Digital assets exhibited growth this week, registering strong ETF inflows and clawing back some recent losses.
Bitcoin recovered from last week’s sharp drops, but was unable to break back above the $60,000 amidst continued concerns related to interest rates and forthcoming Mt Gox restitution
Bitcoin displayed steady growth throughout the week, rising from a Friday low of $53,910 to a weekly high of $59,260 on Wednesday
Ether bounced back better than Bitcoin (albeit having fallen more the week before), building from a Monday low of $2,830 to a Thursday high of $3,197
JP Morgan analysts led by Nikolaos Panigirtzoglou published a new research report this week, forecasting a stronger August after large liquidations in July
Overall digital asset market capitalisation gained $120bn for a current value of $2.12tn
According to industry monitoring site DeFi Llama, total value locked in DeFi remained steady around $88bn
Digital assets experienced significant improvements in market performance this week, although overall sentiment remained subdued. There were numerous positive developments in the ETF space, two of the world’s largest financial institutions hit headlines for tokenisation efforts, Donald Trump was announced as a speaker for a major Bitcoin conference, the SEC dropped a case against stablecoin issuers Paxos, and much more.
What happened: ETF news
How is this significant?
Bitcoin ETFs returned to inflows this week—and they did so in a major way
In total, the week ending July 5th registered nearly $400m of ETF inflows, as analysts believed investors “took advantage of low crypto prices across the board”
The last four trading days with full data available (at the time of writing) all experienced nine-figure inflows; ranging from $143m to $295m
These large inflows were despite Grayscale’s GBTC continuing its trend of sell-offs, as the only ETF with any weekly outflows
BlackRock’s IBIT and Fidelity’s FBTC led the way in daily flows, with the former posting $187m on Monday, whilst the latter followed up with $91m on Tuesday
BlackRock also accrued $121m flows on Tuesday; as ETF Store president Nate Geraci pointed out “More $ went into IBIT *just today* than the *total assets* in nearly 90% of all 300+ ETFs that have launched this year… Most ETF issuers would kill for a $121m inflow day. Of course, IBIT has taken in $18bn in 6 months”
This was backed up by Bloomberg chief ETF analyst Eric Balchunas, who added “last year there were about 500 ETFs launched. We're half way through 2024 and 76% of those are still under $121m in assets. Raising $100m total in the ETF Terrordome is HARD for a newbie. Yet $IBIT has taken in over $100m in a day 60(!) times since launching”
This led to bemusement among analysts, with Bloomberg’s James Seyffart remarking “make it make sense”
Regarding spot Ether ETFs, Bloomberg analysts currently have their prediction for launch date at 18th July, and Bitwise’s Katherine Dowling promoted the “active dialogue” ongoing between the issuer and the SEC, indicating more actual engagement from the regulators than earlier in the process
Beyond Ether ETFs, news broke this week that issuers VanEck and 21Shares both filed to launch a spot Solana ETF, representing the fifth-largest crypto asset by market capitalisation
What happened: Tokenisation news
How is this significant?
The nascent field of tokenisation, whereby ownership of real world assets (RWA) is represented via tokens on a blockchain, continued to grow this week, punctuated by two titans of traditional finance
Commenting on its recent digital asset summit in London, he shared positive client responses to all things crypto; "The definite feedback is, this is something that actually will change the nature of how they can invest... We’ve continued to see an uptick and a broadening in the product suite that clients would like to see available"
He also revealed that Goldman "is set to launch three tokenization projects by the end of the year with major clients"
Although exact details remain scarce, McDermott indicated "the bank’s aim is to create actual marketplaces for tokenized assets" and "one is focused on the fund complex in the US, and another on debt issuance in Europe"
The bank has dabbled in tokenisation since 2022, culminating in last year's launch of its Goldman Sachs Digital Asset Platform last year. McDermott stated Goldman's focus is singularly on #institutional clients, and thus it will remain on private, permissioned blockchains due to regulatory restrictions
BlackRock reached a new milestone as its BUIDL money market fund surpassed $500m in value within just four months of launch; cementing its spot as the highest-valued tokenised fund in the world
BlackRock CEO Larry Fink expects "the tokenisation of every financial asset", and his firm is clearly putting its (tokenised) money where its mouth is; two months ago it led a $47m funding round for Securitize, a blockchain firm specialising in the tokenisation of assets (and a partner in the creation of BUIDL)
This week, Securitize co-founder and CEO Carlos Domingo explained BUIDL’s growth to Bloomberg, noting that after stablecoins "the next, natural asset class to [tokenise] was the closest thing to a dollar; treasuries. Money market funds are basically short-term treasuries"
He identified BUIDL's status as a fully-on-chain fund on the public Ethereum blockchain as one reason for its success; "innovation happens when there's new stuff happening, not when you just make existing stuff cheaper"
Domingo also flagged up private credit as a potential next tokenisation boom if money market enthusiasm wanes after rate cuts
In the same interview, Bloomberg's Eric Balchunas cited fractional ownership and accessibility as key benefits of tokenisation, naming "hard-to-get" asset classes such as farmland, private credit, and art as examples
The top 5 RWA Treasury Bill Products (including BUIDL) currently hold a cumulative $1.52bn dollars in assets—significant growth for an asset class that didn't meaningfully exist before Franklin Templeton's FOBXX (token name: BENJI) was launched in 2021 and opened to the public in 2023
Former US president (and presumptive Republican nominee) Donald Trump confirmed perhaps the highest-profile appearance ever at a digital asset summit, when he was announced as a speaker at the upcoming Bitcoin 2024 conference on July 27th
