Crypto’s Price Correction Isn’t Killing the Industry High
“You should buy crypto in amounts you’re not worried about, and sell it whenever you start thinking about it.”
At least that’s Blockchain CEO Peter Smith’s stance on investing in cryptocurrency, a take issued during just one of a dozen or so panel discussions at Yahoo Finance’s All Markets Summit Tuesday. Focused solely on cryptocurrencies, the one-day event, curated in part by CoinDesk, paired Smith with Chain CEO Adam Ludwin, who agreed this wasn’t exactly a bad investing philosophy.
The comments, while perhaps amounting to ‘Investing 101’ advice, were notable for their contrast to the “just HODL” movement, an ethos propagated by early investors that has largely encouraged the holding of cryptocurrency – no matter the ups and downs.
But that’s not to say that the panel, as well as the day’s event, didn’t showcase just how captivated investors are with cryptocurrency these days.
Smith told attendees:
“There’s probably never been more hype about a technology or industry than ours.”
And numbers from a survey Yahoo undertook seem to bear that out.
According to Yahoo editor-in-chief Andy Serwer, 40 percent of respondents have bought cryptocurrencies over the past year. Yet, in the same survey, about half still believe they may be a fad or even a hoax.
Both the hype and this confusion has caught the attention of various regulators – two of which, the CFTC and the SEC, were called before a Senate hearing on cryptocurrency just a day before the event. As such, the hearing provided ample fodder for the speakers, many of whom saw the regulators’ remarks as a positive for the fast-growing industry.
Speakers touched on the plethora of new investment vehicles and tools, even as some spoke out about what they feel is the nascent state of the technology.
“Usually nascent technologies out of the lab don’t get this much attention because there’s no way to profit off them,” said Ludwin. “It’s good to never lose sight of that.”
“You have a capital markets phenomenon overlaid against a very early technology … so time will tell whether this intense capital markets thing around it stunts the growth or accelerates the growth or stunts and accelerates back and forth, which has sort of been the course so far.”
More sophisticated options
But caution aside, much of the focus was on products, including hedge funds, derivatives, futures and initial coin offerings (ICOs) – topics that were all widely discussed during the day’s event.
For example, Barry Silbert, head of crypto investment conglomerate Digital Currency Group (DCG), was there to tout a new fund announced Tuesday by Grayscale, a DCG subsidiary specializing in public markets vehicles offering cryptocurrency exposure.
The fourth Grayscale product, the Digital Large Cap Fund is designed to give investors exposure to the five largest cryptocurrencies based on market capitalization, and it joins the ranks of a whole slew of hedge funds that have launched over the past year to lure more institutional investors.
Not only that but derivatives, futures and ETFs were also mentioned several times.
Bitcoin futures may have made a debut of two large traditional exchanges, CME Group and Cboe, at the end of last year, but there’s talk that more could be on the way.
According to Karan Sood, the CEO of Cboe Vest, the investment management arm of Cboe, the launch of futures has parlayed into more interest from Cboe’s institutional clients.
Speaking to the combination of traditional tools and the crypto market, Sood said:
“To marry those two gets us all excited.”
Cboe also seems excited about the idea of bitcoin ETFs, filing with the SEC to list six in one week at the end of December. Yet, no ETF has been approved so far. And as the SEC has been reluctant to accept the crypto ETF notion in the past, several speakers voiced pessimism that the product would be seen soon.
“A more likely thing is the continuation of the derivative aspect, because at least you have oversight from the CFTC on derivatives, and that’s how you were able to get the first products out,” said Kathleen Moriarty, a partner at Chapman and Cutler LLP.
Yet, Sood said retail investors are still predominantly driving interest in these sophisticated products. And as such, regulators are doing their best to keep up.
Wait up, innovators
On hand representing this group was CFTC commissioner Brian Quintenz, who spoke about how regulators are still trying to get their bearings in the crypto space.
Over the past several months, the CFTC has made headlines on multiple occasions for the role it played in jumpstarting the bitcoin futures market by overseeing a number of regulated products, and Quintenz didn’t exactly temper the mood Tuesday.
“One of the other takeaways from yesterday,” said Quintenz, speaking to Monday’s Senate hearing, “was you didn’t hear either chairman say ‘No, absolutely not, this is not safe, we must stop this at all costs.’ No one said that.”
“We don’t want to be saying no to innovators.”
Having said that, though, Quintenz did elaborate on where the CFTC and other regulators would be focusing some of their efforts.
