September 13th, 2024
Market Overview:
Digital assets experienced modest gains following last week’s losses, as ETFs returned to inflows and the stablecoin space continued gathering steam.
- Bitcoin recovered gradually throughout the week after a sharp fall heading into the weekend, rising from a late Friday low of $53,060 to a Thursday high of $58,420
- Although some industry observers believe that the US election results could have a significant effect on Bitcoin’s valuation, Standard Chartered analysts this week predicted a positive outcome whoever the victor, believing that both candidates would favour more relaxed regulation than president Biden has
- Ether displayed similar chart patterns to Bitcoin this week, but couldn’t maintain a run above last week’s levels following its weekend decline
- The second-largest digital asset hit a weekly high of $2,397 on Wednesday, following a drop to $2,172 on Friday evening
- Overall digital asset market capitalisation broke above $2tn again after last week’s dip, with a current valuation of $2.05tn
- The majority of the market exhibited positive momentum this week, with only four of the top 50 digital assets by market capitalisation registering a decline at the time of writing
- According to industry monitoring site DeFi Llama, total value locked in DeFi increased slightly, to $79.8bn
Digital assets rebounded slightly from last week’s losses, as global markets recovered from recent negative sentiment. Within the crypto sphere, global adoption news continued, from ETF inflows (and new products) to Japanese mining efforts to stablecoin adoption across emerging markets, to new tokenisation plays, and deployment of blockchain to improve legacy financial infrastructure in Singapore.
What happened: ETF News
How is this significant?
- Digital asset ETFs once again experienced mixed performance, showcasing both inflows and outflows across this week’s trading
- According to CoinShares data, digital asset investment products matched their largest seven-day outflows in the week ending September 6th, as traders hedged exposure amidst last week’s broader market uncertainty
- In total, Bitcoin ETFs bled $1.2bn between August 27th and September 6th, the first sustained and substantial sequence of decline since they started
- Spot Bitcoin ETFs opened this trading week with consecutive inflow days, as weekend declines within the 24/7/365 crypto markets presented an opportunity to traders operating on Wall Street hours
- Overall, ETFs experienced three days of inflows this week, compared to one day of outflows
- These inflows snapped the longest run of outflows since spot ETFs launched—and did so despite rare outflows from BlackRock’s market-leading IBIT fund on Monday
- Fidelity’s FBTC led the way for inflows this week, adding $28.6m on Monday, followed by $63.2m on Tuesday and $12.6m on Wednesday
- These amounts are certainly more modest than spot ETFs were adding during the run-up to Bitcoin’s record high in mid-March, but three other issuers (Bitwise, ARK, and Grayscale’s 0.15% fee mini-ETF) also managed to post eight-figure inflow days
- Bloomberg’s head ETF analyst Eric Balchunas calmly counselled for perspective during the run of outflows, telling Coindesk “This is going to be two steps forward, one step back. That’s the way many ETF categories are born and mature. Nothing goes up in a straight line—flow-wise—ever because ETFs service long term investors and traders”
- Balchunas also pointed out (via a tweet from Bitwise CIO Matt Houghan) that “Just $IBIT's advisor allocations (which add up to $1.5bn) is more organic inflows than any other ETF launched this year”
- Additionally, ETF issuer 21Shares diversified its custody this week, appointing Anchorage Digital Bank and Bitgo in a move to relax reliance on Coinbase
- Spot Ether ETFs continued their trend of lower volumes than more established Bitcoin counterparts, but also managed to post net inflows across trading days at the time of writing
- Grayscale’s converted ETHE trust (trading with a 2.5% fee) halted its string of outflows with consecutive net-zero flow days for the first time since formation
- Inflows were limited, with a net $11.2m on Tuesday outpacing a combined $5.7m outflows on Monday and Wednesday
- Fidelity also led the way in spot Ether inflows, as the only fund to post consecutive inflows (worth a total $15.9m) from Monday to Wednesday
- Nonetheless, Fidelity’s FETH still trails BlackRock’s ETHA by a considerable distance in total post-launch inflows; $414m to $1.02bn respectively
- In other ETF news, State Street and Galaxy launched a range of crypto-focused ETFs this week
- However, rather than providing only direct digital asset exposure, “the new funds will buy shares of crypto-linked companies in combination with other ETFs that hold physical Bitcoin or futures”
- The three new funds will all be actively managed, with State Street Global Advisors chief business officer Anna Paglia saying “Some investors are not comfortable with the short-term, volatile price swings of single-currency crypto. We believe the next evolution of this market is the introduction of actively managed digital asset portfolios”
What happened: Political news
How is this significant?
