The participants in the men’s pair rowing event at the 2008 Summer Olympics and now Bitcoin billionaires Cameron and Tyler Winklevoss have recently begun to show media activity. What is hiding behind this, what do these “whales” intend to achieve for the cryptocurrency industry, and where can their strategy lead the crypto market?
Mysterious Winklevoss Advertising Campaign
2019 in New York began with the residents witnessing a new advertising campaign, which was organized by Gemini Trust Co. (Gemini)—the Winklevoss’ crypto exchange. On ads that were placed in the subway, on billboards, at public transport stops, and also on taxi tops, one could read that Gemini is not just a “cryptocurrency exchange,” but a “regulated” one, a fact which was specifically emphasized. Campaign slogans were diverse, ranging from “Money Has a Future” to “Crypto Without Chaos.” In addition, a whole page was purchased for advertising in the business newspaper The New York Times.
Some analysts thought that Gemini was trying to provide exposure to its mobile application, which was presented on December 11, 2018. But the slogans of the campaign in New York said nothing about the app, although there were references to how to download it. So who was this campaign targeted at?
Gold Will Disappear, Fiat Will Remain…
On January 7, the Winklevosses answered this and many other questions during the AMA (Ask Me Anything) session with users of the Reddit social network, thus clarifying their position. They are confident that in the long run, Bitcoin will become a better store of value than gold, and its price will exceed $320,000, together with its total capitalization surpassing the $7 trillion mark—the one at which the current market cap of gold stands. Their words traced the idea that they see Bitcoin as a store of value, and not a medium of exchange—which goes against Satoshi Nakamoto’s initial vision of Bitcoin replacing fiat. Moreover, the brothers decided to “ignore” the fact that second-layer solutions to the Bitcoin blockchain such as Lightning Network and SegWit have begun to efficiently resolve the slow confirmation time issue.
At the same time, Gemini head of communications Carolyn Vadino emphasized that “mass adoption isn’t too far away,” and, according to her, the only thing that is a real obstacle to that is the lack of knowledge of how to invest in cryptocurrencies. While collecting responses to the advertising campaign, Vadino spoke with New Yorkers on the streets and came to the conclusion that many of them do not have sufficient knowledge about how to buy Bitcoin and other crypto coins.
Are Stablecoins the Best Cryptocurrencies?
The twins do not intend to farewell the U.S. dollar and other fiat currencies. They are convinced that in the future, fiat will remain; more than that, it will become the basis for an increasing number of stablecoins. In particular, they mentioned Gemini’s native stablecoin, the GUSD, which was launched on September 10 of last year after having received permission from the New York Department of Financial Services (NYDFS). The fact that stablecoins can bring not only benefits to the crypto market by attracting fiat to digital assets but also risks was investigated earlier. According to the Winklevosses, gold should fade in the future, and its total value will be “absorbed” by Bitcoin, but fiat will be unshakable. Although, if we compare it, it is gold that is a more stable asset than the U.S. dollar, and this metal is actually starting to lose to “digital gold” in characteristics. If we talk about the types of cryptocurrencies, then the Winklevosses make it clear that if we leave aside the issue with Bitcoin, they see great prospects, above all, for stablecoins.
There Is a License, but There Are Almost No Investors?
The brothers are convinced that the cryptocurrency industry needs “supervision and regulation,” and see no reason to believe that there can be “too many” rules. On October 5, 2015, Gemini received the BitLicense, that is, a permit to conduct cryptocurrency trading in the state of New York. It would seem that there it was, a direct way to reduce people’s lack of education about cryptocurrencies and increase the turnover of digital assets. But the crypto exchange has focused on working with companies that are professional players in the financial market, and as a result, the success is very modest. Three years and four months later, Gemini has a daily trading volume of $12.4 million, ranking 77th according to CoinMarketCap. Gemini is inferior in volume to the absolute majority of leading players, both in the form of centralized crypto exchanges and decentralized platforms.
Friendship with NASDAQ and Patent Registration, but Where Are the Results?
