Chinese New Year (Lunar New Year) has a strong influence on cryptocurrency prices, with Bitcoin prices decreasing in the months leading up to the New Year. This article examines the trend and the possible reasons why it happens. Chinese New Year is celebrated on a different day each year as it is based on the Lunar Calendar.
This year, Chinese New Year will begin on 10 February and end on 13 February. During this time many Chinese Over-the-Counter (OTC) services will be closed – leading to high crypto volatility.
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*Data based on Bitcoin Prices on CoinGecko. Pre-CNY Highs taken as average candle price up to 7 days before the New Year.
This period is a public holiday in China, as many employees make the annual trip back to their hometowns to celebrate with their families. With a population of 1.386 billion, this represents the largest short-term migration in the world. During this time, I also came across some fascinating information about the best Plinko gambling sites, which offer unique and engaging gaming experiences for enthusiasts. All factories in China close during this period, with operations frozen for up to 2 weeks as logistics companies and suppliers slowly open up. Chinese New Year is also celebrated in other Asian countries such as Hong Kong, Singapore, and Korea (Korean New Year). China will also be rolling out a feature allowing people to send red packets containing its digital currency eCNY/DCEP. However, it’s important to note that during this time cryptocurrency exchanges will still operate and facilitate trading around the clock.
Chinese New Year Dump in 2019, 2020, 2021, 2022 and 2023?
Bitcoin prices would almost always drop in the weeks leading up to Chinese New Year.
For example, in 2019, Bitcoin prices dropped steadily from $3,491 right before the Chinese New Year to lows of $3,397 during the holiday.
In 2020, prices fell below the USD$8.3k resistance before Chinese New Year. There was a recovery back to USD$8.5k on the first day of the holidays. However, history cannot help but repeat itself, and within the same day plummeted back below USD$8.3k. Prices then remained stagnant and only made a marked recovery on the last day of the holidays.
In 2021, the tides seemed to have turned with a gradual increase from $32k to $39k in the first week of February, and a huge 2-day rally up to $48k in the few days leading up to the festival. However, during Chinese New Year, prices still began retracing to $46.2k. Fortunately, this did not wipe out the pre-Chinese New Year rally.
2021 Chinese New Year Bitcoin prices (Source: CoinGecko)
In 2022, prices took a sharp nosedive to sub USD$37 levels just before the holidays. Bitcoin prices then rose sharply towards a peak of over USD$39k midway through the Chinese New Year holidays. However, this euphoria was short-lived, and prices took a steep tumble to USD$36.5k on the last day of the Chinese New Year holidays. Essentially undoing the initial price rally a few days prior.
2022 Chinese New Year Bitcoin prices (Source: CoinGecko)
In 2023, prices pumped 1 day before the new year, ringing in a high of US$23,282.40 on the 1st day of Chinese New Year. Prices fluctuated between the US$22,500 and US$23,000 range during the duration of the holidays. However, ultimately closing at US$22,437.68.
Why do Bitcoin prices dump during Chinese New Year?
Decrease in Trading Volume?
Data compiled by CoinDesk Research shows the trading volumes on Binance, Huobi, and OKEx –the most popular cryptocurrency exchanges catering to Chinese customers – were down during the Chinese New Year period. A decrease in trading volume can also be seen during October each year when Golden Week (a 1-week celebration for National Day) in China takes place.
When large numbers of highly leveraged traders all bet on Bitcoin prices moving one way it creates an opportunity for other large investors (whales) to move prices in the other direction. Doing so triggers a cascade of liquidations, sending Bitcoin’s price into free fall and creating huge paper losses for leveraged long traders. The whales are then free to “buy the dip” at the expense of “rekt” traders.
Market Makers on Holiday
It is no secret that market makers and trading bots operate in the Cryptocurrency market – in fact, they are responsible for a portion of the market volume. Market makers located in China and other Asian countries will shut down operations for 3-5 days due to public holidays. Even though market making can be automated by trading bots and algorithms, it still requires humans to watch over the daily operation to make sure the is no malfunction.
During the Chinese New Year, market-making operations will be limited in capacity. This leads to more volatile and less liquid markets.
Cashing out for the New Year
Giving Red Packets filled with cash is a tradition
One of the possible reasons for the dip in Bitcoin prices is that people are “Cashing out” for the holidays. This is especially true in China because, during the festival, lucky packets packed with cash are traditionally given out to children and the elderly. These “red packets” are meant to symbolise luck and prosperity and is the only time when giving cash is not taboo in China.
Tradition dictates that married couples should give out red packets to young unmarried children, elderly and service personnel. Company Executives and managers should also give money to their subordinates – with some packets being filled to as much as the employee’s monthly wage.
Due to the huge amount of cash money required, some suspect that this tradition is responsible for the increase in Bitcoin Sell orders before Chinese New Year.
Chinese OTC Volume Drops
Bitcoin is traded in China via Over the Counter (OTC) desks. These OTC desks match orders from buyers and sellers and can offer escrow services. Top desks include Binance OTC and Huobi OTC.
Chinese New Year 2024 Bitcoin price predictions?
This year, Chinese analysts are already looking into the future and are optimistic for Bitcoin prices in the month after the Chinese New Year. They note that Bitcoin prices have generally gone up in the month after Chinese New Year. For example, in 2023, Bitcoin prices went up by 11.15% in the month after the new year, 13.9% increase in 2022, and 30.18%(!!) increase in 2021.
Prices have already been on the rise since 23rd January 2024 where prices were a at a low of US$38,678.18. Prices have been skyrocketing since 7th February 2024, and have crossed the US$46,000 on 9th February 2024! This was already predicted by some analysts on Weibo, saying that prices will not dip, and to welcome the bull market during Chinese New Year.
Crypto analysts have found that Bitcoin prices would almost always drop in the weeks leading up to the Chinese New Year. Hence in the weeks before and during the “Chinese New Year Dump”, traders expect huge volatility in crypto prices.
Why is there a Chinese New Year Bitcoin dump?
Chinese New Year marks the longest extended holiday in China. This period marks the world’s largest short-term migration as people return to their hometowns to visit family. People also cash out to send money back to their families and gift children “red packets”. Therefore, crypto prices dump during Chinese New Year as there is lower trading volume when everyone has “cashed out” their crypto or is busy celebrating.
When is Chinese New Year in 2024?
This year, Chinese New Year will begin on 10 February and end on 13 February.
The concept of the “Flippening” has been increasingly gaining traction in the crypto space. It refers to the hypothetical moment when Ethereum (ETH) surpasses Bitcoin (BTC) as the most valuable cryptocurrency by market capitalization. The Flippening is important because it would signify a major shift in the overall direction of the crypto landscape, signalling a change in investor sentiment and adoption patterns.
https://www.youtube.com/watch?v=0lQ8bz9QRBo
While the Flippening is not set in stone, there are compelling data that indicate it is coming, and sooner than you think… Here’s why:
The Case for Bitcoin
Being the world’s first cryptocurrency, Bitcoin has maintained its throne on the crypto market since its genesis block in 2009. It is often considered as the safest digital store of value by investors, with its limited supply structure similar to the scarcity of gold, hence its nickname “digital gold.” As such, Bitcoin is usually the primary choice of cryptocurrency for financial institutions looking to get involved. As far as mainstream adoption goes, Bitcoin has led the way so far.
However, Bitcoin’s Proof-of-Work (PoW) consensus model is highly energy-intensive, sparking criticisms of the network’s impact on the environment. Additionally, the usage of Bitcoin is only limited to exchanging and storing value. This is where Ethereum has much more to offer.
The Case for Ethereum
As the second most valuable cryptocurrency, Ethereum is designed to be used as the foundation of a decentralized, blockchain-based internet — an idea that is become known as Web3. Apart from exchanging and storing value, Ethereum introduced smart contract functionalities that allows developers to do all kinds of innovative and creative things on the network. This brought about a proliferation of financial products that have enabled a much broader range of investors.
Ethereum earned its nickname “digital oil” because it is a utility-based asset like oil, fuel or gas, and its value is largely dictated by supply and demand mechanisms. Similar to how the world’s global supply chain is fueled by crude oil, Ethereum lays at the heart of the Decentralized Finance (DeFi) space as well as GameFi and Non-Fungible Token (NFT) market. And as the Web3 landscape progresses, demand will increase as more and more people are recognizing the potential of a decentralized internet. It is only a matter of time when Web2 evolves to Web3, and Ethereum is at the centre of that.
Do “Ethereum Killers” Hinder the Flippening?
It is worth noting that Ethereum faces competition from other prominent layer-1 blockchains such as Aptos, Cardano, Solana, BNB Chain, Polkadot, and Avalanche. There is a trending “Ethereum Killer” narrative in which user adoption will be distributed amongst these blockchains instead of focusing on Ethereum only. However, most of these blockchains in fact depend on Ethereum, as one way or another they are associated with the network’s smart contract. As shown in the image below by Cryptowatch, all of the top layer-1 blockchains are closely correlated with Ethereum’s price action.
Comparing Market Share between Bitcoin and Ethereum
As of 11th January 2023, Ethereum’s market share increased by 3% among global crypto assets, signalling its dominance on the rise. According to Coinmarketcap, Ethereum’s market dominance is at 19%, valued at around $856 billion. On another note, Coingecko’s metrics were slightly different, indicating Ethereum’s dominance at 18.3%. But both aggregation websites show that Bitcoin’s market dominance is decreasing, from 40% to 38%.
It is unclear whether this trend will continue, but according to data sourced from Blockchain Center, the Flippening has been on an uptrend since July 2021. And we are nearly halfway for it to happen. It is also worth noting that Ethereum came closest to the Flippening in 2017, when Bitcoin’s market dominance’s dropped by 40.6% and Ethereum took over 32% of the market amidst the situation.
In reference to the data provided by Blockchain Center, there are also other metrics apart from market cap that determines the Flippening. As of now, Bitcoin is still by far superior in trading volume, which is a crucial metric for adoption usage. However, Ethereum has Bitcoin beat in active addresses, transaction count and volume, and total USD transaction fees.
Outperformance of Ethereum will be primarily driven by the strength of its post-Merge fundamentals. The upcoming Shanghai Upgrade will significantly reduce the risk and opportunity cost of staking ETH, which is likely to attract participation from more crypto users.
