Vitalik Buterin, co-creator of the world’s second most-valuable blockchain Ethereum, has taken a major hit to his net worth after the price of ether (ETH) dipped below $2,000 earlier on Monday.
As of 3:15 p.m. ET, ETH is trading at $1,938 according to Messari, down by more than 50 percent just five weeks after reaching its all-time-high of $4,338 on May 12. The decline of the second-largest cryptocurrency falls in line with the rest of the market, as crypto prices have fallen across the board since news broke of a renewed clampdown on bitcoin miners in China.
Buterin’s two main ether addresses currently hold 325,001 and 1,366 ETH worth a collective $632,499,246 as of 3:15 p.m. ET. The current value of his holdings is $457,500,754 less than the $1.09 billion it was worth on May 3 at 1:30 p.m. ET, according to Messari, when Buterin became the world’s youngest crypto billionaire at age 27. When ETH’s value first surpassed the $3,000 price level Buterin held 333,520 ETH worth $1.09 billion. Forbes is unable to account for the 7,153 ETH difference between his holdings now versus on May 3.
Ether’s current market capitalization is $223,752,321,616, second only to the original cryptocurrency, Bitcoin with a market capitalization of $606,843,934,844. Ethereum has gained notoriety this year as the birthplace of decentralized finance (DeFi) applications aiming to create decentralized alternatives to traditional financial services. At the time of writing there is $51 billion locked in the DeFi market, according to data aggregator DeFi Pulse.
Well, it’s not necessarily Ethereum that is a risky investment, it’s cryptocurrencies: They are highly speculative. Even though some experts and crypto supporters believe they could replace fiat currency one day, the answer is much more complicated.
Despite their bustling activity growth, efficiency, and impressive blockchain technology render, many countries are still anxious about cryptos replacing fiat currency. But even though peer-to-peer currency might be the bane of central banking systems around the world, the simple answer would be: no, cryptos won’t replace fiat. Why?
Because their usage is on the rise, their speculative popularity is why they won’t be adopted as mainstream legal tender: they are driven for value storage and speculative trading – rather than for transactional value.
As the past few weeks have proven, their volatility can be a double-edged sword: Between May 12 and May 24, Ethereum has lost nearly 50% of its value. While it has somewhat recovered since it is gut-wrenching to see.
What is a Bitcoin ATM, and does it actually function as an ATM? The short answer is yes.
Technically, these aren’t traditional ATM’s (Automatic Teller Machines) as they do not allow physical withdrawals of BTC from an account you own. Instead, these machines will enable you to purchase Bitcoin, depending on the specific machine. There are a number of machine types around from various companies, the top 3 being: General Bytes, Genesis Coin, and Lamassu.
You verify your identity through an one-time-password sent to your mobile or email. Again, this varies from machine to machine.
You decide if you want to buy or sell BTC (if you have the option).
To buy, you must choose the amount you want to in terms of BTC or your target fiat currency.
You then deposit the fiat currency into the machine.
Several things may happen depending on the machine:
A QR code may appear on the screen for you to scan
A QR code may be printed off corresponding to your new BTC wallet.
The machine will ask and scan the QR code of your pre-existing wallet.
You input your email address to have a QR code sent to you.
To sell, you must send the appropriate amount of BTC to the address displayed on the screen. Once the transaction is confirmed, you will receive the agreed fiatsum. How long this takes depends on the machine.
Bitcoin ATM’s v.s Crypto Exchanges
Bitcoin ATM’s are connected to exchanges. When using one, you are essentially buying or selling your chosen coin on an exchange. However, you’re interacting with a physical machine in a specific location rather than online. The price difference between using an online exchange and an ATM is generally around 5-10%. This means that ATMs cost 5-10% more to buy, and selling means you receive 5-10%.
Despite the premium that must be paid, many are attracted by these machines’ convenience and ease. They allow for a more visual and straightforward financial transaction that most are already familiar with. In addition, machines do not require any confusing registration processes or the need to learn about online trading interfaces.
When selling through an online exchange like Phemex, the platform’s spot marketsoffer more control over the price you are transacting with. You can also take advantage of limit orders and stop orders if you are not happy with current market prices.
There are many services and locations apart from bitcoin ATMs which provide exchange of bitcoins for cash and vice versa.You can send cash-to-cash payments to your relatives or friends in other countries by using two bitcoin ATMs. Find where to buy or sell bitcoins and other cryptocurrencies through ATMs for cash here…
Led by 8 former Morgan Stanley Executives, Phemex’s goal is to build the worlds most trustworthy cryptocurrency derivatives trading platform. Its leverage a “User-Oriented” approach to develop far more powerful features than any existing exchange.
Above all, they place customers first. All of the features and tools are designed with this philosophy in mind. This is why their development team is directly available and constantly gathering feedback, comments, and requests from our community on social media.
Back in 2017, as experienced professional Wall Street traders and investors, Jack Tao and other founding members of Phemex identified a lack of professionalism, trustworthiness, and customer support within the crypto industry. In the following two years, the number of users engaging in cryptocurrency trading increased significantly.
Nevertheless, existing exchanges showed little to no improvement. Realizing the seriousness of the problem, the team left Wall Street and founded Phemex in the summer of 2019. They then dedicated themselves to building a simple, efficient, but most importantly, a trusted cryptocurrency trading platform. Then, on November 25th, 2019, the Phemex platform officially went live.
Pheme (Fama) is the personification of fame and of the public’s voice in Greek mythology. While MEX stands for mercantile exchange. This name was chosen to highlight our vision and their dedication to stand as the most trustworthy trading platform.
From day one, their mission was and will always continue to be the empowerment of individuals. They want everyone in this world to have access to the right set of tools that will allow them to manage risk efficiently and trade simply. They sincerely believe this to be a fundamental right that all traders should enjoy.
For its crypto derivatives products, Phemex allows you to trade with leverage. This means that you can receive a higher exposure towards a certain crypto’s price increase or decrease, without actually holding the necessary amount of assets. You do this by “leveraging” your trade. In simple terms, this means that you borrow from the exchange to bet more. You can get as much as 100x leverage on this platform.
