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By Arjun Thakkar and Alan Green
Bitcoin worth more than $200bn was wiped off the crypto market on 12th of May. The crash in the BTC price accompanied a generally volatile and uncertain stock market that has seen the Dow Jones and FTSE100 down by 12.7% and 3.7% respectively from the start of the year. The core principle of the markets has always been higher the risk, higher the reward, but the current downward spiral seems to be driven by a perfect storm of events. Is this therefore the end of a bullish run for assets and the risk is too high now for any reward, or are we just seeing a major correction?
The key uncertainty spooking the markets are the high inflation rates. These are being driven by a number of factors, including supply chain problems from China, the Russia-Ukraine war and consequential 25% hike in the price of wheat. Interest rate hikes from the Fed and BoE are pushing borrowing costs higher and driving a sell-off in markets and crypto.
In these uncertain markets investors look for safe investments and the increase in interest rates in 2022 by 0.5% and 0.75% by the BoE and Fed respectively have made cash savings more attractive, leading to a massive sell off in stocks. Added to this, the hitherto stellar performances from crypto assets such as BTC and ETH have prompted well-heeled crypto investors to take their money off the table, further driving the down turn in crypto market valuations.
Supply chain issues continue to act as a drag. China accounts for around 13% of the global trade, and China’s zero tolerance approach towards Covid has led to a lockdown in the country, which has partly resulted in huge levels of shipping congestion near the Chinese ports. Companies such as Tesla have lost about a month of work because of the Shanghai lockdown, and some other companies claim that an “abnormally high” level of inventory was in transit, unavailable or held at ports, sending the stock market into a frenzy. (Bloomberg, 2022)
Image: World Bank
Along with the supply chain crisis, the Russia-Ukraine war has played a significant part in the fortunes of both stock and crypto markets. Russia previously supplied the European continent with 40% of its natural gas and 25% of its oil. The subsequent sanctions and ban on Russian imports sent the price of oil soaring to $109/barrel, driving inflation, and while some of the oil majors and smaller listed oilco’s are now trading at multi year highs, the uncertainty has weighed heavily on the markets.
The impact of higher oil prices has also impacted positively on companies at the junior end of the market. Echo Energy (AIM: ECHO) which has a license portfolio of 12 producing oil and gas fields with infrastructure in Santa Cruz Sur region of Argentina, found itself in the midst of this global demand for oil. Since the start of the Russia-Ukraine war (24th February 2022), Echo Energy shares have risen by 13.1% and at one point (22nd April) had returned its investors a 47% share price increase since the start of the war.
Source: Echo Energy
Whatever phrase you might use to describe it – end of bull run or correction – bitcoin has fallen to its lowest levels in years – $29,000. A number of factors can be attributed, but one key driver has been the collapse of so called stable coin terraUSD (UST), which as a supposedly stable asset, fell from a high of $118 (£96) to $0.4, rocking the crypto currency markets and having a knock-on effect on other stablecoins. The companies behind stablecoins try to ensure they remain in parity with assets such as the US dollar, so one token will equal $1. The collapse of a stablecoin has fundamentally weakened crypto assets for the present, but despite this, after touching $29,000, BTC rocketed 7.6% to $31,200 in one day, demonstrating that there is a chance for brave traders to turn a profit during these volatile times.
This volatility also boosted cryptocurrency transaction volumes on platforms like Binance and Hotcoin Global, which on 11th May 2022 saw 24hr trading volumes of $27.44bn and $10.27bn respectively, generating spectacular platform commission in the process.
There has also been a consequential read over for listed blockchain and crypto companies such as dual listed Coinsilium (AQX: COIN, OTCQB: CINGF), which is a blockchain, open finance, and crypto finance venture builder. Coinsilium shares fell to $0.025 on May 12th, but the next day shares rocketed to $0.039, providing a 24hr return of 56%. The drop in price for # Coinsilium can be attributed to systematic (market) risk and macro-economic factors such as inflation and the collapse in stable coin terraUSD.
While cryptocurrency continues to fluctuate, of course share price performance can be driven by stock specific issues in addition to macro factors. In the case of Coinsilium, in addition to a substantial amount of cash reserves held in crypto currency, the company is growing through its strong fundamentals and most recently a positive response to its recent seed investment in Yellow Network, the first broker clearing network for cryptocurrency exchanges, brokers and trading institutions. Yellow Network assists and develops mesh networks of crypto brokers and traders to execute ultra-high speed trading via decentralised exchanges. With such high volatility and huge transaction volumes in the crypto markets, Coinsilium’s Yellow Network investment could see it benefit from substantial, volume based commission revenues in the future.
What both Echo Energy and Coinsilium fundamentals demonstrate here, is that despite the market turmoil and highly uncertain outlook, they both depict the core principle of the markets – ‘higher the risk, higher the reward.