Here’s the question: Why does Gemini take all those bold steps? In April 2018, under an agreement with the traditional stock exchange NASDAQ, the exchange received all of the modern market evaluation tools on Wall Street. In early July of last year, Gemini recruited the New York Stock Exchange Chief Information Officer Robert Cornish. The Winklevoss brothers have been actively obtaining exclusive rights to various aspects of cryptocurrency activity for their business—11 at the time of this writing. It is obvious that patents may restrict the right of other financial market participants to use modern technologies. It would be understandable if the Winklevosses utilized them in their work, but at such low volumes on their platform, it looks too unreal.
The Winklevosses Are Ready to Apply for Bitcoin ETF Endlessly
The crypto billionaires have said on Reddit that they do not intend to give up their efforts to get permission to launch a Bitcoin exchange-traded fund (ETF). But they failed twice already: first, on March 10, 2017, their application was rejected by the U.S. Securities and Exchange Commission (SEC), and then, on July 26 of last year, the agency reached the same decision after receiving a new application. There is an opinion that the SEC should not regulate the market at all since cryptocurrencies are commodities and currency transactions, not securities, as Congressman Darren Soto said on January 10. And on January 14, ex-congressman George Nethercutt published an article in The Hill magazine, which is influential among the legislators, in which he called things by their proper names. It’s not so much to sit down and figure out whether a token is a security or not, but that by its actions, the SEC harms the American economy. Moreover, according to many experts, cryptocurrencies are in no way securities. The “tug of war” between the SEC and another regulator, the Commodity Futures Trading Commission (CFTC), is still ongoing, and many of the actions of the SEC can be perceived as an element of the game.
In such a situation, asking for “more regulation” looks irrational. In addition, as noted by ShapeShift CEO Erik Voorhees, cryptocurrencies carry a set of rules that are strictly observed in accordance with the principles of blockchain. After the Reddit AMA session on January 22, the Winklevoss brothers appeared on a podcast hosted by Laura Shin, in which they have stated that it is their customers who demand regulation; though, as we can see, there seems to be not so many of them.
The Search for Confidence in Bitcoin, Which Already Exists
In recent years, the Winklevosses have been trying to prove to institutional investors that it is as comfortable to trade cryptocurrencies as it is with securities on Wall Street. Of the last steps in this direction, Gemini, the first among crypto exchanges and custodial providers of cryptocurrency providers, successfully passed the SOC 2® — SOC for Service Organizations Type 1 examination, which was conducted by Deloitte, one of the “Big Four” auditing companies. Gemini’s director of risk management, Yusuf Hussain, said that such a standard of activity should become mandatory for all crypto exchanges. But if all these steps do not lead to an explosive growth in demand for cryptocurrencies from Gemini, perhaps the reason lies in something else? Yusuf Hussain argues that the main issue is trust. His boss, Cameron Winklevoss, is convinced of this. Bitcoin has no problems with this, as the blockchain of the cryptocurrency has been invulnerable to hackers all these years, and most of the Bitcoins were stolen from the addresses of centralized crypto exchanges, and not from decentralized trading platforms.
Winklevosses: There Are Many Riddles, but Only One Answer
What does all of this mean? Are the Winklevoss brothers mistaken or consciously want to lead us onto the wrong path? On the one hand, Cameron made a statement on December 10, 2018: “In 2018, everyone wanted to be in crypto. In 2019, we will find out who really wants to be in crypto.” At the same time, Sterling Witzke, a partner at the investment company Winklevoss Capital that manages the Winklevoss family’s money, has declared on January 17 that she does not expect institutional investors to enter the cryptocurrency sector this year. Moreover, she claims that she saw how many investors tried to deal with cryptocurrencies, but, according to her, investors are “thoughtfully dipping their toes into crypto, not taking the plunge.”
According to Witzke, the problem is the unclear regulation of this sector, as well as the fact that investors do not have confidence in the reliability of cryptocurrency storage conditions. Although we can agree that these factors play a role, this is more true for companies, and not for individuals, on which Gemini do not rely on in taking their steps, although the Winklevoss twins claim to adhere to mass adoption of cryptocurrencies. It seems that it would be more useful not to submit one to Sisyphus’ labor in getting permission for a Bitcoin ETF and not to put cryptocurrencies on the Procrustean bed of Wall Street. Instead, it would be beneficial to run an advertising campaign that would be aimed at what the spokesperson for Gemini mentioned—spreading knowledge about cryptocurrency for millions of people, including those who walk every day through the streets of the U.S. business capital of New York but are still unaware of what Bitcoin and other digital assets are.