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Grayscale Launches Investment Trust for Zen Cryptocurrency

Cryptocurrency asset manager Grayscale Investments has officially launched the ZEN Investment Trust for accredited investors, the company announced Thursday.

Centered around the privacy token zen, formerly known as zencash, the investment trust is a single-asset vehicle, meaning it only contains the one cryptocurrency. It is the latest single-asset investment trust launched by Grayscale, joining bitcoin, bitcoin cash, ethereum, ethereum classic, litecoin, XRP and zcash.

The trust is already open to institutional and accredited investors, according to a press release.

The trust “marks a significant milestone” for the Horizen platform, co-founder and president Rob Viglione said in a statement.

He added:

“Grayscale conducts unparalleled research and due diligence on their investment products, striving to offer regulated and professionally managed exposure to the digital currency market for institutional and accredited investors worldwide. Their values align seamlessly with Horizen’s mission to promote the growth of digital currencies, blockchain, and privacy to a diverse and global community.”

The news comes some months after Grayscale’s parent company, Digital Currency Group, announced it was also adding zen to its “conviction list” of cryptocurrencies.

DCG founder and CEO Barry Silbert said at the time that the asset manager was focusing on privacy coins as he believed “financial privacy is going to become a really, really important thing not just in emerging markets, but in the U.S. as well.”

Grayscale has raised roughly $250 million for its investment trusts in the first six months of 2018, Thursday’s press release noted.

While most of its products are limited to institutional or accredited investors, Grayscale’s bitcoin and ethereum classic investment trusts are open to individual investors as well, the release stated.

Coins image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Airbnb Co-Founder Participates in Almost $23 Million Funding Round for Crypto Startup

Cryptocurrency trading platform SFOX has announced the closure of a $22.7 million Series A funding round with participation from Airbnb co-founder Nathan Blecharczyk, according to an August 16 press release.

Co-founder and partner at Tribe Capital and Social Capital, Arjun Sethi, led the Series A funding round for the U.S.-based cryptocurrency dealer SFOX, with participation from Y Combinator, Khosla Ventures, Digital Currency Group, Blockchain Capital, and Blecharczyk.

The press release notes that the cryptocurrency dealer aims its services at “large-scale investors such as funds, family offices, and high-net-worth individuals,” and has more than $9 billion in transaction volumes to the present.

Sethi stated in the press release that the ability for institutions to “trade from a single account” and “buy and sell high volumes without impacting prices” is “exactly what institutional investors looking to embrace cryptocurrencies need […] as the ecosystem becomes more fragmented.”

The company’s Medium post notes that the goal of the funding round is to add cryptocurrency pairs, improve trading liquidity, and expand into “new geographical regions.”

Earlier this week, enterprise-focused blockchain startup Axoni had raised $32 million in a funding round led by Goldman Sachs and Nyca Partners, with other investors including Wells Fargo, JPMorgan, Citigroup, and Andreessen Horowitz.

In July, the venture capital arm of General Electric (GE) joined a $12 million investment round in blockchain startup Xage Security, along with City Light Capital and NexStar Partners.

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Notes From the Brink: Reasons Behind the Crypto Bear Market

Crypto is notoriously a “tough neighbourhood,” as even evergreen Bitcoin bull Tom Lee has put it. After a week in which double-digit losses wreaked havoc on many high-profile cryptos, and Bitcoin (BTC) momentarily fell through the $6,000 support, pitiless bearish sentiment has been circling, with some accusing the top coin of being “exhibit A” in a “permanently impaired or even game‐over” market.

While Bitcoin may have posted 2018 lows, Ethereum (ETH) also plummeted to an eleven-month low to trade at around $254, falling by as much as 20 percent on August 14 alone. That same day, total market cap collapsed by $13.2 billion — back to late November 2017 levels.

VC investor Tim Draper told Cointelegraph in an email that these vertiginous swings are exactly “why [he] made [his] prediction for 2022:”

“The long term trend is way up, but I expect many short-term swings in the market along the way. Fundamentally, the world needs Bitcoin, and that demand will only increase in the coming years as Bitcoin finds more and more uses and applications.”

Even more unflappable, “Bitcoin Jesus” Roger Ver, told us:

“I’m not sure what crash you are talking about. BTC is up 58% for the last year, and 1048% for the last two years. That feels like the opposite of a crash to me.”

As both of these remarks imply, the week’s cataclysm had in fact disproportionately impacted altcoins, leaving BTC relatively unscathed, as Coin360 data shows:  

Crypto market visualization. 15 June – 15 August historical data. Source: Coin360.

