Grayscale’s Record-Breaking Hat-trick, Q3 Inflows Rakes in Over $1 Billion in Investment

Q3 was the best quarter ever for Grayscale Investments, which serves institutional investors, family officers, and private investors.

The largest digital asset manager took in more than $1 billion in new investment in its largest-ever quarterly inflows, marking it the third-straight quarter when the asset manager broke its own record for inflows.

As per the firm’s report on Wednesday, Grayscale now has $5.9 billion in assets under management (AUM).

This growth came despite the global economy taking a nosedive in 2020, and the price of Bitcoin recording gains of only 18%.

Like every time, the leading digital asset remained the most popular cryptocurrency. Grayscale Bitcoin Trust (GBTC), the company’s largest product, saw $719.3 million in new inflows in Q3.

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The persistent demand for GBTC has the company becoming one of the fastest-growing investment products in the world. It is further increasing the appetite for Grayscale’s other products.

Ethereum saw a record growth with 17% of the investment in Grayscale Ethereum Trust (ETH) from new institutional investors.

This week, Grayscale announced that ETHE is now an SEC reporting company that helped in its price surge.

“We believe in a future where multiple digital assets coexist,” said Michael Sonnenshein, managing director at Grayscale Investments. “We believe that there is a future state where bitcoin, Ethereum, and other digital currencies coexist as part of the digital currency cohort” and are “used for different things,” he said.

Grayscale’s Bitcoin Cash, Litecoin, and Digital Large Cap products also saw over 10x growth in inflows quarter-over-quarter.

Interestingly, for the first time, Grayscale found that a majority of its investors, more than half at 57%, were investing at least two of its crypto investment products, up from 44% a year ago and 37% when the company was first launched in 2012.

More institutions are surely coming, which are not only the primary source of investment capital at 81% in Grayscale, but they also increased their average allocation to $2.9 million from the previous quarter’s $2.2 million.

What is more interesting than this “consistent and significant growth” is what has been behind it.

Besides the digital assets outperforming major indices YTD, investors are interested in them because of the ongoing stimulus concern. With more significant fiscal stimulus expected in Q4, “more investors may look to digital assets for yield in this paradigm of monetary inflation,” it says.

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Author: AnTy

Chinese Investors Turn to Yield Farming Despite The Recent Crash of DeFi Token Prices

Chinese investors are jumping onto decentralized finance (DeFi) despite the recent collapse in crypto markets. In an observation first published on Twitter by Chinese journalist Colin Wu, Chinese crypto exchanges are facing a log-jam of withdrawals as users rush to invest in DeFi tokens.

Over the past few weeks, searches for the word “DeFi” have skyrocketed on the popular Chinese messaging app, WeChat, reaching a high of 900k searches on September 7th. The increase in anticipation and demand for these tokens arises from the supernormal growth and APY returns offered by farming protocols, a trend Wu believes will continue in the future.

Wu also reported a shrinking liquidity pool on local crypto exchanges as investors withdraw large amounts of crypto to cycle them into DeFi. The withdrawals caused several exchanges to shut down operations to prevent a bank run on their liquidity pools.

The Chinese crypto community has since responded to exchanges locking them out of their fund’s launching, a “coin withdrawal campaign.” The campaign calls on all investors from troubled centralized crypto exchanges to withdraw their tokens and “delete their trading accounts.”

Data shows the reserves of crypto exchanges present in China have been depleted with the rise of decentralized finance. Following a massive bull run on the majority of “farming tokens,” the recent slowdown in price has seen Chinese investors rush to fill their bags with ETH in preparation for the net mega bull run. Colin Wu wrote on Twitter,

“[…]The recent sharp drop in the price of ETH, many users buy bottoms on exchanges and then transfer to DEX for farming. The stock of ETH and other farm cryptos on the exchange is falling frantically.”

According to Wu, these exchanges are being forced to list these DeFi farming tokens to keep the investors on their platforms and prevent the move to DEXs.

The DeFi ecosystem has a total locked value (TVL) of $7.7 billion, falling from an all-time high of $9.5 billion recorded earlier in September, according to DeFi Pulse. The DeFi ecosystem started off the year with a TVL of $674 million, experiencing over 9X growth in the past nine months or so. With Chinese investors getting into the ring, the DeFi space could be set for another soar in the near future.

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Author: Lujan Odera

Fintech Investment Firm, Ribbit Capital, Seeks $350M In ‘Blank Check’ Public Offering

Former Trump administration advisor, Sigal Mandelker, teams up with top profile investors in a $350 million public offering in Ribbit Capital, a SPAC firm that invests in fintech firms, including blockchain technology projects. The IPO will raise $350 million for a “blank check” company that invests in the unspecified business at the moment.

