The crypto market, together with stock markets and the global economy in general, have been experiencing a significant drawdown for the past 6 months, leading to a confluence of factors ranging from high inflation, rate hikes, supply chain issues, energy crisis, to geopolitical instability. This combination packs a powerful punch for any risk-on markets, such as stocks and crypto, forcing retail and institutional investors to exit their capital from markets during these uncertain times.
With Bitcoin currently at $20k, down 70% from its $69k ATH, and the total altcoin marketcap being down 72% from its ATH, it is hard to deny that we’ve entered a bear market. But one question remains – is this anything like the bear market of 2018 and will it last equally as long as the previous one? Let’s dissect the situation and understand if this time is truly different, or if this is just a small bump in the road before an accelerated bull market.
Check out our video comparing the crypto bear market now (2022) and in 2018- and more importantly, how to STILL make money during this downturn:
2018 Bear Market
2017 saw the first true mass influx of retail interest into the crypto space. Bitcoin saw a rapid increase in price, everyone’s friend and grandma were kickstarting their own ICOs to attract funds, and regular companies added the blockchain keyword to their names to increase their share prices. 2017 was the wild west, as there was even less regulation than currently, and the space was rife with opportunists spawning scam projects to extract money from ignorant first-time crypto investors.
But, as with any bubble, it eventually pops. The crypto space was heavily overheated, with investors throwing money at everything that moved, doing minimal to no due diligence, just to get on the crypto hype train. Come 2018, things were starting to cool down and people were beginning to feel the pain. In less than 6 months after the peak ICO craze, over 90% of all the projects were already dead, with many more to go down with them in the rest of the 18-month long bear market.
At the peak of the market, a lot of FUD (fear, uncertainty and doubt) was beginning to circulate. Fear of regulation due to the prevalence of scams, and with China/Korea considering banning cryptocurrencies, things were not looking great for the crypto space. Right around the peak of the market, the Chicago Mercantile Exchange (CME) launched their Bitcoin futures product, which allowed institutional investors to get their hands dirty with Bitcoin. And, naturally, they did just that. With all of the FUD circulating and the market waiting to release a lot of pressure, institutions began shorting the market, creating an enormous sell pressure that brought BTC down to $7k, which kept grinding down to $3k till mid-2019.
2022 Bear Market
After Covid-19 hit, the market experienced a tiny two-month recession. As everyone was locked inside, demand dropped and supply shrunk as well. But once central banks began printing more money to help businesses and people via stimulus checks, many found themselves with a lot of extra cash and no way to spend it, so they turned to investing. After the March crash, the rest of 2020 saw the crypto market boom, calling it the “DeFi summer”, with BTC increasing in price by 400% by the end of the year. After that, it just kept on going. 2021 was the year of the NFTs and Metaverse, i.e. GameFi, with numerous projects sprouting up to capture some of the value amid all the hype.
After reaching its peak in November 2021, the crypto market has kept on steadily grinding down. Those who had called the peak in November aptly understood that the markets were overheated, inflation was starting to get out of hand, and the only way for governments to keep that under control was to begin quantitative tightening through rate hikes. Unfortunately, many were still in denial about the onset of the bear market way into April, which has resulted in a lot of people holding bags that might or might not recover.
Now the path forward seems clear. The US Federal Reserve’s hawkish monetary policy is causing markets a lot of necessary and unavoidable pain. Because the money printing since Covid-19 has been at such an unprecedented level, the Fed is finding it hard to slow down the inflation without causing a lot of damage. The result currently is a looming recession at the same time as inflation is still running rampant and driving up the prices of everything, all the while people’s incomes are stagnating and their expenses increasing.
When is the Next Bull Cycle?
At the moment, there are no clear signs of central banks reeling in their hawkish monetary policies. It might possibly take at least several months if not until the end of the year for the dust to settle, the bottom to come in, and for us to be ready for the next bull cycle once the Fed eases monetary restrictions. Continued geopolitical turbulence aside, the next bull cycle will certainly come, but it’s difficult to say what will be the narratives driving the rapid market expansion this time.
The two most touted bull market catalysts are the long-awaited Bitcoin spot ETF and the Ethereum Merge, which will cause the Ethereum network to transition from its wasteful Proof-of-Work mechanism to Proof-of-Stake. However, as is common in life and in markets, the most obvious things tend not to be the ones to catalyze huge changes. Markets are irrational, and a confluence of new narratives that will be born only in 6 months might very well end up triggering the next bull run.
How to Still Make Money During the Crypto Bear Market?
With great pain come great opportunities, and this bear market is no exception. This is the time for learning, accumulating, and paying attention to the market. In our latest video about the current bear market, we outline a few strategies that you can use as an investor to maximize upside potential come next bull run:
1) Dollar cost averaging (DCA) into your investments – instead of trying to catch the generational bottom and investing your whole capital in one go, better invest 20% of your capital at a time during a longer time period, so that way you are more likely to get a great average entry price and reap the profits in the future.
2) Doing lots of research – fundamental analysis of projects is the best way to ensure you invest in projects that have a real potential, and this is the time to be doing just that. Many projects will die during this bear market, so it’s important to source trustworthy information and be critical of everything in order to position yourself properly during the next stage of growth.
3) Diversify your portfolio – as we’ve seen in the past months, there’s no such thing as too big to fail in the crypto space. Instead of going all-in on one project, spreading risk across several projects will ensure your capital is better protected from a few bad investments.
4) Shorting the market – this should not be practiced by anyone who doesn’t have experience trading, as without proper risk management things can get pretty ugly very fast. During a downtrend, a way to make money is by shorting an asset, which essentially means you’re betting on an asset to go down in value.
Of course, none of this is financial advice, and we implore our readers to do their own research and never invest more than they are willing to lose. It’s a highly volatile market and not for the faint of heart.
STEPN is the most popular move-to-earn blockchain game in the crypto market this year after some significant adoption by the market and big moves with other major exchanges and well-known sneaker brands.
