ETF TALK: COINBASE/BLACKROCK: Coinbase ETF Pursuit With BlackRock Comes Into Focus; Could File Submission ‘Early 2019’

Coinbase and BlackRock have been discussing multiple initiatives and structured products for the better part of 15 months. Not just 2018 or over the summer, as some have reported. Both firms have established working groups that have been ‘passing notes’ that lends strategy and expertise to one another. BlackRock by way of their engagement with regulators and the leaders in establishing the ETF asset class; and Coinbase as the de facto leader in the crypto movement and asset class.

That ‘back and forth’ work has come into focus and a specific structured product is nearing completion and could be filed with the SEC as the calendar moves forward in 2019. This much we are sure of based on industry conversations and ‘on background’ conversations.

What we aren’t certain of, and have been unable to ascertain from those conversations, is the nature and set up of a Coinbase ETF. Will it include multiple coins listed on Coinbase? Will it include more than what is listed on Coinbase? Will it be a largely ‘institutional grade’ ETF with financial barriers to entry that will only allow accredited investors to afford the product? Or will it only be a Bitcoin and Ethereum based product?

Here is a wild card that really piqued our interest – could Coinbase put together a product that includes it’s freshly minted stablecoin $USDC in the allocation of assets within the ETF? Could Coinbase be considering a stablecoin ETF all unto itself?

These are all theories that were postulated and discussed with us over the past month. Whatever the eventual asset mix of a Coinbase ETF submission looks like, it is nearing the finish line and only awaiting the perfect time for submission.

A Long Year Of Research And BlackRock Relationship Building

Throughout the past year, Coinbase has engaged in conversations with BlackRock’s blockchain group in order to leverage the firm’s expertise at launching exchange-traded products. An early pioneer of the ETF market, BlackRock is renowned for its popular, low-cost iShares family of ETFs.

As Coinbase pursues an asset specific crypto ETF, it would join numerous other firms also looking to launch their own, including rival exchange Gemini, Bitwise Asset Management, and VanEck. Several firms have seen their ETF applications rejected by the Securities and Exchange Commission (SEC).

Sources stated that the Coinbase ETF would also likely track a number of coins other than Bitcoin. A Bitcoin ETF has been viewed as a next step in gaining legitimacy as an asset class and could lead to the entrance of more institutional money into crypto markets.

Coinbase’s ETF would need to address the same market transparency and manipulation issues that persuaded the SEC to shoot down 9 ETF proposals. Nevertheless, Coinbase’s conversations with BlackRock support the idea that crypto’s appeal is growing among traditional Wall Street circles.

All well and good and certainly within the scope of establishing a relationship that would favor an ETF approval for Coinbase in the future. But it goes much further than that, and we spoke to a source at BlackRock, on the condition of anonymity who gave us a look behind the scenes as to what is being ‘hatched’ in the Coinbase/BlackRock laboratory:

“The relationship between the two firms has been longstanding, a little more than a year, and has included talks on structured products ranging from credit cards, insurance, ETF’s, IRA’s, mutual funds, hedge funds, and even a possible Coinbase IPO. This isn’t just an ETF story meant to fit the current crypto narrative and what is or isn’t going to happen with the SEC. This is long-term planning with the assumption that approvals will come and adoption will continue to push forward. Coinbase values the breadth and depth of our (BlackRock) brand and has remained cozy and complimentary every step of the way.”

“It is clear that Coinbase aims to be the ‘Fidelity of Crypto’ via its retail operations and focus on compliance, custody, and growth of its institutional offerings. And that type of branding and growth is something that we have immense interest in going forward. Forget about what Larry (Larry Fink, BlackRock CEO) has said publicly about crypto and Bitcoin in particular. That is just smoke amongst a sea of questions marks as to where regulators come down and how the shape of cryptos form around it. At some point, there will be clear language and visibility (November?) and then the two firms could announce several initiatives.”

COULD A COINBASE ETF BE A PRECURSOR TO A $10B VALUATION?

Coinbase just recently executed a $300MM capital raise that valued the firm at $8B and that number created serious buzz in the tech venture capital space. Could a Coinbase ETF approval push that valuation even further? It isn’t that hard to begin connecting the dots as to why Coinbase would choose a partner as revered and lionized in traditional finance as BlackRock for precisely that purpose. In fact, with an ETF approval (or several) Coinbase’s value could stretch significantly beyond the $10B number.

COINBASE REMAINS UNPOPULAR AMONGST CRYPTO DIEHARDS

Coinbase, while somewhat unpopular amongst crypto diehards, has been making choices that seek to establish itself as the first brand amongst the masses that eventually find their way into the crypto space as the regulatory and depth of financial infrastructure builds itself around the globe.

Which makes their relationship with BlackRock all that much more important. BlackRock is THE worlds leading financial institution via the pure mass of assets managed (+6 Trillion). Coinbase is making a very, very shrewd move by keeping themselves close to a firm that wields enormous influence in Washington D.C. and on Wall Street.

If you are going to pursue a serious structured product initiative, there simply is no other firm better suited to assist in navigating the regulatory waters than BlackRock. Whatever your opinion of Coinbase may or may not be, in terms of customer service and as a digital asset exchange, their ability to make shrewd moves based on their brand awareness connected to the bull run of 2017.