According to him, regulators are looking at the difference between a futures contract and a sale. If the delivery of an asset happens within 28 days, he said, it’s a sale and not a future. As such, the CFTC is currently looking for input on how to protect investors from what he called “look-alike” futures contracts.
Yet, while many speakers tipped their hats to the regulators for their seemingly positive outlook, Perianne Boring, the president of Chamber of Digital Commerce, a Washington D.C.-based advocacy group for cryptocurrency, said the regulatory landscape remains a mess in her eyes.
The CFTC is regulating cryptocurrency as if it’s a commodity; the IRS calls cryptocurrency property for tax purposes; and the SEC sees some cryptocurrencies as securities.
Because of this, she believes cryptocurrency entrepreneurs might leave the U.S. for not only places with lower regulatory hurdles, but those with a more clear regulatory framework for the nascent industry.
“In three years, we’ve really turned this around, to the point where we have a Congressional blockchain caucus, a group of senators coming together to say we’re going to protect this industry,” Boring continued.
But she and many others are hoping the cryptocurrency industry can come together to find ways to self-regulate so that stricter regulatory action isn’t pursued.
“We need best practices so people can delineate good from the bad,” she remarked.
Proceed with caution
Yet, that’s a tricky thing to do, especially since even experts in the industry have trouble figuring out what end is up in the space.
Alex Sunnarborg, a founding partner at Tetras Capital, went through a list of the ever-expanding list of available cryptocurrencies during his fireside chat, highlighting the growing number of token products, which have primarily differentiated themselves in name only (SAFT, ICO, TGE, ICBM).
All these new names have made it challenging for investors to differentiate tokens in an effort to decide which ones to invest in. And not only that but vetting cryptocurrencies and crypto tokens requires some amount of technical proficiency in looking at the teams, the white papers and the economics of the system.
Brad Garlinghouse, CEO of Ripple, whose native cryptocurrency XRP has seen meteoric growth over the past couple months, also commented on the troubles of assessing the token industry. In particular, he said many of the tokens he sees don’t have much purpose, and that as the industry corrects from the hype, “there’s also going to be carnage along the way.”
With that, Boring reminded the audience they shouldn’t invest in things they don’t understand.
“For the retail investor who wants to get involved in the blockchain ecosystem, whether through an ICO or through other means, you really need to educate yourself,” she continued. “For the first time in possibly history, you can have control – but with that increased amount of control comes an increased amount of responsibility.”
Having said that, though, Boring is still a true-blue crypto believer, telling the audience:
“I have more money in cryptocurrencies than in any formal retirement fund.”
Written by CoinDesk.com
Grayscale Plans to Launch a Cryptocurrency ‘Large Cap Fund’
Grayscale Launches a New Cryptocurrency Fund
The managers of the popular bitcoin investment fund GBTC and the ethereum trust, Grayscale, have decided to create a much larger investment product comprised of a basket of top-performing cryptocurrencies. According to Grayscale’s announcement, the basket will consist of litecoin (LTC) bitcoin cash (BCH) ripple (XRP) bitcoin core (BTC), and ethereum (ETH) for now.
“We’re excited to further expand the universe of Grayscale’s product offerings as interest in the digital currency asset class continues to grow,” said Barry Silbert, CEO, and founder of Grayscale Investments.
As a trusted and experienced manager, Grayscale is committed to creating investment structures that are familiar to qualified investors and provide secure access to this emerging asset class.
The Fund Targets 70% Coverage of the Digital Asset Market
The sponsors first funds consisting of ETH and BTC have done phenomenally well following alongside the prices rises of spot markets. When Grayscale launched its first product back in 2013 at the time BTC was averaging $127 per coin and GBTC became one of the first mainstream investment vehicles tied to bitcoin reserves. In July of 2017, the firm initiated its ethereum trust which is framed in a similar fashion. For the new ‘Grayscale Digital Large Cap Fund’ the sponsor may also hold cash and assets that arise from forks and airdrops. Shares will reflect the platform Tradeblock’s Digital Asset Reference Rate at 4 pm EDT.
“Through a rules-based portfolio construction process, the Fund targets 70% coverage of the digital asset market — The Fund will be rebalanced on a quarterly basis to remove existing digital assets or include new digital assets in the Fund’s portfolio in accordance with certain criteria established by Grayscale,” explains the announcement.
One Year of Holding and Risk
According to Grayscale the Fund is a Cayman Islands limited liability company but based in the United States. The product is also not registered with the U.S. Securities and Exchange Commission (SEC), and is not subject to American based securities laws.
