The trend in the cryptocurrencies market, led by bitcoin, has been positive in early 2020. Bitcoin rose 11% in the first week of the year, then fell to $7,900 on Thursday, after nearing $8,400 the preceding day, its highest level since November 2019, according to figures from CoinMarketCap.
The total value of the cryptocurrency market grew 54% to $193 billion in 2019, with bitcoin accounting for 68% of it. According to the TradeBlock research company, bitcoin trading totaled $3.8 trillion in 2019, slightly more than the total volume of trading in 2017, when the bitcoin bubble inflated to an all-time record.
The cryptocurrency market will draw encouragement from the summary of its state at the end of 2019, despite its negative trend in the second half of the year. After nearing $13,800 in June 2019, bitcoin fell to $7,200 by the end of the year, a loss of almost half of its value: 87% higher than its price at the beginning of 2019, but 64% below its peak of $20,000 in December 2017.
Developments in the market also left their mark on Israeli trading platform eToro, which has managed a social network for investments since 2007, and launched international cryptocurrency exchange eToroX in 2019. eToro cofounder and CEO Yoni Assia told "Globes" that cryptocurrencies accounted for 20% of trading volume on the company's online trading platform over the past year.
"Our main platform is a social investments network in which every investor can see in which assets other investors are investing, whether these are shares, indices, or digital currencies. This is eToro's core business," Assia says. "Most of our customers' trade now is in shares, not cryptocurrencies, and the global stock market went on setting new records in the past year."
"Globes"" Has your volume of trading in shares grown this year?
Assia: "Definitely. We're seeing a great many people who came to eToro from the cryptocurrencies market who later went into trading in shares, and who are now active on our platform mainly in trading in shares.
"When the cryptocurrencies market was at its peak, we saw hundreds of thousands of new users registering every month because it was easy to open and account and trade on eToro. The fact that we're seeing more people like you trading on the platform, and you have the opportunity to communicate with them, is making all activity much easier and accessible. Today, we're one of the few companies in the world in which the customer can both buy bitcoin on the platform and transfer it to his wallet, and also trade in shares."
In late 2018, eToro launched its own digital wallet, through which its customers can hold and transfer cryptocurrencies. Following market rumors, the company recently confirmed that it was planning to launch its own debit card in 2020 for immediate debiting and offer the card to its customers. Assia told "Globes," "The card will expand the financial services that we currently provide to customers from over 100 countries around the world."
How would you sum up the year in cryptocurrencies trading?
"The cryptocurrencies market began 2019 at a low point. It was the complete opposite of the situation at the beginning of 2018, when many companies in the sector were benefiting from the boom atmosphere following the surge in the cryptocurrencies market in 2017. People in the market slowly shed their illusions, realizing that cryptocurrencies winter would not be a short-lived event, and that bitcoin wouldn't return to its peak of $20,000 within a few months. In early 2019, many companies in the sector gave way to the market pressures.
"In the second quarter of 2019, we saw a substantial awakening in the market. The jump in trading turnovers and the prices of currencies in the market was mainly around the 2019 Consensus Blockchain Summit in New York in May, followed by Facebook's announcement in June of its Libra digital currency project. Libra generated unprecedented global awareness of the digital currencies sector; suddenly, everybody was talking about it.
"The market corrected itself in the third and fourth quarters, and investors who hoped for a return to the peaks of 2017 were of course disappointed. Between the first and second quarters of 20149, we saw at least a five-fold jump in trading turnovers and the number of traders in cryptocurrencies at eToro. Afterwards, the market settled down. At eToro, we see a direct ratio between the fluctuations in the market price and the increase in the number of new customers using our trading services. In the fourth quarter of 2019, I estimate that the number of our users and trading turnovers in cryptocurrencies doubled or tripled in comparison with the first quarter of the year. This is slightly less than in the second quarter, which was the strongest quarter in 2019, and a substantial drop in comparison with the peak in late 2017 and early 2018."
"Globes" reported last November that Belgian startup Delta had been acquired by eToro in a deal estimated by the market at $5 million. Delta's product is an app for monitoring investment portfolios in cryptocurrencies. Six months earlies, eToro acquired Danish startup Firmo, whose expertise is development of secured smart contracts on blockchain.
How are the two startups that eToro acquired affecting your cryptocurrencies activity?
"Now that we have acquired the company, Delta's team is part of eToroX, eToro's cryptocurrencies arm. Delta's app now has over 250,000 users a month, and we're working together on making eToro's services available to Delta's customers, and on launching additional services. Delta's product is very popular in the cryptocurrencies market, and its advantage is the ability to connect information coming from 100 cryptocurrencies exchanges around the world and display all of their data in one place.
