Will COVID-19 Accelerate the Demise of Cash? It Puts CBDC’s into Sharper Focus: BIS Head

The outbreak of coronavirus pandemic has brought the whole world to a standstill and it has added to the misery of the financial institutions as well as governments to manage their deficits in these troubled times. While governments are on a money printing spree to get through. The ongoing crisis has also led to a rise in global discussion around Central Bank Issued CBDC’s and brought a sharper focus towards the concept.

During a webinar hosted by Accenture last week at the Reinventing Bretton Woods Committee – Chamber of Digital Commerce, the head of the Bank for International Settlements Innovation Hub, Benoît Cœuré primarily talked on two key areas resilience and technology. Cœuré believed these two key areas would be of great importance in the post-COVID-19 era for central banks and payment gateways

He further elaborated that the ongoing pandemic exposes the loopholes in the financial system and brought out the importance of technological advancements with time. He also believed the focus of central banks and governments should be to look for technologies that can work at arm’s length and overcome present issues of social distancing. In short, he believed that in the post-pandemic era there will be drastic changes in human behavior and consumption patterns which would have a lasting impact on how economies functioned in the pre-COVID era. He explained that there would be significant changes to the payment technology and elaborated,

“The payment industry immediately comes to mind. Payments have been at the forefront of technological change recently. A rapid shift towards digital payments can improve cost, transparency and convenience for billions of consumers. International cooperation is needed to support technological capacity in developing economies, ensure interoperability between national systems, enhance cross-border payments and remittances, and support financial inclusion – in short, to avoid spatial and social fragmentation.”

Physical Cash May Start to See a Decline in Demand

The ongoing pandemic is also going to change how people used physical cash. The head of BIS believed that it is an open question whether the present situation would lead to the demise of use of cash. But, it would surely accelerate the adoption of digital payments. He also believed that the global discussion around CBDCs would see a sharper focus and explained,

“The current discussion on central bank digital currency also comes into sharper focus. Whether COVID-19 will accelerate the demise of cash is an open question. But already, it highlights the value of having access to diverse means of payments and the need for any means of payments to be resilient against a broad range of threats.”

There has been a lot of debate about whether central banks should launch their own digital currencies and that debate has been fueled further by China who is already testing their national digital currencies in several cities.

Interestingly, China is among the most advanced nations when it comes to payment modes where almost 90% of the population is using a digital form of payment which are integrated into their daily use applications. This makes it even easier for the country to implement and issue CBDCs since they won’t have to make significant changes to their payment infrastructure. The ongoing crisis has only proved the need for such innovations and a majority of the nations are believed to spring in action once the pandemic situation is under control.

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Author: Lorraine Mburu

FBI Issues Warning to Crypto Holders About Increasing Coronavirus (COVID-19) Scams

The COVID-19 pandemic outbreak has brought the whole world to a standstill, with the majority of countries worldwide placed under strict lockdown measures to contain the spread.

The crypto community remains enthusiastic, despite the ongoing crisis, with the upcoming Bitcoin Halving just a month away. However, this enthusiasm has also made them vulnerable to scams.

The Federal Bureau of Investigation (FBI) has released a warning on Monday specifically for crypto holders, suggesting they be prepared for a surge of coronavirus-centred crypto scams in the coming weeks.

Cryptocurrencies have turned out to be a lucrative investment in the past couple of years, which has drawn the interest and investments from people of all kinds, be it institutional investors, small-time traders, young or old. This rapid rise in interest has also given way for scammers to lure many into Ponzi schemes, promising high returns in a short period of time.

However, the risk of scammers has risen significantly in these troubled times where a majority of the population are uncertain of their financial future, as most of the financial markets hit record lows and scarce investment opportunities.

The FBI believes scammers are praying on these insecurities to steal people’s hard-earned money, and launder it through the complex ecosystem of decentralized coin exchanges. While entities like Huobi have taken steps to prevent these activities, buyers beware.

FBI Believe Scammers May use Humanitarian Aid as Cover for Scams

The FBI warning noted that the scammers might use a number of methods and curtail their pitches on emotion quotient in the ongoing situation, where they might pretend to be from organizations looking for donations to help the needy.

The FBI also believes blackmail could also be a scamming avenue for making money. Where the scammers may threaten to infect the victim’s family with the Coronavirus.

The FBI has also urged people to be cautious and, use common sense and not let their emotions get better of them.

