A dividend is a share of profit paid by the company to its investors and shareholders. Currently, the interest rate that you get from banks is negligible, and stocks usually pay between 4-6%. Some coins with a higher market cap pay up to 10% and crypto stable coins pay up to 20%, while on some cryptocurrencies some people have earned up to 100% per year. Usually, when people think about dividends they think of those that traditionally come from stock market investments. Crypto dividends appeared in 2018, with the introduction of decentralised finance. This gave people the ability to do yield farming, staking, liquidity providing, lending, and earn interest on their investment. Crypto dividends and different earning methods experienced a huge surge of demand and despite high volatility, they became the best way of earning interest. Just a few days ago, a tech and infrastructure company called BTCS Inc. announced that they will be the first Nasdaq-listed company to pay dividends to their shareholders in Bitcoin. Right after the announcement, their stock price increased by 44%. What are crypto dividends? Crypto dividends are rewards that are earned for holding or performing a specific action with different assets. The amount of dividend granted is frequently based upon the amount of cryptocurrency the investor holds or, if they receive dividends for performing a specific action, this could be through staking or claiming a reward on their platform. The interest rate is usually represented in annual percentage yield (or APY) and represents the returns over a period of a year. How to earn crypto dividends When it comes to the stock market, investors are paid from the profit that a company generates. In the cryptocurrency markets, there are many different principles of how and when dividends are paid. The most popular ways of earning dividends in the blockchain space are by staking, yield farming, lending, and airdrops. Staking is used in proof of stake protocols to verify transactions on the blockchain network. The number of coins you stake usually correlates with the number of transactions you verify and you receive rewards based on that. Yield farming is when you provide liquidity on a trading pair and you gain interest based on the usage of this trading pair. Usually, the returns on yield farming are higher but there is a risk of losing your investment if there is a drastic change in price. This is called impermanent loss. Crypto lending or borrowing is where you lend your cryptocurrency asset for a rate of interest that is repaid after a certain time. Usually, people offer their ETH or BTC as collateral to take stable coins or fiat which they can use to buy more crypto, gold, or even real estate. Crypto airdrops are distributions of specific coins or tokens to a community, usually in response to performing some action required by the company that offers the airdrop. The biggest airdrop was performed by Decred and the users that are still holding their tokens are estimated to have around $500,000. Another way to earn a passive income is through investing in stable coins, for example, by earning a return - or yield. Most often, your return is paid in the currency that you invested in, as is the case on the Kinesis Money platform which pays out in physical gold and silver, for storing precious metals in its ecosystem. As with investing, it is important to consider the extent of the risk posed, as well as things like safety or “lock-in” terms. With stable coins like Kinesis' KAU and KAG, there is the added benefit of securing value over time with the currencies backed by physical precious metals, in addition to no “lock-in” terms, that gives utility and liquidity to users’ investments. Crypto dividends methods and coins Depending on your preference, you should choose a combination of options that will combine high returns for the risk you are willing to take. Here are some of the best options for earning interest on your crypto. Ethereum 2.0 is currently the asset that is staked the most with almost 160 billion. The largest platform for staking ETH 2.0 is Lido finance with an interest rate of 4.8%. Even though the risk and reward ratio is great, you won’t be able to use your Ethereum until ETH 2.0 is released — and the date for that is still unknown. Curve finance or CRV is the largest liquidity pool built on the Ethereum chain. Currently, there are 23.3 billion assets locked on the platform. The curve became famous for its market-making algorithm which allows users to exchange stable coins that are pegged to fiat. The interest rate for fiat is pretty high, around 20%, and since prices won’t change a lot, it decreases the chances of impermanent loss. Maker DAO or MKR is a decentralised lending and borrowing platform. It is currently second (by size) with 19 billion assets locked. On Maker DAO, usually, people provide ETH or some other cryptocurrency as collateral and loan DAI as a stable coin. If the price of collateral goes down, you either need to provide more of it or you need to accept a 13% loss. There are many ways and platforms where you can earn dividends on your assets. Make sure to do your own research, especially if you are looking to earn interest on some smaller coins. Trading vs dividends Many people think that they need to do daily or swing trading to get earnings in the crypto markets but, as we’ve discussed, there are other ways of getting passive income. Daily traders try to identify good entry and exit points and execute the trades from a few minutes