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Bitcoin is tipping the scales in the Remittance Industry: Mexico and Philippines experience heavy adoption

Posted on January 6, 2017 | by [email protected]

‘Borderless’, ‘Peer to Peer’ and ‘Low transactional charges’- prime attributes of Bitcoin that has made its adoption conceivable. Interestingly these are the factors that helped the cryptocurrency to find its place in Remittances Industry. The fact that transactions of high orders are executed within no time at very low transactional costs has caught the attention of many remittance providers. Banking on the same many cryptocurrency based remittance startups have popped up especially in Eastern part of the world. Let’s look into how Bitcoin is disrupting remittance industry:

Remittance Industry Overview:

A remittance is a transfer of money by a foreign worker to an individual in his or her home country. Money sent home by migrants competes with international aid as one of the largest financial inflows to developing countries. Workers’ remittances are a significant part of international capital flows, especially with regard to labour-exporting countries. From the start of this decade India, China, Mexico and Philippines have been the top countries in terms of remittance inflows. Owing to this the remittance startup scenario in South East Asia and Mexico has improved significantly with a touch of cryptocurrencies.

Existing players in fiat currencies:

When it comes to cross border transfer of fiat currencies, there is a standard transaction fee which varies with different countries to carry out the transaction. Most notable companies in this space include Western Union, Money Gram, Ria, TransferWise and World Remit. These companies are pretty old and exist in more than 110 countries making Remittances easy with short processing hours. The volume of transfers of these companies is estimated to be around $750 million per month.

Upcoming Bitcoin based remittances startups:

To capture the remittances market, many Bitcoin startups have come into existence locally in these countries with varied services. FlexM, Fastacash, Sendah, Rebit, Bitspark and Toast are notable startups in South East Asia that have been actively facilitating Bitcoin remittances. Few of these startups also provide facilities of storage in the form of Gold tokens, precious metals and other assets. When it comes to Mexico, chunk of these remittances are estimated to come from US across the border. Bitso and Vogel are two mainstream Bitcoin exchanges in Mexico that offer wallet and merchant services in addition to Bitcoin Trading. They have reported a significant rise in Bitcoin transactions and cross border payments. How Mexican Government would react to the growing popularity of Bitcoin through remittances is to be seen.

China looks to halt Yuan’s fall, tumbles Bitcoin instead

Posted on January 5, 2017 | by [email protected]

Ironically, for a country that has banned Bitcoin and other cryptocurrencies, China remains to be the highest contributor to Bitcoin in terms of volume. With a total contribution of whooping 96% in 2016, China is a major influencer when it comes to Bitcoin prices. Be it the surprise bull run mid – 2016 or the short term fall in prices or the big push towards the end of the year, China has always had a major hand in it. Coming strongly into the New Year, the Bitcoin Bull Run came to a halt owing to Chinese policies. 5^th of January saw Bitcoin dropping from near all-time high to under $950 in a short span of time. Let’s dive deep into how this happened and what might be the fate of Bitcoin from here:

Capital controls kicking in?

The Chinese authorities have closely monitored Bitcoin in 2016 to validate the boost patterns. After thorough analysis, they have concluded that Bitcoin is used to launder money out of the country. China as such has strong capital controls and conversion of local currency into foreign currency is well accounted. Owing to the peer to peer nature of Bitcoin, it has become one of the viable routes to launder money out of the country. Hence Chinese authorities have employed strict capital controls over Bitcoin. These measures require identification and completion of detailed forms to convert yuan into foreign currency. These measures may now be starting to work as the currency becomes scarce offshore.

Halting the Yuan’s fall:

Chinese Yuan increased by 1% following a weak dollar as interest rates rose by 96% in Honk Kong on Thursday. While China has halted the Yuan devaluation temporarily after being included in the SDR basket, they still have some devaluation left to do. Market analysts are betting on a decline of yuan this year to 7.15 from the current 6.8125 but this would trigger a hostile situation with USA. Hence to hold off on the same order China might order their state-owned companies to sell their foreign reserves.

Future Dynamics with US and effect on Bitcoin:

Trump has labelled China as a currency manipulator and aims to negotiate a “fair and free” trade arrangement with China. To escape the falling value of their currency, Chinese citizens started investing in Bitcoin, changing the path of the capital. To stop further devaluation, China is looking to sell foreign reserves. But as this can’t be executed completely owing to US policy intervention, further devaluation of Yuan is likely and definitely set on the cards. Hence Bitcoin will continue the climb once the Yuan dynamics strike a balance.

