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Cryptocurrencies in the Gambling Industry: the Positives and Negatives

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Bitcoin has seems unstoppable over the past year-and-a-half. The one-time experiment has outperformed real-world currencies, given financial institutions something to think about. Recently, it has become a regularly traded commodity with millions of investors, miners and sellers interacting with the ecosystem. Granted, it’s had its hiccups lately, and there are plenty of pretenders to the throne who are jumping on the bitcoin bandwagon, but the first true cryptocurrency is really showing the world it’s potential applications and how problems like scaling are being solved.

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One industry that could change massively from increased use of bitcoin is the online gambling industry. Built completely on millions of online transactions, gaming companies could see that way that their services are paid for transform if more people were to adopt bitcoin as a preferred currency. There are plenty of implications for both players and the owners of these companies, many of which could end up saving both sides plenty of money. But are cryptocurrencies the best currencies to gamble with?

No More Middleman

The big advantage of bitcoin is the lack of an agent to transfer funds. Bitcoin negates the need for a bank or credit card, with the trade taking place directly between the customer and the business. This could result in a huge cost saving for online gaming sites, which would eventually be passed on to the customer. The other side of the coin is the time taken to transfer funds, although playing online games like poker is extremely convenient, players are often left frustrated with the amount of time it takes for them to get their hands on their hard-earned winnings, if online poker sites were to adopt bitcoin the waiting time would be none existent. Unfortunately, for certain banks and credit card services, there can be a wait for several working days before funds become available in the player’s bank account after a win.

One of the biggest outgoings for online gaming sites are currency fees. This can be anything from a credit card charge to the costs associated with exchange rates. Dealing with banks, credit companies and even companies like PayPal instantly means surrendering a percentage, usually around 1-2% of the initial payment from the player before any profit is made. This can often be in the millions per month when large numbers of players carry out multiple transactions and payments in a short space of time.

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Security

The trouble with credit card details are that they can be easily stolen, and with the amount of big-profile hacks seen in 2017, customer details are big business for cybercriminals. We already know about the benefits of blockchain technology for casinos and how much more secure it can be, and this is definitely another advantage for players who wish to deposit their funds using a cryptocurrency. Thanks to the anonymity afforded by bitcoin, there’s also no personal details to file, or any personal information held by the online casino that could be stolen.

Anonymity could be a problem for online gambling companies, however. Crimes like money laundering are already a problem for physical casinos, and allowing anyone to deposit sums in a gaming account without any indication as to who they are could be fraught with issues. The best workaround for this is for all users to register with their personal details before they can deposit anything with their bitcoin account, but there’s still the risk of information being falsified. In addition, it’s a lot easier to buy bitcoin than it is to register a bank account.

Volatility

Accepting or making payments in dollars or pounds is a pretty safe option for gamblers and online gaming companies. It’s unlikely that the currencies will devalue or rapidly increase in value over a short period of time, and it can be favorable to generate interest from money being held in multiple accounts. Although bitcoin has the same growth elements, it is nowhere near as safe as a traditional currency in terms of predictability and stability.

It’s key to remember that bitcoin is unknown territory. We had never seen a cryptocurrency before bitcoin arrived, and for a long time the growth of bitcoin was both exponential and rapid. Last year, a price of $20,000 was topped, before a rapid decrease to a current price of around $8,000 per coin today. This huge change could be very problematic if, for example, a casino accepted payment in bitcoin, but then offered the option to withdraw in a different currency. The easiest solution is to only pay out in bitcoin if payment was made in bitcoin, but then online casinos don’t have the benefits associated with holding cash.

There’s also the more extreme possibility of cryptocurrencies collapsing altogether. Bitcoin may be fairly solid with plenty of public interest and a solid investor base, but there are plenty of others looking to take market share who may not last as long. Accepting payment in a less established cryptocurrency could spell problems if it doesn’t take off, or even disappears altogether with customers expecting a payout.

Scalability

With bitcoin prices at just over $8,000, and with previous prices over $20,000, it’s unlikely that people will be betting that amount in one go (unless they’re Floyd Mayweather). The average stake in the U.K. is just under £9, so expecting anyone to have that sort of cash on hand is unrealistic. Bitcoin can be fractional, but this creates more hassle in terms of transfers and mathematics.

Bitcoin miners have realized this issue, and so have their competitors. Bitcoin cash is the latest challenger, a cryptocurrency aimed at being closer to Satoshi Nakamoto’s original concept by being less about boosting value through investment and more about daily use. As the people behind bitcoin cash are all ex-bitcoin ‘enthusiasts’ (bitcoin is anarchic, with no management or staff, managed totally by an online community), then this could be the hard fork that splits bitcoin truly down the middle.

