Welcome to the latest edition of the Asset (r)Evolution newsletter where we dive into what is important for Financial Advisors to know in the continued evolution of Digital Asset markets and the adoption of decentralized blockchain technology.
Since our last edition the three main Digital Asset topics that are important for investors and financial advisors to be aware of and have a fundamental understanding of:
- Deutsche Bank is latest Traditional Finance Continues Push into Crypto Services
- US Regulatory Activity: Gary Gensler testifies at US Senate Banking Committee, CFTC labels DeFi threat, and a congressional hearing on CBDCs.
- Gemini Earn users get update
Are you a financial advisor or individual investor looking for help staying on top of important aspects of investing safely and securely in digital asset markets?
Then you need to Book a demo here to talk with us!
New Asset Revolution Podcast Episode:
In this episode, Marc Nichols is joined by Kelly Ye, head of research at Decentral Park Capital, a thesis-driven liquid venture fund. She is responsible for research and investing in liquid and early-stage tokens across various crypto sectors. Kelly and Marc discuss her TradFi and Crypto journeys, and they dig into Crypto both as an asset and as a technology. They also offer an engaging discussion about notable opportunities in Crypto.
Now, a run of the numbers…
Run of the Numbers Sponsored by Digital Asset Research
*Data Provided By: Digital Asset Research. Digital Asset Research (DAR) drives the evolution of digital asset data integrity by emphasizing quality, transparency, and accuracy in our solutions for institutional crypto businesses. We help our clients operate confidently in the crypto space by delivering trustworthy ‘clean’ digital asset pricing, market data, research, and expert guidance.
Digital asset markets were slightly down this week with the total industry market cap hovering around $1.09 trillion. The price of Bitcoin (BTC) closed at $26,668.34, up 3.07% on the week, while Ethereum (ETH) closed at $1,635.10, down 0.07% on the week. Year to date, BTC is up 60.5%, ETH is up 36.25%.
Ethereum continues to be positively correlated with Bitcoin when looking at a 30-day rolling correlation, while the S&P 500 and gold continue to be statistically uncorrelated with Bitcoin by the same metric. (See correlation chart just below).
Total Value Locked (USD$) in DeFi verified by Digital Asset Research remained flat this week coming in at $37.73b as of Thursday, September 14th. The top 10 DeFi total value locked verified by Digital Asset Research had no change.
-as of Thursday, September 14th, 7:00 pm ET
*7-Day Average
*Source: Cryptofees.info, Thursday, September 14th, 7:00pm ET
*Fees in USD
Traditional Finance Continues Push into Crypto Services
Germany’s largest bank which manages $1.4 trillion, Deutsche Bank, has entered into a global partnership agreement with the Swiss-based crypto infrastructure firm Taurus SA to provide digital asset custody and tokenization services to its clients. “As the digital asset space is expected to encompass trillions of dollars of assets, it’s bound to be seen as one of the priorities for investors and corporations alike,” Deutsche Bank Global Head of Securities Services Paul Maley said. “As such, custodians must start adapting to support their clients.”
London-based bank HSBC, with $3 trillion in assets, is now working with Fireblocks to build digital asset services as well. However, it is unknown specifically what these services will entail.
On Tuesday, Franklin Templeton filed for a spot BTC ETF joining other firms like Blackrock and Fidelity. In the filing, Franklin Templeton cited their custody partner as Coinbase, and that it would trade on Cboe BZX Exchange, Inc. Franklin adds the application to their ongoing dive into digital asset solutions, now offering SMA services and a blockchain-based tokenized treasury bond.
The Nasdaq stock exchange filed with the Securities and Exchange Commission to list an Ethereum ETF from Brazilian asset manager Hashdex that wants to hold both spot ether and futures contracts. The fund is set to be managed by Toroso Investments, which is registered as a commodity pool operator with the Commodity Futures Trading Commission and a member of the National Futures Association.
Why does all this matter for financial advisors and investors?
The day is coming when a plethora of regulated investment options to gain exposure to the crypto economy, all with very distinct differences that will affect the overall performance and experience of investors, will be available with the click of a button. The day is also coming when the infrastructure we all conduct our businesses and daily financial lives will be drastically different.
One need only look behind the extravagant price predictions and major headlines of regulatory enforcement (see below). This is truly an echo of past technological and industrial revolutions.
Prior to that day lies the opportunity to engage and invest. While sentiment is down and hype is low, this is where all the building is happening. These are the times when advisors and investors should be implementing disciplined long-term investing strategies, not on the day markets are at all-time highs and decisions are based on un-disciplined emotion or tweets of fin-fluencer characters preying on the behavioral psychology of investors “get in now before its too late!”.
