Tag: cryptocurrency

Exchange vs. Over-the-Counter Markets: Eternal War

Financial markets are complex environments with their own conjunctures and institutional structures. Historically, there are two basic ways to organize financial markets—exchange and over the counter (OTC).  The cryptocurrency is no exception. Today we’ll focus on the latter, OTC market, which is now gaining momentum in the crypto world.   What’s its nature? Over-the-counter trading is considered as one of the principal ways to trade crypto for those who want to buy or sell a large portion of digital assets. OTC trades are often placed by high-volume players – ‘crypto-whales’, such as hedge funds, private wealth managers and high-net-worth individuals. Despite the fact that OTC trading is not available for every crypto investor, the Bitcoin market here is roughly three times larger than the exchange one. As a rule, a minimum of $75,000 must be on the table before the discussion between parties can even begin. On average, the game for an institutional player in the OTC market usually starts in $50,000-and-up arena, depending on a company’s policy or individual’s preferences. Some centralized exchanges have already started offering OTC services. In summer, U.S. crypto exchange Bittrex launched an over-the-counter (OTC) trading desk. The new service allows approved clients to “quickly and conveniently trade assets”, and supports nearly 200 cryptocurrencies already offered by the exchange.  One of the latest to join the ‘OTC wave’ is U.S.-based crypto exchange Coinbase which opened its over-the-counter (OTC) crypto trading desk in November, 2018. In his latest interview, the company’s Head of Sales Christine Sandler said why the firm had resorted to the OTC trading: “We launched our OTC business as a complement to our exchange business because we found a lot of institutions were using OTC as an on-ramp for crypto trading” Why ‘whales’ only? It’s no secret that the rich do things differently.  That’s why they are the rich, though. Here ‘big boys’ could avoid excessive commission fees and, in a manner of speaking, feel more decentralized. When compared to exchanges, there transactions are completed through a centralized source. In simple terms, there’s a third party acting as the mediator between buyers and sellers.  If you have some extra millions of dollars, it will be extremely inconvenient to place such an order via crypto exchange due to the hassle with continuous verifications and big commission fees. Plus, the order can move the entire market down and hence will make a negative impact on your fortune. Over-the-counter markets are generally decentralized and have no centralized trading facility. This promotes heavy competition between counterparties and lower transaction costs. Here, there are many mediators who compete to link buyers to sellers. The advantage is that such rivalry ensures that costs for intermediary services are as low as possible. The big crypto OTC providers are Cumberland, Jump, and Circle. But it’s hard to rank them because their transactions and earnings are necessarily kept private. OTC market is not entered unreasonably. One of the principle advantages of OTC trading is that clients can trade with each other via broker without anyone else knowing about their interacting. It’s like you are the only one in restaurant, and brokers are the waitresses who compete in order to serve you.  The trendiest OTC instrument to have arrived on the scene is ICO investing. In most cases the ICO model allows investors to support their favorite projects and receive tokens directly without strict oversight from authorities.  However, where there’s a profit to be made, big brother (regulator) will be watching. Since OTC trading provides the possibility of avoiding official records, the regulators started watching quite thoroughly. That’s why traders and brokers even in OTC market may also need to complete KYC and AML procedures on each other to make sure they satisfy legal requirements. 

