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In spite of the drama, here is why Facebook’s Libra may hit the market

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Facebook Libra

Following article is an opinion. 

How do you keep the masses from accessing any form of vehicle that could make them rich?  Create rules that will by design preclude them from participating in any opportunities.

That is precisely why all the investment opportunities are reserved for the rich and the elite.  

Accreditation of Investors is a fancy way of ‘filtering the masses out’. If consumer protection is actually what Government was after we would all be required to ‘prove our eligibility’’ to enter into a Casino.

Drama is for the masses;  Laws are for the Rich few

rich walk awayZero employees from Goldman Sachs went to jail for causing the 2008 American Depression that cost the US economy more than 22 Trillion Dollars

However, between 2001 and 2010, 7.2 Million people were arrested for “simply having marijuana.”  While we do not condone using illegal drugs, remember, Marijuana usage is found to reduce crime rates.

What gives?

There is a famous quote in my country: “Law is on the side of whoever can afford the best attorney”.

That is exactly the difference between those who got the ‘jail free card’ in spite of ruining millions of lives and those who went to jail for simply ‘chilling out and minding their own business’.

Why is the Goldman Sachs and Marijuana arrests important?

goldman sachs fineYou may be wondering what Goldman Sachs and Marijuana arrests have to do with Facebook’s libra.

Goldman Sachs paid 5 billion dollars in fines for causing the financial crisis. Facebook agreed to pay, again, 5 billion dollars in fines for breaching the privacy of its users.

Both cases were settled with fines and zero arrests.

There lies the hint of what is about to unfold.

In our opinion, we will see a lot of drama.  People from high ranks calling bitcoin a ‘national threat’ and calling Facebook for a congressional hearing is all part of that concerted stage act.   A deliberate and methodical campaign to incite fear will be followed by introducing laws.

These laws will be complex and difficult to comply with.  

Why?  

Because the masses cannot afford good accountants or attorneys with proficiency, but Oligarchs like Facebook can.

“Quickest way to make money on Wall Street is to take the most sophisticated product and try to sell it to the least sophisticated client”Greg Smith, Former Goldman Sachs VP.  

Bear market took out the majority of crypto projects, complex regulations will take out the rest

business shutting downThere were a lot of scammers that plagued the crypto space during 2017 hype cycle.  Most of these fraudsters are out of the market now. Bear market has cleansed the crypto space of these undeserving players.

There were some good concepts backed by well intentioned folks who wanted to change the world with blockchain, they too were the victims of the bear market.  Those who are either working without salary or working out of their garages to bring their ideas to life will soon be greeted by complex regulations.

In our opinion, here is what is going to unfold in the next 1-3 years (basically, a realistic-pessimistic speculations):

Regulations will be cumbersome and it’s a blessing for companies like Facebook

RegulationsAs discussed above, the regulatory framework is likely going to be difficult to comply with. These complications will be introduced, through lobbyists, to curb the competition by creating administrative barriers (remember ‘Accredited Investor rules’). It is funny how the companies that were born in garages will conspire to prevent the future garage hits from entering the market. But that’s the way it is.

Most innovative and idealistic companies will be crushed under the weight of regulations

Companies with world changing ideas, enthusiastic dreamers and visionaries will be crushed by the retroactive compliance requirements. They will probably:

  • Close their shops and dust themselves off
  • Sell their concepts to big players
  • Become employees of these big players

After that, the ideas created to change the world will ultimately be used to make more money for the rich few.

USD may be pegged against Libra and world currencies may trade USD via Libra

USD vs facebook LibraFederal Reserve has alluded to the possibility of issuing its own digital currency back in 2017.  In a research paper by Federal Reserve Bank of Philadelphia titled “Should Central Banks Issue Digital Currency?”, researchers were positive toward having a Federal Reserve Digital Currency. 

In the event of Federal Reserve issuing its own digital currency that is backed by USD then we foresee that Facebook’s Libra will be pegged to the USD.  The countries where Libra will be made available will start trading value in USD (pegged to the Federal Reserve Digital Currency).

This move could completely obliterate the projects that are relying on facilitating payments over blockchain.

Governments have and will continue to facilitate business (and it’s good for BIG businesses)

Let’s say you piss off a mega employer and they leave your State or country, what happens?  

You lose 100s or even thousands of jobs.  Your constituents will be mad at you. Loss of revenue is not acceptable to governments and its citizens, irrespective of the compromises that it requires.

