Will there be any unexpected gains for Bitcoin “die loyalists” under the DeFi boom?

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For the blockchain and cryptocurrency industry, 2020 is destined to be an extraordinary year, with many unexpected events happening one after another: the global financial market collapsed due to the new crown epidemic, Bitcoin block rewards halved, and DeFi booms emerged. The outbreak of the new crown virus at the beginning of the year even affected many countries around the world, including the United States.

However, in the turbulent financial market, a top global hedge fund manager got a windfall on Bitcoin, that is, the founder of New York fund giant Tudor Investment Corp.: billionaire Paul Tudor Jones ( Paul Tudor Jones). It is worth mentioning that Paul Tudor Jones did not initially invest in Bitcoin “specially”. According to his own letter written in May, the reason why he chose to trade a small amount of Bitcoin in his personal account was entirely for “Have some fun.” But what is unexpected is that this “fun” has brought great gains to Paul Tudor Jones. From January 2017 to December 2017, Bitcoin surged from $900 to about $20,000. In a disastrous economic situation, Paul Tudor Jones believes that Bitcoin is an investable asset, not only for him, but also for the Tudor BVI fund, which is valued at $9 billion under his control.

Paul Tudor Jones stated that he is neither a conservative miser, nor a blind cryptocurrency speculator, nor a millennial who is keen on cryptocurrency investment. He just wanted to seize the opportunity while protecting his funds from loss in the ever-changing market environment. Based on this idea, he decided to invest in the world’s fastest growing currency tool and to study it in more depth.

It is worth mentioning that the analysis done by Paul Tudor Jones’ fund is worth studying. Considering that the Fed’s balance sheet is expected to more than double by the end of 2020, Paul Tudor Jones decided to investigate the results of his fund research team’s analysis and to rate some key investable assets based on their stored value capacity. The score is from 0 to 100. At the time of the initial evaluation, the Tudor BVI fund got the following results: financial assets ranked highest with a score of 71; gold assets ranked second with a score of 62; legal tender cash ranked third with a score of 54; Bitcoin ranked fourth with a score Is 43. After that, the Tudor BVI fund began to create evaluation sub-categories, including trustworthiness, liquidity, portability, and purchasing power. The result was surprising: the score of fiat currency was almost zero!

Compared with gold, it has certain advantages

Although in terms of credibility, Bitcoin’s performance does not seem to be satisfactory, but compared with the 2500-year history of gold, the history of Bitcoin is only 11 years. In contrast, Bitcoin actually performs better in terms of liquidity, portability and purchasing power. Knowing that Bitcoin can be easily stored on a smartphone, what other asset can be better than this storage method? And Bitcoin is the only store of value in the world that can truly realize 24/7 transactions. In addition, it is the only large-scale tradable asset with a fixed supply in the world. As the algorithm design of Bitcoin sets an upper limit of no more than 21 million BTC for the total amount of Bitcoin, and the existing 18.5 million Bitcoins in circulation on the market also fully reflects the essence of the scarcity premium, which makes Bitcoin more and more rare And precious, this is also a concept that the central bank and the government are not currently thinking.

Not only that, Paul Tudor Jones also believes that Bitcoin is very cheap. The market value of Bitcoin is only 1/1200 of the market value of financial assets, and its value reserve is 66% of gold, but its market value is 1/60 of the value of outstanding gold.

Why is Bitcoin always under attack?

Warren Buffett once called Bitcoin “rat poison”; JP Morgan CEO Jamie Dimon also considered Bitcoin a “fraud”; US government, inspection agency And financial industry regulators also have a bad attitude towards Bitcoin, believing that it has a bad history of money laundering, hacking, market manipulation, and criminal activities.

Since Daniel Masters launched the world’s first regulated Bitcoin hedge fund Global Advisors Bitcoin Investment Fund (GABI) in 2014, it has received severe criticism from banks, investors and regulators. Even HSBC, the global banking giant with which he had a 15-year partnership, terminated with him and closed the relevant account within 60 days. In the end, Daniel Masters chose another bank service and told his hedge fund that he had obtained a return of more than 800%.

