Crypto’s Last Week
This edition of “Crypto’s Last Week” accounts for some of the most notable, and crypto-related — institutional, investment, or regulatory — news published between Saturday, November 07, 2020, and Friday, November 13, 2020
When it comes to saving or borrowing, technological advancements have left the traditional banking system so far behind that they are nowhere to be seen. Digital currencies and online Peer-to-Peer (P2P) platforms offer equal or lower annual percentage rates (APR) — this is the information that most borrowers seek to understand in a clear manner, since it will affect the amount of money paid by the individual to the lending institution, the lower the better — while offering higher annual percentage yield (APY) — this is the information that will entice lenders to allocate their capital depending on the rate of interest offered by the institutions, the higher the better.
It’s important to note that just as there are notable differences and substantial gains or payment reduction depending on the method (traditional banking or digital asset lending/borrowing platform) there are also risks entailed in each one. The ones to keep an eye on our key access, withdrawal restrictions, compound interests, and account insurance.
In a short period, there have been two dramatically opposing situations within the lending sector of the crypto industry. On the negative side, one of the top lending platforms in the space, CRED, filled for bankruptcy after a couple of tumultuous weeks in which fund inflow and outflow were suspended due to irregularities and a fraudulent incident, which ended up with a report of the Delaware registered company having an estimate of $50–100 million in assets and $100–500 million in liabilities.
During this CRED failure, a direct competitor and crypto lending and borrowing platform, Celsius, announced the achievement of reaching over $2.2 billion in digital assets under management, doubling in 6 months what had taken since 2018 to achieve ($1 billion in AUM).
Celsius CEO, Alex Mashinky, recently asked his followers through his LinkedIn account “How many 2-year-old hedge funds do you know with $2.2B in AUM and 4,600% return in the last 12 months?”
Bringing to light not only the steady growth in user base and allocated capital within the virtual assets service providers but also the benefits that can be reaped by customers when working with the right platform.
Would you be willing to allocate a percentage of your savings to crypto and use lending platforms to accumulate interest or would you rather have devaluing fiat currency in a traditional, more secure bank?
The Boston Consulting Group (BCG) is among the top management and strategy consulting groups worldwide, with over 21,000 employees and revenue (2019) over $8 billion. BCG has recently released a report titled “How Banks can Succeed with Cryptocurrency” in which they establish the parameters for a “major transition” in traditional banking in the first half of the 2020s based on increased interest from customers of all levels to have portfolio exposure to this young and innovative financial vehicle.
BCG clearly states the inherent risks in this young asset class, due to a general lack of knowledge, high volatility, and a tarnished reputation because of it relation to hacks and scams such as the most recent Twitter hack and the request by the criminals to be paid in bitcoin.
Nevertheless, there is a comprehensible realization of the benefits and advantages of overcoming the risks and potential dangers, with a straightforward path towards an increasingly safe framework for retail and institutional investors to enter the space through trustful institutions and organizations and the watchful eye of government regulators safeguarding norms and laws by overhauling the financial oversight of a quickly evolving industry.
There is also a highlighted section that mentions the rapid pace at which adoption has taken over from central banks to financial service providers such as the ECB or JPMorgan Chase with the evaluation of a potential digital euro or the JPM Coin respectively.
This in-depth analysis of cryptocurrencies is a recommended read to anyone who has ever considered or had doubts on the current and future status of this nuanced and avantgarde asset class, since we believe it has highly balanced information and objectively seeks to identify what is still an in-development industry with just as many flaws as advantages, but supported by mathematics, coding and cryptography methodologies never truly exploited until now.
Thank you for joining us and reading “Crypto’s Last Week.”
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