Move-to-earn is a new way to earn money through gaming with the novelty that it rewards not only digital activity within a game or app, but also physical activity. In short, the more you move in the real world, the more you are rewarded in your digital app.
STEPN has been crushing it lately after surpassing 300K daily active users (DAUs), receiving a strategic investment from the venture capital arm of Binance, and launching a unique collection of NFT sneakers on Binance NFT marketplace in partnership with sports brand ASICS.
What is STEPN?
STEPN is a move-to-earn health and fitness app with game elements built on Solana. Users equipped with sneaker NFTs can run and walk outdoors to earn tokens and NFT rewards. The funds earned can either be used to increase earnings in the app or can be withdrawn and sold. The mobile app has a built-in wallet, swap, marketplace, and rental system that allows non-crypto users to onboard.
How does STEPN work?
Anybody can earn tokens and NFTs in STEPN by downloading an app, buying NFT sneakers, and completing various forms of exercise. Similar to how Bitcoin mining works, users in STEPN have to prove they have physically worked out, at the cost of their own time and energy. This is validated by the app’s anti-cheating mechanics using GPS and machine-learning technology.
The tokens and NFTs are then minted to users’ wallets from the people, not from the game developer FindSatoshi Lab, known for its work on cryptocurrency wallet Solwallet. In this way, people can trade their tokens and NFTs 100% peer-to-peer and over time. STEPN has created an ecosystem where the value of tokens and NFTs is based on supply and demand.
STEPN tokens: GMT and GST
There are two types of tokens available to players, GMT (total supply of 6 billion) and GST (unlimited supply). GMT is a management token that allows users to increase their income. GST is an in-game token that users receive for in-game activity.
To create a balanced token ecosystem, the developers have decided not to limit the GMT governance token earning to a small group of people. Instead, they have made GMT and GST broadly accessible to ensure balance in the mining of these two tokens.
Since many GameFi projects with a similar dual-token economy have tended not to thrive, the question is raised about whether GST, with its unlimited supply, will go into a death spiral. STEPN’s model addresses this by making GST earning irrelevant at a higher level. As people approach the higher levels, they are presented with the option to choose which token to earn, and they would naturally want to earn the limited supply of GMT.
This will get amplified over time as more GMT is burned and more GMT use cases are released. This should reduce the GST token supply enough to balance the token value. If too many people are mining GMT, they will earn less than what they can with GST, so they will switch to earning GST. This will reduce the competition for earning GMT, and, in turn, make GMT mining profitable again.
Getting started with STEPN
To get started with STEPN, you must first download the app to your smartphone via Google Play or Apple Store. Then, following the on-screen instructions, you will need to create an account and receive an activation code.
You will be able to use the app fully once you have purchased your NFT sneakers from the in-app STEPN shop. Choose your sneakers based on your abilities. Once you have purchased the sneakers, open the game and start walking or running. You will start earning immediately.
How to join STEPN: Step-by-step guide
1. Download the App
First, you have to install the app on your smartphone. Depending on the model of your phone, you can do this either from the App Store or from Google Play.
2. Create an Account
After launching the app, you will need to enter your email address, to which you will receive a registration confirmation code. Enter your email address and press the ‘Send Code’ button. A code will be sent to your email address, and you will need to enter it in the corresponding field.
3. Obtain Activation Code
You then need to obtain an app activation code. To obtain the activation code, register in the STEPN community on one of the official social networks. Choose the social network that suits you best (Twitter, Telegram, Discord, etc.) and proceed according to the on-screen prompts. An activation code can also be received from a friend via invitation or bought from another user.
Once you have received the activation code, the main app screen will open. Click on the ‘Get activation code’ button. After you have entered your activation code, the app will open and the tutorial will start. Several screens will explain to you how to use the app.
4. Create a Crypto Wallet
You then need to create a crypto wallet in the STEPN app. Click on the wallet image in the top-right corner of the app. This will start the process of creating a crypto wallet, which will take a couple of minutes. While creating the wallet, you will be shown a secret phrase that you need to write down and keep in a safe place. Once the crypto wallet has been created, you will be taken back to the main app screen.
5. Start the Game
In the top-right corner, the token column will show zeros. To start the game, you need to deposit Solana (SOL) tokens into the crypto wallet you just created, in the amount that will allow you to purchase an NFT in the form of a sneaker. SOL can be bought on almost any major CEX or DEX.
6. Buy NFT Sneakers
TIP: Before you buy sneakers in STEPN, open the app and run for 10 minutes in running mode without sneakers. This is so that you can find the right type of sneaker for you. NFT sneakers are purchased in the shop. After buying the sneakers, wait until 25% of the energy has accumulated (approximately 6 hours) and then start the game. You are now ready to move-to-earn!
Playing and Moving to Earn
STEPN currently has solo mode only, in which users receive GST tokens as a reward for moving in the real world. This consumes virtual energy at a rate of 1 unit per 5 minutes of movement. All of these processes are only triggered after the purchase of NFT trainers. If the energy is at zero, no tokens are earned.
GST tokens, and subsequently GMT, are paid out depending on the following factors:
The level and attributes of NFT sneakers – more efficient sneakers cost more. Up until Level 29, users can only earn GST, and from Level 30 onwards, they can switch to earning GMT if they wish.
Sneaker comfort parameter – the higher it is, the more tokens are earned every minute.
Running speed – it is necessary to maintain the recommended speed range for the sneaker. If you deviate too much from it, earnings will be reduced by up to 90%.
Marathon and background modes are set to be added later. Marathon mode will be an entirely new playstyle and is aimed for release towards the end of 2022. Background mode will be added when the STEPN team feels the time is right to approach non-crypto users.
The Importance of Energy
Energy plays an important role in earning tokens in STEPN. As soon as you run out of energy, your earnings will stop. Only when energy is available will your movement be rewarded. The amount of energy determines how many tokens you can earn for walking and running.
To increase the amount of energy you have, you can buy more NFT sneakers or get hold of rarer ones. The more NFT sneakers you own in your inventory, the more energy they will automatically generate. Higher levels and rarity sneakers will give you more energy.