Key Takeaway
Despite Ethereum’s increasing adoption and market dominance, Bitcoin still reigns supreme in the crypto space. In fact, Bitcoin saw significant adoption in 2021-2022 from retail and institutional investors, public companies, and even countries. As of now, El Savador and the Central African Republic (CAR) have adopted Bitcoin as a legal currency. This is a monumental step towards mainstream adoption.
But that is not to say the Flippening will never happen — it is certainly a possibility. After all, both Bitcoin and Ethereum have different visions. Bitcoin aims to become the global reserve currency, whereas Ethereum aims to become the infrastructure of a global digital economy. The Technology Acceptance Model (TAM) applies to both assets, but it all comes down to supply and demand mechanisms. If demand in digital money is higher, then Bitcoin dominates. But if demand in utility-based asset in building out a decentralized ecosystem is higher, then Ethereum is generally favored.
China’s national digital currency DCEP (Digital Currency Electronic Payment, DC/EP) will be built with Blockchain and Cryptographic technology. This revolutionary cryptocurrency could become the world’s first Central Bank Digital Currency (CBDC) as it is issued by the state bank People’s Bank of China (PBoC). The goal and objectives of the currency are to increase the circulation of the RMB and its international reach – with eventual hopes that the RMB will a global currency like the US Dollar. China has recently established an initiative to push forward Blockchain adoption, with the goal of beating competitors like Facebook Libra – a currency that Facebook CEO Mark Zuckerberg claims will become the next big FinTech innovation. China has made explicit that Facebook Libra poses a threat to the sovereignty of China, insisting that digital currencies should only be issued by governments and central banks. DCEP is not listed on cryptocurrency exchanges and will not be for speculation of value.
The significance of DCEP is that it’s designed as a replacement for the Reserve Money (M0) system, cutting back the cost and friction of bank transfers. It is suggested that DCEP will alleviate the risks of offline paper money transactions such as anonymous counterfeiting, money laundering and illegal financing. This is because regulators can better monitor digital currency transactions, which some consider will greatly improve financial and monetary supervision. DCEP can also reduce the costs involved in maintaining and recycling banknotes and coins.
Basically, DCEP is poised to become a digital version of the RMB.
Furthermore, the issuance of DCEP is conducive to promoting the internationalization of the RMB and reshaping the current cross-border payment system. This is because prior to the RMB Cross-Border Inter-Bank Payments System (CIPS) going live in early October 2015, RMB cross-border clearing and settlement was mainly done through CHIPS (Clearing House Interbank Payments System) or SWIFT (Society for Worldwide Interbank Financial Telecommunication). However, some consider that both the CHIPS and SWIFT systems have fatal flaws. Firstly, CHIPS is a US company. Whilst SWIFT, in particular, is seen as a cause for concern to the Chinese because due to its foothold in the international banking system, it is almost essential to use SWIFT for inter-bank transfers across countries. Thus whoever controls SWIFT’s data center will have access to information on almost every cross-border remittance, which some in China posit is the US. This is because whilst SWIFT claims to be a neutral international organization, 12 of the 25 directors are either from the US and her allies. Also, its transactional data were found to have been supplied to the US. Hence it is thought that China is being held back by the US via the SWIFT system, and so, in internationalizing the RMB- China requires its own worldwide banking system- i.e. DCEP.
Hence the Chinese consider that it is a requirement to form a new currency clearing network.
According to Chinese media, DCEP is seen as the “3rd Wave” aimed at the US.
A mandate to adopt Blockchain
China has established a countrywide initiative to push forward Blockchain Adoption. President Xi Jinping has mandated that the ‘country’s development of blockchain technology should be sped up ‘ on Oct 24th in front of the Political Bureau. This speech has also been echoed by Li Wei, head of the People’s Bank of China. In April of 2020, China launched the Blockchain Service Network to unify all the Blockchain related projects in the Nation.
China has adopted the “Blockchain, not Cryptocurrency”, whereby the benefits of Blockchain is highlighted. On the other hand, cryptocurrencies that are native to Blockchain are suppressed as Cryptocurrency Exchanges and ICOs are banned in the country.
History and development of DCEP
Development of DCEP started in 2014 with the establishment of a research institute dedicated to digital currencies and looking at how to improve the Chinese Yuan system with blockchain technology. However during 2014 to 2018, the development process slowed down, probably because the decentralised nature of Bitcoin or blockchain is incompatible with the nature of the Renminbi as a legal national currency. Things rapidly picked up towards the end of 2019 however and this was directly attributable to Facebook preparing to launch Libra, particularly as partner members of the Libra Association and the currencies which Libra was to be backed by had consciously rejected China. Hence, feeling the heat of the competition, China’s central bank felt immense pressure to urgently speed up in the global competition towards a digital currency.
Former Vice-chair of the PBoC’s National Council for Social Security Fund announced on 22nd June 2020 that China had already completed the backend infrastructure of DCEP.
Uses for DCEP
DCEP will be the only legal digital currency in China
DCEP is a currency created and sanctioned by the Chinese Government. It is not a 3rd party stable coin such as Tether’s cryptocurrency token “CNHT” which is also pegged to the RMB in a 1:1 ratio. DCEP is the only legal digital currency in China (cryptocurrencies such as Bitcoin are not legal tender in China).
Huang Qifan (Chairman of the China International Economic Exchange Center) said they have been working on DCEP for five to six years now and is fully confident it can be introduced as the country’s financial system. It’s currently being rolled out, with the People’s Bank of China issuing the currency. According to a speech by Huang at the China Finance 40 Forum, “DCEP can achieve real-time collection of data related to money creation, bookkeeping, etc, providing useful reference for the provision of money and the implementation of monetary policies.”
DCEP is not for speculation
China has made it explicitly clear that its National Digital Currency is not for speculation. Mu Changchun, Head of the People’s Bank of China digital currency institute made it as “a digital form of the yuan” and that “The currency is not for speculation. It is different to Bitcoin or stable tokens”. This is to the disappointment of the online community in China, where some netizens commented “So there will be no fun in it” on Sina.com.
It is also not possible to mine DCEP or stake on the DCEP network.
Cross-border payments with m-CBDC Bridge
China has joined forces to explore cross-border payments for digital currencies alongside Hong Kong, Thailand, the United Arab Emirates (UAE), and the Bank of International Settlements (BIS).
According to a joint statement in February 2021, the People’s Bank of China and the UAE’s central bank are taking part in the Multiple Central Bank Digital Currency (m-CBDC) Bridge project initiated by the Hong Kong Monetary Authority and Bank of Thailand in 2019.
The m-CBDC Bridge project will explore the capabilities of distributed ledger technology, through the development of a proof-of-concept prototype. The project ultimately aims to facilitate cross-border, multi-currency, real-time transactions around the clock.
This move aligns with China’s long-term ambition to use DCEP to boost the use of RMB in international payments. While the project is currently an alliance between just Beijing, Hong Kong, Bangkok, and Abu Dhabi, it is strongly supported by the BIS, an organisation owned by 63 central banks.
The announcement also comes mere weeks after China’s joint venture with SWIFT, the dominant network facilitating international payments between banks. The new entity, Finance Gateway Information Service, was registered in Beijing on January 16 with €10 million (US$12 million) as incorporation capital, according to the National Enterprise Credit Information Publicity System, the Chinese government’s enterprise credit information agency.
Special features of DCEP
DCEP is a Centralized Currency
DCEP is a digital currency that is run on a centralized private network – the Central Bank of China has complete access and control of the currency. This is a huge contrast to Bitcoin, which has an open decentralized network where there is no centralized leader. In the case with DCEP, the Central bank of China has the ability to create or destroy DCEP.
NFC Contact based payment
According to Official Sina Blockchain, DCEP will have NFC based payment options that don’t require devices to be online during the transfer. This will be poised as a direct replacement of paper money, as DCEP will be usable in areas without internet coverage. In addition, DCEP doesn’t require the mobile device to be bound to a bank account – meaning the unbanked population will also have access to the digital currency.
With DCEP’s tap payment feature people can transfer money simply by tapping two phones together, without the use of the Internet. So DCEP is not exactly like blockchain either, rather it is their own variant.
China Construction Bank launches DCEP wallet
On 29th August 2020, China Construction Bank (CCB) had a soft launch of the DCEP wallet. Users of one of China’s big four state-owned commercial banks found a DCEP wallet feature was available inside their mobile app. Users were even able to navigate to the digital yuan wallet and activate it through registering their mobile phone numbers.
Finally, users can send/receive digital currency to others by inputting their unique wallet ID or the phone number associated with the bank account.
CCB DCEP wallet
However, CCB has disabled the DCEP wallet feature from public access, but not before it gained huge attention. Users searching for this wallet now will only get an error message saying that the function is not yet officially available to the public.
Tencent to be a major partner of DCEP
Tencent’s Meituan Dianping has been in talks with the research wing of the PBoC on real-world uses for DCEP. Meituan Dianping boasts billions of dollars in daily transactions on their mobile app platform offering services such as food delivery (similar to UberEats), B&B bookings (similar to AirBnb), ride hailing services, bike sharing, grocery shopping and more. Basically for those in China, all your daily necessities can be met on the Meituan ecosystem.
The PBoC’s research wing is also in talks with another Tencent-backed company, Bilibili Inc. which provides video streaming services. So whilst the specifics of the partnership are yet to be finalised, it is likely that such cooperation is going to be huge for the mass use of DCEP in China.
According to Caijing magazine, the pilot institutions for DCEP will be the 4 major state-owned banks i.e. China Construction Bank, the Agricultural Bank of China, Bank of China and the Industrial and Commercial Bank of China. This initial deployment will serve as an official production test for the currency system, where the network and security will be validated. In the second phase, DCEP will be distributed to large fintech companies such as Tencent and Alibaba to be used in WeChat Pay and AliPay respectively.
DCEP will operate on a two-tiered system
The issuance and distribution of DCEP will be based on a two-tiered system.
