First crypto index in Hong Kong

Speaker: Irene Wong

Date: December 11, 2018

Venue:Meeting Room 3, Level 4,

Cyberport 3, 100 Cyberport Road

Media Meeting

Q&A session

Sharing on ICO and STO development

Sharing of the current cryptocurrency

landscape and problems in today’s market

Introduction of ixCrypto Index's methodology

Agenda

Market Overview

Crypto market

2,000+ Crypto currencies

15 Billion USD Daily volume

123 Billion USD Market capital

No Name Market Cap Price Vol (24h.)

1 Bitcoin $67,217,085,394 $3,860.97 $5,443,788,183

2 XRP $13,731,473,964 $0.34 $429,052,195

3 Ethereum $10,712,911,388 $103.38 $2,120,020,941

4 Stellar $2,646,495,330 $0.14 $76,037,770

5 Bitcoin Cash $2,180,172,216 $124.61 $109,244,008

6 EOS $1,988,074,356 $2.19 $836,237,435

7 Litecoin $1,786,125,831 $30.04 $426,116,359

8 Bitcoin SV $1,588,239,726 $90.87 $80,764,934

9 TRON $947,552,401 $0.01 $72,754,062

10 Cardano $910,681,549 $0.04 $27,515,156

Source: CoinMarketCap as of 6/12/2018

Top 10 Cryptos

Historical Crypto Market Capitalization (free-floated) & Bitcoin Price

(Aug 2017 - Dec 2018)

Source: CoinMarketCap as of 10/12/2018

The Crypto Market Cap peaked in January this year when Bitcoin price reached $16,098

Bitcoin PriceMarket Cap

Bitcoin is the original cryptocurrency with high liquidity and network effects. Because it is the pioneer in this field, its market capitalization is above 50% of the whole market. This is why we call the same type of currency other than Bitcoin as altcoin. Its trading volume accounts for more than 30% of the market.

Unlike Bitcoin, Ethereum is a ledger technology that companies can use to build new projects. Ethereum's technology has received support from the “Ethereum Alliance”, and many of the Fortune 500 companies are willing to jointly develop Ethereum's “smart contract” technology.

Due to the slower transaction speed of Bitcoin, the Bitcoin community began researching programs to increase the speed of transactions. One simple and rude solution is Bitcoin cash, which can be traded at 56 orders per second. But its shortcomings are also more obvious: lack of computing power support.

The essence of Ripple is the global settlement network of other currencies. Compared with Bitcoin, Ripple has two significant advantages: First, faster transaction speed, lower transaction fee. Second, the Ripple network has a good relationship with major banks and regulators, providing a basis for its development.

Like most altcoins, Litecoin is also designed to improve bitcoin. Litecoin has three significant differences: first, it can provide faster transaction confirmation, and second, the amount of issued currency is four times that of bitcoin. Third, it is easier to carry out Litecoin mining on a regular computer. It has become one of the five constituent currencies in the Swiss cryptocurrency ETF that has just been issued.

Top Crypto Hightlights

Bitcoin

Ethereum

Bitcoin Cash

Ripple

Litecoin

Top Crypto Trading Volume

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Source: CoinMarketCap as of 3/12/2018

Top 25: 68.5%

Crypto Rank

Source: CoinMarketCap as of 10/12/2018

* Adjusted Volume - Volume from spot markets excluding markets with no fees and transaction mining

