Recently, a number of well-known companies announced their plans on the virtual currency market.
Among them, VISA disclosed their investment in CryptoPunk and plans to buy more NFTs in the future; on the other hand, Meitu's second quarter financial report shows that the book encryption investment loss is as high as 100 million yuan, mainly caused by the falling price of Bitcoin; it is pushed today. Te also announced the launch of Bitcoin-based payment functions, including support for the Lightning Network.
As more and more giants enter the crypto market, a new wave of adjustments to the global asset structure will be set off, with opportunities and risks coexisting. What other companies have joined the "Colosseum" of this new type of asset, how are they deployed, and what kind of logic is hidden behind them? This article has done some analysis.
Low return rate of unbearable fixed income, proactively allocate high-risk assets
The rate of return is one of the most important indicators of listed companies, and many deployments are centered on the goal of maximizing profits. Therefore, even if they have many reasons to enter the crypto asset market, the motivation behind it must be to optimize financial performance.
In the past two years, the performance of the U.S. dollar has been recognized as weak, coupled with low market interest rates, and 10-year treasury bonds and fixed-income products have too low returns. In order to increase cash yields, many U.S. stock companies have carefully allocated a certain percentage of bits. currency.
VISA
VISA’s main business is payment, settlement and clearing, but its activities in the crypto market are becoming more and more active. Not long ago, it bought an NFT numbered 7610 in CryptoPunk at a cost of approximately US$150,000.
Because as a listed company, its operations cannot arbitrarily deviate from its main business. In addition, it must comply with regulatory requirements. The proportion of high-risk investments must be controlled at a low level. Therefore, US$150,000 is compared with VISA’s foreign transactional investment scale. Only accounted for less than one thousandth.
However, the current NFT art market is still active and has a substantial asset premium.
MicroStrategy
MicroStrategy began to purchase bitcoins in August 2020. As of March 2021, it has invested a total of nearly 2.211 billion U.S. dollars, and the average cost price of each bitcoin is only 15,964 U.S. dollars. In order to implement their Bitcoin acquisition plan, it is almost All in.
In addition, a special issue of US$1.65 billion of priority convertible bonds has been issued, and the annual interest on convertible bonds is about 4 million. The pressure is still not small.
Tesla
Buffett once said: "Be fearful when others are greedy, and be greedy when others are fearful." If you are good at mobilizing market sentiments, you can sometimes get arbitrage opportunities through reverse operations.
Bitcoin has always been the hottest keyword in the crypto market, and it is the asset class with the highest price volatility in the world. Its short-term fluctuations are extremely sensitive to major positive or negative events and news. As a "draw-friendly" asset, those institutions with influence and financial strength can make reasonable use of the rules to arbitrage.
Musk took advantage of this, by stating that Tesla would accept payments in Bitcoin from customers. This news successfully pushed the price of Bitcoin to an ideal price, and the value of Bitcoin in Tesla's accounts received a high premium. .
No matter from which point of view, Musk is a celebrity with global influence. His every move will have some impact on the market. Therefore, he and Bitcoin came to a "joint hand" and successfully tested whether the market gave up as expected. His arbitrage opportunity.
Direct investment in cryptocurrency is risky, and potential projects waiting for equity appreciation
It has to be said that the market has high expectations for the economic value of blockchain and encrypted assets. To a certain extent, the primary and secondary markets have gained a premium, and many concept stocks and projects with related labels have been higher. Valuation.
Because the whole society has a consensus on the role of innovation in promoting economic development. There are many teams in the market trying to create explosive products in the field of distributed technology and encrypted assets. If investors can invest in high-quality projects at an early stage, the potential investment income will be astonishing multiples. Well-funded institutions will certainly not let go of such a good opportunity.
Goldman Sachs
In May of this year, Goldman Sachs jointly led the investment of Coin Metrics. In this round of financing, a total of 15 million US dollars were raised for Coin Metrics. Crypto market data analysis has very broad market prospects. Investors' trading strategies and institutional layouts, and even decision makers who formulate monetary policies, need data analysis as a support, otherwise the complete impact of the crypto market on the economic ecology cannot be measured.
Therefore, in addition to Coin Metrics, projects such as Messari and CoinMarketCap that can integrate encrypted ecological data are very optimistic by investors. In addition to Coin Metrics, Goldman Sachs also invested in 7 projects such as KCOIN, and participated in the early-stage investment of many crypto projects.
