Here’s a Useful Fund For Investing In Blockchain Without Buying Bitcoin

“Buy the rumour, sell the news” is an old market saying – and we got a classic of the genre yesterday.

It was a huge day in the evolution of bitcoin. From its origins on obscure chat boards, the open-source experiment of a few renegade computer programmers, to mainstream investment vehicle.

And then yesterday, for the first time, a nation – El Salvador – made bitcoin legal tender. The bitcoin price was steadily running up on the story – from $30,000 to $53,000. Then “Bitcoin Day” arrived and wallop: it sells off $7,000 to $46,000. The bitcoin price “should” have risen. It didn’t; it rose on the rumour and sold on the news.

How many times? It’s happened before and it will happen again.

How to bet on cryptocurrencies without having to own cryptocurrencies

Traditional investors have long been searching for a vehicle by which they can own bitcoin through their Sipp or Isa, via a regular broker account. The older generation in particular don’t want to get involved with wallets and keys and storing coins on hard drives in safes and all the rest of it. They just want to be able to buy and sell bitcoin through their regular broker, with which they are familiar.

In response to this demand there have been numerous attempts to establish bitcoin ETFs, but every attempt has run into some sort of regulatory issue. The most successful were probably the Greyscale Bitcoin Trust, listed in the US, or Coinshares Swedish listed XBT Bitcoin Tracker One. Neither is quite the same as owning bitcoin, but they do track the price.

But another vehicle has come to my attention and I thought I’d flag it up for you today, as I think it might be quite useful. That is the VanEck Vectors Digital Assets Equity UCITS ETF (LSE: DAGB).

It invests in companies that, to use its own lingo, “are driving the blockchain revolution”. That is to say in miners, exchanges, payment providers, service providers and companies that hold and trade crypto and crypto patents.

If I were to draw a parallel, I’d say that, rather than buying gold, it’s like holding a basket of gold mining companies or a gold mining ETF.

The ETF is listed in London, and it’s been going since the beginning of May. There’s a dollar denominated version whose ticker is DAPP – and a sterling version, which is probably most useful to us, with the ticker DAGB (there are also euro-denominated versions listed in Germany (DAVV) and Italy (DAPP), and a Swiss franc denominated version listed in Switzerland (also DAPP)).

It’s still small – very small – but as awareness grows it has the potential to grow too. It holds 25 companies in total, with 75%-plus weighting to the US and Canada and 12% to China, and it rebalances on a quarterly basis. I’ll post the holdings below, but in case you’re not familiar with them, I’ll outline what the major ones do. 

It’s biggest holding is Marathon Digital Holdings (Nasdaq: MARA) a Nasdaq-listed bitcoin miner. Then there’s Jack Dorsey of Twitter fame’s payment company Square (NYSE: SQ) and Coinbase (Nasdaq:COIN), the recently-listed wallet-provider and exchange

Other miners it owns include Riot (Nasdaq: RIOT), Hive (Vancouver: HIVE) and Argo (LSE: ARB), while other notable holdings include Silvergate (NYSE: SI), the bank for fintech and cryptocurrency businesses, and Michael Saylor’s Microstrategy (Nasdaq: MSTR). 

Saylor has in the past year totally got the bitcoin bug and become one of the most vocal and articulate cheerleaders for the space. His company, Microstrategy, has gone from being a software company to a bitcoin holding vehicle, owning more than $5bn in bitcoin. He’s raised debt to do it so it is a highly leveraged bitcoin play.

Anyway, here are the main holdings:

HoldingTickerSharesMarket value
(US$)
% of net
assets
Marathon Digital Holdings IncNasdaq: MARA37,8581,491,2279.15
Square IncNYSE: SQ5,3801,430,1658.77
Coinbase Global IncNasdaq: COIN5,0421,345,2568.25
Hut 8 Mining CorpToronto: HUT125,4231,261,6757.74
Silvergate Capital CorpNYSE: SI7,986947,2995.81
Microstrategy IncNasdaq: MSTR1,378892,9585.48
Hive Blockchain Technologies LtdVancouver: HIVE257,250857,1615.26
Voyager Digital LtdToronto: VOYG53,621799,9654.91
Riot Blockchain IncNasdaq: RIOT24,755794,8834.88
Bitfarms Ltd/CanadaVancouver: BITF128,704763,9734.69
Galaxy Digital Holdings LtdToronto: GLXY34,963732,1894.49
Taiwan Semiconductor ManufacturingNasdaq: TSM5,431677,2464.15
Canaan IncNasdaq: CAN64,785620,6403.81
Northern Data AgFrankfurt: NB26,290568,4983.49
Argo Blockchain PlcLSE: ARB288,705533,3123.27
Bit Digital IncNasdaq: BTBT45,480533,0263.27
Ebang International Holdings IncNasdaq: EBON157,795397,6432.44
BC Technology Group LtdHong Kong: 863179,501372,2122.28
Coinshares International LtdStockholm COIN26,030257,8651.58
Diginex LtdNasdaq: EQOS40,141222,3811.36
DMG Blockchain Solutions IncVancouver: DMGI201,595205,8231.26
Huobi Technology Holdings LtdHong Kong: 1611113,001204,9561.26
Bigg Digital Assets IncToronto BIGG183,875180,4551.11
Future Fintech Group IncNasdaq: FTFT58,088156,8380.96
Bitcoin Group SeFrankfurt: ADE1,22261,2300.38
Other/Cash-4,083-0.03

