Disclaimer: Everything we write in "The Crypto Insider Report" is an x-ray of the industry as we see it, through the lens of publicly available information. We are not financial advisors.
I read the tweetstorm of Sam Trabucco from Alameda several times because I realized that I don’t have all the tools needed to understand a concept that Kain also mentioned in The Stakeborg DAO Talks: what an efficient market means when we refer to crypto.
I later researched it, and without complicating the theory too much, Sam started from how the price of bitcoin reacted to COVID-related news and how rebounding back to where it fell was getting faster and faster over time. What does that mean?
First of all, the market players are maturing and no longer have exaggerated reactions when a news story comes out. This could be the result of successive "vaccinations" called: Elon FUD, China FUD, FUD regulation, and so on.
Secondly, when the retail (and not only) understands a little better what affects the price and what doesn’t, it costs a bit more for whales to instill panic in order to shake the market, so implicitly their profits will be lower. An efficient market reduces the range of opportunities for those who can earn from price manipulation.
Similarly, an efficient market comes with stability and predictability, two features sought by both big money and those in the regulation area.
Crypto, although it is 10+ years old in theory, is a young and constantly growing market. New and new players join the party every day, many more than those who leave. Are we here for the big opportunities? Yes, but these become certainties as we all educate ourselves and contribute to transforming crypto into a market as efficient as possible.
The next big step in the right direction will be to decouple alts from bitcoin, and I think we're less than a year away from this milestone.
Take care,
Vlad
========================
The first steps in crypto: What Is an ETF?
An exchange-traded fund, or ETF, is a type of investment fund that is traded on an exchange. ETFs have an associated price and a ticker and can be bought and sold like a stock via a traditional brokerage account throughout the trading day.
They can be structured to track an underlying asset or index, so anything from an individual commodity or asset, such as gold, to a basket of assets, such as the well-known S&P 500. Therefore, they can contain various types of investments, including but not limited to commodities, stocks, or bonds.
One of their greatest advantages is that they allow investors to diversify their investment portfolios without actually owning the assets themselves. For example, as the name suggests, a Bitcoin ETF tracks the price of Bitcoin, so those interested can invest in the cryptocurrency without directly owning it.
They usually have lower fees than other types of funds, as well as varying levels of risk. ETFs appeared in the U.S. in 1993, when State Street Capitol launched SPDR S&P 500 ETF, and they are listed on exchanges like the Nasdaq, the New York Stock Exchange, and the Shanghai Stock Exchange.
ETFs are often associated with mutual funds, but one major difference is that just like stocks, the price of an ETF’s share changes throughout the trading hours as the shares are bought and sold on the market. Mutual funds, on the other hand, are priced just once a day.
How Does an ETF Work?
Simply put, an ETF works as follows:
An ETF provider, which is a company that makes exchange-traded funds, designs a fund to track the performance of various underlying assets. It then creates a basket of them using a unique ticker.
As an investor, you can then buy and sell a share of that basket. The process is similar to buying and selling shares, and in the case of ETFs, investors can buy units in an ETF through a stockbroker. The ETFs are then traded throughout the trading hours on an exchange, much like a stock.
Some popular ETF providers include Vanguard, iShares by BlackRock, and State Street.
Advantages and Disadvantages of ETFs
ETFs come with several benefits, including the following:
Ease of use - ETFs are easy to trade, and investors can buy and sell at any time during the trading hours of the exchange. Plus, they can buy a basket of shares or assets in a single trade.
Diversification - ETFs enable investors to access many stocks across various industries that may otherwise be expensive or difficult to access.
Transparency - Index-based ETFs publish their holdings daily, unlike mutual funds that do so monthly or quarterly. In addition, an investor can always search the price activity for a particular ETF.
Low cost - many ETFs have a low management expense ratio (MER) and fewer broker commissions.
However, ETFs are not free of disadvantages. Some of them include:
Currency risk - in case an ETF invests in international assets, the currency movements impact the investor’s returns.
Liquidity risk - some ETFs invest in illiquid assets, which can hinder transactions.
Tracking errors - given that ETFs track the price of the underlying index, there is the risk of technical issues occurring, which can create discrepancies.
