Happy Birthday Bitcoin

Subject: Happy Birthday Bitcoin

To: Limited Partners of Grasshopper Capital Fund I LP
From: Ari Lewis and Sagar Rambhia
Date: 10/31/17

Dear Investors,

We find it hard not to romanticize today, the 9th birthday of Satoshi Nakamoto’s “Bitcoin: A Peer-to-Peer Electronic Cash System.”[1] The new networks created from this thought, are now used by 3M users daily and growing.

Bitcoin Forks and Segwit2x

The majority of the month was largely marked with the bleeding of the altcoin market with prices falling and with the stabilization and appreciation of Bitcoin. There is endless discussion regarding the Bitcoin Gold forks and the upcoming Segwit2X fork. The utility and value of forked coins remain unanswered- yet Bitfinex is offering trading “futures” of Bitcoin Gold. Altcoins lost much of their BTC value vs USD value reflective of the BTC vs USD trading, given the momentum with bitcoin price and the aforementioned forks. For us, at Grasshopper, it brings to mind Vitalik wearing one of his famous t-shirts.

Overall, the rise of forks make us and other economists convinced that cryptocurrencies are akin to the rules of fiat currency with the ability of creation and control of money supply by a group of people. For as much as we like to remove the human aspect- behind every consensus and every computer is a human. The only difference is the manipulation or governance is done by a consensus of participants with a particular set of personal interests rather than central banks.

Political Events

China remains a black box when it comes to cryptocurrency and regulation with today marking the last day before exchanges needed to cease operations. Once a leader in cryptocurrency trading and mining, China’s share of global bitcoin trading went from more than 90% to below 10% according to data published by Coindesk and CryptoCompare.[2] It is still legal to own crypto, and mine the digital gold.

This goes to prove that no government or man (Jamie Dimon) makes or breaks the bitcoin market with us seeing healthy recovery and stability of Bitcoin.

Regulatory Impact

Zcash’s Investment Trust also filed a request with the SEC on Oct 25th that will offer a public listing similar to Bitcoin Investment Trust- a positive sign for ZCash.[3] This will expand the offering for institutional investors beyond Bitcoin and Ethereum Classic. Greyscale Investments and Barry Silbert are doing important work bringing cryptocurrency to institutional investors- and now expanding the offering into privacy tokens. We believe that short-term adoption of crypto will come through the utilization of privacy tokens.

CMEGroup, announced the launch of Bitcoin futures coming as soon as December 2017.[4] This will bring in major capital inflow allowing institutional and retail investors access to crypto. Institutional investors will favor such a product as it removes the operational risk around custody. This is the third exchange to launch Bitcoin futures including Gemini and LedgerX. ETFs, derivatives and futures will make bitcoin trading available to mutual funds and hedge funds and ironically introduce the idea of “hedging” into the space.

Thanks,

Ari and Sagar

[1] https://bitcoin.org/bitcoin.pdf

[2] https://www.cryptocompare.com/coins/btc/analysis/CNY

[3]https://www.sec.gov/Archives/edgar/data/1720265/000095010317010226/xslFormDX01/primary_doc.xml

[4] http://www.cmegroup.com/media-room/press-releases/2017/10/31/cme_group_announceslaunchofbitcoinfutures.html