Crypto traders and managers believe that Bitcoin could achieve new highs soon, barring any major negative regulatory actions by governments. China Money Network recently caught up with three crypto experts to get their predictions, and here is what they had to say.
Michael Wu, founder and CEO of Amber AI, a fintech firm that focuses on applying machine learning/AI into trading, recently spoke to Blockchain Planet, a service of China Money Network, about his views about the future of cryptocurrency investment.
In 2017, Amber AI started trading crypto assets and quickly grew its crypto trading business to monthly turnover of over US$1 billion. By combining machine learning with sophisticated quantitative research, Amber AI aims to continuously identify and deploy best-in-class scalable systematic strategies across all asset classes. Wu graduated Magna Cum Laude with an Economics degree from Dartmouth College.
Watch the video interview below or read the following Q&A interview:
Q: Hi, Michael, welcome, firstly give us a brief introduction to Amber AI?
A: Sure. Amber AI is a quantitative trading shop. We trade in traditional assets as well as crypto currencies. Right now, because we are high-frequency traders in the crypto market, we trade about between US$1 billion to US$2 billion in volume (monthly). Besides trading our own capital and our investors’ capital, with our asset management products, we also provide second market trading services to different counter-parties in the industry.
Q: When you say “high frequency trading,” I know what that means for traditional stock-trading. But in crypto’s perspective, how is it different?
A: I think high-frequency trading is really a relative term. In traditional markets, the infrastructures are very developed and mature, trades are (done in) milliseconds. But in the very young and up-and-coming market like crypto currencies, the infrastructure is yet to be fully developed. So the trading speed is limited by things like exchanged APIs and of our web base. For us, every second we send hundreds of orders, which is probably as fast as we can go in this market right now.
Q: How quickly do they get cleared?
A: Usually the trades are done within seconds. And then, in terms of clearing, I guess it’s tricky because in the crypto market the concept of clearing is very different from traditional market where you actually send out all the assets from one account to the other. In the crypto market, different exchanges do it differently, so there is no accurate time or method or no consistent method for clearing.
Q: Let’s talk about the broader crypto market. From your perspective, what happened in the past six months with the prices dropped so much? What do you think were the drivers behind these market moves?
A: I think first, this market changes so fast. And when you said just six months ago, it feels like…
Q: Centuries ago?
A: Yes, centuries ago, exactly. Because I think 2017 was a remarkable year for the asset class. You have the massive rally not only in Bitcoin and in Ethereum, but also in what we call the "Alts", or alternative tokens. And there is a big wave of ICOs and all that. People made a lot of money from the market. But since the beginning of this year, I think there is a little bit of return to the mean. And markets started to come down. People realized “maybe we went a little bit too crazy last year.”
Probably market rallied a little too much ahead of itself, especially when you consider a lot of those ICOs are raising really a lot of money at very crazy valuations, with a lot of them just in white paper or at very preliminary stage of development.
So this year I think it might be more rational, so price corrected quite a lot from the peak. I think another good thing is because last year was such a bull market, everyone was rushing into it, some were professional, some were non-professional, a lot of retail investors. But this year, because the market was more bearish, some of the smaller institutions or some of the institutions that did not have too much skills stopped accessing the market. While professional and institutional player started to enter the market. I see that as a big change.
Q: Going forward this year, what are some of your predictions?
A: It’s always difficult to really predict where the market can go. But in the really long run, I think crypto is here to stay. It’s already a standard asset class, it will only grow from here. But the exact timing is difficult to say. But the good thing is I think in the crypto market the cycle is really really short. So, usually a bull-bear cycle in a traditional market can take a few years. In crypto, it could be a year or even shorter. Maybe before we know it, we return to a bull market again.
Q: You think that’s going to happen this year?
A: Hard to say.
Q: It depends on how you define "bull market", right?