Leveraged trades are risky though. For instance, let’s say that you have 100 USD in your trading account and you bet this amount on BTC going long (i.e., going up in value). If BTC then increases in value with 10%, you would have earned 10 USD. If you had used 100x leverage, your initial 100 USD position becomes a 10,000 USD position so you instead earn an extra 1,000 USD (990 USD more than if you had not leveraged your deal).
As we mentioned above, in terms of Spot Trading, Phemex has adopted a zero trading fee model. Instead they just charge for monthly Premium Memberships (prices are $9.99 for 30 Days, $19.99 for 90 Days and $69.99 USDT for 365 Days). Becoming a premium member will also allow you to set conditional spot orders, you will enjoy hourly withdrawals with no limits, and will be able to gift trial premium memberships to friends.
With respect to contract trading, Phemex separates between “takers” and “makers”. Let’s describe these terms real quick. Every trade occurs between two parties: the maker, whose order exists on the order book prior to the trade, and the taker, who places the order that matches (or “takes”) the maker’s order. We call makers for “makers” as their orders make the liquidity in a market. Takers are the ones who “take” this liquidity by matching makers’ orders with their own..
Phemex previously didn’t accept any other deposit method than cryptos, so new investors were restricted from trading here. Starting 18 June 2020, however, they partnered with a company called Banxa which is a payment gateway that accepts credit and debit card purchases of crypto.
Since then, Phemex has also partnered with Koinal, Coinify, MoonPay, and Mercuryo. You have a variety of payment options (ranging from bank transfers to Apple Pay) and rates to fit your needs.
To our understanding, Phemex does not charge any fees of their own when you withdraw crypto from your account at the platform. Accordingly, the only fee you have to think about when withdrawing are the network fees. The network fees are fees paid to the miners of the relevant crypto/blockchain, and not fees paid to the exchange itself. Network fees vary from day to day depending on the network pressure.
Generally speaking, to only have to pay the network fees should be considered as below global industry average when it comes to fee levels for crypto withdrawals.
BlockFi, the crypto lending and trading business, mistakenly deposited large amounts of crypto to user accounts. The payments were associated with a promotion they were running, in which users would receive bonuses in USD stablecoins.
The promotion was intended to be “paid out in one lump sum in GUSD” according to their website. Instead, some accounts were paid the amount denominated in Bitcoin, with some receiving over 700 BTC (worth >$28,000,000 at current prices).
A screenshot from one affected user who withdrew the funds shows threat of possible legal action should they not be returned, and a pay-out of $500 should they return them by a set time.
BlockFi clearly has their hands full dealing with the mistakenly deposited bonus payments, and users have reported experiencing additional issues with the company’s services. The BlockFi subreddit is full of posts with individuals receiving the mistaken funds, having difficulty withdrawing, and being unable to trade. One user claims to have been falsely accused of withdrawing mistaken funds after withdrawing USDC which he or she had been deposited a month earlier.
A statement by BlockFi, noted that “fewer than 100 clients were incorrectly credited,” and “BlockFi has contacted these clients and is working with them to rectify the issue.”
There are risks with using centralized services like lending platforms and exchanges—these are especially well known by early Bitcoiner’s who have witnesses a great number of hacks, exit-scams, and insolvencies wipe out customer funds held by large custodians.
BlockFi claims that “client funds are not impacted and are safeguarded.” After raising a recent $350 million funding round, the company likely has large pools of capital to pull from should they be unable to recoup any of the mis-credited funds from users who withdrew to personal wallets.
BlockFi’s previous promotion was, indeed, a friend referral promotion which offered (albeit small) BTC rewards.
I am the Director of Research and Development at Inca Digital, a data and intelligence provider in the digital asset space. I use Inca’s proprietary data system, NTerminal, to aggregate and analyze structured and unstructured data.
Before Inca, I helped start up a pharmacogenetics laboratory and worked in neurodegenerative research. My scientific background influences the way that I think about complex systems such as blockchain networks, and the models used to understand them.
One user who reached out to CoinDesk said they received a large sum of BTC in their account which they thought was a reward for referring their friends – so they sent it to their cold storage wallet. BlockFi’s previous promotion was, indeed, a friend referral promotion which offered (albeit small) BTC rewards.
The user said after looking at the transaction in more detail, they realized it was an error, so they requested a cancellation of the withdrawal. The cancelation request was confirmed via email and their account shows the BTC transaction was reversed, with a note specifying they had reversed the bonus transaction. Nevertheless, the user said the bitcoin reward ended up in their cold storage wallet. They shared these documents with CoinDesk, and the blockchain shows that the funds were indeed transferred to their wallet address.
The next day, they received a phone call and an email (which CoinDesk has reviewed) from BlockFi threatening legal action if they didn’t return the funds, but also offering $1,000 worth of the stablecoin GUSD for any trouble this may have caused.
Yet another user said they received both BTC and GUSD, only to have the BTC reversed. The GUSD remained, but a couple of days later when they tried to withdraw some USDC (+0.09%), a different stablecoin they had deposited a month earlier, BlockFi sent an email accusing them of withdrawing funds that weren’t theirs.
It started even before Elon Musk took the stage on Saturday Night Live. The May 8-14 issue of The Economist arrived in the mailbox, delivering a quiet, existential blow to cryptocurrency as we’ve known it for the last decade or so. The publication’s cover package offered a vision of “govcoins,” digital currencies backed by central banks:
Government e-currencies would score highly, since they are state-guaranteed and use a cheap, central payments hub. As a result, govcoins could cut the operating expenses of the global financial industry, which amount to over $350 a year for every person on Earth.
Although the motivation for these “govcoins” is not to push existing cryptocurrencies to the margins, that would be the likely effect. Then, as Musk appeared on SNL, the price of Dogecoin plummeted. Although news stories attributed Dogecoin’s tumble to a Weekend Update skit that labeled the joke-coin a “hustle,” the selloff started at least half an hour before that. It felt more like a classic “buy the rumor, sell the news” dynamic.
But Musk reserved his true market-moving power for midweek, when he tweeted that Tesla will stop accepting Bitcoin as payment for cars. The reason, Musk said, was “rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” In a later tweet, Musk called the amount of electricity used to produce Bitcoin recently “insane.” Critics pointed out that Musk and Tesla could easily have known about Bitcoin’s energy suck when they embraced the currency months ago; nonetheless, the price of Bitcoin sank by as much as 15% that day.
