Is Tether Safe? Will Bitcoin & Ethereum Recover ? (+ ENJ Giveaway pt. 1!)

Alright guys, today we're in the heart of Hong Kong and we're gonna talk to one of the most insightful traders that I know, Charles. And he sees and gets access to a lot of information that we usually don't have. Like a lot of private trades that's going on in Asia and in China. And he's very very knowledgeable and insightful in this space. On a side note, I have no idea why, but everyone lines up for food in Hong Kong. It's ridiculous. Alright guys, remember this is where all the ATMs live here. Get Bitcoin, Ethereum. And before we go any further, you probably noticed this big giant Bitcoin Cash sign. And that's because one of the owners of GenesisBlock, they're really into Bitcoin Cash. But everyone at GenesisBlock, they have their own opinion and I also tease Charles about it too. And this video is also special because I'm doing a QR code giveaway too. So the way it works is that sometime during the video, there will be a QR code popping up. And if you scan it with the engineering wallet, you're going to get a box mining ERC-1155 non-fungible token for absolutely free. There'll be two QR codes in total and each of them will have 100 gifts. That means they're going to go away pretty quickly as well. So you might want to get ready your engineering wallet right now as we speak. And if you guys aren't watching this live and you missed it, there will be an opportunity for a very big giveaway in the next week. So make sure you subscribe to this channel as well. All right, cool everyone. We're here with Charles now. And Charles, you're the head trader of GenesisBlock. You're seeing a lot of crazy volume that's off the exchanges and off the tables. So can you tell me what's kind of happening in April? Yeah. Thanks again for having me. Last time the interview, I thought it went really well. Actually, a lot of your subscribers and viewers reached out to us. Oh really? Yeah. A lot of guys came here saying that they saw the interview and then they found out about GenesisBlock the first time. So I really want to say thanks and thanks for everyone who's watching. Nice. Yeah. April was brutal. Brutal. In terms of like working hours, I think on average, you know, I was going to bed 2 or 3 a.m. every night. Oh shit. And you know, like with the April Fools kind of event, Yeah, market went kind of crazy. Uh huh. Saw FOMO like for, you know, it's been a while since we used that word, right? Yeah, for the first time in crypto. Yeah. So, you know, I think first time in, I guess, almost a year where we're seeing people chase the market. Nice. And it's not just BTC, but we saw a lot of activity in the altcoins and the stablecoin space as well. Oh, right, right, right, right. So, so you see new players coming in and where are they coming from? So they're coming from, are they coming from China? They're coming from Korea? From around Asia? Where's, what location is that coming from? Yeah, I don't know if it's actually new interest, but I think it's revived interest. Right. A lot of the clients that were very, very, I guess, dormant, suddenly they'll reach out again saying, Oh, we'd like to send you money and help us, please help us buy whatever coin. Right. But two very clear factors of kind of over hype is the premiums in specific countries. And obviously we're very strong in China and Korea. The kimchi premium came back almost 3% for quite a while. And the China premium was also very strong, especially for USDT. Yeah. China was like, they wanted a high demand for USDT. What's the reason for China wanting USDT? Yeah. It's the best on-ramp, right? You can buy USDT through Huobi or OKEx, but it's not directly with the exchange. It's actually peer to peer. Right. So there are these merchants that are trading large quantity. And where do they get the flow? I guess, you know, there are global liquidity providers that can inject that. Right. But at the end of the day, if there's a premium in China, it's going somewhere. Right. And it's obviously going into the hands of retail. So it's just the average retail Chinese person. They want to get into crypto, but because the exchanges are banned, they don't have a good on-ramp directly to BDC or to Ethereum. They buy that USDT first and then they kind of eye the market. Like, OK, exactly. When's a good time to enter? And boom, they enter. Right. Right. Now, we obviously would have some craziness of USDT over the past week or so. New York Contenery General saying there's money missing from Bitfinex slash Tether. How has that impacted the market? What's your view on that? Yeah. We saw this before, right? In a different kind of format, but it's the same company as involved. October of last year, USDT fell to like 85 