BAKKT: BEHIND THE PENDING LAUNCH: Faced With An Unexpected Delay, Bakkt Prepares Massive Roll Out And Marketing Blitz

Bakkt has been the talk of the crypto water cooler for nearly six months now. Conversations about it being a “bear market buster” abound, and it just may be. But it has to be approved by the CFTC before that can happen. And as of today, the lights are a bit dim in CFTC offices in Washington, DC – per the US government shutdown.

But that reality isn’t slowing down the inner workings of Bakkt, its staff, and the teams built around the global commodities exchanges controlled by Intercontinental Exchange. The ‘buzzing’ that can be heard amongst those connected to the Bakkt launch is loud and growing. Work is being done and preparations are in full gear.

The clear expectation is that CFTC approval will follow shortly after the reopening of operations at the CFTC following the end of the shutdown. And the Bitcoin initiative known as Bakkt, partnered with Microsoft and Starbucks, will launch like a rocket.

Take a step back and consider the huge venture capital names committed to Bakkt at the moment. A few names connected to their first round of funding read like an All-Star team of sorts: Fortress, Galaxy Digital, Horizon Ventures, M12 (Microsoft’s own venture fund), and a host of others.

The investment is not necessarily a play on Bakkt trading volumes or the price of Bitcoin, but rather on adoption and daily use that Bakkt plans on pursuing. Here is a portion of that case stated by Maria Smith, Vice President, Partnerships and Payments for Starbucks:

“As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks. As a leader in Mobile Pay to our more than 15 million Starbucks Rewards members, Starbucks is committed to innovation for expanding payment options for our customers.”

In other words, the play for flagship institutional investors is not the volatility associated with Bitcoin, but rather the real world application of it when you walk into Starbucks and order a Grande Cordusio. With a swipe of a finger and a push of a button, Bitcoin is deployed and used for purchase at one of the largest retail chains in the world.

So what is happening today as Bakkt prepares to launch an entirely new asset into the commodities space?

The Bakkt team is working furiously as they prepare for a marketing and execution blitz that they believe will produce tremendous volumes and attract all manner of institutional clients very, very quickly.

One source familiar with Bakkt’s preparations had this to say about what they expect once CFTC approval occurs:

“Take a close look at the increased public dialogue that Bakkt is having with the crypto and financial community. Whether it is a Medium post by Kelly (Kelly Loeffler, CEO of Bakkt) or social media posts meant to continue to build a Bakkt narrative, the PR and marketing ramp up is preparing for launch and all that comes with it.”

“Once launch occurs you can expect Bakkt leadership to be all over the airwaves and in front of TV cameras preaching the Bakkt gospel. And that can be characterized as the safety, custody, and daily use case ecosystem that Bakkt provides to investors. Kelly is uniquely qualified to tell that story and will be a media darling.”

More color on where Bakkt is headed once approval is finalized from sources we spoke with familiar with the firm. The Starbucks initiative is a 2020 project and will be carefully talked about in conjunction with reps at the behemoth coffee company. ‘Message discipline’ will be important with respect to Starbucks so as not to fall into the trap of overpromising and underdelivering.

At launch much more will be made of Bakkt’s familial connection to ICE and their technology partnership with Microsoft. Those will be highlighted early and often as they are trusted names amongst institutional investors and global investment banks.

Further, you can expect Bakkt to be more an more visible at larger financial and technology conferences of note. Also expect the Bakkt message to be spread in the largest of media organizations like the Wall Street Journal, New York Times, CNBC, Bloomberg and the like. Bakkt wants to build a lock-tight institutional seriousness around digital assets and the safety they plan to provide to investors. They believe keeping messaging to legacy outlets will send that message.

Messaging, optics, partnerships, adoption, safety, real-world use cases, ICE, Microsoft, Starbucks, and ‘more digital asset products to come’. Maybe Bakkt is the bear market slayer we all hope it to be?


EXCLUSIVE: ESTONIA: Over 1100 Virtual Currency Licenses Approved in 2018

The Estonian Financial Intelligence Unit (FIU) issued 529 virtual currency wallet service provider licenses and 595 virtual currency exchange service provider licenses in 2018, according to an e-mail received by Abacus Legal from the FIU.

The FIU estimates that the majority of the licenses were issued to foreign businesses. In addition, the FIU estimates that the majority of the firms applied for and received approval for both types of licenses simultaneously. 

Few Applications/Licenses Rejected or Revoked by the FIU

In 2018, the FIU rejected 24 virtual currency wallet service provider applications and 34 virtual currency exchange service provider applications. The FIU did not provide the reasons for the not approving the applications. Estonian law permits the rejection of applications if the applicant fails to submit the necessary documents or a member of the management body, procurator/agent, beneficial owner or owner was convicted of a criminal offense.