to a few hours. Swing traders are doing the same thing, but usually, the trades last from a few days up to a few months. Since the frequency of the trades in swing trading is lower they are usually aiming for a bigger return per trade. In today's markets, crypto dividends can be high, and just by holding or staking assets, investors can outperform most traders. Also, volatility is decreasing over time which lowers the potential for traders to identify good entry and exit points and get the same returns as they were able to do in the past. Due to this, most people will fare better by staking and earning passive income than trading. Future of crypto dividends Decentralised finance is still a new and fast-evolving field in the blockchain space. We had many different tries and different approaches to earning interest on your crypto. Many of them failed, many of them are still in the experimental phase and evolving as well. The most recent boom was Olympus DAO and its forks that are giving over 1000x per year if the price remains the same. We are still early and decentralised finance is one of the most bullish segments in the blockchain industry. To find out more about cryptocurrency investment, see our blog Learn More This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
Yield farming, also known as liquidity farming, is a cryptocurrency investment strategy that enables investors to “lend” their crypto to other investors to generate more crypto. In other words, it is a way of earning interest on your cryptocurrency, similar to how interest is paid out on money held in a savings account. As with investing money in a traditional bank, yield farming involves locking up your cryptocurrency for a certain period of time (in a so-called liquidity pool) in order to generate returns (equivalent to the interest rate in traditional banking). In the world of cryptocurrency, the process of investing your cryptocurrency in a liquidity pool is called “staking”. How does yield farming work? The first step in yield farming involves an investor (also known as a liquidity provider) staking some of their existing coins by depositing them into a lending pool or DeFi protocol (DeFi stands for decentralized finance). An example of a protocol of this type is Uniswap - a decentralized finance protocol that is used to exchange cryptocurrencies. From there, other investors can then borrow coins from the pool. Usually, the coins are used for speculation or arbitrage. Speculation means investors try to profit off of short-term changes to the price of a given cryptocurrency. Arbitrage trading is the act of buying a cryptocurrency on one exchange (market) and selling it for a higher price on another. Yield farming is a common way to kickstart a new decentralized blockchain. By distributing tokens with liquidity incentives, liquidity providers are encouraged to “farm” the new token by providing liquidity to the protocol. Benefits of yield farming For speculators, the benefits of yield farming can be considerable, as the process provides easy access to crypto, just like a bank loan provides rapid access to funds. Savvy traders can make returns off of their borrowings that allow them to profit considerably from crypto market swings, with earnings to spare even after borrowing fees have been paid over. For liquidity providers or lenders, the benefits are clear too. Investors who lock up their coins on a yield-farming protocol can earn both interest (passive income) and more cryptocurrency coins — often the real value to the deal. If the price of those additional coins appreciates, the investor's returns rise as well. What coins are involved? Most cryptocurrencies can be used in yield farming. Yet the altcoins deposited are commonly Ethereum-based or stablecoins pegged to the USD – though this isn’t a general requirement. Some of the most common stablecoins used in DeFi yield farming are DAI, USDT, USDC and BUSD. The reason stablecoins are often used in yield farming is that, if farmed intelligently, these coins can become high-yielding currencies that claim to have no risk of depreciating against the U.S. dollar, locking in their real-world value. There are also newer tokens that advanced farmers are looking to in order to profit from new strategies and ways to earn returns. These include YFI (Yearn Finance, an open-source, decentralized finance lending protocol based on the Ethereum blockchain) and SNX, the native token of the Synthetix platform, a permissionless derivatives protocol. With SNX, users can tap into any of the protocol’s incentivized liquidity provisioning programs, giving participants multiple opportunities to earn an attractive yield with exposure to a wide range of different assets. What is total value locked (TVL)? For investors looking to understand more about the overall health of the DeFi yield farming scene, total value locked (TVL) may be a helpful metric. TVL measures how much crypto is locked in DeFi lending and other types of money marketplaces. In essence, TVL measures the overall liquidity in liquidity pools. For this reason, it’s a useful index to measure the health of the DeFi and yield farming markets as a whole. It’s also a good way to compare the market share of different DeFi protocols. By checking TVL metrics, you can get an instant sense of which platforms have the highest amount of Ethereum or other crypto assets locked in DeFi. It’s worth noting that you can measure TVL in ETH, USD, or BTC. Each will give you a different outlook for the state of the DeFi money markets. Our conclusion on Yield Farming Yield farming can be a very effective way of generating more returns from cryptocurrency holdings if done correctly and skillfully. However, most yield farming strategies are extremely complicated so it is advisable to be cautious. To explore further options in cryptocurrency trading and investment, Kinesis offers a wide range of fiat and cryptocurrency pairs available on the Kinesis Exchange.