Strengths of STEPN
One of STEPN’s biggest strengths in the current market is the successful combination and implementation of GameFi and sports. This could be seen as a clear advantage over any competition as many crypto-native builders don’t have the connections or knowledge to replicate STEPN’s GPS technology and machine-learning anti-cheating mechanics.
Because the health concept of the game and its everyday practicality is relatively simple compared to other games and apps in crypto, STEPN is a prime candidate for mainstream adoption.
Weaknesses of STEPN
There are still quite large barriers to entry for the average person. The registration process is too complicated, and to start playing, new users need to first learn how to open and fund a crypto wallet and buy an NFT item. For a newbie, this is not as straightforward as it should be.
NFTs also cost between 2.5 and 10 SOL, and way upwards of $100 if you want the best sneakers. This means there is an element of ‘pay-to-earn’ about STEPN. However, at the moment, the return on investment (ROI) is in the region of a few weeks, which is not bad at all.
Conclusion
Making money while keeping healthy is a win-win, and as a sports GameFi product, STEPN has struck a decent balance between game elements that are not too rich and complex to stop non-gamers from entering, and sports elements that are not too difficult to stop non-athletic people from trying it out.
The tokenomics also create value for both users and the platform. As long as the concept remains simple and participating remains profitable for the average user, STEPN should continue its impressive adoption rate.
For more information on STEPN, follow their official channels:
Currencies have been around for thousands of years as a way to replace the bartering system and so that people can ascribe a unified value which they can exchange with others. With the popularity of “going digital”, digital currencies have started to emerge to the forefront as a potential new asset class. Starting with Bitcoin in 2008 as the world’s first digital currency, from there many other digital assets evolved such as Ethereum and other cryptocurrencies. Now, companies and even nations are hopping onto this trend to create digital currencies that would serve their own purposes, such as Libra and China’s national digital currency DCEP (Digital Currency Electronic Payment, a.k.a. DC/EP). In this article we take a look at the similarities and differences between cash, Bitcoin, Libra and DCEP.
Many cultures around the world developed the concept of commodity money i.e. objects that have value in themselves as well as their value in their use as money likely during the Bronze Age. Objects that were used as “money” included cowry shells in ancient China, Africa and India, whilst other countries used salt. Eventually metals were favoured and used as money because they were more durable. For example the Egyptians used gold bars of differing weights and the Mesopotamians used silver. During the seventh century in China, the concept of the banknote was developed, though paper money was only formally introduced around the 11th century. The reason for this was so that merchants and wholesalers did not want to carry heavy copper coins in larger commercial transactions.
Bitcoin was invented in 2008 by a “Satoshi Nakamoto”, whose true identity or identities still remains a mystery today. Bitcoin was revolutionary at the time because it was created as a decentralised digital currency without control by any bank or authority. It could be sent from person to person on the Bitcoin network without having to rely on any intermediaries.
Libra was created by the Libra Association, who was in turn co-founded by Facebook and formerly other companies such as PayPal, eBay, Visa and Mastercard. The purpose of Libra was to make it easier and more cost effective for people to transfer money on Facebook, thus attracting new users. In addition, potentially helping to empower billions of people who are unbanked. The plan was for this token to be backed by a portfolio of several types foreign currencies namely 50% USD, 18% EUR, 14% JPY, 11% GBP and 7% SGD to avoid volatility.
DCEP is poised to become the world’s first national digital currency and will be issued by China’s state bank, the People’s Bank of China (PBoC) as a digital version of cash. It is designed as a replacement of the Reserve Money (M0) system and will be pegged with China’s national currency the Renminbi (RMB) at a 1:1 ratio. This means that in future, instead of handing over physical money to buy items in China, you can simply access your electronic wallet on your phone and transfer DCEP to the shopkeeper.
Development of DCEP started in 2014 with the establishment of a research institute dedicated to digital currencies and looking at how to improve the Chinese Yuan system with blockchain technology. However during 2014 to 2018, the development process slowed down, this was probably because the decentralised nature of Bitcoin or blockchain is incompatible with the nature of the Renminbi as a legal national currency. Things rapidly picked up towards the end of 2019 however and this was directly attributable to Facebook preparing to launch Libra, particularly as partner members of the Libra Association and the currencies which Libra was to be backed by had consciously rejected China. Hence, feeling the heat of the competition, China’s central bank felt immense pressure to urgently speed up in the global competition towards a digital currency.
Currently, China had already completed the backend infrastructure of DCEP though there will still be ongoing pilot testing as part of the research and development process. Eventually, other Chinese cities, foreign firms and venues for the 2022 Winter Olympics hosted by China will participate in testing of DCEP.
Type of technology used
Cash is the only type of asset mentioned in this article which does not require any form of technology. Cash is physical paper or coins which can be transferred simply by handing it over to the recipient. Transactions are recorded on a ledger, and can be physical (e.g. a notebook) or digital (e.g. a spreadsheet).
Bitcoin utilises blockchain technology, its founder Satoshi Nakamoto referred to Bitcoin as “a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” Transactions are also publicly recorded on the blockchain, anyone can see what transactions have been made, although they cannot modify the transaction records.
How Bitcoin transactions work (Image credit: CBinsights)
Libra also utilises blockchain technology, but unlike Bitcoin which runs on a public blockchain, Libra would run on a consortium, or permissioned (private) blockchain. This blockchain can only be accessed and managed by the Libra Association, a group of companies which includes Facebook, Thrive Capital, Shopify, Tagomi and Temasek Holdings etc. This digital currency will be on an open-sourced platform built using its own programming language called Move.
DCEP is built with blockchain and other cryptographic technologies such as asymmetric cryptography, smart contracts, UTXO and digital wallet. This was confirmed by Mu Changchun, Head of the People’s Bank of China Digital Currency Institute. In particular, asymmetric cryptography (a.k.a public-key cryptography) technology is a process whereby a public key is used to encrypt a message so that only someone who uses the related private key can decipher it. It is the use of this technology that creates the linkage between DCEP and the blockchain and cryptocurrency industry. DCEP, due to the quasi-anoymous nature (as will be seen below) will also be making use of technology that can track its movements, and big data and data mining technology to monitor and prevent illegal activities.
