Patrick Heusser, Head of Trading at Crypto Finance AG, returned to talk to host Paul Gordon about this week’s developments in the crypto space.
(1:12) The bullish approach of minor retail players through to major institutional investors continues, and this interest is reflected in the bitcoin price and market cap.
(2:37) “The ones who are long, they’re a bit cautious now. They’re not quite sure [if] we’re going to hit a new all-time high….Others are asking can I buy now, is it not too expensive to go in? Clients on the sidelines are a bit cautious but then on the derivatives side there is still a lot of gambling interest out there. There’s lots of volume getting pumped through these exchanges and today over USD 1 billion got liquidated on the short dip we have seen of 2,000 points. It shows that people are a little bit on the cautious side. Our client base is buying and holding, but buying has slowed down a bit,” said Patrick.
(4:12) The CME Group launched a micro contract that should open up the market to a broader audience. The main players in this market remain institutional clients who don’t really care about the size of the contract, said Patrick. The micro contract development might remove a bit of volatility because it would be easier to hedge closer to actual exposure, and it remains to be seen how deep the liquidity would be on that new micro contract.
Tether released an assurance report this week from the accounting firm Moore Cayman that showed its stablecoins were fully backed.
(6:24) “It’s definitely good progress in the whole stablecoin environment as well with Visa getting into the stablecoin business with USDC. The first hurdles for the ‘normies’ that have no exposure to crypto whatsoever, they get the first bridge in front of them which they can pass if they want. It helps the deeper system to mature and attract more flows…It was good to see that Tether had this positive feedback on that,” said Patrick.
Alongside Visa’s stablecoin development, PayPal has rolled out the ability to use crypto assets to 29 million merchants worldwide. This ability to spend digital assets has been backed by merchants in the past, yet historically consumers were reluctant to spend their bitcoin.
(8:44) Reflecting on consumer appetite to spend digital assets, the traditional payment ecosystem is very closed. To hold USDC on your Visa card, it’s still not easily transferable to the DeFi sector and it’s still not crypto, said Patrick.
(9:43) “To me it’s still that big gap between the traditional market and traditional payment rails, having them digitized and having maybe a stablecoin as well, but to transfer it over to the real crypto ecosystem, that’s still not there. It’s not flowing…at the moment.”
Comparing cryptocurrencies and traditional currencies, the latter are earned with a paycheck at the end of the month and that’s what you spend, so that creates a closed loop economy, said Paul. With not enough people earning in crypto, that prevents development.
(10:47) “What I would like to see and what would be really interesting if this could ever happen is let’s assume you have USDC on your Visa card and you get paid 2% interest rate on real dollars in your bank account but you get paid 12% [interest] on your UDSCs in the DeFi sector. If they can bridge it and you can use your USDCs on your Visa account in the DeFi sector and earn 12%, that would be really interesting to see what happens then,” said Patrick.
The Financial Action Task Force (FATF) has moved to classify decentralized exchanges as virtual service asset providers (VASPs) and is placing dApps under similar scrutiny.
(12:50) “It is a concern for me as a DeFi user as well and as a believer in this system how I can manage my own money. On the other side what we also see is, for example, protocols like Aave are teaming up with custody or storage providers trying to offer a joint service that the custody or storage provider can basically lend the client’s coins to the Aave protocol. And they figured that this doesn’t really work. If the clients are institutional clients and the storage or custody provider is a regulated entity, he cannot just lend to a smart contract platform,” said Patrick.
(13:43) The future of DeFi may be two separate versions, one for white label users going through KYC and AML, and another unregulated version reflecting the different pricing in these different environments.