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How Liquidity Influences the Choice of Crypto Investors

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The cryptocurrency market is filled with thousands of cryptocurrencies, some listed and trading on exchanges, others on the process, while some at the moment are currently not listed. 

For those listed, some are limited to the exchange wherein they are traded; others enjoy global presence on exchanges. An example of this is Bitcoin (BTC). As newer coins continue to come to the market joining the existing and together increasing the total market capitalization as they create value, investors who buy in early on those ‘good’ coins are expected to make massive returns, for those less fortunate, meager returns or in the worst cases, massive losses. 

In a perfect system, every crypto coin or token listed on an exchange will grow in value and give everyone gains. But that’s not how it works. In reality, some coins upon listing could send investors to financial hell. There are therefore several key indicators crypto investors and also traders consider before buying into a cryptocurrency. Amongst the several key points is Liquidity.

What’s Liquidity?

Liquidity simply means the fluidity at which a cryptocurrency can be bought and sold. Globally, chicken is a good product. There isn’t any nation that has a ban on the sale and purchase of chickens. This means for anyone who wishes to purchase chicken, he is very much likely to find it. Same goes for Water. 

There’s a matured market where there’s constant demand such that if anyone wishes to sell, he will see buyers and if anyone wants to buy, he will see sellers. This is the same for any cryptocurrency that will be a good choice for crypto investors and/or traders.

A choice cryptocurrency for any savvy investor must be liquid; there must be readily available buyers and sellers of that cryptocurrency. Though some may not be exactly liquid (not enough buyers and sellers) at its’ early time, but there are key indicators that the coin will be liquid at a certain (near) future. 

There are combinations of factors that will drive the liquidity of a new coin, one of which is the exchange it is listed on and the popularity of the coin. An obscure cryptocurrency exchange at the far end of the planet may not command enough buy and sell orders as the one seated high at the center of the earth.

Buying an illiquid Cryptocurrency; what could go wrong?

While buying a cryptocurrency that is not yet liquid may not be a bad thing, this is because they are other factors that may drive that investment decision. This is mostly done at the early time of a cryptocurrency and the fundamentals checks out after doing due diligence on the cryptocurrency. However, buying an illiquid cryptocurrency may present some significant damage to an investor’s portfolio.

As noted above, an illiquid cryptocurrency doesn’t command enough buyers and sellers to and therefore, an investor who purchases such cryptocurrencies may find it difficult to sell and/or recoup his investment. Even if there’s an artificial increase in price (pump) in price by a quite insignificant volume, there will still be difficulties in selling off and making profit.

One of the consequences of this is that an investor’s funds are left hanging on a potential risky investment, he cannot easily liquidate his investment. Another is that the investment could potential end at a disturbing loss thereby negatively impacting the portfolio of the investor.

Conclusion

Every investor has varying investment preference and risk. However, there are standard key evaluation metrics to consider when conducting due diligence on a cryptocurrency. The decision of an investor will likely be a weighted average of the various key metrics. The choice to invest in an illiquid cryptocurrency may be a good one, it may not.

 The decision could be influenced by other key indicators, this notwithstanding, every investor takes the liquidity and expected liquidity of a cryptocurrency into consideration when making that decision of Invest or Not.

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Finance

 $9.2Billion Hedge-Fund, SkyBridge Capital Is Set to Stake on Bitcoin and other Altcoins 

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SkyBridge Capital, a hedge-fund run by Anthony Scaramucci just enabled itself to invest in the cryptocurrency ecosystem. Now, the fund is able to stake on crypto (really digital assets) from a distance. 

From recent registrations with the United States Securities and Exchange Commission, US SEC, which were made public on the 13th and 16th of November 2020, the Asset Manager revealed that two of its hedge funds “may seek exposure to digital assets.” 

The filings at the United States SEC are to enable Skybridge to intelligently stash monies into the crypto space or fund business enterprises within the crypto sector.  

Mind you, don’t conclude that this ten years old hedge fund is set to soly stake on bitcoin (BTC, +2.85%) particularly. It appears that the fund is really open to the crypto sector as a whole. It appears that from the filings, SkyBridge is looking to test the waters of many a digital asset regardless of how volatile it can be.

