Two years after the EU Referendum, investor sentiment towards the UK is subdued despite the recent stock market highs.

Concerns about Brexit and a UK economic slowdown are always present, but is this investor uncertainty justified or are there attractive opportunities for active managers?

On 19 June, the AIC held a media roundtable with investment company managers of large, medium and small-cap strategies investing in the UK. Alastair Mundy, Portfolio Manager of Temple Bar, Georgina Brittain, Co-Manager of JPMorgan MidCap and Neil Hermon, Fund Manager of Henderson Smaller Companies discussed Brexit’s impact, where they see opportunities and risks, and their outlook for the UK.

Their views have been collated alongside those of Simon Gergel, Portfolio Manager of Merchants, Jean Roche, Co-Manager of
Schroder UK Mid Cap and Dan Whitestone, Portfolio Manager of BlackRock Throgmorton Trust.

Brexit’s impact

Neil Hermon, Fund Manager of Henderson Smaller Companies said: “With the UK economy showing one of the slowest economic
growth rates in the G7 it is hard to argue that Brexit is not having an impact. The uncertainty caused by the drawn-out negotiations is causing consumers to rein in spending with weakness noted in areas such as the second-hand housing market and big ticket purchases such as cars, furniture and carpets. On the other hand, manufacturers are benefiting from the weakness in sterling with exports much more competitive compared to foreign competition. In general, most UK corporates are carrying on and investing for the future, recognising that Brexit carries substantial risks, but aware that life goes on and the world will still keep on turning.”

Georgina Brittain, Co-Manager of JPMorgan MidCap said: “As we had anticipated, the two immediate impacts of the Brexit vote in June
2016 were a rise in inflation and sterling weakness. We positioned ourselves accordingly by emphasizing exporters and overseas earners in the portfolio and going underweight on exposure to the UK consumer. Some two years later both of these themes remain in the fund.”

Alastair Mundy, Portfolio Manager of Temple Bar said: “Two years on from the surprise EU Referendum result UK equities remain very out of favour, particularly with overseas investors. However, difficult as it may be, we have to look beyond any bad news and avoid obsessing over noise and babble. Instead we need to determine (approximately) what the picture will look like when we come out the other side and try to capitalise on the longer-term opportunities.”

Simon Gergel, Portfolio Manager of Merchants said: “The uncertainty around the Brexit process may be partly to blame for weak
UK economic growth in the first quarter of 2018, as companies and individuals may be more hesitant with their spending, although the
economy has performed reasonably well since the referendum. In sentiment terms, Brexit seems to be having a depressing effect on the UK stock market, with UK equities one of the least popular asset classes amongst investors according to Bank of America Merrill Lynch. This is leading to many shares in the UK stock market trading at attractive levels, particularly when compared to their international peers.”

Opportunities and risks

Jean Roche, Co-Manager of Schroder UK Mid Cap said: “We see an ever-faster pace of disruption amongst UK plc, and nowhere is this more keenly felt than on the high street. Companies which are not carrying out the disruption or adapting to take account of this
disruption will themselves be ‘carried out’. There are opportunities for management teams which are nimble and creative to take advantage of disruptive trends. The economy can support this because companies and households continue to spend. And mid-cap UK companies, being smaller by definition than large companies, are most likely to be able to adjust to the new normal – elephants rarely gallop.”

Dan Whitestone, Portfolio Manager of BlackRock Throgmorton Trust said: “Our investment philosophy focuses heavily on industry change. We believe nearly every industry is undergoing change right now, often disruptive change, and any industry in flux
creates opportunities both from a long and short perspective.

“One aspect of industry change we are drawn to is changes in distribution. The apps on your smartphone illustrate many industries that have been disrupted through changes in distribution, creating pressures for legacy incumbents as well as revealing a wave of exciting emerging companies.

