This week's latest trends and insights in the digital asset market from our asset management team.
Market Commentary
The price of Ethereum has surged by approximately 22% since Monday (20 May), driven by the highest level of daily spot buying from Ethereum permanent holders seen in 2024 and a new all-time high level for trading volume of US$48 million in the Ethereum futures ETFs. The increase in activity was spurred by a surprising change in the outlook of approval for the US-based spot Ethereum ETFs after the SEC requested minor updates to the 19b-4 forms. The recent change in sentiment in the chance of the ETH ETFs being approved may have come as a result of political pressure ahead of the U.S. presidential election. Bloomberg ETF analysts Eric Balchunas and James Seyffart promptly increased their approval odds for spot Ethereum ETFs, at the beginning of the week, from 25% to 75% accordingly.
Amid the renewed interest in spot Ethereum ETFs, Bitcoin’s price surpassed US$71,000 on 21 May and has since then remained close to the US$70,000 range. The supply of stablecoins has surged significantly, reflecting heightened demand for cryptocurrencies. The total stablecoin market capitalisation has grown by about US$30 billion, from US$130 billion to US$160 billion since the beginning of the year. On the 21st of May alone, Tether’s USDT and Circle’s USDC minted a total of US$1.25 billion in stablecoins, some of which may be used to purchase Ethereum in anticipation of the spot Ethereum ETF approvals in the US. As at the latest updates, the US-based spot Ethereum ETFs have officially been approved by the SEC.
This week has seen a major shift in Washington lawmakers’ stance in favour of effectively regulating digital assets. On 22 May, the Financial Innovation and Technology for the 21st Century Act (FIT21) bill was approved by the U.S. House of Representatives in a 279-136 vote, with support from both parties. This legislation, primarily driven by House Republicans, aims to regulate the U.S. crypto markets, set consumer protections, and appoint the Commodity Futures Trading Commission (CFTC) as the primary regulator of digital assets and non-securities spot markets. It also seeks to clearly define the distinctions between crypto tokens as securities or commodities. This marks the first standalone crypto market structure bill in the U.S. and is considered the most significant policy win for the crypto industry in the country. Another key bill, the Deploying American Blockchains Act of 2023, passed the House on 15 May with an even larger margin of 334-79. This bipartisan bill designates the Secretary of Commerce as the principal presidential adviser on blockchain and assigns the Secretary several responsibilities, including policy development, research, and technology promotion. This move has been seen as reducing the SEC’s influence over cryptocurrencies. Both pieces of legislation still need Senate and Presidential approval, but they signify a positive shift in U.S. crypto policy sentiment.
CEO Comment
The Gap between Bitcoin and the S&P 500 has reduced to 7%, from 11% last week, which continues to close as Bitcoin rallies following the shift in the likelihood of US spot Ethereum ETFs being approved by the SEC this month. As at the latest update the spot Ethereum ETFs within the US have officially been approved by the SEC!!!
As for the shift list, which we define as the major events and announcements facilitating the broader market’s transition to Web3 financial rails or the internet of value, the top shifts for this week include:
- The approval of the 8 US-based spot Ethereum ETFs has to be first.
- It was only a matter of time before Big Bank financial rails infrastructure emerged with a strong use case. Click here to read about the Broadridge and JPM tie up – this leapfrogs BlackRock in terms of “on-ramp”.
- Although many institutions have joined the fray getting Bitcoin exposure – the state of Wisconsin’s is a notable entrant – State of Wisconsin buys nearly $100M worth of BlackRock spot Bitcoin ETF.
Our Top “alts shifts” for this week, featuring shifts in our altcoin universe that drive our thematic approach, saw the second gap, or the broader digital asset market, drop ever so slightly to circa 42%. I want to reiterate that this is a big opportunity, as mentioned we see this as a selective opportunity to identify and grow our alternatives portfolio via our “alThematics” work. The gaps themselves are proving to be a risk on, risk off proxy and hugely high Beta – volatility is a certainty and an opportunity – the building is happening no matter what.
- In terms of scaling real word assets in 2024 – Deutsche Bank joining Guardian is another notable shift.
What are our favourite thematics for 2024? We continue to like any infrastructure plays of the shift from Web2 to Web3 financial rails and any plays in the real-world asset tokenisation infrastructure, data validation and decentralised storage, as well as scale-up technologies such as ZKrollups. We are closely following all the ”de’s” – DeFi, DePin, DeSoc – (want to know what that means? – message us).