The big advantage with cryptocurrencies at the moment is public interest, and increasing trust. The blockchain model is extremely secure and practical, and is even being applied by organisations to provide more transactions, and the immediate, fee-free transfer of funds is very attractive for both users and businesses. But a big detractor is that cryptocurrencies are still fairly unregulated, and possibly even prone to the bubble effect. Speculation is managed in real-world commodity and stock trading by governments and financial regulators, but bitcoin and other cryptocurrencies are parallel to traditional financial institutions. If bitcoin collapsed tomorrow, there’s little in the way of insurance or financial protection.

Although cryptocurrencies have a long way to go, they’re still a great way of placing a bet. As well as being quicker and more secure to use, you’ve also got the possibility of your preferred currency actually growing as you gamble with it, something you wouldn’t get from using a traditional currency. The risk of losing everything is slightly higher, but then again you’re about to gamble with it anyway, so we’re sure you’re happy to take a risk! We’d recommend choosing a provider that accepts and pays out in both bitcoin and other currencies though, so you can take advantage of any market growth if your coins are currently being held by your gaming provider.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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2.3 stars on average, based on 1 rated postsAshley graduated from university in 2016, where he studied Business Management and Finance at London South Bank University.




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  1. Constantin

    March 14, 2018 at 6:44 am

    What about the coins that are meant for online betting and games, like Funfair?
    A follow up that includes these would be interesting.

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Blockchain Talent Demand Surpasses Supply

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If there’s any group in the global workforce that is sitting pretty it’s blockchain developers. Their success has unparalleled with anything in the stratosphere, yet they’re still receiving offers with compensation packages rivaling that of CEO pay packages. And many of them have already become millionaires from investing in the coins of the market leaders they helped to build, including bitcoin and Ethereum, which means they’re less incentivized to join other projects for the size of the offer alone.

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Decentralized World

The thing to remember about blockchain pioneers is that they set out on the mission of a decentralized world not so that they could be subject to the whims of cryptocurrency prices. They are just as focused on the social impact of the blockchain as they are the success of their respective projects. Consider Ethereum’s Vitalik Buterin, who during the peak of the cryptocurrency market rally at year-end 2017 tweeted the following reminder to his followers –

Buterin went on to use Venezuela as an example, whose economy is in tatters. He was dismayed that bitcoin’s price posts were getting more traction than “how Venezuelans were being rescued by crypto.”

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If the corporate culture reflected Buterin’s mission rather than dangling a six- or seven-digit compensation package in front of recruits, they might have more success attracting top blockchain talent.

Talent Battle

Meanwhile, blockchain startups are creating roadmaps with product release dates obligating them to have top development talent in-house, all of which is leading to projects getting stuck and helping to fuel the hiring frenzy. It’s not solely blockchain startups, however.

Global corporations including certain FANG stocks are no longer waiting on the sidelines as ICOs raise billions of dollars and the cryptocurrency market cap has balloons to nearly $400 billion, all of which has placed a high bounty on the pool for blockchain talent. If you have any doubts, consider again Ethereum co-founder Buterin. As Hacked.com previously reported, Buterin tweeted about having received a job offer from Google.

David Schwartz, whose Twitter profile describes him as “one of the original architects of the XRP network,” told The Wall Street Journal how both a startup and a big tech play attempted to poach one of his team members, each of them offering the Ripple developer a million dollar signing bonus.

Meanwhile, the blockchain, a public immutable ledger where transactions are recorded and joined together in individual blocks, has become a catchphrase, one that can mean the difference between hits on a LinkedIn profile or not. According to the Journal story, there are thousands of available jobs posted on the social platform hunting blockchain talent through the early part of May, reflecting more than a 150% jump versus all of last year.

But just as regulators have said they don’t want to rush into crafting any policy in response to market performance, employers should similarly take a step back before throwing everything but kitchen sinks out to software developers. Some companies are developing talent in-house, which is another route to consider. But overall, hiring companies could be much more effective at recruiting blockchain talent if they understood the mission behind decentralization.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 7 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. Full disclosure, she's invested in bitcoin.




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Crypto Hedge Funds Grow 64% Over the Past Year as Institutions Embrace Digital Currency

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After spending much of the last eight years bashing cryptocurrency, Wall Street is beginning to embrace the digital asset class more intently than ever before. Case in point: the number of cryptocurrency hedge funds has increased 64% over the past year. As it turns out, Goldman Sachs isn’t the only institutional player pivoting toward cryptocurrency.