Information from one filing states that

“Investment Funds may invest in digital assets without restriction as to market capitalization or technological features or attributes (including lesser-known or novel digital assets known as ‘altcoins’) and may invest in initial coin offerings, which have historically been subject to fraud.” 

This decision comes in the wake of many funds staking heavily on Cryptocurrencies. Many funds have even gone down the drain and others continue to scale. Let us keep our fingers crossed as we experience what comes of this.

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Finance

NFL Player and Investor, Reginald Fowler May Resort to Plea-bargain in 850 million Shadow Bank Case

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For reasons unknown at press time, the legal counsel to beleaguered NFL player and financier, Reginald Fowler, have moved a motion to pull out from handling a suit revolving around unlawful crypto procedures. It is not surprising that no reasons have been revealed for this move, as this information remain within the purview of privileged information between a lawyer and his client.

Nevertheless, the NFL Player and Investor’s attorneys, James McGovern and Michael Hefter found cover under Local Civil Rule 1.4, which allows a lawyer to plea for a leave of court to withdraw from a suit for “satisfactory reason.”

It was gathered from the motion filed that the attorneys had been on Fowler’s neck that they wanted to pull out from handling the suit at hand even since Feb. 26, 2020. They had only been stalling in a bid to allow Fowler’s new legal counsel get a grasp of the suit. 

Fowler and one Ravid Yosef, the latter being yet unknown, were both alleged to have been involved with “shadow banking” processes for crypto trade platforms. 

The pair were suspected to have hidden under false pretenses by administering real estate contracts, they opened a bank account with several banks so as to unlawfully and pretentiously hold monies for crypto trade platforms. Fowler is alleged to have been involved with the shadow bank issue which is linked to an $850 million black hole of crypto funds which got lost in 2019 from the Bitfinex trade platform.

It appears that at the state in which the case is, the NFL Player is contemplating going for plea bargaining so as to reduce the level of his judgment liability.

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Paypal Increases Trading Bandwidth for Crypto to a Weekly Limit of $15K/Week 

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The Executives of Fintech giant PayPal note that there is going to be a major explosion in the world of Crypto with cryptocurrency services increasing at the speed of light come 2021. These remarks were made at the Company’s Third-quarter earnings call.

Dan Schulman, PayPal’s CEO also added that crypto services will come to Venmo and international customers in the first two quarters of 2021.

All Things Being Equal More US Residents Will Use Crypto Tools

He continued that at present, approximately 10% of US Customers are able to utilize the new Crypto. If all goes as planned, every other American will be able to utilize the tools in the coming two or three weeks.

PayPal made huge profits after allowing more weekly crypto payments from $10,000 to $15,000. This became the new norm starting from October 21st, 2020 – the day the payment giant made a huge announcement to that effect.

Schulman went on to project a future turn of events in a setting where Paypal will continue to scale in a digital financial system where financial services like payments is highly digitized. 

PayPal Planning to Create Expansive Digital Wallet Following CBDCs

With respect to retail facing Central Bank Digital Currencies, Schulman noted that PayPal is planning to create “the most expansive and compelling digital wallet in the world.” world sees a future where their Initiative will thrive.

PayPal recently revealed that they had been working on integrating new features to their technology that will enable their esteemed users trade and store Cryto.

Although Bitcoin (BTC,+2.23%) has since surged by 15% after PayPal gave the October 21 news, the Fintech giant has however battled a net downturn by a significant 12%.

The number of traders using the payment platform grew rapidly by 1.5 million to a whopping 28 million in the third quarter of 2020. It also experienced a whopping 36% increase in the number of new payments to about $247 billion in Q3 2020 during the same period. The Payment services provider now boasts of about 361 million active accounts- this is a consistent  22% increase from one quarter to another. 

In spite of all of these, PayPal’s latest  earnings report only cursorily alluded to cryptocurrencies in its Business Updates section  by just touching on its October 31st news.

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