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Crypto is second most popular investment asset in France: Survey

November 14, 2023 Coin Telegraph

Coin Telegraph

The survey was conducted at the request of the Organisation for Economic Co-operation and Development (OECD) in the spring of 2023.

Cryptocurrencies are the second most popular type of asset for investments among the adult French population, according to a survey by the Organisation for Economic Co-operation and Development (OECD) and published by France’s principal financial regulator, the Financial Markets Authority (AMF, on Nov. 13.

According to the survey, 9.4% of the French population holds crypto assets, which is only marginally lower than those holding the most popular type of investment asset, real estate funds (10.7%). A further 2.8% of respondents possess nonfungible tokens (NFTs).

The survey also measured the group of “new investors” — those who have invested for the first time since the start of the COVID-19 pandemic in early 2020. These are mainly men (64%) and significantly younger than traditional investors, with an average age of 36 against 51 for the latter. Among this category, 54% hold crypto assets.

The survey’s authors also noted that new individual investors have a “relatively low level of financial knowledge,” particularly the youngest group, aged 18-24. They were more likely to give incorrect answers about the basics of investment strategy than “traditional investors.”

The survey was conducted in the spring of 2023, featuring 1,056 respondents and 40 in-depth interviews about their needs and motivations.

France is actively pursuing a leadership role in Europe in digital economy and innovations. In September, local telecommunications group Iliad revealed an investment of 100 million euros ($106 million) to fund the creation of an “excellence lab” dedicated to AI research in Paris. This month, the first-of-its-kind Institute of Crypto-Assets opened in the business district outside Paris.

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Frankfurt Stock Exchange includes crypto trading facility in strategy-2026

November 9, 2023 Coin Telegraph

Coin Telegraph

Deutsche Börse, the largest stock exchange in Germany, says it will accelerate the development of its blockchain-backed D7 digital securities registry and build a trading platform for digital assets.

Deutsche Börse AG, the German stock exchange headquartered in Frankfurt, has included crypto in its strategic priorities for the next few years.

According to the strategic report “Horizont 2026”, published on Nov. 7, Deutsche Börse seeks “an expansion of the leading position in the area of digital platforms for existing and new asset classes.”

The company believes that, in the long run, there is “further growth potential from new technologies through the digitalization of existing or new asset classes.” Hence, it intends to accelerate the development of its blockchain-backed D7 digital securities registry and build a trading platform for digital assets.

The digital asset platform will serve only institutional investors and facilitate tokenization, trading, settlement and custody services for securities, alternative assets and cryptocurrencies. The presentation also mentions stablecoins and central bank digital currencies (CBDCs), although their status on the potential platform is not specified.

Deutsche Börse won’t be the first stock exchange to delve into digital assets trading. Germany’s second-largest stock exchange, Boerse Stuttgart, started offering its customers cryptocurrency trading in April 2022. London Stock Exchange Group is set to provide clearing services for dollar-denominated, cash-settled Bitcoin index futures and options contracts in 2024.

The Frankfurt stock exchange is in no way a novice to crypto. In 2021, its digital exchange, Deutsche Börse Xetra, listed the Litecoin exchange-traded product (ETP) from a London-based ETC Group.

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Token adoption grows as real-world assets move on-chain

October 16, 2023 Coin Telegraph

Coin Telegraph

From real estate and digital art to government bonds, tokenizing real-world assets is no longer a thing of the future.

While critics wrote off much of the initial hype surrounding the tokenized real-world asset (RWA) market, the sector has been on a tear over the past year or so. In fact, Boston Consulting Group expects the tokenization of global illiquid assets to be a $16 trillion industry by the end of the decade.

A variety of asset categories are actively being tokenized and garnering investments, with recent data suggesting that the total value of tokenized real-world assets reached an all-time high of $2.75 billion in August. And while the metric has slipped since then, it still stands at around a respectable $2.49 billion as of Sept. 30.

RWA market cap and share change. Source: Galaxy Research

As per a joint survey by research and advisory firm Celent and American banking behemoth BNY Mellon, 91% of institutional investors are interested in putting their money into tokenized assets, with 97% agreeing that tokenization stands to revolutionize the realm of asset management.

Matthijs de Vries, co-founder of AllianceBlock — a firm building a decentralized tokenized market — told Cointelegraph that these types of statistics give a glimpse into the impact that institutional-grade investments have on the industry.

“This trend is expected to result in exponential growth in the tokenized RWA industry, particularly as more liquidity flows into the space. This will lead to a more sustainable bull market with less capital flight at its peak,” he added.

Why the sudden spike in interest?

