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19th NOVEMBER 2019

This week we cover:

  • CANADIAN STABLECOIN
  • CHINA’S CBDC UPDATE & ITS IMPACT ON THE GREENBACK
  • WESTERN BLOCKCHAIN INVESTORS GETTING INTO CHINESE CRYPTO SCENE
  • US FEDERAL RESERVE SEEKING A CRYPTO MANAGER
  • NERVOS HITS MAINNET
  • BITCOIN HITS THE FRONTPAGE – FIRST TIME!
  • CME LAUNCH DATE FOR OPTIONS – BAKKT CHANGE TACT
  • VECHAIN MAKES ARTWORK IMMUTABLE!
  • HTC INTEGRATES BNB
  • TRADERS PERSPECTIVE
  • FEAR, GREED AND MENTALITY

CANADIAN STABLECOIN

Blockchain Venture Capital Inc (BVC Chain) has officially launched its Canadian CUSD coin, which is a US dollar-backed stablecoin aimed at the Canadian market and Canadian demand. It will be a fiat-based stablecoin that is backed by the USD and securely held with a US-based banking institution. As is the same with other stablecoins, new coins will only be issued when corresponding funds have been escrowed to represent them on chain.

The difference with this coin compared to its other stablecoin counterparts is that it runs on the “BVC-chain, a public, decentralised blockchain that combines the features of Ripple and Ethereum networks.” Its main aim is to “facilitate cashless transactions, while still retaining transparency and connection to the legal financial system.” As per Bitcoinist.  

CHINA’S CBDC UPDATE & ITS IMPACT ON THE GREENBACK

China’s CBDC Renminbi already has “all the system and the network ready” according to Jack Lee, managing partner of HCM Capital, “I think you will see it very soon, in the next maybe two to three months”. China has been steadily readying its Digital Currency Electronic Payment (DCEP) framework over the last few years and once it goes live, it will allow China to issue a digital currency to commercial banks and third-party payment networks like Alipay and WeChat Pay.

While the digital revolution isn’t exactly new in China, it does appear to be a big focus, as communicated by president Xi Jinping with their interest and pursuit of technologies like AI, 5G and blockchain.

For the last three decades, China’s GDP has been growing 10% per year, and they are now looking towards the next growth area. This is a country where the homeless use QR codes to beg and the majority of the population look to WeChat and Alipay to complete transactions. Cash is already a dying commodity and it just makes sense to roll out a digital Renminbi.

If we look back to October 23rd, two days prior to President Xi’s infamous blockchain speech that sent Bitcoin soaring 40% in a day, Mark Zuckerberg told Congress, “If America doesn’t innovate, our financial leadership is not guaranteed”. It was almost as if President Xi was responding directly to this by showing China’s pioneering pursuit of the blockchain space, and racing to be first to market with a government-endorsed digital currency.

Some have said President Trump’s ignorance in this space has actually assisted China. Speaking at Coindesk Invest 2019, Dovey Wan claimed “Trump is going to make China great again … A lot of the policy Trump has pushed out has become a forcing function for China to accelerate this internal development and economic and political reform”.

Up until now China’s stance on anonymity and the CBDC has been unknown, until this week when, Mu Chanchun of the People’s Bank of China’s digital currency research institute stated;

“We know the demand from the general public is to keep anonymity by using paper money and coins… we will give those people who demand it anonymity in their transactions.”

Adding, that counter-terrorism and tax regulations will still need to be put in place,

“that is a balance we have to keep, and that is our goal. We are not seeking full control of the information of the general public.”

Still, we two very different approaches. America is completely stifling crypto and blockchain development, borne out of a “galloping paranoia over money laundering, tax evasion, and terrorist financing (which is mostly done in cash).” And on the flipside is “Beijing with the same concerns but is willing to advance the technology in order to get a financial upper hand in a world that has been dominated by the greenbacks for the past century”. Those statements both from the Crypto Freak Network.

WESTERN BLOCKCHAIN INVESTORS GETTING INTO CHINESE CRYPTO SCENE

Europe’s first Blockchain venture firm and dedicated incubator, Outlier Ventures, has accelerated its expansion plans by targeting an entry into China. Outlier already has some presence in China with their CEO presenting a keynote speech and outlining their key roadmap goals at the recent World Blockchain Conference (Wuzhen), attended by over 4,000 people.

