Fidelity’s digital asset platform finally went live this week with a select group of clients. Minimal fanfare, the official line was “we will continue to roll out slowly to eligible clients”. Great to have them on board, they have $2.46tn of assets under management, which alone is 40x the total bitcoin market cap.
R3 Corda Blockchain
Some more news on the tokenisation front this week as the Swiss stock exchange SIX has pledged to utilise the R3 Corda enterprise blockchain for tokenising equities. The goal of SIX’s digital exchange SDX will be to create a platform for the exchange of digital assets, starting with stocks and expanding to other tradeable instruments.
If 2018 was the year of the ICO, then 2019 is about these kinds of STOs and tokenised assets.
There are several competing blockchains that might host these equity offerings. Early indications are that digital exchanges are targeting permissioned and more centralised blockchains – going against what many had predicted to be a major driver of growth in Ethereum and other decentralised smart contract networks.
We aren’t yet convinced by this semi-centralised path. In reality, if you are hosting a tokenised equity on a centralised blockchain, you might as welll list on a traditional exchange. The concept of a centralised authority is deeply ingrained in finance, people will find it hard to let go and this sort of thing proves it.
Binance breaks out
Strong performances this week from some assets with Binance in particular up over 60% in the last 7 days. This has been driven by their continued strong performance both in terms of trade volume but also their product development, with interest in their decentralised exchange increasing.
Binance stands to gain considerably if the tokenisation of the world rolls out like many think it will. The bigger the blockchain ecosystem gets, the more opportunities for exchanges to profit. It’s been a strong recent run from Binance and they continue to look like one of the winners in the long game.
The chart below shows the extent of the correlation across the asset class, with Binance now starting to break free on its own.
Crypto-mining giant Bitmain is still planning to list this year and recently filed further documents in Hong Kong as part of that process. Rumours are though that all is not well, with suppliers unpaid and their latest release of mining equipment having difficulties.
On the spectrum of risk, crypto-mining is right at the top. If you get it right you make billions, if not its game over. Here’s why:
- Capital expenditure is huge, the amount of equipment now required to mine crypto is enormous and expensive. Generally in 18 months it is obsolete so it needs to be rolled out quickly and succesfully.
- Unlike traditional mining, there are no mineral rights or underlying land ownership that can protect a miner. You can’t mothball a site for example and return when conditions improve – they won’t improve and your equipment will be obsolete.
- Miners are in a permanent arms race for the fastest technology. Previously if you made a fast chip (like intel), people with huge compute requirements would buy it. Then you could roll it out slowly to consumers around the world as prices fall. Now, fast chips can be monetised instantly, almost to the extent that if you develop an amazing mining chip you would not sell it to anyone else until it became obsolete.