be seen how the bulls would react if the price drops abruptly bringing a question mark over Ethereum price prediction direction.

The 20-day EMA is now making an upward slope along with a positive RSI. Any bullish momentum that breaks above $396 can bring $475 into the picture. Remember, the annual high of $488 is very much possible in the next three months.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Blockchain

Bitcoin Price Has Only Ever Spent 93 Days Above $11,500

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With Bitcoin’s price hovering around $11,500, recent data indicated that the asset had spent only about three months of its existence above that particular level.

BTC: Only Three Months Above $11.5K

The official launch of the first-ever cryptocurrency came in early January 2009. Born during the last massive financial crisis, Bitcoin was this “magical money” that actually lacked any significant attention in its initial years. Consequently, its price traded close to zero for a while.

Since then, however, Bitcoin started gaining traction that ultimately resulted in severe volatility throughout the years. The massive fluctuations took the asset towards an all-time high in December 2017 of nearly $20,000, and just a year later, BTC saw its price beneath $4,000.

Fast-forwarding two years and Bitcoin is currently positioned around $11,500. Although this level is nearly twice as less as the all-time high, recent data from the analytics company Skew informed that BTC hadn’t spent a lot of time above $11,500.

Historical Performance Bitcoin Price. Source: Skew
Historical Performance Bitcoin Price. Source: Skew

More precisely, BTC’s price has hovered above $11,500 for only 93 days (or three months) since January 2009.

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Fundamentals in Place

Apart from the data above, Bitcoin’s hash rate has experienced a significant boost even after the completion of the third halving in May. As CryptoPotato reported recently, the metric measuring the computing power miners use to validate transactions on the BTC blockchain reached a new all-time high of 170 exahashes per second. This represented a 40% increase in the five months following the halving.

Although the hash rate is not correlated with the price, another report suggested an upcoming price increase. By indicating that Bitcoin whales, meaning entities with at least 1,000 coins, have slowed down accumulation, Glassnode asserted that this could ultimately be a bullish sign for the asset price.

Historically, once whales have stopped buying massive quantities, this has led to an opportunity for retail investors. According to the analytics company, Bitcoin may be in the “beginning of a run-up to a market top.”

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Source: https://cryptopotato.com/bitcoin-price-has-only-ever-spent-93-days-above-11500/

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US Fed Chair Jerome Powell Says It’s Better to Be Right Than First on CBDC

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  • US Fed Chair Powell believes that the United States should focus on getting right the development of a central bank digital currency (CBDC), rather than attempt to be first.
  • While speaking on a panel hosted by the International Monetary Fund (IMF), Powell reassured that the US is “committed to carefully and thoughtfully evaluating the potential costs and benefits of a CBDC for the US economy and payments system.”
  • Although Powell admitted that the digital currency has the potential to improve the current payments system, he claimed that the Fed hadn’t made a final decision on launching its own.
  • Reports from earlier this year suggested that the Federal Reserve had started experimenting with a hypothetical digital currency.
  • Nevertheless, today’s speech showcased that the US central bank is still unconvinced by that idea. In contrast, the other global superpower China has been making serious improvements on the matter. 
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  • CryptoPotato reported earlier today that China had taken the CBDC tests to its citizens by airdropping $1.5 million worth of the digital yuan and urging them to buy goods. However, the initial results weren’t promising as users said it didn’t offer anything groundbreaking. 

Featured Image Courtesy Of CNBC

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Source: https://cryptopotato.com/us-fed-chair-jerome-powell-says-its-better-to-be-right-than-first-on-cbdc/

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