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


Yale University Endowment Invests in Crypto Fund

October 5 – The Ivy League university Yale has reportedly helped raise $400 million USD for a new cryptocurrency fund. The fund, known as “Paradigm”, was reportedly created by Fred Ehrsam, a co-founder of Coinbase, Matt Huang, a former Sequoia Capital partner, and Charles Noyes, an ex-employee of Pantera Capital. Paradigm has planned to invest in early-stage cryptocurrency projects, new blockchains, and crypto exchanges. Yale, with their $30 billion USD endowment, has been reported as the second largest endowment of US higher-education institutions. While the amount invested by Yale’s endowment in the fund is still unknown, the university’s endorsement and investment in cryptoassets is significant, as it is one of the first large endowments to take the plunge into cryptocurrencies. The $30 billion USD endowment is led by David Swensen, who is seen as a pioneer in the institutional investing space.

Swensen manages one of the most notable and top performing higher-education endowments in the world. Through Swensen’s leadership of the endowment, Yale has returned a yearly average of 11.8% for the past 20 years. Many higher-education endowments have attempted to replicate Swensen’s investment model, which has been known to favour long-term investments as well as alternative assets and other illiquid assets. According to Yale, nearly 60% of the university’s assets for fiscal 2019 are targeting alternative investments, including venture capital, hedge funds, and leveraged buyouts.

Read the full article here.


TD Ameritrade Invests in Cryptocurrency Exchange

October 3 – In a recent press release, major retail brokerage firm TD Ameritrade has announced that it is backing new crypto exchange named “ErisX”. TD Ameritrade is one of North America’s largest retail brokers, and currently provides investment services to approximately 11 million clients. Other media outlets have noted that both DRW Holdings and Virtu Financial are also participating in the investment of ErisX, and both have reportedly agreed to be the market makers behind the new exchange. The presence of market makers on the exchange will ensure a deep order book to help provide liquidity for cryptocurrency trading.

ErisX has been developed as a “reboot” of the traditional futures market, Eris Exchange, which had launched back in 2010. The new exchange will allow investors to trade and withdraw physical cryptocurrencies such as bitcoin, ether, and litecoin. In addition, the exchange will also trade cryptocurrency futures contracts. “We continue to see our retail clients seeking access to trade digital currency products,” said J.B. Mackenzie, the managing director of futures and foreign exchange for TD Ameritrade. “It’s a young product in fast moving ecosystem, and while bitcoin may not have the same demand as it did in December, there is still demand nonetheless.”

Read the full article here.


Winklevoss’ Gemini Exchange Now Provides Insurance for Cryptocurrencies

October 6 – Major cryptocurrency exchange and custody provider Gemini, led by Cameron and Tyler Winklevoss, has reportedly secured insurance coverage for its customer’s digital assets. Gemini’s digital insurance coverage will come from the lending services firm Aon. Back in July, Aon claimed to already occupy 50% of the cryptocurrency insurance market. Aon reported that it would expect to see more insurance protections catering to the cryptocurrency market in the future. Aon will help complement the Federal Deposit Insurance Corporation (FDIC) insured US dollar deposits which are already available on the exchange. According to CoinMarketCap, Gemini is now the 50th largest cryptocurrency exchange by daily adjusted trade volume.

“This furthers our mission to build the future of money by bolstering our commitment to providing you with a safe and secure platform to buy, sell, and store your digital assets. This new coverage complements existing FDIC ‘pass through’ deposit insurance that your fiat funds (US dollars) are eligible for”, said Yusuf Hussain, the Head of Risk at Gemini. “Consumers are looking for the same levels of insured protection they’re used to being afforded by traditional financial institutions. Educating our insurers not only allows us to provide such protections to our customers, but it also sets the expectation for consumer protection across the crypto industry.

Read the full article here.


