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Binance: The Cryptocurrency Bubble Needs to Burst

Ella Zhang, the head of Binance Labs believes there is a cryptocurrency bubble that needs to burst before true blockchain utility can emerge. Zhang recently announced that Binance was investing $1 billion in support of cryptocurrency and blockchain technology startups.

True Utility Will Only Emerge After the Cryptocurrency Bubble Bursts

In a phone interview with Bloomberg, the Binance Labs chief outlined the company’s views on the present state of the market, saying:

We’d like the bubble to break. We still see a lot of hype in the market, valuations are high and unreasonable. We really think if the bubble bursts, it’s a good thing for the industry.

Many cryptocurrency critics say the market is a bubble. Some have even likened it to previous market bubbles like the dot-com bubble of the 90s and the tulipmania of the 17th century. The consensus among the crypto-naysayers is that digital currencies will die-out after a few years.

For the crypto-proponents, many debunk the bubble claims. Even the ones who do say when the bubble bursts, the projects with real utility will emerge and cryptocurrencies will drive the development of the future. They point to the dot-com crash and how it led to the evolution of the modern-day e-commerce space. Zhang’s sentiments seem to support this last opinion. According to the head of Binance Labs, the crypto bull run is good for attracting investors, but it offers no real utility for the market beyond the flow of liquidity.

The Binance Fund and Support for Crypto and Blockchain Startups

Binance recently announced a $1 billion support fund for cryptocurrency and blockchain startups. As head of Binance Labs, the venture incubator for the Binance platform, Zhang is directly in charge of overseeing the support fund. The company is also taking steps to combat the prevalence of fraud in the industry. Binance, the cryptocurrency exchange behemoth plans to launch the Cryptocurrency Governance Initiative (CGI) with the website going live.

Speaking on the initiative, Zhang said:

The main purpose of this is to fight scams and sh*t coins and to boost crypto and blockchain technology.

The head of Binance Labs also said that any project that Binance invests in must vow not to participate in pump and dump schemes. According to Zhang, Binance will closely monitor each project to ensure that they remain in compliance with the provisions of the fund. Any project found violating the terms and conditions will be immediately de-listed and company will cease its collaboration with the erring party.

Record Revenue Earnings for ICOs in 2018

Zhang’s comments on the state of the market bring into sharp focus the Initial Coin Offering (ICO) scene. Despite the decline in the prices of digital currencies, the ICO market continues to grow. 2017 was a breakout year for ICOs with many projects raising hundreds of millions of dollars. The sale of digital tokens by ICOs in 2018 has already far exceeded the record set in 2017. According to figures released by Coinschedule, ICOs have raised about $9.6 billion so far in 2018.

Do you agree with Zhang’s notion that the crypto bubble needs to burst before the industry can indeed begin to flourish? What are your views on Binance’s efforts to support cryptocurrency and blockchain technology startups? Keep the conversation going in the comment section below.

Image courtesy of Shutterstock, LinkedIn (https://www.linkedin.com/in/ella-zhang-992b9817), and Coinschedule.

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Morgan Stanley: Bitcoin “Surprisingly Similar” to Dot-Com Bubble, Unfolding 15 Times Faster

Research published by Morgan Stanley recently found that bitcoin is behaving a lot like the Nasdaq did nearly 20 years ago, during the dot-com bubble. The timeline, however, is unfolding 15 times faster than it did then.

Per a note the financial institution sent to its clients, both the Nasdaq in 2000 and bitcoin nowadays rallied between 250 and 280 percent in their most bullish periods. Sheena Shah, a strategist at Morgan Stanley, noted that bitcoin’s rally was 15 times faster than that of Nasdaq in 2000.

Per Shah, both the price moves and volume behavior are similar when compared. The analyst noted that bitcoin lost 45 to 50 percent of its value in a recent bearish wave, just like Nasdaq did 18 years ago.

Shah further noted that the Nasdaq bear market of 2000 had five similar prices declines “averaging a surprisingly similar amount of 44 percent.” Bitcoin recently fell from a $19,200 all-time high in mid-December to $8,530 at press time.

Trading volume, according to Morgan Stanley, is another red flag. The analyst noted that bitcoin’s trade volumes surged 300 percent since December, but keep falling each rally ahead of the bear markets.

“The follow-up rally for both bitcoin and the Nasdaq always saw falling trading volumes. Rising trade volumes are thus not an indication of more investor activity but instead a rush to get out.”

USDT trading an “interesting development”

There are, however, bitcoin trading developments that weren’t seen during the dot-com bubble. These are, to Morgan Stanley, an “interesting development. Historically bitcoin has been traded in three fiat currencies: the US dollar, the Chinese yuan, and the Japanese yen.

During the recent bear market, Tether (USDT) trading volumes surged. According to data from CryptoCompare, about 15.34 percent of bitcoin trading in the last 24-hour period was done with USDT tokens.

Tether is notably a controversial cryptocurrency. It’s supposed to be pegged to the US dollar 1:1, but some skeptics believe the company issuing them doesn’t actually have any US dollars in the bank to back the 2.2 billion existing USDT tokens.

Commenting on the development, Shah wrote:

“The coin USDT is not a major funding unit but its increasing use is an interesting development. Over the coming years, we think that market focus could turn increasingly towards cross trades between cryptocurrencies/tokens, which would transact via distributed ledgers only and not via the banking system.”

Tether has in the past been subpoenaed by the US Commodity Futures Trading Commission (CFTC). Recently, BitMex researchers found the company may have banking in Puerto Rico.