quantitative easing

CEX.IO Founder: US and UK Investors Expect Bitcoin to Serve as Hedge Against Currency Depreciation

Exclusive Interview with Oleksandr Lutskevych, CEO & Founder, CEX.IO

Oleksandr Lutskevych is the founder and CEO at CEX.IO LTD, a successful London-based group of companies, including CEX.IO Bitcoin Exchange. Established in 2013, CEX.IO is a multi-functional regulated cryptocurrency exchange registered as a Money Business Service (MSB) by the US regulator FinCEN.

CEX.IO is trusted by 3 million users in 220 countries and territories. In 2019, CEX.IO launched a dedicated US presence and has obtained Money Transmission Licenses in 25 states. They are able to currently serve 42 states in the US.

Lutskevych is a pioneer in the Bitcoin industry and serial entrepreneur with deep expertise in internet technology businesses. In this second exclusive interview with Blockchain.News, Lutskevych discusses the current Bitcoin market sentiments in the US and UK following Brexit as well as CEX.IO’s next steps for 2020.

Bitcoin Market Sentiment in the US

The US is one of the toughest jurisdictions for digital assets and cryptocurrency from a regulatory standpoint. As a result, the variety of services, products, and digital assets that are available to people in other parts of the world are not available to US investors.

Lutskevych said, “People in the US look at Bitcoin as a store of value more so than in other parts of the world. We see that at every level of sophistication, from retail consumers to institutions.” He explained, “The former (retail consumers) are price conscious, which is one of the main factors in their decision for which services to use. They want a trustworthy gateway into open finance and they carefully evaluate the fees and commissions, looking for clear pricing models.”

Institutions are also showing a growing appetite for BTC, Lutskevych said, “Even some of them, traditionally regarded as conservative, allocate a portion of their funds towards BTC as a way to diversify their assets.”

Comparing BTC Investment on Both Sides of Atlantic

According to Lutskevych, the UK and the US have very notable differences between what consumers want out of their investments but, “We have noticed that consumers in both countries are looking for bonafide store of value assets.”

“With the uncertainty of Brexit consequences and the effect it will have on the GBP, consumers have expressed similar sentiments to consumers in the US who are concerned about the Federal Reserve’s actions of quantitative easing,” Lutskevych said, “As both established economies may see, and fear, a clear depreciation of their currencies, Bitcoin can become a hedge against that. We notice that the strength of that narrative and public sentiment is only increasing.”

User-Friendly Staking

In part one of our exclusive interview, Lutskevych discussed CEX.IO’s continued geographic expansion of service across the United States with the exchange now operating in 42 states.

A second mission of CEX.IO in 2020, is to expand services to US residents that have been recently introduced to the exchange’s global customers. Lutskevych said, “Since the regulatory landscape varies in different countries, we distinguish between the services (and digital assets) we can offer to the clients outside and inside the US. Historically, we first introduce a service to the global clients, while vigorously researching the regulatory status of such a service in the US. Then we polish and adopt the service for our US consumers.”

An example of one such product set to make its US debut is staking. Lutskevych explained, “CEX.IO customers can participate in staking with relevant coins and easily receive the rewards on their crypto balance. Some people call staking rewards a form of a passive income, and it is certainly an interesting way to participate in the crypto economy.”

Staking is traditionally considered a thing for tech-savvy people, but CEX.IO has made it hassle-free. Lutskevych said, “For CEX.IO customers, staking is nothing more than storing coins and tokens in a CEX.IO account. At the same time, customers remain in full control of their crypto assets. They can trade and even withdraw staked cryptocurrencies at any moment, without needing to wait. It’s a huge competitive advantage considering that staked funds are usually locked.” He added, “Staking is certainly the service we look to bring to our US customers once we determine how it fits into our process with the remaining licenses.”

Other Services Coming in 2020

As the cryptocurrency industry continues to mature, professional traders and institutions are seeking different services than the general everyday investor. Lutskevych said, “Professional participants of the market usually operate at scale, they need liquidity solutions, advanced API, institutional-level custodial services, and an OTC desk.”

