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Why this prominent crypto analyst thinks Ethereum DeFi has topped for now

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Despite weakness in legacy markets, Ethereum has performed well over the 36 hours since the launch of Uniswap’s UNI token. From the time of the announcement, the coin has gained in excess of five percent, outperforming a majority of other cryptocurrencies.

ETH chart
Chart of ETH’s price action since the Uniswap launch. ETHUSD Chart from TradingView

Decentralized finance coins, though, have not performed as well.

Per CryptoSlate market sector data, many top DeFi coins including Yearn.finance, Aave, UMA, and Synthetix Network Token have slipped over five percent in the past 24 hours, underperforming ETH by 10 percent and BTC by six percent.

Analysts think that this trend of DeFi underperforming Ethereum — something that hasn’t been seen in months — may be the beginning of the end for decentralized finance’s phase of growth in the short term.

One prominent market commentator released a Twitter thread on the matter, outlining why he’s calling the medium-term DeFi top.

This analyst is calling a top in Ethereum DeFi for these reasons

Prominent crypto derivatives trader “Theta Seek” is calling a top on the DeFi market after this space has surged exponentially since the launch of Compound’s COMP token in June.

His primary contention with DeFi is that right now, it’s “too difficult to use” for the average user, especially those that are just being onboarded into the crypto space:

“While traction for DeFi (AMM + deposits/yield) has grown tremendously over the past few months, DeFi is difficult to use, the ability to lose funds scares most new users away.”

He specifically cited the story of a user spending $1 million worth of Tether’s USDT on a contract where he couldn’t retrieve his funds. 

Theta also noted that the value of capital entering the DeFi space is likely slowing down:

“A more visible metric is the speed of increase in stablecoins market cap. Other than ETH, USDC is one of the most used stablecoin in the space. MarketCap of USDC increased by 800M (“new money”) in the past month while DeFi market cap inflates by more than 3B in the same period.”

This may be the case as many DeFi coins have printed technical tops over recent weeks, falling dramatically from the highs where they were at the end of August or at the start of September.

Only compounding this, Theta remarked that DeFi has reached a point where regulators may begin to target companies and innovators in the space, especially if there are any notable bugs, hacks, or other questionable trends transpiring in the space.

Not the only one fearful of a loss of momentum

It’s important to highlight that Theta Seek isn’t the only analyst that is fearful that it may be time for DeFi to cool down after a jaw-dropping rally over the past three months.

Crypto analyst Ryan Watkins commented on Sep. 17, referencing the ongoing network congestion:

“Ethereum is damn near unusable right now. I can only imagine what retail will think if they eventually come into this market and face $50+ gas fees and 10+ minutes transaction confirmations… This has been my biggest anxiety about this bull market. The protocols are ready, the infrastructure is not.”

Watkins is not alone in sharing this sentiment. Many others following the space have noted that a number of factors, largely user experience shortfalls, could put pressure on DeFi until technologies like ETH2 and EIP-1559 are implemented.

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Source: https://cryptoslate.com/why-this-prominent-crypto-analyst-thinks-ethereum-defi-has-topped-for-now/

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This Week in Fintech ending 16 October 2020

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This week our experts brought you the following insights based on their experience as investors, entrepreneurs & executives.

To continue receiving This Week in Fintech, you can either become a paying Member for $143 per year (and receive all our content in addition to this weekly summary) by clicking here.  If you just want to receive This Week in Fintech for free, you will need to fill in this form

Your Editor is Bernard Lunn. He is also the CEO of Daily Fintech and author of The Blockchain Economy and occasional opinion columnist.

Monday Ilias Hatzis our Greece-based crypto entrepreneur (Founder & CEO at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech) @iliashatzis wrote BigTech in Finance

Late last year, we heard that Google was looking to get deeper into the financial world by partnering directly with banks. In early August, Google announced its foray into the banking world with another six U.S. banks pledging to offer digital-only bank accounts through Google Pay. Google is already working with Citigroup, Stanford Credit Union, and added to its partnership roster, Bank Mobile, BBVA USA, BMO Harris, Coastal Community Bank, First Independence Bank, and SEFCU. The digital accounts will launch in 2021 in both checking and savings flavors and will be insured FDIC or NCUA. Google is looking to boost the usage of its digital payment services in North America by partnering with banking institutions. Google’s strategy is to let partnered banks and credit unions provide the underlying financial infrastructure and navigate regulation while it builds smarter interfaces and user experience. Lately, it would seem that every major tech firm has set its sights on banking. In 2019 Apple partnered with Goldman Sachs on the Apple Card, which currently has over three million customers in the U.S. In 2020, Samsung announced a competitive product to the Apple Card in the U.K, and now Google is cooking up its own option.