NASDAQ AGAIN: SOURCE: “These are the coins that will get listed in 2019…”

We’ve been chasing an oft-asked question ever since we posted the Nasdaq article last regarding the exchanges intention of creating a yet-to-be-known architecture to list large market cap tokens. And it looks like we’ve been able to come up with some answers.

One source at the Nasdaq, on the condition of anonymity, was able to point us in a direction that made it clear what the exchanges intentions were and the comfort level being created around this listing project. Specifically, the exchanges work with Gemini (of Winklevoss fame) and the market data that has been collected over the past six months of monitoring and research that the Nasdaq has done on that exchange has created a comfort level that has pushed this narrative forward.

**A word of context before we get to the coins that are set to be listed within the Nasdaq framework that it creates – and it will crystallize when you read it. Based on conversations with other sources in and around this story, it is clear that the Nasdaq and other entities are rushing to play catch up with Bakkt. Bakkt has cracked the code and is currently the tail wagging the dog across the intersection of traditional finance and crypto. In other words, the Nasdaq is doing a version of ‘exchange fomo’ in the hopes that they can take crypto a step further than unlocking Bitcoin to the huddled institutions salivating at outsized profits. FYI – did you see that Binance nearly out-earned the Nasdaq in Q1 of 2018? There is your context.**

Our source had this to say about what is to come in terms of coin listings on the Nasdaq: “You can expect the initial listings to mirror what Gemini has on its exchange. They are comfortable with that footprint and can almost mirror that way that Gemini handles order flow and executions, albeit on a larger scale. Most of the public won’t see it, and it may not even be announced, but Nasdaq may even borrow the back end tech that Gemini uses in a lot of ways. Which is mind-blowing, but probably critical to keep up (sic, with Bakkt).”

“And the next to get listed, or to join Bitcoin, Ethereum, and Zcash at launch would be Litecoin. That is the talk that I have heard and would be the bet that I would make if you forced me too. I’ve heard it mentioned several times and the market cap coupled with the visibility of Charlie (Lee) makes it an easy choice. The chances that it launches along the side the other three in 2019 is probably better than 75%.”

And more from the same source:

“Yes, the Bakkt stuff is real and there is scrambling happening across the competitive landscape. Remarkable that they kept it under wraps the way that they did. But you can bet that the scrambling isn’t just connected to Bakkt beating everyone to market – it is probably more closely correlated to the profits being generated at Binance, BitMex, Coinbase, etc. That is as big a motivator as you are ever going to find in capital markets. That kind of revenue and the growth/speed of it cannot and will not be ignored.”

So now you have some answers to the ‘who’ and the ‘what’ associated with the Nasdaq activity. And even some background as to the ‘why’. Bakkt and profits.

And the Nasdaq is set to go beyond just the listing of Bitcoin (part of their strategy to blunt the head start that Bakkt has) and add other large market cap coins. That should ensure, at a minimum, some headlines that rev the engines at launch.

The real question…when $XRP?

SOURCES: NASDAQ CRYPTO AMBITIONS: “The listing of several coins will happen in 2019…”

The NASDAQ is attempting to be the first mover in crypto exchange governance, order execution, and at the forefront of institutional movement into the crypto ecosystem. While there have been other headlines connected to global exchanges dipping their toes into the crypto waters via partnerships and futures trading; the NASDAQ may just go all in.

**This particular article was sourced and penned by Abacus Journal staff nearly three months ago. In light of today’s developments that Nasdaq has not only partnered with MVIS and Van Eck, but also has immediate designs to list security tokens connected to current cryptocurrencies as well as the equities markets – our sources were proven correct.**

And what does ‘all in’ look like for the famously aggressive and tech-savvy NASDAQ? Creating a pathway for cryptos to be listed and traded on the exchange proper.

While the details remain a bit fuzzy a trusted NASDAQ source continues to feed us information on the timelines surrounding the likes of Bitcoin and Ethereum being listed and tradeable on the NASDAQ.

Our source just passed us this note: “The conversation around listing coins has centered on how they will be classified from a regulatory standpoint. As you can imagine, our leadership is closely connected to the rumbling at the SEC and CFTC around cryptos and what is expected over the next 3-6 months. Even with the longest of time frames assumed, some guidance will be provided and I expect we will act quickly. The framework (two different sets of the framework based on two different regulatory outcomes) has already been laid to create a separate silo for coin listings and a robust trading apparatus. Doing the math here, look for regulatory bodies to provide guidance in Q1 of 2019, and an announcement and a ‘coin exchange’ to either be announced or launched in Q2 of 2019.”

Whoa.

But is it really that big of a surprise? The tea leaves have been pretty well read at this point. Take a look at our previous article connected to NASDAQ and Gemini (the institutional Winklevoss crypto exchange) and pick out where this is headed:

That has led to a deeper relationship between the two firms and increased confidence from Nasdaq that there is a pathway to list, at a minimum, Bitcoin, and Ethereum, as tradeable entities on a global scale. This initial foray into the crypto ecosystem would be measured, careful, and work closely with regulatory back channels.

