Jump to content

mars75

Bronze Member
  • Content Count

    85
  • Joined

  • Last visited

  • Days Won

    3

mars75 last won the day on December 7 2017

mars75 had the most liked content!

About mars75

  • Rank
    Regular

Contact Methods

  • Website URL
    Twitter: _mars75

Recent Profile Visitors

The recent visitors block is disabled and is not being shown to other users.

  1. Recently there has been a narrative the past few months that cryptocurrencies or the current digital assets traded on the open market are non-correlated assets to the traditional markets. While this rhetoric has been reiterated, there has not been any substantial evidence backing these claims. General retail investors would stereotypically agree that the crypto market behaves in a chaotic manner. Untethered from any external influences and simply driven by its gradual adoption as a means of transacting business without third parties or as a haven. But given historical macro movements, it appears that there has been a correlation to equity markets. Intermarket relationships typically become exaggerated during the months of large macro movements in the markets. Allowing relationships between assets to be easily observable. While the crypto market is relatively “young”, there are several instances within the past few years that have met these conditions. The infamous bull run of Q4 2017 and the September movements of 2018 were two distinct periods where the intermarket relationship between the cryptocurrency market and equities appear. For the sake of discussion, my observations will be primarily focused on XRP. Both BTC and ETH will be sparingly mentioned as most digital assets moved in tandem during these periods. December 2017 During the period in which both BTC and ETH rallied into Q4 2017, alt-coins were experiencing both drastic and exponential bursts of appreciation and corrections. These price movements were often random and unsupported by any announcements or developments in their blockchain networks. And while retail investors in the crypto market were perplexed by these movements, managers and investors outside of the space realized a bubble was forming. XRP’s sudden ascent into single digit dollars late December spurred rumors of elaborate projects going “live” on the XRP ledger or that massive funds had begun to invest into the digital asset. Yet understanding the financial and economic environment during this period provides valuable context to XRP’s movement. At the time, the US domestic economy (along with other major economies in world) began to enter the late-cycle economic phase. Throughout 2017, global markets were experiencing a bull market that was reflected in equities. Bull markets tend to create feedbacks in which investors continue to reinvest or utilize more capital as assets rise in value and new market participants enter. As lenders and speculators gain money fast, speculators equity grows giving them more collateral to secure new loans to reinvest which reinforces the bubble. As speculators continued to make more money, they began to reinvest in even riskier assets. The crypto market at the current time was a completely new and unregulated market to retail investors, making it extremely speculative. As investors from the traditional markets continued to earn capital, they began to seek other avenues to make more money. Eventually more and more investors found themselves entering into the crypto market after either hearing or seeing how participants were doubling or tripling their money effortlessly and quickly. During a bull market, investor psychology begins to change due to the influx of money being made. This eventually causes a shift in investor mindset where the appreciating assets they own are sacred to them and that anyone without them are missing an opportunity. Which exactly matched the general sentiment around the crypto market in Q4 of 2017. Essentially the performance of global equities created a spillover of capital that reached digital assets. Looking at the historical charts during this period and overlapping them, one can visually see this movement. Equities and the total market capitalization of the cryptocurrency market reached all-time highs within a month of each other. Along with reaching all-time highs in unison, markets began to roughly correct simultaneously with crypto being the first to do so. This was easily explained as cryptocurrencies are extremely speculative in comparison to the equity markets and thus carry the most risk. As markets began to reach their tops, riskier assets began to sell off first which was then followed by other, more traditional financial assets. In order to find how strong of a correlation between US equities and XRP during this period was, one would have to calculate and compare their respective performance. There are several methods of calculating relationships between assets, but my methodology will be focused on calculating the Pearson and Spearman coefficient. Both calculating the Pearson and Spearman coefficient will measure the extent of how linear the relationship between both assets are. Both coefficients are always valued between -1 and 1. A positive coefficient implies a positive correlation while a negative coefficient suggests the relationship being inversely related. Along with that, a coefficient around 0 indicates the relationship between both assets is extremely weak. Spearman's correlation determines the strength and direction of the