Sam Reynolds

<div id="highlights-block_61af70d08e638" class="highlights">
 <ul>
 <li>With crypto legislation finalized in India, CrossTower Research is bullish on its potential in-country</li>
 <li>CrossTower believes that Web3 will be as consequential to the global economy as the birth of the internet, and young, tech-savvy India is poised to capitalize on it</li>
 </ul>
 
</div>



India is poised to capture $1.1 trillion in economic value as its young, tech-savvy population embraces the Web3 era now that <a href="https://cms.blockworks.co/cabinet-note-says-no-crypto-ban-in-india-only-regulation/" target="_blank" rel="noreferrer noopener">legislation around crypto in-country</a> has finalized.&nbsp;That&#8217;s the conclusion of research firm CrossTower in <a href="https://crosstower.com/wp-content/uploads/2021/12/Indias-1-Trillion-Digital-Asset-Opportunity.pdf" target="_blank" rel="noreferrer noopener">their December report</a>.



“India’s geopolitical power, status, and leadership over the next 20 years is inextricably linked to the policies and regulatory framework that it implements today with respect to digital assets and the Web 3.0 industry,” CrossTower wrote.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Many believe this digital-world, paradigm-shift to Web 3.0 will be as consequential as the birth of the internet.”</blockquote>



The report cites a study from the National Association of Software and Services Companies (NASSCOM) which found that the digital asset industry in India could add $184 billion of economic value by 2030 and that the industry could employ several hundred thousand people in India over the same period.&nbsp;



“While this is an impressive amount, we believe the opportunity is much larger, and estimate the economic value to be conservatively $1.1 trillion by 2032,” the firm said. “We believe the bulk of this $1.1 trillion in economic growth for India over these 11 years would be derived from ancillary digital asset-related businesses that have yet to be invented.”



CrossTower believes that Web3 will touch nearly all sectors of India’s economy including supply chain, tokenization of real estate, digital identity, and financial services. CrossTower notes that internet industries actually make up a larger percentage of GDP in India than they do in the US — 12% of the US GDP in 2020, or $2.45 trillion, versus 16% of India’s GDP in 2020.



<figure class="wp-block-image"><img decoding="async" src="https://lh3.googleusercontent.com/m1YVpPN8Lg0X5tURBSaD8PBPCNn2xIPQGKDyRVz6tIMvhfKLybUnbzg4kZu_5x0TRGnRItxqQI8BpKrNZSLZs-NrxBTcKfGly7rA0A0qmjPJKzShnaiRvkswo3Um3Imr8kGgjz_Q" alt=""/></figure>



Part of the reason why CrossTower believes there will be a significant uptick in crypto within India is that, globally, the adoption of crypto has accelerated past that of the Internet in its short lifespan.&nbsp;



“It took the internet approximately 7.5 years to go from around 100 million users to 1 billion users, whereas Visualize Bitcoin expects adoption from 100 million to 1 billion users operating accounts at cryptocurrency exchanges to take roughly 4 years,” CrossTower wrote in its report.&nbsp;



The report also cites India’s relatively young, tech-savvy and entrepreneurial population as a reason for the optimistic projections. Currently, CrossTower says, there are over 230 digital asset startup companies in India and over 150 projects and proof of concepts have been deployed. The report cites data from GlobalData which shows that across India $270 million of VC capital has been deployed to crypto projects.&nbsp;



CrossTower also thinks that the <a href="https://cms.blockworks.co/indias-muddy-stance-on-bitcoin-causes-confusion/" target="_blank" rel="noreferrer noopener">Reserve Bank of India’s CBDC effort </a>will complement the development of digital assets as a whole. “CBDCs will likely coexist with the most popular digital assets, but could replace those whose roles they make redundant, such as stablecoins,” they wrote. “As India looks to the future, embracing digital asset technologies and applications stands to not only drive economic gains, but also ensure India stays on the forefront of the transition from cash to digital currencies.”



The report from CrossTower was sponsored by the US-India Strategic Partnership Forum.



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CrossTower Research: Embracing Web3 Could Be $1.1T Opportunity

<div id="highlights-block_616476f903ba2" class="highlights">
 <ul>
 <li>Critics of Tether often point to its frequent USDT minting near periods of market volatility to suggest a conspiracy that Tethers are minted in order to stabilize, and prop up the market</li>
 <li>CrossTower research suggests that Tether minting has had no material impact on price and rather follow capital flow</li>
 </ul>
 
</div>



Is Tether issuance timed to support the rise of the price of bitcoin during periods of market volatility? No, says a new paper from CrossTower Research.&nbsp;



A <a href="https://newrepublic.com/article/160905/tether-cryptocurrency-scam-enrich-bitcoin-investors" target="_blank" rel="noreferrer noopener">common belief</a> amongst those skeptical of the merits of the digital asset market is that Tether (USDT) is minted in large measure to <a href="https://www.theverge.com/22620464/tether-backing-cryptocurrency-stablecoin" target="_blank" rel="noreferrer noopener">support the growth</a> in the price of bitcoin.



