bridge21 update - February 8, 2022
Exciting updates in crypto-remittance, USD:MXN rates hover in the 20-21 range, crypto markets shake off weak hands as hype deflates
I apologize for the pause with our company updates. We’ve been working hard on expansion plans for bridge21 and hope to have some exciting news for you soon!
Crypto-remittance is heating up
After screaming from the rooftops that crypto-remittance is the future of cross-border (XB) payments for six years, it seems as if the crypto-remittance’s time may finally be here.
The trading volume on centralized exchanges exceeded 14 trillion in 2021, a more than 5x increase over 2020. This is larger than the XB payments market.
Silvergate bought Diem’s IP (the Facebook/Meta stablecoin) and is clearly planning to launch a USD stablecoin across its USD exchange network.
Consortiums of community banks are banding together to create their own stablecoin networks, like USDF.
MoneyGram dove into the crypto-remittance space again, now partnering with Stellar, using their USDC coin to build another crypto-remittance network.
These are powerful signals, but the real reason is fundamental. It’s faster and less expensive to move money internationally by using cryptocurrencies and stablecoins in many cases. These assets tend to command a premium in receiving countries, spreads and fees continue to shrink, and the assets can be transferred quickly and inexpensively.
Crypto and stablecoin based XB payments are going to take a bite out of the traditional XB payments industry, and we believe it’s going to happen much faster than most people anticipate. I believe it is likely that the entire industry could be transformed over 3-5 years.
Short-term USD:MXN forecast
Rates have been hovering in the mid-20s, after a brief spike close to 21:1 earlier in February. We have a strong floor in the high-19s, and believe rates are headed higher over the short-term.
Cryptocurrencies shake off weak hands
Bitcoin reached new all-time highs in early November 2021, before a brutal correction to 33k levels in January. We’ve since seen a recovery to 43k as of the time of this writing. The general crypto market continues to follow Bitcoin’s lead.
The wild speculation around WEB3, NFTs, and the “metaverse” have dampened with the correction, but there are gems in the rough. I’m particularly interested in decentralized exchange, but what’s still lacking with decentralized exchange is opacity and advanced order functionality.
Most cryptocurrency address balances are public, which makes it trivial to see if a trader is planning to make a series of large trades on a decentralized exchange. Trades can also be front-run by monitoring trade transactions and quickly entering trades with higher fees. Advanced order types (limit, stop limit etc) are also not built into major decentralized exchanges today. Honest centralized exchanges do not have these issues because balances are opaque, trades do not appear until they enter the order book, and advanced order types are almost universally available.
These are technical issues with decentralized exchange that can be solved with existing technologies already present in many privacy coins. The first DEFI exchange that achieves high trading volumes while offering shielded balances, advanced order types, and trade front-running protection via shielded trade transactions will be a much bigger threat to centralized exchanges than the decentralized exchanges of today.
Of course, I’m also incredibly bullish on crypto-remittance. I believe this application of the technology will be a strong support for valuations into the coming years across both cryptocurrencies and stablecoins.
Our next update may not be for some time, but hopefully we have some exciting news to share when it comes!