As we now draw into the final week of 2017 we reflect on what an amazing break-out year it has been for blockchain technology and cryptocurrencies. Against the backdrop of mainstream media’s negative commentary on the space, investing/ speculation is now at all-time highs. But we have seen nothing yet!
One of the huge challenges with the market is on-boarding. Essentially there are only two ways you can participate in crypto investing, both with positive and negative elements.
- Buying actual tokens and controlling your private keys in wallets, hardware wallets or paper wallets
- Buying into the market on exchanges or via third-party providers and having slow, with no access to your tokens
So what are the channels, pros and cons?
Right now trying to enter the blockchain market can be very challenging depending on what country you are in. As we understand in the US many of the restrictions are lower and you may connect your bank or credit cards directly to exchanges, however for the majority of nations around the world an on-ramp is needed and other than several third party providers (which may be risky to work through) Coinbase is one of the few options that people have to get into the market.
Coinbase has been running for a number of years and over time has attracted market-leading developers and investment. Attached to the Coinbase ‘wallet’ is the GDax exchange.
Here are some things you should know about Coinbase:
- Setting up an account is not so easy. It may take up to 3 weeks to get verified!
- Initially, you were only able to buy bitcoin to enter. Ethereum was then added and subsequently at time or writing Litecoin and Bitcoin Cash can also be directly bought
- Something many investors/ speculators have disliked about this platform is the restrictions on how much you can purchase. Weekly limits are pre-set at $50 ONLY and it takes some time and work to get this up.
- Fortunately for Coinbase you do have full control over tokens. Once in the market, you can send your tokens to other wallets or exchanges to trade. Also, you can use services like ShapeShift and Changelly I.e Bitcoin to NXT
So you can see if Coinbase is the primary mechanism for the world to enter the crypto market these restrictions have really been holding things up. Perhaps this has been a good thing! Can you imagine the market volatility if mass adoption was un-tethered? The current ‘bubble’ could have easily become 3-10x bigger with much larger run-ups and even bigger pops and corrections. It is simply hard to imagine.
The second market that has fewer restrictions but its own set of challenges has been trading platforms.
EToro is a common platform that I have heard people using. They have un-restricted buying limits, however, there are two MAJOR issues:
- You never own your private keys or in other words you actually never really own anything
- It seems that when you sell, you must sell your entire positions. It cannot be done piece by piece.
The final HUGE issue right now that I always hear sideline commentators chat about is ‘how do you even get your cash out?’
Again from listening to US-based investors it seems that bank links are already in place. So getting into and out of tokens to fiat is as simple as setting up a ‘sell’ order. But once again the US is only a small fragment of the overall market. In Singapore, I have not yet found an easy, straight-forward solution to exit positions back into SGD. The question is how long will it be before banks jump on the opportunity and offer this as a service to clients?
We are looking forward to a huge 2018. Obviously, with so much cash now in the blockchain space, developers are hugely incentivized to solve all of these current issues. Given this, we feel that within another 12 months you will see many platforms emerging that will compete directly with Coinbase and also the barriers entering and exiting the market will continue to decrease. These changes should lead to much more market liquidity and over time should assist to stabilize the current market movements.
Have a great New Years Eve celebration and we will see you on the flip-side
I’m on eToro and it’s true what you say about never owning private keys. They keep saying that they’re going to introduce wallets, but it’s just happened. On the other hand, it is regulated by the FSA, unlike other rogue platforms, such as Plus500 and it’s the quickest way to open up a trade, without going through coinbase and then an exchange. I tend to by in blocks of 10, 100, or 1000, so that I don’t have to close all my position at once.
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