For the average investor to trade or transact in cryptocurrencies is akin to the brokerage process of the 80's and 90's - slow, cumbersome, expensive, and sometimes relegated to the wealthy and well-connected. Virtual Crypto Inc (OTCBB) could make the retail trading of cryptocurrencies significantly more accessible, and the company is poised to profit along the way
How many people remember when E-Trade (NASDAQ: ETFC), Ameritrade (NYSE: AMTD), Charles Schwab (SCHW) and electronic, online stock trading were considered risky and a fad? Prior to 1994 it was nearly impossible for the average person to open a brokerage account and invest or trade in equities in the United States.
We have Mr. William Porter to thank, who created a subsidiary of Trade Plus Inc., called E-Trade, in 1991, for helping the "Average Joe" gain access to the world of stock trading that was previously a "Rich Old Boys Club." No longer were investors forced to convince stockbrokers that they "deserved" an account - anyone with money and an ID could join.
This was made possible through the blossoming of internet technology. Nationwide adoption of home internet access, better technology, lower costs and a user-friendly experience led to the online trading boom. By the mid 1990's, more than 20% of the US population was investing directly in stocks, versus 5% for the decade before. E-Trade's revenue was $850,000 in 1992, $11 million in 1994, and last year it was $2.45 billion. Obviously this was not and is not a fad.
This wasn't the "fad" that CNBC et al called it at the time for one reason: ever-improving technology that made the online trading experience continually better and better. Technology developed allowed faster trade clearing to handle the explosion in volume that the exchanges faced in the 1994-2001 period. The firms that developed this technology, devices, and the algorithms that fed this boom made serious money. Cisco, Microsoft, Oracle and other technology majors all played a role.
What does this trip down memory lane remind you of today? If you said cryptocurrency trading, you're correct. Bitcoin launched 1/3/2009. It was not even on the general public's radar until early 2017. It exploded on the retail investor's consciousness in the last quarter of 2017.
Blockchain technology has and will continue to change economic transactions materially. Individuals can now enter into smart contracts, while anonymous individuals with a profit motive ensure that what you are buying, a cryptocurrency, or token, from the other party is real. These "miners" create the currency with their efforts and essentially get paid to keep the central ledger accurate. Prior to this technology, all transactions that required payment had to run through a centralized system, which adds friction costs. Unlike online trading, which was dominated by US investors because of deeper financial markets, cryptocurrencies like Bitcoin, Lite coin, Ether, and their brethren are growing worldwide due to omnipresent internet access. Cryptocurrencies have grown rapidly and have reached over $.5 trillion of market value in a short time.
However, the investment and trading experience for Average Joe is horrible - think equities in 1994.
Buying and selling a cryptocurrency like Bitcoin requires a way to get fiat money, such as dollars, yen or Euros, into the system to allow the purchase. Companies like Coinbase in the US and others around the world enable this. It is time consuming and discourages easy adoption. There are also Bitcoin ATM's that exist to allow the purchase of Bitcoin, but they are tied to only one central marketplace (exchange) and are extremely slow. There are multiple central marketplaces in the world where local traders buy and sell these cryptocurrencies, and as a result of being tied to one exchange, the investor may miss the best price.
The problem is that before a buy or a sale can occur it must be recorded in the blockchain. This can be as short as 20 minutes (for at least 6 miners to agree) or as long as 2 days. Unless you are a die-hard speculator or investor, you do not want to wait at a machine for that length of time. Plus, you're not even sure you're getting the best price. This archaic system even prevents retail establishments from relying on the cryptocurrency for the purchase of goods unless they want to speculate on the token's direction in the coming hours or days.
Large hedge funds and wealthy individuals are able to buy and sell simultaneously on multiple exchanges and can thus afford to wait for the Iong settlement time. In online equities trading, Etrade confirms the trade immediately, even though there is a 2 day settlement period in reality - the firm has a system to guarantee that the trade settles. This is called DTC. The crypto space does not have a guaranteed settlement like DTC...yet. The retail investor is at a dramatic disadvantage in this space – until now.
Just as new technologies allowed an infrastructure to develop and accelerate online securities trading, Virtual Crypto Inc's (VRCP) technology will allow for a dramatic increase in the accessibility of cryptocurrencies, but especially Bitcoin. VRCP uses proprietary algorithmic and artificial intelligence technology to predict, with a very high degree of accuracy, whether at least 6 miners will accept the transaction into the blockchain. The algorithm has been so efficient that a major insurance company will stand behind the trade, up to $3000 per transaction. This allows the owner of the ATM or the central marketplace the ability to immediately confirm a trade of up to $3000 and allow an immediate cashout. Even though the settlement will take up to 24-48 hours, the ATM owner, retail establishment or central market place can settle immediately.
The second component of VRCP's technology is the ability to sweep up to five coin exchanges simultaneously for the fastest execution at the lowest price with the lowest miner fees. At present, this technology is only available to institutional funds. The ATM owner, retail establishment or central market place will have accounts with at least 5 exchanges and transact business with those exchanges and then transact with the retail customer on a peer to peer basis. This appears as an instantaneous trade for the retail investor.
VRCP is a company that provides this step change technology. They will be selling this technology to ATM networks, stores such as restaurants, casinos and mass gathering locations to enable people to trade or pay with crypto because of the immediate settlement. VRCP sells ATM machines, ATM retrofits for established networks, and tablets for retail stores. The company is selling country licenses as well, like its recent Turkey and Cyprus deal. We expect that they may be close to signing several licenses for several large countries and several states in the US. The company's revenue sources will be upfront fees, equipment sales and licensing fees.
The company recently launched its products on a worldwide basis and has become commercial. VRCP is just like the step change technologies that helped online trading firms like Etrade, Schwab and TD Ameritrade to evolve and consolidate. Obviously, there are risks. The first is the speed of adoption of the technology. We believe it will be quickly adopted due to the ease at which the trade settlement can occur. However it could take time. The company is a small technology company with limited marketing expertise.
The company's market capitalization is approximately $25 million. Major fintech companies may recognize this breakthrough at some point in the next year, with their adoption, VRCP could experience a three- to five-fold move in its capitalization. VRCP could become part of a much larger company when we look back at the market for cryptocurrencies 10 years from now. Etrade, Schwab, and TD Ameritrade were all built with many such step jumps.
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One Equity Stocks is a leading provider of research on publicly traded emerging growth companies. Our team is comprised of sophisticated financial professionals that strive to find the companies and management teams that will outperform the market and deliver investment returns to our subscribers. We are not a licensed broker-dealer and do not publish investment advice and remind readers that investing involves considerable risk. One Equity Stocks encourages all readers to carefully review the SEC filings of any issuers we cover and consult with an investment professional before making any investment decisions. One Equity Stocks is a for-profit business and is usually compensated for coverage of issuers we cover as well as other advisory work we perform. In the case of VRCP, we are reimbursed for actual costs we incur, received 667,000 shares of restricted VRCP stock, and may receive additional compensation from VRCP for Business Development, Capital Markets, and Research Services. Please contact us at [email protected] for additional information or to subscribe to our intelligence service.