Rank Name Adj. Vol (24h)* Volume (24h) Volume (7d) No. Markets Launched

1 Binance $548,177,189 $548,177,189 $640,442,873 396 Jul-17

2 OKEx $533,908,051 $533,908,051 $519,845,187 415 Jan-14

3 Huobi $423,977,873 $423,977,873 $397,359,172 290 Sep-13

4 LBank $418,169,952 $418,169,952 $239,784,037 89 Oct-17

5 DigiFinex $378,722,786 $378,722,786 $359,797,578 97 Apr-18

6 CoinBene $310,640,164 $310,640,164 $280,492,750 175 Sep-17

7 ZB.com $310,386,759 $338,757,706 $324,687,272 92 Nov-17

8 IDAX $285,832,260 $285,832,260 $277,838,392 131 Dec-17

9 BitMart $238,441,550 $238,441,550 $109,359,639 93 Mar-18

10 Bit-Z $230,439,959 $230,439,959 $254,751,047 155 Jun-16

Top 10 Crypto Exchanges by volume

Top 10 exchanges accounted for 26.22% of the total market trading volume

Company Name Origin Index NameNum. of

ConstituentsDissemination Data Source

Bloomberg US BGCI 9(<=12) Daily Mosaic and OnChainFX

Huobi China HUOBI 10 INDEX 10 Per 15 seconds Huobi Exchange

Bitmain ChinaCCI (BLC 10) 10 Per 1 second

11 ExchangesDRP 10 Daily

BBINDEX US

B7 Family 7

Per 3 minutes UnknownB20 Family 20

BT30 Family 30

B50 Family 50

Cryptoindices US

CI10 15

Per 5 minutes UnknownCI20 30

CI50 100

CS&P US CCI30 30 Per 10 seconds CoinMarketCap

Bitwise US

BIT10 10

Daily UnknownBIT20 20

BIT70 70

BIT100 100

MVIS Europe Digital Assets Indices 5-100 Per 1 second CryptoCompare

Some world popular Crypto Indexes

Introduction of

ixCrypto Index's methodology

Introduction

The ix Crypto Index (“IXCI”) serves as a market benchmark that reflects the overall performance of the world crypto market.

The IXCI will be launched on 12 December 2018. The IXCI measures the performance of the largest and most liquid cryptocurrencies listed in the world.

The IXCI is a free-floated adjusted market capitalisation weighted index with a cap on the weighting of individual constituent cryptocurrency and is calculated and disseminated daily.

IndexIndex Level

%Change

1 - Mth 3 - Mth 6 - Mth 1 - Yr YTD

IXCI 888.0797 -48.75% -42.56% -69.41% -68.81% -83.14%

IndexStandard deviation

1 - Mth 3 - Mth 6 - Mth 1 - Yr YTD

IXCI 298.8137 244.4922 420.6864 1276.1503 1232.9134

Period: 01/08/2017 – 06/12/2018

Performance

Inception date: 03/12/2018 (HKT)

Inception index level: 1000

IXCI vs Bitcoin IXCIBitcoin

Constituents Eligibility

Universe

The cryptocurrency must fit the definition of a cryptocurrency*.

The cryptocurrency must be traded publicly, and actively traded on at least two (2) exchanges

* Definition of a cryptocurrency refers to https://en.wikipedia.org/wiki/Cryptocurrency

1

2

Selection Criteria

The cryptocurrency should be among the top N free-floating adjusted market capitalization (“adjusted MC”) cryptocurrencies, where the N cryptos’ market coverage should just exceed 80%.

The cryptocurrency should rank in top 25 in terms of 90-day average trading volume.

If the cryptocurrency in top N in terms of adjusted MC cannot meet the liquidity requirement, it will be kicked off and replaced by the next one or more eligible cryptocurrencies until the total coverage exceed 80%.

3

2

1

Index Review

1 Quarterly Review

2 Buffer Rule

3 Fast Entry Rule

Quarterly Review & Announcement schedule

Review Schedule

Ix Fintech undertakes regular quarterly reviews of IXCI constituents with data cut-off dates of end of March, June, September and December each year.

Announcement dates of constituent changes will be the second Fridayafter the cut-off dates of March, June, September and December.

Effective dates of constituent changes will be the third Friday after the cut-off dates of March, June, September and December.

Next Review Mar 29, 2019 Cut-off date

Apr 12, 2019 Announcement date

Apr 19, 2019 Effective date

Buffer rule

In order to avoid frequent change of constituents, set a 5%buffer zone for market capitalization. It means that, in term of adjusted MC, only when the sum of constituents’ weights is below 75%, it need reconstitution.

Fast entry rule

A new crypto will be added if it meets below requirements for 5 consecutive days:

Daily trading volume ranks top 2.

