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‘The SEC Has to Give its Decision: Yes or No’ to Bitcoin ETF Approval, says Bitwise

The Securities and Exchange Commission (SEC) previously set an Oct. 13 deadline for approving Bitwise Investments’ Bitcoin exchange-traded fund (ETF). With Bitcoin’s high volatility this year, its performance in 2019 remained bullish, although falling by over 20% in one week in September. Bitcoin reached its lowest level in July while hitting its high of over $11,000 in June 2019.

Matt Hougan, managing director and global head of research at Bitwise, is still optimistic about the prospects of getting his firm’s Bitcoin ETF approved. Hougan explained:

“Yes, we submitted a lot of research to the SEC and met with them multiple times. Just the evolution of the Bitcoin market is from night to day, and that’s why I think we’re closer than we have ever been before to getting a Bitcoin ETF approved.”

‘Custody has solved our problem in crypto’

Hougan mentioned the role of custody in the development of Bitcoin, “I’d say custody has really solved our problem in crypto right now. There are a large number of regulated, insured custodians with hundreds of millions of dollars of insurance in place.”

Hougan believes that the issue of market surveillance and market quality are areas people are going to focus on. The investment firm has done a lot of research on where the real nature of the Bitcoin market is. “People’s views of Bitcoin are often anchored a few years ago when it was a wild west.”

Extended research by the firm has shown that the market is truly efficient. The key is the growth of the regulated growth of the CME Bitcoin futures market, which is trading more than $200 million a day, which is around 20-30% of the Bitcoin spot market. This is a significant indicator because the SEC stated that “if there is a large, significant regulated derivatives market trading side-by-side with the Bitcoin spot market, that can solve the problem of market surveillance,” explained Hougan.

One of the most exciting wealth generation opportunities

“The opportunity that’s been taking place in crypto, Bitcoin, and blockchain today is one of the most exciting wealth generation opportunities in the world. You know that because Bitcoin is the single best performing asset over the last five years up about 2000%.”

Hougan explained that if the Bitcoin ETF is approved, users will have “safe, simple, secure” access to the wealth generation taking place in Bitcoin and crypto.

What are the alternatives for the SEC?

Hougan added, “sometime before Monday, the SEC has to give its decision: yes or no. They have no more ways to postpone it at this point. We will hear clearly between now and Monday what they think, and then, depending on what we hear, we’ll go forward from there. But it should be a very exciting week.

Bitwise expects the SEC to provide detailed guidance on which questions they think have been successfully answered, and which ones, if any, remain. The firm will then understand how close they are to the “goal line” if they are “all the way in” or “a few yards outside.”

Canadian Investment Fund Manager Receives ‘Favourable Ruling’ From Regulators to Offer Bitcoin Fund

Canadian investment fund manager 3iQ Corp. announced on Oct. 30 that it had received approval from its public hearing by the Ontario Securities Commission (OSC) for a closed-end Bitcoin fund that will be listed for trading on a major Canadian stock exchange.

3iQ announced that it had received a “favourable ruling” from the OSC for “The Bitcoin Fund,” which is a non-redeemable investment fund expected to be listed by the end of the year.

“Over the past three years, we have worked actively with the OSC’s Investment Funds and Structured Products Branch to create an investment fund that we hope will allow retail investors the benefits of investing in Bitcoin through a regulated, listed fund,” said Fred Pye, President and CEO of 3iQ. “We have addressed the questions of pricing, custody, audit, and public interest issues in a regulated investment fund.”

Gemini Trust Company LLC, a trust company based in New York, has been appointed as the fund’s custodian. “3iQ has carefully selected a team of professional partners with expertise in the digital asset industry to construct a safe and secure fund product for the Canadian market, and we are excited to be selected as their custodian,” said Cameron Winklevoss, President of Gemini.

Support for 3iQ has also extended to the development of an innovative Bitcoin benchmark from VanEck’s MV Index Solutions, which is a regulated index provider and leader in developing cryptocurrency indices and data series.

Howard Atkinson, Chairman of 3iQ said:

“We look forward to offering retail investors exposure to this exciting new asset class within registered and traditional investment accounts. The performance and professionalism of our legal team at Osler and our audit team from Raymond Chabot Grand Thornton (RCGT) was critical to getting support from the panel.”

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Galaxy Digital Capital Management Launches Bitcoin Funds While Making Bakkt and Fidelity Custodians

Galaxy Digital Capital Management LP, an affiliate of Galaxy Digital Holdings Ltd, issued two Bitcoin funds with Bakkt and Fidelity Digital Assets as custodians for the funds, while Bloomberg L.P will be the pricing agent. These funds, the Galaxy Bitcoin Fund and the Galaxy Institutional Bitcoin Fund, offer low-fee to both institutional and accredited investors. It also provides standard tax documentation, client service support, and bitcoin exposure, which is backed by vetted services providers.

