Financial Research

Crypto Newsletter

Crypto Newsletter

As we noted last week, Tesla recently announced it had added $1.5 billion of Bitcoin to its balance sheet. The announcement came less than two weeks after Elon Musk added #Bitcoin to his Twitter bio, an act that caused a huge buzz amongst crypto enthusiasts. Tesla’s Bitcoin purchase adds to the growing list of public companies that are buying and holding Bitcoin in their treasuries. Source: Excluding Tesla, public corporate treasuries currently account for approximately 104,716 Bitcoin or 0.5% of the 21 million total supply cap. Although it has not been reported exactly how many Bitcoin Tesla purchased, we can assume that the purchases were made in January because that was when Tesla amended its investment policy. In January, Bitcoin traded in the range between $27,734 and $42,000 on Coinbase. Assuming Tesla’s purchases averaged the mid-point of the range at ~$35,000, Tesla accumulated about 43,000 Bitcoin with its $1.5 billion investment. Tesla’s Bitcoin position is the second largest public treasury holding behind MicroStrategy, which is currently holding over 71,000 Bitcoin in its treasury. Just today, MicroStrategy announced they are issuing another convertible note for the purpose of accumulating more Bitcoin to the tune of $900 million. The 0% convertible note will Mature in February 2027 and the initial conversion rate is equivalent to $1,432 per share of MSTR. Clearly there is demand for such a product, as MicroStrategy’s previous convertible note was oversubscribed and the initial allocation of $400 million was subsequently increased to $650 million. In our view, MicroStrategy is wisely appealing to fixed income institutional investors and offering them an ETF-like product enabling them to gain exposure to Bitcoin. The current offering is expected to close Friday, and we expect MicroStrategy will be able to fill the entire $900 million allocation. Bitcoin responded positively to the influx of corporate buyers steadily reaching new all-time highs. Source: FSInsight, CoinMetrics, CNBC, MarketWatch As DeFi projects have continued to see growth and adoption, Ethereum has also been performing well and reached a new all-time high this week of $1,873. Last month, our Lead Digital Asset Strategist, David Grider, published his thesis for Ethereum and issued his price target of $10,500. Since the release of the report, DeFi Total Value Locked increased 60% from $25 billion to over $40 billion. This is a positive signal as users are locking ETH and other ERC-20 assets in DeFi protocols to make use of the various products in the ecosystem. Source: DeFiPulse As users are diving into new DeFi products and use cases, usage of the Ethereum blockchain has reached a new all-time high causing transaction fees to skyrocket. Rising transaction fees is a positive indicator as it shows increased demand for the network that makes the network more valuable. However, it can also limit certain use cases and price out smaller users from the network. As shown in the charts below, in recent weeks the average transaction fee has spiked from $2 in mid-December to $22 now, an increase of 1,000%. As expected, this has priced out lower value transactions (and smaller holders/users) with the median transaction value increasing 450% from $60 in early December to $330 per transaction now. Source: FSInsight, CoinMetrics The launch of ETH 2.0 is still at least two years away, and in the interim, layer-two scalability solutions like Optimistic Rollups and Matic can alleviate network congestion. While ETH 2.0 continues its development, competing layer-one protocols focused on delivering DeFi applications may have a window of opportunity to grow their ecosystems. Although Ethereum has performed well, appreciating 209% since beginning of December, ATOM, AVAX, and ADA have outperformed rising 367%, 936%, and 460% respectively. We remain overweight Ethereum and believe it will deliver on its technical roadmap, and we will be paying attention to how the competitive landscape develops over the coming months and years. Source: FSInsight, CoinMetrics, Coinmarketcap, CoinDesk

  • Crypto Newsletter
May 13, 2020

Increasing Outlook: Sentiment & FY 2020 Forecast Support a “Non-Speculative” Bitcoin Price of $16,500

