While many see this as in interesting development that will rekindle the interest of retail investors, some are more critical about the nature of the listing. Coinbase has garnered the power in the crypto-ecosystem to become king maker since any coin it lists instantly sees a 20% appreciation in price. The move to include 0x , in which Coinbase’s co-founder Brian Armstrong has a stake in publicly, has led many the question the nature of this listing.
This is another press release that is without much substance behind it. There have been several mainstream banks and financial institutions looking into crypto since last fall’s bull-run but none of them have even piloted a product offering. The key problem with accredited / institutional investors investing in crypto is one of custody. These investors do not want to hold on to their cryptocurrency in ledger wallets or worse, leave them on their wallets in the exchanges. Fidelity is trying to build a new crypto wallet to hold ETFs but the SEC is nowhere close to approving a crypto ETF. We have the proverbial chicken-egg problem playing out in crypto
Coinbase’s opportunistic move to launch an Index Fund with 4 highly-correlated assets without a custody solution and a minimum buy-in of $250,000 was incredibly short lived. It announced the closure of its Index Fund amidst the “Crypto Winter” where interest from even speculative investors is wearing off. The mammoth initial investment in an untested asset class with 2/20 management fee failed to elicit serious investors
At a conference in Dubai, a commissioner at the U.S. Commodity and Futures Trading Commission (CFTC), Brian Quintenz, explained how certain smart contracts could constitute a prediction market, which the CFTC currently prohibits. Binary options and other derivatives that allow users to bet on certain future events like the assassination of public officials or war are considered to be “against the public interest.” Although Quintenz’s opinion doesn’t necessarily apply to the entire CFTC, what’s interesting about his statement is the broad liability that could befall a smart contract code developer if his/her code were used in a prediction market.
The FSB, an international body that monitors and makes recommendations about global financial stability, released a report that assessed the risks present in crypto-assets and their markets on global financial stability. The report analyzes risks such as market liquidity, volatility, leverage, and operational risk as well as the current exposure of financial institutions. The FSB concluded that crypto-assets are not currently functioning as a medium of exchange, store of value, or unit of account and do not currently pose a risk to financial stability. However, the report warns that crypto-assets could affect financial stability as they continue to evolve.
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