- Although digital assets didn’t make it into the discussion points during the long-awaited Trump/Harris presidential debate, coverage of the asset class within the political spectrum still continued outside of the televised showdown
- Some analysts attributed a post-debate slide in crypto valuations to Harris’ perceived performance; improved odds on Harris winning are viewed as a less favourable outcome to the sector than a victory for the more vocally-pro-crypto Trump
- Crypto Council for Innovation CEO Sheila Warren told Bloomberg that “there is still distance” between Trump and Harris regarding the industry—but also that “there’s sufficiently daylight between Harris and Biden” that the incumbent VP shouldn’t be too tainted by Biden’s hostility towards the industry
- However, Gemini COO Marshall Beard opined that whilst 73% of crypto owners in the US would consider a candidate’s platform on the asset class, he doesn’t believe that a significant proportion of them could be classified as single-issue voters on the matter
- Beard revealed that according to a recent Gemini survey, 13% of crypto owners gained their first exposure to the asset class through ETFs—but this figure rises to 37% in the US, indicating the growing influence and presence of investors from the TradFi world within the ecosystem
- Additionally, the same survey found that 57% of crypto owners considered the asset class a part of their “core portfolio”, whilst 38% of non-owners were avoiding exposure due to regulatory concerns
- He classified crypto as “an alternative, but also an addition” to traditional financial markets and products, noting usecases such as inflation hedges and stablecoins
What happened: Stablecoin news
How is this significant?
- Following the recent Financial Times report on stablecoin developments, several more stories around the digital asset subset emerged this week
- Columbia Business School professor Austin Campbell was one of several commentators this week to identity stablecoins as an area of rapid adoption within the cryptosphere, highlighting benefits compared to existing money transmitters, particularly in international transfers
- This was backed up by a new report titled “Stablecoins: An Emerging Market Story”, commissioned by a bevy of financial heavyweights, including Brevan Howard, Castle Island Ventures, data firm Artemis, and Visa Crypto
- Castle Island’s Nic Carter told industry publication TheBlock “We felt there was a lack of data around how folks are actually using stablecoins around the world, especially in emerging markets, so we commissioned a survey of 2500 users in Brazil, Nigeria, Turkey, Indonesia, and India”
- The survey, conducted by YouGov, found that “69% of the respondents said they have converted their local currency to stablecoins, 39% said they have purchased goods or services with tokens and have sent money to a relative in another country, 30% have used stables for their business and 23% have paid or received a salary in stables”
- TheBlock notes that “the surveyors put forward a conservative estimate that $3.7tn worth of value was settled using stablecoins in 2023… In the first half of 2024, around $2.62tn was settled using stablecoins, putting the sector at an annualised pace of $5.28tn”
- Additionally, in the emerging markets covered by the survey, “the most popular use cases included currency conversion, paying for goods, remittances, and a salary”
- Some interesting regional differences included a Turkish tendency towards earning yield on stablecoins (to offset the country’s rampant inflation), whilst in Nigeria they were used as a vehicle for savings in US dollars
- Appeal isn’t just limited to developing markets however—stablecoin payments in Singapore rose to $1bn in Q2, according to data from blockchain forensics firm Chainalysis
- This represents massive growth from $161m of stablecoin payments in H2 2023, with Chainalysis research lead Eric Jardine touting “efficiency and low cost” as key drivers of increased adoption
- Ripple CEO Brad Garlinghouse identified growth within the APAC region as a key priority for his firm, identifying Yen stablecoin issuance in Japan as a key goal following the (expected) imminent approval for a new Ripple US Dollar stablecoin within their home market
- Circle, the world’s second-largest stablecoin issuer, will move its global HQ to One World Trade Center in New York City, with a ribbon-cutting ceremony to be held by New York mayor (and crypto advocate) Eric Adams
- This appears to be part of a wider strategy by Circle to go public in the US, moving away from its current headquarters in Ireland
- Meanwhile, stablecoin market leader Tether acquired a 9.8% stake in NYSE-listed agricultural conglomerate Adecoagro SA for approximately $100m as part of its wider diversification drive
- The Latin American farming giant may be part of a tokenisation play by Tether, as Adecoagro “owns 213,500 hectares of farmland and industrial facilities spread across Argentina, Brazil and Uruguay”, and has previously partnered with Argentinian startup Agrotoken, which has transformed 230,000 tons of “grains into a digital asset, [allowing farmers] to store or exchange [them] for supplies, services, and other assets”
What happened: Regulatory news
How is this significant?
