This Is Crypto

We're back.

It may not seem like we're back when we see flash crashes and dumps, but they go hand-in-hand with 'green days' that far outstrip what you can find in any ordinary financial market. You may wonder why I'm so confident that I would make that opening statement, "we're back."

The answer is straight-forward, no matter if the numbers are green or red: Volumes. They are now edging slowing and steadily above levels that we saw around the December 2017 time frame, and they are measured in the billions for each of the top five cryptos. Bitcoin, the aging P.O.W. market leader, was lucky if it broke four billion dollars in volume per day in the midst of the 2018 bear market.

Now when you glance at the charts, it regularly exceeds four times that number.

XRP has also benefited by this same multiple of volume, and despite the quarter one price doldrums, is now commanding over a billion in daily volume worldwide.

This is where we left off from a volume standpoint, but crypto is not the same as it was in 2017. The number of exchanges - for XRP and for many other cryptos - has multiplied by a factor of ten or more, which has dramatically enhanced the ease with which new investors can quickly jump into the market. This makes for fast reaction times, and we've already seen some precursors to significant bull runs in the last two months.

So if you are overly-concerned about the last two days, I'll share what I do; take a deep breath and check again in ten minutes. This market is no longer standing still.

General Crypto News

You may have missed a fascinating publication by the IMF in early February.

It was a paper with a title that truly rattled many who glanced at it, published on the IMF's blog site: "Cashing In: How to Make Negative Interest Rates Work."

The two authors, Ruchir Agarwal and Signe Krogstrup, are renowned economists from Harvard and from the Graduate Institute in Geneva, respectively. Both of them teamed up on the post, noting that countries around the world have all but exhausted their ability to lower interest rates.

Lowering interest rates is what central banks typically do to help boost the economy of countries, since that improves the flow of capital to new businesses and generally makes borrowing less expensive for all parties, including consumers.

But these same central banks are now scraping the bottom of the barrel, with interest rates as low as they can possibly go. So the solution proposed by the two authors is to venture into unknown territory: Negative interest rates.

How do negative interest rates work, you may wonder? The authors breathlessly link the idea to the latest "cashless" push around the globe:

"In a cashless world, there would be no lower bound on interest rates.

A central bank could reduce the policy rate from, say, 2 percent to minus 4 percent to counter a severe recession. The interest rate cut would transmit to bank deposits, loans, and bonds. Without cash, depositors would have to pay the negative interest rate to keep their money with the bank, making consumption and investment more attractive.

This would jolt lending, boost demand, and stimulate the economy."

The authors seem to miss how horrifying this statement is to those that have struggled to save money, and continue on in a coldly analytical manner, noting:

"The proposal is for a central bank to divide the monetary base into two separate local currencies—cash and electronic money (e-money). E-money would be issued only electronically and would pay the policy rate of interest, and cash would have an exchange rate—the conversion rate—against e-money. This conversion rate is key to the proposal. When setting a negative interest rate on e-money, the central bank would let the conversion rate of cash in terms of e-money depreciate at the same rate as the negative interest rate on e-money. The value of cash would thereby fall in terms of e-money.

To illustrate, suppose your bank announced a negative 3 percent interest rate on your bank deposit of 100 dollars today. Suppose also that the central bank announced that cash-dollars would now become a separate currency that would depreciate against e-dollars by 3 percent per year. The conversion rate of cash-dollars into e-dollars would hence change from 1 to 0.97 over the year. After a year, there would be 97 e-dollars left in your bank account. If you instead took out 100 cash-dollars today and kept it safe at home for a year, exchanging it into e-money after that year would also yield 97 e-dollars."

And, almost as an unspoken acknowledgment of the anticipated public outrage in response to such measures, and how ordinary citizens would look to alternatives - such as cryptocurrency - the authors ended the proposal with this comment:

"Still, implementing such a system is not without challenges. It would require important modifications of the financial and legal system.

In particular, fundamental questions pertaining to monetary law would have to be addressed ..."

Indeed.

The extraordinarily disturbing proposal would punish the citizens of a country whose central economic planners failed to do their jobs. I'd wager that the irony is lost on the two economists responsible for writing it.

For the rest of us ordinary citizens, I have a different proposal: buy XRP and keep your secret keys safe.

