Crescent Talks Crypto

All you need to get caught up on the world of crypto in 10 minutes or less

 

Weekly Newsletter

03/05/2018 - 03/12/2018

 

Coinbase Announces Cryptocurrency Index Fund

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What happened?

Early last week, CNBC’s “Fast Money” tweeted out that the Coinbase CEO and Ripple CEO would both be on the show with Asiff Hirji (Coinbase’s President and COO) set to announce some exciting news. This immediately led to rumors that the big announcement would have to do with Coinbase listing Ripple aka $XRP. On Tuesday, Asiff Hirji squashed these rumors which lead to Ripple’s price taking on a double-digit percentage decline (more on that later). Instead, Coinbase announced they were creating a new subsidiary named Coinbase Asset Management, which will be responsible for the index fund’s operations. While Coinbase plans to offer future investment vehicles that aren’t limited to what is listed on GDAX, they will be starting off with a passively managed cryptocurrency index fund that will include all digital currencies that trade on GDAX (weighted by market cap). At launch (which is expected in a few months), it will be comprised of 62% BTC, 27% ETH, 7% BCH, and 4% LTC and will rebalance whenever a new asset is added to GDAX . As of now, the only details we have are that the fund will have a $10,000 minimum and charge a 2% annual management fee (with no performance fee).

Why does this matter?

This is just one of many different initiatives blockchain and tech companies are taking which will help bring in more casual investors within the digital asset markets. Bramanthan, the product lead for the new index fund, told Fortune that Coinbase is “expecting huge demand from retail when it’s available” and that they “want to be in a position to accept that demand”. Additionally, investments can be made in USD or any of the included digital currencies. While investors will have to be accredited and US-based for this fund, Coinbase hopes to remove these restrictions for their future funds. Given the volatility of cryptocurrencies, there are a lot of people who choose to sit on the sidelines due to the amount of time needed to constantly manage a portfolio within this space. With this move, Coinbase will be allowing investors who do not want to pick specific winners or losers access to the cryptocurrency markets.

What’s the word on the street?

As expected, the crypto community saw this as extremely bullish news for the space. As mentioned above, the initial fund would be limited to accredited and US-based investors. While this is a restriction, it still allows investors to invest in cryptocurrency and get exposure to the market as a whole. This helps mitigate their risk while also keeping any established firms from endorsing a specific coin or project. By investing in this fund, investors will be able to bypass the hurdles of setting up a hard wallet thanks to Coinbase Custody which will keep these funds in cold storage. According to TechCrunch, the fund’s performance (when backdated to early 2015 when GDAX was launched) shows returns of almost 50x! By lowering the barriers to entry and creating more traditional investment vehicles for this space, Coinbase will help expand the reach of the crypto markets which is huge!

Where can I read more?

CCN: Coinbase Launches Crypto Index Fund

TechCrunch: Coinbase is Launching Its Own Cryptocurrency Index Fund

 

Ripple's (XRP): Riches To Rags As Coinbase Announcement Disappoints

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What happened?

Rumors circulated early this week that Ripple (XRP) would be added to Coinbase, an honor that would surely boost its price as new investors flood into the market. Coinbase is often seen as the gateway to the digital asset world as it allows users to exchange fiat money for Bitcoin, Ether, Litecoin, and Bitcoin Cash. This is similar to when a stock is added to a major index, like the S&P500. The subsequent increase in the security's liquidity, accessibility, and awareness typically push the stock higher. In a market where liquidity is fragmented and, at times, scarce, we often see digital assets get a boost from rumors of new exchange listings. Ripple was no different, and its price rose ~20% in dollar terms in the 24 hours leading up to its March 5th peak. When Coinbase announced it was not adding Ripple, just unveiling its new index fund, the XRP trade unraveled as quick as it started.

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Why does this matter?

