Category: Investing

Categories
Banking FTX Investing Markets

FTX Finalises Deal with BlockFi, Option to Buy for Up to $240 Million

Embattled crypto lender BlockFi has signed a deal with FTX US, the American arm of Sam Bankman-Fried’s crypto exchange, which will see FTX increase its credit facility to BlockFi with an option for FTX to acquire the struggling lender.

In an extensive Twitter thread, BlockFi co-founder Zac Prince explained the deal was valued at up to US$680 million, including a US$400 million revolving credit facility and the option for FTX to acquire BlockFi for up to US$240 million. According to Prince, as of July 2 the deal was still subject to shareholder approval.

BlockFi Hits Choppy Financial Waters 

BlockFi started to experience financial strain following the May collapse of the Terra blockchain and the subsequent bankruptcy of the highly LUNA-exposed Three Arrows Capital, to whom BlockFi had made sizeable loans.

These events – combined with the recent aversion to centralised lenders sparked by Celsius’ liquidity crisis, and the general market decline – have tested BlockFi’s resilience and forced the lender to shed around 20 percent of its workforce, approximately 170 employees.

In June, FTX extended a US$250 million line of credit to BlockFi to help the lender secure client funds. With this new deal, the credit facility has been extended to US$400 million.

According to Prince, BlockFi has not yet had to draw on the available credit, and the CEO insists the lender is still financially strong despite securing an increased line of credit and agreeing to a sale price far lower than its most recent valuation of US$1 billion:

We have not drawn on this credit facility to date and have continued to operate all our products and services normally. In fact, we raised interest rates, effective today. 

Zac Prince, co-founder and CEO, BlockFi

Deal Protects Client Funds

Prince said the deal was primarily about ensuring BlockFi could protect client funds and that FTX was the ideal partner as it shares the same client-first values:

“As a matter of principle, we fundamentally believe in protecting client funds,” Prince tweeted. “Not only because it’s absolutely the right thing to do, but this also benefits the ongoing health and adoption of crypto financial services worldwide. Therefore, it was important to add capital to our balance sheet to bolster liquidity and protect client funds.”

We were presented with various unattractive options where client funds would take a haircut or be behind a lender in the capital stack … Ultimately, we found a great partner in @FTX_US, who shares our commitment to clients. This represents the best path forward for all @BlockFi stakeholders and the crypto ecosystem as a whole.

Zac Prince, co-founder and CEO, BlockFi

According to Prince, the terms of the deal make repayments to FTX subordinate to protecting client funds, which means if the worst were to happen, and BlockFi couldn’t pay all its bills, priority would be given to cashing out clients.

Not Everyone Is Convinced

BlockFi’s claims of financial strength have been widely questioned on Twitter, with many users wondering why a company in a supposedly strong position would seek an increased line of credit and accept an option to acquire it for a fraction of its valuation:

Categories
Australia Bitcoin Bored Ape Yacht Club Crypto News Cryptocurrencies Investing NFTs

Brisbane Man’s Crypto Bet Enabled Him to Buy a Home Mortgage-Free

In less than a decade, Brisbane IT specialist Joe Bridge turned a small-time household crypto mining hobby into an A$1.2 million profit that enabled him to buy a house outright along with two motorcycles and a pair of boats.

Bridge, now 38, was a law student living at home in 2013 when he installed mining software on three computers and used 10 graphics cards to generate Litecoin and Dogecoin.

Traded $LTC and $DOGE for ‘More Than a Dozen’ BTC

Although the power bills at his parents’ house in Paddington, in Brisbane’s inner west, ramped up to over A$600 per month, Bridge mined enough $LTC and $DOGE to trade it for “more than a dozen” bitcoins. He held on to the BTC until 2017 when the price began to spike, then invested some of his stash on motorbikes and boats.

Joe Bridge at his Clontarf home with one of his motorcycles. Source: ABC News / Alex Papp

By the time bitcoin hit its all-time high in November 2021, Bridge was able to cash out A$880,000 for a house at seaside Clontarf in Brisbane’s northeast, and still had enough left over to pay a $290,000 capital gains tax bill.