Have you seen the absurd things that cities tries to do to lure Amazon into their locality?

Same will be true for Facebook.  

Governments will come to a compromise, slap few regulations in place so that business 

goes on as usual.

China factor (we don’t want them to beat the US to the digital currency punch)

china digital currencyChina announced that they are much closer to issuing their own National Digital Currency. 

From most nations perspective, they would rather give too much power to Facebook than to lose the race of digital currency dominance to China.  

Being at the forefront of digital payment solutions is nothing new. China has had chat app based payment system for quite sometime now.  What may be different now is China can peg its digital currency against gold or Bitcoin that can be redeemed for either gold or bitcoin.

That’s what China tried to do with gold backed futures contract to undermine the dollar 

Dominance, although unsuccessful.  

Remember, most currencies are true Fiat.  That means, they mean nothing except the trust that people place in them.  When a digital currency that will potentially be accessed anywhere is backed by redeemable gold or bitcoin, then that will draw a lot of attention.  

US reign over the world is partially dependent on US Dollar being the world’s standard Currency.

If they cannot bring their own digital currency fast enough, they can have someone like Facebook who already has access to 1.7 Billion user base to peg against USD which will ensure that USD is still the most widely used currency in the world.

This article is in direct contrast to what I said in a previous article about how Facebook’s premature attempt to circumvent the legislation backfired.  

That is still the case, however, as we move forward, Facebook’s checkbook will start coming into play.

It already did show how powerful money is with 5 Billion dollars in fine for screwing people up with their privacy breaches. Goldman Sachs is the only other company that paid billions in fines for screwing the hard working American financial lives in 2008.

Once US approves of Libra for political reasons rather than on technological grounds, other countries will follow the suite.

Thank you for reading the article.

Cover Image Source: “Libra Coin 3D Render”by btckeychain is licensed under CC BY 2.0

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

Subscriber-Banner-smallIMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

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About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

RK Reddy is an ardent fan of Blockchain and Cryptocurrencies. You can see the excitement about this new blockchain technology in every article on Cryptotapas.com. Sometimes this excitement leads to an overly optimistic view. Guilty as charged. RK Reddy says what may seem like an ‘overly optimistic expectation’ today may become an everyday norm in 5-10 years; look at the history of cars or airplanes, Blockchain and Cryptocurrencies belong to a similar frame of reference.”  Of course, that is just his opinion.

CryptoSpace

Factors adding gasoline to the Bitcoin shortage fire

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Bitcoin shortage

Bitcoin’s creation and its subsequent proliferation may have all been planned for a long time, this is the outcry of many conspiracy theorists.  

These conspiracy theorists also believe that whistle blowers are mere plants to help prepare the world for what’s coming.

One of their theories is that the end of physical fiat was planned a long time ago, however, the transition of physical fiat to digital fiat needed a catalyst to drive the conversation.

Either by meticulous design or by sheer coincidence – Bitcoin came to life in 2009.

We personally think that Bitcoin was designed by liberals who believed a ‘fair world’ was possible.

The invincibility of this groundbreaking technology meant that the forces that were working on doing away with physical fiat had a runway built for them.

So, the rhetoric has now changed from ‘Bitcoin is for anti-social elements’ to ‘Bitcoin is the currency for the visionaries’.

Why is that backdrop of conspiracies and layout necessary?

Because, irrespective of the underlying reasons the rhetoric has changed and it has changed for good.  This means, as the physical fiat follows the path of extinction, Bitcoin – the king of digital currency, will see a lot of demand.

We were warned a long time back that there will not be enough bitcoin in the world for everyone to buy.

Some studies say that owning .28 Bitcoin will guarantee you a seat in the top 1% bitcoin holders in the world while others say you need 5 bitcoins to claim the top 1% in the Bitcoin rich list.

Point is, even if you have all the fiat in the world, there is a limit on how much bitcoin you can buy.

When people who want to buy bitcoin are ready to pay any price while those who own the fractions of it are unwilling to sell it – the prices have only one way to go: UP.

 

The strategic moves into Bitcoin from MicroStrategy, Square, GrayScale, Fidelity and a host of billionaires who actually know something about money and finance is a tell-tell sign for the rest of the world.

Whether you want to get into Bitcoin to own a piece of technology itself, or to hedge against the inflation, or simply to use it as ‘digital gold’ that you can take with you, any and all of these reasons are good enough to look into Bitcoin.