cents. Yeah. And it's, you know, it's all tied together around whether or not this is actually backed. And now it's pretty much a fact that we know in terms of cash, it is probably like, I think the number is around 70% backed. Right. And whereas the rest of it, if you look at, like they updated their TNC, the terms and conditions basically saying that it's backed 100% by cash and other securities or loans. Right. And they changed that because of Bitfinex. Right. Right. So it sounds, it seems, you know, we, everyone knew that Bitfinex was using payment processors, especially after having trouble. I think they were banking at Puerto Rico for a while. Now I think they're, they might be with Dell Tech. But either way, it's like not a stable kind of solution. Yeah. So we had to rely on these third parties to help process the massive amount of volume that they have. We're glad that this is public now. I would say the risk is more on Bitfinex rather than Tether. Right. Bitfinex has to go bust first before we question USDT. I think fundamentally speaking, the correct trade is a short, short term or long term. It has to be a short because if it's at 97 cents and you're wrong, then you only lose 3%, right? Whereas you're betting on that tiny percent, the tiny chance that it's going to go to zero. So, you know, when people ask me what the right trade is, yeah, short is probably correct, but it's just, I just can't see it happening. What's your view? Do you feel like cryptocurrencies right now, we're going to head towards, you know, a brighter future? Like, when do you think that's going to happen? What's your take on that? Yeah. So, last time we talked, I mentioned I'm not too bullish for 2019. Not a lot of new factors to really fundamentally drive Bitcoin or crypto market as a whole. The thing I got wrong, so I was short even before April Fools. And I lost a bunch of money, personal money, not related to our company. Right. But it's a good learning lesson where you realize you have to think about the incentives of the big players. And this is where I want to talk about mining. Bitmain coming out with new models. Right. Summer being an upcycle for mining where electricity costs actually falls. It kind of makes sense for a few wheels come together and just say, hey, we should start to build some momentum. So that when we get this, like when you get these new contracts for electricity running, we want the maximum margin that we can get. Ah, so you think miners are going to play a role in increasing the price of cryptocurrencies in a couple months? Yeah, in a couple months. I think, you know, April, a lot of the April pump could have been driven by that. And if it falls, then they have reason again to try and get some momentum going. Big players are trying to pick up these cheap rigs on the secondary markets. Right. Especially those that were like damaged with the flooding and all of that. Like you can pick that up for pennies on the dollar. And even though they're not, you know, the top, like the newest models, the return is still there. Right, right. So the news that we saw was people buying rigs and also locking in contracts for the summer. Yeah. Interesting. So that's the complete difference from what a lot of mainstream media portrays, which is like, oh, China ban mining for the eighth time now. Oh, yeah. They did recently, right? Yeah, that's the other BS news. But, yeah. So we're seeing the reverse of that. Chinese miners picking up more miners, buying up cheap units, trying to get new electricity contracts for the summer. For cheap electricity to mine back in. Yeah. Last time you were pretty bearish on Ethereum. The last time we spoke, we talked about how the funds were still in a position to dump. Do you see that happening right now? Or what's your prospect on Ethereum? I think there hasn't been enough activity to change that view. And flow wise, we're not seeing much going on. Oh, really? Buyers or sellers, either way, it's just very quiet. Interesting. So I actually have some personal friends who were investing in ICOs back in the day. They still sit on their ETH and they'll ask what they should do with it. It looks like BTC is outperforming by a lot. Yeah. And it definitely did. But I don't know. If it's not a life-changing amount, then you should just wait. Yeah, I mean the sell pressure should be decreasing by now, right? I mean the whole ICO rushes over. But then we saw the rise of the IEO, the initial exchange offering. Yeah. Bunch of coins listed on exchanges. What was your take on that? So IEOs, I mean it's fun, right? It's fun. If you click and you get it, big celebration, you make 4X, and that's great. The problem is like which coins are benefiting. And clearly like exchanges have, you know, starting with