Good morning Here’s what happens:
Prices: To start the Asian trading day, bitcoin is down 4% to $27,981 and ether is down 2.45% to $1,824
Takeaways: The West will continue to lead the future of crypto, but the East will play an important role, argues Taipei-based Woo Network co-founder Jack Tan.
Bitcoin opens the trading day in Asia at $27,981, down 4.9% over the past 24 hours, while Ether is down 3.8% at $1,824.
Despite this slow $30,000 pullback, in a recent appearance on CoinDesk TV’s All About Bitcoin, Joshua Frank, co-founder and CEO of research platform The Tie, pointed out that there are still plenty of positive market indicators for Bitcoin.
Bitcoin’s market cap dominance is rising again, nearing the June 2020 highs, he noted, but liquidity remains a challenge.
“I think a lot of institutions are excited about bitcoin. I think risk aversion is resonating right now. Just like in 2021,” he said, while explaining that a lack of liquidity remains a challenge for the market but also leads to Bitcoin’s overall outperformance.
“Bitcoin is outperforming for a number of reasons, including market consolidation, low trading volume and bank uncertainty,” he said. “In the short term, bitcoin is more correlated with gold. However, the regulatory environment in the US is unenthusiastic and negative towards crypto, contributing to low liquidity.”
Later in the week, traders will look to US job listings on Tuesday and news from the Fed on interest rate action on Wednesday.
By: Jack Tan, Co-Founder of Woo Network
Crypto companies may have to relocate from the US due to stifling regulations.
However, Western founders and teams can continue to dominate innovation by looking east, where governments are embracing new technologies.
These countries and jurisdictions have enacted more crypto-friendly laws and created a welcoming business environment for digital asset businesses. The mix for western companies with talent and other resources can be potentially powerful.
Regulation has become a key issue in the crypto asset space as the US responds to multiple debacles that have eroded trust in crypto. The Biden administration recently changed its position on crypto from neutral to negative through its advice from White House economic advisers, who said that “crypto assets do not appear to offer investors fundamental value so far.”
Exodus of talent, capital
Big crypto players are no longer looking to the US for leadership, and they have been looking for other jurisdictions to grow out of. For example, Ripple CEO Brad Garlinghouse said the crypto industry has “already started” moving outside the US, while crypto exchange giant Coinbase, whose once optimistic views on US regulation has soured, may launch a foreign trading desk . AndCircle opens a new office outside the US.
It’s hard to imagine they would go to the EU, as even the G7, an intergovernmental political forum made up almost entirely of Western countries, is outlining stricter regulations for digital assets. A French draft law, for example, stipulates that companies must comply with additional rules on internal controls, cybersecurity and conflicts of interest.
Regulators are more supportive in Asia’s financial hubs. Japan recently relaxed token listing requirements. Hong Kong announced it was open to crypto firms, Thailand said it would waive taxes on initial coin offerings (ICOs), and Dubai’s regulatory framework hopes to become a global crypto hub.
The East is also playing a bigger role in cultivating crypto innovation by spurring higher crypto adoption rates. The East dominates analytics firm Chainalysis’ top 20 index of global crypto adoption, including Vietnam, the Philippines, India, Pakistan, Nepal, Indonesia, and China.
Funds also flow into the region. China’s third-largest state-owned insurance institution – Pacific Insurance Investment Management Hong Kong Branch – and Waterdrop Capital unveiled compliant blockchain venture capital and POS token earnings growth funds, respectively. Dubai-based Cypher Capital is looking to raise over $100 million for a new venture capital fund aimed at “Asian tech tycoons.” HashKey Capital, which is instrumental in advancing crypto in Hong Kong, has closed its third $500 million blockchain funding with a focus on growth opportunities in emerging markets.
How could the West still dominate?
A more open regulatory environment, faster crypto adoption, and the flow of funds into the region do not necessarily mean that the East has dominant market players in the crypto space. And western countries still have relatively stronger economies and nurture exceptionally brilliant talent through ingrained cultures of innovation and the strongest financial markets.
Westerners have founded the most innovative companies in the crypto space. For example, Ethereum founder Vitalik Buterin and Binance founder Changpeng Zhao were raised and educated in Canada. The founders of Coinbase, Grayscale, OpenSea, Gemini, Kraken, Uniswap, and Chainalysis are mostly US-based and US-educated.
The West dominates the top 10 ranking of the most innovative economies measured by the Global Innovation Index, including Switzerland, the United States, Sweden, the United Kingdom, the Netherlands, Germany, Finland and Denmark. We would expect innovative crypto projects to continue to emanate from these locations.
The crypto space needs the support of the financial and fintech hubs, and the majority of the frontrunners still come from the West. In the Global Financial Centers Index released last month, 14 of the top 20 financial centers are Western, including New York, San Francisco, London, Los Angeles, Boston and Washington DC.
The importance of a robust risk-reward framework
Having worked in the financial sector my entire professional life, I have witnessed how innovations emerge from crises and deep stressful situations. Innovation is often chaotic.
Businesses and governments forget this, and it is often the leaders who issue policies that are too focused on protecting the status quo through risk mitigation. We’ve seen innovative companies like Kodak and IBM lose their edge as they focus more on stability and the bottom line for shareholders. Meanwhile, scrappy startups with vision, talent and nothing to lose can sometimes be very successful – provided they can operate in a supportive environment.
An east-west partnership could be Crypto’s model for the future.
Another major bank was taken over by the federal authorities, resulting in the second largest bank failure in US history. Jason Brett, Managing Director of Key Bridge Advisors and a former US regulator at the FDIC, along with Ryan Grace, Head of Digital Assets at deliciouscrypto, joined the “First Mover” to discuss how crypto markets are reacting after most assets and First Republic Bank deposits will now be taken over by JPMorgan Chase. Also, Nikhilesh De, CoinDesk’s Editor-in-Chief for Global Policy and Regulation, shared a summary of CoinDesk’s annual Consensus conference.
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