Musk’s pronouncements put the spotlight on cryptocurrencies that claim to require less electricity to produce. All of a sudden, everyone is touting cryptocurrencies that operate on a more efficient standard than Bitcoin’s “proof of work” standard. The flurry recalls the hype around sustainable aviation fuel or ‘70s-oil-crisis car advertising, in which the sole marketing criterion was which vehicle got the most miles per gallon.
The recently launched Chia Network, for example, plays up its “proof of space and time” standard as more energy efficient. Other cryptocurrencies, like Nano and Cardano, took to Twitter to boast about their supposed energy efficiency. On The Defiant podcast, crypto coder Preston Van Loon insisted that Ethereum—a versatile cryptocurrency that’s still valued about 400% higher than on January 1—is “about six months from proof-of-stake.”
Of course, the dramatic dropoff in Bitcoin and Dogecoin prices is both predictable and relative; the idea that Dogecoin is still trading at over 50 cents a coin is ludicrously mind-blowing. Nonetheless, the Musk-Tesla decision around Bitcoin feels like a watershed moment. Cryptocurrency mining’s energy use has gone from a fringe concern to front and center in a matter of weeks. As FIN noted last week, some state legislatures are beginning to discuss limits on crypto mining. It’s going to get harder for crypto enthusiasts to avoid this issue.
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Fintech Meets Healthcare
One of the most powerful fintech applications imaginable is in American healthcare space. The United States spends trillions of dollars a year on health care, and yet the outcomes are consistently below those of other developed countries. There are dozens of reasons for that, but one that seems ripe for solving is how payments work.
The system of private health insurance is tremendously inefficient, to the point where it actively interferes with patient care. Americans almost never know what a given procedure is going to cost, how much their insurance will or won’t cover, or even when they will be billed. Surveys indicate that more Americans stress out over medical bills more than over their actual care. This chart shows why half of all Americans have been late to pay a medical bill:
For their part, doctors and other medical providers feel swamped with paperwork and antiquated billing systems. One company that’s trying to fix this broken mess is Waystar, a Chicago-based healthcare technologies that offers a cloud-based billing system to help rationalize payments. Waystar claims to currently handle about one out of every four healthcare transactions in the US.
In an interview with FIN, Waystar CEO Matthew Hawkins acknowledged that while the American health care system has for decades been slow to digitize, recent legislative changes—such as 2009’s “meaningful use” law—have spurred positive changes. Moreover, the shift to telehealth services brought on by the COVID pandemic should make the system more efficient. Hawkins said his company’s ultimate goal is “paving the way toward price transparency.”
He laments that “we’ve all gotten comfortable behaviorally with going to a provider, receiving health services, and then not really knowing the cost of those services.” Imagine an app that would tell you in advance what a surgical procedure was going to cost you, and even gave you the option to set up a payment program before you see the doctor!
Robinhood’s Customer Service Glitches Explained
Sheelah Kolhatkar is one of the most talented business writers in the world. And given the connection that former officials of S.A.C. have to the Robinhood story (Kolhatkar wrote the book on S.A.C.), she’s by far the best person to write about Robinhood for The New Yorker. Unfortunately for her and the publication, Robinhood has been so heavily covered since January that a lot of her current piece feel overly familiar.
But the one thing she really nails is Robinhood’s terrible customer service. According to her story, Robinhood outsourced its customer service in 2016 to a company called Voxpro, located in Ireland. Voxpro’s poorly paid employees didn’t have the licensing or certification to deal with investors’ problems. In 2017, Robinhood made the conscious decision to eliminate the option for its users to call and speak to anyone. The company later restored an option for an investor to get a callback, but these years of customer-service neglect explain a lot.
FINvestments
🦈Number of the Week: In the April 11 issue, FIN predicted that Better.com would go public this year. Sure enough, that is happening, via SPAC. The company, which made its fortune selling mortgages but clearly plans to expand into a broader range of financial services, will be valued at $7.7 billion.
🦈PayPal’s march to become an overall e-commerce hub continues; this week it bought Happy Returns, a Santa Monica-based company that makes it easy for people to return in person items that they’ve bought online.
For Coinbase’s founders and investors, the timing of its initial public offering this week couldn’t have been better. Bitcoin has been trading at an all-time high, above $60,000. Just eight days ago, Coinbase announced that first quarter revenue in 2021 tripled from the prior quarter, hitting $1.8 billion, while net profit reached nearly $800 million.
On the stock’s first day of trading on Wednesday, it nearly doubled then settled back down for a 30% gain, closing at a market value of $86 billion. CEO Brian Armstrong’s net worth hit $11.8 billion. Cofounder and board member Fred Ehrsam, $3.8 billion. Chief product officer Surojit Chatterjee, $660 million.
As the most popular digital asset brokerage and exchange in America, Coinbase’s key competitive advantages are its brand and deep trading marketplace. The more customers it has, the easier it is for each one to buy and sell at attractive prices when he or she wants to. Today it has 56 million verified users. But now that the nine-year-old San Francisco company is public and under a brighter spotlight, it faces growing threats to its outsized profits.
A Rush of New Competition
Avichal Garg, a managing partner at Electric Capital, one of the largest cryptocurrency investment firms in the U.S., says Coinbase will start seeing much more competition. “It’s going to be a big wakeup call for banks and financial institutions,” he says. He thinks Fidelity is a few years ahead of other incumbents in building a crypto trading business thanks to CEO Abby Johnson. She led the company to start mining bitcoin in 2017 and has created a 150-person team dedicated to helping large investors buy, sell and hold bitcoin.
CNBC’s Bob Pisani breaks down why Coinbase on deck is so important for investors and the crypto space with Matt Hougan of Bitwise Asset Management and Christian Magoon, CEO of Amplify ETFs. Subscribe to CNBC PRO for access to investor and analyst insights on crypto and more: https://cnb.cx/2BT2E7y
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Fidelity doesn’t yet let average Americans buy bitcoin directly, but Garg thinks that will change. “They have their core retail brokerage business—imagine putting Fidelity-branded crypto products into that thing. Now you don’t have to leave Fidelity to get access to bitcoin or ethereum.” (Fidelity declined to comment on whether it’s building such a product.)
