Most Trustworthy Crypto Exchanges | Irrational Bitcoin 13F Exuberance

The asset manager’s new short-term credit fund is hosted on the Ethereum blockchain.

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Mitchell Martin Senior Editor, Forbes Money & Markets
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Steven Ehrlich Director, Forbes Digital Assets
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IN COINBASE WE TRUST

It may not be your grandparents’ financial market, but the cryptocurrency business is looking a lot more staid in 2024 than it did just two years ago. Trustworthiness is in, flamboyance is out, and leading the Forbes list of the best exchanges this year is Coinbase. The San Francisco-based marketplace has played by the book as far as it is possible to do so in a country that has yet to enact any crypto legislation. Nonetheless, with top marks in areas like audit strength and regulation (despite a Securities and Exchange suit that could threaten its existence), Coinbase retains the title it won when we last reviewed the industry in 2022.

Supported by the U.S. financial regulatory and legal systems, Coinbase leads a contingent of seven American companies on our top 20 list. Coinbase has other things going for it, including a crypto custody business that has snagged as clients eight of the 11 newly allowed exchange-traded bitcoin funds. Having the trust of traditional-finance institutions is an important element in drawing new customers who want to be sure their assets are safe. Another important element in Coinbase’s favor is that it has custody of 44% of all the bitcoin and ether, the two dominant digital currencies, held by crypto exchanges.

Coinbase is followed on our list by two marketplaces that are not strictly speaking crypto exchanges at all: Chicago commodities market CME, which makes the list by dint of its global leadership in financial derivatives, and discount broker Robinhood, which gets high marks for low fees. Coinbase, by contrast, levies relatively heavy transaction costs, in part because of its compliance expenses, but that is working out for its shareholders. From the recent low on December 28, 2022, Coinbase stock is up 538%, crushing the double-digit gains of the major U.S. equity averages, more than three times as much as Robinhood and far outpacing the 304% of bitcoin.

Full report: The World’s Most Trustworthy Crypto Exchanges And Marketplaces

BUTERIN AND THIEL BACK POLYMARKET EVENT-BETTING SERVICE

Vitalik Buterin, the founder of Ethereum, and billionaire Peter Thiel are among investors supporting Polymarket, which has raised $70 million in equity funding for its cryptocurrency-based event-betting business. Polymarket bills itself as “the world’s largest prediction market,” and it is getting a boost from the U.S. presidential election this year, which has already drawn $125 million in bets; Donald Trump is favored to retake the office from incumbent Joe Biden, 51%-42%, with maverick Robert F. Kennedy Jr. at just 2%.

Wagers are denominated in dollars, but users have to submit crypto. The usdc stablecoin is preferred, and there are workarounds for tether and ether. Polymarket essentially operates as an offshore betting platform out of the purview of U.S. regulations, which ban betting on elections.

Founders Fund, the venture capital firm founded by Thiel, was the lead investor in the latest fundraising round, Polymarket founder Shayne Coplan told CoinDesk. Forbes estimates Thiel’s net worth at $6.9 billion.

CURRENT PRICE OF TOP 5 COINS (7-Day % Change)

Coin

Price

Percent Change

Bitcoin (BTC)

$66,955

10.4%

Ether (ETH)

$3,093

6.8%

Tether (USDT)

$1

0.1%

Binance Coin (BNB)

$581

0.9%

Solana (SOL)

$169

15.1%

Sources: Forbes Digital Assets, CoinGecko. Prices as of 5:00 p.m. on May 17, 2024.

CURB YOUR BITCOIN ENTHUSIASM: A 13F IS A SNAPSHOT, NOT AN ORANGE PILL

With the mid-January arrival of exchange-traded funds based on the spot price of bitcoin, first-quarter filings with the Securities and Exchange Commission are providing the first look at institutional interest in the new assets. These 13F filings for the quarter were due by May 15, and they show holdings of private-equity firms, hedge and mutual funds, and corporations with large investment portfolios that together amounted to $9.6 billion, or 0.7% of all bitcoin, but only for the last day of the quarter, March 31. That does not necessarily indicate enthusiasm. Many professional traders move in and out of the funds to profit from tiny differences between buying and selling prices. Their holdings often reflect high-volume trading strategies rather than any long-term belief in the assets. Banks and other financial firms also have to file 13Fs because they are involved in trading with fund sponsors.

The final list of filers was unsurprisingly top-heavy with institutions that are likely to be traders more than long-term investors. The biggest was Millennium Management, an alternative-asset shop with $64 billion under management, $1.9 billion of it in bitcoin ETFs on March 31. It was followed by high-frequency trader Susquehanna International Group, with $1.3 billion. In common with many of the top filers, their investments were concentrated in the three biggest funds: BlackRock’s iShares Bitcoin Trust, Fidelity Wise Origin Bitcoin Fund and Grayscale Bitcoin Trust, which was previously organized as a closed-end investment that at times traded at a sharp discount to face value, something ETFs cannot do. Those three funds accounted for $8.3 billion of the ETF total.

One filer that might be taking a long-term view is the Wisconsin Investment Board, 11th on the list. It manages retirement funds and similar vehicles for the state, and was one of the few pension managers contacted in 2018 that said it would consider cryptocurrency investment. “We’re looking into it” a spokesperson said at the time. The agency has declined to comment on its 13F.

Earlier: It’s Disclosure Time For Hedge Funds: What Bitcoiners Should Know

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