Venezuala and Binance shatter records & NASDAQ jumps into Blockchain

maxresdefaultThe Blockchain Bitcoin & Crypto Weekly CXO Briefing is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world. Each week we select the 3 news items that matter and explain why and link to one expert opinion.

For the intro to this weekly series, please go here.

Story 1: Venezuela shatters Bitcoin trading records with 500,000,000 Bolivars per week

Decrypted: Venezuela set a new record for Bitcoin trading, with half a billion bolivars in a week. The people in the country are turning to cryptocurrencies, as Venezuela’s economy is crippled by hyper-inflation.

According to the IMF, last month the inflation in the country was at 46,000 percent, and warned that if it continues on at this pace it would pass 1 million percent by the end of the year.

The tackle the problem, President Maduro’s replaced the hyper-inflated “bolivar” with a new currency, “sovereign bolivar”. Then the sovereign bolivar was pegged to the Petro, the country’s cryptocurrency and the world’s first national cryptocurrency.

The Petro is a cryptocurrency that was announced in February and is pegged to the price of one barrel of Venezuelan oil. One Petro is worth roughly $60, the same price as one barrel of Venezuelan oil. The Venezuelan government set aside five billion barrels of oil to back the currency.

Our take: Imagine living in a country, where you need to pay 14.6 million bolivars (around $2.2) for a kilo of chicken, 5 million bolivars for a kilo of tomatoes or 2.5 million bolivars for a kilo of rise.

The situation in Venezuela is tragic. People have been paying for goods with trash bags full of money, which are valued by their weight, rather than their value as currency. People in the Venezuela are starving and leaving in huge numbers, to escape the situation.

With the national currency hitting rock bottom, to survive in this chaotic situation some people have been buying Bitcoin, Dash and other cryptocurrencies, which have translated in record high trading volumes.

To counter the interest in Bitcoin and other crypto’s, earlier this year the Venezuelan government launched a state-controlled cryptocurrency called the Petro, that has been surrounded by a lot of controversy.

According to a report published by Reuters, Petro is nowhere to be found. While the government continues to mandate that banks accept the Petro, no one seems to know if the cryptocurrency actually exists. Following a four-month investigation on the ground into the matter, Reuters was unable to find any users, investors or readily recoverable resources that back up the currency.

A different report by Time Magazine revealed that Russia secretly helped Venezuela launch Petro to evade U.S. sanctions: “Behind the scenes, the Petro was, in fact, a collaboration — a half-hidden joint venture between Venezuelan and Russian officials and businessmen, whose aim was to erode the power of U.S. sanctions.”

Crypto initiatives in Venezuela and other countries (eg. Turkey) that we’ll probably hear in the future to save their economies,  will only be fireworks for public opinion. Public relation stunts and overblown hype, to show their citizens that they know what they are doing to solve economic problems. The reality is that cryptos represent only a minor thing and most people are turning to the dollar and gold..

Despite the hype around Petro, Venezuelans are flocking to Dash. The adoption in Venezuela is so rapid, that it has become the second largest market, even ahead of China and Russia, and retailers like Subway and Calvin Klein in Venezuela are now accepting Dash.

It’s always great news for the crypto industry, whenever a country jumps into using blockchain. But in the case of Petro, I think Wired’s article sums it up best: “A currency backed by a cryptocurrency backed by petroleum. To put it bluntly: it’s a scam on top of another scam.”

Story 2: NASDAQ Ready to List & Trade Bitcoin, Ethereum & other Cryptos by 2019

Decrypted: Nasdaq, the second-biggest stock exchange on the planet by capitalization, is getting ready to list numerous cryptocurrencies very soon as of 2019. It looks like Nasdaq and Gemini are taking their relationship to the next level, further increasing the likelihood of Nasdaq listing digital tokens.

The ICO Journal is reporting that sources close to the deal have revealed that the Nasdaq exchange is likely to begin offering direct sale of cryptocurrencies by Q2 of 2019, through a ‘joint venture’ with the Winklevoss twins Gemini cryptocurrency exchange.

Back in April, Nasdaq partnered with Gemini, the Cameron and Tyler Winklevoss cryptocurrency exchange, to dip their toes into the cryptosphere. The partnership allows Gemini to utilize Nasdaq’s tools and technologies to augment security and monitor trade activities in real-time.

