Last week our theme was “Why is Bitcoin going up? HOLD on Bitcoin?”. Our theme for this week is “Are you buying BTC? How safe is your Bitcoin?”

TLDR. Digital currency needs to be safe, accessible and provide complete peace of mind to anyone holding cryptocurrency or to anyone that is considering getting in the market. Coinbase, North America’s largest cryptocurrency exchange, holds only 2 percent of its coins insured with Lloyd’s of London. Major insurance companies are starting to offer protection against cryptocurrency theft, rather than missing out on a volatile and loosely regulated, but rapidly growing market.

At the end of May, Bitcoin hit $9,000 and for the last week its been hovering around $7,700.  Many have been predicting that when Facebook launches it’s stable coin, Bitcoin will break $10,000. That’s a lot of money for a single coin and we can expect this value to go even higher, as Bitcoin use cases sprout. Even news stories like India’s proposed ban for crypto that could lead to a jail sentence for up to 10-years… crazy, will only cause citizens in the country to become increasingly interested in Bitcoin and other cryptocurrencies.

But, one thing that scares most people, when it comes to cryptocurrencies, is safety. The average user wants to buy and sell Bitcoin using their phone and be sure that their funds are safe.

Even though we’ve seen great improvements, the risk of cryptocurrency exchange hacks is always there. According to the Wall Street Journal, more than $1.7 billion in cryptocurrency has been stolen over the years, with 61% of the thefts in 2018 alone. Most of the hacked exchanges were based in Asia. Here are four major hacks in 2018:

• Coincheck – $500 million stolen.
• BitGrail – $195 million stolen.
• Coinrail – $40 million stolen.
• Bithumb – $30 million stolen.

Last month, when Binance got hacked for $40 million, it was great to hear that they were going to offer a full refund. Binance users didn’t lose money, thanks to its “Secure Asset Fund for Users (SAFU),” an emergency insurance fund created in July 2018.

On large US based exchanges, like Coinbase and Gemini, US dollars are FDIC insured, for up to $250,000. Currently, the U.S. government does not provide insurance for any digital assets, which means as soon as you convert any sum of money from fiat to crypto, it is no longer insured.

Most people assume that their cryptocurrencies are insured, but that is not always the case. Bitcoin and other cryptocurrencies stored on an exchange or a custodian service, most likely are not insured. Regulations for Bitcoin vary for each country. The crypto space is still highly unregulated and news of big hacks make many insurance companies hesitant to offer coverage to exchanges. While, some countries require exchanges to follow strict guidelines, some don’t require anything at all.

When an exchange claims to be insured, it’s difficult to know if it really is insured. Also an exchange that’s insured could suffer an incident, that’s not covered by insurance.  Even the few exchanges that have a concrete insurance policy, offer very limited cases to make a claim. Insurance is primarily for cases where an exchanges systems are hacked. A user with poor quality passwords or a user that doesn’t follow basic security measures, most likely will not be covered.

The volatility of crypto markets has sidelined many big insurance companies. Until recently, the crypto industry mainly consisted of volatile exchanges and startup companies, which posed high-risk without large enough revenues to encourage the major insurance companies to get involved.

But the situation is slowly changing and we’re starting to hear more and more from exchanges that are offering a safety net to their customers.

Last year, the Winklevoss twins announced that cryptocurrencies on their Gemini exchange and custody services were fully insured.

The Gibraltar Blockchain Exchange (GBX) announced an insurance policy to cover its digital assets, in partnership with Gibraltar-based Callaghan Insurance.

In February, BitGo announced it had secured the industry’s most comprehensive insurance protections for crypto currencies and digital assets will be insured for up to $100 million through Lloyds.

In April, Coinbase revealed the details of its insurance arrangements for cryptocurrency held for customers. In a blog post, the exchange confirmed that it is covered for up to $255 million for coins held in so-called hot wallets, in other words, assets which are essentially online and open to potential hacks.

In South Korea, four exchanges offer insurance: Upbit, Korbit, Bithumb, and Coinone. However the insurance limits on these exchanges are less than $5 million, with is barely enough to cover users in the case of a major hack. Hanwha Insurance, a South Korean insurance company, has introduced a cyber insurance product, that provides compensation for hacking damages to domestic crypto exchanges.