Interactive Brokers, the Greenwich-based $30 billion trading platform that caters to professional traders and sophisticated investors, plans to offer bitcoin trading to customers by the end of this summer, a spokesperson says.
In late 2019, brokerage Charles Schwab released a report showing that the bitcoin-tracking investment product GBTC was a top-five holding in accounts held by Millennial customers. Schwab probably won’t stay on the sidelines if there’s such pent-up demand among its customers, Garg says. A Schwab spokesperson declined to comment on specific plans but noted that it lets customers trade bitcoin derivative securities, adding, “We will continue to listen to our clients’ feedback to make sure that our offering meets their needs.”
Binance, the largest cryptocurrency exchange in the world, launched a U.S. arm in September 2019, and its trading volumes keep hitting record highs, recently transacting $1.3 billion a day to Coinbase’s $5 billion, according to CoinGecko.
Cryptocurrency exchange-traded funds (ETFs) are also on the verge of approval for the first time in America, which will make it easier for retail investors and wealth managers to get exposure to bitcoin through almost any brokerage. Companies ranging from Fidelity to Wisdom Tree have crypto ETF applications sitting on the desk of the Securities and Exchange Commission.
Rich Repetto, a managing director at investment bank Piper Sandler who covers online brokerages, expects the first U.S. crypto ETF to get approved this year. Gary Gensler’s confirmation as SEC chairman makes this even more likely—the former Goldman Sachs banker used to teach a class on blockchain technology at MIT.
Shrinking Fees
All this extra competition for Coinbase means it’s almost inevitable that its high fees will come down. To buy $100 worth of crypto on Coinbase today, it costs $2.99, or 2.9%. To buy $1,000, you’ll pay $14.68, or 1.5%. Prices decrease percentagewise if you’re spending more—average fees across all Coinbase’s brokered transactions were 0.57% in 2020, financial disclosures indicate.
That’s a stark contrast to what it costs to buy a stock today, which is $0 thanks largely to Robinhood. (Coinbase declined to comment for this article due to the regulatory “quiet period” it’s under during its public stock listing.)
Nearly everyone thinks crypto trading fees will fall, but many think it won’t happen quickly. When online brokerages like Etrade came out in the late 1990s, they charged $30 to buy a stock. “It took two decades for those fees to compress to zero,” says Repetto, who has been studying online brokerages since 1999.
According to Electric Capital’s Garg, people have been talking about Coinbase’s fees shrinking for the past five years, so it’s hard to say when it will finally happen. “I think we need some sort of catalyst for it. And I don’t know what that is. Maybe it’s Fidelity, Schwab or somebody like that coming into the market.”
San Francisco-based Kraken is the second-largest U.S. crypto exchange, and its fees are about half those of Coinbase. For a retail investor to buy $100 worth of crypto, it costs 1% to 1.5%, a spokesperson says. When does Kraken think fees will drop? “No one knows for sure. We do think that fees will hold steady, given the tough technical challenges that come with operating an exchange,” says Jeremy Welch, Kraken’s chief product officer.
True to form, Robinhood is trying to speed up fee compression. It recently announced that 9.5 million of its users traded crypto in the first quarter of this year, compared with just 1.7 million in the last quarter of 2020. At a virtual speaking event in March, CEO Vlad Tenev criticized Coinbase’s high fees. “A lot of people will say, we don’t want to compete on price,” Tenev said. “Robinhood will compete on price.”
There are no trading fees to buy crypto on Robinhood—the company makes money by getting rebates from trading firms that execute Robinhood users’ orders, using the same business model it employs for stock trading. Ironically, many of those crypto trades probably get executed on Coinbase’s exchange, since Coinbase has 41% of the U.S. bitcoin trading market, according to Piper Sandler’s research (Kraken has a 19% share).
That means Coinbase is profiting even from the trades that Robinhood users make. Coinbase’s position as both a brokerage that sells you crypto and an exchange that settles your trade is unusual in financial markets and gives it even more dominance in the industry.
Trading Volume Volatility
Another big challenge Coinbase faces is business volatility. Big moves in crypto prices usually mean more active trading (and more fees for Coinbase), but if prices start leveling off, customers can lose interest. For example, in June 2019, 800,000 bitcoins traded hands on Coinbase, according to research site Bitcoinity. Six months later, in January 2020, less than 400,000 traded—a drop of more than 50%—while bitcoin’s price fell just 10% during that period.
Such volatility is rare for a business of Coinbase’s size and will come into sharper focus now that it’s public. That volatility could cause wild swings in Coinbase’s stock price and make strategic, long-term planning difficult, especially as the company grows larger and profit margins potentially narrow. The stock’s gyrations can also be a major distraction for executives and employees.
Customer Service Woes
Like Robinhood, Coinbase suffers from customer service problems, with some users saying they’ve had their crypto stolen from them and that Coinbase hasn’t provided ample support. Brooklyn-based user Michael Pierre allegedly had $100,000 worth of digital assets liquidated from his Coinbase account by a fraudster, according to the New York Times. Now he’s suing the company. A Coinbase spokesperson told the Times that a “24/7 crypto economy, which, combined with a substantial increase in demand, has created a unique set of customer experience challenges” and that .004% of its users had their accounts fraudulently taken over in the past year.
Regulation
Regulation is the largest existential threat to Coinbase’s business, says Garg. If the U.S. government suddenly started to tax cryptocurrency gains at higher rates than capital gains on other assets or decided that all other digital assets except bitcoin were illegal to trade, it could do major damage to its business. “But I think it is very unlikely,” he says. “I think the U.S. government has gotten its head around the inevitability of crypto. The position has shifted to how we make sure that all the innovation that’s happening here happens in the U.S., rather than happening somewhere else.”
