Good morning from San Francisco!
With more than three-quarters of the year now behind us, Bitcoin’s price is showing no signs of a meaningful uptick for the remainder of the year. In terms of positive news for cryptocurrencies, the last two weeks have been probably the best stretch of feel-good cheer in 2018, with TD Ameritrade announcing their investment in a cryptocurrency spot and futures exchange and the news around serious institutional investors (Yale’s endowment fund) finally dipping their toes in to crypto waters.
In a year that has had a dearth of positive triggers to induce an upwards price reaction, we are quite surprised by the market’s impassivity to all this good news. This is the opposite of what we saw at the end of last year, when any negative news was discounted by the market in Bitcoin’s manic run up to $20k.
One reason all the good news is not moving the market is likely because of the passive nature of the cryptocurrency exposure that institutional investors are seeking. We would have expected prices to run up more than they did if Swensen of Yale, for instance, had made a direct investment in cryptocurrencies. Institutional investors preferring indirect exposure to cryptocurrencies is seen as indicative of their misgivings with the fundamentals of this asset class and/or the lack of sufficient institutional-grade custodial solutions. As we have opined before, this has been the biggest deterrent for institutional investors with respect to cryptocurrencies.
There has been anecdotal evidence of institutional investors pouring in money into OTC markets, which should offer more price stability to Bitcoin going forward. And the fact that, unlike equities, where heavy buying/selling in OTC markets has an almost instantaneous effect on exchange-traded prices, the siloed and insular nature of crypto OTC markets makes the flow of information and the subsequent price creep/adjustment into exchange-traded prices much harder and slower.
“Robinhood Expands in the US” Robinhood, the trading app which allows users to trade major cryptocurrencies without any commission is expanding geographies to include 3 more US states. The app also allows trading of stocks, options and ETFs. Its revenue model includes collecting interest on user funds and a premium subscription which allows users to use leverage for margin trading.
“Bitfinex Meets HSBC” Cryptocurrency exchange Bitfinex has tied up with London-based banking giant HSBC to take care of its banking needs such as fiat deposits. The news is a welcome development for the exchange which has had multiple banking crises in the past – Wells Fargo blocked its accounts in 2017 and later, its only other banking partner, Noble Bank, filed for bankruptcy.
“Collateral Damage” Over the weekend, Pantera Capital, a leading US-based blockchain investment fund, released an update regarding its latest fund. The fund, which invests across the cryptocurrency spectrum, is down over 40% since its launch in December 2017. The results are unsurprising given that crypto markets as a whole are down over 70% since their peak in January 2018.
“Petro, Whether You Like It or Not” Venezuela’s citizens continue to suffer under the side-effects of its currency woes and hyperinflation as the government tries to tighten its grip on the monetary landscape. Delcy Rodriguez, the Vice-President has stated that passport fees will only be payable in Petro, the country’s controversial cryptocurrency launched recently. Passport fees were also increased to $200 for new issues and $100 for reissues.
Today’s NAV is ~$1.27, up roughly 29% since launch.
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