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Winklevoss Twins Shift Crypto Focus to Retail Investors, not Resentment

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If anyone in the world has good reason to feel resentment toward Wall Street regulators for rejecting their bitcoin ETF application, it’s Cameron and Tyler Winklevoss of the Gemini cryptocurrency exchange. Their bitcoin ETF product was rejected by the U.S. SEC not once, but twice, the most recent decision of which was responsible for igniting the crypto market meltdown that was exacerbated by the VanEck bitcoin ETF delay.

Instead of harboring feelings of resentment, however, the brothers only seem to be empowered by the development, as evidenced by their decision to focus on the one client group in which they can depend — retail investors, according to a Bloomberg report. If investors could adopt a similar big-picture perspective, perhaps we wouldn’t be in the current situation in which more than $20 billion has been shaved off the total value of the cryptocurrency market over 24 hours.

In fact, for Cameron and Tyler Winklevoss, it’s not only business as usual but it’s more business than usual by the retail segment.

“Wall Street is taking cryptocurrencies seriously, however, the vast majority of Wall Street firms are still not participating in the cryptocurrency market, which remains primarily a retail-driven market. This will change over time, but it will take time,” Tyler Winklevoss told Bloomberg.

Winklevoss isn’t the only one to feel this way. Adam White, vice president and general manager at Coinbase, a rival exchange to Gemini, recently told CNBC: “What’s so unique about cryptocurrencies, and in many ways this asset class, [is that it] was driven by retail investors — not institutions,” characterizing the interest among institutional investors as “profound.”

OTC Market

Meanwhile, a report by Tabb Group earlier this summer revealed that trading volume in bitcoin’s over-the-counter (OTC) market exceeded that of exchanges as much as threefold, which would attach a value of $12 billion in OTC bitcoin trades every day. Here’s the tweet by crypto industry engineer Eric Wall –

A report on Yahoo Finance concluded that the dramatic selling in the cryptocurrency markets on the heels of the Winklevoss bitcoin ETF rejection could have been the result of bitcoin whales selling not on exchanges like Gemini, where the adjusted trading volume over the last 24 hours hovers at $69 million, but instead the OTC market. This inserts a bit more uncertainty into the drivers of cryptocurrency prices.

Nonetheless, it appears clear that the market is placing a great deal of emphasis on a bitcoin ETF, or lack thereof currently. Such a product could open up the asset allocation of large pension funds, for instance, to crypto.

And as for the Winklevoss twins, they already have a “first” in this market. They were behind the maiden Bitcoin Futures Contract (XBT) on the CBOE last December. And if the CBOE has its way, it will be part of the inaugural bitcoin ETF, as well.

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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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4.6 stars on average, based on 60 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. She owns some BTC and ETH.




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Bitcoin

Bitcoin ETF Issuer Must ‘Look, Feel and Smell’ the Part, Says Abra Chief

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With the bitcoin price perched above $7,300 and moving higher, traders have clearly shrugged off the uncertainty surrounding a bitcoin ETF for now. Nonetheless, the market has forgotten about it altogether as investors keep a potential VanEck/SolidX product within sight, despite the regulatory delays. Bill Barhydt, who is at the helm of Abra, a cryptocurrency wallet startup, is a Wall Street veteran who suggests the securities regulator has not evolved enough to embrace the crypto community.

“I think the issue with the SEC, quite frankly, is that the people who are doing the applications don’t fit [the] mold of who the SEC is used to approving,” Barhydt told CNBC.

For instance, Barhydt, who is a Goldman Sachs alum, suggests unless the issuer “looks, feels and smells” the part, it’s going to be an uphill battle for a bitcoin ETF approval. He uses himself as an example: “I probably, unfortunately, couldn’t go like I am here to a meeting at the SEC to say I’m applying for the ability to issue an ETF.”

Abra CEO Bill Barhydt
Source: CNBC

And while Tyler and Cameron Winklevoss might look the part, this logic places the odds more against a blockchain startup like Gemini exchange, which has so far had its bitcoin ETF application rebuffed twice, and more in the corner of traditional Wall Street firms, like a VanEck, which has been around since 1955.

