With Companies Investing In Bitcoin, Here Are The Likely Areas of Impact You Need To Know

Companies have turned to bitcoin investment to boost their balance sheet and returns. Here is the picture so far

With companies investing spare cash in Bitcoin, how will their asset size and return jump look like?

The recent rush of Bitcoin investments by economy giants has unleashed a wave of speculation both over the cryptocurrency market and the traditional one. Many takes have been written about why companies are doing this and what it means for crypto, but there’s been far fewer opinions issued on what this means for traditional markets beyond “companies hedging their bets.”

And yet, it’s understandable that traditional markets wouldn’t know what to do with this information. Until now, economy has always moved around goods and production.

Everything traded in stock or commodity markets had a use, a supply, and a reason to be. Even arguably superfluous items, like jewelry, still have a use (in this case, looking good.) The appearance of bitcoin is not entirely speculative and should have been expected to shake the market.

Why does this new market matter?

As stated above, because it’s entirely speculative. Bitcoin, and its value, isn’t based on anything other than supply and demand for an entirely useless good. There is a world of good to Bitcoin and this can be seen in the huge amounts of money so obscene used in its daily trades that the GDP of several countries is dwarfed in comparison.

Why are companies buying it?

To hedge their bets against a recession, plain and simple. Bitcoin could be thought of as virtual gold (minus the actual, real life uses of gold,) and when markets expect an incoming recession it’s quite common for investment in stocks to drop and investments in certain goods to rise.

While several governments in the world keep acting like nothing is going on and there’s no recession whatsoever, large companies aren’t buying it. They know we’re in the middle of a recession. They know the more than a million deaths from COVID (and counting) plus countless people left with long-term illnesses will take a toll on the worldwide economy.

We just haven’t seen it. So many companies are taking steps to minimize the effect of the recession on their balance sheets.

Should companies then be recession-proof this time around?

Well, so far, fiat money printers have been hard at work with as much as 23 percent of USD ever printed rolled out just in 2020 alone. What this means is that the real value of fiat currencies has nose-dived while that of Bitcoin has remained intact.

Bitcoin cannot be over-minted over night as its block difficulty cannot be overridden by any legislation. In a sense, bitcoin is recession-proof and companies can boost their asset value by investing in bitcoin.

But the price is going up…

Yes, it is. But only because many companies are buying every Bitcoin on the market.

Being entirely speculative, the value of Bitcoin depends exclusively on supply and demand, and we’ve seen a hugely increased demand for the last few months. But that may or may not last.

Why would it last?

Because once the recession is over and economies start growing again, some of these big players on the Bitcoin market might want to cash out and return their liquidity to fiat currency. Not all will, of course, but here’s the detail with the Bitcoin market: It’s made up of very few people hoarding the vast majority of the supply. The recent uptick in USD value for instance led to a mild drop in BTC trading price.

So companies will lose? Returns will go down?

Depends on when they buy and when they sell.

Companies that started buying Bitcoin months ago naturally have an advantage, since they bought the tokens at much lower values than the current. This means they have a much bigger space to maneuver in case the market crashes.

Companies that have entered later, however, are taking risky positions because there’s no telling when one of the large players might want to cash out, potentially flooding the market and crashing it.

What if they don’t, uhm, cash out?

It’s also possible. Most companies will likely want to keep a percentage of their holdings in Bitcoin if their current gamble pays out, which would in turn give the Bitcoin market some stability.

But once again, the problem is how few players actually are controlling the Bitcoin economy. It might take just one company deciding to convert all its Bitcoin to fiat to send the price crashing. That company would, then, report a huge return. Any other holders who sell immediately might, too. But anyone else who takes too long to act, or anyone who buys tokens too late in the curve, will face huge losses.

So the result is…

Some companies will likely win big with this Bitcoin gamble. Others might lose big, and some might choose to invest in the crypto market in the long term, to the point where it won’t matter to them if the price goes crashing in the short term.