BTC dominance — or Bitcoin’s percentage of total crypto market cap — continues to break 2018 highs. As of press time it is at 53.3 percent, levels not seen since mid December 2017, just before the coin hit industry records to trade at $20,000.  

With alts undeniably ravaged, others have been puzzling why — even at a time of international currency crises, Bitcoin itself is yet to rally — this, surely, should be a bullish time for the top crypto? However, Bitcoin has notably failed to hold a recent breakthrough in late July when it was trading just shy of $8,400.

Bitcoin’s brief spike upwards in late July, since which it has tumbled. Source: Bitcoin Price Index

So — even if today’s flush of green has been a sight for your sore eyes, you’d be forgiven for continuing to feel skittish.

Is there method to this madness? Cointelegraph examines five of the most popular explanations for the week’s tumult to find out.

US Regulators Dithering Over Bitcoin ETF Approval

E-T-F — three letters anyone who’s been plugged in to the cryptosphere has probably had swirling around their head in recent weeks.

CryptoCompare CEO Charles Hayter yesterday proposed that the week’s market decline was a ricochet off the back of U.S. regulators’ recent decision to shelve a high-profile application for Bitcoin exchange-traded-fund (ETF) until September. He said:

“[This has been] momentum-based selling following the ETF kickback and the usual gyrations of a market in a depressed mode.”

Hussein Sayed, chief market strategist at FXTM, meanwhile suggested that:

“If an ETF doesn’t see the light in the coming weeks expect to see a further selloff, as it suggests regulators will continue to fight against bringing cryptocurrencies into the mainstream.”

If you’ve heard these three letters too many times by now, yet still can’t account for their mysterious powers to stir markets, let’s unpack this.

ETF stands for an exchange-traded-fund, which is a type of mutual investment fund that divides ownership of an underlying asset — a commodity, an index, bonds, or a basket of assets —  into shares.

The fund tracks the value of the asset(s) and is traded on exchanges, with shareholders entitled to any positive returns. A Bitcoin ETF can therefore offer an indirect way of purchasing BTC, where the investor only holds the corresponding security without having to hold the actual coin.

Crypto-based ETFs have long been discussed as a potential “holy grail” for the crypto industry that would herald major Wall Street adoption and allow for broader investor participation. They’re viewed by some as a less risky bet than investing directly in crypto on spot markets.

But as a marketable security that requires oversight by government authorities, their current regulatory status remains unclear. Several recent high-profile cases have demonstrated just how price-impactful ETF-related announcements from the U.S. Securities and Exchange Commission (SEC) can be.

First, in mid-July, a market rally kicked off, bolstered by news that the $6.3 trillion asset management heavyweight BlackRock –– the world’s largest provider of ETFs –– was beginning to assess potential involvement in Bitcoin.

But just two weeks later, the markets turned, taking a sharp tumble in response to news that the high-profile Winklevoss twins’ Bitcoin ETF appeal had been denied, with a dizzying $12 billion wiped from total market capitalization.

At the beginning of August, the SEC delayed its decision over another Bitcoin ETF application –– this time filed by VanEck & SolidX for trading on the Chicago Board Options Exchange (CBOE). Notably, instead of proposing a BTC-futures-based fund, T plans to go with a physically-backed model involving owning actual BTC. The firm also prices the fund’s shares at $200,000 a pop, eyeing major institutional players.

The SEC’s fickle position has dampened hopes –– even the likes of Charlie Shrem had expected that regulators would have been more likely to grant a stalwart mainstream institution such as CBOE the right to trade an ETF, if not the Winklevoss’ Gemini exchange. EToro analyst Matthew Newton told British newspaper The Independent:

“A green light for the Bitcoin ETF would fire the starting gun on a race among institutional investors to cash-in on this new product, so the market is rightly frustrated by the delay to the decision.”

And –– as The Independent notes –– it’s not just “digital gold” that sees its price fortunes tied to these fabled three letters: the first ever ETF to be backed by gold, which launched in 2003, is reportedly credited for skyrocketing the precious metal’s price up by over 300 per cent in the following decade.

ICO Sell-Off: Developers Are Liquidating Funds Raised Through Token Sales

This theory “soft-forks” three ways.

One

Bloomberg has suggested that developers of Initial Coin Offerings (ICO) are now cashing their holdings into fiat that they can then spend on developing their products. Bearing in mind that most token initiatives are ECR20 projects built on the Ethereum (ETH) blockchain with funds raised in ETH, this could account for the recent shattering price weakness in the Ethereum market. Biswa Das of crypto hedge fund BloomWater Capital told Bloomberg:

“These startups [raised] a lot of funds but they don’t have treasury management or enough cash management experience, so they’re selling too early and causing a lot of pressure in the market. It was fine last year but right now the the market is so fragile that it causes a lot of pressure.”