Anonymity
Cash is truly anonymous as it has no features that can distinguish who its owner is. Simply put, if you picked up a $100 banknote lying on the street it would be very difficult, if not impossible for anyone to challenge your ownership of it. That is why cash is still the preferred instrument of choice for criminal activities such as money laundering, according to a study by Eruopol.
Libra’s aim is to be private. In its White Paper, Libra claims that they would support a privacy approach, though simultaneously taking into account the regulatory aspects of this. However unlike Bitcoin, Libra’s transactions won’t be fully public. Node administrators that run the network e.g. Facebook etc will have a copy of all the transactions made by users. How Libra will achieve this aspect of privacy in practice is unknown. Though there is speculation that short term anonymity can be created under Libra through how the Libra wallet is funded. For example, people can possibly purchase Libra from street sellers who would fund the wallet, or funding the wallet through ATM machines or using other cryptocurrencies. In short, Libra users cannot expect total privacy and anonymity.
Bitcoin allows users to make sever pseudonymous addresses. They are merely strings and numbers and letters, which are not attached to anyone’s identity. But unlike Libra, all transactions on the blockchain are public. So you may be able to find out who the owner of an address is through corroborating the transaction information with known information on who owns certain addresses. It is specifically through this method that funds belonging to victims of various scams are traced and identified, such as the PlusToken scam that resulted in losses of over $3 billion dollars worth of cryptocurrencies.
🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 🚨 789,525 #ETH (105,099,509 USD) transferred from PlusToken to unknown wallet
Through looking at blockchain transactions, analysts are able to see the movement of funds from scams such as PlusToken
On the opposite end of the spectrum is DCEP, which contains features that allow China’s central bank to track the movement of the currency and supervise transactions. Filed patents concerning DCEP hint at this, since the patent concerned appears to be a tracking system that would make DCEP’s movements traceable between transactions and payment parties. Although Mu reassures people that DCEP would balance between allowing anonymous payments and “classified supervision” when illegal activities such as money-laundering are involved.
Market observers believe that the underlying motivation is because China desires to protect its capital boarders in case newer global payment systems and advanced technologies could facilitate illegal cash flows. In addition, Mu confirmed this fear and desire to preserve control when he expressed that if the Renminbi can be converted into Libra, there would be a massive currency exchange which would trigger its depreciation.
Efficiency of transactions
Cash transfers are inefficient, even more so if the transfers are across different jurisdictions. We all have been through the experience of having to wire money overseas which can take several days to process. These methods are also cumbersome, outdated, expensive and time consuming as it involves several entities such as banks.
One of Bitcoin’s major advantages is that you can transfer it conveniently across countries without going through banks. However compared to Libra and DCEP, the efficiency of Bitcoin transfers is still slow at around 7 transactions per second. Depending on the amount of transaction fees you were prepared to pay, some transactions could still take hours.
Libra’s design is to be more efficient than Bitcoin. This is mainly due to the fact that Libra is centralised, i.e. transactions are processed through the Libra Association, which means that Libra will draw less energy. Libra’s transaction speed also aims to be around 1,000 per second, which is much faster than Bitcoin. However this is not confirmed to be in the case in practice since Libra has not been launched yet.
Though anonymous, cash is in fact not decentralised. Banknotes are issued by banks which are regulated by governmental authorities. If you have a bank account, it is the bank that processes your transactions. So there is always some form of control by a central authority or an institution.
Bitcoin on the other hand is completely decentralised, no intermediary is required to process transactions. All transactions are visible on a public ledger known as the blockchain. Each of these Bitcoin transactions is validated and confirmed by the entire Bitcoin network and anyone with the correct hardware can join in and participate in this process.
Libra transactions, as mentioned previously is partially decentralised. Transactions won’t be fully public i.e. we cannot look up a transaction with a blockchain explorer like we can with Bitcoin. However, node administrators that run the network e.g. those in the Libra Association would have access to every user’s transactions.
DCEP is highly centralised. The digital currency would be issued by the PBoC to various intermediaries such as Alibaba and Tencent. These intermediaries would then distribute DCEP to companies and individuals in China and DCEP would circulate when transactions occur.
DCEP will use a two-tiered system of issuance and distribution (Image credit: REITI)
Current status
The status and usage of cash is well developed. It remains the most popular payment method for face-to-face transactions and for cheap everyday purchases. In 2019, the Diary of Consumer Payment Choice found that consumers still used cash in 26% of transactions and 49% of all small-value payments under USD$10 were made in cash. Overall, cash is the second most used payment method, with debit cards being the most popular.
Bitcoin is now gaining more usage and popularity since its invention in 2008. According to data from the US Bureau of Consumer Financial Protection, Bitcoin had US$4 billion in purchasing power in 2018. There are also many major retailers that accept Bitcoin payments e.g. Starbucks and Whole Foods. And almost every country would at least have 1 Bitcoin ATM machine where people can buy Bitcoin. Despite this, its usage is still minuscule compared to credit card purchases, which had a volume of USD$3.7 trillion in 2018. This may be because Bitcoin is still most well-known for being speculative, with many holding onto their Bitcoin in the hopes that they may sell it at a later date for profit.
Libra was announced in June 2019, and is going through some bumps in its development. The project faced suspicion and even criticism from regulators from the European Union, the United States, Switzerland and Japan. Banks also were notably absent during the initial Libra announcement, expressing reluctance to join because of uncertainties surrounding regulation and feasibility. In additional, shortly after Libra was announced several high profile members of the Libra Association such as PayPal and Vodafone departed.
However the Libra project is not “dead” as such, they released the second edition of its White Paper in April 2020. In May 2020, the Libra Association appointed its new CEO and announced several incoming members-bringing it to a total membership of 27. In June 2020, the Association also appointed its Chief Compliance Officer. Going forward, it seems that the Libra Association would continue to try and grow whilst engaging in dialogue with regulators. The Libra Association does not set a definitive timeframe for launch in the second edition of its White Paper, but it certainly is unlikely to be 2020 as per its initial projections.