If you had told us last year that a public limited company will convert its cash reserves into Bitcoin we would have laughed at you, but that is precisely what has happened.

As a result of converting fiat reserves to Bitcoin, the stock price of MicroStrategy saw an immediate boost which was as big as the reserve itself.

Do you think other public companies will stay on the sidelines for long?

When a legend like Paul Tudor Jones says ‘Bitcoin is the fast horse’ to bet on against inflation and he himself invests 2% of his portfolio, how long will it take for other fund managers to take note?

Add to this the demand from retail investors in the form of millennials, who are also set to inherit some $60 Trillion dollars from the baby boomer generation in the coming decade.

Conclusion

We personally think the goldilocks moment for Bitcoin has arrived.  It has the perfect combination of ‘scarce supply’ and ‘growing demand’.  It also has the added elements of adoption and ‘nascentness’ working in its favor.

These factors alone make Bitcoin one of the best investment assets of the century, in our opinion. 

We have been investing in Bitcoin using dollar cost averaging.  We don’t go selling our home or taking on insane loans to invest in bitcoin, rather, we invest $100 here and $100 there.

Before you invest your money into bitcoin or cryptocurrencies, spend some time understanding what Bitcoin is and why it is important in taking the world from the centuries old fiat system to a brand new global currency system.

In our personal view, Bitcoin will become one of the best assets to hold by the next halving.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Why this bull run has no precedence? ONE key metric to rule them all

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bull run 2020

Everyone is singing the praises for the bulls’ arrival in the crypto space.

Some say that 2020 will mark the biggest bull run in cryptos’, albeit short, history.  

We are already in October so we doubt any fireworks will take place now since there is a lot of uncertainty about the US elections.

Add the uncertainty around the stimulus bills, unemployment trends, soon to be lifted forbearances and the list goes on.

2020 still has another 2.5 months to go but most of these uncertainties will take a while to show their true impact.

For instance, what will a Biden presidency mean for the economy and cryptos?  

How many people will be forced to sell their homes once the forbearance’s are lifted?

What happens if the next stimulus bill does not pass through?

When will the vaccine become available?

These are some of the unique situations that we have no precedence for. Do not let anyone convince you that we know what’s going to unfold, because no one does.

Yes, everyone has theories, like the ones we are presenting here, but that is all they are: theories.

The BIGGEST metric that crypto community is not considering

We are no economists nor can we run any fancy charts to impress a point on you.  

We are just good observers and have common sense to deduce a few things based on data.  

For instance, between 2007 and 2010 consumer spending dropped by an overall .2% and we know what that meant for the economy.

Personal consumption expenditure

In 2020, people have literally cut down on their spending.  Some of it is forced due to the restrictions imposed by external forces and most of it is self imposed.

I am sure the spending on marijuana, liquor and food have gone up but what about other spending?

2020 also saw a spike in the savings balances.  

Economy is not stimulated by people hoarding their money. People need to exchange value for the economy to thrive.

What happens to the spending behaviors when the true stats around evictions, lost jobs (that are not coming back) and small businesses that are shutting down permanently are out?

Our guess is that people are going to be weary of spending money in the short to medium term. If we were forced to pick a timeline – we would say about 12-16 months (assuming we get a vaccine in Q1 2021).

When is the next bull run? 

Based on what we have seen in 2007 through 2010 and observing the consumer spending habits in recent times, we think that Bitcoin (and cryptos) will not find their true peak until next halving.

We know this is not what you came to hear.  

If the bull run in your mind is hitting the 2017 highs then we do not think you have to wait until the next bull run.

If the bull run means a $100,000 bitcoin then we stand by our opinion on when that is going to be.

A case for bull run

In spite of what is going on in the street, following factors are acting as strong bull market signals for the crypto space. 

Hype: Crypto space (specifically Bitcoin) has been gathering a lot of steam in terms of brand awareness and mass penetration.  This is great for the long game.

Adoption: More than ever, private and public enterprises are becoming serious about bitcoin and underlying blockchain technology.  What is good for bitcoin is good for blockchain and vice-versa.  MicroStrategy investment, Paul Tudor Jones getting involved with bitcoin are some examples.

