EPIC TROLL: BLOOMBERG CLICK BAIT: Bloomberg’s Crypto Coverage Is A Disaster; Shame On Them

Bloomberg has a dedicated team on crypto reporters. All of which have come from traditional financial markets and other beats – in the hopes to cover a hot market as it hit all-time highs late last year. Maybe that’s why their coverage of the industry, Bitcoin price fluctuations, or what old and irrelevant ‘paragons of fiat currency’ like Jamie Dimon and Warren Buffet think about the digital asset movement.

The terminal services coverage of the crypto bear market sounds like a sad replay of since embarrassed early internet era detractors. All manner of doubters decried the ‘any time now’ death of Amazon, Priceline, Ebay, PayPal, Google, and others. It is downright embarrassing – and we wonder who is approving this mindless drivel.

Take a look at this passage from today’s post about Jamie Dimon and Warren Buffet being ‘vindicated’ with $BTC hovering around $4k (which, as of this print it is actually at $4.5k) :

“The cryptocurrency experts, who clearly didn’t see this coming, are blaming all sorts of temporary culprits — from jittery markets to “hard forks” (blockchain jargon for radical technical changes in a digital currency). But they’re kidding themselves. This is a long-term unraveling of all of the lies, exaggeration and populist fantasies that drove last year’s market mania.”

**We aren’t going to provide a link back to the article, because it is hot garbage and unfit for the eyes. And as far as the above quote “…all of the lies, exaggeration and populist fantasies…” FU** YOU!

Here is another maddening passage from an article just yesterday (they seem to be churning these out at an alarming clip) :

“In September 2017, the JPMorgan Chase & Co. chief executive officer famously called Bitcoin a “fraud” and threatened to fire any employee caught trading it. While the cryptocurrency briefly fell on his remarks, it went on to rally more than fourfold in three months as crypto-mania swept the globe. Dimon became a favorite punching bag for Bitcoin bulls, even after saying later that he regretted the comments and that he believes in the digital asset’s underlying blockchain technology.”

“These days, Dimon’s Bitcoin pessimism is looking more prescient. After tumbling as much as 78 percent from its peak, the cryptocurrency has returned to its level on the day the billionaire banker issued his warning last year. Many of Bitcoin’s peers have sunk even further, with the market value of all virtual currencies tracked by CoinMarketCap.com tumbling almost $700 billion from an all-time high in January.”

Again, we aren’t going to link the article because it is three lazy paragraphs of Jamie Dimon worship and click-bait.

**A word about the term ‘click-bait and why we hate the term. Every media entity in the world engages in click-bait. Two decades ago it was called a headline. Click-bait as a dog whistle is stupid. Welcome to 2018, almost 2019.**

These articles are an embarrassment to a media organization that can clearly afford better and more informed contributors and copy. It is offensive and that is why we are calling them out.

Engaging in the mockery of a community dedicated to technology, finance, and engineering to create the next ‘super asset class’ is debased and beneath them. Do better Bloomberg, do better.

UPDATE: And the coverage has only worsened in the last 48 hours. Bloomberg is producing headlines that are both misleading and seems to be pushing some sort of fiat narrative. Again we ask, who is allowing this stuff to make it to print?

Here is the latest on their SEC Chairman Jay Clayton’s comments on Bitcoin ETF proposals;

“The head of the Securities and Exchange Commission said Tuesday that concern over a lack of investor protections makes it unlikely that his agency will approve a Bitcoin exchange-traded fund anytime soon.”

Actually, no. The commentary by Clayton was neutral at worst and contemplative at best. The last thing you could say about it was some sort of definitive word on the death of current Bitcoin ETF proposals.

CLAIM: KRAKEN AND THE SEC: Beyond Rumors, Calvin Ayre Claims Kraken Is Under SEC Investigation, To Release Evidence

Whatever your opinion happens to be about Bitcoin Cash, Bitcoin ABC, or Bitcoin SV (the prevailing opinion across the crypto ecosystem is decidedly negative) and the current ‘hash war’ it seems to be uncovering all sorts of ‘sludge’ in the crypto underbelly.

