Financial Research

Crypto Newsletter

Crypto Newsletter

Please see important disclosures at the bottom of this report Portfolio Strategy Bitcoin and crypto markets have had a very strong week. We expect the strength could very likely continue over the next week and a half as we approach the Bitcoin halving on May 12th. If you are a longer term investor without crypto exposure, this is still not a bad time to be dipping your toe in the water and gaining that initial allocation, but be comfortable with potential volatility risk and be able and willing to get more aggressive if prices find more attractive levels.   On the other hand, if you are a long-term investor with a proper allocation to crypto, as we have discussed in prior notes, I wouldn’t be jumping in too heavily and chasing the market here to gain added exposure. These run ups usually take breathers and offer the opportunity for more attractive levels. While I’m not recommending investors sell here, if you’re a nimbler trader who caught most of the recovery since we started recommending clients buy aggressively near the sell-off bottom, I wouldn’t blame you for lightening up and taking some profits over the coming days and weeks. To be clear, we remain affirmatively bullish over the next 12 months. But in the immediate days before and weeks after the Bitcoin halvening, we will be keeping a very watchful eye on how the market dynamics unfold. As we have discussed, we are looking to see how the near-term risks play out with miner economics and the potential for coin liquidations. If the market can sustain current or higher levels for the days and weeks following the halvening, we will gain much greater comfort in the medium-term sustainability of these price levels and may adjust our already long term bullish stance more aggressively within our crypto allocations by moving down the caps and towards more cyclical assets. But if the market experiences a pull back, especially one that lasts over a prolonged period of a month or more, depending on the sharpness and severity, we may become more warry of risks to miner balance sheets medium term. We believe our current recommended market positioning remains ideal for balancing between the risk and reward of these two scenarios until time passes. There is no answer I can give you today on how this will play out, nor an affirmative view how to position if it happens just yet. But as we approach the halvening, and we gain more market data, I believe the picture of what to do when we get there will become clearer and the optimal path forward will present itself.   Market Recommendations Our outlook for Bitcoin over the next 12 months and investment themes are shown below: Investment Themes Market Analysis After closing around $6,880 last Tuesday, Bitcoin quickly broke through its $7,000 resistance level on Thursday eventually recording a full recovery from its 37% plunge on March 12th. Momentum was strong throughout the remainder of the period with Bitcoin closing around $7,680 on Monday. Bitcoin’s strong price performance over the past week pushed up its YTD performance into 3rd place compared to 5th place according to our performance ranking below. Strong grains this week pushed it ahead of both bonds and the dollar on a YTD basis and established BTC as the strongest performing asset this month. All major crypto assets had a big week. Ethereum, was the best performing asset this week, climbing up 14.9% on the week on top of its 8.8% gain last the week. Performance was strong across all size based indices this week and the FS Crypto FX 40 retained its leadership with a 14.7% weekly gain compared to a 10% – 13% gain for other size-based indices. Ethereum has been the strongest large cap 5 performer coming out the market sell off, while among the size-based indexes, the Crypto 40 have been performing the best over the same period. Fundamental Valuations Bitcoin’s P/CMR valuation stood at 8.0x as of 4/27 vs 7.1x as of last week. This value is remains slightly below the levels from Mar-19 through present. While not as enticing as prior weeks, the 1M, 3M, 6M & 12M risk/reward still looks attractive here based on historical average forward returns of 19%, 104%, 399% & 1164%, respectively. Bitcoin’s market cap to realized value (MV/RV) multiple was 1.2x as of 4/27. The comp table for large cap crypto asset prices and fundamental valuations is shown below. Valuation Methodology Description The P/CMR ratio is a fundamental valuation method I invented in December 2017 that has historically been a strong predictor of price movements. It functions like a Price/Book (Crypto P/B) ratio by telling investors if a crypto asset is relatively cheap or expensive. It’s calculated by comparing the Market Cap to Cumulative Mining Revenue (Mkt Cap/CMR). The ratio can be calculated on a per coin basis (P/CMR) by adjusting the Mkt Cap and CMR by outstanding supply. Read more. The MV/RV ratio is another method later developed that takes a similar approach but adjusts the denominator value based on the last time coins were moved. Read more. The P/CMR and MV/RV metrics gives an approximate measure of unrealized profit, and therefore an investors incentive to sell or hold. The P/CMR ratio gives a measure closer to the absolute floor value of sunk costs for all investors while the MV/RV ratio gives the highest end of the range. It’s best to take multiple approaches when valuing any asset. These two have been the best for crypto assets in my experience, and the answer probably lies in the middle. Blockchain & Crypto Stocks The table above shows publicly traded blockchain and crypto related stocks, which offer a vehicle for investors who are constrained from owing underlying crypto assets themselves. Winners & Losers Winner: Libra – Checkout. com, a London-based payments processing platform, joined the Libra Association last week. This is the first payment processor to join the association after Visa, Mastercard and Stripe all withdrew from the stablecoin project last October. Loser: The Maltese Crypto industry – The Maltese Financial Services authority (“MFSA”) published the names of 57 blockchain companies which applied for a financial services license but who did not complete the process by November 2019. According to the MFSA, only 26 startups of an original 340 applicants are still contenders in the application process and, Binance is not of them. The Company fully withdrew from this waning crypto hotbed in February. Financing Activity tZERO – Overstock’s blockchain arm, tZERO, raised $5MM in an equity financing round led by GoldenSand Capital, a Beijing based venture capital firm. Applied Blockchain – The London-based enterprise blockchain company backed by oil giant Shell raised $2.5MM from Hong Kong-based venture capital firm QBN capital. The fresh capital is expected to be deployed to continue further developing the Company’s privacy-focused platform. Blockgration Global Corp – Zoompass Holdings Inc., a SaaS provider for the web 3.0 space, announced it will acquire Blockgration Global Corporation (BGC) for an undisclosed sum. Blockgration is a Toronto based digital wallet platform connecting blockchain platforms with payment ecosystems and traditional banking. Recent Research Access Fundstrat’s recent crypto insights if you missed them by clicking below or visiting FS Insight. David Grider subbing in for Tom this week: Tom’s Take on Crypto: What Are the Risks? Robert Sluymer: Crypto Technical Analysis: BTC recaptures its 50-dma – ALTs beginning to move to the upsideKen Xuan: Crypto Quant: Benchmark Crypto Indices Weekly Performance ReviewDavid Grider: Digital Assets Weekly: April 21st, 2020

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Crypto Market Update - 3/13/2020

