Anton Golub, CEO of flovtec, joined Paul Gordon for a weekly review of the markets. Topics ranged from new bitcoin all-time highs, the heat surrounding NFTs, speculation from Mongolia, China and India on potential crypto bans, and governments holding crypto positions.
Bitcoin’s All-Time High (again)
Bitcoin attained yet another all-time high over the weekend. [0:56] This is part of a pattern, in which there’s plenty of action over the weekends in the crypto market. Last weekend, this was balanced by 5-8% market liquidation, representing around $1 billion of positions closed. These movements are perfectly normal, said Anton, as he expects more all-time highs to come. We saw the same thing a couple of weeks ago where the market recovered from the all-time high and consequently sold off strongly.
Non-fundable tokens (NFTs) are the hot topic of the market. Lots of media attention has been focusing on the specific example of Mike Winklemann, whose composite jpeg artwork sold through Christie’s for USD 69.3 million, the third highest price paid for a living artist.
[3:03] This as a green, very new market, said Anton. He first heard of NFTs at an Asian conference in 2017 and saw them as an interesting idea within the art world trying to tokenize existing physical art and sell it to the crypto community. The Winklemann sale can be viewed as a guide to embrace the digital way of doing things. It’s not such a great surprise that digital art could be marketed and sold in this manner.
[4:39] “I definitely think when we relate to this example that the price was very high, especially in the light of how we in the crypto world perceive price. We perceive price as something where you can freely trade it at any time and there’s liquidity for it. In this example, there is no liquidity for that particular art form and you can’t buy and sell it for a particular market cap. We need to be aware that the price in this particular auction is not the one that will be used when we talk about trading tokens in an exchange,” said Anton.
Over time, it will become more apparent that these assets are not liquid assets or liquid tokens. It won’t be easy to buy and especially sell at those price points.
[6:01] You can trace it back further to colored coins, the original idea of crypto representing different assets on the blockchain, which gave rise to things like Tether. We also saw Rare Pepes, collectable cards built onto Bitcoin blockchain, so this is a rehashed concept of something we’ve seen before, which has now reached critical mass and seen an explosion of interest. It as an area that has huge potential, but still flawed, noted Paul. It remains to be seen whether these platforms issuing tokens are going to stand the test of time.
Paul raises the question of where does this fit from a legal standpoint? Are regulators going to classify NFTs as securities? Paul poses Anton the question if his firm will start taking positions in the NFT space.
[8:47] flovtec has plans to become involved in sports loyalty programs. A particular area of interest for Anton is how you market NFTs with them being such a new part of the market.
OpenSea, NiftyGateway, KnownOrigin and Rarible are the main marketplaces, issuers and traders of NFTs. Artists are also able to get royalties on future sales. Liquidity is an information game and perhaps over time the tokens may be proven to be liquid, according to Paul.
It’s a new and exciting market for them as a firm, and likewise for investors.
Mongolia, China and India’s Potential Bans
There has been market speculation about Inner Mongolia banning Bitcoin mining and India’s ban of bitcoin.
[12:24 Switzerland is split and has a market that is very open to crypto, with two native crypto banks, progressive regulation and strong infrastructure support. If, for example, India does ban Bitcoin, the market will hedge and try to find opportunities elsewhere, said Anton These kinds of rumors about bitcoin being banned in India have spread before, only to find out from inside the market that it was more of a negative perspective on crypto and a lack of support for the sector, not an actual ban as such.
Similarly, if China or Mongolia imposed an actual ban, it would be a hit for the sector, but believes common sense will prevail, Anton noted. If operations were forced to stop in these regions, it would also create global opportunities, especially because of the repercussions for the hash rate.
[14:23] “It would be very interesting if we had a hash rate futures market at this point because this market would be integrating the information we see around mining and also the news on the regulatory side and governmental side. I look forward to market evolvement and infrastructure namely around hash rate futures,” said Anton.
Governments Holding Crypto
A French lawmaker signed a petition about whether to allow the central bank in France to buy and hold bitcoin. It’s likely that governments will be one of the last institutions to hold crypto. Bulgaria was an interesting exception to this when they confiscated bitcoin, therefore holding positions on their balance sheet.
The early movers are hedge funds and asset managers and for other entities it’s a bit early. But Anton would toast the moment French or Swiss governments held crypto on their balance sheets.