All manner of spats, quarrels, power struggles, and out and out greed is playing out right in front of us and it is having a decidedly negative effect on the overall value of the crypto markets.

**If we can speak for the larger crypto community – stop it guys. This looks and feels like a high school Instagram cat fight. The sooner it is over and forgotten, the better.**

Until it is over a few new headlines have found there way into our inboxes. Specifically Calvin Ayre and his proclamations that Kraken is under SEC investigation.

Ayre did not provide evidence for the accusations, which he’s promising to release “next week.”

While Kraken has yet to publicly react, Ayre’s words could well end up buried beneath the mountain of rhetoric, which has emerged on social media from all parties in the BCH debacle over the past week.

If true (and that is a big ‘if’ given the immature nature of the BCH battle) it would further develop our exchange story from last week. US authorities continue to evaluate and develop enforcement actions within the crypto space.

To be clear an investigation is much different than an enforcement action, an indictment, or even ongoing conversations to bring an entity into compliance. Still, there is an expectation that the SEC has a long line of coming actions in there crypto ‘zip drive’.

From last week:

Several sources from the AML/CFT, SEC, crypto hedge funds, and other crypto sources have given us thoughts and opinions on where this roadmap could lead and who could be next. Here are parts of those conversations and some explanations as to who, why, where, and when.

A former AML/CFT enforcement agent had this to say based on background conversations with two contacts at the SEC:

“There will be more actions taken. That much I am certain about. Geography is not a factor as they formulate any strategy and are having back-channel conversations. One important point to make here, sticking your thumb up the nose of the SEC over the past six months, or any other regulatory agency, has been noticed and cataloged. It is incredibly stupid to basically dare a federal or state organization to come after you. Which led our conversation to Kraken and the dialogue there CEO decided to air in public. They are firmly in the crosshairs here.”

Further dialogue regarding Kraken and their potential issues with authorities is the reason that their CEO, Jesse Powell, made claims regarding registering with the SEC earlier this year.

Yet making claims and pursuing registration is different than finalizing the process and removing yourself from any pending enforcement action. That could be at the center of Calvin Ayre’s allegations.

And we’ve said this multiple times, it is never a good idea to thumb your nose at regulators:

“I expect Kraken and Bitfinex to be the headliners to get punk’d at some point. How, when, or for what is anybody’s guess at the moment. But one of them has actively antagonized regulators (Kraken) and the other has played all sorts of legal and geographic games specific to avoiding regulators (Bitfinex). Should the SEC begin to really get frisky and take on Bitfinex that would be serious and cause some price destruction. Were I to offer a guess, I think Kraken gets slapped and Bitfinex finds a way to avoid *public* enforcement. I could see a way that a backroom conversation occurs and Bitfinex is given a ‘deal they can’t refuse’ to clean some things up.”

Regulatory actions are in process and are probably in ‘back-channel discussions’ at the moment. Calvin Ayre’s claims may be legitimate, but that doesn’t mean that Kraken is going to get killed. It may mean nothing more than a fine and registration with the SEC.

Let’s see if Ayre is actually holding the cards he claims to be or is it simply a full-throated bluff.

BREAKING: BAKKT MOVES BACK: Bakkt Announces Delayed Launch, January 24th 2019 Targeted

In a newly posted Medium article Bakkt CEO, Kelly Loeffler announced that Bakkt would be delaying its previously slated 12/12/2018 launch.

The Medium announcement reads as such:

“Given the volume of interest in Bakkt and work required to get all of the pieces in place, we will now be targeting January 24, 2019 for our launch to ensure that our participants are ready to trade on Day 1. As is often true with product launches, there are new processes, risks and mitigants to test and re-test, and in the case of crypto, a new asset class to which these resources are being applied. So it makes sense to adjust our timeline as we work with the industry toward launch.”

