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Tag: cryptocurrency trends

  • Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Decentralized Finance (DeFi) has been the breakout trend of 2020. With prices of standout DeFi tokens surging and terms like “Yield Farming” getting mainstream attention, the DEFi field has taken off. This next step in the evolution of finance uses public blockchain technology and has a wide range of sub- divisions that make up the growing field. The most notable and popular of these DeFi services are decentralized exchanges, decentralized stablecoins, decentralized money markets, decentralized synthetics and decentralized insurance. To understand this emerging field, first a definition on what decentralized means must be had. 

    Learn more about DeFi, and liquidity pools such as Balancer, Uniswap and Curve with our video:

    What is decentralized and what does it mean?

    Decentralized is a term you will have definitely heard thrown around even if you are relatively new to the cryptocurrency scene. Be it on Twitter, with the various profiles espousing the benefits of decentralization and calling out centralized cryptocurrency projects, or in articles online. To give a little context, the decentralized v centralized argument is akin to economic arguments on political systems between capitalists and communists. 

    Part of the reasoning for many supporters of decentralization is that blockchain technology at its core was made to be decentralized. Blockchain is reliant on open source networks and has no central entity controlling it. Rather, the computer power and the overall network is split up, which is why it is decentralized. The benefits of this system are that it doesn’t have a single point of failure, making cyber attacks and poor leadership somewhat irrelevant. 

    As such blockchain has been earmarked as the breakout technology of the 21st century. Companies, governments and financial institutions are all clambering to bring developers on board as blockchain continues to be viewed in an increasingly glowing light. Yet, how does blockchain’s decentralized foundation play into the emerging DeFi field?

    DeFi Explained

    For many, blockchain is the embodiment of the DeFi field and is the promised land of finance that Satoshi Nakamoto first imagined when he created Bitcoin. The term DeFi has turned into an all encompassing term for a range of projects, but the core values of each are pretty clear. These are open access to anyone, resistance to censorship, privacy and an open democracy of finance away from singular control. The majority of DeFi sites are run through decentralized apps or Dapps, which allow for financial services to be created and be used easily by anyone. 

    The DeFi Market

    The DeFi market is a field that has grown massively in recent months as billions of dollars are handled every hour in the sub industry. Part of DeFi’s popularity is down to its transformative effect on almost all aspects of finance. From loans to remittance markets and even insurance, the DeFi field could give financial access to people around the world as all they need is an internet connection. The technology could have an impact on the third world, where many of the population is unbanked or even in more developed financial societies as governments and financial institutions continue to lose credibility as they go from recession to recession. Sold on DeFi now? Well if so, read on for a closer look at the different blockchain applications in the field and the top companies within each subcategory. 

    What is a Decentralized Exchange?

    Exchanges are the heartbeat of the cryptocurrency traders. Most of you will have an idea of the more famous centralized exchanges like Binance and Coinbase, but decentralized exchanges (DEX’s) may be less so. The main difference between the two is that there is no central authority over decentralized exchanges, rather governance is determined in various ways, like through earning native tokens. 

    Focusing on namely cryptocurrencies, the decentralized exchanges offer a range of benefits. The first is security as you are not trusting a centralized exchange which could be susceptible to hacks with your funds. Instead trades are done through a peer to peer (P2P) trading network and a range of methods are used to facilitate this. Some DEX’s use proxy tokens, others multi-signature escrow systems and some use shares. Popular DEX’s are dYdX, Uniswap and Kyber network.

    Decentralized Stablecoins

    Much like DeFi applications, stablecoins have also seen a rise in popularity and usage in recent times. Put simply, stablecoins are less volatile tokens that are usually backed by a currency, commodity or a collection of both that enables them to keep a steady price, unlike the often wild swings of other cryptocurrencies. Some stablecoins are centralized but there is a growing amount of stablecoins that have become decentralized. These include industry favourites like DAI, USDC and Tether (USDT). To be classed as a DeFi stablecoin, there needs to be no central figure ruling the tokens or single point of failure as well as a resilient network.

    What is a Decentralized Money Market?