Das added that those projects that raised ETH during the market’s peak will “be most compelled to sell,” which CoinFi CEO Timothy Tam echoed when he remarked that “ICOs that raised a lot of money are really feeling a lot of pain” as the value of their crypto holdings plummets.

Bloomberg cites July figures from Autonomous Research that suggest that ICO liquidations worth around $5 billion have been driving down ETH’s price, an impact that has been “magnified due to deteriorating sentiment and low liquidity.” It also points to data from research website Santiment, which estimates that ECR20 projects “have spent over 110,000 ETH in the past 30 days.”

Back during the height of Ethereum’s allegedly ICO-driven rally in 2017, the altcoin soared to almost 32 percent dominance of the total cryptocurrency market, compared to Bitcoin’s roughly 39 percent at the time, as data from CoinMarketCap shows.

Ethereum’s burgeoning market cap share in June 2017. Source: CoinMarketCap

The turning tide in summer 2017 sparked talk of a so-called “flippening,” with some claiming that Vitalik Buterin’s brainchild would soon take the lion’s share of overall crypto market capitalization.

With Ethereum’s dominance now dipping as low as 13.5 percent August 14, Timothy Tam took the measure of fortunes as now doubly reversed, emphasizing that “the big story in the market [this week] is the huge weakness in Ethereum,” and noting that “Bitcoin has held up relatively well versus Ethereum,” even as it saw a dent in its chart against the dollar.

Ethereum co-founder Joseph Lubin in turn hit back, saying that he does not see the recent price collapse as a constraint to further growth. In a discussion with Bloomberg, Lubin attributed the market volatility to “trader types,” i.e. speculative investors, saying that it is not necessarily an indicator of underlying infrastructure enhancement:

“ … we build more fundamental infrastructure, we see a correction, and the potential gets even more impressive…we are probably two orders of magnitude bigger as a developer community than we were eight or 10 months ago.”  

Lubin added that the value surges of the past year were just another bubble like the previous “six big bubbles, each more epic than the previous one, and each bubble is astonishing when they’re happening.”

Two

Meanwhile, Yahoo Finance’s Jared Blikre has claimed that unconfirmed rumors from insider sources allege that the SEC is about to come out with new rules for ICOs in September. This, he said, could be fuelling “a scare that ICOs are disappearing,” but “who knows if it’s true.”

Three

The starkest version of the sell-off theory held that the “extinction-level event” for crypto assets –– which saw droves of double-digit losses among altcoins –– was a deserved comeuppance for projects that had failed to deliver on the goods. Blockstream Corp.’s Samson Mow suggested that “most cryptocurrencies have been overvalued for a very long time” –– or as financial broadcaster Max Keiser told Cointelegraph in an email:

“Crypto markets are shaking out the excess capacity of having more than 1,800 coins with no use case. Before 2017, the only reason new coins were created was to replace coins that had died. The expectation was that all non-Bitcoins would go to zero. Then 2017, and that equation was turned on its head. In 2018 we’re back to coin suicide watch for all but a few; Bitcoin, Litecoin, Monero, EOS, DASH, and a few others.”

Keiser added his Bitcoin-maximalist prediction that “by 2019, Bitcoin’s preeminence as a store of value will reassert itself and we’ll see new all-time-highs. 20 or so coins will make the cut and see new highs. The rest will go the way of virtually all software, gone and forgotten.”

The week’s carnage notably extended well beyond fledgling tokens and ECR20 projects to major contenders such as Ripple (XRP), Litecoin (LTC), EOS, and Cardano (ADA), as Coin360 historical data shows:

Crypto market visualization. 13 August – 14 August historical data. Source: Coin360.

Eyes bleeding, Digital Currency Group CEO Barry Silbert offered up a poll to gage the sentiment of the crypto twittersphere:

Out of 19,871 respondents, 73 percent thought the tumult isn’t over. But, as Fundstrat analyst Tom Lee quipped in response, the poll could likely be a “contrarian indicator”:

“Interested to see result but because crowds are influenced by price action (hence, not independent…no bottom majority probably means bottom in place.”