From the outside looking in, the tokenization of RWAs seems to be gaining momentum due to improved regulatory clarity in specific jurisdictions (such as Switzerland) and successful pilot projects.

De Vries said the unsustainable yields in decentralized finance (DeFi), which led to the collapse of many major crypto projects in 2022, have prompted investors to seek sustainable, real yields — such as the ones available with tokenized RWAs.

He elaborated: “Investors are now looking for transparent explanations of where these yields come from, making tokenized RWAs more attractive due to their clear yield sources and increased recognition from traditional players.”

“Investors have started to realize that if you can’t easily explain where the yield comes from, it’s probably going to collapse at some point. With tokenized RWAs, the source of the yield can be easily explained to crypto natives and new participants.”

Real estate is one area in which tokenization has had a significant impact. As things stand, it is the largest asset class in the world, with an estimated $613 trillion value in 2023.

Between Q1 and Q3 2023, the value of on-chain real estate grew by 102%, or approximately $90 million.

Real estate RWAs: market cap by issuer. Source: Galaxy Research

The aggregate value of assets tokenized, which in some cases represent fractionalized claims on real estate, stands at $178 million as of Sept. 30. RealT, an issuer of tokenized real estate, holds the lion’s share of the market. Tangible, a fellow issuer of real estate-centric RWAs, witnessed the most growth among its peers. The total value of Tangible’s tokens soared from a mere $100,000 to an impressive $64 million over the first three quarters of 2023.

Bernard Lau, co-founder and CEO of blockchain-based real estate investment company Labs Group, told Cointelegraph that tokenizing real estate is probably the best use for this technology today. Due to its stability and tangible asset value, Lau believes real estate stands out from others as a very solid investment.

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“Previously, many investors from lower economic backgrounds found themselves left out of the real estate game due to the entry barrier that was just too high,” he said. “And since many found themselves out of this equation, they turned to investing in stocks and bonds. However, now that individuals can invest in fractions of houses, buildings or even resorts, more people can participate, fueling the growth we observe in the market.”

Beyond property investments

While real estate has undoubtedly been a popular use case for tokenization, de Vries believes this space could face numerous challenges moving forward — primarily due to differing laws and registries across different jurisdictions. In his view, tokenization translates more seamlessly within asset classes like exclusive collectibles, diamonds, luxury watches, classic cars, securities and even carbon credits.

Moreover, tokenization’s influence can also be actively felt within the realm of traditional finance, especially in relation to popular instruments such as bonds, stocks and exchange-traded funds (ETFs). Adam Levi, co-founder of Backed — a platform for tokenized real-world assets — told Cointelegraph that this transition is a natural one:

“The market needs stable yields. In a bear market, fixed-income products provide this. Globally, interest rates are up, and everyone wants to capitalize on this near-risk-free yield. We have not seen much interest in tokenized equities at the moment despite the S&P 500 being up around 17% year-to-date. However, we’ve particularly seen growing demand for non-USD-denominated fixed-income products.”

Angle Protocol recently launched the first yield-bearing stable euro using bC3M, a tokenized euro-denominated fixed-income ETF. Similarly, Backed has launched three euro-denominated products as part of its financial repertoire. “We are exploring GBP and BRL ETFs next,” Levi added.

Tokenized U.S. Treasurys

In recent months, the valuation of tokenized U.S. Treasury bills, bonds and money markets has scaled up to a whopping $685 million. The allure of tokenized Treasurys has been growing among digital asset aficionados, especially since the yield on U.S. government bonds — broadly perceived as a risk-free interest rate — has now overshadowed the yields delivered by most DeFi offerings.

During 2023 alone, the market has seen the debut of several new players, such as OpenEden, Ondo Finance and Maple Finance — each unveiling their own blockchain-centric Treasury products aimed at adept investors, digital asset enterprises and decentralized autonomous organizations.

Owing to these rapidly emerging trends, researchers at Bernstein Private Wealth Management believe that by 2028, about 2% of the global money supply — via stablecoins and central bank digital currencies — could be tokenized, bringing the sector’s valuation to $5 trillion.

UBS’s and JPMorgan’s tokenization ventures

Earlier this month, banking behemoths UBS and JPMorgan made significant strides in asset tokenization, unveiling platforms to facilitate seamless interaction between traditional financial assets and blockchain technology. UBS, for example, announced the live pilot of a tokenized variable capital company (VCC) fund under the moniker Project Guardian, steered by Singapore’s central bank.

This endeavor, part of a broader VCC umbrella, aims to usher various real-world assets onto the blockchain. UBS Asset Management — via its in-house UBS Tokenize service — has already conducted a controlled pilot of the tokenized money market fund, engaging in activities such as redemptions and fund subscriptions.