Nothing has been confirmed, but this is great news. It could propel crypto into the mainstream and start trigger the next bull run.

Our take: While the SEC has been resistant to crypto, rejecting one ETF after the other, it looks like Nasdaq will list cryptocurrencies in 2019.

Nasdaq is trying to be at the forefront of institutional movement in the digital currency ecosystem, as competition has become more fierce among traditional stock exchanges. Traditional stock exchanges are changing their product and service offerings to include cryptocurrencies.

The Nasdaq rumors, follow the announcement by Germany’s second largest stock exchange, the Stuttgart Stock Exchange, to develop a new platform for ICOs. In July, the Swiss Stock Exchange (SIX) announced its plans to create a new market infrastructure designed for digital currencies, based mainly on blockchain.

In March, the company that owns the 9th largest stock exchange in the world, the TMX Group, has announced the start of its crypto brokerage service. The TMX Group owns some platforms and properties, including the Toronto Stock Exchange, the Boston Options Exchange, and the Montreal Exchange. The combined market cap of these platforms exceeds three trillion dollars, with a combined trading volume of $92 million.

This would be a major shift forward for crypto, if it happens. The possibility of Nasdaq launching its own cryptocurrency exchange goes far beyond what a Bitcoin ETF could do for the future of cryptocurrency.

Could this trigger another bull run?

Overall crypto markets are improving, with Bitcoin hovering over $7000. For the first time in the last few months, people seem to be acting positively about the cryptocurrency market. In the last few of days, the market has risen at a surprising rate. On August 27 the global market cap was $215 Billion, on August 29 it is worth $232 Billion. That is nearly an 8% rise.

In an article posted by Chris Perrotta, he thinks it could: “In 2017 the large build up in the price of Bitcoin (BTC) was due to the promise of legitimacy with the upcoming futures markets. Since then the price of Bitcoin has fallen around 67%, but the Nasdaq potentially listing tradable cryptocurrencies in 2019 along with a potential ETF could spark the next bull market.”

Story 3: Binance profits rival Nasdaq but with only 4% of the staff

Decrypted: The world’s largest cryptocurrency exchange, expects to rake in between $500 million and $1 billion in net profit during 2018. In the first quarter of 2018, Binance pulled in $200 million, while Nasdaq made $209 million and Deutsche Bank $146 million. What is even more amazing is that Binance is doing it with 0.2% of the employees (Deutsche Bank) and 4% (Nasdaq).

Over the last year the company had phenomenal growth. At the start of 2017, Binance had two million users. Currently, Binance serves ten million customers, generating an average of $1.5 billion in trade volume each and every day.

Our take: What Binance has been able to accomplish is nothing short of extraordinary. After starting a year ago, it has become the top crypto exchange in the world.

The exchange raised $15 million in July 2017 and by December 2017 it had 1.5 million users. In the last twelve months, there’s been a lot going on. Recently, it announced plans to establish a $1 billion fund, that aims to fund blockchain and cryptocurrency projects.

The numbers speak for themselves and its evident that Binance has created a service the market has wants, with over 9 million users, more than tripling in 2018 alone.

At the core of Binance’s success is its BNB token and an innovative business model.

With the BNB token, Binance has been integrating different utility features (launchpad, community coin of the month, discounted fees), creating more and more demand for their native ecosystem currency. Also, the fact that Binance’s BNB token is the native ecosystem currency for the exchange is powerful, because it allows users to currently purchase different cryptocurrencies directly with BNB.

Earlier this year, Binance was averaging $1.7bn in daily volume, with 0.2% fees. These margins are quite unusual for a developed asset class. In the world of stocks and FX, exchanges are essentially commoditized utility lines that facilitate financial data throughput. Once the asset class stabilizes, most exchanges end up having comparable offerings and the market works on scale . Traditional exchanges like CME and Nasdaq average less than 0.01% fees.

How did Binance manage to achieve all this?

Binance has an aggressive referral program, which pays a 40% commission. The exchange has its own cryptocurrency (BNB). Holders of these tokens receive 50% discount on transaction fees. Last but not least, Binance gets a lot of users demand because it comprehensively supports a ton of altcoins and hardforks of Bitcoin blockchain. In fact, Binance supports 99% of Bitcoin and Ethereum forks.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Bitcoin & Crypto (BBC) Weekly CXO Briefing each Monday.

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