The digital asset market achieved a new all-time high this week, with record-breaking performance from Bitcoin and Ether crossing the $4,000 mark for the first time since May
Bitcoin grew steadily throughout the week, crossing $60,000 on Friday, rising to a new record high above $65,000 on Wednesday, and continuing to a new peak of $66,930
Bitcoin also experienced its highest weekly close of all time on Sunday, closing just below $62,000
Since July’s market lows beneath $30,000, Bitcoin has more than doubled in value
Ether broke through $4,000 for the first time in over five months, posting a weekly high of $4,141
The total market capitalisation of all digital assets grew by approximately $300bn, reaching a new all-time high of $2.65tn on Wednesday, eclipsing the previous record of $2.53tn on May 12th
Total value locked in DeFi also reached record highs, growing to $104bn according to industry analytics platform DeFi Pulse
Bitcoin—and the digital asset market as a whole—reached new highs after the first US-listed Bitcoin ETF officially launched. Digital asset activity was far more than one new ETF listing though; Square announced plans to expand Bitcoin mining opportunities, and other big names like SocGen, Paul Tudor Jones, Morgan Stanley, Coinbase, and Cboe all featured prominently as institutional investors continue to demonstrate enthusiasm for the asset class.
BITO debuted with nearly $1bn in volume ($999.473m to be precise), making it the second-most-heavily traded fund ever on debut (or the most-traded according to “natural volume”, if pre-seed investments are excluded)
The price of the fund itself rose from $40 on launch to $41.94 at the end of trading, an almost-5% gain
James Seyffart of Bloomberg Intelligence was impressed with the ETF’s performance on its first day, saying “It absolutely obliterated” expectations, and would “likely be the biggest launch of all time”
Data from digital asset analytics firm Bybit showed Bitcoin Options Open Interest hitting its highest levels since April, rising to $14bn alongside news of the ETF launch
The week also featured several other pieces of ETF news, as interest stretched far beyond ProShares:
Grayscale CEO Michael Sonnenschein said “We are of the firm belief that because the futures and the spot pricing for Bitcoin are inextricably tied, that we have the willingness to allow or clear the way for a Bitcoin futures ETF in the market, and also clear the way for a spot ETF”
A press release on Wednesday revealed that Japanese investment bank Nomura is moving into digital assets, through a Memorandum of Understanding with crypto custodians Komainu, and digital asset service provider Crypto Garage
According to the release, this move will “provide digital asset custody services to institutional customers in the Japanese market”
Komainu CEO Hensen Orser said the move would help them to address increasing institutional demand; “The evolution of digital assets is changing the financial ecosystem and Komainu is building out custody solutions as well as additional services to provide institutions with the support they need throughout the entire custody process. We are thankful for the continued support of Nomura and look forward to working with Crypto Garage to further expand Komainu’s global presence, bringing trust and transparency to the servicing of this asset class”
According to reports in the digital asset industry press this week, French financial giant Société Générale (SocGen) are in the process of acquiring (either wholesale or through a strategic stake) a crypto asset custodian, with a view to expanding their presence in the field
The bank has sent out a Request for Proposal, inviting firms with the ability to provide trading services and security for cryptographic keys
One of three sources speaking to industry publication Coindesk said SocGen had a particular interest in Swiss firms Metaco (digital asset technology providers to Swiss affiliates of Gazprombank and BBVA) and Taurus (who were recently helped Credit Suisse tokenise shares of a Swiss alpine resort)
Industry observers have noted an increased interest in custody technology acquisitions by financial institutions, beginning with PayPal’s acquisition of Curv back in March. One expert on crypto custody told Coindesk “When PayPal acquired Curv, the impact of that was that they not only acquired the firm but they took it off the market,...All those customers have had to scramble and look for alternatives”
Morgan Stanley CEO James Gorman sounded a respectful note on digital assets during a third-quarter earnings call this week, in contrast to recent statements by JP Morgan’s Jamie Dimon
Gorman told analysts “I don’t think crypto is a fad. I don’t think it’s going to go away… I don’t know what the value of Bitcoin should or shouldn’t be. But these things aren’t going away, and the blockchain technology supporting it is obviously very real and powerful”
Gorman noted that they don’t currently make direct digital asset purchases for clients, providing exposure through funds instead—but that could change according to demand; “For us, honestly, it’s just not a huge part of the business demand from our clients. And that may evolve and we’ll evolve with it. We’re watchful of it, we’re respectful, and we’ll wait and see how the regulators handle it”
A new survey released by Nickel Digital this week showcased a rising tide of institutional investor appetite for alternative asset classes, including digital assets
The research involved wealth managers and institutional investors from the US, Europe, and the Middle East, managing a combined $275.5bn in assets
53% of respondents said they believe institutional investors will “dramatically increase” the level of diversification in their portfolios over the next two years
A further 40% also believed that diversification will increase, but by a lesser degree
42% of those surveyed believed institutional investors will significantly increase their allocation towards crypto assets over the next two years, highlighting the rising institutional appeal of this new asset class
Fiona King, Head of Institutional Sales at Nickel, noted that “The digitisation of the investment management sector has revolutionised the market in terms of the transparency around different asset classes and the investment strategies that can be developed. This, coupled with developments around alternative asset classes such as cryptoassets, means the opportunities to diversify portfolios have never been greater”
Square, the fintech company founded by Twitter CEO (and prominent Bitcoin advocate) Jack Dorsey, released news this week that they are looking at the creation of an open-source Bitcoin mining system, including new hardware
Currently, mining hardware is primarily produced by specialist companies solely dedicated to their manufacture; Square’s move could mark the first entry of a fintech company into the field
“Bitcoin mining should be as easy as plugging a rig into a power source. There isn’t enough incentive today for individuals to overcome the complexity of running a miner for themselves”
As of Monday, Square held 8,000 Bitcoin in their corporate treasury, currently worth well over $520m
Bloomberg reported this week that Citigroup’s co-head of structured products trading and solutions, Matt Zhang, has left the financial institution to pursue a new career in digital assets
According to sources, the 14-year Citi veteran is starting his own fund aimed at venture capital investments and trading in the digital asset field
What happened: Institutional investment managers currently hold record level of digital assets
How is this significant?