Having obtained a DLT license to provide those services in Europe, this year, CEX.IO is looking to expand them further to the US markets.

Lutskevych concluded, “Overall, we’ll continue building trust with our users and looking for better ways to serve them. Either by offering more services or improving our existing ones, we want to always keep our hand on the pulse of the market and remain agile to meet its evolving demands.”

Fed Slashes Interest Rate to Near Zero and Launches 700Bn QE, Bitcoin Hovers Near $5k

The recent stock market crash has caused a wide “Red Sea” of losses for equities and cryptocurrencies. Bitcoin price has once dipped below $4000 and now hovers near $5000.

Interest Rate Cut

In an attempt to stimulate the US economy amid coronavirus pandemic, the Federal Reserve (“the Fed”) decided to slash the main interest rate to near zero together with the purchase of $700 billion Treasury securities.

The Fed has cut the benchmark federal fund rate by one percentage point, which is now at a range of 0 – 0.25%. According to the Fed, the decision is consistent with its goal to support economic activity, robust labor market conditions, and restore the inflation rate to the Committee’s symmetric 2% objective. The Fed intends to maintain the new target range until they feel confident that the U.S. economy is stabilized amid coronavirus pandemic, to achieve its maximum employment and price stability goals.

700 billion quantitative easing program

Regarding the $700 billion purchase of Treasury securities, the Fed announced to increase its holding of Treasury securities by at least $500 billion and its holding of agency mortgage-backed securities by at least 200 million. Besides, the Fed will reinvest all principal payments from the Federal Reserve’s holding of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions are part of the Fed tools to smoothen the flow of credits to businesses and households.

US President Donald Trump welcomed the latest move by the Fed, “It makes me very happy and I want to congratulate the Federal Reserve. That’s a big step and I’m very happy they did it.”

Cutting of primary credit rate

The Fed also announced to lower the primary credit rate by 150 basis points (bps) to 0.25%, which is comprised of a 100 bps reduction of the target range of the Federal funds rate and 50 bps reduction in primary credit rate. The rate cut is complemented by letting banks borrow from the discount window for as long as 90 days, prepayable and renewable by the borrower on a daily basis. The Fed believes such moves can encourage depository institutions to help meet demands for credit from households and businesses.

To enhance the US Dollar liquidity with other central banks

The Fed coordinated with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank to enhance the liquidity of USD via the standing US dollar liquidity swap line arrangements.

As agreed by the central banks, the pricing on the standing U.S. dollar liquidity swap arrangement will be the US dollar overnight index swap (OIS) rate plus 25 bps. Apart from the current offer of 1-week maturity operations, the foreign central banks also agreed to begin offering USD weekly in each jurisdiction with an 84-day maturity. This aims to ease the strains on the supply of credit to households and businesses domestically and internationally.

What happened to Bitcoin?

Source: CoinMarketCap

Following the announcement by the Fed, Bitcoin price once topped $5824, but then hovered near $5000. Despite the quantitative easing by the Fed, investors are still concerned with global economic uncertainty caused by the coronavirus, such as nations to close their borders, coronavirus “herd immunity” plan by the UK government and quarantine on arrivals by various countries.

Image via Shutterstock

BitMEX Research: Inflation Aftermath of Coronavirus Financial Crash Will Be Bitcoin's Greatest Test

In the aftermath of the current Coronavirus market crash and the subsequent incoming inflation that will be caused by the response of the Federal Reserve and Central banks, Bitcoin will face its truest test and be presented its biggest opportunity to prove itself in its short lifetime, according to new research from global crypto exchange BitMEX.

Bitcoin Could Anchor the New Economy

BitMEX Research published their analysis , Inflation is Coming, on March 17, outlining that the global response to the pandemic and disruption will, “mark a significant economic regime change from monetary policy to central bank funded fiscal expansion” from which intolerable market inflation will rise. It will be within this oncoming financial environment that Bitcoin’s true nature should finally be revealed.

