Authored by Gabor Gurbacs, Director, Digital Asset Strategy, and Kyle DaCruz, Product Manager
At Consensus Invest 2018, VanEck CEO Jan van Eck commented that we could consider 2018 to be the year of regulation, mainly because the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and global regulators became engaged on a number of digital assets conversations. Rather than looking for a home run or a major turning point, he expects 2019 to be a year of "singles" with incremental improvements in projects, technologies, and regulatory solutions.
With bitcoin falling from $19,500 to $3,000, some of us may hope that this was indeed a fad and was safely behind us. Yet, there are solid developments from some major companies. The following is a list of recent singles, including announcements, launches, and events that collectively, can contribute to building out the digital assets markets.
Digital Assets "Singles"
Square Bitcoin Integration
Digital payments company Square (SQ) added an option for users to buy and sell bitcoin through its Cash app. It announced that further enhancements to the app would be explored to allow greater ease around using bitcoin in transactions. In January, Square reported revenues of $166 million from 2018 bitcoin sales. Particularly encouraging was its reporting of higher revenues in the second half of 2018 over the first half. Square's work on bitcoin as a payments option continues to strengthen and spread bitcoin adoption as not only a store of value but also as a currency.
States Accept Bitcoin Tax Payments
In November 2018, Ohio announced it would begin accepting tax payments from businesses in the form of bitcoin. Though the only digital asset accepted is bitcoin and the payment option is only available to businesses, this option is expected to be extended to individuals, along with the use of other digital assets. Several other states, including New Hampshire, Indiana, and Wyoming, are exploring similar bills.
Samsung Brings Digital Assets Key Storage to the Masses
Samsung's (OTC:SSNLF) new flagship phone, the Galaxy S10, contained a pleasant surprise for digital assets enthusiasts. A key addition to the latest model will include dedicated cold storage functions designed for digital assets private keys. This functionality increases key storage options for digital assets users and allows newcomers to join in without purchasing a dedicated device. Samsung is one of the largest mobile phone makers in the world, and the addition of this functionality spreads digital assets access to a wider audience.
Robinhood Expands Reach with Bitlicense1 Approval
Robinhood Crypto LLC was awarded a Bitlicense in January 2019, which will allow it to conduct business in the state of New York. The Robinhood app, marketed toward millennials, offers a user-friendly platform for the purchase and sale of stocks, ETFs, and options, as well as several digital assets. In addition to New York, the in-app purchase and sale of digital assets is currently available to users in 37 states. Robinhood aims to be an easy on-ramp for bringing digital assets to a broader market.
Expansion of the Futures Market
Bitcoin futures were listed in 2017 by both the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME). Since then, the bitcoin futures market has expanded, with CME bitcoin futures posting a 229% increase in average daily volumes since February 2018. In addition, VanEck's subsidiary MV Index Solutions (MVIS2) and Nasdaq announced a partnership to launch a "regulated crypto 2.0 futures-type contract." Intercontinental Exchange also announced the launching of Bakkt, a global ecosystem for digital assets that would include a one-day physically delivered bitcoin futures contract. These launches should serve to support institutional investors comfort with investments in digital assets.
Nasdaq Brings Surveillance to Exchanges
A major SEC concern with the digital assets market is manipulation, and Nasdaq has worked to address the issue. Nasdaq announced that a number of digital assets are using its market-monitoring SMARTS technology. This technology detects patterns tracing illegal activities like spoofing3 and wash trading4. If more digital assets exchanges take similar measures, it may help investors and the SEC get more comfortable in the space.
The World's First Crypto Basket Index ETP
The appetite for digital assets products continues to develop worldwide, and European exchanges have taken notice. The SIX Swiss Exchange listed a note in 2018, which tracks an index developed by Amun and VanEck's subsidiary, MVIS. The index is designed to track the top five digital assets by market capitalization and liquidity. The product allows investors greater diversified passive exposure to the digital assets market.
Facebook Pivots Toward Crypto
Facebook (FB) has secretly been working on its own cryptocurrency, according to a report by The New York Times5. Facebook employees have confirmed that within the next year, the company plans to release a coin that would allow users to make payments across WhatsApp, an application owned by the tech company. By leveraging one of the largest social media networks in the world, the coin would offer access to many who have not yet had an opportunity to use digital assets.
As we continue through 2019, we expect to see more developments that may help solidify the overall structure of the market. As in baseball, many fans come to the game holding out hope for the home run, but in the end, a steady string of singles can be just as effective in securing a win.
1 Bitlicense is issued by the New York State Department of Financial Services that allows a business to engage in activities involving virtual currencies.
2 MVIS is a wholly owned subsidiary of Van Eck Associates Corporation.
3 Spoofing is the act of traders attempting to give an artificial impression of market conditions by entering and quickly cancelling large buy or sell orders onto an exchange, in an attempt to manipulate prices.
4 Wash trading is a process where a trader buys and sells a security for the purpose of manipulating the markets and creating misleading activity in the marketplace.
5 The New York Times: Facebook and Telegram Are Hoping to Succeed Where Bitcoin Failed. February, 2019.
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