Samsung
In April 2019, Samsung invested approximately US$2.9 million in the French cold wallet unicorn Ledger, which was valued at approximately US$290 million at the time. As of July 21, Ledger’s valuation has reached US$1.5 billion.
Ledger's position in France is almost universal when it comes to encrypted storage, just like when it comes to new energy vehicles in China, BYD first thinks of it. Ledger's success means that Samsung's book investment income has doubled at least 5 times.
Use NFT heat to maximize brand marketing effects
No one would deny that NFT has become an outlet, and the label of NFT can increase the brand's popularity. In addition, many experts believe that NFT is an ideal distribution channel and can be used as a distribution carrier alone.
Many well-known brands take the initiative to issue native NFTs, the most typical of which is to launch the market in combination with mobile games. When it forms a distribution channel, the advantages are obvious, lower operating costs and customer acquisition costs.
LV
In order to celebrate the 200th anniversary of the brand, LV launched "Louis The Game", and the response was naturally good. The cumulative downloads in the first week of the release exceeded 500,000.
Other luxury brands have adopted similar strategies. Burberry, Gucci, and RIMOWA have successively launched their first NFT works.
Why are luxury brands playing NFT all the same, because in essence, NFT and luxury goods are the same.
Uniqueness and scarcity: This is what NFT emphasizes, and it is almost identical to the culture and product concept of luxury goods.
Collection value: Behind the valuation or pricing of NFT and luxury goods, there is a similar logic, that is, cultural identity and aesthetic pursuit.
The first auction price of "CryptoPunk 3100" was 90.5 million US dollars. The reason why such a high price can be set is not because of the trading platform behind it or the encryption technology used, but because of its recognized artistry and cultural identity behind it. Market value.
This is the same as the Hermès platinum bag. In France, the platinum bag is a scarce resource, even if you have money, you can't buy it. The reason why such a seller's market can be formed is because it has a wide cultural identity. Therefore, NFT is actually a work of art and luxury in the digital world. The introduction of NFT has actually strengthened the value of these brands in the minds of consumers.
Solve the problem of secure storage of encrypted assets, terminal sales
In fact, the crypto market is still in a period of dividends, especially in terms of infrastructure. Tech giants are aiming at this track and seizing market share by launching more competitive enterprise-level and individual user-level solutions.
As a veteran mobile phone giant, Samsung has realized the demand for cold storage of cryptocurrency users earlier than other mobile phone brands.
Aiming to improve the security level of encrypted asset storage, in February 2019, Samsung released the first mobile phone loaded with cold wallet function-Galaxy S10, built-in Samsung Blockchain Wallet (Samsung Blockchain Wallet), can store blocks The private key of the chain program can also support developers to develop encrypted hardware wallets.
Samsung’s layout has undoubtedly succeeded in attracting more users in the crypto market. With the increasingly fierce competition in the global terminal mobile phone, Samsung’s strategy of extending its target market to cryptocurrency users is a very wise and in line with market expectations.
User development plan, build a payment system under its own ecology
In the IT industry, there are always some cryptocurrency "long-termists", such as Facebook, which has been trying to launch crypto-asset products after repeated battles and failures.
After Facebook failed to launch in Libra, it has recently returned to the public eye because of Novi Wallet. Novi’s positioning is an electronic wallet that can realize zero-cost and real-time transfer or payment through chat software (Whatsapp and Messenger), similar to WeChat Zhongwei Embedded payment function.
In the Facebook ecosystem, the value of active users (1.8 billion app daily active users) has not yet been fully developed. If they can cultivate the habit of using Novi for daily payments and transfers in a large user base, it will be huge value. Perhaps seeing the success of Ant Financial, Facebook realized the more economic value brought by user stickiness.
Although Facebook is a company that is too big to fail, its revenue model still relies mainly on advertising revenue (Attention-base model). From the perspective of diversification, it is not doing enough, and in the long run, a single revenue model is also A risk.
So Novi has become an important measure for Facebook to further tap user value and increase monetization methods, which is not surprising. But the success of Novi depends on whether the Diem coin can pass regulation.
Paypal
People always look forward to the subversion of cryptocurrency in the payment field, but few mainstream payment institutions directly participate. After PayPal announced the provision of mainstream currency transaction services, the first compliant payment institution finally appeared in the market to allow users to deposit cryptocurrencies.
But this business is currently only for the UK market, and PayPal mainly conducts cryptocurrency transactions through Paxos, which has already obtained an operating license in New York. In addition, cash withdrawal is not supported for the time being, which means that cryptocurrency can only be stored in the PayPal application and cannot be exported.
