In this issue
- Filecoin’s crypto top 10 stint
- Decentraland launches new token bridge with Polygon
- Japan opens door to future digital currency
- Coinbase shows off earnings report in advance of Nasdaq offering
- China expands DCEP digital currency testing to include Hong Kong residents
From the Editor’s Desk
Build it and they will come.
For Coinbase, the largest cryptocurrency exchange in the United States, its initial public offering has been nothing less than a vision realized. Founded in June 2012 by ex-Airbnb engineer Brian Armstrong, the company’s valuation when it goes on sale next week through direct-listing on Nasdaq (COIN) is estimated to be US$100 billion, which eclipses the IPO valuation of the startup that Armstrong left. Airbnb, on the day of its December 2020 IPO, was valued at US$47 billion. One created a new way to book lodging. The other created an on-ramp to new money.
But don’t forget about the rest of the world — Asia, in particular.
Singapore-based Diginex, filing via SPAC on Nasdaq (EQOS), already allows global investors to buy into crypto. In Hong Kong, publicly listed OSL is another crypto exchange option. In South Korea, Dunamu — parent of one of the biggest crypto exchanges in the country, Upbit — is reportedly being wooed by Credit Suisse and Goldman Sachs to also go public, possibly on NYSE. It’s a bet that investors are looking to get into the segment. If you don’t want to invest directly in Bitcoin, shares in crypto-industry firms offer an alternative. Investors have already correlated Coinbase’s valuation to the rise of two of the mainstays of crypto. Bitcoin is up about 700% in the past year, while Ether has soared by more than 1,100%. The market is betting that as prices soar, so, too will inbound interest from customers.
They’re not all winners. Like the firms we are monitoring in China that are flying the blockchain flag and popping up like wild weeds when it’s unclear what their true value proposition is. In this time of exuberance, a rising tide lifts all boats. But some have leaky bottoms. The market demands more clarity of who the true winners might be, though that is getting increasingly expensive. Seeing inherent value when it is not obvious to others means bargains are still to be had.
As the space is still young, it continues to inspire ideas yet to be realized amid whispers of “build it and they will come.”
Until the next time,
Founder and Editor-in-Chief
1. Filecoin rockets briefly into crypto’s top 10
By the numbers: Filecoin — over 5,000% increase in Google search volume.
Distributed cloud storage network Filecoin’s cryptocurrency prices, which were at US$36 as recently as March 1, went supernova this past month, briefly becoming the ninth-largest cryptocurrency by market cap while hitting an all-time high of over US$230. It then cooled down over the weekend and now trades at US$149 with a crypto market rank of 15. What happened?
- On March 17, Grayscale investment added five crypto investment trusts — Basic Attention Token (BAT), Chainlink (LINK), Decentraland (MANA), Livepeer (LPT), and Filecoin (FIL).
- The Filecoin Foundation also donated 50,000 FIL (around US$10 million at the time of donation) to the Internet Archive.
- Filecoin is the economic incentive layer of the Interplanetary File System (IPFS) — decentralized network for data storage. Both projects were created by Protocol Labs, and its mainnet was launched in October 2020.
Forkast.Insights | What does it mean?
Within the hype of the current crypto bull run and the arrival of “alt season,” the market has seen a lot of capital poured into speculative cryptocurrencies as investors chase short-term gains. While Filecoin also launched with lots of hype in 2017 — raising over US$200 million in just 30 minutes in its initial coin offering — its native token FIL’s own price surge appears to be based on far more than mere speculation.
Filecoin is a crypto project with strong fundamentals and is an example of blockchain innovation being leveraged as a progressive solution to address present-day technology concerns — specifically decentralization, trust and ownership of data.
Essentially, Filecoin is a peer-to-peer network that stores files or data and offers incentives to miners in FIL to ensure data is stored reliably on the Interplanetary File System (IPFS). The project’s aim is to allow people to control their own data, and decentralize major storage cloud services like Amazon and Cloudflare by facilitating an open market for data storage that anyone can participate in by offering up unused storage capacity on their own computers.
Strong fundamentals and practical use cases aside, there are two major reasons why FIL has surged by over 500% in the last month alone: institutional demand, and the Chinese market.