monotonic relationship between the assets rather than the strength and direction of the linear relationship. “A monotonic relationship is a relationship that does one of the following: as the value of one variable increases, so does the value of the other variable. Or as the value of one variable increases, the other variable value decreases.” (1) The following calculated coefficients used both the SPX and XRP daily closing price (excluding the weekends) from January 03, 2017 to May 10, 2018. Ending at May due to visually seeing a divergence begin between both assets. A total of 341 observed daily closing prices for both SPX and XRP were observed. The Pearson coefficient between the assets was calculated to be 0.783669 while the Spearman coefficient is 0.861674. Both coefficients calculated suggest a moderate to strong correlation between the S&P and XRP during this period. Confirming the assumed correlation derived from visually interpreting the overlapped historical charts. Final Thoughts: • Due to the crypto market being illiquid and having shallow order books compared to equity markets, cryptocurrencies experienced exaggerated movements compared equities. • The May divergence can be attributed to many factors such as governments clamping down on exchanges/cryptocurrencies while warning retail investors that crypto was an unregulated space and penalties could be handed for illicit activity. Another possibility could be that capital began to flee in the wake of a bear market beginning in cryptos and along in global markets. September 2018 Although a divergence followed the market corrections of early 2018 between equities and cryptocurrencies, the correlation would reemerge later in the year. While digital assets further depreciated from a correction into a bear market, equities rallied the following months from May. Global equities rose to month-long highs in October with US equities reaching their previous record highs at the same time. Crypto at the time was finally stabilizing itself from the previous correction in January and began to consolidate. But without any developments or announcements, XRP saw its value rise significantly in September 2018. In respect to the other digital assets, XRP was the only major digital asset to experience such drastic change within a couple of days. The extreme movement once again spawned several rumors of entities utilizing the XRP ledger for operations. But US and global equities during these months provides an insightful context to the digital asset’s movement. For example, US equities once again topped in October and began to enter a period of correction with XRP reacting and following the market. To further support the argument of the equities’ influence on crypto, XRP mirrored the stock movement of SBI Holdings. SBI is a major share holder of Ripple and promoter of Ripple’s technology in the Japan. Forming the Japanese banking consortium intended to use xCurrent for domestic rails and SBI Ripple Asia, a subsidiary meant to drive adoption of xCurrent and xRapid in the Asian Pacific region. Explaining the inexplicable tandem in movement between XRP and SBI’s stock. Calculating the Pearson and Spearman’s coefficient describing XRP’s relationship between the SPX and SBHGF(SBI stock symbol) provides support. Observed daily closing prices of SBHGF, SPX, and XRP from September 17 to December 14 was used in the calculations. The intermarket relationship of XRP and the S&P displayed a Pearson coefficient of 0.509245 along with a Spearman coefficient of 0.600470. Suggesting a moderate positive correlation between assets. In respect to XRP’s relationship with SBHGF, the Pearson coefficient during this period was 0.712559 with a Spearman coefficient of 0.706631. A strong, positively correlated relationship between the assets. In comparison to the correlation’s strength in 2017, the S&P and XRP’s relationship weakened but XRP’s tracking of SBI’s stock reinforced the notion that crypto was still being affected by equities. But regardless of the amount of market participants, capital, or volumes traded, money from the traditional markets entered and withdrew themselves for the second time. Final Thoughts: • An explanation on why the calculated Pearson coefficient weakened the second time around could be that the sample size of the data taken is much smaller in comparison to the original calculation. The crypto market was also a lot more regulated than what it used to be. Possibly dissuading previous participants from the traditional markets on entering again. • There appears to be a pattern in which whenever equities reach a localized high, the crypto market potentially receives an influx of capital from the traditional markets that causes a rise in valuations. Present Day Understanding and observing ONE of the main historical influences on cryptocurrencies can help us interpret the movement’s of today. The economic and financial environment also provides valuable context in interpreting current movements. Back in 2017, cryptocurrencies were the new fad where money was to be made. Currently there is a similar movement going on in the traditional markets that involve IPOs. Displaying a similar bullish or even FOMO (Fear Of Missing Out) sentiment crypto witnessed by the general market. These past few months have also seen very familiar movements in the markets. In the month of July, there was a broad rally across on all different types of assets. Whether it was the more commonly traded stocks or the