The agency has also stated that people should refrain from donating to anyone before verifying the credibility of the source, and report any suspicious website/s or person/s asking for donations.

While there is no clarity on why the agency suddenly issued such a specific warning, it seems there have been many COVID-19-themed scams in the past couple of weeks, prompting the authorities to issue the warning.

In one instance, scammers managed to collect $2 million from PPE seekers in Asia. A few scammers in the UK and USA were found sending malicious texts which drew attention from financial regulators.

A Chainalysis report has revealed that the ongoing pandemic has brought down funding of these scams by one third. This, however, hasn’t discouraged scammers from trying to phish people as their number of attempts have remained constant.

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Author: James W

Market Turmoil Can Bring Capital Controls Back But They’ll Be Good for Crypto

Last month, the coronavirus outbreak and the collapse of oil prices had stock markets crashing and economies come to a standstill with countries in lockdown. In response, central banks have announced stimulus programs.

The coronavirus crisis also affected the capital flows and raised the question of whether currency control would be back too, especially in emerging markets.

In February and March, about $80 billion got wiped out from emerging stocks and bonds.

“There is some early evidence of an unprecedented collapse in global capital mobility which, if sustained, will make it tempting for countries to conserve their FX resources by imposing restrictions on capital outflows,” said David Lubin, head of emerging markets economics at Citi.

This would certainly be the case if the governments offered full compensation for losses inflicted by lockdowns.

Capital Controls could be back

The Fed and IMF have backed the use of capital controls in certain situations while the US has opposed them since Bretton Woods. Back in December, Bilal Hafeez, the CEO of financial strategy firm Macro Hive said US capital controls could be the grey swan, which is basically significant events that are considered unlikely to happen but are still possible.

China has been implementing capital controls, last year it rolled out a new set of currency controls to curb down on a capital flight from the country.

In emerging markets (EMs), the issue of investment flow is especially important because when capital inflows disappear, those that rely on that capital “suffer big demand collapses.”

Last week’s sell-off in emerging market currencies have been on pace with that during the 2008 global financial crisis, as per JP Morgan. Fiat currencies have fallen 10 to 20%.

As such capital control could be a reality, however, for now, currency pressures have eased following massive cash injections by the Fed to weaken the dollar.

Cryptos ideal conduit to bypass them

Back in 2008 and 2015, Iceland and Greece respectively resorted to them. Emerging markets see capital controls as a measure of the last resort.

Nigeria introduced capital curbs in late 2014 after an oil price shock ravaged its economy.

Last month, Lebanon held meetings to discuss capital control aimed at the regulation and setting exceptional temporary controls on some operations and banking services, as per the National News Agency.

Argentina imposed curbs in September to conserve its diminishing dollar reserves and stop a peso run. This saw the demand for stablecoin DAI explode in the country.

The implementation of capital controls is good for crypto and gold. One can purchase the bullion and store it offshore and legally circumvent the control.

“Capital controls are relevant for crypto, as the imposition of capital controls generates demand to bypass capital controls … and crypto assets can be an ideal conduit for doing so,” said economist and trader Alex Kruger.

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Author: AnTy

Ethereum Rules Dapp Market in Q1 Despite Black Swan; DeFi Is The Main Growth Driver

Ass per the latest report of Dapp Review, the Coronavirus outbreak, the Black Swan of 2020 that triggered the global market sell-off had a direct impact on the decentralized applications (DAPP) market in Q1. In the first quarter of 2020, a total transaction volume of $7.9 billion across 13 blockchains was recorded, this has been an increment of 82.2% from 1Q19.

The major three protocols Ethereum, EOS, and Tron contributed more than 99% of the total volume. Among these three top blockchains, Ethereum was the only one with year-over-year growth, both Tron and EOS suffered a loss in users and transaction volume.

DappReview Report
Source: DappReview Report

When it comes to dapps, 254 new dapps were launched in Q1, which was 60% lower than 1Q19. Game, exchange, and casino are the top three sectors in terms of active address. The total active addresses that interacted with dapps meanwhile dropped 22.1%. However, Casino dapp was the popular category last year has been down 64.4% in volume this quarter.

DeFi is the “growth gist”

Ethereum remains the king in the Dapp space, with $5.64 billion in total transaction volume reported by Ethereum dapps, an increase of 652% compared to 1Q19’s $743 million.

However, the active dapps on Ethereum at 641 have been fewer than last time’s 173. Out of these 33 are from Finance, 72 Exchange, 180 Game, and 71 are active Casino dapps.