Conclusions
ETFs are investment vehicles designed to track the performance of a particular asset or group of assets. Their success is mainly due to the ease of use they ensure as investors can diversify their portfolios without actually owning the underlying assets.
There are many types of ETFs, such as bond, commodity, market, inverse, and actively-managed ETFs, which enables investors to access stocks from different sectors. However, even if they are easier to trade, they do have some drawbacks, including potential liquidity issues.
Animation of the day: Multi-Sig wallets:
For more animations: Cryptomatics
Tania
===========
The Altcoin Pulse
1. Borderless Capital raises a $500m fund focused on investments in the development of the Algorand ecosystem.
https://blockworks.co/borderless-capital-launches-500m-algorand-focused-fund/
2. Grayscale launches an investment vehicle, Solana Trust - it is the 16th fund with which Grayscale comes to the market (14 single-asset products and 2 diversified funds).
https://blockworks.co/grayscale-launches-solana-trust/
3. One of the OGs in the AMM segment, Bancor comes out to "attack" with the v3 of its protocol that brings some interesting features.
https://thedefiant.io/bancor-v3/
==================
Interesting Headlines
1. The last week stood out by net flows of $306m in the digital asset funds tracked by CoinShares, the 15th consecutive week of positive net flows. Most volumes went into Bitcoin funds ($247m). Ethereum continues the series of positive net flows ($23m), while Solana ($15m) and Polkadot ($12m) attract significant amounts.
MTD=month-to-date (November), YTD=year-to-date, AUM=total assets
2. Crypto.com aims to offer derivative products to U.S. customers by acquiring IG Group’s stakes in two trading platforms for $216m.
3. StarkWare, one of the pioneers of zero-knowledge-based rollups, has released the mainnet alpha of StarkNet, an L2 on Ethereum.
https://thedefiant.io/starkware-layer-2-rollups-zk-proofs/
4. The new CEO of Twitter and his plans for the crypto segment.
https://cryptorobin.com/parag-agrawal-is-the-new-ceo-of-twitter-what-does-he-think-of-crypto/
5. Fidelity is launching a spot bitcoin ETF in Canada this week.
6. Invesco, an investment firm with $1.3 trillion in assets under management, launches European Spot Bitcoin ETP.
https://decrypt.co/87161/trillion-dollar-investment-firm-invesco-launches-european-spot-bitcoin-etp
7. SoftBank, one of the largest investment funds in the world, continues the series of financing projects that build in the metaverse.
https://www.techinasia.com/softbanks-150m-puts-south-korean-fashion-metaverse-startup-unicorn-club
==================
Tweetstorm of the week:
It's not about crypto, it's about people, but in crypto, there are many people, so it's also about crypto :) Plus, it's very good.
Business book of the week: We keep hearing about the importance of specialization. Range: Why Generalists Triumph in a Specialized World comes with another perspective that, frankly, I resonate with.
Youtube clip of the week: 15 assets that are more useful than cash:
With the risk of being philosophical, is any market really efficient?
It's a shame that semantics suffered a great deal over the centuries - from Adam Smith till present times. The way industry expert talk about, say full employment or market efficiency, and the way layman people perceive these terms is asymmetrical. An economist can skew public perception on the state of the economy, arguing that their country runs on full employment, all the while discounting the fact that people, able or willing to work in the economy, fall by the wayside because they give up hope and stop looking for a job. These people present a systematic risk, yet the headline remains - the economy runs at full capacity!
The same problem applies to the issue of market efficiency. Modern world economists and finance overlords claim that market participants hold full market information. Therefore, the theory makes believe that market participants can steer the markets in the right direction to price in prevailing market trends. In truth, information flows are asymmetrical, financiers are superficial, and everyday people are deprived from wealth growth opportunities because of regulators masquerading as saviors of their financial livelihoods.
To be clear, the above is not a critique to Kain, but a critique to the opaque practices that prevail in traditional markets. I believe the nature of blockchain technology can bring the world closer towards the market efficiency ideal. For that to happen, we may very well need to see a migration of traditional assets into a tokenized form. Blockchain infrastructure would need to meet certain regulatory requirements, such as data privacy (to which zk-roll-ups could be the answer).