Billionaire Michael Novogratz: Web 3.0, Not Bitcoin, Will Change the World

Michael Novogratz, the founder and CEO of Galaxy Digital, a full-service crypto merchant bank, has argued that Bitcoin (BTC) cannot change the world as it is just a currency, which only serves as a medium-of-exchange (MoE) and store-of-value (SoV).

Novogratz, whose comments during the ConsenSys’ Ethereal Summit on May 11, 2019, pointed out that Bitcoin has “established itself as a SoV” and that it is “kind of finished” in terms of having more use cases.

Bitcoin And Gold Are Social Constructs

The former partner at Goldman Sachs compared the pseudonymous cryptocurrency to other asset classes, including the gold bullion. According to Novogratz, both Bitcoin and gold can be considered social constructs.

Although the Princeton University graduate considers BTC to be “digital gold,” he believes that it’s limited to being used as means to exchange value. Because of this, Novogratz thinks the world’s most dominant cryptocurrency is “not going to change the world.”

Web 3.0, Not Bitcoin, Will Change The World

Web 3.0, an evolving set of protocols and standards for the new and more technologically advanced world wide web, does have the potential to transform how business is conducted and it may also drastically improve how people interact. This, according to Novogratz, who also noted that Web 3.0 is “a decentralized platform [for] processing information.”

He added that Web 3.0 protocols would be able to separate data storage and retrieval from information processing and that public blockchains such as Ethereum may play an important role in the future economy. However, Novogratz mentioned that there are a lot of other smart contract platforms that are providing solutions which are similar to what Ethereum offers.

Altcoins Need To “Prove Themselves”

Comparing the thousands of digital assets to the periodic table of elements (in Chemistry), Novogratz argued that altcoins have not yet established their market value as they still need to “prove themselves.”

The crypto entrepreneur also stated that “there’s no one building anything on the Litecoin blockchain”, however there are many different applications being built on the Ethereum (ETH) network.

Bitcoin To Return To Its $20,000 All-Time High

During the SALT Conference held in Las Vegas, Nevada, on May 9th, 2019, Novogratz said that the bitcoin price would most likely return to its previous all-time high of nearly $20,000. However, the billionaire investor cautioned that more damaging events such as the large-scale security breach suffered recently by crypto exchange Binance, could potentially cause the bitcoin price to plummet.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

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