The metaphor of something that is a double-edged sword means that something has the potential to be favorable and even unfavorable. Imagine the blade that is sharpened on both ends. It is a threat to both the opponent and an inexperienced user. This concept can be applied to the recent news from the owner of the NYSE (Intercontinental Exchange) which launches a new Bitcoin market (BTC) through its new Bakkt company.
Caitlin Long, who is a 22-year-old veteran in Wallstreet and has been active in Bitcoin since 2012, believes that the Bakkt company may have some significant benefits to the crypto ecosystem and also damage it. He stated the following in Forbes magazine after the announcement of the ICE on August 3:
This is an important step in the mainstreaming of bitcoins and cryptocurrencies. But it's also a double-edged sword, because it's probably the beginning of Wall Street that creates financial claims for bitcoins from scratch (and not supported by actual bitcoins), which could offset some of the algorithmic deficiencies Forced Bitcoin. Maybe that's why the bitcoin price has slightly decreased after today's announcement of the ICE.
According to Mrs. Long, Bakkt's positives include:
- to attract institutional investors to cryptocurrencies
- to solve the custody problem that has kept many investors institutions aloof from the beginning. Now there is a qualified custodian that the SEC requires for financial advisors who manage $ 150 million or more
- The aid regulators become more comfortable in the sector once they see the ICE involved
- it will attract corporate issuers to raise capital using the Bakkt ecosystem. Cryptocurrencies offer issuers the perspective of capital free from alliances and without low-cost preferences
The negatives of the launch of Bakkt according to Ms. Long in her commentary on Forbes can be summarized as follows:
L & # 39; Wall Street's only blow to control cryptocurrencies means to finance them by leveraging, creating more financial credits to the currencies than the underlying currencies and thus influencing the prices of the underlying currencies through the derivatives markets.
Financial Institutions [will begin] to create claims against cryptocurrencies that are not fully supported by the underlying currencies (which could take the form of marginal loans, loan of coins / re-imputation, currency futures contracts or ETFs that do not track 100% of the underlying currencies at any given time). None of these is still happening in the market.
He went on to explain that:
Bitcoin has a forced scarcity of algorithms, and this is an important part of what gives it value. If Wall Street begins to create bitcoin claims out of thin air, without countering with real bitcoins, Wall Street will be able to compensate for this scarcity to a certain extent.
The same pattern took place in commodity markets, such as gold and silver. It also happened in credit derivatives, which had grown up to 10 times the size of the underlying corporate bond market before the 2008 financial crisis and had become the proverbial "tail that wagged" driving the price of the underlying companies. bonds.
The same institutional investors that the crypto-community asked could end up being the downfall of the industry, as seen during the 2008 Wallstreat financial crisis. But luckily for Bitcoin and according to Mrs. Long:
C & # 39 is reason to be optimistic, thanks to HODLers, because bitcoin is an equity based asset that can only be funded if holders bring their coins into the financial system.
Bitcoin already has confidence and transparency precisely because no centralized institution controls it.
Fortunately, for existing bitcoin investors, HODLers are likely to make it difficult to store most of the bitcoins outside the financial system and make it the epitome of "hard to borrow."
[Photo source, Livestrong.com]