To Conquer Fear Is The Beginning Of Wisdom

This brings us to the golden thread that wove through all three versions of the sell-off theory and spins off into its own self-fulfilling spiral. EToro analyst Matthew Newton told the Express that it’s not just ICOs that are liquidating, but investors themselves that have “hit panic mode”:

“Investors seem to be increasing liquidations of their ICO holdings, with significant drops in price and increased volumes.This has had a knock-on effect on the rest of the altcoin market, with Bitcoin also momentarily dropping below $6,000 late last night. With prices hanging in the balance, emotions will be running high among traders.

Or, as Samson Mow noted, this “feels like the opposite of last year when money piled in as people felt FOMO. Now it’s piling out as they sense panic.” This theory has been echoed across the crypto space, with Blockchain Capital LLC’s Spencer Bogart alleging investor “disillusionment” with tokens and ICOs, and BKCM CEO Brian Kelly saying that “investors that were in it, and maybe caught the hype in November and December, are now panic selling out.”

ThinkCoin chief analyst Naeem Aslam shared his technical analysis with Cointelegraph in an email, suggesting that the market picture is showing signs of strained stamina in a protracted bear market:

“There are serious concerns that we may actually make another new low for the year because of the sturdy bearish sentiment […] traders have been waiting for the bull rally since early June […] but in actual reality, bears have shown their brutal strength over the bulls […] the only reason that we are seeing […] selling off so badly is that traders are losing hope of a bull run […] as long as the price keeps on having a stab at the lows of this year $5,791, we are not out of woods.”

Aslam’s email was penned during yesterday’s market respite, so he qualified his analysis to note that with Bitcoin “breaking [the August 14th] high of $6,298,” there is “a strong hope” for a bull run to continue if downward momentum stops short of forming a new 2018 low. In this scenario, the week will prove to have been a “false alarm,” he wrote. Aslam gave three key levels to keep in mind which show just how far the technicals intersect with sentiment:

“November 13th low: $5,605

October 18th low: $5,109

Psychological level: $5,000”

Although EToro’s Newton did stress that “keeping things in perspective, Bitcoin is still range-bound for now between $5,700 to $8,000 [and] in line with how it has traded over the past few months,” market panic –– as all these commentators suggest –– runs by its own logic.

Alleged despair and disillusionment also means we’re not just on coin suicide watch, but investor suicide watch, as the popular r/cryptocurrency forum on Reddit saw users on August 14 sharing helplines and site links for the US Suicide Hotline and the National Alliance on Mental Illness.

The Indomitable Futures Interaction Argument

We’ll keep this one short, and let you yourself judge whether or not this is a coincidence, remembering that Bitcoin was by no means the largest casualty of the week’s market havoc.

Earlier this summer, Fundstrat’s Tom Lee –– echoed by others –– had attributed the “gut wrenching” price weaknesses of Bitcoin to futures contract expirations, based on analysis of compiled data for the six expirations that have occured since CBOE launched its BTC futures contracts in December 2017.

CNBC’s Brian Kelly yesterday tweeted a graph accompanied by a statement implying that this week’s price tumble may have something to do with August 15 being the date of BTC futures expirations on CBOE:

“Today is CBOE Bitcoin Futures Expiration. This chart comes from one of the best crypto traders I know; who wishes to remain anonymous. I will call him “Pocket Full of Crypto” #bitcoin tends to recover after expiration.”

In a separate tweet, Kelly further noted that “$BTC shorts are still rising toward April highs…hmmm…,” accompanied by a second graph:

In his own comments on the week, Jared Blikre had also noted the transformational impact of futures trading on the Bitcoin space, saying that,

“I think Wall Street is gearing up for Bitcoin in a big way … but in the short term, we could have a washout, we could go down to $5,000, to $4,000, because the character of Bitcoin, the way it trades, has changed since last December’s introduction of futures.”

The Unexpected Fiat Interaction Argument

Blikre this week joined others in proposing what might be an apparently unusual argument for a crypto market analyst, given that many deem crypto assets’ price performance to be immunized from wider economic factors and capital markets. As James Quinn, head of markets at blockchain investment advisory firm Kenetic, told Bloomberg this week:

“Correlations historically have been extremely low between cryptocurrencies and other asset classes, which is one of the reasons why there is interest in this space.”

Nonetheless, in the wider landscape, emerging market economies — the Turkish lira, the South African rand and the Indian rupee — have all tumbled against the greenback this week.

Blikre –– speaking August 14, when Bitcoin was trading 30 percent down over the three week-period –– suggested:

“30 percent is a crash right. The issue is, Bitcoin is a currency, and when we quote on our screen it’s BTC/USD, that’s a symbol. So like other currencies it trades against the US dollar. The US dollar’s on a tear, it’s up 4.5 percent this year, over the last three days it’s up 1.5 percent. That’s a big move for the dollar, and there’s not a lot of overhead resistance, so it could go even further.”

