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Decentralized and diversified autonomous hedge funds that provide exposure to BTC, ETH and the latest DeFi tokens.

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Keep up with the crypto market to make informed investment decisions.

Insula provides weekly updates for you to keep up to date with all significant events in the crypto markets.

China Cracks Down on Crypto Whilst Others Embrace the Change

Volatility remains, but is the market starting to strengthen? After plunging to lows of $30,800 recently, Bitcoin staged a strong recovery on Monday above $40,000. Some of the news the market might be responding to includes El Salvador becoming the first nation to adopt Bitcoin as legal tender, miners’ continued exodus from China, and the crypto industry’s embrace of renewable energy — including Elon Musk’s promise that Tesla will accept Bitcoin again when more than half of mining is powered by renewables.  In the meantime, Bitcoin’s core protocol is planning to implement its first major upgrade since 2017, called Taproot. 

China’s Stance Mixed; Texas Going Pro-Crypto

  • Even as China cracks down on crypto trading and mining, the South China Morning Post reports that the nation “plans to accelerate blockchain development and adoption in push to become a world leader in the technology by 2025.”
  • “Nearly half of millennial millionaires have at least 25% of their wealth in cryptocurrencies” according to a CNBC survey: “The results highlight a new generational divide in wealth creation from crypto, with younger investors able to earn vast fortunes from the surge in the prices of bitcoin, ether and other digital currencies.”
  • In the latest pro-crypto move by Texas, which seeks to become a hub for the industry, the Texas Department of Banking has allowed banks there to hold crypto for clients. 
  • Interactive Brokers, one of the largest of the U.S.-based “e-brokers,” announced it will offer crypto trading by the end of the summer.
  • One other possible reason prices rose this week? A major global banking regulator announced it would introduce capital requirements for banks dealing in crypto. 
  • Another week, another round of Bitcoin ETF applications: “Invesco, a U.S. investment firm with $1.3 trillion in assets under management, has filed two applications for crypto-specific exchange-traded funds,” Decrypt reports. “The two applications join more than a dozen other hopefuls looking to launch cryptocurrency ETFs.

El Salvador makes Bitcoin legal tender

Last week, Salvadoran president Nayib Bukele pushed legislation through the country’s congress that allows citizens to pay taxes in Bitcoin and requires businesses to accept the cryptocurrency as payment for goods and services. Around 20 percent of El Salvador’s GDP comes in the form of remittances — money sent home by El Savadorans living abroad (primarily in the U.S.). “Bukele says that a large chunk of this gets lost in transfer fees, which Bitcoin can help to reduce,” Bloomberg reports. “El Salvador is a so-called dollarized economy, which means that the fiscal and monetary decisions of the U.S. government and Federal Reserve have a tremendous impact. Adopting Bitcoin could give the nation more independence.”

The Central American nation’s Bitcoin adoption may have sparked a global trend: in the past week, officials across Latin America (where high inflation rates and expensive cross-border payments have long been the norm) have been adding laser eyes to their profile pics. And officials in India, which had recently considered banning crypto, are reportedly seeking to make Bitcoin an official asset class.

  • The crypto movement in El Salvador first began in 2019 in a coastal town popular with surfers nicknamed “Bitcoin beach.” There, Bloomberg reports, “some 500 fishing and farming families use bitcoin to buy groceries and pay utilities, something the government envisions for the country at large.”
  • Officials from Latin American countries including Panama, Mexico, Colombia and Argentina have signalled their intention to support bills inspired by El Salvador’s. In Paraguay, congressman Carlos Rejala told Coindesk he hopes to soon pass a bill that would draw crypto businesses to the South American nation: “The project allows cryptocurrency companies … to finance their Paraguayan operations with cryptocurrencies, remit dividends abroad and capitalize their cryptocurrency profits in local banks.”
  • Reportedly inspired by El Salvador, officials in India may move to classify Bitcoin as a regulated asset class: “Top sources tracking the industry told this publication that the government has moved away from its earlier hostile stance towards virtual currencies,” reports the New India Express, “and is now considering classifying crypto as an asset class.” 
  • In Africa, Forbes reports that Tanzania’s new president  has called on the country’s central bank “to begin ‘working on’ facilitating widespread use of cryptocurrencies in the East African nation.”
  • How do El Salvadorans themselves feel about the bill? According to Coindesk they are divided: “some El Salvadoran residents are excited by the thought of bitcoin being treated as legal tender, while others are concerned it may just be a tool for corrupt officials.”

Insula Fund Highlights

This week we will be looking at the cryptocurrency Sandbox (SAND) in the new Insula Scheria investment fund. 