“Second, as we collaborate to help develop this asset class, we are taking opportunities in our start-up phase to expand our offering. We’ll share more about some of these new features in the coming weeks but as a start, I’m pleased to announce that we have insurance for bitcoin in cold storage and are in the process of securing insurance for the warm wallet within the Bakkt Warehouse architecture. We are focused on every aspect of delivering an institutional grade crypto warehouse solution and believe this is a significant step in building confidence in this asset class.”

This delay may cause some price disruption in the crypto markets as it crosses the wires.


BREAKING: CUMBERLAND, GENESIS, CIRCLE: New Index, Based On OTC Data, To Power Coming Crypto ETF Approvals

Genesis, Cumberland, and Circle handle massive amounts of OTC crypto trading and lead that particular part of the market (along with DRW and a few others).

Each of these firms are opening up their respective OTC books to help the markets better understand the movements and pricing swings for BTC and other large-cap crypto brands.

The new ‘data feed’ has been in the works for quite some time, via documents filed with the SEC. In August VanEck said that it planned to use OTC pricing as part of its ETF pricing strategy. Given the amount of volume associated with OTC crypto trading, it makes sense.

The filing added this:

“To address concerns respecting the potential for manipulation of bitcoin exchange prices, the bitcoin held by the Trust will be valued based on an index that tracks the price of bitcoin in the U.S. OTC market. OTC desk prices are not subject to manipulation in the absence of misconduct by the trading desks themselves.”

While there may be some concerns surrounding OTC data and the possibility of some level of manipulation – the scale of the data and the perceived integrity of the three firms involved level sets those concerns.


Per the Press Release:

MV Index Solutions today launched the MVIS Bitcoin US OTC Spot Index (MVBTCO), which is the first bitcoin index based on U.S. price feeds from established OTC digital asset trading operations. 

The index shows the spot price of bitcoin by tracking its performance based on three of the leading providers in OTC liquidity, including Circle Trade, Cumberland and Genesis Trading. MVBTCO expands MVIS’ portfolio to a total of 24 digital assets indices. 

“We are excited to be the first provider to launch a bitcoin index based on the pricing feed of OTC trading desks,” said Thomas Kettner, Managing Director at MV Index Solutions. 

“This enables clients who trade over the counter to use this index as a reliable benchmark for their trades or potential investment products.” 

“As a global leader in cryptoassets, we are committed to creating opportunities that help the ecosystem evolve in a sustainable way,” said Jason Leung, Global Head of Cumberland. “We are proud to provide our markets to the MVBTCO Index, which will provide access to robust data and bring more transparency to the OTC space.” 

“MVIS is making significant advancements in providing the institutional community with reliable and transparent data for the Bitcoin market,” said Elisabeth Carpenter, COO, Circle. “We are happy to have Circle’s OTC platform, Circle Trade, participate in the MVIS spot index for the cryptocurrency.” 

“Genesis Global Trading has been an important player in the OTC marketplace for years. We’re excited to participate in the MVIS pricing index to help the space mature and gain further legitimacy,” said Michael Moro, CEO of Genesis Trading. 

“VanEck continues to support market structure developments in the digital asset space. MVIS’ work with our core OTC partners, Cumberland, Circle Trade and Genesis Trading, is a major step forward towards greater transparency and price discovery in the institutional Bitcoin market. 

The index may pave the way for institutionally oriented products, such as ETFs as well as provide further tools to institutional investors to execute institutional size trades at transparent prices on the OTC markets,” said Gabor Gurbacs, Director of Digital Asset Strategies at VanEck/MVIS. 

Detailed information about the MVIS Bitcoin US OTC Spot Index including methodology details and index data are available on MV Index Solutions website. 

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.

SEC: GUIDANCE BASED ON ENFORCEMENT: As The SEC Announces Enforcement Action Today, It Leaves Crumbs On Token Regulations To Come

Earlier today the SEC announced enforcement actions against two ICO’s that had come under scrutiny within the regulator’s offices. The enforcement actions are interesting in that they announce what steps were taken to decide on the enforcement penalties, but took extensive time to attach those enforcement actions to presumed digital asset regulation that is on its way to crypto markets.