“The power of change within distribution is generally price deflationary and it necessitates incumbents to adapt their business models or
risk being left behind. It can also fundamentally change one’s behaviour as a consumer, for example from ordering take-away food, to binge-watching box-sets, to auto re-ordering food or household goods. We continue to find many opportunities, both long and short, from changes within distribution across consumer services and consumer goods.”

Georgina Brittain, Co-Manager of JPMorgan MidCap said: “We continue to avoid leisure companies such as pub companies and general retailers – with certain exceptions such as a large position in JD Sports Fashion.

“However, we do find pockets of significant value in certain domestically-exposed areas such as the challenger banks and the brick
companies, and we also favour technology companies such as Sophos. We continue to find opportunities in the Mid Cap arena to invest in companies that are exposed to growth areas, or are making their own growth prospects, regardless of the bigger UK picture.”

Neil Hermon, Fund Manager of Henderson Smaller Companies said: “One important source of new investment opportunities is the
IPO market where we see a steady stream of interesting companies. In 2018 we have invested in Integrafin, a B2B platform for IFAs,
and Team17, a software games developer, both of which have risen to substantial premiums to their IPO price.

“In terms of what we don’t like, we typically shy away from those ‘value trap’ type areas such as food producers and industrial transportation. We are also conscious of the structural pressures that legacy companies in areas such as the UK high street are suffering from. The move to online and high property costs are proving major headwinds, as evidenced by recent
announcements from companies such as House of Fraser, Carpetright, Mothercare and New Look.”

that legacy companies in areas such as the UK high street are suffering from. The move to online and high property costs are proving major headwinds, as evidenced by recent announcements from companies such as House of Fraser, Carpetright, Mothercare and New
Look.”

“The best value, though, is among the domestic companies in sectors such as leisure, financials and real estate, where we are finding
opportunities to buy business with strong franchises at attractive prices.”

Alastair Mundy, Portfolio Manager of Temple Bar said: “Our focus, as ever, remains on  searching for out of favour stocks which have
been over-sold. The portfolio has certainly taken on a more UK centric feel in the last 12 months, but as usual retains its strong value bias.”

Outlook for the UK

Neil Hermon, Fund Manager of Henderson Smaller Companies said: “The UK equity market is good value, especially compared to
international markets. It is unloved by international and domestic investors who are very underweight the UK. Although the reasons
for this position are clear – slow economic growth, Brexit and political instability – any change of sentiment to this position could see
the UK equity market rally sharply. In general, UK corporates are performing well and earnings growth is robust.

“Additionally, balance sheets are strong and there is a steady stream of M&A activity, especially from foreign companies, which is
supporting equity valuations. We have a positive medium-term outlook for the UK equity market and especially our portfolio.”

Simon Gergel, Portfolio Manager of Merchants said: “The combination of a reasonable overall valuation for the UK stock market and pockets of very attractive valuations, is supportive for the prospects for UK equities, especially in a context where several other
asset classes are highly valued.

Dan Whitestone, Portfolio Manager of BlackRock Throgmorton Trust said: “The outlook for the UK domestic economy remains
challenged and the recent evidence would suggest it is deteriorating. This has had a notable impact on the share prices of many
domestic companies with several market participants highlighting the value on offer.

“However, whilst many of these UK consumer shares may appear cheap on valuation metrics like ‘price to adjusted earnings’, this fails to take into account the levels of debt and poor cashflow some of these companies exhibit. In many cases these same investments are also exposed to cyclical pressures (weakening demand, or rising cost pressures impacting corporate profit margins), and/or structural
pressures (digital disruption, or competition from low cost or specialised formats).

“As such we remain cautious on UK domestics in general (there are exceptions!) but remain very positive on the outlook for UK plc. We think the UK is home to many compelling investment opportunities where the revenues and profits are generated outside the UK and the companies have a leading differentiated competitive offering. The outlook for these investments is tied to the global economy which
remains robust. Our universe is well diversified by sector and geography and there are ample opportunities to find well managed, dynamic, differentiated companies that are market leaders competing on a global basis.”