Launched in 2011 by Pixowl, The Sandbox is a blockchain-based virtual world allowing users to create, build, buy and sell digital assets in the form of a game. By combining the powers of decentralized autonomous organizations (DAO) and non-fungible tokens (NFTs), the Sandbox creates a decentralized platform for a thriving gaming community.

According to the official whitepaper, the Sandbox platform’s main mission is to introduce blockchain technology to mainstream gaming. The platform focuses on facilitating a creative “play-to-earn” model, which allows users to be both creators and gamers simultaneously. The Sandbox employs the powers of blockchain technology by introducing the SAND utility token, which facilitates transactions on the platform.

By focusing on user-generated content, the Sandbox creates a metaverse of involved players who contribute to the platform’s further development. Not only that, by introducing the SAND token, the Sandbox promotes decentralized governance and allows users to share their views and ideas about the development of the project. Thanks to the evolving technology, decentralized governance is becoming a must-have in blockchain-based projects.

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/fund or reach out directly at info@insulainvestments.com 

Taproot and the Lightning Network: An Effective Way Forward

Bitcoin’s core protocol is set to implement its first major upgrade since 2017. Called Taproot, the protocol based on Ethereum’s central idea includes smart contract capability.

Some of the barriers to adopting Bitcoin for non-investment uses are the occasional high fees and long transaction times. Even if the current transaction fees for Bitcoin are about the lowest they have been all year (about $2), this is a considerable amount of money for potential users in low-income countries – plus the fees are often much higher. Solutions in the form of the Lightning Network scaling protocol and Taproot (the biggest bitcoin upgrade in years) are looming on the horizon. Here’s how they work:

Taproot is the upgrade to Bitcoin’s core protocol that was voted on and approved by the global mining community this week. Should everything go to plan, the protocol will go into effect in November. One of the main changes is the activation of limited smart contract functionality – a core feature of Ethereum that has spurred the development of everything from DeFi to NFTs. 

Taproot and the Lightning Network

Taproot works in part by tightly integrating the Lightning Network, a fast parallel blockchain that can process transactions much faster and cheaper than the main blockchain (fees are typically fractions of a cent). The new protocol has the potential to enable more efficient transaction fee markets, theoretically making transactions cheaper and enabling greater privacy. It also improves the privacy of “multi-signature” Bitcoin transactions, which are used by organisations for storing Bitcoins more securely (multi-signature Bitcoin addresses require the signatures of multiple participants to authorise the unlocking).

Statistics reveal that the Lightning Network is gaining momentum and the network is growing. Nodes in the network have more than doubled in the past year and the total number of BTC locked into Lightning recently reached a record 1,400, indicating growing interest and participation in this scaling solution.

By Ayoub Khirane

Market Update – Week of June 7th 2021

For the second week, crypto prices have remained fairly stable — a welcome reprieve following a period of intense volatility. Bitcoin is currently consolidating in the $34,000 range with ETH settling in the high $2,000s. This comes amongst a series of positive news announcements; like the blizzard of press around the Bitcoin 2021 conference in Miami and El Salvador’s President introducing legislation to make the nation the first to adopt Bitcoin as legal tender. 

Miami hosts biggest-ever Bitcoin convention

This week, the 2021 Bitcoin conference landed in Miami, bringing a wide range of crypto advocates, including Wyoming senator Cynthia Lummis, Twitter and Square CEO Jack Dorsey, skateboarding legend Tony Hawk, and Shark Tank investor Kevin O’Leary. The annual conference is the largest Bitcoin event in the world, and this year’s edition attracted at least 12,000 attendees. The convention was a coup for Miami Mayor Francis Suarez, who has long been vocal about his efforts to make the city America’s crypto capital. But Miami isn’t the only locale hoping to attract the booming crypto industry. Here’s how some of the competition stacks up.

  • Interest in Miami isn’t limited to Bitcoiners. A new $25 million fund called Borderless.Miami — which incorporates USD Coin (USDC) and the Algorand blockchain — will assist local financial technology companies.
  • El Salvador president Nayib Bukele appeared via video at Bitcoin 2021 to announce that he would be sending legislation to his nation’s congress that would make Bitcoin legal tender. 
  • Texas is also making a bid to attract crypto capital. Governor Greg Abbott signed a law creating a new regulatory framework around crypto. “Blockchain is a booming industry that Texas needs to be involved in,” Abbott said.
  • Texas is already a hub for Bitcoin mining — with companies including Bitmain, Blockcap, Argo Blockchain, Great American Mining, Layer1, Compute North, Riot Blockchain and Whinstone operating in the state. 
  • Wyoming has attracted crypto-focused firms for years. In April, it became the first state to recognize decentralized autonomous organizations (DAOs) as LLCs, paving the way for online collectives governed by blockchain-based smart contracts to have the same legal status as companies.
  • A pending bill in South Carolina would make the state a potential incubator for blockchain innovators.