Attached is the enforcement action in total:

“In recent years, we have seen significant advances in technologies – including blockchain and other distributed ledger technologies – that impact our securities markets. This statement[1] highlights several recent Commission enforcement actions involving the intersection of long-standing applications of our federal securities laws and new technologies.

The Commission’s Divisions of Corporation Finance, Investment Management, and Trading and Markets (the “Divisions”) encourage technological innovations that benefit investors and our capital markets, and we have been consulting with market participants regarding issues presented by new technologies.[2]  We wish to emphasize, however, that market participants must still adhere to our well-established and well-functioning federal securities law framework when dealing with technological innovations, regardless of whether the securities are issued in certificated form or using new technologies, such as blockchain.

The Commission’s recent enforcement actions involving AirFox, Paragon, Crypto Asset Management, TokenLot, and EtherDelta’s founder,[3] discussed further below, illustrate the importance of complying with these requirements. Broadly speaking, the issues raised in these actions fall into three categories: (1) initial offers and sales of digital asset securities (including those issued in initial coin offerings (“ICOs”)); (2) investment vehicles investing in digital asset securities and those who advise others about investing in these securities; and (3) secondary market trading of digital asset securities. Below, we provide the Divisions’ views on these issues. 

Offers and Sales of Digital Asset Securities

The Commission has brought a number of actions involving offerings of digital asset securities. To date, these actions have principally focused on two important questions.  First, when is a digital asset a “security” for purposes of the federal securities laws?[4] Second, if a digital asset is a security, what Commission registration requirements apply?[5] The importance of these and related issues is illustrated by several recent Commission enforcement actions involving digital asset securities. In particular, the remedial measures in two of these matters demonstrate a way to address ongoing violations by issuers that have conducted illegal unregistered offerings of digital asset securities.

Today, the Commission issued settled orders against AirFox and Paragon in connection with their unregistered offerings of tokens. Pursuant to these orders, AirFox and Paragon will pay penalties and also have undertaken to register the tokens as securities under Section 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”) and to file periodic reports with the Commission. They have also agreed to compensate investors who purchased tokens in the illegal offerings if an investor elects to make a claim. The registration undertakings are designed to ensure that investors receive the type of information they would have received had these issuers complied with the registration provisions of the Securities Act of 1933 (“Securities Act”) prior to the offer and sale of tokens in their respective ICOs. With the benefit of the ongoing disclosure provided by registration under the Exchange Act, investors who purchased the tokens from the issuers in the ICOs should be able to make a more informed decision as to whether to seek reimbursement or continue to hold their tokens.[6]

These two matters demonstrate that there is a path to compliance with the federal securities laws going forward, even where issuers have conducted an illegal unregistered offering of digital asset securities.

Investment Vehicles Investing in Digital Asset Securities

The Investment Company Act of 1940 (“Investment Company Act”) establishes a registration and regulatory framework for pooled vehicles that invest in securities. This framework applies to a pooled investment vehicle, and its service providers, even when the securities in which it invests are digital asset securities.[7]

On Sept. 11, 2018, the Commission issued the Crypto Asset Management Order, finding that the manager of a hedge fund formed for the purpose of investing in digital assets had improperly failed to register the fund as an investment company. The order found that the manager engaged in an unlawful, unregistered, non-exempt, public offering of the fund. By investing more than 40 percent of the fund’s assets in digital asset securities and engaging in a public offering of interests in the fund, the manager caused the fund to operate unlawfully as an unregistered investment company. The order also found that the fund’s manager was an investment adviser, and that the manager had violated the antifraud provisions of the Investment Advisers Act of 1940 (“Advisers Act”) by making misleading statements to investors in the fund.

Investment vehicles that hold digital asset securities and those who advise others about investing in digital asset securities, including managers of investment vehicles, must be mindful of registration, regulatory and fiduciary obligations under the Investment Company Act and the Advisers Act.[8] 

Trading of Digital Asset Securities

Commission actions[9]and staff statements[10]involving secondary market trading of digital asset securities have generally focused on what activities require registration as a national securities exchange or registration as a broker or dealer, as those terms are defined under the federal securities laws.