Our first Gemini source said the following: “Tyler and Cameron have moved the ball down the field in a meaningful way. Nasdaq, and its leadership, already are predisposed to finding an architecture solution and being the first to list actual tokens. Not just ETF’s or futures or some ‘derivative’ of the crypto apparatus…but rather list actual coins. They are getting very comfortable with the structures they’ve seen from Gemini, and the other research they’ve done with exchanges of note. There is a timeline forming for this decision and it could be earlier than some might think.”

A second Gemini source was a little more specific with the timing of a Nasdaq move into crypto trading: “Nasdaq and Gemini have gotten very, very comfortable with each other. Did you guys catch the little note in one of the latest articles where it said that Gemini was essentially doubling their staff by the end of this year? There is a reason for that and it is their work with Nasdaq. If you made me take a bet on it, I’d put money on their being a joint venture of some sort that sees several tokens listed and available to the public to trade on the Nasdaq by Q2 of 2019. If the people involved in the planning are telling me the truth, that is the bet I’d make…and these aren’t just tea leaves pieced together here – I asked three and four times and kept hearing what I am telling you. Remember, there is serious competition between these global exchanges to get there with cryptos. Nasdaq wants to plant a flag in the ground no different than Intercontinental (ICE), CBOE, CME, all of them.”

We back channeled this through several third parties connected to the ‘secret meeting’ and we were surprised by what we DID NOT hear from each of those contacts. Nobody denied this possibility or the timing of it. Nobody.

A secret meeting. Continued meetings. Backchannels with regulators. Tea leaves everywhere. This intel feels like it may even be a little conservative if you were to ask us.

The NASDAQ has a knack for winning these types of battles and blazing a trail, specific to tech. What better way to move into the next financial frontier than to blaze this particular trail?

BITCOIN BOSS: NOVOGRATZ: Take A Look At The Crypto Investments Made By The ‘Buffet of Bitcoin’ Over The Last Year

Michael Novogratz is quickly becoming the ‘Oracle of Bitcoin’; to borrow a phrase from traditional finance and the worlds most successful investor, Warren Buffet. It seems that wherever and to whoever Novogratz floats his ‘pixie dust’ (aka crypto venture capital) the masses are sure to not only take notice but quickly deem the investment a crypto move of genius proportions.

But those masses aren’t wrong, and Michael Novogratz has found himself on the right side of the digital assets ledger time and time again. For reference, let’s take a look at the investment he’s made in just the past six months:

  1. The just-announced increased investment in his own firm Galaxy Digital.
  2. A partnership with his firm, Galaxy Digital, and Fidelity Digital Assets is announced.
  3. A strategic investment in Hut 8 Mining.
  4. A strategic investment in Bakkt.
  5. An investment in BlockFi, a lending facility for digital assets.
  6. An equity position in Caspian, a digital asset management solution.
  7. A strategic investment in Wax Express Trade, a digital gaming payment/trading system.
  8. An investment in High Fidelity, a VR blockchain project.
  9. A ‘lead investor’ equity stake in Alpha Point.
  10. Partnering with Bloomberg to create the Bloomberg Galaxy Crypto Index (BCGI).
  11. A co-investment with Goldman Sachs in custody service BitGo.

And we are almost certain there are more that haven’t been announced – and we probably even missed a couple. But the above list is remarkable and proves the ‘Buffet of Bitcoin’ moniker. When Michael Novogratz talks about crypto, digital assets, blockchain, use cases, or any other such crypto ecosystem buzz phrase you need to listen – and listen intently.

**Most of you reading this are acutely aware of Novogratz’s crypto prowess, but may not know his traditional finance history equally as well. So some crib notes regarding his work up to this point: Michael Novogratz is an ex-hedge fund manager, formerly of the investment firm Fortress Investment Group. Prior to joining Fortress, he was a partner at Goldman Sachs where he spent much time abroad including leadership roles in Asia and Latin America.**

Goldman, Fortress, and now quite possibly the most powerful financial firm in crypto, Galaxy Digital. That is a resume’ that commands respect, even with the circumstances that surrounded his exits from both Fortress and Goldman. Exits that were predicated on risk-taking that now serves Galaxy Digital perfectly.

This quote from the Bloomberg BitGo announcement yesterday adequately describes the direction and strategic thinking (common sense thinking) behind most of Galaxy Digital and Michael Novogratz’ investments:

“If you were investing in any other asset class, you’re probably not worried about the asset just disappearing — but this one, people still have that fear,” Mike Belshe, BitGo’s co-founder and chief executive officer, said in an interview. For cryptocurrencies to reach their full potential, “we’ve got to conquer that.”

Problem-solving, married to the concepts pressing digital assets forward are what make up Novogratz’ investment philosophy – at least that is what the above investment roster indicates. Custody, data, trading platforms, warehouse facilities, mining – these are all digital versions of another ‘Oracle’ (Warren Buffet) who’s made a few bucks over the years. Infrastructure and hard assets, so to speak.

In crypto, it is becoming increasingly clear that the concept of following the money will eventually pay off big. Galaxy Digital and Michael Novogratz are leaving breadcrumbs all over the digital assets trail, and you’d do well to chase them, picking up every crumb along the way.

