Coinbase sees big inflow of funds 

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One of the world’s largest cryptocurrency exchanges Coinbase has revealed that it is experiencing an “explosion of incoming capital” from institutionalized investors around the world. Infact, Coinbase alone has over $20 billion in crypto under custody with a whopping $14 billion of them just added since April of this year. According to the exchange, a series of events have unleashed a wave of institutionalized investment the likes of which haven’t been witnessed in the sector before. 

Why has Coinbase been Successful in Shepherding in these Investors?

One of the reasons why Coinbase has been so successful in getting institutional investors from around the world to get into Bitcoin investing is because it hired some of them for solicitation. Take the exchange’s Head of Institutional Coverage Brett Tejpaul. He is a former institutional investor and he has over 25 years of experience in investing with conventional firms. He spent 17 years at Barclays, a British bank and then 9 years at JP Morgan, one of the biggest investment banks in the world based in the USA. In an interview with Heidrick and Struggles International, Tejpaul outlined the massive growth his current company is experiencing when it comes to institutionalized investors. He is particularly focusing on Prime, a service for big institutionalized investors like hedge fund managers, VCs, etc. 

Tejpaul was only recently hired to get top investors to invest in the sector. He said:

“I joined in April this year, at that time our assets, institutional assets under custody were $6 billion, today we stand at over $20 billion, so more than a 3-times increase….”

Other exchanges are also targeting big institutional investors around the world. Binance launched a platform for institutional trading back in June this year. Bitfinex, another big cryptocurrency exchange also got a $280 million crypto hedge fund Fugur Alpha and boasted about becoming the go-to exchange for institutionalized investors. 

Coinbase is Riding the Wave but Where did it Start?

But while Tejpaul may boast about getting institutional investors through Coinbase, it is actually important to understand the contribution of several pioneering funds that funneled the first big money into crypto. The very first of these was Grayscale, the first Bitcoin-focused asset management company. It invested more than $1 billion into the cryptocurrency sector during 2020 alone and that investment has probably tripled since then. Grayscale was the first institutional investor the crypto world had ever seen. Now we see funds around the world diversifying their holdings and betting on Bitcoin to get their portfolios to increase their worths. All in all, Grayscale lit the flame and the others followed. 

Other valuable Inputs and Influences

Famed trader and hedge fund manager Paul Tudor Jones also went bullish on Bitcoin and revealed back in May this year that he had put around 2% of his sizable portfolio into Bitcoin. He also compared Bitcoin to getting into Apply and Google early on. Recently, people like Stanley Druckenmiller also revealed that they had gotten into Bitcoin while a recent survey by Cointelegraph showed that most of the European institutional investors and managers had either already invested in cryptocurrencies especially Bitcoin or are looking to get into this digital sector later on. 

Verdict

Overall, this rush of big money coming into cryptocurrencies had been predicted a while back by futurists and people who run the investment business. However, it wasn’t a single event that got many of them to invest in the sector. The interest slowly developed over time and now we are seeing billions being invested by big funds and banks every now and then. It seems like the investing community has suddenly found the next big thing to invest in and they are here to stay and take it to the moon. This influx of big money does have some downsides to it as these investors are sometimes greedy for a profit and might take off after their goals have been achieved and dump the cryptocurrency they have invested in. 

However, the crypto community is known for holding on to its long-term positions and if losses can be minimized and spread out without volatility concerns, the cryptocurrency sector can keep on pushing. So far, the sector has smashed record after record during this year and it seems like the sky is the limit for it at the moment.

The New Green Deal 

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As the USA gears up for a new administration, there are a considerable number of changes expected in the working of the government. However, one thing that is likely to remain constant is that the government will continue to manipulate the Dollar currency at will, often not being sensible about it. As the project winner Joe Biden works on his transition efforts, the idea of a Green New Deal is very much on the cards. According to estimates from top economists, around $1.7 trillion might eventually be needed to get the plan into action. Rather than redistributing tax dollars, the Biden administration will likely ask the Federal Reserve for help so that they can have the freshly minted dollars as they need. 

What is the Green New Deal?

