In this quarterly update we will recap the fourth quarter of 2019, the year as a whole, and take a
preview at 2020. The year 2019 has been a very interesting year on many fronts. A year which is
perceived to be the second year of this extended bear market in cryptographic assets. Although that
might sound somewhat odd with Bitcoin performing +98% for the year, this is clearly the case if we take
a look at digital assets with a smaller market capitalization. The Bitwise 70 Index, (a value-weighted
index of the small-cap crypto assets that does not include Bitcoin), returned a meagre -28,4% for the
year. Even a household name like Ethereum was just able to hold off losses and closed the year at 0%.
This has been the story of the bear market: investors are selling most of their small-cap crypto assets,
and invest it in the ‘safe haven’ asset Bitcoin. This has resulted in decreasing prices for most crypto
assets, and high returns for Bitcoin in 2019.

Another major driver which further strengthens the Bitcoin performance has been market regulation.
Regulators, especially the SEC, have made it very clear that ICO’s have to obey to existing securities laws.
This means that many companies that did ICO’s have received penalties from the SEC. The hands of
regulators have evaporated token sales at large, and pushed investors out of risky crypto assets into the
complete decentralized safe haven of Bitcoin. This has subsequently increased the quality of projects
that are raising money in the current environment. There are still too many free riders, but we have
good hopes that 2020 will be the year in which we will flush out the remainder of the nonsense in the
crypto environment.

Another trend over the course of the year has been the adoption of blockchain technology by large
institutions. We have seen the likes of Microsoft building an ID solution on Bitcoin. In addition, Microsoft
has launched ‘Azure’, a toolkit that assists corporations with the launch of enterprise ready crypto
tokens. Samsung has added wallet functionality to its phone and allows users to hold and pay with
cryptocurrencies. Finally, we saw the testing of sovereign block-based currencies, often referred to as
Central Bank Digital Currencies (CBDC). These are heavily researched by most G20 countries and will
eventually drive digital asset adoption. All the above developments heavily underscore the strength and
use cases of distributed ledger technology for value storage and transfers.

The fourth quarter has been slower than the first half of 2019 for Bitcoin and digital asset markets. The
quarter started with a surprising announcement from China which led to large price appreciations. At
the end of October, Chinese president Xi Jinping announced that China would incorporate blockchain
technologies in all levels of their economy to make it more competitive. The government introduced
blockchain lecture programs on a national level, which also included tutoring programs that explained
the value and the working of Bitcoin and Ethereum. The news catapulted Bitcoin from $7.500 to $10.500
in a single day, but slowly faded away in the weeks after.

One of the biggest drivers of the decreasing Bitcoin price in Q4 of 2019, was the selling pressure from a
Chinese scam called PlusToken. PlusToken is a ponzi-scheme from Asia that promised retail investors
high returns for storing their Bitcoin and Ethereum with them. In July of 2019 their website went dark,
and they took all the 200.000 Bitcoins and 800.000 Ether belonging to investors. They started selling off
the Bitcoin in Q3 and Q4 of 2019 on Asian exchanges, which has led to a selling pressure of roughly 1300
Bitcoin per day. Currently PlusToken is not moving any assets, and rumour has it that the Chinese
government has stopped the selling.

The end of the quarter was marked by babysteps in US crypto legislation, as Congress is potentially
eyeing a new classification framework, the “Crypto-Currency Act of 2020”. The Act aims to appropriate
how agencies would regulate new digital instruments and crypto related business. The Act will
distinguish between various types of asset, providers, and protocols. The Commodity Futures Trading
Commission (CFTC), the Securities and Exchange Commision (SEC), and the Financial Crimes
Enforcement Network (FinCEN) will be acting as “federal digital asset regulators”. The CFTC will be
monitoring ‘economic goods or services’ and crypto-commodities. The SEC will monitor all debt, equity,
derivative instruments, and crypto-securities. Finally, the FinCEN will monitor all crypto-currencies. This
is clearly a step in the right direction in creating a better and more clear level playing field for all
involved, and we look forward to the actual implementation in 2020.