I lead our fintech coverage at Forbes, and I also write about blockchain technology and investing. In October 2020, three of my colleagues and I won the Excellence in Personal Finance Reporting award from the RTDNA and NEFE for our stories on Robinhood. I’ve also written frequently about leadership, corporate diversity and entrepreneurs. Before Forbes, I worked for ten years in marketing consulting, in roles ranging from client consulting to talent management. I’m a graduate of Middlebury College and Columbia Journalism School. Have a tip, question or comment? Email me jkauflin@forbes.com or send tips here: https://www.forbes.com/tips/. Follow me on Twitter @jeffkauflin. Disclosure: I own some bitcoin and ether.
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The cryptocurrency industry is steaming hot. The total market value of cryptocurrencies is approaching $2 trillion – that’s bigger than the market caps of Amazon, Google and Microsoft. Bitcoin has been trading above $50,000 since March 8 and has a market value of $1.12 trillion, almost as much as all the silver in the world. FOMO-ed institutions keep pouring into the space.
But institutions and venture firms rushing to cash in on the surge don’t come empty-handed. Hoards of capital are pouring on crypto startups, minting new unicorns at a break-neck pace. Just in March, three crypto firms raised some of the largest capital raises in the industry’s short but rich history. There are now at least 18 crypto-native companies with unicorn status, according to data platform PitchBook.
Crypto bulls are hoping that this time it is truly different. Publicly listed companies like MicroStrategy and Square have amassed sizable bitcoin positions on their balance sheets and are seeing it as an alternative to gold. Meanwhile applications for a U.S. bitcoin ETF are piling up at the SEC’s doorstep and the market is buzzing in anticipation of Coinbase’s direct listing slated for April 14, the first major public offering for a cryptocurrency company. Amid the frenzy, Forbes analyzed data from PitchBook and compiled a list of the 10 largest venture capital deals for blockchain and crypto-native firms.
Inside Bitmain, the world’s largest Bitcoin mine. The rush to mine Bitcoin and other crypto currencies has gripped the world. China is home to most of the world’s bitcoin mines, and Inner Mongolia has one of the largest. Today, we take a look inside the Bitmain mine and how it works. If you enjoyed, please, like, comment and subscribe, it helps us a lot! Thanks for watching this video: Inside The World’s Largest Bitcoin Mine Check Out These Videos:
Notable investors: Crimson Capital China, Bluebell (Asia), Jumbo Sheen Group, Lioness Capital, Palace Investment Company, Pavilion Capital
Post-money valuation: $15 billion
Previous valuation: $12 billion
The world’s leading bitcoin mining hardware manufacturer, Bitmain also operates Antpool, one of the top bitcoin mining pools, accounting for more than 12% of bitcoin’s network hash, or computational, power. Shortly after the $422 million capital raise, the Beijing-based company filed for an IPO on the Hong Kong Stock Exchange in September 2018, but the offering fell through amid the bitcoin crash and market cooldown.
BlockFi: $350 million
Deal date: March 11, 2021
VC round: Series D
Notable investors: Bain Capital Ventures, partners of DST Global, Pomp Investments, Tiger Global, Susquehanna Government Products
Post-money valuation: $3 billion
Previous valuation: $435 million
Founded in 2017, New-Jersey based BlockFi is now one of the leading cryptocurrency lending providers. Its products span multiple categories including crypto-collateralized loans and interest-bearing accounts through which investors can earn interest on their crypto holdings. Rumors of BlockFi’s potential IPO started to circulate last July following reports of a job opportunity, part of which involved helping the company go public.
Dapper Labs: $305 million
Deal date: March 30, 2021
VC round: 5th round
Notable investors: Coatue Management, Andreessen Horowitz, Michael Jordan, Kevin Durant
Post-money valuation: $2.6 billion
Previous valuation: N/A
The Vancouver-based startup is best known as the developer of NBA Top Shot, an NFT marketplace for basketball video highlights or “moments.” The project, which has already surpassed the $400 million mark in trading volume, is largely responsible for the boom of non-fungible tokens (NFTs), essentially digital proofs of ownership trackable on a blockchain. Earlier, Dapper Labs developed a popular Ethereum game of breedable collectibles called CryptoKitties.
Blockchain.com: $300 million
Deal date: March 24, 2021
VC round: Series C
Notable investors: DST Global, Lightspeed Venture Partners, VY Capital
Post-money valuation: $5.2 billion
Previous valuation: $3 billion
Blockchain.com provides a variety of crypto services to retail and institutional clients but is most famous for its non-custodial digital wallets. Unlike its counterparts controlled by third parties, these wallets give users full control over their private keys that represent ownership of crypto assets. The London-based company claims it has processed 28% of all bitcoin transactions since 2012.
Bakkt: $300 million
Deal date: March 16, 2020
VC round: Series B
Notable investors: Intercontinental Exchange (ICE), BCG Digital Ventures, PayU
Post-money valuation: N/A
Previous valuation: N/A
In February 2020, the crypto venture of ICE (the New York Stock Exchange owner) announced the acquisition of Bridge2 Solutions, provider of loyalty programs, to power Bakkt’s one-stop shop retail platform. Called Bakkt App, the service lets users aggregate various digital assets, including loyalty points, rewards programs, gaming assets, and cryptocurrencies, all in one wallet. In January, Bakkt announced it is going public via a SPAC merger with VPC Impact Acquisition Holdings at an enterprise value of about $2.1 billion. Upon the deal’s closure in the second quarter of 2021, the combined company will list on the New York Stock Exchange as Bakkt Holdings, Inc.
Coinbase: $300 million
Deal date: October 30, 2018
VC round: Series E
Notable investors: Tiger Global Management, Andreessen Horowitz, Government of Singapore Investment Corporation (GIC), Polychain Capital
Post-money valuation: $8.04 billion
Previous valuation: $1.71 billion
On February 25, the largest cryptocurrency exchange in the U.S. filed for a direct listing on the Nasdaq stock exchange. Coinbase was valued at $68 billion, based on the recent filings. On March 19, the company was fined $6.5 million by the Commodity Futures Trading Commission (CFTC) over allegations of false transactions reporting and wash trading between 2015 and 2018 on its GDAX platform, later rebranded as Coinbase Pro. The exchange’s direct listing is scheduled for April 14.