According to Thomas Kaegi, head of UBS Asset Management in Singapore and Southeast Asia, the project is a pivotal step toward deciphering the intricacies of fund tokenization, hoping to bolster market liquidity and accessibility for clients.

JPMorgan rolled out its blockchain-based tokenization platform — the Tokenized Collateral Network (TCN) — with asset management colossus BlackRock among its inaugural clientele. The platform, designed to transform traditional assets into digital counterparts, executed its first trade by transmuting shares of a money market fund into digital tokens.

This pioneering transaction between JPMorgan and BlackRock saw the assets transferred to Barclays Bank serving as collateral for an over-the-counter derivatives exchange between the entities.

The TCN, having undergone its maiden internal testing in May 2022, now boasts a burgeoning pipeline of clients and transactions, aiming to expedite traditional settlements on the blockchain. In a statement, Tyrone Lobban, head of Onyx Digital Assets at JPMorgan, emphasized the platform’s capacity to unlock capital for utilization as collateral in ongoing transactions, thereby increasing efficiency.

More noteworthy developments surrounding the space

Untangled Finance, a marketplace for tokenized RWAs, recently launched on the Celo network after receiving a $13.5 million venture capital injection, spearheaded by London’s Fasanara Capital, to transfer tokenized private credit to the blockchain.

The platform — anticipated to expand to the Ethereum and Polygon ecosystem via Chainlink’s Cross-Chain Interoperability Protocol — aims to elevate the present $550 million worth of private credit on DeFi rails closer to the traditional private credit market’s massive $1 trillion valuation.

Moreover, in late 2022, asset manager WisdomTree unveiled nine digital, tokenized funds, adding to the one it started successfully earlier in the year. The funds allow the transfer agent to keep a secondary record of shares on the Stellar or Ethereum blockchains.

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In February 2023, Hong Kong’s central bank offered an inaugural $100 million tokenized green, or sustainable investment, bond. Meanwhile, in April, French investment bank Credit Agricole CIB and Swedish bank SEB agreed to develop a blockchain-based platform for tokenized bonds.

Lastly, on Sept. 8, the United States Federal Reserve released a comprehensive working paper delving into asset tokenization and risk-weighted assets. In brief, the document states that tokenization, akin to stablecoins, embodies five fundamental constituents: a blockchain, a reference asset, a valuation methodology, storage or custodianship, and redemption procedures.

Therefore, as more and more individuals, major market entities and investors continue to understand the immense technological and financial advantages possessed by tokenized RWAs, it will be interesting to see how this yet nascent market evolves and grows.

Stocks across Asia and Europe rise on Economic growth indicators

October 12, 2023 Coin Telegraph

Coin Telegraph

Stocks across the Asia Pacific region marked a second consecutive day of bullish growth as the European stock market reached a three-week high.

Stock markets in the Asia-Pacific region and Europe saw gains on Thursday. This uptick was attributed to the United Kingdom’s economic recovery, China’s recent stimulus measures and expectations surrounding the United States Consumer Price Index.

The Hang Seng Index in Hong Kong led a positive movement in the Asian markets. The Oct. 12 rise came after reports that China’s sovereign wealth fund increased its investment in some of the country’s major banks.

In Europe, the stock market rally was bolstered by data from the United Kingdom, with reports showing economic growth in August, although some sectors still lagged.

China led bullish stock rally in Asia

China’s sovereign wealth fund announced an increase in its holdings in the country’s four largest banks on Thursday, Oct. 12. The news helped shares of all three main lenders in the country go up during Shanghai’s trading hours. Bank of China stock increased by 3.2%, the China Construction Bank saw an increase of 2.7%, the Industrial and Commercial Bank of China registered a 2.5% gain, and the Agricultural Bank of China jumped 0.6%.

China’s stimulus decisions also helped Hong Kong’s Hang Seng Index rise by 1.9% to 18,257 points for the day, marking the sixth consecutive day of gains for the benchmark index — its longest winning streak since November 2021.

*Hong Kong Hang Seng Index daily price chart. Source: investing.com*

Japan’s Nikkei 225 index recorded another 1.8% gain on Thursday to reach 32,494.66 points, marking its second consecutive day of gains

*Japan Nikkei 225 index daily price chart. Source: Investing.com*

European stocks three-week high led by London

The British economy rose 0.2% in gross domestic product terms in August compared to the previous month, exceeding estimates of less than 0.1%. This GDP growth helped reverse a slide in the economy that began in July with a 0.5% contraction.

The bullish economic growth for the U.K. helped European stock markets rise to a new three-week-high. The benchmark London stock FTSE 100 Index rose 0.8%, the French CAC 40 was up 0.6% and the pan-European Stoxx 600 traded 0.8% higher on Thursday.