Grayscale Investments — the world’s largest digital asset manager — launched a Filecoin crypto investment trust on March 17. Grayscale has become one of the primary avenues to facilitate institutional investment in the cryptocurrency space ever since the launch of its Bitcoin trust. Grayscale’s Filecoin holdings jumped from holding 16,000 FIL to 45,000 FIL on April 1, which saw the FIL price surge by 42% in the subsequent 24-hour period, indicating there is strong institutional demand for exposure to the Filecoin project.
The most significant factor fueling FIL’s price surge, however, appears to be the Chinese Filecoin mining boom, which, according to Decrypt, is being encouraged by the Chinese government “because its decentralized cloud storage purpose fits into China’s agenda to build out its own internet infrastructure as a defense mechanism in the ongoing tech Cold War.”
As a consequence, the Chinese market has become incredibly enthusiastic about Filecoin. Major Chinese companies such as Xinyuan Technology Co., a computer hardware company based in Shenzhen, have entered into the Filecoin mining boom investing around $100 million in Filecoin miners. Chinese retail investors are also being courted through payment functions on popular Chinese social media platforms like WeChat and mainstream advertising on subways.
Unlike proof-of-work blockchains like Bitcoin, Filecoin uses a novel consensus mechanism, called “proof of space-time,” where blocks are created by miners that are storing data. For Filecoin miners to generate more FIL, they require starting capital in FIL tokens and must buy the tokens on the open market.
On April 1, Colin Wu, the crypto blogger known by his Twitter handle, Wu Blockchain, reported that Filecoin trading was booming on major Chinese crypto exchanges, with more Chinese yuan being poured into Filecoin than into the main crypto players Bitcoin and Ethereum.
2. Decentraland launches new bridge with Polygon
By the numbers: Decentraland — over 5,000% increase in Google search volume.
A layer 2 sidechain on the Ethereum blockchain Polygon — formerly known as Matic Network — continues to help in addressing the networks’s congestion issues after announcing the launch of a DApp portal with virtual world Decentraland. The portal allows users to transfer MANA — Decentraland’s native cryptocurrency — to Polygon. Decentraland is an online world that allows users to interact with each other, including social events such as casino nights and even a recent Easter egg hunt. It is governed by a decentralized autonomous organization (DAO).
- Decentraland’s virtual reality world and marketplace, which are built on top of the Ethereum blockchain, have three cryptocurrencies; LAND, MANA and Estate Tokens.
- LAND and Estate tokens are ERC-721 tokens, or non-fungible tokens (NFTs), which represent land or other assets in the virtual world which can be purchased.
- MANA is an ERC-20 token that acts as the currency of this decentralized world. MANA is used to buy LAND and Estate tokens in Decentraland.
- Over US$8 million worth of virtual land and assets have been sold in Decentraland over the past 30 days. While Polygon is becoming a popular platform for DApps such as Aave, NFTs continue to contribute to Ethereum congestion.
- In addition, in the ongoing NFT craze, a Saturday Night Live skit on NFTs sold for 172 Ether on NFT marketplace OpenSea.
Forkast.Insights | What does it mean?
The real estate market has been rallying over the last year — and not just in the real world. There are now thousands of virtual plots for sale worth millions of dollars.
The current virtual real estate boom is being primarily driven by the invention of NFTs. On virtual land platforms such as Decentraland — the leader in this niche — each LAND parcel is represented by an NFT, which is a unique digital asset that guarantees the immutable ownership of virtual property and can’t be forged or replicated, just like land in the real world.
When Decentraland launched in 2017, land parcels in its virtual world were sold for about $20 each. Over the next few years, the Decentraland virtual community continued to grow but remained relatively small until the NFT boom hit last year — which saw LAND begin selling for thousands, hundreds of thousands, and even millions of dollars.
With the increasingly digital nature of our world, ramped up by the onset and social disruption of the Covid-19 pandemic, Decentraland provides an online world that gives its users a place to create an avatar and interact virtually. In lieu of physical interaction, Decentraland allows people from all over the world to participate in a virtual community where users can do everything from attending concerts and art shows, to gambling and real-estate development on digital lots available for purchase in the native MANA token.
Decentraland uses a DAO structure for governance decisions. This means that MANA token holders are in control of how the Decentraland world behaves, by proposing and voting on policy updates, the specifics of upcoming LAND auctions and the types of content that are allowed with the Metaverse.
