November 2018
Market Overview

This month the crypto markets were a sea of red. As of November 29th, 2018 Bitcoin had lost around 30% of its value since the start of November. Likewise, the alt-market followed in lockstep encountering an even more volatile decline. The contentious Bitcoin Cash Fork greatly contributed to the crypto market’s steep decline. The fork has ignited a “hash war” between Bitmain, the largest BCH mining manufacturer in the world and CoinGeek, one of the largest Bitcoin cash mining pools. The quarrel has caused both parties to lose a significant amount of cash and could potentially have a devastating effect on the profit margins of crypto exchanges.

On the other hand, the decline in global markets has also contributed to the sell-off in crypto markets. As liquidity tightens we are seeing investors shift from a risk-on to a risk-off mentality. This is causing institutional investors to de-risk their holdings which has lead to a drop in prices across equity markets, fixed income markets and cryptocurrency markets. Our near-term outlook continues to be bearish, however, a favorable SEC ruling on the status of Bitcoin ETFs could ignite a bullish rally in Q1 of 2019.

December 2018
Market Overview

Cryptocurrency markets posted minor losses in December 2018 with most cryptocurrencies finishing either flat or down on the month. Jerome Powell’s decision to hike interest rates another 25bps, the trade tension between the US and China, global economic growth concerns spiraled equity markets around the world into turmoil and have caused investors to panic and flee to less risky assets like treasuries and gold. Likewise, instability continues to fester in Washington as the government shutdown and continuation of the trade war have caused increased uncertainty in the financial markets.  To add to the bearish sentiment in cryptocurrency markets, the Bakkt Bitcoin Daily Future contract, which was expected to be launched on December 12th, 2018 has gotten its launch date pushed back to January 24th, 2019.

On a positive note, Ohio businesses can now pay taxes with bitcoin and there are widespread rumors that Facebook is currently developing their own blockchain payment protocol. In other words, although we continue to witness a bear market in cryptocurrencies, both blockchain technology and cryptocurrencies are becoming even more embedded in our society. This reinforces our confident long term bullish outlook on cryptocurrency markets, although in the short term we continue to remain bearish.

January 2019
Market Overview

Cryptocurrencies remained flat in the month of January 2019. However, the end of a historical government shutdown and Chair of Federal Reserve Jerome Powell’s dovish monetary outlook are sparking bullish sentiment amongst investors despite trade war anxieties that continue to loom over global markets.

Meanwhile, the cryptocurrency and blockchain sector made major headlines in the month of January. Gemini Exchange, the digital asset exchange and custodian, founded by the notorious Winklevoss twins has just become the first digital asset exchange to acquire a SOC 2 Type1 Certification. In other words, Gemini Exchange is now the only digital asset exchange in the world to possess such a high level of security for their customers.

Following the end of the government shutdown, the Cboe resubmitted their Bitcoin ETF application to the SEC, which if approved, will be groundbreaking for the cryptocurrency space and what many believe to be a powerful enough catalyst to spark the next cryptocurrency bull run.

Fidelity Investments, the $2.48 trillion Financial Services firm, is in the “Final Testing” Phase of launching their cryptocurrency trading and custodial platform Fidelity Digital Assets. BKCC believes that the anticipated release of the platform could be one of the key stimulants needed to cause the institutional adoption of cryptocurrencies. The official launch is expected to take place in March 2019.

Lastly, Coinbase has integrated TurboTax to help US customers file cryptocurrency taxes. This partnership brings further transparency to the cryptocurrency space and is another strategic move made by Coinbase to encourage the mainstream adoption of cryptocurrencies.

February 2019
Market Overview

The ongoing narrative preached by cryptocurrency detractors that the digital asset industry will never blossom into something more than a retail market can now officially be put to rest as a cascade of prominent institutional players entered into the digital asset industry in February 2019.

