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Weekly Investor Letter

Crescent Crypto
Sep 19 · 7 min read

Sept 19 — Crypto assets increased around 1.2% this week, bringing the total market cap up to $262 billion. The Crescent Crypto Market Index (CCMIX) was up 0.7% while BTC lost 2.9% over the same period.

The crypto market saw a slight gain after a small decrease last week. The total value of the crypto market has dropped around 3.7% month-to-date, with Bitcoin dropping 4.8%. Altcoins, as a whole, performed better than Bitcoin this week. Bitcoin did not outperform any Crescent Crypto index or CCMIX constituents this week.

Sector Performance

Bitcoin vs. CCMIX vs. CCALT vs. CCDARK vs. CCSMART

Sep 13th — Sep 19th, 2019

Market Index Constituent Performance

Sep 13th — Sep 19th, 2019

Summary

  • BTC underperformed all other large-cap constituents, finding itself down 2.8% on the week. BTC was the second-worst performer last week down more than 4%.
  • The CCMIX saw strong performance in its constituents, with 8 out of nine ending the week in the green. As the highest weighted asset, BTC knocked down the overall index performance to sub 1% gains.
  • XLM was the best performer this week with a 26% gain. This move comes after XLM ended last week as one of the worst-performing assets losing around 4%.
  • The CCSMART increased by 13% in value outperforming CCALT, CCMIX, and CCDARK indices. The CCALT index performed second best with an 11% gain. CCSMART and CCALT were the top two performing indices last week as well.
  • EOS performed in the top 2 this week up 15%. Smart-contract platforms, in general, saw the strongest results this week. The double-digit gains by the CCSMART index were primarily driven by ETH and XLM, with EOS and Tezos tilting performance slightly downwards.
  • BSV was the worst performer last week down more than 10% and the second-worst performer this week. BSV ended the week with a slight gain of 1.8%.
  • BTC dominance dropped to 67.7% of the total crypto market cap compared to 70.0% last week. This is the second week in a row that BTC’s share of the total market cap declined. This is primarily due to Ethereum’s strong performence this week.

Notable News

Bitcoin Mining Power Hits New High as Half a Million New ASICs Go Online

What Happened?

Bitcoin’s two-week average hash rate reached a new record high 85 exahashes per second (EH/s) last Friday, per data from crypto mining pool BTC.com. This coincided with mining difficulty adjusting to a record level of nearly 12 trillion. The data suggests that more than 600,000 new ASIC mining machines have come online in the past three months to fuel this hashpower increase. These new miners, on average, have hashing power around 55 tera hashes per second. ASIC Bitcoin miners fall in the $1,500 — to $2,500 price range. As a result, it is estimated that the top mining hardware companies ( Bitmain, Canaan, InnoSilicon) made $1billion in revenue over the past three months under these price assumptions. Most manufacturers have sold out equipment for Bitcoin ASICs this year, with customers placing pre-orders months in advance. This supply shortage was driven by Bitcoin’s price rally earlier this year.

Why Does This Matter?

Hash-rate is a function of BTC price as more miners come online due to overcoming profitability thresholds. This was evident this year as hash rate has hit all-time highs throughout 2019, following BTC’s rally from around $3 to $10 thousand. The mining industry as a whole has tight margins with many miners operating at cost, and subsequently immediately selling BTC to cover said costs. When BTC price is rallying, however, miners accumulate excess BTC to sell at greater prices later in the cycle. This economic structure plays into Bitcoin’s market bubbles. This continued trend of increasing deployed capital expressed through hash rate is a bullish signal for the health and sustainability of the BTC network. 2019 has clearly illustrated the growing industrialization and institutionalization of the Bitcoin network.

CME’s Bitcoin Index Provider Wins First EU Crypto Benchmark License

What Happened?

CME’s Bitcoin Index Provider, CF Benchmarks, has become the first cryptocurrency index provider to be recognized as a Benchmark Administrator under the European Benchmarks Regulation (EU BMR). This license allows financial institutions to use CF Benchmarks’ indices in any European financial products. CF Benchmarks’ EU BMR takes full effect on January 1st, 2020. Sui Chung, CEO of Benchmarks, stated: “Here in Europe the use of indices and provision of indices is regulated, so for all regulated firms in Europe if they use a benchmark then they have to make sure that it comes from a regulated benchmark provider.” This license is the first for any cryptocurrency company in the EU. Even though it was the U.K’s Financial Conduct Authority who authorized this license, CF Benchmarks will keep its license even if the U.K exits the EU.

Why Does This Matter?

This news represents another step necessary for the further institutionalization of this nascent industry. As Chung puts it, “There are a lot of regulated firms — there was a potential stumbling block for them if they did want to consider issuing products referencing cryptocurrency indices because they had to make sure if they wanted to market on Jan. 1 2020 [that they used a regulated index].” A fund looking to issue a cryptocurrency ETF that tracks an index must track a compliant and regulated index. CryptoFacilities Bitcoin index sources its index pricing from mapped orderbook data. This is wholly different from other indices which depend on a combination of “last trade price” on underlying exchanges. Consolidated orderbook data is more difficult to manipulate and as such makes for a stronger index for listed products, such as ETFs and Futures. CF’s index quality is one of the reasons the CME BTC futures have gained traction; whereas CBOE’s product (with only Gemini as a pricing source) was not adopted and discontinued.

Harbor Tokenizes Real Estate Funds Worth $100 Million on Ethereum

What Happened?

Harbor, a security token issuance platform, announced the creation of tokens on the Ethereum network representing the shares of four real estate funds worth a total of $100 million. Initially, Harbor sought to help companies issue their own security tokens, but it has recently pivoted towards tokenizing existing securities. Josh Stein, CEO of San Francisco-based Harbor, stated that Harbor has “evolved from crowdfunding and tokens to being the Salesforce.com” of the security token industry. Converting these private securities into tokens makes it easier to trade for investors that hold these tokens. icap Equity, the fund working with Harbor, stated that “for years, we’ve been looking for ways to create the best investment experience we can and for us, that means providing liquidity for them.” Moving tokens from the investor to and from broker-dealers and placement agents are said to be easier through this process.

Why Does This Matter?

Harbor’s pivot away from crowdfunding reveals valuable information about the security token space. On this issue, Stein stated, “the overlap between investors demanding tokens and investors interested in security tokens was zero. People were buying tokens but they weren’t buying it to invest, they were buying it to speculate.” Rather than tokenizing new securities with unknown demand, Harbor has taken to streamlining business practices with existing demand. For iCap, Harbor automates its entry and exit process with greater liquidity through tokenizing existing securities. Stein remarks that harbor’s platform will never be like a public market, but they can “take something illiquid or semi-liquid and make it more liquid.” Interestingly, after the first year of iCap security tokens existence, non-accredited investors will be allowed to trade the security. Security tokens are a hotly debated topic in the industry, with the bifurcation centered around the benefits of the marginal liquidity it can bring. Tracking Harbor and iCap’s growth and progress will be a good public litmus test for the viability of tokenizing real assets.

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