As with all recessions, it’s impossible for a market or company to completely assure they won’t be hit by the dip. What companies here are doing is trying their best not only to remain unscathed, but to also make some money along the way.

Will it work? It will, for some. It won’t for others. In general, companies that jumped in earlier have a head start. Since the stock market upheavals have yet to make companies exit global bourses, you can be sure BTC investing will likely endure as well.

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As Blue Chips Acquire Bitcoin, Here Is The Pathway To The Future

AS big companies move part of their equity into bitcoin, here is the path to the future!

What the big-ticket financial companies buying into Bitcoin could mean in 2021

Bitcoin is having much of a renaissance.

While the cryptocurrencies like bitcoin were never properly considered dead, over the past few months we’ve seen their prices steadily increase, and as of the time of this writing, the value of Bitcoin has broken into a new high of $24,000.

For regular people, it’s easy to read this as a comeback: The strong, unstoppable bitcoin many economists predicted three years ago before the value suddenly crashed is finally coming true. Bitcoin is, then, poised to become the de-facto currency of the future, and everyone should rush to purchase all the tokens they can.

There is certain logic to this reading, and in all honesty if you saw the price data without getting any extra information you wouldn’t be wrong to expect so.

But we do have extra information. Not long after Bitcoin’s value spiked, data was released pointing out a single company, in this case, PayPal had made purchases equaling all of the tokens that had been created over a month.

Financial data from other companies shows that financial giants like Square, Stone Ridge Holdings, and MicroStrategy have also invested millions of dollars in Bitcoin recently. But what does this mean? Does this mean they’re preparing for a cryptocurrency-fueled economy?

Hedging their bets – or why simpler answers are better

No, it doesn’t. While certainly having a large amount of Bitcoin would give these companies a boost if cryptocurrencies were to suddenly move our global economy, there’s no expectation that such a thing will happen in the short-to-mid term. Crypto adoption has grown steadily, and there’s a decent chance we’ll see cryptocurrency transactions as a regular thing… by 2030 or so. Not by 2022.

What these companies are doing instead is an old, common practice for financial giants: They’re buying gold. Only, it’s digital gold.

And they’re doing this because… well, because they don’t trust the economy.

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The recession hasn’t hit in full force… yet

Economists have been predicting a major economic recession for years, partly thanks to historical data that shows the economy works in cycles, and the longer a period of growth and stability lasts the more imminent a recession becomes. Warnings had been written since 2015, arguing that the correct thing to do would be to get ready for a recession.

And then the recession hit, during March 2020. Stock markets went down. The Dow Jones wiped all of its earnings from the previous year in a single day. Chaos ensued, at least among certain circles.

But soon after, the markets recovered. Taking a look at them today, and it’s almost like nothing happened. Many stocks are at all-time highs. Indicators went back up. Was it the shortest recession in history? No, it wasn’t.

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A variable called Coronavirus

The Coronavirus pandemic played a part in the express recession we saw back in March. As it turns out, it’s also part of the reason the apparent recovery was so quick.

The truth is, we’re still in a recession – it’s just not noticeable because economic indicators have shifted due to the pandemic. The economy is currently working at half of its capacity, but we don’t notice it because most of us have been locked up, or nearly locked up, for too many months.

With a vaccine approved, however, the pandemic won’t last much longer – although it won’t be gone in just a couple months either. And once that happens, tens of millions of people will have to face the harsh realities of workplaces closing, unemployment soaring, and the largest number of evictions we’ve seen since the housing bubble burst.

All those things are actually happening as we speak, but we don’t see them, or feel them, because of lockdowns and protections that have been put in place… but will be lifted soon.

Bitcoin is the new gold

Companies have been buying Bitcoin largely because they know this. As it stands, the world is on the brink of a huge recession, and we’ll see it unfold sooner rather than later. While that doesn’t mean the economy will inevitably shatter.

From the above, governments still can do a lot to minimize the impact – having an impending recession doesn’t precisely fill people with hope and trust in fiat currencies.