MC is more than 30% weighting of the total market MC.2

1

*MC = Market Capitalization

Capping Rule

All constituents are initially weighted by their adjusted MC. The selected constituent crypto weight will then be capped at 40% of the IXCI MC when conducting the index review. The maximum constituent crypto weight can therefore exceed or below 40% between quarterly review.

Crypto Initial Weights 30% Cap Adjusted 40% Cap Adjusted 50% Cap Adjusted

Bitcoin 65.74% 30.00% 40.00% 50.00%

ripple 13.53% 27.64% 23.69% 19.74%

ethereum 11.00% 22.47% 19.26% 16.05%

stellar 2.80% 5.72% 4.91% 4.09%

bitcoin-cash 2.75% 5.61% 4.81% 4.01%

eos 2.36% 4.81% 4.13% 3.44%

litecoin 1.83% 3.73% 3.20% 2.67%

• ixCrypto Index will be published at 12:00 noon HKT every working day.

• Dissemination methods:

Index Distribution

ixOption 期權王 ixOptionhttp://ixfintech.com/crypto.html

Running bar with crypto index in coming quarter

• ixCrypto Website & Facebook post:

Index Distribution

Current Crypto World Problem

& HK Regulatory Update

Problems of Cryptocurrency

1•AML: Anti-money laundering

Money laundering

2•How are cryptocurrency exchanges and wallet providers come up

with system to prevent hacks without government regulations?

Hackers

The Speed of Crypto Hacks is Picking Up: April this year alone Thieves Stole $71.5M

Source: CryptoAware.org

Money lost

NameReported Loss

(Crypto)Reported Loss (USD) Occured on Sources

MyEtherWallet DNS

hack215 ETH $152,000 April 2018 Forbes

Coinsecure Theft 438 BTC $3,300,000 April 2018 Coindesk

South Korean Bitcoin

Pyramid SchemeN/A $20,000,000 April 2018 Coindesk

GainBitcoin India Ponzi

SchemeN/A $300,000,000 April 2018 Cointelegraph

Dantang coin Ponzi N/A $13,000,000 April 2018 CryptocurrencyNews

iFan/Pincoin Token

ScamN/A $650,000,000 April 2018 VNExpress

BTC Global Ponzi

ScamN/A $50,000,000 Mar 2018 Coindesk

Coinhoarder Phishing

Scams (ongoing)N/A $50,000,000 Feb 2018 Cisco Research

SFC Regulatory Approach for Crypto-assets

On 1 November, Securities and Futures Commission (“SFC”) set out new regulatory approach for virtual assets*.

Previous regime From 1 Nov 2018 onwards

• Issued statements explaining the

applicability of existing licensing and

authorisation requirements under the

Securities and Futures Ordinance

(“SFO”) for crypto assets and crypto

activity and services.

• Regulatory framework updated to enhance

investor protection by imposing control over

- crypto-asset portfolio managers;

- crypto-asset fund distributors;

and

-crypto-asset trading platform operators.

• Introduce a Conceptual Framework for

potential regulations of virtual asset

trading platform operators.

*A virtual asset is a digital representation of value. Examples include “crypto-currencies”, “crypto-assets”, and “digital tokens”.

SFC Regulatory Approach for Crypto-assets

Core Principals of the Conceptual Framework

All crypto-asset trading activities to be conducted under a single legal entity

Compliance with applicable requirements by the entire crypto-asset trading business

Professional investors as defined under the SFO only

Limitation on trading of initial coin offering assets within the initial 12 months after issue

Ensure the virtual asset trading transactions to be pre-funded, free of leverage, future contracts or other derivative products

ICO and STO development

The ICO Explosion in the past 5 years

Top 10 ICO Funding (USD)

1. Telegram: 850 million (2018)2. Telegram: 850 million (2nd round，2018)3. Dragon: 320 million (2018)4. Huobi: 300 million (2018)5. Filecoin: 260 million (2017)6. Tezos: 230 million (2017)7. Sirin Labs: 150 million (2017)8. Bancor: 150 million (2017)9. The DAO: 150 million (2017)10. Bankera: 150 million (2017)

Thank you

info@ixfintech.com 3539 3631http://ixfintech.com/

Follow us on:

http://ixfintech.com/crypto.html

Q&A Session

Appendix 1 Data source comparison

* All above refer to public data

Data source* CryptoCompare CoinMarketCap

Strength Provide every 3 hours data for latest 24h.