Articles/January 17, 2019

What Presents to Give for Crypto Christmas

Three years ago, in December 2015, John LeFevre, creator of@GSElevator on Twitter, wrote The Unofficial Goldman Sachs Guide to New Year’s Resolutions.  One of his recommendations said: Invest in a Bitcoin wallet. Because it will be the best-performing currency in 2016. Those who followed it, at the end of 2016 were much richer people. In 2016 bitcoin appreciated by 120%, easily beating 20% gains posted by the Brazilian Real and the Russian Ruble. Although at the end of 2018 bitcoin costs four times as much as it did three years ago, we all know that the year has been a hard one. Only in November bitcoin lost 36% of its value. Probably, at the moment recommending to buy cryptocurrencies is not a good idea, because you may find it awkward to talk to your relatives and friends whom you convinced to do it. However, a bitcoin debit car might be an appealing gift, for Christmas or for some other holiday. Or you may opt for a Bitcoin Gift Card. If bitcoin appreciates, you get gratitude from the person you gave the present to, if it depreciates, you lose nothing. Bitcoin Debit Cards To those who deal a lot with cryptocurrencies, bitcoin debit cards are becoming a necessity. At present it is easy to order a debit card and connect it to the bitcoin balance. It is Christmas, so treat yourself! You can choose a cheap utilitarian card or something expensive with a posh name and design. The number of companies that accept bitcoin as payment is growing, but sometimes using bitcoin can be awkward. Bloomberg reports, how one of the University of Puget Sound’s alumni decided to make a gift to his alma mater in crypto, and the University was baffled by this donation. A bitcoin debit card would have come handy in this situation. Bitcoin debit cards are prepaid debit cards that usually have a Visa or a Mastercard logo. They are much like regular debit cards, but owners top them up with bitcoin which is then converted into fiat. Bitcoin is drawn from a cryptocurrency wallet instead of a bank account. When one makes a purchase using the crypto card, an amount of crypto coins is automatically exchanged for fiat currency, and sent to the merchant. It is done fast and seamlessly. In this text we will tell you how to choose such a card, what to pay attention to and what to avoid at all costs. The first thing to avoid is scam cards. Surely, you heard some hype about Floyd Mayweather, one of the best defensive boxers in history, and music producer DJ Khaled, who were promoting the ICO of Centra Tech Inc. But we are interested not in their recent settlement with the SEC. This story is about the Centra card they were promoting.  Centra’s ICO raised $32 million from investors, and its co-CEOs said the money would be used to build a debit card for cryptocurrencies through a partnership with Visa. The trouble was that Visa never heard about this intention because the company never applied to run Centra cards on the Visa network. So avoid scam cards. And try to find some information about the card provider: it is not unlikely that the company has already announced its plans to close the project. On January, 5, 2018 many popular Visa’s bitcoin debit cards suddenly stopped working because Visa suspended the WaveCrest Startups that provided the major part of such cards on the market. The reason was a compliance issue. There is always a risk that something like this may occur again.  Mind that you BTC and other digital coins will be controlled by a third-party. However, you can reduce this risk by depositing a small amount of your Bitcoins into card balance.  Check where the card can be used. Some of the most popular bitcoin debit cards can’t be used, for example, in the US. Visit the card provider’s website to see if its English version is really good. Sometimes it is not, and you would not want to hand the reigns over your money to someone whom you are not able to understand. Check what fiat currencies the bitcoin debit card supports. If you need EUR and GBP, the card that supports only USD may be useless for you. Conversion rate. Normally, foreign currency conversion fees vary from 1% to 5%, but some cards offer no bitcoin conversion fees. ATM transaction fee. That would start from 1% of the transaction, otherwise the card may have a flat rate:  from $2.5 to $3.5 USD. Also check the number of ATMs at which the card can be used. There may also be a limit on daily maximum withdrawal. Some providers offer virtual bitcoin debit cards only. Such cards are convenient for online shopping, but there may be trouble with cash withdrawal. Virtual cards have smaller monthly service fees – starting from $1. Plastic cards have bigger fees – from $15 per month. Some issuers provide access to their platform to unverified users (with limitations placed on unverified accounts), while other demand verification that involves submitting several proofs of identity, address documents and Skype interview. Verification can take up to 10 working days. There may also be some hidden fees, from fees for worldwide delivery (which may be free, or may be not) to issuance fee and inactivity penalties. Some projects require to hold their tokens for a certain period. Some bitcoin debit cards are linked directly to a certain wallet system, which is by all means convenient, but unfortunately works in several countries only. You can find reviews about bitcoin cards here, here and here. There are dozens of bitcoin debit cards on the market already, and definitely there will be more. And if you are looking for a good present, a bitcoin debit card would certainly be appropriate. Either to yourself, or your relatives and friends.

