Investing

Morgan Creek, a capital management company that oversees more than $1.5 billion in assets, has partnered with Bitwise Asset Management to create the Digital Asset Index Fund.

The new cryptocurrency asset fund is the latest in Bitwise’s suite of cryptocurrency investment offerings, as the asset management company already owns the HOLD 10 Index Fund. It also aspires to launch a cryptocurrency ETF in the near future.

As with the HOLD 10 Index Fund, this index takes aim at institutional investors looking to enter the digital asset market. According to its website, the Digital Asset Index Fund “securely tracks the largest investible digital assets and provides approximately 75% coverage of total digital asset market capitalization. The index will weight the majority of its portfolio on bitcoin, with ether receiving the second largest allocation.

“The fund tracks the Morgan Creek Bitwise Digital Asset Index, overseen by an advisory committee comprised of the experts behind Morgan Creek’s asset allocation and Bitwise’s comprehensive, rules-based digital asset index methodology,” the website states.

One of the fund’s most notable advisors is Anthony Pompliano, who has worked for Morgan Creek since his crypto-focused venture capital firm Full Tilt Capital was acquired by the investment house in Q1 2018. In addition to Pompliano, Morgan Creek CEO Mark Yusko and Bitwise global head of research Matt Hougan also sit on a committee specifically assembled to oversee the fund’s overall direction.

Like Bitwise’s HOLD 10 Index Fund before it, the Digital Asset Index Fund rebalances monthly and holds a weighted portion of several different cryptocurrencies. Along with bitcoin and ether, the fund will include bitcoin cash, EOS, litecoin, ethereum classic, zcash, monero, dash and OMG. The fund will also look to conduct annual audits to bolster the funds security.

Notably, due to the fund’s selection process, coins like Ripple’s XRP and Stellar’s lumen were intentionally left out. Explaining the fund’s rationale to Forbes, Pompliano said it excluded a coin if “a central party … owns 30% or more of supply,” believing this “introduces a lot of additional risk that may not be there if it was a more decentralized network.”

In addition to XRP and lumen, IOTA and Cardano were also excluded from the index for not meeting Bitwise’s cold-storage custody requirements.

Even without these additions, the two firms feel confident about the new index. “We’re fully prepared and feel we’ve built something that institutional investors will find attractive regardless of how the assets are categorized,” Pompliano told Forbes. “Whether they’re securities or not.”

Morgan Creek and Bitwise’s joint fund continues a movement that has looked to create a secure investing environment for institutional players looking to enter the market. Coinbase, for example, established its own crypto index fund and custody service in an attempt to quell the anxieties of institutional and accredited investors, who are often repelled from investing in the industry over concerns regarding fund security, asset management and technological learning curves.

At Distributed 2018, the first-ever flagship blockchain conference hosted by BTC Inc. and held in San Francisco, experts and entrepreneurs from various fields gathered for panel sessions and fireside chats, going into detail on specialized sectors of the blockchain industry. In line with one of the conference’s major themes of “East Meets West,” one such panel featured four crypto fund managers with deep ties to the Asia – U.S. markets.

For this discussion, Jason Fang of Sora Ventures, Zhen Cao of JLab, Jehan Chu of Kenetic and Bril Wang of the Cardinal Pitch Club gathered to discuss some of the most pressing concerns facing crypto funds, especially those regarding international regulations. The four of them displayed a diverse range of advice for those interested in crypto investment, discussing such topics as the trend of initial coin offering (ICO) launches and angel investors.

A large proportion of the discussion, however, was related to an issue at the heart of the decentralized economy: potential troubles that arise from running global companies that operate in many jurisdictions. The managers discussed everything from trepidation on the part of the U.S. Securities and Exchange Commission to reasons behind a lack of interest in crypto investing in China.

The video of the panel in its entirety takes a well-reasoned look at these markets and can be found with others from the conference on Distributed’s YouTube channel.

Distributed 2018 was an event of BTC Media, the parent company of Bitcoin Magazine.

Reddit Co-founder Alexis Ohanian has revealed his optimism about the future success of bitcoin despite the daily slump in price in an interview with Yahoo Finance. He believes bitcoin has the potential to be used as a store of value especially in countries where fiat currencies are being devalued.