FORTNITE AND MONERO: CRYPTO GAMING: Crypto Comes To Gaming Via Monero Partnership With World’s Largest Gaming Franchise

In a headline-making post on January 1st the online store connected to Fortnite announced an ‘exclusive’ crypto partnership with privacy token Monero. The news has washed over the crypto ecosystem quickly and brought new eyeballs to the space – just as the calendar turns to 2019.

Via Coin Telegraph:

“Fortnite is an online video game released in July 2017 and developed by Epic Games, which reportedly accounts for more than 125 million players worldwide. In October 2018, Epic Games was valued at over $15 billion in its latest funding round.”

“Retail Row supports crypto payments service GloBee, which allows retailers to accept cryptocurrencies including Bitcoin (BTC), Litecoin (LTC) and Ripple (XRP), while XMR is the only digital currency supported by the store. Customers can also make payments with a range of conventional methods including credit cards and PayPal.”

The most important detail lies in the ‘exclusive’ portion of the announcement connected to Fortnite. That is a really, really big deal. These are the kind of ‘use case’ announcement that could propel crypto back into the spotlight as an attempt to leave the bear market of 2018 in its wake.

Introducing crypto to 125 million die hard Fortnite fans is certainly a good start. What will follow is whether or not Monero finds significant usage amongst a percentage of those users/gamers. If so it makes a compelling case for token usage in the gaming space.

Either way, kudos to the Monero team for striking the deal, and Epic Games for instituting forward thinking with its core audience.

REPORT: Bermuda Authorities Issue Far-Reaching Custodian Provider Code of Practice for Consultation; Remain Crypto Friendly

On 18 December, the Bermuda Monetary Authority (BMA) released a draft digital asset custody code of practice for a one month consultation period.1 The draft code is one of the most comprehensive custody provider guidelines to be issued by any jurisdiction.

The draft code is designed to provide additional clarity regarding the standards the BMA will impose when considering whether a custodian is employing an acceptable level of care with its client’s digital assets.2 Failure to comply with the business or technical provisions in the draft code will be taken into consideration by the BMA in determining whether a licensed digital asset firm is meeting its obligation to conduct its business in a sound and prudent manner.3

The provisions in Bermuda’s draft code of conduct for custodian providers incorporate a broad range of business and technology controls. The draft code will likely be closely reviewed, and possibly used as a model, by other jurisdictions, like the UK, which are drafting digital asset laws and regulations.

Proportionality Principle

The BMA will assess compliance with the code of practice in a proportionate manner relative to the nature, scale, and complexity of the firm.4 Higher standards may be warranted when a firm has a unique business model with extraordinary risk or there are generally accepted breakthroughs in cybersecurity risk management and mitigation strategy.5

Hot and Cold Storage Policies 

The draft code strongly recommends that the majority of client private keys, not required for client transactions, be held in cold storage to mitigate against client loss from cyber-attacks.6 The BMA also strongly recommends a minimal balance be kept in hot storage and the mechanism and thresholds for transfer between hot, cold and other storages must be well documented and audited.7 In no case is a firm permitted to hold less than 90% of client private keys not being used for trading or other transactions in cold storage.8

A digital asset firm must also provide rationale for its choice of storage solutions. Factors for determining the best method of storage include, but may not be limited to, the volume of speed at which transactions need to be completed and the client’s risk tolerance.9

Client Address Strategies

The practice of generating a new address for every transaction further ensures a client’s privacy and confidentiality.However, there are cases where traceability of address activity is desirable.The draft code requires the custodian to exercise judgment in determining an address strategy based on the use of its clients and provides justification for the address use strategy.10

Fraud Detection and Due Diligence Standards

The draft code strongly recommends that digital asset businesses develop a protocol for fraud detection that includes a system for identifying suspicious transactions, as well as a procedure for reviewing suspicious transactions.11

Digital asset businesses must also document policies and procedures related to client identity verification requirements that include, but are not limited to, enhanced due diligence, sanction screenings and adverse media screenings.12

Proof of Asset Valuation and Reserves

The draft code mandates that digital asset business have to disclose the methodology related to its asset valuation calculations and, when possible, use recognized benchmarks or observable, bona-fide, arms lengths market transactions. The draft code strongly recommends that firms disclose the source of the asset valuation to the client and all signatories of the transaction.13

The draft code also strongly recommends that firms have a minimum amount of assets on-hand, within the organization, to withstand the withdrawal of all client assets and ensure sufficient liquidity for the protection of client assets. A periodic proof of reserves audit must also be completed.14

Reporting Standards and Insurability Protections

The draft code requires firms to issue customer statements at least quarterly. The statements must be designed to assure the integrity of the client accounts and permit clients to identify any erroneous or unauthorized transactions, withdrawals or balances.15

Digital asset businesses must also demonstrate that assets under custody carry appropriate insurance or other financial protections to cover or mitigate potential loss exposure.16

Custody Safekeeping Standards

The draft code requires firms to have controls in place to ensure digital assets are securely created and stored. Uninterrupted availability of assets is another important requirement.17 The draft code strongly recommends that seeds should be created using a National Institute of Standards and Technology (NIST) compliant deterministic random bit generator.18