Although six years later, HSBC has also begun to use blockchain to provide record-keeping support for the digital vault of assets worth 20 billion U.S. dollars, but there are still many investors who are skeptical of cryptocurrency, and the era of regulatory crackdowns It is far from over.

Not only that, but Jay Clayton, chairman of the US Securities and Exchange Commission, once described cryptocurrency as a tool to threaten the hegemony of the US dollar. Since he took charge of the US Securities and Exchange Commission in 2017, Jay Clayton has been “against cryptocurrency”. He does not want to clarify or adjust the regulatory framework of the US Securities and Exchange Commission to adapt to Bitcoin or any other crypto-related products. . Jay Clayton believes that it is precisely because the US Securities and Exchange Commission has always upheld and abides by these “ancestors’ rules” that it has created an enviable securities financial market. Although some people think that after entering the 21st century, the US Securities and Exchange Commission can make some adjustments and updates to the rules, but Jay Clayton is completely unmoved.

Market acceptance is getting higher

The U.S. Securities and Exchange Commission does have a lot of concerns about Bitcoin, and it has also given three main reasons why Bitcoin exchange trading gold cannot be introduced, including: Bitcoin market still has a large number of human manipulations, Bitcoin market monitoring is insufficient, And the Bitcoin market has not yet developed to a large enough scale.

But Hester Pierce expressed doubts about the above remarks. She expressed frustration with the current practice of the US Securities and Exchange Commission and believed that they were using a wrong method to protect investors. The US Securities and Exchange Commission seems to be less concerned about its own regulatory work, but more interested in rejecting potential Bitcoin spot and futures market products. The job of the US Securities and Exchange Commission is not to judge the pros and cons of a certain transaction, nor can it play a role in determining the quality of the exchange. The job of the US Securities and Exchange Commission is to ensure the safety of investors and require all parties to abide by trading rules. It is up to them to decide which products to trade.

At the beginning of this year, things seemed to have developed positively: JPMorgan Chase, which had been dismissive of Bitcoin before, announced that it would announce the Gemini Exchange and Coinbit Exchange to the first batch of bank customers in the cryptocurrency industry. The change in attitude towards encryption technology has long since changed. They even launched their own digital currency, JPM Coin, which was the first U.S. bank to introduce independent digital currency issuance.

In addition, in June 2020, New York asset fund company WisdomTree Investments announced that it will develop a plan for an exchange-traded commodity fund that will include up to 5% of Chicago Mercantile Exchange cash-settled bitcoin futures exposure. The fund seems to be “scratching the ball”, so some market participants believe that whether the fund can be approved will be a touchstone for testing whether the US Securities and Exchange Commission allows Bitcoin exchange-traded fund applications.

Hester Pierce, one of the cryptocurrency advocates, believes that it seems unlikely that the US Securities and Exchange Commission will continue to throw out measures that hinder the development of the Bitcoin market. She explained that she hopes to introduce new products in a way that does not affect people. To establish a cryptocurrency regulatory infrastructure, so that crypto projects can finally provide new products in certain areas, and also want to establish a framework for those crypto projects to try. Hester Pierce has been working hard to bridge the gap between the crypto industry and regulators. She designed a “cryptocurrency time limit exemption” policy, hoping to give cryptocurrency projects a three-year grace period in supervision. During this period, project developers will not be subject to the federal securities laws of the United States, so that they can concentrate on building a functional and decentralized encrypted network, but then they must determine whether their cryptocurrency transactions are securities sales or offers.

Not only that, Hester Pierce also proposed the concept of “safe harbor”. She stated that she will tailor information disclosure requirements for cryptocurrency issuance projects based on actual needs, retain the applicability of the anti-fraud provisions of the securities law, and give cryptocurrency issuers the ability to attract users to participate in their networks. This means that in addition to the anti-fraud clause, the distribution and sale of cryptocurrency will not be subject to the Securities Act of 1933, and cryptocurrency issuance projects will also be exempted from registration under the Securities Exchange Act of 1934 to engage in certain cryptocurrencies. Currency trading personnel are also not subject to the definitions of “exchange”, “broker” and “dealer” in the Securities Exchange Act of 1934, but the development team of cryptocurrency issuance projects must meet certain conditions to be exempted, such as Information disclosure, etc.