Ohanian is no stranger to the cryptocurrency scene, having co-founded Initialized Capital with his partner, Gary Tan. in 2011. Initialized Capital started out as a company investing in Y Combinator startups before it delved into cryptocurrencies, as one of the earliest investors of digital asset platform Coinbase.

As a Coinbase investor, Ohanian strongly believes that the instability of fiat currencies in economically crippled countries might pave the way for cryptocurrencies such as Dash and Bitcoin.

Ohanian points to the socio-political relevance of cryptocurrencies in countries like Turkey where the citizens are “losing faith” in the Turkish lira, which opens an opportunity for widespread adoption of bitcoin.

“As a store of value, there is some real traction (with Bitcoin) and actually as we’re seeing in countries like Turkey that are having significant economic crisis — where people are losing faith in the Turkish lira — we’re going to see money move over to bitcoin because, as unstable as it is, it is actually a lot more stable for a lot of people than their own (currency).”

Turkey’s economic fortunes nose-dived following an increase in tariffs levied on the country’s steel and aluminum exports by the Trump-led administration. The decline in the value of the lira also led to high demand in BTC’s trading volume. One country that has used cryptocurrencies to support its faltering economy is Venezuela, where Dash is increasingly playing a substitutive role as private money. The Venezuelan government also issued a national coin, the petro, as a means to attract foreign capital to boost the economy.

Ohanian said he remains enthused about how far crypto has come, which he says is still in its “earliest stages,” but he believes it might take a while before it goes mainstream. He, however, sees cryptocurrency exchanges like Coinbase to be in the pole position to grow the ecosystem.

“No matter what the currency prices are doing, seeing more and more people creating accounts shows more and more adoption, and their end game is to be this interface between people, their fiat money and crypto,” he added.

Image credit: By nrkbeta – Reddit’s Alexis Ohanian @ SXSW 2017, CC BY-SA 2.0,

Once again, bitcoin finds itself precariously perched on the bottom of its macro trading range (TR). After a strong round of selling over the course of two weeks plunged the price back to the $6,000s, bitcoin began consolidating for several weeks at the bottom of the TR:

Figure 1: BTC-USD, 1-Day Candles, Macro TR

As shown in the figure above, the market has interacted several times at the current price range and it has been a source of three major bullish rallies. Currently, there is a lot of bearish pressure trying to submerge the price but very little price movement. If we take a look at the open long and open short positions on Bitfinex, we actually see a record-setting short count for the year as shorts outnumber the longs by almost 30%:

Figure 2: BTC-USD, 1-Day Candles, Longs vs. Shorts

So far, this is the highest the short count has been since bitcoin topped late last year. Also, one thing to note is not only how high the short count is, but how high it is compared to the open long positions.

In situations like this, where the shorts far outnumber the longs, the perfect scenario for what’s known as a “short squeeze” is created. If the shorts continue to stack within a given price range, as we are seeing now, then there is a high possibility for a cascade of short liquidations/short covering to take place.

Basically, what happens is this: As shorts begin to liquidate, they are forced to buy back their position and propel the price higher. This movement, in turn, begins to liquidate the other positions with stops set just above them which then cascade the liquidations (and the price) higher and higher.

If we look at the Bollinger Bands (bbands) on the daily candles, we can see the price is consolidating very tightly as the bbands have begun to “squeeze” around the price action thus indicating price consolidation.

Figure 3: BTC-USD, 1-Day Candles, Bollinger Band Consolidation

Typically, when bbands squeeze, this is a forecast for increased volatility. And, because these are daily candles, it is likely that the next move will be a macro move in either direction.

It’s impossible to know with certainty which way the price will move, but given the number of shorts that keep opening — and the relatively low amount of price movement — the stage is set for a pretty sizeable move upward.

There’s no concrete rule that says “high short count always yields a short squeeze,” but the foundation is definitely laid for one. The last time we had shorts anywhere this level, the price jumped 20% in one day. The short count back then was just under 38k bitcoins. The short count right now is 38.6k bitcoins.

Summary:

1. Bitcoin is, once again, testing the support of the macro TR.
2. As shorts begin to rise, the price is seeing very little reaction. As a result of the high short count over a relatively narrow price range, there is a possibility of a sizeable short squeeze.
3. To further support just how narrow this price range has been and just how tightly wound the market is right now, the daily bbands show a strong squeeze on a macro level that will likely yield a strong move in either direction.

Trading and investing in digital assets like bitcoin and ether is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on Bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.