When Davids rise and goliaths pivot to web3

Dear member,

Bitcoin supply is shifting notably in the U.S. due to growing institutional interest in crypto. This trend, catalyzed by BlackRock’s Bitcoin spot ETF trust application, has been forming for a while. Fund managers with assets over $1B anticipate Bitcoin ETFs to exceed $30T globally in the next decade.

Digital asset ETFs could direct trillions into web3, catalyzing a transformative effect on the finance sector. The gap between traditional finance (tradfi) and web3 has been gradually closing, with digital assets proving their worth beyond speculative tools.

The maturing ecosystem includes a growing custody market ($448m), staking, and over $600m in tokenized U.S. Treasurys. This piques the interest of tradfi giants like BlackRock, indicating a closer convergence with crypto.

Legal and regulatory friction is inevitable as the two worlds merge. The SEC has recently increased actions against crypto firms, including a lawsuit against Ripple. However, Ripple's recent legal victory, deemed non-violative of federal securities law for its XRP token sales, sent the value of XRP and other altcoins soaring, signaling a significant crypto industry milestone.

The recent week saw a spike in web3 startup funding, several from notable funds, including:

As we see the Web2 and Web3 narrowing, we're seeing a growing number of traditional companies and industries embracing blockchain technology. From Google Cloud partnering with Voltage to offer Bitcoin services, to Starbucks featuring artist Micah Johnson's Aku NFT collection in its stores, the line between the traditional and digital worlds is becoming increasingly blurred.

What we can see now clear as day is tradfi institutions’ growing acceptance and acknowledgement of crypto’s staying power. BlackRock CEO Larry Fink went on national TV in the U.S. to state the case of digital assets. It’s a far cry from his pessimistic claims on Bitcoin. And it’s interesting to see the evolution of what (is arguably) the most powerful man in tradfi has said of crypto:

It has happened thirty thousand times before. First they ignore you. Then they ridicule you. And then they attack you and want to burn you. And then they build metaphorical monuments to you on national TV.

Best regards from the Future,
RFTF.ai 

Market Intel

BlackRock's Bitcoin ETF application led to a significant increase in the share of Bitcoin supply held and traded by US entities. This comes despite no US Bitcoin spot ETF application having been approved so far, marking a potential inflection point in supply dominance if sustained.

Bitcoin ETFs may surpass $30T globally in the next 10 years, according to a survey conducted among 325 global participants managing assets exceeding $1 billion. This forecast highlights the increasing acceptance, popularity, and transformative potential of Bitcoin ETFs within the investment landscape.

Crypto custody market reached $448B in 2022, with 120 custody service providers as of April 2023. The report cites a rise of interest in crypto staking and the appearance of NFTs and the metaverse as major developments for the custody market.

Tokenized U.S. Treasurys reach total $614m, the market value of blockchain-based investment products that wrap U.S. Treasury bills, bonds, and money market funds into a form of a token. The demand for tokenized Treasurys among digital asset investors has been steadily growing as the yield on U.S. government bonds surpassed yields in DeFi.

13% drop in developer activity seen in 2023, with the majority of developers being part-time contributors. Open-source crypto developers have contributed to over 32,000 blockchain projects, with Ethereum leading the pack.

Bitcoin exchange whale ratio declined to its lowest value since 2018. The ratio measures the sum of the top ten Bitcoin transactions going to exchanges against the total exchange inflows, suggesting that large investors are not contributing significantly to the total market inflows, possibly indicating a decrease in their interest in leveraged futures trading.

XRP wins landmark case against the SEC, where a U.S. judge ruled that Ripple Labs did not violate federal securities law by selling its XRP token on public exchanges. This long-awaited legal victory for the cryptocurrency industry sent the value of XRP and other altcoins soaring.

Funding Trends

CryptoQuant raised an additional $6.5m in a Series A funding round led by Hashed, bringing its total funding to $11 million. The funds will be used to expand the blockchain data provider’s team and develop new products.

NFT lending protocol Gondi raised $5.35m in a seed round led by Hack.vc and Foundation Capital. Gondi allows lenders and borrowers to capitalize on the value of blue-chip NFT collections on the Ethereum blockchain.

