Green Light to Invest $423B in Crypto Can ‘Increase Demand’ for Them But Pose ‘Significant’ Liquidity Risks: Fitch

Green Light to Invest $423B in Crypto Can ‘Increase Demand’ for Them But Pose ‘Significant’ Liquidity Risks: Fitch

One of the ‘Big Three credit rating agencies’ doesn’t expect large volumes in crypto-exposed funds in the next one to two years, but if other regulators follow Germany’s suit, AUM could eventually reach levels sufficient to pose greater financial stability risks.

One of the ‘Big Three credit rating agencies, Fitch Ratings, says German funds’ crypto investments will pose liquidity risks.

This is regarding the new regulations that came into force on August 2 applying to Spezialfonds, reserved for institutional investors with insurance companies and pension funds dominating their investor base, allowing them to invest up to 20% of their assets in cryptocurrencies.

Open-ended Spezialfonds had 2 trillion euro (nearly $2.35 trillion in USD) assets under management at end-March 2021, implying a maximum crypto-investment of up to EUR360 billion (almost $423 billion), which compares to Bitcoin’s current market cap of $845 billion and the total crypto market cap of $1.95 trillion, noted Fitch in its report.

However, the firm does “not believe that allocations to crypto-assets will reach close to the 20% threshold, considering the traditional risk-averse asset allocation patterns of the main institutional investors in Spezialfonds, as well as other regulatory restrictions on their asset allocation.”

According to Fitch, these regulatory changes can “increase demand for cryptocurrencies” but at the same time pose significant risks, notably liquidity risk, for the funds that invest in such assets.

These changes bring cryptocurrencies into the traditional and more regulated financial system. They could result in increased exposure for crypto assets to retail investors whose assets, such institutions, manage insurance policies and retirement benefits.

Still, volatility in crypto will present challenges for these fund managers, according to Fitch.

Interestingly, amidst these concerns for volatility and riskiness of crypto from the traditional markets, Japan’s new 10 trillion yen ($90 billion) university fund is looking to invest in alternative riskier assets as it seeks returns that would beat those of the country’s more conservative pension funds.

But Fitch feels managing the liquidity risk of mutual funds invested in such highly volatile assets would be important for these managers. These liquidity risks could increase if crypto investments become material in the asset class.

“If these factors caused a temporary suspension of fund redemptions (known as ‘gating’), or fund failure, this could result in reputational damage to the relevant fund managers,” that could potentially heighten regulatory scrutiny, said Fitch while noting that these risks are not limited to crypto-asset funds, several European funds investing in traditional assets gated in March 2020 due to material price movements.

Overall, the rating agency doesn’t expect large volumes in crypto-exposed funds in the next one to two years. Still, if other regulators follow suit, AUM could eventually reach levels sufficient to pose more significant financial stability risks.

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Author: AnTy

Japan FSA Commissioner: Need to “Consider Carefully” to Make It Easier to Invest in Crypto

Japan FSA Commissioner: Need to “Consider Carefully” to Make It Easier to Invest in Crypto

Japan’s Financial Services Agency Commissioner Junichi Nakajima is open-minded about the potential benefits of crypto assets but said they are currently being used primarily for speculation and investment and not as a means of transferring money. Nakajima said in an interview,

“We need to consider carefully whether it is necessary to make it easier for the general public to invest in crypto assets.”

Nakajima, 58, who became the chief of Japan’s financial regulator last month, said new challenges come from decentralized finance (DeFi). Just last month, Japan’s FSA set up a study group of outside experts and is expected to consider regulatory responses to DeFi in the coming months.

Japan continues to be heavily redistricted after the hack of Tokyo-based crypto exchange Coincheck in 2018, which led to the tightening of regulations. In 2017, Nakajima was involved in drafting Japan’s first regulatory framework for crypto assets that included the registration requirement for exchanges.

While the current regulatory framework on exchanges has been effective in anti-money laundering and customer protection, many of the 31 registered platforms are struggling financially, said Nakajima, who is an engineering major from the University of Tokyo.

Nakajima further said that, unlike stocks, crypto-assets do not have underlying assets, as such, subject to big price swings.

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Author: AnTy

Citigroup’s Richest Clients Can Now Trade Crypto; Also Helps Invest in Stablecoins, NFTs, & CBDC

Citigroup’s Richest Clients Can Now Trade Crypto; Also Helps Invest in Stablecoins, NFTs, & CBDC

Citigroup is finally coming around on cryptocurrencies.

