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Major Crypto Exchange Kraken Values Itself at $8B: is it Too Much?

Amid a multi-month bear market in crypto land, this industry’s leading startups have still shot for the stars. Case in point, leaked documents indicate that a distinguished crypto exchange, Kraken, is seeking to be valued at a jaw-dropping sum, which may place the platform among the ranks of Earth’s foremost startups. While the firm’s appetite for grandeur is respectable, analysts fear that the startup could be well overshooting the mark.

Report: Crypto Exchange Seeking $4 Billion Valuation

According to an exclusive report from Finance Magnates, Kraken, a U.S.-centric crypto exchange and long-time industry participant, is discerning whether it should issue a private offering for bigwig investors, not Main Street. In leaked emails gathered by the aforementioned financial news outlet, if the San Francisco-headquartered platform, championed by Bitcoin (BTC) savant Jesse Powell, decides to go ahead with a private placement round, it will self-value 100% of its shares at $4 billion. Yet, it remains to be seen how much Kraken is seeking to garner via its first share offering.

Kraken reportedly stated that the minimum investment for its proposed round will be $100,000, disallowing a majority of retail investors, especially those non-accredited, from throwing money at the leading cryptocurrency exchange. The company message, specifically targeted at Kraken’s high volume and well-known clients, will reportedly have until December 16th to show interest in the potentially once in a lifetime offer.

Explaining its reasoning behind the push for a larger war chest, the exchange noted that it sees the currently depressed industry as ripe for disruption, due to the innumerable opportunities for bigwigs and household names to acquire promising crypto startups. Reassuring investors, the company added that it isn’t in a financial bind due to Bitcoin’s 82% decline off its all-time highs, citing its “significant reserves” likely garnered when Kraken was founded in mid-2011.

Overvalued?

The company’s intent to acquire startups en-masse may be a valiant effort, but some say Kraken isn’t ready, more so when you look at its proposed self-valuation. Andrew Rennhack, a crypto-friendly markets researcher and analyst, recently took to Twitter to break down the American startup’s private placement.

Through a multi-threaded tweet, Rennhack, who prompted responses from The Block’s Cermak and Bitfinex’ed, claimed that according to Bitcoinity, a Bitcoin-centric data aggregator, the platform posted $1 billion in BTC volumes in November. In a bid to prove a point, the commentator made a quick assumption that Kraken posts a conservative $1.5 billion in average monthly volumes, and charges 0.3% in fees.

Doing some napkin math, Rennhack determined that Kraken is likely generating $4.5 million in monthly revenues, a relatively shabby $54 million per year, especially considering Binance’s ability to rake in the latter figure each and every month. Making some further reasonable assumptions, Rennhack then explained that considering a 60% operating margin, similar to that of the CME, Kraken could be turning a net profit of $32 million a year.

Considering the exchange’s proposed $4 billion valuation and a speculated profit of $32 million, in Kraken’s upcoming investment round, it may be valuing itself at 125 P/E (profit to earnings), with such an overvaluation being only reserved for the most promising startups. Even Amazon (AMAZ), often considered one of the Nasdaq’s most overvalued companies, currently trades at a 93.26 P/E.

Yet, some say Kraken’s sky-high valuation isn’t totally nonsensical, as it remains one of the oldest, most tried exchanges throughout crypto’s relatively short ten-year lifespan.

Still, fellow Bay Area startup Coinbase, which arguably touts countless more prospects than its rival in Kraken, recently secured $300 million at an $8 billion valuation. And even while some doubted Coinbase’s investor-determined valuation, others claimed that $8 billion is well within logical bounds, as some lauded the platform for its penchant for innovation throughout nearly all of the crypto ecosystem’s subsectors. For instance, along with incessantly adding altcoins in recent months, Coinbase recently launched an over-the-counter platform behind closed doors to satisfy its growing institutional branch.

Related Reading: Bitcoin Friendly Square Tops iOS Store: Can Coinbase Reclaim Its Throne?

Kraken’s $4 billion value may seem unreasonable when you look at the recent sale of Bithumb, a prominent crypto exchange in South Korea. According to Reuters, the platform, which purportedly posted a jaw-dropping $1.1 billion (figure may be manipulated) in 24-hour trading volumes, was sold to BK Global Consortium for a relatively measly $354 million.

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Binance to Hold Inaugural Blockchain Week in Singapore

While the bears continue to pound the markets into the ground the builders and innovators of crypto and blockchain soldier on. Binance is one of those industry leaders and it has recently announced a week long blockchain conference in Singapore to showcase the technology.

A Week Of Blockchain and Crypto Goodness

The first Binance Blockchain Week will run from 19th to 22nd of January 2019 at the Sands Expo & Convention Centre in Marina Bay Sands. According to the company announcement 2,000 attendees are expected from around the globe. The week will consist of two large-scale events over the four days, a two-day hackathon known as the Binance SAFU Hackathon, followed by the Binance Conference. According to the press release the event is expected to “Bring together industry-leading regulators, investors, academics, entrepreneurs, and technologists to discuss today’s blockchain ecosystem and encourage sustainable growth in the industry. The event will prime the international stage for a global exchange of the latest blockchain knowledge and expertise among high-profile figures in the space.”

