Institutional Digital Asset Newsletter - April 2020

Newsletters Apr 26, 2020

Once a month, we summarize the best crypto news for Institutional Investors

In this monthly newsletter, we plan to answer questions institutional investors may have about Digital Assets. We won’t offer investment advice, but we hope to make it easier for you to develop your own strategy, and to keep abreast of the fast-paced evolution of an emerging asset class.

In each newsletter, you’ll get a smattering of links from Trakx and from other reputable sources that reveal trends and developments for our sector. We’ll also fill you in on movements of people and companies (we might even mention you!).


We hope that you find this useful. Constructive criticism is welcome, feedback is valued, and praise will just make our day. Please send comments to [email protected]

INVESTING

Grayscale Says It Raised a Record $500M in First Quarter

The crypto-focused investment firm raised a total of $503.7 million in Q1 2020, nearly double the previous quarterly high of $254.8 million reached in Q3 2019. While bitcoin-weighted trusts continue to be the company's most popular product, the report noted that Ether trusts also received record inflows in the same quarter as investors added multiple Grayscale products to their portfolios.

Grayscale cumulative quarterly inflows since inception
Grayscale cumulative quarterly inflows since inception

The firm, a unit of New York-based Digital Currency Group, raised about $600 million across the whole of 2019. With last week's report showing Grayscale fund raised more than $500 million in Q1, it's likely that 2020 inflows will exceed the year before.

Grayscale also reported inflows surpassed $1 billion over a 12-month period, the company's first billion-dollar year. This takes the total value of Grayscale assets under management (AUM) to $2.2 billion.

Can Bitcoin Become a “Store-of-Value” Investment ?

Now, we’ve seen an economic crisis that caused dislocation in crypto markets and pushed Bitcoin’s price downward in tandem with Stocks. Also, Gold and Treasury bonds appear to have failed to live up to “safe haven” expectations. If gold’s narrative is being debated, do we still know what “digital gold” means? At the very least, the events of the past month revealed that bitcoin survived the Covid19 and might even thrive coming crisis as fiat will mechanically lose value following the massive injection of liquidities to economies.

Source: Chainalysis - What Covid-19 Means for Cryptocurrency Markets - 8 Apr  2020

Moreover thanks to Coindex research, we’ve learned from last month's events that the bitcoin “store-of-value” notion was not a flight of fancy, as long-term holdings were unmoved on March 12.

The bitcoin code registers timestamps of any transactions, and 2 key trends were seen during the March 12 crash: long-term bitcoin holdings (6 months or more) did not move, while shorter-term investors (especially with bitcoins held for 3 to 6 months) sold abruptly their positions.

The chart below (Source: Coindesk Quarterly Review Q1 2020) shows investors’ holdings over time, according to how long they’ve held bitcoins. The upper bands (long term holders) are unchanged while the shorter-term holders moved to the 1 day band.


DIGITAL ASSET OVERVIEW

LEO Token story

In June 2019 Leo token was launched to rescue Bitfinex, a major crypto exchange owned by iFinex. The exchange had lost USD 851 million of client funds, after a scam (affair involving Bitfinex). To alleviate the cash shortfall, BitFinex had conducted a private offering for $1 billion for it's new token Unus Sed Leo (LEO).

LEO token runs an attractive option for its holders by introducing a whole range of planned benefits and reduced fees.

The owning company, iFinex, is supposed to buy back and burn Leo tokens as long as the tokens are found in commercial circulation.

Tokens are bought back from the market and burnt every 3 hours. Buy-backs are determined following these rules (scroll down to Supply Curve Details).

PLATFORM

·        FTX is launching tokens that track bitcoin volatility

·        Binance is launching a new Ethereum-compatible blockchain

REGULATION

G20 watchdog issues recommendations for regulating ‘global stablecoins’

The Financial Stability Board (FSB), which coordinates rules for the Group of 20 (G20) economies, has issued recommendations for regulating “global stablecoins” such as the Facebook-led Libra project.

The ten “high-level” recommendations, published last Tuesday in a 67-page report, seek to promote “consistent” and “effective” regulation of global stablecoins.

“The recommendations aim to mitigate the potential risks with the use of GSCs [global stablecoins] as means of payment and/or store of value, both at the domestic and international level while supporting responsible innovation and providing sufficient flexibility for jurisdictions to implement domestic approaches,” said the FSB.

PEOPLE MOVE

·        Coinbase Taps Ex-Barclays Markets Exec to Head Institutional Coverage

·        Kraken Hires Lawyer Marco Santori to Ramp Up Acquisitions

Gary Rebibo

CMO @Trakx