Crypto Week In Review: Bitcoin ETF Talk Mounts, Nasdaq To Launch “Crypto 2.0” Futures

The crypto market at large sustained its turbulent price action this week, with Bitcoin (BTC) jolting up and down between key levels of resistance and support. However, in spite of the dreary price action, this industry’s participants kept their pedal to the metal, announcing a series of developments that piqued the interest of investors worldwide. So, as recently put by Anthony “Pomp” Pompliano, Morgan Creek’s in-house cryptocurrency insider:

“Bear markets get rid of tourists so entrepreneurs can focus on building.”

SEC’s Clayton Isn’t Ready To Green Light A Crypto ETF

Since Bitcoin faltered in early-2018, investors in this nascent asset class have sought to find a light at the end of the tunnel. This light, as it turns out, is a U.S.-based, fully-regulated Bitcoin exchange-traded fund (ETF). But, as recently divulged by a commissioner from the U.S. Securities and Exchange Commission (SEC), the advent of a crypto-backed ETF might be nothing more than a quixotic dream, or at least for now.

Speaking at Consensus: Invest on Tuesday, SEC incumbent Jay Clayton, who assumed office in May 2017, exclaimed that he isn’t ready to greenlight a Bitcoin ETF. Backing his somewhat inflammatory statement with rationale, Clayton brought up the lack of market surveillance in crypto markets.

Blockchains may be predicated on a semblance of transparency, but in juxtaposition to this nature, the SEC decision-maker noted that there’s an evident lack of bonafide surveillance implementations on crypto platforms at large. Clayton then explained that investors expect that a commodity-backed fund is free from manipulation, alluding to his sentiment that Bitcoin is susceptible to questionable fluctuations on a group’s whim, or through actions executed by bad actors.

Along with his fears regarding proper surveillance measures, the lawyer by trade also noted that while strides have been taken towards impenetrable custody solutions, these services purportedly remain vulnerable to unauthorized access.

VanEck, SolidX’s Bitcoin ETF Team Meet With SEC 

Despite Clayton’s concerns regarding crypto-backed ETFs, the SEC recently released a memorandum that outlined a paramount closed-door meeting attended by representatives from VanEck, SolidX, and CBOE, the three firms behind the foremost Bitcoin ETF application.

This recent event, which is the second of its kind, saw VanEck outline its proposed vehicle through a 62-part slide deck, breaking down the ETF to its core. Aiming to calm the SEC’s qualms with the cryptocurrency market, including fears that it’s rife low-liquidity, the ETF hopefuls touted the fact that the value of Bitcoin is “tightly linked” on spot and futures markets, apparently evidence that cryptocurrency is a “well-functioning capital market.” VanEck representatives went on to draw attention to the “resilience of Bitcoin markets,” claiming that the fixed supply, distributed, and secure nature of Bitcoin would disallow manipulation.

VanEck went on to laud CBOE’s trading system, which the ETF would be based upon, for its speed, security, and ability to stay compliant with financial law, something that the SEC is likely seeking.

No comments from the SEC were issued on VanEck’s slide deck, but many investors are hopeful that the attendees of the forum were pleased with what was presented.

Nasdaq, VanEck To Launch “Crypto 2.0” Futures, Aims For Q1 2019 Launch

On Tuesday morning, the crypto industry at large was rattled, as insiders reportedly claimed that Nasdaq had plans to launch a Bitcoin futures contract. Although the rumor was somewhat cast aside, with some skeptics calling the news “baseless,” at Consensus: Invest, VanEck digital asset strategist Gabor Gurbacs did his best to clear the air. On-stage, in front of a crowd of hundreds, Gurbacs officially revealed that VanEck was, in fact, partnering with New York-based Nasdaq to “bring a regulated crypto 2.0 futures-type contract” to market.

However, like the Bloomberg report that originally broke the news, Gurbacs seemingly didn’t follow up the comment regarding the proposed product’s exact details.

So due to the apparent secrecy, many quickly resorted to speculation, with some questioning if Nasdaq’s instrument would make use of ‘physical’ Bitcoin in custody, unlike CBOE and CME’s futures, but like Bakkt’s vehicle slated to launch in late-January. Then again, it isn’t clear if Nasdaq has plans to implement such a complicated feature, but seeing that the exchange is relatively blockchain- and crypto-friendly, physical backing isn’t out of the realm of possibility.

Bloomberg noted that Nasdaq is planning to launch the proposed instrument in Q1 2019, which lines up with the planned release of Bakkt, Fidelity Digital Asset Services, and ErisX. It is important to note that the launch day is dependent on a green light from the U.S. Commodities Futures Trading Commission.

