#29 Bitcoin as a Risk-On vs Risk-Off Asset. The Big Four on Track to Become Crypto and Blockchain Auditors
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Thoughts on Bitcoin as a Risk-On vs Risk-Off Asset
A recent CoinDesk article takes a look at Bitcoin’s current performance and how that correlates with its expected risk-off status. First of all, what does that mean? Theory says that one way to split assets is risk-on vs risk-off. The former are assets that are expected to perform well in favorable market times (e.g. stocks), while the latter are store of value type assets that investors fall back to when times are uncertain.
This brings us to an interesting question - what kind of asset is Bitcoin? Well, we are pretty familiar with the “Gold 2.0” theory. Even Goldman Sachs analysts claim that the digital currency will compete with gold for the best store of value spot. That would lead us to believe that Bitcoin is a risk-off asset. In uncertain times people fall back to gold, and if Bitcoin is “Gold 2.0” then they should go long Bitcoin. This, however, would lead to a price increase, which we certainly haven’t seen.
What gives, then? It turns out that right now, Bitcoin is actually pretty correlated with tech stocks, as shown on CoinDesk:
We shouldn’t be surprised. While Bitcoin has great “hard money” properties, it is still currently seen as a speculative, risky asset. High risk, high reward. The kind of asset that would do well in a booming market. Which is not the case right now.
As Bitcoin becomes more mainstream and eats into gold’s market cap, we can expect it to become (1) more expensive and (2) less volatile. At one point, it will probably cross a threshold and become a pure risk-off asset. Until then, as George Kaloudis puts it, we can call it an aspirational store of value.
ERC721R, the Robin Hood of NFTs?
I was reading an article in December about the "Rug Pull" Scams from last year, gathering over $2.8 Billion. And since it is 2022 and the NFTs are here to stay and getting bigger every day, it's harder to differentiate a good project from a scam.
This is because there are still many people who are blown away by a great graphic when choosing an NFT project, they see the FOMO, and they are scared not to miss out. And it's easy to press the mint button and find out afterward what's what.
If you are reading this and you are into NFTs, I can bet you have a few of them in your wallet that you want to forget about. We have all been there.
When I read about Ethereum ERC-721R for the first time, I realized that for the new adopters of NFTs, soon, it might be easier to keep a cleaner wallet 😁.
Why? Because that R at the end of ERC-721R says that, for a specific time since minting an NFT, a time that you'll know before minting, you will be able to say: I changed my mind, I don't want that NFT, and revert the transaction, or at least get a percentage of the original price back (you will know all this beforehand).
I will not get into all the details because I am happy to say that I can provide you with a great article that can shine a good light on the matter, an article written by one of our StakeborgDAO community members MEANiX and published on Coindesk. Congratulations, mate!
You can also read some more about CryptoFighters Alliance, who gave us the ERC-721R, now in beta, and about Elie222 who wrote the code on this on Github, Elie who's willing to talk some more with us about the project; as he mentioned on Twitter the other day, replying to Endi's tweet:
What I can say besides the above article is this:
No matter the pros and cons, the fact that this idea is out is a fantastic thing because it will be a starting point for an ERC protocol that will take over ERC-721 or maybe even Enjin's ERC-1155 used on OpenSea.
Why? Because it will speed a lot the trust process. Let me explain: More and more people realize it takes time to get to know a person, to get to trust a team, to understand their intentions, the roadmap, and the problem they are trying to solve; time that most don't have when buying into a project. But it takes no time to trust a safe SmartContract that says something like this:
"You can buy an NFT from a certain project, and you have 15 days to change your mind whenever. If you do so, you just Revert the Minting process, and you get back 80% of your money (or all of it). On top of that, the smart contract that gives you your money back in the first 15 days says that all the money gathered from the minting process has a cliff of 2 months and then a monthly vesting period of 10% for the team."
How cool would that sound? To know that not only you can get your money back if it's a scam (but you will need to make sure, as the above Coindesk article states, that the smart contract is bulletproof), but you will also know that the team has all their good intentions and interest to build and not get lazy, given the fact that their funds are on hold for two months after the minting date and after that, they receive only 10% monthly. And this is just a small example.