This is a classic case of buy the rumor, sell the fact, except in this case, there was no real news.  There were headlines claiming Coinbase's highly anticipated announcement this week was going to double XRP's price. This market is very sentiment driven. We know that. But event driven trades are difficult to predict, so understanding why a token or coin is moving is crucial as to avoid performance chasing. It is not easy to find objective commentary surrounding these types of events, especially ones that happen in such a short time span, but Ripple's saga this week only strengthens the need to do your own due diligence before chasing a trend. Missing out on short-term, speculative gains is a small price to pay to sidestep even larger losses.

What’s the word on the street?

You'd be hard-pressed to find a coin with more polarized views on its future potential, but that hasn't stopped it from becoming the third largest digital asset by market cap, according to coinmarketcap.com. Skeptics who tried to disprove the rumor early on cited the recent Coinbase blog post outlining its process for adding new assets to its platform (see additional reading below). Coinbase stated,

“As of the date of this statement, we have made no decision to add additional assets to either GDAX or Coinbase. Any statement to the contrary is untrue and not authorized by the company.”

Where can I read more?

Coindesk: No New Crypto: Coinbase Squashes Exchange Listing Rumors

GDAX Blog: Announcing the GDAX Digital Asset Framework

 

Binance Gets Hacked; Only People Who Lose Money Were The Hackers

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What happened?

On Wednesday, Crypto Twitter and Reddit exploded with users complaining about highly unusual trades happening on their Binance accounts. What was quickly realized, was that attackers misled multiple users to give them access to their Binance accounts using a similar URL. When these hackers had the ability to control enough accounts, they directed them to all purchase ViaCoin. As a result, ViaCoin (a Scrypt cryptocurrency which embraces proof-of-work) saw a 200+% increase in value. Fortunately, Binance's alarm system acted fast and prevented the hackers from withdrawing any Bitcoin they obtained via this attack. Furthermore, Changpeng Zhao (Binance's CEO) announced immediately that all fraudulent trades were reversed and that no users would lose any of their funds. Zhao added that the hackers, themselves, were the only one who lost coins during this attack. 

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Why does this matter?

As the world of crypto has gained more and more interest over the past few years, centralized exchanges have become an immediate area of focus and attention from hacker communities for user's valuable digital assets. Ever since Mt. Gox, exchange hacks have been a consistent worry for investors, and it's not hard to see why hackers find exchanges attractive. Binance recently announced that their revenue jumped from $7.5 million to $200 million in just one quarter, which isn't surprising given how popular of an exchange they are amongst the community. Despite Binance's alarm system reacting imminently after the attack and preventing any loss of user's funds, the exchange announced a "Hacker Bounty" over this past weekend to help incentivize talented coders to point out flaws rather than try and abuse them. Given the hackers in this specific situation actually lost money, this will hopefully demotivate hackers from attempting another attack while helping keep Binance more secure in the long run. 

What’s the word on the street?

With all the recent attacks on exchanges (such as the infamous Bitgrail hack), it was refreshing to see an exchange prevent a hack successfully. The crypto community has unanimously applauded the Binance team for their excellent handling of the situation as well as for their transparent and quick response during the strike. As mentioned above, Binance announced a "Hacker Bounty" to further comfort investors about their security shortly after the attack. Hopefully, these actions and the reactions which the community had towards them results in more exchanges focusing on security against these attacks going forward. As always, these moments remind all of us that keeping your digital assets on centralized exchanges are very dangerous! If you haven't already, we highly recommend you look into obtaining a hard wallet to store your crypto. 

Where can I read more?

CCN: Binance Users Report Unauthorized Transactions Linked To Viacoin Pump

It's Blockchain: Binance and Viacoin 

 

New Stablecoin, TUSD, Added To Bittrex

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What happened?