The first tier would be transactions between the PBoC and intermediaries. These intermediaries would be financial institutions (e.g. the 4 major state-owned banks i.e. China Construction Bank, the Agricultural Bank of China, Bank of China and the Industrial and Commercial Bank of China) and non-financial institutions such as Alibaba, Tencent and UnionPay. Here, the PBoC would issue DCEP to the intermediaries.
The second tier would be between the above-mentioned intermediaries and participants in the retail market such as companies (e.g. retail stores) and individuals. In this tier, the intermediaries that have received DCEP will distribute it to retail participants so that it would circulate through the market e.g. through people purchasing items at stores etc.
The main difference in the issuance and distribution of DCEP compared to traditional cash however is the fact that DCEP would be transferred through electronic wallets, rather than bank accounts.
The central government has mandated that all merchants who accepted digital payments (such as Apple Pay, AliPay and WeChat) pay must accept DCEP. This will give DCEP a large nationwide acceptance in China, with every merchant obligated to participate or face a potential loss of their business license. This will make DCEP the most accepted digital currency in the world.
DCEP red packets to be launched for Chinese New Year
China’s DCEP app has launched a red packet gifting feature in time for the Chinese New Year on 22nd January 2023. The app will allow users to send the red packets i.e. “hongbao” containing DCEP to others. This is based on the Chinese New Year tradition of gifting lucky money during the annual festival. In fact, WeChat Pay and Alipay already have this feature for gifting CNY. However, it is the first time that e-CNY will be gifted in such a way, with hopes that this will further pave the way for the mass adoption of DCEP.
DCEP can be used to pay expressway tolls
On 28th December 2022, Chongqing Expressway Group announced it has completed the installation of equipment to accept DCEP for expressway tolls. From 30th December 2022, DCEP can be accepted as payment for tolls on the Chongqing Expressway. Users will need to download the e-CNY app and then simply present the payment QR code at the toll booth.
PBoC’s financial statistics reports now include DCEP/e-CNY
On 10th January 2023, the PBoC released its annual Financial Statistics Report for 2022. What is worth noting is that for the first time, the PBoC included statistics on DCEP/e-CNY. The Report states that as of the end of December 2022, the amount of digital currency in circulation was 13.61 billion yuan. This equates to around 0.13% of the total balance of yuan (13.61 trillion yuan) in circulation at the end of 2022.
Are people in China using DCEP?
According to a report on 28th December 2022, there has been over US$14 billion worth of DCEP transactions since its launch in 2020. Meanwhile, 261 million users have already set up an e-CNY wallet. However, this is considered low adoption since around 903.6 million people use mobile payments in China, according to a 2021 UnionPay report.
DCEP scams
Mere hours after DCEP has been announced, various (potentially scam) Chinese exchanges have listed IOUs or knock-offs clones of DCEP. It’s important to know that DCEP is currently only distributed to banks working with the PBoC and will not be available for the public. If you want to find out what are reputable exchanges, check out our top cryptocurrency exchanges guide. It is strongly recommended NOT to trade DCEP until it is officially released as there is no guarantee exchanges have access to the digital currency.
Knock-off clones of DCEP are already trading in (potentially) scam exchanges.
How to buy DCEP?
Currently, DCEP is only available to other banks working with the People’s Bank of China. This will eventually open up to the general public in 2020. There are currently no cryptocurrency exchanges that trade DCEP.
Implications of DCEP?
Is DCEP a challenge to the US monetary system?
The overwhelming view appears to be yes, both from the Chinese and the US perspective. According to statistics from the World Bank, 1.7 billion adults around the world use cash because they don’t have bank accounts. However, two-thirds of this population own a mobile phone, which can be used to make monetary transactions. This is what’s been happening in China, where mobile payments such as Alipay or WeChat Pay have more than 1.7 billion customers across China. Currently, the two online payment companies handle more payments monthly than Paypal did in the whole of 2017 (i.e. USD $451 billion). It’s very common in China to see street vendors accepting Alipay or WeChat pay.
Alipay and WeChat being accepted at an ATV rental shop
With the mobile wallet payment infrastructure in place, their cooperation with the PBoC could be the answer to distributing DCEP overseas. This would fit China’s “Belt and Road Initiative”, the aim of which is to build a new trade route connecting Asia with Europe and Africa. The idea is that with DCEP being used by mobile wallets, populations along the Belt and Road can be connected, bypassing existing financial infrastructures completely and giving an opportunity for the unbanked to pay for online purchases and build their savings.
In the US, the government does not see a demand for digital currencies. In a letter from the Chairman of the Federal Reserve, Jerome Powell, he took the view that many of the challenges a digital currency intends to solve do not apply to the US. In his view, the US payments landscape is already highly competitive and innovative, with plenty of digital payments options for consumers. Powell also commented, echoing the sentiments of those US lawmakers opposing Libra, that a digital payment where you would know and be able to track each and every payment would be unattractive for the US.
Whilst the House Committee on Financial Services also sees Libra as potentially raising national security concerns, observers consider the challenge from China is not being taken seriously. Because on the other hand, China is worried that Libra will reinforce the dominance of the US Dollar and is therefore working on fast-tracking the launch of DCEP. And it is likely that China will outrun the threat from Libra.
From a wider perspective, some take the view that DCEP can be used as a weapon against the US in an economic war. This is because as DCEP becomes accepted across the Belt and Road, China will have the power of total surveillance and control over the economic activity of potentially half the world’s population. DCEP will allow China to track everyone’s spending and transactions, and can seize or lock customers’ digital assets in their mobile wallets. We’ve already seen this in China, where together with its “social credit system”, millions of individuals have already been barred from purchasing airline tickets using their mobile wallets.
Appearance on Chinese television debate show “Tiger Talk”
On 29th August 2020, I appeared on China’s Phoenix Television show “Tiger Talk” (一虎一席談). Tiger Talk is one of Phoenix TV’s longest-running shows, each week they feature a debate on a major societal issue or event, and would invite experts, academics and guests to participate in the discussion. I was invited by Phoenix Television as an overseas analyst to discuss the topic of the week, namely, “DC/EP: China’s release of digital currency, will it shake the US Dollar’s hegemony?”. You can watch the episode here.
Guest appearance on Tiger Talk
Implications of DCEP on Bitcoin and cryptocurrencies
In the first instance, it should always be borne in mind that DCEP and Bitcoin/cryptocurrencies are vastly different. Key differences are that DCEP does not necessarily use blockchain technology and that it is a centralised currency under the control of a centralised authority. Learn more about the differences between DCEP, Libra, Bitcoin and Cash.
However, the large scale promotion of DCEP on national television in August 2020 is certainly bracing and preparing Chinese citizens for a digital version of the RMB. The gradual rollout of DCEP will also get the average citizen accustomed to the actual usage of digital currencies.
As a result, many people are excitedly speculating on the possibility of a bridge between DCEP and various existing blockchain projects- with some projects proclaiming they will be the first project to launch on DCEP. However it must be borne in mind that we do not know the full technical details of DCEP, so we do not know how this bridge between blockchain and DCEP will work, if at all. Also, the fact is that China is currently very hostile towards cryptocurrencies, this is mostly due to a number of cryptocurrency scams- such as Plus Token. As a result, the Chinese government have closed several bank accounts found to be involved in cryptocurrency transfers and banned all ICOs, several major cryptocurrency exchanges such as Binance and OKEx and some Over the Counter desks. Hence a lot of cryptocurrency circles and discussions occur underground, such as in private WeChat groups.
In a confusing twist, however, the CCP’s official media outlets 参考消息, Xinhua and CCTV have been pushing out headlines that crypto assets are the best-performing asset year to date. Dovey Wan, Founding Partner of Primitive Ventures has observed that the real intent behind this media push is difficult to interpret, but so far the Chinese cryptocurrency community see this as a signal that crypto has reached its top. Meanwhile, on the Western front on Twitter, people have been seeing this as a bull signal. Currently, without any further moves or news in China about DCEP or on the cryptocurrency front, we can only wait and see what China’s next move will be.
Hmm this is an interesting propaganda vibe from CCP’s official media outlets as “参考消息”, Xinhua and CCTV2
the headline “cryptoasset is the best performing asset YTD” was featured on all avenues, news paper, online media and TV
Will DeFi push governments to finally adopt CBDCs?
Decentralised Finance (DeFi) can be considered the cryptocurrency and blockchain star of 2020, having revived the cryptocurrency market and bringing some much-needed revival and positivity. But what is DeFi? In short, DeFi attempts to bring traditional banking to developing industries, but with a twist: it would be open-source, decentralised, cheap and will cut out the middlemen. (Xanax)
So what can central banks and government do to maintain their dominant status quo whilst benefitting from the technology that DeFi can bring? An answer could be to create a CBDC. In a Forbes article, the author suggests that CBDC would be a positive move for governments since it tokenises money whilst allowing users to enjoy the advantages of cheaper, faster transactions.
The article also touches upon our coverage of DCEP and discusses China’s progress in testing DCEP contrasted with the progress of introducing a CBDC in the US. It suggests that governments and institutions, however, will need to be quick to catch up as new DeFi solutions in payments, mortgage, insurance etc. are being created weekly, and this legion of fintech innovators are growing. These innovators challenge the status quo, and with the mounting advantages of DeFi, there may soon be a real contender vying for the attention of citizen-consumers.
FAQs
Is DCEP backed by Gold?
The simple answer is u0022Nou0022. On a recent episode of Kitco News, journalist Max Kaiser claimed that China will launch a gold-backed cryptocurrency, with the intention of destroying the USD as a reserve currency. He added that China has already amassed as much as 20,000 tons of gold. However this is mere speculation – China has no plans to return to the Gold Standard nor issue gold-backed cryptocurrencies.
Will DCEP be interoperable with other Cryptocurrencies
There are many plans to build gateways that allow the swapping of DCEP to other cryptocurrencies. Projects such as Algorand have stated they want to support DCEP and build possible bridges to swap these currencies. However, as the technical details of DCEP have not been fully revealed, such bridges have not been built yet.
Who can issue e-CNY?
There are 7 Chinese commercial banks that can provide e-CNY. They are: ICBC, Agricultural Bank of China, Postal Savings Bank of China China Construction Bank, Bank of China, Bank of Communications, and China Merchant’s Bank. There are also 2 online banks that can provide e-CNY i.e. WeBank (WeChat Pay) and MyBank (Alipay).