Please see important disclosures at the bottom of this report Back in December 2019, I started saying we’re in a “crypto Goldilocks economy” that’s “not too hot and not too cold” – meaning, markets weren’t expensive, but they weren’t cheap either. That changed this week. Corona. Macro. Panic. Reason aside, Bitcoin’s price retraced to a low of $3,858 and now sits around $5,400, and its Market Cap / Cumulative Mining Revenue Ratio has fallen to 5.3x. As an investor in any asset, crypto included, it’s not the price you pay that matters, it’s the relative value you get. Bitcoin has not been this attractively priced, on a relative fundamental valuation basis, since February 2019, when it bottomed out around $3,400. Prior to that, we had not seen similarly attractive levels since November 2016, when Bitcoin was heading into the last bull market cycle and trading under $700!!! Think about that. There’s an 80/20 rule in everything. The chart above has been my 80. Crypto has historically moved in boom and bust market cycles. If you got these macro cycles right, it hasn’t mattered as much what you owned, it’s explained 80% of your success. This valuation model has been a strong predictor of all prior Bitcoin cycles, which is why I give it a heavy degree of importance in my analysis. There are four potential future scenarios over the next 12-18 months: Bear: We’re headed for a full-on protracted crypto bear market where prices have another 50% left to fall and we head towards all time low valuations in the 2x range putting BTC around $2k. Stagnant: We sit here around $5k for a drawn-out period while the broader market works it’s self out and any capital put to work is dead money. Recovery: We turn around, slowly grinding our way back upwards over the course of the year and get some multiple expansion back to the historical average of 9.5x taking us above $9k. Bubble: We get a quick recovery, perhaps even a v-bottom (may by happening already), that bounces us back into another bubble with frothy multiples similar to prior cycle highs that imply prices around $50k-70k.  The chart above should give perspective on the potential risk / reward for each scenario, assuming, the trend hasn’t been broken entirely. My view- history won’t repeat but it will rhyme. The rough probabilities of each scenario in my view right now are: Bear: 5% probability Stagnant: 15% probabilityRecovery: 70% probabilityBubble: 10% probability Let’s walk through each one. Bear: There’s a low probability we go to 2x P/CMR trough multiples. If we do, it puts the price around $2,000 (~55% downside). But keep this perspective, the last time Bitcoin touched a 2x P/CMR multiple was in January 2015 at a price of $175 following the Mt. Gox hack, and it has never fallen below a 1x P/CMR, ever!!! I’m not saying the market can’t flinch, panic, and then quickly move here. I’m saying, that if it does, it should be brief, and viewed as a massive temporary opportunity to buy. Unless, we get some type of “crypto specific event”, that causes the fundamental market environment to change. Not a broader market event like corona, or global recession. Those should fundamentally impact crypto in a mixed, but incrementally positive way in the long term, as I discussed in last week’s newsletter. The short list of (known, unknown) event risks I see that could make this happen are: Exchange Crackdowns: Regulators hit offshore exchanges like Binance, Bitmex, Bitfinex for servicing US/UK customers and it causes a liquidity shock (unlikely IMHO: these guys have been getting their act together and have a lot of money to fight legal battles). Trump: Treasury department decides they don’t like crypto and try to cut it off. Tom’s talked about this. Election year less likely. Plus, there’s a growing crypto lobby in Washington now. Manipulation Enforcement: The CFTC pursues actions against some large crypto whales for market manipulation. Study here from the Journal of Monetary Economics about Price Manipulation in the Bitcoin Ecosystem back in 2014. It’s been my view, that this still exists, but likely to a lesser degree now that the market is bigger. But it’s still a risk. Remember, the Hunt Brothers manipulated the much larger silver market in the 1980’s. Others Lesser Risk: The IRS could take actions against large early whales, but they’d likely pay a fine and go, SEC could move harder on ICOs, but that’s a small part of the market these days, FINCIN tries to kill privacy coins, but they’re fairly insignificant as well. Unknown, Unknowns: What virus could be out there that causes crypto to unexpectedly catch a cold like corona has done to the global economy? Only time will tell. All you can do is price some risk premium in for it. Stagnate: There is some chance we could see a long, drawn out flat-to-choppy, sideways market over the next 12-18 months. That means Bitcoin and crypto is a dead money investment like it was during 2012 and 2015. With all the market turmoil, all the panic, all the central bank and government intervention – how likely is that? As perspective, even if you’d historically bought a prior multi-year crypto price stagnation period, assuming you held, the magnitude of each prior bull market meant you eventually vastly outperformed on an annualized basis. History doesn’t have to repeat, but again, I think it’s more likely than not it rhymes. Crypto moves in its own macro market cycles. Look at the chart above again. See a trend? It doesn’t happen by accident either in my view. It happens in large part, due to structural market factors that drive the supply / demand imbalances. I’m seeing signs these imbalances are forming again, as I’ll discuss in my next point. Recovery: The most likely scenario is, we see a recovery period, where valuation multiples return to their historical life-time average of 9.5x, and prices move back above $9,000 or higher. Sentiment: It’s impossible to know what the entire market is thinking, but I can say, with a high degree of perspective, despite the pull back, the market sentiment today is nowhere near as negative as it was during December 2018. Catalysts: We see three likely catalysts on the horizon: 1) elections, 2) geopolitical risks, and 3) halvening. Structure: The market structure of underwater coin holder should reduce supply on the market as prices move higher. Coin holdings have likely consolidated as well in the prior shake outs. Meaning, many get rich quick folks have been scared out by December 2019 volatility, and large traditional smart money institutional investors may have been forced out by the broader market turmoil. Who is left? Early crypto supporters and die-hard believers, that mentality has historically limited the supply side of the market until prices have reached much healthier levels during recoveries. Bull: The probability I’m placing on a bull market might surprise people. It’s never a good idea, and especially not a sound investment decision, to bet on there being a period of irrational price movement. But some markets are not rational. This is crypto. This market is paradoxically, rationally irrational. Bitcoin and crypto is a product. As a product, it’s historically acted as a Giffen good. Meaning it’s a product that consumers demand more, as its price moves higher. Its rationally irrational. Bottom Line: If you were on the sidelines, now is the time to start buying in earnest. It’s impossible to know with absolute certainty what the market will do next, but what I do know is, if history is any guide, and I firmly think it is, the odds are on your side.

CRYPTO BLAST: Maintaining our constructive crypto market outlook but uncertainty at Binance & OKEX take us from cautious to sell on exchange tokens while we see greater CME market share – that’s GOOD NEWS