Early last week a fully collateralized ERC20 stable coin named True USD (TUSD) began trading on Bittrex. TUSD was issued by the TrustToken platform, a legally enforceable protocol that aims to tokenize real-world assets. There are currently two ways to own the token, with the easier option being a direct purchase on Bittrex. The other option requires users to pass a KYC/AML check and then send USD to a trust company with an escrow agreement. Once verified, a smart contract is generated that sends the appropriate amount of TUSD tokens to the Ethereum address you provide. This smart contract based creation mechanism is also the logic behind the redemption process. In order to convert TUSD back into fiat, an individual who has passed the KYC/AML check would send the TUSD tokens to a smart contract from a registered Ethereum address. At that point, the escrow bank would wire the funds back to the user’s bank account.

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Why does this matter?

Currently only a handful of exchanges offer the ability to convert crypto currency back into USD. The other method of shifting your exposure from crypto to fiat has been purchasing USD Tether (USDT). USDT has seen plenty of issues varying from subpoenas from the CFTC to dedicated twitter accounts echoing the possibility that these USDT tokens are “printed” while not actually being backed by real dollars. On the other hand, the TUSD issuance process creates a system of checks and balances that prevents new TUSD from being circulated without having the appropriate collateralization in place. In its short existence, TUSD’s value has stayed relatively close to parity with the USD with highs and lows of $1.03 and $.97 respectively, according to pricing on coinmarketcap.com. The price of this coin will likely stabilize over time with increased issuance leading to improved liquidity to help establish its role as a less controversial USD alternative.

What’s the word on the street?

This coin has been met with some skepticism on twitter and reddit, but that’s mostly attributable to the contagion from all the controversy surrounding USDT. They offer considerable transparency into their team and process while also having a strong group of partnerships ranging from Stanford University’s StartX Fund and BlockTower Capital.

Where can I read more?

TrueUSD Website

TrustToken Website

 

U.S. Regulatory Update

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It was yet another busy week in the regulatory space with the Securities and Exchange Commission expounding on their scope as investors (and markets) watched with unease. SEC chairman spoke last Tuesday on Fox Business and reiterated the potential he saw in the technology while also indicating that many of these projects were, indeed, securities. This was not the first time that he focused on ICO tokens and their purported ‘utility’ to determine whether or not an offering was a security. Ultimately the SEC is still concerned with investor protection in a space that may offer similar mechanics to traditional asset exchanges without any of the guaranteed protections.

Then, on Wednesday came this public statement from the SEC regarding cryptocurrency exchanges. Essentially it lays out the criteria for what constitutes an exchange platform and what regulatory requirements are then needed in order to operate. The team at Bittrex, the largest U.S. trading site for cryptocurrencies, did not wait to make their statement. Bittrex has been taking steps to delist tokens that can be deemed as securities for some time now and the team stands by their token review process and legal due-diligence mechanisms that exist in anticipation of an event such as this. 

So what’s the key takeaway from this most recent SEC statement? 

Like most things in the space we have to wait and see. While U.S. cryptocurrency exchanges are called out directly their responses would lead you to believe that they have taken steps to prevent a full-scale shutdown. The SEC has yet to engage in any action that can be deemed a ‘crackdown’ and it would be reasonable to assume (for now) that this will continue to be the case.

For a more nuanced legal view of what the regulatory space could look like in the future I highly recommend this piece. 

 

What we're watching this week:

When: March 14th, 2018 at 10:00 AM EST

What: The Capital Markets, Securities, and Investment Subcommittee will be holding a hearing entitled "Examining the Cryptocurrencies and ICO Markets" 

Source: CoinDesk

 

Things we're reading this week. 

Bitcoin.com: Private Token Sales Are Making The Rich Richer

Bloomberg: Seif to Boost Assets With Acquisition - ETF Pioneer Sees A World Where Tokens May Overtake ETFs

CoinDesk: 8 Ways Telegram Thinks ICOs Could Go Wrong - One of the top risks they mention has to do with uncertain regulation, which is constantly brought up within this space. 

CryptoVest: Moving Between Blockchains Are One Stop Shops Possible In Crypto - Quick summary of some projects aimed at making blockchains more interconnected.

 

 

 

 

Anil Lulla