Articles/December 25, 2018

Fantastic Four: Top 4 ‘Crypto-Cities’ in the World

Crypto adoption had made significant leaps since it emerged roughly a decade ago. That’s why it’s unsurprising that many countries are doing their best to establish regulations regarding crypto.  Alas, there are stills some ‘crypto-naysayers’ (some of them you can remember from our recent articles) that decided to refrain from adopting digital currencies. Interestingly, even in such ‘red zones’ there are several cities which we call ‘crypto-partisans’.   Today we’ll review best cities for crypto enthusiasts that have become more eager and have made it to the list of the top 4 crypto-friendly cities in the world under the version of Cryptonomos. Get ready and pack your bags (full of crypto, of course). We are shoving off right now! Hong Kong comes in at number 4 Hong Kong’s authorities are not determined, when it comes to crypto regulations, and even claimed recently that Bitcoin was not a legal tender. Nevertheless, they follow considerably more positive position towards crypto in comparison to mainland China. Many retailers in the ‘city of skyscrapers’ (for the overall development, Hong Kong has the largest number of skyscrapers in the world) are accepting cryptocurrencies.  Noteworthy, Hong Kong has become an ideal crypto haven for Chinese enthusiasts. Hong Kong is basically an autonomous territory of China and has a separate political system from the rest of the country, which has its effect on the local economy as well. Therefore, the city does not inherit the Chinese severe approach towards crypto. A general attitude to cryptocurrencies could be revealed in the statement of the head of fintech at the state economic agency InvestHK Charles d’Haussy: “Blockchain is a very high priority for us. There is hype, and there is the fast grab of money with ICOs in some cases. But what we are looking at building here in Hong Kong is an infrastructure for new businesses and existing businesses, to make sure the technology and innovations remain a key enabler for financial sector growth” 3rd place goes to New York, USA Lauded as a financial capital of the world, New York is now so confident about supportive crypto and blockchain regulations, that perhaps there’d soon be a national monument in its name – ‘A Statue of Crypto-Liberty’.  The city has hosted a number of large conferences so far, including the 4th Annual Blockchain Conference, the North American Digital Commodities Summit, the Consensus 2018 and the Blockchain Summit New York.  There are over 100 merchants that accept Bitcoin and more than 120 crypto ATMs across the cosmopolitan city. Many crypto startups were initially established in New York. For instance, Coinsetter, one of the oldest Bitcoin exchanges, was launched in New York in 2012. By the way, the city even has its own cryptocurrency - the 'New York Coin' (NYC). Buenos Aires, Argentina, takes argentum and the 2nd place There are plenty of reasons to visit Buenos Aires: architecture, specific food, and electric atmosphere at the stadiums during football matches. However, few know that Buenos Aires is home to the second biggest number of crypto-related businesses (around 140) in the world. When the hoopla around Venezuela’s cryptocurrency finished, the hype about crypto was removed to Argentina. Many in Latin America name Buenos Aires as a ‘Bitcoin capital’ because many local individual professionals like photographers, professors, designers, technicians, psychologists and even taxi service providers are reportedly accepting Bitcoin for their services here. Bitcoin’s success in Argentina could be attributed to the inflation of the national currency. Such economic situation forced many citizens to get involved into cryptocurrencies. It should also be noted that there’s a Buenos Aires Institute of Technology located in the city. This private university offers a diploma course in blockchain and cryptocurrencies. Buenos Aires becomes a great point of destination not only for investors, but for those who want to learn more about the crypto world.  And the 1st place goes to… *drum roll*… Zug, Switzerland! For the common tourists of Switzerland, it would be hard to imagine this picturesque lakeside town as anything more than just that.  Zug is considered to be one of the most technologically advanced in the world. Thanks to low corruption, clear legislation and harmonized policies, Switzerland became the number one country in the world in terms of personal and economic freedom. Gladly supporting the title of “Crypto Valley”, the town is a real hotbed of crypto- and blockchain-related companies and foundations. Here you’ll find an entire ecosystem developing around blockchain businesses. For instance, the Ethereum foundation has been located here since 2014 and new companies are moving in with each passing day. Zug is an ideal place for avid travelers who are keen on using digital coins instead of cash. Here you can operate with numerous Bitcoin ATM machines and pay the restaurant bills in crypto. The only disadvantage, or to be accurate, the consequence of high standard of living, is that Zug is an expensive place. Living costs here are exorbitantly high. But still, as the practices of different businesses have shown, it’s worth it.     Cover: Photo by Marvin Ronsdorf on Unsplash Hong Kong Photo by bady qb on Unsplash New York Photo by Colton Duke on Unsplash Buenos Aires Photo by Andrea Leopardi on Unsplash

Articles/December 6, 2018