Vintage Markets is dedicated to the in-depth exploration and reporting of traditional financial news, tracing the journey of global markets and economies from the Stone Age to the Stoned Age.

AI signals vs. human intuition: Decision-making in crypto trading

July 15, 2023 Coin Telegraph

AI and human intuition together can make for powerful trading tools.

Traditionally, traders have relied on human-based pattern recognition and technical analysis, looking at the company’s financial health, competitors and other methods for determining what trades to make on an asset.

However, with the growth of artificial intelligence (AI), there are additional ways that traders can analyze the markets, using the data gathered via machine learning. Both methods have their place in the industry, but it is best to understand how they both work and their benefits and drawbacks.

AI plays a crucial role in cryptocurrency trading by providing insights and predictions based on vast amounts of data. Cryptocurrency markets are highly volatile and operate 24/7, making it challenging for traders to keep up with the constant fluctuations.

AI algorithms can analyze and interpret complex market data in real-time, enabling traders to make informed decisions and maximize their chances of profitable trades.

AI utilizes advanced data analysis techniques and pattern recognition to understand and predict market trends.

By employing AI-based trading algorithms and platforms, traders can gain insights, automate trading strategies and potentially improve their overall trading performance in the cryptocurrency markets.

The role of human intuition in decision-making

Human intuition involves making decisions based on instinct, gut feelings and personal judgement. It plays a significant role in decision-making processes across various domains, including trading.

Intuition involves tapping into unconscious knowledge, experience and emotions to make judgements.

Traditional human-based trading methods include technical and fundamental analysis. Technical analysis involves studying historical price and volume data to identify patterns, trends and indicators to guide trading decisions. Traders using technical analysis rely on charts, graphs and mathematical tools to predict future price movements and make buy or sell decisions.

Fundamental analysis focuses on evaluating the intrinsic value of an asset by analyzing relevant financial, economic and qualitative factors. This approach involves studying financial statements, company news, industry trends and macroeconomic indicators to assess an asset’s value and potential growth.

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Anthony Cerullo, chief communications strategist at Walbi — an AI-powered decentralized finance platform — told Cointelegraph, “We can all agree that AI lacks human intuition. It lacks that ‘gut feeling’ that says when something is right or wrong. In terms of quantitative analysis in trading, that gut feeling is useful.”

Cerullo continued, “Human intuition helps to provide a subjective understanding of market dynamics, investor sentiment and potential opportunities that are not captured solely through numerical data.”

However, the benefits of human intuition don’t make AI obsolete, according to Cerullo. Instead, a relationship combining the two may be beneficial: “This is not to say human intuition is better than AI — just that it can do things AI cannot do.”

“Furthermore, AI can do things humans are not capable of either. That’s why a relationship between the two — and not a competition — is the best possible outcome.”

Comparing AI and human intuition

AI signals offer distinct advantages in trading, including speed, scalability and the ability to reduce emotional bias.

AI algorithms excel at processing and analyzing large volumes of data in real-time. This enables traders to swiftly respond to market changes and execute trades at optimal times.

In highly volatile markets, where prices can fluctuate rapidly, the speed advantage of AI signals can be particularly valuable. Traders can capitalize on timely opportunities and make informed decisions without being hindered by delays in data analysis.

Scalability is another notable advantage of AI signals. These algorithms can be scaled to analyze multiple cryptocurrencies or markets simultaneously. This scalability empowers traders to monitor and trade across various markets, expanding their trading opportunities and potential profits.

*As AI gains popularity, a variety of supposedly AI-driven trading bots have appeared. Source: Twitter*

AI signals also offer the benefit of reducing emotional bias in trading decisions. Human traders are often influenced by emotions such as fear, greed or overconfidence, which can cloud judgement and lead to suboptimal decision-making.

In contrast, AI algorithms operate based on data-driven analysis, relying on objective information rather than emotional factors.

Cerullo told Cointelegraph, “AI algorithms leverage advanced data analysis techniques and pattern recognition. For example, they analyze historical price data, trade volumes, news sentiment, social media trends and other relevant data points to identify patterns and correlations,” continuing:

“Humans can do this, but not nearly as quickly as AI algorithms. Furthermore, humans may miss patterns that AI picks up 100% of the time. By learning from past market behavior, AI algorithms recognize potential trading opportunities or patterns that indicate future price movements.”

Limitations of AI signals

AI algorithms have limitations that must be considered when relying on them for decision-making. One such limitation is the lack of contextual understanding.

These algorithms primarily depend on historical data and patterns to make predictions, which means they may struggle when faced with complex or unique market situations that lack historical precedents or require a deep understanding of contextual factors. In these cases, AI algorithms may not provide accurate or reliable signals.