Which Chinese Cities can sign up and use the e-CNY app?
Currently, there are 12 cities and areas in China which can sign up and use the e-CNY app. They are Shenzhen, Suzhou, Beijing Xiong’an, Chengdu, Shanghai, Hainan, Xi’an, Changsha, Dalian, Qingdao, and Zhangjiakou.
Can tourists or non- Chinese locals use DCEP?
No, DCEP is not fully rolled out yet and is only available in select cities in China.
Is China using DCEP?
According to a report on 28th December 2022, there have been over US$14 billion in transactions since the launch of DCEP in 2020 and October 2022. Meanwhile, 261 million users have already set up an e-CNY wallet. However, this is considered low adoption since, according to a 2021 UnionPay report, around 903.6 million people use mobile payments in China.
When will China officially launch DCEP e-CNY?
Whilst there is ongoing DCEP/e-CNY testing on in increasing scale, there is no official announcement as to when and how China will fully roll out DCEP/e-CNY.
Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.
You’d be surprised at how people, loaded with Bitcoin and other crypto, managed to lose their ticket to retirement.
One Wrong Click – $120,000 Crypto Gone
A phishing attack is the oldest play in the book, the bread and butter of web3 scammers.
They work by tricking victims with fake error messages, wallet pop ups, or flashy hyperlinks. They will then lead you to unofficial websites or extensions that would expose your wallet seed phrase or other sensitive information.
You’d think people would be more careful about connecting to shady websites, but the truth is both crypto newbies and veterans still fall victim to these to this day!
The story went viral and countless people also shared their unlucky experience. They reported to the authorities, but there was nothing they could do as cryptocurrency is still largely unregulated.
Always be cautious when encountering suspicious links especially from an unknown source. Also always double-check the link that you are clicking is indeed the right one. Some scammers can even copy the domains of well-known DApps with slight moderations to it, and you won’t even notice the difference.
Crypto Exchange CEO Died – All Users’ Assets Locked
This case is the literal sense of the phrase, “taking secrets to the grave.”
Canadian exchange QuadrigaCX’s CEO Gerald Cotten allegedly passed away in India in 2018. He was the sole custodian of the exchange’s crypto store, which is all held in cold storage.
No one has ever been able to unlock the digital wallet passwords on his encrypted laptop. As a result, over 115,000 users’ assets are locked indefinitely, including 26,500 Bitcoin, 11,000 Bitcoin Cash, 200,000 Litecoin, and 430,000 Ethereum.
The morale of the story is never store your crypto on exchanges, especially if you have large holdings. Consider holding your funds in hardware wallets like Ledger Nano X, Ledger Nano S or Trezor Model T.
Forgotten Password to 7,002 Hard-Earned Bitcoin
About 20% of all Bitcoins are lost in circulation. That is a lot of money that is unlikely to be recovered. This happens when users forget their private key or even the password to the hard drive containing the private key.
German engineer Stefan Thomas was given 7,002 Bitcoin in exchange for creating an animated video in 2011 called “What is Bitcoin?” However, he has forgotten the password to his encrypted hard drive called IronKey, which stores the private key to the Bitcoins.
IronKey allows users 10 attempts to input their password correctly before the funds are encrypted forever. Thomas only has two attempts left before his Bitcoins are gone forever.
Always remember to write down your password and seed phrase on a piece of paper and store it securely. Or it would be a lifetime of regret.
Spring Cleaning Gone Wrong – 8,000 Bitcoins Lost
Remember when some of your stuff would go missing, only to find out your mom had thrown them away because she thought it was useless? An action figure with sentimental value? No big deal!
But for James Howells, it was life-changing. He had two identical laptop hard drives — one was blank and the other contained 8,000 Bitcoins. Howells had meant to throw out the blank one when he was clearing out the office, but instead the drive containing the crypto ended up in a landfill in Newport, Wales!
This unlucky disaster continues to haunt Howells to this day. He has repeatedly petitioned Newport City Council if he can dig up the landfill site, which were all denied.
10,000 Bitcoins for 2 Pizzas
May 22 is known as Bitcoin Pizza Day. It is a well-known story in the crypto world. It was the day Laszlo Hanyecz paid 10,000 Bitcoins for two Papa John’s pizzas in 2010, which was worth $30 at the time. Now they are worth nearly $230 million!
We can’t blame him for not knowing the future. Since Bitcoin did not have that much value back then, it was more like redemption points for pizza. Had he held his Bitcoins, he would not have to work a day in his life again.
Amazingly, Laszlo said that he had no regrets about it, and was happy to be a part of the early history of Bitcoin. In fact, Hanyecz is the first person to use Bitcoin in a commercial transaction.
All financial markets experience different cycles and market conditions. Since crypto asset prices also go through prolonged periods of bullish and bearish movements, the crypto market is no exception. The most dreaded market phase for crypto traders and investors is a declining or bearish phase, especially one that sustains itself for a long time.
General sentiments regarding the crypto and other financial markets are bleak during these periods, making many investors and crypto enthusiasts understandably worried. However, many traders still find ways to make money during unfavourable market conditions. To earn when the market is down, it is important to understand the concept of a bear market.
Check out our video comparing the crypto bear market in 2018 vs 2022, and how you can still profit during this period of downward price trends:
Table of Contents
What Is a Crypto Bear Market?
A bear or bearish market is a prolonged period characterized by falling prices of at least 20% across major crypto assets. Individual crypto assets may also be in a bear market if they experience a decline of 20% or more over an extended period. A bear market may occur due to widespread pessimism and negative market sentiment, as well as other internal or external factors. Additionally, a weak or slowing economy, pandemics, wars, and geopolitical crises are also characteristics that may cause a bear market.
7 Ways to Make Money and Profit in a Crypto Bear Market
Even when the market is in an overall downtrend, the blockchain and DeFi sector offers various ways for crypto traders and investors to still emerge profitable and victorious. Here are a few lucrative options that crypto investors and traders can utilize to make money and remain afloat in a bearish market phase.
Yield Farming
Yield Farming is a cryptocurrency investment method that allows investors to earn interest and rewards on their crypto assets. With yield farming, investors lend their crypto assets to DeFi platforms that hold these assets in a liquidity pool for a specified period. These pools provide liquidity to decentralized finance platforms that use the funds and ensure that the depositors earn some interest over time.
For those who are new, check out our video on the top yield farming mistakes all newbies make:
Crypto Staking
Staking is the process of earning rewards by locking up funds on a blockchain. Although similar to yield farming, this process does not use tokens for loans. Instead, Proof-of-Stake (PoS) blockchains use staking to validate transactions on their networks.
Users who stake more tokens get higher priority to validate transactions and earn more funds. Earnings from asset staking vary between platforms and depend on the governance community in each case. Before getting involved in yield farming or staking, always do your own research and make sure the returns are sustainable, as many times, there are ludicrous and unsustainable offerings that result in users losing all of their funds.
Crypto Savings and Crypto Lending
Savings and lending are good ways to make passive income from crypto during a bear market. These methods involve storing assets on a platform to earn simple interest on the deposits. Traders should remember that potential earnings mainly depend on the amount stored. Again, do your own research before allocating any capital to these types of platforms.
Forks and Airdrops
Altcoin forks and airdrops are also effective ways to make money in a bear market. A fork happens when users vote to diverge a blockchain and form another due to a material disagreement. This process leads to an airdrop where holders of the old token get the new tokens to participate in the forked blockchain. Depending on the value of the forked token, users can earn quite a bit by simply holding newly acquired tokens. (Modafinil)
Margin Trading
One of the most common ways to make money in a down-trending market is margin trading. This method is simply the process of trading crypto assets with funds from brokers. Margin trading allows users to trade with more money than they have in their accounts, thereby increasing potential profit. Although margin trading is an effective way to earn in a bear market, this method is only recommended to experienced crypto traders, as you can lose the entirety of your initial capital if the market moves in the opposite direction of your call.
Analyze Smaller DeFi Projects
A new DeFi project may have a low valuation after launch, but show huge promise in the long run. Crypto enthusiasts who take the time to analyze and research these projects can likely find and profit from the right ones. Even in a bear market, crypto investors who get in early enough tend to make gains from the increase in the asset prices of these crypto projects.
Dollar-Cost Averaging
One of the most effective ways to thrive in a bear market is to buy the dip. With dollar-cost averaging, investors buy assets at consistent intervals and properly observe market conditions before reinvesting. Since the cryptocurrency market’s volatility is unpredictable, it is nearly impossible to predict the lowest point before a reversal. Hence, dollar-cost averaging helps investors maximize profits by allowing them to buy at low points before the market becomes bullish. You lower your risk by lowering your potential downside and upside, but also allocating capital in a way where you will not only hit peaks and troughs.
Next Steps
Any crypto market condition has potential for profitability if you know how to play it right. The above strategies can help even novice crypto traders earn when the market is bearish. However, traders should note that their preferred strategy should depend on their risk tolerance and portfolio size. Traders should also learn to study the market to ensure that the chosen method will be effective at a particular time.
The crypto market, together with stock markets and the global economy in general, have been experiencing a significant drawdown for the past 6 months, leading to a confluence of factors ranging from high inflation, rate hikes, supply chain issues, energy crisis, to geopolitical instability. This combination packs a powerful punch for any risk-on markets, such as stocks and crypto, forcing retail and institutional investors to exit their capital from markets during these uncertain times.
With Bitcoin currently at $20k, down 70% from its $69k ATH, and the total altcoin marketcap being down 72% from its ATH, it is hard to deny that we’ve entered a bear market. But one question remains – is this anything like the bear market of 2018 and will it last equally as long as the previous one? Let’s dissect the situation and understand if this time is truly different, or if this is just a small bump in the road before an accelerated bull market.
Check out our video comparing the crypto bear market now (2022) and in 2018- and more importantly, how to STILL make money during this downturn:
2018 Bear Market
2017 saw the first true mass influx of retail interest into the crypto space. Bitcoin saw a rapid increase in price, everyone’s friend and grandma were kickstarting their own ICOs to attract funds, and regular companies added the blockchain keyword to their names to increase their share prices. 2017 was the wild west, as there was even less regulation than currently, and the space was rife with opportunists spawning scam projects to extract money from ignorant first-time crypto investors.
