Group items tagged

Bitwise Asset Management, a provider of cryptocurrency index funds, is seeking regulatory approval that would enable it to publicly trade shares of its bitcoin fund on an over-the-counter (OTC) marketplace. The company has filed a 211 form with the U.S.'s Financial Industry Regulatory Authority (FINRA) for the Bitwise Bitcoin Fund. Aiming to compete with the likes of Grayscale Investments, the firm plans shares of its fund to be publicly traded on the New York-based OTCQX marketplace. Fidelity Investments would oversee the custodianship of the fund's bitcoin assets. The fund will offer a 1.5% expense ratio, which is lower than Grayscale's Bitcoin Trust (GBTC) at 2.0%.

On 19 May, Binance customers using leverage found positions automatically liquidated as the crypto price drop wiped out all the collateral in their margin accounts before they could transfer extra funds onto the exchanges. This blog post examines another side of the story - the actual value of Binance's insurance fund and its ability to meet the potential pay-outs on 19 May, had the platform not been closed. I no longer believe the figures that Binance shows on its website for its insurance funds, nor their liquidation reports, and I maintain that a figure of only 3 million USDT for the BTC/ETH insurance fund pay-out on May 19 is grossly inconsistent with the actual number of liquidations on BTC and ETH products on that day. In fact, if the futures platform had not closed, I believe that Binance would have had to subsidise its insurance fund by a billion USDT or more.

The US-based Bank Policy Institute (BPI) is raising concerns that a sizeable proportion of Circle's USDC stablecoin reserves could be parked at the Federal Reserve, despite Circle not having a central bank account. Since November, BlackRock has been managing about two-thirds of the reserve assets in a bespoke money market fund, the Circle Reserve Fund (CRF) , which invests mostly in U.S. short-dated Treasuries. The BPI claims that Blackrock has applied for the fund to access the Fed's overnight reverse repo (ON RRP) facility, which provides money funds and government-sponsored enterprises a standing option to invest overnight with the Fed at a fixed rate, currently 4.3%. This involves the fund buying Treasuries from the Fed, which are resold to the Fed at a future date at a slightly higher price. The net effect of the cash flows, with the transfer of money to the Fed, is not dissimilar to depositing the USDC reserve cash at the Federal Reserve. The use of the ON RRP by the CRF could effectively transform USDC into a "backdoor" synthetic central bank digital currency (CBDC) if all of the assets are parked there. https://bpi.com/will-usdcs-blackrock-money-fund-create-a-back-door-cbdc-give-usdc-an-account-at-the-fed-or-both/

Depending on what information is stored in the digital wallet, we have 3 types of digital wallets. -Pass-through wallets store tokenized card information and it doesn't hold any funds. When we initiate a payment transaction with a merchant, the token goes to the acquirer and then to the card scheme, just as credit cards do. The card scheme decrypts the card information and sends to the card issuer to verify. In this process, only the card scheme and the issuer know about the account details. Since the wallets don't know the account details, pass-through wallets are considered secure and an extension of credit and debit cards. -Staged wallets store encrypted payment details but don't send them anywhere. The transaction is broken down into two stages: the funding stage and the payment stage. At the funding stage, the money is transferred from various funding sources including bank account, debit/credit card, prepaid balance and other wallets. At the payment stage, the wallet transfers funds to the merchant. -Stored wallets hold prepaid balance from various sources including bank accounts, cards and peer-to-peer transfers. Then in a payment transaction, the funds are transferred to the merchant.

"Tokenized funds - investment funds in which the fund units are tokenized and represented on distributed ledger technology (DLT)1 - have begun to emerge as digital investors seek ways to invest in asset classes, such as government bonds, that have become more attractive after recent interest rate hikes. Although the funds come with inherent risks and require managers to have technological expertise, the growing adoption of tokenized funds signals untapped market potential." (Moody's)

Actively managed cryptocurrency hedge-funds underperformed Bitcoin during the largest digital asset's bull run last year, according to Crypto Fund Research. The funds' average rate of return was 166%, compared with a more than 300% increase in Bitcoin. While the funds as a whole significantly underperformed, a few breakout managers that made long bets and invested in decentralized-finance projects exceeded the average.

Fidelity has filed paperwork with the U.S. Securities and Exchange Commission informing them of a new fund dedicated to bitcoin. The Wise Origin Bitcoin Index Fund I, LP was incorporated this year and is being run from the Fidelity's Boston headquarters. The early documentation provides little in the way of details about the fund, and shows that zero investors have currently participated. But the minimum investment to join the pooled investment fund is $100,000, indicating this is likely only for institutional and accredited investors.

Switzerland's Financial Markets Supervisory Authority (FINMA) has approved the first crypto index fund in the country. The "Crypto Market Index Fund" has been tailored to cater to qualified investors only and its approval is based on Swiss law. According to FINMA, the fund falls under the "other funds for alternative investments" group of investment products for its notable risks.

The National Bank of Cambodia (NBC) and Malaysia's Maybank Group reportedly launched the Maybank-Bakong Cross Border Funds Transfer -- a real-time funds transfer service between Malaysia and Cambodia through the NBC's Bakong e-wallet and Maybank's MAE app. In the first phase, customers will be able to transfer funds from Malaysia to Cambodia, while transfers from Cambodia to Malaysia will be rolled out at a later date. There is a minimal service fee. Maybank customers can transfer funds up to US$2,500 (or RM10,000 equivalent) daily via their mobile devices.