Cautionary Advice for Would-Be Investors

No longer active as a crypto investor, Bridge has cautionary advice for anyone thinking of buying the current dip in bitcoin’s price. “I think it’s a dangerous time to be getting into it,” he told ABC News last week. “I would imagine it’s possible [to still make money], though. [But] would I recommend it? No. I’m not currently participating.”

I do think there will be a shake-out and the speculative bubble that surrounds [cryptocurrency] will disappear. Perhaps from the ashes of that, something with real utility to humanity may arise, but there’s a lot of debate about what product that is. I don’t think it’s bitcoin.

Joe Bridge, IT consultant in financial software, former crypto investor
Crypto market cap since November 2021. Source: CoinMarketCap

More than a million Australians now own some form of cryptocurrency, according to a Roy Morgan survey conducted in February this year. However, chances are that none of them will ever get as lucky as Australian NFT collector Steve Morlando, who in May was able to turn US$300 into a whopping US$5 million when he bought a rare Bored Ape for what amounted to 0.01 percent of its then-current value.

Like Joe Bridge, Morlando plans to hang on to his investment “for a minimum of 10 years”.

Categories
Australia Crypto News ETFs Investing Surveys

Millennials Prefer Crypto Over Investment Funds: Survey

A new survey conducted among young adults aged 25 to 40 in the US by French investment firm Alto reveals that more millennials are investing in crypto than in mutual funds.

According to Alto’s report, titled “How Millennials See Their Financial Future”, nearly 40 percent of the survey’s millennial respondents have invested in cryptocurrencies.

Coincidentally, the same percentage of Australian millennials indicated their preference for digital assets over real estate in a similar survey conducted by international crypto exchange Kraken almost exactly a year ago.

Another survey conducted by Australian online investment broker Pearler in May 2021 indicated that “a significant number” of Aussie millennials intended to retire at the age of 50 using their investments in exchange-traded funds (ETFs) and cryptocurrencies.

Current Market Conditions Dissuade Potential Investors

The 40 percent figure mentioned in the latest Alto survey also mirrors the proportion of American millennials who own stocks. The report notes that most millennials either already own crypto or are considering buying some, though Alto founder and CEO Eric Satz concedes that current conditions make it hard for them to consider investing:

In a world of conspicuous consumption, soaring living costs, and mounting student loan debt, millennials find it difficult to invest for the future because they are struggling to afford the present.

Eric Satz, founder and CEO, Alto Investing

Seven in 10 Millennials Intend to Add Crypto to Their Retirement Funds

Participants in the Alto survey who currently hold digital assets mentioned they were likely to add more crypto to their retirement portfolios. This cohort amounted to 70 percent of millennials surveyed.

Other key findings of the Alto survey included:

  • 74 percent of millennials thought that pouring money into the stock market should be considered gambling, whereas 70 percent were of the opinion that such actions were way too dangerous; and
  • 76 percent believed they could essentially be left without any savings if the bears continued to reign supreme on the crypto market.
Categories
Crypto Exchange Crypto News FTX Investing

FTX and Morgan Creek Want a Piece of Troubled Crypto Lender ‘BlockFi’

Less than a week after extending a US$250 million line of credit to BlockFi, Bahamian-based exchange FTX is now in talks to acquire a stake in the beleaguered crypto lending company.

FTX’s credit line offer stood to effectively wipe out all BlockFi shareholders, including investment firm Morgan Creek Digital, the firm told its investors. For this reason, Morgan Creek – a longtime backer of BlockFi – is attempting to raise an equivalent amount from investors to purchase a majority stake in the troubled lender, according to a leaked investor call.

VC Funds Line Up to Help Bail Out BlockFi

While Morgan Creek has declined to comment on the move, multiple venture capital funds are said to be exploring ways to provide equity financing to BlockFi as the lender struggles to stay afloat, according to an insider.

Morgan Creek managing partner Mark Yusko did reveal via the leaked call that BlockFi founders Zac Prince and Flori Marquez had good reason to accept FTX’s terms. Of the several emergency financing offers BlockFi had received, FTX’s was the only one that would not subordinate client assets to the rescuer:

Deal Just Days Away

Yusko also revealed on the leaked call that FTX and BlockFi were “probably three days away from signing a definitive agreement”. The outcome may prove to be the only bright light in what’s been a bleak month for BlockFi – and crypto in general – with Prince announcing in a June 14 tweet that “roughly 20 percent” of its workforce would be let go in the wake of the current market slump.

