Maven’s Insights - May 2020

02 June 2020

The Bitcoin halving took place on the 12th of May 2020. The Bitcoin halving refers to the block subsidy per block being reduced by 50% on the Bitcoin network, to an inflation of ~1,9%. Consequently the issued supply is also reduced by 50%. This marks a major event in the industry and the fact that it happens surrounded by all the macro turmoil in the world makes it even more astounding. Further context on the halving and our thoughts on it can be found here.

The Ethereum 2.0 final testnet has gone live. After years of research and development and plenty of roadblocks and delays this marks an important point. It is the biggest upgrade to a (live) blockchain network ever. The 2.0 upgrade will increase the scalability of the network by 6400% through an effort called “sharding”. In addition it allows users to earn interest by simply owning Ether and designating it to secure the network. Currently the test network runs on 3 client implementations. The mainnet launch is expected to happen later in 2020. Previously we published about block number 10.000.000 being mined on Ethereum.

Facebook has rebranded Calibra, their wallet product for the announced Libra network. It is now called Novi and will be integrated in Whatsapp and Facebook messenger at the time of launch. In addition the Libra foundation has pivoted their product offering to be several stablecoins instead of an entirely new currency. Read more about the biggest social network entering the crypto industry here.

Coinbase has acquired crypto broker Tagomi. The deal, rumored to involve an amount somewhere between 50 – 100M USD, is set to be finalized later in 2020 as it awaits regulatory approval. Coinbase acquiring the prime broker marks an important step for Coinbase to get more institutional traction, which has been an ongoing process for the last two years for the company. 

Polkadot has launched their mainnet. Polkadot is a smart contract platform. Smart contracts allow for utilizing the potential of programmable money to the full extent. Right now Ethereum is the leading platform in this space. Polkadot is a high profile (potential) competitor and has raised over USD 100M at valuations over USD 1B. The mainnet launch of Polkadot is therefore highly anticipated. Currently the network is launched with limited features which will be increased as it proves stable. It will be interesting to see if raising a lot of money can in fact buy market share. 

French banking giant Société Générale is betting big on blockchain technology and tokenization. The bank carries out an experiment with the French central bank, Banque de France, to issue bonds as tokens on the Ethereum blockchain and settle them in digital euro’s. SocGen issued roughly 44 million in bonds. The bank is working on various projects and believes tokenization will allow for better transferability, tradability and liquidity.

The digital dollar project, a partnership between ex-CFTC chair J. Christopher Giancarlo and Accenture, has released their first whitepaper. The project aims to encourage research and public discussion on the potential advantages of a digital dollar. It will also propose possible models and frameworks to establish a dollar as a Central Bank Digital Currency (CBDC). The project believes the US is falling behind in technological developments around blockchain based currencies, and should catch up before others fill the void.

May proved to be another month of Wall Street becoming opinionated on Bitcoin and digital assets. WS behemoth Goldman Sachs last week shared its latest thoughts on inflation, gold and Bitcoin. As they do not expect significant inflation in the short to medium term, Goldman does not recommend gold or bitcoin as hedge. They furthermore note that they currently do not consider cryptocurrencies to be an asset class, for reasons like not producing cash flow or having earnings power. Bitcoin was clearly not designed to have either of the two, and also has an unstable correlation to other markets and high volatility. The correlation argument is rather striking, as various research has already shown that a portfolio with a small allocation to Bitcoin, would have produced a higher return and better diversification over different time horizons. Paul Tudor Jones, the legendary investor, with an impressive track record of over 40 years, has taken the other side of the bet. Paul Tudor Jones sees Bitcoin as a hedge against upcoming inflation. He has built up a 200 million Bitcoin position to utilize this hedge.

Download the full report Maven’s Insights.