 Aloha and good afternoon, ladies and gentlemen. I'm Pauline Schachmachin, your host for Outside In. Today on Outside In and tomorrow on We Like the 1%, we're going to delve into the world of cryptocurrency trading with my guest, Anil Kumar, Senior Trader at ProFX Options. Aloha, Anil. How are you? Can I see you anywhere? Lovely to see you. Well, I can't see you, so there you are. Now I can. So you're joining us by Skype in London and it's midnight in London and it's extremely cold in London. But if it makes you feel any better, here's a lovely backdrop for you to enjoy. And we're going to go into cryptocurrency trading today on Outside In and continue tomorrow and discuss more about your company, ProFX Options on We Like the 1%. So let's kick off with a little bit about yourself. Tell us how you got into trading, why you love to trade so much because this is one of my favorite subjects. Great. Again, first of all, Aloha, and thank you for inviting me to this great show. You're right, it is midnight. It's minus five, so I'm envious of your temper. But it's always a pleasure to see you. And yes, thank you in terms of wanting to know a bit about my experience in trading. I've been trading for the last 20 years, everything from futures contracts to forex to now cryptocurrencies. So anything really that moves up and down as a trader, we enjoy on a movement, basically. We like volatility. And you started off with FX and binary options. Is that correct? Well, binary options is much more of the past now. We focus mainly on FX trading, forex trading. That is very popular in the UK and in Europe, actually. I think a lot of people who enter into forex trading start with an idea that it can actually make them lots of money. But as with all great challenges, the journey is a journey about how to become successful at trading. And that's what we do as a company. We teach people how, from very, very basic knowledge to making money on a consistent basis, and also becoming professional, if that's what their goal and ambition is. Perfect options. We're an education company based in London. What we're going to discuss a little bit is foreign currency trading, which is the basis of what cryptocurrency is trying to copy at the moment. And when I traded about 20 years ago, there were various ways of predicting or trying to predict what might happen, whether the market was going to go up or down, whatever currency pair you were focusing on. And one of the techniques I liked, which maybe you particularly don't care for, was the Japanese candlestick charting, which was developed by HOMMA, to predict the price of rice in Japan. So this is one of the techniques in addition to Fibonacci sequences, to ball-in-jabans, there are various techniques where people research and try to see whether they should put a call or a put. In other words, whether the market's going to go, whether that pair is going to go up or going to go down. So there is another Japanese connection recently in the context of cryptocurrency trading, and that is the introduction of Bitcoin itself, the prime cryptocurrency. So would you like to give viewers and listeners a little bit of a background all the way from when Satoshi Nakamoto introduced the concept of Bitcoin about a decade ago? Absolutely. This is a fascinating topic, really, because as a currency trader, we know that traditional fiat currencies are backed by central governments and they're centrally controlled. Up until 1971, the US dollar, for example, was backed by gold reserves. But as Nixon came along and said, look, we want to decouple the US dollar from the gold standard, it basically became a free-floating currency with no real backing with any assets. The value of the currency was really pegged to the behavior, the performance of the country itself. And as time has gone on, less and less money actually has been backed by assets, and more and more has been notional. And really, what we've seen particularly since 2008 when we had the financial crash, trust basically disappeared in central governments and their ability to manage financial institution. And it was really around 2009 when Satoshi Nakamoto came up with a concept that a currency, it's backing. What is this backing? And we all understood that fiat currency was backed by governments and their institutions. But the notion was presented that actually, the problem with having this central control was that there was no real trust in the banking system. So a new form of trust was developed by a white paper that was produced in 2009. And the concept really was that rather than have a centralized currency, it was proposed that a decentralized currency could be created, and created it was. It took a little while before the adoption of the technology or the concept of blockchain and the cryptocurrency sitting on top of it took hold. But essentially what actually happened was that a group of core programmers took on the whole blockchain concept and started to create these critical currencies. At the very, very beginning, the price of each currency were the Bitcoin was something like more points per Bitcoin. And there was no real value placed upon that currency until really about 2011, 2012, when it became apparent to people that they could actually transfer value anonymously. And this became very attractive to places like the dark web, the silk road where goods and services could be transacted utilizing this Bitcoin in total anonymity. And that was obviously attracted to that particular segment. And it wasn't really until about 2013 when the governing bodies, the FBI, the central governments picked up on the fact they wanted to pour it down the illicit trade. And really by more liking this political trade and the anonymity of cryptocurrencies or Bitcoin particularly, it highlighted the fact that it had value, that it had actually the ability to have anonymity and that whole wave of people into the idea that certainly there was a currency that could be anonymous, that could hold value and what could be transferred from peer to peer. And that's really where it took