Blog : crypto currency

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Here’s Why Crypto Mortgages Are The Next Big Disruptor

Crypto mortgages are bringing in a new wave of onlookers, wondering if this is the next avenue to securing a home? Well it makes sense, but we’ll see if there’s a catch to it. Say you’ve got $300,000 in crypto currency, this can be leveraged against a mortgage company’s $300,000 cash for a home with no taxes paid because you never cashed out of crypto!

Why crypto mortgages do make sense

When you cash out of crypto you pay huge amounts of taxes, short-term investments get hit harder than long-term investments. The trick here is that the bank will hold your crypto equity as collateral, so it’s like you never cashed out and those taxes are out of the equation of your new home. This is especially helpful for those who are self-employed or a regular trader since qualifying isn’t easy traditionally.

The end all is crypto mortgages allow you to pay off your house without meandering through the traditional process, with large dollar signs sitting in your crypto wallets it makes perfect sense to skip all of that lousy traditional process!

Why crypto mortgages are insane 

Okay really, what’s the risk?

Okay, so the thing is, like everything in the crypto world, crypto mortgages are an amazing idea that can go south for you very quickly.

Let’s say that your $300,000 in crypto tanks and now it’s worth $100,000. Your bank will perform a mortgage call and you’ll either need to put up more equity, refinance your home, or otherwise come up and with the cash. 

And let’s be honest, crypto is very volatile. So, the odds are that this could happen.

It’s a gamble. If everything works perfectly, you disrupt the mortgage industry and get an amazing house without paying taxes. If everything goes poorly, you’ll be back on your Robinhood app trading penny stocks in no time at all.

As you should know, the crypto world is very volatile and can make your life either Heaven or Hell depending on the market. How you could end up losing out on big dollars is, say that $300,000 in your wallet tanks down to $100,000 your bank will either require you to refinance your home, put more equity, or otherwise come up with the cash. The odds of this happening are probable as the market fluctuates consistently, so the gamble is up to you. The pros are getting to disrupt the mortgage industry by securing an amazing home without paying taxes, versus the cons of a major setback in your crypto wallet and the bank leveraging you (they know you’re likely to pay considerable fee and high interest to avoid hefty taxes).

What crypto mortgages mean for tech disrupters 

The larger picture is mortgage is a highly regulated and controlled industry. You’re not going to be getting FNMA mortgages, however the fact that you can get a subprime mortgage with crypto makes crypto continue to take over the conventional mainstream spheres.

So, what industry will be next? Travel and hospitality? Restaurants? Manufacturing? As cryptocurrency continues to tumbleweed in support and reach, it can also spread into any of these other sectors and more. Just as Blockchain technology is changing everything from the Metaverse to legal contracts, crypto can be slotted into any type of equity or asset-based transaction. 

Years ago, crypto fans on Reddit rejoiced when they could suddenly order a pizza through BTC. Being able to buy cars, houses, or even just groceries with crypto doesn’t put crypto closer to adoption, it opens new opportunities more widespread than the eye can meet. It’s not just about building some crypto mobile app anymore. Now it’s about what traditional industry you want to disrupt.

Crypto Billionaire Takes Stake in Robinhood
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Crypto Billionaire Takes Stake in Robinhood

Robinhood’s had a pretty bad year, hasn’t it? 
When the Robinhood app launched, it was poised to vastly disrupt the industry of at-home investing. The mobile app made it easy for people to invest from their phones. It gave voice to the often ignored retail investor.
But the Robinhood app eventually betrayed retail investors during the entire GameStop/AMC debacle, ultimately ending up on the wrong side of Reddit. This year has seen Robinhood’s stock regularly tanking… until now.


Robinhood App Surges in Stock Market


While everyone else was going down, Robinhood was going up. Robinhood lost 40% of its value this year, but regained 25% when crypto-billionaire Sam Bankman-Fried took a 7.6% stake in it. Does that mean anything?
Well, maybe.


