CryptoAM: $15b Bitmain Valuation, BCH Insider Trading, and Coinbase Gift Cards

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Good morning everyone! We’re still holding water above 8k and with rumors of ETF abound…


3 things you need to know:

One: Bitmain may reach $15 Billion pre-IPO valuation. A new $1 Billion funding round would value Bitmain just shy of $15.5 Billion, which is AMD’s market cap. Bitmain is the largest manufacturer of ASIC mining chips.

  • My thoughts: POW is certainly not the hottest way to secure your blockchain network anymore. Almost all new coins coming out are either tokens on existing networks or utilize systems closer to DPOS. However, the giants in the market like Bitcoin and Ethereum still use POW algorithms. And at least in the case of Bitcoin, that will never change. As long as POW coins remain used, Bitmain will be valuable.

  • Stats: Bitmain did $2.5b in revenue and $1.25b in net profits in 2017. When Bitmain IPOs it may see valuations upwards of $40b!

  • Read more…

Two: Coinbase internal investigation concludes that no insider trading of Bitcoin Cash occurred. Prior to the listing of Bitcoin Cash on Coinbase, some exchanges had suspicious spikes in price and volume of Bitcoin Cash. Many people accused Coinbase employees of trading on advanced knowledge that Bitcoin Cash would be listed on Coinbase. According to CEO Brian Armstrong, the internal investigation into the incident did not find any of its employees guilty of violating any rules.

  • “We would not hesitate to terminate an employee or contractor and/or take appropriate legal action if evidence showed our policies were violated. We can report that the voluntary, independent internal investigation has come to a close, and we have determined to take no disciplinary action.”

  • Sneaky: While I believe that Coinbase truly did not find any tangible evidence that employees made insider trades, I also know that many people that work at Coinbase are probably smart enough to insider trade without getting caught. Although insider trading may be a violation of Coinbase policy, because Bitcoin is not a security, it’s not illegal under the law.

  • Read more…

Three: Coinbase launches cryptocurrency gift cards in Europe and Australia. Well, e-gift cards that is. In partnership with WeGift, Coinbase users will be able to withdraw cryptocurrency into e-gift card for a 0% fee. On top of that, users will receive special discounted offers for spending crypto from their e-gift card. Retailers include Nike, Tesco, Uber, and Ticketmaster. Coinbase is actively working to expand this program to more countries.

  • Takeaway: More ways to spend crypto, and get rewarded for it? I’m not complaining.

  • Read more…


Also in the news:


What I’m reading today:

Five things needed for a Bitcoin ETF to pass

As you may have noticed, there’s quite a bit of speculation surrounding Bitcoin ETFs lately, with people hotly debating whether an ETF will be approved or not.

There are currently six Bitcoin ETFs being considered by the SEC, five from the company Direxion, and one from the CBOE, who is working with the ETF provider VanEck. Yesterday, the five applications from Direxion got delayed until September 21st from their original date of July 24th.

The deadline for the more prominent CBOE x VanEck application is August 10th, and people are worried this decision might de delayed as well. So, what is the SEC looking for in an application? Luckily they have outlined their thinking for us.

Valuation: Cryptocurrencies are volatile and trade across multiple, fractured exchanges. The fund that issues an ETF will need to calculate end of day net asset value (NAV) for tax and reporting reasons. Due to fragmentation & price variations, this becomes difficult. A potential solution is to copy futures settlement, which just uses the price at closing on one specific exchange, Gemini.

Custody: Best practices are unclear when it comes to storing cryptocurrency. Futures are cash settled, and don’t have to deal with custody. All ETF applications are proposing to actually store & hold bitcoin. The SEC is concerned that the storage may be insufficient. Recent developments in the custody space (such as Coinbase custody) make it more likely for this to become a non-issue.

Liquidity: A key feature of open-end funds, such as mutual funds and ETFs, is daily redeemability. The SEC is concerned that there isn’t enough liquidity in the markets to support redemptions in periods of high stress. They want to ensure funds investing in cryptocurrencies or cryptocurrency-related products will have sufficiently liquid assets to meet redemptions daily. The rise of institutional platforms like Coinbase prime are well positioned to deal with this issue, and are a step in the direction of solving the liquidity issue.

Manipulation: The SEC’s role is to protect U.S citizens from fraud and to ensure the integrity of the market. Chairman Jay Clayton has noted that there are substantially less investor protections in crypto than traditional securities markets, with correspondingly greater opportunities for fraud and manipulation, and that he wants to see some accountability in the markets. Another roadblock is that the FBI is currently conducting an investigation into the manipulation of Bitcoin. If they conclude that manipulation is both rampant (and hard to stop), I find it unlikely that the SEC agrees to approve the ETF.

Arbitrage/Volatility: In order to promote fair treatment of investors, an ETF is required to have a market price that does not deviate materially from the ETF’s NAV. In light of the fragmentation and volatility in the cryptocurrency marketplace, it becomes difficult to ensure fair price through arbitrage. A potential solution here is to employ market makers or to become a maker marker. The fragmentation issue is hard to solve, and no clear solutions have emerged.

I personally believe the decision will be delayed, but am bullish short term on the effects on Bitcoin.


Around the corner:


Market Outlook:

Quick Take

Like predicted we hit 8.5k, and promptly retraced to 8.1k.

I’m expecting some consolidation around this 8.1k, and then another push to 8.5k and beyond. This is a crucial level though, and a breakdown through 8.1k here could send up down to 7.6k.

Daily Chart

Fear & Greed

We’re approaching overbought (greedy) levels but aren’t quite there yet. That’s likely due to alts massively underperforming. Once we see alts take off, It’s time to take some money off the table.

Here’s a reminder of what these criteria mean

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