Has the NFT bubble really burst?

A new analysis by crypto news site Protos showing that NFT sales have fallen by 90 percent since early May has gotten a lot of attention — with headlines declaring that the bubble in digital art and collectibles has popped. But is that analysis accurate? According to the Block’s Data Dashboard, weekly users of Ethereum-based NFT platforms reached all-time highs just last week. So what’s the real story?

  • It’s possible that both are true: while eye-popping sales seem to have slowed in the months since Beeple broke art-world records, the number of individual users — people interacting with NFTs in a variety of smaller ways — could be rising. And there’s certainly no shortage of new projects. 
  • Big names in traditional art continue to explore NFTs. Auction giant Sotheby’s (which facilitated a $16.8M digital art sale for artist Pak in April) has created a digital replica of its London gallery in the Decentraland virtual world. 
  • The auction house has also assembled a sale of significant NFTs — including Kevin McCoy’s 2014 image “Quantum,” which is considered to be the first-known NFT.
  • NFT news from the world of sports seems to break every day. Crypto is “definitely a big conversation in our clubhouse” said Yankees manager Aaron Boone, who is also an investor in an NFT memorabilia program called Athlete Direct. 

E-sports teams score huge crypto deals; Solana seeks to rival Ethereum

  • In a deal that rivals the size of traditional stadium-naming sponsorships, Hong Kong-based crypto exchange FTX paid a popular e-sports team $210 million to change its name to TSM FTX. In a smaller deal, Decrypt reports that the Uniswap community has voted to sponsor e-sports squad Team Secret — in exchange for the $112,500 grant, the team will “create educational content around Uniswap and cryptocurrency.” (Coinbase partnered with e-sports team Evil Geniuses in April.)
  • Solana is raising up to $450 million to challenge the dominant smart-contract compatible blockchain, Ethereum. Solana claims it can process 50,000 transactions per second (compared to Ethereum’s 10 to 15). However there are concerns about Solana’s decentralisation, with many critics pointing out that their high transaction comes at the expense of decentralisation and network security. Ethereum is currently undergoing a shift to the ETH2 blockchain, which will hugely increase speeds and lower costs.  
  • With Bitcoin mining’s energy use in headlines, payments company Square invested $5 million to build a solar-powered mining facility in the U.S. with mining firm Blockstream.

Insula Fund Highlights

This week we will be looking at Uniswap (UNI) in the Insula Pala investment fund. Not only has UNI become one of the most highly valued cryptocurrencies in its own right, it is also the platform on which many other elements of Insula’s fund are based. Uniswap is a popular decentralized trading protocol, known for its role in facilitating automated trading of decentralized finance (DeFi) tokens.

An example of an automated market maker (AMM), Uniswap launched in November 2018, but has gained considerable popularity this year thanks to the DeFi phenomenon and associated surge in token trading. Uniswap aims to keep token trading automated and completely open to anyone who holds tokens, while improving the efficiency of trading versus that on traditional exchanges.

Uniswap creates more efficiency by solving liquidity issues with automated solutions, avoiding the problems which plagued the first decentralized exchanges. In September 2020, Uniswap went a step further by creating and awarding its own governance token, UNI, to past users of the protocol. This added both profitability potential and the ability for users to shape its future — an attractive aspect of decentralized entities.

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 fund you can view more information at https://insulainvestments.com/fund or reach out directly at info@insulainvestments.com 

Newsletter 1

Insula Market Update – Week of May 31th 2021

The crypto world experienced a week of mixed emotions as consolidation got underway following a highly volatile month from April to May. Bitcoin recovered strongly off of lows of $30,000 and is now expected to trade sideways for some time before a longer term direction becomes clearer. On a related note, global search interest for “cryptocurrency” also reached all-time highs. Of the major cryptocurrencies, Ethereum experienced the most severe swing, with prices briefly dipping below $1,800 before recovering to above $2,500 – still far below the $4,400 all-time high set less than three weeks ago. 

Compared to the broader market, Bitcoin held up relatively well — with prices on Monday down about 10 percent for the week. But what drove the sell-off? There appear to be three major issues: fear of a Chinese government crackdown on crypto, uncertainty around US regulators’ intervention, and fallout from Elon Musk’s recent tweets.

