Weekly-chat Recap 16/03/2020: FinNexus Talks About Bitcoin’s Single Day Rout and the World Economy
Our weekly chat on March 16, 2020, understandably focused on the most pressing topics for the cryptocurrency community, namely how could bitcoin drop by 50% in a single day? And what to do with the COVID-19 world economy? As our project, in general, aims to provide better tooling to the crypto community so that they can better manage such volatility in their digital asset portfolios in the future, we decided to let this hour be dedicated mainly to free discussion of whatever came to mind. In times of turmoil, sometimes it’s best just to talk things out.
Participants:
Boris Yang — @BorisYangFNX — FinNexus Founder & CEO
Ryan Tian — @rainiefield — FinNexus Financial Specialist
Prof K, Nicholas Krapels — @shanghaipreneur — FinNexus Strategy Advisor
Discussion:
Ryan Tian: I hope we are all surviving after the crazy week. Everyone here (FinNexus chat) is free to talk. Not just about FinNexus.
Boris Yang: Everyone is facing a situation that has never happened before. So, it is great to talk with you all at this moment.
Nicholas Krapels: Yes, these are once-in-a-century times… I think here is a really good thread about what is happening from the famous US crypto lawyer Caitlin Long. If you haven’t read it, it explains a lot.
Ryan Tian: Has the US Fed dropped the rate to this zero level before ever?
K: Yes, we’ve been here before. From 2008–2015 the interest rates at the Fed were the same 0% to 0.25%.
Roja Saja: I don’t think this really matters. What needs to be done is to contain the virus. After that the economy will recover.
Professor k: Yes, this health care crisis is turning into a financial panic. But you know what they say, there’s always a bull market somewhere!
Ryan: Phoenix rising from the ashes. I have a different thought. Some would say that this virus caused this panic or crisis, while I believe it is a stimulus or catalyser.
Anas Y: Yes. The market was all set for falling.
Alexandros: All good! This is good time for shopping (Crypto).
Dejan: But not yet. I think there will be more downside.
Boris: In the last week, almost all assets are down. No assets are good. What do you think about it?
Nadyns: It seems that stocks and crypto are correlated this times. It means that not crypto as well then.
Anas Y: Crypto will come back faster as it’s dropped more as you can see:)
Ryan: Too much leverage for the crypto market right now.
Steve Malhang: I think good or bad doesn’t matter now. People behave emotionally.
Boris: Agree. After panic, some assets would show difference with others.
K: Stablecoins did well. Bonds did well. Do you notice a theme?
Steve Malhang: I don’t, could you explain, please?
K: Stablecoins and bonds are both backed by assets with cash flows (Usually).
Boris Yang: Yes, last week a lots of investors learned something from it. Safe assets are very important in portfolio.
Serg: What about Defi? How do you think it is affected during the recent crash?
Ryan Tian: Check the problems Makerdao encountered a few days ago. The oracles were not working and there were $5M losses to them.
K: I spoke to MKR earlier this week. Their issue was not so much the oracles as it was the extremely high gas fees! They had black-swan-proofed the system according to Crypto-kitties gas prices, but back then there wasn’t any stable-coins running around on the ETH network. That was where most of the congestion came from.
Ryan: I see. Do you think it is a good idea to print money (auction as called by Makerdao) to compensate for their losses? Seems more like the central bank now.
K: I think it will be VERY INTERESTING to see the results of the MKR auction. I think it is either later today or tomorrow. They are trying to raise 4m DAI to correct this imbalance in the system caused by the 0 Dai auctions.
Ryan: Yes. I don’t see any problems for selling MKR, as they have many big investors already and they will make sure the model will survive.
K: But also, we must realise that the high gas fee problem wouldn’t even exist in ETH 2.0! In such a system, MakerDAO would be all by itself on 1 of the 64 ETH shards.
K: BTC is going down because too many quant traders doing crazy leveraged trades are all exiting the market. Crypto winter moved too much money into BTC trading… and trading strategies with leverage… what I call “picking up pennies in front of an oncoming train”… the train being, of course, a black swan failure in the markets like what happened last week. So they all just got REKT… they tried to come back with some leveraged moves again in the past couple days, but now as we speak they’re getting completely Rekt again. Eventually, these firms will just exit.
Ryan: Totally agree. Actually the problems we have in 2008 was the crazy and blind increase of leverage. The market needs to deleverage to rationality.
Boris: Yes, both Defi and exchange increased leverage. Leverage is almost everything in the crypto world.
John Eck: What do you expect from the ICTO? Do you think there will be less investors in this crisis period?
Ryan: On the contrary, I think there will be more recognising the importance of a real world value connection.
Nagy Szabo: Where do you propose to invest in now? Where you suggest to wait until the markets calm down?
Ryan: The listing will wait. It is bad for the token holders and the project itself, considering the market sentiment right now but our work will continue.
Boris: Last week we saw in the situation that Defi does not help. It brought more closing out. The question we should think about is Defi is just a way but not the nature of investment. What do you think?
Anas Y: I don’t think that would be true ,, the problem of current #DeFi systems, that they have only one face of #DeFi ,, giving loans against stable coins is a very simple #DeFi service ,,, I don’t see it as #DeFi ,,, it’s just the beginning nothing more …. Financial sector is a big industry, don’t you agree?