Alan Green covers #PETS Pets at Home, #COIN Coinsilium & #KDNC Cadence Minerals on the Vox Markets podcast
Alan Green covers #PETS Pets at Home, #COIN Coinsilium & #KDNC Cadence Minerals on the Vox Markets podcast
Listen to the Podcast here
Crypto volatility is back…and then some! Some investors called it downtrend others call it a cryptocurrency reset. The recent cryptocurrency crash wiped out nearly $1 trillion of wealth; Bitcoin fell by 30% while Ethereum dropped by 45% between Dec 2021 – Jan 2022. Although data shows 70% of crypto investors joined the market in 2021, the question everyone is asking is whether crypto market dilution and the uninitiated selling out is the reason for the downtrend, or rathermore is it due to new and better Initial Coin Offerings (ICOs) offering better value? It could of course be nothing more than a normal market correction? Let’s discover!
Theoretically, there is an inverse relationship between interest rates and the prices of opportunity costs such as stock prices, commodity prices and crypto valuation. Moves by central banks such as the Federal Reserve and Bank of England over the past few weeks have had a major influence on the financial markets. We now know that Russia is considering a ban on cryptocurrency and China has announced fresh regulations that include the banning of mining, a massive clamp down on ICOs, all of which has contributed to the huge sell-off.
Despite the fact that monetary policies and interest rates will affect prices in the short-term, the manner in which blockchain or cryptocurrency will be utilized in the future will largely determine its longevity and relevance. Financial institutions such as JP Morgan have started using blockchain technology for the security, speed and privacy of end-to-end transactions. It is already widely accepted that blockchain can be used to verify documents and speed up process with the help of smart contracts in industries like real estate or insurance.
Put simply blockchain and crypto currencies are here to stay. Governments and sovereignties including El Salvador have already adopted Bitcoin as legal tender, so the gradual recognition and acceptance of blockchain and cryptocurrency as legal tender seems almost inevitable despite the recent moves by the Chinese government and the Russian central bank to enforce regulations. But even the latest developments in Russia suggest that President Vladimir Putin and the Russian Finance ministry have changed tack and backed blockchain and crypto mining, albeit with measures to tax and regulate the crypto mining industry.
Despite the recent price correction and downturn affecting all cryptocurrencies, our view is that this is little more than a systemic risk and ‘healthy’ market correction. It is worth considering the individual performances (pre correction) of many altcoins such as Solana and Cardano, which have blasted onto the scene giving higher returns than well-known cryptos like Bitcoin and Ethereum. This despite both Solana and Cardano being built on Ethereum and relying on the Ethereum Blockchain to function.
The rising popularity of these altcoins is due to their improved functionality and their ability to facilitate smart contracts and host decentralized applications at a lower cost than giant rivals like Ethereum. Not only do they offer lower transaction costs but altcoins like Solana are faster and can handle around 50,000 more transactions per second.
Although Solana, Cardano and Ethereum can be used to deliver smart contracts, there are still questions over Bitcoin’s use and functionality going forward? Currently the primary purpose of Bitcoin is to facilitate the transfer of funds via a secure network, although it is worth noting that companies like Coinsilium (AQSE: COIN) (OTCQB: CINGF), are engaged in partnerships to build a Bitcoin marketplace for NFTs and to enable transition of RSK blockchain standard NFTs to other blockchain standard NFTs including Ethereum.
Another burgeoning sector in the crypto and blockchain space is of course Non-Fungible Tokens (NFTs). These were hugely popular a few months back, and some were created by celebrities including William Shatner, Leonardo Messi and Justin Bieber. It does seem at the moment that some of the initial hype has waned so the question remains; are NFTs still a relevant asset class or were they just a flash in the pan?
Our belief is that although interest has waned in the short term, this has largely come about as a result of other major global events and developments taking centre stage as already outlined. Omicron, followed by a stock market and crypto market crash in January 2022 due to Russia and China moves against crypto currency have seen many less experienced investors sell up and get out. These events may have combined to move focus away from the NFT hype in the short term, but we believe longer term the hype and demand for NFTs will return. The size of the NFT market passed $40 billion in 2021 and is expected to double by 2025.
And NFTs are still catching the headlines too. Celebrities Kevin Hart and Paris Hilton recently bought a Bored Ape Yacht Club NFT for over $300,000.
Apart from the traditional use of NFTs as a form of art, they also offer the potential to buy digital lands in virtual worlds like the metaverse, and the potential to license and publish music ownership. Interest and hype may ebb and flow, but NFTs are definitely here to stay.
Stick or Twist
In summary, we believe that while the sharp price movements in cryptocurrency will continue, altcoins like Solana and Cardano with their higher transaction speeds and lower gas fees offer great potential from here on. Alternative uses for Bitcoin – the king of crypto, such as a Bitcoin marketplace for NFTs adds a new dimension and functionality to the original cryptocurrency and a potential target price of $100k in a couple of years.
All in all, for investors able to cope with the sharp price movements, investing into Bitcoin, Altcoins and NFTs looks likely to deliver an increase in portfolio value over the longer term, and always the potential to deliver spectacular quick gains for short term traders. In pontoon parlance – Twist!
Alan Green talks about news from #COIN Coinsilium, Dekel Agri-Vision & #UJO Union Jack Oil
Alan Green talks to Eddy Travia, CEO & Co-Founder of Coinsilium (AQX: #COIN, OTCQB: $CINGF), a Blockchain & Open Finance venture builder based in Gilbratar.