According to the CEO and Founder of Galaxy Digital, Mike Novogratz: “Galaxy has continued to have high hope and assurance in Bitcoin and has made remarkable strides in helping to bring a more institutionalized footprint to the digital asset ecosystem.” He also went ahead to emphasis the importance of this development in achieving the ultimate goal.

The report held that the Head of Asset Management at Galaxy Digital, Steve Kurz, will look after the funds in tandem with Portfolio Manager Paul Cappelli. While the Galaxy Bitcoin Fund requires a minimum investment of $25,000 with quarterly liquidity, the Galaxy Institutional Bitcoin Fund requires a higher minimum investment with weekly liquidity.

Steve Kurz, Head of Asset Management at Galaxy Digital said:

“The Galaxy Bitcoin Funds help accredited investors mitigate the complexities and risks of managing direct bitcoin investments. The funds provide investors bitcoin exposure with institutionally secure third-party custody, best-in-class service providers, and Galaxy’s platform support.”

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ISIS Is Not Hoarding $300M in Bitcoin War-Chest, Reports Chainalysis

Over the past week, the comments of a counter-terrorism think tank Director have indicated that ISIS has been using cryptocurrency platforms to conceal donations and bypass financial security measures and could be hoarding close to 300 million in Bitcoin.

The think tank expert initially made the revelation after identifying an increase in advertising for BTC donations. However, a recent report from Chainalysis suggests that there is no evidence of ISIS’s $300 million BTC war-chest and they are not impressed with the mainstream media’s conflation of the Director’s comments.

The articles reporting the supposed war-chest took their lead from the comments of Hans-Jakob Schindler, Director of the CEP (the Counter Extremism Project, a specialist think tank tracking the trend of terrorism financing), who revealed that since 2017, the authorities have been searching for the terror group’s mission war chest and it is feared that it may have been converted into cryptocurrency to be used at a later date.

Schindler said, “I’m wondering if from 2017-2020 there has been $300M that we have not found and that’s why I’m thinking this might have been one of the ways it might have been used.”

The thought of a notorious extremist group like ISIS being funded by anonymous crypto and Bitcoin fits right into many people’s conceptions of the main use for digital assets: to fund terror and buy contraband.

However, as Chainalysis has revealed in a recent report, there just is no evidence beyond Schindler’s guesstimation and there is no evidence among his think tanks research either to make the $300 million BTC war chest claim. In fact, there is nothing really to suggest that ISIS has any bitcoin at all.

Chainalysis Busts ISIS BTC War-Chest Myth

As mainstream media headlines blew up with the sensation ISIS crypto-fund story, Chainalysis decided to publish a fact-checking blog on May 20, accusing the media of sensationalizing out of context comments.

The report reads, “This week, stories circulated that Hans-Jakob Schindler, director of the think tank the Counter Extremism Project, said that authorities have searched for ISIS’s missing war chest since 2017 and that he is wondering if the $300 million has not been found because cryptocurrency “might have been one of the ways it might have been used… This would be an ideal storage mechanism until it is needed. If done right, it would be unfindable and unseizable for most governments.”

According to the analysis firm, most of the terror financing ever conducted via bitcoin has never even raised more than $10,000.

Chainalysis asserts, “Schindler’s theory is highly unlikely,” further explaining that if ISIS had funneled oil proceeds into Bitcoin, “trading volume of regional exchanges and money service businesses would have reflected this flow of funds.”

Furthermore, contrary to popular belief, cryptocurrency and Bitcoin are not necessarily the ideal storage mechanisms for illicit funds. While digital assets have a reputation for being untraceable, in comparison to cash they are “inherently transparent”, every transaction is recorded and publicly visible in the decentralized ledger.

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European Union Parliament Considers Petition for Crypto Fraud Victims Fund

The European Union (EU) Parliament is considering a petition filed by a consortium of individuals, organizations and companies that seeks to establish a restitution fund for victims of crypto fraud.

The EU Parliament has announced that they are considering a petition submitted by a consortium of crypto fraud victims. The objective of the petition is to seek for the establishment of a restitution fund for victims of crypto fraud.

The victims represented by their lawyer, Dr. Jonathan Levy, have suffered losses exceeding €40 million and like tens of thousands of other crypto crime victims worldwide have been unable to recover their funds through law enforcement, national regulatory authorities or the courts.