Moreover, Grayscale details that the investment product is “highly speculative in nature,” and the Fund is subject to a one-year holding period. This means investors have to “bear the risks” for an entire year, but after the holding period assets can be “resold without restriction,” Grayscale concludes.
Written by Bitcoin.com
Dfinity raises $61 million for platform that rivals ethereum
Dfinity, a new product that rivals ethereum, just raised $61 million by well-respected investors Andreesen Horowitz and Polychain Capital, which has investors ranging from Sequoia Capital to Union Square Ventures.
This is the first token Andreesen Horowitz has invested in. Chris Dixon, general partner at Andreesen, led his firm’s investment in Dfinity. Ryan Zurer, venture partner at Polychain Capital, led his fund’s investment, which is its largest to date.
The $61 million raised in this strategic round brings Dfinity’s total project funding to over $100 million.
Dfinity’s Chief Scientist Dominic Williams told CNBC that Difinity has the power to disrupt the world of technology, calling it the “internet computer that will become the cloud 3.0.”
But what sets Dfinity apart from the rest?
Williams says Dfinity runs extremely fast and doesn’t have the security risks that many cryptocurrencies have fallen victim too.
“Dfinity is ultimately a new technology protocol with no back doors where hackers can get in,” said Williams.
The security component is perhaps most compelling to investors given the number of hacks the cryptocurrency industry has seen in the last 12 months. The latest one in Japan involved over $500 million of tokens being stolen from consumers’ digital wallets.
Time is also Dfinity’s friend. Williams says he’s built a technology that offers 3-5 second transaction finality, which is about 150 times faster than ethereum and over 900 times faster than bitcoin.
If this holds, experts say Dfinity could upend the cryptocurrency market.
“This is extremely important for scalability and transaction throughput on the network and will be important for any use-case that requires high-frequency transactions such as IoT or enterprise solutions. This will be the beginning of an architecture that becomes the new internet,” said Zurer.
One of the challenges in transacting with bitcoin is the amount of time it can take. But software enhancements like the “lightning network” are said to dramatically increase the speed at which one can buy or sell bitcoin. Lightning Labs CEO Elizabeth Stark told CNBC that once the lightning network is rolled out, it could make bitcoin much easier to use and transact with. Bespoke Investment says its bullish forecast on bitcoin is contingent on the lightning network being enabled in the coming months.
Written by CNBC
Korean Supreme Court to Judge Whether Crypto Regulations Are Unconstitutional
Case Referred to Supreme Court
The constitutional appeal filed against the South Korean government over cryptocurrency regulations at the end of December has been referred to the country’s Supreme Court by the Constitutional Court.
Lawyer Jeong Hee-chan alleged that “regulating the trade through administrative guidance without any legal grounds is an infringement of property rights,” the Korea Times reported and quoted Jeong’s law office stating:
The government’s regulations are devaluing virtual currencies by making trading very difficult…Thus, this is an infringement on people’s property rights by the government’s unlawful measures.
Jeong clarified, “We agree that regulations are necessary,” adding “but regulations should come after related laws are implemented. The petition is also a request for the government to respect people’s property rights and introduce regulations after reaching a social consensus.”
Is the Real-Name System Unfair?
As part of the regulations for cryptocurrencies, the government has implemented a mandatory real-name system for cryptocurrency exchange accounts. The system went into effect on January 30.
According to the regulators, all existing virtual accounts used by cryptocurrency traders must be converted into real-name ones in order to deposit money for trading. After one week, only 8.21% of all virtual accounts at the country’s top four exchanges have been converted into real-name ones, leaving 1.6 million accounts unconverted.
Furthermore, banks are only converting accounts for Upbit, Bithumb, Coinone, and Korbit, leaving smaller exchanges with no way to use the real-name system. The Economic Review elaborated:
The key issue is the unfairness of the virtual currency real name system…the government should clarify the grounds for enacting the virtual currency real name system in the main judgment. The basic rights of the people in the Constitution can be restricted only by laws set by the National Assembly.
“The government insisted it [the real-name system] is legitimate based on the Banking Law and the Financial Information Act,” Top Star News described, adding that:
If the court makes an unconstitutional judgment, all the existing [cryptocurrency] regulations of the government can be nullified.
According to the Economic Review, the matter “shall be concluded within 180 days” from the date of filing under the Constitutional Court Act which was on December 30. Therefore, the case is expected to conclude by the end of June.
Written by Bitcoin.com