Coinigy Compendium #9

Coinigy Compendium #9

Coinigy Compendium #9 is out! Apart from the product updates and other research pieces we do, the Compendium series aims to highlight key pieces of work from the community as a whole. Along with this, we briefly describe key industry news developments that took place during the past week that community members may have missed. If you have any questions or think we missed something important, feel free to let us know!

Research and Insights

Rehypothecation: BTC’s path to becoming king of collateral by Patrick Dugan through The Block

  • Rehypothecation is the practice in which a financial institution (brokerage, bank, etc.) uses collateral posted by clients for other uses. In the traditional financial system, rehypothecation is relatively common, and those clients who allow rehypothecation are usually compensated in some way such as a fee rebate. Especially with Bitcoin's Lightning Network, there have been concerns voiced about the practice of rehypothecation in L2 protocols. In this piece, Dugan eloquently explains why these concerns are 'overblown', and further, may even be a necessary component of BTC becoming the 'king of collateral'.

A Primer on Bitcoin Investor Sentiment and Changes in Saving Behavior by Adamant Capital

  • New fundamental metrics for valuing Bitcoin and its use are constantly being explored. This has led to the creation of ratios like NVT, MVRV, Mayer Multiple, and more. Here, Tuur Demeester and the team at Adamant offer two new novel ways of measuring saving patterns in Bitcoin: Relative Unrealized Profit/Loss Ratio (for investor sentiment) and HODLer Position Change (for insider buying and selling).
    • Relative Unrealized Profit/Loss Ratio: Realized capitalization (RC) is valuing coins at the time they were last moved and then combine them into an aggregate value (i.e. Bitcoin users realizing the value at point of transfer). To deduce unrealized capitalization (UC), you can simply subtact RC from the market cap (MC - RC). Then, by dividing UC by MC (UC / MC), you receive Relative Unrealized P&L. This provides a measure of investor sentiment sense because a high ratio (i.e. high amount of unrealized profit) implies investors are being greedy while a low ratio implies investors are becoming more apprehensive in continuing to hold.
    • HODLer Position Change: Based on the idea of Liveliness (sum of Bitcoin Days Destroyed divided by the sum of Bitcoin Days Ever Created), HPC essentially measures how many coins are being kept as long-term investments. With this, coins identified as lost, and therefore not recoverable, are not included so that only coins being moved are counted.

Cryptonetwork Governance as Capital by Joel Monegro of Placeholder VC

  • Monegro explores how cryptonetworks that utilize a token with governance rights are a new form of capital asset. These tokens derive value from their power to affect how the rules of a netowrk are made and changed. While this concept needs to be explored further, we are witnessing new assets being created -- so-called 'network capital'.

Industry News Bits
Banking giant J.P. Morgan is creating their own blockchain-based digital currency for payments.

Carlos Colesa, a Deputy General Director at Spain's Central bank, wrote a piece on Bitcoin in which he claims it to be an inefficient payment system.

Digital currency exchange Coinbase has acquired blockchain surveillance platform Neutrino.

Pantera, one of the largest crypto-focused venture funds, has secured over $125 million for its new fund.

CME's bitcoin futures market reached a new record high daily volume with 18,338 contracts ($360M) traded on February 19th.

Brazil-based bank Banco BTG Pactual is planning to raise $15 million through a security offering for a token backed by distressed real estate.

Cryptoasset hardware giant Bitmain announced a new 7nm chip that enables cheaper and more efficient mining of SHA256-based proof of work coins.

ShapeShift, a popular tool for instant conversions between cryptoassets, has started the process of going through a full rebrand.

Craig Wright, a highly controversial figure, filed a comment with the CFTC about the cryptoasset space in which he continues to claim that he is Satoshi Nakamoto (LOL!).

Through its Seoul Innovation Growth Fund, South Korea says it plans to invest over $1 billion into blockchain and fintech startups by 2022.

Cambridge Associates, a pension and endowment consultancy, stated that institutional investors should begin to explore cryptoasset investments for the long-term in a report released Monday.

Coinbase-backed cryptoasset company Shift is discontinuing their cryptoasset debit card.

In a podcast with ARK Invest, Elon Musk said that "crypto is a far better way to transfer value than pieces of paper," along with other comments supportive of cryptoassets.

Institutional cryptoasset platform trueDigital has hired its new CEO, Thomas Kim, away from Bridgewater Associates, the world's largest hedge fund.

In the announcement for their next generation Galaxy S10 smartphone, Samsung confirmed that the device would come with native support for private key storage.

Eurex, the largest Europe-based futures and options exchange, is planning to launch new contracts tied to Bitcoin and other cryptoassets.

Binance, one of the world's largest cryptoasset exchanges, has launched a testnet for its upcoming 'Binance Chain'-based DEX.