Category Archives: Kyle Samani

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Are Bitcoin Miners Expecting an End to the Price Rally?

Atypical trading patterns from Bitcoin miners indicate they are expecting the price rally to soon come to an end.

While it is not uncommon for miners to sell off a portion of newly-gained coins to cover operating costs, the extent of their sales suggests they are looking to sell before their work becomes less profitable. Reports indicate that in the month of June and the majority of July, the average miner was, in fact, working at a financial loss.

What is particularly unusual about the sales from miners is that the last 24 hours have seen them sell more Bitcoin than they created. They reportedly mined an aggregate of approximately USD 14.4 million in coins, selling a total of USD 17.3 million. Recent trends from the miners show that they have tended sell around the USD 10 million mark of their holdings, averaging less than their daily earnings.

An end to the rally, or just covering costs?

Alternatively, if miners are not expecting an end to Bitcoin’s rally, perhaps the last few unprofitable months have required immediate sales to cover the growing overhead.

Kyle Samani, a managing partner at Multicoin Capital Management weighed in on the subject, speculating that it was likely many miners are currently no longer waiting for a price appreciation to sell, although he did not share any particular reason as to why this might be.

The co-founder of analytics provider Coinmetrics Nic Carter filled this gap by suggesting that miners could not afford to not sell all of their freshly minted coins right now due to the recent relatively low prices. Coinmetrics also suggests that many miners have left the market since Bitcoin’s price highs of December that saw the cryptocurrency reach nearly USD 20,000.
Bitcoin has managed to jump 40% since the start of July, hitting USD 8,000 this week and recovering to May price levels.

 

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Kyle Samani: Crypto Custodianship Will Release “Big Wave of Capital”

Kyle Samani, hedge fund manager at Multicoin Capital, says the final barrier stopping institutional investment was proper cryptocurrency custodianship, and over the next year investors will recognize that this barrier has finally been broken down, leading to a huge release of capital into the cryptocurrency markets.

Properly licensed and regulated cryptocurrency custodianship is essential for institutional investors like hedge funds and banks to feel safe enough to make big investments in cryptocurrency. Custodians ensure that all government regulations are followed, which is quite a complex and difficult task since regulations are constantly evolving and vary from country to country and even from city to city. Also, custodians are insured, so institutional investors that use a proper custodian don’t have to worry about hacking, theft, or sending cryptocurrency to a wrong address.

Additionally, hedge funds often give large amounts of money to their traders, and by mandating that traders use custodians, it guarantees that the traders won’t spend the money on vacations or expensive personal items. Therefore, using a custodian will give hedge funds peace of mind to expand their operations since they will be able to give their traders more freedom, since the custodian guarantees money given to cryptocurrency traders can’t be misplaced.

Multicoin Capital is using the relatively new Coinbase custody services, which only accepts deposits of USD 10 million or more and charges a fee of USD 100,000 just to set up an account, in addition to 0.1% monthly fees on deposited assets which would be USD 10,000 for the minimum deposit. Clearly, Coinbase custody services isn’t geared towards typical investors, but towards the over 100 cryptocurrency hedge funds that have been created in the last year. Coinbase CEO Brian Armstrong says that over USD 10 billion of institutional money is waiting on the sidelines of the market.

Major Bitcoin wallet BitGo acquired Kingdom Trust, a licensed qualified custodian regulated by the South Dakota Division of Banking that controls USD 20 billion of assets. BitGo is planning on merging with Kingdom Trust in order to roll out cryptocurrency custodian services. Nomura and reputable Bitcoin wallet Xapo have also launched institutional grade cryptocurrency custodian services.

Now, there are several reputable firms offering cryptocurrency custodian services for institutional investors, and if Kyle Samani is right it is only a matter of time until large amounts of institutional capital start flowing into markets to spark what could be the biggest cryptocurrency rally in history.

 

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