The Green New Deal is a revolutionary idea put forward by the progressive part of the Democratic party. While the other side, the Republicans hate it and consider it wasteful and useless, the progressives have made it the cornerstone of their development agenda. The idea involves ending anti-environmental procedures like fracking and drilling the national parks while pouring hundreds of billions of dollars into sustainable energy solutions like Wind and Solar. This, according to the deal’s proponents will allow the USA to go into energy independence without relying on fossil fuels while freeing up labour from the conventional “gass guzzling sectors” by banning them altogether. 

While the idea of a Green New Deal seems like a good initiative, an important question that needs to be asked is where the money is going to come from. The proponents of the bill believe that the plan can be implemented through their money printing express, the Federal Reserve Bank. The bank, however, is exhausted from these kinds of operations as it has already doled out two big packages to special interests like the big banks twice this year alone to help deal with the Covid-19 pandemic. Also, the idea of printing a lot of money to go into public sector projects at this magnitude was last done back in the 1930s in the Franklin D. Roosevelt administration when the original New Deal was passed. So, the bank is likely to try and convince the new administration to not pursue this deal. 

The Republican opponents of the deal are also fully against this massive monetary injection. However, they have been fully involved in bailout packages for the big banks before so their opposition is not about these bailout packages but rather at what they are being used for. 

What are the Ramifications of Massive Stimulus Packages?

There were many massive stimulus packages passed by governments around the world this year to help cope with the financial problems caused by the Covid-19 crisis. The European Bank passed more than 2+1 trillion EUR worth of stimulus packages and the US government has already passed more than $4 trillion worth of packages. The idea is that it will provide much needed liquidity in the financial crisis, but banks know that in the long-term the problems will be dire and the people will have to bear them too. 

First of all, the inflation rate is expected to go high. This will cause unnecessary passive appreciation of essential items including food and medicine. Inflation rate is directly tied to these stimulus packages and it is already being experienced around the world as we speak. The US inflation is expected to hit 2% and go even beyond that. Inflation is an industry killer as it is cyclic and causes price uncertainty across the economic spectrum. If the new $1.7 trillion Green New Deal is added into the mix, it will definitely have some long-term effects for the US too. 

Verdict

Climate Change is a real challenge and the countries around the world are doing their best to stop it or at least slow it down. The past 4 years in the US have resulted in a backward, climate change denying policy so it is good to see that the US is once again looking to get serious in combating climate change once again. However, if the government moves forward with a new $1.7 trillion printing spree to get it done, it won’t be without consequences. 

Blockchain and voting 

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The recent US elections on November 3, 2020 underlined several shortcomings in the American system. A record number of mail-in ballots were cast in the country due to the ongoing Covid-19 pandemic. As a result, their counting was delayed and this created considerable political uncertainty in the country. Some of it is still going on as the sitting President Donald Trump keeps refusing to concede. While it is expected that eventually his legal appeals in courts will fail and they will uphold the current standings and declare Joe Biden the winner, the system’s cracks show that there is a lot of room for improvement. The same holds true for countries around the world as fake news, increasing political advertising and polarizing of the public make it difficult to hold the elusive free and fair elections. The public is also skeptical of the process and questions are being asked about how to improve it.

What is the Solution?

The obvious answer to this problem would be to speed things up through improving the system’s technical ability. For years, several tech innovators have come forward with a system that eliminates the need of going to the polls entirely. You just download an app and vote directly from there. The voting time is automatically cut off on election day and the results are declared one state at a time. Easy, right?

Well, not quite. Completely electronic voting is not a very trustworthy way of voting. Various human studies have shown that the vote count process with physical ballots that are sorted out by officials while the candidates’/political parties’ poll watchers look on is still considered the pick of the bunch. It is especially true in case of a very close contest as the recent US elections show. When the democratic process is close, it will tempt both of the candidates to declare victory and cause a problem in peaceful transfer of power. What will happen now in several states like Georgia, Wisconsin and Arizona is that a manual recount will be made in front of poll watchers so that any doubt can be rectified in front of actual people’s eyes. This is not possible if the entire system is completely digitized centrally. The main problem being transparency. If the technology can provide transparency like the paper-based system, we can have a more trustworthy system.

