Interview: Michael Dunworth, CEO of Money Transfer Service Wyre, on MakerDAO Partnership

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On Tuesday, U.S. international wire transfer startup Wyre announced a strategic partnership with MakerDAO. We’ve written about Wyre several times in the past: first when they raised a $5.8 million Series A led by Chinese firm Amphora Capital. The firm went on to acquire Bejing-based Remsity as they took on China. At the time — April 2017 — we reported that they were processing $50 million a month, but Mr. Dunworth had predicted transactions would scale up to $70-75 million per month in the aftermath of the acquisition.

The agreement with MakerDAO will allow instantaneous movement of “fiat currency directly into and out of Dai”. Dai is a stablecoin governed by Maker (of the MakerDAO project). So the implication here is users will be able to transfer international currencies directly into Dai. This was actually something that was discussed in an abstract in a recent interview we did with MakerDAO CEO Rune Christensen.

In the interview, we briefly discussed what Wyre was and how it came about. It turns out Michael and his co-founder were originally working on a company called snapCard that allowed users to buy items on multiple sites with a unified checkout process. The site went on to accept bitcoin and experienced rapid growth, but recognized the opportunity to build a product around international wire transfers since it was something they were doing for international customers anyway.

We went on to discuss the implications of the partnership and Wyre’s relationship with MakerDAO, which appears to have been going on for a long time with Wyre as an investor in the project. The use case for Dai in Wyre was laid out as such: normally wire transfers Wyre gets from clients (who are using Wyre to maintain liquidity through over the counter transactions) take 48 hours. With Dai, they can be instant. This benefits Wyre because it dramatically reduces their capital outlay; it benefits the client since they get quicker access to the liquidity that Wyre requires. It also dramatically reduces the potential for phishing created by traditional wire transfers, something which costs Americans an estimated $500 million per year.

Overall, this partnership is a huge step forward for stablecoins as a whole, and MakerDAO especially. Wyre has become a major player in the international wire transfer business and if they are able to grow alongside the cryptocurrency market they will gain a huge advantage over the competition.

The timing couldn’t be better for MakerDAO as speculation around controversial stablecoin Tether continues to heat up, with the company’s latest issuance of another $50 million worth of USDT. As we discussed in our interview with MakerDAO, Tether’s opponents have some very real points that a recent audit hasn’t entirely alleviated. Either way, analysts will be watching MakerDAO’s price closely in the coming weeks and months.

Note: This interview is part of the CCN Podcast. The podcast and this interview are also available on iTunesTuneInStitcherGoogle Play MusicSpotify, Soundcloud, Youtube or wherever you get your podcasts.

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ETN vs. ETF: Which Is the Investor’s Dream?

There has been a big push for investors to be able to buy Bitcoin without actually having to buy the digital currency. Products — such as futures — have entered the market and upon their arrival in early December last year, Bitcoin rallied toward $20,000.

However, the biggest prize on offer for investors — mainly of the institutionalised variety, who are still skeptical about owning Bitcoin — is an exchange-traded fund (ETF). There has been a push, through the SEC, to try and get a Bitcoin ETF in place for some time now, starting with the Winklevoss twins’ first attempt in March 2017.

Meanwhile, a product, called Bitcoin Tracker One, which has been trading on the Nasdaq Stockholm exchange since 2015, offered what is known as an exchange-traded note (ETN), and this week, it was suddenly quoted in dollars.

The ETN is considered a ‘soft’ alternative to the Bitcoin ETF that many are chasing after, but even with this move to make it accessible to an audience in the United States, separate from their country’s regulations and the U.S. Securities and Exchange Commission (SEC), there was not much movement in the market.

It seems that, even with the option to buy an ETN, U.S. investors — and the Wall Street money they can bring to Bitcoin — are not biting. There was no excitement in the market — a market notorious for taking news as a catalyst for up-and-down movements. This could have to do with the fact that this ETN is not an ETF, but it could also be the heavy bearish sentiment.

Why an ETN or an ETF?

These products, which allow to invest in Bitcoin with relative safety as investors do not own the actual commodity, have been highly praised by many, but they also have their detractors.

An ETF is a marketable security that tracks either an index of funds, a commodity or a basket of assets — and in this case, the asset is Bitcoin. So, what would happen, should the SEC allow a Bitcoin ETF, is that the fund would purchase an underlying amount of actual Bitcoin and distribute those funds into shares, which are then distributed to shareholders.

Thus, they make it far more comfortable and familiar for the institutional investor who has been using ETFs for other assets and commodities, and this might be why many think it could be a big entry point for a lot of money into the Bitcoin space.