Exchange Registration

Advancements in blockchain and distributed ledger technology have introduced innovative methods for facilitating electronic trading in digital asset securities. Platforms colloquially referred to as “decentralized” trading platforms, for example, combine traditional technology (such as web-based systems that accept and display orders and servers that store orders) with new technology (such as smart contracts run on a blockchain that contain coded protocols to execute the terms of the contract). These technologies provide the means for investors and market participants to find counterparties, discover prices, and trade a variety of digital asset securities.

A platform that offers trading in digital asset securities and operates as an “exchange” (as defined by the federal securities laws) must register with the Commission as a national securities exchange or be exempt from registration. The Commission’s recent enforcement action against the founder of EtherDelta, a platform facilitating trading digital assets securities, underscores the Division of Trading and Markets’ ongoing concerns about the failure of platforms that facilitate trading in digital asset securities to register with the Commission absent an exemption from registration.[11]

According to the Commission’s order, EtherDelta—which was not registered with the Commission in any capacity—provided a marketplace for bringing together buyers and sellers for digital asset securities through the combined use of an order book, a website that displayed orders, and a smart contract run on the Ethereum blockchain.  EtherDelta’s smart contract was coded to, among other things, validate order messages, confirm the terms and conditions of orders, execute paired orders, and direct the distributed ledger to be updated to reflect a trade.[12] The Commission found that EtherDelta’s activities clearly fell within the definition of an exchange and that EtherDelta’s founder caused the platform’s failure either to register as a national securities exchange or operate pursuant to an exemption from registration as an exchange.[13]

Any entity[14]that provides a marketplace for bringing together buyers and sellers of securities, regardless of the applied technology, must determine whether its activities meet the definition of an exchange under the federal securities laws. Exchange Act Rule 3b-16 provides a functional test to assess whether an entity meets the definition of an exchange under Section 3(a)(1) of the Exchange Act. An entity that meets the definition of an exchange must register with the Commission as a national securities exchange or be exempt from registration, such as by operating as an alternative trading system (“ATS”) in compliance with Regulation ATS.

Notwithstanding how an entity may characterize itself or the particular activities or technology used to bring together buyers and sellers, a functional approach (taking into account the relevant facts and circumstances) will be applied when assessing whether a system constitutes an exchange.[15]  The activity that actually occurs between the buyers and sellers—and not the kind of technology or the terminology used by the entity operating or promoting the system—determines whether the system operates as a marketplace and meets the criteria of an exchange under Rule 3b-16(a).  For instance, the term “order” for purposes of Rule 3b-16 is intended to be broadly construed, and the actual activities among buyers and sellers on the system—not the labels assigned to indications of trading interest—will be considered for purposes of the exchange analysis.[16]

The exchange analysis includes an assessment of the totality of activities and technology used to bring together orders of multiple buyers and sellers for securities using “established non-discretionary methods”under which such orders interact.[17]  A system “brings together orders of buyer and sellers” if, for example, it displays, or otherwise represents, trading interest entered on a system to users or if the system receives users’ orders centrally for future processing and execution.[18]

A system uses established non-discretionary methods if it provides a trading facility or sets rules.  For example, an entity that provides an algorithm, run on a computer program or on a smart contract using blockchain technology, as a means to bring together or execute orders could be providing a trading facility. As another example, an entity that sets execution priorities, standardizes material terms for digital asset securities traded on the system, or requires orders to conform with predetermined protocols of a smart contract, could be setting rules. Additionally, if one entity arranges for other entities, either directly or indirectly, to provide the various functions of a trading system that together meet the definition of an exchange, the entity arranging the collective efforts could be considered to have established an exchange.

