eResearch | This past quarter, the cryptocurrency industry experienced high M&A and capital markets activity, as digital asset funds become more regulated and cryptocurrency exchanges facilitate greater adoption of digital assets.
Cryptocurrency vs Gold
As the recession and pandemic encourage investors to seek safe-haven assets, cryptocurrencies such as Bitcoin have experienced a surge in demand, competing against traditional safe-haven assets such as gold.
Bitcoin is currently trading at $10,316 per BTC, up 44% this year and up double from the low in March. However, Bitcoin is nowhere close to its all-time-high price of over $19,000, which it reached in 2017.
Gold is currently priced at $1,949 per ounce, up 28% this year. Last month, the price of gold broke its all-time-high record, reaching over $2,000 per ounce.
Instead of competing against gold, some digital asset companies developed cryptocurrencies backed by physical gold. Paxos’ PAXG token and Tether’s XAUT token, are both digital assets which represent one troy fine ounce of gold on a London Good Delivery gold bar.
Bitcoin Solutions
This week, Bitcoin Solutions (www.bitcoinsolutions.ca), an operator of bitcoin ATMs in Canada, announced plans to become the first publicly-traded Bitcoin ATM company. Bitcoin Solutions is expected to pursue a reverse take-over transaction with Red River Capital (TSXV: XBT.P), a capital pool company listed on the TSX Venture exchange.
Bitcoin Solutions operates the longest-running Bitcoin ATMs in Canada, which enables a convenient, secure, and reliable method for consumers to buy and sell cryptocurrencies such as Bitcoin.
Bitcoin Solutions also announced an oversubscription for its recently closed, non-brokered private placement, which raised C$0.85 million compared with its original target of C$0.5 million. The capital is expected to be used towards general corporate purposes and reverse take-over costs.
Digital Currency Group
This week, Digital Currency Group (“DCG”; www.dcg.com), a blockchain and cryptocurrency conglomerate located in the U.S., announced the acquisition of Luno, a cryptocurrency exchange with over 5 million global customers in over 40 countries, based in London, U.K.
DCG initially invested in Luno in 2014 during the seed investment round. DCG enables its subsidiaries to operate as independent companies and does not expect any changes to Luno’s operations post acquisition.
DCG is located in the U.S. with a history of funding more than 160 blockchain companies around the world. Several wholly-owned subsidiaries include:
- Grayscale Investments (www.grayscale.co), a digital currency asset manager
- Genesis (www.genesistrading.com), a digital asset prime brokerage
- CoinDesk (www.coindesk.com), a digital currency media and events company, and
- Foundry (www.foundrydigital.com), a blockchain capital markets advisor.
Grayscale Bitcoin Trust
This past quarter, Grayscale Bitcoin Trust (OTC: GBTC), a fund created by Grayscale Investments, received investments from 20 institutions, including ARK Investment Management, ARK Next Generation Internet ETF, and Kinetics Portfolios Trust.
Earlier this year, Grayscale Bitcoin Trust became a U.S. Securities and Exchange Commission (“SEC”) reporting company, which made it the first Bitcoin fund to file quarterly 10-Qs and annual 10-Ks, providing further validation for the industry.
Grayscale Investments plans to turn its 10 cryptocurrency products into SEC reporting companies, with Grayscale Ethereum Trust (OTC: ETHE) being the most recent one to announce filing with the SEC.
Cryptocurrency Market
Funds and investors are expected to continue increasing the adoption of digital assets as more exchanges, products, and services are developed, while regulatory bodies start to integrate digital asset offerings into traditional regulatory frameworks.
According to Fortune Business Insights, the global cryptocurrency market was $754 million last year and is expected to reach $1.8 billion by 2027, growing at a CAGR of 11%.
The rising popularity of cryptocurrency has led to the acceptance of payments using digital coins such as bitcoin or ether and some central banks and payment platforms are incorporating their use in transactions. We believe this trend will continue as governments spend their way out of the current health crisis and potentially devalue FIAT currencies.
Other eResearch articles related to cryptocurrency:
- May 2020: Bitcoin “Halving” Event Cuts Revenue of Bitcoin Miners by 50%
- Feb 2020: The Financial Services Revolution and How Blockchain is Transforming Money, Markets and Banking
CHART 1: Bitcoin 5-Year Chart – Above $10,000 up from $5,000 in Mid-March
