3iQ Research Group consolidates the top five cryptoasset stories of interest
to investment advisors and our investors.


Why Do Canadian Retail Investors Need a Bitcoin Fund?

September 13 – Canadians are investing in bitcoin today without the benefit of securities law protections. Investor protection is paramount to the mandate of securities regulators, but there is none today for investors in bitcoin simply because bitcoin itself has not been designated a security even if it is being treated as such by the public. Today, Canadians are left with accessing bitcoin in a sub-optimal fashion, incurring unnecessary high costs, potentially unsecured custody and poor liquidity.

Read our full white paper here.


Companies are Racing to Tackle Crypto Custody

September 13 – Despite cryptocurrency prices cooling off from the start of the year, more companies are racing to tackle issues surrounding crypto custody to help boost adoption. Institutional investors, who are used to having money and investments safely stored and FDIC insured, are still questioning where they should store their clients’ cryptocurrencies. “Institutional investors are very interested in finding a solution, but they haven’t seen one that they think is perfect for various reasons,” said Monica Summerville, a senior analyst at TABB Group. “They still self-custody, and manage all their own keys.” One family office that works with Summerville has reportedly been storing their clients’ cryptocurrencies on USB drives and organizing the drives in binders.

Some companies like BitGo, Coinbase, Gemini, and Ledger have been exploring crypto custody services; however, some institutional investors may still be waiting for more established financial services firms to tackle crypto custody. Both Goldman Sachs and Northern Trust have reportedly explored crypto custody services, and the Japanese bank Nomura has announced plans to offer crypto custody as well. “As the crypto-asset class seasons and institutional demand builds, there are a plethora of opportunities for traditional firms to engage in the eco-system,” said Christian Bolu, an analyst at Bernstein. “These include the provision of custodial and asset management services as well as traditional brokerage functions like market-making.”

Read the full article here.


Morgan Stanley Plans Bitcoin Derivatives Trading

September 13 – Morgan Stanley is reportedly planning to offer the trading of complex derivatives that are pegged to bitcoin. The major Wall Street firm will be dealing with contracts that are expected to provide investors with “synthetic” exposure to bitcoin price movements. Investors will be able to buy or sell short the price return swaps, and Morgan Stanley will charge a spread for each transaction that occurs on the price return swaps. According to somebody familiar with the matter, Morgan Stanley is already technically prepared to begin offering bitcoin swap trading, and will launch it as soon as it completes its internal approval process and institutional client demand picks up.

Morgan Stanley now joins the likes of Goldman Sachs and Citigroup, who both this year announced plans to offer bitcoin derivatives and products to their clients. Earlier this year, James Gorman, the chief executive officer of Morgan Stanley, said that the bank wouldn’t let their customers buy and sell cryptocurrencies directly through the bank. Instead, the bank has opted for building a trading desk that could support derivatives that are pegged to various cryptocurrencies.

Read the full article here.


The Mystery of the $2 Billion USD Bitcoin Whale

September 13 – According to Chainalysis, a cryptocurrency data and analytics company that provides tracking tools to law enforcement agencies, a significant amount of bitcoin between August 23 and August 30 was moved from a single wallet. Large holders, otherwise known as “whales”, hold substantial amounts of cryptocurrencies like bitcoin and can often move cryptocurrency prices up or down. Similar to traditional financial markets, players who own large amounts of securities can often do the same to security prices. The transactions that occurred in late August totaled $320 million USD based on the August 22 closing bitcoin price from Bloomberg’s composite data. There were a total of 50 transactions that involved 50,500 bitcoin from that wallet. Chainalysis has reported that they cannot confirm if the bitcoin were moved to exchanges or not.

The whale’s wallet dates back to 2011, which at one point held as many as 111,114 bitcoin. At its peak, the value of the bitcoin would be worth somewhere around $2 billion USD. Some members of the crypto community on Reddit believe that when bitcoin sold off in early August, it may have been fueled by this whale selling their bitcoin. The speculative narrative is fueled by the fact that the wallet address that held the 50,500 bitcoin (wallet address:1933phfhK3ZgFQNLGSDXvqCn32k2buXY8a) were previously scattered across various wallets back in 2014, then moved back to the same wallet address again. Chainalysis notes that there were only small amounts of bitcoin associated with that address from 2014 until just last year, and again in August this year. “This is actually really interesting because of the Reddit detective work that’s been happening and just people making these assumptions that this whale is cashing out,” said Kim Grauer, a senior economist at Chainalysis. “It leads to conspiracy theories that someone’s trying to sabotage Bitcoin — just from someone doing an administrative move of their funds for security purposes, or we don’t even know why they have done it.”

Read the full article here.


Ray Dalio: the US is 2 Years Away From an Economic Downturn

September 12 – Famed billionaire investor and hedge fund manager Ray Dalio believes that the US is about two years away from another economic downturn, noting issues surrounding the valuation of the US dollar over the government printing money to fund increasing federal deficits. Both domestic and foreign demand for US debt may not keep up with the country’s borrowing needs, and the US Federal Reserve will need to continue to print money to help fund the deficit rather than by raising interest rates. According to Dalio, these factors will lead to a steep correction of the US dollar. “Two years out is when I’m worried about,” said Dalio. “It’ll be more of a dollar crisis than a debt crisis, and I think it’ll be more of a political and social crisis.” Dalio believes that the plunge could come with greater conflicts than 2008.

Interestingly, when the major US investment bank Lehman Brothers Holdings Inc. filed for bankruptcy back in 2008, it shook the people’s trust in banks to a point that a new class of asset which was not backed by any formal bank came to be. Bitcoin, the oldest and most established cryptocurrency, was introduced through a white paper by Satoshi Nakamoto on October 2008, just months after the Lehman crisis. 10 years later, Bitcoin and other cryptocurrencies have become some of the most debated financial assets, and their performance during market crises have yet to been seen.

Read the full article here.


3iQ Global Cryptoasset Fund: Price as at September 14, 2018

3iQ is the first regulator approved multi-cryptoasset portfolio manager in Canada, providing accredited investors with exposure to bitcoin, ether, and litecoin through its 3iQ Global Cryptoasset Fund.


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This Weekly Cryptoasset Newsletter is for informational purposes only and does not constitute, either explicitly or implicitly, any provision of services or products by 3iQ Corp (“3iQ”). Investors should determine for themselves whether a particular service or product is suitable for their investment needs or should seek such professional advice for their particular situation.3iQ Corp. makes no representation or warranty to any investor regarding the legality of any investment, the income or tax consequences, or the suitability of an investment for such investor. All content is original and has been researched and produced by 3iQ unless otherwise stated therein. No part of the content may be reproduced in any form, or referred to in any other publication, without the express written permission of 3iQ. All statements made regarding companies, securities or other financial information contained in the content or articles relating to 3iQ are strictly beliefs and points of view held by 3iQ and are not endorsements of any company or security or recommendations to buy or sell any security. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. By visiting and/or otherwise using the 3iQ website in any way, you indicate that you understand and accept the terms of use as set forth on the website and agree to be bound by them. If you do not agree to the terms of use of the website, please do no access the website or any pages thereof. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with 3iQ with respect to any linked site or its sponsor, unless expressly stated by 3iQ. Any such information, products or sites have not necessarily been reviewed by 3iQ and are provided or maintained by third parties over whom 3iQ exercises no control. 3iQ expressly disclaims any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites. The information contained herein, while obtained from sources believed to be reliable, is not guaranteed as to its accuracy or completeness and confers no right on purchasers. Past performance of cryptoassets is not indicative of future performance and should not be used to forecast any return that an investor may realize.