Being really into NFTs, together with Endi and our Its NFTime show for the Romanian community, I am looking forward to the moment when it will become harder and harder to pull the rug on a project that people buy into because of the FOMO and lose their money.
That moment when everyone can say that their first bad experience was transformed into a free learning lesson because they just went back into the "shop" and got their money back, no questions asked.
Until then, keep your wallets safe, don't buy NFTs just because they look cool, keep your fingers crossed and hope for a stable version of this protocol or for one that will become the real Standard, like the cop that catches the thief and gave the old lady back her purse.
The Big Four on Track to Become Crypto and Blockchain Auditors
Even though Bitcoin was created with a trustless ideology in mind, the reality is that the blockchain and crypto industry requires trusted entities to catalyze the development of the ecosystem. Unsurprisingly, professional services giants are among those taking a larger role in tackling new market challenges. The Big Four firms and Fortune 500 companies are working with a number of blockchain and crypto companies on ways to combat regulatory uncertainty, interoperability challenges, consensus models and development of the technology.
According to Henri Arslanian, PWC’s global crypto leader, the Big Four firms specifically have a very important role to play in the advancement of the ecosystem. He also noted that whilst three years ago when he joined the firm not many people were taking crypto seriously, significant growth has been seen since, with the Hong Kong firm now accepting Bitcoin payments from clients and crypto teams being formed in 20 countries. These teams now consist of 200 people working on crypto-related projects and more than 350 engagements conducted in the last 18 months. The focus is not only on tax and accounting challenges but also on audit and assurance services which are also in demand. The other three Big Four firms Deloitte, KPMG and EY are actively trying to grow their involvement in the industry and drive innovation.
Similarly, Accenture, Fortune Global 500 company, is working on a number of blockchain solutions using the technology to drive digital identity, supply chain management and financial infrastructure.
However, it is still debated whether or not professional services giants will lead in blockchain innovation, or if the smaller, more nimble firms will reign supreme. While it’s too soon to tell, it can be argued that the most adaptive and agile company will outshine others. Even though providing accounting services for crypto clients and businesses is a good starting point, we are seeing a lot of centralized players trying to innovate in the blockchain space but missing the point and trying to keep control by creating centralized, private blockchains. Currently, it seems as though EY is the only firm interested in public blockchains.
Value creation through go-to-community strategies
In a recent article written on Future, an a16z-powered collection of resources on how technology is transforming the world, Patrick Woods highlighted the importance and growing role that a proper go-to-community (GTC) strategy has in driving business growth. Patrick is the co-founder and CEO of Orbit, a company that helps organizations develop thriving online communities.
A GTC strategy is seen as a plan that specifies how an organization will create and engage with its community, provide value to its members and derive value for itself. Decentralized purchasing power, a more knowledgeable end-user and decreasing switching costs are making community building activities a key part of an organization strategy. As opposed to a go-to-market funnel-focused approach where people are pushed towards a binary endpoint, community involves creating a compelling environment that naturally attracts people toward its center. Patrick notes that healthy and active communities have gravity and a high gravity community is one that attracts and retains members with ease. The GTC strategy helps build and maintain this gravity.
In a Web3-like ethos, GTC embraces the idea that people are valuable. Inside a DAO the synergies stemming from conversing, listening and actively incorporating community feedback are priceless. Beyond the added motivation of being properly incentivized to participate in the DAO’s growth path, community members have a broad range of key skills that are useful for developing a product, a service, a plan, etc. An active dialogue with the community ensures that products and services respond to one’s target audience needs. Having community members provide feedback to other members is a powerful tool. This cross-feedback loop creates deep collaboration inside the community, improves the learning curve for the DAO as a whole and encourages members to step up.
For more educational crypto content, check out the links below:
The Stakeborg DAO Talks on YouTube: https://www.youtube.com/playlist?list=PLOrFZZifNn4Nx4nSQL3WS52ALPXgrTSVG
Discord channel: https://discord.com/channels/901898461568442458/903006233584341052
StakeborgDAO Quarterly Reports: https://docs.stakeborgdao.com/reports/dao-quarterly-reports
Stakeborg Academy: https://academy.stakeborg.com/