Insuring cryptocurrencies is very important, especially when you consider the valuation of Bitcoin and other cryptocurrencies. Protection against potential hacks could be an important source of revenue, with huge annual premiums for theft coverage. Annual premiums could be as high as 5 percent of coverage limits.

If you’re considering getting individual cryptocurrency insurance, some companies like Allianz, Chubb, XL Group and AIG are quietly offering protection for cryptocurrencies. Allianz offers individual insurance to cryptocurrency investors: “Insurance for cryptocurrency storage will be a big opportunity, Digital assets are becoming more relevant, important and prevalent on the real economy and we are exploring product and coverage options in this area” said Christian Weishuber, a spokesman for Allianz.

Incidents of hacks and stolen funds can damage a market trying to build consumer confidence. As the crypto space is maturing, cryptocurrencies represent potential areas of growth for the insurance industry. Insurance adds a layer of security and ensures that users are properly compensated and reimbursed, in the case of a security breach. Binance has chosen to take on the costs of insurance by allocating 10% of their trading fees to SAFU. It remains to be seen how exchanges around the world approach this issue, and if they build their own coverage or work with insurance companies to guarantee customer funds. Either way, safety is important and needs to be addressed, if we will ever see the mass adoption of cryptocurrencies.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG.

He writes the Blockchain Weekly Front Page each Monday and has no positions or commercial relationships with the companies or people mentioned and is not receiving compensation for this post.

Subscribe by email to join the other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research)

Last week our theme was “Is it time to buy Bitcoin? Google’s data on Bitcoin searches“. Our theme for this week is “Why is Bitcoin going up? HOLD on Bitcoin?”

TLDR. Ten years ago, when Satoshi Nakamoto published Bitcoin’s whitepaper, he described a “peer-to-peer version of electronic cash.” The idea was for Bitcoin to be digital cash. To provide a borderless means for payments, without intermediates. Since then, while Bitcoin has become a household name, it has yet to realize its true potential. It’s primarily used for speculation, instead of an everyday means of exchange.

Major retailers have become very receptive to the idea of accepting Bitcoin as means of payment. Now you can pay your AT&T bills using Bitcoin. Satellite television and Internet service provider Dish Network accepts Bitcoin as a payment option. You can fund your Microsoft account with Bitcoin, to purchase games, movies, and apps in the Windows and Xbox stores. Who accepts Bitcoin? Here’s a list with a few of the major companies accepting Bitcoin.

Yet, research from Chainalysis shows that just 1% of Bitcoin transactions were payments to merchants. Almost no one is using Bitcoin to buy things. Speculation was the primary use for Bitcoin.

In the first four months of 2019, the proportion of merchant related transactions remained low. Only 1.3% of Bitcoin (BTC) transactions were purchases from merchants. The most extensive use is speculation on exchanges. The increase in price has to do with what we are willing to pay for Bitcoin and cryptocurrencies, instead of what we can actually do with them.

Bitcoin’s volatile nature discourages people from using it to buy things. People prefer to HODL and make huge profits in the future, instead of using Bitcoin to pay for things.

Five years ago, criminal activity was behind about 90 percent of cryptocurrency transactions. Now, illegal activity has shrunk to about 10 percent and speculation has become the dominant driver.

Speculation is important for new technologies. Whether you are dealing with emerging technology, a new business or idea, speculation is one of reasons that something will cross the chasm, to become widely adopted or a complete failure. But speculation can also be bad, when its not backed by growing usage.

Today, usage for Bitcoin and cryptocurrencies is still very low. About 85% of Bitcoin’s value is the result of speculation. Investors are heavily speculating on the future usage and adoption for cryptocurrencies and blockchain, but today utility is just a small component of the current price.

Use cases are what will drive Bitcoin’s growth, not speculation.

During a conference in Korea, Andreas Antonopoulos said “Crypto doesn’t have a use-case in the ‘developed’ world… yet“. The reality is that until scalable use cases are fully deployed, cryptocurrency markets will remain a highly speculative and volatile.

Many attribute this to block size, Lightning Network, or user experience.

We are starting to see some real use cases around the world. Projects like Facebook’s upcoming stablecoin, JPMorgan’s JPM Coin and Fidelity’s recent announcement that it will start buying and selling BTC for its clients. These are all important and constitute stepping stones in mass-adoption for cryptocurrency, but I am not sure if they are the Bitcoin’s killer app.