The draft code requires firms to have secure deletion and destruction mechanisms in place and ensure unwanted artifacts from seed, key and wallet generation.19 The draft code also requires firms to ensure that fewer than the number of keys required to transact will ever be stored online or in any one physical location. Key/seed backups must be stored in a separate location from primary key/seed.20

Digital asset businesses must ensure that a regular and recurring internal audit-at least quarterly-of the backup seeds is performed on storage devices to ensure that no backups were tampered with or removed.21

Physical Security and Access Requirements

The draft code requires firms to have storage facilities equipped with highly secure vaults that are penetrative resistance to forcible attack and monitor all physical storage areas on a 24/7 basis. Access to storage areas must be limited to persons authorized by the associated entity and confirmed by a third party through multifactor identity verification.22

The draft code also requires firms to have access requirements that require, at a minimum, badge entry that is restricted to authorized individuals; separate access controls from primary workspaces; facility access control logging systems that maintains access records for a minimum of one year on-site and a copy stored for three years at an off-site location; and CCTV that covers entry access entry.23

Key Compromise and Key Revocation Procedure 

The draft code requires firms to have a documented protocol in the event there is reasonable belief that a wallet, private key or seed has been compromised.24 Digital asset businesses must also have procedures in place for immediately revoking a signatory’s access.25

Perpetual Client Access and Location Redundancy

The draft code requires firms to demonstrate that they can provide clients with perpetual access to all assets in custody in the event the business ceases to operate or cannot fulfill its custody agreement.26

The draft code also requires businesses to maintain disaster recovery and redundancy facilities designed to ensure business continuity and client asset preservation.27

Mandatory Reporting of Security Breaches 

The draft code requires firms to have documented policies and procedures to address actions taken, client notifications, and notifications to the BMA regarding an event or suspicion of hack, theft, compromise or attack.Such procedures must be reviewed and audited annually.Within 14 days of a notification, the senior representative must furnish the BMA with a report in writing setting out all of the particulars of the case.28

Custody Transaction Handling and Custody Operations Controls

The draft code requires firms to ensure transactions are secure and trusted and that there are measures in place to prevent fraud. All transactions must be recorded in system audit records, and these records must be periodically audited.29

The draft code also imposes custody transaction handling control standards, including multi-signature authorizations, collusion mitigation, evidence-based signature approvals, periodic audits and data deletion and sanitization policies.30

IT Operational Controls

The draft code concludes with a series of technology operations requirements. Firms must have best practice IT operational controls in place to ensure a secure and stable custody operating environment. 

The mandated controls include multi-factor authentication; security controls to all systems, particularly internet-facing systems; individual access system controls; security vulnerability and custody services testing; and disaster recovery procedures.31


  1. Consultation on Digital Asset Custody Code of Practice 2018,” Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  2. Consultation on Digital Asset Custody Code of Practice 2018, §1.2, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  3. Consultation on Digital Asset Custody Code of Practice 2018, §1.2, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  4. Consultation on Digital Asset Custody Code of Practice 2018, §1.3, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  5. Consultation on Digital Asset Custody Code of Practice 2018, §1.3, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  6. Consultation on Digital Asset Custody Code of Practice 2018, §1.5, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  7. Consultation on Digital Asset Custody Code of Practice 2018, §1.5, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  8. Consultation on Digital Asset Custody Code of Practice 2018, §1.5, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  9. Consultation on Digital Asset Custody Code of Practice 2018, §1.43, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  10. Consultation on Digital Asset Custody Code of Practice 2018, §1.6, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  11. Consultation on Digital Asset Custody Code of Practice 2018, §1.8, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  12. Consultation on Digital Asset Custody Code of Practice 2018, §1.19, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  13. Consultation on Digital Asset Custody Code of Practice 2018, §1.9, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  14. Consultation on Digital Asset Custody Code of Practice 2018, §1.21, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  15. Consultation on Digital Asset Custody Code of Practice 2018, §1.20, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  16. Consultation on Digital Asset Custody Code of Practice 2018, §1.17, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  17. “Consultation on Digital Asset Custody Code of Practice 2018: Technology Controls Part I: Custody Safekeeping,” Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  18. Consultation on Digital Asset Custody Code of Practice 2018, §1.28, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  19. Consultation on Digital Asset Custody Code of Practice 2018, §§1.30-1.31, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  20. Consultation on Digital Asset Custody Code of Practice 2018, §1.31, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  21. Consultation on Digital Asset Custody Code of Practice 2018, §1.31, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  22. Consultation on Digital Asset Custody Code of Practice 2018, §1.33, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  23. Consultation on Digital Asset Custody Code of Practice 2018, §1.41, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  24. Consultation on Digital Asset Custody Code of Practice 2018, §1.35, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  25. Consultation on Digital Asset Custody Code of Practice 2018, §1.37, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  26. Consultation on Digital Asset Custody Code of Practice 2018, 1.38, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  27. Consultation on Digital Asset Custody Code of Practice 2018, 1.40, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  28. Consultation on Digital Asset Custody Code of Practice 2018, §1.42, Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  29. “Consultation on Digital Asset Custody Code of Practice 2018: Technology Controls Part II: Transaction Handling,” Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  30. “Consultation on Digital Asset Custody Code of Practice 2018: Technology Controls Part II: Transaction Handling,” Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).
  31. “Consultation on Digital Asset Custody Code of Practice 2018: Technology Controls Part III: Operations Controls,” Bermuda Monetary Authority, December 2018, http://cloudfront.bernews.com/wp-content/uploads/2018/12/Digital-Asset-Custody-Code-of-Practice.pdf (accessed 20 December 2018).