Please see important disclosures at the bottom of this report Portfolio Strategy The conditions appear in place for a continued rally in crypto asset prices over the course of the year. Last week brought two events that 1) incrementally de-risked the downside and 2) improved the bull market case. We are gaining confidence in the sustainability of this rally with each day that passes after the halvening that we don’t see signs of trouble in the mining sector. Investor sentiment data has shown signs of strength that offer encouragement for the prospects of a continued rally.   There are risks that remain, but on balance we are seeing enough positive conditions unfold to give us room to revise our Bitcoin outlook upward to $16,500.  Alongside our updated outlook, we are releasing our initial FY 2020 Bitcoin financial forecasts and fundamental valuation metrics to investors – this is the first of such sell-side forecasts on the market, as far as we know. Our FY 2020 fundamental forecasts are calling for Bitcoin’s book value per share (cumulative mining revenue per coin) to reach $1,100, which is a $100 increase from our prior expectations. Investors will recall, the Market Cap/Cumulative Miner Revenue (Mkt Cap/CMR) valuation model I developed has been a very reliable predictor of market movements. Our target is applying a 15x Price/Book multiple (Mkt Cap/CMR), which is equal to its 3-year historical average. Based on our analysis, we believe Bitcoin continues to offer a strong fundamental investment opportunity, beyond a “great speculation”.  PTJ Endorsement The endorsement of Bitcoin from the legendary fund manager Paul Tudor Jones gave markets an added boost last week. PTJ publicly disclosed his exposure to Bitcoin and recommended investors to own 1% to 2% of the asset in their portfolio, which falls in line with the guidance we’ve been offering. The prospects for greater adoption traditional macro funds “taking bets” on the asset is encouraging for market sentiment. Consensus Conference Effect Investors have focused heavily on the halvening effect of prices leading up into and after the Bitcoin block reward reduction. Now that the halvening is past us, and we are looking forward, one other event that we’ve observed producing a similar effect is the Coindesk Consensus Conference in NY that started on the 11th. Bitcoin returns surrounding Consensus have historically been strong in all years except during the bear market in 2018, which is positive for sentiment. Cumberland Pre-Halving Survey A survey of investors taken by the large crypto OTC market maker Cumberland mining indicated that respondents had an overwhelmingly bullish outlook on the price of Bitcoin by the end of the year, which is additionally positive for sentiment. Bitcoin FY 2020 Estimates Our view continues to be that crypto assets follow financial fundamentals that can be viewed from the blockchain. The cumulative mining costs (CMR) for Bitcoin, and other PoW monetary store of value crypto assets have served as a strong indicator of long-term fundamental valuations. The metric can be thought of as equivalent to the “Book Value” of Foreign Direct Investment (FDI) into each digital economy for building infrastructure. Our model forecasts our expected FY 2020 Book Value (CMR) and its resulting Book Value Per Share (CMR/Coin). We take the change in Book Value as the Book Value Growth. We subtract that dilution of new supply as an expense at the rate of the prior Book Value Per Share. We derive a net income to initial shareholders as the net accretion (or dilution if negative) during the period. We adjust the net income by the outstanding supply to arrive at Earnings Per share. The FY 2020 forecasts represent a Return on Equity (Book Value) of 24%, which is conservative compared to prior year results. The Book Value multiple of 15x represents Bitcoin’s 3-year average historical Mkt Cap/CMR valuation ratio. On a growth adjusted basis, the Price/Book/Growth ratio is toward the higher end of the historical range but well below prior bubbles. Comparable Analysis Comparing Bitcoin on a historical basis to its public peers gives us comfort that our assumptions are well within a reasonable range of expectations. We believe Bitcoin deserves to trade at a consistent discount to most of its peers due to its size, growth, and historical valuation ranges. Bitcoin Outlook The results of our $1,100 Book Value Per Share forecast and our 15x Price/Book forward multiple produces our $16,500 Bitcoin price target. Comparison of our current and prior outlooks are below. Investment Themes Market Analysis