Introducing Bridge Finance, your financial freedom dApp, that allows you to unlock liquidity from your Stocks and move it to Crypto currencies, and vice-versa, without selling your equity for fiat. A world’s first retail equity swap platform. The two markets have never really been unified, though other solutions have tried tokenizing real world assets or commodities, the divide still exists. More needs to be done to offer a plethora of rich platforms that build a bridge between the two, allowing a trader to cross market trade, not only in one direction but in both directions.
Previously the world of investing always polarized these two financial markets. So is still the case even today. Its extremely difficult to move your funds/liquidity between these two markets, in any direction. This is a problem that started with legacy markets viewing crypto currency markets as too risky, a bubble, too volatile; and in that regard made all efforts to make life difficult for crypto traders. Or so the conspiracy theories go, but do they really? Lets take a quick dive!
To understand why, we first have to look at who controls most of the liquidity on the equity markets today, banks do. We are not talking about your down the road local bank, we are talking about the Big Four. The colloquial title usually refers to the four main banks in each country, as ranked by assets. Lets take a quick look at The United States of America for argument sake. The big 4 include JPMorgan Chase, Bank of America, Citi Group and Wells Fargo ~ lets throw in Goldman Sachs just to make a point. These five banks combined own a total of 10 trillion in assets! That’s just the top 5 banks only but we know there are other heavy hitters. They practically control where the money flows in terms of market shacking investing. With even more money coming they (as simply put during the 2008 financial crisis) have simply grown too big to fail ~ until they do.
In my career as a investment banker there was a catch phrase “money flows where it’s already crowded the most and it hates new hands”. This simply meant among investment bankers we are throwing money at the usual places where our bosses want to see it even though the prospects there offer less return than in new markets. The wealthy who own these big banks like to keep the money to themselves. This is all despite the fact that their books have all grown too big, the assets under management are too many to manage, that they now rely on Quants just to do that job at the slimmest margins. As a result, it seems stocks only go up, because of all the excess liquidity. The ones with the bad fundamentals are discarded quick, whilst the ones with the good fundamentals, attract all the excess liquidity in the market until they are overpriced. Most good stocks out there tend to be overpriced, because of the lack of a variety in top tier type of stocks to put money in.
There is a lot of money out there, trillions, and the crypto market compared is just a drop in a puddle. If they were to just take a tenth of the money they move and put it into Bitcoin, we would see Bitcoin soaring. But the traditionalists of these big banks despise the crypto market for its uncertainty and most of all its new hands. To them its almost a joke, a nascent mind, but that joke is starting to look a little serious now as it is on the verge of disrupting a lot of old financial systems and mechanisms.
There is now a sense of a change in tide. This is the first of the fundamentals that would push the two polarized markets towards unification for the first time. Real use cases are on the rise and unlike what most people thought that blockchain technology would influence other areas first and financial markets last, its actually going Kamikaze on the financial market first. Go big or go home. As a result of how the use cases are swiftly developing everyday, a lot of people are starting to see blockchain for what its truly worth. Because its now only a matter of when but not if it matures and replaces almost all systems.
This has brought a new age for investors to make money, mostly retail investors who are the new generation from Gen Z to millenials. Our generation is directly inline to influence the equity markets, and it has coincided with the rise of new methods (influencers included), new markets and platforms to do so. This will make blockchain technology even more relevant even to the old traditionalists, as it is the future of world systems that will be used. So its no surprise, the traditional investors have softened a little towards it, and crypto funds are now being talked about as the next amazing thing to create and manage by investment banks. In the short term, what they really want are the commissions, that's what they don't say. A good case to make on how they have decided to tap in on the commissions is by looking at how JP Morgan Chase has reportedly started providing banking services to bitcoin businesses, with the first two clients being Coinbase and Gemini. They would accept your commission but not invest in Bitcoin with you, instead they would rather create their own digital coin and blockchain Quorum, then go on to sell the platform to ConsenSys to pocket the profit. See the pattern here?
To conclude, yes, retail investors are now approaching investment firms and brokers to get into crypto funds. Yes, crypto funds are growing and we will dive into that growth in the next article. More sore has the market of retail stock investing apps, for instance E-Trade, TD Ameritrade and Charles Schwab, are competing, with assets under management of $600 billion, $1.3 trillion and $3.8 trillion. As more and more of our generation get into investing as all previous generations inevitably have, the market will grow even more. There is now a really big market opportunity, with banks looking to get commissions from its crypto keen client base. On the other hand, the loyal crypto fan base was always eager for a gateway that brings more institutional and retail stock traders into crypto markets, with less hustle and geekyness.
In 2019 myself and a colleague saw this opportunity and shift in tide and we put our minds together to create a solution that seeks to solve this problem or at least meet the demand. Introducing Bridge Finance, your gateway between stock and crypto markets, through the use of equity swaps. Not only for the benefit of crypto investors looking to get tokenised real world assets, no. But also for the reverse flow of stock investors, including traditional investment firms and brokers, looking to get into crypto using their stocks as collateral, or offer stocks to the crypto fan base through synthetics backed by real physical assets, with no need to be over collateralized and in turn price mainstream participants out.
In the next article we will talk a bit more about how we seek to solve this problem.