EToro analyst analyst Mati Greenspan mirrored Blikre in a tweet today, saying that “the buck is simply crushing everything in its path. He proposed that the apparent carnage “may well be a side effect” of dollar strength:

“This is the best explanation I can think of for the crypto decline given all the positive developments we’ve been seeing in the industry.”

Max Keiser for his part offered the following chart as evidence of what he termed the “damage [the] rising dollar is having around the world”:

Bloomberg notes that Bitcoin’s slide against the dollar this month is “almost as big as the Turkish lira’s 25 percent slump” –– “putting paid to the notion” –– as chief analyst at Markets.com Neil Wilson told Business Insider –– “of cryptos as a safe haven play.” Wilson added that “ultimately USD and US Treasury notes are the only real safe harbour.”

Before you arch your brows, this week has interestingly seen the exact opposite argument from renowned US economist Peter Schiff, who is credited for predicting the 2008 housing market meltdown. While it’s worth noting that Schiff is not exactly a Bitcoin bull, in his recent interview with Salon he scathingly anatomized what he considers to be an inevitable impending economic collapse in the fiat-denominated world:

“I think the U.S is in worse shape than Europe […] not that Europe and Japan are not in trouble, they are. But I just think we’re in more trouble  […] There are a lot of bubbles. The bond market is a bubble. The stock market, housing, the whole U.S. economy, really, is one gigantic bubble […] We’re going to have to deal with a lot of defaults, [and] a lot of debtors are going to go broke.”

Schiff further predicted that the Fed’s go-to solution of quantitative easing would wreak yet further havoc for the dollar. With the post-2008 bailout measures, he said, we’ve “actually compounded problems” and postponed “consequences to a later date –– we’re headed to that later date.”

Divinatory Practices

Whether you don a chartist’s hat or sift through proliferating white papers to make your investment judgements, commentators of all stripes continue to devise new strategies to interpret crypto-specific market signals.

A research group from Yale recently proposed a system intended to gage the “risk-return trade-off” of major cryptos, identifying a “strong time-series momentum effect” among major assets such as Bitcoin, Ethereum, and Ripple. Yale’s research also found a correlation between price and investor attention, which they deduced via social media and search engine trend analyses.

Fundstrat’s Tom Lee, for his part, has developed a “contrarian index” that lets investors know how “miserable” Bitcoin holders are based on current prices — dubbed the Bitcoin Misery Index (BMI) — which he launched at a time of comparable crypto market woes.

If eye-popping volatility appears –– until now –– to remain something of a paradoxical constant in the crypto space, this summer has seen significant developments, the impact of which is arguably yet to be understood.

Earlier this month, Intercontinental Exchange (ICE) –– the operator of 23 leading global exchanges including the New York Stock Exchange (NYSE) –– unveiled its plans to create a global ecosystem for digital assets that would cover the spectrum from federally regulated markets and warehousing to merchant and consumer needs.

While some have proposed this is the “biggest Bitcoin news of the year,” implying forthcoming bullish price moves as qualified custodian solutions are offered to institutional clients at scale, others propose that leverage-based financialization could hit at Bitcoin’s “algorithmically-enforced scarcity,” with adverse implications.

But –– as this latter argument notes –– this will depend on how HODLers choose to negotiate the new bridge with the traditional financial world. Until then –– we’re in for interesting times.

Cointelegraph would like to thank Helen Partz for her research contributions to this article.

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AngelList’s Regulation-Friendly Token Sale Platform Raises $9.2 Mln In Initial Funding Round

CoinList, a platform for token-based financial services with an emphasis on compliance with regulation, has raised $9.2 mln during its initial fundraising round, according to a press release published today, April 5.

CoinList is a subsidiary of AngelList, a website for connecting startups to investors and job-seekers.

The press release notes that CoinList’s $9.2 mln figure includes previously-raised funds from VC firm Accomplice and research firm Protocol Labs, as well as crypto funds Polychain Capital, Digital Currency Group, FBG Capital, Libertus Capital, Blockchain Capital, Coinfund, and Electric Capital.

According to CoinList’s website, the projects on the platform have raised around $435 mln in the past twelve months, with Filecoin’s Initial Coin Offering (ICO) of more than $205 mln as a standout for the large amount raised.

CoinList hosts a compliance service, ComplyAPI, that promotes itself as “tak[ing] care of compliance 
so you can focus on your token sale.” The service conducts AML and KYC checks on potential investors, as well as ensures that only accredited investors – those with a net worth of over $1 mln or an annual income of $200,000 – are participating in a company’s token sale as “pursuant to US securities laws.”