Ribbit LEAP, short for Ribbit Capital Long-Term Equity Acquisition Pool, is a unique purpose acquisition company (SPAC) looking to join the increasingly popular blank check model that allows the company to effect a merger, acquire assets, purchase stocks, or reorganize a similar business in a prospectus filed with the U.S. Securities Exchange Commission (SEC).

According to the prospectus, the SPAC has yet to define its planned businesses despite raising the multi-million IPO. Blank checks structures allow companies a vast ground for investment and business operations without any interference from shareholders, who are not allowed to vote on any decisions. The S-1 form reads:

“Our shareholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination even though a majority of our shareholders do not support such a combination.”

Ribbit LEAP is one of the first investors in the U.S’ largest crypto exchange, Coinbase, and over 75 other fintech startups, including Robinhood Markets, CreditKarma, MercadoLibre, Inc., Sea Limited, Next Insurance, and Zillow. Other top crypto companies in the Ribbit LEAP portfolio include U.K based Revolut, Xapo, and Chainalysis.

The prospectus further states that the company offered $402.5 million in class A shares at $10 per share to begin, but fees rose to approximately $52 million, bringing the total IPO to raise close to $350 million. Out of the total available shares, the SPAC has pledged a minimum of $100 million in a forward purchase commitment.

According to Reuters, the company is aiming to list the SPAC on the New York Stock Exchange in the coming days with JP Morgan, the only book-manager running the securities.

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Author: Lujan Odera

Fireblocks Users Can Send Crypto Instantly to FTX Exchange With Zero-Confirmation Program

  • Digital asset firm, Fireblocks introduces the ‘zero-confirmation’ deposits platform.
  • Institutional investors and big players expected to witness faster deposits and trading times.
  • Almeda Research-led crypto derivatives exchange FTX becomes the first to integrate the feature.

An announcement provided to the BEG desk confirms Fireblocks, a digital asset firm providing institutional-grade solutions to crypto traders, has introduced the “Deposit Acceleration program.” The program, announced on Tuesday, aims at reducing the time in making crypto exchange deposits by having zero confirmations on the blockchains.

Looking at the Bitcoin (BTC) blockchain, about 1-6 confirmations from miners are needed to verify the block and record the transactions. With Fireblock’s acceleration program, institutional investors will have room to make faster and larger transactions to crypto exchanges, on-chain, with zero confirmations needed. This incentivizes big players to enter the digital asset space.

Speaking on the launch of the zero-confirmation program, Stephen Richardson, VP of Product Strategy at Fireblocks said,

“The Deposit Acceleration Program is a great way to enable Fireblocks customers to trade on the exchange more actively because being able to deploy assets quickly with their exchange partners directly impacts their ability to drive return on capital.”

Read More>> Fireblocks launches a digital asset transfer network to facilitate faster transactions

Fireblocks efforts to reduce onboarding times

One of the oldest crypto exchanges still running today, Bitstamp, partnered with Fireblocks to deploy one confirmation transactions and deposits on the exchange. Since integration with Fireblock’s solutions, the exchange witnessed a 30% boost in its overall volumes traded from the Fireblock’s institutional gateway.

Now, FTX crypto derivatives exchange is the first platform to integrate Fireblock’s zero-confirmation trades and deposits. Sam Bankman-Fried, CEO and Founder of FTX, said,

“We’re really excited about partnering with the Fireblocks team to solve some of the core latency issues around moving digital assets on-chain. As the first member of the program, we now have the fastest settlement venue for institutional traders.”

Adding to the fast deposits, which allows institutions to onboard their funds and allows traders to trade arbitrage opportunities, the Deposit Acceleration program also impacts the derivatives market positively. This is a crucial addition as it allows crypto derivative traders to mitigate losses from failed margin positions and unlocking the ability to trade during volatile markets.

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Author: Lujan Odera

Big US Banks Set Aside Billions in Downturn Warning; Stocks Continue to Tumble

The markets started to see red as investors grew worried about an uptick in coronavirus infections slowing the economic recovery when they kicked higher later in the day yesterday after the banks earning season kicked off.

The Dow Jones Industrial Average raced higher with its biggest percentage advance of the month. S&P 500 also spiked 1.7%, which can be further driven by a good performance by the banks’ stocks.

Bitcoin meanwhile continues to hover around $9,215 as it has been doing for about a month now. The volume remains extremely low while Tether is recording more than double the bitcoin’s ‘real’ trading volume, as per Messari.