DJ Khaled, Floyd Mayweather Fined By SEC In ICO Case  

On Thursday morning, after a cloud of legal action loomed over for months, DJ Khaled and Floyd Mayweather, two of the world’s biggest stars, were revealed to have been name-dropped in a recent crypto-related SEC ruling. The case in question, which involved the two influencers, a crypto-backed debit card project Centra, and lesser-known projects, was publicly released on Thursday afternoon to the likely dismay of Mayweather, Khaled, and their legal counsel. As put by media outlet Gizmodo on Twitter, the “SEC has informed DJ Khaled that he has played himself.”

For those who aren’t in the loop, in 2017, amid the now-infamous crypto boom, Mayweather and Khaled began to foray into the cryptosphere, posting seeming promotional material for Centra’s ICO without disclosing that it was pay-to-play. This, of course, was an issue discussed by the SEC, who claimed that the two were in the wrong due to their failure to sufficiently disclose their business relationship with startup.

Per data gathered by the SEC, Mayweather was paid $100,000 for a series of Centra posts and $200,000 for other ICOs, while Khaled saw a $50,000 check fly his way from Centra alone.

The two players have now been mandated to pay hefty sums. Mayweather will give up $300,000 in disgorgement, another 300 grand as a penalty, and a tad extra for interest. Khaled, in comparison to Mayweather, got off scot-free, as the American music entrepreneur has been required to pay ‘only’ $100,000 in penalties and $50,000 in disgorgement. Both Mayweather and Khaled agreed to enter a timed blackout for advertising securities, at three and two years respectively.

Crypto Tidbits

  • Switzerland’s Amun Crypto ETP Launches: After originally announcing a multi-crypto exchange-traded product (ETP) in September, Amun launched the long-awaited vehicle on Switzerland’s SIX Exchange last week. Many lauded the product, denoted by the “HODL5” ticker, as the sole catalyst that could reverse crypto’s dismal performance in 2018. However, to the chagrin of optimists, HODL5 failed to make a splash on its debut, seeing a mere $400,000 of volume during its inaugural day trading. And in the days that followed, HODL5 didn’t perform much better, in fact, it saw falling volumes day-over-day, while its value collapsed. Although the instrument’s performance has undoubtedly been disheartening, many hold faith, as HODL5 may prove to be an intermediate stepping stone toward a Bitcoin-secured, U.S.-based ETF that will catalyze global adoption.
  • Mike Novogratz’s Galaxy Digital Burns $76M in Q3 2018: While Mike Novogratz, CEO of Galaxy Digital, is unarguably one of the crypto industry’s foremost players, not even he has been safe in 2018’s chaotic market conditions. In Q3 alone, Galaxy Digital, a crypto-centric merchant bank, has reported a net loss of $76.6 million, with 55% of that figure stemming from losing positions in Bitcoin, Ethereum, and XRP. Interestingly, however, Galaxy still holds $90 million worth of crypto assets, indicating that it isn’t ready to throw in the towel.
  • Coinbase Secretly Launches OTC Desk After Months Of Rumors: Stowed far away from the prying eyes of the crypto public, Coinbase recently launched an over-the-counter (OTC) trading desk for its institutional clients. Although this wasn’t initially divulged to the industry at large, earlier this week, Christine Sandler, head of coverage at Coinbase, took to fintech media outlet Cheddar to speak on its new offering. Sandler noted that Coinbase recently launched an OTC system behind closed doors to complement its traditional exchange business. She noted that while the launch of Coinbase’s new platform was opportunistic, the startup has been seeing bonafide interest from bigwig players.
  • Ethereum Co-founder Vitalik Not Sold On Corporate Blockchain: Speaking with Quartz at Devcon4, Vitalik Buterin, a world-renowned co-founder of the Ethereum Project, claimed that he isn’t 100% sold on the idea of corporate-backed blockchain projects, such as those headed by IBM. The Russian-Canadian coder explained that while blockchain technologies have ground-breaking potential in countless systems, many projects today are the byproduct of 2017’s influx of hype, rather than a penchant for true innovation. Still, Buterin maintained his opinion that decentralized ledgers’ killer use case is in payment ecosystems, simply stating that “cryptocurrencies are making international payments easier.”
  • Coinbase Pro Launches ZCash (ZEC) Trading: On Thursday, Coinbase Pro divulged that it would be listing ZEC, the native digital asset of the privacy-centric ZCash ecosystem. This recent listing comes just weeks after San Francisco-based Coinbase added 0x (ZRX), Basic Attention Token (BAT), and USD Coin (USDC). Users of Coinbase Pro from U.S. (New York State excluded), E.U., United Kingdom, Canada, Singapore, and Australia will now be able to deposit, withdraw, and trade ZEC. More supported jurisdictions may be added at a later date, pending regulatory approval in other locations.
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