NBX Attends Paris Blockchain Week Summit: 5 Key Insights
By: Nbx Editorial
Tags: Cryptocurrency, Blockhain, Conference, Cryptoexchnage

In this year of uncertainty, it’s never been more important to stay abreast of the latest developments in the cryptocurrency space. With that in mind, this week, we attended the Paris Blockchain Week Summit, which brought together traditional finance professionals, public sector officials, crypto insiders, and general crypto enthusiasts on the Hopin platform to discuss this year’s progress in the crypto space and look ahead to 2021. Though it was an event with numerous interesting insights, if you were unable to attend, don’t worry. Below, we’ve gathered what we believe are 5 of the top insights from the conference for you.

1. Adoption of the blockchain will become a requirement

First and foremost, in the opinion of industry professionals who presented at the Paris Blockchain Week Summit, the blockchain is becoming a matter of course for all businesses. As of this year, according to a presentation from Angie Lau, the CEO of Forkast News, 61% of global firms are actively exploring blockchain and 100% of them are thinking about some sort of digital transformation, both of which have been spurred on by the spread of the pandemic and the resultant loss of worldwide revenue worldwide.

2. 2021 will feature greater involvement of Asian businesses and millennials in the crypto space

Following her statements on the global adoption of blockchain technology, Lau pointed out that Asia’s share of the global technology revenue is 52% and remittances represent 5% or more of GDP in Asian regions. Based on this data, Forkast believes that Asian businesses will make a bigger impact in the blockchain space, beginning in 2021, spurred on by transformation in the remittances space. On the consumer-facing side, with 42% of 18–34 year-olds planning to buy Bitcoin in the next five years and $5 trillion in wealth poised to be transferred to millennials in the next decade, Forkast has concluded that millennials, particularly in Asian regions, will be the top group to watch with regards to global retail cryptocurrency adoption in 2021.

3. Bitcoin’s rise will continue into 2021, spearheaded by the macro sector

Above all, PBWS presenters echoed the sentiment of many across the crypto space that macro investor interest in Bitcoin will continue to grow and by extent, its driving narrative will continue to be its usage as a safe haven. In a presentation titled, “How Macro Investors Look at Digital Assets,” Dan Morehead, the Founder and CEO of Pantera Capital was asked: “is Bitcoin the next gold?” He responded:

“I think it is. Gold’s been around for 5000 years, so it’s not going away immediately. Over the next few years, however, you’re going to see Bitcoin eating into gold’s market share.”

On the same day, analysts for JPMorgan echoed this, stating that in October alone, money “poured into Bitcoin funds and out of gold.” More specifically, they found that since October, gold ETFs have experienced “$7 billion in outflows, compared to $2 billion in inflows to Grayscale’s Bitcoin Trust.” With this, it’s essential to keep in mind that not all of those outflows are moving to Bitcoin. According to the same analysis, as of now, “Bitcoin only accounts for 0.18% of family office assets, compared with 3.3% for gold ETFs.” So, despite Bitcoin’s record year, it hasn’t considerably eaten into gold’s market-share just yet.

Still, in the opinions of Morehead and the other presenters at PBWS, all this means is that for Bitcoin’s status as a macro-hedge, it’s still early. As we move into 2021, only time will tell how the narrative plays out. For now, Morehead and his fellow macro-insiders are playing the long game.

“Macro investors aren’t as all-in as MicroStrategy and Bitcoin’s leading bulls but they do see it as an unavoidable play for the next few years. They’re being driven by the idea that further inflation is coming and people will have to buy up gold or the next thing to combat it, which is Bitcoin.”

In short, the macro sector is betting on a prolonged economic crisis as we head into the next year. If that were to occur, then one possible thesis that could drive Bitcoin to new heights in 2021 is the fact that, as Raoul Pal has said: “it’s the living embodiment of a Soros-style feedback loop.”

In a general sense, what this refers to is that the more institutional capital flows in, the higher Bitcoin’s market cap becomes. The higher its’ market cap, the more institutions trust in it as an asset with staying power, which causes even more institutions to buy-in. Retail investors, as mentioned above, either follow the behavior of experienced investors/institutions or just buy-in as the price rises. If Bitcoin continues the trend it has followed for most of 2020, then it may fall into one of these “reflexive feedback loops,” at which point, it’s almost impossible to tell what heights its’ price and market cap will reach over the long-term. This idea, together with Bitcoin’s continued performance against traditional assets this year and its’ fixed-supply, has driven and and according to PBWS presenters, will continue to drive macro-interest.

