October 25th, 2024
Market Overview:
Digital assets consolidated after last week’s growth, as Bitcoin briefly broke above the $69,000 mark on numerous occasions.
- Bitcoin hit a weekly high of $69,360 on Monday, bringing it above its 2021 bull run peak, and within around 5% of its all-time high from March this year
- This was backed by strong ETF inflows on Monday, as BlackRock’s IBIT added over $300m
- Bitcoin spent the majority of the week trading between $67,600 and $68,700, before bouncing back from a Wednesday drop to a weekly low of $65,460
- Ether couldn’t sustain last week’s growth, underperforming Bitcoin after dropping off sharply in midweek trading
- Ether declined from a Monday high of $2,760 to a low of $2,463 on Wednesday
- According to industry monitoring site DeFi Llama, total value locked in DeFi increased despite Ether’s decline, to $89bn
Digital assets remained virtually unchanged in market capitalisation after last week’s explosive growth. Bitcoin ETFs once again displayed strong flows, political interest continued to ramp up with the US presidential election on the horizon, stablecoin adoption grew further, more major funding rounds and acquisitions occurred, and tokenisation kept going from strength to strength.
What happened: ETF News
How is this significant?
- Digital asset ETFs experienced a week of mixed performance, as spot Bitcoin products once again posted strong inflows, whilst spot Ether funds faced modest outflows
- According to CoinShares data, digital asset investment products enjoyed their fifth-largest weekly inflows ever in the trading week ending the 18th of October
- Once again, political sentiment was cited as a key driver for investor enthusiasm, as the products hit $2.2bn inflows—the most since July
- This was dominated by Bitcoin ETF inflows, which accounted for approximately $2.13bn of the new value
- Spot Bitcoin ETFs continued their positive momentum this week, although (comparatively minor) outflows on Tuesday snapped a seven day winning streak
- Inflows were dominated by BlackRock’s market-leading IBIT this week, logging $329m, and $317.5m growth on Monday and Wednesday respectively
- IBIT also added $43m on Tuesday, when overall daily outflows of $79m were sandwiched by nine-figure inflows either side
- BlackRock’s dominance was such that no other ETFs achieved even eight-figure inflows—and rather than the historic trend of Grayscale, it was ARK Invest who led the way in outflows, shedding $134m on Tuesday, and $99m on Wednesday
- IBIT is now approaching 400,000 Bitcoin under management, which makes it (comfortably) the third-largest holder of the asset, behind Binance, and long-dormant wallets linked to Bitcoin creator Satoshi Nakamoto
- ETF Store’s Nate Geraci pointed out that of the 575 ETFs launched in 2024, 14 of the top 30 by year-to-date flows (also six of the top ten, and the entire top four) are Bitcoin or Ether ETFs, alongside a couple of MicroStrategy ETFs acting like Bitcoin proxies
- Bloomberg chief ETF analyst Eric Balchunas added “I'll go one further: in the last four years 1,800 ETFs have launched and $IBIT is the most successful of all of them at $26bn”
- Spot Ether ETFs logged overall outflows, as minor inflows on Tuesday and Wednesday were unable to counteract $20.8m outlaws on Monday
- Elsewhere in ETFs, Ripple CEO Brad Garlinghouse declared that ETFs have “very clearly demonstrated there’s demand from institutions, there’s demand from retail”, and that an XRP ETF “is just inevitable”
- Although he noted that Ether ETFs haven’t done as well as Bitcoin, he still opined that they have “done very well”, and that performance is on about a par with the relative market capitalisation of both assets
- He also said that “basket ETFs” of multiple different crypto assets made sense, and that ETF performance and filings “are part of the trend of more and more institutionalised participation in the crypto industry”
What happened: Political and regulatory news
How is this significant?