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies said: “It’s good to hear that there
are still many attractive investment opportunities in the UK despite the negative headlines. Clearly there are areas which are experiencing challenges, but one of the biggest benefits of active management is to be able to adapt portfolios accordingly, backing the winners and avoiding the areas under pressure. Despite the potential risks posed by Brexit, it appears to be business as usual for UK investment companies.”

This post credited to The Market Views. Image source: The Market Views.

Ethereum, which has regained its spot as the world’s second largest cryptocurrency by market capitalization after recent gains, is soaring today, helping to boost the cryptocurrency market—including bitcoin and ripple (XRP) as a post-Christmas rally rolls on.

Ethereum has climbed some 80% over the past month, adding a further 12% rise over the last 24 hours, as an upcoming so-called hard fork pushes up demand for ethereum’s tradable token ether.

Bitcoin has added some 4% over the last 24 hours, while ripple, a common name for the XRP tradable token, has climbed 3%. Ripple last year overtook ethereum as the world’s second largest cryptocurrency on the back of surging interest from the established financial services sector but has failed to hold on to those gains.

The hard fork, which usually means a cryptocurrency splits in two, will see ethereum miner rewards fall from three ether to two and decrease the block time, making the network faster. The update is set for January 16 and is thought to be a key component of ethereum’s transition from using a proof of work protocol to proof of stake.

Cryptocurrency forks do not always mean their value rises, however.

Bitcoin forks have previously led to minor drops in the bitcoin price in the short term. When bitcoin cash forked from the bitcoin network in July 2017, bitcoin dropped some 4%—though bitcoin had risen strongly in the months leading up to the fork and continued to do so in following months before peaking in December 2017.

Bitcoin cash itself then rallied hard ahead of its split in November last year. The bull run proved to be short-lived, however, with both bitcoin cash, and the hived off bitcoin SV, falling sharply in following weeks.

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Ethereum has rallied this month after falling steadily throughout most of 2018.COINDESK

The ethereum price has lost some 80% from its peak 12 months ago, as many of the digital tokens built on the ethereum network failed to hold their value. However, ethereum co-creator Joe Lubin called the “cryptobottom of 2018” in mid-December, saying it was “marked by an epic amount of fear, uncertainty, and doubt from our friends in the 4th and crypto-5th estates.”

The bitcoin and wider cryptocurrency bear market forced Lubin to make changes at his company ConsenSys last year.

Last month, closely followed economist and a cryptocurrency trader Alex Krüger tweeted he expected the reaction to the upcoming ethereum hard fork would be “bullish.”

“Once mining is past the initial (painful) adjustment period, less mining supply mined by fewer miners will be decidedly bullish,” Krüger wrote.

Meanwhile, bitcoin and Ripple’s XRP have also climbed over so far this week, kicking off 2019 with a rise and greeting many traders and investors returning to work today after the holidays with a sea of green.

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Traders returning to work today have reason to be cheerful.COINMARKETCAP

Many will be hoping this positive start to 2019 will continue for the rest of the year after 2018 ended in what’s been called Crypto Winter, due to its debilitating effect on the market and crypto investment and development.

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Retired US Congressman Ron Paul — a bitcoin skeptic turned proponent — reiterated his calls to abolish the Federal Reserve shortly after it raised the baseline interest rate a quarter of a percentage point, to a range of 2.25% to 2.5%.

This is the fourth time that the Fed — the central banking system of the United States — raised interest rates in 2018. The move sparked renewed fears of a US recession that could potentially trigger a global recession in 2019.

Ron Paul said the Federal Reserve should let the free market dictate interest rates instead of artificially manipulating them.

Paul: ‘The Fed Distorts the Economy’

“The Fed has NO IDEA what rates should be,” Paul tweeted. “The Fed manipulates prices, distorts the economy, and makes decisions by looking at the ‘data’ of a distorted economy.”

Central planning produces a world of economic delusions. America needs to get back to reality. End The Fed!

