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Recent Market Drop Reveals Industry Is Entirely Speculative Driven

Cryptocurrency–Confusing is the best word to sum up how the crypto markets have performed over the preceding weeks. Despite the excitement of July and early August’s price rally, a welcome sign in an otherwise severely bearish year, the crypto markets have again failed to hold momentum and slipped backwards. While Bitcoin has managed to sustain above $6000 for the time being, many of the top ten altcoins and beyond have reached all time lows for the year–some of which are approaching their valuation prior to 2017’s end of year explosion.

The result is investors and cryptocurrency enthusiasts left scratching their head and wondering how an investment class that is already eclipsing 90 percent in losses from the beginning of the year can continue to fall.

Some place the blame on the recent emphasis over a Bitcoin Exchange Traded Fund. While ETFs were hardly mentioned during 2017’s bull run (most of the news on that front was consumed with CBOE’s launch of BTC futures) the recent narrative in crypto has approached near obsession over the U.S. Securities and Exchange Commission green-lighting a Bitcoin ETF. The largest proponents of a BTC ETF are the same that continually rally around the “institutional money is coming” slogan, a belief that once Wall Street and other big-capital investors turn their sights to cryptocurrency prices will resume smashing all-time highs. However, the net effect has been an investment base hinging upon news of ETF approval, as opposed to any discussion on the advancement and adoption of cryptocurrency.

While 2017 will be remembered as one of the most bullish crypto markets of all time, 2018 has been far more practical in the sense that crypto’s real world presence is growing. Stories of adoption that are commonplace today would have been celebrated endlessly just twelve months ago. It’s understandable considering the wild price ride to end 2017 brought in a host of new investors–many of which are sitting on >50 percent losses–that are looking to recoup on their investment or find some positive spin on the massive fallout in value. However, speculation alone will not continue to drive the industry. The dot.com bubble never came close to killing the internet, despite the massive amount of capital it flushed down the drain in addition to shuttered companies, because the internet proved itself to be a resilient and necessary technology. Most within the industry of cryptocurrency find similar value in Bitcoin and other projects, it’s just the focus which has shifted away to endless discussion of price.

The Union Bank of Switzerland (UBS) published a report last week concluding that 70 percent of price movements within the crypto markets could be classified as speculative “momentum driven” interest. Value investing has gone out the window as nearly every cryptocurrency community experiences the inverse reaction of positive news being met with declining price. Again, the blame can somewhat be tied to the overall market reliance upon the health of BTC: altcoins rarely hold a standalone impact, and are always at the mercy of the original cryptocurrency when the market turns downward.

But even research into the various technologies, development teams and stories have adoption can be met with a degree of price mockery. To give a recent example, TRON announced a partnership with the world’s leading and most recognizable torrenting service BitTorrent, only to see a decline in price that is 93 percent below January’s all time high. Every currency is suffering, and investors are left with no choice but to try and time the market and cut their losses. However, most of the speculation is being driven by a pan-belief in the declining market. Investors are selling because they believe others will sell and the price will go down, creating a self-fulfilling prophecy that is not indicative of the health of the industry.

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Top Exchange Binance Eyeing $1 Billion in Profits for 2018

CRYPTOCURRENCY EXCHANGES–Leading cryptocurrency exchange Binance is thriving despite 2018 seeing a massive downturn in pricing for cryptocurrency. As alluded to last month by Arthur Hayes, co-founder of exchange BitMex, the falling price of cryptocurrency has yet to dampen the growth most exchanges are seeing throughout 2018. While investors scramble to secure their funds and find profit in the bear market, exchanges continue to win through their model of trading fees and other miscellaneous charges such as for withdrawals. Compared to traditional brokers, such as E-Trade, Charles Schwab or other stock picker portals, the fees imposed on crypto-based transactions are minuscule, often costing users less than a quarter of a percent of the total value transferred.

Ben Delo, who founded BitMex alongside Arthur Hayes in 2014, made headlines earlier in the week when it was revealed by The Daily Mail that he had become the youngest self-made billionaire in Britain’s history, and the first “bitcoin billionaire” to emerge in the United Kingdom. Clearly, despite the tug-of-war capital flowing in and out of the industry of cryptocurrency, exchanges and their employees are managing to flourish in the uncertain landscape of the market.

Binance, currently ranked number one among cryptocurrency exchanges by daily trade volume, has told Bloomberg it expects to turn a profit of $500 million to $1 billion by the end of 2018. Despite the exchange facing significant technical difficulties throughout last week, which brought trading to a halt and raised the ever-present concern of a hack (and also gave investors the iconic response “funds are safu”), Binance CEO Changpeng Zhao told Bloomberg the company netted 300 million USD in revenue through the first half of the year, with the customer base growing past 10 million users.

While other exchanges such as Coinbase have boasted a higher customer base, Binance has managed unreal growth through the first year of its existence. Zhao founded the exchange in July 2017, after raising 15 million USD through an ICO. The company now experiences an avegrage turnover volume of 1.5 billion USD daily, with the customer base growing from a reported 2 million users to start the year.

Given the murky landscape of cryptocurrency exchanges, the lack of regulation and the potential for government crackdown in many countries around the world, the competition for trading platforms has been scant compared to the profit to be made. In addition, established exchanges such as U.S. based Coinbase have struggled to capitalize on demand, being accused by Business Insider of having insufficient resources to handle their customer load as well as a 134 pages of complaints filed with the SEC.

Compared to Coinbase, which offers four cryptocurrencies to buy and sell, Binance is a near-industry leader in cryptocurrency selection for trade. However, it suffers from the ease of use and accessibility that other mobile-based platforms provide to customers. As it stands, the average investor just getting into cryptocurrency will find some difficulty navigating to Binance, even if the registration process itself is fairly simplistic. But, that only reveals how much room the exchange has left to grow, and the untapped customer base it can expand into.

With the acceptance of cryptocurrency exchanges as banks and financial institutions in South Korea, and the looming possibility of regulation in a number of other countries, the landscape of exchanges could swell as companies and entrepreneurs look to capitalize on the massive trading profit.

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