The FIU also revoked 12 wallet service provider licenses and 17 exchange service provider licenses.The FIU did not provide the reasons for the revocation of the licenses. Estonian law permits the revocation of a license if the applicant intentionally submitted incorrect information; the firm repeatedly fails to follow the precepts of the supervisory authority; or the firm has not commenced operation within six months.

Legal Certainty and Location Independent Business Practices Attract Virtual Currency Firms

Virtual currency companies find Estonia an ideal jurisdiction to conduct business for a wide-array of reasons. Estonia is one of the few European Union (EU) member states that have enacted legislation to explicitly regulate virtual currencies. This has provided virtual currency businesses with a high degree of legal certainty. 

The ease of establishing a company through the e-residency program, minimal documentation requirements for the licensing of a virtual currency firm, and expeditious licensing process also provide foreign businesses with a favorable domicile to establish an EU-wide presence.  

Draft AML Legislation Will Increase Operating Costs

Foreign virtual currency firms considering establishing a presence in Estonia should take into account an AML bill currently being drafted. The draft law imposes additional licensing requirements; requires firms to enhance customer due diligence procedures; and extends the application review process from 30 days to as much as six months.   

The draft law also requires companies registered in Estonia to have their place of business and head office in Estonia and companies not registered in Estonia are required to establish a branch in the country.   

After the legislation is enacted, a virtual currency firm that already has a license will be given six months to meet the new requirements. The FIU will revoke a firm’s license if it does not meet the requirements in six months. 


BAKKT BONUS: ACQUIRES ASSETS BEFORE APPROVAL: Bakkt Acquires RCG Assets To Bolster Platform Ahead Of CFTC Approval

Bakkt isn’t resting on its parent company laurels and hoping that the ‘largess’ associated with ICE will bring institutional customers by the buckets full. Instead they are continuing to smartly acquire customers via acquisition as well as staff – as per a Medium post made by their CEO, Kelly Loeffler.

Via Medium:

“To advance that effort, I’m pleased to share that we have entered into an agreement to acquire certain assets of Rosenthal Collins Group (RCG), an independent futures commission merchant with nearly 100 years of earning clients’ trust. In December, RCG announced the sale of all its customer accounts to Marex Spectron, one of the world’s largest commodity brokers. As part of that transaction, our aim was to purchase certain valuable assets related to developing our platform. We expect to close the transaction in February, and are excited to welcome members of the RCG team to Bakkt.”

“How does this advance our work? First, it will enhance our risk management and treasury operations with systems and expertise. Other aspects of the transaction will contribute to our regulatory, AML/KYC and customer service operations as we help enable digital asset acceptance by bringing more choice and control to buyers and sellers.”

“This acquisition underlines the fact we’re not standing still as we await regulatory approval by the CFTC for the launch of regulated trading in our crypto markets. Our mission requires significant investment in technology to establish an innovative platform, as well as financial market expertise to deliver the most trusted fintech ecosystem for digital assets.”

It is not entirely clear what Bakkt has really purchased here, other than mention of ‘customer accounts’ in the dialogue above. That would be an interesting move to drive scale upon launch and provide the markets with volume from day one on their platform.

The staff that comes along with the acquisition will be on interest as to how many were acquired, who stays, and who does not.

A note (as we always do when reporting on Bakkt) as to what Bakkt is set to launch, and why it is seen as a potential bear market buster:

“Bakkt is designed to enable consumers and institutions to seamlessly buy, sell, store and spend digital assets. Formed with the purpose of bringing trust, efficiency, and commerce to digital assets, Bakkt seeks to develop open technology to connect existing market and merchant infrastructure to the blockchain.”

“As an initial component of the Bakkt offering, Intercontinental Exchange’s U.S.-based futures exchange and clearinghouse plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing on December 12, 2018, after receiving CFTC review and approval. These regulated venues will establish new protocols for managing the specific security and settlement requirements of digital currencies. In addition, the clearing house plans to create a separate guarantee fund that will be funded by Bakkt.”

GOLDMAN SACHS: OTC WHALES: Goldman Sachs Has Been Handling Billions Worth Of OTC Trades; “Buy-side volume in 2019 is increasing…”

Goldman Sachs hasn’t been exceptionally coy about their involvement in the crypto markets. Specific to Bitcoin, from a volume standpoint, Goldman Sachs is one of the (if not THE) largest facilitators of OTC trades in the world. They routinely generate more than a billion in OTC trades on a quarterly basis; if the numbers given to us for Q4 are accurate.