As for DCEP, it has been confirmed that there will be closed pilot tests in Shenzhen, Chengdu, Suzhou, Xiong’an and some of the 2022 Winter Olympics locations. This will then be expanded to 28 cities and provinces including Beijing, Shanghai, Guangzhou and the Hong Kong Macau Greater Bay Area. However there is currently no timetable for when DCEP will be officially launched. Experts have revealed that it is unclear whether DCEP can debut in the second half of 2020, although plans for its development have certainly been ramped up by the PBoC.
Summary
Here’s a table showing the various features of DCEP, Libra, Bitcoin and Cash.
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What’s are Bitcoin Over-the-Counter (OTC) brokers?
Over-the-counter (OTC) are entities that allow the buy and sell of large quantities of Bitcoin and other cryptocurrencies. OTCs offer more private and personalized services to institutions and high net-worth individuals who need a high degree of liquidity and privacy. The key advantage to an OTC is that they handle large trading volumes, such as trading $100,000+ USD without price slippage. OTC traders will normally quote a strike price for the entire order block with immediate execution. This is contrasted with trading on cryptocurrency exchanges where large orders will cause the price to decrease due to a lack of buy orders. OTC desks allows institutions and high net-worth individuals to buy Bitcoin without a having dedicated trading desk.
OTC offices can be either regionally located, serving local clients or global. Often major cities such as Hong Kong, Tokyo or New York have OTC brokers servicing local clients. These brokers can provide very personalized services and even in person meetups. In contrast, global OTCs such as Binance OTC handles transactions over the internet.
Traditionally in the stock market world, OTC desks facilitate trading of securities that are not listed on formal exchanges, e.g. the New York Stock Exchange.
Benefits of trading via an OTC broker
High Liquidity – Dedicated traders from OTC desks will help increase the liquidity of the overall market. This means they can handle large order blocks
Fixed Price – OTC brokers will over a quotation for the entire order block. This means orders are not affected by price slippage.
Easy Fiat Options – Brokers will have local bank accounts and can sometimes even accept cash.
Disadvantages of trading via an OTC broker
Limited range of cryptocurrencies – Often OTC brokers specialize on a few cryptocurrencies. This means unlike exchanges, they will not offer 100+ trading pairs. Instead, they will focus on the major popular cryptocurrencies that have high trading volune and interest such as Bitcoin, Ethereum or some stablecoins.
Manual trading process – Traders are executed by a human counter-party. This trading times will often be limited to regular office hours.
Large order size required – Brokers often have a minimum order size, such as $100,000 USD traded within a certain period of time.
How do OTC Brokers work
OTC desks have a network of buyers and sellers. The trades themselves are facilitated by OTC broker-dealer who will locate and negotiate directly with prospective buyers and sellers over computer networks or by phone. This is contrasted from trading over exchanges where the prices and order books are publicly available. For OTC desks, their broker-dealers will negotiate the trade price for you. Trades are also not publicly listed giving the parties privacy.
Therefore, to fully understand what is going on in the cryptocurrency markets it is important to consider what is also happening at OTC desks. This is because large transactions happen on them on a daily basis.
Bitcoin OTC vs Exchanges
The choice of whether to use a Bitcoin OTC or Exchange depends largely on the volume of orders. Big players looking to buy or sell large quantities of cryptocurrencies are better off using an OTC broker. This is because a single exchange (no matter how large) will not have the liquidity necessary to fill large order blocks. Research has shown that sell orders of US$30 million can significantly suppress the price of a cryptocurrency, hence causing slippages of 5-10%. This amount is much larger than the fees charged by OTC brokers. The second advantage of using OTCs is that they can offer to lock in a particular quotation with the option to settle at a later time. This gives people additional flexibility to move funds from banks or cold-storage (such as the Ledger Nano X).
However, depending on who you are, one upside or downside of OTCs is that they are not transparent. So while you can try to gauge whether there is a lot of trade flow through an OTC desk by reading their reports (if any), there is no way you can verify if they are being truthful or giving you the best price. On the other hand you can conduct trades privately compared to on exchanges and the price will be “locked-in” and not subject to any fluctuation between the time of agreement and the time of settlement.
How to trade Bitcoin with OTC Brokers
This guide outlines the general steps involved in trading with Over-the-Counter Brokers. Generally speaking, brokers provide similar on-boarding and trading experiences. It is important to remember all brokers will require verification of your identity, known as Know-Your-Customer (KYC) registration. On top of this, brokers will verify the source of funds to prevent money-laundering.
Summary of how crypto is traded with an OTC broker (Image credit: Genesis Block)
Time needed: 3 days
How to trade with Bitcoin OTC Brokers
Signup
Sign up to the broker via website, email, call or in-person meetup. They will usually ask about the type and quantity of cryptocurrencies you would like to sell.
Onboard
Every broker will require you to fill in onboarding documents and legal disclaimers. They will also ask you to provide various types of documentation such as a Government ID, Proof of Residence and Proof of Income.
Communicate
Once on-boarded, they will give you a communications channel. Typically this involved a messaging platform where you can request quotations for orders such as: You: “I would like to buy 100 Bitcoin” Trader: “We can offer 100 BTC at a price of $8123 USD per BTC”
Confirm trade
You can choose whether to accept the price quotation or not. If you agree, the trade is immediately confirmed and the trade will provide you with a deposit address.
Trade Complete
Once the deposit is received, the order is no fully executed and you will receive your trade
Top OTC Brokers around the world
When trading with OTC brokers, it’s important to only use trusted and regulated brokers. This is important because of the large transaction sizes involved – you don’t want to get delayed or even scammed out of a transactions. We compiled the list of the biggest OTC brokers around the world
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Bitcoin OTC in China and Hong Kong
Bitcoin OTC brokers play a very important role in China due to a government ban on cryptocurrency exchanges. In China, it’s no longer legal to operate a cryptocurrency exchange due to a legislation change in 2017. This has left large Chinese exchanges and OTC desks such as OKex, Binance, Genesis Block and Huobi operating overseas or as OTC brokers.
