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Gu Yanxi: How long will the current slow development of digital finance in the United States last?



In a previous article, I suggested that the current slow development of digital finance in the United States is giving Switzerland time to develop. Switzerland's digital financial ecological construction is in a very leading position due to its clear development goals, correct implementation strategies and regulatory support. Once Switzerland's digital financial ecosystem is established and can attract financial institutions from other countries to participate, due to the network effect of digital finance, such financial applications cannot be migrated to other financial market infrastructures. So even if the United States can develop later, it will be difficult for it to obtain the business that has already been carried out in the Swiss digital financial ecology on a global scale. Therefore, for the Swiss digital financial ecology, the faster it develops before the United States takes action in this regard, the more business it gets, and it will be able to occupy a more favorable market position in the future global digital financial ecology.

Gu Yanxi: The new U.S. government's financial regulatory stance will recognize Bitcoin more, which is more conducive to the inflow of institutional funds into Bitcoin: On January 25, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published a column saying that in the past In the past two years, users who invest in Bitcoin have begun to develop from retail users to institutional users. But even today, there are very few institutional users involved in buying, selling and holding Bitcoin. Most of the funds in the market are in the hands of institutions. Therefore, in terms of inflowable funds, Gu Yanxi believes that Bitcoin still has a very large room for long-term growth. He also said that at this stage, in the eyes of mainstream financial institutions, Bitcoin is still either a useless speculative tool or a highly speculative asset, so these institutions will not invest their assets in Bitcoin . Gu Yanxi pointed out in the article that speculative forces play a major role in any trading product, and changes in the direction of speculative forces will lead to changes in the direction of prices. For Bitcoin, the proportion of speculative funds is much higher than that of conventional securities. In addition, due to the existence of high leverage in the current Bitcoin derivatives transactions, this will also lead to large fluctuations in the price of Bitcoin. So it is very possible that Bitcoin will be highly volatile in the future. At the end of the article, he stated that the financial regulatory stance of the new U.S. government will recognize Bitcoin more, thus promoting Bitcoin to become a mainstream asset type. Therefore, it will be more conducive to the inflow of institutional funds into Bitcoin. Therefore, Bitcoin still has a lot of room to rise in the future. [2021/1/25 13:24:45]

But will America's current state of slow development last for long? Will it watch development leaders like Switzerland maintain their rapid growth and do nothing? I don't think so. Although the current regulatory restrictions in this area in the United States have not changed, when the relevant regulations change, the development of the digital financial ecology in the US market will be very fast.

Gu Yanxi: The entry of institutional funds pushes up the market value of Bitcoin, and its value consensus is completely different from the value consensus of the Internet era: On December 22, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published a column saying that Bitcoin is now The market capitalization of China has surpassed the market capitalization of JP Morgan Chase, the largest commercial bank in the United States, and has also surpassed the market capitalization of Visa, a network that provides global credit card clearing services. This shows that the market has formed a consensus on the value of Bitcoin on a global scale. If only ordinary retail investors around the world form a consensus on the value of Bitcoin, it will be difficult to push the market value of Bitcoin to the current height. The reason why Bitcoin has reached its current market value is because institutional funds have begun to enter Bitcoin. He said in the article that a common view still exists in the market is that the value of Bitcoin is the result of market speculation, and the value caused by such speculation will not last. This view often compares Bitcoin's value to similar bubbles in history, such as the most recent dot-com bubble. However, the current value consensus of Bitcoin is fundamentally different from the value consensus of the Internet era. The value of Bitcoin is not at all dependent on underlying ownership or expected returns. The characteristic of Bitcoin value is that it is its value itself. The size of this value is completely judged by the market, and it is completely people's subjective judgment. Gu Yanxi finally pointed out that the market is not very optimistic about the current currency circulation mechanism, so it is possible to use Bitcoin as a value storage and transfer tool, which leads to the continuous rise of Bitcoin prices. [2020/12/22 16:03:48]

First of all, in terms of the infrastructure construction of the digital financial ecology, the development of the United States in this area is actually the world's leading. In terms of the current underlying framework of the underlying distributed accounting technology that is more suitable for the future digital financial ecology, the main influential frameworks are produced in the United States, such as IBM's HyperLedger Fabric, JP Morgan's Quorum, R3's Corda and Libra's blockchain. In the financial field, R3's Corda has been adopted by many financial institutions around the world. And some of these applications have already begun to be actually used in the production environment of the financial market. Therefore, in terms of the underlying technology of digital finance, the US market is not far behind in this regard.