Lisa Wade, CEO DigitalX
CRYPTO TOP 20 7 DAY PRICE CHANGE
*All figures throughout are in USD unless otherwise specified
Market Updates
- Macro continues to be a key driver for crypto: Coinbase
- Bitcoin hits record in Japan, Argentina and Philippines’ local currency
- CPI report spurs $932M inflows into crypto investment funds
- Ether ETFs filing process sees abrupt progres, though approval not guaranteed: Sources
- Steven Cohen’s Point72 also an owner of Bitcoin via spot ETFs
- Coinbase upgraded to Neutral from Underperform at Bank of America on positive crypto market dynamics
- Spot Bitcoin ETF inflows in May have made up for April outflows: analyst
- Miner Hut 8’s Bitcoin stack gives it capital to pursue upcoming projects, upgrade to buy: Craig-Hallum
- Uniswap Labs and Across Protocol introduce token standard ERC-7683 for better cross-chain interoperability
- Leading crypto-policy academic in Washington to open disclosure firm Bluprynt
- Coinbase to target Australia’s self-managed pension funds: Bloomberg
- Synthetix’s sUSD stablecoin slips below dollar peg to $0.96 amid sell-off
- Prometheum soft-launches Ether custody services, treating it as a security
- Bitcoin mining cost drops to $45K as inefficient miners exit: JPMorgan
- Kraken is ‘actively reviewing’ whether to end Tether support in the EU: report
- Dolce & Gabbana sued for messing up delivery of its NFTs: Bloomberg
- ‘Notcoin’ trading volume tops $1 billion in 2024’s biggest gaming token drop
- Picasso Network integrates IBC with Ethereum, improves cross-chain interoperability
- US shutdowns lead to global decline in Bitcoin ATMs
- Grayscale CEO Michael Sonnenshein steps down, replaced by Goldman exec: CNBC Crypto World
- Binance Plans to List ‘Small to Medium’ Size Tokens Amid Outrage
- Ether futures open interest hits record $14 billion on centralized exchanges
- Trump Becomes First Major Party Candidate to Accept Crypto Donations
- Fidelity Drops Staking Plans in Updated Ether ETF Filing
- US House passes crypto bill despite warnings from SEC
The Shift List
- SEC approves 8 Ethereum ETFs including BlackRock and Fidelity.
- Hong Kong expands cross-border Digital Yuan trial, allows residents to setup e-CNY wallets
- DTCC, Chainlink complete pilot to accelerate fund tokenisation with JPMorgan, Templeton, BNY Mellon
- Ghana, Singapore conduct trade in semi-fungible token pilot project
- CME plan to offer spot Bitcoin trading opens ‘world of opportunity’ for Wall Street
- Morgan Stanley latest bank to disclose spot Bitcoin ETF holdings for clients
- Crypto and DeFi wallet firm Fordefi gets cover from insurance giant Munich Re
- SEC engages with Ethereum ETF issuers on S-1 forms
- First UK crypto ETPs to launch on May 28
Macro and Regulatory Environment
- US Senate passes resolution overturning SEC crypto rule on banks
- Crypto firms rally behind FIT21 bill approaching US House floor vote
- Bipartisan bill for blockchain competitiveness passes US House
- New York Attorney General and Genesis secure $2 billion settlement following judge’s sign off
- Turkey takes crypto bill to parliament, aims to bring crypto licensing to the country
- Venezuela bans crypto mining to protect power grid
- French securities regulator warns investors against crypto exchange Bybit
- U.S. Treasury says it wants to better money laundering regulations around crypto, other illicit finance
- Binance executive denied bail in Nigeria amid $35 million money laundering trial
- India’s SEBI open to oversight of crypto trade, in contrast to Reserve Bank
- India’s market regulator suggests shared crypto oversight even as RBI seeks stablecoin ban: Reuters
- Brazil crypto regulatory framework coming by end of year, nation’s central bank says
- Swiss leaders plan to enforce global crypto reporting framework
- BlackRock, Grayscale, Bitwise File Updated 19B Forms in Rush for Ethereum ETF
About DigitalX
DigitalX Ltd (ASX:DCC) is a leading ASX-Listed Bitcoin and digital asset funds management business. The Company has a 9 year track record mining Bitcoin, blockchain and smart contract development. DigitalX Asset Management is the investment manager of digital asset investment products that provide qualified investors with highly secure and streamlined access to digital asset exposure. To learn more contact the team at [email protected] or visit our website https://digitalx.fund/.
Disclaimer:
DigitalX Asset Management Pty Ltd is a corporate authorised representative (CAR) of Boutique Capital Pty Ltd (AFSL 508011), and True Oak Investments Ltd (AFSL 238184). To the extent to which this document contains advice it is general advice only and has been prepared by the CAR for individuals identified as wholesale investors for the purposes of providing a financial product or financial service. The information herein is presented in summary form and is therefore subject to qualification and further explanation. The information in this document is not intended to be relied upon as advice to investors or potential investors and has been prepared without taking into account personal investment objectives, financial circumstances or particular needs. Recipients of this document are advised to consult their own professional advisers about legal, tax, financial or other matters relevant to the suitability of this information. Past performance is not indicative of future performance.