Steve Malhang: I don’t know to be honest. Everything went down. I think it’s hard to understand the real interdependencies in such a complex scenario.
Veer Singh: One thing to understand is that the Fed injected capital into the markets but bitcoin is still working fine without any such measures. What do you think about it?
Anas Y: The system will take care of them but through a painful process but eventually it will prove that this is the best way
K: I think BTC has a short-term problem as everyone who was “picking up pennies in front of the freight train” de-levers. But in the long term, BTC was literally made for this! The Fed, by putting the reserve requirements to 0, is putting the banks in a position where they themselves can print more money. So USD supply will skyrocket under this scenario, while BTC supply still has a max of 21m.
Serg: Plus the BTC inflation will decrease as a result of halving.
Ryan: Have you heard of the stock-to-flow ratio model? seems a famous model for pricing POW coins right now, BTC fits somehow.
Steve Malhang: Fits in a good or a bad way?
Ryan: It’s got some points, but don’t rely on that too much:)
Professor K: Yes, but this will lead to uncertainty with mining operations. Since people have also levered up there (by buying mining equipment and signing long-term leases on facilities and power generation), so it could become another source of instability and not be the saviour we all have hoped it to be.
Anas Y: Usually before a big run for Bitcoin, there is two major notable acts:
1- Notable reduce in network hash-rate
2- Major drop
Historically from past years this two is combined before any strong rise for #bitcoin.
Serg: Agreed but I don’t know if we can look through past actions now. Right now is special situations and many things can happen. There are many uncertainties right now. But I agree that our crises is related to the virus. After we deal with him there will be more trust in the global economy recovery.
Ryan: The crisis has many things involved. The virus is the pin to the bubble. The banking system, the exhaustion of monetary policies, the trade and tech war, the oil battle, the global warming, the mid-east politics, the greater income gap between the rich and poor (Gini coefficient)…
Serg: Yes, of course. There are a lot of issues in the global economy. But all this chaos is very amplified by the uncertainties regarding the virus. We don’t know what to expect from it. After it will become more predictable and we start to recover.
K: It is said that in a panic the correlation of everything is 1.
Boris: In the panic period it is not a good time to say assets good or bad. Panic will finally end and assets will be reviewed by different investors.
Anas Y: Until we reach to the asset ( intrinsic value ) or maybe even more dip below that value..then things will recover.
K: Right, so now is the time to do your homework, maybe make a shopping list, but don’t actually go to the shop!
Victor: Oh, understood. Does it work for buying, too? Everything we buy now is under-evaluated because of 1 correlation?
Nerd: Does FinNexus support staking? Is there a wallet that I can use to store FinNexus?
Ryan Tian: Wanchain Wallet. There will be staking mechanisms later. Right now we don’t have staking and the tokens are not issued to the public yet..
Boris Yang: How about we share books list and shopping list together?
K: Two books on my list right now:
- Narrative Economics by Robert Shiller,
- Bitcoin Billionaires by Ben Mezrich (about founders of Gemini)
Anas Y: For bitcoin, don’t you think that the BTC intrinsic value should be near to its mining cost ?
Ryan: It depends on how to define the BTC intrinsic value. There’s no mature model for that, yet.
K: Like with everything, it has to do with supply and demand. We know that supply will be halved soon, but where will demand come from? That is the real question we must answer for the long term.
Anas Y: Adoption is the answer.
K: Yes, this is the long term answer. But in the short term we need things like Lolli and Fold, credit cards with bitcoin functionality, Bitcoin ATMs, central banks even maybe? All of them need to be programmatic buyers of BTC to provide a floor on price.
Question 1: As we have seen in the last week’s BTC drop, which dragged all the other tokens along. Do you think if FNX was trading and it would have been effected by it?
Ryan: Of course. All the cryptos are having high correlation right now, except those ones that are manipulated by big players and stable coins with high liquidity. But we are trying to use our product to diversify the risks. That’s why the conversion and UM1S are there. From another angle, the tokenized products in FInNexus are like stable coins with interest, backed by real world assets and cash flows.
Boris: Good question. We do not want to take risk with our investors. So it is better to do it later. We are thinking about the UM1S issued earlier than FNX. UM1S is a good option in the situation now.
K: These would also allow you to have a simple place to put your stable-coins while this volatility shakes out.
Question 2: Will all the conversions from FNX to UM1s be locked for 3 months or will they be free to exchange?
Boris: FNX and UM1S are both free to exchange. No locking period. 3 months is for redeem period.
K: Free to trade, right? There will be a one-way exchange from FNX to UMnS whenever it happens, right?
Boris Yang: Yes, at least everyone can transfer UM1S to other wallets. We will try to find some platform for users to do it.
Veer Singh: Thank you everyone for your participation. It is great to have free discussion with the community. Like always the weekly-chat recap will be posted for everyone who could not be part of the weekly-chat discussion. Thank you again!
About FinNexus
FinNexus is building an open finance protocol to power hybrid marketplaces that trade both decentralized and traditional financial products. The FNX token will live on the Wanchain blockchain to take advantage of the most robust cross-chain capabilities currently available in the industry. The first products FinNexus plans on releasing will be innovative tokenized assets with value based on real-world cash flows.
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