Favourable Information in the encryption financial market again, Bitcoin hits a 15-month high

The cryptocurrency market continues to strengthen, with the price of Bitcoin breaking through $12,000, reaching a new 15-month high, and Ethereum has also rapidly climbed to $331 in the past month. Most of the top 100 cryptocurrencies by market capitalization are showing an upward trend.

Recently, a company backed by Google and Lightspeed Venture Partners received approval from the U.S. Commodity Futures Trading Commission (CFTC) to offer the first physically delivered futures product based on Bitcoin. This news further stimulated the already booming encryption market.

With the release of Facebook's Libra white paper and news of JPMorgan's trial of JPM Coin, more and more large institutions are entering the cryptocurrency space. This means that more funds and users will be attracted to this emerging market, and encryption financial tools will become essential instruments for both new and old players.

encryption wealth management

Encryption wealth management is a relatively new subfield in the field of cryptocurrency finance, with major products emerging at the end of the 2017 bull market. According to statistics, there are currently hundreds of active cryptocurrency wealth management products in the market, and the number of new products has significantly increased since the fourth quarter of 2018. The service providers in this sector can be mainly classified into three categories: exchanges, wallets, and professional wealth management platforms, although there is also some overlap among these three categories.

From the perspective of product attributes, digital asset wealth management products are mainly divided into three types: debt-based wealth management, dividend-based wealth management, and node-based wealth management. Debt-based wealth management primarily earns interest rate spreads through users directly lending on the platform. Dividend-based wealth management obtains returns through methods such as platform leverage trading profit sharing and quantitative fund profit sharing. Node-based wealth management includes node delegation and PoS continuity.

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Exchange: Some exchanges have launched wealth management products, mainly in two categories: one is the deposit coin interest model, with an annualized yield between 0.026% and 2.7%, supporting mainstream coins; the second is the Staking model, which is estimated to provide customers with an annualized yield of about 6.6%.

Investment Platform: Some professional financial management platforms support earning interest on digital currency, with an annual interest rate of about 12%.

Wallet: Some wallets have embedded financial management functions, with annual interest rates ranging from 1.2% to 40%. Among them, the annual interest rate range for fixed and flexible financial management is 12%-14% and 1.2%-5%, respectively; the annual yield range for Staking in the PoS part is 6.5%-40%.

Due to the tightening of regulations and the volatility of cryptocurrencies, there is still uncertainty in cryptocurrency wealth management. In contrast, some notable companies have emerged in the field of cryptocurrency lending.

encryption lending

In the current encryption financial products, lending is quite noteworthy in terms of both the scale of enterprises and the richness of products. At present, the forms of encryption lending products are becoming increasingly complex, often integrating multiple functions. Centralized and decentralized lending products are also gradually merging.

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Centralized:

A large encryption lending institution added 425 million USD in loans in the first quarter of this year, bringing its total loan amount since its establishment to 1.53 billion USD. The institution primarily borrows tokens from large holders and then lends them out at higher interest rates to earn the interest margin. About 10% of its products are also fiat currency loan services.

Another competitor has a relatively diversified business model: on one hand, it offers USD loans secured by cryptocurrency with an annual interest rate of 4.5% and a collateralization rate of about 50%; on the other hand, it allows customers to deposit Bitcoin and other coins to earn interest, with a maximum annual interest rate of up to 6.2%. The company's deposit products have attracted over $35 million in deposits since January of this year.

Decentralized:

Decentralized lending platforms mainly rely on over-collateralized Ether or stablecoins to issue loans. As of early June, the total value of the collateralized cryptocurrencies among the three major platforms was approximately $400 million, $20 million, and $20 million, with collateralization rates of around 480%, 400%, and 210%, respectively.

In addition, a stablecoin project called EOSDT within the EOS ecosystem is also worth noting. The locked EOS has reached 2.69 million, equivalent to approximately 19 million USD, ranking fourth among similar products. However, the number of active users for this project is relatively low, with a maximum of only 40 people in the past 30 days.

Encryption Derivatives

Compared to basic lending and borrowing operations, encryption derivatives bring more possibilities to the market. It is estimated that the scale of the encryption derivatives market may reach trillions of dollars. Encryption derivatives mainly include futures, forward contracts, options, perpetual contracts, and so on.

Derivatives Trading Service Provider

Encryption native exchanges and traditional exchanges are both laying out the derivatives market:

Native encryption exchanges, such as a certain perpetual contract trading platform, are expected to launch options products. Traditional exchanges, such as the Chicago Mercantile Exchange, have already launched Bitcoin futures, with a trading volume exceeding $8 billion in May. Additionally, another exchange has recently been approved to offer physically delivered Bitcoin futures contracts, which may increase the demand for institutions to accumulate Bitcoin.

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A certain decentralized finance derivatives protocol has reimplemented the trading rules of financial derivatives using smart contracts. The project supports margin trading with up to 4 times leverage, as well as lending services with an initial collateral rate of 125%.

In the field of prediction markets, earlier established projects have received millions of dollars in funding. Emerging prediction market projects are also favored by top investment institutions such as Sequoia Capital.

As more institutions enter, the encryption financial market is expected to usher in further development. However, attention must still be paid to the impact of uncertain factors such as regulation.