Buying or owning virtual land may present a confusing scenario to many investors, who may be wondering what value a piece of “property” may have if it doesn’t exist physically. Whether you buy into the concept or not, the market is booming. On March 17, Grayscale Investment added a Decentraland (MANA) crypto investment trust, creating an avenue for institutional investment into the space.
Besides being a creative outlet for a socially restricted and often locked down society, many Decentraland users are generating capital leveraging their LAND through leasing, advertising and paid experiences. Users are also generating income by creating and selling items on the Decentraland marketplace for MANA tokens. Trading volumes in MANA have consistently exceeded hundreds of millions on a daily basis, going as high as US$4 billion on March 14, according to CoinMarketCap. With the relatively low market cap of the MANA token, and the growing interest in NFTs and virtual worlds, it might be safe to assume at this point that the market of virtual worlds will only continue to grow.
3. Japan launches CBDC proof of concept
By the numbers: yen — over 5,000% increase in Google search volume.
The Bank of Japan launched a proof of concept for its central bank digital currency (CBDC) this week, after announcing the completion of necessary preparations.
- Phase 1 of the Bank of Japan’s proof of concept will run for one year, until March 2022, and develop a test environment for the functionalities of a digital yen as a payment instrument.
- The second phase is expected to carry out a pilot test and include private sector participation.
- The Eastern Caribbean Central Bank, headquartered in St. Kitts, launched its pilot of DCash, the CBDC for its 11 member states. It is also the world’s first CBDC in a currency union.
Forkast.Insights | What does it mean?
The Bank of Japan (BOJ) began experiments on Monday to study the potential of issuing its own digital currency. The BOJ joins the growing list of world central banks that are currently striving to develop their own digital currencies in an effort to modernize their financial systems, ward off the threat of cryptocurrencies and their ability to circumvent capital controls, and to speed up domestic and cross-border payments.
As reported by Forkast.News, the Bank of Japan has no immediate plan to issue a CBDC, however, the central bank believes it would be wise to be ready. “From the viewpoint of ensuring the stability and efficiency of the overall payment and settlement systems, we consider it important to prepare thoroughly to respond to changes in circumstances in an appropriate manner,” said Bank of Japan Governor Haruhiko Kuroda, in a speech at the recent FIN/SUM 2021 conference.
Despite no concrete plan to issue a CBDC, last year Japanese lawmakers issued a call for the expedited development of Japan’s digital yen to possibly curb the growing influence of China in the region, citing China’s influence through the Belt and Road Initiative.
The call to action came just days after lawmakers in Japan released proposals aimed at paving the way for the use of digital currency in Japan. Norihiro Nakayama, vice minister for foreign affairs in Japan and the top member of the Liberal Democratic Party, the ruling party that drafted the proposals, called on the U.S. Federal Reserve to partner with six other central banks including the Bank of Japan, in studying digital currencies.
As the U.S. dollar remains the world’s global reserve currency, Nakayama said, “We sense the digital yuan is a challenge to the existing global reserve currency system and currency hegemony. Without the U.S., we cannot counter China’s efforts to challenge the existing reserve currency and international settlement system.”
Nakayama also highlighted China’s already-large presence in Africa and said Japan needed to ensure it had the technological capabilities to respond to the challenge of the digital yuan before it achieved real adoption in the continent.
China remains the leader in the CBDC race and has been conducting mass trials of its DCEP digital yuan for retail use by the general public. Though an official launch date for China’s digital currency, now officially known as e-CNY has not yet been announced, many analysts believe it could be imminent.
4. Coinbase wows with earnings for Nasdaq debut
By the numbers: Coinbase — over 5,000% increase in Google search volume.
Coinbase has disclosed its Q1 financial results ahead of its April 14 direct listing on Nasdaq, revealing 56 million verified users on its platform. The exchange’s total revenue for the first three months this year was US$1.8 billion — an 844% year-over-year increase from US$190 million recorded in March last year.
- Coinbase has submitted an S-1 registration with the U.S. Securities and Exchange Commission to become a publicly listed company through a direct listing.
- Coinbase Q1 financial results were released as the total market cap for cryptocurrencies sits just below US$2 trillion, with Bitcoin dominating 55% of the market.
Forkast.Insights | What does it mean?
Coinbase was set up by its CEO Brian Armstrong in 2011, and is now the largest crypto exchange in North America and perhaps the most recognizable name associated with Bitcoin and other cryptocurrencies. The company’s stated goal is to create an open financial system and in its current state, Coinbase mainly derives revenue from two sources: its operations as a crypto exchange catering to retail customers and institutional investors, and its custody business, which offers custodial services for cryptocurrencies to banks and institutions.