Ripple News

On April 23^rd, Siam Commercial Bank (SCB) announced that they'd teamed with one of their customers, PTTEX. PTTEX is the PTT Exploration and Production Company, which is a national petroleum exploration and production company based in Thailand, and is a subsidiary of the state-owned PTT Public Company. ¹ ²

And of course, SCB has been a Ripple client since 2017, and was one of the most influential early-adopter banks on Ripple's customer rolls. ³

The project discussed in the formal announcement focused on transforming the corporate payment systems for PTTEX using Ripple's blockchain technology, which was sufficiently vague. It could point to any - or all - of the Ripple software solutions.

PTTEX Finance and Accounting Group Executive Vice President Mr. Sumrid Sumneing stated:

"PTTEX will work closely with SCB to continue using Blockchain technology for other financial transactions to optimize its digital competitiveness effectively and quickly."

The announcement was a fantastic testament to what RippleNet members can do on their own when on-boarding secondary corporate customers that can benefit from real-time settlement; it speaks to how important Ripple's first adopter banking customers have been in helping to implement the next generation of global payments.

Q1 XRP Markets Report

Ripple published its first quarter XRP Markets Report on April 24^th, detailing the consistent quarter-over-quarter statistics and measurements that are paired with forward-looking statements about the market and XRP.

Each time they publish their quarterly report, I conduct a thorough review, and compare the reported statistics against their previously-reported numbers. I'll do the same for this report, and then provide my commentary on each of the implications.

The Basic Statistics

The XRP Markets Report listed the sales totals that Ripple conducts through two separate channels:

Institutional Sales (wholesale sales of XRP)
Programmatic Sales (retail sales to buyers on various exchanges)

The first category, institutional sales, can include almost any business you can imagine, from banks and remittance processors, to exchanges and large investors. These sales usually involve very large amounts of XRP, and can be a barometer of both utility-driven demand and speculation-driven demand, as it really depends on who is buying.

We don't really have insight into which category these buyers fall into, since Ripple (wisely) doesn't disclose such details. Here are their reported numbers compared against previous quarters:

⁴ ⁵ ⁶ ⁷ ⁸ ⁹ ¹⁰ ¹¹ ¹² ¹³

The level of "Institutional Wholesale Sales" was the second-highest amount ever recorded by Ripple, which shows a much greater appetite for large purchases of XRP.

The level of "Programmatic Sales" which is where Ripple sells XRP directly to people like you and me, was also the second-highest amount ever recorded by Ripple.

The two categories added together, and then measured against the volume numbers reported by Coinmarketcap.com, indicated that the total sales amounted to .32% of all the trading volume of XRP for the entire quarter. This basis point measurement was the second-highest amount ever recorded by Ripple.

So across the board, the first quarter of 2019 indicated an increase of XRP sales, which, depending on the timing of sales, added up to the $169 million dollars reported by Ripple in their formal Q1 report.

This amount is massive.

Just one quarter of XRP sales has netted Ripple the equivalent of a large Initial Coin Offering (ICO) when measured against some high-profile projects that raised money in 2017 and 2018. While it may be an arbitrary measurement, the comparison is a barometer of how much capital the company was able to raise in a very short amount of time.

Escrow Activity

Each month, one billion XRP is released from a cryptographically-locked transaction and sent to Ripple. This is known as an "escrow" amount of XRP, and while ordinary XRP owners may use them on a small scale to time-lock their investment, Ripple has chosen to use the feature to lock away its XRP so that traders and other market participants can depend on a distribution schedule that mimics that of proof-of-work networks. ¹⁴

The amount not used by Ripple for investment or sales is then returned to a new 55-month escrow at the end of each month, so that the distribution curve looks very much like what we'd expect to see of a 'mine-able' crypto network:

Following this release schedule, Ripple then merges its business objectives and goals with how much it can sell, and then determines what amount to keep versus return to future time-locked escrows.

The amount "kept" by Ripple is then used for sales or investments, such as the UBRI or the Xpring Initiative. The amounts retained by Ripple each month are then added up for a total quarterly amount and reported as part of the XRP markets report.