To understand the importance of currency exchange and the cryptocurrency revolution as it currently stands, we must begin with a deep dive into the origins of currency. What is a Currency? Money has been said to serve three basic functions: a unit of account, a medium of exchange, and a store of value. A currency, more specifically, is money in any form when utilised in circulation, as a medium of exchange. This means that it can be used in financial transactions, including the buying of goods and services. Looking beyond the world currencies we recognise today, notable examples are the metal coins and polymer banknotes that we handle frequently in our everyday transactions - or are hidden, to the best of our knowledge, down the back of the sofa. Before the existence of money, commodities considered to hold intrinsic value were deemed as money. Interestingly, ancient China elected to trade with the cowry shell in the 11th century, whereas the Aztec empire pronounced the copper tajadero (or chopping knife) as their preferred currency. In the modern world, the United Nations (UN) now recognises 180 world currencies as legal tender, which circulate on the foreign exchange market (Forex), leveraging a daily turnover of at least $5 trillion dollars. Consequently, Forex is a major source of revenue and speculation for central banks, institutions and investors, as they seek to observe the projected success or failure of global currencies. By adding cryptocurrency to the mix with El Salvador’s consolidation of Bitcoin as legal tender, it is important to understand the future of currencies, and more so, cryptocurrencies. What are the Major World Currencies? The major world currencies can be defined by the height and frequency of their trading volume. Those with the highest average trade volume are widely accepted as the major world currencies. According to the foreign exchange market (Forex), the US dollar has the highest trading volume of all currencies and is involved in over 80% of all foreign exchange transactions. In 2020, the Euro and Japanese Yen ranked behind the dollar in their foreign transaction volume, contributing to at least 33% (JPY) and 23% (EUR) of Forex transactions. The foreign exchange market indicated the world’s major currencies are the: US dollar (USD)Euro (EUR)British Pound (GBP)Japanese Yen (JPY)Swiss Franc (CHF)Canadian Dollar (CAD)Australian and New Zealand Dollar (AUD), (NZD) What are Major Currency Pairs? While there are at least 8 major currencies in the world, there are only 7 major currency pairings that are traded on the foreign exchange market. This is because a major currency must involve the dollar as the base, or counter currency, in the trade - and of course, the dollar cannot be traded with itself (USD/USD). There is some debate about which pairings should be considered as major currency pairs since the concept can be understood both from an economic (trading volume) and speculative standpoint. As it currently stands, the major pairs are displayed on the table below: What are Minors and Exotics? Minor trading pairs occur when a major currency is traded with another, such as the Swiss Franc and the Euro. Without the appearance of the US dollar, the currency pair in question is defined as a minor currency pair. Popular examples of Forex minor currency pairs are displayed in the table below: An exotic currency pair is a term used to describe the trading of a developing economy’s currency - as either the base/counter currency - with another major currency. Often when trading with exotic currencies, traders must be diligent and experienced in the field and account for destabilising factors that affect currency value. In the case of exotic currencies, these factors can be the political or economic agenda of the country that increase volatility and trigger extreme movements or wild swings within the exotic trading pairs. Why is the US Dollar so important? The prevalence of the US dollar in the foreign exchange market can be attributed to a pivotal point in history: The Bretton Woods Agreement of 1944. The intention was to create an efficient foreign exchange system that would promote economic growth on an international scale, and utilise economic competition to safeguard against the extreme devaluation of currencies. Despite the eventual fall of the Bretton Woods system in 1971, the value of the US dollar continues to prevail. As of the agreement, participating countries concurred that their respective currency would be pegged to the fluctuating value of the dollar. However, at the time of the system, the currency valuation of the US dollar had a basis in allocated gold, due to the abundant stores of the American reserves. Now, this is no longer the case. In 1971, when the US gold supply was considered insufficient to cover the number of dollars in circulation, president Nixon famously devalued the USD when he suspended the ability for citizens to convert their dollars into gold. With gold quite literally out of the trading equation, countries that participated in the agreement suddenly had more autonomy over