But, as with any bubble, it eventually pops. The crypto space was heavily overheated, with investors throwing money at everything that moved, doing minimal to no due diligence, just to get on the crypto hype train. Come 2018, things were starting to cool down and people were beginning to feel the pain. In less than 6 months after the peak ICO craze, over 90% of all the projects were already dead, with many more to go down with them in the rest of the 18-month long bear market.
At the peak of the market, a lot of FUD (fear, uncertainty and doubt) was beginning to circulate. Fear of regulation due to the prevalence of scams, and with China/Korea considering banning cryptocurrencies, things were not looking great for the crypto space. Right around the peak of the market, the Chicago Mercantile Exchange (CME) launched their Bitcoin futures product, which allowed institutional investors to get their hands dirty with Bitcoin. And, naturally, they did just that. With all of the FUD circulating and the market waiting to release a lot of pressure, institutions began shorting the market, creating an enormous sell pressure that brought BTC down to $7k, which kept grinding down to $3k till mid-2019.
2022 Bear Market
After Covid-19 hit, the market experienced a tiny two-month recession. As everyone was locked inside, demand dropped and supply shrunk as well. But once central banks began printing more money to help businesses and people via stimulus checks, many found themselves with a lot of extra cash and no way to spend it, so they turned to investing. After the March crash, the rest of 2020 saw the crypto market boom, calling it the “DeFi summer”, with BTC increasing in price by 400% by the end of the year. After that, it just kept on going. 2021 was the year of the NFTs and Metaverse, i.e. GameFi, with numerous projects sprouting up to capture some of the value amid all the hype.
After reaching its peak in November 2021, the crypto market has kept on steadily grinding down. Those who had called the peak in November aptly understood that the markets were overheated, inflation was starting to get out of hand, and the only way for governments to keep that under control was to begin quantitative tightening through rate hikes. Unfortunately, many were still in denial about the onset of the bear market way into April, which has resulted in a lot of people holding bags that might or might not recover.
Now the path forward seems clear. The US Federal Reserve’s hawkish monetary policy is causing markets a lot of necessary and unavoidable pain. Because the money printing since Covid-19 has been at such an unprecedented level, the Fed is finding it hard to slow down the inflation without causing a lot of damage. The result currently is a looming recession at the same time as inflation is still running rampant and driving up the prices of everything, all the while people’s incomes are stagnating and their expenses increasing.
When is the Next Bull Cycle?
At the moment, there are no clear signs of central banks reeling in their hawkish monetary policies. It might possibly take at least several months if not until the end of the year for the dust to settle, the bottom to come in, and for us to be ready for the next bull cycle once the Fed eases monetary restrictions. Continued geopolitical turbulence aside, the next bull cycle will certainly come, but it’s difficult to say what will be the narratives driving the rapid market expansion this time.
The two most touted bull market catalysts are the long-awaited Bitcoin spot ETF and the Ethereum Merge, which will cause the Ethereum network to transition from its wasteful Proof-of-Work mechanism to Proof-of-Stake. However, as is common in life and in markets, the most obvious things tend not to be the ones to catalyze huge changes. Markets are irrational, and a confluence of new narratives that will be born only in 6 months might very well end up triggering the next bull run.
How to Still Make Money During the Crypto Bear Market?
With great pain come great opportunities, and this bear market is no exception. This is the time for learning, accumulating, and paying attention to the market. In our latest video about the current bear market, we outline a few strategies that you can use as an investor to maximize upside potential come next bull run:
1) Dollar cost averaging (DCA) into your investments – instead of trying to catch the generational bottom and investing your whole capital in one go, better invest 20% of your capital at a time during a longer time period, so that way you are more likely to get a great average entry price and reap the profits in the future.
2) Doing lots of research – fundamental analysis of projects is the best way to ensure you invest in projects that have a real potential, and this is the time to be doing just that. Many projects will die during this bear market, so it’s important to source trustworthy information and be critical of everything in order to position yourself properly during the next stage of growth.
3) Diversify your portfolio – as we’ve seen in the past months, there’s no such thing as too big to fail in the crypto space. Instead of going all-in on one project, spreading risk across several projects will ensure your capital is better protected from a few bad investments.
4) Shorting the market – this should not be practiced by anyone who doesn’t have experience trading, as without proper risk management things can get pretty ugly very fast. During a downtrend, a way to make money is by shorting an asset, which essentially means you’re betting on an asset to go down in value.
Of course, none of this is financial advice, and we implore our readers to do their own research and never invest more than they are willing to lose. It’s a highly volatile market and not for the faint of heart.
STEPN is the most popular move-to-earn blockchain game in the crypto market this year after some significant adoption by the market and big moves with other major exchanges and well-known sneaker brands.
Move-to-earn is a new way to earn money through gaming with the novelty that it rewards not only digital activity within a game or app, but also physical activity. In short, the more you move in the real world, the more you are rewarded in your digital app.
STEPN has been crushing it lately after surpassing 300K daily active users (DAUs), receiving a strategic investment from the venture capital arm of Binance, and launching a unique collection of NFT sneakers on Binance NFT marketplace in partnership with sports brand ASICS.
What is STEPN?
STEPN is a move-to-earn health and fitness app with game elements built on Solana. Users equipped with sneaker NFTs can run and walk outdoors to earn tokens and NFT rewards. The funds earned can either be used to increase earnings in the app or can be withdrawn and sold. The mobile app has a built-in wallet, swap, marketplace, and rental system that allows non-crypto users to onboard.
How does STEPN work?
Anybody can earn tokens and NFTs in STEPN by downloading an app, buying NFT sneakers, and completing various forms of exercise. Similar to how Bitcoin mining works, users in STEPN have to prove they have physically worked out, at the cost of their own time and energy. This is validated by the app’s anti-cheating mechanics using GPS and machine-learning technology.
The tokens and NFTs are then minted to users’ wallets from the people, not from the game developer FindSatoshi Lab, known for its work on cryptocurrency wallet Solwallet. In this way, people can trade their tokens and NFTs 100% peer-to-peer and over time. STEPN has created an ecosystem where the value of tokens and NFTs is based on supply and demand.
STEPN tokens: GMT and GST
There are two types of tokens available to players, GMT (total supply of 6 billion) and GST (unlimited supply). GMT is a management token that allows users to increase their income. GST is an in-game token that users receive for in-game activity.
To create a balanced token ecosystem, the developers have decided not to limit the GMT governance token earning to a small group of people. Instead, they have made GMT and GST broadly accessible to ensure balance in the mining of these two tokens.
Since many GameFi projects with a similar dual-token economy have tended not to thrive, the question is raised about whether GST, with its unlimited supply, will go into a death spiral. STEPN’s model addresses this by making GST earning irrelevant at a higher level. As people approach the higher levels, they are presented with the option to choose which token to earn, and they would naturally want to earn the limited supply of GMT.
This will get amplified over time as more GMT is burned and more GMT use cases are released. This should reduce the GST token supply enough to balance the token value. If too many people are mining GMT, they will earn less than what they can with GST, so they will switch to earning GST. This will reduce the competition for earning GMT, and, in turn, make GMT mining profitable again.
Getting started with STEPN
To get started with STEPN, you must first download the app to your smartphone via Google Play or Apple Store. Then, following the on-screen instructions, you will need to create an account and receive an activation code.
You will be able to use the app fully once you have purchased your NFT sneakers from the in-app STEPN shop. Choose your sneakers based on your abilities. Once you have purchased the sneakers, open the game and start walking or running. You will start earning immediately.
How to join STEPN: Step-by-step guide
1. Download the App
First, you have to install the app on your smartphone. Depending on the model of your phone, you can do this either from the App Store or from Google Play.
2. Create an Account
After launching the app, you will need to enter your email address, to which you will receive a registration confirmation code. Enter your email address and press the ‘Send Code’ button. A code will be sent to your email address, and you will need to enter it in the corresponding field.
3. Obtain Activation Code
You then need to obtain an app activation code. To obtain the activation code, register in the STEPN community on one of the official social networks. Choose the social network that suits you best (Twitter, Telegram, Discord, etc.) and proceed according to the on-screen prompts. An activation code can also be received from a friend via invitation or bought from another user.
Once you have received the activation code, the main app screen will open. Click on the ‘Get activation code’ button. After you have entered your activation code, the app will open and the tutorial will start. Several screens will explain to you how to use the app.
4. Create a Crypto Wallet
You then need to create a crypto wallet in the STEPN app. Click on the wallet image in the top-right corner of the app. This will start the process of creating a crypto wallet, which will take a couple of minutes. While creating the wallet, you will be shown a secret phrase that you need to write down and keep in a safe place. Once the crypto wallet has been created, you will be taken back to the main app screen.
5. Start the Game
In the top-right corner, the token column will show zeros. To start the game, you need to deposit Solana (SOL) tokens into the crypto wallet you just created, in the amount that will allow you to purchase an NFT in the form of a sneaker. SOL can be bought on almost any major CEX or DEX.
6. Buy NFT Sneakers
TIP: Before you buy sneakers in STEPN, open the app and run for 10 minutes in running mode without sneakers. This is so that you can find the right type of sneaker for you. NFT sneakers are purchased in the shop. After buying the sneakers, wait until 25% of the energy has accumulated (approximately 6 hours) and then start the game. You are now ready to move-to-earn!
Playing and Moving to Earn
STEPN currently has solo mode only, in which users receive GST tokens as a reward for moving in the real world. This consumes virtual energy at a rate of 1 unit per 5 minutes of movement. All of these processes are only triggered after the purchase of NFT trainers. If the energy is at zero, no tokens are earned.
GST tokens, and subsequently GMT, are paid out depending on the following factors:
The level and attributes of NFT sneakers – more efficient sneakers cost more. Up until Level 29, users can only earn GST, and from Level 30 onwards, they can switch to earning GMT if they wish.
Sneaker comfort parameter – the higher it is, the more tokens are earned every minute.
Running speed – it is necessary to maintain the recommended speed range for the sneaker. If you deviate too much from it, earnings will be reduced by up to 90%.
