Digital assets displayed volatility this week and surrendered some of last week’s gains, as Bitcoin ETFs continued to exhibit strength but buyers across the wider market took profits.
Bitcoin traded across a wide range this week, ranging from highs of $64,790 on Saturday to lows of $58,440 on Wednesday
Ether’s performed similarly to Bitcoin, peaking at $2,815 on Saturday, before dropping down to $2,425 on Wednesday
Despite recent uncertain performance, Bitcoin remains up around 42% year-to-date at the time of writing, and a new crypto wealth report this week from Henley & Partners revealed that nearly 90,000 new crypto millionaires have been created this year
Overall digital asset market capitalisation dropped down to $2.08tn, with altcoins (particularly Telegram’s proprietary TON token) hit particularly hard
According to industry monitoring site DeFi Llama, total value locked in DeFi grew to $86.1bn
Digital assets experienced mixed performance this week, as strong early trading was reversed following profit-taking and altcoin losses after the arrest of Telegram CEO Pavel Durov in France. Elsewhere, Japanese giant Sony announced its own blockchain, crypto continued to feature in the political discussion, the SEC targeted NFT marketplace Opensea with its regulation-by-enforcement approach, two new nine-figure funds emerged in the space, and much more.
What happened: ETF News
How is this significant?
Digital asset ETFs experienced a mixture of inflows and outflows this week, although Bitcoin products fared better than their Ether counterparts
According to CoinShares data, digital asset investment products (dominated by spot ETFs) experienced strong growth in the week ending Friday the 23rd, with overall net inflows of $533m marking the best performance in over a month
Spot Bitcoin ETFs extended their run of consecutive net inflows to eight days, before widespread profit-taking starting on Tuesday led to outflows
Friday and Monday witnessed particularly impressive performances, with over $200m in net inflows on both days, punctuated by an industry-leading $224m inflows for BlackRock’s IBIT on Monday
Spot Ether ETFs continued their streak of outflows, although was once again dominated almost entirely by Grayscale’s converted Ethereum trust, the 2.5% fee ETHE—most other funds were net neutral throughout the week
However, Ether ETFs snapped their suffering streak on Wednesday, notching their first day of inflows in two trading weeks
This daily inflows was however modest, at a net $5.9m, led by $8.4m from BlackRock’s ETHA
The new Ether products continue to lag behind their Bitcoin contemporaries a month after their debut, as Bitcoin remains—to quote industry analyst Noelle Acheson—”the crypto ‘onramp’ for traditional investors”
However, some other analysts believe a change in fortunes may be due; VanEck’s head of digital assets research Matthew Sigel noted “Volumes have collapsed across all venues this week and Grayscale outflows continue. We’ve seen a total sentiment and positioning re-set that should bode well for September and October”
According to a press release, “OBTC unitholders will receive shares of BITB as part of a liquidating distribution of OBTC, in a transaction intended to be tax-free for U.S. federal income tax purposes”
Bloomberg senior ETF analyst Eric Balchunas noted that “US spot bitcoin ETFs now have 84% of the Bitcoin that [pseudonymous Bitcoin developer] Satoshi [Nakamoto] has, on track to have more and take over top spot by Halloween”
The Defiance 1.75x long MicroStrategy ETF [based on the largest corporate Bitcoin holder] traded over $100m within 6 days of launch, dubbed an “amazingly quick grassroots success” by Balchunas
On Monday, CME Group announced the release of a new derivatives product, “Bitcoin Friday Futures” on the 30th of September (pending regulatory review)
The cash-settled weekly futures contracts are sized at one-fiftieth of a Bitcoin, allowing a wide range of traders “to more accurately fine-tune their bitcoin exposure on a regulated exchange”, according to the group’s crypto product head, Giovanni Vicioso
Thus far, industry firms and PACs have donated and raised around $119m for crypto-friendly politicians; about half of all corporate giving in this election cycle
In primary-phase results, 36 of 42 candidates supported by industry finances emerged victorious
Washington College of Law professor Hilary Allen told Bloomberg that Harris would likely concentrate messaging on higher-profile issues like Middle East conflict and inflation, as only about 7% of voters are believed to own crypto