Over 70 speakers including industry leaders, high-level executives, academics, and heads of state, are slated to appear at the Binance Conference. Eric van Miltenburg, Senior Vice President of Global Operations at Ripple, Justin Sun, Founder of TRON, Da Hongfei, Founder of NEO, Patrick Dai, Founder of Qtum, and of course Changpeng Zhao (CZ), Founder and CEO of Binance are among those taking to the stage.

“We are thrilled to host the first-ever Binance Blockchain Week in Singapore, the finance and technology hub of Asia. Gathering the most notable players and thought leaders in blockchain, this will be a defining event. We look forward to many thought-provoking discussions and debates on how we can further work together to move the industry forward,” CZ added.

The first Binance SAFU (Secured Assets For Users) Hackathon will also be held from the 19th to 20th of January with the aim of exploring innovative solutions to secure crypto assets. Panels of judges and mentors will be in attendance from a number of organizations including the Ethereum Foundation, Binance Labs, PwC, Tribe Accelerator, and Primitive Ventures. Teams are invited to register via Binance from December 10 and a grand prize of $100,000 in BNB has been put on the table by the crypto exchange.

Singapore has been the venue of choice for a number of blockchain and crypto related conferences and seminars this year as its crypto ambitions are forever expanding.

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Hong Kong Blockchain Startup Hires China’s Bitcoin Evangelist After He “Quits”

Although China has continued to relentlessly clamp down certain subsets of the crypto industry, the nation’s blockchain scene continues to swell at an unbridled pace, backed by hotshot entrepreneurs, billions in Renminbi (China’s currency), and world-renowned incubators and venture capital consortiums. Most recently, a notable Chinese blockchain startup hired a legendary Bitcoin investor, accentuating that this industry is far from dead in the water.

Grandshores Hires Li Xiaoli, China’s “Bitcoin Evangelist”

On Monday, Grandshores Technology Group, a blockchain investment group, has divulged that it had formally brought on Li Xiaolai, a bigwig in China’s crypto scene, according to reports from the South China Morning Post (SCMP). Per the Asia-centric outlet, Grandshores, a Hong Kong-listed firm indirectly backed by a large endowment stemming from Hangzhou’s municipal government, has appointed Li as its new co-chief executive officer.

In an official statement, released to its shareholders, the Hangzhou-tied blockchain upstart purportedly claimed that Li, dubbed China’s in-house “Bitcoin evangelist,” will also operate as its executive director. Per Grandshores, Li will be taking the helm of a number of startup’s ventures, namely, a stablecoin slated to be pegged to the Japanese Yen. The statement, elaborated, reading:

“Mr. Li will mainly be responsible for various projects in which the company is taking part, including the establishment of a stable digital currency system (focusing on mainstream international currencies).”

After consulting with Grandshores insiders, SCMP claimed that the Asian blockchain group plans to launch the unnamed Yen stablecoin, originally unveiled in September, by February 2019, with such a crypto asset being one of the first of its kind. Other reports indicate that Yao Yongjie, chairman of the startup, claimed that his firm is also looking into stablecoins tied to other notable currencies, such as the Australian and Hong Kong dollars.

Li is expected to work with the Singapore-headquartered group at least until August 2019, the month of Grandshore’s next annual general meeting, at which point he presumably will be reevaluated. Even if the evangelist’s tenure doesn’t post stellar results, with this move, it is abundantly apparent that Grandshores is well on its way to achieving its long-time vision of funding the “next blockchain unicorn.”

Li, for those not in the know, is most well-known for founding BitFund, a China-rooted cryptocurrency-focused fund that once held 3.8 billion yuan (~$550 million) in assets. Although Li’s brainchild has since vanished from the limelight, the investor is still lauded as China’s richest Bitcoin investor, along with an array of other whimsical titles that would make crypto’s self-proclaimed “experts” jealous.

Didn’t Li Xiaolai Quit Crypto And Blockchain?

While the onboarding of such a notable industry participant is logical, especially considering Hangzhou’s involvement in Grandshores, Li’s involvement in the cryptosphere has been up in the air in recent months. Li’s appearance on Grandshores’ top brass comes just months after he reportedly quit investing in blockchain-centric projects.  As reported by TechNode, who originally broke this intriguing development, through a Weibo post, the supposed billionaire wrote (has been translated by TechNode):

“From this day on, I, Li Xiaolai, will personally not invest in any projects (whether it is blockchain or early stage). So, if you see ‘Li Xiaolai’ associated with any project (I have been associated with countless projects without my knowledge, 99% is not an exaggeration), just ignore it.”

The Chinese Bitcoin tycoon went on to add that he plans to sit on his laurels for “several years,” as he contemplates his next steps in life. This statement, while not explicitly stating he won’t join a blockchain startup, obviously throws a wrench in Grandshores’ exciting announcement, as it indicates that Li has lost faith in this industry.