This is not the first time that Ron Paul — the father of current US Senator Rand Paul — has called to abolish the Federal Reserve.

As CCN reported in October 2018, Ron Paul trashed the Fed for manipulating interest rates, saying such artificial machinations could actually cause a recession. This, in turn, could bring about the death of fiat currency, he said.

“It is likely that the next Fed-created recession will come sooner rather than later,” Paul said. “This could be the major catastrophe that leads to the end of fiat currency.”

Paul said the only way to avoid a Fed-created recession is to let people use alternative currencies like bitcoin and to exempt cryptocurrencies from taxes.

Paul said central banks constantly increase and decrease the money supply to control the economy by manipulating interest rates.

He said the Federal Reserve‘s cyclical manipulation of interest rates creates an artificial cycle of economic booms and busts.

This can create an illusion of prosperity. Eventually, reality catches up to the Federal Reserve-created fantasies.

When that happens, there is a recession or worse, leading the Fed to start the whole boom-and-bust cycle over again.

Like many in the crypto community, Ron Paul is a libertarian who opposes government intervention in the free market. The virtual currency community generally prefers the crypto ecosystem’s decentralized and unregulated market.

Paul said an economy that is not manipulated is better for society. “Not only should we audit the Federal Reserve, we should get rid of it!” he said.

Former Crypto Skeptic Now Embraces Bitcoin

Until very recently, Ron Paul was a staunch advocate of the gold standard who was critical of bitcoin, as CCN reported.

“Bitcoin is very exciting…but [bitcoin investors] don’t have a long-term perspective,” Paul said in December 2017. “What’s it going to be like in 10 years? Nobody knows. But we have a pretty good idea of where gold will be, in a general sense.”

Paul has since changed his outlook on crypto, and now says he believes that bitcoin and a gold-backed currency can co-exist in a free society.

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The world’s fourth-largest asset manager, Fidelity, is exploring the possibility of expanding its custodian services beyond Bitcoin to other assets in the crypto market.

Tom Jessop, the head of Fidelity Digital Assets, a cryptocurrency custodial service provider operated by Fidelity, said that the organization is evaluating the demand for the top five cryptocurrencies in the market and may potentially integrate support for the remaining assets.

The Fidelity executive said at the Block FS conference in New York:

“I think there is demand for the next four or five in rank of market cap order. So we will be looking at that.”

The statement of Jessop comes in a time during which major financial institutions like $70 billion Goldman Sachs and $27 billion State Street are waiting for either regulatory clarity or sufficient demand from customers to support cryptocurrencies.

Demand From Institutional Investors

Most of the infrastructure that is being built by leading financial institutions in the U.S. market are being tailored towards institutional investors that are seeking to invest at least $5 million to the cryptocurrency market, which is the minimum investment threshold on Coinbase Custody.

Currently, the demand for crypto from institutional investors remains an uncertainty and the only way the market can evaluate it is through the evaluation of the performance of custodians that already the exist in the space — that includes Fidelity, Coinbase, and BitGo.

Throughout the past eleven months, the cryptocurrency market has lost about 85 percent of its value. As such, the demand for cryptocurrencies has certainly declined by a significant margin since early January.

But, the evaluation of adding additional digital assets by Fidelity, which require changes to its infrastructure and the structure of its custodian solution, suggests that the organization is seeing enough demand from institutional investors to justify placing more resources to strengthen its product.

bitcoin cryptocurrency fund wall street

State Street, an American financial services and bank holding company, said that it also sees sufficient demand and interest toward cryptocurrencies as an asset class.

At a New York conference, Jay Biancamano, State Street’s managing director for digital product development and innovation, said:

“There is no sense of urgency on the part of our clients to move into these assets right now. When they do, we want to meet them there. There is a very high level of interest but no need to move because currently none of our clients are looking for us to house these assets in custody.”