The first earnings report showed that Wells Fargo took a $2.4 billion loss, the first quarterly loss since 2008. The earnings declined due to low-interest rates, uncertainty associated with COVID-19, and a worse-than-expected macro environment.

The surprise came in the form of JPMorgan, which topped its revenue estimated at $33 billion, up from 15% from the same quarter last year while profits dropped over 50%. Citigroup also reported revenue of $19.8 billion but a drop of 73% in profits from last year.

This was because of trading revenue driven by massive volatility in the market and the Fed injecting liquidity while purchasing corporate bonds as such, not sustainable.

Banks stocks are currently down with Wells Fargo losing as much as 45% in yearly returns. The shares of Wells Fargo and Citigroup fell 5.4% and 2.8%, respectively, yesterday with little changes in JPMorgan’s.

While both Citibank and JPMorgan Chase beat their estimated earnings, they didn’t put out an optimistic outlook.

JPMorgan CEO Jamie Dimon warned that the bank still “faces much uncertainty regarding the future path of the economy.”

All three of the banks meanwhile continue to stockpile billions; Citibank added $5.6 billion in the Q2 2020 while Wells Fargo and JPMorgan added $8.4 billion and $11 billion respectively to prepare for things to get worse.

Although government aid cushioned the economic fallout from the pandemic so far, bank executives said as the programs begin to expire in the coming months, the banks expect their losses to mount as defaults will rise.

“The banks are pessimistic about the course of the recovery,” said Gabriel Chodorow-Reich, associate professor of economics at Harvard University. “The banks don’t see a rapid recovery over the next six months — they see a protracted recession.”

Amidst this, Lael Brainard, a Federal Reserve governor, warned that “a broad second wave could reignite financial market volatility and market disruptions at a time of greater vulnerability.”

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Author: AnTy

Bitcoin’s The ‘Logical Choice’ In 2nd Half Of 2020; DeFi To ‘Stay Hot’ But Returns Cool: Arca

Bitcoin will ultimately be a “great investment in 2H2020 as a flood of new investors flock into the space, and there just won’t be enough BTC offered to satisfy this new demand,” predicts Jeff Dorman, CIO at Arca.

In 2020, crypto investment management Arca predicted that thematic investing will drive crypto performance in rewards, structured tokens, staking, and DeFi which did happen in the first half of the turbulent year.

They predict that DeFi will “stay hot” in the remainder of the year but this also means the return will “cool down.”

While doing a post mortem of their 2020 predictions, Dorman shared that growth in Fan Engagement tokens is just getting started. Also, as we saw “no-coiners” getting pushed into the digital asset realm for various reasons viz. generational theft, data privacy, digitizing everything, nowhere else to turn, and distrust of financial institutions by millennials, they will continue to do so.

What’s Coming

Bitcoin, an alternative to fiat, offers a hedge against the potential financial system collapse as such it will be a “logical choice” as people continue to see a return on capital, which is one of the latest predictions by Arca for the remainder of 2020.

“Bitcoin will remain the best insurance policy against currency collapse, even if many other coins enter the market or central banks launched their very own.”

This is because a recession is coming if it isn’t already here. But for equities, there are a lot more reasons to suffer.

As we saw in 2020, corporations don’t really have saved for rainy days and now they are also forced to consider “‘increasing societal value’ over ‘increasing shareholder value.’” Forced by societal pressures to enhance their communities and constituents, this will lead to “greater digital asset adoption,” Dorman said.

The coronavirus pandemic has already moved people further away from cash to contactless payment solutions. This was what has also been propelling central banks to accelerate their plans for state-backed digital currencies with China now much closer to the release as it uses the ride-hailing company, Didi, for the trial.

Even in the crypt space, Arca sees the rise of non-fungible tokens which are individually unique. By offering a way to create digitally verifiable ownership of assets like art, property, and collectibles, NFTs open up the ability to utilize these assets across platforms, he said.

“Creating a circular economy for legacy assets, as well as new assets, will be the next step towards the exchange of scarce assets.”

Already happening in the gaming industry, the sector is expected to “heat up” in the remainder of 2020 “as decentralized finance continues to gain steam and scarcity is becoming more attractive to the individual,” he said.

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Author: AnTy

Bitcoin Retail Investors will Eat Up All the New Supply Starting 2028: Report

The latest study titled, “Retail Investors Steady in Physical Bitcoin Snatch-Up” talks about how the remaining 10% of bitcoin supply will take 120 years to come to market, reflecting just how scarce the leading digital asset is already and “looks to displace gold as the global store-of-value.”

Bitcoin’s limited supply is what makes this digital asset so attractive, especially during the current unprecedented money printing by governments around the world.

