3iQ Research Group consolidates the top five cryptoasset stories of interest
to investment advisors and our investors.
3iQ Presents Evidence at Public Hearing with Ontario Securities Commission
June 12 (3iQ Corp.) – We sincerely thank the Canadian digital asset industry for their support at our public hearing last week with the Ontario Securities Commission (OSC). The hearing room was at full capacity as interested parties came from every profession relating to Fintech in Ontario. We also thank our legal counsel Osler, Hoskin & Harcourt LLP, for their continuous support and tremendous performance through the entire hearing process.
Since 2016, 3iQ Corp. (3iQ) has been working to bring a public bitcoin fund to market for Canadian retail investors. 3iQ chose to proceed “through the front door” with the OSC to ensure that The Bitcoin Fund addressed all of the regulatory concerns raised by OSC Staff. At the hearing, 3iQ submitted compelling evidence to prove that the custody, pricing and audit of The Bitcoin Fund could be performed in compliance with National Instrument 81-102 and other applicable securities law governing retail investment funds in Ontario. OSC Staff arguments relating to The Bitcoin Fund “not being in the public interest” of Canadians were addressed and 3iQ believes we presented a strong case that the time for this product and structure is now.
3iQ entered into evidence that a cryptoasset custodian which is regulated as a trust company by the New York State Department of Financial Services (NYSDFS) affirmed that it would be in the position to act as the sub-custodian of the Bitcoin Fund, and that the safety of the Fund’s bitcoin should meet the expectation of the regulator. It was also entered into evidence that 3iQ’s Global Cryptoasset Fund received a clean audit from Raymond Chabot Grant Thornton (RCGT).
3iQ submitted that events such as the QuadrigaCX losses in Canada and other platforms being hacked globally show the need for a disciplined product such as The Bitcoin Fund. It was highlighted that generally, the Exchange Traded Funds (ETFs) which were rejected by the U.S. Securities and Exchange Commission are structurally different than The Bitcoin Fund. The closed-end structure of The Bitcoin Fund requires a daily Net Asset Value (NAV) calculation, but redemptions at NAV are only available annually and therefore daily trading is not likely to be impacted by intraday price movements in bitcoin. Consequently, the risk of market manipulation in the downstream bitcoin market is unlikely to have a negative impact on The Bitcoin Fund or its investors. The Manager controls the subscription process for new units of The Bitcoin Fund, and bitcoin is purchased for the Fund from platforms and dealers that hold the “BitLicense” or are otherwise regulated by the NYSDFS.
Final submissions will be made to the Panel on July 24th. 3iQ believes we have defended our rights to make The Bitcoin Fund available to Canadian retail investors and that the Fund is in compliance with applicable securities laws. We are also encouraged by the Ontario government’s recent amendment to the Ontario Securities Act which introduces the principle that innovation in Ontario’s capital markets should be facilitated by the OSC when advancing the purposes of the Act. We look forward to further building financial innovation in the province of Ontario.
President and CEO
Reddit Crypto Discussion Volumes Strongly Correlated to Prices
June 6 – New research from the University of Notre Dame and the Pacific Northwest National Laboratory has found that Reddit discussion volumes on cryptocurrencies are strongly related to their underlying prices. The study pulled data from official subreddit threads of several major cryptocurrencies between January 2015 and January 2018. The academic paper is reportedly “the first [paper] to qualitatively measure and contrast discussion growth about three popular cryptocurrencies with key distinctions in motivation, usage, and implementation”. The paper noted that Bitcoin continues to have the highest popularity among Reddit users as replies made on Bitcoin-related posts occur more frequently than the other cryptocurrencies that were studied. On average, Bitcoin-related posts started receiving comments after 11 minutes, while Ethereum-related posts took 20 minutes and Monero took 27 minutes.
Read the full article from CoinTelegraph here.
Fundamental Analysis on Bitcoin and its Next Halving
June 2019 – The major cryptoasset fund manager Grayscale has released their new research report relating to the upcoming Bitcoin halving, which is expected to occur on May 21, 2020. The report goes into exhaustive detail, providing charts and other fundamental data behind the growth of bitcoin over the last several years to bring light to its upcoming halving. Since the inception of bitcoin, the block reward halving has long been seen as a critical fundamental factor in determining the long term price uptrend of the cryptoasset. “For investors with a multi-year investment horizon and a high-risk tolerance, the confluence of discounted prices, improving network fundamentals, strong relative investment activity and the upcoming halving may offer an attractive entry point into Bitcoin”, said the report.
Read the full research report from Grayscale here.
$100 Million USD Crypto Fund Opens, Focusing on Ether
June 6 – A new investment firm, Darma Capital, has raised over $100 million USD to go long on major cryptocurrencies, namely ether, in anticipation of a multi-year bull run. Ether, the cryptocurrency that operates as the “gas” for the Ethereum network, appreciated 17,775% back in 2017. Despite its strong drawdown in 2018, Darma Capital believes that digital assets such as ether are still poised for another bull-run, which they anticipate will last another 10 years. The company is also planning to introduce new funds for other cryptocurrencies such as bitcoin in the near future. “We want to acquire what we consider a new asset class”, said Andrew Keys, a managing director at Darma Capital. “It’s very difficult to predict the success of any single-asset fund” said Josh Gnaizda, the CEO of Crypto Fund Research. “These type of crypto funds do, however, tend to be more volatile than arbitrage and other quantitative funds that have less of a directional bias.”
Read the full article from Bloomberg here.
Tron/BitTorrent Founder Wins Charity Auction to Have Lunch With Warren Buffett
June 4 – Justin Sun, the CEO of BitTorrent and founder of the cryptocurrency Tron, has won a charity auction for a lunch with the billionaire investor Warren Buffett. His winning bid of $4.7 million USD was reportedly the largest bid in the last 20 years of the charity auction. The proceeds from the auction will be donated to the Glide Foundation, which will help the homeless in San Francisco. Warren Buffett was famously quoted last year for saying that cryptocurrencies like bitcoin were “rat poison”. Justin Sun hopes to shift Buffett’s opinion on cryptocurrencies during their 3-hour lunch. “I want him to learn what the younger generations are doing,” said Sun.
Read the full article from CNBC here.
3iQ Global Cryptoasset Fund: Price as at June 11, 2019
3iQ Global Cryptoasset Fund Returns as at June 11, 2019
Underlying cryptoasset prices sourced from Bloomberg. The inception date of TIQ101 is April 3, 2018.
3iQ Corp. (“3iQ”) is the first Canadian investment fund manager to agree to terms and conditions with the Canadian securities regulatory authorities which permit 3iQ to manage a multi-cryptoasset investment fund available to Canadian accredited investors. 3iQ provides accredited investors with exposure to bitcoin, ether, and litecoin through its 3iQ Global Cryptoasset Fund.
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