Even if the SEC decides once again at the end of this month to postpone its decision on the VanEck product, Abra’s Barhydt belives a bitcoin ETF is in the cards. “It’s going to happen in the next year, I would actually make a bet on it. There is too much demand for it,” he told the business network. Institutional capital should follow alongside the rise of custody solutions. One caveat is the volatility that’s inherent in the bitcoin price, which could also be keeping institutional capital sidelined even though volatility has subsided of late.

In the interim, institutions can trade bitcoin futures, which they are doing. Jonathan Cheesman of crypto asset management firm Distributed Global pointed out that “bitcoin shorts remain persistent” and largely intact for the past week even as the bitcoin bulls have wrestled back control.  Meanwhile, it’s entirely possible that an ETH futures product could emerge before a bitcoin ETF.

Abra development

Meanwhile, the Abra crypto wallet, which supports more than two dozen digital currencies, just launched support for SEPA payments, which gives European customers the ability to purchase cryptocurrencies via bank transfers. Barhydt tweeted the development, which is specific to SEPA deposits. Fiat withdrawals via SEPA are next in the pipeline.

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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4.6 stars on average, based on 60 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. She owns some BTC and ETH.




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Bitcoin

Inevitable Bitcoin ETF Will Do More Harm Than Good: Andreas Antonopoulos

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Prominent bitcoin advocate and author Andreas Antonopoulos believes that a crypto-backed exchange-traded fund (ETF) is inevitable, but will ultimately do more harm than good for peer-to-peer money. According to this view, proponents of virtual currency should stop debating whether regulators will approve a bitcoin ETF and start considering the long-term implications of securitization.

Pseudo-Centralization

Although there are many reasons why Antonopoulos rejects the idea of a bitcoin ETF, the core of his argument stems from the underlying principle of decentralization. A bitcoin ETF, while inevitable in his view, induces pseudo-centralization that could have negative effects on the market’s long-term health.

“ETFs fundamentally violates the underlying principle of peer-to-peer money, where each user is not operating through a custodian but has direct control of their money because they have direct control of their keys,” Antonopoulos says, as quoted by CCN.

An ETF would concentrate influence and decision-making power in the hands of the custodians, who hold bitcoin keys on behalf of their investors (under an ETF model, investors hold no keys and have no role in the ecosystem).

While crypto purists have conveyed similar concerns, most investors are preoccupied with what regulators think the bitcoin market should look like for securitization to be granted. The U.S. Securities and Exchange Commission (SEC) believes the bitcoin market lacks the liquidity, size and manipulation constraints needed for securitization. To be fair, their judgment has been applied to funds that purport to track bitcoin futures as opposed to physical units of the digital currency. A recent application by VanEck and SolidX attempts to overcome these issues by tracking underlying bitcoin and insuring the fund against loss or theft. The SEC is expected to deliver its ruling on the VanEck/SolidX fund later this month.

Intermediary vs. Real Investment

In Antonopoulos’ view, the eventual passing of a bitcoin ETF will create two classes of institutional investors: those with the technical prowess to actually own physical units of bitcoin and those who depend solely on intermediaries like futures and ETFs.

At the moment, it appears that institutional demand is pivoting toward intermediaries, with banks, hedge funds and day traders gravitating toward bitcoin futures and other indirect investments. Several fund managers ranging from ProShares to Direxion and up to the Winklevoss brothers, who own and manage the Gemini Exchange, are pushing hard to make bitcoin ETFs a reality. This is where much of the institutional debate lingers.

The first wave of institutionalization via bitcoin futures appear to have had mixed results. On the one hand, the futures market has contributed to a sharp drop in bitcoin’s underlying volatility. On the other hand, it gave traders the power to short BTC with relative ease, which many believe has actually been responsible for bitcoin’s decline since December. To be sure, futures have probably played a very minor role in the bitcoin price due to underlying liquidity constraints in the market. There simply aren’t enough futures trades being placed to cause the earth-moving collapse in bitcoin’s price over the past eight months. That said, there’s no going around the fact that short positions have dominated the futures market since launch. Case in point: CME’s bitcoin futures contract recently recorded its smallest-ever bearish position at -1,266 contracts. That’s still a net short position.

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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4.6 stars on average, based on 604 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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Analysis

Turkish Market about to Crash. Any Point in Taking Risk?

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By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets

It is an open secret that crises are the best times to invest. During a crisis, companies become cheap, sometimes several times cheaper compared to the real value. Investors who do not rely on emotions think of sharp market falls as of a unique chance for finding and buying such company stocks. However, an even better time to invest is during a correction, which is inevitable when any market is rising.