- Several news items emerged this week regarding the leading US market regulators, the SEC and CFTC
- The SEC settled for $1.5m with trading platform eToro on the matter of unlicenced crypto sales, with eToro to “cease trading of nearly all crypto assets” on its platform going forwards
- However, this “nearly” is significant, essentially identifying the permitted Bitcoin, Bitcoin Cash, and Ether as non-securities—despite the agency’s long-running track record of avoidance and silence regarding the status of any non-Bitcoin digital assets
- Additionally, the settlement stated that eToro’s US-based customers had 180 days to sell their other crypto assets on the platform, and that the firm neither admitted or denied the SEC’s findings
- The CFTC was less successful in its attempted legal interventions this week, as a judge found it “went beyond its statutory authority” in attempting to prevent prediction market Kalshi from offering bets on the US election—potentially opening the door for popular blockchain-based equivalent Polymarket to extend its platform to US customers as well
- On Thursday, FOX Business’ Eleanor Terrett reported that House Financial Services Committee member John Rose submitted a new bill aimed at creating a joint committee between the CFTC, SEC, and “20 non-governmental stakeholders who represent different interests in the digital asset space”... “to shape US crypto regulations”
- The Bridging Regulation and Innovation for Digital Global and Electronic Digital Assets (aka BRIDGE Digital Assets Act) is based on Rose’s belief that “The current heavy-handed, regulation-by-enforcement approach isn’t working and is instead encouraging investment in this key innovation overseas"
- Under BRIDGE, "The Joint Advisory Committee on Digital Assets will provide a framework for the government and private sector partners to cooperate on a path toward success for the regulatory landscape of digital assets and private sector participants”
- However, several of Rose’s Republican colleagues may well hope that any SEC presence on potential future committees excludes current committee chair Gary Gensler, claiming political bias in hiring decisions on his part
- According to reporting in TheBlock, “House Financial Services Committee Chair Patrick McHenry of North Carolina, House Judiciary Committee Chair Jim Jordan of Ohio and House Oversight Accountability Committee Chair James Comer of Kentucky asked Gensler to hand over documents involving the agency's consideration of political ideology for prospective employees”
- Regarding regulatory clarity, this month will also see the beginning of Coinbase’s lawsuit against the SEC, aimed at forcing the regulator to engage in crypto rule-marking
- However, Bloomberg Intelligence’s Elliott Stein only gives Coinbase around a 30% chance in winning that suit, noting that “courts are reluctant to encroach upon” the “large leeway” afforded to regulators such as the SEC
What happened: Japan’s largest power company launches renewable Bitcoin mining initiative
How is this significant?
- Leading Japanese newspaper Asahi Shimbun this week reported that the country’s largest power company—Tokyo Electric Power Co (TEPCO)—will mine Bitcoin using renewable energy
- In particular, TEPCO subsidiary Agile Energy X “is experimenting with drawing on renewables to mine Bitcoins”
- The potential return on energy is seen as a means of fostering renewables adoption; “banking that it can prevent renewable energy from being wasted and prompting its widespread use”
- Agile chairman Kenji Tateiwa told the Shimbun “What we are doing has few parallels in Japan. Success of our framework would prompt more green energy to be introduced”
- The inspiration came from previous practices of “output control” by Kyushu Electric, which requested that during low-consumption periods renewable energy suppliers should “stop generating power, to pre-empt power oversupply, typically when photovoltaic power generation peaked in the daytime”
- As Japan moves towards a net zero carbon goal in 2050, more renewable energy must be produced, but—if excess capacity isn’t directed towards Bitcoin mining—this also means more total energy wasted
- Tateiwa stated “Green energy producers have to operate their businesses on the assumption that part of the power they generate is wasted. If Bitcoins were to provide a new source of income for similar power producers, who are exposed to overinvestments, that would prompt more green energy to be introduced”
- According to the Shimbun “Agile Energy X’s simulations based on open data showed that 240,000 gigawatt-hours of power would be wasted if green energy were to be introduced to account for 50 percent of the total power supply. That surplus power would be too enormous to be stored realistically in storage batteries. The simulations also showed that using 10 percent of that power would allow 360bn Yen ($2.5bn) worth of Bitcoins to be mined every year”
- In other Bitcoin mining news, the network’s mining difficulty once again hit a new record high, indicating continued high levels of competition despite reduced profit margins since block rewards were cut in the recent quadrennial “halving event”
- Despite this elevated competitiveness, a solo miner—i.e. somebody mining purely with their own hashpower, rather than as part of a larger mining pool—hit the news by successfully mining a block, netting a reward worth over $180,000
- This may have been enabled by newer, more efficient solo mining hardware; CryptoQuant's head of research Julio Moreno told industry publication CoinDesk “It is not a rare occurrence that a solo miner finds a block, it is just a low probability event… this has been happening a little bit more frequently [thanks to] growth in the production of small ASICs (mining equipment), specifically targeted to people that want to mine by their own from their own home”
What happened: Grayscale launches XRP token trust
How is this significant?