In the petition, Dr. Levy urges the European Parliament to act directly to help the victims of crypto-active crimes as part of its EU strategy for the creation of a genuine single market for digital financial services.

The petition has been submitted to the EU Parliament—with the EU indicating that it will institute EU wider regulation of crypto assets to be phased in by 2022. Under the current EU rules, there are no provisions for victims of crypto crimes which usually range between fraud, extortion, money laundering, and cyber attacks.

The EU projects that the annual losses to individuals, organizations, and companies as a result of crypto-related crimes are in the billions of Euros and constitute a “massive transfer of wealth to organized crime firms.”

According to the EU announcement, the consortium of victims includes: disabled and elderly victims being preyed upon by crypto scammers posing as brokers. An American investor whose crypto wallet was hacked and nearly 1000 Bitcoins sent to a criminal operation; and, companies and individuals from Europe, America, Africa, Asia, and Australia who were deceived into investing in fraudulent crypto-asset funds, nonexistent crypto mining operations, and deceptive ICOs by seemingly legitimate companies registered in England and Germany.

The consortium also includes victims of some of the more notorious crypto Ponzi schemes like OneCoin, as well as numerous offshore online casinos and FOREX platforms that use crypto to evade AML and consumer protection laws.

Grayscale Ends Quarter with Record-Breaking Inflows of $5.7 Billion as Demand for Crypto Goes Up

Grayscale Investments has released their quarterly report assessing the last months of 2020. Per the report, the year finished with a bang for them, with inflows of investments topping $5.7 billion. This translates to four times the investment amount pouring into Grayscale from 2013 to 2019.

The fourth quarter of 2020 was solid for Grayscale, as $3.3 billion of investments were recorded in simply one quarter.

The demand from institutional investors has been the underlying tone of 2020 and has served to boost the inflows into Grayscale. 93% of the Trust’s investments came from institutional investors, with most endorsement originating from asset managers.

Grayscale’s most popular investment product would be its Grayscale Bitcoin Trust, which saw average weekly inflows of $217.1 million in the last quarter of 2020. Ethereum Trust was the second most popular investment choice, with average weekly inflows of $26.3 million. Barry Silbert, the founder and CEO of Digital Currency Group, the parent company of Grayscale, illustrated the sizeable growth of the Trust.

Per the CEO, Grayscale’s fundraising history goes as such:

2015:
$3 million

2016:
$20 million

2017:
$120 million

2018:
$360 million

2019:
$608 million

2020:
$5.7 billion

For investors looking to secure their funds through a diversified portfolio, Grayscale also offers the Digital Cap Fund. Recently, Grayscale has decided to remove XRP from the basket of assets it offers, allocating a bigger portion of the Fund to Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH).

Has Bitcoin really secured its spot as a safe hedge?

Bitcoin investments has largely gained popularity in 2020, with institutional players embracing the mainstream cryptocurrency. However, although there is growing consensus among institutional investors that Bitcoin is a secure store of value, not everyone is convinced.

While banking giant Wells Fargo has called Bitcoin this year’s leading top asset, it has also labelled it as a ‘speculative’ investment. Wells Fargo compared crypto investments to the early days of the 1850s’ gold rush in a report.

Regardless of how one views Bitcoin, there is definitely a shifted narrative at the moment surrounding the asset. Bitcoin is now considered as a way one can diversify one’s investment portfolio.

According to Coinshares Chairman Danny Masters, the narrative surrounding Bitcoin has quickly gone from it being deemed a risky asset to it being a career risk for an asset manager to not hold any Bitcoin.

How Smart Money Is Investing

With a flurry of renewed interest in cryptoassets, and multiple new opportunities for riches abounding, the vast majority of us can’t help but tentatively listen to that voice whispering in our ear, “remember 2018”. The bull run throughout 2017 ended in tears for many as early 2018 saw the market enter into an abrupt and prolonged bear cycle that lasted the better part of three years. “This time is different though” as we’ve heard from many of the industry professionals, and yes, this time is different from a fundamental perspective. What was largely retail speculation driving prices in 2017 has been augmented with more sustainable, long term institutional buy-in. The likes of Elon Musk, Michael Saylor and Paul Tudor Jones have publicly expressed their support for the asset class, and global asset managers can now safely (and legally) allocate a portion of their portfolios to the new digital gold.

What is not different this time, however, is the high degree of risk that inexperienced traders take on. There is an entire academic field known as Behavioural Finance that delineates the various cognitive and emotional biases that we as humans are susceptible to when it comes to managing our own investments. Given the extreme volatility in crypto markets, behavioural biases become even more apparent as the fear and greed within us becomes magnified by the potential gains and losses.