In last week’s note our guidance to investors was the following: “We are still looking for prices to rally up into the halvening and will start to look more critically at the market in the immediate days before and weeks after for any signs of weakness. Based on current market conditions, we would not be surprised to see Bitcoin reach the $10k level before the event, and possibly have some retracement after.” We got something surprisingly close to that over the last week. Bitcoin rose to touch $10,079 four days before the halvening on the 7th, and quickly sold off to $8,106 two days before the event on the 9th, eventually closing down 3% on the week at $8,591 on Tuesday 5/11. Saturday night’s flash crash erased all of the week’s gains. The crash lasted about 15 minutes, cratered Bitcoin's price about $1,000, and resulted in temporary downtime on Coinbase’s network. Despite this steep sell-off over the weekend, Bitcoin remains the best performing asset class on a YTD basis. Top crypto assets all lagged Bitcoin this week. Bitcoin Cash had the strongest relative performance lagging Bitcoin by about 2% while other major assets declined 10%-12% on the week.  All size-based indices lagged Bitcoin this past week. FS Crypto FX 250 was the worst performing index and was down 8.7% on the week. The table below shows the returns of the largest assets and the FS Size Indexes over the year.  Fundamental Valuations Bitcoin’s P/CMR valuation stood at 8.7x as of 5/11 vs 9.0x as of last week. This value remains slightly below the levels from Mar-19 through present. Bitcoin’s market cap to realized value (MV/RV) multiple was 1.5x as of 5/11 vs 1.6x last week. The comp table for large cap crypto asset prices and fundamental valuations is shown below. Valuation Methodology 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. Its 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 shows publicly traded blockchain and crypto related stocks, which offer a vehicle for investors who are constrained from owing underlying crypto assets themselves. Noteworthy this week: Mining Companies: In line with Bitcoin’s strong run up to $10K last Wednesday, mining stocks saw strong performance into Friday night before opening significantly lower on Monday following Bitcoin’s precipitous decline from about $9,600 on Saturday night to as low as $8,550 on Sunday. Nevertheless, performance on the week was strong and smaller cap stocks Riot and Hut8 significantly outperformed, rising 42% and 57% on the week, respectively. Financial Services:  According to a report from the Wall Street Journal, JPMorgan is now offering banking services to two well-known digital asset exchanges: Coinbase and Gemini. The banking giant’s move into the industry warrants close watching as crypto focused banks such as Silvergate Capital could see increased competition or become attractive acquisition targets. Winners & Losers Winner: f2pool – Prior to the halving event, f2pool mined the final Bitcoin block with a subsidy of 12.5 BTC and included the following message in its coinbase transaction: “NYTimes 09/Apr/2020 With $2.3T Injection, Fed's Plan Far Exceeds 2008 Rescue”. The message is an allusion to one left by Satoshi in Bitcoin’s first block mined over a decade ago in the midst of the 2008/9 financial crisis. Loser: TON – Telegram officially abandoned its TON blockchain project. The withdrawal follows a decision by a US judge prohibiting the TON platform’s GRAM token from being distributed not only in the US, but also globally. Financing Activity Abra – The San Francisco based crypto financial services app raised $5MM from the Stellar Development Foundation (SDF). The partnership will shift some of Abra’s services onto the Stellar Blockchain and comes on top of a $12MM Series C round which took place in early April and was led by American Express Ventures. Lolli - The New York based e-commerce rewards startup raised $3.0MM in seed funding. The round was led by Peter Thiel’s Founders Fund with participation from Bain Capital Ventures, Craft Ventures and Digital Currency Group. Coinme – The Seattle-based digital currency ATM company raised $5.5MM in a financing round led by Pantera Capital. Recent Research Access Fundstrat’s recent crypto insights if you missed them by clicking below or visiting FS Insight. Tom Lee: Tom’s Take on Crypto: The Ten Rules of Bitcoin Investing: Rule No. 2Robert Sluymer: Crypto Technical Analysis: BTC challenges 9-9.5K resistance making new 7-month highs vs S&P 500Ken Xuan: Crypto Quant: Benchmark Crypto Indices Weekly Performance ReviewDavid Grider: Digital Assets Weekly