Allen stated “I would be surprised if the Harris campaign came out with a detailed crypto platform before the election. Despite the enormous amounts of money that the crypto industry is pouring into the election, crypto simply isn’t a salient issue for most voters”
Meanwhile, Republican presidential candidate Donald Trump continued his overtures towards the industry this week
On his social media platforms, Trump also acknowledged World Liberty Financial, a DeFi platform recently launched by two of his sons
Tuesday saw the release of Trump’s fourth set of NFT digital collectibles, with some of the NFTs including perks such as access to exclusive events with the candidate
Some industry analysts believe Trump’s desire for Bitcoins to be “mined, minted, and made” in the US could provide an opportunity to American mining hardware manufacturers—currently lagging well behind Beijing-based Bitmain
Elsewhere, in an interview with Time Magazine, El Salvador’s president Nayib Bukele spoke candidly on the country’s experience since declaring Bitcoin as legal tender in September 2021
Bukele said “hasn't had the widespread adoption we hoped for. Many Salvadorans use it. The majority of large businesses in the country have it… The positive aspect is that it is voluntary; we have never forced anyone to adopt it. We offered it as an option, and those who chose to use it have benefited from the rise in Bitcoin… I expected more adoption, definitely, but we always prided ourselves on being a free country, free in every way”
Sony said that it intends Soneium to acts as a bridge between Web2 and Web3, building a “blockchain ecosystem designed to invoke emotion and empower creativity” to foster mainstream adoption
The joint venture with Startale will soon launch a public testnet, although further details on dates were not provided
Entertainment, gaming, and finance will be areas of particular focus for Soneium, the former two representing key verticals within Sony’s corporate structure
Jun Watanabe, chairman of Sony Block Solutions Labs stated “We believe that the development of a comprehensive Web3 solution based on the blockchain is very significant for the Sony Group… We will work to create diverse businesses and new use cases with the aim of reaching as many users as possible”
Sota Watanabe, Founder of Astar Network and Director of Sony Block Solution Labs, added “Sony Group has strong distribution channels in multiple industries and existing users in our daily lives. Through Soneium, we will make something people want and go mainstream beyond Web3”
Watanabe also told industry publication Coindesk that the chain would initially concentrate on the firm’s offerings “phase one is all about onboarding Web3 people… then phase two, within two years, we're going to onboard Sony products, such as, Sony Bank, Sony Music, Sony Pictures and so on…[phase three] we would like to onboard not only Sony, but also all enterprises and all general Dapps on the top of it”
Transak CEO Sami Start said “This collaboration underscores our commitment to bridging the gap between Web2 and Web3, empowering industries such as gaming and entertainment with innovative solutions that enhance user experiences and drive digital transformation”
In particular, Soneium users will be able to use Transak’s services to purchase digital assets (such as NFTs representing video-game items) using traditional or fiat payment methods
Although there have been crypto firms launching layer-2s (Coinbase’s Base chain), corporations to issue assets on public blockchains (such as PayPal’s PUSD stablecoin, or tokenised funds from BlackRock and Franklin Templeton) and proprietary permissioned corporate blockchains (most notably JP Morgan’s Onyx), this represents quite possibly the most significant example of a corporation building a public blockchain
MakerDAO, one of the oldest and most-established DeFi protocols on Ethereum, announced a rebrand this week to broaden its userbase
Launched in 2014, Maker’s new identity as “Sky” will feature new tokens to act as equivalents—but not replace—the existing MKR governance token and DAI stablecoin
In an interview, co-founder Rune Christensen said “Maker was already very successful, it landed solidly with the core [early adopter] community… But the real question was, how do you become more appealing and available to the mass market?”