off. And we still don't know, we still don't really know the identity of Satoshi Nakamoto, right? He could be Totoro's neighbour, right? Hopefully mythical because some people argue that it's not one person, that it's a group of people. It is part of the mythology of Bitcoin who created it. But the ethos and the deliberation of the white paper was, but really the decentralization that nobody should actually be controlling it, that it should be controlled effectively by the community and that the value transferred to person to person, peer to peer, was a functional fact that it didn't require it to go through the main banking system, through institutions. And I think that was what the attraction was. And the whole technology behind Bitcoin, which is the blockchain technology, and we'll talk about blockchain a bit later on, is what's really taking off in terms of its functionality, its ability to be useful in that type of transaction actually. So Anil, most experienced traders such as yourself have no fear of Bitcoin. You see it as a wonderful new opportunity. It's just as exciting as when email and internet came out 25 years ago. But for most people, the average person, it's still something a little bit scary. And I think this is because people want to physically touch a form of money. So that old fashioned idea of money is still in their head. Certainly the best money has certain characteristics associated with it. The best types of money, for example, have durability. They're in limited supply. They're accepted by a wide range of people. They're portable. Whereas Bitcoin, it's not fiat currency, and fiat doesn't mean it's not backed by anything. What fiat means it's not nobody's forced to use Bitcoin, because fiat means by decree. So that's not the definition of fiat. It just means no one is forced to use it. So it's something entirely new in the system. And one of the problems that people have with cryptos is that they lack intrinsic value unlike gold and silver. But there are some cryptos that have come up in the past couple of years or so, when things have developed rapidly in the past two or three years in this area, that are being backed by resources. So there is, for example, a company named Digix, which is a gold backed Bitcoin. It's on the Ethereum network. Similarly, running on the Ethereum network just recently announced was the government of Venezuela has developed their own version of Bitcoin, which is called the Petro. And I think they got tired of eating their zoo animals and they ran out of zoo animals to eat. So it's time to come up with something new. And they've come up with the Petro, which is backed by the crude oil reserves in Venezuela, as well as some other natural resources and diamonds that they've got there. So what do you think of these progressions in the crypto world? I mean, it is very interesting what's been happening in the last six to 12 months. It's actually very exciting. There's been a lot of adoption by a lot of nations in embracing this blockchain technology and the cryptocurrency on top of it. Because as you well know, the dollar is all powerful and it has an element of control and the US exerts its control. And I think part of the blockchain and the Petro cryptocurrency is to break away from that pegging to break away from the restrictions that denominating anything in the US dollar can actually cause. And that's, I think, what is a massive change that's happening. I mean, we've got Dubai, which are adopting blockchain. We've got Russia embracing the blockchain technology. So as we get more and more, in fact, Iran I think has just announced that it's going to be creating its own cryptocurrency. So we're going to see more and more and more. And the trend isn't going to stop. And I think as a trader, it's very important to us because the further we go down in adoption, the more and more stable in a way, things become. Because I think there was a notion last year that Bitcoin was here today, born tomorrow. And I think that's what created a lot of fear for people is that, you know, it couldn't be stamped there. But I think what's been happening in the last six to 12 months is that with all the publicity, positive and negative, it brought attention to Bitcoin and other cryptocurrencies and the blockchain. In London, for example, we're seeing a massive surge in interest, interest in traditional businesses, looking at blockchain as a function of their business. So going back to the petro, you can see why Venezuela would do this because they're probably restricted in their ability to, you know, make use of their reserves and Petro being the biggest of where they have. They're seeing this as a way of capitalizing on it. Venezuela is another interesting jurisdiction because a lot of mining and a lot of people have been using Bitcoin as a method of exchanging goods and services. And I think them adopting a culture dollar, I think is actually, you know, in many ways, a very, very interesting development. And we're going to be watching that very closely. Okay, wonderful, Anil. Before we get into the speculative investment side, which is the dominant sphere of what cryptos are taking up at the moment since it's not a fiat or it's not a currency by decree, we're just going to take a quick break and we'll go into the investment side of it and the trading side. So we'll be right back after this quick break. This is Think Tech Hawaii, raising public awareness. I just walked by and I said, what's happening, guys? They told me they were making music. Aloha, my name is Mark Shklav. I'm the host of Think Tech Hawaii's Law Across the Sea. Law Across the Sea comes on every other Monday at 11 a.m. Please join us. I like to bring in guests that talk about all types of things that come across the sea to Hawaii, not just law, love, people, ideas, history. Please join us for Law Across the Sea. Aloha, everybody. Welcome back to Outside In. We're talking with Senior Trader at ProFX Options, Anil Kumar. Now, we did the basics of Bitcoin, Anil, and we want to get into the underlying technology because there's