This article was inspired by an investor of ours who was looking to present the case for bitcoin to his firms investment committee. I thought this would be a helpful update to share with the broader finance community.

The rabbit hole

I didn’t get into bitcoin because I am a libertarian or because I am a technologist or a cryptographer. I was first attracted to Bitcoin by the asymmetric investment opportunity it presented.

The optics really were like nothing I‘d ever seen: this was the first investment open to everyone in the world and the fixed supply schedule presented a very clear route to mania should it grow in popularity.

I remember being presented with a few statistics early on….

  1. There are ~60m millionaires globally, but there will only ever be 21m bitcoins which is just 0.35 bitcoin per millionaire. At current prices that’s only $2,550 per millionaire, so you can see the stage is well set for the retail fervor. …

Staking deep dive contributed by Jonathan Marcus

Three of the most innovative and socially progressive intentions of the digital asset movement are:

  1. The re-modelling of the traditional corporate structure
  2. The demotion of capital in favor of ideas and innovation
  3. Stemming the parabolic trends in inequality

The traditional corporate structure heavily favors those that control capital, either through equity or debt financing.

The info-tech revolution had already started to erode the primacy of capital as companies like Facebook or Uber only needed to raise small amounts of seed capital to create vast amounts of value for the founder. …


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As 2018’s woes continue for crypto, the last month has seen Ethereum fall dramatically — 42% in a month.

Ethereum’s meteoric rise at the start of 2017 brought a lot of focus on and investment into cryptoassets. It also provided a crowdfunding platform for new projects to access global capital via the ICO.

While many, or even most, of the 2000 cryptoassets are likely to fail, until recently Ethereum was held as a safe haven. It’s recent decoupling from Bitcoin suggests that safe haven status is at risk.

With the price pressure on, the market is clearly asking existential questions. For some time Ethereum has been “in development”, working on scaling updates and an evolution from proof of work to proof of stake. …


We (at Distributed Global) firmly believe in the long term value being created by distributed ledger technology. In this nascent stage, price volatility and skepticism from the investment community are no surprise. We would argue fervently that the price momentum YTD is not representative of the momentum of the underlying technology nor the bright minds entering the space.

We believe what has been created — early stage decentralized and immutable stores of value, trustless P2P mediums for exchange, flexible smart contracts, a web stack and decentralized applications — is clearly extremely valuable and will grow in value as more and more economic activity happens in a digital format. …


As noted, cryptoassets tend to extreme reflexivity which “is driven by uncertainty and confusion around the early-stage technology, virality of communication mechanisms, lack of standardized valuation frameworks, regulatory paranoia, and majority retail participation”.

The last two months have embodied one of these reflexive tailspins. What’s been particularly unnerving is that this price decline has been accompanied by, on balance, good news for the ecosystem.

In terms of crypto’s price and newsflow decoupling, the particular moment I think back to was when the market failed to respond to news that Nomura and Ledger were planning a custody JV (May 15th). Since then there have been other positive developments, the most encouraging being 1) Coinbase and Ledger’s development of institutional custody, 2) the SEC speech which argued that ETH is no longer a security 3) the revelation that Mt Gox is unlikely to liquidate all holdings 4) clarity over Tether and 5) large ecosystem funds announced by Binance and Huobi. …

About

Jonathan Cheesman

Partner @ Distributed Global

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