Weekly Investor Letter
Aug 22 — Crypto assets increased 1.2% this week, bringing the total market cap up to $260 billion. The Crescent Crypto Market Index (CCMIX) was up 2.1% while BTC gained 2.8 % over the same period.
The crypto market saw a slight uptick after a strong drawdown last week. The total value of the crypto market has dropped around 10% month-to-date, with Bitcoin dropping 5.8%. Bitcoin performed in the middle of the pack of digital assets as a whole this week. Bitcoin outperformed most other CCMIX constituents and slightly better than all other Crescent Crypto indices. Bitcoin is currently trading around $10,042.
Bitcoin vs. CCALT vs. CCDARK vs. CCSMART
Aug 15th- Aug 22nd, 2019
Market Index Constituent Performance
Aug 15th — Aug 22nd, 2019
- BTC outperformed most large-cap constituents, finding itself up 0.55% on the week.
- The CCMIX saw slight gains this week, with 7 constituents ending the week in the green. 10 constituents ended the week in the red with none posting double-digit losses.
- XMR was the best performer this week (2.88%), after losing close to 20% last week. Other privacy coins, ZEC and DASH, both ended the week in the red.
- The CCMIX increased by 2.1% in value outperforming CCALT, CCSMART, and CCDARK indices. The CCSMART index performed second best with a 1.8% gain.
- ATOM was the worst performer this week down 7.4%. Smart-contract platforms, in general, saw decent results as ETH gained around 0.75% week-over-week. ADA was also up 1.7%.
- LINK was the best performer last week down 4.8% and ended up in the middle of the pack this week with a 2.7% loss.
- BTC dominance increased slightly to 68.9% of the total crypto market cap compared to 68.2% last week.
Bakkt finally received the green-light from the CFTC through the self-certification process to launch their Bitcoin delivered futures contract on September 23rd. At first, Bakkt will offer custody and physically-delivered daily and monthly bitcoin futures contracts in partnership with ICE Futures US and ICE Clear US. The New York State Department of Financial Services approved the creation of the Bakkt Trust Company, a qualified custodian. As put by the Bakkt team, “This offers customers unprecedented regulatory clarity and security alongside a regulated, globally accessible exchange in a market underserved by institutional-grade infrastructure.” The Bakkt Futures contracts will be covered by the existing guaranty fund at ICE Clear US, which has an established risk waterfall in place. The Bakkt Warehouse is also protected by $125 million in insurance.
Why Does This Matter?
Bakkt recognized that the digital asset market is global and well-developed, but has largely been designed to serve retail customers rather than institutional participants. With the likes of ErisX and LedgerX, Bakkt is bridging that gap to access this market and solve issues that have prevented institutional inflows. As mentioned before, physically delivered BTC futures trading on a regulated market is a better tool for hedging. Also, the green light from NYDFS for Bakkt to operate as a trust opens the door to a wide arrange of digital asset financial products. Bakkt aims to take extensive regulatory compliant steps to ensure institutional participation, for example, “Bakkt bitcoin futures contracts will not rely upon unregulated spot markets for settlement prices, thus serving as a transparent price discovery mechanism for the benchmark price for bitcoin.”
Coinbase CEO, Brian Armstrong has said that Coinbase Custody receives $200-$400 million per week in new cryptocurrency deposits from institutional customers. The comments were made on Twitter hours after Coinbase confirmed its acquisition of custody competitor Xapo for $55 million. Xapo, which launched in 2013, will hold onto its exchange business, which lets ordinary consumers buy and sell Bitcoin. Its founder, Wences Casares, says he will stay on in his long-time role of CEO. Armstrong stated that “Trusted/safe infrastructure for institutions is just one small step on the journey to building the [crypto economy].” Now that the deal has been confirmed, Coinbase said it has over $7 billion in digital assets under its custody at present. It has been reported that Coinbase outbid investment giant Fidelity.
Why Does This Matter?
Coinbase’s acquisition coincides with Bakkt’s recent announcement mentioned above. Bakkt’s decision to create Bakkt Warehouse poses new competition for Coinbase in the digital asset institutional custody business. The acquisition of Xapo’s custody business escalates its efforts to expand beyond its core trading business and establish itself as the de facto custody solution. Armstrong stated, ”Custody is a critical step toward the institutionalization of the crypto economy. It’s likely to start small — maybe a few billion under custody — but it will grow quickly to a point that it’s a meaningful piece of stable, recurring revenue for the company.” It will be interesting to see how the custody space plays out with growing competitors in Anchorage, Bitgo, and Bakkt.
The cryptocurrency exchange giant Binance is launching an open blockchain project “Venus” focused on developing localized stablecoins worldwide. The exchange is seeking partnerships with governments, corporations, technology firms, and cryptocurrency projects in order to develop this ecosystem. Binance aims to “build a new open alliance and sustainable community” that will empower both developed and developing countries. Binance says it will leverage existing Binance Chain stablecoin infrastructure, as well as Binance’s experience with regulatory regimes. Binance’s new venture seems to compete directly with Facebook’s plan to launch a fiat-pegged stablecoin, Libra, that would power a global crypto payments network. Funnily enough, Binance decided on another astrological name similar to that of Libra and Gemini.
Why Does This Matter?
This new project exemplifies Binance’s continuous horizontal moves in the digital asset ecosystem. Since Binance’s inception, Binance has launched various projects from a decentralized exchange to a smart-contract platform. This new venture is possible the most ambitious as it rivals the likes of Facebook and must comply with stringent regulatory regimes. Shown Facebook’s regulatory hurdles, it will be interesting to see Binance’s approach in launching Venus. Libra is a highly western-centric project, as a result, Binace may try to create an eastern-centric open-blockchain project in response. Nonetheless, it will be important to track the development and regulatory hurdles Venus encounters.