Until the company receives a regulatory green light from local financial authorities, State Street cannot begin to operate as a custody, regardless of the increasing interest towards the asset class. Goldman Sachs is in a similar position, and it is waiting for regulatory clarity before it officially begins serving customers as a cryptocurrency custodian.

Regulation Holding Companies Off

The regulatory barrier between financial institutions and digital asset custodianship is preventing Goldman Sachs, State Street, Morgan Stanley, and more corporations from storing cryptocurrencies on behalf of their customers.

While it could take months for major financial institutions to receive regulatory approval, the companies see enough demand in crypto to justify its entrance into the cryptocurrency sector.

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Crypto industry investor Anthony Pompliano says Bitcoin (BTC) will likely fall to 85 percent below its all-time-highs – around $3,000. Pompliano gave his forecast during an interview on CNBC’s Squawk Box Nov. 26.

The partner at crypto investment firm Morgan Creek Digital Assets argued that while “Bitcoin was overvalued in Dec. 2017” – with selling pressure this year subsequently driving its price downwards – there are several important factors related to the asset’s long-term value that are important to remember:

“First, [Bitcoin] is the most secure transaction settlement layer in the world, so it’s got to be worth something […] it’s the best performing asset class over the past ten years – it’s outperformed S&P, DOW, NASDAQ, etc. during the longest bull run. It experienced two 85 percent drops during that time, but [it’s] still up over 400 percent in the last two years.”

Third, he added, all of Bitcoin’s price action in past years has been driven by retail investors – ahead of any meaningful involvement from major institutional players such as those now poised to enter the crypto space next year. Big players include Fidelity and New York Stock Exchange (NYSEoperator Intercontinental Exchange (ICE).

Pompliano argued that the recent “wash-out” on the crypto markets is a barometer of retail investor patterns; throughout its retail-driven history in 2017, the cryptocurrency traded as a “highly volatile speculative asset.” By contrast, he continued, more recent institutional involvement is primarily conducted via less transparent over-the-counter (OTC) trades, where trends are not immediately apparent and harder to gain insight into.

Pompliano was lastly asked about dwindling profit margins for cryptocurrency miners as the asset’s value tumbles. He conceded that outside of regions with abundant low cost power, such as China – where he claimed miners can mint Bitcoin for as little as $2,000-2,500 – we are seeing a similar “wash out” of miners in areas where electricity costs push expenses closer to $6,000 or $6,500. These latter, he said, “are underwater now.”

As previously reported, Morgan Creek Digital assets is backed by the institutional investment house Morgan Creek Capital, which has $1.5 billion in assets under management. The firm launched a Digital Asset Index Fund in late August, which gives accredited investors indirect exposure to Bitcoin, Ethereum and eight other large market cap assets, although not pre-mined cryptos such as Ripple (XRP) and Stellar (XLM).

Speaking yesterday, Vinny Lingham, CEO of identity management startup Civicpredicted Bitcoin will trade range-bound between $3,000 and $5,000 for at least three to six months; if the coin fails to then break higher, it could lose the $3,000 support as well.

Bitcoin is currently trading at $3,730 by press time, down just over 6 percent over the past 24 hours.

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For the co-founder and partner of cryptocurrency firm CryptoOracle, Lou Kerner, patience is key when it comes to investing in bitcoin.

Speaking to CNBC, Kerner said bitcoin investors should take comfort in the example of tech giant Amazon, which lost significant value when the dot-com bubble burst but has now emerged as the world’s largest online retailer by market capitalization.

“If you go back to the internet bubble, which is what a lot of us in crypto look at for direction, Amazon, arguably one of the greatest companies in the history of the mankind, was down over 95 percent over two years,” Kerner said in an interview with the business news channel.

Not for the Faint-Hearted

amazon stock price
AMZN | BATS

According to Kerner, investing in bitcoin and other cryptocurrencies requires one to have the stomach for handling volatility. The current market weaknesses of crypto, per Kerner, can be attributed to the fact that digital assets lack underlying value other than confidence. In Kerner’s view, the bearish sentiment will, however, pass as the case for bitcoin as a store of value takes hold:

“I think it’s a store of value. I think it’s the greatest store of value ever created. It should surpass gold over time. It won’t happen overnight.”