Some have suspected that he underwent a burnout, brought upon by the tumultuous market and years of putting the pedal to a metal. Others have claimed that events in his checkered crypto history, such as calling Binance “fraudulent,” and reportedly owing creditors 30,000 BTC, sent him to a frenzy. Still, a Hong Kong Stock Exchange-listed company, like Grandshores, wouldn’t be caught dead lying about such a development. So for now, it seems that Li has been legitimately brought onto Grandshores’ team.

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Japan Updates ICO Regulations While BitTrade Joins Huobi Family

Japan’s crypto friendly status has been achieved through a solid regulatory framework which protect investors without stifling trading or innovation. This has been strengthened this week when its financial watchdog announced plans for further ICO regulation.

ICO Regulation for Investor Protection

Earlier this week Japan announced that it was ready to launch ICO regulations to protect investors from the ever growing number of scams in the industry. According to local media, citing sources familiar, the Financial Services Agency is set to go ahead with new procedures to limit the amount of investment that can go into initial coin offerings.

In addition to the extra layer of investor protection the FSA will require business operators that issue their own cryptocurrencies based on the ICO model to be registered with the agency. Crypto exchanges are currently required to do this also but only 16 have successfully completed the procedure so far.

The agency plans to submit bills which will revise financial services and payment services laws during January’s parliamentary session. Citing a growing number of fraudulent ICOs abroad the regulator is aiming to protect domestic and foreign investors from losses by limiting the amount they have to participate in token sales.

BitTrade Joins Huobi Family

It is not easy to make it on to Japan’s short list of fully regulated crypto exchanges which is only 16 at the moment. Huobi, the world’s third largest exchange by trade volume, does not have that accolade so to get around it decided to buy into an exchange that does.

BitTrade, one of Japan’s fully regulated exchanges, has sold a controlling stake to Huobi Japan Holding Ltd in a move that will enable Huobi to gain wider access to Japanese markets. According to reports BitTrade will be closing its platform in order to re-open under the Huobi Group family.

The exchange has asked its customers to re-register a new account and perform the KYC procedures again; “Please prepare your identity confirmation document again … from the viewpoint of thoroughly pursuing the criminal profit transfer prevention law, please register new accounts,”

The new platform will be accessed via huobi.co.jp which was not available at the time of writing. It will support 11 trading pairs and the following six cryptocurrencies; Bitcoin, Ethereum, XRP, Bitcoin Cash, Monacoin, and Litecoin.

BitTrade apologized for the inconvenience and urged clients to withdraw their assets;

“We are sorry for the inconvenience caused by the termination of the Bittrade service and updating to the Huobi new system. In the new system, we will continue to offer more liquidity and convenience services, so we appreciate your patronage.”

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Why Does Mainstream Media Spread So Much Crypto FUD?

Just a couple of years ago finding a Bitcoin or crypto related news article in the mainstream media would have been a tough task. Today nearly every news outlet worth its salt is regularly running stories on crypto. According to a new study a lot of the industry heavyweights are throwing around a lot of fear, uncertainty and doubt, much of which is totally unfounded and superfluous.

Media Sentiment is Not Static

A new study by eSports company Clovr has revealed the ‘complicated and conflictual relationship’ between cryptocurrencies and publications that cover them. Following the rise and fall of the market over the past couple of years the study attempts to ascertain which publications have pushed a positive sentiment and which ones are fueled by FUD.

Looking back at 2017 the research noted that crypto coverage was rather limited and only peaked when prices plunged following bad news such as China’s trading and exchange ban. The year before, positive sentiment far outweighed negative, a ratio that changed in late 2017 when markets started to surge.

FUD was partly fueled by billionaires that had already made their money and possibly considered cryptocurrency a threat. The likes of Warren Buffett calling it ‘rat poison’, or Mark Cuban hammering away with his bubble comments, or Jamie Dimon calling it a fraud, added gasoline to the mainstream media fire.

As markets peaked and then fell in January 2018, mainstream media ramped up its FUD machine and more negative sentiment flooded out. According the study, the top purveyors of ‘bad news’ at the time included the Wall Street Journal, Reuters, Yahoo Finance, the International Business Times, and the Washington Post.

Media that appeals to a younger, more finance orientated audience unsurprisingly ran more positive articles on crypto, these included Forbes, Business Insider, CNN, Cnet, Mashable, and Huffpost. CNBC, whose tweets have found to have an effect,  has been pretty much ‘fair and balanced’ with a good dose of each and today still dedicates a lot of its airtime to crypto which is itself a testament to the growing industry.

Conservative media outlets have shown an overwhelming amount of distain for crypto and these include Breitbart, Fox News, and the Economist. All of which has run predominantly FUD based articles over the past few years. Publications with a more liberal skew have been pretty balanced, and finance or technology focused outlets more positive.

The report concluded that the coverage of Bitcoin and crypto has been far from static over the past five years. Some outlets have become more skeptical while others have become more bullish as crypto markets ebb and flow in cycles that they have already been through several times before.

The takeaway from the study is that most mainstream media publications have their own slant anyway so this will get pushed through in the articles they publish, be it FUD or FOMO. Just like social media, which can often be described as ‘digital pollution’, don’t take everything you read as gospel. Thorough research and not investing more than you can afford to lose are also worth bearing in mind when getting into crypto.