If we want to predict where it might go, we need to look beyond price and follow how its used and who is using it. Lack of real-world use is the biggest challenge for Bitcoin. Maybe Bitcoin will never become a payment currency and will only be a stored value just like gold. But it’s only by using Bitcoin we give it “real”, intrinsic value. Either way, with serious money now coming into the market, we are still at the beginning of everything.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG.

He writes the Blockchain Weekly Front Page each Monday and has no positions or commercial relationships with the companies or people mentioned and is not receiving compensation for this post.

Subscribe by email to join the other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research)

Last week our theme was “Top 7 Crypto Exchanges for IEOs“. Our theme for this week is “”

TLDR. Search data is a great way to track the growth of active Bitcoin and cryptocurrency users. Search is a great indicator of what people are interested in. Engagement levels are red hot, with crypto investors checking the daily price of of their precious coin. Data from Google Trends shows search interest for Bitcoin hit a 14-month high. This data confirms studies that suggest there’s a correlation between Bitcoin’s price movements and search interest for it. For Bitcoin, cryptocurrencies and blockchain looking at the search data for different geographies, we can examine the entire ecosystem in new and interesting ways.

Bitcoin has been hovering around $8,000. The CBS 60 Minutes segment, “Bitcoin’s Wild Ride,” which aired last week was very positive for Bitcoin.

Bitcoin’s price movement has been getting more and more people to search for it. There seems to be a real connection between people searching Bitcoin on Google and actual investment in the cryptocurrency. Bitcoin’s price can be predicted based on the number of Google searches for it, because the latter precedes the former, making Google search a key indicator for Bitcoin trading.

Back in  2017, search engine marketing firm SEMRush found that Bitcoin’s price had a 91% correlation with Google searches for it.

Google trends also shows us the geographic origin of Bitcoin searches, with countries in Africa and Europe ranking in the top 10:

Beyond prices, Google searches also indicate the pulse of an entire geographic region for crypto. Using Google Trends we have tried to uncover the interest for the top two cryptocurrencies, Bitcoin and Ethereum, overall for Cryptocurrencies and for Blockchain technology, performing searches for “Bitcoin”, “Ethereum”, “Blockchain” and “Cryptocurrency”.

Its no surprise that countries like Japan, South Korea, China and Russia lead the world in interest for “Blockchain”. They are building solutions to harness the power of decentralization and stand at the forefront of developing blockchain technologies.

In most western countries like the United States, the European Union, Canada, the United Kingdom and Australia, Bitcoin dominates user searches.

In South America, Venezuela presents an interesting case. With its unstable political situation and economy, “Bitcoin” is the top query with 75% of the results.

There is an incredible amount of information one can obtain from Google’s Trends. But Google search data is not the only source. There have been studies showing  the correlation between Twitter posts and Wikipedia article views to Bitcoin’s price.

No matter how you look at it, the relationship between public interest and price is undeniable. It indicates that people are interested in buying Bitcoin. It is FOMO materialized in numbers and coincides with Bitcoin’s famous, or perhaps infamously wild market cycles.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG.

He writes the Blockchain Weekly Front Page each Monday.I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. 

Check out our advisory services (how we pay for this free original research)

Last week our theme was “Bitcoin going parabolic. ALT Season is Almost Here!“ Our theme for this week is “Top 10 Crypto Exchanges for IEOs”

TLDR. Initial Exchange Offerings (IEOs) are picking up steam, capturing the interest of investors, project teams, and exchanges. IEOs have been breathing new life into the dying ICO model. While the first IEOs took place back in 2017 (Bread, Gifto),  the trend didn’t really take off until early 2019. The demand for IEOs has been considerable, and can be attributed to several factors. IEOs represent a radical shift in the ICO model, in terms of trust. Top cryptocurrency exchanges around the world are launching their IEO launchpads and are scrambling to attract interesting new projects that want to raise funds, by selling tokens directly to exchange’s user base. This article will walk you through the rise of IEOs, their unique nature, advantages and limitations and evaluate the IEO offering by some of the top Exchanges.

Since the Coinmaster token sale in 2013, ICOs have been the most popular way to fundraise. The ICO idea is simple. The project creates a digital token, based on the ERC20 protocol, and then offers it for sale in an initial offering. While ICOs have raised billions and the ICO model became the most popular way to raise money, there have been plenty of problems and the model has been slowly dying.

One of the issues most investors face, is how to predict if the project will work after launch and if it will be successful. But the biggest problem has been scam.