With the market capitalization of bitcoin currently under US$80 billion at current prices, the flagship cryptocurrency would have to appreciate more than a hundredfold to reach gold’s status.

In his own words, much of the faith Kerner has in bitcoin can be attributed to a law coined by Roy Amara, a professor at Stanford University, which states that in the short term, the impact of transformative technology is overestimated while in the long term the impact is underestimated.

Bulls Still Standing

Kerner is not alone in holding a bullish view of bitcoin despite the prevailing bearish conditions. As CCN recently reported, the co-founder of Fundstrat Global Advisors, Tom Lee, still maintains that bitcoin will hit the US$15,000 price target by the end of this year.

CCN@CryptoCoinsNews

Doubling Down: Tom Lee Won’t Abandon $15,000 Year-End Bitcoin Price Forecast https://www.ccn.com/doubling-down-tom-lee-wont-abandon-15000-year-end-bitcoin-price-forecast/ 

Doubling Down: Tom Lee Stands by $15,000 Year-End Bitcoin Price Target

Bitcoin permabull Tom Lee slashed his year-end bitcoin price target to $15,000, citing fallout from a general market slump among tech stocks.

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Terming the recent market downturn an “awkward transition,” Lee is optimistic that institutional investors will embrace crypto in larger numbers once there is regulatory clarity.

Another diehard bitcoin bull who has not wavered in the current bearish climate is the co-founder and CEO of Blockstream, Adam Back. Earlier this week, Back projected in a tweet that in the coming years bitcoin could be trading in the US$250,000 to US$500,000 range:

“I consider $250k-$500k/BTC plausible in the years ahead, from the digital gold, censor-resistent competitor to physical gold, and internet native digital money.”

This post credited to ccn Image from Shutterstock. Charts from TradingView.

In the crypto bull market of late 2017, when tokens reached a valuation of tens of billions of dollars, blockchain networks comfortably surpassed the valuation of commercial companies in the cryptocurrency ecosystem.

At the time, for venture capital investors, direct investments in digital assets and cryptocurrencies seemed substantially more profitable than early-stage funding rounds in startups like CoinbaseBinance, and Circle. These companies have since become behemoths in the cryptocurrency sector, achieving multi-billion dollar funding valuations with profitable and stable business models.

Are Crypto Startups Better Investments Than Blockchain Projects?

In November of last year, retail traders and individual investors triggered an unforeseen short-term rally of cryptocurrencies, allowing the market to collectively reach a valuation of over $800 billion.

However, as CoinShares executive Meltem Demirors explained, institutional investors are more interested in investing in the market through investment vehicles that are stable and regulated.

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As of current, the vision of mega-successful crypto companies like Coinbase and Binance is quite clear; to improve the adoption of digital assets and strengthen the infrastructure of the cryptocurrency exchangemarket.

To institutional investors and large accredited investors, indirect investments in the crypto market are more appealing, partially because blockchain projects, decentralized initiatives, and initial coin offerings (ICOs) have been struggling to remain relevant and to establish a clear vision.

“Many crypto projects that raised money through an ICO face massive challenges to stay relevant and create real purpose. for now, our collective hopes and fears are expressed as speculative price moves. projects don’t die the way companies do, and the arc of time is long,” Demirors said.

Given that institutional investors and venture capital firms favor new companies building infrastructure rather than digital assets with unproven business models, in the short-term, companies are expected to outperform most projects in the global market.

“Most investors aren’t going out and buying crypto directly, nor will they do so anytime soon (sorry) that ‘institutional herd’ is getting exposure through existing investment vehicles that they know and understand (even if the assets are new and strange) more and more traditional financial institutions are looking at crypto as a way to: 1. create new revenue streams 2. play ‘innovation’ theater 2. build enterprise value.”