Technology can Help in Some Way, Right?

The US system allows each state a certain degree of autonomy to determine electoral procedures. West Virginia, a small US state trialed blockchain-based elections back in 2018 midterm elections and now in the recent November 3, 2020 election as well. Some counties in Utah, Colorado and Oregon also unveiled their pilot projects to enable this decentralized approach to voting. However, these projects were limited to enabling the electoral process for the overseas military personnel and other millions of Americans who don’t reside in their country. The projects showed great promise for the future as the electoral process was apparently wrapped up quicker with no contested ballots or accessibility issues. 

Apart from the US, the rest of the world is also warming up to the possibility of giving users more freedom in the electoral process while increasing transparency at the same time. The European Parliament (EP) has also come forward and listed the advantages of blockchain technology in the voting process. According to an online EP document titled “What if blockchain technology revolutionised voting?”, the technology is very effective in ensuring free and fair elections in which everybody can participate. Rather than relying on a central database of any electoral commission to help register votes, voters can register themselves and cast their votes directly, all the while tracking their votes and holding a digital copy of their ballot paper with themselves. This is a revolutionary achievement of the technology as once the ballot paper is cast, the connection is lost from the voter’s side and they can only rely on current online trackers that have proved to be cumbersome and unreliable. The report outlines challenges that need to be to be overcome before such a system can be in place, but overall, it notes that the idea bodes well with the concept of free-and-fair elections, which is a backbone of democracy. 

Verdict

Blockchain-based voting offers the best of both worlds. It gives voters the freedom to register themselves, keep a copy of their vote, track it and tally it at the end through a transparent approach. It is fast, secure, accountable and fair for everyone. However, scaling is everything. If a country can effectively design and deploy such a system to all the voters, it will not only strengthen the democratic norms but also make people trust the system once again.

 

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Experienced conventional markets investor and billionaire Stanley Druckenmiller has revealed that he owns Bitcoin. He also praised the cryptocurrency’s ability to be a store of value and predicted that it might challenge gold in the future for a safe haven.

Who is Stanley Druckenmiller?

Stanley Druckenmiller is a big investment banker. He shot to fame and wealth back in the 80s and 90s when he managed some of George Soros’ money. Soros is among the most well-known American billionaires in the world and he is known to be the source of funding for many liberal nonprofits and action committees. He was worth in excess of $50 billion at one time before donating most of it. People like Druckenmiller made it possible for him to be so wealthy and influential. Druckenmiller founded an investment group named Duquesne Capital back in 1981 and continued to run it till 2010. His combined investments with Soros included the Quantum Fund which he used effectively to bet against the Pound Sterling back in 1992. All of the considerable financial dealings meant that Druckenmiller is now a long-term billionaire in terms of worth despite taking a step back from the ever-busy world of corporate banking/investment. According to business analyst website Forbes, his total worth is close to $4.4 billion as of 2020. 

Druckenmiller Loves Bitcoin

Druckenmiller recently gave an interview with CNBC and praised Bitcoin as an asset. He said:

“I’m a bit of a dinosaur, but I have warmed up to the fact that bitcoin could be an asset class that has a lot of attraction as a store of value

He further elaborated on his positive viewpoint of the largest cryptocurrency by market capitalization. He said that Bitcoin had been around for 13 years and with time it is gathering stabilization and prestige. He also revealed for the first time that he owned Bitcoin and was excited about its future. 

Bitcoin and Gold

Despite being bullish about the cryptocurrency itself, Druckenmiller revealed that much of his portfolio is made up of Gold. He revealed that his gold investment is many times larger than his Bitcoin investment. He does clarify that it is not due to his lack of faith in Bitcoin but because he is betting on Gold at the moment. He was also of the opinion that even if his high stakes position on Gold doesn’t go through, he will probably get better results from his Bitcoin investment anyway. 

The Reaction from the Investment Community

Other investors were quick to point out the significance of Druckenmiller giving these big favourable statements on Bitcoin. Previously, hedge fund managers and conventional investment bankers were mostly against Bitcoin and so much so that they compared it to a scam or a ponzi scheme. However, now things have changed and investors are openly declaring their admiration for the cryptocurrency and its promise of the future. 