So they turn to values as a way to hedge their bets. They buy precious metals. They stockpile goods. And, in 2020, they also buy Bitcoin – a largely speculative virtual currency that many have predicted will withstand a recession.

That’s why companies are investing. It’s not because the Bitcoin future is coming, but because they believe Bitcoin will hold its value better than the USD in case of a recession. And they may be right, or they may be wrong – but the risk is worth taking nonetheless.

Should I run and invest, then?

Hold on, you should first slow down a bit.

Investing right now might be a good move. Or it might be a bad one. Investing six months ago would’ve been a brilliant move, but then again hindsight is 20/20.

How the Bitcoin market develops from here on isn’t clear, because it depends largely on how those huge companies act in the future. As long as they keep holding, and investing into, Bitcoin tokens, the price should remain stable and even go higher.

But as soon as one of these companies decide to cash out? A huge influx of offer vs stagnant demand will spell a price crash. On top of that, this price crash happening is a matter of when rather than if – because it will happen.

However, we don’t know when. It could take two years. Or it might happen next week.

Shall you invest in Bitcoin right now, then, you should see it as playing the lottery. Variables entirely outside of your control will dictate whether you win or lose, and every day you’ll face the question of whether you want to jump off the ship now, or risk another day.

You may win big. But you may also lose big, if you are nit timing the market.

The Big Lure Of Crypto Airdrops And The Headliners of 2021

Airdrops are novel to cryptocurrencies and they have become a fortune boost for savvy investors. Here is how they lead into 2021.

Photo by Karolina Grabowska on Pexels.com

The world of airdrops, leading projects, and what to expect in 2021

Airdrops have long been a controversial subject in the cryptocurrency market. While they’re often touted as a great way to get users for a blockchain, detractors argue they weaken the value of the very crypto being airdropped, thus defeating the very reason to run them. Others see them as cheap ploys to attract users, and in anyway, it is a world of the good, the bad, and the ugly!

However unpopular, airdrops are still a thing in the market – and they’re considered a very useful tool, if properly handled. That’s why, even when some people really dislike them or even consider them “dead,” they still are happening. They just have changed. They’re no longer free-for-all extravaganzas, instead becoming focused events.

What this means is that Airdrops haven’t disappeared, and they aren’t expected to. These days, you just have to look a bit deeper than otherwise to find them.

But first… What is an airdrop?

An airdrop is the name given in the cryptocurrency scene to wide, usually free, distribution of tokens on a blockchain. The most recent celebrated airdrop was for Flare Network, and it helped give XRP a leap since it was predicated on exosting XRP in circulation. Bitcoin Cash AB was also recent and it is holding its place as a crypto of note.

That failure notwithstanding, crypto projects kept offering them, even if in less wide modes. The most common mode of airdrops, known as ICOs (for Initial Coin Offering) were extremely common as ways for projects to obtain early funding, although their popularity has greatly waned over the last two years.

Still, free airdrops have been shown to work in several occasions – and as long as they’re well designed, there’s no reason they shouldn’t work in the future.

Which airdrops have seen success?

Perhaps the largest airdrop to see success comes from Stellar. The then-new blockchain gave away 20% of its token supply to people who owned BTC. The airdrop was deemed a success, enough so that Stellar has in several occasions reactivated the airdrop, letting people sign up for free Lumens tokens.

Decred is another blockchain that hosted a massive airdrop with success, with 285,000 tokens distributed in 2017. While the token saw a price crash in 2018, its value is still close to the pre-airdrop value.

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What do I need to do to get into an airdrop?

It really depends on which airdrops you’re looking to get into. Registering for the airdrop is, of course, a mandatory step for all of them, but some also have other requirements. In some cases, as happened with the XRP airdrop, you need to own another cryptocurrency. Other airdrops require you to sign up for email advertising or even advertise the token yourself via social media.

The latter is more common than you might expect, and makes sense: Airdrops these days are largely used as advertising, and thus the social/viral element of them is expected. In many cases, these airdrops don’t assure you’ll receive tokens, instead giving you what could amount to entries for a raffle. With the recent market leap in prices, it is perhaps worth the effort.

