Bitcoin (BTC) vs USD

Is Bitcoin playing a role as the main denominated currency like USD in the traditional market? The question will be whether BTC/USD itself is the right indicator.


Pleasant surprise to see my newsletter (shared yesterday) was used as a topic for an article in Alphaville (Financial Times)! [Link to the original article]

Jemima is right to say I should not use the 4 month old chart when BTC (over USD) crashed almost by 50% since August this year. Sam Playle kindly shared the updated chart on his twitter and you can find the chart above.

Initially I was thinking of calculating the exact volatility of BTC and other emerging market currencies over various denominated currencies to show the comparison. (I am not saying BTC is not volatile here and my overseas team is not really exposed to BTC changes)

I decided to write a new article to address more fundamental questions.

1. Is BTC (or ETH) the right indicator to represent economics in Crypto Market?

2. Why are we even using USD as a denominator to understand Crypto Market?

(I won’t argue whether USD is the right denominator to represent emerging market indexes either, even though I do not think it is. Yes, but it can be a good relative indice to investors and fund managers managing assets in USD and wanting to manage the relative risk exposure)

Here are my quick answers to the market.

1. BTC/USD focused Market Analysis is the biggest misleading factor (in 2018) 

I always check on CMC and they provide very decent data to the market. Yet, we need more (alternative) data to understand the market properly.

Three main factors to support this. Firstly, there is much bigger liquidity is happening in other currencies (mostly in Asia and not in USD). Secondly, the OTC market is much bigger and this is not reflected in the generally used market data for crypto. Third, most of altcoins do not have any relation to Bitcoin.

Even though Bitcoin is playing a significant role in Crypto ecosystem globally, I do not think BTC/USD is the right indicator to understand Crypto Market globally and it is likely that 2019 will be the year where other Crypto Tokens or Indexes rise to challenge Bitcoin or even USD.

2. Europe will play a big role and Asia will continue to stay as a huge liquidity provider  

One of the main reasons why we are focusing on Europe this year and 2019, is that we think Europe can play an important role in developing a comprehensive legal structure to address innovation and new issues in the right manner. Privacy relate regulation is one of the best examples to show what Europe can do, dealing with issues beyond the usual commercial terms.

Asia will remain as the biggest liquidity provider in Crypto Market and will even grow further in 2019. We also started to see more of Asia based projects such as Wanchain, ICON and NEM.

Connecting Europe and Asia will give good leverage on the both opportunities.

3. It is an open market competition 

2017 was the year that Crypto Market caught global attention and market was widely speculative.

2018 is the year where the Crypto Market is being challenged to address many issues. (Interestingly, the ICO market has grown this year when BTC/USD crashed 80+% from the peak!)

2019 will be the year for existing and new players to show what Crypto can bring to the market and how it can be better structured.

Remittance is one of the easier examples to show how blockchain innovation can work. Fund transfer can be made and filed properly without having exposure to Bitcoin price changes.

Looking forward to seeing one of the leading players to show how (Blockchain powered) Smart Money can play a big role in Smart Cities!