- As the US presidential election draws nearer, overall political sentiment around digital assets continues to improve, and numerous commentators spoke out on the potential prospects for the industry
- Bloomberg noted that the crypto-centric superPAC Fairshake has a lot of funds left in its political warchest; “poised to spend more than $40 million in the final weeks of the 2024 US elections, after already deploying $140 million on dozens of Congressional races nationwide”
- Anti-crypto congressman (and Senate Banking Committee chair) Sherrod Brown of Ohio was noted as a particular target in the congressional races, falling from a six-point lead over challenger Bernie Moreno to “too close to call” status
- The publication also noted that Fairshake’s bipartisan nature was enough to pressure candidates on both sides of the aisle into action; both participants in Nevada(a key swing state)’s congressional race have added pro-crypto points to their manifestos, despite neither receiving funding
- Public Citizen research director Rick Claypool sees this bipartisan approach as unusual (but potentially effective) within the US; “It’s purely transactional and on specific policies. It is a very clear attempt to apply pressure on the lawmakers themselves to essentially say: ‘Support us and we’ll stay out of your race’.”
- Ripple co-founder Chris Larsen donated around $10m (in XRP tokens) to the Harris presidential campaign, whilst Ripple CEO Brad Garlinghouse stated that “the Biden administration’s approach to regulation is coming to an end for sure… [no matter who wins] we’ll have a more constructive engagement with the industry… the United States should be at the forefront and leading”
- Garlinghouse noted that “for the crypto industry, whilst the Republicans—on a macro level—have been more proactive… [but] we’ve seen indications that the Harris campaign wants to reset some of the Biden administration’s very flawed approaches”
- He also predicted that “[SEC chair] Gary Gensler’s reign of terror on the crypto industry is coming to an end very soon”
- Stillmark’s Alyse Killeen also backed the sentiment that digital assets will benefit no matter who lands in the Oval Office; “regardless of the administration, those involved will be looking to foster innovation”
- Standard Chartered analysts meanwhile presented a bullish year-end $125,000 Bitcoin price prediction in the case of a Republican sweep, compared to a $75,000 forecast if Harris wins
- Blockchain-based prediction platform Polymarket moved to crack down on potential US bettors as wagers regarding the presidential election continued to swell
- The New York Times reported that one particular “whale” who boosted Trump’s perceived odds on the platform with $28m of bets is a French national rather than an American, and “is betting out of conviction” rather than manipulation
- Billionaire Paul Tudor Jones was gloomy on overall economic prospects after the election, stating that “all roads lead to inflation”—but noted that this boosted his enthusiasm for Bitcoin (and gold) as a hedge against “fiscal extravagance”
- Over in Europe, Denmark appeared to follow in Italy's recent footsteps regarding increased taxation, proposing a mark-to-market taxation on unrealised crypto asset gains
- Mads Eberhard of Steno Research declared this “a war on crypto”, noting it would be taxed at a 41% rate, and includes crypto obtained before the law goes into effect, as far back as Bitcoin’s genesis block in 2009
What happened: Stablecoin news
How is this significant?
- Stablecoin (and stablecoin-adjacent) developments continued, with new milestones, implementations, and entrants
- Payments processing giant Stripe realised last week's reports by confirming an acquisition of stablecoin platform Bridge
- The deal was worth around $1.1bn, and is expected to be completed within the next few months
- Stripe CEO Patrick Collison stated “Stablecoins are room-temperature superconductors for financial services. Thanks to stablecoins, businesses around the world will benefit from significant speed, coverage, and cost improvements in the coming years. Stripe is going to build the world’s best stablecoin infrastructure”
- Stablecoin giant Tether proposed a system of tokenised boron markets to government officials in inflation-riddled Turkey
- Additionally, the firm reportedly proposed a digital asset exchange in the country, as CEO Paolo Ardoino confirmed the firm is “deeply committed to fostering innovation in Turkey’s digital-asset landscape”
- Visa’s crypto head Cuy Sheffield spoke at DC fintech week, explaining that technological advances were bolstering stablecoin adoption thanks to their efficiency