Currently Bitcoin OTCs brokers are legal in China. They operate by directly connecting buyers and sellers of Bitcoin. However, Chinese financial institutions such as Alibaba’s Alipay have distanced themselves from OTC transactions, stating that they will “immediately stop relevant payment services“.
There’re several reports about @Alipay being used for bitcoin transactions. To reiterate, Alipay closely monitors over-the-counter transactions to identify irregular behavior and ensure compliance with relevant regulations. If any transactions are identified as being related to bitcoin or other virtual currencies, @Alipay immediately stops the relevant payment services.
One of the biggest concerns of OTC brokers and trading is the risk of exposure to criminal funds. This is because OTC desks who do not perform proper due diligence on source of funds can come into contact with tainted coins. In a 2020 report, cryptocurrency research company Chainalysis released a report on money laundering in the exchange and OTC space. The report accused some OTC desks of illegally taking laundering funds for private clients. In order to protect yourself from such activity, ensure you are trading with legitimate brokers who have proper KYC. On top of this, never buy “discounted” Bitcoins offered on social media such as Instagram or Facebook.
Frequently Asked Questions (FAQ)
Will OTC brokers accept cash?
Often OTC brokers will have a cash option – for both buying and selling Bitcoin. It’s important to remember for large quantities of cash, KYC registration is required. On top of this, proof of funds may also be requested.
Do OTC brokers require my Identity?
To comply with anti-money laundering laws, OTC brokers will require you to submit official documentation such as Identity, Proof of address, bank account statements, proof of income or proof of funds. The type of identification required however would depend on the OTC brokers own company requirements and any information as required by the laws of the relevant jurisdiction.
Is there a limit on how much cryptocurrency I can trade with an OTC?
ost OTCs do not have a maximum limit on the amount of Bitcoin you can buy or sell. Order sizes of 100 or above BTC are commonplace for these brokers. However, some brokers will have a minimum order size, such as $100,000 USD.
How do I buy Bitcoin Anonymously (Privately)?
The best way to buy Bitcoin without a record is via cash or peer-to-peer transactions. It is important to remember this contains inherent risk as you’ll need to do your own KYC and potentially offer proof of funds in the future. You should also check that your counterparty is a legitimate trader and not a scammer as there are incidents of people being robbed during these “trades”.
Are there OTCs for Altcoins?
There are OTC services for altcoins and even coins that are not yet listed on exchanges. These OTCs will function similar to a matchmaker – matching sellers and buyers of a particular asset. One such example is Silverway – an OTC deal platform and deal aggregation platform.
How do I find out the volumes handled by OTCs?
OTCs are not obliged to provide trading data such as daily volumes, prices, or order books. However, some OTCs provide annual reports or blog posts that contain aggregated volume data.
What should I look out for when choosing OTCs?
Security and legitimacy are very important with thinking of which OTC desk to trade with, especially since huge sums of money are involved. Prospective customers could for example, check if the OTC desk is registered with the relevant government authorities, ask any peers if they have traded there before and their feedback, check online reviews or social media, or even go to their physical offices to make inquiries before signing up and trading.
Bitcoin Halving is expected to happen at 12 May 2020 07:07:39 UTC
What is the Bitcoin Halving Event?
The Bitcoin Halving event which marks the point where Bitcoin mining rewards will be cut precisely in half. Many view this as a turning point for the price of Bitcoin because it will drastically reduce the new supply of Bitcoin, creating scarcity. Currently the Bitcoin Halving is expected to happen at 12 May 2020 11:04:30 UTC – the exact time and date may vary due to fluctuations in Bitcoin block creation time. Once the halving takes place, the amount of Bitcoin mined per day will decrease from 1,800 BTC to 900 BTC. It is important to remember this event is permanent and will affect all the Bitcoin mined in the future as well (until the next halving event). From an economics standpoint, the less Bitcoin there is being produced the more scare and less accessible Bitcoin will become.
Check out my video on what the Bitcoin halving is, and what opportunities it can mean for Bitcoin.
Reduced Sell Pressure on Bitcoin
There will be substantially less sell pressure from Bitcoin miners as they’re income of Bitcoin will half. Currently, miners will mint $13 million USD worth of Bitcoin per day. This is no small figure – and one of the reasons why mining is such a trillion dollar industry (Check out our Bitcoin mining guide for how to be part of it).
Will Miners shut down / got bankrupt?
After the Halving, miners will receive half of their regular income. This will drastically alter the dynamics and profitability of Bitcoin Mining. For miners who are using older machines (ASICs), the drop in income might spell certain doom. Some miners will yield negative profits and be forced to retire the older less efficient units. This is a common practice in mining – renewing hardware is part of the profitability cycle for miners. This is similar to other tech hardware businesses like server farms which require annual upgrades to hardware.
There is no risk that Bitcoin be without miners – till is still 900 BTC to be mined each day (~$7.5 Million USD). Miners will be looking to be more competitive and source cheaper and cheaper electricity. In addition, Bitcoin difficulty can drop if there is less hashrate on the network, meaning it will be easier to mine Bitcoin.
Hype and Expectations
The Bitcoin Halving comes with a lot of hype and optimism for the future of Bitcoin. Several memes have emerged with charts pointing to “pump” in the price of Bitcoin. The chart above shows the LOG price of Bitcoin over time, with a ascending trend indicating potential prices of $250,000 and even $2,000,000 for the price of Bitcoin. It is important to remember that with cryptocurrencies prices are high volatile and past trends don’t always indicate future trends.
