July 16 – 22, 2018 | Institutional Investors, CFA Curriculum & More Crypto News
3iQ Research Group consolidates the top five cryptoasset stories of interest
to investment advisors and our investors.
Institutional Investors are Buying Into Crypto Funds
July 18, 2018 – Grayscale, the company behind the Bitcoin Investment Trust (OTCQX:GBTC), has released its first Digital Asset Investment Report for 1H 2018, showing record-breaking stats from institutional investors. The company revealed that it has raised nearly $250 million USD so far in 2018, which has been the strongest pace of inflows since the company’s inception back in 2013. Grayscale now manages about $2 billion USD through its crypto funds. Despite recent pressures on the price of leading cryptocurrencies, the surge of inflows was mostly from institutional investors this year – accounting for about 56% of its total inflows.
Barry Silbert, the CEO of Grayscale Investments LLC, confirmed the institutional data in a tweet, separate from the Digital Asset Investment Report. The report does note that institutional investors came in with an average investment of $848,000 USD. Accredited investors accounted for 20% of new inflows, and retirement accounts and family offices accounted for 16% and 8% respectively. Most of these new investors have been allocated to Grayscale’s Bitcoin Investment Trust. Institutional investors may be opting towards the Bitcoin fund over other cryptocurrency funds, as its value is more related to the entire cryptoasset market, similar to the index funds in which these seasoned investors are used to investing in.
CFA Exam Adds Cryptocurrency and Blockchain Topics to Curriculum
July 16, 2018 – The world-renowned Chartered Financial Analyst (CFA) examination will be adding cryptocurrency and blockchain topics to its Level I and II curriculums next year. Study material for the 2019 examinations will come this August, and will now include a new reading titled “Fintech in Investment Management”. The new reading will contain the cryptocurrency and blockchain material, along with other topics relating to fintech. Additionally, cryptocurrencies will make an appearance in the CFA professional ethics readings, alluding to the negligible lack of ethics seen so far in the sector, since initial coin offerings (ICOs) and other tokens do remain in a legal gray zone due to their potentially centralized and security-like natures. It is unclear what exactly the new cryptocurrency and blockchain studying material will cover, but it is becoming clearer that the world of finance is becoming unavoidably associated with these digital assets every day.
The CFA institute has said that there has been a “surging interest” through surveys and other focus groups, which helped lead to the institute’s decision to add cryptocurrencies and blockchain to the curriculum. Stephen Horan, the managing director for general education and curriculum at the CFA Institute, said “we saw the [crypto and blockchain] field advancing more quickly than other fields and we also saw it as more durable.” Horan also stated that cryptocurrencies and the blockchain are “not a passing fad”, potentially adding credibility to the long-term opportunities present in leading cryptoassets.
Ethereum Could Drive Blockchain Towards Widespread Adoption
July 18, 2018 – Jeremy Allaire, the co-founder and CEO of Goldman Sachs-backed crypto firm Circle, thinks that Ethereum may help drive blockchain technology to be as widely adopted as the internet. Allaire notes that Ethereum has been a leading platform for blockchain developers, and “has [had] an enormous amount of developer activity”. The cryptocurrency ether, which acts as the “fuel” for developers on the Ethereum blockchain, remains the second largest cryptocurrency by market cap at approximately $47 billion USD. Developers need to own ether in order to develop their own blockchain projects, and users will need ether to transact on Ethereum platforms – which in turn drives demand for the cryptocurrency.
“One of the things that really catalyzed the [cryptocurrency] market last year was actually that Ethereum, in particular, kind of got to a place where you could build apps on top of it,” said Allaire. “You could issue new tokens on top of it; you could create new kinds of financial contracts, using the smart contracts technology.” Allaire also notes that the success of Ethereum has “catalyzed a lot of competing infrastructures”, but the widespread adoption of development on these platforms has still yet to be seen.
Coinbase Secures $20 Billion Hedge Fund Through its Prime Brokerage
July 20, 2018 – Leading cryptocurrency exchange Coinbase has reportedly secured a $20 billion hedge fund through their “Coinbase Custody” solution. Back in early July, the company had launched its digital assets custodian solution aimed at targeting large institutional investors. The custody service is secured through the SEC-compliant independent broker, Electronic Transaction Clearing (ETC). Some anonymous sources have reported that Coinbase may soon be planning to offer margin financing as early as this year, allowing institutional investors to trade cryptocurrencies on margin.
The lack of prime brokerages and other established custodians in the market may be the reason why some institutional investors have been reluctant to invest in cryptocurrencies. Coinbase had released their “Coinbase Prime” brokerage service earlier this year, which was a first for the crypto space. According to Richard Johnson, a consultant at Greenwich Associates, “Coinbase is pursuing a lot of different initiatives that make sense and take it closer to or are more similar to traditional finance: custody, financing, lending, security tokens, and the institutional portal. They have the resources to fund them and will surely have some successes.”
Mastercard Wins Cryptocurrency Patent for Credit Cards
July 17, 2018 – Mastercard has reportedly won a patent that may allow their cardholders to pay for purchases on their credit cards using cryptocurrencies. According to the document published by the US Patent and Trademark Office, Mastercard stated that there has been an “increased usage” of cryptocurrencies, particularly among those who “value anonymity and security”. While the actual implementation of this patent’s technology is still yet to be seen, it may spark a broader acceptance of using cryptocurrencies as a means of payment for anything you could charge on your credit card.
Seth Eisen, the senior vice president for communications at Mastercard, said “we’re consistently looking at ways to bring new thinking and new innovations to market to create value for us and our customers and cardholders. Patent applications are part of that process, taking steps to protect the company’s intellectual property, whether or not the idea ever comes to market.” According to Fundstrat analyst and co-founder Tom Lee, Mastercard’s patent is a good thing for cryptocurrencies, and “it’s really validating the idea that digital money, or blockchain-based money, is a valid form of transaction.”
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