Which airdrops are yet upcoming?

There are dozens, if not hundreds, of upcoming airdrops, as they’re still used in many crypto projects to attract attention. Several websites were set up specifically with the goal of keeping a list of upcoming token airdrops and their requirements, and they have since become the best tool for airdrop hunters.

As you can likely notice, most free airdrops these days are for low-value tokens, which makes sense considering it’s essentially free money. More serious airdrops have larger requirements, one of them being holding a minimum amount of another cryptocurrency to be eligible. These airdrops, known as Holder Airdrops, are the most commonly successful ones.

Watch Out For Symbol

Perhaps the largest upcoming airdrop as of this writing comes from the Symbol blockchain. An already successful blockchain, known as NEM, is staging a migration towards a newer system that’s considered superior to the current one.

To entice users to migrate, all users holding 100 or more NEM tokens will by early January receive an equal number of tokens in the new blockchain, deemed XEM tokens. Some exchanges are supporting the airdrop alongside some wallet serbvice providers. Coming from an already-established blockchain, this airdrop is expected to be a success and is for now the largest foreseen airdrop for 2021.

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How Flare’s Smart Contract Possibilities is Giving XRP A New Marketplace Leap

Flare Network is bringing smart contract functionality to the Ripple ecosystem. The knock-on effect is real as XRP takes a price leap.

For quite some time now, Ripple, a blockchain-based payment protocol, has been seeking out means to improve the applications and adoption of XRP. Xpring, the investment arm and technology incubator of Ripple, announced its strategic investment in Flare Networks – a smart-contract-based platform.

The Ripple-Flare collaboration promises to add utility, value and new applications for XRP and its connected components.Let’s delve deeper into how the integration of smart contracts will activate Ripple’s market sprint.

The flare network connection

What is the Flare Network?

Flare is an avant-garde blockchain network that feeds off a similar consensus as Stellar and Ripple – the Federated Byzantine Agreement (FBA) protocol. This consensus protocol adopted by the Flare Network has flexible trust and completely ordered, making the possibility of an attack on the order of transactions almost inexistent.

Some of the features of the Flare Network include:

It is completely permissionless, open and Turing-complete.

The overall safety of the network is not dependent on economic incentives.

Owning a token on the network does not grant power

An algorithmic stablecoin that’s generated by burning Ripple (XRP) in parts

Flare adopts XRP’s address schemes and encryption protocols so that both networks can utilize a single key while providing XRP users with a seamless experience

Flare is a useful tool for entrepreneurs and businesses because of the price stability of its token and low volatility. Regardless of the size of your business, even when it grows large, the safety of the Flare Network remains uncompromised. Importantly, this network provides easy and alternative ways for XRP users to explore interesting and complex things.

Also Read: How To Trade Leveraged Tokens on Binance Exchange

How Flare Will Work with Ripple

Late 2019, Flare Network reported its investment and partnership deal with Xpring. A moved poised at bringing partners and an avalanche of resources to expand and enhance the XRP, Xpring and Flare ecosystems. The process entails the integration of the ETH Virtual Machine to allow private and public networks to take maximum advantage of Turing-complete smart contract.

According to the Xpring team, Flare will leverage on Ripple’s encryption system and address to offer Ripple users seamless interfacing with smart contracts. This mechanism is targeted at ensuring that ripple users can explore a variety of use cases for the XPR ledger, such as the development of apps and settlement of contracts

At the launch of the network, a protocol built on Flare, FXRP, will safely activate the trustless distribution, redemption and usage of Ripple (XRP) on Flare. XRP will be trustlessly and safely converted to FXRP and secured by Spark, Flare’s token. Flare will facilitate the interoperability of XRP and other networks through protocols such as Polkadot and Cosmos or with ETH via a structured bridge protocol.

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What does this even mean? Basically, Flare can be utilized as a trustless and defined bridge between XRP and other networks, and more significantly, it can serve as XRP’s smart contract platform.