Sam Bankman-Fried runs FTX, a popular cryptocurrency exchange that has made cryptocurrency far more accessible. The jump in Robinhood’s pricing could indicate a couple of things. First, maybe crypto bros just want to invest in an investor. Maybe they see advantages in crypto expertise.

Second, it could just be the meme. It’s very possible that people simply reinvested in Robinhood because they see “crypto” and they think “good bet.” Really, anything works; people want to believe in the Robinhood mobile app because they want investing to be easy and accessible. Perhaps that’s why it hurt so much that they were betrayed.


The Future of Robinhood


The reality of investing is that it’s designed to protect large fortunes. When you have a David-vs-Goliath situation, David will generally lose out. The skepticism surrounding Robinhood is that Robinhood may very well be ordering trades or making trades in ways that injure smaller investors.


Robinhood has been notorious for pausing trading during times of high volatility. When GME was soaring, they took away the purchase button. Now, that’s not entirely unheard of. The stock market itself stops working whenever there’s a crash.

The problem is that these times of high volatility are generally when a retail trader makes their money. A rich person can put $1,000,000 in a bank account and get thousands back. But if a retail trader is only working with a few thousand to start with, they need to engage in riskier bets.


So, there are a lot of people still using Robinhood. But there are also a lot of people disenchanted with the process. The entire stock market is rigged around not transferring too much wealth in one direction at a time because when that happens, well, the markets crash.


Could a Crypto Billionaire Help?


Well, maybe. A crypto billionaire is certainly more likely to have their finger on the pulse and know what people want. At the same time, we don’t really know what his plans are for influencing the company, even if there are any. The stated reason that he invested was that he saw Robinhood as a good investment. At 40% down from its prior valuation, it very well could have been. A 7.6% stake, even in a company as large as Robinhood, isn’t that much.


But perhaps the news of the stock jump matters. It certainly seems that investors are eager to believe in Robinhood. Robinhood does fulfill a vital position within the investing ecosystem. And if someone were to create an all-encompassing app that was more trustworthy than Robinhood, they would probably be able to capture a significant portion of the market.


Pigs Get Fat, Hogs Get Slaughtered


One thing to remember in all this: It’s not hard to make money in a bull market. The stock market was racing to unseen highs for over ten years. Investors made money hand over fist, not because they were great investors, but simply because they existed.


A lot of retail investors made fortunes. A lot of them lost fortunes. But a disproportionate amount made money just because they weren’t screwing up badly enough to compensate for the sheer market inflation.


Now that we’re in a bear market, we’re going to see a lot more losses. We’re going to see “great investors” lose their shirts. And we’re going to see our day-trading uncles suddenly wonder why it’s “so hard.” How that impacts Robinhood remains to be seen.

What? Coinbase went public yesterday almost valuing the app at $100 Billion! Is it time for Crypto Currencies like Bitcoin to disrupt the world currency standard?
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What? Coinbase went public yesterday almost valuing the app at $100 Billion! Is it time for Crypto Currencies like Bitcoin to disrupt the world currency standard?

In 2010, a single Bitcoin was worth about 8 cents.

Today, it’s nearly $62,000. Yesterday the mobile app known for buying crypto called Coinbase went public reaching almost one hundred billion dollar in valuation. 

Despite its detractors, Bitcoin keeps going up and up. An inherently deflationary currency — a currency that is finite — it is built to grow in value. The same can be said about a multitude of other cryptocurrencies such as Ethereum, Litecoin, and even Dogecoin.

Cryptocurrencies were once treated as a joke. But they’re being taken seriously now. The question remains: How seriously should they be taken?

The State of the Crypto Market as of 2021

Cryptocurrency has gone from being denied on major payment processors (Visa, MasterCard, American Express) to showing up in ATMs. The cryptomarkets now support most major cryptocurrencies, with fringe candidates (such as Dogecoin) being slowly introduced. Market caps are growing. The market cap of Bitcoin stands at $1 trillion.

More companies are supporting cryptocurrency. Recently, Elon Musk stated that people could purchase a Tesla car in Bitcoin. It’s understandable. Cryptocurrency isn’t just a currency, it’s an investment. Companies make more by accepting Bitcoin and then holding it. And that is the double-edged sword.