Marathon and background modes are set to be added later. Marathon mode will be an entirely new playstyle and is aimed for release towards the end of 2022. Background mode will be added when the STEPN team feels the time is right to approach non-crypto users.
The Importance of Energy
Energy plays an important role in earning tokens in STEPN. As soon as you run out of energy, your earnings will stop. Only when energy is available will your movement be rewarded. The amount of energy determines how many tokens you can earn for walking and running.
To increase the amount of energy you have, you can buy more NFT sneakers or get hold of rarer ones. The more NFT sneakers you own in your inventory, the more energy they will automatically generate. Higher levels and rarity sneakers will give you more energy.
Strengths of STEPN
One of STEPN’s biggest strengths in the current market is the successful combination and implementation of GameFi and sports. This could be seen as a clear advantage over any competition as many crypto-native builders don’t have the connections or knowledge to replicate STEPN’s GPS technology and machine-learning anti-cheating mechanics.
Because the health concept of the game and its everyday practicality is relatively simple compared to other games and apps in crypto, STEPN is a prime candidate for mainstream adoption.
Weaknesses of STEPN
There are still quite large barriers to entry for the average person. The registration process is too complicated, and to start playing, new users need to first learn how to open and fund a crypto wallet and buy an NFT item. For a newbie, this is not as straightforward as it should be.
NFTs also cost between 2.5 and 10 SOL, and way upwards of $100 if you want the best sneakers. This means there is an element of ‘pay-to-earn’ about STEPN. However, at the moment, the return on investment (ROI) is in the region of a few weeks, which is not bad at all.
Conclusion
Making money while keeping healthy is a win-win, and as a sports GameFi product, STEPN has struck a decent balance between game elements that are not too rich and complex to stop non-gamers from entering, and sports elements that are not too difficult to stop non-athletic people from trying it out.
The tokenomics also create value for both users and the platform. As long as the concept remains simple and participating remains profitable for the average user, STEPN should continue its impressive adoption rate.
For more information on STEPN, follow their official channels:
Doing your taxes on your cryptocurrency trades has become a necessary burden for many as major nations continue to implement regulations on the industry, and this is actually a positive thing for global adoption. Huge nations such as the United States are currently looking to introduce stricter regulations for crypto and have already been taxing crypto profits. Therefore, to avoid unwanted meetings with the IRS, American investors are having to play by the old rules.
But if that’s not something you’re into (long live financial freedom!) or you’re a crypto maximalist, the good news is there are several places in the world that might present better options for you.
This article highlights seven countries around the world that are pro-crypto and some that will even allow you to trade and earn crypto income tax-free. Here’s our video comparing the top best countries for crypto investors.
Portugal
No capital gains tax on crypto
No personal income tax on crypto received
Portugal is one of the most crypto-friendly countries in the world after establishing a Digital Transitional Action Plan in April 2020 to promote decentralization. The country experienced hyperinflation in the early 1990s which almost drove companies to bankruptcy, so it is no surprise the Portuguese people have shown trust towards crypto.
If you’re making any capital gains from purchasing or selling cryptocurrencies you do not have to pay any taxes, nor is there any income tax on payments received in crypto. If you don’t hold an EU passport then you can invest 350,000 euros in funds in the country for five years to become eligible for citizenship via the Golden Visa Scheme. The best part is you’ll only need to spend seven days in Portugal per year, meaning you don’t have to permanently relocate.
2. Bermuda
No income tax at all
No capital gains tax on crypto
As an example of Bermuda’s crypto-friendly nature, we only need to look at the Bitcoin ETF that was approved in late 2020 after years of unsuccessful attempts to launch in the United States. The Bermuda Stock Exchange approved Hashtag’s Nasdaq crypto ETF making it one of the first of its kind and proving that the country is likely to continue to be forward-thinking regarding crypto.
It’s fairly easy to obtain residency in Bermuda as long as you have sufficient income. At least $2.5 million must be invested into real estate, businesses, or bonds in the country in return for a passport.
3. Malta
No income or capital gains tax on long-term crypto investments
35% income tax on crypto trading
Malta is a southern European island in the Mediterranean Sea that has been using crypto for the longest time. Crypto traders receive 35 per cent in income tax as it is viewed as the same as stock trading by legal definition, but on the plus side, there is no income or capital gains tax on long-term investments in digital currencies. So if you’re a long-term hodler you would love Malta, but not so much if you’re a day trader.
If you’re not an EU citizen and want to become one you can buy Maltese citizenship and receive a passport in about one-and-a-half years at a cost of around $1 million dollars. This is more for long-term players who really want to cash out their crypto tax-free.
4. Singapore
No capital gains tax on crypto
No existing crypto funds subject to taxation
Singapore already enjoys the reputation of being one of the most business-friendly places on the globe and is slowly emerging as a safe haven for crypto investors as well. The country’s central bank believes the crypto ecosystem should be monitored to prevent money laundering and other illegal activities, however, also insists innovation should not be stifled. Singapore is known as the fintech hub of Asia as residents and companies do not have to pay any capital gains tax nor are there any existing funds subject to taxation.
Residency in Singapore is easy for students, who just need to study there for two years and pass a government exam, but the requirement is much higher for their investor program – at least 2.5 million Singaporean dollars (roughly US$1.8 million) must be invested into new businesses or funds.
5. Switzerland
No capital gains tax on crypto
Bitcoin is legal tender in some regions
Swiss banks were the first in the world to offer crypto companies business accounts in 2018 after recognizing that banking channels would help to eliminate fraud and encourage legitimate businesses in Switzerland. Crypto is classified as an asset and Bitcoin is recognized as legal tender in some regions so the narrative for crypto is generally positive. The Swiss don’t see crypto as a threat to their fiat currency.
If you trade or hold any crypto as an investment in your own account and qualify as an individual trader you will not be liable for any capital gains taxes. Residency in the country is a bit tricky in comparison to other countries – you must be under the age of 55 and need to invest at least one million Swiss Francs in a way that stimulates new technology developments in the region.
6. El Salvador
No income or capital gains tax on Bitcoin
Bitcoin recognized as legal tender
Building world’s first ‘Bitcoin City’
El Salvador made mainstream media headlines and is the undisputed king when it comes to crypto-friendly regulation after Bitcoin was recognized as legal tender in 2021. Consequently, the country has no income tax or capital gains tax on Bitcoin and plans to maintain its status as a crypto hub by building the world’s first ‘Bitcoin City’.
In the future it might also be possible to buy an extra passport and a new nationality with crypto. The law hasn’t been confirmed yet but ever since Bitcoin became legal tender in the country El Salvador has continued to accumulate and now holds more than 1,800 Bitcoin as they want to continue to build up their Bitcoin reserves. Do not be surprised to one day see El Salvador offering citizenship in exchange for crypto investments.
7. St. Kitts & Nevis
No capital gains tax at all
Buy a passport for $150k or BTC equivalent
Move freely between Caribbean Union countries
St. Kitts & Nevis is an island in the West Indies that has welcomed digital assets with open arms and implemented legislation to make crypto transactions easier under its Virtual Asset Bill of 2020. You can use crypto to buy a passport to this tax haven and the best part is you don’t even have to land in the country to get the passport. A passport costs about $150,000 or the equivalent in Bitcoin and you can get it in about four months.
There is no capital gains tax in the country at all and local banks work happily with crypto investors. The island nation has Bitcoin ATMs placed throughout the country and you can live in any other Caribbean countries that are also part of the Caribbean Union.
Conclusion
At the end of the day there are still many countries that consider crypto to be a threat to their sovereignty yet each day more and more nations are realizing the benefits and possibilities of welcoming the innovation of blockchain and crypto. The treatment of digital assets varies depending on each country’s financial regulations and procedures, which is why it’s essential to do your own research and consult a tax advisor before deciding to immigrate.
Currencies have been around for thousands of years as a way to replace the bartering system and so that people can ascribe a unified value which they can exchange with others. With the popularity of “going digital”, digital currencies have started to emerge to the forefront as a potential new asset class. Starting with Bitcoin in 2008 as the world’s first digital currency, from there many other digital assets evolved such as Ethereum and other cryptocurrencies. Now, companies and even nations are hopping onto this trend to create digital currencies that would serve their own purposes, such as Libra and China’s national digital currency DCEP (Digital Currency Electronic Payment, a.k.a. DC/EP). In this article we take a look at the similarities and differences between cash, Bitcoin, Libra and DCEP.
Many cultures around the world developed the concept of commodity money i.e. objects that have value in themselves as well as their value in their use as money likely during the Bronze Age. Objects that were used as “money” included cowry shells in ancient China, Africa and India, whilst other countries used salt. Eventually metals were favoured and used as money because they were more durable. For example the Egyptians used gold bars of differing weights and the Mesopotamians used silver. During the seventh century in China, the concept of the banknote was developed, though paper money was only formally introduced around the 11th century. The reason for this was so that merchants and wholesalers did not want to carry heavy copper coins in larger commercial transactions.
Bitcoin was invented in 2008 by a “Satoshi Nakamoto”, whose true identity or identities still remains a mystery today. Bitcoin was revolutionary at the time because it was created as a decentralised digital currency without control by any bank or authority. It could be sent from person to person on the Bitcoin network without having to rely on any intermediaries.
Libra was created by the Libra Association, who was in turn co-founded by Facebook and formerly other companies such as PayPal, eBay, Visa and Mastercard. The purpose of Libra was to make it easier and more cost effective for people to transfer money on Facebook, thus attracting new users. In addition, potentially helping to empower billions of people who are unbanked. The plan was for this token to be backed by a portfolio of several types foreign currencies namely 50% USD, 18% EUR, 14% JPY, 11% GBP and 7% SGD to avoid volatility.
DCEP is poised to become the world’s first national digital currency and will be issued by China’s state bank, the People’s Bank of China (PBoC) as a digital version of cash. It is designed as a replacement of the Reserve Money (M0) system and will be pegged with China’s national currency the Renminbi (RMB) at a 1:1 ratio. This means that in future, instead of handing over physical money to buy items in China, you can simply access your electronic wallet on your phone and transfer DCEP to the shopkeeper.
