September 11, 2018
BTC: $6,315.56 | ETH: $194.21  (8:00am ET 11/9)
Welcome to the first Institutional Crypto newsletter, powered by CoinDesk!

What is “institutional crypto”? It refers to the interest from financial institutions – old and new, large and small – in the growing sector of cryptoassets.

This interest, as it stands today, consists largely of questions. How do I invest in cryptoassets? What rules do I need to observe? Is what I want to do legal? How can I protect my investment? What changes are coming? How mature is the sector? What is everyone else doing?

In this weekly newsletter we plan to answer those questions. We won’t offer investment advice, but we hope to make it easier for you to develop your own strategy, and to keep abreast of the fast-paced evolution of an emerging asset class.

Each newsletter will include a short note discussing an issue of the previous week. You’ll get a smattering of links from CoinDesk and from other reputable sources that reveal trends and developments for our sector. We’ll also fill you in on movements of people and companies (we might even mention you!). And, of course, Crypto Twitter will get a look-in.

We hope that you find this useful. Constructive criticism is welcome, feedback is valued, and praise will just make our day. Please send comments to noelle@coindesk.com.


Nasdaq Said to Be Building Tool to Predict Crypto Price Movements (CoinDesk) – The US stock exchange is exploring cryptocurrency data sets and the application of machine learning tools to create a sentiment gauge, and a source close to the company expects a product launch this autumn.

Grayscale Launches Investment Trust for Zen Cryptocurrency (CoinDesk) – The cryptocurrency asset manager has officially launched the ZEN Investment Trust for accredited investors.

Gemini Launches NYDFS-Regulated Crypto Pegged to the Dollar (CoinDesk) – The crypto exchange, which is regulated by the New York Department of Financial Services, has launched the Gemini dollar, an ethereum-based token pegged to audited and FDIC-insured fiat currency holdings.

Paxos Unveils Dollar-Backed Stablecoin Approved by New York Regulator (CoinDesk) – And so has Paxos. Called the Paxos Standard, the token will be backed by dollars in the firm’s custody.

SEC Suspends Exchange-Traded Bitcoin and Ether Investment Vehicles (CoinDesk) – The Securities and Exchange Commission has temporarily US halted trading in exchange-traded notes Bitcoin Tracker One and Ether Tracker One, citing “confusion amongst market participants”.

Quoine Looks to Boost Crypto Liquidity With New Trading Platform (CoinDesk) – The Japan-based cryptocurrency exchange has launched Liquid, a trading “portal” that claims to offer traders access to exchanges around the world, matching trades across multiple currencies.

Australian Watchdog to Apply Market Rules to Crypto Exchanges (CoinDesk) – The Australian Securities and Investments Commission has indicated that it is developing a new framework that will apply "the principles for regulating market infrastructure providers to crypto exchanges".
 

Coinbase plots to become the New York Stock Exchange of crypto securities (TechCrunch) – The founder and CEO of Coinbase, Brian Armstrong, spoke at TechCrunch’s Disrupt Conference last week on the future of his company and of cryptocurrencies in general.

Citigroup Planning Crypto Trading by Issuing Receipts (Bloomberg, paywall) – Unconfirmed reports indicate that the global financial institution is developing a series of depositary receipt-like instruments to allow clients to trade bitcoin without holding it.

Coinbase is exploring a crypto ETF, and it has sought help from $6 trillion Wall Street giant BlackRock (Business Insider, paywall) – The cryptocurrency exchange operator is, according to people familiar with the matter, considering joining the list of companies looking to issue crypto ETFs, and apparently asked BlackRock’s blockchain working group for advice.

A $112 Billion Money Manager Asks Goldman for Lessons in Crypto (Bloomberg, paywall) – While Korea Post, run by the South Korean government, apparently has no intention of investing in cryptocurrencies (the government has issued anti-crypto statements in the past), its staff will meet with Goldman Sachs’ research team to learn more about the asset class.

Apex will soon custody cryptocurrency assets (InvestmentNews) – Apex Clearing plans to launch Apex Crypto in Q4, to give its custody and clearing clients access to cryptoasset trading and storage.

The developing world of crypto custody (Securities Lending Times) – Executives from Archax and Lendingblock discuss sector infrastructure and trends.