The majority of tokens in the market have also failed to maintain active GitHub repositories, with low double-digit code commits recorded last quarter and hundreds of daily on-chain transactions.

Could the Trend Change?

Chart shared by Meltem Demirors and CoinShares

In the long-term, as the mainstream opens up to decentralized systems and institutions begin to see value in blockchain projects, Demirors stated that a trend reversal is inevitable.

“If the next five years are anything like the last, expect value to flow from centralized corporate entities to less centralized networks and applications. we can’t pinpoint when that shift will happen, but here at CoinShares- we believe it’s inevitable.”

There exist a few key factors that could drive an increasing amount of investment in the blockchain space. In the upcoming months, if major markets like the US, Japan, and South Korea establish clear guidelines to regulate and govern the ICO market, it could open a regulated channel for institutions to invest in the market in a secure and stable manner.

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At a meeting with the US Securities and Exchange Commission (SEC) commissioner Elad L. Roisman, representatives from SolidX, VanEck, and CBOE presented five major reasons why the commission should approve the Bitcoin exchange-traded fund (ETF) filing of VanEck and SolidX.

VanEck, an investment management firm headquartered in New York that has decades of track record in the traditional finance sector and hundreds of ETFs filed under its name, outlined the following points the SEC should consider in approving its Bitcoin ETF:

  1. There now exists a significant regulated derivatives market for bitcoin
  2. Relevant markets – CBOE, bitcoin futures, OTC desks – are regulated
  3. Concerns around price manipulation have been mitigated, consistent with approval of prior commodity-based ETPs
  4. CBOE’s rules are designed to surveil for potential manipulation of Trust shares
  5. Promotes investor protection

Significant Volume and Trading Activity in the Futures Market

Previously, the SEC rejected the Winklevoss Bitcoin ETF primarily due to its reliance on a public cryptocurrency exchange in Gemini to find the base price of BTC. The SEC deemed cryptocurrency exchanges to be insufficiently regulated and liquid to handle an ETF.

As a response to the rejection of the Winklevoss Bitcoin ETF, ProShares and two other companies filed 9 ETFs, basing the BTC price of the ETFs on the futures market operated by CBOE and CME Group. At the time, the filling of ETFs by the three companies was considered a smart move as it considered the SEC’s concerns regarding cryptocurrency exchanges.

However, the SEC rejected the 9 ETFs and stated that the futures market is not of significant size to support an ETF.

SEC cryptocurrency regulation

During its presentation, VanEck, SolidX, and CBOE representatives told the SEC that the futures market is able to handle the operation of an ETF through the Depository Trust & Clearing Corporation (DTCC), which was especially relevant given the involvement of CBOE in the filing.

VanEck also emphasized that the approval of an ETF would reduce counterparty risk for investors and it would provide a simple solution for investors seeking price exposure, by increasing the stability of the market.

“As of now, no CCPs support the clearing of bitcoin Investors are left facing absolute counterparty risk. Such risks are often unacceptable to many investors An ETF provides a straightforward solution for investors seeking price exposure without facing counterparty risk, as the ETF would be cleared through DTCC Furthermore, in creations and redemptions, the Trust always requires APs and trading counterparties to settle their leg of the trade before the Trust will do so.”

The claim of VanEck directly supports the statement of SEC commissioner Hester Peirce, who previously stated that the current structure of the cryptocurrency exchange market only allows a selected group of investors with specific know-how and knowledge in the market to trade and benefit off of the liquidity in the market.

“This complexity means that only a very particular type of investor can pursue the diversification opportunities such assets can provide. Entrepreneurs are developing new products through which people can access cryptocurrencies indirectly or hedge their cryptocurrency holdings. Bitcoin futures, for example, began to trade recently,” she explained.

VanEck Has the Highest Chance

Throughout the past several months, analysts have given VanEck and SolidX the strongest chance of having an ETF introduced in US markets given the history of VanEck in successfully filing hundreds of ETFs with the SEC.