Here is the amount that Ripple has "kept" each quarter since the inception of the escrow program:

As you can see, the amount retained for quarter one was the highest amount ever recorded by Ripple, and is consistent with the high amount of sales logged for the quarter.

xRapid

The previous report - the Q4 2018 XRP Markets Report - contained a section on xRapid, and was a great way for Ripple to keep the community in the loop on a topic that receives widespread attention and speculation in the community, as this solution from Ripple is the one that has the greatest potential for adding to utility-based-demand for XRP.

However, this XRP Markets Report did not call out the Ripple solution separately; instead, it included an update on the overall numbers of businesses, banks, and financial institutions that joined RippleNet, and listed the xRapid customers separately. These included a couple names that were new to me, and a few that I'd already heard about:

JNFX
SendFriend
Transpaygo
FTCS
Euro Exim Bank

That's five new customers for xRapid, adding to the list we already knew about and the payment flows that we've already seen chugging along on the three xRapid exchange partners. It was fantastic to see this list.

Other XRP Markets Report Items

The report provided an update on the increasing numbers of banks and companies that comprise RippleNet - now over 200 - and then dove into general digital asset market trends.

The ones I found most interesting:

Legacy players (like Coinbase and others) have emphasized the "payments" use case with updates to their platform, and have announced new cross-border payment services.
Digital banks are entering the market and competing with traditional banks.
Mobile wallets, even some traditional bank-sponsored ones, have added crypto support, which can help drive digital asset adoption.

Each one of these spells good news for XRP, as it indicates expanding adoption of crypto-assets, generally, and especially since it validates what Ripple has stated from the beginning: that crypto-assets can facilitate and improve banking and finance, and that crypto firms should work to identify how blockchain technology can vastly improve financial capabilities for all stakeholders, especially the customers.

My Take

Ripple has a very challenging job when it comes to managing the world's largest storehouse of XRP.

Yes, the escrow forces limitations around what's possible and what's not, but beyond that, they must carefully manage the released XRP to ensure that the market retains trust in supply, and that traders have insight into the activities that impact both sides of the coin: supply and demand.

Each side of the scale must be carefully balanced against each other, to ensure that:

The XRP ecosystem and future utility will keep growing
The supply of XRP doesn't negatively impact price

If the balance swings too far one way instead of the other, problems develop. For example, let's bring it to extremes to see what happens:

Scenario 1: Ripple returns entire escrow and doesn't sell or invest any of it.
Scenario 2: Ripple sells or invests all of the XRP released from escrow.

In scenario one, we can safely say that the supply will be restricted, and that the price might increase a very small amount due to this restriction. But at what cost? We would be sacrificing the future utility of XRP if we were not to invest any money in building new capabilities.

In scenario two, we can safely say that the supply would be too much, and that the price might decrease to lower levels, and would also dissuade many from betting on XRP's price appreciation. While it may be nice to invest all of the escrow for the future, it would probably have a detrimental impact to network liquidity, which is absolutely necessary to bootstrap Ripple's xRapid solution and other use cases such as micropayments.

So each quarter, Ripple plays a guessing game, and has to employ some mathematical analysis to determine how much to sell & invest, and how much to place back into escrow.

So here's the big question: Did they succeed in doing this properly in the first quarter of 2019?

It was an important enough question to prompt me to ask some of the most knowledgeable people I know, including some that know - and use - technical analysis. The consensus was that there was, at very low levels, a small-but-measurable downward pressure on price during times when we would least expect it. This doesn't mean that the effect was from Ripple's programmatic sales, but it was enough to make some market participants suspicious, rightly or wrongly.

If it is related to XRP entering the supply, it could be due to the fact that in addition to sales, the level of investment of XRP by Xpring was edging the scales out of balance slightly. In addition, the supply of XRP is increased by other non-Ripple activities such as philanthropic donations of the digital asset by Rippleworks.

Was this the case?

I don't think Ripple's programmatic sales are detectable by the market. They account for less than one third of one percent of daily volume. However, there is one observation that I believe in: If prices are rising, then nobody will really care about these sorts of matters, or who sells what amounts. But if prices are stagnant or declining, those that own XRP will be looking very closely at matters which, under different circumstances, they wouldn't think twice about.

My Criticism of This Report

Ripple's choice to dispense on any formal reporting of xRapid statistics in their report was a mistake.

I would strongly urge them to reconsider this change from last quarter's report and re-institute a specific section about xRapid, and report volume statistics as well as their targets for future quarters.