Provide all

Open/High/Low/Close/Volume/Market Cap

daily data from one crypto’s inception day

WeaknessOnly provide price data.

Historical data are discontinuous.Don’t provide minute-level data

Data difference The difference between 3 cryptos (BTC, ETH, LTC) within 1 month is 1.2699% on average.

Appendix 2 Index Calculation

The Index level is calculated as:

CyptoIndex𝑡 =σ𝑖=1𝑥 𝑃𝑖,𝑡×𝑆𝑖×𝐹𝑖

𝐷𝑡

Where

CyptoIndex𝑡 = the index level on day t

𝑃𝑖,𝑡 = the close price for Constituent i on day t, in USD

𝑆𝑖 = Circulating Supply for Consituent i in current quarter

F𝑖 = Cap factor for Constituent 𝑖,

D𝑡 = Index Divisor

𝑥 = Number of constituents

Appendix 2 Index Calculation

Initial Divisor is calculated as:

D0 =σ𝑖=1𝑥 𝑃𝑖,0×𝑆𝑖×𝐹𝑖

𝐵𝑎𝑠𝑒𝑙𝑖𝑛𝑒

Where

D0 = Divisor on inception day

𝑃𝑖,0 = the close price for Constituent i on inception day, in USD

𝑆𝑖 = Circulating Supply for Consituent i in current quarter

F𝑖 = Cap factor for Constituent i

𝐵𝑎𝑠𝑒𝑙𝑖𝑛𝑒 = 1000, 𝑤ℎ𝑖𝑐ℎ 𝑖𝑠 𝑡ℎ𝑒 𝑖𝑛𝑐𝑒𝑝𝑡𝑖𝑜𝑛 𝑖𝑛𝑑𝑒𝑥 𝑙𝑒𝑣𝑒𝑙

𝑥 = Number of constituents

The Cap Factor is calculated as:

F𝑖 =𝑤𝑖,𝑎𝑑𝑗𝑢𝑠𝑡𝑒𝑑

𝑤𝑖,𝑖𝑛𝑖𝑡𝑖𝑎𝑙

Where

F𝑖 = Cap factor for Constituent 𝑖,

𝑤𝑖 , 𝑎𝑑𝑗𝑢𝑠𝑡𝑒𝑑 = Cap adjusted weight for constituent i

𝑤𝑖 , 𝑖𝑛𝑖𝑡𝑖𝑎𝑙 = Initial weight for constituent i

Appendix 3 Index Rebalancing

When constituents are changed. We just re-calculate the divisor using new constituents:

D𝑛𝑒𝑤 = D𝑜𝑙𝑑 ×σ𝑖=1𝑥 𝑃𝑖,𝑡×𝑆𝑖×𝐹𝑖,𝑛𝑒𝑤

σ𝑖=1𝑛 𝑃𝑖,𝑡×𝑆𝑖×𝐹𝑖,𝑜𝑙𝑑

Where

D𝑜𝑙𝑑 = Old Index Divisor in previous month

𝑃𝑖,𝑡 = the close price for Constituent i on day t, in USD

𝑆𝑖= Circulating Supply for Consituent i in current quarter

F𝑖,𝑛𝑒𝑤 = Cap factor for Constituent 𝑖 𝑖𝑛 𝑛𝑒𝑤 𝑞𝑢𝑎𝑟𝑡𝑒𝑟

F𝑖,old = Cap factor for Constituent 𝑖 𝑖𝑛 pre𝑣𝑖𝑜𝑢𝑠 𝑞𝑢𝑎𝑟𝑡𝑒𝑟

𝑥 = Number of new constituents

𝑛 = Number of old constituents

Divisor adjustments