Bitcoin Is 'Digital Gold' Because People Say It Is
  What you need to know today in crypto and beyond March 17, 2021 Sponsored By:  If you were forwarded this newsletter and would like to receive it, sign up here.
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Top Shelf Today's must-reads
HIGH NET MOVES: Morgan Stanley is offering wealthy clients access to three bitcoin funds because of client demand, according to an internal memo CNBC acquired. This makes it the first major U.S. bank to allow its $4 trillion wealth management division to deal with crypto. Two of the funds on offer are from Galaxy Digital while the third is a joint effort from asset manager FS Investments and bitcoin company NYDIG, a company in which Morgan Stanley has invested.
PUBLIC AMENDMENT: Coinbase has amended its public offering prospectus to show it plans to sell 114,850,769 shares of Class A common stock for a proposed maximum offering price of $943,218,155, in line with rough estimates, according to the latest document filed with the U.S. Securities and Exchange Commission. These shares are expected to list within weeks on Nasdaq under the "COIN" ticker. TERMS OF SURRENDER: Arthur Hayes, founder and former CEO of BitMEX, confirmed he will surrender to U.S. authorities in Hawaii on April 6 to face charges the cryptocurrency derivatives exchange facilitated unregistered trading and other violations. As part of an agreement with a U.S. judge, Hayes would be allowed release on a $10 million personal recognizance bond, to keep his passport and stay at his home in Singapore. NEW TRUSTS: Grayscale Investments, the world's largest digital asset manager, said it's opening its first new trusts since 2019. It's beginning with five trusts that will invest in tokens from oracle provider Chainlink, decentralized data storage provider Filecoin, decentralized video streaming network Livepeer, crypto-enabled web browser Brave and virtual-reality world Decentraland. Recent filings show trusts for aave, cosmos, polkadot, monero and cardano may soon follow. (CoinDesk and Grayscale are both owned by Digital Currency Group.) DEFI DILEMMA: A scuttled $80 million deal between Sam Bankman-Fried's Alameda Research and DeFi upstart Reef Finance offers an inside look at the wild world of over-the-counter trading. Alameda purchased a large number of REEF tokens at a significant discount. But doubts over Alameda's "long-term interest in being a strategic investor" arose for Reef when it noticed those tokens were transferred to Binance, presumably to be cashed out.
– Daniel Kuhn
Sound Bite Overheard on CoinDesk TV
 "Everyone wants to start their own [private] blockchain rather than joining somebody else's. That is a recipe for guaranteed failure."
– Paul Brody, principal and global innovation leader of blockchain technology at Ernst & Young, on CoinDesk TV Wednesday morning.
Catch the latest First Mover episodes here.
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Off-Chain Signals What others are writing....
Bloomberg asks, if you're a Fed, "how do you stop a problem like bitcoin." Answer: Build a better cryptocurrency… like JanetYellenCoin. "A firming regulatory framework, deepening liquidity, availability of products and growing investor interest" mean crypto is passing the threshold as a suitably investable asset class, according to Morgan Stanley. CNBC reminds NFT investors of their tax obligations. Not to pop the bubble.
Safe words. Censorship. And non-fungible tokens. Sex workers are getting into crypto.
– D.K.
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The Takeaway Putting the news in perspective
All that glitters In early March, the mobile software firm Meitu made headlines as the first public company to put ether (ETH) on its balance sheet along with bitcoin (BTC). Today, it announced another allocation to those two cryptocurrencies.
In its initial announcement, the firm said blockchain could disrupt finance and technology, like "mobile internet has disrupted the PC internet." It holds a particularly high opinion of Ethereum and could imagine investing in projects or protocols, or even developing Ethereum-based applications. But it's Meitu's reasons for investing in bitcoin that actually bear examination.
One of several publicly traded companies to put bitcoin on its balance sheet over the past several months, Meitu thinks of the cryptocurrency as an "alternative store of value." Amid "aggressive increases in money supply by central banks globally," bitcoin has a chance of holding its value, a Board statement says. But the consensus opinion around bitcoin is more important to Meitu than its fundamentals. Despite cryptographic features including limited supply, portability and fungibility, "[bitcoin's] price is primarily a function of future demand that is driven by consensus of investors and the general public." In other words, bitcoin excels as a store of value because that's what other people say it is.
"Recently the Board has seen growing momentum in the consensus building process," Meitu writes. It noticed "conservative institutions" such as insurance funds, asset managers and other publicly listed companies – like Tesla, unnamed – moving to accept bitcoin payments as well as adding it to their treasuries.
It's common to describe bitcoin as digital gold, though as Meitu's announcement shows, that may be little more than a meme. Bitcoin maintains its value because more and more people believe it will. As Bloomberg's Tracy Alloway once argued, bitcoin is whatever you want it to be, making it "really the perfect post-modern financial asset." Last week, CoinDesk's director of data and indexes, Galen Moore, wrote that bitcoin is less like digital gold, as it's often described, than a $100 bill. Bitcoin, designed for online commerce, is a rarely used "bearer instrument" as well as a store of value. "[B]itcoin isn't valuable necessarily because it is spent, but because it could be spent." Presumably, there will be a counterparty on the other side of that transaction. Does it matter why Meitu is investing in bitcoin exactly? Not really. It's all the same to BTC, which carries on regardless, whatever people think of it. But the statement does point to the meta-nature of modern investing, where memes mean as much as revenue and bottom lines.
As Satoshi said: "It might make sense just to get some in case it catches on."
– D.K.
 What are bitcoin and ether's value propositions for investors? A new report by CoinDesk Research explains how the two most popular cryptocurrencies by market capitalization behave in the market, how their infrastructure differs, and what on-chain metrics say about them.
Download "Bitcoin + Ether: An Investor's Perspective" from the CoinDesk Research Hub.
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