There are a few investment methods during crises:

  • The first one is finding some particular companies. Those should be the companies with the best outlook, but the risks are high, as you never know this very company will react to the crisis.
  • Another method is more simple, and consists in investing into a particular industry. In this case, you won’t need to analyze certain companies, betting on an entire sector instead through buying an index.
  • Finally, the third method is investing into exchange-traded funds, or ETF’s.

An ETF is a portfolio based on stocks, commodities, currencies, bonds, or interest rates, that usually replicates a certain stock index. By buying an ETF, you invest not only into a particular stock or industry, but into the country’s economy as well. Meanwhile, as ETFs consist of multiple financial instruments, they are the most safe forms of investment, and one of the most popular, too. Many ETFs are traded in the US market, where an access to any exchange means an opportunity to invest into any asset being traded around the globe.

Lately, the Turkish lira depreciated so much that many market participants started to watch it. The EU market was one of the first to suffer, which led to the US dollar rising and investors leaving high risk assets.

The major Turkish indices were meanwhile going down steadily. The stock market started plunging as early as in April after the US imposed customs duties on steel and aluminum (25% and 10%, respectively). In mid-August, the US doubled these rates, which led to the Turkish stock market going down further.

Bist 100: Turkish Stock Index

The reason for the stock indices going down was not the crisis, though. The depreciation occurred at the same time of the US imposing the duties; this could influence the metal industry negatively, but for other companies exporting their products abroad cheap lira was a good thing, as prices became more competitive. This means that the Turkish economy is very much under-priced, and while the indices are going down, this is a great opportunity for a long-term investment. This also allows one to clearly see the reasons for Trump’s having imposed the duties.

When the US imposed customs duties on China, the PBC started depreciating the renminbi in order to neutralize the effect. The same happened in Turkey, although the central bank did not take any part in it, the lira lost much more than it should, while steel and aluminum got cheaper, even taking the duties into account, which turned Trump’s effort totally useless. Of course, the only thing he could do in this situation was raising the duties.

It is considered obvious that Trump’s imposing duties lead to a stronger dollar. At the same time, in case the countries take some counter-measures, exporting from the US may become a few times more expensive than before.

When a crisis occurs, the central bank usually cuts rates in order to stimulate inflation and export and allow businesses to take affordable loans. In Turkey, however, inflation is already beyond control, and the government is on the verge of a disaster. On the one hand, they need to stop the inflation by raising key interest rates, on the other, they have got to support the businesses, and, to that end, leave the rate unchanged. The Turkish central bank run by the government finally chose the second option and do without a rate hike, which is a good signal for the stock market. In case inflation turns slower, this decision may turn out to be very good in the long run.

Perhaps this was the very signal that served as a reason for a large cash flow coming to one of the Turkish ETFs. It is called iShares MSCI Turkey ETF (TUR), and some sources say the cash flow there was around $147.5M last week. This is the largest foreign investment amount since 2013. The iShares MSCI was second to only ETF iShares China Large-Cap (FXI), whose weekly cash flow was $165.2M. This all means that large investors are very much interested in the Turkish markets, seeing a lot of opportunities across it.

Another signal regarding iShares MSCI Turkey ETF (TUR) and the Turkish stock market, in general, is that the market is oversold. This is calculated through dividing the GDP by the overall capitalization of all stocks being traded publicly.

When it is less than 50%, the market is usually considered oversold, and this makes a good buy signal, while in case this parameter is over 150% (often happens in the US), this means the market is overpriced and a correction is coming.

In Turkey, the high was as low as 50%, while the low is 10%. Currently, this percentage is 15%, which clearly indicates the market is heavily oversold.

The Turkish economy got such results only 3 times since the stock market inception, and every time before the fall changed to the rise by 30%, which, again, is a buy signal for (NYSE:TUR).

Technically, the interest towards the index is confirmed with a sharp increase in volumes. Currently, the resistance has formed around 22.00, and once it gets broken out, the ETF may continue rising to reach $33.00 or $35.00.

A more long-term period shows that TUR has reached its highs and is now trading near a very strong support, which may follow with a bounce, same like in 2008.

Disclaimer

Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

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 postsHaving majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.




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