Bitcoin went through the roof and part of this development might be to due the long-anticipated start of two BTC ETFs but inflation fears apparently play a role, too. That’s not all though as there are plenty of more interesting stories in this week’s edition of the FinTechnologist Weekly:
One step closer to Mainstream Plus Better Finance
The Unstoppable Crypto Machine
Bitcoin reached a new all-time high last week wednesday, almost breaking the barrier of $67,000. The world’s favourite cryptocurrency saw a record-breaking run stop short to retreat just above the magical $60k mark. Questions started popping up whether it was already the end of the latest craze, but this morning we are already back up above $62k, so for now things look solid, but who knows what’s next.
The latest bull run came on the back of the debut of two futures back to US bitcoin exchange-traded funds (ETFs). The first, ProShares Bitcoin Strategy ETF ranked as the second-busiest launch ever and took assets in the fund over $1 billion in just two days. The start of the second ETF, the Valkyrie Bitcoin Strategy ETF, wasn’t as successful, but represents another step for cryptocurrencies towards the mainstream.
The second reason that is rumoured to be behind the latest record run of bitcoin is based on a statement of famous investor Paul Tudor Jones. In an interview with CNBC on Wednesday (note the timing!), he said that he viewscryptocurrency right now as a better hedge against inflation than gold. Seen over the course of the past year, gold as an investment lost 8% over the past 12 months compared with bitcoin’s 437% one-year gain. You mustn’t forget that in the same period BTC was down at one point below $30,000, so crypto investing still isn’t for the weak minded and require nerves of steel as my predictions is that this isn’t the end of crypto volatility, but don’t take my word for it.
It should also be said that Ethereum has seen an equally impressive week capped by its own new all-time high on Wednesday. It’s not across the bench, but several other cryptocurrencies have followed the lead. Several traditional stock incidences have reached or are close to record levels, gold might be back above $1,800 again soon and let’s not even get into the price of oil. At the same time, economies in Germany and the UK report highest levels of inflation and breached the 5% mark. Are Bitcoin and other cryptocurrencies a solid inflation hedge then? Tudor seems to think so and in a recent note sent to investors, JM Morgan said many investors are choosing Bitcoin over gold as a hedge against inflation. Should we believe them? Well, that’s one everyone has to decide for him or herself, I’d say.
Insights on the Wirecard Fraud
As Germany’s minister of Finance, Olaf Scholz, is preparing his ascend to chancellorship, the case of Wirecard still manages to puzzle me. His ministry has played a somewhat dubious role in the whole affair and Scholz as well as outgoing Chancellor Merkel have been criticized heavily for bungling oversight. I guess it will take years if ever to find out what exactly happened behind closed doors, but I’ve come across an interesting paper from students at the University of Stavanger, Norway. If you’re looking for an overview of the events that goes a little bit deeper but is still very readable, here you go.
With the help from the fraud triangle and several articles, the authors found that the management of Wirecard to most likely be a part of the fraud, but assigning part of the responsibility to the auditors and BaFin, the German financial watchdog. Interestingly, they also found that around 31% of European FinTech companies are not subject to any regulation, concluding the need for improved regulation.
Leveraging Financial Inclusion Through Technology-Enabled Services Innovation
While we are at the topic of interesting research, I won’t keep another interesting piece from you. Four researchers from the USA, Saudi Arabia, India, and Croatia looked at a case of economic development in India to determine how technology enable service innovation could be leveraged for financial inclusion. Using India as an example, the authors showed that the majority of the population does not enjoy the advantages of inclusive growth and development which is referred to as financial inclusion and that has become a challenge for the Indian economy.
Covid-19 made matters worse and the paper confirmed that thanks to the government efforts by opening almost half a billion of banking accounts, India is according to the researchers close to achieving financial inclusion with full potential thanks to radical changes in mobile subscribers and 4G, internet, and smartphone growth.
Despite this progress, the report also highlights, that significant change and development can be attained only if the government provides and motivates citizens to adopt the innovation services for financial inclusion. Given the number of factors playing a role in this, it is no easy task, especially when considering various environmental factors may impact the relationship between financial inclusion and innovative digital services as the authors argue.
Sustainable Investing and Greener Finance
Talking about environmental factors and great ambitions, the government of the United Kingdom has published a document that sets out its aspiration to make the country the best place in the world for green and sustainable investment.
I’m always for dreaming big, but this goal is no easy one and requires a number of steps as the report itself stresses. In fact, the document in question focuses on the first step to deliver this: ensuring that the information exists to enable every financial decision to factor in climate change and the environment.
The UK’s government has outlined the three phases it will require to green the financial system and align it with the UK’s world-leading net-zero commitment, namely:
- Informing – ensuring decision-useful information on sustainability is available to financial market decision-makers
- Acting – mainstreaming this information into business and financial decisions
- Shifting – financial flows across the economy shifting to align with a net-zero and nature-positive economy
This report is looking at the first step and at the bottom of it are Sustainability Disclosure Requirements that build the foundation to make impactful investment decisions – which in turn leads to the weak point, i.e., the need to be followed by investors and though the government calls for the pensions and investment sectors to action through a detailed outline of its expectations, it comes with a big if, doesn’t it?
Well, that’s all for this week but if you have an interesting story, please connect on Twitter. And if you would like to join me on the new FinTechnologist podcast, the same applies, of course. So, make sure you get in touch and in the meantime, I hope you have a good week!
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