Have you thought about how to assess crypto projects and what criteria to use? In today’s issue, Matthew Burgoyne, a partner at Osler Hoskin & Harcourt LLP, offers a comprehensive guide for investment advisors on how to evaluate crypto projects effectively.

In our Ask an Expert segment, David Ben Kay, president of Function X, provides insights into key considerations for advisors when assessing crypto investments.

–S.M.

As the exclusive sponsors of this week’s Crypto for Advisors newsletter, we extend our congratulations to Grayscale on their launch of the new Ethereum ETF. The ticker symbol, ETH, cleverly reflects its focus!

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Evaluating Crypto Projects: A Guide for Investment Advisors

With the growing momentum in the crypto and blockchain sector, financial advisors are increasingly fielding inquiries from clients about specific crypto assets and the projects behind them. To make informed investment decisions, it’s crucial to thoroughly evaluate these projects. Below are key factors advisors should consider when assessing the legitimacy and potential of any crypto project and its associated asset:

1. Due Diligence on Project Founders

Investigate the backgrounds of the project’s founders, including their professional history, prior projects, and reputation within the industry. Look for credible expertise and be wary of potential fraud. Warning signs include recently created social media profiles and anonymous team members.

2. Analyzing Tokenomics

Tokenomics encompasses the economic model of a cryptocurrency, including its supply, distribution, and utility. Key aspects to evaluate include:

• Supply and Distribution: Understand the total token supply and its distribution among stakeholders. Examine how tokens are allocated to founders, team members, advisors, and investors. A balanced distribution helps mitigate the risk of market manipulation.
• Utility: Assess the token’s practical use within the project. It should have a clear function, such as facilitating transactions, accessing services, or incentivizing participation. Be cautious of projects with vague or unnecessary token applications.
• Inflation and Deflation Mechanisms: Examine whether the project has mechanisms to control the token supply, such as token burns or buybacks. Understanding these mechanisms is crucial for evaluating long-term value stability.

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In the dynamic landscape of the Stock Exchange of Hong Kong (SEHK), July 2024 has witnessed significant movements among companies boasting high insider ownership growth. Insider ownership, a crucial metric in the realm of stock market dynamics, reflects the percentage of a company’s shares owned by its insiders, such as executives, directors, or major stakeholders. This indicator often signals confidence in a company’s future prospects, influencing investor sentiment and market dynamics.

Understanding Insider Ownership Growth

Insider ownership growth is a pivotal aspect of market analysis, providing insights into how closely aligned company insiders are with shareholders’ interests. A surge in insider ownership can signify various factors:

• Confidence in Strategy: Executives and insiders increasing their stake might indicate confidence in the company’s strategic direction, management capabilities, or future growth potential.
• Alignment of Interests: Higher insider ownership aligns the interests of management with shareholders, as insiders benefit directly from the company’s performance.
• Market Perception: Investors often interpret significant increases in insider ownership as a positive signal, potentially influencing stock prices and market sentiment.

Identifying Companies with Notable Changes

During July 2024, several companies listed on the SEHK have caught attention due to notable increases in insider ownership:

1. Company A: Noted for a substantial rise in insider ownership, Company A has seen key executives and major stakeholders significantly increasing their stake. This move underscores their confidence in the company’s strategic initiatives and growth trajectory amidst evolving market conditions.
2. Company B: With a focus on transparency and governance, Company B has witnessed a notable uptick in insider ownership. This development reflects strong internal belief in the company’s ability to navigate challenges and capitalize on emerging opportunities in the market.

Implications for Investors and Market Participants

For investors and market participants, tracking insider ownership trends can provide valuable insights into investment decisions:

• Signal of Confidence: Companies with increasing insider ownership may be perceived as more stable and potentially promising investments.
• Market Sentiment: Changes in insider ownership can influence overall market sentiment and investor perceptions, impacting stock prices and trading volumes.
• Due Diligence: Understanding the reasons behind insider transactions and ownership changes requires careful analysis and due diligence. Factors such as corporate governance practices, market conditions, and company-specific developments should be considered.

Conclusion

In conclusion, July 2024 has brought attention to SEHK-listed companies experiencing notable growth in insider ownership. This phenomenon underscores the significance of insider confidence in shaping market dynamics and investor sentiment. As stakeholders navigate the complexities of the stock market, monitoring insider ownership trends remains a critical component of informed decision-making and strategic investment planning.

By staying attuned to these developments, investors can position themselves advantageously in a dynamic and evolving market environment, leveraging insights from insider ownership as a key indicator of corporate health and potential future performance on the SEHK.

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What Happened: Once a vocal critic of Bitcoin (CRYPTO: BTC), Trump has now shifted his stance to support the development of U.S.-based digital currencies. He emphasizes the need to counter China’s expanding influence in the digital currency space.

This change in Trump’s position aligns with a broader strategy to establish the U.S. as a leader in emerging technologies, contrasting sharply with the Biden administration’s more cautious regulatory approach.

According to NASDAQ, one in four Americans owns Bitcoin, with many getting started through free crypto faucets.

Cathie Wood has suggested that holding 6 Ethereum (ETH) could potentially make you a millionaire, citing reasons for this possibility.

Trump told Bloomberg, “If we don’t act, China will figure it out and have it—or someone else will.” This statement marks a significant shift from his previous dismissals of Bitcoin as a “scam” and a “disaster waiting to happen.”

Trump’s new perspective on cryptocurrency highlights a broader political dynamic. With the Biden administration taking a more skeptical stance on crypto, Trump has sought to court the industry and its supporters. In May, he vowed to “stop Joe Biden’s crusade to crush crypto,” a stance that has resonated with certain voter groups.

Trump’s campaign has leveraged this position, launching initiatives such as a “crypto army” and accepting cryptocurrency donations.

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Why It Matters: Trump’s pivot comes amid his ongoing legal issues and his campaign for the 2024 Presidential election. Known for his ability to influence news cycles and shift narratives, Trump’s new focus on cryptocurrency and competition with China is part of a broader strategy to differentiate himself from the current administration and appeal to new voter demographics.

During his presidency, Trump engaged in a trade war with China and worked to reduce U.S. reliance on Chinese manufacturing. His current position reflects a nuanced approach, acknowledging the need to compete with China in emerging technologies while maintaining a critical stance on broader economic and geopolitical matters.

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