Stats
Total Bitcoins in circulation:
18,367,900
Total Bitcoins to ever be produced:
21,000,000
Percentage of total Bitcoins mined:
87.47%
Total Bitcoins left to mine:
2,632,100
Total Bitcoins left to mine until next blockhalf:
7,100
Bitcoin price (USD):
$9,987.70
Market capitalization (USD):
$183,453,074,830.00
Bitcoins generated per day:
1,800
Bitcoin inflation rate per annum:
3.64%
Bitcoin inflation rate per annum at next block halving event:
1.80%
Bitcoin inflation per day (USD):
$17,977,860
Bitcoin inflation until next blockhalf event based on current price (USD):
The cryptocurrency mining and hardware production company Ebang has just filed for a $100 million USD initial public offering with the US SEC. This filing not only shows the there is a market for Bitcoin mining, but that the industry in high demand. Ebang’s annual revenue is $109 million last year, despite falling cryptocurrency prices. The annual production of Bitcoin is worth $3.5 Billion USD at current Prices. Miners need new hardware as new chip technologies, such as those produced by Ebang, is both more powerful and energy efficient. In 2019, 82% of Ebang’s revenue came from application-specific integrated circuit (ASIC) chips.
Moving to 10nm production is expensive
One of the reasons for Ebang going public is to move to even more advanced technology and production techniques. In chip manufacturing, moving to smaller node sizes, such as 10nm makes the miner more powerful and power efficient. Ebang’s new mining chip, the DW1233 is independently developed and based on the new 10nm production process.
Although the Bitcoin price started to recover in the second quarter of 2019, our operations generally lag behind the increase of Bitcoin price.
Ebang Press Release
Failed IPOs and Second Chances
This is Ebang’s second attempt at an initial public offering, after they failed to file for an IPO with the Hong Kong Stock Exchange (HKEX) in 2018. The initial IPO was not granted by the HKSE after 6 months of application, indicating it was not accepted by the HKEX. This time around Ebang has a smaller raise of $100 Million USD as opposed to the first filing, which valued the company at $1 Billion dollars.
Cryptocurrency mining ecosystem
Large cryptocurrency mining hardware manufacturers have all been seeking Initial Public Offerings as a method to raise capital for expansion. Part of the reason is the growing market Bitcoin and cryptocurrency ecosystem.
2020 is a huge year for Bitcoin mining. Huge changes to the mining ecosystem – changes that will spark another “gold rush” for mining. This will be spearheaded by two factors – the release of new more efficient mining hardware known as ASICs and Bitcoin halvening. The release of new hardware will give new players a bigger advantage in mining due to the efficiency factor – new ASICs generate more hashpower with less power. (https://www.sliderrevolution.com) We’re already seeing large funds like Fidelity Investments building large mega-watt mining facilities in North America and other continents. You can hare about the North America mining explosion in this podcast. This marks the return of mining as a major investment opportunity this year.
Table of Contents
Cryptocurrency Mining is a $6 Billion+ USD per year industry
Sizes of Exchange, Mining, DeFi and ICO industries respectively
One well-kept secret of the mining industry is the huge profits being generated by cryptocurrency miners (Bitcoin, Ethereum, DASH and Monero mining). Let’s start off with an industry Fact – every day $19,000,000+ USD dollars worth of cryptocurrencies are being produced by miners across the world. This means a total of $6.8 Billion dollars will be mined in 2020 alone. The biggest currency being mined is Bitcoin – with a 1,800 bitcoin being produced per day totalling to a value of $15,833,340 USD. To put everything into perspective, the ICOs only raised a total of $371 Million in 2019 according to icodata.io. Mining is currently the second largest industry behind exchanges (source: Bloomberg).
Miners upgrading and replacing older hardware (often confused with “miner capitulation”)
Ironically the miners have perpetuated myths such
as “mining is not profitable” or “the bitcoin mining death spiral” to deter
new players coming into this profitable space. Many reports in 2019 have
featured erroneous calculations that Bitcoin mining is not profitable. This is
because researchers have incorrectly assumed that miners are getting
expensive commercial electricity costs of $0.07-12 cents per kilo-watt
hour. This is far from the truth – mining operations receive considerable
discounts as they purchase low priority power (meaning they will get cut off
grid in the event of a surge in power usage). The actual figure is in the range
of $0.01 – $0.03 per kw/h. This means miners are generating large amounts of
profit. It is the biggest industry in the blockchain space, and yet it is
surrounded by both mystery and false information.
New
Hardware (ASICs) is game changing
New high efficiency Bitcoin mining hardware is coming in 2020 will be a huge game changer. Bitmain will be releasing the new Antminer s19 based on the 7nm manufacturing process. Competing ASIC manufactures are also making new chips, with Innosilicon and Canaan hot on the heels. This die shrink increase the hashpower of chips whilst reducing power consumption at the same time. These two factors mean these new units will be more efficient – the biggest factor contributing to Bitcoin mining profitability.
Hashr8 – New MiningOS
New operating systems dedicated for mining cryptocurrencies such as Hashr8 are also being launched this year. These OSes will make it easier for commercial, enthusiast and retail miners to improve mining efficiency and management. This is a huge positive trend for the industry as a whole as it makes professional tools mainstream and accessible to the general public. This will level the playing field and reduce the gap between large-scale miners.
Why does Bitcoin always “pump” in short periods of time? Can we benefit on this type of price action. Are OTC Bitcoin trading volume flows responsible for this type of price action and how do we learn about Over-the-Counter trading.
In this article, we’ll tackle one of the greatest mysteries in the Bitcoin and cryptocurrency investing space – namely why does Bitcoin prices have drastic price movements in short bursts of time. This type of movement is almost commonplace in Cryptocurrency investing, for example just today Bitcoin prices moved from $8150 to $8450, then to $8800 in the space of 4 hours, with two big green candles leading the charge. What’s also surprising is that there is no fundamental reason to cause these movements – they are not triggered by a single world or political event. In this article we’ll look at the must possible reason behind what’s happening.
Let’s get one thing out of the way – sudden Bitcoin pumps are not executed by a large group of people with small amounts of money. If this was the case, this group of people would have to be well organised, and information about such pumps are bound to leak out. We would know well in advance of the event happening. It would be common knowledge – especially considering how fast information spreads.