Gracy Chen, managing director at crypto exchange Bitget, told Cointelegraph:

“It is crucial for traders to continuously validate the accuracy and stability of AI signals in real-world conditions. Regular monitoring and iteration are necessary to ensure the AI system’s signals remain reliable.”

“Should any issues arise, updating the data used by the AI system becomes crucial to enhance the stability and accuracy of the signals it generates.”

Another limitation of AI algorithms is their susceptibility to data biases. The quality of AI signals depends on the data they are trained on. The AI signals may be flawed if the training data is incomplete, biased or not representative of current market conditions.

Biases in the training data can influence the accuracy and reliability of the predictions made by AI algorithms. Therefore, ensuring that the training data is comprehensive, unbiased and relevant to the current market conditions is crucial.

Over-reliance on AI signals can also pose potential risks, such as technical failures, that AI systems may encounter. These failures can result in inaccurate or misleading signals.

It is, therefore, important to have human involvement and supervision to mitigate the risks associated with technical failures.

The strengths and limitations of human intuition

One advantage of human intuition is its flexibility. Traders can quickly adapt to changing market conditions and make decisions based on their unique perspectives. Unlike AI algorithms, which primarily rely on numerical data, human intuition allows traders to consider a broader range of factors.

They can consider qualitative information, market sentiment and industry knowledge, which can significantly influence trading decisions. This flexibility enables traders to incorporate a more comprehensive market understanding into their decision-making process.

This adaptability is crucial in dynamic markets where unforeseen events or sudden shifts in trends can occur.

Critical thinking is an essential component of human intuition. It involves combining rational analysis with subconscious information processing. Traders with developed intuition can assess the credibility and reliability of information. They can question assumptions, identify potential biases and make judgements based on a holistic market view.

However, limitations of human intuition can also impact decision-making in trading. One limitation of human intuition is cognitive limitations.

Humans have limited memory, attention span and information processing capacity. In complex and data-intensive trading environments, these cognitive limitations can impact the accuracy and reliability of intuitive judgments.

Traders may struggle to process and analyze vast amounts of information efficiently, leading to potential errors or oversights in decision-making.

Combining AI signals with human intuition can be particularly effective. AI can provide data-driven insights, identify patterns and process large volumes of information efficiently. Human intuition, on the other hand, adds contextual understanding, adaptability and critical thinking to the decision-making process.

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Traders can leverage their intuition to identify potential biases in AI signals, consider additional qualitative factors, and make adjustments based on their experience and market understanding. This collaboration between AI signals and human intuition enhances the overall decision-making process.

Developing a balanced approach is key. Traders can integrate AI signals and human intuition with other traditional analysis methods. By considering multiple perspectives and approaches, traders can gain a more comprehensive assessment of market conditions. This balanced approach reduces the risks associated with relying solely on one approach and increases the chances of making well-informed trading decisions.

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Bitcoin ETF race begins: Has institutional trust returned to crypto?

July 4, 2023 Coin Telegraph

Coin Telegraph

Seven institutional firms have filed for a spot Bitcoin ETF in the U.S., including the world’s largest asset manager BlackRock, driving optimism and higher Bitcoin prices.

With the Bitcoin (BTC) halving event less than a year away, several financial giants have filed applications for a spot Bitcoin exchange-traded fund (ETF) — a scenario last seen before the 2020 to 2021 bull run.

Institutional interest in the sector dried up after major crypto giants such as FTX collapsed amid a prolonged crypto winter in 2022. Bitcoin and many other cryptocurrencies traded largely sideways as several crypto exchanges fell under regulatory scrutiny.

However, on news that major financial institutions such as BlackRock, Fidelity, Valkyrie and others were filing applications to list a spot Bitcoin ETF, the price of BTC recovered to over $30,000, spurring investment into the crypto market again.

*Bitcoin one-month price chart. Source: CoinMarketCap*

While several institutional giants have filed spot Bitcoin ETF applications with the United States Securities and Exchange Commission (SEC) in the past, all have either withdrawn their applications or faced outright rejections from the regulator.

The SEC approved the first Bitcoin futures ETF in October 2021 — the ProShares Bitcoin Strategy ETF — which debuted on the New York Stock Exchange on Oct. 19, 2021.

However, the spot Bitcoin ETF filing by the asset management giant BlackRock has increased the chances of the SEC approving the first spot Bitcoin ETF. That’s according to Bloomberg senior ETF analyst Eric Balchunas, who gives BlackRock a 50% chance of getting its spot Bitcoin ETF approved.