Bitmain: $292.7 million
Deal date: June 19, 2018
VC round: Series B
Notable investors: Sequoia Capital, Coatue Management, China Taijia, Blue Lighthouse Services
Post-money valuation: $12 billion
Previous valuation: $100 million
Hangzhou Qulian Technology: $235 million
Deal date: June 4, 2018
VC round: Series B
Notable investors: Xinhu Zhongbao Company, China Gaoxin Investment Group, State Development and Investment Corporation
Post-money valuation: $470.25 million
Previous valuation: $40.33 million
Qulian Technology provides blockchain products for China’s major organizations and institutions, including the Ministry of Industry and Information Technology, the State Administration for Market Regulation, the State Grid, and local governments. Its one-stop blockchain open service BaaS platform, FiLoop, is used by some of the largest banks in China, including China Construction Bank, Agricultural Bank of China, and China Merchants Bank, according to the company. Qulian Technology’s partners also include Google and Microsoft.
Bithumb: $200 million
Deal date: Apr 19, 2019
VC round: 2nd round
Notable investors: Vidente, ID Ventures (South Korea), ST Blockchain Fund
Post-money valuation: N/A, valued at $888.27 million as of January 2021
Previous valuation: $868.42 million
In September 2020, the Seoul Metropolitan Police Agency has reportedly raided the offices of one of South Korea’s largest crypto exchanges on fraud allegations, linked to a $25 million token sale that never materialized and led to losses for investors.
In December, Ripple Labs and its top executives were accused by the U.S. Securities and Exchange Commission of selling $1.3 billion of XRP, the native asset of the payments network developed by the company, as an unregistered security. Following the charges, multiple exchanges and trading platforms, including Coinbase, Binance.US, and eToro, delisted XRP and suspended its trading. In January, U.K.-based investment firm Tetragon Financial Group filed a lawsuit to redeem its equity in Ripple but ultimately lost the case. Despite the fallout, XRP remains one of the top traded digital assets.
I report on cryptocurrencies and emerging use cases of blockchain. Born and raised in Russia, I graduated from NYU Abu Dhabi with a degree in economics and Columbia University Graduate School of Journalism, where I focused on data and business reporting.
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Bitcoin could be at the start of a “massive transformation” into the mainstream and on the path to become “the currency of choice for international trade,” according to leading investment bank Citi, which noted the cryptocurrency’s meteoric rise in value in recent years and a growing interest from institutional investors as potentially setting the stage for widespread success.
In a report published Monday, Citi analysts said the world’s most popular cryptocurrency was at a “tipping point” between widespread adoption or a “speculative implosion.”
Bitcoin’s growing use as a payment tool, the increasing availability of digital wallets, and institutional interest from the likes of Tesla and Mastercard have all helped buoy confidence in the cryptocurrency and could see it become the leading medium for international trade in the future, Citi said.
The analysts described Bitcoin as the “North Star” of the blockchain ecosystem, with its underlying technology launching an entirely new domain of the digital economy around it.
However, there are a number of risks and obstacles that could see the Bitcoin bubble burst, the analysts warned, and widespread changes to the market would be required for Bitcoin to be adopted more widely.
Dampened institutional investment in the post-Covid-19 world would remove a key pillar of support for Bitcoin, Citi said, and anticipated regulation and oversight—which runs counter to the anti-establishment ideology underpinning the cryptocurrency—could also “cause many of the most innovative developers and entrepreneurs to exit the ecosystem,” the analysts wrote.
Key Background
Bitcoin is one of the most volatile asset classes around. It has a bumpy and storied history since it was outlined in a paper in 2009, moving from practically worthless to an all time high of over $58,000 a coin in February 2021 (the price has since dropped to around $47,000) with several significant troughs and peaks in between. At its highest, Bitcoin’s market capitalization exceeded $1 trillion. As with the bulk of its history, Bitcoin is still driven by retail investors, who billionaire philanthropist Bill Gates warned not to get drawn in by the “mania” and enthusiasm of Elon Musk who has money to spare should things go wrong.
Crucial Quote
“I think bitcoin is really on the verge of getting broad acceptance by sort of the conventional finance people,” Tesla CEO Elon Musk said on Clubhouse earlier this year.
Tangent
In October, PayPal finally welcomed cryptocurrencies to its platform, believed by many to be a precursor to it moving into the mainstream. PayPal will support four different cryptocurrencies—bitcoin, ethereum, litecoin and bitcoin cash—and will expand the service to Venmo in 2021.
I am a London-based reporter for Forbes covering breaking news. Previously, I have worked as a reporter for a specialist legal publication covering big data and as a freelance journalist and policy analyst covering science, tech and health. I have a master’s degree in Biological Natural Sciences and a master’s degree in the History and Philosophy of Science from the University of Cambridge. Follow me on Twitter @theroberthart or email me at rhart@forbes.com
Bybit is a crypto exchange from the British Virgin Islands. On the date of last updating this review (2 December 2020), Bybit informed on their website that they had more than 1.2 million users, which is very impressive.
Bybit is a crypto derivatives exchange where you can trade with as much as 100x leverage on a certain number of assets (see above what cryptos you can trade here). But that’s not all you can trade. At this platform, it is even possible to trade quarterly futures contracts. These contracts will expire based on its calendar cycle and converge to the spot price. One key advantage is that users no longer need to pay any funding fees.
Bybit’s matching engine is allegedly capable of up to 100,000 TPS (Transactions Per Second) which is incredibly impressive and a great future for anyone interested in leveraged trading. We say “allegedly” as there is no way for us to verify this information, not because we mistrust it in any way. Bybit continuously improves the safety and reliability of the trading platform. For instance, on 2 December 2020, they made a number of speed improvements to the platform that made order placements 50% faster, made the trading platform require 50% less CPU and memory load and made the connections to EMEA and Latin America 500% faster.
This platform is not only available for desktop, but also Android and Apple mobile phones. Most traders in the crypto world today carry out their trades via desktop (around 70% or so). However, there are naturally people out there that want to do it from their smart phone as well. If you’re one of those people, then this platform can still be for you, seeing as it has a native mobile application (unlike e.g. BitMEX).
