With everything becoming more “digital” nowadays, it is no wonder that currency would follow suit. During the past decade, we have seen cryptocurrency rise in prominence and become integrated into payments and financial investments. Along with this increase in popularity comes a rivalry between digital currency and traditional – or ‘fiat’ – currency.
Fiat currency typically takes the form of physical dollars. Alternatively, its representation can be in electronic form, a notable example being bank credit. The government is largely in control of the supply and you are able to pay your taxes with it. The form of cryptocurrency, however, is more akin to bank credit sans the bank. In other words, it has digital representation, but no backing from a bank or government. An algorithm is in control of the supply and you are unable to pay your taxes with it. Instead, you need to pay taxes on it.
With that said, there is little to no intrinsic difference between the two. Both forms of currency allow us to purchase goods and services, after all.
Evident distinctions aside, there has been a recent development concerning the two. Popular global cryptocurrency exchange, Binance, is making headlines for officially launching fiat-to-crypto currency trading pairs. It is starting its endeavor with Nigerian Naira (NGN). Binance users can now deposit NGNs and purchase bitcoin (BTC), Binance coin (BNB) and Binance’s native dollar-pegged stablecoin, BUSD.
For contextual purposes, we must first explain what exactly ‘trading pairs’ are. They are basically a trading strategy involving matching a long position with a short position in two stocks. Specifically, two stocks that possess a high correlation. The concept utilizes both statistical and technical analysis in order to look for potential market-neutral profits.
A pairs trade strategy draws from the historical parallel of two securities. It is mandatory for the securities in a pairs trade to have a high positive correlation. This is the leading operator behind the strategy’s overall profits. The best deployment of a pairs trade strategy is when a trader identifies a correlation inconsistency. There is a heavy reliance on the historical notion that the two securities will maintain a specific parallel. Going off of this, the deployment of the pairs trade can be when this correlation flounders.
Whenever there is a deviation with the pairs from the trade, an investor seeks to take a dollar matched the long position in the underperforming security. Then, they aim to sell short the surpassing security. Should the securities return to their historical correlation, then a profit stems from the union of the prices.
Whenever a pairs trade ends up performing just as planned, the investor profits. Furthermore, they also mitigate any potential losses that could otherwise occur in the process. The generation of profits happens when the underperforming security reclaims value. In addition, when the outperforming security’s price starts to deflate. The net profit as a whole is the total that one will gain from the two positions.
The new feature
Up until now, binance.com, the company’s primary service, was only supportive of crypto-to-crypto trading. Evidently, that is no longer the case, for it is launching local fiat gateways in various locations. These include Singapore, Uganda, Jersey and – most recently – the U.S.
The NGN deposit feature is offered by way of the U.S. payments tech firm, Flutterwave. The company’s initiation was back in 2016 and is operated by a team of ex-bankers, entrepreneurs, and engineers. According to the official website, this firm’s overall mission is:
“…to inspire a new wave of prosperity across Africa by building payments infrastructure to connect Africa to the global economy.”
A Binance spokesperson made a statement regarding the platform’s choice to support NGN first. Their justification centers around the fact that Nigeria is the largest economy in Africa, consisting of nearly 200 million people.
“It is absolutely a promising market with great potential. In addition, Flutterwave offers very competitive rates for NGN, and the deposit processing fee is as low as 1.4%.”
The location of the main headquarters of Flutterwave is in San Francisco. The company itself has offices in Lagos, Accra, Nairobi, and Johannesburg. The firm receives support from various prominent investors; one of which includes Y Combinator. Its clientele includes the likes of Uber and Booking.com, among several others.
Main goal: 180 currencies
Successfully launching fiat-to-crypto trading is an impressive feat, but Binance is not through with its ambitions. The platform has plans to one day be able to support all 180 fiat currencies that exist in the world. Specifically, for its direct fiat-to-crypto trading facility.
CEO of Binance, Changpeng “CZ” Zhao, would announce the news at the exchange’s meetup event in Singapore last November. In front of the audience, CZ outlines his plan:
“One of the key things I want to do for the next few months – six to nine months or so – is to get those other 180 [fiat currencies] onboarded onto Binance.com … We want to have them directly on Binance.com wherever possible so that this way, they have direct access to the large liquidity on Binance.com”
By utilizing the initiative, Binance will be able to give customers the proper access to the large liquidity that’s available. The announcement discloses a specific strategy that Binance is formulating. That being they want to work with third-party services in order to include as many fiat/crypto pairs as possible.