A: Yeah exactly. And also different kinds of a bull market will have different impacts. I actually think if we really take a step back in the long run, the bear market is good for the asset class and good for the industry. Because it forces us to calm down, even forces some of bad players out, encourage the institutions to come in at more reasonable levels. The next bull market, if it returns, can return in a more steady-fashioned way. The good projects start to show their true value and true growth. I think that would be really good for the market.
Q: What are the main drivers for market movements in this year? What are the two or three things you watch most closely?
A: At a macro level, number one is always the regulation, what we call the macro-environment, how different government solve different regulators, treat this asset class and how they plan to regulate it. For example, one big change is China. Last year Chinese regulators took a very harsh stance on the asset class, they pretty much banned a lot of things. But this year we start to hear things like the new PBoC (People’s Bank of China) governor Yi Gang actually say in an interview that this asset class needs to be cautiously regulated. To us, that is already a huge improvement. It might set the tone for what’s to come and for the market to become more regulated and standard.
So that’s one: regulation and the macro-environment. Number two is always positioning. I think prices fell so much at the beginning of the year, especially what we call the ALTS, because people really hd too much position and too much leverage in the market.
That, I think, has mostly been cleared out. So that’s good. I think that protects the downside from here. The third thing I will see is fundamental development of the blockchain industry in the applications. Because if you think about last year, despite all the ICOs raising so much money, we have yet to see real solid decentralized applications.
Q: Lastly, what do you think Bitcoin would be trading at the end of 2018? Just give a wild guess?
A: That will be a wild guess. My guess is, I think by the end of the year, we’ll probably make a new high.
Q: Really? Higher than December 2017?
A: December 2017 was almost US$20,000, right? I think by the end of the year, we might go into US40,000 or US$50,000 (for Bitcoin).
Ryan Rabaglia is head trader at Octagon Strategy Ltd., the largest digital asset broker in the Asia-Pacific region. He has over 16 years of financial trading experience across various major product spaces, including equities, commodities and FX. Prior to joining Octagon, he built his own proprietary trading firm in New York, as well as trading at a multinational oil company in Hong Kong.
Rabaglia spoke to Blockchain Planet, a service of China Money Network, about the future of cryptocurrency investments.
Watch the video interview below or read the following Q&A interview:
Q: What is the main business of Octagon?
A: Octagon Strategy is Asia’s largest digital asset brokerage. We’ve been operating in this space as a group for almost five years now here in Hong Kong. So we have a pretty strong foothold in what we’re doing. Our primary business is over-the-counter block trading of digital assets. So, we facilitate buy-and-sell order in digital assets for large players, ultra high-level individuals, institutions from family offices, private banking clients, hedge fund and fund-of-funds.
Q: What is your trading volume?
A: We generally reach around US$2 billion monthly in trading. The (crypto) market has lent itself to a more active trading (status). Recently I think we’ve seen a low in the market. But it hasn’t stopped some of the key institutional players from continuing the trade.
Q: The OTC market for crypto assets is relatively new. What is the industry landscape of the OTC market now?
A: The OTC market people know it as an old concept. But in today’s high-tech world of digital asset trading, it’s sort of a new concept. We’ve been engaged in this since 2016. But it hasn’t really seen the spotlight in the media until probably early 2017, when ourselves and a few other corporate players were really kicking up the volume.
Q: What are some of the trends you see in the OCT market for crypto now?
A: I think it’s pretty similar across other part of the industry. On the surface, most people understand OTC as this sort of private network where people trade essentially like a dark pool (similar) to traditional assets. So the whole demographic shift from your retail investors to your institutions wanting privacy and a hands-off approach (is really taking place).
Q: I notice you say "digital asset" rather than "crypto asset". Obviously there are differences. By making that distinction, what are you including in the mix?
A: I think it’s just terminology, everything is called crypto currency and digital assets (interchangeably). Of course we understand digital asset do include a whole array of other products. Our objective going forward is to continue along the path of being institutionally focused company.
Q: Currently, what percentage of your clients are institutional?