As mentioned above, Bybit allows you to trade with leverage. This means that you can receive a higher exposure towards a certain crypto’s price increase or decrease, without actually holding the necessary amount of assets. You do this by “leveraging” your trade. In simple terms, this means that you borrow from the exchange to bet more. You can get as much as 100x leverage on this platform.
For instance, let’s say that you have 100 USD in your trading account and you bet this amount on BTC going long (i.e., going up in value). If BTC then increases in value with 10%, you would have earned 10 USD. If you had used 100x leverage, your initial 100 USD position becomes a 10,000 USD position so you instead earn an extra 1,000 USD (990 USD more than if you had not leveraged your deal). However, the more leverage you use, the smaller the distance to your liquidation price becomes. This means that if the price of BTC moves in the opposite direction (goes down for this example), then it only needs to go down a very small percentage for you to lose the entire 100 USD you started with. Again, the more leverage you use, the smaller the opposite price movement needs to be for you to lose your investment. So, as you might imagine, the balance between risk and reward in leveraged deals is quite fine-tuned (there are no risk free profits).
Different exchanges have different trading views. And there is no “this overview is the best”-view. You should yourself determine which trading view that suits you the best. What the views normally have in common is that they all show the order book or at least part of the order book, a price chart of the chosen cryptocurrency and order history. They normally also have buy and sell-boxes. Before you choose an exchange, try to have a look at the trading view so that you can ascertain that it feels right to you. The below is a picture of the trading view at Bybit:
US-investors may not trade here. The exclusion of US-investors is primarily due to regulatory reasons. The US-legal regime imposes obligations on many companies accepting funds from US-investors. If you are a US-investor, don’t despair! Why don’t you just try finding the best cryptocurrency exchange for you to trade at by using the filters in our Cryptocurrency Exchange List? Check it out.
Every trade occurs between two parties: the maker, whose order exists on the order book prior to the trade, and the taker, who places the order that matches (or “takes”) the maker’s order. We call makers for “makers” as their orders make the liquidity in a market. Takers are the ones who “take” this liquidity by matching makers’ orders with their own.
At Bybit, takers are charged 0.075% per order. This is difficult to compare to the global industry average taker fees for regular centralized exchanges, as the instruments traded at the different exchanges are also different from each other. In any event, 0.075% is a fair fee.
When it comes to the makers, their fee is -0.025%. This essentially means that each maker get paid to trade. To clarify, let’s say that you are the maker in an order where you purchase cryptocurrency for USD 1,000. This means that instead of paying USD 1,000, you will only have to pay USD 997.50. This is a very competitive trait indeed.
Bybit Withdrawal fees
When withdrawing BTC from the Bybit trading platform, you will have to pay 0.0005 BTC. This is 40% lower than the global industry average BTC withdrawal fee (0.0008 BTC) and thus also a very competitive withdrawal fee.
Deposit Methods
Bybit does not accept any deposits of fiat currency. This means that new investors (i.e., investors without any previous crypto holdings) can’t trade here. In order to purchase your first cryptos, you need a so called entry-level exchange, which is an exchange accepting deposits of fiat currency. Find one by using our Exchange Filters!
Bybit Security
We run all exchange-websites in Mozilla’s Observatory-test (https://observatory.mozilla.org/). The score in such test is one of many indicators of the exchange’s security. Bybit received a B-score in this test. B is very impressive, particularly in light of most exchanges in our Exchange List only receiving F-scores.
Good work, Bybit!
***
Low trading fees are indeed very important for any crypto investor. All of the following exchanges also – like the above exchange – have very low trading fees (some of them don’t even charge trading fees at all):
Liquidity is a topic that always pops up now and then in both the crypto community and beyond. We are sure that there is no crypto enthusiast who hasn’t heard about Bitcoin liquidity. The question is how to calculate liquidity and how to find the most liquid exchange? Let’s dig out the truth, but first things first.
Some Terminology
Liquidity is a key parameter of a certain market, which reflects the “saleability” of a certain asset. Making it simple – liquidity reflects the price change, which will be caused by filling the Market order of a certain size. In a perfectly liquid market, one would be able to sell any amount of an asset at the same price without moving it.
Thus, liquidity is an opportunity to sell assets on the market without influencing their price. Liquidity could be measured not only for certain assets but also for the whole market in general. Let’s dig deeper and determine how liquidity affects crypto trading with and what you should know about it.
The liquidity of a cryptocurrency is determined by a number of factors – from its popularity to real-world use cases of the traded asset. To better understand the concept of liquidity, it’s crucial to introduce the Order Book of a certain market. The name says it all – order book is a list of other people’s confirmed desire to purchase a traded asset at a certain limit price. When someone needs to buy or sell the crypto-asset immediately, they will have to place Market orders, which will execute against the available orders in the order book.
How To Detect Liquid Exchange?
For example, someone plans to Buy or Sell 1 BTC having an appropriate amount of USDT and BTC on balance. Let’s review some of the options to do this (it’s worth mentioning that at the time of writing, BTC is worth something around $9,200).
First, let’s look at BTC/USDT pair on the Binance exchange.
In the right section of the trading interface, you can see the above-mentioned order book and the last price at which BTC was bought or sold. From the order book, we can see that the lowest price at which someone is ready to Sell BTC is 9,189.04 and there is 4.026387 BTC available at this price.
If the user will submit a Market Buy order at the moment of the screenshot, her order will be matched against that offer and the last price of BTC/USDT would become $9,189.84, the amount of BTC available at this price will decrease and become 3.206387 BTC. In this case, liquidity on a Binance BTC/USDT pair on the Buy-side was good enough for a 1 BTC order size allowing the trader to Buy the BTC at the best available price.
At the same time, we can see from the other side of the order book that the highest price at which someone is willing to Buy BTC is 9,189.83, but they are willing to buy only 0.693640 BTC at this price. Consequently, if the user submits a Market Sell order for 1 BTC, he will ‘eat’ through 3 levels of the order book. Such an order will consume entire Buy offers at 9,189.83 and 9,189.71 levels and most of the 9,189.47 price level, moving BTC/USDT price to $9,189.47. At the same time, the All Buy orders sitting in the Order Book with the prices of $9,189.83 and $9,189.71 would be 100% filled, while the Buy orders with the price of $9,189.47 would be partially filled for the size of 0.30136 BTC. The average execution price of the 1 BTC Market Sell would be:
0.69364*9,189.83 + 0.005*9,189.71 + 0.30136*9,189.47 = $9,189.72. The difference of $0.11 between the observed best Buy offer in the Order Book at 9,189.83 and effectively achieved the average execution price of 9,189.72is called price slippage. Price slippage represents a loss for the trader due to insufficient liquidity on the Buy side of the Binance order book. Were the trader to send a Market Sell order for the amount greater than 1 BTC, the price slippage incurred would increase substantially.
