Insula Market Update – Week of June 21st 2021

A wide variety of major cryptocurrencies — everything from Bitcoin and Ethereum to cryptos like Dogecoin and DeFi tokens like Uniswap’s UNI — tumbled sharply this week. Bitcoin dropped from around $41,000 to a low near $31,000 (less than half of its April high of $65,000) and ETH dropped below $2,000. Some investors took advantage of low prices to “buy the dip,” while others bailed on fast-falling tokens. As always, it will be those who remain calm and in control in moments like these that benefit from the innate volatility of the crypto markets.

The Macro View

The broader cryptocurrency market has lost $1 trillion in value since May — down from around $2.5 trillion to $1.5 trillion. A major factor driving the decline has likely been China’s weeks-long crackdown on crypto, which entered a new phase this week. The province of Sichuan ordered mining operations to shut down on Friday; Weibo, a hugely popular social-media platform in China, reportedly shuttered the accounts of popular crypto commentators; and on Monday, China’s central bank doubled down on warning the nation’s financial firms not to conduct crypto business. According to a Bloomberg report, “China … summoned officials from its biggest banks to a meeting to reiterate a ban on providing cryptocurrency services. It’s the latest sign that China plans to do whatever it takes to close any loopholes left in crypto trading.”

Another potential factor? Following Wednesday’s meeting of the Federal Reserve, the central bank signalled it may raise interest rates sooner than expected in response to rising inflation. The dollar strengthened initially following the meeting, and stocks briefly dipped before returning to all-time highs. Crypto, on the other hand, continued its downward trend following the meeting.

In the world of DeFi, a high-profile project backed by Mark Cuban called Iron Finance saw prices for its TITAN token collapse from a high of around $65 to near zero as panicked sellers bailed. According to Bloomberg, Cuban hasn’t revealed the size of his loss, but said, “as a percentage of my crypto portfolio it was small … but it was enough that I wasn’t happy about it.” 

Of course, many investors took advantage of low prices to increase their holdings. Bitcoin’s biggest corporate backer, Microstrategy, doubled down and purchased nearly $500 million more Bitcoin. 

Is Bitcoin good politics?

Miami, which recently hosted the Bitcoin 2021 conference, is now trying to woo displaced Chinese Bitcoin-mining operations with low energy prices and, according to CNBC, “essentially unlimited supply of cheap nuclear energy nuclear power.” Mayor Francis Suarez told the network that the city is working to lower the cost of electricity in order to entice miners to make the move to Florida. In terms of climate emissions, nuclear energy is a “clean” source of power. 

Institutions Remain Bullish

A survey of 100 hedge fund CFOs found that they expect to hold more than 7 percent of their assets in crypto within five years — holdings which would total around $312 billion.

Crypto asset manager Grayscale is exploring 13 new products, including funds tied to Solana (SOL) and Polygon (MATIC) tokens. As the Block reports, “Grayscale is the largest crypto asset manager in the world, managing more than $34 billion in client assets.”

Goldman Sachs, which relaunched its crypto-trading desk earlier this year to provide Bitcoin exposure to certain clients is now expanding into Ethereum via futures and options contracts. 

High-profile investors including Peter Thiel backed a decentralized autonomous organization called BitDAO’s $230 million fundraise. BitDAO will provide grants to fund DeFi projects.

Wedbush Securities, a brokerage and wealth manager that manages assets worth more than $2.4 billion, became the fifth financial institution (others include Bank of America and Credit Suisse) to join Paxos’s blockchain-based equities settlement network — which allows two parties to settle stock trades in under a day. 

More than $17 billion in venture capital has poured into the crypto industry so far this year — only slightly less than all previous years combined. 

Insula Fund Highlights

This week we will be looking at the cryptocurrency Badger DAO (BADGER) in the new Insula Thrinacia investment fund. 

Badger DAO is an open-source, decentralized automated organization that is dedicated to building products and infrastructure of simplifying the use of Bitcoin (BTC) as collateral across many smart contract platforms.

The platform is a shared space where the developers, known as Badge Builders, have the ability to collaborate and implement Bitcoin as collateral to as many blockchains as possible. A developer can earn a percentage of the fees and BADGER tokens from the developer mining pool for every implementation. The mainnet was launched on December 3, 2020.

A builder can be a single developer, a group of developers, or even a company. There are no fixed obligations to participation requirements, and anyone can create. The pillars of Badger DAO include the Badger Builders, the community-created products, the Dedicated Badger Operations team, the fairly initial distribution of the BADGER tokens for governance and the fact that all of the code is open-sourced.

Who Are the Founders of Badger DAO?

The founder of Badger DAO is Chris Spadafora. He is a long-term crypto enthusiast, investor, and partner at Angelrock.

What Makes Badger DAO Unique?

Badger DAO has two main products: Sett and DIGG. Badger DAO is a community-driven project; as such, before any products are developed they first need to be pitched to, voted on and approved by token holders.

Sett is a decentralized finance (DeFi) aggregator that has flash loan mitigation measures focused on tokenized BTC through five strategies. Once a user makes a deposit, they can earn a yield as the protocol’s smart contract does the work.

In order to incentivize this participation, farmers that deposit tokenized BTC into the Sett vault earn BADGER and DIGG. Aside from a 0.5% fee, an additional 4.5% is deducted from the profits to cover gas and transaction costs.

DIGG is a non-custodial synthetic Bitcoin on Ethereum’s blockchain that is pegged to the price of BTC with a flexible supply and a re-base function. Its main goal is to remove centralized third parties.

We hope you have enjoyed our weekly email and that it has been effective in informing you about Insula and the crypto market as a whole. If you would like to invest Insula’s diversified crypto funds you can view more information at https://insulainvestments.com or reach out directly at jules.becci@insulainvestments.com 

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