their currency exchange agreements, making them free-floating. The Future of Currency When considering the volatility of exotic currencies, it is significant to witness nations such as El Salvador shaking up the financial market by making Bitcoin legal tender. As an emerging market economy (EME), reliance on Bitcoin, and further broadening country-wide use of cryptocurrency, has produced a considerable response from Salvadorians. As the first country to utilise virtual currency as legal tender, many have opposed the introduction of Bitcoin due to fears surrounding its instability. This anxiety was coincidentally proven to be true on the first day Bitcoin was introduced as legal tender when the cryptocurrency fell by 20% of its value. It seems that currency, or more widely money, must act as a medium of exchange in addition to a store of value. Currencies exchanged on the Forex market are known as fiat currencies and, even in the case of the US dollar, have depreciated in value over time. El Salvador is just one example of a country adopting alternatives to fiat currency. More widely, emerging economies are desperately seeking new currencies that are not susceptible to the depleting effect of inflation. In light of this, we should question whether Bitcoin and other cryptocurrencies more generally, are the right option for emerging markets? The recent crash seen for Bitcoin in the past week suggests otherwise, with its inherent volatility now taking its toll. Could the implementation of gold as currency once again, perhaps, be the solution for countries looking to elevate the stability and prosperity of their economy? What if this gold was digitalised, made portable through a mobile phone and underpinned by the efficient, peer-to-peer, blockchain technology, much the same as Bitcoin operates on? Kinesis has already rolled out public-private partnership projects in Indonesia, to create a stable foundation for emerging economies, bringing forward a system that enables the spending, trading and storing of gold as currency. By making KAU - Kinesis’ native gold-backed currency - legal tender, could developing nations establish a new monetary path that introduces, anew, the enduring value of gold seen in the Bretton Woods era? It seems that only time will tell. Find out more about the Kinesis offering today Learn More
In recent years, this has been a frequent question for investors. Oftentimes, Bitcoin and gold are pinned against each other, as journalists observe the rally in Bitcoin’s market value, speculating on the future of the two assets. It seems strange to compare gold and Bitcoin when they are in fact two very different financial instruments. As it will be explored further, despite the many similarities that they share, these are far outweighed by their significant differences. On the whole, when observing the potential face-offs between the two in today’s technological environment, the outcome is favourable for precious metals. What is Bitcoin (BTC)? In 2009, Bitcoin was created as an electronic currency which, unlike conventional currencies, came on to the financial market as a decentralised option, eradicating the need for a bank or financial institution to act as an intermediary. Instead, transactions are recorded in a public database, which is then distributed on the Bitcoin blockchain network. The network enables the anonymous, peer-to-peer exchange of virtual coins (or fractions of them), as transactions that cannot be manipulated, duplicated or destroyed. These transactions are broadcast to several computers which act as ‘nodes’ on the global Bitcoin network, to verify the records as accurate. To date, Bitcoin has never been hacked or compromised, because to do so would be extremely difficult, if not impossible. This can be attributed to vast amounts of energy supply needed to power the Bitcoin network, such that one Bitcoin transaction uses nearly the same amount of electricity as a British household in two months. For certain institutions like central banks or governments, the possibility of taking full control of cryptocurrency transfers and transactions is well out of reach. Gold and Bitcoin: What are the differences? Tangibility Gold is a tangible, raw material with even its derivative contracts linked to an underlying value of physical gold that follows the same price valuation trend. Unlike precious metals, virtual or digital currencies have no intrinsic value, rather, they are mechanisms for exchange. For a large proportion of the globe, the value of digital currencies comes from their ability to act as a utility, that can be transferred, transacted and exchanged peer-to-peer. History Gold, as we know it, has been used as a material since antiquity, with its unique properties that have enabled its survival through bloody wars - and even tempestuous market conditions. The other competitor, Bitcoin (and virtual currencies) has been present in human history for just over a decade, leaving much still to be understood about the full extent of their impact on money as we know it today. During this time, Bitcoin has experienced everything from major price growth and subsequent declines, to hacking scandals on compromised crypto wallets. With a backdrop of high volatility and triumphant advertisement from crucial figures like Elon Musk, the future of cryptocurrencies continues to divide and spark opinion. Demand On the whole, the global demand for gold has been relatively stable over time, within even significant variations in the range of 5-10%. Underpinning