Lending credibility to the belief that UHNW individuals, family offices, hedge funds, and other financial entities of scale are trafficking in Bitcoin. Buying, selling, holding in cold storage, wallet to wallet – Bitcoin is increasingly a vehicle for wealth ‘store of value’ in an uncertain global economy.

Speaking with two sources at Goldman Sachs who are facilitators in the OTC markets and aware of Goldman’s ability to broker transactions – it is clear that Bitcoin has begun to resonate with investors as ‘digital gold’.

One source had this to say: “Understand that Goldman banks a huge portion of UHNW families that trust the firm to make the right calls. Those families have seen Goldman invest in Circle and other Bitcoin-related firms and are increasingly comfortable with the digital currency. The narrative that is ‘bitcoin is digital gold’ has begun to take hold in the minds of investors. This has led to increased volumes late in 2018 and throughout the beginning of 2019. And if the global economy continues to soften, expect those volumes to continue to increase.”

The second source we spoke to over the weekend said the following: “OTC volumes have increased across the board. Global economic uncertainty and a ‘flight to safety’ now includes Bitcoin. That is why you are seeing an increase in volume year over year, and again to start 2019. Goldman is a MAJOR player here. They’ve got ‘first mover’ privileges at Circle, because of their equity stake in the firm, so they are more effective from a pricing standpoint than other large bank facilitators. Their clients know this and it breeds confidence in the firm as a safe place to funnel investment dollars into digital assets.”

Several media outlets have published OTC volumes ranging in the billions on a daily basis and the feedback amongst those ‘in the know’ regarding Goldman’s involvement would echo those numbers.

OTC trading has begun to significantly outpace exchange volumes as larger investors (whales) increasingly prefer to trade with a perceived air of invisibility, while avoiding pushing the markets one way or the other.

Speaking to a crypto focused firm in New York late last week they commented on the strength of their $BTC OTC operations and its growth over the past 90 days. Specifically, increased volume on the buy-side.

And it isn’t just UHNW individuals doing the buying. Shadow crypto trade desks at firms like State Street, Morgan Stanley, etc are buying $BTC in volume as well. They are simply stopping short of drafting press releases to tell the world about it.

As the tail of the bear market lengthens, smart money sees $BTC as an accumulation opportunity. Don’t be surprised, once the regulatory framework in the US is sufficiently clear if these firms begin to disclose the breadth and depth of their involvement in the crypto space.

It may surprise all of us.


BEYOND RESEARCH: MORGAN STANLEY CRYPTO: Morgan Stanley Is Discussing Several Different Institutional Bitcoin And Ethereum Products

Morgan Stanley released a report late last year that described their take on Bitcoin and made passive mention of the crypto ecosystem in general. The report was widely reported on and it seems that the headline of choice was Morgan Stanley proclaiming that Bitcoin isn’t as much a store of value as it is an institutional asset class set to take on trading, and presumably, volatility needs at big banks and family offices across the globe.

While this language is and should be offensive to Bitcoin maximalists and anyone who believes in the original mission of Bitcoin – it certainly isn’t a surprise. If institutional (and a plurality of retail) clients ask enough times for something these institutions are going to give it to them, pure and simple. There is serious money to be made by creating expensive structured products wrapped around the guise of crypto volatility. The key words there are expensive and volatility. Expensive and volatility.

Morgan Stanley doesn’t have any interest in building out a warehouse facility or cold storage vault to house private keys and racks of hard wallets. There isn’t any money in it. At least not the kind of money that Tier 1 institutions have an interest in earning on that type of investment.

Instead, they are focused on several structured product initiatives that we’ve been made aware of that should be of interest to anyone attempting to get an understanding about how a powerhouse global investment bank is attempting to meet client demands.

Based on extensive discussions yesterday afternoon and again this morning we’ve heard three specific initiatives that are being *discussed* at Morgan Stanley (FYI – much like Goldman Sachs is in *internal discussions* regarding an Ethereum product to satisfy demand) and could come to market in 2019:

  1. A dedicated institutional trade desk that handles futures, OTC transactions, NDF like products that clients traffic across other Tier 1 institutions (Goldman, Citi).
  2. Internal discussions are ongoing as to whether Morgan Stanley uses Bakkt infrastructure *exclusively* with respect to Bitcoin futures transactions or using every resource that exists by 2019 (Bakkt, ErisX, CME, CBOE).
  3. Leadership in Morgan Stanley’s trading divisions are discussing whether or not to go all in on a Bitcoin NDF as well as an Ethereum product that has yet to be given a trading classification.