Categories
Crypto News DeFi Investing

Crypto Hedge Fund ‘Three Arrows Capital’ Faces Insolvency Amid Forced Liquidations

The future of Singapore-based crypto venture capital firm Three Arrows Capital (3AC) has been blunted by rumours it faces insolvency after being liquidated on several fronts by its lenders to the tune of around US$400 million.

After a three-day social media silence, co-founder Su Zhu has addressed the rumours with the following, perhaps intentionally vague statement on Twitter:

3AC Sweats on a Repayment Plan

Sources say 3AC – which includes troubled financial services company BlockFi among its venture bets – is working on a way to repay lenders post-liquidation, the latest disaster for an investment firm that has backed the likes of Avalanche, Polkadot and Ether, down 57 percent, 38.8 percent and 47 percent respectively in the past 30 days.

3AC itself sustained significant losses during the collapse of the Terra ecosystem last month after investing heavily in its native token, LUNA. Insolvency rumours escalated when Zhu removed 3AC’s investment profile from his Twitter bio, retaining only a mention of Bitcoin.

Luke Davies (left) and Su Zhu, co-founders of Three Arrows Capital. Source: bloomberg.com

Then both he and Three Arrows Capital co-founder Kyle Davies went conspicuously quiet:

Celsius Stares Down its own Potential Insolvency

Meanwhile, DeFi banking platform Celsius has been shoring up positions to avoid liquidations and this week was positioned for a buyout by crypto services business Nexo after pausing withdrawals in an attempt to stave off insolvency.

Celsius funds account for a significant proportion of the total value locked in various platforms in the DeFi ecosystem, while 3AC is a major borrower. The collapse of either or both would have significant implications for the entire space.

 

Categories
Australia Coinstash Crypto News Investing

Own a Piece of an Australian Crypto Exchange with Coinstash in its Crowdfunding Round

Fancy owning a piece of a rapidly growing and trusted Australian crypto exchange? Brisbane-based digital asset platform Coinstash is growing at a rapid rate and now presents Australian retail investors with the opportunity to own a piece of the action:

Public Crowdfunding Round

AUSTRAC-registered Coinstash is officially offering prospective investors to register interest in an opportunity to participate in its second equity crowdfunding round.

At Coinstash, we believe cryptocurrency is one of the biggest and most transformative inventions of the 21st century. Our mission is to financially empower our clients by bridging the gap between traditional finance and the world of crypto.

Ting Wang – CEO & Co-Founder

This follows an enormously successful A$2.8 million crowdfunding raise in 2021. In fact, last year proved to be an enormously successful one for Coinstash, which demonstrated exponential growth across a number of key metrics. In particular, customer growth exceeded 500 percent, while trade volume increased by 322 percent.

Currently, the exchange has more than 20,000 registered users who trade more than 340 cryptocurrencies. Part of the company’s success is no doubt attributable to recently launched Coinstash Earn, a loyalty program where customers can earn rewards of up to 24 percent on their crypto assets.

Coinstash Earn program. Source: Coinstash

Exciting Future For Brisbane and Crypto

According to its website, Coinstash has a number of exciting plans scheduled for launch prior to the end of 2023, subject to regulatory approval. These include:

  • Coinstash Borrow – where customers can borrow Australian dollars (or crypto) using their crypto holdings as collateral.
  • Coinstash Spend – a crypto credit card where customers’ crypto holdings would be a factor in determining their credit limit.

These exciting initiatives offer additional evidence that Coinstash is much more than an exchange. As crypto investors increasingly demand yields on their crypto, not to mention the capacity to borrow against it, Coinstash appears well-positioned to capitalise on these trends.

Prospective investors can register their interest directly here and find out more by attending an upcoming webinar on May 27 at 12pm AEST.

For more information on Coinstash, please see our Coinstash review.

Disclaimer: Always consider the general CSF risk warning and offer document before investing.

Categories
Bitcoin Crypto News Cryptocurrencies Investing

Why Bill Gates Won’t Invest in Crypto: ‘It Has No Valuable Output’

Bill Gates, co-founder of Microsoft and the world’s fourth-richest man, has told a Reddit AMA (Ask Me Anything) session why he doesn’t see any point in investing in cryptocurrency.