that stability is the fact that demand comes from different sectors, such as industry and jewellery, in addition to central banks and investors. The relationship between these two sectors is often inversely correlated, such that during an economic crisis, demand from the jewellery and industrial sectors will tend to fall while increasing from the investment sector. In times of economic expansion, the scenario will likely be reversed. The same cannot be said to apply to the cryptocurrency market, which is still in its infancy. Prone to volatility, the value of Bitcoin, as with other cryptocurrencies, moves in extreme cycles that resemble sharp spikes and dips. Market capitalisation Despite its multiple rallies, Bitcoin’s market capitalisation has never come close to that of gold. Speaking of which, it has been estimated by the World Gold Council that gold’s market cap sits at around $10-11 trillion. This figure is around 8 times more than the market capitalisation of Bitcoin and around 5 times more than the entire cryptocurrencies sector. Moreover, even if Bitcoin has a key role to play, the total value of cryptocurrencies is divided between more than 10,000 different e-currencies. This offers a fragmented picture of the cryptocurrency world, making it more difficult to make a comprehensive assessment of the sector. Furthermore, certain cryptocurrencies may cease to exist in the future. It is gold that remains ever-present in the world, even if it is lost, stolen or hard to recover - at the depths of a sunken ship, for example. This too could happen to Bitcoin. At the same time, large quantities of gold are held by individuals as family treasures, with jewels stored privately across the five continents. The World Gold Council has estimated that this gold tucked away amounts to around 90,000 tonnes, effectively reducing its availability on the market by 45%. The similarities between Gold and Bitcoin Finite Supply One possible common feature of gold and Bitcoin though is that supply seems to be finite. The total number of Bitcoins that can be "mined" is equal to 21,000,000 units, which should be mined completely by 2140. About 50% had been mined by 2014, and 75% by 2017. The pace then declined progressively, with energy costs making the activity increasingly uneconomical - regardless of Bitcoin’s market price. Gold’s current global supply is also limited, with known reserves estimated by the World Gold Council at 57,000 tonnes. However, there are two limitations. First, the quantity is finite, secondly, some of that gold is practically impossible to extract, or at least it is not economical to do so at the current market price. For example, consider the gold that is buried under mountains or located underwater in the middle of the oceans. Price Comparison Some similarities have been found analysing the gold rush of 2002-2011 with Bitcoin rallies. From a technical viewpoint, the gold prices jumped from around $250 to a peak of $1,920 in the span of a decade. Bitcoin’s explosion was much quicker and corrections were also much sharper. All this is telling of the crypto market that is just getting started, with significantly higher volatility. In a few words, the possibility of reaching higher returns could be greater. However, as many investors may have already experienced first-hand, the possibility of facing sharp declines or sometimes collapse can be detrimental to a portfolio. Needless to say, Bitcoin is not yet gold and will probably never become like the precious metal. Gold is still widely accepted as the preferred safe haven for investors. Carlo Alberto De Casa is Market Analyst for Kinesis Money. He also writes as a technical analyst for the Italian newspaper La Stampa. Carlo Alberto provides regular commentary for UK outlets including the BBC, Telegraph, the Independent Bloomberg & Reuters. He is also a commentator for CNBC Italy. He worked for Bloomberg as their Equity Research Fundamental Analyst before joining brokerage ActivTrades in 2011 to specialize in currency markets and commodities. In 2014 he published a book on gold and the gold market, followed by a new updated edition in 2018. This report is not an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance.
Cryptocurrencies have been a major disruptor to financial institutions and trading in recent years. Now they’re transforming the way we send money overseas as well. Understanding how cryptocurrency works It’s a question most of us have asked: how can I send cash abroad without being hit by exorbitant fees? But before we look at how to use crypto for international money transfers, it’s worth understanding the fundamentals of cryptocurrencies. Cryptocurrencies are digital assets that can be exchanged for goods and services instead of using a traditional flat currency like the US dollar or the European euro. They’re decentralised, which means they’re not backed by a central authority like a bank or a government. There’s no middleman between you and the person you’re paying, so you have full control over your cryptocurrency wallet. Bitcoin is the most widely known cryptocurrency, but there are over 6,000 cryptos around today and this figure is growing steadily. Other big players in the market include Ethereum, Ripple and Cardano. Blockchain is the technology underpinning cryptocurrency. It’s a shared ledger (known as the ‘blockchain’) that records transactions of digital assets like cryptocurrencies. On the blockchain, all virtual currency is traceable, which means there’s an owner ascribed