Bitcoin is supposed to be outside of the traditional financial system so it sounds funny saying that I own DAGB in my Sipp, but I do. I’m not, however, recommending that you go out and buy it straight away. I see it more as a useful vehicle to be aware of.

My overriding theory that we are in a period of “frustrating consolidation” for bitcoin remains in play, so I would try to wait for the sell off to get really harsh before you buy: buy the dips, as they say. But this should be a good vehicle to play the bitcoin game, should you see fit.

Regulating the unregulatable

In other news, I see that a bit of a crypto storm is now brewing in Brussels, where the European Parliament is about to try and regulate cryptocurrencies. Good luck with that! What could possibly go wrong when regulators are trying to regulate something they don’t understand, one of the purposes of which is to obviate bureaucracy?

The polling company Redfield and Wilton has run a poll and found that the overwhelming majority of Europeans want cryptocurrencies regulated by their own countries and not at the EU level, with many seeing EU regulation as a power grab. Greece, The Netherlands and Latvia are the most anti-EU regulation, while Spain and Portugal are the most pro. Make of that what you will.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Dominic Frisby author headshot

By: Dominic Frisby

Source: https://moneyweek.com/

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Digital Assets and Blockchain Technology: US Law and Regulation

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Boom or bust? Welcome to the freewheeling world of crypto lending


		

Haven’t Checked On That Bitcoin Account In A While? Your State Could Have It Liquidated

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If you know you have an old bitcoin or dogecoin account somewhere but haven’t gotten around the digging up your login information, you may have a nasty surprise waiting for you. With the rise of cryptocurrency, nine states have now adopted rules that include it as a form of unclaimed property and several more are requiring or recommending that companies report their unclaimed virtual currency.

That means that this fall, when banks, insurers, retailers and state government agencies are required to annually report and remit any unclaimed funds, your old cryptocurrency account could be liquidated and turned in to the state’s unclaimed property office.

There are a lot of concerns about this possibility, not the least of which is the fact that liquidating a cryptocurrency account prevents the owner from realizing any future gains. But there’s also a larger economic issue, says Kristine Butterbaugh a solution principal, at the tax firm Sovos.

“Some of our clients don’t want to liquidate these accounts because it could have an impact on the market as a whole,” she says. “We’re talking millions of accounts, potentially, across the country.”

What’s muddling things is a lack of clarity on the rules around cryptocurrency. Unclaimed property law is written for traditional property but now it’s being enforced for non-traditional property.

Here’s how unclaimed property law usually works: Every fall, businesses are required to remit any unclaimed property to the state. For accounts and other financial instruments to be considered unclaimed, they have to be dormant for three to five years, depending on the state. That means the account holder hasn’t accessed the account or responded to any communications. Once the account is deemed unclaimed, it gets transferred to the state’s general fund.

That’s all well and good when we’re talking about a traditional bank account that is sitting around earning minimal — if any — interest. But states aren’t equipped to hold cryptocurrency, so they’re telling firms to turn those accounts into cash before handing them over.

Now let’s say you watched the meteoric rise of dogecoin this past spring and decided to go hunting for those coins you invested in on a whim a few years ago. And when you finally tracked them down you discovered your account was liquidated back in November, robbing you of thousands of dollars in potential earnings? You’d probably be pretty angry.

“Companies are in a really uncomfortable position because they’re unsure whether or not they should be liquidating for fear of owner retribution down the road,” says Butterbaugh. “And then you have the state saying, ‘You have to,’ even if it’s not explicitly in the statute.”

States are also motivated to enforce unclaimed property laws because it’s a revenue gain for them. Although the state keeps track of the amount due and the rightful owner can still eventually claim the money at any time, states in the meantime can use the money for their general operations. This may seem like a gamble, but only about 2% of unclaimed property ever gets returned to the true owner, according to Accounting Today.