We are long term bullish on the overall crypto market but see pockets of the industry that offer greater risks than others - exchange tokens are one of them. In a previous report (Regulatory Actions Highlight Risks But Market Remains Bullish), we urged investors to carefully consider risks associated with assets in the offshore exchange token sector, and specifically Binance (BNB), due to its historical allegations and actions taken by US regulators against the derivatives exchange BitMEX. A week later, the CEO of one exchange token we listed, OKEX (OKB), was taken into custody by Chinese police, leaving user funds unavailable for withdraw since October 16th and causing the value of its token to drop by over 30% on the news. Yesterday, a Forbes staff reported on leaked documents that allege Binance “conceived of an elaborate corporate structure designed to intentionally deceive regulators and surreptitiously profit from crypto investors in the United States.” The reports are unconfirmed by the company, but the news underscores our prior concerns from industry rumors and calls for caution on BNB’s token and the sector in general. The total crypto market cap excluding stable coins is roughly $380B, which makes exchange tokens at roughly $9B ~2% of the market a small pocket of risk with Binance (BNB) being ~1/2 – one we have been questioning if, and now believe, investors should avoid for the following reasons: Headline risk of allegations alone is enough to cause a market sell off on uncertainty. BitMEX news has caused many industry venues to enhance verification procedures and remove unallowed customers, which could lower trading and token value. Actual regulatory investigations and actions like those taken against BitMEX caused material harm to its business as 16% of volume dropped the day after the announcement, which would be bad for venues with tokens with their value derived from trading profits and buybacks. If allegations of regulatory violations are investigated and proven to be true, exchanges could face fines (bad for profits, buybacks, and token price) or worse, exchanges could be shut down and assets could go to zero. Yes, the same set of risks apply to banks, and all businesses, but given industry history, recent regulatory actions, and news announcements, we believe now is the time to be conservative in this area. Further, while a crypto bull market will likely bring increased trading, fees, and token values, we would rather own the underlying crypto assets themselves as we believe they have greater upside potential and risk/reward tradeoffs. Bottom line: We’re recommending investors who own assets in the exchange token sector sell holdings. However, we would cushion against shorting these volatile crypto assets. We’re watching how offshore exchange risks play out for the broader market short term, but not sounding any alarm bells besides the specific sector risk. We think the real positive is that this news likely drives more volume to regulated venues like CME as has happened since the BitMEX actions. If this happens and if there is any regulatory action (we are not making any speculations there is), the market may have already moved on and it may not cause systemic disruptions as happened with BitMEX due to volume migrating after the March price crash. We see that as GOOD NEWS for crypto markets long term. Point 1: Maintaining our positive long-term view on Bitcoin and crypto while eyeing short-term market risks optimistically for now Bitcoin and crypto have been the top performing asset class in 2020. We’re maintaining our constructive long-term view on the overall market and our FY 2020 BTC price target of $16,500. While we believe the situation at Binance and OKEX are worth watching very closely, it’s too early to sound the alarm bells for systemic risks across the space, but certainly see cause for concern within the exchange token sector. Source: Fundstrat Point 2: We’ve been cautious of the risks associated with crypto exchange tokens and have seen further risks mounting with OKEX and Binance ever since In a previous report, we questioned if the exchange token sector was exposed to regulatory risks after the derivatives exchange BitMEX was announced to be under investigation by U.S. authorities. Source: Fundstrat Binance (BNB) is the exchange we discussed specifically given it’s the largest offshore crypto exchange and the 6th largest crypto asset (ex stablecoins) by market cap sitting at ~$4.25B. Source: Fundstrat Given historical allegations against Binance, we have been urging clients to ask the question - Is the risk/reward of paying nearly the same times earning for BNB and major exchanges worth it? At this point, we think the answer is clearly NO. Source: Fundstrat Point 3: OKEX CEO investigation very well may be unrelated to the exchange, but it has been ongoing for 2 weeks, which is bad for its business & OKB token… but we are not sounding any other alarms yet One of the leading Asian exchanges OKEX had its CEO taken into custody by Chinese authorities on an investigation. User exchange balance withdraws were halted after, presumably because the CEO is a private key signer required to approve such transactions. Many have claimed that this investigation has nothing to do with the exchange and that its related to personal matters and that users funds are safe. Without speculating on what caused the investigation or what’s going on, users are surely not happy with their funds being held on the exchange going on two weeks now, and its harmed trading activity which was paused for a period of time, which are both bad for the value of the OKB token. Source: Coindesk Some market participants have found a work around to help users get funds off the exchanges. Trusted parties, usually other exchanges with accounts at OKEX, much like correspondent banks, have allowed users to use the internal transfer mechanism at the exchange to move funds into their account. From there, these trusted parties issue IOU tokens for the assets held at OKEX in their account and deliver them to the owner. They then can sell them on the secondary market to gain access to liquidity. The buyer assumes the counterparty risk of collecting from the exchange once withdraws are opened and usually demands a discount to face value. Thus far, we know of this happening firsthand with TRON and USDT and have heard second hand unconfirmed of it happening with other assets like BTC. Source: Google, Poloniex On some exchanges, we have seen the IOUs for USDT, a stable coin usually valued at $1, trading at a $0.80, but we’ll note on relatively low volume thus far that we’ve seen. But the price represents some combination of investors’ need for liquidity and the markets expectations for OKEX default risks. Source: CoinEX History doesn’t repeat but it often rhymes. Such a scenario happened before back in 2014 right before the infamous exchange Mt. Gox went under following its hack and loss of Bitcoin. An exchange called Bitcoin Builder popped up that allowed users to trade these Bitcoin IOUs, as can be seen from the 2014 article below. Source: Coindesk What gives us some level of comfort around the situation at OKEX is that the market doesn’t seem to be pricing the same default risk in after two weeks as it did for Mt. Gox back in 2014. At the time, the price of Bitcoin on Mt. Gox was trading at a much more significant discount to Bitcoin on other exchanges than the OKEX USDT IOU discounts we’re seeing today. Source: Bitcoin Charts Point 4: Bitcoin rallied 25% after OKEX announced no withdraws, with it holding ~7% of BTC on exchanges, we wonder how much this supply limitation fueled the move, and question what that means for prices next? Over the short term, for tactical investors, we are considering what effect the reduction in BTC supply locked on the exchange might have had on this recent price rally. Bitcoin has seen its price rise by ~25% since the withdraw restriction was announced, while the price ok the OKEX exchange token OKB has fallen by roughly the same amount. Source: Trading View We estimate Bitcoin held on the OKEX exchange is 7% of all exchange balance supply, which would be a material portion of the traded float and could lead to short term selling pressure if pent up BTC becomes able to move to other exchanges and be liquidated. Source: Viewbase, Coinmetrics, Glassnode, CryptoQuant, Chain. info While trading has resumed on the platform, thus far the only fiat pair enabled have been the CNY, INR and VND, while withdraws have remained closed. Point 5: New accusations against Binance are very serious and potentially as bad or worse than those against BitMEX if proven, but headline risk is enough to cause investors to flee as they did with BitMEX Source: Forbes The Forbes article alleges Binance designed a structure meant evade regulators with its on shore exchange never intended to capture material profits and value. One of the risks we highlighted in our prior note was that very little of the exchange volume at Binance comes from its US based exchange. We saw this as a risk given BNB value tied to exchange profits and fees were largely coming from the offshore entity, which is perhaps at a greater regulatory risk. We also wonder if its BNB token would be an illegal security in the U.S. given the relationship to profits, despite being listed on its regulated exchange which has a money transmitter license but not a broker dealer license? Source: Forbes The alleged plan to mitigate U.S. enforcement across all major agencies, if proven true, would constitute a very serious situation for the exchange likely to land it in hot water with regulators as happened with BitMEX recently. Source: Forbes Following U.S. government enforcement claims against BitMEX, its exchange saw a significant fall in usage and volumes and presumable profits. BitMEX has not issued a token tied to exchange profits as some other offshore venues have, but we feel its safe to say, had there been one, its prospects would not have been bright following the news. We feel Binance may be in a similar situation and sill over risks make us want to avoid the entire sector for now. Source: Crypto Briefing Point 6: Binance allegations are a POSITIVE for U.S. institutional investors since Bitcoin volume will likely flow to CME as happened after BitMEX news Immediately following the news of U.S. regulators investigating one the largest Bitcoin derivatives exchanges BitMEX, funds and transaction volume flowed off the exchange. Much of it made its way to the Binance offshore exchange, but the U.S. regulated venue CME was a very big beneficiary as well. Source: Skew With these current accusations against Binance we think a repeat of the same may happen again, and it will push more funds to U.S. regulated venues – that’s good for integrity of the Bitcoin capital markets, institutionalization of the industry, and the price in the long term.

Regulatory Actions Highlight Risks But Market Remains Bullish

For a full copy of this report in PDF format, click this link. Key slides from this report…Bad news is no news while good news takes Bitcoin higher (Slide 2)... Interviews with key opinion leaders offer insights into what it means for markets (Slide 7)... Key Opinion Leader Takes - Legal Insights: Carlton Fields (Slide 8)... Key Opinion Leader Takes - Capital Market Insights: Genesis (Slide 10)... Key Opinion Leader Takes - Active Manager Insights: Arca Funds (Slide 11)... Key Opinion Leader Takes - Index Insights: Bitwise Asset Management (Slide 12)...