DRAPER DIGS IN: Doubles Down On Bitcoin Price Prediction, 225,000 By 2022

Tim Draper could be Bitcoin’s leading evangelist. And any evangelist worth his salt not only reveals himself as a true believer but acts as such in public and private. Tim Draper revels in doing just that at every turn and stated again that Bitcoin will reach astronomical price levels over the next 42 months.

The Bitcoin [BTC] enthusiast and entrepreneur, earlier predicted that Bitcoin will reach a value of $225,000 in 2022. He mentioned this prediction in his book and stands by it.

In sticking to his prediction that Bitcoin will soar to $250,000 by 2022, he’s effectively carved out the high ground amongst other well-known crypto bulls. At one of his latest conference appearances, he spoke about the potential in technology regarding the banks and venture capital. He spoke about his hopes about cryptocurrency, the new world order, and his bullish beliefs about the token, Bitcoin [BTC].

He also believes that fiat currency will lose its value, he said:

“So, you’ll go in and try to buy coffee with fiat and the barista will laugh at you. Because there is so much more friction with fiat currency than there is with cryptocurrency. And I think you’ll be able to buy it with Bitcoin, Ether, or Bitcoin Cash.”

(**more to come about the above concept later today and throughout the week in reference to Bakkt and their pending ‘pipes’ connected to $BTC).

In 2014, he made a purchase of 30,000 BTC when it was trading at $650 at a public auction. However, it was seized by the US authorities from Silk Road.

And a reminder that Tim Draper doesn’t mind getting all up ‘in his feelings’ about Bitcoin by doing his best old man Eminem impression on cryptocurrency:

“Wherever you are,
Thank you for Bitcoin, the blockchain and more
You started this snowball from the top of the hill
And now it’s pervasive
It’s the people’s will
It’s the people’s will
We want a new world order
We want to play across the border
Just wanna be a Hodler
on my Bitcoin hustle
on my Bitcoin hustle
on my Bitcoin hustle
Yeah!
Get your hustle going
Flex that crypto muscle
Yeah!”

LOL! Tim is going to Tim. The enthusiasm can be contagious and he remains the worlds foremost ‘Crypto Evangelist’ at the moment – displacing other high profile personalities. Of course, a middle-aged white guy constructing a rap about a significantly white/male phenomenon seems a bit much.

Still, wherever he goes, whatever he says the crypto world is listening. And holding on to his $225K bitcoin prediction for dear life.

TRADERS: BULL RUN: 5 Reasons A Legitimate Bull Run Is Coming (and soon)

The crypto bear market has lasted nearly 11 months, and for all intents and purposes, seems to be accelerating at the moment. Bitcoin logged another leg down overnight and this morning; crypto sentiment seems to be at 2014/2015 levels. Instead of bullish posts being all the rage, the latest crypto twitter meme seems to be rage tweets claiming portfolio destruction and leaving the space altogether.

Sounds perfect – to several tenured crypto traders and crypto hedge fund managers. The screeches and audible pain that is emitting from crypto ‘hodlers’ and traders sounds like the sentiment that occurs just before a turn and the makings of a quiet bull market floor forming.

In discussions with several traders and a couple of crypto hedge fund managers over the weekend, we gathered five good reasons why the next crypto bull run could be upon us. Let’s take a look:

  1. Institutional infrastructure breadth and depth: Beyond individual stories about Goldman Sachs, Fidelity or Bakkt – two hedge fund managers spoke extensively about the breadth of institutional involvement in crypto that is on its way to the markets. Goldman Sachs, Fidelity, DRW and TD Ameritrade (ErisX), BlackRock and Coinbase, Nasdaq, Bakkt and the NYSE, and on and on and on.
  2. OTC Markets are quietly robust: One trader told us that the volume on the OTC markets is at a turning point and volumes have recently spiked higher; and not for sellers, but for buyers. Smart money sees the 2018 bear market as an opportunity to buy ‘digital gold’ on the cheap and stash it away for a couple of years. If traditional markets weaken any further the OTC buyers dynamic will only increase and push Bitcoin prices higher.
  3. The SEC just gave muted guidance (via enforcement) that should embolden the tokenization movement: The latest enforcement actions by the SEC, scolding two separate ICO’s, provided further guidance to the tokenization movement and its actors. The short version is essentially this ‘ICO’s aren’t illegal, and we really don’t mind them, just check in with us, pursue registration, and you should be good.’ The ICO enforcement actions taken late last week amounted to small fines given how much those ICO’s raised. A virtual slap on the wrist. And neither announcement claimed fraud of any kind.
  4. Garbage alt-coins are being destroyed: One crypto hedge fund manager discussed Verge ($XVG) as an example of the kind of waste that needed to be burnt out of the ecosystem for the next bull run to begin, “…a token like Verge, built on nothing more than vaporware, hype, cringe partnerships, and stickers on rented lambos are what needed to go away before capital could consolidate and find it’s way back to the likes of projects that are serious and legitimate. Bitcoin, Ethereum, Monero, Stellar (and others) – these are teams that are legitimately attempting to build something that lasts and you can see money flows moving in that direction.”
  5. Bakkt arrives on January 24th: Bakkt brings serious force to the crypto markets by providing Tier 1 institutions the ability to accumulate and trade Bitcoin no differently than they trade gold, oil, natural gas, silver, copper, etc. Trading Bitcoin globally on the ICE exchange networks is 10x the size of CME and CBOE futures trading. The daily gold futures volume on global exchanges is routinely better than $200B. Yes, that is the DAILY volume. DAILY. The late 2017 bull run was somewhat fueled by the Bitcoin futures ramp up on the CME and CBOE. Expect a similar market reaction to Bakkt.