  • On Friday, Chinese Vice Premier Liu He called for authorities to “crack down on Bitcoin mining and trading behavior.” Chinese officials reportedly have a variety of concerns about the cryptocurrency: its potential to disrupt other markets, the perception that Chinese mining operations are using too much energy, and a desire to protect the digital Yuan (the central-bank digital currency the nation has been racing to develop). 
  • In the wake of the announcement, some large mining companies announced they’d be suspending operations in China. This is significant because a large portion of all mining happens in China. (Important to note that many in the crypto community see the potential for less mining to be concentrated in a single country to be a positive outcome.)
  • On Thursday of last week, the US Treasury announced that any crypto transfer of $10,000 or more will have to be reported to the IRS. According to a CNBC report, the move came as analysts on Wall Street and beyond suggest that the Treasury and SEC could “soon take a more active role in cryptocurrency regulation.”

Musk’s Influence Continues

Elon Musk surprised the crypto community and sent markets reeling when he announced on May 12 that Tesla would suspend accepting BTC payments due to concerns over the environmental impact of Bitcoin mining. The Tesla CEO met with the biggest North American mining companies (including Argo Blockchain, Hive Blockchain, and Riot Blockchain) on May 23. Following the meeting, the mining firms announced the formation of the Bitcoin Mining Council — a consortium that aims to accelerate the adoption of sustainable-energy mining worldwide. 

So what does the science say about crypto and the environment? While everyone agrees that Bitcoin mining is a resource-intensive process, Bitcoin doesn’t seem to be a significant contributor to climate change — and new research shows that it could even be helping drive the transition to sustainable energy. 

Stablecoins, Microstrategy and Sports NFT’s

  • Following the NBA and the MLB into the world of non-fungible tokens, Major League Soccer announced new NFT products. 
  • As crypto prices fell, many traders sought refuge in stablecoins. The market capitalization of USD Coin surged past $20 billion — a 400 percent increase since the beginning of the year. 
  • Billionaire investor Ray Dalio — founder of Bridgewater Associates, the world’s largest hedge fund — revealed in an interview that he owns “some Bitcoin.” Citing concerns about inflation, he said, ““Personally, I’d rather have bitcoin than a bond.” 
  • Wells Fargo is the latest large bank to offer crypto exposure to wealthy clients.
  • MicroStrategy, which began adding bitcoin to its treasury last year, announced that it made another $10 million purchase this week. As of May 21, the total value of Bitcoin held by Microstrategy is more than $3 billion. (MicroStrategy CEO Michael Saylor also organized the meeting between Musk and the major North American mining companies.)

Insula Fund Highlights

This week we are focusing on the synthetics aspect of the holdings within Insula’s investment fund, Insula Pala. Synthetic assets allow indirect exposure to financial instruments when it is inconvenient (or even impossible) to own the underlying asset. One of the ways Insula provides exposure synthetically is via an Ethereum project called Synthetix.  

Synthetix

Synthetix is a decentralized finance (DeFi) protocol that provides on-chain exposure to a wide variety of crypto and non-crypto assets. The protocol is based on the Ethereum (ETH) blockchain and offers users access to highly liquid synthetic assets (synths). Synths track and provide returns on the underlying asset without requiring one to directly hold the asset. The platform aims to broaden the cryptocurrency space by introducing non-blockchain assets, providing access to a more robust financial market.

Via Synthetix, Insula gives investors exposure to Cardano (ADA) and Polkadot (DOT), two of the most valuable projects in the cryptocurrency market:

Cardano

Cardano is a proof-of-stake blockchain platform that says its goal is to allow “changemakers, innovators and visionaries” to bring about positive global change. The open-source project also aims to “redistribute power from unaccountable structures to the margins to individuals” — helping to create a society that is more secure, transparent and fair. Cardano was founded back in 2017, and the ADA token is designed to ensure that owners can participate in the operation of the network. Because of this, those who hold the cryptocurrency have the right to vote on any proposed changes to the software. 

Polkadot

Polkadot is an open-source sharding multichain protocol that facilitates the cross-chain transfer of any data or asset types, not just tokens, thereby making a wide range of blockchains interoperable with each other. This interoperability seeks to establish a fully decentralized and private web, controlled by its users, and simplify the creation of new applications, institutions and services. The Polkadot protocol connects public and private chains, permissionless networks, oracles and future technologies, allowing these independent blockchains to trustlessly share information and transactions through the Polkadot relay chain (explained further down). Polkadot’s native DOT token serves three clear purposes: providing network governance and operations, and creating parachains (parallel chains) by bonding.

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 fund you can view more information at https://insulainvestments.com/fund or reach out directly at jules.becci@insulainvestments.com