If you’ve read any of our Bitcoin-centric posts, then you already know that we’re tracking the development of the same trend and you can rest assured that we will continue to do so. With that being said, for now, the consensus from both us and industry experts at the conference is that Bitcoin adoption is just beginning to take off with regards to legacy financial institutions and retail investors alike. Therefore, those who have already invested in Bitcoin, even this year, are still involved in its formative years on a global scale.

4. Better KYC and AML have decreased cryptocurrency crime

On Thursday, Dave Jevans, the CEO of CipherTrace, presented the blockchain analytics firm’s December report on crypto crime at the PBWS. Highlights from it include that they’ve seen a 60% reduction in criminal-based crypto payments to exchanges that are tied to criminals over the past year to 0.2% of exchange volume globally. Jevans and his team have attributed this to a greater focus on compliance, i.e., KYC/AML, from exchanges worldwide. Jevans clarified their findings by saying:

“KYC changes everything. Those with adequate KYC, i.e., full compliance, tend to have 1% or less coming in from dark markets, while those with weak or porous KYC jumped up to 70–80% this year in that respect.”

Generally, CipherTrace has also found that exchanges without a clear domicile or one that’s in a location with little to know financial regulation, fall into this risky category. With adequate KYC procedures in place, however, exchange clients can rest assured that their funds are always safe and the crypto they’re trading with hasn’t been touched by criminal organizations. Jevans concluded his presentation by saying that exchanges that work closely with regulators to ensure full compliance are those which can be trusted. This is a category that we, at NBX, fall into since we’ve done this from the get-go and already have approval from the Norwegian Financial Supervisory Authority.

5. Overall, the cryptocurrency industry is still in an infrastructure building phase.

This year was the first year that institutions began to buy into Bitcoin in a significant, headline-grabbing fashion. Across the conference, during multiple talks, this sentiment was repeated, alongside the idea that the crypto space is still building the proper infrastructure so that the rest of the global financial system can reliably shift over. Working with this theme, Misha Alefirenko, the CEO of Velvet Formula, a crypto market maker, said:

“We believe that the majority of volume will move to exchanges from OTC desks with time but right now OTC desks are king and have all the flow. It’s enough space for everybody in the market right now.”

With this, it’s crucial to keep in mind that by “all the flow,” Alefirenko means “the bulk of the institutional in-flow.” Later on Alefirenko and other presenters added that as this trend plays out, the exchanges that are already working to make their offerings more attractive to institutions should attain the bulk of this shift in capital over time. Since, we’re working on both our institutional and retail offerings concurrently, at NBX, we believe that we’re poised to do that.

Near the close of the presentation, Alefirenko and the other presenters reached consensus on the idea that institutional investors will also begin to move more towards options as a hedge against cryptocurrency volatility and away from futures. If this does begin to occur in 2021, the effect that it would have on the average investor is easy to grasp. Measures like the skew, which we have discussed in one of our Knowledge Base articles, would become even more important than they are today in terms of predicting upcoming volatility. Furthermore, though it was not explicitly stated by any of the presenters, stablecoins might also become less prominent as hedges on the institutional side.

So, what does all of this tell us?

All in all, the insights of presenters as well as the audience at-large at the PBWS confirmed that the driving narrative for Bitcoin continues to be its’ usage as a safe haven which is largely synonymous with it working as a treasury reserve for institutions. Additionally, though this has been a banner year, the consensus throughout the conference was that everyone seems to be expecting 2021 to be even more significant than 2020 in more ways that one.

Chainanalysis and others like Alefirenko from Velvet Formula particularly highlighted that 2021 will be the year that all crypto comes to the top of global regulators’ agendas. This will, in their minds, also decrease cryptocurrency crime and bring in more risk-averse investors into crypto who need regulatory certainty to even dip their toes into new asset classes.

As a general rule, no prediction should ever be taken as a matter of course.

Even so, the above represents the consensus of not just the presenters at the PBWS, but also, by-and-large, the leading opinions of the crypto industry as a whole. Overall, it’s best to treat this data as a hypothesis as 2020 comes to a close and we move into 2021 and watch how these trends play out. Next week, we’ll delve into what a Bitcoin supply-shock is, why it’s happening now, and how it relates to the growing trend of Bitcoin as a safe haven. Until next time, as always, remember that we’re here to help you. If you have any thoughts or questions about this post as well as others, reach out to us any time here, on Twitter, or our website!