Tether Limited certainly lends itself to conspiracy. With its outsized role in the broader crypto market — USDT accounting for 70% of all volume on centralized exchanges — and opaque structure with <a href="https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether" target="_blank" rel="noreferrer noopener">questionable holdings</a>, it has been <a href="https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether" target="_blank" rel="noreferrer noopener">described recently</a> as a company that seems to be “practically quilted out of red flags.”



But often reality is less interesting than imagination.&nbsp;



Tether is currently the fourth-largest digital asset by market cap, according to <a href="https://www.coingecko.com/en" target="_blank" rel="noreferrer noopener">CoinGecko data</a>, with $69 billion USDT in circulation. Its closest stablecoin competitor, <a href="https://cms.blockworks.co/celsius-reportedly-borrowed-1b-from-tether-with-bitcoin-as-collateral/" target="_blank" rel="noreferrer noopener">Circle’s</a> USDC, has a market cap of just over $33 billion.&nbsp;&nbsp;



<h3 class="wp-block-heading">The Tether tie</h3>



The belief that there was, or is, some deliberate relationship between Tether mints and the price of bitcoin first began in 2018 when an anonymous report was published — “<a href="https://www.tetherreport.com/" target="_blank" rel="noreferrer noopener">The Tether Report”</a> — which claimed that 40% of bitcoin price growth could be attributed to Tether.



<a href="https://poseidon01.ssrn.com/delivery.php?ID=542020096000010096113080070065068102026044031032057003066126105028004098107026113066031056003008104040034096126064110019002088027091046046045108065096110108089017004077083060020091016071122113080065025003122025122064019075070109077066024085027070005102&amp;EXT=pdf&amp;INDEX=TRUE" target="_blank" rel="noreferrer noopener">Another paper</a> from University of Texas at Austin finance professors John Griffin and Amin Shams argued that even though the positive price action from Tether minting was small, sometimes just 1%, if timed correctly during periods of market volatility there were “substantial aggregate price effects” downstream.&nbsp;



“These distortive effects, when unwound, could have a considerable negative impact on cryptocurrency prices,” they wrote. “Our findings support the historical narrative that dubious activities are associated with bubbles and can contribute to further price distortions.”



CrossTower notes that many of the crypto derivatives and futures contracts are denominated in USDT, which has contributed to the growth of the stablecoin alongside the popularity of crypto derivatives.



CrossTower points to Tether’s use in dodging Chinese capital controls as one of its many utilities which have led to its continued market dominance despite the numerous questions around it.&nbsp;



“With growing institutional investment into the crypto market, we would expect an increase in the amount of Tether being created,&#8221; the company stated in the report.



<h3 class="wp-block-heading">Price action</h3>



According to CrossTower’s analysis of pricing data, Tether mints do not follow weak price action, nor do they have a material impact on price.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">CrossTower found that Tether’s mints, usually occurring on a Monday, followed lower bitcoin and ether prices that occurred simply because of reduced crypto trading over the weekend. However, other mints that occurred were related to positive price action in the 30 days or seven days preceding the mint.&nbsp;</blockquote>



When minting occurs, pricing action doesn’t change much over a median average. CrossTower noted that those days during which mints preceded a positive price move occurred during a broader bull market trend.



CrossTower says that, for bitcoin, the mean price increase on the day of minting ranged from 1.5% to 1.9%; however the day before the mean price increase ranged from 1.0% to 1.9% — the day-to-day price increase was not materially different from the broader trend.&nbsp;



Furthermore, the day after the mint, CrossTower’s research showed bitcoin&#8217;s gains were rather subdued, with a mean price increase ranging from 0.7% to 1.2%.



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="996" height="469" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg" alt="" class="wp-image-9211" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=996 996w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/10/2021-10-11-Tether_crop.jpg?w=80 80w" sizes="(max-width: 996px) 100vw, 996px" /><figcaption>Price movement around a Tether mint day for mint sizes &gt;$100M; Source: CrossTower Research</figcaption></figure></div>



“All in, our findings suggest that USDT mints could have led to higher bitcoin, but largely disproves the notion that these mints were predicated on negative price performance in the&nbsp; days before,” wrote CrossTower. “We note that there are simply too many confounding factors that make it difficult to attribute the price movements of bitcoin solely to mints of Tether. It could also simply reflect that Tether mints are reflective of real inflows into the crypto ecosystem.”



This story was updated on October 11, 2021, at 5:27 pm ET



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