defensive assets such as bonds, much of the market rose synchronized. Even speculative assets such as crypto, which are last to receive capital due to their risk, witnessed a rise in prices. Both BTC and ETH broke out of their downward month-long trends to post new relative highs. With XRP seeing movement as well but not to the degree of the other digital assets. And as equities began to top out again, corrections throughout the markets began to ensue. Currently it appears that what traders witnessed last October and even further back, January 2017, in the markets has occurred again. The third time in which cryptocurrencies and equities have topped and corrected in tandem. Yet past performance is not indicative of future performance or movements. And while I personally believe that this relationship will change in the future, observing and considering historical trends helps us put the cryptocurrency market’s recent movements into perspective. Time will tell.
  2. Although arguments can be made against the notion of future adoption of the XRPL by the financial system thru supporting the retention of the current international payment system or emphasizing the technological progress in the SWIFT payment network, they fail to address critical flaws in today’s system. Hackers, political pressure, regulators, and the shrinking correspondent banking system are all legitimate issues that are impacting banking operations. Most international payments are facilitated through the SWIFT network today. SWIFT is a messaging network used to send and receive information on financial transactions between financial institutions. Currently, more than 11,000 financial institutions from around the world are linked to the SWIFT network for operations. Typically, the originating bank is required to have a working relationship with the destination bank in international wire transfers. If there is none, the originating bank can search the SWIFT network for a correspondent bank that has one with both banks.(2) Once found, the transaction is transferred through Nostro accounts held at the intermediary bank for a fee to the destination bank. Although SWIFT’s inception has proven to be beneficial in enabling international payments between banks globally, it’s reliance or the monopolistic position has become a double-edged sword. Due to their international relationships, SWIFT was viewed as an apolitical organization that was independent of any country’s domestic foreign policy. Unfortunately, this has not been proven the case the past few years as political disputes now threaten to fragment the international payments space. Regardless of your political views towards Iran, the United States pressure on SWIFT to disconnect Iranian financial institutions from the network has been unprecedented. While the action undergone by SWIFT contradicts the European Union’s desires. Although the EU intends to maintain trade with Iranian institutions, SWIFT complied with the US requests.(3) With the consequence being that now the international payment network has become weaponized to exert political pressure onto countries or regions. This undermines the trust within the network as participants can ultimately be on the wrong side of political discourse. Along with Iranian FIs, there has been heavy speculation from US media sources and diplomats that Russian financial institutions might face similar sanctions to their Iranian counterparts in the future.(4) Further eroding any participant confidence in SWIFT remaining apolitical. SWIFT’s inability to remain impartial to the network’s participants is already beginning to have repercussions. In Europe, there has been a political push back on the US influence over the payment network. Germany's foreign minister, Heiko Maas, has publicly stated that the EU should "strengthen European autonomy by creating payment channels that are independent of the United States — a European Monetary Fund and an independent SWIFT system".(5) Even more striking were Maas’ comments that the EU had already begun the process of developing an alternative payment system. Both Iran and Russia have also taken similar responses to the EU. Iran has begun implementing an alternative banking platform for banking transactions with foreign institutions.(6) Meanwhile, Russian financial institutions have prepared themselves to be disconnected from the SWIFT network at a moments notice and have begun to adopt another alternative payment system CIPS. CIPS or the Chinese Alternative Global Payments System is also an alternative payment platform provided by China. CIPS was intended to make transactions between China and Russia easier while enticing other countries to utilize the system.(7) Russia has also begun to develop its own payment system called the “System for Transfer of Financial Messages” (SPFS). Essentially, the global political environment has pushed regions or countries to develop or adopt alternative solutions to SWIFT. Creating an ever growing, fragmented international payment network that will require interoperability between systems. SWIFT’s security has also been exploited these past several years, further testing the participant's trust of the network. Along with the frequency of these hacks occurring, the severity of them is increasing. Of the top five biggest SWIFT hacks by money lost, four of them have occurred within the past two years.(8) The sophistication of these attacks is becoming so advanced for SWIFT’s liking that they have begun to issue warnings and urge participants to increase their security measures.