Andy Bromberg, the co-founder and CEO of CoinList, said in the press release that the success of CoinList’s funding round “reflects the growing need that promising [B]lockchain companies have for superior token sale compliance and execution:”

“Now more than ever, companies raising money through an ICO need a platform partner that knows the intricacies of execution and regulation. CoinList provides even more integrity to the startups that have already distinguished themselves, and comfort to the accredited investors that want to commit to [B]lockchain technology.”

Launching an ICO in the US requires a company to either register for the US Securities and Exchange Commission (SEC) accredited investor exemption, or register their ICO as a security offering.

ICOs across the country have been shut down due to what the SEC cites as a selling of “unregistered securities,” most recently in Massachusetts, in part due to the SEC’s recently launched cryptocurrency probe.

The Praetorian Group filed in early March with the SEC to register their ICO as a security offering; if their application is accepted, they will become the first company to hold an SEC-regulated ICO.

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XRP, BCH, LTC & ETH: Grayscale Adds 4 New Crypto Trusts

Grayscale Investments, the creator of the Bitcoin Investment Trust, is launching four new trusts today, doubling its number of products aimed at helping investors explore cryptocurrencies.

The new trusts – which bring ethereum, litecoin, XRP and bitcoin cash to the offerings the firm provides – join Grayscale’s existing bitcoin, ethereum classic and zcash investment trusts, as well as its Digital Large Cap Fund, a multi-crypto investment fund announced last month.

Each of the newly announced cryptocurrencies is already part of the Digital Large Cap Fund, but were not previously available individually.

Michael Sonnenshein, the managing director of Grayscale Investments, said the new products are part of an expanding suite, and that the firm – a Digital Currency Group subsidiary – will continue to announce new products, both single-currency and diversified.

Sonnenshein continued:

“It is our belief that digital currencies as an asset class have not only arrived, but are here to stay. Consequently, we are committed to providing investors with structures that enable them to participate in this exciting asset class.”

The new products are among the first securities to allow investment in those particular cryptocurrencies, according to a press release. It adds the disclaimer that, the value of a share in a trust may not correspond to the value of a cryptocurrency being held by the trust.

As of March 5, Grayscale had $2.1 billion in assets under management, Sonnenshein said, up from $208 million just a year ago.

“This is a meaningful milestone for Grayscale as it increases the number of investment offerings under the Grayscale umbrella from four to eight. At this time last year, Grayscale had only one product, Bitcoin Investment Trust,” he told CoinDesk in an email.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Grayscale, Ripple, and Zcash Company, the for-profit entity that develops the zcash protocol.

Coins image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

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Crypto VC Firm Digital Currency Group Invests $114 Mln In Pro-Crypto Silvergate Bank

The Digital Currency Group (DCG), a cryptocurrency venture capital firm, has reported they have invested in the Silvergate Capital Corporation, which contains the crypto-friendly Silvergate Bank, in a tweet yesterday, Feb. 26.

The Silvergate Capital Corporation had posted on its site yesterday, without disclosing the investors, that they had sold 9.5 mln shares of Silvergate stock through a private placement for around $114 mln. The news post writes about the projected goals behind the acquisition:

“Proceeds from this placement will support further growth in the Bank’s nationwide fintech deposit initiative and its business banking and residential lending activities.”

Cryptocurrency companies have traditionally had a hard time finding banks to accept them as customers. Over the weekend, the Bangkok Bank terminated the account of the Thai Digital Asset Exchange, and in January of this year, several Indian banks suspended or limited the accounts of crypto exchanges.

Tether, a digital token backed by fiat currency, also experienced banking problems in 2017 when all international wires to Tether were frozen by Tether’s Taiwanese banks.

DCG also tweeted that it has “huge news” from multi-currency mobile-payments app Circle, which is a DCG portfolio company:

Circle announced their acquisition of crypto exchange Poloniex yesterday, writing in their press release that they hope to grow Poloniex into a “robust multi-sided distributed marketplace.”

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Digital Currency Group Invests in Bitcoin-Friendly Silvergate Bank

Cryptocurrency venture capital firm Digital Currency Group (DCG) has confirmed an investment in Silvergate Capital Corporation, the holding company of the bitcoin startup-friendly Silvergate Bank.

According to an announcement from Silvergate, the firm said Monday that it sold 9.5 million shares through a private placement generating $114 million in total – funds that will be used to further support the bank’s fintech deposit initiatives.