An ETN, on the other hand — seen as a ‘soft’ ETF — is a debt instrument that is backed by its issuers, such as a bank, rather than a pool of assets. Often, they focus on esoteric strategies that don’t easily fit into a fund.

The interesting debate about whether these types of products are needed in the cryptocurrency ecosystem is often exaggerated by the broad and all-encompassing nature of the space. There are traders, blockchain engineers, get-rich-quick types, crypto-anarchists and cryptocurrency purists who are all operating around Bitcoin and other cryptocurrencies and all have their own beliefs.

Andreas Antonopoulos is quite against the idea of a Bitcoin ETF, stating:

“I am going to burst your bubble […] I know a lot of people want to see an ETF happen, because of ‘to the moon’ and Lambos and all of that. […] I still think it is going to happen, I just think it is a terrible idea. I am against ETFs. I think a Bitcoin ETF is going to be damaging to the ecosystem.”

Antonopoulos’ criticism is not that an ETF would cause prices to drop or investments to stop. In fact, he goes on to state:

“Everybody is so excited about ETFs, because what we have seen in other markets is [that] when an ETF becomes available — as we saw in gold — the price really increases dramatically, as suddenly that commodity becomes available to a lot more investors. And these investors pile on.”

While many see ETFs as the kickstart that the crypto markets need right now from a price point of view, Antonopoulos argues that the real dangers of the introduction of ETFs lie somewhere else:

“But, the other side of it is that there [are] always these claims that these commodities markets are heavily manipulated. And opening up these ETFs only increases the ability of institutionalized investors to manipulate the prices of commodities — not just on the markets where they are traded as an ETF, but also more broadly.”

Why this ETN is not a market-mover

Taking into consideration assertions that ETFs could skyrocket the price of a commodity as institutionalized investors pile into the market, it could seem strange that the announcement of this option — i.e., an ETN that is able to be traded with dollars — brought very little movement in the market.

One could assume that a smaller, ‘safer’ option to an ETF would be snapped up and popular for the institutionalized market, but perhaps these investors are holding out — or are still too bearish.

Jeff Kilburg, the founder and CEO of KKM Financial, explains that Bitcoin and its up-and-down volatility is going to continue until a decision is reached on ETFs and that even the ETN won’t have much say in it all.

“I think there will be continued volatility, but it really is contingent on this exchange-traded fund. […] These long-term, bullish buyers have to understand that people are going to have access globally to an exchange-traded product and, if that comes in — and we do get some absolute determination that it is coming short-term […] this fall — then I think the rally continues.”

Kilburg is clearly optimistic about the power an ETF would have on the market, and so is Bart Smith, the head of the digital assets division of the global investment market giant Susquehanna International Group, who says that the ETN has gained some traction, but is nowhere near as explosive as the possibility of an ETF.

“What you are seeing now is that we are right back to where we were. A month ago, we were talking about breaking out, but this is a bear market rally. Until we break to new highs, people are not buying.”

Smith follows in Kilburn’s reasoning that this ETN is not as big as a potential ETF would be:

“This is not as big as [it would be] if it was SEC regulated. An ETF in the U.S. — that was SEC registered — would have a much bigger effect. But, if there is something that is driving new money into the price of Bitcoin, then you would imagine it would raise it up.”

The ETF Holy Grail

With an ETN now available to U.S. investors — as well as futures trading possible through a number of institutionalized trading houses — Bitcoin is still not reaching new heights. There is a lot of hype and excitement about a possible ETF, as the SEC continues to mull over a number of applications for various Bitcoin ETFs.

While no one can predict the future of the price of Bitcoin and how it will react to the news of an ETF, the sentiment is strong from most that it will make a big difference. The feeling is that there is a mountain of money waiting to enter the Bitcoin space that is being held back by nontraditional methods of investing. If this barrier is broken down, is it possible Bitcoin will surpass $20,000 again?

Bitcoin Cash Futures, Venture Funds, and Lawsuits: This Week in Crypto

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Make sure you check out our previous edition here, now let’s go over what happened in crypto this week. Also, make sure you subscribe for this weeks edition of The CCN Podcast on iTunes, TuneIn, Stitcher, Google Play Music, Spotify, Soundcloud, Youtube or wherever you get your podcasts.