The cryptoasset market, largely due to its relative infancy and high proportion of retail traders, is often prone to speculative bubbles and crashes as investor emotions drive prices away from their intrinsic value.

Overconfidence is a common bias exhibited in a market rally, along with overtrading, underestimation of risks, and a rejection of contradictory information. Traders will often seek out information confirming their pre-existing beliefs. A basic example would be a trader Googling “How high will Bitcoin go this week”, instead of “Reasons Bitcoin may be due for a correction”. If you have a bullish bias on the market, it is incredibly tempting to seek out information that confirms your own beliefs, thereby justifying your position.

As a market rally corrects, there can be underreaction that can be caused by a bias known as anchoring. This happens when investors do not update their beliefs in the face of new market information and attribute too much significance to data encountered earlier. The early stages of a market correction can involve cognitive dissonance amongst investors; ignoring losses and attempting to rationalize flawed decisions. As the market unwinds, investors may initially be unwilling to accept losses. In crashes, the disposition effect encourages investors to hold on to losers and postpone regret. This response can initially cause an underreaction to bad news, but a later capitulation and a (larger) realized loss on investment.

I certainly do not believe that we will have a bubble and subsequent crash of nearly the same magnitude as we have experienced in the past, however, that is not to say that the crypto market will not have periods of mean reversion. Given the immense growth we have seen in brokerage app downloads such as Robinhood, it has become apparent that retail participants are taking an active approach to their investments like never before. This influx of retail day-trading participation (as opposed to simply buying and holding) may cause heightened volatility in the markets as human emotions take up a greater portion of trading volume than before. One way to eliminate our own emotions from hindering the performance of our portfolio is to allocate capital to professionally-managed crypto-focused funds that have risk mitigation techniques. This frees you from the stress of managing your own biases on a daily basis, and allows you to comfortably hold over the longer term with peace of mind.

Invictus Capital has a fantastic range of tokenized crypto funds that cater to the full spectrum of investor risk profiles. Global investors are able to invest using USDT, or a range of other cryptoassets, with no minimum amount required. Founded in 2017, the company has a stellar track record across their range of funds with its Crypto10 Hedged Fund earning multiple awards from the reputable Crypto Fund Research for its performance. 

The team at Invictus Capital have recently launched their new investor portal, which makes it easier than ever for new investors to sign up and manage their portfolio on their own dashboard. Furthermore, the InvictusCapital.com (ICAP) token has recently launched which rewards the investor community for staking their Invictus fund tokens for predefined periods. Investors are therefore able to earn additional returns on their investments by simply holding for the longer term. To find out more, visit the Invictus Capital website and sign up for a hassle-free investment experience.

Image source: Invictus Capital Media

Swiss Market Watchdog Approves First Regulated Crypto Fund for Investors

Switzerland’s financial market watchdog announced that it had approved the first regulated cryptocurrency fund in the country.

The Swiss Financial Market Supervisory Authority (FINMA) disclosed on Wednesday, September 29, that it had granted the launch of the Crypto Market Index Fund, according to Swiss law.

The market regulator further stated that the Crypto Market Index Fund would be restricted to qualified investors investing majorly in cryptocurrencies or digital assets with “sufficiently large trading volume” running on the blockchain or distributed ledger technology.

The FINMA classified under other funds for “alternative investments” with particular risks and stated that it would require investors to invest only through established counterparties based in a member country of the Financial Action Taskforce and are subject to corresponding Anti-Money Laundering regulations.

The Crypto Market Index Fund is launched by Swiss asset management firm Crypto Finance AG and is administered by investment management firm PvB Pernet von Ballmoos AG. At the same time, custody is offered by regulated custodian SEBA Bank AG.

Crypto Finance AG said that the crypto fund would track the performance of the Crypto Market Index 10, a product administered by the Swiss market index under the SIX Swiss Exchange.

“The objective of the Crypto Market Index 10 is to reliably measure the performance of the largest, liquid crypto assets and tokens and to provide an investable benchmark for this asset class,” crypto Finance stated.

Besides that, FINMA has granted SEBA bank permission to provide digital assets to Swiss-domiciled mutual funds.

Announced on Wednesday, FINMA granted SEBA bank a license set to allow the bank to act as a custodian bank and offer liquid investment funds with cryptocurrencies.

SEBA Bank CEO Guido Buehler talked about the development and said that the license would attract more investment.

“This collective investment scheme license allows institutional clients, and then later retail clients, to invest into crypto assets on a liquid basis through fund structures,” Buehler said.