The most recent spate of ETF filings began with BlackRock’s filing with the SEC on June 16. WisdomTree, Invesco and Valkyrie also filed in the days and weeks that followed.

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On June 28, ARK Invest, which previously filed for a spot Bitcoin ETF in June 2021, amended its filing to make it similar to that of BlackRock. The next day, asset manager Fidelity Investments also filed for a spot Bitcoin ETF. In total, seven institutional giants have now filed for a spot Bitcoin ETF to date.

Some industry observers believe 2023 to 2024 will be crucial for approving a spot Bitcoin ETF. Robert Quartly-Janeiro, chief strategy officer of the cryptocurrency exchange Bitrue, told Cointelegraph that the timing is right, as “inflation is rampant and the money supply is a mixed picture, interest rates are high, and businesses are seeing decent revenues, which means crypto will need to perform in an economic environment where rates and inflation are key considerations.”

Institutional trust in Bitcoin

Bitcoin has weathered the aftermath of 2022 remarkably well and recovered more than half of its price decline during the bear market, largely thanks to the continued interest of institutional investors in the asset.

Indeed, there are significantly more institutional investors in the crypto market now compared with only one year ago. Until 2022, institutions kept a safe distance from the market, with even MicroStrategy stopping its routine BTC purchases.

Many large funds and companies have become interested in cryptocurrencies and are exploring their potential to invest in them.

Despite market volatility, global institutions show a steady interest in cryptocurrencies. Bitfinex chief technology officer Paolo Ardoino told Cointelegraph that Bitcoin represents tremendous value in terms of its utility and unique nature as a perfectly scarce asset that cannot ever be debased. He said, “The most traditional financial institutions recognize that,” adding, “It’s hardly surprising that at a time of record inflation in both major industrialized economies, as well as emerging markets, that the value of Bitcoin is being better understood by markets.”

“The recent new applications for Bitcoin spot market ETFs by some of the world’s most important asset managers demonstrates that there is investor, as well as issuer demand for Bitcoin, and that will only intensify. Apart from demonstrating increased institutional demand for Bitcoin, it will also attract new retail investors and encourage broader participation,” Ardoino said.

While many institutions distanced themselves from crypto over the past year, much of that was due to the public relations disaster brought on by FTX, with bank failures further exacerbating it. Richard Gardner, CEO of Modulus, told Cointelegraph that institutions foresaw the simmering of the crypto industry, and decided to lay low and sidestep the political and public response in the aftermath of FTX, thinking they’d be able to revisit their decision before crypto surged.

“We’re at the point where they’re beginning to weigh the risk versus reward of stepping back into the fray. Most institutions will likely be far more cautious, given the FTX disaster. They’re going to largely be moved based on the regulatory environment. As governments cobble together a full regulatory regime, and as bureaucrats decide how they plan to interpret the law, institutions will gauge their response and move forward accordingly,” Gardner said.

MicroStrategy — the leading investor in Bitcoin and one of the driving forces behind institutional adoption of BTC in 2020 — has continued its Bitcoin buying spree in 2023. When the firm faced major losses as the BTC price plunged below $16,500, CEO Michael Saylor maintained it had no intention of selling and would continue to add more BTC to its treasury. MicroStrategy currently hodls 152,333 BTC acquired for roughly $4.52 billion at an average price of $29,668 per Bitcoin.

Institutional inflow revives bull run optimism

While the 2017 bull run was sparked by retail interest, the 2020 to 2021 bull run was sparked by institutional inflows, with the likes of MicroStrategy and Tesla, and multiple other publicly-listed companies adding Bitcoin to their balance sheet.

Gracy Chen, managing director at crypto exchange Bitget, told Cointelegraph that institutions would act swiftly once they observe “stable and predictable retail interest.” Chen said, “The cumulative impact of institutions outweighs that of individual investors, and, therefore, they will continue to be a driving force for the growth of cryptocurrency market capitalization.”

She also stressed that growing interest from institutions could further crypto adoption, helping to spark the next bull run:

“Analysts expect that in the event of the approval of BlackRock’s ETF application alone, there could be a twofold increase in the price of Bitcoin. Considering BlackRock’s potential institutional investor base and influence, the approval of their spot BTC ETF would have a greater impact on the crypto market growth. With their BTC spot ETF application, they will likely inspire competition among relevant financial companies. This will direct more funds from traditional markets to Web3.”

Apart from the institutional push, there have been major developments in the retail market, with Hong Kong opening the doors for crypto exchanges to offer services to retail customers. Ben Caselin, vice president at crypto exchange MaskEX, told Cointelegraph that during the previous bull run, “U.S. institutions were the primary drivers of the upsurge, but they were arguably not ready to engage deeply and behaved no different than retail, essentially chasing gains and acting on hype.”