A; I might say around 45% to 50%. It’s very close to half-half at this point.
Q: How much do you see that ratio increasing?
A: It definitely was a smaller figure a year ago. There is a continuing shift for institutions to become more attracted to the OTC market. It’s tough to say what level it (will go up to) because I think we’ve all been going down in the rabbit hole, but it is coming on a little slower than people had thought.
Down the road, one thing is the potential custody issue, as a lot of institutions will require that because it’s important to (make this something they) could offer to their clients. So I would probably say there could be a significant jump, but it wouldn’t go up more than 70% to 75%.
Q: From where you sit, what do you think drove the market volatility in the past four, five months?
A: I think it’s pretty clear what drove that volatility, including the tension in countries such as Japan and Korea, even India at times. I would also say the retail segment of the market is definitely what has drove the volatility.
Q: For the rest of this year, what kind of drivers are going to determine how markets evolve?
A: The biggest one, of course, everyone knows it’s regulation. Each country is putting their stamp on how they will deal with these assets in the markets, the people who trade them and the companies that offer the services.
So I think regulation is going to be the number one driver. I also think who will be the first offering custody services (will also impact). Will that open a gateway for the institutions? I think those two would probably be the biggest drivers.
Q: Any the other factors you are paying close attention to?
A: Hedging tools and derivative products. The liquidity and volumes coming through those products are actually increasing. There is a very significant increase month-over-month starting last month. I think more products coming in the form of derivative hedging tools, more complex instruments where people can use in hedging trade would also be critical.
Q: What are the new institutional products you see coming to the market this year?
A: More futures product, of course, and more options, options-based futures as well as new ETFs.
Q: Last question. Give us your wild guess of where Bitcoin would be trading by the end of this year?
A: I’ve been asked of this a number of times. And I’ve seen some wild stabs.
Q: Right. Tim Draper just said US$250,000.
A: It’s tough for me to go out (to predict). Because of course Tim Draper’s made great calls in the past. But it’s really tough to say. I’ve been in this market for five years. We’ve seen almost everything that’s occurred. That being said, there’s never time with market won’t teach you something that you didn’t know. So I think everyone needs to sort of keep that in the back of their mind.
Q: So you are going to be smart and not give a prediction?
A: I would like to say north of US$15,000. I don’t think we are going to hit another high this year. But once again, it really comes down to what event catalysts there are. Because as we know, this market is purely event-driven.
Jianbo Wang is chief investment officer of CYBEX, a decentralized crypto-asset exchange. Wang is formerly Director of ETF and China Risk trading at Deutsche Bank Asia, Vice President of ETF and Equity derivatives trading at Citigroup Asia, Vice President of Equity derivatives proprietary trading at Credit Suisse. Jianbo received both a B.S. and a M.S. in Electrical Engineering from Stanford University.
Wang spoke to Blockchain Planet, a service of China Money Network, about his views on the future of cryptocurrency investments.
Watch the video interview below or read the following Q&A interview:
Q: Hi Jianbo, welcome. Tell us more about CYBEX?
A: We started the project last year, and finished our private fundraising around December last year. We just got online about a month ago.
Q: You did an ICO?
A: No, we just did private sales.
Q: Why didn’t you do an ICO?
A: One reason is policy. Second is that we raised enough money. So there is not much of a point to try that. We got online about a month ago, so CYBEX is up and running. We have a roadmap to make things faster and list more interesting assets and tokens.
I am more in charge of the Hong Kong (operations) and we try to build a Hong Kong IT team to make the back-end grow much faster, ten or probably a hundred times faster. We are trying to get it done by end of this year, probably a little earlier.
Q: How many decentralized crypto exchanges do you think there are right now?