Delaware — home to more than a million companies — is one of the most aggressive states when it comes to auditing companies on unclaimed property law compliance and has secured hundreds of millions of dollars over the last decade in unclaimed property and fines.

So, companies are stuck between not wanting to get dinged for noncompliance and being afraid to liquidate a cryptocurrency account. They want more clarity on what to do and Butterbaugh says two places — New York and Washington, D.C. — are working on a solution.

But in the meantime, she advises companies dealing in cryptocurrency to start addressing their dormant accounts now.

I am a fiscal policy expert, national journalist and public speaker who has spent more than 15 years writing about the many ways state and local governments collect and spend taxpayer money. I sift through that complicated information then break it down in quick ways that everyone can understand. I’m most known by policy wonks for my work at Governing magazine and for my fellowship at the Rockefeller Institute of Government where I write about the intersection of government and the future of work. My work is also in the Wall Street Journal, Bloomberg, CityLab and other national publications. Frequent and enthusiastic radio and podcast guest.

Source: Haven’t Checked On That Bitcoin Account In A While? Your State Could Have It Liquidated

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Curious About Crypto? Here’s What 10 Financial Experts Think

A photo to accompany a story about financial experts' advice for investing in cryptocurrency

Everyday investors are overflowing with cryptocurrency questions, according to the financial advisors hired to answer them.

There is clearly an “emotional euphoria that seems to be sweeping through the public around cryptocurrency,” says Frederick Stanfield, a CFP with Lifewater Wealth Management in Atlanta, Georgia.

But for the average person focused on retirement planning and financial stability, is it time to consider investing in cryptocurrency?

The answer is complicated, so we asked financial advisors for their crypto advice, and here’s what 10 of them are telling clients. In an emerging field with few set rules and norms, we discovered some universal truths that everyone should know before putting money in cryptocurrency.

First of all, financial advisors say a healthy dose of skepticism is a crucial place to start, and you should never invest in crypto if it takes away from other goals and financial fundamentals like paying off debt, building an emergency fund, or maxing out your retirement accounts.

As difficult as it may be, do not become seduced by the intrigue and allure of this new technology, says Stanfield. Instead, employ the same mindset you bring to your regular investment strategy.

Here’s what else the experts want you to know about cryptocurrency investing:

Be Prepared for Loss

As with any investment, financial gains are far from guaranteed with cryptocurrency investing. For some financial advisors, crypto looks more like a lottery ticket than an investment strategy.

That means you should only put in what you’re OK with losing. “On a spectrum between gambling and investing, I think it’s closer to the former,” says Matt Morris, principal advisor at Sanderling Finance in Columbia, South Carolina.

As a high-risk, high-reward investment, keep any crypto investments in perspective amid your broader goals and finances. As with certain types of gambling, “you have a high chance of losing it all, but a small chance of winning it big,” says Nate Nieri, a CFP with Modern Money Management in San Diego, California. “Just don’t gamble an amount that would burden your family or prevent you from achieving your goals” if you lost it all.

Steer Clear if You’re Risk Averse

If you’re risk averse, crypto isn’t the investment for you.“How well can you sleep at night knowing that this is an emerging asset class with high volatility? And if you were to wake one morning to find that crypto has been banned by the developed nations and it became worthless, would you be OK?” asks Stanield.

If you’re going to be constantly stressing about your crypto investment, or tempted to change your investments in light of the volatility that comes with crypto, then you’re better off putting your money in a more stable investment, according to Stanfield.

“I believe it is still in its infancy stage, and just like any new fund or IPO, there is a level of uncertainty about the future that I’m not ready to stomach,” says Alajahwon Ridgeway, owner of Ridgeway Wealth Management in Lafayette, Louisiana. “I believe it … is an unnecessary risk at this point for my clients to reach their financial goals.”

There’s also far less historical data available about cryptocurrency to help investors make informed decisions — unlike conventional ETF and index/mutual funds. Crypto investors face additional risk in the form of poor or inaccurate trade data, competition among fellow investors, theft, loss of wallet passwords, supply and demand issues, government regulation, and energy consumption concerns, says Chelsea Rude, a CFP at Rude Wealth Advisory in Olney, Illinois.

“Most importantly for investors, there is a lack of a well designed and tested way to value the assets,” Rude says. This means crypto investors are essentially going in blind, and subjecting themselves to the uncertainty that comes with any new business or investment

Know Why You’re Interested In the First Place

Some people see crypto as an emerging investment, while others see it as an interesting new global currency you can use instead of the U.S. dollar or other international currencies. But whether crypto has long-term staying power on either front is still uncertain.

