Can we escape the liquidity curse of the crypto market? DAF says yes!
Reinforce the crypto market liquidity by borrowing it from fiat world
Summary: Crypto investors are increasingly worried about the crypto currency (ex. bitcoin) being latter-day tulip mania, due to the immaturity and lack of liquidity of the market. However, why wait for the last straw or be an ostrich, if there is a way to escape the immature market curse? An upcoming ICO in crypto asset management proposes a possible solution to reinforce the crypto market by borrowing liquidity from fiat world, which has infinite liquidity, through DAF.
Liquidity squeeze: The sword of Darmocles over the crypto market
Over time, financial market crashes have shown that liquidity is key for sustainable performance. If we take a retrospect on previous market setbacks, the lesson is that exponential performance is often derived from niche anomaly reserved to few players, leading to a bubble without enough market depth to hedge. The result is often predictable: a blood bath. Didier Sornette has developed interesting models based on seismic activity to try to time such events.
Even if crypto market will undoubtedly become the “new classic market” for their secured and transparent features, it is still a young market. A good example is the discrepancy of BTC/USD bid-ask spreads among exchanges with risk-free arbitrage opportunities. However, it is difficult to do arbitrage for size. This was exactly the case of the equity markets in the ’90s and we all know what happened: the bear slid in after long-time euphoria, liquidity drained, panic followed and a free-drop from heaven to hell.
So, is there any way to escape the immature market curse?
The solution: Benefit from the fiat liquidity to reinforce the crypto world
An upcoming ICO, NapoleonX (NPX) seeks to tackle the liquidity issue in crypto world by borrowing liquidity from the fiat world. NPX is the first crypto asset manager offering algorithmic hedge-fund strategies (ex. low frequency market timing) for crypto investors. Their value proposition is to collect money in the crypto world, convert it into fiat world, generate performance and bring it back to crypto safely.
4 bln € fund managers waved au revoir to the bank for ICO
Two of the three founders, Stephane and Jean-Charles were fund managers trading 4 bln € for more than 20 years in BNP Paribas, they are confident about outperforming in the fiat world.
Two of the three founders, Stephane and Jean-Charles were fund managers trading 4 bln € for more than 20 years in BNP Paribas, they are confident about outperforming in the fiat world.
How DAF works in this case?
A DAF will have, throughout its entire life, the mission to deliver sustainable performance to its token holders. To achieve the goal, corresponding smart contracts will have access to algorithmic strategies, the trading bots. Some of them will be run entirely in the crypto world, while others will be run in the fiat world, enabling the transfer of value from one universe to the other. As the saying goes, money doesn’t stink. What’s more, new crypto instruments (ex. Futures) make it possible to structure such appealing proposals without being the subject to fiat vs. crypto currency volatility.
Two birds, one stone: adding the investment brick in the crypto ecosystem
The approach of NPX, Stephane argued, not only reinforces the crypto world liquidity but also generates performance for token holders. So far, crypto currencies are either a method of payment or a “store of value”, and the investment solution is limited: millennial crypto investors merely benefit from the appreciation of crypto vs fiat currencies, the same way as their grandpa invest. The project can be a virtuous cycle to accelerate the development of the crypto world and attract a wider adoption of crypto.
More details are presented in NapoleonX Blackpaper, such as the structuring process as well as how first 10 trading bots work.