Entities using blockchain or distributed ledger technology for trading digital assets should carefully review their activities on an ongoing basis to determine whether the digital assets they are trading are securities and whether their activities or services cause them to satisfy the definition of an exchange. An entity engaging in these types of activities should also consider other aspects of the federal securities laws (and other relevant legal and regulatory issues) beyond exchange registration requirements.

Broker-Dealer Registration

An entity that facilitates the issuance of digital asset securities in ICOs and secondary trading in digital asset securities may also be acting as a “broker” or “dealer” that is required to register with the Commission and become a member of a self-regulatory organization, typically FINRA.  Among other things, SEC-registered broker-dealers are subject to legal and regulatory requirements that govern their conduct in the marketplace and that provide important safeguards for investors.

Section 15(a) of the Exchange Act provides that, absent an exception or exemption, it is unlawful for any broker or dealer to induce or attempt to induce the purchase or sale, of any security unless such broker or dealer is registered in accordance with Section 15(b) of the Exchange Act. Section 3(a)(4) of the Exchange Act generally defines a “broker” to mean any person engaged in the business of effecting transactions in securities for the account of others. Section 3(a)(5) of the Exchange Act generally defines a “dealer” to mean any person engaged in the business of buying and selling securities for such person’s own account through a broker or otherwise. As with the “exchange” determination, a functional approach (taking into account the relevant facts and circumstances) is applied to assess whether an entity meets the definition of a broker or dealer, regardless of how an entity may characterize either itself or the particular activities or technology used to provide the services.[19]

The Commission’s recent TokenLot Order illustrates the application of the broker-dealer registration requirements to entities trading or facilitating transactions in digital asset securities, even if they do not meet the definition of an exchange. According to the order, TokenLot was a self-described “ICO superstore” where investors could purchase digital assets, including digital asset securities, during or after an ICO, including in private sales and pre-sales. The parties’ brokerage activities included marketing and facilitating the sale of digital assets, accepting investors’ orders and funds for payment, and enabling the disbursement of proceeds to the issuers. They also received compensation based on a percentage of the proceeds raised in the ICOs, subject to a guaranteed minimum commission. TokenLot also acted as a dealer by regularly purchasing and then reselling digital tokens for accounts in TokenLot’s name that were controlled by its operators.


The Divisions encourage and support innovation and the application of beneficial technologies in our securities markets. However, the Divisions recommend that those employing new technologies consult with legal counsel concerning the application of the federal securities laws and contact Commission staff, as necessary, for assistance. For further information, and to contact Commission staff for assistance, please visit the Commission’s new FinHub page.”

Deconstructing the attachment to regulations that are coming to the tokenized asset space is best found here: https://twitter.com/MeatTC_/status/1063455967017345025

“Capital conservation is your best option at this time…”

Bitcoin continues to struggle with testing the 5600 support level as downside continues to test recent lows. On the mid-scale (4-hour chart) as shown gives light to this level holding – however, there are some concerns before the long play of BTC can be considered. 

As BTC broke multiple supports over the last two days, it should be noted that support should be confirmed. At this time, there is a small pennant/flag that has formed mid-scale with a flat bottom.

Additionally, there is the MA (moving average) line that puts downside pressure on price action as it attempts to retrace. Considering there has been very little upside along with low volatility, a breakout buildup has begun to form.


Hourly signals have produced a soft higher low*, however, this should be carefully watched before any re-entry attempts. At the moment, 5600 support must be confirmed by looking at BTC and whether it will hold 5600 support. 

A break lower looks to seek out 5200 support next. The next major resistance level up still stands at 5600 – also 1/2 retracement of the previous leg down.

Stochastic levels mid-scale now exit the oversold (<20) levels to seek the upper region.

MACD readings now tick positively, however, keep in mind that this should not be used as an entry tool at this time.

BTC is currently a No Play. Risk: High.

If looking for a short-term buy/hold strategy, one option (Risk: High) is to place entry near support with a stop at 5500; as a break below to this level will likely seek new short-term lows.

Futures Traders – trade the trend. The short-term trend is currently sideways – no trade scenario.

Capital Conservation is the best option at this time until trend/pattern is confirmed.