Olymp Capital launches European blockchain and crypto asset fund (HedgeWeek) – The fund will invest in blockchain-related private equity, crypto funds as well as ICOs, making it one of the first Europe-based vehicles to invest directly in tokens.
 

NOTHING TO SEE HERE

In yet another example of “you see what you look for”, last week the market and the media took the report that Goldman Sachs was “shelving” its plans to open a crypto trading desk as yet another sign that institutional interest was dwindling.

However, in a conference the following day, Goldman’s CFO Marty Chavez denied the “news”, saying that their plans hadn’t changed.

The intriguing part of this sequence of events is not that the media succumbed to the temptation to publish unconfirmed reports (after all, rumor can sometimes be news).

Nor is it that the market started to slump soon after, and the report’s denial did not generate a rebound (which indicates that maybe the slump had nothing to do with the report?).

It’s that the crypto community seems to have been expecting a Goldman Sachs bitcoin trading desk announcement sometime soon.

Why is this expectation surprising?

It’s true that Goldman Sachs has been one of the pioneers among big Wall Street firms in its work with cryptocurrencies. It was one of the first to clear bitcoin futures for clients when they launched late last year. And, in May, itconfirmed plans to set up a trading desk for cash-settled bitcoin futures. Neither of these activities, however, requires a significant investment or departure from standard procedure, since they act like the derivatives Goldman Sachs is already very used to handling.

Actual cryptocurrencies, however, are a different matter. Regulation is still uncertain, and bulge bracket financial institutions are unlikely to undertake any venture without the regulators’ explicit approval.

And, there’s the technological difficulties. Crypto custody (necessary for actual bitcoin trading) is complicated and expensive, and while several startups and a handful of established institutions offer an institutional-grade service, the “too big to fail” set – names familiar to the large funds – has yet to take this function on board.

What’s more, Goldman’s new strategy involves a shift away from trading revenue (which can be annoyingly unpredictable) towards recurring fee income, with most of its recent investments supporting its retail lending business. While this doesn’t rule out new trading services, we need to recognize that the nature of the bank is changing.

Finally, if you look on the company’s careers page, you’ll see that there are currently no job vacancies related to cryptocurrencies. Earlier this year, the firm hired digital asset traders for the pending futures trading operation. But adding a new asset (actual bitcoin) in the near future would require additional talent.

Then, as if things weren’t confusing enough, more unconfirmed reports have suggested that Citigroup is launching a depositary receipt-like instrument to allow non-custodial trading of bitcoin. Is this rumor true? If so, it could be taken as big name institutional involvement, right?

And two regulated crypto exchanges have launched fiat-backed stablecoins, which could open up a slew of applications for institutional investors and traders. And yet bitcoin barely blinked.

What’s the takeaway from this crazy week? That work on the sector’s infrastructure is progressing fast, but carefully. And that headlines should be taken with a grain of salt.

- Noelle
 

Former TradingScreen and Liquidnet CFO Kevin Held has joined Alphapoint, a blockchain company providing trading platform and asset digitisation technology to financial institutions.

Venture capital firm Andreessen Horowitz has hired Dan Boneh – the head of the Applied Cryptography group and co-lead of the Computer Security Lab – as a Research Partner for a16z crypto.

Minh Ha Duong, formerly investment manager at Berlin-based venture capital firm Project A Ventures, has joined crypto fund of funds Cambrial Capital.

David Sacks, a partner at Craft Ventures and co-founder of token compliance platform Harbor, has joined the advisory board of 0x, an open protocol for decentralized exchanges.

Blockchain security research boutique Cryptic Labs has added Dr. Eric S. Maskin and Sir Christopher Pissarides – both Nobel laureates in Economics – to their advisory board.

Got a tip? Drop me a line at noelle@coindesk.com.
 

Consensus: Invest 2018 is fast approaching! Join us in NYC on the 27th of November for a solid opportunity to talk to and listen to institutional crypto investors, experts and service providers about trends, news and what’s just around the corner.

(Remember Consensus:Invest 2017? When the price of bitcoin broke through $10,000 for the first time ever? That was a good time to be in the room. Just sayin’.)
 

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