This would have the benefit of:

Providing insight into what should be the unquestionably-largest use case for XRP
Giving traders perspective on the growing levels of xRapid adoption

My gut feeling is that Ripple is working stridently to improve volumes of xRapid on exchanges, and that's commendable; however, the market will find out one way or the other about the estimated volumes, and I think it would be much better to hear it 'straight from Ripple,' rather than hobbyist bloggers that have analyzed payment signals.

The Good Stuff

Say what you want about the investments from quarter one; they are complete, and they are fantastic:

And that's the abridged version that was included in the report. In addition to these popular investments that might goose short-term demand, long-term investments in securitization and content monetization were made as well, which may reap substantial rewards down the line.

Ripple has continued to voluntarily publish their XRP Markets report, and unlike many other central championing organizations in crypto, the report provides detailed insight for investors in XRP, and gives us the details that we need to compare against other crypto projects. And based on what I've seen, this comparison continues to be something to celebrate.

Navin Gupta In Dubai

A recent Fintech conference at the Dubai International Financial Center featured a panel called "Tomorrow's Innovation Today," facilitated by Yuri Bender, the Editor-in-Chief of Private Wealth Management at the Financial Times.

Include in the panel discussion was:

Nicolas Cary, Co-Founder and Vice Chairman, Blockchain
Jonathan Larsen, Chief Innovation Officer, Ping An Group
Navin Gupta, Managing Director, South Asia, Middle East and North Africa, Ripple
Pawel Stefanski, Financial Services Sector Leader, Middle East & Africa, IBM

Nicolas Cary provided a comprehensive review of both the basics of blockchain technology, and some of the futuristic thinking around AI and its potential to merge with some of the new fintech innovations represented by digital assets:

At around the twenty-five minute mark, Yuri Bender, after a few questions to some of the other panelists, introduced Navin Gupta and told a story that compared Ripple to famous challenger soccer teams. After making the statement that Ripple wanted to duplicate what "SWIFT has done" and then become the dominant player in the market, Navin Gupta responded this way:

"That diagnosis would be like saying Jeff Bezos started Amazon to replace Barnes and Noble or Walmart, right?

But that's really not true; but what happens is, people need a reference point. So whenever we speak to people if you talk to them about something abstract ... if Jeff Bezos in the (beginning) started talking about cloud computing, they wouldn't get it; they need a reference point; they need a starting point.

For example, books; he started selling books, so similarly, Ripple has started where we're connecting two banks together in a "WhatsApp" kind of format, right? And what does it create? First, what it creates is a great customer experience. So whenever you send money overseas - all of you - have sent a private transfer, and I can say that, easily, 90% of people are hugely frustrated with the experience that they have. But with Ripple, the experience that you have is it's error-free.

That means that even before the transaction, (Ripple technology) essentially moves the name, the account number, the AML checks ... are already done, to make sure if the money leaves your account, it instantly gets delivered into the destination account itself ...

... the fees are transparent, so you know what FX rate you're paying. You know what fee will be charged by the originating institution; what fee will be charged by the receiving institution; and what net amount in the destination currency will get credited to the account."

And then, with flair, Navin Gupta picked up a bottle of water sitting beside him and held it up:

"How many people in this room would buy this bottle of water from a supermarket, not knowing what the price will be? And better still, you check out, and after two years it shows up on a credit card bill that this is the price of this particular bottle of water?

How many of you would do it? But that's what exactly we do today in the wire transfer world."

And then, speaking of the use case for liquidity sourcing using digital assets - XRP - he talked about the concept of Nostro-vostro account requirements:

"That's not where we are stopping ... the next big thing if we really wanted to bring the cost of international remittances down, is this five trillion dollars that is stuck capital by banks in the world, which is called 'pre-funding;' so, as you know, whenever a bank sends a 'bi' transfer, it actually keeps pools of capital in currencies around the world to make that wire transfer happen.

These pools of money have capital costs for the banks. It has ... hedging cost. And that's the reason why wire transfers are so expensive. So this is true with the World Bank reports: On average, each wire transfer costs 7% ... for a person to send it from point 'A' to point 'B.'

Can anybody tell me what is Toyota's net profit percentage, or a gross profit percentage? Or Volkswagen's? Sometimes it's between 2% to 7%.