- He said “If you used a stablecoin a year ago, it was very explicit. You knew you were using a stablecoin. You usually had to seek out a crypto wallet, you had to figure out how to manage your private key. We’re starting to see both major fintechs, existing wallets like PayPal and others put frontend interfaces on it that just look like another fiat wallet. And so they use stablecoins on the backend”
- Perena founder Anna Yuan (formerly of Solana) urged the need for stablecoin-specific legislation, including the need for more corporate on-ramps
- Circle’s Euro-pegged EURC stablecoin reached a new milestone this week, hitting €100m in market capitalisation
- Regulatory-compliant Euro-pegged stablecoins are of particular interest in the region, as incoming MiCA legislations means Coinbase has already committed to delisting non-compliant stablecoins within the EU from December onwards
- In terms of another tokenised dollar-pegged asset, tokenised money market funds are emerging as an alternative to stablecoins
- BlackRock approached numerous exchanges regarding use of its tokenised fund—BUIDL—as collateral for derivatives trades
- Prime brokers FalconX, Hidden Road, and custodians Komainu have confirmed use of BUIDL as collateral in trades, whilst Bloomberg reported that BlackRock has held discussions with exchanges Binance, OKX, and crypto derivatives platform Deribit
- BlackRock’s tokenisation partner Securitize commented “The BUIDL ecosystem keeps growing, and we see significant potential in traders using the fund as collateral”
What happened: Nomura-backed crypto custodian makes first acquisition
How is this significant?
- Komainu, a crypto custodian backed by Japanese financial giant Nomura, completed its first major acquisition this week, absorbing Singapore-based custodian Propine Holdings Pte Ltd
- The acquisition will strengthen Komainu’s presence in the broader APAC region, according to a press release, leveraging Propine’s licence for access to the Singapore market
- Additionally, Komainu will pursue a Major Payment Institution licence in Singapore, allowing it “to fully offer payment services”
- Komainu CEO Paul Frost-Smith stated “Singapore is an important strategic hub for Komainu in Asia and Propine will enhance our capabilities in meeting the client demand we are experiencing”
- He declined to disclose the terms of the deal, but did indicate to Bloomberg that they would pursue several further acquisitions
What happened: Bitcoin miner plans $350m raise
How is this significant?
- Bitcoin mining firm Terawulf issued a press release this week announcing a $350m convertible senior note issue, aiming to fund a $200m share repurchase program
- According to the company, “The share repurchase program reflects the Company’s confidence in its business strategy and financial health. TeraWulf intends to repurchase shares using excess cash, prioritising this initiative after disciplined capital expenditures aimed at supporting organic growth in HPC/AI and evaluating strategic opportunities, such as potential site acquisitions”
- The firm mined around 176 Bitcoin in September, roughly consistent with 184 the month before
- As Bitcoin’s mining difficulty hit a new all-time high this week, Bitcoin miners in a post-halving landscape have generally fallen into one of two camps; spending on expansion and hoarding mined Bitcoin, or diversifying into A.I. services by repurposing their existing hardware
What happened: Pension firm L&G confirms interest in tokenisation
How is this significant?
- The asset management arm of $1.5tn AUM financial services firm Legal & General (L&G) is currently exploring tokenisation of its funds, according to numerous reports this week
- Ed Wicks, global head of trading at L&G told industry publication Coindesk “We are evaluating ways to make the Legal & General Investment Management Liquidity funds available in tokenized format”
- He outlined numerous benefits of the technology, saying “Digitisation of the funds industry is key to improving efficiency, reducing cost and making a broad range of investment solutions available to a wider range of investors. We look forward to continued progress in this space”
- UK investment funds were approved to undertake tokenisation efforts by a government working group in 2023
- LGIM’s CEO Michelle Scrimgeour was a member of the working group, and commented at the time that “Fund tokenisation has great potential to revolutionise how our industry operates, by enabling greater efficiency and liquidity, enhanced risk management and the creation of more bespoke portfolios. It is vital the UK remains at the forefront of technological development”
- According to data on blockchain aggregator Dune, tokenised government securities are currently worth $2.25bn
- Singapore’s DBS Bank meanwhile announced a host of tokenised banking services for institutional clients, including “instant, real-time payment settlement” via a permissioned Ethereum-compatible blockchain