A look back to how some accomplished traders view Bakkt and its ability to curtail the bear market:

“Nothing else on the horizon comes close to what Bakkt will mean for Bitcoin. The depth and breadth of the ICE (Intercontinental Exchange) network and exchange ecosystem means that adoption/trading volumes will skyrocket overnight. The same pipes and structures that allow Goldman, JPMorgan, Morgan Stanley, among a horde of others, to trade billions in commodities like gold, silver, soybeans, and corn; will be the same architecture used to trade Bitcoin.”

“Think of it this way…with the custody and ‘warehouse facility’ solved inside of Bakkt’s infrastructure you have solved the final issue that institutions have been clamoring for in the digital asset space. Their Bitcoin transactions and investments are ‘safe’ via the warehouse facility, and the ability to go claim their Bitcoin straight from the warehouse should they allow their position to mature to that point.”

“Rather than ‘physical’ Bitcoin per se, you are getting access to Bitcoin being housed in an uber protected, heavily secure facility that will hold the digital asset as the backstop for Bitcoin. That is what the Novogratz’ of the world and Goldman and JPMorgan have been clamoring for.”

“While it would be interesting if Bakkt got the press it deserved, there really isn’t a single ‘name’ banking institution that could accompany them in a headline. And that is precisely the scale of the Bakkt story. The ramp up and volume with be enormous and lightning fast. Within months you will have billions of dollars in institutional cash running through Bakkt’s system, buying and selling Bitcoin.”

“This is ultimately the solution that the biggest players (within banking) want and need. And this move furthers the narrative of Bitcoin as a ‘store of value’ or ‘digital gold’.”

And a reminder regarding the reactions crypto hedge fund managers had to the Fidelity ‘digital assets’ initiative several weeks ago (that aims to compete with Bakkt):

“The rumors out there stem from Fidelity passing on taking a stake in Bakkt and then have run amok from there. They’ve been just as secretive about their build as Bakkt was for nearly two years leading up to their announcement. All we know is what we hear from a couple guys that work at Fidelity, but even that is vague and a wink and a smile. But as we see stuff leaked via the media in some way it makes sense that they would scale up. Bakkt has all the institutional pipes, but Fidelity has that same access, but a massive retail name that can tap millions of customers.”

“The real intrigue here is the rumor that Fidelity considers themselves to be crafting a real competitor to Bakkt. That is a mouthful if you ask me. Bakkt is leveraging fifty plus years worth of exchange infrastructure to establish Bitcoin as a standard and then offer products that evolve from there. Fidelity is said to be further along in the way they plan to leverage that same architecture. If that is true, and that is a big if, it only furthers adoption, and the crypto ecosystem wins. Still, lots of chatter about what could come from a name like Fidelity.”

Even Bank of America keeps grabbing crypto custody and blockchain patents by the armful:

“Describing its place and necessity in the future of financial services, the application reads, “As technology advances, financial transactions involving cryptocurrency have become more common. For some enterprises, it may be desirable to securely store cryptocurrency.” The Bank of America began its development of this online cryptocurrency vault system in 2014. So while top leaders at Bank of America have publicly derided Bitcoin and cryptocurrency in general, actions speak louder than words. And they are preparing for the rollout of custody solutions, structured products, and payment systems. Book it.”

A bull run is coming…and if tenured traders are to be believed, it is just around the corner.

BREAKING: COINBASE AND WEALTHFRONT: Robo-Advisor Disrupting Wall Street Partners With Coinbase To Offer Clients Token Access

In a press release from Wealthfront earlier today, the leading robo-advisor platform has struck a deal with Coinbase to offer clients (read: millennials) access to digital assets such as Bitcoin, Ethereum, and the coming wave of tokens that Coinbase has signaled they plan to list over the next year. 

The continued cross-currents between both Wall Street and the digital asset economy are undeniable at this point. All manner, size, scale, and reputation of traditional finance based exchanges and broker-dealers are set to offer some sort of access to digital assets and tokens. It isn’t slowing down, rather the pass is picking up.

Via Wealthfront: 

“Today, we’re excited to announce you can now track your cryptocurrencies by connecting your Coinbaseaccount to Wealthfront! We’re especially excited because this has been one of our clients’ most requested features.”