Bitcoin at “Inflection Point” as Volatility Hits 17-Month Low

October 5 – Bitcoin, which remains the largest cryptocurrency by market capitalization, has hit a 17-month low in volatility, indicating that the cryptocurrency may be at an “inflection-point”. Traders who are looking for historical pricing patterns seem to be out of luck, as neither a strong positive or negative divergence has formed over the past month. From a technical standpoint, bitcoin traded in a similar pattern only one other time this year, and then proceeded to jump from around $5,900 USD to around $8,200 USD. Bitcoin, while under its 200-day moving average, is still attempting to form a higher low over prices seen back in June and August.

Bitcoin is celebrating its 10th anniversary this month, as it was introduced during October 2008 through Satoshi Nakamoto’s white paper shortly after the 2008 financial crisis began. Some pundits argue that while cryptocurrency prices have retraced this year, the entire market is becoming more matured, and many investors are still taking the long approach. “This is a maturing market, so volatility should continue to decline,” said Mike McGlone, a Bloomberg Intelligence commodity strategist. “When you have a new market, it will be highly volatile until it establishes itself. There are more participants, more derivatives, more ways of trading, hedging and arbitraging.” The stabilization of the price of bitcoin has led to a decline in speculative investments, indicating the market may continue to see less volatility. “Volatility and volumes are two sides of the same coin,” said Gil Luria, the director of research at D.A. Davidson & Co. “When speculators are involved, they drive unusually high volumes as well as volatility by trading the asset with high frequency. As speculator involvement is diminished, volumes go down and volatility goes down as well.”

Read the full article here.


Deloitte: 5 Things for Blockchain to See Widespread Adoption

October 1 – One of the “big four” accounting firms, Deloitte, has outlined five crucial challenges for blockchain to overcome before it gains mainstream adoption. Many argue that blockchain is the technology that will revolutionize financial services, as its ability to function without a central-controlling authority and its ability to store immutable data has proven to be paramount. Deloitte believes that blockchain will also be beneficial to a variety of industries other than finance, such as those that amass paper records and still use outdated legacy technologies, such as law, real estate, or healthcare. Here are Deloitte’s five challenges for blockchain:

1. Increased performance – Deloitte argues that blockchain is still relatively “slow” in contrast to some legacy transaction processing systems. Some legacy systems can process thousands of transactions per second, whereas the Bitcoin blockchain can only handle about three to seven transactions per second, and on the low-end, the Ethereum blockchain can only process 15 transactions per second. However, Deloitte notes that new developments in consensus mechanisms, such as “Proof of Stake”, could help accelerate this process over the “Proof of Work” consensus mechanisms present in the mineable blockchains like Bitcoin and Ethereum have today.

2. Interoperability – Despite an increasing number of blockchain players, Deloitte argues that with so many different networks, there is no standard that allows them to work with each other. However, Deloitte believes that developments such as “Interledger” could enable payments between different distributed ledger networks. Not noted in the article is the development of “Atomic Swaps”, which could allow for cross-blockchain trading without the need for a crypto exchange.

Learn more about “Atomic Swaps”, by 3iQ Research Group

3. Reduced complexity, cost – Deloitte believes that blockchain networks rely on intensive computing power and increasing amounts of electricity to operate. However, Deloitte notes that efforts from bigger players such as Amazon, IBM and Microsoft, are already working on ways to improve the cost and complexity involved in creating blockchain networks by using cloud technology and blockchain “templates” to make them easier for developers to run.

4. Supportive regulation – While blockchain and cryptocurrency regulations remain a top issue, Deloitte notes that some progress is being made. There are already  17 US state legislatures which are either assessing or passing bills related to blockchain. Additionally, this year a blockchain “working group” had been formed, which included some of the biggest crypto exchanges and blockchain technology companies to help regulators establish key frameworks.

5. More collaboration – Deloitte thinks that more firms working with the blockchain need to collaborate with one another in order for the technology to advance in terms of application and education. Deloitte lists a number of groups that are currently pushing for more collaboration, such as R3, the RiskBlock Alliance, the Enterprise Ethereum Alliance, and Hyperledger.

Read the full article here.


3iQ Global Cryptoasset Fund: Price as at October 5, 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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