Analysing the news, Bloomberg’s Sonali Basak commented “There’s a hope here that perhaps a change in the administration will really start to dilute some of the influence some of the stronger-voiced anti-crypto members of Congress have had”
The SEC this week “quietly dropped” its case against stablecoin issuers Paxos, having accused them in February 2023 of unlicenced securities offerings through their BUSD stablecoin partnership with Binance
Paxos received a “formal termination notice” on July 9th, indicating that the agency will not take any enforcement action against it
In an open response, Paxos stated that the decision could have dramatic effects on the wider stablecoin space; “We believe this development will unlock a new wave of stablecoin adoption by leading global enterprises. Well-designed stablecoins with strong consumer protections will transform the financial system in payments, settlement and remittance use cases”
Paxos head of strategy Walter Hessert told Fortune “The termination of this investigation formally is an enormous relief for us. It’s what we expected all along, and it really should create, hopefully, more certainty in the market among what we see as a growing number of large enterprises”
In other stablecoin news, PayPal’s proprietary PUSD stablecoin (launched in partnership with the aforementioned Paxos) exceeded $500m in circulation this week,
A different judge denied Coinbase’s request to subpoena SEC chair Gary Gensler, stating “It would be great if the parties could work together more constructively and bother me less. I don't sense that that's happening”
Additionally, the SEC allowed some exceptions to crypto accounting rules outlined in its recent SAB121 guidance, which Bloomberg Law analysts believe opens “a path for banks and brokerages to avoid reporting their customers’ crypto holdings on their balance sheets”
However, “companies must offset risks those assets pose” in order to custody them without the SAB121 requirements
Speaking at a July 10th Senate hearing, CFTC chair Rostin Behnam seemingly undermined his counterpart Gary Gensler’s assertion that most digital assets are securities, stating that an Illinois court “court re-affirmed that both Bitcoin and Ether are commodities under the Commodity Exchange Act” and telling lawmakers that 70-80% of crypto assets are non-securities
What happened: German state of Saxony nears end of Bitcoin liquidation
How is this significant?
Contrary to reporting over the last couple of weeks, it appears that activity on addresses linked to the federal government of Germany was in fact specific to the individual state of Saxony, which seized 50,000 Bitcoins in a criminal case earlier this year
As the coins were seized in the state of Saxony by the state’s police (LKA) rather than the federal police (BKA), they are being liquidated as per standard procedure with any seized assets in the state, and thus the sales don’t represent a particular investment thesis or policy by any federal bodies
As Dr. Lennart Ante of Germany’s Blockchain Research Lab explains “The general prosecutor's office of Saxony is responsible for liquidating confiscated assets, and the sell-off is hardly surprising. Seized assets are always liquidated within a certain period. This is a routine business process, although at a larger-than-normal scale”
Ante further adds that the assets being sold from a BKA (rather than LKA) wallet address is likely due to the BKA’s expertise in handling large amounts of digital assets—but the federal police are bound to LKA instructions, and would not be able to liquidate Saxony’s assets on a federal basis
Blockchain analysts from Arkham Intelligence noted that following recent transfers, the vast liquidations could soon cease, as wallet balances on Thursday dropped to 4,925 Bitcoins; around 9.9% of Saxony’s haul
Zodia—the digital asset firm founded by Standard Chartered, Northern Trust, and SBI—is currently in the process of acquiring a significant stake (or even full ownership) of Elwood Capital; a settlement and OTC platform backed by hedge fund billionaire Alan Howard
According to sources, the deal could be completed as soon as this month
With Standard Chartered as the majority owner of Zodia, this represents another significant move in the digital asset space for the global bank, following its recent decision to open trading desks for Bitcoin and Ether
Sources told Bloomberg that the acquisition could signal a shift in specialisation for Zodia; “A deal for Elwood Capital would give Zodia Markets licences as a virtual asset service provider and investment business in Jersey, supporting the company’s push to focus more on OTC settlement services”
The move would also serve to benefit Alan Howard’s continued digital asset interests; earlier this year it was reported that he’s selling off personal stakes in crypto firms in order to further bolster his digital asset hedge fund
Some oft-cited advantages of digital assets include their potential role as a hedge against currency degradation, low transaction costs, and borderless transfers—all factors which have led to a rapid growth in their use for remittances to Venezuela
According to a new study, around 30% of households in Venezuela currently receive remittances—7.7 million Venezuelans have left the country over the last decade as the country’s economy has struggled through consistent (hyper)inflation
Research by blockchain forensics firm Chainalysis suggests that around 9% of all money remitted back to Venezuela was done in crypto (worth over $461m) last year; a new record
Whilst traditional remittance agents like Western Union may charge up to 7% in fees, some digital assets enable transfers costing fractions of a cent
As one Venezuelan told Bloomberg; “If I need to give my aunt or my grandma money quickly for any emergency and I know my cambista doesn’t have the money, I ask my cousin to help me by giving them crypto and they deposit the money in her account”
Digital assets (and in particular stablecoins pegged to strong currencies like the US dollar) can help economic migrants preserve their capital in ways that traditional financial infrastructure cannot
One Venezuelan migrant to Argentina (another country facing inflation issues) explained; “This is the easiest way I have found to send money to my family and also save money in another currency hit by hyperinflation. My current job thankfully pays me in dollars, but back when I made a living in Argentine pesos, I transferred them into crypto so they wouldn’t lose value”