BNB, Binance has been very smart to say you can only invest using BNB. And that drives massive demand for the token. Everybody's followed like OKB, HT, KuCoin shares, whatever, right? Yeah. The problem is this kind of hype is like a pump and dump basically. It's not a long-term kind of fundamental trend. And unfortunately, BTC and ETH don't really benefit. I think there's only a couple exchanges that will accept BTC. So thanks for calling it straight, you know? Yeah. Because one of the issues here is just the amount, the insane amount of hype. And people, I feel like going into a certain IEO without even researching, right? They just research, OK, like, alright, when it's going to list, OK, I'm going to gamble on this one. That's kind of the gameplay there. But I think you should keep clicking if it works, right? Like, if you, the only risk you have to be considered, like, you have to watch is, you're exposed to the exchange token itself, right? So if you don't get it and it dumps right after, then that could be pretty ugly. So just bear that in mind. And then if you think it's worth it, then go ahead. Right. Right. You said you talked about these exchange tokens are benefiting a lot of IEOs. Do you see that continue to happen down the road? I think, you know, BNB has rallied for not just IEOs, but because of the launch of Binance Chain and their DEX. Now we're seeing tokens migrate to the Binance Chain. And I think everyone was talking about, oh, this is going to be the new Ethereum killer. Everyone's going to migrate and smart contracts will be all on Binance Chain and so on. It doesn't really work that way, I think. I mean, it might work from a marketing perspective, like Mithril rallied 60% or something on the news. But if you think about it, like why is this even Apple to Apple? Binance Chain has 11 validators all selected by Binance. This is not a decentralized protocol. No, no. And they don't even support smart contracts. They have the BEP2 token standard, but the token standard is super limited in what they do. It's just token. You can't really do anything smart with it technically. Yeah. So I think the DEX is exciting, not because it's decentralized, but because if anyone's going to do it right, it's going to be Binance first because they have the users. Right. And user acquisition is so expensive and so difficult. We still see new exchanges arise today, reaching out saying, how can we get you to trade with us? And we're like, what can you offer me? Right. Right. So you're at a good position there. You're going to choose exchanges. They want new customers. They want your customers. Yeah. They want access to more liquidity and funds. And then you're just basically asking, okay, can you be 10 times better than anyone else? Right. What unique features can you offer? And do you see any exchanges that do that? I'll be really honest. Like in general, especially for very liquid large caps, we rarely touch exchanges. Right. The OTC space has changed a lot in the last six months, I would say, where these liquidity providers have become very, very tight, meaning it's actually cheaper to trade with the OTC than to trade on exchange. Even if you think about fees. So why is that? So, you know, if you guys aren't new to the OTC space, what causes changes? What is the difference between, say, an OTC and an exchange? Yeah. So it's really about competition, right? So back in the day, if you wanted to get a quote on 50 Bitcoin, you would have a spread of just say, just say it was 10 back in the day. Right. And now that flows are a lot, it's a lot quieter in terms of volume, there's a need for these big players to fight for flow. And the best way to do it is to offer cheaper, like better price, better pricing. So that means the price they buy and the price they sell is very, very close. Right. So the margin between the buy and sell and also flows, you're talking about the amount of Bitcoin that can either buy or dump on the market. Right. So right now it's changed substantially. So you, an OTC deals exclusively with a lot of big players, they deal with large numbers and they have better quotes for being able to buy or sell large. I just think in absolute numbers, small or big, exchanges are definitely a big disadvantage. Right. Obviously, like this kind of pricing is not available to everybody. But, you know, from an institution's perspective or, you know, somebody that trades decent volume, this is the environment they're in where, you know, like for exchanges, you have to send coins first. Right. You can't click anything until you have money there. Right. In the OTC space, it's actually not like that, where you can lock prices first and then you settle afterwards. So it's a lot of flexibility, sometimes credit involved. And