This leads to the next conclusion – Bitcoin pumps are executed by small groups of people with access to the OTC market. We already know the world has high wealth concentration – 1% of the world has 99% of the wealth. The 1% can easily transact enough fiat to cause these sudden shifts in the price intentionally or otherwise.
This theory is validated by reports of strong OTC volume flow in the past few weeks. This is across all trading desks around the world, especially with strong volume coming out of China and Southeast Asia. Recently reports have surfaced that OTC desks such as Genesis Block are expanding and opening new offices in Thailand to deal with the extra volume.
China has start a country wide initiative to rapidly adopt Blockchain Technology and ‘urgently’ develop use cases. China’s President Xi Jinping personally appealed for a greater urgency to develop blockchain in-front of the Communist Party of China Central Committee. This sentiment was echoed in by state media People’s Daily published a front page article on “Placing Blockchain as one of the countries core initiatives, with a target on key breakthroughs“. On top of this, national TV station CCTV-2 had various news segments dedicated to discussion blockchain technology – with a key emphasis that Blockchain, not Bitcoin is China’s key focus.
China’s leading newspaper, People’s Daily, calls for Blockchain Adoption
This huge initiative to push Blockchain is clearly related to the launch of China’s National Digital Currency – “DCEP” (Digitial Currency / Electronic Payment). This new currency is issued by the People’s Bank of China (PBoC), and will act as both a replacement for Researve Money (M0) and as a digital cash. DCEP will initially be rolled out to banks affiliated with PBoC and eventually to the general public via Tencent and Alibaba.
It is important to point out the DCEP will be a centralized & private blockchain. New currency on the network will be issued by the PBoC via authority from the Chinese Government. There will be no public participation in the network, unlike the decentralized Bitcoin network which uses Blockchain to form an open public consensus.
Blockchain, Not Bitcoin
One of the key areas of contention in the cryptocurrency space is whether a private or centralized Blockchains have value.
Opinion 1: Bitcoin, not Blockchain
Opinion 2: Blockchain, not Bitcoin
Proponents of Bitcoin argue that Blockchain’s key value is that it allows for a decentralized network, a leaderless network where anyone can join, participate and verify transactions. The argument is that if the purpose of a Blockchain is record transactions like a database, centralized databases like MySQL or MongolDB will have higher efficiency than Blockchain. Thus, it would only make sense to use Blockchain when there is a need for public open consensus. Following this argument, cryptocurrencies like Bitcoin and Ethereum are neccessary for a Blockchain to function, as they play an intrinsic role in rewarding good actors on the network.
Proponents of Blockchain argue that the Blockchain offers security and transparency, giving it a distinct advantage over traditional databases. China takes this argument one step further and actively discourages the use of cryptocurrencies and trading in cryptocurrencies (eg. Cryptocurrency exchanges are banned in China).
Government condones “Air Coins” and Cryptocurrency Speculation
State media People’s Daily have explicitly condoned cryptocurrency speculation and brought accusations against “air currency”. Air Currency, or air coins, is a chinese colloquial term used for cryptocurrencies that have no intrinsic value, very much like air. This move is designed to counter-act the surge in rushed venture capital investments into different cryptocurrencies in China, many of which don’t have a real use-case. In addition, the article explicitly called for illegal transactions and money laundering to be rectified, suggesting further enforcement actions against none state regulated cryptocurrencies. This heavy enforcement can be seen as a “stick” measure to push users away from decentralized cryptocurrencies into the centralized national currency, DCEP.
“Blockchain is a Scam” is Censored by Social Media
WeChat blocks articles calling Blockchain a Scam
Experiments done by @cn_Ledger and other Chinese media sources have found that articles calling Blockchain a “scam” are actively being censored in China. Anyone posting these articles will find that they are quickly deleted and may face potential account suspensions. This type of media content control is standard in China once the Central Party issues a particular doctrine. Media platforms are quick to comply, or they will risk the removal of their ICP license.
Cryptocurrency Mining is no longer “Banned” in China
The Chinese Government is no longer pushing for the elimination of cryptocurrency mining (such as Bitcoin and Ethereum mining). This is a complete 180° reversal of government policy will take effect on 1 Jan 2020, meaning mining will a legal and taxable industry in China. Previously “Cryptocurrency Mining” was part of a list of industries to be eliminated. This change comes directly from the new edition of China’s Industrial Structure Adjustment Guidance Catalog, where an updated revision no longer mentions cryptocurrency mining as an industry to be phased out.
Traditionally China has always played a major role in Bitcoin, Ethereum, Litecoin and DASH mining. This is mainly due to the abundant supply of cheap electricity in China (especially in the Sichuan and Mongolian regions), where electricity costs can go as low was $0.02 USD per kw/h. To find more about Bitcoin mining, check out our full Bitcoin mining guide.
Overall this policy reversal sends strong positive signals about cryptocurrencies in China. This is a clear indicator that the Chinese Government recognizes the importance of mining and it’s role in decentralized public Blockchains. Such policy changes suggest a positive future where other policies halting cryptocurrency development could be reversed.
Cryptocurrency trading is still banned
China has banned cryptocurrency trading since 2017. The government has taken down chinese operation of big fiat exchanges such as OKex, Huobi and BTChina. Chinese exchanges no longer have fiat bank accounts. As users move to peer to peer trading. Alipay has made it clear that it will not tolerate crypto trading on it’s platform.
If any transactions are identified as being related to bitcoin or other virtual currencies, @Alipay immediately stops the relevant payment services.
What about Chinese Blockchain projects like Vechain and NEO
Whilst China’s Blockchain Initiative explicitly discourages the speculation in cryptocurrencies – Blockchain projects are thriving in China. This is a Cryptocurrency is a core part of Blockchain – Satoshi Nakamoto created Bitcoin and Blockchain together in his 2009 white paper. So whilst the Publications by the central government tries the downplay cryptocurrency speculation, every public cryptocurrency network must have an associated platform token.
Having the Blockchain initiative being pushed forward will greatly help the adoption of projects like Vechain in China. At the end of the day, the government validated the value proposition of Blockchain, answering many skeptics who are critical of Blockchain’s real life use case.