Trading Crypto: Bitcoin Bear Market Intensifies; Support Levels Remain Tenuous And Ripe To Break Lower

Bitcoin continues its path lower as overnight (US CST) trading sets to test the bounds of the downtrend overall. This may take up to 48 hours, but the path test pivot areas is a clear-cut directive at this point. 

As BTC broke support levels lower than the 6k region, 5600 support was next – which on the mid-scale gave rejection so far. Now trading at about 6700, price action gets ready to be challenged by the MA(moving average) line.

This line is a tool that currently may give BTC considerable resistance. Therefore, for those looking to re-enter, there should be increased caution as the trend is still down and there is no confirmation of bottoming yet. It is likely that BTC will test support once again before any continuation to the upside. 

However, the challenge even in that case will remain the long-term bearish upper trend line(orange line). This line now stands to be the 1/2 retracement point – also a bad sign considering it must be held firmly short term as support in some way to continue upward.

Stochastic readings are oversold mid-term, but keep in mind that daily momentum isn’t so and by looking at MACD levels, complete sell signals remain across the board until positive traction begins course along with supports holding.

BTC is currently a No Play overnight(or the next 12-18 hours)

Futures Traders – trade the trend. The short-term trend is currently short.

BAKKT: BUZZ GETS LOUDER: “Nothing else comes close to what Bakkt will mean for Bitcoin…”

The best crypto minds understand what Bakkt is about to unveil on December 12. Less than a month away from inviting institutional ‘fomo’ to satisfy itself with the protection and trust of the ICE network of exchanges and history. Bakkt is going to be big – and crypto hedge funds, family offices, and Tier 1 global investment banks are prepared to take advantage.

If you are reading this what do you really know about Bakkt and what is about to happen to Bitcoin and the crypto markets connected to the newly formed firm?

Here is what you should know. Every single serious crypto investor, personality, institution, and hedge fund is talking about Bakkt. Almost exclusively. They don’t care about a Bitcoin ETF. They care about the Bakkt launch December 12th and the enormous volume of trading that will commence connected to the penultimate digital asset across the globe.

**A reminder of what Bakkt is and what it will actually launch on December 12th, via Forbes’ excellent article in early August: “Bakkt plans to offer a full package combining a major CFTC-regulated exchange with CFTC-regulated clearing and custody, pending the approval from the commission and other regulators. Bakkt will provide access to a new Bitcoin trading platform on the ICE Futures U.S. exchange. And it will also offer full warehousing services, a business that ICE doesn’t have. “Bakkt’s revenue will come from two sources,” says Loeffler, “the trading fees on the ICE Futures U.S. exchange, and warehouse fees paid by the customers that buy Bitcoin and store with Bakkt.”

Step back and consider what you just read. A CFTC-regulated exchange, clearing, and custody. Some have often called Bitcoin ‘digital gold’. The infrastructure that Bakkt has built and is set to unleash takes the term ‘digital gold’ and makes it a reality.

But what does it all mean for the price of Bitcoin? What does it mean for continued and deeper adoption?

Those are precisely the reasons that both Microsoft and Starbucks were announced as partners when Bakkt released its vision in August. It is precisely the reasons that Fortress, Susquehanna, and Eagle Seven were more than happy to be included in the press that was done regarding the announcement of Bakkt onto the scene.

This is the biggest and most important initiative since Bitcoin was born. Period.

So what is the crypto ‘smart money’, where billionaires have been nibbling at the Bitcoin pie for the past three to five years, saying about Bakkt? Why is it the one initiative that lights up their eyes and gets them quickly talking about what ‘could’ and ‘should’ happen?

One ‘substantial’ crypto hedge fund manager that we spoke with had this to say about Bakkt:

“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’.”