**Not included in the above list was a less prominently mentioned discussion point that included where does Morgan Stanley fall once a Bitcoin ETF product is created, as well as other SEC approved products throughout 2019. Discussions remain active as to whether or not Morgan Stanley creates their own branded products that are functionally identical to competitor products, or simply offer competitive products and whatever premium fee structures are inherent in the products themselves.

The discussions moving through trading rooms and in strategy sessions at the firm is not whether or not crypto is sustainable or a ‘flash in the pan’ bubble that will eventually fade. The discussion is focused on regulatory approvals and guidance, strategies to benefit from those new rules, and how to best position Morgan Stanley’s crypto products (should they choose to create native structured products) and services to its largest clients.

Which leads us to the dialogue in the Morgan Stanley research report making the rounds today. It adds context to the discussions internally as the firm positions itself for 2019; a year that those we spoke to believe will produce massive adoption, new (and relatively tame) regulations in the US, and trading volumes set to skyrocket.

The ‘money quote’ in the report, as it was told to us (to pay particular attention to) is this:

The net dollar amount in crypto hedge funds in 2016 was $380MM. Today it stands at over $6B.

You don’t need any other explanation for Institutional ‘fomo’ than those hard numbers. Those are funds that are eschewing fiat based products and diving into crypto, even in the midst of a bear market.

Morgan Stanley wants to be a real player in this market. They are working overtime to figure out just how to do it. Regulatory and legal hurdles need to be appropriately approached and handled, but when that happens they are planning to be at the forefront of what they believe will be a highly profitable new ‘super asset class’.

WINKLEVOSS PREDICTION: BITCOIN BETTER THAN GOLD: “Bitcoin is better at being gold than gold…”

The Winklevoss twins are currently running an aggressive campaign to build awareness among the masses with respect to crypto and Bitcoin. Whether it is a billboard, NYC streetside signage, or a ‘crypto bus’ pacing the streets of Manhattan – they are determined to spread their message.

A message that has served to annoy some in the crypto community. The Winklevoss twins assertion that crypto desperately needs regulation to matter seems to be the anti-thesis of the foundation of Bitcoin itself. Still, they continue undeterred and focused on bringing their message to a larger and larger audience.

Since launching their regulated US cryptocurrency exchange and trading platform Gemini, the Winklevoss twins have staked huge amounts on Bitcoin’s success, despite opening up trading of larger market cap altcoins. This puts their campaign under a microscope and into some perspective.

Their thesis, in an interview earlier this week, is that Bitcoin most closely resembles gold. Going so far as to say that “bitcoin is better at being gold than gold. Bitcoin is certainly the OG crypto! It’s hard to defeat network effects — so in terms of ‘hard money’ (i.e., store of value) Bitcoin is most likely the winner in the long term.”

Whatever your reaction happens to be to their ‘crypto is better when it is regulated’ campaign – the Winklevoss twins hold enormous influence within the crypto space. Their Gemini exchange is a leader in OTC volume and people listen when they speak. Thousands attended their Reddit AMA and headlines were made.

Very few in the crypto ecosystem carry that kind of influence. The question one might ask, though, is this – does their influence push Bitcoin and crypto in the right or wrong direction? Is regulation really the answer?

Whether they are right or wrong could either position them to gobble up market share or leave them chasing for what may remain. Interesting nonetheless.

BANK OF AMERICA, WELLS FARGO: RIPPLE ENGAGEMENT: Bank Of America/Wells Fargo Sends Reps To Engage Ripple Leadership; Payment Systems Partnership Discussed

Something is brewing between Ripple Labs and a couple of massive financial institutions. Why and what you might ask? They keep finding themselves in the same rooms together, meet up after meet up, conference call after conference call, and discussion after discussion – all surrounding payment systems that these institutions are considering implementing.

Both Wells Fargo and Bank of America continue to have discussions with Ripple representatives concerning payment processing technology and potential partnerships.

Other banks and financial firms have discussed the same with Ripple: MUFG Bank, WestPac, Standard Chartered, Banco Santander, American Express, Siam Commercial Bank, and SBI. Clearly, Wells Fargo and BofA would be the biggest names and ‘get’ for Ripple Labs as of yet.

Still, from that above group, headliners being Bank of America, American Express, and Banco Santander – who all possess global presences and brands of scale, are partners that any crypto brand would love to add to their client list. Ripple has obviously rolled out the red carpet for these brands and made a commitment to doing whatever is necessary to partner with them.

Ripple continues to make other announcements that have been highlighted over the past couple of months connected to their ever developing payment systems.