“You have always been able to connect a wide variety of account types and asset classes to our Path advice engine—from bank and brokerage accounts to real estate, mortgages, and student loans. But we know many of you like to dabble in other innovative financial products, like cryptocurrencies. So now, we make it possible for you to add information about your cryptocurrency holdings in your Coinbase account to Wealthfront to get a more holistic view of your financial picture. And even more importantly, we factor that information into your free financial plan.”

Rather than offer the ability to trade cryptocurrencies directly from Wealthfront, they’ve created a specific API that allows clients to link their Coinbase account to their platform and be visible on their statements/app/desktop. The same functionality exists for other accounts at Fidelity, Bank of America, Vanguard and others. 

Still, another move of scale forward for the digital assets ecosystem.

BAKKT: FUTURE PRODUCTS: Bakkt Foreshadows ‘Future Crypto Products’ In Dialogue; Bullish Hopium

As if we needed another reason to continue to anticipate the launch of Bakkt. In a late Sunday tweet Bakkt foreshadowed the future of their ambitions with the following line:

“…which could open the door for other products around crypto.”

This from a tweet at 4:42 PM. Deconstructing the backstory on ‘other products’ is the key here. Clearly, Bakkt doesn’t aspire to simply create and trade, ad infinitum, bitcoin futures and bitcoin futures alone. As competitors such as Nasdaq and ErisX push forward with multiple cryptocurrencies and futures that will be traded at their respective launches, Bakkt won’t be left behind.

To get a bit more clear-eyed on what other products Bakkt may be talking about that will come from a more orderly price book from Bitcoin take a look at the gold futures markets, spot markets, etc. What type of products has evolved from the ‘physically deliverable’ gold markets dominated by ICE, the parent company of Bakkt?

Orderly gold markets trade better than $100B worth of the commodity per day. The products that have been born from that type of volume have been the following:

  • Physical gold is readily available to the public from all manner of sources.
  • Gold ETF’s have been approved across the board and trade on several exchanges.
  • Gold mutual funds have also become mainstream.
  • Gold derivatives are traded amongst commodity exchanges.
  • Gold futures are also traded across multiple commodity exchanges.
  • Gold options.

**The collective trading in the above products approaches $500B on a daily basis.

Can anyone guess who manages the largest gold-based ETF’s in the world? Anyone? Anyone? BlackRock. Yes, that BlackRock – the worlds largest asset manager. And there just happens to be a story or two out there that connects BlackRock to Coinbase as the two comingle their efforts on potential crypto ETF products.

Bakkt aspires to be the foundation on which firms like BlackRock, State Street (SPDRS), Invesco, Vanguard, VanEck, and Deutsche Bank create Bitcoin and digital asset ETF’s. Collectively the aforementioned firms manage nearly $4T in ETF assets. FOUR TRILLION.

So it makes a bit of sense for Bakkt to have an interest in processing the type of digital asset volumes connected to an ever-expanding ETF ecosystem.

And this is the reason that Nasdaq, Bakkt, ErisX, and Fidelity have rushed into the custody and trading markets for Bitcoin and other large market cap digital assets. The fees and profits on ETF’s, mutual funds, options, and derivatives are in the 10’s if not 100’s of billion dollars a year.

Would Bakkt, Fidelity, and Nasdaq really announce large-scale crypto infrastructure if the smartest people in those firms have yet to do extensive due diligence on the expected profits? And those expected profits far outweigh the risks involved in digital assets? Of course, they have put the scales to it and their eyes have widened at the expected and potential profits.

Take a look at some commentary directly from Bakkt’s CEO, Kelly Loeffler regarding where Bakkt is headed – and we will highlight specific phrases that point to significantly more than just Bitcoin futures:

“Our goal is to make digital assets more liquid, trusted and accessible; allowing meaningful innovation to follow. Many in our space are working toward this objective.”

“By virtue of passporting ICE Futures U.S. and ICE Clear U.S. into other jurisdictions outside the U.S., institutions operating on a global scale can better serve their customers. Bakkt’s first contracts will be physically delivered Bitcoin futures contracts versus fiat currencies, including USD, GBP and EUR.For example, buying one USD/BTC futures contract will result in daily delivery of one Bitcoin into the customer’s account. This aspect of physically delivery adds to the utility of Bitcoin, beyond simply trading.”

“While there are many aspects of Bakkt that we’ll continue to develop and share, our initial focus is supporting regulated institutions in serving customers in this emerging asset class. The foundation on which we are building our solutions for buying, selling, storing and spending digital assets is not a piece of Italian Carrera marble, like the statue of David, but is built upon the time-tested, regulated futures markets — which have advanced markets ranging from coffee to gold for hundreds of years.”

“Key to cryptocurrency’s success is a trusted market price. We are working to create a regulated for of price discovery, which could open the door for other products around crypto.”

Again, the implications here over the next three to five years are enormous. A regulated and orderly market for large-cap tokens will turn a $150B – $200B market capitalization ecosystem into a $1T – $2T industry of scale. If the gold markets are any indication of what lies ahead for digital asset structured products and daily trading volumes – fill your bags right now.

Don’t be blinded by the pain of a bear market. Bakkt, Fidelity, Nasdaq and other global firms of scale are building and loading up. Shouldn’t you be?