Although the announcement did not disclosed any investors, Barry Silbert, founder of DCG, confirmed the firm’s participation in the sale via an email to CoinDesk, following an official tweet.

While the amount of investment remains unknown, the move by DCG is notable given Silvergate’s known stance in supporting cryptocurrency startups.

As early as in 2014, the cryptocurrency industry has encountered challenges in receiving banking services from traditional financial institutions, with many banks refusing to open accounts for crypto firms, or abruptly closing accounts without explanation.

Silvergate Bank, however, offered bank accounts to bitcoin startups, even while others shied away from bitcoin-related clients due to risk concerns.

According to a previous CoinDesk article, Silvergate Bank was supporting 15 cryptocurrency startups as of May 2016.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Silvergate Bank.

Dollars image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

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Grayscale Launches Fund for Top Crypto Assets (ETH Included)

The creator of the Bitcoin Investment Trust is today launching its fourth fund aimed at giving accredited investors a way to explore cryptocurrencies.

Unlike Grayscale’s previous funds, which focus on bitcoin, ethereum classic and zcash, the offering, formally called the Digital Large Cap Fund, is designed to give investors exposure to the five largest cryptocurrencies based on market capitalization.

At launch, the fund’s shares will be solely invested in a basket of crypto assets that will initially include bitcoin (BTC), ether (ETH), ripple (XRP), bitcoin cash (BCH) and litecoin (LTC).

The decision to include new currencies, and to sidestep other cryptocurrencies that are already offered by Grayscale, was based on the total value of the assets, according to Grayscale managing director, Michael Sonnenshein.

“Investors are looking for broad market exposure to the digital currency asset class,” said Sonnenshein, in interview today.

He told CoinDesk:

“This gives them the ability to make a singular investment that is going to give them exposure to approximately 70 percent of the market via this one vehicle.”

Investors will buy shares in the private placement investment vehicle, which is backed by actual cryptocurrency, valued at 4:00 p.m. EST. The valuation will be based on the Digital Asset Reference Rate provided by institutional trading technology firm, TradeBlock.

Each digital asset will be evaluated, less the fund’s expenses and other liabilities.

To account for changes in cryptocurrency market caps, it will be rebalanced on a quarterly basis, potentially removing existing digital assets and adding new assets. The fund is a passive investment vehicle that is not actively managed.

In addition to market cap, liquidity, operational requirements and the availability of custodial solutions will also be factors weighed during listing.

Additionally, the fund will not offer a redemption program at launch, meaning there is no assurance that the value of the shares will approximate the actual value of the assets held by the fund. The fund is offering shares on an ongoing basis to certain accredited investors as described by the US Securities and Exchange Commission (SEC).

Interestingly, the total assets under management by Grayscale, a subsidiary of Digital Currency Group, has decreased by almost $1 billion in the past couple months. In December, Silbert, the founder of DCG, tweeted the firm was managing $3 billion. In the current statement, that number has decreased to $2.1 billion.

As some of Grayscale’s previous fund can attest, the shares may trade at a substantial premium over the value of of the underlying asset if quoted on any secondary market in the future.

According to the official press release, Grayscale may eventually seek regulatory approval to operate a such a redemption program.

Sonnenshein further said that the firm intends to follow the path set forth by their first investment vehicle, the Bitcoin Investment trust, which trades over the counter with the ticker symbol, GBTC:OTCQX.

Sonnenshein said:

“It will be our intention to create a public quotation about this in about a year’s time.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group.

Image via Bailey Reutzel for CoinDesk

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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Bitcoin is No Longer Just a Man’s Game

The stereotype of the early Bitcoin adopter is one of a techie camped out in his mom’s basement mining Bitcoin by the hundreds, and now living the high life off the profits. In those early days there was little room or scope for women in the burgeoning technology ecosystem.

However, as the digital economy has expanded to be worth just under $400 bln doors have been opening up and it’s women who’re stepping into the breach, making successes of themselves in a market that has no preconceived gender roles or prejudices.

Four out of 30 of the largest initial coin offerings this year through October had female co-founders, and two of their ICOs were among the largest so far.

Taking the market

With the cryptocurrency market expanding rapidly and new niches and subsidiary markets opening up, there is an abundance of new jobs and it seems that women are flooding in to take up these positions.

It’s not only successful ICOs that are being headed up by women. Key speakers at a number of conferences are women and Coinbase said 46 percent of its new hires this year are women, or indeed, are ethnically diverse.

An inclusive culture

It is a positive and interesting social experiment as this new market has sprouted in less than seven years and in that time there has been this new influx of talent from a previously marginalized sector of the population.