So a car company which is making this amount of profit; the same amount of cost is being used in sending a wire transfer from point 'A' to point 'B,' because of this five trillion dollars being stuck.

So we use a digital asset to essentially do real-time funding; to do funding on demand. So that this five trillion dollars is not required. And we are making this industry hugely efficient. So that the cost of remittances can come down. The experience can come down; and we can really move on to the 'WhatsApp' world the way we know today ... There is no reconciliation required."

Both of the analogies were sparkling examples of the oratory style that seems to be Navin Gupta's trademark. It reminds me somewhat of being in college with a professor that has a set of tools to connect complex topics with an audience of students, to gently take them down what would ordinarily be a difficult mental path.

There was more from him on other topics such as remittance provider choice diversity, and Ripple's guerrilla marketing tactics at the first SWELL conference. I recommend the video for the content provided by the other panelists as well, as some of the topics, while heady and futuristic, may be a glimpse into the not-so-distant future.

XRP News

The XRP meetup in Amersfoort was only one of many planned for 2019. One happened in Texas earlier last quarter, and another one is scheduled for a (to be determined) date in November of this year in Japan, and that meetup is expected to draw hundreds of fans to Tokyo.

While I covered the significant events and announcements from Amersfoort, one of the news items that I missed had to do with new services and features offered by the company behind Bithomp, one of the most popular XRP Ledger search tools available online.

Viacheslav Bakshaev contacted me on XRP Chat (he goes by the avatar @warbler on that forum), and indicated some news items that Bithomp announced at Amersfoort, but that had perhaps been overlooked based on the spotlight centered firmly on news about XRPL Labs and their licensing strategies:

"We made a couple announcements at the XRP Meetup:

A new service card2xrp.com where Europeans can buy xrp with a card payment. The service is powered by another Swedish company, Safello AB. ¹⁵

Another announcement we made was about username registration on Bithomp. It's the same as Rippletrade had, and we want to continue their service ... So users are able to register a username and then search for it in explorer and have short links (like https://bithomp.com/explorer/bobway)"

He was excited about the card, as he'd managed to negotiate a rate of 5% for the card purchases, which is (comparatively) a low fee:

"I know it's still expensive but for card payments (crypto) it isn't so bad ...
... many others offer 10-11% usually, as crypto is in the risk group for card purchases."

He also followed up later and indicated that Wietse Wind had now made the card one of the ways in which customers of the XRP Tip Bot could fund their account:

The team behind Viacheslav Bakshaev is responsible for some incredible tools that have benefitted the XRP Community over the years, and I'd love to see his new card gain traction against competitors in the market. Since he was able to negotiate a (comparatively) low interest rate on purchases, then it should help him compete against larger rivals like Wirex and others. And, of course, he is a prominent supporter of the XRP ecosystem.

It will be interesting to see if his new service posts significant adoption numbers in 2019; it's great to see the number of options for crypto-related cards rise, as it will inevitably increase competition and make the entire space more customer-friendly.

XRP Zoo

A number of XRP YouTubers and other community members came together in 2018 to form a group called the "XRP Zoo."

The group is comprised of:

The group periodically gets together to record YouTube presentations as part of their collaborative channel, and have published an amazing 73 videos as part of their series.

The group has hosted special 'ladies night' guests like @sentosumosaba, @BirdDog1227, and other women crypto commentators, as well as prominent crypto personalities and XRP Community members like @kingblue_XRP, @thekungfunerd, and @LoveForCrypto17.

The XRP Zoo is much bigger than just the YouTube regular commentators; it also includes other venues such as Twitter DM sessions (group chats) and other informal communication channels. @FakeCoinExpert (Bob Moneybags) explained it this way:

"They are called the XRP Zoo because you can be yourself on the show. You can act like a zoo animal. There is no need to act a certain way as long as you're not being incredibly rude or offensive. The XRP Zoo reaches out with open arms to the community to invite people on and get to know about their personal insight and learn more about them.

We believe that by being open like this, we can do our part to ensure that the XRP Community is a welcoming place for those involved, or even those that just join the community."

He indicated that he also focuses on that inclusive vibe in his own channel, where he's done interviews with XRP Community leaders and charity fund-raisers like @cpilots2017 and @KingBlue:

"I do live-streams on my YouTube channel as well. My objective is very similar.