Why 2017 can turn out to be very positive for Bitcoin

Posted on January 4, 2017 | by [email protected]

Bitcoin has had a strong start to 2017 with the trend looking strong enough to break the all-time high set in 2013. 2016 has been a positive year for the cryptocurrency with the currency showing an increase of $460 during the year. Most investors have resorted to use this digital asset as a portfolio diversifier and it has proved out to be a winning gamble. Fundamentally this was a well thought out move and it payed off with good dividends. But the question lingering in the minds of many Bitcoin enthusiasts and investors is how these strategies and Bitcoin would fare in 2017. Let’s look into few reasons why we believe Bitcoin would continue to weather the terrain to outperform assets:

China and the East step up the game:

China has always been a major price and volume driver for Bitcoin. The Yuan trading volumes observed a major uptick towards the year end owing to the Chinese Government’s announcement of imposing capital controls over Bitcoin. While this might happen sometime late this year, people are now actively moving funds out of the country at a very quick pace. This avalanche might last for a good amount of time into 2017.

With Japan abolishing sales tax on Bitcoin, South Korea encouraging Bitcoin and Blockchain accelerators and India’s demonization prompting for a cashless Indian society, the contributing prospects from the east only look stronger.

Eurozone’s loss would be Bitcoin’s gain:

The staggering effect of Brexit this year was evident when the European markets collapsed while Bitcoin soared mid-year to trigger a bull run. This quick transfer of funds into a digital unrelated asset has been the defining aspect of 2016’s Bitcoin Bull Run. In the face of Geo-Political crisis Bitcoin has replaced Gold as the safe hedge. With Eurozone still wobbly with impending debt and banking bail outs, cryptocurrencies seem to be a safer option for investing and hedging.

With Italian banking bail outs, Spain’s growing recession, ongoing crisis in Greece and post effects of Brexit, 2017 would see heavy activity in Bitcoin owing to the European continent.

USA’s growing adoption levels and the Trump factor:

The regulation of cryptocurrencies has been a hot topic in the US senate in 2016 and has seen some implementation in major states. With Trump’s policies aligned with major changes required to accelerate Fintech industry, adoption might reach higher levels in 2017. With thoughtful regulation and strong backing, mainstream adoption looks very viable in USA which would drive prices significantly in 2017.

Summing up, 2017 looks very positive for Bitcoin and Blockchain with the cryptocurrency all set to reach new levels of penetration.

The Chinese look to impose capital controls over Bitcoin, a hiccup to the Bull Run?

Posted on November 4, 2016 | by [email protected]

When it comes to countries and cryptocurrencies, China and Bitcoin share a relationship similar to estranged lovers. China has a credit fueled economy; Bitcoin had a period of stagnated growth. Chinese used Bitcoins to escape the debt trap and this in turn boosted the growth of the cryptocurrency. The price of Bitcoin almost tripled (from $220 to $730) in a year thanks to the Yuan devaluation. While this is convenient to the proponents supporting the currency, the Chinese government sees this as a threat to the economy.

The Hostility:

China has dominated Bitcoin mining and trading domains for some time now. The widespread use of the digital currency has led the Government to initiate regulations to monitor Bitcoin. In 2013, the government classified Bitcoin as a commodity threatening its status as currency. This placed Bitcoin outside the purview of the foreign exchange regulator. People’s Bank of China and financial regulators made it a point to specify that bitcoin functioned as digital commodity only. Owing to the success of the cryptocurrency, the government itself was looking into possibility of its own national digital currency. In 2013, finally China moved to ban Bitcoin barring all financial institutions from handling Bitcoin transactions.

Capital Control:

Capital control represents any measure taken by a government, central bank or other regulatory body to limit the flow of foreign capital in and out of the domestic economy. These controls include taxes, tariffs, outright legislation and volume restrictions, as well as market-based forces. Capital controls can affect many asset classes such as equities, bonds and foreign exchange trades. As mentioned earlier, China has a credit fueled growth, which implies that it is important that they ensure the value of money is intact. This can only be assured by implementing Capital Control over certain assets.

Government to make the move soon:

According to Bloomberg, Chinese regulators are looking into measures for limiting Bitcoin transactions taking the funds out of the country. The policies include restricting domestic bitcoin exchanges from moving the cryptocurrency to platforms outside the nation. Also would be in place quotas for the amount of bitcoins that can be sent abroad.