to every coin. This makes it virtually impossible to ‘cheat the system’, and it’s why cryptocurrency trading can exist without oversight by banks or other authorities. Transferring money internationally using Bitcoin When it comes to transferring money internationally, Bitcoin and other cryptos offer some of the cheapest ways to send cross-border funds. This is because cryptocurrency transfers are decentralised, which means you don’t have to pay the slew of fees charged by middlemen for a traditional wire transfer. Aside from the cost-saving aspect, there are several reasons why cryptos are an attractive option for international money transfers: Speed: Unlike banks, cryptocurrency services generally operate 24/7. In many cases, transactions happen instantly.Freedom: Because cryptos aren’t tied to banks or government institutions, you can send as much money as you want, whenever you want.Flexibility: There are hundreds of ways to transfer cryptocurrencies with different payment options and platforms suited to different destination countries.Transparency: With a traditional international bank transfer, you hand your money to a third party and hope it gets where it needs to go. With a crypto transfer, you can see exactly where your funds are at all times. Traditional versus cryptocurrency money transfers To send money abroad the traditional way, you need to go through a Money Transfer Operator (MTO) like Western Union or arrange a direct transfer from your checking account. Both banks and MTOs usually charge a fee for international money transfers. They also make a profit on the exchange rate they use when converting one currency to another. Not surprisingly, this approach is expensive. In Q1 2021, the global average cost to send money overseas was 6.38%. That’s more than $12 in transfer fees for a payment of just $200! When sending money from the host country to the recipient, the sender can face a transaction fee, a loss of value due to the exchange rate, and a fee relative to the speed of the transfer - taking anywhere from under an hour to more than six days. The majority of people remitting payments to their countries of origin are likely fulfilling families or individuals in developing countries who are considered to be underbanked. What’s more, remittance payments function as an alternative financial solution for, often, the poorest segments of society. With international cryptocurrency transfers, you can send Bitcoins or other digital currencies directly to a recipient’s wallet via a peer-to-peer cryptocurrency exchange. Once it reaches their wallet, the recipient can hold the cryptocurrency or cash it out. Are cryptocurrency money transfers free? In short, it depends. Some exchanges and platforms will allow you to send cryptocurrency from your wallet to another person’s wallet for free. Others charge a minimal fee. In most cases though, using cryptocurrency is one of the cheapest ways to send money abroad because you don’t have to pay the fees and foreign exchange rates associated with MTOs and banks. How to send money from blockchain to a bank account To transfer cryptocurrency to a bank account, you’ll need to convert your virtual currency to fiat currency via the exchange platform you’re using. From there, you can cash out the funds to a bank account. Alternatively, there are a few other ways to ‘cash out’ cryptocurrency: Use a card that supports cryptocurrency payments: These cards can be linked to your crypto wallet and used in the same way as any other debit card. When you use the card, it draws from your crypto wallet, converting it into fiat currency at the card’s exchange rate. Spend it directly: A growing number of companies are accepting cryptocurrencies such as Bitcoin as payment. This means you can shop online and pay directly using your crypto wallet. Use a crypto ATM: In major cities in the United States and other countries, you can buy Bitcoin and other cryptos at physical ATMs. Some of these ATMs will also allow you to convert crypto and withdraw cash in the local currency. Sending money abroad with Kinesis Cryptocurrency provides an easy and cheaper way to send money to friends, family or business associates abroad. But what happens when market fluctuations impact the value of your crypto wallet? One of the biggest arguments against using cryptocurrency in any capacity is its inherent volatility. Kinesis presents an alternative digital currency backed by historically stable, physical assets – gold and silver bullion. Kinesis currencies combine the secure flexibility of cryptocurrency with the appreciating value of precious metals to minimise volatility and bring stability to your portfolio. So, how do you get started? The Kinesis Exchange is an easy-to-use platform where you can buy, sell and manage your digital currency portfolio, as well as fiat currencies. Not only that, Kinesis has introduced the ‘send-to-email' feature that enables users to send digital assets to other account holders and those outside the Kinesis Monetary system with only the recipient’s email address needed as information for the transaction. As a streamlined payment option for all Kinesis users, the ‘send-to-email’ feature can be utilised on both the Kinesis desktop and mobile application. The exciting new functionality allows system participants to transfer digital assets, including Kinesis gold (KAU) and Kinesis silver (KAG), as well as Kinesis Velocity Token (KVT), to friends, family or business associates outside of the Kinesis Monetary System. Open an account with Kinesis Money to start sending, spending, storing and trading digital currencies in one convenient interface.