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“I expect this bull market to be Asia driven once again, perhaps with Hong Kong at the helm for the region, but based on my personal observations on the ground, I also expect a significant push to come from the Middle East, particularly from the United Arab Emirates, Saudia Arabia and other oil-rich jurisdictions,” he added.

With the next Bitcoin halving scheduled for April 2024, the rising interest of institutional investors is seen as a bullish sign for Bitcoin’s price and the broader crypto market. Bull runs have historically started in the run-up to the Bitcoin halving event, where the amount of BTC reward per block gets reduced by half every four years. The scarcity factor drives the price surge as retail traders and institutional giants rush to add to their Bitcoin portfolios.

AI financial tools: A smart way to manage money or a risky experiment?

May 22, 2023 Coin Telegraph

AI is transforming the world of finance, but is it ready for the retail sector? Experts weigh in.

The ever-evolving financial sector has been seemingly attracting cutting-edge technology over the last few years, with blockchain technology and digital currencies trying to help traditional finance evolve for over a decade. Now, artificial intelligence (AI) is bringing in new tools.

AI tools like ChatGPT and Bing Chat have shown an impressive capability to help boost efficiency, to the point 7,800 jobs at IBM are at risk of being replaced by AI within years, according to the company’s CEO. This technology manages to boost efficiency by being able to churn through colossal data sets in little time and bring in valuable insights that humans would take hours or days to recover.

Machine learning, a subset of AI that helps computer systems learn from data and improve in a system that mimics human decision-making, has been in use for years by several high-profile financial institutions that are harnessing the power of AI.

In its 2022 annual report, trading platform Robinhood noted its machine learning models are “highly advanced and contribute to multiple capabilities across our business.”

Earlier this month, major cryptocurrency exchange Crypto.com announced the launch of “Amy,” a generative AI user assistant built to inform users about the crypto industry. Similarly, Binance launched an AI-powered nonfungible token (NFT) generator that minted over 10,000 tokens in less than three hours.

While these developments are exciting, AI-powered tools may not yet be ready for a retail audience, as they cannot fully support an individual during financially challenging times. On top of that, algorithmic bias is a legitimate concern that has been raised by various experts, as AI may unintentionally favor or disadvantage potential ideas based on bias carried from its model.

AI’s effects on the retail finance sector

Some basic AI financial tools are already being used in the retail finance sector, including the above-mentioned AI-powered NFT generator Binance launched and Crypto.com’s Amy chatbot.

Other tools meant to scrape financial social media for sentiment indicators and trends have also been launched, as have tools made to simplify analyses of financial reports.

Speaking to Cointelegraph, Robert Quartly-Janeiro, chief strategy officer of cryptocurrency exchange Bitrue, said that new AI tools are “part of the future far beyond” its current uses. He added that businesses will use these tools if they save money, although customers “prefer to deal with humans, be it in-branch, online or on the phone.”

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Asked about the potential for AI to transform the retail finance sector in the next few years, Quartly-Janeiro said he “hopes it doesn’t,” aside from creating “fairer lending decisions, more open-mindedness on consumer credit to increase access to finance, and better risk management parameters.”

He added that consumers and the billions of decisions they make “drive economies and their growth,” cautioning:

“If you replace humans on a large scale with a machine that doesn’t buy, sell, invest, lend, borrow, then you have a serious problem on your hands; temporary profitability isn’t worth the risk of mass employment displacement.”

Chris Ainsworth, CEO of investment service Pave Finance, which uses AI to monitor market conditions and personalize portfolios, told Cointelegraph he does not believe AI financial tools are currently ready to be used in the retail sector without oversight.

According to him, current AI tools can “deviate from their intent fairly quickly,” and it will “take much longer than people think to fully deploy AI without oversight.” Ainsworth added that oversight is needed to “ensure models are adjusting properly, given volatility, correlations and the dynamics of markets changing quickly.”

He said that, in the future, AI tools will help drive down costs for the retail finance sector, although without proper oversight AI-driven models will not account for markets that can be driven by human emotion.

Ahmed Ismail, CEO and founder of AI-powered crypto liquidity aggregator Fluid, told Cointelegraph that AI tools are “mature enough to assess and manage risk, detect and prevent fraud, make effective credit and trading decisions, offer round-the-clock interaction and communication services, automate recurrent processes and reduce the scope of human error.”

Ismail added there’s nevertheless always a chance to improve, especially when it comes to preventing cyberattacks and safeguarding private data. Per his words, AI will play a transformative role in shaping the retail finance industry and will “shift paradigms” in trading, personalized banking, underwriting, financial advisory and more.