“I strongly believe the vast majority of people who own crypto currency are doing so for all the wrong reasons and misunderstanding what they are truly buying,” says Ben Lies, chief investment officer at Delphi Advisers.

Many experts are concerned about people dumping their money into crypto without real understanding of the area. Do your own research, and make sure you’re thinking about your investment in the right way.

“Hype and excitement around the space are not reasons for inclusion into any portfolio, but I believe there are compelling reasons to consider cryptocurrencies,” says James Vermillion, owner of Vermillion Private Wealth in Lexington, Kentucky. “When discussing crypto with clients I emphasize education and understanding. It’s important to note that there are thousands of cryptocurrencies in existence and they are not created equally. Due diligence is important, just as it is when looking at stocks or other investment vehicles.”

Nieri warns those who see Bitcoin as a currency to think about what that means for investing. “I don’t typically trade or have a currency hedge as part of my investment strategy. Would you have ever thought about trading dollars for Euros as an investment? In order for Bitcoin to be a legitimate currency, the world’s governments would need to accept it as a global currency, something that has a remote likelihood,” Nieri says.

Keep Crypto In Its Place

Don’t rely on crypto investments for your retirement or overall financial strategy. Make sure the majority of your investment portfolio is made up of stable assets projected for long-term growth.

“What I am sharing for [my clients] to do is build their future financial pie with investments such as stocks and bonds. If there is extra money they want to play with, buying crypto is an option,” says Eric Powell, financial advisor and founder of the Future Mill.

Make sure your overall investment portfolio is predominantly made up of conventional investments like stocks and bonds, says Powell. But within any crypto investments you might have, experts recommend sticking with the big names.

“I personally do not go beyond Bitcoin and or Ethereum,” says Michael Kelly, a CFA at Switchback Financial in Madison, Connecticut.  “I feel those two have a bit more of an established base and feel the risk of other coins becomes too significant.”

By:

 

Source: Curious About Crypto? Here’s What 10 Financial Experts Think | NextAdvisor with TIME

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Decentralized finance (commonly referred to as DeFi) is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments, and instead utilizes smart contracts on blockchains, the most common being Ethereum.[1] DeFi platforms allow people to lend or borrow funds from others, speculate on price movements on a range of assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts.[2]

DeFi uses a layered architecture and highly composable building blocks.[3] Some DeFi applications promote high interest rates[2] but are subject to high risk.[1] By October 2020, over $11 billion (worth in cryptocurrency) was deposited in various decentralized finance protocols, which represented more than a tenfold growth during the course of 2020.[4][2] As of January 2021, approximately $20.5 billion was invested in DeFi.[5]

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References

Braun, Alexander; Cohen, Lauren H.; Xu, Jiahua (May 2020). “fidentiaX: The Tradable Insurance Marketplace on Blockchain”. Harvard Business School. Retrieved 2021-01-05.

Crypto’s Terrible, Horrible, No Good, Very Bad Week

It started even before Elon Musk took the stage on Saturday Night Live. The May 8-14 issue of The Economist arrived in the mailbox, delivering a quiet, existential blow to cryptocurrency as we’ve known it for the last decade or so. The publication’s cover package offered a vision of “govcoins,” digital currencies backed by central banks:

Government e-currencies would score highly, since they are state-guaranteed and use a cheap, central payments hub. As a result, govcoins could cut the operating expenses of the global financial industry, which amount to over $350 a year for every person on Earth.

Although the motivation for these “govcoins” is not to push existing cryptocurrencies to the margins, that would be the likely effect. Then, as Musk appeared on SNL, the price of Dogecoin plummeted. Although news stories attributed Dogecoin’s tumble to a Weekend Update skit that labeled the joke-coin a “hustle,” the selloff started at least half an hour before that. It felt more like a classic “buy the rumor, sell the news” dynamic.

But Musk reserved his true market-moving power for midweek, when he tweeted that Tesla will stop accepting Bitcoin as payment for cars. The reason, Musk said, was “rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” In a later tweet, Musk called the amount of electricity used to produce Bitcoin recently “insane.” Critics pointed out that Musk and Tesla could easily have known about Bitcoin’s energy suck when they embraced the currency months ago; nonetheless, the price of Bitcoin sank by as much as 15% that day.

Musk’s pronouncements put the spotlight on cryptocurrencies that claim to require less electricity to produce. All of a sudden, everyone is touting cryptocurrencies that operate on a more efficient standard than Bitcoin’s “proof of work” standard. The flurry recalls the hype around sustainable aviation fuel or ‘70s-oil-crisis car advertising, in which the sole marketing criterion was which vehicle got the most miles per gallon.