Digital Assets Weekly: September 29th

For a full copy of this report in PDF format please click HERE. Market Analysis This week, Bitcoin gained some ground but largely still exhibited choppiness as it consolidated above $10,000. As of yesterday, Bitcoin has closed above the key level of $10,000 for 64 consecutive days, which is an all-time high. The previous all-time high was 62 consecutive days back in 2017-2018. At time of writing, Bitcoin is currently trading at ~$10,750. The Dollar has been exhibiting strength which may serve as a headwind for the crypto market. Also, Gold has been underperforming in recent weeks, which may be another contributor to Bitcoin’s recent weakness. Despite these factors, Bitcoin remains the best performing asset class on a year-to-date basis. Despite a big down move in the entire market early in the week, all of the crypto majors were in the green this week, with Bitcoin Cash showing the strongest resurgence after recent weakness (+6.1%) and Bitcoin rising the least (+2.6%). After the previous week’s dismal performance, all the FS Crypto FX indexes finished this week in positive territory with the FS 40 gaining ground after its double-digit loss the prior week (+8.5%). The FS 10 gained the least this week (+3.2%). Bitcoin Cash was in danger of moving into negative territory on a year-to-date basis, but its strong performance this week moved it back to a double-digit gain YTD. Bitcoin and Ethereum remain the strongest leaders appreciating 50% and 176% YTD, respectively. Bitcoin’s Mkt Cap/CMR ratio increased 2.3% week over week from 9.9x to 10.2x. Bitcoin’s Mkt Cap/RV ratio decreased 2.4% week over week and currently sits at 1.7x. Noteworthy this week:Ebang International Holdings (NASDAQ: EBON): Ebang, a leading ASIC chip design company and leading manufacturer of high-performance Bitcoin mining machines, announced it has established a wholly-owned subsidiary in Canada to improve its industrial chain layout and upgrade its digital asset financial service platform. The Company’s new subsidiary in Canada received a Money Service Business License from the Financial Transactions and Reports Analysis Centre of Canada, which will allow the Company to engage in foreign exchange trading, digital currency transferring and dealing in virtual currencies in Canada. Grayscale Investment Trusts: All of Grayscale’s listed products’ premiums to NAV fell this week. The ETHE premium to NAV fell to a new all-time low of 19% (45% last week). The ETHE decline is notable as it listed at a premium of >1,000% and has an average historical premium of ~250%. The GBTC and ETCG premiums fell to 7% and 2% respectively (13% and 15% the weeks prior). Grayscale’s newly listed products BCHG and LTCN still have sizable premiums but also dropped to 144% and 602% (303% and 664% the weeks prior). Overstock (NASDAQ: OSTK): The U.S. District Court in Utah on Monday dismissed a securities class-action lawsuit against Overstock. com Inc. filed by investor Mangrove Partners Master Fund Ltd. in September 2019, ruling in favor of Overstock and other defendants. The plaintiffs, led by Mangrove Partners on behalf of people who bought Overstock stock between May 9, 2019,and Nov. 12, 2019, alleged that the defendants falsely made financial projections for 2019 and schemed to issue a digital dividend that purportedly caused a rapid increase in stock price. The court, in its order to dismiss the suit, said Mr. Byrne's statements regarding future financial performance were protected by safe-harbor provisions. “There isn't any evidence that the company concealed information related to the dividend that was material to investors,” the order said. Square Inc. (NYSE :SQ): Jed Kelly of Oppenheimer upgraded Square's stock from Perform to Outperform, while establishing the price target of $185 (trading at ~$167 at time of writing). COVID-19 has resulted in a “massive shift in digital commerce requiring merchants to rapidly adopt omni-channel solutions,” Kelly wrote in the note. He added that Square’s business model has “two sided networks of sellers and consumers,” which positions the company’s platform as a “structural winner during the recovery.” Winners & Losers WinnerBitwise – Revealed in regulatory form filed with the SEC last week, crypto asset management firm Bitwise has raised about $9 million for its bitcoin fund over the last one year. Bitwise also offers an Ethereum fund and a crypto index fund. The index fund raised about $66.5 million (lifetime) as of June this year according to their latest SEC filing. Click here to see Fundstrat’s recent research report on Bitwise. LoserKuCoin – The Asian exchange KuCoin suffered the third-largest hack in history after losing an estimated $279 million. The total amount stolen from exchanges has exceeded $1.79 billion with this hack. In the last three days, the hacker has already sold $6.5 million of the stolen assets on Uniswap. Over 200 cryptocurrency assets trade on KuCoin with a combined daily average volume of around $100 million, ranking it as one of the busiest trading exchanges, according to the cryptocurrency data site CoinGecko. The price of KuCoin’s exchange token KCS fell by 14% to $0.86 within an hour on Saturday as news of the security breach spread on social media. KuCoin is investigating the hack with international law enforcement and stolen customer money will be “covered completely” by an insurance fund. Financing and M&A Activity Noteworthy this week:Dune Analytics – Dune Analytics, the community-driven analytics platform that provides data tools for the Ethereum network, has raised $2 million in a seed funding round. Dune came out of stealth mode last fall after having been backed by Binance's startup incubator. The end result is an open-walled analytics platform that provides free services, with premium offerings as a value-add to customers that want a more customized experience, such as private queries and data exports. Robinhood – Brokerage app Robinhood has raised an additional $460 million for a now-closed Series G funding round, adding to the $200 million it announced last month. Robinhood now touts an $11.7 billion postmoney valuation. The company’s valuations were just $8.6 billion in July and $11.2 billion in August, The Block previously reported. Robinhood now has over 13 million users, with the median age of users around 30. The app lets users buy and sell stocks without paying a commission but offers educational material to help users better understand investing. Reports & Events • Tom Lee and David Grider: Tom and David will be speaking at the upcoming CoinGeek conference thisThursday October 1st.• Leeor Shimron: Investing in the DeFi Landscape Panel Discussion at the LA Blockchain Summit on October 6th• David Grider: Digital Assets Weekly: September 22nd• FS Digital Strategy Team: Bitwise: Leading Crypto Index Funds & New Alpha Opportunity