Ripple has confirmed the launch of xRapid, a cross-border remittance solution built on the top of Ripple’s proprietary blockchain, last month. The announcement had caused an abnormal bull run in XRP price action, bringing its value up over 100 percent in just a week. The excitement, however, dried off as long position holders began to exit their position on new intraday highs, causing a selloff.

Some of the biggest companies have already nodded to test Ripple xRapid system on their frameworks. These companies include names like MoneyGram, Western Union, Mercury FX, and Cambridge Global Payments. An excerpt from the Ripple website:

“xRapid is for payment providers and other financial institutions who want to minimize liquidity costs while improving their customer experience. Because payments into emerging markets often require pre-funded local currency accounts around the world, liquidity costs are high. xRapid dramatically lowers the capital requirements for liquidity.”

The speculators are expecting these announcements to continue and remain a catalyst for $XRP price action throughout this year. The team announced that it will launch the system in October of last year (which did actually happen), but the actual date of its commencement remains unclear. Unclear or not, having Bank of America and Wells Fargo in the room discussing anything with you is meaningful. Very meaningful.

To the extent that Bank of America, Banco Santander and others will use Ripple’s product line once is it launched and available for daily client and customer transactions also remains to be seen. But there aren’t a dozen cryptocurrency and blockchain firms having these kinds of conversations and building this type of architecture.

In fact, you could count on one hand the other blockchain/crypto firms that are involved, to this serious depth, not only building use case products but actually on the precipice of executing those exact use cases.

While some in the crypto community may scoff at Ripple’s ambitions and the way they go about their announcements, there is real substance involved. Bank of America and Wells Fargo don’t send reps to just anywhere for a nice cup of coffee – they don’t need to based on their reputation and scale.

We expect more and interesting announcements to occur throughout the rest of 2019. Should they rise to the level of actual news and use case seriousness, we will bring it to you.

**To be clear, we are not saying that final conclusions to these talks are imminent and about to be announced. Rather, the inclusion of these firms in any discussions with a cryptocurrency firm is newsworthy. Let’s see how these ‘meetings’ develop and what does, or does not, come of them.

CRYPTO ETF CHATTER: FIDELITY, GOLDMAN SACHS, BLACKROCK: 2019 Is The ‘Genesis’ Of The Crypto Structured Product

At some point, a Bitcoin ETF application is sure to be approved. But that isn’t the talk around water coolers (or via text and social media DM’s) at places like the CBOE, CME, NYSE, and global financial institutions. Each of those organizations is sure that an approval is coming and are preparing the infrastructure for the onboarding of any and all new crypto money.

The talk has quickly turned to the next set of crypto ‘structured products’ that could flood the market in 2019. All manner of ETF’s connected to other cryptocurrencies and ‘baskets’ of alt-coins are coming. And it won’t stop with just ETF’s.

One conversation was illuminating with a source from Gemini: “We’ve got months worth of backlog that is waiting for the first approval. Some of the biggest institutions in the world have crypto products prepped and ready to hit the markets. We expect 2019 to be a year of accelerated adoption.”

A former CME executive echoed those sentiments: “Some of our clients are not only locked and loaded with ETF products, but there are a second set of firms that are set to service and market those products that will indirectly benefit from a succession of crypto-based approvals. This really is the push that seems to be moving the markets as it is on the tip of everybody’s tongues at the moment. That first approval will open the floodgates. In six months the first ‘Bitcoin ETF’ will look like a dinosaur to crypto investors. And the regulation that will be attached to any structured products like this will gather massive amounts of institutional assets.”

A Goldman Sachs source confirmed the 2019 narrative: “2018 has been about building out the legal/regulatory and custody architecture that creates a level of comfort for clients. 2019 will address adoption and investment directly.”

Read the pages of this site or any crypto-based publication over the past month and you can see *clear-eyed* the pent-up demand from all sorts of well-known names, individuals, and institutions, for the right crypto product. Those massive amount of dollars are there for the taking.

First movers in the space will take advantage and reap huge benefits. Names like BlackRock, Fidelity, Goldman Sachs – all of them have current ‘working groups’ connected to digital assets. You can bet that each of them is ready to pounce when the regulatory framework finally takes shape.

Institutions are serious and poised to shovel client cash into cryptos, finally. The moves by Bakkt, Fidelity, ErisX (and by extension DRW), TD Ameritrade, Yale and Harvard endowments over the past 45 days prove that the architecture is nearly finished and lift off is imminent.

There is zero, ZERO chance the above organizations make the moves and spend the capital to build what they are building without a seriously good faith understanding of what regulators will and will not do. That isn’t how ‘high finance’ works.

Not only is a Bitcoin ETF coming, but a flood of crypto-based products will quickly follow.

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.

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.