Tesla Bitcoin Buy Only Beginning Of Corporate Crypto Demand

Tesla news sent Bitcoin and crypto soaring this morning. We see this as an important moment for market validation but are not surprised by the move. In our 2021 Crypto Outlook report we saw corporate crypto buyers as a key catalyst for demand (slide 19: factor #16) and reason for raising our price target on Bitcoin from $40k to $100k. We’re reiterating our bullish view on crypto. ● Tesla $1.5 billion Bitcoin purchase news sends crypto prices to new heights. This morning, Tesla disclosed a purchase of Bitcoin in its latest annual report and announced that the company will start accepting cryptocurrency as a form of payment. Crypto prices are up 10%+ on the news. We think the move is justified and the beginning of a larger corporate demand trend. ● Crypto offers a $1 trillion consumer base opportunity for corporates to support as form of payment. Moves by Tesla, PayPal and others allowing customers to pay with crypto make the assets more usable. We expect this trend to continue. The market cap of Bitcoin and crypto now exceed $1 trillion dollars. We think many companies will look at that stored wealth and that consumer base and start accepting crypto as a greater means of payment. We expect that to get more crypto in the hands of corporates and consumers and we think that will be very beneficial to adoption and prices going forward. ● Purchase makes strategic sense given Bitcoin and Tesla are both transforming the energy landscape. We think Tesla buying Bitcoin makes a ton of strategic sense given how both are reshaping the way energy is captured, transported, and consumed. Tesla’s solar and battery capabilities capture and transport energy in ways that weren’t previously possible. Bitcoin mining similarly allows people to convert excess energy into digital value that can be stored and later converted into products and services. We’re seeing energy producers and utilities sell excess capacity to miners. Renewable energy is an under-tapped resource. We wouldn’t be surprised if Tesla allowed customers to convert excess capacity into Bitcoin via mining in the future. ● Crypto networks are disrupting a range of technology and financial services industries. We see crypto disrupting many industry segments across the tech (cloud, advertising, software, platforms, etc.) and fintech (payments, borrowing & lending, asset management, exchanges, etc.). Crypto assets are network value instruments. Like the internet, as users and businesses join the network for its technological utility the value rises. The difference with crypto networks and companies is incumbents can’t buy Bitcoin or crypto out of business. We see this with PayPal today. Bitcoin payments are already 3x larger, growing 12x faster, and 99% cheaper than PayPal - that’s disruptive but you can’t acquire your competitor if it’s a crypto network. ● Companies exposed to blockchain disruption may have to buy crypto as a business model hedge. If you’re a business exposed to crypto disruption, how do you hedge? You own the asset, and you support crypto use by your customer base. This gives you incremental revenue over the short term as we’ve seen form Square and heard talk about with Apple and RBC this morning. In the long term as you make the network more valuable, you own a piece of it, and if it eats into your business model than the rise in the assets value helps offset revenue losses. We think this could happen with many other companies and think this is the key reason corporate treasury purchases are set to grow over the long run as a disruption hedge for incumbents. ● S&P 500 companies hold $2.8T of cash and a 7.7% allocation like Tesla would be $215B of crypto demand. The $1.5B Tesla crypto purchase represents 7.7% of the company’s $19.3B cash balance but only 0.025% of the $2.8T in cash held by S&P 500 companies. A similar allocation to Tesla would equal ~$215B of demand. We don’t think this happens overnight, but we do think there’s much more room for corporate treasury penetration and expect the trend to continue. ● What are the risk? Crypto is volatile. Profit taking. Corporations may be slow to adopt crypto. Demand may be overstated. Bottom Line: We’re encouraged by Tesla’s decision. The move is in line with our broader crypto thesis. We see fundamental reasons for corporate crypto treasury exposure and expect others to follow suit. We’re reiterating our bullish view on crypto.