Right now, cryptocurrency is still a relatively new technology. Ask the average person how the blockchain works, they won’t know. They don’t understand how the treasury works, either, however; they just have faith that it does. Consequently, the barrier isn’t really “understanding” the new technology. Right now, the barrier is usability.

How does someone purchase a Bitcoin? How do they invest in Ethereum? How can they turn a Bitcoin into a cheeseburger — or Ethereum into the down payment of a house? It’s these questions that need to be answered by the crypto market moving forward.

How Crypto Currency is Already Disrupting the World

As with any currency, crypto has some good aspects and bad aspects.

First, let’s tackle the bad. Untraceable currency has led to the proliferation of scams (such as malware and ransomware attacks) and a huge underground drug purchasing community (the dark net). Because it’s both currency and investment, it’s volatile. Most people don’t want to wonder if a cheeseburger is worth $10 or $1600 every morning; Bitcoin’s swings are no longer that volatile, but they used to be. While $1 trillion is a large market cap, it’s nothing compared to say USD ($30 trillion). It’s easily influenced. A single tweet from Elon Musk can send it doubling its price.

But, there’s the good. Volatility means a lot of money can be made. And the untrace-ability of Bitcoin is it working as intended; the idea is that Bitcoin being untraceable essentially means that anyone can use it for anything, true economic freedom. Even those who are in areas where they have an autocratic or dangerous government can purchase things that are important but “contraband.”  Ideally, globalizing currency will make it easier to trade and will make it less likely any one country, such as the US or China, can control trade.

Crypto currency has already significantly disrupted many markets. And it will continue to do so.

The More Things Change, the More Stay the Same – It Won’t Replace Fiat Currency

Most analytics believe that crypto will definitely disrupt currency, but it’s probably not going to replace it. “Bitcoin is way too volatile to be used as money. Imagine if you had taken out a mortgage worth $250,000 in Bitcoin last March; you’d owe the bank $2 million today.”, says Andrei Jikh.

“Personally I think we will see a wave of adaptation and adoption of this across the board until we reach a point, of it being widely accepted,” says Eric Spivak. It’s likely that crypto is going to become another payment method, alongside the currency of whatever country a person is in. But even as we move away from “cash” standards, crypto is not likely to get complete adoption.

There are some technical issues that need to be surmounted. People can “lose” their Bitcoin forever; there’s no “Bitcoin” bank that can guarantee them their currency. Because Bitcoin is untraceable, theft cannot be tracked or reversed. And because cryptocurrencies are deflationary, they are inherently volatile. No one will hold onto a dollar bill thinking it will be worth more in the future. But people will hold onto Bitcoin, which means they are extremely hesitant to liquidate and actually use their Bitcoin or Ethereum — thereby reducing usage and exposure.

Once Bitcoin starts to even out and adoption becomes more universal, the desire to keep hoards of wealth will change. But there will still be concerns relative to the technology itself that need to be addressed.

The Next Evolution of Crypto: Where Does It Go From Here?

Fern Murias points out, “Crypto has a long way to go in terms of usability, and in order to expedite widespread adoption, I think it is crucial to build a bridge to legacy payment systems.” Adding Bitcoin to ATMs, Cash App, and other payment apps is one step. But Bitcoin still has to be easier to use.

When people get used to using things such as Apple Pay (tapping their phones rather than using a credit card or cash), then Bitcoin can become virtually indistinguishable from paying with US dollars. There will still be issues of volatility, but people will find themselves using Bitcoin seamlessly; that’s when adoption will increase.

Cryptocurrencies aren’t necessarily required to disrupt the world currency standard. They can simply provide an alternative currency standard. When alternative currency standards are introduced into the mix, it becomes vastly less likely that global powers can influence the world markets — and more likely that people themselves can be in control of a decentralized currency network.

And whether cryptocurrencies remain a niche investment or become a powerful financial instrument, they aren’t going away. At Colure, the success of our agency is built upon the success of our clients. Contact Colure’s Mobile App Development team today to build your blockchain app. Let’s grow!