Furthermore, the Flare Protocol (FXRP) methodology could also be adopted by other non-flare tokens, as the means to determine suitable tokens is embedded into the system and its governance network.

Mechanism of the Flare Network and Ripple

FXRP grants holders of XRP (originators) the ability to transfer their asset to certain XRP Ledger (XPRL) addresses dubbed “agents.” In turn, originators get FXRP on a 1:1 conversion basis with XRP, of course, secured with Flare’s Spark. It is also possible for an FXRP holder (redeemers in this case) to redeem the equivalent worth of FXRP back in XRP.

All they need do is, transfer the FXRP back to Flare, and the agents will send the equivalent amount of XRP to the XPRL address of the redeemer; all facilitated by smart contracts. If for one reason or the other, the agent is unable to quickly see the redemption process through, the redeemer receives the equivalent value of FXRP in XRP and also compensation to cover transaction cost on the next XRP trade. Let’s take a typical illustration of the Flare-Ripple workflow.

“Say, Jake, for instance, wants to convert his XRP to FXRP on Flare; Jake is the originator. As already established, he’ll incur a transaction fee that’s a certain percentage of XRP. Jake specifies the volume to be converted and the FXRP system suggests the available agent (say Peter) on Flare and records the originator’s address on the XPRL.

If there exists an adequate volume of FXRP in the system, an escrow-like protocol locks the required volume of FXRP for some time, pending the authentication of Jake’s transaction. This means that James doesn’t have to contact Peter or even trust him.

Consequently, Peter’s address is generated by a set of algorithmic instructions and forwarded to Jake to fulfil his part of the transaction by transferring XRP to the XRPL, inclusive of transaction fees. The Flare system then mints FXRP and sends to Jake through his nominated address. If by any chance, the system does not have the desired volume FXRP, Jake is refunded his escrowed asset.”

The innovation in the mix

Ripple is in a league of its own for many reasons. It’s very unlike several other blockchain projects that just want to live up to BTC’s standards, without any particular use case or aim. Since its blowout in 2012, has always had the goal of using blockchain, XRP and the internet for cheap, cheap and reliable cross-border transfer of value.

In other words, Ripple hopes for banks and financial institutions to adopt its tech, but it’s been quite the opposite. Mainstream adoption has been a long-standing issue and Ripple resolved to delve into other use cases that will ignite the interest of the world. This concern is a contributing factor to the innovative collaboration with the Flare Network.

The ideology of the Flare-XRP collaboration was birthed to increase the use cases of the XPR token, promote platform interoperability and the utilization of XPRL. while also receiving massive representation in decentralized finance. It was only reasonable to have looked on to Flare Network, a new smart contracts platform for integration, although some enthusiasts disagree with Ripple’s move.

Conclusion

When you take a look at platforms that utilize the Proof-of-Work and Proof-of-Stake protocols, the security of such networks is mostly dictated by incentive given to nodes. In this case, Flare boasts an innovative security architecture that doesn’t survive on economic incentives. Also, the Flare-XRP collaboration has largely improved Ripple’s market performance and created avenues for more use cases.

How To Trade Leveraged Tokens on Binance Exchange

Binance exchange provides a remarkable experience with leveraged tokens. Here are the vital insights.

Margin trading is a risky business where profit margins are paper-thin. That’s a fact. While hundreds of thousands of people have dabbled into the market, be it via forex or cryptocurrencies, the truth still remains: Making a living out of regular margin trading can be extremely difficult, if not impossible. Moreover, a single mistake can completely destroy your position, sending you back weeks or months.

Due to the extremely thin profit margins, leverage trading is also a common practice: In this model, a user receives an amount of money for trading that’s several times higher (Usually 5x or 10x, though in some cases much larger) than the amount of money they have. They are then allowed to trade with that money, with the caveat that if they lose an amount of money equal to their initial amount (their leverage) they must immediately liquidate their position and pay back the loan.

