Why deal with the anxiety of trading cryptocurrencies, with their volatile prices and the incessant stream of news and drama, when you can simply have someone else do it for you?
Hassle-free trading, more formally known as copy trading or social trading, allows novice punters to mimic the strategies of more experienced peers with the mere click of a button. And when it comes to herd mentality, trading platforms need look no further than cryptocurrency speculators.
EToro, the copy trading platform that London readers will know for its brazen CopyFunds adverts on the underground, raised $100m from investors last week as it continued to capitalise on the crypto gold rush.
A 500-employee firm, based in Israel and regulated in both the UK and Cyprus, eToro raked in more than $1bn in customer deposits last year, boasting more than 1m new registration requests in the fourth quarter alone.
Even the company was caught off guard by the sheer scale of the boom, rushing to hire more than 90 people in the quarter mainly in customer support and operations, Iqbal Gandham, UK head of eToro, told the FT. “We were not expecting [such] vertical growth. Even then, I don’t know how you plan for vertical growth,” he said.
But a recent dip in crypto prices and trading volumes - daily bitcoin transactions have fallen from a peak of nearly 500,000 to less than 150,000 today - gives more breathing room for forward planning.
Last week’s fundraising was facilitated by the London Stock Exchange’s private placement platform, with investment bank Rothschild acting as financial adviser. Unsurprisingly the latest round of cash - taking the total raised by the business to $162m - will go to “continued research into and development of blockchain technology and the digitisation of assets”. Some of it will also be spent on “expansion into new markets”, the company said.
And it looks like Asia - which remains the world’s crypto hub - is calling. While the fundraising took place in the City, it was led by China Minsheng Financial, a Hong Kong-based investment holding company, with involvement from Japan’s SBI Group, Korea Investment Partners and World Wide Investment Company Limited, also from Hong Kong.
“Everyone knows the crypto market in Asia is very well-established. We are looking at Japan and looking at Hong Kong,” Mr Gandham said, adding that the group already has some operations in China and is also weighing up expansion into Australia and the US.
It will also consider potential acquisitions in the blockchain space, he said. “We are trying to work out how to get the next generation into investing - they don’t want shares in Lloyds; they want to hold bitcoin and ethereum.”
EToro is not the only player out there whetting the appetite of Asian investors. Another European copy trader, Ayondo, floated on Singapore’s junior stock market on Monday - making it the ever first fintech to do so in the region, it says.
The German company priced its initial public offering - which was fully subscribed - at 26 Singaporean cents. This raised around S$21m and now puts the firm’s market capitalisation at around S$130m (US$100m).
But enthusiasm for crypto trading since Ayondo launched new products on its site in September has now turned to a lull, said chief executive Robert Lempka, who thinks cryptos are losing their sheen for good.
The bear to eToro’s bull, he likens bitcoin’s rise to the dotcom boom and says that while the company will continue to offer crypto investments, he is leaning towards the more traditional products. “We are not positioning ourselves in the crypto space…Personally, I’m very pessimistic.”
Further fintech fascination
B2B bonanza Sending money between companies across borders is big business, according to a new report by Juniper Research. The company predicts cross-border B2B transactions will exceed $218tn by 2022, up from $150tn this year. That's nearly treble global GDP. And fintech startups will take a ever larger slice of that pie: 13.3 per cent or $29tn by 2022, from 7.5 per cent or $10.4tn last year. The report highlights Visa’s partnership with startup Billtrust to provide virtual cards for B2B transactions, and Mastercard’s tie-up with Optal to offer virtual accounts as evidence of disruption. The report's author Lauren Foye says: “Whilst traditional banks still facilitate the vast bulk of B2B cross-border transactions, new technologies, such as virtual accounts, eInvoicing, and blockchain technology will aid in driving businesses to solutions which provide savings in time, efficiencies, and transparency.” Read Juniper's whitepaper here.
Too big to refuse The reach of Tencent and Alibaba in their home market dwarfs that of the big tech groups in the US. While the latter accounts for less than 5 per cent of all venture capital flows in their home market, Alibaba and Tencent account for 40-50 per cent of venture capital flows in mainland China, according to data from McKinsey. With their large resources and long-term perspective, the two Chinese groups are transforming Asia’s investment landscape, posing challenges for private equity and venture capitalists as well as the start-ups looking for funds.
Block phone Huawei, among the world’s biggest smartphone handset makers, is looking into developing a new mobile that would be able to run blockchain-based applications, reports Bloomberg. The company is said to have held talks with blockchain startup Sirin Labs to discuss ways to “bring blockchain technology to the masses in a secure way”. Sirin Labs is soon to bring its own blockchain-based mobile to market, with features including an offline wallet for your cryptocurrencies. All this and more for a cheap and cheerful target price of $999.
Real saga Some of the world’s best-known economists - Jacob Frenkel, chairman of JPMorgan Chase International and former governor of the Bank of Israel; Myron Scholes, the Nobel Prize-winning economist; and Dan Galai, co-creator of the Vix volatility index - have clubbed together to create the thinking person’s cryptocurrency. The saga token is designed to avoid wild price swings by tethering itself to reserves deposited in a basket of fiat currencies at commercial banks and will have new features to increase traceability. But critics point out that the thinking men apparently neglected to think about was what exactly this digital currency should be used for.
Bits and bobs
Follow the crypto Magic circle and top US law firms are increasingly cashing in on crypto mania by advising on the “wild west” initial coin offering space, in the hope that the nascent fundraising tool will shift into the mainstream in the future. This despite the fact that some 46 per cent of businesses that held ICOs in 2017 have already been unsuccessful: some are outright scams, while other launches have been linked to illicit activity such as money laundering or simply failed to produce the promised services.
Jackpotty Spanish police have arrested a Ukrainian man they suspect is the head of a cyber crime gang, which stole more than €1bn from 100 financial institutions, often by hacking into banks’ computers and ordering ATMs to spew out cash - a technique known as "jackpotting". The gang has inflicted losses on banks in more than 40 countries using malware known as Carbanak and Cobalt, which also allowed the hackers to divert money to their own accounts before laundering it through cryptocurrencies.
Bonding process JPMorgan, Bank of America and Citi are developing a new platform to overhaul the disjointed bond issuance process, hoping to solidify their control of the lucrative underwriting business that last year generated billions of dollars in fees for investment banks. The three banks want the new platform to improve communication between underwriters and asset managers.
Let us payOur father, we thank you for this “match made in heaven” - or so sayeth Swedish startup iZettle. The card reader maker announced a tie-up with the Church of England that will allow a new cashless generation of churchgoers to make donations via contactless card payment. The CoE plans to bring in portable card readers at more than 16,000 churches, cathedrals and religious sites.
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