Gu Yanxi: The new high of Bitcoin has become the tipping point for the development of encrypted digital finance, and this growth is more stable: On December 17, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published a column saying that the price of Bitcoin reached 2 million U.S. dollars, making it a record high since its launch in January 2009. This record high of Bitcoin is not only a record high in the trading price of an encrypted digital asset, but also indicates that the development of encrypted digital finance has reached the tipping point. Encrypted digital finance will develop in an accelerated manner and will bring fundamental changes to the existing financial market. He pointed out that the most direct factor leading to new highs in Bitcoin prices is the supply and demand relationship of Bitcoin transactions. Subordinate factors are factors directly related to Bitcoin transactions. In addition, the increase in bitcoin holdings by various mainstream financial institutions is also a further recognition of bitcoin. All of the above factors have made the market expect that a large amount of funds will flow into the Bitcoin trading market, thus pushing Bitcoin to a record high. Gu Yanxi said that the rapid growth of bitcoin prices this time is fundamentally different from the growth in 2017. Factors leading to this growth include a more friendly regulatory environment, a more solid market infrastructure and the entry of institutional investors, while the growth in 2017 was mainly the result of speculation in the market by retail users. So this time the growth has a more solid foundation. Although the price trend of Bitcoin will still fluctuate greatly in the future, its growth trend is certain. [2020/12/17 15:29:51]

In terms of market enthusiasm, the US market can be said to be at a very leading stage from the very beginning. Although the difficulty of exploration in this area far exceeds the expectations of early entrepreneurs, the actual application development is also relatively slow. But the exploration of this aspect of the market has been going on. On the premise that it does not involve the need to change the current regulatory laws, application exploration in this area has been in progress. Therefore, in terms of the practical application of digital finance, the development of the US market is not far behind.

Gu Yanxi: Digital asset transactions on the future blockchain should be free: On July 24, Gu Yanxi, a researcher of blockchain and encrypted digital assets, published an article "Digital asset transactions on the future blockchain should be free The" stated that based on the development of the Internet era, the current development of the securities industry, and the benefits that can be generated from the application of blockchain technology, future digital asset transactions should be free. He said that first of all, future digital asset exchanges must be based on distributed ledger technology. Distributed ledger technology will fundamentally change the securities industry. When blockchain technology and digital currency are used in securities transactions, transactions will be settled. Therefore, there is no need for clearing and settlement companies and registration companies in the current securities market, and the overall cost of securities transactions will therefore be greatly reduced. Trading commissions are therefore bound to drop significantly. Secondly, in the future securities market, DeFi applications will further reduce the cost of the securities market. Finally, since blockchain technology directly supports peer-to-peer transactions, many digital asset transactions in the future can actually be completed directly between the generator of the asset and the buyer of the asset. There is no need for a brokerage as a financial intermediary, and the cost of asset transactions will be further reduced. [2020/7/24]

Even at the regulatory level, the progress of regulators in different fields has been inconsistent. The CFTC, which oversees commodity derivatives, is the most aggressive of any U.S. financial regulator. It issued a trading license and clearing license for encrypted digital currency derivatives in July 2017. Therefore, compliant encrypted digital currency derivatives transactions in the US market have been developing. The OCC, which currently oversees the U.S. banking system, has also begun to adopt a more aggressively supportive stance. Recently, it not only allows U.S. commercial banks to start hosting encrypted digital currencies, but also solicits opinions from the industry on how to improve the application of encrypted digital currencies in the banking industry. The SEC, which oversees the securities industry, is the most conservative regulator. But it has also been closely watching the development of the digital asset industry, so it can carry out timely law enforcement.

The most fundamental factor affecting the development of digital finance in the United States is the legislation of the US Congress. Even before the final legislation, if the U.S. regulation allows the market to carry out innovative experiments within a certain range, then in the U.S. market, based on the current developments related to blockchain technology and the business capabilities and resources of the U.S. financial industry, it is in this regard. The speed of development will be very fast. This is because the financial industry has reached a consensus on the application and development trend of blockchain and encrypted digital assets in the financial industry. There is also a more or less correct judgment on the future development direction of the digital financial world. It's just because of the existing regulation, the strategies adopted by the existing players are different. Some of the current strategies of these financial institutions are long-term, and some can achieve short-term business income, but lack the foundation for long-term development. But generally speaking, the U.S. market can quickly develop capabilities that are stronger than those of the Swiss digital financial ecosystem.

Among the various factors affecting the development of digital finance in the US market, the most important is its market mechanism and its established position in the financial industry so far. In the application methodology in my blockchain application lecture, I proposed that 95% of the factors that determine the success of blockchain application projects are factors other than blockchain technology. In the process of digital financial ecological construction, this principle is also applicable. In the construction of digital financial ecology in the United States, in fact, it is also in the process of digital financial ecological construction in various places. The market position of existing financial services is a major decisive factor in determining the future development of digital financial ecology. This is because the network effect in the digital financial ecology is very strong. The number of current financial business partners directly determines whether the digital financial network ecology can be established. Therefore, the strong ecology of financial business in the current market makes it easier to build a new ecology based on the new financial market infrastructure.

In short, although the current development of the digital financial industry in the United States is relatively slow, and countries like Switzerland are relatively leading, the US financial market has a very strong vitality and foundation. Therefore, after the corresponding regulatory adjustments, the development of digital finance in the US market will be very fast. It's like a basketball game. Although the strong team may fall behind in the first three quarters, it can still win the game because it can exert force in the fourth quarter.


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