    Money markets are markets for borrowing and lending assets. The decentralized element means that users can borrow and lend cryptocurrencies without the control of a central figure. The lack of central authority is fixed using smart contracts and algorithms to determine the markets function. Decentralized money markets put interest earning potential in the hands of anyone with an internet connection in the world. Popular examples of decentralized money markets include Aave, Compound, MakerDao and Balancer. This area of DeFi has gained the most traction in recent times, especially with the bearish crypto market. This is because there are lots of profits to be made, with “Yield Farmers” churning in large sums from interest earned.

    Decentralized Synthetics

    Decentralized synthetics is another growing sector of the DeFi field. Synthetics or derivatives as it is also known refers to the tracking of a value for an asset. This means traders can get an insight into an asset without physically investing themselves. This representation of the asset allows traders to make educated investment decisions. There are a number of decentralized synthetic companies, the most popular ones being UMA and Synthetik. Expect more companies to pop up in the future too.

    Decentralized Insurance

    As blockchain gains exposure, more and more use cases appear, from accounting to product tracking. One industry that has taken to the technology is insurance. The bureaucratic side of the industry is perfect for blockchain technology and smart contracts, with a wide variety of usages for the technologies. The technology has the ability to revolutionise the insurance field as it cuts out added fees and reduces smart contract risk. Notable decentralized insurance companies include Nexus Mutual and Opyn.

    Conclusion

    Overall, it would appear that the DeFi field is growing and most importantly, is here to stay. People around the world are increasingly seeing the problems of a centralized method, especially in the cryptocurrency industry which has a long history of customers’ funds being lost due to hacks of centralized exchanges. Partner this with an increasingly more aware population with regards to internet privacy, you have the makings of the next big thing in the cryptocurrency industry and possibly the wider financial field. 

    Although the industry is in its infantile stage, there are a number of interesting projects and options, most strikingly in the decentralized exchange and money market area, which users can partake in. Boxmining has a number of guides which can help you decipher more clearly which is the best project for you. For more DeFi related information and other cryptocurrency news, subscribe to our YouTube channel and newsletter. 

    Decentralised Finance (DeFi) series: tutorials, guides and more

    With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces

    The DeFi series on this website also covers topics not explored on YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Tutorials and guides for the ESSENTIAL DEFI TOOLS:

    More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!

    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.

  • Secrets of “Darkpools” and unreported trade volume and Bitcoin OTC

    Secrets of “Darkpools” and unreported trade volume and Bitcoin OTC

    In Crypto, not all trade volumes are visible – in fact “Darkpools” account for a huge amount of crypto trading and has an enormous impact on cryptocurrency prices. Darkpools include peer-to-peer trading, such as on sites like localbitcoins.com and also Over the Counter (OTC) desks. The reason why it’s unreported is because deals are done privately, for example Peer-to-peer trading can be done in person and with cash, leaving virtually no trace of the transaction ever happening. Large volumes are also traded OTC – this is more organised as private buyers and sellers are matched, with some form of escrow to allow the transaction to take place. OTC desk sometimes even require minimum volumes, like $100,000+ USD to up to 1 Million.

    First things first. What’s an Over the Counter (OTC) desk?

    Traditionally, OTC desks facilitate trading of securities that are not listed on formal exchanges, e.g. the New York Stock Exchange.

    The trading of cryptocurrencies on OTC desks is similar to those in traditional markets.

    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.

    What does a trader at an OTC desk do?

    Traders at OTC desks are the broker-dealers mentioned above. Their role is to locate and match buyers and sellers, and negotiate the best deal for all the parties involved.

    Part 1: Crypto trading/ Market Manipulation/ OTC Markets

    Therefore, it is important for traders at OTC desks to have a keen eye on the cryptocurrency markets and be knowledgable of the market trends.

    I had the opportunity to interview Charles Yang, Head Trader at Genesis Block Hong Kong, an OTC desk. In my interviews we discuss what’s really happening at OTC desks away from the public eye. We also discuss his thoughts on the market sentiment.


    Is Tether Safe? Will Bitcoin & Ethereum Recover? 

    Secrets and Insights from an OTC Trader

    Here’s a summary of the key points from the interviews with Charles.

    There is still interest in cryptocurrencies

    Charles observes there is revived interest in cryptocurrencies despite this bear market.

    He notes that a lot of the customers from the OTC desk who were previously dormant have recently contacted them wanting to buy and sell cryptocurrencies.