no reason to be afraid of blockchain. There might be some reason to be afraid of ICOs. They could be frauds and scams. But we did a two-part blockchain with Professor Minelli, who was also joining us from London about a month ago, and we went quite in-depth into what blockchain is. But we're going to focus on blockchain in the context of trading cryptocurrencies with you because the block size is what is important. The block size is what caused that fork, that rift between Bitcoin Core and Bitcoin Cash. Is that correct? What actually happened with that fork, if we're specifically talking about that, is that when Bitcoin was conceived, it actually had limitations in the amount of information that could be contained in that. It was limited by a certain amount of space. And what has been happening is that as more and more people come on with new ideas and want to use these cryptocurrencies, there's been a diversion from the original code to expand the code. And I think Bitcoin Cash was one of the first we saw of that. But certainly what we're seeing more and more is that the industries are supposed to look at how they can utilise cryptography on the block size to encapsulate things like smart contracts. Smart contracts is why the expansion has been needed. And a smart contract is, without going into too much detail, is basically an obligation, but a token or a currency that has a function that will, through its contract, have an obligation to fulfill. It's quite a complex subject in terms of smart contracts. But that's why we're having this expansion of block size to allow for the facility to make more use of it. Because the issue between Bitcoin Core and Bitcoin Cash is that the blockchain developers are purposely keeping the block size small. And that wasn't really Satoshi Nakamoto's original vision. It was to get more people on board to have small transaction fees. And by the blockchain developer keeping the blockchain small, you can increase the transaction fee, which is what is happening. And then the Bitcoin Cash people said, no, this isn't right. So they increased their block size to, I think, eight megabytes. Is that right? So their transaction fees can be lower. But people are trapped in either of these two spheres. And then there are these things like Lightning Hub, I think. But I don't know how we can get out of this problem. Because people can have both Bitcoin Core and Bitcoin Cash in their wallet, in their e-wallet. Yeah, there's a community, isn't there? There's true die-hard Bitcoiners who don't want any change whatsoever. And then there's the others that want to fork off and try and do different things for different reasons. And sometimes it's monetary. They want to control the forks and be able to make money for themselves. Whereas the traditional Bitcoiners are much more focused on the ethos and the plan for the whole idea of decentralized ledger, distributed ledger, and the ability to do transaction and store wealth. I think there's a divergence of these communities, basically. And I think that's what we're seeing more and more. But I think the change is coming where I think it's going to become much more blockchain-orientated rather than just the conditional currencies that we see at the moment. I think the functionality of blockchain is really coming to the fore now. Okay, now let's go into the possibilities of trading in cryptocurrencies. So we've got FX, the standard currency pairs in fiat money, such as pound dollar, pound euro, euro yen, these kind of trades. And one of the disadvantages in the FX market is that it's only open five days a week, right? It's 24 hours, but it's only five days a week. Now, the advantage with the cryptocurrency trading, because it's in a virtual world and it's all markets, is that it's open 24-7. Is that not correct? So now we're getting into the sphere of how to trade cryptocurrencies and how to make money from the movements. That's kind of our specialty. The underlying technology is all very interesting, but what we really care about is how can we capitalize on these movements? The problem I suppose with cryptocurrencies is that you have three problems. One is where to buy it safely. The second is where to store it safely. And the third is where to trade it. And all these three problems are kind of unique cryptocurrencies, whereas with fiat currencies, a lot of them are in regulated markets, the movements are regulated, the brokers are regulated. So we're moving from a regulated to an unregulated sphere, which adds a number of elements of risk, but it's not a risk that should be overestimated. I think if you take care of where you buy your cryptocurrencies, where you store your cryptocurrencies and where you trade cryptocurrencies, you can actually take advantage of the volatility that exists in cryptocurrencies that is less volatile in fx markets. And you may say, well, is volatility good or bad? As a trader, we like volatility. We don't want currencies just to be going flatlining. So that's why it's attracting a lot of people into the crypto space is because they see these movements anywhere from 5% to 10% to 20% moves a day, where in traditional fiat currencies, we might see 1% or 2% of these. So we can see as played as why people are getting attracted to trade cryptocurrencies over and above fiat currencies. Yes, the common misconception is that, oh, Bitcoin already went up to 19,000, it's dropped back to 15, now it's dropped even further, about 5,000 more. And people always tell me it's too late for me to get into it. And I say, as a trader, you never think it's too late. You get in on the pullback. And a lot of people aren't aware that you can actually make money when a pair or an investment goes the opposite direction. They think it should always be going up or being green. So that's a call. And that's the kind of bet you place. But you also make money when the price drops. So that's a put in currency trading. So there is still a chance. It's never too late to get in on it, but you want to get in when it pulls back, like it's doing now, right? We saw the