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The Rise of the Crypto Hedge Fund

There are now 287 hedge funds devoted to cryptocurrency trading, compared with 175 a year ago, according to data from Autonomous Next. Astonishingly, there were only 20 crypto hedge funds in existence in 2016.

Over the past year, at least 100 hedge funds have been launched for the sole purpose of trading cryptocurrency. At this rate, institutions will play an increasingly pivotal role in the digital currency market in the very near future.

Digital currency exchanges are betting big on institutional money. San Francisco-based Coinbase recently unveiled four new products designed to unlock up to $10 billion in institutional capital currently sitting on the sidelines. This includes a new custodial service that will provide institutions with a trusted steward to safeguard their digital assets.

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As for hedge funds themselves, April saw a huge turnaround in terms of profitability, as firms played the crypto-market rebound to great success. In the process, they gained more than 80% compared with March.

The Next Bull Market

Coinbase has put forward the position that institutional capital will be responsible for the next great bull market in cryptocurrency. If 2017 was the year of the retail investor, 2018 and beyond will largely be driven by institutions. A close examination of Google search trends seems to support this view.

The 2017 bull market was accompanied by a wave of new entrants into the cryptocurrency market, as evidenced by the surge in Google search results for terms like “bitcoin” and “cryptocurrency.” If we use the same metrics, we can conclude that cryptocurrency has lost its buzz among new traders. For example, a term like “cryptocurrency” achieved a Google Trends score of 12 in the most recent week, down from a perfect 100 at the start of 2018.

That said, hedge funds are still a long ways away from dominating the crypto market.  In fact, institutional adoption remains weak overall in spite of the recent growth. This was recently pointed out by Tom Lee, the Wall Street crypto analyst leading research at Fundstrat Global Advisors.

In Lee’s view, cryptocurrencies failed to rally during blockchain week because of adoption hurdles at bank as well as a lack of custodial tools among major institutions. Using the same logic, Lee concludes that institutional demand is one of the missing ingredients for a large rally in prices.

However, Lee has maintained a strongly bullish outlook on crypto assets, including a price forecast for bitcoin of $25,000 by the end of the year.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 417 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Walmart’s Flipkart Deal: The Dawn of a New Day in India

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It’s the dawn of a new day in India, particularly cross-border investment, thanks to Walmart’s groundbreaking controlling stake in Bengaluru-based e-commerce darling Flipkart. Walmart has tried for years to no avail to enter the South Asian country, until now.

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As a result of the deal, Walmart now has five seats on the online retailer’s board and is poised to play an influential role on the direction of the company — including a possible Flipkart IPO — setting the tone for further investments into the region in the interim.

It’s $16 billion deal values Flipkart at a whopping $21 billion and helps the Arkansas-based big-box retailer to compete more fiercely with Amazon, considering that the integration goes smoothly. Walmart has chosen a controversial target company to kick things off. Flipkart has been at the center of a saga ironically surrounding a previous cross-border investment.

Amazon is fighting back, however, as evidenced by it reaching into the belly of western India including Gujarat’s Bhuj, where some residents don’t even have online access. Amazon is taking an Etsy-like approach there with a focus on handmake craft items that are unique to this corner of the world.

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No doubt corporations around the world have it on their radar as a possible harbinger of more cross-border investment activity to unfold in the region.

Gopal Jain of Mumbai-based private equity firm Gaja Capital told The Financial Times: “India continues to be perceived in global boardrooms as a tough place to do business in.” But he also said that as a result of this deal, global executives have gone from “being on the heels to being on the toes.”

India’s Cross-Border Investment

The overhaul of India’s international investment has been two decades in the making. And while India Prime Minister Narendra Modi says his administration has opened the doors to foreign investment, there still hasn’t been much evidence of that. For instance, cross-border M&A into India totaled $14.5 billion last year, lagging the performance of other developing countries including Brazil and China by as much as 50%, as per Dealogic data cited in the FT.

Indeed, the last time that a deal of anything close to the size of Walmart’s Flipkart acquisition was more than a decade ago in the telecom space when Vodafone took a majority position in Hutchison Essar. That deal left a sour taste in the mouths of would-be pursuers given hostile tax environment in which Vodafone was forced to operate.

Prime Minister Modi has the opportunity to prove to the rest of the world that India indeed is open for investment. If the Walmart deal can somehow help to shake the stigma that is attached to foreign investment into India, as evidenced by the “tax terrorism” that’s been attached with the region, it, in fact, could reflect the dawn of a new day for cross-border M&A in India.

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Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 7 rated postsGerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. Full disclosure, she's invested in bitcoin.




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