    The risk of Tether is exaggerated

    Firstly, what is Tether? Refresh your memory with our Tether Explained guide below:

    We’ve seen in recent news that USDT is not fully backed by cash. Instead, Tether is around 75% backed by cash, and the remaining 25% by other securities or loans.

    Confused with what’s happening in this Tether scandal? Check out our video below which explains what is happening and the latest legal action surrounding Bitfinex.

    Despite this, there is still demand for USDT in Asian countries such as China, where they are buying USDT at a premium.

    This is because China bans cryptocurrency exchanges, so retail investors cannot buy cryptocurrencies such as BTC. What they do instead is they first buy USDT through peer to peer merchants, and then enter the cryptocurrency market at a later time when conditions are right. 

    Right now, Bitfinex who is being accused of “losing” customers funds is more at risk. Bitfinex will have to go bust first before people question USDT.

    Charles believes that fundamentally short trading would have less losses because if USDT is at 97% and your prediction is wrong, then your loss would only be 3%. Whereas the opposite would be to bet that it goes to 0.

    Mining is still profitable

    The recent “official news” in China was that cryptocurrency mining has been banned.

    Despite this ban, Bitmain is coming up with new models and generally summer is big for mining because electric costs falls.

    There may be miners who start accumulating and building to maximize their margins 

    Charles notes there is news that big players are scrambling to get cheap damaged mining rigs. They are not the newest models but there are still returns from using them to mine cryptocurrencies.

    So despite the official news about China banning mining the word on the street is that people are buying rigs and locking in contracts for the summer months.

    Simple guide to the aftermath of the Chinese Bitcoin mining ban

    Initial Exchange Offerings (IEOs) are risky, but need not be avoided completely

    If you participate and get allocation you would benefit. But ultimately it is the exchanges that benefit because you need to buy their token to participate.

    For example Binance requires you to buy into IEOs with their BNB token. Of course it’ll be great for you in the short term if you get allocation and the coin pumps. However your risk is that you would be left with the exchange token if you don’t manage to get any allocation after the lottery.

    IEOs are also highly volatile, especially immediately after listing

    It may be better to trade with OTC desks than exchanges

    Charles notices that there is quieter trade flow, so big players looking to buy or sell cryptocurrencies need to offer better prices. Therefore the margin between the buy and sell price is much less. Bigger players also can offer better quotes because of volume. Therefore it may be cheaper to trade with OTCs who deal exclusively with larger orders than exchanges.

    And whilst exchanges require you to have the funds ready at the time of transaction, OTC desks allow you to lock in the prices and settle later. This gives people more flexibility .

    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. On the other hand you can conduct trades privately compared to on exchanges.

    What coins to hold? Bitcoin Bitcoin Bitcoin (BTC)

    Unlike other coins, Bitcoin (BTC) has a 10 year history. There is no founding team or leader. For this reason it is not affected by company politics and is the most decentralised.

    We can see the prices for a lot of tokens crash during the Initial Coin Offering (ICO) crash. Some may be due to the project running out of funds, failing to deliver on its promises or in worse cases the founders and key personnel leaving the project altogether. Studies were shown that over 80% of ICOs in 2017 were scams.

    I was standing in the same spot glued to my phone for 2 hours when this all went down.

    We also see that the ICO game was not fair, some people were able to purchase tokens for a more favourable rate or terms even before the token was listed to the public. This however would never happen with BTC.

    Is day trading profitable? No (sorry)

    For retail investors, day trading is not profitable even for traditional markets.

    This is because retail investors would be bogged down by trading fees, but not all trades are profitable.

    Retail investors are also unprotected from market manipulation. This is especially true for cryptocurrency investing, which is generally an unregulated space.

    Don’t do this

    Conclusion

    Ultimately, trading cryptocurrencies requires exercising caution and doing your own research. One can look at OTC desk reports to have a good grasp of what may be quietly happening with some big players, but at the end of the day, question everything. Also, whilst you may stand to gain several times your initial investment by going into highly volatile IEOs, bear in mind it is designed so that exchanges ultimately win. The most prudent thing to do is to never invest more than you can lose.

    Links

    Buy Bitcoin in Hong Kong – https://buybitcoinhongkong.com/