“The value of companies is based on how they make great products,” Gates said. “The value of crypto is just what some other person decides someone else will pay for it, so it’s not adding to society like other investments.” He prefaced his comments on crypto by saying:

I don’t own any. I like investing in things that have valuable output.

Bill Gates, Microsoft co-founder and co-chair of the Bill & Melinda Gates Foundation

Gates has previously described crypto as one tech innovation the world would be better off without. As he noted in February last year: “The way cryptocurrency works today allows for certain criminal activities. It’d be good to get rid of that.”

Gates Echoes Warren Buffett

Gates is certainly not the first of the world’s super-rich to shun cryptocurrency. Billionaire Warren Buffett, CEO of American multinational Berkshire Hathaway, told the company’s annual meeting of shareholders in late April:

“Whether [crypto] goes up or down in the next year, or five or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t produce anything,” Buffett said. “It’s got a magic to it and people have attached magics to lots of things.”

Berkshire Hathaway vice-chairman Charlie Munger was more scathing, about bitcoin in particular, telling the same meeting: “In my life, I try to avoid things that are stupid and evil and make me look bad … and bitcoin does all three.”

Munger didn’t stop there, either: “In the first place, it’s stupid because it’s still likely to go to zero. It’s evil because it undermines the [US] Federal Reserve System … and third, it makes us look foolish compared to the Communist leader in China [Xi Jinping]. He was smart enough to ban bitcoin in China.”

Never one to hold back, Munger told CNN earlier this year that bitcoin was “akin to a venereal disease”. And not to be outdone, Buffett has previously described crypto as “rat poison squared”.

Other Billionaires Are Bitcoin Fans

Not all billionaires share these extreme opinions, evidently. Several, including Tesla CEO Elon Musk and MicroStrategy’s Michael Saylor, regularly tweet their support of virtual currencies. And last year, Mexico’s third-richest man, Ricardo B. Salinas, invested 10 percent of his personal wealth – a staggering US$1.5 billion – into bitcoin.

As founder and chairman of Grupo Salinas, a group of companies with interests in telecommunications, media, financial services and retail stores, Salinas said bitcoin was “the best thing to put your money into”.

Categories
Bitcoin Crypto News Ethereum Investing Markets Solana Terra

Crypto Retail Investors Drop to 24% of Volume, Indicator Still Showing ‘Extreme Fear’

Retail investors are deserting the crypto market, with just over three-quarters of Q1 2022 trading volume at Coinbase coming from institutional investors, according to the exchange’s most recent letter to shareholders.

Support for BTC, ETH Holds Up Amid Terra Bloodbath

In spite of the past week’s crypto market downturn precipitated by the collapse of Terra’s $LUNA and its UST stablecoin, institutional investors are banking on the flagship cryptocurrency Bitcoin (BTC) and Ethereum rival Solana (SOL).

Latest analysis as per Bitcoin’s Fear & Greed Index. Source: alternative.me

According to CoinShares, BTC investment products saw US$45 million in inflows over seven days as assets under management fell to levels “seen during the lows in sentiment at the beginning of the year”.

Negative sentiment towards Ethereum contributed to outflows of US$12.5 million in the same period, bringing ETH outflows year-to-date to US$207 million, or 0.8 percent of assets under management.

Solana’s SOL the Sole Altcoin with ‘Substantial Inflows’

Last week, Ethereum rival Solana’s SOL was the “sole altcoin to see any substantial inflows”, totalling US$1.9 million.

With the price of bitcoin having shrunk more than one-third and the overall crypto market cap down by 38 percent, falling prices have led to unrealised losses for at least 40 percent of bitcoin investors.

Flying in the face of market gloom, the richest bitcoin whale splurged US$90 million on BTC in less than a month. Last week, blockchain intelligence platform IntoTheBlock disclosed that bitcoin whales collectively added to their holdings amid the crypto sell-off, with just over 50 percent of BTC holders still in profit.

Little over a month ago, US$250 billion was wiped from crypto’s market cap amid a welter of leveraged liquidations and general fear and uncertainty. After the storm comes the correction, as witnessed seven months ago when a US$840 million liquidity flush drained nearly US$400 billion from the market.