Another US regulatory agency: the new chairman of the US Commodity Futures Trading Commission Heath Tarbert (Heath Tarbert) also pointed out that although the US Commodity Futures Trading Commission has regulatory powers, the choice of regulatory approach is equally important. Compared with rule-based “high-pressure” supervision projects, principle-based supervision can in many cases provide a more effective supervisory method to supervise digital assets, and can ensure that the United States remains the leader of global financial technology. America’s future prosperity is crucial. The best way to regulate the emerging market of digital assets is to be based on principles. Principle-based supervision means that it may be necessary to deviate from detailed prescriptive rules and rely more on high-level and widely stated principles to set standards for regulated companies and products. After that, companies will try to find the most effective way to meet these standards. This kind of supervision method can provide greater flexibility for the financial technology industry, and by reacting more quickly to technological and market changes, it can also allow the US Commodity Futures Trading Commission to maintain a leading position in financial technology supervision.

Risk issues still exist

Although Bitcoin has many attractive properties, for example, it is a decentralized currency, and it has been outside the global financial system for more than ten years. However, there are indeed many risks associated with investing in Bitcoin, including: Bitcoin is vulnerable to manipulation by malicious actors or botnets; Bitcoin spot transactions are vulnerable to fraud, manipulation and other illegal activities; there is no government. Recognize that Bitcoin is a legal legal tender.

In fact, Bitcoin, like many similar cryptocurrencies, can be regarded as a virtual representation of currency/money. Although this “currency” consists only of computer code, it can be traded, transferred, and stored online, just like regular currencies. , It can even be exchanged for cash. But unlike traditional currencies, the “main life” of Bitcoin and other cryptocurrencies is based on the Internet and protected by a computer code layer, and can be sent across international borders around the world as easily as text.

For those who want to receive and send funds securely via portable computers, mobile phones, or e-mail, but don’t want to involve intermediaries or traditional bank accounts, cryptocurrency is actually very useful. Unfortunately, cryptocurrency is also very effective for criminals and terrorists. The U.S. government is worried that criminals and terrorists may try to develop their own virtual currency in the future, and even this virtual currency is more efficient and more efficient. Difficult to track.

It is these factors that make institutional investors, regulators and the US government feel so nervous. They don’t seem to like this open financial model, and even call it “Pandora’s Box.”

Many hedge fund traders admit that they are very worried that Bitcoin may eventually be banned by the US government. Because similar trading bans have indeed occurred in the United States, for example, onion futures and Maine potatoes have been affected by the US government ban. And as early as five years ago, Jamie Dimon of JPMorgan Chase said: If there is a real, uncontrolled currency in the world, then no government can endure the existence of this currency for a long time.

In fact, since the birth of Bitcoin, there has been widespread rumors in the market that Bitcoin will overturn US legal tender. Although somewhat dramatic, it is not impossible.

There is no doubt that cryptocurrency is an area that may create risks, but we need to understand what these risks are. The technology used in Bitcoin and other cryptocurrencies can be interpreted in many different ways, which makes it difficult for US regulators and policymakers to decide what these are and how to treat them.

Cryptocurrency regulation should be realized as soon as possible

Although cryptocurrency may be the world’s most daring financial experiment since the birth of the Internet, in Washington, government officials have made it clear in public and private that they have not seen a clear way to regulate cryptocurrency, and they hope to realize cryptocurrency as soon as possible Regulatory.

As we all know, the United States has always been able to economically sanction, dismantle and destroy the evil financial network, because this practice is vital to US national security. Compared with direct deployment of armed forces or conducting diplomatic activities, financial sanctions are generally safer and more effective. The US Democratic Defense Foundation claims that the United States is currently paying close attention to how China, Iran, Russia and Venezuela are developing cryptocurrency and blockchain technology, because this alternative payment system can enable many global business transactions to bypass US economic sanctions. At the same time, the U.S. Democratic Defense Foundation also warned that blockchain technology may enable U.S. opponents to operate outside the U.S.-dominated financial system for the first time and achieve innovation across the economy. This process may take two to thirty years, but These participants are now developing components. They envision a world in which cryptocurrency technology will help them surpass the financial strength of the United States, just as the US dollar once devalued the pound.