Digital Assets Weekly: September 22nd

For a full copy of this report in PDF format please click HERE. Market Analysis This week, Bitcoin briefly traded above $11,000 before losing ground and ending the week down 1.9% at $10,455. Bitcoin has been exhibiting greater short-term correlation with the broader markets, which could be the primary reason for Bitcoin’s weakness in recent weeks. At time of writing, Bitcoin is currently trading at ~$10,500. Notably, Bitcoin’s decline corresponds with the decline in the equities market. Despite recent weakness, Bitcoin remains the best performing asset class on a year-to-date basis by a wide margin. The crypto majors continue to show correlation, and all of them declined this week. Amongst all the major crypto assets, Bitcoin’s decline was the most muted (-1.9%), whereas Litecoin had the largest decline (-11.4%). Altcoins are often viewed as a leverage play on Bitcoin, magnifying the direction Bitcoin moves in. Continuing this week, all the FS Crypto FX indexes were negative with the FS 40 performing the worst (-14.4%) and the FS 10 performing the best (-4.3%). Despite Ethereum’s negative performance this week, it is still up 166% YTD and is firmly the best performing crypto major. All the FS Crypto FX indexes are up more than 50% YTD. Bitcoin’s Mkt Cap/CMR ratio decreased 2.3% week over week from 10.2x to 9.9x. Bitcoin’s Mkt Cap/RV ratio decreased 2.4% week over week and currently sits at 1.7x. Noteworthy this week:Marathon Patent Group (NASDAQ: MARA): Marathon Patent Group Inc. pulled its offer to acquire Fastblock Mining in an all-stock deal because the two companies could not extend the term of a power agreement. Marathon said it found out that an agreement for Fastblock to provide power at a subsidized rate was going to end in three years and the agreement could not be extended with the power provider to a term that would make the deal economically feasible for Marathon. Marathon said it has a term sheet with another power company and will announce those terms when due diligence is done. Overstock (NASDAQ: OSTK): Overstock. com’s security token crypto exchange, tZERO, on Wednesday reported a record trading volume of more than 2.3 million digital securities in August, 21 times higher from the year-ago period. It said it transacted nearly $22 million of securities for the month, up from $7.6 million in July. Year-to-date through August, tZERO's traded shares jumped by over 300% from last year, it reported. tZERO said its Crypto app's users increased by more than 11% in August. Square Inc. (NYSE :SQ): Square is set to establish a cryptocurrency patent alliance to enable open access to patents covering foundational technologies in the cryptocurrency sector. This is seen to be necessary for the crypto community to grow, freely innovate, and build new and better products. The Cryptocurrency Open Patent Alliance, or COPA, seeks to democratize patents for everyone, empowering even small companies with tools and leverage to defend themselves. There is an invitation for all in the crypto community to join the alliance to address patent lockup concerns. TAAL (CSE: TAAL): TAAL announced it purchased all of the issued and outstanding shares of WhatsOnChain Limited (“WhatsOnChain”) enhancing TAAL’s technology portfolio and accelerating TAAL’s strategy as a leading provider of enterprise blockchain infrastructure services. TAAL purchased WhatsOnChain for $2MM GBP, which was paid through the issuance of 1,739,882 TAAL common shares (the “Consideration Shares”), with a share value of $1.97. WhatsOnChain owns proprietary Bitcoin SV blockchain explorer technology developed by its founders who created the first-ever BSV block explorer to provide data in an easy and user-friendly manner. Winners & Losers WinnerKraken – This week, Kraken Financial became the first crypto company to receive a banking charter under Wyoming’s Special Purpose Depository Institution statute. The new structure was purpose-built for cryptocurrency companies and will allow the crypto exchange to offer certain banking functions to clients and effectively serve as the exchange operator's primary banking relationship. Up until this point, Kraken has relied on third-party providers for wire transfers and other services that enable it to engage with the broader financial system. LoserUniLogin – UniLogin, which provides a user onboarding solution for Ethereum apps, is shutting down due to high gas fees. UniLogin is out of gas, co-founder Alex Van de Sande said in a blog post on Friday. Not necessarily out of money, but the current Ethereum gas market, the rise of DeFi [decentralized finance], have changed the game significantly enough that we don't see a way forward with the project.“Van de Sande said UniLogin is particularly sensitive to gas prices because before onboarding any users, the project was deploying a new multi-sig wallet on users' behalf, registering an ENS [Ethereum Name Service] name, and sometimes using its relayer to add a Dai transaction. He went on to say that some days the whole process of onboarding a new user was costing over $130, equivalent to a cost of a hardware wallet. Financing and M&A Activity Noteworthy this week:APY. Finance – APY. Finance, which is building a decentralized finance (DeFi) aggregator for yield farming, has raised $3.6 million in new funding. APY claims to be building the Wealthfront for yield farming, or a roboadvisor that helps optimize token lending for risk-adjusted gains. With the fresh capital in place, APY plans to speed up its platform development and launch it in mid-October. PowerTrade – PowerTrade raised $4.7 million via token sales in a round led by Pantera Capital and joined by Framework Ventures, CMS Holdings and QCP Capital among others. PowerTrade said in a press release it will offer low minimum deposits allowing traders access to crypto options for as little as $1. The platform, which will launch to non-U.S. traders first, will focus on user experience and education, while helping traders understand and manage risk, it said. Recent Reports & Events • Leeor Shimron: Investing in the DeFi Landscape Panel Discussion at the LA Blockchain Summit on October 6th• David Grider: Digital Assets Weekly: September 15th• FS Digital Strategy Team: Bitwise: Leading Crypto Index Funds & New Alpha Opportunity

Digital Assets Weekly: September 15th

For a full copy of this report in PDF format please click HERE  Market Analysis Following last week’s downside volatility, Bitcoin stabilized and regained some ground finishing the week ending 9/14 up 2.8% at $10,663. Bitcoin currently sits around ~$10,850 and seems poised to retest $11,000. Bitcoin is still down double digits this month (-10%) alongside oil and commodities. Historically, September has been Bitcoin’s worst performing month. Amongst all the major crypto assets, Ethereum was the best performing asset this week (+6.5%) and Bitcoin Cash was the worst (-1.3%). Reversing from the week prior, the FS Crypto FX 250 was the best performing index this week (+5%) and Bitcoin was the worst (+2.8%) as the entire crypto market showed signs of recovery after the big selloff. All major crypto assets and the FS Size Indexes remain firmly in the green on a YTD basis. Bitcoin Cash is the worst performing asset which was the only asset that declined this week and posted a gain of only 10% YTD. Ethereum remains firmly ahead with a gain of 192% YTD. Bitcoin’s Mkt Cap/CMR ratio increased 2.5% week over week from 9.9x to 10.2x. Bitcoin’s Mkt Cap/RV ratio increased 2.8% week over week and currently sits at 1.7x. Noteworthy this week:Grayscale Investment Trusts: Despite its resurgence last week, the ETHE premium to NAV trended lower finishing at 41% (55% last week). The ETHE decline is notable as it listed at a premium of >1,000% and has an average historical premium of ~260%. Grayscale’s newly listed products BCHG and LTCN continued to trade with high premiums finishing the week with premiums of 327% and 700%, respectively. Silvergate Capital Corp. (NYSE: SI): Silvergate Capital Corp. Class A rose 6%, more than any full-day gain since July 10 as its sector advanced. Trading volume was double the average for this time of day. Analysts have 2 buy, 1 hold, and no sell recommendations on the stock. The consensus rating is 4.3, on a 1-5 scale with 1 meaning strong sell and 5 meaning strong buy. The price target of $18 represents a 15.49% increase from the last price. Analysts boosted their targets 0.7% in the past three months. Square Inc. (NYSE :SQ): Square released a new report that highlights how the onset of COVID-19 has affected global commerce and payments behavior. This is the third installment of Square’s Making Change series, which examines whether we’re headed towards a cashless society. In February 2020, just 5.4% of Square sellers across the US were cashless. By April 2020, amidst the height of shelter-in-place mandates, that number jumped up to 23.2%. By August 2020, as the world slowly began to reopen, the number of Square sellers with a cashless business model was showing signs of stabilizing at 13.4%. That said, there has still been a remarkable increase in cashless adoption rates compared to pre-pandemic. TAAL (CSE: TAAL): TAAL, a vertically integrated blockchain infrastructure and service provider announced the opening of its new office in Zug, Switzerland, along with key hires in c-suite and senior management roles. TAAL is onboarding a number of key new hires with the goal of expanding the Company’s operations, including a Chief Technology Officer, Chief Compliance Officer, VP of Product Development, Head of Business Development, Chief Scientist and VP of Digital Strategy. Chief Executive Officer Jerry Chan and Chief Financial Officer Satoshi Kitahama will be relocating to the Swiss office in 2021. Winners & Losers WinnerYearn Finance (YFI) – Despite the market wide selloff the past two weeks, YFI surged to a new all time high of ~$40,000 per token, largely in anticipation of its Coinbase Pro listing Tuesday. During the selloff, YFI tested its $20,000 support level before bouncing back to reach new highs. YFI is a DeFi protocol aggregator with a token cap of 30,000. The YFI token confers governance rights and a portion of on-chain cashflows from the yield generated through the protocol. LoserbZX – The Fulcrum DeFi protocol developed by bZX, which had recently relaunched after a series of hacks in February forced the team to regroup, was hacked once again to the tune of about $8 million. According to the incident disclosure by bZX, the culprit was one line of code placed at the wrong location in the contract for its “iTokens,” the token representing a user’s share in the pool of supplied assets — essentially a tokenized deposit balance.A fix was quickly deployed to prevent further occurrences. The bZX team reported that the hacker returned themoney on Monday, saying, “The attacker was tracked and identified due to their on-chain activity, he cameforward shortly after this and returned the funds stolen.” Financing & M&A Activity Noteworthy this week:INX – Crypto exchange INX, which recently launched its security token initial public offering (IPO), has crossed the minimum $7.5 million threshold imposed by the U.S. Securities and Exchange Commission (SEC). The regulator wanted INX to raise the first $7.5 million of its up to $117 million IPO in dollars and not crypto. Now that the minimum requirement has been met, INX will start accepting bitcoin, ether, and USDC stablecoin, beginning September 14. LN Markets – LN Markets, a crypto derivatives exchange built on top of Bitcoin’s Lightning Network, has raised an undisclosed sum of money in a pre-seed round. Developed by bitcoin startup ITO, LN Markets currently has trade limits set at 0.01 bitcoin per trader. The exchange said its users have so far executed more than 25,000 trades, worth over $10 million in volume. Recent Reports & Events Access Fundstrat’s recent crypto insights if you missed them by clicking below or visiting FS Insight:• David Grider: Digital Assets Weekly: September 9th• FS Digital Strategy Team: Bitwise: Leading Crypto Index Funds & New Alpha Opportunity• Leeor Shimron: The Coming Age of Yield Farming