The measures were triggered when investors bought bitcoin on local exchanges and sold them offshore evading taxes. Whenever the Yuan depreciated, there was heavy inflow of funds into Bitcoin as means of hedging. With U.S. interest rate hike around the corner, policy makers are trying to restrict the outflow of funds with Yuan weakening. When the measures will be implemented, growth of Bitcoin will surely face little discomfort.

Ethereum Hard fork and Yuan Devaluation push Bitcoin prices higher, strong correction to follow?

Posted on October 31, 2016 | by [email protected]

For some time, the month over month price of Bitcoin has been on the rise and the trend has been consistent. It is a recognized pattern that due to onset of some factors the Bitcoin prices tend to break out during the fag end of the month. For the month of September while the break out was purely technical, October had a couple of major factors. Let’s look into these factors, how they have influenced the price and what might be the further price movement:

Yuan Devaluation:

The International Monetary Fund announced the launch of the new Special Drawing Right (SDR) valuation basket on October 1st. This basket now includes the Chinese renminbi making it the fifth currency in the SDR basket. China is noted to have a credit fueled growth. Most of the Heavy industries in the leading sectors are escaping the inflation by exporting their products abroad. But for China to fit in with other currencies in the basket, it has to depreciate Yuan. They have been holding off this move as they were in the review period by IMF. Now that they have bagged the SDR, they have started to devalue Yuan slowly but consistently. The first wave of the move was observed in the last week of October which prompted the Bitcoin prices to go up.

Ethereum Hard fork:

A hard fork is a change to the underlying Ethereum protocol, creating new rules to improve the system. After consensus is reached on what changes should be included in a hard fork, changes to the protocol are written into the various Ethereum clients. Since September 18th (UTC), the Ethereum network has been under attack by a person or group resulting in large delays before transactions were processed. The network is currently filled with pending transactions which is causing users delays in processing their transactions. Hence both Ethereum and Ethereum Classic have Hard forked on 18^th and 25^th of October respectively. This might be one of the major reasons why increased trading volumes and higher prices were observed in Bitcoin.

Bitcoin to see correction:

Owing to the above major factors, the cryptocurrency has risen beyond the $700 levels in the last week of October. But one concerning factor to this uptrend is the fact that the rise has been meteoric and not organic. The break out from $620 to $640 levels saw the prices coming down again to compensate for the lack of volumes in that region. Similarly the break out to above $700 levels saw very few volumes. This might compel the market to trade sideways in the void region for some time in the form of correction. Later the genuine uptrend might continue taking the prices further higher.

Bitcoin Finds Strength for Bullish Rally as Chinese Yuan Becomes Weaker

Posted on October 26, 2016 | by [email protected]

China is fueling an impressive uptrend in the price of Bitcoin as Chinese investors find more reasons to store their wealth in alternative currencies. The Chinese Yuan has been falling lower in the last couple of weeks in response to the possibility that the U.S. Federal Reserve might raise interest rates by the end of this year.

However, Chinese folks are flocking to alternative currencies such as Bitcoin to hedge against currency devaluation and volatility in the Chinese economic landscape. This piece seeks to explore the relationship between Chinese economic woes, currency devaluation and its effect on the gains in the price of Bitcoin.

CoinDesk Bitcoin Price Index for China

Bitcoin soars to four-month high in response to weak Yuan

The Chinese Yuan is becoming weaker in the wake of tougher capital controls designed to limit the amount of money that Chinese people are permitted to move abroad. The weakness in the Yuan has started fuelling an increased demand for Bitcoin and the upside potential for the alternative currency is looking strong.

On October 21, Bitcoin soared by 4% to near a three-month high of $655.50 to mark the highest trading price since July 29. Trading data available in the markets also show that trading volume soared to 5.5 million Bitcoin to mark the highest point in trading volume in the last 7 months.

You’ll remember that China devalued its currency in August 2015 as a means to halt the outflow of money out of the country and in order to help its local manufacturing industry. The move to devalue the currency didn’t sit well with China’s money families and they protected their wealth by diversifying into Bitcoin and other alternative investments. Of course, the price of Bitcoin has gained about 80% from August 2015 to date in response to that devaluation among other things.

