A flurry of crypto investment funds
were announced, as NYDIG predicts it will see $25 billion in bitcoin
under management by year's end.
Three stories
1. Qualified investors are plowing money into cryptocurrency-focused investment funds. Yesterday, macro trader Dan Tapiero, most known for his DTAP Capital fund and eye for gold, announced a new $200 million fund called 10T Holdings that will make bids on crypto startups.
- CrossTower, a Bermuda-based capital markets firm, is launching a bitcoin (BTC) hedge fund that will compete against Grayscale’s Bitcoin Trust (GBTC). The firm has $20 million in assets under management from early investors, with minimum buy-ins set at $100,000. (Grayscale and CoinDesk are both owned by Digital Currency Group.)
- Meanwhile, Stone Ridge Asset Management’s existing bitcoin unit, NYDIG, could see more than $25 billion worth of bitcoin
under management, based on current demand. NYDIG currently manages $6
billion in bitcoin for 280 institutional clients, CEO Ross Stevens said
at a MicroStrategy event yesterday. - But is this the right time
to crowd into crypto? In other words, are we at a market top? Well,
famed rapper and entrepreneur LL Cool J (along with Paul Tudor Jones and
others) signed onto North Island Ventures’ new $72 million fund.
2. PayPal’s cryptocurrency business has beat expectations,
according to CEO Dan Schulman during the company’s Q4 earnings call.
Launched late last year, PayPal’s (PYPL) crypto services – buying,
selling and transacting – volumes have “greatly exceeded” the firm’s initial projections.
- Customers
who purchased crypto through the platform have been logging into PayPal
twice as often as they were before buying crypto, the company said in
its investor update. PayPal gained 16 million new active users since
launching crypto, though there may not be a direct causal relationship. - PayPal
Chief Financial Officer John Rainey didn’t deny the possibility of
M&A deals in the crypto space while prices are high, but called it
part of a “multi-year” strategy. Notably, PayPal’s spending in
technology increased year over year by more than 30% to $732 million.
3. Only 16 nations have specific tax policies regarding cryptocurrency,
according to a U.S. Library of Congress report examining 31 different
jurisdictions. The library’s law division released a report detailing
the differences between how nations tax “block rewards.”
- The
report found there is a specific disparity between jurisdictions that
set policies for coins acquired through mining versus staking, with the
latter often being undefined. There is also little unified thinking on
whether crypto is taxed as income, capital gains and value-added tax for
mined tokens. - “In order for these technologies to thrive and
reach their revolutionary potential we must have the knowledge and
organizational landscape of the approaches to regulation,” U.S.
Congressman Tom Emmer said in a press release on Wednesday.
At stake
Great debate?
Earnings
season is upon us, meaning the latest snapshot of publicly traded
companies’ financials will come into view. This includes the handful of
firms playing around with crypto. As mentioned above, PayPal has seen
explosive growth in its newly launched crypto services business.
The
fintech giant enabled buying, selling and holding for a number of
large-cap cryptos for its 350 million users on Nov. 12, 2020. While the
total number of crypto users on the platform or the profitability of
this business line aren’t known, the company executives seemed pleased
with the decision to enter the market.
In CoinDesk reporter Nathan DiCamillo’s terrific rundown of the company’s earnings report, he included comments from Susquehanna Financial Group regarding merchant crypto adoption on PayPal.
Comparing
PayPal’s trading services to Square’s (SQ), Susquehanna noted that the
latter’s bitcoin business hasn’t been all that profitable. Although
revenues have been growing every quarter, Square doesn’t “really mark it
up,” meaning it’s not bringing in much cash from CashApp.
It’s
for this reason that Susquehanna is interested in PayPal merchants
accepting crypto as part of their business. “Trading is interesting but
it’s not nearly as interesting to us as a payments acceptance device. …
[PayPal has] incredible merchant volume,” James Friedman, a senior
fintech research analyst at Susquehanna, said.
As DiCamillo notes:
"In
December 2020, Susquehanna surveyed more than 120 small to medium-sized
business owners to poll their interest in adopting bitcoin payments.
"More
than 70% of respondents said they would accept bitcoin for payment at
checkout if PayPal or Square enabled it, but around half of respondents
said they believed there would be no impact on their business if they
added the feature.
"Susquehanna also surveyed more than a 100
American adults on attitudes toward cryptocurrencies… [and] found that
nearly half of respondents would not purchase a product or service with
cryptocurrency, while 5.5% of them would do so 10 or more times per
year."
The
sample size is small, though largely matches the sentiment about
bitcoin. Although initially figured as a “peer-to-peer” cash system, in
Satoshi’s white paper bitcoin is increasingly seen as a store of value.
Many
of the market entrants in 2020 that made headline splashes pointed to
bitcoin’s prospects as “digital gold.” Bluford Putnam, chief economist
and managing director of CME Group, for instance, went on record saying
bitcoin is an “emerging competitor” to gold.
For
some bitcoin OGs or outside watchers this trend could subvert the
aspects that make bitcoin such a powerful tool for financial freedom.
Responding
to Francis Pouliot, CEO of Bull Bitcoin, who said “The next attack [on
bitcoin] could very well come from self-proclaimed Bitcoin Maximalists
under the cover of the corporate store of value narrative,” Bloomberg’s
Joe Weisenthal noted:
“This
has been my theory as well. With Bitcoin becoming increasingly
corporate, some players in the space may find the
cypherpunk/censorship-resistance angle to be an embarrassing
distraction.”
“‘Why
have private wallets, when Bitcoin can be a SoV in an ETF?’” he said.
(The U.S. has yet to accept a bitcoin exchange-traded fund application.)
As
mentioned before, PayPal doesn’t let users move bitcoin they’ve
purchased off its platform. This introduces a middleman to what exists
on its own as a self-contained and uncensorable payments system.
It
should be said the bitcoin codebase has been running for 12 years,
without downtime, allowing anyone to transact with anyone, without
exception. But the corporate environment around bitcoin is still
emerging and it’s unknown the total impact it may have on the ecosystem.
The tension between corporate actors and a fully decentralized system
will be a thing to watch.
Market intel
Yesterday, Ethereum miners earned $27.75 million in transaction fees as the blockchain’s native currency, ether (ETH) rallied. The average transaction fee was as high as $23.43,
the highest it’s ever been (it’s never been above $20, in fact),
according to crypto data provider Blockchair. This means it’s more
expensive than ever to actually run decentralized applications or send
funds using Ethereum – a blessing and curse, experts say.
- “Ethereum
miners have been a primary beneficiary of the fee spike,” CoinDesk’s
Will Foxley wrote. The industry earned some $830 million in ether last
month with 40% attributed from fees alone.
Quick bites
- “There’s a macroeconomic wind blowing – big – it’s gonna impact $400 trillion of capital,” a vibing Michael Saylor told a corporate audience at MicroStrategy’s annual conference.
- Elon Musk’s short Twitter reprieve ended with another DOGE meme.
- Miami’s mayor announced a flurry of crypto-related policies the city is considering.
- Myanmar’s government is meddling in the internet.
- China leads Africa’s digital currency race. (CoinDesk Opinion)
Who won Crypto Twitter?
source link : https://www.coindesk.com/blockchain-bites-the-rise-of-the-bitcoin-investment-fund