The Supply & Demand of it

When the first block of the digital asset was solved, the miner was rewarded with 50 Bitcoin, which in May 2020 was reduced to 6.25 BTC.

The creator of the cryptocurrency, pseudonymous Satoshi Nakamoto designed its inflation rate to “emulate the new supply of gold coming to the market,” as such every four years it goes through halving that decreases the miners’ rewards by half until 21 million BTC are created. At that point, there won’t be any new supply.

Currently, 900 BTC is generated per day, and before this decade is over, only 225 new BTC will enter the market as fresh supply. “This means a near 90% loss in new supply – within the next eight years alone.”

Now, if we look at the demand side, as Chainalysis data states, there’s a continuous growth in bitcoin investment regardless of its price.

Interestingly, even during the global market sell-off when BTC also crashed, addresses/entities with rounded bitcoins, 1, 2 up to 10, increased and have grown by 11% since the start of the year and have “yet to see a single month in decline” since April 2019.

Source: Zubr via Chainalysis Data

In April 2020, addresses holding exactly 1, 2, 3 all the way to 10 BTC have surpassed 500,000 and have been growing every month since the start of the 2018 bear market except for a single month.

“The value of these on-chain holdings at the start of June 2020 breached the $5bn mark for the third time ever.”

Zubr extrapolates future demand at this pace which points to a “very dramatic shift in 2028” when these retail addresses begin to eat up all the new supply alone, which means in about 2024, they will be gobbling up more than 50% of the physical supply.

Source: Zubr via Chainalysis Data

Replacing Gold

The traditional safe-haven asset gold is a valuable commodity because of one of its main attributes that is a limited supply – “an attribute that Bitcoin is designed to mimic in electronic format.”

But while technology helps bitcoin remains truly limited in supply, it has done the opposite to the bullion.

The new quantity of gold entering the market has been actually increasing, in 2019 gold production rose by 11% over 2010, as per the World Gold Council. On the other hand, there has been a decline in demand.

However during the coronavirus pandemic, both gold and bitcoin saw “strong demand.” But gold faced supply interruption due to lockdown which resulted in price dislocation so much so the spread between London’s spot market and COMEX gold futures rose by 700% which usually is just a few US Dollars.

Such production supply disruptions are unlikely to be a problem with bitcoin, an electronically transferable commodity but “physical Bitcoin supply-constraints could have the same effect regardless and in turn, as seen with gold, push prices further higher.”

But the critical difference is these supply constraints will be the result of the “permanent perpetual nature of the store-of-value cryptocurrency that is designed to cut off new supply,” which might come sooner if the demand from small investors remains as steady as it has been all these years.

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Author: AnTy

Centra Tech Co-Founder Duped Investors for $25M via DJ Khaled & Floyd Mayweather Promoted ICO

Co-founder of the cryptocurrency firm Centra Tech admitted to conspiring to dupe investors into investing $25 million into the company by lying about an initial coin offering (ICO), the Justice Department said.

Robert Farkas, 33, and two other founders of Central Tech Inc., Sohrab Sharma, and Raymond Trapani were charged in 2018 with misleading investors by claiming to have developed a debit card, the “Centra Card,” that supposedly allowed users to make purchases using cryptocurrency at any business accepting Visa and Mastercard.

Before founding Centra Tech, the trio worked at a luxury car rental company in Florida called Miami Exotics, according to prosecutors.

They got celebrities including boxer Floyd Mayweather and music producer DJ Khaled to promote their ICO, who later settled with the U.S. Securities and Exchange Commission but didn’t admit or deny guilt in the settlement.

From July 30, 2017, through October 5, 2017, Farkas and other co-founders solicited investors to purchase unregistered securities in the form of digital tokens “CTR Tokens” issued by Centra Tech through an ICO.

The claims made by Farkas at that time were false including the purported Harvard-educated chief executive officer “Michael Edwards” who was a fictional person fabricated to dupe investors. Cetra Tech also didn’t have any partnership with Bancorp, Visa, or Mastercard and they neither have any money transmitter and other licenses in 38 states as claimed.

Farkas pleaded guilty on Tuesday in federal court in Manhattan of securities fraud conspiracy and wire fraud conspiracy, appearing by phone before the US Magistrate Judge James Cott.

He faces as much as a decade in prison but prosecutors agreed to seek a sentence of 70 to 87 months and a fine of as much as $250,000 under a plea agreement. Sharma and Trapani will go to trial in November.