(9) In some attacks, hackers have been able to order payments to banks in other countries by copying preformatted payment requests into the SWIFT messaging software. Even further eroding trust in the network’s security, it was discovered that the NSA had breached SWIFT’s security and have developed tools for its operations. Thru leaked documents and files by a hacker group, the public was made aware of how the NSA had accessed the messaging system. Possibly setting in an uncomfortable feeling for financial institutions located in Eastern countries that the SWIFT network is a possible vector for attacks. Structurally, the correspondent banking system has been on a gradual decline for several years while total volume and value of payments through SWIFT are increasing. The Financial Stability Board conducted a study in which the FSB found that from 2011 to the end of 2017, active correspondent relationships declined by 15.5 percent across all currencies.(1) While for 2017 alone, it declined by 4.1 percent. More recent studies have concluded that 2018 saw declines in active relationships and corridors of about 3.5% and 2% respectively.(11) With the global correspondent banking network now declining by about 20% and the number of active corridors having fallen by roughly 10% the past seven years. This decline in active correspondent relationships has also coincided with the increased concentration within the correspondent banking market. Remaining participants in the network have their market share increase as competing banks exit the system. Both these trends pose respective risks and issues to the banking system. An increase in the volume of payments with the decrease in the number of correspondent relationships is theorized to increase the length of the payment chains. Implying payments will need to be facilitated thru more intermediary parties to reach the same destination. Possibly adding more exchange or transaction fees along with increasing the settlement time. Meanwhile, a concentration in the correspondent banking market introduces an unwelcoming scenario. Theorized consequences include a decrease in the competition of services, leading to higher costs and more fragile networks. As the payment network relies on fewer participants to facilitate payments, the failure of a participant will have greater repercussions as they are more relied on. Ultimately, the global political environment is causing a fragmentation of the global payment system while the financial system is gradually entering a delicate state. Both trends have already begun to force global and financial institutions to adapt and find alternative systems. Regardless of what SWIFT can develop to enhance it’s services to its participants, there will be issues the organization cannot resolve. Interoperability will more than likely be the key in enabling the future global payment space to withstand any geopolitical shocks, along with providing a crucial capability if the financial system is under strain due to the structure of the correspondent banking system. Placing Ripple’s xCurrent or ILP in an advantageous position. 1. https://bankingjournal.aba.com/2018/11/basel-decline-in-global-correspondent-banking-relationships-accelerates/ 2. https://www.investopedia.com/terms/c/correspondent-bank.asp 3. https://www.ft.com/content/8f16f8aa-e104-11e8-8e70-5e22a430c1ad 4. https://www.voanews.com/a/us-diplomat-russia-should-release-ukrainian-sailors-by-christmas-/4688911.html 5. https://www.businessinsider.com/germany-wants-european-rival-to-us-backed-swift-payment-system-2018-8 6. https://en.mehrnews.com/news/139715/Iran-welcomes-foreign-banks-to-join-its-alternative-to-SWIFT 7. https://ethereumworldnews.com/after-ripple-chinas-cips-now-competes-with-swift-departure-from-us-dollar/ 8. https://medium.com/@kvantorcom/top-5-biggest-swift-hacks-52fca78145c 9. https://www.reuters.com/article/us-cyber-heist-warning/swift-warns-banks-on-cyber-heists-as-hack-sophistication-grows-idUSKBN1DT012 10. https://www.reuters.com/article/us-usa-cyber-swift/hacker-documents-show-nsa-tools-for-breaching-global-money-transfer-system-idUSKBN17H0NX 11. https://www.bis.org/cpmi/paysysinfo/corr_bank_data/corr_bank_data_commentary_1905.htm
  3. @KarmaCoverage It shows when desired, Corda has the ability to tap into the XRPL for liquidity. Nothing more, nothing less. I don't necessarily believe banks will be carrying each other's CBDCs as reserve currencies due the constant management entitled to it and it's possible consequences (see right now).
  4. UPDATE: 12-5-2018 https://www.coindesk.com/r3s-new-corda-app-supports-payments-in-xrp-cryptocurrency
  5. EDIT 10-30-2018 (PAGE 28-32) BoC is working with MAS and BoE on blockchain cross border payments) https://www.bankofcanada.ca/wp-content/uploads/2018/10/presentation-251018.pdf
  6. Something else to add to the GCash speculation: GXI description, https://businessmirror.com.ph/western-union-expands-digital-distribution-through-gcash-mobile-wallets/