The solution appears to be a new identity which eschews crypto-centric terminology such as DAO (decentralised autonomous organisation)
Christensen stated “DeFi should stop feeling like crypto and should start feeling like finance got a lot better. It should be more about the benefits versus constraints. The launch of Sky is the first major step”
Following the recent approval of a law legalising crypto mining and digital asset use in cross-border payments, Russia took further steps this week to bring the policies into action
According to anonymous Bloomberg sources, crypto trials on official exchanges and international payments will begin in early September, using the country’s National Payment Card System to exchange Rubles for digital assets
The sources said that any existing digital assets can be used within the trial, and “Russia may allow the Moscow Exchange and the St. Petersburg Currency Exchange to set up crypto platforms next year if the trials are successful”
However, as of August 14th, finance minister Anton Siluanov admitted that the country didn’t currently have a solution on how to legalise existing crypto exchanges
As recently as 2022, the country’s central bank proposed a blanket ban on digital assets, but as the Russian Ruble lost its lustre as a direct unit of international trade (and centralised financial infrastructure like SWIFT was cut off), the decentralised and borderless nature of digital assets gained more perceived value
New York-based digital asset management firm ParaFi Capital this week raised $120m as part of a new investment strategy
ParaFi has previously operated both VC and hedge fund strategies, securing investment from firms including KKR and Bain Capital
The new $120m raise (from investors including Theta Capital Management and Accolade Partners) will go towards acquiring 30 to 50 “general-partner stakes in other crypto funds that are focused on specific market segments, strategies or geographies”
ParaFi founder Ben Forman told Bloomberg “GP stakes are a growing asset class in traditional finance, but haven’t existed at scale in crypto. We think they will. We’ve watched the crypto-fund landscape evolve closely over the years. We believe there will be many more crypto funds as institutional capital enters this space”
In other VC-adjacent news, investment firm Lemniscap this week revealed a new $70m Web3 fund designed to back early-stage projects
The fund is anchored by Accolade Partners (who contributed to the ParaFi raise above), and will focus on the Bitcoin ecosystem, particularly technological capabilities (such as zero-knowledge proof privacy) more commonly associated with the Ethereum blockchain
Opensea CEO David Finzer responded by tweeting “We're shocked the SEC would make such a sweeping move against creators and artists. But we're ready to stand up and fight”
In a company blog, he wrote that the SEC alleged NFTs were unregistered securities, a position which Opensea disputes
He stated “Crypto assets have long been in the crosshairs of the SEC, and companies like Coinbase, Uniswap, Robinhood, Kraken, and Consensys have been fighting against the SEC's single-track approach of "regulation by enforcement… NFTs are fundamentally creative goods: art, collectibles, video game items, domain names, event tickets, and more. We should not regulate digital art in the same way we regulate collateralized debt obligations.“
He also added that the firm would provide $5m towards legal costs of any NFT creators or developers hit by the same notice
Although Opensea is by far the largest NFT-related entity to earn the ire of the SEC, there have been severalprevious cases of enforcement against creators of non-fungible tokens
In other SEC-related news, US District Judge William H. Orrick ruled that the agency’s lawsuit against crypto exchange Kraken could proceed to trial
However, the finer points of this decision were actually hailed as somewhat of a victory for the exchange (and possibly wider industry)
Judge Orrick called the SEC’s labelling of tokens on Kraken as “crypto asset securities” “unclear at best and confusing at worst”, and said he was “reading the agency’s claims to be focused on assets offered as part of investment contracts, and not as allegations that individual cryptocurrency tokens are themselves securities”
Kraken’s chief legal officer Marco Santori tweeted “the Federal Court for the Northern District of California ruled, as matter of law, that none of the tokens trading on Kraken are securities. This is a significant win for Kraken, for the principle of clarity and for crypto users everywhere. It also confirms Kraken’s long-standing position that it does not list securities”
He added “The Court called out the SEC’s straw man tactics, too, wondering aloud and on the record why the SEC consistently mischaracterises Kraken’s position as requiring a “written contract” for there to be a security… The SEC unqualifiedly lost on this “tokens are securities” theory, and will not be permitted to rely on it going forward… Instead, it will need to prove, for every alleged transaction on Kraken, that the Howey Test factors are satisfied”
Elsewhere, lending platform Abra settled with the SEC, without confirming or denying the sale of securities on its platform
The administrators for bankrupted lenders Celsius revealed in a court filing that the firm has distributed payouts to around two-thirds of affected customers, worth 93% of eligible payouts
Late on Thursday night, Elon Musk and Tesla secured the dismissal of a market manipulation lawsuit claiming that the billionaire had used his public profile to “rig” the price of popular memecoin Doge