Although the current centralized system is better in terms of transaction speed, the use of encrypted payment can reduce the transaction fee rate. Merchants hope that one day they can reduce the handling fee of credit transactions, which is what many merchants with huge settlement volume want.
Therefore, although there are many restrictions on directly operating cryptocurrency trading business, Facebook, PayPal, and many traditional large companies are still actively deploying, let us see their determination to introduce cryptocurrency into the mainstream market.
Bitcoin's volatility effect, investment banks act as the middleman
There are such a group of high-net-worth people in the market: they think it is interesting to bet on the fluctuation of BTC price and hope to profit from the transaction, but they lack in-depth knowledge of encrypted assets and lack the ability to control investment risks. For this type of investment group, structured products provided by professional institutions are required to meet their specific needs.
JPMorgan
Starting from April 2021, JPMorgan Chase will provide high-net-worth clients with a package of fund trading services linked to Bitcoin. In fact, in the fund that JP Morgan Chase will provide, the underlying asset is not Bitcoin, but an investment note composed of 11 stocks. The investment income at maturity is completely determined by the rise and fall of each stock.
Of course, these stocks are companies that actively invest in or deploy encrypted assets. Some invest heavily in Bitcoin, such as MicroStrategy, and some provide infrastructure, such as Riot (mining machine) and Nvidia (chip).
Such structured products look like ETFs, but they are not. Because it is actually only a nominal position, it will not actually open a position for the client, which is a mixed index trading note. For investors, the risk is lower, because the risk lies mainly in the operating results of these companies, rather than the absolute trend of Bitcoin.
JPMorgan Chase’s strategy is also very wise, because according to the specific provisions of this service, JPMorgan Chase does not have any positions, and only charges management fees and fees for closing positions based on the size of funds, which means that there is no exposure risk.
According to records, Goldman Sachs began planning bitcoin futures products in 2018, perhaps due to regulatory pressure, or it may not find a suitable partner until June this year. Goldman Sachs will provide customers with Bitcoin futures on the Chicago Board of Trade, with Galaxy Capital acting as the main market maker. In a strictly regulated environment like Goldman Sachs, it usually avoids directly opening positions.
So these well-known investment banks, whether they provide structured products or derivatives, especially when it comes to Bitcoin, basically provide middlemen's services. The investment bank's attitude towards getting involved in cryptocurrency is: both greedy and cautious.
Long-term high volatility: Investment banks try to avoid direct positions because they are afraid of volatility risks, but institutional investors and wealthy individual customers are willing to bet on ups and downs.
Horrible market activity: Bitcoin's trading activity is unique. Basically, the daily transaction volume is more than 20 billion U.S. dollars, behind which is the scale of tens of thousands of transactions per day. Therefore, although the underlying assets are risky, market activity and volatility create profit margins. Investment banks only need to launch suitable products and act as intermediaries, and they can obtain management fees from each investment.
Optimistic about the characteristics of NFT identity information carriers, focusing on copyright and traceability
In the field of copyright protection, NFT represents the incarnation of justice. Because NFT is a virtual carrier that represents ownership and identity information, it is very suitable for solving pain points such as infringement and difficulty in traceability.
IBM
In April of this year, IBM announced a partnership with IPwe to launch an NFT trading tool on patents and copyrights. If Visual China mainly serves the C-side, then this set of IBM tools will be for the B-side, solving the problems of patent applications, long transaction times and high costs, and the main benefits are small and medium-sized enterprises.
In fact, when IBM uses digital tools such as NFT to solve these problems, the company’s intangible assets are no longer "sleeping assets" without liquidity and difficult to realize. Information related to patents or trade secrets can be passed through at low cost. The way of knowledge permission realizes the transfer of ownership or use right.
End Words
The entry of giants into the crypto market is a process of mutual promotion, which will undoubtedly benefit the continuation of the crypto bull market. At the same time, it also released a strong signal that the technology behind encrypted assets is accelerating its application to the real economy. Cryptocurrency has not been widely used in reducing payment rates, and it is only used among a limited number of companies in the circle.
The benefits of NFT in equity confirmation have not been fully explored, except for extremely popular areas such as art trading and game P2E. We believe that Bitcoin, NFT, and even other encrypted assets have wider applications.
Giants will not rush into the market. On the basis of full research, plus sufficient funds and influence, it will promote the benign integration of the crypto market and the existing market.
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