Digital Assets Weekly: September 9th

For a full copy of this report in PDF format please click HERE Market Analysis Following a quiet August for Bitcoin price action, the asset sold off from its highs around  $12,000 to as low as $9,946 on Saturday, before climbing back above $10,000 support and ending the week around $10,400. For the 7 days ended 8/7, Bitcoin was down 11.2% and now sits around ~$10,250. Despite its meaningful sell-off, Bitcoin remains well ahead of all other asset classes on a YTD basis. Outside of Bitcoin, nearly all other major asset classes saw price declines last week with oil falling as much as 7%. Amongst all the majors, Bitcoin was the best performing asset this week (-11.2%), while Litecoin was the worst performing asset (-20.2%). Bitcoin led all FS Crypto Indices this week. FS Crypto FX 250 was the worst performing index with Maker (-22%) and Synthetix (-37%) representing major contributors to the underperformance. Despite a 19% decline this past week, Ethereum remained well ahead of all other major crypto assets on a YTD basis and is still up 175%. Bitcoin’s Mkt Cap/CMR ratio decreased 11.5% week over week from 11.2x to 9.9x Bitcoin’s Mkt Cap/RV ratio declined 11.3% from 1.9x to 1.7x. Digital Asset Investment Vehicles & Stocks Noteworthy this week:Canaan (NASDAQ: CAN): Canaan plans to repurchase up to $10M of its outstanding American depositary shares. The company plans to fund the repurchases from its existing cash balance and will run from September 22 until the next 12 months. Shares finished the day up about 9%on Tuesday on the news. Grayscale Investment Trusts: This week, the ETHE premium to NAV fell to a new all-time low of 33% (39% last week) before finishing the period around 55%. The ETHE decline is notable as it listed at a premium of >1,000% and has an average historical premium of ~260%. Grayscale’s newly listed products BCHG and LTCN kept their high premiums finishing the week with premiums of 295% and 750%, respectively. Overstock (NASDAQ: OSTK): tZERO a subsidiary of Medici Ventures, the blockchain-focused, wholly owned subsidiary of Overstock. com (NASDAQ:OSTK) has made trading free for broker-dealers trading publicly traded digital securities registered with the U.S. regulators, effective September 3rd. Winners & Losers WinnerFlexa – The team behind the New York-based digital asset payments company launched its new digital token, AMP, on the Ethereum mainnet this week. This ERC20-compliant token will be used as a collateral token for DeFi applications with the first emergent use case being to secure all payments on the Flexa network. AMP was designed in conjunction with Ethereum development studio, Consensys. Crypto asset custodian and exchange Gemini has announced plans to support AMP. LoserSushiSwap – The imitation of the popular automated market maker Uniswap had a rough week. Having  surged in use due to its lucrative yield farming numbers, the platform accounted for over 70% of the total value on Uniswap at the beginning of September. This week, Chef Nomi, the pseudonymous founder and leader of SushiSwap, converted a portion of SUSHI tokens allocated for the development in exchange for approximately $13M worth of Ethereum triggering a sell-off as many marker participants viewed the sale as an exit scam. While Nomi insists that he had a right to sell the tokens and did so to focus on technical issues, the price of the SUSHI token has declined precipitously from as high as $8.50 last Tuesday to as low as $2.80 by end of day Monday, or a decline of about 67%. The project is now under new management of Sam Bankman-Fried, the FTX crypto exchange CEO. Financing & M&A Activity Noteworthy this week:Zero Hash – The Chicago-based crypto derivatives exchange formerly known as Seed CX — announced last Wednesday that it closed a Series C fundraising round to help it further build out its settlement-as-a-service business. The firm is hoping the fresh cash injection will help it reach profitability by the end of the year. Investors in the round include broker-dealer Tastyworks, the active trader-aimed options platform led by Tom Sosnoff, as well as The Small Exchange, Bain Capital, Trade Station, CMT Digital and Monday Capital. Dusk Network – the Amsterdam-based fintech building a security token exchange raised over $1M from iFinex, the owner of the crypto exchange Bitfinex. The Company’s funding comes in addition to a ~$9M private sale conducted in 2018. Luno – DCG acquired the London-based crypto exchange for an undisclosed sum. DCG first invested in Luno in its seed round in 2014. DCG now operates five subsidiaries, including recently-launched Foundry, Grayscale Investments, Genesis, CoinDesk, and Luno. Recent Research • David Grider: Digital Assets Weekly: September 1st • Tom Lee & David Grider: If you missed it, view a recording of the Business Use Cases of the BSV Blockchain Webinar• FS Digital Strategy Team: Bitwise: Leading Crypto Index Funds & New Alpha Opportunity