Categories
Australia Crypto News Cryptocurrency Law Investing Regulation

Portugal’s Crypto Tax Haven Status Set to End, 28% Capital Gains Impost Coming Soon

Portugal’s Finance Minister Fernando Medina has confirmed that the southern European nation will begin taxing cryptocurrencies, reversing a six-year-old tax law that excluded crypto gains on the grounds that they are not legal tender.

The current capital gains tax rate for financial investment in Portugal is 28 percent. However, legislation relating to the introduction of such an impost on crypto could take two or more years to implement, given Portugal’s notoriously slow-moving bureaucracy:

Portugal’s altered tax stance will bring the country into line with many other nations around the globe. Among them are Australia – whose Tax Office earlier this week warned investors of the need to report annual crypto capital gains and losses – the UK and US.

Goodbye ‘Golden Visa’

Until now, Portugal has been seen as a crypto tax haven that offers permanent residency via what is known as the ‘Golden Visa’, because it grants holders special tax exemptions and a path to citizenship. The program was instituted as a means of attracting foreign investors, and in response to the country’s new tax plan, industry observer and cyber security professional Anthony Sassano saw the funny side:

Portugal may wish to take note of the fact that late last month, Panama passed a bill exempting crypto from capital gains tax, making the Central/South American republic a more attractive destination for digital asset investors.

Categories
Australia ETFs Investing Markets

Australian Crypto ETFs Fizzle on Debut, Only $2 Million in Volume

This week’s long-awaited launch of the first Australian crypto ETFs went off not with a bang but with a fizzle, as the investment products were released amid some of the darkest days in the history of crypto.

Since May 11 Australians have been able to invest directly in three Bitcoin and Ethereum exchange traded funds (ETFs) listed on Cboe Australia, through two providers. 

All three new crypto ETFs had trading volumes far below what was predicted, as the Terra blockchain collapse continued to wreak havoc across the entire crypto market, with Bitcoin plunging to levels not seen since 2020 and Ethereum falling to a six-month low.

All Three ETFs Attract Little Interest 

On their first day of trade, none of the newly launched funds was able to crack A$1 million in trading volume:

  • ETF Securities’ issued ETFS 21Shares Bitcoin ETF (EBTC) saw investor inflows of A$954,925. 
  • ETF Securities’ Ethereum fund ETFS 21Shares Ethereum ETF (EETH) attracted just A$604,305.
  • Cosmos Purpose Bitcoin Asset ETF (CBTC), issued by Sydney-based Cosmos Asset Management, fared worst, securing only A$454,002 in investor funds.

These numbers compare poorly with the launch of the BetaShares Crypto Innovators ETF (CRYP) – a fund that doesn’t invest directly in crypto but rather in crypto-related shares, such as Coinbase – which did over A$8 million in trade within 15 minutes of its listing on the Australian Securities Exchange (ASX). To be fair, though, that fund launched when Bitcoin was at an all-time high last November and the crypto market was on the ascent.

Why the Poor Start?

The new funds launched during a full-blown crisis in crypto markets, the magnitude of which we haven’t seen for years, if ever. It makes sense that concerned investors would be less inclined to get into crypto under current conditions.

The collapse of the Terra blockchain has sparked a US$450 billion drop in the overall crypto market cap since May 7, in a single week. According to CoinGecko, the price of Bitcoin has dropped by almost 25 percent in the past fortnight alone and now sits at US$29,531. 

In addition, the unusually high 42 percent margin requirement imposed on the new ETFs by national clearing authority, ASX Clear, has made the funds less attractive to market participants, meaning major brokers and platforms are refusing to support the ETFs.

Due to the high margin requirements and higher volatility of the underlying assets, some brokers who are selling the ETFs are also only allowing sophisticated investors to trade and are charging additional fees for the privilege.

Another factor likely affecting demand is that investors can already easily access Bitcoin and Ethereum directly, simply by purchasing the assets from a crypto exchange.

The race to launch the first crypto ETF in the Australia market was closely contested, with these three Australian-based crypto ETFs just beating out funds from Canadian challenger 3iQ Digital Asset Management.