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Soros’ Entry into Cryptocurrency Market Reignites Debate Over Institutional Trading

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After bashing cryptocurrencies earlier this year, billionaire George Soros is now planning to trade the virtual asset class, according to people familiar with his affairs. By entering the market, the Soros family office could spark renewed interest in crypto assets among institutions traditionally weary of them.

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Soros to Trade Crypto

Bloomberg reported on Friday that Soros Fund Management is set to begin trading cryptocurrencies in the near future. Though no trades have been wagered, the company received internal approval to enter the market earlier this year. The fund currently manages $26 billion in assets.

It is not entirely clear how Soros intends to trade cryptocurrencies. He has referred to bitcoin as a “bubble” that cannot be considered actual currency due to extreme volatility and highly speculative nature. He also highlighted the potential role of dictatorships in propping up the digital asset class.

That said, Soros doesn’t have to be bullish on bitcoin to trade the digital asset class. The billionaire investor is widely known as the man who “broke the Bank of England” by successfully shorting the British pound in 1992. He netted $1 billion in profits for predicting that the BOE would be forced to exit the European Exchange Rate Mechanism.

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Institutional Demand

Attracting institutional money is considered one of the next major obstacles for cryptocurrencies – a market that is struggling with regulatory uncertainty and liquidity constraints. The arrival of bitcoin futures in December was the first major sign that institutional cash would begin flowing into the market, although initial uptake has been weak.

With bitcoin futures in the mix, the next domino will likely be a crypto-backed exchange-traded fund (ETF). Crypto’s entry into the $5 trillion ETF market is “the only major project that remains,” according to Morningstar.

A bitcoin ETF is no easy feat, but there are signs that regulators are entertaining the discussion. The U.S. Securities and Exchange Commission (SEC) has launched formal proceedings on whether to change Section 19(b)(2)(B) of the 1934 Securities and Exchange Act. This doing would theoretically enable the likes of CBOE to start listing bitcoin-based ETFs.

With Soros set to trade cryptocurrency, the debate over institutional demand continues to be an important one. Despite his negative view of the market, his fund has a large stake in Overstock.com – the first publicly-traded company to not only accept bitcoin, but launch its own virtual currency through a subsidiary project called tZERO.

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.

Featured image courtesy of Shutterstock.

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 335 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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Saxo Bank Expects Cryptocurrency Prices to ‘Springboard’ in Second Quarter

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After a dismal first quarter, cryptocurrency prices may be entering a bullish cycle, according to analysts at Denmark’s Saxo Bank. The financial institution recently issued an optimistic outlook on the asset class but warned that downside risks remain.

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The Bullish Case for Cryptocurrency

In Saxo’s quarterly outlook report, analyst Jacob Pouncey argued that cryptocurrencies could be poised for a comeback in the second quarter as bearish pressures continue to fade. Recent acquisitions of crypto exchanges by major financial firms and the consolidation of the blockchain industry make Q2 a possible venue for a large price recovery.

“The steep losses have driven industry consolidation. The rush to market was badly timed and a number of crypto asset hedge funds, exchanges, and ICOs have shut down already,” he said.

“However, several events could serve as springboards for a cryptocurrency bull market in Q2, whether it is through fundamental drivers, or it is just a self-fulfilling prophecy.”

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Advocates of cryptocurrencies have a lot more to be optimistic about. The digital asset class has gained about a third in the last week, with combined prices reaching their highest level since mid-March. The rally has been associated with a steep recovery in the value of altcoins, which now account for nearly 61% of the total market.

Amid the latest downturn, altcoins saw their share of the total market drop to around 54%.

Uncorrelated Assets

The Saxo analyst made another interesting observation: blue-chip cryptocurrencies have historically shown unique price independence in the face of financial-market shocks. As money continues to flow from the equity markets, so-called “uncorrelated assets” such as bitcoin could be poised to benefit.

Research has shown that bitcoin exhibits low correlation of returns, which means it behaves independently of other asset classes. We saw a breakdown of this quality earlier this year as cryptos seemingly traded in the same direction as stocks (likely due to the influx of new traders to the market).

When it comes to investing, low correlation essentially refers to price independence. This means blue-chip cryptocurrencies like bitcoin are influenced by distinct market forces that do not always apply to other asset classes. Likewise, traditional politico-economic drivers do not influence digital assets to the same degree.

The Saxo report was released on Tuesday, so there’s a good chance that the cryptocurrency forecast was influenced by the recent uptrend in prices. However, Pouncey also indicated that the future presents more opportunity for stability as “weak hands” are purged from the market after the recent bearish cycle. This outlook is shared by many, who expect crypto assets to extend their recovery in the short-to-medium term.

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.

Featured image courtesy of Shutterstock.

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 335 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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Coinbase Alert: Amazon Is Coming

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Amazon is to the 21st century what Walmart was to the 20th century.  Slowly, Amazon is putting its imprint onto more and more areas of business.  Already AMZN is one of the world most valuable companies worth more than $725 billion.  Their sheer size allows them to go wherever they want. Last year’s jumbo acquisition of Whole Foods is a good example.

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From these moves, it is clear that Amazon intends to avoid becoming the “one trick pony” that its rival Apple has succeeded in becoming.  That means that Amazon must forever be searching for giant technology centric markets. Cryptocurrency may be on the horizon.

Just yesterday the U.S. Patent Office issued # 9,947,033 to Amazon for software titled Streaming Data Marketplace.  CNBC first reported the headlines.  Here are some direct excerpts from the patent application:

Streaming analytics technologies hold the promise of making vast volumes of data available in a low latency fashion. However, while prior technologies may be able to provide data in a low latency fashion, the raw data may have low value (or have less valuable than the data could have) until the raw data is enhanced by correlating the raw data with additional data, such as by matching records using common values.