The Wall Street giant now allows its richest clients to bet on crypto as part of a new digital assets group inside its wealth management unit.

This wealth management unit has been in the works ever since Citigroup formed the division earlier this year, and more recently, it has been focused on building out a series of wealth management hubs across Europe and Asia.

Under Citigroup’s crypto plan, the new group will help clients invest in cryptocurrencies, stablecoin, non-fungible tokens (NFTs), and central bank digital currencies (CBDCs), according to the memo.

The new effort will be led by Alex Kriete and Greg Girasole, who will serve as liaisons to “all other business groups at Citi who are expanding into this rapidly emerging space also.”

“They will be responsible for developing our future product capabilities, client delivery mechanisms, and thought leadership around all digital assets,” said Iain Armitage, Citigroup’s global head of capital markets for its private bank, and Rob Jasminski, who oversees the bank’s investment management arm globally, in the memo.

The bank is forming the unit as investor demand for crypto assets continues to soar and its rivals like Goldman Sachs and Morgan Stanley also start offering crypto-related services to their clients.

The newly formed unit comes just weeks after the CEOs of the six biggest US banks were grilled by Congress over their ties to cryptocurrencies. At the time, Citigroup chief executive Jane Fraser said her bank was taking tentative steps in the crypto space.

“We proceed with great caution here,” Fraser said.

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Author: AnTy

Payments Giants PayPal and Visa Invest in Blockchain Capital’s New Fund Focused on DeFi & NFTs

Payments Giants PayPal and Visa Invest in Blockchain Capital’s New Fund Focused on DeFi & NFTs

Payments giants PayPal and Visa both have invested in Blockchain Capital’s latest fund.

The blockchain-focused venture capital firm raised $300 million in funding for its Fund V from investors, including PayPal and Visa.

Blockchain Capital that invests in both crypto and equity assets said the investments would be focused on blockchain infrastructure and application of the technology, NFTs, and decentralized finance (DeFi).

The firm said some investors, including both the payments giant, will also be participating in a strategic partnership program.

Founded in 2013, the company has invested in more than 110 companies so far, including cryptocurrency exchanges Coinbase and Kraken and Anchorage and non-fungible token (NFT) marketplace OpenSea.

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Author: AnTy

Mike Novogratz’s Publicly Trading Company to Invest $100 Mln in Crypto Venture Funds

Mike Novogratz’s Publicly Trading Company to Invest $100 Mln in Crypto Venture Funds

Billionaire Mike Novogratz, CEO of New York-based Galaxy Digital, has announced that he will be investing $100 million in crypto-related venture funds over the course of the next two years.

Cryptology Asset Group, a Malta-based investment company co-founded by Novogratz, has 450 million euros ($548 million) in assets. Through its latest investment, the firm intends to focus on first-time funds and emerging managers with stakes in crypto assets or crypto-related companies.

A publicly traded holding company for blockchain-related assets in Europe, Cryptology already has Block.one, Northern Data, and Iconic Funds in its portfolio. Co-founder Christian Angermayer said in the release,

“We are at the very beginning of the crypto revolution, and we strive to become one of the leading global investors in this very nascent asset class.”

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Author: AnTy

The Debate on Bitcoin’s Energy Consumption Continues

Twitter CEO Jack Dorsey, along with Cathie Wood’s Ark Invest, are working towards using Bitcoin mining to “accelerate the global energy transition to renewables.” According to CoinShares, an estimated 74% of the energy used in bitcoin mining actually comes from renewable sources.

While people argue that given the majority of Bitcoin’s hashing power comes from China, that it energy consumption is based on coal, but that’s not true because most of the Chinese miners depend on hydroelectric power; which is the cheapest power source.

Inner Mongolia, the second-largest coal producer, has shut down crypto mining, which could further push miners towards using renewable sources.

As a step towards making the world greener, the CEO of crypto exchange FTX announced the donation of $1 million to offset the blockchain resources it uses. Another exchange, BitMEX, has joined FTX in its green efforts.

Amidst the energy consumption discussion, Sam Korus, an analyst at Ark Invest, posted an update to ARK’s open-source solar, battery, and Bitcoin mining model, which now allows one to test how the system would have performed in historic Bitcoin bull and bear markets.

“The takeaway is that regardless of a Bitcoin bull or bear market, Bitcoin mining can incentivize additional solar and battery installations,” he said. “The next step is to dimension solar+battery+Bitcoin mining at the household level.”

Elon Musk also chimed in here.

