TR 05.11

// FOOLS HESITATE IN BEAR MARKET - MEANWHILE, OPPORTUNITY ABOUNDS

The fear continues. Funds are down. Many will close come January as crypto hedge funds book severe losses on the years’ performance. They still have no strategy, and still don’t know how value is captured in the space.  

Meanwhile, as utility in tokens clearly isn’t enough, founders still vainly hope to avoid selling equity - real value - in their companies, instead offering inappropriate revenue share or asset-backed instruments to venture investors. ¯\_(ツ)_/¯.

Yet - the technology being built in the space has never been better. Talent continues to flock to the sector. The potential rewards for cracking the future of economics, governance, money and identity are boundless.

Additionally, valuations are down 10X compared to 6-8 months ago. If you believed in the investment thesis of projects before, when valuations were sky-high, surely, surely you double-down now? Yet - this is not the case. Few projects are getting funded, as fewer investors than ever before are actually investing. The funds that are investing, are writing checks 10-50% of the amounts that they were investing only 6 months ago. The lemming-like tendencies of investors in this space continues to fascinate and disappoint.  

For the reasons above, and more, The Reserve, plans to capitalise on this opportunity by creating Trust Fund One, The Reserve’s first venture fund. A fund with a laser-sharp focus on the future of distributed ledger technology.

We’re excited to put our money where our mouth is and fund the future of Trust...

// MUST READS

  • Morgan Stanley released a 50-page research report on the current state of the cryptocurrency market. Topics include: the shift in value proposition narratives, the recent rise of stablecoins, Bitcoin’s stunted adoption as a payment system and the growing role of institutional investors.

  • In this Hackernoon piece, Neyma Jahan reflects upon the future of Security Token Offerings (STOs): as long as on-chain governance isn’t possible, the value proposition of security tokens over traditional equity may be limited.

  • The Mosaic research team provides a detailed analysis of how the mechanisms of a token sale impact the long-term governance and socio-economics of a protocol.

// DISASTER OF THE WEEK

  • IOTA-based project Oyster (ticker: PRL) was the victim of a particularly interesting exit scam, allegedly executed by pseudonymous founder “Bruno Block”. The original smart contract of the ICO was reactivated, allowing the founder to buy additional PRL tokens at ICO price (in effect printing 4 million new tokens), which were later sold on the KuCoin exchange for close to $300,000.

  • Trading of the PRL token was eventually halted on KuCoin at the request of Oyster’s CEO, but not before the token’s market capitalisation had collapsed by 66% from $20m to $6.3m and the project’s reputation had been irremediably compromised in the eyes of investors.  

// TRACTION

  • Microsoft Corp. is partnering with Nasdaq Inc. on blockchain technology.

  • HTC has made a blockchain phone geared towards people owning cryptocurrency – such as bitcoin, ether, or one of the thousands of new coins.

  • Hong Kong Exchange and Clearing Limited (HKEX) has joined forces with Digital Asset to develop a blockchain platform for post-trade allocation and processing of trades.

  • Invest Cyprus, the country’s national investment partner has signed an MoU with public blockchain service creator VeChain Foundation and blockchain project strategy advisory Cream to introduce DLT in Cyprus.

  • The World Payments Report 2018 published, found that distributed ledger technology (DLT) is not currently capable of meeting financial market demands. The annual report was jointly compiled by consulting and technology services firm Capgemini and leading European bank BNP Paribas.

// ROAD TO REGULATION

The UK government's Cryptoasset Taskforce published its report after considering the growth of crypto assets over the past year. While regulation is certainly required to create certainty in the sector and to protect consumers, we believe that bad regulation is worse than no regulation and  agree with the response from a number of figures in the London blockchain community that, “any regulation should be iterative, open to feedback and evolve along with the crypto-asset sector.” A one size fits all approach as envisaged by the Taskforce’s report is simply not suitable for such a nascent and diverse sector.

Hong Kong’s Securities and Futures Commission released a statement that said it is “setting out a conceptual framework” that could be used to regulate crypto exchanges since they currently operate outside of current regulation, which is focused on traditional investment. This appears to be a proportionate move that is designed to protect against the riskier elements of the industry but not kill off the growing local industry before it matures. A regulatory sandbox is also proposed for companies and even funds to experiment subject to anti-money laundering and other rules.

The United State’s Securities and Exchange Commission is probing investment advisers for potential misconduct involving cryptocurrencies, focusing on how investment advisers registered with the agency are storing the cryptocurrency assets they hold, as well as on possible price manipulation, and the digital currencies' vulnerability to cyberattacks. This appears to mark an escalation of the agency’s efforts to clamp down on rule-breaking and poor practice in the sector - all of which are good things. More clarity on how to deal with the issuance and trading of tokens would be helpful, however.

// PROJECTS

  • StarkWare has raised a $30 million equity round lead by Paradigm. The cryptography startup is responsible for developing the zk-STARKS privacy feature, is aiming to allow public blockchain networks to add similar privacy to their own protocols. The funding round included a number of funds including Sequoia, ConsenSys, Coinbase Ventures and Multicoin Capital among others.

  • Binance Uganda has signed up over 40,000 users in its first week in Uganda. The global exchange in partnership with a local mobile payments provider now allows users to to buy and sell crypto through the mobile payment system. The platform conducts AML/KYC on it’s users and on it’s initial launch allows users to purchase bitcoin and ether.

// TOKEN SALES

Dusk.Network is the first project to launch on Ethfinex’s new token sale platform. Read more about this novel process and collaboration here.

// EVENTS

Blockchain Life 2018 - Saint-Petersburg, Russia - Nov 7 - 8, 2018

MoneyLIVE: Nordic Banking 2018 - Copenhagen, Denmark - Nov 6 - 8, 2018

MoneyLIVE: Private Banking & Wealth Management - London, UK - Nov 12 - 12, 2018    

The NYC Family Office & High Net Worth Blockchain - NY, USA - Nov 13 - 13, 2018    

Empire Startups Fintech Conference - San Francisco, USA - Nov 13 - 13, 2018    

Finance Magnates London Summit - London, UK - Nov 13 - 14, 2018

Blockchain & CryptoCurrency Conf 2018 - Kuala Lumpur, Malaysia - Nov 13 - 15, 2018

// OUR MEETUPS

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James Roy PoulterComment