Eddy talks about his role in the evolution of Coinsilium from the first ever blockchain IPO on the Aquis market, through to the move to Gilbraltar and last year’s pivot to become a venture builder in the blockchain and Non Fungible Token space.
We look at the Nifty Labs JV between Indorse and Coinsilium, and the potential of the new NFT Marketplace currently under development. We then discuss NFT Vision Hack, an NFT focussed global hackathon organised jointly between Coinsilium and Indorse, and Eddy outlines what he expects from it, before Eddy discusses the NFT market in comparison to the cryptocurrency market
We finish with a look at the financial position of Coinsilium ahead of the interims, before Eddy provides some H2 2021 milestones to look out for.
Alan Green talks Bitcoin, Berkeley Group #BKG, Mosman O&G #MSMN & Altona Rare Earths #ANR on UK Investor Magazine podcast
Alan Green joins the Podcast for our weekly instalment of markets and UK equities.
This Podcast starts by looking at Bitcoin and the factors driving the recent selloff. China has implemented restriction on Bitcoin that sent the price spiralling and we look at both sides of the argument around whether now is a time to buy.
We explore Berkeley Group Holdings (LON:BKG) after the company updates the market on a bumper 2020 where the South East focused house builder managed to grow their top line despite the pandemic.
However, shares in the London-listed company fell in the immediate aftermath and we question whether investors were simply expecting too much from the company, or were nerves around a slowdown in the wider housing market driving sentiment.
Rightmove said they saw house prices rise 0.8% in June, down from 1.8% in May.
We also discuss Mosman Oil & Gas (LON:MSMN) and Altona Energy (LON:ANR).
Alan Green talks to Malcolm Palle, Executive Chairman of Coinsilium (AQX: #COIN, OTCQB: $CINGF), a Blockchain & Open Finance venture builder based in Gilbratar.
Malcolm traces the history of Coinsilium as the first ever blockchain IPO on the Aquis market, through to the move to Gilbraltar and last year’s pivot to become a venture builder in the blockchain and Non Fungible Token space.
We discuss the nebulous opportunities available across the NFT market, with examples of digital art by Beeple and the Kings of Leon album release as an NFT.
Malcolm then covers the company finances before providing some key takeaway points and milestones for investors.
No sooner do most retail market investors finally understand the difference between cryptocurrency and blockchain, (simply put crypto needs blockchain, blockchain doesn’t need crypto), than the timely debate starts as to which platforms are actually commercially viable.
With Bitcoin and Ethereum taking up the most column inches, the uninitiated could easily believe they are the only platforms out there.
Whilst they are arguably the most popular names in the public blockchain arena, there are many other public and private platforms offering distributed ledger technology (DLT), each with their own strengths and weaknesses.
As you can probably guess, given the title the only certainty is that they don’t talk to each other. Older readers will of course remember the hackneyed comparison and discussions regarding VHS (JVC) and Betamax (Sony) home video recorder systems in the dim and distant past. While it would be nice to think that we we’ve learnt something about technical standards in that time, it appears not to be the case – after all who really needs interoperability anyway?
Accenture’s press release (1) earlier this month details its approach to enable two or more disparate blockchains to have some form of communication whether this be transfer of a tokenised asset or data mapping different blocks across different blockchains. The devil is of course in the detail, but this is obviously a move in the right direction; anything that helps bring together two organisations with different technical solutions and / or with disparate requirements must be good.
Interoperability is key to the take-up of DLT technology. Therefore, the ability to run an application on a DLT platform, any DLT platform is a key consideration with solutions like Sequestrum our Universal Digital Repository application (2). The universal element here was designed in from day one, we wanted to achieve an application that had near zero barrier to entry, an application that could be added to legacy systems to provide that immutable proof of record whether the use case be for copyright, audit or governance, without have to re-engineer vast swaths of code.
It was equally important that the application could sit on top of the client’s choice of DLT platform. Taking the approach adopted by some of the application development frameworks, we looked to separate the application from the DLT platform, choosing to interface these via an application programming layer (API). Not a new solution, but very flexible. In theory this API layer acts like the Babel fish, allowing two incompatible elements to communicate, sometimes easily, sometimes with a bit more complexity. In this case allowing the application to remain agnostic to whichever platform it is accessing its data from.
Sequestrum is fully owned by us at Catenae Innovation (CTEA.L), is already listed on the LSE and is in many ways well ahead of Silicon Valley as a proven, cash generating offering.
Developed by Alan Simpson, better known for building and launching the BBC iPlayer, Sequestrum is currently being developed on two private DLT blockchain platforms and is a leap forward both in being both cost effective to the end user and ultra efficient compared to current solutions.
Our next client implementation is based on a Hyperledger platform, after all if it’s good enough for IBM!
We may yet have to deliver the modern age equivalent of the morphing tape cartridge to fit all the VCRs in the world, but the Catenae team are more than happy that Sequestrum is a good start.
by Tony Sanders