Swiss Crypto Adoption on The Rise

The development by The Swiss Financial Market Supervisory Authority (FINMA) to grant more regulatory approval for cryptocurrency investment instruments not only signals cryptocurrency adoption continues to gain momentum in Switzerland. Still, it marks a milestone for the progressive step towards approving a Crypto ETF in the country.

The Swiss financial market regulator embraces a more flexible approach to cryptocurrency than authorities in several other countries.

As a result, Switzerland is among the leading countries in terms of crypto adoption in Europe.

The FINMA approved many similar asset-oriented products in the recent past, with firms such as CoinShares and 21Shares have unveiled multiple exchange-traded products on the SIX Exchange.

In September 2020, the Swiss authorities started allowing local companies and citizens based in Zug to pay their taxes in either Bitcoin or Ethereum.

This year, FINMA granted permission to the Swiss bourse to develop an exchange dedicated to digital token offerings in mid-September this year.

Overall, Switzerland has been considered as a “crypto valley” s several industry firms are drawn to the jurisdiction over its friendly cryptocurrency and blockchain regulation.

Andreessen Horowitz to Raise $4.5B for Two New Crypto Funds

Wallet Street Venture Capital firm, Andreessen Horowitz (a16Z) is rallying investors for a $4.5 billion dual fund targeted at making strategic investments in the cryptocurrency ecosystem.

According to the Financial Times, $3.5 billion is billed to be earmarked for its newest cryptocurrency enterprise fund, while $1 billion will be reserved for strategic investments in crypto startups seeking seed funding.

The Silicon Valley-based Andreessen Horowitz plan’s to secure the funding by March which will nearly double the firm’s previous crypto fund of $2.2 billion.

While Wall Street may be waking up to the potentials of the cryptocurrency industry, Andreessen Horowitz has long been backing innovations and promising startups in the emerging world. As Blockchain.News reported, the firm tapped the services of the head of the New York Stock Exchange (NYSE)’s regulatory unit, Anthony Albanese as its new chief regulatory officer while also spearheading its thriving cryptocurrency division as far back as 2020. Former Coinbase vice president of communication, Kim Milosevich, also join a16Z as the chief marketing officer.

If the firm is able to pull the funds as reported, it will be the biggest funds raised in the digital currency world, a record that is currently being held by Paradigm Capital, a joint venture between Coinbase’s Fred Erhsam, and Sequoia Capital’s Huang, which pulled $2.5 billion in funds to back startups in the fast-growing cryptocurrency ecosystem in November last year.

While the a16Z’s plans have not been made public yet, the company is well known for a related fundraiser in the ecosystem. The company pulled $2.2 billion from investors back in June last year to create the Crypto Fund III, the largest at the time.

Renowned for being one of the early investors in big multinationals such as Meta Platforms Inc (formerly Facebook Inc), Twitter, and Coinbase Global Inc, Andreessen Horowitz has also made headlines for backing projects like OpenSea, CryptoKitties, and Helium amongst others. With the metaverse and NFT related innovations taking momentum at present, the proposed $4.5 billion will surely be put to very good use.

South Korean Kookmin Bank to Launch the First Crypto Fund

Kookmin Bank, the largest banking financial institution in South Korea, has announced its plans to launch the nation’s first crypto fund, a move targeted at retail investors.

According to the announcement from the bank, a Digital Asset Management Committee has been established to oversee the launch of an Exchange Traded Fund (ETF) product right after the regulatory laws in the country permit.

“We will launch a virtual asset-themed equity fund, etc., as soon as possible,” says Hong-Gom Kim, head of Kookmin Bank’s index quant management division. “We will also publish periodicals.”

In a bid to complement its planned launch of a crypto fund, the bank is also planning a move that will see it float a hybrid fund that will feature both traditional assets and cryptos. Per the announcement, the hybrid fund will be a reference point for outsourced chief investment officers to provide guarantees on their investments.

The planned move from Kookmin Bank is very pivotal in South Korea. The country is a major crypto hub in Asia with significant digital currency traction amongst both retail and institutional investors. Billed as the largest bank by total Assets Under Management (AUM) which topped 100 trillion Korea Won (approximately US$83.8 billion), according to data gleaned from the bank’s website.

With a deep customer base amongst the top stakeholders in the country, the embrace of the proposed crypto and hybrid funds is poised to gain massive traction from investors across the board.

While all hands seem on deck for the proposed Kookmin Bank products, scaling the stringent regulatory provisions is another hurdle that must be crossed. South Korea is known for its strict regulations imposed on digital currency trading platforms, most of whom were sent packing on grounds they could not secure a banking partner last year.

With the regulatory ecosystem largely unpredictable, Kookmin bank may ride on its previous crypto custody services and broader grip on the economy to steer its way to secure the required licenses required to float the products.