I wanted to use it as a platform for the charitable people in the Good Souls Group to be transparent about their projects that involve raising XRP for charity. I also bring people within the community on that are willing to come on my stream to have myself and others learn more about how they became involved with XRP and have them provide any potential insight that they might have (E.g., I always ask them, "What got you involved with XRP?"). I want to learn what the "trigger" was so to speak for those that were curious about this digital asset.

My hope is to use these personal testimonies to maybe help others that are curious about XRP and Ripple. The XRP Zoo channel was created with a very similar purpose. We want this community to grow. Those that are new to the community should know that they are welcome with open arms."

The XRP Zoo's latest guest was none other than Curis Wang, the CEO of Bitrue, a Singapore-based exchange that made waves by choosing to go live with XRP as one of its primary base pairings against other digital assets in July of 2018. Since going live in 2018, Bitrue has quickly climbed the global crypto trading rankings, posting adjusted volumes that place it 63^rd among worldwide exchanges:

Curis provided a fascinating interview with all of the commentators, and the relaxed conversation covered a comprehensive number of topics regarding Bitrue, along with some of the recent promotions and features available on the exchange.

Curis talked about the original motivation for his opening of a crypto exchange, his goals for the exchange, his timeline for bank account integration, exchange security and insurance, customer deposit interest rates, a possible 'Bitrue Coin' on the XRPL, and a myriad of other topics over the course of an hour-long interview.

Congratulations to the XRP Zoo for conducting a lively and content-rich interview with the CEO of Bitrue; I recommend the video, and a number of other videos already released as part of their channel.

PayWithMoon

PayWithMoon is an extension for the Chrome browser.

It operates with the Lightning network, and can handle payments in various cryptocurrencies. On April 23^rd, @RipplePandaXRP received a confirmation over Twitter from PayWithMoon's official Twitter account that they plan on adding XRP support in the "next few months:"

It was a successful effort by @RipplePandaXRP to gain greater exposure for XRP through another payment processor, and it will be interesting to see XRP be a part of the scaling network that was originally envisaged mainly for Bitcoin (Lightning).

The expansion of XRP as part of a payment option on the Lightning network goes to show how much crypto is changing to emphasize interoperability over 'network protectionism.' My hope is that we can see more of this interoperability and cooperation among the different network solutions.

We're Back ... And Crypto Is Getting Big Very Fast

Most of us probably are not 'ready' for when things happen in crypto.

Certainly, when the unexpected happens, it can be in either direction, and it inevitably happens fast. The cryptomarket is attracting many investors that have, up to now, only been comfortable dealing with traditional forms of investment.

The traditional stock markets still command the vast majority of all capital and security flows, even though the crypto market continues to move forward and upward.

But we're seeing some interesting developments that have now borne fruit, and we're also starting to see derivatives, lending, and other forms of finance make their way into crypto. The market is growing by leaps and bounds, and in the span of just over a year, the number of global exchanges has increased by a factor of ten.

The exchange listings have seen dramatic changes as well, with the slower-moving early entrants passed by quick and nimble Asian-built platforms. And we're seeing crypto-assets enter mainstream use, albeit more slowly than speculators would like. xRapid, although still at its beginning stages, has just seen five new customers in 2019 give it a try, on the heels of first adopters like Mercury FX and Euro Exim Bank.

But even ahead of these traditional entrants, whole new industries are being enabled by XRP's low-cost transactions. Specifically, micropayments have now become a reality, and are now feasible to stream across cyberspace. Tools like the Interledger Protocol are enabling transaction speeds with no upper boundaries, and businesses using it like Coil have already processed billions of payments.

For crypto, the digital assets with the largest use cases are well-positioned for the next phase of growth. Even prior to utility-driven demand, we've seen speculation alone drive the value of these crypto-assets to value points that numb onlookers and cause true anguish to those that may have felt safer sitting on the sidelines.

Crypto is back; there is no stopping censorship-resistant, decentralized, no-counter-party, cryptographic networks. If you're reading this, then perhaps I'm preaching to the choir; maybe it's time for us to school the rest of the world on what we already know.

Sources and Credits:
Cover Art: Thank you to Sergi Viladesau

This Is Crypto

Hodor

Hodor

General Crypto News