A: I think for the names I’ve heard, probably five to six. The bigger ones are Bitshares and Waves. There are a few smaller ones. The building technology is probably the easier part, even though it’s difficult, but it’s probably the easier part of running a community and how to be relevant. That takes a lot of work. We are lucky that we have James Gong to be our team leader. He has been in the industry for five or six years. So a lot of the crowd know him, and know that he always tries to do the right thing. So it’s easier for us to get a community, get the relevant asset, and also get things rolling for us. Probably not every exchange has that luxury.
Q: From a project perspective, how has the market volatility impacted your project development?
A: Since we raised enough money, we are just trying to do the work as we promised, including things like autonomic swap, make the base chain much faster, and engage a good team that has a lot of good digital asset that can be listed.
The market moves up and down, but it doesn’t impact us much. Of course we raise a lot of assets as in Ethereum so that will affect us a little bit. Well, we did our hedging, so we are fine with that.
To us, we all believe in the long-term game. We believe the decentralized exchange is the way to go. I don’t know when that will happen. By happening I mean, maybe 50% of loading goes to decentralized exchange. Probably 99.9% of loading goes into centralized exchange at the moment. We just need to keep being there to do the relevant work and hope the moment that people want decentralized exchange then we would be there to catch the flow.
Q: Now let’s look at the crypto market in general. Where do you think we are in the cycle?
A: I think last year was a great year that made crypto relevant and brought the big push for the crypto asset. I think last year made it clear that crypto asset can be used as a payment. So Bitcoin, Ripple, and a few other tokens like Dash are in (such category).
Q: Sounds like you still think it’s early time for crypto adoption, yeah?
A: Yes. So last year was only the payment, which is just the first (application). Bitcoin is always a payment, it’s a digital cash. But for me, to make blockchain relevant, it must go through to add other applications.
For example, last year there was a token called the IPFS, basically a distributed drop-box if you like. So that’s another app of storing files and retrieving it. So I think going forward, there will be more and more apps. In that sense, we are very very early in the game.
Q: Now going forward, what do you think will be the biggest challenge for crypto asset development?
A: If you look at Bitcoin and Ethereum, which are the number one and number two coins out there, they are (facing challenges in) speed. Bitcoin is running at probably 12 to 15 trades per second. They did a lot of side-chains, but the unchained trading is still limited to that. And Ethereum at probably 18. Both of them are doing a lot of side-chain products.
So I think speed is the biggest problem. And also there are security related issues. A lot of people try to come up with creative methods to try to solve the speed problem. But how do we do that without sacrificing security? A lot of people are working on it. Given that there are so much resources being put into it and so many good minds being put towards it, I think we probably can solve that problem sooner or later. I see one promising project called EOS. They are trying to push real hard on the DPOS consensus. As far as I know, the speed of that probably will be somewhere between 1,000 to 10,000 per second. That will make us a lot more relevant. It’s not top in terms of speed yet, but at 10,000 we can do a lot more things.
Q: Lastly, I’m not sure if you have a view on this. But what do you think Bitcoin would be trading at the end of this year?
A: End of this year? It’s a difficult call. I think given that last year was such a great year. The bottom was like US$8,000 around probably February. Even in a bull market, you probably don’t expect it just to go from here to US$40,000 or something like that.
So I think a lot of people just use last year and make it as a common year. I don’t think it’s the case. This will probably take a lot of consolidation and then the people need to see what’s really going on. I think it’s probably more consolidation. In term of how high it would go, I’m not quite sure.
Q: Do you have any prediction on that?
A: I think we are in a bounce. I’m not sure. For in a project, I think the EOS Project is kind of interesting if people want to look into DPOS. Because the main net would be online in June. I think around the next economic crisis, I don’t know when that will happen, that would probably give a major push to the crypto asset in general.
Q: If the next economic crisis arrive, how much do you think Bitcoin would go?
A: Look at gold, gold is around a US$6 trillion market. And all the crypto asset right now is perhaps half a trillion. Given gold went 1.5 times higher (during the last crisis), crypto probably would be a lot more than that.
Q: So you are a bullish?
A: I’m bullish. But I usually don’t tell people about predictions.