Alluvial raised $12m in a Series A funding round for the development of Liquid Collective, a liquid staking protocol. The round was co-led by Ethereal Ventures and Variant, with participation from Brevan Howard Digital and others.

Olympix raised $4.3m in a seed funding round led by Boldstart Ventures. The company aims to help developers avoid vulnerabilities in smart contract code. Olympix's private alpha has helped developers secure over $300m in assets since its launch.

Vanguard Group adds 39% to its total stake in the Bitcoin mining sector, now exceeding $560m. The company has increased shares in Marathon Digital and Riot Blockchain, two major players in the Bitcoin mining space.

LunarCrush raised a $5m in a Series A round co-led by Draper Round Table and INCE Capital. The crypto intel platform is expanding from a digital asset trading focus to allow users to search for any topic.

Web3 music platform Sound raised $20m in a Series A funding round led by Andreessen Horowitz (a16z), with participation from Snoop Dogg and others. The platform allows artists to mint their songs on-chain as a non-fungible token (NFT) to sell directly to fans.

Get Protocol raised $4.5m in a funding round. The NFT ticketing company aims to challenge traditional ticketing industry giants like Ticketmaster by offering a "Web 2.5" alternative that uses blockchain technology to issue tickets.

Web2 → Web3 Immersion

More traditional game publishers will embrace NFTs, predicts Mythical Games CEO John Linden. He believes that the gaming industry will scale quickly as more major publishers enter the blockchain space.

Auctions are driving the growth of NFTs, said Abridged co-founder James Young, with platforms like OpenSea and Foundation leading the way. He also mentioned that the NFT market is evolving from one-off sales to more complex financial products, including fractional ownership and NFT-backed loans.

68% of financial services industry (FSI) customers are comfortable with cryptocurrencies but less so with AI (at only 46%), a Salesforce survey revealed.

Tennis star Andy Murray's Wimbledon data has been transformed into an NFT artwork. The data, which includes his heart rate, distance covered, and speed, was used to create a unique piece of art that was auctioned off on the platform WithFND.

Google Cloud partners with Voltage to offer Bitcoin services. The partnership will allow Google Cloud users to run their own Bitcoin nodes and connect to the Lightning Network, a layer-2 solution that enables faster and cheaper Bitcoin transactions.

Starbucks partnered with artist Micah Johnson to feature his Aku NFT collection in its stores. The partnership will see Aku NFTs displayed in select Starbucks locations, with customers able to interact with the NFTs through an augmented reality app.

Magic Johnson partnered with Simwin Sports to launch a fantasy football AI NFT. The NFT, which uses AI to predict player performance, will be auctioned off, with proceeds going to the Magic Johnson Foundation.

Minecraft partnered with Zebedee to enable Bitcoin payments for players. The partnership will allow players to earn Bitcoin by playing the game, and spend their earnings in the Minecraft marketplace.

Lightning Labs released new tools for AI-Bitcoin integration by merging AI technologies, APIs, and blockchain technology to facilitate transactions over the Lightning Network.

7-Eleven launched NFTs on the Polygon network to celebrate Slurpee Day. The NFTs, which are part of a game revolving around the company's virtual Slurpee cup, can be minted by customers on Polygon.

The Jackson Pollock Studio is releasing an NFT collection featuring four perspectives from Pollock's studio floor. The collection includes 100 digital artworks, each sold with a corresponding physical print.

Digital art platform Particle loaned its $12.9m Banksy painting, "Love is in the Air," to major museums worldwide. The loan was voted on by the co-owners of the Particle's artwork.

Google set to support blockchain-based content on its Play Store. The policy will require developers to clearly state if their app or game sells or enables users to earn tokenized digital assets, like NFTs.

Regulatory Round-up

APAC

China is testing offline payments for its digital yuan. The aim is to make the digital currency more accessible and convenient for users, even when they don't have access to the internet.

The Reserve Bank of India is urging lenders to embrace the digital rupee. The central bank believes that the digital currency can provide a range of benefits, including improved efficiency and reduced costs.

HDFC Bank, one of India's largest private lenders, has successfully enrolled over 100,000 customers and 170,000 merchants in pilot programs utilizing the CBDC. The e-rupee initiative reportedly aims to explore the potential benefits of a digital alternative to physical cash.