Latin America’s largest investment bank, Banco BTG Pactual SA has recently announced and released its own security token collateralized by distressed real estate assets in Brazil, while one of Japan’s largest banks, Mizuho, is planning to launch its own Yen-Pegged stable-coin in March 2019. Meanwhile, the Swiss banking giant, Julius Baer, will soon be offering its clients access to an array of digital asset services. Additionally, the largest investment bank in the world, JP Morgan Chase, stole the spotlight when they announced that they had released their own stable-coin, JPM Coin, which will compete directly with Ripple’s tokenization model.

Investment banks are not the only institutional players making headlines within the digital asset space. Fairfax County’s Retirement Systems (fairfaxcounty.gov/retirement/) is now the first Pension Fund in the United States to allocate capital to digital assets. We strongly believe this move will ignite confidence in other Pensions Funds to further allocate capital to digital asset managers. Cryptocurrencies also made groundbreaking moves in the Fintech industry in the month of February. Kraken’s nine-figure purchase of regulated futures trading startup, CryptoFacilities (cryptofacilities.com), marks its entrance into the $1.2 quadrillion derivatives market. Conversely, Samsung’s flagship smartphone, the Galaxy S10, will now include a highly secure cold storage cryptocurrency wallet that will allow users to store Ethereum and Bitcoin on their smartphone.

As professional money managers, it is our job is to identify the narrative
underpinning financial markets, look for inflection points that could alter that narrative and then capitalize on the opportunity. Many people said that cryptocurrencies will never gain institutional adoption, now JP Morgan Chase, the world’s largest investment bank, has released their own cryptocurrency. Many people said that cryptocurrencies will never reach mainstream adoption, now Samsung, the world’s largest manufacturer of consumer electronics, is including a built-in cold storage wallet in their flagship smartphone. It is now more obvious than ever that the narrative has changed, but are investors willing to capitalize on the opportunity?

March 2019
Market Overview

Digital assets caught bids in March 2019 igniting investor confidence in cryptocurrency markets as Securities and Exchange Commission Senior Advisor for digital assets, Valerie Szczepanik, confidently told a crowd at SXSW, that she believes investors will see a “crypto spring” in 2019. In other words, Szczepanik believes that the SEC will approve a bitcoin ETF and set a regulatory framework for cryptocurrencies to come this spring.

While the SEC is in the midst of bringing further transparency to the digital asset space, Colorado Governor, Jared Polis, just recently signed The Digital Token Act on March 8^th into law. By exempting cryptocurrencies from state security laws, Polis believes this act will spur a new digital asset driven job market in Colorado.

Outside of the regulatory sector, BlockFi, a digital asset-backed lending firm, received an astonishing $35 million in cryptocurrency deposits in just two weeks after launching its new lending product. This marks their entrance into one of the fastest growing digital asset sectors as they look to compete with both Celsius Network, a peer to peer crypto lending firm which did $600 million in lending in the past 6-9 months and Genesis Capital, an institutional crypto lending firm which, did $1.1 billion in lending in 2018.

On the other hand, WesternUnion, the $8.4 billion market cap global financial services firm, which has been dubbed one of bitcoin’s biggest rivals, has officially made a play in the cryptocurrency industry by partnering up with Stellar collaborator Thunes. Western Union customers will now be able to send funds directly into a mobile recipient’s wallet.

In global markets, e-commerce giant Rakuten has completed registration of its cryptocurrency exchange, Rakuten Wallet, which will go live next month. Rakuten is one of several billion-dollar market cap Japanese tech firms which is attempting to penetrate and capitalize on the digital asset revolution. Likewise, South Korean tech giant Kakao, is also entering into the cryptocurrency space by integrating a crypto wallet onto its famous messaging platform, KakaoTalk, for its 44 million users.

Lastly, it is interesting to note that in the past several months we have seen many prominent tech companies and traditional institutions enter into the cryptocurrency space such as Facebook, Rakuten, J.P. Morgan & Chase, Samsung, WesternUnion, and Kakao. Like the internet boom, global companies are feeling the need to adapt to the digital asset revolution in fear of becoming obsolete. As the cliché goes, “If you can’t beat them, join them”.