What’s happening with Bitcoin – Hash Rate into the Halving
In our third quarterly report we have written extensively about some of Bitcoin’s on-chain fundamentals
and their possible impact on price. Although we saw the Bitcoin price decrease over the past two
quarters, fundamentals are currently looking very healthy. This was also addressed during our Investor
Circle at the end of November. We are seeing consistent growth in metrics like ‘Active Addresses’ and
‘Addresses with > 1 BTC’, which has currently expanded to 850k addresses. This shows that Bitcoin is
becoming more distributed between users, which is healthy for the ecosystem.
A metric we would like to focus on in this piece is the Hash Rate (red line in graph below), the total
amount of computing power supporting the Bitcoin Network. The Bitcoin Network rewards its miners
for securing the network with hash power by distributing Bitcoins as a reward. Currently a miner
receives 12,5 Bitcoin (~$100.000 at time of writing). That means that every 24 hour 1.800 Bitcoins are
issued to miners securing the network. Every 4 years this inflation reward is cut in half, underscoring

Bitcoin’s scarcity factor. The upcoming halving is planned around the 14th of May 2020, and on this day
the reward will be lowered from 12,5 to 6,25 BTC per block. As miners use the Bitcoins they mine to pay
for their hardware and electricity costs which are mostly USD denominated, one can see how this will
impact the equilibrium of active miners and the hash rate after the block reward halving. We will elaborate on the potential pricing impact further down in our outlook for 2020.










Looking into 2020, building blocks of a transformative decade

The year 2020 will be a big year for digital asset and crypto, with most of the attention around the
Bitcoin halving happening in May. We expect many more building blocks to be set out and are looking
forward to a year of high adoption.

1. Bitcoin halving will obliterate the old highs in the second half of 2020
The halving, decreasing Bitcoin’s inflation rate through lowering block rewards, is reducing the yearly
inflation from 3,8% to 1,8%. We have seen many opinions on the halving, even some saying that is
already fully priced into today’s price and therefore is a non-event. We could not disagree more, and
think that a supply shock of this magnitude will lead to very unpredictable price behaviour. The one year
price performance of Bitcoin after the halving of 2012 was over +5000%, and +400% in 2016. Obviously
we can not draw strong conclusions from only two data points. However, at the same time we are of the
opinion that the culmination of a supply shock via halving, further institutionalization of Bitcoin, and the
positioning as uncorrelated asset will lead to substantial upward pressure on pricing. Something we
have already seen unfolding over the Iran crisis mere days ago.

2. The rise of CBDC

Central Bank Digital Currencies (CBDC) have been getting increased attention over the last few years.
The announcement of the Libra cryptocurrency project by Facebook et al has acted as a flywheel for
more urgent research and faster development. Earlier this year, the Bank for International Settlements
noted that five central banks have already been running pilot projects with their own central bank digital
currency. More recent reports also indicate that the People’s Bank of China is accelerating the
development and testing of a digital currency with various commercial banks and a selection of cities in
China. On the whole, there is not a single major central bank that has not expressed interest in the
concept of a central bank digital currency.
This is good for blockchain networks because these currencies will run on a blockchain, although a
permissioned one. In turn this will introduce users to various concepts such as desktop wallets, mobile
wallets, confirmation times, smart contracts and other general concepts of digital currencies.
Consequently, the leap forward to recognize the value of cryptocurrencies and various tokenized assets
which run on blockchain networks is easier. In addition, we believe the permissioned blockchains are to
public blockchains what the intranet was to the internet. While at first attractive, their advantages will
diminish and they will eventually be replaced by their public counterparts. While we do not expect all
this to happen in 2020, as central banks are behemoths that need to act carefully and considerate and
therefore act more slowly. However, we do expect at least ten central banks to have run proof of
concepts with digital currency. Furthermore five central banks will have launched their own central bank
digital currency, one of which is a central bank from a G20 economy. Our chips are on China….

3. Crypto exchanges will continue to lose customer funds

Crypto exchanges getting hacked, or founder’s dying with private keys, is a certainty that will continue to
plague the industry in 2020. Last year alone the 7 biggest crypto exchange hacks accounted for well over
$100 million being stolen. There has been a decrease in hacks in the last quarter of 2019, which
indicates increased security at exchanges. However, we expect that custodial exchanges will continue to
be attractive targets for malicious actors. And as such we unfortunately, again, expect $1 billion of
crypto customer assets to be stolen or ‘lost’ by third party exchanges or wallet providers.