In the face of potential threats, the US Democratic Defense Foundation gave some suggestions: If the United States wants to maintain the integrity of global finance, cultivate professional knowledge and influence, and become a leader in the international cryptocurrency competition, it needs to act decisively. , To promote the combination of digital currency technology and legal-based financial order. The US government is publicly monitoring some parts of the cryptocurrency, but many people do not know that they are still monitoring other parts more secretly.

What is certain is that US law enforcement agencies are actively and effectively using technical tools to solve these problems. They are in a more mature state than a few years ago. As the world view of cryptocurrencies and people’s awareness continue to strengthen, cryptocurrencies are gradually integrating into global finance. System and become part of the system.

It is worth mentioning that the current US Congress has proposed more than 30 bills on cryptocurrencies. This is also the largest number of bills on a certain industry sector in history. Most of the bills focus on how to regulate Bitcoin, In terms of other cryptocurrencies and blockchain technology, there are also some bills that focus on combating illegal activities such as the use of cryptocurrencies for terrorist financing, money laundering, and human and sex trafficking.

Interestingly, there are also disagreements among US market regulators. These differences include: how hard to restrict the expansion of cryptocurrency; whether the waiting time for law enforcement is too long, and whether cryptocurrency will put the US financial dominance at risk.

The chairman of the US Securities and Exchange Commission, Jay Clayton, is hostile to the crypto industry, saying that he is almost going to declare war on cryptocurrencies. It is not an exaggeration; while another commissioner of the US Securities and Exchange Commission Hester Peirce (Hester Peirce) Has become one of the most famous cryptocurrency advocates in Washington. Since joining the US Securities and Exchange Commission in 2018, Hyster Pierce has been providing institutional and retail investors with more ways to use Bitcoin and other crypto products. The US Securities and Exchange Commission has repeatedly blocked the listing of encrypted products on the National Stock Exchange, and this move has also been criticized by Hester Pierce. Not only that, Hester Pierce also accused the US Securities and Exchange Commission of rejecting a series of proposals to bring Bitcoin products to the market. However, Hester Pierce also frankly said that Bitcoin’s past history is not too good, but the problem is that these shadows have been overshadowed for too long. It’s time to see through the clouds and fog, and tracking Bitcoin is actually bigger than tracking. Some dollar transactions are much easier.

A big change in investor attitudes

Despite all the hardships, Bitcoin has not been eliminated. On the contrary, Bitcoin began to quickly attract people’s attention, and also captured the imagination of scientists, traders, engineers, bankers, and futurists to help them continue to introduce innovative technologies.

Polychain Capital, a San Francisco-based crypto industry venture capital firm, is also the industry’s first $1 billion cryptocurrency fund. The president of the fund, Joe Eagan, said that many investors are not aware of the many other applications of Bitcoin and blockchain, but simply regard them as a kind of “safe haven” for funds. People mistakenly believe that Bitcoin is a traditional store of value. Disruptors, or an interesting hedging product, because Bitcoin is a deflationary asset. But in fact, the real highlight of Bitcoin and other cryptocurrencies is programmable technology, and they also have all the advantages of decentralization, which can be used to build many new technologies and implement large-scale disruptive innovations.

Paul Tudor Jones explained what kind of “best refuge asset” to invest in during the economic storm:

“The question every investor faces is: what will be the winner in ten years? The best strategy to maximize profits is to own the fastest racehorse. If you only have the best rider, but the horse is not there On the right track, you still can’t get good results. Therefore, don’t think you are smarter than the market. This kind of thinking may get you into trouble in some ways. If you have to let me choose a safe-haven asset, my The bet will be Bitcoin.”

Frankly speaking, before Paul Tudor Jones made such remarks, Wall Street’s attitude towards Bitcoin was not too friendly, and many financial professionals even called it “pirate currency.” But after the real bigwigs spoke, Wall Street’s attitude and rumors towards Bitcoin took a 180-degree turn, and institutional investors’ worries about investing in Bitcoin were eliminated.

For the “die loyal” of Bitcoin, will there be any windfalls in adhering to the faith? Let us wait and see.