According to Ismail, numbers suggest that more than half of financial organizations with over 5,000 employees have already adopted AI, citing Bank of America’s chatbot Erica and Capital One’s natural language SMS text-based bank assistant Eno as examples.

While so many financial institutions are bringing AI tools to a retail audience, there are numerous challenges to overcome on several fronts. While concerns surrounding the technology abound, privacy and regulatory concerns are also worth considering.

Avoiding hiccups when implementing AI in finance

Bitrue’s Quartly-Janeiro said that financial institutions implementing retail-focused AI solutions also have to consider the implementation, adoption and cost benefits of their decisions, with the risks being “far more complicated,” as once they hand control of a function to AI, it isn’t clear how they’ll reclaim it.

He noted J. Robert Oppenheimer who, after perfecting the atomic bomb during the Manhattan Project, became a prominent proponent of banning nuclear weapons. Numerous high-profile individuals, including Tesla’s Elon Musk and Apple’s Steve Wozniak, have asked for a pause in the development of AI technology.

Fluid’s Ismail pointed to a different challenge — the “presence of human bias in data used to train AI,” which he said may lead to “embedded bias in AI algorithms.”

“These biases may lead to the exclusion of specific customer segments, inefficient operations or process mechanisms and a lack of trust in the technology.”

To Ismail, the predictive models used in making the technology work must also be “free from modeling pitfalls as realistically possible,” while cybersecurity and data privacy issues “should also be seriously considered.” AI-powered financial service solutions could “fall prey to data poisoning attacks, input attacks or model extraction or inversion attacks.”

He concluded, “The fast transformation of such a large market — as financial services and advisory are — to AI-based providers may affect the system’s stability by making it vulnerable to a single point of failure.”

Maya Mikhailov, founder of AI app tool Savvi AI, told Cointelegraph that when implementing AI, financial institutions must consider data security and privacy and follow applicable local data collection and storage laws.

Mikhailov added it’s also essential they have “transparency and audibility for the models that they are deploying,” as regulators will not accept them not knowing how their model works in case their AI programs end up violating lending or other local laws.

Their reputation may also be tied to the accuracy of the results provided by the AI tool, meaning they must be diligent and stop the program from hallucinating and giving customers inaccurate or harmful advice.

Taking all of this into account, it isn’t clear whether major financial institutions will have retail-ready AI tools in the near future. Smaller projects are likely going to be launching these tools as they can, as they don’t have to worry about reputational risk.

Is AI going to replace human financial advisers?

The jury is still out on whether these retail-ready AI tools will be able to outperform the market, suggest different strategies based on an individual’s profile, or replace human financial advisers.

To Mikhailov, retail AI-based financial tools may end up replacing human advisers at the “lower end of the market” to offer more “mainstream advisory tools to larger audiences.”

“A smartly deployed AI program will augment human, financial advisers with tools they can use to quickly and efficiently provide the strongest recommendations for their client’s portfolios.”

Fluid’s Ismail noted that there are “conflicting opinions among industry experts and analysts on whether AI will ever fully replace human advisers. AI’s advantages of AI over human-led services are evident.”

He added that AI can manage financial matters in real-time and offer “a more tax-efficient advisory service,” stating, “AI-powered decisions are also expected to be more immune to faults than those taken by human advisers. Commission expectations will not drive these AI-powered decisions and be free of biases towards or against a specific customer segment.”

Pave Finance’s Ainsworth said that human financial advisers may end up being replaced but added that such a possibility is “likely much further out than people think,” as by then, AI “will need to account for human emotion, which will be difficult.”

Caleb Silver, editor-in-chief at financial education portal Investopedia, told Cointelegraph that AI may “never be able to replace the personal touch that financial planning and advice requires for some clients who have complicated financial needs.”

He said that clients aren’t just looking for portfolio allocation and investment strategies but want “holistic financial planning and advice that is customized for them, and that requires a level of multidimensional thinking and execution that software alone isn’t yet capable of providing.”

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Even if AI never replaces human advisers, it may still help democratize access to financial knowledge and services and aid crypto’s ethos of banking the unbanked. Ainsworth said:

“AI will help drive down costs and make investing more accessible. The key will be to make sure people are educated and have guardrails to support their investment decisions.”

While recent developments in the world of AI show just how fast the technology is growing, a human touch is still missing in AI interactions. Despite the advances, AI systems are unable to comprehend an individual’s unique circumstances through a simple chat interface or provide emotional support when red candles take over.

Human advisers, on the other hand, are able to provide this type of support and don’t raise privacy concerns the way AI systems do.

Nevertheless, AI is here to stay, and the market will likely determine whether financial tools using the technology are retail-ready.

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