Not only that but CZ intends on making improvements in the area of customer service. He recounts the early days before Binance. How there were reports of users of other exchanges submitting support tickets and waiting a long time for a response. This waiting period would last weeks; sometimes months.
There is, of course, the challenging regulatory variation that had an influence on Binance. Because of it, the platform provides different freedoms to users that depend on their country of residence. In spite of this, executives continue to remain optimistic about what the future holds. “One of our key goals for 2020 is to bring crypto to the masses,” CZ says.
In December of 2019, Binance would list four Russian ruble (RUB) trading pairs. The first trading pairs that feature RUB include BNB, BTC, Ether (ETH), and XRP. The addition of trading pairs on Binance follows the debut of RUB trading on the platform in late October. To elaborate, it was when CZ made the announcement that users could deposit and withdraw fiat funds in rubles.
Beforehand, CZ was once praising Russia’s position as a significant jurisdiction for crypto and blockchain industries alike. He recognizes the extreme amount of wealth pertaining to computer science talent within Russia. In fact, he makes the claim that President Vladimir Putin is the most influential person in the blockchain industry.
RUB support and trading pairs are the latest in brand new features and assets going on the platform. During the last few months, their inclusion is proving to have an effect on the platform as a whole. In November, Binance would add support for the Turkish lira. Furthermore, it would be the first exchange to include the ‘Fiat Gateway’. The creation of this network is all thanks to stablecoin operator, Paxos.
A confirmation from Binance proves that it will offer euro (EUR) trading against six cryptocurrencies in the latest fiat expansion. They previously had payment solutions to purchase cryptocurrencies in Euro. The downside, however, was that there weren’t any trading pairs that were available in Euro. The current development aids crypto-traders with directly trading cryptocurrencies in Euro.
In a blog post on January 3, Binance affirms that trading for EUR pairs would begin at 8 am that day. With this addition, users will have the ability to trade EUR against BTC, ETH, XRP, and BNB. Binance will also be supportive of trading against two particular stablecoins. One is Tether (USDT) and the other is BUSD.
The move is following the addition of EUR deposits and withdrawals back in November. This was a development that came to be along with identical services for the RUB, Ukrainian hryvnia, and Kazakhstani tenge. As a matter of fact, the exchange already offers EUR trading pairs on its loyal subsidiary, Binance Jersey. The launch of this subsidiary was last January. It extends the exchange’s operations into Europe, similar to how Binance Uganda branches out the company into Africa.
With the latest release, the fiat currency will now be available to traders on Binance’s main platform. All it will end up leaving behind is its US partner, Binance US.
XRP & Ethereum
Binance is now able to support three fiat pairs. Specifically, with the Turkish Lira (TRY) that feature ETH, XRP, and leading stablecoin Tether (USDT). On top of that, the exchange’s users are now able to trade USDT against the RUB.
On Christmas Eve of 2018, Binance would officially add XRP as a base currency. What’s more, they would rename its ETH market to simply the ‘ALTS market’. As CZ says in a Twitter post on the matter:
“We will be adding a couple trading pairs with XRP as the quote currency shortly. And rename ETH markets to ALTS market. Running out of space on the UI.”
In November of 2019, the TRY currency would become the latest fiat currency to be on the number one exchange by trading volumes. Binance would only permit its customers to use bitcoin to buy BTC, ETH, and XRP. Moreover, it was allowed only via Turkey payment company, Papara. This is a platform in which customers load balance with thousands of points and transfer money 24/7. In addition, they are able to shop safely online and also play games.
Binance is not the only platform that is dominating fiat-to-crypto trading. Liquid is a platform that is maintaining the top spot concerning trade count. This is especially noticeable over the last three months when it comes to its BTC-JPY market. They boast the following statement on their official website:
“Liquid is a unified, globally-sourced trading platform that bridges the worlds of fiat and crypto.”
Among the top fiat-to-crypto exchanges, Liquid possesses the largest average daily trade count. Its number of trades is 575k combined with a low average trade size of 0.038 BTC. For the sake of comparison, Binance registers as the second-highest trade. They execute more than 260,000 trades each day.
For all its growth, Binance has yet to dominate the American market. In late September, its US-based arm would begin trading under the authority of former Ripple executive, Catherine Coley. So far, it has been unable to garner substantial traction. Its trading volumes are not soaring quite yet and cannot hold a candle to a platform like Coinbase.
Regardless, it is gradual progress that – with time – will prove to be worth it. CZ is remaining upbeat about what will happen in the future, saying in a Twitter post, “Slowly but surely!”