The value of Bitcoin will continue to increase going forward as the realities of a weak Yuan sinks deeper. Zhu Jiawei, COO of Beijing-based Huobi, one of the largest Chinese Bitcoin exchanges observes that “as the Yuan enters a path of depreciation, investors will consider investing in assets that can preserve value and hedge risks.” This morning, Bitcoin is already up 0.78% to $653.47 to suggest that it has found support around $640. Bitcoin is up 0.47% on the Chinese market as it trades against 4,505.87 Yuan.

Can Bitcoin cross the $1000 milestone again?

Arthur Hayes, founder of Hong Kong-based Bitcoin exchange BitMEX observes that that value of Bitcoin will continue to increase if Beijing doesn’t deviate from its plan for constant devaluation of the Yuan. It should be noted that Bitcoin currently trades at a 2% premium against to the Chinese Yuan at 4,488.6 in contrast to the price of Bitcoin against the USD.

The Yuan is currently in a free fall against the dollar dropping 0.1% to 6.77723. Hayes observed that the Yuan could fall as much as 7% against the USD by January and that such a massive decline could cause Bitcoin to rise to cross the $1000 milestone again. In the words of Hayes, “The continued devaluation of the Chinese yuan is what’s driving traders at the margin to buy Bitcoin.”

Will a Trump presidency mean Triumph for Bitcoin?

Posted on October 3, 2016 | by [email protected]

One of the two contenders of the US Presidential race Donald J Trump is all set for the big day. With just over a month left, the republic nominee has been very entertaining throughout his campaign. While U.S.A. waits for the decisive day, let’s look into what Trump’s presidency would mean to cryptocurrency enthusiasts:

Trump’s Economic policies:

Source: Moody Analytics Report — Source: Moody’s Analytics Report

At a 2016 Republican convention, Trump declared that he was going to free U.S. from bad trade agreements. He confirmed his anti-globalism position when he said:

“Americanism, not globalism will be our credo.”

He added that U.S. might pull back from NATO commitments which means U.S. would be walking away from the world. The effects of this could be similar to U.K. leaving the European Union. ‘Brexit’ had seen Bitcoin Prices soaring up with investors moving funds into the cryptocurrency. A similar event on part of U.S. might contribute to high prices and mainstream adoption.

A Trump presidency would put in place regulatory reforms on all industries. These reforms aim to remove “least critical regulations”. For Fintech industries, these financial rules were instituted one or two centuries ago. This implies that the regulatory environment may, finally, become far more welcoming for Bitcoin and Blockchain Technology. This may allow U.S. to finally catch up with European countries in terms of Fintech regulations.

While individually few policies might seem positive, on a whole, Trumps economic policies might turn out to be fatal for the economy.

Trump against immigration:

Stopping immigration has been the central theme of Trump’s campaign. He pledged to check immigration and remittances which followed his controversial speech about building a wall along the US-Mexico border. If these measures come into play, then people will start looking for alternative modes of remittance, which is Bitcoin.

If Trump really stands firm on his policies against immigration and remittance, Bitcoin transfers across borders will experience an uptick. This would lead to the development of a healthy Bitcoin ecosystem in U.S. and Mexico.

Trump’s Policies on China and the East:

Trump has vocally proclaimed many times during his campaign that the trade agreements with China will be renegotiated. He persuasively argues that we are currently in a trade war with the global economy resembling a zero-sum game. Nations are outright cheating by intentionally devaluing their currency, making exports cheaper at the expense of others. His economic plan aims to implement a non-zero sum system where trade benefits all. This is detrimental to the interests of Chinese as that would decrease their hold over their exports.

How any movement in Yuan has affected the Bitcoin prices is evident from recent devaluation policies by China. Implementation of the said policy by Trump would put China in a position of discomfort. They would initiate monetary strategies that would make Yuan sufficiently volatile. This would certainly see investments flowing into the Bitcoin market and the ecosystem would never be at equilibrium.

Hence Trump’s policies have an indirect bearing over Bitcoin and would push the currency in a positive light.

China’s Social Security fund considers to integrate Blockchain

Posted on September 6, 2016 | by [email protected]

Bitcoin’s price has been trading around the $600 levels after a surge in buying coupled with a small correction over the first week. The increase in the spot price continued to be bolstered by strong positive sentiment in the market. Fundamentally the market has grown more bullish on the news that China is considering integrating it’s Social Security fund with blockchain technology. Let’s take a closer look at China’s plans.