As Brett Winton, Director of Research at Ark Invest, talked about Bitcoin mining being able to allow solar and battery systems to economically scale to provide a larger share of grid energy, Musk took part in this conversation by agreeing that “this can be done over time.”

However, “recent extreme energy usage growth could not possibly have been done so fast with renewables,” he added.

Musk then goes on to say how Bitcoin’s energy usage has started to exceed that of medium-sized countries, making it “almost impossible for small hashers to succeed without those massive economies of scale.”

As Bitcoiners have been pointing out, Bitcoins’ energy usage is what makes the network so secure and decentralized.

“Achieving truly decentralized finance – power to the people – is a noble & important goal. Layer count depends on projected bandwidth & compute, both rising rapidly, which means single layer network can carry all human transactions in future IMO,” said Musk. “For now, Lightning is needed.”

In a separate tweet, he continued to share his love for Dogecoin as he demonstrated a Doge dollar sticker that a Tesla supporter gave him in Berlin.

Musk further revealed that he actually owns DOGE, the sixth-largest cryptocurrency by the market of $50.3 billion, trading at $0.3574, and that he has no plans to sell any. DOGE -10.22% Dogecoin / USD DOGEUSD $ 0.36
-$0.04-10.22%
Volume 7.42 b Change -$0.04 Open $0.36 Circulating 129.69 b Market Cap 46.44 b
6 h The Debate on Bitcoin’s Energy Consumption Continues 3 d FTC Data Reveals Big Jump In Crypto Investment Scams, Losses Totaling $80M 3 d Coinbase Enables its Over A Million Wallet Users to Use DeFi — DEXs, NFTs, & More

“I haven’t & won’t sell any Doge,” said Musk.

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Author: AnTy

Venture Capital Giant Is Planning to Raise $1 Billion to Invest In Cryptocurrencies and Startups

Venture Capital Giant Is Planning to Raise $1 Billion to Invest In Cryptocurrencies and Startups

Andreessen Horowitz, a venture capital giant, is looking to raise as much as $1 billion in cryptocurrencies and crypto startups.

This new fund aims to raise between $800 million and $1 billion from investors, reported the Financial Times, citing people familiar with the matter.

With this latest move, one of Silicon Valley’s highest-profile venture capital firms is introducing one of the largest pools of capital to crypto, potentially twice the size of its predecessor — its third crypto fund, which raised $515 million a year ago.

After the success of Coinbase, currently valued at about $60 billion down from the initial brief valuation of $100 billion, institutional investors such as endowments and foundations are now renewing their bet on the technology.

Founded in 2009 by Marc Andreessen and Ben Horowitz, the venture capital firm, which was also an early investor in Coinbase along with Ripple through traditional funds, was managing $35.8 billion in regulatory assets at the end of last year.

Its latest fundraising would rival the capital raised by Paradigm, a crypto investment firm founded by Coinbase co-founder Fred Ehsram and former Sequoia Capital partner Matt Huang in 2018.

Paradigm has raised $1 billion from investors, including endowments of Harvard and Yale universities.

Another one, Pantera Capital, aims to raise $600 million for a new blockchain fund that will combine investments in private companies and tradable tokens. Its last venture fund raised $175 million in 2018, which surged 3.8x in January this year.

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Author: AnTy

Wealthfront Allows Clients to Invest in Crypto; Germany Passes Legislation on Spezialfonds

Wealthfront Allows Clients to Invest in Crypto; Germany Passes Legislation on Spezialfonds to Allocate 20%

Wealthfront is the latest one to start allowing its clients to invest in cryptocurrencies later this year.

The US digital wealth manager with $16 billion in assets under management said starting this week; users will be able to build their own portfolio from a range of ETFs vetted by their team.

This a notable shift for Palo Alto, a California-based startup that has been traditionally more conservative and long term. It is not yet known which cryptos would be available.

Dan Carroll, co-founder, and chief strategy officer of Wealthfront, said the changes reflected a growing desire from Millennial and Gen Z investors to make investment choices.

“Wealthfront will be the place to invest responsibly, not some Wild West arcade,” Carroll said. “We can do it in a fiduciary way. We care what is in your best interests. We won’t let you put 100% of your portfolio in crypto.”

The company, which has around 357,425 accounts, will also continue to rebalance portfolios automatically and tell users about the impact their investment choices have on their risk level.

Amidst this growing adoption of cryptos, big news came from Germany, where new legislation allows the managers of popular institutional investment funds, Spezialfonds, to allocate 20% to crypto assets.

