“Bitcoin could jump to $ 40,000, but fall at the same rate”

The phenomenal leap of Bitcoin is causing great excitement in the world, and not only among crypto coin holders. On Thursday morning, the price of Bitcoin reached more than $ 23,000 – its highest level ever, after a jump of more than 200% since the beginning of the year. This, after the day before the leading crypto currency crossed the $ 20,000 threshold for the first time since December 2017, thus breaking the all-time record it held for 3 years.

Despite the excitement, experts in the crypto market understand that the price of bitcoin, and the crypto market in general, should be treated with due care. One of the senior experts in the field in Israel is Prof. Yevgeny Leanders, who about two months ago took up his new position as head of the Celebrating Institute for Blockchain Research in the Faculty of Management of Tel Aviv University.

In his first interview with the Israeli media, Prof. Landers tells Globes: “Bitcoin is not based on anything but people’s trust and their expectation of its price in the future. Therefore, it is impossible to truly estimate its real price. As the price of Bitcoin can skyrocket to $ 40,000, It could plummet to $ 10,000 or less at the same rate. We’ve already seen this kind of drop in the past March.

After years of academic career as a professor of finance in the United States, where he taught at Boston University and Rice University (Houston, Texas), this year Prof. Landers returned to Israel with his family, and about two months ago took up his new position as head of the Blockchain Institute at Tel Aviv University. Leanders and Prof. Dan Amiram, Deputy Dean of the Faculty of Management. The director of the Celebrating Institute is Dr. Ari Ahiez.

Leanders’ main areas of research are the interaction between financial and operational decisions of companies, the effects of competition in the product market on financial decisions such as capital structure, issues, acquisitions and mergers. Recently his research has focused mainly on applications of blockchain technology in finance.

How reliable is the information currently published by the world’s crypto exchanges?

“There are studies around the world that show that between 30% and 70% of trading on crypto exchanges is counterfeit,” says Prof. Landers. “Because there is not too much regulation on these exchanges, counterfeiting trading volumes is done relatively easily: one way is to create different cryptocurrencies through which the exchange transfers cryptocurrencies so that it does not affect the price of the currency but certainly increases trading cycles. Another, more sophisticated way. Is that exchanges offer incentives to investors to increase the volume of trading they perform.Because sites like CoinMarketCap and other aggregators rank the crypto exchanges according to their trading volumes, the exchanges have an interest in displaying as large turnovers as possible.

“In a study we conducted at Tel Aviv University (Prof. Landers together with Prof. Dan Amiram and Daniel Rabati), we examined the issue of counterfeit trading on crypto exchanges around the world. Between certain currency pairs.

“One of the interesting findings of our study is that stocks that are in tougher competition tend to generate more counterfeit trading than stock exchanges that do not have strong competition. In addition, we have seen dynamic effects of trading data falsification on competing stock exchanges. Forge less trading data than unsupervised exchanges.We found the most counterfeit trading in the Bitcoin and Tether currency pairs (‘stable’ currency denominated in dollars; RK), which are the most traded currencies on the exchanges.

“Another thing we found is that investors in crypto exchanges usually do not recognize in the short term the falsification of trading data on the exchanges – which works for the benefit of the exchanges and to the detriment of investors. However, in the longer term, half a year or a year, And this can be seen in these ranges in the decrease in trading fees on the same stock exchanges. “

What do the studies on the safekeeping and security of cryptocurrencies in hardware or software wallets teach?

“It is very difficult to collect data and conduct empirical research on cryptocurrencies that have disappeared or been stolen from various wallets. Personally, as someone who is not a technology expert in the field, I would prefer to keep the cryptocurrencies in a ‘cold’ wallet (paper wallet or non-networked hardware wallet; , And not in ‘hot’ wallets (which are connected to the network). You have to be knowledgeable in the field to understand which companies that provide digital wallets are more or less reliable. “

Is the situation in the crypto market today similar to what it was in the hype period of 2017?

“In terms of counterfeiting trading volumes on cryptocurrencies, there is currently more competition between exchanges and therefore there is also more counterfeiting trading than in 2018-2017. In terms of market size, it has not grown significantly since those years. The total value of the cryptocurrency market is currently about 650 billion Dollars, about the same as at the end of 2017. Although market regulation has evolved and this may inspire more confidence on the part of investors, it is not reflected in the volume of cryptocurrencies or capital raising in the market. Therefore, in my opinion, the market has not matured significantly this year, though That he has definitely recovered from the downturn, ‘Crypto Winter’, which was in late 2018 and early 2019. “

How can the use of blockchain technology or digital currencies help the world?

“A lot of people think that Bitcoin and blockchain are the same thing, but they are not. Bitcoin is just one application of Bitcoin, and not necessarily the most successful, in my opinion. Blockchain is a distributed system of information registration – and because of its decentralization it can be built to be More reliable than an information system that belongs to only one person or one body. For a blockchain system to be reliable, its users need to have the incentives to do the right thing – that is, to provide real information. “In a democratic election that will prevent vote-rigging. There is potential for that, in my opinion, but there are also quite a few obstacles along the way: it is a complex, expensive technology, and the incentive for users to provide real information involves considerable investment.”

“In the current period, when there are difficulties in trade between countries due to the limitations of the corona, there are quite a few problems of trust between parties and international trade – and a blockchain can help, for example, in supply chain management. For example, if an Israeli company imports products from China, the products move There are a lot of intersections along the way – and it is worthwhile to be able to verify the integrity and originality of the goods at each intersection along the way, until it reaches its destination. “

How is Bitcoin different from digital currencies like Diam (formerly Libra) which is developing a group of companies led by Facebook, or the digital yuan recently launched by the Chinese central bank?

“Currencies like Diam (formerly Libra) or the digital yuan, and even Tether, which is a dollar-linked stablecoin, are currencies that are backed up in some way by the company or country that issues them. Secure the value of the currency, however, Bitcoin, Ether (the currency of the blockchain platform Etherium; RK) or many other cryptocurrencies – their value depends solely on the degree of public confidence in the currency, and no asset will guarantee That value. That’s the main difference, in my opinion.

“Beyond that, there is a significant difference between the currencies you mentioned and all those tokens issued mainly in the years 2018-2017 in so-called ICOs (initial issues of digital currency; RK). These tokens are much closer in meaning to stocks because they actually confer a right to use any product or service of the company that issued them. It is much easier to estimate the value of such currencies, compared to currencies like Bitcoin or Ether. In contrast, a digital yuan has no definite value, whereas in the case of Bitcoin, no one guarantees the value you will receive for it in fiat currencies (sovereign currencies such as dollars, shekels, etc .; RK) “.

Is the issuance of Security Tokens – digital currencies that are considered securities, as the Israeli blockchain company INX is currently issuing in the USA – do you think is a good way to raise capital?

“Issuing Script Tokens (STOs) can be a good way to raise capital, because it is done under regulation, unlike ICO issues made in the past, and therefore it should gain more public trust. For investors in such issues. An STO issuance is not suitable for every company, but it can suit certain companies. With Security Token the issuing company can offer investors a share of the proceeds, as opposed to a share of the profits offered to shareholders. In principle, I think the concept of issuing tokens for raising capital will work in the coming years as well. “