This post credited to ccn Images from Shutterstock

Another of the world’s largest investment banks is quietly building a product that will allow its clients to trade bitcoin, at least indirectly.

Citing a person familiar with the matter, Bloomberg reports that Morgan Stanley, the sixth-largest bank in the U.S. by assets, is creating a proprietary derivatives product that will give traders “synthetic exposure” to the price of bitcoin.

From the report:

“The U.S. bank will deal in contracts that give investors synthetic exposure to the performance of Bitcoin, said the person, who asked not to be identified because the information is private. Investors will be able to go long or short using the so-called price return swaps, and Morgan Stanley will charge a spread for each transaction, the person said.”

The report further indicated that Morgan Stanley, whose CEO — James Gorman — said earlier this year that the firm won’t let customers trade cryptocurrency directly through the bank, is “technically prepared” to begin offering these bitcoin swaps, pending the completion of an internal approval process and demand from institutional investors.

CCN earlier reported that Morgan Stanley had poached Credit Suisse’s “bitcoin expert,” Andrew Peel, to head its new crypto division.

The bank joins a growing number of major financial institutions that are said to be evaluating how best to integrate cryptocurrencies into their institutional product lines. Both Goldman Sachs and Citigroup, the fourth- and fifth-largest U.S. banks, respectively, plan to offer bitcoin derivatives products to their clients. JPMorgan has reportedly also begun exploring ways to help its clients invest in cryptocurrency, despite the fact that CEO Jamie Dimon has been one of bitcoin’s most vocal critics.

Meanwhile, Intercontinental Exchange (ICE), the operator of the world’s largest stock exchange, will soon launch the first physically-delivered bitcoin futures product, meaning that contracts will be settled in actual BTC rather than cash (as is the case with the bitcoin futures products currently available on Chicago-based exchanges CME and CBOE).

This post credited to ccn  Featured Image from Shutterstock

Digital asset minding company Kingdom Trust announced today that it has secured insurance coverage through Lloyd’s of London. The insurance is to protect investor assets against theft, destruction, and loss.

Kingdom Trust is a qualified custodian of over 30 cryptocurrencies and holds assets valuing $12 billion USD.

Mainstream Involvement

The announcement today has made investors sit up, as it is seldom that mainstream financialinstitutions get involved with the volatile and unregulated crypto industry; large banks rarely, if ever, handle cryptocurrency.

Is Llyod’s Ahead of the Game?

The fact that Llyod’s is offering protection of Kingdom Trust’s assets is a sign of the growth of cryptocurrency business and concern for its volatility may just be outweighed by the potential of massive financial gains.

Perhaps Llyod’s for one is throwing caution to the wind, aiming to be the first to jump on what will no doubt be a lucrative new crypto-industry: cryptocurrency insurance.

For investors, mainstream involvement is an important factor in this industry as it signals a greater adoption of the currency and an acceptance for a move away from traditional fiat currencies.

But there is Danger

However, the reality is that the crypto industry has seen billions of dollars worth of cryptocurrency lost through exchange hacks, corrupt deals, fraud, and even simple technical errors. It is an understandably difficult measure to insure.

Some losses have been so extensive that it results in the complete closure of an exchange, for example.

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Kingdom Trust

According to its website, Kingdom Trust is qualified under US financial regulations to hold assets on behalf of investment advisers, securities brokers, and retirement plans.

The company is regulated as a trust company by South Dakota and has been on the search for an insurer since 2010:

“From the very beginning, we saw insurance as a key factor to bring institutional investors into the marketplace.”

It stores over 30 digital assets, including Bitcoin, Ethereum, Litecoin, Ripple, and ZCash.

What do you think? Is Lloyd’s doing something clever here? The institute has yet to comment on the matter itself, so it’s hardly screaming from the rooftops about it.

What does that say?

 

This post is credited to cryptocurrencynews  Image source: Google Images