The law that cleared federal parliament last Thursday will come into force on July 1, which further legitimizes the asset class and boosts the cryptocurrency industry in the country.

According to market experts, this could release huge sums of money as it allows thousands of existing investment funds to invest in Bitcoin and other crypto-assets.

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Author: AnTy

UK Hedge Fund Brevan Howard Plans to Invest 1.6% of $5.6B Capital in Cryptocurrencies

UK Hedge Fund Brevan Howard Plans to Invest 1.6% of $5.6B Capital in Cryptocurrencies

European hedge fund Brevan Howard Asset Management is reportedly planning to invest part of its capital in Bitcoin, according to Bloomberg.

Hedge Fund Joins League of Institutional Investors

Per the report, the firm is set to invest up to 1.6% of its $5.6 billion capital in cryptocurrencies. This translates to about $84 million soon to be allocated into digital assets.

Co-founders of crypto investment firm Distributed Global, Johnny Steindorff and Tucker Waterman, will oversee the crypto purchase for Brevan Howard.

Brevan Howard plans to have a diversified portfolio of cryptocurrencies; not just Bitcoin (BTC) and Ethereum (ETH).

The billionaire co-founder, Alan Howard has been investing in cryptocurrencies with his personal investments. He joins the likes of wall street heavyweights backing cryptocurrencies.

Howard owns a significant stake in European cryptocurrency asset manager CoinShares. He has also led and participated in many funding rounds for crypto startups. These include European companies such as Komainu and Nextmarkets.

More To Come, Less To Go

With the increasing debut of institutional investors in cryptocurrencies across the world, experts believe that more will come in and less will go because of the rising value of Bitcoin. At press time, Bitcoin trades at $61,896, still down 1.6% in the last 24 hours.

A survey report conducted by Glassnode showed that there was about 4 million Bitcoin in circulation, a feat that has never happened before.

The report added that the sharp rise in the demand for digital assets might lead to a massive supply squeeze in the meantime, which is capable of pushing the price higher.

As a result, the coins being mined are not even enough to meet the people’s demand. Most experts believe the short squeeze is also a factor driving crypto prices.

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Author: Jimmy Aki

JPMorgan, Mastercard, & UBS Invest in ConsenSys’ $65M Round to “Accelerate the Convergence” of DeFi and Traditional Finance

JPMorgan, Mastercard, & UBS Invest in ConsenSys’ $65M Round to “Accelerate the Convergence” of DeFi and Traditional Finance

ConsenSys, an Ethereum software company, announced the closing of a $65 million round to “accelerate the convergence” of DeFi and Web3 applications on Ethereum.

The companies that took part in this funding involve J.P. Morgan, Mastercard, UBS, Protocol Labs, the Maker Foundation, Fenbushi, The LAO, and Alameda Research.

“Enterprise Ethereum is a key infrastructure on which we and our partners are building payment and non-payment applications to power the future of commerce,” said Raj Dhamodharan, Executive Vice President of Digital Asset and Blockchain Products and Partnerships at Mastercard.

Other investors include CMT Digital, Greater Bay Area Homeland Development Fund, Quotidian Ventures, and Liberty City Ventures.

Interestingly, several funds invested with Ethereum-based stablecoins, DAI and USDC, read the official announcement by the tech company.

“We are proud to partner with preeminent financial firms alongside leading crypto companies to further converge the centralized and decentralized financial domains at this particularly exciting time of growth for ConsenSys and the entire industry,” said Joseph Lubin, founder of ConsesnSys who co-founded Ethereum. ETH 7.13% Ethereum / USD ETHUSD $ 2,302.61
$164.187.13%
Volume 29.46 b Change $164.18 Open $2,302.61 Circulating 115.46 m Market Cap 265.85 b
3 h CoinList’s Rally Network Liquid Token Sale Attracts 40k Users to Buy $22 Million in RLY 5 h JPMorgan, Mastercard, & UBS Invest in ConsenSys’ $65M Round to “Accelerate the Convergence” of DeFi and Traditional Finance 8 h CoinShares is Launching an XRP ETP (XRPL) as the Digital Asset Nears $2

The company currently has a headcount of 360 and plans to add another 100 employees by the end of this year.

ConsenSys’ list of products includes MetaMask with over 3 million monthly active users across, more than 150,000 developers use Infura’s APIs, and millions of developers using Truffle to create and deploy smart contracts. Meanwhile, its Protocols group, which develops Hyperledger Besu and Quorum, is building Central Bank Digital Currencies (CBDCs) for six central banks.

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Author: AnTy