from our perspective, those are the terms that I'm comparing. I'll go with like other liquidity providers any day rather than exchanges. Right. Okay. Now, a big question is like, okay, so we see a lot of flow that you said that developed over the OTC space over the last six months. So how can we see that flow? I mean, is there any way to see that flow? Because I think a lot of retail, they worry because we see exchange volumes reported on CoinMarketCap every day. But what about the OTC space? We see, we hear the flow from you, but then like, how do we see that? I think there's the big guys like, I think DRW or Genesis Trading, these guys put out quarterly reports. Circle does as well. Right. And I think you have to assume that they're telling the truth when they say, oh, we saw a lot of buyers in April versus, you know, like compared to previous months. This is a good way to gauge what's going on in OTC. But at the end of the day, like they call it dark pools for a reason, right? It's not visible. It's not transparent. It's not visible. And it's, you know, like the reality is it's a disadvantage for the average person. Now we talked about OTC trading. We see that for, you know, what are your biggest coins for OTC trading? Flows, mostly BTC, USDT, some other stable coins like Pax. Yeah, I think people are starting to learn. They understand it's getting more liquid as a pair. So when you look at BTC versus Pax, BTC versus USDC, the volumes are getting decent. So this brings demand for other stable coins rather than just USDT only. How about crypto to crypto stable coins? So we saw the DAI made by MakerDAO. What's your opinion on that? I don't think I've ever traded DAI in my entire life. Yeah. Wow. I mean, obviously it's in the news a lot, especially because it's struggling to maintain one-to-one. A lot of politics there. I mean, the CTO just left. But then obviously with the whole USDT fight, everyone's looking for other alternatives. Yeah. But it's just, I don't know if they have the mechanism right. Right. This whole collateralized ETH to borrow DAI, it's just creating leverage. It just seems like people are using it for the wrong reason. Yeah. Got it. So, okay. So you saw, so BTC USDT stable coins. So do you see other flows in other altcoins or are there? Yeah. So you did a very good video on a TT, Funder. Yeah. And I don't know what drove this, but all of a sudden in around mid April, at least, you know, a dozen, two dozen people reached out saying, can you help us find buyers or sellers? Right. And it was actually pretty sizable. Like, you know, naturally the spreads on these illiquid assets are a lot wider. Right. So it gives us a lot more room to make money. Right. So that was interesting. Something that we haven't done a lot of before. Maybe it's just for our desk, in terms of like the lowest market cap things we trade, probably goes up to LTC, Litecoin. And it's not because we don't want to. It's just that's where the supply and demand sits. The hardest question. Okay. If you have to choose between like five coins to go into the future, what would your personal pick be? Five coins. To model or five picks this one. BTC, BTC, BTC, more BTC, man. It's so hard. It's really hard. Right. Especially in terms of the level of conviction you have between the coins. I don't think I'm bullish on any other coin nearly as much as BTC. It's just, you just feel so comfortable. Why BTC? It's mostly about the fact that it has a 10 year history. And the mechanism is very clear in terms of why it's secure. Right. Right. And of course, the factor that there is no founding team or, you know, leading leader, founder, like, it's by far the most decentralized. And it's just, it's not easy to replicate that. You can copy the code. You can fork it. You can, you know, you can make TPS, higher TPS and like faster block all that. It makes no difference because you're just trading off between something that's very decentralized and bring it closer to a more centralized kind of protocol. So, yeah, nothing, nothing really grabs my attention, especially after seeing the ICO crash, like ICO market crash and all these first layer protocols that are basically gone. It just shows like getting adoption and getting distribution of the token itself. It doesn't happen overnight. And it's, that's really the key difference of how it's distributed. Yeah. Awesome. It's good to know that. Let's keep huddling and we'll be busy next time. And you guys, if you have any questions for Charles as well, what's happening kind of in a darker space, we'll hope to get some questions, leave some comments down below and I'll try to bring Charles next time and we'll answer those as well. Thanks to you guys so much for watching, man. Thanks, Michael. Cheers.