Tech explosion: Crypto space is home to some of the brilliant minds in the tech space. Add Big Techs interest in the crypto space and you have a perfect recipe for monumental shifts in crypto perception. Tech giants like Microsoft, Google, Twitter, Facebook are all getting involved with blockchain and cryptocurrencies in some shape or form.

Retail demand: More and more retail investors are looking for alternative investments and they are waiting on the sidelines to get involved with Bitcoin.  As soon as companies like Fidelity or other brands offer crypto investment through retirement plans – there would be a massive influx into this space.

DeFi: DeFi in its current state might be infested with shittty projects but as a concept and technological shift to turn the current banking system upside down – it holds great potential. Any demand to DeFi brings more demand to bitcoin, ethereum and blockchain in general.

Conclusion

The debate around when is the next bull run will hinge on how the market recovers from this pandemic. How soon will we get the vaccine and how many of the lost small businesses and jobs are we going to resurrect?

From a macro perspective, Bitcoin and few select cryptocurrencies will continue their upward trajectory so if you looked back to 2020 five years from now, you might think bitcoin was on sale.  

Question is: how many people have that kind of patience?

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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Is Cryptocurrency driven by fundamentals or hype?

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Fundamentals or Hype

During the early 2000s India experienced a massive real estate bubble. With a lot of western companies opening their outsourcing centers in India, the land prices shot up 2x, 5x, 10x, and even 100x.

You read that right. 

Have you heard about 100x in Real Estate?

To be sure, the demand was exponentially growing in the major cities like Bangalore, Hyderabad, etc., which were quickly turning into back offices for the many western companies.

The hype in these cities was somewhat justified.

However, here is the kicker.  Many remote places which did not directly benefit from this influx of foreign direct investment started seeing their prices go up in similar fashion.

In a crazy case of trickle effect and super-hype created by the real estate agents, properties were just trading from one party to another for unbelievable markups and the prices constantly went up.

Today, that massive bubble is still intact minus the crazy multipliers.

The reason we like the comparison of what happened in Indian Real Estate market to the crypto is that a genuine need in a specific space has been exploited to translate that hype onto anything tagged with the name. 

In India that hype tag was ‘land’ and in crypto that hype tag could mean anything from ICOs to DeFi.

Ask any crypto enthusiast they will make you believe that crypto is all about fundamentals.  However, anyone who has spent even a few months in the space quickly realizes that crypto prices don’t follow fundamentals.  

This is one place where Crypto space shares its similarities with the stock market as well.

Stock market is completely distanced from the economy and it too acts irrationally, that is, when people are losing jobs and businesses are shutting down permanently, the stock market rallies higher and higher.

Similarly, crypto space, to its own detriment, is ignoring the projects that have amazing fundamentals while pumping other projects solely based on the hype.

Long term vs. Short term

Hype is short lived. Fundamentals are a long game.

That is why we emphasize that anyone interested in the crypto space does their own research in finding the projects that meet their fundamental criteria.

Once you know that a project has fundamentals (team that can execute, problem worth solving, solution that can solve, market demand, etc.,) then you just ignore the FOMO and FUD.

This will help you sleep better and use your spare time and energy in quality endeavors like taking care of yourself or spending time with family, etc.,

If you get on the hype train – it will be difficult to catch the right wave and this constant lookout for the next big thing is going to rob you of all the peace.

And, if you find yourself on the right side of the wave – you will be decimated and drowned.

DeFi defies all common sense

That is what happened with a lot of people who tried to ‘time’ the DeFi market.  

Don’t get us wrong. Many people made a ton of money (and good for them).  However, remember, crypto at this point of its evolution is a zero sum game.  That means, for everyone who made a million someone lost that million.

Unless you got on a project quite early keeping your risk level low or you have some insider information (not to mention this being illegal), you can generally not ‘time’ the market.

Many veteran traders have lost their shirts in chasing the market.

Conclusion: does this mean I should stay away from DeFi?

We cannot tell you that.  That is something you got to decide for yourself.

By market cap, Yearn Finance is considered one of the top DeFi projects. It lost over 67% in less than a month.   

Personally, if the top most project is still trying to find the ground while other projects are losing 99% of their value in a matter of a day, that means one thing:  the space needs time to mature.

We will continue to learn about DeFi. We will continue to invest what we can afford to lose when we find the right project that meets our fundamentals criteria.

That is our strategy at the moment. You have to find a strategy that suits you.

While crypto space is riding on the hype at the moment, we continue to believe in fundamentals.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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