According to CB Insights, global fintech funding hit its lowest level since 2017, totaling $7.8 billion in Q2 2023 (-48% from Q1 2023) through 845 rounds (-22%). The payments segment was hardest hit (-75% in funding terms), followed by digital lending (-44%). At the other end of the spectrum, fintech companies with artificial intelligence (AI)-led models (e.g., focused on digital lending, insurtech, and investment and capital market technology) saw strong funding growth according to data from S&P Global Market Intelligence. https://www.spglobal.com/marketintelligence/en/news-insights/research/global-fintech-funding-nearly-halves-to-23b-in-h1-2023

In 2022, fintech companies secured a total of $75.2 billion in funding, a 46% decline from 2021. Deal counts also decreased, falling 8% year-on-year from 5,474 deals in 2021 to 5,048 deals last year. Fintech funding steady declined throughout the year, dropping from $30.4 billion in Q1 to $21.2 billion in Q2, $13 billion in Q3 and $10.7 billion in Q4 - the latter being the lowest level since 2018. Banking startups took the biggest hit, with funding plummeting 63% and deals falling 33% year-over-year.

"We consider a continuous-time financial market with no arbitrage and no transactions costs. In this setting, we introduce two types of perpetual contracts, one in which the payoff to the long side is a fixed function of the underlyers and the long side pays a funding rate to the short side, the other in which the payoff to the long side is a fixed function of the underlyers times a discount factor that changes over time but no funding payments are required. Assuming asset prices are continuous and strictly positive, we derive model-free expressions for the funding rate and discount rate of these perpetual contracts as well as replication strategies for the short side. When asset prices can jump, we derive expressions for the funding and discount rates, which are semi-robust in the sense that they do not depend on the dynamics of the volatility process of the underlying risky assets, but do depend on the intensity of jumps under the market's pricing measure. When asset prices can jump and the volatility process is independent of the underlying risky assets, we derive an explicit replication strategy for the short side of a perpetual contract. Throughout the paper, we illustrate through examples how specific perpetual contracts relate to traditional financial instruments such as variance swaps and leveraged exchange traded funds."

The UK Technology Working Group published a report builds on its first report published in November 2023, and expands the potential use cases of fund tokenisation first highlighted in that initial report. In particular, the report explores the use of tokens as collateral for money market funds, and the role tokenised funds play in a fully "on chain" investment market that will streamline back-office functionality. [First report: https://www.gov.uk/government/news/technology-working-group-publishes-report-on-fund-tokenisation]

Osprey Fund's bitcoin trust is now available to retail investors via the over-the-counter (OTC) market. The fund was formed two years ago, and Osprey applied to register the trust with the U.S. Securities and Exchange Commission (SEC) in the middle of last year. This fee structure makes the fund cheaper than Grayscale Bitcoin Trust but more expensive than other new funds like CrossTower's master-feeder bitcoin fund.

According to Crunchbase, last year, financial services was the leading sector for venture investment, with at least $131 billion globally going into startups in the space. This year, the industry still ranks among the largest recipients of venture capital funding. However, investment to startups in the space has been dropping every quarter this year, with Q4 likely to be the lowest yet. Even with the steep year-over-year decline, financial services funding is still high by historical standards, and 2022 is on track to deliver the second-highest funding total of the past five years.

My best guess is that Libra is meant to be like a mutual funds share, redeemable (by authorized resellers, not by the public directly) at the net asset value of a low-risk mutual fund diversified across several fiat currencies. The public can buy and sell Libra "coins" in exchange for existing fiat money. Also, unlike an ordinary mutual fund, which allows members of the public to buy shares directly and sell them directly back to the fund at their current net asset value, Libra only allows Resellers to interact directly with the Libra Reserve.

Binance recently announced that Margin Insurance Fund has been bled dry by liquidations, and they are now putting their own "profits" into the fund to try and replenish it. The Insurance Fund is designed to use the collateral from fees on non-bankrupt clients to cover losses when the client accounts go below 0 in value, to limit the occurrences of counterparty liquidation. During the recent flash crash billions was liquidated, probably bleeding the Insurance Fund dry. Binance has also reduced the interest rates on flexible savings on USDT/BUSD from 6.5% to 2%.

BlackRock is adding cash-settled Bitcoin futures as an eligible investment to three funds. It filed updated prospectuses with the U.S. Securities and Exchange Commission that included cash-settled Bitcoin futures among the assets they can buy. The three funds are the Global Allocation Fund, Strategic Income Opportunities Portfolio, Emerging Markets Flexible Dynamic Bond Portfolio.

Guggenheim Funds Trust filed an amendment with the U.S. Securities and Exchange Commission to allow its $5 billion Macro Opportunities Fund gain exposure to bitcoin by investing up to 10% of the fund's net asset value in the Grayscale Bitcoin Trust (GBTC). The Macro Opportunities Fund is part of Guggenheim Investments, the global asset management and investment advisory division of Guggenheim Partners, and has more than $233 billion in total assets across fixed income, equity and alternative strategies.

Trading in Bitwise Asset Management's 10 Crypto Index Fund is live. It tracks the 10 largest crypto-assets and allows investors to buy shares that represent them. It is billed as the first publicly traded crypto index fund in the United States. The Fund debuted with $120 million in assets under management. 75% of the assets are Bitcoin, 13% in Ether and the remaining 12% split between XRP, Litecoin, Chainlink, Tezos, Bitcoin Cash, Stellar, and EOS.