The fourth revolution and the potential influx of new source of capital in the Asia financial hub
We are in an era where global digital economy and financial system is revolutionizing, and has opened the gates to blockchain — known as the “fourth industrial revolution” as described by the World Economic Forum. Blockchain is a decentralized technology that Bitcoin and other digital assets use to store and share data transparently, and be able to perform transactions in a secure and immutable manner in real-time. It uses virtual asset graphic hashing to encrypt data and creates a group of blocks that cannot be altered. This technology, and predominately, Bitcoin has garnered a range of audiences and attracted a lot of tech savvy individual investors to start studying, trading, and investing into this area. 2017 was a bearish run for digital assets and it created a new of group of audiences’ interests, including regulators, media, banks, institutions, professional investors and amongst others to start paying more attention to this area.
For Adam White, former executive of Coinbase and now the COO of Bakkt once said in a Fortune interview that, “the interest in Bitcoin and other currencies started changing from retail to the institutional side. But the level of infrastructure of the existing trading sites often didn’t meet their expectations. That’s why they’re waiting on the sidelines.” The big banks, says White, needed exchanges that provided the safety equivalent to what they enjoyed in trading equities, bonds or gold. “Virtual asset markets go their own way, we see bull and bear markets,” he says. “But what matters is that the number of daily transactions for all virtual asset is up year over year. And we’re also seeing the introduction of new protocols from open source software developers that make virtual asset far easier to use.”
Despite the volatility of digital assets in 2018, many experts and analysts stayed positive of this emergent technology. The market sentiment was great, the daily transactions and average low price for Bitcoin showed a positive signal where the numbers grew year by year (see graph below).
There are only 636,813 more Bitcoin to be mined before the next halving. Historically, about a year before each halving, there tends to be an indication of the next bull. This reflected in April 2019 when there was a spike where Bitcoin surpassed the $5,000 mark.
In April 2019, 54,000 BTC were mined, Grayscale Bitcoin Trust bought about 21 percent of that monthly supply (equivalent to 11,000 BTC) suggesting a heavy demand from Wall Street. Another 10 percent of that monthly supply was bought by Square Cash App (See below).
Whales are also hungrier than ever to acquire more Bitcoin, according to Eleesa Dadiani, owner of a decentralized art gallery said “one of their clients approached them and were interested in acquiring 25 percent of all bitcoin currently circulating”. Assuming the circulating supply is 17,731,812 according to CoinMarketCap, 25 percent of that would be 4.43mn BTC equivalent to approximately US$38.5bn at time of publishing.
Institutional investors are tipping their toes into the market, with different risk matrix, and regulatory requirement. They have more knowledge and financial ability than retail investors to withstand the volatility of trading virtual assets and have huge demand for digital currency. In addition, they choose custodians, ETFs and insurance as the basis for their investment in bitcoin. According to traditional asset management industry, professional investors tend to entrust their assets to licensed professional third parties, of course, the professional third parties should be verifiable in net assets, highly transparent, and provide assets insurance mechanisms. In response to such demand, Coinsuper, a Hong Kong based company are one of the few players in the market that provide platforms for both retail and institutional investors to trade in a secure and safe manner. They also offer OTC and custodial services tailored for professional investors.
We are midway through 2019, which will be another breakthrough year for institutional investors to further understand this new asset class. Tokenization on real asset backed or STOs will also play a vital role as it will bring this asset on-chain, like the traditional market where they have asset-back securities (ABS) or the REITs model. STO model is a solution to many companies in their matured stage yet difficult to do addition venture capital rounds but is not in a scale to go public. Hong Kong specifically is a great financial hub, and a tax haven jurisdiction for professional investors to test out this space.
In Hong Kong, Securities and Futures Commission (SFC) announced a sandbox guideline for virtual asset trading operators which was published on 1 November 2018, and recently also issued a statement on Security Token Offerings (STO) on 28 March 2019.
Coinsuper co-founder and CEO Karen said in a recent interview: “We are very pleased to see Hong Kong’s regulatory research and guidance on digital currency and market. We embrace supervision and strive to provide customers with a safe and easy-to-use digital currency trading experience.”
Coinsuper — Institutional-grade virtual asset trading platform
As a Hong Kong-based exchange, Coinsuper is committed to building a secure, compliant and professional institutional-grade virtual asset trading platform, thanks to a strong financial background and support from strategic partners and investors include tier 1 capital investors in Asia, the US and Europe.
Running in parallel as Coinsuper Pro, Coinsuper Premium is an institutional platform tailored for professional investors, it has features including USD and HKD dual currency fiat channels, high deposit and withdrawal limits, user friendly account opening procedures, advanced APIs and optimized frequency limits, and a delegated customer service manager for each account.
Coinsuper has a relatively open attitude towards virtual asset in Hong Kong, and has been adhering to compliance standards since its inception. As the market further grows, there will be more clarity from regulators and once institutional investors are comfortable, there will attract a new source of institutional capital into this Asian market.