Development of DCEP started in 2014 with the establishment of a research institute dedicated to digital currencies and looking at how to improve the Chinese Yuan system with blockchain technology. However during 2014 to 2018, the development process slowed down, this was probably because the decentralised nature of Bitcoin or blockchain is incompatible with the nature of the Renminbi as a legal national currency. Things rapidly picked up towards the end of 2019 however and this was directly attributable to Facebook preparing to launch Libra, particularly as partner members of the Libra Association and the currencies which Libra was to be backed by had consciously rejected China. Hence, feeling the heat of the competition, China’s central bank felt immense pressure to urgently speed up in the global competition towards a digital currency.
Currently, China had already completed the backend infrastructure of DCEP though there will still be ongoing pilot testing as part of the research and development process. Eventually, other Chinese cities, foreign firms and venues for the 2022 Winter Olympics hosted by China will participate in testing of DCEP.
Type of technology used
Cash is the only type of asset mentioned in this article which does not require any form of technology. Cash is physical paper or coins which can be transferred simply by handing it over to the recipient. Transactions are recorded on a ledger, and can be physical (e.g. a notebook) or digital (e.g. a spreadsheet).
Bitcoin utilises blockchain technology, its founder Satoshi Nakamoto referred to Bitcoin as “a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” Transactions are also publicly recorded on the blockchain, anyone can see what transactions have been made, although they cannot modify the transaction records.
How Bitcoin transactions work (Image credit: CBinsights)
Libra also utilises blockchain technology, but unlike Bitcoin which runs on a public blockchain, Libra would run on a consortium, or permissioned (private) blockchain. This blockchain can only be accessed and managed by the Libra Association, a group of companies which includes Facebook, Thrive Capital, Shopify, Tagomi and Temasek Holdings etc. This digital currency will be on an open-sourced platform built using its own programming language called Move.
DCEP is built with blockchain and other cryptographic technologies such as asymmetric cryptography, smart contracts, UTXO and digital wallet. This was confirmed by Mu Changchun, Head of the People’s Bank of China Digital Currency Institute. In particular, asymmetric cryptography (a.k.a public-key cryptography) technology is a process whereby a public key is used to encrypt a message so that only someone who uses the related private key can decipher it. It is the use of this technology that creates the linkage between DCEP and the blockchain and cryptocurrency industry. DCEP, due to the quasi-anoymous nature (as will be seen below) will also be making use of technology that can track its movements, and big data and data mining technology to monitor and prevent illegal activities.
Anonymity
Cash is truly anonymous as it has no features that can distinguish who its owner is. Simply put, if you picked up a $100 banknote lying on the street it would be very difficult, if not impossible for anyone to challenge your ownership of it. That is why cash is still the preferred instrument of choice for criminal activities such as money laundering, according to a study by Eruopol.
Libra’s aim is to be private. In its White Paper, Libra claims that they would support a privacy approach, though simultaneously taking into account the regulatory aspects of this. However unlike Bitcoin, Libra’s transactions won’t be fully public. Node administrators that run the network e.g. Facebook etc will have a copy of all the transactions made by users. How Libra will achieve this aspect of privacy in practice is unknown. Though there is speculation that short term anonymity can be created under Libra through how the Libra wallet is funded. For example, people can possibly purchase Libra from street sellers who would fund the wallet, or funding the wallet through ATM machines or using other cryptocurrencies. In short, Libra users cannot expect total privacy and anonymity.
Bitcoin allows users to make sever pseudonymous addresses. They are merely strings and numbers and letters, which are not attached to anyone’s identity. But unlike Libra, all transactions on the blockchain are public. So you may be able to find out who the owner of an address is through corroborating the transaction information with known information on who owns certain addresses. It is specifically through this method that funds belonging to victims of various scams are traced and identified, such as the PlusToken scam that resulted in losses of over $3 billion dollars worth of cryptocurrencies.
🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 789,525 #ETH (105,099,509 USD) transferred from PlusToken to unknown wallet
Through looking at blockchain transactions, analysts are able to see the movement of funds from scams such as PlusToken
On the opposite end of the spectrum is DCEP, which contains features that allow China’s central bank to track the movement of the currency and supervise transactions. Filed patents concerning DCEP hint at this, since the patent concerned appears to be a tracking system that would make DCEP’s movements traceable between transactions and payment parties. Although Mu reassures people that DCEP would balance between allowing anonymous payments and “classified supervision” when illegal activities such as money-laundering are involved.
Market observers believe that the underlying motivation is because China desires to protect its capital boarders in case newer global payment systems and advanced technologies could facilitate illegal cash flows. In addition, Mu confirmed this fear and desire to preserve control when he expressed that if the Renminbi can be converted into Libra, there would be a massive currency exchange which would trigger its depreciation.
Efficiency of transactions
Cash transfers are inefficient, even more so if the transfers are across different jurisdictions. We all have been through the experience of having to wire money overseas which can take several days to process. These methods are also cumbersome, outdated, expensive and time consuming as it involves several entities such as banks.
One of Bitcoin’s major advantages is that you can transfer it conveniently across countries without going through banks. However compared to Libra and DCEP, the efficiency of Bitcoin transfers is still slow at around 7 transactions per second. Depending on the amount of transaction fees you were prepared to pay, some transactions could still take hours.
Libra’s design is to be more efficient than Bitcoin. This is mainly due to the fact that Libra is centralised, i.e. transactions are processed through the Libra Association, which means that Libra will draw less energy. Libra’s transaction speed also aims to be around 1,000 per second, which is much faster than Bitcoin. However this is not confirmed to be in the case in practice since Libra has not been launched yet.
Though anonymous, cash is in fact not decentralised. Banknotes are issued by banks which are regulated by governmental authorities. If you have a bank account, it is the bank that processes your transactions. So there is always some form of control by a central authority or an institution.
Bitcoin on the other hand is completely decentralised, no intermediary is required to process transactions. All transactions are visible on a public ledger known as the blockchain. Each of these Bitcoin transactions is validated and confirmed by the entire Bitcoin network and anyone with the correct hardware can join in and participate in this process.
Libra transactions, as mentioned previously is partially decentralised. Transactions won’t be fully public i.e. we cannot look up a transaction with a blockchain explorer like we can with Bitcoin. However, node administrators that run the network e.g. those in the Libra Association would have access to every user’s transactions.
DCEP is highly centralised. The digital currency would be issued by the PBoC to various intermediaries such as Alibaba and Tencent. These intermediaries would then distribute DCEP to companies and individuals in China and DCEP would circulate when transactions occur.
DCEP will use a two-tiered system of issuance and distribution (Image credit: REITI)
Current status
The status and usage of cash is well developed. It remains the most popular payment method for face-to-face transactions and for cheap everyday purchases. In 2019, the Diary of Consumer Payment Choice found that consumers still used cash in 26% of transactions and 49% of all small-value payments under USD$10 were made in cash. Overall, cash is the second most used payment method, with debit cards being the most popular.
Bitcoin is now gaining more usage and popularity since its invention in 2008. According to data from the US Bureau of Consumer Financial Protection, Bitcoin had US$4 billion in purchasing power in 2018. There are also many major retailers that accept Bitcoin payments e.g. Starbucks and Whole Foods. And almost every country would at least have 1 Bitcoin ATM machine where people can buy Bitcoin. Despite this, its usage is still minuscule compared to credit card purchases, which had a volume of USD$3.7 trillion in 2018. This may be because Bitcoin is still most well-known for being speculative, with many holding onto their Bitcoin in the hopes that they may sell it at a later date for profit.
Libra was announced in June 2019, and is going through some bumps in its development. The project faced suspicion and even criticism from regulators from the European Union, the United States, Switzerland and Japan. Banks also were notably absent during the initial Libra announcement, expressing reluctance to join because of uncertainties surrounding regulation and feasibility. In additional, shortly after Libra was announced several high profile members of the Libra Association such as PayPal and Vodafone departed.
However the Libra project is not “dead” as such, they released the second edition of its White Paper in April 2020. In May 2020, the Libra Association appointed its new CEO and announced several incoming members-bringing it to a total membership of 27. In June 2020, the Association also appointed its Chief Compliance Officer. Going forward, it seems that the Libra Association would continue to try and grow whilst engaging in dialogue with regulators. The Libra Association does not set a definitive timeframe for launch in the second edition of its White Paper, but it certainly is unlikely to be 2020 as per its initial projections.
As for DCEP, it has been confirmed that there will be closed pilot tests in Shenzhen, Chengdu, Suzhou, Xiong’an and some of the 2022 Winter Olympics locations. This will then be expanded to 28 cities and provinces including Beijing, Shanghai, Guangzhou and the Hong Kong Macau Greater Bay Area. However there is currently no timetable for when DCEP will be officially launched. Experts have revealed that it is unclear whether DCEP can debut in the second half of 2020, although plans for its development have certainly been ramped up by the PBoC.
Summary
Here’s a table showing the various features of DCEP, Libra, Bitcoin and Cash.
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What’s are Bitcoin Over-the-Counter (OTC) brokers?
Over-the-counter (OTC) are entities that allow the buy and sell of large quantities of Bitcoin and other cryptocurrencies. OTCs offer more private and personalized services to institutions and high net-worth individuals who need a high degree of liquidity and privacy. The key advantage to an OTC is that they handle large trading volumes, such as trading $100,000+ USD without price slippage. OTC traders will normally quote a strike price for the entire order block with immediate execution. This is contrasted with trading on cryptocurrency exchanges where large orders will cause the price to decrease due to a lack of buy orders. OTC desks allows institutions and high net-worth individuals to buy Bitcoin without a having dedicated trading desk.
OTC offices can be either regionally located, serving local clients or global. Often major cities such as Hong Kong, Tokyo or New York have OTC brokers servicing local clients. These brokers can provide very personalized services and even in person meetups. In contrast, global OTCs such as Binance OTC handles transactions over the internet.
Traditionally in the stock market world, OTC desks facilitate trading of securities that are not listed on formal exchanges, e.g. the New York Stock Exchange.
Benefits of trading via an OTC broker
High Liquidity – Dedicated traders from OTC desks will help increase the liquidity of the overall market. This means they can handle large order blocks
Fixed Price – OTC brokers will over a quotation for the entire order block. This means orders are not affected by price slippage.