Find out what Tether's recent audit investigation means for its future and how Tether fares against Kinesis native gold-backed currency: KAU. What is Tether? Tether (USDT) made its stance on the crypto scene when its trading started in 2015. It quickly established itself as a fiat-backed alternative to standard cryptocurrencies like Bitcoin or Litecoin, which experience extreme market volatility. As the name suggests, Tether is a cryptocurrency that is 1:1 allocated - or tethered - to the equivalent amount in traditional fiat currency, specifically the US dollar (USD). Today, it ranks 5th among the leading world cryptocurrencies, according to its coin market capitalization, certainly making it one to watch. How does Tether stay at $1 dollar? Since one Tether coin is pegged 1:1 to the US dollar, it is not surprising that its valuation should rest comfortably at a pricing of $1 for a coin. This single fact can be attributed to Tether’s success, as a cryptocurrency with a proposition to ensure the collateralized, fully allocated value of each coin. Since fiat currency has traditionally operated with fractional reserve banking and is managed by central banking institutions, Tether exists as an alternative that claims to have a pegged, stable value to every single coin. This provides the basis for a more stable option to holding fiat currency in a traditional bank account, where only a proportion of fiat is held in its physical form (cash reserves). A Dip in the Market Despite Tether’s reputation as a stablecoin, its price has dipped below the value of $1 a number of times in recent years. Tether sparked controversy in 2019, causing an alarming debate about the integrity of the cryptocurrency when an investigation into Tether’s trading platform revealed that it was not fully backed by the dollar. In fact, the landmark investigation by New York Attorney General, Letitia James, found that Tether was in fact only 74% backed by the dollar at the time. A few months before in November 2018, Tether Ltd. published an audit report of their cash reserve at Deltec Bank & Trust Ltd. but at least $700 million was removed from Tether’s account the following day. Without user awareness, it was revealed that this sum was moved from Tether’s account to Bitifinex’s - one of their affiliated companies. Trust in Stablecoin Since the scandalous revelations about Tether unfolded, users continued to trade the cryptocurrency, as evidenced by its trade volume which has almost doubled since late 2018. However, when scandals like this one are publicised, general trust for crypto, especially a currency that claimed to be a stablecoin, can be severely dented. After Tether published the report on their dubiously audited cash reserves, Tether denied further commentary on the investigation but conceded to pay an $18 million fine as settlement, promising to provide quarterly audits of their reserves for the next two years. To avoid future penalisation, Tether clarified their claim of being 100% backed, making the following addition on their website: “Every Tether token is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”).” Tether’s reserves, revealed as being diversified across unnamed third parties and affiliates, was a public response from the company that left participants questioning the security of it as a digital asset. One damning report even suggests that Tether’s cash reserves only back the USDT tokens by 2.9% as opposed to the 100% backing initially promised by the company. Clearly, this presents a problem for customers who want to exchange their USDT tokens for physical US dollars, as the company does not provide any guarantee of physical redemption. In contrast, when Kinesis users redeem the value of the Kinesis gold-backed KAU, they receive its equivalent value, since KAU is always backed 1:1 with physical gold bullion. With biannual audits published twice a year, Kinesis seeks to provide a fair and transparent monetary system for all users on the platform. Find our most recent audit here. A Question of Value With fiat, crypto or alternative forms of currencies, it is clear that money cannot just be a medium of exchange but must also function as a store of value.Hence, the instability of Tether as a supposedly stablecoin will continue as long as the dollar is not linked to a stable asset or commodity backing its value, such as precious metals. Market analysts have shown that gold and the dollar oftentimes have an inverse relationship, so while the dollar has depreciated, gold has appreciated in value over time. The dollar has historically depreciated in value, in line with inflation, since its value was separated from gold after the fall of the Bretton Woods Agreement in 1971.However, gold has appreciated in value almost 50 times over since this date, making it the asset of enduring value. By modelling a system on the steady and stable value of gold, Kinesis offers a true alternative to the ills of the byzantine banking system. In comparison to Tether, Kinesis KAU and KAG currencies enable users to generate a recurring passive monthly yield simply for holding the gold and silver in their Kinesis accounts or wallets. In today’s low or even negative-yielding environment, the need for gold-backed stablecoins is clear, in addition to a currency that ensures protection against inflation, which fiat currencies do not. Find out more about the Kinesis Money yield system here.