Leveraged tokens are an attempt to help with this complicated process. Instead of having to ask for leverage and then invest using it, you just buy leveraged tokens. Leveraged tokens have their value semi-pegged to that of another crypto token… except their value changes at 2-3x the rate.

In other words, if you want to try leverage trading, using leveraged tokens make the process much easier by getting rid of the middleman and allowing you to multiply your gains (or losses) automatically.

How do Leveraged Tokens on Binance work?

First of all, not every token that’s traded on Binance works as a leveraged token. Not all tokens have a leveraged equivalent, either. As with other Binance programs, like pegged tokens, leveraged tokens are only offered for a handful of cryptocurrencies – naturally, the ones that see leverage trading more often, and thus where there’s a market.

An important thing to note is that a leveraged token isn’t equivalent to the actual token. A Binance Leveraged Bitcoin, for example, can’t be used to make Bitcoin purchases. They’re essentially a separate token, whose value is pegged to that of Bitcoin.

Knowing that, the process is simple: You can buy or trade leveraged tokens on Binance in almost the same way you can buy or trade the actual tokens, with the only difference being that the leveraged token’s daily change will be steeper. For example, if the price of a Bitcoin goes up by $1,000 during a trading session, the price of a Bitcoin-based BLVT will go up by $2,000-$3,000.

Sounds like easy money… Where’s the catch?

There isn’t much of a catch in the sense that there’s no small print that will make you lose your money. However, one thing you’ll have to know is that leveraged trading tokens are rebalance every day to make sure the relative value to the base token holds.

What does this mean? Well, it’s simple. Say, a BTC leveraged token (we’ll call it BTCL) releases today, with the initial exchange being 1BCT = 1BTCL. At the end of the first day, BTC gains 10% of its value. Since BTCL was set to 3x leverage, that means that at the end of that day 1.3BTC = 1BTCL.

That works for a single day. However, as more days go on, problems start arising: First, because maintaining the same ratio over many trading sessions can get difficult – what started as a 3x leverage can easily balloon into much higher values after successive positive sessions, for example. But more importantly, because the exchange needs to have liquidity so they can perform token payouts.

This directly affects the value of the token, as one would expect. In many cases, this will make earnings somewhat smaller over a longer period than the actual accumulative. It can also make losses smaller over a longer period in the same way. Due to how the market and rebalancing works, it can also create losses even when the original token’s price variation evens out to 0% (that is, if price goes up, then down, over two separate sessions.)

Rebalancing is important to maintain liquidity and keep the reference existing, but you need to look into how your exchange does it to know exactly what to expect. For more information, see the “Volatility decay” section in Binance’s own website.

Alright. What else is there? Why should I trade on Binance and not elsewhere?

Your choice of trading company is entirely yours, and people tend to have vastly different preferences depending on their goals. However, Binance does offer a few things to their leverage traders that might sway your opinion:

Tiny trading fees. Binance leveraged tokens exist in Binance’s own blockchain – and, as usual for Binance operations, its own intra-blockchain trades have much smaller fees than extra-blockchain ones. Obtaining Binance Leveraged Tokens will result in a much lower fee than obtaining the tokens themselves, on top of the extra earnings.

Constant leverage rebalance. While other exchanges only rebalance the token value, Binance also changes the leverage for each trading session depending on how the token has been faring. Generally, this means the leverage will flow between 20 and 30% depending on the current market, but it can also go higher or lower at times.

High Market Liquidity. Binance is one of the crypto exchanges with the highest liquidity in the world – and thus they have enough crypto in storage to weather almost any market swings. This is important when the market is particularly volatile, since smaller exchanges with lower liquidity could run into issues if prices vary widely in an unexpected manner. For Binance, this shouldn’t be a problem.

Conclusion

The market depth of cryptocurrencies is improving and there are more ways to trade and explore digital currencies.

With Binance LVT, you can take more positions and reap rewards. As exciting as the crypto market might be, never forget that it is high risk, and only invest what you can lose and still be able to get a good night rest.