Price Watch:

  • Bitcoin is up 0.82% to about $6,300 following a fall of 12% last week and 15% the week before that following a multi-week price drop. Analysts have cited the strong US Dollar as a reason for the recent drops. One thing more striking about bitcoin’s recent price movement is that the downward movements have been much less dramatic than the rest of the market. This could be, as Tom Lee would say, because “bitcoin is the best house in a tough neighborhood.” Others have continued to blame the SEC’s rejection of the Winklevoss’ second ETF. In any case, so far it’s clear that bitcoin has historically performed best in bear markets, surpassing gold in settlement volume despite its 70% price drop.
  • Ethereum is down 11% to $287 following a fall of 24% last week and 14% the week before. Aside from arguments that explain the whole market’s downturn (e.g. strong US Dollar, ETF rejection, etc.), analysts believe ethereum, in particular, is falling because ICOs are selling off ether. As Cinnober analyst Eric Wall said on his Twitter, “The problem when you give millions of ETH to ETH competitors is that they can unload the ETH on the spot market and short ETH on the futures market before that, so they’re not only securing the funding but also manipulating the underlying spot market in favor of their shorts”. The analyses follow news that BitMEX shorts of ETHUSD are at an all-time high. As far as movements this week, ether has been all over the place, dropping as low as $249 before rising almost 17% to the crucial $300 level. The rally correlated with the issuance of $120 million worth of Tether tokens, indicating the price increases could be due to new capital entering the market.
  • The entire cryptocurrency market cap is flat this week despite intermittent price drops by both ripple (XRP) and ethereum. The market briefly fell below $200 billion this week before returning to the $208 billion mark. Some altcoins have been doing well, like VeChain, which had its price spike nearly 50% overnight. Other coins such as Ontology and PundiX recorded similar gains.

Exchanges:

Startups:

  • Pantera Capital Seeks $175 Million For Third Venture Fund – Pantera Capital, which has pioneered investments in cryptocurrency assets, has set its goal for its third venture fund at $175 million, surpassing the $25 million raised for its second fund and the $13 million from its first one, according to TechCrunch. A new filing for a Pantera venture fund offering with the Securities and Exchange Commission notes the company has already raised $71.4 million in commitments from 90 investors.
  • Genesis Mining Offers Customers a Discount to Offset Falling Bitcoin RewardsGenesis Mining, responding to falling bitcoin mining rewards for its customers, is offering a discount to help customers withstand the current downturn, the company announced in a blog. The company’s Radiant bitcoin mining upgrade price per 1 TH/s has been lowered from $285 to $180. Operating time has been changed from open-ended to five years, incurring no termination. In addition, the daily maintenance fee has been cut to $0.14.

Enterprise:

  • Capital One Files Blockchain Authentication Patent Capital One has applied for a patent entitled “Blockchain Systems and Methods for User Authentication.” The patent was filed in Virginia, USA, with Johnathan Weimer and Ryan Fox listed as the inventors of the authentication system. The move comes as the latest blockchain use in the banking industry, with Chinese banks already implementing blockchain systems. Barclays, Goldman Sachs, and JP Morgan have also filed blockchain patents.
  • Demand Film Launches Cryptocurrency Australian-based Demand Film has released a new virtual currency to reward users who promote and watch movie trailers. Demand Film is officially releasing the cryptocurrency, known as ‘Screencreds,’ before the company launches in Germany next Tuesday.
  • 39% of Enterprises Believe Blockchain is ‘Overhyped’ – According to the Deloitte 2018 global blockchain survey, almost 39% of the respondents were of the view that blockchain technology was ‘overhyped.’ The study polled over 1,000 blockchain-savvy executives at firms boasting annual revenues of $0.5 billion or more in the United States, the United Kingdom, Canada, Mexico, Germany, France, and China. Nonetheless, respondents did see benefits, with 84% of those polled saying blockchain was more secure.
  • UPS Files Blockchain Routing Patent – According to documents published by the US Patent & Trademark Office (USPTO) on Thursday, the Georgia-based UPS has applied for a patent that utilizes blockchain and distributed ledger technology (DLT) to route packages throughout an international supply chain that may include multiple carriers. Once a package has been scanned into a packaging facility, the system will automatically select a route based on the service offerings of network-connected shipping providers. As the package travels to its destination, information about the shipment will be recorded in the blockchain ledger, allowing the system to rate whether service providers are meeting the obligations of their respective service offerings.
  • Bitcoin Investor Sues AT&T for $224 Million after Mobile-Linked Theft – According to CNBC, California resident Michael Terpin has filed a 69-page complaint against AT&T in U.S. District Court in Los Angeles, in which he alleges that he lost $24 million worth of cryptocurrency after the cellular service provider negligently allowed a hacker to obtain unauthorized access to his cell phone account. In addition to the $24 million he lost in the two thefts, Terpin is seeking $200 million in punitive damages from AT&T, which is the world’s largest telecommunications provider and the second-largest mobile services provider.

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