Former big investment banker Raoul Paul said that it will open floodgates of institutionalized investment into Bitcoin. However, George Soros himself is yet to comment on the matter. 

Verdict

Every great revolution/technology in history was first heavily ridiculed before it eventually overcame all odds. Bitcoin is the key for the future and much of the flak it received in previous years was from the conventional banking industry. Many of the top investment bankers are now coming out in favour of Bitcoin. It seems that when your worst skeptic has joined your side, you can only come out stronger than ever and that can now be seen in the increasing Bitcoin price index.

Vitalik Buterin 

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The Ethereum cryptocurrency and its network is in for a dynamic shift next month. The chief developer and co-founder of the Ethereum network Vitalik Buterin announced that the new Ethereum 2.0 update will occur in December this year, thus rounding off speculation that it could be delayed once again. 

What is Ethereum 2.0?

The Ethereum 2.0 is a vision for the Ethereum network that lays emphasis on reducing energy intensiveness and inefficiencies while simultaneously improving scaling and capacity of the network. Most of 2020 was spent preparing for a transition to Ethereum 2.0 and it seems that history might be made in the near future with it.

Vitalik Buterin, Ethereum’s top developer and co-founder has successfully initiated the Phase 0 of the update already. He has sent 3,200 in ETH cryptocurrency to one of the staking wallets. This will allow the network to migrate from an energy-intensive Proof-of-Work (PoW) algorithm to a more supposedly agile Proof-of-Stake one. In this altogether different approach, big miners with huge computing power will cease to exist. The users themselves will be able to lock their cryptocurrency together and then earn rewards (based on the among locked) in a process similar to interest-based fixed deposits. These mining rewards are doled out through an approach called staking. For the staking to occur, they ought to have staking wallets and until now that was not the case with Ethereum. Now with Phase 0 in motion, the staking wallets have been created but no one can engage in staking right now because much of the update is still in the cards. Phase 1 will officially kick off from next month as announced by Buterin. A total of 4 phases are being planned for the entire update. 

Why is Everyone Interested in it?

Ethereum is the world’s premier programmable blockchain network. It means that in addition to being a platform for the verification, storage and transaction of cryptocurrencies, it has additional capabilities too. It allows automated contract resolution on its platform through its smart contracts features, allows users to create their own cryptocurrencies and even allows people to use its computing power in a currently limited capacity.

The promise of the Ethereum network was that it represented a true use case of blockchain technology. For many technologists, Bitcoin only represents the crude half of all things blockchain. For them, distributed computing, smart contracts and record keeping are the main focus of blockchain technology. Buterin famously proposed a change back in 2013 on Bitcoin itself, arguing for a second programming layer to be added on the network. This would have allowed Bitcoin to become a programmable blockchain as well but the Bitcoin community snubbed it. Buterin then proceeded to create his own network and partnered with Joseph Lubin, Charles Hoskinson, Gavin Wood, and others to create Ethereum. 

Ethereum’s Height of 2017, 2018

Ethereum was the network that started the famous Crypto Kitties game back in 2017 and early 2018. This game made the sector popular and showcased users what it was capable of. Immediately, the online community had its sights on Ethereum and a swarm of decentralized applications and new coins were planned and launched on the network. This sudden influx of new projects showed a weakness in the network especially regarding the mining process and scaling. Buterin then went to work with his team and gave us the Ethereum 2.0 project. This is a long-term update that will take upwards of two years to be fully functional. 

What is happening to its Cryptocurrency ETH?

Ethereum’s native cryptocurrency Ether (ETH) is now trading around the $450 mark. It has gone up almost 20% during the last 7 days but overall, it is still trailing behind Bitcoin in long-term effective investments. The Ethereum 2.0 project, if successful, will have a positive overall impact on the price of the cryptocurrency but there is still too much work to be done to make it successful. It is a little risky overall to invest in Ethereum right now, but the rewards could potentially be excellent if everything goes well.