Outlier plan to:

  • Open an office in China in 2020
  • Undertake a three-city tour – Shanghai, Beijing and Hangzhou in December
  • Join leading Chinese players FBG Capital to discuss blockchain’s importance and their technology “Convergence Stack” this incorporates IoT
  • Work with regional Chinese innovation and research centres to invest in R&B protocols relating to the “Stack” technology, this includes Blockchain, AI and Autonomous systems.

These kinds of developments continue to highlight the future opportunities afforded to global companies that are leaders in the blockchain and cryptography space. It also shows that there is plenty of industry outside of Bitcoin itself and large global players willing to commit time and funding into developing the technology right.

US FEDERAL RESERVE SEEKING A CRYPTO MANAGER

The US Federal Reserve has advertised for a Head of Retail Payments division based out of Washington D.C. Given the innocuous title, you could be easily forgiven for skimming past this. But the role is responsible for conducting research and analysis into stablecoins, cryptocurrencies and distributed ledger technologies and investigating how these can be applied to the current US business model. The Head of Retail Payments will also oversee the current retail payment system and work on existing and new policies and regulation.

If you think you have what it takes, there’s a cool $250K USD salary up for grabs.

Goes to show that the US Government is taking this sector more seriously by the day.

Sources here and here

NERVOS HITS MAINNET

One of the most anticipated projects of 2019, Nervos (CKB) launched its mainnet, LINA, last Saturday (16th November). The Nervos blockchain was designed to generalise Bitcoin’s UTXO model to support user-defined tokens and smart contracts, making it flexible and sustainable. UTXO stands for Unspent Transaction Output and is used by both Bitcoin & Ethereum. Nervos was built to be a decentralized layer 1 blockchain that can scale with layer 2 solutions, making it the only proof-of-work (PoW), multi asset, store of value and smart contract platform.

CKB aims to achieve sustainability through its novel token economics model, which is focused on providing a long-term store of value. By having an adaptable PoW algorithm (adjusting based on the bandwidth of participating nodes) sustainability is greatly improved.

Major Chinese state-owned bank, China Merchants Bank International (CMBI), has outlined plans to use Nervos to create fintech applications for retail and institutional clients. In July, Nervos secured $28 million USD of investments from various crypto related enterprises, as well as $72 million USD from token sales, bringing the networks total valuation at launch to $100 million USD.

Nervos’ price on launch opened at approximately $0.012 and has since settled at $0.01 at the time of writing (19th November 2pm AEST).

BITCOIN HITS THE FRONTPAGE

In a historical first, Bitcoin made the front page of a Chinese state newspaper – the Xinhua. The article, “Bitcoin: The first successful application of blockchain technology” supposedly discussed some of the more negative aspects of the digital currency including volatility and a problem with centralization.  

Matthew Graham, CEO of Sino Global Capital, was one of the first to Tweet about it:

While I can’t confirm the contents myself, it was noted by Crypto Media Agency Tokenhell as not consisting of “compliments of Bitcoin rather its major focus was on the negative aspects”.

A translated portion of the article reads;

“First of all, Bitcoin is not a tangible currency. It is produced and operated on the Internet … [Unlike] banknotes [which are] supported by national laws and sovereign credit, Bitcoin is completely born in modern technology Internet era.”

The article plays on the volatility in price, energy intensive nature and suggest the counter the argument that decentralisation is actually a good thing citing how a government backed cryptocurrency would provide a higher degree of safety for its users.

Some positive features are also mentioned, commenting provides “good anonymity… people can freely transfer money through Bitcoin without having to verify various identity information like bank transfer.”

CME LAUNCH DATE FOR OPTIONS – BAKKT CHANGE TACT

CME Group revealed this week that it is launching bitcoin futures products on 13th January 2020 subject to regulatory approval. So far this year CME’s daily volume has been 6,500 contracts or 32,500 BTC ($282 million) a day, with over 3,500 individual accounts registered to trade, half of these outside of the U.S. (statistics as per Crypto Globe). CME will be offering cash settled markets, which is a concern for me, as there is no physical Bitcoin or asset to back up the position.

