The Blockchain Weekly Front Page is a CXO level briefing. Our mission is to serve the mainstream business community by selecting one major theme in the Blockchain Economy each week and three news stories to illustrate that theme. This is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world, in your email inbox each Monday at 7am CET.
For more on the format please click here.
Last week our theme was “Decentralized Exchanges (DEX)”.
If you are still having doubts about cryptocurrencies, it looks like the old is meeting the new. Its been going on for a while now and in some cases not always getting a lot of coverage.
Last week in an announcement, Yale University invested in a $400 million in Paradigm, a crypto fund operated by veterans from cryptocurrency and finance industries.
Paradigm was created by Fred Ehrsam, Coinbase’s co-founder, Matt Huang, former Sequoia Capital partner, and Charles Noyes, an ex-employee from the Pantera crypto hedge fund.
The university has allocated 60% of its assets for 2019 in alternative investments, like venture capital, hedge funds, leveraged buyouts and now cryptocurrencies. Yale is among the few large institutions to invest in the cryptocurrencies, which has tumbled, since its rocket growth in 2017.
While in February, 96% of endowments and foundations responding to a survey by consulting firm NEPC said they don’t invest in digital currencies and didn’t expect to change their stance, a recent poll by Apeiron Ventures showed that around 40% of family offices are looking to invest or have already invested and view cryptocurrencies as a new asset class.
Crypto funds have been launching at a record pace, with more than 90 new crypto funds having launched this year alone. At this rate, there will be 120 new crypto funds launched this year. The total number of crypto funds is now approaching 500.
It has been reported that multiple high profile banking interests have also moved into cryptocurrency, most notably, George Soros, the Rockefellers, and the Rothschilds.
George Soros is looking to trade various cryptocurrencies and the Soros Fund Management venture internally approved the trading of virtual coins. In January of 2018, he described cryptocurrency as a bubble. With the price of Bitcoin at third of the price in December, Soros has turned into a believer. George Soros may be controversial, but when it comes to investments, he’s rarely wrong.
The Rothschilds connection to cryptocurrency has been documented in several articles. Last summer, the family purchased Bitcoin for the first time. In February, Tether accounts of Bitfinex were opened in the Dutch bank ING, owned by the Rothschild.
The Rockefellers have also joined the party. Venrock, the official venture-capital arm of the family, reportedly signed a partnership with Coinfund, a cryptocurrency investment fund, to back virtual tokens and blockchain business innovations.
In the past, bankers and large financial institutions have not a had a clear position, one minute bashing cryptocurrencies and the next praising them. I think they are starting to realize the attractiveness of Bitcoin and other cryptocurrencies, and their ability to hold value in a decentralized network, that is not dependent on the global economy.
For a while now, Bitcoin has been relatively stable in mid-$6,000 range. IMHO, Bitcoin stability is extremely healthy indication. The low volatility we’ve witnessed, is very important for large investors and in part we can probably can attribute the stability to institutional investors coming in.
In September, billionaire investor Mike Novogratz tweeted that the crypto market has already reached a bottom at $186 billion, and is ready for new rally:
“This is the BGCI chart… I think we put in a low yesterday. retouched the highs of late last year and the point of acceleration that led to the massive rally/bubble… markets like to retrace to the breakout..we retraced the whole of the bubble.”
Novogratz also said that a “Herd of institutional investors are moving into crypto”. The entrance of pension funds, academic institutions, and large-scale financial companies into the market could trigger FOMO, amongst institutional investors.
According to research conducted by Satis Group, crypto trading volume will grow by over 50% in 2019. In the United States, the volume of cryptocurrencies traded will overtake the trading volume of corporate debt this year. And even more significantly, the trend shows that crypto trading volume is set to reach 10% of the equity trading volume in the world’s largest economy and home to the globe’s biggest stock market. Currently, the volume of U.S. equities is estimated to be over US$74 trillion, while that of crypto trading is US$7.3 trillion.
But as most look at prices as a measure of performance, it’s certainly not the only way to look at things.
Adoption is a equally important, if not more important. Potentially, usage and adoption are what will drive prices up in the future. Crypto has being growing on all fronts. When we compare Internet and crypto adoption, we’ll see a steep upward trend for wallet growth.
Bitcoin has been making significant steps with the Lightning Network. CoinGate, a payment processing gateway, recently announced its support for Lightning Network, across its entire merchant base. This could be a major boost to Bitcoin adoption, as CoinGate, will be adding all 4,000 of its merchants to the off-chain system. In September the capacity of Lightning Network reached 100 BTC, according to data from monitoring resource 1ML. The network’s capacity six months ago, was as low as 3 BTC.
The articles we’ve been reading paint a completely different picture, not necessarily reflected by today’s crypto prices.
NYSE’s parent company introduced Bakkt, that will bring big brands, like Microsoft and Starbucks, into the market and drive the adoption at the merchant level. The UAE has a vision to be a world leader in the adoption of blockchain technology. The EU recently ratified its Blockchain Resolution. Leading giants, like IBM, MasterCard, Microsoft and others, are continuously applying and accumulating patents for crypto and blockchain. Facebook has put together a Blockchain team to develop the technology in their products. Walmart wants to store payment data on a blockchain. Revolut introduced a card allowing its customers to receive cash back in Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and XRP. Over 90 central banks across the globe are engaging in research and development of the blockchain technology.
And these are just some of stories that have been floating in the news.
Bitcoin’s present stability was necessary. We needed a cooling period, during which a stronger base would be established, for the next bull run. This period is useful because it can be used to further develop the network and allow institutional capital to flow in. The entrance of some major institutional money, could spark more and more major organizations to invest at a large scale in cryptocurrencies. Ultimately this will benefit the entire crypto ecosystem and over time shoot prices upward, driving even greater adoption.