The recently launched Chia Network, for example, plays up its “proof of space and time” standard as more energy efficient. Other cryptocurrencies, like Nano and Cardano, took to Twitter to boast about their supposed energy efficiency. On The Defiant podcast, crypto coder Preston Van Loon insisted that Ethereum—a versatile cryptocurrency that’s still valued about 400% higher than on January 1—is “about six months from proof-of-stake.”

Of course, the dramatic dropoff in Bitcoin and Dogecoin prices is both predictable and relative; the idea that Dogecoin is still trading at over 50 cents a coin is ludicrously mind-blowing. Nonetheless, the Musk-Tesla decision around Bitcoin feels like a watershed moment. Cryptocurrency mining’s energy use has gone from a fringe concern to front and center in a matter of weeks. As FIN noted last week, some state legislatures are beginning to discuss limits on crypto mining. It’s going to get harder for crypto enthusiasts to avoid this issue.

Don’t Miss Out on Future FIN

This edition of FIN is going out to our full list of e-mail sign-ups, which we provide about once a month. For the full FIN experience, be sure to subscribe: you’ll gain access to FIN’s exclusive industry interviews, timely charts, and groundbreaking analysis.

Fintech Meets Healthcare

One of the most powerful fintech applications imaginable is in American healthcare space. The United States spends trillions of dollars a year on health care, and yet the outcomes are consistently below those of other developed countries. There are dozens of reasons for that, but one that seems ripe for solving is how payments work.

The system of private health insurance is tremendously inefficient, to the point where it actively interferes with patient care. Americans almost never know what a given procedure is going to cost, how much their insurance will or won’t cover, or even when they will be billed. Surveys indicate that more Americans stress out over medical bills more than over their actual care. This chart shows why half of all Americans have been late to pay a medical bill:

For their part, doctors and other medical providers feel swamped with paperwork and antiquated billing systems. One company that’s trying to fix this broken mess is Waystar, a Chicago-based healthcare technologies that offers a cloud-based billing system to help rationalize payments. Waystar claims to currently handle about one out of every four healthcare transactions in the US.

In an interview with FIN, Waystar CEO Matthew Hawkins acknowledged that while the American health care system has for decades been slow to digitize, recent legislative changes—such as 2009’s “meaningful use” law—have spurred positive changes. Moreover, the shift to telehealth services brought on by the COVID pandemic should make the system more efficient. Hawkins said his company’s ultimate goal is “paving the way toward price transparency.”

He laments that “we’ve all gotten comfortable behaviorally with going to a provider, receiving health services, and then not really knowing the cost of those services.” Imagine an app that would tell you in advance what a surgical procedure was going to cost you, and even gave you the option to set up a payment program before you see the doctor!

Robinhood’s Customer Service Glitches Explained

Sheelah Kolhatkar is one of the most talented business writers in the world. And given the connection that former officials of S.A.C. have to the Robinhood story (Kolhatkar wrote the book on S.A.C.), she’s by far the best person to write about Robinhood for The New Yorker. Unfortunately for her and the publication, Robinhood has been so heavily covered since January that a lot of her current piece feel overly familiar.

But the one thing she really nails is Robinhood’s terrible customer service. According to her story, Robinhood outsourced its customer service in 2016 to a company called Voxpro, located in Ireland. Voxpro’s poorly paid employees didn’t have the licensing or certification to deal with investors’ problems. In 2017, Robinhood made the conscious decision to eliminate the option for its users to call and speak to anyone. The company later restored an option for an investor to get a callback, but these years of customer-service neglect explain a lot.

FINvestments

🦈Number of the Week: In the April 11 issue, FIN predicted that Better.com would go public this year. Sure enough, that is happening, via SPAC. The company, which made its fortune selling mortgages but clearly plans to expand into a broader range of financial services, will be valued at $7.7 billion.

🦈PayPal’s march to become an overall e-commerce hub continues; this week it bought Happy Returns, a Santa Monica-based company that makes it easy for people to return in person items that they’ve bought online.

By: James Ledbetter

Source: Crypto’s Terrible, Horrible, No Good, Very Bad Week – James Ledbetter’s FIN

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Related Links:

Bitcoin alternatives: The ‘green cryptocurrencies’ that want to solve Elon Musk’s crypto climate concerns

Bitcoin crashes as Elon Musk announces Tesla cars can no longer be bought with cryptocurrency

Former BlackRock executive says Wall Street’s green investing is ‘PR spin’

UK ‘halfway to net zero’ due to dip in emissions, analysis reveals

Is the government doing enough to incentivise households to go green

The environmental costs of fast fashion

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