CryptoAM: ETF Troubles, Iran Coin, and a Tepid CME

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As the ETF goes, so does Bitcoin.

3 things you need to know:

One: The SEC has rejected the Winklevoss Twins’ second attempt at listing a Bitcoin ETF. Notably, the SEC cited part of it’s reasoning for rejecting the ETF was, “The Susceptibility of Bitcoin and Bitcoin Markets to Manipulation,” and even referred to the recent paper out of UT Austin that linked Tether to market manipulation.

  • Stumble: The rejection of the ETF was followed by a rapid decline in Bitcoin’s price from over $8300 to $7900. This falls in line with our expectations that the ETF was being priced into BTC.

  • Dissent: One of the four SEC commisioners, Hester Peirce, wrote a dissent on the SEC’s order. “I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market. More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order.”

  • Takeaway: As I discuss in this thread, the reason of rejection was not Winklevii specific, and means no ETF is going to be approved anytime soon.

  • Avi Felman@AviFelman

    What’s really interesting about the rejection of this ETF was that it was a 3-1 vote. Hester Pierce was the sole dissenter. The opinions mostly concerned the manipulation of the bitcoin markets (as expected)

    July 26, 2018

  • Read more…

Two: Iran moving forward with plans to launch state sponsored cryptocurrency in order to get around sanctions. The announcement was made on state sponsored TV by the Iranian Deputy for Management and Investment affairs. The deputy specifically mentioned avoiding sanctions as one of the benefits of a state backed cryptocurrency. The cryptocurrency will be pegged to the Iranian Rial.

  • “We are trying to prepare the grounds to use a domestic digital currency in the country. This currency would facilitate the transfer of money [to and from] anywhere in the world. Besides, it can help us at the time of sanctions.”

  • Doubts: Venezuela’s Petro hasn’t exactly been wildly successful. When I think of a country being able to successfully pull off a state-backed crypto, Iran is not the first country that pops in my mind.

  • Read more…

Three: CME CEO not in a rush to list altcoin contracts. Terry Duffy said that he will “wait and see,” in regards to the success of the Bitcoin Futures contracts before adding derivatives for any other cryptocurrencies. On average, the CME has been trading around three thousand bitcoin futures contracts a day. The total amount of contracts traded on the CME in Q2 2018 was over 18 million.

  • My thoughts: I would be cautious about listing altcoin contracts too if I were the CEO of the CME. Even within the top ten cryptocurrencies, I still believe that the crypto markets are capable of being manipulated to a reasonable extent.

  • Read more…

Also in the news:

What I’m reading today:

NEXO proposes an acquisition of Salt Lending, a cautionary tale about investing in Crypto

SALT lending, a once promising crypto project, is in the process of failure after less than a year in operation. After raising $48M in their August 2017 ICO, they claimed to be well on their way to building out a robust crypto-loans platform. Their aim was to allows holders of blockchain assets to leverage holdings as collateral for actual cash loans. It purported itself to be the first first asset-backed lending platform to give blockchain asset holders access to true liquidity.

They’ve come under fire as their CEO has exited and their business model is falling apart. They’ve come under such duress, that a competitor has announced a proposal to buy their assets. While this definitely a PR campaign, it would save the loans of many SALT token holders who would be pretty grateful in return.

The (seeming) failure of SALT and subsequent (proposal) by NEXO to acquire hammers home the importance of investor protections. If you're a VC, you have access to the team and all the information you need to make informed decisions. Public companies issue reports quarterly and yearly that provide clarity.

With Bitcoin/ethereum/open source projects, all the information is out there to make good decisions. But most of the time you're investing in an ICO, you're not investing in a cryptocurrency. You're investing in a company with a "cryptocurrency". You have no insight.

I’d always caution to think carefully before buying a token, and figure out what you're actually purchasing. Are they a company disguised as a cryptocurrency, as so many are?

Around the corner:

Market Outlook:

Quick Take

The news of the Winklevii ETF being rejected sent BTC through support at 8.1k, and wrecked our bullish thesis. As expected, once breaking 8.1k we began the trek down to 7.8k where we are likely to bounce or consolidate. If we go below 7.8k, the bullish market structure breaks and I’d be likely to reduce a lot of my exposure to cryptocurrencies.

I’m expecting a bounce on 7.8k, and and looking for a break of 8k. A long at 7.8k, seems like great R/R, as a break below 7740 would invalidate the bullish thesis (that’s where my stop loss would be).

Note on alts: As discussed before, the ETF speculation drove Bitcoin prices up at the expense of alts, as people re-allocated capital from alts to BTC. Over the next few days, we should see alt/BTC pairings rise is value as capital is reallocated to alt coins, so moving back to your favorite alt coins may be an approach.

Daily Chart

Fear & Greed

We’re almost fearful again, giving us another indicator the market may be overbought.

Here’s a reminder of what these criteria mean

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