The total funding of coins and tokens in 2017 reached o $11.9 billion, with 11% ($1.34 billion) going to scams. A research study by Statis Group, revealed that more than 80% of ICOs in 2017 were scams. I am sure you all remember Bitconnect and their $2.6 billion Ponzi scheme (BTW, I just heard that Bitconnect is coming back and will go live in 42 days).

The trend has been changing and IEOs represent a safer way to invest in tokens. The most important advantage of IEOs is trust.

An IEO is just like an ICO, with the difference the tokens are sold only to the users of the exchange, that is conducting the token sale. IEOs offer plenty of advantages, over ICOs. An exchange can tap into its user base. The standards for due diligence are higher. The project gets an immediate listing on an exchange.

While, IEOs look very similar to ICOs, they offer more security and trust.

The exchange screens every project that wants to launch an IEO on its website. It analyzes the project’s whitepaper and tokenomics, marketing, product status and a few other things, to determine if the project is promising enough. If the project has legs, then a date is set for the IEO and exchange’s users can purchase the token. After the IEO completes, the token is listed on the exchange and is available for trading.

Binance kicked off IEOs early this year. In January, Binance’s Launchpad hosted a public sale of BitTorrent tokens, raising $7.4 million for the file-sharing service owned by Tron.

But major trading platforms like OKEx, Huobi, Bitrrex, Bitmax, Coineal, Exmarkets, KuCoin and others are joining the IEO bandwagon. The majority of the IEO platforms are currently held by Asian exchanges, however, European platforms are also getting ready to join the party.

Choosing the right platform to host an IEO is very important. Its give a project the best chance to achieve its fundraising goal. Some of the things to consider when selecting an IEO platform are: easy of use, safety and security, high liquidity, multi-coin support and strong technology.

1. Binance Launchpad: Superior technology, partnerships and a seamless user experience, are the reasons for its high liquidity. Currently the exchange has the highest number of users in the world giving it a broader reach, supporting all devices and multiple languages.
2. OKEx Jumpstart: The Malta based exchange, is one of the leading exchanges by tradING volume. To provide uniqueness to its platform, OKEx Jumpstart uses a subscription, plus allotment approach. The subscription opens for 30 minutes and it will close early if the oversubscription limit is reached. Once the subscription is over, allotment then follows.
3. Huobi Prime: Huobi positions its launchpad as a Direct Premium Offering (DPO) platform. All coins purchased through Huobi Prime are immediately deposited into user’s accounts and are tradable on Huobi Global against Huobi Token (HT).
4. Bittrex: Bittrex’s first attempt at an IEO didn’t go as planned. RAID, its first IEO had stop, due to some controversy with the project being funded.Unlike most other exchanges, Bittrex does not have its own token.
5. Kucoin Spotlight: At start the only requirement to participate, was to have a verified account and the principle was “first-come, first-served”. Now the exchange plans to use a lottery model. The exchange’s native coins are used as an instrument in the IEO model.
6. Coineal: A big exchange with almost $700M daily trading volume and a stronghold in the southeast Asian markets with investors in China, Japan, Korea, Vietnam.
7. Exmarkets Launchpad: One of the newer aggressive exchanges in the race. The platform lists 9 completed IEO’s 4 ongoing and 3 upcoming.

To launch an IEO, most exchanges ask for an upfront flat fee and a percentage of tokens or the funds raised. In most cases, terms are determined through private discussions rather than standardized procedures. Several exchanges are making IEOs a priority and are no longer considering new or niche assets for general listings. When I was speaking with a new exchange a couple of days ago, they told me their strategy is for IEOs to be their main source of revenue.

With 260 exchanges listed on Coinmarketcap, the exchange business is profitable, however the market has become vert saturated and competitive. Exchanges are looking for new ways to earn and IEOs can boost their revenues and through listing fees.

During the ICO boom in 2017, many projects hit the market and a lot of money was invested. But because of high scam rates, several countries in order to protect investors, banned ICOs or placed strict rules to reduce potential fraud. IEOs solve many problems that existed in the ICO model. High levels of trust make the IEO crowdfunding process much more efficient. However the possibility of the project failing after raising funds from an IEO still exists.

Initial Exchange Offerings mark the end of a long crypto winter, bring more security to the blockchain fundraising, change the fortunes for most of these exchanges and ultimately protect investors from scammers and fake projects.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research)