Social security fund to integrate Blockchain

China’s state social security system is trying to leverage blockchain technology in the maintenance of the funds. According to state-run newspaper China Daily, Wang Zhongmin, the National Council for Social Security Fund’s vice chairman said that the office is experimenting with the technology. The goal of the team is to reduce the transaction costs. The article, while presenting a potentially notable development from China, had few details on what this integration would entail.

Zhongmin said

“There’s no doubt that blockchain technology will be used in the Social Security system because of its valuable applications in the investment and management of social security funds.”

While how the integration would look is only up to speculation right now, the move came as a pleasant surprise. Especially since it came from one of the toughest opponents of the digital currency.

Apple’s approved list

For a long time, Apple’s stance on cryptocurrencies has been unclear. For the first time ever on Sunday, their approved list of blockchains and cryptocurrencies have been released. The biggest technology firm did this after reaching out to Anthony Di Iorio, founder of Jaxx, a cryptocurrency wallet. They had to tell him that they could no longer feature a version of his Jaxx wallet in their store. This is because the wallet features controversial Dash functionality. While Di Iorio is perplexed about the list, he believes that it is probably to protect its customers. The approved currencies are Bitcoin, Dogecoin, Litecoin, Ethereum, the DAO and Ripple.

Increase in Blockchain Technology Jobs

American Banking Sector has seen a steady increase in Blockchain Technology related Jobs. Companies are stepping up their recruitment process by offering a number of blockchain technology related jobs. This is majorly as companies realized the potential of the blockchain. According to Yahoo Finance, IBM recently proclaimed that it is undergoing massive internal restructuring. The reorganization is in line with the company’s plans with Blockchain. They have created a new unit called Watson Financial Services, which includes Watson, cloud and blockchain-related strategy. Many major banks and firms are also looking for Blockchain professionals to transform their automation.

With increasing adoption of the underlying technology of the digital currency in many fronts, the currency itself is sure to enjoy good bull run for some time to come.

3 Bitcoin trading events that every Bitcoin investor should know about

Posted on August 31, 2016 | by [email protected]

Getting to know the Bitcoin Market

Given that Bitcoin market is relatively new, investors share uncertainty about its long-term viability. Like other currencies, Bitcoin is susceptible to fluctuations in price and value. However, the mechanisms that govern Bitcoin are radically different than those of traditional currencies. Bitcoin uses peer-to-peer technology, which is a selling point for people hedging their bets against centralized government. However, in the event of a systemic failure, such as a market collapse, there exists no central authority to respond. In a conventional capitalist system, such as the U.S., for example, the Federal Reserve can intervene in times of crisis with monetary policy. The question then becomes: how effective is Bitcoin in times of failure? Although there is no definitive answer to this question, by examining Bitcoin’s historical performance in times of crisis, investors can improve their understanding of the asset.

Three Bitcoin Crises

Three consequential crises of Bitcoin include the regulation of the central bank of China (December, 2013)¹, the collapse of Bitcoin exchange Mt Gox (February 2014)², and the security breach of Bitfinex (August 2016). Each of these events directly impacted the price of Bitcoin, pictured below.

Source: Coinbase

Bitcoin is Risky

In examining each of these failures, investors should consider the recovery process and the probability that a crisis will repeat itself. The regulation of the central bank of China was an unusual event; many investors were forced to exit the market and the remaining pool of investors became increasingly aware of the potential for regulation. The resulting slide in value of Bitcoin reflects the shift in regulatory risk analysis. This shift demonstrates that changes in legislation are often unpredictable and can have severe implications for Bitcoin price. To date, the price has not recovered to its high of December 2013. However, despite regulatory burdens, China has resumed high levels of Bitcoin consumption.

The collapse of Bitcoin exchange Mt. Gox and security breach of exchange Bitfinex demonstrate the market risk of database failures. Importantly, each of these cases was a result of human error. The blockchain did not fail, which possibly contributed to value recovery. In considering the recovery periods of each of these events, Bitcoin price recovered to 100% of its value within three weeks of the Mt. Gox collapse³, and has recovered to 97.5% of its value within a week of the Bitfinex collapse³. Despite lacking a centralized system, in each of these cases, after an initial loss, Bitcoin retained much of its value.

Sources

Library of Congress: Regulation of Bitcoin in Selected Jurisdictions
CoinDesk: Mt Gox: The History of a Failed Bitcoin Exchange
CCN.LA: China now Controls Bitcoin (and that’s just the Beginning)