It hints that other sectors in which women struggle to break into – such as banking and finance, the main rival to сryptocurrencies – may contain institutional prejudice.

The сryptocurrency market is also showing its disruptive nature when it comes to hiring, as this inclusive culture spreads above and beyond gender, racial and cultural differences.

Moving across

There has been evidence of determined women who scrapped their way to the top of ‘old boys’  sectors, jumping ship to lead a new dawn for cryptocurrencies.

For example, Blythe Masters, the former JPMorgan Chase & Co. banker, quit her job to run Digital Asset Holdings. Another is Elizabeth Stark, who taught at Yale and Stanford universities before co-founding Lightning Labs, which is testing a technology to speed up cryptocurrency transactions.

A growing handful

Maxine Ryan, who launched Bitspark after dropping out of university and has made a success in that ICO, says there is a notable feminine influence:

“It’s still a handful, even though it’s growing,” said Ryan, about the presence of women in the Blockchain world.

Digital CUrrency Group’s director of development Meltem Demirors says women don’t always get the credit they deserve: She recalls being referred to as a “random marketing chick” earlier in her career and just last month had a man try to explain to her how crypto technology works at an event in Hong Kong where she delivered the opening remarks. She said:

“I truly believe a lot of the women are the ones who are actually doing a lot of the hard operational, strategic work.”

Kathleen Breitman, the San Francisco-based co-founder behind Tezos, says things are really on the up for women.

“I think things are much better than they were before,” said Breitman, who a year ago met with a New York hedge fund in lieu of her male co-founder and husband, only to have them remark that they were “really surprised” she was smart. Breitman concluded:

“The improvement now is due to more sophisticated actors entering the space across development and investment. There are also a lot of women who have entered the space across development and operations. Both trends have elevated the professionalism.”

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Litecoin Creator Charlie Lee Publicly Opposes SegWit2x

Charlie Lee, the creator of Litecoin, a former executive at Coinbase, and a long-time supporter of Bitcoin, has expressed his concerns over SegWit2x and the pursuit of the solution by a group of companies that are trying to alter the Bitcoin protocol without user consensus.

Lee stated:

“Miners and business cannot change Bitcoin without user consensus. So today, to show my disapproval, I’m adding [NO2X] to my name.”

SegWit2x and lack of support from community

Initially, SegWit2x was proposed by Barry Silbert-led Digital Currency Group as a follow up solution to the Hong Kong agreement; to increase the Bitcoin block size by 2MB and in return, activate the Bitcoin Core development team’s scaling and transaction malleability solution Segregated Witness (SegWit2x).

But, the majority of the Bitcoin community opposed the activation of SegWit2x, due to the lack of support from Bitcoin Core developers and users. Acknowledging the decline in the probability of the Bitcoin community agreeing to the SegWit2x proposal, the companies behind the movement proposed a hard fork execution in November, to create a separate Bitcoin-based Blockchain network, like Bitcoin Cash.

One major issue with SegWit2x is the timing of the proposal. It is rather odd that a centralized group of businesses are trying to alter the Bitcoin protocol without the agreement of Bitcoin Core developers, the open-source development community, the industry, and users. More to that, SegWit is still at its early stage in adoption and it already has demonstrated significant impact on the Bitcoin network in terms of scalability. Although only five percent of transactions are SegWit-enabled as of now, the average block size has decreased from 1MB to 0.86 and the size of the Bitcoin mempool has decreased from 150 mln bytes to less than 10 mln bytes.

The substantial decline in the size of the Bitcoin mempool is especially important to consider, because the mempool is the holding area for unconfirmed Bitcoin transactions. For the past month, the size of the Bitcoin mempool has remained below 15 mln bytes, less than 10 percent of where it was a month ago.

Let SegWit play out, wait until community seeks for SegWit2x

Not all Bitcoin Core developers and experts in the Bitcoin sector are opposed to Bitcoin block size increase. In 2015, Bitcoin pioneer and Blockstream CEO Adam Back expressed his support towards increasing the Bitcoin block size.

But, it is vital to increase the Bitcoin block size when necessary. SegWit has already scaled the Bitcoin network at a similar rate, as a 2MB block size increase and still at five percent capacity. If it reaches 50 percent and 100 percent in the upcoming months, the Bitcoin Blockchain will scale even further.

Therefore, it is crucial to let SegWit play out, have Bitcoin companies adopt the solution, and when it is absolutely necessary, pursue the idea of increasing the Bitcoin block size. It is not logical to implement a major update on the Bitcoin protocol when SegWit, which was integrated just last month, is still in progress in terms of adoption and integration by wallets and exchanges.