According to industry analytics and custodianship firm Coinshares, investment managers have increased their Bitcoin and Ether exposure to record levels, following high institutional inflows in recent weeks
For the week ending October 17th, institutional managers held $72.3bn in digital assets, compared to $71.6bn of institutional crypto asset holdings during the market’s previous all-time high in May
Digital asset investment products saw inflows of around $80m last week, with Bitcoin accounting for $70m
Pennsylvania’s Stronghold Digital Mining set the final price for their IPO on Wednesday at $19, exceeding the previously-predicted range of $16-$18 per share
Their total share offering was also upsized above expectations, rising from 5.8 million shares to 6.7 million
Stronghold stated that they expect to raise $115m from their offering, which could potentially rise above $132m if underwriters choose to execute options they were granted
Chicago-based Cboe are re-entering the digital asset market two years after abandoning it, through the acquisition (financed by cash and debt) of a digital asset trading platform
Cboe’s acquisition of Eris Digital Holdings LLC will give the exchange operator access to Eris’ spot market, regulated futures platform, and clearinghouse
The firm’s CEO Ed Tilly cited rising demand as the prime driving force for their return to the field, saying “The demand for digital assets is huge, and there are some early movers in the retail-broker space that are eager to see this transaction… There is a trust factor when you see Cboe operate in a geography or asset class. This is no different”
The company aims to utilise their new resources and expertise for the development of indexes, derivative products, and market data which Tilly touts as an “all-in-one solution”
Cboe and Eris will develop their new platform in conjunction with a committee, featuring representatives from Robinhood, Galaxy Digital, and Virtu Financial Inc, who may all acquire minority stakes in the new entity
What happened: Coinbase announces deals with Facebook, NBA, and NFT marketplace
How is this significant?
Leading American exchange Coinbase had a busy week, announcing numerous new partnerships and product offerings, as well as increasing regulatory efforts
Bloomberg reported their exchange of a policy proposal promoting the creation of a new regulator and rules specifically for digital assets, rather than the application of rules created in a context when crypto assets couldn’t even be conceptualised
The exchange also announced collaboration with Facebook on the creation of the social media giant’s official digital wallet—named Novi—built for the integration of various digital assets including their forthcoming Diem stablecoin
This more than doubled their initial list, taking the total number of companies to 43
BofA’s list of stocks “that may see market value expansion due to digital asset exposure” now includes the likes of AmEx, Accenture, Facebook, IBM, Microsoft, Mastercard, and Visa, amongst others
The bank in particular identifies firms operating in the industries of “finance, technology, supply chains, social media and gaming” as those most likely to see tangible benefits from integration of digital assets and blockchain technology
Calling inflation “probably the single biggest threat to certainly financial markets and I think to society just in general” in a CNBC interview, he believes current government financial policy is “absolute death” for the traditional 60/40 stocks/bonds portfolio split
However, he sees great value in crypto assets, preferring them to classic inflation hedges like gold; “We're moving into an increasingly digitized world… Clearly there's a place for crypto, and clearly it’s winning the race against gold at the moment”
Animoca Brands, a company focused primarily on blockchain gaming, achieved a $2.2bn valuation and unicorn status this week, following a $65m investment
Investors included Sequoia China, Alan Howard-backed 10T, and perhaps most prominently, video game developer Ubisoft
This new raise follows a $139m round of funding in as recently as July
Animoca Brands chairman Yat Siu claims the raise was motivated by demand for collaboration from traditional gaming entities; “We weren’t originally looking to raise another round, but some of the partners that we had viewed as strategic people wanted to work with us and collaborate on potential blockchain games and licensing deals. That led to this round”
This week, the Banque du France conducted a trial alongside Belgian financial services firm Euroclear, successfully using a CBDC for the settlement of French treasury bonds on a blockchain testnet (a theoretical test, rather than a public release)
Participants in the experiment traded bonds and security tokens, settling them with a government-issued CBDC, using a system developed alongside IBM
Euroclear chief Isabelle Delorme deemed the trial a success; “We have together successfully been able to measure the inherent benefits of this technology, concluding that central bank digital currencies can settle central bank money safely and securely”
IBM’s global director of financial markets, Soren Mortensen was similarly positive, believing that the efforts “went well beyond previous blockchain initiatives” trialling “most central securities depository and central bank processes” without involvement from any market intermediaries