- Crypto investment firm Grayscale this week announced a new closed-end fund based on XRP, the token issued by Ripple Labs
- Announcement of the Grayscale XRP Trust led to a temporary surge in the token’s value, but the long-term ramifications of the new product may be more significant than any momentary market movements
- In a press release, Grayscale’s Head of Product & Research Rayhaneh Sharif-Askary said that “We believe Grayscale XRP Trust gives investors exposure to a protocol with an important real-world use case. By facilitating cross-border payments that take just seconds to complete, XRP has the potential to transform the legacy financial infrastructure”
- The creation of this Trust echoes the company’s previous Bitcoin and Ether trusts, which were both converted into spot ETFs earlier this year—thus leading to speculation that the new product could eventually lead to an XRP ETF, particularly since Ripple has a recent history of legal victories over the SEC
What happened: Crypto fund tokenises VC exposure
How is this significant?
- Digital asset fund ParaFi this week became the latest firm to engage in tokenisation efforts—by offering a minority portion of its latest VC fund, via LP interest tokenised by Securitize on the Avalanche blockchain
- The fund, which closed in May, is the first step in several tokenisation efforts by the $1.2bn firm, according to ParaFi founder Ben Forman
- ParaFi has previously invested in both Securitize and Avalanche, and Forman said “We are investors in this technology, but we didn’t just want to invest in the tokenization infrastructure, we wanted to use it ourselves”
- He added that “We’ve probably seem more interest and activity in tokenisation space in the last year than in the prior years combined”
- In other tokenisation and VC-related news, tokenised RWA (real world asset) platform Huma Finance concluded a $38m funding round, helping to fund further development of its payment financing model, as well as deployment across additional blockchains
- Chao Deng, CEO of contributors Hashkey Capital said “Huma's PayFi network marks a paradigm shift in payment financing, bringing essential liquidity and interoperability to an industry long plagued by inefficiencies and limited access”
- Additionally, a new crypto fund called Reforge launched this week, with an aim of taking on “misaligned incumbents” within the industry
- Co-founder Alexander Lin told Bloomberg that for instance “VCs don’t understand the latency requirements of distributed nodes… [many don’t understand] the viability of what they’re investing in”
- The firm is aiming for $80m with its first fund, having already raised $25m
What happened: Singapore moves mutual funds onto blockchain
How is this significant?
- As part of a continued drive to position itself as a (non-retail) crypto asset hub, Singapore recently progressed on its Financial Services Industry Transformation Map 2025 initiative, leveraging blockchain to digitise and expedite the glacial-paced world of mutual funds
- Marketnode, a joint venture between Singapore’s stock exchange and sovereign wealth fund Temasek Holdings, developed the Fundnode platform which has already cut the settlement time from over a week to two days on cash orders
- Bloomberg reports that “Before the end of the year, the savings parked with Singapore’s state-run and privately operated pension programs will also be able to move in and out of mutual funds with equal ease”
- Marketnode CEO Rehan Ahmed praised blockchain as a “single source of truth” allowing everyone to track a unified repository
- The process of getting that data into the repository required some time and effort, “replacing manual processes with smart contracts, or self-executing computer code”
- Ahmed explained some potential benefits from the increased efficiencies; “large private banks issue about 500 structured products in a day to their clients. Squeeze the 10-to-15-day settlement period, and high-net-worth individuals might be able to execute bespoke bets over shorter timeframes”
- HSBC previously issued structured products through marketnode as part of the city-state’s Project Guardian trials, as well as leading a Series A funding round for Marketnode in May