Crypto Weekly: 2/4/2021

THIS MESSAGE IS BEING SENT SOLELY TO CLIENTS OF FSINSIGHT Last Thursday, we held our FSInsight 2021 crypto outlook call and made three bold predictions: We raised our price target on Bitcoin from $40k to $100k. We reiterated our $10.5k Ethereum price target released on 1/20/2021. We forecasted the total crypto market cap to rise to $5T. Source: FSInsight Outlook Implied Crypto Market Expectations While prices have risen a bit since our call last week, the below table illustrates the outlook implied expectations for the market cap of Bitcoin, Ethereum and altcoins more generally. Source: FSInsight, Coinmarketcap Bitcoin Rallied This Week We remain bullish on Bitcoin and think it must continue to rise during 2021 for our other forecast to prove correct given its size and heavy influence over the entire crypto market. After the quick run we saw in the first week of the year, we think the retracement and choppy movement from Bitcoin has allowed capital to flow to other assets within the crypto ecosystem. Bitcoin has started to rally again and we think as long as prices hold generally in this range or above, it will benefit crypto assets broadly.  Source: FSInsight, Tradingview Ethereum Hitting New Highs We continue to see Ethereum as the best risk reward play in the crypto ecosystem. Our price target is $10.5k. This year it has continued its trend of outperforming Bitcoin and we think more upside remains. Source: FSInsight, Tradingview Healthy Altcoin Rally As bitcoin started to consolidate, we thought it could be beneficial for alts (Follow me on twitter: @David_Grid). Our outlook implies altcoins could see greater gains (note: higher potential returns = greater risk!!). Source: FSInsight, Twitter Thus far this year we can see from the Bitwise size indices that smaller cap alts have been outperforming Bitcoin which led the rally as it headed toward all time highs. We think if a healthy alt rally can continue for at least a week or two, it will set the stage for a move higher in Bitcoin. Source: FSInsight, Bitwise Strong DeFi Performance Expected During 2021 One of the altcoin sectors that we think will perform strongly during 2021 is Decentralized Finance (DeFi). The Tokensets Defi Pulse index has outperformed Bitcoin YTD. While we expect there to be waves of rotations, on balance we think over the course of the year, this altcoin sector is a very good place to have exposure. Source: FSInsight, Tokenset: DeFi Pulse Index

Ethereum Hits New ATH: Maintaining OW & Issuing $10.5k Target As Web 3.0 Blockchain Computing Looks Set To Disrupt The Cloud

For a full copy of this report in PDF format, click this link. Ethereum (ETH) reached a new all time high of $1,440 today, passing the previous high set during January 2018 at the peak of the crypto bubble. We’ve been recommending an overweight in Ethereum since April 2020 and continue to see upside. We continue to believe Ethereum fundamentals are incredibly strong and think ETH represents the best risk / reward investment play in crypto. Web 3.0 blockchain computing may be the future of cloud in our view. Ethereum is now capturing a notable share of the cloud market. ETH transaction fee revenue has been growing at 1099% 5-year CAGR and finished 2020 at ~$600M. During 2021 YTD, ETH has already recorded $180M in cloud revenue, implying an annualized $3.9B by FY 2021. We believe Ethereum should be valued like a cloud 1.0 stock. On a growth adjusted basis, we calculate Ethereum is 1/8th the price of the BVP Cloud Index. Based on our analysis, we are issuing a $10,500 price target on Ethereum (ETH) which represents ~650% upside from current levels.  Web 3.0 blockchain computing may be the future of cloud: Smart contract platforms like Ethereum are enabling a new version of the internet. Web 3.0 blockchain networks give users connected edge computing, trustless community-owned protocols in replace of platforms like Facebook, privacy control over data and AI, and crypto DeFi natively imbedded into the internet. Computing has gone in trends from centralized to decentralized, and the transition from cloud to blockchain cloud offers the next evolution in this shift. Ethereum is the Ant Financial 2.0 of decentralized cloud finance: Ethereum has the largest and most active ecosystem in crypto for blockchain decentralized applications (Daaps). The decentralized finance (DeFi) ecosystem build atop Ethereum offers software automated services borrowing and lending, asset exchange, payments, insurance, and asset management. We view Ethereum as a new type of supper app platform and see it as the Ant Financial of crypto. ETH transaction fee revenue of $600M during FY20 on pace to hit $3.9B in FY21: DeFi activity atop Ethereum network has led to material and rapidly growing transaction fee revenue of $600M during 2020. During the first 17 days of 2021, fees have already topped $180M putting Ethereum on pace to capture $3.9B in revenue during FY 21. Growing at 500%+ YoY, Ethereum looks undervalued against cloud 1.0 index peers: Trading at ~150B market cap, with $3.9B of estimated revenue, Ethereum offers a 39x price to sales ratio. However, Ethereum revenue trends are vastly outpacing the fast growing and high-flying conventional cloud stocks. Growing at a 1099% 5-year CAGR, and at 1624% year over year from 2019 to 2020, Ethereum is on pace to grow at 554% during 2021. This compares against 21x price to sales multiple and 38% growth for the Bessemer Venture Partners (BVP) Emerging Cloud Index. On a growth adjusted basis, Ethereum trades at a Price-to-Earnings-Growth (PEG) rate of 0.07x vs. 0.55x for the cloud comps. Issuing price target of $10,500 which represents 650% upside from current levels: We believe Ethereum could trade in line with cloud 1.0 peers. Based on our analysis, we are issuing a price target of $10,500 for Ethereum, which represents 650% upside form the current price $1,400. We further see ETH as undervalued relative to Bitcoin based on a price to book multiple basis and believe capital flows from Bitcoin could act as a catalyst for higher ETH prices. What are the downside risks? Growth doesn’t materialize. ETH 2.0 has a bug or doesn’t happen. Crypto markets overall experience a recession. Investors don’t value Ethereum the same way that we are.  Bottom Line: We remain bullish and overweight Ethereum. We think blockchain computing may be the future of the cloud. We think the trend is in the early innings. Ethereum is showing material and measurable signs of success. We think ETH should trade like a cloud stock and it looks undervalued.  We are issuing a price target of $10,500 on ETH.  Key slides from this report… Crypto Platforms Offer The Next Era Of The Web (Slide 2)... Cloud to Blockchain Platform & Value Shift Underway (Slide 6)... Ethereum Has Large & Growing Decentralized Finance Ecosystem (Slide 7)... Network Generated ~$600M Cloud Fee Revenue During FY 2020 (Slide 8)...  Revaluing Ethereum In Line With Cloud Peers Implies ~$10.5k ETH (Slide 11)... 