"The activity of Firmo, which we acquired last March, has already been assimilated into eToro, and Firmo's team is now working as eToro's blockchain laboratory. With the help of Firmo's technology, we have launched 17 stablecoins on the eToroX exchange this year. Today, we're probably the company with the most stablecoins in the world."
Stablecoins are cryptocurrencies whose prices are linked to the price of fiat currencies (sovereign currencies) or commodity prices. This linkage gives them more price stability than ordinary cryptocurrencies, such as bitcoin, Ether, or XRP. In addition to the seventeen stablecoins launched by eToro linked to the dollar, the euro, the British pound, the Japanese yen, the Chinese yuan, and ten other fiat currencies, and to the price of precious metals (gold and silver), eToroX now accommodates trading in ten ordinary cryptocurrencies - a total of almost 100 pairs of digital currencies.
"eToroX, launched in April 2019, is an exchange designed for more sophisticated customers in the cryptocurrencies market," Assia explains. "These are customers who usually use several exchanges simultaneously for trading in various cryptocurrencies. In 2017-2018, there was an enormous worldwide increase in demand for cryptocurrencies, and enormous pressure was created, which made it hard to buy currencies on many exchanges. In recent years, eToro has created links with 15 cryptocurrencies exchanges around the world. Today, using eToroX, we aggregate all of these exchanges, and that is our pool of liquidity."
Yoni Assia and his brother, eToro cofounder and chief product officer Ronen Assia, told "Globes in early 2019 that they were planning to expand the social network to investors in other countries, such as Hong Kong and South Africa.
In which countries did eToro expand its activity over the past year?
"Our activity grew substantially in 2019 in both Australia and Southeast Asias: the Philippines, Vietnam, Thailand, Indonesia, Malaysia, and China. Our growth there was over 50% in comparison with 2018. We're continuing the expansion of our activity in all of the countries in the world in which we operate. Furthermore, we launched activity in the US this year, and this is a very important step for the company. Today, we offer US customers only trading in cryptocurrencies, but in the future, we'll expand our activity there to trading in shares. In addition to the 42 US states in which we're active, we're planning to expand to other states, including New York."
There are currently only four trading platforms for securities in Israel. Is eToro also interested in operating in Israel?
"This is an option that we're constantly considering, but as of now, we aren't active in Israel. Only qualified Israeli investors can use eToro's services."
What do you think about security tokens (cryptocurrencies treated as securities) that companies like (Israeli company) INX are planning to offer?
"Securities tokens are a very interesting segment, but the liquidity and supply in this market are still not enough to interest investors. I think that among the various buzz words we hear in the cryptocurrencies market, security tokens will be in the infrastructure development phase this year. On the other hand, stablecoins and decentralized finance (DeFi) apps (in which the Ethereum platform is prominent, for example, R.K.) are areas in which we'll see more activity in 2020, in my opinion."
"I believe that the entire financial industries will undergo tokenization (turning financial assets into digital assets, R.K.) in the coming decade," Assia says. "I think that the activity of many financial institutions will be based on blockchain infrastructure. I think that this is a gradual process that will occur as part of the financial sector's digitalization. It requires a change in concept on the part of the financial industry, with the realization that every customer can independently move his assets from person to person and from place to place at any point in time."
What lies ahead for the leading currencies in the cryptocurrencies market in the coming year?
"In my opinion, bitcoin will continue to lead the market in the long term," Assia says. "Beyond that, among the leading blockchain platforms, I think that the activity of Ethereum will continue to attract great interest, and will lead in the smart contracts realm. Ripple, which is responsible for the XRP cryptocurrency, is still focusing on devising infrastructure for transferring money between banks. There are other interesting platforms in the market, such as Tezos, which focuses on creating decentralized corporate governance, and IOTA, which concentrates on Internet of Things (IoT). Each of them has its own specialty."
In addition, Assia says, bitcoin's block reward halving, scheduled for 2020, will be an important event in the market this year. "If the price of bitcoin is determined by supply and demand, and at a certain point, the supply is halved, while the demand remains the same, the price will rise. The question arises here of whether or not the market is already taking this event into account. When the price of bitcoin rises, the demand for the currency usually also increases," he says.
Assia remarks, "The bitcoin community grew in 2019. I think that the concept of bitcoin as a hedge against a recession and changes in economic policy in various countries has taken hold, for example a negative interest rate or restrictions on foreign currency purchases. Beyond that, public discourse around the world on the subject of the concept of money's substance has increased to unprecedented proportions. On the other hand, the stock market continues to break records."
Published by Globes, Israel business news - en.globes.co.il - on January 12, 2020
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