Markets Stay Flat To Open Week

Still Looking For A Spark To Start The Fire

Today’s market was extremely choppy with flat, unremarkable volume.

It’s par for the course at this point, but like all things it will help us get to where we’re going.

As evidence of that, we finally know when Bakkt will be launching their futures exchange: December 12th.

Importantly, they still have not received approval from the CFTC, but by making their launch date public it does speak to their confidence.

As a reminder, Bakkt is a flagship institutional organization pressing into the this space and has been advertised as a scalable on-ramp for institutional, merchant and consumer participation in digital assets.

Additionally, it aims to be an open platform for digital assets across global markets and commerce, and was, in part, pitched as a solution for day-to-day crypto payments for merchants.

A short reminder of what Bakkt is on the cusp of executing:

“Bakkt is designed to enable consumers and institutions to seamlessly buy, sell, store and spend digital assets. Formed with the purpose of bringing trust, efficiency, and commerce to digital assets, Bakkt seeks to develop open technology to connect existing market and merchant infrastructure to the blockchain.

As an initial component of the Bakkt offering, Intercontinental Exchange’s U.S.-based futures exchange and clearinghouse plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing on December 12, 2018, after receiving CFTC review and approval. These regulated venues will establish new protocols for managing the specific security and settlement requirements of digital currencies. In addition, the clearing house plans to create a separate guarantee fund that will be funded by Bakkt.”

The big announcement Bakkt made that had investors excited is that they will offer a physically settled daily futures contract for Bitcoin, which is much more preferable than what the CME and CBOE currently offer. Importantly I called attention to this in a video last month, point out that having their Digital Asset Warehouse offchain gives them the ability to perform rehypothecation and commingling.

Seemingly in response, Bakkt CEO Kelly Loeffler addressed this by stating that Bakkt will not perform these techniques that normally enable them to trade a single asset many times over. In essence, Wall St’s money comes from their ability to take a single asset and borrow against it many times over. We could very well see the defined limitations of Bitcoin’s 21 million coins be superseded by financial institution’s ability to trade “Bitcoin”, or paper Bitcoin that is borrowed against many times over.

I am still very skeptical of Bakkt’s position on this. Simply because they say “we will not do this” does not mean that will be true ad infinitum. When they’re a year out, and deem it won’t be noticed by investors, they could easily come out and say, “after careful consideration, we are changing our policy on rehypothecation in order to better meet the demands of our shareholders.”

So, unfortunately, Bakkt launching is bittersweet.  

This is not a direct criticism of them directly, but rather the coming tide of institutionalization that seems inevitable at this point.  

Let’s spend the rest of this newsletter talking about some altcoin portfolio additions we’re making:

DGTX: You’ve probably heard us talk about DGTX, and for good measure. They’re on the cusp of getting on a bigger exchange, they have a big announcement lined up in Q4, they will be presenting at the Malta conference on Nov. 1st, and they will go live Q1 2019. They are aiming to be the feeless version of Bitmex, which we see as being a very popular alternative.

RVN: Unfortunately this one has absolutely skyrocketed lately so right now might not be a good entry point, but we wanted to get in anyways. We should see continued excitement around this one until their mainnet launch on Oct. 31st. The Ravencoin protocol is open-source and available to the public, and focuses on the creation of digital assets on its Proof-of-Work (PoW) blockchain. The blockchain itself is secured by sixteen different hashing algorithms, all of which are rotated on a non-patterned basis. The algorithm changes depending on the final digits in the preceding block hash, making it impossible to predict by ASIC mining machines.

As stated in the initial release notes last year:

“The core developers are currently focused on building the asset layer which will allow Ravencoin to facilitate the transfer of assets.  There is a hard-fork planned for the network to implement this additional asset layer in around October/November 2018 time frame.”

I am concerned that it costs 500 RVN which are burned to create an asset. If RVN price is low thats bad for investors, if price is high then RVN isn’t a cost effective platform to launch an asset and people will move into substitute platforms. The flat, unchanging 500 RVN is crude and not likely to lead to optimal outcomes. Hopefully they change this in the future.

QNT: Quant Network (Overledger) aims to be the first inter-operable blockchain operating system that facilitates the internet-scale development of decentralised multi-chains applications.

OverLedger is focusing on three goals:

1. Developing an interface to connect the world’s networks to multiple blockchains.

2. Bridging existing networks (e.g. financial services) to new blockchains.

3. Developing a new blockchain operating system with a protocol and a platform to allow developers to easily create next-generation, multi-chain applications.

This one has received some great attention lately. Interoperability is always a smart play.

SWM: Swarm held their ICO over a year ago.

Swarm is an Ethereum-based investment platform that enables the tokenization of traditional assets such as stocks and real estate, making them more tradeable and more liquid. Importantly, Swarm provides a legal framework to make tokenized securities compatible with regulations around the world.

Simply put, the project has massive potential. As crypto continues to make waves internationally, an increasing amount of the working class will double-take and want to dabble, and with global internet usage on the rise, the opportunity will be available to them.

With the ability to aid the operations of experienced investors as well, Swarm is aiming high. They had a busy August 2018, where they released their Market Access Protocol, announced a partnership with OpenFinance Network, and tokenized the popular investing app, Robinhood.

TomoChain: TomoChain is a public EVM (Ethereum Virtual Machine) compatible blockchain with the following advantages: low transaction fees, fast confirmation times, double validation, and randomisation for security guarantees.

TomoChain is an innovative solution to the scalability problem with the Ethereum blockchain, and other current blockchain platforms

Q3 was a busy quarter for TomoChain, successfully launching testnet 2.0 — as well as the Testnet wallet, Tomo Scan, Tomo Master and Tomo Stats. Additionally the walk-through for setting up a Testnet Masternode was released and there are several test nodes currently running.

The draft sharding design paper was also released — which outlines how sharding will be implemented using TomoChain’s unique masternode architecture. It is well worth a read.

Mainnet is due to launch this quarter (Q4), likely late November/early December.

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Defensive Actions for the next trading day: 

• None.