Bakkt, who offer physically settled Bitcoin futures, have also come out this week saying, “we have the intention of offering a cash-settled contract as well”. This is a concern for me, as Bakkt were always fighting the good fight in my eyes – a physically settled futures market is a much healthier approach for maintaining stability. When you start using cash settled futures, you get into a market much like the rest of the world. In some cases, it’s running a 500:1 leverage, is derivatives-based and relies on “cash reserves” that at the end of the day don’t even exist. Take the global banks that are lending billions upon billions but only required to hold 10% of the total value in physical cash. It’s a sad eventuation, and one that I don’t personally think is good for the future of the crypto space.

VECHAIN MAKES ARTWORK IMUTABLE!

VeChain showed 100 pieces of limited edition artwork from The Capital Artworks this week at the CoinMarketCap (CMC) sponsored “The Capital 2019” event in Singapore. All of the artwork was powered by VeChain’s, ToolChain, whose goal is to;

“exploit the massively untapped business world and generate long-term network effect and value creation by blockchain technology … As a one-stop comprehensive blockchain solution, Vechain ToolChain enables enterprises to effortlessly integrate data and assets with blockchain to enhance collaboration with external parties and add value to its business”

The goal of the collaboration with CMC and The Capital Artworks was to show off one use case of the technology demonstrating authenticity and traceability with the use of blockchain technology. Each piece of art was embedded with an NFC chip. The owners of the artwork were able to then scan the chip using their smartphone to inspect the history of the artwork, written details pertaining to the art and verify ownership.

For further reading, The VeChain foundation did a full write up of the event on Medium, which is where the above facts were sourced.

HTC INTEGRATES BNB

“Binance is one of those fearless companies that challenge traditional financial systems and how things are done”, according to HTC’s Decentralised Chief Officer, Phil Chen on Binance and the integration of BNB on the HTC EXODUS 1 smartphone.

HTC has identified the global increasing synergy between smartphones and cryptocurrencies. They have now announced that the newest crypto enabled smartphone, the Exodus 1 by HTC will have the Binance Chain added to the mobile and allow people to store any token built on it to be stored in its Zion Vault wallet app. It will also mean that users can get direct access to Binance’s DEX platform from the phone.

The development of crypto-enabled smartphones makes so much sense since more and more people are paying cashless and nearly always have their phone in the hand, not cash or credit cards. HTC comment on this exact element, highlighting that:

“Smartphones will play a key role in the mass adoption of crypto and smartphones are the most natural devices for a hardware wallet that is simple to use and always with you”

TRADER’S PERSPECTIVE

Bitcoin is still maintaining its long-term upwards trajectory. The upward trend is represented by the linear red line in the chart below, and as you can see, we are sitting right on the line. This trend would need to be broken with a significant jump to the upside to continue into further price appreciation.

Zooming in to the last week of price action, we can see the previous week’s bullish pennant is broken and as a result, the price moved downwards.

This has created a potential descending wedge, which if it plays out, would result in a breakout to the upside.

If the descending wedge doesn’t breakout to the upside, then the alternative is a bearish scenario with both the long-term upward trend line being broken as well as the next support line at $7,400.

Long term traders will be presented with another opportunity to pick up some Bitcoin at solid value. The Bitcoin halving event is looming early 2020 and previous Bitcoin halvings have been bullish for the price, both short and medium term.

Looking at the impact on price of previous Bitcoin halvings, the diagram below shows a price prediction at 2023 as sitting above $100K USD.

FEAR, GREED AND MENTALITY

Alternative.me Fear and Greed index has posted its second week in the fearful category. Apart from a short spike into neutral territory 3 weeks back, we’ve been sitting in this realm for over a month now.

News from around the world continues to be positive for long-term cryptocurrency growth with several countries publicly paying attention to blockchain.

Continued uncertainty around the future global economic outlook, not to mention the riots and uncertainty in countries such as Hong Kong, proves the need for an alternative solution to the mainstream, something that gives the people a voice and a choice.

As always continue to approach your trading with a plan, and if you are dollar cost averaging then ensure you are capitalising on fearful markets.

Author: Julian Carruthers

Not financial or investment advice, always do your own research.

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