Digital Assets Weekly: September 1st

For a full copy of this report in PDF format please click HERE Market Analysis Early in the week, Bitcoin dipped testing $11,000 as support before rebounding and ending the week only slightly down(-0.8%) from the week prior at $11,678. August is only the second month in Bitcoin’s history that it traded above $10,000for the entire month. Bitcoin continues its 2020 outperformance compared to all major asset classes. Notably, equities reached new all-time highsthis week and the Dollar continued its decline as investors expressed their appetite for risk-on assets. Amongst all the majors, Ethereum was the only asset that was positive this week (+6.7%), largely driven by the growth ofthe nascent DeFi space which broke above $8 billion in total value locked this week. When Bitcoin dipped earlier in the week, it dragged the rest of the market down with it, but all the FS indices bounced backand ended the week flat compared to the week prior. Bitcoin’s Mkt Cap/CMR ratio decreased 1.2% week over week from 11.3x to 11.2x. Bitcoin’s Mkt Cap/RV ratio was flat on the week and remained at 1.9x. Digital Asset Investment Vehicles & Stocks Noteworthy this week: Canaan (NASDAQ: CAN): Canaan Inc., a provider of high-performance computing solutions reported on Tuesday a Q2 net loss of 0.11 yuan ($0.02) per American depositary shares, compared with a net loss of 1.88 yuan per ADS in the same period last year. Revenue totaled 178.1 million yuan ($25.2 million) for the June quarter, down from 241.5 million yuan for the prior-year period. Grayscale Investments: This week, the GBTC premium to NAV ticked up back above 20% while the ETHE premium fell to its all-time low of 39%. The ETHE decline is notable as it listed at a premium of >1,000% and has an average historical premium of ~260%. Grayscale’s newly listed products BCHG and LTCN kept their high premiums finishing the week with premiums of 265% and 525%, respectively. Square, Inc. (NYSE: SQ): Square rallied 3.2% premarket Tuesday after Wedbush analyst Moshe Katri wrote that shares could reach $250-$300, citing a call the firm hosted with the mobile payment solution’s former global head of sales. That call provided a “bull case” assuming CashApp grows to 200m users from 30m today and a recovery in the seller segment. TAAL (CSE: TAAL): TAAL, a verticially integrated blockchain infrastructure and service provider announced its financial results for Q2 2020. The Company reported a net loss of $2,425,520 as compared to a net loss of $139,743 for the comparable period in 2019. Additionally, it reported gross revenue of $1,604,452 for the three-months ended June 30, 2020, as compared to $4,304,627 for the same period in 2019, a 62.7% decline that reflects the termination of hashing operation in May 2020, which resulted in gross revenue of $7,608,956 for the six months ended June 30, 2020, as compared to $4,304,627 for same period in 2019. Winners & Losers Winner Fidelity – Fidelity Investments is launching its first bitcoin fund, adding its establishment name and star power to the fledgling and often controversial asset class. Two years ago, it started Fidelity Digital Assets, a unit meant to manage these products for hedge funds, family offices and trading firms. The Boston-based money manager said in a filing to the SEC that it will begin to offer the Wise Origin Bitcoin Index Fund I through a new business unit called Fidelity Digital Funds. Fidelity’s latest foray into the world of crypto is welcome news for fans who have long sought greater acceptance of digital currencies and blockchain by Wall Street mainstays. Loser Mongolian Miners – A document issued by the Department of Industrial and Information Technology of the Inner Mongolia Autonomous Region. The suspension means these mining farms will no longer be able to enjoy electricity discounts that come from a liquid energy marketplace provided by the Inner Mongolia Power Group, a state-owned energy trading firm in the region. Financing and M&A Activity Noteworthy this week: Blockfolio – Hong Kong-based crypto exchange FTX acquired crypto portfolio tracker Blockfolio for $150 million and is said to be one of the biggest acquisitions in the digital asset industry. FTX settled its acquisition using a combination of stock, crypto, and cash. The move signals FTX’s intention to enter the retail end of the industry. Acala – Acala, a decentralized finance project building on top of the Polkadot blockchain network, has raised $7 million in Series A through a simple agreement for future tokens (SAFT) sale. Acala is building various DeFi products, including a decentralized stablecoin called aUSD, a decentralized exchange and a staking derivative. Recent Research & Events Access Fundstrat’s recent crypto insights if you missed them by clicking below or visiting FS Insight:• Tom Lee & David Grider: If you missed it, view a recording of the Business Use Cases of the BSVBlockchain Webinar• FS Digital Strategy Team: Bitwise: Leading Crypto Index Funds & New Alpha Opportunity• David Grider: Digital Assets Weekly: August 25th

Digital Assets Weekly: August 25th

For a full copy of this report in PDF format please click HERE Market Analysis After breaking above $12,000 resistance, Bitcoin quickly fell below that level and is consolidating in the mid-$11,000 range. Bitcoin ended the week down 4% at $11,771. CME’s 6-month Bitcoin futures contracts expire at the end of the month, which may lead to greater volatility this upcoming week. Despite the pullback this week, Bitcoin remains firmly in front of all other major asset classes in terms of YTD performance. This week, the Dollar has rebounded slightly, and equities markets have reached new all-time highs. Bitcoin’s dip this week set the tone for the rest of the market, leading to slightly stronger dips among the other majors. FS Crypto FX 250 is the only index that finished the week in positive territory (+1.3%). The crypto majors (FS Crypto FX 10) declined the most of all the FS indices (-4.7%). Bitcoin’s Mkt Cap/CMR ratio decreased 4.8% week over week from 11.9x to 11.3x. Bitcoin’s Mkt Cap/RV ratio decreased 4.9% week over week from 2.0x to 1.9x. Digital Asset Investment Vehicles & Stocks Noteworthy this week: Galaxy Digital Holdings Ltd. (TSX: GLXY): Galaxy reported its AUM on Monday which totaled $390.5 million as of July 31st, 2020. This compares with $389.6 million recorded in the same period last year. The unit's AUM includes committed capital in a closed-end vehicle and seed investments by affiliates. Changes in AUM are generally the result of performance, contributions, withdrawals and, through July 2019, capital commitments funded from one vehicle to another. Grayscale Investments: Grayscale released a report this week (Valuing Bitcoin) exploring several methodologies for valuing the first and largest digital asset, which underlies its GBTC Bitcoin trust. This past Monday saw the launch of OTC trading on its Litecoin (LTCN) and Bitcoin Cash (BCHG) trusts (see Fundstrat stock list). LTCN shares have been trading at a 753% premium while BCHG shares have traded at a 351% premium to their Net Asset Value (NAV), giving early trust investors a nice added return over the underlying assets. Market demand for these types of products creates similar premium potential for other new crypto exposure vehicles that are yet to be listed. The Horizen (ZEN) Trust, Bitwise Bitcoin Trust, and Bitwise 10 Crypto Index Fund are three others that may be able to capture similar NAV premium benefits. Investors seeking to better understand listed crypto trusts products can refer to our recently published report on Bitwise for more detail. Marathon Patent Group (NASDAQ: MARA): The Company said Monday it has installed 1,360 cryptocurrency miners at its hosting facility with Compute North, boosting its total mining capacity by 130/Ph to 186/Ph. The new units consist of 700 WhatsMiner M31S+ from MicroBT and 600 S19 Pro Antminers from Bitmain. The Company now has 2,060 miners in operation. Canaan (NASDAQ: CAN): Canaan Inc., a leading high-performance computing solutions provider, today announced that it plans to release its second quarter 2020 financial results before the market opens on Monday, August 31, 2020. Winners & Losers WinnerAave (LEND) – This Monday, Aave’s U.K. business entity, Aave Limited, announced it was issued an Electronic Money Institution (EMI) license in July. The authorization allows the decentralized lending protocol to offer services such as issuing digital cash alternatives and providing payment services. Aave CEO Stani Kulechov said, “The objective was to help Aave Ecosystem to access payment accounts and on-board users into DeFi. Electronic Money Institution is the same authorization that Coinbase and Revolut has in Europe. It will mostly support on-boarding new users into the Aave Ecosystem and to the decentralized protocol over time. Aave will pilot in the U.K., before rolling out to cover the whole EEA and expanding globally. Specifically, the service will allow users to go from Fiat to stablecoins and other assets natively in the Aave Ecosystem and then use these assets in the Aave Protocol. Loser Ethereum Classic (ETC) – Earlier this month, Ethereum Classic saw two 51% attacks wherein a miner amasses sufficient hash power to amend the network’s transaction history and reward themselves tokens. The issue stems from the fact that Ethereum Classic’s hash rate remains very low – the cost to carry out the attack is about $5,300 per hour. Notably, Ethereum Classic Labs proposed a multi-stage strategy last week to combat the risk of 51% attacks including closer coordination with exchanges, beefed-up network monitoring, and implementing a finality arbitration system to inhibit chain reorganizations while maintaining consensus among nodes. Financing & M&A Activity Noteworthy this week: Bella – Beijing-based decentralized finance aggregator Bella Protocol announced Tuesday it has raised $4 million in a funding round led by Arrington XRP Capital. Marketed as a one-stop shop for DeFi assets, the firm’s asset management platform is currently under development. The firm said its platform aims to fix the complex user experience issues related to DeFi assets, such as the need to hop among different protocols and platforms in pursuit of high yields. BlockFi – The centralized crypto lending platform raised $50 million in a Series C round, led by Anthony Pompliano’s Morgan Creek Digital. The Company has now raised nearly $100 million in the past 12 months. BlockFi has $1.5 billion in crypto assets on its lending platform and is producing a little less than $10 million a month in revenue. Recent Research Access Fundstrat’s recent crypto insights if you missed them by clicking below or visiting FS Insight:• Tom Lee & David Grider: Register for the upcoming Business Use Cases of the BSV Blockchain Webinar• FS Digital Strategy Team: Bitwise: Leading Crypto Index Funds & New Alpha Opportunity• David Grider: Digital Assets Weekly: August 18th