South Korea will mandate companies to disclose their crypto holdings in financial statements from 2024. The move is aimed at enhancing transparency and accountability in the crypto sector.

EU

Standards, governance, and funding will be at the core of the EU’s focus for the metaverse, believing that these areas are crucial for ensuring the success and sustainability of the metaverse.

The UK Treasury has begun consultations on a 5-year trial for digital securities. The trial aims to explore the potential benefits and challenges of digital securities, and to develop a regulatory framework that can support their use.

Tokenized asset exchanges are testing UK regulations. These exchanges are exploring the legal and regulatory landscape for tokenized assets, which could pave the way for greater adoption of this technology.

The Bank for International Settlements (BIS) has stated that DeFi could act as a starting point for the security systems of CBDCs. The BIS believes that DeFi can provide valuable insights into how to manage risk and ensure stability in the financial system.

International

Central banks are increasingly turning to gold and Bitcoin to battle inflation. These assets are seen as a hedge against inflation, providing a store of value that can protect wealth in times of economic uncertainty.

The IMF has stated that tax systems need to be updated to account for crypto assets and decentralized exchanges. The IMF believes that the anonymity of crypto transactions can facilitate tax evasion and money laundering.

The Central Bank of Russia could launch a digital ruble as soon as 2025. The digital ruble is expected to coexist with cash and non-cash rubles intended to facilitate payments and reduce costs, but will not bear interest. Concurrently, the Russian Duma has passed a bill for a CBDC, the digital ruble, which still requires approval from the upper chamber of the Federal Assembly and the President of Russia.

US

Bank of America has praised Ripple's ability to streamline and reduce the costs of cross-border transactions. Ripple's technology has been lauded for its speed, low cost, and transparency, which can help improve the efficiency of the banking industry.

The US Senate Finance Committee has asked the crypto industry for guidance on tax issues. The committee is seeking input on how to develop a fair and effective tax system for cryptocurrencies.

US Senators will reintroduce a bill to establish a comprehensive regulatory framework for digital assets. The Responsible Financial Innovation Act bill pushed by US Senators Cynthia Lummis and Kirsten Gillibrand aims to clarify the roles of the SEC and CFTC in regulating digital assets and provide consumer protection.

The Raven Also Spotted

BlackRock CEO Larry Fink's recent positive stance on Bitcoin has elicited mixed reactions from the crypto community. While some see it as a positive sign for mainstream adoption, others remain skeptical due to Fink's previous dismissive comments about Bitcoin.

Blockchain gaming has emerged as a dominant force in the crypto space amidst regulatory turmoil, according to DappRadar. The report highlights that blockchain games have seen a surge in user activity and transaction volumes, indicating a growing interest in play-to-earn models.

US presidential candidate Robert F. Kennedy Jr. owns Bitcoin worth between $100,000-$250,000, according to recent financial disclosure forms. This contradicts his previous statement at the Bitcoin 2023 Conference where he claimed he wasn’t a BTC investor. Kennedy's campaign has also announced that it will accept Bitcoin donations, a first for a presidential candidate.

Bitcoin spot ETF approval could unlock $30T worth of capital for the Bitcoin market, Bloomberg ETF analyst Eric Balchunas suggests. This figure represents the estimated amount of assets controlled by financial advisors in the U.S., who would be willing to get exposure to Bitcoin through a regulated exchange-traded fund.

Cboe Global Markets has amended 5 spot Bitcoin Exchange-Traded Fund (ETF) applications to include a surveillance-sharing agreement (SSA) with Coinbase. The SSAs are an attempt to meet the SEC's standards aimed at preventing fraudulent conduct and protecting investors.

Tradfi companies creating Bitcoin ETFs are a moment of validation for crypto, claims Grayscale CEO Michael Sonnenshein. He stated that if Grayscale could convert its GBTC fund to an exchange-traded fund, it would unlock billions of dollars of investor capital.

Crypto-related crime dropped by 65% in 2023 compared to 2022 despite the rise in digital asset prices, according to blockchain data firm Chainalysis. However, ransomware attacks are on the rise, with attackers extorting at least $449m through June.