Central banks and governments have been fast to respond to the disruption caused by the Coronavirus. The analysis highlighted, “In the US the Federal reserve has lowered interest rates to near zero (0% to 0.25%), announced the purchase of at least $500bn of treasuries and $200bn of mortgage backed securities, and also reduced the commercial bank reserve requirement to absolute zero.”

Bitmex believes that there are further measure to come, but it is clear that these attempts to restabalize the broken system are, “the last major throw of the dice from central bankers. Monetary policy will not be enough.”

The researchers claim that not only will inflation come, “it will be a shock” as inflation has been low and stable for 30 years and our collective memory does not nor recall the consequences of digging ourselves into such a financial hole. Although they do not specify exactly when the inflation will hit, BitMEX predict it will be “similar to the 1970s where it went as high as 15%.”

US Consumer Price Inflation YoY

Source – Bloomberg

The analysis by BitMEX’s research arm stated, “ In our view, in this changed economic regime, where the economy and financial markets are set loose, with no significant anchor at all, not even inflation targeting, it could be the biggest opportunity Bitcoin has seen, in its short lifetime.”

Bitcoin’s Value and Trading in CrisisIn a recent interview with Blockchain.News, FXCM’s Managing Director Michael Kamerman addressed Bitcoin’s potential to be an alternate store of value to gold, He said, “There are two parts to this question. First, is Bitcoin a “safe haven?” My answer is, no, not yet. It has the characteristics of what would be a “safe haven” asset but if you look at the way it moves on a chart, it is not a “safe haven” instrument.” He added, “I think as Bitcoin is more widely adopted, investors and traders will wake up to its “safe haven-like” qualities – but it is too early now.”

Prior to the recent stock market crash which sent equities plummeting, traders hardly had a trouble-free environment to operate within. Over the last year, market participants have also had to contend with a China-US trade war, Brexit uncertainty and Coronavirus disruption, making investment anything but straightforward.

On his observations regarding traders’ movements over the last year of rising uncertainty, Kamerman said, “I would not say our customers are shifting their investment sentiments, but instead remain opportunistic. If forex is moving, they trade forex. If Bitcoin is moving, BTC/USD is all the rage. Recent volatility has benefitted our cryptocurrency product line in that our number of active crypto traders is up. Data does not show our customers choosing crypto over forex or vice versa. Customers just want to trade what is moving.”

Bitcoin Rallies Back to $50,000 on Backing from Ark Investment CEO

Bitcoin (BTC) surged past $50,000 after nosediving to lows of $45,000 as a price correction was imminent after hitting a new all-time high of $58,350.

Bitcoin’s Tough Week

This price surge of about 7.2% to hit $51,393 in Asian trading was witnessed after Bitcoin’s price plummeted to nearly $45,000 because of significant selling pressure. Cathie Wood, the CEO of Ark Investment Management, trusts that this correction is healthy for the market as she is still very positive on Bitcoin.

The price correction to levels below the $50,000 mark was partly triggered by the liquidation of 474,968 BTC trades worth $4.4 billion on Feb 23.

Furthermore, there was an 11x exchange inflow spike, which signals the urge to transit crypto assets like Bitcoin to cash because they are withdrawn from cold storage intended for future usage or speculation. This trend, therefore, contrasts with the holding culture.

More Stimulus On the Horizon

Bitcoin is expected to continue to benefit from the rollout of more stimulus packages as echoed by the US Federal Reserve Chair Jerome Powell that the central bank is nowhere close to unwinding its easy policy.

Global governments have been adopting financial initiatives like quantitative easing (QE), which involves printing of more money needed to fight the economic impact of the coronavirus (Covid-19) pandemic.

This tide of monetary and fiscal stimulus, together with remarkable institutional investments, has been the engine behind BTC’s present uptrend. One of the corporate giants making notable BTC investments include Square, which has revealed pumping in a further $170 million in Bitcoin.

Square has optimized on the temporary Bitcoin dip and scooped up more of the digital asset, buying approximately 3,318 Bitcoins when the cryptocurrency’s price was trading around $50,000.