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Author: AnTy

36% of Big Institutional Investors Own Digital Assets While 80% Find them Appealing: Fidelity

36% of large institutional investors own digital assets such as Bitcoin, according to a survey from Fidelity Investments which also runs a service that trades and secures digital assets. Tom Jessop, president of Fidelity Digital Assets said,

“These results confirm a trend we are seeing in the market towards greater interest in and acceptance of digital assets as a new investable asset class.

This is evident in the evolving composition of our client pipeline, which spans from crypto native funds to pensions.”

Investors in Europe are more likely to own digital assets

Across the US and Europe, a third of the survey’s 774 respondents said they own cryptocurrencies or derivatives. In Europe, 45% of institutions — including pension funds, investment advisers, family offices, and hedge funds are invested in digital assets.

In the US, only 27% of the surveyed 393 institutions said they own digital assets. Interestingly, 59% of these US investors are invested directly and only 22% have done so via futures. Although just over half of Europe’s, interest investors in the US has increased from 22% a year ago. “Europe is perhaps more supportive and accommodating,” said Jessop which could

“be just things going on in Europe right now, you got negative interest rates in many countries. Bitcoin may look more attractive because there are other assets that aren’t paying return.”

Bitcoin continues to be the digital asset of choice

The survey was conducted by Greenwich Associates between November 2019 and early March, right before the market crashed.

Over a quarter of the respondents hold Bitcoin while only 11% are holding Ether. In 2020 so far, Bitcoin is up 32% while Ethereum has gained 86%. After tumbling during the COVID-10 pandemic triggered sell-off, crypto assets have rallied.

Besides price, the survey also noticed that over the last year, there have been incumbent service providers and increasing coverage by the mainstream financial firms, all of which contribute to the upward trend seen in institutional investors’ digital asset ownership.

Volatility the main concern impeding adoption

There is still a lot of scope for growth here as almost 80% of investors surveyed find something appealing about the asset class.

Interestingly, while 25% of European investors find the fact that certain digital assets are free from government intervention to be appealing, only 10% of investors in the U.S. feel this way.

91% of those open to exposure to digital assets in the next five years expect to have at least 0.5% of their portfolio allocated to them.

The majority of institutional investors feel digital assets have a place in their portfolio while 40% believe it to be an alternative asset class and 20% as an independent asset class.

The survey found that price volatility was the top concern followed by market manipulation and lack of fundamentals to gauge appropriate value hindering digital assets’ wider institutional adoption.

But according to Jessop, these issuers are largely those that will “resolve themselves as the market infrastructure evolves.”

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Author: AnTy

Crypto Custodian Launches Brokerage Service, BitGo Prime, For Institutional Traders

Cryptocurrency custodian, BitGo, launches a prime brokerage service for institutional investors. According to the CEO of BitGo, Mike Belshe, speaking on the launch this Wednesday, the service will offer institutions the best trading prices across four of the top 10 exchanges.

BitGo Launches Prime BitGo Prime

BitGo, announced the launch of the BitGo Prime services to institutional investors with at least $1 million in their accounts. This follows the recent launch of crypto lending services for institutions in March adding to it trading and custodial services.

Institutions interested in crypto trading will need to store their funds with centralized exchanges to effectively trade. This process increases the risk on the funds as well as increases the transaction fees and time in order to find the best exchange to trade on.

BitGo Prime aims at solving this problem by directly connecting to 4 of the top 10 crypto exchanges allowing institutions to directly trade on the best market prices. Moreover, institutional investors will be able to directly trade from their cold wallet storage ensuring the security of their funds.

Belshe also said that the privacy of investors will be the exchange’s paramount duty to prevent abuse of knowledge on when a big investor wants to make a purchase. The investors will still undergo full KYC/AML compliance in line with the U.S. regulated crypto custodial guidelines.

The high quality of services BitGo Prime users however will not come cheap. Belche said,

“If you don’t have an account balance of a million dollars or more, you probably wouldn’t come to us, and even a million dollars is kind of on the low end.”

A New Dawn for Institutional Investors

The new entity will be led by current head of financial services at BitGo, and CEO of BitGo Prime, Nick Carmi. Speaking on the launch of the new service, Carmi said,

“BitGo Prime delivers a new level of control over cryptocurrency trading by aggregating liquidity from multiple counterparties, optimizing order flow and executions directly from the investors’ custodial wallets.”

Following the acquisition of Lumina, a tax software company, in April, BitGo investors will enjoy a one stop shop on the platform leveraging tax reporting and portfolio tools of the latter. Institutional investors in BitGo Prime are also covered in a $100 million insurance fund launched in March in the exchange losses users’ funds or bankruptcy.

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Author: Lujan Odera