  7. ***this is speculation*** In the wake of AliPay's announcement of launching a cross-border remittance service powered by blockchain technology, a closer inspection of the partnerships reveals several layers of Ripple associates. The cross-border remittance services into the Philippines will be offered by in a collaboration between GCash, AliPay, and Standard Chartered. With further details on Standard Chartered's involvement, https://www.pymnts.com/news/cross-border-commerce/2018/alipay-gcash-blockchain-cross-border-remittance-philippines/ Standard Chartered is currently a RippleNet adopter, primarily using it for cross-border payments between India and Singapore. The bank has also broadcasted it's plans on extending it's utilization of RippleNet to five other countries/pairs this year. https://www.finextra.com/newsarticle/32048/standard-chartered-to-extend-use-of-ripplenet-to-more-countries Standard Chartered acting as the settlement bank by offering it's infrastructure to both AliPay and GCash for remittance services, falls into Winters statement of expanding it's capabilities to other currency pairs with the Philippine Piso (PHP), the Hong Kong Dollar (HKD), and the Chinese Yaun/renminbi (CNY) being the suspects. GCash in itself also has an abundance of service and associate overlaps with Ripple. Currently GCash and it's services such as GCASH REMIT into the Philippines is consisted of SoftBank Payments and Globe Telecom. https://www.gcash.jp/?lg=e SBI Holdings' business relationship with SoftBank has been under speculation since SBI's involvement with Ripple but Globe Telecom can reveal other intentions of GCash. GCash is not the only notable subsidiary of Globe Telecom, Mynt is another subsidiary of Globe Telecom's financial technology arm that includes Ayala Corp and Ant Financial(AliPay/Alibaba). https://www.mynt.xyz/about-us/ The significance of Mynt pertains to an announcement this past March. Globe Telecom with Ayala Corp and Ant Financial thru Mynt, partnered with MoneyGram to provide remittance services into the Philippines to smartphone users for their GCash mobile wallets. http://news.abs-cbn.com/business/tech-biz/03/08/18/globe-fintech-arm-moneygram-launch-smartphone-based-remittance-service MoneyGram is well known in the Ripple community for it's involvement in trialing xRapid for a pilot which utilizes the XRP Ledger (XRP) for cross-border payments. http://ir.moneygram.com/news-releases/news-release-details/ripple-and-moneygram-partner-modernize-payments As of now, we publicly know that Mynt (Globe Telecom, Ayala Corp, and Ant Financial) partnered with MoneyGram to improve remittance services into the Philippines for GCash mobile wallet users. MoneyGram states that it's intention on piloting XRP this past January was because the digital asset offered negligible transaction fees and because the average transaction time involving XRP is 2-3 seconds. Interesting enough, this new remittance service provided by both Alibaba and GCash involves HKD and PHP. And the transaction time publicly shared took only 3 seconds... After Alibaba's failure to acquire MoneyGram this past January (same time as MoneyGram's announcement of it's xRapid pilot), Alibaba was adamant that they would still collaborate with MoneyGram to develop remittance and digital payments to several countries including the Philippines........ https://www.reuters.com/article/us-moneygram-intl-m-a-ant-financial/u-s-blocks-moneygram-sale-to-chinas-ant-financial-on-national-security-concerns-idUSKBN1ER1R7 Very interesting times indeed! Time will only tell EDIT: (more speculation in regards to GCash & Western Union) GXI description, https://businessmirror.com.ph/western-union-expands-digital-distribution-through-gcash-mobile-wallets/
  8. "The Governor also mentioned that the bank has begun working together with the Bank of Canada, the Monetary Authority of Singapore, and some private-sector organizations to upgrade inter-bank cross-border payments, including initiatives based on DLT." https://cointelegraph.com/news/bank-of-england-to-rebuild-settlement-system-to-interface-with-blockchain-platforms/amp?__twitter_impression=true
  9. I'll be honest to say I debated whether or not I should have included IBM/Stellar. I don't share your view on Stellar beating out Ripple in the region. Two of the big four banks in Australia (which dictates the region) are already xCurrent adopters while the other were in discussions with Ripple. Meaning in a small region interoperability between the big four banks will be critical. Whatever transpires there are two things that people need to take away in regards to Stellar. 1. Any transactions involving with RippleNet users will by default make Stellar users utilize the interledger protocol for interoperability. Meaning Ripple gains access to whoever is using Stellar in the region. Both IBM and Stellar are Hyperledger members and if they intend to use Quilt, they'll be using the interledger protocol as well. 2. The same criticism applies to Stellar that is used on Ripple in regards to XRP. As of now, IBM has not publicly disclosed any intentions of supporting or utilizing XLM to address liquidity in the region. As of now, no one knows what their intentions are.
  10. New post on a new website guys, pertains to the Australian Pacific region and why it's likely to see some major adoption in the future. https://www.xrp.tips/index.php/2018/05/14/ripple-integration-in-the-australian-pacific-just-around-the-corner/ So there will be a few changes in terms of where I will be posting guys. I'll be primarily using www.xrp.tips for the foreseeable future. I still plan on being active on XRPChat but just not as frequent. Hopefully you guys will still find my posts enjoyable, more to come!
  11. https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/npci-plans-international-remittance-on-upi-platform/articleshow/63540688.cms
×
×
  • Create New...