markets, we saw Bitcoin particularly reach almost 20,000 before December. And the reason it went so high is because from August, September, October, more and more news channels were starting to talk about cryptocurrencies, where more and more were talking about these tremendous moves. There was a lot of hype about where Bitcoin could potentially go by lots of characters. And with anything pulling, it's all about supply and demand. And what happened between September and December was that everybody wanted to buy. And when you have demand, and when everybody wants to buy, that naturally pushes the prices up. And with almost every asset price, it will reach a price where it becomes too expensive. And in December, we saw that. So this natural pullback that was predicted by us actually, because it needed, it shot up so far, so quickly that pullback was actually natural and required. We're seeing Bitcoin around 10,000 and we're starting to see a bit of strength back in again. And its behavior, and as you probably know, we trade algorithms, we trade patterns. And the patterns we're seeing in Bitcoin are very, very familiar to us, because the market is made up of buyers and sellers. And buyers and sellers have that same emotional fear and grief element to it. So when people say to me, when is the right time to buy cryptocurrencies? As you rightly said, wait for the pullbacks. And it's definitely pulled back. And, you know, whilst I don't want to predict where it's going to go in the market to take advantage, as you said, when the market's going up or when the market's going down. And what Bitcoin is usually pegged against is the US dollar. So that's why you'll see the insignia USD slash BTC. This is the code for the US dollar and Bitcoin currency pair transactions. But it is now possible, obviously, because the Ethereum network is building up to trade Bitcoin against another crypto like Ethereum. So you'll see the insignia BTC slash ETH for Ethereum. So this is quite exciting. And do you have a preference for trading cryptos against cryptos? Or would you prefer to trade cryptos against fiat currency? So there are two elements to that question, actually. One of the things that we've seen is that banks aren't particularly fond of cryptocurrencies. And they've done a lot of things in the last few months to sort of make it more difficult, things like not allowing people to use their credit cards, which actually is a good thing to buy cryptocurrencies. The second part of your question really is trading one currency once the other. There are a lot of exchanges out there which don't even accept fiat currency. They allow you to import your Bitcoin, and then you can use your Bitcoin to trade it against other currencies, whether it's Ethereum, whether it's Ripple, whether it's any of the top currencies can be traded against each other. And it's trying to remove its requirement to trade against a fiat currency. And it's very important, you mentioned top currencies, because we advise everybody to go to CoinMarketplace.com. This lists the thousands of coins that are on display at the moment. For traders, it's typically advised that they trade only the top 10 coins. So these include entities like Bitcoin Core, Bitcoin Cash, Ethereum, Ripple, Litecoin. So these are safer than hobo nickels, for example, that we were looking at. I mean, safety is a word that I'll just caveat, because everybody should understand every type of trading is risky, and you should only really risk an amount that you can risk. Yeah, because trading is not for widows and orphans, right? And like going to a casino, be prepared to lose whatever you invest in that kind of thing. I always tell my students that, and I tell everybody that trading is risky, and that they should be careful. It's not a one way street. We saw people who were telling me that they bought Bitcoin at 5,000, now it's 15,000, and they were thinking they were rock stars. But a rock star in trading is very simple when the market's going up. It's how you handle yourself when markets go down. And I think that's what we've seen a lot of people crying about, is that they don't know how to trade it in a downward market. And that's the point I wanted to make a bit earlier on. The difference between investing and trading. Investing is where you would buy Bitcoin and you just hold it for whatever duration you want, whether it's one month, six months, 12 months, five years, and you don't care too much about the upward and downward movements. Traders, we like the upward downward movements, and we can take advantage of those in either direction, as you mentioned earlier. And with the advent of futures contracts being offered against Bitcoin, it's made it a lot easier to be heading techniques to make sure that we can take some of the volatility out of selling Bitcoin, for example. Currently, only Bitcoin has a futures contract, but I can see a time when Ethereum and some of the top currencies will also be taking on futures contracts on regulating market, but let's wait and see. And of particular interest to a lot of people are the privacy coins, is that correct? Like Monero and Zcash are doing very well, because people are fearing for their safety on the cryptocurrency platforms, aren't they, or the cryptos themselves? Yeah, so again, there's two elements to the question. One is the privacy of who actually owns that cryptocurrency, that it can't be traced back to them. That's one type of people that may be looking for that and may be interested in that. But in a peer-to-peer nature of Bitcoin, for example, if I wanted to transfer a Bitcoin to you, we could do it privately and we wouldn't need anything else to do that yet. Okay, Anil, thank you so much for joining us on Outside In. We're going to continue this discussion because you're my last two-part guest on one of my favorite subjects, and we'll see you tomorrow on We Like the 1% in the evening at your time, morning at 11 as usual here. Aloha, Anil, and thank you, and see you tomorrow. Aloha, everybody. We'll see you tomorrow and We Like the 1%. Aloha, thank you.