Editor note: the acceleration of disruption due to pandemic is making life very hard for incumbents

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Tuesday Efi Pylarinou @efipm our Swiss-based Fintech Adviser,  founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019 wrote Knock & iBuying in US Real Estate Fintech

The SPAC trend continues in the US and Chamath Palihapitiya is one of the leading investors with his IPOA, IPOB,… series. The latest Fintech deal was focused on a real estate disruptor in the US, OpenDoor.

With Zillow, being the blue-chip name and already public, I wanted to dig into how OpenDoor`s positioning differs. Technology with all the B2B Software as a Service offerings (Saas) makes it so challenging to create and sustain a moat.

The secret sauce of a fintech business in real estate is not evident because the US real estate market is on the one hand mature but also very fragmented. On top of that, there are several uncertainties and moving pieces of the puzzle due to the current macro-economic environment and the emerging new normal life-style trends.

Editor note: Real estate it is a big broken market, but houses need creative selling. If Fintech can coop rather than eliminate realtors, it will be huge, just by eliminating the administrivia.

Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy wrote:Could the Sidetree decentralized identity protocol enable both privacy and personalization?

I am a bit of a privacy nut. I don’t like being tracked and I don’t like anybody else controlling my identity. Yet I know that being tracked can create personalized services that are useful to me. That is why I am a fan of decentralized identity on the blockchain. (see Part 3/Chapter 6 of The Blockchain Economy digital courseware for more on how decentralized identity on the blockchain will disrupt today’s media business).

Today we give up our privacy/identity to Big Tech/Media and that is a massive business for them. So, as a media entrepreneur in a niche domain (Fintech) I want to understand how one can make money if identity is decentralized and under user control. I think keeping advertising to contextual (avoiding all tracking technology) is part of the answer, but users want personalisation (and the networked community enabled by personalisation) and that requires access to identity.

This got me to  look at the Sidetree approach to decentralized identity to see if it could be win/win ie for both users and media owners.

Editor note: bleeding edge technology alert, but all big disruption starts this way.

Wednesday Alan Scott Managing Director EMEA at 24 Exchange @Alan_SmartMoney wrote Stablecoin News for the week ending Wednesday 14 October 2020.

This weekly snapshot is the news that matters in the Stablecoin market.

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Thursday

Rintu Patnaik, an Insurtech expert based in India, wrote: Taking Root, the Next Insurtech IPO. Clover Chooses SPAC.

After Lemonade and other successful IPOs including Snowflake and Palantir, Root Insurance has its sights set on the primary public market. In its S-1, Root minces no words about its intent to reinvent the $266 billion US auto insurance.

Five insurtech companies established after 2015 have each raised private capital in the region of $500 million. Lemonade has gone public, Root has announced plans and there are signs of more to come.

Root Insurance which focuses on automotive, claims to be the only P&C insurance carrier with a scaled proprietary telematics solution and largest proprietary dataset of miles driven, driving behavior and claims experience.

Editor note: Public market investors finally get a chance to ride the Insurtech wave – at rich valuations of course because of stimulus and investment bankers doing a good job.

Christian Dreyer @x3er, our Swiss based CFA who focusses on how XBRL changes our world wrote XBRL News:SupTech, future of reporting, taxonomy guidance

Editor note: This weekly snapshot is the news that matters in the XBRL market.

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Friday Howard Tolman, a well-known banker, technologist and entrepreneur in London, wrote: Alt Finance for week ended 16 October 2020

Editor note: This weekly snapshot is the news that matters in the Alt Lending market.

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To continue receiving ‘This Week in Fintech’, the weekly recap of our articles, you will need to fill this form to give us consent to send this to you. Please note that Daily Fintech requires your organizational email address (e.g. corporate, educational or government) and your LinkedIn URL. This information is required for subscribers who want ‘This Week in Fintech’ for free. If you prefer to not provide this information, you can still receive all our content by becoming a paying member.