4. Corporates utilizing public blockchains

Currently corporations are mostly testing and running prototypes on permissioned and private
blockchain networks. There are also some companies, such as EY, that have begun building on top of
public networks. Recently EY disclosed their Ethereum addresses and as such users could see the
tokenization taking place on these addresses. The address they disclosed was being used to provide
traceability of wine. This is required for vineyards and wineries that want to sell to Asian markets.
We believe this trend will continue in 2020 as more companies will start trialling public blockchains and
see the benefits of public networks compared to closed networks. Furthermore, we think companies will
publicize their Ethereum addresses to indicate that they are embracing the technology and making
efforts in utilizing it. As such we predict that at least 10 major companies (>$1 billion revenue) will have
shared their smart contract Ethereum address in 2020.

5. Financialization of ETH/BTC and introduction of Ether futures

We expect further financialization of the major cryptocurrencies: Bitcoin and Ethereum. Bitcoin has had
institutional grade trading products since 2017. Ethereum has yet to have the first institutional grade
trading product based on the native token of the Ethereum network, Ether. The progress made for
Bitcoin on this frontier will have spillover effects on the digital asset Ether. As such, we predict that
regulated and CTFC approved Ether futures will be launched in 2020. We also expect the efforts for a
Bitcoin ETF to continue and predict more ETF applications coming in. However, we do not expect a
Bitcoin ETF to be approved in 2020 because of regulatory hurdles. We do expect to see more crypto
friendly banks scale further into crypto as it is a natural higher margin business, and growth is higher
than in traditional markets. In addition, we will see overall improvements in derivatives, more developed
options markets, and further growth in lending and borrowing offerings as investors seek to weed out
capital inefficiencies.

Portfolio Updates

Ethereum has recently commenced phase 0 of moving to Ethereum 2.0 and incorporating it’s
proof-of-stake model, leading to better scalability and usability. There are 7 phases identified, and
Ethereum and it’s community will find many challenges along the way. If Ethereum’s successes are
moving to Ethereum 2.0, and at the same time grow its community and developer base, there is not
much that can stop them from being the go-to smart contract platform.

In 2018, we saw many so called “Ethereum killers” raise substantial amounts at very high valuations.
Projects like Hedera Hashgraph, Algorand, Dfinity, and Solana raised more than $100 million at
valuations of $3 billion and higher. These projects are now coming to the market, and are experiencing
very bad returns. Hedera Hashgraph is down -95% since listing in Q4 of 2019. Whereas almost every
major crypto fund worldwide invested in these projects, we at Maven 11 have always been prudent of
these insane valuations. We therefore have no exposure to these (failing) projects as one of the few in
the industry.

We have added Binance, BNB, back to the portfolio for various reasons. Its price came down
substantially after trading at $40 in the middle of the year. The company recorded a whopping $1 billion
in profits for 2019, and Binance alone has rolled out more products then all top 10 exchanges combined.
CZ, Binance’s CEO, is on a mission to conquer the world and is not leaving anything untouched. BNB will
play a leading role in access to all his services.

Nash Exchange is leading the way in non-custodial technologies in trading and payments. After going live
in September, we are expecting a heavy product delivery Q1. They will be the first ever decentralized
exchange to offer non-custodial Bitcoin trading at the level of centralized exchanges in terms of
performance. Next to that they will be offering their own fiat on and off ramps, allowing for people to
come in- and out of crypto.

Elrond had large milestones over the course of 2019, and outperformed our expectations in terms of
execution. After the successful IEO in the middle of the year, they are currently launching mainnet and
have grown their community substantially over time. Even more important is that Samsung added
Elrond’s wallet functionalities to it’s phones. Next to being added to the Samsung phone, Elrond has
developed a blockchain-based game which is currently in the Samsung app store.

Last but not least, Dusk. Dusk has launched it’s sandbox mainnet in December, making itself ready for
digital securities issuance on their ledger. Tokenization is one of the killer applications of blockchain
technology. Dusk is focusing on the issuance of tokenized securities and tokenized illiquid asset classes
like private equity and real estate. Dusk very well understands that issuance will be commoditized down
the line, and having a full product offering which includes secondary markets is key. We expect them to
deliver the right technology stack for users and developers in combinations with the right commercial

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