Bitcoin Quickly Hits Target & Has Healthy Pull Back But Bull Market Remains Intact

After raising our outlook 50% from $25,000 to $40,000 on December 30th, Bitcoin quickly rose to reach our target late last week. Prices then started to consolidate and slide over the weekend before retracing ~25% down to ~$30,000 and now rebounding to ~$33,800. Bitcoin and crypto are volatile assets, but the speed at which prices moved to hit our target was quite fast and we think a pull back is healthy.  We don’t think the retracement was indicative of a bull market top – to be clear we firmly believe the fourth crypto bull market remains intact. We think the sell-off was simply a combination of 1) traders taking profits after 50%+ gains in under two weeks, 2) an uptick in treasury yields and dollar strength, and 3) modestly negative news out of the U.K. Nearly 70% of investors were in unrealized profit after the sharp move up and that means some selling is to be expected. But investors shouldn’t forget, last time Bitcoin reached these unrealized profit and loss levels during a bull market, Bitcoin still rose from ~$2k to ~$20k or ~10x over the course of the cycle. We think for Bitcoin to sustainably move higher to levels many expect, a similar pattern is necessary.  Macro conditions of a weaker dollar and low 10-year treasury yields, which have been trending in Bitcoin’s favor, saw what we see as a short-term bounce, which likely dampened the rally.  Finally, negative headlines out of the U.K. Financial Conduct Authority may have had a modestly negative impact on retail sentiments and prices.  We have been in crypto long enough to know that these types of pull backs are common and represent opportunities during bull market cycles, even though 25% moves will seem extreme to traditional investors and the main stream media. Excluding the current move, since 2013 has Bitcoin has had 35 drawdowns of 25%+ over two days, and the average 6-month forward return has been 93% with a win ratio of 57%. Among those drawdowns, 20 happened during bull markets and their average 6-month forward returns were 170% with an 80% win ratio.  Bottom line: We think the crypto bull market remains intact, but we expect to see waves of choppiness as prices move higher. Bitcoin sits ~20% under our $40,000 target, which we view as conservative. Our current target is under review with a bias to the upside. 

  • Crypto Blasts
Oct 30, 2020

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)...

  • Crypto Newsletter
Sep 29, 2020

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

  • Crypto Newsletter
Sep 22, 2020

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

  • Crypto Newsletter
Sep 15, 2020

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

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