Easy Fiat Options – Brokers will have local bank accounts and can sometimes even accept cash.
Disadvantages of trading via an OTC broker
Limited range of cryptocurrencies – Often OTC brokers specialize on a few cryptocurrencies. This means unlike exchanges, they will not offer 100+ trading pairs. Instead, they will focus on the major popular cryptocurrencies that have high trading volune and interest such as Bitcoin, Ethereum or some stablecoins.
Manual trading process – Traders are executed by a human counter-party. This trading times will often be limited to regular office hours.
Large order size required – Brokers often have a minimum order size, such as $100,000 USD traded within a certain period of time.
How do OTC Brokers work
OTC desks have a network of buyers and sellers. The trades themselves are facilitated by OTC broker-dealer who will locate and negotiate directly with prospective buyers and sellers over computer networks or by phone. This is contrasted from trading over exchanges where the prices and order books are publicly available. For OTC desks, their broker-dealers will negotiate the trade price for you. Trades are also not publicly listed giving the parties privacy.
Therefore, to fully understand what is going on in the cryptocurrency markets it is important to consider what is also happening at OTC desks. This is because large transactions happen on them on a daily basis.
Bitcoin OTC vs Exchanges
The choice of whether to use a Bitcoin OTC or Exchange depends largely on the volume of orders. Big players looking to buy or sell large quantities of cryptocurrencies are better off using an OTC broker. This is because a single exchange (no matter how large) will not have the liquidity necessary to fill large order blocks. Research has shown that sell orders of US$30 million can significantly suppress the price of a cryptocurrency, hence causing slippages of 5-10%. This amount is much larger than the fees charged by OTC brokers. The second advantage of using OTCs is that they can offer to lock in a particular quotation with the option to settle at a later time. This gives people additional flexibility to move funds from banks or cold-storage (such as the Ledger Nano X).
However, depending on who you are, one upside or downside of OTCs is that they are not transparent. So while you can try to gauge whether there is a lot of trade flow through an OTC desk by reading their reports (if any), there is no way you can verify if they are being truthful or giving you the best price. On the other hand you can conduct trades privately compared to on exchanges and the price will be “locked-in” and not subject to any fluctuation between the time of agreement and the time of settlement.
How to trade Bitcoin with OTC Brokers
This guide outlines the general steps involved in trading with Over-the-Counter Brokers. Generally speaking, brokers provide similar on-boarding and trading experiences. It is important to remember all brokers will require verification of your identity, known as Know-Your-Customer (KYC) registration. On top of this, brokers will verify the source of funds to prevent money-laundering.
Summary of how crypto is traded with an OTC broker (Image credit: Genesis Block)
Time needed: 3 days
How to trade with Bitcoin OTC Brokers
Signup
Sign up to the broker via website, email, call or in-person meetup. They will usually ask about the type and quantity of cryptocurrencies you would like to sell.
Onboard
Every broker will require you to fill in onboarding documents and legal disclaimers. They will also ask you to provide various types of documentation such as a Government ID, Proof of Residence and Proof of Income.
Communicate
Once on-boarded, they will give you a communications channel. Typically this involved a messaging platform where you can request quotations for orders such as: You: “I would like to buy 100 Bitcoin” Trader: “We can offer 100 BTC at a price of $8123 USD per BTC”
Confirm trade
You can choose whether to accept the price quotation or not. If you agree, the trade is immediately confirmed and the trade will provide you with a deposit address.
Trade Complete
Once the deposit is received, the order is no fully executed and you will receive your trade
Top OTC Brokers around the world
When trading with OTC brokers, it’s important to only use trusted and regulated brokers. This is important because of the large transaction sizes involved – you don’t want to get delayed or even scammed out of a transactions. We compiled the list of the biggest OTC brokers around the world
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Bitcoin OTC in China and Hong Kong
Bitcoin OTC brokers play a very important role in China due to a government ban on cryptocurrency exchanges. In China, it’s no longer legal to operate a cryptocurrency exchange due to a legislation change in 2017. This has left large Chinese exchanges and OTC desks such as OKex, Binance, Genesis Block and Huobi operating overseas or as OTC brokers.
Currently Bitcoin OTCs brokers are legal in China. They operate by directly connecting buyers and sellers of Bitcoin. However, Chinese financial institutions such as Alibaba’s Alipay have distanced themselves from OTC transactions, stating that they will “immediately stop relevant payment services“.
There’re several reports about @Alipay being used for bitcoin transactions. To reiterate, Alipay closely monitors over-the-counter transactions to identify irregular behavior and ensure compliance with relevant regulations. If any transactions are identified as being related to bitcoin or other virtual currencies, @Alipay immediately stops the relevant payment services.
One of the biggest concerns of OTC brokers and trading is the risk of exposure to criminal funds. This is because OTC desks who do not perform proper due diligence on source of funds can come into contact with tainted coins. In a 2020 report, cryptocurrency research company Chainalysis released a report on money laundering in the exchange and OTC space. The report accused some OTC desks of illegally taking laundering funds for private clients. In order to protect yourself from such activity, ensure you are trading with legitimate brokers who have proper KYC. On top of this, never buy “discounted” Bitcoins offered on social media such as Instagram or Facebook.
Frequently Asked Questions (FAQ)
Will OTC brokers accept cash?
Often OTC brokers will have a cash option – for both buying and selling Bitcoin. It’s important to remember for large quantities of cash, KYC registration is required. On top of this, proof of funds may also be requested.
Do OTC brokers require my Identity?
To comply with anti-money laundering laws, OTC brokers will require you to submit official documentation such as Identity, Proof of address, bank account statements, proof of income or proof of funds. The type of identification required however would depend on the OTC brokers own company requirements and any information as required by the laws of the relevant jurisdiction.
Is there a limit on how much cryptocurrency I can trade with an OTC?
ost OTCs do not have a maximum limit on the amount of Bitcoin you can buy or sell. Order sizes of 100 or above BTC are commonplace for these brokers. However, some brokers will have a minimum order size, such as $100,000 USD.
How do I buy Bitcoin Anonymously (Privately)?
The best way to buy Bitcoin without a record is via cash or peer-to-peer transactions. It is important to remember this contains inherent risk as you’ll need to do your own KYC and potentially offer proof of funds in the future. You should also check that your counterparty is a legitimate trader and not a scammer as there are incidents of people being robbed during these “trades”.
Are there OTCs for Altcoins?
There are OTC services for altcoins and even coins that are not yet listed on exchanges. These OTCs will function similar to a matchmaker – matching sellers and buyers of a particular asset. One such example is Silverway – an OTC deal platform and deal aggregation platform.
How do I find out the volumes handled by OTCs?
OTCs are not obliged to provide trading data such as daily volumes, prices, or order books. However, some OTCs provide annual reports or blog posts that contain aggregated volume data.
What should I look out for when choosing OTCs?
Security and legitimacy are very important with thinking of which OTC desk to trade with, especially since huge sums of money are involved. Prospective customers could for example, check if the OTC desk is registered with the relevant government authorities, ask any peers if they have traded there before and their feedback, check online reviews or social media, or even go to their physical offices to make inquiries before signing up and trading.
Bitcoin Halving is expected to happen at 12 May 2020 07:07:39 UTC
What is the Bitcoin Halving Event?
The Bitcoin Halving event which marks the point where Bitcoin mining rewards will be cut precisely in half. Many view this as a turning point for the price of Bitcoin because it will drastically reduce the new supply of Bitcoin, creating scarcity. Currently the Bitcoin Halving is expected to happen at 12 May 2020 11:04:30 UTC – the exact time and date may vary due to fluctuations in Bitcoin block creation time. Once the halving takes place, the amount of Bitcoin mined per day will decrease from 1,800 BTC to 900 BTC. It is important to remember this event is permanent and will affect all the Bitcoin mined in the future as well (until the next halving event). From an economics standpoint, the less Bitcoin there is being produced the more scare and less accessible Bitcoin will become.
Check out my video on what the Bitcoin halving is, and what opportunities it can mean for Bitcoin.
Reduced Sell Pressure on Bitcoin
There will be substantially less sell pressure from Bitcoin miners as they’re income of Bitcoin will half. Currently, miners will mint $13 million USD worth of Bitcoin per day. This is no small figure – and one of the reasons why mining is such a trillion dollar industry (Check out our Bitcoin mining guide for how to be part of it).
Will Miners shut down / got bankrupt?
After the Halving, miners will receive half of their regular income. This will drastically alter the dynamics and profitability of Bitcoin Mining. For miners who are using older machines (ASICs), the drop in income might spell certain doom. Some miners will yield negative profits and be forced to retire the older less efficient units. This is a common practice in mining – renewing hardware is part of the profitability cycle for miners. This is similar to other tech hardware businesses like server farms which require annual upgrades to hardware.
There is no risk that Bitcoin be without miners – till is still 900 BTC to be mined each day (~$7.5 Million USD). Miners will be looking to be more competitive and source cheaper and cheaper electricity. In addition, Bitcoin difficulty can drop if there is less hashrate on the network, meaning it will be easier to mine Bitcoin.
Hype and Expectations
Bitcoin Halving Memes and Hype
The Bitcoin Halving comes with a lot of hype and optimism for the future of Bitcoin. Several memes have emerged with charts pointing to “pump” in the price of Bitcoin. The chart above shows the LOG price of Bitcoin over time, with a ascending trend indicating potential prices of $250,000 and even $2,000,000 for the price of Bitcoin. It is important to remember that with cryptocurrencies prices are high volatile and past trends don’t always indicate future trends.
Stats
Total Bitcoins in circulation:
18,367,900
Total Bitcoins to ever be produced:
21,000,000
Percentage of total Bitcoins mined:
87.47%
Total Bitcoins left to mine:
2,632,100
Total Bitcoins left to mine until next blockhalf:
7,100
Bitcoin price (USD):
$9,987.70
Market capitalization (USD):
$183,453,074,830.00
Bitcoins generated per day:
1,800
Bitcoin inflation rate per annum:
3.64%
Bitcoin inflation rate per annum at next block halving event:
1.80%
Bitcoin inflation per day (USD):
$17,977,860
Bitcoin inflation until next blockhalf event based on current price (USD):