Don’t have the time or energy because you are working on other initiatives, or developing services for your clients in other wealth management areas? Then get in touch and let us be your strategic partner to take this endeavor on.
US Regulatory Activity
On Tuesday, The Committee on Banking, Housing, and Urban Affairs conducted a hearing on “Oversight of the U.S. Securities and Exchange Commission.” Where the witness was SEC Chair, Gary Gensler. Predictably, Gensler affirmed his stance on crypto that new crypto legislation is not needed with existing securities laws being more than adequate. Gensler was also asked about the recent spot BTC ETF filings and the Grayscale court decision. Gensler said his agency was still reviewing the Grayscale decision, as well as “multiple filings around bitcoin exchange-traded products.”
In a speech at a conference hosted by the Practising Law Institute., Ian McGinley, the CFTC’s enforcement director, called unregulated decentralized finance exchanges an “obvious threat” following the agency’s charges against multiple DeFi protocols last week. “The existence of unregulated DeFi exchanges is an obvious threat to the markets regulated and customers protected by the CFTC, and it is one we have taken very seriously,” Ian said.
Also, this week U.S. lawmakers weighed the pros and cons of issuing a central bank digital currency (CBDC) on Thursday. Rep. French Hill, R-Ark., asserted that the Federal Reserve would need the go-ahead from Congress before issuing a CBDC. “Let me be unequivocally clear here for this audience: there is no support for a CBDC in Congress, except those on the fringes who think somehow a CBDC might be an amazing solution to many unstated global problems,” Hill said in his opening remarks during a House Financial Services subcommittee hearing.
Why is all this important?
Regulated financial services providers are eagerly awaiting reasonable rules and regulations when it comes to digital asset markets and the crypto economy. This is one of the keys, if not the key, to unlocking the next wave of innovation and growth in the sector.
Through court cases creating precedent and proactive legislation from both sides of the aisle, it will happen, but it is unknown when or how. It’s also still very unclear of the US’s position when regulatory clarity is achieved given the activity we see on a global scale.
A key element here is that if you build globally allocated investment portfolios then it’s imperative to explore digital asset exposure. While it remains scary as a US-based consumer or allocator, do not let fear override your overarching fiduciary duty.
Gemini Earn Users Get Update
We are closing in on the one-year anniversary of Gemini Earn users being unable to withdraw funds from their platform. DCG’s Genesis owes approximately $1.1 billion to Gemini’s Earn customers, which account for nearly 99% of all claimants, according to representatives of DCG. Digital Currency Group has proposed a new creditor agreement as part of Genesis’s bankruptcy proceedings that could see Gemini Earn users recoup all the crypto held by the platform. The new DCG plan provides a framework for creditors that would offer “all unsecured creditors a 70-90% recovery with a meaningful portion of the recovery in digital currencies.”
While this has not yet been voted on, it is an important step in the right direction. Gemini Earn was a place where many US investors were participating in depositing tokens to earn yield on them, with the other being BlockFi.
If you are an advisor in the US, there is a high probability that if you have a client who answers yes to whether they have invested in crypto, that they have holdings in Gemini Earn or BlockFi.
Be sure to reach out to us if you need help understanding what to do or where to go with clients who are in this situation.
Digital Asset Learning:
Webinar: Institutional DeFi Unlocked
Created By: Intotheblock
Abstract: In an evolving DeFi landscape that’s bursting with potential, the management of complex risks—particularly economic risks—stands as a cornerstone for institutional adoption. Understanding, measuring, and, mitigating these risks is key for any organization looking to capture DeFi’s potential.
In this webinar, Our head of research, Lucas Outumuro, will go through our latest research and share what you need to know to secure your advantage in DeFi.
Thank you for your continued trust. Be sure to tell someone today you care about them!
The content presented is for information purposes only and should not be considered specific or individualized financial advice. Arbor Digital is a Division of federally registered Arbor Capital Management, Inc. (ACM) CRD # 111362. Registration does not imply a level of skill or knowledge. Past performance is no guarantee of future results. The digital asset class is speculative and has unique risks compared to traditional assets. See our regulatory disclosures or contact us for more information.
Definitions:
Network Addresses:
The sum count of unique addresses holding any amount of native units as of the end of that interval. Only native units are considered (e.g., a 0 ETH balance address with ERC-20 tokens would not be considered).
Daily Active Addresses:
The sum count of unique addresses that were active in the network (either as a recipient or originator of a ledger change) that interval. All parties in a ledger change action (recipients and originators) are counted. Individual addresses are not double-counted.
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