What Impacts Cryptocurrency Markets?

Tokens

The regulated token environment has been interesting over the last month. We’ve seen earlier this year one of the biggest platforms come to market being T-Zero which is still only open to accredited investors as they figure out some of the internal workings of how they’re going to bring this to public markets later this year. We’ve seen news of Circle starting to work on security token offerings.

We still see this as the biggest opportunity because it brings new liquidity to the market once this is available to the public. As an accredited investor right now, you have to have a high-risk potential or high-risk profile in order to be participating in some of these investment opportunities with the hopes that as they come public that they will create interest from public investors, ie. bring more liquidity into the market which then in turn can be brought back through to stable coins and potentially even Bitcoin.

ETFs

The next being ETF’s. While we haven’t necessarily seen any ETF’s get approved for public use by the SEC, we have started to see some of the private offerings get a little bit more momentum behind them and that they’ve even spawned off some secondary opportunities.

Genesis has become the custodian for Bitcoin in Ethereum Bank. Why is this interesting? Well, the banks paying 6.2 percent interest on Bitcoin in Ethereum deposits.

Now, you can go out and do your own research in order to avoid making it sound like we’re recommending using this bank without doing due diligence. You’re going to have to go out and do some of your research or look at our newsletter and it’ll link you to stories about this bank and what they’re doing so that you can make a decision of whether or not you think this is an interesting opportunity for you if you are one of those 8 percent of Americans that have cryptocurrency holdings.

Why do I keep saying 8 percent of Americans that have cryptocurrency holdings? Well, that means 92 percent of the people out there don’t. This leads to a macro-element of the overall cryptocurrency industry.

We’re seeing the highest volumes in Bitcoin that we’ve seen in 13 months. Since the last major decline, we’re seeing the most interest in the market that we’ve seen since that decline. That’s a really good indicator of potential forward momentum.

We’re not necessarily seeing a mass entrance of new liquidity into the market, ie. new investors bringing capital in to buy previous supply, but we are seeing interest in both content as well as cyclical trading volume increasing without an influx of net new capital.

When we look at that from a macro environment, we know that there’s 5,000 different assets out here in the cryptocurrency sphere. They all lead up to Bitcoin in one way or another, not from a technology perspective, but from a value prop perspective.

Maybe with the secondary asset into some of Ethereum or in some of the stable coins in order to have cash in market while not having it deployed in a volatile asset.

When you have 5,000 assets and you really only have 100 of them that should exist, you’re starting to see the remainder of people shed those non-liquid assets at any dollar value that they can to move into those other assets that are going to have a better potential for forward momentum, ie. Bitcoin with all of the momentum behind those big three.

Regulation

We’ve talked about ETF’s, we’ve talked about equity tokens. Let’s talk a little bit about regulation. Now, regulation is kind of stifled ETF’s and it’s also stifling some of the future projects like backed that wanted to come out with Bitcoin settled future contracts with a current future contract from the CBOE are actually settled in USD, so you’re not playing off of an underlying asset. You’re playing off of the underlying assets bases or volatility in order to try to predict and make money.

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We saw last month a slight spike in core asset values. When we talk core assets, we’re talking about the big six that you can get access to from the Equity Trust trading platform through your self-directed IRA and the momentum into those.

Now, it’s not been heavy in all of them, but it did create some forward momentum in Bitcoin in Ethereum. Ethereum’s been pegging between $120 and $160 sitting in about $135 today. If you’re a volatility trader, there’s a lot of opportunity there for 5-percent, 10-percent swings.

Bitcoin had a little bit of a push up over that $4,000 spot price before falling back down slightly below it right now. Again, all of that building forward momentum across one of the big three hitting.

Potentially, this year 2019 we could see all three. Regulation being figured out to allow for ETF’s in future contracts. The launch of publicly available futures in ETF’s contracts, and then also our equity tokens becoming public at the end of the year creating greater liquidity by broadening their horizon for investment into digital assets.

In the news: Facebook cryptocurrency project

I want to talk about two stories that I think are really important for the market. The biggest piece of news was about the Facebook cryptocurrency project and what that’s going to look like. It’s really under lock and key and kind of hush-hush at Facebook. Apparently, they’ve set up separate offices, require separate ID cards to get into, none of the staff that’s working on the project is allowed to talk with other Facebook employees or anyone in the general public about exactly what they’re doing.

It’s going to be a really big deal because if you look at Facebook’s potential for being a marketplace for assets, which it already is.

When I say assets, I mean tradable goods. The Facebook marketplace, as a real estate investor myself when we need to rent out properties, I don’t bother with Craigslist anymore. I go straight to Facebook and I’ve got a 100% rental rating out of that.

If I need to sell something, yes there’s a lot of apps or something out there, but if I need to get rid of a snowboard or something like that, I throw it up on the Facebook marketplace and I’ve got offers within minutes.

Now, the ability to transact between these individuals is a little bit more complicated. I’ve got to go out. I’ve got to meet them somewhere. I don’t want to invite them to my home. We’ve got to trade cash. There’s risks associated with that.

What if a currency could be used in the middle that could be settled in USD? We call it maybe a Stable Coin. It’s pegged to value of USD, so there’s no volatility that would allow me to do online transactions of services and goods, settle that into a cryptocurrency that’s got a lot more security associated with it, and then take that currency and trade it back into USD or whatever your denomination is in the country that you may be in. That’s kind of a big deal.

Seeing a major player like Facebook, there were rumors that it was going to be Amazon first and we don’t know if Amazon is or is not working on some of these, but Stable Coins will provide new outlets for the trading of goods, and then create more opportunity for liquidity that those people that own those assets could then move into the Bitcoin markets with greater ease and efficiency.

Roger Bryan is not an employee of Equity Trust Company. Any opinions or ideas expressed by Mr. Bryan are not necessarily those of Equity Trust Company nor do they reflect their views or endorsement. These materials are for informational purposes only. Equity Trust Company, and its affiliates, representatives and officers do not provide legal or tax advice. Investing involves risk, including possible loss of principal.

Prior to making any investment decisions, please consult with the appropriate legal, tax, and/or investment professionals for advice. As a self-directed IRA custodian, Equity Trust Company will not provide investment advice or risk assessment of any investment. The digital currency market may experience a high degree of volatility and clients should consult with an investment professional before any investment is made.