Besides the direct price slippage implications of exchange order book liquidity, one could also try to derive various trading signals from it. In the example above, since the liquidity of BTC/USDT pair on Binance appears to be better on the Sell-side of the order book, a simple conclusion could be drawn that the Selling pressure is high and that high Level 1 Sell liquidity represents market makers’ opinion that the short-term market price movement will be downwards. However, since this prediction is quite obvious, it might not come to fruition.
Binance, though, isn’t the only exchange on the market. Let’s check what would happen if the same user would try to complete the same orders on let-it-be BitRabbit exchange. Frankly speaking, we’ve never heard of this exchange and strongly don’t recommend using it for trading. One of the reasons, apart from the funny name and doubtful security of the exchange, would be presented below.
On a screenshot, you can see the same market (BTC/USDT) on the BitRabbit exchange. The first notable difference is that the price of BitRabbit is around $30 lower than on Binance. Though, it’s not the biggest problem with this screenshot.
If the user will (for any reason) deposit the necessary funds to purchase and sell 1 BTC worth of assets – the situation will be different compared to Binance.
If she will try to submit a Market Buy of 1 BTC for USDT the order will be executed at the price that is nowhere near the Last Price of $9,163.98. The thing is that all the Sell orders sitting in the whole visible part of the order book aren’t enough to fill the order of 1 BTC. Even more, they won’t even fill a third of it, which means that the average price of 1 BTC purchased on this exchange at Market would be over $9,182, representing a price slippage of almost $20. Remember, that on Binance the price slippage incurred by the same 1 BTC order was just $0.11.
In the case of Market Sell Order of 1 BTC on BitRabbit, the slippage would not be so bad, though the order will ‘eat’ through the first three levels of the order books and fill at fourth – the price will slip less than a dollar.
This simple comparison gives you a basic idea of why liquidity is such an important characteristic of an exchange. If an order of 1 BTC can create a slippage of 20+ dollars, imagine what would happen next time BTC rallies some $500+ in 15 minutes and you are trying to exit or enter a large position on an exchange like BitRabbit.
What Influences Liquidity?
Exchange listings.
The asset’s presence on several trading platforms increases its liquidity in most cases. The more exchanges have listed an asset, the more opportunities for traders to trade it. So, the trade volume is increasing.
Though, often, listings don’t provide liquidity. It is a typical situation when one of the assets in TOP 50-150 of CoinMarketCap is listed on 10 exchanges, while it has more than $100,000 daily volume only on 1-2 of them.
Though, in general, new cryptocurrencies are characterized by low liquidity due to their absence from major exchanges.
Use cases outside the crypto industry.
A holy grail of every crypto project is wide user adoption though, real adoption was achieved only by a few of the coins on the market. Apart from the obvious BTC use case as a “digital gold” and store of value, Ethereum managed to get some real usage back in 2017, when a boom of Smart Contracts and ICOs occurred. It now seems to gain traction with DeFi.The most recent example of wide enough adoption is Binance Coin, which became a lottery ticket to the IEO hype of 2019. Though, both of these cases still weren’t a “wide adoption outside of the crypto industry” – more like wide adoption inside of it.
Popularization.
The stronger the crypto community scales, the more liquid in general the crypto assets are. This fact is undeniable and the proof is the performance of Bitcoin in 2017, when this coin rapidly gained at price, volume, social media mentions, and Google trends.
However, if the cryptocurrency is new and a sufficient number of crypto enthusiasts haven’t heard about it, then, most certainly, it lacks trust from the crypto community. The asset would be considered of low liquidity or, in the worst case, manipulated by bot trading and fake market making. At the same time, the asset has every chance to change its position, drawing attention to it with marketing activities, constant development, and a solid project team behind the project.
Cryptocurrency Liquidity as an Indicator of Confidence
The liquidity of cryptocurrencies is undoubtedly an important parameter that you should pay attention to when devising your trading strategy.
Think about buying a $10,000 worth of some TOP-500 altcoin, while it’s daily trading volume is $20,000. In the best case, if you don’t want to push the price up to and incur huge slippage, you’d have to accumulate your position over a week or even a few weeks. Illiquid assets often become subjects of speculations, and pump and dump schemes. It is easier for pumpers to influence the price of an illiquid asset by buying or selling a large chunk of the daily volume of this asset. In case, if the asset has low liquidity, this “large chunk” of daily volume would cost the pumpers less money.
Sadly, Pump and Dump schemes are still a thing in the crypto market. As a result, the vast majority of the new crypto traders fall victims to at least one of those schemes. Mainly, if a new crypto enthusiast goes through an experience like this, basically a new crypto market hater would go to social media and spread the word that the whole industry is a fraud.
Current Market Liquidity
One notable thing about crypto markets and industry, in general, is that despite the speculative spikes, one could see a slow but steady adoption. It is reflected not only in the real-world use cases, a growing number of wallets, and on-chain transactions but also in the growing liquidity of the crypto market in general. It can be seen when looking at the crypto trading volume on major exchanges 2020 volumes are much higher than in 2017 or 2018 when BTC was all over the news with an all-time high price of $18,000-$20,000.
Though undeniably growing in general, crypto liquidity is shifting. Some of these shifts represent secular trends such as growing liquidity of derivative and margin exchanges vs the spot exchanges, and some are cyclical, such as periodic shifts from BTC to altcoins (altseason) and back, or the evergreen ‘flippening’ of BTC and ETH.
Liquidity definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Liquidity can be defined as: Availability of resources to meet short-term cash requirements. Liquidity has to do with our ability to pay for short term obligations, whether they be short term debt or operational needs.