Digital Assets Weekly: August 18th

For a full copy of this report in PDF format please click HERE Market Analysis After bumping up against its $12,000 resistance level for the greater part of the week, Bitcoin broke above $12,000 on Monday August 17th and finished the 7D period up 3.8% at $12,316. Open interest on CME Bitcoin Futures hit an all-time high on Friday ($846M vs last week’s record of $840M) and Bitcoin’s hashrate hit an all-time high over the weekend rising a record 129 TH/s. Bitcoin has continued its dominance in terms of its YTD performance compared to other asset classes. Notably, gold continues to perform well alongside Bitcoin as the dollar suffers, pointing to Bitcoin’s growing role as a global store of value. Litecoin, which had lagged all other major crypto assets on YTD basis, led by 6% - 12% this week. Outperformance was primarily driven by bullishness regarding the protocol’s impending privacy upgrade. Referred to as Mimblewimble, the upgrade is expected to help shield the identities of holders of senders while also improving the network’s scalability. It is scheduled for testnet launch in September. Bitcoin’s Mkt Cap/CMR ratio increased 5.2% week over week from 11.5x to 11.9x. The recent rally has taken the valuation of Bitcoin off the deep value levels seen in March of 2020 at its lows. Bitcoin is now trading at growth at a reasonable price (GARP) levels, consistent with the current expansion stage of the macro market cycle. Bitcoin’s Mkt Cap/RV ratio increased was unchanged week over week at 2.0x. Digital Asset Investment Vehicles & Stocks Noteworthy this week:Galaxy Digital Holdings Ltd. (TSX: GLXY): Galaxy reported $38 million in comprehensive income for the second quarter of 2020 relative to $113 million in Q2 2019. The firm said it saw an uptick in trading in its OTC business, reporting $1 billion in volume. The current quarter gain was largely a result of realized gain on digital assets, i.e. cryptocurrencies which trade continuously in the market, the firm said. Marathon Patent Group (NASDAQ: MARA): Last Friday, the Company announced that it has entered into a Long-Term Purchase Contract with Bitmain for the purchase of 10,500 next generation Antminer S-19 Pro ASIC Miners. After the installations go operational this week, the Company expects to generate positive net cash flow, based on the current price of Bitcoin and Hashrate difficulty. Overstock. com (NASDAQ: OSTK): Shares of Overstock. com have skyrocketed Monday, up by 21%, after getting a bullish initiation from Wall Street. Piper Sandler kicked off coverage of the e-commerce company with an overweight rating. Analyst Peter Keith assigned a price target of $140 on Overstock shares, even as the stock has already gained 1,200% year to date. The COVID-19 outbreak has created a surge in demand for e-commerce tech companies, and Overstock has been able to capitalize on this trend by focusing heavily on its home furnishings category. Riot Blockchain (NASDAQ: RIOT): Riot Blockchain announced a deal to purchase 8K next-gen Bitmain S19 Pro Antminers for $17.7M from BitmainTech. Receipt and deployment are expected to begin in January and continue through April. Despite Bitcoin's big recent rise, Riot says the size of the purchase allowed the Company to secure a lower cost per miner than what it's typically paid. Chairman Remo Mancini calls the mega-order a milestone deal moving the Company towards its goal of becoming one of the largest bitcoin miners in North America. Riot, he says, is seen becoming cash flow positive by year-end 2020. Winners & Losers Winner Coinshares: The digital asset financial service firm CoinShares released an in-depth research report this week, titled A Little Bitcoin Goes a Long Way research report, and its been gaining attention from industry insiders. The report discusses Bitcoin’s place as an alternative asset in a modern portfolio and is worth a read. Uniswap – Last week, Uniswap announced its $11 million Series A fundraising round. The leading decentralized exchange (DEX) protocol, has hit a record high for user growth. According to The Block Research, Uniswap added 57,976 new users in July as compared to 24,963 in June, i.e. growth of 132%. In August thus far, the exchange has added 27,253 unique users. Uniswap has been adding users at a growing pace since the launch of its new version, Uniswap V2. The new protocol introduced features like ERC-20 pairs, more manipulation-resilient price oracles and flash swaps, among others. Uniswap currently leads the DEX market, with more than 40% market share as of last month. LoserCurve Finance (CRV) – DeFi project Curve Finance appears to have been forced to launch its DAO (decentralized autonomous organization) and governance token CRV after an anonymous developer front run and deployed smart contracts without the knowledge of the Curve team. The anonymous developer with the handle @0xc4ad tweeted Thursday from a newly created account that Curve's DAO is ready to rock. The developer spent 19.9 ETH (~$8,000) in fees to deploy the contracts. Around 80,000 CRV tokens were reportedly pre-mined before the Curve team verified the deployed contracts. Curve was initially skeptical, but later found out that the deployment was with correct code, data and admin keys.“ Some observers have termed the early launch of Curve's DAO and token as shady. The nature of permissionless networks means anyone can deploy codes. Financing & M&A Activity Noteworthy this week:DeversiFi – a decentralized crypto exchange spun out of Bitfinex that leverages StarkWare’s batching technology, raised $450K from D1 Ventures and ParaFi. The funds invested $450K in Tether tokens, in return for the exchange’s NEC governance token. Robinhood – Brokerage app company Robinhood has raised $200 million in a Series G funding round, adding D1 Capital Partners as a new investor. the new funding elevates its valuation to $11.2 billion. The move comes roughly two months after Robinhood raised $320 million at an $8.6 billion valuation during a round that added TSG Consumer Partners and IVP as new investors. Recent Research Tom Lee: Fundstrat's Tom Lee on why boomers are buying gold while Millennials are trading bitcoin Leeor Shimron: Global DeFi Summit: The Coming Age of Yield Farming David Grider: Digital Assets Weekly: August 11th

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