Ethereum-based Decentralized Finance (DeFi) projects are the main volume growth driver. DeFi has been the “growth gist” of Ethereum since 2019 with the largest transaction volume.

Source: DeFi Pulse

However, instead of Ethereum’s native token Ether, most of the volume of DeFi projects are in ERC 20 tokens like DAI, USDC, and WETH. As such, $5.64 billion transaction volume of Ethereum, 84% was generated by ERC-20 tokens.

The sell-off on March 12, actually resulted in the transaction volume of Ethereum dapps reaching a historic peak of 3326 million, mainly contributed by MakerDAO, dYdX and other DeFi projects.

Now, Tron is also slowly making its place in DeFi space with the unveiling of Djed, a MakerDAO-like stablecoin system.

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Author: AnTy

BitMex Research Suggest Bitcoin Ecosystem is Thriving With Diverse Development Work

In the wake of the coronavirus outbreak, the financial institutions have come to a standstill and governments around the globe are pumping and printing fiats at their will to keep it going. Bitcoin, the decentralized digital currency which was created in the wake of the 2008 financial crisis also registered a massive drop of almost 50% leading to panic selling.

Apart from the price drop, the Bitcoin network has also seen falling hashrate input, decreased mining difficulty which created a sense of uncertainty among many. However, a recent report from BitMex Research suggests that Bitcoin is going strong and the network is healthier than that of 2014.

The research report suggests that the development of the Bitcoin network is getting stronger not just from the Bitcoin core community, but the contribution has poured in from different walks of the crypto ecosystem who are continuously working to make the network more scalable.

Lightning Lab and Blockstream Biggest Contributors

Source: BitMEX Research

The BitMex report revealed that Lightning Lab and Blockstream are the biggest contributors to the Bitcoin network. Both these platforms have continuously worked on scaling the sidechain solutions. Bitcoin’s scalability has been one of the biggest talking points in recent times and layer 2 solutions in the form of lightning network and liquid are being actively developed as a sidechain to contain the congestion on the main network.

Twitter CEO Jack Dorsey’s Square app comes in the third position in terms of their contribution to the Bitcoin network. Square is well-known for its belief in the lightning network and has worked in accordance with them to make it more reliable and user friendly.

The research also makes note of independent developers contributing to the network and believe there are at least 33 core developers working on the platform, but there are many other anonymous contributors as well which cannot be easily tracked.

Altcoins Do Not Enjoy Same Diversity in Development

While it’s very evident from the research that the Bitcoin network still attracts a lot of developers both known and unknown to its platform, the same does not hold true in the case of altcoins. The research report revealed that the development community for the majority of the altcoins is quite centralized.

Ethereum and IOTA top the list with over 100 developers working on the foundation tram. While centralization in the developer team has its drawback, it also ensures a clear vision for the platform which streamlines the flow of development and subsequent progress of the network.

As for the financial aspect of the development, the exact details of the funding is obscure as contributions pour in from many non-profit organizations like Chaincode Labs and MIT DCI, while the likes of Square and Blockstream has raised significant amount as well.

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Author: James W

Analyst: BTC Trading like an Absolute Shitcoin; ‘Hedge Against a Mild Global Recession’

  • Since the Coronavirus outbreak internationally, “Bitcoin has been mirroring the stock indexes, almost exactly,” – analyst Mati Greenspan
  • Messari Crypto’s Qiao Wang says Bitcoin looks “depressingly correlated with S&P” and that biggest risk is “breaking the narratives”
  • “Bitcoin market not positioned for a down move?”

Yesterday, the US Federal Reserve announced an emergency cut of 50 basis points for the first time since the 2008 recession. Although the stock market initially climbed up on the news, it soon fell. And bitcoin followed the stock market’s lead. Mati Greenspan notes,

“Bitcoin has been trading a lot like a risk asset lately and ever since the outbreak of Coronavirus made the leap from China into an international issue, Bitcoin has been mirroring the stock indexes, almost exactly.”

Bitcoin does react to events beyond the immediate industry

Over the past week, crypto-assets sold off in line with risk assets amidst the news of coronavirus spreading out of its epicenter China and its economic implications.

However, Coin Metrics notes that during the times when the need for liquidity is high, safe haven assets like gold and bitcoin can also be sold since liabilities, including margin calls and debt service obligations like interest and principal payments, can be paid only in fiat currency.