Source: https://dailyfintech.com/2020/10/16/this-week-in-fintech-ending-16-october-2020/

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Alt Lending Week Ended 16th October 2020

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The Inevitable COVID crash. When and where will it strike?

Despite the pessimistic tone Matthew Lynn is in fact doing us all, Banks and Alt Lenders alike, a favour. In this piece he reminds us that that there has never been a recession yet which has not been accompanied at some point by a financial crash. And of course it is difficult to argue that the COVID recession is any different. You cannot regulate away an economic shock as big as this one and the impact of the sharp fall in economic activity is bound to manifest itself sooner or later. The big banks in the UK seem to be taking this pretty seriously reining in lending policies and being more selective. The Alt lenders however are behaving quite differently. Certainly their algorithm driven lending policies will steer them clear of the most obvious problem sectors but it is difficult to see how they will not undergo a certain amount of financial pain within the immediate future. I was given the unenviable task of managing a whole loan portfolio in decline. Computers are great at increasing efficiency in  reaching lending decisions and processing documentation and data, even, perhaps, assisting in getting money back more quickly, but it will not help if there is a systemic collapse. To use the current situation as a means to build loan portfolios to me looks questionable as a strategy.

Fed says small businesses dissatisfied with online lenders/

In January of this year the Federal Reserve published the Small Business Credit survey which looked at the business practises of online small business lenders from all over the United States. This was of course before COVID changed everything. The business showed a small number of common characteristics which include an automated online application process, proprietary algorithms to determine credit worthiness and a focus on speed and inclusivity. Succinctly the conclusion was that borrowers generally liked working with online lenders upfront but not later in the journey. This is obviously tied to the likelihood of approval which, not surprisingly, is the critical factor for a lender but it also points to the fact that credit is easier to obtain for online lenders than from traditional institutions such as banks. Satisfaction levels from borrowers working with digital lenders were significantly lower with the new boys clients citing inflexibility, high interest rates onerous repayments etc. It is much easier to dole out the cash than to get it all back together with interest and on time. Since January the whole situation has become a lot more risky. Next year’s report will be very interesting.

Government Loans £ 26 billion fraud risk

The UK national audit office has warned that up to £ 26 billion in Government bounce back loans are at risk either through fraud or the inability of borrowers to repay. I cannot say that I am surprised by this as it was a hurried scheme and was probably not thought through thoroughly. The loans are made either through existing banks both traditional and digital  and are guaranteed by the government. The institutions that rushed in to capitalise on the government guarantee had better start looking very closely at their documentation and compliance with stipulated process. Looks like a lot of organisations might find out the hard way that a guarantee is not cash.

Howard Tolman is a well-known banker, technologist and entrepreneur in London,

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives.

Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.

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Source: https://dailyfintech.com/2020/10/16/alt-lending-week-ended-16th-october-2020/

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“Digital businesses are the future”: Airwallex’s journey from café to one of Australia’s fastest growing fintech firms

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The pandemic has prompted an explosion of digital and global business services. Airwallex, an online business account for SMEs, has seen this surge in digital business first-hand.

“A major shift in the way businesses operate from offline to online is something Airwallex predicted from our inception,” said Jack Zhang, CEO and Co-founder of Airwallex.

“However, 2020 has fast-tracked this transition in a way no one could have foreseen. Businesses are now racing to embrace digital transformation at an unprecedented rate. We are more certain than ever that the digital economy is going to be the centre of the world’s economic structure.”

Airwallex’s impressive growth is a testament to the digital revolution that is facing businesses.

It achieved “unicorn” status – a $1 bn valuation – last year. In Q3 2020, it experienced over a 100 per cent increase in net revenue after recruiting more than 140 staff in early 2020.

Last month, Airwallex closed their extended series D fundraising with an additional $US 40 mn after initially announcing $US 160 mn series D funding in April 2020.

To date, Airwallex has raised over $US 400 mn since it was founded in late 2015.

Source: https://australianfintech.com.au/digital-businesses-are-the-future-airwallexs-journey-from-cafe-to-one-of-australias-fastest-growing-fintech-firms/

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