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One example is a data stream that publishes or includes global bitcoin transactions (or any cryptocurrency transaction). These transactions are completely visible to each participant in the network. The raw transaction data may have little meaning to a customer unless the customer has a way to correlate various elements of the stream with other useful data.

For example, a group of electronic or internet retailers who accept bitcoin transactions may have a shipping address that may correlate with the bitcoin address. The electronic retailers may combine the shipping address with the bitcoin transaction data to create correlated data and republish the combined data as a combined data stream.

A group of telecommunications providers may subscribe downstream to the combined data stream and be able to correlate the IP (Internet Protocol) addresses of the transactions to countries of origin. Government agencies may be able to subscribe downstream and correlate tax transaction data to help identify transaction participants.

Translating Into English

Amazon filed this patent back in 2014 so it is obvious that cryptocurrencies were not the only application they had in mind for their Streaming Data Marketplace.  That doesn’t change the fact that crypto has evolved in value to over $300 billion and adoption of bitcoin by Amazon would be a major legitimizing force in the whole crypto movement.

The one big thing standing in the way of acceptance of a large number of relatively small value transactions is liquidity (speed) and Amazon vendors profits could be enhanced or completely wiped out by crypto volatility.  Before getting all excited, the Streaming Data Marketplace would need to address this issue.

Without trying to get into the techno garbodigook, one way to address the problem would be for Amazon to create their own massive crypto exchange that not only provided low latency transactions but serve as yet another Amazon service.  Just using the Amazon name would bring enormous credibility.

The Value Of the Data

After reading through the patent, it is obvious there are many applications to be developed. Helping regulators may be one of those. Here is what the patent application states.

For example, a law enforcement agency may be a customer and may desire to receive global bitcoin transactions, correlated by country, with ISP data to determine source IP addresses and shipping addresses that correlate to bitcoin addresses.  The agency may not want additional available enhancements such as local bank data records.

Good Or Bad For Bitcoin (And Others

Is having all of the additional data available to law enforcement and other regulators a good or bad thing?  After all, doesn’t this take away all the anonymity that attracted so many to cryptocurrencies in the first place?

There are arguments on both sides of this issue but I think the benefits are worth some consideration.  The biggest is that if Amazon and all of its vendors have a mechanism in place to accept payment in bitcoin, this is a huge plus.  The day this happens eBay and virtually every other online merchant will get with the game. And let’s remember we are talking about far more than just bitcoin.  The downside is that if you have obtained your crypto from some questionable activities or wish to maintain your anonymity, stay away from online shopping.

Featured image courtesy of Shutterstock. 

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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4.3 stars on average, based on 60 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Barclays Considers Possibility of Cryptocurrency Trading Desk as Institutional Interest Grows

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Barclays Plc is weighing the possibility of launching its own cryptocurrency trading desk, a move that would likely boost institutional adoption of the digital asset class. Though the bank later clarified that a crypto trading operation is not currently being developed, it did acknowledge that it had opened dialogue with clients.

Gauging Client Interest

Bloomberg reported Monday that Barclays is currently gauging institutional demand for cryptocurrency to determine if the new business model is feasible. Quoting unnamed sources, the report indicated that a preliminary assessment had been undertaken, although it is unclear what it revealed. The same source also said that a crypto-trading operation would require approval from CEO Tim Throsby and possibly Jes Staley, who also serves as a company CEO.

A spokesperson at the British bank later issued the following statement:

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“We constantly monitor developments in the digital currency space and will continue to have a dialog with our clients on their needs and intentions in this market.”

Gauging Institutional Demand

Barclays is the United Kingdom’s second-largest bank by assets and its venture into crypto would likely spur wider adoption within institutional circles. For many, institutional capital is necessary to overcome liquidity constraints currently plaguing the market. For traders, ‘liquidity constraints’ generate extreme fluctuations in prices, which makes it difficult to gauge supply/demand characteristics in the market.

Goldman Sachs Group Inc. will become the first major bank to set up a virtual currency trading desk. The new business venture is expected to be up and running by the end of June, if not earlier, according to reports that first circulated in December. While Goldman will almost assuredly make markets in bitcoin, it’s unclear what other cryptocurrencies will be supported. Not surprisingly, Goldman strategists believe most digital assets are headed for zero, an opinion shared by the likes of Vitalik Buterin and others.

We’ve seen what ‘institutional demand’ can do for cryptocurrencies. The market enjoyed unprecedented gains in November and December amid news that major exchanges CBOE and CME Group were planning to launch bitcoin futures. Now, CBOE is championing bitcoin exchange-traded funds (ETFs) in its effort to democratize cryptocurrency.

Though initial uptake in bitcoin futures was tepid, this is expected to change as investors more averse to risk look for safer ways to enter the market. Futures are attractive to those who want exposure to bitcoin but do not want to own the cryptocurrency outright. Futures offer a regulated environment for trading bitcoin-based products without having to rely on unregulated exchanges and the threat of cyber theft that comes with them.

There’s enough evidence out there to suggest that many institutional investors are planning to venture into cryptocurrency (including George Soros). A survey carried out in November by Triad and Datatrek Research revealed that more than a third (36%) of institutional investors were considering buying bitcoin while 19% already did. Additionally, 41% of respondents said they thought bitcoin had similar store-of-value characteristics as gold.

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.

Featured image courtesy of Shutterstock. 

 

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 335 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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