Bitcoin did register gains after Bank of Japan among other central banks said they would take all the necessary steps to stabilize markets which,

“Add to the body of evidence that BTC and the broader crypto asset market do react to events beyond the immediate industry.”

The crypto assets recorded sharp declines but forced liquidations on crypto derivatives exchange BitMEX and other futures exchanges “remain modest” which is in sharp contrast to the pattern we saw last year.

The biggest risk is breaking the narratives

Qiao Wang, Head of Product at Messari Crypto also noticed,

The fact that bitcoin has been trading like an “absolute Shitcoin” over the last couple of weeks, Wang calls for “hedging against a mild global recession” those holding large amounts of crypto.

Although it isn’t that bitcoin will necessarily get crushed by a mild recession, it would surely get affected as we have been seeing.

The biggest risk he said is “breaking the narratives (digital gold, halving rally, etc.) that took 10 years to form might set the entire industry back a couple of years.” However, he remains “incredibly bullish over a 5+ year time horizon.”

Futures market showing a grim picture

CME bitcoin volumes also share a similarly grim picture that says capital and focus is not on bitcoin currently. Bitcoin futures on the regulated platform have “collapsed” since the global market panic started.

Open interest and volume put/call ratio have also decreased to “historically low level” following the February expiry, notes Skew markets, questioning, “Market not positioned for a down move?”

Currently, bitcoin is trading around $8,760, up 0.08% in the past 24 hours. According to trader Nik Patel, the two possible scenarios for BTC price involves a sweep of yesterday’s low and a close above it or reclaiming today’s open at $8,757 with a tight SL at today’s low, expecting LOD to be in at that point.

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Author: AnTy

Gold Hits 7-Year High As Investors Jump into Safe Haven Assets But Bitcoin Not Following

  • Coronavirus outbreak has the investors fearing a slowdown in global growth and piling into safe-haven assets like gold
  • US dollar also rising while bitcoin just like the stock market is falling

The yellow metal is flying just like altcoins.

Gold hit a 7-year high as investors rush into the safe haven trade. On Thursday, gold rose to $1,621.60 per ounce, its highest level since Feb. 2013. The precious metal is on track for its seventh straight positive day and the eighth positive week in nine of 2020.

The deadly coronavirus outbreak has the investors fearing a slowdown in global growth and piling into safe haven assets like gold.

The concerns are proving to be true as Apple (APPL) announced that it would not be able to meet its revenue expectation for the current quarter, that was laid out on Jan. 28 and was already wider amidst the coronavirus outbreak.

Spreading beyond China Border

US investors’ optimism that the coronavirus will be short-lived is being challenged as the virus spread beyond China’s border. While the World Health Organization (WHO) said the number of new cases of infections in China continues to decrease, South Korea saw a spike in new cases and a larger spread of the COVID-19 across the US has also been registered.

11 of the 13 patients from the cruise ship in Japan have been tested for the novel coronavirus. This came at a time when seasonal flu is already at its peak in the US.

“This is the time to open up your pandemic plans and see that things are in order,” said Dr. Anne Schuchat, a top official of the Centers for Disease Control and Prevention.

“At some point, we are likely to see community spread in the U.S. or in other countries,” she warned.

US Dollar Higher while Risk Assets on Thinner Ice

These rising concerns are not only working in favor of gold but also the US dollar, pushing the greenback at its highest level in about three years.

“What is becoming clear is that the consensus that is being priced into risk assets is on much thinner ice,” said Ed Al-Hussainy currency analyst at Columbia Threadneedle Investments.

“The consensus (forecast) has a very solid recovery in earnings this year. That is coming under pressure from loss of demand in Asia and also the stronger dollar.”

While gold and dollar are surging, a sudden drop had both the S&P 500 and Nasdaq fall from their record highs, while Dow dropped 388 points after a sharp rise in coronavirus infections were noted at a single Beijing hospital.

Bitcoin follows the stock market

During this time, instead of going the gold route like a purported safe haven, bitcoin is following the lead of the stock market.

Late Wednesday, Bitcoin prices took a fall from about $10,300 to nearly $9,400, which has been the day after the digital asset surged $650.

Economist and trader Alex Kruger says correlation of prices is not the key rather returns is as the correlation between the bullion and the digital asset get severed because of a sharp rise in gold while Bitcoin is down.

Currently, BTC/USD is trading at $9,730, in the green by just 1.52%, however, the digital asset is still up 32% year-to-date.

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Author: AnTy