**Several points to make sure we deconstruct here – the custody solution that Bakkt is proposing and will launch with is remarkable. To treat Bitcoin in the same way that wheat, corn, or copper is treated may not sound sexy, but it actually is. Institutions will flock to the asset because the custody issue has been solved, de-risked, and security layers will have been deployed to the underlying ‘warehoused’ Bitcoin. Every major investment bank trades billions of dollars of their own assets, and client assets on ICE’s network of exchanges across the globe (12 global exchanges, 6 clearinghouses). Adding Bitcoin as a commodity within its already deeply established exchange, clearing, and warehousing infrastructure makes Bakkt the immediate and defacto leader. Every investment bank in the world will now be able to trade Bitcoin in the same way that they would trade gold or silver. That capability does not exist, on this scale, anywhere else.

A second hedge fund manager gave us a little more color on what Bakkt means for their business:

“Institutional trading and recognition of Bitcoin as a legitimate asset class is what Bakkt brings to the table. The legitimate (not smoke and mirrors) to brand like the NYSE, Microsoft, and the family of ICE exchanges is infinitely bigger than a Bitcoin ETF approval. An ETF approval might make headlines, but you are about to watch crypto trade desks metastasize across Wall Street connected directly to what Bakkt is providing all of us.”

“Remember, all of the IB’s (investment banks) are massive clients of ICE and the NYSE. They transact billions upon billions of daily transactions in other commodities on their platforms across the US, Europe, and Asia. Positioning an initial digital asset such as Bitcoin within ICE’s exchange architecture makes it just as easy to trade as gold or wheat. The custody solution has been the final frontier for larger institutions, and Bakkt has effectively solved that problem.”

“What do I expect in terms of price movement as Bakkt launches and moves beyond the end of 2018? I expect that Bitcoin will make a move up close to the 10k mark as volume picks up dramatically and clients continue to clamor for a piece of the ‘future of money’.”

A few words about the architects of Bakkt and their vision, via Fortune’s article several weeks ago:

“Bakkt is the brainchild of Jeff Sprecher, the founder, chairman, and CEO of ICE, and a disrupter par excellence. Sprecher (pronounced “Sprecker”) stands alone as the leading force in modernizing the world’s exchanges in recent years from open-outcry pits into super-efficient electronic marketplaces. Along the way, Sprecher built a flailing electricity exchange that he reportedly purchased for $1 into a global trading and data empire now worth $44 billion. “In 25 years he’s gone from nothing to the most powerful exchange entrepreneur in the world,” says Larry Tabb, chief of consultancy the Tabb Group. “He hasn’t failed yet.

“Sprecher and his investment partners are putting this one-of-a-kind mission in the hands of a first-time CEO who’s Sprecher’s soulmate in both business and in life: Kelly Loeffler. The ICE executive has ridden shotgun alongside Sprecher since the company’s fledgling days in 2002. In 2004, they married. Loeffler long ran marketing, investor relations, and communications for ICE. Now she’s giving up her ICE roles to run Bakkt.”

As Michael Novogratz was quoted as saying on the day that the Bakkt news was released, “Heard from a contact that you never want to be ‘short’ Jeff Sprecher, so we are happy to be long.” 

The point being made by Novogratz is that Jeff and Kelly have been phenomenally successful in bringing products to market at just the right time, in just the right place, and to just the right customers.

Nearly every member of the crypto ‘mind-hive’ would agree with him – and many of them have large stakes in Bakkt and its pending success.

**A quick and short word about some rumors connected to Bakkt and future coin listings. We heard from one source that Bakkt initially planned to list more than just Bitcoin on its exchanges but pulled back. Bitcoin and Ethereum, and before that, possibly a third digital asset were considered. We were not able to confirm with a second source that this was true (in fact, we were told that the veracity of that claim was ‘dubious’ at best) or get our hands on the actual offering documents. We did, however, have several conversations that made it sound like Bakkt would eventually like to list another ‘non-security’ token across its platforms, and that token would likely be Ethereum. Again, as of yet, Bakkt has yet to share any public guidance around additional listings or any other rumor that may have arisen since their announcement.**



EXCLUSIVE: 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 for approval the moment the calendar turns to 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 its 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 24 hours. 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.”


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, 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.