Coinbase going public is the latest sign of cryptocurrency becoming increasingly mainstream. Coinbase’s intentions were first reported as a rumor by Reuters on July 8, 2020. At the time, the story became almost impossible to avoid on Twitter and crypto news sites, and speculation was rampant on what effects the major U.S. exchange’s listing would have on the cryptocurrency industry as a whole.
While the Nasdaq listing is a gargantuan development for the crypto community, it also has caused further focus on Armstrong’s role in the evolution of the crypto world. With reports of enforced apolitical stances, excessive government cooperation and an eye firmly on profits, the hardcore decentralized crypto community have often come to deride Coinbase as “the Facebook of crypto,” and Armstrong, who may represent himself as a fellow cypherpunk, as just another capitalist looking to cash in.
Nevertheless, despite pushback from the anti-establishment faction of the crypto community, Coinbase’s planned April 14 listing on the Nasdaq will undoubtedly boost the crypto industry by providing mainstream investors a safer and a more regulated inroad to the crypto sector. The move will also potentially bring further public attention to cryptocurrencies and digital assets, which could trigger a wave of new investment, and spur accelerated innovation for established financial markets and services.
Coinbase reported that it had achieved its best quarter results ever last week, pulling in $1.8 billion in first-quarter revenue as rising interest in cryptocurrencies constantly pushed the market to new highs. No matter whether you count yourself among the cypherpunks or the capitalists, would failing to secure shares in Coinbase when it hits the Nasdaq have you living with regret?
5. China widens digital currency tests to Hong Kong residents
China has expanded the testing of DCEP, its central bank digital currency officially known as e-CNY, to Hong Kong residents for the first time.
- According to Guangzhou Daily, Hong Kong residents are now able to register digital yuan wallets via their Hong Kong phone number and use digital yuan in retail stores in the Luohu District of Shenzhen. It is the first time that Hong Kong residents are being included in DCEP testing.
- At the same time, the People’s Bank of China (PBOC) and the Hong Kong Monetary Authority have begun “technical testing” for cross-border use of the digital yuan, according to Wang Xin, director of the research bureau of People’s Bank of China.
- PBOC is collaborating with the United Arab Emirates, Hong Kong and Thailand for a “Multiple CBDC Bridge” project, using distributed ledger technology to achieve cross-border transactions between different central banks.
Forkast.Insights | What does it mean?
China continues to accelerate the rollout of its digital yuan, now officially known as e-CNY. Following its efforts in 2020, which saw China distribute around 30 million worth of its digital currency to citizens of Shenzhen and Suzhou, selected via digital currency lotteries — Hong Kong residents are now the latest human testers who can register for their own digital yuan wallets.
The extension of digital yuan wallets to Hong Kong residents is in line with China’s 14th five-year plan — the country’s strategy for economic and social development for the period of 2021 to 2025. The latest five-year plan outlines that over the next few years, China’s policymakers also plan to expand testing of the e-CNY in several other regions, including the Guangdong-Hong Kong-Macao Greater Bay Area.
According to the PBOC’s latest annual RMB Internationalization Report, published in August, Hong Kong was the largest offshore market for the yuan in 2019, settling 44.9% of cross-border yuan payments and receipts, equal to 8.83 trillion yuan, or US$1.3 trillion — greatly exceeding runner-up Singapore’s 10.3% share.
While the majority of the world’s central banks are currently exploring central bank digital currencies, China is still well in front of the pack. As reported earlier by Forkast.News, PBOC’s digital currency research institute has also joined the Hong Kong Monetary Authority’s digital currency research project along with the central banks of Thailand and the United Arab Emirates to facilitate cross-border payments. The aim of the initiative, known as m-CBDC Bridge, is to work in collaboration with other central banks to solve problems associated with cross-border fund transfers, including inefficiencies, high costs and complex regulatory compliance.
The m-CBDC bridge cross-border collaboration may also be evidence of the PBOC’s intention to leverage the digital yuan as a way of internationalizing its currency — which has long been the suspicion of some commentators regarding China’s enthusiasm for a digital currency, despite already being a predominantly cashless society reliant on payment services like Alipay and WeChat Pay.